Speaker 1: Good morning. I'm Brian Curtis.
Speaker 2: And I'm Doug Krisner. Here are the stories we're following today.
Speaker 3: US equities posting the biggest drop in six months. The
Speaker 3: market is adjusting here to a world where rates will
Speaker 3: be higher for longer. Here's Shanaide Colton Grant, Global head
Speaker 3: of Investors Solutions at bny MELON Wealth Management.
Speaker 4: Investors are working through very unusual inflation environments, much tighter
Speaker 4: central bank policy, and we're reacting to new information. So
Speaker 4: I would say earlier in the year there was actually
Speaker 4: probably too much optimism about potential FED rate cuts that
Speaker 4: then got priced out of markets. We've now consolidated, We've
Speaker 4: built a better base to move forward.
Speaker 1: Bn Y Melon's Shinade Colton Grant.
Speaker 2: So we heard today from the former head of the
Speaker 2: Saint Louis FED, Jim Bullard. He was saying the Fed
Speaker 2: may need to raise rates even further as a way
Speaker 2: of avoiding a reacceleration in inflation. Here is Bullard speaking
Speaker 2: earlier to Bloomberg.
Speaker 5: Earlier this year, there was White's prediction that there would
Speaker 5: be a recession, and in the second half of twenty
Speaker 5: twenty three that recession isn't materializing. So to the extent
Speaker 5: you thought that a recession would produce extra downward pressure
Speaker 5: on inflation that had to be taken back out. So
Speaker 5: you've got you ended up with a higher for longer
Speaker 5: message here. I think that makes a lot of sense.
Speaker 2: Former Saint Louis Fedbank President Jim Bullard. Now, yesterday we
Speaker 2: were talking about the Fed holding rates steady at that
Speaker 2: twenty two year high for the FED funds in a
Speaker 2: range now between five and a quarter to five and
Speaker 2: a half percent. Most policymakers at the Fed also signaled
Speaker 2: they would favor one more rate hike this year, and
Speaker 2: in new production of predictions, officials trimmed estimates for the
Speaker 2: number of rate cuts next year from one hundred basis
Speaker 2: points all the way down to fifty basis points.
Speaker 3: Brian well Doug a changing of the guard at Fox
Speaker 3: and his parent company, At least on paper, we had
Speaker 3: the story from Bloomberg Steve Roppaport.
Speaker 6: Rupert Murdoch is stepping down as chairman of Fox's parent
Speaker 6: company and his news Court media holes, but the ninety
Speaker 6: two year old will maintain a presence as chairman emeritus
Speaker 6: of both companies. Fox says Murdoch's son Lachlan Murdock will
Speaker 6: ascend to chairman of News Corp and retain his role
Speaker 6: as Fox Corps CEO. Lachlan, in a statement, expressed gratitude
Speaker 6: that his father will stay on to provide counsel for
Speaker 6: both companies. Rupert Murdoch got his start with a small
Speaker 6: newspaper in Australia and worked his way up to a
Speaker 6: global media empire with a vast portfolio that includes the
Speaker 6: Fox News Network, the Wall Street Journal, and television properties
Speaker 6: in the US and the UK. Steve Rappaport Bloomberg Radio.
Speaker 1: Big Tech tild deal.
Speaker 2: Today, Cisco Systems has agreed to buy the software developers Splunk.
Speaker 2: It's a twenty eight billion dollar transaction and it is
Speaker 2: Cisco's biggest acquisition to date. This move really highlights Cisco's
Speaker 2: massive push into software and AI powered data analysis. Here's
Speaker 2: Bloomberg's Ed Ludlow.
Speaker 7: This is so in line with Chuck Robbins right, a
Speaker 7: networking gear seller like Cisco adding the software services in
Speaker 7: complement to that. Splunk is a data indexing business. Basically,
Speaker 7: you can monitor network users in real time. It has
Speaker 7: a cyber security element. For those investors or Cisco and
Speaker 7: Splunk investors out there. This deal will not impact Cisco's
Speaker 7: previously an out shared by back program.
Speaker 2: Bloomberg zed Ludlow. There By the way, Cisco will be
Speaker 2: paying one hundred and fifty seven dollars a share cash
Speaker 2: that represents a thirty one percent premium to Splunk's closing
Speaker 2: price on Wednesday. By the way, the cost of the
Speaker 2: transaction represents roughly ten percent of Cisco's market value.
