Speaker 1: From Marhart where Innovation, Money and Power Collie in Silicon Valley, NBN.
Speaker 2: This is Bloomberg Technology with Caroline Hyde and Ed Ludlow.
Speaker 3: And Caroline Heiner Bloomberg's world headquarters in New York.
Speaker 4: And Imed Lovelow in San Francisco. This is Bloomberg Technology.
Speaker 5: Coming up full coverage on the inflation print CPI coming
Speaker 5: in hotter than expected. Former US Treasury Secretary and of
Speaker 5: course Open AI board member Larry Summers joins to discuss.
Speaker 4: Plus TSMC sales surge after riding the AI chip boom.
Speaker 4: We'll break down the details and discuss intaeils on veil
Speaker 4: of its new Goudi three processor.
Speaker 5: And SpaceX's prized Starlink satellite business.
Speaker 3: We're still burning through more cash than it brings in.
Speaker 5: I'll bring you our exclusive Bloomberg reporting and so much
Speaker 5: more throughout this hour. At first, it is a macro
Speaker 5: day and the market is under pressure as once again
Speaker 5: pricing increases are still running little harder than the market
Speaker 5: wants to see. Zero point four percent month a month
Speaker 5: increase in consumer price index higher than had been anticipated,
Speaker 5: and indeed does a federal reserve therefore only get to
Speaker 5: hike what two times this year the market and indeed
Speaker 5: the faded signal three times previously. We reprice the idea
Speaker 5: that Fed hikes will be coming, and only two to
Speaker 5: two of them. We're seeing a one percent fall on
Speaker 5: the Nasdaq. More broadly, we're off of our lows, and
Speaker 5: indeed we are seeing a real pushback.
Speaker 3: In terms of the bond market.
Speaker 5: We're seeing yield spiking some eighteen basis points on the
Speaker 5: front end on the two year, but we're higher across
Speaker 5: the curve ed notably, though, we are down from those
Speaker 5: twenty one basis point move that we sought a little
Speaker 5: bit earlier, but nevertheless we are basically at the highs
Speaker 5: of this year. I'm looking at Bloomberg Dollar Index that
Speaker 5: strengthens into a far more hawkish tone. That's coming really
Speaker 5: from the market signing that the Fed doesn't and can't
Speaker 5: hike as many times as indeed cut as many times
Speaker 5: had been anticipated. We're currently up some seven tens percent,
Speaker 5: as many feel that perhaps we have to remain higher
Speaker 5: for longer, so fewer rate cuts coming will only be
Speaker 5: two that we get for the yes the rest of
Speaker 5: the year. Let's move on to have a look at
Speaker 5: what's happening in the price of bitcoin because as we
Speaker 5: see a more hawkish tone, yes, we're going to see
Speaker 5: risk assets Sellok, across the board, we're down some seven
Speaker 5: tenths percent on bitcoin as a dollar does indeed strengthen,
Speaker 5: but ed as we reprice what the Federal Reserve has
Speaker 5: to do, and indeed maybe they remain higher for longer.
Speaker 3: What are you watching on the.
Speaker 4: Micro Well, three semiconductor related names, I would say are
Speaker 4: probably standing on their own two feet in this session
Speaker 4: rather than being caught up in what's happening with the
Speaker 4: post CPI trade. Meta is actually basically flat at ten
Speaker 4: percent higher. Next generation of its Meta Training and Inference Accelerator,
Speaker 4: its own AI chip that will now be deployed, just
Speaker 4: been announced, not doing much for.
Speaker 6: The stock Intel's down two point three percent.
Speaker 4: GALDI three AI accelerator is coming in the third quarter,
Speaker 4: Intel saying that it outperforms in some training cases in
Speaker 4: Vidia's H one hundred and will be comparable to the
Speaker 4: H two hundred that stocks down to zero point three percent.
Speaker 4: Though in Taiwan's semiconductor these are the US listed shares
Speaker 4: or ADRs, They're up one percent. The March quarters saw
Speaker 4: sales jump are better than expected sixteen percent. That's the
Speaker 4: best jumping growth going back to twenty twenty two. And
Speaker 4: the story, as we've said at the top of the show,
Speaker 4: is TSMC riding the AI wave. Remember this is the
Speaker 4: world's biggest contract manufacturer of semiconductors.
Speaker 5: Yeah, let's dig into TSMC and chipsmore broadly.
Speaker 3: We're pleased to welcome rumages.
Speaker 5: Ian King and well it was a surprise, but we
Speaker 5: perhaps were anticipating a real strengthening of TSMC's business because
Speaker 5: of AI.
Speaker 7: Yeah, I mean all roads lead to Taiwan right now.
Speaker 7: If you're going to build anything, whether it's in video
Speaker 7: and their data center accelerators, whether it's AMD who are
Speaker 7: doing better in servers than Intel, who are also getting
Speaker 7: into data center accelerators, whether it's BROADC and the networking,
Speaker 7: you are going to TSMT and you are paying for
Speaker 7: their most expensive stuff.
Speaker 4: That is pretty much a shape of the industry kind
Speaker 4: of story. There are some specific names that are interesting.
Speaker 4: Meta is interesting. A story you've been writing about Evasha accounts.
Speaker 4: They've just broken the story that they're bringing in next
Speaker 4: gen MTIA chip, but this is the in house silicon
Speaker 4: they want to deploy for their own training and influenced purposes.
Speaker 6: What do you make of it?
Speaker 7: I mean, this is them basically joining that long list
Speaker 7: and lengthening list of these companies that think, hey, I
Speaker 7: can do this better in terms.
Speaker 6: Of what I could better than who.
Speaker 8: Well that's the.
Speaker 6: Problem, isn't it right?
Speaker 7: They don't want to be paying the massive premiums that
Speaker 7: they're paying to in video, but they still are. But
Speaker 7: when it comes to a general purpose processor like this one,
Speaker 7: perhaps we can do it better than Intel.
Speaker 5: Isn't it fascinating that we see this after the day
Speaker 5: after the cloud event coming from Alphabet, where that is
Speaker 5: just this ongoing tension of these big providers of cloud
Speaker 5: but also runners of AI and builders of large language
Speaker 5: models wanting to depend on in video but not too
Speaker 5: much and ultimately having to be frenemies in Is this
Speaker 5: a relationship that can continue?
