Speaker 1: Good morning. I'm Brian Curtiz. Here are the stories we're
Speaker 1: following today. The FTC is poised to pause its Microsoft
Speaker 1: Activision Blizzard merger trial and that will open the door
Speaker 1: to settlement talks. More from Bloomberg's Denise Pellegreeney.
Speaker 2: This is seen as a huge win for Microsoft in
Speaker 2: Activision as they seek to close the largest ever gaming
Speaker 2: deal in the US, and sources also tell us the
Speaker 2: FTC really had to back down and withdraw its internal
Speaker 2: case because under its own rules, it's expected to do
Speaker 2: so after losing a last ditch fight in federal court
Speaker 2: to keep the sixty nine billion dollar merger from taking place.
Speaker 2: At what's next for the two companies, Watch for Microsoft
Speaker 2: and Activision to try to persuade FTC's commissioners to accept
Speaker 2: a settlement or drop their antitrust opposition to the deal altogether.
Speaker 2: Denise Pellegriney, Blueberg Day Breakay Show.
Speaker 1: In terms of the stocks, Activision Blizzard was flat today.
Speaker 1: Microsoft was caught up in the selling in big tech.
Speaker 1: It traded down two point three percent. Well Blackstone has
Speaker 1: become the first private equity firm to manage one trillion dollars. However,
Speaker 1: the accomplishment is tempered somewhat by a deal making slump
Speaker 1: that weighed on second quarter results. Distributable earnings tumbled thirty
Speaker 1: nine percent to one point two billion dollars, the lowest
Speaker 1: in two years. Blackstone slowed the pace of new deals
Speaker 1: as more buyers and sellers struggled to agree on valuations
Speaker 1: for private assets. Here's Blackstone COO Jonathan Gray.
Speaker 3: This year, you had a lot of concern about where
Speaker 3: inflation was going, a lot of concern about how far
Speaker 3: the Fed would go. You had the banking crisis in March,
Speaker 3: and naturally you see a slow down in deal activity.
Speaker 3: I think the good news is the.
Speaker 4: Tone has improved as we've worked through this quarter. The
Speaker 4: deal market feels like it's unfreezing a bit, so I
Speaker 4: think as people feel better about the overall picture a
Speaker 4: little more certainty, I think we'll see deal volume pickup
Speaker 4: as we move forward.
Speaker 1: Blackstone's Jonathan Gray. Private equity firms that grew rapidly during
Speaker 1: the deal feelmaking boom now face more scrutiny from investors
Speaker 1: on how they will weather higher interest rates. Still, Gray
Speaker 1: says that markets are beginning to recognize that inflation is
Speaker 1: under control. As the fed works to cool the economy
Speaker 1: and bring down inflation. Some leading artificial intelligence companies are
Speaker 1: now expecting to commit to implementing safeguards for the technology.
Speaker 1: We get that story from Bloomberg's Tom Busby.
Speaker 5: Open Ai, the maker of Chat, GPT, Microsoft, and Alphabet's
Speaker 5: Google Unit all expected to voluntarily commit to White House
Speaker 5: demands on Friday, pledging to responsibly develop and deploy artificial
Speaker 5: intelligence capabilities after the Biden administration warn those companies that
Speaker 5: they have to ensure the technology does not lead to
Speaker 5: any harm. But the company's commitments will expire when Congress
Speaker 5: has expected passes legislation addressing those safety issues over AI.
Speaker 5: According to a draft of the White House document tom
Speaker 5: Busby Bloomberg Daybreak Asia, the.
Speaker 1: US Senate has adopted in an end mean that blocks
Speaker 1: China from purchasing oil from American emergency stockpiles. The measure
Speaker 1: was added to the must pass National Defense Authorization Act.
Speaker 1: It's sponsored by Senators Joe Manchin and Ted Cruz. The
Speaker 1: legislation is similar to a bill that passed in the
Speaker 1: House back in January. It would prohibit the sale of
Speaker 1: US oil from the SPR to any company under the
Speaker 1: control of the Chinese Communist Party Senator Manchin said this
Speaker 1: Senate version also borrows the sale of oil to Russia,
Speaker 1: to North Korea and Iran. The US Senate is hoping
Speaker 1: to finish the bill before the August recess. Taiwan's Semiconductor
Speaker 1: has cut its annual revenue outlook and has delayed the
Speaker 1: start of its Arizona plant until twenty twenty five. That
Speaker 1: story from Bloomberg's Joan Wong, the.
