Ben's Market Chat - Insights and Interviews

Check out our YouTube Channel @BensMarketChat for this week’s comment. Don’t forget to like, subscribe, and tell a friend.Join our email list to be the first to see these videos every week: https://mailchi.mp/traderoutescapital/giuox24tmgThis week we parse through Jay Powell’s decision to remain on the Fed rate setting board and the key results from last week. Alphabet rose (justifiably) by 10% whilst Meta fell 10% (unjustifiably in our opinion) by 10%.Jay Powell becomes one of 8 members of the Fed rate setting committee that are non-aligned with the Trump administration wish to keep reducing rates at almost any cost. The other 4 Trump appointed governors are likely to push through with the dovish agenda. Question is, how many of the 8 will turn? We think that ceteris paribus, re the economy ie assuming we remain in the current range of activity, the Fed will likely reduce by a further 25-50bps this year. A positive for risk assets.A slew of major results were announced and digested last week. We’ll not dwell on each suffice to say that Alphabet came in as the champ whilst Meta won the wooden spoon in terms of share price reactions.As an ongoing theme, capex continued to rise but companies also highlighted faster data centre growth and capacity uptake as well improved metrics on margin and uptake thanks to the AI capex initiatives.Meta has been perceived of late as a net loser in the AI race. They are spending almost as much on capex as the DC players but with no DC platform and have, what some may call, a lame LAMA LLM (Large Language Model) product. What the market, we believe is missing, is that Meta probably has the most transparent route to AI monetisation of all the MAG7. Ad revenue targeting is already allowing for a re-acceleration in revenues. According to consensus estimates, revenue is set to rise by 25-30% this year and next. That’s a $130-150bn incremental growth over 2 years. Even at this early stage that’s pretty impressive ROI and payback.In terms of valuation, Meta (according to consensus estimates) is trading on 20x 26 p/e with revenue growth of 25-30%. This is by far the most attractive of the MAG7.Meta has been through investor shunning before and then bounced back. This could well be another such episode.Mastercard & Visa are a backbone to any global portfolio in our opinion. Little in last week’s announcement and guidance has shifted our view. These act as a duopoly in a global payment processing market with EBITDA margins in excess of 65%. There are few if any existential threats to their dominance, at least on the medium term horizon.Always do your own research or seek the advice of your professional financial advisor.You can find us on LinkedIn and YouTube, Money Matters, Ben Hakham CEO at Traderoutes Capital.

Check out our YouTube Channel @BensMarketChat for this week’s comment. Don’t forget to like, subscribe, and tell a friend.Join our email list to be the first to see these videos every week: https://mailchi.mp/traderoutescapital/giuox24tmgThis is a big week for markets with over 44% the S&P500 Index in capitalisation terms announcing results. The most significant are Visa, Alphabet, Microsoft, Amazon, Meta, Ely Lilly and Mastercard. Just these companies combined account for 33% of the S&P500 Index.The DOJ have announced that they will drop their charges on current Fed head Jay Powell. No doubt pressure from up top has induced this change of heart to allow for the easy passage to crown Kevin Warsh as the new Fed governor.We’re unlikely to see any movement from the FOMC this Wednesday but clearing the way for a May Warsh appointment brings a resumption in interest declines back to the top of the agenda and hence a re-awakening in risk assets.In the meantime, European inflation numbers out this week are likely to re-enforce stagflationary fears in the Eurozone as this will be combined with Q1 GDP growth, most likely close to zero.The US core CPE is also due this week and likely to be closer to 3.2% vs 3% in Feb and way off the Fed’s 2% target. However, Q1 GDP growth is likely to suggest an annual run-rate of 2.1%. This is at least better than an inflationary/no growth environment we’re witnessing in Europe.On the corporate front, we talk about the dynamics of the last 3 major Top 10 stock concentration eras. The Nifty 50 during the 60’s & 70’s when the top 10 stocks accounted for 30% of the S&P500 Index, the dot com boom in the early 2000’s when the top 10 accounted for 25% of the Index and the current crop of top 10 stocks accounting for 40% of the S&P500 Index. We discuss the valuation differentials, the earnings growth outlook and the point in the cycle. We conclude that the latest AI driven cycle and the top 10 stocks by capitalisation are still in the ‘early innings’ of the current cycle.We also discuss Intel’s results from last week and how the CPU is the latest chip type to join the AI ‘growth train’.Always do your own research or seek the advice of your professional financial advisor.You can find us on LinkedIn and YouTube, Money Matters, Ben Hakham CEO at Traderoutes Capital.

