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Speaker 2: Here are the latest headlines on the Bloomberg. The fierce
Speaker 2: winds expended to continue in southern California, exacerbating wildfires and
Speaker 2: putting lives at risk. And the number of dead that
Speaker 2: we know about right now, it is up to twenty
Speaker 2: four and that's expected to climb. Let's get the update
Speaker 2: on all this. Will Wade is the Bloomberg Energy and
Speaker 2: climate reporter here at Bloomberg. Will put things into perspective
Speaker 2: for those of us on the East Coast. How much
Speaker 2: has burned?
Speaker 3: A lot? I mean a whole lot. We're up to
Speaker 3: about forty thousand acres. I know that sounds like kind
Speaker 3: of a random number. So here's some perspective. Forty thousand
Speaker 3: acres is a little bit bigger than Staten Island.
Speaker 4: Wow.
Speaker 5: Well, what do we know so far about the origins
Speaker 5: of these fires?
Speaker 3: Oh?
Speaker 6: It started, and.
Speaker 3: You know what we don't know a whole lot about that.
Speaker 3: I was just talking to my teammates. We cover utilities,
Speaker 3: so obviously we've seen in the past a lot of
Speaker 3: power lines get blamed for fires, and so often it's
Speaker 3: the case we Pgenie went bankrupt a few years ago
Speaker 3: because they started a terrible fire. Today we don't know
Speaker 3: that utility in Southern California, Southern California Edison, and they
Speaker 3: are looking at their power lines. There's no evidence now,
Speaker 3: but they've fielded some of these requests to retain evidence.
Speaker 3: So that's definitely where people are checking.
Speaker 2: First, we've heard a lot of blame being pointed at
Speaker 2: the mayor, at the governor. Is there any legitimacy to
Speaker 2: any of that at all? As far as you.
Speaker 3: Can tell, As far as I can tell, it seems
Speaker 3: like a lot of politicization. I may turn out to
Speaker 3: be wrong on that, but for today, I'd say, don't
Speaker 3: pay too much attention to that stuff.
Speaker 5: So you're the energy and climate reporter for us folks
Speaker 5: out here in New York. Help us kind of understand
Speaker 5: the climate in California.
Speaker 3: Not only the geography, but just the winds.
Speaker 5: And the weather that they have that kind of propelled
Speaker 5: this fire and is causing it to spread so quickly.
Speaker 3: Sure, I mean, I know this really well. I grew
Speaker 3: up in California the fall and winter months, the Santa
Speaker 3: Ana winds. They come every year. But what's happened in
Speaker 3: the past several years is, you know, with climate change,
Speaker 3: we've got longer, hotter summers. We've been had droughts, so
Speaker 3: you've get these hillsides that are just baked dry all
Speaker 3: summer long, all fall long. There's nothing there but dry
Speaker 3: bush and trees, and it's fuel for fires. And then
Speaker 3: the winds come and any tiny spark can trigger it,
Speaker 3: and the winds are going to just blow these blazes
Speaker 3: all over the place. That's was the problem. A week
Speaker 3: ago when there were like ninety mile an hour winds.
Speaker 3: They died down for a few days, but they started
Speaker 3: back up again. Now it's supposed to last through Wednesday,
Speaker 3: could be more after that. I think they're up to
Speaker 3: seventy mile per hour gusts coming this week. So it
Speaker 3: blows sparks, it fans the flames, it makes it harder
Speaker 3: to put them out.
Speaker 2: What is the What do we know in terms of
Speaker 2: the economic damage so far?
Speaker 3: Oh, it's a big number. I just saw a number
Speaker 3: this morning. We're looking at two hundred and fifty to
Speaker 3: two hundred and seventy five billion dollars in damages. That's
Speaker 3: from damages, lost wages, supply chain disruptions, sort of the
Speaker 3: whole package. But that's that's a lot of money.
Speaker 2: That would place this at I mean, correct me if
Speaker 2: I'm wrong, it would be the in terms of the cost,
Speaker 2: the worst natural disaster in history in the US history.
Speaker 2: I suspect it could be.
Speaker 3: I haven't seen a ranking on that, but certainly it's
Speaker 3: going to be up there. This is a this is
Speaker 3: a big fire, and we're not done yet. I mean,
Speaker 3: the two main fires are the Palisades Fire and the
Speaker 3: Eaten Fire. Palisades is about fourteen percent contained. Eton is
Speaker 3: about thirty something percent contained.
Speaker 2: Okay, what does that mean?
