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AkhenOsiris
OpenAI $NVDA $GOOGL
https://t.co/N7fbQNh0UB
Ben Thompson:
It’s also worth pointing out, as Eric Seufert did in a recent Stratechery Interview, that Google started monetizing Search less than two years after its public launch; it is search revenue, far more than venture capital money, that has undergirded all of Google’s innovation over the years, and is what makes them a behemoth today. In that light OpenAI’s refusal to launch and iterate an ads product for ChatGPT — now three years old — is a dereliction of business duty, particularly as the company signs deals for over a trillion dollars of compute.
And, on the flip side, it means that Google has the resources to take on ChatGPT’s consumer lead with a World War I style war of attrition; OpenAI’s lead should be unassailable, but the company’s insistence on monetizing solely via subscriptions, with a degraded user experience for most users and price elasticity challenges in terms of revenue maximization, is very much opening up the door to a company that actually cares about making money.
To put it another way, the long-term threat to Nvidia from TPUs is margin dilution; the challenge of physical products is you do have to actually charge the people who buy them, which invites potentially unfavorable comparisons to cheaper alternatives, particularly as buyers get bigger and more price sensitive. The reason to be more optimistic about OpenAI is that an advertising model flips this on its head: because users don’t pay, there is no ceiling on how much you can make from them, which, by extension, means that the bigger you get the better your margins have the potential to be, and thus the total size of your investments. Again, however, the problem is that the advertising model doesn’t yet exist.
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OpenAI $NVDA $GOOGL
https://t.co/N7fbQNh0UB
Ben Thompson:
It’s also worth pointing out, as Eric Seufert did in a recent Stratechery Interview, that Google started monetizing Search less than two years after its public launch; it is search revenue, far more than venture capital money, that has undergirded all of Google’s innovation over the years, and is what makes them a behemoth today. In that light OpenAI’s refusal to launch and iterate an ads product for ChatGPT — now three years old — is a dereliction of business duty, particularly as the company signs deals for over a trillion dollars of compute.
And, on the flip side, it means that Google has the resources to take on ChatGPT’s consumer lead with a World War I style war of attrition; OpenAI’s lead should be unassailable, but the company’s insistence on monetizing solely via subscriptions, with a degraded user experience for most users and price elasticity challenges in terms of revenue maximization, is very much opening up the door to a company that actually cares about making money.
To put it another way, the long-term threat to Nvidia from TPUs is margin dilution; the challenge of physical products is you do have to actually charge the people who buy them, which invites potentially unfavorable comparisons to cheaper alternatives, particularly as buyers get bigger and more price sensitive. The reason to be more optimistic about OpenAI is that an advertising model flips this on its head: because users don’t pay, there is no ceiling on how much you can make from them, which, by extension, means that the bigger you get the better your margins have the potential to be, and thus the total size of your investments. Again, however, the problem is that the advertising model doesn’t yet exist.
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AkhenOsiris
$AMZN
Amazon’s AI chatbot, Rufus, saw a surge of adoption on Black Friday, according to new data published over the weekend by market intelligence firm Sensor Tower. In the U.S., Amazon sessions that resulted in a purchase surged 100% on Black Friday compared with the trailing 30 days, while sessions that resulted in a purchase and didn’t include Rufus increased by only 20%.
In addition, Amazon saw a 75% day-over-day increase for sessions that included Rufus and resulted in a purchase, compared with just a 35% day-over-day increase for sessions without Rufus that had resulted in a purchase.
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$AMZN
Amazon’s AI chatbot, Rufus, saw a surge of adoption on Black Friday, according to new data published over the weekend by market intelligence firm Sensor Tower. In the U.S., Amazon sessions that resulted in a purchase surged 100% on Black Friday compared with the trailing 30 days, while sessions that resulted in a purchase and didn’t include Rufus increased by only 20%.
In addition, Amazon saw a 75% day-over-day increase for sessions that included Rufus and resulted in a purchase, compared with just a 35% day-over-day increase for sessions without Rufus that had resulted in a purchase.
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AkhenOsiris
$AMZN
The firm also noted that Amazon sessions that involved the AI chatbot outpaced total website sessions.
On Black Friday, Amazon’s total website sessions increased by 20% day over day, while those that involved Rufus were up by 35%.
