ORCL,MSTR & OWL Concerns...
- Marc Bentin
- Nov 17
- 7 min read
BentinPartner Weekly
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Please find below our latest Weekly Trend Report.
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Marc Bentin,
Bentinpartner GmbH
Last week unwound in a similar way as the week before with a miraculous squeeze that took the markets away from a technical danger zone despite a week marked by building economic and financial troubles.
Indicators of risk appetite left scars for the week, with bitcoins ignoring Friday’s equity markets squeeze, and shedding -14% on the week (sending MSTR share price into a near tail spin), with the CDS of ORCL closing at its highest level since 2021, adding 13bps on Friday (to 102 bps), despite ORCL shares recouping losses on Friday (still ending the week with a 10% loss) and with Chinese tech shares which dropped on Friday with nobody to salvage them.
After Monday’s short covering squeeze, Thursday and early Friday let more fear transpire about the growing AI/tech bubbles with MAG7 shedding -3.7% at the lows of the day and the Nasdaq -2.1% before a “buy the dip” emerged that brought major US indices away from the near abyss they were staring to close mostly unchanged for the day.
The long and short unanswered question facing the equity market is how long it will be able to sustain the AI bubble which is fueling most of the equity market’s rally and also 40% of the US economic growth at the same time as clouds gather above most other parts of the economy, including job markets dynamics, consumer spending (with a record number of Americans falling behind on their car payments) and real estate to which we can add the question marks that were added last week about the December Fed rate cuts and some evidence of mounting liquidity troubles.
In other words, the question is how long can equity markets (without massive QE) be sustained despite the building constraints of a K shaped economy and out of mind borrowing excesses (and promises thereof) from a handful of overhyped and overvalued AI hyperscalers presenting the promised land to equity investors while at the same time actively sowing the seeds of a job market tsunami which is about to hit the US (and) world economy.
The encouraging news (for equity investors), at this stage is that the Fed (and the US government) cannot and will not let the AI bubble deflate (as it perhaps should to clear out some excesses) which at this stage is still synonymous with economic growth…but threats are looming from the lopsided structure of the economy and I cannot help thinking, as I posited last week that we are indeed somewhere around 1927, going into 1928 with a serious day of reckoning looming shortly thereafter (most likely on the debt, currency and inflation side). The only thing I am fairly confident about is that massive QE is coming (also because the Fed will have to bail out the US public finances and US public finances the debt excesses of the AI hyperscalers) as a savior of first and last resort (the market, due to its modified structure, offers “0” liquidity on down days and “huge” liquidity on up days because they are run by machines operating with no capital, pulling the plug on down days…and even down hours and minutes). In this context, stocks are still likely to perform (but it will not be possible to put a finger in every rowing boat’ leaking scull …) and, at this stage, I would prefer physical gold (and silver) as long-term investments over any equity markets even if the efforts of manipulation on the latter remain on the downside, ultimately serving the appetite of the structural bid (central banks’ buying).
The fact that M. Berry (known for having made a fortune shorting CDO’s during the big financial crisis) decided to close his hedge fund last week, just days after his big short positions were released was likely less of a sign of capitulation than an urge for discretion on whatever stocks he is shorting (or buying), at this particular juncture.
Interestingly, Bloomberg reported that the value of banks’ synthetic securitization (essentially the offloading of CDS (received premium) to SPV’s selling the risk to end investors eager to take more risks, had surpassed USD670bn, expanding at double digits and showing lenders racing to offload (transfer) risks.
This is only me being bearish on the economy (and cautious on stocks) and many voices beg to differ, starting with Softbank (which just announced it sold out its Nvidia position) saying “skipping AI is riskier than betting big” or M. El-Erian who said the AI Bubble is a “rational” bubble, or Microsoft President saying “there is no AI bubble” or Ed Yardeni calling market nervousness “healthy” or AI chairman saying “enough” to the doubters, adding that he’ll find an investor to anyone who wishes to sell…
Similarly to last April’s markets dynamics, safe haven buying into government bonds were non-existent during Thursday and Friday selloff. There was a “huge” whale buyer of 10Y note futures on Friday in the deepest moment of the equity selloff which sent yields down 8bps only to reverse all these gains and close 2 bps higher on the day (at 4.14%). Gilts suffered a blow on Friday with 10Y yields adding 14bps on the day (to 4.57%), closing 11bps higher on the week after UK Chancellor R. Reeves reversed course on raising income taxes to reduce deficit spending. Japanese yields also rose (with the currency weakening) after the new Prime Minister geared up for more fiscal stimulus and BoJ pressuring. US high yields were volatile and closed higher on the week.
