July 10, 2025 • 42 mins
Markets extended their stunning 2025 rebound, with the S&P 500 logging one of the fastest recoveries from a bear market on record. Anthony and Piers unpack Goldman’s bullish upgrade spree and how Nvidia’s $4 trillion surge is fueling the rally.
They dissect Trump’s copper tariff shock, the market’s technical whiplash, and what it reveals about U.S. supply chain fragility. Plus, the “Big Beautiful Bill” signed on July 4th quietly eliminated a top 2025 risk while cutting taxes and scrapping green subsidies.
Also on the docket: Apple’s AI lag, UK gilt drama, and why big money like BlackRock is buying the dip. From CDS mechanics to market psychology, the episode maps the key drivers behind the summer surge.
(00:00) Intro & Key Themes in Focus
(02:21) Market Outlook and Stock Predictions
(08:51) The Rise of Nvidia and Big Tech
(13:53) Trump's Tariffs and Copper Market Dynamics
(22:56) The Big Beautiful Bill and Debt Ceiling Updates
(26:07) Understanding Credit Default Swaps (CDS)
(31:52) UK Gilt Yields and Market Reactions
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 we've got lots of things to discuss that have happened in
the global financial markets in the last few days from Goldman
Sachs strategists raising their outlook for U.S. stocks for the
second time in just two months. So what's their rationale there?
And I think they've done it fourtimes perhaps since the start of
(00:21):
the year. So how frequent is that?
Is that normal? How reliable is that?
We'll look to answer then. We've had the likes of BlackRock
and Schroeder's buying gilts during a market slump and this
is that. Big asset managers adding to
holdings and a bet that the selloff sparked by doubts over the
(00:41):
Chancellor Rachel Reeves. You might have seen her crying
in Parliament very recently. They were betting against while
a lot of the mainstream media was saying which was calling for
her head. They were thinking right.
Actually, we think this is just short term volatility and a good
opportunity to add to their position.
So look to understand that a bitmore.
(01:01):
Can't go an episode without mentioning Piers being a new
fanboy. Actually of, of Trump going off
recent episodes, which is the latest bout of volatility.
And this time in industrial metals, specifically copper
prices. You might have seen they were in
the headlines because Trump announced a 50% tariff on copper
(01:23):
imports, causing a record spike in New York copper futures.
And also to wrap into the Trump thing, we've been talking a lot
about debt ceiling, the big beautiful bill.
So a bit of an update there. And we are going to tackle some
jargon like CDSS, credit defaultswaps and some movement we've
(01:44):
had there. Fear not, we'll explain it as in
simple terms as we can. And then finally NVIDIA, they've
become the first ever company tohit $4 trillion in market cap.
And so, yeah, I mean, what a turn around that has been.
We touched on this briefly last episode, but we'll have a look
at that as well. So Piers, maybe to kick off then
(02:07):
and to kind of I guess wrap it all into one on piece the
Goldman's view on lifting U.S. stocks, like what's that all
about? Yeah.
I mean, they, they, you know what?
So all these big banks, obviously they have analysts
that are covering different things.
(02:28):
And so you have, you know, your macro analysts that are looking
at U.S. stocks, for example, andlooking at stock index and one
of the outputs of their models is trying to predict, right,
what's going to be where is the S&P 500 going to be by year end
or where's the S&P 500 going to be in 12 months time?
OK. And then models have inputs,
(02:49):
which is a whole bunch of macro stuff, economic data points,
sentiment, you know, all this stuff feeding in and it outputs
right in there. So David Costin, he's the kind
of head guy at Goldman's kind ofcovering, you know U.S. stocks
and he's been bullish, he's beenupgrading couple of times
already this year. The latest one's just come in
and he's lifted the 12 month forecast.
(03:12):
So that's like to to midpoint of2026.
He now predicts 6900 on the S&P 500.
It's a decent uptick. His previous forecast was 6500.
Remember that the index like right now is trading at 6250.
So these numbers like 6000, well, his last one, 6500, I mean
(03:37):
it's less than 5% above where we're trading now, right?
So you know, given the extraordinary rally we've seen
and we'll talk, I could throw a few stats at you in a minute,
but the speed of that has made these year end, particularly the
year end targets look a bit stupid because his year end
(03:58):
target was 6100. So we've smashed through that in
style. So he's he's lifted that now to
6600. So yeah, you know, he's
expecting this rally to continue.
And I and I guess, well, why is he expecting that to continue?
And look, there's obviously the macro side.
(04:18):
So actually, after we recorded last week, we, we had the
payrolls data, that's the US nonfarm payrolls data for the month
of June, which came in pretty strong, came in at 147,000 jobs
created in that month, which wasquite a bit better than
expected. And you know, continuing to show
a solid resilient labour market.And, you know, obviously that's
(04:43):
a good factor from that sort of,you know, those fears from
earlier in the year, which partly, you know, obviously
Trump's tariff triggered the bigsell off back in April.
But it was in amongst concerns around the sustainability of
economic growth, in amongst concerns around, you know,
inflationary pressures, meaning the Fed can't cut and all this
kind of stuff. But whilst the tariff risk has
(05:06):
gone away, mostly, we'll talk about copper in a second.
But you know, good solid data means this is good news, right,
from a stock market point of view.
And so I think this is helping with Goldman's to, you know,
reduce recession expectations and therefore increase their
(05:26):
kind of stock market targets. So look, and, and, and also, you
know, the, the S&P, as I said, it's just been on an absolute
flyer. We talked about this, I'm going
to give you an update. We've thrown stats at you every
week as this rally's been going on.
It's by every week. It's like what it's gone again.
We're now 30% up from the April 7 low, which is kind of making
(05:48):
this actually the second fastestrecovery from a bear market in
the history of mankind for the S&P 500.
So it took 1.6 months. What was number 1 then?
Well, yeah. It's interesting that of the
most rapid was 1.1 months. Any guesses when that might have
(06:13):
happened? It's going to be something where
it's like either COVID or the GFC, or probably COVID would
have been the bazooka beyond allbazookas.
Spot on so February 2020 the market hit bear market
territory, but it was back to new highs by mid March, so 1.1
(06:37):
month plus that was the rap mostrapid.
But this one, you know, yeah, point big.
It's just kind of right. Obviously extraordinary scenes
with regards to the speed of therecovery.
Can I, can I just ask then? So I'm looking at this, this
chart which is mapping all of the 2025 S&P 500 views from
(06:57):
Goldman Sachs. Interestingly, the dotted lines
at the top show that their initial year end target.
So I'm assuming this was issued in December of 2024.
About what does the year ahead look like?
Was 6500 the current year end target 6600?
So there might be people listening, going, what is the
(07:18):
point of these targets when basically they're exactly where
they were six and a bit months ago and they've had all this
movement. So what do these targets serve
as their purpose? Well, I don't think it's quite
this chart. I don't think it's quite fair to
kind of look back like this and just laugh because Oh my God,
(07:38):
how stupid are they? They've got it so wrong, I
think. And this is, this is at any
moment in time, it's really a reflection of sentiment.
And at that moment in time, that's really important because
sentiment drives markets. So in the moment, it's, it's
these these calls and these, youknow, year end target updates
(08:00):
and stuff I think are important.Look, don't forget these banks
are trying to this is a revenue stream for them as well, right?
They're selling research to buy side institutions.
And so, you know, obviously someone like Goldman's is going
to have a very strong client base for purchasing that
research. And so they they, they are
sending out periodic quarterly is obviously a a perfect time.
(08:23):
So right, let's hit our buy sideclients with a fresh update,
which and let's raise some more revenue by charging the money
for that. So obviously they've got to do
it in this cycle of quarterly. And so they have to update based
on their models. So, but I think it's, you know,
it's a good indicator of where we're at from a sentiment
perspective. And where we're at at the moment
is no one believes Trump in terms of tariff risk.
(08:47):
And so, you know, what are we left with?
And we're left with, you know, pretty solid.
And I I'll say we're left with aroaring tech sector where, you
know, the big boys are right at the front of this kind of
juggernaut that's taken this market back to a new all time
high. And this is so interesting,
(09:07):
right? Because I remember, what, two
months ago, probably not long ago, the point being, everyone
was flashing the charts of how like, big Tech was
underperforming and how there's an imbalance in the Mag 7 and
the Mag 7 rotation. And so what's the latest status
there? Maybe we could talk about
NVIDIA? Yeah, well, the latest status is
(09:28):
most of the mag 7. As I said, they are the ones
that are most of the rally. Most of this 30% rally in the
last whatever 1 1/2 months is because of the big tech.
