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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Welcome to the Daybreak

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Speaker 1: Asia podcast. I'm dek Krisner. Equity markets across the Apac

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Speaker 1: are mixed after an upbeat session in the States. We

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Speaker 1: had US energy and defense shares trading higher after the

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Speaker 1: ouster of Venezuelan President Nicholas Maduro. Now Chevron is the

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Speaker 1: only super major oil company still operating in Venezuela. Today,

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Speaker 1: AT shares were up five percent, which helped to lead

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Speaker 1: the Dow to a fresh record high. Later in the day,

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Speaker 1: President Trump suggested the US may subsidize efforts by energy

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Speaker 1: companies to rebuild Venezuela's oil industry. We got some perspective

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Speaker 1: from Bloomberg Stephen Stepchinski. He spoke with Bloomberg TV host

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Speaker 1: Paul Allen and Avril hom.

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Speaker 2: We're definitely in a wait and see situation. There are

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Speaker 2: two ways you could play what's been happening in Venezuela.

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Speaker 2: One is its bullish for prices because it injects geopolitical risk.

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Speaker 2: It could reduce production in the country, or it could

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Speaker 2: also add some risk to maybe the US hitting other

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Speaker 2: countries that are oil producers. There's been a lot of

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Speaker 2: chatter on Twitter and other social media about what's happening

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Speaker 2: in Iran with something in other countries. So that could

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Speaker 2: be something that the market looks at they're kind of

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Speaker 2: hedging that risk there. The other way you look at

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Speaker 2: it is this clears the way for the US to

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Speaker 2: remove their sanctions and their blockade essentially on the shadow

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Speaker 2: flea ships and on the exports of sanctioned crued out

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Speaker 2: of Venezuela.

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Speaker 3: That would add more supply to the market.

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Speaker 2: But then when you take a zoom out and you

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Speaker 2: look at this in a really macro view, Venezuela is

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Speaker 2: really not that big in the grand scheme of things.

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Speaker 2: They produce less than one percent of global oil supply,

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Speaker 2: while they do.

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Speaker 3: Have vast reserves.

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Speaker 2: It isn't clear whether or not Trump will be able

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Speaker 2: to convince the Chevrons, the Exxons, those folks into investing

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Speaker 2: in the country the tens of billions of dollars that's

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Speaker 2: required to really pump up that production.

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Speaker 3: Yeah, Steven, tell us a little bit more about that.

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Speaker 4: What sort of investment would be required, what sort of

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Speaker 4: time frame would it happen over, and critically, I guess

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Speaker 4: what sort of security guarantees would they need to be.

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Speaker 3: Well.

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Speaker 2: So when you speak to the analysts that you get

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Speaker 2: all sorts of numbers, but I think the general view

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Speaker 2: is that it's going to take about ten billion.

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Speaker 3: Dollars per year over.

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Speaker 2: The next decade to get Venezuela back to.

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Speaker 3: Where it was producing in the past.

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Speaker 2: Now, to give you some context, Venezuela produces about eight

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Speaker 2: hundred thousand.

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Speaker 3: Barrels per day of oil.

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Speaker 2: Now, when you look at the early two thousands, it

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Speaker 2: was closer to three million barrels per day, and when

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Speaker 2: you look at the seventies, it was four million barrels

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Speaker 2: per day. So when Trump is talking about increasing reviving

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Speaker 2: this oil production, he's looking more at three million barrels.

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Speaker 2: That's more than tripling of production where we are right now.

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Speaker 2: The reason why production has come down so much over

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Speaker 2: the last two decades or so is because there hasn't

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Speaker 2: been investment in infrastructure. It's because the country has been

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Speaker 2: dealing with corruption, and also the sanctions have reduced a

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Speaker 2: lot of the output as well and customers requiring the fuel,

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Speaker 2: and that reduced the amount of rigs on the ground

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Speaker 2: as well. So to get us back up there, it's

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Speaker 2: going to cost billions of dollars and it's also going

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Speaker 2: to take essentially a decade to get back here now.

