WEBVTT - Berkshire Earnings Beat, Hope For A Soft Landing

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<v Speaker 1>Good morning.

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<v Speaker 2>I'm Brian Curtis and I'm Doug Krisner. Here are the

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<v Speaker 2>stories we're following today.

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<v Speaker 1>An earning speed from Berkshire Hathaway, but some questions still lingering.

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<v Speaker 1>Let's get the story from Bloomberg's Denise Pellegreeny.

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<v Speaker 3>We do pretty much have blowout earnings from Berkshire Hathaway.

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<v Speaker 3>Billionaire Warren Buffett's conglomerate reporting second quarter operating income that

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<v Speaker 3>beat the average analyssessment, and that was thanks in large

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<v Speaker 3>part to strength and its insurance unit. Why do I

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<v Speaker 3>say that? Because Berkshire had a seventy four percent increase

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<v Speaker 3>in insurance underwriting earnings. That's us. It cut costs and

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<v Speaker 3>raise prices At Geico, the thing is price hikes and

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<v Speaker 3>pullbacks and ad spending like that, well, they can backfire,

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<v Speaker 3>and that could be happening. Over the last twelve months,

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<v Speaker 3>policies in force decreased by two point seven million, and

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<v Speaker 3>that does suggest the cuts to advertising spending are costing

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<v Speaker 3>the conglomerates. Auto Insure some market share there and another

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<v Speaker 3>thing to watch for Berkshire's railroad unit BNSF. Well, profit

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<v Speaker 3>there fell twenty four percent. To d spelling Ay Bloomberg

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<v Speaker 3>Day BREAKASIE.

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<v Speaker 2>In the States, the earning season is nearing an end,

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<v Speaker 2>and in the week ahead, we have several key reports due.

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<v Speaker 2>We have a preview now from Bloomberg's Charlie Pellett.

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<v Speaker 4>We've heard from roughly eighty percent of S and P

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<v Speaker 4>five hundred companies, but there will be plenty more to

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<v Speaker 4>come this week. Amid questions about current market valuations given

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<v Speaker 4>the prospects for corporate earnings. Nattie Lovell is senior US

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<v Speaker 4>equity strategist at UBS Financial Services.

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<v Speaker 5>We think at some point that the barton has to

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<v Speaker 5>be pastor earnings and the outlook for that we're maining

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<v Speaker 5>somewhat subdued in our expectations. We're looking for sort of

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<v Speaker 5>mid single digit growth over the next twelve months, so

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<v Speaker 5>we think that this market is probably cap as a

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<v Speaker 5>result of the earn is outlook.

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<v Speaker 4>Among this week's most closely watched reports will be Walt Disney.

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<v Speaker 4>We'll also be hearing from UPS, Lily, Take To Entertainment,

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<v Speaker 4>and Rivian Automotive in New York. Charlie Pellett Bloomberg Daybreak Asia.

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<v Speaker 1>As we headline, FED Governor Michelle Bowman says the US

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<v Speaker 1>Central Bank may need to do more, hiking rates further

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<v Speaker 1>in order to fully restore price stability. Bowman says she

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<v Speaker 1>supported the decision to raise rates at the Fed's meeting

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<v Speaker 1>last month, and she wants to see more proof of

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<v Speaker 1>sustained disinflation, so, like the rest of us, she's watching

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<v Speaker 1>inflation data very closely. She said she's keeping a close

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<v Speaker 1>eye out for signs of slowing in consumer spending and

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<v Speaker 1>more hints that the labor market could be weakening well.

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<v Speaker 2>Former US Treasury Secretary Larry Summers was saying a soft

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<v Speaker 2>landing for the American economy looks more likely than it

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<v Speaker 2>previously did. However, he's concerned about inflation picking up steam.

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<v Speaker 2>This is after the July jobs data show to rise

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<v Speaker 2>in wages. Here is Summer speaking earlier on Bloomberg's Wall

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<v Speaker 2>Street Week.

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<v Speaker 6>If you look at wage inflation, it was faster for

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<v Speaker 6>the month than for the quarter, faster for the quarter

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<v Speaker 6>than for the year, and running for the quarter at

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<v Speaker 6>about four point nine percent. That's not consistent with two

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<v Speaker 6>percent underlying inflation. I don't think we can yet be

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<v Speaker 6>content that we're not going to see a reacceleration of

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<v Speaker 6>inflation at some point down the road, and that's the

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<v Speaker 6>thing that I'm focused on.

