WEBVTT - George Noble Talks ROI on AI, Inflation

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news, joining.

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<v Speaker 2>Us in studio George Noble, who changed investment.

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<v Speaker 1>There's no other way to put it. This oddity came out.

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<v Speaker 2>Years ago Fidelity Overseas Fun and was a juggernaut for

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<v Speaker 2>a decade working with mister Lynchett Fidelity.

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<v Speaker 1>He is with Noble Capital Advies US. I got eight

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<v Speaker 1>ways to go.

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<v Speaker 2>I'm going to ask one look back question and then

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<v Speaker 2>we got to look at the present tense right now.

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<v Speaker 1>Because you're fired up out on.

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<v Speaker 2>LinkedIn and Twitter, everybody needs to read one hundred and

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<v Speaker 2>twenty eight pages John Kenneth Gelbraith lived almost to a

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<v Speaker 2>green span one hundred A short history of financial euphoria.

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<v Speaker 1>It's an exquisite jewel. I put it out on Twitter

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<v Speaker 1>and LinkedIn.

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<v Speaker 2>What's the character of our financial euphoria right now?

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<v Speaker 1>A la JK. Gilbraith.

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<v Speaker 3>Great to be here. There's really nothing new under the sun,

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<v Speaker 3>and that's his human nature. Doesn't change. The characters changed,

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<v Speaker 3>names change, but it's fear and greed. We can go

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<v Speaker 3>back to the South Sea bubble, Dutch Tulip bulb mania.

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<v Speaker 3>History repeats itself over and over again.

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<v Speaker 4>Put AI into that context here because people have been

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<v Speaker 4>positioning AI other than electricity, There's been nothing more important

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<v Speaker 4>than AI. How do you think about just this whole

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<v Speaker 4>concept writ large.

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<v Speaker 3>I'm not bearish on AI per se. I'm sure we're

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<v Speaker 3>all going to use it. Many of us are using

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<v Speaker 3>it already. The question is what's the ROI on the AI.

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<v Speaker 3>It starts out the way these bubbles all start. There's

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<v Speaker 3>a kernel of truth. It captures the imagination of the individual,

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<v Speaker 3>whether it's a Southsea bubble, or it's Dutch tulip bulbs,

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<v Speaker 3>or it's dot com, which I've lived through. Ye, And

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<v Speaker 3>it starts out it's a good idea, But what happens

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<v Speaker 3>is the price changes immeasurably. And the best definition I've

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<v Speaker 3>actually heard of a bubble. There are many definitions. The

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<v Speaker 3>best one I've heard is something that changes human behavior,

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<v Speaker 3>that people do things that they wouldn't do otherwise, and

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<v Speaker 3>whether it's because of fomo, fear of missing out or otherwise.

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<v Speaker 3>And I think that's kind of where we are with

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<v Speaker 3>with AI. I mean, I'm happy to change my mind,

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<v Speaker 3>but show me the money. Where's the ROI? And I

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<v Speaker 3>don't see it, and I don't see it coming either.

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<v Speaker 4>It doesn't seem to be deterring capital from flowing to

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<v Speaker 4>that business. We've seen extraordinary amounts of equity raised. Now

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<v Speaker 4>we're seeing tech companies and everything thought about the bond

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<v Speaker 4>market raising tens of billions of dollars in investment grade

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<v Speaker 4>bond market. We've got a Korean company listing its ad

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<v Speaker 4>rs today here in the US. I mean that I've

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<v Speaker 4>been on Global Wall Street for thirty years. I've never

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<v Speaker 4>seen this amount of money flow.

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<v Speaker 3>The things I read the same sources you do. I

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<v Speaker 3>file that under my category on X of things you

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<v Speaker 3>don't see at a bottom. We've seen this movie before

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<v Speaker 3>with Japanese subtitles, Housing subtitles, Tech subtitles. Go back to

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<v Speaker 3>dot com. I actually think this is much worse than

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<v Speaker 3>dot Com simply because the sums involved by that much greater.

