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Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.

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Speaker 2: Welcome to the Daybreak Asia podcast. I'm Doug Chrisner. On

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Speaker 2: today's episode, we'll preview the trading week ahead in the

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Speaker 2: APAC region, as well as tomorrow's decision from the Bank

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Speaker 2: of Korea, plus a very busy week stateside. At the

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Speaker 2: end of the week, we'll get that PCE inflation data

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Speaker 2: obviously the Fed's preferred measure, and midweek earnings from Nvidia

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Speaker 2: are due coming up in a moment or two. We'll

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Speaker 2: be speaking with Chuck Camello. He is the president and

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Speaker 2: CEO at Essex Financial Services. But let's begin in Sydney.

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Speaker 2: Joining me now is Garfield Reynolds. He leads Bloomberg's Markets

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Speaker 2: Live team for the Asia Pacific. Can we begin with

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Speaker 2: the Bank of Korea. Obviously that's the first major event

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Speaker 2: that we have in the APAC region, and I'm wondering

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Speaker 2: whether or not the BOK is going to be inclined

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Speaker 2: to cut rates because of this threat of potential US tariffs,

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Speaker 2: and I'm thinking particularly of steel when it comes to

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Speaker 2: South Korea. Is that a possibility.

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Speaker 1: Well, the tariffs are certainly something that's going to be

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Speaker 1: very much on the Bank of Korea's mind. In general,

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Speaker 1: the situation with the Korean economy is looking pretty grim

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Speaker 1: as well as some of the concerns around. You're both

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Speaker 1: direct impacts from tariffs and then the indirect impacts. Even

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Speaker 1: though China itself is looking as though it can shrug

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Speaker 1: off at least some of the tariff pain, the overall push.

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Speaker 1: We had a US representatives highlighting the idea that the

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Speaker 1: metals tariffs are ultimately aimed at China, so Korea is

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Speaker 1: very China exposed as well. That doesn't help. And the

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Speaker 1: political uncertainty created by what went on with the former

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Speaker 1: president imposing martial law and then being impeached and then

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Speaker 1: being removed. We've got poor consumer confidence, poor business confidence.

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Speaker 1: There's a lot not to like about Korea's economy. So

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Speaker 1: the expectation is at the Bank of Korea will downgrade

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Speaker 1: its growth expectations and therefore feel obliged to cut even

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Speaker 1: at a time when it does have some concerns that

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Speaker 1: cutting rates will weaken the currency further and add to

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Speaker 1: the inflation risks. But the growth side of the equation

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Speaker 1: is seen very much as driving them to cut rates.

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Speaker 2: So I mentioned steel obviously semiconductors is the big export

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Speaker 2: for the South Korean economy, and we know that the

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Speaker 2: Trump administration has already threatened to place tariffs on chips.

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Speaker 2: Is the chip industry in South Korea braced for any

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Speaker 2: of this?

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Speaker 1: I don't think it's such a huge concern for them

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Speaker 1: in particular. A lot of the heat when it comes

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Speaker 1: to what's been going on with China and with tariffs

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Speaker 1: has been on the AI side of the chip industry,

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Speaker 1: and South Korea to some extent, missed the boat a

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Speaker 1: little bit there. That's part of why its equities market

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Speaker 1: has lagged so far behind Taiwan's, so South Korea's you're

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Speaker 1: more stuck making the chips that were vital about five

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Speaker 1: ten years ago, which in tech terms is a couple

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Speaker 1: of centuries ago.

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Speaker 2: Yeah, I think they still in terms of AI do

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Speaker 2: participate in those high bandwidth memory chips. So companies like

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Speaker 2: Samsung and Skhiinex. Can we talk a little bit about

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Speaker 2: inflation in your neck of the woods? I think we

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Speaker 2: have consumer inflation data this week, right, and whether or

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Speaker 2: not that's going to play into the thinking at the

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Speaker 2: Reserve Bank of Australia. What say you?

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Speaker 1: The RBA will keep a very close eye on the

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Speaker 1: data that comes out this week, which is the it's

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Speaker 1: the monthly CPI, which in Australia is still something of

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Speaker 1: an innovation. The RBA traditionally pays a lot more attention

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Speaker 1: to the quarterly releases. We had one of those at

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Speaker 1: the end of last month before or the fourth quarter

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Speaker 1: of twenty twenty four, which that one came in relatively

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Speaker 1: mild and so helped to back the RBA's decision to

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Speaker 1: cut rates. However, the labor market data that came out

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Speaker 1: last week was so strong that it's also backed the

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Speaker 1: RBA's extreme caution about the idea that it would be

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Speaker 1: cutting rates again anytime soon. With that set up, I

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Speaker 1: think there's some asymmetric risks here. If the monthly CPI

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Speaker 1: reading comes in soft, I don't think the RBA will

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Speaker 1: pay a lot of attention to that. They'll be of

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Speaker 1: the mind that well, we need more data to be sure,

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Speaker 1: especially given what's been going on the labor market.

