{"id":32061,"date":"2026-10-27T04:00:00","date_gmt":"2026-10-27T03:00:00","guid":{"rendered":"https:\/\/www.thebrokernews.ch\/?p=32061"},"modified":"2026-10-26T09:15:08","modified_gmt":"2026-10-26T08:15:08","slug":"seven-stocks-in-zero-gravity","status":"publish","type":"post","link":"https:\/\/www.thebrokernews.ch\/en\/seven-stocks-in-zero-gravity\/","title":{"rendered":"Seven Stocks in Low Gravity"},"content":{"rendered":"
Interest rates are the \"gravity\" of the financial markets: The weaker their effect, the further prices drift away from earnings.<\/span><\/div>\n\n\n\n

Earnings season through a physicist\u2019s eyes. Tesla kept a 195-times multiple on a profit that had halved. Netflix told the truth and was punished. The index fell while the average stock rose. I finally watched Interstellar.<\/strong><\/p>\n\n\n\n

A word first about who is writing, because it explains everything that follows. This column pays nothing and is not meant to; it exists to help a reader avoid being trapped on the wrong planet. Long before any of this had to do with money, what held me was mathematics and physics, and that is still the instrument I trust, because the numbers tend to show what the crowd has not yet priced. Being realistic, in this business, is forever mistaken for pessimism, which it is not: over the long run the bull makes more money than the bear, so the aim is never to fight the market but to follow it, with the eyes open, and to see the turn a little before the rest of the room. Anticipation is not the opposite of following. Blind following is.<\/p>\n\n\n\n

Under the yields, then, I am still the one who listens to Jean-Pierre Petit when he explains that the universe may be shadowed by a twin made of negative mass, and who had made a private rule not to mention a certain film until it had actually been watched. I wish I could sit with him. This week I watched Interstellar<\/a>, which Christopher Nolan built on real equations with Kip Thorne. The same week the largest companies opened their books, and the two things sat on top of each other longer than I expected.<\/p>\n\n\n\n

Gravity is the discount rate<\/strong><\/h6>\n\n\n\n

The force that does the work of gravity on Planet Finance is cash. The strength of the field is the interest rate. When the field is strong, prices stay close to the earnings that justify them. When it weakens, prices drift. The weightlessness of the easy-money years was just what prices do in low gravity.<\/p>\n\n\n\n

The film\u2019s cruel idea is time dilation. The astronauts land on a planet so close to a black hole that one hour there costs seven years on the ship. This is Einstein, and it is correct. It is also what a discount rate does. A low rate pulls distant cash flows forward until a profit promised in 2040 is treated as almost present. Raise the rate and the same cash flow is crushed toward zero in today\u2019s money. The future recedes.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

The worth today of $100 promised at a future date, under a weak field and a strong one. Raise the discount rate and the distant future collapses toward zero.<\/em><\/p>\n\n\n\n

Tesla, priced in low gravity<\/strong><\/h6>\n\n\n\n

Tesla reported on Tuesday. Revenue was flat. The adjusted profit beat the estimate by a couple of cents. Operating profit, the money the business actually makes from operations, fell fifty-six per cent. Capital spending has doubled. The company is spending on artificial intelligence, on Optimus, on robotaxi, faster than profits grow. After a brief wobble the stock still trades near one hundred and ninety-five times earnings.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

That multiple is not a financial fact. It is a statement about the field. A price of two hundred times earnings can only exist where the far-future profit is valued as if it were already in the room. Six days before the results Musk unveiled a new Roadster and said that, with thrusters borrowed from his other company, it would leave the ground. A car that nearly flies, from a firm whose earnings are falling. It was theatre. It worked, because for this shareholder base the dream is the product and the car is the delivery mechanism. A dream has no price-to-earnings ratio. You are not buying a drivetrain. You are buying a man\u2019s imagination, and imagination has not yet had to file accounts.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

What the market will pay for a story versus a product. A 56 per cent fall in operating profit this quarter changed none of it. Multiples approximate.<\/em><\/p>\n\n\n\n

