 Okay, welcome back to episode 77 of the market maker podcast and a welcome back to Piers Curran. How's it going? It's going well. Yeah, I've missed I've missed this Well, yeah for me I had to go solo literally solo last week desperate Probably the best ratings of Of all our episodes Do you know our best rating actually was Milan who joined me? We had a chat two episodes ago and Yeah, had some great feedback and actually was out of 77 episodes our fourth most popular and it's only been out for two weeks It's not right. So there you go actually actually perhaps You're gonna get pumped more permanently. What what more evidence do I need all right, so Yeah, I'll see you then I'm not needed right Quick question then when you're away given Your career trading and obviously now being a business owner when you are away Do you actually switch off or Is that hard? The answer is really no and like especially at this time of year I would say Well, I like from our well as you know from my kind of business point of view It's the busiest time year summer I guess I mean that situation where I've got kids in our school holidays. So there's any set Periods of the year where you can kind of do a family break. So yeah The summer just falls the school summer holiday kind of falls right on our most busiest time of the year from a kind of business point of view Obviously markets wise things are pretty spicy They're trying to keep an eye, but yeah, normally and end of the year sort of Christmas new year is the kind of best time for me to just Switch it off Yeah, okay. Well, look, I hope you're feeling I hope you're feeling fresh because there's plenty for us to get our teeth into today Starting off with what I'll do is I'll go through a series of the major news from this week and we'll have a little discussion on each point and then something which Kind of goaded me into is a little bit of you just come back and you're like, look, let's just have it out Let's have a fist fight which way stocks going up or down you and me And I was like, whoa, whoa, whoa, what happened on your holiday? Well, we were talking the other day and you yeah, I was trying to think we have now opposite opinions on The direction of the stock market. Let's just say I don't think that happens very often. So alright, let's have it out Okay What we'll do then is we'll We'll spar over the direction of us equities. I'm not sparring Look, you're an old man is better we spar So we'll get to that we'll put forward a bit of a pitch as to Stocks up or down from here on out for you for the US but before that let's talk over some of the week's major headlines starting with the headline US CPI print And the reaction in markets and it was pretty much the opposite of where we finished the prior week where non-farm payrolls came out And it was a super strong report hawkish report. Everyone Got really spooked again by the fact that we're gonna have to go for the third Time 75 basis points and everything sold off stock sold off The yields obviously saw dollars sold some major FX pairs Everything got hit CPI comes out It's all okay again. The world's a great place Yes inflation is still on a year-and-year basis at eight and a half percent So we're still talking about multi-decade high inflation But the fact is is it decelerated from 9.1 percent and it was a lower figure than people expected now Part of that was not unexpected of course because gasoline prices have been dropping quite dramatically So the core figure so this is the one you'll hear quite a lot It kind of extrapolates out then more volatile components like food and energy specifically as the one a lot of people are focused on and the key thing there was that that was expected to tick up to 6.1 percent, but instead it remained constant at 5.9 percent and She would imagine the markets flipped Immediately stocks rallied led by none other than the Nasdaq and tech think we finished up maybe three percent almost on that day Followed up by the producer price index the day after Unexpectedly fell in July for the first time in more than two years as well Thoughts pierced and lost a seesaw price action big shifts over at the moment We we're going 75 50 in the the short end of the rates market. What's your view? Well, yeah, firstly the reaction Let's say the positive stock reaction to the CPI data that was a larger reaction and the negative reaction the week before to the jobs market data and that's Correct inflations the big ticket in time right in terms of the influencing forces So it's the inflation data is more important even though obviously they're all kind of linked, but um, yeah, I mean It's a relief In many ways, I think what we're seeing is a short term relief Continuation of what's been a really strong rally in stocks over the last few weeks So we've just gone again another step higher and it's and it's and it's relief I think that When it comes to inflation so you mentioned core inflation, but also It's important to understand that inflation is it's kind of measured on an annualized basis So those figures you were throwing out there. That's on an annualized basis. So for example the core Inflation reading for July was 5.9 percent. So that means that in July 2022 Core prices were 5.9 percent higher than in July 2021 Okay, and that was a positive because as you said we're expecting it to go up But it's in line with June right so it's not like inflation is going down on a core level on an annualized basis However, inflation is also measured on a shorter term And this is important. So a month-on-month reading This is comparing prices in July to prices in June. So one of the figures out of that Wednesday inflation report was that the CPI month-on-month reading was zero So it didn't go up and that's the first zero print On a month-on-month basis that we've had since COVID since the COVID outbreak back in spring 2020 So you could say that's a more of a shorter term look at inflation, which maybe gives you a better signal as to Where the trend might go, you know in the months to come. So look people We're so used to getting higher than expected inflation and it feeds into this narrative of more rapid rate hikes and it's all negative and this is just a short term I think short term Kind of relief. It's not worse and expected for once great You know, maybe the Fed aren't gonna have to hike XYZ and so the markets pop to the upside And we're gonna round back the week, you