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We're seeing aggregate delinquency rates elevated in Q3. Subprime auto loan delinquencies skyrocketing. The Fed doesn't want to cut. Foreclosures moving up in new construction homes in overbuild areas. We're seeing a deceleration of spending power by consumers. Bond market is cracking based on what we're seeing at not just Oracle, but also uh Applied Digital.
That terrible bond sales. All of these are a red flag. It's official. The odds of a Federal Reserve rate cut December 10th are now less than a coin toss. At just 43.2% a chance of a 25 basis point cut in December. It looks like the Fed might actually just cross its arms and do absolutely nothing, which is really bad given the cracks that we're seeing.
This is coming at a really inopportune time. Consider, for example, what's happening on the 30-year bonds for Oracle. Now, shout out to Gordo. Not a lot of people love this guy, but in fairness, he's pointing out a chart that you can't dispute. Look at these September 26 30-year bonds for Oracle. These 30-year bonds for Oracle are now trading at an 8% discount, which is actually pretty remarkable for a company that should be such a major behemoth in the AI data center place.
And it's a sign that basically investors are saying, "Hey, if you want me to take out a 30-year mortgage on your AI infrastructure, you're going to have to pay me more, aka give me a discount on the bonds." This is coming at the same time as we're seeing some creepy things happening not just in the bond market.
I mean, there was more news on that, but also with consumers and investors, like Robin Hood data on investors. What's going on with retirees that we talked about this morning? We'll tie it all together in just a moment, but look at this. This morning, Applied Digital sold $2.3 billion dollar of quote junk bonds at quote one of the steepest discounts of the year as the deal struggled to generate investor demand.
Now, that's a little nerve-wracking to me because it's a sign that when you're already offering junk debt at 10%. You know, if you're having to offer a 10% yield, it's probably junk. Don't even get me started on STRC, okay? Leave a comment if I should make a different video on that. But if you've got to offer 10% to raise money, it's a problem.
And when you offer a yield at 10% in the AI space and then you're having to do so at a discount, like you're not even selling that 10% for a premium, you're selling it for a discount. It means investors are looking at the 10% going, "Yeah, no, still not enough. I want more of a discount. That's a sign.
That's an early warning sign. It's not good. Now, Coreweave gave us disclosures on their material services agreement. They finally got posted, but they basically gave us a blank material services or master services agreement. And they gave us absolutely no insights into the arrangement that they made between them and Nvidia when they can force Nvidia to buy unused data center capacity which is really interesting because Microsoft is one of their top two customers.
Out of the top two customers, Coreeave has Microsoft revenues at about 67%. Exact which is a lot. And apparently there's unused data center capacity when Microsoft is one of your largest customers and Nvidia is picking up this capacity which you're buying chips from Nvidia and now Nvidia is buying the unused data center capacity and these bonds are starting to sell off.
It's weird. It's the bond market saying we're in a weird place. Oh, and you're going to see a lot on this. Warren Buffett just bought shares of Google while trimming Apple. But I want you to think about the ratio of this. Warren Buffett sold about $2 for every dollar he bought. So it kind of makes me feel like while that is going to grab bullish headlines, he's still a little hedged.
Remember, they've got over $300 billion to go shopping. They bought 6.4 and they sold 12.5. So they net raised cash where not only is the Federal Reserve potentially going to rugpull us, which isn't great. In other words, not giving us the rate cut we're looking for, but you've got underlying parts of the market that are keeping the economy propped up, saying this isn't looking good.
Look at the 102 yield curve, for example. The yield curve has started spiking over 50 again, now at 54. Anything above 50 is historically shock territory. Now, in 1995, we hung out around 50 to 60, kind of like we are now, and we were still able to hold a soft landing or pull off a soft landing. But in 1995, we didn't have the kind of, let's call them, risk moves that we're seeing now.
Remember yesterday that FINRA margin data we were looking at and we're like, man, how is it that all of a sudden people are going vertical on margin? People are literally leaving comments going, "Oh my gosh, I'm getting margin called." I'm like, "Dude, we're 4% off all-time highs and you're getting margin called." Like, talk about not being diversified in your portfolio and being overleveraged in like momentum names or something.
It's crazy. I I mean, I I'm seeing people are like, "I'm all in on Beyond Meat. I'm all in on Open Door. I'm all in on quantum, you know, meme stocks that have no revenue." you. And I'm like, dude, those are supposed to be trades, you know, like little edge trades that you play. Like in our alpha report, we're like, look, open door, this is cheap at 80 at five bucks.
