DHUnplugged #795: Johnny B Good

JCD BACK IN THE HOUSE! Correction in some areas and sectors. Crude oil DROPS after “good” talks and a deal brewing with Iran. Airports are a mess. PLUS we are now on Spotify and Amazon Music/Podcasts! Click HERE for Show Notes and Links DHUnplugged is now streaming live - with listener chat. Click on link on the right sidebar. Love the Show? Then how about a Donation? Follow John C. Dvorak on Twitter Follow Andrew Horowitz on Twitter Warm-Up - JCD BACK IN THE HOUSE - Need a new CTP - Airports are a mess - Not Kosher - Futures moves Markets - From the Brink....All is good? - Correction in some areas and sectors - US Dollar Rises, Gold, Silver and Bitcoin Drop - Crude oil DROPS after "good" talks and a deal brewing with Iran - reversing all of the above JCD UPDATE - AH waiting by the microphone on a Tuesday in March - - no John... 9pm, 9:05, 9:15pm... - Health update etc...Can we get the story? - Thoughts on John S. Dvorak (Mimi on No Agenda) - Family backup! Market Update - Small-Caps taking the brunt of the selling - Russell 2000 small-caps are down 10% from their high - an official correction -- Interestingly the R2000 is still up this year by about 2% - Stocks up on Monday after President Trump says intense negotiations over weekend and postpones targeted attacks for 5 days (after giving a 48 hour ultimatum) Manipulation? Say it ain't so... - Dateline Monday morning... - Futures took a leg down pre-market - even after Friday (after close) President Trump said he was looking to wind down the Iran affair - At around 6:50 a.m. in New York, S&P 500 e-Mini futures trading on the CME recorded a sharp and isolated jump in volume. - A similar pattern was observed in oil markets. - Roughly 15 minutes later, at 7:05 a.m., Trump posted a market-moving announcement about Iran on Truth Social. - Futures on DJ up 1,000 and oil down 89% --- Were there really conversations and negotiations over the weekend? A Few Leftovers that need to be discussed Private Credit Again - All of a sudden they are admitting there is a problem..... - Blackstone Inc. approved redemptions of a record 7.9% from its flagship private credit fund, totaling about $3.8 billion. - Redemption requests have increased across multiple private credit funds in recent quarters. - Investor unease is being driven by concerns over the private credit asset class, particularly exposure to software companies vulnerable to AI disruption. - According to Hugh Chung, CIO of Endowus, Blackstone’s experience suggests these concerns are asset-class wide, not limited to a small group of managers. - Apollo Global Management CEO Marc Rowan warned that a shakeout is coming for private credit firms, driven by rising defaults on loans to software companies. - Rowan emphasized that the shakeout is unlikely to be short-term, calling it foreseeable and predictable, and underscoring the importance of disciplined underwriting and strong risk management. - He argued that investors should prefer having credit risk reside within private markets firms, rather than on bank balance sheets backed by government-insured deposits, which can amplify systemic risk. - LATEST: Apollo is curbing redemptions from one of their biggest Private Credit funds. Michael Gayed: Private credit default rate just hit 9.2%. That's higher than 2008 bank loan peaks. $1.8 trillion in assets, $100B in secondary liquidity. 18:1 mismatch PRIVATE CREDIT More OpenAI Funding - Amazon invested $50 billion, Nvidia invested $30 billion and SoftBank invested $30 billion in the round, OpenAI said in a release Friday. - The investment boosts OpenAI to a $730 billion pre-money valuation, which marks a big jump from its $500 billion valuation in a secondary financing in October. - The will use some of the money to expland and buy more chips and cloud from NVDA and AMZN (? Circular?) MORE ON THE CIRCULAR SHAM - OpenAI said it is expanding its existing $38 billion agreement with Amazon Web Services by $100 billion over the next eight years. -  AWS will also serve as the exclusive third-party cloud distribution provider for OpenAI’s enterprise platform Frontier, which it unveiled earlier this month. AI and Where we stand - Can we talk about Anthropic? Is the Government going to crush Claude? - What is our Go-to AI bots? - What stage are we at right now? LLMs > Infernce>Agentic - - What comes after Agentic Netflix OUT - Last week, Netflix exited the bidding for Warner Bros. Discovery after a competing bidder submitted a superior offer. - The decision followed pre-planned bidding scenarios, with co CEO Ted Sarandos saying the company knew exactly how to respond once the higher offer emerged. - Sarandos said the Paramount deal is likely to drive significant cost-cutting, including roughly $16 billion in reductions and thousands of job losses. - He emphasized that Netflix will continue investing in its business and explore new ways to collaborate with theater owners, rather than pursuing large acquisitions.