Speaker 1Welcome to the Saxo Market Call. Before we get started, it's important we emphasize that the views and opinions expressed in this podcast are those of the hosts and guests and do not constitute investment advice or recommendations. All information provided is for educational and entertainment purposes only. Hey everyone, it's Thursday, 22nd of October, 2026, and what a bizarre market we have here. We saw quite a comeback day in beta stocks, high beta stocks that is, tech, etc. We had the SOX index, for example, up almost 2%, NASDAQ up over 1%. Broader market was still up, but a lot more tepid. Russell 2000 only up a quarter of a percent. The S&P equal weight only up a third of a percent. But then the vibe just shifting violently late in the day yesterday. Okay. And, you know, scratching around for a reason for this, I'm not sure any of these come up in a satisfactory way. Feels like there was just a huge vibe shift. So one of the things you could point to was the very negative action in Lamb Research. Was this a big enough company to cause such a profound risk off across everything? I don't know, but it was the most negative story in the earnings reports yesterday. It was down over 8%. Basically, you know, great results, all that, the usual stuff, but they're just not. And, you know, they're complaining about the China contribution potentially not being there to as great a degree as before, and some supply constraints going forward as a concern. Lamb Research, if you don't know, and, you know, this is so hyper complicated, the whole manufacturing process, fab process for semiconductors, basically involved in sort of the, you know, it's complementary to what ASML does. So ASML does this lithography and sort of Lamb Research does, apparently, it's sort of the materials. It's coatings to get those circuits in place and to coat the chip in the first place before ASML does the actual lithography on it. So obviously key in the whole, you know, high-end supply chain around the creation of chips. In any case, I mean, we're talking about a company that peaked out. It was one of those ones that was really ramping into the end of Q2, posted an intraday high of over $438 a share overnight, hitting $238 a share. Just to give an idea of the magnitude of, you know, where it's come from. And that was down, again, over 8% after hours last I checked, at least. There's that, you know, we were discussing among colleagues and my network what could be driving things here. There's, you know, talk of overall concern that we're really gearing up for something bigger going on in Iran, both Israel and the U.S. We've got this third carrier coming back into the scene, into the area. And, of course, all the military assets. That brings Michael Evry with a few headlines on Israel making noise at the, you know, doing some kind of power projection in the region and posturing as well. And it's incredible noise here on all of this. So it does feel like something is happening. There is going to be some kind of final showdown, it feels like, at this point in time. What could that involve? Something more profound on the ground? The risk of more powerful bombs? And what is the retaliation? From Iran, does it feel like there's nothing left to lose and go after something even more damaging than before, if it still maintains some kind of operational capabilities, et cetera? I think that's quite potentially a key one here that the market is concerned about. The other one could be a little bit on the hacking side, and I'm less sure about this, but there have been some remarkable cybersecurity incidents. So Cloudflare's CEO, Matthew Prince, out talking about this, and this is something I was not aware of until this morning. It was already a story two days ago. On the 20th, this so-called, what is it called, PHP2 shell is the name of this, what is the name of it? I guess it's the name of the hack. Basically, PHP is a programming language that powers most of the web. It basically creates something like 70% of the websites, is what I'm being told anyway. But this is some vulnerability that gives you password-free access to, basically, the back end, I guess, and you can disrupt websites. And, of course, once something like this is discovered, all you have to do is set your little nefarious agent loose to go after it with your AI agent or otherwise, I guess, whatever tools these crazy hacker networks out there are creating. And the ironic thing is this is probably something that's existed for years. I'll put a couple links on this issue in the podcast episode description. There are patches that can address this, but in the meantime, it has damage been done to who. And this kind of thing and what kind of disruptions has it created. This Cloudflare CEO saying it went from a few hundreds into the millions within 48 hours of attacks they're registering on their networks. Not seeing a huge positive side for cybersecurity shares, but they weren't down either when the broader market was badly down. I want to talk about badly down. You've got your screen in front of you. You can see where things are now. Whatever now is for you. But as the time of this