Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney. Alongside
Speaker 1: my co host Matt Miller. Every business day we bring
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
Speaker 1: at Bloomberg dot com slash podcast. Let's check in with
Speaker 1: Adam Gold, founder and Chief investment Officer Acadam l L
Speaker 1: c Adam Again, kind of a boring day today, but
Speaker 1: when you talk to your clients, what's your number one
Speaker 1: message these days? Good morning, guys, Thanks for having me
Speaker 1: back on. We think boring days are fun. They may
Speaker 1: not be fun for for the news cycles, but generally speaking,
Speaker 1: things don't change that much day today in the long term,
Speaker 1: in the big scheme of things, any given days something
Speaker 1: might change that. But generally, since we last spoke a
Speaker 1: few months ago, things have gotten, you know, extremely worse
Speaker 1: across so many investor sentiments, inflation numbers, interest rates, rysing
Speaker 1: and all of that is already priced in. We think
Speaker 1: a lot of that is what's caused the markets to
Speaker 1: sell off here the last few months. So people who
Speaker 1: talk and we speak with clients every day and they're
Speaker 1: very concerned about where they are, and we say that
Speaker 1: that's the opportunity to be deploying capital. To be concerned now.
Speaker 1: To sell now feels like you're a few months behind
Speaker 1: the curve um And somebody argue that's where the fete is.
Speaker 1: But the fet is you know, trying to react to
Speaker 1: to what they see every day. And so we think
Speaker 1: the opportunity is for people who have a long term horizon,
Speaker 1: which is multi years, which is the only kind of
Speaker 1: investors investors and investments we try to focus on. Then
Speaker 1: we think this is a time when other people are selling,
Speaker 1: you should be buying. And it's not easy, it's not
Speaker 1: fun day to day, and things may continue to you know,
Speaker 1: to get worse on a daily sort of return basis,
Speaker 1: But that's where the opportunity is because long term, there's
Speaker 1: still extremely large, glowing, growing trends around technology, around population growth.
Speaker 1: There there's just a lot of underlying tailings here in
Speaker 1: the long term. So I mean, we're we I know
Speaker 1: that we're not trading for undred, but we are at
Speaker 1: forty four D on the S and P. It's it's
Speaker 1: not so far off from the high are you saying,
Speaker 1: are you saying it's just um, you know, gonna look
Speaker 1: like we'll look like in the rear view mirror five
Speaker 1: ten years from now, such an opportunity that you should
Speaker 1: buy now, regardless of what we do in the next
Speaker 1: few weeks or months. That's our viewpoint. When I was
Speaker 1: born in three the Dow was eleven hundred. When I
Speaker 1: started my career in two thousand one, the Dow is
Speaker 1: ten thousand. We're at thirty four thousand now. And if
Speaker 1: you look forward a couple of years by a couple
Speaker 1: I mean, you know, a couple of decades, rather you know,
Speaker 1: we're going to have a Dow at a hundred thousand,
Speaker 1: and that keger. That annual growth rate is sort of
Speaker 1: in the low mid single digits. It's not in the
Speaker 1: teams anymore, because you know, when you have a large numbers,
Speaker 1: there's it's hard to continue to grow at that pace.
Speaker 1: But if inflation is in the mid single digits and
Speaker 1: fixed interest rates are in the low single digits before tax,
Speaker 1: we still believe equities are the only place to be
Speaker 1: invested over long term to have any chance of beating inflation.
Speaker 1: All right, So what are some of the sectors that
Speaker 1: you think we should be looking at here as we
Speaker 1: go into or as we you know, we certainly are
Speaker 1: in the beginning of a rising interest rate environment. Yep.
Speaker 1: So I think historically financials, you know, there's sectors. Now
Speaker 1: what's now we're refocused. This is what I think generally.
Speaker 1: The opportunity that people may think is well with rising rates,
Speaker 1: banks can get paid more. But then of course we
Speaker 1: have inflation concerns, and so there's obviously recession risk, and
Speaker 1: so banks do not do very well during recessions because
Speaker 1: there's a lot of loans and there's bad debt, revisions
Speaker 1: and things that cost their earnings to go away to
Speaker 1: take away some of that. You know, interest rates increased opportunities.
