1 00:00:00,120 --> 00:00:04,360 Speaker 1: Bloomberg is now on your dashboard with Apple CarPlay and 2 00:00:04,360 --> 00:00:08,160 Speaker 1: Android Auto. It gives you access to every Bloomberg podcast, 3 00:00:08,280 --> 00:00:11,560 Speaker 1: live audio feeds from Bloomberg Radio, print stories from Bloomberg 4 00:00:11,640 --> 00:00:14,920 Speaker 1: News in audio form, and the latest headlines of the 5 00:00:14,920 --> 00:00:18,640 Speaker 1: click of a button with Bloomberg News. Now it's free 6 00:00:18,680 --> 00:00:21,439 Speaker 1: with the latest version of the Bloomberg Business App. That's 7 00:00:21,680 --> 00:00:24,400 Speaker 1: the Bloomberg Business App. Get it on your phone in 8 00:00:24,440 --> 00:00:27,760 Speaker 1: the Apple App Store or on Google Play. Just download 9 00:00:27,800 --> 00:00:30,560 Speaker 1: the app, connect your phone to your car and get started. 10 00:00:30,960 --> 00:00:34,400 Speaker 1: And it's all presented by our sponsor, Interactive Brokers. 11 00:00:35,400 --> 00:00:38,600 Speaker 2: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 12 00:00:38,640 --> 00:00:39,800 Speaker 2: my co host Matt Miller. 13 00:00:40,200 --> 00:00:44,159 Speaker 1: Every business day we bring you interviews from CEOs, market pros, 14 00:00:44,320 --> 00:00:48,160 Speaker 1: and Bloomberg experts, along with essential market moven News. 15 00:00:48,720 --> 00:00:51,839 Speaker 2: I'm the Bloomberg Markets podcast called Apple Podcasts or wherever 16 00:00:51,960 --> 00:00:55,800 Speaker 2: you listen to podcasts, and at Bloomberg dot Com Slash podcast. Dan, 17 00:00:55,840 --> 00:01:00,160 Speaker 2: I've senior Equadanaos Whatbush Security covers all things technology. Hey Dan, 18 00:01:00,240 --> 00:01:02,080 Speaker 2: let's start with the Apple news that just came across 19 00:01:02,200 --> 00:01:05,679 Speaker 2: the tape here A little bit delaying or halting temporarily 20 00:01:05,959 --> 00:01:08,600 Speaker 2: at least some of their watch sales in the US. 21 00:01:09,560 --> 00:01:11,119 Speaker 2: What do you make of this news? Again, it stocks 22 00:01:11,120 --> 00:01:13,120 Speaker 2: off about one point three percent today. 23 00:01:14,280 --> 00:01:16,560 Speaker 3: Yeah, I mean, look, there have been some issues on 24 00:01:16,600 --> 00:01:18,800 Speaker 3: the on the Apple watch side, and a lot of 25 00:01:18,840 --> 00:01:21,080 Speaker 3: it is really around models in terms of what they're 26 00:01:21,080 --> 00:01:24,919 Speaker 3: trying to drive. I view this as just a small 27 00:01:24,959 --> 00:01:28,000 Speaker 3: bump of the room. But I actually think watchals this 28 00:01:28,160 --> 00:01:30,679 Speaker 3: holiday season are going to be up double digit. So 29 00:01:30,760 --> 00:01:33,840 Speaker 3: I viewed this is sort of noise relative to the 30 00:01:33,840 --> 00:01:34,800 Speaker 3: broader story. 31 00:01:36,000 --> 00:01:39,280 Speaker 4: And I was informed that you are at the airport. 32 00:01:39,400 --> 00:01:42,640 Speaker 4: So for YouTube audience, unfortunately can't see Dan right now, 33 00:01:42,640 --> 00:01:45,320 Speaker 4: but usually he's got the pastels on. Paul knows what 34 00:01:45,360 --> 00:01:49,320 Speaker 4: I'm talking about, but he needs so we're disappointed there. 35 00:01:49,640 --> 00:01:51,880 Speaker 4: But when you have a stock like this, obviously back 36 00:01:51,920 --> 00:01:55,440 Speaker 4: around at three trillion dollar market cap threshold, trading round 37 00:01:55,520 --> 00:01:59,880 Speaker 4: records in news like this kind of breakdown to us, 38 00:02:00,000 --> 00:02:01,840 Speaker 4: does it make sense to you because you'd think, I mean, 39 00:02:01,880 --> 00:02:03,960 Speaker 4: the stock's only down I think a little more than 40 00:02:04,000 --> 00:02:06,200 Speaker 4: one percent at this point. Is it just kind of 41 00:02:06,200 --> 00:02:07,560 Speaker 4: a reason to sell a little bit here? 42 00:02:08,600 --> 00:02:08,799 Speaker 5: Yeah? 43 00:02:09,120 --> 00:02:13,040 Speaker 3: And does in my opinion this is the start of 44 00:02:13,160 --> 00:02:16,800 Speaker 3: the next phase of the Apple growth story, because essentially 45 00:02:16,800 --> 00:02:20,959 Speaker 3: what's happening now is services is upticking. Despite some of 46 00:02:21,000 --> 00:02:22,799 Speaker 3: the news come out of China. You know, I saw 47 00:02:22,840 --> 00:02:27,360 Speaker 3: Bloomberg report it, which is obviously overall headwind, China is 48 00:02:27,400 --> 00:02:31,400 Speaker 3: actually resilient as overall demand. So when you put it together, 49 00:02:31,800 --> 00:02:35,520 Speaker 3: I think a year from now, still in pastels, I 50 00:02:35,520 --> 00:02:37,640 Speaker 3: think we're looking to afford trillion dollar mark now. 51 00:02:38,880 --> 00:02:42,560 Speaker 2: So Dan give us I don't know your latest thinking 52 00:02:42,600 --> 00:02:45,560 Speaker 2: on just China in general, because arguably there is no 53 00:02:45,639 --> 00:02:49,680 Speaker 2: company in the world that is more exposed positively and 54 00:02:49,720 --> 00:02:53,160 Speaker 2: potentially negatively to China, both as a customer and as 55 00:02:53,200 --> 00:02:56,959 Speaker 2: a source of product. How do you break that down 56 00:02:57,000 --> 00:02:58,240 Speaker 2: for your clients? 57 00:02:59,680 --> 00:03:03,200 Speaker 3: Yeah, look, I think, and someone like myself spends so 58 00:03:03,280 --> 00:03:06,440 Speaker 3: much time in the region, you got to separate between 59 00:03:07,160 --> 00:03:10,200 Speaker 3: headline risk and what's really happening in the market. I 60 00:03:10,240 --> 00:03:13,600 Speaker 3: think Huawei, what we've seen in terms of cold tech 61 00:03:13,639 --> 00:03:14,399 Speaker 3: war between. 62 00:03:14,280 --> 00:03:15,200 Speaker 6: US and China. 63 00:03:15,320 --> 00:03:18,919 Speaker 3: Yeah, it's an issue, but there's one hundred million iPhones 64 00:03:18,919 --> 00:03:22,160 Speaker 3: in China that have an upgrade in three years, so 65 00:03:22,280 --> 00:03:25,000 Speaker 3: the demand continues to be strong there, and I think 66 00:03:25,000 --> 00:03:29,120 Speaker 3: when it comes from a production perspective, they'll diversify some 67 00:03:29,360 --> 00:03:33,400 Speaker 3: into India. But the reality is next two to three years, 68 00:03:33,919 --> 00:03:36,680 Speaker 3: I mean, that's not going to significantly change. That is 69 00:03:36,720 --> 00:03:40,120 Speaker 3: the hearts and lungs of the Apple story, supply and demand. 70 00:03:41,760 --> 00:03:44,680 Speaker 4: And Dan, we know you're arguably the biggest bull on 71 00:03:44,760 --> 00:03:46,760 Speaker 4: Wall Street when it comes to technology. But what do 72 00:03:46,800 --> 00:03:49,040 Speaker 4: you think is the biggest risk to your brule case 73 00:03:49,160 --> 00:03:50,320 Speaker 4: in the shorter term? 74 00:03:50,400 --> 00:03:50,640 Speaker 2: Here? 75 00:03:51,880 --> 00:03:56,240 Speaker 3: Look, I think the biggest risk your term is China. 76 00:03:56,320 --> 00:04:01,720 Speaker 3: It's not the numbers, it's not fed despite the poker game, 77 00:04:02,320 --> 00:04:04,840 Speaker 3: you know, regard everyone knows you're gonna have cuts in 78 00:04:04,920 --> 00:04:08,560 Speaker 3: twenty four that I think creates really this Pillsbury dough 79 00:04:08,600 --> 00:04:09,680 Speaker 3: Boys soft landing. 80 00:04:10,360 --> 00:04:12,480 Speaker 6: I think it's really the China story. It's the it's 81 00:04:12,480 --> 00:04:13,680 Speaker 6: the geopolitical. 82 00:04:13,720 --> 00:04:16,800 Speaker 3: But that's also why a lot of the Bears that 83 00:04:16,839 --> 00:04:20,240 Speaker 3: have been hibernation mode through all of twenty twenty three, 84 00:04:20,720 --> 00:04:23,040 Speaker 3: they're starting to come out of their caves a little 85 00:04:23,720 --> 00:04:26,680 Speaker 3: and look at this market, because I believe it's started 86 00:04:26,720 --> 00:04:28,560 Speaker 3: this new tech bowl market. 