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$AMZN
The firm also noted that Amazon sessions that involved the AI chatbot outpaced total website sessions.
On Black Friday, Amazon’s total website sessions increased by 20% day over day, while those that involved Rufus were up by 35%.
$AMZN
Amazon’s AI chatbot, Rufus, saw a surge of adoption on Black Friday, according to new data published over the weekend by market intelligence firm Sensor Tower. In the U.S., Amazon sessions that resulted in a purchase surged 100% on Black Friday compared with the trailing 30 days, while sessions that resulted in a purchase and didn’t include Rufus increased by only 20%.
In addition, Amazon saw a 75% day-over-day increase for sessions that included Rufus and resulted in a purchase, compared with just a 35% day-over-day increase for sessions without Rufus that had resulted in a purchase. tweet
AkhenOsiris
No surprise but good to know that the guys poring over the books agree that CNN is indeed a 0
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No surprise but good to know that the guys poring over the books agree that CNN is indeed a 0
BREAKING: Bidders on @wbd say the board has really warmed to a @netflix offer (kudos to Steve Sunshine) for a lot of reasons including the chemistry between Zas and Sarandos but are worried about the regulatory hurdles, as I reported today in the @nypost, including a 2-year slog through Trump DOJ antitrust, EU exams even before this even gets to court. Other thing I picked up is that the value of the $WBD cable properties ie @CNN are considered pretty di minimis in the context of the entire transaction tweet
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RT @onechancefreedm: Japan’s 10 Year Is Ringing An Alarm Bell And Here’s What It Really Means
Japan’s 10 year yield pushing toward 1.9% in Japan is a seismic shift. For the better part of 30 years, that bond wasn’t a market instrument, it was a policy prop. The BoJ pinned it near zero, bought most of the market, and treated the yield as more of a message than a price.
Now it’s acting like a real bond again. And this sudden climb is the market saying you can’t hold back the tide forever.
Inflation has stuck around. Japan’s debt load is enormous. And with the BoJ stepping back from yield curve control, investors are finally demanding something closer to a real return. The whole curve 2 year, 5 year, 10 year, 30 year is lifting in a way Japan hasn’t seen since before the global financial crisis.
This isn’t a clean normalization story. It’s the market testing how far Japan can walk away from three decades of emergency style policy before something snaps.
What Happens If the Global Cycle Breaks?
Here’s the critical part no one wants to talk about: this shift only holds if the world stays afloat.
If the global economy rolls over into a real recession or worse, a deflationary shock…Japan will blink first. No country is more scarred by deflation. If growth cracks, trade slows, and global prices fall, the BoJ won’t sit back and watch yields drift upward while the domestic economy sinks.
They’ll push rates back toward the floor. They’ll revive bond buying. They may not bring back the old, rigid yield caps, but they’ll throw enough tools at the curve to keep borrowing costs from choking the system.
The difference this time is they know the side effects with broken bond liquidity, weak banks, a perpetually soft yen that can become a liability if import costs spike. So the rescue will be messier, more improvised, but still inevitable.
The Real Message Behind the Move
So today’s 10 year spike isn’t Japan saying they love high rates now. It’s the market asking how long can you sustain this without breaking something?
If the global cycle holds up, Japan is inching back toward positive rates after 30 years underwater. If the cycle cracks, this move reverses fast, and the BoJ returns to its old instinct of cutting hard, stabilize the curve, fight deflation at all costs.
That’s the real takeaway…Japan is trying to leave the zero rate world behind, but the exit ramp is narrow. One global downturn, and they’re right back in the old playbook.
tweet
RT @onechancefreedm: Japan’s 10 Year Is Ringing An Alarm Bell And Here’s What It Really Means
Japan’s 10 year yield pushing toward 1.9% in Japan is a seismic shift. For the better part of 30 years, that bond wasn’t a market instrument, it was a policy prop. The BoJ pinned it near zero, bought most of the market, and treated the yield as more of a message than a price.
Now it’s acting like a real bond again. And this sudden climb is the market saying you can’t hold back the tide forever.
Inflation has stuck around. Japan’s debt load is enormous. And with the BoJ stepping back from yield curve control, investors are finally demanding something closer to a real return. The whole curve 2 year, 5 year, 10 year, 30 year is lifting in a way Japan hasn’t seen since before the global financial crisis.
