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Speaker 2: Let's go ahead and get to the economic data of
Speaker 2: the morning. The notes that I'm getting seemed to then
Speaker 2: reaffirm that Goldilock scenario, right, because we have subdued inflation,
Speaker 2: everything else seems to be hanging in.
Speaker 3: The FED can continue to cut.
Speaker 2: Maybe they can even cut fifty if inflations come down enough.
Speaker 2: Ira Jersey is Bloomberg Intelligence Chief US interests rate strategist,
Speaker 2: and he joins us. Now, Ira, is that theory like, Hey,
Speaker 2: it's Goldilocks. Hey, inflation comes down, they can cut fifty.
Speaker 3: Is that vibe with you?
Speaker 4: It depends. It depends if the trend continues or if
Speaker 4: we stabilize here right on. One of the things, Alex,
Speaker 4: that I've been looking at is this trend in and
Speaker 4: slowing momentum in just the number of transactions. So one
Speaker 4: of the things that you get with the PC report
Speaker 4: is not only these okay, personal spending is is you know,
Speaker 4: up a little bit and inflation is a little bit lower,
Speaker 4: And yes, that seems like goldilocks, But when you look
Speaker 4: at the momentum of the economy and the momentum of
Speaker 4: personal spending, it's it's come down quite dramatically, and it
Speaker 4: even slowed again this h in the latest month, which
Speaker 4: is it's still August, right, so it's still like pretty
Speaker 4: old data in terms of you know, all before the
Speaker 4: cut and everything else, but by the Fed. So it
Speaker 4: I still it does not point to an upbeat economy
Speaker 4: right now. And there is this this issue and I'm
Speaker 4: gonna you know, talking about like the h the potential
Speaker 4: long short and strike if inflation goes up, because you know,
Speaker 4: good sector prices continue to go up. I think one
Speaker 4: of the questions is it will consumers then, you know,
Speaker 4: buy more goods or buy the same goods at a
Speaker 4: higher price, and not buy as many services because services
Speaker 4: is really what's been propping up the economy, and that
Speaker 4: was confirmed again in this report, with services continuing to
Speaker 4: be the one bright part of the economy whereas everything
Speaker 4: else is actually kind of met.
Speaker 5: Now, one thing I've been trying to get a read on,
Speaker 5: does inflation data matter to the same extent that it
Speaker 5: did before, or is now the focus really shifting toward employment.
Speaker 4: Yeah, So when you go back eighteen months, the Fed
Speaker 4: basically had a single mandate and that was to get
Speaker 4: inflation lower, and it didn't really care what was going
Speaker 4: on in the jobs market. All the jobs market was fine.
Speaker 4: So now we're more in balance, right, So, yes, the
Speaker 4: inflation data still matters, but the employment data matters at
Speaker 4: least as much. And the employment data, you know, is
Speaker 4: certainly weakening. But in a historical context, you go back
Speaker 4: a long time ago, and we used to say that
Speaker 4: like one hundred and fifty thousand jobs being created a
Speaker 4: month was fine. The I think the issue is now
Speaker 4: is will that continue to decelerate further? And then what
Speaker 4: does that does that of a knock on effect on
Speaker 4: wages because the other piece of the why spending continues
Speaker 4: to be reasonably robust in the services sector is that
Speaker 4: wage growth has been okay. So even though there's still
Speaker 4: a lot of people who are having a problem finding jobs.
Speaker 4: You know, we talk about new entrances to the workforce.
Speaker 4: You know, college students who can't find a job after
Speaker 4: school is trending a little bit higher. But the issue
Speaker 4: is that even though they have a problem, the people
Speaker 4: who have jobs have been continuing to get reasonable wage
Speaker 4: increases and that's allowed for personal spending to be maintained,
Speaker 4: you know, two ish percent per year, and that's not
Speaker 4: a terrible outcome. The thing is will that be maintained,
Speaker 4: And actually I question whether or not it can be
Speaker 4: maintained just given all of the trends that are currently
Speaker 4: in place.
Speaker 2: What's also quite interesting too is the amount of money
Speaker 2: that people still have. And I hear you on the
Speaker 2: wage increases, but there was the revision in data yesterday
Speaker 2: that saw the income was actually revised up by eight
Speaker 2: hundred billion dollars between twenty twenty two and twenty twenty three.
Speaker 2: I was also taking a look at money market funds
Speaker 2: and how much money has gone back into money market
Speaker 2: funds ever since the Fed did cut and that if
Speaker 2: you take a look at say, income generated from money
Speaker 2: market surged to more than twenty seven billion in August alone,
Speaker 2: it's like, we don't know how to discount that yet.
Speaker 4: Well, there certainly is income from interest again, right when
Speaker 4: where we haven't been used to that the last fifteen years.
Speaker 4: But you know, you go back to the early two thousands,
Speaker 4: you go back to the nineteen nineties, and in and
Speaker 4: interest income was a non trivial share of overall income.
Speaker 4: You can't just look at money market funds. And the
Speaker 4: reason is is that there's still this disconnect between the
Speaker 4: rates of money market funds, which are still well over
Speaker 4: four percent right on four and a half four four
Speaker 4: and three quarters percent, versus deposits at banks. Right the
Speaker 4: posits at banks are still paying you know, relatively low
Speaker 4: interest compared to money market funds. So people are still
Speaker 4: you know, incrementally when incremental savings goes into money markets,
Speaker 4: as is still some depositive flight out of some banks
Speaker 4: and into money market funds. So don't think about that
Speaker 4: as cash on the sideline. I think that's a mistake.
