DHUnplugged #823: Election Infection
The Biggest Story of the year – The McRib lawsuit.
Next of course we have to discuss the election.
For good measure let’ dive into the AI and Semi meltdown
A couple of important announcementsas well.
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ELECTION NIGHT IN AMERICA
Warm-Up
- WORLD PEACE - Thank you Melania !
- Big Disruptions in the Communications space
- ELECTIONS
- McRib Lawsuit Update
Markets
- Oooofah - quite the ugly moves last week - at least bonds got a big (YUGE) bid
- OIL - OMG have you seen pricing. Worst offensive move to say we won't attack until after the midterms.
- META - good earnings, but stock tumbles
- Starting to worry - Bond crisis is France could spillover
--- But encouraging that safety trade leading to bonds again
DHU MAILING LIST! - Go to DHUnplugged.com
Two more important announcements !
1. NEW PODCAST - Party Line with the Dvorak Family
2. ASK ANDREW - This week's TDI Podcast - YOU GET FREE FINANCIAL ADVICE
- Send questions to [email protected]
ELECTION INFECTION
- Early but it looks like a blue wave - somewhat surprising
- Markets not so happy (QQQ Down 1.7%, S&P Down 0.80)
- What is going to be the fallout -> IRAN, Exec Orders, Reconciliation process?
OIL HITS $115 Last Week
- Brent touched $115, a five-month high; WTI above $100.
- Attacks on Saudi Arabia threaten regional oil supplies.
- Higher fuel and transportation costs squeeze consumers, raise inflation pressure and complicate central bank policy.
- This is not temporary at this point and the longer this goes on the more entrenched inflation becomes.
- FOLLOW UP - 7% drop Monday as President Trump says something about diplomacy
FAV STORY!
MELANIA BROKERS CEASEFIRE - WORLD PEACE? NOT QUITE
- Headlines trumpet Melania Trump brokering a Russia-Ukraine ceasefire. Sounds like the war is ending, right? Not exactly.
- Agreement covers ONE city: Russian-occupied Oleshky in southern Ukraine. The rest of the war continues.
- Temporary ceasefire begins October 29 to allow humanitarian aid and civilian evacuations. Not a nationwide peace agreement.
- White House claims diplomatic victory, but neither Russia nor Ukraine had independently confirmed the deal when announced.
- Quite the headline: "Melania Brokers Russia-Ukraine Ceasefire." Apparently the fine print is that the ceasefire covers one city. At this rate, only a few thousand more municipalities to go!
MCRIB, HOLD THE RIB
- A federal judge allowed key claims in a proposed class action against McDonald's to proceed over alleged misleading McRib marketing.
- Customers say its name and rib-shaped patty suggest actual rib meat, causing them to overpay for the roughly $7 sandwich.
- McDonald's denies using heart, tripe or stomach and calls the claims meritless; the ruling does not establish wrongdoing.
MICROSOFT OFFERS AN EXIT
- Microsoft offered voluntary buyouts to roughly 60,000 employees, about 27% of its global workforce.
- Eligible teams include Copilot, Xbox, Windows, finance and HR across the U.S., Canada, India and U.K.
- The cost-cutting move comes alongside planned calendar-year capital spending of $175 billion.
- These are buyout offers, not 60,000 confirmed departures.
--- IF YOU ARE ONE OF THESE PEOPLE - CONTACT US BEFORE MAKING ANY DECISIONS
AI TRADE FACES A CREDIBILITY TEST
- Nasdaq plunged 2.6% last Thursday ; semiconductor stocks led declines.
- Meta fell 7%, reporting $2.12 billion negative free cash flow after spending $34.9 billion on capital expenditures.
- Lam Research plunged nearly 12% despite strong results; Tesla dropped 3.1% after reducing its 2026 capex outlook.
- Investors demanding measurable returns on AI spending, not simply larger infrastructure budgets.
- Serious worries about where the next tranche of money is going to come from to pay for this party
- Intel whacked - down 30% on earnings report - blaming PC weakness
TELECOM STOCKS FACE A NEW THREAT
- SpaceX exploring a nationwide wireless network with spectrum reportedly covering nearly 100% of the US population.
- AT&T, Verizon and T-Mobile face a potential fourth competitor.
- Starlink satellites offer a unique competitive advantage, while cell tower operators could benefit from expansion.
FURTHER UPDATES - SPACEX - THE FOURTH WIRELESS GIANT?
- This is a major story - could be mega industry disruption.
- BUILDOUT COSTS - Analysts estimate SpaceX could spend more than $80 billion building a nationwide wireless network, beyond its massive spectrum purchases.
- WINNERS AND LOSERS - When the clarification and updates were made end of last week, AT&T, Verizon and T-Mobile fell 3%-5%, while Crown Castle surged over 13% and American Tower gained as SpaceX reportedly seeks access to 80,000 cell sites.
- THE BIG CATCH - Satellite service still cannot match traditional cellular capacity or indoor coverage; regulatory approvals and an expensive terrestrial network buildout remain major hurdles.
THE FED PAUSE - BUT OIL CHANGES THE EQUATION
- Fed meets October 27-28; most economists expect no rate change.
- Current target range: 3.75%-4.00%; another 25-basis-point increase remains possible in December.
- Oil near $115 threatens inflation expectations and could force the Fed to maintain a tightening bias.
- It seems that December guidance may matter more than October's decision.
