Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Let's check in with our next guest here, Steve Iiceman,
Speaker 2: senior portfolio manager at newburg Or Berman. All right, I'm
Speaker 2: looking at I guess Steve, you're on the Odd Lots
Speaker 2: podcast recently and you said that you are bullish on
Speaker 2: stocks that gain from artificial intelligence power needs. What does
Speaker 2: that mean?
Speaker 1: Well, good question, thank you.
Speaker 2: I'm front running Alex because Alex is our energy.
Speaker 1: The current the current GPUs use about three times more
Speaker 1: electricity than your typical CPU. So the grid in the
Speaker 1: United States has been under pressure now for years. You know,
Speaker 1: utilities keep increasing their CAPBAX budgets, and now you've put
Speaker 1: an entire new pressure on the on the grid. So
Speaker 1: whatever money is being spent on the grid is going
Speaker 1: to keep going up, probably for the next ten years.
Speaker 1: So just to give you just one stock for example,
Speaker 1: you know, when utilities announce that they're increasing their CAPEX budgets,
Speaker 1: utilities don't actually do anything. You know. What they do
Speaker 1: is they send you electricity and send you a build.
Speaker 1: But in terms of construction, that's sun by a company
Speaker 1: called Quanta, which is the largest engineering construction company for utilities.
Speaker 1: So The only thing I would tell you is that
Speaker 1: every time the CEO gets on the quarterly conference call,
Speaker 1: he just looks happier.
Speaker 3: That's fair. Yes, if you demand's going to.
Speaker 1: Grow up by it has no to do with himself.
Speaker 1: He can't satisfy all of the demands. So that's just
Speaker 1: just one example. But there are other companies that benefit
Speaker 1: as well. But that I look, I think there are
Speaker 1: three major themes of our time, AI, infrastructure, and crypto,
Speaker 1: and I believe in the first two and I don't
Speaker 1: believe in the third.
Speaker 4: So just for framing here, I mean, you really made
Speaker 4: your name through the housing crisis and betting against housing
Speaker 4: debt back in two thousand and eight. You're portrayed in
Speaker 4: the Big short film by Steve Carell.
Speaker 1: Had to bring that up, but okay.
Speaker 3: I did, But just just to give context.
Speaker 4: If our viewers or listeners don't know, like you have
Speaker 4: a history of betting, having contrarian bets that pay off
Speaker 4: big time. Yes, what would be that contrarian bet out
Speaker 4: of the three things you just said, what's that big
Speaker 4: contrarian bet.
Speaker 1: I don't have a contrarian bet here. I mean I
Speaker 1: don't like crypto.
Speaker 3: I like in crypto feels contrarian.
Speaker 1: Well, it's contrarian, and that says that I don't believe
Speaker 1: in it. I think the whole thesis behind it is wrong.
Speaker 1: But you know, shortening a cult when there's no when
Speaker 1: there's no data to prove that it's wrong, because a
Speaker 1: death wish, you know, So what do I mean by that?
Speaker 1: So when you when I bet again subprime mortgages. Every
Speaker 1: month securitizations produce data. They give every single credit quality
Speaker 1: data possible, so every month you could check it.
Speaker 3: You could look at it.
Speaker 1: Every month you looked at the fact and that and
Speaker 1: that fact. Credit quality was the major determinant of the
Speaker 1: value of subprime mortgage paper. So you had a data
Speaker 1: point every month, a massive data dump. Crypto trades on ether.
Speaker 1: You know, what is a trade The thesis that crypto
Speaker 1: of crypto is that it's a hedge against fear currency,
Speaker 1: so it's like digital gold. But it doesn't trade like that.
Speaker 1: It trades in perfect correlation with NASDAC, so it trades
Speaker 1: against its own thesis. So what data point is there
Speaker 1: to show that crypto is wrong? I mean, if the
Speaker 1: deficit came down, it's not relevant because that's not how
Speaker 1: it trades anyway, so there's nothing to do. What's your
Speaker 1: macro call here?
Speaker 2: I mean, there's a lot of folks in the marketplace saying,
Speaker 2: you know, this Federal Reserve is going to cut rates
Speaker 2: in twenty twenty four, maybe not as many times as
Speaker 2: we originally thought, maybe not as much as we originally thought,
Speaker 2: but that this economy is in good shape, but still
Speaker 2: there might be some rate cuts here. Is that kind
Speaker 2: of the backdrop that's for you? Or how do you
Speaker 2: think about it?
Speaker 1: I mean, the way I think about it is that
Speaker 1: Powell is a dove. He has always been a dove.
Speaker 1: Raising rates was completely against his nature. He's wants to
Speaker 1: cut rates because he always wants to cut rates. The
Speaker 1: data is not completely in his favor. So maybe they
Speaker 1: cut once. Do I think they should cut it at all?
Speaker 1: I would personally I would wait, but trust me, nobody
Speaker 1: consults me.
Speaker 3: No one consults us either. It's very stair.
Speaker 1: So I think they'll probably cut once. It's my guess.