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<v Speaker 2>That is former Treasury Secretary Larry Summers and has he

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<v Speaker 2>pointed out average hourly earnings increased in July by more

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<v Speaker 2>than economist had predicted. However, overall job growth was below forecast,

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<v Speaker 2>and interestingly, data from a separate survey produced an unexpected

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<v Speaker 2>drop in the unemployment rate.

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<v Speaker 1>Brian, Yeah, it's really curious and something that we can

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<v Speaker 1>get into with our guests coming up. Well. Foreign buying

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<v Speaker 1>of Japanese equities is said to have exceeded that of

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<v Speaker 1>Chinese peers for the first time since twenty seventeen. Let's

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<v Speaker 1>get the story. Here's Bloomberg's Bunny Ou in Hong Kong.

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<v Speaker 7>Global funds snapped up one point three eight billion dollars

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<v Speaker 7>of Japanese stocks in the last week of July. According

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<v Speaker 7>to official data. Optimism is running high even after the

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<v Speaker 7>Bank of Japan adjusted. It's ultra easy monitory stance, and

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<v Speaker 7>it comes as investors sells Chinese equities on a net basis.

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<v Speaker 7>China is losing out due to concerns about economic growth

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<v Speaker 7>and geopolitical tensions with the West. Investors are worry about

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<v Speaker 7>whether Beijing stimulus will bear fruit. Meantime, some strategists argue

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<v Speaker 7>that recent changes at the BOJ will turn out to

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<v Speaker 7>be a positive. They say, with a big overhang removed,

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<v Speaker 7>stocks will be able to rise further in Hong Kong.

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<v Speaker 7>I'm Bonnie ol Bloomberg Day Break Asia.

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<v Speaker 1>And coming up in our interview with Benjamin Netanyahu, he

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<v Speaker 1>pulls back on the most aggressive elements of the judicial

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<v Speaker 1>overhaul at BATS will have that story for you. Once

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<v Speaker 1>the makeup of the judge selection committee is changed, other

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<v Speaker 1>steps can be halted. Stay tuned will also be playing

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<v Speaker 1>an excerpt from that coming up. Doug. Just on that

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<v Speaker 1>last point from Bonnie, there Japan attracting more equity flows

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<v Speaker 1>than China, no surprise really, We've seen the Nike gain

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<v Speaker 1>fourteen percent year to date in US dollar terms, while

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<v Speaker 1>China and Hong Kong are negative. And as she said there,

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<v Speaker 1>towards the end, investors still doubt the efficacy of the

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<v Speaker 1>stimulus that we've heard about.

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<v Speaker 2>Meantime, here in the States, we had a commentary from

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<v Speaker 2>Bank of America on Friday, the Bank Brian's saying that

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<v Speaker 2>clients fled equities as they moved to adopt a more

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<v Speaker 2>kind of risk off approach given a lot of the

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<v Speaker 2>concerns about economic contraction here in the States, we've been

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<v Speaker 2>talking a lot about soft landing, But according to b

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<v Speaker 2>of A, some of the clients are concerned about contraction,

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<v Speaker 2>and private clients sold stocks in the five days through

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<v Speaker 2>August second. However, at the same time, bond purchases the

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<v Speaker 2>strongest since October in the past two weeks.

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<v Speaker 1>Yeah, we'll see if that bears out in the short term.

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<v Speaker 1>That sounds like a little bit more of a long

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<v Speaker 1>term story. Growth is actually popping pretty good in the US.

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<v Speaker 1>The Atlanta GDP now growth numbers three point eighty six percent. However,

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<v Speaker 1>when you look at and you wonder, you wonder whether

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<v Speaker 1>that leads to higher inflation, and maybe that's ultimately because

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<v Speaker 1>the has to respond to that, maybe that's ultimately what

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<v Speaker 1>does drive growth down sometime, you know, down the road.

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<v Speaker 2>The other thing I want to point out very quickly

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<v Speaker 2>is the move on the part of the PBOC last

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<v Speaker 2>week to vow a more flexible approach and to use

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<v Speaker 2>some policy tools to ensure ample liquidity in the banking system.

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<v Speaker 2>So the story on China involves additional support.

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<v Speaker 1>Yep, more is coming. We have Mira pandit waiting in

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<v Speaker 1>the wings. Vice president and global market strategist at JP

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<v Speaker 1>Morgan Asset Management, she'll join us right after Global News.