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<v Speaker 2>This is really important because you know, the fossil sitting

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<v Speaker 2>around the table.

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<v Speaker 1>You know, we talked about Dana for a couple of

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<v Speaker 1>days ago.

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<v Speaker 2>I remember being in meetings at sixty State Street dot

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<v Speaker 2>com and all that. What's the distinction right now versus

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<v Speaker 2>ninety eight ninety.

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<v Speaker 1>Nine and then what we enjoyed in.

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<v Speaker 3>One again, I want to elaborate on the sheer magnitude

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<v Speaker 3>of this. Julian Garrett of Micro Macro Strategic Partners in

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<v Speaker 3>the UK Aerodyite Economists of the in many years has

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<v Speaker 3>made a calculation that this bubble, this malinvestment is seventeen

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<v Speaker 3>times seventeen times what we saw in the air of

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<v Speaker 3>dot com and what's allied to that. What's really important

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<v Speaker 3>is the sums involved are so much larger relative to

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<v Speaker 3>the real economy. The fallout from this could really be

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<v Speaker 3>much more significant.

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<v Speaker 2>For Global Wall Street. On this Friday, A real treat

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<v Speaker 2>George Noble with us of course definitive infidelity with mister

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<v Speaker 2>Lynch a few years ago at is Noble Capital Advisors.

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<v Speaker 2>He's been on fire out on LinkedIn and Twitter with

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<v Speaker 2>his criticism of the moment at him.

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<v Speaker 1>Paul Sweety with George Nobook again.

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<v Speaker 4>Another definitive part in this market was the I feel

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<v Speaker 4>of a company called SpaceX.

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<v Speaker 1>Oh my thought. I thought you'd never ask what do

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<v Speaker 1>you make of that?

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<v Speaker 4>I mean, I can't imagine setting in a fidelity office

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<v Speaker 4>conference room, and you know the bankers bring elon muskin

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<v Speaker 4>to make this pitch. I would have loved to have

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<v Speaker 4>been a fly on the wall. What do you make

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<v Speaker 4>of that.

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<v Speaker 3>History shows that buying companies that over ten times revenues

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<v Speaker 3>usually ends very badly. We all recall Scott McNeely famously

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<v Speaker 3>in some microsystems. What happens when you have to, when

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<v Speaker 3>your return is gonna be you buy number ten x.

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<v Speaker 3>This is one hundred and twenty times revenues. And you

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<v Speaker 3>know it's even if you look at companies and projection,

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<v Speaker 3>I mean they're already borrowing money. You look at the

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<v Speaker 3>companies projection, they'll be cashful negative for years to come.

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<v Speaker 3>And here's the worst part of SpaceX, which I don't

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<v Speaker 3>want to engage in the captain obvious thinking. But the

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<v Speaker 3>thing everyone should consider, and that is the staggered lockup

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<v Speaker 3>that we're now, the unlocked that we're looking at. Okay,

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<v Speaker 3>starting from next month, when the quarterly earnings come out,

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<v Speaker 3>you're twenty percent of this shares come unlocked shortly thereafter,

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<v Speaker 3>and then there's a whole series of unlocked seven percent

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<v Speaker 3>every twenty or thirty days. By December, one hundred percent

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<v Speaker 3>of the shares will be freely floating. The point of

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<v Speaker 3>the important point that investors should understand is even without

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<v Speaker 3>any change in the fundamentals, when you go from a

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<v Speaker 3>five percent float to one hundred percent float.

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<v Speaker 2>George, in the old days when you would take a

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<v Speaker 2>two hour lunch at Lockovers and you use the whole.

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<v Speaker 1>Court there off the bar.

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<v Speaker 2>But in the old days, when a company went public,

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<v Speaker 2>it like took its shares public and maybe they had

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<v Speaker 2>a little stub that kept private. Now we're unloading five

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<v Speaker 2>percent of the public. To me, it's manipulative. Should regulators

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<v Speaker 2>step in and get the initial public offering market back.

