Speaker 1: This is Bloomberg Business Wait inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: global business finance and tech news. The Bloomberg Business Week
Speaker 1: Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Speaker 2: Should we talk about crypto?
Speaker 3: Yeah, I'm taking a look at bitcoin right now, and
Speaker 3: I haven't seen a rally like this in quite some time.
Speaker 3: It's up seven point four percent just today, Carol.
Speaker 2: Yeah, I'm looking at the whole crypto monitor on the
Speaker 2: Bloomberg like it's all up. Ethereums up about five and
Speaker 2: a half percent.
Speaker 3: Which makes no sense. If this is about bitcoin, then
Speaker 3: why is every other crypto?
Speaker 2: I'm sorry, Tim Stenewick. You want sense when it comes
Speaker 2: to the crypto market.
Speaker 3: Maybe Hannah Miller can help us make sense.
Speaker 2: I hope so, because we did have a three judge
Speaker 2: appeals panel in Washington today overturning a decision by the
Speaker 2: SEC to block a spot based bitcoin ETF from Grayscale.
Speaker 3: Does that make sense to you?
Speaker 2: You know? I just feel like getting an interpreter when
Speaker 2: it comes to all things crypto. We do get an
Speaker 2: assist from Hannah Miller's Digital currencies and venture capital reporter
Speaker 2: for Bloomberg News, and she's with us on the phone
Speaker 2: in San Francisco. Hannah, take it away. So big decision,
Speaker 2: significant help.
Speaker 4: Yeah, So this is a significant decision for the industry.
Speaker 4: You know, this has been a very drawn out battle.
Speaker 4: This is lasted years, and it is paving the way
Speaker 4: for the approval of the spot Bitcoin ETF in the US.
Speaker 4: But that is not definitive. There's still a lot of
Speaker 4: stuff that needs to happen. There still needs to be
Speaker 4: an approval process from the SEC. So I've been talking
Speaker 4: to people in the industry. It's been a lot of
Speaker 4: cautious optimism about what's happening here.
Speaker 3: Okay, forgive the question, Hannah, but why do we need
Speaker 3: a spot bitcoin ETF when bitcoin is so easy to buy?
Speaker 2: Oh my god, they're banging out the doors, Tim the
Speaker 2: crypto folks.
Speaker 4: No, that is a great question. So this stockcoin, the
Speaker 4: spot Bitcoin ETF, allows people to have exposure to bitcoin
Speaker 4: without actually buying the cryptocurrency. So for people who are,
Speaker 4: you know, a little nervous about bitcoin, especially amid all
Speaker 4: of the regulatory uncertainty happening here, this is a way
Speaker 4: to kind of get a taste of the action without
Speaker 4: you know, going all in. So a lot of people
Speaker 4: think that this could broaden mainstream adoption amongst both retail
Speaker 4: and institutional investors.
Speaker 2: So what do you wait? So what do you own?
Speaker 4: Then you have an ETS that's tied to the spot
Speaker 4: bitcoin price. You know, you are able to track the market.
Speaker 4: And they're hoping, they're hoping that, you know, the discount
Speaker 4: between the gray scale bitcoin trust and bitcoin itself will narrow,
Speaker 4: you know, with this decision, and we've seen that happen.
Speaker 4: You know, these two are becoming more closely aligned in price.
Speaker 4: So you know, GBTC is up, Bitcoin is up. Uh,
Speaker 4: the industry is celebrating right now.
Speaker 3: Sounds like a derivative. I don't it's I don't want
Speaker 3: to get too mechanical here because I know we're talking
Speaker 3: crypto and not necessarily et S. This is not et
Speaker 3: f IQ, but it's it's just again, I I question
Speaker 3: that the need for something like this, and also the
Speaker 3: reaction from from the entire crypto market.
Speaker 4: Yeah, I think that entire crypto market is just looking
Speaker 4: for some positive news here. I mean, there's been you know,
Speaker 4: such entanglement with regulators, there's all these legal battles. This
Speaker 4: is you know, a much needed win, even though you
Speaker 4: know there's still a lot of uncertainty about what's going
Speaker 4: to happen here.
Speaker 2: So what's so, is there a timeline, a date that's
Speaker 2: kind of on your radar radar as to what's next.
Speaker 4: Yeah, so we could see an approval as soon as
Speaker 4: next week. You know, there's this labor day deadline, and
Speaker 4: you know that that could happen. But again, there are
Speaker 4: a lot of logistics that need to you know play
Speaker 4: out here. The SEC has to decide how they're going
Speaker 4: to react to this, if they're going to you know,
Speaker 4: file with new reasoning for their rejection or if they're
Speaker 4: just going to capitulate here. So there's stuff that we
Speaker 4: still need to watch a Buyah, no.
Speaker 2: Go ahead, Hannah.
Speaker 4: Oh, there's just also a lot of buzz about ethereum products,
Speaker 4: you know, ethereum ets, you know, whether this could help
Speaker 4: pave the way for I always just.
Speaker 2: Feel like whenever there's like a crypto story, Hannah, I
Speaker 2: don't know, tim like it's like hey, hey good, but
Speaker 2: like there's always a.