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Speaker 2: So what is that tight labor market in Australia reflecting

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Speaker 2: right now? Which industries are doing well? Is it mining

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Speaker 2: and materials, is it stuff that is related to the

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Speaker 2: services economy? What is driving the demand for labor.

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Speaker 1: Well, it's broad, but a lot of it is to

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Speaker 1: do with some of us, to do with the governments

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Speaker 1: have been expanding what they're doing. There's also very tight

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Speaker 1: supply when it comes to trades people you know, plumbers, electricians,

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Speaker 1: we have and that's the sort of the area that's

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Speaker 1: been really big on driving concerns about transmission of tight

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Speaker 1: labor conditions towards higher prices. There's a lot of higher

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Speaker 1: prices that are to do with supplies of materials when

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Speaker 1: it comes to the building industry, but there's also concerned

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Speaker 1: that there's just not enough builders and building associated trades.

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Speaker 1: You're not enough people around to do those jobs, and

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Speaker 1: that that's an underlying and concern when it comes to inflation, Garfield.

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Speaker 2: Before I let you go, I have to ask about

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Speaker 2: the inflation story in Japan. We get CPI data this

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Speaker 2: week for the city of Tokyo as a leading indicator

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Speaker 2: for what can happen in the broader economy in Japan,

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Speaker 2: and the expectation in the market right now is that

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Speaker 2: the Bank of Japan is on the verge of tightening again.

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Speaker 2: I don't know when that will be. There's a debate

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Speaker 2: in that I was talking to m Live strategist your

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Speaker 2: colleague Mary Nicola in Singapore last week. The possibility exists

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Speaker 2: maybe that we could get a rate hike in March.

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Speaker 2: I'm looking at a much stronger currency right now, on

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Speaker 2: the strong side of one forty nine against the dollar.

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Speaker 2: Where is Tokyo, the city of Tokyo in the inflation

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Speaker 2: story right now.

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Speaker 1: Well, that Tokyo CPI indicator is often extremely important because

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Speaker 1: it offers very a very big guy to where the

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Speaker 1: national one will come in, which will come in some

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Speaker 1: weeks afterwards. And in the current environment where we had

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Speaker 1: a strong national CPI report recently, that helped drive that

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Speaker 1: speculation you talked about when it comes to the BOJ,

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Speaker 1: and we've got a strong yen on the back of it,

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Speaker 1: partly because those it's a self reinforcing loop. The concerns

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Speaker 1: about inflation and the potential for BOJ tightening has helped

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Speaker 1: to drive bond yield higher, so that helps to drive

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Speaker 1: the yen as well along with that rate situation. So again,

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Speaker 1: traders will be looking at that Tokyo CPI for any

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Speaker 1: hints that that's going to increase the pressure on the BOJ,

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Speaker 1: and to some extent, the BOJ have made things harder

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Speaker 1: for themselves because they have had a tendency to not

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Speaker 1: really gear up as far as how they're guiding the

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Speaker 1: market until quite close to actual meetings. So last time around,

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Speaker 1: when they hiked in the initial sort of period for

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Speaker 1: the first sort of half or so of the period

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Speaker 1: between rate meetings, they were given the impression that, yes,

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Speaker 1: we're going to hike eventually, but we're going to take

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Speaker 1: our time about it, sort of poo pooing the idea

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Speaker 1: that they would really be so radical in their terms

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Speaker 1: as to go in January. And then just about ten

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Speaker 1: days or so before the actual meeting was when there

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Speaker 1: were a couple of appearances from officials that made it

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Speaker 1: clear that this was on and then they did indeed hike.

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Speaker 1: So even now where the again, the pricing at the

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Speaker 1: moment is mostly for May or June as the likely venues,

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Speaker 1: and March isn't seen as a major chance, but that

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Speaker 1: can change very quickly if the BOJ provides some signals

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Speaker 1: to the market that March is a live meeting, So

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Speaker 1: that's helping to keep that speculation bubbling away, and unless

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Speaker 1: if Tokyo CPI comes in strongly then we'll get an

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Speaker 1: extra step up in that and an extra step or

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Speaker 1: two up in the end.

