A bit too much perfection in the price?
25:31 Share

Welcome to the Saxo Market Call. Before we get started, it's important we emphasize that the views and opinions expressed in this podcast are those of the host and guests and do not constitute investment advice or recommendations. All information provided is for educational and entertainment purposes only.

Hey everyone, it is Friday 27th of June 2025 and we have U.S. equities with another strong session. S&P 500 teasing the all-time highs and Nasdaq 100 making a new record close. It's all getting a bit uncomfortable here to me with this market, where it's going. I don't know what sort of throws up a stop sign or a hurdle to what is going on here, but...

It increasingly looks like we're priced for a very nice form of perfection. I mean, there's a lot of uncertainty incoming. We have what is the shape of the trade deals? Could we have a sell-the-fact moment with the markets so complacent on what these trade deals finally look like and what they actually mean for the economy going forward? Could it be in the earnings season we start to see coming in, of course, mid-July when that's starting to crank into gear?

Do we have World War III in motion? I've got some thoughts on that, by the way. Iran-Israel, is this really the end of that chapter of what's going on in the Middle East? It's also end of quarter, if you want to get more immediate. That's on Monday. Just have a feeling. There's no real strong signs of divergence, I can point to. We had the last time around when we were teasing these –

And to add all-time highs back before the whole Liberation Day debacle, there were some nice signs of divergence that you could point to. And I think we did point to some of those, if I recall, in the podcast. Not really seeing much of that. I mean, I have mentioned the sort of lackluster Bitcoin market as one, you know,

One leading indicator. It's been a leading indicator at times, at least. It's not really firing. And Tesla as well. Ugly, ugly reversal there. It's a very popular specular area, but it is just a very specific story.

And then I mentioned Palantir yesterday. Another ugly candlestick today. We actually managed to, or the stock managed to hit a new high, but then a somewhat smaller shooting star candlestick. So a couple of ugly candles there. I don't know. I just think this is getting a bit overbaked. One thing that was not overbaked, though, was Nike shares overbaked.

I previewed those yesterday before the earnings report after the close. And you would think from the reaction with Nike up, I think it ended up after I was 9.5%, it was up as much as 11% at one point, that they shot the lights out. But that really wasn't the message in the earnings call. It was merely that the downdraft was less bad than expected, more like minus 12% on the revenue year-on-year rather than minus 15%.

And then outperforming in a number of categories, but still almost everything I saw. I couldn't find it. In fact, the whole rundown that I looked through, there was not a single positive in terms of absolute positive category year on year, but most of them, if not all of them.

Not all of them, but most of them were obviously less bad than expected. They had this so-called win-now set of actions and the CEO managing to guide Posit on that. And this is seen as the trough quarter for that company's performance. They'll still be at negative year-on-year levels in the next quarter. At least that's the anticipation. But maybe some more interesting product launches coming in with this Kim Kardashian product.

uh, collaboration, uh, and as well, the, the scale of the, uh, of the, of the drop-off should be lower. So, um, I saw some concerning signs on inventory reduction, et cetera, but, uh, it's just interesting to see the market reaction in itself. And, um,

Some of that could be options inspired. So interesting to see how that stock holds up or not today in the cash session with the options for Friday expiring. I was noting you have stuff like 130% implied volatility on options. That means that those that are in the money may want to capture the profits, etc.

By the way, I forgot to mention this is a full-service podcast, and we do have a slide deck today. You can find the link to the slide deck in the podcast description. For once, I actually put something on the cover slide. I got, as I mentioned yesterday, a Midjourney license, and I prompted it with futuristic Nike sneakers in lieu of Nike's earnings. A couple of the things it came up with actually looked like a plausible product. I guess it's got some pretty good –

Pretty good database of images to snag and scrape off of the internet to build these images. I've been pretty disappointed in my journey, if you will, with mid-journey. I think a lot of it is in the art of prompting.

