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Speaker 3: Geopolitical News front End Center again. Today, the Ukraine carries
Speaker 3: out first strike with US missiles in Russia, you know,
Speaker 3: and then we had some rudder coming out of the
Speaker 3: Russian Foreign Minister down at the G twenty Mark really
Speaker 3: spooky markets.
Speaker 4: Mark Champion joins us.
Speaker 3: He's a calmnist for Bloomberg Opinion. He's located in London
Speaker 3: and he is one of our resident experts on geopolitics,
Speaker 3: particularly in that part of the world. Here, Mark, it
Speaker 3: just feels like, you know, today was not a good
Speaker 3: day for the folks that were looking to try to
Speaker 3: move towards a resolution there in Ukraine. What's your latest
Speaker 3: view on what's happening in that part of the world.
Speaker 5: Yeah, I mean, you know what we the kind of
Speaker 5: trajectory we have is that the Ukrainians are very much
Speaker 5: on the back foot in on the battlefield, and at
Speaker 5: the moment they have been for some months. You know,
Speaker 5: obviously you have a new US president coming in who
Speaker 5: says he wants to end it all in a day.
Speaker 5: But you know, the question is at this point, you know,
Speaker 5: everybody is agreed, including Voladimir's Zelenski, that the you know,
Speaker 5: this needs to come to an end next year. You know,
Speaker 5: the question is which day? Uh? And you know which
Speaker 5: end of the year. And you know, how do you
Speaker 5: get President put into the negotiating tables as you know,
Speaker 5: opposed to just offering to accept Ukraine surrender, you know,
Speaker 5: in the current circumstance or what the Ukrainians want to do,
Speaker 5: what the Biden administration seems to be, you know, trying
Speaker 5: to help it to do is to change the facts
Speaker 5: on the ground such that you know Putin will have
Speaker 5: some incentive to actually negotiate.
Speaker 6: Well, I was gonna say, who has the upper hand
Speaker 6: at this moment.
Speaker 5: Well, there's no question the Russians do. They're moving, you know,
Speaker 5: every day, they're moving forward along the front lines, and
Speaker 5: it's it's not a collapse. It's not a kind of
Speaker 5: sudden you know, end of days. But you know, there's
Speaker 5: there's no doubt about you know, which side has the
Speaker 5: initiative at the moment. You know, that has kind of
Speaker 5: flipped from one side to the other, you know, throughout
Speaker 5: the war, and it could flip again. But at the moment,
Speaker 5: the Ukrainians simply lack the number of personnel the manpower
Speaker 5: to do it. They were late with the mobilization and
Speaker 5: they are in a pretty bad state. So what they're
Speaker 5: asking for is different ways of helping them so that
Speaker 5: they can stabilize the line, perhaps even change the momentum
Speaker 5: a little bit, and then importantly strike behind the Russian
Speaker 5: lines to increase the cost of continuation for President Putin
Speaker 5: so that he actually has a reason to say, Okay, i'll.
Speaker 3: Talk between now and inauguration day. It seems like a
Speaker 3: day at a time period where each side will be
Speaker 3: trying to just improve their position, with the understanding that
Speaker 3: it looks like, whether we want or not, we're going
Speaker 3: to the negotiating table.
Speaker 5: Is that kind of the view, Yeah, I think that's
Speaker 5: exactly what's going to happen. And you know, that's the
Speaker 5: context in which to say, to look at the sort
Speaker 5: of Russian sabers rattling again on the nuclear issue at
Speaker 5: the moment, I mean, the reasons for not pushing the
Speaker 5: nuclear button have not changed, and there are real hurdles
Speaker 5: and costs involved in doing so. And you know President
Speaker 5: Putin didn't do that when Russia was losing on the battlefield,
Speaker 5: and he's very unlikely to do it when they're winning.
Speaker 5: But it does tell you that he's trying to shape
Speaker 5: what the the US in particular does between now and
Speaker 5: next year. And this is one tool which he has
Speaker 5: to do it. He has others, and you know, yes,
Speaker 5: absolutely both sides will be trying to maximize their position
Speaker 5: for when they actually have to make some kind of deal.
Speaker 6: And does that deal is that contingent on say President
Speaker 6: Trump or you think, regardless of who's in the White House,
Speaker 6: this is the way it was going.
Speaker 5: It was. It's going to probably get there faster because
Speaker 5: of the arrival of Donald Trump, but yes, that's where
Speaker 5: it was going. You you know, Zolenski, if you look
Speaker 5: at Zelenski's victory plan, which you know is often miss construed,
Speaker 5: if you actually read it, you know he's got a
Speaker 5: five point plan there. None of them talk about territory.
Speaker 5: None of them say we have to get crimea back
Speaker 5: or we have to get this back, or that it's
Speaker 5: four points which are just about security. How do we
Speaker 5: secure Ukraine to make sure that when we agree to
Speaker 5: a cease fire it's just not a little interlude for
Speaker 5: the Russians attack again. And then a final one which
Speaker 5: is a sort of you know, just a bid to
Speaker 5: interest Donald Trump in particular, but you know the West
Speaker 5: in general in what they can get out of helping
Speaker 5: Ukraine in terms of resources and so on.
Speaker 3: All right, Mark Champion, thank you so much. We really
Speaker 3: appreciate getting your thoughts there. Mark Champion, he's a calmness
Speaker 3: for Bloomberg Opinion, joining us from London via zoom giving
Speaker 3: us the latest thoughts on Ukraine. Again, the thinking now
Speaker 3: is perhaps in twenty twenty five that might be a
Speaker 3: period for some type of truth to come to that
Speaker 3: part of the world. We'll have more reporting on that.
