1 00:00:00,840 --> 00:00:04,000 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,040 --> 00:00:05,240 Speaker 1: my co host Matt Miller. 3 00:00:05,640 --> 00:00:09,600 Speaker 2: Every business day, we bring you interviews from CEOs, market pros, 4 00:00:09,720 --> 00:00:13,600 Speaker 2: and Bloomberg experts, along with essential market moven news. 5 00:00:14,160 --> 00:00:17,279 Speaker 1: Find the Bloomberg Markets Podcast on Apple Podcasts or wherever 6 00:00:17,400 --> 00:00:21,480 Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast. Certainly, 7 00:00:21,560 --> 00:00:24,760 Speaker 1: the big news down in Washington, DC these days is 8 00:00:24,800 --> 00:00:27,720 Speaker 1: the indictment of former President Donald Trump. We want to 9 00:00:27,720 --> 00:00:30,880 Speaker 1: get the latest on how that's developing news over the weekend, 10 00:00:30,920 --> 00:00:33,000 Speaker 1: so we're going to bring in a couple of smart 11 00:00:33,080 --> 00:00:37,360 Speaker 1: voices here, Nick Ackerman, former assistant special Watergate prosecutor and 12 00:00:37,479 --> 00:00:40,120 Speaker 1: assistant US Attorney for the Southern District of New York, 13 00:00:40,600 --> 00:00:42,640 Speaker 1: so he knows his way around the legal side of it. 14 00:00:42,640 --> 00:00:46,760 Speaker 1: Plus Bloomberg's Washington correspondent and Ree Horden also joined us, 15 00:00:46,760 --> 00:00:49,480 Speaker 1: and we appreciate both of them. Nick, Lex, let's start 16 00:00:49,520 --> 00:00:51,680 Speaker 1: with you here, just for us, you know, kind of 17 00:00:51,760 --> 00:00:56,320 Speaker 1: lay people here. I guess what's different about all of 18 00:00:56,360 --> 00:00:59,840 Speaker 1: the former president's legal challenges is that this one is federal. 19 00:01:00,040 --> 00:01:00,840 Speaker 1: How serious is this? 20 00:01:01,920 --> 00:01:06,400 Speaker 3: It's extremely serious. It's federal it means that the case 21 00:01:06,640 --> 00:01:10,959 Speaker 3: is likely to move a lot faster. The judges, for 22 00:01:11,000 --> 00:01:15,600 Speaker 3: the most part, including deciding Cannon, are normally better judges, 23 00:01:15,640 --> 00:01:17,720 Speaker 3: although the judge in the state case in New York 24 00:01:18,160 --> 00:01:23,640 Speaker 3: is an excellent judge. But this case will go to 25 00:01:23,720 --> 00:01:27,840 Speaker 3: trial probably quicker than the state court cases, certainly quicker 26 00:01:27,880 --> 00:01:31,800 Speaker 3: than the New York case, and quicker than the case 27 00:01:31,840 --> 00:01:35,240 Speaker 3: that's about to be brought in Fulton County, Georgia. 28 00:01:36,360 --> 00:01:38,520 Speaker 4: Dates times, how quickly could we see that? 29 00:01:39,760 --> 00:01:43,360 Speaker 3: Oh? I mean, it depends on the prosecutor and the judge. 30 00:01:43,400 --> 00:01:46,560 Speaker 3: If I were the prosecutor, I'd be telling the judge 31 00:01:46,560 --> 00:01:50,080 Speaker 3: that I'm turning overall discovery by the end of next week, 32 00:01:50,640 --> 00:01:53,880 Speaker 3: and that we want a quick motion date and a 33 00:01:54,000 --> 00:01:56,160 Speaker 3: quick trial date. I would try and do this within 34 00:01:56,240 --> 00:01:58,960 Speaker 3: ninety days if you could. Well, but that may be 35 00:01:59,160 --> 00:02:02,680 Speaker 3: a bit optimate stick. I think, you know, within four 36 00:02:02,760 --> 00:02:05,000 Speaker 3: or five months is certainly conceivable. 37 00:02:05,800 --> 00:02:08,320 Speaker 1: Ann Marie. What's the feeling in Washington, DC. We've had, 38 00:02:08,360 --> 00:02:11,320 Speaker 1: you know, several days now to digest this news here, 39 00:02:11,360 --> 00:02:14,560 Speaker 1: and I guess the political angles are starting to be 40 00:02:15,000 --> 00:02:17,240 Speaker 1: kind of drawn here. What are you singing in Washington? 41 00:02:17,560 --> 00:02:19,200 Speaker 5: Well, I think a lot of people are focusing on 42 00:02:19,520 --> 00:02:22,480 Speaker 5: these two polls that came out of the weekend, and 43 00:02:23,040 --> 00:02:28,200 Speaker 5: this one from CBS really shull shows the control the 44 00:02:28,240 --> 00:02:32,840 Speaker 5: former president has on the Republican Party and surely on 45 00:02:32,919 --> 00:02:35,440 Speaker 5: his base because obviously he's being indicted, but this is 46 00:02:35,480 --> 00:02:38,480 Speaker 5: all happening at the same time as he is running 47 00:02:38,520 --> 00:02:42,040 Speaker 5: to be the candidate for twenty twenty four. So most 48 00:02:42,080 --> 00:02:45,920 Speaker 5: Republican primary voters seventy six percent said they're concerned that 49 00:02:45,919 --> 00:02:49,240 Speaker 5: Trump's indictment was politically motivated in this poll, and then 50 00:02:49,280 --> 00:02:53,400 Speaker 5: a majority ruled out that the charges would change their 51 00:02:53,480 --> 00:02:56,960 Speaker 5: views of Trump, and eighty percent of them said that 52 00:02:57,080 --> 00:02:59,720 Speaker 5: he should win a second term in office. So this 53 00:02:59,880 --> 00:03:03,280 Speaker 5: just goes to show how this potentially can play out. 54 00:03:03,360 --> 00:03:05,919 Speaker 5: Trump can keep a really strong hold on the base 55 00:03:06,120 --> 00:03:08,440 Speaker 5: even while he has this as his only Attorney General 56 00:03:08,440 --> 00:03:13,160 Speaker 5: put it over the weekend, Bill Barr damning indictment. The issue, 57 00:03:13,160 --> 00:03:15,440 Speaker 5: of course, is that a lot in the Republican Party 58 00:03:15,560 --> 00:03:17,920 Speaker 5: are starting to look at but this what does this 59 00:03:18,040 --> 00:03:21,200 Speaker 5: mean for a general election? Because the indictment might not 60 00:03:21,360 --> 00:03:24,040 Speaker 5: matter for primary voters Republican Party, but what does it 61 00:03:24,120 --> 00:03:26,840 Speaker 5: mean nationally for US voters overall? 62 00:03:26,919 --> 00:03:30,639 Speaker 1: Well, Nick does the federal government bring a case like this. 63 00:03:31,320 --> 00:03:33,360 Speaker 1: I mean, how shorre do they have to be about 64 00:03:33,400 --> 00:03:36,000 Speaker 1: their case before kind of bringing a case like this, 65 00:03:36,080 --> 00:03:36,440 Speaker 1: do you think? 66 00:03:37,080 --> 00:03:40,120 Speaker 3: Well, put it this way, when you're dealing with someone 67 00:03:40,400 --> 00:03:44,240 Speaker 3: with the high visibility of a former president, you make 68 00:03:44,360 --> 00:03:48,680 Speaker 3: sure that you've got this button down one hundred percent solid. 69 00:03:48,720 --> 00:03:51,720 Speaker 3: I mean, obviously, when you go before a jury, nothing's 70 00:03:51,760 --> 00:03:54,560 Speaker 3: ever one hundred percent solid, But boy, this case is 71 00:03:54,600 --> 00:03:58,200 Speaker 3: about as solid as you can possibly get. Having done this, 72 00:03:58,360 --> 00:04:02,440 Speaker 3: been there before with water, you don't go about doing 73 00:04:02,480 --> 00:04:06,400 Speaker 3: an indictment like this unless your evidence is spot on 74 00:04:06,400 --> 00:04:09,880 Speaker 3: one hundred percent solid. And here they've got it. They've 75 00:04:09,880 --> 00:04:13,760 Speaker 3: got our witnesses. They've got a tape with Donald Trump 76 00:04:13,840 --> 00:04:16,880 Speaker 3: actually talking about the fact that one of the documents 77 00:04:17,000 --> 00:04:20,400 Speaker 3: was classified, that he couldn't unclassify it because he was 78 00:04:20,440 --> 00:04:24,560 Speaker 3: no longer president. They've got pictures of how this stuff 79 00:04:24,720 --> 00:04:28,760 Speaker 3: was mishandled at mar A Lago, and they've got the 80 00:04:28,800 --> 00:04:33,160 Speaker 3: testimony of his former lawyer, who basically will say that 81 00:04:33,880 --> 00:04:37,560 Speaker 3: Trump was trying to hoodwink him and play him, and 82 00:04:37,920 --> 00:04:41,160 Speaker 3: that he was being used by Donald Trump, and that 83 00:04:41,800 --> 00:04:45,520 Speaker 3: thirty boxes were kept from his view, all of which 84 00:04:45,560 --> 00:04:49,520 Speaker 3: contained classified information that was later recovered in the search warrant. 