Speaker 4: So does that affect so the thesis that you have,
Speaker 4: like at the infrastructure, the power demand and AI and
Speaker 4: AI in.
Speaker 3: General, does what the Fed does? It's irrelevant, irrelevant. Does
Speaker 3: it change.
Speaker 4: How you play those themes or of timing.
Speaker 1: Okay, I mean this is how what I think credit
Speaker 1: quality in the United States is fine other than office
Speaker 1: real estate, and office real estate is not big enough
Speaker 1: to sink the economy. It's a problem. It's a regional problem.
Speaker 1: It's a regional bank problem. It's some investors problem. If
Speaker 1: consumer is not over levered, the housing market is not
Speaker 1: in fuego, there's a shortage of housing. So all the
Speaker 1: and the and the financial system of the United States
Speaker 1: has never been this healthy in anyone's lifetime period. So
Speaker 1: all the things that existed prior to two thousand and
Speaker 1: eight don't exist today. You have a very dynamic economy
Speaker 1: with some very very powerful themes. The FED cutting or
Speaker 1: not cutting rate makes headlines for a couple of days,
Speaker 1: But when you think about it, if the FED cuts
Speaker 1: rates once or twice or no no times, I mean
Speaker 1: the end of the day, who cares. It's it's it's
Speaker 1: the minimis it's not I mean the FED raising rates
Speaker 1: five hundred bases points. Yep, that got that got everybody's attention.
Speaker 1: The FED cutting rates twenty five basis points or fifty
Speaker 1: basis points and then stopping like like everybody get a life, right,
Speaker 1: all right?
Speaker 2: In terms of getting a life on AI, a lot
Speaker 2: of well, I'll just speak for myself. I'm trying to
Speaker 2: figure out how much of this AI stuff and I'm
Speaker 2: putting in air quotes here for our listeners. Is incremental
Speaker 2: all tech spending or is it just taking some money
Speaker 2: from IT or other tech budgets and putting it to
Speaker 2: it depends on.
Speaker 1: Which subsector you're talking. Okay, So if you're talking about
Speaker 1: the semiconductor sector, where it's in video or a m D,
Speaker 1: it's it's massively incremental. You know. If you're talking about
Speaker 1: overall tech spending at this point, not clear. What's what
Speaker 1: is pretty clear is that companies like some of the
Speaker 1: IT consulting companies have no revenue growth because it's taking
Speaker 1: Peter to PayPal, so and software unclear. So it's it's
Speaker 1: only very clear in hardware.
Speaker 4: Let's overlay the presidential election with these thesis thesis. Thesis
Speaker 4: is plural and okay, it's important. I took Latin from the.
Speaker 1: CS, but this is a THESSCS.
Speaker 4: Okay, So what is your prediction for the election and
Speaker 4: how does that impact Because a lot of what you're
Speaker 4: talking about is driven by fiscal policy.
Speaker 1: Okay, so let's backtrack for a second. So, first of all,
Speaker 1: caveat whatever I'm about to say. I am not speaking
Speaker 1: for New Burger Bartment. I'm speaking just for myself because
Speaker 1: I don't want to get into trouble. So it's May seventh.
Speaker 1: We're how many months? Five months? Six months from the election?
Speaker 1: Very far, and as far as I'm concerned, the election
Speaker 1: is baked. It's done, which is and Trump's gonna win,
Speaker 1: and I think he'll win every single swing state, and
Speaker 1: this is how it's going to play. So at this point,
Speaker 1: the protesters and what I'm about to say has nothing
Speaker 1: to do with who I'm going to vote for, what
Speaker 1: my predilections are. This is just pure analysis. The protesters
Speaker 1: on the college campuses have rapidly become the face of
Speaker 1: the Democratic Party, not completely, but that will be solidified
Speaker 1: because I am one hundred percent sure that in August
Speaker 1: at the Democratic Convention in Chicago, Irony, when you think
Speaker 1: about nineteen sixty eight, they will all be protesting there
Speaker 1: and they'll be screaming and yelling, and they'll be screaming
Speaker 1: and yelling a lot of things that are anti American
Speaker 1: and the country is going to be appolled, and at
Speaker 1: that point it'll be very very clear that Trump will win.
Speaker 1: But as far as I'm concerned, it just reminds me
Speaker 1: a little bit of August two thousand and seven. If
Speaker 1: you look back at the financial crisis, the crisis took
Speaker 1: place in the fall of eight, but in August of seven,
Speaker 1: starprime paper had collapsed. The crisis was baked in August
Speaker 1: of seven. The rest was just an inevitable play. So
Speaker 1: I kind of feel about like that about the presidential
Speaker 1: lecture right now. It's baked, but the only people who
Speaker 1: don't know the voters.
Speaker 2: All right, We'll see how that plays out. In the
Speaker 2: Mark by Steve Iisman, Thank you so much for joining.
Speaker 2: Steve Heisman is a senior portfolio manager at Newburger Berman.
Speaker 2: Joining us live here in our Bloomberg Interactive Brokers studio