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Speaker 1: All right, let's check in with Alison Williams. She covers
Speaker 1: the banks for Bloomberg Intelligence. In One of the big
Speaker 1: banks is JP Morgan, and they're having their investor day today. Allison,
Speaker 1: give us what have you learned from our good friends
Speaker 1: at JPM today at their investor day.
Speaker 3: So I think, you know, the most important thing is
Speaker 3: they're keeping their long term seventeen percent targets and then
Speaker 3: sort of supporting that they did up their net interest
Speaker 3: income guidance. We don't think that there's going to be
Speaker 3: much change to I guess the consensus, because I think
Speaker 3: consensus is already there. So they up the guide ends
Speaker 3: to reflect fewer cuts. But we already knew that they
Speaker 3: also up their expense guidance. Again, we knew that because
Speaker 3: they you know, have already flagged that they're going to
Speaker 3: have a gain from some visa shares and they're going
Speaker 3: to use some of that to pre fund investment, spending
Speaker 3: some charitable contributions, and then finally, you know, they did
Speaker 3: some math walking through capital. So Basil three endgame is
Speaker 3: the big question. They looked like they would be short
Speaker 3: based on the last proposals that we had that we
Speaker 3: got last July, but Powell has said that we're going
Speaker 3: to see big changes, and so JP Morgan did some
Speaker 3: scenario analysis around that, and you know, they feel pretty
Speaker 3: comfortable and they're starting to increase their buybacks and there
Speaker 3: is a lot more to come if we do get
Speaker 3: some relief to that proposal.
Speaker 4: Also, aside is down like half a percent. Did do
Speaker 4: I take away anything from that in terms of how
Speaker 4: investors perceive the numbers?
Speaker 3: I mean, I would say that we didn't get any
Speaker 3: big positive surprises. So I think that's what the stock is,
Speaker 3: you know, telling you, as I said, they they up
Speaker 3: there in an interest income guidance, but consensus was already there.
Speaker 3: We already knew that there were less federate cuts expected,
Speaker 3: and so they just kind of guided to that. And
Speaker 3: then you know, they there were questions around their target,
Speaker 3: but they were so far above that last year. They're
Speaker 3: operating at such a high level, and again consensus is
Speaker 3: already expecting them to beat that target this year. So nothing,
Speaker 3: I think, no real big surprises. I think the next
Speaker 3: you know, I guess new news if you will, that
Speaker 3: we will get o the stress tests in June, where
Speaker 3: Jason Morgan said today they actually expect their stress buffer
Speaker 3: their requirement to go up. So I think setting that
Speaker 3: guideline it sets them up to either you know, meet
Speaker 3: or surprise positively. And then when we do get those
Speaker 3: guidelines the summer on, buzzle through the endgame to see,
Speaker 3: you know, what the big changes are and if we
Speaker 3: are going to get uh some of the reliefs that
Speaker 3: everyone basically expects after Powell has made those comments.
Speaker 1: You know, Alex, you mentioned this stocks down about half
Speaker 1: a percent today, but intra day earlier this morning hit
Speaker 1: an all time high. Fair enough, all he's unbelievable five
Speaker 1: hundred and eighty five billion dollars in market cap, Alison
Speaker 1: interest to refresh our memory, where are we in terms
Speaker 1: of our discussion of succession for Jamie Diamond? Is that
Speaker 1: even on the table anymore? We just where are we
Speaker 1: in that?
Speaker 2: You know?
Speaker 3: I think that you know, they're sending more and more
Speaker 3: clear message. Today, having Dan Pinto, you know, sort of
Speaker 3: walk through some of the opening remarks, I think that
Speaker 3: you know more and more that really they've they've sort
Speaker 3: of made clear the plan. You know, Jamie has the
Speaker 3: running joke about the five years, although you know, more
Speaker 3: recently it seems like he has talked about getting a
Speaker 3: little bit closer towards that goal. But I think really
Speaker 3: at these investor days you see what a strong bench
Speaker 3: they have on display. We already heard, you know, from
Speaker 3: Marion Airdose and we heard from Marion Lake who runs
Speaker 3: a consumer business. And really, I mean the strength in
Speaker 3: these stories. There's so much positive going on, you know,
Speaker 3: just continuing to invest for growth, you know, net influence
Speaker 3: in the asset management business, building out branches in the
Speaker 3: consumer business. You know, a lot of positive things going
Speaker 3: on the business lines, and again a strong bench.
Speaker 4: Before I let you go, have you learned anything about
Speaker 4: investment banking, what the IPO looks like, what the M
Speaker 4: and A market looks like. We're still waiting for that
Speaker 4: turnaround moment, any word on that.
Speaker 3: So that's I think all coming up on the agenda.
Speaker 3: As I said, just so far, we really have just
Speaker 3: been focusing on the asset and wealth and the consumer side.
Speaker 3: But I think we'll definitely be digging into the details
Speaker 3: and that in the next few sessions.
Speaker 4: Excellent, all right, Alison Williams, thank you so much. We
Speaker 4: really appreciate you stepping out and chatting with us. Alison
Speaker 4: Williams is Bloomberg Intelligence Senior US Banks analyst. He also
Speaker 4: covers basically anything that handles money, so she's very helpless manager,
Speaker 4: you name it.
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Speaker 4: Thirty tatty Monday. I'm Alex Stee alongside Paul Sween need this.
Speaker 4: In Bloomberg Intelligence Radio, we bring you all the top
Speaker 4: news and finance and economics through our lens of our
Speaker 4: Bloomberg Intelligence analysts. They cover two thousand companies in one
Speaker 4: hundred and thirty industries worldwide. We also take you outside
Speaker 4: Bloomberg Intelligence and get a look at under the hood
Speaker 4: and on the street and saying, hey, what are you
Speaker 4: doing with your money. It is very clear that we're
Speaker 4: in an everything rally when it comes to metals and
Speaker 4: when it comes to the equity markets. John Tucker was
Speaker 4: just saying, adding twelve trillion dollars in value since the
Speaker 4: since the S and P bottom back in October. So
Speaker 4: what's going to disrupt that? I honestly don't have a
Speaker 4: good answer, but maybe Dana Dioria does, co chief investment
Speaker 4: Officer over at invest net Is invest net I got
Speaker 4: there is standing by Dana. What stops it?
Speaker 3: Hi?
