Bears hang in at key levels as Palantir rides the retail whirlwind
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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. All right, it is Tuesday, May 6th, 2025.

And market really getting interesting here for the bears in the case of the U.S. equity indices. You can follow along with what some of the things we're talking about, by the way, in the podcast slide deck. You can find the link in the podcast description. So we've been talking about the NASDAQ 100 and the 200-day moving average. Just a very nice touch and rejection of that average above 20,200 or so on the cash index.

And that has held so far. And quite an interesting contrast in the action in the U.S.,

And in Europe, where we've sort of bowled back towards the highs of the cycle, if you look at the German DAX, even some indices in Europe are going to all-time highs. So this anticipation of investment in Europe and portfolio reallocations away from the U.S. and towards Europe, certainly continuing to see that in the equity indices, even on the currency market, we've gone a little bit sideways. Speaking of FX, though, currencies, if we look at what's been going on in Europe,

Asia has been very interesting, to say the least. So dollar, renminbi moving quite sharply on Friday, hitting that 722 level and even trading below it to start this week, despite the dollar not being particularly weak elsewhere.

You're seeing some other Asian currencies rallying as well. Again, the whole notion that the U.S. is saying, look, stop recycling your capital into the U.S., stop this mercantilist models and look at what you're doing. Could this in part be a move ahead of trade deal negotiations? That's also an angle. But besides the dollar renminbi move, which in absolute terms is still quite modest, mostly interesting simply because of the level that was challenged there.

Look at the Taiwan dollar, 6% move, I believe it was, on Friday and another big move to start the week yesterday. I mean, this is like the largest moves in multiple decades. You're looking at a country, let's remind ourselves, with a 14% current account surplus. That's 14% of GDP, that is. And certainly looking embarrassing in light of the U.S. focus on these trade imbalances with the U.S. So,

In part, yes, maybe it's a scramble to move away from the unhedged exposure to the U.S. dollar to some degree by local players, many people pointing to life insurers specifically.

But to put a little bit of a nice look on things ahead of trade negotiations, it certainly would help to have a massive move higher in the local currency. So it's a combination, I think, of all these factors. And the question will be, is this triggering something wider? Does China want to do a devaluation or revaluation as well? And will it move very, very slowly or all at once? Huge questions with huge implications across markets, but certainly just something to have on your radar here.

And along these lines, we're seeing gold with a monster rebound with that 3,200 area. We didn't even quite test that figure. And the really almost, at least in local terms, existential level of 3,165 was never tested. And we've just ripped back higher, 3,350 or something like that the last time we looked at it. Let's not go into the full discussion on gold, but just the top sort of headline figures.

drivers you're seeing that are having gold rebounding to this degree? Well, I think it's actually just very simple. China has returned from holiday. There you go. And we talked about that actually last week. We did indeed. Thanks for reminding me that we did. Indeed. And the rally we've seen now in the last two sessions, this clearly reflects that appetite we continue to see in Asia, but we can talk a bit more. Yeah, we'll delve into that. We've got a couple of thoughts on gold further into the presentation, but I think...

Certainly interesting the way that's come back online so quickly. And then sort of in the retail bubble stock space, Palantir was off 9% after reporting earnings late yesterday after the close, despite what the company billed as a, quote, ravenous whirlwind, unquote, of demand for AI software and raising its 2025 forecast. Just goes to show that when you're priced for beyond perfection, it almost doesn't matter what you deliver, right?

And some interesting comments around this stock. So besides the crazy valuation levels, you can talk about anything from

That it's priced at, I can't remember, I think before the close yesterday, it was at 90 times sales. 90 times sales. 9-0 times sales. This is for a profitable company. And at 70 times 2029 anticipated income, of course, with some built-in growth expectations from current levels. And 25 times 2029 sales. Just incredible valuations. There was an interesting comment from an institutional...

coverage of the company, of the space, saying, look, this is a retail story. There's no serious institutional discussion of this stock. So a risky one there and certainly one that's come unglued and contrasts with some of the other stocks in the AI space. I'll be getting to that later as well. In other news, ISM services marginally flat to slightly beating expectations. The employment subindex did improve a bit, but still below 50%.