Speaker 4: People are doing that. That is savings, right, That is
Speaker 4: people who are saving their money, and also people who
Speaker 4: are worried that like with stocks at their relatively lofty
Speaker 4: valuations in some people's opinion, then you know, the return
Speaker 4: to cash makes some sense because if you can lock
Speaker 4: in you know, four percent for the next say, three
Speaker 4: to six months and then redeploy that money. People are
Speaker 4: considering doing that because you know, you might say, oh, well,
Speaker 4: that's a little short sighted too, because if money funds
Speaker 4: are paying four and three quarters percent, and then the
Speaker 4: Federal Reserve were to cut interest rates another hundred basis
Speaker 4: points this year, then you're looking at what the ten
Speaker 4: year yield is right now. So I do think that
Speaker 4: there are some people who are, you know, trying to reallocate,
Speaker 4: going into safe assets. But that rotation, that's not money
Speaker 4: that's going to rotate back in the stocks just because
Speaker 4: interest rates are a little bit lower, and it's going
Speaker 4: to find other fixed income assets or find its way
Speaker 4: back into bank deposits more than likely.
Speaker 5: Let's talk soft and hard landings. What has been the
Speaker 5: general consensus as we've seen this latest data. What are
Speaker 5: you looking forward to.
Speaker 3: Let's pretend that you can't use the word goldilocks.
Speaker 5: Yes, off limits.
Speaker 4: So well, so the way that we have so the
Speaker 4: way we have it couched and we put out a
Speaker 4: piece earlier this week where we looked at five different
Speaker 4: scenarios for how the economy might react and where treasure
Speaker 4: yields and how the Fed might react. Each of those
Speaker 4: five scenarios, so one is a hard landing, and that's
Speaker 4: actually our base case scenario is we do think we're
Speaker 4: going to see a recession in the next twelve to
Speaker 4: eighteen months, and because of that, you have treasure yields
Speaker 4: much lower, the Fed reserve cutting interest rates quite aggressively,
Speaker 4: even more aggressively than what's currently priced, which is already
Speaker 4: pretty aggressive, quite frankly. But then there is a chance
Speaker 4: for a reacceleration.
Speaker 1: Right, So.
Speaker 4: Even though you know, I think that there's going to
Speaker 4: be a recession next year, if I'm wrong, I might
Speaker 4: be wrong. The other direction, which is we see a
Speaker 4: reacceleration in spending, We see you know, firms not wanting
Speaker 4: to give up their employees because they're worried about retraining
Speaker 4: or finding people with the same skills easily. If there
Speaker 4: is a rebound, and if we do have a reacceleration
Speaker 4: in the economy and somewhat and inflation starts to tick
Speaker 4: up a little higher, then the Fed is going to
Speaker 4: have to stop very early, right, and that means that
Speaker 4: the whole entire treasury market is going to have to
Speaker 4: sell off probably twenty five to fifty basis points across
Speaker 4: the curve. And if that scenario plays out, so when
Speaker 4: you take like the weighted average of all of these
Speaker 4: scenarios is equals of soft landing. But that and that
Speaker 4: seems like the one of the least likely outcomes is
Speaker 4: that soft landing scenario. More likely we'll have either a
Speaker 4: hard landing or a reacceleration. But each of those seems
Speaker 4: more plausible to us.
Speaker 3: Totally fair, real quick for you.
Speaker 2: Go, But then we get all this inflow of stimulus
Speaker 2: from China, and does this kind of offset that impact?
Speaker 3: Is it blunt that.
Speaker 4: Well, that's one of my concerns and one of the
Speaker 4: reasons why you could potentially get a reacceleration with with
Speaker 4: central banks globally easing rates like not only China, right,
Speaker 4: but you have ECB and the BOE as well as
Speaker 4: the FED to reserve all easing interest rates. At the
Speaker 4: same time, you do have a global stimulus stimulus going
Speaker 4: that's going to be hitting the market.
Speaker 6: Now.
Speaker 4: It might take three to six months before we see
Speaker 4: any of that in the data, but it is coming
Speaker 4: at some point. And you know, the Fed's going to
Speaker 4: cut in November and they're probably going to cut in December,
Speaker 4: so that's going to feed into some next year's next
Speaker 4: year's outlook for the economy for sure.
Speaker 2: All Right, Ira, thanks a lot, really appreciate It's like
Speaker 2: the thing we've all been waiting for. We get it,
Speaker 2: and then it may not be so awesome on a
Speaker 2: broad level, Ira, thanks a lot. Ira Jersey having good weekend.
Speaker 2: Bloomberg Intelligence US Interest Rates Strategist.
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Speaker 3: Alex Steel here alongside Nora Melinda. This is Bloomberg Intelligence Radio.
Speaker 2: We bring you all the top news and business, economics
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Speaker 2: They cover two thousand companies and one hundred and thirty
Speaker 2: industries all around the world. We also tap the best
Speaker 2: of Bloomberg. And one of those things is this great
Speaker 2: Bloomberg News Morning Console poll. It's a great poll and
Speaker 2: it measures all the different aspects of the election. Now,
Speaker 2: in the latest poll of swing states, it shows that
Speaker 2: Vice President Harris Now is leading among likely voters by
Speaker 2: seven percentage points. In Nevada, five points in Pennsylvania, three
Speaker 2: points in Arizona, Michigan, and Wisconsin, and three points in
Speaker 2: North Carolina. Both Trump and Harris are tied in Georgia,
Speaker 2: US as. Laura Davison, Bloomberg Politics Editor, can you walk
Speaker 2: us through I know I gave the broad strokes, but
Speaker 2: can you walk us through some of your takeaways from
Speaker 2: this pole.
Speaker 7: Yeah, So Harris is leading in all of these swing states.
