September 11, 2025 • 43 mins
In this episode, Anthony and Piers unpack a week of upside surprises, from inflation data clearing the path for Fed rate cuts to Oracle’s shock $455 billion order book and the tech rally pushing markets to fresh highs.
They question whether Wall Street’s S&P 500 forecasts are still too cautious, explore why Klarna’s IPO success might reignite deal flow, and dissect the $53 billion Anglo-Teck copper merger. More than just a headline deal, it’s a masterclass in corporate defense, streamlining portfolios, leaning into future-facing assets like copper, and turning defense into offense with smart, strategic M&A.
(00:00) Market Overview & Outlook
(02:38) Inflation Data & Fed Policy
(05:35) Tech Stocks & Performance
(08:27) Oracle Earnings & AI
(11:01) Musk’s $1T Pay Package
(14:11) Analyst Calls & Forecasts
(16:47) Banks & Deal Flow
(19:35) Klarna IPO & Markets
(22:38) Anglo-Teck Merger
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Hello and welcome back to the Market Maker podcast.
And three things we're going to have as talking points.
Inflation surprise puts the Fed on track for rate cuts 3.
In fact, I think the markets arepricing and what's the stocks
reaction record highs once again, here we are.
Then Wall Street banks in in turn then are lifting their S&P
(00:23):
500 forecasts, betting on AI earnings to keep the rally
alive. I think we go back what, nine
months now to our outlook for the year ahead.
I think I was the one who said 7500, baby.
And when the market dipped below5000, didn't it?
(00:43):
Only a few months ago. I do remember a lot of people
calling me out, you know, sayingand you're so bad, you're so
wrong, you know, mugging me off and here we are.
Well, I'll. Be coming to fruition.
We're not there. We're not there.
But to be honest. This rally's too early.
I, I was banking on this rally happening at the end of the
(01:03):
year, to be honest, when we eventually top 7500, but we we
shall see. It's a bit early for me, so
we'll talk about that's. A good point actually, just just
before you go on to the rest of the docket.
I, I was very bearish at the beginning of the year and you
were very bullish. And actually both of our calls
have played out like basically within the first sort of eight
(01:28):
months of the year basically with the massive bear sell off
in in April and now the big bullrun.
So yeah, we were both right, butit's all just happened way
faster than we'd expected. Yeah.
And and loan, behold, we'll probably end up exactly where
Stephen said, which was in the middle.
So the other thing is big deals are back in the banking space.
(01:52):
We've had the eventual listing of Klarna, their IPO and we've
also had a blockbuster M and a deal announced in the commodity
space, $50 billion mining mega merger.
And so quick look at some of that.
But we're also going to talk about Oracle, about Elon's
trillion dollar pay packet, about copper and data centres.
(02:13):
So, yeah, lots to come. But Piers I I don't think you
own a penthouse apartment. So who?
So where are you? Well, you don't, you never know.
This is my penthouse apartment in Sydney and this is, I'm in
Sydney at the moment. So yeah, bit of a time zone
difference. We, we just about managed to
(02:36):
kind of figure it out and connect.
I think I'm nine hours ahead of you at the moment.
But yeah, no, I'm in. I'm in Sydney just for a sister
event I'm running tomorrow. But yeah, Sydney's.
Have you ever been to Sydney? No.
Never, never Australia. So it's a.
Great, great city, a really coolvibe, much smaller than London.
(02:58):
But also I'm kind of say it's way more relaxed, doesn't feel
quite, you know, like the rat race in London can often kind of
dominate, but here it's quite chilled.
You know people clocking off work at like half 4, You know,
it's it's just a completely. Different question speed.
(03:19):
To it. Sydney or Dubai because a lot of
people leave the UK or the rat race for example, OK Dubai has a
a tax efficiency thing and so on.
But for lifestyle wise people say similar.
So where? Where would you go?
I haven't been to Dubai for probably 15 years, but based on
(03:40):
that and my experience here in Sydney, I I would say Sydney all
day long. All right, here we go.
There's going to be a poll and comments on the video, please.
Sydney or Dubai, What, what are you picking?
All right, well, let let let's dive into this and perhaps we
can talk about some important U.S. data on the inflation side
(04:04):
and what that means for for future Fed policy.
Yeah. I mean, so we had and we'll look
we've got more inflation data. Actually I think it's my time
zone thing isn't screwed up. I think it's later today, right.
We've got the CPI report. But what we had earlier in the
week is something called the PPI.
So remember CPI that's consumer price index, PPI that's producer
(04:29):
price index. Both are a measure of inflation.
It's just a different part in the, the kind of journey of a
product. So PPI is earlier on in the
journey. This is when a company, so the
producers prices. So what what is the producer of
the product? What's the prices of these
components, Let's say that they are buying in order to to then
(04:54):
manufacture their product, whichwhen then they sell, of course,
that's when it becomes the consumer price, when the
consumer is buying the finished product.
So this is like earlier on in that kind of life cycle and I,
I, you know, I would say generally speaking isn't as
important. So PPI isn't as important as CPI
(05:14):
when we think about economics and when we think about, we'll
move on to Fed policy, right? the Fed is more concerned about
the consumer end of, of the price mix because what's
happening at the moment? Well, let me just say the data
that was announced earlier in the week, PPI was way lower than
expected. And actually, interestingly, the
month on month change was negative.
(05:36):
So the month on month was -.1%, much lower than expected.
The year on year also dropped quite sharply from the month
before. So in August, year on year PPI
was 2.6%. What had happened in July, the
PPI number jumped quite sharply to 3.1.
And everyone's going, ah, tariffs, tariffs, tariffs.
(05:57):
Look, it's prices are coming through.
This is going to, you know, result in this being passed on
to consumers. So you might have that
terminology a lot. And that's basically, well, if a
company is having to pay more for its components, the cost of
building its product rises. And inevitably the company's
going to pass on that extra costto the consumer by raising the
(06:18):
price of the end product, right,to protect their profit margins.
So when it jumped to 3.1% in July, everyone's going, oh,
tariffs, right, inflation's coming, you know, drum drumming
that, that kind of that, that drum.
But now in in August, it's dropped back to 2.6% on the year
on year front, which is very interesting because maybe it
(06:39):
looks like, I mean, not only areproducers not passing the price
rises on to consumers yet, maybeactually the price rises for
producers is actually not going to be as bad as everyone
thought, right? So that's the kind of general
theme here. So really positive inflation
(07:01):
print when you're wanting thingslike Fed cuts, you know, Fed
interest rate cuts, and when you're wanting Fed rate cuts to
kind of continue to fuel this kind of stock market rally and,
you know, stimulate an economy because we're a bit worried that
maybe the labor market's beginning to kind of soften.
So this kind of all feeds into the positive economic and stock
(07:23):
market narrative. So from a reaction function then
I know we are, as you said, recording this before the CPI
data comes out. When people listen to this, it's
probably going to be after. But thinking about market
positioning then having moved torecord highs, we've kind of just
sat there since. And so do you think the market
is quite primed from a positioning perspective where
(07:45):
now if that does not fall in a line of a similar type of vein
that there could be, you know, adecent intraday pull back, not a
massive reversal of sentiment interms of what people are
thinking? Yeah.
I'd say like with any of this data, the downside risk, let's
just talk about the stock marketand the US stock market
specifically and looking at the S&P 500 downside risk is much
(08:06):
greater than upside risk just because of a function of what's
been going on in that market forthe last couple of months.
Or if you go back to the that low mid-april, right was at
5000, we're now at 6500. Don't start protecting your call
here, Piers. It's been an epic rally.
So the point is to continue to rally.
(08:29):
You know, just good data doesn'tcut it.
You know, it's got to be like, fantastic, It's got to be much
better than expected, right, Which is what that PPI number
was earlier in the week. I mean, it really was a surprise
in a good way. So, but yeah, I mean, if the CPI
data comes out super hot later on, meaning higher than
(08:53):
expected, remember the feds paying more attention to that
consumer side, well, then that that kind of positivity of the
PPI number early in the week will definitely be reversed.
Yeah, for sure. And then under the bonnet, I was
just trying to see if I can quickly bring up a bit of a heat
map of the the year to date. And I was just having a look
NVIDIA up 32, Google up 26, Metaup 28, Microsoft up 18, Apple
(09:19):
and Tesla the laggards of the the mag 7, Apple down 9.
You see the new phone. I did the what?
They're calling it the Razor or no Skip.