Speaker 1: Brian, and here is something you alluded to earlier, Doug.
Speaker 3: The Bank of Japan expected to keep monetary stimulus unchanged
Speaker 3: at its meeting today. Investors will be focusing on any
Speaker 3: remarks by Governor Kazu Ueita on negative rates or the
Speaker 3: yen that says the end trades near a ten month low,
Speaker 3: although we did get a pop today. As Doug mentioned,
Speaker 3: at the moment dollar yen one forty seven fifty five
Speaker 3: traders are on alert for possible intervention, with one fifty
Speaker 3: per dollars seen as the trigger level. Investors will be
Speaker 3: looking for clarification on Nueita's remark to the Yomiuri newspaper
Speaker 3: this month. Uaita said that the chances are not zero
Speaker 3: that authorities might be able to confirm a virtuous wage
Speaker 3: inflation cycle by year end, and that could be a prerequisite.
Speaker 1: For a rate hype.
Speaker 3: Ryan Curtis and Doug Critisner Rashad Saloma will join us
Speaker 3: in a few moments. Doug, as journalists were naturally cynical.
Speaker 1: I can give you example.
Speaker 3: We were waiting for a hawkish pause from the Fed,
Speaker 3: and we got it. But the thing is, we were
Speaker 3: waiting for a douvish hawkish pause, and we got a
Speaker 3: hawkish hawkish pause, So go sell. That's kind of the
Speaker 3: way the market reacted. And I see that as just
Speaker 3: the skiddest nature to all of this.
Speaker 2: Could be right about that. And let's talk about a
Speaker 2: case of bad timing now, because the latest data from
Speaker 2: ep FR Global shows that investors plowed in about twenty
Speaker 2: six point four billion dollars into US equities in the
Speaker 2: most recent week, that was last week. That level is
Speaker 2: the most that we've seen since March twenty twenty two.
Speaker 2: And if you look at what was put into tech alone,
Speaker 2: about one point three billion. So timing maybe not the best.
Speaker 2: And I think it's fair to say this retreat that
Speaker 2: we have seen not just in the equity market, but
Speaker 2: in the bond market as well, has been very painful
Speaker 2: for that sixty forty portfolio. So far in the month
Speaker 2: of September, the sixty to forty model is down nearly
Speaker 2: two percent.
Speaker 3: So what's troubling, And this goes to the first part
Speaker 3: of your comment is it doesn't look like now investors
Speaker 3: are quite prepared to buy the dip on megacap tech,
Speaker 3: at least at the moment.
Speaker 1: We don't know, but that's the signal that we saw today.
Speaker 3: But also what could be troubling to others is that
Speaker 3: you had a pullback in everything, particularly in cyclical consumer
Speaker 3: cyclical areas. The only thing that reasonably performed well was healthcare,
Speaker 3: particularly managed care. That might be a standout going forward.
Speaker 3: I wanted to mention one other story that we will
Speaker 3: be looking at a little bit later. China is loosening
Speaker 3: capital control measures, and this is to make it easier
Speaker 3: for foreigners in Beijing to move their wages and their investments,
Speaker 3: their investment gains and such out of the country. So
Speaker 3: that's part of the effort to woo foreign investors. Will
Speaker 3: it work, well, we have to wait. They've become pretty disillusioned.
Speaker 2: Bill Gros said today that bond markets are headed for
Speaker 2: an unprecedented third year of losses because of sticking inflation
Speaker 2: and widening government deficits.
Speaker 1: And wouldn't that be amazing. I can't even remember the
Speaker 1: last year. Last time we had three years of losses.
Speaker 1: We should we should look that up. Now it's time
Speaker 1: for Global News.
Speaker 3: US House Speaking, Kevin McCarthy has sent members home for
Speaker 3: the weekend after his funding proposal was blocked at Baxter's.
Speaker 3: On top of that, has Global News from the nine
Speaker 3: to sixty news room in San Francisco.
Speaker 8: Ed, Yeah, that's right. Brian McCarthy's efforts to get a
Speaker 8: government funding bill have blown up, at least for now,
Speaker 8: as he got ambushed by two ultra Conservatives who voted
Speaker 8: even against bringing the bill up for a vote, dissidents
Speaker 8: Eli Crane and once loyal supporter Marjorie Taylor Green.
