Latest / Felix Nikolas Prehn's Podcast / Felix Prehn - FED: NO MORE CUTS! + Stock Market News 29 January 2025

Transcript

Felix Prehn - FED: NO MORE CUTS! + Stock Market News 29 January 2025 · Felix Nikolas Prehn's Podcast

• 0:00
  Speaker 1: Life at last, and I want to walk you through probably the biggest day we've had this year.
• 0:06
  Speaker 1: We get the Fed deciding interest rates today, jerome Powell giving a press conference.
• 0:11
  Speaker 1: After that we have massive, massive tech earnings, the big tech guys.
• 0:16
  Speaker 1: Tonight We've got Tesla coming up, and all of that, baked together together with what Trump is doing, means the markets are on what, baked together together with what Trump is doing, means the markets are on what Edge of their seat?
• 0:28
  Speaker 1: I'd say Pre-market, not looking particularly glorious Futures pretty flat, a little bit on the red side, but there is an opportunity if you understand this.
• 0:35
  Speaker 1: So I want to walk you through the following I want you to understand why the Fed isn't going to cut rates today.
• 0:40
  Speaker 1: I want you to understand what the deep seek stuff really means, because, yes, that is still a big story out there.
• 0:48
  Speaker 1: I want you to understand what's happening with inflation and what's happening with the big tech stocks, and then I'll take your questions.
• 0:52
  Speaker 1: Does that sound like a lot to cover?
• 0:54
  Speaker 1: I think it sounds rather like a lot to cover.
• 0:56
  Speaker 1: We are muted.
• 0:57
  Speaker 1: Seriously, are we really muted?
• 1:02
  Speaker 1: Someone say that you can't hear me.
• 1:05
  Speaker 1: No, no, no, we're not muted, but it did work Right.
• 1:12
  Speaker 1: So here we go.
• 1:13
  Speaker 1: And, by the way, those ads you saw me go live on Twitter instead.
• 1:17
  Speaker 1: Yeah, that was the wrong bloody stream.
• 1:19
  Speaker 1: So you know, tech sometimes does funny things with us in the mornings.
• 1:22
  Speaker 1: So this here is an important trap, because this is what's preventing Sounds.
• 1:27
  Speaker 1: Ok, thanks, guys.
• 1:30
  Speaker 1: This here is what's preventing the Fed from cutting interest rates today.
• 1:33
  Speaker 1: This is the data from Goldman Sachs.
• 1:35
  Speaker 1: You know the bankers with a big heart who love and care about us so very deeply and they're basically saying this is inflation.
• 1:42
  Speaker 1: Right, this is the inflation.
• 1:44
  Speaker 1: They're basically saying inflation is going to come down unless we get the sort of 10 percent tariffs across the board which Trump is talking about, in which case inflation will actually pick up and then come down again.
• 1:59
  Speaker 1: Because inflation is because of tariffs is a temporary thing, it's transitory.
• 2:10
  Speaker 1: To use that word Jerome Powell loves so much because basically what it means is say you know, you say you're now paying a dollar for something foreign, right, and then he puts 10% tariffs on it and then it goes to $1.10.
• 2:18
  Speaker 1: So you have in year one, in theory, 10% inflation on that right.
• 2:20
  Speaker 1: So you have in year one, in theory, 10% inflation on that right, but in year two it still costs you $1.10.
• 2:28
  Speaker 1: So your inflation is now what?
• 2:30
  Speaker 1: Zero?
• 2:31
  Speaker 1: That's how inflation works.
• 2:32
  Speaker 1: It doesn't go back.
• 2:33
  Speaker 1: It doesn't get cheaper again, right?
• 2:36
  Speaker 1: So it's a temporary thing, so the Fed doesn't have to raise interest rates because of it, but it will probably stop them from.
• 2:45
  Speaker 1: Okay, give the man a coffee.
• 2:46
  Speaker 1: I'm not showing you the chart, oh dear, it's one of those mornings, is it?
• 2:49
  Speaker 1: So, basically, you know, say your stuff goes from $1 to $1.10, goes up 10% in price, but the next year stays at $1.10, it's still zero.
• 3:00
  Speaker 1: In fact, it might actually go down a little bit because maybe domestic manufacturing gets a little bit cheaper, and so on.
• 3:06
  Speaker 1: Right?
• 3:06
  Speaker 1: Electrolytes, that's probably a good idea, right?
• 3:08
  Speaker 1: Let's put some of those on.
• 3:10
  Speaker 1: That's usually how we get my brain to function.
• 3:13
  Speaker 1: Seriously, it works.