Speaker 3: Lot of bubbs. Well that's so my butt question for
Speaker 3: Hannah before we go, just in the last minute that
Speaker 3: we have. Does this mean that Chair Gensler is a
Speaker 3: friend of crypto?
Speaker 5: Now?
Speaker 4: I wouldn't go that far. I think he's taken a
Speaker 4: couple of blows here. This is the latest setback. We'll
Speaker 4: see what happens, but yeah, I think it hasn't been
Speaker 4: the easiest road as of late for Gensler and NASTYC.
Speaker 2: All right, well, it's keeping us on our toes in
Speaker 2: these dog days of August. That's gonna say, that's for sure.
Speaker 2: Hannah Miller, thank you, Thank you. She's Digital Currencies and
Speaker 2: VC reporter for a Bloomberg News joining us on the
Speaker 2: phone from San Francisco. You did so much reporting too
Speaker 2: for Crypto r L. Yeah, so how are you thinking
Speaker 2: about these?
Speaker 3: I mean, this is something that the industry has wanted
Speaker 3: to see for a very long time. So it's a
Speaker 3: huge win for the industry. But I still question, you know,
Speaker 3: is it a product?
Speaker 2: I want to see a unicorns flying in the sky,
Speaker 2: But does that mean it's a good thing?
Speaker 3: Again, it's so easy to buy crypto. You can use
Speaker 3: PayPal or like, you know, just pull out your phone
Speaker 3: and buy it. But do more?
Speaker 2: Does general investors feel like it's so easy?
Speaker 3: I think so yeah, it's really easy.
Speaker 2: I don't know all right to be continued, that's for sure.
Speaker 1: If you're listening to the Bloomberg Business Week podcast, catch
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Speaker 2: We want to continue a little bit with the hp
Speaker 2: E story because they are out. We're waiting for HPQ
Speaker 2: to report. As we said, HPE did pre announce, so
Speaker 2: a lot of it was already laid out for investors.
Speaker 2: Having said that, we do want to get a little
Speaker 2: bit of some color, if you will, on the quarter
Speaker 2: of the outlook and how this particular tech company, well
Speaker 2: known around for a long time, kind of fits into
Speaker 2: our world.
Speaker 3: Very pleased to have with us this after in Bloomberg
Speaker 3: Intelligence Senior Technology analyst Wou Jenoe with us on zoom
Speaker 3: from b I headquarters in Princeton, New Jersey. So good
Speaker 3: to have you with us this afternoon. The question I
Speaker 3: have is what in here was a surprise to you?
Speaker 3: What's new to you?
Speaker 5: Well, I mean, there's really nothing new here. They're pretty
Speaker 5: much okay.
Speaker 3: I guess they pretty much pre announced, but if we did,
Speaker 3: if we dig deeper.
Speaker 5: Into the numbers, actually, look what's been white hot not
Speaker 5: only for HPE, but also the rest of the tech
Speaker 5: sector has been the networking space. And the slide upside
Speaker 5: into the quarter was the intelligent edge, right that that
Speaker 5: segment group fifty percent on a year on year basis.
Speaker 5: Where it fell short, however, was on the compute space.
Speaker 5: There has been some concern that, uh, the service space
Speaker 5: is going to be weak, and they missed by about
Speaker 5: three percent versus consensus expectation, and that that turned out
Speaker 5: to be true. We're still waiting for the service space
Speaker 5: to rebound. It still may take a couple of quarters
Speaker 5: before we start seeing growth come back here.
Speaker 2: You know, in an AI obsessed world, how do we
Speaker 2: think about HPE specifically and where they fit in?
Speaker 5: Yeah, I mean they're actually trying to really position position
Speaker 5: themselves very well in AI. Keep in mind that they
Speaker 5: have this high performance compute division which is going to
Speaker 5: drive some AI.
Speaker 6: Uh.
Speaker 5: The CEO, Antennayo Nire said either recent investor briefing that
Speaker 5: they had about eight hundred million dollars in order. So
Speaker 5: that's a number that I'm really curious to hear on
Speaker 5: on the on the call. But you know, in the
Speaker 5: overall picture, they're still growing that AI business. Uh. But
Speaker 5: and also they have to get access to the Nvidia
Speaker 5: cards to build these AI clusters for the enterprise. So
Speaker 5: it's going to take some time for that AI business
Speaker 5: to be to be a real business.
Speaker 3: What is that AI business like? What does it look like,
Speaker 3: what do customers experience? And how much of it is done?
Speaker 3: I mean, how much of a value creator is HPE.
Speaker 3: You said it sounds like a real winner is in video.
Speaker 5: It's it's it's potentially you know, a value creator over
Speaker 5: over the long term near term. I you know, eight
Speaker 5: hundred million dollars in orders in a roughly forty million
Speaker 5: dollar revenue base or twenty nine billion revenue base isn't
Speaker 5: going to move the needle anytime soon. But there's a
Speaker 5: couple of things right First, the enterprise customers do not
Speaker 5: have access to these Nvidia cards where all the clouds
Speaker 5: are sucking them up. HP can actually come in there
Speaker 5: and provide as a service provider to build in house
Speaker 5: AI systems for these enterprises. That's number one, number two HPE.