Yeah, that's right. Yeah, using the terminal, yeah,
because obviously the MacBook Air and stuff like that, they're
kind of continuing that theme. Right.
Love to hear what the audience thinks with these monumental
(09:41):
leaps in innovation from Apple. Is the is the is the $2000 new
iPhone Pro Max worth it or the Air would buy it for for the for
what it is? Well, the air is 999, which was
the interesting point from the pricing perspective.
(10:02):
It's like, OK, I mean, maybe if you're pro Apple you then you
say, well, they're listening, they're listening, you know,
cost of living crisis that here's a here's a better phone,
but we're not going to put prices up kind of thing.
But yeah, I mean, well, their share price push higher off the
back of that. I mean, Apple have had a decent
(10:24):
few months having been, you know, definitely the laggard,
you know, earlier on in the yearjust from the point of view of
them being kind of out of the AIrace at this point.
But we'll talk about Oracle in aSEC because it's interesting
about are you in the AI race or not?
And if not, well then just does that mean you're dead and
buried? And the and being in the AI race
(10:46):
doesn't mean you have to be producing these models and on
the software side, right? No, that's right.
It it it can be on that kind of product end, which which is kind
of coming right, where then you have AI driven products that you
know, people and businesses can use, you know, in order to, you
(11:08):
know, Dr. efficiencies or drive up productivity, right.
And so, you know, obviously Apple are, you know, hugely
connected business with regards to users of their products, both
on the phone side and on the kind of computer side, right?
So they are still in a position where they can benefit from the
(11:29):
AI journey, but just a bit further down the track when it
comes to actually apps being subscribed to for businesses to
use. But still nothing from Apple on
this really. So who knows?
But you know, the big winner of the week, which kind of ties
into this story was Oracle, where I mean, Oracle were up
(11:52):
40%, OK, yesterday off the back of their earnings that kind of
delivered. They delivered on Tuesday night.
And it's a classic story of likeif you go back to 2022, Oracle
got absolutely slammed. Oracle were down 50% I think by
(12:12):
the sort of latter end of 2022. Stock price down 50%.
You know, partly that was because of a broader stock
market sell off. We were concerned about the kind
of inflation crisis kicking off and interest rate cycle moving
to the upside and all the rest of it, right.
But also Oracle got double slammed because they just
weren't in the AI race. You know, traditionally they
(12:34):
were seen as the kind of databases and, you know,
businesses, you know that that kind of software enterprise from
the past. And then you have the Nvidia's
coming through and they're they're they're the future,
right? And Oracle was, you know, taken
over by NVIDIA and was the poster child of that AI boom.
(12:54):
And and Oracle was thought that they weren't in the race, right?
And so they got slammed. But what's gone on since was,
well, kind of all came to a headin their earnings earlier this
week where they've just announced just spectacular order
book growth. And it's kind of come out of
nowhere to an extent. Well, I don't know unless you
(13:17):
follow Oracle more closely, which I don't, it kind of came
out of nowhere from my perspective.
But basically in terms of their order book pipeline, they've got
bookings of $455 billion this quarter.
They have signed $455 billion worth of revenue.
Not, not not that it's going to come immediately.
(13:38):
These are multi year deals that have now been signed, right?
Signed with the likes of Open AIXAI, Meta, you know, NVIDIA,
AMD, you name it, right? They're all now coming through
with monster orders. To give you a context, $455
billion worth of orders. The analysts expectations was
for 138 billion. So you know it's 3 1/2 xed what
(14:05):
the analysts were expecting and that analysts expectation was a
massive jump to the kind of big,you know they were talking about
mainly $18 billion worth of revenue in the quarter.
So analysts were saying that strong order about 138 billion
signed, but it's 3 1/2 X that. So they've just come and
absolutely just it's kind of NVIDIA esque right from a couple
(14:27):
of years back when NVIDIA started to report this just
ridiculous revenue growth. And I guess it kind of just
tells a story, I think of an, you know, if you're not in this
AI race, which Oracle were not actually doesn't matter.
And that's just because the demand side of this compute
(14:49):
thing, right? For AI, the demand side is so
far outstripping supply. The Oracle, even though they are
woefully late, they can still turn up now and the demand is so
huge, there's plenty of the Katethere for them to go and gobble
up, right? Is this bad news for NVIDIA and
(15:09):
the like? No, just because again, the
demand is so wildly outstrippingthe the current capacity, right?
So yeah, quite an interesting story and a couple of side
notes. So on the day that earnings day
that that kind of big jump 40% up in their share price.
So actually that puts them as the sixth biggest ever single
(15:32):
day market cap gain. So they added 244 billion to
their market cap in one day, puts them six the the top five,
three of them are NVIDIA, including NVIDIA being number
one. They added 441 billion on
earnings day back on the 9th of April.
(15:53):
But yeah, NVIDIA a first, third and 4th on this list telling
exactly that story of the AI revolution, right?
Apple actually a second on the list with their earnings from
April 2025 and then Microsoft the 5th again, April 2025
earnings. So, yeah, huge upside for them,
you know, really putting them, you know, firmly in this race.
(16:17):
And and then final side note, Ellison, So Larry Ellison, who's
the founder, he still owns 40% of this business, which is quite
remarkable. So actually briefly, because the
stock, the stock rallied 40%, then it kind of dropped off a
little bit. I think.
I think it closed like 30% up. But whilst it was 40% up, Larry
(16:39):
Ellison was the most wealthiest man on the planet.
Very briefly, his kind of wealthreached 386 billion, which just
took out Musk, who's currently on 384 billion.
So just for a few hours there, Allison knocked Musk off top
spot. Yeah.
And just on the point of Musk, in the news this week, of
(17:02):
course, was the a new pay package which would come in at
$1 trillion that Musk has got through, which is obviously
record shattering in its size. But here's a couple of you
remember when he had his this, the, the tension around whether
or not he would be paid out on his previous one was these
(17:22):
astronomical milestones that were set out.
But when Tesla was in his infantscene and I guess the management
team were like, OK, you get somereally chunky rewards for some
really spectacular milestones. And obviously he achieved chief
them all. And so now looking at this, here
are some numbers of what this latest package.
(17:45):
So if he's going to become a trillionaire, then he's got to
hit a couple of these. So it's approximately a trillion
dollars over 10 years if Musk hits 12 milestones, some of the
12. So how many robo taxis are they
selling at the moment? Just remind me 00, OK, so he
(18:06):
needs to be selling 1,000,000 robo taxis as as a milestone.
Yeah, OK. Yeah, 20 million vehicles a
year. Because that's so that for
context, I think they produce 2 million roughly at the moment.
Right. It's going to get up to 20.
And like the biggest, like the big, big, big boys, you know,
(18:27):
the Toyotas and the VWS in this world, they produce about 10
million vehicles a year at. The moment, no problem, they
love it for 400 billion EBITDA and a market cap.
So the market cap at the moment,I mean, look, it fluctuates.
By the time you've listened to this, it's probably going to be
different. But let's say it's around 1
(18:49):
trillion, so that that market cap milestone is $8.5 trillion.
So they're like the most expensive business in the world
is NVIDIA, which is like just it's like between 4:00 and 4:00
and a half trillion, isn't it? So yeah, OK.
So it needs to be double the market cap of the current
(19:11):
largest business on the planet. Yeah.
No pressure. Yeah, well, look, these moon
shots come through. It's all gravy, baby.
Well, but to be fair, like his package we had last time, which
they kind of rolled out, I thinkit was like 2018, everyone at
the time was like what? It's just absolutely ridiculous.
(19:31):
Obviously it's not going to happen.
Then it did. So it's kind of say it's kind of
like Deja vu here with this package, but.
Yes, it's very. Interesting to see.
You mentioned there about with Oracle really smashing the
street. So a couple of things.
A segue. One, how did these analysts get
(19:54):
it so badly wrong? Because I thought that their job
is to look the financial metricsaside.
I thought they're supposed to stay pretty close to the pulse
by talking to business executives of the firm to get
the headwinds to pick up those soft signals so you don't get
caught with your pants down and missing by such a whopping
(20:16):
margin. So I guess that.
And then maybe we could talk about the Wall Street upgrades,
like how meaningful are they, ifanything at all?
I think to be fair to the analysts, I would say two
things. Number one, you know we are
still at the very beginning of what is a multi decade, you
(20:40):
know, global secular shift to AI, right.
