What were you watching out for on that front? Are we seeing any signs that the Fed might need to move more urgently?

Yeah, I think urgently is the critical word there because, you know, obviously there are multiple things contributing to inflation and things that are, you know, probably deeper than just the energy story when it comes to why the Fed's going to be hiking interest rates more than likely in the future.

The, uh, matter of urgency comes down to what's happening with energy markets dynamics, uh, at the moment.

And what we're going to see in these numbers in the next couple of days is that the headline number is expected to pick up into the high threes or so, and that's sort of telling a story that for most households, prices are rising, standards of living are either s-slowing or, or, or in decline.

But then on top of that, too, the core measure is expected to tick up to about two point five percent, and there is the belief that some of those s-sub-indices, uh, and inputs that feed into the more important PCE data, which everyone will be watching for, as a little bit of a clue-- for, for clues about where the Fed could go next with monetary policy, might also pick up, again, reflecting those sort of underlying price pressures, um, and that kind of more structural story about higher for longer interest rates.

So I think that's what we're looking at now.

And I mean, the markets have really discounted the idea that the Fed is more than likely not gonna be hiking interest rates in October for a variety of reasons.

So how much of a concern is that gonna be for the earnings season coming up and, of course, for the regional economy?

How big a blow is this for them? Because they're obviously hoping to attract capital right now.

It is somewhat of a blow, and I think one of the reasons why there was so much excitement around this listing is that we've had a dearth of them over the last few years, and especially companies that are tied to this very strong thematic in artificial intelligence.

But this isn't a problem necessarily unique to the ASX either.

The London Stock Exchange has had it very significant issues with attracting ipos markets across europe too and everything going to almost your point before seems to be happening in the united states where capital markets are very very deep there's a lot of money going around a lot of people willing to take risks especially on companies like these and you know as a result everyone else is kind of being left behind so it is a little bit of a blow not necessarily unique to the asx but it does show the kind of Again, opportunities that local investors are being deprived of from not being able to participate and get involved in these really sort of big, exciting IPOs.

Do you think the Nasdaq could potentially be a better fit for Firmus? Is the investor market there more sort of geared into the tech sector and big technology plays like this with a lot of growth potential?

I mean, all else being equal, obviously, the company is probably going to be able to attract more capital and a higher valuation than it would have otherwise on the ASX.

The next question, though, is, of course, will it be the 32 billion US dollars that it was valuing itself at? It was more or less trying to sort of price its shares at.

And is that going to be achievable for that company? There are still doubts about that, and I think ultimately the concern from investors about the company's fundamentals here was around execution risk.

So it seems very highly valued, really.

Yes, and I mean, you could probably draw parallels to SpaceX, and then you could also talk about the open AI and the anthropic IPOs in the United States too, where because there's such a powerful narrative and a story at the moment, not entirely unjustified.

There's a kernel of truth of it, obviously, because AI is going to be a huge technology.

There's a lot of upside risks to future profits with these companies.

But it does tend to come with very strong sentiment.

And of course, companies try and list at times when sentiment is very strong because they can get the best valuation and try and effectively sell the stock and raise capital at the highest possible share price.

So inherently, these things come with a lot of excitement, again, a lot of hype, maybe too high expectations.

So clearly there is still a lot of demand out there, though, from investors for the AI-related businesses like them.

One thing that stood out to me was consumer spending still seems to be holding up pretty well, and that's now putting pressure on the RBA and rates

ratesYeah, and, you know, there's this kind of difficulty in trying to assess, you know, the backward-looking information like how these companies have, uh, performed over the last period, and then also what the outlook is for the period of ahead, the period a- ahead.

So, you know, if you look at the consumer discretionary names, in particular JB Hi-Fi was a good example, is that the results were, you know, pretty good for the half, but the guidance going forward was a little bit patchy.

And so there's this question of, okay, things were okay and more resilient than expected in the past, but is that going to last? And, you know, if you're m- trying to draw a policy, uh, uh, implication from that, you know, should we be, you know, uh, adjusting policy rates necessarily on the basis that things are probably going to deteriorate from that consumer perspective from here? You know, the other side of things as well is that there's, you know, definitely a change in consumer behavior where they're trading down to staples and obviously spending more money on those kind of necessities as inflation goes up.

