Daily Brief Macro: How Oaktree’s Howard Marks Spots a Market Bubble and more

• Howard Marks correctly called the dot com bubble in the early 2000s
• The 1990s were a placid period for credit investors but a hot time for equity investors
• Being too far ahead of your time in predicting market trends can be painful and indistinguishable from being wrong

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• AI investors were shocked by China’s DeepSeek successfully matching the performance of OpenAI’s GP4-o1 at a fraction of the build cost and despite export restrictions.
• Innovating a more productive use of capital does not negate the potential gains from increasing processing power. Either way benefits the economy with faster AI progress.
• Foundation model IP needs better protection against the attack of cloning distillation techniques to reap a return on investment while pushing the performance frontier.

• For the week ending 24/Jan, U.S. natural gas prices gained 2% amid volatility driven by colder weather forecasts and increasing LNG exports.
• Henry Hub Put/Call volume ratio fell to 1.05 from 1.18 (17/Jan) the previous week as call volumes rose by 7.2% WoW, while put volumes declined by 4.3%. 
• Henry Hub OI PCR inched up to 0.93 from 0.92 from last week. Call OI grew by 4.4% WoW, while put OI increased by 5.5%.

• Global markets will be driven by policies and current valuation in 2025, especially new Trump administration policies.  
• Trump could jawbone markets for a lower value of the USD and lower oil prices, which could have a temporary modest impact (joint US/Japan FX intervention is possible)
• But the structural drivers are much more important.  Meanwhile, an overvalued U.S. equity market is vulnerable to a 2018 style correction on any major bad news that could then trigger

• WTI futures fell by 3.5% for the week ending 24/Jan on the back of downward pressure from Trump’s hydrocarbon output policies and brewing trade disputes.
• WTI options Put/Call volume ratio fell to 0.85 from 1.28 (17/Jan) last week, as call volume rose by 8.3% WoW while put volume decreased by 28.4%.  
• WTI OI PCR rose to 1.01 from 1.00 last week. Call OI rose by 5.7% WoW and put OI increased by 7.3%.

• India Real Estate, South Korea Financials and Turkey Financials see big increases in ownership in 2024.
• South Korea Materials, China Technology and China Health Care saw investment levels decline.
• Sk Hynix saw the largest increase in fund ownership, but which stocks saw large decreases, and which look set for a promising 2025?

• Exposure levels and ownership reaches record highs for active GEM funds in GCC countries, yet 30% of funds remain without exposure.
• Saudi Arabia and the United Arab Emirates dominate the ownership picture, with both at record high investment levels, driven by the Financials and Real Estate sectors
• Al Rajhi Bank is the most widely held stock, with a top tier including Emaar Properties and Aldar Properties surging to record levels of investment in 2024.

• Small cap Emerging Market funds have outperformed their large-cap peers over the past 10 years.
• Yet small and midcap exposure decreased to near record levels last year, in spite of managers maintaining an overweight position versus the benchmark.
• We screen for well owned and small/midcap stocks that are showing strong momentum among managers.