WEBVTT - Intel CEO Forced Out, France Turmoil 0:00:00.080 --> 0:00:09.119 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:09.119 --> 0:00:13.320 Bloomberg Intelligence podcast. Catch us live weekdays at ten am 0:00:13.320 --> 0:00:15.800 Eastern on Apple card Playing and broud Otto with the 0:00:15.800 --> 0:00:19.720 Bloomberg Business App. Listen on demand wherever you get your podcasts, 0:00:19.920 --> 0:00:22.280 or watch us live on YouTube. 0:00:23.360 --> 0:00:25.840 Bloomberg News is now reporting that the board has forced 0:00:25.880 --> 0:00:30.400 out Intel's CEO Gelsinger. So definitely some concerns there at 0:00:30.440 --> 0:00:32.879 Intel as it tries to play catch up on the 0:00:32.960 --> 0:00:36.120 AI game against the videos of the world. Man Deep 0:00:36.120 --> 0:00:39.440 Sing joins his senior technology Industrynals for Bloomberg Intelligence joins 0:00:39.479 --> 0:00:42.760 us here on our Bloomberg Interactor Brokers studio. So again, Mandy, 0:00:42.600 --> 0:00:44.519 by the reporting we're seeing out of Bloomberg News now 0:00:44.600 --> 0:00:46.320 was that it was kind of the board forcing at 0:00:46.400 --> 0:00:49.040 mister Gelsinger. And that kind of makes sense because you know, 0:00:49.080 --> 0:00:53.040 as you mentioned earlier, board concern, investor concern about the 0:00:53.080 --> 0:00:56.360 pace of which Intel was trying to, you know, really 0:00:56.600 --> 0:00:59.560 become a bigger player in AI. What do you think 0:00:59.600 --> 0:01:00.000 is going on. 0:01:00.760 --> 0:01:05.399 And the overall strategy for turnaround like this, I mean, 0:01:05.480 --> 0:01:09.480 we know turnarounds are rare in tech, and in this case, 0:01:09.520 --> 0:01:13.560 I think the doubling down on the foundry side was 0:01:13.600 --> 0:01:16.480 a big mistake in hindsight, I would be very surprised 0:01:16.520 --> 0:01:20.520 if whoever their point, whether it's internal or external, really 0:01:20.640 --> 0:01:23.440 wants to focus on the foundry side as opposed to 0:01:23.480 --> 0:01:27.240 their core chip business, which is where they still generate 0:01:27.280 --> 0:01:29.160 bulk of their operating free cash flow. 0:01:29.200 --> 0:01:30.839 And you know, when you look at. 0:01:30.680 --> 0:01:34.840 The PC business, it's a thirty billion dollar business, generates 0:01:34.920 --> 0:01:37.800 ten billion dollars in free cash flow, and it's still there. 0:01:37.840 --> 0:01:40.399 I mean, they're not gaining any share, but there's still 0:01:40.400 --> 0:01:43.440 the dominant force when it comes to the client PC 0:01:44.160 --> 0:01:47.360 desktop business, and I think that's the path to turn 0:01:47.400 --> 0:01:48.280 around this company. 0:01:48.560 --> 0:01:51.720 Were you surprised by this in that this happened before 0:01:51.760 --> 0:01:57.200 there was a successor actually announced, considering that it meaning that, 0:01:57.280 --> 0:01:59.200 like what's going to happen in the next, say, two 0:01:59.200 --> 0:02:01.360 months while they were looking for a successor, that would 0:02:01.440 --> 0:02:03.320 have meant that Pat Gelsinger had to leave. 0:02:03.560 --> 0:02:06.280 I mean, this reminds me a little bit about Microsoft, 0:02:06.400 --> 0:02:10.000 the way Steve Balmer left and the way Satya Nadella 0:02:10.200 --> 0:02:13.680 was appointed. I wouldn't be surprised if one of the 0:02:13.800 --> 0:02:18.440 co CEOs, Michelle Johnson, like she ends up being elevated 0:02:18.480 --> 0:02:22.679 to the CEO. But when I look at the turnaround prospects, 0:02:22.800 --> 0:02:25.280 I think this is a much harder turnaround than a 0:02:25.400 --> 0:02:29.799 Microsoft simply because you've got a player in Nvidia that's 0:02:30.160 --> 0:02:33.919 really taking share on the server side and then TSMC 0:02:34.080 --> 0:02:37.280 on the foundry side. So on both the fronts, Intel 