Everything in Markets Is Now Moving Incredibly Fast

The market is acting in ways that make it very hard to get a handle on what exactly is going on right now. The overall indices are surging, while many individual stocks are doing badly. Rates are rising, but the economy is still robust. There's capex spending and the AI trade. There's the war in Iran. And of course there's persistent inflation and the Federal Reserve's ongoing tightening cycle. On this episode, we speak with our former Bloomberg News colleague Luke Kawa, who is now head of markets at Sherwood News. We go over all the big market themes, and he explains why the one consistent theme of this moment is the sheer speed of the moves and the pace of the news itself. See Odd Lots Live in Chicago! https://events.bloombergevents.com/event/OddLotsLiveChicago/summary See omnystudio.com/listener https://omnystudio.com/listener for privacy information.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Tracy Alloway?

  There are some market stories where you want every detail. Joe and I have made quite a few podcasts on that basis. But sometimes you've only got 10 minutes and just want to know what's moving markets fast. That's the Barclays Brief Podcast. Every week, experts from Barclays Markets and Research get you up to speed on what's happening and what to watch next. Concise, focused, and brief. Search Barclays Brief wherever you get your podcasts.

• 0:25Speaker 01

  Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at chatgpt.com by selecting Work Mode, available on Plus and Pro Plans.

• 1:07Speaker 02

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• 1:44Joe Weisenthal?

  Hey, Odd Lots listeners. The Odd Lots tour continues, and our next stop is in Chicago.

• 1:48Tracy Alloway?

  That's right. Joe and I will be at the City Winery Chicago on October 15th for a live Odd Lots recording. Tickets are on sale now at Bloomberg dot com forward slash Odd Lots.

• 1:59Joe Weisenthal?

  And of course, a special thank you to Barclays for supporting Odd Lots Live.

• 2:03Tracy Alloway?

  So that's October 15th at City Winery in Chicago. Get your tickets now.

• 2:11Speaker 01

  Bloomberg Audio Studios, podcasts, radio, news.

• 2:26Joe Weisenthal?

  Hello and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

• 2:31Tracy Alloway?

  And I'm Tracy Alloway.

• 2:33Joe Weisenthal?

  Tracy, this, it dawned on me the other day. The market's kind of crazy right now. No, no, it's like, seriously, it's like, we're sort of used to all this stuff and everything and that. And then one day, one moment, I realized, oh, markets are really crazy these days.

• 2:47Tracy Alloway?

  I would say weird. I find them very weird at the moment with like the biggest tension being what's happening in the bond market and the stock market. By the way, I have a huge caveat for this episode, which is we are recording this on September 29th. I've been away for the past week on vacation. I probably should have put up my like normal going on vacation warnings. So something is about to blow up. Turns out it was the bond market.

• 3:09Joe Weisenthal?

  Yeah. Actually, it's funny you say that because the way I think about the market right now is so much is happening and nothing is happening in the specific sense that it's like, okay, we're in the middle of a war with Iran. And so many, we're just like, oh, it's just this headline, Trump says negotiations are going good, Trump. And then it's like, people move on. There's some crazy model leap, et cetera, by one of the AI companies. Huge news, but also so regularly cadence now that even that almost becomes noise. Obviously, the movements in the bond market, I guess, like, that is probably the one thing that does feel novel about maybe just the last few weeks, but even there, a lot of that angst has been going around a long time.

• 3:54Joe Weisenthal?

  So it's like, there's so much of everything. There's nothing, there's no like one thing that just, you know, I was thinking like yesterday, September 28th, it was announced that David Zervos was going from Jefferies to.

• 4:07Tracy Alloway?

  I saw that. I was in Connecticut with no electricity, and even I saw that.

• 4:11Joe Weisenthal?

  10 years ago, if that is announced, that would be like a really big thing people talk about. People would have been, who, all this stuff, and it barely broke through. But that would have been a time where that would have been the biggest sort of market related or Wall Street related story of the day.

• 4:27Tracy Alloway?

  It feels like stock markets are sort of overwhelmed and or inured to everything happening except trying to make money.

• 4:35Joe Weisenthal?

  No.

• 4:35Tracy Alloway?

  Like, that is the one impulse that remains. That never gets old.

• 4:38Joe Weisenthal?

  No, and that's arguably the point of the whole thing. Anyway, we need like a sort of big rambling state of the market episode, and we really do have the perfect guest. Someone who used to be our colleague here at Bloomberg. We are, of course, speaking to Luke Kawa, Head of Markets at Sherwood News. Luke, thank you for coming back on Odd Lots.

• 4:57Speaker 04

  Oh, great to be here. Thanks for having me, Al.

• 4:59Joe Weisenthal?

  Let me start on something niche, actually, because there's so much going on. Suddenly lately, markets having a great year, S and P up or over 12% or about that as the time I'm talking. I see a lot of talk about breadth. This is, everyone's talking about market breadth these days. What's that all about?

• 5:15Speaker 04

  Yeah, I think why they're talking about breadth is because it's absolutely god awful. There's been a lot of different stats to to show. You can say the average stat is XYZ below its high. Well, the S and P 500 is, you know, as of writing about, you know, 1.5% off of its high. The one I came up with that bothered a lot of people the other day was coming into this week. The S and P 500 was 0.5% off a record high and just 51.2% of stocks were above their 200 day. The last time we had that proximity to a high with that few stocks above the 200 day was literally the day after the dot com bubble peak. So that that gets a lot of people mad. But then you have to point out, okay, wait. Breath was also that bad in 1998. Market ripped for another two years after that.