The truth tax<\/strong><\/h6>\n\n\n\n

Netflix did the unfashionable thing. It made real money, beat the analysts, grew revenue twelve per cent, and then said its advertising business would bring in about $2.7 billion this year rather than the $3 billion it had once hoped. For that it was taken to a two-year low. Price targets were cut. The shortfall was three hundred million dollars in one young line.<\/p>\n\n\n\n

Set the two beside each other. The company that promised a flying car and earned less was rewarded. The company that sold a real product and earned a little less than it hoped was punished. A dream sits far from the black hole, where no one can weigh it. A reported number sits close in, where every ounce is measured. This market forgives the far and audits the near. It does not price earnings. It prices the distance between a story and its most recent disappointment. A dream, having not yet happened, cannot disappoint.<\/p>\n\n\n\n

A price is a shadow<\/strong><\/h6>\n\n\n\n

The film\u2019s climax imagines a space in which time is laid out like a corridor. What we see is a low-dimensional shadow of something larger. A price is such a shadow. So is an index.<\/p>\n\n\n\n

The headlines said the American market fell this week, by about half a per cent. The S&P 500 is weighted by size. The seven largest companies fell nearly two per cent and dragged the visible number down with them. Weight the same five hundred companies equally and the picture inverts: that index rose about one per cent, and value beat growth by nearly three points. The average American company had a good week. The shadow on the wall had a bad one.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Selected weekly returns, 19-23 October 2026. The equal-weight index counts every member the same. The gap between it and the headline index is the story.<\/em><\/p>\n\n\n\n

Seven dreams holding up the sky<\/strong><\/h6>\n\n\n\n

The seven largest companies are now about thirty-five per cent of the S&P 500, some twenty-four trillion dollars. When you buy the index, the supposedly diversified object an ordinary saver is told to own, you are putting a third of the money into seven technology bets. Weight those seven equally against their peers and they would be less than one and a half per cent of the basket. What you think you own and what you actually own are two different things. Only one of them is diversified.<\/p>\n\n\n\n

We have been here before: the last time the index leaned this hard on a handful of glamour names was the Nifty Fifty of the early 1970s. Most of the companies survived. The prices did not.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

The Magnificent 7 are now roughly a third of the S&P 500 by value: the index you are told is diversified is a one-third bet on seven stocks.<\/em><\/p>\n\n\n\n

The loop that builds itself<\/strong><\/h6>\n\n\n\n

At the climax the hero reaches back through time and hands his younger daughter the equation that will later send him on the journey. The future causes its own past. Physicists call it a bootstrap: a loop with no beginning that still holds. The artificial-intelligence build-out is such a loop, and it is not fiction. Hundreds of billions are being spent today on a future that the spending itself is trying to summon. The capital validates the story. The story raises the capital. The earnings that would close the loop are always one more year of capital expenditure away.<\/p>\n\n\n\n

All seven giants are running the same loop at once. That is why their once-commanding lead in earnings growth over the rest of the market has shrunk to its narrowest since 2023. A loop like this can deliver the world it promised. Or it can be a hand reaching back for an equation that was never written. From inside, as the film knows, you cannot always tell which.<\/p>\n\n\n\n

The edge goes first<\/strong><\/h6>\n\n\n\n

Which brings me to the question everyone is finally asking out loud: is the AI bubble bursting? It is the wrong question. Bubbles do not go off like balloons; they deflate from the outside in, and this one is already well advanced at the edges.<\/p>\n\n\n\n

