00:00Max, we obviously had an at-the-money offering from one large hyperscaler, and there's concerns
00:06that the rest will follow just because the equity risk premium is now negative, so it
00:09makes sense then for them to tap that equity channel.
00:12How do you feel about that?
00:15Yeah, overall, I'm not particularly worried, to be honest, because this whole equity versus
00:19debt, I mean, let's be honest, when you look at equity offerings overall, yes, the dollar
00:24amounts sound very, very high.
00:26We know that the free float obviously is a very different number than the total market
00:30cap.
00:31That's number one.
00:31Number two is when you look at the dollar amounts even of free float or the IPO that's coming
00:36to market, the IPOs that are coming to market this year, plus the equity offerings, in terms
00:41of market cap, you're probably more on par with 2020, not with 2021, and you're probably
00:47even a bit lower than in 2020.
00:49And let's remember in 2020 and 2021, when you compare this to now, when people say, oh, my
00:54God, we're in an earnings bubble and it's all just AI and it's tech and it's exuberance.
00:58Let's remember what we did in 2020 and 2021.
01:01We threw money behind SPACs.
01:03We literally threw money behind companies where people said, well, I don't really know
01:07what I'm going to invest in.
01:09I don't know when I'm going to do it, but you know what?
01:11Just give me some money and I'll figure it out.
01:13And really, we call this a bubble where we do see these crazy, crazy margins.
01:17These crazy margins look at Micron two weeks ago and we compare that really and call this
01:22more of a bubble or even a bubble than what we had in 2020 and with 2021.
01:27I think that was really way more exuberant paired also with much more, you know, much
01:32more exuberant positioning, both on the systematic and the discretionary side.
01:36So overall, yeah, I can't really get myself too worried about that.
01:40So, Max, not for me to say if it's a bubble or not.
01:42That's your job.
01:43You're in that seat.
01:44I'm not a technologist either.
01:45But I do look at market signal and the market's sending a pretty obvious signal, at least from
01:49my perspective, to one single name.
01:51If you go back a month to the start of June, when we had that FT article that reported that
01:56Meta was considering a capital raise, equity, that stock sold off.
02:00A month later, we have a Bloomberg story and they're considering selling excess capacity.
02:05That stock rallied.
02:06Doesn't the C-suite have to sit up and take notice of those kind of signals coming from
02:10the financial markets?
02:12Yeah.
02:13And therefore, it probably makes sense to go a bit broader in your particular U.S.
02:17equity exposure and not just by the memory and the semi names.
02:21Right.
02:21We are still going to face that shortage probably well into the next year and a half.
02:26But is that really the only game in town anymore?
02:29No, it's not.
02:30That really was the story in April and in May.
02:33When you looked at what happened since the end of March, that was when the semi names, the tech and
02:38AI names
02:39really within the S&P went up almost 50 percent.
02:42And the rest of the market went actually down 10 percent and only recovered half of its drawdown from the
02:49Middle East conflict.
02:49We've just now in the last two weeks went above that watermark.
02:53So they now flat the rest of that S&P outside of those semi, outside of those AI infrastructure complex.
03:01They're just above 100 now.
03:03They're just back to where they were at the end of February.
03:06And that's the stuff that I think you want to lean into.
03:08Play a bit more the broadening and actually play that it's not just semis.
03:12It's not just that AI infrastructure universe that's doing well.
03:16It's actually the median company.
03:18Look at median earnings, for example, the last two earnings season, not only in the US.
03:23Look at Europe.
03:24You look at Japan.
03:25You look at EM.
03:26It's everywhere where in the last two reporting seasons really median earnings growth has gone up
03:31and median earnings surprises have gone up.
03:33So it is more of a broad based fundamental story.
03:36The good news as well, just to jump in for the broader story, is that the rate story is stabilized
03:40too.
03:41Data was a bit softer than expected on Thursday.
03:43Crude's lower this morning, back to 68 on WTI.
03:46Brent Crude back to 71.
03:48Max, do you believe we have removed some of the urgency to do something at the Federal Reserve?
03:53Oh, yeah, absolutely.
03:54I think that whole story around Kevin Walsh being the big hawk and us as markets now having to finally
04:04price some data
04:05and not only rely on the Fed to give us forward guidance.
04:08To be quite frank, I mean, I sat there in the press conference and I thought, what the heck have
04:12we done so far in the last 15 years?
04:14Really? Did we only just wake up like one hour every three months, look at the dots and then go
04:18back to sleep?
04:19Really? I mean, this is a slightly bizarre take from the market, I think, to read so much into what
04:24Kevin Walsh was saying
04:25and how hawkish he was. Remember the first press conference, he said the 2% target, the 2% inflation
04:31target is not up for debate for now.
04:33How is that so hawkish? So I think that whole, you know, that whole hawkish narrative was too much narrative,
04:40not enough backed by the data.
04:41And let's remember, when you look at activity surprises, just look at U.S. against Eurozone activity surprises,
04:47you really had the third biggest divergence, the third biggest outperformance of U.S. surprises in the last 10 years.
04:54So I do wonder now, going into the second half, how much further can that go?
04:58That U.S. exceptionalism, that's really making its way into consensus.
05:02That was very different three, four months ago. If you said, look, no, the U.S., I know there is
05:07geopolitics going on,
05:09but the U.S. domestically is doing so, so fantastically well. That was out of consensus. That was raising eyebrows.
05:15Now, if you say U.S. exceptionalism, I mean, your meeting with clients is done after 10 seconds because everyone
05:20agrees.
05:21So I do wonder, really, rates, perhaps both front-end and long-end coming down, that should help awesome multiples
05:27to recover.
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