This isn’t a clean normalization story. It’s the market testing how far Japan can walk away from three decades of emergency style policy before something snaps.
What Happens If the Global Cycle Breaks?
Here’s the critical part no one wants to talk about: this shift only holds if the world stays afloat.
If the global economy rolls over into a real recession or worse, a deflationary shock…Japan will blink first. No country is more scarred by deflation. If growth cracks, trade slows, and global prices fall, the BoJ won’t sit back and watch yields drift upward while the domestic economy sinks.
They’ll push rates back toward the floor. They’ll revive bond buying. They may not bring back the old, rigid yield caps, but they’ll throw enough tools at the curve to keep borrowing costs from choking the system.
The difference this time is they know the side effects with broken bond liquidity, weak banks, a perpetually soft yen that can become a liability if import costs spike. So the rescue will be messier, more improvised, but still inevitable.
The Real Message Behind the Move
So today’s 10 year spike isn’t Japan saying they love high rates now. It’s the market asking how long can you sustain this without breaking something?
If the global cycle holds up, Japan is inching back toward positive rates after 30 years underwater. If the cycle cracks, this move reverses fast, and the BoJ returns to its old instinct of cutting hard, stabilize the curve, fight deflation at all costs.
That’s the real takeaway…Japan is trying to leave the zero rate world behind, but the exit ramp is narrow. One global downturn, and they’re right back in the old playbook.
BREAKING: Japan's 10Y Government Bond Yield surges to 1.84%, its highest level since April 2008.
This chart is concerning to say the least. https://t.co/fBkMMyBnqy tweet
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RT @onechancefreedm: What Japan’s 2 Year at 1% Is Really Telling Us
Japan’s 2 year yield hitting 1% might look unremarkable to anyone used to U.S. or European rates. But in Japan, that number is a siren. It’s the market saying for the first time since 2008 that short term yen money is no longer free.
For decades, Japan was the global anchor of zero: zero policy rate, zero bond yield, zero cost to borrow yen. It made the country the world’s quiet funding machine. When the 2 year lifts to 1%, it’s the clearest signal yet that this long standing equilibrium is breaking.
And it’s not happening in a vacuum. Markets are pricing in a real chance of another BOJ hike 57% to 62% odds into December and expectations that policy rates could end up closer to 0.75% next year. In other words, investors no longer believe in the eternal zero story. They now see a Japan that might keep rates positive for a while.
Yet underneath, the economy isn’t exactly glowing. Growth is uneven. The demographic drag is enormous. Productivity is lukewarm. So you’ve got this uncomfortable mix of an economy too fragile for aggressive tightening, but a bond market too restless to sit at crisis era yields forever. The 2 year is caught right between those opposing forces.
How Long Can This Hold?
This shift is real, but it isn’t bulletproof. If the global economy cracks into a true deflation scare with falling demand, slipping prices, rising unemployment, Japan will not defend a 1% 2 year just to prove a point.
No country fears deflation like Japan does. It’s the ghost that haunted them for 30 years. In a global downturn, the BOJ would absolutely lean back in and cut rates, ramp up bond buying, reopen liquidity channels, and cushion the curve. That reflex is baked into their institution.
The difference now is that they won’t want to recreate the old mistakes. Hard yield caps, negative rates, and a frozen JGB market all came with serious side effects, a broken bond market, crushed bank margins, and a yen that became too weak at exactly the wrong time. So even if they’re forced back down, they’ll likely aim for near zero with more flexibility, not a rigid return to the past.
How I See the Bigger Picture
Right now, a 1% 2 year tightens things at the margins. It makes yen borrowing more expensive. It weakens the carry trade. And it gives Japanese investors a reason to bring money home rather than chasing yield abroad. That quietly pulls liquidity out of the global system, something markets haven’t had to account for in years.
But you can’t look at this as a permanent state. It’s a snapshot: Japan’s attempt to reenter a world of positive rates, as long as the global cycle holds.
If that cycle holds, the move matters for currencies, for Treasuries, for global risk appetite. If the cycle breaks, Japan will be one of the first to pivot, maybe not back to the old zero forever regime, but definitely toward easing.
