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JPMorgan, Micron, JetBlue, and Meta (Podcast) · Bloomberg Intelligence

• 0:00
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
• 0:04
  Speaker 1: my co host Matt Miller.
• 0:05
  Speaker 2: Every business day we bring you interviews from CEOs, market pros,
• 0:09
  Speaker 2: and Bloomberg experts, along with essential market moving news.
• 0:14
  Speaker 1: Find the Bloomberg Markets Podcast called Apple Podcasts or wherever
• 0:17
  Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast.
• 0:21
  Speaker 1: JP Morgan Equity BQ. That gives me my Bloomberg quote,
• 0:24
  Speaker 1: which is my go to quote for any security I
• 0:26
  Speaker 1: pop in there. It's up like one tenth to one
• 0:29
  Speaker 1: percent today, it's up four percent year to date. Aren't
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  Speaker 1: they having an investor day today? Shanli bassk you cover
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  Speaker 1: all the Wall Street stuff I was expecting. Maybe not
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  Speaker 1: a bombshell, but can I have a little bit of
• 0:39
  Speaker 1: excitement coming out an investor day?
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  Speaker 3: But so far not so much.
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  Speaker 4: I mean JP Morgan makes money, big deal. No, I'm kidding, Hi, Well,
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  Speaker 4: that's the thing.
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  Speaker 5: I mean.
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  Speaker 4: JP Morgan the typically when they do investor Day, you've
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  Speaker 4: got a lot of detail about how they're managing the
• 0:51
  Speaker 4: business line by line, business by business, executive by executive.
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  Speaker 4: But you know, they they have not been known to
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  Speaker 4: sit there and throw out massive, big targets on a
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  Speaker 4: fester day. They have reiterated the targets that've set, but
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  Speaker 4: they have a one target I think in particular is important.
• 1:08
  Speaker 4: It's the twenty twenty three that interest income expectation. They're
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  Speaker 4: expected to make more, and it's because of that First
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  Speaker 4: Republic deal. You would expect some of that, but it's,
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  Speaker 4: to your point here, somewhat muted because there is still
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  Speaker 4: a lot of uncertainty and JP Morgan's executives tell you
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  Speaker 4: all about it.
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  Speaker 1: So there haven't been any bombshells yet, have there from
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  Speaker 1: this acquisition of this bank. I mean they kind of
• 1:30
  Speaker 1: sometimes you go when there and you're like, uh, oh,
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  Speaker 1: you know, but they didn't have any of that so
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  Speaker 1: far at least.
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  Speaker 4: I think what it will be is a matter of
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  Speaker 4: showing just how much this will move the deal for
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  Speaker 4: JP Morgan overtime. You think back to bear Stearns, for example,
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  Speaker 4: and it wasn't immediately clear, especially when on the horizon
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  Speaker 4: there were so many hiccups to work through just how
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  Speaker 4: much of a huge strategic change bear Stearns would be
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  Speaker 4: have made them one of a the top fixed income
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  Speaker 4: trading house on Wall Street. It now is making them
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  Speaker 4: such a competitive institutional broke if you will, you know,
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  Speaker 4: just at the heart of capital markets, competing with the
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  Speaker 4: investment bank. But First Republic will really make it a contender,
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  Speaker 4: bigger and bigger in wealth, wealth and consumer.
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  Speaker 1: Here, I'm just looking at a red headline going across
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  Speaker 1: the Bloomberg terminal. Biden, We'll meet with McCarthy at five
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  Speaker 1: thirty pm today Wall Street time to discuss the debt limits,
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  Speaker 1: so we'll have more reporting on that. But that seems
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  Speaker 1: like a move in the right direction. Pretty gup that
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  Speaker 1: joints us here Bloomberg Interactior broker students just coming off
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  Speaker 1: the TV screen. So Creta's just talking to Shanali here.
• 2:29
  Speaker 1: Not a whole lot of action coming out of the
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  Speaker 1: JP Morgan. I wanted to ask you about a smaller
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  Speaker 1: deal green Hill, Mizuho Bying green Hill. Now green Hill
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  Speaker 1: is only it's a small company, it's less than a
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  Speaker 1: billion dollar market cap, but it's Bob Greenhill, who was
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  Speaker 1: a just a.
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  Speaker 3: Legendary deal maker.
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  Speaker 1: They were one of the first boutique investment banks to
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  Speaker 1: come public like twenty years.
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  Speaker 3: Ago or something.
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  Speaker 4: There's a reason, and I've got to say I thought
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  Speaker 4: the story would do well. It is the most read
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  Speaker 4: on the terminal already and within a couple of hours here,
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  Speaker 4: and the reason is, Yes, Bob Greenhill, he was a
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  Speaker 4: bank over the Sumner red Stone. He was a banker
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  Speaker 4: to Sandy while he was really in that era of
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  Speaker 4: legendary investment bankers Morgan Stanley former Morgans only left out
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  Speaker 4: on his own form green Hill and Company. And yeah,
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  Speaker 4: it was one of the original boutiques and one of
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  Speaker 4: the first to go public, really the first in this generation,
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  Speaker 4: and it inspired others like Evercore, PJT. Hulahan, Loki Mulison
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  Speaker 4: Company to go public too. So it's really an end
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  Speaker 4: of an era for a public run for green Hill
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  Speaker 4: in Company, but really a tough decade. Paul, Yeah, I mean.
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  Speaker 3: I'm just looking at the stock price chart.
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  Speaker 1: I mean it's you know, they're getting paid double where
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  Speaker 1: they closed on Friday, but still it's a fraction of
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  Speaker 1: where was it its peak.
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  Speaker 4: I mean, in the heat in the aftermath of the
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  Speaker 4: financial crisis, this was a stock at more than eighty
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  Speaker 4: one dollars a share on Friday. It closed at less
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  Speaker 4: than seven dollars a share, So that just shows you
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  Speaker 4: how far they had come. And remember, investment bankers are
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  Speaker 4: partly paid in equity of their own investment banks, so
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  Speaker 4: it's a tough retention tool when you're facing that much
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  Speaker 4: pressure on your stock price.
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  Speaker 6: So one of the key takeaways I'm going to bring
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  Speaker 6: back to JP Morgan here because five hundred and fifty
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  Speaker 6: million dollars from a Zoho. But it feels like JP
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  Speaker 6: Morgan all eyes on Jamie Diamond, especially with geopolitics kind
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  Speaker 6: of rearing its ugly head once again. What is the
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  Speaker 6: JP Morgan take on China?
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  Speaker 4: You know, it's funny you keep on asking that to
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  Speaker 4: take unt I know, I'm you're so convinced that the
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  Speaker 4: investment banks are stepping away at full scale.
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  Speaker 6: Well, so the reason I ask is because it feels
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  Speaker 6: like we're headed towards a and correct me if I'm wrong.
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  Speaker 6: It does feel like we're headed towards an era or
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  Speaker 6: a couple of decades where you do start to see
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  Speaker 6: this kind of de globalization, right, it's been in the
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  Speaker 6: works for the past couple of years as well.
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  Speaker 1: I can't remember.
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  Speaker 6: I think you might be the one of who showed
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  Speaker 6: me this, or maybe someone else said. But when you
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  Speaker 6: look at the league tables, a lot of the deal
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  Speaker 6: volumes fallen in Asia specifically. I'm not sure whether that's
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  Speaker 6: a function of kind of recession or these late COVID
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  Speaker 6: measures or things.