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Speaker 6: let's get back to the market here. So we may
Speaker 6: have some geopolitical risk shaking in the market, but if
Speaker 6: you take a look at some of the equities, like
Speaker 6: a Walmart still holding up fairly well, that stock now
Speaker 6: are on the highs of the session, up almost five percent.
Speaker 6: Joining us how to discuss as Emily Cohne and Bloomberg
Speaker 6: Consumer team leader, I mean, she heads all the stuff
Speaker 6: of consumer stocks. She joins us now in studio. Emily,
Speaker 6: wonderful to see you.
Speaker 8: Thanks, Alich.
Speaker 6: What do we make about the reaction to Walmart stock?
Speaker 6: Because consensus was already high, the stock had already moved
Speaker 6: like we kind of knew it was going to be good.
Speaker 1: So when you think about Walmart Walmart is a bellweather
Speaker 1: of the American economy, of the American consumer.
Speaker 8: What is Walmart? Or tell us about that.
Speaker 1: Walmart beat expectations today sent a really strong signal that
Speaker 1: the holiday season is off to a solid start, and
Speaker 1: the market was excited about that.
Speaker 8: The growth in the number.
Speaker 1: Of transactions or checkouts slowed, the growth rate slowed a
Speaker 1: little bit. Ticket the average ticket, the amount people were
Speaker 1: paying in each checkout, was up, and a lot of
Speaker 1: that growth was coming from higher income shoppers, people in
Speaker 1: households making more than one hundred thousand dollars a year.
Speaker 1: That cohort made up roughly seventy five percent of the
Speaker 1: share gains.
Speaker 8: So this was good. It was a solid start to
Speaker 8: the holiday.
Speaker 1: Season, and the stock is up a lot. Four and
Speaker 1: a half percent is up a lot for a company.
Speaker 3: That Big stopstocks at all time high of sixty seven
Speaker 3: percent year today, which I had no idea their e
Speaker 3: commerce business. Talk to us about their e commerce business.
Speaker 3: I know it's big, but Amazon's pretty big too, So
Speaker 3: how did they talk about their e commerce business?
Speaker 1: When they talk about e commerce, they just talk about
Speaker 1: the potential to grow. It is big, but there is
Speaker 1: still so much room to grow. So just in the
Speaker 1: last couple of months, we saw them branching into categories
Speaker 1: that you wouldn't find in a typical Walmart store. Pre
Speaker 1: owned watches, collectible sneakers, stuff you would typically go to
Speaker 1: another retailer for, but now you can buy at Walmart online. Also,
Speaker 1: they're adding benefits to their services, like Walmart Plus. You
Speaker 1: can now get discounts of Burger King if you're a
Speaker 1: Walmart Plus member. So they're really expanding their offering there.
Speaker 1: Deliveries can get faster, and they see just endless potential there.
Speaker 8: It's always growing.
Speaker 6: My question I had before the break was those people
Speaker 6: that make over one hundred thousand dollars or more, are
Speaker 6: they sticky as in, once the economy save recovers or
Speaker 6: once they feel better about inflation or et cetera, do
Speaker 6: they flee than to go to Target or somewhere else,
Speaker 6: or go to the fancy drug store or do they
Speaker 6: stay at Walmart.
Speaker 1: I think that's a really good question and something we're
Speaker 1: definitely watching for. You know, spending across the board at
Speaker 1: Walmart was consistent. The growth, as you said, was coming
Speaker 1: from these wealthier households. Maybe it's a shopper who typically
Speaker 1: shops at Whole Foods, but is feeling particularly pinched right
Speaker 1: now and is going to Walmart for value? Do those
Speaker 1: people stick around when they get a raise in their
Speaker 1: next paycheck or their paycheck in the next couple of quarters.
Speaker 1: That's something we're definitely watching for. I think it does
Speaker 1: have limits.
Speaker 3: So are they still opening stores? Isn't there Walmart pretty
Speaker 3: much in every town USA these days?
Speaker 8: It's a good question.
Speaker 1: I think, like when they talk about growth now, they're
Speaker 1: talking about e commerce growth. I think that's where they
Speaker 1: see the highest potential for growth, and they needed to
Speaker 1: get profitable. That's something we heard the CEO talk about today.
Speaker 1: Not that they're racing to it, but it's a long
Speaker 1: term game they want their e commerce division to.
Speaker 3: So they feel them pretty okay about a holiday shopping
Speaker 3: season because.
Speaker 1: Yeah, holiday, right, Yeah, holiday shopping is off to a
Speaker 1: strong start. So the interesting thing about the holiday season
Speaker 1: this year is that it's.
Speaker 8: Shorter than in most years.
Speaker 1: Thanksgiving is following later in the month of November. So
Speaker 1: the answer to that is that they triggered the deals
Speaker 1: even earlier than than usual.
Speaker 6: Coming in to Paul Knows and I shop on the sales,
Speaker 6: let's go to Low's because that is interesting as well.
Speaker 6: That stock is off the loads of the session, but
Speaker 6: still down over three percent. What did Lo say?
