00:00When you talk about short interests, Bob Sloan's name comes to mind because of the data that you guys provide
00:06on the Bloomberg Terminal, I should say, as well, Bob.
00:08Welcome to the program. Thanks for joining us. What do you make of that slide?
00:12You know, an 8% move is a big one, and obviously there's a huge catalyst with the war in
00:18Iran.
00:19Sure. So thanks for having me on, as always.
00:23Danny did a great interview with Michael Arangetti of Ares, and, you know, what did he say?
00:28He said, you know, this is not 08, right?
00:31And then you have Lloyd Blankfein saying there are echoes of 08.
00:35And you have Jamie Dimon saying there are the creepy crawlies around the capital markets.
00:38And so what we want to do today is walk you through what they might be seeing that makes them
00:43feel that way.
00:44One of the things that we think is that the most important stock out there is CoreWeave.
00:50The short interest is very high. Why?
00:54People don't like the business model.
00:56And so what's the business model?
00:58It is the leveraged stress test for the NVIDIA demand thesis.
01:04You borrow money, a lot of it.
01:06You buy chips.
01:07You rent out the compute.
01:09And you hope that you make enough money to outrun your debt service.
01:13People are selling against that model.
01:17Now, what makes people nervous?
01:18Where's the interconnectivity?
01:19That was what 08 was about.
01:20Everything was connected.
01:21We didn't see it was connected until it happened.
01:25The connectivity is to private credit.
01:28So Blue Owl is a major lender to CoreWeave.
01:31They tried to put together a $4 billion syndicated loan, and it failed.
01:36Doesn't all of this make it worse for private credit, too?
01:39Because now they need to not just contend with all of the headline risk and some of the investors pulling
01:45money out of retail funds, but now higher inflation and maybe rates that are sticky.
01:49The initial drop-off in a lot of these private capital names happened when the Fed started to hike rates.
01:54Doesn't this just exacerbate some of the issues they're already facing?
01:57It does.
01:58And that's what the short interest is telling you in Blue Owl.
02:01It is 15%.
02:02It's an all-time high.
02:03And so what are they saying?
02:05What are short interest saying about private credit?
02:07We don't believe the marks.
02:09So if you want to draw an analogy to 08, you say the business model is suspect.
02:14Who's Bear Stearns?
02:16Now, we're not saying that they're Bear Stearns.
02:17This is what the data is saying.
02:19The data is saying that Blue Owl is potentially Bear Stearns because we don't believe the marks.
02:24And the collateral underneath supporting these loans is suspect.
02:28So whenever I think about shorting, I recognize that you had to pay money to borrow these stocks and sell
02:36them, right?
02:38How much is it costing to short a core weave?
02:43Or how much is it costing to short a Blue Owl?
02:45Yeah, so the cost is a factor.
02:48But borrowed data in and of itself is like the blind rat mole of data, okay?
02:54It is blind.
02:55It buries itself underneath the sand.
02:58It's a pest, and it's useless.
02:59But it is emotive.
03:01You see one of these things in your backyard.
03:02You go, oh, my God, this is going to ruin my garden.
03:05It is, these are very sensitive times.
03:08This is very powerful data with a powerful narrative when you're talking about 08 and what people are thinking.
03:13To say that borrows equal the entire market cap is short, it's irresponsible.
03:19And that's not what's happening.
03:21They're just saying the marks in private credit are suspect.
03:24So that would lead us to the next thing in the narrative, which is, well, if you have Bear Stearns
03:29and you have a suspect business model, what's next?
03:32Well, Lehman Brothers.
03:34And who's Lehman Brothers in this particular point in time, according to short interest?
03:38Who is it?
03:39Oracle.
03:40Why do you think, though, with Blue Owl specifically, that this has become such a concentration for short bets?
03:47Because if it's become suspect of the marks, when you look at the bad marks, it's been first brands, Tricolor,
03:54now MFS.
03:56In the U.K., Blue Owl hasn't been part of any of those deals.
04:00Why has this become the concentration for short sellers?
04:02Because one fund has a 70% concentration in software.
04:06And if you look at the S&P 1500 and you look at the Z-score, so what we do,
04:11you can do this on the terminal.
04:12What we do is we actually show you the standard deviation.
04:15So compare the short interest history to itself.
04:17Some of these things are three and four standard deviations higher than the mean.
04:21So it measures that there's an immense amount of intensity in the short interest.
04:27And what does that tell you?
04:28Is that the software, the collateral, right, going back to 08, the collateral that undermines and underpins these loans, people
04:38don't, they think AI is going to eat it.
04:40Now, I would say probably that's not necessarily right.
04:45You look at Salesforce, it's bumped up 50, almost 30% off its lows.
04:50So, you know, usage, system of record, these things are very powerful things to try to dislodge and displace.
04:56The same must be true of Oracle, right?
04:59And this is a stock, I should note, that is down from its high by almost half or more than
05:04half in last September.
05:06So what's remarkable about Oracle and why people are mentioning 08 is because the CDS, you have $100 billion of
05:14investment grade debt, $100 billion.
05:18The CDS is trading at 08 levels.
05:20And you have short interest, very high, given its own history.
05:25When is the credit and short interest bets the same?
05:30Usually, equity short interest is outrunning credit, and credit knows more than short interest, given certain scenarios.
05:36In this case, they're both very elevated.
05:38It's very bearish.
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