recording, the Nasdaq futures were down over 500 points. And even the S&P also off getting close to a percent at least the last time I looked. So this is really, again, a huge energy shift here. I don't think the land research news is quite heavy enough an item to have caused all of this. You can point to some other things. But just to continue through what the markets are doing overnight, we saw the cost be down over 3.5%. The Nikkei down over 2.5%. And basically hitting the lowest close since late July. If it closed down where I saw it, I think there may have been a few minutes left of the session when I jotted that down. And Europe badly down. Erasing all of yesterday's pretty decent gains, actually. And getting back close to that 200-day moving average again in the case of the stock's 50 index. So it's all looking dodgy out there at the moment again after trying to put a positive spin on things yesterday. And you've talked about the so-called Goldman Sachs broad AI portfolio. They also have one called the high beta momentum. Those two are largely similar in terms of the price trajectory. But broad AI is down. With yesterday's rally, it was up, trying to touch the 200-day moving average. Obviously, if we open where futures are now, that's going to be way back down again. The so-called high beta momentum Goldman Sachs index is down something like 29% from its highs. Again, into that big end. End of Q2 ramp. So huge, huge energy shift. There were some other earnings in. Tesla was out with a pretty chunky sell-off. I've got so many things noted down here. I didn't even note something down on what was driving that. I don't really care because the valuation of the company has nothing to do with their day-in, day-out results, really. So that was a negative one there. IBM also down, and down more than 5%. And that was the rallying. They went from below the 200-day moving average and rallied right to that 200-day moving average on the close of yesterday's session. And now they're down over 5% after reporting. It didn't look like terrible results, but only 5% growth on revenue. And there was a pretty big ramp into this earnings report. Their software unit growing 8.3%. Pretty humdrum growth rates compared to what is going on elsewhere. I mean, even Lamb Research, which absolutely dumped post the close, is posting 54% growth year-on-year. Meta was up slightly. They're claiming that their AI investments are paying off. They're even upping their plans to do more CapEx. They're even going to issue new non-voting stock to help fund some of this. Pretty remarkable stuff that the market is absorbing this still with a positive vibe. But, I mean, a company this size with revenue growing at 26% to $64.6 billion for the quarter. Very strong ad results, etc. And all the noise around the Muse AI Assistant and its growth rate has been making waves there. So that's the one positive story that sticks out in the mix here. Texas Instruments was down very slightly. They're sort of involved more in the types of chips and connectors that basically feed power to racks, to actual chips, more on the analog power side of things. But there has been a late comer to the picks and shovels play. The AI space. And they had strong Q4 guidance. Nonetheless, they were down slightly, more or less in line, really, with where the broader index was down overnight. That pretty much is the earnings roundup. Some interesting names coming up today. We've got Procter & Gamble on the consumer side. Western Digital very much on the data center side. Again, the hard disk maker. They're down way over 50%, which has allowed them to now have a PE of 18. But, again, they're at the. These unprecedented levels of profitability relative to their whole history. So there is an element of trying to discount the cyclicality of their business and these insane profit margins that they are managing to maintain at the moment. Blackstone, a private equity name. Another defense giant, Lockheed Martin. Spotify. Bloom Energy, very much data center adjacent with their fuel cell solutions. So, again, those that are not finding grid capacity, they can pay through the nose for a Bloom Energy. Fuel cell setup, assuming they can get the natural gas to the fuel cell, which then can power. at a pretty high price point their data centers um bloom energy right around its 200 day moving average by the way and then this is quite important for the whole uh for the whole so-called neo cloud space one of the two really big names in the so-called neo clouds these these bigger companies that are that are newer building data center capacity core weave is the most prominent one and the one with the shaky debt a big deep dive by the way in that link yesterday to corey's whole financial structure and the issues around that nebius back to today is reporting today they are also trading right near their 200 day moving average by the way small correction to yesterday steve kindly wrote in i assume from australia about this next dc company that was off over 40 yesterday that he's saying and i'll rely on his expertise more than my own it's not really a neo cloud it's more like a general purpose data center