| - Stock rose nicely on the news Tariff Refund Update - You are screwed.... -- Trump administration seems hell-bent on keeping our money Airlines - After a rather bullish commentary from Delta last week.... -  United Airlines is cutting more unprofitable flights over the next two quarters as it prepares for a prolonged period of high jet fuel prices due to the Iran war, even as strong travel demand has allowed U.S. carriers to raise fares. Chief Executive Scott Kirby said in a staff memo the airline is preparing for oil to rise as high as $175 a barrel and remain above $100 until the end of 2027. - At those levels, United's annual fuel bill would rise by about $11 billion, more than twice the profit it earned in its "best year ever," he said. - Ticket prices going up! Gas Prices - Have you seen diesel prices? - > $5 gallon on average across the U.S. -- Implications beyond --- Let's discuss the similarities to the 1973 oil embargo. (Barry switching license plates) - 1973–1974 ? Arab oil embargo (the classic “1970s oil embargo”) - 1979 ? Second oil shock caused by the Iranian Revolution (not an embargo, but another major supply shock) Even So - Fedex - FedEx Corp. raised its full-year profit forecast, with adjusted earnings expected to be $19.30 to $20.10 a share for the fiscal year. - The company's shares climbed after the announcement, with the stock advancing about 23% this year through Thursday's close. - FedEx does not expect the war in the Middle East to have a direct material effect on its business, but the broader consequences, including higher energy prices and volatile shipping patterns, are adversely affecting the global economy. - In fact, company raised its full year outlook..... --- Not a material effect??? Bad People - SuperMicro Co-Founder Charged! - Super Micro shares sank 28% last Friday after U.S. prosecutors charged three people linked with the company, including its co-founder, with helping smuggle billions of dollars worth of AI technology to China. (NVDA chips) - The U.S. Justice Department charged Super Micro co-founder Yih-Shyan Liaw, sales manager Ruei-Tsang Chang, and contractor Ting-Wei Sun with running a scheme to route U.S.-made servers through Taiwan to Southeast Asia. - The defendants allegedly used a Southeast Asian company as a middleman to place orders for high-end servers containing restricted Nvidia H200 and Blackwell chips. The equipment was then repackaged into unmarked boxes and diverted to China. - To evade U.S. audits and customs inspections, the individuals allegedly created thousands of "dummy" servers and used a hair dryer to remove and reattach serial number labels from genuine servers to the fake ones. --- Soooo, only 3 people did all of this? Amazon Phone - Amazon's new phone project codenamed 'Transformer' - Focus on AI integration, Alexa features, and mobile personalization - Here is what we know: -------It is a smartphone, not a wearable or accessory - It is AI-centric, with Alexa deeply integrated - It is meant to act as a personalized, always-on gateway into Amazon’s ecosystem (shopping, Prime Video, Prime Music, services like Grubhub) - It is being built inside Amazon’s Devices & Services group by a skunkworks team called ZeroOne, led by former Xbox architect J Allard OpenClaw - Nvidia CEO Jensen Huang says OpenClaw could be the next ChatGPT as AI shifts from answering questions to taking action. - Jensen said : Nvidia is building security around the technology with NemoClaw to enable safe and scalable adoption of AI agents. - Project OpenClaw: “It is now the largest, most popular, the most successful open-sourced project in the history of humanity,” - OpenClaw is an open-source autonomous AI agent platform that goes beyond traditional chatbots. -----Instead of answering questions, these agents can complete tasks, make decisions, and take actions with minimal input from users. - Use case: Prompt to study images of a kitchen, learn design tools, iterate ideas to learn how to design a kitchen ------- Jensen says: “Every carpenter can now be an architect. Every plumber will become an architect. We are going to elevate the capabilities of everyone” ---- What happens to the architects? Something.... - One of the hardest hit countries in all of this mess has been South Korea - ~70% of South Korea’s crude oil imports come from the Middle East - Most of that oil transits the Strait of Hormuz - Margin calls kicked in as high margin debt with heavy retail participation - Won weakened sharply (17-year low) - Korea economy is dependent on global demand and stable energy prices - South Korea often leads sell-offs as it is the purest RISK ON market in Asia ---- SOOOOO, if this thing ends quickly, there is a potential of EWY to move up again....     Love the Show? Then how about a Donation? THE CLOSEST TO THE PIN for CATERPILLAR Winners will be getting great stuff like the new "OFFICIAL" DHUnplugged Shirt!     FED AND CRYPTO LIMERICKS   See this week’s stock picks HERE Follow John C. Dvorak on Twitter Follow Andrew Horowitz on Twitter