Speaker 9: We should be passed in appropriation bills right now, and
Speaker 9: I've been very clear about take the Ukraine money out
Speaker 9: of the defense bill and put it in a separate
Speaker 9: funding bill so that members.
Speaker 8: Like me can vote know and others can vote yes
Speaker 8: if they want. Now, McCarthy has sent members home until Tuesday,
Speaker 8: shortening the working time frame, and still saying there is
Speaker 8: time though.
Speaker 10: No it's not pretty, but this country's too great to
Speaker 10: quit on. And so what we are going to do.
Speaker 10: And remember what this is, it's not a cr it's
Speaker 10: the funding of government for the next thirty days to
Speaker 10: get our work done.
Speaker 8: But the reality is he can't get any work done
Speaker 8: within his own party. Democratic House Leader Hakim Jeffrey's other
Speaker 8: side of the aisle is scolding the mega Republicans and
Speaker 8: Republicans in general for that matter.
Speaker 11: Need the extreme mega Republicans to get their act together
Speaker 11: in the civil war that's happening on the Republican side
Speaker 11: of the isle, that's paralyzing Congress. Get your act together
Speaker 11: so we can handle the business of the American people
Speaker 11: and solve problems on their behalf.
Speaker 8: The deadline is September thirtieth, as you probably know, let's
Speaker 8: see Tuesday when they come back is the twenty sixth WOW.
Speaker 8: And Bloomberg's Laura David this says almost an impossible job
Speaker 8: right now.
Speaker 12: Kevin McCarthy is still thinking at how can I keep
Speaker 12: my job? How can I keep my right flank happy?
Speaker 12: So they're trying all sorts of different things. They voted
Speaker 12: on this defense bill earlier in the day. It failed
Speaker 12: for the second time this week, a surprised to McCarthy.
Speaker 12: Now they're looking at okay, can we go one by
Speaker 12: one and pass all these government spending bills. They're going
Speaker 12: to have to do some sort of shut stop gap
Speaker 12: measure to avoid a shutdown in nine days. But this
Speaker 12: is where they're still kind of throwing everything at the
Speaker 12: wall see what they can get. And it's almost certain
Speaker 12: that we're headed to a shutdown now, just given the
Speaker 12: timing and given where everyone is.
Speaker 8: Nine days and they're gone for three. Meanwhile, McCarthy has
Speaker 8: met with Ukrainian President of Vladimir Zelensky. He says some
Speaker 8: of his questions were answered, but all of the presidents
Speaker 8: wishes could not be met.
Speaker 4: So let's get.
Speaker 10: Asked for a joint session.
Speaker 13: We just didn't have time.
Speaker 1: He's already given joint session.
Speaker 10: So what we're doing for for Zelenski is exactly the
Speaker 10: same thing that we did for the Prime Minister of
Speaker 10: the UK the Prime Minister of Italy. We're putting the
Speaker 10: bipartisan group of members together to meet with him.
Speaker 8: So continued aid from Congress continues to be a question
Speaker 8: for Zelenski. Chinese President Shi chiampiing well meet with Sirius
Speaker 8: Bashara Salud Assad, I should say on the sidelines of
Speaker 8: the Asian Games this week, as Assad makes his first
Speaker 8: trip to China in nearly twenty years, and the Indian
Speaker 8: Parliament has approved a bill a reserve a third of
Speaker 8: lawmaker seats for women. Prime Minister Noarendra Motives says, a
Speaker 8: defining moment in the nation's democratic journey. Global News powered
Speaker 8: by more than twenty seven hundred journalists and analysts in
Speaker 8: over one hundred twenty countries. In San Francisco, I'm Ed Baxter,
Speaker 8: and this is Bloomberg.
Speaker 3: This is Bloomberg Daybreak Asia. I'm Brian Curtis here in
Speaker 3: Hong Kong. My colleague Rishad Saloma is here in the
Speaker 3: studio with me, and our guest is Kim Forrest, founder
Speaker 3: in io of Book Capital Partners. So just a few
Speaker 3: moments ago, Kim, we were musing over what was causing
Speaker 3: some of this nervousness in risk assets, like to get
Speaker 3: your take on it.