• 5:58Speaker 04

  So it really is a case of, and I think to unify a lot of what you were talking about in the intro. Is the market inured to higher rates? No, a lot of the market isn't. The S and P 500 equal weight certainly isn't. The Russell 2000 certainly isn't. However, basically, to me, there seems to be just this big bet that the AI impulse will continue to eat and swallow the world until who knows what puts a stop to it. Whether that's kind of credit conditions, the capacity to lend, whether that's regulation. But right now, the the pricing to me just looks like more and more betting on a singular factor to be able to drive growth. Like, think about it. When's the last time that there seemed to be more confidence in European industrials than the US consumer during a period of strong growth?

• 6:43Speaker 04

  I like, I cannot ever remember that happening outside of maybe like Euro boom. What was it, 2017 for a couple of months?

• 6:50Tracy Alloway?

  I mean, it is true that in higher rates, so rates are a blunt tool for the Fed, right? And they're going to hurt something like a home builder a lot more than an AI company that is issuing like mega deals into the bond market, I would imagine. Is it the case that, you know, maybe the bet on AI makes sense in that environment? Maybe the AI companies are the ones that are less rate sensitive than a lot of other businesses out there.

• 7:16Speaker 04

  I think right now that's like a perfect encapsulation of conventional wisdom. To me, it's also very interesting that as we've had this latest explosion higher in yields. And we've talked about like, oh, it's the AI impulse, this, that. It's also come at a time where hyperscaler credit spreads, none of them are at their wides of the year at the long end.

• 7:35Tracy Alloway?

  Yeah.

• 7:36Speaker 04

  It comes after a September of you can tell me how much US IG and US IG issuance there was by hyperscalers. I believe that's a zero for September. So it's, yeah, so very, very interesting.

• 7:45Tracy Alloway?

  They cut back a lot because they got a little bit spooked with the CapEx response from the market.

• 7:51Speaker 04

  So that to me is something that like, hey, a lot of this in the bond market, both the response to to stronger growth and the potential for issuance, a lot of this is like the classic mark Dow belated overreaction to something we've been thinking and talking about for a long while. And then I think the the question is, how long can the cyclicals that are doing well, you know, operationally at least? How long can you, they be plumbing 52 week lows, a lot of these? And is it just because AI is doing so well? And I think that's the kind of important part to be making, the important point to be making, that so much of this market has been dispersion. Helene Meisler calls it the either or market. I've called it, you know, the Elaine George market, Jerry's friends, only one can do well at the right time.

• 8:35Speaker 04

  But that's, that's been a really, really defining trademark of 2026. At first, it was semi software. I think more recently, it's been like this idea of inertia stocks versus the general AI beneficiaries. And like, that to me is a bit of an important twist. It's this idea that like, it's not just one layer of AI that benefits. It's multiple layers through through software, through the hardware providers that get to benefit from an impulse like Muse, like Agentic Commerce, and then others that get hit. So that, that to me is the least a bit of a nuance in how the market treats AI and the impulse. But for me, it's just really a sign of the mechanics that have continued to dominate and just continuing to play out.

• 9:15Joe Weisenthal?

  It's interesting. I looked up a chart of McDonald's. And that was doing really well up until, and then it peaked on March 3rd, and then it's been straight down. So it's like basically when the Iran war started, that was.

• 9:29Tracy Alloway?

  Wait, was that when the CEO ate?

• 9:31Joe Weisenthal?

  Oh.

• 9:32Tracy Alloway?

  Reluctantly ate part of the cheeseburger.

• 9:36Joe Weisenthal?

  But it's just like any consumer name you can think of right now. The stock is awful. Nike is the classic example. That was a, that's crazy. That was a $180 stock in 2021. It's 35 now. I mean, there's just like, I mean, granted, it had a huge run up in 2021 too. But like, any like, just sort of like regular business that is, they're just doing terrible.

• 9:58Speaker 04

  It's, it's crazy. Like, and when you look at Nike, one of the things that stands out, and you know, I think you could apply this more recently to a Walmart, possibly to a Costco, and I'll tie this back to software, oddly enough. But these were relatively expensive stocks that didn't have exceptional top line growth in a world where nominal growth has been accelerated. That's been the, that's been what the bond market move is about. That's what stock market resilience is about, like. Why do you want, why do you want to own those stocks? Why do you want to own the stocks that aren't growing that fast, that are expensive? When everything else is growing very fast? So I, I think for what happened for a while is that a lot of these consumer names and Walmart and Costco in particular, they were stand ins for the, the software stocks that were, you know, bound to be disrupted by AI.

• 10:41Speaker 04

  Because if you think about it, if you're going to spend a certain amount at Walmart every month, that looks to me like an ARR kind of revenue profile that you've got there. Costco is literally a, a subscription kind of membership.

• 10:52Joe Weisenthal?

  Yeah.

• 10:52Speaker 04

  In a lot of ways. So I, I think that was a stand in for disruption fears. And as software has come back, you've seen kind of multiples there deflate. So I think it is, we gotta find someone to punish. Maybe it's just because everyone's very invested, but when AI is doing well, you gotta find someone to punish.

• 11:08Tracy Alloway?

  What about just in terms of pure earnings expectations, what we're seeing here? Because this is the other thing that's, that in theory should be happening, which is you hear about productivity gains from AI. You should be seeing people get excited about the possibility of cutting labor costs. I don't know, coming up with new products with AI or whatever. And in theory, you should be seeing that go into the earnings estimates for future years. Are we seeing any of that?

