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Speaker 2: Well, let's bring in Paul Krugman, Nobel Laureate in Economics,
Speaker 2: Research professor at the City University of New York's Graduate Center,
Speaker 2: author of a popular substack. More than a half million subscribers.
Speaker 2: People are following him. His writings are a must, he
Speaker 2: joins us remotely, Professor, good to have you with us.
Speaker 2: You argue, or ask the question, rather, is this crypto's
Speaker 2: fimble winter? Do you think it is?
Speaker 3: Yeah? Uh, yeah, so I got a you know, we
Speaker 3: have talked about crypto winters a few times in the past,
Speaker 3: and I got carried away with the winter metaphor, and
Speaker 3: in Norse mythology, the fimble winter is the final disastrous
Speaker 3: winter before Ragnarok, the.
Speaker 4: End of all things.
Speaker 3: You know, Crypto, it's a it's a really weird space, right,
Speaker 3: the if you ask, how is bitcoin value compared to fundamentals? Well,
Speaker 3: what fundamentals? It's kind of all vibes, uh, And it
Speaker 3: has bounced back several times from big declines because people
Speaker 3: had faith in it and because it was you know,
Speaker 3: there was there was a lot of ideology behind it.
Speaker 4: But this is this time looks different.
Speaker 3: This time. A lot of the recent rise has been
Speaker 3: driven by Strategy Inc. And other you know, crypto hoarders.
Speaker 3: A lot of it has been political associated with Donald Trump.
Speaker 3: Everyone is comparing the price now to what happened when
Speaker 3: when he won the election, and those things are harder.
Speaker 3: You know, the kind of sentimental or almost mystical attachment
Speaker 3: that people have had to bitcoin itself probably doesn't apply
Speaker 3: to shares in Strategy probably doesn't. And the kind of
Speaker 3: libertarian ideology that supported bitcoin doesn't really apply now that
Speaker 3: it's largely a political creation, and it's sort of it's
Speaker 3: in some ways tied to what you think Trump's for
Speaker 3: future prospects are.
Speaker 2: So this is different, you know.
Speaker 5: I think about this a lot, Professor Krugman, and I
Speaker 5: think about supply demand, certainly when it comes to trades
Speaker 5: in assets. I'm not quite sure what you call cryptocurrencies.
Speaker 5: I think we still struggle with what it really is.
Speaker 5: Having said that, if President Trump wasn't in the White House,
Speaker 5: what's your view on whether or not crypto would be
Speaker 5: you know here around sixty four thousand dollars, would it
Speaker 5: be a very different trade? Potentially?
Speaker 2: Well, it might be.
Speaker 3: I don't think it would have gotten up to one
Speaker 3: hundred and twenty five thousand or you know thereabouts without
Speaker 3: his election. It's possible that the day of reckoning might
Speaker 3: have waited longer. I mean, there was a in some
Speaker 3: way is the very prominence of crypto, the huge attention
Speaker 3: given to it, the all of the hype about, uh,
Speaker 3: this is a crypto friendly White House has in some ways,
Speaker 3: you know, led to a big run up, but also
Speaker 3: focused people's minds. And I think there's a lot more
Speaker 3: so what is this actually for anyway? And there's also
Speaker 3: you know, the sell America trade, the the basement trade, which,
Speaker 3: among other things, first of all, should have benefited bitcoin
Speaker 3: if it was the kind of refuge asset that people
Speaker 3: had sold it as. But also the fact that a
Speaker 3: lot of people sold bitcoin as being the next gold.
Speaker 3: And it turns out that in the face of doubts
Speaker 3: about stability, doubts about politics. The next goal turns out
Speaker 3: to be gold, not bitcoin. I think it's a big
Speaker 3: wake up for people that, you know, maybe this isn't
Speaker 3: actually going to be an enduring asset, so I you know, no,
Speaker 3: it's again, it's really really hard. If you ask what
Speaker 3: when people make for price forecasts for bitcoin, always wonder
Speaker 3: on what basis. Yeah, it's not like you could do
Speaker 3: a price earnings rasue on this thing, because there's no earnings,
Speaker 3: no services. It's all just pure faith. But it does
Speaker 3: feel like we're seeing a real crisis of faith right now.
Speaker 2: What would stop this administration, in your view, from stopping
Speaker 2: from coming in and bailing out the industry. I mean,
Speaker 2: the industry spent a lot in twenty twenty four to
Speaker 2: get pro crypto politicians elected. It was successful in many
Speaker 2: different cases, particularly in the Senate race in Ohio and
Speaker 2: seating Shared Brown. Some Republicans want Scott best At, the
Speaker 2: Treasury Secretary, to buy bitcoin by selling some of the
Speaker 2: US's gold reserves. When asked whether the US Treasury has
Speaker 2: the ability to bail out bitcoin, the Treasury Secretary said
Speaker 2: this week he doesn't have the authority to buy bitcoin
Speaker 2: with tax dollars. Could the president do that?
