The Bond Market JUST Exposed Oracle's Scam | COLLAPSE WARNING.

in the last say four or five sessions is

down almost a clean 20%.

>> Right? I think now down about 40% from

its recent high. Clearly there is

opportunity here for management to level

set the expectations around debt

financing just how much it's planning to

raise. Uh according to a credit investor

I spoke to on Friday. The expectation is

that this is a company that needs to go

to the debt market sooner than expected

because the latest 10Q did show a

substantial rise in data center leases,

which again resurrects this whole

question around financing.

>> Well, folks, Oracle bonds are falling

off a cliff. And this is a really big

red flag because it means the money

printing Jerome Powell is doing might

just be pushing against a string. Now,

we'll look at the fundamentals and we'll

see what's actually going on because

that's what we like to do on the channel

here is talk about what's actually

happening by looking at the financials.

But this morning, I took out this cable.

And the reason I took out this cable in

the course member live stream this

morning is to provide an analogy. I said

on Friday, mind you, I said that I

expect chip selling and hardware selling

to continue. And this morning markets

were green. And I'm like, guys, this we

do this before the market opens up,

right? like guys the like don't trust

the pre-market going green this hardware

selling could keep going rapidly and

it's exactly what we've seen cororeweave

NBIS all of them falling off a cliff but

remember the Fed printing money is in

part designed to prop up money for

private credit so if private credit gets

propped up it funds banks who can then

fund the bonds for companies like Oracle

the problem is what you're about to see

we have big problems okay so understand

for a moment when The Fed prints money.

Their goal is to take this oracle side

of the cable over here, call my hand

over here, the Oracle side of the cable,

and they're like, "Guys, pump pump."

They're pushing money in, and they're

trying to be really aggressive over

here. But as you could see, that Oracle

side isn't moving that much. And then

you get dummies sometimes in the

comments like, "But Kevin, like somebody

literally wrote this comment the other

day, like, Kevin, all of Private Credit

could literally implode this weekend and

it wouldn't be a black swan." And I'm

like, you don't even know what you don't

even know. Like, you're so dumb. You

don't even realize how stupid that

comment is. Private credit is a $3.5

trillion industry. Okay? Our GDP is $25

trillion. So, if I take three and a half

and I divide that into 25 nominally,

private credit makes up 14% of the

economy. Now, add leverage. Yeah. Okay.

It's a really, really big problem. So

private credit issues are an issue and

the issue that we see with Oracle is as

a downstream recipient of private credit

funding, Oracle bonds are falling off a

cliff. Now unfortunately when Bond

Primis, this was shared on uh X, shout

out to uh special situations. I was

chatting with him on X this weekend. Uh

and you know he's making the argument he

posted these and he's like Kevin the

problem is when the 5-year bond and the

10-year bond for Oracle start falling

off a cliff. This right here is the uh

10-year bond for Oracle. When they start

falling off a cliff, what it means is

the market is demanding a higher premium

for these bonds. Okay, that's a fancy

way of basically saying people don't

want this debt. They need to be

compensated more for the risk. And

that's bad because unfortunately it

means they're going to have less

capacity to pick up money from Wall

Street. Those are selling at a 5%

discount on the 10-year. You want to see

the 30-year? This is the 30-year for

Oracle. The 30-year for Oracle, which is

right here, 2055 expiration. It is

selling at an 11 and a half% discount

because people do not want to bag hold

these assets. And this means even though

the Fed is trying to bail them out, it

may not actually be enough to make it

happen, which is scary. Now, I put this

together, which is Oracle CDS's. Now,

this is something else that's scary.

Okay, if you go back to 2008, all the

way to the left side, 2008, which I

don't have charted, but you'll see that

these CDS's peak out at about 128. Well,

right now the CDS's, you ready for this?

We ended up uh crossing the 128 line

over here last week, and then all of a

sudden, we just shot up even more. We're

at 148 right now on Oracle 5-year credit

default swaps. They're mooning. this

hedging that's going on against Oracle

is mooning right now. And so on Friday's

alpha report, I said, "Expect the chip

sell off to continue." Monday morning, I

said, "Don't trust the pre-market green

hardware sell off to continue." Uh, and

then of course, we're seeing premiums

fall for these. The problem with

premiums uh collapsing for these bonds

and the bonds selling at a discount is

that you basically and this is what

special situations and I were talking

about is basically Oracle is going to

have to pay more in interest to

compensate people for the extra risk.