• 11:33Speaker 04

  I would say in theory and in practice, what we continue to see more of is the AI hardware impulse as just the, the straight fuel for earnings. Goldman had a good note released a couple of days ago where they said about half of earnings growth this year is expected to be just driven by hyperscaler capex. So pretty, pretty big impulse. We're talking about how strong growth has been, earnings growth has been this year. And you, you can just link it and distill it just down to that one factor. And then also, if you look at, okay, they also ran in a separate note, what do we think explains multiples across Russell 1000 stocks? And the answer they came up with was more so than usual. It's three years forward sales estimates.

• 12:15Speaker 04

  Right now, the one year forward sales estimates and those revisions have almost no explanatory power. So sales growth right now and for the near future, it's priced in. We all know it. We, we see the backlogs, all this, all that. The, the real bet on what you're willing to pay for is the kind of three years out thing. And when I did a scan of stocks that were just both expensive and had, so markets willing to reward them and fairly high sales estimates, your Bloom Energies, a lot of the optic stocks, those are the ones that, that pop out there. So that's been kind of the way to earn a higher valuation right now in this market. It's betting on the continuation of, of the hardware trade.

• 12:48Joe Weisenthal?

  Yeah, this is something interesting. Both Tracy and I love the hair charts, the Medusa charts of all sorts.

• 12:55Speaker 04

  Lawnmowers.

• 12:55Joe Weisenthal?

  Where you see historical expectations of trajectory. And one of the ones you're starting to see more is just the capex one. And so you look at what sell side had estimated hyperscaler capex would be in 2023 and for over the next three years. And then that gets, keeps getting revised higher. And it seems like it's continuous. And so I'm curious, like, there is, some number exists, right? So maybe, I don't know what it is. They'll say like, okay, they're expected to spend 1.2 trillion over X period of time. And that's up. But like, how much of the trade is essentially a trade that, that the estimates will keep getting revised higher for spending?

• 13:38Speaker 04

  I, I gotta think a solid chunk right now. And there's, at some point, I think there has to be this handoff from that to a kind of, kind of more broader set. And when Nvidia and it was either a quarter ago or one before that, they actually kind of rejiggered how they're organizing their earnings to account for the fact that we expect sovereign AI and, and robotics and physical AI on-prem stuff. We expect that to be contributing more and more to our sales going forward. It's going to be real small now to start, but we expect that to be a bigger driver than hyperscalers and potentially Neo clouds, but they're, they're doing all they can to support that going forward. So I, I think right now that is a huge, huge chunk of the trade, the, the bulk of the trade.

• 14:19Speaker 04

  But the, the promise of AI is that it has to be more applicable than that, right? To your point, it has to have the productivity booms, it has to have the labor saving. If it doesn't, then what are we here for is kind of, I think, the question at some point.

• 14:33Tracy Alloway?

  Yeah. Did you see the chart? I think it was in Adam Tuza's newsletter this morning saying that the capex expenditure on AI is now like the biggest.

• 14:41Joe Weisenthal?

  Oh, yeah, yeah. There've been a few great papers.

• 14:43Tracy Alloway?

  Yeah.

• 14:44Joe Weisenthal?

  I saw the economist Hannah Lustig, I'm not sure if I'm pronouncing his name right, who's saying that to justify all the spending that they estimate, like a handful of companies will have to get revenue that's like 9% of GDP.

• 14:57Tracy Alloway?

  Yeah.

• 14:57Joe Weisenthal?

  In order to justify it, which is just like unbelievable, but.

• 15:02Tracy Alloway?

  Ambitious, ambitious. I'll put it that way.

• 15:20Tracy Alloway?

  There are some market stories where you want every detail. Joe and I have made quite a few podcasts on that basis, but sometimes you've only got 10 minutes and just want to know what's moving markets fast. That's the Barclays Brief Podcast. Every week, experts from Barclays Markets and Research get you up to speed on what's happening and what to watch next. Concise, focused and brief. Search Barclays Brief wherever you get your podcasts.

• 15:45Speaker 01

  Some people treat ChatGPT like some kind of smart search engine and some use it to get work done. ChatGPT work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at chatgpt.com by selecting work mode, available on Plus and Pro plans.

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• 17:51Tracy Alloway?

  So I promised myself I wasn't going to talk exclusively fixed income in this conversation, but we can't have fluke on without talking more about fixed income. Bond yields rising. So these are the headlines that I saw when I was on vacation last week. The 10-year going to above 5%, 30-year rising as well. What's your story for, I guess I should divide it up, global bond yields rising and then US Treasury yields rising specifically?

• 18:18Speaker 04

  Predominantly, I think it's the same story for both or the same. Like if you had to do a principal component analysis or something, I think what would stick out across the board is it's the global growth impulse, it's activity, it's both in the US and globally. I think we see the industrial side of every economy is doing incredibly well and expected to do so. And I think something you wrote a while ago kind of fits into this about that which can be repurposed for AI will be with reference to Ford.

• 18:45Joe Weisenthal?

  Yeah.

• 18:46Speaker 04

  I believe that it's, it seems as though the, the impulse is just getting more widely shared. You have an impulse this big, it's bound to lift a lot of boats. And I, I would say that's kind of what's happening throughout the, the global economy. That is far and away, I would say, the one thing to, to think of if you had to, if you just had an elevator pitch with someone, why are bond yields high? Because growth is, is really strong, that's putting inflation up and central banks are expected to respond to that.

• 19:11Tracy Alloway?

  Wait, but we haven't had a huge move in like break evens in the US, for instance.

• 19:16Speaker 04

  Yeah. But I think that somewhat speaks to the idea that central banks are going to be quote unquote credible in, in keeping a lid on inflation over time. You can believe that or not, because like, if you've been a hold to maturity buyer of five-year US Treasuries from at any point in 2011 to 2021, outside of like a little before the shale bust, if you got in there, you have negative real returns through that entire period.