Speaker 14: Sure, well, I agree with your view, both of your views,
Speaker 14: that it's a lot of things, and I also think
Speaker 14: the third quarter is always kind of tricky and I
Speaker 14: have to see it through my old cell site analyst goggles,
Speaker 14: which says, oh, the third quarter is where a lot
Speaker 14: of companies are unsure of whether or not they've made
Speaker 14: their quarter because of vacations throughout the northern hemisphere. Everybody's
Speaker 14: on vacation and it's just hard to get big deals done.
Speaker 14: So that just adds a layer of uncertainty to this
Speaker 14: quarter that many other quarters don't have. So it's everybody's nervous.
Speaker 14: It's the third quarter, and part of me scratches my
Speaker 14: head and goes, well, what are you playing this game for? Like,
Speaker 14: what's your timeline? And if it's to outperform for this year,
Speaker 14: maybe you're going to have a tough time. But how
Speaker 14: about we do this. How about we own good companies
Speaker 14: and we look for the next three to five years.
Speaker 3: Yeah, I think that makes a lot of sense. It
Speaker 3: depends on your time horizon, and the short term looks
Speaker 3: like choppy waters. I wonder whether some investors are fearful
Speaker 3: here that this is more than just seasonal weakness and
Speaker 3: that it could morph into a little bit more of
Speaker 3: a selloff on the idea that you have this inversion
Speaker 3: of the yield curve that's telling us that something is
Speaker 3: out there that is likely at least to happen at
Speaker 3: a time when the FED is pretty firmly committed here
Speaker 3: to higher for longer.
Speaker 14: Sure, but I do think that what we're really missing
Speaker 14: here is that this is a data driven FED, and
Speaker 14: what they saw was data that inflation is persistent and
Speaker 14: higher than they want. So they're saying, the job number
Speaker 14: one is inflation, you know, getting that under control.
Speaker 11: Now.
Speaker 14: Remember America is really kind of unique with respect to
Speaker 14: them mandates of their central bank. They have two of them,
Speaker 14: which is full employment and steady pricing. But just because
Speaker 14: they have two of them doesn't mean they can ignore one,
Speaker 14: but they can wait one more than the other. And
Speaker 14: right now, inflation is what they're trying to conquer. Now,
Speaker 14: if they see, you know, the economic conditions changing, guess
Speaker 14: what they're going to do. They're going to change. But
Speaker 14: right now they were saying, right now, all things being considered,
Speaker 14: we're going to have to leave it higher for longer,
Speaker 14: which you know, that says that there's some strength here
Speaker 14: in the US. Shouldn't be a bad thing. And yet
Speaker 14: people are very very nervous that they're going to blow it.
Speaker 14: And I think they've done relatively well so far, so
Speaker 14: let's see what happens.
Speaker 13: Yeah, see what happens certainly, So you know, are we
Speaker 13: going to be seeing a slow down? I mean I'm
Speaker 13: not talking about styflation, recession or anything quite that drastic,
Speaker 13: but actually a meaningful slow down in the pipeline. And
Speaker 13: will that, as you've been alluding to, be evidenced in
Speaker 13: the data we get out of what you say, the
Speaker 13: earnings reports that we get. And where does that leave
Speaker 13: you with your portfolio?
Speaker 14: Well, I think we may see that. I think that
Speaker 14: is a very likely thing that probably in the next year,
Speaker 14: some that the economy of the US is going to slow.
Speaker 14: I don't think it's going to stall. I don't think stackflation.
Speaker 14: But again, this could give you the ability to pick
Speaker 14: up a good stock at a reasonable price, or maybe
Speaker 14: even an extra reasonable price. I keep coming on your
Speaker 14: show and saying, bad things happen, for sure, and you
Speaker 14: should know what they could be. But good things happen too.
Speaker 14: I don't own Nvidio, but in video is quadrupled this
Speaker 14: year because of its changing fortunes. And that's what you
Speaker 14: as an investor need to be looking for, is not
Speaker 14: just the downside changing fortunes, but being brave stepping out
Speaker 14: and understanding that there might be a trend that you
Speaker 14: should spot and then invest into. So I don't think
Speaker 14: going to cash is ever, ever, ever the answer, but
Speaker 14: always being aware of both the downside but then the
Speaker 14: upside as well.
