The Foxhole

Oracle has $638 billion of orders it can't fill yet. Tonight tells us how much it's costing to get ready.

📉 Bullish anyway: The capex is eating the cash, and this author still sees 131% upside.
📋 In someone's top 10: Andre Santos' best 10 stocks to buy.
📊 Before the print: Oracle's fundamentals and estimates.

Part of Oracle’s business is renting out computer hardware. Companies like OpenAI need enormous computing power and would rather rent than own it. But Oracle can only rent out machines it already owns, so before it collects a dollar it has to buy the chips, build the warehouse and connect the power. It burned $23.7 billion in cash doing that last year.

Oracle reports after the close, giving investors another pulse check on just how much cash flow will be shed for the privilege of a large backlog.

Is this the price you want to be buying at, or is it too early?

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mitchell_lawler

26m

Oracle has $638 billion of orders it can't fill yet. Tonight tells us how much it's costing to get ready.

Oracle reports after the close, giving investors another pulse check on just how much cash flow will be shed for the privilege of a large backlog.

Is this the price you want to be buying at, or is it too early?

mitchell_lawler

Razors, glasses, mattresses, all toppled by direct-to-consumer upstarts. Beer wasn't. A 90-year-old law is why.

🍺 The undisruptable aisle: What the three-tier system is, and why it exists.
🚚 Legally required: 9 listed US beer distributors, the middlemen the law mandates.
📊 The protected giant: What the market assumes about AB InBev (BUD) today.

Direct-to-consumer upstarts came for razors, glasses, mattresses and vitamins, and toppled the incumbents in each. Beer? Largely untouched by youthful competitors. The reason is a 90-year-old law.

After Prohibition, the US split alcohol into three legally separate tiers: brewer, distributor, and retailer. Every beer passes through an independent distributor that takes its cut. The playbook that gutted a dozen consumer categories is simply illegal here.

That raises the drawbridge for the giants. AB InBev (BUD) has the volume to command the best distributors and shelf space, while smaller brewers struggle to get a boozy foot in the door. But the real protected party isn't the brewer, it's the distributor, a legally mandated tollgate that's nearly impossible to fire.

Is a regulatory moat enough when the market itself is shrinking?

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mitchell_lawler

The most boring corner of the market just hit a 50-year low against stocks. History says that's when it's worth paying attention.

⛏️ Half a century cheap: Jefferies flags commodities at a 50-year low against stocks.
🏗️ Looking for value: 42 miners and materials producers the market may have wrong.

Jefferies flags that commodities are the cheapest they've been against the S&P 500 in over 50 years. The last two times, after the Nifty Fifty and the dot-com bust, they beat stocks for years. At the same time yields are at two-decade highs, US debt just crossed US$40 trillion, and rising rates could strip pricey AI names of their premium in favour of real assets.

While the crowd piles into AI, the miners and drillers could be the contrarian opportunity. The honest caveat, though, is that there are two variables in this equation… commodities don’t need to rally for the ratio to equalize.

Are you investing in mining companies or sticking with a different part of the market?

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15 comments

mitchell_lawler

Robinhood now earns more from people betting on outcomes than companies. Is that a flaw or a feature?

📊 Bigger than stocks: Event contracts at $156m last quarter.
⚖️ The fight over it: 44 state attorneys general vs the CFTC.
👉 Under the hood: Robinhood’s fundamentals and valuation.

Event contracts brought in $156 million for Robinhood last quarter. Equities did $129 million. A year ago that line was worth $10 million.

The easy read is that everyone started gambling, but I don’t buy it. Betting on outcomes is one of the oldest markets there is. What changed is friction, not appetite. Robinhood put it inside an app 28 million people already had open.

The only issue is that it may not get to keep it. The Ninth Circuit says sports contracts aren’t swaps and states can regulate them. The Third Circuit says the opposite.

Are prediction markets a better business than stock broking?

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