Nothing Matters in the Market Until It Does with Mike Tracey

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Guy Adami (1:32)

A very warm welcome to the Risk Reversal Podcast. I'm Guy Adami, typically joined by Dan Nathan. Today, I'm joined by Mike Tracey. He's the Vice President of Risk at Apex Fintech Solutions and somebody that really loves, enjoys, and immerses himself in the markets. Hello, Michael. How are you?

Mike Tracey (1:52)

I'm doing great, Guy. How are you?

Guy Adami (1:54)

I'm well, thanks.

We're doing this audio only because I'm impaling myself, as typically I do with technology. But it's all good because I really want to hear what you have to say about the last couple of weeks. I want to start with what's been going on in the credit markets and the debt markets because that seemingly is driving a lot of the action we're seeing in the market.

Mike Tracey (2:14)

Yeah, absolutely. I think you have the credit markets one, and then you also have what's going on with Anthropic and OpenAI and sort of the whisper numbers around their IPO, right? And so the implication is that if debt remains elevated, that a lot of these companies will not be able to fulfill their obligations. Because you got to remember that a lot of these companies like Micron, Corweave, they have remaining performance obligations.

So the money is booked, the revenues are booked, but it remains to be seen whether they actually get paid out on that or not.

Guy Adami (2:59)

Yeah. And that seemingly is a concern. By the way, that's been out there for a while, but it seemingly has been sort of amplified, I think, by the move in the bond market. Now, respectfully, and just to put it out there, Tenure yields, which went north of 5.3%, backed off all the way to about 5.04%.

Now we're hovering out of the side of sort of 5.1%. So yields are seemingly cooperating, Michael, but the problem is, I think, the volatility in the bond market has some people spooked.

Mike Tracey (3:28)

Yeah, yeah, I think the entire AI capex trade, it started out being funded by cash, now it's fully funded by debt and circular funding. So when you pull out one spoke in the bicycle, there's this fear that the entire thing can collapse.

Guy Adami (3:49)

And that seemingly is what's happening now. And as we're sitting here, I'm looking at Oracle, I'm not looking to pick on Oracle by any stretch of imagination, but you go back almost a year, and Oracle had a 40% rally back in, I don't know, I want to say the fall of 2025, on the back of some announcements, stock made at the time at all time high, I think it was north of $310 ish, maybe it was 308 But think about what's happened since then. I mean, we're talking about a stock that's now $132 a share, and seemingly at the epicenter of this entire thing, what I have said is, Larry Ellison has pushed all the chips into the middle of the table, on the back of where he views Oracle to be on sort of the AI stack. And the market is saying, you know what Larry, we love what you're doing, but we don't believe you.

Mike Tracey (4:38)

Yeah, and they're 100% dependent on the build out of the data centers coming to fruition.

And for one data center to get built, you have tons of regulatory hurdles to cross and everything to go correctly to get that up and running. And so when an article comes out last week that says OpenAI revenues maybe 20 billion below what the street's expecting, Oracle is the first place they run to. Conversely, funnily enough, the next day, when you have another article clarifying those numbers, you see Oracle rally. So Oracle, it seems as though it's basically a derivative of OpenAI and the expectation for OpenAI and their business.