Some relief in software. Eyes on Trump-Xi next week.

Welcome 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 host and guests and do not constitute investment advice or recommendations. All information provided is for educational and entertainment purposes. Everyone, it is Friday, May 20, 26th, getting a bit of a late start here today. But yeah, what should we say? Had a little bit of a pull back yesterday with fresh concerns about the situation. The Persian Gulf surprise, the price, but you know this is modest stuff. Oil price is backing up a tad. This latest kinetic confrontation. Not enough though to really spark wider concerns. Although Europe is down today, even though the US futures have come back. But kind of an interesting session some ways in the US yesterday that the overall NASDAQ 100 was off only 13, 13, 0.13 percent. SEP off about 0.4 percent. The equal weight a bit worse than that. So the average stock or median stock was down quite badly minus 0.7 almost. And the Russell 2000. So the smaller stocks out there minus 1.6. There was also news on the tariffs being ruled against by Trump. This just doesn't seem to raise much of a fuss anymore. The idea being that he shifts to some new basis of this section 1, 2, 2, whatever the section was that they're based on is not considered legal framework or a worthy legal framework for these tariffs. It's a bit like the whole you know almost constitutional types of initiatives that were made for example in the wake of the Vietnam War, the War Powers Resolution to not allow president to pursue these major campaigns, major military actions beyond a certain amount of time without an official declaration of war or approval from Congress. In the max being 60 days and there was that May 1 expiry, the Trump administration just says well you know the subsequent stuff has been not sufficiently high or hasn't cleared us sufficiently high hurdle to be considered you know comprehensive military operations and basically the the the whole war effort is wound down anyway. So we don't have to worry about this particular requirement. And we have to keep in mind, Oleh Hanson was out with circulating the actual production rates from these key Persian Gulf countries that those that are relying on getting their shipments through the straight and you have Iraqi and Kuwaiti production of course is the most heavily impacted. I don't have the percentages but Kuwait is the most profoundly impacted in terms of percentages. They're very heavily also though and Saudi down around 30% and UAE down 40% of the production even though they're able to get some exports to market via those alternative pipelines. Still overall nine million barrels a day that we're not that is not coming to market. It's very considerable. So and of course even if in a smart there's some production upstart time. Supposedly, Iran's production is only down some 10% or so but there is the issue of whether they're going to be hitting so-called tank tops or how they're going to be getting accrued to market. I think one more news I saw on the geopolitical front that just spotted it before I wanted to start recording the podcast. It's a very strange outfit actually. It does have a ticker. It is a company called Critical Metals. C-R-M-L is the ticker. It's sort of created as a SPAC. I believe it or not out of an Austrian company called European Lithium. They're trying to simplify the whole ownership structure according to my chat to GPT inquiry but it's a bit odd there but the idea is that this Critical Metals is a US company acquiring 92.5 percent of this so-called 10 breeze mine in Greenland as well as a company that has some kind of drilling expertise or the majority shareholders. Majority share of an actual drilling company. This stock has been pumped before. I think right around the time of the whole fuss when the US or Trump was threatening to invade Greenland etc. late last year. It's been on the up and up again and of course it's going to be a long time before it's actually selling rare earth production into market but just interesting to see this in a geopolitical sense an American company getting securing access to this one of the world's best if not the best single mine for some of these potential especially heavy rare earths. Very apparently rich resource high grades of these in the ore and low thorium and uranium content which means that that can apparently complicate the production and processing when you have radioactive materials and association with the ore. So you know just another one of these key steps towards the US securing these keys apply chains. As we're heading into the macro-dg political macro event of the year which has to be this C Trump summit that is scheduled for next week and we'll be talking more about that. But going back to the stock market some of the single stock we were saying moving up and down. By the way I forgot to mention the essence just the overall divergence is here of course we have the key AI related to hardware names just running away an incredible super cycle to the upside NASDAQ 100 is blasting into the stratosphere even the S&P 500 is you know blasted some 300 plus points above its prior major high but the equi-weight index shows you how concentrated that move is because the broader market just barely scratched to an all-time high on Wednesday sort of intraday actually it was an all-time high close and then a slightly further intraday high yesterday before that negative close so the divergence is a foot the market is not just the market we've covered this kind of thing before and then in an added twist yesterday we saw super strong results from a I don't know how exactly to position this company but they're sort of operating somewhat like as far as I know in the in the cloud and somewhat like a cybersecurity company that do also have some AI powered software here so it's not purely a software as a service play there's a different angle here but data dog is the name of the company they're up over 30 percent yesterday and you saw some feed-in to other companies that have been getting a lot of negative attention because of that feared impact from the likes of inthropics software creation tools etc so a company like Fortinet up 20 percent crown strikers up 8 percent even in Palo Alto up 7 percent and then the other sort of software is a service name not all of them but many of them are also up strongly on the day service now at 5 percent and snowflake a big one up 9.3 percent on the day yesterday so you know a bit of a difference there and in the vibe that we've seen of late let's see if this is just a one-off because of that data dog result or if there's maybe a changing sentiment in the space