Opening Note…

Welcome back to this weeks newsletter.

The news this week has been absolutely chaotic, from wildfires to collapsing borders and more… let’s jump straight in!

1. Weekly Spotlight

Big Tech Just Ran Up A $1.2 Trillion Bill

This week Microsoft, Meta and Amazon all reported earnings within 48 hours of one another. Microsoft jumped 8% and Amazon rose nearly 10%, both on strong cloud growth, while Meta fell 8%.

Alphabet, which reported the week before, dropped 7% despite solid results because it raised its spending plans and posted its first negative free-cash-flow quarter since going public in 2004 (meaning it spent more than it took in).

So the general view is that discipline is finally back.

However I think everyone's looking at the wrong thing…

I was reading a Moody's note last week that got almost no attention, and it puts the big companies' spending at $785 billion this year, heading for $1 trillion in 2027. The debt they've taken on to fund it sits at about $460 billion.

But there’s also one number that you won't see.

Between these companies, they are sitting on $1.2 trillion of data centre lease commitments and more than $820 billion of that is for buildings that haven't been built yet.

Now, "lease commitment" is one of those phrases that sounds boring on purpose, so let me break it down.

A lease isn't a loan, so it doesn't show up as debt. What it actually is, is a contract to hand over a fixed sum every single month for the next fifteen or twenty years, whether or not the thing you built ever earns a penny.

It's the exact same obligation as a debt, it just sits in a different part of the balance sheet. It's like saying your mortgage doesn't count as debt because you've agreed to call it rent.

So why is all this happening now?

Two things happened at once; the cash has started to run out, and borrowing got more expensive. PIMCO estimates this spending now consumes around 94% of these companies' operating cash flow, against 40% in 2023 (cash flow is one of the most important things in a company so this is not a good sign)

When these companies went out to borrow back in February, investors offered them nearly five times the money they were asking for. By July, that had fallen. Nobody's refusing to lend at this time, but the queue is getting shorter and the price is creeping up (and that's how these things start).

Next: Watch the bond market rather than the share prices; that's where this will crack first, and probably long before most people spot it.

2. Quick Takes

Here are the other top stories shaping the week:

• Hamas Has Agreed To Hand Over Its Weapons, Just Not To Israel

  Trump has announced a deal to disarm Hamas and every other armed group in Gaza, with Israeli troops leaving in stages as the guns are surrendered. But Hamas says it won't hand over a rifle until Israel goes first, and Netanyahu's office says the deal falls short. I'd expect this to stall in the same place the last one did, with each side waiting for the other to move

• Fourteen Countries Have Joined A Saudi-Led Navy In A Week

  Saudi Arabia says 14 nations have now backed its new Maritime Defense Alliance to protect shipping lanes. It was announced the same day Iran's Revolutionary Guard said the Strait of Hormuz stays shut, and that any country helping Washington faces a harsh response. Alliances like this normally take years of treaties and summits, so the fact this one came together in days tells me how completely the cargo has stopped moving (big problem coming later)

• Italy Wants Spain Suspended From Europe's Passport-Free Zone

  60,000+ crossed the border from Morocco into the Spanish enclave of Ceuta on Thursday with more today. Sánchez blamed a court ruling that bars returning anyone who arrives by sea. Italy's Giorgia Meloni then called for Spain to be suspended from Schengen, the agreement that lets people move between 29 European countries without passport checks

• BP Is Walking Away From The North Sea After 60 Years

  BP has put its whole UK North Sea business up for sale: five hubs, 1,100 staff, 117,000 barrels a day, worth around £2 billion. It's part of a $20 billion asset sell-off to cut debt.

• Your Council Tax Bill Is Going Up £500 By 2030

  England's council tax take is set to rise 43% by 2030/31, from £41.2 billion to £58.8 billion, an extra £18 billion from 25.6 million homes. Mayors can add their own charge on top, and Burnham's Manchester one rose 127% in eight years. He named the cost of living as his number one priority… (treat that £500 as the floor, not the ceiling)

• Britain Is Paying Its Bills Out Of The Savings Pot

  Household savings have fallen 14% in a year to £44.5 billion, and the share of income people put aside is now below 9%. Retail sales keep beating forecasts and the richest fifth do 40% of the spending. The high street looks healthy, but I'd argue it's being funded out of the buffer rather than out of wages, and buffers eventually - run out

• Gold Has Stopped Falling For The First Time Since February

  Gold looks set to close July around $4,080, up 1.8% and its first monthly gain in five months, though still roughly 27% below January's record of $5,597. Central banks bought 289 tonnes in the second quarter after 244 in the first, and buyers appeared every time it neared $4,000

• The AI Trade Is Cracking And The Nasdaq Has Fallen Into Correction

  The Nasdaq 100 is 11% below its June peak, which counts as a correction, the label markets use for a 10% drop from a recent high. Chip stocks are the worst hit, with the semiconductor index down five days running and Micron losing 9.9% in a day, all while the companies post record numbers

• OpenAI's Own AI Hacked Two Companies

  OpenAI has paused training after its models escaped a test environment and spent four days breaking into a company called Hugging Face and another firm. Hugging Face asked Anthropic's model for help, but it refused on safety grounds, so they used a Chinese one instead

3. Chart Of The Week

America Owes $40 Trillion, More Than China, Japan, Britain And France Combined

The US government is projected to owe $40.7 trillion by 2026, a bigger pile than those four countries put together. But size isn't everything.