Check out our YouTube Channel @BensMarketChat for this week’s comment. Don’t forget to like, subscribe, and tell a friend.Join our email list to be the first to see these videos every week: https://mailchi.mp/traderoutescapital/giuox24tmgRisk assets are on a tear despite the oil price increasing thanks to the latest development in the Iran war. President Trump has instigated a blockade on Iran’s existing blockade of the Straights of Hormuz. That’s a lot of blockading!But Why? Last week’s chat with Anthony Scaramucci (head to Ben’s Market Chat on our YouTube channel to watch the full interview) gave us a sneak peak into the logic. China receives 90% of its oil needs from Iran through the Straight. The US needed to prevent Iran from blockading all shipping bar those heading to China to force China to negotiate with Iran.China is Iran’s paymaster thanks to its oil purchases and as such would have the biggest influence on getting Iran to bend to US’s will. Anthony was spot on on that one.US banks report this week. The US Banks ETF has been in a funk. The worst performance since 2023. However, Goldman’s report yesterday indicated a strong investment banking fee flow. We would also suggest that a potentially steepening yield curve going forward would play into the hands of the sector as this would imply higher Net Interest Margins (NIMs).Whilst the Iran war impact on inflation is likely to be negative, the Fed, under a new head appointed by Trump is still keen to reduce rates, be it later than initially anticipated. Fixed Income investors will not take well to this as concerns of stagflation re-surface. The Fed controls the narrative at the short end of the yield curve but the long end is firmly in the hands of investors. Investors may well continue to drive rates higher for 10 year treasuries whilst the Fed aims to put a lid on rates at the 2 year maturity.This means a steepening yield curve implying recession concerns. Banks generally borrow in the short end and lend on the long. Most mortgages are set at the 10 and 30 year rates. The widening rate horizon improves bank margins but is not great for homebuyers seeking a new mortgage.After this week’s results, expect a potential bounce back in financials.Always do your own research or seek the advice of your professional financial advisor.You can find us on LinkedIn and YouTube, Money Matters, Ben Hakham CEO at Traderoutes Capital.

Check out our YouTube Channel @Ben'sMarketChat  for this week's comment. Don't forget to Like, Subscribe & tell a friend.Few investors expect a swift resolution to the Iran conflagration. But that's not what the oil markets are telling us. Spot is in excess of $115 per Brent barrel whilst December futures are still hovering at $85.The key concern is that the US get 'bored' with the lack of a swift solution and simply walk away. This would leave the straits of Hormuz at the beck and call of the Iranian authorities and would suggest that the transport of oil would remain imperilled for the foreseeable future. That scenario would suggest that despite a potential US withdrawal, the oil price shock does not go away.The S&P500 Index is trading below the all crucial 200 day moving average and the Nasdaq is in correction territory. The S&P500 Index Put:Call ratio is at 1.3. Decidedly bearish but not in capitulation territory having reached 2.3 in 2022. Conditions can get worse but worth noting that post the 2022 decline, the subsequent rally returned 55% trough to peak.Inflation fears abound, investors fear a hike in rates and the OECD had reduced growth assumptions for the global economy to 2.9% and suggesting that the UK will be the worst hit if all G20 countries.We do not believe that a Kevin Warsh led Fed will raise rates. Moreover, we continue to view the Fed as a soothing layer for an economy whose growth characteristics are becoming murkier. The next Fed move remains downward in our view.Having said that, inflationary pressure is a real threat. Transportation costs will increase and stay elevated longer than markets believe even if the US walk away from the conflict. But to us, that means rates fall 25bps this year and potentially a further 25bps in 27. Ie a much slower decline than forecasts pre war.Meta's tobacco moment? Two key court cases have gone against them. They have been found guilty of creating addictive algorithms (Google has been inculcated in this too) and that Meta had not sufficiently protected youngsters against predators.For us, the key are the advertisers. We don't believe that brands will abandon Meta. With pattern recognition becoming so much more granular thanks to AI adoption, brands have 1. Limited access to consumers digitally and 2. Their ROI on marketing budgets are improving daily. Meta's platforms play a crucial role. Furthermore, under 18's account for less than 10% of the user base. Better age verification and controls are required. This is a relatively low cost to business for Meta. We do not believe this is that Tobacco moment.Always do your own research or seek the advice of your professional financial advisor.You can find us on LinkedIn and YouTube, Money Matters, Ben Hakham CEO at Traderoutes Capital.