And you can sort of see that in some of those, you know, Wes- uh, uh, supermarkets, Wesfarmers, those kind of names that, you know, are obviously benefiting from that sort of theme.

So there's a lot of different signals, uh, you know, coming from some of the consumer activity we've seen.

I think what would be fair to say, though, is that it's been a little bit more resilient in the past but, you know, most corporates are telling us there's maybe some challenging times ahead as we look forward to the, to, to the next period.

Uh, clearly travel demand was affected by the conflict in the Middle East, but overall it seems like both airlines are in pretty good shape with demand for Aussies still wanting to go on holiday.

They didn't like the idea that he kinda didn't quite know exactly where and how they were gonna use all of this extra computing capacity they were putting in.

Without a doubt.

And, you know, there's two ways to obviously look at this, is that, you know, there's the industry-wide dynamic, which again this week has been relatively good news, and has shown that overall that companies are still finding ways to monetize artificial intelligence technologies.

But there is an arms race going on, and there's some significant competitive pressures between these hyperscalers to be more or less the business that is the winner that takes all and can eventually build the moat around itself so that it can capture these AI gains.

And what we saw from Meta was, amongst some other things to its fundamental business, you know, maybe some soft revenue guidance, um, and some evidence that, you know, AI isn't being used as effectively as h- as, as hoped and shown as in the past to, to help boost its ad revenues.

The business is digging into free cash flow significantly to invest in artificial intelligence, but isn't really delivering the same results, again, as its counterparts in Amazon and Microsoft.

So investors punished Meta as being one that has fallen behind the pack, relatively speaking, uh, in contrast to Amazon and Microsoft, which were obviously handsomely rewarded on their day of earnings.

But on the other side of it also, you've got to put up with the prospect that there's gonna be discounted offerings that are gonna be in there for, as you say, the hyperscalers, but even for chip markets in the future as well.

The volatility is, is firmly in the AI chip maker space, right? Is this just the way it is going forward? Because even if we are kind of set for a higher day today, those gains have not been so readily translated over the last few weeks.

I think everyone's waiting for earnings season and basically tech earnings, which we're going to start to get.

And I think, you know, maybe the rally that we've seen in the last 24 hours or so on Wall Street has been very much the market's front running that.

I do see a lot of similarities to where we were at this point in the last quarter, which is to say that we were sort of marred by geopolitical risk and interest rate uncertainty, but then it was these extraordinary profits from the hyperscalers in particular that really fed this narrative that monetization was happening, that the investment boom would continue because there'd be sort of greater free cash flow to sort of pump back into capital expenditure.

And we saw everything rise from, you know, semis, um, because obviously my expectation that would flow to...

in, into sort of chip demands as, as ma- amongst other things as well.

Uh, along with, of course, you know, those hyperscalers, those who are sort of at the front line of benefiting from the, the, uh, artificial intelligence technology themselves.

Given the view on China stocks was becoming more constructive in recent weeks and months anyway, does this just add to that support?

Yeah, how closely do you think traders are gonna be watching its performance over the first few weeks? Because clearly sentiment to the computer chip sector's been a bit up and down recently.

It certainly has.

And I mean, it's one of the reasons why we've seen such significant swings in the market, on Wall Street anyway.

In a fair- fairly narrow set of tech stocks, there's this kinda sense that maybe, uh, demand could be at a peak.

And the flip side of that too is that maybe costs might be building up, and that, you know, we're gonna start to see margins erode for some of these, you know, chip makers and then also tech companies more broadly too.

The real test will probably be in a few weeks' time actually, because we're gonna get US earnings season, and that will tell us a lot about hyperscaler profits and the kind of extent that they are still making money monetizing AI technology to continue, uh, buying chips and investing in, in, in their businesses as well.

I think what should be said with SK Hynix is one of the reasons why they've listed is that they get a better valuation, a higher multiple by, you know, um, listing their ADR on, on Wall Street.

Still looks like there's a fair bit of dive- investor demand out there for AI stocks still to come in the pipeline.

What's the message to tour- uh, to motorists? Because the discount to the fuel excise that we've seen, that's going to be reduced from Wednesday.

