AkhenOsiris
RT @obsidiancap1: 25% return in 4 wks since goog’s VP of infra Amin Vahdat went on pod banging drum about demand and TPU utilization…
tweet
RT @obsidiancap1: 25% return in 4 wks since goog’s VP of infra Amin Vahdat went on pod banging drum about demand and TPU utilization…
How can ppl still think 1) there isn’t alpha in mega caps, and 2) all info is priced in?
$GOOG AI/infra VP went on pod right before earnings and publicly disclosed they are seeing “tremendous” demand and 100% utilization rates on TPUs
+8% AH on a $3 trillion mkt cap
(Yes I know non-cloud search beat too) tweet
Offshore
Photo
Dimitry Nakhla | Babylon Capital®
RT @DimitryNakhla: A quality valuation analysis on $META 🧘🏽♂️
•NTM P/E Ratio: 19.89x
•3-Year Mean: 22.75x
•NTM FCF Yield: 1.50%
•3-Year Mean: 3.20%
As you can see, $META appears to be trading below fair value on an earnings multiple
Going forward, investors can expect to receive ~14% MORE in EPS & ~53% LESS in FCF per share🧠***
Before we get into valuation, let’s take a look at why $META is a quality business
BALANCE SHEET✅
•Cash & Equivalents: $44.45B
•Long-Term Debt: $28.34B
$META has an excellent balance sheet, an AA- S&P Credit Rating & 112x FFO Interest Coverage Ratio
RETURN ON CAPITAL✅
•2021: 33.7%
•2022: 22.0%
•2023: 25.7%
•2024: 29.4%
•LTM: 32.9%
RETURN ON EQUITY✅
•2021: 31.1%
•2022: 18.5%
•2023: 28.0%
•2024: 37.1%
•LTM: 32.6%
$META has great return metrics, highlighting the financial efficiency of the business
REVENUES✅
•2020: $85.97B
•2025E: $199.46B
•CAGR: 18.33%
FREE CASH FLOW✅*
•2020: $23.58B
•2025E: $41.47B
•CAGR: 11.95%
•2028E: $74B*
NORMALIZED EPS✅
•2020: $10.09
•2025E: $25.99
•CAGR: 20.83%
SHARE BUYBACKS✅
•2019 Shares Outstanding: 2.88B
•LTM Shares Outstanding: 2.59B
By reducing its shares outstanding ~10%, $META increased its EPS by ~11% (assuming 0 growth)
MARGINS✅
•LTM Gross Margins: 82.0%
•LTM Operating Margins: 42.6%
•LTM Net Income Margins: 30.9%
***NOW TO VALUATION 🧠
As stated above, investors can expect to receive ~14% MORE in EPS & ~53% LESS in FCF per share
Using Benjamin Graham’s 2G rule of thumb, $META has to grow earnings at a 9.95% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2026 - 2028 EPS growth over the next few years to be slightly less than the (9.95%) required growth rate:
2025E: $25.99 (9% YoY) *FY Dec
2026E: $30.31 (17% YoY)
2027E: $33.55 (11% YoY)
2028E: $35.02 (4% YoY)
$META has a decent track record of meeting analyst estimates ~2 years out, so let’s assume $META ends 2028 with $35.02 in EPS & see its CAGR potential assuming different multiples
24x P/E: $840💵 … ~12.2% CAGR
23x P/E: $805💵 … ~10.6% CAGR
22x P/E: $770💵 … ~9.1% CAGR
21x P/E: $735💵 … ~7.5% CAGR
20x P/E: $700💵 … ~5.8% CAGR
As you can see, $META appears to have double-digit CAGR potential if we assume >23x earnings, a multiple near its 3-year mean and a multiple that’s potentially justified given its growth rate, balance sheet, visionary leadership & AI-related investments
As I’ve mentioned before: “… the increased investment in future growth and necessary Al development, which has the potential to lead to better growth prospects, should be viewed with a bullish tone rather than a bearish one” — (which can lead to a sustainable re-rating over the next few years)
Today at $594💵 $META appears to be slightly undervalued, those buying today have a small margin of safety and will not need to rely on margin expansion
I consider $META a great buy ~$535💵, offering ~11% CAGR assuming a conservative 21x 2028 EPS est
#stocks #investing
___
𝐃𝐈𝐒𝐂𝐋𝐎𝐒𝐔𝐑𝐄‼️
𝐓𝐡𝐢𝐬 𝐜𝐨𝐧𝐭𝐞𝐧𝐭 𝐢𝐬 𝐩𝐫𝐨𝐯𝐢𝐝𝐞𝐝 𝐟𝐨𝐫 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐚𝐧𝐝 𝐞𝐝𝐮𝐜𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐩𝐮𝐫𝐩𝐨𝐬𝐞𝐬 𝐨𝐧𝐥𝐲 𝐚𝐧𝐝 𝐝𝐨𝐞𝐬 𝐧𝐨𝐭 𝐜𝐨𝐧𝐬𝐭𝐢𝐭𝐮𝐭𝐞 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐚𝐝𝐯𝐢𝐜𝐞, 𝐚𝐧 𝐨𝐟𝐟𝐞𝐫, 𝐨𝐫 𝐚 𝐬𝐨𝐥𝐢𝐜𝐢𝐭𝐚𝐭𝐢𝐨𝐧 𝐭𝐨 𝐛𝐮𝐲 𝐨𝐫 𝐬𝐞𝐥𝐥 𝐚𝐧𝐲 𝐬𝐞𝐜𝐮𝐫𝐢𝐭𝐲.
