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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am

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Speaker 1: Eastern on Effo card Playing and broud Otto with the

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Speaker 1: Bloomberg Business App. Listen on demand wherever you get your podcasts,

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Speaker 1: or watch us live on YouTube.

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Speaker 2: Eco Go, folks. It's been busy here this morning. That

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Speaker 2: gives you all the economic data that's released by the government.

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Speaker 2: A lot of stuff here, jolts, factory orders, durable goods.

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Speaker 2: I mean I heard about all this stuff in economics class.

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Speaker 2: I didn't really know what it is, but I see

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Speaker 2: the numbers here. Michael McKee, he knows what's going on.

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Speaker 2: He does all the economic stuff for Bloomberg television, radio

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Speaker 2: and everything else. Actually, Michael, of all the economic data here,

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Speaker 2: what jumped out.

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Speaker 3: Of you today? What do you think the Fed is

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Speaker 3: going to focus on?

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Speaker 4: Maybe today, well, if it's going to look at jolts,

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Speaker 4: because it does show the labor market is in a

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Speaker 4: looser state, where pretty much back to where we were

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Speaker 4: pre pandemic in terms of the number of job openings.

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Speaker 4: It was a drop, a bigger drop than expected from

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Speaker 4: last month, but the prior month June was revised lower

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Speaker 4: as well, and when you look at what we've seen

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Speaker 4: in the time series, we've seen job openings in the

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Speaker 4: seven million range for three of the last four months,

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Speaker 4: so it's not a shock. It's not a major change

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Speaker 4: in the overall outlook. These numbers are not necessarily super reliable.

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Speaker 4: The quits rate, which people take as an evidence of

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Speaker 4: how people feel about the labor market and whether they

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Speaker 4: can continue to get jobs, still at two point one percent,

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Speaker 4: where it's been for a long time, so it doesn't

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Speaker 4: look like it's making major news today. Oddly enough, factory

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Speaker 4: orders come in up five percent now, durable goods up

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Speaker 4: as part of that, a revised nine point eight percent

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Speaker 4: from nine point nine percent. We knew that, So what

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Speaker 4: that's telling you with a five percent gain after a

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Speaker 4: negative three point three percent the month before is non

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Speaker 4: durable goods sales were pretty good, and that is good

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Speaker 4: news for the idea that the Fed doesn't have to

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Speaker 4: immediately cut rates or anything like that. Probably the most

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Speaker 4: interesting number of the day, though, trade ballance. The trade

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Speaker 4: balance at seventy eight point eight billion, widest the widest

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Speaker 4: in two years, up from seventy three point zero and

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Speaker 4: just a little bit lower than the forecast, but basically

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Speaker 4: saying that we are importing a lot of stuff. Now,

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Speaker 4: there could be two reasons for that. One, the economy

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Speaker 4: is still in good shape and people want to buy.

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Speaker 4: Or two, retailers are stocking up for the holiday season,

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Speaker 4: which then becomes a question for your retail analysts of

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Speaker 4: are they making a bad bet or not? Is the

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Speaker 4: economy going to slower, Our consumer is going to stop spending,

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Speaker 4: and we're going to be stuck with a.

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Speaker 5: Lot of inventory. All right, So that's why it's an

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Speaker 5: interesting number. Put that in your hat, shake it up.

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Speaker 5: What a we what's the trajectory for the US economy?

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Speaker 5: Based on what you've seen so.

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Speaker 4: Far, it looks like the trajectory is pretty much the

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Speaker 4: same as it was. That the economy has slowed, we're

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Speaker 4: not seeing it fall off a cliff, and therefore the

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Speaker 4: Fed is going to say we can cut rates, but

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Speaker 4: we don't have to do an emergency great cut of

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Speaker 4: fifty basis points or anything like that.

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Speaker 5: We can do twenty five all right.

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Speaker 3: Mike McKee, thank you so much for joining us.

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Speaker 2: We appreciate getting your expertise there on a bunch of

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Speaker 2: economic data crossing the tape here this morning.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on applecar Play and Android

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Speaker 1: live on Amazon Alexa from our flagship New York station

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Speaker 1: Just Say Alexa playing Bloomberg eleven thirty.

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Speaker 2: Yesterday, Nvidia suffered a record two and seventy nine billion

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Speaker 2: dollar route as AI worries sink stocks. They also got

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Speaker 2: a DOJ anti trust probe, a lot of headwinds for

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Speaker 2: that stock, a lot of issues for investors to figure

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Speaker 2: out for in Vidia stock still up over one hundred

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Speaker 2: percent year to date. Man Deep saying, he's the guy

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Speaker 2: we talked about in video all the time. He's Bloomberg Intelligence,

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Speaker 2: he's pretty smart. But the guy we really want to

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Speaker 2: talk to you today is Justin Teresi, Anti Trust Litigation

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Speaker 2: and Policy chanlest for Bloomberg Taligence. I've never met you before, Likewise,

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Speaker 2: I did hire you, So I'm just going to go

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Speaker 2: on Man Deep's recommendation. What's the DOJ saying here as

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Speaker 2: it relates to Nvidia and how concerned should in Vidia

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Speaker 2: and its shareholders be?

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Speaker 6: Yeah, so I think the real takeaway here. The most

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Speaker 6: important thing to keep in mind is the timing that's

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Speaker 6: associated with this. So news broke a couple of months

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Speaker 6: ago that DJ was looking into Navidia here and what

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Speaker 6: we think there are a couple issues they might be

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Speaker 6: interested in. One, market consolidation, maybe in the video is

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Speaker 6: growing a little bit faster than the authorities would like

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Speaker 6: to see. The other issue they might be interested in

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Speaker 6: is one related to how they're selling their products. Are

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Speaker 6: they tying things into anti competitive manner? Are they bundling

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Speaker 6: products in such a way that it's really impossible for

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Speaker 6: other folks to compete. But really, this development yesterday in

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Speaker 6: terms of the subpoena really is something we were expecting.

