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Speaker 1: Good morning.

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Speaker 2: I'm Brian Curtis and I'm Doug Krisner. Here are the

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Speaker 2: stories we're following today.

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Speaker 3: Micron Technology is predicting a steeper loss than anticipated in

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Speaker 3: the current quarter. It's an indication that an industry slump

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Speaker 3: is still weighing on the largest US maker of memory chips.

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Speaker 3: The company predicted a fiscal first quarter loss of as

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Speaker 3: much as a dollar fourteen a share, excluding some items,

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Speaker 3: and that was much worse than analyst predictions of a

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Speaker 3: ninety six cent loss.

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Speaker 1: Here's a CFRA analyst, Angelo Zeno.

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Speaker 4: This is a company that's seen its revenue decline not

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Speaker 4: fifty percent peak to trough, right. I mean, this is

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Speaker 4: probably the ugliest downturn we've seen on the memory side

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Speaker 4: of things since the financial crisis.

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Speaker 1: So it's been you know.

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Speaker 4: It's been a long time coming here over the last

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Speaker 4: couple of quarters.

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Speaker 3: And that is Angelo Zeno. On a positive note for Micron,

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Speaker 3: revenue is expected to start recovering in the period. Micron

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Speaker 3: expects sales of four point two to four point six

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Speaker 3: billion dollars, compared with an estimate of four point to

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Speaker 3: one billion. Mike Gren stock was up during the regular

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Speaker 3: session about four tenths of one percent and just training

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Speaker 3: here in after hours with a loss of about four percent.

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Speaker 1: Doug.

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Speaker 3: I'll have a little bit more on the China angle

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Speaker 3: on this in a moment.

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Speaker 5: Let's move on to the hedge funds Citadel. The firm

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Speaker 5: is preparing to push back against a probe by the

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Speaker 5: Securities and Exchange Commission over the use of WhatsApp. Sources

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Speaker 5: telling us that Citadel has told industry peers it's planning

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Speaker 5: to battle the SEC if the regulator moves against Citadel.

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Speaker 5: Here's Bloomberg Shanali Bossik.

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Speaker 6: Back in January, the Managed Funds Association PAD said that

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Speaker 6: the rules with private funds industry are different than that

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Speaker 6: of the banks. Now, there's no sense that the SEC

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Speaker 6: will necessarily bring a case forward, But as we've been

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Speaker 6: reporting here, we know that they've really expanded the probe

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Speaker 6: here and the idea of looking at more private funds.

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Speaker 6: Hedge funds, private equity firms Apollo Blackstone all facing these

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Speaker 6: same questions when it comes to communication from employees and

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Speaker 6: how the SEC looks at it.

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Speaker 5: That is Bloombrog Shanali Bossik. Now, so far, the banks

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Speaker 5: have paid more than two and a half billion dollars

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Speaker 5: to settle probes by US regulators into employees' use of

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Speaker 5: unofficial messaging platforms for business Now Citadel would be the

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Speaker 5: first to fight the SEC over any allegations of untracked communications.

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Speaker 7: Brian Well.

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Speaker 3: The Federal Trade Commission is reviving its challenge against Microsoft's

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Speaker 3: acquisition of Activision Blizzard. That story from Bloomberg Steve Rappaport.

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Speaker 8: The FTC plans to move forward with its in house

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Speaker 8: trial against the sixty nine billion dollar deal after pausing

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Speaker 8: it over the summer. A US appeals court in July

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Speaker 8: denied the agency's bid to stop the merger. The FTC

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Speaker 8: typically drops antitrust challenges when they lose in federal court,

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Speaker 8: but the Commission says public interest warrants a trial to

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Speaker 8: resolve the matter. Microsoft and Activision Blizzard are expected to

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Speaker 8: finalize the largest ever video gaming deal this year, but

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Speaker 8: the FTC challenge will continue even after the companies complete

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Speaker 8: their merger. Steve Rappaport, Bloomberg Radio Well.

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Speaker 5: The Justice Department is ramping up a probe into ubs.

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Speaker 5: The DOJ alleges the Swiss Bank and its one time rival,

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Speaker 5: Credit Suisse failed to comply with regulations allowing Russians to

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Speaker 5: evade sanctions. Here is Hugo Miller from Bloomberg's offices in Geneva.

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Speaker 9: We should stress that this is not in any sense

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Speaker 9: from what we understand, the DOJ suspecting that the bank

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Speaker 9: has actively sought to have people avoid sanctions. You know,

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Speaker 9: when you're onboard to use the bank jargon a client,

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Speaker 9: or when you off board a client, you have to

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Speaker 9: make sure that you're doing the necessary compliance.