85 00:04:49,600 --> 00:04:51,839 Speaker 4: Well, Nick on on that point, though, you know, you 86 00:04:51,920 --> 00:04:56,880 Speaker 4: mentioned these statements potentially from his former attorneys, and I 87 00:04:56,920 --> 00:04:58,880 Speaker 4: look through that document, there does seem to be a 88 00:04:58,880 --> 00:05:02,080 Speaker 4: lot of information that provided by people who were his attorneys. 89 00:05:02,600 --> 00:05:07,000 Speaker 4: Does could attorney client privilege get in the way, particularly 90 00:05:07,000 --> 00:05:10,200 Speaker 4: with maybe and a judge that's not necessarily quite as 91 00:05:10,480 --> 00:05:13,000 Speaker 4: has handed down some I guess questionable rulings in the 92 00:05:13,040 --> 00:05:17,360 Speaker 4: past from the perspective of the federal government. Or are 93 00:05:17,400 --> 00:05:20,039 Speaker 4: there other big challenges that you see moving forward in 94 00:05:20,040 --> 00:05:20,719 Speaker 4: this prosecution. 95 00:05:20,960 --> 00:05:24,159 Speaker 3: Well, a couple of questions in there. Well, yes, sorry, 96 00:05:24,040 --> 00:05:28,960 Speaker 3: the attorney client privilege. The purpose of that privilege is 97 00:05:29,080 --> 00:05:33,800 Speaker 3: for a client to be able without qualification, to be 98 00:05:33,800 --> 00:05:37,800 Speaker 3: able to tell his lawyer everything about a case, so 99 00:05:37,839 --> 00:05:41,640 Speaker 3: that the lawyer feels comfortable in representing that person in 100 00:05:41,680 --> 00:05:46,680 Speaker 3: the proper way. The purpose here was completely different. Trump 101 00:05:46,839 --> 00:05:49,800 Speaker 3: was basically not using his lawyer to get legal advice. 102 00:05:49,839 --> 00:05:52,960 Speaker 3: He was using his lawyer to commit a crime. The judge, 103 00:05:53,080 --> 00:05:56,280 Speaker 3: the chief judge in d C, has already determined that 104 00:05:56,760 --> 00:06:00,960 Speaker 3: all of this information was admissible because it was part 105 00:06:01,000 --> 00:06:04,600 Speaker 3: of the exception to the crime fraud exception to the 106 00:06:04,640 --> 00:06:09,000 Speaker 3: attorney client privilege. I don't see any judge overturning that 107 00:06:09,320 --> 00:06:13,680 Speaker 3: or coming up with a different view on what happened here. 108 00:06:13,800 --> 00:06:16,520 Speaker 3: I mean, the facts are absolutely damning. They're all in 109 00:06:16,600 --> 00:06:22,160 Speaker 3: the indictment. Secondly, you raised the question about Judge Eileen 110 00:06:22,320 --> 00:06:28,919 Speaker 3: Cannon in the in the Florida case, where yeah, she 111 00:06:29,040 --> 00:06:34,400 Speaker 3: did screw up on her decision to appoint a special master. 112 00:06:35,120 --> 00:06:37,560 Speaker 3: But keep in mind, you know, even though she did that, 113 00:06:37,720 --> 00:06:40,159 Speaker 3: she did it in the context where a special master 114 00:06:40,240 --> 00:06:43,320 Speaker 3: had been appointed for two of two search warrants relating 115 00:06:43,360 --> 00:06:48,159 Speaker 3: to two Trump lawyers, Michael Cohen and Rudy Giuliani, and 116 00:06:48,240 --> 00:06:53,880 Speaker 3: she was basically overturned by the Eleventh Circuit, of which 117 00:06:53,960 --> 00:06:57,080 Speaker 3: you know two of those judges were also appointed by Trump. 118 00:06:58,080 --> 00:07:01,240 Speaker 3: So look, judges, screw up, that's what she did. And 119 00:07:01,279 --> 00:07:03,680 Speaker 3: the fact that she did it once and she's been 120 00:07:03,800 --> 00:07:05,880 Speaker 3: chasing on it, I think, look, we have to give 121 00:07:05,880 --> 00:07:08,320 Speaker 3: her the benefit of the doubt. I mean, there's every 122 00:07:08,400 --> 00:07:12,280 Speaker 3: reason to believe that she's a totally competent jurist. She 123 00:07:12,400 --> 00:07:15,080 Speaker 3: went to Michigan Law School, a top tier law school. 124 00:07:15,120 --> 00:07:17,720 Speaker 3: She worked in a respective law firm, She worked for 125 00:07:17,760 --> 00:07:20,480 Speaker 3: the US Attorney's office for a number of years. 126 00:07:20,320 --> 00:07:20,920 Speaker 1: So maybe. 127 00:07:22,560 --> 00:07:24,520 Speaker 3: We've got to be real careful here not to be 128 00:07:24,960 --> 00:07:29,480 Speaker 3: trashing as judge, because we're falling into the same trap 129 00:07:29,520 --> 00:07:32,200 Speaker 3: that the Trump supporters are doing and trashing the Department 130 00:07:32,240 --> 00:07:32,800 Speaker 3: of Justice. 131 00:07:33,120 --> 00:07:35,480 Speaker 1: Hey, so yeah, yeah, I just want to get the 132 00:07:35,640 --> 00:07:38,680 Speaker 1: Anne Marie here. We've got a presidential election coming up 133 00:07:39,280 --> 00:07:41,760 Speaker 1: next year and there seems to be no shortage of 134 00:07:41,760 --> 00:07:46,000 Speaker 1: Republican challengers to the president. What's the feeling in DC 135 00:07:46,200 --> 00:07:48,480 Speaker 1: and Mary is to how this is all shaping up 136 00:07:48,600 --> 00:07:51,040 Speaker 1: given the backdrop of this federal indictment. 137 00:07:51,800 --> 00:07:54,320 Speaker 5: So what's interesting is there's been some mixed feelings in 138 00:07:54,400 --> 00:07:59,360 Speaker 5: terms of how Republicans are responding to this indictment. You 139 00:07:59,440 --> 00:08:02,880 Speaker 5: had Governor Ron De Santis, for example, tweeting after the 140 00:08:02,880 --> 00:08:06,200 Speaker 5: indictment that it was a weaponization of federal law enforcement 141 00:08:06,400 --> 00:08:09,800 Speaker 5: and it's a mortal threat to free society. Then you 142 00:08:09,880 --> 00:08:14,440 Speaker 5: had others like Mike Pence, you know, he was Obviously, 143 00:08:14,520 --> 00:08:16,560 Speaker 5: all these people are out and about and you're able 144 00:08:16,600 --> 00:08:18,360 Speaker 5: to get access to them because they're in New Hampshire 145 00:08:18,400 --> 00:08:22,320 Speaker 5: or Iowa, and at times they could be critical, but 146 00:08:22,360 --> 00:08:26,000 Speaker 5: at the same time they do call what's happening as unprecedented, 147 00:08:26,600 --> 00:08:29,200 Speaker 5: Like Mike Pence for a vice president, he's running, and 148 00:08:29,240 --> 00:08:33,680 Speaker 5: he says it's a politicization of the Justice Department, although 149 00:08:33,720 --> 00:08:36,880 Speaker 5: he also added he's deeply troubled to see this indictment 150 00:08:37,000 --> 00:08:37,600 Speaker 5: move forward. 151 00:08:38,320 --> 00:08:39,880 Speaker 6: Then you have others like Chris Christi. 152 00:08:40,280 --> 00:08:42,400 Speaker 5: He continuously say no one is above the law, no 153 00:08:42,440 --> 00:08:45,120 Speaker 5: matter how much they wish they were, and they want 154 00:08:45,120 --> 00:08:48,080 Speaker 5: to wait to see how the facts are revealed. So 155 00:08:48,320 --> 00:08:50,839 Speaker 5: this is a moment where you're going to see each 156 00:08:51,040 --> 00:08:56,040 Speaker 5: candidate really try to walk a fine line because a 157 00:08:56,040 --> 00:08:58,320 Speaker 5: lot of them want to talk about how they think 158 00:08:58,320 --> 00:09:01,800 Speaker 5: it's politicized yep, And they don't want to ostracize the 159 00:09:01,840 --> 00:09:04,400 Speaker 5: base that Trump has a hold on, which is why 160 00:09:04,400 --> 00:09:06,800 Speaker 5: I keep going back to that CBS News poll because 161 00:09:06,840 --> 00:09:08,760 Speaker 5: it really does show if the election were today, he 162 00:09:08,840 --> 00:09:09,760 Speaker 5: would be the nominee. 