87 00:04:28,839 --> 00:04:31,839 Speaker 2: Hey, Dan, I guess AI. As we think back to 88 00:04:31,880 --> 00:04:34,920 Speaker 2: twenty twenty three, AI was certainly a theme, the theme, 89 00:04:35,040 --> 00:04:38,800 Speaker 2: certainly the tech theme. As we look forward to twenty 90 00:04:38,800 --> 00:04:42,880 Speaker 2: twenty four. Is there something else out there? How do 91 00:04:42,880 --> 00:04:45,320 Speaker 2: you what's the theme for twenty twenty four in your mind? 92 00:04:45,680 --> 00:04:47,520 Speaker 6: Yeah, Paul, I think it's okay. 93 00:04:47,520 --> 00:04:50,960 Speaker 3: I think it's really use cases because if you if 94 00:04:51,000 --> 00:04:54,960 Speaker 3: you follow the breadcrumbs filew the use cases, you'll find 95 00:04:55,080 --> 00:04:58,599 Speaker 3: the treasure. So the use cases are really what's gonna 96 00:04:58,720 --> 00:05:06,200 Speaker 3: drive leg of growth for Microsoft, for Google, for what 97 00:05:06,240 --> 00:05:09,200 Speaker 3: we see with the Godfather of AI and Vidia and Jenten, 98 00:05:09,279 --> 00:05:12,080 Speaker 3: and then you have some of the pure players like Pound, Pier, Mango, 99 00:05:12,160 --> 00:05:14,720 Speaker 3: Dib and others. And I think it's actually a year 100 00:05:14,760 --> 00:05:16,560 Speaker 3: from now it's going to be the rest of tech. 101 00:05:16,800 --> 00:05:21,200 Speaker 3: The rest of tech joins this party. I still view 102 00:05:21,279 --> 00:05:24,960 Speaker 3: it from a tech party. It's nine to thirty pm, 103 00:05:25,080 --> 00:05:26,480 Speaker 3: it's not two am. 104 00:05:27,120 --> 00:05:30,640 Speaker 4: Who So, walk us through Tesla. You had a note 105 00:05:30,640 --> 00:05:32,080 Speaker 4: that came out at the end of the last week 106 00:05:32,120 --> 00:05:35,160 Speaker 4: talking about how Tesla battle with unions in Scandinavia. Now 107 00:05:35,160 --> 00:05:37,320 Speaker 4: on the radar for the street, you do have a 108 00:05:37,360 --> 00:05:39,839 Speaker 4: twelve month price target around three hundred and ten dollars 109 00:05:39,880 --> 00:05:42,360 Speaker 4: currently trading for Tesla. Right now it stucks around two 110 00:05:42,440 --> 00:05:45,120 Speaker 4: hundred and fifty seven dollars. Walk us through what you're 111 00:05:45,120 --> 00:05:47,159 Speaker 4: seeing with Tesla here and what you see moving forward. 112 00:05:48,080 --> 00:05:49,839 Speaker 6: Yeah, I mean, look, I think when you look at. 113 00:05:49,680 --> 00:05:52,800 Speaker 3: Deliveries, feel d risk for Q four. I think we're 114 00:05:52,800 --> 00:05:55,960 Speaker 3: seeing a good China number, and I think that's something. 115 00:05:56,160 --> 00:05:57,840 Speaker 3: There's a stock that's going to probably move higher in 116 00:05:57,839 --> 00:06:00,120 Speaker 3: the next few weeks, going to deliveries in early in 117 00:06:00,200 --> 00:06:01,080 Speaker 3: early January. 118 00:06:01,279 --> 00:06:02,000 Speaker 6: Bill with the. 119 00:06:02,040 --> 00:06:06,320 Speaker 3: Union issue, it's a UFC battle at WWE. I mean 120 00:06:06,480 --> 00:06:09,160 Speaker 3: they're they're starting to see it now in Scandinavia. It 121 00:06:09,279 --> 00:06:12,720 Speaker 3: was Sweden originally, Now it's gone to Norway. Than when 122 00:06:12,920 --> 00:06:19,080 Speaker 3: Denmark the worry here, you give in here then uaw 123 00:06:19,640 --> 00:06:24,240 Speaker 3: sean fain. They watched this carefully, so you can't give 124 00:06:24,240 --> 00:06:25,360 Speaker 3: it in to you give a mile. 125 00:06:25,440 --> 00:06:27,320 Speaker 6: And I think that's why this battle is so. 126 00:06:27,440 --> 00:06:31,080 Speaker 3: Important, because I think there's a better chance to me 127 00:06:31,520 --> 00:06:35,880 Speaker 3: playing an NFL playoffs than teslavn union workers. Wow. 128 00:06:37,680 --> 00:06:39,720 Speaker 2: Hey, so Dan, one of the things I'm trying to 129 00:06:39,720 --> 00:06:43,360 Speaker 2: get wrap my head around is again, AI, I guess 130 00:06:43,400 --> 00:06:45,479 Speaker 2: I'm there. I was, you know, a little bit, you know, 131 00:06:46,720 --> 00:06:49,719 Speaker 2: I don't know, just cautious, skeptical at the beginning. I 132 00:06:49,760 --> 00:06:51,600 Speaker 2: guess what would help me get a little bit more 133 00:06:51,600 --> 00:06:54,400 Speaker 2: on board is I can go back and look at 134 00:06:54,440 --> 00:06:57,880 Speaker 2: the IBC technology spend over the last you know, number 135 00:06:57,880 --> 00:07:01,520 Speaker 2: of years. How much of that going forward incrementally will 136 00:07:01,560 --> 00:07:05,240 Speaker 2: be AI versus I don't know, just tech spending growth 137 00:07:05,240 --> 00:07:05,720 Speaker 2: in general. 138 00:07:06,600 --> 00:07:09,440 Speaker 3: Sure, it's a great question. I think actually it's it's 139 00:07:09,440 --> 00:07:12,600 Speaker 3: a phenomenal question because it hits it the crux here 140 00:07:13,520 --> 00:07:15,920 Speaker 3: in twenty twenty three, we think we'll less than one 141 00:07:15,960 --> 00:07:22,040 Speaker 3: percent of budgets or AI twenty four based on our analysis, 142 00:07:22,280 --> 00:07:25,480 Speaker 3: eight to ten percent of it budgets will be AI driven. 143 00:07:26,040 --> 00:07:30,400 Speaker 3: That's why it's the Latto ticket for those companies with 144 00:07:30,480 --> 00:07:33,840 Speaker 3: the use cases, software chip services. 145 00:07:33,480 --> 00:07:36,000 Speaker 6: That go into that market. And I think it's all 146 00:07:36,160 --> 00:07:37,080 Speaker 6: use case driven. 147 00:07:37,360 --> 00:07:40,680 Speaker 3: Eighty use cases today, three four months ago you had 148 00:07:40,760 --> 00:07:42,000 Speaker 3: less than twenty. 149 00:07:42,680 --> 00:07:45,480 Speaker 4: We've talked so much, and especially analysts on Wall Street 150 00:07:45,560 --> 00:07:50,000 Speaker 4: about the productivity boom potentially when it comes to AI. 151 00:07:50,200 --> 00:07:53,160 Speaker 4: Walk us through what you think AI skills are and 152 00:07:53,240 --> 00:07:56,040 Speaker 4: how employees can acquire them. 153 00:07:57,080 --> 00:07:59,320 Speaker 3: Well, I think I was just I was at a 154 00:07:59,320 --> 00:08:02,320 Speaker 3: conference speak in a few weeks ago, and it was 155 00:08:02,360 --> 00:08:05,960 Speaker 3: more of an accounting conference, and you know they're My 156 00:08:06,080 --> 00:08:09,200 Speaker 3: suggestion is, you know, for anyone on the account it's 157 00:08:09,240 --> 00:08:11,960 Speaker 3: really gonna be developer language, whether it's Python or other. 158 00:08:12,000 --> 00:08:14,240 Speaker 3: I think you're gonna see more and more from a 159 00:08:14,280 --> 00:08:18,240 Speaker 3: developer language perspective starting early that you're going to see 160 00:08:18,320 --> 00:08:22,880 Speaker 3: more starting take that over as another skill set, because 161 00:08:22,960 --> 00:08:27,640 Speaker 3: if you understand AI and the developer language as more 162 00:08:27,680 --> 00:08:34,160 Speaker 3: of these functional areas finance, marketing, within hospitals, within healthcare, 163 00:08:34,480 --> 00:08:37,040 Speaker 3: it's going to just from a skill set perspective and 164 00:08:37,280 --> 00:08:38,680 Speaker 3: be that much more valuable. 165 00:08:38,760 --> 00:08:41,840 Speaker 4: Do you think it's not necessarily than just the stereotypical 166 00:08:41,920 --> 00:08:44,280 Speaker 4: STEM type careers. It can go beyond that. 167 00:08:45,240 --> 00:08:46,480 Speaker 6: I think it goes way beyond that. 168 00:08:46,600 --> 00:08:49,600 Speaker 3: And that's why I just disagree with the view the 169 00:08:49,640 --> 00:08:52,760 Speaker 3: whole like it takes away everyone's jobs, because I think 170 00:08:52,800 --> 00:08:55,160 Speaker 3: in the the next three to five years it's a 171 00:08:55,280 --> 00:08:59,000 Speaker 3: job creator when you actually start to look at what's 172 00:08:59,040 --> 00:09:02,800 Speaker 3: going to happen from the developers first by marketing and 173 00:09:02,920 --> 00:09:06,080 Speaker 3: use cases. And I think that's why it's so important. 174 00:09:06,640 --> 00:09:08,679 Speaker 3: So then we'll be come out for the for really 175 00:09:08,720 --> 00:09:09,720 Speaker 3: the next decade. 