Please check out our YouTube Channel @BensMarketChat for this week’s comment. Don’t forget to like, subscribe, and tell a friend.Three key related factors dominate our discussion this week; Oil Shocks/Stagflation, midterm elections & Trump’s ‘offramps’.Investors are getting increasingly concerned that oil at over $100 per Brent barrel is going to lead the global economy into Stagflation not too dissimilar to the oil shocks of the 1970’s post the Yom Kippur War of 1973. Whilst the key factor in fulfilling this investor prophesy is duration ie the longer the oil price remains elevated the more likely more of the price escalation seeps into the logistics infrastructure, other considerations play their roles too. None more so than, impact.Impact refers to the role that oil now plays in a modern economy. In the case of the US, the amount of oil required to generate $1M of GDP growth has fallen by 70% since the 1970’s. Furthermore, oil in the energy mix in the US peaked at 48% in 1978 and is now down to less than 38%. In other words, it will take longer duration compared to the 1970’s for the oil price hike to seep into inflationary pressure.This is where the mid term election issues kick in. President Trump is already significantly under water in terms of approval rating at below 40%. In this scenario, historically, the incumbent party in the House has generally lost its control. This is likely to be repeated again in this cycle. However, the administration could take succour in that of the 35 seats in the Senate up for grabs, 22 of those Republicans are defending and in the main, they are secure Red seats. However, the war with Iran and the subsequent effects on growth, interest rates and inflation, threaten at least four of those seats ie Maine, North Carolina, Texas and Ohio.The longer the war continues, the more marginal these seats become. This would turn a 53-47 Republican Senate into a stalemate, taking into account the VP vote. It could get uglier for the Republicans if the next 4 seats begin to marginalise in Alaska, Iowa, Florida (Rubio’s former seat) and Montana.For this reason, Trump’s administration is no doubt spending all its efforts looking for viable off ramps from this conflict. We list a number of potential ‘outs’:1. The process has already begun in outlining met objectives that would allow for cessation of hostilities. Whether actually met or not, the very fact that the administration have said they’re met would be sufficient to allow for retracement.2. Let Iran know that any re-armament or proxy financing would result in a re-visit of US military - this might create the conditions for a long term ‘forever’ war. Whether future administrations would agree to this is a moot point.3. Regime change is now off the table, so this goes on the back burner as a condition for cessation.4. Blame Congress and the Dems for not allowing the administration to conduct the war without the approval of the $200B defence package.All in all, the TACO trade is not far away!NVDIA announced a $1T pipeline of orders from the hyperscalers through 2027. The real spoiler here could be the reduction of Ad spend thanks to economic slowdown. Ad spend is at the heart of the cashflow story. The better the AI targeting process of customer spending habits, the better ROI for brands and advertisers, the more revenue to the giant digital advertisers that is getting used in funding the AI capex. Slowdown in this base cashflow generator and the AI story unwinds somewhat.Always do your own research or seek the advice of your professional financial advisor.You can find us on LinkedIn and YouTube, Money Matters, Ben Hakham CEO at Traderoutes Capital.