NVIDIA are valued at 4:00 trillion dollars.
That's breaking news. I think that's about sort of 45
minutes old when NVIDIA kind of broke through that price point.
(09:53):
Hang on, it was 162. Sorry, $164.36 was the moment
where it broke them through the four trail ceiling that takes
them. They a couple of weeks ago they
broke Apple's previous record. So Apple in December last year
hit 3.92 trillion, right? So it's kind of taken that out.
(10:16):
You know, the market and the S&Pis up 30%, right?
Nvidia's up 40% since early May.So it's the biggest component
and it's the most rampant, you know, on the upside.
And when you take the kind of big tech, like the tech sector
makes up 33% of that index, right?
(10:36):
And so when that sector's flying, obviously the whole
index just kind of ramps up. And NVIDIA, this has been one of
those key concerns from the start of the year that helped to
trigger, you know, and add fuel to that sell off back in April.
And it was the idea that, you know, the tech infrastructure
build out couldn't be sustained.You know, these big tech
(10:57):
companies cannot continue spending money to build out
their data centres at such a crazy rate and NVIDIA are going
to be the worst impacted by that.
And so obviously they were leading the sell off, right.
But what's happened? Well, actually all the big boys.
So Microsoft, Meta, Amazon, Alphabet, they're now tracking
to spend 350 billion this year. That's up from three ten billion
(11:19):
last year. So far from pulling back, it's
the opposite. They're, they're kind of
actually ramping up spend and these just those four companies
make up 40% of Nvidia's revenue.So when your big, big, big
clients go right, let's spend more, well then happy days.
And so that NVIDIA sort of remarkable story has continued
(11:43):
beyond what people were worried about.
And so that's helped obviously with the kind of general
sentiment shift to a much more positive space.
Yeah. And there is a company there
that you didn't mention, and that was Apple, because you
mentioned Microsoft, Meta, Amazon, Alphabet, who've been
big beneficiaries of the recovery here on the AI story.
(12:04):
But Apple's Sharp's looking way less tasty, right?
So you asked you know what's what's what's happening in
amongst those Mag 7? I said most of them are rallying
Apple 8. So Apple's down on the year.
One of the reasons is they're not in that list I've just given
you, meaning they're just absentfrom the AI race.
I don't know. Do you use your iPhone?
(12:25):
Do you ever use Siri? I do little driving.
How bad is Siri? Siri is.
Bad. It's shocking and they've just
don't seem to be doing anything about it, right.
So, and plus, they're obviously more impacted by tariff risk.
Supply chain concerns with China, even though I've
(12:45):
contradicted myself because I'vejust said tariff risk isn't
really a thing, but tariffs havegone up.
You know, there is a 10% tariff on the whole planet.
And so, you know, companies likeAlphabet, sorry, not Alphabet,
Apple, you know, do get overly impacted by that compared to
most, right? So yeah, Apple's definitely
still the underperformer out of those big big Mag 7.
(13:09):
Well, and Tesla. I should say.
Of course, yeah. And now that Musk's decided to
start his own political party, did you see that?
Yeah, I think, I think I got a push notification about a few
minutes ago saying I think is itthe XCO stood down or?
Yeah, that's right. Yeah, I saw that as well.
(13:30):
It's all going on now. Yeah, it's kind of it's kind of
imploding another kind of that'sanother part of the wave, the
cycle with with Elon, isn't it? It's ups and downs.
And yeah, yeah, we're definitelyon a down leg at the moment.
OK. Well, look, you did mention
there tariffs and and so is Trump.
(13:52):
So let's talk a little bit aboutTrump and copper and then maybe
the bigger picture we've been talking about for a number of
months, which is Trump and the US debt situation.
So what happened with copper? Well, Trump said today we're
doing copper. That was this quote.
Yeah. And So what does that mean?
(14:12):
Well, he's kind of now, you know, in his in his playbook,
which is just repeating again and again and again.
He's now right. Let's let's focus on copper,
right, 50% tariffs right on everyone.
Let's start there. So, yeah, I mean, you've got a
spike higher in the copper price.
I mean, there's it's a bit of a throwaway line.
(14:34):
We've got absolutely no details.It's just classic Trump.
But look, within an hour, copperprices did spike 11%.
They then came off that spike. They kind of sold, well, I don't
know, they've kind of sold off maybe 1/3 of it and then it's
kind of consolidated. But so there, there was a big
(14:57):
move and, and actually, what waskind of notable about that move
did mean that it, and I would say what was notable and, and
probably contributed because like, on the one hand, you got
Trump, right, who threatens tariffs and then, well, Taco,
right, he, he pulls back and youget nothing like 50%, right?
(15:17):
So why would the market react? And as you look at some of the
copper producers, their share prices hardly moved.
And when you look at some of theother markets, you know, broader
macro markets, because copper's obviously such a key component
in our electronic world. And like when you look at some
(15:38):
of the other, like, you know, how's it like, I don't know
NVIDIA, right? NVIDIA when they're making their
chips, needle load of copper, right?
That's a really key input. And so, you know, did the NVIDIA
share price really react or any of the other tech producers?
And, and the answer's no, nothing really reacted except
for the copper price. And it's punk it, it pinged 11%.
(15:58):
But I think what led to that mostly was because it was a
break to a new all time high. And it was a breakthrough this
$5, you know, quite psychological level.
We've been knocking on the door of $5 for a few years.
So actually the 2021 high, the 2022 high, the 2024 high, the
high from earlier this year in 2025, you know, all around that
(16:21):
$5 mark, you know, really, really key kind of technical
resistance. And that broke off the back of
this throwaway comment from Trump, which just, so there was
obviously a lot of stop orders just sitting up above that $5
mark that got triggered. These are stop orders.
So if you're, if you're short copper, expecting the resistance
(16:43):
to hold and you want the copper price to hit 5 and then reverse
back down. So you're selling at 5 expecting
resistance and making profit from the fall from that point.
But to protect yourself and manage your risk, you'll have a
stop order above 5. So if the price does punch
through, well then you're out because you know, my strategy is
(17:04):
wrong. I don't want to be sure anymore.
This thing's going up. So to get out you buy.
But if there's a concentration of stop orders, when you have a
really important significant technical level, there's a
concentration of stop orders. And once triggered lease a
really accelerated kind of stop order buying volume that kind of
(17:25):
exaggerates then the reaction inthe market.
And I think that's a lot of the reason why we we pinged 11%
here. And what this compounded by the
fact that you know copper is notlike a treasury bond in terms of
its market depth and there's a lot of automated algorithmic
systems that will jump on momentum signals and it all
(17:45):
compounds and exacerbates the short term market reaction.
Would that be correct? That would be correct indeed.
But like kind of stepping back from the market reaction for a
SEC, you know, what is this a thing?
I mean, firstly, as we know Trump, this is, this is his
playbook. So it's not going to be 50%,
right? I don't know where it'll end up.
I guess we'll find out, but definitely a lot lower.
(18:06):
So, you know, where are we left?Because from a sort of supply
and demand perspective. So for your info, the US like
over the last few years anyway, have been importing about 44% of
their refined copper, OK? So from a tariff point of view,
that's a lot. That's a lot of their copper
that they're having to import. So obviously from a tariff point
(18:29):
of view that's really significant.
But they have actually been importing a lot.
And look, people look, this tariff thing is obviously not
new. Everyone was expecting copper to
come under the spotlight at somepoint.
So you have seen copper prices drifting generally higher.
That's why we're up at 5 bucks, right?
We're up at an all time high before, you know already.
(18:50):
So people have kind of been looking at this and they've been
front loading some of their copper imports.
So actually from a supply point of view, it's believed that the
US have probably got about 1/3 of a year's worth of supply
already in the country. So I don't think there's like an
immediate concern here about tariffs.
(19:12):
And I guess it just buys time for Trump to do his thing and
we'll end up at a much lower tariff point than 50%, right?
So I think that's why generally markets haven't particularly
other than that copper price specifically for those reasons
I've given. I think generally everything
else was pretty sanguine about that.
There's one we don't have any details.
And there's one interesting point someone spots spotted,
(19:34):
which was quite funny because like so some of that the 44%
imported refined copper, most ofthat comes from Chili, right?
So Chili's the world's biggest copper producer.
Bit of random, a random stat foryou there to utilize at your
next pub quiz. But so a lot of it comes in from
Chile, right? So would they?