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Speaker 2: President Trump said on NBC earlier today that he's looking

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Speaker 2: at getting this up and running whatever that word to mean,

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Speaker 2: in eighteen months, which is really against what the view

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Speaker 2: of analysts in the market says, which is going to

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Speaker 2: take quite a bit longer.

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Speaker 1: That is Bloomberg Stephen Stepchinski. We turned to technology next

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Speaker 1: and the CEES conference. It officially gets underway Tuesday in

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Speaker 1: Las Vegas. Today, in Vidia CEO Jensen Wang announced a

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Speaker 1: group of AI models and tools designed to speed up

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Speaker 1: development of autonomous vehicles. Huang said the aim is to

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Speaker 1: help create vehicles that can think their way out of

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Speaker 1: unexpected situations such as traffic light outage. Here is Wang.

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Speaker 5: Today, we're announcing Alpa Mayo, the world's first thinking reasoning

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Speaker 5: autonomous vehicle AI. ALP Mayo is trained end to end,

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Speaker 5: literally from camera in to actuation out.

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Speaker 1: That is Nvidia CEO Jensen h Wang. Now, Bloomberg's Annabelle

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Speaker 1: Droolers is at CEES. She spoke with Bloomberg TV host

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Speaker 1: Paul Allen and Avril Hong.

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Speaker 6: Really one of the biggest announcements he had was around

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Speaker 6: this Reuben architecture.

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Speaker 3: It's essentially the success.

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Speaker 6: It's a blackwell, it's a lot more powerful, it can

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Speaker 6: do a lot more with a lot less energy demands

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Speaker 6: as well, So you're getting a bit of a nod

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Speaker 6: to that. Essentially, he's saying that the production has started,

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Speaker 6: they're going to be ramping that up into the end

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Speaker 6: of twenty twenty six, and it has been something designed

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Speaker 6: specifically for gigawat Ai factories now gigawort Ai factories. You're

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Speaker 6: essentially talking as well about what he addressed during that presentation,

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Speaker 6: which is that AI is becoming a lot more complex

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Speaker 6: and so as a result, it needs a lot more

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Speaker 6: compute power, and that's what he's saying that basically preparing

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Speaker 6: these products to address that need. It's interesting as we

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Speaker 6: ended twenty twenty five, we were talking still a lot

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Speaker 6: about those AI bubbles. He didn't address that specifically in

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Speaker 6: the presentation, but I think he did nod to it

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Speaker 6: when he talked about the demand that he's seeing and

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Speaker 6: how essentially the entire computing industry is changing and that

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Speaker 6: is driving these big shift in R and D budgets

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Speaker 6: as well from companies across a range of different industries,

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Speaker 6: so essentially saying and videos at the center of the

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Speaker 6: AI ecosystem, and again that demand is very much still

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Speaker 6: there for the company. But interesting to note, of course,

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Speaker 6: gensen Hung still talking about these products a lot earlier

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Speaker 6: in the year than he would typically do.

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Speaker 3: Well.

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Speaker 4: Jensen Huang was also speaking about autonomous driving. What did

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Speaker 4: you have to say about that?

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Speaker 6: Yeah, it was a really big focus as well in

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Speaker 6: the earlier part of the presentation, more on that sort

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Speaker 6: of embodied AI or physical AI, and to that end,

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Speaker 6: motives certainly were a big part. So he's announced what's

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Speaker 6: called the Alpha Mayer models. So he's saying that this

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Speaker 6: is the world's first thinking rather reasoning autonomous vehicle AI.

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Speaker 6: So I don't want to get two technical on it,

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Speaker 6: but what he's saying is essentially solving for the so

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Speaker 6: called long tail, which is when you're out in the world,

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Speaker 6: you're driving your vehicle and you come across very messy

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Speaker 6: or unpredictable situations, and so far he's saying that the

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Speaker 6: autonomous driving software technology hasn't really been able to solve

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Speaker 6: for that. But he's saying that Alpa Mayer will have

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Speaker 6: those capabilities, he'll be able to stop reason with more

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Speaker 6: human like capabilities and then make a decision. And that's

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Speaker 6: what he's saying is going to be the really big difference.