• 19:39Joe Weisenthal?

  I'm actually very curious. I find this, the stability of break evens to be very surprising because usually what people say is like, well, yeah, naturally, people think the Fed is going to take its dual mandate seriously. And okay, we're gonna, they're going to have to raise rates to roughly, I think it's, and therefore inflation will be a little over 2%. Are you surprised that?

• 20:04Joe Weisenthal?

  After years and years of the Fed missing its inflation target, there hasn't been more like, no, we do not think, we do not have the confidence that the Fed will be able to maintain stable inflation in the years ahead, or why isn't it manifesting on that chart?

• 20:22Speaker 04

  I would say in a word, yes, I, I'm genuinely surprised by that.

• 20:25Joe Weisenthal?

  I find this really surprising.

• 20:26Speaker 04

  I think it is an odd dynamic. The, the best explanation I have for it is just thinking back to when I'd be in meetings and we're discussing asset allocation, especially during 2022 at UBS and 2023, high inflation, high inflation environment. Basically, bonds become the residual at a certain point. Like you buy bonds when you're worried about growth and you don't think there's going to be that much inflation. If you think growth is fine and it's inflationary, well, you know, it's cash or short term and a lot of stocks and, or stocks, commodities, a little bit of cash. So it's just like, bonds are kind of the thing you make the final decision on. So I would say the fact that a lot of this is driven by real yields might come back to a, a thing of like, how do we get bonds to be more attractive relative to stocks?

• 21:11Speaker 04

  And a lot of people will do the, your earnings yield, less the plain vanilla yield on bonds. You should probably be doing it versus the real yield. Stocks are stock earnings, more of a real stream of assets. So I think in order to get bonds to be a more competitive asset with stocks, you do need to see reels rising and that a lot of the move is effectively saying like, hey, I can't, I can't justify buying a 2% even real return, 3% real return. When this is what I think is on offer in AI. So I think having it come through reels is, is part of that story and part of why, part of the decision-making process in terms of how a cross asset investor would be looking at bonds.

• 21:49Tracy Alloway?

  Or you go the financial repression route and just make everyone hold bonds, right? That's like, that's an actual possibility.

• 21:56Joe Weisenthal?

  Or we need to have a big national campaign to get people to stop spending money and to put their money into AI bonds, Allah war bonds, right?

• 22:07Speaker 04

  I mean, yeah, I, with people already putting some weight on P doom with not liking the noise from data centers and their environment. I think what America needs right now is to be told to, to spend less so that the AI boom can more fully run its course. I'm not running as a third party candidate and I'm also probably not allowed, but that, that would be definitely my platform.

• 22:27Tracy Alloway?

  I would classify that under financial repression, but I'm sure you see it differently.

• 22:31Joe Weisenthal?

  It is a form of financial repression. Yeah, yeah, totally. I just, yeah. Just make it patriotic and it's like, no, I, I, this is actually where it's, where some dynamic to me in this sort of like, thinking about the economy, which is people perceive that AI supremacy is going to be crucial for national security. Right? This is all, I believe this is a widely held view in Washington, et cetera. If we actually then like took that idea seriously, we would be saying like, yeah, we want to depress the non-AI parts of the economy to free up real resources for the build out, et cetera.

• 23:11Joe Weisenthal?

  No one, clearly no one can say this or like articulate this or say, we're going to tax consumption of this. We're going to tax consumption of boats, anything that could be stripped for its parts to be put into a data center, et cetera. But if it is a matter of like existential national security, that would be the way we would be doing policy, right?

• 23:34Speaker 04

  Almost certainly. And then you have to go like with, man, if I'm being told I can't, you know, still can't buy a house because of the, that's, that's going to bother the hell out of me. So I, I think there is.

• 23:45Joe Weisenthal?

  And it's not like, and it's not like the nuclear, the nuclear race where once a country has achieved a bomb, it is then in the club of nuclear powers. There's like, it's never ending because it's like, there's no like reason to presume it's like, oh, we got the capabilities here.

• 24:01Speaker 04

  And when I, when I hear that, what I immediately think of is damn, we don't know how easy we had it, speaking as a policymaker back in the post-GFC era.

• 24:11Tracy Alloway?

  Oh, yeah.

• 24:12Speaker 04

  There were no, like, did trade-offs exist?

• 24:14Joe Weisenthal?

  No, there were no trade-offs.

• 24:15Speaker 04

  Did not exist for an entire cycle. We still probably didn't do it optimally, but pretty, pretty darn close. And now I'm, I grew up hearing about how central banks, just by virtue of saying inflation was going to be 2%. That was one of the important factors that would help it be 2% over time. I think now we're learning that that's junk that completely junk that you gotta prove it over time. Or else we'll be in a situation we are right now where people really apparently don't like to hold bonds.

• 24:40Tracy Alloway?

  So Joe described this as a crazy market. I described it as a weird market. Can you choose your one word for describing the market? And then you're over at Robinhood now. I'm sure you see some interesting retail investment trends and color and maybe a little bit of flow. Like, what are you seeing at the moment?

• 24:58Speaker 04

  Yeah. So if I had to summarize like cross asset, how I see it, like last era was Tina and.

• 25:05Joe Weisenthal?

  There is no alternative.

• 25:06Speaker 04

  Yes, there is no alternative. This is too fast to fade, both prices and earnings just moving.

• 25:11Tracy Alloway?

  That's good. I like that.

