Oil’s supply premium evaporates; private credit redemptions mount.

Transcript

Tom Oil’s geopolitical premium is melting, and private credit investors are sprinting for the exits. This weekend, we’re breaking down what it means for your portfolio — from a 60-day Iran deal to a rare Super El Niño.

Marie Welcome to Investment Flash for Saturday, June 21st. I’m Marie, with Tom and Gerald. We’ve got a packed show: oil geopolitics, private credit redemptions, Bank of America tech picks, and a Super El Niño guide that could redraw your watchlist.

Tom And we start with oil — Gerald, you've been eyeing that Strait of Hormuz risk, right?

Gerald Yeah look, VP Vance in Switzerland for Iran talks, an interim 60-day deal, and suddenly 16 million barrels flowed through Hormuz without a hiccup. The United States Oil Fund is still up 66 percent year to date, but that supply-premium unwind has room — the risk premium is deflating fast.

Marie Hold on — it’s a 60-day interim deal. If talks collapse, oil snaps back violently. Selling here is betting on diplomacy, and I’m not that confident. I mean, I get the supply side argument, but diplomacy is messy.

Tom But Gerald’s also pointing to Iraq boosting output to over 3 million barrels per day. That’s a real supply pulse, not just hope.

Gerald Exactly. The Energy Select Sector SPDR was down over 1.6 percent last session. That’s the market pricing in the de-escalation. I’d sell the oil ETF and the energy ETF here.

Marie Alright, fair point — the supply side is loosening. But I’m keeping an eye on gold. If the Iran deal holds, safe-haven demand fades.

Tom Gold flat on the year — not much to lose. But let’s pivot to a meltdown that’s closer to my heart — crypto. Strategy — that’s the bitcoin treasury company, down 75 percent from its all-time high, and its preferred stock just crashed to 83 bucks. Gerald, you must be loving this.

Gerald Tom, buddy, Strategy’s preferred at 17 percent below par, unrealized bitcoin losses of over $11 billion, and they just burned cash on a bond buyback. That’s not a buying opportunity — that’s a capital structure crack.

Tom But they hold 846,000 bitcoin! If bitcoin bounces, Strategy could rip. It’s only 8 percent above its fifty-two-week low. I think the sell call is late.

Marie Wait — if bitcoin drops below sixty thousand, the losses deepen, and dividend coverage on the preferred is just six months. Illiquidity plus leverage is a dangerous cocktail, Tom.

Tom Okay, okay, but no one’s forcing them to sell bitcoin now. They just did a buyback to manage liabilities. Maybe it’s a one-time stress.

Gerald The bond buyback consumed cash, and the preferred dividend coverage shrunk. One more bitcoin dip and the entire capital structure is under severe pressure. I’m with the sell signal.

Marie And this ties right into private credit, but we’ll get there. First, Japan’s megabanks — record dividends! Mitsubishi UFJ, Sumitomo Mitsui, and Mizuho all up over 30 percent year to date.

Tom Two trillion yen in dividends! That’s a win. And they’re all near fifty-two-week highs.

Gerald Exactly, Tom — near fifty-two-week highs. The record payout is already priced. It’s a hold, not a buy. I’d rather stick with yesterday’s Commerzbank call, which still has upside.

Marie But Gerald, Japan’s shareholder reforms are real. A 16-times trailing price-to-earnings ratio for MUFG with stable dividends isn’t bad for income.

Tom Yeah, and compared to yesterday’s European bank play, these have more momentum.

Gerald Fair enough, but momentum near all-time highs can reverse. I’ll watch.

Marie Now, something that’s beaten-down: China’s large-cap ETF, FXI, is at its fifty-two-week low, but Hong Kong’s financial secretary is talking up tech giants.

Tom I love this! A mean-reversion trade on China tech? FXI could rip if sentiment shifts. The selloff is overdone.

Marie Wait — the bear case is still massive: regulatory headwinds, property woes. A shift in sentiment could spark a rally, but fundamentals are lagging.

Gerald I’d rather buy European equities from yesterday’s call, honestly. China’s a gamble.

Tom Come on, Gerald, you’re going to miss a fifty-two-week low ripper? I’m putting FXI on my radar.