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Speaker 2: Garfield, always a pleasure. Thank you so much. Garfield Reynolds,

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Speaker 2: who who leads Bloomberg's Markets Live team from Sydney, joining

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Speaker 2: us here on the Daybreak Asia podcast. Welcome back to

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Speaker 2: the Daybreak Asia Podcast. I'm Doug Chrisner. Certainly will be

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Speaker 2: a busy week state side. We'll get earnings from Nvidia

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Speaker 2: on Wednesday, and then Friday. It's the Fed's preferred measure

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Speaker 2: of inflation. That's when we get the core PCE. Joining

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Speaker 2: me now for a closer look is Chuck Amelo. He

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Speaker 2: is the president also the CEO at Essex Financial Services,

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Speaker 2: joining us from south central Connecticut on a Sunday night

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Speaker 2: here in the States. Chuck, thanks for making time to

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Speaker 2: chat with us. Can we begin with the inflation story,

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Speaker 2: because I think what may have been a little unnerving

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Speaker 2: at the end of last week was the reading from

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Speaker 2: the University of Michigan on inflation expectations, particularly that longer

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Speaker 2: term measure, which is now at the highest level in

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Speaker 2: nearly three decades. That's not the information that they FED

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Speaker 2: would welcome. I would imagine, how do you understand where

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Speaker 2: we are right now in the inflation story.

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Speaker 3: Yeah, well, thank you so much for having me on tonight,

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Speaker 3: and yees listen that that is the big one right

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Speaker 3: in inflation when when we talk about it in the

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Speaker 3: office among our team, you know, we took a poll

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Speaker 3: and by far, both on the personal and professional level,

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Speaker 3: professional in this setting being more important. It was the

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Speaker 3: number thing, number one thing that our folks were worried about.

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Speaker 3: And I have to tell you from from many conversations

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Speaker 3: and meetings we have with clients, it's it's the same

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Speaker 3: on the client side. So look, if if you look

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Speaker 3: at the last inflation numbers that came in with CPI, right,

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Speaker 3: I mean it was certainly, you know a little higher

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Speaker 3: than expected, with you know, energy leading it, but even

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Speaker 3: core x food and energy was higher than anticipated. You know,

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Speaker 3: inflation has been sticky. It it has defied any significant

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Speaker 3: move from where it sort of seems to be, you know,

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Speaker 3: stuck at right now. You know, the FED is in

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Speaker 3: sort of a holding pattern. You know, they're they're really

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Speaker 3: not doing anything with rates. I don't I think you know,

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Speaker 3: maybe July you see something from them, but without any question,

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Speaker 3: you know, even with the consumer confidence report that did

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Speaker 3: come out that is a little bit skewed politically, just

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Speaker 3: depending upon how a person you know reports their political affiliation.

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Speaker 3: But I'm I'm a big fan of what I call

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Speaker 3: the mark one eyeball, and nothing in my life, no

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Speaker 3: prices in my life have gone down. They've only gone

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Speaker 3: up and everything is more expensive. And I think that

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Speaker 3: has just been the case for a long time, and

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Speaker 3: it's starting to become sort of the what the average

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Speaker 3: person expects. I think the key thing, Doug is it

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Speaker 3: really hasn't affected, you know, the overall economy. Yet retail

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Speaker 3: sales in January were much lower than anticipated, so maybe

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Speaker 3: that's a canary in the coal mine, although January usually

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Speaker 3: is a very slow retail month. But I think we're

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Speaker 3: going to find out more. But without any question, it's

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Speaker 3: the number one thing we worry about it and I

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Speaker 3: think clients worry about Yeah.

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Speaker 2: It's interesting because if you look at the way the

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Speaker 2: market interpreted this Friday, I think yields were down across

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Speaker 2: the curve in the case of the two and the ten,

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Speaker 2: each off about seven basis points. Describe to me what

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Speaker 2: you say in the way in which the bond market

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Speaker 2: is kind of digesting all of this and what's really

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Speaker 2: happening with with bond traders right now? Do you think, yeah, well.

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Speaker 3: So I think they're I think they're scratching their head

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Speaker 3: a bit as well. I mean, there's so much uncertainty

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Speaker 3: right now. And again, the market, above anything else, hates uncertainty.

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Speaker 3: And let's not forget Doug too. The consumer confidence number

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Speaker 3: came on the heels of Walmart's earnings on Thursday, right

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Speaker 3: where where that tank the market, and people were concerned

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Speaker 3: that that was an indicator about the US consumer, which

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Speaker 3: drives you know, you know, two thirds of the US economy.

