The Brief by Introduction.com - Fintech Friday: The Price of Money

Hey guys, happy Friday. Hope you're well.

This was the week oil set the price of money.

Inflation came in hot, the 10-year hit 5.30%, and Korea's stock market fell 7.6% in a single day. Money pulled out of AI debt and crypto, then rates and oil eased by Friday.

Oh, and Tesla brought back the Roadster.

Here's our take on what's happening out there, and what we actually think about it.

Grab a coffee, let's get into it.

Rates jumped, then fell back.

On Wednesday, inflation came in hot, and the 10-year Treasury hit 5.30%. By Friday it was back near 5.10%, after Fed Chair Kevin Warsh said the economy was on track.

The 10-year sets the price of most loans. When it rises, mortgages and business loans cost more.

30-year mortgage rates held at 7.40%.
The odds of an October rate hike went from about 50% on Wednesday to about 14% on Friday.

Money got cheaper by Friday. It's still expensive.

🇺🇸 The numbers that moved

Full rates table, at home and abroad, on the Big Board.

The biggest check was a buyout: Penske's founders and Mitsui are taking Penske Automotive private in a $16.3 billion deal, including debt.

Two more buyouts: Proofpoint is buying Varonis, a data security company, for $6.3 billion in cash. Bumble is going private for $1.3 billion.

The biggest raise was Ramp, the corporate card company: $1.85 billion at a $60 billion value.

When money costs more, the biggest checks go to companies with real revenue.

Biggest checks this week

All 25 deals on the Big Board.

Brent, the global oil price, held near $105. WTI, the US oil price, rose about 6% to around $98.

Diesel fuels the trucks, trains and farm equipment that move almost everything we buy. It rose 5¢ to $6.33 a gallon, and the IEA says the shortage lasts into the second half of 2027.

That's where this week's main story starts.

Diesel is the price behind every other price.

🌐 At the pump and the barrel

Full price sheet, plus power for AI and the East, on the Big Board.

Rates jumped, Korea's stock market crashed, chip stocks sank, oil stayed near $100, and money left crypto.
It looks like five stories. It's one.

It starts with oil. Expensive diesel raises the cost of almost everything.

On Wednesday that showed up: consumer prices were 3.7% higher than a year ago. Higher inflation pushes interest rates up, and the 10-year Treasury hit 5.30%.

When a safe bond pays over 5%, risky bets have to earn more to be worth it.
So investors sold the bets built on borrowed money first:

By Friday, rates eased and oil dipped after President Trump said Iran asked for a halt to US attacks.

But the link still holds: as long as oil stays high, money stays expensive, and the riskiest bets get sold first.

Oil sets the price of money. The price of money sets the price of everything else.

On Thursday, Tesla showed the new Roadster. Elon Musk said Tesla will start building it in 2028. Tesla still hasn't said what it will cost.

To get in line, buyers put down a deposit. The Performance version takes $50,000. The faster Thrust version, which Tesla says goes from 0 to 60 mph in under 1 second, takes $250,000. A third version, Rocket, is invite only.

Tesla has done this before. It took $50,000 deposits for the Roadster in 2017, and nine years later none of those buyers has a car.

Even so, shares rose about 5% before Friday's open.

"Never bet against me."

That line comes from the internet's version of the reveal: an anime-style clip of the Roadster blasting off on rocket thrusters, with 2 million views in a day.

Tesla reports earnings Wednesday, Oct 21, and analysts expect about $27.6 billion in sales.

A fast car buys a headline. Earnings buy the stock.

Bitcoin barely moved this week, down about 1% to around $82,300.

Underneath, investors pulled about $535 million out of Bitcoin funds and $635 million out of Ether funds this month.

After the inflation report, nearly $1 billion in borrowed bets was wiped out in one day.

Then MSCI approved rules that could drop Strategy, the biggest company holding Bitcoin, from its stock indexes. Funds that track those indexes would have to sell. JPMorgan estimates that could force about $2.8 billion of selling.

Prices didn't crash. Confidence did.

🪙 The majors

All five coins and the week's crypto rules on the Big Board.

Saw this online. Two commodity calls, one on AI and one on oil.

Hedge fund manager Harris "Kuppy" Kupperman says AI tokens, the units AI is sold in, are now a commodity. He says the companies making them have overbuilt, spending about $2 trillion by his count, and will keep producing tokens at a loss. His line: "This bankruptcy cycle will be epic."

An a16z chart built on Citadel Securities data shows token prices falling this year, while the price to rent AI chips held up. Cheaper AI gets used more, so the chips stay busy.

A view we keep hearing: after the next oil spike, move money from oil funds into energy stocks, like Exxon and the refiner Valero, whose plants aren't in the war zone. An oil fund only pays if you time the swing. A refiner earns from high prices every quarter. Tanker owners pay out big too: Frontline paid $2.61 a share last quarter, about a 20% yearly yield at today's price if it kept that pace.

How we read it: compute is crude oil, and tokens are the gasoline. The crude is scarce and holding its price. The gasoline gets cheaper every month. In oil and in AI, the money right now is in owning the scarce part. Not advice.

"At long last we have finally created the remote control war pretending to be a video game from Orson Scott Card's classic 'Don't Create The Remote Control War Pretending To Be A Video Game'" @art_pleb

Translation: in Ender's Game, a kid fights a real war thinking it's a video game. This week a Ukrainian studio released a drone combat game built with military pilots.

The Math: Do you trust AI revenue numbers?
🟦⬜⬜⬜⬜⬜⬜⬜⬜⬜ Yes, mostly: 10%
🟦🟦🟦🟦🟦🟦⬜⬜⬜⬜ Only audited ones: 60%
🟦🟦🟦⬜⬜⬜⬜⬜⬜⬜ Not at all: 30%

The Rate: Where's the 10-year at year-end?
🟦🟦🟦⬜⬜⬜⬜⬜⬜⬜ Below 5%: 30%
🟦🟦🟦🟦🟦⬜⬜⬜⬜⬜ 5% to 5.5%: 50%
🟦🟦⬜⬜⬜⬜⬜⬜⬜⬜ Above 5.5%: 20%

The Trade: Where would you put new money?
🟦🟦🟦⬜⬜⬜⬜⬜⬜⬜ Tankers and shipping: 30%
🟦🟦🟦⬜⬜⬜⬜⬜⬜⬜ Long bonds at 5%+: 30%
🟦🟦⬜⬜⬜⬜⬜⬜⬜⬜ Bitcoin on the dip: 20%
🟦🟦⬜⬜⬜⬜⬜⬜⬜⬜ Cash: 20%

Disagree? Reply and tell us where you'd put it.

This is what membership looks like.

We showed you what oil did to money. Members know who's still lending.

We showed you the $16.3 billion buyout. Members got the calls on the deals that matter.

The edition is public. Membership isn't.

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