𝐁𝐚𝐛𝐲𝐥𝐨𝐧 𝐂𝐚𝐩𝐢𝐭𝐚𝐥® 𝐚𝐧𝐝 𝐢𝐭𝐬 𝐫𝐞𝐩𝐫𝐞𝐬𝐞𝐧𝐭𝐚𝐭𝐢𝐯𝐞𝐬 𝐦𝐚𝐲 𝐡𝐨𝐥𝐝 𝐩𝐨𝐬𝐢𝐭𝐢𝐨𝐧𝐬 𝐢𝐧 𝐭𝐡𝐞 𝐬𝐞𝐜𝐮𝐫𝐢𝐭𝐢𝐞𝐬 𝐝𝐢𝐬𝐜𝐮𝐬𝐬𝐞𝐝. 𝐀𝐧𝐲 𝐨𝐩𝐢𝐧𝐢𝐨𝐧𝐬 𝐞𝐱𝐩𝐫𝐞𝐬𝐬𝐞𝐝 𝐚𝐫𝐞 𝐚𝐬 𝐨𝐟 𝐭𝐡𝐞 𝐝𝐚𝐭𝐞 𝐨𝐟 𝐩𝐮𝐛𝐥𝐢𝐜𝐚𝐭𝐢𝐨𝐧 𝐚𝐧𝐝 𝐬𝐮𝐛𝐣𝐞𝐜𝐭 𝐭𝐨 𝐜𝐡𝐚𝐧𝐠𝐞 𝐰𝐢𝐭𝐡𝐨𝐮𝐭 𝐧𝐨𝐭𝐢𝐜𝐞.
𝐈𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐡𝐚𝐬 𝐛𝐞𝐞𝐧 𝐨𝐛𝐭𝐚𝐢𝐧𝐞𝐝 𝐟𝐫𝐨𝐦 𝐬𝐨𝐮𝐫𝐜𝐞𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞𝐝 𝐭𝐨 𝐛𝐞 𝐫𝐞𝐥𝐢𝐚𝐛𝐥𝐞 𝐛𝐮𝐭 𝐢𝐬 𝐧𝐨𝐭 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞𝐝 𝐚𝐬 𝐭𝐨 𝐚𝐜𝐜𝐮𝐫𝐚𝐜𝐲 𝐨𝐫 𝐜𝐨𝐦𝐩𝐥𝐞𝐭𝐞𝐧𝐞𝐬𝐬. 𝐏𝐚𝐬𝐭 𝐩𝐞𝐫𝐟𝐨𝐫[...]