And even some of the tutorials you run through, they come up with these images based on a simple prompt that I'm unable to achieve the quality of anything resembling what they've achieved with this. And I'm just wondering if they did a prompt a million times before they came up with this. Anyway, interesting to play with an actual paid version of some of this AI to see where it can take us and where it cannot take you in terms of creativity.

When you really sort of challenge it to just come up with something a bit more or a bit less straightforward than what you're seeing there in that Nike picture. Rolling forward, the key headlines here, one of them being very unspecific, but U.S. Commerce Secretary Lutnick claimed that the U.S. and China had essentially agreed or solidified whatever was agreed back in Geneva.

And that there will be 10 more or trade deals with 10 more of the major U.S. trading partners. Guess what time frame, folks? In the coming two weeks. But arguably that's plausible because of that July the 9th deadline from Liberation Day pause there. And as well, there's other indicators and other officials saying, yes, if negotiations are ongoing, we can slip past that date.

We did see the new all-time highs in equities, at least in the NASDAQ 100 for sure. VIX hitting a slight new low since February.

I covered the Nike there. Rate's not really doing much. Again, we saw with the Wall Street Journal exclusive on Trump potentially announcing somebody early. I think that was actually denied from the White House yesterday. So saw some of that rate reaction to that, this early nomination of the new Fed chair to replace Powell that crushed rates to new local lows here.

That eased off. On macro, we saw – I didn't note it here in the slide deck, but we saw another jobless claims – not another jobless claims. We saw – we get the weekly claims report. And this one was not as bad as the previous few. So it puts a little bit of doubt on are we in the newer area of higher claims, weekly claims data.

We'll need a few more weeks to find out. And there was a seasonal rise around this time of year for the past two years. So there could be some kind of seasonality effect that the seasonality adjustments, which are already in there, is not picking up on. So a bit of uncertainty on that. But it was the continuing claims that continue to flash amber with another high. I think it was 1.974 million, a new high for that data series, and it is a concern.

We've seen an extension of the dollar weakness. And then yesterday we saw that extension, but then it sort of unwound a little bit, but nothing that indicates that we're set at all for any sort of major dollar consolidation. So a weak dollar still remains a strong headline. On the metals front, I think very interesting, though, and I'll get to this. I've got some interesting charts for you there. But gold is really fizzling badly and looks even worse if you don't look at it versus the U.S. dollar.

Of course, if gold versus the dollar is weakening, you have a weak dollar. That means gold versus other currencies is looking weaker still. Looking forward to the next slide, earnings calendar. I mean, it is very – it's crickets out there. Next week for earnings, we only have Constellation Brands, a company that's pretty much on its knees in terms of the share price relative to the last few years.

Had some tremendous momentum, and I was really shocked to find out that they have the number one beer brand in the U.S. with Modelo, which was formerly not much of a brand at all. So well done there, but it looks like that tremendous growth they've seen in their dominant – what is dominant for them from a revenue perspective, and that is beer, that this growth pace they've seen since 2020 is going to be coming off well.

And it's a pretty flat forward outlook. So, of course, the share prices are down, but they're down for a reason there. Yes. And then let's talk a little bit of FX here. So quite a bit to talk about.

I decided to choose Aussie dollar rather than flashing the usual Eurodollar or dollar-yen chart. Dollar-yen has gotten a little bit boring because of the weak yen. So we have a weak dollar, a weak yen and a weak dollar at the same time. The yen hitting new lows, in fact, in some areas. Again, we're very near there, Euro-yen, et cetera. When you have this strong risk sentiment, even with the yields coming off a bit, it just weighs on the yen because of the carry trading.

And then on Aussie, it's kind of interesting because we continue to – or we've continued since May. So we've hit new highs since May. It was one, two, three, at least three times, arguably four times before this latest attempt at new highs above 65.40. And each time, it just sort of chops back down into the range but then doesn't really go into a proper sell-off either.

