Partying Like It's 2008

The Wisconsin PSC just through a major monkey-wrench into Oracle's plans to build a data center there when it announced that because of its recent downgrade by S&P to BBB-, the roach motel of software companies will have to post a $7,000,000,000.00 bond in order to be hooked into the grid.

It is refreshing to see that a billionaire cannot buy his way into regulatory forbearance somewhere. 

Oracle says that it could face more than $100 million a year in financing costs to guarantee the power commitments behind a nearly 1 GW datacenter campus it is developing in Wisconsin with Vantage and OpenAI.

Local regulators have refused to revisit a decision that they say protects existing customers and improves public transparency around the energy-related needs of datacenters.

Oracle's plans to build the Lighthouse Campus datacenter in Port Washington are supported by local utility We Energies. The campus is expected to require nearly a gigawatt of power.

The Public Service Commission (PSC) of Wisconsin, an energy regulator, told the Financial Times it had "declined to take action" on a petition seeking to reopen or overturn its earlier decision.

In April, the PSC considered We Energies' application for Very Large Customer (VLC) and Bespoke Resources Tariff status around the datacenter. Among the modifications to improve the tariff was a revision "to address the risk of transmission cost shifting from dataCenter customers to existing customers."

In an affidavit supporting the joint petition to reopen or rehear the decision, Oracle explained that if the decision was not modified, it would have to post security in a cash deposit or a letter of credit.

"Based on our current projections, we anticipate that, under the current mandated requirements, we will ultimately be required to post financial security, likely in the form of a letter of credit in an amount exceeding $7 billion, at an annual cost that could exceed $100 million," the document said.

To qualify for an exemption, Oracle would have to meet several tests, including maintaining ratings of at least A- from S&P and A3 from Moody's. At the time of the PSC decision, S&P rated Oracle BBB, but downgraded it to BBB- earlier this month.

"We estimate that OpenAI makes up roughly half of the $638 billion in (Oracle's) remaining performance obligations (RPO)," S&P said. "OpenAI's ability to meet its contractual obligations and raise external financing will be contingent upon AI tailwinds continuing and its models being market leaders. If OpenAI were unable to pay Oracle, we believe Oracle could be left with massive datacenter leases that it might be unable to exit or have to re-lease to new tenants under less-favorable terms."

………

In September last year, Oracle's valuation rocketed after it boasted $455 billion in RPOs, $300 billion of which turned out to be for OpenAI.

In the period since, Oracle has raised debt to fund its datacenter building program and has negative free cash flow.

S&P said Oracle's capex guidance had risen to between $90 billion and $95 billion for fiscal 2027, which started in June, up from an earlier forecast of $60 billion. For the same period, S&P forecasts negative free operating cash flow of $42 billion, worse than its previous estimate of negative $24 billion.

Yes, this does remind me of early 2008.  We are seeing signs of the credit markets slowly freezing up.

It's only going to get worse. 

It's Bank Failure Friday!!!

Today was kind of busy, with the 3rd commercial bank failure of the year, Kentland Federal Savings and Loan Association of Kentland, IN, and the 6th credit union failure of the year, WeDevelopment Federal Credit Union of Kansas City, Missouri.

I'm not sure if this is the start of something, or just a blip.

Here is the  Full FDIC list, and here is the Full NCUA list, and the direct link for this year.

Look! A (Shadow) Bank Run!

That's a bank run When redemption requests from a private credit fund exceed 15% in a quarter, that's a bank run.

Apollo, and I would assume Cliffwater, and probably HPS and Blackstone are experiencing a run on their assets. (See graph)

To the degree that anyone is saying that it is not a bank run, particularly since Apollo is restricting redemptions, they are lying.

Investor redemption requests at Apollo’s flagship retail private credit fund surged to 17 per cent of the vehicle’s value in the second quarter, underscoring fears of falling returns and rising stress in debt markets.