163 00:09:09,840 --> 00:09:10,040 Speaker 3: Yep. 164 00:09:10,120 --> 00:09:14,640 Speaker 1: Absolutely all right, fascinating. Nick Ackerman, former assistant special Watergate prosecutor, 165 00:09:14,679 --> 00:09:16,680 Speaker 1: thank you so much. We appreciate getting your time on 166 00:09:16,720 --> 00:09:20,880 Speaker 1: the legal side. Bloomberg Washington correspondent and Marie Hordern get 167 00:09:20,880 --> 00:09:23,120 Speaker 1: into political angle. There some fascinating discussion. 168 00:09:24,600 --> 00:09:28,040 Speaker 7: You're listening to the team Ken's are live program Bloomberg 169 00:09:28,080 --> 00:09:31,440 Speaker 7: Markets weekdays at ten am Eastern on Bloomberg dot Com, 170 00:09:31,520 --> 00:09:34,679 Speaker 7: the iHeartRadio app and the Bloomberg Business App, or listen 171 00:09:34,720 --> 00:09:37,040 Speaker 7: on demand wherever you get your podcasts. 172 00:09:39,320 --> 00:09:43,240 Speaker 1: Simoan Foxman, Paul Sweeney here in the Bloomberg Interactive Brokers studio. 173 00:09:43,320 --> 00:09:46,360 Speaker 1: Lots of economic data this week, so on your Bloomberg 174 00:09:46,440 --> 00:09:49,839 Speaker 1: terminal type in eco go give you all the data 175 00:09:49,840 --> 00:09:51,960 Speaker 1: and kind of the forecast, that consensus, all that kind 176 00:09:51,960 --> 00:09:55,400 Speaker 1: of stuff. We have cpippi of course, we have got 177 00:09:55,440 --> 00:09:58,199 Speaker 1: retail sales and then of course Wednesday the FED meeting 178 00:09:58,240 --> 00:10:01,280 Speaker 1: in the press, coperts and all that. So that is 179 00:10:01,360 --> 00:10:04,480 Speaker 1: kind of driving the market action this week. Let's check 180 00:10:04,520 --> 00:10:06,520 Speaker 1: in with somebody who can We found this very closely 181 00:10:06,600 --> 00:10:10,200 Speaker 1: ifan debit chief investment officer for the Menetic Group. So 182 00:10:10,840 --> 00:10:13,640 Speaker 1: thanks so much for joining us here. What are you 183 00:10:13,679 --> 00:10:17,720 Speaker 1: looking from the FED this Wednesday? 184 00:10:17,880 --> 00:10:20,440 Speaker 8: Well, we're expecting a pause. I think like most other 185 00:10:20,480 --> 00:10:23,760 Speaker 8: observers at this point, we're not seeing We also would 186 00:10:23,760 --> 00:10:26,360 Speaker 8: agree with your previous guests around the direction of inflation. 187 00:10:26,800 --> 00:10:30,120 Speaker 8: We're not seeing that same stickiness that's been present in 188 00:10:30,200 --> 00:10:33,280 Speaker 8: the UK. Although there's always the potential for surprise, of course, 189 00:10:33,320 --> 00:10:36,400 Speaker 8: and those numbers the backshop of what the Canadian Central 190 00:10:36,400 --> 00:10:39,920 Speaker 8: Bank did. There is always precedent for surprise, but I 191 00:10:39,960 --> 00:10:43,319 Speaker 8: don't think our US FED is so inclined at the moment, 192 00:10:43,440 --> 00:10:46,520 Speaker 8: so it's likely to be a pause we expect, you know, Ethan, 193 00:10:46,600 --> 00:10:47,120 Speaker 8: we have. 194 00:10:47,200 --> 00:10:51,040 Speaker 4: A story out this morning. FED backs away from wages focus, 195 00:10:51,200 --> 00:10:54,520 Speaker 4: bolstering case for rate pause. I just want to get 196 00:10:54,520 --> 00:10:59,000 Speaker 4: your sense. Our reporters, Janelle Martin and Augustasarrievas say that 197 00:10:59,040 --> 00:11:02,360 Speaker 4: FED officials are rethinking their view that wage gains are 198 00:11:02,400 --> 00:11:06,840 Speaker 4: fueling inflation. Your take on this is, we are we 199 00:11:07,000 --> 00:11:09,760 Speaker 4: how much are wage gains factoring into their discussion or 200 00:11:09,760 --> 00:11:11,600 Speaker 4: going to factor into their discussion this week? 201 00:11:12,400 --> 00:11:14,720 Speaker 8: A very interesting discussion, and I would agree with that 202 00:11:14,920 --> 00:11:18,719 Speaker 8: because wages will be perhaps the most lagging of all indicators. 203 00:11:18,760 --> 00:11:22,280 Speaker 8: So the difference between fueling inflation when it comes to 204 00:11:22,320 --> 00:11:25,679 Speaker 8: wages and being a symptom of inflation, a reaction to inflation, 205 00:11:26,120 --> 00:11:29,600 Speaker 8: a desire to really make employees even or whole with 206 00:11:30,400 --> 00:11:32,480 Speaker 8: along with the rate of inflation, and that's what we're seeing, 207 00:11:32,760 --> 00:11:35,840 Speaker 8: so as opposed to actually driving inflation, I think wage 208 00:11:35,880 --> 00:11:39,319 Speaker 8: gains are a response to inflation. And the core drivers 209 00:11:39,640 --> 00:11:42,800 Speaker 8: getting around that. We talked about supply chain issues before, 210 00:11:42,840 --> 00:11:46,120 Speaker 8: we talked about the push on energy and some of 211 00:11:46,160 --> 00:11:49,160 Speaker 8: that filtering into energy and food and the services again 212 00:11:49,160 --> 00:11:51,480 Speaker 8: which have the lagging effects. I think they're absolutely right 213 00:11:51,559 --> 00:11:54,360 Speaker 8: to take the focus off wage gains because that would 214 00:11:54,360 --> 00:11:56,760 Speaker 8: just be more looking in the rear view mirror. 215 00:11:58,120 --> 00:12:01,200 Speaker 1: Ethan. You know, one of the that I know has 216 00:12:01,240 --> 00:12:04,560 Speaker 1: some folks concerned is the lack of breadth in the 217 00:12:04,600 --> 00:12:06,760 Speaker 1: market we've seen so far this year with the SPX, 218 00:12:07,120 --> 00:12:10,640 Speaker 1: you know, up twenty percent off of the lows, but 219 00:12:10,720 --> 00:12:12,240 Speaker 1: really if you look at the you know, the equal 220 00:12:12,240 --> 00:12:14,679 Speaker 1: weighted in the nextra is really no movement at all. 221 00:12:14,760 --> 00:12:16,240 Speaker 1: How much of a concern is that for you? 222 00:12:17,520 --> 00:12:19,520 Speaker 8: Yeah, that's actually been a concern. It was the siren 223 00:12:19,600 --> 00:12:21,640 Speaker 8: call has been going out now for months, and it's 224 00:12:21,679 --> 00:12:24,959 Speaker 8: really got more traction and more widespread appeals the longer 225 00:12:25,000 --> 00:12:27,200 Speaker 8: it has persisted. And I'd say, what it is, It 226 00:12:27,280 --> 00:12:30,280 Speaker 8: really is underscoring the FOMO of not being an equity market. 227 00:12:30,320 --> 00:12:33,040 Speaker 8: So when you are sitting in cash or in money 228 00:12:33,040 --> 00:12:34,960 Speaker 8: market funds and you're not doing as badly as you 229 00:12:35,000 --> 00:12:37,640 Speaker 8: were before, is it's not that same drag you're still 230 00:12:37,800 --> 00:12:40,400 Speaker 8: not looking at positive real rates in those funds if 231 00:12:40,400 --> 00:12:43,760 Speaker 8: we're dealing with five percent inflation, so we're barely breaking 232 00:12:43,800 --> 00:12:45,800 Speaker 8: even in a money market fund. So when you see 233 00:12:45,840 --> 00:12:47,880 Speaker 8: that going on, you're going to want it to follow 234 00:12:47,880 --> 00:12:49,840 Speaker 8: the action, which is inequities, and you're going to want 235 00:12:50,000 --> 00:12:52,960 Speaker 8: to send money that way. And clearly, as I've mentioned before, 236 00:12:53,000 --> 00:12:55,840 Speaker 8: I think big tech is now the safety trade essentially 237 00:12:56,200 --> 00:12:58,679 Speaker 8: because there is very just like you can't get goot 238 00:12:58,720 --> 00:13:02,080 Speaker 8: fired for buying IBA, the old adage, buying big tech 239 00:13:02,120 --> 00:13:04,400 Speaker 8: stocks a pretty safe play at the moment because they're 240 00:13:04,400 --> 00:13:08,240 Speaker 8: supported by the markets themselves as well as this AI story. 