Speaker 7: I mean it's been going on for years now. If
Speaker 7: you look at AWS, is the progenitor of this trend,
Speaker 7: and they have really shown that, Look, we can you know,
Speaker 7: we've got the size to make the economics work, so
Speaker 7: we will do this as much as we can. But
Speaker 7: at the same time, the actual the real silicon companies
Speaker 7: that have been around for years, are still just about
Speaker 7: in the lead. They're still able to push the performance
Speaker 7: for the limits. So that's the balance that's been struck.
Speaker 6: Let's end on Intel.
Speaker 4: Intel has introduced its latest AI accelerator, Goudi three. It
Speaker 4: will be available in the third quarter of this year,
Speaker 4: but likely not at scale, and its performance is where
Speaker 4: Pat Gelsinger has focused. What else do we need to
Speaker 4: know about Goudi three.
Speaker 7: Well, it's not so much about Gaudi three really, it's
Speaker 7: the elephant in the room, which is what in Vidio
Speaker 7: announced earlier this year, which is they'll have their new
Speaker 7: Blackwell architecture in the market probably around that time. And
Speaker 7: as Girl Single's forced to basically admit yesterday, we don't
Speaker 7: know how we'll compare to that, and the influence that
Speaker 7: people have taken from that is you won't be able
Speaker 7: to compare to that.
Speaker 3: All right.
Speaker 4: Bloomberg's Ian King, who leads ours semiconductive coverage here at Bloomberg,
Speaker 4: and he's very busy man. Now, coming up on the show,
Speaker 4: we break down today's CPI reports with former US Treasury
Speaker 4: Secretary and Open AI board member Larry Summers's coming up,
Speaker 4: Stay tuned, we'll be right back.
Speaker 6: This is Bloomberg.
Speaker 4: Coinbas and Circle has penned letters to Senators Schumer and
Speaker 4: mcconnor urging Congress to enact a comprehensive regulatory framework for
Speaker 4: stable coins and digital asset market structure. It comes a
Speaker 4: week after US Appeals Court revived a twenty twenty one
Speaker 4: consumer lawsuit against coinbase, accusing the cryptocurrency exchange of facilitating
Speaker 4: the sale of unregistered securities. Joining us now is fire
Speaker 4: Our shows ad, chief policy officer at Coinbase, on set
Speaker 4: in San Francisco. Let's start with the suit or the
Speaker 4: revival of a suit last week and just get your
Speaker 4: immediate response to it.
Speaker 8: Well, the suit you're.
Speaker 9: Talking about is a private action that has gone up
Speaker 9: to appeals, and we'll go back to the trial court.
Speaker 9: We did quite well at the trial level. Your a
Speaker 9: couple of issues of the appellate court has sent back
Speaker 9: and so we look forward to going back to the
Speaker 9: district court and settling those out. But the big issue
Speaker 9: is the litigation involving the SEC, and we feel quite
Speaker 9: good about where we are.
Speaker 2: We were able to get one of.
Speaker 9: The major pillars of the SEC's case against us knocked
Speaker 9: out at a very early stage. In the trial we're
Speaker 9: going to go to discovery, yes, and we look forward
Speaker 9: to that process.
Speaker 4: We're going to talk about your relationship with DC in
Speaker 4: the regulatory pathway. But one thing we've reflected on Bloomberg
Speaker 4: Technology in the last year is that in your industry,
Speaker 4: we continue to regulate through lawsuits.
Speaker 2: Yeah, would you.
Speaker 4: Say that that's a fair statement, and in the context
Speaker 4: of both the consumer suit and the SEC that's what's
Speaker 4: happening still.
Speaker 2: Oh absolutely.
Speaker 9: I mean, you know, in the end of the day,
Speaker 9: as a company, our goal is to get regulatory clarity.
Speaker 9: So if that's through lawsuits or otherwise, we'll take it.
Speaker 9: But the right way to regulate, particularly if the US
Speaker 9: is going to be a leader in digital asset technology,
Speaker 9: is for Congress and the administration to do what they
Speaker 9: say they want to do, which is to create comprehensive
Speaker 9: federal frameworks around crypto markets and around stable coin issuance.
Speaker 9: I think we can do it on a bipartisan basis,
Speaker 9: and we hope our letter is encouraging of that to happen.
Speaker 4: You've written this letter to Schumer and others, and McConnell
Speaker 4: and others.
Speaker 6: Why, well, we have.
Speaker 9: A shared and rejective with Treasury and law enforcement, which
Speaker 9: is to get at bad actors that are in the
Speaker 9: crypto space. So there's specific powers the Treasury should have
Speaker 9: they've asked Congress for and we're supportive of. But we
Speaker 9: also want to remind everyone of the big picture is
Speaker 9: that we need the industry to grow in the United States,
Speaker 9: reflecting US values and under US laws, and the bigger
Speaker 9: the US industry is, and the more comprehensive it is
Speaker 9: in terms of defining crypto globally, the better it is
Speaker 9: for American national security.
Speaker 4: What the lawsuits we discussed in this initiative with DC
Speaker 4: having in common is you're trying to make everyone feel
Speaker 4: better that the ghosts of your industry are behind you.
Speaker 4: Let's be honest, Sam Bankman, freed was a big story
Speaker 4: of the last week is sentencing.
Speaker 6: Do you feel like, I mean, that's your job.
Speaker 4: Are you making any progress in convincing a wide range
Speaker 4: of people that this is a cleaner industry that is
Speaker 4: making progress?
Speaker 1: Well?
Speaker 2: Absolutely.
Speaker 9: I remember much of the bad actions that we saw
Speaker 9: FDx finance others were largely offshore. So I think for
Speaker 9: a lot of people it surprises them the degree to
Speaker 9: which there is a bit of there is a dividing
Speaker 9: line between the US industry and those offshore who avoid
Speaker 9: stringent regulation. But in the end of the day, you
Speaker 9: know fifty two million Americans who have bought crypto.
Speaker 2: The American people have voted with their.