I'm like, too much risk. Get out of this. This is going to go down again. You got to be careful. It's the same thing with Quantum. I'm like, they've run their course. You got to be careful. But look at this Robin Hood data, folks. This is something else. So yesterday the FINRA data we saw was that cash was declining at the same time as debt was going up.
So I got the Robin Hood numbers and you could actually see a decline in cash at Robin Hood which is really interesting because look it's been increasing. Cash has basically been increasing every single month with the exception right here of it looks like November to December you had about a point4 move down in cash.
Well, you just had a $1.2 billion move down in cash over here in October, and it is the first time we've seen this decline since November of 2024, and it's three times as large of a cash decline. At the same time, not only does that align by, by the way, with the FINRA data that we saw yesterday, but at the same time, options have just skyrocketed 22% in October.
By the way, this is probably big pee pee. Big pee pee for Robin Hood earnings. Like Robin Hood makes a crapload of money off of crypto and options. In fairness though, with crypto going down, I don't know if it's as clear of a bet because you're going to have less trading in crypto and crypto goes down.
And crypto and options are where Robin Hood makes the most money. Equity trading barely makes Robin Hood any money. That's to get you in the door. Credit card money loser. That's to get you in the door. They want you taking in debt and then spending it on margin or or spending it on options and crypto.
You'll notice that's why they really promote that in the app or margin. But anyway, look at their margin book. Margin debt increased by 18.7% in one month on Robin Hood. That is a massive, massive increase. Now look, we've been increasing since liberation, okay? We've probably had, you know, a 5% increase, maybe another 5% increase.
Roughly doing this mental math here with you, right? This was maybe about a 14% increase, maybe about another h this is a little less than 10%, like 9.5% there. Mental math there, right? Maybe another 10% right here. This is the largest increase we have seen in this available chart in margin which is kind of crazy because at the same time as we're seeing the largest move up in margin which is the largest move matched with the largest move up in speculation which is matched what we saw at the FINRA charts.
What has the stock market done this month? That's something to think about or at least in October, right? So over the last month what have we had since October? a 1.8% move in the cues. I mean, we know the six-month chart has been fine, but let's look at all of October. If you margined up October 1st to now, sure, you're up 93% on the cues.
And we see these sorts of skyrockets in margin, speculation, and debt, and options, and Bitcoin selling down. That's crazy. That's this combined obviously with what we're seeing with the bond market. I these are little warning signs. Now, also JP Morgan gave us a little bit of a warning sign and this is all coming in the face of the Fed basically wanting to rugpool us.
But JP Morgan gave us a warning sign here that if you look at forward price to earnings ratios and you invest anytime the S&P 500 is having a basically a forward multiple of greater than about 22.5 which is on the right side here where this red line is this vertical line. Anytime you're to the right of that line on price to earnings ratios which again currently sit at about 22.8 8.
But anytime you're above about 22.5, this red line right here, your expected annual returns are really, really low. They fall between this little box right here, which is probably like positive 1% because we're a little further to the right over there to -2%. And that's every single year. So, your expectation of a profit investing in stocks at these valuations per JP Morgan, who knows, maybe this time will be different, is bad.
And you could see it through their little fancy category scatter chart thingy here. Basically, the more to the right you go, the lower you're expecting to make when you invest. The more to the left you are, in other words, the cheaper the stock market is, the more you could actually expect to make on an annual basis.
Okay, great. So, we've got JP Morgan telling us valuations are high. FINRA debt with what we saw on the chart yesterday. If you didn't see the chart yesterday, I guess let me just show it to you really quickly. This was the FINRA chart yesterday, right? This is where we're seeing 26% more debt than the 2021 peak yet lower cash.
21% lower cash today. That aligns with the Robin Hood chart. So, that's just more supplemental data that's reiterating this. So, think about what we have so far. the Fed going, "Yeah, nah, we don't really see the need to cut." At the same time as you've got AI that's holding up the economy starting to wobble because we're seeing bonds wobble.
That's weird. You got JP Morgan saying investing in the S&P 500 at these valuations is not associated with good positive returns over the next 5 years, which makes sense if we're slow bleeding out, right? And then dead in speculation is skyrocketing at the same time as we're seeing the second largest and and the year is not even over yet.
So it could end up being the largest, but 2024 and 2025 are some of the largest inflows that we have seen from international investors making our US stocks more expensive. Now I'm not trying to bag on international saying, "Oh, you're not allowed to buy our stocks." No, please. Like you please support our companies.
I think it's great. Like we've got a bunch of investors in house hack. We just crossed 1.2 2 million uh in inflows in November here for House Hack. So, we're really grateful. We've got a bunch of international investors. And we got people in Canada. They're like, "Please, Kevin, open like a Canada only version where you invest in Canada." We're like, "Oh, wow.