Speaker 1: So? Lowe's years fell before the bell and quarterly comps
Speaker 1: were better than expected but still declining. So high interest
Speaker 1: weight rates and a week housing market means people are
Speaker 1: moving less than they were before. It means they're spending
Speaker 1: less on big ticket home renovations. But despite blooming gloomy,
Speaker 1: Lowe's actually raised its forecast for the year, seeing positive
Speaker 1: growth in its professional business so selling goods to contractors
Speaker 1: and builders, also in e commerce, and spending on smaller.
Speaker 8: Ticket outdoor projects. Last week we.
Speaker 1: Saw Home Depot similarly say that the weather was actually
Speaker 1: a bright spot for its sales. So hurricane led to
Speaker 1: higher sales for Home Depot. Warm weather meant that people
Speaker 1: were spending more on grills because the Great Grilling Season
Speaker 1: was getting longer.
Speaker 8: So in general, for these loes, Home Depot.
Speaker 1: Sales are down, but the outlook got a little bit
Speaker 1: better this quarter.
Speaker 3: Where do we see the weakness in the consumers like
Speaker 3: in the dollar stores? Because I mean I can I
Speaker 3: see a strong number from Walmart to me that is America?
Speaker 3: So where is the American consumer hurting, is it? I
Speaker 3: guess it's even a lower end than.
Speaker 1: Wal Yeah, the lower end is definitelyfering. The dollar stores
Speaker 1: are suffering. They don't offer the variety that Walmart offers.
Speaker 1: Walmart sixty percent of Walmart's business today is in groceries
Speaker 1: and you can go, wow, uh, you know some pretty
Speaker 1: good stuff at Walmart these days, gluten free items and
Speaker 1: organic produce and stuff that like you're not going to
Speaker 1: necessarily find out your dollar store. And that's really really
Speaker 1: helping them, especially when it comes to growing an e
Speaker 1: commerce business where people are looking for a one stop
Speaker 1: shop for everything.
Speaker 3: So before I let you I have a gluten free friend.
Speaker 8: And it's a good job.
Speaker 4: It's a thing.
Speaker 6: It is a thing.
Speaker 8: I have multiple friends.
Speaker 3: I didn't know it was. Oh I've been educated.
Speaker 6: You've been educated for that one friend.
Speaker 8: Before I let you go.
Speaker 6: We get a lot of retailers out this week as well.
Speaker 6: What are you going to be focusing on? The consumer trends? Land?
Speaker 1: Definitely the holiday season? What are people seeing that's the
Speaker 1: big question this year. Are people spending as much as
Speaker 1: they usually spend? Are they buying as many gifts as
Speaker 1: a usually by also Thanksgiving for the grocers. I think
Speaker 1: a lot of people are just worn out from paying
Speaker 1: really high prices for food.
Speaker 8: They're also worn out from.
Speaker 1: Cooking a lot more than they have been since they're
Speaker 1: eating out less. So how is that showing up in
Speaker 1: consumer sales? Definitely trying to get a sense of how
Speaker 1: the consumer is feeling about what is the most significant
Speaker 1: shopping season of the year.
Speaker 6: I know my husband's getting a little burnt by all
Speaker 6: the cooking he's doing. I'm really good at ordering takeout.
Speaker 6: He's the chef in the family. All Right, thanks so much,
Speaker 6: it's really I really appreciate it. It was wonderful to have
Speaker 6: you at Emily Cohen joining us. She has consumer trends
Speaker 6: coverage for Bloomberg News.
Speaker 2: You're listening to the Bloomberg Intelligence podcast. Catch us live
Speaker 2: weekdays at ten am Eastern on Apple card Play and
Speaker 2: Android Auto with the Bloomberg Business app. Listen on demand
Speaker 2: wherever you get your podcasts, or watch us live on YouTube.
Speaker 6: All right, taking a look at the markets again. Get
Speaker 6: the smp is down by about four tens of one
Speaker 6: percent of the nasdag off just slightly. What do you
Speaker 6: do in the market when there is a slight safe
Speaker 6: haven bit. I say slight because we've definitely backed off
Speaker 6: some of the levels that we've seen earlier in the session.
Speaker 6: Chris Walling is CEO and chief market strategist along View Economics,
Speaker 6: and he's here in studio to discuss his latest calls. Chris,
Speaker 6: we're getting all the twenty twenty five calls out now.
Speaker 6: Everyone's looking pretty bullish. But the bear case and then
Speaker 6: the bull case seems to be super wide. What are
Speaker 6: you guys modeling right now?
Speaker 4: Well, I think what's really interesting is what we're seeing
Speaker 4: in terms of the global economy next year. When you
Speaker 4: sort of whip around the world, you look at China,
Speaker 4: you look at Europe, the UK, and the States. Obviously
Speaker 4: with this new government, there's all sorts of stimulus coming.
Speaker 4: I mean, if you look at a raft of ninety
Speaker 4: central banks around the world, the vast majority of them
Speaker 4: the cutting, and they're in cutting very few raising weights.
Speaker 4: That's normally a very good environment for equity markets. So
Speaker 4: tons of stimulus lots coming. Yes, there's a lot to
Speaker 4: worry about. That's why you get those wide ranges on
Speaker 4: those forecasts. There's a lot of left to fail with
Speaker 4: the new administration, and one's got to think about those
Speaker 4: tariffs and the like, and appointments still to come, so
Speaker 4: one doesn't really know how that's going to play out.
Speaker 4: But I generally think that the thrust is good, and bizarrely,
Speaker 4: we could actually absent those risks. We could actually have
Speaker 4: a year where volatility falls and sort of got you
Speaker 4: remember twenty thirteen or twenty seventeen. Volatility collapses because everyone's
Speaker 4: cutting rates. There's a lot of equality around, so I
Speaker 4: can't get my l's out there.