• 3:18
  Speaker 1: I had a long lunch today, I might explain it and Japanese for dinner because, if you hadn't noticed, I'm about 13 hours ahead of you guys on the East Coast.
• 3:27
  Speaker 1: So all because it's not allowed to slurp as electorate.
• 3:31
  Speaker 1: You see what you did there.
• 3:32
  Speaker 1: You see what you did by stopping me from slurping.
• 3:34
  Speaker 1: So the Fed's going to say there is uncertainty around federal government policy.
• 3:42
  Speaker 1: Therefore, we're going to wait and see.
• 3:44
  Speaker 1: That's one of the reasons they're not going to cut today.
• 3:45
  Speaker 1: The market isn't going to love that.
• 3:47
  Speaker 1: And if you look at the policy outlook here and again I got data from every single Fed muppet who's spoken in the last month or so they are basically all saying you know, we don't need to do anything.
• 4:01
  Speaker 1: That's essentially what they're all saying.
• 4:02
  Speaker 1: I'm not going to run you through every single one of these quotes.
• 4:04
  Speaker 1: If you want to really read them, like, just take a screenshot, but I don't think it's really essential.
• 4:09
  Speaker 1: I always think let's focus on the essential, but feel free to take a screenshot of this if you want to read it.
• 4:14
  Speaker 1: Stop being as polite.
• 4:15
  Speaker 1: In Japan as it, I was literally just at a Japanese sitting at Japanese chaps next to me and the Japanese chef who was like really weird, like being transported into Japan, it was very, very funny.
• 4:26
  Speaker 1: And guess what they were talking about?
• 4:27
  Speaker 1: Elon Musk, the whole thing.
• 4:28
  Speaker 1: It was like Japanese, japanese, japanese Japanese and then Elon Musk.
• 4:31
  Speaker 1: I was like it's very funny, so he's a subject all around us.
• 4:35
  Speaker 1: Now, why am I throwing in this random thing here?
• 4:39
  Speaker 1: What the heck is this?
• 4:40
  Speaker 1: This is ASML, and I'm going to throw you a few bits of data here that you need to understand, to understand the bigger picture that's forming today in the market, because this feeds into the deep seek disaster that we got yesterday or the day before.
• 4:55
  Speaker 1: Asml the guys who make the machines to make the chips, reported tremendous earnings really fantastic numbers.
• 5:02
  Speaker 1: And Goldman Sachs, the bankers who donate all their spare funds to flappy kitten sanctuaries.
• 5:10
  Speaker 1: They say the stock should go up 56%, which is pretty significant, right, so they're loving it.
• 5:16
  Speaker 1: And essentially, asml said if AI gets cheaper, more people will run it.
• 5:21
  Speaker 1: Therefore, they'll need more chips An interesting way of looking at it.
• 5:24
  Speaker 1: They might well have a point that adoption accelerates Now.
• 5:36
  Speaker 1: Their sales, of course, came out before DeepSeek.
• 5:38
  Speaker 1: There's a little bit of a warning there.
• 5:40
  Speaker 1: But, yeah, I think the DeepSeek stuff is totally exaggerated.
• 5:45
  Speaker 1: That's just my view.
• 5:46
  Speaker 1: I think, yes, they're probably doing it a little bit more efficiently.
• 5:49
  Speaker 1: Openai is saying that they used OpenAI to train, which is interesting, that they borrowed their GPUs.
• 5:57
  Speaker 1: So I think that it's definitely an overblown story and therefore definitely an opportunity here.
• 6:02
  Speaker 1: But look at their margins, right, 51% gross margins.
• 6:05
  Speaker 1: Their income is 30% higher.
• 6:07
  Speaker 1: Their cash is sitting at $12.7 billion.
• 6:11
  Speaker 1: They sold more units than we expected.
• 6:13
  Speaker 1: It's just, you know, pretty, pretty good, pretty good and china is already not that relevant to them, which is also kind of kind of positive that.
• 6:21
  Speaker 1: So I think it's totally overblown.
• 6:23
  Speaker 1: Now inflation the real inflation underneath it is actually coming down pretty significantly.
• 6:32
  Speaker 1: So I don't think the inflation thing is a problem, but I still think the Fed isn't going to give us the rate cap we want.
• 6:39
  Speaker 1: They're going to wait and I think they're going to make this last stand of.
• 6:42
  Speaker 1: We really are independent from Trump and therefore they're not going to do it.
• 6:46
  Speaker 1: I think they're almost trying to defy him.
• 6:49
  Speaker 1: I think it's silly politics, as it usually is.
• 6:52
  Speaker 1: And here I go to get to the DeepSeek story.
• 6:55
  Speaker 1: This is Morgan Stanley and I think they put it quite nicely.
