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Everyone is Wednesday, 12th of August, 2026 and we are awaiting a US CPI preview that
yesterday does feel like a key pivot point as emphasized one way or another somewhat
linking a couple of things here.
Of course, there are some of the rise in US Treasury yields, especially the long end of
the curve.
And we had the 10 year testing those highs since 2024 yesterday, about 4.7 percent.
We had the 30 year.
I'm not sure if it actually poached to the actual high since 2007 or is within a basis pointer.
So doing so.
And then we came in and saw decent rally actually in treasuries, makes some sense that participants
didn't want to take this yield rise too far ahead of such a key data point.
But we also had a strong three year US Treasury rally, sorry, three year Treasury note auction
yesterday with very strong demand and global yields also coming in with the exception of
Japan.
So overnight we saw the two year rising once again.
This was after a day of holiday in Japan, the prior day.
So the two year hitting again, a new high since the mid 90s, the sort of expectations for
the bank of Japan meeting firming up for September, a September hike where at 80 percent
probability and a lot of coverage in the news of this Scott Besson's US Treasury Secretary
attention with the with Japanese official demos, you know, some of the conditionality
around you a support for the case of a stronger yen is that the bank of Japan hikes more
aggressively.
I don't know if that story cycle is helping things out probably is at the margin.
So, but it's not helping the yen out right now, which is still fretting.
I think these high crude oil prices is fretting just the general level of treasuries a bit surprising.
It didn't come in for a little bit of a rally with the with the Treasury rally yesterday
and global bond yields elsewhere coming in a bit.
But it didn't and we're getting closer and closer to 160 a sort of psychological level
for it.
Dollar in.
By the way, another interesting sign of this whole theme about the US Treasury market
and the sense that, you know, Treasury Secretary Besson wants to do whatever it takes to keep
long yields from blowing out to too much somebody passing around the story that the Treasury
is no longer or some whatever the responsible regulatory organization will no longer require
that US companies and individuals sort of report the beneficial ownership of treasuries
saying basically, we don't care who owns the treasuries as long as somebody does.
Apparently, it wasn't particularly hard to get around these rules previously, but just
another one of these of these signs here.
So, what is it, you know, the CPI can report today, I don't know many of you will be hearing
this after the fact.
So, it's not particularly important for further additional thoughts from myself, but it does
just feel like an either a moment also because on either or is if we get a hot number yields
blow higher, I think that starts to impact risk sentiment more broadly into the equity
market, etc.
Whereas a softer number and which may or may not trigger a rally and treasuries and lower
yields, but if it does do that, then risk sends bit at least isn't pressured and can do
its own thing independent of whatever is going on in the treasury market.
For some wonder reason, back of the back of the hairs on the back of the neck contrarian,
maybe over contrarian bias in my history as a trader and observer, I feel like I'm
a little bit bullish on treasuries to rally here.
But another key component is this oil price is sticky up here near $90 and brand.
We have the ongoing U.S. Iran situation and they're at loggerheads over the homeless
street, there's been hostilities in the Red Sea.
Some ship was struck there where there's a U.S. attacking some ship trying to get through
the homeless straight on Iranian terms, whatever.
Neither side looking like it wants to give in here.
There's rumors.
I think it was a some package to any official involved in negotiations talking about.
There's potential for a deal, but my goodness, how many times have we heard that?
The oil can do its own thing independent of the U.S. CPI independent of anything else.
Reaggravation, it feels like we're sort of the cutting edge of how bad the aggravation
can get, but I suppose it could go another not sure, three worse.
Then of course, it suddenly can get a lot better if and underlining if triple time, three
times, especially Trump backs down or there's some kind of clearing that is sitting in
here.
Iran wants to make a nuisance of itself in terms of the oil price itself, because it
sees that as some kind of leverage against Trump and his popularity going into the midterms
whether they succeed.
I don't know.
All right.
Broader review.
By the way, in macro, we have gold and silver, pretty firm, gold suffered a pretty significant
interday set back yesterday, but rallied again near 4,400 last time I checked, and silver
also fairly stable here, and then just 4x is just completely more a bunch.
I mean, we have the end crosses coming back up a little, we have a little bit of starting
strength, a little bit of Swiss frank weakness, but we're waiting and watching for paint to
drive feels like in the major currencies at the moment.
Let's give it a reassessment post CPI tomorrow.
Broader markets looking at how the U.S. equity markets performed yesterday, small down in
the NASDAQ and S&P, I think some mag 7 involved in some of that, especially alphabet, and
I couldn't really find approximate story for their ugly performance yesterday.
S&P 500 equal weight and Russell 2000 were up small and the SOX index was up 0.9%, but
it is still down around 15% from that crazy run up.
It had some of that link to leveraged ETFs and Korean memory names, etc. and of course,
the situational awareness fund, not so called, it was called that with Leopold, Ashenbrenner
at the head.
Still a little bit of recovery from that whole leveraged situation.
A little bit on that front, AI hardware, etc., we had a trio of names reporting and seeing
a positive reception of those earnings reports.
Core weave, they reported what they reported, 112% revenue growth, etc., have to keep in
mind though, this company.