The firm’s $15bn Apollo Debt Solutions fund pitched to wealthy individual investors reported roughly $2.4bn of withdrawal requests in the most recent period. The fund met less than 30 per cent of the withdrawals it faced in the quarter, capping redemptions at 5 per cent of the value of the vehicle.

The Apollo fund, which has an investment portfolio worth nearly $26bn, had been hit with withdrawal requests of 11 per cent in the first quarter.

The rising withdrawal requests at the fund signal that the broader investor exodus from private credit has not abated, even as public markets have rallied and a sell-off in loans to private equity-backed software companies has moderated.

The funds have been a significant fundraising source for private investment groups, offering lucrative fees for the asset managers. However, private credit has faced scrutiny over its lending to the software industry, given the risks companies face from advances in AI.

Investors have sought to pull nearly $15bn from nine major funds tracked by the FT in the second quarter. The funds, which manage roughly $200bn across their investment portfolios, have met less than 40 per cent of the withdrawal requests.

………

The Apollo fund, like most of the vehicles operated by its competitors, is relying on a gating mechanism that allows the investment manager to restrict redemptions when they eclipse a 5 per cent threshold.

I'm waiting for lawsuits from the investors in these funds, sooner rather than later.

This sounds a lot like 2008, or 1929. 

Not Gonna Happen

Still, it is heartening that the Senate Armed Services Committee has Added a provision to the national defense authorization act that would require Pentagon pre-approval before engaging in stock buybacks or paying dividends.

Even if this were to make it into the final bill, the Pentagon would never enforce it.

Just look at the fate of the march in rights in the Bayh-Dole Act of 1980.  The have never been used.

Still it is nice that the problem has been identified. 

The Senate Armed Services Committee approved a must-pass bill with a provision that could bar some defense contractors from executing stock buybacks or paying dividends unless they have Defense Department approval.

The measure, an annual bill known as the National Defense Authorization Act, was approved 18-9 in a closed-door committee meeting last week. The stock buyback provision’s inclusion in the committee’s bill greatly increases its chances of becoming law and sets up a potential sea change in how the Pentagon interacts with some of the country’s largest businesses.

.........

The provision in the bill, Section 815, specifically would prohibit the Pentagon from entering into contracts with contractors unless the contractor agrees in writing not to “purchase an equity security of such entity, or any parent entity of such entity, that is listed on a national securities exchange” or “pay dividends or make any other capital distribution with respect to the equity securities of the entity.”

The provision would take effect June 15, 2027. The defense secretary could agree to waive the limitation if the contractor provides a “qualifying defense investment plan.”

114%

That is how overpriced the SpaceX IPO is according to a Morningstar analysis reported by that Commie rag the Financial Times. (They ain't called th, Pink Paper," for nothing.)

My guess is that even an analysis stating that IPO is overvalued by 114% will be shown by reality to be over optimistic.

………

Their headline findings are:

• The stock’s probably worth $63 per share, a 53 per cent discount to the $135 issue price.
• SpaceX probably has an addressable market of about $129bn, rather than the $1.6tn claimed in its S-1 filing.
• In a (metaphorical) moonshot scenario, where SpaceX pioneers orbital data centres and captures 20 per cent of AI computing capacity by 2040, the company would be worth $1.97tn, or $154 per share.
• Morningstar assigns only a 7 per cent per cent chance of the moonshot scenario happening.
• For Starlink, Morningstar estimates the global market to be worth about $129bn, which is rather less SpaceX’s estimate of $1.6tn. “[T]echnical constraints and unit economics limit the business primarily to lower-density markets,” it says.
• Here’s a link to the full note on SpaceX valuation, and here’s its note on Starlink market sizing. Space cadets and attached bankers, do please tell us in the comments what Morningstar gets wrong.

Look out below.

Bummer of a Birthmark, Elon

Unlike Nasdaq and a number of other stock indices,  S&P will not be waiving its rules for inclusion into its S&P 500 index for the SpaceX IPO.

