NVIDIA is a better credit risk than America? YES! NVIDIA spends money and generates wealth and value. The U.S. government takes money, redistributes it to inefficient and unproductive uses and destroys value. Or as the guys in operations used to say to the back office corporate guys - we are revenue, you are overhead. NVIDIA = Revenue U.S. Govt. = Overhead.
Credit ratings price durability of cash flow, not value creation, and the government's edge is coercive: it can tax in a downturn. NVIDIA's revenue leans on a concentrated set of buyers, and one of them, OpenAI, crossed $25B annualized while projecting $14B in losses. The ops-versus-back-office line works right up until the people booking the revenue stop being able to pay for it.
Pretty fascinating set of charts. The water-and-almond chart is mind-blowing, but so were the Nvidia and Elon Musk charts. The pessimism in the economy seems to align with the chart on sports ticket prices and college tuition, in that inflation has an inordinate effect on how people view their finances. Certainly, tickets to an NBA final and uber-expensive schools are luxuries that people can do without, but the rise in food and gas prices is ringing alarms across the nation. And why not? That is one of the top two issues responsible for Trump's victory over Biden. The frequency of food and gas prices (not to mention seeing the price of a gallon of gas every time you drive by a gas station) constantly reminds people how out of reach bigger items, like sporting events, private college, and even homeownership, are becoming. Combine that with the tone-deaf and seemingly random tariff policies, the never-ending ceasefire in Iran (and higher energy prices) that increases the likelihood that a Donald Trump "deal" will probably look like Barack Obama's deal, and it's small wonder people think the economy is in worse shape than it actually is. Consumers might have easily forgiven a temporary rise in fuel prices in exchange for eliminating Iran as a nuclear power; but they won't accept them in exchange for giving Iran $24 billion, permanently increasing oil prices due to Iranian control of the Strait of Hormuz, and the continued suffering of the Iranian people. Perception can often be reality.
The frequency point is the real mechanism here: gas is the only price most people see in foot-tall numbers twelve times a week, so it anchors how they judge everything else. I'd push back on "worse than it actually is," though. The aggregate runs hot (OECD just raised its US inflation forecast from 2.8% to 4.2%), and beneath it non-AI business investment is contracting around 17%. Headline numbers average a booming AI buildout with a shrinking everything-else, so people feeling poorer may be reading the half the average conceals.
During my days at Campbell Soup, the largest consumer of California tomatoes, I used to stump consumers with this question: which consumes more water, almond trees or tomatoes? Everyone guesses tomatoes. And they were wrong. Almonds consume several times more.
NVIDIA is a better credit risk than America? YES! NVIDIA spends money and generates wealth and value. The U.S. government takes money, redistributes it to inefficient and unproductive uses and destroys value. Or as the guys in operations used to say to the back office corporate guys - we are revenue, you are overhead. NVIDIA = Revenue U.S. Govt. = Overhead.
Credit ratings price durability of cash flow, not value creation, and the government's edge is coercive: it can tax in a downturn. NVIDIA's revenue leans on a concentrated set of buyers, and one of them, OpenAI, crossed $25B annualized while projecting $14B in losses. The ops-versus-back-office line works right up until the people booking the revenue stop being able to pay for it.
The reference to John McEnroe is the best
Seriously, this is a must-read.
Pretty fascinating set of charts. The water-and-almond chart is mind-blowing, but so were the Nvidia and Elon Musk charts. The pessimism in the economy seems to align with the chart on sports ticket prices and college tuition, in that inflation has an inordinate effect on how people view their finances. Certainly, tickets to an NBA final and uber-expensive schools are luxuries that people can do without, but the rise in food and gas prices is ringing alarms across the nation. And why not? That is one of the top two issues responsible for Trump's victory over Biden. The frequency of food and gas prices (not to mention seeing the price of a gallon of gas every time you drive by a gas station) constantly reminds people how out of reach bigger items, like sporting events, private college, and even homeownership, are becoming. Combine that with the tone-deaf and seemingly random tariff policies, the never-ending ceasefire in Iran (and higher energy prices) that increases the likelihood that a Donald Trump "deal" will probably look like Barack Obama's deal, and it's small wonder people think the economy is in worse shape than it actually is. Consumers might have easily forgiven a temporary rise in fuel prices in exchange for eliminating Iran as a nuclear power; but they won't accept them in exchange for giving Iran $24 billion, permanently increasing oil prices due to Iranian control of the Strait of Hormuz, and the continued suffering of the Iranian people. Perception can often be reality.
The frequency point is the real mechanism here: gas is the only price most people see in foot-tall numbers twelve times a week, so it anchors how they judge everything else. I'd push back on "worse than it actually is," though. The aggregate runs hot (OECD just raised its US inflation forecast from 2.8% to 4.2%), and beneath it non-AI business investment is contracting around 17%. Headline numbers average a booming AI buildout with a shrinking everything-else, so people feeling poorer may be reading the half the average conceals.
Short sighted. There are long-term goals to achieve here.
During my days at Campbell Soup, the largest consumer of California tomatoes, I used to stump consumers with this question: which consumes more water, almond trees or tomatoes? Everyone guesses tomatoes. And they were wrong. Almonds consume several times more.
I heard that stat about the amount of water almonds require and had the same reaction. That’s insanity.