Speaker 5: Over the past several years, that has been moving over
Speaker 5: to this as a service business model, and with that
Speaker 5: they've actually introduced a new AI large language model service
Speaker 5: to provide to these customers. So if there are customers
Speaker 5: who want to build out these large language models do
Speaker 5: not have the wherewithal they can actually rely on HPE.
Speaker 5: And among all the large enterprise vendors enterprise IT providers,
Speaker 5: HPE is very far along relative to someone like ADEL
Speaker 5: or a Cisco.
Speaker 2: Which just as a reminder that when we speak of
Speaker 2: about AI and the needs and the demands and who
Speaker 2: are the winners, there's going to be multiple ones. Is
Speaker 2: that safe to say? Wouldjin Well?
Speaker 5: Right now, the the the big winter right is in video,
Speaker 5: as we saw on last week's earning right, and when
Speaker 5: when we think about AI in the early stages and
Speaker 5: think about AI house being built, the first thing that's
Speaker 5: going to be built is the plumbing. And in video
Speaker 5: is the leader there. One smaller name that I can
Speaker 5: share is probably a risk of Networks and they provide
Speaker 5: Ethernet networking and they're probably going to try to fight
Speaker 5: the battle where Nvidia is on the networking side. You know,
Speaker 5: if you talk about on a services perspective, the cloud,
Speaker 5: the hyperscale cloud providers are probably nearer in terms of
Speaker 5: being revenue generating versus like meaningfully revenue general genera generating
Speaker 5: relative to some of these enterprise I guys.
Speaker 2: Recent Networks is fifty two percent this year to Sharon, Yeah.
Speaker 3: Wujin who would be competitors when A comes to AI
Speaker 3: and where Hewlett Packard Enterprise is really trying to grow.
Speaker 5: Well, you know, the one benefit that HPE has is
Speaker 5: actually their their Qua acquisition from several years back, and
Speaker 5: they've actually been they've been trying to pivot that towards
Speaker 5: an AI play, so they know high performance compute really
Speaker 5: really well, and they are starting to build out the
Speaker 5: servers for enterprises to drive AI. Now the one company
Speaker 5: that is trying to there are two companies that are
Speaker 5: trying to move on the server side. One larger company
Speaker 5: is Dell. They're building out their own AI servers. A
Speaker 5: smaller company that I can share is super Micro and
Speaker 5: they've been performing. They've been delivering these high performance compute
Speaker 5: and if you look at that stock price that's I
Speaker 5: think has tripled over the past year because of they
Speaker 5: make these AI specific servers.
Speaker 2: Yeah, two hundred and eighteen percent this year alone, So yeah,
Speaker 2: it's been on a tear. It's been a thirteen almost
Speaker 2: fourteen billion dollar market cap company for micro HPE. Nice done.
Speaker 2: HPE is down about four ten percent in the aftermarket.
Speaker 2: H can we flip to HPQ. We're waiting for those numbers.
Speaker 2: It's definitely been outperforming. It's uh, you know, former sister, brother,
Speaker 2: whatever you want to call it HPE.
Speaker 3: Well, before you get into that, is it typical wujin
Speaker 3: that these are two companies report on the same day.
Speaker 3: This is surprising to me.
Speaker 5: It's it's all legacy.
Speaker 3: They always bear they do okay, all right, so they're
Speaker 3: stick to brother and sister and they're still like, you know,
Speaker 3: kind of.
Speaker 2: Related twins of a Yeah. So okay. HPQ up about
Speaker 2: sixteen percent. We used to call this was the old right,
Speaker 2: uh heulid packard. What are you watching out for that one?
Speaker 5: Yep. So I'm looking for the rebound on the on
Speaker 5: on the PC market. It looks as if it's silently
Speaker 5: flattened out in the second well the calendar second quarter
Speaker 5: of their fiscal third quarter, and hopefully they'll talk about
Speaker 5: signs of a slow but steady recovery. I don't think
Speaker 5: it's going to go down any further, and I don't
Speaker 5: think they're going to stick the neck outs and talk
Speaker 5: about growth anytime soon. What stability is where investors want
Speaker 5: them to be right now.
Speaker 3: Did back to school help with with PCs?
Speaker 5: Well, look what had happened over the past couple of
Speaker 5: quarters was that there was such an influx of PC
Speaker 5: production build that companies have overbuilt PCs and there was
Speaker 5: an inventory correction, so there was a halt on PC sales.
Speaker 5: Back to school and a return to seasonal demand is
Speaker 5: going to help back to school plus the holidays.
Speaker 2: And it looks like HPQ just crossing. Just go through
Speaker 2: a quick some numbers at you Amujin hp Inc. C's
Speaker 2: fiscal year adjusted EPs of three twenty three to three
Speaker 2: thirty five had seen three thirty to three fifty, So
Speaker 2: it looks like it's bringing in its fiscal year justin EPs.
Speaker 2: Looking at fourth quarter just a DPS eighty five to
Speaker 2: ninety seven, the estimate is ninety four cents personal third
Speaker 2: quarter personal systems revenue eight point nine to three billion,
Speaker 2: that is better than the estimate of eight point seven
Speaker 2: to nine billion, and third quarter free cash flow we're
Speaker 2: looking at nine hundred million. Estimate though was for more
Speaker 2: than a billion dollars.