Speaker 7: So I'll note that those leads are within the margin
Speaker 7: of air. So what that tells us is if this
Speaker 7: race is really really close. This is something that we
Speaker 7: have seen, you know, across pulling other polls for several
Speaker 7: weeks now, and this is really going to be a
Speaker 7: nail bider of a race. And you know that either
Speaker 7: candidate really has the potential to win any of these states,
Speaker 7: and the electoral College could down come down to just
Speaker 7: one state. You know, one of the ones that being
Speaker 7: most close closely watched right now is Pennsylvania. That's really
Speaker 7: a must win for Harris and the biggest electoral college
Speaker 7: prize of all of these. When you kind of dig
Speaker 7: down into the data a little bit further, what is
Speaker 7: sort of one of the key takeaways this month is
Speaker 7: that Harris is really cutting into Trump's lead on trust
Speaker 7: in the economy. We've pulled every month about how much people,
Speaker 7: you know, whether they prefer Trump or Harris or Trump
Speaker 7: and Biden on a bunch of different topic issues. You know,
Speaker 7: Trump throughout the entire pool has had a lead on
Speaker 7: the economy, though Harris has really narrowed that gap. And
Speaker 7: that's really come as she started to lay out her
Speaker 7: policies on housing, on taxes, on prices, and inflation. So
Speaker 7: this is sort of an indication that some of those
Speaker 7: messages are getting through to voters. The other main issue
Speaker 7: that voters say is their top their top issue this
Speaker 7: cycle is immigration. On that Trump still holds a pretty
Speaker 7: big lead. So that's where we're You're going to see
Speaker 7: Harris focusing a lot of her attention, you know, including
Speaker 7: today she's headed to Arizona to go to the border.
Speaker 7: She'll you know, have a rally in Nevada later on
Speaker 7: the weekend. So you started to see her focus, you know,
Speaker 7: the kind of she's tackled the economy. That's something that
Speaker 7: will still see is key to messaging. But now turning
Speaker 7: attention to immigration.
Speaker 5: Now since Kamala Harris announced her run for presidency back
Speaker 5: in July. Has there been a specific shift at all
Speaker 5: in terms of her lead in the polls.
Speaker 7: Yeah, we have seen her generally cut into Trump's lead,
Speaker 7: both the national polls as well as swing state poles
Speaker 7: like the Bloomberg News Morning Consult poll. And on the
Speaker 7: issues too, she has you know, inched up, you know,
Speaker 7: specifically on the economy, She's grown her lead when it
Speaker 7: comes to abortion, housing, democracy, but she she the immigration
Speaker 7: is kind of that one key issue where she has
Speaker 7: not really made any dent in Trump's lead.
Speaker 8: There.
Speaker 7: Uh, this is you know, sort of notable. As you know,
Speaker 7: Trump has made a lot of inflammatory statements, including us
Speaker 7: the most recent debate about you know, this unfounded claim
Speaker 7: I should note about immigrants in Ohio eating household pets.
Speaker 2: In terms of the issues, though, I'm wondering in terms
Speaker 2: of the why do we think that she's gained more
Speaker 2: in the economy, How has she been able to close
Speaker 2: a little bit of that gap.
Speaker 7: What we have seen from her campaign really over the
Speaker 7: past four or five weeks is they've been putting out
Speaker 7: different specific policies. So she put out a policy calling
Speaker 7: for an increase of building of housing units, as well
Speaker 7: as it down payment assistance for first time homepires. You've
Speaker 7: seen her call for an expanded Chile tax credit.
Speaker 3: She's also called for.
Speaker 7: Other tax cuts, including one that dot Trump has also embraced,
Speaker 7: no taxes on tips. She's called for an end to
Speaker 7: corporate price gouging and has sort of a fuzzy proposal there.
Speaker 7: We've pulled specifically on some of these policies, and they
Speaker 7: are broadly popular, you know, talking you know, more upwards
Speaker 7: of sixty to seventy and in some cases even eighty percent.
Speaker 7: So that means that she's winning over not just Democrats,
Speaker 7: but also a decent chunk of Republicans as well, and
Speaker 7: of course independent voters. Those are the people that she
Speaker 7: needs to win over in order to win this election.
Speaker 5: So for the average listener, how important are polls in
Speaker 5: an election year?
Speaker 7: So polls are an important tool, but they you know,
Speaker 7: aren't necessarily you know, one hundred percent predictive. They can
Speaker 7: give you a snapshot of where the race is right now,
Speaker 7: and obviously, as we know this year that you know,
Speaker 7: a lot can happen in a couple of weeks and
Speaker 7: really change the contours of this race. So you know,
Speaker 7: it's important that this is sort of where the race
Speaker 7: is now. There is a margin of air, So it's
Speaker 7: important to not just look at you know, the headline numbers,
Speaker 7: but also you know how much those have fluctuation within them.
Speaker 2: Where where does President Trump, a former president Trump still
Speaker 2: pull quite well, like what issues and how does that
Speaker 2: play out in the specific states.
Speaker 7: Yeah, so he you know, really immigration is one where
Speaker 7: he still has a strong lead. He also, you know,
Speaker 7: he still has a lead on the economy, albeit much
Speaker 7: smaller than he used to. Some of his proposals are
Speaker 7: also broadly popular. The most popular issue we pulled this
Speaker 7: month was no taxes on Social Security benefits. This is
Speaker 7: one that he has you know, trot it out on
Speaker 7: the campaign trail. It's very appealing of course to older voters,
Speaker 7: but this is one that you know has broad broad
Speaker 7: bipartners and support. He also has a proposal to end
Speaker 7: taxes on overtime pay, really very appealing to blue collar workers.