176 00:09:10,480 --> 00:09:12,640 Speaker 2: All right, Dan ives, thank you so much. We appreciate that. 177 00:09:12,720 --> 00:09:15,440 Speaker 2: As always, Dan i'ves He's a managing director, senior equity 178 00:09:15,480 --> 00:09:20,680 Speaker 2: analyst web Bush Securities and a huge Penn State fan 179 00:09:20,760 --> 00:09:24,160 Speaker 2: he made even going down to Atlanta as Penn State 180 00:09:24,200 --> 00:09:27,839 Speaker 2: football that Nitleylands continued preparations for the December thirtieth Peach 181 00:09:27,880 --> 00:09:30,720 Speaker 2: Bowl date with old miss in Atlanta. 182 00:09:30,800 --> 00:09:32,360 Speaker 4: I bet we see your picture on I bet you'll 183 00:09:32,360 --> 00:09:33,600 Speaker 4: see that social medium. 184 00:09:33,679 --> 00:09:35,720 Speaker 2: Yeah, he'll be out there on the field. We'll figure 185 00:09:35,760 --> 00:09:37,480 Speaker 2: that out. So against a little bit of news out 186 00:09:37,480 --> 00:09:40,760 Speaker 2: there on Apple today about a temporary hault of certain 187 00:09:40,840 --> 00:09:45,679 Speaker 2: watches starting in a few days in the US, stock 188 00:09:45,720 --> 00:09:48,520 Speaker 2: off a little more than one percent. Maybe on that news, 189 00:09:48,600 --> 00:09:52,640 Speaker 2: dan Ives takeaway was not material to the overall story 190 00:09:52,960 --> 00:09:53,600 Speaker 2: at Apple. 191 00:09:55,120 --> 00:09:58,959 Speaker 5: You're listening to the teenth Ken's Line program Bloomberg Markets 192 00:09:59,000 --> 00:10:02,080 Speaker 5: weekdays at ten am, daring on Bloomberg dot com, the 193 00:10:02,160 --> 00:10:05,320 Speaker 5: iHeartRadio app, and the Bloomberg Business App, or listen on 194 00:10:05,360 --> 00:10:07,360 Speaker 5: demand wherever you get your podcasts. 195 00:10:09,120 --> 00:10:12,160 Speaker 2: Niphan agreeing to buy US Steel for fourteen point one 196 00:10:12,200 --> 00:10:15,720 Speaker 2: billion dollars, the deal of the day, books Southerman Jorans, 197 00:10:15,720 --> 00:10:18,319 Speaker 2: And she's a columnist covering all these industrial companies and 198 00:10:18,400 --> 00:10:20,720 Speaker 2: end deals, so a great voice to get on that. 199 00:10:20,720 --> 00:10:25,160 Speaker 2: She's from Bloomberg Opinion zooming in from Boston. Hey Brooke, 200 00:10:25,400 --> 00:10:27,440 Speaker 2: what do you make of this deal. I mean, it 201 00:10:27,960 --> 00:10:29,719 Speaker 2: kind of feels like I'm trying to wrap my head 202 00:10:29,720 --> 00:10:32,679 Speaker 2: around the valuation. The last time I had paid attention, 203 00:10:33,600 --> 00:10:37,160 Speaker 2: Cleveland Cliffs had a seven billion dollar offer on the table, 204 00:10:37,679 --> 00:10:39,839 Speaker 2: and now fourteen billion. Where did that come from? 205 00:10:41,000 --> 00:10:43,959 Speaker 7: It is certainly a very robust premium. I mean, I 206 00:10:44,000 --> 00:10:47,280 Speaker 7: think that underscores the value of these assets, especially in 207 00:10:47,320 --> 00:10:51,080 Speaker 7: the context of the saer amount of investment we're seeing 208 00:10:51,120 --> 00:10:54,640 Speaker 7: in the US in infrastructure and also in factory construction. 209 00:10:54,800 --> 00:10:57,640 Speaker 7: You need steel to make all of those things. US 210 00:10:57,679 --> 00:11:02,160 Speaker 7: steel has also been pivoting toward greener production strategies. All 211 00:11:02,160 --> 00:11:04,720 Speaker 7: of that is very valuable, and these are scarce assets. 212 00:11:04,720 --> 00:11:08,960 Speaker 7: There's not that many big steel companies left to purchase 213 00:11:08,960 --> 00:11:11,600 Speaker 7: and for nipon. The ability to gain a really strong 214 00:11:11,679 --> 00:11:14,680 Speaker 7: foothold in the US, I think is what's really driving 215 00:11:14,679 --> 00:11:17,400 Speaker 7: this premium here. But it's certainly a significant step up 216 00:11:17,400 --> 00:11:19,640 Speaker 7: from what we were talking about in August when Cleveland 217 00:11:19,640 --> 00:11:22,480 Speaker 7: Cliffs lobbed in its initial bid, And I think that's 218 00:11:22,480 --> 00:11:25,480 Speaker 7: why you see Cleveland Cliffs out this morning congratulating US 219 00:11:25,520 --> 00:11:28,880 Speaker 7: steal on this steal and wishing them luck. I think 220 00:11:28,880 --> 00:11:31,520 Speaker 7: that economic gulf is just far too wide for them 221 00:11:31,520 --> 00:11:32,319 Speaker 7: to be able to close. 222 00:11:32,559 --> 00:11:35,200 Speaker 4: If you look at US steel stock ticker simple AX 223 00:11:35,280 --> 00:11:37,680 Speaker 4: up about twenty six percent on pace for its best 224 00:11:37,720 --> 00:11:41,000 Speaker 4: day since August fourteenth of earlier this year, you look 225 00:11:41,040 --> 00:11:45,600 Speaker 4: at Nippon, it's actually down about close to five percent. 226 00:11:45,760 --> 00:11:47,640 Speaker 4: So is it fair to say, if you are a 227 00:11:47,840 --> 00:11:50,440 Speaker 4: US steel shareholder that they're liking this steal? 228 00:11:51,960 --> 00:11:53,640 Speaker 7: I mean sure, I don't know what there is to 229 00:11:53,679 --> 00:11:56,480 Speaker 7: not like about this steal. If you're a US steel shareholder, 230 00:11:57,120 --> 00:12:00,200 Speaker 7: it's normal for you know, stocks of the acquired to 231 00:12:00,240 --> 00:12:01,959 Speaker 7: go down on the announcement. I mean, I think the 232 00:12:02,000 --> 00:12:05,839 Speaker 7: biggest question as a US steel shareholder is what the 233 00:12:05,960 --> 00:12:09,240 Speaker 7: US government is going to think of this steal. You know. 234 00:12:09,320 --> 00:12:11,720 Speaker 7: On the call today to talk about it, executives said 235 00:12:11,720 --> 00:12:15,160 Speaker 7: they did not foresee any issues from ascifius perspective, although 236 00:12:15,200 --> 00:12:18,160 Speaker 7: of course this will get a review with a foreign 237 00:12:18,240 --> 00:12:21,679 Speaker 7: company buying a US one, I think that it might 238 00:12:21,720 --> 00:12:25,240 Speaker 7: be slightly more complicated than their answers on the call suggested. 239 00:12:25,400 --> 00:12:28,800 Speaker 7: It's this is a very politically charged industry. It was 240 00:12:28,880 --> 00:12:31,680 Speaker 7: not that long ago that we were slapping tariffs on 241 00:12:31,840 --> 00:12:37,360 Speaker 7: steel imported from Japan as a quote unquote national security issue. 242 00:12:37,679 --> 00:12:40,000 Speaker 7: And so I think this is going to get a 243 00:12:40,040 --> 00:12:44,040 Speaker 7: lot of scrutiny. We already had some comments from politicians, 244 00:12:44,080 --> 00:12:45,920 Speaker 7: you know, back in August, when this kind of first 245 00:12:47,320 --> 00:12:50,560 Speaker 7: came under you know, the prospect of a deal was 246 00:12:50,640 --> 00:12:52,920 Speaker 7: being talked about, the number of politicians said, we do 247 00:12:53,000 --> 00:12:55,880 Speaker 7: not want to see US steals sold to a foreign company. 248 00:12:55,920 --> 00:12:58,160 Speaker 7: And obviously that is the announcement that we're getting today. 249 00:12:58,160 --> 00:13:00,400 Speaker 7: And so it's going to be interesting to see what 250 00:13:00,520 --> 00:13:02,520 Speaker 7: happens with this now, I will say. I mean, there's 251 00:13:02,520 --> 00:13:05,960 Speaker 7: been a number of foreign companies making investments in the US, 252 00:13:06,080 --> 00:13:10,160 Speaker 7: spurred by the incentives included in the Chips Act, included 253 00:13:10,200 --> 00:13:13,040 Speaker 7: in the IRA those have been cheered by the Biden administration. 254 00:13:13,480 --> 00:13:16,120 Speaker 7: And from a practical standpoint, if jobs are being created 255 00:13:16,120 --> 00:13:18,960 Speaker 7: and factories are being built, does it really matter if 256 00:13:19,000 --> 00:13:21,720 Speaker 7: it's a US company or a US subsidiary of a 257 00:13:21,800 --> 00:13:24,760 Speaker 7: company that's based in a country that's a strong US ally. 258 00:13:25,440 --> 00:13:28,120 Speaker 7: Maybe not, But politics can be very prickly. 