These requirements are:

• Last quarter earnings and the sum of the last four quarterly earnings must both be positive.
• Annual trade volume must meet or exceed the market cap.
• 12 months have passed since the initial public offering.
  US-based. The company trades on a US exchange, a plurality of its assets are US-based, and the headquarters are in the US
• The company must be a corporation that issues common stock. It cannot have multiple share structures.
• Unadjusted market cap is at least $8.2 billion.
• The IWF is at least .10.

With a $75 billion IPO on a $1.75 trillion (IWF=0.04) it means that SpaceX would not qualify for inclusion for well over a year.

The company fulfills only one of the requirements for a listing. 

Considering the large number of funds that either in whole or in part invest in the S&P 500 as an index fund, this means that about $14 billion in forced purchase of the stock will not occur. 

So about 20% of guaranteed demand for the IPO won't be there.

Despite an expected record-breaking IPO, SpaceX will still have to follow the rules and wait at least a year before it’s added to the S&P 500, the benchmark behind many Americans’ retirement funds

S&P Dow Jones Indices announced Thursday that it is keeping its eligibility rules intact for the S&P 500 and several other major indexes. Indexes are benchmarks that track specific slices of the stock market. The best known is the S&P 500, which tracks 500 of the largest publicly traded companies in the United States.

Many index funds and exchange-traded funds (ETFs) hold stocks that mirror these benchmarks in an effort to replicate their performance. These funds are a key part of many 401(k)s, pension funds, and retirement accounts.

………

Other index providers, including Nasdaq and FTSE Russell, have already changed their rules to allow companies like SpaceX to join some of their indexes sooner.

But the S&P 500 remains the most widely tracked equity benchmark in the world. Roughly $7.5 trillion in passively managed funds follow it, Bloomberg reports.

If SpaceX had been fast-tracked into the index, it would have resulted in about $14 billion in forced passive buying of the company’s stock, according to an estimate by Bloomberg Intelligence.

How dare they interfere with Elon Musk's God given right to commit stock fraud.

It's Bank Failure Friday!!!

We another credit union failure, the 5th (sort of) the year, Beverly Hills City Employees Federal Credit Union of Beverly Hills, California.

If this sounds familiar, that is because it is.  It was conserved on 22 January, and on Tuesday it was merged with Nuvision Federal Credit Union.  I'm calling it number 6 of the year, but it could be just an extensions of the 2nd closure of the year, or you could call this an additional ½ credit union closure.

Thoroughly confused now? 

Anyway, here is the Full NCUA list, and the direct link for this year.

Of Course He Did

Remember serial (and surreal) fraudster and former Congressman George Santos?

Well, he is back in the news, because he announced that he would be attending the State of the Union address and then bet that he would not be there on Kalshi, and then did not show up.

George Santos may be the latest individual caught trading on insider information in a prediction market.

According to NPR, the U.S. Department of Justice (DOJ) is examining whether the former New York congressman placed bets on Kalshi using nonpublic details about his own plans. The market in question centered on whether Santos would attend President Donald Trump’s State of the Union address in February.

In the days leading up to the State of the Union address, Santos posted a video on X stating he would appear in the event. That public confirmation pushed the odds of his attendance on Kalshi close to 75% the night before the event, drawing millions of dollars in wagers across related markets. Santos did not show up to the State of the Union address, however. During the speech he posted on X that he was watching from an airport television instead. The odds on his attendance collapsed shortly afterward.

The first thing learned (more accurately re-learned) is that George Santos is a cheap bunco artist.

The second thing learned is that this is a feature, and not a bug of the, "Prediction markets." 

Replacing Low Value Human Capital

Bill Winters, CEO of Standard Chartered Bank, used that phrase to describe the 8,000 people that he plans to replace with AI.

After his odious utterance, he tried to walk it back.

Hopefully, he won't be able to do so, and he will spend the rest of his life living in fear and paying for bodyguards.

AI has emboldened CEOs to make all kinds of smug declarations that betray their contempt for lowly human laborers.

But Bill Winters, the CEO of the British multinational bank Standard Chartered, said something so viscerally off-putting that he’s now gone into full damage control mode to get the heat off his back.