241 00:13:08,480 --> 00:13:12,760 Speaker 8: We're seeing some of the exuberants around they just driving 242 00:13:12,800 --> 00:13:15,600 Speaker 8: cars and electrical cars, et cetera. So clearly quite a 243 00:13:15,600 --> 00:13:18,240 Speaker 8: lot of height in that number. And where I would 244 00:13:18,240 --> 00:13:20,360 Speaker 8: see the issue is, yes, that it is not broad based. 245 00:13:20,440 --> 00:13:22,680 Speaker 8: It is not filtering into small caps into some of 246 00:13:22,679 --> 00:13:25,440 Speaker 8: the valued stocks. We expect that to follow though, because 247 00:13:25,440 --> 00:13:27,000 Speaker 8: and we're seeing little bit of signs of that. We've 248 00:13:27,000 --> 00:13:29,680 Speaker 8: seen a bit of a pickup as this market strength 249 00:13:29,720 --> 00:13:33,280 Speaker 8: gained some momentum, you know, technically hitting a bull market. 250 00:13:33,320 --> 00:13:35,840 Speaker 8: That's obviously a nice syndicator that sends a good signal. 251 00:13:36,120 --> 00:13:38,319 Speaker 8: So I'd say that we've always had a core approach. 252 00:13:38,440 --> 00:13:42,000 Speaker 8: We don't target call sectors. We've never been out of tech, 253 00:13:42,280 --> 00:13:44,920 Speaker 8: but we are. We are reassured now to see markets 254 00:13:44,960 --> 00:13:48,439 Speaker 8: getting that broader basis, because too much concentration will lead 255 00:13:48,480 --> 00:13:49,560 Speaker 8: to too much volatility. 256 00:13:50,400 --> 00:13:52,439 Speaker 4: Kiffn you know you mentioned in some notes you sent 257 00:13:52,480 --> 00:13:56,920 Speaker 4: across before this interview that there's this concern from the 258 00:13:57,040 --> 00:14:01,920 Speaker 4: SEC regulatory action around binance and coinbase, and maybe potentially 259 00:14:01,960 --> 00:14:05,600 Speaker 4: this could factor into AI as well. I mean obviously 260 00:14:05,760 --> 00:14:08,920 Speaker 4: different kind of questions here, but you know, two regulatory 261 00:14:08,960 --> 00:14:12,120 Speaker 4: concerns in tech. You look at the best performing in 262 00:14:12,160 --> 00:14:15,840 Speaker 4: the SP Nvidia number one, up one hundred and sixty 263 00:14:15,920 --> 00:14:18,559 Speaker 4: seven percent this year. AMD also among the top five 264 00:14:18,600 --> 00:14:24,080 Speaker 4: buzz performing. Are AI driven names like this overvalued at 265 00:14:24,080 --> 00:14:24,520 Speaker 4: this point? 266 00:14:25,760 --> 00:14:27,880 Speaker 8: It's a really interestant point. Certainly, the heights is they're 267 00:14:27,960 --> 00:14:30,720 Speaker 8: around AI, the same heights that was there around blockchain 268 00:14:30,760 --> 00:14:33,680 Speaker 8: and digital assets two years ago. So I think what's 269 00:14:33,680 --> 00:14:36,040 Speaker 8: really notable is just we have to have that time 270 00:14:36,160 --> 00:14:39,960 Speaker 8: lag between regulators getting winds of a new trend and 271 00:14:40,040 --> 00:14:43,360 Speaker 8: actually getting the teeth behind the enforcement. They see they've 272 00:14:43,360 --> 00:14:46,560 Speaker 8: really now got teeth in this particular wave of enforcement 273 00:14:46,600 --> 00:14:48,800 Speaker 8: that they're kind of woken up to some of the 274 00:14:49,400 --> 00:14:52,280 Speaker 8: lack of transparency, the lack of disclosure that's been around 275 00:14:52,280 --> 00:14:54,960 Speaker 8: some of these exchanges. Perhaps they're going about it with 276 00:14:55,000 --> 00:14:58,160 Speaker 8: a blood instrument, which is by forcing these exchanges into 277 00:14:58,240 --> 00:15:02,400 Speaker 8: the classifications of other securities. But they're they're certainly asserting 278 00:15:02,440 --> 00:15:04,960 Speaker 8: themselves in that way. When it comes to AI, it 279 00:15:05,040 --> 00:15:08,720 Speaker 8: is completely uncharted territory. This explosion has been such a 280 00:15:08,760 --> 00:15:12,360 Speaker 8: short time of a history so far we're speaking of 281 00:15:12,520 --> 00:15:16,160 Speaker 8: the last six months through this explosion of usage around 282 00:15:16,240 --> 00:15:18,720 Speaker 8: AI tools and the rolling out of all of them. 283 00:15:19,040 --> 00:15:21,160 Speaker 8: I'm not sure that this will affect that those makers 284 00:15:21,160 --> 00:15:23,520 Speaker 8: of chips, because in the sense the demand for AI 285 00:15:23,640 --> 00:15:25,960 Speaker 8: is going to be burgeoning. But I think perhaps has 286 00:15:26,000 --> 00:15:28,520 Speaker 8: been overstated is the impact is going to have on 287 00:15:28,560 --> 00:15:31,520 Speaker 8: business models some of those names that just ticked up 288 00:15:31,560 --> 00:15:35,000 Speaker 8: because AI was simply mentioned in an earnings release. We 289 00:15:35,080 --> 00:15:37,600 Speaker 8: have to understand what is AI actually going to generate 290 00:15:37,920 --> 00:15:41,000 Speaker 8: more revenue streams? Is going to bolster the efficiency or 291 00:15:41,040 --> 00:15:44,920 Speaker 8: the capital structure, perhaps the earning structure of this company. 292 00:15:45,240 --> 00:15:47,680 Speaker 8: And the question is, we don't know how regulation is 293 00:15:47,720 --> 00:15:50,000 Speaker 8: going to look in AI. I don't doubt it's coming. 294 00:15:50,320 --> 00:15:52,840 Speaker 8: I think though, because it's all so new, it'll take 295 00:15:52,840 --> 00:15:55,600 Speaker 8: the regulators probably another year or two to figure out 296 00:15:55,800 --> 00:15:58,320 Speaker 8: where they're going to go around copyright protection. But I 297 00:15:58,320 --> 00:16:01,080 Speaker 8: look at the music industry, just how easily that industry 298 00:16:01,400 --> 00:16:05,080 Speaker 8: when you ramped up its ability to capture royalties. When 299 00:16:05,120 --> 00:16:07,760 Speaker 8: streaming came about, there was some loss of ground, but 300 00:16:07,840 --> 00:16:09,760 Speaker 8: a real catch up by the music industry. So I 301 00:16:09,760 --> 00:16:11,720 Speaker 8: think there's going to be a catch up around those 302 00:16:11,760 --> 00:16:15,560 Speaker 8: generators of content. We just have to see where it goes. 303 00:16:15,600 --> 00:16:17,600 Speaker 8: And remember, the regulators still have to sort out the 304 00:16:18,400 --> 00:16:21,360 Speaker 8: regional banks in the US first, so we will probably 305 00:16:21,400 --> 00:16:23,440 Speaker 8: have a couple more waves of regulations before we get 306 00:16:23,480 --> 00:16:23,800 Speaker 8: to AI. 307 00:16:24,520 --> 00:16:25,800 Speaker 1: You can just want to talk a little bit on 308 00:16:25,880 --> 00:16:28,440 Speaker 1: the fixed income side. Any reason I shouldn't just stick 309 00:16:28,480 --> 00:16:30,320 Speaker 1: my money into your paper and get four point six 310 00:16:30,440 --> 00:16:31,160 Speaker 1: one percent. 311 00:16:32,440 --> 00:16:34,400 Speaker 8: That's not the only reason is that inflation is still 312 00:16:34,400 --> 00:16:36,440 Speaker 8: at five percent right now. It may be heading downwards, 313 00:16:36,480 --> 00:16:38,040 Speaker 8: but if you're looking to make some kind of a 314 00:16:38,080 --> 00:16:40,600 Speaker 8: real return, it's certainly more interesting than you made in 315 00:16:40,600 --> 00:16:43,360 Speaker 8: the past, and you have a two year timeframe. You 316 00:16:43,360 --> 00:16:45,520 Speaker 8: could do a lot worse sticking it in paper like that. 317 00:16:45,800 --> 00:16:48,400 Speaker 8: But ultimately you put your time horizon is probably longer 318 00:16:48,440 --> 00:16:50,400 Speaker 8: than two years you want to be looking at if 319 00:16:50,400 --> 00:16:52,400 Speaker 8: you're trying to roll that investment just so you stuck 320 00:16:52,400 --> 00:16:54,320 Speaker 8: it all in there in two years, what would you 321 00:16:54,360 --> 00:16:56,800 Speaker 8: potentially be getting in two years? We still have this 322 00:16:56,880 --> 00:16:59,520 Speaker 8: inversion yeel curve probably not the same. So if you 323 00:16:59,560 --> 00:17:01,280 Speaker 8: want to invet us for the long term, you need 324 00:17:01,320 --> 00:17:03,880 Speaker 8: to be looking at at a real rate of return 325 00:17:03,920 --> 00:17:08,160 Speaker 8: after inflation, and that's where we get to aiming higher. 