Really Bad Underwriting

Good morning.

The strategic reserves were set up more than 50 years ago for a rainy day. It's a monsoon out there!

On Wednesday, the 32 member nations of the International Energy Agency (IEA) announced an agreement to release 400 million barrels of oil to combat supply disruptions sparked by the US-Israel conflict with Iran. The massive reserve dump marks a record for the IEA, a fitting response for what consulting firms Rapidan Energy Group and Wood Mackenzie called the biggest oil supply disruption in history. The IEA was created in 1974 in response to the Arab oil embargo.

Tapping the reserves has proven effective in lowering prices in the past, both in 1991 amid Operation Desert Storm and later in 2022, when the group released 182 million barrels in response to Russia's invasion of Ukraine. As for the immediate market response to the latest dump? US crude prices on Wednesday climbed more than 5% to $88 a barrel as of late afternoon, while the international Brent crude benchmark climbed nearly 6% to reach $93 per barrel. We fear the original IEA founders didn't consider that traders 50 years in the future would simply price in any supply dumps.

The signs of stress in the $1.8 trillion private credit industry are becoming more and more public.

Multiple reports on Wednesday confirmed that JPMorgan, America's largest bank, reduced its exposure to private credit by marking down the value of loans it holds as collateral. At the same time, the nation's sixth-largest lender, Morgan Stanley, limited redemptions at one of its private credit funds after investors asked to repurchase nearly 11% of shares.

'Crisis of Really Bad Underwriting'

The private credit loans JPMorgan devalued were made to software companies. Because the bank holds them as collateral, trimming their value limits how much the funds that made the loans can borrow. That means less exposure to a sector JPMorgan CEO Jamie Dimon has long trashed (a person familiar with the matter noted this was a preemptive move that affects a small number of borrowers and represents only changes in loan valuations, not actual losses).

For the impacted funds, it means less borrowing capacity at a time when investors are pulling money over concerns AI will devour the software industry, which comprises some of private credit's biggest borrowers. Funds at Blue Owl, Blackstone and BlackRock have been hit hard by withdrawals. Earlier this week, fund manager Cliffwater joined the casualty list: An investor exodus spurred redemption requests of more than 7% from its flagship private credit fund. Then came Morgan Stanley's North Haven Private Income Fund, which said in a letter to investors that it's capping quarterly redemptions at 5% and returning about 46% of the total amount that holders requested in the first quarter. Retail and institutional investors were initially drawn to private credit because the loans typically yield higher returns than public bonds. But prominent Wall Street figures are warning that underwriting standards have slipped. "It's not just a crisis of confidence, it's a crisis of really bad underwriting," Christian Stracke, president of $2.3 trillion asset manager Pimco, said during a podcast appearance this week:

• "The reality is you don't know which manager is good, which one is bad," he added. "You don't know which loan is good, which one is bad. And if you're in this for yield and you see that there's really interesting yield in other products out there that are more liquid, that are more diversified, that have better credit, that have actual credit ratings to begin with, then you have options."
• Wall Street veteran and former Fidelity fund manager George Noble expressed similar concerns. "Opaque valuations. Illiquid assets. Limited transparency. And the false promise of steady returns with no volatility," he wrote in a tweet. "The whole sales pitch was equity-like returns with bond-like stability. But you can't eliminate volatility, you can only hide it … until you can't."

Stock Shock: Shares of major private-credit lenders are down significantly this year: Apollo has lost 26%, KKR 31%, Blackstone 30%, and Ares 35%. The VanEck Alternative Asset Manager ETF, which has holdings in major publicly traded private credit firms, is down more than 20%.

Written by Sean Craig

This AI holding company is built to scale. It's Q1, and RAD Intel already has multiple 7-figure enterprise contracts secured for 2026, plus 2x sales contract growth from 2024 to 2025*. That's forward demand, signed early, and already in place for the year ahead.

That level of commitment is why RAD Intel has formalized a holding company structure designed to scale multiple operating businesses on one shared AI core, with consistent standards and measurement as the portfolio grows. In an AI market shifting from experiments to consolidation, structure is the leverage point.

Backed by multiple Fidelity funds. Selected by the Adobe Design Fund. Nasdaq ticker reserved $RADI.

SEC-qualified Reg A+ shares are available at $0.85/share for now. The share price changes tonight at 11:59pm PT, subject to availability and offering terms.

Lock in $0.85/share before 11:59PM PT tonight.*

Oracle has looked into the future, and swears it sees a world in which it will still be relevant post-SaaSpocalypse.

Its proof? Just a stellar quarterly earnings report, which raised hopes that the company's massive AI infrastructure bets will actually pay off. The win proved enough to push the company's shares up more than 9% Wednesday, delivering a welcome reversal from a months-long selloff.

Head in the Clouds

Oracle has not been able to catch a break for months now. First, shareholders grew wary that the company's massive capex to become a major cloud provider in the AI age would place it inside the tech industry's possibly ballooning bubble. Then came this year's Claude-led SaaSpocalypse, which sparked fears that the very AI boom that Oracle's cloud business is fueling could eviscerate the company's core data-crunching software business. The double whammy has thus pushed shares down roughly 50% from a September peak.