On Wednesday, he wrote an internal memo to employees attempting to explain away his remark that he would be firing thousands of workers and replacing the company’s “lower-value human capital” with AI.

Yes, you heard that right: “lower-value human capital.” And it clearly didn’t go over well.

“Many of you will have seen media coverage following the investor event in Hong Kong, particularly the reporting around automation, AI, and workforce changes,” Winters said in the memo, per The Wall Street Journal. “I know this may be unsettling when reduced to simple headlines or a quote out of context.”

No, it's not a matter of context.  You told your truth and revealed yourself to be a psychopath.

Snark of the day

It's not a specific line, it's the entire video about the complete vacuity of the SpaceX IPO.

Patrick Boyle is both amusing and infuriating here.

Back in the days when we-actually enforced stock fraud laws, Elon would be in jail.

About Someone Banned This Crap

Minnesota has just passed a law banning prediction markets. (Utah seems likely to follow

About f%$#ing time.  This is a profoundly wasteful, corrupt, and unproductive activity.

Of course, because it is a corrupt activity, and one of Trump's sons is on the payroll of the two largest players in the space, Polymarket and Kalshi, so the Trump administration promptly sued to prevent the law from going into effect.

The Trump administration yesterday sued Minnesota in an attempt to block the first state law that prohibits prediction markets.

While other states imposed restrictions on prediction markets, Minnesota banned them outright in a law signed by Gov. Tim Walz on Monday. The US Commodity Futures Trading Commission announced a lawsuit against the state, saying that Minnesota’s “new legislation represents the most aggressive move by a state to shut down CFTC-regulated markets and undermine the federal regulatory regime set up by Congress more than 50 years ago.”

………

The Minnesota law makes it a felony to create, operate, or advertise a prediction market. The CFTC asked the court for preliminary and permanent injunctions to prohibit Minnesota from enforcing the law, which is scheduled to take effect on August 1. The case was filed in US District Court for the District of Minnesota.

………

The Minnesota law defines a prediction market as “a system that allows consumers to place a wager on the future outcome of a specified event that is not determined or affected by the performance of the parties to the contract.” The law’s specified events include but are not limited to sports games, wars, mass shootings, acts of terrorism, elections, court cases, deaths or assassinations, weather conditions, and pop culture events such as awards or release dates.

That last bit sounds an awful lot like the Marine Insurance Act of 1746, which was an unalloyed good.

Shut them down. 

A Side of Stock Fraud

Is anyone surprised that Donald Trump has been lauding various companies that he bought stock in?

In some cases, he bought the stock literally minutes before he pumped it up. 

Also, he has steered government business to companies he was already invested in.

So, stock fraud, front running, and insider trading.  (No wonder Wall Street loves him) 

Donald Trump’s Wall Street side hustle is starting to look like a full-time job.

During the first three months of 2026, the billionaire president pocketed tens of millions of dollars through 3,700 investment trades involving companies with direct ties to his administration.


“This is an insane amount of trades,” Matthew Tuttle, chief executive officer of Tuttle Capital Management, told Bloomberg, which first obtained the 79-year-old president’s financial disclosures.

Overall, Trump disclosed at least $220 million in financial transactions earlier this year, including trades in securities tied to major U.S. companies.

………

At the same time, Trump is not the only one who has profited from his presidency. The Trump clan—including Melania and Ivanka’s husband, Jared Kushner—was worth a staggering $10 billion in September, the last time Forbes estimated the family’s individual net worths, double their collective wealth in 2024. Trump himself had his most lucrative year yet: Forbes reported in September that he added $3 billion to his assets.

Here's an idea for the first post-Trump Attorney General, make Donald Trump poor.

Egregiously Corrupt

The Trump Appointed US Attorney for the Southern District of New York is offering a deal to the banksters, self report your fraud, and get a slap on the wrist and all records hidden from the public.

He's doing this openly, and the rest of us will pay for this bullsh%$.