• 25:13Speaker 04

  Too fast to fade. And speed is something that I think has completely defined 2026. If you look at the monthly change between semis and software, those have had some of its like, its most four violent moves in either direction this year alone. I remember when silver was going crazy, but that was, that was sheer, like absolutely nuts moves all over the place. And to, to make this an AI thing, we were being told AI compresses economic time. And I think that was both because the power of the technology, the need to be able to look forward and see what has disrupted. And now because of agents who can work when we're asleep. So this idea of a compression of time and speed manifesting in the markets is really, really what sticks out to me.

• 25:53Speaker 04

  And in terms of the, the retail side, the trading I've seen, so I, I can describe a net single stock purchases at Robinhood. So the absolute peak for that, the rolling 21 day peak happened right about at the, in late June, let's call it. So, you know, around Micron's earnings, then that was the, the overall peak. There was one before that in early November, 2025, which coincided roughly with a really big spec asset peak in, in my view in October, 2025. That's still, you know, in some senses, we haven't fully recovered from.

• 26:26Joe Weisenthal?

  So I do a spec?

• 26:28Speaker 04

  A spec asset, like a lot of things like, you know, Palantir, Bitcoin, quantum stocks, so many of these things.

• 26:34Joe Weisenthal?

  Yes, yes.

• 26:35Speaker 04

  And even call option volumes in total, those peaked for a while and rolled over. But that was a huge spec top that we're, we're still kind of clawing our way back from in, in some senses. So there's that. And more recently, what we've seen is supposed to be traditionally a slow month, September for retail. It's really rebounded quite, quite strongly. September, last numbers I have are about 89% of the peak that we saw in, in June, we're back to. So it's been a really strong month for buying.

• 27:04Tracy Alloway?

  It's because I went on vacation and spent a lot of money.

• 27:06Speaker 04

  And it's, it's like, a lot of it's the names you would suspect. It's your Microns, your SpaceXs, those lead it. But every day when I look at this, there's a name in the top 25. I consider myself someone who knows a lot of tickers. There is a name that I do not recognize and have to look up very often. And you know, it's, it's fun. It's, you know, it's a sign of how people look for volatility. People look to get rich quick, look at options, trading. Stock market is a place where we go to express our views about the long-term earnings power of corporate America. And we do it with options with four days or less to expiry. Like that's, that's the story of the world we live in now.

• 27:41Joe Weisenthal?

  The October 2025 speculative assets boom is, does not get talked about that much, but it's fun. It's a good chart. Like if you just pull up Bitcoin and Palantir, how close their peaks were together around October. They both recently sort of hit a low in, uh, June. I'm sorry. I saw it was 63, so I had like counted up. But I love, like, actually, I love the framing of speed because it seems very relevant to even how I introduce this. And one of the things that like the AI singularity type people talk about, Cursewell talked about, et cetera, is this notion of like, okay, if you measure time

• 28:22Joe Weisenthal?

  by how long it takes for the world, the, the earth to revolve around the sun, that's like stable. If you measure time by how long does it take for there to be a headline worthy event, which is a different legitimately different way to measure time. This is like extraordinary because, and it goes to the intro, which is just the pace of headline worthy events is just extraordinary. And then you see it manifest therefore then in the speed of the movements of the whatever underlying asset you're trading.

• 28:55Speaker 04

  Yeah. Spooze and Blues should have been like all across my Twitter feed yesterday and it probably got drowned out within, you know, a couple of minutes. That's for the uninitiated, that's your David, your old, old motto there back in the day.

• 29:06Tracy Alloway?

  Wait, is it headlines though, or is there also an element of market structure in here? Because the other thing that's happened is we have a lot more pod shops that are out there that seem to be affecting the market and causing sharp swings. We have a lot more products. We have a lot more zero day call options, things like that. And this has been an ongoing trend in the market for a while where we see the mean reversals happening really, really fast now, much faster than they used to.

• 29:29Speaker 04

  I, I certainly think both the higher participation of retail, the increased AUM, if you, if you want to call it that, in the pod shop models with, with tighter, with tighter stops, even agentic trading, which from what I could see so far, seems to be a little more Momo driven the most in terms of the, the rules people will put in to do this. Yeah. I think all of that and overlay the dispersion trade on, on top of that. I, I think all of that does contribute to an environment where you, you do get a lot more single stock volatility and a lot less at the index level. And that means even when markets are doing absolutely nothing, it's the classic duck with its feet underwater going crazy. We always have something to talk about, even when the stock market is completely aimless for months.

• 30:14Joe Weisenthal?

  This reminds me, you know, I don't trade, but one of the projects I sort of want to see how easy it is to build now is like an agentic trading bot and like paper trade on Kelsey or something. And I like go do a bunch of academic research, find where people speculate that there might be mispricing. And then like create a systematic thing, make no mistakes and go. I haven't, I've like started to fiddle around with that, but I haven't really done it. Do you see a lot of people like diving headlong into figuring this out?

• 30:45Speaker 04

  I, I see a lot of people like diving or tiptoeing at least into, into setting it up. It's honestly something I want to look at a lot more because I think it has some, you know, fun implications potentially for market structure. Like, hey, if you've got an agent setting up rules for trading, does that mean there's less orders, less stops out there? Does that mean, what does that do to market visibility, that kind of thing? So like, I'm, I'm interested in, in that and kind of how that, how that manifests. And I, I do need to, I think, talk to more people that have their fingers on the button, so to speak. But I really think it also has the potential to, again, exacerbate volatility. It, it seems like basically everything we've done and been moving towards has the potential to exacerbate single day volatility.

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• 34:50Tracy Alloway?