So the message is clear that the zero rate era is fading, but it’s not extinct. It’s sitting right under the surface, waiting for the next global shock to decide whether Japan stays on this new path or snaps back to what it knows best.
tweet
RT @onechancefreedm: What Japan’s 2 Year at 1% Is Really Telling Us
Japan’s 2 year yield hitting 1% might look unremarkable to anyone used to U.S. or European rates. But in Japan, that number is a siren. It’s the market saying for the first time since 2008 that short term yen money is no longer free.
For decades, Japan was the global anchor of zero: zero policy rate, zero bond yield, zero cost to borrow yen. It made the country the world’s quiet funding machine. When the 2 year lifts to 1%, it’s the clearest signal yet that this long standing equilibrium is breaking.
And it’s not happening in a vacuum. Markets are pricing in a real chance of another BOJ hike 57% to 62% odds into December and expectations that policy rates could end up closer to 0.75% next year. In other words, investors no longer believe in the eternal zero story. They now see a Japan that might keep rates positive for a while.
Yet underneath, the economy isn’t exactly glowing. Growth is uneven. The demographic drag is enormous. Productivity is lukewarm. So you’ve got this uncomfortable mix of an economy too fragile for aggressive tightening, but a bond market too restless to sit at crisis era yields forever. The 2 year is caught right between those opposing forces.
How Long Can This Hold?
This shift is real, but it isn’t bulletproof. If the global economy cracks into a true deflation scare with falling demand, slipping prices, rising unemployment, Japan will not defend a 1% 2 year just to prove a point.
No country fears deflation like Japan does. It’s the ghost that haunted them for 30 years. In a global downturn, the BOJ would absolutely lean back in and cut rates, ramp up bond buying, reopen liquidity channels, and cushion the curve. That reflex is baked into their institution.
The difference now is that they won’t want to recreate the old mistakes. Hard yield caps, negative rates, and a frozen JGB market all came with serious side effects, a broken bond market, crushed bank margins, and a yen that became too weak at exactly the wrong time. So even if they’re forced back down, they’ll likely aim for near zero with more flexibility, not a rigid return to the past.
How I See the Bigger Picture
Right now, a 1% 2 year tightens things at the margins. It makes yen borrowing more expensive. It weakens the carry trade. And it gives Japanese investors a reason to bring money home rather than chasing yield abroad. That quietly pulls liquidity out of the global system, something markets haven’t had to account for in years.
But you can’t look at this as a permanent state. It’s a snapshot: Japan’s attempt to reenter a world of positive rates, as long as the global cycle holds.
If that cycle holds, the move matters for currencies, for Treasuries, for global risk appetite. If the cycle breaks, Japan will be one of the first to pivot, maybe not back to the old zero forever regime, but definitely toward easing.
So the message is clear that the zero rate era is fading, but it’s not extinct. It’s sitting right under the surface, waiting for the next global shock to decide whether Japan stays on this new path or snaps back to what it knows best.
JAPAN 2-YEAR YIELD RISES TO 1% FOR FIRST TIME SINCE 2008 tweet
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RT @onechancefreedm: When Leverage Meets Reality And The Real Story Behind Bitcoin’s Sudden Drop
This kind of straight down move almost never comes from some sudden revelation about Bitcoin itself. It’s what happens when a heavily leveraged market runs into a shift in the macro weather. The drop wasn’t about fundamentals, it was the structure underneath the price giving out.
For weeks the market was tilted one way. Traders were leaning long, funding was rich, and the whole space was positioned for the idea that the Fed was about to turn friendlier and liquidity was right around the corner. When positioning gets that one sided, it only takes a small shove to set off the avalanche. One wave of selling triggers stops; stops trigger liquidations; liquidations trigger more selling. Prices don’t fall, they get dumped through the floor.
Why Now, Not Yesterday
The timing isn’t random. Yields across the world have been creeping higher again, U.S. bonds, Japan’s curve, all of it. That’s a quiet signal that liquidity isn’t loosening yet. And layered on top of it is the reality that the Fed ending QT tomorrow doesn’t automatically mean liquidity is flooding back into markets tomorrow.
Yes the Fed cut twice this year. And yes there’s a strong chance of a third cut in December. But QT officially ending tomorrow doesn’t flip the switch. It just stops the balance sheet from shrinking further. The cash everyone expects from this turn doesn’t show up instantly; historically it takes time to work its way into the real economy. Markets, especially crypto, got ahead of that timing.