- PLUS - this close to the mid-terms would invite way too much fire and scrutiny
FRANCE REMAINS EUROPE'S PRESSURE POINT
- French 10-year yield crossed 5%, highest since 2002.
- Moody's reviewing France's Aa3 rating with negative outlook.
- Budget gridlock, political instability and borrowing needs are widening yield spreads versus German bonds.
- Potential spillover to European banks, sovereign debt and euro.
- This is a problem
FRANCE - THE NEXT EUROPEAN DEBT CRISIS?
- France's debt near 119% of GDP; 10-year yields above 5%, highest since 2002. Spread over Germany reached nearly 178 basis points, a euro-crisis-era level.
- Deutsche Bank reports French 10-year government bonds are experiencing their WORST YEAR IN 223 YEARS, based on historical returns.
- Moody's reviewing France's Aa3 rating October 23; political gridlock, massive deficits and 2027 elections make spending cuts extremely difficult.
- Contagion risk spreading toward Italy and Greece. Banks holding government bonds face losses, higher funding costs and potential forced selling.
- H&C's Take - France is the eurozone's second-largest economy, and ECB intervention is not guaranteed. A French debt crisis could be far harder to contain than Greece in 2012.
VOLVO CARS - A BRUTAL QUARTER
- Volvo shares plunged nearly 30%, a record decline.
- Q3 operating loss of 3.7 billion Swedish crowns; revenue declined 23%, with China down nearly 50%.
- Another 2,500 layoffs following 3,000 announced in 2025.
- New 5 billion crown cost-cutting plan as tariffs, Chinese competition and weak EV demand squeeze profitability.
META HIT WITH $25 BILLION PRIVACY PENALTY
- New Mexico judge ordered Meta to pay $25 billion over the Cambridge Analytica privacy scandal.
- Nearly 44 million consumer-law violations identified.
- Original calculated penalty of $219.5 billion was reduced; judgment includes 15% annual interest.
- Meta expected to appeal the decision.
- Bigger issue was earnings report - which was GREAT - BUT (as we have feared) now cash flow NEGATIVE
APPLE BEATS, BUT MARGINS BITE
- Revenue rose 12% to $114.5 billion; EPS of $2.10 beat expectations near $2.00, including a $0.05 boost from tariff refunds.
- iPhone sales reached $57.6 billion versus $56.5 billion expected; China revenue missed at $17.5 billion versus $18.8 billion.
- Services hit a record $31.6 billion, essentially matching estimates.
- Holiday-quarter gross margin forecast of 45%-46% disappointed as higher memory costs squeeze profits; shares fell during the call.
AI-DISCOVERED BUG THREATENS THE INTERNET
- AI tools discovered critical PHP vulnerabilities, some reportedly undetected for more than a decade.
- PHP powers roughly 75% of identifiable website backends.
- European government sites reportedly disrupted, along with Wikipedia and Internet Archive.
- Emergency patches issued, but an estimated 1.5 million PHP hosts reportedly remain exposed.
- AI increasingly used to discover security flaws that traditional software testing missed.
MODERNA - GOOD DATA, TERRIBLE STOCK REACTION
- Moderna shares plunged 17.6% despite positive cancer data.
- Merck partnership showed a 42% reduction in melanoma recurrence or death risk.
- Two-year cancer-free survival: 82.2% versus 70%.
- Trial results reportedly leaked ahead of conference; shares had already gained over 500% earlier this year.
Lesson: WHY MODERNA PLUNGED DESPITE GOOD RESULTS
- EXPECTATIONS TOO HIGH - Moderna shares had surged more than 500% in 2026, pricing in nearly perfect cancer vaccine results.
- KEY DATA DISAPPOINTED - Vaccine reduced melanoma recurrence or death risk by 42%, but distant metastasis risk reduction was only 38%, versus 59%-65% in earlier trials.
- EARLY DATA LEAK - Results appeared on an oncology website before the scheduled presentation, triggering heavy selling and a 17.6% stock plunge.
INDIA'S MASSIVE JIO IPO
- Mukesh Ambani's Jio launched a $3.2 billion IPO, valuing the business near $108 billion.
- Investor bids exceeded $77 billion, more than 13 times the available shares.
- Trading expected October 28; major test of appetite for enormous technology listings.
HEINEKEN WORRIED ABOUT WEIGHT-LOSS DRUGS
- Heineken warns GLP-1 weight-loss drugs may reduce beer demand.
- Ozempic and Wegovy users potentially drinking less alcohol.
- UK pub and restaurant beer market near GBP 14 billion, versus under GBP 300 million for low- and no-alcohol beer.
- Carlsberg says available data do not confirm the threat.
ANTHROPIC IPO - AI'S BIG MARKET TEST
- Anthropic reportedly preparing a November public offering, with a prospectus potentially available in late October.
- Other AI companies delaying listings amid market turmoil.
- Enormous infrastructure costs and financing requirements raise questions about profitability and valuations.
- Latest report showed $80 billion quarterly loss
- IPO could provide a major test of AI investor enthusiasm.
MERGER COLLAPSES OVER WHO GETS THE TOP JOB
- Johnson & Johnson and Smith & Nephew discussed merging J&J's orthopedic medical-device business.
- Financial terms and deal structure reportedly agreed.
- J&J favored former Smith & Nephew CEO Namal Nawana; Smith & Nephew favored current CEO Deepak Nath.
- Advanced negotiations reportedly collapsed over who would lead the combined company.
- Obviously this was never about what is best for shareholders - rather what is best for management....
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