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  Speaker 4: Let me give you the let me give you the
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  Speaker 4: bold case, because you have seen a lot of hedge
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  Speaker 4: funds come back into China. You have seen a lot
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  Speaker 4: of big investment managers hold tight into China even amid
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  Speaker 4: all these uncertainties. When you're a banklet Morgan listen to
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  Speaker 4: your America's biggest bank. America is your biggest market. A
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  Speaker 4: city group, however, is a little more diversified. They have
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  Speaker 4: a lot more global businesses. The reopening of China has
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  Speaker 4: been so far a pretty big boon to activity, and
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  Speaker 4: not just in China, in Europe pretty where the investment
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  Speaker 4: banks are also trying to double down. I think the
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  Speaker 4: bigger question here is one how global supply chains start
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  Speaker 4: to untangle, and then also geopolitical risks, because the big
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  Speaker 4: whale in the room is China's relationship to Taiwan. And
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  Speaker 4: again we've been talking about this a lot. The US
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  Speaker 4: bank CEOs have been grilled on Capitol Hill asking what
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  Speaker 4: they would do in that event, and it's a complicated question.
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  Speaker 4: Because they answer really is nothing. That is the real answer,
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  Speaker 4: and it's because they follow what the US regulators would
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  Speaker 4: make them do, which at this point in time is nothing.
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  Speaker 6: Well, how does that work exactly? When you kind of
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  Speaker 6: let's say they have these deals or even assets sitting
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  Speaker 6: in China in that kind of scenario, just play this
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  Speaker 6: out for me, worst case scenario. I mean, what happens
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  Speaker 6: to those assets? I mean when I'm kind of comparing
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  Speaker 6: this to and correct me if I'm wrong, if this
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  Speaker 6: is an extreme example, but kind of the bank presence
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  Speaker 6: in Russia, for example, would we see something similar.
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  Speaker 4: I think that's a long shot. I think that it
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  Speaker 4: would be a long shot to equate the two. It
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  Speaker 4: would take a lot. But it is on the surface,
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  Speaker 4: it is under the minds, on the minds of many executives.
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  Speaker 4: But the idea of it getting to that point is
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  Speaker 4: still not the immediate concern because it's not happening. And
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  Speaker 4: China is such a whale in the room, the activity
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  Speaker 4: of China as a global force in the economy, the
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  Speaker 4: demographics being more on their side than in the United States.
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  Speaker 4: I'll give you another example of this. Let's not take
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  Speaker 4: JP Morgan. Let's take credit Sweez Credit Squeze. When they
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  Speaker 4: tried to build another investment bank, they tried to do
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  Speaker 4: it with a firm that focused only in China and
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  Speaker 4: Saudi Arabia based in New York City. I don't know, Critty,
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  Speaker 4: that doesn't show me a story that is trying to
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  Speaker 4: untangle from the rest of the world.
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  Speaker 1: Chani Bask thanks so much for joining as Shannalani Basic.
• 6:58
  Speaker 1: She covers all things Wall Street Today, giving us the
• 7:00
  Speaker 1: latest reporting JP Morgan again. They're having an investor day
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  Speaker 1: ongoing today in New York City, as I recall, so
• 7:08
  Speaker 1: getting all their investors and analysts together talking about the future.
• 7:11
  Speaker 1: Maybe go take a tour of their new headquarters, which
• 7:13
  Speaker 1: is being built on Park Avenue. It is awesome. I
• 7:16
  Speaker 1: can't wait to see what it looks like when it
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  Speaker 1: opens up, but I'm sure it'll be state of the art.
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  Speaker 7: You're listening to the team Ken's are Live program Bloomberg
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  Speaker 7: Markets weekdays at ten am Eastern.
• 7:26
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• 7:30
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• 7:31
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• 7:35
  Speaker 1: Do we want to talk energy, We want to talk
• 7:38
  Speaker 1: ETFs and so we want to do that. We talked
• 7:40
  Speaker 1: to Will Ryan. He's the chief executive officer of Granite
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  Speaker 1: Shairs Advisors. He joins us live here in our Bloomberg
• 7:45
  Speaker 1: Interactive Burger studio. So Will on the commodities front here,
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  Speaker 1: I want to start with gold. Our commodities analyst here,
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  Speaker 1: Mike McLoone of Bloomberg Intelligence. He says, basically, buy gold
• 7:58
  Speaker 1: and short everything else, including the oil. Talk to us
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  Speaker 1: about gold. What's your call there?
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  Speaker 3: What are you guys thinking about that?
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  Speaker 9: Well?
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  Speaker 10: Gold right now? I mean the biggest concern for I
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  Speaker 10: think point most people in the market, but certainly for
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  Speaker 10: those who are interested in gold is the debt ceiling.
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  Speaker 10: Because you may remember that back in twenty eleven when
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  Speaker 10: the US ultimately defaulted and sorry, as you say, the
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  Speaker 10: credit rating was downgraded for the first time. That propelled
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  Speaker 10: gold to at the time high and so clearly if
• 8:28
  Speaker 10: there was any breakdown and talks and a deal doesn't
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  Speaker 10: get done, fears that that could happen again certainly elevates
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  Speaker 10: that premium for people looking for a hedge in gold.
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  Speaker 6: How does that work exactly? When you invest through the
• 8:42
  Speaker 6: ETF space, it feels like there's that one ETF that
• 8:45
  Speaker 6: everyone uses for gold, But then if you're doing any
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  Speaker 6: other sort of commodities, ETFs aren't really the vehicle to use.
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  Speaker 10: Right, I guess it sort of depends, because you know,
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  Speaker 10: the beauty of gold and the beauty of precious metals
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  Speaker 10: is that their natural state after they've been mined is
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  Speaker 10: you can store it in a vault. So the bars
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  Speaker 10: that you can put in a vault, they won't decay,
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  Speaker 10: nothing will happen to them unless they're you know, clearly
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  Speaker 10: something nefarious, and so they're ideal to hold in a
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  Speaker 10: fund that's a natural investment state. When you go outside
• 9:16
  Speaker 10: of precious metal, as you're dealing with commodities that can
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  Speaker 10: decay or even die, you know, that's a different proposition.
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  Speaker 10: And typically the way that we address that is via
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  Speaker 10: the futures market. And so you're talking about broad commodity
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  Speaker 10: TF or even an ETF on oil, et cetera.
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  Speaker 6: That's typically done like you isn't Wasn't there kind of
• 9:32
  Speaker 6: a famous story about copper ETF's not working for that
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  Speaker 6: exact reason that they fall apart or something that the
• 9:37
  Speaker 6: storage becomes an issue.
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  Speaker 10: That's right, So you know they're a physical any physical
• 9:44
  Speaker 10: backed physically backed commodity is clearly going to be challenged
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  Speaker 10: to the extent that there's a challenge on securing supply.
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  Speaker 10: So if you can imagine something like copper, the price
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  Speaker 10: of a pound of copper is clearly materially different from
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  Speaker 10: you know, gold, so you need a lot more storage
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  Speaker 10: for the same weight of metal as you do in gold.
• 10:04
  Speaker 10: And so it's not to say that you can't do that.
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  Speaker 10: You can, it's just that it's going to be logistically
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  Speaker 10: a lot more challenging than providing storage for gold.
• 10:14
  Speaker 1: Touch on a platinum, that's what we hear. I hear
• 10:17
  Speaker 1: more and more about and you've guys have got the
• 10:19
  Speaker 1: granite shares platinum trust. Why would I want to have
• 10:22
  Speaker 1: exposure to platinum here.
• 10:23
  Speaker 10: Well, platinum's a really interesting one because the fundamentals for
• 10:27
  Speaker 10: this year we're expecting a big deficit, so in other words,
• 10:32
  Speaker 10: more demand than we have supply for this year, so
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  Speaker 10: automatically for any commodity, that puts you on a firm footing.