Speaker 3: So in that kind of environment, long stocks, my long credit.
Speaker 3: How do you think they play it here?
Speaker 4: Well, I think your long equities and your long bonds. Bizarrely,
Speaker 4: I think our government bonds are oversold. And actually, I mean,
Speaker 4: I know the data is distorted today, but housing's just struggling.
Speaker 1: You know.
Speaker 4: They're parts of the US economy that need lower rates
Speaker 4: to get it going. And the fiscal impulse is dying
Speaker 4: as we go into next year, and we'll have to
Speaker 4: wait until you get another fiscal package, and we don't
Speaker 4: know what the size of it will be. So I
Speaker 4: think long stocks and long bonds, and I want you
Speaker 4: want to play the cyclical parts of the market, which
Speaker 4: I think you know, when you get that cyclical week acceleration,
Speaker 4: it's that's a great place to put money. So Mag's
Speaker 4: seven dominance is slowly dying in my opinion. But then
Speaker 4: on the.
Speaker 6: Flip side, you'll say, I'll hear things like, yeah, but
Speaker 6: retail sale are holding up, the job market's still holding up,
Speaker 6: inflation stills holding up, So maybe we're not going to
Speaker 6: get the kind of rad cutting cycle that we might expect.
Speaker 4: Well, yes, yes, and no. I mean inflation, in my
Speaker 4: opinion is dying. I mean that this was a classic
Speaker 4: monetary surge of inflation. People like to compare it to
Speaker 4: the seventies, but they're much better comparisons going further back.
Speaker 4: We're m two surgees and then two collapses, and that's
Speaker 4: really what we've had. And that's the kind of inflation
Speaker 4: outcome we're going to get where inflation is going to dissipate.
Speaker 4: So that'll encourage the fete, I think, to do a
Speaker 4: little bit more than people expect.
Speaker 3: The event tomorrow, presumably just on the earnings front, will
Speaker 3: be in video after the close.
Speaker 6: I was like, what event.
Speaker 4: Yes, Yeah, we've kind of got it.
Speaker 3: We've been talking about it since, you know, earning season began,
Speaker 3: you know, four or five weeks ago. How important is
Speaker 3: zach is? It seemed like for twenty twenty three, for
Speaker 3: most off not all of this year, the AI trade
Speaker 3: has been powering this market.
Speaker 4: It feels like maybe it's fading a little bit. But
Speaker 4: how important is in video tomorrow? You well, in video
Speaker 4: is important, but it is only one stock. I mean,
Speaker 4: it doesn't feel like only one stock. If it feels
Speaker 4: like the whole market, but it's only one stock. And
Speaker 4: really the MAG seven has become the sort of MAG
Speaker 4: one or two, So there's a limit to how much
Speaker 4: the market can be paid high by a couple of stocks.
Speaker 4: And I think that's the point. And the other thing
Speaker 4: about in video is, you know, the second duvetive of
Speaker 4: earning's growth is slowing, So it's kind of when stocks
Speaker 4: like that, you need the first two to be fast,
Speaker 4: and that's now slowing. I wonder if margins are topye,
Speaker 4: So you know, I think MAG seven as a whole
Speaker 4: is topy on margins, and video of course is exciting,
Speaker 4: but I don't think it has the influence it had
Speaker 4: last year.
Speaker 6: So based on that, and then you talk about the
Speaker 6: rate cutting cycle really being front and foremost and sort
Speaker 6: of how you view the market. Is that an ex
Speaker 6: US equity situation or is that a US and or is.
Speaker 8: That just US?
Speaker 4: So I think it's it's a global cyclical trade, which
Speaker 4: and of course the large gap US is dominated by
Speaker 4: mag seven, So I think what we'll find is they've
Speaker 4: become a source of funds to buy into cyclical parts
Speaker 4: of the global stock market. So in the US mid
Speaker 4: and small caps, some of the cyclical areas of the market,
Speaker 4: for sure, people talk about financials tick. But outside the US,
Speaker 4: tons of stuff, you know, there's so much cheap stuff
Speaker 4: that cyclical we're going into sort of nominal GDP growth.
Speaker 4: This is all good for those parts of the world.
Speaker 4: We like the UK. We like Spain. Bizarrely sort of
Speaker 4: no one's talked about Spain for a long long time
Speaker 4: because Spain's spent fifteen years getting his house in order,
Speaker 4: and Germany's the sick man of Europe, which means rates
Speaker 4: are lower in Europe and the otherwise would be in
Speaker 4: Spain gets cheap money. So it's a lovely little combo.
Speaker 4: And Spain's doing really well this year. There's four out
Speaker 4: of fifty countries in the world that are a more
Speaker 4: than fifty cent discount of the US, and they're only
Speaker 4: scor faster over the last few years. Places like that
Speaker 4: are going to do really, really well. Greece is one
Speaker 4: of them. I mean, who talks about Greeen.
Speaker 6: Nobody, Nobody sunys about green That's amazing. That's on equity side.
Speaker 6: So for spanding, Greece is on the equity side, not
Speaker 6: the bond side.
Speaker 4: That's all. The equity side absolutely bonds, you know, I
Speaker 4: mean fine, US bond's great, exactly.
Speaker 3: All right, So you woke up two weeks ago in
Speaker 3: London South the Americans elect themselves in your president. We
Speaker 3: now know that how the Congress is going to look like.
