Is the Stock Market Sending a Warning?

0:00We don't just invest in cutting-edge companies. We look at companies with a history of steady growth, and companies whose growth cycle has come round again. Because in the real world, you have to look at growth in three dimensions. Monks investment trust. Some people treat Chachy-P-T like some kind of smart search engine, and some use it to get work done. Chachy-P-T work is a new way of working in Chachy-P-T 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 Chachy-P-T to work on your most ambitious ideas and projects. Get started at chachy-P-T.com by selecting Work Mode, available on plus and pro plans. This is Robert Smith from Business History. If you're listening to this, there's a good chance

1:00you're a small business owner. And like every small business owner you started with a dream to do what you love and watch it grow. What you probably didn't dream about, keeping up with cyber threats. That's where MasterCard can help, with access to tools that help identify cyber threats to better protect your business. Building a dream business, priceless. For cybersecurity and a changing world, there's MasterCard. Learn more at mastercard.com slash small business. Bloomberg Audio Studios. Podcasts, radio, news. Welcome to the Marin Talks Money market rap, but we talk about the biggest moves in markets this week. And what is driving them? I'm Marin Zepweb UK Money Editor at Large. And I'm joint state of senior reporter at Bloomberg and author of the Money to Steal newsletter. Okay, John, there's a lot going on. There's always a lot going on these days.

2:01But listen, one of the things that I want to talk about, and I'm not sure that you agree with me, this is a big deal, but I do think it is a big deal, is about breadth in the market. So quite a few people have written about this week, including our very own John Orthers, who points out that on Tuesday, and that's like went up quite a lot, right? But of that rise, more than half of the rise, we was down to four companies, or four chip-making companies, basically, Micro and Fandist, advanced micro, devices and video. So everything else is basically a relevant to this huge concentration. Now we know that isn't new, right? But it just seems to be getting more and more intense that when the market moves, it's just being dragged along by a couple of big companies, and everything else is either knocking around and neutral or going down a little bit, or really just not doing very much. And that's not normal. You know, it doesn't happen that often. He looks at it and he says that in terms of this kind of really extended period of outperformance by a couple of big companies, you've got to go back to the late 1990s to see, if you'll know what happened then, right?

3:03Narrowing of performance. And the more you look at it, the worse it gets. And he actually, John, points out a tweet that I was looking at the other day, which first made me think, ooh, I'm a bit worried about this, which was from one of the traders on X. And so there are two days in history like today, when the S&P 500 rallies, at least one percent to his own, one percent of the new high, and more of the stocks fell to new lows than highs. July 23rd, 1929, and December 21st, 1999. So both before, really, really, really epic, epic market fails. Right? Now, as John says, and I agree, it's a very small sample sale, it doesn't mean anything, but it doesn't feel good. That's it. Having the market led by companies like this, and people constantly think, oh, it's a new high, it's a new high, everything's fine, but underneath everything, can it, isn't it? Fundamentally, I agree. And obviously, I agree that the market is very, very concentrated, it's very pricey.

4:03And like any measure that you pick, really, we'll show that the S&P is expensive, and that's that expensive size. I actually don't disagree at all with the fundamental. Only actually we've read this, but people talk about it a lot, and quite often it then just goes on to widen out. So whenever you get down, you're talking about these things, which are almost kind of time and devices. And that's all, because I sort of question like, does it actually tell us in three months' time, the market's going to start crashing, or whatever? I mean, to be fair, I've already got a market, I've produced a little graph in my Bloomberg term, note in a mind made that the economist had Nvidia on the cover a couple of weeks ago, and so I've just got what you know with that with the Nvidia share price, because that's my kind of chosen time and indicator. The last house is John Glass-Hauses. Oh no, no, no, no, this is not a criticism. It's because the economist is so widely read and so widely respected that it works.

5:03Yes. It's not because it's a bad title, because everyone reads it. So yeah, I'm sort of like going crash alert for about at least six months from the publication date, which was about September earlier this month. So yeah, this kind of hides to that feeling. It's just, I don't know, I've heard Bretisnaru a lot. Okay, I'll give you that. But when Bretisnaru, and when, there are so many things to worry about with the companies that are leading it. Yeah. Right? And you've written about this week yourself, right? I've written about this week. Yes. And what did you say this week? What is this? And you worry, John, are you just piling on top of our old worries about too much CapEx and not enough revenue? It is basically just the old worries, too much CapEx, not enough revenue. Chris Claudier, over the capital, getting asset management, wrote a white paper. Basically, showing what a a wild level of spending is going into this. And the correspondingly, a wild level of revenue that will have to come from it,

