The Morning Call---What Wall Stree isn't teling investors about AI credit risk

 

The Morning Call

 

8/12/26

 

The Market

         

    Technical

 

            Tuesday in the charts.

https://www.zerohedge.com/markets/mideast-malaise-ai-angst-batter-big-tech-bitcoin-bonds-shrug-oils-gains?gift=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJuaWQiOiIxMTIxMTUxIiwic2VuZGVyVWlkIjoiUUhnc3BaZVVFS2E3RHhXM216eFlKbjhaWEFoMiIsImlhdCI6MTc4NjQ3OTk3MiwiZXhwIjoxNzg5MDcxOTcyLCJhdWQiOiJ6aC1naWZ0In0.jvRNVXGkDpNcm0nwJ4kzDs_OY0E2Sd-laPMiDkm7AeI

 

            Tuesday in the technical stats.

            https://www.barchart.com/stocks/momentum

            https://www.barchart.com/stocks/market-performance

            https://www.barchart.com/stocks/sectors/rankings

            https://www.barchart.com/stocks/signals/new-recommendations

 

Wednesday morning setup: US: Futures are higher, led by Tech as AI infra earnings boost the theme while the Semis trade was bid overnight led by a surge in Korea's Kospi. As of 7:45am ET, S&P futures are up 0.2% ahead of today's CPI report, while Nasdaq futures gain 0.7% as investors react positively to updates from US technology firms. Semis / Memory are outpacing broader markets with Mag7 trading higher, too. Software is lower, so watch to see if the +Semi / -Software dynamic returns after a significant reversal. CoreWeave shares are up ~17% in premarket on stronger-than-expected sales growth. Super Micro Computer shares have climbed 9% after their revenue forecast topped estimates. Tech stocks also outperformed in Asia where the Kospi climbed 3.7%. European stocks are inching higher. The market has seen muted volumes this week into today’s CPI print, with PPI and Retail Sales tomorrow, providing more details on the growth / inflation dynamic. Consensus sees Headline CPI MoM of +0.1% and Core MoM of +0.2%, which is 3.4% YoY for Headline and 2.5% YoY for Core (our preview is here). A dovish print today may remove Sept hike expectations, boosting stocks.Broader risk sentiment has improved as Brent crude futures turned negative and fell back below $89 a barrel after another well-time headline by Pakistan which said the 60-day deadline for a US-Iran MoU may be extended, but the larger peace process has stalled. Earlier, Donald Trump said the US “totally” controls the Strait of Hormuz. Treasuries extend gains ahead of the US CPI report, with US 10-year yields down 2 bps at 4.66%. European government bonds followed suit. The Bloomberg Dollar Spot Index is little changed. Precious metals are advancing, with spot silver up almost 3%. Looking at today's economic data calendar we get July CPI data at 8:30am and July federal budget balance at 2pm. Fed speaker slate is blank; Cleveland Fed’s Hammack and Richmond Fed’s Barkin have appearances slated Thursday

 

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

Month to date retail chain store sales were up 8.3% versus up 8.7% in the prior week.

 

Weekly mortgage applications rose 3.6% while purchase applications were up 3.0%.

         

July existing home sales were down 1.7% versus consensus of -0.7%.

 

July CPI was up 0.1%, in line; core CPI was up 0.2%, also in line.

 

                        International

 

July YoY Japanese machine tool orders increased 50.4% versus estimates of +42.0%.

 

July German CPI came in at +0.9%, in line.

 

                        Other

 

 

                          US household debt dropped in Q2.

                                      https://www.zerohedge.com/economics/despite-record-surge-subprime-car-loan-originations-us-household-debt-dropped-q2-first

 

                          Nothing has changed.

                          https://alhambrapartners.com/monthly-macro-monitor-status-quo/?src=news

 

                          The housing recession is over.

                          https://conorsen.substack.com/p/the-housing-recession-is-over-8b6?r=1y6w9

 

            Overnight News

 

The oil market faces a severe supply deficit of 1.8 million b/d this quarter due to renewed Middle East conflict, despite high prices cutting demand by half to 1.6 million b/d.

 

            Monetary Policy

 

              Warsh faces a host of problems.

  https://www.bloomberg.com/opinion/articles/2026-08-11/fed-chair-kevin-warsh-s-problems-go-deeper-than-his-rocky-start?accessToken=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJzb3VyY2UiOiJTdWJzY3JpYmVyR2lmdGVkQXJ0aWNsZSIsImlhdCI6MTc4NjQ2NTIwNiwiZXhwIjoxNzg3MDcwMDA2LCJhcnRpY2xlSWQiOiJUSkxMMEdLR1pBSzAwMCIsImJjb25uZWN0SWQiOiJCMzFCNTRDQTI3MTE0NjAxOUQxMURCN0IxRUM4NTE2MyJ9.wfVBwrHLfWhqcih6nfjGPA5vVMnhNFwkpBRDzLF2t24

 

 

            Fiscal Policy

 

              The mistaken notion that a balanced budget is a worthy goal.

              https://www.realclearmarkets.com/articles/2026/08/11/balanced_budget_hagiography_plays_into_the_hands_of_big_government_1199113.html

 

            AI

 

              What Wall Street isn’t telling investors about AI credit risk.

 https://www.zerohedge.com/markets/rebalancing-odds-heres-what-wall-street-wont-tell-you-about-ai-credit?gift=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJuaWQiOiIxMTIxMTQ2Iiwic2VuZGVyVWlkIjoiUUhnc3BaZVVFS2E3RHhXM216eFlKbjhaWEFoMiIsImlhdCI6MTc4NjU0MDAxOSwiZXhwIjoxNzg5MTMyMDE5LCJhdWQiOiJ6aC1naWZ0In0.WJVvQNPCKNrHImFm7y3ccxzAurWlamZKlnA7WQGXCa8

 

 

              AI buyers still waiting for the payoff.

              https://www.apollo.com/wealth/insights-news/insights/daily-spark/the-buyers-of-ai-are-still-waiting-for-the-payoff

 

              AI follows other boom and bust cycles.

              https://mrzepczynski.blogspot.com/2026/08/ai-investment-follows-other-boom-and.html

 

              Counterpoint.

              https://www.riskhedge.com/outplacement/the-750-billion-ai-question

 

            The Financial System

 

              Private credit’s ‘redemption crisis’.

              https://talkmarkets.com/article/private-credits-redemption-crisis-never-actually-ended-it-just-stopped-making-headlines-1786454963

 

     Investing

 

            Earnings drive both bull and bear markets.

            https://www.advisorperspectives.com/commentaries/2026/08/11/earnings-drive-both-bull-bear-markets

 

            The risks associated with a concentrated market.

            https://www.advisorperspectives.com/commentaries/2026/08/11/why-dont-own-it

 

            Your portfolio’s biggest threat.

            https://www.realclearmarkets.com/articles/2026/08/11/your_portfolios_biggest_threat_isnt_the_market_its_you_1199465.html

 

            Why the bond market is so important.

https://www.nytimes.com/2026/08/07/business/bonds-stocks-federal-reserve-interest-rates.html?unlocked_article_code=1.4lA.h_Bn.ZAtQIChjKFe2&smid=url-share

 

            Corporate earnings growth is broadening out.

                        https://www.marketwatch.com/story/good-news-for-stock-market-bulls-corporate-earnings-growth-is-no-longer-being-driven-just-by-tech-ddac973b?st=Ai3WTi

 

            The economics of the prediction market.

            https://trendlabs.com/they-dont-want-you-to-invest/

 

    News on Stocks in Our Portfolios

 

 

 

What I am reading today

 

           

 

 

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