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Speaker 6: And that's because what it lays a formality upon this

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Speaker 6: investigation that wasn't there before. Previously it was informal questionnaire.

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Speaker 6: Now NAVIDI is really going to have to certify that

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Speaker 6: the information it's handing over to DOJ is what they're

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Speaker 6: looking for and a true and accurate depiction of what

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Speaker 6: they want to know about.

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Speaker 5: Is there a political element to this? I mean, everybody's

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Speaker 5: got Nvidia in their four oh one K. Does the

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Speaker 5: Harris campaign pick up the phone and say, couldn't you

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Speaker 5: have waited till after November?

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Speaker 6: I think that might be the question of the day

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Speaker 6: with relation to this. So look, if I'm na Vidia's

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Speaker 6: attorneys right now, what I'm trying to do is to

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Speaker 6: delay responding to this as much as I possibly can,

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Speaker 6: right because there is that element of an election coming

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Speaker 6: up in November. Here, what does a new administration do

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Speaker 6: with the investigation itself? How hard do they go? Are

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Speaker 6: they more open to a settlement than the current regime

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Speaker 6: might be? So that's really the name the name of

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Speaker 6: the game here. I think you're spot on there. That

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Speaker 6: really the.

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Speaker 5: Teacher and the question for Vice President Harris for me

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Speaker 5: is are you going to continue this aggressive anti trust

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Speaker 5: behavior in a new administration? Potentially? Right? So, you know

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Speaker 5: that becomes a real campaign issue, doesn't it.

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Speaker 6: It does, and I think it has, right. I think

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Speaker 6: we've seen that already with a lot of rhetoric coming

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Speaker 6: from both the Harris camp and you know Trump camp

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Speaker 6: with Jada Vance on the issue too, right. So I

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Speaker 6: think moving ahead, we think there could be some softening

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Speaker 6: perhaps in some ways, or more measured or deliberate approach

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Speaker 6: to things. If Harris were to win the White House.

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Speaker 6: But what we see from the Trump camp is Jade

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Speaker 6: Vance does have that rather strong anti big tech mentality

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Speaker 6: when we ever we talk about anti trust with him

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Speaker 6: as a candidate. So really we're not quite sure what

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Speaker 6: to make of the situation there. But delay is the

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Speaker 6: name of the game. If I'm the video right now.

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Speaker 2: When you talk to investors or we need to hear

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Speaker 2: from the company, what do investors think about this risk?

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Speaker 2: Is it just another big tech company facing some regulatory

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Speaker 2: headwinds like we've seen for years.

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Speaker 7: Yeah, I think in Nvidia now is part of that

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Speaker 7: club that Amazon, Google, and Meta which have faced regulatory

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Speaker 7: scrutiny over the years. And look, in the case of Google,

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Speaker 7: it was fairly obvious that regulators doubled down on their

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Speaker 7: distribution agreements that they had with Apple and Samsung to

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Speaker 7: be the default search. So in this case, it would

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Speaker 7: be interesting to see DOJ's approach. What is it that

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Speaker 7: they really want to focus on in terms of how

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Speaker 7: in Nvidia is distributing their chips to the hyperscalers and

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Speaker 7: their largest customers, Because clearly in Vidia has a lot

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Speaker 7: of interest from all types of customers. The market is undersupplied,

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Speaker 7: so do they have an algorithm to say, Okay, I'm

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Speaker 7: gonna distribute X number of chips to customer A and

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Speaker 7: Y to customer B. And look it comes down to

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Speaker 7: in videos, how they have their relationship with their customers

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Speaker 7: and they can distribute the chips.

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Speaker 2: Say why I know that's it seems like it's a

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Speaker 2: market operating efficiently.

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Speaker 3: But what do I know?

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Speaker 2: But what I do know is the beauty of Bloomberg

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Speaker 2: Intelligence as we bring together industry and company specific research

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Speaker 2: analysis and Man Deep sing he's been doing it for

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Speaker 2: years and Justin terrasa anti trust litigation policy analysts Bloomberg Intelligence,

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Speaker 2: where you can bring these folks together, they can partner

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Speaker 2: their research and to integrate their research and give you

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Speaker 2: a really good view of what it means for some

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Speaker 2: of these companies as they face some of this risk

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Speaker 2: from the regulators. And again it's great to have that.

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Speaker 2: It's part of Bloomberg Intelligence. B. I go on the terminal,

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Speaker 2: Oh and guess.

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Speaker 5: What videos shares seem to have bottomed out today?

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Speaker 3: Exactly?

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Speaker 2: All right, Man Deep seeing senior tech analyst, Justin Tracy,

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Speaker 2: anti trust analyst, Bloomberg Intelligence in our studio breaking it

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Speaker 2: down for it in video.

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Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on afflcar playing right Oh

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Speaker 1: with the Bloomberg Business app. Listen on demand wherever you

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Speaker 1: get your podcasts, or watch us live on YouTube.

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Speaker 3: Let's got our next guest, Paul Carter.

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Speaker 2: He's co founder managing partner of twin Focus, joining us

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Speaker 2: from Boston, Massachusetts via zoom. Paul, what are you telling

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Speaker 2: your clients these days as to where the best opportunities are.

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Speaker 2: We've got the S and P five hundred, you know,

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Speaker 2: up eighteen percent. I mean that's pretty darn solid, but

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Speaker 2: yet I can still get a decent yield and to

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Speaker 2: your treasury at three point eight percent.

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Speaker 3: What are you telling your clients these days?

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Speaker 8: Paul, John, thanks for having me. You know here at

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Speaker 8: twin Focus, we've we've largely been invested according to our

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Speaker 8: policy benchmarks all year. You know, the expectation has really

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Speaker 8: been for soft landing, reasonable growth, low inflation, lower rates.