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Speaker 4: This event that you're out of course, BELL is really

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Speaker 4: one of the ones where the biggest names in tech gather.

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Speaker 3: What else are you looking forward to at the event?

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Speaker 6: Yeah, well, it's the biggest names, and then it's also

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Speaker 6: the names that maybe you haven't heard of before as well,

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Speaker 6: because there's all sorts of innovations that we're expecting to

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Speaker 6: see on display, and I think just the thing about mobility,

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Speaker 6: for instance, that's going to be one of the big

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Speaker 6: focus points of the event. And just behind me is

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Speaker 6: actually a product that I've never seen before, which is

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Speaker 6: a motorcycle with two wheels in the front. One of

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Speaker 6: the backset's a reverse.

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Speaker 3: Trike or a taphole trike.

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Speaker 6: But what is interesting about it is that it's also

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Speaker 6: an evetol or an electric vehicle takeoff and landing vehicles.

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Speaker 6: So expecting to see lots of different innovations on displaying

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Speaker 6: the mobility space, but also humanoid service robots. They're going

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Speaker 6: to continue to be key announcements around digital health, longevity,

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Speaker 6: energy demands as well, because there's that big question how

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Speaker 6: you're going to meet the power needs of AI and computing,

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Speaker 6: so solutions in solar wind, small nuclear reactors for instance,

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Speaker 6: next generation batteries. But then also this move to the edge,

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Speaker 6: which we've been talking about for quite a while now,

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Speaker 6: but should be a big focus of cesscre is so

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Speaker 6: called AI Everywhere or EDGAI, which is when you have

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Speaker 6: a lot of that sensitive data that ends up being

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Speaker 6: processed locally. And again just going back to Jensen HWANGI

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Speaker 6: actually did announce or nod to this in his presentation

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Speaker 6: because he was talking about agentic AI technologies that are

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Speaker 6: going to become a lot more customized, and again that

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Speaker 6: points to the need for AJI.

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Speaker 1: That is Bloomberg's Annabel droolers from the CEES conference in

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Speaker 1: Las Vegas. Here on the Daybreak Asia podcast. Welcome back

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Speaker 1: to the Daybreak Asia podcast. I'm Doug Chrisner. We are

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Speaker 1: well aware of the number of forces working on markets

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Speaker 1: these days. There are obvious geopolitical risk, especially those associated

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Speaker 1: with Venezuelan oil after the US ouster of President Nicholas Maduro.

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Speaker 1: There are also questions surrounding the durability of the AI trade.

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Speaker 1: And let's not forget the outlook for central bank policy,

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Speaker 1: chiefly from the FED. For a closer look, I'm joined

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Speaker 1: by Andrew Skadoff. He is the founder and CIO at

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Speaker 1: Bancreek Capital Advisors. Andrew's on the line from Los Angeles.

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Speaker 1: Thanks for being here. So I highlighted many of the factors,

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Speaker 1: and given all of these influences, how do you go

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Speaker 1: about separating signal from noise?

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Speaker 7: You know, when you think back to twenty twenty three

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Speaker 7: to twenty twenty four, we did see a fairly narrow

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Speaker 7: rally in the market, and that kind of broadened out

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Speaker 7: a bit in twenty twenty five with kind of AI

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Speaker 7: infrastructure stock theme durability being surprisingly strong as the current

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Speaker 7: administration kind of increased the port of the tech sector

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Speaker 7: after witnessing the impact their initial terror policies. Said earlier

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Speaker 7: in the year, we're having but we're still seeing a

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Speaker 7: pretty concentrated market, right and I think, you know, some

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Speaker 7: investors may not fully appreciate the kind of concentration risks

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Speaker 7: that many portfolios still have today, which again, as we

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Speaker 7: move into twenty six, we actually think there's more of

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Speaker 7: a dispersion that will be present, and I think it

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Speaker 7: could set up well for stock pickers, So you know,

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Speaker 7: when you're asking about, like what does that look like

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Speaker 7: for assessing noise and signal, what we tend to do

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Speaker 7: is a very data focused approach where we're looking both

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Speaker 7: fundamentally under the hood for these businesses as well as

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Speaker 7: some autitative features that we've developed to help us assess,

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Speaker 7: you know, what businesses are structurally advantaged and will have

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Speaker 7: the ability to compound capital for investors over time.

