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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Bloomberg

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Speaker 1: Daybreak Asia podcast. I'm Doug Krisner. The equity market finished

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Speaker 1: at record highs today despite a pickup in underlying US inflation.

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Speaker 1: In the month of July, the Core consumer Price Index

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Speaker 1: was up month on month by three tenths of one percent.

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Speaker 1: Services prices rose more than the goods that may have

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Speaker 1: been impacted by those tariffs, and that news helped U

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Speaker 1: support the price of bitcoin. In a moment, we'll take

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Speaker 1: a look at the crypto space. I'll be joined by

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Speaker 1: Peter Chung, head of research at Presto, but we begin

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Speaker 1: here in the States. Joining me now is Charles Lieberman.

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Speaker 1: He is co founder also the CIO at Advisor's Capital Management.

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Speaker 1: Charles is on the line from just outside New York City. Chuck,

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Speaker 1: thank you so much for making time to chat with me.

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Speaker 1: What did you make of the CPI data.

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Speaker 2: Well, I thought it was a bit of a relief

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Speaker 2: for the market. Investors were kind of nervous that the

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Speaker 2: news would be worse, that some of the tariffs would

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Speaker 2: flow through very visibly into the CPI data. Fortunately, the

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Speaker 2: impact looks like it was relatively modest. I think it

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Speaker 2: is there if you look at the trend in the

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Speaker 2: good side of the economy, that's upward. But nonetheless the

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Speaker 2: core and the core number was a little bit high,

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Speaker 2: but the overall number was on the soft side. So

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Speaker 2: I think the market was relieved that the news was

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Speaker 2: not worse, and that's why the market rallied so strongly.

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Speaker 1: Do you have a sense of what it may do

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Speaker 1: to the thinking at the Fed, Well.

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Speaker 2: I think it frees them to go by twenty five

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Speaker 2: for sure, but it might even lead to fifty. It

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Speaker 2: depends on whether or not they want to throw an

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Speaker 2: olive branch to the president. They did misjudge the economy,

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Speaker 2: as we all did. The last employment report was just

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Speaker 2: absolutely a shocker. What we thought we knew about the economy,

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Speaker 2: that growth was continuing at a very solid pace, turns

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Speaker 2: out not to have been the correct evaluation. It looks

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Speaker 2: like we hit a soft patch for a number of months,

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Speaker 2: undoubtedly due to concerns about tariffs and the impact of tariffs,

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Speaker 2: and so firms were a little slow to hire. So

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Speaker 2: economic growth was a lot weaker than expected, and that

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Speaker 2: justifies a rate reduction, and of course they didn't do

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Speaker 2: that in advance. They only found out about this after

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Speaker 2: the revisions, and so to make up for it, they

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Speaker 2: might feel that fifty basis points is appropriate. A lot

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Speaker 2: will depend on upcoming data.

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Speaker 1: So if we can agree that for the moment, the

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Speaker 1: tariffs are not being passed on to consumers, are we

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Speaker 1: to understand then that profit margins are under pressure quite

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Speaker 1: a bit?

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Speaker 2: Not clear. We do have data for the second quarter

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Speaker 2: and those profit margins were fine. Corporate profits did very

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Speaker 2: very well, So I would say that's certainly not the

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Speaker 2: case for the data that we have. Looking forward. It

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Speaker 2: may be that some of the tariffs are being absorbed

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Speaker 2: by the producers the manufacturers overseas that won't hurt us

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Speaker 2: profit margins. But it may also be that the third

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Speaker 2: quarter will be a little weaker than we expect because

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Speaker 2: the profit margins might be squeezed a bit.

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Speaker 1: We also had word that tariff revenue reached a fresh

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Speaker 1: monthly record for the month of July. I think somewhere

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Speaker 1: in the magnitude of about twenty eight billion dollars. Do

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Speaker 1: you think this is sustainable the rate of revenue that

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Speaker 1: the government is going to kind of collect as a

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Speaker 1: result of these tariffs, or are we going to deal

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Speaker 1: with maybe something that tapers off a little bit as

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Speaker 1: we kind of get adjusted to this new paradigm.

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Speaker 2: Well, well, certainly be some adjustment, because certainly import will

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Speaker 2: choose to import from wherever they can get goods at

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Speaker 2: the lowest cost, and so it's impossible to adjust the

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Speaker 2: supply chains that quickly, and so initially they may be

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Speaker 2: getting from the original the original source, in which case

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Speaker 2: the tariff levels are running hot. But as they adjust

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Speaker 2: and as deals are cut by the way between the

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Speaker 2: US and other countries, some of those tariffs may come down.