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Speaker 8: You know, before today, before the jolt's number that just

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Speaker 8: came out, the Fed funds were pricing in one hundred

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Speaker 8: percent probability of a twenty five basis point rate cut

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Speaker 8: in September, November, and December. With this most recent number,

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Speaker 8: you know, bigger miss than expected, and it seems to

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Speaker 8: be signaling, you know, greater job availability out there and

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Speaker 8: kind of weaker job market. You've seen that that FED

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Speaker 8: funds market respond with, you know, perhaps a greater chance

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Speaker 8: of perhaps fifty basis points cut at this next meeting.

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Speaker 8: Given all of this, you know, as mentioned, we've been

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Speaker 8: focused on remaining fully invested, and we have been able

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Speaker 8: to take advantage of the run in risk assets. But

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Speaker 8: we're looking to diversify our risk more broadly, and you know,

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Speaker 8: away from this, you know, purely the AI trade, if

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Speaker 8: you will.

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Speaker 5: All right, Paul and Paul, I think this is one

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Speaker 5: of those moments where I'm supposed to throw confetti in

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Speaker 5: the air. Sure the yield curve? Yes, this inverted? Oh wow,

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Speaker 5: so two and ten's now well back, I spoke too soon,

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Speaker 5: But anyway, do you attach? I mean, Paul, they used

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Speaker 5: to tell me that inverted your curve preceeds recession. Well

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Speaker 5: didn't happen? Do you put? What's your significance of this?

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Speaker 5: Do you think you know? Attention to the old curve.

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Speaker 8: We absolutely are focused on the yield curve. You know,

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Speaker 8: there's there's perhaps a number of reasons why we didn't

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Speaker 8: see a recession, you know, in part being this whole

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Speaker 8: AI trade. You know, the productivity that we've seen in

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Speaker 8: the economy and the forecasted productivity that we will see

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Speaker 8: from AI that combined with a lot of the stimulus

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Speaker 8: that was still waning and in effect after COVID that said,

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Speaker 8: you know, a recession I think, you know, at some

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Speaker 8: point is not completely off the table. You know, hopefully

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Speaker 8: we're able to escape with justice soft landing, but we're

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Speaker 8: nineteen years, eighteen, nineteen years into the business cycle here,

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Speaker 8: so it wouldn't be surprising to see something at some point.

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Speaker 8: You know, there is this talk of rate cuts become

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Speaker 8: obviously more prominent with some weakness and inflation, but I

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Speaker 8: think that, you know, it usually takes some time to

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Speaker 8: see those rate cuts impact the econom so we may

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Speaker 8: not see that until Q one, Q two next year.

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Speaker 8: Until then, you know, the market's going to try to

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Speaker 8: decide on the overall direction, and I think we're just

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Speaker 8: going to continue to see a lot of volatility between

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Speaker 8: now and then.

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Speaker 2: Paul, in terms of maybe trying to temper some of

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Speaker 2: that volatility, what do you guys, or how are you

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Speaker 2: guys approaching the fixed income markets?

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Speaker 3: Are you?

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Speaker 2: You know, I'm content to sitting in a to your

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Speaker 2: treasury three point eight percent, but some people might want

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Speaker 2: to take some more credit risk.

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Speaker 3: How do you think about fixed income opportunities today?

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Speaker 8: Sure, so let's let's talk about credit and kind of

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Speaker 8: safe treasury allocations. You know, we've largely been barbelled with

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Speaker 8: perhaps a bit of an overweight towards the shorter end

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Speaker 8: of the curve. So when rates were up fours and five,

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Speaker 8: we were taking advantage of locking in some ten year money.

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Speaker 8: Then you know, while it's compelling to sit in a

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Speaker 8: three and a half or four percent short term treasury,

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Speaker 8: you do have some reinvestment risk if you see, you know,

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Speaker 8: rates come down. So we have been starting to nibble

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Speaker 8: at some duration. On the credit side, you know, we've

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Speaker 8: been less enamored with this whole private credit trade that

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Speaker 8: everybody seems to have fallen in love with, and so

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Speaker 8: we've been focused on really more idiosyncratic return streams or

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Speaker 8: areas of the market that seem to be more capacity constrained.

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Speaker 8: And they're harder to find today for sure, as there's

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Speaker 8: a lot of money out there chasing, chasing various trades.

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Speaker 5: So you see us softening in private equity. I think

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Speaker 5: in your investment Noe, you quote the great Proverto Durant.

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Speaker 8: No Moss, No Moss. Yeah, we've we've, like many institutional

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Speaker 8: family office investors, over the past decade two decades, we've

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Speaker 8: allocated significantly to private equity, which is which has served

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Speaker 8: us fine. But we think going forward the market has

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Speaker 8: completely changed and just there's just an enormous amount of

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Speaker 8: market participants. Uh, there's just enormous amount of capital chasing,

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Speaker 8: and we've found more compelling returns frankly in public markets,

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Speaker 8: which you know, I would have never thought I'd say

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Speaker 8: that five years ago. That's where we are today.

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Speaker 2: Hey, Paul, thanks so much for joining us. Really appreciate

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Speaker 2: getting a few minutes of your time.

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Speaker 3: Paul Carter.

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Speaker 2: He's co founder and manager partner Twin Focus. Up there

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Speaker 2: in Boston.

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Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on applecard Play and Android

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Speaker 1: Auto with the Bloomberg Business app. You can also listen

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Speaker 1: live on Amazon Alexa from our flagship New York station,

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Speaker 1: just Say Alexa playing Bloomberg eleven thirty.

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Speaker 3: Let's stick a look at Nordstrom.

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Speaker 2: The Nordstrom family bids to take the chain private for

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Speaker 2: three point eight billion dollars. Stock pretty much unched on

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Speaker 2: the day, so not a big deal here for most shareholder.

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Speaker 2: SOCCA is up twenty three percent year to date. It's

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Speaker 2: got a market cap about three point seven billion dollars.

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Speaker 2: You throw in the net debt, it's a little over

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Speaker 2: seven billion dollars total enterprise value. Let's check in with

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Speaker 2: Mary Ross Gilbert. He's Bloomberg Intelligence senior Acadanalysts covering the

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Speaker 2: retail space.

