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Trump, NASDAQ, UK, Oil, and Activison (Podcast) · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
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Speaker 1: my co host Matt Miller.
0:05
Speaker 2: Every business day, we bring you interviews from CEOs, market pros,
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Speaker 2: and Bloomberg experts, along with essential market moven news.
0:14
Speaker 1: Find the Bloomberg Markets Podcast on Apple Podcasts or wherever
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Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast. Certainly,
0:21
Speaker 1: the big news down in Washington, DC these days is
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Speaker 1: the indictment of former President Donald Trump. We want to
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Speaker 1: get the latest on how that's developing news over the weekend,
0:30
Speaker 1: so we're going to bring in a couple of smart
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Speaker 1: voices here, Nick Ackerman, former assistant special Watergate prosecutor and
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Speaker 1: assistant US Attorney for the Southern District of New York,
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Speaker 1: so he knows his way around the legal side of it.
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Speaker 1: Plus Bloomberg's Washington correspondent and Ree Horden also joined us,
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Speaker 1: and we appreciate both of them. Nick, Lex, let's start
0:49
Speaker 1: with you here, just for us, you know, kind of
0:51
Speaker 1: lay people here. I guess what's different about all of
0:56
Speaker 1: the former president's legal challenges is that this one is federal.
1:00
Speaker 1: How serious is this?
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Speaker 3: It's extremely serious. It's federal it means that the case
1:06
Speaker 3: is likely to move a lot faster. The judges, for
1:11
Speaker 3: the most part, including deciding Cannon, are normally better judges,
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Speaker 3: although the judge in the state case in New York
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Speaker 3: is an excellent judge. But this case will go to
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Speaker 3: trial probably quicker than the state court cases, certainly quicker
1:27
Speaker 3: than the New York case, and quicker than the case
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Speaker 3: that's about to be brought in Fulton County, Georgia.
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Speaker 4: Dates times, how quickly could we see that?
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Speaker 3: Oh? I mean, it depends on the prosecutor and the judge.
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Speaker 3: If I were the prosecutor, I'd be telling the judge
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Speaker 3: that I'm turning overall discovery by the end of next week,
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Speaker 3: and that we want a quick motion date and a
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Speaker 3: quick trial date. I would try and do this within
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Speaker 3: ninety days if you could. Well, but that may be
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Speaker 3: a bit optimate stick. I think, you know, within four
2:02
Speaker 3: or five months is certainly conceivable.
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Speaker 1: Ann Marie. What's the feeling in Washington, DC. We've had,
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Speaker 1: you know, several days now to digest this news here,
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Speaker 1: and I guess the political angles are starting to be
2:15
Speaker 1: kind of drawn here. What are you singing in Washington?
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Speaker 5: Well, I think a lot of people are focusing on
2:19
Speaker 5: these two polls that came out of the weekend, and
2:23
Speaker 5: this one from CBS really shull shows the control the
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Speaker 5: former president has on the Republican Party and surely on
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Speaker 5: his base because obviously he's being indicted, but this is
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Speaker 5: all happening at the same time as he is running
2:38
Speaker 5: to be the candidate for twenty twenty four. So most
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Speaker 5: Republican primary voters seventy six percent said they're concerned that
2:45
Speaker 5: Trump's indictment was politically motivated in this poll, and then
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Speaker 5: a majority ruled out that the charges would change their
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Speaker 5: views of Trump, and eighty percent of them said that
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Speaker 5: he should win a second term in office. So this
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Speaker 5: just goes to show how this potentially can play out.
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Speaker 5: Trump can keep a really strong hold on the base
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Speaker 5: even while he has this as his only Attorney General
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Speaker 5: put it over the weekend, Bill Barr damning indictment. The issue,
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Speaker 5: of course, is that a lot in the Republican Party
3:15
Speaker 5: are starting to look at but this what does this
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Speaker 5: mean for a general election? Because the indictment might not
3:21
Speaker 5: matter for primary voters Republican Party, but what does it
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Speaker 5: mean nationally for US voters overall?
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Speaker 1: Well, Nick does the federal government bring a case like this.
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Speaker 1: I mean, how shorre do they have to be about
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Speaker 1: their case before kind of bringing a case like this,
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Speaker 1: do you think?
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Speaker 3: Well, put it this way, when you're dealing with someone
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Speaker 3: with the high visibility of a former president, you make
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Speaker 3: sure that you've got this button down one hundred percent solid.
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Speaker 3: I mean, obviously, when you go before a jury, nothing's
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Speaker 3: ever one hundred percent solid, But boy, this case is
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Speaker 3: about as solid as you can possibly get. Having done this,
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Speaker 3: been there before with water, you don't go about doing
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Speaker 3: an indictment like this unless your evidence is spot on
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Speaker 3: one hundred percent solid. And here they've got it. They've
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Speaker 3: got our witnesses. They've got a tape with Donald Trump
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Speaker 3: actually talking about the fact that one of the documents
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Speaker 3: was classified, that he couldn't unclassify it because he was
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Speaker 3: no longer president. They've got pictures of how this stuff
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Speaker 3: was mishandled at mar A Lago, and they've got the
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Speaker 3: testimony of his former lawyer, who basically will say that
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Speaker 3: Trump was trying to hoodwink him and play him, and
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Speaker 3: that he was being used by Donald Trump, and that
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Speaker 3: thirty boxes were kept from his view, all of which
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Speaker 3: contained classified information that was later recovered in the search warrant.
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Speaker 4: Well, Nick on on that point, though, you know, you
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Speaker 4: mentioned these statements potentially from his former attorneys, and I
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Speaker 4: look through that document, there does seem to be a
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Speaker 4: lot of information that provided by people who were his attorneys.
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Speaker 4: Does could attorney client privilege get in the way, particularly
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Speaker 4: with maybe and a judge that's not necessarily quite as
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Speaker 4: has handed down some I guess questionable rulings in the
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Speaker 4: past from the perspective of the federal government. Or are
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Speaker 4: there other big challenges that you see moving forward in
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Speaker 4: this prosecution.
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Speaker 3: Well, a couple of questions in there. Well, yes, sorry,
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Speaker 3: the attorney client privilege. The purpose of that privilege is
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Speaker 3: for a client to be able without qualification, to be
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Speaker 3: able to tell his lawyer everything about a case, so
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Speaker 3: that the lawyer feels comfortable in representing that person in
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Speaker 3: the proper way. The purpose here was completely different. Trump
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Speaker 3: was basically not using his lawyer to get legal advice.
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Speaker 3: He was using his lawyer to commit a crime. The judge,
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Speaker 3: the chief judge in d C, has already determined that
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Speaker 3: all of this information was admissible because it was part
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Speaker 3: of the exception to the crime fraud exception to the
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Speaker 3: attorney client privilege. I don't see any judge overturning that
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Speaker 3: or coming up with a different view on what happened here.
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Speaker 3: I mean, the facts are absolutely damning. They're all in
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Speaker 3: the indictment. Secondly, you raised the question about Judge Eileen
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Speaker 3: Cannon in the in the Florida case, where yeah, she
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Speaker 3: did screw up on her decision to appoint a special master.
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Speaker 3: But keep in mind, you know, even though she did that,
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Speaker 3: she did it in the context where a special master
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Speaker 3: had been appointed for two of two search warrants relating
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Speaker 3: to two Trump lawyers, Michael Cohen and Rudy Giuliani, and
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Speaker 3: she was basically overturned by the Eleventh Circuit, of which
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Speaker 3: you know two of those judges were also appointed by Trump.
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Speaker 3: So look, judges, screw up, that's what she did. And
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Speaker 3: the fact that she did it once and she's been
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Speaker 3: chasing on it, I think, look, we have to give
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Speaker 3: her the benefit of the doubt. I mean, there's every
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Speaker 3: reason to believe that she's a totally competent jurist. She
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Speaker 3: went to Michigan Law School, a top tier law school.
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Speaker 3: She worked in a respective law firm, She worked for
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Speaker 3: the US Attorney's office for a number of years.
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Speaker 1: So maybe.
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Speaker 3: We've got to be real careful here not to be
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Speaker 3: trashing as judge, because we're falling into the same trap
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Speaker 3: that the Trump supporters are doing and trashing the Department
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Speaker 3: of Justice.