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<v Speaker 1>Israel's Prime Minister Benjamin Nettnaho says that he will not

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<v Speaker 1>pursue the entire judicial overhaul as originally was planned at

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<v Speaker 1>Baxter Has Global News. In the nine to sixty, newsman

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<v Speaker 1>in San Francisco.

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<v Speaker 8>Ed yeah, Brian exactly. Net Yaho says he's giving it

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<v Speaker 8>time to hash out. In an exclusive interview with Bloomberg's

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<v Speaker 8>Francing Lack. While he did say it will rebalance the

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<v Speaker 8>branches of government.

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<v Speaker 4>I'm still going to get several months to try to

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<v Speaker 4>get another consensus.

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<v Speaker 2>What is it?

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<v Speaker 4>It would probably be about the composition of the committee

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<v Speaker 4>that elects judges, with the.

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<v Speaker 2>Selection of the judges.

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<v Speaker 3>Yes, how they're selected, right.

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<v Speaker 4>That's basically what's left.

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<v Speaker 8>And he says a pendulum should not swing all away

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<v Speaker 8>from one side to the other. China's Foreign Minister Wangyee

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<v Speaker 8>is invited the European Union's top diplomat, Joseph Borrow and

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<v Speaker 8>his delegation for a visit in the fall. This after

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<v Speaker 8>a trip to Beijing was postponed earlier in the year.

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<v Speaker 8>The two spoke by phone earlier to set up the

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<v Speaker 8>early groundwork as well. The statement says they exchange views

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<v Speaker 8>on regional issues, including Ukraine and Niger. Now we're getting

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<v Speaker 8>a glimpse of Donald Trump's potential legal defense against the

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<v Speaker 8>charges in the latest indictment regarding election interference. The main

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<v Speaker 8>theme is that Donald Trump firmly believed that Mike Pence

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<v Speaker 8>did have the ability to not go ahead with a

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<v Speaker 8>certification of the election. Now, Trump attorney John Laurel on

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<v Speaker 8>ABC has heard here on Bloomberg says, there is an

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<v Speaker 8>interesting judicial line.

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<v Speaker 9>I make think that somebody is acting inappropriately under constitutional principles.

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<v Speaker 9>But mister Pence, who's a lawyer, never said to mister Trump,

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<v Speaker 9>I think what you're doing is criminal, and that's very important.

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<v Speaker 8>But former Attorney General William Barr, who served with Trump, says,

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<v Speaker 8>mister Trump knew. He told him.

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<v Speaker 10>Three occasions at least, and I told him in no

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<v Speaker 10>uncertain terms that there was no evidence of fraud that

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<v Speaker 10>would have changed the opport.

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<v Speaker 8>And Barr says, a creation of a separate slate of electors, well,

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<v Speaker 8>that's just very damning.

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<v Speaker 10>One that he keeps on repeating, is you know that

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<v Speaker 10>there were more that more people voted than absentee balance

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<v Speaker 10>that were requested, and that was mixing apples and oranges,

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<v Speaker 10>and once that was explained to him, we should have

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<v Speaker 10>heard no more about that.

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<v Speaker 8>As for Attorney Laura on Pence, if.

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<v Speaker 9>He testifies consistent with his book, then President Trump will

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<v Speaker 9>be acquitted.

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<v Speaker 8>And says he can't wait to get him on the stand.

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<v Speaker 8>Pence says he has notes and CBS told Trump on

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<v Speaker 8>many occasions, no, I.

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<v Speaker 11>Knew the founders of this country would never have given

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<v Speaker 11>any one person the right to choose what electoral College

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<v Speaker 11>votes to accept in which ones to reject. I was

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<v Speaker 11>very consistent with the President about that, and my recollections

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<v Speaker 11>all reflect that.

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<v Speaker 8>Running alongside this, the court may rule as early as tomorrow,

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<v Speaker 8>and what steps to take regarding Trump exclaiming that he

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<v Speaker 8>will go after the people who have gone after him,

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<v Speaker 8>as well as what evidence should be given to the

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<v Speaker 8>Trump legal team and the US lab that was able

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<v Speaker 8>to finally produce nuclear fusion that produced more energy than

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<v Speaker 8>it took to create it has done it again. Lawrence

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<v Speaker 8>Livermore labs here in the Bay Area, says after several

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<v Speaker 8>unsuccessful tries last week, it completed its process called inertial

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<v Speaker 8>confinement and that it was successful. Says it wants to

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<v Speaker 8>go a STEP's future to get high power magnets that

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<v Speaker 8>could be used by power plants. Global Newspower more than

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<v Speaker 8>twenty seven hundred journalists and analysts in over one hundred

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<v Speaker 8>twenty countries in San Francisco, I med Baxter and this

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<v Speaker 8>is Bloomberg.