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Speaker 3: Mary Ross, thanks so much for joining. Make you sure

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Speaker 3: what do you make of.

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Speaker 2: What the Nordstrom family members are suggesting here? I know

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Speaker 2: this has been in the news for a while, but

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Speaker 2: where do we go from here?

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Speaker 9: Yeah, so Nordstrom, the Nordstrom family has been wanting to

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Speaker 9: take the company private for some time. Right, We've seen

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Speaker 9: this iteration before, but this time partnering with the Mexican

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Speaker 9: retailer El Puerto de Liverpool. They're they're in a good

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Speaker 9: position in terms of coming up with the financing because

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Speaker 9: they're going to pony up about one point two billion

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Speaker 9: in cash in addition to rolling over, they're about ten

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Speaker 9: percent steak in the stock. And of course the Nordstrom

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Speaker 9: family combined they own about you know, a third of

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Speaker 9: the shares, so you've got forty three percent wrapped up.

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Speaker 9: They do need two thirds approvals. We just need to

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Speaker 9: get another twenty three to twenty four percent on board.

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Speaker 9: And you look at the price, there's really no premium here,

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Speaker 9: and they're they're basically saying, well, if you look at

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Speaker 9: the time that we proposed this transaction, which was back

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Speaker 9: in March, the stock was trading much lower, somewhere around

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Speaker 9: you know, seventeen, So this is really a premium to

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Speaker 9: where the shares were then, and it's about a thirty

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Speaker 9: five percent premium. But if you look at how the

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Speaker 9: stock is traded over the last five years, it's pretty

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Speaker 9: much close to the average price, and over the last

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Speaker 9: ten years, it's at a steep discount, like forty one

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Speaker 9: percent discount, you know, over the last ten years. So yeah,

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Speaker 9: there's not a premium. Could another buyer step in here,

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Speaker 9: it's possible, but trying to piece together a transaction could

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Speaker 9: prove onerous and it's going to you know, involve debt,

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Speaker 9: as we know. But not as much incremental debt. The

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Speaker 9: company already has about two point six billion, so they'll

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Speaker 9: probably have to bring on another one point eight billion

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Speaker 9: UH to be able to complete this transaction, and of

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Speaker 9: course the transaction is contingent upon that deal getting done.

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Speaker 9: But with Shortstrom, what really stands out versus the other

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Speaker 9: department stores. Of course, we know that the Macy's proposed

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Speaker 9: buyout has con gone by the wayside at this point.

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Speaker 9: With Nordstrom, you've got a fast growing off price segment

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Speaker 9: and that's what's really exciting here. And their comp sales

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Speaker 9: were up over four percent, their total growth was up

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Speaker 9: nine percent in the second quarter. And if you look

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Speaker 9: at their full line stores, this sort of traditional department store,

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Speaker 9: they were up almost one percent on a comp basis,

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Speaker 9: But if you look at their peers, they were all

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Speaker 9: down anywhere from down three percent for Go Forward stores

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Speaker 9: for Macy's to down five percent for Dillard's and Coals.

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Speaker 9: So Nordstrom sure looks like they're in a better position.

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Speaker 9: They're also much smaller, only ninety three stores versus you know,

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Speaker 9: close to five hundred department stores over at Macy's, which

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Speaker 9: of course that's why they're closing one fifty.

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Speaker 5: So when you're a company and you have problems and

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Speaker 5: you into deal making to try and solve those problems,

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Speaker 5: what does that say, it's got a bit of minute left.

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Speaker 9: Yeah, So in this case here, I think they they're

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Speaker 9: employing a number of news strategies. Let's say with the

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Speaker 9: full line store and with off price. I think they're

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Speaker 9: off to a good track there and big expansion. You know,

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Speaker 9: they're going to be opening like twenty two rack stores

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Speaker 9: this year, and I think they're going to continue that

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Speaker 9: pace going forward. So I think that the idea that

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Speaker 9: they don't have to be under the quarterly lens of

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Speaker 9: investors is probably a relief for them.

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Speaker 2: Right all right, Mary Ross, thanks so much for joining us.

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Speaker 2: Mary Ross Gilbert senior Eckery analysts covering the retail space

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Speaker 2: for Bloomberg Intelligence. She's based out there in Los Angeles

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Speaker 2: and Norstrom some of the family members offering twenty three

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Speaker 2: dollars per sharing cash to take the retailer private for

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Speaker 2: three point eight billion dollars.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on applecar Play and androyd

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Speaker 1: Otto with the Bloomberg Business app. You can also listen

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Speaker 1: live on Amazon Alexa from our flagship New York station,

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Speaker 1: Just say Alexa playing Bloomberg eleven thirty.

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Speaker 2: We need some perspective on this markets after yesterday's sell off.

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Speaker 2: I got a little bit of green on this screen

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Speaker 2: here people trying to get a sense of how do

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Speaker 2: you factor in what was a decent earnings cycle for

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Speaker 2: most of the S and P five hundred plus what

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Speaker 2: they feder reserve that is likely to.

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Speaker 3: Begin cutting rates.

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Speaker 2: How does that factor into the outlook here for risk assets?

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Speaker 2: Margie Battel, she's got a lot of perspective, a lot

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Speaker 2: of experience. She's a senior portfolio managed all Spring Global Investments.

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Speaker 2: Joining us from Zoom on Zoom from Boston, and again,

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Speaker 2: if you're in Boston.

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Speaker 3: Our new home is ninety two nine FM in Boston.

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Speaker 2: MARGI thanks so much for joining us here. How do

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Speaker 2: you piece this all together?

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Speaker 7: Here?

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Speaker 2: We're pretty much through the earnings season and investor conferences

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Speaker 2: are kicking in high gear here in September, September eighteenth,

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Speaker 2: the FED is going to meet and presumably start lowering rid.

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Speaker 3: So how do you put all that together and what

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Speaker 3: comes out for you?