• 10:40
  Speaker 10: What's interesting is the majority of platinum comes from South
• 10:42
  Speaker 10: Africa and at the moment they're having very very big
• 10:45
  Speaker 10: issues with energy supply to the sector, so you're seeing
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  Speaker 10: that manifesting in blackouts across the country, but particularly obviously
• 10:55
  Speaker 10: is it pertains to the production itself. So once you
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  Speaker 10: have energy blackouts, that that affects mind supply and so
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  Speaker 10: the outlook for supply gets even bleaker. But the demand
• 11:05
  Speaker 10: story for platinum is really there's two fold good stories.
• 11:08
  Speaker 10: One is main uses in catalytic converters, so particularly for
• 11:12
  Speaker 10: diesel engine cars, so cleans the emissions, and vehicle sales
• 11:16
  Speaker 10: despite all the negative news we have, vehicle sales across
• 11:20
  Speaker 10: the globe are expected to increase this year. The second
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  Speaker 10: thing is that you need platinum or as a vital
• 11:26
  Speaker 10: ingredient for the production of hydrogen. And so hydrogen is
• 11:29
  Speaker 10: another story which people are focused on as an alternative
• 11:36
  Speaker 10: or a complement to electricity produced by batteries, and so
• 11:41
  Speaker 10: hydrogen is an alternative fuel source is something that a
• 11:44
  Speaker 10: lot of governments and indeed make makers of autos to
• 11:49
  Speaker 10: aeroplanes and start to focus on. Now, so we need
• 11:51
  Speaker 10: platinum for that.
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  Speaker 6: When you're talking about platinum, what do you from an
• 11:56
  Speaker 6: investment point of view, though, what's the narrative behind that?
• 11:59
  Speaker 6: For gold? It's easy, it's the debt ceiling, it's inflation.
• 12:01
  Speaker 6: It's all about jazz, copper, it's China oil, China US whatever.
• 12:05
  Speaker 6: What's the investment narrative behind platinum.
• 12:08
  Speaker 10: Well, platinum's much more of a fundamentally driven commodity. So,
• 12:11
  Speaker 10: in other words, do you expect the demand for platinum
• 12:15
  Speaker 10: to go up over time? And in an ideal scenario,
• 12:19
  Speaker 10: is the demand going to outstrip supply? And therefore, like
• 12:21
  Speaker 10: any commodity, it's sort of economics one oh one that
• 12:25
  Speaker 10: that will dictate where pricing goes. So for platinum, you know,
• 12:29
  Speaker 10: we look at this market. We have more demand than supplies.
• 12:31
  Speaker 10: That's good. Outlook for autos is positive, so more sales
• 12:36
  Speaker 10: for orders. And we think that the hydrogen story is
• 12:38
  Speaker 10: a really good one. You know, we're going to have
• 12:40
  Speaker 10: hydrogen as an alternative green fuel source and we need
• 12:44
  Speaker 10: platinum for that. But you know that's really the it's
• 12:48
  Speaker 10: a metal. It's thirty times rareer than gold's much smaller market.
• 12:51
  Speaker 3: I didn't know that.
• 12:51
  Speaker 1: Okay, all right, let's go more boring stuff, mundane stuff,
• 12:54
  Speaker 1: WTI crude oils.
• 12:56
  Speaker 3: It's under seventy two.
• 12:56
  Speaker 1: Bucks a barrel. It just feels like it should be higher.
• 13:00
  Speaker 1: Why isn't it?
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  Speaker 10: The main reason is, again the debt ceiling scenario at
• 13:06
  Speaker 10: the moment, But.
• 13:06
  Speaker 3: That's going to get fixed.
• 13:08
  Speaker 1: You're go down to the trading pits of oil and
• 13:10
  Speaker 1: tell these guys it's going to get fixed.
• 13:13
  Speaker 6: The contrary, and.
• 13:15
  Speaker 10: Exactly no, it is. I mean, the the any any
• 13:20
  Speaker 10: kind of downward move we've had in oil typically, and
• 13:23
  Speaker 10: I don't want to over generalize, but over the last
• 13:26
  Speaker 10: twelve months has been about recession narratives. So whether we're
• 13:30
  Speaker 10: talking about the debt ceiling immediately leading to recession or
• 13:35
  Speaker 10: whether we're just talking about a more global slowdown. But
• 13:38
  Speaker 10: but that's the story. I mean, the data coming out
• 13:40
  Speaker 10: of China's actually been really good. March was a huge
• 13:42
  Speaker 10: month in terms of oil demand consumption. And we know
• 13:47
  Speaker 10: from you know, the Middle East that you know, Saudi
• 13:49
  Speaker 10: Arabia and the OPEC Consortium are definitely not opposed to
• 13:53
  Speaker 10: cutting production if they feel like pricing is at a
• 13:56
  Speaker 10: lower left level.
• 13:59
  Speaker 6: Can we go back to the gold story. I'm just
• 14:01
  Speaker 6: I'm looking you up on your LinkedIn profile. Used to
• 14:04
  Speaker 6: work at the World Gold Council, which that's pretty cool.
• 14:07
  Speaker 1: There is a thing, there is a thing. Come on,
• 14:10
  Speaker 1: you just count gold.
• 14:12
  Speaker 6: What do you do with the World Gold Council tell
• 14:13
  Speaker 6: our audience, Well, the World Gold Council is the official
• 14:18
  Speaker 6: industry body, if you will, for the gold industry.
• 14:21
  Speaker 10: So it's supported by the gold mining companies with a
• 14:24
  Speaker 10: mission to raise awareness for gold. So think of it
• 14:28
  Speaker 10: as like a trade association at some respects. But the
• 14:32
  Speaker 10: most well known thing that the World Gold Council probably
• 14:34
  Speaker 10: does is it owns the gld ETF, which is the
• 14:37
  Speaker 10: largest gold ETF. So I was the CEO of that
• 14:39
  Speaker 10: for for two and a half years. For starting my
• 14:42
  Speaker 10: own one bar with granite shares. That's the ticket, sorry bar,
• 14:46
  Speaker 10: But yes.
• 14:47
  Speaker 1: Okay, all right, So Critty, here's the thing about Will Ryan.
• 14:50
  Speaker 1: Every time he comes in, I'm like, I go look
• 14:52
  Speaker 1: through my notes and I see he goes to he
• 14:53
  Speaker 1: went to the University of Bath in England.
• 14:55
  Speaker 6: So I google that and what you should only say
• 14:58
  Speaker 6: in an accent apparent.
• 14:59
  Speaker 3: Exactly you can say.
• 15:01
  Speaker 1: But you google it and it looks like the most
• 15:03
  Speaker 1: beautiful town anywhere. And then I keep asking myself how
• 15:06
  Speaker 1: come I've never been there? And I go to my
• 15:09
  Speaker 1: little map thing, immajig. It's only an hour and seventeen
• 15:11
  Speaker 1: minute train ride from Paddington station in London. Why haven't
• 15:16
  Speaker 1: I been. I've been to London like a thousand times.
• 15:18
  Speaker 10: It's a good question. So all right, I think it
• 15:20
  Speaker 10: just made an itinerary for your next trip.
• 15:21
  Speaker 1: I can do a day trip there, right, or I
• 15:23
  Speaker 1: could do an overnight trip.
• 15:23
  Speaker 10: Oh yeah, easily, easily.
• 15:25
  Speaker 3: All right, put that on the itinerary.