Speaker 3: Yeah, and in the after hours shares at least the
Speaker 3: kne jerk reaction is lower wo'gen down about six point
Speaker 3: five percent. What's your immediate reaction.
Speaker 5: The reduction in guidance is possibly because of higher mix
Speaker 5: of PCs. Because PCs did better, that means they have
Speaker 5: lower gross margin. The printing business actually has higher gross
Speaker 5: margin and operating margins because of the supplies business.
Speaker 1: So the.
Speaker 5: Stability or better PC business is actually encouraging.
Speaker 2: Sign It did say, I'm just going to get to it.
Speaker 2: Our rite through real quickly reducing its full year cash
Speaker 2: flow and profit outlooks. Sing A rebound on the market
Speaker 2: for PCs will take longer than expected, so it sounds
Speaker 2: like a little bit more of the same that we've
Speaker 2: been expecting. Hey, thank you so much in real time
Speaker 2: breaking down those earnings with us. Swi Jinho. He's senior
Speaker 2: technology analyst at Bloomberg Intelligence, joining us from BI headquarters
Speaker 2: in Princeton. We've been leaning on those guys a lot.
Speaker 2: Heading out to our Princeton bureau today and our BI team.
Speaker 2: They are incredible.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 2: All right, well, speaking of shaky ground out Later this
Speaker 2: week the Double City's issue of Bloomberg BusinessWeek, where a
Speaker 2: team of global reporters looked around the world to tell
Speaker 2: stories happening in all corners of our societies. Among them
Speaker 2: is one about a fragile real estate boom emerging in
Speaker 2: Palestinian territories.
Speaker 3: Tim Yeah, one in which Arab Israelis are purchasing luxury
Speaker 3: homes in Jericho, adding a new dynamic to their complex
Speaker 3: relationship with other Palestinians and Jewish Israelis. Take us to
Speaker 3: taking us to the development known as Jericho Gay. We've
Speaker 3: got Bloomberg News Israel Bureau chief Ethan Bronner with us
Speaker 3: on zoom along with the editor of Bloomberg BusinessWeek, Joel Webber,
Speaker 3: who joins us on the access line in Massachusetts. So Joel,
Speaker 3: take us first into you know, the Double Cities issue
Speaker 3: and where Ethan's truly amazing story fits in.
Speaker 7: So Jericho happens to be one of the oldest cities
Speaker 7: in the world. So I thought that was pretty fitting
Speaker 7: way to you know, build the city's issue, go to
Speaker 7: the really old, and then also find ways to talk
Speaker 7: about some of the new new challenges and new innovations
Speaker 7: and things that we can all be excited about, as
Speaker 7: we've also discussed right here on the show before. I
Speaker 7: went to one of the world's most complicated geopolitical situations
Speaker 7: in Taiwan recently, and you know, the only place in
Speaker 7: the world that might rival that one is probably where
Speaker 7: Ethan resides. And so I thought, you know, we can
Speaker 7: always talk about cities, and we can talk about the pandemic,
Speaker 7: but let's be real and talk about some seriously interesting stuff.
Speaker 7: And that's what Ethan was able to bring us from
Speaker 7: a development called Jericho Gate. So Ethan, what's happening?
Speaker 8: A Jael hs Tevit and Carol So, yes, it is
Speaker 8: a very complex and interesting situation. I mean, of course,
Speaker 8: the West Bank is occupied, militarily occupied by Israel, and
Speaker 8: it is no fun to live under occupation. It is
Speaker 8: a difficult situation for many. But what I learned is
Speaker 8: that despite that, there has been a Palaestadian business class
Speaker 8: that has decided to build vacation villas with pools, for
Speaker 8: there are several hundred some thousands of Palace Citians who
Speaker 8: can afford it. And now the complicated thing here is
Speaker 8: also that there are three kinds of Palestinians evolvetor those
Speaker 8: who live under occupation in the West Bank, those who
Speaker 8: live in Jerusalem, which is a kind of occupation, but
Speaker 8: they have special IDs because Israel considers all of Jerusalem
Speaker 8: it's capital. And then there are those who are Israeli Arabs,
Speaker 8: who are citizens of Israel, and all three populations have
Speaker 8: grown wealthier, I don't want to say wealthy, but wealthier
Speaker 8: in the last twenty years, because Israel has become very,
Speaker 8: very wealthy compared to what it was generation ago. And
Speaker 8: therefore there is kind of a room for vacation homes
Speaker 8: for people who live nearby. Now, the other thing that's
Speaker 8: so interesting is that the Israeli Arabs were not really
Speaker 8: mixing with those of the West Bank for many years.
Speaker 8: Now they are. And one of the questions the story
Speaker 8: raises is what that might mean politically in the future.
Speaker 2: Can we just take a step back and just talk
Speaker 2: about the development itself and what's inside the walls and
Speaker 2: kind of what surrounds it.
