00:00Let's just start with the grand data. Kind of a surprising stock, really. Intel. It's the best performer in the
00:05Philadelphia Semiconductor Index this year.
00:07A stock, let's face it, a lot of people I felt like left for dead a few years ago. It's
00:11had a huge resurgence, but now there are a lot of people starting to bet against it.
00:14What does your data show? So one of the things that you all have taught me here at Bloomberg is
00:19that data drives news and news drives markets.
00:22And so I think this is a perfect example of a stock where the data is really actually disconnected from
00:32the narrative.
00:34So the narrative is, hey, super cycle, AI conquers all, this thing's going to the moon.
00:41And actually what you've seen, if you look at the Z-scores, which is a very fancy way of saying
00:46compare the history of short interest to itself.
00:50If you look at the Z-score of Intel or you look at Qualcomm or all these stocks, they're very
00:55high.
00:56They're two and a half, almost three times as high as they've ever been.
00:59So what's really happening here is you have a tale of two cities.
01:02You have longs expanding, but the rate, the rate at which shorts are expanding is very, is faster.
01:10And so what that's telling you is that the narrative is to the moon, their data and the positioning is
01:18saying not so fast.
01:19Is that just specific to Intel or you're seeing that across the broader chip space?
01:24Across, across the board.
01:25There's, prove it to me, there's a credibility gap between the shorts leaning in, but you also see active long
01:33managers piling in too.
01:35It's just the rate of short interest is faster than longs are at.
01:38And it's interesting, you know, I know that you've socialized the term battleground stocks here.
01:44And I'm taking a look at, you know, the most shorted U.S. stocks right now.
01:47They're actually leading the rally, which is a really interesting dynamic.
01:51I mean, how does this typically turn out?
01:54I mean, how long can shorts sort of take this sort of pain?
01:57So what you've seen is, and it's a really fascinating part of the market, is that the trashiest stocks have
02:05outperformed massively.
02:07So the most shorted stocks, as a percentage of float, have performed beautifully on the long side.
02:15So I think that's telling you that the narrative is disconnected from what's happening.
02:20The narrative is, hey, inflation is higher, rates are not coming down, unemployment is this, we've got, you know, gas
02:26prices are higher.
02:27We've got all these kind of negative sentiment, but the trashiest stocks, the highest beta, are outperforming.
02:33Risk is on and at higher levels.
02:36And I also, you know, one of the things that you point out is that when it comes to short
02:42covering, you know, the flip side of all these shorts being piled on,
02:44that part is real, but you're saying this isn't necessarily a squeeze here.
02:49So it's not necessarily driving the rebound that we're seeing.
02:52Yeah, that's right.
02:53So in March, early April, you saw shorts lean in.
02:57But now it's flattened out to, I don't know if you can call it a squeeze.
03:02It's somewhat covering, but not enough to say that they're flying to the exits.
03:06I want to talk a little bit about what we saw in the private capital markets, particularly with the publicly
03:11traded BDCs.
03:12Obviously, Blue Owl was kind of the poster child for that sell-off.
03:16We've kind of forgotten about them.
03:17Have investors and more importantly, have short sellers forgotten about them?
03:20No, not at all.
03:21So the short interest is now tripled from 50 million shares to 150 million shares.
03:25But really, most importantly, hedge fund longs have been flat.
03:29But active money manager longs have capitulated.
03:33They've more or less thrown in the towel.
03:36So the stock has gone from, what, 18 to 10?
03:40And the short sellers are in control of the stock.
03:42If you're looking at the day-to-day, and you mentioned battleground, if you look at the long-short ratio,
03:48meaning what's the ratio between active long and short at Blue Owl, it keeps getting more negative.
03:53It keeps going more and more to one.
03:55So if you have active longs equal to active shorts, that's one.
04:00And it means the next dollar either way can move the stock.
04:03So expect a lot more volatility.
04:05Is there a sense, though, that this can flip?
04:08And I mean, who knows what the fundamentals are with these firms?
04:11But the idea that if everyone sort of gets so lopsided in one direction, as we've seen with some of
04:16these BDC stocks, that any sort of good news to the upside can just turn that on its head?
04:22Well, we've been saying for a long time that CoreWeave is the most important stock in the U.S. stock
04:26market because it is the stress test.
04:28It's the leveraged stress test of the NVIDIA business model.
04:31And Blue Owl is totally connected to that.
04:33So there's a disconnect here, right?
04:35People are hype.
04:36You know, semiconductors are rallying like crazy.
04:38But Blue Owl, short sellers are in control.
04:41Again, the data and the narrative, we've never seen stocks where that bit ask, so to speak, has been wider.
04:48Yeah, absolutely.
04:49And it's interesting that when you take a look at some of the charts you have when it comes to
04:52Owl in particular, that, okay, short sellers in control, like you said.
04:57But it's not as if, you know, you have people coming in and bargain hunting here.
05:02At least when you take a look at the active long, it looks like that has come down pretty significantly.
05:06It has, and that's the point, is that the short sellers are leaning in, and the people that are daily
05:11market participants, active longs, you can see it's a very, very, very, they've gotten out of their positions in a
05:19very aggressive way.
05:21So beyond the universe of what we're seeing in chips, software, and then to a certain extent with the BDCs,
05:26are there any other pockets where you're starting to maybe see any sort of short activity bubble up?
05:31Well, interestingly, where there's a lack of short activity.
05:34What's that?
05:34Energy.
05:35Energy.
05:36So everybody's saying, you know, energy, kind of one-way bet.
05:39We've got all this geopolitical risk.
05:41Oil probably is at least this level, maybe higher, given what's happening with the peace talks.
05:46There's no short interest in energy.
05:47So actually, what looks like it's safe has Air Pocket written all over it.
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