Speaker 9: Feed and their pocketbooks that they want to help update
Speaker 9: the system by participating in the crypto economy, and regulations
Speaker 9: need to keep up with them. And I think there's
Speaker 9: a bit of a gap but sometimes between policymakers and
Speaker 9: the public. And I think once people begin to see
Speaker 9: how many Americans have participated, I think they'll understand.
Speaker 4: Still, we've carried some committee hearings on this program, and
Speaker 4: we were aware of some lawmakers thoughts on your industry.
Speaker 4: If there is one area of lingering concern, it's about
Speaker 4: the use of crypto, which is a broad term now
Speaker 4: in illicit finance, finance or white collar crime. How much
Speaker 4: progress are you making we're getting DC on board to
Speaker 4: work together on that front.
Speaker 9: Well, I think Deputy Secretary i Domo said it well
Speaker 9: that the traditional financial sector is by far the larger
Speaker 9: threat to ilicted activity. They're the that's where most of
Speaker 9: the illicited activity occurs. I think they look at crypto
Speaker 9: as an area of potential future emergence as the center
Speaker 9: of listed activity, any amount of bad actions and cryptos
Speaker 9: too much. And you know, companies like ours follow all
Speaker 9: the same rules that traditional finance does. We are Bank
Speaker 9: Secrecy Act regulated and so on, and so I think
Speaker 9: those who know know that the industry in the US
Speaker 9: is a good act.
Speaker 6: It's clear what you want.
Speaker 4: But we have this House Financial Services Committee piece of
Speaker 4: legislation that patrickmc henry is trying to get through.
Speaker 6: No traction there. Why is there no traction? Really?
Speaker 9: Look, it's rare for congressihass builds through two different committees
Speaker 9: with strong bipartisan votes, and that's what we have. So yeah,
Speaker 9: I think, look, any legislation done, funding the government, funding
Speaker 9: the wars, all, that's going to be hard to do.
Speaker 9: But if you take a step back and realize that
Speaker 9: you've got Democrats and Republicans have come together who understand
Speaker 9: we need digital assets in the United States and they
Speaker 9: voted for it, I think that's exciting.
Speaker 4: Fire our Show's chief policy officer over at coinbas great
Speaker 4: discussion here in some this morning.
Speaker 6: Caroline.
Speaker 5: Yeah, we've got to turn our attention back to the
Speaker 5: macro picture right now that CPI print hotter than expected
Speaker 5: third straight time than inflationary pressures are coming in faster
Speaker 5: than expected month and month increase of zero point four percent.
Speaker 5: Now this is affecting the market check out where we're
Speaker 5: currently seeing bond markets yields the highest so far this year,
Speaker 5: yields up well, I mean, significantly higher when you're looking
Speaker 5: at a two year yield some eighteen basis points.
Speaker 3: Some of the key outperformers.
Speaker 5: Meta still manages to outperform on the day on its
Speaker 5: AI news. Intel though drag lower as we see chip
Speaker 5: makers more broadly sinking. But I'm looking at the moment
Speaker 5: Bloomberg Dollar Index currently up some eight tenths of a percent. Now,
Speaker 5: this is as we see the Bloomberg Dollar Index actually
Speaker 5: at its highest since November of last year. So dollar
Speaker 5: highest since we've seen this year. Yields highest since we've
Speaker 5: seen this year. NASDAK currently off by more than percentage point.
Speaker 5: But put it into context, we're still near the highest
Speaker 5: for equity benchmarks that we've seen on But what is
Speaker 5: the takeaway on the CPI print? What does the Fed
Speaker 5: do in terms of rate cuts? Is June off the table?
Speaker 5: So much more to discuss next with David.
Speaker 10: For our Bloomberg audiences worldwide. I'm David Western. We're joined
Speaker 10: right now by Larry Summers of Harvard, a very special
Speaker 10: contributor here on Wall Street Week. So Larry, great to
Speaker 10: have you with us on short notice. We've been talking
Speaker 10: on inflation on Wall Street Week for some time now.
Speaker 10: I know you're not hoping for more inflation, but you've
Speaker 10: been warning about it. What do you make of the
Speaker 10: numbers we sow today?
Speaker 8: I was not hugely surprised by the numbers.
Speaker 1: In an economy that's growing faster than potential, with an
Speaker 1: unemployment rate that has a three handle, in the presence
Speaker 1: of massive and growing budget deficits and epically easy financial conditions,
Speaker 1: the idea that inflation would remain robust or even accelerate
Speaker 1: should not be a surprise to anyone.
Speaker 8: And that's what this data suggests.
Speaker 1: It was not me or some outside observer who emphasized
Speaker 1: the concept of supercore inflation, that is, taking out the
Speaker 1: transitory stuff and also taking out housing, and by that measure,
Speaker 1: the inflation is running an above a six percent rate,
Speaker 1: and the three month rate exceeds the six month rate,
Speaker 1: and the six month rate exceeds the one year rate.
Speaker 1: This confirms the idea that the neutral rate is way
Speaker 1: above the two point six percent level that the FED
Speaker 1: has been using as a north star. In my view,
Speaker 1: puts back on the table. It is still not what
Speaker 1: I would expect, But you have to take seriously the
Speaker 1: possibility that the next rate move will be upwards rather
Speaker 1: than downwards, and anything could happen. Markets could crash, the
Speaker 1: indicators could turn down.
Speaker 8: But on current facts, a rate cut.
Speaker 1: In June, it seems to me would be a dangerous
Speaker 1: and egregious error, comparable to the errors the FED was
Speaker 1: making in the summer of twenty twenty one when it
Speaker 1: just didn't get the thread on inflation.
Speaker 10: Larry, you mentioned the supercore that, as I recalled, shared J.
Speaker 10: Powellmong others has talked about. Specifically, it raises the issue
Speaker 10: of are there aberrations you've seen in these data. We
Speaker 10: hear some people saying, wait a second, this is really
Speaker 10: housing and auto insurance. There are a couple of outliers,
Speaker 10: and that the rest is in this trouble saying is
Speaker 10: that right?
Speaker 8: I don't think so.
Speaker 1: Look, you can always find particular indicators that are up
Speaker 1: or down, but when you're making up.
Speaker 8: A story month after month.
