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Speaker 1: This is Bloomberg Daybreak Asia. It is Tuesday January in

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Speaker 1: Hong Kong, Monday January twenty three in New York and

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Speaker 1: coming up this hour, US equities jump, led by tech

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Speaker 1: shares as the market looks ahead. Two key earnings from

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Speaker 1: the sector. Microsoft is investing ten billion dollars in Open

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Speaker 1: Ai and Spotify is planning to cut about six percent

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Speaker 1: of its workforce US to increase pressure on China to

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Speaker 1: stop importing Iranian oil. Parts of China get a record

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Speaker 1: called new Calls for Gun Reform after the killing of

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Speaker 1: eleven lunar New Year's Eve revelers in California. I'm at

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Speaker 1: Baxter with Global News. Two more American men advanced to

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Speaker 1: the quarterfinals of the Australian Open. On Dan Schwartzman. I'll

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Speaker 1: have that story and more coming up in Bloomberg Spoorts.

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Speaker 1: That's all straight ahead on Bloomberg Daybreak Asia on Bloomberg

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Speaker 1: eleven three on New York, Bloomberg Washington, d C, Bloomberg

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Speaker 1: one six one, Boston, Bloomberg nine. Just Go Sirius XM

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Speaker 1: one nineteen and around the world on Bloomberg Radio dot

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Speaker 1: com and via the Bloombird Business app. Good morning. I'm

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Speaker 1: do Prisoner and I'm Brian Curtis. Here are the stories

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Speaker 1: we're following today. So we've had some gains on the

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Speaker 1: SNP five hundred dug and it's it's been four percent

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Speaker 1: year today. Doesn't sound like a lot, but it's part

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Speaker 1: of a twelve percent move off the October low, and

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Speaker 1: so it's definitely getting the attention of people. As you mentioned,

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Speaker 1: closing above four thousand for the first time in a month,

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Speaker 1: and I was just having to look at the two

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Speaker 1: day moving average. We're about one and a half percent

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Speaker 1: above the two hundred day. So I mentioned Microsoft up

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Speaker 1: two percent today, and we had some big news when

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Speaker 1: it came to a ten billion dollar investment in open Ai. Right, yeah, yeah,

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Speaker 1: that now that's something that was tipped early and we

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Speaker 1: had that, but this is confirmed now and it really

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Speaker 1: is a big push to take on for sure Google

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Speaker 1: Goal and others as well like Meta. We also have

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Speaker 1: in the news today. Elon Muski was back in court

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Speaker 1: today defending the famous tweet about taking Tesla private. Now

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Speaker 1: the shareholder, Susan suing Musk are contending these tweets were

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Speaker 1: lies and they resulted in big losses due to some

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Speaker 1: wild swings and Tesla shares over about ten days back

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Speaker 1: in eighteen. That was before this plan was abandoned. Well, today,

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Speaker 1: Mr Musk told a jury private funding had been secured

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Speaker 1: and the Saudi Public Investment Fund was unequivocal in its

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Speaker 1: support from this transaction. Mr Musk also said he could

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Speaker 1: have sold shares in SpaceX well. The lawyer for the

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Speaker 1: shareholders was focused on showing that Mr Musk's tweets were

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Speaker 1: premature and very little legwork was done. Musk argued that

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Speaker 1: the actual language of that tweet, considering taking Tesla private,

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Speaker 1: was not the same thing as saying the deal will

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Speaker 1: be done. Certainly, Mr Musk is no stranger to courtroom battles.

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Speaker 1: He has been nicknamed flon Elon for his ability to

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Speaker 1: escape unscathed. All right, let's circle back to Microsoft. We

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Speaker 1: do have Michael Cogino coming up, and we get that

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Speaker 1: and get a news update as well. A few more

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Speaker 1: details here on Microsoft saying that it is investing ten

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Speaker 1: billion dollars in Open AI over multiple years. It's being

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Speaker 1: done to help the company expand its artificial intelligence business

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Speaker 1: and compete with companies like Alphabet and Amazon, which we

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Speaker 1: alluded to earlier. Open Aiyes AI tool Chat GPT will

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Speaker 1: give a boost to Microsoft's Azure cloud service. Chat GPT

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Speaker 1: is an AI chat bought that has been trained and

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Speaker 1: designed to hold natural conversations. Microsoft said it plans to

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Speaker 1: use open aiyes models through throughout consumer and corporate products,

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Speaker 1: and will also release new categories of products based on

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Speaker 1: open ais work all at the time, it's coming up

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Speaker 1: on six minutes past the hour. D Baxter has Global

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Speaker 1: News from the nine six News Room, ed, Yeah, you're right,

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Speaker 1: Brian Biden, administration's top roun en voice, as the US

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Speaker 1: will end increase pressure to cease the imports of Iranian oil.