So you had high leverage, rising yields, and a dawning realization that the liquidity moment everyone front ran isn’t immediate. And in that moment of hesitation, Bitcoin cracked exactly where it was most vulnerable: the leveraged long side of the book.
The Bigger Meaning
This wasn’t Bitcoin failing. This was leverage getting cleared out because the macro backdrop pulled the rug from underneath a crowded trade. The long term story hasn’t changed, but the short term path is still shaped by a world where rates are high, liquidity is slow, and global funding conditions are tightening at the edges.
QT ending is good over time but it doesn’t save traders who were already stretched. A December cut is likely but it won’t rescue bad positioning ahead of time. And when yields rise, even quietly, traders start trimming risk. Crypto is always the first place where that stress shows up because it’s where the leverage lives.
So the move today wasn’t about sentiment or belief. It was a reminder that even in a market with a strong long term narrative, the near term mechanics still matter. Liquidity hasn’t shown up yet. Rates are still high. And in that kind of world, over extended positions don’t unwind gently, they blow up all at once.
tweet
RT @onechancefreedm: When Leverage Meets Reality And The Real Story Behind Bitcoin’s Sudden Drop
This kind of straight down move almost never comes from some sudden revelation about Bitcoin itself. It’s what happens when a heavily leveraged market runs into a shift in the macro weather. The drop wasn’t about fundamentals, it was the structure underneath the price giving out.
For weeks the market was tilted one way. Traders were leaning long, funding was rich, and the whole space was positioned for the idea that the Fed was about to turn friendlier and liquidity was right around the corner. When positioning gets that one sided, it only takes a small shove to set off the avalanche. One wave of selling triggers stops; stops trigger liquidations; liquidations trigger more selling. Prices don’t fall, they get dumped through the floor.
Why Now, Not Yesterday
The timing isn’t random. Yields across the world have been creeping higher again, U.S. bonds, Japan’s curve, all of it. That’s a quiet signal that liquidity isn’t loosening yet. And layered on top of it is the reality that the Fed ending QT tomorrow doesn’t automatically mean liquidity is flooding back into markets tomorrow.
Yes the Fed cut twice this year. And yes there’s a strong chance of a third cut in December. But QT officially ending tomorrow doesn’t flip the switch. It just stops the balance sheet from shrinking further. The cash everyone expects from this turn doesn’t show up instantly; historically it takes time to work its way into the real economy. Markets, especially crypto, got ahead of that timing.
So you had high leverage, rising yields, and a dawning realization that the liquidity moment everyone front ran isn’t immediate. And in that moment of hesitation, Bitcoin cracked exactly where it was most vulnerable: the leveraged long side of the book.
The Bigger Meaning
This wasn’t Bitcoin failing. This was leverage getting cleared out because the macro backdrop pulled the rug from underneath a crowded trade. The long term story hasn’t changed, but the short term path is still shaped by a world where rates are high, liquidity is slow, and global funding conditions are tightening at the edges.
QT ending is good over time but it doesn’t save traders who were already stretched. A December cut is likely but it won’t rescue bad positioning ahead of time. And when yields rise, even quietly, traders start trimming risk. Crypto is always the first place where that stress shows up because it’s where the leverage lives.
So the move today wasn’t about sentiment or belief. It was a reminder that even in a market with a strong long term narrative, the near term mechanics still matter. Liquidity hasn’t shown up yet. Rates are still high. And in that kind of world, over extended positions don’t unwind gently, they blow up all at once.
BREAKING: Bitcoin falls -$4,000 in 2 hours as mass liquidations return.
$400 million worth of levered longs have been liquidated over the last 60 minutes. https://t.co/qKB7MYJapu tweet
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RT @onechancefreedm: The Charts Are Saying One Thing: Crypto Front Loaded a Liquidity Story That Hasn’t Arrived Yet
If you zoom out and look at all of these side by side, there’s a single story running through them: the air is slowly coming out of a market that ran too far, too fast, on a narrative that hasn’t materialized yet.