Speaker 1: That's a problem when commodity prices are biking and those
Speaker 1: are being taken as a market indicator of inflation expectations,
Speaker 1: when break evens have risen, When the political economy of
Speaker 1: the country is heavily about inflation, trying to dismiss it
Speaker 1: on an indicator by indicator basis is an odd thing
Speaker 1: to do. Look, it is a technical subject, the price
Speaker 1: indices for housing. I don't think there are many Americans
Speaker 1: who feel like housing is becoming lots.
Speaker 8: More affordable these days. They really don't.
Speaker 1: And so to argue that somehow housing isn't a source
Speaker 1: of inflation psychology seems to me to be quite a surprising.
Speaker 8: View to take.
Speaker 1: Look why is why are we thinking about rate cuts
Speaker 1: when the economy is below what the FED thinks is
Speaker 1: the normal unemployment rate, when the economy is growing faster
Speaker 1: than what the FED thinks is potential, and when inflation
Speaker 1: is unambiguously above target and plausibly accelerating. The FED has
Speaker 1: once again, in important respects, lost its way over the
Speaker 1: last six or nine months. In the same way, making
Speaker 1: policy and making forecasts based on hope rather than on
Speaker 1: a hard headed look at reality. I think that the
Speaker 1: FED did a good job of cleaning up on the
Speaker 1: errors they had made in twenty twenty one, and I
Speaker 1: think it's.
Speaker 8: Reasonable to think.
Speaker 1: That they will pivot off the errors they made last
Speaker 1: fall that led markets to be ludicrously expecting six cuts
Speaker 1: this year, and I'm hopeful that that will happen.
Speaker 8: But I think the FED.
Speaker 1: Does need to learn some important lessons from this experience.
Speaker 1: Let me say one other thing if I could, David,
Speaker 1: there's been a lot of talk about nineteen ninety five
Speaker 1: as some kind of useful analogy.
Speaker 8: I think not.
Speaker 1: The unemployment rate was five point six percent in nineteen
Speaker 1: ninety five. Equity markets, as shown by what shown by
Speaker 1: the fact that they more than.
Speaker 8: Doubled subsequently, were not frothy.
Speaker 1: Particularly in nineteen ninety five, we had just come off
Speaker 1: a major program of deficit reduction rather than being in
Speaker 1: a program of unprecedented fiscal expansion. And we have really
Speaker 1: clear evidence of a kind we don't yet have now
Speaker 1: of productivity acceleration, and interest rates.
Speaker 8: Were higher than they are right now.
Speaker 1: So the case that somehow this moment looks like nineteen
Speaker 1: ninety five and that's a reason for cutting is something
Speaker 1: that I find inexplicable. Another thing that it seems to
Speaker 1: me is problematic is the notions that are increasingly being.
Speaker 8: Brooded about that the FED is going to slow QT.
Speaker 1: Of course, one of the things that today's movement and
Speaker 1: interest rates, the interstrates that interest rates moves that we've
Speaker 1: seen over the last month mean is that the Fed's
Speaker 1: efforts to do parry trades in the bond market have
Speaker 1: proven to be extremely expensive for taxpayers. And the length
Speaker 1: of time for which the FED is going to be
Speaker 1: showing annual losses or on a mark to market basis
Speaker 1: large balance sheet losses that looks like it's longer than
Speaker 1: we thought some months ago. So we need a FED
Speaker 1: that stays focused on what is very clearly the focus
Speaker 1: of the American people, which is price stability. And I'm
Speaker 1: afraid there are some signs that in the last few
Speaker 1: months they have lost their focus in favor of more
Speaker 1: ambitious economic theories about preempting.
Speaker 8: Slack that's not happening. Were some such Lary, You're.
Speaker 10: Always the first to warness that things can change, So
Speaker 10: we can't predict what's going to happen in the fall
Speaker 10: and into next year. You've said you think it's definitely
Speaker 10: a mistake for the Fed to cut in June. But
Speaker 10: given where we are now, what you know right now,
Speaker 10: if you had to make a decision, are we going
Speaker 10: to see any cuts this year? And what is the
Speaker 10: likelihood of actually an increase?
Speaker 1: Just to quibble with what you said, I said, on
Speaker 1: current facts, I see no case for.
Speaker 8: A cut in June. But facts can change.
Speaker 1: Inflation indicators could come in much lower than most of
Speaker 1: us are expecting.
Speaker 8: The economy could turn down.
Speaker 1: So never make an absolute judgment about policy several months
Speaker 1: from now, because all kinds of surprises could could happen.
Speaker 1: I think the odds are that the next rate cut
Speaker 1: will be down rather than up. But I think you
Speaker 1: have to assign a greater probability to the next rate
Speaker 1: cut rate move being up than you did.
Speaker 8: Several months ago.
Speaker 1: I don't know whether it's fifteen percent or it's twenty
Speaker 1: five percent, but somewhere in that range is what I
Speaker 1: would say for the next rate cut rate being up.
Speaker 1: I still think the odds probably favor another rate cut
Speaker 1: this year, but not by very much, and not by
Speaker 1: as much as is priced into the markets, even after
Speaker 1: the adjustment that we have seen. So reality markets are
Speaker 1: adjusting to reality. The FED is adjusting to reality, but
Speaker 1: I think the process is slower than would be ideal.
Speaker 10: Laurie, let me ask you what, for someonest be the
Speaker 10: scary question, which is, does the FED have the power
Speaker 10: to get their arms around inflation at this point through
Speaker 10: monetary policing or are there other factors that are larger
Speaker 10: than what they can really effect over the shorter medium term.
Speaker 1: I think FED has considerable influence over inflation expectations, which
Speaker 1: are an important determinant of subsequent inflation.
Speaker 8: I think monetary restraint does.
Speaker 1: Influence the economy, which feeds through into the inflation process.
Speaker 8: But gosh, we ought.
Speaker 1: To be doing everything we can on the supply side.
Speaker 8: Anytime anybody sees.
Speaker 1: A bottleneck, we ought to be going after it.
Speaker 8: I am all for.