Larry Ellison, executive chairman and chief technology officer, insisted the rise of AI coding agents is a tailwind, not a headwind, for Oracle's software business. "Yes, some smaller or single-focused SaaS players may well be disrupted … but we think we are the disruptor," Ellison said, while highlighting how the company is using AI agents to both expand and enhance its software suite.

Still, the company went to great lengths to show its capex eyes aren't bigger than its stomach:

• The company's cloud division posted revenue of $8.9 billion in the latest quarter, accounting for 52% of total revenue, up from 44% a year ago. Oracle also reported remaining performance obligations of $553 billion, a 325% year-over-year spike.
• The company expects total capital expenditures for the fiscal year ending in May to run $50 billion, or double the year prior, with plans to reach $85 billion by 2029. But Oracle said it is requiring cloud customers to help finance its growth through a mix of up-front payments and a system in which customers supply their own chips for Oracle's data centers.

Oracle's credit risk, which has spiked since its AI buildout, fell to a one-month low following the earnings call, according to ICE Data Services figures seen by Bloomberg. Meanwhile, RBC Capital analyst Rishi Jaluria wrote in a note that Oracle is "demonstrating its ability to increase capacity without the need for additional financing."

No Swiping: Earnings filings this week also revealed that Oracle's roughly 15% stake in the new US-controlled version of TikTok is valued at about $2.2 billion. That makes the ultra-popular short-form video app's current market cap roughly equal to … Pinterest?

Written by Brian Boyle

Most people use ChatGPT like Google and miss its real power. These 1,000+ proven prompts help you solve problems in minutes instead of hours. Join 1M+ professionals reading Superhuman AI to get the prompts plus a 3-minute daily newsletter with practical AI tools and workflows. Claim your free prompts.

Adults who can't keep organic plants alive are buying up Lego's Botanicals sets, padding the Danish company's sales (and their own living rooms) with plastic chrysanthemums and bonsai trees. Sales of the Botanicals set, along with team-ups with Formula 1 and Fortnite, helped push Lego to a record year.

Lego reported Wednesday that its revenue rose 12% to about $12.9 billion last year. The jump was fueled by 16% growth in consumer sales, well above the toy industry's collective 7%, according to Lego. The toymaker attributed the growth to increased volume, rather than price hikes.

The company has been a post-pandemic darling, both by appealing to kidults with new toy sets and by pulling off a supply chain switcheroo that helped it handle unpredictable tariffs.

Building a Brand Brick by Brick

Lego said it launched 860 sets last year, marking its largest-ever toy collection. Half of those sets were new to market, including fresh sets from its partnership with Formula 1 (watch out, Hot Wheels). It's also making sets in collaboration with Fortnite-maker Epic Games, as well as popular franchises Bluey and Pokémon.

Lego's success isn't just built on what toys it sells but how it sells them in the tariff era:

• The brick-maker has factories near, or in, the countries it sends its toys to, cutting shipping times and costs as the plants tailor their output to meet regional demand. Its Mexico plant supplies the Americas; its Hungary factory makes toys for Europe, the Middle East and Africa; and its newly opened Vietnam factory builds bricks for the Asia-Pacific region. Lego's opening its first US plant next year.
• The toy industry has been rapidly moving its supply chain away from China. Adjusting to tariffs has been smoother for some than for others: Hasbro's revenue rose 14% last year, while Mattel's dipped slightly. However, Mattel expects a turnaround this year.

Kidulting: Toymakers are benefiting from the growing number of nostalgic adults buying their products. Circana data found grownups buying toys for themselves now make up as much as 30% of global toy sales. Companies beyond Lego have leaned into serving the older demo: Build-A-Bear has an after-dark collection featuring a silver fox wearing a "Zaddy" tee. At the same time, MGA Entertainment sells a surprise ball full of mini cocktails.

Written by Jamie Wilde

• McPrice Cuts: Next month, McDonald's will roll out a new menu of items for $3 or less in an effort to shore up its affordability reputation among fast-food consumers inundated with value offerings.
• New Chips on the Block: Meta debuted four custom, in-house artificial intelligence chips to power generative AI features, diversifying its supply after giant deals with Nvidia and AMD.
• 5000% Growth. Share Price Changes Tonight. Last chance to invest at $0.85 per share. RAD Intel reports a $225M+ valuation, 2x sales growth, and multiple 7-figure contracts for 2026. Nasdaq ticker reserved: $RADI. SEC-qualified Reg A+ pricing changes tonight at 11:59PM PT. Lock in $0.85/share now.*

*Partner

Disclaimer

*This is a paid advertisement for RAD Intel made pursuant to Regulation A+ offering and involves risk, including the possible loss of principal. The valuation is set by the Company and there is currently no public market for the Company's Common Stock. Nasdaq ticker "RADI" has been reserved by RAD Intel and any potential listing is subject to future regulatory approval and market conditions. Please read the offering circular and related risks at invest.radintel.ai.