Are AI Stocks in Danger? | Macro Mondays: December 15, 2025

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2:14Hello all there. Welcome to another edition of Macro Mondays here at Real Vision. My name is Mikl Rosenwald, and I'm joined as usual by my co-host Andreas. Welcome to the show, Andreas. Thanks, Mikl. we've had a great week Andres we're getting close to the holiday season so we're going to see if we can try and pump some hope into the Santa rally that we're all looking for we're going to be talking about that for the next half hour Andres see what we have in the macro landscape remember this is our weekly macro show where we give you a free sneak peek into the research that we do and publish at Real Vision we have a great week ahead of us at Real Vision lots of content there for the various tiers.

2:57So let me just go through that before we get started here, Andreas. On Wednesday, I'm hosting Jacob Shapiro at 10.30 Eastern on Geopolitics, Big Geopolitics show. On Thursday, we have our Ask Me Anything pro session, you and I, Andreas. And on Friday, Raul and Julian do their weekly or their monthly Ask Me Anything. So lots of good stuff to come up here right before the holiday season. We're also publishing our three weekly reports, Andreas, your steno-sickles, my the drill, and then our trade ideas portfolio update every Friday where you get our full access. We are getting close to a new year, Andreas, a new edition or a new season for our portfolio.

3:37Our show next week will be a little bit more about that, and we will be publishing a full breakdown of our view into 2026, including our investment thematics and the way we position ourselves to go into the year. So be on the lookout for that. That's going to be released on the approach here in Real Vision, but should be really, really interesting, Andreas. And before we get any further, we might want to remember people that even though we try to be very, very actionable, we have a model portfolio tracking our trade ideas so you can see how well they perform. That some of these are... Sometimes it may be good, sometimes it may be shit.

4:20that's the way it is andreas gennale gottuso we have to get get him in there as well uh and one more thing andreas i forgot uh there are still tickets available for real visions annual creature gathering it's in miami beach you're not going to be there andreas january 22nd to 25th so you won't want to miss it check out the uh the website for tickets for that uh so without further ado Andres, let's get into it. We had a very interesting week last week. Obviously, we had the rate cut that we expected, but we also had quite a sell-off towards the end of the week. A lot of people tried to explain it.

4:57Obviously, we had some less than stellar numbers out of both Broadcom and Oracle. A lot of people are talking about private credit. How did you read this sell-off, Andres? Because that's not really what we wanted from this. in many ways I consider it fully unrelated to the Federal Reserve meeting on Wednesday. We got the most dovish message from the Federal Reserve in years, basically since the peak of the pandemic. But it still hasn't really been enough to turn the tide on everything tech-related in particular. We're back to talking about AI bubbles, especially in the mainstream media. We're also back to talking about the risks related to private credit, etc.

5:44Even though everything is actually improving in that sector beneath it, I'll get back to a chart on that in a second. And we're, I guess, back to being scared about the investment pays related to the data center build-out and all of that. Also, some of these names related to the data center build-out and the AI build out. They're taking a beating as the market has opened here this morning, US time. And as was the case on Friday, we've actually seen the optimism into the open bill fading very quickly in the futures here. So it seems like there is still some stress related to this AI tech build out story that is not going away.

6:28And my best guess is that we'll have to wait a few weeks before it fully goes away. Interesting, Andreas. I want to point to this chart that you posted that's really interesting. It's an oracle and their relations between their profits and cash flow. Is it charts like this that are fueling the fears of an AI bubble? And what do you read out of this? Because obviously, it's extraordinary to have such negative free cash flow with decent net income. Well, it happens if you're a growth company. So the difference between the two here is basically the CapEx going into the AI build out for Oracle, right?

7:09So CapEx obviously impacts the free cash flow immediately, while you use depreciation to slowly but surely depreciate your CapEx investments in the net income over time, right? So of course they'll meet again. The question is just when and how. And by design, the most likely thing is actually that the free cash flow flips above net income if the investments into AI are actually profitable over time, right? So, you know, this chart made the rounds. It is admittedly a bizarre chart, not least given how Oracle has developed over many decades, right? And you've basically gone from being a semi-value stock, I'm allowed to say that about a tech company, to now clearly a growth stock, right?

8:06This picture of CapEx diverging from net income, you've seen that before in growth cases. So I don't necessarily think it's an issue. The issue is mainly related to the potential lack of return on investments, right? If the return on investment is not solid, then you obviously have a problem. But otherwise, CapEx is not a problem, right? In many ways, we've been longing for CapEx for a long while, a lack of CapEx across the board. And then as soon as we see CapEx, a lot of people start moaning about that, right? So it obviously all depends on whether AI will turn into a good investment or not.