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Speaker 1: Envoy Robert Malley on Bloomberg's Balance of Power says the

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Speaker 1: US is stepping up actions to enforce nuclear sanctions right now.

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Speaker 1: You know the conversation we've had with the Chinese now

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Speaker 1: which go back several months, but they're going to be intensified,

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Speaker 1: as you know, We're going to have more contacts with

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Speaker 1: with the Chinese government and will make sure that they

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Speaker 1: understand why it is so important for US to make

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Speaker 1: sure that around cannot continue to export. He says sanctions

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Speaker 1: can never be enforced perfectly, of course, but the US

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Speaker 1: will do everything and its power to help China understand

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Speaker 1: the importance of doing so. With six more classified documents

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Speaker 1: found at President Joe Biden's home in Wilmington's over the weekend,

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Speaker 1: Bloomberg's Emory Hordern says, the latest batch is, well, it's

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Speaker 1: a little different than the other, not just as time

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Speaker 1: as vice president, but also what we've learned from the

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Speaker 1: lawyers is time at the Senate. Obviously, this is going

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Speaker 1: to be a huge headache. It's just growing really for

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Speaker 1: the White House. Maurice as the White House attack remains.

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Speaker 1: Comparing the way it is providing the documents and released

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Speaker 1: information to the way that Donald Trump did. Now, Bloomberg's

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Speaker 1: Rick Davis says that should not be the focus. Needs

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Speaker 1: to explain to the American people that he's made a

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Speaker 1: mistake here. Clearly he should not be in possession of

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Speaker 1: these documents. He's lost the high ground to Donald Trump,

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Speaker 1: so they shouldn't even be thinking about that at this point.

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Speaker 1: It's really all about how to maintain the legitimacy of

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Speaker 1: the Biden presidency. Meanwhile, Bloomberg's Jennie san Zeno says Biden

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Speaker 1: chief of staff Ron Klaine's announced departure should not come

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Speaker 1: as a surprise. It seems like a natural time for

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Speaker 1: him to step down because, of course, as Republicans take

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Speaker 1: over the House, the shift in focus from the White

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Speaker 1: House visa v Congress has changed a good deal, and

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Speaker 1: the administration has announced that Jeff Zience, former head of

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Speaker 1: the COVID Response Team, will step in his chief of staff. Now,

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Speaker 1: parts of China are experiencing records record lows they've never

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Speaker 1: seen before. China's halong Jen province recorded temperature below zero

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Speaker 1: sixty three point four person at sixty three point for fahrenheit,

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Speaker 1: that is fifty three degrees minus celsius. There were new

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Speaker 1: calls for tighter gun controls after the tragic shooting at

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Speaker 1: a lunar New Year celebration in Monterey Park, California, over

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Speaker 1: the weekend. Authorities now say eleven people died. Police say

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Speaker 1: the gun in a seventy two year old man took

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Speaker 1: his own life. Congresswoman Judy Choose says the gun laws

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Speaker 1: need to be looked at right now, people can still

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Speaker 1: buy guns without that check if they buy them online

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Speaker 1: or at a gun show or through personal sale. Meanwhile,

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Speaker 1: police say the shooter tried to do the same earlier

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Speaker 1: at another celebration not too far away, and Brandon SI

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Speaker 1: was just finishing his shift when confronted by the gunman.

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Speaker 1: At that moment, there were many people I was thinking about,

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Speaker 1: especially when I was fighting. I was thinking about everybody,

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Speaker 1: real life heroes. I managed to take the gun away

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Speaker 1: and the man fled later to go to Monterey Park

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Speaker 1: in San Francisco. I'm ed Baxter. This is Bloom the

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Speaker 1: time here nine minutes past the hour. I'm Brian Curtis,

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Speaker 1: along with Vonnie Quinn, and our guest is Michael Cogino,

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Speaker 1: President and portfolio manager at Permanent Portfolio Family of Funds. Michael,

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Speaker 1: great to have you on the program. We are in

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Speaker 1: a position here where it seems like both the bulls

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Speaker 1: and the barriss can see the finish line. You can

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Speaker 1: argue both sides pretty easily, depending upon unknown events in

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Speaker 1: the future. How do you see things developing? Yeah, good

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Speaker 1: to speak with you, Brian. Yeah. I think there's smart

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Speaker 1: minds all over on all sides of this this discussion. Um,

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Speaker 1: but you know, the interest rates, I think we're closer

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Speaker 1: towards the end of the tightening cycle than the beginning.

