This week's interesting finds

 

A few charts worth discussing

“The volume of loans trading below $60 is approaching all-time highs.”

- Derek Skomorowski

“It's important to be aware of these correlations when thinking about portfolio construction. Non-obvious correlations can lead to unintended overexposure to one idea. AI capital spending extends well beyond computing, flowing into the networking, power, cooling and physical infrastructure required to build and operate AI data centres.”

- Tye Bousada

“New Whoppers, higher quality…take a look inside Burger King’s big revamp.” (Video)

- Greg Sinclair

Other charts worth pointing out

Historical multifamily delinquency rate

Long-term U.S. bond returns since 1793

Global government bond yields – YTD

S&P 500 Utilities Index dividends vs. 10-year treasury yield

U.S. corporations vs. government – net interest payments

Aggregate business development company (BDC) fund flows

Russell 2000 vs. S&P 500 – Cumulative relative performance since 1990

Percentage of unprofitable small-cap and biotech companies

Small caps vs. S&P 500 Index – performance over the last 12 months

Small-cap performance over the last 12 months by industry

Trailing 12-month return contributions by market

Trailing 12-month return contribution by sector and style

12-month forward P/E ratios by MSCI regions

12-month forward P/E ratios by MSCI World sectors and styles

Anthropic and OpenAI bankers push for top-tier credit ratings post-IPO

Anthropic and OpenAI’s bankers are lobbying for an investment-grade credit rating after their upcoming initial public offerings, a designation that would lower the borrowing costs for their ambitious AI infrastructure plans.

Morgan Stanley and Goldman Sachs have held talks with credit rating agencies in recent weeks on behalf of the two leading AI labs, as they look to gain access to the $11.7tn corporate bond market post-IPO, said people familiar with the matter.

Analysts at the rating agencies told the FT that bankers acting for Anthropic and OpenAI had argued that the two companies’ public listings would unlock vast amounts of liquidity and improve the health of their balance sheets.

Achieving an investment-grade rating from Fitch, Moody’s and S&P soon after going public would be a remarkable feat for the two lossmaking AI labs, unlocking big benefits for the companies and their infrastructure partners including Oracle and Nvidia.

The rating would open the door to pension funds, insurers and other institutional investors that take far more limited positions in riskier speculative-grade debt.

It would provide another example of Wall Street changing longstanding practices to usher in the three largest IPOs in history. SpaceX, which went public in June, was the first large tech company to receive an immediate investment-grade rating.

Elon Musk’s rocket conglomerate also benefited from changes to index rules that meant billions of dollars in passive investment tracking the Nasdaq immediately flowed into its stock.

Previous tech heavyweights such as Meta, Netflix and Tesla waited a decade or more after their listings to get a top-tier credit rating.

Anthropic and OpenAI have recently arranged substantial credit lines with big banks but have mainly relied on institutional and venture capital investors to finance their hundreds of billions of dollars in spending on specialist chips and data centres to train and run their models.

Both labs have also leaned on the investment-grade rating of partners to secure preferential borrowing terms for debt tied to their infrastructure projects.

However, concern over the mounting debt load tied to AI projects has pushed up borrowing costs in recent months. An investment-grade rating would give the companies access to a broader pool of capital and obtain better borrowing terms.

Analysts at rating agencies are waiting to see the results of their IPOs before reaching a decision. The two companies remain unprofitable and have shown little sign of generating positive free cash flow. They also face growing risks, including the popularity of Chinese open-weight models.

The credit ratings of OpenAI and Anthropic are important to their Big Tech partners, which have taken on hundreds of billions of dollars in guarantees on the assumption that both labs will soon be able to borrow on their own.

A ratings bump could also help Oracle refinance some of its current debt pile after raising funds to fulfil a $300bn data centre build-out for OpenAI that has put it at risk of losing its investment-grade status following a recent downgrade.

Anthropic is expected to unveil its IPO prospectus soon, allowing investors to pore over its finances ahead of a listing that could value the five-year-old company at $2tn or more. OpenAI is expected to follow suit with an IPO next year.

Analysts said opaque finances and the start-ups’ use of flattering annual recurring revenue figures have masked their actual performance.

SpaceX issued $25bn in bonds days after it went public and received its investment-grade credit rating from all three rating agencies in June. S&P at the time said the rating reflected the “solid foundation” that the rocket maker had built through its launch business and Starlink satellites.

However, SpaceX’s bonds sold off shortly after being issued, which could also serve as a cautionary tale for credit investors.

This week’s fun finds

Nikki, from the Institutional Team, was able to spice things up in the office by hosting a build-your-own-taco moai. The team enjoyed building their own creations all while being able to reconnect after the long weekend.