Speaker 6: Surprise cut and revenue for this year sends a warning
Speaker 6: to investors suggests that despite the boom and ai the
Speaker 6: global electronic slum may persist for some time. Add to
Speaker 6: that the delay of the plant Arizona project that will
Speaker 6: be worrisome for Washington as it tries to establish a
Speaker 6: more robust chip industry at home. TSMC chairman Mark leeus
Speaker 6: that the company faces several challenges at the US facility
Speaker 6: that includes a shortage of skilled workers and higher expenses
Speaker 6: than in Taiwan. This still comes on the heels of
Speaker 6: TSMC's financial results. The chipmaker now projects a ten percent
Speaker 6: fall in sales this year, versus previous guidance for a
Speaker 6: single digit decline In Hong Kong, join Wong Loomberg, DA Bragasia, a.
Speaker 1: Few other stories to keep in mind. Will get the
Speaker 1: Japan CPI numbers out this morning. That will be of
Speaker 1: interest for sure. The headline at three point two percent,
Speaker 1: that's the estimate for core. If you strip out energy
Speaker 1: and also food, that's expected to be as hot as
Speaker 1: four point two percent. And we'll be taking a closer
Speaker 1: look at Taiwan Semi as well. Now it's time for
Speaker 1: global news. Russia has intensified its attacks on Ukrainian ports
Speaker 1: and has threatened ships headed there with attack at Baxter
Speaker 1: has Global News from the nine to sixty newsroom in
Speaker 1: San Francisco.
Speaker 7: Ed, Yeah, this a slowly building escalation for sure. Brian
Speaker 7: third straight day Moscow exit of the grain deal you
Speaker 7: know three days ago, began reimposing a blockade. UN Secretary
Speaker 7: General Antonio Gutera says the attacks have implications that go
Speaker 7: far beyond Ukraine.
Speaker 8: Hundreds of millions of people face hunger and consumers are
Speaker 8: confronting a global cost of living crises, and they will
Speaker 8: pay the price.
Speaker 7: As well as food supplied diplomatic relations. Russian bombing has
Speaker 7: also damaged the Chinese consulate in Odessa. Russia's also warned
Speaker 7: ships headed to Ukrainian ports that they would be considered
Speaker 7: to be carrying munitions and in danger, and in response,
Speaker 7: Ukraine has said that it would consider ships headed to
Speaker 7: Russian ports to be carrying munitions and be in danger. Meanwhile,
Speaker 7: the US says Ukraine has has begun deploying US supplied
Speaker 7: cluster bombs. White House Deputy spokes from When Sabrina Singh
Speaker 7: says that Ukraine is.
Speaker 6: Committed to use it responsibly, to keep track and record
Speaker 6: where they are using it so when this war is over,
Speaker 6: they can begin those demining efforts definite escalation.
Speaker 7: Though within the past few days, US President Joe Biden
Speaker 7: has ordered a working group on how to avoid the
Speaker 7: last minute game of chicken over the national debt. Bloombergs
Speaker 7: Jonathan Tamara says pressure from the left.
Speaker 8: This is something that a lot of more progressive Democrats
Speaker 8: had really urged him to do, in something that he
Speaker 8: rejected ahead of the most recent that limits standoff, where
Speaker 8: they said, listen, we should just get rid of this thing.
Speaker 8: Republicans keep holding democratic president's hostage over it, and it's
Speaker 8: threatening the credit of the United States. Whenever we get
Speaker 8: run into these logjams.
Speaker 7: Whether or not it could withstand legal challenges is another question.
Speaker 7: China has ordered its largest cities to step up preparations
Speaker 7: for future medical emergencies by building leisure and recreational facilities
Speaker 7: that can be used for quarantine during a pandemic. It
Speaker 7: wants to handle things a bit differently than during COVID.
Speaker 7: After praising former US Secretary of State Henry Kissinger the
Speaker 7: day before, Chinese President Chi Chimping has held a meet
Speaker 7: with him, now the first known in the Chinese capital
Speaker 7: in more than three years. Kristin Hahn Democratic strategists on
Speaker 7: Balance of Power.
Speaker 9: That there are different ways that we communicate with foreign governments,
Speaker 9: particularly one that's as difficult, as complicated as our relationship
Speaker 9: is with China, and you know that could be something
Speaker 9: that's happening right now.
Speaker 7: She told Kissinger that China is ready to discuss the
Speaker 7: correct way for nations to talk. And let's play jeopardy.
Speaker 7: The answer is one point zero eight billion dollars. The
Speaker 7: question what is the lottery ticket sold in southern California?
Speaker 7: You're going to pay out that.