Speaker 1: So we've only focused on technology for over twenty years.
Speaker 1: The reason is that innovation and new product cycles, these
Speaker 1: are not priced into stocks today. The only thing that
Speaker 1: analysts can do is project forward for what they see
Speaker 1: in front of them. I don't give the example of Apple.
Speaker 1: When I started investing the company with the iPod, people
Speaker 1: thought the iPod was going to go the way of
Speaker 1: the Mac, Windows and Microsoft, We're going to take them out.
Speaker 1: And then a few years later that hadn't happened. So
Speaker 1: the company grew very nicely, but then they introduced the
Speaker 1: iPhone and that none that there was no revenue or
Speaker 1: profits based into those estimates. And we think about are
Speaker 1: their innovative companies today that are doing exciting things And
Speaker 1: that's where the technology world is so great, because there
Speaker 1: are companies working on internal innovation and new products where
Speaker 1: analysts cannot price them in, and so we're starting to
Speaker 1: see downgrades. You know, it's funny, is you know, back
Speaker 1: in November always saw our upgrades of companies, example like
Speaker 1: Navidia three forty share, we were seeing upgrades, analysts were
Speaker 1: chasing each other with targets that were higher, and now
Speaker 1: at to twenty the stocks down thirty cent, same company,
Speaker 1: same business, same innovation, we're seeing downgrades. There were no
Speaker 1: downngrades at three forty and so it just seems like
Speaker 1: the Wall Street and some of the analysts that are
Speaker 1: focused on generating commissions around trading, they do the exact
Speaker 1: opposite of what you should do for a long term investing.
Speaker 1: You guys get commissions, Paul, You we should definitely get
Speaker 1: I mean, you get ranked by your salesforce and stuff,
Speaker 1: and you know, making some big calls and things like that.
Speaker 1: So kindly. Yeah, but I think the exact opposite of
Speaker 1: how to compound wealth. You want to buy low and
Speaker 1: sell high. To be downgrading stocks that are down thirty
Speaker 1: out of cash flows, that of, you know, exciting opportunities
Speaker 1: in the future. That doesn't seem like the great long
Speaker 1: term decisions. I hear you, all right, good stuff. I mean,
Speaker 1: I don't know. I mean, I guess I kind of
Speaker 1: did that back in the day on the cell side,
Speaker 1: Adam Gold, founder and chief investment officer Cantampent. That's the
Speaker 1: sin he's telling us. That's the wrong thing, that's not
Speaker 1: serving your customers. I was a big investment banker as
Speaker 1: an analyst. We did tons of deals in my space.
Speaker 1: I'll mention if I'm still on, I'll mention one more
Speaker 1: example of a great investor. The Oracle from Omaha has
Speaker 1: deployed over thirty in the last month. Yea, I know
Speaker 1: he's been putting money to work. We appreciate that. Adam Gold,
Speaker 1: thank you so much. Founder in chief investment Officer Cadam LLC. Matt,
Speaker 1: you have any idea what Elon Musk is doing with Twitter? I? Uh, well,
Speaker 1: you know, what we watched. We all watched that Ted
Speaker 1: talk thing last week, and I thought it was really fascinating. Um,
Speaker 1: he says this is something that he wants to do
Speaker 1: for democracy, for society. It's a free speech issue and
Speaker 1: not an economic move. Okay, A lot of people aren't
Speaker 1: going to take that at face value, and especially you know,
Speaker 1: on the left, there's a lot of concern that he
Speaker 1: wants to I don't know why there is this concern,
Speaker 1: but everyone's saying that he's kind of coming to the
Speaker 1: rescue of pro Trump people or I have no idea
Speaker 1: about that. He seemed genuine and uh, I think it's
Speaker 1: fascinating to watch. It's fascinating to watch, and fortunately for us.