259 00:13:28,800 --> 00:13:31,600 Speaker 2: How about the unions, Brooke, I know the unions are 260 00:13:31,640 --> 00:13:35,480 Speaker 2: a very important voice in these deals, and I believe 261 00:13:35,520 --> 00:13:38,800 Speaker 2: the union had supported the Cleveland Cliffs offered. I'm not 262 00:13:38,840 --> 00:13:40,440 Speaker 2: sure about this one. 263 00:13:41,520 --> 00:13:44,280 Speaker 7: No and so they you know, they the head of 264 00:13:44,320 --> 00:13:46,760 Speaker 7: the unions made some comments of Bloomberg News this morning 265 00:13:46,840 --> 00:13:49,319 Speaker 7: in the interview that the notice on this deal was 266 00:13:49,400 --> 00:13:52,640 Speaker 7: rather short and they were not involved in the communication 267 00:13:53,840 --> 00:13:57,000 Speaker 7: leading up to it, and so it will be interesting 268 00:13:57,080 --> 00:14:00,480 Speaker 7: to see, you know, what tactic the union takes doesn't 269 00:14:00,679 --> 00:14:03,679 Speaker 7: like this deal. I don't know what avenues they have 270 00:14:03,840 --> 00:14:06,160 Speaker 7: to push back. At this point, they'd transferred their right 271 00:14:06,360 --> 00:14:08,640 Speaker 7: to they'd said they were willing to transfer their right 272 00:14:08,679 --> 00:14:11,320 Speaker 7: to counterbid to Cleveland Cliffs. But as I mentioned, Cleveland 273 00:14:11,360 --> 00:14:14,600 Speaker 7: Cliffs is that this morning congratulating us steal and the deal. 274 00:14:14,640 --> 00:14:17,760 Speaker 7: They do not look like they're gearing up to try 275 00:14:17,800 --> 00:14:21,480 Speaker 7: to challenge this offer. And the difference between what Cleveland 276 00:14:21,480 --> 00:14:24,920 Speaker 7: Cliffs was offering Nipon is now offering is very wide, 277 00:14:25,280 --> 00:14:28,160 Speaker 7: and that would be a very tough bridge to tough 278 00:14:28,200 --> 00:14:31,400 Speaker 7: gap to bridge. So I'm not entirely sure what the 279 00:14:31,480 --> 00:14:33,240 Speaker 7: union can do to block the deal. 280 00:14:33,040 --> 00:14:33,520 Speaker 6: At this point. 281 00:14:33,760 --> 00:14:35,920 Speaker 4: So any sort of regulatory hurdles. 282 00:14:37,200 --> 00:14:39,400 Speaker 7: Yes, like I just was talking about with Cyphius, I 283 00:14:39,440 --> 00:14:41,080 Speaker 7: think that's going to be a key one to watch. 284 00:14:41,600 --> 00:14:46,600 Speaker 2: So there's nothing like can you actually explain Syphius to me? 285 00:14:46,640 --> 00:14:49,080 Speaker 2: Because I was just going to ask about DOJ or FTC, 286 00:14:49,240 --> 00:14:51,680 Speaker 2: but maybe there's a different body here, So explain the 287 00:14:51,680 --> 00:14:52,480 Speaker 2: Syphius review. 288 00:14:53,360 --> 00:14:57,280 Speaker 7: Sure, So Syphius gets involved when there's a foreign company 289 00:14:57,320 --> 00:15:01,280 Speaker 7: acquiring a US act and they tend to review deals 290 00:15:01,280 --> 00:15:04,760 Speaker 7: from a national security perspective. So it's a different process 291 00:15:04,800 --> 00:15:07,480 Speaker 7: than what we typically see from the anti trust regulators. 292 00:15:08,400 --> 00:15:10,600 Speaker 7: You know, there was some question about whether a Cleveland 293 00:15:10,600 --> 00:15:13,880 Speaker 7: Cliff's US steel combination would raise anti trust red flags. 294 00:15:13,920 --> 00:15:17,160 Speaker 7: I don't think that's the primary concern in this case 295 00:15:17,200 --> 00:15:21,280 Speaker 7: is Nipon does not have a particularly robust presence in 296 00:15:21,320 --> 00:15:24,240 Speaker 7: the US already from a steel perspective. So the question 297 00:15:24,360 --> 00:15:27,160 Speaker 7: is really going to be are we comfortable with letting 298 00:15:27,200 --> 00:15:30,920 Speaker 7: a foreign company own this US asset? Obviously, Japan is 299 00:15:30,960 --> 00:15:33,480 Speaker 7: a very important US ally. It is a very different 300 00:15:33,600 --> 00:15:35,880 Speaker 7: question than if there was a Chinese company trying to 301 00:15:35,880 --> 00:15:38,640 Speaker 7: come in and buy a US steel maker. But I 302 00:15:38,760 --> 00:15:41,600 Speaker 7: still think, just given the environment that we are in 303 00:15:41,760 --> 00:15:45,960 Speaker 7: politically and all of the scrutiny over ownership of important 304 00:15:46,040 --> 00:15:49,320 Speaker 7: American assets, that this is going to get sub scrutiny. 305 00:15:49,640 --> 00:15:52,760 Speaker 4: Do you foresee additional m and A happening in that 306 00:15:52,840 --> 00:15:55,400 Speaker 4: particular industry group. On the back of this. 307 00:15:57,520 --> 00:15:59,520 Speaker 7: Never say never. I mean, anytime you have a big 308 00:15:59,600 --> 00:16:01,880 Speaker 7: deal like this, it tends to get people thinking about 309 00:16:01,920 --> 00:16:04,960 Speaker 7: what other possibilities there could be. But this is already 310 00:16:04,960 --> 00:16:08,560 Speaker 7: a very consolidated industry, and so I think to see 311 00:16:08,680 --> 00:16:13,120 Speaker 7: much more consolidation happen would be difficult. And then you 312 00:16:13,160 --> 00:16:15,640 Speaker 7: do start bumping up on questions of antitrust. 313 00:16:16,560 --> 00:16:20,680 Speaker 2: So explain to me, Brooke. I know one of the 314 00:16:20,720 --> 00:16:22,640 Speaker 2: growth areas of US Steel is I think they have 315 00:16:22,680 --> 00:16:25,480 Speaker 2: a new plant maybe in Arkansas or something. Can you 316 00:16:25,480 --> 00:16:27,920 Speaker 2: talk to us about that plant and that technology. 317 00:16:29,320 --> 00:16:33,920 Speaker 7: Sure, and so it's a greener technology, you know, they 318 00:16:34,000 --> 00:16:37,080 Speaker 7: use sort of more recycled materials. This is sort of 319 00:16:37,120 --> 00:16:39,880 Speaker 7: the considered the future of steel making, and so that's 320 00:16:39,880 --> 00:16:43,760 Speaker 7: obviously a very attractive asset for Nifeon. And you know, 321 00:16:43,840 --> 00:16:45,760 Speaker 7: these companies talked a lot about and McCall about sort 322 00:16:45,760 --> 00:16:50,760 Speaker 7: of their shared commitment to decarbonizing, about investing in R 323 00:16:50,760 --> 00:16:54,440 Speaker 7: and D and new technologies to try to improve upon 324 00:16:54,480 --> 00:16:57,080 Speaker 7: the steel making process. And so that's certainly one of 325 00:16:57,120 --> 00:16:58,720 Speaker 7: the key drivers of this acquisition. 326 00:17:00,120 --> 00:17:02,600 Speaker 4: And when it comes to something like this, especially if 327 00:17:02,640 --> 00:17:04,720 Speaker 4: you're thinking about steel and what that means for the 328 00:17:04,760 --> 00:17:08,880 Speaker 4: global economy as far as the position that these two 329 00:17:08,920 --> 00:17:11,280 Speaker 4: companies are in, what do you think this tells us 330 00:17:11,359 --> 00:17:15,120 Speaker 4: about the global economy if these two are potentially mrging here? 331 00:17:16,800 --> 00:17:19,040 Speaker 7: Sure, I mean, I think it's a vote of confidence 332 00:17:19,200 --> 00:17:24,879 Speaker 7: in the US manufacturing renaissance or revitalization of US supply chains, 333 00:17:24,960 --> 00:17:27,199 Speaker 7: on shoring, whatever you want to call it. It's a 334 00:17:27,280 --> 00:17:30,720 Speaker 7: narrative that's taken some hits recently. If you look at 335 00:17:30,760 --> 00:17:33,520 Speaker 7: particularly in the EV sector, there's been a number of 336 00:17:33,600 --> 00:17:37,359 Speaker 7: companies sort of pulling back or delaying some of the 337 00:17:37,359 --> 00:17:40,399 Speaker 7: investments that they've announced, and you know that sort of 338 00:17:40,480 --> 00:17:42,280 Speaker 7: just does raise the question of, Okay, well, what does 339 00:17:42,320 --> 00:17:46,439 Speaker 7: this on shoring boom actually look like? And this is 340 00:17:46,440 --> 00:17:48,280 Speaker 7: something that I've written about a lot. Is I think 341 00:17:48,320 --> 00:17:50,760 Speaker 7: that you know, there was a lot of enthusiasm around this, 342 00:17:50,840 --> 00:17:53,440 Speaker 7: partly because of the government stimulus, that this was never 343 00:17:53,520 --> 00:17:58,000 Speaker 7: going to be sort of a clear and streamlined timeline. 