8:48And as you know, I'm pretty upbeat on that. We're getting a lot of questions in on Japan, Andreas, and we'll get back to that a little bit later in the show. I just want to touch upon our regime models. Regular listeners to the show will know that we like to pull in these, our proprietary models from time to time, and they might shed some light on some of the prints that we're getting this week as well, Andreas. So let's dive into our regime model for the U.S. And obviously, very, very big on Thursday, we are having the inflation prints from the U.S. and the non-farm payrolls as well, I believe.

9:22So what are you reading out of our regime model right now? Inflation is at floor level, basically a flat line there. And we saw a little bit of hiccup in our growth parameter as well. What are you reading into this and how will this feed into the prints already this week? So let's start with inflation. You're absolutely right that we get the delayed inflation numbers on Thursday. And, you know, since they haven't collected data through October, it will be a slightly out of the ordinary setup where they actually, you know, we're basically talking about two months of inflation data in one inflation report, right?

10:04based on the sample that they've managed to collect during November. And the consensus is roughly 3.1 for inflation. It's actually a tad higher than the last inflation pinned at 3. And the way to read the nowcast that you just showed, Michael, is that it is a probability-based model. So, I mean, when the probability is close to zero, It basically means that our data suggests that inflation will go from three to below three. So I feel fairly certain that inflation will surprise lower during the data that we received this week. But, you know, the uncertainty is larger than usual since we're talking about two months of data in one report, right?

10:50But that also means that we can actually get a pretty sizable surprise compared to what's in the survey. That's on inflation. I also think inflation will surprise obviously next year in the U.S., mainly due to the inventory cycle. I mean, we're talking about a country that front-loaded a lot of stuff before the tariffs. So, you know, all of the critical resources are there in huge stockpiles in the U.S. And that's actually a bigger issue for the rest of the world than it is for the U.S. next year, now that, you know, the immediate tariffs effects are fading. And on top of that, you're obviously right that we've seen a setback in growth as well in the US.

11:30And given what we've been through, it's probably not a big surprise. I mean, we've had a government shutdown, a very long one, one of the longest ever, if not the longest at least in modern times, paired with the trade standoff between Xi and Trump back in October. So that double whammy ultimately had to show up.

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13:08And therefore, which is probably a very, very important takeaway, Mikkel, for next year, the Federal Reserve still got a pretty decent case to cut interest rates, which is not necessarily the case for some of the other big central banks. So I think it's a very solid trend story, this story about the Federal Reserve cutting interest rates to a much larger extent than their peers into next year. Absolutely, Dustin. That is also very much going to be defined by the job numbers that we're getting. And we're getting sort of a bit of a composite, a bit of a weird report this week, some October weeks and some November weeks.

13:43But do you expect continued weakness in those numbers or what's your expectation there? Yes. I mean, first of all, I think it was a very interesting part of the press conference last week when Jay Powell referred to the official numbers and basically stated that they've been higher than the reality. so I think he said that the Fed considered the non-farm paywalls to have overstated the job creation by 60k jobs a month meaning that we're actually running below zero if they're right so that's probably the kind of numbers you should look for this week as well around zero something like that in the trend job creation and it obviously looks weak but it's not really a super big surprise when you shrink the size of the labor forces as has been the case for a couple of quarters running now, it would actually be a bigger issue almost if the economy created a lot of jobs when you're not importing any supply of labor.

14:51So in my opinion, the weakness in the labor market has blown a little bit out of proportion here, but nevertheless, it works as a good excuse to cut interest rates, right? Yeah, the question is how well functioning is it as a guiding principle? But for now, it is the guiding principle, the guiding numbers. So that's how we should address it. But Miguel, I'd like to show a final chart on markets and everything related to the US. So we have this chart on private credit versus the broader equity market on page 60. year. And remember back during the early autumn and into October, we had a lot of discussions about the private credit names underperforming the broader market, being in a sell-off as sort of an early warning of liquidity trends turning more negative as almost a smoke alarm.

15:47and it proved to be at least partially right that it was a smoke alarm. But no one is highlighting that this particular space is rebounding a lot beneath the hood. And it has rebounded a lot during the first couple of weeks of December as well. So I think this is worth paying attention to because this is essentially some kind of a live bellwether of what's going on in the liquidity space. because these names will be impacted very directly from high repo rates and stress in broad liquidity terms. And we've actually seen a substantial rebound there, which bodes well for the first quarter of next year.