The recent one was the most significant sell-off testing, successfully surviving the zero spot 64 area in Aussie dollar. So I'm wondering what we really need here to stick this higher. I think one of the keys would be China sending a stronger signal on letting its currency strengthen more markedly versus the U.S. dollar. And I have the FX board showing the broad strength and weakness in currencies. And you can see that the Chinese renminbi just continues to

just continues to sort of track the direction of the U.S. dollar, even though the dollar-renminbi rate is towards the lows of the year. So there's that one, and maybe that's not needed, but that would certainly help. We have seen a copper price jump here recently. We'll get older to talk more about that on the podcast next week. And that's a support. Generally, the commodity support is needed there. But yeah, just a frustrating one for the Aussie bulls.

And elsewhere in FX, and I don't have charts here, but let's roll forward a little bit to slide six. So you can see the relative strength of the various currencies. Topping them off is the euro. That's a strong 4.8 reading.

On the trending strength and almost matching the weakness in the dollar at minus 4.6. And you can see the yen is just really struggling there with Swiss franc more or less following what's going on in the euro. And then you can see there the very noteworthy gold weakness. And I will just point out on the individual pairs that we have.

dollar yen not yet triggering on the trend to the downside. It needs another couple days of selling off to do so. But gold teetering after 120 days in a positive trend, according to our measure of how the trend is registered, is getting close to a negative flip. And if I roll back up to slide five, you can see that little insert there. I have the, on the FX board, I also follow the gold price versus other currencies and

And it's already slipping, today being the first day.

And many of these currencies flipping into a negative trend versus today specifically versus sterling versus the Naki versus a Kiwi and versus the Swedish Corona did so flip negative three days ago against the Euro and against the Swiss franc. And today at current prices, it would flip negative versus the Aussie cat and even the renminbi. So interesting developments there. What are the technical levels? Well, 3,300 is really critical area locally. That was the minor low there.

Yesterday when we came into the podcast, it looked like it was trying to rally and erase that sort of latest little extension lower. That failed and we're getting some follow through overnight. Quite interesting that happened in the Asian session. Also, sometimes the price action gets really dodgy on a Friday in gold. So just be aware of that.

Next levels, 3250 area. That was a minor low on the way up back in June, or sorry, earlier this month, I should say. And it's the 61.8% retracement of the latest little rally wave. So 3250 area, really important. If that's failing, the focus shifts lower to that bigger retracement level, the 3132 of the massive rally off the November lows.

And that is also near that low. It was actually slightly lower, $31.20. So in short, gold is tumbling, and especially when you look at gold versus other currencies, which I think is important to do when you're also seeing a weak dollar.

All right. And then I've put in slide seven, the calendar for the week forward. Today, we have the PCE inflation number. I have no, of course, directional sense of where this might be headed. It's expected to 0.1% month on month if there's a surprise there. To the downside, it could accelerate the dollar selling into the weekend. Probably more challenging for, of course, what's going on in the market right now would be a hot reading at the core. So

Be aware of the surprise risks there. If it's in line, of course, it's a non-factor. And then next week, really heating up on the U.S. data front with that jobs report towards the end of the week, but not on Friday because Friday is July the 4th. So it's on Thursday, actually, one thing to note for your calendar.

We'll be having a compressed week in terms of that first-of-the-month data. We normally get the ISMs early in the week, Tuesday and then Thursday, for the ISM services and all the child support stuff on Thursday.

We also get the last two important CPI readings out of Europe, the German one on Monday and the Eurozone one on Tuesday. And the ECB is hosting its Centra conference. A lot of central bank owners there, including Fed Chair Powell. So we can get some maybe statements from them. But again, I think it's elsewhere that this market is looking in this era of fiscal dominance. It can still move the currency markets day to day.

One currency I neglected to mention, and I think I'm trying to find reasons for its recent strength, and that's sterling. And I think part of this is anticipation that they're going to roll back some of these non-domicile tax rules that have seen a lot of wealthy people leaving the UK. And if they do so, that at least helps stem some of the bleeding, I think, that is there and a risk for sterling.

especially in periods of weak risk aversion. When you have strong twin deficits, budget, and trade, you need capital inflow. And capital inflow can also come from non-doms that you're not taxing and not scaring them out of the country. So I think that's an inevitability for the country, but interesting to see the timing there and the reactivity if they do finally announce something firm on that.