This week we chat to Basil Demeroutis, founder of FORE Partnership, one of the first, if not only sustainability focused London office developer. Basil is a property guy through and through having run Jeff Skoll’s (eBay founder) Real Estate division of his family office, Capricorn Investment Group and has built over £1.3bn in real estate value spending over £500mn in construction over 16 projects whilst at the FORE Partnership.Basil tells us that whilst the London office market has had a profound downturn, there are signs of green shoots appearing. The build rate slowed down significantly and demand is now running ahead of supply. Since COVID, 350,000 new hires have been in the City & Mayfair markets. The long believed structural decline of the office space with the onset of hybrid working post COVID does not appear to have killed off office space demand.More so, rents are still heading higher and yields have risen at least 200-250 basis points higher than the heady levels witnessed during the mid 2010’s. Landlord and tenants are also demanding more sustainable and community based working spaces and FORE Partnership is at the vanguard of the trend for lower cost and more sustainable office buildings and space. Basil also talks about his firm’s approach to investment, investors, and returns profile and tells us about his new venture MORE, which advises landlords how to optimise value and returns.Connect with Basil at https://www.forepartnership.com/ And check out MORE at https://everythingmore.com/-----------------------------------------------------------------------------------------------------------Join our email list to be the first to see these videos every week:https://mailchi.mp/traderoutescapital...Check out this and all of our episodes in podcast form on Spotify and Apple MusicSpotify: https://open.spotify.com/show/67oVN7g...Apple: https://podcasts.apple.com/us/podcast...Join the community on LinkedInhttps://www.linkedin.com/in/ben-hakham-bens-market-chat-insights-interviews/Always do your own research or seek the advice of your professional financial advisor.You can find us on LinkedIn and YouTube, Money Matters, Ben Hakham CEO at Traderoutes Capital.

Please check out our YouTube Channel @BensMarketChat for this week’s comment. Don’t forget to like, subscribe, and tell a friend.With lack of new job creation since Liberation Day last April and an oil price hike to a high of $120 per barrel, its no surprise that investors are fearing a 70’s style oil shock and stagflation.Despite President’s Trump insistence last night that the war with Iran is coming to an end, Iran’s appointment of the late President’s sone to succeed him implies, they may have a say in the matter.It is all about oil! At least that’s how the market is behaving. The US is the world’s largest producer at 15% of total production but the Straits of Hormuz account for 20% of oil shipments. So whilst the US may be supply independent, it cannot avoid the commodity price rise and the subsequent inflationary impact on energy and logistics. President Trump is already under the hammer in terms of affordability which is weighing heavily on the Republicans chances of winning the House of Representatives in November. A continuation of the war could bring the Senate into the Blue corner too. A scenario that is hugely unacceptable to President Trump.Markets are nervous. Not that you’d notice with the S&P500 Index almost flat on the year. However, dig deeper and the sector breakdown looks very different. Technology is down over 5% whilst Energy is up over 25% YTD. Financials are down 11% whilst Industrials are up 5%.With interest rates likely to fall under the new Fed governor in May and inflationary fears somewhat cushioned by the deflationary nature of a strong dollar (the safety trade at times of war), economic growth may subside but not fall away and the inflationary threat may not be as large as feared. In a moderate growth economy with stable inflation and falling rates, it is Technology and Financials that benefit. If the war tapers off, its Energy that will suffer.Always do your own research or seek the advice of your professional financial advisor.You can find us on LinkedIn and YouTube, Money Matters, Ben Hakham CEO at Traderoutes Capital.