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Speaker 1: Hey, so yeah, yeah, I just want to get the
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Speaker 1: Anne Marie here. We've got a presidential election coming up
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Speaker 1: next year and there seems to be no shortage of
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Speaker 1: Republican challengers to the president. What's the feeling in DC
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Speaker 1: and Mary is to how this is all shaping up
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Speaker 1: given the backdrop of this federal indictment.
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Speaker 5: So what's interesting is there's been some mixed feelings in
7:54
Speaker 5: terms of how Republicans are responding to this indictment. You
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Speaker 5: had Governor Ron De Santis, for example, tweeting after the
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Speaker 5: indictment that it was a weaponization of federal law enforcement
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Speaker 5: and it's a mortal threat to free society. Then you
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Speaker 5: had others like Mike Pence, you know, he was Obviously,
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Speaker 5: all these people are out and about and you're able
8:16
Speaker 5: to get access to them because they're in New Hampshire
8:18
Speaker 5: or Iowa, and at times they could be critical, but
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Speaker 5: at the same time they do call what's happening as unprecedented,
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Speaker 5: Like Mike Pence for a vice president, he's running, and
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Speaker 5: he says it's a politicization of the Justice Department, although
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Speaker 5: he also added he's deeply troubled to see this indictment
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Speaker 5: move forward.
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Speaker 6: Then you have others like Chris Christi.
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Speaker 5: He continuously say no one is above the law, no
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Speaker 5: matter how much they wish they were, and they want
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Speaker 5: to wait to see how the facts are revealed. So
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Speaker 5: this is a moment where you're going to see each
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Speaker 5: candidate really try to walk a fine line because a
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Speaker 5: lot of them want to talk about how they think
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Speaker 5: it's politicized yep, And they don't want to ostracize the
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Speaker 5: base that Trump has a hold on, which is why
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Speaker 5: I keep going back to that CBS News poll because
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Speaker 5: it really does show if the election were today, he
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Speaker 5: would be the nominee.
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Speaker 3: Yep.
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Speaker 1: Absolutely all right, fascinating. Nick Ackerman, former assistant special Watergate prosecutor,
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Speaker 1: thank you so much. We appreciate getting your time on
9:16
Speaker 1: the legal side. Bloomberg Washington correspondent and Marie Hordern get
9:20
Speaker 1: into political angle. There some fascinating discussion.
9:24
Speaker 7: You're listening to the team Ken's are live program Bloomberg
9:28
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9:31
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9:34
Speaker 7: on demand wherever you get your podcasts.
9:39
Speaker 1: Simoan Foxman, Paul Sweeney here in the Bloomberg Interactive Brokers studio.
9:43
Speaker 1: Lots of economic data this week, so on your Bloomberg
9:46
Speaker 1: terminal type in eco go give you all the data
9:49
Speaker 1: and kind of the forecast, that consensus, all that kind
9:51
Speaker 1: of stuff. We have cpippi of course, we have got
9:55
Speaker 1: retail sales and then of course Wednesday the FED meeting
9:58
Speaker 1: in the press, coperts and all that. So that is
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Speaker 1: kind of driving the market action this week. Let's check
10:04
Speaker 1: in with somebody who can We found this very closely
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Speaker 1: ifan debit chief investment officer for the Menetic Group. So
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Speaker 1: thanks so much for joining us here. What are you
10:13
Speaker 1: looking from the FED this Wednesday?
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Speaker 8: Well, we're expecting a pause. I think like most other
10:20
Speaker 8: observers at this point, we're not seeing We also would
10:23
Speaker 8: agree with your previous guests around the direction of inflation.
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Speaker 8: We're not seeing that same stickiness that's been present in
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Speaker 8: the UK. Although there's always the potential for surprise, of course,
10:33
Speaker 8: and those numbers the backshop of what the Canadian Central
10:36
Speaker 8: Bank did. There is always precedent for surprise, but I
10:39
Speaker 8: don't think our US FED is so inclined at the moment,
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Speaker 8: so it's likely to be a pause we expect, you know, Ethan,
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Speaker 8: we have.
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Speaker 4: A story out this morning. FED backs away from wages focus,
10:51
Speaker 4: bolstering case for rate pause. I just want to get
10:54
Speaker 4: your sense. Our reporters, Janelle Martin and Augustasarrievas say that
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Speaker 4: FED officials are rethinking their view that wage gains are
11:02
Speaker 4: fueling inflation. Your take on this is, we are we
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Speaker 4: how much are wage gains factoring into their discussion or
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Speaker 4: going to factor into their discussion this week?
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Speaker 8: A very interesting discussion, and I would agree with that
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Speaker 8: because wages will be perhaps the most lagging of all indicators.
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Speaker 8: So the difference between fueling inflation when it comes to
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Speaker 8: wages and being a symptom of inflation, a reaction to inflation,
11:26
Speaker 8: a desire to really make employees even or whole with
11:30
Speaker 8: along with the rate of inflation, and that's what we're seeing,
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Speaker 8: so as opposed to actually driving inflation, I think wage
11:35
Speaker 8: gains are a response to inflation. And the core drivers
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Speaker 8: getting around that. We talked about supply chain issues before,
11:42
Speaker 8: we talked about the push on energy and some of
11:46
Speaker 8: that filtering into energy and food and the services again
11:49
Speaker 8: which have the lagging effects. I think they're absolutely right
11:51
Speaker 8: to take the focus off wage gains because that would
11:54
Speaker 8: just be more looking in the rear view mirror.
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Speaker 1: Ethan. You know, one of the that I know has
12:01
Speaker 1: some folks concerned is the lack of breadth in the
12:04
Speaker 1: market we've seen so far this year with the SPX,
12:07
Speaker 1: you know, up twenty percent off of the lows, but
12:10
Speaker 1: really if you look at the you know, the equal
12:12
Speaker 1: weighted in the nextra is really no movement at all.
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Speaker 1: How much of a concern is that for you?
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Speaker 8: Yeah, that's actually been a concern. It was the siren
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Speaker 8: call has been going out now for months, and it's
12:21
Speaker 8: really got more traction and more widespread appeals the longer
12:25
Speaker 8: it has persisted. And I'd say, what it is, It
12:27
Speaker 8: really is underscoring the FOMO of not being an equity market.
12:30
Speaker 8: So when you are sitting in cash or in money
12:33
Speaker 8: market funds and you're not doing as badly as you
12:35
Speaker 8: were before, is it's not that same drag you're still
12:37
Speaker 8: not looking at positive real rates in those funds if
12:40
Speaker 8: we're dealing with five percent inflation, so we're barely breaking
12:43
Speaker 8: even in a money market fund. So when you see
12:45
Speaker 8: that going on, you're going to want it to follow
12:47
Speaker 8: the action, which is inequities, and you're going to want
12:50
Speaker 8: to send money that way. And clearly, as I've mentioned before,
12:53
Speaker 8: I think big tech is now the safety trade essentially
12:56
Speaker 8: because there is very just like you can't get goot
12:58
Speaker 8: fired for buying IBA, the old adage, buying big tech
13:02
Speaker 8: stocks a pretty safe play at the moment because they're
13:04
Speaker 8: supported by the markets themselves as well as this AI story.
13:08
Speaker 8: We're seeing some of the exuberants around they just driving
13:12
Speaker 8: cars and electrical cars, et cetera. So clearly quite a
13:15
Speaker 8: lot of height in that number. And where I would
13:18
Speaker 8: see the issue is, yes, that it is not broad based.
13:20
Speaker 8: It is not filtering into small caps into some of
13:22
Speaker 8: the valued stocks. We expect that to follow though, because
13:25
Speaker 8: and we're seeing little bit of signs of that. We've
13:27
Speaker 8: seen a bit of a pickup as this market strength
13:29
Speaker 8: gained some momentum, you know, technically hitting a bull market.
13:33
Speaker 8: That's obviously a nice syndicator that sends a good signal.
13:36
Speaker 8: So I'd say that we've always had a core approach.
13:38
Speaker 8: We don't target call sectors. We've never been out of tech,
13:42
Speaker 8: but we are. We are reassured now to see markets
13:44
Speaker 8: getting that broader basis, because too much concentration will lead
13:48
Speaker 8: to too much volatility.