Speaker 1: Matt Winkler, the founder of Bloomberg News, editor in chief
Speaker 1: emeritus of Bloomberg News, he's paying attention to this, uh
Speaker 1: so he can share his thoughts. Matt. You know, we
Speaker 1: we look at Elon Muskin. I as a traditional investor
Speaker 1: am uncom table with this guy, particularly if I were
Speaker 1: a shareholder of one of his companies, even though the
Speaker 1: stock has done so great and he's made so many
Speaker 1: investors so much money. How do you think about Elon
Speaker 1: musk These days. You have to think about him in
Speaker 1: the context of maximizing shareholder value. And if you go
Speaker 1: back to the initial public offering of Tesla in two
Speaker 1: thousand ten, Uh, to understand what has happened to Tesla,
Speaker 1: you have to put an exponent next to Tesla, so
Speaker 1: it's Tesla to the twelfth power. So this is a
Speaker 1: company that's gone from a billion dollars to UH a
Speaker 1: trillion today. And um, it wasn't luck. It was if
Speaker 1: you think about it, two thousand and ten, virtually nobody
Speaker 1: took electric vehicles seriously, today everybody does. And disclosure mat
Speaker 1: you are a Tesla driver owner, right I am, and
Speaker 1: a happy one. Yeah, And I can attribute that that
Speaker 1: to uh combination of meeting Musk for an interview at
Speaker 1: Bloomberg and SpaceX headquarters back in two thousand fourteen, and
Speaker 1: after we got done, h he invited us to try
Speaker 1: a Tesla or two, and uh, you know that's where
Speaker 1: it started. But you know, really all kidding aside. What
Speaker 1: is relevant about Tesla is that it has been very
Speaker 1: methodical and very disciplined about growth and that's the something
Speaker 1: that's the one thing that gets investors excited. And Tesla's
Speaker 1: had growth that has been unequaled by any of the
Speaker 1: top largest companies today. And Tesla got to its one
Speaker 1: trillion market capitalization in eleven years sooner, if you like,
Speaker 1: than any of the companies were familiar with, whether it's
Speaker 1: Microsoft or Amazon. Facebook got there briefly, but it didn't
Speaker 1: last very long. This the Tesla evaluation is sticky. And
Speaker 1: you may have noticed that last Thursday, Uh, one of
Speaker 1: Tesla's champions, arc Cathy would Um, increased her target more
Speaker 1: than to forty dollars a share. So that's an indication
Speaker 1: of just where testing she's Tesla. I mean, you point
Speaker 1: out in your column that she um forecast I think
Speaker 1: it's trillion dollar valuation before anyone else did and stuck
Speaker 1: to her guns. Yeah and uh. And there's a reason
Speaker 1: for that, is that why is Tesla done as well
Speaker 1: as it done, because it actually anticipates the things that
Speaker 1: it needs before everybody else does. And what I mean
Speaker 1: by that is Musk was very concerned about vertical integration
Speaker 1: long before COVID nineteen became a problem for every company worldwide. Uh.
Speaker 1: He did things to achieve supply security, if you like
Speaker 1: Nicol for example, very important essential component in electric vehicles,
Speaker 1: and he made several agreements to get nick Um so
Speaker 1: that the supply would not be disruptive for UH Tesla.
Speaker 1: And the latest quarter, for example, show the deliveries were
Speaker 1: much better than what people anticipated, even though he said
Speaker 1: it was a very difficult quarter. So this is a
Speaker 1: company that actually has been very strategic in the way
Speaker 1: it goes about UH manufacturing vehicles. Their factories are built
Speaker 1: from the ground up, whether it's Berlin, Austin, Texas, UH Fremont, California. UM.
Speaker 1: And he's done incredible. Look he I still use PayPal.
Speaker 1: I noticed this weekend. I was like, wow, I'm still
Speaker 1: using PayPal and we saw him last week. I think
Speaker 1: send for civilian citizens to the I S S which
Speaker 1: is like mind blowing Lee, just unbelievable how well he's
Speaker 1: done in SpaceX. Why do you think he um makes
Speaker 1: all this noise on Twitter and challenges the SEC? I mean,
Speaker 1: is it just because he can? You know, I don't
Speaker 1: actually spend a lot of time thinking about what you
Speaker 1: and others would consider his eccentricities. Otherwise smoking a joint
Speaker 1: on Joe Rogan's podcast, Are there other than to say
Speaker 1: this that he isn't the first brilliant chief executive officer,
Speaker 1: founder of a company if you like, to have attributes
Speaker 1: that people have considered socially questionable. And that's just has
Speaker 1: been something that we've seen in history. And so what
Speaker 1: is far more important, the context that I think everybody
Speaker 1: misses is this company, Tesla, has transformed the world's view
Speaker 1: of vehicles to the extent that Tesla itself is a
Speaker 1: robotic company if you like, you know it's not a
Speaker 1: car company. How do you view by the way. I also,
Speaker 1: I don't want to sound too naive, but you have
Speaker 1: to give it to him that he's on so much
Speaker 1: to fight climate change. He at least says he wants
Speaker 1: to buy Twitter right now to support free speech and democracy.
