1 00:00:00,160 --> 00:00:01,520 Speaker 1: Whatever DUPERZL. 2 00:00:01,720 --> 00:00:04,080 Speaker 2: Now, after the market turmoil of the past week, the 3 00:00:04,160 --> 00:00:06,520 Speaker 2: question of courses, has the bubble burst or have we 4 00:00:06,519 --> 00:00:07,960 Speaker 2: still got a little bit of a way to go here? 5 00:00:08,039 --> 00:00:12,360 Speaker 2: Sam Dickey from Fisher Funds is with me. Now, Hey Sam, Heather, Sam, 6 00:00:12,400 --> 00:00:14,280 Speaker 2: am I right, but you were just warning about all 7 00:00:14,320 --> 00:00:16,680 Speaker 2: this stuff the other day and then it's happened. 8 00:00:18,280 --> 00:00:20,160 Speaker 1: I'm not sure about warning, but you and I were 9 00:00:20,160 --> 00:00:21,840 Speaker 1: certainly talking about Heather, Yes. 10 00:00:21,760 --> 00:00:25,200 Speaker 2: Yeah, okay. So the specific risks that have led to 11 00:00:25,239 --> 00:00:26,520 Speaker 2: the point that we're at, what are they? 12 00:00:27,920 --> 00:00:31,800 Speaker 1: Yes, outside of the unlined of the giant Japanese carry trade, 13 00:00:31,800 --> 00:00:34,920 Speaker 1: which in plain English means borrowing at near zero present 14 00:00:34,960 --> 00:00:36,879 Speaker 1: in Japanese un and using that money to invest in 15 00:00:37,440 --> 00:00:39,400 Speaker 1: risky assets around the world. Outside of that, there were 16 00:00:39,920 --> 00:00:42,120 Speaker 1: two other things happening which caused a third to happen, 17 00:00:42,240 --> 00:00:45,279 Speaker 1: so the US economic growth risk. The market was far 18 00:00:45,360 --> 00:00:49,280 Speaker 1: too complacent about what investors call a soft economic landing. 19 00:00:49,360 --> 00:00:52,840 Speaker 1: So despite the sharpest rate high cycle bi central banks 20 00:00:52,840 --> 00:00:55,920 Speaker 1: in forty years, the US economy was expected to sail 21 00:00:55,960 --> 00:00:58,240 Speaker 1: through and that came unstuck. And then there was the 22 00:00:58,280 --> 00:01:02,200 Speaker 1: AAAI Hyphe press can remember that. One number to remember 23 00:01:02,320 --> 00:01:05,520 Speaker 1: ten trillion dollars. So we add up half a dozen 24 00:01:06,400 --> 00:01:10,160 Speaker 1: of the AI darlings, and their market capitalization or valuations 25 00:01:10,160 --> 00:01:13,000 Speaker 1: had gone up by over ten trillion dollars in the 26 00:01:13,040 --> 00:01:15,480 Speaker 1: last twenty months or so. But on the ground, the 27 00:01:15,560 --> 00:01:18,280 Speaker 1: reality was you and I were not prepared to pay 28 00:01:18,319 --> 00:01:20,880 Speaker 1: for that. There was no AI use case out there 29 00:01:20,920 --> 00:01:23,520 Speaker 1: headed that really caught our fancy. So there was this 30 00:01:23,600 --> 00:01:27,080 Speaker 1: huge yawning gap between the hype and the reality. So 31 00:01:27,160 --> 00:01:31,440 Speaker 1: those two things caused the market. A third thing to 32 00:01:31,480 --> 00:01:33,760 Speaker 1: happen that the market was being driven by a very 33 00:01:33,800 --> 00:01:37,760 Speaker 1: few stocks, So that's a sort of unhealthily narrow rally, 34 00:01:37,880 --> 00:01:40,319 Speaker 1: so that those were the four risks that kind of 35 00:01:40,319 --> 00:01:41,479 Speaker 1: became unstuck all at once. 36 00:01:41,760 --> 00:01:44,839 Speaker 2: I see that the JP Morgan analysts reckon that, especially 37 00:01:44,920 --> 00:01:48,080 Speaker 2: with regards to the carry trade. We're only about halfway 38 00:01:48,120 --> 00:01:50,240 Speaker 2: through that turmoil. What do you think, I mean, can 39 00:01:50,320 --> 00:01:53,440 Speaker 2: you tell whether