Oil and inflation are tightening. The bond selloff is right.

Transcript

Tom Oil shoots the moon, inflation rattles bonds, but chips hit a record. Two markets, one day — let's dig in.

Marie Good morning from New York. This is the May twelfth, twenty twenty-six edition of Investment Flash. I'm Marie, joined by Tom and Gerald. Today we're navigating a split screen: energy and AI are screaming higher while bonds price in a rate-hike hangover. Fascinating day, non?

Gerald And I'm already bracing for the bond bloodbath. C P I at three point eight — it's going to be a long one. Honestly, the selloff is right.

Marie Oui, the C P I number — three point eight percent headline, highest in almost three years. Core beat estimates. And TLT, the long-duration Treasury ETF, is hugging its fifty-two-week low.

Gerald Yeah look, the thing is, with gas prices driving this, it's sticky. The Fed can't cut, and if they hike, duration gets hammered. TBT, the inverse long bond ETF, is a direct bet on yields rising — and that's the cleanest play here.

Tom Buddy, I get it, but chasing the dollar from here? DXY's already up. The inflation shock is priced in to some degree. But the real pain is in China — they're warning about imported inflation. That could tighten policy, hit their large-caps like FXI. That's a downer for EM.

Gerald Fair enough, but the yield differential story is still powerful. Higher yields and risk-off flows, the dollar wins by default. MarketWatch flagged it. I'm not saying pile in at the highs, but it's a resilient trade.

Marie Écoute, but what about the ECB? If oil pushes European inflation up too, then the pain is global. Bonds are selling off everywhere. But no, the Fed is the driver. Gerald chéri, must you puncture every rally before breakfast? Still, the dollar might have legs.

Tom For real? And the US-China trade piece from WSJ says Trump might win concessions. That's a binary bet. I'd rather watch FXI from the sidelines than be long into a negotiation.

Marie Darling, sideline is a position. Alright boys, focus — next up, oil itself.

Tom So USO jumped three point eight percent today. Three supply bombs: Russian loadings down, UAE gas plant wrecked until 2027, and Hormuz fear. The oil ETF is already one hundred and ten percent above its fifty-two-week low. No way I'm chasing that.

Gerald The thing is, Tom, the supply story is real. Bloomberg, FT, WSJ all confirming disruptions. UNG, natural gas, was up six percent today on that UAE plant damage. Multi-year constraint. That's not just a blip.

Marie But Gerald, you always warn about extrapolation. The Nikkei piece says Idemitsu expects Hormuz to calm by July. If that happens, oil could reverse fast. The positioning is extreme. I'd rather short the spike than buy USO here.

Tom That's the counter-argument, right? But until we see a ceasefire, the premium stays. I'm tempted by natural gas via UNG though — the UAE repair timeline is multi-year, demand for gas will only rise as AI data centers need power. It's a cleaner supply story.

Gerald Alright, so you're linking gas to AI? That's a stretch, buddy. UNG is volatile, and the oil correlation breaks down sometimes. But if you're playing momentum, I guess.

Tom Speaking of derivatives, the FT says hedge funds are betting on corn and soy for ethanol and biodiesel. CORN and SOYB. Corn ETF near a fifty-two-week high, soy up fifteen percent year to date. High-beta play on oil.

Gerald Look, biofuel bets are classic peak-oil trades. Valuations get silly. FUE, the broad biofuels ETF, is tiny and illiquid. I'd rather just own energy equities — XLE is cheap on a trailing P-E of about twenty-one, and it's still ten percent below its high.

Marie Ah non, energy equities? The WSJ says they're cheap, but they've underperformed the commodity. The war premium hasn't flowed through. Maybe because investors think it's temporary. If you believe the crisis persists, XLE is a bargain, but if not, you're bag-holding.

Tom Buddy, XLE is a value play in a momentum market. That's your sweet spot! But the real momentum is in AI and chips. SMH, the semiconductor ETF, hit an all-time high today, up ten percent just this week. That's the NACHO trade — tech ignoring everything else.