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Speaker 1: Well?

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Speaker 10: I think right now we're in a period of cross

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Speaker 10: currents because the overall urns reports for the quarter were

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Speaker 10: once again pretty good. However, we did have some slight

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Speaker 10: weakness from expectations for some of the large tech companies

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Speaker 10: in contrast to the previous quarters where they surprised on

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Speaker 10: the upside. And since this group was so heavily over owned, frankly,

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Speaker 10: it was really due for correction. And we've seen that

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Speaker 10: over the last really since the end of July into yesterday,

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Speaker 10: where you just had this cascade of all the texts

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Speaker 10: going down and other economically sensitive sectors that have done

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Speaker 10: really well. So I think it's just really adjusting, waffling around,

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Speaker 10: waiting for the FED to once again come in and

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Speaker 10: be on the lakeside, frankly, and I think now we

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Speaker 10: have a news gap, So this is a seasonal slope

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Speaker 10: period of the year, and I think that by the

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Speaker 10: end of the year we should have a strong December,

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Speaker 10: a strong rebound after the election really no matter who wins,

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Speaker 10: because that's just really what happens in election years. So

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Speaker 10: a little more waffling around, and then I think in

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Speaker 10: maybe the stembers that you won't see the market moved up.

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Speaker 5: I got to get this one. By the way, put

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Speaker 5: your bond pat on for a second. Did you throw

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Speaker 5: confetti in the air when the curve disinverted between twos

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Speaker 5: and tens this morning?

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Speaker 7: Well?

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Speaker 10: Yes, it's really amazing how the curve has come down

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Speaker 10: and we're just about flat now, which I think is

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Speaker 10: a step and really to me. It says the market

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Speaker 10: is making the adjustment to interest rates that the fedruar

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Speaker 10: I should be doing, in other words, pushing down short

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Speaker 10: rates short rates compared to long rates. So to see

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Speaker 10: the two year come down so much over the course

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Speaker 10: of this year compared to the ten year and have

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Speaker 10: both of them really well under three eighty is pretty encouraging.

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Speaker 10: It says that we are in the middle of a

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Speaker 10: period of very very tight money. At all we need

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Speaker 10: is the Fed to come in and provide some stabuilt.

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Speaker 10: I think the Fed is really the one who's beyond

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Speaker 10: the curve. The market's really doing what the Fed should

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Speaker 10: be doing by bringing rates down and making putting a

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Speaker 10: little bit of a floor under how big of a

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Speaker 10: correction we'll have.

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Speaker 2: So, Margie, are you a proponent of kind of moving

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Speaker 2: away or de emphasizing or diversifying away from some of

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Speaker 2: the big techniques into this diversification trade, if you will,

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Speaker 2: the rotation into maybe some smaller caps, maybe some lower

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Speaker 2: valued sectors. Is that something that interests you.

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Speaker 10: I'm a little luke more about that, because you did

437
00:22:36,280 --> 00:22:39,399
Speaker 10: have some of those sectors, like small caps, have a

438
00:22:39,400 --> 00:22:42,280
Speaker 10: big jump up in price just because they had really

439
00:22:42,320 --> 00:22:44,480
Speaker 10: gotten so out of whack compared to the rest of

440
00:22:44,520 --> 00:22:46,679
Speaker 10: the market. But if you think we're in a period

441
00:22:46,760 --> 00:22:50,719
Speaker 10: over the rest of the year of frankly slow economic growth,

442
00:22:50,800 --> 00:22:53,280
Speaker 10: maybe a GDP of one percent, one and a half

443
00:22:53,359 --> 00:22:55,879
Speaker 10: something like that, it's really hard to see how some

444
00:22:55,920 --> 00:22:59,760
Speaker 10: of those more value the companies that have slow growth

445
00:22:59,800 --> 00:23:02,399
Speaker 10: markets are really going to continue to shine. So I

446
00:23:02,440 --> 00:23:05,920
Speaker 10: think you really have to get through this volatility period

447
00:23:06,440 --> 00:23:09,359
Speaker 10: and then look for a companies that should have higher

448
00:23:09,359 --> 00:23:12,520
Speaker 10: than average growth, higher than a GDP backdrop we say

449
00:23:12,560 --> 00:23:14,920
Speaker 10: only one one and a half percent, So I think

450
00:23:14,960 --> 00:23:17,240
Speaker 10: it's a short term move. The long term I still

451
00:23:17,240 --> 00:23:19,480
Speaker 10: think will be with the larger companies that have a

452
00:23:19,520 --> 00:23:22,760
Speaker 10: sustained growth path for cyclical growth.

453
00:23:24,000 --> 00:23:27,560
Speaker 5: In video one on Waight forty ish, is that an

454
00:23:27,720 --> 00:23:32,000
Speaker 5: entry port a point for investors? Your thoughts just on

455
00:23:32,040 --> 00:23:33,919
Speaker 5: the tech space specific.

456
00:23:33,400 --> 00:23:37,879
Speaker 10: To in vidia, Well, certainly you've had a huge correction there,

457
00:23:38,280 --> 00:23:41,320
Speaker 10: and if you thought it was rather highly priced at

458
00:23:41,359 --> 00:23:45,760
Speaker 10: one forty very high pe, certainly with a about a

459
00:23:45,800 --> 00:23:49,400
Speaker 10: thirty percent or more adjustment and price, it looks much

460
00:23:49,440 --> 00:23:53,400
Speaker 10: more fairly priced compared to its growth. So I would

461
00:23:53,440 --> 00:23:56,240
Speaker 10: say that it's certainly better buy here than to sell

462
00:23:56,280 --> 00:23:57,280
Speaker 10: at these levels.

463
00:23:58,280 --> 00:24:00,639
Speaker 2: Fixed income, I see the best performance is in high yield.

464
00:24:00,720 --> 00:24:03,240
Speaker 2: Is that something of interest you or is it spreads

465
00:24:03,280 --> 00:24:03,640
Speaker 2: too tight?

