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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: Welcome to the Daybreak Asia podcast. I'm Doug Krisner. Tensions

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Speaker 2: over trade between the US and China seemed to soften

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Speaker 2: a bit during the last session. Both sides signaled over

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Speaker 2: the weekend a willingness to keep negotiations alive after each

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Speaker 2: made a series of threats. Now, President Trump talked about

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Speaker 2: an increase in tariffs on Chinese imports to one hundred percent.

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Speaker 2: He seemed to be reacting to new Chinese restrictions on

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Speaker 2: the export of rare earth minerals. The timing was very interesting,

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Speaker 2: since the trade data from China for the month of

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Speaker 2: September blue past estimates. On Monday, Beijing reported outbound shipments

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Speaker 2: rose eight point three percent. That's the fastest pace in

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Speaker 2: six months, a total value of three hundred and twenty

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Speaker 2: eight point six billion US dollars. Later in the day,

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Speaker 2: we heard from Treasury Secretary Scott Bessant. Now he was

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Speaker 2: saying all options are open for the US to retaliate

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Speaker 2: against China's moved to titan exports on rare earths. Here's

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Speaker 2: best in speaking to Fox Business.

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Speaker 3: Here in the US, we have an all hands on

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Speaker 3: deck policy This is something that we didn't get here

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Speaker 3: in a day. This has been the failure of previous

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Speaker 3: administrations over decades not to see this strategic hole.

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Speaker 2: That was US Treasury Secretary Scott Besson speaking to Fox Business.

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Speaker 2: For more on the latest between the US and China

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Speaker 2: in terms of trade, we heard from James Aitken of

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Speaker 2: Aitken Advisors. He spoke with Bloomberg's Paul Allen at the

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Speaker 2: ANZ Investment Conference in Sydney.

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Speaker 4: The last few days I have really been fascinating, and

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Speaker 4: it's perfect timing to have you walk us through it,

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Speaker 4: because it's just given us another example of how markets

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Speaker 4: can be so suddenly uphanded by rhetoric and changes in

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Speaker 4: trade policy. And we've also seen a re emphasis of

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Speaker 4: the so called taco tradeump Trump always chickens out, but

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Speaker 4: you want to give us another acronym to be careful

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Speaker 4: of them. That's the FAFO trade. Do people need to

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Speaker 4: be careful? Can you always rely on that taco trade?

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Speaker 5: Yeah?

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Speaker 6: I think that's a great place to start.

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Speaker 7: I mean, look, we've had a bit of FAFO, We've

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Speaker 7: had a lot of taco and certainly, let's be clear,

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Speaker 7: the market is betting once again that this is another

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Speaker 7: Taco episode.

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Speaker 6: I'm not so sure. But before we.

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Speaker 7: Think about the path ahead, let's think about the conditions

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Speaker 7: that prevailed as recently as the middle of last week.

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Speaker 7: So unsurprisingly, people were all in, Systematic investors were all in.

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Speaker 7: Everyone was all in and levered long equities, which makes

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Speaker 7: a lot of sense. It's the right thing to do.

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Speaker 7: But Wednesday last week, per the Bloomberg terminal, ten day

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Speaker 7: realized correlation on the S and P five hundred fell

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Speaker 7: to zero, which is about as low as it can go.

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Speaker 7: Ten day implied correlation on the S and P five

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Speaker 7: hundred felt about five or.

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Speaker 6: Six, which is as low as it has been.

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Speaker 7: And the point I'd make is that the conditions, the

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Speaker 7: initial conditions ahead of Thursday Friday last week, were already

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Speaker 7: very stretched. It didn't particularly matter what might come up

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Speaker 7: to disrupt that. But we were primed for some kind

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Speaker 7: of disruption, and of course it got knocked over by

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Speaker 7: resumption of the Rarest contest, which is what it is.

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Speaker 7: And look, I know it sounds a little bit dramatic

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Speaker 7: that we have been in the Rarest cold war now

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Speaker 7: for a long long time. It's just that it's only

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Speaker 7: burst to the surface and what we're seeing of late

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Speaker 7: is a taste of what's to come.