Speaker 7: Some of his other proposals, however, things you know, like
Speaker 7: increased tariff He's also talked about increasing the state and
Speaker 7: local assualt deduction cap and that's something that he talked
Speaker 7: about in New York this past week. You know those
Speaker 7: are less popular, you know, more around fifty percent.
Speaker 9: Of people like those.
Speaker 5: You mentioned Pennsylvania being the grand prize this year. How
Speaker 5: are the two candidates strategizing and trying to tackle that area.
Speaker 7: So the airways there are blanketed in ads. When you
Speaker 7: look at ads spending from both campaigns, that is where
Speaker 7: they are putting you know, if not the majority, at
Speaker 7: least the plurality of their money. So they're spending heavily
Speaker 7: in that state. You also see a lots of visits there. Harris,
Speaker 7: you know, very strategically chose Pittsburgh as where she was
Speaker 7: going to give her economic address this earlier this week
Speaker 7: to talk about, you know, bolstering the industrial economy and
Speaker 7: you know, looking at steel and iron manufacturing. Trump will
Speaker 7: see him go there next week. He's planning a rally
Speaker 7: in Butler, Pennsylvania, at the same site where the first
Speaker 7: assassinating as fascination attempt was in July. So you've seen
Speaker 7: the candidate spend a lot of time there and spend
Speaker 7: a lot of their money, and that's really kind of
Speaker 7: where you see the bulk of the campaigning happening.
Speaker 2: There has been a lot of criticism around Harris's campaign
Speaker 2: that she's a light on details, and I appreciate that
Speaker 2: she did give that speech as you reference in Pittsburgh,
Speaker 2: but nonetheless in your poll finding, is that still a problem.
Speaker 7: So it shows that she is. We actually asked the
Speaker 7: specific question of you know, which Canada described as having
Speaker 7: the best detailed policy positions. In August, she was trailing
Speaker 7: Trump and then in September she's leading him. You know,
Speaker 7: it was the sort of a they were pretty close
Speaker 7: and relatively close, but she has pulled ahead. And part
Speaker 7: of that is she has given more economic speeches and
Speaker 7: she also put up a document this week. This is, however,
Speaker 7: after the poll was but she put out a big,
Speaker 7: eighty page document that had some more policy details. It
Speaker 7: was still largely a political document, but she puts some
Speaker 7: stuff on paper. So these are the kinds of things
Speaker 7: her campaign sees it as helping. You know, Trumps has
Speaker 7: done less in terms of like writing out his ideas,
Speaker 7: but he's been sort of trotting out idea this week
Speaker 7: by week.
Speaker 3: All right, Laura, I really appreciate it. Thank you so much.
Speaker 2: Laura Davison, Bloomberg Politics reporter on the latest Bloomberg Morning
Speaker 2: Console poll you're listening to.
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Speaker 2: All right, taking a look at these markets here, Yes,
Speaker 2: it feels like we continue to kind of melt up
Speaker 2: slash move higher. And I say that because clearly we've
Speaker 2: not seen a ton of volume, doesn't feel like there's
Speaker 2: a ton of conviction, but yet we keep making record
Speaker 2: highs after record highs. The wildcard, though, is what's happening
Speaker 2: with China, And sort of what I'm interested in is
Speaker 2: where the catch up potential is. Quants were caught really
Speaker 2: offside by the move right flows are going to be
Speaker 2: caught really offside. CTA's will be caught off side. So
Speaker 2: how do you manage all of that? NADIA level is
Speaker 2: senior US equity strategistic global wealth management over at UBS.
Speaker 2: How are you looking at the stream of money that's
Speaker 2: going to be pumped into the Chinese economy?
Speaker 10: You know, it remains to be seen how that actually
Speaker 10: translated into real demand and the real economy. It's not
Speaker 10: like the code coming out of COVID. When the COVID
Speaker 10: zero policy was turned off, we sort of flip the
Speaker 10: switch and that helped to reopen the economy. It's going
Speaker 10: to take some time for this to filter through to
Speaker 10: the economy, just given the issues in the property market
Speaker 10: over the last couple of years. Yes, you're seeing those
Speaker 10: trying to expose stocks catch a bit this week, but
Speaker 10: I think that some of this remains to be seen
Speaker 10: and how that actually translates into profits and.
Speaker 5: On a domestic landscape. That data that we got this morning,
Speaker 5: the inflation data that everyone's looking at. Some people are
Speaker 5: saying that we hit a sweet spot. Others are saying
Speaker 5: that this, you know, is just a small thing in
Speaker 5: the pipeline. What do you think the impact of this
Speaker 5: data that we saw this morning will have moving forward.
Speaker 10: I think the focus right now is more on the
Speaker 10: growth data and then necessarily in inflation data. The inflation
Speaker 10: data recently has been well. It behaved, came in in
Speaker 10: lot of our expectation colle PC at two point seven percent.
Speaker 10: I don't think that was only real surplies to anyone.
Speaker 10: I mean, monetary policy have started to ease. It took
Speaker 10: inflation to get this, so that and it will take
Speaker 10: the labor market to determine how large the rate cuts
Speaker 10: are going forward. So even though the FAT has said
Speaker 10: it's data dependent, the data is more focused on the
Speaker 10: labor market and less inflation at this point.
Speaker 3: So what kind of sector do you like right now?