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Speaker 8: In this case, what.

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Speaker 9: The DOJ suspects is that there were just some fundamental

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Speaker 9: failures of due diligence.

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Speaker 5: That is Bloomberg's Hugo Miller reporting from Geneva. Now, if

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Speaker 5: you look at US traded shares of UBS today, they

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Speaker 5: were down nearly four percent Brian.

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Speaker 3: Meantime, US and Japanese officials are warning that China back

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Speaker 3: hackers have been modifying software to target company based in

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Speaker 3: their countries.

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Speaker 1: The story from Bloomberg's Charlie Pellett.

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Speaker 7: According to the advisory from American and Japanese law enforcement

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Speaker 7: and cybersecurity officials, the group known as black Tech has

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Speaker 7: targeted government, industrial, technology, telecommunications, and defense sectors. The advisory says,

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Speaker 7: once inside the internal networks of international subsidiaries. The group

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Speaker 7: has disabled logging in order to pivot undetected to target

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Speaker 7: the company's headquarters in the US and Japan in New York.

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Speaker 7: Charlie Pellett's Bloomberg Radio Doug one of the big.

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Speaker 3: Stories that broke yesterday that we will follow up on

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Speaker 3: today is the house arrest of the evergrand chair, Huei

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Speaker 3: kai Yan. He's under what's called residential surveillance. That means

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Speaker 3: that he can't move around freely. He can't even talk

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Speaker 3: to anybody, meet with anybody, or talk to anybody without approval.

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Speaker 3: Now this is interesting because we all know what Evergrad

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Speaker 3: has been going through. But this guy, mister Hoay, had

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Speaker 3: been considered one of the best connected businessmen in all

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Speaker 3: of China, and so it's a major development. It puts

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Speaker 3: the restructuring of the developer back in question, and it

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Speaker 3: also brings liquidation more into the picture. I mean, it's

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Speaker 3: it's not apparent that that could happen soon, but it

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Speaker 3: is coming up in a court in Hong Kong. October thirtieth,

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Speaker 3: the shares down nineteen percent, by the way, down ninety

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Speaker 3: nine percent from four years ago.

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Speaker 5: That's amazing, you know, when you look at some of

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Speaker 5: the risk over here in the States. Brian, Obviously we

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Speaker 5: have to consider the potential for a government shutdown. It

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Speaker 5: risks up to one point nine billion a day in

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Speaker 5: lost or delayed revenue. And I think we also have

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Speaker 5: to add to the list the auto workers strike now

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Speaker 5: in it's thirteenth day. We know now that the union

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Speaker 5: is planning to expand the strike on Friday if there

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Speaker 5: isn't major progress. It's kind of interesting because today Neil Kashkari,

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Speaker 5: the head of the Minneapolis FED, was telling CNN, if

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Speaker 5: these downside scenarios were to hit the American economy, the

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Speaker 5: FED might have to do less, to do less with

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Speaker 5: monetary policy in order to get inflation back down to

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Speaker 5: two percent.

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Speaker 3: Yeah, it's really hard to discount all of these possible developments,

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Speaker 3: you know. So we're talking about the FED going down.

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Speaker 3: Just the other day, we were worried about Jamie Diamonds

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Speaker 3: seven percent on the FED funds rate.

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Speaker 1: A couple of other quick notes.

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Speaker 3: I mentioned that I would rope in China's angle on Micron.

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Speaker 3: You know, back in May, China said that Micron's products

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Speaker 3: were a national security risk, and that meant that any

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Speaker 3: sales in China were in question. What's interesting about the

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Speaker 3: report today from Micron is that although profit is still struggling,

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Speaker 3: they are pretty upbeat now about a pickup in revenue coming.

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Speaker 3: So that might mean that Micron is navigating the China restrictions.

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Speaker 1: I don't know if i'd say well, but at least okay.

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Speaker 3: And one other quick note, I think it's important to

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Speaker 3: note this that China Europe relations did not blow up

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Speaker 3: over these US or EU subsidies on evs. There were

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Speaker 3: plenty that we're worried about a new trade war that

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Speaker 3: could even rival what we saw from former President Trump

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Speaker 3: and US in China, but that didn't develop, and in fact,

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Speaker 3: European officials after their Trade minister's trip, found the government

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Speaker 3: in China to be willing to talk and willing to

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Speaker 3: make some new promises. Now it's time for global news.