Speaker 3: Yeah, there's been quite a sell off in some of
Speaker 3: the high flying megacap tech stocks, more than ten percent
Speaker 3: in some cases. In fact, what's interesting about nvidio. Remember
Speaker 3: when it came out with its earnings, the stock pop
Speaker 3: from three hundred to four hundred, and then it went
Speaker 3: further up after that, but now it's back to four
Speaker 3: to ten, So it's given up almost all the gains
Speaker 3: except for that one day repricing following the earnings. So
Speaker 3: you can imagine that some people might be enticed by that.
Speaker 3: But with rates higher for longer, you know, it seems
Speaker 3: like a lot of people are just interpreting this as
Speaker 3: sell tech.
Speaker 14: Yeah, I mean that always is the default answer for
Speaker 14: a lot of investors, and that's because tech and especially
Speaker 14: chips have been tied at the hip to global growth,
Speaker 14: if not a region growth. Right, So if you think
Speaker 14: that the global growth is going to slow even more
Speaker 14: than it has now looking at China and Europe. I
Speaker 14: would say those are slow growing, if not negative growing places.
Speaker 14: But I think too you have to understand this generative
Speaker 14: AI stuff and AI in general, is something that a
Speaker 14: lot of companies are going to be playing around with
Speaker 14: and investing in to see if they can't get more
Speaker 14: productivity out of their workers by using it. And that's
Speaker 14: the key. Look for productive uses of AI, not just
Speaker 14: cool uses of AI.
Speaker 13: I mean, everybody mentions it now, that's the thing. And
Speaker 13: it's so reminiscent of the dot com boom. I mean,
Speaker 13: it does seem as though it's going to be the
Speaker 13: panacea for the all the world's evils. The way it's
Speaker 13: going right now, do you think people have just essentially
Speaker 13: just gone a bit too far as they did in
Speaker 13: the late nineteen nineties.
Speaker 14: Absolutely, that is a great analogy. But look where we
Speaker 14: are at the time. We thought ordering dog food online
Speaker 14: was the miss thing on earth, and yet you know,
Speaker 14: here we are ordering a whole lot of other dumb
Speaker 14: stuff and depending on it for a lot of you know,
Speaker 14: our daily needs. But it does work its way into
Speaker 14: your life. It just doesn't play out the way you
Speaker 14: think at the beginning of an investing cycle. And I
Speaker 14: think that should be the lesson for us. All Let's
Speaker 14: keep our eyes open and not just guess, oh, it's
Speaker 14: in Nvidia, they're going to win. Let's sell everything out,
Speaker 14: So give.
Speaker 3: Us a theme that you can really bank on, and
Speaker 3: maybe just talk about portfolio construction before we finish.
Speaker 14: Well. I kind of like to not overweight or underweight
Speaker 14: sectors because as we are finding out again this year,
Speaker 14: oil's taking off and if you knew, if you look
Speaker 14: at the beginning of the year, I don't think anybody
Speaker 14: would have thought that, right. So I like maintaining the
Speaker 14: sector weighting of whatever your benchmark is, but then trying
Speaker 14: to find companies that are going to outperform their peers
Speaker 14: within those sectors. So things that we like in tech,
Speaker 14: since we're going to talk about tech are I know,
Speaker 14: AI always has the need for a lot of storage
Speaker 14: and fast computing power, and I think companies like AMD
Speaker 14: and maybe even in TOW might have the ability to
Speaker 14: scale up and at least get some of the crumbs
Speaker 14: that fall off of Nvidia's table. But more importantly, there's
Speaker 14: a lot of data needed for AI. So I like
Speaker 14: anything that has to do with storing data, and that's
Speaker 14: Micron and net app.
Speaker 1: Okay, Kim, really good session.
Speaker 3: Thanks so much for joining us, Kim Forrest, founder and
Speaker 3: CIO of Book Capital Partners. This is Bloomberg Daybreak Asia,
Speaker 3: your morning brief on the stories making news from Hong
Speaker 3: Kong to Singapore and Wall Street.
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Speaker 1: I'm Brian Curtis.
Speaker 2: And I'm Doug Chrisner. Join us again tomorrow for all
Speaker 2: the news you need to start your day, right here
Speaker 2: on Bloomberg day Break Asia.