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Speaker 1: Good morning. I'm Brian Curtiz. Here are the stories we're

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Speaker 1: following today. The FTC is poised to pause its Microsoft

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Speaker 1: Activision Blizzard merger trial and that will open the door

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Speaker 1: to settlement talks. More from Bloomberg's Denise Pellegreeney.

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Speaker 2: This is seen as a huge win for Microsoft in

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Speaker 2: Activision as they seek to close the largest ever gaming

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Speaker 2: deal in the US, and sources also tell us the

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Speaker 2: FTC really had to back down and withdraw its internal

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Speaker 2: case because under its own rules, it's expected to do

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Speaker 2: so after losing a last ditch fight in federal court

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Speaker 2: to keep the sixty nine billion dollar merger from taking place.

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Speaker 2: At what's next for the two companies, Watch for Microsoft

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Speaker 2: and Activision to try to persuade FTC's commissioners to accept

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Speaker 2: a settlement or drop their antitrust opposition to the deal altogether.

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Speaker 2: Denise Pellegriney, Blueberg Day Breakay Show.

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Speaker 1: In terms of the stocks, Activision Blizzard was flat today.

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Speaker 1: Microsoft was caught up in the selling in big tech.

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Speaker 1: It traded down two point three percent. Well Blackstone has

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Speaker 1: become the first private equity firm to manage one trillion dollars. However,

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Speaker 1: the accomplishment is tempered somewhat by a deal making slump

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Speaker 1: that weighed on second quarter results. Distributable earnings tumbled thirty

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Speaker 1: nine percent to one point two billion dollars, the lowest

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Speaker 1: in two years. Blackstone slowed the pace of new deals

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Speaker 1: as more buyers and sellers struggled to agree on valuations

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Speaker 1: for private assets. Here's Blackstone COO Jonathan Gray.

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Speaker 3: This year, you had a lot of concern about where

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Speaker 3: inflation was going, a lot of concern about how far

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Speaker 3: the Fed would go. You had the banking crisis in March,

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Speaker 3: and naturally you see a slow down in deal activity.

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Speaker 3: I think the good news is the.

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Speaker 4: Tone has improved as we've worked through this quarter. The

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Speaker 4: deal market feels like it's unfreezing a bit, so I

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Speaker 4: think as people feel better about the overall picture a

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Speaker 4: little more certainty, I think we'll see deal volume pickup

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Speaker 4: as we move forward.

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Speaker 1: Blackstone's Jonathan Gray. Private equity firms that grew rapidly during

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Speaker 1: the deal feelmaking boom now face more scrutiny from investors

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Speaker 1: on how they will weather higher interest rates. Still, Gray

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Speaker 1: says that markets are beginning to recognize that inflation is

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Speaker 1: under control. As the fed works to cool the economy

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Speaker 1: and bring down inflation. Some leading artificial intelligence companies are

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Speaker 1: now expecting to commit to implementing safeguards for the technology.

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Speaker 1: We get that story from Bloomberg's Tom Busby.

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Speaker 5: Open Ai, the maker of Chat, GPT, Microsoft, and Alphabet's

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Speaker 5: Google Unit all expected to voluntarily commit to White House

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Speaker 5: demands on Friday, pledging to responsibly develop and deploy artificial

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Speaker 5: intelligence capabilities after the Biden administration warn those companies that

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Speaker 5: they have to ensure the technology does not lead to

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Speaker 5: any harm. But the company's commitments will expire when Congress

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Speaker 5: has expected passes legislation addressing those safety issues over AI.

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Speaker 5: According to a draft of the White House document tom

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Speaker 5: Busby Bloomberg Daybreak Asia, the.

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Speaker 1: US Senate has adopted in an end mean that blocks

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Speaker 1: China from purchasing oil from American emergency stockpiles. The measure

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Speaker 1: was added to the must pass National Defense Authorization Act.

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Speaker 1: It's sponsored by Senators Joe Manchin and Ted Cruz. The

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Speaker 1: legislation is similar to a bill that passed in the

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Speaker 1: House back in January. It would prohibit the sale of

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Speaker 1: US oil from the SPR to any company under the

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Speaker 1: control of the Chinese Communist Party Senator Manchin said this

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Speaker 1: Senate version also borrows the sale of oil to Russia,

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Speaker 1: to North Korea and Iran. The US Senate is hoping

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Speaker 1: to finish the bill before the August recess. Taiwan's Semiconductor

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Speaker 1: has cut its annual revenue outlook and has delayed the

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Speaker 1: start of its Arizona plant until twenty twenty five. That

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Speaker 1: story from Bloomberg's Joan Wong, the.