Wall Street’s top prosecutors want lawbreaking companies to hand themselves in, offering behind-closed-door deals that let them avoid being charged, fined or having full details of their fraud made public.

The US Attorney’s Office for the Southern District of New York, which secured huge fines and guilty pleas from companies such as Drexel Burnham Lambert and Steve Cohen’s SAC Capital, has been meeting big law firms and corporate advisers in recent weeks to promote its softer approach to white-collar crime. 

The lenient new deals are available even in cases where alleged fraud was pervasive, caused severe harm, involved senior leaders and had already been reported in the press or by a whistleblower.

Prosecutors might charge individuals, but they would not charge companies even if the wrongdoing was worse than originally admitted. They would also not publish details of the deals.

So-called voluntary self-disclosure policies have been available in the past but the new SDNY version, which only applies to fraud, is significantly more generous to companies.

The policy here is simple, if wypipo do it, it's not a crime. 

It's Bank Failure Friday!!

And we have another credit union failure, Jackson Area Federal Credit Union, of Jackso, Mississippi, the 5th failure of the year.

It happened a week ago Wednesday, my bad. 

Here is the Full NCUA list, and the direct link for this year.

Today in Corruption

It appears that the Apartheid Era Emerald Heir Pedo Guy™ and the Securities and Exchange Commission have cut a corrupt deal, with a $1.5 million dollar slap on the wrist for Elon Musk's Twitter stock fraud.

Elon Musk’s trust has agreed to pay $1.5mn to settle a case in which the US Securities and Exchange Commission accused him of failing to properly disclose stakes in Twitter, a fraction of the sum it claimed the billionaire gained by breaching regulations.

The SEC and the Elon Musk Revocable Trust asked a federal judge in a joint filing on Monday to accept the deal, after which the agency said it would file a dismissal of Musk that would “entirely” resolve the case. The regulator initially alleged the billionaire wrongfully profited by at least $150mn.

Musk’s proposed settlement comes after the SEC showed leniency towards several figures and businesses with ties to the Trump administration, notably dismissing cases against crypto exchanges Coinbase and Kraken, both of which have donated to the president.

………

The deal filed on Monday was made possible by an unusual procedural step earlier in the day, when the SEC amended its complaint to add the trust, through which Musk bought his Twitter shares in 2022, as a defendant.

As part of the proposed deal, the trust does not need to acknowledge any wrongdoing, and Musk faces no personal penalties.

We really need to start frog-marching these rat-bastards out of their offices in handcuffs. 

It's Bank Failure Friday!!!

It's been a busy week.  We had the 2nd bank failure of the year, Community Bank and Trust - West Georgia of Lagrange, Georgia.

Meanwhile, on the credit union side, People Trust Community Federal Credit Union of North Little Rock Arkansas has moved conserved to liquidated. (I am keeping the count at 4 failures)

Not enough for a data point, but this is interesting.

 

And Then There Is the Fed

First, and most significantly, the Federal Reserve held rates steady again.

Also, in what is a pretty direct, "F%$#-you," Donald Trump, Jerome Powell has announced that he will remain as a Governor for the Fed even after he is no longer Chairman, which prevents Trump from filling that seat.

At his Senate confirmation hearing last week, Kevin Warsh told lawmakers that the Federal Reserve needed a serious shaking up, with “messier meetings” and “a good family fight” at an institution that has cultivated discipline and consensus.

He may be getting all of that and more.

On Wednesday afternoon, the man he’s set to replace as Fed chair, Jerome Powell, announced he wouldn’t be leaving right away. Three of Powell’s colleagues delivered a pointed warning that they are in no mood to cut rates anytime soon.

Every Fed chair for the past 75 years has left the central bank when his or her successor took over. Powell’s announcement that he would remain on the Fed’s board as a governor after handing the baton to Warsh next month broke with that precedent. It underscored how far the Trump administration’s pressure campaign had pushed the Fed into uncharted territory.