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Speaker 4: How do you see this situation evolving? Because we heard

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Speaker 4: from JP Morgan today it's going to funnel another one

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Speaker 4: and a half trillion into that rare earth sector, and

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Speaker 4: Jamie diamond saying, look, this isn't charity, this is just

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Speaker 4: a sense of a move. So is this an opportunity

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Speaker 4: here or is it more as you've sort of referred

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Speaker 4: to with the FAFO chance to damage limitation.

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Speaker 7: Let's differentiate markets. Want to bet that there's a dip,

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Speaker 7: you buy, the party resumes. Okay, that's a path. But

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Speaker 7: what we're actually seeing and whisper it is that everything

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Speaker 7: has been subjugated to national security, which I'd argue was.

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Speaker 6: Long over due.

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Speaker 7: So all this debate which you've talked about about inflation

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Speaker 7: targets independence, Look, if.

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Speaker 6: It's all about national.

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Speaker 7: Security, which I think it should be, then everything is

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Speaker 7: subjugated by that. So inflation targets are important, But we've

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Speaker 7: got a whole bunch of investments we need to make

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Speaker 7: to make ourselves more resilience across the West, more.

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Speaker 6: Resilient even and that's barely started.

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Speaker 7: So yes, it's an opportunity for all sorts of investors

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Speaker 7: to participate.

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Speaker 6: And let's call it a national security rebuild. It's long overdue.

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Speaker 7: It starts first and foremost with critical minerals and rare

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Speaker 7: earth in Australia has plenty.

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Speaker 6: Of those, but it's more broader than that. It expands

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Speaker 6: the supply chains.

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Speaker 7: And I think what Jamie Diamond announced yesterday is commendable

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Speaker 7: and extreme, and I think it's a taste of what's

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Speaker 7: to come now.

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Speaker 4: You mentioned a moment ago a number of S and

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Speaker 4: P metrics that suggested what happens now is predictable. However,

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Speaker 4: the only metric that it really matters to investors as well.

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Speaker 4: We saw it again this morning, the S ANDP hitting

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Speaker 4: a level that we haven't seen since May. So that

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Speaker 4: he just keeps on rolling on. But are you seeing

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Speaker 4: any warning signs longer term that that could come undone?

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Speaker 4: Because typically don't any of us stop it as a recession.

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Speaker 4: But is there anything else you're watching it now?

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Speaker 7: You're right at a headline level, a happy clappy, let's

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Speaker 7: muddle through, let's continue to play the game, absolutely right,

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Speaker 7: and that's.

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Speaker 6: The implied bet of the market.

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Speaker 7: But you dig beneath the surface or under the hood,

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Speaker 7: and you see absolute turmoil. We've just had one of

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Speaker 7: the biggest factor smash ups in a long long time.

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Speaker 7: Shades of the game stopped Debarcle in twenty twenty one.

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Speaker 7: So on the surface it looks serene and calm and

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Speaker 7: the game rumbles on. But under the surface it's been

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Speaker 7: massively disruptive and unsurprisingly, anytime correlations rise and realize volatility rises,

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Speaker 7: that's very difficult for the leverage market participant. And regrettably,

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Speaker 7: there was an awful lot of damage across an awful

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Speaker 7: lot of risk taking silos on Friday. And again, as

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Speaker 7: much as the sentiment is let's put the party back on,

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Speaker 7: up we go again, I think risk appetite is going

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Speaker 7: to be fairly.

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Speaker 6: Subdued for a little while to come.

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Speaker 4: It feels like a good moment to ask you what

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Speaker 4: the Rallian gold prices means to you and can it continue?

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Speaker 7: Look, I'd love to give you a really clever answer. Frankly,

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Speaker 7: I don't know. All I can see is walking down

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Speaker 7: Martin Place is people queuing up.

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Speaker 6: Outside the gold bullion shop.

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Speaker 7: Now I don't know if they're buyers or sellers, but

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Speaker 7: there's clearly something going on. Look, I'm watching it with interest.

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Speaker 7: I'm watching it in the context of a broader rally

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Speaker 7: in commodities. Historically, if gold did something like this, Paul,

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Speaker 7: you would have said, I'll watch out the dollars going

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Speaker 7: to go down as well. But so far as we

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Speaker 7: can see the dollars holding in, so I view gold

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Speaker 7: as a special situation. It's interesting in the recent past

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Speaker 7: that implied volatility on gold has started to shoot up

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Speaker 7: as well, which hasn't happened for a while, maybe suggesting

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Speaker 7: this gold rally is a little bit long in the tooth,

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Speaker 7: But look to state the obvious, it's very.