RT @DimitryNakhla: A quality valuation analysis on $META 🧘🏽♂️
•NTM P/E Ratio: 19.89x
•3-Year Mean: 22.75x
•NTM FCF Yield: 1.50%
•3-Year Mean: 3.20%
As you can see, $META appears to be trading below fair value on an earnings multiple
Going forward, investors can expect to receive ~14% MORE in EPS & ~53% LESS in FCF per share🧠***
Before we get into valuation, let’s take a look at why $META is a quality business
BALANCE SHEET✅
•Cash & Equivalents: $44.45B
•Long-Term Debt: $28.34B
$META has an excellent balance sheet, an AA- S&P Credit Rating & 112x FFO Interest Coverage Ratio
RETURN ON CAPITAL✅
•2021: 33.7%
•2022: 22.0%
•2023: 25.7%
•2024: 29.4%
•LTM: 32.9%
RETURN ON EQUITY✅
•2021: 31.1%
•2022: 18.5%
•2023: 28.0%
•2024: 37.1%
•LTM: 32.6%
$META has great return metrics, highlighting the financial efficiency of the business
REVENUES✅
•2020: $85.97B
•2025E: $199.46B
•CAGR: 18.33%
FREE CASH FLOW✅*
•2020: $23.58B
•2025E: $41.47B
•CAGR: 11.95%
•2028E: $74B*
NORMALIZED EPS✅
•2020: $10.09
•2025E: $25.99
•CAGR: 20.83%
SHARE BUYBACKS✅
•2019 Shares Outstanding: 2.88B
•LTM Shares Outstanding: 2.59B
By reducing its shares outstanding ~10%, $META increased its EPS by ~11% (assuming 0 growth)
MARGINS✅
•LTM Gross Margins: 82.0%
•LTM Operating Margins: 42.6%
•LTM Net Income Margins: 30.9%
***NOW TO VALUATION 🧠
As stated above, investors can expect to receive ~14% MORE in EPS & ~53% LESS in FCF per share
Using Benjamin Graham’s 2G rule of thumb, $META has to grow earnings at a 9.95% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2026 - 2028 EPS growth over the next few years to be slightly less than the (9.95%) required growth rate:
2025E: $25.99 (9% YoY) *FY Dec
2026E: $30.31 (17% YoY)
2027E: $33.55 (11% YoY)
2028E: $35.02 (4% YoY)
$META has a decent track record of meeting analyst estimates ~2 years out, so let’s assume $META ends 2028 with $35.02 in EPS & see its CAGR potential assuming different multiples
24x P/E: $840💵 … ~12.2% CAGR
23x P/E: $805💵 … ~10.6% CAGR
22x P/E: $770💵 … ~9.1% CAGR
21x P/E: $735💵 … ~7.5% CAGR
20x P/E: $700💵 … ~5.8% CAGR
As you can see, $META appears to have double-digit CAGR potential if we assume >23x earnings, a multiple near its 3-year mean and a multiple that’s potentially justified given its growth rate, balance sheet, visionary leadership & AI-related investments
As I’ve mentioned before: “… the increased investment in future growth and necessary Al development, which has the potential to lead to better growth prospects, should be viewed with a bullish tone rather than a bearish one” — (which can lead to a sustainable re-rating over the next few years)
Today at $594💵 $META appears to be slightly undervalued, those buying today have a small margin of safety and will not need to rely on margin expansion
I consider $META a great buy ~$535💵, offering ~11% CAGR assuming a conservative 21x 2028 EPS est
#stocks #investing
___
𝐃𝐈𝐒𝐂𝐋𝐎𝐒𝐔𝐑𝐄‼️
𝐓𝐡𝐢𝐬 𝐜𝐨𝐧𝐭𝐞𝐧𝐭 𝐢𝐬 𝐩𝐫𝐨𝐯𝐢𝐝𝐞𝐝 𝐟𝐨𝐫 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐚𝐧𝐝 𝐞𝐝𝐮𝐜𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐩𝐮𝐫𝐩𝐨𝐬𝐞𝐬 𝐨𝐧𝐥𝐲 𝐚𝐧𝐝 𝐝𝐨𝐞𝐬 𝐧𝐨𝐭 𝐜𝐨𝐧𝐬𝐭𝐢𝐭𝐮𝐭𝐞 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐚𝐝𝐯𝐢𝐜𝐞, 𝐚𝐧 𝐨𝐟𝐟𝐞𝐫, 𝐨𝐫 𝐚 𝐬𝐨𝐥𝐢𝐜𝐢𝐭𝐚𝐭𝐢𝐨𝐧 𝐭𝐨 𝐛𝐮𝐲 𝐨𝐫 𝐬𝐞𝐥𝐥 𝐚𝐧𝐲 𝐬𝐞𝐜𝐮𝐫𝐢𝐭𝐲.