Yeah, and for that reason, we'll probably see oil prices slowly revert, um, over the next couple of months.

The two big drivers are obviously what's happened with the underlying crude price, and actually the Brent price is back to where it was before the start of the war or floating around those levels anyway.

And then, you know, clearly the excise has been significant.

We're probably seeing prices somewhere between ten to twenty, perhaps a little bit more cents per liter below where they would otherwise be with crude prices at these levels.

Everyone's kind of looking at refining margins too, so what we call crack spreads, and they've been fluctuating really significantly because the market has been so, uh, majorly disrupted that they've actually been quite high.

So refiners are taking, um, a lot of money.

And finally, in wrapping up, what are you telling your clients right now, and where do you see the opportunities for investors?

from wednesday

yeah and for that reason we'll probably see oil prices slowly revert um over the next couple of months the two big drivers are obviously what's happened with the underlying crude price and actually the brent price is back to where it was before the start of the war or floating around those levels anyway and then you know clearly the excise has been significant we're probably seeing prices somewhere between 10 to 20 perhaps a little bit more cents per liter below where that would otherwise be with crude prices at these levels Everyone's kind of looking at refining margins too, so what we call crack spreads, and they've been fluctuating really significantly because the market has been so majorly disrupted that they've actually been quite high, so refiners are taking a lot of money.

But as Dave sort of normalized a little bit too, that's putting some downward pressure on those end products that you speak about, like the unleaded fuels and things that basically go into your car.

But over the next few months, we'll probably see two countervailing forces.

One will be that the Underlying crude price, assuming everything goes okay with the war, will feed through to a weaker petrol price.

But on the flip side of that, over the next couple of months, there'll be these couple of step changes as those excise cards are reversed.

And finally, in wrapping up, what are you telling your clients right now and where do you see the opportunities for investors?

Talking to them just about thematics of the war is one of them as being a source of volatility.

Yeah, we've never seen a company this large join the market, so I mean, what sort of impact could it have on global markets? Is it gonna force investment funds to buy into SpaceX, to just hold SpaceX because it's simply so big?

Well, one development that we've had in the last couple of weeks is that a lot of index, uh, providers have suggested that they won't include, uh, SpaceX immediately in, uh, a lot of indexes.

So that means that the passive money going into, uh, a company that size won't occur, and we won't have that dilution effect.

But there's two things here.

Certainly, we are probably seeing a dynamic where investors are selling other things because all of a sudden we're getting a lot of this issuance, uh, coming to the market and people wanna obviously- Put, you know, the dollars they have towards SpaceX and taking it out of dollars and other investments to do so.

You know, the other thing here is, as I noted before, that at the end of the day, a company's going to be judged on its cash flows and its profitability.

And if, you know, we get a bit of a sobering up of the market and prices, uh, fall a little bit, investors are gonna be obviously holding a loss-making investment, and that's going to inve- uh, impact their ability and desire to invest in other things, too.

This sort of allocation of retail seems pretty unusual, doesn't it?

Yeah

...

Eastern Standard Time, um, you know, true social post that could come through just before obviously the, the opening bell to kind of change the narrative a little bit.

But I mean, I think this is one thing that we've heard a lot over the last few months is that traders are finding it very difficult to trade in this environment because, you know, clearly the narrative can s- shift by virtue of a true social post.

And then on top of that too is that there is a little bit perhaps a, a distortion going on of reality of what's, what's actually happening here between the US and Iran, which is, you know, there is this overall hope that both sides, uh, have strong enough incentives to at least want to maintain a, a ceasefire and perhaps, um, you know, continue peace talks.

But what seems to have shone through again in the last 24 hours is that the terms of any kind of peace deal seems to be, you know, very, very hard to, uh, agree upon, specifically reparations, um, for, for, for Iran for damage to infrastructure and things of that, the Strait of Hormuz, and then, you know, the big one, um, is nuclear facilities and, and uranium en- enrichment.

So, you know, this is one thing that I think the markets have basically placed their bets on and has been responsible for Wall Street's record highs or helped Wall Street's record highs, is that everyone's sort of willing to bet that there will be a maintenance of the ceasefire and that a peace deal will eventually materialize.