326 00:17:08,640 --> 00:17:10,960 Speaker 8: I would say, also, we don't need to aim for 327 00:17:11,000 --> 00:17:13,879 Speaker 8: the riskiest part of the capital structure any longer to 328 00:17:13,960 --> 00:17:15,920 Speaker 8: get returns that are in excess of inflation. 329 00:17:16,560 --> 00:17:18,159 Speaker 1: All right, Evan, thank you so much for joining us. 330 00:17:18,160 --> 00:17:21,399 Speaker 1: Always appreciate getting your perspective. Evan Debit. She's a chief 331 00:17:21,440 --> 00:17:24,040 Speaker 1: investment officer of Moneta Group. 332 00:17:24,160 --> 00:17:26,840 Speaker 7: If you're listening to the tape, catch our live program 333 00:17:26,880 --> 00:17:30,840 Speaker 7: Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, 334 00:17:31,000 --> 00:17:33,720 Speaker 7: the tune in app, Bloomberg dot Com, and the Bloomberg 335 00:17:33,760 --> 00:17:36,880 Speaker 7: Business App. You can also listen live on Amazon Alexa 336 00:17:36,920 --> 00:17:40,200 Speaker 7: from our flagship New York station, Just say Alexa play 337 00:17:40,320 --> 00:17:41,919 Speaker 7: Bloomberg eleven thirty. 338 00:17:43,119 --> 00:17:46,240 Speaker 1: The latest update on what's happening out there in those markets. 339 00:17:46,320 --> 00:17:52,200 Speaker 1: Let's get to the deal of the day, Nasdak. Nasdak 340 00:17:52,680 --> 00:17:55,959 Speaker 1: to acquire a Denza for ten point five billion dollars 341 00:17:55,960 --> 00:17:58,920 Speaker 1: in cash and stock. That is your deal of the day. 342 00:17:59,160 --> 00:18:01,720 Speaker 1: Let's bring in Paul Berg. He covers all the financial 343 00:18:01,760 --> 00:18:06,600 Speaker 1: stuff for Bloomberg Intelligence. So Paul, what's NASDAK doing here? 344 00:18:06,680 --> 00:18:08,520 Speaker 1: Number one? Well, first of all, number one, what is 345 00:18:08,560 --> 00:18:12,800 Speaker 1: a Denza? And then why is NASDA buying a Denza? 346 00:18:13,000 --> 00:18:16,040 Speaker 9: H Paul, thank you by having me. A Denza is 347 00:18:16,080 --> 00:18:21,400 Speaker 9: a financial solutions company. It's a combination of two prior companies, 348 00:18:21,440 --> 00:18:25,440 Speaker 9: Calypso and Axiom. Lipsa was involved in derivatives a lot 349 00:18:25,600 --> 00:18:29,520 Speaker 9: in terms of the basically financial software companies, and Axiom 350 00:18:29,600 --> 00:18:30,960 Speaker 9: is mostly risk management. 351 00:18:32,400 --> 00:18:36,240 Speaker 4: So why purchase this? From Nasdaq's perspective, we get the 352 00:18:36,400 --> 00:18:38,840 Speaker 4: whole idea that they want to move beyond, you know, 353 00:18:38,920 --> 00:18:42,720 Speaker 4: the exchange themselves. But doesn't the purchase of this sort 354 00:18:42,760 --> 00:18:49,040 Speaker 4: of put them in competition with other financial services software 355 00:18:49,480 --> 00:18:52,080 Speaker 4: products or No? Is this sort of a standout kind 356 00:18:52,080 --> 00:18:52,680 Speaker 4: of acquisition? 357 00:18:53,800 --> 00:18:56,480 Speaker 9: No, I think it's actually not a standard at all. 358 00:18:56,640 --> 00:19:02,840 Speaker 9: Nasdaq is actually very much a financial services company. Already 359 00:19:03,080 --> 00:19:06,200 Speaker 9: almost three quarters of the revenue comes from financial software, 360 00:19:06,280 --> 00:19:10,240 Speaker 9: not from the exchange commissions. And they've been buying companies 361 00:19:10,280 --> 00:19:15,440 Speaker 9: like the Logos Investment over time that provide financial software 362 00:19:15,440 --> 00:19:20,240 Speaker 9: services to the financial industry. So that's not unique and 363 00:19:20,280 --> 00:19:23,879 Speaker 9: I think it's very strategically complementary for that. So in 364 00:19:23,960 --> 00:19:27,920 Speaker 9: terms of competition question, yes, it is. They do compete 365 00:19:27,960 --> 00:19:30,840 Speaker 9: with the companies, including the likes of trust banks and 366 00:19:30,920 --> 00:19:34,960 Speaker 9: such that offers similar services, so it gets them more 367 00:19:34,960 --> 00:19:36,040 Speaker 9: competitive against them. 368 00:19:36,480 --> 00:19:40,440 Speaker 1: So what are what are exchanges today? Paul? I mean again, 369 00:19:40,480 --> 00:19:44,520 Speaker 1: I kind of think about Nasdaq NYSA as places where 370 00:19:44,560 --> 00:19:48,440 Speaker 1: you trade securities and they make the commissions, and that's 371 00:19:48,480 --> 00:19:51,359 Speaker 1: the business. But that's a little data, isn't What did 372 00:19:51,400 --> 00:19:52,480 Speaker 1: these exchanges do today? 373 00:19:54,720 --> 00:19:59,480 Speaker 9: The exchangessforming themselves to become software companies. So it's not 374 00:19:59,600 --> 00:20:03,640 Speaker 9: just now it's the obviously Eyes that's in the process 375 00:20:03,720 --> 00:20:06,800 Speaker 9: of trying to buy Black Night to expand into a 376 00:20:07,520 --> 00:20:12,560 Speaker 9: mortgage service and business and mortgage data business. And then 377 00:20:13,200 --> 00:20:21,800 Speaker 9: companies even like Cboat that's been buying auxiliary businesses. They're 378 00:20:22,240 --> 00:20:25,520 Speaker 9: even fast growing the exchange business. But then if you 379 00:20:25,560 --> 00:20:28,560 Speaker 9: look across the pond, the LC and affinity if they've 380 00:20:28,560 --> 00:20:31,640 Speaker 9: been huge in terms of moving away from the exchange 381 00:20:31,680 --> 00:20:34,240 Speaker 9: products to being a software provider. 382 00:20:35,280 --> 00:20:37,879 Speaker 4: Does this get into you know, I think back to 383 00:20:38,760 --> 00:20:43,120 Speaker 4: these stories about speed training high frequency traders and such. 384 00:20:43,960 --> 00:20:48,160 Speaker 4: It does becoming a software services company for the financial 385 00:20:48,160 --> 00:20:52,680 Speaker 4: services sector get in the way in any way from 386 00:20:52,960 --> 00:20:57,480 Speaker 4: sort of developing these broader market making activities, or I 387 00:20:57,480 --> 00:20:59,080 Speaker 4: guess how do these two things go together? 388 00:21:00,760 --> 00:21:03,119 Speaker 9: Also? I think in terms of getting a way of 389 00:21:03,920 --> 00:21:06,919 Speaker 9: market making activities, these things they are only a handful 390 00:21:06,920 --> 00:21:09,720 Speaker 9: of exchanges, right, they're dark food, a handful of dark pools, 391 00:21:09,720 --> 00:21:12,520 Speaker 9: they're smaller exchanges. But really there are three large exchange 392 00:21:12,560 --> 00:21:16,840 Speaker 9: operators SIBONNAS that can ice in the US, and then 393 00:21:16,920 --> 00:21:20,200 Speaker 9: you have a handful of market makers like Virtual Citadel 394 00:21:20,440 --> 00:21:23,680 Speaker 9: that operate most of the market. So the margins are 395 00:21:23,680 --> 00:21:27,800 Speaker 9: extremely thing. They really dependent on market activity in the volume. 396 00:21:27,880 --> 00:21:30,399 Speaker 9: So what the exchanges are trying to do, they're trying 397 00:21:30,440 --> 00:21:32,800 Speaker 9: to walk away from it to more recurrent revenue. And 398 00:21:32,840 --> 00:21:36,840 Speaker 9: this is one of the things that NASDEK is doing here. 399 00:21:36,960 --> 00:21:39,680 Speaker 9: They said that are about eighty percent of the revenue 400 00:21:39,720 --> 00:21:44,320 Speaker 9: that can come from adesthma is recurring, So they're looking 401 00:21:44,400 --> 00:21:48,399 Speaker 9: for more recurrent revenue, more stable revenue stream that hopefully 402 00:21:48,480 --> 00:21:50,240 Speaker 9: gets multiple from the market. 