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Speaker 6: Surprise cut and revenue for this year sends a warning

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Speaker 6: to investors suggests that despite the boom and ai the

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Speaker 6: global electronic slum may persist for some time. Add to

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Speaker 6: that the delay of the plant Arizona project that will

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Speaker 6: be worrisome for Washington as it tries to establish a

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Speaker 6: more robust chip industry at home. TSMC chairman Mark leeus

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Speaker 6: that the company faces several challenges at the US facility

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Speaker 6: that includes a shortage of skilled workers and higher expenses

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Speaker 6: than in Taiwan. This still comes on the heels of

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Speaker 6: TSMC's financial results. The chipmaker now projects a ten percent

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Speaker 6: fall in sales this year, versus previous guidance for a

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Speaker 6: single digit decline In Hong Kong, join Wong Loomberg, DA Bragasia, a.

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Speaker 1: Few other stories to keep in mind. Will get the

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Speaker 1: Japan CPI numbers out this morning. That will be of

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Speaker 1: interest for sure. The headline at three point two percent,

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Speaker 1: that's the estimate for core. If you strip out energy

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Speaker 1: and also food, that's expected to be as hot as

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Speaker 1: four point two percent. And we'll be taking a closer

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Speaker 1: look at Taiwan Semi as well. Now it's time for

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Speaker 1: global news. Russia has intensified its attacks on Ukrainian ports

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Speaker 1: and has threatened ships headed there with attack at Baxter

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Speaker 1: has Global News from the nine to sixty newsroom in

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Speaker 1: San Francisco.

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Speaker 7: Ed, Yeah, this a slowly building escalation for sure. Brian

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Speaker 7: third straight day Moscow exit of the grain deal you

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Speaker 7: know three days ago, began reimposing a blockade. UN Secretary

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Speaker 7: General Antonio Gutera says the attacks have implications that go

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Speaker 7: far beyond Ukraine.

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Speaker 8: Hundreds of millions of people face hunger and consumers are

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Speaker 8: confronting a global cost of living crises, and they will

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Speaker 8: pay the price.

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Speaker 7: As well as food supplied diplomatic relations. Russian bombing has

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Speaker 7: also damaged the Chinese consulate in Odessa. Russia's also warned

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Speaker 7: ships headed to Ukrainian ports that they would be considered

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Speaker 7: to be carrying munitions and in danger, and in response,

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Speaker 7: Ukraine has said that it would consider ships headed to

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Speaker 7: Russian ports to be carrying munitions and be in danger. Meanwhile,

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Speaker 7: the US says Ukraine has has begun deploying US supplied

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Speaker 7: cluster bombs. White House Deputy spokes from When Sabrina Singh

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Speaker 7: says that Ukraine is.

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Speaker 6: Committed to use it responsibly, to keep track and record

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Speaker 6: where they are using it so when this war is over,

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Speaker 6: they can begin those demining efforts definite escalation.

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Speaker 7: Though within the past few days, US President Joe Biden

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Speaker 7: has ordered a working group on how to avoid the

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Speaker 7: last minute game of chicken over the national debt. Bloombergs

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Speaker 7: Jonathan Tamara says pressure from the left.

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Speaker 8: This is something that a lot of more progressive Democrats

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Speaker 8: had really urged him to do, in something that he

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Speaker 8: rejected ahead of the most recent that limits standoff, where

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Speaker 8: they said, listen, we should just get rid of this thing.

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Speaker 8: Republicans keep holding democratic president's hostage over it, and it's

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Speaker 8: threatening the credit of the United States. Whenever we get

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Speaker 8: run into these logjams.

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Speaker 7: Whether or not it could withstand legal challenges is another question.

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Speaker 7: China has ordered its largest cities to step up preparations

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Speaker 7: for future medical emergencies by building leisure and recreational facilities

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Speaker 7: that can be used for quarantine during a pandemic. It

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Speaker 7: wants to handle things a bit differently than during COVID.

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Speaker 7: After praising former US Secretary of State Henry Kissinger the

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Speaker 7: day before, Chinese President Chi Chimping has held a meet

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Speaker 7: with him, now the first known in the Chinese capital

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Speaker 7: in more than three years. Kristin Hahn Democratic strategists on

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Speaker 7: Balance of Power.

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Speaker 9: That there are different ways that we communicate with foreign governments,

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Speaker 9: particularly one that's as difficult, as complicated as our relationship

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Speaker 9: is with China, and you know that could be something

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Speaker 9: that's happening right now.

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Speaker 7: She told Kissinger that China is ready to discuss the

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Speaker 7: correct way for nations to talk. And let's play jeopardy.

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Speaker 7: The answer is one point zero eight billion dollars. The

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Speaker 7: question what is the lottery ticket sold in southern California?

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Speaker 7: You're going to pay out that.