0:02:37.440 --> 0:02:40.440 is really losing share. The only front where they still have, 0:02:41.240 --> 0:02:43.480 you know, steady share is the client PC business, And 0:02:43.520 --> 0:02:47.200 that's why I think breaking up the company is probably 0:02:47.200 --> 0:02:50.680 the likely scenario here. I would be surprised if anyone 0:02:50.760 --> 0:02:52.880 tries to turn this around as is. 0:02:53.800 --> 0:02:57.240 So, I mean, it's just an attractive job for sir, 0:02:57.480 --> 0:02:59.600 an external person. Let's say I'm a senior person in 0:02:59.639 --> 0:03:02.520 n vidio, I can get the big chair at Intel. 0:03:02.639 --> 0:03:03.400 Is that attractive? 0:03:04.200 --> 0:03:07.040 It could be, but it sounds more like a Pe 0:03:07.200 --> 0:03:10.440 playbook here. You know, look at the entity as a whole, 0:03:10.600 --> 0:03:14.640 figure out the strategic options, lever up and look the 0:03:14.680 --> 0:03:18.480 foundry business outside of Intel may actually end up doing well. 0:03:18.520 --> 0:03:21.480 And the reason I say that is right now, no 0:03:21.560 --> 0:03:24.800 one from an Amazon or a Microsoft, or Google or 0:03:24.880 --> 0:03:27.880 Nvidia wants to use Intel foundry because they know Intel 0:03:28.000 --> 0:03:30.800 is a competitor on the chip design side. Well, once 0:03:30.840 --> 0:03:33.360 you take out the company and you know it's an 0:03:33.360 --> 0:03:38.360 independent entity, everyone wants to have some onshore manufacturing of chips. 0:03:38.360 --> 0:03:41.680 That's what the government wants. So these companies may be 0:03:41.880 --> 0:03:44.760 forced and with the incoming administration, I won't be surprised 0:03:44.800 --> 0:03:47.520 if they say, Okay, you guys have to use some 0:03:47.560 --> 0:03:49.440 of the foundry options. 0:03:49.240 --> 0:03:49.960 Within the US. 0:03:50.000 --> 0:03:52.880 At TSMC or Samsung don't have that kind of capacity 0:03:52.920 --> 0:03:55.000 that Intel has within the US. 0:03:55.240 --> 0:03:58.000 So would the pitch be to spin off the foundry 0:03:58.040 --> 0:04:00.640 business kind of thing and then keep the chips and 0:04:00.680 --> 0:04:01.440 the AI chips. 0:04:01.800 --> 0:04:04.360 Yeah, I mean, look, the foundry business is an eighteen 0:04:04.400 --> 0:04:08.000 billion dollar revenue business, although most of it is Intel 0:04:08.200 --> 0:04:11.200 outsourcing their business and counting as revenue, so it's not 0:04:11.360 --> 0:04:16.200 external foundry revenue. But it's negative gross margins. So the 0:04:16.200 --> 0:04:18.800 core PC business is about a forty to forty five 0:04:18.800 --> 0:04:22.599 percent gross margin. The foundry business is negative gross margin, 0:04:22.960 --> 0:04:25.839 and they're spending twenty five billion dollars a year on 0:04:25.960 --> 0:04:28.640 capex just to buy the machines to keep up with 0:04:28.720 --> 0:04:30.040 the advancement in nodes. 0:04:30.680 --> 0:04:32.919 Why do I have a business that has negative gross margins? 0:04:33.360 --> 0:04:36.960 Because it's it's like Intel is the vertical integrated player 0:04:37.080 --> 0:04:40.839 in chip design and manufacturing, so they do it all 0:04:40.880 --> 0:04:44.040 in house, and for a while, that's why Intel's gross 0:04:44.040 --> 0:04:47.359 margins were the best because they were doing everything in house. 0:04:47.560 --> 0:04:50.880 But the moment they missed out on that node advancement 0:04:50.920 --> 0:04:54.080 where TSMC leap rocked against them, that's when it all 0:04:54.080 --> 0:04:54.920 started to go wrong. 0:04:55.560 --> 0:04:58.120 Amazing stuff, all right, Andy, thanks a lot, really appreciate it. 0:04:58.120 --> 0:04:59.880 We'll clearly be talking to you every day on this. 0:05:00.120 --> 0:05:00.640 For a while. 