Leave me a comment if you're even interested in something like that." But anyway, um we we have Canadian family. So, so you know, we we would work with our Canadian family. My father-in-law, my wife is, you know, half Canadian. But anyway, uh this is really interesting because it it means a lot of money has flown into our markets making it expensive and part of it is because of the money that's flowing in from international investors and the other part is just debt and speculation.
Then of course you have Bank of America's cash indicator which suggests that currently the fund manager survey says fund managers only have about 3.8% 8% of cash in their portfolio, which is wild because yesterday people are leaving comments going, "Oh my gosh, how come stocks are red? Like, I thought there were $7 trillion in money markets outstanding." You have to be careful.
There are knuckleheads, and I see this. There are knuckleheads on Twitter that are like, "Oh, well guys, this is bullish. Rate cuts are coming." Uh, no, that just got basically rugpulled. Then on top of that, you have uh this idea that, oh, well, there's all this money outstanding in money markets. That's not people.
Mostly that is not people. Mostly what that is is large institutions that park their money in between doing stock buybacks like Nvidia or Apple just basically hoarding cash. So in other words, yes, that money is there, but it's not money that's readily available for the stock market. The stock market to go up, we got to see some more pumping of I hate to say it, but debt.
And that's not great. Okay. So, what did we see this morning? Well, this morning on the cues, we're right here and in our alpha report, I said, "Look, the goal is first 15 minutes, watch for a bounce." I thought we would bounce at 595. We bounced $2 above that. So, I wasn't good with this 595 line, but if you notice, the first 15 minutes would have brought us to about uh right about here, about 602.
And the goal was if we beat or bounced within the first 16, my goal is we would end up going to 606. We ended up getting 606 with a triple reject over here. We got a breakout of 606, which was phenomenal. Ended the day at 608 to 609, which is great. So, the day didn't continue its bearish trend, but we also didn't have a lot of news today.
There wasn't a lot of bad news outside of Schmid being a little bit of a schmeistery bear. Schmid says inflation should be might end up being much broader than just tariffs. It's important that we lean against growth, which is basically saying be more restrictive. And he's in the same place as he was in in October, which means voting for no cut.
And it seems like more and more people at the Fed are coming out going, "Yeah, I don't see a need to cut unless all of a sudden jobs fall off a cliff." Yet, it seems like they're blatantly blind to the fact that as soon as jobs fall off a cliff, we're cooked because that ends up leading the stock market off a cliff, as we saw this morning, that ends up leading to more unemployment via potentially labor force participation increasing because seniors have to go back to work as their portfolios get reamed or other people have to take on multiple jobs just to get ahead because they can't rely on the stock market's wealth anymore.
Affects the international community as well. In the meantime, Fed's like, "Ne, everything's fine." Now, maybe, and this is that teeter totter environment we're in, look at City. City tells us that right now we are actually seeing further incremental signs of a weakening consumer. We're seeing aggregate delinquency rates elevated in Q3.
Subprime autoloan delinquencies skyrocketing. The Fed doesn't want to cut. Foreclosures moving up in new construction homes in overbuild areas. We're seeing a deceleration of spending power by consumers. Bond market is cracking based on what we're seeing at not just Oracle, but also uh Applied Digital.
That terrible bond sales, all of these are a red flag, right? So, when you put all of this together, it's like, man, sure, I guess we could hope for a pickup in 2026. That's literally what they say. The expectation is to decelerate in Q4, but pick up in 2026. the expectation here that you have a weak consumer in 2 in Q4 and then you rebound in January.
Good luck rebounding after the holidays. I mean, I'm hopeful. I mean, like, here are some things you could target. Literally, Target, Target, Lowe's, TJ Maxx, Walmart, Ra, Ross, Fun, Dave Busters almost back at 2020 levels. Home Depot, uh, Six Flags. Like, a lot of these have tanked. Restaurants, hotels, airlines, entertainment.
We are in like a consumer discretionary recession right now. If you're looking for dips, man, and and you think we're going to soft land, the consumer stocks are great freaking play right now because they're dirt cheap. Obviously, unless we go into a recession, then you're screwed. And if we go into a recession, it wouldn't surprise me that we end up having, and I hate to say it, but in our stock market with how insane it's gotten, we could see a hopefully not this bad, but this sort of Japanese style.
Have you seen this? For the first time in 36 years have investors who invested in December of 1989 in Japan actually made money again. How insane is that? 36 years of basically losses, you know, hoping to get back to gains. And you know, here we are now with 60% of Americans over 55 years old not working.