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Speaker 3: Lucky player unknown to us to date, one point zero

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Speaker 3: eight billion dollars.

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Speaker 7: Carolyn Becker the lottery says the cash value is over

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Speaker 7: five hundred and sixteen million before taxes. She says the

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Speaker 7: lucky winner will have a lot of new friends. He

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Speaker 7: she they have not come forward. Global News powered by

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Speaker 7: more than twenty seven hundred journalists and analysts over one

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Speaker 7: hundred and twenty countries in San Francisco. I'm Ed Baxter in.

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Speaker 1: This is Bloomberg him, Brian Curtis. Let's get to our guest,

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Speaker 1: Matt Lloyd, chief investment strategist at Advisors Asset Management. Matt,

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Speaker 1: the dial up nine days in a row and the

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Speaker 1: laggards kind of having their day. I know you're a

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Speaker 1: value guys, so this must be music to your ears.

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Speaker 1: Does it continue?

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Speaker 10: Yeah? I thanks Brian, It's great to be with you.

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Speaker 10: We think so. I think that the shift has been

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Speaker 10: in place. But when anytime you have a regime change,

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Speaker 10: a shift from growth to value, or any international move,

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Speaker 10: it doesn't go easy into that good night either. It

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Speaker 10: doesn't go softly. It fights and it battles back and

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Speaker 10: it usually these patterns take times and years to really materialize.

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Speaker 10: So we still think it's great. I mean, with a

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Speaker 10: lot of the risk that's out there, the pricing of

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Speaker 10: the equities in the growth sector really almost perfection to

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Speaker 10: next year's earnings. We see a little bit better risk

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Speaker 10: reward in value, and value doesn't just necessarily mean here

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Speaker 10: in the US matching up with certain you know, basic

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Speaker 10: historical price book, price sales, cash blok, but also international,

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Speaker 10: because international is a very big value play.

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Speaker 1: It's funny that you say that, because I had in

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Speaker 1: my notes of something to put to guests this notion

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Speaker 1: that the US has all these big companies, important companies

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Speaker 1: in AI, cybersecurity, cloud software, you know, mega tech, more

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Speaker 1: so than other countries. And if these companies now have

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Speaker 1: to take a pause because they've run pretty hard, pretty fast,

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Speaker 1: that there might be good opportunities in Europe and in

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Speaker 1: other areas like Japan to sort of play ketchup as

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Speaker 1: those laggers rally laggers rally. So you mentioned that you're

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Speaker 1: looking at some of these other markets. What would be

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Speaker 1: chief among them?

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Speaker 10: Well, I think if you look at even with the

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Speaker 10: big run up in Japan, you look at Japan as

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Speaker 10: you know, really about sixteen percent from its all time

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Speaker 10: highs cording the MSCI Japan Index. You know again that

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Speaker 10: was set in nineteen eighty nine. For those of US

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Speaker 10: that can remember trials and tribulations of Japan to now.

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Speaker 10: This is a long time coming, which is why you

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Speaker 10: can see the Bank of Japan is really trying to

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Speaker 10: keep that yield curve control because they like a little

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Speaker 10: bit of the inflation. Maybe not to the degree they're

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Speaker 10: talking with the three to four percent on the core rate,

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Speaker 10: three percent on the regular, but they still feel very

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Speaker 10: vibrant right now. But you look at every metric in

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Speaker 10: their index, it's really a price. It's a value, price

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Speaker 10: to book, price to sales, cashblow generation, steadiness and earnings.

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Speaker 10: And even in Europe you're seeing the same thing, some

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Speaker 10: earnings revisions, but it's broad based because the MSCI World

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Speaker 10: Index is really done fairly well here recently. So we

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Speaker 10: continue to see when we see pressures on the dollar

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Speaker 10: up and down and so forth, some of the steadiness

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Speaker 10: in earnings projections look a little bit better international and

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Speaker 10: we continue to see a break in the dollar, which

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Speaker 10: should bode well for many emerging markets. China is probably

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Speaker 10: the only one right now with the GDP to play

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Speaker 10: a coming out that's pretty problematic for them because the

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Speaker 10: consumption level hasn't really taken off for them in general.

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Speaker 10: When we look at a very balanced portfolio. The values

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Speaker 10: really in the international play in select sectors in national,

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Speaker 10: and then the growth sectors really are dominated here in

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Speaker 10: the US outside of certain individual companies. So just by

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Speaker 10: that mere fact of having diversification between growth and value,

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Speaker 10: you're going to probably be steering more international. Yeah.

