Everything in Markets Is Now Moving Incredibly Fast

25:30And I think that was both because the power of the technology, the need to be able to look forward and see what has disrupted. And now because of agents who can work when we're asleep. So this idea of a compression of time and speed manifesting in the markets is really, really what sticks out to me. And in terms of the retail side, the trading I've seen. So I can describe net single stock purchases at Robinhood. So the absolute peak for that, the rolling 21-day peak, happened right about in late June. Let's call it. So around Micron's earnings then, that was the overall peak. There was one before that in early November 2025, which coincided roughly with a really big spec asset peak, in my view, in October 2025.

26:14That's still, in some senses, we haven't fully recovered from it. Should I do a spec? A spec asset. Like a lot of things like Palantir, Bitcoin, Quantum Stocks, so many of these things. Yes, yes. And even call option volumes in total, those peaked for a while and rolled over. But that was a huge spec top that we're still kind of clawing our way back from in some senses. So there's that. And more recently, what we've seen is supposed to be traditionally a slow month September for retail. it's really rebounded quite quite strongly september last numbers i have are about 89 of the peak that we saw in in june we're back to so it's been a really strong month for buying because i went on vacation and spent a lot of money and it's it's like a lot of it's the names you would suspect it's your microns your spacexes those lead it but every day when i look at this there's a name in the top 25 i consider myself someone who knows a lot of tickers there is a name that I do not recognize and have to look up.

27:14Very often, it's fun. It's a sign of how people look for volatility. People look to get rich quick, look at options trading. Stock market is a place where we go to express our views about the long-term earnings power of corporate America. And we do it with options with four days or less to expiry. That's the story of the world we live in now. The October 2025 speculative assets boom does not get talked about that much, but it's fun. And it's a good chart. Like if you just pull up Bitcoin and Palantir, how close their peaks were together around October. They both recently sort of hit a low in June.

27:52I'm sorry. I saw it was six. But I love like actually I love the framing of speed because it seems very relevant to even how I introduced this. And one of the things that like the AI singularity type people talk about, Kurzweil talked about, et cetera, is this notion of like, okay, if you measure time by how long it takes for the world, the earth to revolve around the sun, that's like stable. If you measure time by how long does it take for there to be a headline worthy event, which is a different legitimately different way to measure time. This is like extraordinary because and it goes to the intro, which is just the pace of headline worthy events is just extraordinary.

28:40And then you see it manifest. Therefore, then in the speed of the movements of the whatever underlying asset you're trading. Yeah, spooze and blues should have been like all across my Twitter feed yesterday and it probably got drowned out within a couple of minutes. That's for the uninitiated. That's David Zervo's old motto there back in the day. Wait, is it headlines, though, or is there also an element of market structure in here? Because the other thing that's happened is we have a lot more pod shops that are out there that seem to be affecting the market and causing sharp swings. We have a lot more products.

29:10We have a lot more zero day call options, things like that. And this has been an ongoing trend in the market for a while where we see the mean reversals happening really, really fast now, much faster than they used to. I certainly think both the higher participation of retail, the increased AUM, if you want to call it that, in the pod shop models with tighter stops, even agentic trading, which from what I can see so far seems to be a little more Momo driven than most in terms of the rules people will put in to do this. Yeah, I think all of that and overlay the dispersion trade on top of that. I think all of that does contribute to an environment where you do get a lot more single stock volatility and a lot less at the index level.

29:54And that means even when markets are doing absolutely nothing, it's the classic duck with its feet underwater going crazy. We always have something to talk about, even when the stock market is completely aimless for months. This reminds me, you know, I don't trade, but one of the projects I sort of want to see how easy it is to build now is like an agentic trading bot and like paper trade on Kelsey or something. And like go do a bunch of academic research, find where people speculate that there might be mispricing and then like create a systematic thing, make no mistakes and go. I haven't, I've like started to fiddle around with that, but I haven't really done it.

30:33Do you see a lot of people like diving headlong into figuring this out? I see a lot of people like diving or tiptoeing at least into setting it up. It's honestly something I want to look at a lot more because I think it has some fun implications potentially for market structure. Like, hey, if you've got an agent setting up rules for trading, does that mean there's less orders, less stops out there? Does that mean, what does that do to market visibility? That kind of thing. I'm interested in that and kind of how that manifests. And I do need to, I think, talk to more people that have their fingers on the button, so to speak.

31:03But I really think it also has the potential to, again, exacerbate volatility. It seems like basically everything we've done and been moving towards has the potential to exacerbate single day volatility.