20% of those never worked. Uh, and so now 25% of Americans over 55 never worked. Clarify that number. So we're in a really bizarro place. Now hopefully the job numbers that we get, mark your calendar for it, okay? We're going to get those BLS job numbers now on the 20th. That's going to come out at 5:30 in the morning.
So obviously I'll be covering it with a live stream. Make sure you're part of the alpha membership and meet Kevin.com. But digesting and having a plan for that is going to be critical for short-term trades. Now, for longer term trades, I'm still of a strong or I still have a strong mindset that there is an opportunity to potentially trim at certain plays that have done really really well.
Like I just trimmed uh a couple days ago a stock that I was up like what 1600% on or something. And I'm going into a stock I'm building a position out on. Now, the danger right now with buying obviously any stock is that you you're just catching a falling knife. So, somebody asked me, they're like, "Hey, Kevin, how come it seems like your buys are so much smaller than your sales right now?" Well, it's because of where my opinion is about how important this data is that we're about to get.
And so, while I'm taking big profits on stocks that have done really well, I'm only trickling maybe a buck out of every $10 back in right now. So, I want to keep that other $9 as ammunition for, you know, when and if we hit the fan. Now, with House Hack, it's worth noting as well, we just bought 11 properties, maybe to be 12.
We'll see. We got uh, you know, another project here in mind. But my goal is to get all of these rented out, you know, within the next few weeks. And then we're just going to chill for Q1 and Q2 probably with House Hack. I don't like buying in the first half of the year anyway. I like buying at the end of the year.
Uh, but it's great because we've just deployed quite a good amount of capital, but we still have over $10 million in cash just sitting around. So, we've got optionality should something weird happen. And that makes us really satisfied. Not in a way of like, oh, look, 10 million just that's for the sake of transparency.
You know, hack.com and . And because I I I just want you to think I'm not saying like don't buy. I'm just saying with some of what we're seeing, be a little cautious. There's no reason you should even be remotely concerned about getting margin called. And if you are, maybe it's time to set some trailing stops.
But anyway, try to put this together as well. In 1999, the NASDAQ Technology Index, which was a lot more sensitive back then, saw four 10% declines and then three more in just the first quarter in 2000. And then the market finally peaked and crashed. So far, in the last 6 months, we've only seen NASDAQ losses of 2% or more three times.
That's tiny. Like, we're not seeing any real downside volatility. And the fact that people are like losing their SH9T with how little prices have come down makes me really nervous that people are massively more indebted than we think. Now, I was talking about uh SoFi this morning. I was doing an analysis with uh course members on SoFi this morning.
Do I have it in here? I think I do. Uh so I was doing an analysis on SoFi. Yeah, here it is. And uh we were going through uh their their balance sheet because I got this SoFi offer right here because I I uh opened like a I had a little SoFi just side account for a while. But anyway, um so they have my data basically.
But they sent me this and they're like, "Here's your offer. Request any amount for a personal loan of $5 to $100,000 fixed rate 8.74%." Which is obviously much cheaper for, you know, than paying a credit card rate. But I'll tell you the problem with these. And this is a noob versus pro for you. Okay, so the noobs get an offer in the mail that says, "Hey, here's a SoFi personal loan.
You'll have a lower interest rate. Just pay off your credit card by using a personal loan of $50 to $100,000 and just pay off your credit card and have it all in a nice fixed rate lower interest rate loan. It sounds like a good financial decision. is actually a terrible financial decision because when you have a lower rate on one of these personal loans, your motivation to actually ever pay that debt off plummets and your motivation now to take a credit card that literally has zero balance and go out there and spend skyrockets.
So, I would argue that the vast majority of people that take these credit card consolidation loans end up paying off their credit card and then immediately going back into credit card debt. And now you have the worst case scenario. you've increased your personal loan exposure and your credit cards are filled right back up.
That's always how it works in America and it's so dangerous to get into this kind of stuff. Now, for SoFi, it's absolutely brilliant. Good on them. Now, obviously, we're not in a recessionary environment right now, and SoFi's got a really interesting funding method. We talked about this in the alpha report, so make sure you go check it out.
It's also under the stock tab, but the way SoFi is raising money to facilitate their growth could run into some headwinds. Let's just leave it there. And if you don't know, I'll give you a hint as to where you could find it. Study the cash flow statement of SoFi and then ask yourself how that's likely to evolve over the next 6 to 24 months.
Almost did a 67 there. Anyway, so all right. So, if we think about this and emotions, I don't know if it's just like X, like people on Twitter, you know, X or just emotional because it's like they get engagement or what, but the fact that people seem like they're literally losing their SH9T, legit losing it, and stocks are down so nominally makes me again nervous that they're either not diversified at all uh or they're heavy heavy heavy in deb.
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