Speaker 4: Well?
Speaker 3: Yeah, I mean in general, you know, Scott bestn't. His
Speaker 3: word is not good as goal, let's say, on these things.
Speaker 3: And they could, but I would say, look at the parallel.
Speaker 3: The US spend a really fairly limited sum in bailing
Speaker 3: out Malay in Argentina, Relatively, you know, it's a tiny
Speaker 3: sum compared with what it would take to bail out bitcoin,
Speaker 3: and there was a firestorm of outrage over it. Not
Speaker 3: enough to stop them from doing it, but enough to
Speaker 3: really get pause if they tried to step in and
Speaker 3: bail out this industry, especially given all the stories about
Speaker 3: crypto as a channel of corruption, all the stories about
Speaker 3: the Trump family being enriched through crypto, all of the
Speaker 3: buying of politicians, the pardons of crypto crypto criminals, I
Speaker 3: think the political backlash would be huge. Now, maybe they've
Speaker 3: spent enough, maybe the crypto industry has spent enough money
Speaker 3: to overrule all of that, but I think it's highly questionable.
Speaker 5: You know, one thing I think about, Professor Kruman is
Speaker 5: transparency to investors. It's something we talk about with everything.
Speaker 5: It's one of the things we're going through with private credit,
Speaker 5: right It's why although the US market financial markets may
Speaker 5: not perfect, it is why it's in many ways the
Speaker 5: gold standard for global investors. Having said that, on that
Speaker 5: transparency issue, does it make sense as we look at
Speaker 5: what's going on in crypto that we really have a
Speaker 5: full understanding of the White House's exposure the President and
Speaker 5: his family to cryptocurrencies, to understand what's at stake for
Speaker 5: them personally, politically, financially, especially as policies unwined, and to
Speaker 5: understand maybe how that might be from a supplied demand
Speaker 5: metric and all that that entails supporting this market at
Speaker 5: least up until late.
Speaker 3: Yeah, I mean that we can people are just making
Speaker 3: guesses at how much the Trump family is exposed and
Speaker 3: other government officials. By the way, let's not forget that
Speaker 3: the Commerce Secretary, Howard Lutnik, you know, his firm was
Speaker 3: very close to Tether, which is very much in the
Speaker 3: in the crypto business and particularly seems to be used
Speaker 3: for a lot of unsavory aspects of that business. But
Speaker 3: it's certainly a significant exposure, and there's a kind of
Speaker 3: shadow exposure in the sense that the crypto industry has
Speaker 3: been throwing a lot of money, not just at campaign contributions,
Speaker 3: but at the presidential family directly so, and a crypto
Speaker 3: another Crypto winter would would would be financially harmful to
Speaker 3: the first family. But again that's all sort of taken
Speaker 3: as a given that there's a stake there. I don't
Speaker 3: even know if it's a lack of transparency. We all
Speaker 3: know that there's a large personal financial stake in how
Speaker 3: Crypto does. The question is can they really get away
Speaker 3: with it. I mean, there's lots of things have been
Speaker 3: gotten away with, but this is the kind of thing
Speaker 3: that really does get voters enraged. This is the kind
Speaker 3: of thing that leads to a lot of yelling at
Speaker 3: at Republican members of Congress and town halls. So I'm
Speaker 3: not sure that this is something that they're going to
Speaker 3: be able to do pticularly because this is big, right,
Speaker 3: Crypto was still even with the recent foll it's still
Speaker 3: two and a half trillion dollar asset class. It takes
Speaker 3: a lot of money to build that out.
Speaker 5: We should put out on Howard Lutnik, his sons Brandon
Speaker 5: and Kyle, now serves chief executive and executive vice chairman of, respectively,
Speaker 5: of Canter Fitzgerald and that Howard Lutnik did divest to
Speaker 5: comply with ethics agreement he signed when he joined at
Speaker 5: President Trump's cabinet. So we just wanted to kind of
Speaker 5: put that out there.
Speaker 3: Yeah, that's right. I mean he's not personally, but you know, yeah,
Speaker 3: if my relatives were very involved in the business, people
Speaker 3: would kind of would not say that I had fully
Speaker 3: disconnected myself from it.
Speaker 2: Hey, professor, before we let you go, the promise of
Speaker 2: bitcoin was this decentralized currency that would flow easily across borders,
Speaker 2: allow people to exchange value, and it would be you know,
Speaker 2: not tied to a single government entity. In your view,
Speaker 2: does bitcoin have any value?
Speaker 4: No?
Speaker 3: Or let let me give a slight qualification the places
Speaker 3: where bitcoin has actually been useful to people. I mean
Speaker 3: it's it's it's VARs. They used for essentially criminal enterprise
Speaker 3: of some kind, but not all crimes are the same.