6:03if it's actually to be, to kind of make a reasonable return on capital. And obviously Chris' view is that, well, that's not like later materialising. So at some point, we're going to get a reality check. Although it may be very easy, and you wouldn't feel corn for the protecting the reversal inside the next 12 months, whereas most of it had prop, well, I'd be surprised if we don't get some sort of reaction in the next 12 months, because, apart from anything else, the Anthropic IPO is meant to be coming anytime soon. So, second and actual point for people to start thinking, is this going to work or not? Yeah, the thing that I keep saying is, the failure of data centres to be completed. So, we talk about all these capex being thrown at it, and doing data centres going up all over the place, but they're kind of not. So, there's an awful lot of chips sitting around in boxes. So, one thing that will be in various suggestions about what percentage of the chips that people have been buying and not actually being activated, they're just sitting around waiting for the data centre, they're supposed to be going in to be built,

7:04and they're not being built at the speed that was previously expected. You've got all the protests against them. You've got the problem with the electricity hookups. You've got the heat, problems with the water, problems with all sorts of things. That means that, well, the money is being technically spent. It's not necessarily clear that the infrastructure is being built at the speed that's supposed to be in it. I was going to worry about something, actually, about, you know, beyond Omigadda and that kind of thing. That's what I would worry about. The data centre is not going up. I mean, where I live in Scotland, every time anyone looks about a data centre, the protestors come straight out, and I see that's the case across a lot of the US. One of the things I was looking at today is the amount of heat these things generate. So, you know, we've all took about cooling systems and that kind of thing. But there's now an idea that if you live near a giant data centre, you're just going to get hot. It's about maybe people shouldn't be objecting to it, so much in Scotland. I don't think that's the Scottish issue. This is more a Texas issue.

8:05Yeah, I mean, I think that's a really good point. Because, you know, any other time we talk about infrastructure, if it's nuclear, or if it's real, the first thing that comes to anyone's mind is, well, is this even going to get built? But it's where the kind of hyper-scale stuff is, like, the click of fingers, and we imagine that it's just, is magic, out thin air. And, yeah, you're absolutely right. The chances of any infrastructure project getting built on time and to schedule are relatively low. If you take the average, I think, across most infrastructure projects. So, it's slightly weird how we see me have this slight blind spot about this kind of aspect of the AI build out. Yeah. Well, I think that it is interesting that a lot of people still forget that, well, previous things, I mean, take the internet bubble. That wasn't hardware, actually, the same extent. This is, this is, AI is very, very physical, right? Everything about it is physical. And we think of it as being digital, but it's simply not.

9:05So, if you want to see what's going to happen next, you probably need to stop paying attention to the digital side and really look at the physical side. See, this is interesting, look, is bought with that, I actually mean, on the investment side, if you've got strength, or if you get to lead capacity, but then you've still got the capacity, presumably that wouldn't be bad for the hyper-scales because they're the ones who are benefit from any actual shortage in data center capacity, because they're the ones that can own it and rent it out. Sure, but a lot of their forecasts are based on having more data center capacity. Yeah, yeah. I mean, so high-apprecied data center rentals, maybe okay, but we're moving outside our area of co-compcience here, John. No, I'm just, because I'm just thinking it's good. It'd be good for someone, if there's a shortage somewhere, so I'm assuming it just jacks up the rent or something like that, but yes, yes, we'll need to, we'll need to see what we can do

10:05some digging into that one for you. Yeah, let's think about that one. Let's think about that one. And of course, I suppose the other thing to point out is that chips don't last that long. I mean, as we were saying in the show in Edinburgh, there was a lot of talk about how previously when you've looked at infrastructure build out and you've gone, oh, well, do you know the thing crashes, but we still got the infrastructure. And I like color pointed out that that simply isn't the case with data centers because you might still have the building, but the chips inside are outdated very quickly. Yeah. So you just have a big building? Yes. A big empty shared full of obsolete chips. Okay, so let's move on to worrying about debt, shall we? We don't just invest in cutting-edge companies. We look at companies with a history of steady growth and companies whose growth cycle has come round again. Because in the real world, you have to look at growth in three dimensions,

11:06Mokes Investment Trust. Some people treat Chachi-PT like some kind of smart search engine and some use it to get work done. Chachi-PT work is a new way of working in Chachi-PT 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 Chachi-PT to work on your most ambitious ideas and projects. Get started at chachi-PT.com by selecting Work Mode, available on Plus and Pro Plans. At Edward Jones, we believe Rich is more than caring about the latest and greatest. It's also taking care of what gives your life meaning. That's why your dedicated financial advisor meets you where you are with personalized financial strategies that help protect what matters,

