AI sell-off and macro risks (with Tom, Lizzy)

Cameron Crise views the KOSPI sell-off as a natural risk management rebalancing, not a structural shift. He discusses the Fed's potential shift under Kevin Warsh, including scrapping the dot plot, and notes the neutral rate may have risen due to AI capital demand.

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Cameron Crise 4.0

AI sell-off and macro risks (with Tom, Lizzy)

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Cameron describes the KOSPI sell-off as a natural rebalancing, but notes the AI trade is still the dominant theme. The cautious tone on tech is implied by the discussion of leverage and profit-taking.

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The discussion focuses on the KOSPI and Nasdaq, with no specific mention of the Russell 2000. The broader market rotation mentioned (into industrials, banks) suggests a sideways or mixed view for small caps.

Asks if the oil story is starting to derail the AI trade.

Tom
Cameron Crise

The KOSPI sell-off is a risk management process, not a fundamental shift. Foreign investors are rebalancing after a 100% rally.

Yesterday was the second biggest daily outflow of foreign investors from Korea on record. Korean retail investors have been taking up the slack but are weaker hands.
Asks if the AI theme being questioned could lead to a discussion about the end of US exceptionalism.

Lizzy
Cameron Crise

The AI theme has reasserted itself; if you want to play it, you go to the US, Korea, Taiwan, not Europe.
Asks about the possibility of Kevin Warsh scrapping the dot plot and how markets would interpret it.

Lizzy
Cameron Crise

Warsh has been skeptical of the Fed's forward guidance 'fetish'. Scrapping the dot plot could be a soft entry to reducing its utility, but the neutral rate may have risen due to AI capital demand.

The thirst for capital to fund the AI trade has gone up substantially. The natural conclusion is that the neutral interest rate has risen. You need a higher interest rate so that savings becomes more attractive.
Asks what the neutral rate is.

Tom
Cameron Crise

In nominal terms, the neutral rate could be 4%. We haven't had inflation at target in 5+ years.

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