So that'd be tariffed, but then,right, to take the refined
(19:56):
copper and to turn into something useful.
Well, actually, typically the USsend a lot of the refined copper
to Canada And there's a lot of, there's a process in Canada that
turns it into like copper wire, for example, and then it gets
brought back into the US. So there's a double tariff
problem here for Trump because what, is he going to tariff it
(20:17):
on the way in from Chile? And he's going to send it to
Canada. What?
He's going to tariff it again onthe way back from Canada.
So, you know, obviously from a practical point of view, you
know, more reason to expect thatyou're not going to get a 50%
tariff on copper, you know, comethe end of this sort of latest
(20:38):
saga. Yeah.
It's really interesting to not think of it as just a final
finished product and that goes ready for any commodity product
across the space. I guess in terms of when we talk
about this sort of thing, I saw one analyst saying the US does
not have nearly enough mine, smelter, refinery capacity
(21:02):
through all each three differentparts of this process to be
self-sufficient in copper. The point being, mines take too
long to develop for that to be achieved.
And they were giving time framesreally for that to go full
circle to be productive. That's going to be a 10 year
timeline and the US would need to rely heavily on foreign mines
(21:23):
to meet demand for the foreseeable future.
So actually, yeah, as you said. And this and this is the problem
with the US, one of the problemslike from a regulatory
perspective, why, why, how can it take 10 years?
I'd like China can bring on these facilities in like 12
months. But the the regulatory burden, I
(21:45):
mean, this is one of the thing that Trump got voted in for was
to try and get in amongst that regulatory situation and start
chopping away at it and making doing stuff just more efficient.
But, you know, again, trying to adjust these regulations as, you
know, something on the radar forTrump.
He will get to that. At the moment, though, it's time
(22:08):
for copper. Yeah.
And just to conclude, like, why the time for copper?
One thing I saw in terms of timing wise that makes a lot of
sense is Trump's proposed coppertariffs came a day after, so 24
hours after he had sent letters to 14 trading partners,
including big hitters, Japan, South Korea, obviously
(22:29):
threatening to whack some steep levies on them if they don't
make a deal by August 1st. So this is like page 7 out of
Art of the Deal. It's like you, you, you send the
letters and then you go out witha really meaningful splash and
then you follow up with the e-mail the next day.
How's that? How you how's, how's that
consideration going on that trade deal?
(22:51):
So how are? How are them apples?
Exactly. All right, so look, with Trump,
let's let's finish the Trump part we're talking about, Yeah,
the the big beautiful bill and afew updates that we've got on
that side. Yeah, like classic Trump.
You know, he never misses an opportunity, does he?
So his big beautiful bill was signed into law on July 4th.
(23:12):
Of. Course, so obviously he never
wants to miss a kind of media opportunity there, but he signed
it off. So, you know, obviously there's
a raging debate right there as to right, I mean, is this a good
thing? Is it a bad thing?
And look, there's good and bad parts.
That's the thing. The thing about this bill, it's
(23:33):
just a monster of stuff that they've just shoved into one
bill and and kind of got through.
And so often a lot of stuff in there goes overlooked because
the media or let's say the left-leaning or the right
leaning media will latch on to certain specific things, right?
But, you know, there's tax cuts,extended tax cuts.
So they now become law. They're tax cuts Trump
(23:55):
implemented back in his first term, by the way, that were
expected to expire. So we get continued tax cuts.
He put in some other new tax cuts that he promised on the
campaign trail, like his his very famous no tax on tips.
So that's now law, which I don'tknow, is quite interesting
because like if I was, if I was in the USI would now put my
(24:16):
prices down my official prices and have a like a kind of side
agreement with my client that look, just pay me a bigger tip
now I'll reduce your price, but pay me a bigger tip, right?
And then so I don't know whetherthat that particular that that's
the scope for a lot of shenanigans there, I think which
(24:38):
which may lead to of course, lower tax receipts for the
government, right. But anyway, that's in there.
They've obviously slashed some other programs in terms of
government like healthcare, government payouts for
healthcare for the poor. It's kind of been changed.
You've got changes to like particularly interesting from an
Elon Musk battle point of view. They've they've chopped and
(25:00):
removed the electric vehicle subsidies.
They've removed various electricmanufacturing subsidies.
So there's definitely the Green Party a very not that were very
unpleased about all of this, butone thing that was in there that
I didn't realize and no one's really talking about is they've
actually agreed to raise the debt ceiling.
So that whole debt ceiling crisis, which I had right at the
(25:25):
top of my list of risks for 2025has now been entirely removed.
So another reason why people like Goldman's are going, all
right, let's go more upside herefor things like the S&P.
It's because one of the key risks has gone.
So in this debt, in this bill, they've agreed to raise the debt
(25:46):
ceiling by 5 trillion bucks, which actually is the single
biggest one time increase to thedebt ceiling ever in history.
So takes them to 41 trill. So just an NVIDIA with some
change. Basically just boosted it.
(26:07):
So perhaps then did we, we couldgo into what is ACDS?
So this the default swap like what is it?
First, what do people need to know as simple facts and then
what's happened in terms of why we're talking about it?
Yeah. I mean, in simple terms, it's
insurance against bankruptcy. So if you're at risk, if you've
(26:30):
got credit risk, right, if you're at risk of someone going
bankrupt, IE you've, you've lentthem money.
So in the bond markets, this is you've, you've bought their
bonds, right? So from a government point of
view, this is the government issuing bonds, selling those
bonds to investors. That's how the government
borrows. So now the investor is carrying
(26:51):
the, the default risk. They're obviously getting paid
an interest for that loan, but they're at risk that the, the,
the borrower's going to go bankrupt.
OK, so now you can buy insuranceto protect yourself.
So that should there be a default event, actually you
don't lose all your money. The insurer basically pays out
OK, now the price and the cost of insurance, like with
(27:15):
anything, your car insurance, ifyou have a crash, then you renew
your insurance, it's going to goup, right.
The the premium on your insurance is going to go up
because hang on, the risk on youis higher now because look,
you've crashed. So obviously the cost of
borrowing increases as the risk of default increases.
And so this year the CDs price for US1 year debt, right, had
(27:43):
increased. And you know, through the months
of February and through the months of April, it'd been going
up and up to as we were approaching the summer because
the whole risk was, well, actually the US hit their debt
ceiling, the self-imposed limit of 36 trillion.
They hit that in January. So since January the government
(28:04):
hasn't been borrowing any new money they've obviously been
paying for stuff, but they've been dipping into their savings
account at the Fed right and thethought was that the savings
account would run out this summer So if the government
can't do a deal to raise the debt ceiling, the government's
going to run out of money and technically default right So the
(28:25):
cost of insuring was increasing as a result but after this
bill's been announced there was a big drop in the CDs price now
reflecting the fact that that default risk whilst.
Look. Was still small because they
always get this deal done. It had been rising.
And so anyway, it's now sold offagain to reflect that that that
(28:47):
deal's done. And I, I'm surprised it hasn't
been, it hasn't got any more airtime to be honest.
But yeah, it's another big 2025 risk that's been removed from
the table. So just the final question then
on what you've described, So of what proportion of people having
ACDSA credit default swap as insurance as opposed to those
(29:08):
people who are speculating on CDs price movement?
OK. That's a good question I don't
know the answer to. So like you're basically asking
the volumes that get traded in the CDs market, what proportion
are actually people buying insurance because they're
holding bonds and have that realdefault risk, But you don't need
the underlying to trade that CDsmarket.
(29:31):
You can just punch your way around as a speculator betting
on whether the cost of insuranceis going to change, right.
So I actually don't know the answer to that.
So I don't know what the volume split is speculator to to actual
hedging parties, I don't know. If you're listening and you do
know, let us know in the comments and you know, give us
(29:52):
some, give us some facts, stat check, verification check going
on here. Perhaps then to finish, we could
talk about another some kind of similar related situation
because we're talking about the UK government and borrowing
costs because there was quite a big fluctuation in 10 year gilt
yields. So maybe we can talk about
(30:14):
what's a guilt as well, just to quickly make sure everyone's on
the same page. But then also we have this
really sharp move higher in a very short time frame on the 1st
going into 2nd of July. And so that obviously sparked a
lot of concerns that, you know, are we going to get a repeat to
the yield crisis that we had going back a few years with Liz
(30:38):
Trust? And then the markets reverse.