Unfortunately that means they have to

take on more expensive debt to justify

their existence. The problem is Oracle

is legitimately telling you that they're

so broke that you should bring your own

chips. I mean, think about this. If you

go to some rich guy's house for a

Christmas party, is that rich, really

wealthy person going to tell you to

bring your own beer? No. BYOB is when

you've got normal, hardworking Americans

who just can't afford the luxury of

paying for alcohol for everyone. And

that's normal, okay? But the rich guy

inviting you over doesn't ask you to

bring your own beer. Okay? When you

start getting a little tight, that's

when you ask people to bring their own

beer. Okay? And it's fine. It's

reasonable. Like, don't be a freeloader.

Bring your own beer. Right? But when a

rich company like Oracle starts saying

it, it might be a problem because that's

literally what they're saying. Okay? If

you go to the earnings call on Oracle,

and this is crazy. I I like I my mind

was blown when I saw a rich company like

Oracle saying this in terms of funding

our growth. There are a variety of

sources available to us through our debt

structure in public bond bank and

private debt markets. Do you see what

I'm saying here? And and I haven't even

gotten to the zinger yet here, but

listen to what they're saying. We have

money available through private bond

market which is collapsing. We just saw

the charts. It's collapsing. bank and

private debt markets. Oh, you mean the

ones that the the blind people are

going, "H, private debt market doesn't

matter." No, it literally does. It

literally matters because even Oracle is

referencing it. And then in addition to

the public bond market, which is

tanking, credit default swaps, which are

indicating massive risk, and the private

debt market, which is panicking right

now, and the Fed is trying to bail it

out. In addition to all of that

happening, they say, "Oh, by the way, we

also have other financing options

through customers that may bring their

own chips to be installed in our data

centers." Wow, what a party host. Oracle

is literally now saying, "Bring your own

chips so that way we don't have to buy

them." They actually get asked about

this again later in the earnings call. I

like I wish I was making this up, but

you can't. You have an analyst that

says, "Hey, congratulations, blah, blah,

blah. Hey, uh question uh Clay or Doug.

Uh Oracle is clearly the destination of

choice for sophisticated AI customers.

Got to prop them up before you ask the

hard question, right? That's always if

you ever have to ask a hard question,

learn about framing, right? Oh, Donald

Trump, you're so great. You're the best

ever. Hey, just wondering, you know, how

come things aren't going so great with

Putin? By the way, love what you're

doing on Truth Social.

You know, it's all about framing, right?

It's a manipulation, right? So anyway,

uh but this is far more capital inensive

unlike any business Oracle has ever been

in before. Uh how do you guys raise the

funds for this AI growth ahead? Mind

you, at the same time, you've got this

plummeting going on in the bond market.

So basically in English, hey guys, this

is expensive. Okay, you ready for this?

All right, here we go. One of them is

that customers can actually bring their

own chips. In these models, Oracle

obviously doesn't have to incur any

capital expenditures upfront for that

model, aka don't worry, bring your own

chips. Uh so then they try to sell that

as we're uh chip agnostic and my

translation is Nabro. We just can't

finance this anymore and the bond market

is pissed. So now uh what I wrote over

here, well, let's get into their

fundamentals. What else did I write

here? Oh, I did I do have this quote

that I've had in my alpha reports since

September October. I've had in my alpha

reports at the bottom that Cororeweave,

Enbis, Oracle, and Iron have the writing

on the wall that these will be bag

holding companies. This is a direct

quote from my alpha reports that have

been, you know, published for like three

or four months. So, you know, I'm not

trying to shill anything. I'm just

simply trying to say like if you go back

to the day charts on these these

companies are roundt tripping literally

since I wrote these notes in September

and October that's when you got your

double top on NBIS that's when you

peaked out uh or nearly you had your

second essential peak out over here on

Coreweave uh after their IPO and that's

when you've double peaked out on Iron

all of them now selling off

substantially 9% in the day on Iron 6%

on Cororeweave 7% on on NBIS and So,

this writing is clearly on the wall that

these are the bag holding companies. You

know, Oracle's down another 2.8%. Uh,

Broadcom's down another 4.5%. The

writing's been on the wall, but take a

look at the finances because maybe you

don't believe that the bond market is

telling you a warning, right? The bond

market is screaming, "This is a

problem." Kevin has been screaming in

the alpha reports, "This is a problem."