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<v Speaker 1>To a normal segmentation one hundred percent.

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<v Speaker 3>It's not a question of what's legal or illegal.

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<v Speaker 1>It's just not right.

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<v Speaker 3>Society is not well served by allowing this. Grandma's four

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<v Speaker 3>oh one k is an exitent liquidity for this manipulation.

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<v Speaker 3>And I think I think the regulators are sleep at

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<v Speaker 3>the wheel. They only usually jump in action after the

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<v Speaker 3>carpinases occurred.

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<v Speaker 2>Guenstler who sat in this chair recently, and I said

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<v Speaker 2>to Gary Gensler, I said, okay, you let bitcoin in.

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<v Speaker 2>I get it, it's a free market and all that,

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<v Speaker 2>But what do you say to retail that enjoyed bitdog

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<v Speaker 2>at one ten and it's now down at sixty SpaceX, Okay,

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<v Speaker 2>it's back to one fifty. I'm watching the debt of

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<v Speaker 2>SpaceX to be blunt, it can't find a bid.

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<v Speaker 3>A lie to that, Tom, I promise you that once

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<v Speaker 3>it goes under the offering price and the unlocked shares

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<v Speaker 3>come to market, the insiders who were in at a tenth

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<v Speaker 3>of the current price, they're going to hit the bid

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<v Speaker 3>so fat that it's gonna make it well.

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<v Speaker 1>I got to make some news here.

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<v Speaker 2>To be honest, Fidelity was way out front christer Munts

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<v Speaker 2>on this. Would you recommend that Abbie Johnson and the

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<v Speaker 2>team sell their SpaceX?

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<v Speaker 3>They know the company better than I do. Let's just

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<v Speaker 3>say if I was handed a portfolio, if Philly were

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<v Speaker 3>to rehire me, I would sell it right away.

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<v Speaker 4>Elon Musk, you have to. I'm not sure we've seen

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<v Speaker 4>anything like this in terms of the value that gets

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<v Speaker 4>described to mister Musk relative to the earnings, relative to

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<v Speaker 4>the cashlow. We've seen it year for years in Tesla,

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<v Speaker 4>and you look that Tesla analysts, the auto analysts all

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<v Speaker 4>have holds their cells on it and they've been wrong.

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<v Speaker 4>And the tech anisi filou all been saying, just buy it.

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<v Speaker 4>It's Elon, It's Elon, It's it's autonomous robots and all

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<v Speaker 4>that kind of stuff. Have you seen that in the

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<v Speaker 4>past where one individual can have such an influence on valuation.

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<v Speaker 3>No, I think Tesla's probably the biggest misallocation of capital

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<v Speaker 3>at scale in the history of stock markets, perhaps only

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<v Speaker 3>surpassed by SpaceX. I was one of those wrong analysts.

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<v Speaker 3>I'm a fossil. I happen to be the auto analyst

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<v Speaker 3>for Peter Lynch in nineteen eighty one. We went to

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<v Speaker 3>Detroit to visit Chrysler, Ford and GM, so I know

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<v Speaker 3>of what I speak. Fundamental work has not guided one

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<v Speaker 3>in the case of Tesla. I think, however, though he's

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<v Speaker 3>bitten off more than he can chew. Now everyone's speculating

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<v Speaker 3>whether or not SpaceX may merge take over Tesla. I

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<v Speaker 3>have no special insight on that, but if I had

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<v Speaker 3>to gamble, if I had to speculate, and if I

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<v Speaker 3>ever speculate, I would say it's a reasonable speculation.

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<v Speaker 2>Let me reintroduce here worldwide, including overseas and across America.

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<v Speaker 2>George Noble with us for years, definitive in the business

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<v Speaker 2>of over seas investment and fidelity thrilledies in our studio

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<v Speaker 2>today controversial to say the least on the euphoria at hand.

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<v Speaker 4>Paul Sweene, So, George, where do you see opportunity these days?

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<v Speaker 4>I'm sure you look at various markets, various geographies.