0:05:00.839 --> 0:05:04.720 Mandu Seing Bloomberg Intelligence senior technology analyst joining us on 0:05:04.839 --> 0:05:09.280 Intel and reportedly Pat Gelsinger being asked to leave by 0:05:09.400 --> 0:05:09.839 the board. 0:05:11.360 --> 0:05:15.240 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:05:15.320 --> 0:05:18.240 weekdays at ten am Eastern on applecar. 0:05:17.880 --> 0:05:20.600 Play and Android Auto with the Bloomberg Business Act. 0:05:20.760 --> 0:05:23.600 You can also listen live on Amazon Alexa from our 0:05:23.640 --> 0:05:27.599 flagship New York station, Just Say Alexa, play Bloomberg eleven 0:05:27.720 --> 0:05:29.720 thirty Alex. 0:05:29.480 --> 0:05:32.280 Stelier alongside Paul Sweeney. This is the Bloomberg Intelligence Radio. 0:05:32.320 --> 0:05:34.760 We bring you all the top news, business, economic and 0:05:34.800 --> 0:05:37.360 finance through our lens of our Bloomberg Intelligence folks. They 0:05:37.360 --> 0:05:40.040 cover two thousand companies and one hundred and thirty industries 0:05:40.120 --> 0:05:42.080 all around the world. All right, let's get to one 0:05:42.080 --> 0:05:44.960 of them right now, super Micro devices. Super Micro, I 0:05:44.960 --> 0:05:46.960 should say, up solidly. 0:05:47.040 --> 0:05:48.040 At some point it was up. 0:05:48.000 --> 0:05:50.840 Like thirty percent today, up twenty two percent now at 0:05:50.839 --> 0:05:54.320 this point, the super Micro reviews finds no evidence of 0:05:54.400 --> 0:05:59.080 fraud and the CFO was replaced. Let's get more on this. 0:05:59.200 --> 0:06:03.440 Ujin hoo boom. Bring intelligence and your technology analysts, joins us. Now, 0:06:03.440 --> 0:06:06.480 remind us what the problem is that super Micro is 0:06:06.520 --> 0:06:08.279 trying to create too correct. 0:06:09.160 --> 0:06:11.960 Yeah, hey, Alex, thanks for having me on a couple 0:06:12.080 --> 0:06:15.200 couple of things. There was a short sell of report 0:06:15.720 --> 0:06:21.000 back in August citing that there was some fraud you know, 0:06:21.080 --> 0:06:25.520 with internally, and essentially because of that, there was an 0:06:25.560 --> 0:06:28.280 internal investigation and they delighted their ten K and ten 0:06:28.360 --> 0:06:33.840 Q filings. And what super Micro is essentially saying their 0:06:33.920 --> 0:06:37.360 internal investigation has found nothing or no evidence of fraud. 0:06:38.360 --> 0:06:40.440 But the ten K and ten Q filing still have 0:06:40.520 --> 0:06:41.280 yet to be filed. 0:06:41.800 --> 0:06:43.800 But it's not every day that a big four accounting 0:06:43.800 --> 0:06:47.600 firm does what happened here basically says, you know, they 0:06:47.600 --> 0:06:49.680 really can't rely upon the management team and they and 0:06:49.720 --> 0:06:52.360 they just walk away from an account that doesn't happen. 0:06:52.440 --> 0:06:57.520 Yeah, problem, No, Paul, I think between your lifetime and 0:06:57.560 --> 0:07:04.039 my lifetime in the financial industry, probably four or five times, right, So, yeah, 0:07:04.040 --> 0:07:07.240 it doesn't happen. It doesn't happen. They did find an 0:07:07.279 --> 0:07:12.440 alternative BDO USA, and you know, quite quite frankly, with 0:07:12.480 --> 0:07:18.080 the special investigation you know, being completed without evidence of fraud, 0:07:18.440 --> 0:07:21.560 it actually almost gives them a BDO a safety net 0:07:21.600 --> 0:07:25.560 to actually expedite the ten Q and ten K filing 0:07:25.680 --> 0:07:27.240 sign off in my opinion. 0:07:27.280 --> 0:07:29.840 So does this put all the questions to bed at 0:07:29.840 --> 0:07:30.560 this point? 0:07:31.400 --> 0:07:34.760 No, not necessarily, quite frankly. I mean, let's see what 0:07:34.800 --> 0:07:36.840 BDO says. I do think they're going to try to 0:07:36.840 --> 0:07:40.400 push along the filings as quickly as possible, possibly by 0:07:40.480 --> 0:07:45.320 year end. You know, the deadline is sometime in late February. 