And then just want to point out crypto, which has been kind of proven itself as a decent leading indicator on the direction and risk sentiment.

before and as we ramped up in this rally here lately and U.S. equities, for example, has gone kind of sideways to slightly lower since the weekend. So I just continue to have it on my screen now because I want to discuss crypto, but just as a sort of liquidity animal spirits indicator. Now, looking forward to the earnings and coming rest of the week, some nice names and coming in big ones as well. AMD after the close today. And as I point out on slide three, I mean, you're looking at a company that has really suffered a setback. It

it got into bubbly territory with the price action in early 2024 trading north of 225 before collapsing all the way to something like 80. i don't have the actual low in front of me here

And then trading back up towards 100 recently. Still down massively, and yet this company has been growing at a quite nice clip in recent quarters and is anticipated to continue to do so. So it just goes to show you that sometimes, of course, price does matter. And I read up those Palantir forward earnings multiples and sales multiples earlier.

for you earlier. But look at AMD, you know, continue to expect to expect to continue to see growth, not wild growth. We're talking 20% ish on the, on the top line next couple of years, easing down towards 15 and even 10% by 2029. There is the anticipation of some margin expansion, but with all that in baked into the cake for forward expectations it

It is trading now at only 10 times of 2029 earnings. Apparently, the company's new chips will not be available until the second half of this year. So it'll be interesting to see what they have to say on current levels of business as well as the guidance. Lots of other big names that we'll wrap up with and talk about later this week. Novo Nordisk is up tomorrow for the Danish investors out there. And we have a lot of Danish listeners here in Denmark.

App Lovin' is an interesting one that many have followed. Mercado Libre is a spectacularly successful company. Ryan Mattal, Siemens Energy, and more in Europe. So lots to talk about towards the end of this week when we get some more of these earnings reports in.

Rolling forward to slide four in the FX space, just wanted to point out, you know, it's really gotten a little bit quiet. The yen is picking up a bit of steam this morning, however. I have some thoughts in a moment on that, but I'm really curious if this, again, this Renminbi move from China, is this the start of something or do the Renminbi and the U.S. dollar remain sort of joined at the hip, at least in terms of relative strength versus the rest of the market? Interesting move, but not interesting enough until we get some more follow-up action.

And that would look like something like the dollar C&H continuing lower at a faster pace, for example, than the pace at which the dollar is devaluing versus other currencies. And there you see the massive pickup in the gold price showing up on our FX board, the momentum reading just really jolting higher after the last couple of days of action. And

As I've discussed before, those yen sort of attempted breakouts and attempts to establish new uptrends higher, yen crosses that is, so the yen weakening, a lot of that is reversed out. And that does not surprise me. I still think that the Japanese yen remains undervalued, broadly speaking. I think what would help get it much stronger would be a weaker U.S. economy and lower U.S. rates, whether by the market forces themselves or if intervention is necessary.

to get these long U.S. rates lower. And I'll talk about that in a moment as well. In the meantime, just two quick slides on the dollar-yen and U.S. long-term rates. Slide five, you can see the daily there and how tightly those have been correlated at times. Makes sense. You know, the U.S. spread widens. It's better for the dollar versus the Japanese yen. And the carry traders in Japan really enjoy that type of environment.

But really since Liberation Day, which I show sort of an intraday basis on slide six, things have really come unglued in terms of this correlation, sometimes even becoming negatively correlated. What's the story there? Well, I think it's that if U.S. Treasury yields are headed higher here, it's not because of the normal cyclical factors, anticipation of a growing economy, a term premium rising for that type of reasoning and rationale.

but it's because of concerns about the stability of the U.S. Treasury market. If there are concerns about that, that is positive for the Japanese yen and negative for the U.S. dollar in relative terms, as well as

I really don't think, and I think the market as well doesn't think that the U.S. will tolerate any sort of dysfunction in the U.S. treasury market for any significant period of time or for any significant rise in yields. So we're talking before 5%, I would imagine, if the economy is where it is now and certainly if it's getting weaker.

you have measures that the Treasury comes in with to deal with the situation, which is dollar negative, Japanese yen positive. So we did get that one-off squeeze from a surprisingly dovish Bank of Japan, but it's interesting to see this dollar-yen rally unwinding quite rapidly, even as U.S. yields have backed up. We do have an FOMC tomorrow, by the way, that could also impact what's going on here.

All right, let's get to the commodities markets. I think there's two interesting markets to talk about here, Ola. I guess you would agree. One that appears to me to have some kind of geopolitical influences on what's going on, perhaps as always, but certainly these days maybe more than ever, and that's the crude oil market on top of our gold discussion. So let's start with crude, what you're seeing here, where you think this is going, and any signals that you think we might ought to be looking for. Yeah.