Um, but do you anticipate that, you know, the questions around the AI narrative will come to the fore again? Like, do market participants want something to worry about or not?

And it seems like another business just wanting to spend as much as it can investing in AI.

Yeah, I mean, it's an interesting one because we've probably seen Apple not getting caught up quite as much in the AI arms race as some of the other hyperscalers who have poured money dollar after dollar into infrastructure to make sure that it has the compute necessary to compete in this kind of space.

Apple has sort of taken the approach of taking a little bit of a step back and considered ways it can integrate the technology into existing hardware, into existing products and more or less you know, sort of stick to what's needed to some extent.

So what we saw with Apple was, you know, revenues that were far above what the company guided last quarter and an upgrade to its revenues going forward too.

And there is this hope that, you know, combined with some, you know, macro tailwinds, Chinese sales were a little bit more resilient.

We're seeing that the company is able to maintain some level of market share against those sort of domestic incumbents there that will start to see the integration of AI technology into its products.

And that should provide, you know, another upgrade cycle for a lot of our Apple users and therefore, you know, another sort of tasty hits revenues going forward for Apple shares as well.

But is this enough to give US markets the next leg up?

Do you think the energy markets are starting to price in a more longer-term conflict now? Because it's gone on for four weeks and there doesn't seem to be an end in sight.

Yeah, I mean, I think what is illustrative at the moment is if you look at the full Brent futures curve, which is, you know, more or less a bit of an indication where prices are going to go in the next sort of, well, however long you want to look at it.

And what we're seeing is, you know, clearly there's still a lot of stress in the spot market.

There's a lot of dislocation there and prices have risen to the levels that, you know, you see every day on the news and what have you.

But if you look again at that kind of futures curve, what it suggests is that even when this crisis ends and whenever this crisis happens to end, it's going to take a long time for the energy markets to normalize once again.

And that means oil prices, for example, might be around $70 to $80 per barrel on average, rather than say $60 to $70 per barrel on average before the crisis.

So this thing will have a very long tail and that's gonna have very significant impacts on growth, on inflation as well.

What do you think's been driving that?

This appears to be another major AI tool that's just instantly disrupted the market and has got tech investors feeling pretty nervous.

Yeah, I mean, I think this is kind of characteristic of kind of the start of the growth cycle that we're in in artificial intelligence, and it's not a story that's entirely unfamiliar.

A new development in this instance in the software space risks disrupting existing business models, as well as potentially taking sort of a larger share of the pie that is available to a lot of these tech companies when it comes to future AI growth.

So what we saw last night was really a little bit like what we saw at the end of last year when Gemini 3 was released by Alphabet and raised questions about OpenAI's valuations and that of Microsoft and other players as well, is that there is currently this, again, question about how big the AI pie will be, how much will it disrupt existing industries, and who's going to get the largest share of that pie as well.

So if you combine that with the fact that we've still got these doubts about tech valuations and this sort of rotation that we've seen into cyclicals overnight, it catalyzed a fairly significant drawdown that, of course, as you noted, manifested in the ASX tech sector today as well.

What do you think is causing investors to start cashing out of the crypto?

I think there's a number of factors at play, and it's always difficult to pin the cause on one of them, especially when it comes to crypto.

Bitcoin tends to be correlated with tech stocks.

Why and what do you think this means for consumers, motorists especially?

Well, it's a supply and demand story, quite naturally.

The demand story has looked increasingly soft because of some patchy global growth.

We've seen China data at the start of the week is a part of that.

Even the US data is a part of that as well.

And there is a sense that going into next year that we're in a sort of mixed footing, if not a sluggish footing for global growth.

But of course, the other side of that is the demand outlook.

So what's the market now expecting?

And he's made some pretty subtle threats or not so subtle threats to the shareholders if they do not vote for that trillion dollar US pay deal.

Yeah, it's basically, you know, vote for it or I go.

And again, you know, there's an element of this which is about remuneration and it could be a very hefty pay packet.

Of course, it's tied to KPIs and what have you.

But if he was to hit those, it's, you know, it's a $1 trillion remuneration package.

But the way that Musk describes it anyway, and to be honest, you know, he shoots from the hip and is normally pretty candid, if not crude in his comments.

communication.

Just whether they are toppy and vulnerable.