Speaker 8: Sure, So this is just outside the city of Jericho,
Speaker 8: and as Joel mentioned, one of the very oldest cities
Speaker 8: in the world, the lowest city on the planet as well,
Speaker 8: and just near the Dead Sea. And so you have
Speaker 8: a whole group of Palestinian developers who created villas with
Speaker 8: walls around them, typically three bedrooms, three bathrooms with a pool,
Speaker 8: pretty big pool fied by ten meters. And these are
Speaker 8: vacation homes that sell for a quarter of a million dollars,
Speaker 8: which is a pretty good price in most places for
Speaker 8: a vacation villa like that. And there is a big
Speaker 8: development around. They're still building it, but the plan is
Speaker 8: for going to be a couple of three or four malls,
Speaker 8: a water park and other kinds of tourism things. So
Speaker 8: the idea is to make it a real a place
Speaker 8: of attraction for people visiting from within Israel and Palestine
Speaker 8: areas and from outside.
Speaker 3: There's an incredible quote in your story. One of the
Speaker 3: subjects says, Jericho is booming despite the checkpoints and occasional war.
Speaker 3: People can make money here.
Speaker 8: That's right, that's right. I mean, what is the.
Speaker 3: Looming threat of war described that.
Speaker 8: Look, I mean there have been is there you know,
Speaker 8: there there is tension. I mean, nobody wants to live
Speaker 8: under military occupation. So there are young men who are armed,
Speaker 8: who are go after Israeli soldiers and Israeli settlers, and
Speaker 8: then the Israeli army comes in and tries to quote
Speaker 8: unquote restore order from its perspective.
Speaker 9: So there in January there were there was a shooting
Speaker 9: at a restaurant where Israeli's go and the Israeli military
Speaker 9: went into a refugee camp near Jericho Gate and killed.
Speaker 8: Five guys and the course of trying to restore the
Speaker 8: situation to the stems quote ante. So that's what that means.
Speaker 8: And at any given time, there could there have been
Speaker 8: two so called intifadas uprisings in the last forty years,
Speaker 8: and there could be another one in theory, And that's
Speaker 8: what the mayor means, the mayor who said those things.
Speaker 8: At the same time, there is money to be made,
Speaker 8: because there is a lot of money slashing around now,
Speaker 8: partly as a result of Israel's wealth and partly as
Speaker 8: a result of some savvy business folks who are decided
Speaker 8: listen whatever happens, we're here. And that's the other interesting
Speaker 8: aspect here, right, that these developers and business people who say, look,
Speaker 8: whatever happens, we're not going to go, so let's just
Speaker 8: build and make sure that whatever happens in the end,
Speaker 8: we have someplace nice to live.
Speaker 7: So talk to us about that. The fragile piece that
Speaker 7: it's all sort of built on ethan because sure you
Speaker 7: can build stuff like this and you can develop it,
Speaker 7: but like underneath it all, you know, as you kind
Speaker 7: of mentioned here, I mean, there's there's some real fragility
Speaker 7: that it's all built on.
Speaker 8: That's true. There is increasingly less and less of a
Speaker 8: chance that there will be an independent Palestinian state. Israel
Speaker 8: is very powerful and has turned to the right. It
Speaker 8: has decided mostly that it is not especially interested in
Speaker 8: helping the creation of Palestinian state. At the same time,
Speaker 8: you have millions of Palestinians, several million who lived in
Speaker 8: the West Bank without full rights, and would not be
Speaker 8: surprising if they were to rebel again. Now the situation
Speaker 8: is that Israeli military does maintain a sense of order
Speaker 8: in the place it does. It isn't so easy to
Speaker 8: rebel against Israeli military. But you know, as you said,
Speaker 8: it could happen again. At the moment, the kind of
Speaker 8: occupation that Israel is engaged in has seemed to have
Speaker 8: kept down any genuine full time violence as opposed to
Speaker 8: what has happened in Godz that we're talking about justin
Speaker 8: in the West Bank. But you know, until there is
Speaker 8: some kind of political horizon that makes sense, there's always
Speaker 8: a risk of vice. And that's what those guys are
Speaker 8: talking about.
Speaker 7: So for the for the past Indians who are able
Speaker 7: to buy these villas, what does it feel like for them?
Speaker 7: And what do the villains look like?
Speaker 8: Well, the villas are beautiful there, as I said, three bedroom,
Speaker 8: three own, sweet bathrooms, tiles, beautiful kitchen appliances, last sliding
Speaker 8: doors out to the pool, you know, slip free tiles
Speaker 8: around the pool, computer worrying about the pH of the
Speaker 8: water and so forth. They're gorgeous. The people who go there,
Speaker 8: you know, it's it's sort of like they've decided. You know,
Speaker 8: all these years, all these decades, we never nothing seems
Speaker 8: to be going right. But you know what we have,
Speaker 8: We have enough money. This is where we live, and
Speaker 8: we're going to do this. And and Jericho has historically
Speaker 8: been I mean long history, a place that in winter
Speaker 8: people go because it's low and warm, and so the
Speaker 8: idea that it can be your vacation weekend replace is
Speaker 8: very appealing to both to Palestinians who live in Jerusalem
Speaker 8: and the West Bank, and again interestingly, thousands and thousands
Speaker 8: of Palestinians in who aren't Israeli citizens, who are sort
Speaker 8: of spending their weekends in the West Bank because they can,
Speaker 8: because they can afford, you they can't afford to buy
Speaker 8: such a property in Israel, which is very, very expensive,
Speaker 8: and they're culturally, of course in tune with the people there.