0:07:45.360 --> 0:07:47.640 But you know, I do think they'll try to push 0:07:47.680 --> 0:07:49.840 it along now, I will tell you. 0:07:50.360 --> 0:07:50.520 Uh. 0:07:50.600 --> 0:07:53.160 The other question is is that was there so much 0:07:53.200 --> 0:07:58.440 reputation damaged because of this? Did they lose business? And 0:07:59.080 --> 0:08:01.200 if you think about where the shares are today, it's 0:08:01.240 --> 0:08:02.400 still well off the peaks. 0:08:03.560 --> 0:08:07.040 So assuming they can put this issue behind them, what 0:08:07.200 --> 0:08:09.600 is the story for this company here, super Micro News, 0:08:09.640 --> 0:08:12.920 how do you position it within your tech stocks? 0:08:13.080 --> 0:08:13.320 Yeah? 0:08:13.480 --> 0:08:17.000 Look, super Micro has been one of the hottest companies 0:08:17.880 --> 0:08:21.600 within the hardware industry. They were on the forefront or 0:08:21.600 --> 0:08:25.160 the poster child of AI servers, and you've seen a 0:08:25.240 --> 0:08:28.400 rapid rise in sales, going from a billion dollars or 0:08:28.480 --> 0:08:31.600 three billion dollars in annual sales, and they were on 0:08:31.720 --> 0:08:34.319 track to about twenty six to thirty billion dollars in 0:08:34.360 --> 0:08:36.959 annual sales in fiscal twenty twenty five. Right, and this 0:08:37.000 --> 0:08:41.000 is over a span of four years. Now, they didn't 0:08:41.040 --> 0:08:45.120 retract a guidance, but they didn't affirm guidance either. So 0:08:45.200 --> 0:08:47.840 the question is is that, look, what is the real 0:08:47.920 --> 0:08:50.480 sales going into fiscal twenty five. We do have a 0:08:50.480 --> 0:08:54.720 scenarios scenario analysis that in a draconian way, it's going 0:08:54.800 --> 0:08:56.559 to be sixteen billion dollars in sales. 0:08:56.840 --> 0:08:57.000 Right. 0:08:57.040 --> 0:08:59.439 That's far off of the twenty six on the low end, 0:09:00.080 --> 0:09:02.600 but you know, it's still sixteen billion dollars in sales 0:09:02.640 --> 0:09:06.000 that super Micro could deliver on the AI story alone. 0:09:06.200 --> 0:09:10.439 And this is AI netlike hardware right, versus AI chips 0:09:10.920 --> 0:09:13.800 for example from in video, right, So a competitor would 0:09:13.800 --> 0:09:15.760 be like Dell, right, like an. 0:09:15.679 --> 0:09:17.320 AI server play exactly. 0:09:17.400 --> 0:09:19.200 So if I was a customer and I was like, 0:09:19.200 --> 0:09:21.320 you know what, super Micro, I need to go somewhere else. 0:09:21.640 --> 0:09:23.520 Is the only other option Dell? Or are there other 0:09:23.559 --> 0:09:24.400 players out there? 0:09:24.960 --> 0:09:25.080 Oh? 0:09:25.200 --> 0:09:30.040 Yeah, Look, if we go back to last May at 0:09:30.200 --> 0:09:35.400 Video's conference, there were a host of AI server companies 0:09:35.440 --> 0:09:38.760 that were willing to partner with Dell, I mean, with Nvidia. 0:09:39.120 --> 0:09:41.640 So super Micro is not the only game in town. 0:09:41.679 --> 0:09:41.800 Now. 0:09:41.800 --> 0:09:45.760 There is Dell nor Hpe. There are some Taiwanese ODMs 0:09:46.400 --> 0:09:49.000 that are more than happy to assemble AI servers out there. 0:09:49.040 --> 0:09:52.360 So we've seen the because of the growing competitive pressure, 0:09:52.360 --> 0:09:56.320 we've seen margins compress as a result for the industry. 0:09:56.640 --> 0:10:01.920 So they sacrifice. It feels like this. How does the 0:10:01.960 --> 0:10:04.599 street feel about the rest of the management team, the 0:10:04.679 --> 0:10:06.480 leadership as well as the board. 