Speaker 3: Did that change your view at all about how to invest?
Speaker 4: Well? At the margin? Potentially you get a bit more
Speaker 4: fiscal and a bit less sort of consumption growth out
Speaker 4: of the States, So there's a bit of a risk
Speaker 4: at that, but actually made me feel more bullish, you know.
Speaker 4: I'm I'm a political, I'm a bridge so I don't
Speaker 4: have nothing to do with me. But looking at it objectively,
Speaker 4: it seems much more pro growth with the with the
Speaker 4: with the exception of the tariff's risk basically, So yeah,
Speaker 4: maybe more bullish cyclcal stuff, but.
Speaker 6: I guess what it does matter is the fiscal side
Speaker 6: and the fiscal policy. In which case, where do you
Speaker 6: invest in small caps?
Speaker 9: Say?
Speaker 4: Well, you know, I think the consumers going to do well.
Speaker 4: There's there's untapped wealth in the US and the UK
Speaker 4: and southern Europe, and so I like consumer cyclicals, and
Speaker 4: I think bonds are coming down, so I like housing
Speaker 4: related stuff. So all of that I think is good.
Speaker 4: I'd be cautious on the biotech because there's also some
Speaker 4: policy changes coming around the corner. But yeah, I think
Speaker 4: I think there's a lot to go for in the
Speaker 4: mid and smalls.
Speaker 6: All right, Chris, it's always good to see you. Thanks
Speaker 6: for coming by. Great to see you in person at
Speaker 6: Chris Watlin, CEO and chief market strategist of lomuew Economics.
Speaker 6: I read read their weekly report every Friday. Good really
Speaker 6: eleven thirty in the morning. But I'm focused. It's just
Speaker 6: paying commercial breaky. You gotta stay car around to engage.
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Speaker 6: We bring you all the have news in business, economics
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Speaker 6: They cover two thousand companies in one hundred and thirty
Speaker 6: industries worldwide, and here is one of the best of them.
Speaker 6: Man keep saying, Bloomberg Intelligence, senior tech industry analyst.
Speaker 8: He joins us.
Speaker 6: Now, a lot of things to pick about here. Obviously
Speaker 6: in Vidia tomorrow definitely part of the story. But one
Speaker 6: is Google and the DOJ pushing Google to sell Chrome
Speaker 6: to break up its search monopoly.
Speaker 8: How seriously do.
Speaker 6: We need to take this concerning there's gonna be like
Speaker 6: a new White House and a new DOJ in a
Speaker 6: few months.
Speaker 1: Yeah.
Speaker 9: Look, I think it's still uncertain who President and Elect
Speaker 9: Trump is going to appoint to run the agency, and
Speaker 9: a lot depends on how hard they want to go
Speaker 9: against the likes of Alphabet and Meta. But in this case,
Speaker 9: the fact that DOJ is proposing and we know the
Speaker 9: Vice President elect he is not opposed to, you know,
Speaker 9: breaking up these big tech companies. So clearly it is
Speaker 9: a risk, and I think when you look at what
Speaker 9: they're proposing, you know, breaking Chrome. You could argue there
Speaker 9: are independent browser companies out there, like Mozilla, so Chrome
Speaker 9: could exist as an independent company. But it's very hard
Speaker 9: to see how you can make a business model out
Speaker 9: of Chrome. And then it does hurt, you know, Google's engagement.
Speaker 9: In the end. This is the distribution for Google, the
Speaker 9: owning the Android operating system and owning the browser. You
Speaker 9: take out the browser, their distribution for search goes away.
Speaker 9: I mean, Google Search will still be the dominant search engine.
Speaker 9: But in the Internet world it's about owning distribution. That's
Speaker 9: why Apple has so much cloud, That's why you know,
Speaker 9: owning Android and Chrome or the crown jewels. When it
Speaker 9: comes to Alphabet as a franchise, so many deep just
Speaker 9: painted is a pretty dire picture there.
Speaker 3: Guess what stocks up today? Why because people like gen
Speaker 3: who covers litigation for us, this is her sense. I
Speaker 3: know you didn't write this exactly, I know her writing.
Speaker 3: If Alphabet were forced by the DOJ to sell its
Speaker 3: Chrome browser Comma, which we view as unlikely. So that's
Speaker 3: kind of the takeaway there soon, Jenry tells me it's
Speaker 3: kind of unlikely, but still I guess we have to
Speaker 3: expect or I guess Google investors have to expect some
Speaker 3: types of modifications to behavior in their business models. But
Speaker 3: I guess on the margin the market saying it's not
Speaker 3: going to be that material.
Speaker 4: It's reflected in the stock.
Speaker 9: In the end, it comes down to what is the
Speaker 9: valuation right now? What is baked into the stock, and
Speaker 9: all the bad news around regulation is in the stock.
Speaker 9: That's why alphabet is not trading at thirty times earning.
Speaker 9: It's trading at a discount to the likes of Microsoft.
Speaker 9: So look, I mean, I think they will have to
Speaker 9: make remedies, even if it's not a forced syvestiture. They're
Speaker 9: already starting to pair back when it comes to at targeting,
Speaker 9: how much data they mix and match across their family,
Speaker 9: whether it's YouTube, maps, search. So from that perspective, I
Speaker 9: think they are going to try and do these measures
Speaker 9: on their own, and you know, just to convince the
Speaker 9: regulators that owning the browser is not something that gives
Speaker 9: them an advantage, and maybe they have to expose the
Speaker 9: data that they're using for targeting the users. When it
Speaker 9: comes to ads, that's the other part of the remedy here.