Speaker 10: Yeah, we continue to light tech just given the AI
Speaker 10: tailwinds that are behind tech. We've gotten a number of
Speaker 10: incrementally positive news this week when you look at the
Speaker 10: likes of a centure that goings to continued demand for
Speaker 10: general AI and investments around there, and also even micron
Speaker 10: Earns this week that suggests that high bandwid memory chips
Speaker 10: are sold out for twenty twenty four into twenty twenty five,
Speaker 10: So we like that story. We also would lean into
Speaker 10: financials as cyclical value that should benefit from lower interest
Speaker 10: rates and a potential pickup in long growth. And then
Speaker 10: I think you balance that out with some utilities that
Speaker 10: this is no longer like your grandparents' utilities. Yes, it's defensive,
Speaker 10: but it also has those cycle of tail winds behind it,
Speaker 10: given the increase in demand for power associated with AI.
Speaker 5: Nadia. What about small and MidCap stocks, what's your view there?
Speaker 3: Yeah, MidCap is actually at a record today. Yeah, yeah,
Speaker 3: you know.
Speaker 10: So we are neutral on small cap, and so that
Speaker 10: means you should have a market weighted exposure to small cap.
Speaker 10: I think that small cap will benefit as interest rates
Speaker 10: come down from a balance sheet standpoint, some alleviation of pressure.
Speaker 10: But what we're really waiting for to become more constructive
Speaker 10: on the space is a pickup in Ernest Group, which
Speaker 10: just hasn't been followed through yet. I mean that could
Speaker 10: come through if we start to see a pickup in PMIS.
Speaker 10: I mean pmi's manufacturing has been struggling for quite some time.
Speaker 10: So if we get that, then maybe we could be
Speaker 10: more incrementally positive on small cap and we see that
Speaker 10: acceleration and Earnest Group potentially in twenty twenty five, Well
Speaker 10: what about.
Speaker 2: Me madcaps, because it feels like that some say that
Speaker 2: could be the sweet spot, right, like, you're not ready
Speaker 2: to get into small caps, but midcaps could provide that for.
Speaker 10: You, absolutely. I mean MidCap then tends to be a
Speaker 10: bit higher quality, so we would also look at that
Speaker 10: area as well to be able to add to. But
Speaker 10: our preference overall is really more towards the larger names
Speaker 10: that we think that do have those secular growth stories,
Speaker 10: but I think metcalvs also you can find some value
Speaker 10: there as well, because it's you are right, it is
Speaker 10: and that's somewhat of us sweet spots.
Speaker 3: All right, thanks so much, Nadia. I really appreciate it.
Speaker 2: Natia Level, senior US equity strategist at Global Wealth Management
Speaker 2: over at UBS, we really appreciate it.
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Speaker 3: Thirty Going to the markets here.
Speaker 2: Some of the headlines is that Intel rebuffed an offer
Speaker 2: from ARM after ARM inquired about buying a unit from Intel.
Speaker 2: Man Deep Singh, senior tech industry analyst, joined us now
Speaker 2: for Bloomberg Intelligence.
Speaker 3: Man, Deep, is this just going to be like a
Speaker 3: string of.
Speaker 2: Random suitors for random parts of the business here, Like,
Speaker 2: what was your take on this?
Speaker 11: I mean, in this case, it's very specific in the
Speaker 11: sense that Qualcomm was more about chip design. ARM is
Speaker 11: specifically interested in the IP related to the instruction set
Speaker 11: business that Intel has. Remember, Intel has got a lot
Speaker 11: of assets within the company which is you know, patented,
Speaker 11: it's IP that's very desirable. That's been the basis of
Speaker 11: their mode for the last forty years. And ARM is
Speaker 11: a competitor to Intel's eighty six architecture. But at the
Speaker 11: same time, ARM wants to expand into other adjacencies and
Speaker 11: that's where you know they are looking probably to buy
Speaker 11: some of that IP or patents from Intel. I mean,
Speaker 11: we don't know the details, that's just a speculation, but
Speaker 11: I can imagine ARM getting into you know, chip design
Speaker 11: or foundry manufacturing. That's just a way out of what
Speaker 11: they're doing right now. So the natural extension of their
Speaker 11: business would be to buy some of the IP from Intel.
Speaker 5: I mean, the company's got quite a few suitors. We're
Speaker 5: seeing shares down as much as fifty two percent year
Speaker 5: to date. What do you think would really be a
Speaker 5: positive outcome for the Stockwader analysts saying the route that
Speaker 5: they should be taking.
Speaker 11: I mean, everyone looks at Intel based on the some
Speaker 11: of the parts spaces, and clearly the current market cap
Speaker 11: of Intel doesn't justify you know, all the assets and
Speaker 11: the IP that is within the company. At the same time,
Speaker 11: they're bleeding money when it comes to the foundry side
Speaker 11: of the business, losing almost seven to eight billion dollars
Speaker 11: a year. They're investing a lot in capex subsidized by
Speaker 11: the US government, but the turnaround clearly hasn't played out.
Speaker 11: And that's where you know, the bigger you are, the
Speaker 11: harder it is to turn around the ship. But at
Speaker 11: the same time, one could argue, you know that X
Speaker 11: eighty six business will rebound if this AI super cycle
Speaker 11: has to play out, because they still have that dominant
Speaker 11: eighty percent share. When it comes to the PC market,
Speaker 11: and if everyone is upgrading their PCs, guess what it
Speaker 11: will be an Intel PC. It's as if they are
Speaker 11: losing market share on that PC side. So that's that's
Speaker 11: the hope when it comes to the Intel turner round.
Speaker 2: So do we know when the PC market, the consumer
Speaker 2: market is going to start turning around? Like it feels
Speaker 2: like the trough is in, But how long that looks
Speaker 2: and what that looks like?
Speaker 11: We just have to watch for data points. In fact,
Speaker 11: Micron this week gave us one data point they called
Speaker 11: out AIPC being you know, rebounding and twenty twenty five
Speaker 11: being a better year than the past couple of years.