And it's right at the start, youknow, it's equivalent.
And many people say it will be much bigger, but it's equivalent
to the Internet, right? So at the end of the 90s, again,
analysts had a shocking time trying to value businesses that
(21:00):
were online because it was so new and it was impossible to
kind of really foresee how this is all going to pan out.
And so you had massive valuationerrors back then, though,
valuation errors as in overvaluing businesses.
I think what you've got here is perhaps the opposite, but again,
it's the same function around just so difficult to really know
(21:22):
how this is all going to shape up and pan out and let's learn
our lessons from the.com bubble bursting.
And so perhaps they're just a bit more cautious.
Secondly, I would say businesseslike Oracle, you know, when
you're talking, I, I guess they don't want to announce or even
talk or whisper about a mega deal being discussed because the
(21:43):
last thing they want is to starttalking about it.
People start getting excited andthen the deal not happening
because the set share price is just getting slammed.
So I think they're just kind of holding back info until there's
ink on the paper and then it's like surprise.
I find it so hard when you're talking about a couple of 100
(22:04):
bill. And so let's say I'm an employer
Oracle, like the vibe in Oracle,that sales floor in my Oracle
office. And I'm like, Jesus, what's
going on up there? There's like, there's like a
party every day and they're like, they're all they're doing
is getting drunk every night. And then they're just like, what
is going on? Like surely like there's that
(22:26):
gets out to an extent. And then the employees and then
there's some options trading andthen there's some flow being
seen and then the words out because forget the analysts
because the analysts are going to be slow to the party.
What about those sophisticated people who who who do have areas
to the ground? But we're talking about handful
(22:48):
of deals that are mega insides, right?
So like who's going to be brokering the deal with with
Meta? It's probably Ellison himself,
right? Or if it's not, it's like his
absolute, absolute senior top dog salesperson.
So it's only happening right at the very top, I would say.
So again, maybe they're maybe they're just trying to be
(23:11):
cautious and not letting that flow down to the wider.
OK, I've got, I've got a strategy.
Got a strategy for you. So I reckon we should put some
sort of tracker and, and watch Ellison's movements to see
geographically what is his actual physical location.
And so we could see where he's going, who he's meeting, what's
(23:33):
his patterns, who are you going?To who are you going to send in?
Who's going to plant the tracker?
Why are you in Sydney? Like I mean, OK, well like Wall
Street analysts then I mean theyhave they have upped the ante.
It's the first time of the year that the the 7000 figures now on
the table. So yeah.
(23:54):
Any thoughts on on that? I mean, hey, what, why have they
done this? Like what are the main
predominant drivers? And then, yeah, I mean, we're,
we've still got a whole four months to run yet.
So how valid are these at this point?
Yeah, there's plenty of time. I mean, the drivers are very
clear. It's Fed rate cuts, which is a
(24:15):
function of the inflation situation, like the PPI data
that we had earlier this week and the labor market softening.
So, right, those two economic measurements are dropping, which
it's a tricky 1 to really explain, right?
(24:35):
Because then the Fed are going to cut rates and we're even now
pricing 3 rate cuts before year end.
But you can flip it and go hang on that labor market softening
that looks quite alarming, the rate at which it suddenly
dropped off. So isn't that bad news
economically? Aren't we going to get a
recession? But I think right, and and we
may well do, but at the moment there's enough uncertainty
(24:56):
there. And look, the immigration
situation has meant the labor force has kind of shrunk.
And so maybe less jobs being created.
Actually, it's fine for a smaller labor force.
There's all these counter arguments you can put forward.
So right now we're in that sweetspot where the economic disaster
can't be seen on the horizon. It's possibly just over the
(25:17):
horizon, but we can't see it yet.
So in the meantime, we just got more rate cuts and it's like,
well, hey, let's go. That's that's number one.
And then number 2 is the AI story.
And like Oracle perfect. You know, another kind of
validation point in that thing around AI, the AI boom is is
(25:38):
ongoing. It's not slowing, right?
We were worried the whole NVIDIAstory was going to be, you know,
it was going to stumble this year.
That growth rate couldn't be sustained.
Well, it was and it is an Oraclean hour further evidence to that
point. So that they're the two factors
Fed cuts without an economic crisis on the horizon and the AI
(25:58):
revolution, you know, full steamahead.
So with the, the banks then, so Deutsche have got 7000 by year
end. Barclays just well around 6500.
Well, then they're saying it's going to go.
So there's, there's a timing difference.
So they're basically saying 6450now and then up to 7000 in 2026
(26:24):
again, I'm, I'm going to find what that means in terms of
2026. And then Wells Fargo plus, well,
I guess they're saying plus 11% on the current price by the end
of 26. Yeah, I mean.
Like. I mean 7000, sure.
I mean that we've gone from 5000to 6 1/2 thousand in three
(26:46):
months. What's another 500 points when
you've already done 1500, right.So I, I think we can get to
7000. Barclays are interesting.
So they're basically saying we're going to get a drop
because we're at 65. Now they're saying 6450 by year
end. So that I guess they're saying
this rally is done, but we're not going to get a sell off and
(27:08):
maybe a consolidation here before then.
Another push 2026, yeah, maybe that's being a bit more cautious
and conservative, I would say. But I mean, I wouldn't be
surprised if we saw 7000 before year end, given that given these
key drivers of the Fed cuts nextweek and they're dovish, you
(27:29):
know, in terms of their rhetorictowards the direction of travel
into year end. Meaning are they going to really
confirm or as far as they can that they're going to cut rates
at least once more, if not twicebefore descent before year end?
Well, then you know that that story's great.
As long as we don't get a continued collapse in labour
market data, then I think you'vegot that nice sweet spot from
(27:52):
our stock market's point of viewwhere you're getting rate cuts
with with the AI boom, as I've said, ongoing.
And so I mean, remember that it's the tech firms that are
fueling this S&P rally, right? It's only going to get to 7000
if the tech giants continue booming.
And and if they do, you can easily get there given how much
(28:12):
of A dominant force they are in that index.
So rather than these banks outlook on the US stock market,
how about the banks in themselves?
So it does feel like general market environment is still
fairly well. I say that the VIX wouldn't
agree with me, but it feels likevolatility.
(28:32):
We're out of that volatility peak that we that we were in, in
prior quarters which we saw these record-breaking trading
revenues at a lot of these investment banks.
But at the time, it was the banking part of the business,
which was pretty slow going and didn't live up to the beginning
of the year expectations becauseof Trump and tariffs and
(28:54):
inflation and so forth. What is it looking like now?
Because I know there was a few little leaks in the press about
how some of these big banks are getting on the banking side,
which seems seemingly is livening up because as I said,
at the top of the show, you've had pretty much the biggest
listing and a massive blockbuster M and a deal.
So what's the what are we getting as signals as to how
they're performing? Yeah, I mean, look, the banking
(29:17):
side is starting to Rev up and you know why it's hard to, I
mean, deal flow is, is, is increased, right?
And we're going to talk about a couple now in a second.
But you know, more broadly, remember going back to the start
of the year, we we've had a weird year thinking about deal
flow right at the end of last year.
(29:38):
Trump's coming deregulation, right?
Deals are back, baby. You know, Trump's all about the
deal, remember? And so we were really optimistic
about investment bank revenues in 2025.
Then we hit quarter one and it just didn't happen.
There was nothing and it was dire and everyone reversed their
expectations. But actually, as we've come
(30:00):
through the summer, you're actually starting to get some
big deals starting to come to the docket.
And so actually fees are really starting to pick up now.
It's why why now rather than at the start of the year, I think
that we've gone through the tariff sort of speed bump, let's
say from a confidence point of view.
(30:22):
And you know, don't forget dealsrequire financing and financing
costs money. And look, if we're going to get,
if we're in a rate cutting environment, well, really in the
end that's going to be the biggest catalyst for deal flow,
right. So if we are now in a, if we can
see three rate cuts before year end, well, happy days from a
kind of financing cost perspective, which is going to
(30:44):
drive more deals, right? So, and then there's so much
pent up demand. We'll talk about clan as IPO in
a minute, right. But they, they were wanting to
IPO back in 2021, right? And here we are four years
later. So the, the queue is just
ridiculous in terms of companiesthat have been wanting to get
something done and just haven't been able to for years now.
(31:07):
So I think that kind of pent up demand there is starting to come
through as well. So yeah, it's, it's actually
looking really good from a sort of banking, investment banking
fee generation point of view. Yeah.