• 15:27
  Speaker 6: Put that on the itinerary. Let's go back to market
• 15:29
  Speaker 6: pricing here. I think we've got a few more minutes left.
• 15:33
  Speaker 6: Pull me back to gold, though, we were just near
• 15:34
  Speaker 6: record Do we break the record high? I can't remember,
• 15:37
  Speaker 6: but we were near record highs for gold and then
• 15:40
  Speaker 6: kind of retreated back. I think we're in nineteen seventy
• 15:42
  Speaker 6: the last time I checked nineteen seventy two on spot gold.
• 15:45
  Speaker 6: What would it take to break that record high?
• 15:48
  Speaker 10: Most immediately, some kind of breakdown in the debt ceilings.
• 15:52
  Speaker 10: That's the clear and present danger for the market. But
• 15:56
  Speaker 10: you know, gold prices will thrive off any kind of
• 15:59
  Speaker 10: dislike cation event, and you know, the fear of this
• 16:03
  Speaker 10: happening has been one of the main reasons why gold
• 16:06
  Speaker 10: has climbed back up to these levels. But clearly, if
• 16:09
  Speaker 10: we have any breakdown, obviously, worst case scenario, we had
• 16:13
  Speaker 10: some kind of default event, prices of gold would be
• 16:16
  Speaker 10: materially higher.
• 16:17
  Speaker 1: And silver doesn't the silver foul gold. What's the relationship
• 16:20
  Speaker 1: gold to silver?
• 16:21
  Speaker 10: It does?
• 16:23
  Speaker 3: You know silver?
• 16:23
  Speaker 10: Silver is more industrial because the majority of demand for
• 16:27
  Speaker 10: silver is more industrial. So it's a bit like platinum
• 16:29
  Speaker 10: where it's going to be more related to the business cycle. However,
• 16:33
  Speaker 10: you know, silver is the closest correlated to gold, and
• 16:37
  Speaker 10: so when gold prices are going up, typically silver prices
• 16:40
  Speaker 10: are also going up.
• 16:41
  Speaker 1: But you can't corner that. Like who cornered the silver
• 16:43
  Speaker 1: market back in the day. That wasn't the Hunt brothers.
• 16:46
  Speaker 1: How do you corner a silver market?
• 16:48
  Speaker 3: I mean, is it? Is it the size that it
• 16:50
  Speaker 3: can be done?
• 16:52
  Speaker 10: I mean, most most commodities are at the size that
• 16:55
  Speaker 10: they can be done. I mean clearly you know opek,
• 16:57
  Speaker 10: remember is a cartel, and if it's self, it's designed
• 17:01
  Speaker 10: to corner the market in the in the same sense
• 17:04
  Speaker 10: as the Hunts did. But you know that's I guess
• 17:07
  Speaker 10: short order, why we have regulation in these markets to
• 17:10
  Speaker 10: try and stop these days happening.
• 17:12
  Speaker 1: Interesting, Okay, we'll Rind joining us here in our Bloomberg
• 17:14
  Speaker 1: Interactive Broker studio Will Rand. He's a chief executive officer
• 17:17
  Speaker 1: of Granted Shairs Advisors.
• 17:19
  Speaker 7: You're listening to the tape Cat's are live program Bloomberg
• 17:22
  Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the
• 17:26
  Speaker 7: tune in app, Bloomberg dot Com, and the Bloomberg Business App.
• 17:29
  Speaker 7: You can also listen live on Amazon Alexa from our
• 17:32
  Speaker 7: flagship New York station. Just say Alexa play Bloomberg eleven thirty.
• 17:38
  Speaker 1: He woke this morning to the news at China declaring
• 17:43
  Speaker 1: Micron Technologies a cyber security risk. I guess that's a
• 17:47
  Speaker 1: no no. So they're China's barring Micron chips. What does
• 17:50
  Speaker 1: it mean? A stockment is down about four percent of
• 17:52
  Speaker 1: John just mentioned here. Let's bring in an expert here
• 17:55
  Speaker 1: to kind of frame this out. Paula Pincal, she covers
• 17:58
  Speaker 1: semiconductors with Bloomberg Intelligence. She joins us live here in
• 18:00
  Speaker 1: our Bloomberg Interactive Broker studio. So we appreciate you coming in.
• 18:04
  Speaker 1: You get a gold star for that, unlike your management,
• 18:06
  Speaker 1: which mails it in, phones it in. I appreciate you
• 18:09
  Speaker 1: coming in, Paula. How big a deal is this for Micron? Again,
• 18:13
  Speaker 1: the stock is off a little bit, but frame it
• 18:15
  Speaker 1: out for.
• 18:16
  Speaker 9: Us happy to be here, Paul, Thank you. Look, it
• 18:21
  Speaker 9: was a low ball punch against the United States. And
• 18:27
  Speaker 9: I say that because MICRONU China can easily replace the
• 18:34
  Speaker 9: product with its by its competitors in Southeast Asia, Samsung,
• 18:39
  Speaker 9: sk Heinex, So it's not really hurting itself by banning
• 18:44
  Speaker 9: these products. Micron stock is down, yes, but I think
• 18:48
  Speaker 9: they're starting it's starting to pair some of those losses.
• 18:51
  Speaker 9: I think as people look at it more closely, China
• 18:55
  Speaker 9: roughly represents maybe eleven percent of direct sales of Micron's
• 19:00
  Speaker 9: direct sales, but of that the majority goes into consumer
• 19:05
  Speaker 9: electronics products, and so even less of that is likely
• 19:10
  Speaker 9: to be exposed to this ban.
• 19:13
  Speaker 2: Yet.
• 19:14
  Speaker 9: You know caveat here, though, is that China has not
• 19:18
  Speaker 9: completely defined what it means by this ban. There's very
• 19:22
  Speaker 9: few details out there. There is a risk it could
• 19:25
  Speaker 9: be broader than that.
• 19:28
  Speaker 6: So you said, it's.
• 19:29
  Speaker 1: Given very few details.
• 19:30
  Speaker 6: What has it said about this ban.
• 19:32
  Speaker 9: It basically said that it's banning Microns chips that are
• 19:36
  Speaker 9: used in critical information infrastructure product and you know that
• 19:43
  Speaker 9: could be anything from defense, healthcare, transportation. But it's very vague.
• 19:50
  Speaker 9: And so we know that Micron makes most of the
• 19:53
  Speaker 9: chips for consumer electronics like phones and notebooks and things
• 19:58
  Speaker 9: like that. So even though they have this roughly eleven
• 20:01
  Speaker 9: percent direct exposure, actually sixteen percent if you include Hong Kong,
• 20:06
  Speaker 9: the exposure could be a lot less than that. But
• 20:09
  Speaker 9: you know, for headlines, it's like, wow, you know, China
• 20:14
  Speaker 9: is banning Micron chips and that's not gonna you know,
• 20:17
  Speaker 9: the stock market is clearly reacting to that.
• 20:19
  Speaker 6: So when you say there is no direct exposure, kind
• 20:22
  Speaker 6: of unpacked that for us here, because from a very
• 20:26
  Speaker 6: rudimentary knowledge of chips, when you put a chip into
• 20:30
  Speaker 6: or manufacturer chip and then sell us a Chinese company
• 20:35
  Speaker 6: and that goes into a consumer electronics whatever, let's say
• 20:39
  Speaker 6: a smartphone hypothetically bus smartphone has brought let's say exported
• 20:42
  Speaker 6: right back here to the States. Is that the chip
• 20:45
  Speaker 6: that's included in this ban or is it not included
• 20:49
  Speaker 6: because it's ultimately going back into a consumer smartphone.