13:50
Speaker 4: Kiffn you know you mentioned in some notes you sent
13:52
Speaker 4: across before this interview that there's this concern from the
13:57
Speaker 4: SEC regulatory action around binance and coinbase, and maybe potentially
14:01
Speaker 4: this could factor into AI as well. I mean obviously
14:05
Speaker 4: different kind of questions here, but you know, two regulatory
14:08
Speaker 4: concerns in tech. You look at the best performing in
14:12
Speaker 4: the SP Nvidia number one, up one hundred and sixty
14:15
Speaker 4: seven percent this year. AMD also among the top five
14:18
Speaker 4: buzz performing. Are AI driven names like this overvalued at
14:24
Speaker 4: this point?
14:25
Speaker 8: It's a really interestant point. Certainly, the heights is they're
14:27
Speaker 8: around AI, the same heights that was there around blockchain
14:30
Speaker 8: and digital assets two years ago. So I think what's
14:33
Speaker 8: really notable is just we have to have that time
14:36
Speaker 8: lag between regulators getting winds of a new trend and
14:40
Speaker 8: actually getting the teeth behind the enforcement. They see they've
14:43
Speaker 8: really now got teeth in this particular wave of enforcement
14:46
Speaker 8: that they're kind of woken up to some of the
14:49
Speaker 8: lack of transparency, the lack of disclosure that's been around
14:52
Speaker 8: some of these exchanges. Perhaps they're going about it with
14:55
Speaker 8: a blood instrument, which is by forcing these exchanges into
14:58
Speaker 8: the classifications of other securities. But they're they're certainly asserting
15:02
Speaker 8: themselves in that way. When it comes to AI, it
15:05
Speaker 8: is completely uncharted territory. This explosion has been such a
15:08
Speaker 8: short time of a history so far we're speaking of
15:12
Speaker 8: the last six months through this explosion of usage around
15:16
Speaker 8: AI tools and the rolling out of all of them.
15:19
Speaker 8: I'm not sure that this will affect that those makers
15:21
Speaker 8: of chips, because in the sense the demand for AI
15:23
Speaker 8: is going to be burgeoning. But I think perhaps has
15:26
Speaker 8: been overstated is the impact is going to have on
15:28
Speaker 8: business models some of those names that just ticked up
15:31
Speaker 8: because AI was simply mentioned in an earnings release. We
15:35
Speaker 8: have to understand what is AI actually going to generate
15:37
Speaker 8: more revenue streams? Is going to bolster the efficiency or
15:41
Speaker 8: the capital structure, perhaps the earning structure of this company.
15:45
Speaker 8: And the question is, we don't know how regulation is
15:47
Speaker 8: going to look in AI. I don't doubt it's coming.
15:50
Speaker 8: I think though, because it's all so new, it'll take
15:52
Speaker 8: the regulators probably another year or two to figure out
15:55
Speaker 8: where they're going to go around copyright protection. But I
15:58
Speaker 8: look at the music industry, just how easily that industry
16:01
Speaker 8: when you ramped up its ability to capture royalties. When
16:05
Speaker 8: streaming came about, there was some loss of ground, but
16:07
Speaker 8: a real catch up by the music industry. So I
16:09
Speaker 8: think there's going to be a catch up around those
16:11
Speaker 8: generators of content. We just have to see where it goes.
16:15
Speaker 8: And remember, the regulators still have to sort out the
16:18
Speaker 8: regional banks in the US first, so we will probably
16:21
Speaker 8: have a couple more waves of regulations before we get
16:23
Speaker 8: to AI.
16:24
Speaker 1: You can just want to talk a little bit on
16:25
Speaker 1: the fixed income side. Any reason I shouldn't just stick
16:28
Speaker 1: my money into your paper and get four point six
16:30
Speaker 1: one percent.
16:32
Speaker 8: That's not the only reason is that inflation is still
16:34
Speaker 8: at five percent right now. It may be heading downwards,
16:36
Speaker 8: but if you're looking to make some kind of a
16:38
Speaker 8: real return, it's certainly more interesting than you made in
16:40
Speaker 8: the past, and you have a two year timeframe. You
16:43
Speaker 8: could do a lot worse sticking it in paper like that.
16:45
Speaker 8: But ultimately you put your time horizon is probably longer
16:48
Speaker 8: than two years you want to be looking at if
16:50
Speaker 8: you're trying to roll that investment just so you stuck
16:52
Speaker 8: it all in there in two years, what would you
16:54
Speaker 8: potentially be getting in two years? We still have this
16:56
Speaker 8: inversion yeel curve probably not the same. So if you
16:59
Speaker 8: want to invet us for the long term, you need
17:01
Speaker 8: to be looking at at a real rate of return
17:03
Speaker 8: after inflation, and that's where we get to aiming higher.
17:08
Speaker 8: I would say, also, we don't need to aim for
17:11
Speaker 8: the riskiest part of the capital structure any longer to
17:13
Speaker 8: get returns that are in excess of inflation.
17:16
Speaker 1: All right, Evan, thank you so much for joining us.
17:18
Speaker 1: Always appreciate getting your perspective. Evan Debit. She's a chief
17:21
Speaker 1: investment officer of Moneta Group.
17:24
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17:40
Speaker 7: Bloomberg eleven thirty.
17:43
Speaker 1: The latest update on what's happening out there in those markets.
17:46
Speaker 1: Let's get to the deal of the day, Nasdak. Nasdak
17:52
Speaker 1: to acquire a Denza for ten point five billion dollars
17:55
Speaker 1: in cash and stock. That is your deal of the day.
17:59
Speaker 1: Let's bring in Paul Berg. He covers all the financial
18:01
Speaker 1: stuff for Bloomberg Intelligence. So Paul, what's NASDAK doing here?
18:06
Speaker 1: Number one? Well, first of all, number one, what is
18:08
Speaker 1: a Denza? And then why is NASDA buying a Denza?
18:13
Speaker 9: H Paul, thank you by having me. A Denza is
18:16
Speaker 9: a financial solutions company. It's a combination of two prior companies,
18:21
Speaker 9: Calypso and Axiom. Lipsa was involved in derivatives a lot
18:25
Speaker 9: in terms of the basically financial software companies, and Axiom
18:29
Speaker 9: is mostly risk management.
18:32
Speaker 4: So why purchase this? From Nasdaq's perspective, we get the
18:36
Speaker 4: whole idea that they want to move beyond, you know,
18:38
Speaker 4: the exchange themselves. But doesn't the purchase of this sort
18:42
Speaker 4: of put them in competition with other financial services software
18:49
Speaker 4: products or No? Is this sort of a standout kind
18:52
Speaker 4: of acquisition?
18:53
Speaker 9: No, I think it's actually not a standard at all.
18:56
Speaker 9: Nasdaq is actually very much a financial services company. Already
19:03
Speaker 9: almost three quarters of the revenue comes from financial software,
19:06
Speaker 9: not from the exchange commissions. And they've been buying companies
19:10
Speaker 9: like the Logos Investment over time that provide financial software
19:15
Speaker 9: services to the financial industry. So that's not unique and
19:20
Speaker 9: I think it's very strategically complementary for that. So in
19:23
Speaker 9: terms of competition question, yes, it is. They do compete
19:27
Speaker 9: with the companies, including the likes of trust banks and
19:30
Speaker 9: such that offers similar services, so it gets them more
19:34
Speaker 9: competitive against them.
19:36
Speaker 1: So what are what are exchanges today? Paul? I mean again,
19:40
Speaker 1: I kind of think about Nasdaq NYSA as places where
19:44
Speaker 1: you trade securities and they make the commissions, and that's
19:48
Speaker 1: the business. But that's a little data, isn't What did
19:51
Speaker 1: these exchanges do today?
19:54
Speaker 9: The exchangessforming themselves to become software companies. So it's not
19:59
Speaker 9: just now it's the obviously Eyes that's in the process
20:03
Speaker 9: of trying to buy Black Night to expand into a
20:07
Speaker 9: mortgage service and business and mortgage data business. And then
20:13
Speaker 9: companies even like Cboat that's been buying auxiliary businesses. They're
20:22
Speaker 9: even fast growing the exchange business. But then if you
20:25
Speaker 9: look across the pond, the LC and affinity if they've
20:28
Speaker 9: been huge in terms of moving away from the exchange
20:31
Speaker 9: products to being a software provider.
20:35
Speaker 4: Does this get into you know, I think back to
20:38
Speaker 4: these stories about speed training high frequency traders and such.