And some of the I think it was aReuters article that was listing
some of the early numbers sayingthat city IB fees are seen in
the mid single digits, JP low double digits percentage and
(31:31):
Bank of America IB fees up around 10 to 15%.
So yeah, pretty, pretty decent. But let's talk about two of
these deals then. I mean, one was I guess the the
troubled route to to listing of what was Klarna, but it did
start trading from the day we were recording this yesterday
(31:52):
and I think they initially shot up 25% and I think they finished
the day up around 14 or so. So really positive first day, so
to speak, on what was otherwise looking like a really quite
challenging process to get to this point.
Yeah, you've got to. You've got to go back in the
(32:13):
clown a story to really get it all into context.
Because if you just look at thisIPO only, it's like, OK, demand
was like off the scale and like 25 times oversubscribed, which
is obviously huge. And as a result of that demand,
(32:34):
they ended up pricing the deal at $40, which was above the
initial range, OK. So from an IPO perspective,
right, really strong then the market, you know what happens on
an IPO of course is that this iswhere the company issues shares
and sells shares in the IPO to investors, right at $40, OK,
(32:55):
Bang. Then what happens is you then
list on a Stock Exchange. So you then these shares become
freely tradable on a Stock Exchange, OK?
So you then get the market open the following day or that or
that morning, the mark, the stock opens for trading on the
Stock Exchange for the first time.
And then that's the next measureof demand.
(33:15):
So those that missed out on the IPO issuance directly can then
get involved just in the secondary market, right?
And so the stock price popped another 25%.
So they priced it at 40, which was above the range because of
super high demand from the $40. It then popped 25% in trading on
(33:38):
the stock market on on day one, right?
So this is all super strong. And it's like, wow, amazing
Klarna, awesome story. What you got to understand since
if you go back in time so that this put them at a 15 billion
market cap, OK, based off the $40 that is.
So obviously they went up a bit.Can I just quickly ask a
(33:58):
question? Yeah, you've mentioned already
on this conversation about tech giants are booming and they're
really important. And then I was thinking about
the you said there's a bit of pent up, a lot of companies want
to come to market, let's say do deals.
That deal could be listing transactions, whatever it might
be. If I was the banker leading
(34:19):
this, if I was the lead runner on this deal and I knew that
there's a pipeline and it's predominantly tech orientated,
like all of these deals are are predominantly tech.
That's where the biggest value is.
The biggest fees for me is the banker.
Surely I'm going to low ball this.
So there is way over bid so thatyes, someone could criticize
(34:43):
that we could reduce this for more fees.
But I'm thinking about the other10 deals I've got in the backlog
that once I see this success, they're going to be like and
when can we go and I'm just going to cue those up.
And so do you think this, do youthink that rationale is a bit of
engineering going on here on thebankers side?
I do and that all makes sense. But one thing to add, don't
(35:04):
forget that it's been a, it has really up until maybe now, it's
been quite a cautious market, the IPO market, right?
It for those reasons I've said right, earlier in the year, we
were hoping for a big wave and then it just didn't happen and
we had some IP OS that kind of failed.
(35:25):
So I think these bankers are tiptoe, they're still tiptoeing
towards these deals, preferring undervaluing them or at least
the range they put up to start with is is on the cautious side
because remember, the last thingthey want is a failed, you know,
marquee failed IPO because it's just kind of collapse
confidence, right? So just just tiptoeing and being
(35:48):
cautious. And then, yeah, if they can get
a nice story with a great successful launch, then great.
That kind of feeds into their order book that they've got
backing up. Absolutely.
So, you know, I think, yeah, they're playing a strategic game
here. But yeah, I mean, look, let me
go back though, because planner,So they took investment from
(36:12):
SoftBank, OK, back in 20/21/2021was the post COVID bubble, the
tech bubble, right? And a lot of these firms went to
crazy prices and SoftBank, you know, took on or sorry, stepped
in and invested in Klarna, valuing Klarna of 45.6 billion.
(36:34):
OK, 45.6. They've just done an IPO which
has priced them at 15, 45.6 in 2021.
By 2022, literally 12 months later, they had to take on more
funding because they were running out of cash basically.
And they did a private funding round at 6.7 billion.
(36:55):
So that's the that's the tech bubble bursting 2021 peak to
2022 through like Klarna was like the most extreme example,
about 45 billion down to six, right?
So now they've kind of doubled in a bit more from that through
right? It was 6.
(37:16):
And now look here we're at 15 three years later.
So they're kind of climbing out of that hole.
SoftBank are still staring at like 60 odd percent haircut on
their their kind of deal they did in 2021.
Who knows, maybe they'll kind oftake a scratch on that trade in
a few years time if Farner can now kind of generate some good
(37:39):
growth, obviously. But yeah, there's a big back
story here. But still, that aside, yes, it
was a successful IPO and the bankers are very happy.
Yeah. And those bankers being Goldman
Sachs, JP Morgan, Morgan Stanley, and there was actually
11, 1111 other firms working on that deal.
So it was a big job to get to get done.
(38:01):
So final one just before we wrapis talking about, you know, one
of the largest mining deals in over a decade.
I mean, this is this is a big one.
So yeah. Tell me more about the Anglo
American Tech Resources merger. Yeah.
Well, this is such an interesting story.
This you might have been tracking well, partial.
(38:23):
Well, you and Stephen did I think more than one episode
tracking the Anglo or or the BHPBilliton bid for Anglo America,
which I mean, when was that lastyear or maybe even was it even
into the start of this year? And we'll have to check on that.
But this is really interesting. So you've got two companies
(38:45):
here, Anglo America and Tech, right, the 222 big mega miners
and they are now merging like a merger of equals roughly.
I mean, I think Anglo will take about I think it's 63% of the
merged business will basically be owned by by Anglo, but
roughly a merger of equals. But both of them have had to
(39:08):
fend off quite hostile bids overthe last sort of 12 to 24
months. So Tech, they got approached by
Draincore and Draincore were trying to buy tech OK, they
fended them off BHP Billiton were trying to buy Anglo fended
them off. Why?
Why are these two attractive targets?
(39:30):
Copper. They've got huge copper mine
reserves in Chile. OK.
And copper. No, it's the prize metal, right?
It's the it's the metal of the AI revolution.
Copper is needed for electricityand for chips and all this, you
know, power, right. So This is why Anglo and and
(39:52):
tech separately was seen as quite attractive strategic moves
for Glencore and BH Billiton to try and kind of future proof
their kind of business right now.
Both of them got fended off these attacks and.
There's even, I don't want to delve too much into this, but
there's there's specific reason like complexity of the deal.
(40:14):
So BHP wanted Anglo to kind of divest certain parts of their
business and streamline it to the to copper.
But then there's regulatory hurdles to that because South
Africa where Anglo do a lot of non copper mining.
Anglo's a huge employer of SouthAfrican people.
(40:34):
And so the South African government will like, hang on a
SEC, no chance anger. You're not divesting these
parts. We're not happy with that,
right? It was a very complex deal.
And anyway, Anglo thought, hang on BHP, you're massively
undervaluing us for the valuation wasn't there either.
So it was a undervaluation. It was a deal complexity.
(40:54):
It was a regulatory scenario that kind of really kind of
prevented that from happening. And look, Tech batted off
Glencore as well. So now you've got these two
coming together. And actually what's a quite nice
defensive play is to say, hey, you big boys circling back off,
(41:17):
because we're kind of grouping together and becoming a bit of a
giant ourselves, right? So it's a great defensive play.
Also, there's some awesome kind of synergy cost savings here.
These twos are Anglo and Tech. They've got 2 mega copper mines
in. They've each got a copper mine
in Chile, but they're right nextto each other.
So they reckon they can save $80million pretty much in year 1 on
(41:42):
the kind of costs of running these two mines, given their
adjacency. Geographically, there's a really
interesting kind of cost saving synergy story as well as a
defensive play. So from a kind of deal strategy
perspective, there's so many different angles to this and
it's actually a really good one.If you're thinking about, you
know, applying for roles in the M&A space and you're looking to
(42:05):
go into interviews and so on. You know, if you want a story
that covers so many different kind of strategic angles, then
there's there, there isn't a better one than this.