Speaker 6: And this just means like then they're getting ahead of it,
Speaker 6: right then they're getting ahead of anything that may come
Speaker 6: from DC or Europe at any time. In essence, what
Speaker 6: are you going to be looking kind of go to
Speaker 6: video now it's it's been a two minutes, okay, so
Speaker 6: tomorrow in video? Or what am I looking at?
Speaker 9: I mean, there's so many things when it comes to
Speaker 9: the continuation of this Genni wave. This is the Belvether company.
Speaker 9: And look, when it comes to data center spend, it's
Speaker 9: all about how scalable the models are going to be
Speaker 9: in terms of you know, whether it's Chat, GPT or
Speaker 9: Google Gemini, how big of a cluster they want to
Speaker 9: create for next year. Because right now everyone is looking
Speaker 9: at the compute that you know, open Ai has used
Speaker 9: for GPT four and they're saying they already have a
Speaker 9: trillion plus parameter model. Can it get any bigger? The
Speaker 9: answer from Nvidia is yes, we are giving you a
Speaker 9: more powerful chip and you can create a bigger cluster
Speaker 9: next year to train your models. So if that's the case,
Speaker 9: then the computer requirements continue to scale up, which is
Speaker 9: what they are betting on. In terms of the data center.
Speaker 9: Upward revisions we have seen the whole of this year,
Speaker 9: and they think the scaling of the foundational models is
Speaker 9: going to continue. The moment you hear about a plateauing
Speaker 9: of the foundational models, that's when you know, you know
Speaker 9: you're not going to see the upward revisions we have
Speaker 9: seen for in radio's data center in video.
Speaker 3: Stock is up three percent today, up one hundred and
Speaker 3: ninety percent year to date with a three point five
Speaker 3: trillion dollar market cap. Dan Eyes and what Push Securities
Speaker 3: was at with a tweet this morning saying he believes
Speaker 3: that they will beat on revs by two billion dollars
Speaker 3: to take their guidance up by another two billion dollars.
Speaker 4: You cause that that dropped the mic, so.
Speaker 9: That may not be enough to drive the multiple. See
Speaker 9: that's the thing.
Speaker 3: Yeah, we're talking about earnings what is.
Speaker 9: Reflected in the stock. In the case of Nvidia, last
Speaker 9: time around when they reported earnings, the stock had a
Speaker 9: fifteen percent downroad draft because everyone had such high expectations
Speaker 9: that even though they had a beaten raise, there wasn't enough.
Speaker 3: So the play man. Yeah, so, but even you came
Speaker 3: in here probably six quarters ago and said, as long
Speaker 3: as they keep doing it, the stock will keep working.
Speaker 3: But at some point with that that quarter's gonna come
Speaker 3: where they're going.
Speaker 9: To because it's not recurring revenue. And in the end
Speaker 9: the moment you're talking about digestion. Okay, if we have
Speaker 9: had enough in terms of scaling. Now we are focusing
Speaker 9: on inferencing and you know, deploying this. We're not getting
Speaker 9: the Bengal for mark when it comes to scaling the models.
Speaker 9: That's when Nvidia has to find another way to you know,
Speaker 9: keep driving to growth.
Speaker 6: All Right, Mandy, we appreciate you and good to see you.
Speaker 6: Thank you so much. Man keep saying, no doubt we'll
Speaker 6: see him every day for the next few days. He's
Speaker 6: senior technology analyst over at Bloomberg Intelligence.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 2: say Alexa Play Bloomberg eleven thirty.
Speaker 3: Alex Deel, Paul Swening. We're live here in our Bloomberg
Speaker 3: Interactive Proker Studio. We're streaming live on YouTube as well
Speaker 3: as a head over to YouTube dot com and search
Speaker 3: Bloomberg Podcast and that's where you'll find us. David Bonsen
Speaker 3: joints us here. He's the chief vessel officer at Bonson Group.
Speaker 3: They about six and a half billion dollars assets under management. David,
Speaker 3: thanks so much for joining us here. You woke up,
Speaker 3: you know, two weeks ago almost we have a new
Speaker 3: president in the White House in starting January, we're going
Speaker 3: to have a new Congress as well. Did that change
Speaker 3: your outlook, your investment outlook at all?
Speaker 10: It did not, in the sense that the primary things
Speaker 10: that drive markets we felt were not going to move
Speaker 10: a ton, which is around the earnings profile, earnings expectations,
Speaker 10: and the monetary policy. However, within the weeds, it reinforced
Speaker 10: our optimism in the energy sector, which has certainly been
Speaker 10: very validated over the last couple of weeks, and the
Speaker 10: financial sector. That was an area where we thought policy
Speaker 10: would make a difference, and particularly some of President Trump's
Speaker 10: policies more favorable in those two sectors, and Vice President
Speaker 10: Harris is less so.
Speaker 3: From the earnings perspective, you mentioned earnings obviously driving stocks here.
Speaker 3: We're just kind of finishing up with some of the
Speaker 3: retailers this week. What is your view of the earnings
Speaker 3: profile this S and P five hundred these days?
Speaker 10: I think that the earning this profile is obviously very good,
Speaker 10: and that the growth of earnings next year is very good,
Speaker 10: and that that is fully and completely priced in the market,
Speaker 10: and so the risk is really very little that earnings disappoint.