Speaker 5: Thank you for having me.
Speaker 6: Well, yeah, I mean we've definitely sort of get it
Speaker 6: over to this idea that you know, the resilience.
Speaker 5: Is the name of the game. The markets are doing well,
Speaker 5: we're seeing breath.
Speaker 6: It's not just you know, obviously the Magnificent seven, but
Speaker 6: I do look, I mean there are definitely cracks that
Speaker 6: could potentially and become more of an issue, and and
Speaker 6: you know, one of them, of course, at a high level,
Speaker 6: is just the election coming up and the volatility that's
Speaker 6: going to be coming into markets as a result of that.
Speaker 5: I think as the election season heats up, and that's
Speaker 5: not to.
Speaker 6: Say, you know, one winner versus another, there will be
Speaker 6: definite winners and losers based on how the election pans out.
Speaker 6: But I think as we head into the election, expect
Speaker 6: more volatility, uh in markets. And then of course, you
Speaker 6: know jobs, Employment obviously is a big one. You know,
Speaker 6: we're not we're not seeing any real cracks there, but
Speaker 6: if there were to be, that would be an issue.
Speaker 6: And growth obviously came in this you know, last quarter
Speaker 6: a little lower than expected as well.
Speaker 1: Dana, it seems like some recent move we've seen off
Speaker 1: that April kind of weakness was maybe driven by good
Speaker 1: old fashioned earnings. What did you take away from the
Speaker 1: most recent earning cycle? Again, we have another big name
Speaker 1: reporting ondesday after the close with Nvidia.
Speaker 6: Yeah, I mean, earnings has been what's been propping up
Speaker 6: the account of me right alongside employment.
Speaker 5: I think the fact that you know, we haven't.
Speaker 6: Seen the weakness yet on the corporate side, we have
Speaker 6: seen productivity kind of holding steady. Now that being said,
Speaker 6: you know, the market to a large extent, I would say.
Speaker 5: Has been sort of priced for an expectation.
Speaker 6: So you know, individually, when you see anybody kind of
Speaker 6: coming in not at you know exactly where it needs
Speaker 6: to be your beating, you know, they kind of get punished,
Speaker 6: and I expect that we continue, you.
Speaker 5: Know, into next quarter as well.
Speaker 6: But yeah, earnings have definitely bullied us for you know,
Speaker 6: not even just.
Speaker 5: This last quarter, but in general if you look back
Speaker 5: to twenty twenty three.
Speaker 4: Right, which makes it so hard to then sell because
Speaker 4: if you take a look at say the EA function
Speaker 4: on the Bloomberg terminal, and you look at earnings and
Speaker 4: sales growth year on year, excuse me, quarter on quarter
Speaker 4: over the next year, it just keeps going up. So
Speaker 4: it's hard for me to then defind the reason to
Speaker 4: then sell. How do you look at the next four quarters?
Speaker 5: Yes, So one of.
Speaker 6: The things I would differentiate, of course, is you know,
Speaker 6: size of companies interest rate. You know, how dependent is
Speaker 6: that company I'm going to capital markets, for example, in
Speaker 6: an environment of.
Speaker 5: Higher for longer for example.
Speaker 6: Small caps tend to be you know, more interest rates sensitive.
Speaker 5: If you're going to look individually just who who's.
Speaker 6: Able to fund self fund versus not so in an
Speaker 6: environment that's higher for longer and as corporate debt starts
Speaker 6: rolling over. I do think that's one area if for
Speaker 6: you know, as we're talking about it, to say, okay,
Speaker 6: this is a place where weakness can come in on
Speaker 6: the corporate side, because these companies do have to return
Speaker 6: to capital markets and roll over debt at higher rates
Speaker 6: than they've needed to in the past, higher rates than
Speaker 6: you know, they've needed to in a decade. Right, So
Speaker 6: I do think that's that's one thing. Now, that being said,
Speaker 6: I am a proponent of small caps. I just think
Speaker 6: you have to be able to buy in and hold
Speaker 6: on because I think the market has priced in that
Speaker 6: scenario for them.
Speaker 1: Data in a fixed income side, how much risk are
Speaker 1: you suggesting people take because we can sit in to
Speaker 1: your treasure. You can get four point eight three percent today.
Speaker 1: How much credit should I be taking out there?
Speaker 6: Yeah? I mean, you know, it's a it's it's a
Speaker 6: funny thing, right, Suddenly you're getting paid whereas you weren't
Speaker 6: for a long time in the fixed income space, and
Speaker 6: you really don't need to extend that credit.
Speaker 4: So we so.
Speaker 6: Coming from you know, a platform that services retail advisors
Speaker 6: and clients for a long time. You know, we've we
Speaker 6: saw sort of just a stretching on the fixed income side.
Speaker 6: If you look at that standard sixty forty, taking that
Speaker 6: forty percent and really stretching what could be called, you know,
Speaker 6: a fixed income position, right, a traditional ballast position that
Speaker 6: portfolio by pushing into higher and higher you know, higher
Speaker 6: yielding you know, leverage loans even to an extent dividend
Speaker 6: payers because you were looking for some return on that.
Speaker 6: We're not in that environment anymore, And for the standard investor,
Speaker 6: I agree with the premise of your question that, yes,
Speaker 6: it's not the same take credit risk, but you don't
Speaker 6: have the need anymore that you did, you know, in
Speaker 6: a period of financial repression, to really move out on
Speaker 6: the credit risk to be putting in you know, perhaps
Speaker 6: you know, areas and fixed income on a different place
Speaker 6: in the capital structure, and areas that are you know,
Speaker 6: just just higher yielding but also bringing more risk to
Speaker 6: the portfolio when you already have that big equity stake.
Speaker 4: So you said you liked small caps, but you got
Speaker 4: to kind of stomach it. Why do you like small caps? Yeah?
Speaker 5: Look, I mean small caps, and if you excise.
Speaker 6: The growthiest you know, least profitable small caps, which are
Speaker 6: more like a lotto ticket type payoff structure, then you're
Speaker 6: living in a world where you know, they have outperformed
Speaker 6: over time. Small value in particular has tended to not
Speaker 6: only outperform, but also to outpace inflation.
Speaker 5: And so if you look at.