Speaker 1: I mean, this is a guy who has big ideas
Speaker 1: about helping the world right. So people can be cynical
Speaker 1: about that because he's made so much money doing it, um,
Speaker 1: but you can't deny the fact that he's changed the
Speaker 1: way we think about the future of transportation. Yeah, and
Speaker 1: if you consider all the obstacles a raid against him,
Speaker 1: remember a lot of states wouldn't let Tesla's sell its
Speaker 1: vehicles the way it wanted to because the car dealer lobby,
Speaker 1: if you like, was so powerful. Um, and he somehow
Speaker 1: got through that. The fact that now everybody's in this
Speaker 1: market and Tesla has been able to hold its market
Speaker 1: share consistently even though the market has expanded dramatically tells
Speaker 1: you something about the quality of the vehicles that he has.
Speaker 1: And and Cathy would for example, says that in battery
Speaker 1: tech knowledge, he alone Tesla is at least three years
Speaker 1: ahead of its competitors. Matt Um, your column today has
Speaker 1: got the headline in defense of Elon Musk managerial excellence. Uh.
Speaker 1: Tesla CEO's track record proves he's a pretty eminent builder
Speaker 1: of businesses and maximizer shareholder value. He retweeted that out today.
Speaker 1: Did you see that? Somebody told me that your column formed.
Speaker 1: He's got a couple of followers, so I'm thinking, I
Speaker 1: think this might get Mr Winklers some notoriety because nobody
Speaker 1: let's let's just founded Bloomberg News, you know, I mean,
Speaker 1: but Musk does have eighty two point four million followers.
Speaker 1: That's big. I'm just a reporter trying. You're just a reporter.
Speaker 1: You and Chinpeg and your team doing great stuff as always,
Speaker 1: lots of data in your column here. So again, check
Speaker 1: it out on Bloomberg dot com. Uh, and on the
Speaker 1: Bloomberg terminal and on Twitter apparently and on Twitter want
Speaker 1: a switch to crypto? Taxes? You have to pay taxes
Speaker 1: apparently meant on your crypto gains. Tom, we'll write founder
Speaker 1: of Wealth Ability Joints us here. Tom, give us your overview.
Speaker 1: What do you what do you tell your clients about
Speaker 1: crypto and the tax implications of crypto and all things crypto? Thanks, Matt. Well,
Speaker 1: what you have to realize is that every time you
Speaker 1: use crypto, you've sold it and it's treated as a
Speaker 1: taxabull transaction. So you have to keep track not just
Speaker 1: when you actually sell it. Let's say you're you know,
Speaker 1: selling to Bitcoin went up and so you're selling something,
Speaker 1: but you're actually using it. When you use it, you
Speaker 1: also have to pay tax on that. And losses are
Speaker 1: capital losses, so they're limited. Gains are capital gains, and
Speaker 1: so if you hold it for more than a year
Speaker 1: you actually get a tax benefits. Wait, uh, capital losses
Speaker 1: are limited. They can only upset capital gains. Ah, that
Speaker 1: is such a huge bummer. Um, I'm sure that no
Speaker 1: one's keeping track of bitcoin. They're using when they buy something. Um.
Speaker 1: In fact, this whole area is so new. Do you
Speaker 1: get a lot of people coming to you saying like,
Speaker 1: I just need uh you know crypto tax rules one
Speaker 1: oh one? Because how how would you have any idea
Speaker 1: what kind of tax burden coin or or an n
Speaker 1: f T is going to generate for you? Well? Yeah, totally.