And there's also headlines now going that BlackRock, Schrosers
kind of soar through the market volatility, but what made them
so confident as well? So yeah, couple of different
angles here to cover. Well, firstly, do you know why
they're called? Well, so what's a guilt?
That's just the name we use for UK government bonds.
(31:00):
But do you know why is it calleda guilt?
I don't know. Come on.
It's actually so they're called guilts.
So this is short for guilt edgedsecurities.
And this is because they were originally issued with gilded,
so gold edged certificates. So that was just kind of
(31:23):
symbolize like the high quality and the reliability of the UK
government as a borrower, right?So that's why guilt edged.
Wow, do you know what? I am going to absolutely smash
this tough quiz coming up the next one when it comes Chile
gilt edged bonds. Let's go.
That's right. That's right.
(31:43):
I mean that's just the value I bring to to the listening
community. Yeah.
I mean, look, the UK, well, let's be more specific.
The labour market is the government here in the UK and
has been for the last year. Yeah, let's just say that I've
been having a great time of it from a fiscal kind of
(32:07):
sustainability point of view. And last October they set about,
they put forward a huge budget. So every year they obviously
renew their budget, right? What are we going to spend money
on? How much are we going to spend?
And right, where are we going toget it from?
So right, what's our borrowing requirements, OK.
And at the end of last year, they basically said, right,
(32:28):
we're going to have to, we, we got a 40 billion a pound hole we
need to fill. So we're going to raise tax.
And so they did a few tax increases such as increasing
National Insurance for employers, OK.
And they said at the time, look,this is going to be a one off.
We've got this hole. We're just going to sort it
(32:48):
right now. We're going to make big moves,
big changes now and then that'llbe it, OK?
This will be the only time we doit, OK?
Here we are like 7-9 months later.
And unfortunately, as time's been going on, the UK economy
hasn't been necessarily firing. Tariffs have come along, which,
you know, we have tariffs, right?
There's a 10% tariff on on our stuff going into the US.
(33:11):
So, you know, that has had an impact.
And ultimately, as time's been going on, the gap that was 40
billion that they filled, that gap's now widening again.
And it's like between 20 and 30 billion apparently, according to
some measures. And so everyone's going, OK,
sorry guys, you're going to haveto, you're going to raise taxes
again, aren't you? Because so how else are you
(33:31):
going to manage this? And the neighbor like, well,
yeah. And not really saying whether
they or not, not certainly not saying they're not going to
raise tax, right. So they're going to have to.
And so look, there's fiscal. So it's just back to that simple
point about creditworthiness andand about supply, You know, are
the UK government going to have to borrow more money?
(33:55):
Are they going to raise taxes toavoid borrowing more money?
But if they raise taxes, well, isn't that going to kind of
derail economic momentum? So you kind of got it, you're
stuck here, right? But if they go down the path of
borrowing more, well, interest rates are actually still
relatively really high. The one thing that the UK has in
its favour from its debt position, they've actually got
(34:15):
quite a that their average maturity of their debt book is
actually really long compared tomost countries, just meaning
that there's less pressure on refinancing debt in the short
term, right? But if they need to borrow more
like right now, well, OK, you are borrowing in the short term
and that's going to cost you money, right?
(34:37):
So there's kind of all that going on.
But yeah, I guess the big boys were saying, look, let's buy the
dip. So if prices come down then you
know, they're just saying we don't believe it's our strategy,
that we don't believe this is going to end in a debt crisis
for the UK. So we believe this is a good
(34:58):
opportunity to Hoover up some more on the cheap.
Yeah. I mean, my, my interpretation of
this when I was following it a few days ago was, you know, what
you've explained is all that the, the technical process, if
you like, But the trading part of this was basically on the
catalyst was Keir Starmer, the PM, not giving backing, not
(35:21):
publicly, immediately giving full backing to his chancellor.
That then triggered because the marketplace sees her as a, a
voice of rationality, a market friendly person, fiscal
discipline. And oh, what if he buckles,
let's her head roll and someone else comes in who's not so
(35:43):
disciplined and the market's kind of fretted over that and
that kind of jumped things to life.
But then I think he quickly understood or got the memo
because perhaps he didn't connect the dots of exactly what
that meant. And things reversed course well,
within within a day, Within the day, right?
Pretty much. Yeah, Yeah, exactly.
(36:04):
And so it's, it's just volatility that people are just
trying to exploit. I mean, I look, I would say from
a yield perspective, you know, we're right up.
We're just like on a 10 year guilt.
We're kind of SAT camped out under the 5% handle, which is
really high. And we've been camped out
largely speaking around that point for the whole of 2025.
(36:26):
And we're kind of this was the kind of highs from 2023 and the
whole Liz Trust saga got us up. So we're actually sat yields
higher than the spike up in the Liz Trust saga, OK?
We're we're actually just slightly higher than that right
now and have been for the whole year just below 5, right?
This is a quite precarious position.
(36:49):
And the markets are broadly all right.
There's ups and downs and short term volatility, which is what
we're talking about here, where they came in and bought the dip.
But longer term, you know, are we going to break 5 and move
higher and this is going to become a real crisis for the UK
or or not, you know, can the Labour government get it right
(37:10):
from a strategy point of view? Can the Bank of England cut?
Can we get some momentum going and positive sentiment around
the economy, in which case theseyields, you know, might come
back off again. But at the moment we're quite
precarious just living under that 5% handle.
Question for you and I, you don't have a specific answer.
What do you think in terms of like if you were Black Rock and
(37:32):
I would hoovering out some guilts here on this on the
spike, wouldn't you? It'd be like Wall Street, like
the original Wall Street, Michael Douglas.
I'll pick up the phone and I'll be like blue Horseshoe loves it.
UK gilded bombs. And then and then and then my
buddy at Schroeder's goes, you hear Black Rock saying and
they're going to do that. And then like how, how
(37:53):
incentivized are you and what guardrails are they regulatory
wise that if I'm buying, I want to, I want to tell everyone I'm
buying, yeah, A, to turn the market and B to other people to
join my trade, to push my position.
Yeah, and that's fine. That's not illegal.
You could tell people I've bought.
You know, why do people go on Bloomberg and CNBC every day
(38:16):
like these PM, these portfolio managers get wheeled out.
You know, every hour there's someone else chatting about
their book and telling them, telling the audience what
they've done, right. Of course, once you've bought,
tell everyone else you bought because if you've got a good
reputation, they're going to buyas well.
And you've already bought and you're you're kind of front
running them buying, but not in an illegal way.
(38:40):
It's not like you're giving awayinsider knowledge here.
So that's not that's not a thing, but.
I think, what about when Rishi Sunak goes to work for Goldman
Sachs there? Wow, Yeah, that was interesting
news, doesn't it? When you.
(39:00):
Draw the line between then the Ear of Westminster and In Power
of Influence and the financial Masters of the Universe.
It's a very good point. And there is a long history of,
you know, like, was it George Osborne went tried off to work
for Goldman's, wasn't it after the after he left the
Conservative Party? Or there's a long history of
(39:22):
politicians going to be, you know, advisors for banks.
And look, yeah, where's, where is the line?
That's a, that's a definite greyarea, but it happens.
And if the paycheck's big enough, then they'll do it,
right? But final .5% yields, right?
If I said short term volatility in like they're buying the dip.
(39:44):
But actually there's some long term play in here as well.
Because if you think this is thehighest yields will be, if you
think this is long term, it's taken five years to go from
yields that were nearly down around 0 around COVID, second
five years to go to 5%. So do you think that now in the
(40:06):
next 5 years, you know, ultimately yields will drop
again? Do you think the inflation
crisis is fully in the rear rearview mirror and inflation will
get to 2? All lower.
You're going to get a rate cutting cycle, you know.
Do you think those things are going to happen?
In which case this is a beautiful time to buy gilts
(40:27):
because they ain't going to be as cheap as this for years, if
that's your opinion. Now there's other people on the
other side of that trade who think Labour are going to cock
it up. Inflation is going to stay
stubbornly high. Thank you.
England aren't going to cut, youknow, they're going to have to
borrow more money. They're going to have to
(40:47):
increase supply, driving prices down and yields up.
You're going to get a break of five and this is going to be a
crisis, right. So that's that's the opposite
side of that sort of thought process.
I wonder as well, just connecting the dots then, if you
have the midterms and let's say Trump loses a bit of power, the
messaging around tariffs, given he's gone so hard now, it's not
(41:10):
going to be, you would think, asintense in two years time
towards the back end of being reelected.
And that would all be favourableconditions, if you like, for
believing that yields will decline over time.