Speaker 10: I mean, that's always possible, there's always issues that could
Speaker 10: disrupt expectations. We happen to have a very very good
Speaker 10: track record in our financial markets, so being able to
Speaker 10: project earnings. However, you're paying twenty two, twenty three times
Speaker 10: next year's best case earnings right now, and so I
Speaker 10: find that problematic.
Speaker 8: So where else would you go?
Speaker 9: Then?
Speaker 6: If that feels too expensive?
Speaker 10: We would not buy the entire index, especially where it's
Speaker 10: cap weighted, especially where a lot of the big tech
Speaker 10: names that are big profit earners are trading it over
Speaker 10: fifty times, and if you're looking at trading earnings, they're
Speaker 10: trading at seventy or eighty times earnings. Therefore, you have
Speaker 10: to be more selective, and we're more value biased at
Speaker 10: our firm and very divid and growth oriented. But some
Speaker 10: of the healthcare names, some of the financial names I
Speaker 10: mentioned energy. You know, right now, if everything goes perfectly
Speaker 10: for mag seven, it's about twenty one percent of next
Speaker 10: year's earns. It's thirty three percent of the financial So
Speaker 10: the only two sectors thanks projections are more than what
Speaker 10: they represent within the S and P. So we just
Speaker 10: recommend people be more bottom up right now.
Speaker 3: All right, So within let's save energy, for example, where
Speaker 3: in the energy space are you seeing opportunities.
Speaker 10: Very very heavily in midstream? And that's kind of interesting
Speaker 10: to say, because it's had a heck of a year,
Speaker 10: and really since November of twenty twenty has had quite
Speaker 10: a great tear. But it was doing so from just
Speaker 10: decimated prices out of COVID. Now not only have the
Speaker 10: pricing environment and the psychology and investor sentiment got better,
Speaker 10: but the fundamentals are dramatically better. Way less debt, less leverage,
Speaker 10: way more cash flow coverage, and certainly right now a
Speaker 10: policy you can see from the new Secretary of Energy
Speaker 10: coming in the Secretary of Interior. There is a philosophical
Speaker 10: bend that is pro our ability to get permits for
Speaker 10: new oil and gas pipeline and to export LNG. These
Speaker 10: two things are huge growth sectors.
Speaker 6: Yeah, meaning that you can actually put a shovel in
Speaker 6: a ground to build a pipeline.
Speaker 4: Maybe that's right.
Speaker 10: And so what you have right now is a lot
Speaker 10: of value in the current pipelines because they're all we have.
Speaker 10: And then now you get the opportunity to build new pipelines,
Speaker 10: which I think adds to the growth profile of the sector.
Speaker 3: So, Dave, how about in financials here? I mean, do
Speaker 3: you stick with the JP Morgan's Goldman Sachs is of
Speaker 3: the day or do you try to get little bit
Speaker 3: more specialized.
Speaker 10: Well, so we own JP Morgan and have owned it
Speaker 10: since March two thousand and nine, and it's one of
Speaker 10: the most profitable investments we've ever made, and we have
Speaker 10: had to tick down our waiting a little bit because
Speaker 10: it has just done so well. But we're not abandoning it.
Speaker 10: They're the cream of the crop and there isn't another
Speaker 10: big bank we want to own. We also as far
Speaker 10: as big commercial banks, Morgan Stanley is the name we own,
Speaker 10: not Goldman Sachs. They're actually both fantastic companies, great brands,
Speaker 10: great franchises. It's just the dividend growth. We think Ted Pick,
Speaker 10: the new CEO at Morgan Stanley. I joke, he's the
Speaker 10: person in America second most passionate about dividend growth, with
Speaker 10: myself being first. And we think Morgan Stanley's got a
Speaker 10: great fee oriented business that's much less lumpy and much
Speaker 10: less you know, dependent upon institutional securities and investment banking
Speaker 10: versus Goldman Sachs. They are They're wealth management and asset
Speaker 10: management are really annuittized at Morgan Stanley.
Speaker 6: David, we really appreciate it. We always love your perspective
Speaker 6: on this. David Bonson, Chief in Estment Officer at the
Speaker 6: Bonson Group, Thank you very much.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 2: flagship New York station Just Say Alexa playing Bloomberg eleven thirty.
Speaker 6: One of the best performing stocks in the S and
Speaker 6: P today yesterday, you name it is super Micro. Here
Speaker 6: with the latest is Wujin Hoo Bloomberg Intelligence Senior technology Analyst.
Speaker 6: So the latest is bdo that's going to be their
Speaker 6: new auditor. That's not like a giant, huge name though, right.
Speaker 6: Are you disappointed in the name or is it just
Speaker 6: the fact that hey, they have someone?
Speaker 11: Yeah, Hey, Alex, thanks for having me on the fact
Speaker 11: that they actually had got an auditor, given what they've
Speaker 11: gone through over the last two to three months, is
Speaker 11: actually positive news for them.
Speaker 3: Which when I kind of just look at this story again,
Speaker 3: they've had some real concerns with their auditors, and some
Speaker 3: of the auditors concerns about the risk controls.
Speaker 5: I guess at the company.
Speaker 3: Can you give us your opinion of management of this
Speaker 3: company and the board of this company.
Speaker 11: Yeah. You know, one of the reasons why I and
Speaker 11: Y resigned as an auditor as part of the AK
Speaker 11: filing was that there were some integrity issues that they
Speaker 11: found as part of trying to get some financial documents.