SOL and XRP both tell you the same thing in different shapes. They each had their big run, sentiment got loud, and then the bid faded. The rallies over the last few months weren’t new demand, they were aftershocks. Every bounce has been weaker than the last, and the market caps have been grinding lower in that way that doesn’t look dramatic on a single day, but looks unmistakable over a year. That’s what a slow, steady risk off shift looks like.
BTC’s weekly structure makes it even clearer. Price losing the 50 week moving average, RSI rolling over, momentum drifting from controlled strength into sloppy weakness, that’s not a blow off top, it’s a market that ran ahead of the macro backdrop and is now slipping back to meet it. When you see volatility rising into downside, you’re not watching people sell because they suddenly hate Bitcoin; you’re watching crowded leverage unwind in real time.
And the BTC monthly chart seals it. A 20% drawdown with a near vertical drop tells you there was too much leverage leaning in one direction, and the moment macro wobbled without injecting liquidity, velocity cooling, that positioning got flushed.
What It All Means Together
The takeaway is that crypto priced in the idea of easier liquidity long before liquidity actually arrived. Markets traded the story, not the reality. And now the reality is catching up.
Money is still expensive. Activity is slowing. Liquidity exists in the system, sure but it’s sitting in T-bills and money markets, not chasing beta. Until the real economy actually feels the effects of rate cuts and easier conditions which historically takes quarters, not weeks every rally is going to feel heavy, and every air pocket is going to hit harder than it should.
This is a market adjusting back to the world it’s actually in, not the one it hoped would show up overnight.
Highly recommend giving @levenson_david
a follow.
tweet
RT @onechancefreedm: The Charts Are Saying One Thing: Crypto Front Loaded a Liquidity Story That Hasn’t Arrived Yet
If you zoom out and look at all of these side by side, there’s a single story running through them: the air is slowly coming out of a market that ran too far, too fast, on a narrative that hasn’t materialized yet.
SOL and XRP both tell you the same thing in different shapes. They each had their big run, sentiment got loud, and then the bid faded. The rallies over the last few months weren’t new demand, they were aftershocks. Every bounce has been weaker than the last, and the market caps have been grinding lower in that way that doesn’t look dramatic on a single day, but looks unmistakable over a year. That’s what a slow, steady risk off shift looks like.
BTC’s weekly structure makes it even clearer. Price losing the 50 week moving average, RSI rolling over, momentum drifting from controlled strength into sloppy weakness, that’s not a blow off top, it’s a market that ran ahead of the macro backdrop and is now slipping back to meet it. When you see volatility rising into downside, you’re not watching people sell because they suddenly hate Bitcoin; you’re watching crowded leverage unwind in real time.
And the BTC monthly chart seals it. A 20% drawdown with a near vertical drop tells you there was too much leverage leaning in one direction, and the moment macro wobbled without injecting liquidity, velocity cooling, that positioning got flushed.
What It All Means Together
The takeaway is that crypto priced in the idea of easier liquidity long before liquidity actually arrived. Markets traded the story, not the reality. And now the reality is catching up.
Money is still expensive. Activity is slowing. Liquidity exists in the system, sure but it’s sitting in T-bills and money markets, not chasing beta. Until the real economy actually feels the effects of rate cuts and easier conditions which historically takes quarters, not weeks every rally is going to feel heavy, and every air pocket is going to hit harder than it should.
This is a market adjusting back to the world it’s actually in, not the one it hoped would show up overnight.
Highly recommend giving @levenson_david
a follow.
https://t.co/2MAdCZxL4t tweet
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Quiver Quantitative
Earlier this year, a stock trade by Representative Robert Bresnahan caught our eye.
We posted this report.
$CRDO has now risen 169% since his trade.
It just rose another 12% in after-hours trading. https://t.co/wPdOQ123PR
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Earlier this year, a stock trade by Representative Robert Bresnahan caught our eye.
We posted this report.
$CRDO has now risen 169% since his trade.
It just rose another 12% in after-hours trading. https://t.co/wPdOQ123PR
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EndGame Macro
Reading Between the Lines of the ISM Manufacturing Report: A Cooling Economy in Motion
If you read this month’s ISM report without overthinking it, it comes across pretty plainly: the manufacturing side of the economy is still slowing, and the parts that look healthy are being held up by things that won’t last. The PMI at 48.2 marks nine straight months of contraction, new orders fell again, backlogs shrank for the 38th month, and employment continues to roll over. Those aren’t noisy month to month wiggles. they’re long stretches of weakness, the kind that only show up when demand has been soft for a long time. You can hear it in the actual comments too: companies talking about cutting staff, customers refusing to plan ahead, and everyone tiptoeing around uncertainty. None of that sounds like a sector that’s confident about next year.