Speaker 3: And I will say that if you're trying to smuggle
Speaker 3: money out of Iran or something like that, then bitcoin
Speaker 3: is a way around capital controls. But it's also a way,
Speaker 3: you know when it's also a way that criminals who
Speaker 3: install malware on your computer and then demand the ransom
Speaker 3: collect the money. In terms of the original idea that
Speaker 3: this was actually a superior form of money. It's a
Speaker 3: total bust, and it's a seventeen year old bust. That's
Speaker 3: the thing that gets to me. It's this is not
Speaker 3: an idea of the future. This is not a cutting
Speaker 3: edge technology. This is something that is only slightly younger
Speaker 3: than the first iPhone, right, and if it hasn't made
Speaker 3: any inroads as an actual legitimate means of payment in
Speaker 3: seventeen years, then clearly it wasn't a great idea to
Speaker 3: start with.
Speaker 2: Stay with us more from Bloomberg Business Week Daily coming
Speaker 2: up after this.
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Speaker 2: I want to bring in Urian tim Or, director of
Speaker 2: Global Macro Fidelity Investments, seventeen and a half trillion in
Speaker 2: assets under management, six point eight trillion in discretionary assets.
Speaker 2: He joins us from Boston. Urian, I want to start
Speaker 2: where we left off with Professor Krugman, and that's all
Speaker 2: about the effect of cryptocurrency, the decline and bitcoin that
Speaker 2: we're seeing, and whether or not that has a wider effect.
Speaker 2: Michael Burry certainly warned of that earlier this week. Are
Speaker 2: you worried about it?
Speaker 6: No, I think it is. There's a few things going on.
Speaker 6: And by the way, I do disagree with Professor Krugman
Speaker 6: about the inability to value bitcoin, because you can make
Speaker 6: that same argument for gold, and even though neither of
Speaker 6: those assets generate a cash flow, you can value them, right.
Speaker 6: You can value bitcoin on the size of its network.
Speaker 6: It is a network asset. And you can value gold
Speaker 6: on the basis of you know, it being hard money,
Speaker 6: so you can compare it to soft money. So if
Speaker 6: you do a ratio of the gold above ground value
Speaker 6: to the m to money supply, it goes in a
Speaker 6: band in a ratio if you will, And you can
Speaker 6: apply the same logic to bitcoin. So I do think
Speaker 6: you can value them, and I do that. I compare
Speaker 6: the value of both gold and bitcoin to the money supply,
Speaker 6: and they've both run a lot. You know, a few
Speaker 6: years ago they were half the size of the money supply,
Speaker 6: but even gold on its own is now thirty five trillion.
Speaker 6: The money supply is twenty three trillion. Bitcoin is about
Speaker 6: one point seven trillion in market value, so they've come
Speaker 6: a long way and it's not that surprising that they're
Speaker 6: taking a rest. You know, Bitcoin did form kind of
Speaker 6: its fifth wave, if you will, two one hundred and
Speaker 6: twenty six thousand, it was one hundred and five percent
Speaker 6: keeger over one hundred and forty five weeks at sixty
Speaker 6: five thousand. I actually think it has some value again,
Speaker 6: but they're different players on the same team. They take turns,
Speaker 6: and that's exactly what we've seen. So but coming back
Speaker 6: to your question, I don't think bitcoin, it's the client itself,
Speaker 6: will be a systemic event. You know, the last time
Speaker 6: it happened, it wasn't. It is getting caught up in
Speaker 6: the speculative you know, first frenzy and then unfrenzy in
Speaker 6: in you know, kind of the mean stocks and the
Speaker 6: nonprofitable gross stocks, the other speculative names. And of course
Speaker 6: we have the treasury uh, you know those treasury companies
Speaker 6: that are that are really hurting right now. So it
Speaker 6: is part of a bigger picture. But I don't think
Speaker 6: it's going to lead to a systemic you know, sell
Speaker 6: off in assets in general.
Speaker 2: Okay, cool, and with today's decline down nine percent. Right now,
Speaker 2: the market cap of all of bitcoin is falling pretty quickly.
Speaker 2: It's at about one point three trillion as we speak.
Speaker 5: So you're in what would you rather own? Bitcoin, gold
Speaker 5: or stocks?
Speaker 6: I actually like them all. I mean, the stock market
Speaker 6: is the stock market, and that is the best compounder
Speaker 6: over time. You know, they do generate cash flows and earnings,
Speaker 6: you can value them. Most of the stocks around the
Speaker 6: world are not expensive, the S and P is, but
Speaker 6: that's because of basically seven names that are trading, you know,
Speaker 6: in the mid thirties. But the equity market is a
Speaker 6: undisputed compounder over time. I think, in my view it
Speaker 6: should always be the anchor asset in any portfolio. And
Speaker 6: then beyond that, you know, I see gold and bitcoin
Speaker 6: and commodities in general, as well as alternatives as basically diversifiers,
Speaker 6: assets that generally are uncorrelated to both equities and bonds,
Speaker 6: and certainly gold fits that bill even more so than bitcoin.