16:30Yeah, and then the question to get back to the job numbers. So a quick break in your regular programming. If you're serious about your future, grab my free report called Prepare for 2030. I think you've got five years to make as much money as possible. And this guide will help you navigate what's coming. The link is in the description. Download it now. This money that's flowing into companies at some point, are they going to use it on anything else than the data centers? Are they going to use it on anything that creates jobs? So that's the interesting part where the job numbers might become less and less relevant for this.

17:05But that's a much larger discussion. Andreas, I want to talk a little bit about Bitcoin before we get to Japan here. We have a few questions here. Maybe we should do the one from King Blink Kong, I think he's called, from Twitter. Actually, before that, let me get my laugh of the week in here, Andreas. I love this from a guy named Smokey in a bunch of Japanese letters here. If you found a penny on the street in 2025, you outperformed Bitcoin. Homeless people outperformed Bitcoin. This is great rage bait, in my opinion.

17:42pulling the knife around the wound here, Andreas. What's your vibe regarding Bitcoin into 2026 and what kind of year has this been? It's obviously been a bad year, right? But I guess we're at crossroads because everything related to this discussion on whether we have a four-year cycle and those people who made the very simple calculations around Bitcoin peaking in October because of this cycle thesis and all of that, they've so far been proven right. Maybe that's a coincidence. I think it is. But they've so far been proven right. And as you know, with people fanatically looking at charts and patterns, as long as patterns have been recognizable and they play out again, the market will tend to follow.

18:38and therefore we need some sort of an exogenous shock to blow this four-year cycle into smithereens. And that exact shock could be a positive surprise to the economy in 2026, right? We need a business cycle uptick in 2026, which would be sort of out of the typical cycle schedule to rock the boat on this four-year cycle thesis because currently, you know, if you subscribe to that one, why would you stop subscribing to it when it has apparently worked and it still works, right? Apparently. So I think that's the key question here. And, you know, as a fan of business cycle frameworks, I still feel fairly confident that 2026 will surprise many to the upside, not least in terms of the more cyclical parts of the economy.

19:28And we've actually seen a pretty decent rotation towards cyclical names, everything from banks to commodities linked to the industrial cycle and all of that over the past couple of weeks, which rhymes pretty well with this, but we just haven't seen the spillovers to high beta assets yet. And I think that, again, relates to the liquidity question that we've discussed over and over for weeks now. On my calculations, I can maybe summarize the whole discussion on Bitcoin and high beta assets with that. On my calculations, we'll be fully out of the woods by mid to late February when it comes to the dollar liquidity available for money markets.

20:07The Federal Reserve will buy roughly$40 billion over the next month. And then my personal assumption is that they'll increase the pace a little bit ahead of the April tax season, which should bring us back above paying levels somewhere at the very latest around 1st of March. Interesting. We are still going to have digital assets as part of our 2026 macro portfolio, but with some distinctions in there. But we'll get back to that over the coming weeks when we present our thematics for 2026. Andres, let's get on to talking about Japan because we're getting a lot of questions about this. You're very knowledgeable about Japan and the BOJ policies here.

20:49I want to bring in the question from Atro from the Real Vision platform here. If we can get it on screen here. Hi, guys. So apparently BOJ is expected to start increasing rates in the near future. question. If we didn't have an extended business cycle, I guess that we could say that these increases should have marked the start of the bear market of the current circle. Since the cycle was extended, how should we view these news and should we position ourselves differently? Is M2 still king? Yes. So first of all, I kind of like the question here because you've seen it before, that Bank of Japan has been the last mover in many cycles, right?

21:32They've been the last central bank to hike interest rates. And when they finally joined that camp, it proved to be too late. I don't think that's the case this time because, you know, this has not been an ordinary cycle by any means. We've actually not seen a cycle uptick at all. For example, in the ISM PMIs, we've had a flat business cycle development, but still rates going up and down through that, which is kind of an odd relationship between rates and the business cycle. So typically, I'd argue that you see around 14 to 18 months of time lag between moves in new curves at interest rates and the subsequent moves in the business cycle.