know the highest levels We've seen on on US stocks for like you've actually got to go back now. Let me just get this right You got to go back to May the 4th Star Wars day. Yeah, what's the last time US stocks were higher on the S&P 500 that is were higher than where they are now And technically I heard you talking about a key levels were out at the moment in terms of where we close around these points for bullish bearish signals with technical perspective. Is that right? Yeah, so looking at the S&P 500 that obviously the markets been Trending lower all year if you're looking at the longer term but you zoom in to the last six weeks and it's been going up, right, but Where we've reached now is the kind of end of May highs So around 4200 on the S&P 500 Was kind of a quite a key level at the end of May we're just up above that now I'm quite interested to see where the market closes today Because it's the end of the week, right? So if you're looking at charts on a weekly timeframe, you get your weekly candlesticks and if If it looks like at the moment we're trading 4,220, right? So it looks like we'll close above 4,200 and that would be significant from a kind of technical point of view If by the end of today's session Things drift lower and we close below 4,200. I think that's actually a really negative reversal technical signal So yeah, it'd be quite interesting to see where we close today But for now that inflation figure Popped us up through that 4,200 resistance and we're kind of just sat on top of that for a moment And then part of what we were discussing there was it was the energy and US gas prices this week Fell back below very key psychological marker of four bucks A gallon that is down more than 20% from the record high So substantial But I did read the goldman's came out and they were saying that they don't think that's going to last I Below four is going to go back up above that in the kind of near medium term Rationale global suppliers of oil are still running relatively low And argue that demand from US drivers is likely to rise after showing signs of weakening Yeah feelings on that So you're talking about gasoline here, right? So gasoline. Yeah Yeah, I mean oils The reason why it's below four dollars a gallon at the petrol pump Is because what the price of oil has been going down for the last couple of months So there's very much a function of oil prices So I guess you're just saying what you've got a basic to to to make the judgment of where Petrol pump prices are going to be in a month from two months and three months Really, you're asking for your opinion on the direction of the price of crude oil and Yeah, I'd say for me again I think that the reason it's come off in the last couple of months is because of us kind of switching attention to The the negative economic impact that high commodity prices is going to have and we're going to slide into recession And therefore demand is going to weaken And it's that weakening demand back look that's led to oil prices coming back down But I think that's probably run its course now Um, and I personally again in my personal opinion and I might be wrong I think two months of downside on oil now has put us at a price level but Looks pretty cheap My personal opinion is oil probably rise again in the months to come which means then petrol prices go back up Do you think do you think psychologically for a us consumer when we talk about say your routine food shop And there are very large increases in certain items There could be like butter or cheese and things like that Which could be in excess of 15 20 percent But because it's like a small item and it's bunched in with a basket of goods literally when you're shopping Do you think at the pump? It's a lot more easier for the consumer to judge inflation Because it's just literally you're looking at numbers on a screen. Yeah when you're doing it Definitely and like every time you drive past the petrol station and the numbers are there right and you're seeing That high Yeah, for sure. I think inflation is hard, isn't it with inflation as you're saying How much has it entered the psyche of the consumer because ultimately that's what's the most important as to how How much of a negative impact inflation has on demand I mean, I would say it's been above four and now it's below four Then it depends, right? I think consumers are quite short term in their thinking and they're probably thinking right it's below four Right. Thank god. I mean Right, let's go and go on that driving holiday that we'd cancelled and so maybe we're going to go and you know Now spend more money on fuel but below four is still double the price Of where it was pre covid double. It didn't used to really ever get above two dollars So I think there is this danger in the short term There's relief. It's below four. Let's go and fill up the car. But in the end They'll come through in their finances that actually yeah, we are spending way more On this than we were a couple of years ago and inevitably that will feed through to negatively impacting disposable income And there's only so much you can put on your credit card right And when we hit that kind of credit card limit wall Well, then yeah, there's nowhere to go from there other than Stop spending as much and that's when it starts to bite So someone who is obviously talking about us a lot was our dear friend joe And uh, mr. Biden was quite vocal letting everyone know about the decline of uh, of gasoline But the other thing of course that kind of the main thing that you would have heard this week was the senate pass something called the inflation reduction act The ira Is what I'm not sure about the shorthand that they're referring by that but The inflation reduction act as we'll call it And basically Just wanted to have a quick chat about this first off it's been kind of showcased if you like by biden as He's got this through it's another big package Hit a massive roadblock several months ago Trying to push through his legislative agenda And now he's got this done. It's labeled literally The inflation reduction act. We're in a cost of living crisis. The midterms are just months away now What did you think when you saw that? After I'd finished kind of hysterically laughing at what a ridiculous title Um I think it's it's a classic classic I'm going to be very cynical here. I think it's a class everything I hate about politicians. It's like self-interested