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34:35Find an independent agent at CINFIN.com. Can I put you on the spot and ask you, I guess, the question that everyone is wondering, because a lot of people will look at this market and say, like, it does, in fact, look a little bit bubbly. It's, again, weird that we've been able to shake off interest rate pressures, a freaking war with Iran, all of that. What are the sort of warning signs that you're looking out for for a durable turnover, I guess, in stocks? You mentioned breadth earlier, but again, like breadth can give a false positive like we saw in 1998. Yeah, breadth is not something that I would use as like a sufficient or even necessary cause for this.

35:15I'm very boring and I like to stick for what drive stocks over the long term. also kind of does help drive them over the medium term and shorter term. It's earnings. I took a look at it recently. So what would happen if you waited until S &P 500 earnings revisions were 5 % off their 52-week high? And we all know analysts are notoriously late. You've definitely missed the top. But how bad would that be? How far off would that be? The only place where you're really, really getting killed on that for the past six or seven bear markets is COVID, just because it happened so fast and absolutely nobody had time.

35:52And we were already in the whole lockdown by the time it happened. But pretty much every other time, if you held for two years backwards, even after the time that estimates have been cut. So, you know, you're arriving late to the party, admittedly. Most of the time, you're still looking at pretty healthy gains. So my kind of thing is, hey, if you've been invested, you can probably afford to wait for earnings to start to crack at the index level and have some kind of warning signal you're getting out. Beyond that, I think it's folks like you who are keenly focused on the credit market and some of the peculiarities happening there that are going to be, I think, in the best position to be able to spot, okay, when has this kind of financial ingenuity gone too far?

36:32Because one of the things that was high conviction for me was when hyperscalers went negative FCF, okay, you have two choices right now. Either the AI boom slows or the financing starts to get more creative. The financing has gotten more creative. So, you know, at a certain point, it's interesting to think about because when you think about sources of profits right now, hyperscaler capex, obviously, and more of that debt financed. And we do have a big fiscal deficit. So can you think of more safe places to be sourcing your profits from than hyperscaler debt and fiscal debt? That's pretty darn safe until it isn't your classic kind of Minskyan formula there.

37:08So that's one thing that honestly has me surprised that multiples haven't even been more supported. just the fact that this debt comes from kind of safe places. Right. Talk to us a little bit more about if you're on the recipient end of hyperscaler spending, it almost feels like a bond at this point, right? Like that's sort of, not really, but that's kind of what you're saying, which is like, these are big structural things. It could be fairly predictable. On the other hand, when you look at who some of the recipients of this money are going to be, like, it's not literally the recipients of the CapEx money, but kind of like CoreWeave CDS.

37:43How do you think about credit angst among some of the AI players with the assumption that AI spending is just going to keep going through the moon? Yeah, I think you can pretty closely map in a lot of cases just a straight up concern about the level of debt and just look at your classic debt ratios. And there's a reason why Oracle stands out versus all the other major hyperscalers on this and kind of use that to flag. What's the reason that they stand out? I would say just relatively more indebtedness than peers or just like less credit worthiness to begin with. That's why I think a big recent thing that's happened is NVIDIA trying to effectively credit wrap, make everyone the safest AI borrower possible.

38:27But yeah, no, I do think we live in a world where now a lot of companies both aren't necessarily treated as unimpeachable AI beneficiaries and also the second derivatives turned. We are no longer pricing in the fastest earnings or visions across the board ever. At some point, you've got to make the transition from hyper growth to growth at a reasonable price. And a lot of stocks post the Q3 momentum road are still trying to do that. Only have two semiconductor companies that had made 52 week highs in Q3. Only two. AMD and Skyworks in the S &P 500. Interesting. Crazy. Speaking of like Oracle being different, Greg Ip at the Wall Street Journal had a really good tweet the other day observing the fact that, okay, the one thing that makes the AI boom weird is that it's not being financed by the fruits of the AI boom, right?

39:18So you have all these internet, right? And so it's like the companies that are best positioned to spend have their own money, printers, Facebook has gigantically profitable businesses. Google has search, et cetera. Oracle is like, fine. No, I mean, nothing against Oracle. It's a good, successful company, but it does not have that like pure money spigot the way the other hyperscalers had. And actually right now today, or we continue to see their CDS spike. Speaking of financial engineering and cash spigots, there's a headline that came across the terminal just as we started this conversation, Luke.