• 6:57
  Speaker 1: They're saying DeepSeek caused an overreaction in US stocks with exposure to AI.
• 7:02
  Speaker 1: He points US data center pipelines suggest the vast majority of known pipeline is AI inference and non-AI use cases rather than IT training.
• 7:12
  Speaker 1: So even if AI training, so if training the new AI model gets cheaper and cheaper and cheaper, that's actually a very small amount of the AI spend because it's only AI spend from like open AI kind of making the new ones rather than providing data compute services for their customers and they say the cost of compute will fall by 90% over the next six years, which means underlying demand for AI will rise as AI adoption grows, because very few people are using AI in terms of large companies, they still think there's going to be considerable AI infrastructure spend in the US and they also think US power demand growth comes from non-AI drivers, onshoring of manufacturing, just general electrification, evs, etc.
• 8:05
  Speaker 1: So the whole kind of story we've been talking about energy infrastructure still stands.
• 8:12
  Speaker 1: That's their view on it and I think they're largely right on that.
• 8:16
  Speaker 1: Now, what about the market then?
• 8:18
  Speaker 1: Which is looking?
• 8:18
  Speaker 1: I'll show you.
• 8:19
  Speaker 1: I'll show you how the market's looking.
• 8:22
  Speaker 1: This is yesterday right, which was pretty decent.
• 8:25
  Speaker 1: Right.
• 8:25
  Speaker 1: 9% bounce in NVIDIA.
• 8:26
  Speaker 1: We're pretty happy with that.
• 8:27
  Speaker 1: The pre-market, yeah right, not looking amazing.
• 8:32
  Speaker 1: Nvidia down again a little bit.
• 8:34
  Speaker 1: Apple down a little bit.
• 8:35
  Speaker 1: Meta Google flat, amazon flat, Microsoft flat, tesla flat.
• 8:39
  Speaker 1: So no real oomph there, because everybody is waiting for what?
• 8:43
  Speaker 1: The big earnings.
• 8:44
  Speaker 1: And Jerome, the magnificent owl speaking today Palantir down 0.6%.
• 8:51
  Speaker 1: So no big moves, but also not amazing.
• 8:54
  Speaker 1: T-mobile is up.
• 8:59
  Speaker 1: Is that to do with the Starlink deal?
• 9:00
  Speaker 1: That's also an Apple thing which I'll get to in just a second because I think that's also important to understand.
• 9:05
  Speaker 1: But if you want to understand where the market gets more volatile, so where I would get worried, a little bit teeny worried this is the S&P 500.
• 9:13
  Speaker 1: Below 6,000 here a little bit teeny worried.
• 9:18
  Speaker 1: This is the S&P 500.
• 9:19
  Speaker 1: Below 6,000 here See all that options volume here at 6,000.
• 9:20
  Speaker 1: This is a screenshot from Trade Vision, which is a software that we built.
• 9:22
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• 9:29
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• 9:33
  Speaker 1: You drop below 6 000 points.
• 9:36
  Speaker 1: Bad things happen, yeah, bad things happen.
• 9:40
  Speaker 1: So be a little bit worried.
• 9:42
  Speaker 1: Around that level.
• 9:43
  Speaker 1: That's meant to be a slightly worried chap.
• 9:45
  Speaker 1: Um, we move back above 6 100 where there is quite a lot of volume.
• 9:54
  Speaker 1: Here you move it back above that and things start to get much better, and above 6,200, you've got a really, really, really happy market.
• 10:03
  Speaker 1: So that's kind of what I'm looking at.
• 10:04
  Speaker 1: Below 6,000, I might hold off on buying the ETFs or the index.
• 10:10
  Speaker 1: Individual stocks is always a different story.
• 10:11
  Speaker 1: Is there a way to understand the strength of support and resistance, says Christopher?
• 10:15
  Speaker 1: Okay, for the lines.
• 10:18
  Speaker 1: We give you support and resistance.
• 10:20
  Speaker 1: Generally speaking, we only give it to you on pretty high volume stocks, looking at the overall volume of options on that stock.
• 10:32
  Speaker 1: This would be the way I would do it.
• 10:33
  Speaker 1: I mean you could do that on the screen that we have.
• 10:36
  Speaker 1: You could otherwise literally look at, hover these little bars there and they'll tell you what the open interest is.
• 10:43
  Speaker 1: That gives you a bit of an idea.
• 10:44
  Speaker 1: But on the S&P, spx it's pretty decent volume.
• 10:48
  Speaker 1: That's just the way it works.
• 10:58
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• 10:59
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• 11:03
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• 11:12
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• 11:14
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• 11:20
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• 12:52
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• 12:55
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• 12:59
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