00:00Let's start with the earnings story then. We've had earnings as well in Europe out of ASML and Richemore,
00:04but the bank story is telling us a lot. It tells us about geopolitics, it tells us about the capital
00:08markets
00:08and the opening there of things like IPOs and the underwriting, and it tells us just about the broader macroeconomic
00:14sentiment as well.
00:15In the US, what stood out to you? Does this set us up for a solid earnings season? What stands
00:20out from these numbers?
00:21Obviously, very strong earnings, and we're expecting this to be a very positive earnings session overall.
00:26I think, you know, up until quite recently, expectations were kind of going a little bit more subdued,
00:32and therefore they're easy to beat, but I think their earnings are now likely to be very strong.
00:35The AI CapEx bubble is continuing. We knew financials will always be strong, leading it.
00:39I think what's interesting is that, you know, 10 years ago, you would have said financials were kind of the
00:43leading edge of giving us the direction,
00:45but I don't think that's the case anymore. So are you saying is this setting us up?
00:48I think we are going to have a strong earnings season, but I don't think it's because financials are providing
00:51the guiding light.
00:52I think it's all about AI still, and I think that this earnings season will be positive until or unless
00:58a hyperscaler says they're cutting their CapEx plans.
01:01And if that happens, that's a complete game changer, like just massive game changer.
01:05You do not fight that signal, but I don't think that's going to happen this earnings season.
01:08I think they're probably still, you know, a couple of quarters away, but however, every single hyperscaler earnings call,
01:14I will be listening very attently, and if they ever say we're actually going to significantly scale back in our
01:18CapEx plans,
01:19that's the AI trade over.
01:20Okay, and that's the timeline.
01:22And certainly ASML's numbers suggesting that we're not there yet, to your point.
01:26You're seeing not herding in the markets, herding in AI trades, but not just in equities.
01:31You're seeing also in FX and bonds as well.
01:34Yeah, like, I mean, I don't know whether it's because, I don't know why this seems to be more extreme
01:39than before,
01:39but it was really notable what happened in rates.
01:42So last Thursday, there was about six basis points priced in for July.
01:45By the time we got to the CPI meeting, it was about 50% priced.
01:49I mean, that was an amazing move between Friday and Monday.
01:52And everyone I spoke to over the last couple of days in the hedge fund community was paid rates going
01:57into CPI,
01:58which obviously regrets it a bit now.
02:00They know that not everyone was doing July, but they're kind of paying at the front end.
02:04What was interesting is basically all of them are saying, look,
02:06the price action says someone got the nod that Warsh was going to be hawkish or was looking to hike
02:10rates.
02:10And so everyone is kind of hopping on the same trade.
02:12But no one seemed to have the source information of why this was the case.
02:15But I think we're really seeing extreme herding in all markets at the moment.
02:20OK, extreme herding in all markets.
02:22Does the inflation story leave you more or less concerned about that dynamic?
02:26Or is it very backward looking, given what we're seeing right now today in the straight?
02:29Yeah, I think exactly.
02:30I think the development of the straight over the last week has kind of changed the game.
02:34I think we talked about this bit yesterday about how the tit for tat is now seen as being adding
02:37a structural premium to oil prices.
02:39And so even though people have realized from the straight over the last it wasn't as, you know, terrible as
02:43we all worried about,
02:45and that there is a massive amount of fossil fuels in the world,
02:48I think that the supply of them is going to continue to be disrupted and be more expensive than hoped.
02:54We've also got what's happening in Russia, Ukraine as well.
02:55We're kind of focusing on the straight, but the Russia, Ukraine thing is almost as problematic.
02:58So I think higher oil prices means, no, yesterday's CPI is too backward looking and it's old news.
03:03It's not solved the inflation problem.
03:05And we've got producer prices later today as well.
03:06We'll see if that adds further detail.