Measured against the economy, US debt sits at 126% of GDP, which only ranks ninth in the world.

Japan tops that table at 204%, with Singapore on 172% and Italy on 138%.

Washington gets away with it because the world still wants dollars. Japan gets away with it because the Japanese own most of their own debt.

4. Market Overview

S&P 500 (U.S.) 
Ended up about where it started after a wild ride. The Fed held rates and gave no real hint about what comes next, which knocked things over midweek, and Treasury yields pushing to multi-year highs didnt help. Then Microsoft and Amazon came through with big cloud numbers and dragged the market back up, while Apple went the other way on soft services and China sales.

FTSE 100 (UK)
Rose, and hit record highs three days running. Miners did the heavy lifting as copper firmed, and energy stocks kept climbing with the US-Iran conflict still rumbling on. Earnings were a mixed bag, Rolls-Royce and Lloyds impressed, Rentokil and the London Stock Exchange got hammered.

S&P/TSX Composite (Canada)
Flat. Set a record early on, gave it all back when the Fed spooked everyone midweek, then clawed most of it back on solid energy and mining earnings before gold slipped Friday and pulled the miners down again. Busy week, nothing to show for it.

ASX 200 (Australia)
Up, and its best week in a while after three losing ones. Softer inflation and an RBA sounding less keen on hiking again did most of the work, with miners chipping in on stronger copper. Money's been rotating out of AI names and into banks and defensives, which suits this market just fine.

🇺🇸 United States – S&P 500

• High: 7,487

• Low: 7,320

🇬🇧 UK - FTSE 100

• High: 10,986

• Low: 10,755

🇨🇦 Canada – TSX Composite

• High: 35,760

• Low: 35,220

🇦🇺 Australia – ASX 200

• High: 9,079

• Low: 8,843

Cryptocurrency:

• Bitcoin (BTC): -2.0%

• Ethereum (ETH): 0.2%

• Tether (USDT): 0.0%

• BNB (BNB): 4.5%

• USDC (USDC): 0.0%

• XRP (XRP): -2.8%

  Solana (SOL): -1.1%

• TRON (TRX): -1.4%

• Figure Heloc (FIGR_HELOC): -0.1%

• WhiteBIT Coin(WBT): -1.9%

Metals Market:

Gold–Silver Ratio: ~70:1, Crept higher this week, drifting from the high-68s up toward 71 before settling just above 70. No dramatic story here just gold outpacing silver a touch, keeping the ratio on the rich side of its recent range.

Gold & Silver:

• Gold:  -0.57% with a Week High: $4,120 & Week Low: $3,996

• Silver: -1.94% with a Week High: $60.10 & Week Low: $56.71

5. Faith & Success

I was hoping that after the chaos of last week at the castle that this week would turn around…

But this week has seen just as many difficulties, hence the lack of videos again.

Unbelievably, because of the oil pipe problem, we had to dig up the entire back area, after only just completing it a month ago!

But the good news is that after this weekend, we should be on a good footing for next week.

And I honestly can’t see us ever needing to ever do any work again for a very long time, ha.

Not only did we take the place back to stone, but we’ve now replaced the electrical feed and water pipes, plus sewage pipes now too.

And this is the verse that a friend of mine sent me this week after I shared how stressed I was this week…

He said that I’m going through a real test at the moment... but it will be good for me.

And it reminded me how we all go through these tests regularly, sometimes it’s to stretch us - other times it’s just bad luck.

And that's exactly what this verse is getting at. It's not really about money - it's about character.

How you handle the small stuff IS the audition for the big stuff (I believe).

The unglamorous decisions are shaping whether we’ll be ready for the big, exciting ones when they come.

And here's the encouraging part: it means the path forward is always available. You don't need to wait for a big break to make progress this month…

You just need to be faithful with what's already in your hands - the small budget, the small client, the small habit. Handle it well, and watch what it grows into.

Have a wonderful weekend my friend,

Take care, and God Bless,

Neil,

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DISCLAIMER
This newsletter is 100% FREE & is designed to help your thinking, not direct it. These newsletters shall NOT be construed as tax, legal, or financial advice and may be outdated or inaccurate; all decisions made as a result of this information are yours alone.

Trading/Liability: Neil McCoy-Ward operates/trades under a private Ltd company within the Isle of Man.

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