466
00:24:05,280 --> 00:24:08,040
Speaker 10: Well, spreads are tight. Double bees are a little over

467
00:24:08,160 --> 00:24:12,399
Speaker 10: two basis points more than treasuries. Single bees maybe a

468
00:24:12,400 --> 00:24:16,439
Speaker 10: little over three percentage points, which is narrow historically. However,

469
00:24:16,560 --> 00:24:19,520
Speaker 10: defaults are very low. Defaults are on a hunder four percent,

470
00:24:20,160 --> 00:24:22,359
Speaker 10: and if you look where we are in the credit cycle,

471
00:24:22,400 --> 00:24:24,760
Speaker 10: the FED is now hopefully one of these days going

472
00:24:24,800 --> 00:24:27,240
Speaker 10: to be on an easing cycle where short rates come down.

473
00:24:27,640 --> 00:24:29,720
Speaker 10: So that says to me, that's a pretty good backdrop

474
00:24:29,760 --> 00:24:33,359
Speaker 10: for high yield. The big negatives, of course, the yields

475
00:24:33,359 --> 00:24:35,760
Speaker 10: aren't very high. You're looking at say six to seven

476
00:24:35,800 --> 00:24:39,399
Speaker 10: and a half percent for most issues. But really, if

477
00:24:39,440 --> 00:24:41,720
Speaker 10: you think the economy is going to be growing very slowly,

478
00:24:41,840 --> 00:24:44,840
Speaker 10: which I do, one and a half percentage. Say, then

479
00:24:44,920 --> 00:24:47,480
Speaker 10: that implies that the growth in the equity market over

480
00:24:47,520 --> 00:24:50,200
Speaker 10: the balance of the year may well be load of

481
00:24:50,320 --> 00:24:53,600
Speaker 10: in single digital return from here, which would really be

482
00:24:53,640 --> 00:24:57,360
Speaker 10: about comparable with what you get from high old bonds.

483
00:24:57,480 --> 00:24:59,920
Speaker 10: So we may actually have high old bonds running no

484
00:25:00,000 --> 00:25:02,679
Speaker 10: I connect with equities over the next few months. So

485
00:25:02,720 --> 00:25:05,360
Speaker 10: I think they're pretty good, especially if you are more

486
00:25:05,400 --> 00:25:07,520
Speaker 10: looking for income. Rayland capital appreciation.

487
00:25:08,000 --> 00:25:09,639
Speaker 2: All right, MARGI, thank you so much for joining us.

488
00:25:09,640 --> 00:25:12,280
Speaker 2: Always appreciate getting your thoughts and perspective. Market Betel, Senior

489
00:25:12,320 --> 00:25:16,119
Speaker 2: portfolio manager, all Spring Global Investments. Joining us from Boston

490
00:25:16,280 --> 00:25:17,159
Speaker 2: on zoom.

491
00:25:18,400 --> 00:25:22,280
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

492
00:25:22,359 --> 00:25:25,880
Speaker 1: weekdays at ten am Eastern on applecard Play and Android

493
00:25:25,920 --> 00:25:28,680
Speaker 1: Otto with the Bloomberg Business app. You can also listen

494
00:25:28,800 --> 00:25:31,880
Speaker 1: live on Amazon Alexa from our flagship New York station

495
00:25:32,280 --> 00:25:36,000
Speaker 1: Just Say Alexa playing Bloomberg eleven thirty.

496
00:25:36,920 --> 00:25:40,680
Speaker 2: Interesting story across the Bloomberg terminal here at John Tucker.

497
00:25:41,280 --> 00:25:44,080
Speaker 2: The Biden Harris Administration's big bet on Intel Corp. To

498
00:25:44,200 --> 00:25:47,040
Speaker 2: lead a US chip making renaissance is in grave trouble

499
00:25:47,080 --> 00:25:50,320
Speaker 2: as a result of the company's mounting financial struggles. Creating

500
00:25:50,320 --> 00:25:54,320
Speaker 2: a potentially damaging setback for the country's most ambitious industrial

501
00:25:54,359 --> 00:25:57,080
Speaker 2: policy in decades. I kind of forgot that. Five months

502
00:25:57,119 --> 00:26:01,080
Speaker 2: ago President Biden traveled to Arizona to unfail a pit that.

503
00:26:01,040 --> 00:26:04,680
Speaker 5: Was a big deal, a news conference, second standing there

504
00:26:04,720 --> 00:26:06,040
Speaker 5: with mister Gilsinger.

505
00:26:06,160 --> 00:26:09,520
Speaker 2: Yeah, twenty billion, and that is now in jeopardy. Perhaps,

506
00:26:10,000 --> 00:26:12,880
Speaker 2: Mackenzie Hawkins joins this Bloomberg News technology reporter.

507
00:26:13,520 --> 00:26:16,240
Speaker 3: She joins us. Mackenzie, you reported on this story.

508
00:26:16,240 --> 00:26:19,080
Speaker 2: Here, give us the latest year on Intel and the

509
00:26:19,119 --> 00:26:21,760
Speaker 2: ability of it to kind of fulfill its end of

510
00:26:22,000 --> 00:26:23,680
Speaker 2: the agreement with.

511
00:26:23,600 --> 00:26:24,320
Speaker 5: The US government.