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Speaker 3: At the deadline for a government shut down looms, there

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Speaker 3: are more and more people coming out saying it looks inevitable.

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Speaker 3: At Baxter is covering the story with other Global news

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Speaker 3: from San Francisco.

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Speaker 10: Yeah, that's right, Brian. Another man in the crosshairs of

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Speaker 10: the shutdown, House Speaker Kevin McCarthy is not one of

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Speaker 10: those who feels it's inevitable. He says, he feels a

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Speaker 10: continuing resolution can be passed by the end of the week.

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Speaker 11: Why don't you sit down in a meeting. Why aren't

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Speaker 11: you serious about making sure government doesn't shut down? The

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Speaker 11: first thing I would do, I would sit down with us.

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Speaker 11: I want to sit down with the president to secure

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Speaker 11: that border.

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Speaker 10: So listen, that now seems to be the sticking point today,

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Speaker 10: the border. He blames President Joe Biden.

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Speaker 11: Of course he should finish where the wall is at.

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Speaker 11: He should have remained in Mexico. He's got the title

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Speaker 11: forty two as well to be able to secure the

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Speaker 11: border and stop moving everybody across illegally.

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Speaker 10: So the message is shifted again, send a majority of

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Speaker 10: Leader Chuck Schumer delivered a message aim directly at McCarthy.

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Speaker 12: Speaker McCarthy, the only way, the only way out of

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Speaker 12: a shutdown is bipartisanship, and by constantly adhering to what

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Speaker 12: the hard right wants, you're aiming for a shutdown. They

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Speaker 12: want it, You know it. You can stop it.

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Speaker 10: Senator Lindsey Graham meanwhile, says a Senace CR does buy

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Speaker 10: some time, a.

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Speaker 13: CR that gives us to November will probably be a

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Speaker 13: smaller version of what we need in November of whatever

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Speaker 13: the time period. We're going to need some funding and

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Speaker 13: some policy changes for the border, and that will give

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Speaker 13: us about six weeks to work out a package.

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Speaker 10: Yeah, so again the border.

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Speaker 3: Now.

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Speaker 10: Meanwhile, if you're looking for the direction of what the

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Speaker 10: Republicans actually want, you're not alone is about spending. Then

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Speaker 10: it was about Ukraine, and today the border. Bloomberg's Julie

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Speaker 10: Fine says, it just keeps moving.

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Speaker 14: Well, I mean, at this point, you can't get anything

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Speaker 14: through a goal post if the goal post keeps on moving.

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Speaker 14: I think right now everybody is trying to prove their point.

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Speaker 14: But to what availed, and that.

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Speaker 10: Leads through Republican debate tonight, Bloomberg's Ryan Beckwith, also on

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Speaker 10: Balance of Power, says shutdown will be a major topic.

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Speaker 15: Nikki Haley has already come out on Bloomberg television and

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Speaker 15: said that it would be irresponsible and a bad idea

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Speaker 15: and would hurt tax payers.

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Speaker 8: But she also said.

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Speaker 15: That they need a reign in spending however they can,

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Speaker 15: which kind of undercut that message a little bit. But

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Speaker 15: we saw DeSantis served cheerleading for it, calling up some

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Speaker 15: members of Congress on the House Republican side, encourging them

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Speaker 15: to stay the course.

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Speaker 10: And Donald Trump holds a rally in Michigan about the

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Speaker 10: same time. US soldier Travis King, who entered North Korea

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Speaker 10: without permission in July, now back in US custody. He

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Speaker 10: went through China and then South Korea and now on

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Speaker 10: a plane headed back to the US. And let's see

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Speaker 10: here the giant pandas that have been in the Atlanta,

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Speaker 10: San Diego, Washington, d C, Memphis Zoos. They are on

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Speaker 10: their way by December back to China. A three year

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Speaker 10: agreement has been reached, and apparently China wants them back.

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Speaker 10: Global News powered by more than twenty seven hundred journalists

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Speaker 10: and analysts over one hundred twenty countries. In San Francisco.

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Speaker 10: I'm at Baxter and this is Bloomberg. This is Bloomberg

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Speaker 10: Daybreak Asia. I'm Brian Curtis here in Hong Kong.

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Speaker 3: Our guest is Jay Hatfield, CIO at Infrastructure Capital Management. Jay,

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Speaker 3: one of the top points in your notes is that

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Speaker 3: you see the Eurozone heading into a significant recession. Will

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Speaker 3: that be strong enough that it drags a lot of

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Speaker 3: other trading partners down as well.