Speaker 6: The standard portfolio that most people are sitting in, they
Speaker 6: have a ton of the big growth just by virtue
Speaker 6: of the fact that if they're not index ers, you know,
Speaker 6: the active managers are not going to stray that far.
Speaker 5: They can't stray that far to take on that much
Speaker 5: tracking error.
Speaker 6: So small caps are a nice diversifyer that have paid
Speaker 6: off over time again if you take out those really
Speaker 6: low profitability stocks. And that's why we see a lot
Speaker 6: too around, you know, by quality small caps by the
Speaker 6: six hundred.
Speaker 5: Right, because you can you can get.
Speaker 6: That diversification benefit, that long run return potential, especially now
Speaker 6: that there's a cost of capital again, you know, and
Speaker 6: some of the fundamentals can be reasserting in these you know,
Speaker 6: style factors for example, in these portfolios.
Speaker 4: All Right, Dan, thanks a lot, super appreciated. Dana d'oria
Speaker 4: joining us CO chief investment officer over at in invest Net,
Speaker 4: joining us from Connecticut. It just feels like it's going
Speaker 4: to be really hard to change the narrative at this point.
Speaker 4: I mean, maybe in Vidia does something.
Speaker 1: But yeah, maybe in Vidia does something. Maybe we hear
Speaker 1: from the FED. That's you know, I don't know what
Speaker 1: we hear from the FED so often, But what could
Speaker 1: they say at the next meeting that would freak people out?
Speaker 1: I think the market they kind of conditioned the market
Speaker 1: to saying, Hey, we're going to hang here for a
Speaker 1: little bit, but on the margin, we're going to be
Speaker 1: cutting more likely than not at some point this year.
Speaker 1: I think that in of itself, the anticipation of a cut,
Speaker 1: to me is almost as good as the cut itself, totally.
Speaker 4: And that's what Mike McKee was saying to Rafael Bostik.
Speaker 4: He was like, I know you guys don't want to
Speaker 4: do four guidance, but aren't you kind of doing for
Speaker 4: a guidance by doing all that? Because the market front
Speaker 4: runs you and you obviously signed up that. But nonetheless.
Speaker 2: You're listening to the Bloomberg Intelligence podcast. Catch us live
Speaker 2: weekdays at ten am Eastern on Apple car Playing and
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Speaker 2: wherever you get your podcasts, or watch us live on YouTube.
Speaker 4: All right, let's get to the news item over the weekend,
Speaker 4: and also take a look back at cut ours economic
Speaker 4: form because a lot of interesting things came out of
Speaker 4: that last week. Ronnie and President Ibrahim Ricey died yesterday
Speaker 4: in a helicopter with his foreign minister. That was the news.
Speaker 4: We want to go to Bobby Go. She's senior editor
Speaker 4: at Bloomberg News and he joins us through Zoom. He
Speaker 4: follows a lot of geopolitical issues along these lines with us. Bobby,
Speaker 4: Where does this leave Iran? What is the instability risk here?
Speaker 7: Well, this has never happened in Iran's recent history. No
Speaker 7: sitting president has ever died. So this is a fork
Speaker 7: in the road that Iran has never come to before.
Speaker 7: This regime likes to convey a sense of stability and continuity,
Speaker 7: but it has not been tested in this manner before. I,
Speaker 7: for one, don't expect a great deal of instability, because
Speaker 7: let's remind ourselves, the person who really pulls the strings
Speaker 7: in Iran is not the president. It is the supreme leader,
Speaker 7: who is unelected. Ali Khamine is his name. He sits
Speaker 7: above the entire government and in the frankly the entire administration,
Speaker 7: and he calls all the important shots. His policies are
Speaker 7: the ones that the president and others implement. He hasn't changed.
Speaker 7: He's old and ill and quite ill. He's eighty five
Speaker 7: years old, and so there are some concerns about succession there,
Speaker 7: and there was some thought that President Raisi would be
Speaker 7: the logical successor to the Supreme Leader. Now that's off
Speaker 7: the charts. But there's going to be an election in
Speaker 7: fifty days. Anytime there is an election, there is always
Speaker 7: an opportunity, however slim it might be, for other voices
Speaker 7: to be heard. The regime will try to maintain that
Speaker 7: continuity by making sure that in the new president, whoever
Speaker 7: he is, is also a hardliner, just like RAYSI. But
Speaker 7: you know, this is a black Swan event. And the
Speaker 7: thing about things about black Swan events now that you
Speaker 7: really can't be absolutely certain about what's going to happen next,
Speaker 7: precisely because it's never happened before.
Speaker 1: Bobby, is there any reason to believe the death of
Speaker 1: the reigning president will alter in any way around views
Speaker 1: or actions or policies as it relates to the broader
Speaker 1: Middle East? Here, I'm thinking Daza Israels happening today.
Speaker 7: I wouldn't be optimistic about that. Again, Kamene is the
Speaker 7: one whose policies are being implemented. He's not going to
Speaker 7: change his mind. He's an old school, died in the
Speaker 7: world hardliner. He hates as well, he hates America, and
Speaker 7: no matter who becomes president, they will basically have to
Speaker 7: do what Kamene says. The other joker in the pack
Speaker 7: is the IRGC, which is the military arm of the
Speaker 7: Iranian state. They're also very hardline and they will basically
Speaker 7: not tolerate a government that is softer towards the West.
Speaker 7: So I don't expect any significant change in foreign policy
Speaker 7: from the Iranians no matter who becomes president.
Speaker 4: You were also last week at Katar's Economic Forum, I
Speaker 4: mean huge lineup of guests. What were some of the
Speaker 4: takeaways that you had from that, like what should we
Speaker 4: be king in on?
Speaker 7: Well, interestingly and coincidentally, the number one theme, and this
Speaker 7: took me by surprise, was geopolitics and instability. I suppose
Speaker 7: I shouldn't have been surprised because of what's going on
Speaker 7: in the region, the war in Gaza. Now look at
Speaker 7: it from this distance, you might think, well, that's a
Speaker 7: very localized conflict that's just taking place in Gaza that
Speaker 7: does not involve the rest of the Middle East and
Speaker 7: the price of oil is stable, the governments in the
Speaker 7: Middle East are all more or less stable, and so
Speaker 7: they would be concerned. But actually there was a lot
Speaker 7: of concern. We heard from the Prime Minister of Qatar
Speaker 7: about his concerns about the fact that the ceasefire talks
Speaker 7: between hamas And and Israel are not going anywhere. We
Speaker 7: heard from the Prime minister from Malaysia. We heard from
Speaker 7: the President of Indonesia. We also heard about the geopolitical
Speaker 7: uncertainties that are sort of continuing from the Ukrainian the
Speaker 7: conflict in Ukraine with the Russia invade in Ukraine. We
Speaker 7: heard from the President of Poland who talked about that.
