Rich Duprey
6 min read
Quick Read
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Lennar’s gross margin fell to 15.8% and revenue dropped 8.5%, while D.R. Horton maintained 20.7% margins despite cancellations rising to 20%.
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Microsoft’s free cash flow fell 6% despite net income rising 31%, while NVIDIA carries $108 billion in guarantee obligations at 46 times earnings.
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Rates running 1.5 points above CBO baseline add $6 trillion to deficits through 2036, with the 10-year Treasury yield already hitting 5.22%.
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Just released. Our analysts combed the entire stock market and named the ten best stocks to buy right now, and DR Horton didn’t make the cut. Enter your email to see the names that beat DHI. The report is free. Enter your email and see if any of your stocks made the cut.
Ray Dalio spoke at the Milken Institute Asia Summit on Oct. 8. He warned that strong corporate earnings have helped stocks hold up as interest rates rise, and that the edge stocks hold over bonds is shrinking. His advice to investors was to look at free cash flow alongside earnings. Higher borrowing costs are now moving out of Washington and into housing, gold and AI spending, which makes that advice relevant.
How a $6 Trillion Federal Problem Reaches Your Portfolio
The Congressional Budget Office recently said that if rates average 1.5 percentage points above the CBO’s February baseline, deficits from 2026 through 2036 grow by $6 trillion. Higher interest on existing debt accounts for $4.9 trillion of that. Financing the extra borrowing adds another $1.1 trillion. Even before any rate shock, net interest is expected to rise from 3.3% of GDP in 2026 to 4.6% in 2036.
Markets are already pricing that pressure. The 10-year Treasury yield reached 5.22% on Oct. 8. Its one-year low was 3.97% in February. The Fed raised its upper target to 4.00% on Sept. 17.
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Homebuilders Are Taking the First Hit
For its fiscal third quarter, Lennar (NYSE:LEN) reported revenue of $8.05 billion, down 8.5% from a year earlier. Its SEC filing shows homebuilding gross margin fell to 15.8% from 17.5%. Incentives ran at 12%, and in many markets almost 50% of visitors can’t immediately qualify for a mortgage. CEO Stuart Miller told analysts, “The Federal Reserve’s assistance is clearly off the table for practical purposes, and not a near-term source of relief.” The stock is down 23.73% year to date.