20:43
Speaker 4: It does becoming a software services company for the financial
20:48
Speaker 4: services sector get in the way in any way from
20:52
Speaker 4: sort of developing these broader market making activities, or I
20:57
Speaker 4: guess how do these two things go together?
21:00
Speaker 9: Also? I think in terms of getting a way of
21:03
Speaker 9: market making activities, these things they are only a handful
21:06
Speaker 9: of exchanges, right, they're dark food, a handful of dark pools,
21:09
Speaker 9: they're smaller exchanges. But really there are three large exchange
21:12
Speaker 9: operators SIBONNAS that can ice in the US, and then
21:16
Speaker 9: you have a handful of market makers like Virtual Citadel
21:20
Speaker 9: that operate most of the market. So the margins are
21:23
Speaker 9: extremely thing. They really dependent on market activity in the volume.
21:27
Speaker 9: So what the exchanges are trying to do, they're trying
21:30
Speaker 9: to walk away from it to more recurrent revenue. And
21:32
Speaker 9: this is one of the things that NASDEK is doing here.
21:36
Speaker 9: They said that are about eighty percent of the revenue
21:39
Speaker 9: that can come from adesthma is recurring, So they're looking
21:44
Speaker 9: for more recurrent revenue, more stable revenue stream that hopefully
21:48
Speaker 9: gets multiple from the market.
21:50
Speaker 1: Eighteen time revenue USA a huge, huge multiple.
21:54
Speaker 9: Now it is eighteen times revenue, thirty one times that
22:00
Speaker 9: before the cost synergy. So yes, it's expensive. They're buying
22:03
Speaker 9: the software company. And I chatted earlier this morning with
22:07
Speaker 9: OURMBI Colics Power Software, and I think the question and
22:12
Speaker 9: why the market.
22:13
Speaker 3: Is not.
22:14
Speaker 9: Being so warmed to the deal is if you buying
22:17
Speaker 9: a software company, the high fly or high growth company
22:21
Speaker 9: that grows twenty thirty fifty percent a year, Yes, the
22:24
Speaker 9: outlook for growth here is about fifteen percent, so it's
22:29
Speaker 9: a modest growth. It's an established financial services sector, and
22:34
Speaker 9: yet they're paying them multiple for those high flying software
22:37
Speaker 9: tech companies.
22:39
Speaker 4: So Toma Brasow has owned a Denza and it is
22:45
Speaker 4: going to get a steak in NASDAC, like a very
22:48
Speaker 4: large stake in NASDAC. As was a scene on the board.
22:51
Speaker 4: Does that private equity firms participation in Nasdaq? Does that
22:55
Speaker 4: say anything to you as you analyze the ongoing few
23:00
Speaker 4: future of NASDAC.
23:03
Speaker 9: Probably not immediately. I mean it's a fifteen percent stake,
23:06
Speaker 9: so they'll have a boat, they'll have a port seat,
23:09
Speaker 9: but they're probably gonna not gonna impose their views and
23:14
Speaker 9: strategy on nas that. I think nasdeg is operating reasonably well.
23:19
Speaker 3: Uh.
23:20
Speaker 9: In part it's a lock up for the top of brower, right,
23:22
Speaker 9: so they can't just dump the shares and run away
23:26
Speaker 9: from the company if the deal is not working well.
23:29
Speaker 1: So I'm looking at some of these exchanges here and
23:34
Speaker 1: the stocks have their are kind of single digits. What's
23:38
Speaker 1: the feel for this exchange business these days? The market
23:41
Speaker 1: doesn't seem to be fully embracing these names.
23:45
Speaker 9: I'm assuming we're not talking about today, we're talking about
23:47
Speaker 9: like year today.
23:48
Speaker 1: Yeah, yeah, just kind of the year today. Cebo's up
23:50
Speaker 1: seven percent, seeing ME up six percent, Intercontinental five percent,
23:54
Speaker 1: So really not great performance given where the market's done.
23:56
Speaker 1: I'm wondering if there's a what what the concern might
23:58
Speaker 1: be out there for these names.
24:00
Speaker 9: I think there are two concerns. One concern is on
24:03
Speaker 9: the trading side, and it's been a mixed bag. So
24:05
Speaker 9: you have in the ex options that's really benefiting CBO.
24:10
Speaker 9: You have energy that picked up a little bit from
24:13
Speaker 9: sluggish last year that's helping CEME and at the same
24:16
Speaker 9: time you have pretty sluggish equity trading compared to last year,
24:19
Speaker 9: so you do have a mix of products and activity
24:23
Speaker 9: that we see in here. And then if you think
24:25
Speaker 9: of exactly where Nastic is going right now with the
24:29
Speaker 9: acquisition the software solution services, so there is a lot
24:33
Speaker 9: of uncertainty in the market that elongates the sales cycle.
24:37
Speaker 9: So whatever they typically sell, their pipelines are very strong still,
24:41
Speaker 9: but it takes longer to close the transactions for those
24:44
Speaker 9: recurrent venues, and typically those are three to five year contracts,
24:49
Speaker 9: so it takes a while, and that's what makes the
24:52
Speaker 9: investors a bit that nervous, but I think a little
24:55
Speaker 9: bit reserved.
24:56
Speaker 1: Yep, all right, Paul, thanks so much for joining us.
24:59
Speaker 1: Really appreciate it. Paul Goldberg. He covers some of these
25:02
Speaker 1: financial stocks that the exchanges, all that kind of fun stuff,
25:05
Speaker 1: as well as the Canadian banks. He does all that
25:07
Speaker 1: for Bloomberg Intelligence and again Nasdak acquire a Denza for
25:12
Speaker 1: ten point five billion dollars in cash and stock. What
25:15
Speaker 1: got my attention, Smoan was at the multiple to paying
25:18
Speaker 1: eighteen times revenue, and I guess you know, is Paul
25:20
Speaker 1: suggesting for a fast growing software company. Okay, but as
25:25
Speaker 1: Paul pointed out, this thing's kind of growing fifteen percent
25:27
Speaker 1: doesn't really I don't know. I guess that's one of
25:30
Speaker 1: the reasons why NASDAK is off eleven point seven percent.
25:32
Speaker 4: Yeah, and I wonder too, you know how much of
25:34
Speaker 4: this sort of stuff can ultimately be automated to some degree.
25:38
Speaker 4: I know we have these discussions ongoing discussions about AI,
25:41
Speaker 4: but you know, some compliance stuff, some things like that.
25:44
Speaker 4: You know, one thing there might be an opening there.
25:46
Speaker 1: Yeah, exactly. So anyway, we'll keep an eye on that
25:48
Speaker 1: one big big trade in the exchange business.
25:51
Speaker 7: Today you're listening to the Team Ken's are Live program
25:56
Speaker 7: Bloomberg Markets weekdays at ten am Eastern on Bloomberg, the
26:00
Speaker 7: iHeartRadio app and the Bloomberg Business app, or listening on
26:03
Speaker 7: demand wherever you get your podcast.
26:08
Speaker 1: And Paul Sweene here in the Bloomberg Interactive Brookers Studio. So, simon,
26:11
Speaker 1: I'm looking at wtacrude oil off three percent today, just
26:15
Speaker 1: just a sixty eight dollars a barrel. And you know,
26:18
Speaker 1: all these commodity people have always taught me it's just
26:20
Speaker 1: supply and demand. Well, didn't they cut supply.
26:23
Speaker 9: A couple of weeks ago.
26:25
Speaker 4: Yeah, but I mean we have Russia potentially working against this,
26:29
Speaker 4: and I mean, but it's this interesting feeling, right because
26:32
Speaker 4: you talk to so many commodity people, You talk to
26:34
Speaker 4: the energy ministers of various countries, and they look out
26:37
Speaker 4: a couple of years and say, supply is going to
26:39
Speaker 4: be really short. But at the same time you have
26:42
Speaker 4: Jeff Curry, head of Commodities research at Golden and Sacks
26:46
Speaker 4: on BTV last week. We have never been this wrong
26:50
Speaker 4: for this long without seeing evidence to change our views.
26:53
Speaker 4: So he's clearly as start.
26:55
Speaker 1: As we are. All right, So some of the extra stuffed.