It did advance 15% almost on the earnings report after the close yesterday.
Still has a negative cash flow and in the case of this prior quarter of minus 5.7 billion
rising to minus 8.0 billion anticipated or forecast for the next quarter.
I mean just massive capital needs to do what it's doing and building out data center stuff.
Just for perspective, before you take a look at the stock, you should also know that
creditors are concerned.
They're issuing a lot of debt or have issued a lot of debt and just to take an example,
their bonds are under pressure.
They've bounced back but they were under very significant pressure before and still as
of yesterday's close, the 2031 bond, so around a five-year bond with a 9 and 3/4% coupon,
if I've known it correctly, either that or 8 and 3/4.
I think it's 9 and 3/4 coupon sales at a yield of 11.7%.
So that is suggesting a high risk of default, at least of that debt, where equities holders
might sit, of course, could be somewhere else, but just to keep in mind, they're at the
bleeding edge financially of taking risks and doing what they're doing.
Supermicro's somewhat different company, but a similar involvement in the data center
space, up almost 8% after the close after they reported.
Lamentum, so one of these two optical interconnect names, up over 6%, wild volatility in that
stock, as I emphasized yesterday, up, what was the revenue, up 109% year on year, their
first billion dollar revenue quarter, and with good guidance for the coming earnings
and revenue growth.
Today, in a couple, at least one name that I mentioned recently, today we already had
Vestus out reporting, they ripped higher, don't have the percentage in front of me, but hitting
about a two and a half year high, I don't really understand wind power does make sense
to me, but it's doing what it's doing.
And then maybe four arguably key AI names, Nebius, increasingly evolved in the data center
space, a very popular stock for here in Europe as it is based in Netherlands, a lot of activity
in the options market, et cetera.
The reporting as far as I can tell, a bit earlier in the day, around 130 GMT today, if the
source I have is correct, a big focus for that stock.
And one I did not mention recently in the rundown this week is Sarah Bruss, they're reporting
after the close today, if you don't recall, this is the company that makes these insanely
large sort of CPU chips and they can arrange a bunch of them in parallel for very powerful
AI data crunching systems.
The market is very enthusiastic and when it valued the stock at its IPO from not that long
ago, if I'm recalling correctly or to this year, $52 billion market cap, this quarter's
anticipated revenue at a sub $200 million, so you know, you can field evaluation in the
multiples when you put out those two numbers.
Let's see what they report and how the market. plays a very, very aggressively valued stock like that.
Similarly co-coherent of these optical interconnect stocks
reporting today and Cisco systems,
which has had us a fantastic year to date so far
with, of course, the revival of their business
and their growth being this whole AI investment phenomenon.
Let's see, that's about a wrap for the markets for today.
We'll be waiting again for the, for the US CPI release.
And I got some, you know, stop to consider,
take a look at some of the links.
If you want to spend the time on it
in today's podcast episode description,
I think there's some really important ones today.
Couple of these inspired or passed on to me from FT Alpha,
one of those from James Aiken,
who I haven't heard from in a long time
or haven't followed in a long time.
He could be a bit, I don't know,
smart me or whatever.
He's very entertaining, though, in his commentary.
He uploaded one of his pieces from Aiken Advisors,
talking about how the, you know,
the last FOMC, how Kevin Moore
should really flubbed the communication
and how Jackson Hole should really be put in our calendars
as an important event coming up at the end of this month.
Not at the very end, I don't know the dates in front of me,
whatever that's heading into that weekend is in late August,
that it could be a key sort of chance
for Worsh to get more coherent and cogent communications,
policy, you know, or sort of revealed or mobilized.
So note that, I agree with the many of his points
in his piece there.
And also note, from Michael McNaird,
and also Michael Evry actually pointing out as well,
noting a couple of key figures
from the sort of pro-globalist past
of top economics commentators.
So in Michael McNaird's case,
he's talking about Stephen Roach,
turning the quote unquote against globalization
and making some points there about georeconomics
and points like that when you're subsidizing domestic
industry at the cost of consumption,
that is a kind of, you know, effective,
you know, tariff-like move, if you will.
And then, every noting as well,
that even Paul Krugman's, his tune has changed
on the issue of globalization.
So, the whole world is shifting in favor of this outlook
and overview, or overlay and framework
of macro strategy, industrial policy,
needing to operate in the real world,
not in this hyper-tune globalized system
with different players taking advantage of the system
at the cost and the risk of fragilizing other players
and fragilizing its in the tail of sense,
and the worst risks from the fragilizing have accrued
to those that played the globalism card,
the most aggressively, especially the USA.
And then he points out, I put out a link
to Michael Evry's daily piece.
Some cool links in there,
talking especially interesting
on the US defense fronts,
the Pentagon has put out sort of,
I think it was a 21-day demand.
So, how are you going to address your inability
to produce high-end missiles basically through the industry?
There's all this news going around
of their higher-end missile interceptors
and others being in very low supply.
The stocks are very low and they just don't have the ability
to crank these things up.
It's unbelievable that you, as a defense company,
you know, tune everything towards maximum price point,
maximum performance,
but in the event of a war,
the inability to ramp up production.