344 00:17:58,080 --> 00:17:59,919 Speaker 7: That there's a lot of variability here, a lot of 345 00:18:00,080 --> 00:18:03,280 Speaker 7: pushes and pulls. This is not something that has you know, 346 00:18:03,880 --> 00:18:08,080 Speaker 7: managed to separate itself entirely from the broader economy. That 347 00:18:08,119 --> 00:18:11,320 Speaker 7: companies are still sort of subject to those economic forces, 348 00:18:11,359 --> 00:18:14,720 Speaker 7: but there are underlying tailwinds here that are driving investment, 349 00:18:14,760 --> 00:18:16,840 Speaker 7: one of which, of course is the stimulus funds, and 350 00:18:16,840 --> 00:18:19,760 Speaker 7: that there is you know, the lessons learned from COVID, 351 00:18:19,800 --> 00:18:22,480 Speaker 7: but also you know the terrafs or the Trump administration 352 00:18:22,560 --> 00:18:24,880 Speaker 7: that it's very valuable to have a US supply chain 353 00:18:24,920 --> 00:18:28,560 Speaker 7: and not be dependent on having ship goods from across oceans. 354 00:18:29,359 --> 00:18:31,600 Speaker 7: And then you know, the energy transition. Things like that 355 00:18:31,640 --> 00:18:36,400 Speaker 7: are very strong underlying forces that I think will ultimately 356 00:18:36,480 --> 00:18:39,120 Speaker 7: lead to more manufacturing in the US. It just may 357 00:18:39,119 --> 00:18:42,320 Speaker 7: not happen on the on the timeline that we might 358 00:18:42,359 --> 00:18:43,120 Speaker 7: have been hoping for. 359 00:18:43,640 --> 00:18:46,000 Speaker 2: Brooke, thanks so much for joining us. Brook Sutherland calumnist 360 00:18:46,280 --> 00:18:50,560 Speaker 2: covering industrials and deals for Bloomberg Opinion. Again, Japan's a 361 00:18:50,640 --> 00:18:53,480 Speaker 2: Nipon agrees to buy US Steel for fourteen point one billion, 362 00:18:53,480 --> 00:18:55,199 Speaker 2: and of course I go check out who the bankers 363 00:18:55,240 --> 00:18:58,159 Speaker 2: are on the m and a banker City Group is 364 00:18:58,200 --> 00:19:03,159 Speaker 2: acting as financial advisor to Nipon steal. Barclay's, Goldman, Sachs 365 00:19:03,200 --> 00:19:06,679 Speaker 2: and Evercore are advising US Steel. So this is a 366 00:19:06,760 --> 00:19:09,440 Speaker 2: it's a good deal to get announced before year in 367 00:19:09,960 --> 00:19:12,840 Speaker 2: to you know, global iconic names, particularly US Steel, but 368 00:19:12,920 --> 00:19:15,000 Speaker 2: Nippon Steel has been a big, big player globally for 369 00:19:15,040 --> 00:19:17,399 Speaker 2: a long time. So good m and a trade to 370 00:19:17,400 --> 00:19:19,280 Speaker 2: get on your sheet right before year in. You go 371 00:19:19,400 --> 00:19:22,720 Speaker 2: talk to your boss and well, they'll be working over 372 00:19:22,720 --> 00:19:24,000 Speaker 2: the holidays papering over this deal. 373 00:19:24,280 --> 00:19:27,320 Speaker 5: You're listening to the tape. Cat's are live program Bloomberg 374 00:19:27,440 --> 00:19:31,040 Speaker 5: Markets weekdays at ten am Eastern on Bloomberg Radio, the 375 00:19:31,080 --> 00:19:34,320 Speaker 5: tune in app, Bloomberg dot Com, and the Bloomberg Business App. 376 00:19:34,359 --> 00:19:37,159 Speaker 5: You can also listen live on Amazon Alexa from our 377 00:19:37,200 --> 00:19:42,320 Speaker 5: flagship New York station. Just say Alexa play Bloomberg eleven thirty. 378 00:19:43,200 --> 00:19:48,040 Speaker 2: Penny Folly, managing director for Emerging Markets for TCW, joins 379 00:19:48,040 --> 00:19:51,640 Speaker 2: this year in studio, so she gets a special gold 380 00:19:51,640 --> 00:19:55,840 Speaker 2: star there. Penny, How can I play merging markets when 381 00:19:55,880 --> 00:19:58,600 Speaker 2: my biggest merging market is China and I have no 382 00:19:58,680 --> 00:20:00,440 Speaker 2: idea what's going on in China? How do you guys 383 00:20:00,440 --> 00:20:02,400 Speaker 2: think about that from a thirty thousand foot. 384 00:20:02,280 --> 00:20:07,440 Speaker 8: Level, Well, we focus obviously on fixed income. China is 385 00:20:07,480 --> 00:20:10,800 Speaker 8: actually a relatively small part of the index. It's about 386 00:20:10,840 --> 00:20:16,480 Speaker 8: four percent, and we're typically that's the dollar index, and 387 00:20:16,520 --> 00:20:21,040 Speaker 8: we're underweight. China could use corporates to some extent, which 388 00:20:21,080 --> 00:20:25,560 Speaker 8: are pretty defensive, shorter maturity, higher ratings. So that would 389 00:20:25,600 --> 00:20:27,720 Speaker 8: be how we play China in the dollar market. In 390 00:20:27,840 --> 00:20:31,360 Speaker 8: the local currency market, we've used China as a funder 391 00:20:31,880 --> 00:20:37,120 Speaker 8: largely low you know, is it low yields. The currency 392 00:20:37,160 --> 00:20:40,800 Speaker 8: has been relatively stable, so that for US is a funder. 393 00:20:41,119 --> 00:20:45,359 Speaker 8: If you look at EM as a whole, the growth 394 00:20:45,440 --> 00:20:49,600 Speaker 8: rates this year have widened relative to DM growth rates. 395 00:20:49,600 --> 00:20:52,000 Speaker 8: We expect the same and twenty twenty four, and that 396 00:20:52,160 --> 00:20:56,520 Speaker 8: excluding China, we expect growth to really remain pretty much 397 00:20:56,560 --> 00:20:59,080 Speaker 8: the same from twenty three to twenty four. So I 398 00:20:59,119 --> 00:21:02,400 Speaker 8: think the fundamentals are pretty attractive in these markets. If 399 00:21:02,440 --> 00:21:05,800 Speaker 8: you look at the world from a debt perspective, debt 400 00:21:05,960 --> 00:21:09,120 Speaker 8: peaked at about sixty two This is excluding China. Debt 401 00:21:09,280 --> 00:21:11,919 Speaker 8: peaked at about sixty two and a half percent in 402 00:21:11,960 --> 00:21:14,520 Speaker 8: twenty twenty. We expect it to be about fifty six 403 00:21:14,560 --> 00:21:18,040 Speaker 8: percent by the end of twenty twenty four. There was 404 00:21:18,080 --> 00:21:21,920 Speaker 8: a lot of concern about default in twenty at the 405 00:21:21,960 --> 00:21:24,960 Speaker 8: beginning of twenty twenty three, and that concern continues. They're 406 00:21:24,960 --> 00:21:29,560 Speaker 8: about seventeen countries in EM that don't have access to 407 00:21:29,600 --> 00:21:33,800 Speaker 8: the public markets, so those are clearly candidates. Of those, 408 00:21:33,960 --> 00:21:38,440 Speaker 8: eight have maturities in twenty twenty four, and we expect 409 00:21:38,560 --> 00:21:41,399 Speaker 8: seven of those will be able to make it through 410 00:21:41,480 --> 00:21:46,040 Speaker 8: with funding from the IMF and other sources local markets 411 00:21:46,040 --> 00:21:49,480 Speaker 8: as well. The only one that is at risk is Athiopia, 412 00:21:49,520 --> 00:21:53,640 Speaker 8: which obviously just announced their intention not to pay. 413 00:21:54,000 --> 00:21:58,160 Speaker 4: How do you view emerging markets that are commodities driven 414 00:21:58,280 --> 00:22:02,000 Speaker 4: emerging markets versus the rest that aren't as closely tied 415 00:22:02,000 --> 00:22:05,200 Speaker 4: to commodities, as far as what their economic outlook looks 416 00:22:05,240 --> 00:22:05,960 Speaker 4: like next year. 417 00:22:06,160 --> 00:22:07,520 Speaker 8: You know, I think that one of the things to 418 00:22:07,520 --> 00:22:09,920 Speaker 8: think about in emerging markets is the index today for 419 00:22:11,080 --> 00:22:15,000 Speaker 8: fixed income is about seventy countries plus, so they're all 420 00:22:15,000 --> 00:22:17,280 Speaker 8: over the place. It used to be back in the 421 00:22:17,320 --> 00:22:19,240 Speaker 8: old days, when you could just say this is a 422 00:22:19,320 --> 00:22:21,520 Speaker 8: this is a trade where you know we're going to 423 00:22:21,600 --> 00:22:25,000 Speaker 8: have compression of spreads, and everybody was pretty much in 424 00:22:25,040 --> 00:22:29,200 Speaker 8: the same area. We had ten countries in the index 425 00:22:29,280 --> 00:22:32,680 Speaker 8: and two thousand, you had thirty in two thousand and eight, 426 00:22:32,720 --> 00:22:35,280 Speaker 8: and you have over seventy. So it's very much a 427 00:22:35,280 --> 00:22:39,760 Speaker 8: game of differentiation. And so in our in our strategy, 428 00:22:39,800 --> 00:22:43,600 Speaker 8: we're about forty countries and that so we really are 429 00:22:43,600 --> 00:22:47,400 Speaker 8: ignoring about a third of the index. And there are 430 00:22:47,520 --> 00:22:50,800 Speaker 8: countries that we that are in the in the portfolio 431 00:22:50,920 --> 00:22:55,040 Speaker 8: because we like the local story and you know, Mexico 432 00:22:55,160 --> 00:22:58,439 Speaker 8: and Brazil or two that benefit both from local story 433 00:22:58,520 --> 00:23:01,399 Speaker 8: as well as in the case of Brazil, uh is 434 00:23:01,840 --> 00:23:05,800 Speaker 8: commodities and in the case of Mexico it's really near 435 00:23:05,880 --> 00:23:09,240 Speaker 8: shoring into the US. So those are two countries we 436 00:23:09,400 --> 00:23:10,520 Speaker 8: like very much. 437 00:23:10,800 --> 00:23:14,000 Speaker 2: What else besides those, how risky do you go out 438 00:23:14,080 --> 00:23:17,040 Speaker 2: in your kind of profile for merging markets? 