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Speaker 2: So for both of those reasons, it wouldn't surprise me

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Speaker 2: if the flow rate, the run rate for a tariff

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Speaker 2: revenue comes down a bit.

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Speaker 1: Are you already seeing evidence that tariffs are having an

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Speaker 1: impact on trade flows? Kind of a rerooting of how

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Speaker 1: goods are beginning to flow into the US?

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Speaker 2: Absolutely. In fact, the most glaring example is there was

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Speaker 2: a sharp decline in Chinese exports to the US, but

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Speaker 2: a significant increase in exports from other of Asia. So

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Speaker 2: it sure looks like a lot of Chinese goods are

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Speaker 2: being transshipped through other countries. And that of course is

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Speaker 2: also subject to change because the administration knows about it,

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Speaker 2: they've talked about it, and they may impose tariffs on

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Speaker 2: some of those transhipments.

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Speaker 1: And now part of the tariff strategy is to engender

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Speaker 1: maybe a little bit more reshoring of American manufacturing. Do

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Speaker 1: you think that's really picking up some traction right now

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Speaker 1: or is that something that we're going to have to

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Speaker 1: wait for more evidence of.

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Speaker 2: Oh, I think that'll take years. He just can't turn

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Speaker 2: on domestic manufacturing easily, certainly not if you have to

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Speaker 2: build new plants. Some increase in production is possible from

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Speaker 2: existing facilities. If consumers, for example, are deterred from buying

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Speaker 2: a Mercedes or a Jaguar or a Toyota that's manufactured overseas,

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Speaker 2: they can always increased domestic production a bit to satisfy

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Speaker 2: that shifting demand. But there are limits in their capacity constraints,

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Speaker 2: and so I think the true shifting the ultimate source

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Speaker 2: of all of these products will definitely take time.

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Speaker 1: After the Bell we had news from the cloud services

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Speaker 1: provider core Weave. Losses were steeper than expected. This company

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Speaker 1: is continuing to build out to meet demand from AI developers,

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Speaker 1: and one of the takeaways here is that core Weave,

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Speaker 1: even though revenue did triple to around one point two billion.

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Speaker 1: Capital investment was two and a half billion, so obviously

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Speaker 1: the company seems to be responding to very strong demand

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Speaker 1: for data center capacity. How are you feeling about the

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Speaker 1: AI trade right now?

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Speaker 2: Well, there are parts of it that we feel reasonably

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Speaker 2: comfortable with. For example, we're looking at utilities that will

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Speaker 2: supply energy to these data centers. I've got some investments

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Speaker 2: to take advantage of that. The actual construction of these

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Speaker 2: facilities will take some time, and the market, of course

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Speaker 2: has anticipated a lot of this. So there are lots

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Speaker 2: of parts of the market that reflect very very strong

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Speaker 2: growth in AI and all of the suppliers and the

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Speaker 2: key components of it. So the market's priced for a

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Speaker 2: lot of growth. The real question is how much growth

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Speaker 2: will take place relative to expectations. If it turns out

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Speaker 2: to be stronger than expected, these stocks could turn out

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Speaker 2: to be cheap, and of course if it isn't, if

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Speaker 2: the actual increase in output is less than expected, where

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Speaker 2: the profitability is less than these stocks are very expensive.

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Speaker 2: It's what makes the investing in AI and some of

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Speaker 2: the chip sectors really difficult.

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Speaker 1: So we had records today for both the s and

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Speaker 1: P five hundred, the Nasdaq one hundred, and even the

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Speaker 1: Nasdaq Composite. Right now, I'm looking at the valuation on

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Speaker 1: the composite and exit around thirty five times earnings. Historically,

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Speaker 1: I think we can agree, Chuck, it seems to be

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Speaker 1: pretty expensive. Are you alarmed by that?

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Speaker 2: I wouldn't say alarmed, but I definitely see it as expensive.

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Speaker 2: And that's why I made some of the comments that

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Speaker 2: I made earlier. It really depends on how large the

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Speaker 2: sector becomes and how profitable it can become. I find

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Speaker 2: the valuations to be quite expensive, very optimistic, and so

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Speaker 2: I'm personally not comfortable with investing in some of these companies.

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Speaker 2: And I don't feel like I have to, because if

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Speaker 2: you exclude the top ten pe multiple stocks in the

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Speaker 2: s and P five hundred, and you go to the unloved, dislike, heated, ignored,

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Speaker 2: you choose your adjective for ninety the SMP four ninety.