I've also been screaming that the

Federal Reserve is trying to bail them

out, but they're pushing against the

string and it's it's not working right.

So I that's why I think this analogy is

useful. Like they're trying but they

just started Friday. They just started

running the money printer on Friday. So

it might be early like maybe the bailout

will start working. But understand this.

Go to the financials for Oracle. Okay.

The financials for Oracle show that

their plant property and equipment sit

at $67 billion. 67.

So, of course, their earnings per share

are going up because they're buying

actual data center equipment.

Fine. But the question is, where do they

get that money from? Right now, they

have $136 billion of debt. $136 billion

of debt works out to 7 years of

operating cash flow that these company

that these people like if they stopped

spending today, it would take them seven

years to pay off their debt. That's a

That's an eternity. That's a whole chip

life cycle. It's probably more than

that. But anyway, if you actually go to

their net operating activities, you

could find that they are in a six-month

period losing well, they're burning $10

billion in free cash flow, which means

they have to borrow money. And that's

exactly what they're doing on their cash

flow statement. You could see they've

borrowed $18 billion. They paid a little

bit uh $2.8 billion in dividends, so

about 15% of that. Then they issued

stock about 5% of that and they paid off

a little bit of debt about 10ish 12-ish%

of that. But they've net borrowed

massive amounts of money. They have net

borrowed and issued $19.3 billion less

than 2.8 in dividends, less than 2.1 in

debt payoff. They have net issued $14.4

billion, which is 140% of their negative

free cash flow. They are literally

borrowing. So, they're borrowing every

freaking penny to finance their their

capital expans the expansion of their

data centers. Now, I looked and I go,

but hey, like Wall Street is forecasting

that they're going to have net income of

$60 billion a year in 2030. Okay, that's

cute because if they had $60 billion a

year of net income in 2030 and they

stopped borrowing, they could pay off

their debt in like 2 years. In less than

2 and 1/2 years, they could pay off all

of their debt. But the problem is to get

to $60 billion of net income. We looked

it up together. We finally found what

Wall Street is forecasting for their

plant property and equipment growth.

Right here, this is the line. Wall

Street is forecasting that the 67

billion dollars that they have in data

centers right now is actually going to

rise to 86 next year, 136 and 27, 191

and 28, 241 and 29, 272 by 2030. So in

order to actually get $60 billion a year

of net income, they're going to have to

borrow another $25

billion.

That's why the bond market is freaking

out. That's why the bond market is

falling off a cliff because the bond

market is like, "Bro, you guys have 67

billion of data center exposure right

now. How in the world are you going to

get another $25 billion when right now

you're having to borrow at 140% of your

free cash flow? You're having to borrow

more than your negative free cash flow

just to sustain this business. At the

same time, you're trying to sell to

people, hey guys, um, yeah, bring your

own chips, boys. Well, if people start

bringing their own chips, guess what

happens? Your EPS forecasts go down even

more.

That's the problem. Now, yes, on a

valuation basis, they don't seem that

expensive right now, but that's because

the valuations assume the growth that

Wall Street is forecasting.

So if you use a price to earnings growth

multiple, this company's trading for

like a 08 on a PEG ratio, which is very

cheap. But you have to understand the

PEG ratio has the G in the denominator.

In English, if the growth goes down, the

whole formula gets ruined and they look

really, really expensive. And the bond

market is telling you poop's not doing

really well. So it's no surprise this

hardware selloff is continuing. Now if

you actually look at their their

fundamental earnings, you can also see

that PP is compressing at least

somewhat. Okay, so cloud margins used to

be gross cloud margins used to be 77%.