439 00:23:17,160 --> 00:23:18,840 Speaker 8: Well, you know, I think one of the things that 440 00:23:19,000 --> 00:23:22,600 Speaker 8: is particularly interesting about em is that is those countries 441 00:23:22,640 --> 00:23:25,320 Speaker 8: that are you know, that have tried every bad idea 442 00:23:25,600 --> 00:23:28,120 Speaker 8: in the you know, in the book, and they run 443 00:23:28,160 --> 00:23:31,920 Speaker 8: out options. And that's what we call a significant turning point, 444 00:23:31,920 --> 00:23:34,400 Speaker 8: and that can be driven by just hitting the wall, 445 00:23:34,600 --> 00:23:38,320 Speaker 8: can be driven by a change in administration. Argentina is 446 00:23:38,359 --> 00:23:40,880 Speaker 8: a good example right now of a country it could 447 00:23:40,960 --> 00:23:44,280 Speaker 8: well come out from a couple of decades of bad 448 00:23:44,400 --> 00:23:48,160 Speaker 8: management to a better UH, to a better environment and 449 00:23:48,200 --> 00:23:50,760 Speaker 8: it's you know, it's still relatively So how. 450 00:23:50,720 --> 00:23:52,679 Speaker 2: Are your positioned for Argentina, for example, because that what 451 00:23:52,720 --> 00:23:54,120 Speaker 2: really was in the news most. 452 00:23:53,880 --> 00:23:58,240 Speaker 8: Recently, we are We're overweight Argentina pretty significantly. We have 453 00:23:58,280 --> 00:24:02,760 Speaker 8: a strong, you know, em Latin America strategist who's been 454 00:24:03,000 --> 00:24:07,600 Speaker 8: he's Argentine and he's and he suffers from from a 455 00:24:07,680 --> 00:24:12,800 Speaker 8: negative bias, but he's been very positive about Argentina and 456 00:24:12,920 --> 00:24:16,960 Speaker 8: the and the outlook under the new administration. 457 00:24:17,359 --> 00:24:20,120 Speaker 4: You look at some of the data under Bloomberg Intelligence, 458 00:24:20,119 --> 00:24:22,640 Speaker 4: so Gina Martin's Adams team, they're looking more at what 459 00:24:22,720 --> 00:24:25,320 Speaker 4: happens with the equity side of things, but especially looking 460 00:24:25,320 --> 00:24:27,800 Speaker 4: at how emerging markets are definitely prime to lead when 461 00:24:27,800 --> 00:24:30,399 Speaker 4: they're looking at some of their global counterparts, just because, 462 00:24:30,560 --> 00:24:33,080 Speaker 4: especially from an earnings perspective, they have gotten hit hard 463 00:24:33,320 --> 00:24:35,439 Speaker 4: in the past few years. How do you view that 464 00:24:35,480 --> 00:24:37,840 Speaker 4: going into next year when you're looking at emerging markets 465 00:24:37,960 --> 00:24:39,720 Speaker 4: versus other countries globally. 466 00:24:40,000 --> 00:24:44,160 Speaker 8: Well, I think EAM went into a downturn a little 467 00:24:44,240 --> 00:24:46,960 Speaker 8: earlier than the developed world, and they're coming out a 468 00:24:46,960 --> 00:24:52,000 Speaker 8: little earlier. They started to increase rates really a year 469 00:24:52,119 --> 00:24:56,080 Speaker 8: before before the developed world, and they're in Latin America 470 00:24:56,160 --> 00:24:59,040 Speaker 8: and in Central and Eastern Europe rates are coming down. 471 00:24:59,359 --> 00:25:02,840 Speaker 8: We expect that to broaden out over the course of 472 00:25:02,920 --> 00:25:06,520 Speaker 8: twenty twenty four inflation is coming down faster than it 473 00:25:06,560 --> 00:25:08,919 Speaker 8: is in the developed world. So right now you have 474 00:25:09,000 --> 00:25:15,359 Speaker 8: about a third of countries that have services inflation pre 475 00:25:15,440 --> 00:25:20,240 Speaker 8: pandemic levels and two thirds goods inflation pre pandemic levels. 476 00:25:20,800 --> 00:25:24,760 Speaker 2: So you mentioned Central and Eastern Europe, and of course 477 00:25:24,800 --> 00:25:27,560 Speaker 2: a lot of geopolitical risks there that you and other 478 00:25:27,600 --> 00:25:29,520 Speaker 2: merging markets folks have to deal with. How do you 479 00:25:29,600 --> 00:25:31,679 Speaker 2: think about that part of the world here? Is it 480 00:25:31,760 --> 00:25:34,240 Speaker 2: just too risky given what's happening in Ukraine. 481 00:25:34,760 --> 00:25:39,400 Speaker 8: No, we're we are neutral the region overall. Obviously E three. 482 00:25:40,000 --> 00:25:45,240 Speaker 8: We've taken our way in Poland, which also is going 483 00:25:45,320 --> 00:25:49,440 Speaker 8: through a transition, a government transition, which could be positive, 484 00:25:50,440 --> 00:25:54,000 Speaker 8: and we're less excited about some of the other countries 485 00:25:54,240 --> 00:25:56,920 Speaker 8: in the region which are going in our view and 486 00:25:57,000 --> 00:25:58,040 Speaker 8: slightly in the wrong direction. 487 00:25:58,280 --> 00:26:01,240 Speaker 4: There's been so much debate about the Federal Reserve potentially 488 00:26:01,240 --> 00:26:03,480 Speaker 4: having to maintain a hockey stanch, even on the back 489 00:26:03,480 --> 00:26:06,479 Speaker 4: of what we obviously heard from FED share pal last 490 00:26:06,520 --> 00:26:09,000 Speaker 4: week and these FED officials that have been coming out 491 00:26:09,080 --> 00:26:11,720 Speaker 4: leaving the door open to those potential rate cuts in 492 00:26:11,760 --> 00:26:13,760 Speaker 4: the second half of next year. But when you're looking 493 00:26:13,760 --> 00:26:16,679 Speaker 4: from a global perspective. Do you see anything, even in 494 00:26:16,680 --> 00:26:19,920 Speaker 4: particular with emerging markets or anything going on with inflation 495 00:26:20,040 --> 00:26:22,679 Speaker 4: that you really feel like is a risk and could 496 00:26:22,880 --> 00:26:27,360 Speaker 4: end up sparking potentially further downside risk to the global 497 00:26:27,400 --> 00:26:30,720 Speaker 4: economy that maybe investors are underestimating. 498 00:26:31,040 --> 00:26:34,720 Speaker 8: I think the biggest risk on the inflation side is 499 00:26:35,200 --> 00:26:40,800 Speaker 8: really commodity prices and conflict that generate higher commodity prices. 500 00:26:41,600 --> 00:26:46,800 Speaker 8: Ukraine Russia. Ukraine obviously shot food prices up substantially, that's 501 00:26:46,840 --> 00:26:49,960 Speaker 8: come down a little bit since then, and on the 502 00:26:50,480 --> 00:26:52,199 Speaker 8: conflict in the Middle East has yet to have a 503 00:26:52,200 --> 00:26:55,320 Speaker 8: major impact on oil prices. But those are two major risks, 504 00:26:55,320 --> 00:26:58,600 Speaker 8: and oil and food or very heavy weight in them 505 00:26:58,920 --> 00:27:03,400 Speaker 8: inflation basket close to fifty percent. So those I think 506 00:27:03,440 --> 00:27:04,920 Speaker 8: will be the bigger the big risk. 507 00:27:05,240 --> 00:27:08,920 Speaker 2: Where you what areas or situations are you guys avoiding 508 00:27:09,040 --> 00:27:11,439 Speaker 2: the most? Where's your highest conviction of Like, we just 509 00:27:11,440 --> 00:27:12,720 Speaker 2: cannot be in this part of the world. 