But yeah, interesting. Good stuff.
Well, look, we'll wrap it there as per usual.
Any questions at all about anything we've discussed, please
(41:31):
do put your point of view. We'd love to hear from you.
Any questions, criticisms might be, might be some.
So it might be some Tories on the call who want to give their
2 pence about the fiscal situation.
Then please just let us know. We're open to all arguments with
valid substance, let's say. All right, we'll wrap it up
(41:54):
there. Thanks everyone for listening
and we will see you next week. Take care.
See you later. Bye bye.
Hello and welcome back to the Market Maker podcast.
And we've got lots of things to discuss that have happened in
the global financial markets in the last few days from Goldman
Sachs strategists raising their outlook for U.S. stocks for the
second time in just two months. So what's their rationale there?
And I think they've done it fourtimes perhaps since the start of
(00:21):
the year. So how frequent is that?
Is that normal? How reliable is that?
We'll look to answer then. We've had the likes of BlackRock
and Schroeder's buying gilts during a market slump and this
is that. Big asset managers adding to
holdings and a bet that the selloff sparked by doubts over the
(00:41):
Chancellor Rachel Reeves. You might have seen her crying
in Parliament very recently. They were betting against while
a lot of the mainstream media was saying which was calling for
her head. They were thinking right.
Actually, we think this is just short term volatility and a good
opportunity to add to their position.
So look to understand that a bitmore.
(01:01):
Can't go an episode without mentioning Piers being a new
fanboy. Actually of, of Trump going off
recent episodes, which is the latest bout of volatility.
And this time in industrial metals, specifically copper
prices. You might have seen they were in
the headlines because Trump announced a 50% tariff on copper
(01:23):
imports, causing a record spike in New York copper futures.
And also to wrap into the Trump thing, we've been talking a lot
about debt ceiling, the big beautiful bill.
So a bit of an update there. And we are going to tackle some
jargon like CDSS, credit defaultswaps and some movement we've
(01:44):
had there. Fear not, we'll explain it as in
simple terms as we can. And then finally NVIDIA, they've
become the first ever company tohit $4 trillion in market cap.
And so, yeah, I mean, what a turn around that has been.
We touched on this briefly last episode, but we'll have a look
at that as well. So Piers, maybe to kick off then
(02:07):
and to kind of I guess wrap it all into one on piece the
Goldman's view on lifting U.S. stocks, like what's that all
about? Yeah.
I mean, they, they, you know what?
So all these big banks, obviously they have analysts
that are covering different things.
(02:28):
And so you have, you know, your macro analysts that are looking
at U.S. stocks, for example, andlooking at stock index and one
of the outputs of their models is trying to predict, right,
what's going to be where is the S&P 500 going to be by year end
or where's the S&P 500 going to be in 12 months time?
OK. And then models have inputs,
(02:49):
which is a whole bunch of macro stuff, economic data points,
sentiment, you know, all this stuff feeding in and it outputs
right in there. So David Costin, he's the kind
of head guy at Goldman's kind ofcovering, you know U.S. stocks
and he's been bullish, he's beenupgrading couple of times
already this year. The latest one's just come in
and he's lifted the 12 month forecast.
(03:12):
So that's like to to midpoint of2026.
He now predicts 6900 on the S&P 500.
It's a decent uptick. His previous forecast was 6500.
Remember that the index like right now is trading at 6250.
So these numbers like 6000, well, his last one, 6500, I mean
(03:37):
it's less than 5% above where we're trading now, right?
So you know, given the extraordinary rally we've seen
and we'll talk, I could throw a few stats at you in a minute,
but the speed of that has made these year end, particularly the
year end targets look a bit stupid because his year end
(03:58):
target was 6100. So we've smashed through that in
style. So he's he's lifted that now to
6600. So yeah, you know, he's
expecting this rally to continue.
And I and I guess, well, why is he expecting that to continue?
And look, there's obviously the macro side.
(04:18):
So actually, after we recorded last week, we, we had the
payrolls data, that's the US nonfarm payrolls data for the month
of June, which came in pretty strong, came in at 147,000 jobs
created in that month, which wasquite a bit better than
expected. And you know, continuing to show
a solid resilient labour market.And, you know, obviously that's
(04:43):
a good factor from that sort of,you know, those fears from
earlier in the year, which partly, you know, obviously
Trump's tariff triggered the bigsell off back in April.
But it was in amongst concerns around the sustainability of
economic growth, in amongst concerns around, you know,
inflationary pressures, meaning the Fed can't cut and all this
kind of stuff. But whilst the tariff risk has
(05:06):
gone away, mostly, we'll talk about copper in a second.
But you know, good solid data means this is good news, right,
from a stock market point of view.
And so I think this is helping with Goldman's to, you know,
reduce recession expectations and therefore increase their
(05:26):
kind of stock market targets. So look, and, and, and also, you
know, the, the S&P, as I said, it's just been on an absolute
flyer. We talked about this, I'm going
to give you an update. We've thrown stats at you every
week as this rally's been going on.
It's by every week. It's like what it's gone again.
We're now 30% up from the April 7 low, which is kind of making
(05:48):
this actually the second fastestrecovery from a bear market in
the history of mankind for the S&P 500.
So it took 1.6 months. What was number 1 then?
Well, yeah. It's interesting that of the
most rapid was 1.1 months. Any guesses when that might have
(06:13):
happened? It's going to be something where
it's like either COVID or the GFC, or probably COVID would
have been the bazooka beyond allbazookas.
Spot on so February 2020 the market hit bear market
territory, but it was back to new highs by mid March, so 1.1
(06:37):
month plus that was the rap mostrapid.
But this one, you know, yeah, point big.
It's just kind of right. Obviously extraordinary scenes
with regards to the speed of therecovery.
Can I, can I just ask then? So I'm looking at this, this
chart which is mapping all of the 2025 S&P 500 views from
(06:57):
Goldman Sachs. Interestingly, the dotted lines
at the top show that their initial year end target.
So I'm assuming this was issued in December of 2024.
About what does the year ahead look like?
Was 6500 the current year end target 6600?
So there might be people listening, going, what is the
(07:18):
point of these targets when basically they're exactly where
they were six and a bit months ago and they've had all this
movement. So what do these targets serve
as their purpose? Well, I don't think it's quite
this chart. I don't think it's quite fair to
kind of look back like this and just laugh because Oh my God,
(07:38):
how stupid are they? They've got it so wrong, I
think. And this is, this is at any
moment in time, it's really a reflection of sentiment.
And at that moment in time, that's really important because
sentiment drives markets. So in the moment, it's, it's
these these calls and these, youknow, year end target updates
(08:00):
and stuff I think are important.Look, don't forget these banks
are trying to this is a revenue stream for them as well, right?
They're selling research to buy side institutions.
And so, you know, obviously someone like Goldman's is going
to have a very strong client base for purchasing that
research. And so they they, they are
sending out periodic quarterly is obviously a a perfect time.
(08:23):
So right, let's hit our buy sideclients with a fresh update,
which and let's raise some more revenue by charging the money
for that. So obviously they've got to do
it in this cycle of quarterly. And so they have to update based
on their models. So, but I think it's, you know,
it's a good indicator of where we're at from a sentiment
perspective. And where we're at at the moment
is no one believes Trump in terms of tariff risk.
(08:47):
And so, you know, what are we left with?
And we're left with, you know, pretty solid.
And I I'll say we're left with aroaring tech sector where, you
know, the big boys are right at the front of this kind of
juggernaut that's taken this market back to a new all time
high. And this is so interesting,
(09:07):
right? Because I remember, what, two
months ago, probably not long ago, the point being, everyone
was flashing the charts of how like, big Tech was
underperforming and how there's an imbalance in the Mag 7 and
the Mag 7 rotation. And so what's the latest status
there? Maybe we could talk about
NVIDIA? Yeah, well, the latest status is
(09:28):
most of the mag 7. As I said, they are the ones
that are most of the rally. Most of this 30% rally in the
last whatever 1 1/2 months is because of the big tech.
NVIDIA are valued at 4:00 trillion dollars.
That's breaking news. I think that's about sort of 45
minutes old when NVIDIA kind of broke through that price point.
(09:53):
Hang on, it was 162. Sorry, $164.36 was the moment
where it broke them through the four trail ceiling that takes
them. They a couple of weeks ago they
broke Apple's previous record. So Apple in December last year
hit 3.92 trillion, right? So it's kind of taken that out.