Yeah. And actually in your notes
you've got this really great five point kind of strategic
theme plan and I think I'll try and share that where we put this
episode kind of breaking down what you said, copper is the
(42:25):
price as you're explaining aboutthe critical for EVSAI, date
centers and so on. Defense by focus, streamlining
portfolios, focusing on what you're good at as a business,
doubling down friendly emerges when more of equals and a
national interest. You mentioned South Africa and
(42:46):
then complexity killing beds. So yeah, that's great.
And I'll look to share that. But look, my headphones have
just died according to the the AI voice in my my ear.
And so with that, thank you verymuch Piers and everyone else for
listening. And yeah, safe trip back from
Sydney, you know. Thanks a lot.
Hello and welcome back to the Market Maker podcast.
And three things we're going to have as talking points.
Inflation surprise puts the Fed on track for rate cuts 3.
In fact, I think the markets arepricing and what's the stocks
reaction record highs once again, here we are.
Then Wall Street banks in in turn then are lifting their S&P
(00:23):
500 forecasts, betting on AI earnings to keep the rally
alive. I think we go back what, nine
months now to our outlook for the year ahead.
I think I was the one who said 7500, baby.
And when the market dipped below5000, didn't it?
(00:43):
Only a few months ago. I do remember a lot of people
calling me out, you know, sayingand you're so bad, you're so
wrong, you know, mugging me off and here we are.
Well, I'll. Be coming to fruition.
We're not there. We're not there.
But to be honest. This rally's too early.
I, I was banking on this rally happening at the end of the
(01:03):
year, to be honest, when we eventually top 7500, but we we
shall see. It's a bit early for me, so
we'll talk about that's. A good point actually, just just
before you go on to the rest of the docket.
I, I was very bearish at the beginning of the year and you
were very bullish. And actually both of our calls
have played out like basically within the first sort of eight
(01:28):
months of the year basically with the massive bear sell off
in in April and now the big bullrun.
So yeah, we were both right, butit's all just happened way
faster than we'd expected. Yeah.
And and loan, behold, we'll probably end up exactly where
Stephen said, which was in the middle.
So the other thing is big deals are back in the banking space.
(01:52):
We've had the eventual listing of Klarna, their IPO and we've
also had a blockbuster M and a deal announced in the commodity
space, $50 billion mining mega merger.
And so quick look at some of that.
But we're also going to talk about Oracle, about Elon's
trillion dollar pay packet, about copper and data centres.
(02:13):
So, yeah, lots to come. But Piers I I don't think you
own a penthouse apartment. So who?
So where are you? Well, you don't, you never know.
This is my penthouse apartment in Sydney and this is, I'm in
Sydney at the moment. So yeah, bit of a time zone
difference. We, we just about managed to
(02:36):
kind of figure it out and connect.
I think I'm nine hours ahead of you at the moment.
But yeah, no, I'm in. I'm in Sydney just for a sister
event I'm running tomorrow. But yeah, Sydney's.
Have you ever been to Sydney? No.
Never, never Australia. So it's a.
Great, great city, a really coolvibe, much smaller than London.
(02:58):
But also I'm kind of say it's way more relaxed, doesn't feel
quite, you know, like the rat race in London can often kind of
dominate, but here it's quite chilled.
You know people clocking off work at like half 4, You know,
it's it's just a completely. Different question speed.
(03:19):
To it. Sydney or Dubai because a lot of
people leave the UK or the rat race for example, OK Dubai has a
a tax efficiency thing and so on.
But for lifestyle wise people say similar.
So where? Where would you go?
I haven't been to Dubai for probably 15 years, but based on
(03:40):
that and my experience here in Sydney, I I would say Sydney all
day long. All right, here we go.
There's going to be a poll and comments on the video, please.
Sydney or Dubai, What, what are you picking?
All right, well, let let let's dive into this and perhaps we
can talk about some important U.S. data on the inflation side
(04:04):
and what that means for for future Fed policy.
Yeah. I mean, so we had and we'll look
we've got more inflation data. Actually I think it's my time
zone thing isn't screwed up. I think it's later today, right.
We've got the CPI report. But what we had earlier in the
week is something called the PPI.
So remember CPI that's consumer price index, PPI that's producer
(04:29):
price index. Both are a measure of inflation.
It's just a different part in the, the kind of journey of a
product. So PPI is earlier on in the
journey. This is when a company, so the
producers prices. So what what is the producer of
the product? What's the prices of these
components, Let's say that they are buying in order to to then
(04:54):
manufacture their product, whichwhen then they sell, of course,
that's when it becomes the consumer price, when the
consumer is buying the finished product.
So this is like earlier on in that kind of life cycle and I,
I, you know, I would say generally speaking isn't as
important. So PPI isn't as important as CPI
(05:14):
when we think about economics and when we think about, we'll
move on to Fed policy, right? the Fed is more concerned about
the consumer end of, of the price mix because what's
happening at the moment? Well, let me just say the data
that was announced earlier in the week, PPI was way lower than
expected. And actually, interestingly, the
month on month change was negative.
(05:36):
So the month on month was -.1%, much lower than expected.
The year on year also dropped quite sharply from the month
before. So in August, year on year PPI
was 2.6%. What had happened in July, the
PPI number jumped quite sharply to 3.1.
And everyone's going, ah, tariffs, tariffs, tariffs.
(05:57):
Look, it's prices are coming through.
This is going to, you know, result in this being passed on
to consumers. So you might have that
terminology a lot. And that's basically, well, if a
company is having to pay more for its components, the cost of
building its product rises. And inevitably the company's
going to pass on that extra costto the consumer by raising the
(06:18):
price of the end product, right,to protect their profit margins.
So when it jumped to 3.1% in July, everyone's going, oh,
tariffs, right, inflation's coming, you know, drum drumming
that, that kind of that, that drum.
But now in in August, it's dropped back to 2.6% on the year
on year front, which is very interesting because maybe it
(06:39):
looks like, I mean, not only areproducers not passing the price
rises on to consumers yet, maybeactually the price rises for
producers is actually not going to be as bad as everyone
thought, right? So that's the kind of general
theme here. So really positive inflation
(07:01):
print when you're wanting thingslike Fed cuts, you know, Fed
interest rate cuts, and when you're wanting Fed rate cuts to
kind of continue to fuel this kind of stock market rally and,
you know, stimulate an economy because we're a bit worried that
maybe the labor market's beginning to kind of soften.
So this kind of all feeds into the positive economic and stock
(07:23):
market narrative. So from a reaction function then
I know we are, as you said, recording this before the CPI
data comes out. When people listen to this, it's
probably going to be after. But thinking about market
positioning then having moved torecord highs, we've kind of just
sat there since. And so do you think the market
is quite primed from a positioning perspective where
(07:45):
now if that does not fall in a line of a similar type of vein
that there could be, you know, adecent intraday pull back, not a
massive reversal of sentiment interms of what people are
thinking? Yeah.
I'd say like with any of this data, the downside risk, let's
just talk about the stock marketand the US stock market
specifically and looking at the S&P 500 downside risk is much
(08:06):
greater than upside risk just because of a function of what's
been going on in that market forthe last couple of months.
Or if you go back to the that low mid-april, right was at
5000, we're now at 6500. Don't start protecting your call
here, Piers. It's been an epic rally.
So the point is to continue to rally.
(08:29):
You know, just good data doesn'tcut it.
You know, it's got to be like, fantastic, It's got to be much
better than expected, right, Which is what that PPI number
was earlier in the week. I mean, it really was a surprise
in a good way. So, but yeah, I mean, if the CPI
data comes out super hot later on, meaning higher than
(08:53):
expected, remember the feds paying more attention to that
consumer side, well, then that that kind of positivity of the
PPI number early in the week will definitely be reversed.
Yeah, for sure. And then under the bonnet, I was
just trying to see if I can quickly bring up a bit of a heat
map of the the year to date. And I was just having a look
NVIDIA up 32, Google up 26, Metaup 28, Microsoft up 18, Apple
(09:19):
and Tesla the laggards of the the mag 7, Apple down 9.
You see the new phone. I did the what?
They're calling it the Razor or no Skip.
Yeah, that's right. Yeah, using the terminal, yeah,
because obviously the MacBook Air and stuff like that, they're
kind of continuing that theme. Right.
Love to hear what the audience thinks with these monumental
(09:41):
leaps in innovation from Apple. Is the is the is the $2000 new
iPhone Pro Max worth it or the Air would buy it for for the for
what it is? Well, the air is 999, which was
the interesting point from the pricing perspective.
