Episode summary
Credit Blowup in London Has Wall Street Chasing Billions | Bloomberg Surveillance
Bloomberg Surveillance
· · 39 min · Hosts: Tom Keene, Paul Sweeney, Lisa Mateo, Michael Barr · Guests: Chris Verrone, Constantine Courcoulas, Yael Selfin, Rohit Chopra, Jennifer Welch
Summary
The episode centered on a broad market rotation away from big-cap growth and software toward cyclicals, value, and the so-called real economy. The host and a guest argued that the 10-year Treasury yield moving through 4% was not a decisive break, but that the more important signal was the equity tape: equal-weight stocks and industrials had been outperforming, while the Nasdaq and software names were under pressure. The guest said this looked like an early, durable trend rather than a short-term trade, with earnings still growing around 12% to 13% year over year but leadership clearly changing.
The conversation then turned to a London credit blowup involving Market Financial Solutions, with a guest saying there were not yet signs of contagion in credit even though lenders and equity holders had already taken hits. He described allegations of misdirected funds and double-pledged collateral and said the pattern of fraud and leverage looked broader than a one-off idiosyncratic event.
Later segments covered Europe’s weaker growth profile, the role of AI and defense spending, and a constructive case for emerging markets. A guest from Lazard argued that EM is benefiting from positive real rates, a weaker dollar, better liquidity, and AI-linked opportunities, with Korea, China, and Brazil highlighted as attractive areas. The final discussion focused on Iran and Cuba, where the analyst said the U.S. is still trying to force a nuclear deal with Iran while keeping pressure on Cuba without immediate escalation.
Key takeaways
- The guest said the move from growth to cyclicals began in September and October and could define the rest of the year and beyond.
- The guest said a 10-year yield above 4% is less important than the shape of the curve and the broader trend in equities.
- The London credit case had not shown clear contagion yet, but the guest said the allegations point to a larger pattern of leverage and fraud.
- The guest said emerging markets are in an 18-month rebound, helped by a weaker dollar, positive real rates, and AI-linked industrial investment.
- The analyst on Iran said U.S. military buildup is meant to signal resolve and preserve options if negotiations fail.
Notable quotes
“the transition from kind of the speculative corners of the market to the real economy or the old economy. I think that's well underway”
“it's only how many how many examples you need for it not to be considered a trend”
“the best value in emerging markets today is Brazil”
How the episode opens
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Eastern on Apple CarPlay or Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Christopher Veron is with us working with Jason Trenid at Strategus.
He is definitive on trendbased technical analysis. As many of you know, I'm comfortable with that versus the catching a knife in the uh dark approach. Chris, I got eight ways to go here, but I got to first go to price up, yield down.
Is it a critical pro level that the 10-year yield is through 4%.
I don't think it is. I mean, let's just look back at the last three years. We've effectively been between 375 and 450 on 10ear yields for 3 years.
We've had this very unsatisfying call on yields that the only correct call is no call. And I'm kind of still in that camp here. You know, under 375, my antenna would start to go up more that, you know, maybe something's really starting to change.
But, you know, frankly, Tom, it's more curve shape right now than it is anything. And you have this little subtle flattener.
It's Friday. Yeah. — Okay. We're going into the weekend. Sweeny's flying to California. You're supposed to say, "OMG, it's like a huge deal. Paul, pick it up." So, we've seen Chris um you know, boy, a rotation in the equity markets here. Um
You know, the growth has definitely taken it on the chin a little bit here. Some of the software stocks and things like that. Um some of the industrials and small midcaps have been working here. Is that a short-term trade or is that something bigger, do you think?
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- london credit blowup
- semi/software spread
- distressed debt
- european economy
- global ai supply chain
Companies and tickers mentioned
- LAZ
- Strategas Research Partners
- KPMG UK
- Lazard Asset Management
- Bloomberg News
- Bloomberg Economics
Watch the episode
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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