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Speaker 16: That's our view if you really look at the data,

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Speaker 16: and the terminal is a great place to monitor this,

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Speaker 16: particularly if you're in the United States or not. In Europe,

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Speaker 16: the data has been actually horrendous, you know, both industrial

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Speaker 16: production and retail sales dropping at double digit rates. But

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Speaker 16: it's not just Germany. France's pmis are very weak. Italy

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Speaker 16: had a big drop in retail sales. So we think

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Speaker 16: since Germany is thirty percent of the Eurozone GDP, that

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Speaker 16: not just it will drag the rest of Europe, but

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Speaker 16: really this ultra tight ECB policy, they shrink the monetary

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Speaker 16: base by five hundred billion in the last two months.

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Speaker 16: Rates or you know, the curve is dramatically inverted, and

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Speaker 16: they don't have all the tailwinds that we have here

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Speaker 16: in the United States, like a strong housing market, you know,

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Speaker 16: government spending. So we're we think that that's super negative

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Speaker 16: for Europe, but probably good for the global bond markets.

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Speaker 1: Yeah.

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Speaker 3: Maybe credit, the thirty or fixed mortgage has one of

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Speaker 3: those reasons, one of those feathers in.

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Speaker 1: The cap that the US has.

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Speaker 3: You know, but the higher interest rates, the effect of

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Speaker 3: that is likely to be happening in the US as well.

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Speaker 3: It doesn't seem so tangible at the moment, but you

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Speaker 3: must be figuring that the US is also in danger

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Speaker 3: of slipping into recession.

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Speaker 16: Well, we definitely think that it's going to slow the

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Speaker 16: you know, the landed GDP, which is the real time

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Speaker 16: GDP tracker is kind of at a ridiculous four point

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Speaker 16: eight percent. Our forecasts is the US economy slows to

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Speaker 16: one to two percent, but does not go into recession

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Speaker 16: like Europe. And we have three or four big advantages

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Speaker 16: over Europe. Our natural gas prices are eighty percent below

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Speaker 16: Europe and the rest of the world, which also translates

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Speaker 16: into electricity because that natural gas price is electricity at

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Speaker 16: the margin. You know, I mentioned we have these four

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Speaker 16: spending bills that are all for the first time, probably ever,

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Speaker 16: countercyclical because they're focused on investment. And then we have

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Speaker 16: a shortage of housing and autos. So all these factors

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Speaker 16: really don't exist in Europe, and so we think will

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Speaker 16: stay out of recession, but they actually we're calling for

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Speaker 16: a major recession. I think a lot of people think Germany, well,

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Speaker 16: Germany's already in a minor recession, but that Germany's really

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Speaker 16: the weakest link.

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Speaker 3: I'm curious about the spike in energy prices and what

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Speaker 3: you see as the cause. A lot of people talk

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Speaker 3: about supply, but if demand is also part of the equation,

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Speaker 3: then that would seem to be suggesting some support that

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Speaker 3: there's some residual growth there that doesn't go away.

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Speaker 16: Well, what I think a lot of people don't appreciate

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Speaker 16: about the demand side. You've been talking about China a

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Speaker 16: lot and slowing in China. Demand is very sticky, particularly

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Speaker 16: in China, so even if their growth is three percent

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Speaker 16: versus six, they still have steady growth in demand. And

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Speaker 16: that's true for most of the world. And by the way,

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Speaker 16: Europe is not a major consumer a oil. They have

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Speaker 16: very high gasoline prices because of taxes, so on the

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Speaker 16: demand side it just grows slowly. But for the first

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Speaker 16: time ever, we actually have slow growth in supply. We

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Speaker 16: call it OPEC plus plus, so not just Russia and

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Speaker 16: the normal OPEC, but also US production is growing very slowly,

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Speaker 16: mostly because of the capital markets, a little bit because

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Speaker 16: of VSG and the current administration. So particularly with OPEC

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Speaker 16: constraining production, We're pretty bullish on all prices, think that

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Speaker 16: the range next year is going to be eighty five

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Speaker 16: to one oh five. Having said that, we don't think

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Speaker 16: it's going to be a super spike, but it is

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Speaker 16: negative for inflation, and the FED tends to underestimate the

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Speaker 16: bleed through from headline to core. So we were bearish

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Speaker 16: about a lot of near term inflation indicators like PCE

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Speaker 16: because you do get immediate bleed through which the Fed

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Speaker 16: doesn't seem to appreciate.

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Speaker 3: So how much risk are you willing to take on

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Speaker 3: now in portfolios?