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<v Speaker 1>Where do you see value these days?

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<v Speaker 3>Well, it's a market of stocks. As Peter J. Always

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<v Speaker 3>used to say, don't try to call the market. I

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<v Speaker 3>think they're outstanding opportunities right now. On energy, I'm actually

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<v Speaker 3>quite concerned about the energy picture. I think we're sleepwalking

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<v Speaker 3>into the biggest energy this location in history. You look

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<v Speaker 3>at the disparity between the divergence between the financial market

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<v Speaker 3>for oil and the physical market for oil. We're between

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<v Speaker 3>a rock and a hard place. The energy stocks. Crude

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<v Speaker 3>is sold off significantly the last few weeks, as have

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<v Speaker 3>the energy stocks. You know. I think the risk award

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<v Speaker 3>is very appealing. There's very little downside and potentially a

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<v Speaker 3>lot of upside. I like reflation. Generally speaking, gold stocks

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<v Speaker 3>I think are a huge buy right here SSRM as

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<v Speaker 3>an example, seven times earnings, not cash flow, seven times earnings, right, So,

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<v Speaker 3>gold stocks, energy stocks, other commodity names, like some of

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<v Speaker 3>the copper copper names, they're all they're all very interesting

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<v Speaker 3>to me.

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<v Speaker 4>Part of this AI story to the extent people are

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<v Speaker 4>looking for other ways to buy it other than the chips.

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<v Speaker 4>Has been some of the picks and shovels. One of

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<v Speaker 4>them has been energy. How are we going to power

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<v Speaker 4>all these data centers that are being built in everybody's backyard.

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<v Speaker 4>I mean, they can stick a little nuclear reactors next

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<v Speaker 4>to each one. How are we going to do that?

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<v Speaker 1>It took thermodynamics exactly.

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<v Speaker 3>Well, the one thing you shouldn't do is buy oklow,

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<v Speaker 3>which is one of the biggest frauds out there on

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<v Speaker 3>the market right now.

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<v Speaker 1>But that's a whole nother story. Ok L.

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<v Speaker 3>We've been short that for a year. You know. The

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<v Speaker 3>problem with it was some of the names you mentioned,

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<v Speaker 3>some of the utility stocks with the AI trade comes unstuck,

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<v Speaker 3>and I believe it will. I think a lot of

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<v Speaker 3>those derivative plays are going to take on water cru

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<v Speaker 3>It's a little different so in sight, a different orbit,

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<v Speaker 3>but a lot of the derivative power plays I think

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<v Speaker 3>are going to have a big problem. One last joke

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<v Speaker 3>of it was great lines, someone you used a few

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<v Speaker 3>weeks ago and me. They talk about, hell, you know,

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<v Speaker 3>you got to buy the picks and shovels. They said, yea, Well,

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<v Speaker 3>what happens to buy the picks and shovels and there's

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<v Speaker 3>no gold in them?

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<v Speaker 1>Hills Georgia.

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<v Speaker 2>I got to get two things in here that I

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<v Speaker 2>think our audience is really interested in.

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<v Speaker 1>And overseas in the huge.

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<v Speaker 2>Ups and some of the challenges you had a t

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<v Speaker 2>ton as well. Are you correlated on overseas to what

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<v Speaker 2>the dollar does? Like do you have to have a

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<v Speaker 2>week dollar to make overseas work?

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<v Speaker 3>No, you don't, but it's a very good question. You

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<v Speaker 3>don't need a week or dollar. What you need to

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<v Speaker 3>keep in mind is the economic cycles across different geographies

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<v Speaker 3>varies enormously, and that's what you're trying to anticipate. You

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<v Speaker 3>need to have somewhat of a top down perspective, not

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<v Speaker 3>just bottom investing Internationally. However, one thing I will say

0:11:02.720 --> 0:11:05.520
<v Speaker 3>the dirty secret they don't tell you anymore. Way back

0:11:05.520 --> 0:11:06.880
<v Speaker 3>when when I was a young and in the early

0:11:06.960 --> 0:11:10.600
<v Speaker 3>days at Fidelity, it was much less correlation between the markets. Now,

0:11:10.679 --> 0:11:13.840
<v Speaker 3>given the increasing interlinkages between markets, the correlation is a

0:11:13.920 --> 0:11:14.440
<v Speaker 3>much higher.