Powell’s decision followed a criminal probe of his oversight of building renovations. Trump had cheered that investigation but prosecutors halted it last week to advance Warsh’s confirmation. Last year, Trump attempted to fire a Fed governor in a case that is now before the Supreme Court.

“My concern is really about the series of legal attacks on the Fed, which threaten our ability to conduct monetary policy without considering political factors,” Powell said at his news conference. “I worry that these attacks are battering the institution.”

………

Three regional Fed presidents broke publicly with Powell on the language explaining the decision. The dissent itself was striking: not over the rate action itself but rather because they opposed signaling that a rate cut remains more likely than a rate hike. Powell offered only a light defense at his news conference.

The three presidents—Cleveland’s Beth Hammack, Minneapolis’s Neel Kashkari and Dallas’s Lorie Logan—were effectively serving notice, less to Powell on his way out than to Warsh on his way in: That with energy prices rising, underlying inflation stuck near 3% and tariffs still working through the system, this is a committee unable to deliver the cuts the White House expects.

A fourth official, governor Stephen Miran, dissented in the opposite direction, favoring a cut. Miran, a Trump appointee, is set to leave the board because Powell’s decision to stay denies the administration the vacancy it had been counting on. Four dissents were the most at any meeting since 1992, before the Fed announced its rate decisions in real time.

Well played, soon to be former Fed Chair Powell.

It's Bank Failure Friday!!!

No commercial bank failures this week, but I did miss a credit union failure from last week:

3. Copper & Glass Federal Credit Union,  Glassport, PA

I'm not sure of the specifics, but it has been liquidated after being placed under conservatorship in November of last year.

Here is the Full NCUA list, and the direct link for this year.

It's Bank Failure Friday!!!

My bad, I have not checked the announcements from the FDIC and NCUA for a while. 

Here are the commercial bank failures

1. Metropolitan Capital Bank & Trust, Chicago. IL, on January 20.

Here is the  Full FDIC list. 

Here are the credit union failures

1. People Trust Community Federal Credit Union, North Little Rock, AR, on January 16.
2. Beverly Hills City Employees Federal Credit Union, Beverly Hills, CA, on January 22

Here is the Full NCUA list, and the direct link for this year. 

My bad for not looking at the lists.

Not enough to see a trend. 

At least this time I did it on a Friday. 

TACO for Profit

Is this the best timed trade of 2026?

At 6:50 AM ET today, $1.5 BILLION in notional value worth of S&P 500 futures contracts were bought.

This trade was so large it sent the entire index +0.3% higher that minute.

Then, 14 minutes later at 7:04 AM ET, President Trump announced… pic.twitter.com/zFdZ1sQxeq

— The Kobeissi Letter (@KobeissiLetter) March 23, 2026

Roll Tape!

So, Donald Trump announced a unilateral suspension of some strikes on Iran, because Trump Always Chickens Out.

I do not expect Iran to reciprocate, because they (IMHO correctly) believe that this is merely a ploy by the Americans to time for the next round of attacks.

I think that Trump's announcement on social media that there have been, "Very good and productive conversations," probably has another motivation, personal profit.

You see, minutes before he posted it, someone made billions of dollars in futures trades, on the S&P 500 going up and oil prices falling.

It seems that someone was trading on this information, and my guess is that their name rhymes with Ronald Lon Rump. 

Unusually large futures trades placed minutes before a major geopolitical announcement have sparked allegations of potential insider trading, after market participants pointed to timing and scale that appeared closely aligned with U.S. policy developments.

According to data shared by the market-tracking account unusual_whales, approximately $1.5 billion in S&P 500 futures contracts were purchased while roughly $192 million in oil futures were sold just five minutes before President Donald Trump announced a halt to attacks on Iran.

The trades were reportedly four to six times larger than typical order sizes observed at that time.

The sequence of events has raised questions over whether the trades were informed by non-public information, given the immediate market reaction that followed.

What will the SEC do about these suspicious trades? 

I think that they will take a cue from Inspector Renault.

One of these days,  I need to watch Casablanca in one sitting.

I've seen all of it, but not all at once.