Market largely shrugs off blowout Nvidia report. Not a great look.

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Today’s Links

The FX Trader by yours truly from earlier today - covering JPY and USD and overall G10 and key G10 pairs, CNH and metals technical trends.

The many rebuttals to that Citrini AI dystopia scenario keep rolling in. It’s a great debate!
The Citrini Research report imagining ugly future disruption of companies and even the entire economy from the widening deployment of AI has drawn a huge response - much of it pushing back against the negatives - and is driving a great debate. One of the most authoritative and high profile responses has been from Citadel Securities, weighing in with a qualified take on how wrong-headed it sees Citrini’s report. The peripatetic Aakesh Gupta X account has a short rundown of the Citadel response as well. A slightly different take from Jim Bianco was also out with a more optimistic and even celebratory take on AI disrupting “soul-draining, mind-numbing database slavery” jobs that involved humans endlessly querying and correcting databases, setting these people free to do something else.

How insurance became the lifeblood of private credit
FT with excellent coverage that of the insurance/private equity symbiosis that raises eyebrows as it grows and grows. Of course, would insurers just be allowed to go belly up if private equity does likewise or would there just be a bailout…S

Stablecoins - what are they good for?
Brent Johnson thinks they are transformative and help to extend the lifespan of USD hegemony and lays out the case on Adam Taggart’s Thoughtful Money.

The glass half empty or at least “the bottom-of-the-K take” on the US economy.
Long form Danielle DiMartino Booth interview on the Julia La Roche Show. Yes, she has been saying we are in a recession forever, but still formidable grasp of the data and there has to be a reason US sentiment surveys are in the dumps despite strong markets. She reposted an interesting indicator on the weakness of the US housing market today as well.

What happens when the tides of history make decisions more than leaders?
I was caught wondering whether the Trump administration feels forced into its confrontation with Iran as a significant step along the way toward the Thucydides Trap (the inevitability of war when a rising power (China and its allies) begins to rival the existing hegemon (USA)). Some argue that the US is picking off China’s energy supplies one by one - starting with Venezuela and now moving to Iran, with the urgency to end the Ukraine war a step toward the hope of normalizing Russia’s relationship with the West/Non-China axis so it can have a go at redirecting Russian exports as well eventually. The risks are endless, of course, including how regime-change ready the Iranian regime is and the overall danger of escalation, as well as the uncertainty of where this will all lead, as the new rival isn’t going to take this all lying down. Listen in on this conversation between US President Lyndon B. Johnson as he mostly listens to a Democratic Senator as they fret the decision to go into Vietnam, with Johnson saying at one point “I don’t think it’s worth fighting for and I don’t think we can get out.” A shame for both Vietnam and the US that the tides of cold war history forced the decision.

This rare earths thing just won’t go away…
Reuters exclusive reports that shortages for key rare earth elements are in very short supply, some with important aerospace and semiconductor applications. “China exported 17 tons of yttrium products to the U.S. in the eight months after controls were introduced last April versus 333 tons in the eight months before the measures.” What is China playing at?

Chart of the Day - Workday (WDAY)

The Workday earnings report and the trading day following its release (gaps 8% lower on open, closes up over 2%, so up over 10% intraday) were perhaps indicative that the selling pressure on software names seen most at risk of disruption from AI may be easing here. The company reported very slightly disappointing earnings growth for the current quarter and disappointing forecasts relative to expectations, even as it expects to see 13% growth for coming fiscal year. Some of the markdown in shares looks reasonable just because bubbly valuations have been a massive problem, but with the valuation at something like 12 times next year’s forecast cash flow with revenue growing around 13% next year as well, this is incredibly reasonable relative to so many other names out there. Take Nike, the sportswear brand, for example. If that currently stagnating-at-the-topline company manages an incredible turnaround and manages to quickly take its fiscal 2027 (ending May 2027) free cash flow back to all time highs of 2024 of USD 6.6B (about 80% more than currently forecast), it would still be valued at around 15 times FCF - currently it is valued over 25 times fiscal 2027 FCF. Market narratives can drive incredible divergences in price versus fundamentals. Sure - as the future of the AI impact is uncertain, we need to discount for uncertainty. But consumer and especially fashion tastes are also very uncertain and Nike may or may not be able to become a growth company again.