Speaker 7: So it was really quite My perception was that the sessions, look,
Speaker 7: it was a very well attended event, and all the
Speaker 7: sessions were very well attended, but the ones that seem
Speaker 7: to capture people's imaginations were around the idea that we
Speaker 7: are now going through a period of instability because of wars,
Speaker 7: hot wars between countries and the Cold War between the
Speaker 7: United States and China and everything else. Everybody's strategy, every
Speaker 7: company's way of thinking of the world, every government's way
Speaker 7: of thinking of the world has to be refracted through
Speaker 7: these lenses of conflict. That was quite striking to me.
Speaker 1: Bobby, here's my ignorant question of the day. It's just
Speaker 1: from a geography perspective, the Persian golf nations are attracting
Speaker 1: so much capital, and there's so much optimism about many
Speaker 1: of those that part of the world. There United Arab
Speaker 1: Emirates Qatar, for example, How I guess how closely are
Speaker 1: they kind of thought of from investors perspective with the
Speaker 1: Middle East, with what's gone on in Israel, Egypt and Gazan.
Speaker 1: I mean, are they considered two separate regions? So if
Speaker 1: I'm thinking about investing in you know, Cutter, for example,
Speaker 1: I'm not too concerned about the regional conflicts or am.
Speaker 7: I Well, you would think that, but a lot of
Speaker 7: international investors outside of the Middle East are not making
Speaker 7: that distinction, and they are that we've heard recently. For instance,
Speaker 7: Saudi Arabia, southi Arabia is a long way from the
Speaker 7: war zone. The Saudist have a robastic well, while gas
Speaker 7: prices are high, a pretty strong economy. They're sitting on
Speaker 7: a massive, massive war chest. They're building these gigantic projects,
Speaker 7: a whole new city in the desert and they're open
Speaker 7: for business. They want foreign investors to come, and you
Speaker 7: think foreign investors would want to get in on the
Speaker 7: ground floor in a lot of those projects not happening.
Speaker 7: Not happening the South as RBN Business Business Bloomberg News
Speaker 7: colleagues have reported they're really struggling to get foreign investors.
Speaker 7: And some of that is to do with the larger
Speaker 7: geopolitical instability in the region. Some of it is specifically
Speaker 7: to do with events in Saudi Arabia.
Speaker 4: When we take a look at you politics, how we're
Speaker 4: very obviously US centric because we're in the middle of
Speaker 4: New York right, How interested is the rest of the
Speaker 4: world in the twenty twenty four presidential election? Like, how
Speaker 4: did the Biden Trump scenario play out? And cut there?
Speaker 7: Oh yeah, every conversation I had, bar every conversation with
Speaker 7: every delegate, all wanted to know, you from New York,
Speaker 7: what's going on with the election? Is Biden really going
Speaker 7: to win? Is Trump really going to win? There was
Speaker 7: some attempt to you know, we heard from Ken Griffin,
Speaker 7: for instance, on the stage, who said that who gave
Speaker 7: the impression that it wouldn't really matter. He seems to
Speaker 7: favor a Trump presidency, a return of Trump. But there
Speaker 7: were some attempts on from stage from various speakers to say, oh,
Speaker 7: you know, the US economy is robust and it doesn't matter.
Speaker 7: That is not how it was reflected. In my private
Speaker 7: conversations with people off the stage. A lot of it
Speaker 7: was really really deep concerned, you know, the things that
Speaker 7: they are seeing from that distance taking place in America unprecedented,
Speaker 7: an American former president in court for every day, with
Speaker 7: the possibility of going to jail. There's a lot of
Speaker 7: concern about that. Would that lead to instability, would that
Speaker 7: lead to something a repetition of the storming of Congress.
Speaker 7: There's concern about the age of the candidates, even in
Speaker 7: a part of the world where leaders tend to be
Speaker 7: quite old. So that was the backdrop against which all
Speaker 7: conversations do place.
Speaker 1: All right, Bobby, thank you so much for joining us there.
Speaker 1: Bobby go She's a senior editor for Bloomberg News, joining
Speaker 1: us from New York via zoom Busy on the geopolitical front,
Speaker 1: and we'd like to have access to Bobby and his
Speaker 1: world view and all of his experience there again, the
Speaker 1: death of the Iranian president over the weekend, and then
Speaker 1: of course the Economic Forum and cut her a lock
Speaker 1: go on on in that part of the world obviously.
Speaker 4: Yeah, and also I'm sure that Ellen g played prominently
Speaker 4: also just in terms of that being a key product
Speaker 4: that the US has me as well as Japan and
Speaker 4: cut her in the AAE, and then also securing that
Speaker 4: sort of energy security conversation as well. I'm just so interested.
Speaker 4: If I'm a CEO of a company, how do you
Speaker 4: possibly make long term investment decisions in this political environment
Speaker 4: US and globally, Like, how do you do that?
Speaker 1: I think, Well, I don't know. I mean, I think
Speaker 1: you have to think that these investments are going to
Speaker 1: outlive the next four years, the next whatever.
Speaker 4: And yeah, but when you don't have any distanctions and
Speaker 4: trade restrictions.
Speaker 1: Like, how do you And they're so different one side
Speaker 1: versus the other. I mean before, I mean, there were
Speaker 1: distinctions between Republicans and Democrats, but like everything else in
Speaker 1: the world today, those distinctions seem to be more stark
Speaker 1: these days. And that includes regulatory restrictions when it towers.
Speaker 1: But now we've got the Biden administration not only maintaining
Speaker 1: the Trump administration towers but adding new ones, which is
Speaker 1: something you wouldn't necessarily right.
Speaker 4: It's like, how do you deglobalize? How do you deglobalize
Speaker 4: and also decarbonize and also grow? How do you do
Speaker 4: all of those three things at once?