12:07so you can preserve your progress while creating a path forward. The key to being Rich is knowing what counts. Let's find your Rich together. Edward Jones, member SIPC. Let's talk about healthcare for a second. It doesn't always work the way people expect it to. If you've ever waited on a prescription refill or had a hard time getting the care you needed, you know the feeling. The system should just work better for everyone. That's exactly what the people at Optum are trying to do every day. They're a healthcare company linking patient care and pharmacy services and using data and technology to drive the whole system. So, care is connected, not complicated, for patients and providers. Things like making it easier to get care that looks at the whole person from primary care doctors to mental health support and even in-home care. And then using technology to make sure they all work together. Technology designed to help doctors spend less time on busy work and more time with their patients. In those prescriptions, Optum is working to bring costs down,

13:07save patients money and make it easier to get refills. Little by little, Optum is helping make healthcare work as one for everyone. Head to business.optum.com to see how. Obviously, we can worry about the private debt that's all that. But let's look at public debt. Obviously, we had a horrible borrowing numbers from the UK this week. We borrowed much more than we are for. We were going to. We're spending an absolute fortune on debt interest. It's going to go up to about 4% of GDP. 4% of GDP, John. It's ridiculous over the next year or so. So insane. And think of it in the 2010s, it was more like 2%. And I know this is not all because we're spending more. It's because the rates are going up, of course. But it doesn't really matter. It doesn't really matter where the rise and spending is coming from and it's still horrible and it's still the responsibility of the government to do something about it where they are demonstrably not.

14:09It's the present but entirely expected. We're getting all the same sort of a cake flying now as we did before. The last couple of budgets. So they're going to do this, but capital gains tax. But no one's talking about cotton spending. And actually, the other thing that I have to say is that the other parties or certainly the Lib Dems in reform, they have both said that they want to lose the personal allowance to 15,000 pounds. And you're kind of like, have any of you looked at the debt to GDP figures recently, do you need to get a grip on this? You can't turn around and say that we're going, I mean, I'm all for lower taxes. But tax places too heavily concentrated on people in high incomes. And there's no way on near enough coming out to actually the lower incomes say the things. Partly because we all need to be in it together, but also partly because the only way they actually make up the kind of figures we need is to take a bit of money from everybody. And so the idea that they're going to then do these effective giveaways.

15:11And then they're going to pay for them with things that they haven't actually cost they do. So for the Lib Dems, it's a magical EU deal that won't happen. And for reform, it's spending cuts that they still need to spell out. So I think that this kind of like basically, basically it feels as if we're going to run up to an election and everyone's kind of like bidding for voters rather than taking the situation seriously. And I would like to think the bond market would have something to say about it. But for now, it seems to just be drifting along, just pointing to the oil price more than anything else. Drifting along quite a high level. Remember by the way, John, when you say the Lib Dems want to raise the personal allowance, this is already all their fault. This was a Nick Clegg policy. Nick Clegg policy to keep raising the personal allowance because you have this idea that people shouldn't pay tax, that people shouldn't participate in having these arguments with them about the same. But surely democracy requires participation.

16:12Even if it's very small participation, we as you said, we've got to be in it together. And that's how you keep a tax-based steady and stable. It's by requiring everyone to at least in small part participate in it. The more people you take out of it, the less stable the whole thing becomes. You're always in the most sensible view in that, because whenever I was young and idealistic and stupid, I thought, well, what's the point in taking money away from people if you're just going to give it back to them in benefits? But yes, as I've grown older and less idealistic and hopefully slightly less stupid, I've realised, well, yeah, because you take it better away from people and they realise, oh, don't somebody's going pay for this stuff? Yeah, yeah. Like every single young person when they see their first paycheck, you watch, but he was that. Yeah, that's your tax, honey. Anyway, I don't know how sure you've got all these things that happened to you. You know, I think you've just been listening to me for 20 years now, you know? Finally getting there. No wiser just with better influences. Is this what you're saying?

17:12Maybe, maybe. Anyway, you were worried in particular about France this week, right? I mean, don't worry. It was so like, gazing with curiosity across the channel. Okay, fine. I mean, yeah, I mean, that is interesting, because France, obviously, in many ways, actually, France is in more state than the UK. And probably the two main things that I've kept, it's yields lower than Britain's, it's because inflation's lower than the Eurozone. And also, France is underwritten by the German taxpayer via the European Central Bank in the way that Britain isn't. But yeah, but it's the kind of the price for France borrowing over 10 years has blown out to more than a percentage point over the cost for Germany. So the spread has got a bit bigger. And this is the first time this spread has been above 1% for a thing since 2012. And it's just saying that markets have started to actually get genuinely concerned about France because obviously there's a big election next year.