(10:02):
It's like, OK, I mean, maybe if you're pro Apple you then you
say, well, they're listening, they're listening, you know,
cost of living crisis that here's a here's a better phone,
but we're not going to put prices up kind of thing.
But yeah, I mean, well, their share price push higher off the
back of that. I mean, Apple have had a decent
(10:24):
few months having been, you know, definitely the laggard,
you know, earlier on in the yearjust from the point of view of
them being kind of out of the AIrace at this point.
But we'll talk about Oracle in aSEC because it's interesting
about are you in the AI race or not?
And if not, well then just does that mean you're dead and
buried? And the and being in the AI race
(10:46):
doesn't mean you have to be producing these models and on
the software side, right? No, that's right.
It it it can be on that kind of product end, which which is kind
of coming right, where then you have AI driven products that you
know, people and businesses can use, you know, in order to, you
(11:08):
know, Dr. efficiencies or drive up productivity, right.
And so, you know, obviously Apple are, you know, hugely
connected business with regards to users of their products, both
on the phone side and on the kind of computer side, right?
So they are still in a position where they can benefit from the
(11:29):
AI journey, but just a bit further down the track when it
comes to actually apps being subscribed to for businesses to
use. But still nothing from Apple on
this really. So who knows?
But you know, the big winner of the week, which kind of ties
into this story was Oracle, where I mean, Oracle were up
(11:52):
40%, OK, yesterday off the back of their earnings that kind of
delivered. They delivered on Tuesday night.
And it's a classic story of likeif you go back to 2022, Oracle
got absolutely slammed. Oracle were down 50% I think by
(12:12):
the sort of latter end of 2022. Stock price down 50%.
You know, partly that was because of a broader stock
market sell off. We were concerned about the kind
of inflation crisis kicking off and interest rate cycle moving
to the upside and all the rest of it, right.
But also Oracle got double slammed because they just
weren't in the AI race. You know, traditionally they
(12:34):
were seen as the kind of databases and, you know,
businesses, you know that that kind of software enterprise from
the past. And then you have the Nvidia's
coming through and they're they're they're the future,
right? And Oracle was, you know, taken
over by NVIDIA and was the poster child of that AI boom.
(12:54):
And and Oracle was thought that they weren't in the race, right?
And so they got slammed. But what's gone on since was,
well, kind of all came to a headin their earnings earlier this
week where they've just announced just spectacular order
book growth. And it's kind of come out of
nowhere to an extent. Well, I don't know unless you
(13:17):
follow Oracle more closely, which I don't, it kind of came
out of nowhere from my perspective.
But basically in terms of their order book pipeline, they've got
bookings of $455 billion this quarter.
They have signed $455 billion worth of revenue.
Not, not not that it's going to come immediately.
(13:38):
These are multi year deals that have now been signed, right?
Signed with the likes of Open AIXAI, Meta, you know, NVIDIA,
AMD, you name it, right? They're all now coming through
with monster orders. To give you a context, $455
billion worth of orders. The analysts expectations was
for 138 billion. So you know it's 3 1/2 xed what
(14:05):
the analysts were expecting and that analysts expectation was a
massive jump to the kind of big,you know they were talking about
mainly $18 billion worth of revenue in the quarter.
So analysts were saying that strong order about 138 billion
signed, but it's 3 1/2 X that. So they've just come and
absolutely just it's kind of NVIDIA esque right from a couple
(14:27):
of years back when NVIDIA started to report this just
ridiculous revenue growth. And I guess it kind of just
tells a story, I think of an, you know, if you're not in this
AI race, which Oracle were not actually doesn't matter.
And that's just because the demand side of this compute
(14:49):
thing, right? For AI, the demand side is so
far outstripping supply. The Oracle, even though they are
woefully late, they can still turn up now and the demand is so
huge, there's plenty of the Katethere for them to go and gobble
up, right? Is this bad news for NVIDIA and
(15:09):
the like? No, just because again, the
demand is so wildly outstrippingthe the current capacity, right?
So yeah, quite an interesting story and a couple of side
notes. So on the day that earnings day
that that kind of big jump 40% up in their share price.
So actually that puts them as the sixth biggest ever single
(15:32):
day market cap gain. So they added 244 billion to
their market cap in one day, puts them six the the top five,
three of them are NVIDIA, including NVIDIA being number
one. They added 441 billion on
earnings day back on the 9th of April.
(15:53):
But yeah, NVIDIA a first, third and 4th on this list telling
exactly that story of the AI revolution, right?
Apple actually a second on the list with their earnings from
April 2025 and then Microsoft the 5th again, April 2025
earnings. So, yeah, huge upside for them,
you know, really putting them, you know, firmly in this race.
(16:17):
And and then final side note, Ellison, So Larry Ellison, who's
the founder, he still owns 40% of this business, which is quite
remarkable. So actually briefly, because the
stock, the stock rallied 40%, then it kind of dropped off a
little bit. I think.
I think it closed like 30% up. But whilst it was 40% up, Larry
(16:39):
Ellison was the most wealthiest man on the planet.
Very briefly, his kind of wealthreached 386 billion, which just
took out Musk, who's currently on 384 billion.
So just for a few hours there, Allison knocked Musk off top
spot. Yeah.
And just on the point of Musk, in the news this week, of
(17:02):
course, was the a new pay package which would come in at
$1 trillion that Musk has got through, which is obviously
record shattering in its size. But here's a couple of you
remember when he had his this, the, the tension around whether
or not he would be paid out on his previous one was these
(17:22):
astronomical milestones that were set out.
But when Tesla was in his infantscene and I guess the management
team were like, OK, you get somereally chunky rewards for some
really spectacular milestones. And obviously he achieved chief
them all. And so now looking at this, here
are some numbers of what this latest package.
(17:45):
So if he's going to become a trillionaire, then he's got to
hit a couple of these. So it's approximately a trillion
dollars over 10 years if Musk hits 12 milestones, some of the
12. So how many robo taxis are they
selling at the moment? Just remind me 00, OK, so he
(18:06):
needs to be selling 1,000,000 robo taxis as as a milestone.
Yeah, OK. Yeah, 20 million vehicles a
year. Because that's so that for
context, I think they produce 2 million roughly at the moment.
Right. It's going to get up to 20.
And like the biggest, like the big, big, big boys, you know,
(18:27):
the Toyotas and the VWS in this world, they produce about 10
million vehicles a year at. The moment, no problem, they
love it for 400 billion EBITDA and a market cap.
So the market cap at the moment,I mean, look, it fluctuates.
By the time you've listened to this, it's probably going to be
different. But let's say it's around 1
(18:49):
trillion, so that that market cap milestone is $8.5 trillion.
So they're like the most expensive business in the world
is NVIDIA, which is like just it's like between 4:00 and 4:00
and a half trillion, isn't it? So yeah, OK.
So it needs to be double the market cap of the current
(19:11):
largest business on the planet. Yeah.
No pressure. Yeah, well, look, these moon
shots come through. It's all gravy, baby.
Well, but to be fair, like his package we had last time, which
they kind of rolled out, I thinkit was like 2018, everyone at
the time was like what? It's just absolutely ridiculous.
(19:31):
Obviously it's not going to happen.
Then it did. So it's kind of say it's kind of
like Deja vu here with this package, but.
Yes, it's very. Interesting to see.
You mentioned there about with Oracle really smashing the
street. So a couple of things.
A segue. One, how did these analysts get
(19:54):
it so badly wrong? Because I thought that their job
is to look the financial metricsaside.
I thought they're supposed to stay pretty close to the pulse
by talking to business executives of the firm to get
the headwinds to pick up those soft signals so you don't get
caught with your pants down and missing by such a whopping
(20:16):
margin. So I guess that.
And then maybe we could talk about the Wall Street upgrades,
like how meaningful are they, ifanything at all?
I think to be fair to the analysts, I would say two
things. Number one, you know we are
still at the very beginning of what is a multi decade, you
(20:40):
know, global secular shift to AI, right.
And it's right at the start, youknow, it's equivalent.
And many people say it will be much bigger, but it's equivalent
to the Internet, right? So at the end of the 90s, again,
analysts had a shocking time trying to value businesses that
(21:00):
were online because it was so new and it was impossible to
kind of really foresee how this is all going to pan out.
And so you had massive valuationerrors back then, though,
valuation errors as in overvaluing businesses.
I think what you've got here is perhaps the opposite, but again,
it's the same function around just so difficult to really know
(21:22):
how this is all going to shape up and pan out and let's learn
our lessons from the.com bubble bursting.