builder and it was down basically on problems with getting power connected to their new data center in the state of victoria which means they had to lower the revenue estimate the more interesting story perhaps on the neo cloud front in australia was this gambit by this company firmus to uh to ipo i was hearing that name bandied around i was trying to look up a listed name name firmus and the problem is they never got listed because their ipo failed uh essentially they were way too aggressive and trying to project where their growth could take them there was too much of it would have to be debt financed it just didn't look solid enough for the ipo valuation they're looking for which was in the 30 billion dollar range i don't know if that was australian dollars doesn't really matter regardless they they pulled the plug on that ipo and that perhaps together with all the other you know swirl of concerning news items it has put a bit of a a cloud over the whole space and while we're in the uh errors category it wasn't so much an error i don't i'm not sure what i said exactly yesterday but i was uh or the day before i was talking about wgi being up at a surprisingly high level but that was because we're in the last day on um on tuesday of the uh november wgi a crude oil contract let's recall that wgi is not cash settled so that means that we can get these weird expiry days where somebody you know to avoid taking delivery uh you know has to maybe buy out you can get these crazy squeezes long story short uh and that is indeed what we saw where that contract squeezed all the way to if i can read my handwriting 110 and a half before settling around uh below 102 on its final day um and that pump obviously low volumes it does suggest some kind of tightness in the in the spot market but it was it was just a wild day so there's nothing really suggesting much about wti versus brent uh besides this odd expiry day and we're now in december wti which uh was closer to 98 dollars on the close yesterday after 101 high now trading closer to around 100 bucks a barrel that that fits better with the normal spread normal recently normal spread versus brent and december brent is the one trading the most right now uh was up a couple bucks uh once again more concerns around the middle east as mentioned at the top of the podcast there is a little bit on you know fresh little attempts they were pretty minor though and no damage to any activity on the ground in terms of oil the sheba oil field attacked in saudi by by huthi rebels as was damam airport but uh there were a couple of fatalities but not many kind of real disruptions of note okay a little bit over into uh well i just want to see how this is feeding through uh elsewhere i think it's uh one of the interesting things to point out here is the pressure on gold prices and silver prices once again copper rolling over is this a dr copper move uh you know concerns about ai feeding into concerns about the cyclicality and the economic uh indicator called dr copper what will the forward demand be um copper on the defensive and i think silver following its lead but gold not doing well either so we've had silver down below 56 dollars at times overnight and this morning and gold just exactly touching that recent low of 4066 watch uh that one uh every time it's kind of spiked down there it sort of gathers up a little bit but that's looks like the local last gasp ahead of a full test of the fourth demand and i think that's going to be a little bit of a challenge for the stock market so we're going to have to wait and see if we can do anything about it and i think we're going to have to wait and see if we can do anything about it and i think we're going to have to wait and see if we can do anything about it and i think we're going to have to wait and see if we can do anything about it and i think we're going to have to wait and see if we can do anything about it and the areas below uh i'm hearing from pretty decent resources that a lot of the speculative crowd might be getting kind of short on this uh gold contract would make sense from sort of the technical angle the recent downtrend whereas uh those maybe stickier longs that are rolling into etfs or accumulating etfs continue to show a strong accumulation um which has been as we've mentioned before quite unusual it's tended to the accumulation and uh the accumulation of gold is and uh selling of of those etf holdings has tended to follow the gold price rather than be counter to whatever the price is doing so there seems to be some kind of long-term conviction in the investing crowd over an fx paint is busily drying we did see a decent amount of volatility overnight in dollar yen felt a little bit like an intervention this morning i didn't see any proximate cause to this although i still would say that risk off and yields coming back down which they did since the beginning of the year but i think it's going to be a little bit of a yesterday should be somewhat yen supportive although the higher energy price is not but regardless just it struck struck me a little bit as intervention-esque the price action we managed to trade dollar yen below 157 