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Speaker 3: But I think you know, from all the conversations and

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Speaker 3: meetings we have with a lot of fixed income professionals,

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Speaker 3: you know, most people you know, feel that given where

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Speaker 3: we are with rates right now, I mean, you know,

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Speaker 3: five seems to be the upper level, you know, where

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Speaker 3: we are right now a little bit lower. But I

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Speaker 3: think the bond market is trying to figure out with

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Speaker 3: all these different cross currents, and especially with the unknowns

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Speaker 3: of tariffs and the impacts of of you know, a

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Speaker 3: potentially reduced workforce as a result of deportations, of how

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Speaker 3: that's going to ten. So I think a lot of

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Speaker 3: people are just in this holding pattern to see what happens.

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Speaker 3: But I mean, I think we're just going to be

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Speaker 3: just I don't want to call it flat lining. I

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Speaker 3: think we're just going to be in this sort of

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Speaker 3: no man's land for a little while until we get

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Speaker 3: a little bit more clarity.

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Speaker 2: So I mentioned a moment ago that Wednesday we'll hear

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Speaker 2: from Nvidia. What are you expecting this company to let

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Speaker 2: us know about the market for these pieces of hardware

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Speaker 2: that are very much central to this revolution and artificial intelligence?

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Speaker 3: Yeah, well, I wish I was an expert on that

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Speaker 3: for a lot of different reasons. But it certainly seems

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Speaker 3: an awful lot is riding on this report from Nvidia.

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Speaker 3: And you know, I think with the very sluggish performance

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Speaker 3: of the mag seven, you know, technology sort of written

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Speaker 3: large so far this year, and again two months does

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Speaker 3: not a year make, But a lot is riding on

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Speaker 3: this report from Nvidia. And again you've seen both sides

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Speaker 3: that are right, one that deepseek is more of a

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Speaker 3: threat the other side, and again it could be in

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Speaker 3: Vidia talking the wrong book about how bullish it is

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Speaker 3: for them in terms of the number of chips. Blackwell

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Speaker 3: et cetera, that they'll be required under either circumstance. So

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Speaker 3: I think it's from everything I've heard and seen from

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Speaker 3: a lot of the very smart folks we talk about.

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Speaker 3: It's still obviously an outstanding company when you want to own.

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Speaker 3: I think if you do get a sell off in Nvidia,

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Speaker 3: it would be long term of buying opportunity.

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Speaker 2: One of the things that I think the deep Seek

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Speaker 2: story represents is a real bending of the cost curve.

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Speaker 2: Could that have a negative impact on some of these companies?

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Speaker 1: Do you think?

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Speaker 3: Possibly? But I think I think there's still a lot

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Speaker 3: we don't know about Deep Seek, and you know, I

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Speaker 3: think there are awful lot of very smart people running

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Speaker 3: these technology companies. In Vidia's product is the best one

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Speaker 3: out there. I think it it causes a pause and

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Speaker 3: a question in terms of, you know, if all of

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Speaker 3: this money continues to be spent and it turns out

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Speaker 3: that you didn't and you could have done it for

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Speaker 3: a lot cheaper, that's a big impact, and I think

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Speaker 3: that has the ramifications to be a major disruptor in

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Speaker 3: the market in fact that does come true. But I

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Speaker 3: think I think we're way too early to try to

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Speaker 3: make a guess on that but I think if you

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Speaker 3: look at the future of technology, the future of AI,

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Speaker 3: there's no if sense of butts about it. No matter

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Speaker 3: how you size it and dicea Nvidia is going to

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Speaker 3: be on the forefront. I think it's just a matter

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Speaker 3: of how these other companies continue to invest in it,

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Speaker 3: and right now there seems to be no pause in

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Speaker 3: that They're They're investing like gangbusters.

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Speaker 2: We heard from Berkshire Hathway over the weekend Warren Buffett's

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Speaker 2: firm ended last year with more than three hundred and

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Speaker 2: twenty one billion dollars in cash and treasury bills. What

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Speaker 2: does it say to you if Warren Buffett cannot find

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Speaker 2: value in the equity market, Yeah.

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Speaker 3: Well he probably just hasn't found value enough, right, And

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Speaker 3: sitting on that amount of cash at four percent in

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Speaker 3: treasury bills, right, you know you're making a pretty good

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Speaker 3: return on it. But I think Warren and his team

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Speaker 3: are very, very a student investors, to put it mildly,

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Speaker 3: so I think they probably just haven't found the right

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Speaker 3: thing yet. And if you get a excel off in

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Speaker 3: the market, I bet some of that money gets put

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Speaker 3: to work. Is I'm sure they have some some firms

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Speaker 3: and companies identified that they'd love to be able to

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Speaker 3: get at their preferred price, and I just think it

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Speaker 3: hasn't happened yet.

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Speaker 2: So where is Chuck Camello finding value these days?

