00:00I know, Mark, you have an eye on what's happening in South Korea again.
00:03We're expecting maybe the government to step in or the regulators to step in to address the leveraged ETFs part
00:08of that story.
00:09Is that something to be welcomed? Is that what's needed?
00:11There is this incredible volatility and the cost be down again today.
00:15So those announcements we're expecting in two hours' time, they probably won't be game-changing.
00:18They'll probably kind of raise the minimum deposit required, change how a little bit of the rebalancing happens.
00:23But I think what's important here, it's a Korean holiday tomorrow.
00:26So these announcements are basically coming at the end of the week when the cost be is closing kind of
00:31near the lows after a large correction in the last few weeks.
00:35And we're going to get the reaction in lower liquidity futures or U.S. ADRs or U.S.-based two-times
00:43ETFs, et cetera.
00:44So there's the Hong Kong two-times ETF, which will trade.
00:47So I think there's a chance for kind of a very misplaced and oversized reaction, even though this won't be
00:52game-changing.
00:53And I think technically it's not looking great that we're kind of closing this week at the low,
00:57because we are closing the lows because there's no trading tomorrow in the benchmark index.
01:00So I think that the price action in semis, in chip stocks, is remaining globally extremely poor.
01:06And I think cost is the leading light for that.
01:08So I think we've probably got a bit more pain in that section next week.
01:10And, Mark, I want to take it to the oil market, because I was just listening to owner speaking there
01:13and thinking a little bit about how the dynamic now on the Strait of Hormuz is a little bit different
01:16than it was in the first half of this conflict
01:19and the question of the sort of binary nature of the open or close of the Strait of Hormuz.
01:22When it's closed, the market can freak out.
01:25It can sort of push prices higher and higher and higher.
01:27That puts pressure on Trump.
01:28When you don't have clarity on that, the market is going to have a much harder time pricing that.
01:32What kind of risk do you think is associated with that kind of condition?
01:35Yeah, I think there's two things here.
01:37I think it's not just the change narrative on their moves.
01:40We've talked about that quite a bit this week, about how people now are realizing there needs to be a
01:43structural high-up premium oil.
01:44But it's what's happening in Russia, Ukraine.
01:46Arguably, I won't say it's more important, but it's as important because it's happening at the same time as people
01:53are realizing that Hormuz is not going to normalize this year.
01:56I mean, it might have periods of higher flow, but we're not going back to the way it was.
02:00We saw this before with what happened around the Houthis and around the Red Sea.
02:05So that normalization doesn't come through.
02:08So oil prices are going to be slightly higher than we were thinking maybe a couple of weeks ago.
02:12However, the one other facet is that we've realized that there are a lot of fossil fuels out there and
02:16the supply is large.
02:17Do you think that's why?
02:18Because the market reaction to the producer prices and consumer prices that's backward looking, looking to June, was positive.
02:22And we saw yields down.
02:23We saw repricing the Fed.
02:25And yet we know that what is happening, what you've detailed, is real and material.
02:30Is there a disconnect?
02:31Or are the markets seeing that this is still an oversupplied energy market globally?
02:36I mean, we've got to remember this is a supply-side shock for inflation.
02:39And therefore, like, you know, if we're going to have inflation purely because of supply chain disruption, there's the whole
02:44COVID debate.
02:45Do you want to be hiking rates anyway?
02:47So it's easier for the Fed to argue, to kind of look through that and kind of dismiss the fact
02:53that they haven't had inflation anywhere near target for a gazillion years.
02:56So I think it's more about the worse Fed reaction function, which people are still trying to work out, and
03:01what the overall committee reaction function is.
03:03I'm still in the camp that they're going to try doing nothing for as long as possible.
03:07And, you know, ultimately, we might get a hike in September, but that's assuming the market's still super strong.
03:13And I think there's more fragilities out there in the market.
03:15And I remember Mark Cudmore, before the AI boom, before that was the conversation that was dominating the stable, I'm
03:20much more sort of bearish, a little bit more worried about the risks on the horizon.
03:24Thinking about this AI boom, it seems everything we're hearing today in the last couple of weeks, it's got more
03:28runway.
03:29We've been talking about it here.
03:30What about the risks that are building out under the surface?
03:33How are you guys taking a view of sort of that unwind, if and when it comes?
03:36So my story hasn't really changed for the last kind of years.
03:39Like, I think the bubble keeps on inflating until an earnings season changes.
03:43And what I'm looking for in earnings season is a slash in capex.
03:46So I think it is a tremendous AI capex bubble.
03:49I think it's going to be very painful when it happens.
03:51But I don't think you can preempt it.
03:52And I think it's a – I think, you know, is this a turning point now?
03:56I don't think so.
03:58But, like, I'm open-minded.
03:59But, like, basically, I think you've got to stay underlyingly positive until we get that capex reduction.
04:04However, as we've discussed since May, I think we're in the much more volatile stage.
04:08And I think the volatility we've seen in the last two months is what we're going to get for the
04:10next few months.
04:11But like the prior bubbles, that volatile stage lasts about six months.
04:14So to me, you know, my base case is we're another earnings season away always.
04:18But I'm going to be open-minded to every single hyperscaler earnings report.
04:21As soon as capex gets slashed, that's game over.
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