after more like 158 plus of course in recent days and that that was enough for a more than two week low at least intraday this morning aussie suffering from that metal uh the the weak risk sentiment in general since yesterday but especially some of that creeping into metals iron ore is looking horrible china is is looking terrible in terms of the growth trajectory so it makes sense to see some of that weighing on aussie and then aussie yen quite a reversal there 111 30 plus traded and then we traded down towards 110 as low as that on aussie and this morning the euro managing to hang in there versus the u.s dollar at the moment even though we're seeing new highs in the germany france 10-year spread to 166 basis points could have gone higher already today i'm not sure i keep having to scratch my number out and put in a new higher number when i'm watching it before coming here to the podcast so keep an eye on that one but there is something else that's potentially afoot here and now i mentioned the the nominal yield level of five percent being critical and there's some parallels between the whole experience back in late 2022 when the italian spreads were in focus and that around that five percent level was where it was all stopped or where the intervention kind of came in uh with ecb tilting its purchases to help stamp down the the spreads we did trade above five percent yesterday in the french 10-year oat that is a 24-year high in nominal yields but maybe more interesting was someone in my network uh thank you very much passing along a super interesting story that i think is a lot of color here to what might be going on and one of the key drivers behind this spread widening and that was from of all places an e-financial careers website talking about suddenly a lot of macro hunt hedge fund types especially of the rates trading variety are suddenly jobless in london because quote everyone has blown up unquote and it refers to anecdotally to a lot of these traders and hedge funds doing the same thing which is basically to be long these french bonds i guess of varying you know time frames to two year out to 10 year who knows maybe longer and using that higher yield level uh and then and then sort of repoing at a daily at the lower rate and then enjoying the carry of that trade plus you know adding i'm sure plenty and probably too much leverage to the situation with the assumption very dangerous assumption that because we've probably because we've had that that range that it never sort of got above the 80 something basis points uh in the in the recent past that this was some kind of level that the ecb would defend or wouldn't be allowed to go higher whatever you know and so i think that's a really good point and i think it's a really good point you know using that distribution as just an assumption that they could get away with doing this to me it is unbelievably lazy thinking it smacks so much of all the lessons we've we've learned through the years it was probably encouraged by the whole era of financial bailouts or market bailouts by central banks we are in a new era at some point these huge debt levels do mean something at some point politics means something uh so in some ways those traders got what they deserve but of course that could be aggravating as people are having to uh unwind these trades that could be aggravating the width of the spread more than any kind of sense you know on the ground that the debt situation is worsening or some kind of general confidence level it's just purely a function of value at risk these portfolios that are in trouble very lccm like and need to be squeezed out of their positions this is all kind of anecdotal just piecing together evidence but it's it smells it smells right um and clearly these people again have not learned from history they haven't learned from the history but they've learned from history and they've learned from history and they've learned from history and they've learned from history and they've learned from history and they need to go back and read about that episode and they need to read their uh nassim talib as well on uh our inability to know the probabilities of things so any case just thought i'd add that in there i think it's a super interesting uh anecdote on where this is at again i will put a link to the i've kind of said everything there is to say about it but i'll put a link to the article in the podcast episode description as well as on the cyber security incident and on there was one and i'm forgetting if it was uh cory doctorow or ft alphaville a super interesting substack article on the singularity talking about It's always 20 years away, just well-written. I can't remember the name of the substack. It doesn't matter. You'll find the link in the podcast episode description. There's a couple of reading recommendations in there. I'll see if I can find something that's a bit more up-to-date than those two recommendations, but actually just trying to say what would it be like if we did see the singularity? What would it mean for society and for technology and for many things? So I'll put that in there. And then just a reminder, read or have a