Speaker 3: Like fourteen percent contained?
Speaker 2: Does that mean that.
Speaker 5: It's likely to just continue to keep spreading? Like what
Speaker 5: is the definition of a contained fire?
Speaker 7: You know what?
Speaker 3: I don't know exactly what it means, but it certainly
Speaker 3: means that they are not even close to under control
Speaker 3: yet They're probably going to get bigger.
Speaker 2: That's the economic toll the damage is. There's also a
Speaker 2: psychological aspect of it. You know people out there, you're
Speaker 2: from that area, I do what's going through their minds.
Speaker 3: Well, I'll tell you about my aunt because I was
Speaker 3: texting with her yesterday. Her house is about two and
Speaker 3: a half blocks from the front lines of the Eton
Speaker 3: Fire in North Pasadena. She evacuated a week ago last
Speaker 3: Tuesday night. She was allowed to go home briefly to
Speaker 3: pick up some stuff over the weekend, but she is
Speaker 3: just really rattled. It looks like her house might be safe,
Speaker 3: at least from what I've been looking at today. It
Speaker 3: hasn't encroached on it anymore in the past several days,
Speaker 3: and I hope that stays true. But if she loses
Speaker 3: her house, it's going to be really serious for her.
Speaker 2: And this is an area where it's just like you
Speaker 2: grow up, you live there, and then the landscape just
Speaker 2: like in a few days, completely changes. That's going to
Speaker 2: have a tremendous impact on your psyche.
Speaker 3: Oh yeah, I mean I know this area. I was
Speaker 3: there last summer. My mom texted me last week, She's like,
Speaker 3: remember that place we went for brunch last June when
Speaker 3: you were here. Yeah, it's gone.
Speaker 5: Yeah, even the I've seen photos of some houses on
Speaker 5: blocks are the one house left standing, which, in that sense,
Speaker 5: I guess you can feel lucky if that was your house.
Speaker 5: But then what happens Then you move back into your
Speaker 5: house and all your neighbors are gone, and then you're
Speaker 5: just on an empty block.
Speaker 3: I mean that's devastating. I would think that would really
Speaker 3: be hard to live there, just to look around at
Speaker 3: the community that you used to know, and now it's gone,
Speaker 3: and it'll rebuild, but it'll be different.
Speaker 2: What is your sense of what has to happen in
Speaker 2: terms of rebuilding and what happens in the future. I mean,
Speaker 2: can you really make your house and your property fire proof?
Speaker 3: I mean, you can build it out of concrete. But
Speaker 3: the thing is, I've been writing about climate change for
Speaker 3: years and it just gets worse and people more people
Speaker 3: talk about it now, but we still need to see
Speaker 3: behavioral changes. There are places that are no longer as
Speaker 3: safe as they used to be.
Speaker 2: Well, I mean behavioral changes in terms of what.
Speaker 3: In terms of thinking should I live here? Should I
Speaker 3: not live here? You know, there's a lot of coastal
Speaker 3: communities that are you know, the local agencies are saying
Speaker 3: we're not going to pay to keep rebuilding the roads
Speaker 3: when the oceans overturn it every summer, and you're going
Speaker 3: to have to think about how you want to live there.
Speaker 2: Well, maybe you know, we should all move to Vermont. Oh,
Speaker 2: but wait, part of it was washed out because of
Speaker 2: the heavy rains. Maybe I should move to Florida. But oh,
Speaker 2: I'm going to get hit with you know, where'd he go?
Speaker 2: What's safe?
Speaker 4: Now?
Speaker 3: I wish I had a better answer for you. What
Speaker 3: I know is that climate change is real and it's
Speaker 3: a bigger threat than it ever was.
Speaker 2: Do you get a lot of pushback when you say
Speaker 2: something like that.
Speaker 3: Sometimes when I talk to my relatives in the South.
Speaker 2: Yeah, well, always a pleasure. Thanks Will Wait, Bloomberg Energy
Speaker 2: and Climate Reporter, the Los Angeles wildfires.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch the program
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Speaker 1: Just say Alexa play Bloomberg eleven thirty Tech.
Speaker 2: Heavy NASDAK down another one percent in today's trading. So
Speaker 2: what's next. Let's put that question to Kim Forrest, a
Speaker 2: founder at thee Cio Boca Capital Partners. It's kind of
Speaker 2: safe to describe you as something of a tech geek
Speaker 2: considering your background. What's on your Bingo card right now?