Real-Life “Paw Patrol”: In a First for Britain, 3 Adorable Dogs Are Working Security at Major Train Station

London’s Waterloo station has become the first major train station in Britain to put dogs on regular security patrols, employing canine colleagues Riley, Buster, and Flo as part of a three-month trial to offer passengers increased safety assurance.

Like a real-world version of the animated kids’ show Paw Patrol, the pups were deployed by South Western Railway and Network Rail Wessex in partnership with canine security company Alpha Canine Specialists. And although we know they have very serious jobs, it’s hard not to break out in a grin when looking at their happy faces.

This week's interesting finds

 

A chart worth discussing

“Auto loan delinquencies are at an all-time high. Credit card delinquencies over 90 days are matching 2010 levels.”

- Tracey Chen

“Did not have tech being more capital intensive than mining in my playbook during our lifetime.”

- Greg Sinclair

Other charts worth pointing out

iPhone Index vs. Big Mac index

S&P 500 Index – 2025 performance review by sector

Fund categories – % of top performers that maintained their ranking

Canadian equity funds – underperformance rate & benchmark performance

Diesel processing costs vs. North Sea crude oil

Discretionary spending by generation

Online betting

SEC Preps Plan to Widen Investor Access to Private Markets

The US Securities and Exchange Commission is eyeing a plan to expand access for retail investors to private markets and allow investment advisers to charge performance fees to a wider set of clients.

The regulator’s planned proposal was received by the White House Office of Management and Budget on Monday. It’s the latest sign of the agency attempting to open up an area of the market that’s off limits to most mom-and-pop investors.

“Exposure to the full dynamism of our markets – both public and private – should not be reserved for wealthy insiders,” the SEC said in a statement.

The proposed rule would amend the Investment Advisers Act of 1940 and the Investment Company Act of 1940 by “modernizing” the performance fee framework and allowing retail exposure to private markets through registered funds, the SEC’s rulemaking notice states. Further details weren’t included in the notice.

Investment advisers are currently limited to charging performance fees to so-called qualified clients, said Thoreau Bartmann, partner at K&L Gates and former attorney in the SEC’s investment management division.

“Through limiting performance fees, you’re limiting access to that asset class,” Bartmann said. “Whether that’s a good or bad thing, that’s debatable.”

Investing in private markets has historically been the domain of institutional investors or wealthy individuals who, in theory, have the knowledge to assess whether an investment is a good idea. 

SEC Chairman Paul Atkins has repeatedly bristled against such restrictions, saying fast-growing companies that are able to attract capital in private markets remain unavailable to most investors. Broadening access to private markets is about “freedom and fairness,” he said at an SEC event in March.

At the same time, investments offered privately provide fewer disclosures than those in the public markets, which can make them harder to value. That exposes investors to more risks, groups like Better Markets have warned.

Once the White House completes its review of the SEC measure, the current three-member commission is expected to release a proposal for the public to the public for comment. The agency will then incorporate that input into a final version of the rule, which must be voted on by the commission again.

This week’s fun finds

On a recent visit to the Toronto office, Catherine brought several cat-themed hot sauces from Québec for her fellow EdgePointers to try. They were bright, full of flavour and had a nice kick to them.

Shipwreck Divers Discovered a 162-Year-Old Bottle of Guinness Brewed During the Reign of Queen Victoria—and They Want to Take a Swig

If you dive to the Mindoro more than once, you’ll find that the shipwreck is always changing. The vessel has been resting in the cold, dark waters of the English Channel since the 19th century—but as currents shift, some parts of the site emerge from the sand, while others disappear into it.

Last year, when diver Stefan Panis explored the wreck with a friend, he stumbled upon a sealed bottle, which he decided to bring up to the surface. When he rinsed it off, he could read the words emblazoned on the seal: “Guinness Extra Stout, London.”

The Mindoro was a British sailing barque that sank on November 27, 1864, making this particular bottle of Guinness roughly 162 years old. Panis hadn’t known that the brand’s history stretched back that far. Unsure of what to do with the bottle, he shared his discovery with Pawel Truszynski, a fellow diver and researcher, who started making plans to investigate the beer.

“We immediately recognized that we weren’t just holding an old artifact,” Truszynski tells Smithsonian magazine. “We were holding a flawlessly sealed time capsule of liquid history.”

What would this bottle of Guinness have tasted like in the 19th century, during the reign of Queen Victoria? The two men wanted to find out, and they had a few possible paths forward: They could analyze traces of the yeast and try to recreate it. They could also just pop open the bottle and take a swig.

This particular bottle was found lying on the ocean floor, but Panis noticed others nearby that were still secured in wooden crates. Now, he and Truszynski need to determine how well the beer has been preserved at the wreck site, located roughly three miles off the coast of Dover. 