• 20:53
  Speaker 9: It's not completely clear, and that's sort of a broader
• 20:56
  Speaker 9: potential risk within the supply chain. And but what I
• 21:01
  Speaker 9: will say is that direct exposure being Micron has a
• 21:06
  Speaker 9: contract with a local Chinese distributor or company, who does
• 21:14
  Speaker 9: you know, contract manufacturing for large chip manufacturers and they're
• 21:19
  Speaker 9: literally putting the product together and there they usually buy
• 21:23
  Speaker 9: Micron chips. So in this case, those Chinese companies within
• 21:26
  Speaker 9: China are not going to be allowed to purchase certain
• 21:31
  Speaker 9: chips directly from Micron. Now you look at a company
• 21:35
  Speaker 9: like Nvidia, they use Micron chips in their latest gaming
• 21:40
  Speaker 9: you know, video gaming products GPU that is manufactured in China.
• 21:46
  Speaker 9: That's Micron chip. Okay, that's still consumer electronics. But like,
• 21:50
  Speaker 9: there is a risk if China really wants to play hardball.
• 21:53
  Speaker 9: I'm not suggesting I think they will, but there is
• 21:56
  Speaker 9: the risk that this could broaden and expand beyond just
• 22:01
  Speaker 9: you know, memory chips sold directly to China.
• 22:05
  Speaker 1: So where are we on this kind of budding tech
• 22:09
  Speaker 1: cold war between China and kind of the US and
• 22:13
  Speaker 1: the West. I mean, you follow these big chip companies,
• 22:15
  Speaker 1: big tech companies, they have broad exposure there. What are
• 22:19
  Speaker 1: you hearing from your companies? This is really something to
• 22:21
  Speaker 1: be concerned about. As President Biden, you know, kind of
• 22:23
  Speaker 1: came out today and said not to worry, We're gonna tone.
• 22:27
  Speaker 3: It down a little bit with China.
• 22:28
  Speaker 1: But is there a cold war in technology?
• 22:31
  Speaker 5: Yes?
• 22:32
  Speaker 9: Okay, and there has been for some time, and it's
• 22:34
  Speaker 9: actually it's heating up right now. And you know, we
• 22:38
  Speaker 9: just had a G seven event and at that event,
• 22:42
  Speaker 9: China was criticized not just for economic policies, but also
• 22:49
  Speaker 9: for human rights abuses all these other things. And so
• 22:53
  Speaker 9: it's not surprising that literally a day later they come
• 22:57
  Speaker 9: out with the conclusion on cyber security risk for microns chips.
• 23:02
  Speaker 9: So there is a cybersecurity war. So what we're seeing
• 23:05
  Speaker 9: is just a disruption in the overall supply chain. There's
• 23:08
  Speaker 9: a regionalization taking place. No one really knows what it's
• 23:12
  Speaker 9: going to look like in the end because everybody it's
• 23:15
  Speaker 9: so complicated and everybody's so integrated. So even China, they're
• 23:20
  Speaker 9: walking a fine line because they need many of our
• 23:23
  Speaker 9: advanced chips. So that's why I say banning microns chips
• 23:28
  Speaker 9: was an easy one because they can source them elsewhere
• 23:31
  Speaker 9: pretty easily because they're commoditized. But they're not going to
• 23:34
  Speaker 9: potentially ban you know, Qualcomm's chips right away because that's
• 23:38
  Speaker 9: half their phones going into their own domestic market.
• 23:41
  Speaker 6: I was just about to say, so that's a soft punch.
• 23:43
  Speaker 6: What does what does a hard punch look like to
• 23:45
  Speaker 6: the US.
• 23:46
  Speaker 9: You know, I again, that would be a hard that
• 23:50
  Speaker 9: would be looking at a Qualcomm or some company like
• 23:54
  Speaker 9: Qualcomm sixty four percent of their revenues derived from China
• 23:59
  Speaker 9: and so, and I don't know how realistic that is,
• 24:03
  Speaker 9: but something like that would be a hard punch. If
• 24:06
  Speaker 9: China came out today and said, yeah, we have three
• 24:09
  Speaker 9: nanometer node technology, which you know, they say they have
• 24:14
  Speaker 9: seven nano, which is more advanced. Mostly China uses twenty
• 24:20
  Speaker 9: four nanometer technology right now, advanced to seven nano and
• 24:25
  Speaker 9: under in general they developed seven nano, but it's not
• 24:30
  Speaker 9: being mass produced yet and it takes time to like
• 24:34
  Speaker 9: experiment with these things to get them up running efficiently.
• 24:37
  Speaker 9: So if China came out and said, oh, we have
• 24:39
  Speaker 9: three nanotechnology or we now have advanced memory technology, that
• 24:44
  Speaker 9: could be a big blow. They could steal it. They
• 24:49
  Speaker 9: may have it and they're trying to develop it further,
• 24:52
  Speaker 9: or they may have a product and often they look
• 24:55
  Speaker 9: at that product and sort of back into the technology
• 24:57
  Speaker 9: to create their own. So these are the kind of
• 24:59
  Speaker 9: thing things that could be hurtful. But I suspect there's
• 25:03
  Speaker 9: going to be more negotiation because no one wins in the.
• 25:08
  Speaker 3: End, right, it's very integrated, as we're finding out. Paula,
• 25:10
  Speaker 3: thanks so much for joining us.
• 25:11
  Speaker 1: Paula Pencalocy is the semiconductor analyst on the technology team
• 25:16
  Speaker 1: at Bloomberg Intelligence, again, in my opinion, the best tech
• 25:19
  Speaker 1: team on Wall Street. Appreciate getting some time from Paula.
• 25:22
  Speaker 7: Here. You're listening to the team Ken's are Live program
• 25:27
  Speaker 7: Bloomberg Markets weekdays at ten am Eastern.
• 25:29
  Speaker 8: On Bloomberg dot Com, the iHeartRadio app and the Bloomberg
• 25:33
  Speaker 8: Business app, or listen on demand wherever you get your podcasts.
• 25:38
  Speaker 1: All right, let's turn to this debt ceiling issue where
• 25:42
  Speaker 1: it looks like President Biden has a call with Speaker
• 25:45
  Speaker 1: of the House today at five point thirty pm Wall
• 25:48
  Speaker 1: Street time.
• 25:49
  Speaker 3: I take that as a good sign.
• 25:50
  Speaker 1: I mean, you know, I kind of think in negotiations
• 25:52
  Speaker 1: you'll want the sides to be talking rather than not talking.
• 25:55
  Speaker 1: But let's check it with Nancy Kimmelman, professor at Northeastern University. Nancy,
• 26:00
  Speaker 1: how do you think about this these discussions here? Is
• 26:03
  Speaker 1: it just just the cost of doing business in America today?
• 26:06
  Speaker 1: Is there something that we should be maybe more concerned
• 26:09
  Speaker 1: about this? There might be a bigger risk out there
• 26:11
  Speaker 1: than maybe the average person thinks, well.
• 26:15
  Speaker 11: There could be risk. I mean, we are getting remarkably
• 26:19
  Speaker 11: or distressingly close to this judent first dead line, and
• 26:23
  Speaker 11: it's a real deadline. I mean, if we push against it,
• 26:26
  Speaker 11: Medicare payments aren't going to get out, Social Security payments
• 26:29
  Speaker 11: aren't going to get out, and it's going to have
• 26:31
  Speaker 11: a real impact on real people. So it's not something
• 26:34
  Speaker 11: to pooh pooh about. That said, you know, this year,
• 26:38
  Speaker 11: the dead ceiling talk is taking place in a different world.
