AI froth and retail late-cycle dynamics (with Guy Johnson; Tom Mackenzie; Anna Edwards)

Asks about the structural market imbalance between puts and calls given parabolic moves in some tech stocks.

Guy Johnson

Victor Hilt

Strategically, buy dips in equities and volatility. Earnings expectations have gone parabolic (e.g., KOSPI up 100% YTD, expectations up 150% YTD). Froth is in earnings expectations.

Context: the equity market is chasing earnings expectations.

Questions whether the 'E' (earnings) can keep growing given circular financing and unknown data center buildout.

Guy Johnson

Victor Hilt

Retail money was absent in April, came in late, now sitting on capital gains. IPOs are another source of volatility, designed to encourage retail participation with higher allocations and small free floats.

Retail missed the opportunity to buy, now chasing familiar tech stocks.

Asks if retail will double down on tech IPOs or reallocate from existing positions.

Anna Edwards

Victor Hilt

There will likely be reallocation. IPOs are designed to encourage retail participation.

Asks how much of this is down to central banks.

Anna Edwards

Victor Hilt

Central banks are crucial. Unlike the late 1990s, corporate leverage is absent outside hyperscalers, and the Fed has not started hiking. Once the Fed gets into restrictive territory, the market will struggle. So far we are not there.

Comparison to late 1990s: market carried on after emergency cuts were removed, but struggled once in restrictive territory.

Asks if the gap between the energy story and AI story will close, and if equity markets will be derailed by energy and central bank response.

Tom Mackenzie

Victor Hilt

Amber lights are not flashing yet. To see the Fed slow things down, the economy needs to broaden out. Outside hyperscalers, there is not much leverage or investment. The tech space has the credit market to itself.

In credit world, you want to see companies outside hyperscalers start issuing bonds and investing.

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