Well, yeah, Crude Oil had a bit of a dismal week last week. I believe the drop was more than 10%. We slumped further yesterday on the opening after OPEC 8+. As they're called right now, there's basically eight OPEC Plus members that has been caught in production that are now racing production again. The weekend announcement that they would add another 411,000 barrels in June on top of the once similar amount in March.

in may rather than the market at least in the short term but i think also we have to just to look at the the price action last week say that this was really by rumor self-fact announcement it was more or less priced in already and we've seen the subsequent bounce here in the tuesday session we're back to basically taking taking back the the losses we initially saw yesterday so what's happening

Well, I think, as you mentioned, John, the political aspect of this is obviously that Washington is well pleased to see oil prices coming down. That's what they promised. So oil prices are now coming down. You can obviously argue the

The initial weakness was driven by economic weakness, which is not a good thing, but now it's been weighed down by additional supply. So what is the plan here from OPEC? Well, I think Saudi Arabia is obviously the leader in this decision. They want to regain market share. They are fed up with the producers who have been free-riding the high prices that they have achieved through holding back production. So they want some of these free-riders, most notably,

Kazakhstan, Iraq, and I would say UAE as well, to rein in some of the production to bring it back in line. If they do, then these increases would not be felt as hard as otherwise.

In addition, we are seeing already now shale oil produced in the U.S. announcing cutbacks, saying these prices are not good business. It doesn't make sense from a business perspective. I put in a chart on slide 7, which is basically showing the year-on-year growth in U.S. production, both shale and oil.

The blue line is shale, which is roughly three quarters of total U.S. output. And you can see the year-on-year growth has really just continued to move towards flat. And we potentially could go into negative territory in the coming months if these low prices persist. So Saudi Arabia, they have achieved several things. They are pleasing the U.S., they're pleasing Trump.

They are at the same time getting some of the shale oil production under control, which in the long term will be, I suppose, will be good for them because that will give them an additional market share. So it's kind of, they see this as a win-win situation for now and prepare to take the economic steps

beating from lower revenues, partly being offset by higher production. What do you think? Do you think the angle here, if at all, is against Russia to any degree in order – financing its war effort because –

We're seeing the attempts to put together a deal that sees detente. We're not seeing it. It doesn't really seem anything's progressing on that front besides this U.S.-Ukraine minerals deal, which many people, I think for good reason, are somewhat skeptical of the sort of strength of that deal.

Well, you're absolutely right, John. We should add that as a third reason. Again, also, I would say pleasing the White House simply because Russia's revenues for gas is coming down. Gas prices also tanked in the past months and that leaves them with oil as the main source of

source of revenue and with prices at these levels, then those revenues will shrink and potentially support a movement towards some kind of a deal with the Russia-Ukraine war. So one most certainly worth following. And yeah, I'm sure it's interesting. It would be interesting to be a fly on the wall in the discussions between Russia and Saudi Arabia right now. Okay. Now switching forward to gold, and I think there's some important points here to discuss with gold besides the price action.

One of the links, by the way, in the must-reads and links appendix you can find is to a fellow named Ben Ashby. I can't remember what he does, but it's a very good post on LinkedIn in which he sort of lays out why what is going on is going on, what the situation is for China versus the U.S., and who has the upper hand or does not have the upper hand. And he makes some simple statements, I think, that are very –

essential basic for understanding the framework here and understand what's going on. And one of those is the reasons for the gold driver.

saying, look, China is in a world of hurt in its domestic economy, massively over-indebted. It does not necessarily hold the upper hand in many ways because of that. And it does need to do a devaluation versus something to devalue that debt, at least domestically. And it says it's going to have to print a lot of money and sort of hope that its closed capital account isn't too leaky and not too much of that money sort of leaks out of China. So if they can keep that speculation going,

within their own mainland territory in an asset like gold, which they have directly encouraged their citizenry to buy as a store of value, then I think the way many Asian countries and especially China operates, they send a signal, policy signal on stocks, boom, everyone goes into stocks, at least initially. This time it's for gold. It's just a big and very sustained driver potentially here for an ongoing revaluation of the gold price as well as the backdrop of

the risk that people need to find a new asset to recycle their surpluses, profits into if it's not going to be U.S. Treasury. So I just want to do that as a preamble to whatever you have to say, Ula, on gold.

It is, and it has been a very strong driver for quite a while. And as you rightly say, John, the availability of products in China, if you want to see some kind of a haven asset is limited. As far as I'm aware, they're not allowed to trade in Bitcoin or cryptos. So that really leaves gold as a playing field. And we have seen that.

in recent weeks, just a phenomenal demand for ETFs. And it points to retail investors being the main driver. On top of that, we have insurance companies who have been allowed to increase their holdings of gold as well. So this is an ongoing thing. And it just confirms also through what we see in the activity in the market, as we highlighted recently,

futures market, the Comus Gold market has quite often in the last months seen actually negative price action during the US day but it's then been more than compensated by strong rises overnight which is obviously the Asian session. Also

If you look at what speculators have been doing, they have actually been net selling now for six weeks of gold. They brought their net long position down to the lowest level in more than a year. I show that on the small insert on slide eight, top right corner, the red line, that's the net long held by managed money account in the futures market.