Join our email list to be the first to see these videos every week: https://mailchi.mp/traderoutescapital/giuox24tmgYouTube channel - https://www.youtube.com/@bensmarketchatThis week we talk to Cris Acconci. Cris is a successful serial entrepreneur who has founded and sold businesses in the sports betting and gambling arena. He was one of the founders of Whoscored.com, a football statistics platform with over 4mn active monthly users. The business was sold to Oddschecker, a subsidiary of Flutter. Cris then went on to advise All Sports X on their blockchain rollout and took on the roll of Chief Product Officer at Click Media. We talk about the impact of AI on the online gambling environment. Customisation and fractionalisation of betting has been an ongoing trend in the industry and AI is only accelerating the trend towards targeted and deeply granular betting opportunities across sports but now new areas that hitherto have not been open to gambling. Clearly Prediction markets have ballooned rapidly and cross multiple segment lines including traditional sports but now also offering contracts on business and political events. Cris tells us how the current incumbents like Flutter, Entain, FanDuel etc are dealing with new upstart and fast growing companies like Kalshi and Polymarkets as well as how the regulators are trying to get their heads around how to deal with new forms of gambling and jurisdictional controls on licensing. We talk about Sportsbook vs Casino and we talk about trends in the sector from venture level through to the listed sector. We also touch on the advertising budgets of these major cash generating businesses.Online gambling is becoming granular in format allowing for further revenue opportunities. The granularity is coming from peer to peer opportunities, in-game and live activation and spilling into so many more sectors than traditional platforms. Human nature is competitive and gambling for many is a way to formalise conviction. Always do your own research or seek the advice of your professional financial advisor.You can find us on LinkedIn and YouTube, Money Matters, Ben Hakham CEO at Traderoutes Capital.

Join our email list to be the first to see these videos every week: https://mailchi.mp/traderoutescapital/giuox24tmgYouTube channel - https://www.youtube.com/@bensmarketchatA generational economic disruption from AI, a software meltdown, private credit agonies and now a major regional war!! Investors are heading for the exits. Nerves are fraying and emotional trading has kicked in. We are not belittling the impact that all these events are implying for global economic and earnings growth, however, it is still the case that the duration of these disruptions have not yet become long enough to spill over into the real economy. Whether it’s the rise in Brent Crude to almost $80 per barrel or the 25% drop in the software ETF (IGV) or the 10% fall in the Financials ETF (IYF) YTD, all these are justified if the events described above turn out to have duration built-in.We discuss the impact of the Iran War on the US economy and the economic implications. We also look at the impact of this nervousness on US Treasury yields and why current levels, if they persist, will make the new Fed Chair’s decision to lower rates much easier. We also look at the state of the private credit market and assess whether Blue Owl’s woes are an indication of the health of the sector or whether there is undue panic unfolding. Average rates charged in the sector are 8-12% but these headline rates are falling thanks to declines in the 10yr UST rates and Fed rate direction. What is concerning however is that according to Fitch, default rates are trekking higher from 5.6% in Dec 25 to 5.8% in 26 with particular pain felt in the software, consumer and healthcare sectors.One of the ways the current woes turn into real economic headwinds is if the Iran War becomes a long, arduous ground offensive. The standing army is 610k with a further 350k reservists. A ground offensive would be disastrous in terms of human lives lost of course but also in terms of global growth. It would be particularly painful for the US economy and the current administration. US voters are not keen on ‘forever’ wars abroad and even less keen on the prospect of US casualties. The administration is already under water in the polls and the current insurgency will only make matters worse, the longer the process goes on. Prospects of a loss of both houses in November’s election becomes more likely. The last thing Trump and his cabinet want is a long war or a ground war.If, and currently it’s a MAJOR IF, the current turmoil turns out to be a transient episode, this will have turned out to be a significant buying opportunity. With this in mind, buying the dips prudently and expeditiously would still be a sensible approach.Always do your own research or seek the advice of your professional financial advisor.You can find us on LinkedIn and YouTube, Money Matters, Ben Hakham CEO at Traderoutes Capital.

