The Mag7 just lost $2T in June — Burry says it's just the start.

Transcript

Tom The Magnificent Seven just lost two trillion dollars in June—and Michael Burry says it's only the beginning. But here's the twist: the S&P 500 is near a record. Welcome to the great rotation, or is it?

Marie I'm Marie, it's Thursday, July second, London edition. With me, Tom and Gerald. Let's get into it.

Tom Okay, the Mag7 selloff—I get it, it's ugly. Microsoft down eighteen percent year to date, Meta negative five. But come on, this is profit-taking in a high-growth sector, not a collapse. The fundamentals are intact.

Gerald Tom, they lost two trillion in market cap in a month. That's not profit-taking, that's air coming out of a bubble. Meta now plans to sell AI compute—talk about an oversupply narrative. The story's changing.

Marie And it's not just US names. The Asian chip selloff spilled into Korea—the Korea ETF down nine and a half percent in a week. Nvidia's only up four and a half percent year to date, miles off its high. This is a broad repricing of AI risk.

Tom But look at the S&P 500—up nine percent year to date, near all-time highs. That tells you money is moving, not leaving. Goldman's Oppenheimer says gains are broadening. Rotation, not rout.

Gerald Broadening into what? Overpriced generator stocks? Cummins at twenty times forward earnings for a diesel engine maker? Only Gerald could turn a generator stock into a P-E warning, I know, but still.

Marie Ha — fair enough. But actually, that data center engine thesis is the most original take today. The demand for off-grid power is real because hyperscalers can't get connected fast enough. Generac and Cummins are surging.

Tom Exactly! Generac up ninety-one percent year to date, Cummins thirty. They dipped last session—perfect entry point. This isn't just a trade, it's the infrastructure play behind AI.

Gerald A seven percent dip after a ninety percent run isn't an entry, it's a warning shot. Generac's trailing P-E is eighty-four. I'd rather buy the nuclear ETF—NUCL up ten percent, but still thirty-three percent below its high. Value.

Marie Nuclear? Long-term I'm with you, but regulatory timelines are decades. The small-engine makers are solving a today problem. That's why they're popping—it's immediate.

Tom And speaking of immediate, Cathie Wood's Ark Invest bought the crypto dip hard—forty-four million into Coinbase, twenty-five million into Circle. Coinbase surged almost nine percent yesterday on that disclosure.

Gerald Ark buying dip after dip isn't conviction, it's a strategy that needs a rescue plan. Coinbase is still sixty-four percent below its fifty-two-week high. That's not value, that's a falling safe.

Marie But crypto got a boost from Fed Chair Warsh's dovish comments—inflation risks cooling, Bitcoin back above sixty thousand, Solana up sixteen percent on the week. Dovishness always juices risk assets.

Tom Solana leading the rally—that's my play. Momentum plus a friendly Fed equals liftoff, buddy.

Gerald Liftoff to where? Bitcoin traders are loading up on fifty-thousand-dollar puts. Cantor Fitzgerald might call a cycle bottom, but the options market is betting on more pain. Contradictory signals everywhere.

Marie And then there's Michael Burry shorting AI—Tesla, Caterpillar, Applied Materials, the SMH chip ETF. He's calling it the 'beginning of the end.' Applied Materials dropped nearly ten percent in one session.

Tom Burry's been calling the end of everything for years. He's like my gym membership—great in theory, painful in practice. He's early, again.

Gerald Tom, your gym membership hasn't seen you since 2022. But Burry made his name on the housing crash. And look at Caterpillar—up sixty-five percent year to date, then drops seven percent in a day. Topping signal.

Marie Ha! Fair point. But let's not ignore the Google antitrust fine—two billion dollars to Klarna in Sweden. It's not the money, it's the precedent. EU courts forcing damages for monopolistic behaviour.

Tom Two billion is a rounding error for Alphabet. The stock's up fourteen percent year to date, trading at twenty-five times forward earnings. This is noise.