So someone is buying because they're clearly selling. And also, just in the last three weeks, we've seen that total holdings in ETFs, mostly registered in the West, have fallen by ideally a million ounces. So it just, again, points to another source of big demand, and it's coming out of Asia. So that net long is falling on future speculators. I have to wonder if some of that is just…

value at risk because the trading ranges are very slightly larger than they were a few months ago. Indeed, John. And I'm just writing an update, which will be out a bit later, and just highlighting there's two reasons. Obviously, the deleveraging of the Dash for Cash, the rising inflation, the rise in volatility, and simply because CTAs or hedge funds, they've had a horrible couple of months. So they're just scaling back some of their positioning. That's obviously also impacting their gold position.

But then also the recent loss of momentum, which also means that from a technical perspective, some just have to step out and sit on the sideline waiting for new input. But also I just want to highlight, because we talked about Chinese investors, we obviously also have to talk about central banks and banks.

There was a recent update for Goldman Sachs. I did borrow a slide from that presentation, which I think just tells it all. Since 2022, when we've seen a net drop in ETF holdings, you can see that as well in the top insert, the blue line. This is the total ETF holdings.

by ETFs registered mostly in the West. We see how that has been on a year-long decline up until this year when it started to pick up again. So that was not supporting gold. Managed money account, as also mentioned, not really a major long-term influence. So what really is the main driver? That's the green area there, that central bank demand.

picked up in 22 when Russia had reserves frozen by the West and it has continued ever since. And there's not much that points to that demand diminishing or being reduced anytime soon. So these are the engines, China and central banks, behind this ongoing rally in gold. Diversification away from the US dollar is a key driver there. Yep.

Super. I'll let you go. Thanks so much for joining. I'll just close it out with a look at the macro calendar highlights ahead and a little bit more on the must-reads and listens. So for the calendar ahead,

Not much up for today. Look at that U.S. March trade balance will again show some of this tariff front running, which is a risk going forward that we've seen a bit of hurry up in activity and in the U.S. economy as we've seen scrambling ahead of the implications of these tariffs. So it really is going to be the May and June data cycles, I don't think, until we get a sense of where the U.S. economy is today.

and how much of that there's a risk of a cliff edge or a hangover from this sort of hurry up type of economic activity, again, ahead of the Liberation Day and in its wake.

FOMC tomorrow, we have no expectations really for the Fed to move on rates at all. Of course, this meeting, only about eight basis points of easing price to the June meeting and the full cut mostly priced not until the July meeting. I think they'll try to indicate a very sort of nimble stance and incoming data. The risk on that incoming data, though, is, of course, as I just said, that we don't really get that incoming data until the May-June cycle. But maybe there's enough in May for them to move forward.

in the June meeting? I would think so. I think the expectations that we're only at minus 78 basis points from here by year end look far too modest. I think we're headed for at least 125 basis points of further easing from the Fed for this calendar year, unless there's some kind of miraculous reversal from Trump on the direction of these tariffs. And that is a big unless because we don't know, of course, what he may decide.

Also, Bank of England, also considerable further easing potential there. We have this meeting is priced for a cut. The following meeting is not fully priced, so we could get guidance there that indicates a tilt for a further reduction in the rate of coming meetings.

Sweden's Riksbank only priced for about one more cut this year. Some analysts looking for two. I'm really indifferent there. I think the outlook for Sweden is very much linked up to the optimism around the European Union growth trajectory and the euro, which I see as benefiting the Swedish kronor over the medium to long-term timeframe.

Norris Bank is up as well. And yeah, other bits and pieces, weekly jobless claims last week was impacted by a specific New York situation where apparently I think it's teachers can apply for claims during the Easter holiday, which sounds very mysterious. Clearly we need to see two, three, four of these weaker claims at a new level relative to that very, very low baseline and not just these one-off pops to get a signal that this

traditionally high frequency indicator that gives us a good read on the U.S. labor market is starting to flash a bit more determinedly red.

Okay, on the must-reads, must-listens, a couple – again, that Ben Ashby post on LinkedIn, highly recommended there. He also lays out in a very brief fashion the likely path for bringing the U.S. treasury market back into order with – very likely eventually to see new rules on the supplementary leverage ratio for banks that would allow them to hold far more treasuries without impacting the size of their balance sheet.

And, therefore, providing new buyers and helping the yields lower and eventually heading towards some kind of quote-unquote facility that won't be called QE but is QE or something like that because, of course, the U.S. government must be funded.