um, it's a policy To win votes and I know you might say well actually isn't that right then if it's a policy that wins votes Then isn't it a policy that the public want? um And maybe there's an argument there, but I just think that The problem is And I was going to talk about this in our boxing match bull versus bear in a minute But I'm going to bring it up. I'll touch on it now from the fiscal side of things We're about to hit fiscal headwinds, okay The governments have been stimulating and pumping up these economies since covid here and now the reverse is going to happen with this bind and thing two things number one um The fact it's inflation reducing the whole part there is he's going to tax people To raise this money to then spend, okay um, but he's taxing corporations So just as corporations are seeing earnings growth decline Just as corporations are seeing their costs massively increased because of commodity price inflation and all the rest of it Now their taxes are going up as well. It's like a triple whammy, right? And so companies are going to have to lay people even more people off So you'll get more unemployment as a result of this in the medium to long term. I'm talking about let's say the next 12 months and Yeah, I think it will ultimately come down come back to kind of hurt the economy rather than Boost it. No, I'm all for the green energy side for sure. So I think that's important. I think that is a good thing But it's like penalizing all of society Just at the time where they're most vulnerable When and that's not direct, right? It's not penalizing society as right. I'm going to raise income tax I'm going to raise sales tax. It's it's a second, you know raising corporate taxes It's the primary focus, but that leads to the secondary impact Of then more redundancies, which then impacts the consumer, right? So That's my opinion. The other thing to say is that This isn't going to have a positive even if you put all that to one side and you say look, this is a big spending bill You know great more more consumption drives growth. It's not going to happen anytime soon It's not like immediately this money is going to get spent Yeah, so I think that's where the The real detail is is that obviously the optics as you said and what you think about politicians is that This is all aimed regardless of this is a long-term plan to address the short-term optics of Navigating the political storm that's going to happen in about two three months time One interesting comment I saw out of out of the Morgan Stanley chief u.s. Economist She said that basically the common thinking is that by reducing deficits it calms inflation And so you can spin this narrative of the title of this package But when you look at the numbers 300 billion dollar deficit reduction is spread over 10 years Yeah, so it's 30 billion In a year in an economy that's greater than 20 trillion so From a short-term impact It has zero difference. So is it going to influence what the Fed are going to do in september? Absolutely. No But is it going to perhaps influence the long-term Impacts in the economy then yes, so I think there's there's important to Understand how this has been engineered by the administration And what actually the implor the economic implications are From a time perspective Because the two are disconnected, but the first one is done very purposefully. I guess it's the point. Yeah But look enough about sleepy joe. Let's move on and let's talk Let's talk a little bit about the uk briefly. We just had some data out this morning uk economy is contracted by 0.1 percent in q2 of this year households coming back on spending but on a Sectoral basis if you're looking at the office of national statistics, which is when you get a bit more detail Under the bonnet of where the weakness was and a lot of it was in services, particularly the healthcare sector Um, as you all know, if you live in the uk test and trace Vaccine programs were were all wound down and that's had a subsequent impact as to of course Great time while it was happening a few extra days off work, but the queen's jubilee Did happen and that meant some extra bank holidays But actually the impact was not as bad as feared For that month alone the economy contracted 0.6 percent. I think economists were actually thinking it was going to be double that in terms of the impact but The same point remains right inflation is nowhere near where it's going ahead Which is substantially higher than its current level So certainly breaching double digits and beyond in terms of getting up to 13.3 percent As far as the boe thing in october this year rates have raised or risen already multiple times the key benchmark rates currently one and three quarter one percent and When we're looking at about what markets are pricing the market currently is looking for a further 150 basis points of hikes by may of 2023 Not only this the uk could face managed electricity blackouts We heard this week under a worst-case energy crisis scenario this winter We've obviously heard and seen similar things happening in mainland europe i.e. germany For example credit suisse came out. They've lowered their growth forecast unsurprisingly But from a timeline they expect the uk economy to enter a session from q4 and that will last through to q3 Of 2023 but that's pretty much what the bank of england. We're kind of insinuating so Any new information here or is this just Playing into the same view essentially that the worst is yet to come winter is coming That's all i'm going to say i mean i guess That gdp data announced this morning. So minus 0.1 percent for quarter two. Okay, so contraction Was actually a smaller contraction than what was forecasted as you would kind of imply and so the forecast was for minus 0.2 But it's minus 0.1. All right slightly better than expected, but look still negative But this data is really old You know We're mid august here. We're halfway through quarter three And this data is for quarter two and we know full well that really in july and then in august and the latter part of this year is where All of these kind of factors are really going to come home to roost and so Yeah, it's kind of not particularly It's not going to influence anybody's outlook change anybody's outlook for the second half of this year in particularly the quarter four and then quarter one 2023 this is where we're really going to find out How bad all this kind of doom and