𝐁𝐚𝐛𝐲𝐥𝐨𝐧 𝐂𝐚𝐩𝐢𝐭𝐚𝐥® 𝐚𝐧𝐝 𝐢𝐭𝐬 𝐫𝐞𝐩𝐫𝐞𝐬𝐞𝐧𝐭𝐚𝐭𝐢𝐯𝐞𝐬 𝐦𝐚𝐲 𝐡𝐨𝐥𝐝 𝐩𝐨𝐬𝐢𝐭𝐢𝐨𝐧𝐬 𝐢𝐧 𝐭𝐡𝐞 𝐬𝐞𝐜𝐮𝐫𝐢𝐭𝐢𝐞𝐬 𝐝𝐢𝐬𝐜𝐮𝐬𝐬𝐞𝐝. 𝐀𝐧𝐲 𝐨𝐩𝐢𝐧𝐢𝐨𝐧𝐬 𝐞𝐱𝐩𝐫𝐞𝐬𝐬𝐞𝐝 𝐚𝐫𝐞 𝐚𝐬 𝐨𝐟 𝐭𝐡𝐞 𝐝𝐚𝐭𝐞 𝐨𝐟 𝐩𝐮𝐛𝐥𝐢𝐜𝐚𝐭𝐢𝐨𝐧 𝐚𝐧𝐝 𝐬𝐮𝐛𝐣𝐞𝐜𝐭 𝐭𝐨 𝐜𝐡𝐚𝐧𝐠𝐞 𝐰𝐢𝐭𝐡𝐨𝐮𝐭 𝐧𝐨𝐭𝐢𝐜𝐞.
𝐈𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐡𝐚𝐬 𝐛𝐞𝐞𝐧 𝐨𝐛𝐭𝐚𝐢𝐧𝐞𝐝 𝐟𝐫𝐨𝐦 𝐬𝐨𝐮𝐫𝐜𝐞𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞𝐝 𝐭𝐨 𝐛𝐞 𝐫𝐞𝐥𝐢𝐚𝐛𝐥𝐞 𝐛𝐮𝐭 𝐢𝐬 𝐧𝐨𝐭 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞𝐝 𝐚𝐬 𝐭𝐨 𝐚𝐜𝐜𝐮𝐫𝐚𝐜𝐲 𝐨𝐫 𝐜𝐨𝐦𝐩𝐥𝐞𝐭𝐞𝐧𝐞𝐬𝐬. 𝐏𝐚𝐬𝐭 𝐩𝐞𝐫𝐟𝐨𝐫[...]
Offshore
Dimitry Nakhla | Babylon Capital® RT @DimitryNakhla: A quality valuation analysis on $META 🧘🏽♂️ •NTM P/E Ratio: 19.89x •3-Year Mean: 22.75x •NTM FCF Yield: 1.50% •3-Year Mean: 3.20% As you can see, $META appears to be trading below fair value on an earnings…
𝐦𝐚𝐧𝐜𝐞 𝐝𝐨𝐞𝐬 𝐧𝐨𝐭 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞 𝐟𝐮𝐭𝐮𝐫𝐞 𝐫𝐞𝐬𝐮𝐥𝐭𝐬.
tweet
tweet
Offshore
Photo
EndGame Macro
Large Banks Freed, Community Banks Cushioned: The Capital Shift That Signals What’s Coming
Over the last stretch, regulators quietly rewired both ends of the banking system. At the top, they loosened the enhanced leverage rules for GSIBs, lowering the eSLR buffer and trimming TLAC and long term debt requirements. At the bottom, they lowered the community bank leverage ratio (CBLR) from 9% to 8% and doubled the grace period from two quarters to four, while allowing up to eight quarters of grace in any 5 year window.
These moves look technical, but together they tell a much bigger story: the system is being given more room to bend before the stress arrives.
Large Banks: Making Room for a Heavy Treasury Cycle
The big bank changes matter most for liquidity. The old eSLR had become a frequently binding constraint, limiting how much Treasuries, repo, and reserves GSIBs could hold. Regulators openly acknowledged this in their memo. After the recalibration, the economic tables show something striking: roughly $1.1T of extra room at bank subsidiaries for reserves and Treasuries, and about $2.1T at broker dealers for Treasuries, assuming hedging.
That’s almost $3T of potential balance sheet capacity created by design. Regulators don’t usually publish numbers like that unless they want to send a message. And the message is simple…“When Treasury issuance spikes or liquidity thins, we need the biggest banks free to step in.”