• 26:42
  Speaker 11: We live in a different world politically. You know, we're
• 26:46
  Speaker 11: in the midst now of figuring out who the candidates
• 26:49
  Speaker 11: are going to be for the next presidential election. We
• 26:52
  Speaker 11: have the Santis throwing his hat and Trump is going
• 26:55
  Speaker 11: full bore. You know, that is a part of this
• 26:58
  Speaker 11: whole conversation, because I think a lot of what's going
• 27:02
  Speaker 11: on between McCarthy and Buden at this point is political theatrics,
• 27:08
  Speaker 11: and neither side can really afford to be seen given ground,
• 27:12
  Speaker 11: and it's causing this death ceiling debate or this negotiation
• 27:18
  Speaker 11: to just be held at a different level than we've
• 27:20
  Speaker 11: seen previously.
• 27:22
  Speaker 12: So then do you think that this is more a
• 27:25
  Speaker 12: debate that is just for showmanship, like you said, or
• 27:28
  Speaker 12: do you think there's real risk here to a potential
• 27:30
  Speaker 12: default that markets might not even necessarily be properly pricing
• 27:35
  Speaker 12: in right now.
• 27:37
  Speaker 11: I think the impact on the economy and especially the
• 27:40
  Speaker 11: financial markets could be very, very real. It already is.
• 27:44
  Speaker 11: We're already seeing the prices getting hammered for treasury securities
• 27:48
  Speaker 11: that would be affected by the by the Treasury not
• 27:51
  Speaker 11: being able to roll over the debt. We've seen the
• 27:55
  Speaker 11: forecasts that are coming out of private forecasters as well
• 27:58
  Speaker 11: as the Council of Economic Advisors and others in Washington
• 28:01
  Speaker 11: suggesting that if we if we breached this this this
• 28:05
  Speaker 11: line in the sand, the impact on unemployment could be severe.
• 28:10
  Speaker 11: It could immediately throw the economy into a recession. I mean,
• 28:14
  Speaker 11: this is this is real, real side economics, and it's
• 28:18
  Speaker 11: really unfortunate that the politicians are planning a little bit
• 28:21
  Speaker 11: loose with these negotiations. Not that they're not trying, but
• 28:25
  Speaker 11: you know, nobody's willing to give brown. There's really a
• 28:29
  Speaker 11: sense that politics at this point in time, neither side
• 28:33
  Speaker 11: can be seen giving in. And that's a very dangerous
• 28:35
  Speaker 11: position for us to be on politically as well. As economically.
• 28:39
  Speaker 1: All right, here's my dumb question of the day, professor,
• 28:41
  Speaker 1: Maybe you can help me out. What what are they
• 28:43
  Speaker 1: actually negotiating? Like, is it a debt ceiling raise? Is
• 28:47
  Speaker 1: it to solve our problems for the end of time?
• 28:50
  Speaker 3: What are they negotiating?
• 28:51
  Speaker 11: No, No, it's certainly not for the end of time.
• 28:53
  Speaker 11: It would be nice if it were. No, here's the
• 28:55
  Speaker 11: gig the treasury has. The government has already. This is
• 28:59
  Speaker 11: the irony that probably those people don't realize. The government
• 29:01
  Speaker 11: has already authorized payment of these moneies. In other words,
• 29:06
  Speaker 11: the government has a spending plan of what it has
• 29:09
  Speaker 11: to spend on every day of the year. And the
• 29:12
  Speaker 11: problem is we don't raise enough in the way of
• 29:14
  Speaker 11: taxes to be able to make those commitments real. In ords,
• 29:19
  Speaker 11: if we want to send out Social Security checks, we
• 29:21
  Speaker 11: have to either have enough tax revenue in the Treasury's
• 29:25
  Speaker 11: coffers to be able to pay those Social Security checks
• 29:27
  Speaker 11: or we have to borrow the money. Now, everyone knows
• 29:30
  Speaker 11: that the US government runs a deficit. We have in
• 29:32
  Speaker 11: for decades, and therefore the gap is always made up
• 29:36
  Speaker 11: by issuing new debt. But the commitment to spend the
• 29:40
  Speaker 11: money is already there. What they're arguing about is whether
• 29:43
  Speaker 11: they're going to approve the debt to be issued so
• 29:48
  Speaker 11: that the payments can be made. So that's what it's
• 29:51
  Speaker 11: about now. The problem is, because we run a continual
• 29:54
  Speaker 11: deficit year after year after year, the amount of debt
• 29:57
  Speaker 11: outstanding just keeps growing and growing and growing. Pay off
• 30:01
  Speaker 11: the debt that we issued last year or ten years
• 30:03
  Speaker 11: ago or thirty years ago, we never really pay it off.
• 30:06
  Speaker 11: We just replace it with newer securities, with newer bonds.
• 30:10
  Speaker 11: So the debt is going to continue to accumulate. That number,
• 30:14
  Speaker 11: which obviously is in the trillion. It's is just going
• 30:15
  Speaker 11: to keep getting bigger and bigger, and they'll agree to
• 30:18
  Speaker 11: a debt limit, I hope before June first. But all
• 30:22
  Speaker 11: that will do is take the debt limit, that debt
• 30:24
  Speaker 11: ceiling off the conversation, out of the conversation. I'll take
• 30:28
  Speaker 11: it off the table for a period of time, maybe
• 30:30
  Speaker 11: a couple of years, and then we'll be right back
• 30:32
  Speaker 11: in it again with another negotiation. Because the government really
• 30:37
  Speaker 11: doesn't ever get to a point where the level of
• 30:39
  Speaker 11: debt outstanding at repulse.
• 30:43
  Speaker 12: Do you think that they let it expire for a
• 30:46
  Speaker 12: couple of years though, or do you think Republicans say, hey,
• 30:49
  Speaker 12: let's have another expiration date before the twenty twenty four election.
• 30:52
  Speaker 11: Oh, that is a nasty question. That is a nasty question.
• 30:58
  Speaker 11: I think everyone can earned is praying that that's not
• 31:02
  Speaker 11: what happened. And I also have to say, no, Eli,
• 31:05
  Speaker 11: are we all praying it doesn't happen. I'm not exactly
• 31:09
  Speaker 11: sure who which side is going to be the loser
• 31:12
  Speaker 11: in this. Neither side is going to come out the winner,
• 31:15
  Speaker 11: but which side is really going to be the worst loser?
• 31:18
  Speaker 11: You know, if the McCarthy and the Republicans really play
• 31:22
  Speaker 11: hardballs here and the Democrats, which they haven't done yet,
• 31:26
  Speaker 11: by the way, can say, tell a convincing story about
• 31:29
  Speaker 11: how they're playing ball, but the other side isn't. I
• 31:31
  Speaker 11: don't think, you know, the Democrats have done a particularly
• 31:34
  Speaker 11: good job for themselves in that regard. But if the
• 31:37
  Speaker 11: American people decide that Grandma didn't get her Social Security
• 31:41
  Speaker 11: check and it's because of that wrangling in Washington, I
• 31:45
  Speaker 11: don't know that that's going to be particularly good for
• 31:47
  Speaker 11: election prospects for either side. So I suspect that the
• 31:50
  Speaker 11: Republicans as well as the Democrats, we'll get this thing passed,
• 31:54
  Speaker 11: and it will take us test hopefully will take us
• 31:57
  Speaker 11: past the election, because I don't think either side wants
• 32:01
  Speaker 11: to be negotiating this going into an election in a
• 32:03
  Speaker 11: few months.