Speaker 1: Because you know, if you if you spend money, you
Speaker 1: don't typically think, oh I've got a tax taxical transaction
Speaker 1: there I have to track when I spend money. You
Speaker 1: don't think that. But with crypto you do. It's like
Speaker 1: it's like if you actually, um use the stock. Let's
Speaker 1: say you use some of your apple stock to buy something,
Speaker 1: it would be the same thing. Uh. That's the way
Speaker 1: the I R S treats it. So tracking it is
Speaker 1: the actually the number one issue right now is how
Speaker 1: do you track all of your crypto transactions. I'm just
Speaker 1: guessing the I R S has no idea what to
Speaker 1: do with crypto? Are they tracking this stuff closely? Did
Speaker 1: they know what they're doing? No? I don't think so.
Speaker 1: I actually don't think anybody really knows what they're doing
Speaker 1: from a tax standpoint. Let's never stopped the I R
Speaker 1: s yep. That's the point that has never stopped the irs.
Speaker 1: What However, in the in the Infrastructure bill last year,
Speaker 1: they did they are going to require crypto exchanges to track.
Speaker 1: So at least the crypto exchanges will have to track.
Speaker 1: This is kind of like back in the early um nineties. UM,
Speaker 1: I recall when people were day trading and they had
Speaker 1: to track every single day trade. But now the brokers
Speaker 1: do it, right, that's what's going on in crypto. All right, Tom,
Speaker 1: thanks very much, appreciative. Tax Day wasn't confusing enough. Now
Speaker 1: we've got crypto, you have to you know, track the
Speaker 1: taxable uh transactions that you have with crypto. Tom will right,
Speaker 1: he's a founder of wealth Ability giving us some thoughts
Speaker 1: here on crypto when I don't know, I don't I
Speaker 1: don't think I've ever claimed anything on my tax returns
Speaker 1: for crypto at this point, and I you know what,
Speaker 1: I don't plan on doing it ever. About that you're
Speaker 1: gonna have to do really yeah, I mean, at some
Speaker 1: point it's going to become, um, just like any other asset,
Speaker 1: or you're gonna have to have regulators to declare it
Speaker 1: like a currency. Wad of cash in my pocket I'm
Speaker 1: showing Matt, that's how we roll here. Matt. Back in
Speaker 1: the summer of before between my first and second year
Speaker 1: business school, Duke did an internship at Merrill Lynch Investment Bank.
Speaker 1: My key transaulor Meryl. My key transaction from that summer
Speaker 1: was a million dollar I think that was amount liquid
Speaker 1: yield option note a lion for ker McGee, the energy
Speaker 1: company down in Texas. Uh wow, yep. We can't believe
Speaker 1: that you have trouble understanding crypto when you're dealing with
Speaker 1: such incredibly complex transactions. I have no idea what you
Speaker 1: just said. Yep, it was cool. Discounted the note for
Speaker 1: Kirman Ghee. That was pretty cool. I can't remember the
Speaker 1: banker who I pitched it with, but anyway, that was
Speaker 1: good stuff. Anyway, they reported some numbers today. Uh Shali
Speaker 1: Bassing Joints is here in our Bloomberg in Erector Broker
Speaker 1: studio Shnale. How did my friends at Bank of America
Speaker 1: Merrill Lynch do. It's pretty fascinating. You would not have
Speaker 1: expected this to be a quarter where anything hit a record,
Speaker 1: but advisory fees for the first quarter hit a record,
Speaker 1: equity trading hit a record, and part of that was
Speaker 1: because you have buy side clients of the likes of
Speaker 1: hedge funds and other clients, big investors still taking on
Speaker 1: financing in order to engage with these markets, more derivatives
Speaker 1: trading and so really robust trading desks there in the
Speaker 1: face of expected high declines. Talk to me about compensation.
Speaker 1: That's my favorite topic. We talked about these investment banks.
Speaker 1: What are what are the big banks saying now because
Speaker 1: they're paying their junior bankers a lot more, I assume
Speaker 1: that means they're paying their senior bankers more. How big
Speaker 1: of an issue is this for the margins, Yeah, it
Speaker 1: depends on who you are. For Bank of America in particular,
Speaker 1: remember their headcount has declined steadily over the last couple
Speaker 1: of quarters, so you know, you can raise prices for
Speaker 1: some bankers, but you can also not have as many
Speaker 1: of them. Bank of America is keeping control of costs.