403 00:21:50,720 --> 00:21:54,840 Speaker 1: Eighteen time revenue USA a huge, huge multiple. 404 00:21:54,880 --> 00:22:00,280 Speaker 9: Now it is eighteen times revenue, thirty one times that 405 00:22:00,440 --> 00:22:03,639 Speaker 9: before the cost synergy. So yes, it's expensive. They're buying 406 00:22:03,720 --> 00:22:07,440 Speaker 9: the software company. And I chatted earlier this morning with 407 00:22:07,560 --> 00:22:12,240 Speaker 9: OURMBI Colics Power Software, and I think the question and 408 00:22:12,280 --> 00:22:13,400 Speaker 9: why the market. 409 00:22:13,160 --> 00:22:13,440 Speaker 3: Is not. 410 00:22:14,920 --> 00:22:17,679 Speaker 9: Being so warmed to the deal is if you buying 411 00:22:17,760 --> 00:22:21,240 Speaker 9: a software company, the high fly or high growth company 412 00:22:21,240 --> 00:22:24,720 Speaker 9: that grows twenty thirty fifty percent a year, Yes, the 413 00:22:24,960 --> 00:22:29,920 Speaker 9: outlook for growth here is about fifteen percent, so it's 414 00:22:29,960 --> 00:22:34,520 Speaker 9: a modest growth. It's an established financial services sector, and 415 00:22:34,680 --> 00:22:37,920 Speaker 9: yet they're paying them multiple for those high flying software 416 00:22:37,960 --> 00:22:38,760 Speaker 9: tech companies. 417 00:22:39,720 --> 00:22:45,159 Speaker 4: So Toma Brasow has owned a Denza and it is 418 00:22:45,200 --> 00:22:48,600 Speaker 4: going to get a steak in NASDAC, like a very 419 00:22:48,640 --> 00:22:50,880 Speaker 4: large stake in NASDAC. As was a scene on the board. 420 00:22:51,240 --> 00:22:55,360 Speaker 4: Does that private equity firms participation in Nasdaq? Does that 421 00:22:55,720 --> 00:22:59,960 Speaker 4: say anything to you as you analyze the ongoing few 422 00:23:00,000 --> 00:23:01,280 Speaker 4: future of NASDAC. 423 00:23:03,280 --> 00:23:06,840 Speaker 9: Probably not immediately. I mean it's a fifteen percent stake, 424 00:23:06,920 --> 00:23:09,040 Speaker 9: so they'll have a boat, they'll have a port seat, 425 00:23:09,119 --> 00:23:14,439 Speaker 9: but they're probably gonna not gonna impose their views and 426 00:23:14,600 --> 00:23:19,200 Speaker 9: strategy on nas that. I think nasdeg is operating reasonably well. 427 00:23:19,680 --> 00:23:20,000 Speaker 3: Uh. 428 00:23:20,400 --> 00:23:22,880 Speaker 9: In part it's a lock up for the top of brower, right, 429 00:23:22,960 --> 00:23:25,840 Speaker 9: so they can't just dump the shares and run away 430 00:23:26,359 --> 00:23:29,640 Speaker 9: from the company if the deal is not working well. 431 00:23:29,920 --> 00:23:34,240 Speaker 1: So I'm looking at some of these exchanges here and 432 00:23:34,280 --> 00:23:38,600 Speaker 1: the stocks have their are kind of single digits. What's 433 00:23:38,640 --> 00:23:41,040 Speaker 1: the feel for this exchange business these days? The market 434 00:23:41,080 --> 00:23:42,840 Speaker 1: doesn't seem to be fully embracing these names. 435 00:23:45,200 --> 00:23:47,560 Speaker 9: I'm assuming we're not talking about today, we're talking about 436 00:23:47,560 --> 00:23:48,240 Speaker 9: like year today. 437 00:23:48,359 --> 00:23:50,439 Speaker 1: Yeah, yeah, just kind of the year today. Cebo's up 438 00:23:50,480 --> 00:23:54,160 Speaker 1: seven percent, seeing ME up six percent, Intercontinental five percent, 439 00:23:54,240 --> 00:23:56,720 Speaker 1: So really not great performance given where the market's done. 440 00:23:56,720 --> 00:23:58,919 Speaker 1: I'm wondering if there's a what what the concern might 441 00:23:58,960 --> 00:23:59,880 Speaker 1: be out there for these names. 442 00:24:00,880 --> 00:24:03,520 Speaker 9: I think there are two concerns. One concern is on 443 00:24:03,560 --> 00:24:05,719 Speaker 9: the trading side, and it's been a mixed bag. So 444 00:24:05,760 --> 00:24:10,040 Speaker 9: you have in the ex options that's really benefiting CBO. 445 00:24:10,200 --> 00:24:12,960 Speaker 9: You have energy that picked up a little bit from 446 00:24:13,119 --> 00:24:16,640 Speaker 9: sluggish last year that's helping CEME and at the same 447 00:24:16,680 --> 00:24:19,840 Speaker 9: time you have pretty sluggish equity trading compared to last year, 448 00:24:19,960 --> 00:24:22,560 Speaker 9: so you do have a mix of products and activity 449 00:24:23,080 --> 00:24:25,399 Speaker 9: that we see in here. And then if you think 450 00:24:25,440 --> 00:24:29,040 Speaker 9: of exactly where Nastic is going right now with the 451 00:24:29,160 --> 00:24:33,000 Speaker 9: acquisition the software solution services, so there is a lot 452 00:24:33,040 --> 00:24:37,359 Speaker 9: of uncertainty in the market that elongates the sales cycle. 453 00:24:37,680 --> 00:24:41,200 Speaker 9: So whatever they typically sell, their pipelines are very strong still, 454 00:24:41,600 --> 00:24:44,920 Speaker 9: but it takes longer to close the transactions for those 455 00:24:44,960 --> 00:24:48,840 Speaker 9: recurrent venues, and typically those are three to five year contracts, 456 00:24:49,320 --> 00:24:52,639 Speaker 9: so it takes a while, and that's what makes the 457 00:24:52,680 --> 00:24:55,680 Speaker 9: investors a bit that nervous, but I think a little 458 00:24:55,680 --> 00:24:56,320 Speaker 9: bit reserved. 459 00:24:56,560 --> 00:24:59,359 Speaker 1: Yep, all right, Paul, thanks so much for joining us. 460 00:24:59,400 --> 00:25:02,040 Speaker 1: Really appreciate it. Paul Goldberg. He covers some of these 461 00:25:02,080 --> 00:25:05,760 Speaker 1: financial stocks that the exchanges, all that kind of fun stuff, 462 00:25:05,800 --> 00:25:07,479 Speaker 1: as well as the Canadian banks. He does all that 463 00:25:07,920 --> 00:25:12,359 Speaker 1: for Bloomberg Intelligence and again Nasdak acquire a Denza for 464 00:25:12,440 --> 00:25:15,840 Speaker 1: ten point five billion dollars in cash and stock. What 465 00:25:15,880 --> 00:25:18,160 Speaker 1: got my attention, Smoan was at the multiple to paying 466 00:25:18,160 --> 00:25:20,560 Speaker 1: eighteen times revenue, and I guess you know, is Paul 467 00:25:20,640 --> 00:25:25,080 Speaker 1: suggesting for a fast growing software company. Okay, but as 468 00:25:25,080 --> 00:25:27,639 Speaker 1: Paul pointed out, this thing's kind of growing fifteen percent 469 00:25:27,800 --> 00:25:30,000 Speaker 1: doesn't really I don't know. I guess that's one of 470 00:25:30,000 --> 00:25:32,840 Speaker 1: the reasons why NASDAK is off eleven point seven percent. 471 00:25:32,960 --> 00:25:34,919 Speaker 4: Yeah, and I wonder too, you know how much of 472 00:25:34,960 --> 00:25:38,080 Speaker 4: this sort of stuff can ultimately be automated to some degree. 473 00:25:38,119 --> 00:25:41,000 Speaker 4: I know we have these discussions ongoing discussions about AI, 474 00:25:41,320 --> 00:25:44,280 Speaker 4: but you know, some compliance stuff, some things like that. 475 00:25:44,680 --> 00:25:46,680 Speaker 4: You know, one thing there might be an opening there. 476 00:25:46,760 --> 00:25:48,760 Speaker 1: Yeah, exactly. So anyway, we'll keep an eye on that 477 00:25:48,800 --> 00:25:51,399 Speaker 1: one big big trade in the exchange business. 478 00:25:51,400 --> 00:25:56,400 Speaker 7: Today you're listening to the Team Ken's are Live program 479 00:25:56,520 --> 00:26:00,639 Speaker 7: Bloomberg Markets weekdays at ten am Eastern on Bloomberg, the 480 00:26:00,720 --> 00:26:03,840 Speaker 7: iHeartRadio app and the Bloomberg Business app, or listening on 481 00:26:03,920 --> 00:26:05,840 Speaker 7: demand wherever you get your podcast. 