gloom kind of Predictions are going to be because I was reading this morning like uk energy bills are going to Get above five thousand pounds Per year right that's compared to less than two thousand pounds last year so I don't know who I don't know how your kind of Energy bills looking like but that's an extra three thousand pounds Who can there's not not many people that can afford? Oh an extra three grand That's fine. Yeah got some spare change down the back of the sofa Three thousand pounds that is a huge sum of money for and obviously especially for the lower income and the mid-income and every the engine room of the economy in terms of consumption right and so Yeah, this is going to really hurt and Just not quite sure how much yet and just at that moment. We're going to have inflation forecasted Yeah, 13 14 percent more rate hikes I mean for the uk especially The outlook going into this winter is I mean I well, I've never known a worse outlook In my life Well, I mean something to to alleviate some of that fear Boris Johnson Double down on his insistence that it's not his job. It's for his successor to deal with this So it's nice to you know, the prime minister sat there while As you said conditions are worse ending by the day and well, it's obviously not his job You know what I would say about Boris to be fair if he did start wading in going right I'm going to implement new policy to fix this There would be a massive uproar From the left going what look you're not in charge anymore get you know get into the background where you belong So it's kind of a loose lose there in that specific point. I would say for Boris I don't know. I think if I was a spin doctor, I could make him look More favorable by not tabling, but just the language he's using. I think that's what I'm saying He could he could manage that better If I was part of his team From the communication point of view But yeah, I mean look we won't go into Sunak and this try But that is that is another final point like in terms of the negative the roster of negatives from the UK. The other one is of course Yep, no functioning government That little old thing Yeah, so As if we needed that on top of everything else Okay, well look we'll move on work We've got one final piece on the kind of broader macro front and then we'll go into some single stock stuff It's a little bit about tesla Of course need on mask but before that oil prices have been a little bit jumpy but Far smaller than what we've seen on prior occasions But we did see earlier in the week a bit of nervousness because of Russian crude flows from Ukraine to Hungary, Slovakia And the Czech Republic were halted Apparently last week after sanctions prevented payment of the transit fee essentially now Something which a lot of people i'm assuming haven't heard of before is the drusba pipeline and essentially You want me to say again, don't you? The drusba pipeline If there's any Russian speakers out there, it's fine. Send me your hate mail. It's okay and essentially this is The world's longest oil pipeline and one of the biggest oil pipeline networks in the world Comes from the eastern some russia and splits off into kind of northern southern channels So it's super key And something that you definitely should be aware of if you're you know, if you're operating or interested in markets But we heard something similar because we were talking about it ourselves about Some soft commodities grains moving out of Ukraine for the first time and we know that things like wheat prices were highly Kind of volatile over that period of initial invasion given that's where predominant amount of global supply comes from But they were making one of their first shipments and then it was actually we don't want to accept it And there's a lot of grain commodities sat there in cargo On the sea at the moment. So I guess the point here is what the russian situation is not concluded far from it Actually on this point, I think it's amazing how um the fighting in ukraine is no Better of a state than what it was several months ago And also for accelerate that to last week Now no one's talking about china now in taiwan five days later After everyone was screaming blue murder and we're going to have a world war All people pumping that narrative online nothing now. I mean the drill things are still happening But what i'm talking about is the media response to these things Because now it's back to cost of living and inflation And these narratives are very compelling obviously When it comes to the individual attention spans Are basically reducing as time goes on right the tiktok generation You know The story lasts for more than what 15 seconds and it's like dull move on But I think from a from a understanding markets and how they function. I think it is an important thing though because um What i'm saying is that as as bad as the situation From a humanitarian point of view is in ukraine Yeah, the focus has shifted Irrespective of what's happening on the ground So from an investment point of view The risk factor has shifted Um because the influencing factors have kind of the blocks have shifted if you like in terms of what is and isn't As the biggest risk right now. Yeah, even though that actually these the I mean the The individual components are all still there. Yeah But it's something that you should definitely be mindful of and and now this was something I was trying to stress on last week's episode about I really disagreed with how some people were reporting the chinese situation just very sensationalized Over every ship crossing the median line every missile overland And it was like this is the biggest thing that's happened and yeah It is an escalation, but I guess the end game is where does it go? and then What's the next step and what's on the near-term horizon that could then shift the focus And yeah, it's just amazing how quickly it shifted again It's just that this is the function of the the state of the media, isn't it in this day and age it's sensationalizing everything and You know clickbait That's what it's all about, but obviously it influences the global narrative Which then influences behavior around everything including markets So right and then public policy and Yeah But look, let's let's jump into some stocks news And let's talk tesla And although tesla signed contracts worth About five billion dollars to buy materials for their batteries from nickel processing