(10:16):
You know, the market and the S&Pis up 30%, right?
Nvidia's up 40% since early May.So it's the biggest component
and it's the most rampant, you know, on the upside.
And when you take the kind of big tech, like the tech sector
makes up 33% of that index, right?
(10:36):
And so when that sector's flying, obviously the whole
index just kind of ramps up. And NVIDIA, this has been one of
those key concerns from the start of the year that helped to
trigger, you know, and add fuel to that sell off back in April.
And it was the idea that, you know, the tech infrastructure
build out couldn't be sustained.You know, these big tech
(10:57):
companies cannot continue spending money to build out
their data centres at such a crazy rate and NVIDIA are going
to be the worst impacted by that.
And so obviously they were leading the sell off, right.
But what's happened? Well, actually all the big boys.
So Microsoft, Meta, Amazon, Alphabet, they're now tracking
to spend 350 billion this year. That's up from three ten billion
(11:19):
last year. So far from pulling back, it's
the opposite. They're, they're kind of
actually ramping up spend and these just those four companies
make up 40% of Nvidia's revenue.So when your big, big, big
clients go right, let's spend more, well then happy days.
And so that NVIDIA sort of remarkable story has continued
(11:43):
beyond what people were worried about.
And so that's helped obviously with the kind of general
sentiment shift to a much more positive space.
Yeah. And there is a company there
that you didn't mention, and that was Apple, because you
mentioned Microsoft, Meta, Amazon, Alphabet, who've been
big beneficiaries of the recovery here on the AI story.
(12:04):
But Apple's Sharp's looking way less tasty, right?
So you asked you know what's what's what's happening in
amongst those Mag 7? I said most of them are rallying
Apple 8. So Apple's down on the year.
One of the reasons is they're not in that list I've just given
you, meaning they're just absentfrom the AI race.
I don't know. Do you use your iPhone?
(12:25):
Do you ever use Siri? I do little driving.
How bad is Siri? Siri is.
Bad. It's shocking and they've just
don't seem to be doing anything about it, right.
So, and plus, they're obviously more impacted by tariff risk.
Supply chain concerns with China, even though I've
(12:45):
contradicted myself because I'vejust said tariff risk isn't
really a thing, but tariffs havegone up.
You know, there is a 10% tariff on the whole planet.
And so, you know, companies likeAlphabet, sorry, not Alphabet,
Apple, you know, do get overly impacted by that compared to
most, right? So yeah, Apple's definitely
still the underperformer out of those big big Mag 7.
(13:09):
Well, and Tesla. I should say.
Of course, yeah. And now that Musk's decided to
start his own political party, did you see that?
Yeah, I think, I think I got a push notification about a few
minutes ago saying I think is itthe XCO stood down or?
Yeah, that's right. Yeah, I saw that as well.
(13:30):
It's all going on now. Yeah, it's kind of it's kind of
imploding another kind of that'sanother part of the wave, the
cycle with with Elon, isn't it? It's ups and downs.
And yeah, yeah, we're definitelyon a down leg at the moment.
OK. Well, look, you did mention
there tariffs and and so is Trump.
(13:52):
So let's talk a little bit aboutTrump and copper and then maybe
the bigger picture we've been talking about for a number of
months, which is Trump and the US debt situation.
So what happened with copper? Well, Trump said today we're
doing copper. That was this quote.
Yeah. And So what does that mean?
(14:12):
Well, he's kind of now, you know, in his in his playbook,
which is just repeating again and again and again.
He's now right. Let's let's focus on copper,
right, 50% tariffs right on everyone.
Let's start there. So, yeah, I mean, you've got a
spike higher in the copper price.
I mean, there's it's a bit of a throwaway line.
(14:34):
We've got absolutely no details.It's just classic Trump.
But look, within an hour, copperprices did spike 11%.
They then came off that spike. They kind of sold, well, I don't
know, they've kind of sold off maybe 1/3 of it and then it's
kind of consolidated. But so there, there was a big
(14:57):
move and, and actually, what waskind of notable about that move
did mean that it, and I would say what was notable and, and
probably contributed because like, on the one hand, you got
Trump, right, who threatens tariffs and then, well, Taco,
right, he, he pulls back and youget nothing like 50%, right?
(15:17):
So why would the market react? And as you look at some of the
copper producers, their share prices hardly moved.
And when you look at some of theother markets, you know, broader
macro markets, because copper's obviously such a key component
in our electronic world. And like when you look at some
(15:38):
of the other, like, you know, how's it like, I don't know
NVIDIA, right? NVIDIA when they're making their
chips, needle load of copper, right?
That's a really key input. And so, you know, did the NVIDIA
share price really react or any of the other tech producers?
And, and the answer's no, nothing really reacted except
for the copper price. And it's punk it, it pinged 11%.
(15:58):
But I think what led to that mostly was because it was a
break to a new all time high. And it was a breakthrough this
$5, you know, quite psychological level.
We've been knocking on the door of $5 for a few years.
So actually the 2021 high, the 2022 high, the 2024 high, the
high from earlier this year in 2025, you know, all around that
(16:21):
$5 mark, you know, really, really key kind of technical
resistance. And that broke off the back of
this throwaway comment from Trump, which just, so there was
obviously a lot of stop orders just sitting up above that $5
mark that got triggered. These are stop orders.
So if you're, if you're short copper, expecting the resistance
(16:43):
to hold and you want the copper price to hit 5 and then reverse
back down. So you're selling at 5 expecting
resistance and making profit from the fall from that point.
But to protect yourself and manage your risk, you'll have a
stop order above 5. So if the price does punch
through, well then you're out because you know, my strategy is
(17:04):
wrong. I don't want to be sure anymore.
This thing's going up. So to get out you buy.
But if there's a concentration of stop orders, when you have a
really important significant technical level, there's a
concentration of stop orders. And once triggered lease a
really accelerated kind of stop order buying volume that kind of
(17:25):
exaggerates then the reaction inthe market.
And I think that's a lot of the reason why we we pinged 11%
here. And what this compounded by the
fact that you know copper is notlike a treasury bond in terms of
its market depth and there's a lot of automated algorithmic
systems that will jump on momentum signals and it all
(17:45):
compounds and exacerbates the short term market reaction.
Would that be correct? That would be correct indeed.
But like kind of stepping back from the market reaction for a
SEC, you know, what is this a thing?
I mean, firstly, as we know Trump, this is, this is his
playbook. So it's not going to be 50%,
right? I don't know where it'll end up.
I guess we'll find out, but definitely a lot lower.
(18:06):
So, you know, where are we left?Because from a sort of supply
and demand perspective. So for your info, the US like
over the last few years anyway, have been importing about 44% of
their refined copper, OK? So from a tariff point of view,
that's a lot. That's a lot of their copper
that they're having to import. So obviously from a tariff point
(18:29):
of view that's really significant.
But they have actually been importing a lot.
And look, people look, this tariff thing is obviously not
new. Everyone was expecting copper to
come under the spotlight at somepoint.
So you have seen copper prices drifting generally higher.
That's why we're up at 5 bucks, right?
We're up at an all time high before, you know already.
(18:50):
So people have kind of been looking at this and they've been
front loading some of their copper imports.
So actually from a supply point of view, it's believed that the
US have probably got about 1/3 of a year's worth of supply
already in the country. So I don't think there's like an
immediate concern here about tariffs.
(19:12):
And I guess it just buys time for Trump to do his thing and
we'll end up at a much lower tariff point than 50%, right?
So I think that's why generally markets haven't particularly
other than that copper price specifically for those reasons
I've given. I think generally everything
else was pretty sanguine about that.
There's one we don't have any details.
And there's one interesting point someone spots spotted,
(19:34):
which was quite funny because like so some of that the 44%
imported refined copper, most ofthat comes from Chili, right?
So Chili's the world's biggest copper producer.
Bit of random, a random stat foryou there to utilize at your
next pub quiz. But so a lot of it comes in from
Chile, right? So would they?
So that'd be tariffed, but then,right, to take the refined
(19:56):
copper and to turn into something useful.
Well, actually, typically the USsend a lot of the refined copper
to Canada And there's a lot of, there's a process in Canada that
turns it into like copper wire, for example, and then it gets
brought back into the US. So there's a double tariff
problem here for Trump because what, is he going to tariff it
(20:17):
on the way in from Chile? And he's going to send it to
Canada. What?
He's going to tariff it again onthe way back from Canada.