Speaker 6: So I think they all have a place, And especially
Speaker 6: in a world of fiscal dominance, where maybe debt gets
Speaker 6: debased over time, we get maybe a closer cooperation with
Speaker 6: between the Fed under presumably soon to be Kevin Walsh
Speaker 6: and the Treasury under Scott bessened if there's going to
Speaker 6: be greater coordination in terms of managing the debt load.
Speaker 6: I can see the argument for harder assets, and I
Speaker 6: think gold and bitcoin again, I see them as different
Speaker 6: players on the same team. But again I don't think
Speaker 6: either one of them compares to equities over the long term.
Speaker 5: Just got thirty seconds forgive, and you've got to come
Speaker 5: back soon. But the AI trade, it does feel like
Speaker 5: we're having a little bit of a reckoning, certainly when
Speaker 5: it comes to software. Thirty seconds on your view there.
Speaker 6: Well, so AI of course is perhaps the greatest technological
Speaker 6: innovation we've seen in a long time. And I think
Speaker 6: you know because that market has ramped up so high
Speaker 6: that whenever anything goes wrong, you can see you can
Speaker 6: see the rationale for everyone sort of exiting first and
Speaker 6: asking questions later. But we've seen this before, We saw
Speaker 6: this even last November. We've seen it before.
Speaker 1: That you're listening to the Bloomberg Business Week Daily podcast.
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Speaker 2: Well, cindyd does. Ken Griffin made some comments at a
Speaker 2: Wall Street Journal event this week. They're getting a lot
Speaker 2: of traction. He said, the Trump administration's tendency to reward
Speaker 2: loyalists doesn't play well with business executives. He also criticized
Speaker 2: the president's willingness to enrich his family while in office.
Speaker 2: Here's what he said. He said, President Trump has made
Speaker 2: quote missteps in making decisions that benefit his family while
Speaker 2: in office. It raises the question of whether the public
Speaker 2: is being served, he said at the Journal event.
Speaker 5: Yeah, he did so. This brings us to Tim O'Brien
Speaker 5: and his latest colum from Bloomberg opinion, how the President's
Speaker 5: UAE deal is a security risk. Tim joins us now
Speaker 5: here in our Bloomberg Interactive Brokers studio. Tim, It's interesting,
Speaker 5: I feel like since the Journal did this dive into
Speaker 5: this deal, or what seems to be a transactional deal
Speaker 5: could appear that way in a presidency that many agreed,
Speaker 5: there are so many transactions that go on. It is
Speaker 5: a transactional White House. Why are we talking so much
Speaker 5: or why should we about this particular deal.
Speaker 7: Well, the context of it is that during during the
Speaker 7: Biden administration, the export of high end computer processing chips
Speaker 7: were banned to the UAE, and they were banned because
Speaker 7: the ua is a transit port for the same chips
Speaker 7: to China, and the US isn't a foot race for
Speaker 7: on the technological side on aie these chips. AI that
Speaker 7: these chips due will and then obviously militarily they have
Speaker 7: all sorts of military applications, and the Biden administration and
Speaker 7: a number of national security experts didn't feel it was
Speaker 7: a safe transit point.
Speaker 5: Cause for concern in terms of US national security, yeah, and.
Speaker 7: Our economic competitiveness both, right, both, you know, I mean
Speaker 7: one of our edges in the world is technological innovation
Speaker 7: and it's represented by chips. And I think that's an
Speaker 7: entirely non ideological, non partisan viewpoint. It's about American security
Speaker 7: and American economic growth. Within two months of Donald Trump
Speaker 7: getting inaugurated, those bands were being renegotiated and various things,
Speaker 7: and then by May an agreement was in place, and
Speaker 7: by last November it was finalized and the UAA now.
Speaker 2: Gets those chips.
Speaker 7: And there had been various, you know, reasons positive for
Speaker 7: this change in that position. The amoradis promised about a
Speaker 7: one point four trillion dollar investment in the United States
Speaker 7: over ten years. I believe that was given as one reason.
Speaker 7: A little further along, Bloomberg News reported that the Amoradis
Speaker 7: took a stake in World Liberty Financial, the crypto platform
Speaker 7: of the Trump's control.
Speaker 4: And then The New.