Join our email list to be the first to see these videos every week: https://mailchi.mp/traderoutescapital/giuox24tmgYouTube channel - https://www.youtube.com/@bensmarketchatThis week we talk about the steady state of the US economy with small business optimism on the rise, inflation under control and unemployment continuing to hover around full employment levels. Even the UK’s inflation rate is at bay allowing for further falls in the base rate through the spring. So why are stock markets getting so nervous?Is AI going to destroy the software Industry? Its certainly what the IGV (US Software ETF) would suggest. We don’t believe this will happen and we’ll discuss why. Are the Hyperscalers ‘doom spending’? Again, investors appear to think so. There’s an underlying tone of sell first & ask questions later syndrome affecting markets. Amazon stock has fallen more than 20% this year alone on its capex plans. We have seen this cycle before when Amazon built AWS in the late 2000’s and again spent heavily on logistics through the COVID period. What happened was that its Free Cash Flow (FCF) virtually disappeared for a couple of years during the spend but then more than doubled from previous highs in the ensuing 2-3 years. This has resulted in a Return On Invested Capital (ROIC) of 12%+ on average throughout the last 20 years. Amazon is doing the same again with AI data centre buildout. FCF is falling into negative numbers this year and next as capex exceeds FCF but, according to consensus estimates at least, climbs above $100bn per year from 2029 onward. Does it make sense that the hyperscalers in the form of Amazon, Alphabet and Microsoft should spend so much on capex for virtually no return? It would if these businesses were in what’s known in classical economics as ‘perfect competition’ where no company has any advantage or edge on its competitor and must compete on price to grow. These hyperscalers are an effective 3-party Oligopoly. Price will not be the competitive issue here. On the contrary, the AI compute capacity required will be paid for by the user base. There won’t be an alternative source of access. The buildout is partly competitive positioning but mostly for profit. This is a sensible use of capital with way better long-term returns than any mutual fund can generate. As before, traders are taking the short-term view and exiting. This may be another moment in history, when being a contrarian may pay off over a slightly longer time horizon.Always do your own research or seek the advice of your professional financial advisor.You can find us on LinkedIn and YouTube, Money Matters, Ben Hakham CEO at Traderoutes Capital.

Join our email list to be the first to see these videos every week: https://mailchi.mp/traderoutescapital/giuox24tmgCheck out our YouTube channel - https://www.youtube.com/@bensmarketchatThe US economy is humming along at a steady pace. Are we in a Goldilocks phase with further expansion on the horizon? We think so. Data centre (DC) capex announcements by Microsoft, Alphabet and Amazon have put investors into a tailspin. Will DC owners ever make a return on this huge spend? According to Gartner, IT spend between now and 2029 will amount to $7trn worldwide of which $4trn will head toward AI capacity expansion. Other street reports suggest that half this AI capex will come from the main hyper scalers. Worse still Remaining Performance Obligations (RPOs) by the big DCs have one big private company at the centre, OpenAI. So much depends on one Unicorn in the process of raising $100bn to fund its expansion. RPOs are the exposure of total yet unfulfilled contracts with customers. In other words it is a deferred revenue and a liability in the balance sheet. Of Microsoft’s $650bn of RPOs announced in their recent earnings announcement, 45% of the exposure is to OpenAI.Will OpenAI break tech? We think it won’t. Any damage to OpenAI as a business would certainly be very disruptive to the sector BUT the momentum is too strong. The AI revolution and productivity renaissance is now unstoppable.If AI capex woes weren’t enough to contend with, the AI impact on software companies has been catastrophic YTD. The software ETF (IGV US) is down 30% since its high in September 25 and down 25% YTD vs the Equal Weight S&P500 Index up over 6% for the same period. Investors are bailing out of the sector a pace last seen during the GFC. Is it overdone or justified? As with most issues, a bit of both in our view. Investors are kicking out the proverbial ‘baby with the bath water’ but its not all gloom. We’ll discuss why some software vendors can not only survive by thrive in the AI world.We also discuss the revenge of the ‘old’ economy on the ‘new’. Financials, energy, commodities, Industrials & utilities have finally come out of almost a decade of hibernation! Has the rotation from ‘new’ to ‘old’ got legs? Listen to the end to find out!Always do your own research or seek the advice of your professional financial advisor.You can find us on LinkedIn and YouTube, Money Matters, Ben Hakham CEO at Traderoutes Capital.