26:57
Speaker 1: We have our own expert here, Fernando Valley, your analysts
27:00
Speaker 1: for Bloomberg Intelligence, joining us live here in our Bloomberg
27:02
Speaker 1: Interactive Broker studio. So, Fernando, the Saudis cannot be happy
27:06
Speaker 1: with what's happening here. Why do you think crude oil
27:11
Speaker 1: is declining despite a reduced output by Saudi Arabia.
27:16
Speaker 10: Well, you said it it's supply or demand, So it's
27:19
Speaker 10: not supply, it's demand. Okay, So it's you know, we
27:23
Speaker 10: said it before when the first cut in April. You
27:27
Speaker 10: can't fight the FED and they're trying to fight the FED,
27:30
Speaker 10: and the FED is telling you know, we're going to
27:31
Speaker 10: crush demand, and here we are. I mean, imports in
27:34
Speaker 10: China are down seven and a half percent in May.
27:37
Speaker 10: Logistic manager indexes in the US are down third consecutive
27:41
Speaker 10: month that they make their lowest ever readings. So demand
27:44
Speaker 10: is weak and that's that's what the price is telling
27:47
Speaker 10: you is you can cut supply, but we're not buying it.
27:51
Speaker 4: Well. On the demand side, we had some headlines out
27:54
Speaker 4: of China. We're seeing some of the highest rates in
27:59
Speaker 4: terms of COVID nineteen testing since at the end of
28:04
Speaker 4: twenty twenty two. Remember when all those things go away.
28:06
Speaker 4: I don't know that that's the story leading China for
28:09
Speaker 4: oil traders. Give me your thinking there. I guess how
28:12
Speaker 4: much pessimism is there around this China side of the equation.
28:15
Speaker 10: Well, I think China, the COVID part of it is
28:18
Speaker 10: still fairly new. But when you think about the recession
28:21
Speaker 10: fears in the Western world, who is China's biggest trading
28:25
Speaker 10: partners if not the Western world. It is an export nation.
28:28
Speaker 10: It can't continue exporting if we're not buying. I think
28:32
Speaker 10: the US and European consumer are still the bigger story.
28:35
Speaker 10: Of course, they're domestic markets a lot bigger, a lot
28:37
Speaker 10: more important today, and so the COVID story is important,
28:41
Speaker 10: it's not irrelevant. But the biggest tissue is their exports
28:44
Speaker 10: are down and so far, you know, as we look
28:48
Speaker 10: at the numbers in the US as the bell weather,
28:51
Speaker 10: they're not showing a lot of improvement. Credit card spending
28:54
Speaker 10: is down as well, So all of those signs point
28:57
Speaker 10: to weak demand, which is weak of demand for their
29:00
Speaker 10: exports as well.
29:02
Speaker 1: So as I look at the daily national average gasoline
29:05
Speaker 1: price for regular unleaded three dollars and fifty nine cents,
29:08
Speaker 1: why isn't that closer to three bucks? If oil is coming.
29:11
Speaker 10: Down, well, there's going to be a little bit bit
29:13
Speaker 10: of a lag. Remember last week it was still in
29:15
Speaker 10: the seventies. So we're going to see that filter through.
29:18
Speaker 10: So hopefully for your Fourth of July, maybe the Juneteenth holiday,
29:23
Speaker 10: we're gonna get a little bit cheaper gas out in Jersey.
29:26
Speaker 10: But then the crackspread are still elevated. If you look
29:31
Speaker 10: at the crackspread for gasoline, still over thirty dollars a barrow.
29:35
Speaker 10: That is a combination of factors. But we shut down
29:38
Speaker 10: a lot of refining capacities we talked about, and then
29:41
Speaker 10: just the type of gasoline is still not the right
29:44
Speaker 10: type of gasoline. We do think that, especially for next year,
29:49
Speaker 10: the renewable fuels component of it is actually going to
29:51
Speaker 10: make gasoline structurally cheaper. It's only a few cents a gallon,
29:55
Speaker 10: but it's probably a structurally cheaper gasoline for several years because, uh,
30:00
Speaker 10: there is a drop into renewable fuel credits that we
30:03
Speaker 10: expect will come through next year.
30:05
Speaker 4: I'll take that couple of cents, but I have a
30:07
Speaker 4: hybrid now. So are you trying to yet? Wow, cut
30:11
Speaker 4: my gas, cut my gas?
30:12
Speaker 1: Do you like it?
30:13
Speaker 6: Yeah?
30:14
Speaker 4: It's really nice?
30:15
Speaker 9: Cool?
30:15
Speaker 4: Okay, yeah, don't have to rely on those charging stations.
30:18
Speaker 4: We were talking about Tesla earlier. Don't have to try
30:20
Speaker 4: and rely on those charging stations.
30:21
Speaker 1: Is it a.
30:22
Speaker 4: Quiet no, no, hudai Okay, anyway, it's very neat. But
30:28
Speaker 4: you know, one of the reasons that you know, Goldman
30:31
Speaker 4: downgrading it's it's forecasts. And I guess they're they've just
30:34
Speaker 4: been so bullish for so long that this is really
30:36
Speaker 4: kind of getting, you know, getting people's attention.
30:39
Speaker 6: It is because they.
30:40
Speaker 4: See supply increases from sanctioned countries Russia.
30:43
Speaker 6: You're on Venezuela.
30:45
Speaker 4: How significant are those supply increases?
30:52
Speaker 1: You know?
30:52
Speaker 4: Can that make us focus a little bit more on
30:54
Speaker 4: the supply side of the story or what's what's your
30:57
Speaker 4: take there?
30:58
Speaker 10: I think it definitely in the world where we're seeing
31:01
Speaker 10: weaker demand, any little bit of supply helps bridge that gap.
31:07
Speaker 10: And it's not just those sanctioned countries. It's also strategic
31:09
Speaker 10: petroleum reserves. And we talked about the US last year,
31:13
Speaker 10: but China has over one billion barrels of strategic petroleum reserves.
31:16
Speaker 10: They can crush that price too in the short term.
31:20
Speaker 10: So there is plenty of supply, even if it's not
31:22
Speaker 10: daily output from Saudi Arabia, from other sources, the sanctioned countries,
31:26
Speaker 10: strategic reserves, Russia.
31:29
Speaker 1: Can you explain to me, is there oil getting out
31:32
Speaker 1: to the market and if so, how's that happening.
31:35
Speaker 10: By a lot of ships and yes. And then to Asia.
31:40
Speaker 10: It was very interesting to see Saudi Arabia raising their
31:43
Speaker 10: official selling prices, especially to Asia, because there's still plenty
31:46
Speaker 10: of Russian crude making its way to India, Pakistan, China.
31:51
Speaker 10: It seems like they're trying to shore up their revenues
31:54
Speaker 10: per barrel by raising the official selling price. But they're
31:57
Speaker 10: going to seed market share because the sanctions are impacting
32:01
Speaker 10: the price that Russia gets for its barrow, but not
32:05
Speaker 10: the overall volume.
32:06
Speaker 1: All right, so they're still getting this stuff out by ship,
32:10
Speaker 1: not by pipeline, right.
32:12
Speaker 10: Some pipeline, but ships, okay, but at a lower price.
32:15
Speaker 4: Yes, okay, I guess that's why Saudi Arabia is, you know,
32:20
Speaker 4: taking these unilateral moves because clearly Russia and maybe not
32:23
Speaker 4: holding up, well, maybe maybe not holding up. It's under
32:26
Speaker 4: the bargain. Can we shift to the micro a little bit?
32:29
Speaker 10: Our?
32:29
Speaker 4: Javier Blass has a great column today from Bloomberg Opinion
32:35
Speaker 4: saying that Exxon should be included in the Dow Jones
32:38
Speaker 4: Industrial Average. Remember it was expelled back in August.
32:42
Speaker 1: For Salesforce went in there for it.
32:45
Speaker 4: Yes, I believe Salesforce went that. That sounds about right.
32:48
Speaker 4: There were about six names in there, three A and
32:51
Speaker 4: three out.
32:53
Speaker 10: Your take, Fernando, I mean you should never have left.
32:56
Speaker 10: It's only what four hundred and fifty billion dollars in
32:59
Speaker 10: market cap significance four volume, it's four and a half
33:04
Speaker 10: percent of global oil supply. It's a very important company
33:08
Speaker 10: no matter how you skew it. And at the end
33:09
Speaker 10: of the day, oil and gas is a significant cornerstone
33:13
Speaker 10: of our energy matrix and it will be, regardless of scenario,
33:16
Speaker 10: for the next thirty to forty years and next all
33:18
Speaker 10: is an important part of that.