  Can I put you on the spot and ask you, I guess, the question that everyone is wondering? Because a lot of people will look at this market and say, like, it does, in fact, look a little bit bubbly. It's, again, weird that we've been able to shake off interest rate pressures, a freaking war with Iran, all of that. What are the sort of warning signs that you're looking out for, for a durable turnover, I guess, in stocks? You mentioned breadth earlier, but again, like breadth can give a false positive like we saw in 1998.

• 35:21Speaker 04

  Yeah, breadth is not something that I would use as like a sufficient or even necessary cause for this. I'm very boring and I like to stick for what drives stocks over the long term. Also, kind of does help drive them over the medium term and shorter term. It's earnings. I took a look at recently. So what would happen if you waited until S and P 500 earnings revisions were 5% off their 52-week high? What if you like, and we all know analysts are notoriously late, you've definitely missed the top. But like, how bad would that be? How far off would that be? The only place where you're really, really getting killed on that for the past six or seven bear markets is COVID, just because it happened so fast and absolutely nobody had time and we were already in the whole lockdown by the time it happened.

• 36:06Speaker 04

  But pretty much every other time, if you held for two years backwards, even after the time that estimates had been cut, so you're arriving late to the party, admittedly. Most of the time, you're still looking at pretty healthy gains. So my kind of thing is, hey, if you've been invested, you can probably afford to wait for earnings to start to crack at the index level and have some kind of warning signal you're getting out.

• 36:28Tracy Alloway?

  Yeah.

• 36:28Speaker 04

  Beyond that, I think it's folks like you who are keenly focused on the credit market and some of the peculiarities happening there.

• 36:35Tracy Alloway?

  Yeah.

• 36:35Speaker 04

  That are going to be, I think, in the best position to be able to spot, okay, like, when has this kind of financial ingenuity gone too far? Because one of the, one of the things that I was high conviction for me was when hyperscalers went negative FCF, okay, you have two choices right now. Either the AI boom slows or the financing starts to get more creative. The financing has gotten more creative. So, you know, at a certain point, it's, it's interesting to think about, because when you think about sources of profits right now, hyperscaler capex, obviously, and more of that debt financed, and we do have a big fiscal deficit. So can you think of more safe places to be sourcing your profits from than hyperscaler debt and fiscal debt? That's pretty darn safe until it isn't your classic kind of Minskyan formula there.

• 37:19Speaker 04

  So that's one thing that honestly has me surprised that multiples haven't even been more supportive, just the fact that this debt comes from kind of safe places.

• 37:27Speaker 05

  Right.

• 37:28Joe Weisenthal?

  Talk to us a little bit more about if you're on the recipient end of hyperscaler spending, it almost feels like a bond at this point, right? Like that sort of, not really, but that's kind of what you're saying, which is like, these are big structural things, it can be fairly predictable. On the other hand, when you look at who some of the recipients of this money are going to be, like, it's not literally the recipients of the capex money, but kind of like core weave CDS. How do you think about credit angst among some of the AI players with the assumption that AI spending is just going to keep going through the moon?

• 38:03Speaker 04

  Yeah, I think you can pretty closely map in a lot of cases, just a straight up concern about the level of debt and just look at your classic debt ratios and Oracle's, there's a reason why Oracle stands out versus all the other major hyperscalers on this and kind of use that to flag.

• 38:19Joe Weisenthal?

  Wait, what's the reason that they stand out?

• 38:21Speaker 04

  I would say just relatively more indebtedness than peers or just like less creditworthiness to begin with. That's why I think a big recent thing that's happened is Nvidia trying to effectively credit wrap.

• 38:34Tracy Alloway?

  Yeah.

• 38:34Speaker 04

  Make everyone the safest AI borrower possible. But yeah, no, I do think it's, I do think we live in a world where now a lot of companies both aren't necessarily treated as unimpeachable AI beneficiaries and also the, the second derivatives turn. We are no longer pricing in the fastest earnings revisions across the board ever. At some point, you've got to make the transition from hypergrowth to growth at a reasonable price. And a lot of stocks post the Q3 momentum route are still, are still trying to do that. Only have two semiconductor companies that have made 52-week highs in Q3, only two. AMD and Skyworks in the S and P 500.

• 39:12Joe Weisenthal?

  Interesting.

• 39:13Speaker 04

  Crazy.

• 39:13Joe Weisenthal?

  Speaking of like Oracle being different, Greg Ip at the Wall Street Journal had a really good tweet the other day, observing the fact that, okay, the one thing that makes the AI boom weird is that it's not being financed by the fruits of the AI boom, right? So you have all this internet, right? And so it's like the companies that are best positioned to spend have their own money printers. Facebook has gigantically profitable businesses. Google has search, et cetera. Oracle is like, fine, no, I mean, nothing against Oracle is a good, successful company, but it does not have that like pure money spigot the way the other hyperscalers had. And actually, right now, today, or we continue to see their

• 39:58Joe Weisenthal?

  CDS spike.

• 39:59Tracy Alloway?

  Speaking of financial engineering and cash spigots, there's a headline that came across the terminal just as we started this conversation, Luke. Slight tangent, but I think it's still relevant. Man City inflated revenue, cut costs by 900 million pounds Premier League fines. They're going to be sanctioned. We don't know what the sanctions are just yet, but immediate reaction, let's do sports.

• 40:22Speaker 04

  Yeah, immediate reaction couldn't happen to a better Man, Manchester team. Hey, you know.

• 40:29Tracy Alloway?

  You're a Man U fan, right?

• 40:30Speaker 04

  Yes, yeah. So this is, you know, what is it, FAFO? I'll keep it, I'll keep it to that. And I'm very much hoping that. I will tolerate Arsenal retroactively getting trophies if it means we can also retroactively get one as well. And that that takes a lot for me to say.

• 40:46Tracy Alloway?