Beyond the seven giants lies the whole speculative frontier of the same trade, the firms that were going to power, compute, orbit and defend the AI future, and this week their prices read like a map of returning gravity. The small modular-nuclear companies, almost pure promise with barely any revenue, have fallen the furthest, Oklo down about eighty per cent from its high and NuScale nearer ninety. The quantum-computing names, selling a future that is a decade away if it comes at all, are off sixty to seventy-five per cent. Space, drones, the neocloud \u2019AI utilities\u2019 such as CoreWeave, the exotic power and photonics plays, all halved or worse. On one widely shared tally of forty-nine of these stocks, the median company now sits more than forty per cent below its high and thirteen have lost at least half their value. In the film this is Mann\u2019s planet: the frozen world Dr Mann faked the data on to lure a rescue, which became a grave for the man who believed him. The speculative edge of the AI trade was sold the same way, on a habitable future that was never going to arrive, and the ice is now cracking under everyone who landed.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

The AI value chain, from power at the base to software at the top, coloured by how far each group has fallen from its high.<\/em><\/p>\n\n\n\n

And the core? Dented, not broken, which is the important distinction. Nvidia, which actually sells the shovels at a fat margin, is down about twelve per cent from its high, and the profitable software names, Palantir, ServiceNow, CrowdStrike, are off only single digits. But watch where the deflation has now reached. The ring just inside the frontier, the chips themselves, has begun to give, the memory makers and the lesser designers down twenty to thirty per cent, the semiconductor index on its longest losing streak in years. The bubble is not bursting. It is deflating, inward, one ring at a time, and it has already crossed from the fringe into the outer edge of the core. Whether it reaches the centre depends on the single thing this whole column has been circling: whether the giants\u2019 earnings are real, or merely, like the fringe\u2019s, one more year of capital expenditure away.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Drawdowns indicative, from this week\u2019s snapshot.<\/em><\/p>\n\n\n\n

This is no longer gravity. This is the looking-glass<\/strong><\/h6>\n\n\n\n

Physics is lawful. Gravity returns. Time dilates with the rate. Loops either close or they do not. This week one number broke the physics, and to read it you need a different Oxford mathematician. Kip Thorne has a colleague across the centuries in Charles Dodgson, who, writing as Lewis Carroll, sent a girl into a place where logic runs backwards. That is where Meta\u2019s accounts have gone.<\/p>\n\n\n\n

Meta spent about seventy-two billion dollars building things last year. Next year it intends to spend as much as one hundred and forty-five billion, nearly double, in a single twelve-month stretch. One hundred and forty-five billion is more than the entire stock-market value of Ford and Nike put together, comfortably more than Starbucks, and within sight of McDonald\u2019s and Disney. Meta proposes to spend, in one year, roughly what it would cost to buy an entire household-name corporation outright, and then to do it again the year after.<\/p>\n\n\n\n

In the lawful world an owner told that the company would spend the price of a Disney every year would reach for the exit. Here the owners applaud, because the spending is not counted as money leaving. It is counted as proof of ambition. The ordinary rules of arithmetic are suspended for the occasion.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

A single year of Meta\u2019s capital spending set against the entire market value of famous companies. Meta figures from guidance; market caps approximate, October 2026.<\/em><\/p>\n\n\n\n

Two scenes from the book fit too well. The first is the Red Queen\u2019s race: Alice runs as hard as she can and stays exactly where she is. That is the capital-expenditure arms race. All seven giants are sprinting, spending more, to hold a lead in earnings growth that keeps shrinking. The second is Alice after the cake, grown so large her arm goes out of the window and her foot up the chimney. A company whose yearly spending has outgrown the economy it operates inside looks like that.<\/p>\n\n\n\n

Gravity is honest. It always sends the bill. The looking-glass postpones the bill by insisting the normal arithmetic does not apply in here. It does apply, in the end. Wonderland is a wonderful place to visit. Nobody has ever managed to stay.<\/p>\n\n\n\n

Another reality, on the other side of the hole<\/strong><\/p>\n\n\n\n

The film has three worlds, and so does this market. Miller\u2019s planet, where time slows and the future is lived as the present: the seven giants. Mann\u2019s planet, the beautiful lie that kills those who land on it: the speculative edge we have just walked through. And the ship itself, far enough out that the clock runs true and every hour is paid for in full. Europe is the ship. Gravity never had to return there, because it never left, and what is arriving now is not a metaphor. It is a sovereign-debt crisis that no one in office will name.<\/p>\n\n\n\n