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Speaker 3: Well, your boy, we always talk about sort of that

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Speaker 3: that that next dollar of how to how to get

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Speaker 3: it invested in. I think you know, Doug, from from

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Speaker 3: what you and I were chatting about earlier regarding the

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Speaker 3: volatility last week, what we have most likely coming over

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Speaker 3: this week. You know, we're in personally a big proponent

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Speaker 3: of picking and choosing your spots legging into this market.

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Speaker 3: I've said it before. I think if you I think

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Speaker 3: you don't own tech at your own peril, and I

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Speaker 3: think there's different times to get into it, and you know,

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Speaker 3: we might be coming up on one of those if

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Speaker 3: we have this volatility. But the other thing I would

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Speaker 3: certainly would say is you're starting to see a lot

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Speaker 3: of more interest internationally. You've got the you know, the

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Speaker 3: EFA index outperforming so far, a lot of US investors

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Speaker 3: are are underweight that. You know, IFA year to date

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Speaker 3: is up a percent, SMPCE up to and change. Again,

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Speaker 3: two months does not a year make, but you're definitely

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Speaker 3: seeing some strength and some other areas. And honestly, for

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Speaker 3: some clients, you know, dug the private markets, whether it's

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Speaker 3: private equity, private credit, or other areas that we're looking at.

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Speaker 3: So overall, the concern about the level of evaluations is real.

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Speaker 3: I think it's a it's a very valid concern. But

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Speaker 3: at the same time, in all of these types of

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Speaker 3: periods of time in the market, over all of history,

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Speaker 3: it's always giving you an opportunity for something, and you know,

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Speaker 3: it's our job to help our clients try to find

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Speaker 3: out how to put some of that money to work

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Speaker 3: take advantage of that. But across the across the spectrum,

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Speaker 3: I mean, you see, even look at RSP, RSP, for

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Speaker 3: the first time in a long time is actually outperforming

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Speaker 3: the S and P five hundred, not by a lot,

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Speaker 3: but still that hasn't been the case in a very

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Speaker 3: long time. And again we'll see where we are at

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Speaker 3: the end of twenty twenty five. But I think it's

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Speaker 3: going to be very interesting and wild ride that will

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Speaker 3: be full of excitement both on the up and some

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Speaker 3: panic on the down.

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Speaker 2: But to go back to Buffett, I mean, does it

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Speaker 2: make sense maybe to keep a little bit of dry powder.

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Speaker 3: Around, Oh, one hundred percent. Listen, I think so certainly

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Speaker 3: for him. And there's a lot more stuff going on

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Speaker 3: there also as you read some of the things that

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Speaker 3: perhaps they're keeping that amount of cash and for and

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Speaker 3: again an eventual succession, as you know, Warren eventually retires

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Speaker 3: or got food, something happens to them. But we you're

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Speaker 3: literally getting paid four percent to sitt in cash right

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Speaker 3: and right now. That's outperforming the market. So there's absolutely

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Speaker 3: nothing wrong. We think it makes a lot of tactical

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Speaker 3: sense to keep some powder dry because I do think

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Speaker 3: this market is going to give you days or weeks

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Speaker 3: where you know, you pick the catalyst Trump, tariffs, geopolitical rates, inflation,

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Speaker 3: pick your poison that's going to tank the market, and

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Speaker 3: you're going to have an opportunity to put some of

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Speaker 3: that money to work and buy some great companies, great

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Speaker 3: or great ETFs or sectors you know as they as

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Speaker 3: they drop again, as long as you've got the right

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Speaker 3: time frame. You know, I'm not talking about day trading,

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Speaker 3: that's not what we do. But you know, if your

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Speaker 3: time frame is a couple of years out, two, three,

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Speaker 3: four years or longer, you know, those periods of market

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Speaker 3: disruption are when you can truly put some money to

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Speaker 3: work and get it. It's pretty good prices.

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Speaker 2: Chuck, always a pleasure. We'll leave it there. Thank you

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Speaker 2: so much for spending time with us. Chuck Camelo, he

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Speaker 2: is the president and CEO at Essex Financial Services, joining

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Speaker 2: us here on the Daybreak Asia Podcast. Thanks for listening

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Speaker 2: to today's episode of the Bloomberg Daybreak Asia Edition podcast.

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Speaker 2: Each weekday, we look at the story shaping markets, finance,

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Speaker 2: and geopolitics in the Asia Pacific. You can find us

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Speaker 2: on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere

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Speaker 2: else you listen. Join us again tomorrow for insight on

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Speaker 2: the market moves from Hong Kong to Singapore and Australia.

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Speaker 2: I'm Doug Chrisner, and this is Bloomberg