So, they need to answer for that.
The answer could be to go down scale
in terms of the components and in terms of the cost.
And on that note, he notes that Boeing
has possibly come up with a much cheaper radar seeker.
There's a story on that.
And the idea that I agree with this,
that necessity is the mother of invention.
I can't even imagine how the, you know,
the whole political situation within the US military
and at these defense companies,
how they must all be scrambling
to really change the whole nature
of how they communicate what the needs are
and then fulfilling those needs
from the company's point of view.
The, and then there was a Mike Green post on his,
yes, I give a big sub-stack talking about his leaving
in the near future, simplified asset management
and starting tier one alpha.
I'm not sure if it's a hedge fund or it's some kind of outfit
where he's going to be aiming at,
and of course, he's a guru on all the impacts
and effects of passive investing.
He's a very smart guy.
Some people don't appreciate his way of communicating
and arrogance, maybe some would say whatever.
I don't care.
I just like the guys intellect and the things he points out.
And I think he's intellectually extremely serious.
But his tier one alpha outfit
will be looking at exploiting how passive investing is,
the types of opportunities it creates
because it is just sort of a monolithic thing
that happens so when companies get taken in
or out of indices, what those impacts could be,
how it affects flows and the asset values based
on those flows and all kinds of different odd ways.
And something I've commented a lot on and a podcast
in the past pointing out how companies like Walmart
have become egregiously overvalued based on their status
as very large companies and presence in large industries.
And the valuation doesn't make sense,
but that doesn't necessarily mean
there's an opportunity to short it
because if the passive flows continue,
then so does the evaluation rise in some cases.
So I just thought I would note that.
I'll put a link in there.
I'm not sure if it's available to,
if you don't have a subscription.
And then finally, there was a super interesting article
that I just didn't manage to read,
but I did get an AI summary of it
just before I came in here to record the podcast.
And it's a super fascinating subject.
Again, this one was also from FT Alphaville
to some some side I've never heard of before.
Arguing that Google search,
I think the title is Google search is dying,
what replaces it could be worse or will be worse.
And just a couple of summary points.
And I agree with the risks.
And I agree with the really the,
one of the annoyances and concerns you have
when you're using AI for research to compile data,
to compile arguments or to learn things,
can you 100% trust it?
So the arguments in the article are,
for example, that AI is degrading information retrieval
that the AI summaries, for example,
from Google can hallucinate even the most simple
factual information.
And then this is the super interesting part,
so that the idea that the underlying web itself
is disappearing.
Links that don't work anymore,
what they call link rot,
deleted archives and manipulated source material,
or even source material that is itself created by AI,
mean that the corpus,
so the body of work that AI depends upon,
is becoming less reliable.
And for example, Disney,
which owns ABC, which owned 538,
deleted the entire 538 archive,
although 538, I think it was many cases,
was incredibly misleading in some of their activities,
but still there was a lot of compilation of,
of polls and all kinds of things,
political polls and otherwise on that website.
And that AI creates a destructive feedback loop
for knowledge institutions.
Wikipedia provides material that AI systems ingest,
but AI answers, reduce clicks back to Wikipedia,
potentially producing the attention
and the donations required to sustain it.
So you're just relying on that front end of the AI,
to deliver, deliver, deliver, at the back end,
it's getting ignored.
Are people sustaining the infrastructure information
and quality information infrastructure needed
to feed the AI?
Oh, even the internet archive is becoming less effective,
another point, litigation cyber attacks, storage costs
and publishers blocking,
there's an outfit called Wayback Machine,
Crawlers, and the weakening the author,
what the author describes is effectively
the web's backup memory.
So really cool points.
Europe is trying to offer a model of how to deal with this.
France and other European governments
are adopting domestic privacy oriented search,
messaging and open source alternatives.
There's even a German court ruling
that held Google Responsible for false AI generated summaries,
which could also shift platforms
from being treated as a neutral digesters of information
towards them having some kind of editorial responsibility.
So putting their responses on the line,
they're wrong, and there's a legal liability there.
Super interesting area and something I'm sure
is going to be discussed so much in the future.
Basically, I just covered most of that article,
but if you want to read the source itself,
I will provide a link to that.
And that brings me to the end of today's podcast.
Let's see how this CPI goes down.
Let's see, for those that are reviewing us before the fact,
we're going to expect it 0.1 plus on the headline month
on month 3.4 a year on year.
That is versus 3.5 year on year headline for June.
The July core CPI expected it plus 0.2,
and the year on year expected 2.2 month on month,
2.5 year on year, and that was versus 2.6 year on year
and June for the core.
So yeah, in line, the market has to decide what it wants to do.
I would suspect maybe--
given where near the highs of the range, as long as oil is coming off, maybe the Treasury's
rally, we avoid the yield spike situation. Clearly a big beat on Core, 0.3 is going to
be ugly. A big test for the market could be even leaking into risk sentiment. And then
the undershoot would be interesting for mostly macro and equities would sort of do what they
want, but might find some encouragement there for a fresh rally if we can undershoot, especially
if we get a crush lower in Treasury yields on the back of that. Let's see what happens
and stay careful out there. 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
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