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Speaker 1: Is the concentration risks solely big cap tech?

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Speaker 7: Yeah, I mean obviously a lot of people have covered this,

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Speaker 7: but when you when you look back historically, we're just

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Speaker 7: in a position that we've never seen before where you know,

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Speaker 7: you have a handful of positions not only being the

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Speaker 7: lion's share of you know, some indicies, but also generating

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Speaker 7: you know, for sure over the lion's share of the

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Speaker 7: returns over those specific years. And I think you know,

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Speaker 7: the risk is, or you know, the surprise could be,

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Speaker 7: you know, as you look out in twenty six and

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Speaker 7: twenty seven, even if those returns are muted or slightly lower,

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Speaker 7: folks could be surprised that, you know, the overall returns

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Speaker 7: of the market will be lower because there's such they

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Speaker 7: have such a dominant share in positioning. That's the opportunity,

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Speaker 7: we believe for active management and individual stock picking.

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Speaker 1: One of the things that the market is beending on

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Speaker 1: is a lot more in the way of rate cuts

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Speaker 1: from the FED. And I'm trying to understand whether you

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Speaker 1: would categorize the debate at the FED and a lot

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Speaker 1: of market speculation more as signal or noise.

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Speaker 7: A little bit of both, right, because you know, the

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Speaker 7: FED has been more accommodating with respect to rate reductions

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Speaker 7: and we think that will continue to help kind of

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Speaker 7: broader equity markets in general. Though at current valuations, investors

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Speaker 7: need to be mindful of where to allocate capital, and

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Speaker 7: that is where you know, it's really important to search

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Speaker 7: for the signals. You know, I always talk about if

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Speaker 7: you have like two assets and they both you know,

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Speaker 7: let's say compound at ten percent over a period of time,

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Speaker 7: one asset is ten percent every year and the other

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Speaker 7: asset is kind of all over the place up forty, down, thirty,

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Speaker 7: up twenty, but you end up kind of in the

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Speaker 7: same place. You know, is there a difference between the

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Speaker 7: two And we would say absolutely, because the signal that

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Speaker 7: you're getting from the first asset is telling you there's

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Speaker 7: something structurally advantaged and consistent about that assets ability to

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Speaker 7: generate return for shareholders. The other asset, obviously, it has

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Speaker 7: a much more volatile path, which tells you there could

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Speaker 7: be increased competition, it could be a more cyclical business

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Speaker 7: environment that they're operating in, but there's potential disruption for

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Speaker 7: that asset, and that's really kind of what we're focused on.

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Speaker 7: And so when you think about kind of the AI

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Speaker 7: and infrastructure play going forward, we do think there are

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Speaker 7: really interesting ways to play it. And so when you

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Speaker 7: look at some of the positions that we own within

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Speaker 7: our ETFs, you'll find businesses that have been around for

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Speaker 7: you know, one hundred or so years, kind of oldline

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Speaker 7: industrials that will be participating in you know, data center buildouts,

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Speaker 7: just not from like the initial tech stack.

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Speaker 1: So today the Rustle two thousand was up about one

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Speaker 1: point six percent today. How does your work view the

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Speaker 1: small cap space right now?

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Speaker 7: You know, it's funny small caps obviously from when I

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Speaker 7: started my career like twenty years ago, it's very different

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Speaker 7: today and obviously much larger. So you know, there are

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Speaker 7: some small to mid cap companies that have kind of

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Speaker 7: achieved this escape velocity where they might have may have

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Speaker 7: started as a really niche market, but have grown and

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Speaker 7: are now scalable and what I would call structurally advantaged.