companies in indonesia Which was an interesting story in itself It's been superseded and the reason why is because it's come to light that elon musk has off loaded Just another six point nine billion of stock in tesla and in fact that's his biggest sale on record the rationale Of course, he tweeted in response to a question from Just some bloke on twitter Was to avert a fire sale of stock if he is compelled to complete the 44 billion dollar takeover of twitter effectively The agency planning if private investors don't come through. This is what he was saying Cast your mind back to just may musk at the time said there'd be no more share sales And here we are this week tesla stock is up was up As much as 50 percent and when he said that in may so obviously time to offload another seven bill At this point in time. So he has now sold around 32 billion worth of stock in 10 months And in terms of his actual holding in tesla now it's down to 14.84 percent So hang on. Okay. So what was so what in percentage terms? Where was he? Of course started selling in april. I'm not sure what the starting percent was But he's still got 15 odd percent left Right Yeah, I just thought this was uh, just just classic elon basically Well, it's it's just good trading Basically Is we're here for the 50 bounce and then right let's let's get rid of a whole not a bunch Yeah, well, you know, we've been talking about this all year that this is Arguably it's going to turn out to be one of the best exit strategies in the history of mankind No, I think with twitter, right and he's using that as the Obviously the rationale For selling but yeah, the fact he said I'm not gonna sell anymore in may and here he is selling more But I you know, I think ultimately he's saying that no if I have to buy twitter Then I'm going to need financing I had financing in place But that financing and those promises of loans from the big banks have kind of just been shelved Because the banks were worried that the tesla share price Was too volatile and it had moved way too low for it to be Kind of a safe enough sort of collateral For that bank loan And so musk is saying wow. Yeah, I need to sell more twitter I'm sorry tesla shares to raise the financing to fill that gap because the banks won't be interested anymore but You know, what's going to happen with twitter and I'll go through the legal case, which I think in october, I believe Um And then look the court will decide or whether it gets to court. I don't know. I mean ultimately I think Worst-case scenario for musk. He engineers a cheaper price to buy twitter Best-case scenario for musky doesn't have to buy it Um, I think in the first example where he ends up buying it for cheaper Well, great. It's cheaper, right? So he doesn't need as much financing as he had in place earlier in the year Secondly by then once the price is fixed and it's going ahead. Well, then I'm sure he'll be able to find banks that will back in so Yeah, I definitely think this is still A genius exit strategy from his massive tesla holding settlement Could shave off a couple bill just hand it over What you mean twitter from his 32 billion that he's managed to exit Right, right. I see so 32 bill becomes the just say right. I'm going to write off 20% of that just to just to shut them up They go away and I'll walk away and actually the share appreciation on the exit value I still end up weighing the money. So that's just the cost of transaction. Yeah I think why not? I love that guy All right, so fies fies Um, well actually before fies I want to talk disney plus actually I had them on my hit list and the reason why is because they've edged past netflix In the streaming wars with 221.1 million subscribers they added 14.4 million disney plus subscribers the street was looking for 10 million That is a ginormous beat on expectations Um, there were some big hits the star wars series obi-wan kanobi marvels miss marvel Were the kind of headlines in comparison just to refresh your memory because we talked about netflix at the time I think they lost another 1 million subscribers So just to repeat disney added over 14 million And netflix have lost a million and that was their first ever back-to-back quarterly loss of customers and everyone was kind of I guess positioning themselves for Cost of living crisis people are tightening their belts cutting back on streaming services because they're unnecessary Not the case for disney at this point. I must add that disney had particularly good performance on their theme parks as well though It's not just a streaming Organization and a lot of that was they were talking about pent-up demand And so forth because of the covid situation, but they did have a very good performance there As well. So yeah, what do you think about that disney now top of the pile? Yeah, amazing. I mean well done them. I think they've had an impressive strategy to Well, hang on. It's not as good as it sounds though they've had an aggressive strategy to basically convert netflix Subscribers into disney subscribers at the expense of netflix. So they're kind of going in opposite directions at the moment disney's offering is half the price There's a price point thing also you get like I mean I I've got disney plus Do you want to know why? Because I was sorting out a new mobile phone And with o2 and I don't know if they're doing it with other providers But with o2 you get a part of part of the deal You just sign up for another 24 month contract or whatever you get three months free disney plus Right, I mean, obviously you get it and then you forget about it and fine You end up being a subscriber but um Yeah, the fact you gain these on ramps that are you know hugely good deals Means that it's it's costly for disney plus. So they're losing about About a billion dollars Yeah, so they're Streaming effort lost or reported 1.1 billion in the quarter I'm in the quarter sorry right in a quarter and they've also lost The rights for the cricket in india right Yeah, it's going to impact their guidance is a really important point because whilst those numbers look amazing more than Netflix, you know 14 million subscriber growth blah blah blah They're losing over a billion a quarter Secondly, they're losing the contract on the ipl the indian premier league which is that massive cricket Kind of franchise and tournament that happens annually in india and it is massive this tournament and they've lost the rights