33:19
Speaker 1: What did the company say about This is a topic
33:22
Speaker 1: we talked about, I don't know several years ago, but
33:24
Speaker 1: maybe not as much now about peak oil. What's the
33:28
Speaker 1: where's the market on the discussion about peak oil?
33:31
Speaker 10: Here's a lot of debate from twenty thirty to twenty
33:33
Speaker 10: forty as the target date for peak oil, some more
33:37
Speaker 10: aggressive saying that was twenty twenty, which is not proven
33:40
Speaker 10: to be the case. You know, our view is it's
33:44
Speaker 10: probably closer to the twenty forty benchmarkting that depends on
33:48
Speaker 10: a lot of innovation. Reason being, you have five billion
33:52
Speaker 10: people in the emerging markets that consume a fraction of
33:56
Speaker 10: what we do in consumption. The only way to improve
33:59
Speaker 10: their standard of living is I consuming more energy. You
34:01
Speaker 10: can look at how any country developed and their energy
34:04
Speaker 10: per capital rose. Most sub Saharan Africans consume less energy
34:08
Speaker 10: than one American refrigerator, so a year, So that can't
34:13
Speaker 10: happen without you increasing their energy consumption. And it's it's
34:17
Speaker 10: very you know, hypocritical of us to say you can
34:20
Speaker 10: industrialize how we did, but you know, we're going to
34:23
Speaker 10: continue living in these various plush offices and commuting in
34:28
Speaker 10: our nicely made test lists were built using coal power
34:33
Speaker 10: plants in China.
34:34
Speaker 4: You know, we only have about thirty seconds here. But
34:36
Speaker 4: you know, one of Javier's arguments was that there's this
34:39
Speaker 4: realization on the part of even environmentally focused investors that
34:43
Speaker 4: we're going to need oil and gas for at least
34:45
Speaker 4: a little while. Is there an overall framework in which,
34:50
Speaker 4: you know, investors are changing their minds a little bit
34:52
Speaker 4: about these oil majors.
34:54
Speaker 9: Yeah.
34:54
Speaker 10: One is we can reduce the carbon footprint without changing
34:57
Speaker 10: all of the infrastructure, carbon capture being one one of
35:00
Speaker 10: those ways, renewable fuels being another. We need to find
35:05
Speaker 10: an equilibrium between energy security, affordability, and environmental impacts.
35:11
Speaker 1: All right, Fernando, thanks so much for joining us. Fernando Vale.
35:14
Speaker 1: He covers all things global energy for Bloomberg Intelligence. And again,
35:20
Speaker 1: you know, as Fernando said, it's supply and demand, and
35:23
Speaker 1: we know we've got maybe a little bit of declining
35:25
Speaker 1: supply with the Saudi's cutting a million barrels per day
35:28
Speaker 1: of production, but I guess not enough to offset declining
35:31
Speaker 1: demand around the world, particularly in the US and some
35:35
Speaker 1: other Western markets. But also you get a factor in Japan,
35:39
Speaker 1: is they're reopening as robust as maybe we initially thought,
35:42
Speaker 1: perhaps not. WTI crude oil off three point twenty four
35:46
Speaker 1: percent right now sixty seven dollars in ninety one cents
35:50
Speaker 1: per power.
35:51
Speaker 7: You're listening to the tape. Catch our live program Bloomberg
35:54
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35:58
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36:01
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36:08
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36:10
Speaker 1: And Floxman and Paul Sweeney here in the Bloomberg Interactive
36:12
Speaker 1: Broker Studio. I don't know. I got the SPX up
36:15
Speaker 1: twenty percent off of that October low last year, but
36:18
Speaker 1: I've also got an inverted yield curve telling me the
36:20
Speaker 1: world's coming to an end. I don't know how you
36:22
Speaker 1: square those two things, but fortunately I don't have to
36:24
Speaker 1: know that anymore. But our next guest does, Hans Olsen,
36:28
Speaker 1: cio at Fiduciary Trust Company out of Boston. He joins
36:32
Speaker 1: his live here in our Bloomberg Interactive Broker studio. So, Hans, again,
36:35
Speaker 1: I've kind of got a stock market that's rallying. I
36:38
Speaker 1: guess off off of those lows, but i've got the
36:41
Speaker 1: fed down. I'm not sure they're going to pause. I've
36:43
Speaker 1: got people tell me there's a recession either here now
36:45
Speaker 1: or coming very soon. How do you kind of square
36:48
Speaker 1: all that out for your outlook?
36:49
Speaker 11: Yeah, I mean, if you look at the the S
36:51
Speaker 11: and P five hundred, it seems to be signaling all
36:54
Speaker 11: is clear, don't worry right onto the next narrative. But
36:57
Speaker 11: if you look at that same market a little differently
37:01
Speaker 11: from an equal weighted view, then it all starts to
37:03
Speaker 11: foot a lot more.
37:04
Speaker 9: Right.
37:05
Speaker 12: So, if you equal weighted S and P or really
37:07
Speaker 12: which is.
37:07
Speaker 11: A proxy for the average stock, right, that's what three
37:11
Speaker 11: percent this year, which is signaling sort of uncertainty and concern.
37:17
Speaker 11: That reflects an inverted deal curve, tightening credit conditions, weak
37:21
Speaker 11: business surveys like the ism. So I think it's all
37:24
Speaker 11: about how you define the market this year. You know,
37:27
Speaker 11: you look at the NASZAC up eighty basis points today.
37:31
Speaker 11: Really you're talking about two stocks, right, which is about.
37:33
Speaker 12: Twenty five percent of the index.
37:36
Speaker 11: So it's really it's really become such a narrow market,
37:40
Speaker 11: you know, and any pyramid that's inverted is inherently unstable.
37:45
Speaker 4: Well, before we get to some of these stock names,
37:48
Speaker 4: tell me your predictions. We all eyes on the FED,
37:51
Speaker 4: and all eyes as well on the CPI print that's
37:53
Speaker 4: going to come out. How hot or how slow would
37:57
Speaker 4: we need for a surprise in either direction? And what
38:01
Speaker 4: do you expect to see?
38:02
Speaker 11: So the Fed decision, I think the skip is the
38:06
Speaker 11: new word that people are using because it's sort of.
38:11
Speaker 6: Still pause.
38:12
Speaker 12: You know, when you look.
38:13
Speaker 11: At it, short rates now are slightly above the inflation rate,
38:18
Speaker 11: so you know, I look at it rather simply, right,
38:21
Speaker 11: trailing twelve month CPI over the short rate, we're about
38:25
Speaker 11: what twenty five thirty basis points over. That's kind of
38:30
Speaker 11: what normal looks like over a very long period of time.
38:32
Speaker 11: Maybe a little more fifty basis points, but a real
38:35
Speaker 11: rate of interest on money represents I think what good
38:40
Speaker 11: looks like, a sharp departure from what it's been for
38:42
Speaker 11: the last twelve thirteen years.
38:45
Speaker 12: Right.
38:45
Speaker 11: But the point is is that the Fed can simply
38:48
Speaker 11: do nothing. You know, the act of doing nothing is
38:50
Speaker 11: an act itself, right, It's an action itself. And let
38:54
Speaker 11: it settled in with this real rate of money for
38:56
Speaker 11: a while and let the market acclimate.
38:59
Speaker 12: So I think that's it's okay.
39:00
Speaker 11: They can they can go a couple of meetings without
39:03
Speaker 11: doing anything and let this new sort of price structure
39:08
Speaker 11: of money sink in. As far as the CPI is concerned,
39:11
Speaker 11: I think the estimate for core is what four percent
39:15
Speaker 11: for yeah.
39:16
Speaker 4: Four point one believe we're sorry that the core number
39:21
Speaker 4: I think is a little higher. And then the headline
39:23
Speaker 4: is four point one four.
39:24
Speaker 12: Point one, and but that's down from roughly five. That'd
39:27
Speaker 12: be a big drop, you know.
39:29
Speaker 11: So I think the surprise will be if if it
39:32
Speaker 11: actually just stays where it is, it would be a
39:35
Speaker 11: bit of a hit to the markets.
39:36
Speaker 4: Would that change the Feds?