I know Michael Barry the famed big short speculator is he's been out saying that he's long a lot of software company names including Adobe and he's short some of the AI related names so there's at least one person trying to pursue that trade it's a it's a dangerous business though with the momentum we've seen of late I forgot to cover no more yesterday apologies for that and not much to say about it it was a you know a very low bar that they cleared good results relative to expectations was surprised to see something about only 200,000 weekly prescriptions of the wigovie pill you know it's a big addressable market especially in the US that that needs to come up way up into the millions here curious to see how novos stock starts to trade right you know if it does manage to clear this 300 level it's been up quite sharply obviously from the low so it's a sub 225 to well over 300 day after the announcement of those earnings it's it was rolling back to below 300 yesterday earnings incoming I forgot what's coming up today wasn't anything interesting but on Monday we have this AST space mobile so that company that's looking at putting these lower earth orbit satellites into orbit a bit like Starlink but the idea being that they're so low and their antenna is extremely sensitive they could tune into standard mobile phones not even requiring special phones and of course not the dishes that that a starleet does a very interesting business model they were recently saw a huge setback when a blue origin rocket could not deliver these key satellite I think it was a key test satellite for the system was unable to deliver it into space so a real speculative play there not a recommendation never recommendation constellation energy also reporting on Monday and then we have Siemens energy of course a high flyer on all the energy interest picks and shovel interest from the energy side into into powering data centers and Siemens is one of the few producers of these key gas turbines which are used and deployed for power usages it's come from from a level by the way Siemens energy to something like 180 from sub 10 levels in 2023 just to get an idea of how it seemed to be a sort of a state you know industrial company can suddenly become a growth company like you wouldn't believe what else do I have gold and silver very much finding that strong support silver even testing above 80 times gold above 4700 really key zone all the way into to 5000 for gold to to find that you know fresh up upside impetus I think and then I think one interesting indicator I haven't mentioned maybe in a couple days is as crypto just just I'm just struggling to figure out what crypto is trading on or because of or linked to you know this massive run up in speculative shares maybe it's because the focus has been drawn away from crypto and into this real build out of AI that is happening, but it's just a bit disappointing that once it's set of sort of broke that key resistance in the high 70s and got above 80 even that it just hasn't continued to fall through and now we've rolled back to 79k so a little bit of a disappointment there. On the macro front, a lot's going on here. I don't want to spend too much time on this but especially because we're not seeing much reaction into the market which is a bit frustrating. My background is very much in Forex and the volatility has not been terribly inspiring. We did get some very strong German factory orders numbers from March up 6.3 percent. That was versus 1.7 percent expected that's work day adjusted by the way in 3.5 percent previously. We have UK elections where yesterday council elections the most widespread since 2024 are seeing lots of positive results for reform. Those are all in. Is this the time frame that is seeing Cure Starmer's leadership challenge that the head of the Labour Party is who could replace him going to be further left and negative for sterling. Certainly sterling is feeling zero volatility at the moment so it doesn't feel like there's a heck of a lot of anticipation around this in the markets but bears watching if you have any sterling exposure. In the US, a jobs market we have, of course, we've seen another good claims number to me that indicator just seems dead forever and because it just always seems to be so incredibly low relative to its history. 200K, it was lower the previous week but I mean we're talking about historic, historic low levels I think there's just a different structure to US jobs market so it's not the greatest indicator anymore. Maybe indicative though of the overall strength elsewhere within the claims was the continuing claims dropping to 1766 below expectations and this is like the best in a couple years as far as I can remember here from looking at the chart yesterday and forgetting to note the exact data but it's been dead it's getting close to 2 million at one point so we've come down there those that have been out of work for quite some time. We're looking at that of course jobs report later today and many of you will be listening to this after the facts I won't dwell on it too much but pretty low expectations only a plus 65K versus that bigger number of the prior time around and the unemployment rate focus will be at 4.3% which is unchanged would be unchanged from the prior month. The ADP was a bit disappointing for April only a plus 109 relative to some of those somewhat strong weekly numbers that were coming in. We've also got the preliminary May University of Michigan sentiment survey and not a huge one worth reacting to but just an interesting one to note. More interesting still probably were the reeksbank and noisebank central bank meetings yesterday so Sweden's reeksbank unchanged that was expected but they're super cautious and wanting to roll out any kind of guidance and this was seen as quite double-ish relative to expectations where European peers are tipped to generally look at potential rate hikes if the inflation feeds through from higher energy prices. Reeksbank a bit more cautious here we saw the Swedish corona quite a bit weaker. Eurostocking bowling up towards the highs of the recent range. And noisebank surprised with a 25 basis point hike taking the rate to 4.25% and even saying that they might hike again by forecasting that the policy rate could be between 4.25 and 4.5% by the end of this year that's a raise. The funny thing though for Norwegian corona which did respond to the strong side on that data point or on that development was that the of course with lower energy prices have laid that's a negative influence on the currency so it's kind of just churned towards the high in the highs of its range but then backing away from those on this dominated by the energy