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 1: Alex Deal Paul Sweeney. We're live here in our Bloomberg
Speaker 1: Interactive Broker Studio. We're streaming live on YouTube as well
Speaker 1: as head over YouTube dot com and search Bloomberg Podcast. Commodities.
Speaker 1: Let's talk the hard commodities, the metals. We'll get to
Speaker 1: the safts on another day, another time. It's all about
Speaker 1: copper and gold and all that kind of stuff. Oh yeah,
Speaker 1: what's going on here? Mike Mclone does because he's been
Speaker 1: doing us his whole life. He's a senior commodity strategist
Speaker 1: for Bloomberg Intelligence. He's usually down at South Beach, but
Speaker 1: we got him up here in New York where the
Speaker 1: real people work. So, Mike, thanks so much for joining
Speaker 1: us here. First, I haven't heard about copper in a while.
Speaker 1: Now it's every day we're hitting new highs.
Speaker 8: What's going on there, Yeah, it finally has. There's been
Speaker 8: some nuances there, but it's it's the key thing. You
Speaker 8: started off with the hard commodities, and there's everything else.
Speaker 8: The hardest commodities are the metals. So let's point out
Speaker 8: the Bloomberg Golf Medals Total Index Total return DEX is
Speaker 8: up twenty percent this year. That just tracks the hard commodities.
Speaker 8: The copper is a big part of it. But the
Speaker 8: way you look at copper, it's kind of just catching
Speaker 8: up to gold in the stock market. It's made a
Speaker 8: new high they in the US five dollars and twenty
Speaker 8: cents a pound.
Speaker 1: And what's what's the chicker actually be using for copper?
Speaker 8: Hg one.
Speaker 4: All right, I'm on it, and that's from versus the LM.
Speaker 8: And I knew. I knew Alex would go over and
Speaker 8: point out the other point out they all made tons.
Speaker 8: It's in metric tons. But since ver Yanks, we'll talk
Speaker 8: about the you know, I get knfuzzled with both of them.
Speaker 8: So the key thing I like to point out is
Speaker 8: what I'm concerned about is it's catching up to S
Speaker 8: and P five hundred because it's a very high correlation.
Speaker 8: I member Alex pointed out once that if you look
Speaker 8: at those two, they're like tick for tick, but manage
Speaker 8: money net possessions. I hedgehunds, futures stuff I used to
Speaker 8: trade and used to watch the really long thirty two
Speaker 8: percent of open interest. It's the high since twenty twenty one.
Speaker 8: So they're on top of this trade. They're making money,
Speaker 8: and it's rare that markets can really stay going up
Speaker 8: when they're that longer rangy. So the key thing I
Speaker 8: look at is then there's a macro. I look at
Speaker 8: the US stock market in some ways it's very stretched
Speaker 8: just versus one hundred week movement A is twenty two percent.
Speaker 8: And then China. Number one thing is China. Just look
Speaker 8: at bond yields in China. So those two key factors
Speaker 8: for copper to stay strong in long term obviously very
Speaker 8: bullish copper, but China in decline and use stock market
Speaker 8: very expensive means. I think these headshreens are more likely
Speaker 8: to have to hit their stops and their lungs and
Speaker 8: get stopped out of it at some point.
Speaker 4: So a couple of things that get you get all.
Speaker 1: That I'm stopping out of my cop.
Speaker 4: So there's a couple of different exchanges right that you
Speaker 4: look at, and that's London, then it's the US, and
Speaker 4: that's Shanghai. And you can do a lot of arm
Speaker 4: trades right where you can go long one and short
Speaker 4: at the other base and where you think the demand's
Speaker 4: going to be. And that's kind of what Mike was
Speaker 4: talking about in terms of there was a short on
Speaker 4: the US inventories and a long on the Shanghai copper,
Speaker 4: and then all of a sudden that you got a
Speaker 4: short squeeze that reverse. And now there's stories about let's
Speaker 4: break this down to what so normal people can understand
Speaker 4: this doing the bathroom. I was trying to do the bathroom.
Speaker 1: Okay, I'm not using a lot of copper. I'm using
Speaker 1: cross link polyethylene.
Speaker 4: Okay. Well, actually that's that's an excellent point because if
Speaker 4: it gets too expensive, then you're going to see substitutions, right,
Speaker 4: And that's is the bull thesis for copper, as bullish
Speaker 4: as the bulls say, which is basically like you're going
Speaker 4: to have endless demand and the energy transition forever.
Speaker 8: HIVR Blast's column this morning, I forget the title of it,
Speaker 8: was pointed out that is the problem, and Copperer is
Speaker 8: very article related. It's almost like silver. Silver's to earn
Speaker 8: the reputation as the devil's metal because it only goes
Speaker 8: down after it goes up. I'm worried about that happening
Speaker 8: in copper. It's like, Okay, you had to hear that first,
Speaker 8: but it's ceuta cordation factor. So I think people are
Speaker 8: buying into the bullish theory thesis and it makes sense
Speaker 8: in the long term. But for a trader standpoint, when
Speaker 8: you see these type of nuances where stock market is
Speaker 8: really expensive, it's catching up manage money and positions really strong,
Speaker 8: and China having problems and by the way, China's the
Speaker 8: biggest buyer a planet of gold, it kind of makes
Speaker 8: me very scared about getting longer copper. Now I'm very
Speaker 8: enduringly bullish gold. I mean, gold could correct ten percent,
Speaker 8: it still doesn't matter. It's the fact is central banks
Speaker 8: are gold, They're not buying copp The key thing is
Speaker 8: that's one thing I've heard. There's rumors that maybe China's
Speaker 8: hoarding some other metals.
Speaker 1: Have you heard that out?
Speaker 4: I have not heard it, but that doesn't surprise me.
Speaker 4: I mean, it makes sense. You can make an argument
Speaker 4: that the US should also be having a strategic preserves
Speaker 4: of things like nickel and lithium and stuff like that
Speaker 4: for the energy transition. No, we do not tweave oil
Speaker 4: as far as we know this is true. I'm glad
Speaker 4: you point out Hoavier's column, So, Javier Blast Bloomberg opinion columnists,
Speaker 4: I highly recommend you guys read it. And he was
Speaker 4: saying that the big distinction between say oil and copper
Speaker 4: is that oil, once you use it, you burn it,
Speaker 4: it's done. Copper you use it if you put it
Speaker 4: in your pipe for your bathroom or whatever, that's going
Speaker 4: to be there for a very long time. And you
Speaker 4: can also then reuse copper too, So it doesn't have
Speaker 4: the same kind of demand pull endless man pull in
Speaker 4: the same way, even if structurally you are looking at
Speaker 4: stronger demand because the energy transition. I found that to
Speaker 4: be very thought provoking.