• 32:04
  Speaker 1: At some point, do we as a government of people,
• 32:07
  Speaker 1: do we have to pay down this debt, pay back
• 32:10
  Speaker 1: this debt, or we just can let it roll into perpetuity.
• 32:14
  Speaker 11: We let it roll into perpetuity. Now, let's be realistic
• 32:19
  Speaker 11: about it is what is at risk here if we
• 32:22
  Speaker 11: don't pass a debt ceiling is that the world will
• 32:25
  Speaker 11: not look upon US debt the same way it has
• 32:27
  Speaker 11: in the past. For decades now, foreign buyers of US
• 32:32
  Speaker 11: Treasury securities have been robust. Those purchases by foreigners have
• 32:37
  Speaker 11: been very robust. So we really haven't seen any need
• 32:40
  Speaker 11: to pay down our debt because every time we have
• 32:42
  Speaker 11: a new bond issue or a new bill issue, not
• 32:45
  Speaker 11: only do American Americans buy those securities, but people come
• 32:49
  Speaker 11: all over the world by those securities, and they do
• 32:52
  Speaker 11: so willingly. Not only do are the buyers there willingly. Remember,
• 32:56
  Speaker 11: the US Treasury has a relatively low interest rate to pay.
• 33:00
  Speaker 11: Our interest rates are sort of the benchmark, and they're
• 33:02
  Speaker 11: below all the other interest rates that companies and individuals
• 33:05
  Speaker 11: have to pay, so there's no incentive for the US
• 33:10
  Speaker 11: Treasury to get to the point where we would pay
• 33:12
  Speaker 11: down the debt. As long as as long as the
• 33:15
  Speaker 11: rest of the world, and as long as the Americans
• 33:17
  Speaker 11: are willing to lend that money to the US Treasury.
• 33:19
  Speaker 11: It seems a model.
• 33:21
  Speaker 1: That works, all right.
• 33:21
  Speaker 3: It's a model.
• 33:22
  Speaker 11: I don't think anyone's ready to break that model.
• 33:25
  Speaker 1: Yeah, it's a model that doesn't work for me, But
• 33:27
  Speaker 1: I guess it works for the government.
• 33:28
  Speaker 3: Good for them. I guess, doctor Nancy Kimmelman, work.
• 33:30
  Speaker 11: For you individually at all. It doesn't work for any
• 33:32
  Speaker 11: of us.
• 33:32
  Speaker 1: No, exactly, Doctor Nancy Kimmelman, economics professor for Northeastern University
• 33:37
  Speaker 1: and Tufts University, talking about this debt ceiling.
• 33:41
  Speaker 7: You're listening to the tape can'sur live program Bloomberg Markets
• 33:45
  Speaker 7: weekdays at ten am Eastern on Bloomberg Radio, the tune
• 33:48
  Speaker 7: in app, Bloomberg dot Com, and the Bloomberg Business App.
• 33:51
  Speaker 7: You can also listen live on Amazon Alexa from our
• 33:54
  Speaker 7: flagship New York station. Just say Alexa, play Bloomberg eleven
• 33:58
  Speaker 7: thirty and.
• 34:01
  Speaker 1: We need to know about tech. We talked to this guy,
• 34:05
  Speaker 1: man Deep Singh.
• 34:06
  Speaker 3: We hired him.
• 34:07
  Speaker 1: We can't get rid of the dude. He just keeps
• 34:08
  Speaker 1: sticking around. He's our senior tech anistor for Bloomberg Intelligence,
• 34:11
  Speaker 1: and he shows up every day. None of this phoning
• 34:14
  Speaker 1: it in, working from home, any of that silliness. He's
• 34:17
  Speaker 1: in here in a Bloomberg Interactive broker studio. All right,
• 34:19
  Speaker 1: so meta, there is nothing stopping this freight train this year.
• 34:23
  Speaker 1: I mean it got crushed last year, down sixty percent,
• 34:26
  Speaker 1: but it's up over one hundred percent. They get fined
• 34:29
  Speaker 1: by the EU, and the market's just.
• 34:30
  Speaker 3: Like, no big deal. Is that? Is that a.
• 34:33
  Speaker 1: Reasonable read that it really is not that big a
• 34:36
  Speaker 1: deal for their business?
• 34:37
  Speaker 5: Well, so, I think last year the sentiment was too negative.
• 34:41
  Speaker 5: This year everyone realizes that it's a great business. It
• 34:44
  Speaker 5: can print thirty forty billion dollars in freak cash flow
• 34:47
  Speaker 5: every year. And then you know, when you think about
• 34:49
  Speaker 5: the size of the fine, one billion dollar isn't that
• 34:53
  Speaker 5: big off a deal. I think what it conveys to
• 34:56
  Speaker 5: me is one regulators feel this business model is too good,
• 35:00
  Speaker 5: and it's you know, kind of driven by the ad market,
• 35:05
  Speaker 5: which there is a very fine line between privacy and
• 35:09
  Speaker 5: showing ads. And we have seen that with Google over
• 35:11
  Speaker 5: the years. Google has paid over eight to ten billion
• 35:14
  Speaker 5: dollars in cumulative fines just in the EU.
• 35:17
  Speaker 1: So and Microsoft before, Microsoft before.
• 35:21
  Speaker 5: We have and and so it's not changing. I think
• 35:24
  Speaker 5: what it does to a company is it limits their
• 35:27
  Speaker 5: ability to really innovate in a sense that they can't
• 35:30
  Speaker 5: you know, acquire any company. I mean, forget about you know,
• 35:35
  Speaker 5: capturing more data from the users. In turn, they have
• 35:38
  Speaker 5: to change their business practices to please their regulators, and
• 35:42
  Speaker 5: you won't see any effect, you know, in the next
• 35:44
  Speaker 5: one or two quarters, but over time it limits their
• 35:47
  Speaker 5: ability to grow. And I think that is the big risk.
• 35:50
  Speaker 5: Given the business model is so good, given they keep
• 35:53
  Speaker 5: you know, printing free cash flow, is will it hurt
• 35:56
  Speaker 5: their growth in the long term. And the answer to
• 35:58
  Speaker 5: that is yes. We did see my Microsoft Limited you
• 36:01
  Speaker 5: know for a number of years now the EU has
• 36:03
  Speaker 5: approved the activision deal, but for a number of years
• 36:06
  Speaker 5: Microsoft couldn't buy anything. And I think that is what
• 36:09
  Speaker 5: you will see with Meta as well.
• 36:11
  Speaker 12: Can Meta hedge against that through any changes on their
• 36:15
  Speaker 12: end or by just suffering the losses that aren't that
• 36:17
  Speaker 12: big of a deal for them, well.
• 36:19
  Speaker 5: So GDPR came into effect, you know, three years back,
• 36:22
  Speaker 5: and they have plenty of time to change AD or PETE.
• 36:25
  Speaker 1: That is the stuff that says I got to click
• 36:27
  Speaker 1: yes if I want the cookies one kind of stuff.
• 36:29
  Speaker 3: Yeah, that's that. Yes.
• 36:31
  Speaker 5: And also the regulations with regards to storing the data
• 36:34
  Speaker 5: within the EU region. That is why they had to
• 36:37
  Speaker 5: pay this fine. Is because right now they are storing
• 36:40
  Speaker 5: the data, the EU data outside the region in the
• 36:44
  Speaker 5: US data centers.
• 36:45
  Speaker 3: And the EU regulators don't want that.