482 00:26:08,640 --> 00:26:11,879 Speaker 1: And Paul Sweene here in the Bloomberg Interactive Brookers Studio. So, simon, 483 00:26:11,960 --> 00:26:15,000 Speaker 1: I'm looking at wtacrude oil off three percent today, just 484 00:26:15,200 --> 00:26:18,040 Speaker 1: just a sixty eight dollars a barrel. And you know, 485 00:26:18,119 --> 00:26:20,399 Speaker 1: all these commodity people have always taught me it's just 486 00:26:20,480 --> 00:26:23,800 Speaker 1: supply and demand. Well, didn't they cut supply. 487 00:26:23,600 --> 00:26:24,480 Speaker 9: A couple of weeks ago. 488 00:26:25,160 --> 00:26:28,960 Speaker 4: Yeah, but I mean we have Russia potentially working against this, 489 00:26:29,160 --> 00:26:32,320 Speaker 4: and I mean, but it's this interesting feeling, right because 490 00:26:32,320 --> 00:26:34,480 Speaker 4: you talk to so many commodity people, You talk to 491 00:26:34,480 --> 00:26:37,440 Speaker 4: the energy ministers of various countries, and they look out 492 00:26:37,480 --> 00:26:39,119 Speaker 4: a couple of years and say, supply is going to 493 00:26:39,160 --> 00:26:42,280 Speaker 4: be really short. But at the same time you have 494 00:26:42,359 --> 00:26:46,320 Speaker 4: Jeff Curry, head of Commodities research at Golden and Sacks 495 00:26:46,320 --> 00:26:49,919 Speaker 4: on BTV last week. We have never been this wrong 496 00:26:50,119 --> 00:26:53,960 Speaker 4: for this long without seeing evidence to change our views. 497 00:26:53,960 --> 00:26:55,240 Speaker 4: So he's clearly as start. 498 00:26:55,040 --> 00:26:57,479 Speaker 1: As we are. All right, So some of the extra stuffed. 499 00:26:57,480 --> 00:27:00,520 Speaker 1: We have our own expert here, Fernando Valley, your analysts 500 00:27:00,520 --> 00:27:02,880 Speaker 1: for Bloomberg Intelligence, joining us live here in our Bloomberg 501 00:27:02,880 --> 00:27:06,879 Speaker 1: Interactive Broker studio. So, Fernando, the Saudis cannot be happy 502 00:27:06,920 --> 00:27:10,800 Speaker 1: with what's happening here. Why do you think crude oil 503 00:27:11,160 --> 00:27:16,280 Speaker 1: is declining despite a reduced output by Saudi Arabia. 504 00:27:16,440 --> 00:27:19,880 Speaker 10: Well, you said it it's supply or demand, So it's 505 00:27:19,880 --> 00:27:23,520 Speaker 10: not supply, it's demand. Okay, So it's you know, we 506 00:27:23,640 --> 00:27:27,359 Speaker 10: said it before when the first cut in April. You 507 00:27:27,400 --> 00:27:29,960 Speaker 10: can't fight the FED and they're trying to fight the FED, 508 00:27:30,000 --> 00:27:31,720 Speaker 10: and the FED is telling you know, we're going to 509 00:27:31,800 --> 00:27:34,600 Speaker 10: crush demand, and here we are. I mean, imports in 510 00:27:34,720 --> 00:27:36,880 Speaker 10: China are down seven and a half percent in May. 511 00:27:37,280 --> 00:27:41,119 Speaker 10: Logistic manager indexes in the US are down third consecutive 512 00:27:41,119 --> 00:27:44,840 Speaker 10: month that they make their lowest ever readings. So demand 513 00:27:44,880 --> 00:27:47,280 Speaker 10: is weak and that's that's what the price is telling 514 00:27:47,320 --> 00:27:50,439 Speaker 10: you is you can cut supply, but we're not buying it. 515 00:27:51,040 --> 00:27:54,240 Speaker 4: Well. On the demand side, we had some headlines out 516 00:27:54,240 --> 00:27:59,720 Speaker 4: of China. We're seeing some of the highest rates in 517 00:27:59,800 --> 00:28:03,919 Speaker 4: terms of COVID nineteen testing since at the end of 518 00:28:04,000 --> 00:28:06,159 Speaker 4: twenty twenty two. Remember when all those things go away. 519 00:28:06,920 --> 00:28:09,080 Speaker 4: I don't know that that's the story leading China for 520 00:28:09,200 --> 00:28:12,480 Speaker 4: oil traders. Give me your thinking there. I guess how 521 00:28:12,560 --> 00:28:15,480 Speaker 4: much pessimism is there around this China side of the equation. 522 00:28:15,960 --> 00:28:18,720 Speaker 10: Well, I think China, the COVID part of it is 523 00:28:18,760 --> 00:28:21,640 Speaker 10: still fairly new. But when you think about the recession 524 00:28:21,640 --> 00:28:25,320 Speaker 10: fears in the Western world, who is China's biggest trading 525 00:28:25,359 --> 00:28:27,720 Speaker 10: partners if not the Western world. It is an export nation. 526 00:28:28,320 --> 00:28:32,120 Speaker 10: It can't continue exporting if we're not buying. I think 527 00:28:32,119 --> 00:28:35,040 Speaker 10: the US and European consumer are still the bigger story. 528 00:28:35,040 --> 00:28:37,800 Speaker 10: Of course, they're domestic markets a lot bigger, a lot 529 00:28:37,840 --> 00:28:41,280 Speaker 10: more important today, and so the COVID story is important, 530 00:28:41,320 --> 00:28:44,880 Speaker 10: it's not irrelevant. But the biggest tissue is their exports 531 00:28:44,920 --> 00:28:48,320 Speaker 10: are down and so far, you know, as we look 532 00:28:48,360 --> 00:28:51,000 Speaker 10: at the numbers in the US as the bell weather, 533 00:28:51,600 --> 00:28:54,320 Speaker 10: they're not showing a lot of improvement. Credit card spending 534 00:28:54,400 --> 00:28:57,680 Speaker 10: is down as well, So all of those signs point 535 00:28:57,680 --> 00:29:00,360 Speaker 10: to weak demand, which is weak of demand for their 536 00:29:00,400 --> 00:29:01,960 Speaker 10: exports as well. 537 00:29:02,160 --> 00:29:05,040 Speaker 1: So as I look at the daily national average gasoline 538 00:29:05,040 --> 00:29:08,080 Speaker 1: price for regular unleaded three dollars and fifty nine cents, 539 00:29:08,480 --> 00:29:11,200 Speaker 1: why isn't that closer to three bucks? If oil is coming. 540 00:29:11,040 --> 00:29:13,680 Speaker 10: Down, well, there's going to be a little bit bit 541 00:29:13,680 --> 00:29:15,600 Speaker 10: of a lag. Remember last week it was still in 542 00:29:15,640 --> 00:29:18,400 Speaker 10: the seventies. So we're going to see that filter through. 543 00:29:18,760 --> 00:29:23,520 Speaker 10: So hopefully for your Fourth of July, maybe the Juneteenth holiday, 544 00:29:23,680 --> 00:29:26,080 Speaker 10: we're gonna get a little bit cheaper gas out in Jersey. 545 00:29:26,640 --> 00:29:31,120 Speaker 10: But then the crackspread are still elevated. If you look 546 00:29:31,120 --> 00:29:34,400 Speaker 10: at the crackspread for gasoline, still over thirty dollars a barrow. 547 00:29:35,240 --> 00:29:38,000 Speaker 10: That is a combination of factors. But we shut down 548 00:29:38,040 --> 00:29:41,360 Speaker 10: a lot of refining capacities we talked about, and then 549 00:29:41,840 --> 00:29:44,320 Speaker 10: just the type of gasoline is still not the right 550 00:29:44,400 --> 00:29:48,560 Speaker 10: type of gasoline. We do think that, especially for next year, 551 00:29:49,040 --> 00:29:51,840 Speaker 10: the renewable fuels component of it is actually going to 552 00:29:51,840 --> 00:29:55,400 Speaker 10: make gasoline structurally cheaper. It's only a few cents a gallon, 553 00:29:55,680 --> 00:30:00,520 Speaker 10: but it's probably a structurally cheaper gasoline for several years because, uh, 554 00:30:00,560 --> 00:30:03,239 Speaker 10: there is a drop into renewable fuel credits that we 555 00:30:03,320 --> 00:30:04,800 Speaker 10: expect will come through next year. 556 00:30:05,480 --> 00:30:07,640 Speaker 4: I'll take that couple of cents, but I have a 557 00:30:07,680 --> 00:30:11,280 Speaker 4: hybrid now. So are you trying to yet? Wow, cut 558 00:30:11,280 --> 00:30:12,560 Speaker 4: my gas, cut my gas? 559 00:30:12,840 --> 00:30:13,400 Speaker 1: Do you like it? 560 00:30:13,760 --> 00:30:14,040 Speaker 6: Yeah? 561 00:30:14,280 --> 00:30:15,200 Speaker 4: It's really nice? 562 00:30:15,240 --> 00:30:15,520 Speaker 9: Cool? 563 00:30:15,560 --> 00:30:18,040 Speaker 4: Okay, yeah, don't have to rely on those charging stations. 564 00:30:18,040 --> 00:30:20,200 Speaker 4: We were talking about Tesla earlier. Don't have to try 565 00:30:20,200 --> 00:30:21,800 Speaker 4: and rely on those charging stations. 