Speaker 1: Effective competition policy that restrains price increases. I think the
Speaker 1: most important competition policy is maintaining economic openness and allowing
Speaker 1: competition for US goods from less expensive foreign goods. That's
Speaker 1: the most important competition policy. That's the most important. Anti
Speaker 1: gouging policy, that's the most important. Contain excessive profit margins policy,
Speaker 1: And so I'm sorry to see the extent of bipartisan
Speaker 1: consensus in favor of policies that are relatively protectionist. Do
Speaker 1: people really think there is an overwhelming danger that we're
Speaker 1: going to have excessive production of batteries in the world
Speaker 1: given climate change? Do people really think there's an overwhelming
Speaker 1: danger that we're going to elect we're going to have
Speaker 1: an excessive effort to use solar power?
Speaker 8: If not, I worry in inflationary.
Speaker 1: Times about policymakers decrying the growth of capacity, and there's
Speaker 1: been a certain amount of that on Secretary Yellen's trip
Speaker 1: to Shida and in US rhetoric on a bipartisan basis.
Speaker 8: So, yes, we should complement the FED with.
Speaker 1: Fiscal policies that are oriented towards restoring credibility, recognizing the
Speaker 1: defense spending that's going to need to come and allowing
Speaker 1: for it, And with microeconomic policies that are competition promoting,
Speaker 1: the most important of which is open to the global economy,
Speaker 1: with respect to goods, with respect to labor, with respect
Speaker 1: with respect to the flow of capital.
Speaker 10: So, Larry, you mentioned nineteen ninety five in productivity, is
Speaker 10: there some hope perhaps that we can get some relief
Speaker 10: from inflation because of a general of AI you're on
Speaker 10: the board of open AI. We had Jamie Dimond this
Speaker 10: week come up with his letter saying it's like the
Speaker 10: steam engine you at one point, I think that it
Speaker 10: was like fire. Is there a prospect that we could
Speaker 10: get some downside risk, as it were to inflation from
Speaker 10: general of AI.
Speaker 1: Any it's a question about horizon, Shavid, And again, I
Speaker 1: never make completely confident predictions, because the one thing we
Speaker 1: know about the economy is that it surprises us. I
Speaker 1: think that's potentially a very important factor if you look
Speaker 1: three or four years out. I would be very surprised
Speaker 1: if it was an important factor in the next year
Speaker 1: or two. And I think the fact that open AI
Speaker 1: or not open AI artificial intelligence is a potential competitor
Speaker 1: for commentators leads this to kind of have more salienc
Speaker 1: in commentary than it otherwise would. So yes, for the
Speaker 1: long run, I think this could be a huge event
Speaker 1: for inflation, a huge event for productivity growth. But I'd
Speaker 1: be pretty surprised if the effects were really large in
Speaker 1: the short run.
Speaker 10: And I thank you for mentioning commentators and not interviewers
Speaker 10: in that sense. I really appreciate that. One last question
Speaker 10: is important to Bloomberg audiences. In particular, financial conditions. You
Speaker 10: referred to the signaling of Cut's last fall. Financial conditions
Speaker 10: have been sort of off to the races here. To
Speaker 10: what extent do you think financial conditions played a significant
Speaker 10: role in these numbers we got today?
Speaker 8: Well, I think there's no question that.
Speaker 1: The twelve trillion dollars of wealth that have been created
Speaker 1: have contributed to greater spending, which has contributed to inflationary pressure.
Speaker 1: I think the availability of credit has had similar kinds
Speaker 1: of effects, So I don't I think it's hard to
Speaker 1: quantify precisely, but I think there's no question.
Speaker 8: That financial conditions have had a role.
Speaker 1: But look, David, sometimes the indicators or different indicators are
Speaker 1: pointing in different directions. This time, activity is super fast,
Speaker 1: Unemployment is very low, fiscal is expansionary, financial conditions are
Speaker 1: very loose and on the ground, inflation measures are above
Speaker 1: target and possibly accelerating. What is the theory of a
Speaker 1: ring cut into that configure that configuration right now? I
Speaker 1: don't think there is one, and I think that the
Speaker 1: FED has a communication challenge in keeping it on the table,
Speaker 1: because again, anything can happen. It can be financial accidents,
Speaker 1: there can be sudden changes towards reduced employment.
Speaker 8: There can be global developments, so never rule anything out.
Speaker 1: But I think there is a communication challenge around the
Speaker 1: fact that in the main ste dream scenario, we do
Speaker 1: not need.
Speaker 8: Rate cuts right now.
Speaker 10: Larry, thank you so much for taking time out of
Speaker 10: a busy data is found this today. That's Larry Summers
Speaker 10: of Harvard and now back to you.
Speaker 6: All right, thanks to David Western. Larry Summers.
Speaker 4: Let's get a quick check in on the markets NASDAK
Speaker 4: one hundreds where I'm looking, because throughout the course of
Speaker 4: that interview, we actually paired declines on the Nasdaq one
Speaker 4: hundred from a session low of one point three percent
Speaker 4: to around one percent. We're treading water at the start
Speaker 4: this week until we got that hot CPI print, not
Speaker 4: seeing any movement at least at the short end of
Speaker 4: the curve in the bomb market. The CPI front and center.
Speaker 4: In terms of the news cycle, we continue to look
Speaker 4: at individual names AI and the impact of infrastructure build out,
Speaker 4: which Larry Summers was talking about a little bit. There
Speaker 4: continue to be stories in terms of the individual names
Speaker 4: that we're looking at. Three kind of main stories in
Speaker 4: the chip space today. If the director switches up the
Speaker 4: board and we get to them, thank you very much.
Speaker 4: Alphabet shares down one percent. They held their Google Cloud
Speaker 4: Next event where they basically demonstrated that Gemini Pro one
Speaker 4: point five generation model is ready for the enterprise use case,
Speaker 4: and we dug into that throughout the show. Intel continues
Speaker 4: to be lower two point four percent, Galdi three coming
Speaker 4: in the third quarter, the market's not cheering it much,
Speaker 4: and Meta up half a percentage point introducing their own
Speaker 4: AI accelerator or the current generation they're starting to deploy.
Speaker 4: That share has pushed higher since that news came out.
Speaker 4: Those are the public markets. Let's talk a little bit
Speaker 4: about the private markets. SpaceX's prized Starlink satellite business is still.
Speaker 6: Burning through a lot of cash.