Speaker 11: So clearly that inventory correction has happened and we have
Speaker 11: seen a trough and now it's a question of how
Speaker 11: fast does the units recover. And I think that's where
Speaker 11: Intel we'll see a nice rebound on that client PC side.
Speaker 11: On the server side, I mean, clearly there is no
Speaker 11: fix right now. They are losing share to Nvidia ANAMD
Speaker 11: and that's unlikely to change in the near term.
Speaker 5: Hey, Mandy, what's about a minute on the clock. I'm
Speaker 5: curious what will investors really be looking for from earnings?
Speaker 5: What's the most important thing here?
Speaker 11: Well, I think they're looking for a plan. So Amazon
Speaker 11: you tying up with Intel to use their foundry side
Speaker 11: for chip manufacturing. That's a positive sign. The question is
Speaker 11: the scale at which Amazon is going to look to
Speaker 11: use Intel versus TSMC that they're using right now. So
Speaker 11: that foundry business is where Intel is bleeding money. Hyperscalers,
Speaker 11: partnering with Intel on that side is great news, and
Speaker 11: I think that's where you want, you know, more positive
Speaker 11: news in terms of Microsoft and other hyperscalers really ramping
Speaker 11: up on Intel foundry.
Speaker 3: All right, man, Deep thanks a lot.
Speaker 2: We really appreciate man Deep Say Bloomberg Intelligence senior tech
Speaker 2: industry analyst joining us on Intel on the struggles and
Speaker 2: kind of how you wind up moving forward from their net.
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Speaker 2: So let's get more into it. Michelle Martin is president
Speaker 2: of Prosperity. It is an iSER amper company. To discuss
Speaker 2: her market outlooks, she joins us now from Minneapolis. Hey, Michelle,
Speaker 2: I feel like some takeaway from the last two weeks
Speaker 2: has been are we actually in a global easing cycle
Speaker 2: now that China's on board? And does that change how
Speaker 2: you think about things?
Speaker 9: It certainly does, and thanks for having me on today.
Speaker 9: I think with the global easing there's more likelihood that
Speaker 9: we might be heading for a soft landing. We're seeing
Speaker 9: it across you know, what's happening with China today or
Speaker 9: this week, and we're certainly with interest rates coming down,
Speaker 9: it appears that we're in a really good place. It's
Speaker 9: been a great week for that, and the trends are
Speaker 9: showing that there may be more cuts ahead.
Speaker 5: And when we're thinking about China, just as a big,
Speaker 5: big has a big economy, how much do we really
Speaker 5: think that this will affect other aspects more globally in
Speaker 5: pointing it back to the US here.
Speaker 9: So it's interesting and I think you were just talking
Speaker 9: about this. We've been on the sidelines as it relates
Speaker 9: to China, as many have just based upon the performance.
Speaker 9: I think we would typically have a wait and see
Speaker 9: attitude again, understanding what comes out of the election and
Speaker 9: what tariffs might be in place. I think that we've
Speaker 9: seen a general trend of companies moving away from China,
Speaker 9: So I would say that we're we have looked at
Speaker 9: getting back into emerging markets, particularly with this news with China,
Speaker 9: and we would ease our way back in.
Speaker 3: How do you do that?
Speaker 2: Like is it local consumer facing stocks? Is it through ETFs?
Speaker 9: It's through generally ets and mutual funds within our portfolios.
Speaker 2: Absolutely, And how aggressive you said dipping your toe? So
Speaker 2: how does that progress work? Like you dip your toe
Speaker 2: and then what do you wait to see if more
Speaker 2: stimulus comes, do you wait to see how assets perform?
Speaker 9: Yes, exactly what we're really look at, NOURA is for
Speaker 9: the trends to take hold. So in other words, it
Speaker 9: would be dipping the toe in probably a position of
Speaker 9: a couple percent in a portfolio, and then really really
Speaker 9: watching what that performance looks like, what the volatility is,
Speaker 9: and if we're starting to see the trend become solid
Speaker 9: more than you know, more than an indication it's relatively recent,
Speaker 9: So we would want to and from an emerging markets
Speaker 9: perspective in our portfolios, that generally is a relatively low
Speaker 9: allocation for us to begin with.
Speaker 5: Can you just speak a bit more to the opportunity
Speaker 5: in emerging markets more broadly?
Speaker 9: Well, I think the thing that's really interesting about emerging markets.
Speaker 3: Being a part of looks like.
Speaker 2: We're freezing up a little bit. Let's see if you
Speaker 2: can re establish that connect with President of Prosperity. We're
Speaker 2: just going to re establish that connection and see if
Speaker 2: that winds at making sense. Okay, but what you were
Speaker 2: asking about was flows, right, and to really diversifying out right.
Speaker 5: I mean, I think that's really interesting, especially as we've
Speaker 5: really been looking at the China stimulus and how it's
Speaker 5: really been affecting I mean, we just had Abigail Doolittle
Speaker 5: here talking about how it's even affecting casinos thoughts. So
Speaker 5: I'm really curious how she and other investors are really
Speaker 5: thinking about how they're going to be allocating their money
Speaker 5: and if they want to put some of it into
Speaker 5: emerging markets as we're looking forward.
Speaker 2: I've been talking to a tactical strategist and one of
Speaker 2: the main banks and just how it's been a really
Speaker 2: painful week for some of the investors and the flows
Speaker 2: are now flying into stuff that we haven't seen before,
Speaker 2: and that's been a really painful week. And take a
Speaker 2: look at tech and the underperformance that we've seen, right,
Speaker 2: Like Micron was a one off right this week.