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Speaker 2: There are lots and lots of great values in that

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Speaker 2: part of the market, and those companies are doing perfectly well.

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Speaker 2: They'll continue to grow, they will prosper, and then a

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Speaker 2: healthy economy in which AI does well and technology does well,

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Speaker 2: the whole rest of the economy will come along, so

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Speaker 2: I feel there are safer ways to invest right now.

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Speaker 1: Chuck, you have been in the markets for quite some time,

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Speaker 1: and I'm wondering whether or not you're a bit concerned

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Speaker 1: by the degree to which the White House is becoming

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Speaker 1: more involved with things like the FED and FED policy

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Speaker 1: trying to influence that outcome, even what's been going on

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Speaker 1: with the Bureau of Labor Statistics. Does that concern you

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Speaker 1: at all?

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Speaker 2: Absolutely, it's quite inappropriate. I don't like seeing it. It's

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Speaker 2: not consistent with my view of how the FED operates.

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Speaker 2: I worked at the FED twice in my career. These

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Speaker 2: are professionals. They're not going to intentionally make concessions to

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Speaker 2: the President or for politicians in general, there may be

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Speaker 2: one or two individuals who might be influenced. That's always possible.

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Speaker 2: But even for example, with the President appointing the chairman

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Speaker 2: of the Council of Economic Advisors to a reserve board,

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Speaker 2: and he's clearly on board with what the President wants, Nonetheless,

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Speaker 2: he's simply one vote, and there are a lot of

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Speaker 2: people on the board who are first and foremost going

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Speaker 2: to be concerned about the legacy that they leave in

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Speaker 2: terms of how they ran monetary policy, and they're not

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Speaker 2: likely to sacrifice themselves for political considerations.

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Speaker 1: Chuck w believe it. They're always a pleasure. Thank you

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Speaker 1: so very much. He is Charles Lieberman, co founder, also

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Speaker 1: the CIO at Advisors Capital Management, joining from just outside

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Speaker 1: if here in New York City on the Daybreak Asia podcast.

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Speaker 1: Welcome back to the Daybreak Asia Podcast. I'm Doug Chrisner.

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Speaker 1: Last week, President Trump signed an executive order to clear

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Speaker 1: the way for digital assets to be added to the

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Speaker 1: mix of investments available in workplace retirement plans. Now, this,

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Speaker 1: needless to say, is an historic shift, and it's being

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Speaker 1: viewed as a major victory for several industries, including cryptocurrencies,

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Speaker 1: those companies looking to tap some of the roughly twelve

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Speaker 1: and a half trillion dollars held in retirement accounts. For

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Speaker 1: a closer look. Now, I'm joined by Peter Chung. He

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Speaker 1: is head of research at the quant trading firm Presto.

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Speaker 1: Peter's on the line from Hong Kong. It's always a

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Speaker 1: pleasure to have a chance to chat with you, Peter.

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Speaker 1: Thank you so much for making time. I want to

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Speaker 1: point out right out of the gate, here that this

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Speaker 1: executive order also eases access to private equity and real

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Speaker 1: estate and some other alternative assets as well for those

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Speaker 1: four oh one k plans. Give me your take on

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Speaker 1: this and what you think it represents for the industry.

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Speaker 1: Obviously a huge boon, right.

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Speaker 3: That's correct. Yes, So, I mean what this is going

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Speaker 3: to do is it's going to allow these retirement savings

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Speaker 3: to maximize a risk of just the return. You know,

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Speaker 3: the portfolio theory one on one tells you that a

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Speaker 3: way to raise expected return of your portfolio without raising

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Speaker 3: risk is by adding an uncorelated asset to your portfolio,

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Speaker 3: and crypto is one of those assets. So it's a

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Speaker 3: big win for the retirement savers, but also big win

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Speaker 3: for the crypto industry as well.

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Speaker 1: There's also the Genius Act to talk about, and one

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Speaker 1: of the things the Act will offer is more of

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Speaker 1: a boost for the stable coin industry. And I'm wondering

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Speaker 1: whether you believe that this necessarily creates some competition for

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Speaker 1: the crypto space when you're looking at a digital asset

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Speaker 1: like bitcoin.