39:38
Speaker 11: No, I don't think it should. I don't I don't
39:40
Speaker 11: necessarily should. Again, this takes time. These as we all know,
39:44
Speaker 11: these uh these policy decisions act with very long and
39:49
Speaker 11: variable effects, as we've seen in the in the first quarter, right, all.
39:54
Speaker 1: Right, So if we don't own these seven names that
39:57
Speaker 1: have been just magnificent, the Magnificent Seven. All right, I
40:01
Speaker 1: missed that trade. Now what do I do?
40:03
Speaker 12: Yeah, let's focus on that for a second. The Magnificent Seven.
40:06
Speaker 11: You know, I don't know if you guys watched the
40:08
Speaker 11: original or the remake, but you know the rest of
40:11
Speaker 11: that story was most of those guys die, yeah by
40:14
Speaker 11: the end of the movie. So, and it kind of
40:16
Speaker 11: reminds you all back. You know, the last time the
40:19
Speaker 11: market was this concentrated, back in the late nineteen nineties
40:23
Speaker 11: and the run up to the tech bubble.
40:25
Speaker 12: You had, you know, incredibly narrow markets.
40:28
Speaker 11: Valuations of those of those favored Few were incredibly high
40:33
Speaker 11: and simply unsustainable. So if you look at you know,
40:37
Speaker 11: if you look at the average stock, I think there's
40:40
Speaker 11: some pretty good value to we had there. So it's
40:41
Speaker 11: a question of where do you want to place the
40:43
Speaker 11: money if it's that Favorite Few or the Magnificent Seven.
40:47
Speaker 11: You know, a lot has to go right if you're
40:49
Speaker 11: playing twenty times sales for company like Nvidio, right your
40:53
Speaker 11: price for perfection?
40:55
Speaker 12: And no question, you.
40:58
Speaker 4: Know, one of the things sent across the notes earlier,
41:01
Speaker 4: one of the things you point out is you like
41:02
Speaker 4: energy and materials for the energy green transition teams. I think,
41:07
Speaker 4: you know, energy has been one of those most pressured
41:10
Speaker 4: places in the stock market so far this year.
41:13
Speaker 11: How do you play this kind of interesting where you
41:15
Speaker 11: have energy the energy sector weak this year, but the
41:18
Speaker 11: overall market seem suggesting that the economy is fine.
41:22
Speaker 12: That doesn't quite foot, does it.
41:26
Speaker 11: I think the you know, again, the money is going
41:30
Speaker 11: after the story and the narrative, and the narrative is
41:32
Speaker 11: all about generative AI and the like, and you'll see
41:35
Speaker 11: more and more companies I think, sort of attach AI
41:38
Speaker 11: to whatever they're doing in order to get the multiple
41:40
Speaker 11: uplift with respect to earning energy. I mean, I think
41:44
Speaker 11: for us, we're playing it for a longer dated theme,
41:50
Speaker 11: which is a transition from fossil fuels to green And
41:53
Speaker 11: the reality is is that the infrastructure and just the
41:56
Speaker 11: energy ratios energy into energy out on renewables of various
42:01
Speaker 11: forms or fusion simply aren't there yet, and all the
42:06
Speaker 11: infrastructure that will be needed to.
42:08
Speaker 12: Be built out.
42:09
Speaker 11: We'll all favor both carbons and materials for us to
42:15
Speaker 11: get to that greener future, and it's going to take longer,
42:18
Speaker 11: more expensive, and the technology simply isn't there to create
42:23
Speaker 11: the excess of supply of energy for our needs at
42:28
Speaker 11: this point.
42:28
Speaker 1: Structured credit, what does that mean to you? What is
42:31
Speaker 1: the structured credit investment in? Why do you guys like those?
42:34
Speaker 11: So it could be seasoned mortgages, right, really well seasoned mortgages.
42:39
Speaker 12: Maybe non agency r mbs and the like.
42:42
Speaker 11: We've stayed away from commercial credit, but really our focus
42:47
Speaker 11: has been in the non agency residential mortgage back market
42:51
Speaker 11: where we're we're not taking really anything in the way
42:54
Speaker 11: of duration risk per se, and we're getting nice ye'll
42:57
Speaker 11: pick up.
42:58
Speaker 12: So you know, it's been a.
43:00
Speaker 11: Very nice corner of the market to collect a cupeon.
43:05
Speaker 4: You know, it was interesting to me Paul was asking
43:07
Speaker 4: with a previous guest earlier, do you just get into
43:09
Speaker 4: the two year treasuries because they're getting close to inflation?
43:13
Speaker 4: I mean, but hedge funds boosting their nets short to
43:16
Speaker 4: your positions for the eleventh straight weeks. What's your take
43:19
Speaker 4: get in stay out?
43:21
Speaker 3: Ye?
43:21
Speaker 11: Yeah, you know, look, I think if you believe that
43:26
Speaker 11: getting the last bit of inflation, so.
43:29
Speaker 12: We were at nine, we're down at five.
43:31
Speaker 11: We got to get to two according to what central
43:33
Speaker 11: bankers are telling us. You know, those those last three
43:36
Speaker 11: percentage points could be the most difficult percentage points to
43:40
Speaker 11: transit of all right, And so if you think, if
43:42
Speaker 11: you believe that in the develop economies, to get it
43:45
Speaker 11: back there, it's it's harder and it takes longer, and
43:49
Speaker 11: that means that rates are stuck at a higher level
43:52
Speaker 11: for a bit longer. And you know, I think that
43:56
Speaker 11: you have a choice now when you have a real
43:58
Speaker 11: rate of money, and it's really important to think how
44:00
Speaker 11: radical that is where the price of money in relation
44:03
Speaker 11: to the price of things is back to something that
44:07
Speaker 11: most of us would say.
44:09
Speaker 12: Is the order of things?
44:10
Speaker 1: Is it order thing?
44:11
Speaker 7: Yep?
44:11
Speaker 1: Absolutely, it's a new world order the last twelve years
44:14
Speaker 1: maybe a little bit unusual in hindsight. Hans Olsen he's
44:17
Speaker 1: the chief investment officer Fiduciary Trust Company based in Boston, Massachusetts.
44:22
Speaker 1: He joins us here in a Bloomberg Interactive Broker studio.
44:25
Speaker 7: You're listening to the tape cat'sur live program Bloomberg Markets
44:29
Speaker 7: weekdays at ten am Eastern on Bloomberg Radio, the tune
44:32
Speaker 7: in app, Bloomberg dot Com, and the Bloomberg Business app.
44:35
Speaker 7: You can also listen live on Amazon Alexa from our
44:38
Speaker 7: flagship New York station Just Say Alexa playing Bloomberg eleven thirty.
44:44
Speaker 1: Jen Reachie does all the anti stuff, antitrust legislation and
44:48
Speaker 1: all the work there when we have big deals and
44:50
Speaker 1: anti trust issues come up and the lawyers get involved.
44:53
Speaker 1: She does all that for Bloomberg Intelligence. He joins us
44:56
Speaker 1: here in a Bloomberg Interactive broker studio. So, Jen, it
44:59
Speaker 1: does it seem like it's just, you know, at first,
45:02
Speaker 1: blush that it seems like Microsoft's kind of a really
45:04
Speaker 1: tough time getting this deal done. What's the latest.
45:07
Speaker 6: Oh, yeah, They've really had a tough haul. So obviously
45:10
Speaker 6: the FTC must be concerned about a Microsoft and activision
45:14
Speaker 6: going ahead and closing their deal despite the fact that
45:16
Speaker 6: right now they're facing a UK opposition right and they're
45:19
Speaker 6: fighting in court with the UK. But they have talked about,
45:22
Speaker 6: you know, looking at all possibilities and the FTC's obviously
45:25
Speaker 6: heard that. So they have to protect themselves because they
45:28
Speaker 6: have an in house process set to start in August,
45:31
Speaker 6: but a decision from that in house process probably won't
45:34
Speaker 6: come out to one queue. In the meantime, they may
45:37
Speaker 6: need to stop the companies from closing the deal, because
45:39
Speaker 6: it's a lot harder to unwind a deal that's already
45:41
Speaker 6: been closed and consummated than it is to stop it
45:43
Speaker 6: from closing to begin with. So this would be going
45:46
Speaker 6: to court to seek a preliminary injunction just to stop
45:49
Speaker 6: them from closing, pending that in house process that starts
45:52
Speaker 6: in August.