The US dollar index dropped slightly for the week with precious metals recovering some of the previous week’s selloff while bitcoin witnessed more leverage unwind being the first asset class to lose all its gains for the year.
Gold and precious metals recovered some of their previous week’s losses.
Nvidia will report after the close on Wednesday and Walmart on Thursday morning to provide an update on the AI trade and the US consumer. This week will also see the return of economic releases as the government shutdown ended with a partial US job report due on Thursday (originally scheduled for October 3d).
Over the past week, the S&P500 gained 0,1% (14,6% YTD) while the Nasdaq100 dropped -0,1% (19,1% YTD). The US small cap index dropped -1,7% (7,5% YTD, Z-score -2,3). AAPL gained 1,5% (8,8%).
The Equally Weighed SP500 dropped -0,1% (6,9% YTD), underperforming the S&P500 by-0,3%. The median SP500 YTD return closed the week at 5,8%.
Cboe Volatility Index rallied 3,9% (14,3% YTD) to 19,83.
The Eurostoxx50 rallied 2,3% (19,3%), outperforming the S&P500 by 2,2%.
Diversified EM equities (VWO) gained 0,6% (24,5%), underperforming the S&P500 by 0,4%.
The Dollar DXY Index (UUP) measuring the USD performance vs. other G7 currencies dropped -0,2% (-4,5%) while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) gained 0,2% (6,4%).
10Y US Treasuries dropped 5bps (-42bps) to 4,15%. 10Y Bunds climbed 5bps (35bps, Z-score 2,0) to 2,72%. 10Y Italian BTPs climbed 4bps (-5bps, Z-score 2,6) to 3,47%, outperforming Bunds by -1bps.
10Y French OAT's dropped 0bps (26bps) to 3,46%, outperforming Bunds by -5bps.
US High Yield (HY) Average Spread over Treasuries dropped -5bps (4bps) to 2,91%. US Investment Grade Average OAS was unchanged (2bps) to 0,89%.
In European credit markets, EUR 5Y Senior Financial Spread dropped -2bps (-5bps) to 0,59%.
Gold rallied 2,1% (55,6%) while Silver rallied 4,7% (75,0%). Major Gold Mines (GDX) rallied 5,0% (124,6%).
Goldman Sachs Commodity Index gained 0,3% (7,4%). WTI Crude gained 0,6% (-16,2%).
Overnight in Asia…
S&P future +31 points; Hong Kong -0.8%; Nikkei -0.3%; China -0.7%
US futures are propped up this morning despite the whole of Asia showing losses and bitcoin shedding -2%
Japan’s economy sank at an annualized rate of 1.8% in the July-September period, data showed overnight, as President D. Trump’s tariffs sent the nation’s exports spiraling.
China is escalating its confrontation with Japan over Prime Minister Sanae Takaichi’s comments on Taiwan, with state media threatening major countermeasures after Beijing’s travel warnings raised the specter of economic retribution, Bloomberg reported. Those measures put millions of Chinese tourists — about a quarter of all visitors to Japan annually — on the line, triggering slides in the shares in tourism and travel-related stocks, with Shiseido falling as much as 11% this morning.
In Mexico, President Claudia Sheinbaum criticized a Gen Z march in Mexico City against rising crime and following the recent assassination of Mexico’s mayor for his hardline stance against organized crime, calling it a movement financed by right wing politicians and business leaders opposing the government. The mobilization could become another challenge for the government as more of such protests are erupting worldwide amid growing anger over inequality, unemployment and corruption, the WSJ reported. Some food for thought for D. Trump and his crusade against Venezuela.
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