Speaker 8: The headline of his article was Copper's boom story has
Speaker 8: some truth and much hogwash.
Speaker 1: And that's what I love is that hogwashes when you
Speaker 1: hear everybody say the same thing.
Speaker 8: I've heard it so many times, like Member Crudel two
Speaker 8: years ago as going to one fifteen and we're heard
Speaker 8: at nine eighty bucks. Your hearing Commandie's got to be
Speaker 8: very careful. The only one that usually really works in
Speaker 8: the long term is gold.
Speaker 1: And that's what you've been telling us since day one.
Speaker 1: So all right. So if I I'm trying to come
Speaker 1: up without the trade here copper, I feel like it's
Speaker 1: technically high. Technicals are driving this thing. So it's just
Speaker 1: a question when I see this thing roll over, yeah, short.
Speaker 8: It because well that I look at as a trader,
Speaker 8: I'd be willing to I can't say it anymore, but
Speaker 8: I would structure like a plip strategy. I'll be thinking that,
Speaker 8: and so why not. Also, the thing is that it's
Speaker 8: the trickle down. If copper starts trickling down, it's probably
Speaker 8: gonna be really to this US stock market, really to China.
Speaker 8: And it's that deflationary trajectory. I see you look at
Speaker 8: cgb's Chinese government bondials at two point three percent versus
Speaker 8: our tenure note yield at four point four percent. That's
Speaker 8: very rare, and that's an indication from a sovereign market
Speaker 8: of deflationary trends in the world's second largest economy.
Speaker 4: Well also, I mean talking about the trade, just because
Speaker 4: it may go down doesn't mean it's going to go
Speaker 4: to zero. Like okay, is that like say ten thousand
Speaker 4: on the lme you take a little bit of heat off,
Speaker 4: it's not. It's still not. We're still going to be
Speaker 4: using it. And there is still a both thesis. You
Speaker 4: don't have to necessarily be a crazy bowl though.
Speaker 8: Yeah, Well, commodity people think trading right a lot, so
Speaker 8: I look in conpric very simply. If you're looking that,
Speaker 8: people look at four is kind of the key pivot.
Speaker 8: Once it broke about four hours a pound, which was
Speaker 8: at the end of March, which shot up. It was
Speaker 8: a good technical signal. Now it's like it just got
Speaker 8: to be careful with that big thesis of everybody's piling on.
Speaker 8: That's what I point out from a commodity simpoint. Yes,
Speaker 8: they were very cheap versus the stock market just a
Speaker 8: few months ago on the start, and I'm hearing a
Speaker 8: significant allocation towards commodities. But I always like to point out, well,
Speaker 8: stick with the metals bloombergol medals in the next typically
Speaker 8: is the best performance over time start with gold, and
Speaker 8: if you really interest in broader commodities, energy equities typically
Speaker 8: way outperformed things like like like USO.
Speaker 1: Right, let's switch gears to gold another high. So is
Speaker 1: this I mean you've been saying long, gold, short everything
Speaker 1: else for years and years and years. Are we what's
Speaker 1: the case for gold here? Other than I guess the
Speaker 1: Chinese are buying it.
Speaker 8: It starts I think with the macroeconomic situation. You know,
Speaker 8: unlimited friendship shifted the world order. The world's largest buyer
Speaker 8: of gold right now is China. Central banks the world's
Speaker 8: gold The World Gold Council point out of Q one
Speaker 8: was the biggest Q one ever and their view is
Speaker 8: it's going to continue. Okay, So that's what matters. But
Speaker 8: I hear'st put some numbers on it. There's been thirty
Speaker 8: million outflows from gold ETFs in terms of bounces and
Speaker 8: about one hundred million purchases of ounces.
Speaker 1: From central banks.
Speaker 8: So what's been significant is the banks are buying deepest
Speaker 8: money in pockets we can print dollars are buying gold,
Speaker 8: and there's issues with you know, China, Russia. But investors
Speaker 8: like to say in this country is why by gold?
Speaker 8: If you get five percent t build the stock market's
Speaker 8: on a tear. That to me is gonna flip at
Speaker 8: some point because we had so much outflows and ETFs.
Speaker 8: At some point that's going to turn back up, and
Speaker 8: that accelerates the gold.
Speaker 4: So you give him one question with gold though, just
Speaker 4: because China keeps buying it doesn't mean they're going to
Speaker 4: keep buying it exactly.
Speaker 8: That's why I had lunch with a World Gold Council
Speaker 8: member last year and last week, and I always try
Speaker 8: to put them down, what's your expectation. Yes, that's the
Speaker 8: rice they could stop, but it's not just China. Like
Speaker 8: in the last data, the number one buyer was Turkey.
Speaker 8: Singapore Monetary Exchange was a big buyer. It's just they're
Speaker 8: starting to add up. And I think it's part of
Speaker 8: that kind of run away from the dollar situation to
Speaker 8: worry about. Like I say, it was started with the
Speaker 8: unlimited friendship.
Speaker 1: WTI eighty dollars a barrel here, what are we doing
Speaker 1: with gold? I mean with oil.
Speaker 8: I think it's more likely and I've been wrong, but
Speaker 8: early maybe more like would go to fifty than higher.
Speaker 8: Because look at WTI the price right now on the screen.
Speaker 8: It is first trade in two thousand and seven. And
Speaker 8: what happens when it goes up, it goes down. Why
Speaker 8: because it creates more supply and demands. So the key
Speaker 8: fact is what's pressured Crudel for the last fifteen years
Speaker 8: is the excess of supply to US and Canada. And
Speaker 8: now we have that building surplus out of OPEC. So
Speaker 8: to me, it's just about matter of time it goes over.
Speaker 1: There's also be an example.
Speaker 8: Natural gas did it It got too expensive, it got
Speaker 8: down to low price, cure at the lowest priced since
Speaker 8: nineteen ninety, and it bounced. I think krudelse found that trajectory.