0:10:07.280 --> 0:10:10.280 Well, look, the main issue in my mind was not 0:10:10.320 --> 0:10:14.280 only the CFO, but also the board. When you have 0:10:14.440 --> 0:10:18.360 the wife of the CEO as a member of the 0:10:18.360 --> 0:10:23.199 board and a seventeen year old a person on the 0:10:23.200 --> 0:10:26.720 board who's been on for about seventeen years, there's very 0:10:26.720 --> 0:10:29.720 limited independence. Quite frankly, I do think there needs to 0:10:29.760 --> 0:10:32.640 be some sort of overhaul of the board. And I've 0:10:32.679 --> 0:10:34.760 said in the past on this show, and I have 0:10:34.840 --> 0:10:37.440 written that I think the CEO may need to be 0:10:37.520 --> 0:10:40.440 promoted to a chairman role and I may need a 0:10:40.480 --> 0:10:41.040 new CEO. 0:10:41.840 --> 0:10:44.199 Now, is this what part of all of this has 0:10:44.240 --> 0:10:46.480 to do with just going from a company in the 0:10:46.559 --> 0:10:49.040 Russell to the company in the S and P and 0:10:49.200 --> 0:10:52.480 is growing super fast and having different kind of analysts 0:10:52.480 --> 0:10:54.000 coverage And how much of this was going to come 0:10:54.080 --> 0:10:54.840 kind of no matter what. 0:10:56.040 --> 0:10:59.560 Yeah, you know, that's a good question, Alex. You know, look, 0:10:59.720 --> 0:11:03.439 this used to be a Russell company or a mid 0:11:03.480 --> 0:11:07.360 cap company and it was under the radar for a 0:11:07.360 --> 0:11:09.400 lot of analysts. And now we're talking about being in 0:11:09.440 --> 0:11:11.680 the S and P five hundred index and you're gonna 0:11:11.720 --> 0:11:15.840 have a lot of magnifying glasses on the financials. And 0:11:16.080 --> 0:11:18.400 keep in mind, you know, it's only been about five 0:11:18.440 --> 0:11:22.079 to six years back where they were delicted from from 0:11:22.120 --> 0:11:25.640 the NASDAC and for them to do this again, it's 0:11:25.720 --> 0:11:29.520 quite frankly shameful in my mind. Now, if there is, 0:11:29.720 --> 0:11:32.800 if there is no wrongdoing here, shame on me, right, 0:11:33.320 --> 0:11:37.080 But you know, Fumi wants, you know, shame on them, 0:11:37.160 --> 0:11:40.920 fully twice shame on me. So you know you're gonna 0:11:40.920 --> 0:11:42.559 see a lot of scrutiny going forward. I don't know 0:11:42.559 --> 0:11:43.679 if they'll come back after this. 0:11:43.920 --> 0:11:48.480 Have they lost have they lost customers to any material basis? 0:11:49.240 --> 0:11:53.200 Nothing reported as of yet. What they said on the 0:11:53.280 --> 0:11:57.360 last earnings call was that there were a couple of 0:11:57.440 --> 0:12:02.560 customers who you know, they're trying to retain. 0:12:03.600 --> 0:12:05.640 That's a nice way of saying not yet. I think 0:12:06.200 --> 0:12:09.680 from a CEO speak, how much more? 0:12:09.720 --> 0:12:10.000 Okay? 0:12:10.000 --> 0:12:12.640 So, just pure valuation perspective, how do we know how 0:12:12.720 --> 0:12:15.000 to value this company when they're all these questions. 0:12:15.480 --> 0:12:18.600 Look at the end of the day, you know, and 0:12:18.640 --> 0:12:21.000 Paul taught me, well, it's all about cash flow and earnings. 0:12:21.640 --> 0:12:25.240 Nice John, And I don't know what. I don't know 0:12:25.320 --> 0:12:28.320 what earnings is. In our scenario model, we have a 0:12:28.360 --> 0:12:33.120 buck sixty in earnings go going forward, and hardware companies 0:12:33.600 --> 0:12:38.080 of this ilk AI companies are ranging anywhere between ten 0:12:38.080 --> 0:12:41.520 to fifteen times. So if my buck sixty is right 0:12:41.600 --> 0:12:43.839 and it's going at around let's just say at the 0:12:43.920 --> 0:12:47.560 high end, fifteen to sixteen times. No, it seems like 0:12:47.559 --> 0:12:50.520 from a valuation standpoint, it's training at the fundamentals. 