Speaker 3: But if Tech continues to kind of underperform.
Speaker 5: What does that mean?
Speaker 3: What does that mean?
Speaker 5: What does that mean?
Speaker 2: And then on a headline level, can the headline s
Speaker 2: and p go up if Tech is underperforming? It may be,
Speaker 2: but even so, it's a just cheering kind of under
Speaker 2: the surface.
Speaker 5: Right, And it's counted for so much of our gains
Speaker 5: this year. It's really had the wind in the sales here.
Speaker 2: Yeah, exactly, So looking forward to that. All right, I
Speaker 2: think she's back. Michelle Martin, President Prosperity joining us. Sorry
Speaker 2: about that glitch, Michelle. So you were saying in terms
Speaker 2: of flows and where it's all going, walk us through it.
Speaker 9: So I think, you know, generally, I think one of
Speaker 9: the from a flow perspective, I think where we're really
Speaker 9: watching things is we've had really strong success with high
Speaker 9: yield credit, but in the equity market, we're really looking
Speaker 9: at the trends that are starting to take hold. And
Speaker 9: what we're seeing, particularly over the last quarter, is that
Speaker 9: we're seeing dividend pain stocks, value stocks in sectors like
Speaker 9: utilities and industrials really start to you know, take hold
Speaker 9: and outperform and perhaps become more of a position within
Speaker 9: our portfolios. Technology has been such a strong performer, and
Speaker 9: what we're seeing now is that technology is basically consolidating.
Speaker 9: It's come so far, so fast, and we're starting to
Speaker 9: see those trends start to change. That also gives us
Speaker 9: an indication that we might want to be looking at
Speaker 9: Europe a little bit more. We've been waiting for Europe
Speaker 9: to uh for that trend to solidify. We have underweight
Speaker 9: in in our international stocks in general, both in developed
Speaker 9: international as well as emerging markets, and so this is
Speaker 9: actually starting to look much more attractive in those in
Speaker 9: those sectors as well.
Speaker 5: Now, Michelle, how are you all thinking about small and
Speaker 5: mid caps? Is there a play there?
Speaker 9: Well? There is, and we've we've definitely been had a
Speaker 9: presence in the mid cap space holding back on small cap.
Speaker 9: But with interest rate cuts, there's definitely an opportunity because
Speaker 9: particularly small businesses have much more sensitivity to interest rates.
Speaker 9: So with the cost of credit going down, there's absolutely
Speaker 9: an opportunity that we could see a rebound in small cap.
Speaker 2: If and I say if, because it's like I've heard
Speaker 2: the story before, right, I've heard the story about European cyclicals.
Speaker 3: I've heard the story about small.
Speaker 2: Caps before, and I always seem to manage that story
Speaker 2: for like a few weeks and then all of a sudden,
Speaker 2: we're back.
Speaker 3: To the basics.
Speaker 2: Right, So this is the question, right, why, what conviction
Speaker 2: do you have at this time might be different?
Speaker 9: Well, I think we're seeing it in the results. We're
Speaker 9: seeing some quarterly numbers that are starting to point towards
Speaker 9: that we saw small cap rally earlier this summer, and
Speaker 9: then we had a big pullback in it, So you know,
Speaker 9: we're as I had mentioned earlier, it really is important
Speaker 9: to start to see those trends take hold, to start
Speaker 9: to see the consumer confidence with small business owners. I
Speaker 9: think that plays into it as well, and we're you know,
Speaker 9: to have banks be a little bit more agreeable to lending.
Speaker 9: We're seeing credit standards being relatively tight right now, so
Speaker 9: I think that conviction is probably still a little ways
Speaker 9: out from our perspective on small cap so we're kind
Speaker 9: of waiting on the sidelines ready to jump in, but
Speaker 9: the environment is definitely more favorable than it has been.
Speaker 5: How are you thinking about opportunity in the equities market especially,
Speaker 5: We've been hearing people saying that we could be at
Speaker 5: lofty levels. How are you looking at that as we
Speaker 5: think about year end and all the rate cuts that
Speaker 5: people are pricing in.
Speaker 9: You know, it's so true, I think, and we actually
Speaker 9: have been slightly underweight to equities just because of where
Speaker 9: we're at. Equities are are somewhat priced for perfection, particularly
Speaker 9: on the growth side of the equation, so we've you know,
Speaker 9: I think it's stay steady invests for the long term.
Speaker 9: I think what we're really looking at and what we're
Speaker 9: seeing with a lot of client accounts or people that
Speaker 9: we're talking to is that money markets have been so
Speaker 9: favorable and so they've pulled out of the markets thinking
Speaker 9: that they're overextended. I think that it's definitely, you know,
Speaker 9: methodical a phase in. I think the challenge is that
Speaker 9: if you wait on the sidelines too long, you know,
Speaker 9: you kind of miss if we if we look back
Speaker 9: even to like, you know, the years of after the
Speaker 9: Great Recession in twenty ten twenty eleven, I had many
Speaker 9: clients that we're just afraid to get back in and
Speaker 9: sat on the sidelines and really miss that opportunity. So
Speaker 9: I think it's a gradual phase back in for those
Speaker 9: that are sitting on the sidelines. And then it's really
Speaker 9: been thoughtful about tactical shifts within the equity exposure to
Speaker 9: these areas that you know, create are showing some opportunity
Speaker 9: most people.
Speaker 2: Yeah, Michelle, we got to leave it there up against
Speaker 2: a break. But it's such a good point and also
Speaker 2: sort of when we're going to wind up seeing that
Speaker 2: money come out of high yield savings account and money
Speaker 2: market funds. Michelle Martin, a president of Prosperity Give you're.