And then I've got a couple of things here. Actually, I have my appendix of must-reads and must-lists on slide 8, but I think I'll roll forward to slide 9. It's just something I came across when I was just trawling around for smaller stocks and seeing what had performed particularly well.

And one of those, or two of those, are stocks in a very interesting technology, LiDAR, so the sort of laser-based technology that allows, especially the application being for EVs, to sort of physically feel out the environment, when I say physically, using lasers rather than visual field cameras. And the technology is just really progressing by leaps and bounds. If you recall or have seen some of the old Waymo cars and other vehicles,

autonomous cars. You saw this giant rotating thing on the top of the cars. It looked like kind of an awkward thing that was shooting out lasers to feel the environment out. These are shrinking and shrinking fast, and they're becoming solid state-based, not based on sort of mechanically rotating things. And it sounds like within a year or two, we'll be talking about chips mounted, just tiny things. So you could have many of these on a vehicle. There is a ID Buzz, a Volkswagen EV that has them

I believe it was nine of them or something like that on its version or a collaborator's version of the IDBuzz for autonomous driving purposes. So in other words, there's a lot going on in the space. And it's interesting that this technology is not living with some established player, but startup companies that are actually listed, have been listed for a few years on the stock exchange. And there are a number of them elsewhere, but these are two American ones. And I've got the charts there on slide nine.

So there's one called Ouster. It is a company with around $144 million anticipated sales by the end of this year, market cap around $1.4 billion. And then you can see the chart there has gone from sub $7 to $26-ish in the space of a very compressed period of time, just a few weeks. Similarly, and even more spectacularly, is the move in IAVA, if that's how you pronounce it. I've got the stock tickers there on slide nine.

You know, from sub five bucks to what are we talking? Thirty thirty three dollars plus also in the space of maybe seven or eight weeks.

Or maybe more of that from the sub $5 area, but whatever. This one is smaller, but it seems to be getting more momentum. And I don't know the comparison in terms of which one leads the league. Market cap there is $1.8 billion on only $17 million of anticipated sales. So clearly these are priced either for spectacular growth that will be ramping, because if we are going to have autonomous vehicles, I suspect they will contain a heck of a lot of this technology.

whether it's from these players or elsewhere or otherwise, don't know, or they're priced for, of course, for some kind of a takeover so that some outfit could incorporate it into their product portfolio, anticipating this will be a huge growth market. These are not stock recommendations. Just thought it was an interesting couple of companies to profile.

All right, let's roll back to slide eight and the recommendations. A couple of interesting ones here. I'll start with the last one because I've not even listened to it. I just am bookmarking it and it could be of interest. It's Bob Elliott, formerly of Bridgewater,

I'm not much of a Ray Dalio fan, but it just sounded like the topic was quite interesting. How about the economy is going to be rewired and where inflation could come that may surprise folks and what it could mean for future market returns and the market structure could be very different going forward and corporate profitability levels. A very interesting and critical topic in this era of extremely concentrated markets and very, very high profit margins by historical standards.

And then we can go to the – we'll start from the bottom and go up. So the other one, and I've listened to most of this one, and it's rather scary to listen to. And we all need to take everything anyone says with a grain of salt. But particularly here, he's talking about an angle on Iran-Israel conflict that I had not thought about at all. And that was that basically they're running scarily low on the missile tech for Iran.

for their missiles to protect themselves from incoming missiles because they're sending so much off to Ukraine. And this was a preemptive strike on Iran to prevent their production of this kind of stuff. Um,

There's just all kinds of other interesting points in this podcast that he's making, pretty prominent points worth listening, worth considering as we try to figure out where this Iran-Israel situation and the Middle East in general are headed. And he talks about the broader picture as well.

And then if you're into AI and like to follow what's going on and think about what the biggest players, the hyperscalers, et cetera, are doing and what the outlook is there, there's nobody like Stratechery on this. It was so fast that I was having a hard time even following it while I was driving my car. I might dive back into this one. But basically looking at the outlook on Stratechery.