0:12:51.240 --> 0:12:52.520 All right, Wujin, thank you so much. 0:12:52.559 --> 0:12:53.120 We appreciate it. 0:12:53.120 --> 0:12:57.079 Wujin Home senior technolog channels for Bloomberg Intelligence down there 0:12:57.120 --> 0:13:00.679 in Princeton, New Jersey, super Micro, they're trying to make 0:13:00.720 --> 0:13:03.720 some headway here. They let go of their CFO, but 0:13:03.720 --> 0:13:06.320 it looks like they're going to get their accounts to 0:13:06.360 --> 0:13:08.600 sign off on some of the financial statements that allow 0:13:08.679 --> 0:13:11.439 them to file their k's and queues and maybe get 0:13:11.480 --> 0:13:14.360 some of this accounting issues behind them, because, as Wujin 0:13:14.480 --> 0:13:17.079 was saying, before this accounting issue there was a high 0:13:17.080 --> 0:13:20.200 flying stock and really believed to be in discount of 0:13:20.200 --> 0:13:22.360 by the market is one of the plays for AI. 0:13:22.600 --> 0:13:27.760 Right here, you're listening to the Bloomberg Intelligence Podcast. Catch 0:13:27.840 --> 0:13:30.560 us live weekdays at ten am Eastern on FO car 0:13:30.679 --> 0:13:33.440 Playing and broud Otto with the Bloomberg Business app. Listen 0:13:33.559 --> 0:13:36.640 on demand wherever you get your podcasts, or watch us 0:13:36.679 --> 0:13:38.439 live on YouTube. 0:13:39.360 --> 0:13:41.559 Let's get more on the manufacturing data because for the 0:13:41.600 --> 0:13:45.600 first time in eight months, new orders entered expansion territory. 0:13:45.679 --> 0:13:47.520 Joining us for now is Tim Fiori, chair of the 0:13:47.520 --> 0:13:51.520 Institute for Supply Managements Manufacturing Business Survey Committee, and he 0:13:51.600 --> 0:13:54.160 joins US now Hey, Tim, what drove that expansion? 0:13:55.640 --> 0:13:56.520 A couple of things, Alex. 0:13:56.559 --> 0:13:59.600 First off, the new order number finally broke fifty. I mean, 0:13:59.600 --> 0:14:01.760 we broke fifty before in the last couple of years, 0:14:01.800 --> 0:14:04.480 but we've broken fifty here for a good reason. It 0:14:04.480 --> 0:14:06.760 feels like the man is starting to come back now 0:14:06.760 --> 0:14:09.000 that the uncertainty around the election is behind us. 0:14:09.520 --> 0:14:10.080 That's a good thing. 0:14:10.120 --> 0:14:12.400 The other thing that validates that is that our manufacturing 0:14:12.440 --> 0:14:16.520 inventory number actually rose five point five points, which would 0:14:16.520 --> 0:14:18.840 also indicate that companies are more willing to invest in 0:14:18.920 --> 0:14:21.680 working capital to get ready for the twenty twenty five 0:14:21.800 --> 0:14:22.400 business here. 0:14:22.480 --> 0:14:24.960 So overall, a good report. I think. The other point 0:14:25.000 --> 0:14:26.240 here is our employment. 0:14:26.280 --> 0:14:29.160 Although we're still destaffing, we're not destaffing as strongly. 0:14:29.600 --> 0:14:31.480 You know, we came into forty eight point one. 0:14:31.400 --> 0:14:33.800 So the three of those together got us close to 0:14:33.880 --> 0:14:37.200 forty nine. And I'll tell you if the supplier delivery number, 0:14:37.640 --> 0:14:41.200 which surprisingly actually got faster, if it had remained slower, 0:14:41.480 --> 0:14:43.320 we would have broke forty nine and gotten closer to 0:14:43.360 --> 0:14:43.760 the fifty. 0:14:43.920 --> 0:14:46.600 So overall, a good report from November. 0:14:46.600 --> 0:14:48.440 A little bit surprising, a little bit more positive than 0:14:48.480 --> 0:14:51.040 I would have thought this early, but very consistent with 0:14:51.080 --> 0:14:51.800 the fact that. 0:14:52.160 --> 0:14:54.040 Rate we're on a rate reduction cycle. 