Speaker 8: So there is this kind of growing intermixing of Israeli
Speaker 8: Arabs and West Bank Palestinians. And you know, I think
Speaker 8: it's too early to know, because it's only been five
Speaker 8: or some years, if this has been happening on a
Speaker 8: big basis, but I suspect that there could be a
Speaker 8: political development which would bring leadership, possibly from Israeli Arabs
Speaker 8: who go to the West Bank because they know the
Speaker 8: place they're coming from, and they know that the country
Speaker 8: they have to deal with, and they of course politically
Speaker 8: and culturally aligned with the people in the West Bank.
Speaker 8: But it's very early, it is really.
Speaker 3: But even talk a little bit, talk a little bit
Speaker 3: about the politics though of this. That's that's really where
Speaker 3: I want to go and understand how this could have
Speaker 3: political implications and maybe.
Speaker 2: Be a stabilizing force, right to see, that's right, you know,
Speaker 2: the movement of this wealth into it.
Speaker 8: That's right. So we have, of course, the most right
Speaker 8: wing religious government in Israel's history. It is not it
Speaker 8: is a government under Benjamin Senya, who that is not
Speaker 8: dedicated to independent Palestinian state, trying to limit and possibly
Speaker 8: annex some of that land. So there's that now. Internally
Speaker 8: in terms of the millions of palestin is the two
Speaker 8: million Palestinians who are israel As citizens and the several
Speaker 8: million who live in the West Bank. I think the
Speaker 8: politics of this is that they they you know, let
Speaker 8: me let me step back for one second. The region
Speaker 8: is not an encouraging place to live. If you are
Speaker 8: an Arab and you look around at Jordan, Lebanon, Syria, Egypt,
Speaker 8: and you say to yourself, I'm an Israeli Arab. I mean,
Speaker 8: I'm very unhappy that I don't have political independence. On
Speaker 8: the other hand, everything around me is in many, maybe
Speaker 8: far worse that. So maybe there will be some kind
Speaker 8: of accommodation internally for bi Palestinians internally to somehow come
Speaker 8: to terms with the with the Jewish state of Israel.
Speaker 8: And I say this is because the two million Palestinians
Speaker 8: who are citizens of Israel. On the one hand, of
Speaker 8: course they can't. It is it is a Jewish country,
Speaker 8: and that is, you know, not something easy for them
Speaker 8: to embrace. On the other hand, the bourgeoissification, the middle
Speaker 8: classification of Israeli Arabs over the last generation has been remarkable,
Speaker 8: lightning strong. They all go to university, They are filling
Speaker 8: Israel's occupations, including high tech and and so. On the
Speaker 8: one hand, it is sort of scarier to be an
Speaker 8: Israeli Arab than ever, and on the other hand it
Speaker 8: is easier to be. And those parallel lines are aspects
Speaker 8: of Israel that you see all around. Israel is both richer,
Speaker 8: more more advanced, and heading toward weird medieval forces at
Speaker 8: the same time, all at the same time. And for
Speaker 8: Israeli Arabs, they're like the canary and the coal mine.
Speaker 8: They what's going to happen to them? We don't know.
Speaker 8: The other question is do they view buying property in
Speaker 8: the West Bank as an insurance policy in case it
Speaker 8: gets really ugly in Israel?
Speaker 6: Right?
Speaker 8: I don't know, but some do it.
Speaker 7: You know.
Speaker 2: What's what's fun about, as you guys all know, is
Speaker 2: that we cover markets and we have investors, business folks.
Speaker 2: They take risks. Who's the developer who has taken the
Speaker 2: risk in this? Just at about a minute, I know,
Speaker 2: you tell a really long, not alone, but a really
Speaker 2: detailed story which which is so rich. But who is
Speaker 2: this individual who does it?
Speaker 4: Yeah?
Speaker 8: Yes, So the brains behind it is a man named
Speaker 8: Samir Huli Lay and he's a fascinating guy who pilled
Speaker 8: those of you listening will read the story because he's
Speaker 8: sixty five year old Palestinian who was in politics and
Speaker 8: ended up in private enterprise and has this vision, got
Speaker 8: got purchased in fat millions and tens of millions of
Speaker 8: dollars worth of land from a particular clan and then
Speaker 8: you know, started to sort of engage sixty two separate
Speaker 8: Palestinian developers to create the villas and so on. So
Speaker 8: I mean he and he, you know, he's the guy
Speaker 8: who says in the story, I realized in the end
Speaker 8: that there if whatever, however this ends up, what's the
Speaker 8: point of having a flag over a garbage stop? Which
Speaker 8: was an amazing quote, I thought. He so he said,
Speaker 8: you know, we need to resist, we need to build,
Speaker 8: and that's how we're going to look forward. Politically, We're
Speaker 8: not going anywhere. We're not gonna win on the battlefield
Speaker 8: right now. But this is what I can contribute. And
Speaker 8: I was very moved by that.
Speaker 2: Yeah, well, we can tell and it's an incredible story.