Speaker 8: You have to shut off that excess to supply out
Speaker 8: of the US. And here's key facts. Diesel demand, unleaded
Speaker 8: gas demand, and container board demand in this country are
Speaker 8: all in recessionary trajectories.
Speaker 1: Okay, we did the container shipping, the container board stuff
Speaker 1: stuff left. We did hear, Yes we heard that, Yes.
Speaker 4: We did hear that. But it also you're having some
Speaker 4: refiners open up now after maintenance season and it is
Speaker 4: summer driving season. So even if the demand isn't great.
Speaker 4: You may just continue to se a little uptick of
Speaker 4: demand because we're.
Speaker 1: Going to drive more.
Speaker 3: I don't know.
Speaker 1: We see because he drives like seventeen hours a day
Speaker 1: and the Michael Barr. You put those.
Speaker 4: Together, it should be better for them. But you know
Speaker 4: they're going to complain anyway. So there is that, and then.
Speaker 1: They have the congestion pricing they have to pay.
Speaker 4: Well, that's a whole different bag of chips on that. Hey, Mike,
Speaker 4: good to see you. Good to see you in studio.
Speaker 4: Mike mcgloonan, a Bloomberg Intelligence senior Kammardi Strategy, is always
Speaker 4: fun to talk to.
Speaker 2: You're listening of the Bloomberg Intelligence podcast. Catch us live
Speaker 2: weekdays at ten am Eastern on Apple card Play and
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Speaker 2: station Just Say Alexa playing Bloomberg eleven thirty.
Speaker 1: So Alex, you asked if I've ever been in the
Speaker 1: board Menia answers Yes. My famous board meeting discussion is
Speaker 1: I literally got thrown out by a top three, top
Speaker 1: four media mobile on the planet for valuing his satellite
Speaker 1: company at what he thought was half the price. We
Speaker 1: literally got thrown out, esquoted out. He didn't pass our
Speaker 1: fee for like a year. Wow, it was due like
Speaker 1: the day after good job two years later. Sold it
Speaker 1: for half of what.
Speaker 4: We valued it half of what you valued it at.
Speaker 1: Yeah, so we were wrong, but we were high. But anyway,
Speaker 1: that was my getting thrown out. Our next guest describes
Speaker 1: participating in board meetings as a quote, punch yourself in
Speaker 1: the face experience. I've experienced that. Edward Norton joined. He's
Speaker 1: a co founder of ZECH. He joins us live here
Speaker 1: in on o Bloomberg Inner Actor Broker Studio. No mailating
Speaker 1: for this guy. Edward, thank you so much for joining us.
Speaker 1: Really appreciate it. Talk to us about ZECH. What are
Speaker 1: you guys trying to do with ZECH.
Speaker 9: Well, we're trying to make the experience between management of organizations,
Speaker 9: and I say that meaning corporations or nonprofits, because obviously
Speaker 9: we've got a couple million nonprofit organizations in this country
Speaker 9: that have governance and boards and stuff like that. We're
Speaker 9: trying to take what we feel is an increasingly toxic
Speaker 9: dynamic and reform it into being what it's supposed to
Speaker 9: be which is a relationship that that propels an organizations supports,
Speaker 9: you know, brings additional leverage, positivity to an organization. And
Speaker 9: we you know, I've definitely had some people say to me, like,
Speaker 9: you have an interesting day job, why would you get
Speaker 9: involved in.
Speaker 1: And your day job? Just for folks that on the radio,
Speaker 1: Edward Norton actor has been in a bunch of movies
Speaker 1: in the all kind of stuff.
Speaker 9: Yeah, the and I and I will, I will admit
Speaker 9: that you know, on the surface, like a software platform
Speaker 9: for for board governance features seems pretty esoteric, but it
Speaker 9: grew out of it grew out of my own experiences
Speaker 9: over the last thirty years, not dissimilar to years from
Speaker 9: serving on the board of arts organizations, serving on you know,
Speaker 9: conservation organization boards. And then as I built my own companies,
Speaker 9: and I've built a few software companies that that we
Speaker 9: had our own boards, people like Fred Wilson from Union
Speaker 9: Square or you know Excel or Graylock or these these firms.
Speaker 9: We were on the management side and we were experiencing
Speaker 9: what it meant to have a board. And then when
Speaker 9: I sold one of my companies and I joined the
Speaker 9: board of GoFundMe the company that acquired us. You know,
Speaker 9: I started sitting on corporate boards and we my partners,
Speaker 9: and I really started feeling that that this there, there's
Speaker 9: this elephant in the room, which is that is that
Speaker 9: companies go through four to eight times a year. They
Speaker 9: go pencils down to get ready for this thing that
Speaker 9: essentially to them feels like a hall monitoring moment. And
Speaker 9: board members, on the other hand, when I was a
Speaker 9: board member, you got thirty six hours before the meeting,
Speaker 9: You get a ninety page PDF and you're supposed to
Speaker 9: read it in the airport terminal, and then you go
Speaker 9: to the meeting and get it read back to you.
Speaker 5: You know what I mean?
Speaker 8: Like there was just and so.
Speaker 4: You're looking to make it a more what interactive visual
Speaker 4: engaging experience.
Speaker 9: I think we say two things. One is quantitatively, board
Speaker 9: meetings are an enormous waste of time for everybody, and
Speaker 9: that has to do with the amount of redundant time
Speaker 9: waste on setting these meetings up and the presentation materials.
Speaker 9: And that can be crushed down by having cloud based
Speaker 9: AI powered tools that make it like a tenth the
Speaker 9: time for a company on zech a company can set
Speaker 9: up for a board meeting in one tenth the time
Speaker 9: wow that they were using to prep before it. Board
Speaker 9: members should get to read something that's you know, you
Speaker 9: wouldn't read in the New York Times or Bloomberg on
Speaker 9: a PDF. You you read it in a mobile friendly
Speaker 9: scroll right that we expect that now, and so everything
Speaker 9: about the user interface should be easier for both sides
Speaker 9: of the table. But also think about this, think about
Speaker 9: how much time, how many professional talented people with time
Speaker 9: is valuable sit there in board meetings, approving minutes, approvals,
Speaker 9: approving stock option packages, things that they ought to be
Speaker 9: able to do from the airport lounge in advance. So
Speaker 9: we built governance function that can be interactive and mobile.
Speaker 1: And also so your customer is the board.