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Speaker 6: Difficult to sell well.

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Speaker 4: Of course gold price in US dollars as well, and

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Speaker 4: we've seen the US dollar gaining in the Bloomberg dollar

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Speaker 4: spot in decks about one and a half percent take

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Speaker 4: on month. But considering the trade tension, the rolling government shutdown,

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Speaker 4: FED easing, ballooning US debth Ai bubble risk, what's driving

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Speaker 4: dollar strength right now and going to last inertia?

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Speaker 6: What's driving it is inertia.

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Speaker 7: But there's two big decisions that global save as global

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Speaker 7: investors have had to make in twenty twenty five and

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Speaker 7: probably twenty six and beyond. It's like A what do

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Speaker 7: I do with my underlying US dollar asset exposure, private

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Speaker 7: credit equities and so forth?

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Speaker 6: B what do I do about the dollar? And these

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Speaker 6: large pools of capital.

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Speaker 7: Can move money around, but no market offers the capacity

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Speaker 7: that the United States does.

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Speaker 6: Across a range of instruments.

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Speaker 7: And you remember, ten years ago the world made a

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Speaker 7: very smart bet. Collectively, the world went overweight unheedged US

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Speaker 7: assets and equities in particular. It worked really, really well,

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Speaker 7: which means the bar to changing that allocation is very high.

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Speaker 7: There was a big test of that in February, March

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Speaker 7: and April, as we all recall. But again, those cumultive

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Speaker 7: gains are so large that there's this inertia that drives

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Speaker 7: strategic asset allocation around the world.

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Speaker 6: So are people nervous, apprehensive?

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Speaker 7: Absolutely, are there some conversations around town about how should

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Speaker 7: we think about dollar hedging and everything else? Absolutely, the

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Speaker 7: buy and large so good has been the performance of

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Speaker 7: the underlying asset exposure that people have decided that they

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Speaker 7: take the option of waiting and seeing, and that I

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Speaker 7: think explains a large part of the dollar resilience. So

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Speaker 7: the fast money ducks and wheeds through fire exchange markers.

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Speaker 7: The really big money is just sitting back and watching

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Speaker 7: and enjoying their enormous cumulative rolled up games.

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Speaker 2: That's James Aken of Aitken Advisor speaking with Bloomberg's Paul Allen.

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Speaker 2: In the States, the equity market advanced thanks to a

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Speaker 2: rally among chip stocks. Coming up, we'll look at the

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Speaker 2: market with Matthew Tuttle of Tuttle Capital Management here on

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Speaker 2: the Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast.

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Speaker 2: I'm Doug Chrisner. Semiconductor stocks grabbed the spotlight in the

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Speaker 2: US session. That was after open Ai agreed to buy

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Speaker 2: custom chips and networking equipment from Broadcom in a multi

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Speaker 2: year agreement. Shares in Broadcom rallied nearly ten percent. Joining

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Speaker 2: me now for a closer look is Matthew Tuttle. He

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Speaker 2: is the CEO also CIO at Tuttle Capital Management. Matthew

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Speaker 2: is on the line from Greenwich, Connecticut. Thanks for making

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Speaker 2: time to chat with me. I'd like to begin by

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Speaker 2: asking you, in relation to this open Ai Broadcom deal,

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Speaker 2: whether it feels a little like late cycle to you?

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Speaker 1: It does?

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Speaker 5: I mean, I definitely think that you want to be

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Speaker 5: in these AI stocks. I do think we're late in

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Speaker 5: the cycle, but that doesn't mean that there still aren't

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Speaker 5: a lot more gains to come. I think you've just

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Speaker 5: got to be You've got to be careful with it.

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Speaker 5: You've got to be cognizant of the fact that we

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Speaker 5: are probably in a bubble. At some point bubble it's

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Speaker 5: going to burst, but you know that could be a

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Speaker 5: year from now, two years from now, three years from now.

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Speaker 5: So until then, we tell people trade based on what

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Speaker 5: you see and what you see as these AI stocks

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Speaker 5: go up and you want to be buying the dips

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Speaker 5: like Friday.