512
00:26:26,200 --> 00:26:30,400
Speaker 11: So thirty thousand foot perspective here. The US government has

513
00:26:30,440 --> 00:26:33,919
Speaker 11: this thirty nine billion dollar program to issue grants to

514
00:26:34,080 --> 00:26:37,240
Speaker 11: chip companies and convince them to do manufacturing on American soil,

515
00:26:37,680 --> 00:26:40,520
Speaker 11: and Intel is supposed to be the biggest winner from

516
00:26:40,520 --> 00:26:43,520
Speaker 11: that effort. The package that you referenced that Biden went

517
00:26:43,520 --> 00:26:46,040
Speaker 11: to Arizona to announce was eight and a half billion

518
00:26:46,080 --> 00:26:49,080
Speaker 11: dollars in grants and eleven billion dollars in loans. Putting

519
00:26:49,119 --> 00:26:51,800
Speaker 11: aside the twenty five percent tax credits that Intel could

520
00:26:51,840 --> 00:26:54,960
Speaker 11: maybe get on what could be one hundred billion dollars

521
00:26:54,960 --> 00:26:57,760
Speaker 11: in US investments. So we're talking about massive, massive sums

522
00:26:57,800 --> 00:27:01,880
Speaker 11: of money here, but all of those are preliminary, and

523
00:27:02,160 --> 00:27:05,679
Speaker 11: right now the company is undergoing due diligence and hashing

524
00:27:05,720 --> 00:27:09,360
Speaker 11: out the finer details of its accord with the Biden administration.

525
00:27:10,040 --> 00:27:12,760
Speaker 11: That happens to be going on at the same time

526
00:27:12,920 --> 00:27:16,520
Speaker 11: as Intel is in dire financial straits. The company had

527
00:27:16,520 --> 00:27:20,560
Speaker 11: a pretty disastrous earnings report last month, sentence shares tanking

528
00:27:20,920 --> 00:27:24,680
Speaker 11: the worst route that it's seen in decades, and now

529
00:27:24,680 --> 00:27:26,800
Speaker 11: there are a lot of questions looming about whether Intel

530
00:27:26,840 --> 00:27:30,280
Speaker 11: can actually pull off this big US manufacturing expansion, and

531
00:27:30,440 --> 00:27:33,960
Speaker 11: given it centrality to what's called the Chips Act overall,

532
00:27:34,160 --> 00:27:36,439
Speaker 11: whether the Biden administration will still be able to achieve

533
00:27:36,440 --> 00:27:37,480
Speaker 11: its policy goals.

534
00:27:37,920 --> 00:27:41,000
Speaker 5: Now I'm no politician, but if I'm going to head

535
00:27:41,000 --> 00:27:43,520
Speaker 5: out to Arizona have a news conference as President of

536
00:27:43,560 --> 00:27:45,919
Speaker 5: the United States, I would think that somebody on my

537
00:27:46,080 --> 00:27:49,359
Speaker 5: staff has actually done the due diligence to make sure

538
00:27:49,440 --> 00:27:52,639
Speaker 5: that Intel, who I'm having a news conference with, is

539
00:27:52,720 --> 00:27:55,879
Speaker 5: actually going to be able to meet those milestones. Am

540
00:27:55,920 --> 00:27:56,720
Speaker 5: I too cynical?

541
00:27:58,880 --> 00:27:59,120
Speaker 7: Well?

542
00:27:59,240 --> 00:28:01,840
Speaker 11: The Commerce Department, which is running the Chips Act, has

543
00:28:01,840 --> 00:28:04,720
Speaker 11: actually set up this pretty intentional process from the outset

544
00:28:04,760 --> 00:28:07,600
Speaker 11: telling companies, you apply for this money, we reach a

545
00:28:07,640 --> 00:28:10,840
Speaker 11: preliminary memorandum of terms. That's what was announced for Intel

546
00:28:10,920 --> 00:28:12,960
Speaker 11: and all of the companies that are part of the program,

547
00:28:12,960 --> 00:28:15,600
Speaker 11: which includes some of the world's leading chip makers, Taiwan's

548
00:28:15,640 --> 00:28:20,359
Speaker 11: TSMC and South Korea Samsung, And basically the government is

549
00:28:20,440 --> 00:28:24,639
Speaker 11: agreeing to underwrite this program, but companies have to go

550
00:28:24,720 --> 00:28:27,520
Speaker 11: through due diligence and a sort of private equity type model.

551
00:28:27,600 --> 00:28:30,800
Speaker 11: After reaching that preliminary agreement, then they sign a final

552
00:28:30,880 --> 00:28:33,399
Speaker 11: term sheet, and then they have to actually hit the

553
00:28:33,480 --> 00:28:36,560
Speaker 11: milestones on their projects before they receive any money, and

554
00:28:36,760 --> 00:28:39,600
Speaker 11: the government has the ability to claw back money if

555
00:28:39,600 --> 00:28:42,040
Speaker 11: they hand it out. But the projects are never fully completed,

556
00:28:42,440 --> 00:28:44,840
Speaker 11: so there are a lot of guardrails built in place

557
00:28:44,920 --> 00:28:48,520
Speaker 11: to prevent the Biden administration or the next administration from

558
00:28:48,560 --> 00:28:51,760
Speaker 11: actually handing out money to a company that may not

559
00:28:51,840 --> 00:28:53,880
Speaker 11: be able to pull things off. If that ends up

560
00:28:53,920 --> 00:28:54,920
Speaker 11: being the case with Intel.

561
00:28:55,040 --> 00:28:57,280
Speaker 5: Intel's not even sharing all the information, is it.

562
00:28:59,000 --> 00:29:01,880
Speaker 11: Well, they're going through a pretty contentious due diligence process

563
00:29:01,960 --> 00:29:04,640
Speaker 11: right now. You know, the company and the Biden administrations

564
00:29:04,640 --> 00:29:07,000
Speaker 11: say that they're working hard to reach a final agreement,

565
00:29:07,040 --> 00:29:09,440
Speaker 11: but there are certain requests that government officials have made

566
00:29:09,520 --> 00:29:12,200
Speaker 11: of Intel that the chip maker doesn't want to deliver on.