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Speaker 1: It's been a very volatile UM year, and we've had

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Speaker 1: a very aggressive move. A lot of the impact of

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Speaker 1: those rate moves have not been felt in the economy yet.

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Speaker 1: We're starting to see signs of that. Yet. We also

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Speaker 1: are starting to be Each successive rate increase gets us

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Speaker 1: closer and closer to the end where the perceived terminal

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Speaker 1: rate would be. And I think we're getting that. You're

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Speaker 1: starting to hear that in the public domain. Basis points,

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Speaker 1: fifty basis points, not much longer, etcetera, etcetera. And I

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Speaker 1: think the market is looking at that, because the market

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Speaker 1: tends to predict the future, UM is looking at that

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Speaker 1: as being the end of the tightening cycle and and

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Speaker 1: either stabilizing or potentially cutting. So, Michael, where do you

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Speaker 1: see the terminal rate? And does the FED get up

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Speaker 1: there and hang on or does it get up there

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Speaker 1: and immediately start decreasing rates again? Yeah? How are you Vanni? Um?

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Speaker 1: I uh, you know, I I think probably it's prudent

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Speaker 1: to slow down and let the impact of the rate increases,

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Speaker 1: you know, work their way through the economy. UM. And

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Speaker 1: I do see them probably staying roughly higher for a while.

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Speaker 1: Where that is, I'm not sure it's probably somewhere in

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Speaker 1: the five percent range. And I think the main reason

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Speaker 1: for not being sure is that we still don't really

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Speaker 1: know where inflation is going to settle. I don't see

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Speaker 1: it going back to two for a while. I think

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Speaker 1: it's going to be more stubborn. Um. I do see

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Speaker 1: it continue to decline, frankly, because there isn't as much

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Speaker 1: liquidity in the system. That wave is already hit and

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Speaker 1: it's receding. Um. And so you're starting to see the

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Speaker 1: the what you would expect inflation declining across the system.

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Speaker 1: But when it stops and slows down, we don't know yet.

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Speaker 1: It's at five percent, four percent, six percent. I don't

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Speaker 1: really know the other You think that we need a recession?

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Speaker 1: Do you do we need a recession to beat inflation?

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Speaker 1: And if we don't that we're going to probably if

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Speaker 1: we avoid recession, we'll probably have inflation sticky, as you say,

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Speaker 1: maybe three, and the FED will have to stay on

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Speaker 1: your back. Well. Yes, um, I have a hard time.

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Speaker 1: But I think the soft landing story is still potentially

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Speaker 1: out there. Um. Although I think it's risky to bet

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Speaker 1: on it. The fact of the matter is, I think

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Speaker 1: it's very difficult to have a real deep recession with

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Speaker 1: unemployment as low as it is, and so as long

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Speaker 1: as people are working, they're spending money. And that's a

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Speaker 1: big chunk of the US economy. That does get into

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Speaker 1: geopolitical risk. It doesn't get into other issues, but it

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Speaker 1: does put some kind of a foundation under the economy

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Speaker 1: which makes a soft landing viable. Now, is that going

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Speaker 1: to happen? I mean, labor is a lagging indicator. You

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Speaker 1: can all of a sudden see labor, you know, the

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Speaker 1: bottom fallout, and unemployment goes up very very quickly. Then

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Speaker 1: that's a different issue. And that's why markets are so unpredictable.

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Speaker 1: We just don't know. But but I do think that

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Speaker 1: it's hard to get a deep recession with unemployment as

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Speaker 1: low as it is, and and so that would argue

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Speaker 1: for the FED to slow down and eventually stop and

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Speaker 1: sit tight for a while and see what happens. But

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Speaker 1: not cut. I think a quick cut. I don't see

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Speaker 1: that happening at the moment. Michael's regards do political risks

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Speaker 1: you just mentioned them. What are you telling your clients

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Speaker 1: about China this year? Are you concerned it all the

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Speaker 1: China might turn into one? Well? I think China is

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Speaker 1: always a risk. Um. I don't trust the data the

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Speaker 1: data coming out of China often I need to see it,

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Speaker 1: you know, uh, support by other anecdotal evidence usually um.

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Speaker 1: But you know, we've had this sort of one day

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Speaker 1: they're opening, one day they're not. One day the economy

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Speaker 1: is expanding, one day it's not. And there is always

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Speaker 1: the political risk in China, given the very different system

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Speaker 1: than what we have and the relations between the two countries.

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Speaker 1: So I do think it's always a risk. And I

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Speaker 1: think to the degree they're growing and everybody's getting along,

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Speaker 1: that's a tailwind to global economic activity and and a

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Speaker 1: tail wind of the US. If not, it's a headwind.

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Speaker 1: And and I think it varies depending on the headlines. Um.