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<v Speaker 1>This is Bloomberg Daybreak Asia. I'm Brian Curtis in Hong Kong,

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<v Speaker 1>along with Rushad's Salamat in London, and our guest is

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<v Speaker 1>Mira Pandit, vice president and global market strategist at JP

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<v Speaker 1>Morgan Asset Management. US equity futures are up a little bit.

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<v Speaker 1>We have the jobs report to talk about this morning, Mira,

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<v Speaker 1>and so many other things too. We can look more

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<v Speaker 1>closely at Berkshire Hathaway's earnings and some of these stories

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<v Speaker 1>here in Asia, but let's start off with the jobs.

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<v Speaker 1>There's still some debate on whether this was a net

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<v Speaker 1>positive or a net negative. You had kind of a

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<v Speaker 1>weak headline number, but then you had unemployment going down

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<v Speaker 1>and wages were pretty firm.

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<v Speaker 4>So how did you read it?

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<v Speaker 12>I read it as a mixed report. I mean, some

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<v Speaker 12>people are calling it goldilocks. I might still call it

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<v Speaker 12>a bit mixed because if you think about the one

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<v Speaker 12>hundred and eighty seven thousand jobs at work created, that

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<v Speaker 12>is consistent with a more neutral labor market in terms

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<v Speaker 12>of job gains. But then on the other hand, you

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<v Speaker 12>did have that elevated wage gain, and that has some

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<v Speaker 12>people concerned about how that might play out from an

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<v Speaker 12>inflation standpoint, and more importantly in the near term, how

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<v Speaker 12>the FED is going to digest this data. And when

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<v Speaker 12>we think about what the FED has to contend with,

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<v Speaker 12>we might want to focus on that slower job growth.

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<v Speaker 12>They might want to focus on stickier wages. We might

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<v Speaker 12>want to focus on falling headline CPI. They might focus

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<v Speaker 12>on stickier core inflation. So I think the challenge with

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<v Speaker 12>the jobs report is it doesn't give a clear enough

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<v Speaker 12>signal that the economy is kind of zooming into equilibrium.

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<v Speaker 13>Amir, we're going to be getting the CPI figures this week.

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<v Speaker 13>What are you looking at and when does the higher

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<v Speaker 13>oil price start of feeding. I know they'll be looking

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<v Speaker 13>at the core, but certainly this is something which everybody

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<v Speaker 13>does actually have to pay ultimately, and it has a

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<v Speaker 13>feed through to other parts of the inflation kind of

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<v Speaker 13>components that are in the basket.

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<v Speaker 12>Absolutely, we can't get too hung up on only core inflation,

0:12:03.840 --> 0:12:07.120
<v Speaker 12>because the reality is headline is what Americans actually pay

0:12:07.400 --> 0:12:11.280
<v Speaker 12>and therefore it influences inflation expectations. So that does play

0:12:11.320 --> 0:12:14.079
<v Speaker 12>into the fed's calculus long term. When I think about

0:12:14.120 --> 0:12:16.400
<v Speaker 12>this week, we're likely to see some moderate gains in

0:12:16.440 --> 0:12:18.960
<v Speaker 12>both headline and core CPI, But I think we have

0:12:19.000 --> 0:12:21.200
<v Speaker 12>to consider on the year over year basis, how those

0:12:21.280 --> 0:12:23.520
<v Speaker 12>base effects are going to play out over the next

0:12:23.520 --> 0:12:27.600
<v Speaker 12>couple of months. Because headline CPI peaked last year in June.

0:12:27.880 --> 0:12:31.040
<v Speaker 12>Therefore the base effects going forward are going to be less.

0:12:31.200 --> 0:12:33.440
<v Speaker 12>So if you see things like higher oil prices potentially

0:12:33.520 --> 0:12:37.559
<v Speaker 12>higher food prices, that could slightly raise headline inflation. If

0:12:37.559 --> 0:12:39.760
<v Speaker 12>we think about core, we actually saw that peak in

0:12:39.840 --> 0:12:42.800
<v Speaker 12>core inflation last year in September, so we potentially have

0:12:42.880 --> 0:12:46.320
<v Speaker 12>some reports ahead of us that could actually bring some

0:12:46.400 --> 0:12:48.800
<v Speaker 12>of the gas out of that core number, But we

0:12:48.840 --> 0:12:51.120
<v Speaker 12>don't quite know when that's going to play out, and

0:12:51.120 --> 0:12:52.719
<v Speaker 12>that's a little bit tricky when we think about the

0:12:52.760 --> 0:12:55.560
<v Speaker 12>Fed's timeline over the course of the fall. If we

0:12:55.640 --> 0:12:57.520
<v Speaker 12>do start to see inflation tick up a little bit.