567
00:29:12,280 --> 00:29:14,680
Speaker 11: I think the challenge for the administration is such a

568
00:29:14,680 --> 00:29:19,240
Speaker 11: big part of vetting a project's commercial viability is knowing

569
00:29:19,240 --> 00:29:21,880
Speaker 11: that they have customers that there will actually be demand

570
00:29:21,960 --> 00:29:25,160
Speaker 11: for the chips that they intend to manufacture, and in

571
00:29:25,240 --> 00:29:28,240
Speaker 11: Intel's case, the picture is a little bit bleak. The

572
00:29:28,320 --> 00:29:33,160
Speaker 11: company has secured some potential commitments from firms including Broadcom,

573
00:29:33,160 --> 00:29:36,280
Speaker 11: Media Tech, and Microsoft, but none of those have chosen

574
00:29:36,320 --> 00:29:39,280
Speaker 11: to go to full production with Intel's facilities yet. Commerce

575
00:29:39,280 --> 00:29:43,240
Speaker 11: Secretary Gina Raimongo encouraged leading AI chip makers in Nvidia

576
00:29:43,360 --> 00:29:47,560
Speaker 11: and AMD to consider manufacturing at Intel's Ohio facility, which

577
00:29:47,800 --> 00:29:50,280
Speaker 11: Pat Golsinger said could be the world's largest chip making

578
00:29:50,320 --> 00:29:52,840
Speaker 11: factory if it's fully built out, and neither of them

579
00:29:52,880 --> 00:29:55,960
Speaker 11: plans to do so. So this is putting the Biden

580
00:29:55,960 --> 00:29:58,719
Speaker 11: administration in a bit of a difficult spot, and despite

581
00:29:58,720 --> 00:30:01,080
Speaker 11: the fact that they haven't actually released any money yet,

582
00:30:01,520 --> 00:30:04,160
Speaker 11: it could become potentially a huge political liability.

583
00:30:04,840 --> 00:30:08,560
Speaker 2: What is the administration saying in terms of any backup plan?

584
00:30:10,800 --> 00:30:13,000
Speaker 11: So we have to keep in mind that Intel is

585
00:30:13,080 --> 00:30:16,280
Speaker 11: just one company that is supposed to benefit from the

586
00:30:16,360 --> 00:30:20,280
Speaker 11: Chips Act. There were hundreds of companies that expressed interest

587
00:30:20,360 --> 00:30:23,920
Speaker 11: in this money, and the Biden administration has announced investments

588
00:30:24,240 --> 00:30:27,520
Speaker 11: in the preliminary agreement form of north of thirty billion

589
00:30:27,600 --> 00:30:30,920
Speaker 11: dollars to around sixteen or seventeen firms in total, and

590
00:30:30,960 --> 00:30:34,280
Speaker 11: that includes commitments from all of the world's top ship makers.

591
00:30:34,360 --> 00:30:36,080
Speaker 11: Intel is one of them, but as I mentioned before,

592
00:30:36,160 --> 00:30:39,560
Speaker 11: TSMC and Samsung are also planning on producing leading edge

593
00:30:39,600 --> 00:30:42,840
Speaker 11: logic ships in the United States. Micron, one of the

594
00:30:42,960 --> 00:30:46,200
Speaker 11: world's top memory chip makers, is building factories in Idaho

595
00:30:46,280 --> 00:30:48,080
Speaker 11: and New York. So there are lots of companies that

596
00:30:48,120 --> 00:30:50,760
Speaker 11: are part of this program. At the same time, Intel

597
00:30:50,880 --> 00:30:54,600
Speaker 11: is uniquely important. The US wants to reach fifth or

598
00:30:54,640 --> 00:30:57,920
Speaker 11: twenty five sorry, the US wants to reach twenty percent

599
00:30:57,960 --> 00:31:00,000
Speaker 11: market share a fifth of the world's most advanced life

600
00:31:00,360 --> 00:31:03,320
Speaker 11: chips by the end of the decade. Intel's factories are

601
00:31:03,360 --> 00:31:06,040
Speaker 11: a crucial part of that effort, and the company is

602
00:31:06,080 --> 00:31:08,800
Speaker 11: also supposed to be the sole intended beneficiary of this

603
00:31:08,920 --> 00:31:12,160
Speaker 11: three and a half billion dollar program to make secure

604
00:31:12,200 --> 00:31:16,800
Speaker 11: semiconductors for the Pentagon, So there is a backup plan,

605
00:31:16,880 --> 00:31:20,360
Speaker 11: and so are there are other companies involved, but Intel matters.

606
00:31:20,040 --> 00:31:23,240
Speaker 5: A lot, and presumably this is to create jobs, and

607
00:31:23,280 --> 00:31:26,480
Speaker 5: it comes at a time when Intel's cutting around fifteen

608
00:31:26,520 --> 00:31:28,000
Speaker 5: thousand jobs. Exactly right.

609
00:31:28,120 --> 00:31:30,240
Speaker 2: I go, McKenzie, great reporting. Thank you so much for

610
00:31:30,280 --> 00:31:33,920
Speaker 2: joining us. Mackenzie Hawkins, technology reporter for Bloomberg News, joining

611
00:31:33,960 --> 00:31:36,000
Speaker 2: us from Washington, d C.

612
00:31:36,240 --> 00:31:36,880
Speaker 3: Appreciate that.

613
00:31:36,920 --> 00:31:40,320
Speaker 2: So Intel again, another day, another piece of bad news here.

614
00:31:40,360 --> 00:31:42,000
Speaker 3: And it just seems like and.

615
00:31:41,960 --> 00:31:44,040
Speaker 2: Again I don't follow the chip business day to day,

616
00:31:44,040 --> 00:31:47,480
Speaker 2: but it just seems like the technology to some degree

617
00:31:47,480 --> 00:31:50,560
Speaker 2: has passed by Intel and they missed kind of the

618
00:31:50,600 --> 00:31:56,520
Speaker 2: AI wave or evolution, whereas Nvidia boit right right.

619
00:31:56,440 --> 00:31:58,400
Speaker 5: Which in Vidia doesn't make chips, they just.

620
00:31:58,440 --> 00:32:01,040
Speaker 3: Designed them exactly right and exactly my understanding.

621
00:32:01,320 --> 00:32:05,800
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622
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623
00:32:09,240 --> 00:32:12,640
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624
00:32:12,720 --> 00:32:16,120
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625
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626
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