Speaker 2: And I feel like this is I've said it a
Speaker 2: million times that you guys all at business we do
Speaker 2: this so well. You open a window into the world
Speaker 2: where people probably don't know what's going on, and you
Speaker 2: really tell the story with so many details and how
Speaker 2: it can be potentially a changing force or not. Time
Speaker 2: will tell.
Speaker 3: Yeah, it's a really great piece. I should note it
Speaker 3: is in the upcoming new Double Cities issue of Bloomberg
Speaker 3: Business Week. It's on newstands later this week. The story
Speaker 3: though already online at Bloomberg dot com, slash BusinessWeek Carol
Speaker 3: and of course always on the Bloomberg terminal.
Speaker 2: I highly recommend everybody check it out and read it
Speaker 2: in its entirety because as we said, it's just really
Speaker 2: rich in detail and just pretty amazing. Who knew this
Speaker 2: was going on? Well, Ethan Bronner did. He's Bloomberg News Israel,
Speaker 2: your chief. We thank him, joining us on zoom and
Speaker 2: then of course the edit of Bloomberg Business Week, Till
Speaker 2: Weber joining us on the access line in Massachusetts. You're
Speaker 2: listening and watching Bloomberg Radio.
Speaker 1: I'm brother Marc, a journal.
Speaker 5: How about you let me drive? No, no, no, no, who's
Speaker 5: going to drive?
Speaker 7: Honey?
Speaker 8: Please?
Speaker 1: I'll do the riding gravel? Exclet's met, I want to dry.
Speaker 6: It's good question time.
Speaker 1: This is the drive to the globe.
Speaker 8: Con me think we'll buy around yether Don on Bluebird Radio.
Speaker 2: All right, everybody, just under eighteen minutes left in today's
Speaker 2: poling session. A dozen Indeed, it's funny how that works,
Speaker 2: you know. O'clock just going uh and this is one
Speaker 2: for the bulls, everybody, because we're holding out of the games.
Speaker 2: You just heard gains. Excuse me, you just heard from Charlie.
Speaker 2: We're pretty much at our best levels of the session.
Speaker 2: You got one and a half percent higher on the
Speaker 2: S and P five hundred ten and one point eight
Speaker 2: percent higher on the Nasdaq, and then you've got yields
Speaker 2: down on that softer economic news. So right now traders
Speaker 2: are maybe you know, we talked about this at the top.
Speaker 2: Maybe you know the FED is getting closer to being done.
Speaker 2: But yeah, I know, maybe we have another point.
Speaker 3: You've been playing that game for quite a bit of time.
Speaker 3: Let's see what Nicole Webbs, senior vice president at the
Speaker 3: financial advisor at the registered investment advisor at Wealth Enhancement,
Speaker 3: joining us on Zoom from Plymouth, Minnesota, has to say, Nicole,
Speaker 3: good to have you with us. How are you.
Speaker 6: Hey, I'm doing well today.
Speaker 8: Thank you.
Speaker 3: So does a rally like this have legs? Is it warranted?
Speaker 6: You know, I think today has a lot to do
Speaker 6: with the Joelts data. Everyone's you know, just sing the
Speaker 6: same song there where Glad you said that.
Speaker 3: Because I thought I had to do with the Jolt
Speaker 3: data too. Finally you can stay you know, I.
Speaker 6: Think it's Yeah, it's one of those weeks where bad
Speaker 6: news is good news. You know, we're going to read
Speaker 6: into this to say, okay, do we have to price
Speaker 6: in an additional twenty five basis points? And only two
Speaker 6: weeks ago we were looking at shipping costs we were
Speaker 6: looking at oil over the last two months and we
Speaker 6: were going, Okay, are we going to have some resurgence
Speaker 6: of inflation? Are we going to be talking about that,
Speaker 6: you know about kind of additional stickiness in the back
Speaker 6: half of this year. And so some of the deterioration
Speaker 6: and jobs is meaningful. And I think you couple that
Speaker 6: with this pressure on return to work, which is showing
Speaker 6: a little bit of a nuance from a business perspective
Speaker 6: of we're not as fearful to lose you as we
Speaker 6: once were. So if it's a if it's a deal
Speaker 6: breaker for you to come to the office, that's okay
Speaker 6: with us. There's available workers out there that we'll go grab.
Speaker 2: So when you and your team advise and are helping clients,
Speaker 2: and I understand it's long term accumulation, it all. Everybody
Speaker 2: has specific investment goals. But what is it that right
Speaker 2: now in this broader market environment that makes you pull
Speaker 2: a trigger on something or saying, hey, we know you're
Speaker 2: in it for the long term, but you might want
Speaker 2: to think about this, or you might want to think
Speaker 2: about this, and what would those this is or that
Speaker 2: be if you will.