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Speaker 7: So there are some very interesting opportunities kind of in

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Speaker 7: that let's say, you know, billion to five billion dollar

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Speaker 7: market cap range, where you can find these kind of

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Speaker 7: durable compounders, if you will, that are positioned and set

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Speaker 7: up quite nicely, and with multiples that are fairly reasonable.

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Speaker 1: Well, you mentioned multiples there. One of the criticisms of

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Speaker 1: the equity market state side has been that by and

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Speaker 1: large it's still very expensive, particularly given the AI trade.

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Speaker 1: I'm wondering whether or not it's forced you to look

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Speaker 1: offshore these days, and if so, what are you finding internationally?

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Speaker 7: Yes, so another great point for sure, the the US

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Speaker 7: market valuation landscape is a little more stretched than you know,

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Speaker 7: we would we would like, and so you know, we

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Speaker 7: do have international portfolio as well, and what we found,

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Speaker 7: you know, historically is that it's traded at a pretty

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Speaker 7: steep discount to the US markets, and you're you're still

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Speaker 7: seeing some of that discount, but you know, similar type themes,

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Speaker 7: the same durable compounding types of companies. You know, for instance,

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Speaker 7: you might have like a company like ABB in Switzerland

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Speaker 7: that is a super interesting leader in electrification and automation,

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Speaker 7: and they're going to benefit from kind of the infrastructure

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Speaker 7: spend for data center build out.

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Speaker 3: And I look at this as kind of like.

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Speaker 7: An added tail into what is already a very stable,

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Speaker 7: well positioned business. You could also look at companies like

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Speaker 7: BA Systems, right, so obviously one of the largest defense

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Speaker 7: and aerospace companies in the world. Given what's going on,

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Speaker 7: you know, internationally these days, you are seeing Europe and

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Speaker 7: other allies outside of the US looking to work more

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Speaker 7: closely with non US defense contractors to procure, you know,

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Speaker 7: weapon systems and improve their defense capabilities, probably now more

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Speaker 7: than ever. And just given the long term nature of

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Speaker 7: these contracts, the defense contractors conform really deep customer relationships.

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Speaker 7: I look back at how well some of the US

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Speaker 7: defense companies like Lockheed Martin and Northrope in general dynamics

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Speaker 7: have performed over the last few decades, and you know,

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Speaker 7: we think BAE will have a meaningful long term runway

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Speaker 7: from here.

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Speaker 1: One of the areas of strength today in the US

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Speaker 1: equity market was financials. How are you viewing the financial

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Speaker 1: industry right now.

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Speaker 7: So financials have been pretty volatile over time. So again

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Speaker 7: our perspective is you want to get paid for you know,

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Speaker 7: incremental you know, unit of volatility or risk that you're

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Speaker 7: taking as an investor. One area of financial is that

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Speaker 7: has performed really well and that we do incorporate into,

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Speaker 7: you know, our quantitative approach has been insurance companies. So

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Speaker 7: you have something like an arch Capital Group, which is

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Speaker 7: you know, best in class specialty insured and reinsure, and

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Speaker 7: you know the reason being they've displayed like exceptional and

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Speaker 7: disciplined underwriting over other twenty plus years in existence, and

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Speaker 7: they generate really high ROI c you know in the

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Speaker 7: insurance world, like mid to thigh teens is actually really attractive.

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Speaker 7: So it allows the company to kind of compound its

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Speaker 7: book value while remaining resilient through different insurance cycles. So

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Speaker 7: we still like the insurance companies and think that's a

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Speaker 7: great company and type of investment for anybody's portfolio.

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Speaker 1: Andrew will leave it there. Thank you Sovuch for being

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Speaker 1: with us. Andrew Skateoff is founder also the CIO at

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Speaker 1: Bancreek Capital Advisors, joining from Los Angeles here on the

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Speaker 1: Daybreak Asia podcast. Thanks for listening to today's episode of

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Speaker 1: the Bloomberg Daybreak Asia Edition podcast. Each weekday, we look

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Speaker 1: at the story shaping markets, finance, and geopolitics in the

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