Speaker 8: Sure, well, let's just make a mixed metaphor here my
Speaker 8: Bingo card, and I was a software engineer. I became
Speaker 8: a cell side analyst that followed computer company.
Speaker 2: I didn't mean that as a pejorative, but you know,
Speaker 2: I know, no.
Speaker 6: No nervous like a good thing.
Speaker 8: Man, I love it, okay, But anyhow, just giving people background,
Speaker 8: and so I do look at tech and tech you
Speaker 8: know it drove the market. Actually, one company really drove
Speaker 8: the market last year. I was looking at some statistics.
Speaker 8: Do you know that the S and P five hundred
Speaker 8: is fifteen percent in Vidia?
Speaker 6: Holy cow? How'd that get to be there?
Speaker 8: Well, because in Vidia grew, right, But going to is
Speaker 8: in Vidia going to grow this year?
Speaker 6: Probably a little.
Speaker 8: Bit, but not like it did in twenty three for sure,
Speaker 8: and maybe not as it did in twenty four. So
Speaker 8: but should you throw out tech? I don't think so.
Speaker 8: I think there's a lot of smaller companies and probably
Speaker 8: companies that you don't think are in the bullseye of.
Speaker 6: AI that you could take a look at.
Speaker 8: So that's what I do if you are a tech investor,
Speaker 8: But I'd also be very, very concerned about what's happening
Speaker 8: in bonds. And you don't expect a computer person or
Speaker 8: a software person to be concerned with that. But it
Speaker 8: really will affect the market if bond rates go higher
Speaker 8: from here.
Speaker 2: Because the text in particular depend on future earnings and
Speaker 2: yields are going to put it into that party pretty quickly.
Speaker 8: I suppose, yes, yes, I would love to be able
Speaker 8: to escape you know, math and math modeling, but it
Speaker 8: really does limit earnings whenever, you know, rates go up.
Speaker 8: It is the thing that the tenure is the number
Speaker 8: that everybody discounts forward cash flows at. So the higher
Speaker 8: that goes, the lower multiple that you can expect. Is
Speaker 8: it really that easy?
Speaker 9: Sadly it is, okay, But you know, I'm just trying
Speaker 9: to think about years where you know, in the last
Speaker 9: maybe two years or so, there was a lot of
Speaker 9: talk about higher rates and how that was going to
Speaker 9: dent textocs and it hasn't yet.
Speaker 5: I'm wondering if something has changed now that we're in
Speaker 5: what could be I guess a good news for the
Speaker 5: economy means bad news for textiles because rates are higher
Speaker 5: because you know, we were kind of saying that last
Speaker 5: year and it didn't actually play out that way.
Speaker 8: Right, And I agree with you one hundred percent that
Speaker 8: things change and we should never ever just accept like
Speaker 8: those old sayings of Wall Street because every year is different.
Speaker 8: We have different investors, we have different companies, we have
Speaker 8: a different rate environment. There's so much going on. So
Speaker 8: at the basis I agree with you on that. I
Speaker 8: believe if you would have taken out the Magnificent seven,
Speaker 8: which are all growing well mostly you know, we'll kick
Speaker 8: out Netflix and Apple are mostly growing on AI, right,
Speaker 8: the theory that AI is going to drive these things
Speaker 8: higher in perpetuity.
Speaker 6: I think most of tech was down.
Speaker 8: And remember tech spending used to equal business it spending,
Speaker 8: so that's where the higher rates kind of come into play.
Speaker 8: It was businesses are not going to spend on it,
Speaker 8: and you know, because they're going to pull back and
Speaker 8: just not build for the future. So that's kind of
Speaker 8: one driver there. But I also think in Nvidia has
Speaker 8: had such an outweighed emphasis on the market on tech
Speaker 8: and specifically for the last two years. If you go
Speaker 8: and look at their quarterly earnings and just look at
Speaker 8: the revenue. That tells you the entire reason why everybody
Speaker 8: has piled into in Vidia and why it became, you know,
Speaker 8: a less than trillion dollar company surely and now the
Speaker 8: biggest company in the S and P five hundred right
Speaker 8: by market waiting and.
Speaker 6: Price.
Speaker 8: So it's been a completely outsized move because it had
Speaker 8: a completely outside moved in its revenues.
Speaker 2: Okay, so what's a spending going to look like from
Speaker 2: here on out?
Speaker 6: Right? Well, you get you get a kind of a picture.