Speaker 6: Yeah, I actually really appreciate you framing the question that
Speaker 6: way because all too often, you know, we spend a
Speaker 6: lot of time talking about the risk on, risk off narrative,
Speaker 6: but that doesn't work the same way for a bank
Speaker 6: as it does for an individual. When we think about
Speaker 6: the market today, there's certainly opportunity below the surface. And
Speaker 6: so if we know or expect we think, we know
Speaker 6: that we're in a higher for longer environment, and we
Speaker 6: know that this year had a lot to do with
Speaker 6: margin expansion. We know last week and the video was
Speaker 6: a bit a bit of a look through into what
Speaker 6: we could expect from the technology sector. You know, if
Speaker 6: we think about jewelt Stata telling us a piece of
Speaker 6: the duration story, then in a moment like the one
Speaker 6: we're in right now, there's two things we talk a
Speaker 6: lot about when it comes to equities, and that's you know,
Speaker 6: the four hundred ninety other companies we haven't been talking
Speaker 6: about this year, areas of growth like liquid natural gas
Speaker 6: or companies with multi business lines that aren't leveraged in
Speaker 6: this environment at all. And then you couple that with
Speaker 6: the story around opportunities and fixed income outside of just
Speaker 6: ultra short duration meaning money market and T bills, and
Speaker 6: look at when do we start to incrementally increase that
Speaker 6: duration exposure because rates at the levels are at today
Speaker 6: are higher than we would expect to growth rate over
Speaker 6: the next ten years to be. And that's when one
Speaker 6: starts to think about placing some of that extended duration
Speaker 6: in risk free assets.
Speaker 2: So, well, you know, it's funny that you say that,
Speaker 2: So is it the net net there? And I've heard,
Speaker 2: you know, various folks around the table here in this
Speaker 2: control in the studio say that, you know, you look
Speaker 2: at what's going on in US treasure yields and you're right, like,
Speaker 2: that's not so bad. And considering, you know, the reduced
Speaker 2: risk in going into a US treasury that's giving you
Speaker 2: four or five percent at this point versus the risks
Speaker 2: potentially in the equity markets, is that basically the net
Speaker 2: net there?
Speaker 6: Yeah, I also think one has to remember that, you know,
Speaker 6: volatility in the market is actually extremely profitable for the
Speaker 6: individual for the long term investor, the reinvestment of dividends
Speaker 6: alone in aggregate makes up a great sum of that
Speaker 6: total return perspective. And so when we think about the
Speaker 6: market we're in, you know, there's a couple of trends
Speaker 6: we think about for the year ahead. We do believe
Speaker 6: the stickiness of inflation and that's been a huge win
Speaker 6: for large cap companies and their ability to pass along
Speaker 6: pricing to the consumer and not have volume decrease. We
Speaker 6: expect that trend to continue, but we also believe that
Speaker 6: we can incrementally be buying into the small cap spectrum
Speaker 6: knowing that we've likely reached a price point where the
Speaker 6: price to entry is very inexpensive comparative to the large
Speaker 6: cap and so I think you're going to see a
Speaker 6: lot of positioning or reposition in the back half of
Speaker 6: this year when we come out of you know, lame August,
Speaker 6: and it's all going to play into the story you're
Speaker 6: talking about.
Speaker 3: You guys still have a expectation a year in target
Speaker 3: of forty six hundred on the S and P five hundred.
Speaker 3: Here we are close to forty five hundred at this point.
Speaker 3: What does the path between now and December thirty first
Speaker 3: look like?
Speaker 6: Yeah, we expect that there is you know, ye, last
Speaker 6: week was a bit of a game changer in terms of,
Speaker 6: you know, expectations around what Navidio would provide in terms
Speaker 6: of a look through into the tech sector. You couple
Speaker 6: that with you know some of the data supporting now
Speaker 6: that perhaps there isn't another twenty five basis point increase
Speaker 6: yet this year. But at the same time, we do
Speaker 6: expect there to be a bit of a churning at
Speaker 6: the surface. This is where we step away a bit
Speaker 6: from passive investing and think more about being really thoughtful
Speaker 6: in how we deploy into specific names in the back half.
Speaker 6: So our expectation of how we get to forty six
Speaker 6: hundred is less in that the top ten of the
Speaker 6: cap waiting of the SMP and more of a churn
Speaker 6: below below the surface that is less noticeable. And so
Speaker 6: all of that to say, a bit of a tighter
Speaker 6: trading range to get there probably bouts some polatility in
Speaker 6: some of the text sector as you see that drew
Speaker 6: up into the end of the year.
Speaker 2: All right, good to get some time with you, Nicole.
Speaker 2: Thank you. Nicole Webbs. She's senior VP and financial advisor
Speaker 2: at the registered investment advisor Wealth Enhancement, joining us on
Speaker 2: zoom from Plymouth, Minnesota.
Speaker 3: Told you bad news is good news.
Speaker 2: I'm with you because I think as soon as those
Speaker 2: data points came out and it was one afternoons right
Speaker 2: room exactly, and it's just like, well, wait a minute,
Speaker 2: maybe the FED is getting closer to being done.
Speaker 3: Maybe maybe, like Ira said, wait till later this week,
Speaker 3: we're gonna get a lot more.
Speaker 2: Data PCEE than jobs and jobs those big ones, and
Speaker 2: then there's still more to time until we get to
Speaker 2: that September two, right.
Speaker 3: Seeing Ja Peel is just like relaxing, joining some time
Speaker 3: of Jacksonville.
Speaker 2: Spoilt Jackson Yeah, I get some time kids massage, spickle
Speaker 2: it off, Manny Petty.
Speaker 4: No, maybe not.
Speaker 2: This is Bloomberg.
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