The Noble Update Podcast

All it takes to break the AI picks and shovels trade is order growth slowing from 30% to 15%. That's STILL double-digit growth, but the stocks can get crushed anyway.

My friend Peter Boockvar joined me, and he thinks this is gut check time for the whole trade:

* The warning lights already flashing on the AI dashboard, from Chinese chipmakers to scrapped data center IPOs
* Why the memory chip boom peaked within weeks of a Chinese rival going public
* The credit market pricing a 55% chance that one AI darling defaults within 5 years
* The cyclical chip stock that just became the top holding in a major value ETF, and why that should worry you
* The most hated sector in the market that Peter loves right now

You can also watch the full conversation on Youtube:



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Last week CoreWeave's bonds traded at yields around 15%, and the cost of insuring its debt implied roughly a 60% chance of default within 5 years. Oracle's default insurance hit a record high at the same time.
That's what it looks like when narratives and dreams run into a lack of cash flow and a mountain of debt.

When easy money dries up, the most indebted company with the weakest fundamentals gets shot first, which is why CoreWeave is at the front of the line. It's our biggest short, we added to it 2 weeks ago, and I think it's a better short at around $60 than it was at $107.

As Hemingway put it, you go bankrupt gradually, then suddenly.
Check out the full conversation.

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P.S. Every position we hold is on our public scoreboard with the date and price we called it, including the ones that aren't working:



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This is the final episode of our series with Tom Gober.
Last episode ended with Tom challenging the offshore reinsurers to show us the $1.5 trillion, and in Episode 4, he shows you which companies are behind it.
Just 40 companies account for 85% of it, and the biggest sends $235.7 billion to a single offshore affiliate while holding only $4 billion of surplus, which Tom describes as moving money from one pocket to another, like "trust me, bro, I got this."

Here's what we're going over in Episode 4 "The Offshore Black Box":

* Tom maps every internal reinsurance deal at a household name in American insurance, with billions swirling between its own companies and all of it tapping into 7 captives in Arizona where you can't get any information.
* Tom shows how a company you'd recognize asked Texas to approve a reinsurance deal worth more than $20 billion with its own affiliate, and when it never heard back, it disclosed the deal as "non-disallowed."
* Tom ranks the 25 carriers he worries about most, and at the top of the list, just over 1% of the higher-risk assets going bad would wipe out the entire surplus.
* Tom shows that over the last 9 years, the industry's surplus grew by about 50% while the affiliated reinsurance he's worried about doubled.

We also call out 9 state insurance commissioners by name, so stay for that.

I'm very bearish on private equity and private credit, and this episode made me even more so. Insurance companies have been a huge source of money for those firms, and a lot of that paper ended up in 401(k)s and pension plans, so a firefighter in Peoria who's never thought about private credit may already own it.

Over 4 episodes, Tom has taken us from a recorder hidden in a briefcase to a $1.5 trillion question the regulators still haven't answered, and neither of us got paid a cent to do it. We did it because the people who've paid their premiums on time for years deserve to know where their money went.
I'm asking every American who watches this to speak up, and the easiest place to start is sending this series to anyone you know with a life insurance policy or an annuity.
Tom's closing words say it all:
The more people who hear the truth, the better off the policyholders will be.



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Last episode, we left off with Tom Gober about to reveal a secret document he found in a company president’s personal files, and Episode 3 opens with what it said.
A CFO in a criminal case was recorded calling these offshore deals “a little bit like morphine,” and Tom explains why: once you start, the hole gets bigger and you need a bigger dose.
Here’s what we’re going over in Episode 3 “The Secret Side Letter”:
* Tom tells you what was in the side letter hidden behind a reinsurance contract that looked perfect to an examiner, from a case that sent the man in control to prison for 18 and a half years, and you’ll hear what happened when the FBI knocked on his door in Del Mar.
* Tom puts the cushion of the entire US life and annuity industry at about $650 billion, and he says more than that sits in secret captives alone, while more than $1 trillion has gone offshore, out of sight.
* Tom shows what happened at a big insurance group after KKR took it over from Goldman Sachs, including a carrier with about $3.7 billion in affiliated investments sitting on roughly $200 million of surplus, where a 6% haircut would wipe out its entire surplus.
* Big institutions hold more than $500 billion of short-term notes issued through these insurers, and at one of those companies, a legal opinion puts those investors on equal footing with policyholders like you, which Tom says means they’ll see trouble coming first and get to the exit before you do.
Tom also names the two insurers he loves, so stay for that.
In my world, if you sell a stock through one broker and buy it right back through another, that’s painting the tape, and you’re not allowed to do it because it kills true price discovery. When the same owner sits on both sides of an insurance company’s investments, it looks eerily similar to me.
Tom ends this one with a simple message for the offshore reinsurers and secret captives: if the $1.5 trillion is really there, show us.


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Our long/short spread widened to 67.4% today, with our longs up 25.9% on average and our shorts down 41.6%.

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We made money on both sides of the book, which is exactly what a hedge fund is supposed to do.

But the people chasing momentum and narratives are having a very different day.

When the tide of easy liquidity goes out, the momentum and narrative bros find out what they really own, and anyone who's been doing the work on valuation and fundamentals finds this market pretty easy to read.

We doubled down on a lot of our shorts last week, and CoreWeave alone is down almost 25% since we added to it on October 8.

If you only started investing after the financial crisis, all you've ever known is more liquidity, and that game is OVER. I'm not calling a crash, because we're long and short, but the downside from here looks much bigger than the upside, and I have far more conviction in my shorts than my longs.

If you want 60 more ideas for what comes next, our technicians conference runs October 27 and 28, with 20 of the best chartists on the street bringing 3 ideas each. Tickets are $99 until midnight tonight, and then the price goes to $199.
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BRACE FOR IMPACT


This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit georgenoble.substack.com/subscribe