But they've actually compressed to

71.2%.

So they actually have shrinking pee pee,

>> little pee pee.

>> And nobody wants shrinking pee pee. So

at the same time, you have shrinking pee

pee. At the same time you're telling

people to bring their own ships. At the

same time the bond market is selling off

risk on this company. You have a company

that's saying oh we can rely on the

private credit markets on the bond

market. People are going really I don't

think so. And henceforth

we see the chip market dunking

coreweave, iron, nbby, Oracle, Broadcom.

Now that's obviously taking, you know,

the market down with it to some extent.

I mean, we were green like 70 basis

points this morning on the cues. Uh,

again, this isn't to to shill the alpha

membership. It's just to say we were

green this morning on the cues. And I'm

like, that's great, but like watch the

first five minutes because I wouldn't be

surprised if we see the chip selloff

continue as people rotate out of

hardware. The pre-market doesn't matter.

What matters is what institutions are

doing. And institutions don't see these

issues lightening up. Look at the JP

Morgan call. So, if you go and JP

Morgan's not my favorite, you'll know

that. But you can still see what their

credit analysts are saying, and they

obviously throw money around. Look at

this. Oracle is a show me story after

big debt bet. JP Morgan says JP Morgan

expects the company's bond pressure will

persist into the next year, which isn't

great. Uh on top of that, you've got uh

you know, the only people who are really

bullish on them are MLY Fool. And I know

there are a lot of people who aren't

really enthused about the mly fool, but

the mly fool is like, "Hey, there might

be some big uh speed bumps ahead, but uh

as long as you can weather this, maybe

uh and you believe they're making the

right long-term move, maybe you can pull

this off as a high conviction buy."

That's cute. But that's also where we

just have to ask ourselves, how many

data centers do we need for the same

freaking models?

Okay. Well, if we keep getting

improvements in artificial intelligence,

maybe this is all just a hiccup in the

road. You know, maybe the funding will

come through. This is the bullcase,

right? The bull case is the Federal

Reserve is able to print money. It

supports the private credit wos. The

private credit woes go away. Private

credit ends up with a lot of liquidity

and cash. The liquidity crisis ends

because the Federal Reserve is printing

money again. Private credit then goes

and funds the Oracle data center

expansion. And we need more data centers

because AI keeps getting more and more

powerful, powerful, powerful. Great.

That's the bullcase scenario. I mean, I

know there are bullcase scenarios for

artificial intelligence. We don't

actually need a lot of data center

capacity for our like productivity and

net worth boosting AI that we do at my

startup. That's househack.com. Uh,

reinvest.co. Same company. We just

raised, you know, we announced that

we're closing the fund raise at the end

of the year. We raised $940,000 in

effectively the two business days after

uh we announced that close, which is

awesome. Like, you know, people are

plowing money in which is great. We're

going to put it to great use. So like

there are winners in AI and I think like

we're part of that. I mean I I'm

grateful to say knock on wood that like

we're EPS profitable with this giant

boost that we got from artificial

intelligence of people buying our

product or our service. But anyway like

there will be winners in AI and there

will also be losers. But the problem is

a lot of this data center explosion is

leading a lot of people to get really

optimistic about things that could be

these really crazy long shots. Like

frankly, not only Oracle, but also if

you haven't seen it yet, I encourage you

watch my SpaceX video. So I made a

SpaceX video uh about the next 10X in in

uh data centers or whatever. And if you

jump in over here, the next 10x in

stocks, Elon Musk, you can watch that

video

>> and I talk about the SpaceX IPO, but we

talk about specifically data centers in

space, how people are talking about

this. We talk about the SpaceX

valuation. We talk about the Terminator

zone, basically 247 cooling, which is

great uh in in space, but I'm sorry, uh

uh power 24/7 power in space. But people

think that space cooling of chips will

be useful, but you actually introduce

new problems. You don't have air flow in

space and you need like ammonia based

cooling which is very damaging for

humans. So you need robots to be able to

really service the equipment which maybe

is good for Optimus robots if we can

make it there. But the question is all

this hype around data centers in space.