510 00:27:14,240 --> 00:27:17,119 Speaker 8: Well, we were pretty much in all parts of the world. Okay, 511 00:27:18,560 --> 00:27:22,240 Speaker 8: turns out right now we're overweight Latin America and we're 512 00:27:22,280 --> 00:27:27,439 Speaker 8: overweight UH SUPs of here in Africa, We're we're equal 513 00:27:27,440 --> 00:27:32,760 Speaker 8: weight in in in UH CEE and also in the 514 00:27:32,800 --> 00:27:35,800 Speaker 8: Middle East, and we're way underweight in Asia. We find 515 00:27:35,800 --> 00:27:39,439 Speaker 8: that less interesting. Underweight underweight in Asia, we find it 516 00:27:39,640 --> 00:27:42,159 Speaker 8: less interesting at this point just just in terms of 517 00:27:42,480 --> 00:27:45,320 Speaker 8: UH in terms of rates are lower, they have less, 518 00:27:45,560 --> 00:27:49,680 Speaker 8: you know, less duration opportunities there as well. So our 519 00:27:49,680 --> 00:27:55,919 Speaker 8: big positions in UH in Asia are Indonesia UH India 520 00:27:56,320 --> 00:27:59,600 Speaker 8: in corporates in the dollar side, India on the local 521 00:27:59,640 --> 00:28:03,399 Speaker 8: currency side because of its inclusion in the index going forward, 522 00:28:04,119 --> 00:28:08,680 Speaker 8: and Korea also on the local currency side in expectation 523 00:28:08,960 --> 00:28:13,360 Speaker 8: for a better external environment and also possibly being included 524 00:28:13,400 --> 00:28:13,879 Speaker 8: in the WIGBI. 525 00:28:14,160 --> 00:28:16,199 Speaker 4: We only have about twenty seconds left. But what's the 526 00:28:16,200 --> 00:28:18,840 Speaker 4: top question you get from your clients? 527 00:28:19,240 --> 00:28:21,720 Speaker 8: Well, interesting enough, we now get one of our top 528 00:28:21,800 --> 00:28:24,720 Speaker 8: questions is when do we get involved? If you look 529 00:28:24,720 --> 00:28:28,760 Speaker 8: at the technicals, we've lost something like one hundred and 530 00:28:28,840 --> 00:28:32,040 Speaker 8: fifteen billion outflows since the beginning of twenty twenty two, 531 00:28:33,280 --> 00:28:37,280 Speaker 8: So there's most people in our in my seat are 532 00:28:37,320 --> 00:28:40,600 Speaker 8: either neutral or underweight, and there's very little tourist capital 533 00:28:40,600 --> 00:28:43,320 Speaker 8: in our markets. So I think the technicals are really 534 00:28:43,320 --> 00:28:46,200 Speaker 8: supportive going forward. And in terms of issuance, we expect 535 00:28:46,280 --> 00:28:48,400 Speaker 8: issuance to be largely ig. 536 00:28:48,640 --> 00:28:51,000 Speaker 2: Okay, very good, pennyfully thank you so much for joining us. 537 00:28:51,040 --> 00:28:54,160 Speaker 2: Pennyfullies and managing director and Meerger Markets for TCW. 538 00:28:54,920 --> 00:28:58,040 Speaker 5: You're listening to the tape Can's our line program, Bloomberg 539 00:28:58,120 --> 00:29:01,680 Speaker 5: Markets weekdays at ten am Easter on Bloomberg Radio, the 540 00:29:01,760 --> 00:29:05,000 Speaker 5: tune in app, Bloomberg dot Com, and the Bloomberg Business app. 541 00:29:05,000 --> 00:29:07,840 Speaker 5: You can also listen live on Amazon Alexa from our 542 00:29:07,840 --> 00:29:12,920 Speaker 5: flagship New York station Just Say Alexa playing Bloomberg eleven thirty. 543 00:29:14,000 --> 00:29:16,080 Speaker 2: You know, I've been long saying that she seems to 544 00:29:16,120 --> 00:29:19,080 Speaker 2: me for the next generation, one of the really big 545 00:29:19,120 --> 00:29:21,720 Speaker 2: growth stories is going to be cybersecurity. Yes, I mean, 546 00:29:22,080 --> 00:29:25,240 Speaker 2: you can't go wrong there. Everybody's got to spend money to, 547 00:29:25,880 --> 00:29:28,200 Speaker 2: you know, protect their their their networks. I'm looking at 548 00:29:28,200 --> 00:29:31,640 Speaker 2: Palo Alto Networks here stock. It's a ninety seven billion 549 00:29:31,680 --> 00:29:33,800 Speaker 2: dollar market cap stock. I guess the market agrees with 550 00:29:33,880 --> 00:29:36,479 Speaker 2: my assessment. Stocks up one hundred and twenty percent. So 551 00:29:36,880 --> 00:29:40,080 Speaker 2: Wendy Whitmore joins us. She's the senior vice president, head 552 00:29:40,120 --> 00:29:44,160 Speaker 2: of the cybersecurity team of Palo Alto Networks, and but 553 00:29:44,480 --> 00:29:47,520 Speaker 2: her highlight of her resume, she's on Duke University, Master 554 00:29:47,600 --> 00:29:51,880 Speaker 2: of Engineering and Cybersecurity Industry Advisory Board. That's a mouthful, 555 00:29:51,920 --> 00:29:56,120 Speaker 2: but anybody who's associated with Duke can stay Wendy, Can 556 00:29:56,160 --> 00:29:59,280 Speaker 2: you tell us what Unit forty two. 557 00:29:59,520 --> 00:30:04,960 Speaker 9: Is absolutely so great to be here. Unit forty two 558 00:30:05,000 --> 00:30:06,760 Speaker 9: is really the eyes and ears on the ground for 559 00:30:06,840 --> 00:30:10,000 Speaker 9: all of Palo Optove network. So we are the special 560 00:30:10,040 --> 00:30:13,720 Speaker 9: form forces unit, if you will, that really responds on 561 00:30:13,760 --> 00:30:17,280 Speaker 9: the ground to all of our clients' situations. So oftentimes 562 00:30:17,320 --> 00:30:20,160 Speaker 9: that's helping them in their worst day, everything from responding 563 00:30:20,200 --> 00:30:22,880 Speaker 9: to breaches, to doing the research and analysis on the 564 00:30:22,880 --> 00:30:25,680 Speaker 9: front end to understand what cyber attackers are doing and 565 00:30:25,720 --> 00:30:29,160 Speaker 9: then threat hunting on nodes throughout the world to identify 566 00:30:29,200 --> 00:30:31,040 Speaker 9: the latest and greatest attack patterns. 567 00:30:31,360 --> 00:30:34,880 Speaker 4: Well, there were a number of big cyber attacks this 568 00:30:35,040 --> 00:30:38,920 Speaker 4: year alone. Why do you think this is and Woolsey 569 00:30:39,080 --> 00:30:39,960 Speaker 4: continue to. 570 00:30:40,080 --> 00:30:46,320 Speaker 9: Escalate They unfortunately, they absolutely will continue. I think we're 571 00:30:46,800 --> 00:30:48,840 Speaker 9: you mentioned it. You know, cyber is really the story 572 00:30:48,840 --> 00:30:52,080 Speaker 9: in terms of a major industry moving forward. The reality 573 00:30:52,160 --> 00:30:53,560 Speaker 9: is right now there's a lot of money to be 574 00:30:53,640 --> 00:30:57,200 Speaker 9: made by attackers in the space. So what's happened is 575 00:30:57,240 --> 00:31:01,760 Speaker 9: we have major geopolitical activity going on throughout the world 576 00:31:01,840 --> 00:31:06,320 Speaker 9: right every region from Amia to certainly in the Asia 577 00:31:06,360 --> 00:31:09,960 Speaker 9: Pacific Rim as well. And so when you have that occurring, 578 00:31:10,000 --> 00:31:13,960 Speaker 9: you oftentimes behind the scenes have nation state actors continuing 579 00:31:14,000 --> 00:31:17,000 Speaker 9: to propagate activity even more. And so we're seeing that. 580 00:31:17,360 --> 00:31:20,360 Speaker 9: What we're also seeing though, is a combination of cyber 581 00:31:20,400 --> 00:31:24,800 Speaker 9: criminals becoming more sophisticated. Again, this relates to money being 582 00:31:24,880 --> 00:31:27,480 Speaker 9: made and the reality that there's a lot of money 583 00:31:27,520 --> 00:31:29,600 Speaker 9: to be made in this space. But cyber criminals in 584 00:31:29,640 --> 00:31:35,440 Speaker 9: particular really understand how businesses operate, their level of interconnectivity 585 00:31:35,520 --> 00:31:38,840 Speaker 9: between B to B type of markets, and they're taking 586 00:31:38,880 --> 00:31:40,440 Speaker 9: advantage of that as we speak. 