  Joe thinks the primarily is the bull case for Europe. So.

• 40:50Joe Weisenthal?

  Oh, yeah.

• 40:50Speaker 04

  I loved those competing articles. I will not say which one I enjoyed more of all my parents equally.

• 40:57Joe Weisenthal?

  You know what I you know, our friend Guan?

• 40:59Tracy Alloway?

  Yeah.

• 41:00Joe Weisenthal?

  He bought me. He got me a gift. The Shenzhen Peng City Football Club. He got me one of their jerseys.

• 41:05Tracy Alloway?

  What colors?

• 41:06Joe Weisenthal?

  It's blue. They're owned by Man City. It's part of the same corporation or something like that. There's some sort of connection. Shenzhen Peng City FC is part of the City Football Group Network alongside Manchester City. And I think like Manchester City.

• 41:23Speaker 04

  What's the equivalent of the Championship League over there? So.

• 41:25Joe Weisenthal?

  I don't know. I want to. I want to learn more. Like every American, first of all, their jerseys are the same color as the Manchester City jerseys. But every American, you know, it's like, oh, we get excited about the World Cup and then we forget about soccer. Not me. Me and my son have been watching the UEFA tournament that's happening right now. Spain versus England was really good. Harry Kane missed a penalty kick.

• 41:48Speaker 04

  Love that.

• 41:48Joe Weisenthal?

  We saw the Netherlands versus Serbia game. So I am not one of the Americans who just stops paying attention to soccer when it ends.

• 41:56Speaker 04

  I like that. You're like, you're the hipster American soccer fan. This is very good. Yeah. No, hey, what else are you supposed to do? Like, like in the morning, in the morning on the weekends, I'd like.

• 42:07Tracy Alloway?

  Watch stock.

• 42:08Speaker 04

  Yeah, there's things to do, but like, hey, for the rest of us, what else? What else is there to do?

• 42:11Tracy Alloway?

  Well, you never know. Also, maybe China football will become a huge thing if the UAE can't spend money in the UK anymore.

• 42:17Joe Weisenthal?

  Oh, yeah. I think it's good. Yeah, it's gonna be. It's probably gonna be huge. I mean.

• 42:21Speaker 04

  We're just putting Luke on the spot. We're like, it's like Luke, another. If we're gonna transition to a sport, I was really hoping we'd go to hockey next, but okay.

• 42:29Joe Weisenthal?

  To bring it back to markets for a second, there was an interesting note in my inbox, Terry Wiseman over at Macquarie. And he had pointed out that, like, okay, so we talk about these huge spending impulses, et cetera. And the two big ones, obviously, AI and then structural government entitlements, et cetera, that keeps going up. And then he points out, though, that, like, wars are really expensive. And so markets, people look at the Iran war headlines. It seems like mostly through the lens of the oil price, right? To the extent that people are trading, their interest in the Iran war is basically, okay, when is the Strait of Hormuz gonna open?

• 43:09Joe Weisenthal?

  What are the prices of oil? Very diesel spreads, maybe. But he points out, it's like wars are very expensive. And he's like, is this like, this is a third driver of inflationary impulse that doesn't get much attention. But defense spending rising for years all around the world.

• 43:25Speaker 04

  Yep. Wars are expensive, rearmaments expensive, trying to reshore and dull the domestic capacity of semiconductors.

• 43:33Joe Weisenthal?

  Yeah, yeah.

• 43:33Speaker 04

  It's expensive. Yeah. All of this is really, really expensive. It's it is the defining feature of this era. Like how much we are willing to kind of tolerate the side effects that are in our face every day of policies that are, quote, that are definitely bottom line inflationary.

• 43:51Joe Weisenthal?

  Anything else like really like stand out for you right now as being kind of eye opening in this market?

• 43:58Speaker 04

  I don't have much else. The only thing like, I do think it is just borderline psycho that the idea that European equal weight is closer to an all time high than US equal weight. When we're running like around 6% nominal growth right now in the US, like blows, absolutely boggles my mind. That like US consumer discretionary has become the new punching bag for the market in a strong growth environment. Like in a quarter where, you know, it's estimated to contribute, what, 2.8 percentage point to growth? Nuts. Amazing.

• 44:31Joe Weisenthal?

  I guess one question I have in addition to that is like, in a different era, there would have just been so much more attention to how like bad the housing market is. And like, it used to be housing was the business cycle. Well, A, housing was the business cycle for multiple reasons. People spent out of their home equity, et cetera. Now we have this like miserable punk housing market and it hardly seems to matter.

• 44:56Tracy Alloway?

  But now AI is the business cycle, which worries me because you get the same dynamic.

• 45:00Joe Weisenthal?

  And this wealth effect of like people spending out of their stock market gains. I'm just sort of like curious, like your take on, I don't know, either, either way you look at it, whether it's like the salience of the stock market and the wealth effect, or just the general market's lack of interest in housing these days.

• 45:19Speaker 04

  Well, perfect timing, right? Wasn't it earlier this year when Americans share wealth from stocks versus from housing also crossovers?

• 45:26Joe Weisenthal?

  Yeah.

• 45:27Speaker 04

  Yeah, it is a, it does feel like a seminal moment in that front. And when you think about why housing was the business cycle, it's because you had these spillover effects to consumption via HELOCs or just via wealth effect from that. And also, you know, spillovers from housing markets doing better, you're buying more consumer durables. You can just take all of that and transfer it over to AI, right? Like, you just take, that's where the construction impulse comes from. That's where the wealth impulse comes from. And as we've talked about, it's rivaling or surpassing everything we've ever done in terms of the capex boom in size. So, you know, do I think it lasts forever? No. Do I think it's kind of more of an anomaly around the now? Certainly. Because like, at the end of the day, we're all either businesses trying to make a profit

• 46:08Speaker 04

  or consumers trying to buy something we like. Like, all of this has to eventually be good for somebody downstream at the end of this. Or else there is no point to anything we're doing. So there is no point to the, to the profit if there's no kind of consumer intent for it in the long run and a consumer income to buy it.