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Speaker 1: And that's been true of late here, and I think

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Speaker 1: that's going to continue. Do you like gold here? Yeah,

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Speaker 1: we do, Um, we do. Uh. You know. One thing

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Speaker 1: that really hasn't gone been discussed much is that we

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Speaker 1: we have recently just passed in the last six months

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Speaker 1: another three trillion and spending. I believe between the Inflation

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Speaker 1: Act and the recent budget bill, that's gonna be more

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Speaker 1: liquidity coming into the economy. And so one of the

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Speaker 1: reasons inflation might be more stubborn or maybe might might

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Speaker 1: reduce and then you know, uh stagnate for a while.

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Speaker 1: In terms of the reduction is that you've got more

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Speaker 1: liquidity coming into the economy at some level, um due

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Speaker 1: to that stimulus spending, and we don't know the impact

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Speaker 1: of that yet, just like we don't know the ultimate

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Speaker 1: impact of all the rate increases coming through. So there's

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Speaker 1: a little bit of an uncertainty factor there, but but

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Speaker 1: we do um, you know, we do see this is

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Speaker 1: sort of an issue for two thousand twenty three. As

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Speaker 1: regards commodities, Michael, I know it's something you keep an

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Speaker 1: eye on very closely. What are you looking for. We've

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Speaker 1: already had a gain since January one, and things like

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Speaker 1: gasoline and natural gas. What about agricultural commodities and more

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Speaker 1: importantly you know, metals, Yeah, and I think you know

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Speaker 1: the question on gold. We we do like gold at

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Speaker 1: the precious metal aspect of it. The alternative currency, the

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Speaker 1: fact that if the FED is closer to the end

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Speaker 1: than rising rates, um, you're likely to get a bouncing old.

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Speaker 1: We've seen some of that, and uh, you know, the

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Speaker 1: dollar is not going to stay as strong as it

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Speaker 1: has been for the last you know, year, year and

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Speaker 1: a half. It's it's been hitting all time highs against

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Speaker 1: other currencies and decade highs. And that's not sustainable, especially

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Speaker 1: as other countries, UM, you know, raise interest rates to

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Speaker 1: meet our interest rates, or you would get a global

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Speaker 1: economic growth story. UM. And so we do like gold

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Speaker 1: in the long term as a hedge against money creation,

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Speaker 1: inflation uncertainty. UM. With respect to the broader commodity space,

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Speaker 1: I think we are in maybe a longer turn upturn,

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Speaker 1: especially if you do get growth. UM. There was under

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Speaker 1: investment over the last ten years or so. You had

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Speaker 1: you know, uh, not a lot of people investing in it.

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Speaker 1: A lot of those assets were consolidating UM. People were

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Speaker 1: investing in growth stocks and higher multiple type assets versus commodities.

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Speaker 1: And so I think you're at the beginning of a

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Speaker 1: multi year commodity cycle that uh, that could have some

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Speaker 1: staining power, especially if you get some support from something

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Speaker 1: like a China or other emerging markets, or a growth

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Speaker 1: story in the US coming out of recession. Michael, we

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Speaker 1: touched on this a little, but just for investors coming

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Speaker 1: into the show at this time, your your thoughts on earnings,

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Speaker 1: whether or not, earnings will come down quite significantly this year.

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Speaker 1: Like Mike Wilson from Oregon Stanley, that was a clip

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Speaker 1: we played earlier. He believes that. Or do you think

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Speaker 1: that the cost cutting that we've seen and sort of

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Speaker 1: the action the management skills of these companies will mean

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Speaker 1: that the earnings hanging there this year? Well? And I

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Speaker 1: would add one more thing. Sometimes inflation drives up the

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Speaker 1: earnings numbers and the revenue numbers because of rising prices.

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Speaker 1: And if you have you know, the power to pass

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Speaker 1: on you know, rising costs, you you can raise revenues

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Speaker 1: and earnings. But with inflation, that's the interplay because on

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Speaker 1: one hand you have higher costs, input costs, labor cost,

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Speaker 1: material costs, etcetera. UM, And and at some point the

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Speaker 1: benefits of inflation on the revenue side get outweighed the

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Speaker 1: costs of inflation, and then the estimates and the earnings

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Speaker 1: come down. I don't know where that is, and it's

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Speaker 1: different by industry and by individual characteristics, but I do

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Speaker 1: think there's going to be more pressure on earnings and revenues. UM.

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Speaker 1: You know, I do think an economic slowdown of some

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Speaker 1: sort is real at some level. I don't know whether

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Speaker 1: it translates into one outright recession, but I do see

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Speaker 1: some you know, economic factors may be weakening a little bit. Here.

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