Speaker 8: Looking at Microsoft, they say they're going to They said
Speaker 8: they're going to spend eighty billion dollars this year, this
Speaker 8: fiscal year. I think it was JP Morgan did a
Speaker 8: quick assessment on how much Meta, Google, Amazon, and Microsoft
Speaker 8: is spent. It looks like Microsoft was on track to
Speaker 8: spend about eighty billion dollars last year because they did
Speaker 8: it from January to August, and I just annualized, you know,
Speaker 8: whatever the run rate was, So that brings us to
Speaker 8: eighty billion. Now, let's not sneeze at eighty billion dollars.
Speaker 8: That's a lot of money, but it's going from eighty
Speaker 8: seventy eight billion in twenty twenty four to eighty billion.
Speaker 8: So I don't know that the big spenders in AI
Speaker 8: are going to increase like they did in the last
Speaker 8: couple of years again because they could. Right they were
Speaker 8: spending zero on it and now they're spending a lot
Speaker 8: on it. But I don't know that they're going to
Speaker 8: double it again.
Speaker 2: Kim boys your pleasure. Thanks for being here. I appreciate it.
Speaker 2: Kim Forrest, founder CIO Boca Capital Partners.
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Speaker 10: Matt Miller here sitting in for Alex Emily Graffeo sitting
Speaker 10: in for Paul Sweeney on a day when the markets
Speaker 10: are down again. I looked this morning at the open, Emily,
Speaker 10: we were looking at fifty seven eighty two on the
Speaker 10: S and P five hundred. You know what's interesting, that's
Speaker 10: exactly the closing level on November fifth, really, yes, the
Speaker 10: day of the US election. After that, of course we
Speaker 10: rallied higher. I think we were in the fifty nine
Speaker 10: hundreds already by the morning the open of November sixth,
Speaker 10: but we've erased all of those games and then some
Speaker 10: since we knew that Donald Trump won the presidential election
Speaker 10: on November fifth. We were also at four twenty five
Speaker 10: on the ten year yield back on November fifth, and
Speaker 10: now we're looking at four seventy seven, So for actually no.
Speaker 10: Four seventy nine to sixty four right now on the
Speaker 10: ten year yield, so we're up a solid sixty five
Speaker 10: points from our fifty five points from there. The Bloomberg
Speaker 10: Dollar Index also much higher right now at thirteenenty twenty two.
Speaker 10: We were closer to twelve twenty back on November fifth.
Speaker 10: So we've seen all the wrong assets rise in terms
Speaker 10: of I guess bond yields, and the dollar in the
Speaker 10: right ones fall in terms of the stocks.
Speaker 7: I want to bring in Guarev Moleague to.
Speaker 10: Talk a little bit about this, chief investment officer over
Speaker 10: at Palace Capital Advisors. Does this repricing make sense to you, Guarrev.
Speaker 2: I wouldn't say that it makes sense.
Speaker 4: I mean it's it's hard to make much sense of
Speaker 4: the markets these days, with a lot being driven by sentiment.
Speaker 4: I think if you look at fundamentals from our standpoint
Speaker 4: from November five till now, in terms of actually what
Speaker 4: has occurred, nothing much has changed. I think we still
Speaker 4: expect that we're going to see a pretty solid Q
Speaker 4: four earning season. We remain excited about earnings for twenty
Speaker 4: twenty five. I think the places where most investors taking
Speaker 4: pause is really what's the action the incoming Trim administration
Speaker 4: is going to take on the policy front. So in
Speaker 4: some areas, I would say, yeah, a bit of a
Speaker 4: surprise to see the uprally and then the downtrended markets.
Speaker 4: But from a fundamental standpoint, I think for stocks and earnings,
Speaker 4: we haven't seen much change.
Speaker 5: So even after Friday's jobs report and the moves that
Speaker 5: we've seen in treasury rates, you're still optimistic and it
Speaker 5: sounds like on the outlook for stocks for twenty twenty
Speaker 5: five we are.
Speaker 4: I think that, you know, as we look at the
Speaker 4: fundamental drivers, which from a macro level we think about
Speaker 4: what's going to occur with GDP growth, I think that
Speaker 4: looks pretty solid when we think about company's own projections,
Speaker 4: and again as we get through Q four, see some
Speaker 4: will get a sense of how they're advising as we
Speaker 4: look at twenty twenty five, but again, expectation of about
Speaker 4: five to six percent revenue growth. Margins for the S
Speaker 4: and P are at all time highs, which justifies, frankly,
Speaker 4: the multiple we're seeing at twenty one. So many things
Speaker 4: I would say that don't worry us too much. I
Speaker 4: think yes, on inflation and yields, A bit more surprised
Speaker 4: on that front since November. I mean again, you know,
Speaker 4: but the market has been so volatile with incoming macro
Speaker 4: data that you know, in the morning, I was talking
Speaker 4: with our investment team. We're talking about what's the projection
Speaker 4: for the end of the year, and I said, you know,
Speaker 4: I'm just nervous about making a projection because the economic
Speaker 4: data that has been coming in and bond voltarty, frankly,
Speaker 4: has been in so high.