Gerald Calling the bottom on China again — that’s six bottoms this cycle, Tom.

Tom Ha — fair enough. But this time feels different with the HK tech push.

Marie Alright, let’s get to something with more solid footing: Bank of America’s top tech picks — Nvidia, Meta, Snowflake, Dynatrace, and Sandisk.

Tom Now we’re talking! Nvidia at 16.6 times forward earnings is a steal. With AI dominance, that’s a buy.

Gerald But Snowflake at 86.5 times forward earnings? That’s not a steal, that’s highway robbery. And Sandisk up 820 percent year to date — the easy money is long gone.

Marie Dynatrace at 18.3 times forward earnings with only a 2 percent dip year to date looks interesting — a lower-risk growth play.

Tom See, Gerald, you always hyper-focus on the high-flier. Nvidia and Meta at 15 to 16 times are perfectly reasonable. I’d buy those.

Gerald Meta down 11 percent year to date, fair. But Snowflake’s optimism is baked in — I’m watching that one from a distance.

Marie And analysts raising price targets after an 820 percent rally is basically a retirement plan.

Tom Oh, that’s brutal — but not wrong.

Gerald Moving on — Goldman Sachs upgrading Allegiant Travel to buy, $125 price target. Tom, you love a good travel play.

Tom 30 percent upside! Allegiant is still 15 percent below its high after a 5 percent pop. The Sun Country acquisition and Spirit’s exit give them pricing power. I’m in.

Marie Wait — benefiting from a competitor’s closure is temporary. That’s not a sustainable moat. The airline sector is brutal.

Gerald Travel stocks are cyclical, Tom. You’re buying near a high on merger hopes. I’d watch.

Tom But the 5 percent pop says the market is waking up. I think there’s more.

Marie Alright, but let’s talk about the red flags from the private credit market — an investor racing to pull $80 million, Ares Capital and the Putnam BDC Income ETF near fifty-two-week lows.

Gerald This is the real story. Redemption queues are building, and the liquidity squeeze could intensify. This isn’t just noise.

Tom Gerald, Ares Capital is down 23 percent from its high and trading at 0.92 times book. Much of the downside is priced. Selling now is late.

Marie But if gates go up and redemptions freeze, NAVs could gap down. The stress isn’t over. I’d still be cautious.

Tom Private credit redemptions — it’s like a bank run but with nicer suits.

Gerald Ha — that’s fair.

Gerald Exactly. The private credit structure was built for low rates, and now we’re seeing the cracks. Not doom, but not over.

Tom That’s the whole story.

Marie One hundred percent.

Gerald Right.

Marie Now, the most original take today — Bloomberg’s guide to a Super El Niño. This is a climate event that could scramble agriculture and insurance markets.

Tom Yeah, the agriculture fund DBA only up 5 percent year to date, so weather premiums aren’t priced. But timing is uncertain.

Gerald I’m watching DBA. If crops get hit, that fund moves. But it’s a long-term play.

Marie And the insurance ETF KIE, down 2 percent year to date. Extreme weather claims would spike. Insurers are not priced for a bad hurricane season — this is a tangible risk.

Tom So we’re adding DBA and KIE to watchlists. But today’s big picture is about geopolitical premium deflation meeting liquidity stress.

Marie And here’s what’s missing: the Federal Reserve. Nobody’s connecting the oil supply surge to inflation. A sustained oil drop would lower C P I and give the Fed room.

Gerald To be fair, if oil comes down from up 66 percent year to date, headline inflation eases. That could shift the rate path — but it’s not being discussed, which is a missing puzzle piece.

Tom The cleanest expression of this moment is increased dispersion — active over passive. Sell crowded energy longs, buy beaten-down like Domino’s Pizza down 26 percent year to date or FXI at lows.

Marie I’ll push back on that — Domino’s is down for a reason. But I agree dispersion favors stock-pickers. The old narratives are stale.

Tom Alright, we’re out of time. If you’re just finding us, hit follow on Spotify for daily market flashes.

Gerald We’re back Monday with the London Edition at seven-thirty a.m. London time. Have a great rest of the weekend.