22:16But that hasn't really worked three or four years running now, probably as the debt profile was altered materially across the board. and across geographies during the pandemic when we had a yield curve that was flat as a pancake, right? And when the debt profile is changed, it also changes the sensitivity of the economy to interest rates, right? And that's ultimately why we've seen a different cycle this time. That's my take at least. So is Japan something to worry about? I get the question because I said 15 months ago, we had this major scare after a hike from Japan. Remember, they hiked interest rates, but they also allowed the yield curve to move towards a steeper direction, meaning that long-term bond yields were allowed to move more than front-end bond yields.

23:09And we had this massive pullback from the so-called carry trade of being long the U.S. and funded in Japan. What's different this time, you can see that on page 12, Michael is that the positioning in this exact carry trade is very, very different to that carry scare back in 2024. So what I do here is that I collect various sources of positioning in the Japanese yen versus the dollar. And then I standardize it by looking at the volatility in the measure over the past 52 weeks. And on such a rolling score, we had a three standard deviation position in dollar-yen back in 2024. So a lot of market participants were long dollar, short Japanese yen as a funding vehicle.

23:56While now, as you can see, we're much closer to what I would consider a neutral territory. If you look at the official data available from the CFTC, you can see that on page 13, it's even more visible that we have a much different situation than the 2024 carry scare. We've actually had, on a net basis, more people speculating in a positive development in the Japanese yen than the opposite this year. And that is very out of the ordinary in many ways because you haven't seen that a lot for years. So I'd actually argue that the situation is vastly different to the summer of 2024, not least because a lot of these levered players are not involved in the bet.

24:42and they typically amplify a move once we see the ball rolling. On top of that, we've gotten a new PM in Japan, Takahishi. She's been fairly vocal in her opposition to the planned rate hike this Friday. That doesn't necessarily mean that she will be proven right, but it probably means that the Bank of Japan is even more incentivized than last year when it comes to sort of sugarcoating the impact of a rate hike. And therefore, my best guess is that, yes, they'll deliver a rate hike, but the governor of Bank of Japan, Ueda, is a master of that. He'll deliver a rate hike, and then no promises at all to do anything related to tightening from here.

25:42One big muddy picture, you don't have a clue when they will move next, etc. And that will probably calm down things. So I get why people are asking this question on Japan. But I don't think there is any signals in the court package when you look through the market data and the positioning in Japan that really worries me. Does that also include treasuries? Because that's often mentioned as the pain point here, Andreas, that the Japanese incentive, we have a chart on that here, that the Japanese incentive to buy U.S. treasuries could be weakened. Are we still not in the danger zones on that? Or what should you take?

26:23So the important thing is whether there is a spread pickup in U.S. treasuries relative to local bonds, especially when you adjust for the running cost of hedging your currency exposure, which is important to note because the Japanese investors typically hedge the foreign exchange risk. So when you make that calculation live, the pickup is not super attractive, to be honest. Actually, there is no pickup in buying treasuries. But obviously, a Japanese pension fund, they cannot only own local bonds. So they'll buy treasuries no matter what. The question is just how many. And that how many question is typically defined by the change in this variable since the quarter that went by.

27:13And currently, when you look at that metric, so here, the 30-year spread, if we can get that on the screens, again, a 30-year spread in between Japanese and U .S. treasuries, and then adjusted for the running costs of hedging the FX exposure. And, you know, subsequently, you can see that we typically see the impact on the actual purchases of treasuries by Japanese investors a while after. And currently, as you can see here, it doesn't really point to a sell-off of treasuries, rather slightly the opposite. The reason why, just to underscore that, is that the Federal Reserve is cutting interest rates.

27:57So it basically gets cheaper to hedge the interest rate cuts when you adjust for the steeper yield curve in the U.S. okay I want to get to another question here Andreas and we're doing a lot of questions we're not going to get through everyone remember that we do and ask me anything on Thursday as well where we can get through more of this one thing we will be talking about Andreas is also the dollar and the outlook for the dollar you've been texting a bit about that or tweeting a bit about that but a question here from Theda and maybe we can use this to to explain some of these dynamics there's a lot of talk about the delta and interest rate differentials suggesting a weaker dollar.

28:34But what about the growth differentials? Cuts should be pro-growth, and if the new ESLR also accelerate growth, this should be USD positive. I agree with that. Again, timing is important here because when you cut interest rates now, it will impact growth in a while. So you don't get that immediate impact through the growth channel. And judging from our now casts, we need to see further cuts to really reignite the US cycle next year. And we'll eventually get there. The point I'd like to make on the dollar, first of all, I agree that the divergence between the Federal Reserve and the ECB is crystal clear right now.