Speaker 3: Still getting four percent. It's still four percent.
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Speaker 1: Just Say Alexa playing Bloomberg eleven thirty.
Speaker 2: The news over the last twelve hours was Hurricane Helen.
Speaker 2: Helene Helene, right, Helene. Helene has just barreled into the
Speaker 2: western coast of Florida, dangerous winds, knocking out power for
Speaker 2: more than a million customers and threatening to unleash deadly
Speaker 2: flooding across several states. Helene made landfall near Perry with
Speaker 2: top sustained winds of one hundred and forty miles per hour.
Speaker 2: And that's according to the US National Hurricane Center. It
Speaker 2: made it a Category four on the five step scale
Speaker 2: before weakening now to a tropical storm. And this just,
Speaker 2: I mean, these headlines just keep on coming fast and furious.
Speaker 2: We wanted to take a business angle to it and
Speaker 2: look at the oil and gas industry. Vincent Piazza, Bloomberg Intelligence,
Speaker 2: senior equity research analysts for oil and gas Vincent to
Speaker 2: some extent, these companies are very well known.
Speaker 3: To these risks.
Speaker 2: They know how to shut down the infrastructure, they know
Speaker 2: how to shut down any sort of offshore rigs, et cetera.
Speaker 2: What have they done in the path to the storm?
Speaker 8: Yeah, you're right, you know the companies the infrastructure benefited
Speaker 8: from Well probably not the best word to say, but
Speaker 8: the storm moved eastwards, so it was not a direct
Speaker 8: hit on the installations, And in fact, some of the
Speaker 8: operators are looking to restart the platforms. I know Chevron
Speaker 8: mentioned earlier that they'll be looking to bring production back
Speaker 8: on the six platforms that they shut in. It's never
Speaker 8: really about the supply side, because, as you mentioned, Alex,
Speaker 8: the companies are well versed in executing these types of
Speaker 8: disaster plans. Where the impact really is is on the
Speaker 8: demand side, And especially for guys like me who cover
Speaker 8: natural gas, you know, those without power that can be
Speaker 8: a longer term issue across many states, and the latest
Speaker 8: stats that we have, we're looking at at least roughly
Speaker 8: four million people without power at the moment across states
Speaker 8: like Florida somewhere around a million, Georgia somewhere around a million,
Speaker 8: and I think if you had the Carolinas together at
Speaker 8: somewhere around two million, so there's as much as four
Speaker 8: million residents without power and that is truly devastating. Although
Speaker 8: if this had occurred in July and August, where the
Speaker 8: weather would would have been much warmer, it would have
Speaker 8: a more devastating impact. We're right in the middle of
Speaker 8: the shoulder season here, so maybe there's a little bit
Speaker 8: of reprieve with the weather. But over the next six
Speaker 8: to ten days our weather projections, what we see from
Speaker 8: across the various providers is that it is somewhat still
Speaker 8: warm in that neck of the woods, but probably not
Speaker 8: as bad as it would have.
Speaker 6: Been if it had hit during July and August.
Speaker 5: Yeah, I mean you mentioned the idea of a demand.
Speaker 5: What just how catastrophic could a backup and demand be
Speaker 5: for oil and gas companies here.
Speaker 8: Well, if we look at the last couple of days,
Speaker 8: you know, you're roughly looking at two bcf a day
Speaker 8: of demand coming off. And you know, power gen is
Speaker 8: a very important end market for many of these producers.
Speaker 8: It's the supply into the electricity facilities and that is
Speaker 8: a significant source of consumption for natural gas.
Speaker 6: So it is a very important market. It is interrelated.
Speaker 8: Because when a storm like this hits, thousands of customers
Speaker 8: come offline.
Speaker 6: And of course these customers not.
Speaker 8: Only use these facilities for air conditioning, but also hospitals
Speaker 8: and also other areas other institutions need these facilities as well,
Speaker 8: the HVAC facilities, especially in the south where it can
Speaker 8: get very, very warm, and that's where this storm is hit.
Speaker 6: If we're right, you know, four million folks without power.
Speaker 8: That takes a long time to bring back on online,
Speaker 8: especially now.
Speaker 6: Yeah.
Speaker 2: Absolutely, And at the flip side, just before we let
Speaker 2: you go, have about a minute left, I'm taking a
Speaker 2: look at crude here WTI at sixty eight right, It
Speaker 2: doesn't sound so bad, but I look at that curve.
Speaker 2: We are still in backgradation. But the rerating we've seen
Speaker 2: in the whole curve at that front end has been
Speaker 2: quite extreme.
Speaker 3: At what point do producers get worried?
Speaker 8: So producers are pretty much still in a little bit
Speaker 8: of a sweet spot here.
Speaker 6: You know, that seventy handle is still okay.
Speaker 8: The demand side of the equation for global crude, that
Speaker 8: tends to be the real concern. What happens overseas, especially
Speaker 8: in China, that still seems to be somewhat of concern
Speaker 8: demand overall, especially here in the US as well, as
Speaker 8: things tend to slow. But for the most part, the
Speaker 8: producers are holding in discipline very very well. We as
Speaker 8: analysts and investors are more concerned with that discipline.
Speaker 6: And returning excess cash.
Speaker 8: To investors, either in the form of dividends or share buybacks.
Speaker 8: So the operators have been hearing that message and have
Speaker 8: been sustaining that discipline overall.
Speaker 2: All right, Vince really appreciated, Thank you so much. Vincent
Speaker 2: Piaza joining us Boomberg Intelligence and your equity research analyst
Speaker 2: Oil and Gas joining us on the impact of the
Speaker 2: storm Hellen that has tabok there on Florida as well.
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