0:14:54.200 --> 0:14:56.320 The election is behind us, it's obviously going to be 0:14:56.360 --> 0:14:58.720 a positive thing for the economy, and off we go 0:14:58.800 --> 0:14:59.840 into twenty twenty five. 0:15:00.440 --> 0:15:01.520 Tim, great to have you with us. 0:15:01.560 --> 0:15:04.000 Tim Fury, chairman of the Manufacturing Business Survey for the 0:15:04.000 --> 0:15:07.920 Institute for Supply Management, zipping in here with some economic data. 0:15:07.960 --> 0:15:09.360 For word came in a little bit better and expected, 0:15:09.400 --> 0:15:10.800 so we'll take that. I wonder how much of that 0:15:11.160 --> 0:15:13.120 has to do with the election and some of the 0:15:13.440 --> 0:15:16.320 economic optimism that has felt in a lot of parts well. 0:15:16.360 --> 0:15:18.560 And also I wonder how that winds up looking as 0:15:18.560 --> 0:15:20.960 we go into twenty twenty five, because it will we 0:15:21.000 --> 0:15:23.640 see stockpiling ahead of any tariffs well, and will that 0:15:23.760 --> 0:15:26.280 change the inventory in new orders? That could be interesting 0:15:26.280 --> 0:15:26.920 to figure out too. 0:15:27.160 --> 0:15:27.800 Yep, very good. 0:15:29.280 --> 0:15:33.160 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:15:33.240 --> 0:15:36.760 weekdays at ten am Eastern on applecar Play and Android 0:15:36.800 --> 0:15:39.560 Auto with the Bloomberg Business app. You can also listen 0:15:39.680 --> 0:15:42.760 live on Amazon Alexa from our flagship New York station, 0:15:43.120 --> 0:15:45.880 Just Say Alexa, Play Bloomberg eleven thirty. 0:15:47.160 --> 0:15:48.880 Alex steal here alongside Paul Sweeney. 0:15:48.960 --> 0:15:51.240 This is Bloomberg Intelligence Radio. We bring you all the 0:15:51.280 --> 0:15:52.000 top news. 0:15:51.760 --> 0:15:54.800 And business, economics and finance and politics from our lens 0:15:54.800 --> 0:15:57.560 of our Bloomberg Intelligence folks. They cover two thousand companies 0:15:57.600 --> 0:16:00.280 in one hundred and thirty industries all around the world world. 0:16:00.320 --> 0:16:03.360 We also tap wonderful guests outside of Bloomberg Intelligence for 0:16:03.400 --> 0:16:06.720 their broader take on the market, particularly after a really 0:16:06.720 --> 0:16:07.440 stellar year. 0:16:07.440 --> 0:16:08.360 Here's some facts for you. 0:16:09.200 --> 0:16:11.920 SMP is up almost twenty seven percent on the year, 0:16:11.960 --> 0:16:16.400 the best performance through November since nineteen ninety seven, and 0:16:16.480 --> 0:16:19.600 going back fifty years, the SMP has always gained in 0:16:19.640 --> 0:16:22.440 December after rising twenty five percent or more in the 0:16:22.440 --> 0:16:24.840 first eleven months. That's a technical way of saying the 0:16:24.960 --> 0:16:26.160 rally could continue. 0:16:26.280 --> 0:16:27.200 I'll joining us more. 0:16:27.440 --> 0:16:30.440 For his take is David Awaddell, CEO and chief investment 0:16:30.440 --> 0:16:33.320 strategist at Waddell and Associates. He joins us now in 0:16:33.360 --> 0:16:35.360 the studio. David, good to see you, Thanks for joining. 0:16:35.440 --> 0:16:35.960 Good morning. 0:16:36.040 --> 0:16:36.120 Now. 0:16:36.840 --> 0:16:38.480 Is that the deal? Like, Hey, we're up just to 0:16:38.520 --> 0:16:39.040 keep buying it? 0:16:39.040 --> 0:16:39.320 Why not? 0:16:39.520 --> 0:16:41.480 I think the number of occurrence is in that sample 0:16:41.520 --> 0:16:43.720 space was rather small, but we'll go with him. Okay, 0:16:43.880 --> 0:16:47.200 I think the Santa claus rally can continue. And you 0:16:47.200 --> 0:16:51.400 know what's amazing is that earnings are accelerating from here, right, 0:16:51.520 --> 0:16:54.080 So as we look out over the next twenty four months, 0:16:54.080 --> 0:16:57.440 earnings grow fifteen percent next year, maybe fifteen percent the 0:16:57.480 --> 0:17:00.160 following year. And so with that as a backdrop, and 0:17:00.200 --> 0:17:02.520 by the way, here's a nice stat In years where 0:17:02.520 --> 0:17:05.760 there's not a recession, markets are higher eighty six percent 0:17:05.760 --> 0:17:08.840 of the time. So it bodes well for next year. 0:17:08.880 --> 0:17:10.840 And I think people are squaring that going into the 0:17:10.920 --> 0:17:11.560 end of