look at this 1873 book by Liaquat Ahmed, if that's how you pronounce his name. Some of it kind of goes into weird details in a way, but it's super interesting, this whole episode, and how quote-unquote dumb the authorities were back then. So you had enormous credit bubbles back then, triggered by one of the first waves of financialization and especially bond markets. And a lot of those bonds, bond markets linked to a huge boom and really bubble, and railroads as well linked to a huge credit bubble in Germany from the settlement of the Franco-Prussian War. So you had all this huge bubble, and then the dealing with the cleanup was just so brutally deflationary. It's just unbelievable how much they stuck to the deflationary moves, at least some little bit of an escape valve. Now you could argue that since the global financial crisis, and even the episodes before that, we've been too generous on the central bank easing side to always bail out everybody, all the moral hazards associated with that, all the ways that it continues to blow up inequality. But on the flip side, this whole deflationary assistance upon not allowing some level of inflation to sort of keep levels of debt from rising, so that those that are indebted just become completely wiped out and going bankrupt. And this is shutting down whole economies for years is not the right policy either. And oddly, the lesson was not learned at all for the Great Depression because it is sort of like a trial run of the Great Depression, what happened back then. There was also plenty of moral hazard back then, and there's some wholly new stuff in here that I wasn't aware of, sort of the role of this whole credit bubble and the ensuing mayhem with the rise and intensification of anti-Semitism in Germany. And with even the colonial aspect of how England ended up getting much more heavily involved in Egypt, because Egypt and Turkey were massive lenders back then and got in way over their heads with too generous lending into their not very well-run economies because they're run by despots who are squandering the money, essentially. That whole episode is super interesting, as well as the American side and this insane, I mean, you almost can't make it up that they moved, they chose this time, to move to a gold standard and to stop the bimetallism, which was to have a monetary status for both gold and silver. And I'd always sort of, I had not really gone that far back in my financial history reading. I'd kind of focused more on the Great Depression as one of the key learning events. But if you go back to this episode, this whole focus back then on what this did to farmers and those that were trying to sell products at these prices that kept going down and down. And meanwhile, on the credit side, or the debt side, I should say, for a farmer, somebody that's borrowing to raise money or had borrowed to raise money for their farming operations, of course, the real value of those debts rising and rising as their products are getting lower and lower prices in the market. Fascinating stuff, an absolute must-read to think about the whole episode. And then to also think about how maybe we overlearned some of those lessons with our approach, or have overlearned some of those lessons with our approach this time around with, excessively bailing out everything all the time. And then also just colorful individual stories like this guy Gladstone, the prime minister of, I think the liberal prime minister of the UK back then who was supposedly more in favor of taking an anti-colonial approach to the UK's involvement in Egypt, but he was personally long through the nose and the bonds there, so he actually needed to be super, for his personal interests, gung-ho, and doing whatever he could to ensure that those bonds were made good by the Egyptian taxpayer. Anyway, once again, obviously a recommendation there. With that, I think I've reached the end of what I had to say for today. Wow, what a change in the vibe. It seems to be happening day to day. It's kind of scary to see the energy shifts here. What is this about? Are we leading to something bigger? I'm quite nervous. Every time I say that, the market goes back the other way, and rallies, but who knows, at some point, maybe we actually piece together a bit of a nasty correction here to clear out some speculative energy before we can find a new equilibrium. Don't know. It feels a bit shaky for sure. Geopolitics could be a key driver here. The AI trade is clearly in need of some kind of new positive vibe to get back on its feet. I'm not sure where that's going to come from. It's all very interesting stuff, and, we'll tell you one day at a time. Stay careful out there, and we'll be back tomorrow with the next Saxo Market Call. This has been the Saxo Market Call podcast. Thanks for joining today's episode. We're always happy for your feedback and questions of all kinds. To reach out, you can drop us an email at marketcallatsaxobank.com. That's marketcallatsaxobank.com. Saxo. Serious trading worldwide. We'll see you next time on Saxo Market Call. We'll see you next time on Saxo Market Call.
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