Speaker 7: York Times did a big deep dive in the fall
Speaker 7: last year about the apprehension within Trump's own administration about
Speaker 7: loosening these controls member of his own White House. The
Speaker 7: new element of this that then surfaced was this recent
Speaker 7: Wall Street Journal story in which we learned that actually
Speaker 7: four days before he was inaugurated, Before Donald Trump was inaugurated,
Speaker 7: Sheik tach Nun, who is one of the most powerful
Speaker 7: people in the UAE, is the brother brother of the
Speaker 7: country's president. He oversees one of the world's biggest sovereign
Speaker 7: wealth funds, he controls two AI companies, and he oversees
Speaker 7: the nation's national security and intelligence apparatus. Made a big
Speaker 7: investment in the Trump's families company and it was about
Speaker 7: half a billion dollars, and of that, about one hundred
Speaker 7: and eighty seven million went to the Trump family, raising
Speaker 7: the obvious question of was Donald Trump bribed to loosen
Speaker 7: Chip exports to the UAE. And I think anyone who
Speaker 7: you know sort of looks at this dispassionately, see, yes,
Speaker 7: that's certainly a possibility.
Speaker 2: So we should note that the White House, in that
Speaker 2: Wall Street Journal story said that quote, President Trump only
Speaker 2: acts in the best interests of the American public. There
Speaker 2: are no conflicts of interest. The White House spokeswoman added
Speaker 2: that Witcoff is working to advance President Trump's goals of
Speaker 2: piece around the world. I bring that up because you know,
Speaker 2: that's that's what the White House says. Congress though, where
Speaker 2: can I just comment with us?
Speaker 3: Yeah?
Speaker 7: So, first off, the Whitcoff family also benefited from Shake
Speaker 7: Tanune's investment. Steve Whitcoff, who's the ENVOYD of the Middle East.
Speaker 7: His son is a co founder of World Liberty Financial.
Speaker 7: Todd blanche Is that at the Attorney General, was on
Speaker 7: the news shows last weekend. He was asked the same question.
Speaker 7: He said, what Trump is doing is neither untoward or unprecedented,
Speaker 7: but actually is untoward. And the volume of these transactions
Speaker 7: and the frequency of them is certainly unprecedented.
Speaker 2: So I want to go to the We're going to
Speaker 2: jump around your piece a little bit, but you end
Speaker 2: this piece in a way that I think is important
Speaker 2: because it's kind of crickets right now coming from Congress.
Speaker 2: You write that it's absolutely true that Trump has hung
Speaker 2: a four cell sign on the Oval Office at a
Speaker 2: scale and frequency that is untoward and unprecedented. It's also
Speaker 2: true that a Republican controlled Congress and the courts are
Speaker 2: unlikely to do a thing about it. You know, there's
Speaker 2: the four hundred million dollar jet from Qatar that in
Speaker 2: any other world would be like, you know, outrage from Congress. Perhaps,
Speaker 2: why are lawmakers so unwilling to push back?
Speaker 7: Well, I mean, I think I think this was also
Speaker 7: true of his first term. And the reality is I
Speaker 7: think the Republican Party has been recast in President Trump's image,
Speaker 7: and I think that members of his party are disinclined
Speaker 7: to take him on publicly about, you know, abusing the
Speaker 7: privileges and powers of an office that's always, by design,
Speaker 7: by constitutional design, had a meaningful amount of latitude compared
Speaker 7: to all of the other federal offices. So I think
Speaker 7: that's one factor. The other factor is that the federal
Speaker 7: agencies that would look into things like this are also
Speaker 7: beholden to trup President Trump, whether it's the Justice Department
Speaker 7: or the FBI, or the Securities and Exchange Commission, State Department,
Speaker 7: et cetera, et cetera.
Speaker 5: You know, it's funny. We talked with Paul Krugman at
Speaker 5: the top of the hour and our top of the
Speaker 5: two pm hour, and he talked about he's looking at
Speaker 5: what's going on with crypto and he says, if we're
Speaker 5: going to have a crypto crash, best to get it
Speaker 5: over with now before the industry becomes too big or
Speaker 5: too politically powerful to fail. It's just this interconnectedness, if
Speaker 5: you will, with so many things it feels like with
Speaker 5: what appears to be in terms of the White House,
Speaker 5: family moves and so on. That's what I'm blown away by, Tim.
Speaker 5: And maybe this sounds so naive that there are absolutely
Speaker 5: it feels like no checks and balances. And I would
Speaker 5: say the same thing if this was a democratic white House.
Speaker 5: So is our system broken or like what? I don't know.
Speaker 5: I'm thinking about what do we do on the other
Speaker 5: side of this, because I'm just wondering, could there be
Speaker 5: then whoever next comes into the White House, whatever party
Speaker 5: they might be, that are now emboldened to see the power.
Speaker 7: The self deal.
Speaker 5: Yeah.
Speaker 7: Well, you know, the framers of the Constitution worried about this.
Speaker 7: You know, they were realists. And there are two so
Speaker 7: called emolument's clauses in the Constitution that forbid the president
Speaker 7: from essentially a monument. A monument is a is an
Speaker 7: eighteenth century word for bribe that basically prevents the president
Speaker 7: from accepting gifts or monies or titles in order to
Speaker 7: make sure that the policy making process is pristine. At
Speaker 7: the same time, the conflict of interest law rules that
Speaker 7: have come into the federal government since Watergate don't apply
Speaker 7: to the presidency, and for reasons, right, for good reasons,
Speaker 7: because the president touches so many things from a policy
Speaker 7: level and a diplomatic level that once you begin circumscribing
Speaker 7: what they can touch, you actually diminish the powers of
Speaker 7: that office to act effectively.
