Episode summary
It's a Bloodbath | Animal Spirits 487
Animal Spirits
· · 1 hr 9 min · Hosts: Michael Batnick, Ben Carlson
Summary
The episode argues that the recent selloff was less about the broad index and more about cracks appearing in the most crowded parts of the AI trade. The hosts focus on CoreWeave’s bond stress, the jump in borrowing costs across AI-related financing, and whether a small company can serve as an early warning sign for a larger bubble unwind. They also make the case that the bond market, by demanding higher yields, may act as a governor on excess risk-taking rather than just a symptom of it.
A second theme is that 2020s investors remain eager to buy dips, even after sharp reversals in momentum stocks. The hosts push back on the idea that the market is in a “bloodbath,” noting that the average stock, equal-weight indexes, and many sectors are still positive year to date, even while former leaders have been hit hard. They argue that valuations are compressing in a healthy way across the U.S. and abroad, which is a very different setup from a classic late-cycle mania.
The episode also ranges into inflation, data centers, AI’s economic spillovers, and real estate politics. The hosts say energy remains a major driver of inflation, question how much of the AI buildout will prove profitable, and criticize efforts to cut property taxes as politically convenient but economically distortive.
Key takeaways
- CoreWeave’s bond stress is presented as a possible AI canary, but the hosts think it is probably too small to matter by itself.
- The hosts argue the bond market is now imposing discipline on AI borrowing, which could prevent a worse bubble.
- Despite big drawdowns in high-momentum names, the average stock and equal-weight indexes are still up meaningfully this year.
- They think the 2020s appetite for risk is still intact, so a crash would not necessarily end speculative buying.
- Valuations are falling even as earnings hold up, which the hosts read as healthier than a market going vertical on multiples.
- They say property-tax rollbacks mainly help homeowners at the expense of renters and local public finances.
Notable quotes
“Weak links start to show in AI borrowing”
How the episode opens
Today's episode is sponsored by Wisdom Tree. Higher yields deserve attention. So does the duration risk you're taking to earn them.
USFR, the Wisdom Tree floating rate treasury fund offers treasury income with minimal duration exposure through floating rate notes that reset weekly. Learn more at wisdomtree.com/usfr. Investing involves risk principal loss as possible.
Before investing, carefully consider a fund's investment objectives, risks, charges, and expenses along with other information containing the perspectus available at wisdomree.com/ us. Read it carefully. Welcome to Animal Spurs with Michael and Ben.
Last week, we finally had an exciting week in the stock market. It has been relatively boring. I forgot what the data point was, but there was like 80 days between 1% corrections, which is abnormal.
Longest streak since X. And uh last week a match was lit. And I was thinking about this on it was Tuesday night.
So Tuesday morning, we got the high uh inflation report for consumer prices and the market decided to use that as an excuse finally to do some selling. Uh and it was pretty bad. It was a pretty bad day in the stock market and I'm I'm I'm at home.
I don't know if I was lying in bed wherever I was, but Robin's talking about some nonsense. Something that is well not nonsense to her in fairness. Uh but isn't it my point is this.
Isn't it funny when there is a pretty serious day in the stock market and nobody cares?
Civilians you're talking about that don't pay attention to this stuff. — Yeah. Yeah. What a luxury. And they're probably better off for it in some ways. Some ways they're not because it is this is the most exciting game in town. It is
No, no, no, hold on.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai debt concerns
- coreweave funding
- stock market carnage
- falling valuations
- real estate property taxes
Companies and tickers mentioned
- CoreWeave
Watch the episode
Watch “It's a Bloodbath | Animal Spirits 487” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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Drowning Financially | Animal Spirits 489 -
Sudden Wealth Syndrome | Animal Spirits 485 -
Will Higher Rates Kill the Stock Market? | Animal Spirits 484 -
The Wobbly House of Cards | Animal Spirits 483 -
How to Talk To Your Clients About Ray Dalio | Animal Spirits 482
Animal Spirits, this episode and its artwork belong to The Compound. Octagon is not affiliated with the show; this page is an independent summary.