0:11:14.520 --> 0:11:15.880
<v Speaker 1>I like to joke, why do.

0:11:15.880 --> 0:11:17.720
<v Speaker 3>I need to be up at ten o'clock at night

0:11:17.760 --> 0:11:19.720
<v Speaker 3>trading the Japanese mark? I get up at five am

0:11:19.760 --> 0:11:22.280
<v Speaker 3>to watch the London market. I can lose money just

0:11:22.320 --> 0:11:24.320
<v Speaker 3>as well between nine thirty a m. At four pm

0:11:24.400 --> 0:11:26.120
<v Speaker 3>Eastern time, and I can get and I can get a.

0:11:26.240 --> 0:11:28.840
<v Speaker 2>Jobs padhground on that, and of course on private credit.

0:11:28.920 --> 0:11:31.120
<v Speaker 2>I know you've been in the dump known as the

0:11:31.120 --> 0:11:33.679
<v Speaker 2>Saint Regis. The old Saint Regis in Beijing was an

0:11:33.720 --> 0:11:38.000
<v Speaker 2>absolute dump, folks. I'm sitting there in the nineties listening

0:11:38.040 --> 0:11:42.080
<v Speaker 2>to CEO squared stuff and bankers giddy and the whole thing.

0:11:42.240 --> 0:11:45.000
<v Speaker 2>Are we doing the reducs there on private credit and

0:11:45.040 --> 0:11:48.160
<v Speaker 2>private equity where there's some shadows to say.

0:11:48.040 --> 0:11:49.920
<v Speaker 3>The least, you couldn't have said it better. My father

0:11:49.920 --> 0:11:51.480
<v Speaker 3>always used to like to say, there's two ways of

0:11:51.559 --> 0:11:54.120
<v Speaker 3>learning things, either by precept or by experience. It's much

0:11:54.200 --> 0:11:56.800
<v Speaker 3>or more economical. But with my precept, we're all human.

0:11:56.960 --> 0:11:59.600
<v Speaker 3>We all think that this is brand new. It's Dayevo

0:11:59.640 --> 0:12:01.240
<v Speaker 3>all over again, as Yogi would say.

0:12:01.760 --> 0:12:04.800
<v Speaker 4>So how about just real quick US versus non US?

0:12:04.800 --> 0:12:06.560
<v Speaker 4>How do you think about that these days? Because there

0:12:06.720 --> 0:12:08.600
<v Speaker 4>was a flight out of the US when the tariffs

0:12:08.840 --> 0:12:10.080
<v Speaker 4>sure started happening.

0:12:10.200 --> 0:12:13.679
<v Speaker 3>Sure you know, the US we had a more than

0:12:13.720 --> 0:12:15.679
<v Speaker 3>a decade of app performance largely in the back of

0:12:15.720 --> 0:12:18.400
<v Speaker 3>the fact that US had much superior Ernie's growth was

0:12:18.480 --> 0:12:21.800
<v Speaker 3>justified largely led by tech. Okay, but now that when

0:12:21.800 --> 0:12:25.920
<v Speaker 3>this global reflation growth is not as scarce as it was,

0:12:26.040 --> 0:12:28.760
<v Speaker 3>so the rest of the world, rarely speaking, starts to do,

0:12:29.520 --> 0:12:31.840
<v Speaker 3>the gap closes, and in fact that Ernie's growth and

0:12:31.840 --> 0:12:33.800
<v Speaker 3>a lot of the farm markets exceeds what you see

0:12:33.840 --> 0:12:36.319
<v Speaker 3>in the US right now in particular, but not all.

0:12:36.880 --> 0:12:40.160
<v Speaker 3>It's rather a heterogeneous group. So I think Japan's interesting.