Speaker 11: You know, Paul, I haven't seen the word integrity issues
Speaker 11: in an AK filing or an auditor resignation since back
Speaker 11: in the Enron days. I'm not saying that this isn't Enron,
Speaker 11: but this is something that you don't typically find in filing.
Speaker 11: So you know, I have called for you may need
Speaker 11: an overhaul of the board or greater independence and possibly
Speaker 11: change of the CFO, because this is not the first
Speaker 11: rodeo of having delayed filings.
Speaker 6: Do you feel like the stock move is justified or
Speaker 6: does it have more to go? I mean, I'm taking
Speaker 6: a look at them move in the last couple of
Speaker 6: days and it's tremendous. But if you look at a
Speaker 6: one year chart, this move is at pittance.
Speaker 11: Yeah. So if we think about the recent moves, there's
Speaker 11: actually been more headline risk that's been driving this doct
Speaker 11: than the fundamentals. I think much of this is more
Speaker 11: of a relief rally that they're not going to get delisted. Now,
Speaker 11: delisting would have meant a couple of things. First of all,
Speaker 11: for they get delisted and it is going to start
Speaker 11: some force selling, but it also potentially well it would
Speaker 11: have forced the removal of the S and P five hundred,
Speaker 11: which would have been another round of force selling when
Speaker 11: the rebalancing comes in December the fifth, So that eliminates
Speaker 11: that risk for super micro So there is some relief there,
Speaker 11: but they're still not out of the woods.
Speaker 3: Where does this company fit into kind of your part
Speaker 3: of the tech stack? Wouge in terms of being a
Speaker 3: supplier of you know, hardware and components and things like that,
Speaker 3: because I mean it's got twenty five billion of I
Speaker 3: guess revenue. I'm just looking at the FA function forecasted
Speaker 3: for June twenty five.
Speaker 4: I mean it's a big company.
Speaker 11: Yeah. Look, it's all about AI AI AI. I'm in
Speaker 11: Hotlanta today for an A I conference and quite frankly,
Speaker 11: super Micro is going to take a prominent role at
Speaker 11: this conference to get customers. The question I have is
Speaker 11: how reliable are those estimates. Keep in mind there's been
Speaker 11: several suspend coverage suspensions, and I don't know how up
Speaker 11: to date those estimates are.
Speaker 6: Who are the customers for super Micro?
Speaker 11: Yeah, so we do know that there are a couple
Speaker 11: of large There's one large cloud customer which we suspect
Speaker 11: is Meta, but it's a tier two custom Tier two
Speaker 11: cloud customers company that may be filing for an IPO
Speaker 11: called core Weave, and also Tesla's x AI. They bought
Speaker 11: probably about one point five billion dollars in equipment from
Speaker 11: super Micro this past year.
Speaker 3: And which to your point about the analyst coverage, I
Speaker 3: just pulled up the A and R function for analysts recommendations.
Speaker 3: Most or a lot of the annals have suspended coverage
Speaker 3: or not rate is kind of what we see.
Speaker 2: So we of the.
Speaker 3: Ones that do have a rating on their three buys,
Speaker 3: seven holds, and two sells. So it sounds like this
Speaker 3: company has a lot of ground ahead of it to
Speaker 3: rebuild confidence from the analyst community, probably their customers, and
Speaker 3: from investors. Is that kind of your.
Speaker 11: Thought, Yeah, yeah, I mean, look, I think some of
Speaker 11: the headline risk has been eliminated for now, or at
Speaker 11: least extended. You know, they only received an extension from
Speaker 11: the Nasdaq. The next milestone, quite frankly, is probably February
Speaker 11: twenty fifth, when if they don't file their filings on
Speaker 11: time by that time, the delisting questions will start arising again.
Speaker 11: They essentially kick the can down the road.
Speaker 6: This might be a super silly question. At one point
Speaker 6: I probably knew the answer to this, But where does
Speaker 6: super Micro sit in the AI play stack?
Speaker 11: Yeah, so they're actually in the server space. It's the
Speaker 11: hardware equipment that helps run the models. Among the US vendors,
Speaker 11: they actually at the largest amount of AI service sales,
Speaker 11: larger than Dell and larger than HPE.
Speaker 6: So they're very much like needed in this market, Like
Speaker 6: it's going to be hard to replace them either way, right,
Speaker 6: Like they're needed essential.
Speaker 11: Well, that's that's a good comment and good question. Competition
Speaker 11: has grown. Dell is actually strengthening their AI chops quite
Speaker 11: a bit. But I came back from a couple of
Speaker 11: conferences recently and we're starting to see other companies with
Speaker 11: similar capabilities that we'll be making it much more competitive.
Speaker 11: And one of the evidence there so far is the
Speaker 11: lower gross margin. They peaked their gross margin at around
Speaker 11: seventeen percent a couple of years back when they with
Speaker 11: the sole player, and now that you have more players
Speaker 11: coming in, their gross margin in the last couple of
Speaker 11: quarters went from went to about thirteen percent and eleven percent.
Speaker 3: Wow, I'm just going to the dees function. March nineteenth,
Speaker 3: twenty twenty four, the company sold two million shares at
Speaker 3: eight hundred and seventy five dollars per sure. Coleman Sex,
Speaker 3: thank you very much, Wuginho, thank you for joining us
Speaker 3: at Woojin. Host is senior technology channels for Bloomberg Intelligence.
Speaker 3: I mean that is just amazing.
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