Brent closed the week at $116.72, up more than six per cent, its highest close since the spring. Diesel in Germany is still above \u20ac2.25 a litre and in France above \u20ac2.30, after Berlin cut the energy tax. The pump did not receive the memo that the artificial-intelligence trade is fine. Oil is a strong field. It crushes first the economies that cannot print the currency in which the oil is priced. The politics of that fact are not theoretical.<\/p>\n\n\n\n

Germany built the turbines. It did not build the weather. This week the wind dropped, the days were short, and the wholesale price spiked while coal, gas and French nuclear filled the gap. The machines are not useless. They are useless when the wind does not blow, which is the one fact the energy transition was never allowed to price. The bill arrived anyway, in euros per megawatt-hour and in the carbon burned to keep the lights on.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

France is standing closer still. Debt is near 120 per cent of GDP, the same neighbourhood as the United States. The difference is the one that matters: France does not print the reserve currency, and no one needs its bonds the way the world needs Treasuries. On Thursday the 10-year OAT touched 5.14 per cent, the highest since 2002, and for a few hours traded through the American 10-year for the first time since 2013. The spread over German Bunds widened to about 168 basis points, the widest since the euro crisis.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

10-year government bond yields, 23 October 2026 (approximate). France now borrows for longer at a higher rate than the United States, and about 170 basis points above Germany, the widest since the euro crisis.<\/em><\/p>\n\n\n\n

The sellers are not abstract. Japanese investors, who still hold a meaningful slice of the stock, have been reducing. Hedge funds are openly short the OAT. The bid is thin. The question that now sits on the ECB\u2019s desk is this: can it resist, or will it intervene again to stop a sovereign market from breaking? It will almost certainly intervene. The cost will be the one that always comes with such interventions: the signal that the central bank is once more underwriting a government that will not close its deficit, the further politicisation of the balance sheet, and the fury of populations who are already paying \u20ac2.30 for diesel and watching their power bills jump when the wind stops. In the film, one hour near the black hole costs seven years on the ship. In Paris and Frankfurt, one year of 5 per cent funding costs more than the budget can spare, and the future is already arriving as interest and as anger.<\/p>\n\n\n\n

The seven American stocks are still on Miller\u2019s planet, where the distant profit is treated as present. The speculative edge is stranded on Mann\u2019s, discovering the ground was never solid. Europe is on the ship, watching the clock run and arguing about who will pay for the fuel. The same physics. Three distances from the hole.<\/p>\n\n\n\n

What to watch, and how<\/strong><\/h6>\n\n\n\n

Keep two things in view. The first is that Apple, Microsoft, Alphabet, Amazon and Meta report next week. Because the index is seven stocks in a long coat, those five sets of accounts will be the market whatever the other four hundred and ninety-five companies do. The second is quieter: whether the equal-weighted market keeps beating the headline one. If it does, the rally is finally broadening beyond the seven. That would be the healthiest thing to happen to this market in three years, and the least reported, because health rarely makes a headline.<\/p>\n\n\n\n

Gravity is coming back. A sterner central bank has raised the field. Across the autumn the most distant and most speculative promises have begun to fall toward where the equations say they belong. The market called it a crash. A physicist would have called it the return of gravity and would not have been surprised. In Europe the return has already happened. Oil is the field. The OAT is the clock. The turbines are the equation that never closed.<\/p>\n\n\n\n

At the end of the film the hero is saved. It is tempting to say he is saved by love. He is not. He is saved because somewhere, across the dimensions, someone did the mathematics, and the numbers were right. Behind every story there is an equation quietly keeping time. Listen to the story if you must, but keep one eye on the equation. The story can say anything. The equation cannot. The only question that was ever worth asking is how close to the black hole you were standing when the gravity came back.<\/p>\n\n\n\n

Eric Lefebvre<\/p>\n\n\n\n

See also: How I Learned to Stop Worrying and Love Leverage<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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