The Awkward Mix That Doesn’t Quite Add Up
At the same time, the report throws out a few numbers that don’t match the slowdown narrative on the surface. Production actually rose this month, and customers inventories are still marked as too low, which usually hints at future restocking. Prices are also still rising, not dramatically but enough to keep the prices index in the high 50s. On paper, that’s the kind of mix you’d expect from an expansion: higher output, low inventories, firm prices. But when you look at why these things are happening, the story gets more fragile. Production is up because factories are burning through old backlogs, not because new demand is coming in. Customers’ inventories are too low because they’re scared to commit, they’re ordering only what they need right now. And prices aren’t rising because buyers are flush with cash; they’re rising because tariffs and input costs are working their way through the system. It’s late cycle behavior dressed up as resilience.
Why This Can Slide Toward Deflation
My biggest takeaway from all of this is that the underlying momentum is fading, and the more companies rely on cutting labor and squeezing margins to keep things steady, the closer they get to the point where something finally breaks. When backlogs run out, and 38 months of contraction tells you they already have production eventually has to fall. When customers stay cautious long enough, low inventories stop being bullish and start being a sign that people simply don’t want to hold excess goods. And when firms keep trying to raise prices into weakening demand, there’s a point where the pricing power just cracks. That’s how an inflation story quietly flips into a disinflation or even deflation story: first volumes roll over, then margins, then prices. You can already see the outline. The report doesn’t scream recession or collapse, it’s quieter than that but it’s full of the kind of slow, grinding weakness that eventually forces companies to lower prices because demand just isn’t there anymore. And once that shift happens, it tends to move faster than people expect.
tweet
Reading Between the Lines of the ISM Manufacturing Report: A Cooling Economy in Motion
If you read this month’s ISM report without overthinking it, it comes across pretty plainly: the manufacturing side of the economy is still slowing, and the parts that look healthy are being held up by things that won’t last. The PMI at 48.2 marks nine straight months of contraction, new orders fell again, backlogs shrank for the 38th month, and employment continues to roll over. Those aren’t noisy month to month wiggles. they’re long stretches of weakness, the kind that only show up when demand has been soft for a long time. You can hear it in the actual comments too: companies talking about cutting staff, customers refusing to plan ahead, and everyone tiptoeing around uncertainty. None of that sounds like a sector that’s confident about next year.
The Awkward Mix That Doesn’t Quite Add Up
At the same time, the report throws out a few numbers that don’t match the slowdown narrative on the surface. Production actually rose this month, and customers inventories are still marked as too low, which usually hints at future restocking. Prices are also still rising, not dramatically but enough to keep the prices index in the high 50s. On paper, that’s the kind of mix you’d expect from an expansion: higher output, low inventories, firm prices. But when you look at why these things are happening, the story gets more fragile. Production is up because factories are burning through old backlogs, not because new demand is coming in. Customers’ inventories are too low because they’re scared to commit, they’re ordering only what they need right now. And prices aren’t rising because buyers are flush with cash; they’re rising because tariffs and input costs are working their way through the system. It’s late cycle behavior dressed up as resilience.
Why This Can Slide Toward Deflation
My biggest takeaway from all of this is that the underlying momentum is fading, and the more companies rely on cutting labor and squeezing margins to keep things steady, the closer they get to the point where something finally breaks. When backlogs run out, and 38 months of contraction tells you they already have production eventually has to fall. When customers stay cautious long enough, low inventories stop being bullish and start being a sign that people simply don’t want to hold excess goods. And when firms keep trying to raise prices into weakening demand, there’s a point where the pricing power just cracks. That’s how an inflation story quietly flips into a disinflation or even deflation story: first volumes roll over, then margins, then prices. You can already see the outline. The report doesn’t scream recession or collapse, it’s quieter than that but it’s full of the kind of slow, grinding weakness that eventually forces companies to lower prices because demand just isn’t there anymore. And once that shift happens, it tends to move faster than people expect.
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