0:12:40.200 --> 0:12:42.960
<v Speaker 3>I think selected emerging markets like Brazil and China, but

0:12:43.040 --> 0:12:45.080
<v Speaker 3>you can't color them all the same brush.

0:12:45.400 --> 0:12:47.880
<v Speaker 2>I got to ask one final question, and I'm doing

0:12:47.880 --> 0:12:48.840
<v Speaker 2>this for ninety two nine.

0:12:48.840 --> 0:12:49.959
<v Speaker 1>Good morning up in Boston.

0:12:50.080 --> 0:12:52.599
<v Speaker 2>Thrill that you're with us from Mount Cataden down to

0:12:52.640 --> 0:12:54.520
<v Speaker 2>the National Hotel on Black Island.

0:12:55.160 --> 0:12:57.800
<v Speaker 1>George Noble, there was a girl.

0:12:57.800 --> 0:13:01.240
<v Speaker 2>That was just sort of at Fidelity. She came out

0:13:01.240 --> 0:13:05.200
<v Speaker 2>of Hobart Williams Smith, have a name named Johnson, and

0:13:05.280 --> 0:13:07.640
<v Speaker 2>Fidelity was there when you were there and after you

0:13:07.640 --> 0:13:12.559
<v Speaker 2>were there. What Abby Johnson has done at Fidelity is

0:13:12.600 --> 0:13:16.800
<v Speaker 2>a miracle. I mean, are you surprised or shocked at

0:13:16.880 --> 0:13:20.600
<v Speaker 2>what her leadership has done? There after the turmoil going

0:13:20.640 --> 0:13:21.679
<v Speaker 2>from dad to daughter.

0:13:22.360 --> 0:13:26.640
<v Speaker 3>It really has been outstanding, you know it. Phail is

0:13:26.679 --> 0:13:29.000
<v Speaker 3>a wonderful company, is I think it was Garrett Morrison

0:13:29.000 --> 0:13:32.640
<v Speaker 3>Saturday Night Live used to say Fidelity bad any bety

0:13:32.640 --> 0:13:36.839
<v Speaker 3>good to me. It's extremely well run company. Ned was fantastic.

0:13:37.760 --> 0:13:40.520
<v Speaker 3>She's done a fantastic job as well. When I joined

0:13:40.520 --> 0:13:41.480
<v Speaker 3>FIDELI you're gonna laugh.

0:13:41.559 --> 0:13:41.880
<v Speaker 1>Last thing.

0:13:41.920 --> 0:13:44.800
<v Speaker 3>I'll say they had eight billion under management. I think

0:13:44.880 --> 0:13:47.960
<v Speaker 3>only three billion inequities. Fidelity, believe it or not, only

0:13:48.040 --> 0:13:50.240
<v Speaker 3>hired two people a year back in nineteen eighty one.

0:13:50.480 --> 0:13:53.400
<v Speaker 3>They came through the seventies, they lost money some years,

0:13:53.400 --> 0:13:55.920
<v Speaker 3>they had the layoffs, and now they're eighteen trillion.

0:13:56.360 --> 0:13:57.280
<v Speaker 1>This is the final line.

0:13:57.280 --> 0:13:59.240
<v Speaker 3>I think it comes from Ned Johnson himself with something

0:13:59.280 --> 0:14:01.880
<v Speaker 3>like never confused brains with a bull market.

0:14:02.160 --> 0:14:06.640
<v Speaker 1>So we'll do that. You can leave right now. George Noble,

0:14:06.720 --> 0:14:09.720
<v Speaker 1>thank you so much. Definitive at Fidelity Overseas.

0:14:09.760 --> 0:14:12.480
<v Speaker 2>Can't say enough about Look for him out on LinkedIn

0:14:12.520 --> 0:14:13.920
<v Speaker 2>alone and on Twitter.

0:14:14.040 --> 0:14:17.480
<v Speaker 1>His caution of the disease times of Euphoria