Speaker 3: Lucky player unknown to us to date, one point zero
Speaker 3: eight billion dollars.
Speaker 7: Carolyn Becker the lottery says the cash value is over
Speaker 7: five hundred and sixteen million before taxes. She says the
Speaker 7: lucky winner will have a lot of new friends. He
Speaker 7: she they have not come forward. Global News powered by
Speaker 7: more than twenty seven hundred journalists and analysts over one
Speaker 7: hundred and twenty countries in San Francisco. I'm Ed Baxter in.
Speaker 1: This is Bloomberg him, Brian Curtis. Let's get to our guest,
Speaker 1: Matt Lloyd, chief investment strategist at Advisors Asset Management. Matt,
Speaker 1: the dial up nine days in a row and the
Speaker 1: laggards kind of having their day. I know you're a
Speaker 1: value guys, so this must be music to your ears.
Speaker 1: Does it continue?
Speaker 10: Yeah? I thanks Brian, It's great to be with you.
Speaker 10: We think so. I think that the shift has been
Speaker 10: in place. But when anytime you have a regime change,
Speaker 10: a shift from growth to value, or any international move,
Speaker 10: it doesn't go easy into that good night either. It
Speaker 10: doesn't go softly. It fights and it battles back and
Speaker 10: it usually these patterns take times and years to really materialize.
Speaker 10: So we still think it's great. I mean, with a
Speaker 10: lot of the risk that's out there, the pricing of
Speaker 10: the equities in the growth sector really almost perfection to
Speaker 10: next year's earnings. We see a little bit better risk
Speaker 10: reward in value, and value doesn't just necessarily mean here
Speaker 10: in the US matching up with certain you know, basic
Speaker 10: historical price book, price sales, cash blok, but also international,
Speaker 10: because international is a very big value play.
Speaker 1: It's funny that you say that, because I had in
Speaker 1: my notes of something to put to guests this notion
Speaker 1: that the US has all these big companies, important companies
Speaker 1: in AI, cybersecurity, cloud software, you know, mega tech, more
Speaker 1: so than other countries. And if these companies now have
Speaker 1: to take a pause because they've run pretty hard, pretty fast,
Speaker 1: that there might be good opportunities in Europe and in
Speaker 1: other areas like Japan to sort of play ketchup as
Speaker 1: those laggers rally laggers rally. So you mentioned that you're
Speaker 1: looking at some of these other markets. What would be
Speaker 1: chief among them?
Speaker 10: Well, I think if you look at even with the
Speaker 10: big run up in Japan, you look at Japan as
Speaker 10: you know, really about sixteen percent from its all time
Speaker 10: highs cording the MSCI Japan Index. You know again that
Speaker 10: was set in nineteen eighty nine. For those of US
Speaker 10: that can remember trials and tribulations of Japan to now.
Speaker 10: This is a long time coming, which is why you
Speaker 10: can see the Bank of Japan is really trying to
Speaker 10: keep that yield curve control because they like a little
Speaker 10: bit of the inflation. Maybe not to the degree they're
Speaker 10: talking with the three to four percent on the core rate,
Speaker 10: three percent on the regular, but they still feel very
Speaker 10: vibrant right now. But you look at every metric in
Speaker 10: their index, it's really a price. It's a value, price
Speaker 10: to book, price to sales, cashblow generation, steadiness and earnings.
Speaker 10: And even in Europe you're seeing the same thing, some
Speaker 10: earnings revisions, but it's broad based because the MSCI World
Speaker 10: Index is really done fairly well here recently. So we
Speaker 10: continue to see when we see pressures on the dollar
Speaker 10: up and down and so forth, some of the steadiness
Speaker 10: in earnings projections look a little bit better international and
Speaker 10: we continue to see a break in the dollar, which
Speaker 10: should bode well for many emerging markets. China is probably
Speaker 10: the only one right now with the GDP to play
Speaker 10: a coming out that's pretty problematic for them because the
Speaker 10: consumption level hasn't really taken off for them in general.
Speaker 10: When we look at a very balanced portfolio. The values
Speaker 10: really in the international play in select sectors in national,
Speaker 10: and then the growth sectors really are dominated here in
Speaker 10: the US outside of certain individual companies. So just by
Speaker 10: that mere fact of having diversification between growth and value,
Speaker 10: you're going to probably be steering more international. Yeah.