Overlay that with two rate cuts already behind us, QT ending December 1, new Treasury purchases starting December 11, and the fed funds effective rate sitting around 3.88% and you see monetary and regulatory easing moving in the same direction. They’re clearing obstacles in advance, not after the fact.
Community Banks: Extra Oxygen Before Losses Hit
The community bank rule is the other half of the picture. CRE is the Achilles’ heel here with falling property values, higher refinancing costs, and concentrated loan books. Regulators know small banks can’t raise capital quickly, especially during a downturn. So they lowered the CBLR to 8%, the statutory floor and doubled the time banks can remain in the framework if they fall below the threshold.
According to the proposal, this brings roughly 475 more banks into eligibility and opens about $64B of lending capacity for those already in the framework.
It’s not subtle, they’re letting small banks run with more leverage and more time so a wave of CRE problems doesn’t force them into immediate deleveraging or credit cuts.
The four quarter grace period and the ability to use it for up to eight quarters over five years is the loudest tell. You don’t build that unless you expect a multi year grind.
What’s Unusual And What It Signals
A few things stand out…
1. Capital relief for both GSIBs and community banks at the same time, that’s rare. Post 2008 reforms tightened cushions late in cycles; they didn’t loosen them.
2.Publishing multi trillion dollar capacity estimates, regulators almost never quantify balance sheet expansion this explicitly.
3.Dropping the CBLR to the COVID emergency level…permanently, that alone tells you where they think the cycle is heading.
4.Longer grace windows for small banks, a quiet admission that stress won’t resolve in two quarters.
These are not the moves of regulators expecting a smooth landing.
My Read And What This Foreshadows
Taken together, this is coordinated pre-crisis preparation…
•Large banks are being set up as shock absorbers for the Treasury market and the Fed’s balance sheet pivot.
•Community banks are being given time, room, and simplified rules to keep lending even as CRE losses rise.
They’re not saying the economy is breaking. They’re adjusting the architecture like they expect real stress with slower growth, higher defaults, and a refinancing wave the system can’t handle without more flexibility.
This is the scaffolding you build when you want the system to bend, not snap. tweet
Large Banks Freed, Community Banks Cushioned: The Capital Shift That Signals What’s Coming
Over the last stretch, regulators quietly rewired both ends of the banking system. At the top, they loosened the enhanced leverage rules for GSIBs, lowering the eSLR buffer and trimming TLAC and long term debt requirements. At the bottom, they lowered the community bank leverage ratio (CBLR) from 9% to 8% and doubled the grace period from two quarters to four, while allowing up to eight quarters of grace in any 5 year window.
These moves look technical, but together they tell a much bigger story: the system is being given more room to bend before the stress arrives.
Large Banks: Making Room for a Heavy Treasury Cycle
The big bank changes matter most for liquidity. The old eSLR had become a frequently binding constraint, limiting how much Treasuries, repo, and reserves GSIBs could hold. Regulators openly acknowledged this in their memo. After the recalibration, the economic tables show something striking: roughly $1.1T of extra room at bank subsidiaries for reserves and Treasuries, and about $2.1T at broker dealers for Treasuries, assuming hedging.
That’s almost $3T of potential balance sheet capacity created by design. Regulators don’t usually publish numbers like that unless they want to send a message. And the message is simple…“When Treasury issuance spikes or liquidity thins, we need the biggest banks free to step in.”
Overlay that with two rate cuts already behind us, QT ending December 1, new Treasury purchases starting December 11, and the fed funds effective rate sitting around 3.88% and you see monetary and regulatory easing moving in the same direction. They’re clearing obstacles in advance, not after the fact.
Community Banks: Extra Oxygen Before Losses Hit
The community bank rule is the other half of the picture. CRE is the Achilles’ heel here with falling property values, higher refinancing costs, and concentrated loan books. Regulators know small banks can’t raise capital quickly, especially during a downturn. So they lowered the CBLR to 8%, the statutory floor and doubled the time banks can remain in the framework if they fall below the threshold.
According to the proposal, this brings roughly 475 more banks into eligibility and opens about $64B of lending capacity for those already in the framework.
It’s not subtle, they’re letting small banks run with more leverage and more time so a wave of CRE problems doesn’t force them into immediate deleveraging or credit cuts.
The four quarter grace period and the ability to use it for up to eight quarters over five years is the loudest tell. You don’t build that unless you expect a multi year grind.