Speaker 9: Customer is the company and the board. You know, yeah,
Speaker 9: both sides, management and board members suffer in different ways,
Speaker 9: and we've tried to reform it. But when you when
Speaker 9: you when you crush the redundant inefficiency of time waste,
Speaker 9: you improve the quality of the meeting too, because a
Speaker 9: board meeting should be a forward looking experience.
Speaker 8: Not a you don't want to spend.
Speaker 9: Hours looking backward. Everybody can ingest the looking backward part
Speaker 9: before the meeting. You want the meeting to be propulsive
Speaker 9: and additive to where the company or the organization is
Speaker 9: trying to go. And the best thing about what people
Speaker 9: are saying to us is not just oh, we really
Speaker 9: love the user interface. It's much easier, it's easier to read.
Speaker 9: We love that they're saying to us. This has radically
Speaker 9: improved the quality and the value of the meeting itself
Speaker 9: and what we're getting out of our board.
Speaker 4: So you guys just raised about seven and a half
Speaker 4: million Series A led by Salesforce Ventures, including some other
Speaker 4: guys as well. What are you gonna do with it
Speaker 4: and what's sort of your angle here?
Speaker 9: Well, you know, I think if you look at I mean,
Speaker 9: first of all, Salesforce to this day is still I mean,
Speaker 9: they still are the greatest innovator in cloud based corporate tools.
Speaker 9: And I've known Mark Benioff a long time, even though
Speaker 9: I never told him that we were doing this with
Speaker 9: his own team until it was done, because I didn't
Speaker 9: want to, you know, I didn't want it to come
Speaker 9: from the top down. The Salesforce team is really phenomenal.
Speaker 9: But you know, our fantasy was to work with Salesforce
Speaker 9: because really nobody nobody understands the business of cloud based
Speaker 9: corporate tools better than they do. And I also like
Speaker 9: their ethos as a company. I think I think they
Speaker 9: have a great customer service ethos there. But you know,
Speaker 9: if you look at think about today, would you ever
Speaker 9: get a FedEx package with with signature tabs on your
Speaker 9: legal documents? No, you get it in DocuSign. Now, right, don't.
Speaker 9: You don't manage your cap table in Excel spreadsheets anymore?
Speaker 9: You use Karta. And we've we've made this evolution towards
Speaker 9: Lots of aspects of corporate function have gone into the cloud,
Speaker 9: but this really critical function hasn't. And we think that
Speaker 9: on a business level, to be honest, if you look
Speaker 9: at you know, Karta, which is a seven billion dollar
Speaker 9: private company and DocuSign is a fifteen billion dollar public company,
Speaker 9: there's an enormous market in in relatively low priced corporate
Speaker 9: software tools. And we really thought this this was a
Speaker 9: good business. We think there's a very large marketplace of
Speaker 9: companies and nonprofit orgs that need to reform this critical
Speaker 9: piece of Where are you in the.
Speaker 1: Evolution of the company? You signed up clients?
Speaker 9: Now, oh yeah, we have, we have We're into the
Speaker 9: thousands of companies and nonprofit orgs.
Speaker 1: Who are our customers like Fortune five hundred companies, what
Speaker 1: size companies?
Speaker 9: Yeah, well, actually it's funny you say that we are
Speaker 9: just in the process of clearing what they call the
Speaker 9: sock two software security process, and that that lets you
Speaker 9: be a platform for public We actually have a number
Speaker 9: of large public companies using it, but we have been
Speaker 9: mostly for smaller and mid sized private companies until we
Speaker 9: clear this this critical kind of So.
Speaker 4: You guys have an end goal here because I know
Speaker 4: with your previous company, crowd Rise, right, that was sold
Speaker 4: to go fund me. Yeah, the same co found Uh
Speaker 4: is this the same roadmap for you guys here?
Speaker 6: Yeah?
Speaker 9: You know, I think that I think that we've been
Speaker 9: totally focused on the product to date, making sure that
Speaker 9: it really really works and really gets the kind of
Speaker 9: response that it's getting. So essentially, we went to Salesforce
Speaker 9: and said we've here, here's how it works.
Speaker 6: Here.
Speaker 9: They loved it, and we said, how do we how
Speaker 9: do we now sell this? You know, how how do
Speaker 9: we now grow this as a business? And and you know,
Speaker 9: even even when we present it like Salesforce's Dreamforce and things,
Speaker 9: you're you're talking to a constituency of many tens of
Speaker 9: thousands of companies, and and that's and that's our agenda.
Speaker 9: Now is we we kind of did it in stealth,
Speaker 9: and as we're doing here with you, we're kind of
Speaker 9: we're kind of coming up and out.
Speaker 1: And is it just a subscription model?
Speaker 9: Yeah, yeah, it's for any company, for any company that
Speaker 9: it's incredibly familiar. And if you subscribe to docu sign
Speaker 9: if you subscribe to Karta, you're talking sub ten thousand
Speaker 9: dollars a year type subscriptions for these tools. And that's
Speaker 9: why we think because it has to work for it
Speaker 9: has to work for a nonprofit org, it has to
Speaker 9: work for a small startup company. It's we're not talking about,
Speaker 9: you know, one hundred thousand dollars year enterprise software contracts.
Speaker 9: We're we're literally talking under ten thousand dollars a year.
Speaker 1: Interesting stuff. Thanks for stopping absolutely. Edward Norton, he's a
Speaker 1: co founder of ZECH. He's also got an acting career
Speaker 1: from what I understand, so he's kind of busy out
Speaker 1: there doing that there kind of again bringing I bet
Speaker 1: you're the pandemic. The pandemic accelerated a lot of that stuff.
Speaker 4: It's such a good quodcast.
Speaker 1: Sign and all that stuff.
Speaker 4: I don't know anything on PDF. Ideas were done on
Speaker 4: my phone, Like of course you're going to want to
Speaker 4: but you.
Speaker 1: Still go to a restaurant and you give them the
Speaker 1: credit card. They go somewhere, they do it all. They
Speaker 1: bring you back to seventeen or as you go to
Speaker 1: one of Europe, somewhere the little person comes up and what's.
Speaker 4: The little person comes up and puts the other thing.
Speaker 1: I don't know how it works, but the technology serving.
Speaker 4: You in Europe, every little people.
Speaker 2: This is the Bloomberg Intelligence podcast, available on Apple, Spotify,
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