45:53
Speaker 4: So this is more of an insurance policy that they
45:56
Speaker 4: can't move ahead. And you know what, this may be
45:57
Speaker 4: why we're not seeing shares of either company moved too
46:01
Speaker 4: much today, Activision down just less than a point a
46:07
Speaker 4: tenth of a percentage point, Microsoft up to two tens
46:11
Speaker 4: of one percent. You know, what's the path forward for
46:16
Speaker 4: Microsoft and Activision? They want to complete this deal, but
46:18
Speaker 4: they've gotten a lot of.
46:22
Speaker 6: Pushback.
46:23
Speaker 4: Where do we go? What's how did the next couple
46:25
Speaker 4: months play out?
46:26
Speaker 12: Right?
46:26
Speaker 6: And that's the issue because and I think that maybe
46:28
Speaker 6: that's part of the reason the stock hasn't reacted much,
46:30
Speaker 6: is because no matter what happens in the US, there's
46:32
Speaker 6: still this big hurdle in the UK, right that has
46:34
Speaker 6: to be overcome. And if Microsoft they have an appeal
46:38
Speaker 6: pending right that it's a very high standard to win
46:42
Speaker 6: and get the reversal of a decision by the Competition
46:45
Speaker 6: Markets Authority. So that's going to be a difficult path.
46:48
Speaker 6: So we have heard Microsoft talking about other potential options,
46:51
Speaker 6: which could be closing and just continuing to fight in
46:54
Speaker 6: court and face whatever sanctions they might face, or perhaps
46:57
Speaker 6: closing and pulling the activision business out of the US.
47:00
Speaker 6: I mean, we've heard them talk about these things. I'm
47:02
Speaker 6: not sure how they would do that. It would be complicated,
47:05
Speaker 6: but they are thinking about those options. Then they'd have
47:09
Speaker 6: to win in the US as well and not you know,
47:11
Speaker 6: be the recipient of an injunction blocking them. I think
47:14
Speaker 6: they do have a better shot in the US, not
47:17
Speaker 6: only in court, but also before the FTC's administrative law
47:21
Speaker 6: judge the process that's starting in August. So if they
47:24
Speaker 6: can manage to succeed in the US, which I think
47:26
Speaker 6: they can, and that'll play out this year and into
47:29
Speaker 6: the first quarter, we'll have all those decisions I think
47:32
Speaker 6: court probably in four Q alj probably in one Q
47:36
Speaker 6: If this companies continue down this path, and then they
47:39
Speaker 6: have to decide what they want to do about the UK.
47:41
Speaker 1: So is this just the Democrats being democrats? Kind of
47:45
Speaker 1: anti deal or are the regulars like the FTC, the
47:49
Speaker 1: DJ Are they kind of pursuing novel law here? I mean,
47:53
Speaker 1: what's going on?
47:54
Speaker 6: I think it's both, you know, I really think it's
47:56
Speaker 6: it's both. There's really just been a big push ever
47:59
Speaker 6: since the executive order that was issued by President Biden
48:02
Speaker 6: back in July of twenty twenty one, kind of instructing
48:04
Speaker 6: all agencies, not just the primary anti trust agencies that
48:08
Speaker 6: are Trade Commission and Department of Justice, but across the
48:10
Speaker 6: whole government to try to slow down consolidation. You know,
48:13
Speaker 6: there's this belief, I think right now by this administration
48:17
Speaker 6: that we have had lacks anti trust enforcement for years,
48:20
Speaker 6: and we've landed today in twenty twenty three with a
48:23
Speaker 6: bunch of industries that are too consolidated, and as a result,
48:26
Speaker 6: we have low innovation, low quality, and high prices. Right,
48:29
Speaker 6: So they're trying to stem that tide. So it's both
48:32
Speaker 6: trying to slow down the deal making but also trying
48:36
Speaker 6: to expand anti trust law using novel concepts. So it's
48:40
Speaker 6: a combination, and in some ways they have to use
48:42
Speaker 6: novel concepts in order to slow deal making, right, because
48:45
Speaker 6: they're trying to go after deals that would have likely
48:48
Speaker 6: closed a few years ago.
48:49
Speaker 4: Yeah, these novel concepts, though, I mean, what things could
48:54
Speaker 4: ultimately end up ahead of a judge and the judge
48:58
Speaker 4: rules you can't use concepts. You know, this deal should
49:01
Speaker 4: move forward. I guess what are the pieces that are
49:04
Speaker 4: most at play?
49:05
Speaker 3: You know.
49:05
Speaker 6: The thing that's difficult about the novel concepts is that
49:07
Speaker 6: they're difficult to prove, which is why perhaps they haven't
49:11
Speaker 6: worked in the past. So let's say one thing that
49:13
Speaker 6: they're going after our deals where an incumbent is buying
49:17
Speaker 6: what looks like an up and coming potential rival as startup,
49:20
Speaker 6: a scrappy startup, and it's called nascent competition. They don't
49:24
Speaker 6: necessarily compete today, but we think you're going to compete
49:27
Speaker 6: in a fulsome way in the future. That's kind of
49:29
Speaker 6: a new novel concept that both the FDC and the
49:31
Speaker 6: DOJ are going after. And the issue they have with
49:34
Speaker 6: it is that that's something very very hard to prove.
49:36
Speaker 6: I mean, you're saying, here's what we think might happen
49:38
Speaker 6: in the future if this big incumbent doesn't buy this
49:41
Speaker 6: scrappy startup. And right now, as a matter of fact,
49:45
Speaker 6: the Federal Trade Commission is trying to unwind Facebook's acquisitions
49:48
Speaker 6: of Instagram and WhatsApp because they believe this is exactly
49:52
Speaker 6: what we let through that we shouldn't have when Facebook
49:54
Speaker 6: bought these scrappy startups when they were kind of, you know,
49:57
Speaker 6: on their way to being bigger competitors, and had book
50:00
Speaker 6: not bought them, they would have posed, you know, a
50:03
Speaker 6: bigger rival to Facebook and social networking. So that's one
50:07
Speaker 6: of the types of concepts and it's just difficult to
50:09
Speaker 6: prove in court.
50:11
Speaker 1: All right, but this is a big deal and this
50:13
Speaker 1: is Microsoft. I can't imagine them walking away here. Do
50:16
Speaker 1: you think they fight it to the end?
50:17
Speaker 6: And it's a really good question. You know, they have
50:20
Speaker 6: an end date in July, right, so their purchase agreement
50:23
Speaker 6: says that as of I think it's around mid July
50:26
Speaker 6: that Activision can walk away and accept their breakup fee.
50:29
Speaker 6: I think it's around three billion dollars. It's a lot
50:31
Speaker 6: of money. So we're going to have to see what happens.
50:33
Speaker 9: Then.
50:34
Speaker 6: They seem to me committed to fighting this out Activision
50:37
Speaker 6: as well. They've hired a lot of big guns in
50:39
Speaker 6: Europe and in London to fight that appeal. It looks
50:43
Speaker 6: like they're going forward in the US. So we'll see
50:46
Speaker 6: if they extend that agreement so that the end date
50:50
Speaker 6: is pushed further out.
50:51
Speaker 1: So when would they negotiate extending the agreement? Is that
50:54
Speaker 1: something that they can wait till this summer or do
50:56
Speaker 1: they need to do it kind of nowish?
50:58
Speaker 6: They probably have to do it nowish. And the thing
51:00
Speaker 6: is July could hit, the end day could hit, and
51:02
Speaker 6: Activision could just stay in. It doesn't necessarily mean that
51:05
Speaker 6: the agreement's off. It means it gives either one the
51:07
Speaker 6: ability at that point to walk away. They can just
51:10
Speaker 6: not walk away and they can continue. But Microsoft might
51:13
Speaker 6: want to protect itself more than that, right.
51:14
Speaker 1: All right, Jen, thanks so much for joining us, jumping
51:17
Speaker 1: into the studio here, giving us the latest on the
51:19
Speaker 1: antitrust landscape. Again. Microsoft has a deal for Activision Blizzard
51:23
Speaker 1: sixty nine billion dollars and that's a big deal. To
51:27
Speaker 1: you walk away from that, I can't imagine.
51:30
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51:33
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51:39
Speaker 1: I'm Matt Miller.
51:40
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51:44
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51:45
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51:47
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