Speaker 1: And remember it's not just the bankers, it's the investment
Speaker 1: in technology. This quarter, Bank of America generated more than
Speaker 1: half of its total sales through digital means. Yes, fascinating,
Speaker 1: and so you are seeing they have hundreds of patents
Speaker 1: out for more you know, advanced technology and you do
Speaker 1: see them really keeping control over their costs at a
Speaker 1: time where they're willing to invest to gain more share
Speaker 1: in a tough market. So we've this is the last
Speaker 1: of the major Wall Street banks to report, right, if
Speaker 1: you step back and look at them, can you say
Speaker 1: something universal about the banks this season? I go back
Speaker 1: to what Jamie Diamond and his executive said a couple
Speaker 1: of days ago, which is that the probability of a
Speaker 1: recession went from being low to less low. So you
Speaker 1: have all these banks that are, you know, not answering
Speaker 1: questions necessarily on what the probability of a recession is,
Speaker 1: but the fact that it may happen, and this is
Speaker 1: what their businesses could look like in that scenario. Interestingly,
Speaker 1: in the event of an interest rate rise that's more
Speaker 1: severe than initially expected, Bank of America says that rates
Speaker 1: would have to rise a lot more in order to
Speaker 1: impact the way that people are borrowing, because right now,
Speaker 1: consumers are still pretty healthy at least how they look
Speaker 1: at it. Yeah, when I when I think about Bank
Speaker 1: of America, I think about Wells Fargo. I think about
Speaker 1: you know, real lending to real businesses on main street,
Speaker 1: whether that's Main Street small town, you know, say main street,
Speaker 1: big city, USA, but really lending to fund growth. What
Speaker 1: are they saying about loan demanding? I mean, do you
Speaker 1: want to mortgage a five percent? That is mortgage? I
Speaker 1: mean historically, I mean it's not three percent that Matt,
Speaker 1: you know the mortgage arbitress. You're got just a couple
Speaker 1: of months. I'll spend my easter somebody talking to mortgages somehow.
Speaker 1: But we are yes. I mean, listen, it does have
Speaker 1: an impact here on residential home loan originations, and you
Speaker 1: see it a lot of the major banks. But the
Speaker 1: thing is credit card spend and credit card borrowing is
Speaker 1: still pretty high, So there is still borrowing. It's just
Speaker 1: not everywhere necessarily. So in terms of assumptions, right, um,
Speaker 1: do we have to assume that the FED is going
Speaker 1: to drive us into a recession? And I mean because
Speaker 1: that will change loan demand? Right, The assumption is that
Speaker 1: you can't look out past three months. The assumption is
Speaker 1: the next three months things could be okay, but after
Speaker 1: that things are very cloudy, and it's really anyone's guest
Speaker 1: where things go. Remember, Bank of America has sold off
Speaker 1: pretty heavily this year, about four cent or so so
Speaker 1: they are rising today, but it seems like these banks
Speaker 1: are trading within a range here with not too much
Speaker 1: upside on how some of those clouds leave the horizon.
Speaker 1: When I think about the retail side of the business, Shannale,
Speaker 1: it's just I always read stories about Bank A poaching
Speaker 1: broker from Bank B. Is that still a thing? Oh? Yeah.
Speaker 1: People love the wealth business and if you look at
Speaker 1: the price to book ratios, that means a place that
Speaker 1: they're trading at. It's really JP Morgan and Morgan Stanley
Speaker 1: trading more richly than anybody else, which shows you there's
Speaker 1: a premium on wealth here. Good stuff, good stuff Wall Street.
Speaker 1: I mean some good numbers. I think coming out of
Speaker 1: this first course, maybe the expectations were a little bit low,
Speaker 1: but we got through most of the big financials. Shale
Speaker 1: keeping us in the loop as she always does. Shanale,
Speaker 1: Basketball Street reporter for Bloomberg News. Thanks for listening to
Speaker 1: the Bloomberg Markets podcast. You can subscribe and listen to
Speaker 1: interviews with Apple Podcasts or whatever podcast platform you prefer.
Speaker 1: I'm Matt Miller. I'm on Twitter at Matt Miller three.
Speaker 1: Put on False Sweeney. I'm on Twitter at pt Sweeney
Speaker 1: before the pod cask. You can always catch us worldwide
Speaker 1: at Bloomberg Radio.