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Speaker 16: Well, right this moment in time, we're trying to take

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Speaker 16: on as little risk as we can, and we do

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Speaker 16: run long term ETFs that aren't hedge funds, but we

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Speaker 16: do have a hedge fund. We don't have any risk

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Speaker 16: on in that hedge fund. But having said that, if

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Speaker 16: we're correct that Europe is going to go into a

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Speaker 16: significant recession and rates stop going up every day like

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Speaker 16: they are now, so find a bottom on the prices

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Speaker 16: and a top near four fifty, then we are very

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Speaker 16: bullish about the fourth quarter. But the real thing to track,

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Speaker 16: it's not really seasonality. What it is is newsflow, and

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Speaker 16: there's no newsflow until we have earning season that's likely

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Speaker 16: to be positive. You just give macro news and and

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Speaker 16: open market open mouth operations from the FED, which all

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Speaker 16: tend to be negative. So random news tends to be negative.

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Speaker 16: Earnings news when the economies strong is almost always bullish,

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Speaker 16: so we would wait to add risk till like mid October.

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Speaker 3: Yeah, I was hearing a lot of analyst calls in

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Speaker 3: the past forty eight hours that in this in this

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Speaker 3: little recent mini correction that we've had, it hasn't really

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Speaker 3: hit tech too hard, maybe eight to ten percent or so,

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Speaker 3: and some are saying that you won't really get it

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Speaker 3: clearing until that happens. Could you see a major correction

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Speaker 3: around the corner, And if so, do you think that

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Speaker 3: high quality tech will get targeted or no.

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Speaker 16: Well what a lot of people then appreciate is they

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Speaker 16: always say, oh, well, tech is a long duration asset,

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Speaker 16: so it's interest rate sensitive. But if you really you know,

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Speaker 16: we're bond investors, so if you actually calculate duration, it's

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Speaker 16: almost the same for all companies that are publicly traded,

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Speaker 16: so it's not really interest rates bought. Having said that,

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Speaker 16: interest rates affect the whole market, and when all market

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Speaker 16: goes down, the high beta stocks go down the most,

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Speaker 16: you know, like in the video is a tow beta stock.

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Speaker 16: Most of the big tech stocks or two beta, so

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Speaker 16: if the market keeps going down, Teckle get smashed the most.

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Speaker 16: We're pretty We actually think the trading so far, we've

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Speaker 16: been cautious, publicly cautious about the fall period, which isn't

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Speaker 16: that insightful, but it's coming true. We actually think the

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Speaker 16: trading so far has been pretty orderly given how much

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Speaker 16: the ten years sold off, So we actually would say

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Speaker 16: it's bullish, and you got this strange bounce today even

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Speaker 16: though everything seemed terrible and the news flow is probably

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Speaker 16: not going to be that good. So we remain constructed,

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Speaker 16: but just with the only caveat is we have to

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Speaker 16: also be right about the bond market, not you know,

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Speaker 16: sort of doing a Jamie Diamond going to infinity.

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Speaker 1: Yeah.

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Speaker 3: Yeah, we referenced that a few moments ago. Okay, final question,

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Speaker 3: I want to switch to China. You mentioned that we

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Speaker 3: talk about China a lot, so I would hope that

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Speaker 3: you're a dedicated listener. We note that China EU relations

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Speaker 3: didn't take a dip, even though there was some There

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Speaker 3: were some sharp comments leading up to this trip.

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Speaker 1: By of all this, Dean Brovski's the four day trip.

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Speaker 3: But European officials seem to back away from some of

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Speaker 3: the really sharp language. Should we take that as a

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Speaker 3: good sign about policy?

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Speaker 16: I think so. I mean Europe is more particularly Germany,

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Speaker 16: which where I discussed, is far more dependent on net

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Speaker 16: exports and China being the leader there, so they would

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Speaker 16: really be shooting themselves in the foot, and they'll probably

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Speaker 16: let the US take the lead on China bashing and

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Speaker 16: be in more self preservation mode. So we would take

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Speaker 16: that as a constructive step and just recognize that Europe

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Speaker 16: has the luxury of letting the United States take the

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Speaker 16: lead on being the tough guy.

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Speaker 3: Well, even China has welcomed in four top US officials

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Speaker 3: here over the past month, month and a half or so,

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Speaker 3: so it even seems like on that front that there

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Speaker 3: is a little bit of an interest in reaching out

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Speaker 3: for a stability.

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Speaker 1: So we'll hope that that happens. Jay, Thanks for joining us.

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Speaker 3: Jay Hatfield, CIO at Infrastructured Capital Management. This is Bloomberg

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