What’s Unusual And What It Signals
A few things stand out…
1. Capital relief for both GSIBs and community banks at the same time, that’s rare. Post 2008 reforms tightened cushions late in cycles; they didn’t loosen them.
2.Publishing multi trillion dollar capacity estimates, regulators almost never quantify balance sheet expansion this explicitly.
3.Dropping the CBLR to the COVID emergency level…permanently, that alone tells you where they think the cycle is heading.
4.Longer grace windows for small banks, a quiet admission that stress won’t resolve in two quarters.
These are not the moves of regulators expecting a smooth landing.
My Read And What This Foreshadows
Taken together, this is coordinated pre-crisis preparation…
•Large banks are being set up as shock absorbers for the Treasury market and the Fed’s balance sheet pivot.
•Community banks are being given time, room, and simplified rules to keep lending even as CRE losses rise.
They’re not saying the economy is breaking. They’re adjusting the architecture like they expect real stress with slower growth, higher defaults, and a refinancing wave the system can’t handle without more flexibility.
This is the scaffolding you build when you want the system to bend, not snap. tweet
Offshore
Photo
EndGame Macro
America’s Credit Rejection Rate Just Hit a Record. Here’s Why It Matters
This is the credit system quietly tightening around the edges. The NY Fed’s rejection rate for credit applicants has floated between the mid teens and low 20s for more than a decade. Even the tighter years never really broke past the 23% area. Now we’re pushing toward 25%, the highest in the entire series.
And this isn’t people afraid to apply. This is the group that did apply…for auto loans, credit cards, refis, limit increases, mortgages and got turned down. One in four being rejected is the kind of level you usually see late in a credit cycle, when lenders stop trying to grow and start trying to protect themselves.
Historically, when rejection rates rise like this and stay elevated, it’s a sign that banks are bracing for the next phase, in a quiet, defensive posture. It’s the same pattern you saw leading into the early 90s recession, the early 2000s slowdown, and again in 2007 before things really cracked.
Why It’s Happening Now
Delinquencies are rising almost everywhere just look at subprime autos, credit cards, student loans. Recent grads are struggling with both unemployment and eroding credit scores. Households have been running hotter and thinner for two full years, leaning on cards and long term car loans to fill the gap while rates climbed. And lenders aren’t blind to this; they’re seeing the deterioration show up in their own books.
There’s also the macro backdrop. Funding costs are still elevated. Commercial real estate is sitting on its own maturity wall. Regulations for both big and small banks were just loosened which, ironically, is a sign regulators are preparing for stress, not celebrating strength. When banks read that signal, they don’t accelerate lending, they get choosier.
Put yourself in the banker’s mindset…this isn’t the moment to take on a wave of borderline borrowers. So standards tighten, thresholds shift, and the marginal applicant suddenly falls on the wrong side of the line.
What It’s Foreshadowing
A rejection rate hitting a new high isn’t the end of the world, but it does tell you how the next stretch of this cycle is likely to feel.
People who’ve been relying on credit to smooth over rising costs are going to hit a wall sooner. The group already struggling with delinquencies won’t have escape valves like refinancing or higher limits. And as that happens, the pressure on household cash flows will feed back into consumption and debt service.
This is the part of the cycle that doesn’t announce itself with a crash, it shows up slowly, in charts like this one. A quarter of applicants being denied is a sign that the system is already shifting from expansion to defense.
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America’s Credit Rejection Rate Just Hit a Record. Here’s Why It Matters
This is the credit system quietly tightening around the edges. The NY Fed’s rejection rate for credit applicants has floated between the mid teens and low 20s for more than a decade. Even the tighter years never really broke past the 23% area. Now we’re pushing toward 25%, the highest in the entire series.
And this isn’t people afraid to apply. This is the group that did apply…for auto loans, credit cards, refis, limit increases, mortgages and got turned down. One in four being rejected is the kind of level you usually see late in a credit cycle, when lenders stop trying to grow and start trying to protect themselves.
Historically, when rejection rates rise like this and stay elevated, it’s a sign that banks are bracing for the next phase, in a quiet, defensive posture. It’s the same pattern you saw leading into the early 90s recession, the early 2000s slowdown, and again in 2007 before things really cracked.
Why It’s Happening Now
Delinquencies are rising almost everywhere just look at subprime autos, credit cards, student loans. Recent grads are struggling with both unemployment and eroding credit scores. Households have been running hotter and thinner for two full years, leaning on cards and long term car loans to fill the gap while rates climbed. And lenders aren’t blind to this; they’re seeing the deterioration show up in their own books.