Speaker 4: Sources familiar with the finances of the world's most valuable
Speaker 4: startup say that Starlink has lost at times as much
Speaker 4: as four hundred and fifty dollars on each of the
Speaker 4: millions of ground terminals that it ships, and that's cast
Speaker 4: some doubt on claims by CEO Elon Musk and the
Speaker 4: company's top brass that the business is in quote profitable trajectory.
Speaker 4: But could Starlink be turning a corner carrot.
Speaker 5: Well, this is where I ask you for your expertise
Speaker 5: on this. The joy of being a privately held company
Speaker 5: is you don't have to be making public statements about
Speaker 5: your finances.
Speaker 3: But people are interesting.
Speaker 5: Because this is a company that probably has to raise
Speaker 5: money in the private field. So ultimately, what is revenue
Speaker 5: doing at the same time as profitability is still not
Speaker 5: quite less, So.
Speaker 4: We know that this year is a key year where
Speaker 4: revenue from starlink, you know, consolation based internet, outpaces the
Speaker 4: launch business.
Speaker 6: But I think what sources are.
Speaker 4: Telling us is that SpaceX can be quite selective in
Speaker 4: the financials it puts forward when they do a funding
Speaker 4: round or investors ask. The main thing is that they've
Speaker 4: zeroed in on manufacturing, just like Tesla did, to improve
Speaker 4: the manufacturing process for both the satellites themselves and the
Speaker 4: ground receivers. Now the margins on Starlink are improving, and
Speaker 4: what I heard from sources is that at the end
Speaker 4: of twenty twenty three they kind of hit this profitable
Speaker 4: metric and that's continued in a more meaningful way into
Speaker 4: twenty twenty four.
Speaker 5: And it is notable that I think it's a great
Speaker 5: story that You've written with colleagues car Porter Lauren Gush
Speaker 5: as well. But really the CFO isn't hinting that there's
Speaker 5: going to be an IPO anytime soon. But you want
Speaker 5: to be seeing ultimately when starlink is such a lynch
Speaker 5: pin for SpaceX in terms of all they.
Speaker 3: We're thinking of, what's separating it off as a business.
Speaker 4: Yeah, the simple equation is this, the launch and Starlink
Speaker 4: units need to be profitable, and that profit will fund
Speaker 4: development of Starship, and Starship will get humankind to Mars.
Speaker 6: Let's keep the conversation going.
Speaker 4: Joining us now for more is Andrea Lamari, a managing
Speaker 4: partner at Quatro Capital but also transitioning general partner at
Speaker 4: Manhattan Venture Partners. That's a venture firm that is invested
Speaker 4: in SpaceX across multiple funds under their management. You have
Speaker 4: invested in track this company for a long time. How
Speaker 4: zeroed in a you on Starlink and Starlink's profitability.
Speaker 11: Thank you, Ed and team. So I would say overall,
Speaker 11: as we.
Speaker 12: Look at SpaceX valued at the north of one hundred
Speaker 12: and eighty billion dollars at this point in time and
Speaker 12: has deployed fifty six hundred active satellites, which is just tremendous,
Speaker 12: so obviously below the signaled target of tens of thousands
Speaker 12: of satellites that they've said that.
Speaker 11: They can achieve.
Speaker 12: Overall, what we have said is that that profitability margin
Speaker 12: can increase, but the money that they spend manufacturing with
Speaker 12: satellites and spending money on.
Speaker 11: Ground terminals has to continue decreasing.
Speaker 12: And with that being said, we know that Starlink will
Speaker 12: always be this amazing harbinger for all the missions and
Speaker 12: launches that they're doing.
Speaker 3: And we saw this week.
Speaker 12: That SpaceX continues to build great momentum with some of
Speaker 12: their customers with their bandwagon test flights, and you know
Speaker 12: they are intending to send payloads to Lark with all
Speaker 12: of their customers. But with Starlink, they have to really
Speaker 12: build that customer trust and momentum and continue reducing latency.
Speaker 12: Otherwise there is a world where they do see that
Speaker 12: consumer trust diminish.
Speaker 5: And what about trust of you, the people writing the checks.
Speaker 5: I'm really interested is the when you've been writing checks.
Speaker 5: At the very beginning of such a business, it was
Speaker 5: all about just making the vision of reality, let alone
Speaker 5: thinking about profitability. But when we start to see the
Speaker 5: nuances profitable territory. Does it worry you when actually perhaps
Speaker 5: some of them here and then now isn't living up
Speaker 5: to those sorts of statements.
Speaker 12: I would say that overall, you know, there's been tremendous
Speaker 12: gains happening at SpaceX for what they've achieved in such
Speaker 12: a short period of time.
Speaker 11: We have a lot of trust in SpaceX because.
Speaker 12: You know, Elon at the Helm has always been known
Speaker 12: to make boisterous statements around the nature of the profitability
Speaker 12: and growth of these companies. But the proven momentum in
Speaker 12: the trust that we have is own by way of
Speaker 12: the various components of customers across all of Baths's.
Speaker 11: Lines of business.
Speaker 12: And with that being said, with Starlink, we have to
Speaker 12: see that they continue expanding their coverage. As we know
Speaker 12: there's a lot of entrance coming into this space. Do
Speaker 12: what Airline Zion is doing with their Kuyper project for example,
Speaker 12: right of course on a much smaller scale, and there's
Speaker 12: going to be a lot of work done. That took
Speaker 12: SpaceX quite a long time to get to the point
Speaker 12: where it.
Speaker 11: Is with its Starlink deployment.
Speaker 12: But overall, I would say SpaceX has such a leg
Speaker 12: up against its competition, both domestic and international, and it's
Speaker 12: really with Elon at the helm.
Speaker 5: Or indeed it's Gwinn shot well as well, who's really
Speaker 5: sort of operating at this business.
Speaker 3: The SpaceX president.
Speaker 5: She had a great line on a podcast recently saying
Speaker 5: there's probably one hundred and fifty rocket customers out there
Speaker 5: on the planet, but there's actually eight billion potential.
Speaker 3: Customers of Starling.
Speaker 5: What does Starlin need to do not only in terms
Speaker 5: of revenue, profitability, but actually just ease of use and
Speaker 5: reliability to make sure that we start to see more
Speaker 5: than the common use device.
