Prof G Markets
00:18:49 · Paul Kedrosky, Ed Elson
[00:18:49] S4: Yeah. $1.05 or so. I keep hearing him. [00:18:51] S3: Yeah. What do you think will happen here? Do you think this goes out at $2,000,000,000,000, $1,500,000,000,000? Does it go out at all? What do you think? [00:18:59] S4: I think if it goes, it goes to $1.05 or so, but I I reserve the right, and this is my long standing claim, is The US won't have a functioning government for the balance of the year, so who knows what will actually be able to come public and what won't and what won't. [00:19:11] S3: It's not very helpful, Paul. [00:19:14] S4: It's not my fault that we don't have a functioning government. Blame politicians. But nevertheless, one five assuming we have a functioning government, zero if it doesn't. [00:19:22] S3: Paul Kedrosky is managing partner at SK Ventures. Paul, always appreciate your time. Thank you. [00:19:28] S4: Yep. Thank you. [00:19:31] S3: After the break, a chill in the markets. And for even more markets insights, you can subscribe to my weekly newsletter, simply put, at edwardelson.substack.com.
00:19:31 · Ed Elson, S5
[00:19:31] S3: After the break, a chill in the markets. And for even more markets insights, you can subscribe to my weekly newsletter, simply put, at edwardelson.substack.com. [00:19:49] S5: Support for the show comes from SoFi. Here's the thing. Most traditional banks pay almost nothing in interest, so your money ends up just sitting there twiddling its sums doing nothing. And if your money's doing nothing, it's not doing its job. You work hard for every dollar, so why not put those dollars to work for you? That's where SoFi comes in. With the everything app for smarter money, with SoFi checking and savings, you can easily track your spending and save towards your goals while earning nine times the national average savings rate. You'll get paid up to two days early with direct deposit, and you can access additional FDIC insurance up to $3,000,000 on your deposits through a network of participating banks. You'll pay no account or overdraft fees, and you can also earn a cash bonus when you sign up with eligible direct deposit. You also can organize your savings into vaults for the goals that matter most. Small decisions like this can create big momentum over time. You can open your SoFi checking and savings account today. Head to sofi.com/profgbank to get started. That's sofi.com/profgbank. SoFi checking and savings is offered through SoFi Bank NA member FDIC.
00:20:52 · S0, S1
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00:21:56 · Ed Elson
[00:21:56] S3: We're back with Prof G Markets. Markets are beginning to feel a chill in the air. The Nasdaq one hundred fell nearly 3% on Thursday, its worst day since June, as worries about how big tech will pay for the AI build out hit tech stocks. The same fear showed up in the corporate bond market. Corporate bond yield premium surged to their widest levels since May 2025. Meanwhile, investors moved back into treasuries, pushing the ten year yield below 5% for the first time in a month. Now stocks did rise yesterday, but the S and P and the Nasdaq are coming off of two weeks of losses with big tech earnings and a Fed meeting still ahead this week. So the question for investors, is winter coming for the market? Joining us to discuss this, we're speaking with Robert Armstrong, US financial commentator for the Financial Times and author of the Unhedged newsletter. Rob, good to see you. You wrote that last week's, quote, epic treasury rally and the accompanying route in tech stocks had the feeling of a turning point, the sudden arrival of winter after a long summer. Very general question that you posed in in your piece. Is winter coming for stocks?
00:23:13 · Robert Armstrong
[00:23:13] S6: I think it's really important that the ten year and the thirty year yield went up last week when stock markets were faltering. Because if you remember, it was hardly a week ago when all bad things were being done by treasuries, and treasuries were trash. The US fiscal system is unsustainable. Inflation is out of control. These things are monstrous. They only go down. And with that as the context, things got spooky enough in equities that people started buying the crap out of treasuries anyway. Like, you know, we had, like, a 19 basis point day on the ten year last week. I can't remember the last 19 basis point day when the yields went down that much. People were really buying this stuff. And by the way, the bad feelings about the bond market may have been overdone. Right? When when you can get in real terms, in inflation adjusted terms, you're talking about two to 3% from the bond market. I'd say that's pretty good. And so it's it's not like there was an irrational rush into bonds, but this fast change of mood, I think, really told you something. And that was, you know, and that's extremely striking. That's point number one. And I'm rattling on here, but I'll get it all out, and then you can respond. Point number two is that cracks had really been appearing in the equity markets for quite a while before this happened. So as we've discussed on this show before, I believe, the Nasdaq and the S and P five hundred have been heading in a herky jerky way sideways for six months and since May. But below that, we have seen the market behaving in a way that is consistent with the end of a cycle and is consistent with higher bond yields putting pressure on them. So we've seen things like... One of the examples I pointed out last week was there was this group of industrial stocks, like GE Verona, and Caterpillar was one of them, and Comfort Systems. These were all the industrial stocks that sort of benefit from the AI boom. They like put the cooling and electronic systems into... And the construction part of the data centers. Great. Those had an unbelievable run. A lot of them doubled. Well, they've been doing like crap since May. Right? And, you know, the small cap stocks have been doing terrible. A lot of the interest sensitive parts of the S and P, utilities, real estate, those have been doing badly.
00:26:04 · Robert Armstrong, Ed Elson
So it was like, you know, more and more work was being done by the big tech stocks. And last week, those started to crack. And we saw the response in bond yields, and it's like, okay. Something is different as now. It's not all unicorns and rainbows and, hard candy at this point. You know? It's like something feels different. So I'm not calling for a crash, but the the euphoria is broken. There's a much more realistic, much more wary, set of fundamental action... Price action going on in the stock market now. And that remains true today even though we had a pretty decent day today in markets, I would argue. [00:26:49] S3: It seems that the the ten year is is really the the the crucial thing to look at. And just to be clear for everyone, you know, beginning of the month, we were at 5.3%. And I'm gonna take my little victory lap here, which is that on October 5, I said that this was the end of the sell off, and my prediction was we're gonna see the yield come back down, and and we'll see bonds rally. That is what's happened. We're we're now down below 5%. [00:27:18] S6: Yeah. That is a huge move. Just for re... Readers who don't follow the stock market, that's like a 15% move in the stock market would be a equivalent size. This is a shift.