There’s also the macro backdrop. Funding costs are still elevated. Commercial real estate is sitting on its own maturity wall. Regulations for both big and small banks were just loosened which, ironically, is a sign regulators are preparing for stress, not celebrating strength. When banks read that signal, they don’t accelerate lending, they get choosier.
Put yourself in the banker’s mindset…this isn’t the moment to take on a wave of borderline borrowers. So standards tighten, thresholds shift, and the marginal applicant suddenly falls on the wrong side of the line.
What It’s Foreshadowing
A rejection rate hitting a new high isn’t the end of the world, but it does tell you how the next stretch of this cycle is likely to feel.
People who’ve been relying on credit to smooth over rising costs are going to hit a wall sooner. The group already struggling with delinquencies won’t have escape valves like refinancing or higher limits. And as that happens, the pressure on household cash flows will feed back into consumption and debt service.
This is the part of the cycle that doesn’t announce itself with a crash, it shows up slowly, in charts like this one. A quarter of applicants being denied is a sign that the system is already shifting from expansion to defense.
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AkhenOsiris
$DKNG $FLUT $HOOD Kalshi Polymarket
Macquarie's near-term TAM assessment frames prediction markets as a material, incremental opportunity for DraftKings and FanDuel, and puts a figure of $4.4bn on the sports-only TAM and $5bn when non-sports are included.
This is largely concentrated in non-OSB states representing ~40% of the US population, led by California and Texas, the team added.
Both operators intend to launch their prediction products in Q425 or Q126 at the latest, initially focused on jurisdictions without legal sports betting.
The analysts constructed the sports-only TAM by assuming prediction handle will be 25% lower than OSB handle, reflecting fewer bet types, weaker promotional intensity and less sophisticated same-game parlay/prop inventories.
Macquarie estimates a ʻbig five'
competitive set: DraftKings, FanDuel, Kalshi, Polymarket and Robinhood.
The analysts modeled market shares of 15% for DraftKings and 17% for FanDuel for sports prediction markets, yielding roughly $700m revenue and ~$150m EBITDA each.
Blending both sports and non-sports verticals, Macquarie assigned DraftKings a 14% total prediction market share and FanDuel 16%, resulting in incremental market value creation of $2.5bn for DraftKings and $2.8bn for FanDuel.
This will be entirely additive to
current OSB economics given these markets are outside existing sportsbook jurisdictions.
Macquarie also modeled OSB cannibalization scenarios. Crucially, even with 10% cannibalization, prediction markets still generate net positive EBITDA for both DraftKings and FanDuel if they achieve the assumed 14% and 16% market shares.
In light of their view that prediction markets are a net additive, not substitutive, they believe the recent share-price declines for both operators are fundamentally overdone.
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$DKNG $FLUT $HOOD Kalshi Polymarket
Macquarie's near-term TAM assessment frames prediction markets as a material, incremental opportunity for DraftKings and FanDuel, and puts a figure of $4.4bn on the sports-only TAM and $5bn when non-sports are included.
This is largely concentrated in non-OSB states representing ~40% of the US population, led by California and Texas, the team added.
Both operators intend to launch their prediction products in Q425 or Q126 at the latest, initially focused on jurisdictions without legal sports betting.
The analysts constructed the sports-only TAM by assuming prediction handle will be 25% lower than OSB handle, reflecting fewer bet types, weaker promotional intensity and less sophisticated same-game parlay/prop inventories.
Macquarie estimates a ʻbig five'
competitive set: DraftKings, FanDuel, Kalshi, Polymarket and Robinhood.
The analysts modeled market shares of 15% for DraftKings and 17% for FanDuel for sports prediction markets, yielding roughly $700m revenue and ~$150m EBITDA each.
Blending both sports and non-sports verticals, Macquarie assigned DraftKings a 14% total prediction market share and FanDuel 16%, resulting in incremental market value creation of $2.5bn for DraftKings and $2.8bn for FanDuel.
This will be entirely additive to
current OSB economics given these markets are outside existing sportsbook jurisdictions.
Macquarie also modeled OSB cannibalization scenarios. Crucially, even with 10% cannibalization, prediction markets still generate net positive EBITDA for both DraftKings and FanDuel if they achieve the assumed 14% and 16% market shares.