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Speaker 2: So in terms of what we're going to be hearing

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Speaker 2: from these companies, the hyperscalers, everybody in that space that

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Speaker 2: begins reporting third quarter numbers, is it really the cap

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Speaker 2: X figure that's most important to you?

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Speaker 1: That is going to be huge.

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Speaker 5: As long as that spending spigot is continues to be

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Speaker 5: wide open, then we think you've got to be buying

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Speaker 5: this market.

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Speaker 1: You know, the second that people have kind.

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Speaker 5: Of that where's the beef moment where they're wondering, weave,

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Speaker 5: you know, how are we going to make money off

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Speaker 5: of all of this spending? That's when this starts to unravel,

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Speaker 5: and you know, you've just got to be hyper villaging,

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Speaker 5: hypervillaging on all these earnings and what the CEOs are saying,

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Speaker 5: and watch for signs of that.

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Speaker 2: Let's turn our attention to the other earnings that we're

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Speaker 2: going to be getting tomorrow. Will hear from some of

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Speaker 2: the big banks, including JP Morgan The stock was up

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Speaker 2: today by more than two percent. A lot of focus

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Speaker 2: here on trading revenue, on fees from investment banking. Broadly speaking,

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Speaker 2: will the big banks deliver pretty strong quarterly results?

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Speaker 1: You know, I think they'll deliver decent results.

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Speaker 5: I'm not a big fan of the banks, you know,

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Speaker 5: I think this market has become completely thematic, and I

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Speaker 5: really think you want to stick with a lot of

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Speaker 5: these top themes. You know, we did see you know, Friday, Yeah,

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Speaker 5: big sell off, but coming into Friday, you saw a

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Speaker 5: lot of sectors that had really kind of turned and

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Speaker 5: we're looking wobbily even before that. So I would personally

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Speaker 5: just focus on on these bigger themes. But I mean,

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Speaker 5: I think the banks are going to be okay. It's

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Speaker 5: just it's not an area that's of interest us in.

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Speaker 2: Terms of themes that would impact the banks. I would

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Speaker 2: imagine FED rate cuts are a part of that story.

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Speaker 2: Anna Paulson today, the head of the Philly FED, was

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Speaker 2: essentially indicating two more quarter point rate cuts are called

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Speaker 2: for this year. She's very much focused on the risk

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Speaker 2: to the labor market. Is the FED at risk of

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Speaker 2: maybe ignoring the inflationary pressures that still are above target

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Speaker 2: and they seem to be persistent.

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Speaker 5: Yeah, I mean, you know, the FED, I in my opinion,

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Speaker 5: has gotten a lot wrong over the past couple of years,

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Speaker 5: and you know, and they do run the risk of

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Speaker 5: you know, kind of miss missing inflation like they did

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Speaker 5: the last time. You know.

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Speaker 1: Right now, all the market cares about is they're running

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Speaker 1: it hot.

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Speaker 5: And you know, so AI cap X to me is

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Speaker 5: number one. FED continuing to cut rates and run it

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Speaker 5: hot short term is number two.

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Speaker 6: You know.

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Speaker 5: Again, another risk to this market is if we end

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Speaker 5: up in some sort of stagflation environment, that's.

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Speaker 1: Not going to be good.

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Speaker 2: So late in the day Monday, New York time, we

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Speaker 2: had the price of silver jumping to an all time

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Speaker 2: high fifty two fifty announce. When you look at the

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Speaker 2: price section and not only silver but gold, what do

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Speaker 2: you come away with? What's your take on this.

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Speaker 1: It's it's the debasement trade.

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Speaker 5: You know, it's people moving out of fiat currency, and

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Speaker 5: it's you know, it's related to crypto. You know, Crypto's

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Speaker 5: got its own little unique things to it. And you

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Speaker 5: saw kind of that selloff Friday and a little bit

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Speaker 5: over the weekend. But it's really at the end of

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Speaker 5: the day, it's the same trade. It's people, you know,

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Speaker 5: losing faith in the central banks all of the debt

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Speaker 5: and getting out of fiat currency into you know, the

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Speaker 5: alternative currencies.