we're still seeing this happen or whether 40 00:01:53,480 --> 00:01:54,400 Speaker 2: it's already done. 41 00:01:55,680 --> 00:01:57,360 Speaker 1: There's a lot of thought gone on to that around 42 00:01:57,360 --> 00:02:00,880 Speaker 1: the world. My thought with these things is, you know this, 43 00:02:01,840 --> 00:02:04,560 Speaker 1: the seeds for this was sowed back in the nineteen 44 00:02:04,600 --> 00:02:07,760 Speaker 1: eighties in Japan. I'm not saying they've been building for 45 00:02:07,800 --> 00:02:10,240 Speaker 1: that long, but really that's where the seeds were. So 46 00:02:10,400 --> 00:02:12,640 Speaker 1: when the bubble burst, and we took sort of thirty 47 00:02:12,760 --> 00:02:18,160 Speaker 1: years of anemic growth and anemic inflation, you know, driven 48 00:02:18,160 --> 00:02:20,160 Speaker 1: by the scar tissue of the bursting of that bubble 49 00:02:20,480 --> 00:02:24,200 Speaker 1: and a shrinking and aging population in Japan, and you know, 50 00:02:24,240 --> 00:02:28,520 Speaker 1: the Japanese government and the boj is being desperate to 51 00:02:28,560 --> 00:02:32,880 Speaker 1: manufacture inflation, and finally they got an opportunity to piggyback 52 00:02:32,919 --> 00:02:36,040 Speaker 1: on a once in forty years spike in global inflation. 53 00:02:36,120 --> 00:02:37,880 Speaker 1: But they were just kind of a day late and 54 00:02:37,919 --> 00:02:40,600 Speaker 1: a dollar short. So I do think when these things 55 00:02:40,600 --> 00:02:45,200 Speaker 1: have been building for months and months, if not years, 56 00:02:45,880 --> 00:02:48,640 Speaker 1: they're not going to unwind and sort of forty eight hours, 57 00:02:48,639 --> 00:02:50,639 Speaker 1: So I guess I agree with that long way of saying, 58 00:02:50,639 --> 00:02:52,800 Speaker 1: I agree with the Japanese Joping Morman analysts. 59 00:02:52,919 --> 00:02:55,560 Speaker 2: Interesting, okay, So I mean, what do we take out 60 00:02:55,560 --> 00:02:57,639 Speaker 2: of this if we're investors? 61 00:02:58,240 --> 00:03:00,679 Speaker 1: Well, four days of a lifetime markets, but quite a 62 00:03:00,720 --> 00:03:02,679 Speaker 1: few things have changed in each of those three or 63 00:03:02,680 --> 00:03:07,760 Speaker 1: four risks, so on new its economic growth expectations. The 64 00:03:07,760 --> 00:03:10,560 Speaker 1: good news is the markets expecting the Federal Reserve to 65 00:03:11,360 --> 00:03:15,440 Speaker 1: know the ca cavalry to arrive. So the market was 66 00:03:15,480 --> 00:03:17,359 Speaker 1: pricing two rate caps by the end of the year 67 00:03:17,840 --> 00:03:20,600 Speaker 1: literally seven days ago, and now it's pricing five rate 68 00:03:20,639 --> 00:03:23,480 Speaker 1: cuts and nothing happens in a vacuum. You know, New 69 00:03:23,520 --> 00:03:26,239 Speaker 1: Zealand's now pricing another rate cut or two by the 70 00:03:26,320 --> 00:03:28,760 Speaker 1: end of the year as well. And in equity markets, 71 00:03:28,760 --> 00:03:31,919 Speaker 1: we've seen the frost blown out and economically sensitive stocks 72 00:03:32,639 --> 00:03:35,160 Speaker 1: down a lot more. So that's good news. That's at 73 00:03:35,240 --> 00:03:39,440 Speaker 1: least partially getting priced in on the AI bubble. You know, 74 00:03:39,480 --> 00:03:41,520 Speaker 1: in the last week or so, we've seen the big 75 00:03:41,560 --> 00:03:43,800 Speaker 1: tech companies come out with the results and they continue 76 00:03:43,840 --> 00:03:47,440 Speaker 1: to weigh and then plow more money into AI hardware 77 00:03:47,480 --> 00:03:50,640 Speaker 1: like in videos, computer chips. But the market's lost patients. 