Speaker 12: So overall, they have to continue optimizing satellite positioning. With
Speaker 12: that reliability, they have to improve their ground infrastructure. They
Speaker 12: have to address those technical issues promptly and be reliable
Speaker 12: with their customer service. I do say that Amazon, you know, overall,
Speaker 12: has had a tremendous customer service arm and as the
Speaker 12: Kuiper project comes in as a new entrant in this space, overall,
Speaker 12: we have to see that SpaceX can keep up with
Speaker 12: that reliability. And furthermore, with Starlink, they have to continue
Speaker 12: its spinning coverage. It involves targeting specific regions that still
Speaker 12: have satellite deployments that are necessary and marketing those app
Speaker 12: efforts to potential subscribers. And we know that as Amazon
Speaker 12: continues to encroach in the space, they have a captive
Speaker 12: audience of potential customers, which will mean increasing competition across
Speaker 12: the board.
Speaker 4: Uh, Andreas, SpaceX is fantastic company. The starlink technology we've
Speaker 4: just discussed endlessly, and the financials are what they are.
Speaker 4: You know they will be profitable, they won't be and
Speaker 4: we will get human clind to mars on starship maybe.
Speaker 4: But you're an investor in SpaceX or Manhattan Benure Partners,
Speaker 4: is there's intense interest? How difficult is it to get
Speaker 4: hold of SpaceX and say I want to invest in
Speaker 4: your company? What is the competition like to have a
Speaker 4: piece of that pie?
Speaker 11: So it's a fantastic question, ed.
Speaker 12: I would say it's a very competitive cap table right
Speaker 12: the equity ledger of SpaceX and getting involved as an investor,
Speaker 12: you have to prove to be a value ad investor
Speaker 12: and be willing to stay with.
Speaker 11: The company for a long duration.
Speaker 12: Overall, And with that being said, because of the enormous
Speaker 12: amount of capital and the billions that SpaceX is ready
Speaker 12: to date, you have to prove that if you want
Speaker 12: to be an investor in SpaceX, you're willing to also
Speaker 12: deploy quite.
Speaker 11: A large check of a private market INA.
Speaker 12: And so with that being said, Basic has been quite selective,
Speaker 12: and you will see that the newer investors that have
Speaker 12: joined the cap table are ones that can really weigh
Speaker 12: into the company now with a large check B value
Speaker 12: add and then most likely be the same investors who
Speaker 12: will anchor the company going into the IPO and then
Speaker 12: continue investing once the company goes public if and when
Speaker 12: that happens.
Speaker 4: Quatro Capital Managing partner Andrea Lamari Grades, catch up, grades,
Speaker 4: Talk SpaceX, Thank you. Toyota Ventures has just raised an
Speaker 4: additional three hundred million dollars for its venture fund, one
Speaker 4: hundred and fifty million for its Frontier Fund two and
Speaker 4: one hundred and fifty million for its Climate fund too.
Speaker 4: Joining us how to discuss where they'll be investing is
Speaker 4: the founder and general partner of Toyota Adventures, Jim Adler.
Speaker 4: And Yes, Toyota Adventures is the early stage venture capital
Speaker 4: arma of Toyota, which has eight hundred million dollars in
Speaker 4: assets under management. I know Toyota, I've been talking a
Speaker 4: lot about Toyota for the last year in the context
Speaker 4: of EV or no EV.
Speaker 6: This is more money for you to play with.
Speaker 4: How involved is the mothership in Japan in each investment
Speaker 4: opportunity that you look.
Speaker 13: At, Well, thanks for having me at Caroline. I think
Speaker 13: that our mission is to discover what's next for Toyota,
Speaker 13: So there is a bit of a decoupling between what
Speaker 13: the corporate parent is doing.
Speaker 6: We view.
Speaker 13: Toyota as our limited partner. We are an a venture
Speaker 13: capital fund and the startup is our customer, and so
Speaker 13: there is a I think a healthy decoupling between what
Speaker 13: we're doing, which is investing for the very long term.
Speaker 13: The good news for us is that we have a
Speaker 13: very engaged, thoughtful, patient limited partner in Toyota, and they
Speaker 13: have continue to support us and our connection with the
Speaker 13: startups that are bringing the disruptive innovation to the marketplace.
Speaker 4: A lot of the legacy OEMs have a venture on
Speaker 4: work's in a very similar way and they're looking for
Speaker 4: something that adds in some way. But within that it's
Speaker 4: a huge range software, battery technology. Toyota is still very
Speaker 4: much focused on hydrogen as I understand it, just outline
Speaker 4: where you'll be looking.
Speaker 13: So we as you mentioned, we have two funds, a
Speaker 13: Frontier Fund which is focused on AI of course, autonomy, mobility, robotics,
Speaker 13: a little fintech, and then our Climate Fund, which is
Speaker 13: focused on carbicaps and storage, renewable energy battery electric, hydrogen
Speaker 13: as you mentioned, and even far reaching technologies like nuclear fusion.
Speaker 13: So we are really discovering what's next for Toyota and
Speaker 13: looking in places that are often not looked at by
Speaker 13: a big fortune global one hundred company.
Speaker 3: A lot of robotics in there.
Speaker 5: When I'm looking at portfolio companies, seventy five global startups already, Jim,
Speaker 5: we're not exits.
Speaker 3: You've had one. Jobe in particular, was a high point.
Speaker 3: I'm sure.
Speaker 5: Are you anticipating that you're going to be able to
Speaker 5: see them reap some rewards from prior investments this year?
Speaker 13: Well, Caroline, we do operate like an institutional venture capital fund,
Speaker 13: so financial returns are important. We are structured along a
Speaker 13: decade long GPLP term, so we do expect to see
Speaker 13: financial returns along the way.
Speaker 6: We are patient.
Speaker 13: We work with our startups every day to see them
Speaker 13: come up with their innovations, bring them to market. Grow
Speaker 13: their valuations and ultimately end in an exit that works
Speaker 13: for them, the other investors, and of course us as
Speaker 13: we count ourselves among our co investors.
Speaker 5: How competitive is out there at the moment in the
Speaker 5: VC space, Jim?