• 46:27Tracy Alloway?

  Yeah, the circularity and the size is what starts to worry you, I think. And when you hear that, like, people are using their stocks, their stock market gains to buy stuff, which is helping the economy along, along with the AI capex build out. And that's leading to stock gains and relative economic growth. And then it just becomes very perpetual motion machine.

• 46:48Joe Weisenthal?

  Something that you've talked about for a long time that I've started to think about is like this idea of like, something big is gonna happen soon, right? And that big could be, it's like, oh, maybe there's like a major catastrophe like caused by a bot or whatever, or sorry, an AI model. Or the something big could be like, youtopia and everyone, real weight, real wealth goes up dramatically and things get a lot cheaper, et cetera. Or there's something big could be a major reshuffling of people's place in the labor market in some way. But I'm curious whether like, okay, some thing that everyone just sort of has out there is gonna happen,

• 47:29Joe Weisenthal?

  whether that leads to like a dip in the savings rate because it's like, well, like this, you know.

• 47:35Speaker 04

  See, that's.

• 47:36Joe Weisenthal?

  That's a real thing yet.

• 47:38Speaker 04

  It's the exact opposite of the like, right? If you fear nuclear war, then just buy stocks anyways, because if it's in the price. I think now, like, you could reasonably argue the other side, like, hey, if, if the world's doomed in 10 years, why am I saving it all? I, I, I find that fun, interesting.

• 47:52Joe Weisenthal?

  Do you think that's like a real thing yet?

• 47:53Speaker 04

  I like, I don't think if you're like someone with children, you could possibly countenance the, hey, like, I'm going to sacrifice their future welfare for that. So I don't think it's something that could gain broad traction. But in terms of like infecting people's minds, I think we're kind of definitely already there.

• 48:12Tracy Alloway?

  If AI kills us all by setting off a nuclear weapon, our portfolios will be on fire.

• 48:18Joe Weisenthal?

  And you're so stupid for not having gone out to eat.

• 48:21Tracy Alloway?

  Doesn't kill us all.

• 48:22Joe Weisenthal?

  Yeah.

• 48:23Tracy Alloway?

  Then our portfolios will also be on fire.

• 48:25Joe Weisenthal?

  That's a good one.

• 48:26Tracy Alloway?

  Thank you. I've tweeted that before, so I'm recycling my own jokes.

• 48:29Joe Weisenthal?

  Fine, that's fine. Luke, that was a lot of fun. I love your framing. Great stuff. Appreciate you coming back on Odd Lots.

• 48:36Speaker 04

  Always a pleasure. Keep it up, guys. I love, love following and reading what you guys do.

• 48:52Joe Weisenthal?

  That's a lot of fun. I could just, we could talk to Luke for hours.

• 48:56Tracy Alloway?

  Yeah.

• 48:57Joe Weisenthal?

  And I do think, you know, I went into this episode, it's like, oh, there's a crazy market. I love this, the, the speed characterization that Luke gave. I think that's perfect.

• 49:07Tracy Alloway?

  No, I think that makes a lot of sense. And again, in my mind, there's two things happening here, which is you have a change in the actual structure and makeup of the market, and you also have just the headlines.

• 49:16Joe Weisenthal?

  Yeah.

• 49:17Tracy Alloway?

  Flying thick and fast. It's so hard to keep up. And if you see one negative headline on a Monday, chances are you might see a positive headline on a Tuesday. Even if you don't believe the positive headlines, the markets will, you know, the markets will react to them. And so you're just sort of ping ponging back and forth between the news flow.

• 49:34Joe Weisenthal?

  I want to build something like where we just look, the history of red headlines would be an interesting chart, right?

• 49:41Tracy Alloway?

  Yeah.

• 49:41Joe Weisenthal?

  And it would be really curious to look over trends about the pacing of them. There's gotta be some way to do that.

• 49:47Tracy Alloway?

  One thing I'd be interested in, it used to be the case with early machine reading, trading, as we used to call it. No one calls it that anymore, that people would actually step away when there was a big headline. So there was a little bit of a dip in liquidity because it took like a second for a lot of the machines to read the news and like figure out how to react. I doubt that's the case anymore. I would be very curious to see what liquidity provision actually looks like around headlines. But I don't know if anyone's done a study.

• 50:15Joe Weisenthal?

  I worry about, I worry about plenty of things.

• 50:19Tracy Alloway?

  Okay. Shall we leave it there?

• 50:21Joe Weisenthal?

  Let's leave it there.

• 50:22Tracy Alloway?

  All right. This has been another episode of the Odd Lots Podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.

• 50:28Joe Weisenthal?

  And I'm Joe Weisenthal. You can follow me at TheStalwart. Follow our producers, Carmen Rodriguez at CarmenArmand, Dashell Bennett at Dashbot, Cale Brooks at CaleBrooks, and Kevin Lozano at KevinLloydLozano. And follow our guest, Luke Kawa at LJ Kawa. For more Odd Lots content, go to Bloomberg.com/oddlots. We have a daily newsletter and all of our episodes. And you can chat about all of these topics 24/7 in our Discord, discord.gg/oddlots.

• 50:54Tracy Alloway?

  And if you enjoy Odd Lots, if you like it when we do these markets episodes, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.

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