And then Luke Groman, along this in here, he's sort of a counterpoint to sometimes to what is being said by Brent Johnson of the dollar milkshake theory. I think is a very especially good one from Groman, this long form interview laying out the case for the long term gold bull market that both the US and China are devaluing versus a reserve asset. That is the new reserve asset in town, which is gold.

And also, I think in just sort of anecdotal terms, a really interesting and robust discussion around how difficult it is to return a manufacturing base to the U.S. with a basic story about a huge contract that is held up by a single person because the expertise just doesn't exist that used to exist in certain types of industrial processes. And that is a risk. And what he calls, and I think this is the gem of the interview, you know, we've talked

many have talked about the quote hollowing out unquote of the u.s economy from its years of providing the world with the global reserve currency and all these multiple mercantilist nations that have been taking advantage of that to build their economies with exceptionally weak currencies etc

What he calls, Grohman calls, dollar Dutch disease. Just an absolutely wonderful expression there. I really appreciate that. Talks about how China is, with the host, how China is leading on exporting nuclear know-how. Eventually, if they continue to build out so aggressively with building nuclear power at one-sixth the cost of what the U.S. can do it, and on down the line. So some interesting thoughts there.

And then on the Doge and what it's all about, there was a solid Bloomberg article running around or running down how

How are we supposed to see what the Doge has done and has not done? Is it a completely wasted effort or have there been some aspects of this that are interesting? Is it just a political witch hunt to sort of defund the clearly Democratic-leaning parts of the discretionary budget and to get some of these Democratic bureaucrats out of the way? Is it a prep for some sort of reduction in entitlement spending, which Trump has very explicitly been against from the beginning?

Is it about rationalization and building of efficiency in U.S. computer systems, many of which are just impossibly outdated, et cetera? One could hope so because that would be a good type of productivity to bring to the U.S. government, which I'm sure is extremely unproductive in many areas. I just think it is a good set of questions because the doge is not on the course to reduce spending meaningfully. It's caused a lot of disruption.

And that disruption, ironically, has been so disruptive that it may end up costing more than it was originally budgeted to get things back on the rails and various agencies working again where people were suddenly fired. My own brother was a consultancy for an agency and lost his job from one moment to the next. And now they're coming back and saying, hey, would you like to come back onto this project some weeks later?

So it's a very chaotic situation, and we still don't know what the doge is all about, as well as we don't know what tariffs, what type of, you know, what the tariff levels will be in the final analysis and how much revenue that can bring. With Groman also making the point that it's interesting if you actually go through the maths of actually just eliminating income taxes for the bottom 90%, 90% of Americans. Actually somewhat possible if there's significant new income

tariff revenue combined with some more efficiency in government. Yeah, that just about does it for this podcast. We have Elbows Up Carney. Elbows Up is his tough boy or tough man hockey reference. When he was on the campaign trail, he is in Washington suddenly with a very different tone as he is set to talk with Trump. That's the inevitability when suddenly you're in power, your campaigning style suddenly fades.

Interesting to see how that exchange goes and as well with this Alberta referendum on potential independence that could be in the works sometime in the coming year or so.

So where are we across markets? Well, again, we hit that key resistance on the NASDAQ 100 and sold off from there. For perspective, we have some remarkably similar sort of relative levels and rallies that we saw back in 2008. So a very, very different market, obviously, in many ways, but in some ways structurally similar just in terms of the technicals. So back in 2008, and actually from the 2007 highs,

We sold off about 25% in the NASDAQ, and then the rally came in into the June area of the next year, 23% rally from the lows, which meant that they were actually anywhere near approaching the highs because if you sell off 25%, of course, you have to rally 33% to get back to zero.

S&P, the scale was something like a 20% sell-off followed by a 14.6% rally. So this time around, so it was 25 versus 23 rally in NASDAQ. This time we've sold off 25.6% and just rallied 22% at the high. So almost identical numbers. The S&P only sold off 18% this time around.

Sorry, has rallied 18% after a 21% sell-off. So a bigger rally in relative terms. But we have to remember back in 2007, 2008 that the financial system was at the epicenter of what was going wrong. And the financials weighed extremely heavily in the S&P 500 back then.

There was a catastrophic sell-off in financials before that rally came in in 2008, which was far more modest in the case of the financials. So there you have it. Some parallels there. Let's see if those persist. We don't know. We have the bear case still intact. But is there a catalyst to get some fresh selling in here, and what would that be? Certainly some key event risk coming up, especially with the FOMC up tomorrow.

Does that spark any further activity? We'll see. And we'll be back soon with the next Saxo Market Call.