39:58Slight tangent, but I think it's still relevant. Man City inflated revenue cut costs by 900 million pounds, Premier League fines. They're going to be sanctioned. We don't know what the sanctions are just yet, but immediate reaction. Let's do sports. Yeah. Immediate reaction couldn't happen to a better Manchester team. Hey, you know. You're a Man U fan, right? Yes. Yeah. So this is, you know, what is it fafo i'll keep it i'll keep it to that and i'm very much hoping that i will tolerate arsenal retroactively getting trophies if it means we can also retroactively get one as well and that that takes a lot for me to say joe thinks the primary league is the bowl case for europe so oh yeah i loved those competing articles i will not say which one i i enjoyed more love all my parents equally um you know what i you know um our friend guan yeah he bought me he got me a gift the shenzhen pang city football club he got me one of their jerseys what colors it's blue they're owned by man city it's part of the same corporation or something like that there's some sort of connection shenzhen pang city fc is part of the city football group network alongside manchester city and i think like manchester city what's the equivalent of the championship league over there I don't know.

41:15I want to learn more. Every American, first of all, their jerseys are the same color as the Manchester City jerseys. But every American, it's like, oh, we get excited about the World Cup and then we forget about soccer. Not me. Me and my son have been watching the UEFA tournament that's happening right now. Spain versus England was really good. Harry Kane missed a penalty kick. Love that. We saw the Netherlands versus Serbia game. so I am not one of the Americans who just stops paying attention to soccer when it ends. I like that. You're the hipster American soccer fan. This is very good. No, hey, what else are you supposed to do?

41:54In the morning on the weekends, you have kids, so there's things to do but hey, for the rest of us, what else is there to do? You never know. Also, maybe China football will become a huge thing if the UAE can't spend money in the UK anymore. Oh yeah, I think it's probably going to be huge. We're just putting Luke on the spot. I was like, Luke, another football player. If we're going to transition to a sport, I was really hoping we'd go to hockey next. But okay. To bring it back to markets for a second, there was an interesting note in my inbox, Terry Wiseman over at Macquarie. And he had pointed out that like, okay, so we talk about these huge spending impulses, et cetera.

42:33And the two big ones, obviously, AI and then structural government entitlements, et cetera, that keeps going up. And then he points out, though, that like wars are really expensive. And so markets, people look at the Iran war headlines. It seems like mostly through the lens of the oil price. Right. To the extent that people trading their interest in the Iran war is basically, OK, when is the straight over? He's going to open. What are the price of oil? Very diesel spreads, maybe. But he points out like wars are very expensive. and he's like, is this like, this is a third driver of inflationary impulse that doesn't get much attention, but defense spending rising for years all around the world.

43:14Yeah, wars are expensive, rearmaments expensive, trying to reshore and build domestic capacity of semiconductors is expensive. Yeah, all of this is really, really expensive. It is the defining feature of this era, like how much we are willing to kind of tolerate the side effects that are in our face every day of policies that are in quote that are definitely bottom line inflationary anything else like really like stand out for you right now is being kind of eye-opening in this market i i don't have much else the only thing like i do think it is just borderline psycho that the idea that european equal weight is closer to an all-time time than U.S.

43:59equal weight when we're running like around 6 % nominal growth right now in the U.S. Like blows, absolutely boggles my mind that like U.S. consumer discretionary has become the new punching bag for the market in a strong growth environment. Like in a quarter where, you know, it's estimated to contribute what 2.8 percentage point to growth. Nuts. Amazing. I guess one question I have in addition to that is like in a different era, there would have just been so much more attention to how like bad the housing market is. And like it used to be housing was the business cycle. Well, A, housing was the business cycle for multiple reasons.

44:38People spent out of their home equity, et cetera. Now we have this like miserable punk housing market and it hardly seems to matter. But now AI is the business cycle, which worries me because you get the same dynamic. AI is the business cycle and there's no cycle and this wealth effect of like people spending out of their stock market gains. I'm just sort of like curious, like your take on, I don't know, either way you look at it, whether it's like the salience of the stock market and the wealth effect, or just the general market's lack of interest in housing these days. Well, perfect timing, right?

45:10Wasn't it earlier this year when Americans share wealth from stocks versus from housing also crossed overs? Yeah, it does feel like a seminal moment in that front. And when you think about why hosing was the business cycle, it's because you had these spillover effects to consumption via HELOCs or just via wealth effect from that. And also, you know, spillovers from housing markets doing better. You're buying more consumer durables. You can just take all of that and transfer it over to AI, right? Like you just take, that's where the construction impulse comes from. That's where the wealth impulse comes from.