for next year So they're a huge portion of the 220 plus whatever Million subscribers a portion of those are indian subscribers who are subscribing to the cricket And when that drops off, yeah, I'm sure that's going to hurt their numbers when you come through to 2023 Yeah, no, it's um I kind of concluded a piece I wrote about disney saying the bottom line is that you know during the pandemic The streaming services went kind of gangbusters, but in the post covet world Cost of living crisis. I think a lot of attention is switching for investors to profit As we go through this period away from growth so much metrics And although they buck the trend the competition in the streaming world is fierce And the pent up demand on the park side, that's not going to last in my humble opinion It just won't that's the nature of it being pent up. It alleviates over time Yeah, at least there's diversity in their revenue streams that you can't say for netflix, right One thing is that's interesting is that from a consumer point of view Is that say like my daughter's watching? disney Like she can watch frozen Like literally to my dismay 50 times and never be bored Whereas on netflix. I watch one netflix original series. I will never watch it ever again Yeah, and so the pressure is on one thing I quite like about disney's model is the their content library where they have Like a hundred years worth of content that is picked up and recycled Again and again and again, whereas with netflix. There's a lot of emphasis on generation of original new content Which is a challenge obviously Yeah, for sure. We've talked about this in the past about How you know owning a big franchise It's key and so you know disney with The marvel franchise And obviously the star wars franchise They've got two of the biggest out there and yeah, so puts them in a You know really good position netflix are really struggling without that monster franchise Okay final one fizer I mentioned and just briefly on this one because I wanted to mention An m&a deal update and that's because they're to buy global blood Therapeutics and a five point four billion dollar deal The rationale that really underpins that deal is You're gonna have another drive at me now Fizer will gain ox breeder Ox breeder Okay global bloods therapy for sickle cell disease That's sold about just shy of 200 million u.s. Dollars last year And fizer sees it as do global blood therapeutics as a blockbuster in the making Quick tip when I used to do my old job and this could be for any m&a analysts in the future Like if there's a drug name Obviously you try to find Uh youtube videos or someone's saying the drug name so you can Understand how to say it If in doubt You just need to own the word and say it like you think it said the right way because other people don't know how to say it either And so if you just can Pretend that you're saying it correctly people actually believe you Yeah, yeah It's like I used to one of my favorite foods back in the day was um quinoa Okay Otherwise pronounced as quinoa I was calling it. I was calling it quinoa for at least five months or foe vietnamese foe. Oh, yeah, which is far I get Yes Okay So the list goes on anyway enough enough of uh food education Fizer in their press release said the proposed acquisition drives growth by basically bridging their own with this other companies disease expertise their portfolio and pipeline importantly and they're looking at combined I didn't They didn't obviously put forward the exact timetable But what they're looking at with the blockbuster type sales figure is more than three billion dollars on a worldwide basis Which is quite incredible considering and they're talking about 200 million starting point at the moment so Yeah, m&a activity still I've seen quite a few actually deals at the moment irrespective of current predicament aside of economically where we're at at the moment. There still seems to be plenty of um appetite for certain deals I think on the m&a side it's a bit different to let's say raising capital like ipo or You know follow on offerings or You know corporate bond issuance and that kind of stuff that that stuff's collapsed but m&a Often you'll see at the bottom of a cycle a lot of consolidation and Industries and sectors consolidating where you're getting some of the big and the strong You're picking up some of the little guys and some of the weaker guys Low valuations at the bottom of the cycle and so it makes sense, you know that you get this kind of consolidation at this point Yeah, we just had a great guest speaker on with our our interns who was a Very senior pe guy and he was talking about I think it was blackstone Have basically got accumulated like a 50 billion dollar war chest for buying up distressed assets In real estate for this specific situation that we're in essentially so yeah, there's always Well, I was going to call the vultures, but I'm just mindful of any uh Opportunists opportunists, um, I should say on that front, but anyway, look let's let's conclude and let's let's try and keep this as Uh to the point as possible. Otherwise, I feel like we've got it. We're going to go the full 12 championship rounds and So I'll let you I'll let you shoot first Let's have your your kind of highlight reel behind Why your bearish on stocks right now? Okay, and let's define this because you put a poll out on LinkedIn. Yeah under the amplify me LinkedIn handle if you haven't voted yet Please go to the answer by me linked in and vote and though and the poll is asking What level do you think will be hit first in the s&p 500? Will it be? 4600 so we rally from where we are. Let's just say we're at 4200 at the moment So do you expect the s&p tip 4600 first or Sell off back to 3700 first. Which one of those is going to happen first? That's the poll Right now I mean, I don't I need to say anything other than look the people have spoken And right now the poll is showing that 60 percent of people have voted for 3700 So we've got a bearish Community and I mean not sure I need to really go any further, but I will So here's I'm the 3700 count and Here's why Sure inflation the data on wednesday was lower than expected Great. Happy days hunky dory. Look, it's one month's data. Okay, and look gasoline prices came down whatever look the core reading Although lower than expected. It was still a 5.9. Okay. Here's my main theme on inflation It went up rapidly okay 2021 and