Speaker 2: So there's a good reason for that.
Speaker 7: What that then means is you have to have someone
Speaker 7: occupying the office who is morally grounded, who is observant
Speaker 7: of the law, who is self regulated, who has a
Speaker 7: respect for the majesty and powers of that office, regardless
Speaker 7: of what power they powerty they come from.
Speaker 2: We're in a midterm year right now. Could this change
Speaker 2: if Democrats take control of Congress?
Speaker 7: What will change probably if the Democrats take control of
Speaker 7: Congress is the frequency of investigations and hearings around this.
Speaker 7: Does that mean it will change the behavior? I don't know,
Speaker 7: and you know, and I think a lot of American
Speaker 7: voters grew sick of some of the infighting and began
Speaker 7: tuning it out in the first Trump term. I don't
Speaker 7: think that means it shouldn't be examined, to be examined.
Speaker 7: Whether or not examinations alone are enough to put an
Speaker 7: end to it. I'm skeptical of that.
Speaker 5: Yeah, I mean I do think about where this goes
Speaker 5: from here and what do we learn? I mean, are
Speaker 5: we learning also that our system there needs to be
Speaker 5: if we can't count on somebody doing the right thing,
Speaker 5: And I think about what we teach our kids and accountability.
Speaker 5: I feel like we've talked about this with you before.
Speaker 5: If we can count on an individual to do the
Speaker 5: right thing, then what then?
Speaker 7: Congress needs a pass legislation forbidding the kind of activities
Speaker 7: that Donald Trump is engaged in an office, like entering
Speaker 7: into business transactions, even if it's once removed with your
Speaker 7: children while in the White House. This is not a
Speaker 7: complex thing to forbid, right what about the Supreme Court, Well,
Speaker 7: the Supreme Court to take action here too, But I
Speaker 7: think what the Supreme Court would say is it's up
Speaker 7: to Congress first. I think philosophically that's where they're disposed.
Speaker 7: And I think the Biden administration had an open door
Speaker 7: to close off some of these loopholes when Joe Biden
Speaker 7: was president, and they just didn't prioritize it, and it
Speaker 7: was a huge missed opportunity.
Speaker 5: I want to go back to the national security issue
Speaker 5: because it's interesting. I feel like in the first White
Speaker 5: House Donald Trump did some things, especially when it came
Speaker 5: to China, that President Biden continued, like the pushback, and
Speaker 5: I think we actually had some agreement on both sides
Speaker 5: of the aisle about China and its role in the
Speaker 5: world and the US's role in the world, and how
Speaker 5: the two were really competing against our are competing for
Speaker 5: similar dominancy or dominant positions. Having said that, how would
Speaker 5: you describe our national security right now? Well, you know,
Speaker 5: US as some of these deals.
Speaker 7: I mean, we remain the most powerful military force on
Speaker 7: the planet and that's a huge advantage. But the reality
Speaker 7: is we can be compromised in the shadows, and if
Speaker 7: the president and the President's delegates and the president's advisors
Speaker 7: aren't hewing to ethical lines themselves, and we make policy
Speaker 7: changes like admitted allowing export controls on chips to be lifted,
Speaker 7: that is flat out not in our interests.
Speaker 2: Stay with us more from Bloomberg Business Week Daily coming
Speaker 2: up after this.
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Speaker 5: You continue to see this stock, it's off its lows.
Speaker 5: It was down as much as eleven percent here in
Speaker 5: the aftermarket. Now Tim just down about seven percent.
Speaker 2: I want to bring in James Chalkmark, partner and chief
Speaker 2: investment officer at Clockwise Capital. Have got about seventy million
Speaker 2: in assets under management. Also, they've got the Clockwise US
Speaker 2: Core Equity ETF. Ticker is Time and Amazon is the
Speaker 2: third biggest holding in the fund, more than five percent
Speaker 2: of the fund. James, with shares down seven and a
Speaker 2: half percent, are you buying more tomorrow.
Speaker 8: I don't think we'll be increasing our positions, on increasing
Speaker 8: the size of any of our positions at this juncture,
Speaker 8: with the exception of the semiconductor space.
Speaker 4: You know, we see that the capex.
Speaker 8: Numbers continue to come in ahead of expectations across all
Speaker 8: the hyperscalers, and we think you just have to follow
Speaker 8: the money in this market. And you know, we're equal
Speaker 8: weight roughly with the index with respect to Amazon. See
Speaker 8: no urgency in the grossing of Amazon or any other
Speaker 8: of the megacap names.