45:41And as we've talked about, it's rivaling or surpassing everything we've ever done in terms of the CapEx boom in size. So do I think it lasts forever? No. Do I think it's kind of more of an anomaly around the now? Certainly. Because at the end of the day, we're all either businesses trying to make a profit or consumers trying to buy something we like. All of this has to eventually be good for somebody downstream at the end of this or else there is no point to anything we're doing. So there is no point to the profit if there's no kind of consumer intent for it in the long run and a consumer income to buy it.

46:16Yeah. The circularity and the size is what starts to worry you, I think. And when you hear that people are using their stocks, their stock market gains to buy stuff, which is helping the economy along, along with the AI CapEx build out, and that's leading to stock gains and relative economic growth. And then it just becomes very perpetual motion machining. Something that you've talked about for a long time that I've started to think about is like this idea of like something big is going to happen soon. Right. And that big could be it's like, oh, maybe there is like a major catastrophe like caused by a bot or whatever, or sorry, an AI model.

46:54Or there's something big could be like utopia and everyone real weight, real wealth goes up dramatically and things get a lot cheaper, et cetera. Or there's something big could be a major reshuffling of people's place in the labor market in some way. But I'm curious whether like, okay, some thing that everyone just sort of has out there is going to happen, whether that leads to like a dip in the savings rate because it's like, well, like this, you know, that's a real thing yet. It's the exact opposite of the like, right? If you fear nuclear war, then just buy stocks anyways because if it's in the price, I think now like you could reasonably argue the other side, like, hey, if the world's doomed in 10 years, why am I saving at all?

47:39I find that fun and interesting. Do you think that's like a real thing yet? I don't think if you're like someone with children, you could possibly countenance the, hey, like I'm going to sacrifice your future welfare for that. So I don't think it's something that could gain broad traction. But in terms of like infecting people's minds, I think we're kind of definitely already there. If AI kills us all by setting off a nuclear weapon, our portfolios will be on fire. If AI doesn't kill us all, then our portfolios will also be on fire. That's a good one. Thank you. I've tweeted that before, so I'm recycling my own jokes.

48:18That's fine. Luke, that was a lot of fun. I love your framing. Great stuff. Appreciate you coming back on AdVox. Always a pleasure. Keep it up, guys. I love following and reading what you guys do.

48:41That was a lot of fun. We could talk to Luke for hours. And I do think, you know, I went into this episode as like, oh, there's a crazy market. I love the speed characterization that Luke gave. I think that's perfect. No, I think that makes a lot of sense. And again, in my mind, there's two things happening here, which is you have a change in the actual structure and makeup of the market, and you also have just the headlines flying. thick and fast. It's so hard to keep up. And if you see one negative headline on a Monday, chances are you might see a positive headline on a Tuesday. Even if you don't believe the positive headlines, you know the markets will react to them.

49:20And so you're just sort of ping-ponging back and forth between the news flow. I want to build something like where we just look, the history of red headlines would be an interesting chart, right? And it would be really curious to look over trends about the pacing of them. There's got to be some way to do that. One thing I'd be interested in, it used to be the case with early machine reading trading, as we used to call it. No one calls it that anymore. That people would actually step away when there was a big headline. So there was a little bit of a dip in liquidity because it took like a second for a lot of the machines to read the news and figure out how to react.

49:55I doubt that's the case anymore. I would be very curious to see what liquidity provision actually looks like around headlines. But I don't know if anyone's done a study. I worry about I worry about plenty of things. OK, shall we leave it there? Let's leave it there. All right. This has been another episode of the All Thoughts podcast. I'm Tracy Allaway. You can follow me at Tracy Allaway. And I'm Joe Weisenthal. You can follow me at The Stalwart. Follow our producers, Carmen Rodriguez at Carmen Armand Daschle Bennett at Dashbot Kale Brooks at Kale Brooks and Kevin Lozano at Kevin Lloyd Lozano.

50:28And follow our guest, Luke Kawa at LJ Kawa. For more OddLots content, go to Bloomberg.com slash OddLots. We're the daily newsletter on all of our episodes. And you can chat about all of these topics 24-7 in our Discord, discord.gg slash OddLots. And if you enjoy OddLots, if you like it when we do these markets episodes, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad-free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there.

51:01Thanks for listening.

51:46We'll see you next time.

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