Speaker 13: Briefly, it depends on the sector. Of course, we tend
Speaker 13: to like to hit them where they ain't. We look
Speaker 13: it into deep tech and places where we think the
Speaker 13: world is going. Because we are so patient, we can
Speaker 13: actually look in places that are deep tech that are
Speaker 13: not necessarily running your typical SaaS valuation ramp, but might
Speaker 13: be popping being very flat and then popping in valuation
Speaker 13: as huge milestones are hit in certain areas like AI.
Speaker 13: Of course things are quite competitive.
Speaker 5: Started your career as a rocket engineer. Fascinating to see
Speaker 5: how you've now built into the VC arena with Twyota Ventures.
Speaker 3: Jim Adler, We thank you so much for your time.
Speaker 5: Christie's Venture, it's now reached ten investments since it's launched
Speaker 5: back in July twenty twenty two by adding two new
Speaker 5: companies to its portfolio, Conserve and Mentage.
Speaker 3: We're here now with none.
Speaker 5: Other than Christy's Ventures global head Tovang Zaka, along with
Speaker 5: Midget founder Nick Adler, And this is what's so interesting.
Speaker 5: You're investing in areas where sort of art meats technology,
Speaker 5: but also where fashion meets technology. Talk us a little
Speaker 5: bit about some of these investment rounds and how competitive
Speaker 5: it is in your space, the moment of vang.
Speaker 14: Thank you again, Caroline for having it's always a pleasure
Speaker 14: to talk here. Ten investments for us as a milestone,
Speaker 14: but as you know, we invest in four areas of technology,
Speaker 14: starting with fintech because while people think things like buy now,
Speaker 14: pay later as a huge investment, we've been doing that
Speaker 14: for two hundred and fifty seven years as an art
Speaker 14: company Web three, which is something we started pioneering in
Speaker 14: digital art two years ago. AI more recently, and finally
Speaker 14: what I'm calling human computer interfaces or hardware, because I
Speaker 14: think while chip's at a macro layer quite interesting, and
Speaker 14: we talk about Nvidia, chips also connect people in very
Speaker 14: interesting ways. Mintage is one example here today, so is
Speaker 14: Conserve works with institutions like MoMA and the Smithsonian Libraries
Speaker 14: and Archives to put chips behind paintings to track how
Speaker 14: their conservation is progressing. Are they having some sort of humidity?
Speaker 14: Are they sort of having some cracks developed, like all
Speaker 14: those things are important, and chips we don't think about
Speaker 14: in those fashions, but chip chips are a very interesting
Speaker 14: human computer interface, So that's an interesting area for.
Speaker 8: Us to invest in.
Speaker 3: Talk about NFC chips in your vintage collection? Why, Nick,
Speaker 3: What does it bring?
Speaker 2: Well? Vintage is an incredible category.
Speaker 15: It's something that my world expanding when I learned about it,
Speaker 15: whether it's the provenance of a product of an item,
Speaker 15: the rarity or the traits. I've been a collector of mintage.
Speaker 15: My partnershop Withtherspoon's very well known as a designer someone
Speaker 15: who works with vintage. So when he and I connected
Speaker 15: with with our third partner, Brendan Ruster from Adidas, we
Speaker 15: saw this world where people wanted to know more about
Speaker 15: these vent items. Vintages twenty twenty four is a two
Speaker 15: hundred and fifty billion dollar addressable market. Ten percent of
Speaker 15: retail right now is secondhand kids right now, they want
Speaker 15: to wear it, they want to flex it, and they
Speaker 15: want to learn more about it.
Speaker 2: And we want to add a chip to it when
Speaker 2: you tap it and you can learn all about it.
Speaker 3: But also you're on the intersection of web three as well.
Speaker 5: I mean, you've got such an interesting career background and history,
Speaker 5: haven't been in law having set up so film festivals,
Speaker 5: having work very closely still do with snoop for example,
Speaker 5: who is big in the NFT space? Yeah, why play
Speaker 5: NFC chips rather than more broadly Web three.
Speaker 2: Well, we really started in Web three.
Speaker 15: We started by thinking about how could these physical items
Speaker 15: manifest themselves in the digital world. And we did that
Speaker 15: through thinking about, you know, designers working to design digital
Speaker 15: NFTs as clothing, how could they work with games like
Speaker 15: Call of Duty or or GTA.
Speaker 2: So that's where we started, and the more.
Speaker 15: We explore digital we realize that attaching digital physical is
Speaker 15: one of the beautiful things that blockchain offers.
Speaker 2: So this has just opened up a whole world for
Speaker 2: us to exp and.
Speaker 5: Therein lies the underlying technology, the power of it. But
Speaker 5: we're now back in a bit of a hype cycle
Speaker 5: when it comes to crypto, certainly in a hype circle
Speaker 5: when it comes to AI.
Speaker 3: How do you see the wood for the trees where
Speaker 3: the good investments?
Speaker 14: I think that's the million dollar question, right, No fun intended.
Speaker 2: We look at it.
Speaker 14: From two barometers. Of course, when we started ventures, we
Speaker 14: had a dual mandate. One was potential for returns and
Speaker 14: looking at where the traditional venture play would look like.
Speaker 2: But we also try to.
Speaker 14: Look at investments we make as potential avenues of bringing
Speaker 14: new capabilities to Christie's. Can we bring new technologies to
Speaker 14: Christi's similar to what our previous host our guest was
Speaker 14: talking about with respect to Toyota, But in our case,
Speaker 14: out of the ten investments, five of them we've actively
Speaker 14: used and deployed inside Christie's, which is a very different
Speaker 14: way of operating. We can actually test these technologies, bring
Speaker 14: them to customers, give feedback. You saw Nick bring some
Speaker 14: of his technologies to the Christie's Art plus Tic Summit
Speaker 14: last year, which we hope to do again this year,
Speaker 14: and I think that gives us a real pulse of
Speaker 14: the technology. With just deploying capital, we also deploy resources
Speaker 14: behind it.
Speaker 5: Fascinating how your relationship built around that particular event be
Speaker 5: on tech Summit. We thank you, Christy's Ventures Global head
Speaker 5: to Bang Phaka and Mintage founder Nick Adler go so
Speaker 5: fast ed.
Speaker 3: That's it for Blueberg Technology.
Speaker 4: Recap, the podcast's greatest CPI print of our lifetime.
Speaker 6: Some were saying, this is Bloomberg