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Speaker 3: Actually, I think it's very complementary to an asset like

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Speaker 3: a bitcoin, because what it allows is that if the

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Speaker 3: stable coin becomes the mainstream instrument, it becomes a lot

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Speaker 3: easier for you know, the users of a stable core

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Speaker 3: coins to uh to you know, trade it for bitcoin

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Speaker 3: because uh, you know, I think up until now, if

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Speaker 3: you wanted to buy bitcoin, you know, do you have

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Speaker 3: to transfer your funds from a legacy banking fiat based system,

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Speaker 3: uh into the own chain assets like a bitcoin through

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Speaker 3: a centralized exchanges like you know, coin base, or also

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Speaker 3: with the help of the legacy bank banks as well. Now,

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Speaker 3: once you get your assets on a stable coin, uh

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Speaker 3: you know, it's because both stable coin and bitcoin are

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Speaker 3: in the assets that operate on the blockchain.

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Speaker 2: Uh.

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Speaker 3: You know, basically what it means is those two you're

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Speaker 3: you're dealing with the two assets that operates at the

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Speaker 3: same wave length. So uh, you know, treating in and

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Speaker 3: out of bitcoin is going to be far easier uh

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Speaker 3: you know activities then than if it is done without

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Speaker 3: the help from the stable coin.

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Speaker 1: You don't believe that the perception, given the fact that

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Speaker 1: stable coins are backed by US Treasury's T bills primarily,

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Speaker 1: you don't think that that's going to creat in and

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Speaker 1: of itself, a greater degree of confidence. And as a

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Speaker 1: result of that, maybe take a little bit of business

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Speaker 1: away from the bitcoin type market, the cryptocurrency market.

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Speaker 3: No, No, I don't think that, because I mean stable coin.

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Speaker 2: Yeah.

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Speaker 3: Stable cooin is basically it's a tokenized version of US dollars.

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Speaker 3: So if you're somebody looking to protect yourself from inflation

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Speaker 3: or debit currency debasement risk, you're not going to do

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Speaker 3: that by just simply staying with US dollar pet stable coin.

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Speaker 3: You want to move your assets away from US dollars

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Speaker 3: into an asset whose supply is constant fixed and is

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Speaker 3: not affected by arbitrary monetary policy of the central banks.

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Speaker 3: And so therefore, yeah, I mean, if you're somebody who's

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Speaker 3: concerned about maintaining your purchasing power and you know, protecting

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Speaker 3: your family from you know, the currency long term devaluation, yeah,

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Speaker 3: you've got to move into an asset like a bitcoin.

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Speaker 1: What about market volatility, That's something that really we haven't

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Speaker 1: seen much of lately. Is there a reason for that?

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Speaker 1: And do you believe the risk of market volatility has

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Speaker 1: been removed somewhat from the bitcoin market.

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Speaker 3: You're actually right if you look at over the long run,

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Speaker 3: the volatility of a big coin has come down compared

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Speaker 3: to let's say, you know, ten fifteen years ago, and

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Speaker 3: I mean there could be many reasons behind it. Obviously

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Speaker 3: it's a lot more mature asset now. Also with the

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Speaker 3: participation of institutional investors, it's less vulnerable to the rumors

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Speaker 3: or retail hyps. So all of things I think helped dampen, uh,

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Speaker 3: the volatility of of a bitcoin, and I think it's

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Speaker 3: a good thing. You know, I think for the broader public. Uh,

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Speaker 3: these ups and downs the bigcoin has been of a

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Speaker 3: ton off for for getting, you know, getting involved with

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Speaker 3: this asse class. But uh yeah, now now that the

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Speaker 3: volatility bicoining is, I think it's a similar to uh

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Speaker 3: uh the goal the similar to the oil crude oil

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Speaker 3: volatility now, so uh it's a lot more manageable and

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Speaker 3: I think that's going to attrap more people into into

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Speaker 3: this assea class.

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Speaker 1: Peter will leave it there. Thank you so very much

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Speaker 1: for being with us. Peter Chung is head of research

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Speaker 1: at the quant trading firm Presto, joining from Hong Kong

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Speaker 1: here on the Daybreak Asia podcast. Thanks for listening to

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Speaker 1: today's episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday,

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Speaker 1: we look at the story shaping markets, finance and geopolitics

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Speaker 1: in the Asia, Pas pacif. You can find us on Apple, Spotify,

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Speaker 1: the Bloomberg Podcast YouTube channel, or anywhere else you listen.

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Speaker 1: Join us again tomorrow for insight on the market moves

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Speaker 1: from Hong Kong to Singapore and Australia. I'm Doug Prisoner

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Speaker 1: and this is Bloomberg