Is it being hyped up to help Elon Musk

sell SpaceX stock or do we actually need

the data centers? See, one of the big

downsides of SpaceX that people complain

about is, "Hey, yes, Starlink is great,

but do we actually need to send a lot of

cheap payloads to space?" And there's

competition for these payloads as well.

China's working on their reusable

rocket, obviously copying Elon. Uh Jeff

Bezos and Blue Origin just successfully

landed their reusable rocket. Obviously

copying Elon. GPS technology has gotten

really good, right? This is like, have

you ever done a drone like return to

home? It's kind of the same GPS

technology just on a much larger scale.

But anyway, uh it's not to downplay what

they're doing, but the point is like the

biggest objection to SpaceX investments

have been well, what are we actually

going to send to space when we can make

all these trips to space?

What about data centers? Great, great

sales pitch. Everybody be like, "Oh,

that's a great idea." As long as the

data center boom doesn't go bust. And

right now, we're at a really precarious

turning point where we're not sure if

the Federal Reserve's money printing is

going to be enough to support private

credit, to support the bond market, to

support Oracle, and support this

continued data center expansion. So

Oracle should really be an oracle of bad

things to come if this Fed money

printing doesn't work in bailout. So

this is scary that that is a very big

problem. So anyway, um it's also

possible that banks are just hedging

against data centers, right? Maybe

that's why the CAS's are going up. But

you need to raise debt to get their

earnings to actually continuously prove

that this company's expansion plans are

going to survive. Now again, valuation

wise, they actually seem dirt cheap. But

if for whatever reason our data center

needs collapse, all of these investments

go poopy dupy. And that is the big fear

is that Oracle investments go poopy

dupy. That means I ren go poopy dupy. If

they go poopy dupy, then Nvidia and AMD

go poopy dupy. Google TPU nobody cares

about anymore and all these custom chips

go poopies and then we don't need data

centers in space at least for the

foreseeable futures future. That's the

big risk factor and I think that's what

markets are really worried about right

now. And then people look and go, "Oh, I

guess it was in hindsight it was all a

bubble after all." Right?

So anyway, that's the situation. So he

says, "Data center under the ocean free

cooling." Yeah. Hey, you know, there are

a lot of different ideas for where to

put the data centers. The the the wild

thing is

there's also plenty of land on Earth and

we have planned out a whole lot of data

centers already. And the question is, is

it a sustainable level of spend? And

what most experts seem to point out when

it comes to studying history, so history

experts, is that you really can't have a

new revolution, like a new industrial

revolution without a bubble. So it's not

a matter of like will there be a bubble

anytime there is a change in an

industrial revolution whether it's cars

or radios or data centers there will

always be overinvestment

because capitalism is in part fueled by

optimism and hope uh and that leads to

overinvestment

over capitalization

and uh every single technological

revolution ends in a bubble. The big

question that people have right now is

well are we in a bubble now or are we

going into the bubble? JP Morgan,

Goldman Sachs, and um Morgan Stanley.

All of them argue that we are actually

not in a bubble yet. That we are going

into the bubble.

Unfortunately, the one thing that's

creating cause for concern is the

skyrocketing of credit default swaps at

Oracle, the plummeting of premiums on

Oracle bonds. Uh and you can't forget

the 102 spread. The 102 spread is

another issue. Remember this was the uh

the chart of the uh 30 uh the 10-year

and the 30-year bond for Oracle. But

then, you know, you factor into this as

well what you have with the 102 yield

curve over here now at 67 as well.

Exactly the same number as how much

Oracle has in plant property and

equipment. 67 billion. Just 67's just

everywhere right now. Uh but the

question is, is this a signal of greater

shock sensitivity coming? So, we'll see.

Maybe we're just in the expansion phase.

My hope is that the Federal Reserve's

money printing bails us out, but um

that's where we stand.

>> Why not advertise these things that you

told us here? I feel like nobody else

knows about this.

>> We'll we'll try a little advertising and

see how it goes.

>> Congratulations, man. You have done so

much. People love you. People look up to

you.

>> Kevin Praath there, financial analyst

and YouTuber. Meet Kevin. And always

great to get your take.