Strait of Hormuz Is Source of Asset Pain: 3-Minutes MLIV

Added: 2026-05-18

[00:00:00]Interesting that stocks are selling off quite as much as they are.

[00:00:03]What do you think is the is is a primary driver of that?

[00:00:06]Because if we look at the European bond market session just opened up here, we're actually pretty flat on bonds on yields this morning, a far cry from Friday of course. But what's your assessment of why stocks keep selling off. So I think that the primary catalyst right now is that the summit is out of the way.

[00:00:23]And the reason for for the US to play nice on the straight, because they couldn't have that flare up before the summit, otherwise it would get cancelled. Now there's so much out of the way.

[00:00:31]The straight over Moses back in focus. There's no real solution there.

[00:00:35]And we saw bonds kind of priced that quite aggressively last week with the help of some high inflation prints globally.

[00:00:42]So bonds are probably I've kind of already done the kind of panic around that. I think they may have a little bit more to go, but essentially we'll see. Long term debt buyers and bond market come in to kind of lock in some of these higher yields perhaps this week I think for stocks, you know, in the last couple of weeks we've been very bullish into the summit. And we said that post summit we expect the folks to return to the straight and be more negative because there's no easy resolution to the straight. So I think now we're in a in one of those, one of the larger dips that we can expect in stocks.

[00:01:05]I think that's going to last for the next couple of weeks.

[00:01:08]Ultimately, this doesn't derail the larger CapEx bubble.

[00:01:11]We'll still obviously record high in stocks later on this year.

[00:01:13]But I don't think this is a this is a dip that people are going to want to buy quickly. They might try to buy quickly because we've got massive hurting in stock markets at the moment because everyone's getting their same advice, may I? But ultimately I do think that stocks now go have a couple of weeks and pain. And that as we discussed last week, the headline numbers will be very dramatic, which will get people to declaring this is the end of the bubble. But that's only in context of the extraordinary gains we've seen in recent weeks.

[00:01:37]I was telling everybody to buy. I just kind of feel like the narrative at the moment. Um, just to back to that CapEx story, is there. If inflation keeps going higher and yields keep going higher. This stuff is increasingly debt fueled the build out of the AI data centers. Is there a kind of point?

[00:01:55]Is it easy to identify a point where that becomes a problem, that yield story? There is a point it's not easy to identify, but I don't think it will. It'll matter.

[00:02:04]I think the earnings rug pull will come first.

[00:02:06]Ultimately we're going to We're going to have to folks at some point that these companies are all competing for the same pool of earnings, and they're all projecting ridiculous earnings that are multiples of the company that they're supposedly supplying services to. So ultimately, there's got to be an earnings rug pull at some point. A lot of this data spending will seem like like a crazy thing. And, you know, when we look back in hindsight. But I don't think we did get that yet because it's not happening in this earnings season.

[00:02:28]So it's probably at least next earnings season.

[00:02:30]As for when the debt matters, I think that's probably later.

[00:02:33]And therefore that'll be a hindsight narrative.

[00:02:36]Mhm. So does that mean what where does that leave Nvidia. That's the middle of the week mark.

[00:02:40]And that does seem to be a focus for some people.

[00:02:44]Yeah. So normally Nvidia we see great earnings beats the expectations. And then the stock sells off and you know sells off for a couple of days. And then we get back into the AI bubble.

[00:02:53]I don't see any really change this time. I think Nvidia matters less this time.

[00:02:56]It's not going to change the underlying narrative.

[00:02:58]The long term narrative is still good for these AI kappa CapEx companies.

[00:03:03]We're seeing that from this earnings season very clearly.

[00:03:05]We don't need Nvidia, but I don't think it's going to save the short term negativity we're going to trade over the next couple of weeks.