Gerald Yeah, SMH at a record with no resistance. But the multiple on some of these... Nvidia's forward P-E is what, forty plus? The catch-up trade is happening, but it's purely momentum. You're buying a story, not a cash flow.

Tom For real? The AI demand is tangible. Data centers are being built, chips are sold out. And now CNBC says the AI rally is so parabolic, bulls are eyeing uranium. The 'meme metal' is back because nuclear power is the only way to feed these data centers. URNM, the uranium miners ETF, jumped five percent today.

Marie Ooh la la, Tom, you're chasing a meme metal now? Uranium? The regulatory hurdles are enormous. In France, we love nuclear, but building reactors takes a decade. The thesis is speculative. The most original take, yes, but high risk.

Tom Marie, that's exactly why it's interesting! Cameco, the top producer, is up three percent today, trading at sixty-two times forward earnings. The growth is priced in, but if uranium prices double, it's a steal. It's a second-order AI bet.

Marie Tom mon trésor, sixty-two times forward earnings for a miner? That's some expensive optimism. But the uranium trade is the most original take of the day, non?

Gerald And a reminder — none of this is investment advice. That multiple makes my teeth ache, but you do you, Tom.

Marie Alright, let's talk crypto pain. CleanSpark just reported a massive loss — mining cost per bitcoin at eighty-eight thousand dollars, above the current price. CLSK should be selling off, but it's up slightly on AI hopes. Illogical.

Tom And MARA sold one point five billion in bitcoin to pivot to AI data centers. That's desperate. MARA up three and a half percent today might be a dead cat bounce. I'd sell both. Fundamentals are terrible.

Gerald To be fair, the pivot to AI might be the only move, but without a track record, it's a gamble. The market is giving them a pass today, but earnings don't lie. Stay away.

Marie And South Africa — the rand shrugged off an impeachment threat against Ramaphosa. EZA flat but up nearly six percent this week. Investors betting reforms hold. I'd hold, but not chase.

Tom Gerald, you love EM drama. What about US-China? That WSJ opinion piece says Trump goes to Beijing with a strong hand. FXI up half a percent, but still deep in the hole.

Gerald An opinion piece is just an opinion, mate. FXI is a binary bet on trade negotiations. I'd rather watch from the stands. Not a time to be a hero.

Marie The convergence today: oil and inflation tightening, rates rising, yet tech and energy equities diverging. The NACHO trade is real — duration gets crushed while commodity and tech stocks soar.

Gerald Our view is the same: it's a split market. But the extremes are dangerous. USO at one hundred ten percent above its fifty-two-week low, TLT near its low. If Hormuz tensions ease by July, the whole inflation thesis unwinds. The counter-argument is strong.

Tom But the momentum is undeniable. Chips at records, uranium catching a bid. You fade that at your peril. The missing piece is the consumer — higher gas is a tax on spending, yet no one's talking about retail. That could be a drag.

Marie Voilà, and the Fed's balance sheet. With C P I at three point eight and rates already high, they might accelerate quantitative tightening. That hits long-duration assets harder. The second-order trade is long oil, short bonds, but entry is terrible.

Gerald Exactly. Long USO, short TLT sounds clean, but both are at extremes. Better to wait for a Hormuz headline to fade and then short oil. That's the patient man's trade.

Tom For now, we're watching, not buying the panic. But if that headline drops, I'm ready to pounce. That's Tom's play: fade the spike.

Gerald And I'll be waiting to buy bonds on that dip. The history of these oil shocks is they don't last. When it turns, duration will rally hard.

Marie And that's it for this edition. A reminder: nothing we say is investment advice. Do your own research. We'll be back tomorrow with another flash. Salut!

Gerald And a special thank you to our listeners who flagged the uranium play early — you know who you are. Cheers.

Tom See you in the morning, folks. Stay sharp.