“They were packed upside down, which under deep-sea pressure created a perfect natural hydraulic block, keeping the seawater out,” Truszynski says. If experts can determine that no seawater penetrated the bottle, bringing harmful bacteria with it, then the beer might be safe to drink.

The men sent samples from the bottle to KU Leuven, a university in Belgium, where microbiologist Kevin Verstrepen plans to analyze them in his lab. If the Guinness gets the green light, Truszynski will be one of the first in line to try it. “To taste a flavor profile that has been trapped in a vacuum since the Victorian era would be an unforgettable, once-in-a-lifetime experience,” he says.

Panis, meanwhile, tells BBC News’ Adam Mandeville that he’s normally “not that big” of a Guinness fan. But if the testing determines that the beer is safe to drink, he will “of course” have to sample it for himself.

This week's interesting finds

A chart worth discussing

“Europe has one of the lowest rates of air conditioning penetration globally.”

- Claire Thornhill

Other charts worth pointing out

Quarterly U.S. Apple App Store spending – year-on-year change

Food manufacturing company stock exposure to GLP-1 usage

U.S. GLP-1 users

Restaurant spending by generation

Food spending by retailer type

U.S. Treasuries – Outstanding vs. percentage of non-U.S. ownership

Global federal reserve gold weights – total vs. percentage of total reserves

Long-term interest rate movement relative to Federal Open Market Committee meetings

Canadian exports targeted by U.S. tariffs – destination breakdown

45-day correlation between high beta and low volatility stocks

Defaults by credit rating

China’s IPO Rush Is Showing Strain With Pace Nearing 2023 Frenzy

China’s high-powered market for initial public offerings is showing signs that its breakneck pace could be difficult to sustain.

Fueled by enthusiasm for all things artificial intelligence, companies are raising money at the fastest rate since 2023, with volumes at levels just before cooling measures back then ushered in a multiyear lull. Recent high-profile deals have struggled to hold on to initial gains, while a robust IPO pipeline has reanimated liquidity concerns. And some highly anticipated deals may be taking longer to come to market than previously thought.

Since the beginning of July, proceeds have exceeded 119 billion yuan ($17.7 billion), more than the 114 billion yuan in the third quarter of 2023. Three years ago, that milestone marked a turning point in China’s IPO market. As Beijing pledged to boost capital markets, regulators also moved to curb the IPO frenzy to address concerns about liquidity drain. The measures effectively applied brakes to earlier reforms that had made it easier for companies to list.

Investor enthusiasm has so far been buoyant enough to absorb the barrage of offerings. But as momentum in tech begins to fade, the market’s ability to take on fresh supply is being tested. 

“Since the AI trade rolled over in June, liquidity has been draining from the market,” said Yang Tingwu, fund manager at Fujian Tongheng Investment. “Mutual funds, quants and retail investors alike have little capacity nor appetite to add, and state-backed funds have largely been net sellers. In a market without incremental inflows, this level of IPO issuance is hard to digest.”

China’s stock market, along with Hong Kong, has emerged as the engine of fundraising for the AI buildout, with companies racing to sell shares as they look to expand capacity and compete with mostly US competitors. With deals such as CXMT Corp.’s near-record share sale, IPO proceeds this year have surpassed $30 billion for the first time since 2023, according to data compiled by Bloomberg.

So far, there’s been no official communication to indicate that authorities are preparing a clamp down on IPOs. And in contrast with the wave of 2023 deals, many of the largest offerings are tied to strategic sectors such as semiconductors and AI, which have heavy capital needs. Authorities have also made it clear that they will continue to support high-quality tech firms including homegrown large language models to list.

Still, signs of fatigue are emerging. Nearly a third of this quarter’s listings have lost more than half their value from post-debut peaks. Unitree is down 45% from its intraday high recorded during its blistering first day of trading.

Regulators may already be signaling discomfort with the pace of activity. Local media reported that exchanges recently met with brokerages to discuss the quality of IPO filings. Authorities have so far haven’t reacted to the reports.

This week’s fun finds

Relationship manager Lauren (centre) organized a Middle Eastern meal for her EdgePoint colleagues this week. Lunch included fresh falafel, heavenly hummus and savoury salads. Thanks for bringing us all together!

Why some people mow a lawn better than others

You’ve probably done something like mow a lawn or vacuum a rug hundreds of times without thinking much about it. Some part of your brain works out a route that’s usually good enough to get the job done. People are actually pretty good at this, and better than you’d guess for a problem that is hard for computers. We wanted to see it for ourselves, so we built a lawn and asked people to mow it.