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Speaker 2: One of the things that we need to talk about

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Speaker 2: the trade relationship between the US and China. Over the

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Speaker 2: last couple of trading days, things were on the hot

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Speaker 2: side rhetorically. Mike Wilson from Morgan Stanley is the chief

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Speaker 2: US equity strategist, was saying that there could be a

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Speaker 2: larger than expected correction in US equities if Presidents Trump

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Speaker 2: and Chief failed to resolve their escalating trade tensions.

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Speaker 6: Do you agree with that?

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Speaker 2: Is the trade story being largely ignored by the market

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Speaker 2: right now.

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Speaker 5: So to me, the trade story is kind of a sideline.

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Speaker 5: You know, could there be a correction, There could, but

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Speaker 5: to me that that becomes a buying opportunity as long

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Speaker 5: as AI cap X spending is chumming along, and as

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Speaker 5: long as the FED is accommodative. You know, I think

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Speaker 5: Trump has shown you this playbook. And you know we

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Speaker 5: believe in taco. You know, Trump always chickens out until

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Speaker 5: proven otherwise.

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Speaker 2: Were you finding value in USA equities right now?

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Speaker 5: Value is a tough one, not a lot of places,

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Speaker 5: you know, you really when you're buying these themes. And

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Speaker 5: I'm really I'm a fan of all the AI infrastructure.

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Speaker 5: I'm a fan of space. I'm a fan of drones.

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Speaker 5: I'm a fan of anything kind of rare earth. And

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Speaker 5: then you know, I love gold and I love crypto,

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Speaker 5: But value, I mean, you've really got to hold your

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Speaker 5: nose and say look for right now and eventually valuations matter.

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Speaker 5: But for right now, you know, in this market, you know,

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Speaker 5: valuations don't matter a lot.

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Speaker 2: I'm thinking about the power that's required to drive this

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Speaker 2: data center compute. Maybe away from the utility companies and

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Speaker 2: the power producers, think about the companies that actually produce

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Speaker 2: the turbans that create the electricity. Is that is that

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Speaker 2: an attractive trade to you?

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Speaker 5: That's an attractive trade to us? You know, the ge Vernova.

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Speaker 5: You know, it's really all of you know, the cooling,

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Speaker 5: you know, natural gas. There's just so much to this

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Speaker 5: AI trade. And then you can even take it to

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Speaker 5: the third order. Who's going to build the data centers,

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Speaker 5: who's going to provide those materials?

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Speaker 1: You know, there's just so much in there.

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Speaker 5: Again, which is why something like banks, when I've got

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Speaker 5: such a target rich environment, I'm just not interested in

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Speaker 5: the banks.

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Speaker 2: Okay, fair enough. But if you had to look at

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Speaker 2: a tech industry away from artificial intelligence, something away from

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Speaker 2: let's call it a pure play on semiconductors, something we

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Speaker 2: don't often discuss, such as robotics, I'm wondering whether robotics

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Speaker 2: is an area that interests you at all.

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Speaker 1: Robotics is huge.

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Speaker 5: My number one that people don't talk about is space,

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Speaker 5: and you know, and that's that's a ways out, but

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Speaker 5: there is so you know, for example, there are things

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Speaker 5: that you manufacture on Earth that gravity messes up that

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Speaker 5: can be done in space. I think eventually we're going

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Speaker 5: to have a whole infrastructure which is going to require

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Speaker 5: defending it, transporting things back and forth, building these satellites.

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Speaker 1: Or whatever we have up there. That's really interesting to me.

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Speaker 5: That would be my number one kind of out there

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Speaker 5: that you're not talking about.

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Speaker 1: Robotics would be number two.

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Speaker 2: We'll leave it there, Thank you so much. Matthew Tuttle

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Speaker 2: is the CEO also the CIO at Tuttle Capital Management.

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Speaker 2: On the line from Greenwich, Connecticut here on the Daybreak

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Speaker 2: Asia Podcast. Thanks for listening to today's episode of the

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Speaker 2: Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at

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Speaker 2: the story shaping markets, finance, and geopolitics in the Asia Pacific.

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Speaker 2: You can find us on Apple, Spotify, the Bloomberg Podcast

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Speaker 2: YouTube channel, or anywhere else you listen. Join us again

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Speaker 2: tomorrow for inside on the market moves from Hong Kong

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