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Speaker 1: Well, the diversification is key because we don't know actually

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Speaker 1: if growth is going to correct here. I mean, you

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Speaker 1: can have a couple of bad days for sure, but

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Speaker 1: you still have the S and P five hundred well

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Speaker 1: above the fifty day moving average. I think five to

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Speaker 1: six percent above it's fifty day moving average, which is

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Speaker 1: a little hot, but there's some room to slide back,

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Speaker 1: which would be completely normal and could mean that you know,

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Speaker 1: you continue to see the same type of behavior that

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Speaker 1: we saw in the first half. Are you thinking about that.

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Speaker 10: Yeah, we are. We look a little bit more a

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Speaker 10: longer term and strategic We look at the risk reward

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Speaker 10: and since we cover a lot of different asset classes

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Speaker 10: and debt classes, we are always looking at that risk

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Speaker 10: reward scenario. And the only problem is the AI is

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Speaker 10: reminds me of the Internet back in the late nineties.

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Speaker 10: You know, it's a great promise, great hope, but it's

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Speaker 10: going to take some time to materialize and incorporate, to

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Speaker 10: regulate and so forth. So I think it's a lot

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Speaker 10: of fever on that, but it also probably has to

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Speaker 10: do with the run up in the technology. And two

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Speaker 10: things everyone's anticipated the pause by the Federal Reserve, which

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Speaker 10: we think is a little bit premature because inflation is

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Speaker 10: probably going to be a little bit higher in the

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Speaker 10: second half than the low print that we just got.

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Speaker 10: And then secondly, there's been so much cash on the

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Speaker 10: sidelines that the FOMO investors have kind of come back

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Speaker 10: into it, you know, and we get that sense where

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Speaker 10: people are like, I'm not going to miss the boat.

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Speaker 10: But if you go back in time in history, every

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Speaker 10: time the Fed is paused, you've seen a market rally

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Speaker 10: until they actually cut, and if they cut, it's usually

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Speaker 10: for one reason, and that's usually a recession or demand destruction.

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Speaker 10: And that is why you start to look at these

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Speaker 10: little blurbs. And this is a much more exaggerated if

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Speaker 10: we'd say, bear market rally. But you know, Serge, however,

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Speaker 10: you're just pricing too much perfection. So again when we

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Speaker 10: look at it, we're not against growth, and so forth,

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Speaker 10: we just have dialed it down a little bit and

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Speaker 10: been more selective, and I think the values it gives

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Speaker 10: you a little bit more predictability.

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Speaker 1: I know you want to buy quality companies, so I

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Speaker 1: need to. I mean, I think all investors want to

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Speaker 1: buy quality companies, but I want to hear from you

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Speaker 1: how you actually define quality.

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Speaker 10: Number one is cash flow when you're looking at times

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Speaker 10: like it is now, when you look at higher interest rates,

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Speaker 10: and the best thing the corporations did was like prolong

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Speaker 10: some of their maturity profiles in anticipation of higher rates.

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Speaker 10: I know they didn't expect these kind of rates, but

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Speaker 10: in twenty six, late twenty five, twenty six, you're going

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Speaker 10: to start getting some refinancing costs a bit higher, and

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Speaker 10: that's going to really hurt a lot of the money

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Speaker 10: that we go investment into capex and so forth. So

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Speaker 10: when we look at that thing that that measure and

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Speaker 10: so forth, cash flow right now is what we're looking at,

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Speaker 10: whether that's high yield on the short run looking two

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Speaker 10: years and in or in general with companies because they

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Speaker 10: have a little bit of pricing power, we're looking at

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Speaker 10: steady margins and earning. But positive cash flow is crucial

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Speaker 10: right now for both debt and we think equity investors.

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Speaker 1: Yeah, I think costs. You know, if you look at

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Speaker 1: the strikes that we're seeing and some of the requests

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Speaker 1: from from workers, you know, the labor cost is continuing

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Speaker 1: to go up. Is not going to hit you know,

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Speaker 1: earnings in the stock prices, and is it already happening.

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Speaker 10: It already is happening. If you look at retail sales,

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Speaker 10: real retail sales are pretty much flat if you take

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Speaker 10: the inflation, the real cost of it, and really interest

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Speaker 10: seeing it on some of the consumer sentiment numbers, the

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Speaker 10: access to credit to you know, basically pay up for

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Speaker 10: certain things. Now it's very biprocated. You see forty fifty

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Speaker 10: percent really struggling, and then you're seeing discretionary income still

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Speaker 10: high for people that have you know, had good jobs.

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Speaker 10: But even going to your point, the job market, even

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Speaker 10: the last month, you had a large chunk of the

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Speaker 10: new jobs where people getting second jobs. And so when

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Speaker 10: we look at those kinds of second jobs that's not

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Speaker 10: in the narrow equity markets, those aren't really great harbingers

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Speaker 10: for what's coming.

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