Speaker 5: What about if we were to get I'm not making
Speaker 5: a prediction here, but a FED hike, because when you
Speaker 5: look at to your yields, that is certainly what some
Speaker 5: bond investors are expecting to come. Do we need a
Speaker 5: cut for your kind of optimistic view to continue to
Speaker 5: play out, or if we were to get a hike,
Speaker 5: could we still see stock staying resilient?
Speaker 4: So hike seems something that would shock markets frankly, right,
Speaker 4: So now you're talking about a slightly different way to
Speaker 4: view that situation. That would indicate to us that the
Speaker 4: fact doesn't know what they're doing. Right so far, they
Speaker 4: mean guiding us towards this fact that, Okay, we think
Speaker 4: infation is going to be under control. Now again that's
Speaker 4: been pushed off a little bit. Perhaps we're expecting a
Speaker 4: two percent number would have showed up by twenty twenty five,
Speaker 4: and I think that's looking more like twenty twenty six expectations.
Speaker 4: But direction is indicating that they're still in a mode
Speaker 4: where monetary policy is tight and they're going to keep
Speaker 4: it at that level. So a change in direction on
Speaker 4: that side to say we're going to certainly start doing
Speaker 4: hikes to tighten it even more, I think that would
Speaker 4: send a signal marketplace the fact doesn't know what it's doing,
Speaker 4: and then you're looking certainly at a spiraling effect on
Speaker 4: stock market.
Speaker 2: So I think that would be very concerning.
Speaker 10: So, I mean, we get a couple of data points
Speaker 10: over the next couple of days that are going to
Speaker 10: mean a lot to the Federal Reserve, at least they
Speaker 10: mean a lot to how markets forecast what the Fed
Speaker 10: is going to do. We get PPI tomorrow and we're
Speaker 10: looking for three point eight percent on the core year
Speaker 10: over year. It's pretty high, right, And we get CPI
Speaker 10: on Wednesday and there we're still looking for three point
Speaker 10: three percent.
Speaker 7: On the core number year over year.
Speaker 10: The Fed wants these numbers to be two, so they're
Speaker 10: still pretty far away. Don't rates need to be restrictive.
Speaker 4: Rates do need to be restrictive, But again, you know,
Speaker 4: when you think about the lagged effect of policy changes,
Speaker 4: both on the up and the down, still maintaining rates
Speaker 4: at a four point two five four point five handle
Speaker 4: for the Fed is still tight.
Speaker 2: So maybe that isn't room for one more.
Speaker 4: Rate thought, which clearly market is also icing in at
Speaker 4: most one rate cutting out of the end of the year.
Speaker 3: I think that's still in restrictive territory.
Speaker 2: Now.
Speaker 4: The inflation picture is also sort of clouded by the
Speaker 4: fact that there's a huge difference between what's occurring on
Speaker 4: the services side and on the good side. You know,
Speaker 4: on the good side, we're saying disinflation. We're seeing disinflation
Speaker 4: occurring in most of the post of the world. On
Speaker 4: the good side, right, that's going to flow through to
Speaker 4: some extent, again, notwithstanding what's the bard that trumped regetation
Speaker 4: takes on datifs. But again that's an effect that is disinflationary.
Speaker 4: So the real question that leaves us where there is
Speaker 4: what's going to court on the services side. And I
Speaker 4: think at a four point two five four point five
Speaker 4: level policy is restrictive enough that we will see a
Speaker 4: lack of effect showed through in inflation numbers. Now again,
Speaker 4: not to say that we'll get to just retrading the
Speaker 4: fact that, not to say we'll get to a two
Speaker 4: handle in twenty twenty five, I think that's not in
Speaker 4: the cards, that we don't see that occurring, but I
Speaker 4: think it gives us some confidence to say that two
Speaker 4: is a number that's possible when you look out at
Speaker 4: the end of twenty twenty six.
Speaker 7: All right, g thanks so much for joining us.
Speaker 10: Appreciate your Insightguarov Malik there is the chief investment officer
Speaker 10: at Palace Capital Advisors.
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