And so perhaps they're just a bit more cautious.
Secondly, I would say businesseslike Oracle, you know, when
you're talking, I, I guess they don't want to announce or even
talk or whisper about a mega deal being discussed because the
(21:43):
last thing they want is to starttalking about it.
People start getting excited andthen the deal not happening
because the set share price is just getting slammed.
So I think they're just kind of holding back info until there's
ink on the paper and then it's like surprise.
I find it so hard when you're talking about a couple of 100
(22:04):
bill. And so let's say I'm an employer
Oracle, like the vibe in Oracle,that sales floor in my Oracle
office. And I'm like, Jesus, what's
going on up there? There's like, there's like a
party every day and they're like, they're all they're doing
is getting drunk every night. And then they're just like, what
is going on? Like surely like there's that
(22:26):
gets out to an extent. And then the employees and then
there's some options trading andthen there's some flow being
seen and then the words out because forget the analysts
because the analysts are going to be slow to the party.
What about those sophisticated people who who who do have areas
to the ground? But we're talking about handful
(22:48):
of deals that are mega insides, right?
So like who's going to be brokering the deal with with
Meta? It's probably Ellison himself,
right? Or if it's not, it's like his
absolute, absolute senior top dog salesperson.
So it's only happening right at the very top, I would say.
So again, maybe they're maybe they're just trying to be
(23:11):
cautious and not letting that flow down to the wider.
OK, I've got, I've got a strategy.
Got a strategy for you. So I reckon we should put some
sort of tracker and, and watch Ellison's movements to see
geographically what is his actual physical location.
And so we could see where he's going, who he's meeting, what's
(23:33):
his patterns, who are you going?To who are you going to send in?
Who's going to plant the tracker?
Why are you in Sydney? Like I mean, OK, well like Wall
Street analysts then I mean theyhave they have upped the ante.
It's the first time of the year that the the 7000 figures now on
the table. So yeah.
(23:54):
Any thoughts on on that? I mean, hey, what, why have they
done this? Like what are the main
predominant drivers? And then, yeah, I mean, we're,
we've still got a whole four months to run yet.
So how valid are these at this point?
Yeah, there's plenty of time. I mean, the drivers are very
clear. It's Fed rate cuts, which is a
(24:15):
function of the inflation situation, like the PPI data
that we had earlier this week and the labor market softening.
So, right, those two economic measurements are dropping, which
it's a tricky 1 to really explain, right?
(24:35):
Because then the Fed are going to cut rates and we're even now
pricing 3 rate cuts before year end.
But you can flip it and go hang on that labor market softening
that looks quite alarming, the rate at which it suddenly
dropped off. So isn't that bad news
economically? Aren't we going to get a
recession? But I think right, and and we
may well do, but at the moment there's enough uncertainty
(24:56):
there. And look, the immigration
situation has meant the labor force has kind of shrunk.
And so maybe less jobs being created.
Actually, it's fine for a smaller labor force.
There's all these counter arguments you can put forward.
So right now we're in that sweetspot where the economic disaster
can't be seen on the horizon. It's possibly just over the
(25:17):
horizon, but we can't see it yet.
So in the meantime, we just got more rate cuts and it's like,
well, hey, let's go. That's that's number one.
And then number 2 is the AI story.
And like Oracle perfect. You know, another kind of
validation point in that thing around AI, the AI boom is is
(25:38):
ongoing. It's not slowing, right?
We were worried the whole NVIDIAstory was going to be, you know,
it was going to stumble this year.
That growth rate couldn't be sustained.
Well, it was and it is an Oraclean hour further evidence to that
point. So that they're the two factors
Fed cuts without an economic crisis on the horizon and the AI
(25:58):
revolution, you know, full steamahead.
So with the, the banks then, so Deutsche have got 7000 by year
end. Barclays just well around 6500.
Well, then they're saying it's going to go.
So there's, there's a timing difference.
So they're basically saying 6450now and then up to 7000 in 2026
(26:24):
again, I'm, I'm going to find what that means in terms of
2026. And then Wells Fargo plus, well,
I guess they're saying plus 11% on the current price by the end
of 26. Yeah, I mean.
Like. I mean 7000, sure.
I mean that we've gone from 5000to 6 1/2 thousand in three
(26:46):
months. What's another 500 points when
you've already done 1500, right.So I, I think we can get to
7000. Barclays are interesting.
So they're basically saying we're going to get a drop
because we're at 65. Now they're saying 6450 by year
end. So that I guess they're saying
this rally is done, but we're not going to get a sell off and
(27:08):
maybe a consolidation here before then.
Another push 2026, yeah, maybe that's being a bit more cautious
and conservative, I would say. But I mean, I wouldn't be
surprised if we saw 7000 before year end, given that given these
key drivers of the Fed cuts nextweek and they're dovish, you
(27:29):
know, in terms of their rhetorictowards the direction of travel
into year end. Meaning are they going to really
confirm or as far as they can that they're going to cut rates
at least once more, if not twicebefore descent before year end?
Well, then you know that that story's great.
As long as we don't get a continued collapse in labour
market data, then I think you'vegot that nice sweet spot from
(27:52):
our stock market's point of viewwhere you're getting rate cuts
with with the AI boom, as I've said, ongoing.
And so I mean, remember that it's the tech firms that are
fueling this S&P rally, right? It's only going to get to 7000
if the tech giants continue booming.
And and if they do, you can easily get there given how much
(28:12):
of A dominant force they are in that index.
So rather than these banks outlook on the US stock market,
how about the banks in themselves?
So it does feel like general market environment is still
fairly well. I say that the VIX wouldn't
agree with me, but it feels likevolatility.
(28:32):
We're out of that volatility peak that we that we were in, in
prior quarters which we saw these record-breaking trading
revenues at a lot of these investment banks.
But at the time, it was the banking part of the business,
which was pretty slow going and didn't live up to the beginning
of the year expectations becauseof Trump and tariffs and
(28:54):
inflation and so forth. What is it looking like now?
Because I know there was a few little leaks in the press about
how some of these big banks are getting on the banking side,
which seems seemingly is livening up because as I said,
at the top of the show, you've had pretty much the biggest
listing and a massive blockbuster M and a deal.
So what's the what are we getting as signals as to how
they're performing? Yeah, I mean, look, the banking
(29:17):
side is starting to Rev up and you know why it's hard to, I
mean, deal flow is, is, is increased, right?
And we're going to talk about a couple now in a second.
But you know, more broadly, remember going back to the start
of the year, we we've had a weird year thinking about deal
flow right at the end of last year.
(29:38):
Trump's coming deregulation, right?
Deals are back, baby. You know, Trump's all about the
deal, remember? And so we were really optimistic
about investment bank revenues in 2025.
Then we hit quarter one and it just didn't happen.
There was nothing and it was dire and everyone reversed their
expectations. But actually, as we've come
(30:00):
through the summer, you're actually starting to get some
big deals starting to come to the docket.
And so actually fees are really starting to pick up now.
It's why why now rather than at the start of the year, I think
that we've gone through the tariff sort of speed bump, let's
say from a confidence point of view.
(30:22):
And you know, don't forget dealsrequire financing and financing
costs money. And look, if we're going to get,
if we're in a rate cutting environment, well, really in the
end that's going to be the biggest catalyst for deal flow,
right. So if we are now in a, if we can
see three rate cuts before year end, well, happy days from a
kind of financing cost perspective, which is going to
(30:44):
drive more deals, right? So, and then there's so much
pent up demand. We'll talk about clan as IPO in
a minute, right. But they, they were wanting to
IPO back in 2021, right? And here we are four years
later. So the, the queue is just
ridiculous in terms of companiesthat have been wanting to get
something done and just haven't been able to for years now.
(31:07):
So I think that kind of pent up demand there is starting to come
through as well. So yeah, it's, it's actually
looking really good from a sort of banking, investment banking
fee generation point of view. Yeah.
And some of the I think it was aReuters article that was listing
some of the early numbers sayingthat city IB fees are seen in
the mid single digits, JP low double digits percentage and
(31:31):
Bank of America IB fees up around 10 to 15%.
So yeah, pretty, pretty decent. But let's talk about two of
these deals then. I mean, one was I guess the the
troubled route to to listing of what was Klarna, but it did
start trading from the day we were recording this yesterday
(31:52):
and I think they initially shot up 25% and I think they finished
the day up around 14 or so. So really positive first day, so
to speak, on what was otherwise looking like a really quite
challenging process to get to this point.