situation more than by Norwegian bank hawkishness. And then worth noting the UK construction PMI this week was out at 39.7 it's the lowest in a long time. And South Korean exports for March just wanted to note this down 35 billion dollar in dollar terms. A triple of what it used to be and just very interesting to think about what is a South Korea that is reaping these kinds of profits going to do with that incredible surplus. Is there a domestic market or production potential to invest into maybe the risk to a degree? You have to imagine that that goes towards some kind of US trade deal investing in US infrastructure etc. After all all this massive catpacks we're seeing and there's a good about three links I think in the podcast episode description today one of those two a you know there's this scale of catpacks and how it's driving S&P 500 earnings. So you have the the spending which is kind of hidden in many ways in terms of the financial in terms of the financial statements shows up as negative cash flow but does it sort of impact the earnings whereas the actual spend from these big companies and startups and all the others does show up on the profits on the bottom line in the companies that are absorbing that spending and a heck of a lot of these companies are not in the US. A heck of a lot of them are over in Taiwan namely TSMC but also South Korea with the memory makers and the $35 billion I mean that's just absolutely Titanic you know current account supplements we're talking for talking about for this country in the year to come and some of that's going to get recycled back into the US it kind of helps you build the the strong or at least this the dollar remaining as reserve currency and narrative when you think about it in that way. And then I just wanted to mention this headline because it just goes to show you how serious thinkers and serious investors in the bond space are thinking especially in the treasury space Bond King Goodlock saying that he is you know taking a long shot bet in case of the US debt restructuring the Bloomberg article believe it was where he's talking about making sure that he owns for I guess especially for longer term treasuries he owns treasuries with a small coupon not a large one because he fears that the debt trajectory is so unsustainable that the US could do some kind of forced measure technically a total default by doing something like lowering the coupons on existing debt he's saying it's not even a 30 percent odds it's something like this is going to happen but he's just clearly afraid of some kind of scenario like this. In terms of the links today there was a very long golden piece I skimmed through it there's some interesting data in there you know who knows if they're right but it's just wants to point out where a lot of the money is going and a lot of the factors and variables you need to consider when you're looking at all this AI spend ahead it's called tracking trillions and it's it's a very long form piece you can find a link and there's a PDF if you want to read it offline and then there's a big Craig Tendale piece I'm hoping at some point actually a saxomarker called listeners to get Craig Tendale on the podcast he's agreed in principle but I need to get myself together and get my back in order to put together a good set of questions for him and hopefully he can join at some point but his latest you know opus a very grand opus if you will is on his concerns around some of these climate change systems and climate change phenomena that are not sort of properly incorporated into the sort of the the consensus narrative of where climate change is headed the sort of idea that we're going to slowly grind higher in temperature as CO2 slowly accumulates in the atmosphere there's some very specific key systems that could be tipped into a sort of a overbalance or tipped into some kind of a well tipping point beyond a tipping point that creates a huge follow on an exponential change in how things are doing are performing in the climate and one of those is this and we've many people have read about this before talked about it before but this Atlantic meridonial overturning circulation so it's these circulation of the North Atlantic water because of the fresh water versus saltwater content and if that overturning or if that circulation is slowed down or even stopped suddenly you're throwing north of Europe into the deep freeze you could have huge ice and snow accumulation that actually ironically ends us putting us into some kind of an ice age trajectory or at least some kind of super cooling regionally so these are the types of modeling that just aren't incorporated into what we're thinking about when we think about climate change there's also the El Nino and there's this very interesting area that I was not aware of at all I was aware of that with the change in the shipping requirements in terms of what all these big ships can burn for fuel the so-called bunker fuel where the required to not spew so much sulfur into the atmosphere that spewing of sulfur those aerosols of the sulfur going into the air is a tremendous source of global pollution and while it is pollution it had the side effect of of creating helping to create more clouds and reflecting a lot of sun energy or solar energy back into space so that cleaning of the air ironically has increased heat exposure and into onto the earth's surface it could be driving some of the climate change and rising temperatures we were seeing but his point, Crack Tendell's point and I was not aware of this is that a lot of these ships apparently too clean they're exhaust before it's as spewed into the air are using some kind of scrubbing technique that captures those particles into some kind of sludge and they just eject the sludge into the sea creating some kinds of obviously ugly pollution effects there so there's these effects among others that he's talking about these feedback loops that was the word I was struggling for earlier that we're just not considered and how things could tilt all kinds of erratic ways. And I share somebody's concerns highly recommended reading on that one. And then yeah, that was the one about the cat-backs driving S&P earnings. And yeah, if that continues, we continue to see the growth in the cat-backs. It could continue to drive this incipient. Not incipient. It's sort of like the second round, it feels like of this tremendous bubble. Is the bubble going to end now? Or are we gonna see this extending into 2027? Like going to be critical stuff for investors. All right, I think I was planning to cover today. Call it a day for a day and we'll be back soon with the next SACS on working call. (upbeat music) (upbeat music)