78 00:03:50,640 --> 00:03:54,560 Speaker 1: They're not prepared to allow them to continue plowing money 79 00:03:54,600 --> 00:03:59,000 Speaker 1: into this I guess this AI experiment with no revenue 80 00:03:59,040 --> 00:04:01,520 Speaker 1: at the other side. So the good news is the 81 00:04:01,560 --> 00:04:05,080 Speaker 1: market is forcing these companies to become more prudent and 82 00:04:05,240 --> 00:04:10,000 Speaker 1: drive an obvious return on invested capital. So that yawning 83 00:04:10,080 --> 00:04:12,400 Speaker 1: gap I talked about between kind of the hype and 84 00:04:12,440 --> 00:04:14,880 Speaker 1: the capex that's going in there and the reality of 85 00:04:14,920 --> 00:04:16,360 Speaker 1: the fact you and I are not prepared to pay 86 00:04:16,400 --> 00:04:18,839 Speaker 1: for this year. Here there is still there. But the 87 00:04:18,880 --> 00:04:21,120 Speaker 1: good news is we've seen some of these AI darlings 88 00:04:21,200 --> 00:04:27,359 Speaker 1: correct hard. So super Micro Computer, which builds liquid cooling 89 00:04:27,440 --> 00:04:30,640 Speaker 1: systems for these very hot and video chips, has down 90 00:04:30,720 --> 00:04:33,440 Speaker 1: twenty five percent of last week. And on the unwind 91 00:04:33,480 --> 00:04:37,800 Speaker 1: of the giant carry trade Japanese carry trade, the deputy 92 00:04:37,880 --> 00:04:40,720 Speaker 1: governor of the boj almost came out and corrected as 93 00:04:41,160 --> 00:04:44,160 Speaker 1: the governor, and they said they've heard the market's message 94 00:04:44,200 --> 00:04:48,039 Speaker 1: loud and clear after the sharpest fall in the stock 95 00:04:48,080 --> 00:04:51,920 Speaker 1: market's history, and they said they wouldn't raise interest rates 96 00:04:51,920 --> 00:04:55,160 Speaker 1: anymore until the financial tumoli has calmed down. So we've 97 00:04:55,160 --> 00:04:57,600 Speaker 1: seen a stabilization there. So the good news is when 98 00:04:57,760 --> 00:05:00,760 Speaker 1: risk's on the front page of every newspaper around the world, 99 00:05:00,880 --> 00:05:02,480 Speaker 1: or at least on the front page of the business section, 100 00:05:02,760 --> 00:05:06,080 Speaker 1: we can rest asshuredage at least partially priced into assets 101 00:05:05,880 --> 00:05:07,200 Speaker 1: and stock markets. 102 00:05:07,240 --> 00:05:09,760 Speaker 2: Fascinating, really fascinating stuff. At the moment, ame. 103 00:05:10,320 --> 00:05:12,240 Speaker 1: Yeah, very fast. I was going to say. One last 104 00:05:12,240 --> 00:05:14,280 Speaker 1: thing is a really another good piece of good news 105 00:05:14,400 --> 00:05:18,080 Speaker 1: is owning a portfolio of stocks and bonds and using 106 00:05:18,080 --> 00:05:21,680 Speaker 1: the bonds and insurance is definitely working again after not 107 00:05:21,839 --> 00:05:25,080 Speaker 1: working during the kind of inflation spike of twenty twenty two. 108 00:05:25,160 --> 00:05:29,080 Speaker 1: So while equities fell sharply this week, your bond investments 109 00:05:29,120 --> 00:05:31,800 Speaker 1: went up sharply as insurance, so that is good news. 110 00:05:32,120 --> 00:05:34,479 Speaker 2: Thanks Wit Smart, Hey Sam, thank you very much, appreciate it. 111 00:05:34,480 --> 00:05:37,240 Speaker 2: As always, we'll talk to you soon. Sam Dickey Fisher Funds. 112 00:05:38,000 --> 00:05:41,160 Speaker 1: For more from Hither Duplessy Allen Drive. Listen live to 113 00:05:41,279 --> 00:05:44,320 Speaker 1: news talks it'd be from four pm weekdays, or follow 114 00:05:44,360 --> 00:05:46,120 Speaker 1: the podcast on iHeartRadio.