Yeah, you've got to. You've got to go back in the
(32:13):
clown a story to really get it all into context.
Because if you just look at thisIPO only, it's like, OK, demand
was like off the scale and like 25 times oversubscribed, which
is obviously huge. And as a result of that demand,
(32:34):
they ended up pricing the deal at $40, which was above the
initial range, OK. So from an IPO perspective,
right, really strong then the market, you know what happens on
an IPO of course is that this iswhere the company issues shares
and sells shares in the IPO to investors, right at $40, OK,
(32:55):
Bang. Then what happens is you then
list on a Stock Exchange. So you then these shares become
freely tradable on a Stock Exchange, OK?
So you then get the market open the following day or that or
that morning, the mark, the stock opens for trading on the
Stock Exchange for the first time.
And then that's the next measureof demand.
(33:15):
So those that missed out on the IPO issuance directly can then
get involved just in the secondary market, right?
And so the stock price popped another 25%.
So they priced it at 40, which was above the range because of
super high demand from the $40. It then popped 25% in trading on
(33:38):
the stock market on on day one, right?
So this is all super strong. And it's like, wow, amazing
Klarna, awesome story. What you got to understand since
if you go back in time so that this put them at a 15 billion
market cap, OK, based off the $40 that is.
So obviously they went up a bit.Can I just quickly ask a
(33:58):
question? Yeah, you've mentioned already
on this conversation about tech giants are booming and they're
really important. And then I was thinking about
the you said there's a bit of pent up, a lot of companies want
to come to market, let's say do deals.
That deal could be listing transactions, whatever it might
be. If I was the banker leading
(34:19):
this, if I was the lead runner on this deal and I knew that
there's a pipeline and it's predominantly tech orientated,
like all of these deals are are predominantly tech.
That's where the biggest value is.
The biggest fees for me is the banker.
Surely I'm going to low ball this.
So there is way over bid so thatyes, someone could criticize
(34:43):
that we could reduce this for more fees.
But I'm thinking about the other10 deals I've got in the backlog
that once I see this success, they're going to be like and
when can we go and I'm just going to cue those up.
And so do you think this, do youthink that rationale is a bit of
engineering going on here on thebankers side?
I do and that all makes sense. But one thing to add, don't
(35:04):
forget that it's been a, it has really up until maybe now, it's
been quite a cautious market, the IPO market, right?
It for those reasons I've said right, earlier in the year, we
were hoping for a big wave and then it just didn't happen and
we had some IP OS that kind of failed.
(35:25):
So I think these bankers are tiptoe, they're still tiptoeing
towards these deals, preferring undervaluing them or at least
the range they put up to start with is is on the cautious side
because remember, the last thingthey want is a failed, you know,
marquee failed IPO because it's just kind of collapse
confidence, right? So just just tiptoeing and being
(35:48):
cautious. And then, yeah, if they can get
a nice story with a great successful launch, then great.
That kind of feeds into their order book that they've got
backing up. Absolutely.
So, you know, I think, yeah, they're playing a strategic game
here. But yeah, I mean, look, let me
go back though, because planner,So they took investment from
(36:12):
SoftBank, OK, back in 20/21/2021was the post COVID bubble, the
tech bubble, right? And a lot of these firms went to
crazy prices and SoftBank, you know, took on or sorry, stepped
in and invested in Klarna, valuing Klarna of 45.6 billion.
(36:34):
OK, 45.6. They've just done an IPO which
has priced them at 15, 45.6 in 2021.
By 2022, literally 12 months later, they had to take on more
funding because they were running out of cash basically.
And they did a private funding round at 6.7 billion.
(36:55):
So that's the that's the tech bubble bursting 2021 peak to
2022 through like Klarna was like the most extreme example,
about 45 billion down to six, right?
So now they've kind of doubled in a bit more from that through
right? It was 6.
(37:16):
And now look here we're at 15 three years later.
So they're kind of climbing out of that hole.
SoftBank are still staring at like 60 odd percent haircut on
their their kind of deal they did in 2021.
Who knows, maybe they'll kind oftake a scratch on that trade in
a few years time if Farner can now kind of generate some good
(37:39):
growth, obviously. But yeah, there's a big back
story here. But still, that aside, yes, it
was a successful IPO and the bankers are very happy.
Yeah. And those bankers being Goldman
Sachs, JP Morgan, Morgan Stanley, and there was actually
11, 1111 other firms working on that deal.
So it was a big job to get to get done.
(38:01):
So final one just before we wrapis talking about, you know, one
of the largest mining deals in over a decade.
I mean, this is this is a big one.
So yeah. Tell me more about the Anglo
American Tech Resources merger. Yeah.
Well, this is such an interesting story.
This you might have been tracking well, partial.
(38:23):
Well, you and Stephen did I think more than one episode
tracking the Anglo or or the BHPBilliton bid for Anglo America,
which I mean, when was that lastyear or maybe even was it even
into the start of this year? And we'll have to check on that.
But this is really interesting. So you've got two companies
(38:45):
here, Anglo America and Tech, right, the 222 big mega miners
and they are now merging like a merger of equals roughly.
I mean, I think Anglo will take about I think it's 63% of the
merged business will basically be owned by by Anglo, but
roughly a merger of equals. But both of them have had to
(39:08):
fend off quite hostile bids overthe last sort of 12 to 24
months. So Tech, they got approached by
Draincore and Draincore were trying to buy tech OK, they
fended them off BHP Billiton were trying to buy Anglo fended
them off. Why?
Why are these two attractive targets?
(39:30):
Copper. They've got huge copper mine
reserves in Chile. OK.
And copper. No, it's the prize metal, right?
It's the it's the metal of the AI revolution.
Copper is needed for electricityand for chips and all this, you
know, power, right. So This is why Anglo and and
(39:52):
tech separately was seen as quite attractive strategic moves
for Glencore and BH Billiton to try and kind of future proof
their kind of business right now.
Both of them got fended off these attacks and.
There's even, I don't want to delve too much into this, but
there's there's specific reason like complexity of the deal.
(40:14):
So BHP wanted Anglo to kind of divest certain parts of their
business and streamline it to the to copper.
But then there's regulatory hurdles to that because South
Africa where Anglo do a lot of non copper mining.
Anglo's a huge employer of SouthAfrican people.
(40:34):
And so the South African government will like, hang on a
SEC, no chance anger. You're not divesting these
parts. We're not happy with that,
right? It was a very complex deal.
And anyway, Anglo thought, hang on BHP, you're massively
undervaluing us for the valuation wasn't there either.
So it was a undervaluation. It was a deal complexity.
(40:54):
It was a regulatory scenario that kind of really kind of
prevented that from happening. And look, Tech batted off
Glencore as well. So now you've got these two
coming together. And actually what's a quite nice
defensive play is to say, hey, you big boys circling back off,
(41:17):
because we're kind of grouping together and becoming a bit of a
giant ourselves, right? So it's a great defensive play.
Also, there's some awesome kind of synergy cost savings here.
These twos are Anglo and Tech. They've got 2 mega copper mines
in. They've each got a copper mine
in Chile, but they're right nextto each other.
So they reckon they can save $80million pretty much in year 1 on
(41:42):
the kind of costs of running these two mines, given their
adjacency. Geographically, there's a really
interesting kind of cost saving synergy story as well as a
defensive play. So from a kind of deal strategy
perspective, there's so many different angles to this and
it's actually a really good one.If you're thinking about, you
know, applying for roles in the M&A space and you're looking to
(42:05):
go into interviews and so on. You know, if you want a story
that covers so many different kind of strategic angles, then
there's there, there isn't a better one than this.
Yeah. And actually in your notes
you've got this really great five point kind of strategic
theme plan and I think I'll try and share that where we put this
episode kind of breaking down what you said, copper is the
(42:25):
price as you're explaining aboutthe critical for EVSAI, date
centers and so on. Defense by focus, streamlining
portfolios, focusing on what you're good at as a business,
doubling down friendly emerges when more of equals and a
national interest. You mentioned South Africa and
(42:46):
then complexity killing beds. So yeah, that's great.
And I'll look to share that. But look, my headphones have
just died according to the the AI voice in my my ear.
And so with that, thank you verymuch Piers and everyone else for
listening. And yeah, safe trip back from
Sydney, you know. Thanks a lot.
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