• 36:49
  Speaker 5: But when you think about you know, generative AI and
• 36:51
  Speaker 5: large aguage models, it's about gathering a lot of data
• 36:55
  Speaker 5: and then doing AI on it. So Meta, even though
• 36:59
  Speaker 5: it has all these different assets Instagram, you know, Facebook, app, WhatsApp,
• 37:04
  Speaker 5: and then it operates globally, it can't really combine all
• 37:07
  Speaker 5: those data sets because of these restrictions. So if EU
• 37:11
  Speaker 5: restricts their ability to take the data outside the region,
• 37:16
  Speaker 5: then basically, you know, think of it this way, they
• 37:18
  Speaker 5: can't even apply AI to their own first party data
• 37:21
  Speaker 5: set that they have across regions. And I think again
• 37:24
  Speaker 5: it goes back to the point about putting restrictions which
• 37:27
  Speaker 5: limit your ability to target ads and then on top
• 37:30
  Speaker 5: of that, you have to make business model changes to
• 37:32
  Speaker 5: please their regulators, So it is restrictive in that sense.
• 37:35
  Speaker 1: Markus Zuckerberg the metaverse, it's a business. Most of his
• 37:40
  Speaker 1: shareholders don't understand, but what they know is he initially
• 37:44
  Speaker 1: was going to spend a gajillion one dollars on it.
• 37:47
  Speaker 3: How is he.
• 37:48
  Speaker 1: Viewing this metaverse and the expenditures associated with developing it.
• 37:53
  Speaker 5: I mean, it's been a complete one eighty you know,
• 37:56
  Speaker 5: in the sense that last year he was like, we
• 37:59
  Speaker 5: are doing this, and we're going to do this at
• 38:02
  Speaker 5: all costs. This year it's been more shareholder of friendly
• 38:06
  Speaker 5: acknowledging what shareholders want in terms of restraining their meta
• 38:10
  Speaker 5: worse bets, and they have taken down the guidance in
• 38:13
  Speaker 5: terms of this spend. So clearly that is what's driven
• 38:16
  Speaker 5: that one hundred percent move in the stock. I mean,
• 38:19
  Speaker 5: has a completely given up on meta worse. That can
• 38:22
  Speaker 5: happen only if he changes the name of the company
• 38:25
  Speaker 5: back to Facebook from Meta I don't know if that
• 38:27
  Speaker 5: will happen anytime soon.
• 38:28
  Speaker 12: Well, it sort of feels like the metaverse very minimal
• 38:33
  Speaker 12: wave was like totally overtaken by the AI wave. If
• 38:36
  Speaker 12: we're going to compare the two. Does metas focused on
• 38:40
  Speaker 12: cost cutting become the new headline story for them? And
• 38:44
  Speaker 12: is the market happy about that?
• 38:45
  Speaker 5: I mean market is happy about the cost discipline that
• 38:48
  Speaker 5: they have showed this year. I don't know if they'll
• 38:51
  Speaker 5: be happy about Meta being a cost cutting story for
• 38:54
  Speaker 5: the medium to long term, simply because if it's not
• 38:57
  Speaker 5: a growing asset, why does it serve a premium multiple
• 39:01
  Speaker 5: in the peer group. And we've got a lot of
• 39:03
  Speaker 5: you know, assets within tech which becomes low growth over time,
• 39:07
  Speaker 5: and then the market is like, okay, this is just
• 39:09
  Speaker 5: a cash machine. They can do buybacks, but there won't
• 39:12
  Speaker 5: be any top line growth. And that is what they
• 39:14
  Speaker 5: need to answer, whether it's metawors or generative AI. I
• 39:18
  Speaker 5: don't think it's that we answer that then well so,
• 39:22
  Speaker 5: I mean, ad models are beautiful in the sense they
• 39:24
  Speaker 5: scale very well. And Meta has got Instagram, WhatsApp. WhatsApp
• 39:28
  Speaker 5: a lot of people would argue is under monetized, and
• 39:32
  Speaker 5: they have been talking about click to message ads being
• 39:34
  Speaker 5: a ten billion dollar revenue run red business. If they
• 39:37
  Speaker 5: can scale that, that could easily drive the next three
• 39:40
  Speaker 5: years of top line growth. And Instagram we know how
• 39:42
  Speaker 5: well that has done. They have a problem with the
• 39:45
  Speaker 5: Core Blue app, but clearly I think they have levers
• 39:48
  Speaker 5: to pull. The question is what will that meta verse
• 39:51
  Speaker 5: that look like? And if Apple launches a device, which
• 39:53
  Speaker 5: we are hearing they could next week, then maybe that
• 39:56
  Speaker 5: validates that metalworse much. Next week, well, they have their
• 39:59
  Speaker 5: Apple has their developer conference, right, so you know that
• 40:03
  Speaker 5: I'm not going, but we have coverage within bi.
• 40:06
  Speaker 1: Within bi Okay. Sandis Stander is a Ford investor day today,
• 40:12
  Speaker 1: just pointing that out. All right, let's talk about the
• 40:15
  Speaker 1: NASDAK here up twenty one percent year to date. That's good,
• 40:21
  Speaker 1: but we're still down twenty percent from that late twenty
• 40:23
  Speaker 1: one high.
• 40:24
  Speaker 3: Do I buy NASDAK here? Do I buy tech? Or
• 40:26
  Speaker 3: do I make a value call? Do I? I mean? What
• 40:29
  Speaker 3: am I doing here?
• 40:30
  Speaker 5: Well, so it all goes back to I think what
• 40:34
  Speaker 5: FED does in terms of interest rates. Remember these are
• 40:36
  Speaker 5: all long duration assets, right, so if the FED has
• 40:39
  Speaker 5: hit a pause and they are not going to raise
• 40:41
  Speaker 5: interest rates, that is a positive for a lot of
• 40:44
  Speaker 5: the tech stocks, and that is why they've gone up
• 40:46
  Speaker 5: so much. The question is can the top line growth
• 40:49
  Speaker 5: come back, which is really what is not very obvious
• 40:53
  Speaker 5: right now is can Google go back to, you know,
• 40:55
  Speaker 5: growing fifteen twenty percent, Can Meta go back to growing
• 40:58
  Speaker 5: fifteen twenty percent? I think clearly we've seen an inflection
• 41:02
  Speaker 5: in terms of ad pricing headmans ad pricing is getting better.
• 41:05
  Speaker 5: So that's a fourth step, and then you just have
• 41:07
  Speaker 5: to watch out for how the overall global economy does
• 41:11
  Speaker 5: in the second half.
• 41:12
  Speaker 1: I'm looking at the chart here for Meta again, it's
• 41:14
  Speaker 1: up one hundred and some odd percent this year, but
• 41:16
  Speaker 1: it's still down pretty big from it's late.
• 41:19
  Speaker 3: Twenty one high.
• 41:19
  Speaker 1: So I mean it seems like the market is kind
• 41:22
  Speaker 1: of in between on these names.
• 41:23
  Speaker 3: I mean, they.
• 41:23
  Speaker 1: Oversold them, as you said, last year, and now trying
• 41:27
  Speaker 1: to get some of that back. All right, I'll go
• 41:29
  Speaker 1: with that.
• 41:30
  Speaker 3: You know, how can you not own big tech?
• 41:32
  Speaker 1: Maybe it's just because we've been so influenced over the
• 41:35
  Speaker 1: last fifteen years really and even longer than that quite frankly,
• 41:38
  Speaker 1: but the big tech is back.
• 41:43
  Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can
• 41:46
  Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever
• 41:50
  Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
• 41:54
  Speaker 2: at Matt Miller nineteen seventy three and I'm fall Sweeney.
• 41:57
  Speaker 1: I'm on Twitter at pt Sweeney before the Pods cast.
• 42:00
  Speaker 1: You can always catch us worldwide at Bloomberg Radio