Speaker 2: Are you concerned about the two hundred billion dollars that
Speaker 2: Amazon will spend this year?
Speaker 4: Obviously it's a concern for them and for everybody else.
Speaker 8: I mean, we're living in a world now, in a
Speaker 8: market now where you know, earnings, free cash flow, return
Speaker 8: on spend, all those things are important again. You know,
Speaker 8: just a couple of quarters ago, you couldn't spend enough
Speaker 8: and be rewarded for it. And now you know, there's
Speaker 8: the market's kind of getting religion again as it relates
Speaker 8: to the financial performance and the financial expectations and projections
Speaker 8: for these companies. And you know it was bound to
Speaker 8: become relevant again at some point and you know, it
Speaker 8: really started last quarter with broad cop in the month
Speaker 8: of December, and now you're seeing it perclaid across all
Speaker 8: the companies reporting in January February.
Speaker 5: I want to ask you about what the details are
Speaker 5: that matter, and I'm looking at some other highlights from
Speaker 5: the press release from the last earnings they announced. This
Speaker 5: is Some of the highlights since the company's last earnings
Speaker 5: announcement include that Amazon announced new AWS agreements with open Ai, Visa,
Speaker 5: the NBA, black Rock, Perplexity, Lift, United Airlines, DoorDash, Salesforce,
Speaker 5: US air Force, Adobe, Thompson, Reuters, AT and T, S
Speaker 5: and P Global, National Bank of Canada, London, Stock Exchange, Group,
Speaker 5: Choice Hotels, Accenture, Indeed, HSBC, CrowdStrike, and more. The reason
Speaker 5: I went through the list is because I feel like,
Speaker 5: you know, we have this question. Is it just about
Speaker 5: the hyperscale are spending and building out? But what we're
Speaker 5: increasingly seeing, right is more businesses tap into this. Can
Speaker 5: we make the assumption at this point, James, that these
Speaker 5: are businesses that are going to continue to have to
Speaker 5: spend with an Amazon, or for that matter, with an Alphabet.
Speaker 8: Absolutely, I think you have to make that assumption I mean,
Speaker 8: the world is only going in one direction. Productivity is
Speaker 8: only going to get grow, and you need to leverage
Speaker 8: the infrastructure that these companies have built in order to
Speaker 8: achieve those goals and capitalize on those opportunities. That being said,
Speaker 8: you know, the money and the profits do matter, and
Speaker 8: we're going through a transition period right now where kind
Speaker 8: of growth assumptions are being revisited, valuations assumptions are being revisited.
Speaker 8: You look at all the companies that are reported thus far,
Speaker 8: and a lot of them are traded down.
Speaker 4: I think Meta being kind of the main exception.
Speaker 8: Estimates have gone up for the most part, however, I
Speaker 8: mean Palleteers actually the poster shop of this. Estimates came
Speaker 8: up materially. However, the stock has since fallen back a lot.
Speaker 8: And what that means is when estimates go up and
Speaker 8: the stock goes down, that means there's valuation compression. And
Speaker 8: you're seeing the market right now north or three time
Speaker 8: sales valuations are at or near all time highs, and
Speaker 8: you know they have to come in and that's why
Speaker 8: you got to stay nimble, you got to stay hedged.
Speaker 8: And I don't think any of these companies are going
Speaker 8: to be immune with the exception of semiconductor companies, which
Speaker 8: are probably the only area of the market where you
Speaker 8: can likely see our performance relative to expectations by the
Speaker 8: biggest margin on earnings versus other text companies and other sectors.
Speaker 2: So when you know when metaplt forms, was it he
Speaker 2: was met at earlier? This?
Speaker 5: No, it is Alphabet.
Speaker 2: I'm losing losing track here, James, Thank.
Speaker 4: You, Carrol C.
Speaker 5: Matt Miller not the only one who forgets.
Speaker 2: What dat it is when Alphabet. You know, when when
Speaker 2: other companies report higher than expecting cap ax, like Alphabet yesterday,
Speaker 2: you see at least the knee jerk reaction you could
Speaker 2: see like a Broadcom moving higher for example, who's the
Speaker 2: beneficiary of this two hundred billion dollars?
Speaker 8: I mean, it's all the companies that you you'd consider,
Speaker 8: you know, within the AI ecosystem from Envideon down. But
Speaker 8: really what we're focused on in terms of our holdings is.
Speaker 4: Where the scarcity is.
Speaker 8: You know, we think there's scarce city in two aspects
Speaker 8: of the semiconductor industry, and that's memory and and manufacturing.
Speaker 8: You know, that's why we actually took up our Intel
Speaker 8: position today. You know, Micron continues to be one of
Speaker 8: our top holdings, and.
Speaker 4: You know, we follow.