In light of their view that prediction markets are a net additive, not substitutive, they believe the recent share-price declines for both operators are fundamentally overdone.
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AkhenOsiris
Anthropic Claude Productivity Assessment
Across one hundred thousand real world conversations, Claude estimates that AI reduces task completion time by 80%. We use Claude to evaluate anonymized https://t.co/cBAQCMiXmu transcripts to estimate the productivity impact of AI. According to Claude’s estimates, people typically use AI for complex tasks that would, on average, take people 1.4 hours to complete. By matching tasks to O*NET occupations and BLS wage data, we estimate these tasks would otherwise cost $55 in human labor.
The estimated scope, cost, and time savings of tasks varies widely by occupation. Based on Claude’s estimates, people use Claude for legal and management tasks that would have taken nearly two hours, but for food preparation tasks that would have taken only 30 minutes. And we find that healthcare assistance tasks can be completed 90% more quickly, whereas hardware issues see time savings of 56%. This doesn’t account for the time that humans might spend on these tasks beyond their conversation on https://t.co/cBAQCMiXmu, however, so we think these estimates might overstate current productivity effects to at least some degree.
Extrapolating these results to the economy, current generation AI models could increase annual US labor productivity growth by 1.8% over the next decade. This would double the annual growth the US has seen since 2019, and places our estimate towards the upper end of recent estimates. Taking as given Claude’s estimates of task-level efficiency gains, we use standard methods to calculate a 1.8% implied annual increase in US labor productivity over the next ten years. However, this estimate does not account for future improvements in AI models (or more sophisticated uses of current technology), which could significantly magnify AI’s economic impact.
https://t.co/napRaQfQhT
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Anthropic Claude Productivity Assessment
Across one hundred thousand real world conversations, Claude estimates that AI reduces task completion time by 80%. We use Claude to evaluate anonymized https://t.co/cBAQCMiXmu transcripts to estimate the productivity impact of AI. According to Claude’s estimates, people typically use AI for complex tasks that would, on average, take people 1.4 hours to complete. By matching tasks to O*NET occupations and BLS wage data, we estimate these tasks would otherwise cost $55 in human labor.
The estimated scope, cost, and time savings of tasks varies widely by occupation. Based on Claude’s estimates, people use Claude for legal and management tasks that would have taken nearly two hours, but for food preparation tasks that would have taken only 30 minutes. And we find that healthcare assistance tasks can be completed 90% more quickly, whereas hardware issues see time savings of 56%. This doesn’t account for the time that humans might spend on these tasks beyond their conversation on https://t.co/cBAQCMiXmu, however, so we think these estimates might overstate current productivity effects to at least some degree.
Extrapolating these results to the economy, current generation AI models could increase annual US labor productivity growth by 1.8% over the next decade. This would double the annual growth the US has seen since 2019, and places our estimate towards the upper end of recent estimates. Taking as given Claude’s estimates of task-level efficiency gains, we use standard methods to calculate a 1.8% implied annual increase in US labor productivity over the next ten years. However, this estimate does not account for future improvements in AI models (or more sophisticated uses of current technology), which could significantly magnify AI’s economic impact.
https://t.co/napRaQfQhT
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AkhenOsiris
Piper on $HOOD JV, reit OW $155 target
MIAXdx holds several derivatives licenses, including a Designated Contract Market (DCM), Derivatives Clearing Organization (DCO), and Swap Execution Facility (SEF), which will enable the joint venture to build a prediction markets exchange.
Until now, Robinhood has been using external exchanges such as Kalshi and ForecastEx for its prediction market offering, but this acquisition will allow the company to operate its own platform.
Piper Sandler views the deal as "quite positive" for Robinhood, estimating the company will receive approximately a 45% boost on its prediction market economics for contracts traded through the new joint venture.
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Piper on $HOOD JV, reit OW $155 target
MIAXdx holds several derivatives licenses, including a Designated Contract Market (DCM), Derivatives Clearing Organization (DCO), and Swap Execution Facility (SEF), which will enable the joint venture to build a prediction markets exchange.
Until now, Robinhood has been using external exchanges such as Kalshi and ForecastEx for its prediction market offering, but this acquisition will allow the company to operate its own platform.
Piper Sandler views the deal as "quite positive" for Robinhood, estimating the company will receive approximately a 45% boost on its prediction market economics for contracts traded through the new joint venture.
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