587 00:31:41,040 --> 00:31:44,719 Speaker 2: So, you know, in twenty twenty three, one of the 588 00:31:44,720 --> 00:31:49,000 Speaker 2: investing drivers here was AI artificial intelligence, and I just 589 00:31:49,280 --> 00:31:50,680 Speaker 2: first time I kind of heard that, I was like, 590 00:31:51,080 --> 00:31:54,360 Speaker 2: oh boy, put AI together with criminals? Where how bad 591 00:31:54,440 --> 00:31:56,760 Speaker 2: can this get? So, how do you guys appallo out 592 00:31:56,760 --> 00:31:59,080 Speaker 2: to networks when you talk to your clients, how do 593 00:31:59,160 --> 00:32:04,760 Speaker 2: you out AI as an opportunity but as also a risk? 594 00:32:05,720 --> 00:32:09,080 Speaker 9: Absolutely? So I think with any new advancement in technology, 595 00:32:09,080 --> 00:32:11,760 Speaker 9: there are pros and there are cons. On the pro side, 596 00:32:11,880 --> 00:32:16,240 Speaker 9: we have leveraged AI in particular precision AI as well 597 00:32:16,240 --> 00:32:20,080 Speaker 9: as machine learning to advance our technologies and detect these attacks. 598 00:32:20,160 --> 00:32:22,480 Speaker 9: And that's been going on for years, but what we've 599 00:32:22,480 --> 00:32:25,360 Speaker 9: seen over the past year in particular is the advancement 600 00:32:25,400 --> 00:32:29,560 Speaker 9: of generative AI, and that is obviously enabling a lot 601 00:32:29,600 --> 00:32:33,120 Speaker 9: more effective human communications and that's everything from Britain to 602 00:32:33,280 --> 00:32:37,040 Speaker 9: verbal and in some cases video. So we think from 603 00:32:37,120 --> 00:32:39,720 Speaker 9: a defender perspective, there is a whole lot of great 604 00:32:39,760 --> 00:32:44,240 Speaker 9: things that we can leverage from AI, and we're doing 605 00:32:44,240 --> 00:32:47,120 Speaker 9: that today to advance our analysis, to make sure that 606 00:32:47,120 --> 00:32:51,000 Speaker 9: we're leveraging our human resources for the most difficult problems 607 00:32:51,040 --> 00:32:53,800 Speaker 9: and automating as much as possible on the front end 608 00:32:53,840 --> 00:32:57,160 Speaker 9: for our machines to solve that said, the attackers are 609 00:32:57,200 --> 00:33:00,760 Speaker 9: also doing something similarly. What we're seeing today is their 610 00:33:00,920 --> 00:33:05,360 Speaker 9: use of heavy reliance on the communications piece, so whether 611 00:33:05,440 --> 00:33:10,040 Speaker 9: that's in crafting spear phishing emails or communications on the 612 00:33:10,040 --> 00:33:14,000 Speaker 9: written side, or in some cases whether that's impersonating verbal 613 00:33:14,000 --> 00:33:19,520 Speaker 9: communications to circumvent employee identity verification so that they can 614 00:33:19,560 --> 00:33:22,400 Speaker 9: break into an environment. We're seeing a full spectrum. 615 00:33:22,760 --> 00:33:26,600 Speaker 4: Talk to us about this new SEC ruling and how 616 00:33:26,640 --> 00:33:28,240 Speaker 4: it relates to cybersecurity. 617 00:33:30,320 --> 00:33:33,400 Speaker 9: Well, so we're seeing increased regulation across the board, right, 618 00:33:33,480 --> 00:33:36,520 Speaker 9: So what we're looking at from the SEC is an 619 00:33:36,560 --> 00:33:41,960 Speaker 9: emphasis for reporting from individual organizations. I think the challenges 620 00:33:42,000 --> 00:33:45,520 Speaker 9: are in terms of timeframes oftentimes you know the least 621 00:33:45,600 --> 00:33:48,400 Speaker 9: and not oftentimes always you know, you know the least 622 00:33:48,440 --> 00:33:51,520 Speaker 9: at the beginning of an investigation, and so those first 623 00:33:51,600 --> 00:33:54,800 Speaker 9: forty eight to seventy two hours to weeks are really 624 00:33:54,840 --> 00:33:57,560 Speaker 9: where we're identifying a lot of information, and it can 625 00:33:57,600 --> 00:34:01,280 Speaker 9: be very dynamic, right, it is changing constantly. One thing 626 00:34:01,320 --> 00:34:03,960 Speaker 9: that I think we're seeing that's really interesting coming from 627 00:34:04,200 --> 00:34:08,320 Speaker 9: the SEC notification is the fact that attackers have now 628 00:34:08,360 --> 00:34:10,959 Speaker 9: and again we're talking about cyber criminals, not nation state 629 00:34:11,000 --> 00:34:14,200 Speaker 9: actors at least not yet, but cyber criminals saying well, hey, 630 00:34:14,280 --> 00:34:16,640 Speaker 9: I'm going to use this to my advantage, and if 631 00:34:16,680 --> 00:34:19,959 Speaker 9: I compromise an organization and they didn't report it yet, 632 00:34:20,200 --> 00:34:21,880 Speaker 9: I'm going to let the SEC know and I'm going 633 00:34:21,920 --> 00:34:26,080 Speaker 9: to follow a disclosure notification myself, which is causing you know, 634 00:34:26,120 --> 00:34:29,880 Speaker 9: obviously even more headache around the notification challenges. 635 00:34:30,920 --> 00:34:36,160 Speaker 2: We do we know what percentage of cybercrime is by individuals. 636 00:34:36,200 --> 00:34:39,520 Speaker 2: A couple of knuckleheads in the garage versus US, you know, 637 00:34:39,640 --> 00:34:40,360 Speaker 2: nation states. 638 00:34:42,840 --> 00:34:44,799 Speaker 9: But you know, that's a great question. I'm not sure 639 00:34:44,840 --> 00:34:48,279 Speaker 9: anyone can answer that completely comprehensively. But I would say 640 00:34:48,320 --> 00:34:51,400 Speaker 9: a significant amount of the activity, certainly that we see 641 00:34:51,600 --> 00:34:54,960 Speaker 9: and that our competitorcy is focused on nation state. The 642 00:34:55,040 --> 00:34:58,080 Speaker 9: difference there is that it often you know, really runs 643 00:34:58,160 --> 00:34:58,880 Speaker 9: under the scenes. 644 00:34:58,960 --> 00:34:59,120 Speaker 8: Right. 645 00:34:59,200 --> 00:35:03,080 Speaker 9: It's not something where these attackers are stealing information and 646 00:35:03,200 --> 00:35:07,040 Speaker 9: data and then sharing it publicly, right, they are providing 647 00:35:07,080 --> 00:35:09,560 Speaker 9: it to some sort of analytical capability on the back 648 00:35:09,640 --> 00:35:13,720 Speaker 9: end so that they can identify information, usually targeted against 649 00:35:13,719 --> 00:35:16,600 Speaker 9: a political objective. That's very different than when you have 650 00:35:16,640 --> 00:35:20,040 Speaker 9: a cyber criminal who's looking to cause disruption to business. 651 00:35:20,120 --> 00:35:20,239 Speaker 4: Right. 652 00:35:20,239 --> 00:35:23,560 Speaker 9: We're seeing that today with disruption to retailers, you know, 653 00:35:23,600 --> 00:35:26,480 Speaker 9: on their busiest period trying to satisfy orders before the 654 00:35:26,480 --> 00:35:30,360 Speaker 9: holiday season. And you know we see that over the 655 00:35:30,440 --> 00:35:33,040 Speaker 9: past few months. You saw disruption in Las Vegas in 656 00:35:33,120 --> 00:35:36,439 Speaker 9: terms of operational impact. People can't check into hotel rooms, 657 00:35:36,440 --> 00:35:39,399 Speaker 9: they can't place bets, right, So we see really two 658 00:35:39,400 --> 00:35:40,439 Speaker 9: different objectives there. 659 00:35:41,800 --> 00:35:43,799 Speaker 2: All right, Wendy, thank you so much for joining us. 660 00:35:43,960 --> 00:35:46,560 Speaker 2: Fascinating stuff. And again, if you think back to the 661 00:35:46,560 --> 00:35:50,719 Speaker 2: movie The Graduate Plastics as being the future cybersecurity. I 662 00:35:50,719 --> 00:35:54,080 Speaker 2: think it's the future here. Wendy Widmore, senior vice president 663 00:35:54,080 --> 00:35:57,640 Speaker 2: and headed the cyber security team at Palo Alto Network. 664 00:35:57,640 --> 00:36:00,000 Speaker 2: Do you think she gets some like panic phone calls 665 00:36:00,040 --> 00:36:01,360 Speaker 2: in the middle of the night. You think that happens 666 00:36:01,360 --> 00:36:05,040 Speaker 2: from clients, I would imagine. 667 00:36:06,120 --> 00:36:09,239 Speaker 1: Thanks for listening to the Bloomberg Markets podcasts. You can 668 00:36:09,280 --> 00:36:13,040 Speaker 1: subscribe and listen to interviews at Apple Podcasts or whatever 669 00:36:13,160 --> 00:36:16,840 Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter 670 00:36:17,080 --> 00:36:19,000 Speaker 1: at Matt Miller nineteen seventy three. 671 00:36:19,440 --> 00:36:21,880 Speaker 2: And I'm fall Sweeney. I'm on Twitter at pt Sweeney. 672 00:36:21,920 --> 00:36:24,600 Speaker 2: Before the podcast. You can always catch us worldwide at 673 00:36:24,640 --> 00:36:26,359 Speaker 2: Bloomberg Radio.