So, you know, obviously from a practical point of view, you
know, more reason to expect thatyou're not going to get a 50%
tariff on copper, you know, comethe end of this sort of latest
(20:38):
saga. Yeah.
It's really interesting to not think of it as just a final
finished product and that goes ready for any commodity product
across the space. I guess in terms of when we talk
about this sort of thing, I saw one analyst saying the US does
not have nearly enough mine, smelter, refinery capacity
(21:02):
through all each three differentparts of this process to be
self-sufficient in copper. The point being, mines take too
long to develop for that to be achieved.
And they were giving time framesreally for that to go full
circle to be productive. That's going to be a 10 year
timeline and the US would need to rely heavily on foreign mines
(21:23):
to meet demand for the foreseeable future.
So actually, yeah, as you said. And this and this is the problem
with the US, one of the problemslike from a regulatory
perspective, why, why, how can it take 10 years?
I'd like China can bring on these facilities in like 12
months. But the the regulatory burden, I
(21:45):
mean, this is one of the thing that Trump got voted in for was
to try and get in amongst that regulatory situation and start
chopping away at it and making doing stuff just more efficient.
But, you know, again, trying to adjust these regulations as, you
know, something on the radar forTrump.
He will get to that. At the moment, though, it's time
(22:08):
for copper. Yeah.
And just to conclude, like, why the time for copper?
One thing I saw in terms of timing wise that makes a lot of
sense is Trump's proposed coppertariffs came a day after, so 24
hours after he had sent letters to 14 trading partners,
including big hitters, Japan, South Korea, obviously
(22:29):
threatening to whack some steep levies on them if they don't
make a deal by August 1st. So this is like page 7 out of
Art of the Deal. It's like you, you, you send the
letters and then you go out witha really meaningful splash and
then you follow up with the e-mail the next day.
How's that? How you how's, how's that
consideration going on that trade deal?
(22:51):
So how are? How are them apples?
Exactly. All right, so look, with Trump,
let's let's finish the Trump part we're talking about, Yeah,
the the big beautiful bill and afew updates that we've got on
that side. Yeah, like classic Trump.
You know, he never misses an opportunity, does he?
So his big beautiful bill was signed into law on July 4th.
(23:12):
Of. Course, so obviously he never
wants to miss a kind of media opportunity there, but he signed
it off. So, you know, obviously there's
a raging debate right there as to right, I mean, is this a good
thing? Is it a bad thing?
And look, there's good and bad parts.
That's the thing. The thing about this bill, it's
(23:33):
just a monster of stuff that they've just shoved into one
bill and and kind of got through.
And so often a lot of stuff in there goes overlooked because
the media or let's say the left-leaning or the right
leaning media will latch on to certain specific things, right?
But, you know, there's tax cuts,extended tax cuts.
So they now become law. They're tax cuts Trump
(23:55):
implemented back in his first term, by the way, that were
expected to expire. So we get continued tax cuts.
He put in some other new tax cuts that he promised on the
campaign trail, like his his very famous no tax on tips.
So that's now law, which I don'tknow, is quite interesting
because like if I was, if I was in the USI would now put my
(24:16):
prices down my official prices and have a like a kind of side
agreement with my client that look, just pay me a bigger tip
now I'll reduce your price, but pay me a bigger tip, right?
And then so I don't know whetherthat that particular that that's
the scope for a lot of shenanigans there, I think which
(24:38):
which may lead to of course, lower tax receipts for the
government, right. But anyway, that's in there.
They've obviously slashed some other programs in terms of
government like healthcare, government payouts for
healthcare for the poor. It's kind of been changed.
You've got changes to like particularly interesting from an
Elon Musk battle point of view. They've they've chopped and
(25:00):
removed the electric vehicle subsidies.
They've removed various electricmanufacturing subsidies.
So there's definitely the Green Party a very not that were very
unpleased about all of this, butone thing that was in there that
I didn't realize and no one's really talking about is they've
actually agreed to raise the debt ceiling.
So that whole debt ceiling crisis, which I had right at the
(25:25):
top of my list of risks for 2025has now been entirely removed.
So another reason why people like Goldman's are going, all
right, let's go more upside herefor things like the S&P.
It's because one of the key risks has gone.
So in this debt, in this bill, they've agreed to raise the debt
(25:46):
ceiling by 5 trillion bucks, which actually is the single
biggest one time increase to thedebt ceiling ever in history.
So takes them to 41 trill. So just an NVIDIA with some
change. Basically just boosted it.
(26:07):
So perhaps then did we, we couldgo into what is ACDS?
So this the default swap like what is it?
First, what do people need to know as simple facts and then
what's happened in terms of why we're talking about it?
Yeah. I mean, in simple terms, it's
insurance against bankruptcy. So if you're at risk, if you've
(26:30):
got credit risk, right, if you're at risk of someone going
bankrupt, IE you've, you've lentthem money.
So in the bond markets, this is you've, you've bought their
bonds, right? So from a government point of
view, this is the government issuing bonds, selling those
bonds to investors. That's how the government
borrows. So now the investor is carrying
(26:51):
the, the default risk. They're obviously getting paid
an interest for that loan, but they're at risk that the, the,
the borrower's going to go bankrupt.
OK, so now you can buy insuranceto protect yourself.
So that should there be a default event, actually you
don't lose all your money. The insurer basically pays out
OK, now the price and the cost of insurance, like with
(27:15):
anything, your car insurance, ifyou have a crash, then you renew
your insurance, it's going to goup, right.
The the premium on your insurance is going to go up
because hang on, the risk on youis higher now because look,
you've crashed. So obviously the cost of
borrowing increases as the risk of default increases.
And so this year the CDs price for US1 year debt, right, had
(27:43):
increased. And you know, through the months
of February and through the months of April, it'd been going
up and up to as we were approaching the summer because
the whole risk was, well, actually the US hit their debt
ceiling, the self-imposed limit of 36 trillion.
They hit that in January. So since January the government
(28:04):
hasn't been borrowing any new money they've obviously been
paying for stuff, but they've been dipping into their savings
account at the Fed right and thethought was that the savings
account would run out this summer So if the government
can't do a deal to raise the debt ceiling, the government's
going to run out of money and technically default right So the
(28:25):
cost of insuring was increasing as a result but after this
bill's been announced there was a big drop in the CDs price now
reflecting the fact that that default risk whilst.
Look. Was still small because they
always get this deal done. It had been rising.
And so anyway, it's now sold offagain to reflect that that that
(28:47):
deal's done. And I, I'm surprised it hasn't
been, it hasn't got any more airtime to be honest.
But yeah, it's another big 2025 risk that's been removed from
the table. So just the final question then
on what you've described, So of what proportion of people having
ACDSA credit default swap as insurance as opposed to those
(29:08):
people who are speculating on CDs price movement?
OK. That's a good question I don't
know the answer to. So like you're basically asking
the volumes that get traded in the CDs market, what proportion
are actually people buying insurance because they're
holding bonds and have that realdefault risk, But you don't need
the underlying to trade that CDsmarket.
(29:31):
You can just punch your way around as a speculator betting
on whether the cost of insuranceis going to change, right.
So I actually don't know the answer to that.
So I don't know what the volume split is speculator to to actual
hedging parties, I don't know. If you're listening and you do
know, let us know in the comments and you know, give us
(29:52):
some, give us some facts, stat check, verification check going
on here. Perhaps then to finish, we could
talk about another some kind of similar related situation
because we're talking about the UK government and borrowing
costs because there was quite a big fluctuation in 10 year gilt
yields. So maybe we can talk about
(30:14):
what's a guilt as well, just to quickly make sure everyone's on
the same page. But then also we have this
really sharp move higher in a very short time frame on the 1st
going into 2nd of July. And so that obviously sparked a
lot of concerns that, you know, are we going to get a repeat to
the yield crisis that we had going back a few years with Liz
(30:38):
Trust? And then the markets reverse.
And there's also headlines now going that BlackRock, Schrosers
kind of soar through the market volatility, but what made them
so confident as well? So yeah, couple of different
angles here to cover. Well, firstly, do you know why
they're called? Well, so what's a guilt?
That's just the name we use for UK government bonds.
(31:00):
But do you know why is it calleda guilt?
I don't know. Come on.
It's actually so they're called guilts.
So this is short for guilt edgedsecurities.
And this is because they were originally issued with gilded,
so gold edged certificates. So that was just kind of
(31:23):
symbolize like the high quality and the reliability of the UK
government as a borrower, right?So that's why guilt edged.