Speaker 8: We think that the other areas of the semiconductor landscape
Speaker 8: will increasingly become commoditized over time, and that includes Nvidia, A,
Speaker 8: D and others. So we're focused on the areas of
Speaker 8: scarcity and we think those will continue to approve a
Speaker 8: disproportionate amount of the benefits. But as far as where
Speaker 8: this capex spend goes, you know, I think it will
Speaker 8: be a rising times lifts all both situations. But who
Speaker 8: has the pricing power of that and the most material
Speaker 8: upside testaments that's where we are focuses.
Speaker 5: We should point out shares of Nvidia in the aftermarket
Speaker 5: are just up about one quarter of one percent. I'm
Speaker 5: going to look at something like a micron and that stock.
Speaker 5: Let me just pull it up here to see if
Speaker 5: there's any movement. It's actually down about one point three percent.
Speaker 2: Hey.
Speaker 5: One of the things I want to just ask you about.
Speaker 5: It's in the press release Amazon writing that it introduced
Speaker 5: AWSAI factories to transform customers existing data centers into higher
Speaker 5: performance AI environments, which accelerates AI buildouts by months or
Speaker 5: years compare to building independently. So it sounds like they've
Speaker 5: got a little service, like you've got a data center,
Speaker 5: we can help get you up to speed. Is that
Speaker 5: kind of what that's about.
Speaker 8: Well, I'm hearing it real time from you right now,
Speaker 8: so I need to look into it. But you know,
Speaker 8: services are a big part of the AWS offering and
Speaker 8: Amazon offering, and that's because it's all about how do
Speaker 8: I increase utilization of my platform? And you know, if
Speaker 8: you can educate, train and build awareness of the capabilities
Speaker 8: and the trajectory of offerings, that will only increase utilization
Speaker 8: and stickiness and customer attention over time. So not surprised
Speaker 8: that they're doing something like that. Specifics of it, I
Speaker 8: need to.
Speaker 4: Look you know.
Speaker 5: That's okay. I'm getting up to speed too. I just
Speaker 5: looked at a press release. This is back in December,
Speaker 5: and they talked about by combining the latest a WS
Speaker 5: Trainium accelerators and Nvidia GPUs and so on and so
Speaker 5: FORAR They're talk about how they can accelerate these factories.
Speaker 5: I'm just curious about aws's own chips and accelerators. That's
Speaker 5: that's an important business to them.
Speaker 8: I think it increasingly will become an important business to them.
Speaker 8: Google as well. I think there's a lot of opportunity there.
Speaker 8: It's very early days. Obviously there's a balancing ad with
Speaker 8: Nvidia and other players, so not stepping on toes, but
Speaker 8: I think it will. That's an area of optionality for
Speaker 8: the business that is right now not getting an incredible.
Speaker 2: Hey, Jame's just an overall sentiment. You say you're not
Speaker 2: adding to any positions except semiconductors right now. I'm just
Speaker 2: wondering how you're looking at an overall sentiment in an
Speaker 2: environment where we're seeing, you know, a decline of more
Speaker 2: than one percent and tech stocks on the day today
Speaker 2: we're seeing decline of seven and a half percent on
Speaker 2: Amazon right now, Bitcoins down fifty percent from its October
Speaker 2: highs It's it's down today eighty nine thousand dollars. What
Speaker 2: sentiment look like? Is bitcoin of leading indicator to you?
Speaker 4: Yeah, Well, I'll take the first part first.
Speaker 8: The as far as where we're adding, that was with
Speaker 8: respect to technology stocks. You know, within technology we're exclusively adding,
Speaker 8: but add we are adding other areas. You know, aerospace
Speaker 8: defense continues to be an area that we're.
Speaker 4: Increasing our weight.
Speaker 8: We're increasing our sizing of utilities and staples you know,
Speaker 8: we think that you know, any money we can pull
Speaker 8: out of stocks that have run and the non scarce
Speaker 8: components of technology, we will we're putting into value, with
Speaker 8: the exception of seven conductors. As far as bitcoin is concerned,
Speaker 8: you know, we think that this is all about leverage
Speaker 8: in the system. You know, Bitcoin crypto has more leverage
Speaker 8: than pretty much arguably any other part of the market
Speaker 8: right now. So you're seeing disproportionate hits from that unwinding,
Speaker 8: and as that leverage on winds, you're seeing it trickle
Speaker 8: down into and proliferate into the other aspects of the market.
Speaker 8: And and we're not really un sure, you know, how
Speaker 8: much leverage there is ultimately, how much more is left
Speaker 8: to unwind. So I've seen some headlines that suggest that,
Speaker 8: you know, is this, uh, does this negate the whole
Speaker 8: debasement argument, the digital gold argument for bitcoin. I would
Speaker 8: venture to say the answer to that is still no.
Speaker 8: But at the same time, there's a lot of leverage
Speaker 8: in the system and that's unwinding and that's gonna, I think,
Speaker 8: exacerbate pressures in the market over the short term.
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