Speaker 1: Well, the diversification is key because we don't know actually
Speaker 1: if growth is going to correct here. I mean, you
Speaker 1: can have a couple of bad days for sure, but
Speaker 1: you still have the S and P five hundred well
Speaker 1: above the fifty day moving average. I think five to
Speaker 1: six percent above it's fifty day moving average, which is
Speaker 1: a little hot, but there's some room to slide back,
Speaker 1: which would be completely normal and could mean that you know,
Speaker 1: you continue to see the same type of behavior that
Speaker 1: we saw in the first half. Are you thinking about that.
Speaker 10: Yeah, we are. We look a little bit more a
Speaker 10: longer term and strategic We look at the risk reward
Speaker 10: and since we cover a lot of different asset classes
Speaker 10: and debt classes, we are always looking at that risk
Speaker 10: reward scenario. And the only problem is the AI is
Speaker 10: reminds me of the Internet back in the late nineties.
Speaker 10: You know, it's a great promise, great hope, but it's
Speaker 10: going to take some time to materialize and incorporate, to
Speaker 10: regulate and so forth. So I think it's a lot
Speaker 10: of fever on that, but it also probably has to
Speaker 10: do with the run up in the technology. And two
Speaker 10: things everyone's anticipated the pause by the Federal Reserve, which
Speaker 10: we think is a little bit premature because inflation is
Speaker 10: probably going to be a little bit higher in the
Speaker 10: second half than the low print that we just got.
Speaker 10: And then secondly, there's been so much cash on the
Speaker 10: sidelines that the FOMO investors have kind of come back
Speaker 10: into it, you know, and we get that sense where
Speaker 10: people are like, I'm not going to miss the boat.
Speaker 10: But if you go back in time in history, every
Speaker 10: time the Fed is paused, you've seen a market rally
Speaker 10: until they actually cut, and if they cut, it's usually
Speaker 10: for one reason, and that's usually a recession or demand destruction.
Speaker 10: And that is why you start to look at these
Speaker 10: little blurbs. And this is a much more exaggerated if
Speaker 10: we'd say, bear market rally. But you know, Serge, however,
Speaker 10: you're just pricing too much perfection. So again when we
Speaker 10: look at it, we're not against growth, and so forth,
Speaker 10: we just have dialed it down a little bit and
Speaker 10: been more selective, and I think the values it gives
Speaker 10: you a little bit more predictability.
Speaker 1: I know you want to buy quality companies, so I
Speaker 1: need to. I mean, I think all investors want to
Speaker 1: buy quality companies, but I want to hear from you
Speaker 1: how you actually define quality.
Speaker 10: Number one is cash flow when you're looking at times
Speaker 10: like it is now, when you look at higher interest rates,
Speaker 10: and the best thing the corporations did was like prolong
Speaker 10: some of their maturity profiles in anticipation of higher rates.
Speaker 10: I know they didn't expect these kind of rates, but
Speaker 10: in twenty six, late twenty five, twenty six, you're going
Speaker 10: to start getting some refinancing costs a bit higher, and
Speaker 10: that's going to really hurt a lot of the money
Speaker 10: that we go investment into capex and so forth. So
Speaker 10: when we look at that thing that that measure and
Speaker 10: so forth, cash flow right now is what we're looking at,
Speaker 10: whether that's high yield on the short run looking two
Speaker 10: years and in or in general with companies because they
Speaker 10: have a little bit of pricing power, we're looking at
Speaker 10: steady margins and earning. But positive cash flow is crucial
Speaker 10: right now for both debt and we think equity investors.
Speaker 1: Yeah, I think costs. You know, if you look at
Speaker 1: the strikes that we're seeing and some of the requests
Speaker 1: from from workers, you know, the labor cost is continuing
Speaker 1: to go up. Is not going to hit you know,
Speaker 1: earnings in the stock prices, and is it already happening.
Speaker 10: It already is happening. If you look at retail sales,
Speaker 10: real retail sales are pretty much flat if you take
Speaker 10: the inflation, the real cost of it, and really interest
Speaker 10: seeing it on some of the consumer sentiment numbers, the
Speaker 10: access to credit to you know, basically pay up for
Speaker 10: certain things. Now it's very biprocated. You see forty fifty
Speaker 10: percent really struggling, and then you're seeing discretionary income still
Speaker 10: high for people that have you know, had good jobs.
Speaker 10: But even going to your point, the job market, even
Speaker 10: the last month, you had a large chunk of the
Speaker 10: new jobs where people getting second jobs. And so when
Speaker 10: we look at those kinds of second jobs that's not
Speaker 10: in the narrow equity markets, those aren't really great harbingers
Speaker 10: for what's coming.
Speaker 1: This is Bloomberg Daybreak Asia, your morning brief on the
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