Wow, do you know what? I am going to absolutely smash
this tough quiz coming up the next one when it comes Chile
gilt edged bonds. Let's go.
That's right. That's right.
(31:43):
I mean that's just the value I bring to to the listening
community. Yeah.
I mean, look, the UK, well, let's be more specific.
The labour market is the government here in the UK and
has been for the last year. Yeah, let's just say that I've
been having a great time of it from a fiscal kind of
(32:07):
sustainability point of view. And last October they set about,
they put forward a huge budget. So every year they obviously
renew their budget, right? What are we going to spend money
on? How much are we going to spend?
And right, where are we going toget it from?
So right, what's our borrowing requirements, OK.
And at the end of last year, they basically said, right,
(32:28):
we're going to have to, we, we got a 40 billion a pound hole we
need to fill. So we're going to raise tax.
And so they did a few tax increases such as increasing
National Insurance for employers, OK.
And they said at the time, look,this is going to be a one off.
We've got this hole. We're just going to sort it
(32:48):
right now. We're going to make big moves,
big changes now and then that'llbe it, OK?
This will be the only time we doit, OK?
Here we are like 7-9 months later.
And unfortunately, as time's been going on, the UK economy
hasn't been necessarily firing. Tariffs have come along, which,
you know, we have tariffs, right?
There's a 10% tariff on on our stuff going into the US.
(33:11):
So, you know, that has had an impact.
And ultimately, as time's been going on, the gap that was 40
billion that they filled, that gap's now widening again.
And it's like between 20 and 30 billion apparently, according to
some measures. And so everyone's going, OK,
sorry guys, you're going to haveto, you're going to raise taxes
again, aren't you? Because so how else are you
(33:31):
going to manage this? And the neighbor like, well,
yeah. And not really saying whether
they or not, not certainly not saying they're not going to
raise tax, right. So they're going to have to.
And so look, there's fiscal. So it's just back to that simple
point about creditworthiness andand about supply, You know, are
the UK government going to have to borrow more money?
(33:55):
Are they going to raise taxes toavoid borrowing more money?
But if they raise taxes, well, isn't that going to kind of
derail economic momentum? So you kind of got it, you're
stuck here, right? But if they go down the path of
borrowing more, well, interest rates are actually still
relatively really high. The one thing that the UK has in
its favour from its debt position, they've actually got
(34:15):
quite a that their average maturity of their debt book is
actually really long compared tomost countries, just meaning
that there's less pressure on refinancing debt in the short
term, right? But if they need to borrow more
like right now, well, OK, you are borrowing in the short term
and that's going to cost you money, right?
(34:37):
So there's kind of all that going on.
But yeah, I guess the big boys were saying, look, let's buy the
dip. So if prices come down then you
know, they're just saying we don't believe it's our strategy,
that we don't believe this is going to end in a debt crisis
for the UK. So we believe this is a good
(34:58):
opportunity to Hoover up some more on the cheap.
Yeah. I mean, my, my interpretation of
this when I was following it a few days ago was, you know, what
you've explained is all that the, the technical process, if
you like, But the trading part of this was basically on the
catalyst was Keir Starmer, the PM, not giving backing, not
(35:21):
publicly, immediately giving full backing to his chancellor.
That then triggered because the marketplace sees her as a, a
voice of rationality, a market friendly person, fiscal
discipline. And oh, what if he buckles,
let's her head roll and someone else comes in who's not so
(35:43):
disciplined and the market's kind of fretted over that and
that kind of jumped things to life.
But then I think he quickly understood or got the memo
because perhaps he didn't connect the dots of exactly what
that meant. And things reversed course well,
within within a day, Within the day, right?
Pretty much. Yeah, Yeah, exactly.
(36:04):
And so it's, it's just volatility that people are just
trying to exploit. I mean, I look, I would say from
a yield perspective, you know, we're right up.
We're just like on a 10 year guilt.
We're kind of SAT camped out under the 5% handle, which is
really high. And we've been camped out
largely speaking around that point for the whole of 2025.
(36:26):
And we're kind of this was the kind of highs from 2023 and the
whole Liz Trust saga got us up. So we're actually sat yields
higher than the spike up in the Liz Trust saga, OK?
We're we're actually just slightly higher than that right
now and have been for the whole year just below 5, right?
This is a quite precarious position.
(36:49):
And the markets are broadly all right.
There's ups and downs and short term volatility, which is what
we're talking about here, where they came in and bought the dip.
But longer term, you know, are we going to break 5 and move
higher and this is going to become a real crisis for the UK
or or not, you know, can the Labour government get it right
(37:10):
from a strategy point of view? Can the Bank of England cut?
Can we get some momentum going and positive sentiment around
the economy, in which case theseyields, you know, might come
back off again. But at the moment we're quite
precarious just living under that 5% handle.
Question for you and I, you don't have a specific answer.
What do you think in terms of like if you were Black Rock and
(37:32):
I would hoovering out some guilts here on this on the
spike, wouldn't you? It'd be like Wall Street, like
the original Wall Street, Michael Douglas.
I'll pick up the phone and I'll be like blue Horseshoe loves it.
UK gilded bombs. And then and then and then my
buddy at Schroeder's goes, you hear Black Rock saying and
they're going to do that. And then like how, how
(37:53):
incentivized are you and what guardrails are they regulatory
wise that if I'm buying, I want to, I want to tell everyone I'm
buying, yeah, A, to turn the market and B to other people to
join my trade, to push my position.
Yeah, and that's fine. That's not illegal.
You could tell people I've bought.
You know, why do people go on Bloomberg and CNBC every day
(38:16):
like these PM, these portfolio managers get wheeled out.
You know, every hour there's someone else chatting about
their book and telling them, telling the audience what
they've done, right. Of course, once you've bought,
tell everyone else you bought because if you've got a good
reputation, they're going to buyas well.
And you've already bought and you're you're kind of front
running them buying, but not in an illegal way.
(38:40):
It's not like you're giving awayinsider knowledge here.
So that's not that's not a thing, but.
I think, what about when Rishi Sunak goes to work for Goldman
Sachs there? Wow, Yeah, that was interesting
news, doesn't it? When you.
(39:00):
Draw the line between then the Ear of Westminster and In Power
of Influence and the financial Masters of the Universe.
It's a very good point. And there is a long history of,
you know, like, was it George Osborne went tried off to work
for Goldman's, wasn't it after the after he left the
Conservative Party? Or there's a long history of
(39:22):
politicians going to be, you know, advisors for banks.
And look, yeah, where's, where is the line?
That's a, that's a definite greyarea, but it happens.
And if the paycheck's big enough, then they'll do it,
right? But final .5% yields, right?
If I said short term volatility in like they're buying the dip.
(39:44):
But actually there's some long term play in here as well.
Because if you think this is thehighest yields will be, if you
think this is long term, it's taken five years to go from
yields that were nearly down around 0 around COVID, second
five years to go to 5%. So do you think that now in the
(40:06):
next 5 years, you know, ultimately yields will drop
again? Do you think the inflation
crisis is fully in the rear rearview mirror and inflation will
get to 2? All lower.
You're going to get a rate cutting cycle, you know.
Do you think those things are going to happen?
In which case this is a beautiful time to buy gilts
(40:27):
because they ain't going to be as cheap as this for years, if
that's your opinion. Now there's other people on the
other side of that trade who think Labour are going to cock
it up. Inflation is going to stay
stubbornly high. Thank you.
England aren't going to cut, youknow, they're going to have to
borrow more money. They're going to have to
(40:47):
increase supply, driving prices down and yields up.
You're going to get a break of five and this is going to be a
crisis, right. So that's that's the opposite
side of that sort of thought process.
I wonder as well, just connecting the dots then, if you
have the midterms and let's say Trump loses a bit of power, the
messaging around tariffs, given he's gone so hard now, it's not
(41:10):
going to be, you would think, asintense in two years time
towards the back end of being reelected.
And that would all be favourableconditions, if you like, for
believing that yields will decline over time.
But yeah, interesting. Good stuff.
Well, look, we'll wrap it there as per usual.
Any questions at all about anything we've discussed, please
(41:31):
do put your point of view. We'd love to hear from you.
Any questions, criticisms might be, might be some.
So it might be some Tories on the call who want to give their
2 pence about the fiscal situation.
Then please just let us know. We're open to all arguments with
valid substance, let's say. All right, we'll wrap it up
(41:54):
there. Thanks everyone for listening
and we will see you next week. Take care.
See you later. Bye bye.
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