18:14None of the parties there are keenly caught spending either. And in fact, the far left guy is saying, why don't we just bomb all the debt that the Bank of France holds? So which is equivalent to the Bank of England saying, see how these boys we've been selling in QT? We're just going to set fire to them. And we're not going to worry about that. And with that to be honest, I'm just moving deck chairs around right? No, it's not moving deck chairs around if you actually just destroy the debt because that's just that's basically monetization. And also in top of that, that would blow up the yield. It's coming anyway. You know, the great. So we made the great global demaluation. It's on the way. So we might as well just burn everything. You can't do it more subtly than that. OK, I don't think I'm up to the job of these podcasts anymore. Turning into a real hell of a government debt levels. You should go and stand for election. And I should be talking about it.

19:14Stand for election. And your local constituency never made friends. And you probably get a few votes for that. I don't know. I made many friends. Look, that's what someone pointed out to me today that if you look at how much UK government is, it's roughly the same as the total revenues of the Mag 7, a GDP and a debt, which are basically the same thing, are also roughly the same as the revenues of the Mag 7. It is so humiliating. But it is. It is. And I can see my people said, and see attacks the Belly and the Aussbet. None of those Belly and the Aussbet actually live in this country. No, sorry, that doesn't happen. That doesn't happen. The last thing I wanted to point out this week is that, OK, so we're worried about the markets. We're worried about AI. We're worried about breadth. I am. You're not. We're worried about public debt. We're worried about global devaluations. We're worried about fear, currencies. And at the same time, you saw the numbers out from the World Gold Council this week pointing out

20:16that China is back in the market big time. Spent 158 billion on gold so far this year, which is way more than last year. And they're also producing quite a lot of gold themselves nearly 400 tons this year. And they're carrying back their holdings of US Treasury. It's just signals. These are just signals. Well, I think the China thing is important. I was talking to somebody yesterday and just pointing to the obviously gold used to have a genuine place and they're kind of global monetary system. And if you did want to internationalize the yuan, then the very obvious way to present it is being a parallel system to the US dollar system for countries that would rather run on Linux rather than Windows. Then having a yuan back by gold is actually a pretty good way to do it and make it if you're like a feasible alternative to the dollar. Excellent. Thank you, John. There's no better way to finish this podcast than with a minor conspiracy theory.

21:20Thanks for listening to this week's Merrin Talks Many Market's Wrap. If you like our show, rate, review and subscribe wherever you listen to podcasts. Also be sure to follow me and John on ex at Merrin.w and John underscore topic. This episode is produced by Samus Adium and questions are comments in this show and all our shows are always welcome. I'll show email it Merrin Money at Bloomberg.net and there's not a minor conspiracy theory, by the way. It's entirely possible. At Edward Jones, we believe Rich is more than caring about the latest and greatest. It's also taking care of what gives your life meaning. That's why your dedicated financial advisor meets you where you are with personalized financial strategies that help protect what matters so you can preserve your progress while creating a path forward. The key to being rich is knowing what counts.

22:22Let's find your rich together. Edward Jones, member SIPC. Healthcare doesn't always work great. If you've ever waited on a refill or couldn't schedule an appointment, you get it. That's the kind of stuff Optum is changing. They're using data and technology to integrate patient care, pharmacy and everything else. So healthcare is connected, not complicated. What's that look like? Cheaper prescriptions that are easier to get and care that looks at the whole person. How you need it. Optum is helping make healthcare work as one for everyone. Learn more at business.optum.com Dog grooming genius here. Most people see a busy dog salon, but I see operational excellence. Thanks to genius from global payments. Scheduling, personalized. Checkouts, instant. Absolutely genius. From game day crowds to every groomer in this shop, genius keeps everything flowing seamlessly. Schnowser-style. Flawless execution.

23:22Big league reliability for any business. That's genius. This is Robert Smith from Business History. If you're listening to this, there's a good chance you're a small business owner. And like every small business owner you started with a dream. To do what you love and watch it grow. What you probably didn't dream about, keeping up with cyber threats. That's where MasterCard can help. With access to tools that help identify cyber threats to better protect your business. Building a dream business, priceless. For cyber security in a changing world, there's MasterCard. Learn more at mastercard.com slash small business.