Where the AIs, these major players in AI sit in a number of categories in terms of their tech, in terms of the threat for disruption versus evolution or whatever it was, the work he used. And a very interesting discussion. I think he agreed with me on Google with the threat to their search business. There were other areas where Google could prove strong.

especially on its data. And then Apple also threatened because they have a lack of AI strategy, but a lot of their product before was not particularly threatened right away by AI. But an interesting and fast-paced and very sort of got to do your homework, I think, afterwards take on AI for these five companies. And then there was just an interesting one on the technology. Had not thought about this at all, as some are trying to say that the Iranian government

facilities under the mountain were or were not destroyed. And there was this article from Popular Mechanics, very long, very nerdy, but very interesting. I didn't read all of it. On ultra high performance fiber reinforced concrete is completely changing the game and the ability to withstand kinetic forces.

And of course, there'll be an arms race of therefore destructive technology to destroy this type of concrete. But for now, the concrete may have the upper sort of the upper hand if it's protectable enough, I guess, by a mountain. Finally, on the links for today or for this week, really, I think this is a fascinating astronomy project or project.

telescope project that I was reading about years ago and was really excited about it, but it's actually seeing first light. So this observatory called the Vera Rubin Observatory. Do read this link if you're into astronomy. This is going to completely change our knowledge of the universe. Basically, it's a

What is it, a 9-meter camera, 8.4-meter primary mirror. It's not huge by the huge telescope standards. However, the interesting thing here being that it has a high-speed super-resolution camera, 3.2 gigapixels per image, and it will take pictures of the sky very rapidly.

and build an entire deep field view of the sky in the space of 80 days or something like that. And then it can reiterate over time so the results can show you how different little bits and pieces of the sky and objects in the sky are moving over time. So it's bringing in this, not only the resolution and the mapping of the entire, in this case, only the southern hemisphere because it's placed in Chile,

but that it shows things as they progress through time. And that picture is just of a, just a little tiny chunk of the sky in the Virgo cluster. You can see how many galaxies it's just mind boggling. Anyway, a bit nerdy there, but I think it's going to be fascinating. And it saw first light. It'll be very interesting to see what kind of reports come out of that, come out of that amazing, amazing effort.

And I thought that was the end. And for those of you that hung on to my nerdy discussion of astronomy, there was one little bit on my messy notes I forgot to discuss or to mention when I was looking at

headlines this morning. I saw that QuantumScape, sort of a company that many have probably left for dead because it's a company that sort of IPO-ed quite early on. It was during the pandemic and there was a lot of anticipation around EVs at the time. So it saw spectacular performance. The share price hit like 130 before collapsing to not really a penny share, but sub $5 at least before this. Latest very strong run-up to above $7 in the space of just a short period of time.

It was a bit early to get out maybe for listing, but it clearly needed a lot of money for the research to build these solid-state batteries. Apparently, the news is that it has achieved some kind of milestone in its manufacturing process. So I'm not really fully aware of all the technology. The future promise of solid-state is great because, A, it's solid. It's not liquid. Therefore, the fire risk is nonexistent or certainly nothing like the whole lithium-ion semi-liquid and liquid batteries situation.

And as well, the power density is superior as well as the charging rate. The tricky bit is that these things are very, very, very difficult to manufacture and have not been or not yet proven technology. But apparently some kind of manufacturing process milestone was achieved and they claimed success with that. And therefore, there's this stock price is coming back almost from the debt.

And just a brief note on the status of the Saxo Market Call. You notice I've been doing a lot of the solo shows of late. That may continue here in the near term. I will be leaving for summer holiday next Thursday and will be away essentially for three weeks. Do know that we are getting new resources allocated to the team. So hopefully we'll have a more regular schedule.

conversations and two, even three people on the podcast sometime out in August or September. So you can look forward to that, I hope, and if you're getting a bit tired of my monotonous voice. And yeah, that's a wrap for today. It's Friday, so stay safe out there. Have a great weekend when you get there, and we'll be back next week with the Saxo Market Call.