first up of 2022 Don't think it's going to come down rapidly At the core level. I think sure inflation might have peaked And sure it might be coming down But I don't think it's going to come down anywhere near as quickly as it went up And that's because look inflation's sticky Right, and I think you're getting to the point now where inflation is fed through To being kind of self-hostaining at least for the medium term and that's because people are now companies are just putting up prices Not because they specifically have seen input costs go up necessarily They might have gone up a little bit But they're putting up prices because they're saying to their customers. Ah, have you seen inflation? No, sorry. We're having to raise prices by 15% like inflation soft Basically, they're increasing profit margins because they've got the chance to do so right so prices are rising okay more medium to long term and this is Perhaps not a great argument for this short-term question on 4600 or 3700 It could be that we've really reached the end of what's been a two decade anomaly Of really really low inflation Maybe the last two decades is the Abnormal and we're new moving back now into more normal higher inflation levels The last two decades have been really low inflation because We've had very unusually Low and stable energy prices and commodity prices We've also had China And globalization so china demographics has meant that the cost of production dropped sharply Which fed into them the prices of goods dropping sharply, but now The chinese demographic situations turned and it's now marching back the other way So I I actually think we're Going to see a more prolonged period of higher inflation So if we turn to monetary policy now People are thinking if you think we're going to hit 4600 first basically What needs to be priced in is the fed will stop hiking at the end of this year and they'll start cutting in 2023 Personally, I don't think that's going to happen. I think if the fed Start cutting next year Inflation is going to still be too high And what you're going to end up with is stagflation of recession With inflation staying high And ultimately that's a bigger problem And the fed I think are going to they won't be able to cut next year. They might even have to continue to hike Okay Adding the fiscal headwinds like all the fiscal stimulus has gone and we're now going to get tax rises and that's going to be a drag add in the labor force situation where Fine, it all looks great non farm payrolls 500 and whatever thousands. Yeah, well done, but The quit rate is dropping sharply The job open rate is dropping sharply and now I think better kind of lead indicators So I think this labor market is going to turn over and two more points us yield curve Is that it's most inverted point For decades and this is the key indicator for recession, right? So this is where the two-year yield is higher than the 10-year yield That's kind of that alarm bell has been sending all year and is continuing to sound and then finally you got emerging market risk I'm not even bothering to mention Geo politics here, by the way, but emerging market risk. I think it's massively on the up We've seen what's happened in Sri Lanka. We've seen Pakistani bomb yields spiking This week and last week. Did you know like through the pandemic? You've already had the likes of Argentina, Belize, Ecuador, Lebanon, Srinam, Zambia. They've all defaulted already Did you see what Argentina did this morning? Yeah, they raised interest rates by nine and a half percent They raised interest rates by eight percent two weeks ago Eight percent two weeks ago nine and a half percent again today interest rates in Argentina 69.5 percent to try and tackle inflation that's clocking at 17 So look, you've got big risk in the emerging market space because and the more hawkish the fed are The stronger the dollar gets the worse it gets for that emerging market space So I think there's a bit of a domino effect risk As these emerging markets start to hit the wall So wrap it all up Recession is coming Winter is coming Short-term relief because there's one inflation prince trapped but the worst is yet to come Okay nine points That would say a couple of things to think about nine points first one is a behavioral one Hearing you and everyone else sound like you're sounding just makes me want to buy stuff as in like When everyone says we're getting like and there's been some significant shifts I feel recently where because of the nature of the rally that we've seen over recent weeks Everyone's been trying to call like dead cap bounce is selling off And if you were a short-term trader Already, you've got some severe egg on your face because every week it's punched higher and you've lost a lot of money at the moment So We do keep punching higher. So one of the main things here is a behavioral thing. I never feel comfortable when there's too much Consensus around a singular view bullish or bearish and in this case it's a bearish one and I love the fact that Michael Burry always he's got a hotline that guy To the wall street journal and he literally every time the s&p goes up like another 10 points He's like right we need to run another Michael Burry splash Here's why I think the world's ending and they print it for him Like what he he's just as predictable. I think as Elon Musk By the way, he uses the media but that aside the other things are a couple things one the Fed the Fed have continued to talk about this idea of like We've got flexibility. We'll act accordingly data dependent. I think you're right one piece of data is one piece of data I don't think we can call September at all as where we stand at the moment But the one thing I think that the Fed are very keen to keep up is to keep their ammunition box available By keeping the dream alive that we can go 75 or we can go harder if we want dependent on the situation But the more that they can spin that narrative the more flexibility there is to Not have to dramatically start slowing but insinuate and go through the kind of incremental communication approach of utilizing the buffer of going from 75 to maybe 75 to now with props of possibly reconsidering Okay, now we're at 50 and then and once you go through all of that it kind of acts as a Safeguard mechanism to offset and when I'm talking about obviously we're training 4200 so going back to 37 100 is a serious Downward correction in market