Gerald It's not noise—it's a structural headwind. The European regulatory machine is grinding down the dominance model. That's a long-term cap on multiples.

Marie Exactly. And while we're on structural risks, the private credit market is flashing red. Medallia's faceplant—the FT says it's a warning. BDC and leveraged loan ETFs are down year to date, and nobody's sounding the alarm.

Tom Private credit blowups have been predicted forever. The economy's fine, defaults are low.

Gerald Spreads are still tight, but if the AI unwind causes broader risk aversion, leveraged loans get hit first. It's a blind spot.

Marie A blind spot that ties right back to the Mag7 selloff. If tech earnings don't re-accelerate, the rotation could flip into a full risk-off event. Watch high-yield ETF flows.

Tom Alright, but then we've got contrarians buying China—the FXI ETF down twenty percent year to date, trading at point eight times book. To me, that's a value trap, no catalyst.

Gerald Trailing P-E of nine is deep value, I admit. But absent a policy shift, it's dead money. Fair enough.

Marie Gold's death cross is a cleaner signal. GLD down seven percent year to date, twenty-seven percent below its high, record open interest. The strong dollar is crushing it.

Tom Gold? That's Gerald's territory. I'm looking at Japan—the EWJ ETF up fourteen percent year to date, near highs. The Wall Street Journal says tech bulls should keep an eye on it. Trend is up.

Gerald Japan's interesting, but no specific catalyst. A weak yen helps exporters, I suppose. Alright, I'll watch it.

Marie But circling back to the main event—the Mag7 loss and Burry's shorts—the cleanest expression is betting on broadening. Long the SPY, short the QQQ. Or if you believe Burry, buy puts on the SMH.

Tom That SPY-QQQ spread is perfect. SPY up nine percent year to date, QQQ up eighteen but slipping. The rotation is happening right now.

Gerald But if the Mag7 recovers in Q2 earnings, that spread blows up. Burry's 'beginning of the end' could be just a pause. Liquidity is still supportive—Warsh's comments prove it.

Marie Right, and that's the bear case against the rotation. If inflation keeps cooling, growth stocks could roar back, punishing the shorts. Burry's been early before.

Tom But the data right now says rotation. Goldman's call, the old-economy plays winning—I'm sticking with the broadening bet.

Gerald Just remember, yesterday Marie called to sell Ryanair—still down today, nice one. And Tom's Alcoa buy is up again. Maybe this rotation is bigger than tech-to-engines; it's a broader reflation trade.

Marie Great callback, Gerald. And yes, Alcoa's working, so the commodity cycle isn't over. But let's not get complacent—private credit risks are real.

Tom Okay, let's do a quick agree moment: The Mag7 selloff is not a collapse, but a rotation—wait, we don't all agree. But we do agree the S&P 500 near highs means broadening is real, right?

Gerald One hundred percent.

Marie Exactly.

Tom That's the whole macro.

Marie And another agree: private credit is the unspoken risk. No one's talking about it, but if the rotation sours, it's exposed.

Gerald Right—

Tom Yeah, the BBDC and SRLN shorts are worth watching closely.

Marie Exactly.

Tom So for today, I'm going with the broadening trade: buy SPY, short QQQ. And a side of Cummins on that dip.

Gerald I'll take the SMH put—Burry's got the right idea. And I'm keeping my GLD short; that death cross is hard to ignore.

Marie I'm watching Google. The two-billion-dollar fine is just the start of structural regulatory headwinds. Sell Alphabet.

Tom And don't sleep on Ark's crypto dip buys—Coinbase could snap back hard. High risk, but Solana's sixteen percent week is lovely.

Gerald Crypto is a casino, but alright, I'll give you Solana's momentum.

Marie As always, none of this is investment advice. Just three friends talking markets.

Tom If you're just finding us, hit follow on Spotify—or check investmentflash.com for the full digest with charts and sources. We love having you along.

Marie We'll be back at nine a.m. New York time for the New York edition. See you then.

Tom Stay sharp, buddies.