this year. 0:17:12.040 --> 0:17:15.720 We're almost a month of past the election. When you 0:17:15.760 --> 0:17:17.639 look up the day after the election, did you and 0:17:17.680 --> 0:17:21.919 your team did you rethink maybe your outlook for asset 0:17:21.960 --> 0:17:25.080 allocation or maybe how you think about investing. Did the 0:17:25.160 --> 0:17:28.400 change in administration and the Republican controlled Congress did that changed 0:17:28.440 --> 0:17:29.200 how you looked at it? 0:17:29.280 --> 0:17:32.199 A great question. So to a certain extent, we were 0:17:32.240 --> 0:17:34.160 all so already anticipating a. 0:17:34.119 --> 0:17:35.600 Move down the cap spectrum. 0:17:35.640 --> 0:17:37.320 You know, I don't think the mag seven go to 0:17:37.359 --> 0:17:40.120 the LAG seven, but other people should participate, and they 0:17:40.119 --> 0:17:41.720 have in the second half of the year. So we'd 0:17:41.760 --> 0:17:43.920 already sort of moved down the cap spectrum, which is 0:17:44.000 --> 0:17:46.520 part of the Trump trade. The part I hadn't really 0:17:46.560 --> 0:17:49.560 anticipated was how strong the currency reaction was going to be, 0:17:49.960 --> 0:17:53.639 So our offshore holdings currently are unheedged. That's up for 0:17:53.720 --> 0:17:56.760 discussion now in terms of because the move in the 0:17:56.760 --> 0:18:00.119 currency has been dramatic, and that may be the big 0:18:00.240 --> 0:18:02.879 story for next year. Less so interest rates, since it 0:18:03.000 --> 0:18:06.520 pears that the markets like our new treasury nominee. But 0:18:07.359 --> 0:18:09.960 that's up for discussion. On the investment com me is 0:18:09.960 --> 0:18:11.119 whether it a hedge currency or not. 0:18:11.200 --> 0:18:14.560 Well, that's actually quite interesting because President elect Donald Trump 0:18:14.600 --> 0:18:16.399 has made no bones about the fact that he wants 0:18:16.440 --> 0:18:19.439 a week er dollar. But then the thread over the 0:18:19.440 --> 0:18:21.560 weekend to the bricks Nations about you has still have 0:18:21.680 --> 0:18:24.840 to use the dollar, and we know that tariffs are coming. 0:18:25.800 --> 0:18:27.400 How does that square itself? 0:18:28.000 --> 0:18:30.280 I don't know, and I keep going through that gymnastics 0:18:30.280 --> 0:18:31.920 in my head. But I'll tell you the most interesting 0:18:31.960 --> 0:18:36.560 thing to me is US imports are four trillion dollars. 0:18:36.640 --> 0:18:41.000 If Trump slaps ten percent tariff on that, you know, 0:18:41.040 --> 0:18:43.840 it's four hundred billion dollars in potential tax revenue. Now, 0:18:44.480 --> 0:18:47.159 my economics textbook says, well, that just means that ford 0:18:47.160 --> 0:18:49.679 producers are just going to raise their price is ten percent. Well, 0:18:49.720 --> 0:18:53.480 the dollars appreciated eight percent since the end of September, 0:18:53.480 --> 0:18:56.840 which almost negates that in the marketplace. So I think 0:18:56.880 --> 0:18:59.560 the interplay between the tariffs and the movement and the 0:18:59.600 --> 0:19:02.440 currents may be the most interesting thing going into next year. 0:19:02.640 --> 0:19:05.320 And again that may just be you know, state craft 0:19:05.400 --> 0:19:09.080 and jaw owning and not really policy but more negotiating positions. 0:19:09.080 --> 0:19:09.679 We won't know. 0:19:10.240 --> 0:19:12.560 But I think the currency is the most interesting. 0:19:12.960 --> 0:19:15.639 US versus non US. How do you guys position that 0:19:15.800 --> 0:19:16.600 generally speaking? 0:19:16.800 --> 0:19:20.640 Well, so we benchmark against the all world the ACLEE, 0:19:21.200 --> 0:19:24.960 and we've been tilted towards the US, but the valuations 0:19:25.000 --> 0:19:28.280 overseas are much more compelling. The earnings growth is okay, 0:19:28.720 --> 0:19:33.320