will bearish We'd be going like 20 odd percent. So we're talking about big moves if that was happening I think the Fed would already kick into full gear At that point the other things are I think a lot of people were massively hyped about how bad earning season was going to be And that might yet come to fruition, but they got it wrong This time it might well get it wrong next time as well. And I think that was I think people are just so keen to see a bearish outcome in Wall Street to match Main Street That it's almost becoming somewhat a bias That's happening to a certain extent and that's been inflated by The fact that everyone's talking the same view and so it's like what do you think and it just reaffirms my thinking And I go, yeah, that's what I thought. Let's get some more in the bear camp. Let's have a big party like So then the other things are energy prices energy prices, I don't think are likely to move substantially back higher There's obviously there exists as we've just talked about supply disruption risk. They're still there as a present danger But I think now I don't think we're going to get a dramatic collapse in oil I think we already kind of really had that a little bit with pricing in the recession move that we've seen So that's kind of factored in so let's say we kind of stick about where we are There's some other things that came out of the inflation report Shelter prices was one It's been a big contributing factor to the stickiness Because of the fact that those prices aren't subject to such rapid Types of change over a short period of time and that's starting to roll over and come back down Which is I think a positive signal the ppi unexpectedly fell as we said earlier for the first time in In more than two years. So some of that pipeline inflationary pressure beginning to ease Could well then filter through into the consumer price side So that's enough on inflation in the Fed flip it over to cove in china Now I just read some headlines this morning. They're still doing mass testing It doesn't look good when you start looking at some of the headlines. They're still having quite onerous response to these outbreaks and they seemingly are still happening at this point my point on that The chinese communist party national congress is happening later this year And I think you will get lock and key. They won't let out what the real situation is about covid And in fact, there will be a tactical approach from beijing To try and mask that as best as possible to the broader global community To paint as best picture as possible So it's our lack of on-ground intel means with no visibility I think that discounts a large portion of that that risk on the china covid side Then I was looking at some s and p historical data On the s and p's historically underperformed in the year leading into the midterms So the average annual return of the s and p 500 in the 12 months before a midterm election Is 0.3 percent And that's significantly lower than the historical average of 8.1 percent So what i'm saying here with this is that This is always the case a change in leadership Regardless of country, but america let's take it you come in at the top because it's like that's cultivated to change And basically your popularity just degrades over time and it's not that's not unusual then to Give up some power when it comes to midterms. It's quite a typical pattern the post midterm election period Is a very different story the s and p 500 historically Outperformed the market in a 12 month period after the midterm election with an average return of 16.3 percent This is especially true And most poignant in the one to three month window of the post midterm period um Which historically significantly outperforms when there's no other midterm election year now I guess the way to summarize that is the idea that biden's taken a battering and like inflation reaction Billicide and gas prices coming down whatever is happening. I don't not looking at that to really influence too much the short term Narrative the point is have we had forget peak inflation? Have we had peak biden peak biden negativity? And it's like it's already like Okay, he's going to lose the senate or you know, perhaps congress and you do have these significant headwinds, but We know that right? We've known that already and things haven't yet shifted and although policy then comes to reality of when it cannot Cannot be inactioned. He does have um Superceding powers as president to do push through certain agendas even with a locked congress But I don't think that that's not even worth talking about. I don't think that would even come to that point. The point is I think I don't look at history as a definitive guide to pin my mask to but It you know history. What's the saying it? doesn't repeat but it often rhymes and the statistics are quite compelling then Don't forget santa claus Santa claus always comes to town And he'll bump things up Good old cent nick will come And you know week of the 20th whatever the run-in is to the the christmas period. He'll give a little bump And the other thing was final point since world war two i'll start for you Every time the smp 500 recovered a 50 percent of a bear market price decline While the 500 may have retested the prior low It's never then set a new low So for the conversation of us saying could it go 3700 This stat would say it can but it can't it won't go below Because it never has done if you went back for every recovery of a 50 percent move in the last 75 80 years is that right So when the markets hit bear market territory So it's dropped 20 percent or more from its high if it's then recovered 50 percent of that It's never gone on to break that low On the yeah the interesting So yeah, there's a couple of things to think about but for me actually resides all the other specifics I just don't like the feeling of everyone being bearish. It doesn't make me comfortable. That's the main thing and that is really A gray answer, but yeah, there you have a couple of points as well to throw into boot. So yeah still bearish All right, well, look, let's let's wrap it up Feel free to check out the show notes for access to attend one of our finance accelerators We've had some really awesome turnouts So much so we've had to put a cap On each week's Session now because we want everyone to get the maximum Kind of experience out of it. 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