0:12:57.559 --> 0:13:01.600
<v Speaker 12>I wouldn't necessarily think about it as a genuine reacceleration

0:13:01.720 --> 0:13:02.920
<v Speaker 12>in inflation, though.

0:13:03.520 --> 0:13:06.600
<v Speaker 1>Would you see do you estimate that equity flows then

0:13:06.679 --> 0:13:10.320
<v Speaker 1>would basically be moving from the US to other markets?

0:13:10.360 --> 0:13:12.360
<v Speaker 1>And if so, which ones do you like?

0:13:13.960 --> 0:13:17.760
<v Speaker 12>Potentially you could see some movement abroad. But the reality

0:13:17.880 --> 0:13:20.160
<v Speaker 12>is the US is kind of stuck in a pretty

0:13:20.200 --> 0:13:25.000
<v Speaker 12>comfortable place where equities are past the inflation spikes and

0:13:25.000 --> 0:13:28.079
<v Speaker 12>the FED hikes, and yet they're looking for some sign

0:13:28.120 --> 0:13:32.680
<v Speaker 12>of souring economy or souring profit growth, and yet that

0:13:32.760 --> 0:13:34.520
<v Speaker 12>hasn't happened yet. So I'm not sure that there's a

0:13:34.559 --> 0:13:38.000
<v Speaker 12>clear catalyst for a selloff. And yet, with valuations as

0:13:38.000 --> 0:13:40.840
<v Speaker 12>expensive as they have gotten with a significant rally this year,

0:13:41.120 --> 0:13:43.600
<v Speaker 12>there is some vulnerability there we have to be aware of.

0:13:43.920 --> 0:13:46.280
<v Speaker 12>So I do think from an investment standpoint, it's important

0:13:46.320 --> 0:13:49.439
<v Speaker 12>to look at valuations and prices above all. And we're

0:13:49.440 --> 0:13:52.720
<v Speaker 12>seeing internationally that there are some areas across the world

0:13:52.760 --> 0:13:54.920
<v Speaker 12>that look a whole lot cheaper than the US and

0:13:55.000 --> 0:13:57.559
<v Speaker 12>still have some room to run. And I think about

0:13:57.760 --> 0:14:00.880
<v Speaker 12>what's been driving global equities this year, and you see

0:14:00.880 --> 0:14:04.520
<v Speaker 12>in areas like Europe and Japan that there's genuine earnings

0:14:04.679 --> 0:14:07.880
<v Speaker 12>upside that is helping out equities. You see areas like

0:14:07.960 --> 0:14:10.840
<v Speaker 12>Latin America where easing central banks are starting to have

0:14:10.920 --> 0:14:14.520
<v Speaker 12>that input on equity valuations overall. So I do think

0:14:14.559 --> 0:14:17.200
<v Speaker 12>some of those areas abroad can add nicely to a

0:14:17.280 --> 0:14:18.439
<v Speaker 12>diversified portfolio.

0:14:19.080 --> 0:14:20.080
<v Speaker 13>Growth visus value.

0:14:20.080 --> 0:14:22.600
<v Speaker 4>Marry Quickly still.

0:14:22.560 --> 0:14:24.840
<v Speaker 12>Kind of stuck in do we care about style? Do

0:14:24.880 --> 0:14:27.520
<v Speaker 12>we care about sector? I'd say we care about companies

0:14:27.600 --> 0:14:30.880
<v Speaker 12>underneath the surface and which companies are actually managing through

0:14:30.920 --> 0:14:33.760
<v Speaker 12>some of the headwinds as it relates to margins and

0:14:33.800 --> 0:14:36.080
<v Speaker 12>as it relates to revenues. So that's really where I'm

0:14:36.160 --> 0:14:38.800
<v Speaker 12>keeping my eye on, as opposed to one specific style

0:14:38.880 --> 0:14:42.200
<v Speaker 12>or sector. How company management is doing and how valuations

0:14:42.240 --> 0:14:42.640
<v Speaker 12>are doing.

0:14:45.800 --> 0:14:48.600
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