566 00:30:21,880 --> 00:30:22,280 Speaker 1: Is it a. 567 00:30:22,600 --> 00:30:27,920 Speaker 4: Quiet no, no, hudai Okay, anyway, it's very neat. But 568 00:30:28,320 --> 00:30:31,080 Speaker 4: you know, one of the reasons that you know, Goldman 569 00:30:31,320 --> 00:30:34,360 Speaker 4: downgrading it's it's forecasts. And I guess they're they've just 570 00:30:34,400 --> 00:30:36,400 Speaker 4: been so bullish for so long that this is really 571 00:30:36,440 --> 00:30:39,440 Speaker 4: kind of getting, you know, getting people's attention. 572 00:30:39,920 --> 00:30:40,760 Speaker 6: It is because they. 573 00:30:40,680 --> 00:30:43,600 Speaker 4: See supply increases from sanctioned countries Russia. 574 00:30:43,680 --> 00:30:45,000 Speaker 6: You're on Venezuela. 575 00:30:45,920 --> 00:30:50,440 Speaker 4: How significant are those supply increases? 576 00:30:52,120 --> 00:30:52,320 Speaker 1: You know? 577 00:30:52,360 --> 00:30:54,600 Speaker 4: Can that make us focus a little bit more on 578 00:30:54,640 --> 00:30:57,600 Speaker 4: the supply side of the story or what's what's your 579 00:30:57,640 --> 00:30:58,040 Speaker 4: take there? 580 00:30:58,560 --> 00:31:01,160 Speaker 10: I think it definitely in the world where we're seeing 581 00:31:01,520 --> 00:31:06,200 Speaker 10: weaker demand, any little bit of supply helps bridge that gap. 582 00:31:07,000 --> 00:31:09,880 Speaker 10: And it's not just those sanctioned countries. It's also strategic 583 00:31:09,960 --> 00:31:13,000 Speaker 10: petroleum reserves. And we talked about the US last year, 584 00:31:13,040 --> 00:31:16,440 Speaker 10: but China has over one billion barrels of strategic petroleum reserves. 585 00:31:16,960 --> 00:31:19,880 Speaker 10: They can crush that price too in the short term. 586 00:31:20,160 --> 00:31:22,240 Speaker 10: So there is plenty of supply, even if it's not 587 00:31:22,720 --> 00:31:26,720 Speaker 10: daily output from Saudi Arabia, from other sources, the sanctioned countries, 588 00:31:26,880 --> 00:31:29,160 Speaker 10: strategic reserves, Russia. 589 00:31:29,200 --> 00:31:32,360 Speaker 1: Can you explain to me, is there oil getting out 590 00:31:32,400 --> 00:31:34,840 Speaker 1: to the market and if so, how's that happening. 591 00:31:35,280 --> 00:31:39,440 Speaker 10: By a lot of ships and yes. And then to Asia. 592 00:31:40,200 --> 00:31:43,360 Speaker 10: It was very interesting to see Saudi Arabia raising their 593 00:31:43,440 --> 00:31:46,840 Speaker 10: official selling prices, especially to Asia, because there's still plenty 594 00:31:46,840 --> 00:31:50,320 Speaker 10: of Russian crude making its way to India, Pakistan, China. 595 00:31:51,320 --> 00:31:54,120 Speaker 10: It seems like they're trying to shore up their revenues 596 00:31:54,160 --> 00:31:57,680 Speaker 10: per barrel by raising the official selling price. But they're 597 00:31:57,720 --> 00:32:01,720 Speaker 10: going to seed market share because the sanctions are impacting 598 00:32:01,760 --> 00:32:04,880 Speaker 10: the price that Russia gets for its barrow, but not 599 00:32:05,120 --> 00:32:06,080 Speaker 10: the overall volume. 600 00:32:06,640 --> 00:32:10,560 Speaker 1: All right, so they're still getting this stuff out by ship, 601 00:32:10,600 --> 00:32:11,920 Speaker 1: not by pipeline, right. 602 00:32:12,520 --> 00:32:15,600 Speaker 10: Some pipeline, but ships, okay, but at a lower price. 603 00:32:15,760 --> 00:32:19,560 Speaker 4: Yes, okay, I guess that's why Saudi Arabia is, you know, 604 00:32:20,160 --> 00:32:23,680 Speaker 4: taking these unilateral moves because clearly Russia and maybe not 605 00:32:23,760 --> 00:32:26,920 Speaker 4: holding up, well, maybe maybe not holding up. It's under 606 00:32:26,960 --> 00:32:29,240 Speaker 4: the bargain. Can we shift to the micro a little bit? 607 00:32:29,640 --> 00:32:29,760 Speaker 10: Our? 608 00:32:29,840 --> 00:32:34,480 Speaker 4: Javier Blass has a great column today from Bloomberg Opinion 609 00:32:35,440 --> 00:32:38,680 Speaker 4: saying that Exxon should be included in the Dow Jones 610 00:32:38,680 --> 00:32:42,400 Speaker 4: Industrial Average. Remember it was expelled back in August. 611 00:32:42,240 --> 00:32:45,160 Speaker 1: For Salesforce went in there for it. 612 00:32:45,760 --> 00:32:48,280 Speaker 4: Yes, I believe Salesforce went that. That sounds about right. 613 00:32:48,280 --> 00:32:51,080 Speaker 4: There were about six names in there, three A and 614 00:32:51,120 --> 00:32:52,760 Speaker 4: three out. 615 00:32:53,560 --> 00:32:56,360 Speaker 10: Your take, Fernando, I mean you should never have left. 616 00:32:56,640 --> 00:32:59,400 Speaker 10: It's only what four hundred and fifty billion dollars in 617 00:32:59,440 --> 00:33:04,719 Speaker 10: market cap significance four volume, it's four and a half 618 00:33:04,760 --> 00:33:07,880 Speaker 10: percent of global oil supply. It's a very important company 619 00:33:08,040 --> 00:33:09,920 Speaker 10: no matter how you skew it. And at the end 620 00:33:09,920 --> 00:33:13,000 Speaker 10: of the day, oil and gas is a significant cornerstone 621 00:33:13,040 --> 00:33:16,560 Speaker 10: of our energy matrix and it will be, regardless of scenario, 622 00:33:16,680 --> 00:33:18,400 Speaker 10: for the next thirty to forty years and next all 623 00:33:18,480 --> 00:33:19,320 Speaker 10: is an important part of that. 624 00:33:19,560 --> 00:33:22,240 Speaker 1: What did the company say about This is a topic 625 00:33:22,240 --> 00:33:24,840 Speaker 1: we talked about, I don't know several years ago, but 626 00:33:24,880 --> 00:33:28,000 Speaker 1: maybe not as much now about peak oil. What's the 627 00:33:28,360 --> 00:33:30,960 Speaker 1: where's the market on the discussion about peak oil? 628 00:33:31,280 --> 00:33:33,800 Speaker 10: Here's a lot of debate from twenty thirty to twenty 629 00:33:33,840 --> 00:33:37,920 Speaker 10: forty as the target date for peak oil, some more 630 00:33:37,920 --> 00:33:40,680 Speaker 10: aggressive saying that was twenty twenty, which is not proven 631 00:33:40,680 --> 00:33:44,440 Speaker 10: to be the case. You know, our view is it's 632 00:33:44,480 --> 00:33:48,160 Speaker 10: probably closer to the twenty forty benchmarkting that depends on 633 00:33:48,440 --> 00:33:52,080 Speaker 10: a lot of innovation. Reason being, you have five billion 634 00:33:52,080 --> 00:33:56,240 Speaker 10: people in the emerging markets that consume a fraction of 635 00:33:56,280 --> 00:33:58,960 Speaker 10: what we do in consumption. The only way to improve 636 00:33:59,000 --> 00:34:01,360 Speaker 10: their standard of living is I consuming more energy. You 637 00:34:01,400 --> 00:34:04,000 Speaker 10: can look at how any country developed and their energy 638 00:34:04,040 --> 00:34:08,320 Speaker 10: per capital rose. Most sub Saharan Africans consume less energy 639 00:34:08,360 --> 00:34:13,840 Speaker 10: than one American refrigerator, so a year, So that can't 640 00:34:13,920 --> 00:34:17,560 Speaker 10: happen without you increasing their energy consumption. And it's it's 641 00:34:17,680 --> 00:34:20,239 Speaker 10: very you know, hypocritical of us to say you can 642 00:34:20,360 --> 00:34:23,560 Speaker 10: industrialize how we did, but you know, we're going to 643 00:34:23,600 --> 00:34:28,160 Speaker 10: continue living in these various plush offices and commuting in 644 00:34:28,200 --> 00:34:33,000 Speaker 10: our nicely made test lists were built using coal power 645 00:34:33,040 --> 00:34:33,840 Speaker 10: plants in China. 646 00:34:34,400 --> 00:34:36,319 Speaker 4: You know, we only have about thirty seconds here. But 647 00:34:36,719 --> 00:34:39,640 Speaker 4: you know, one of Javier's arguments was that there's this 648 00:34:39,719 --> 00:34:43,600 Speaker 4: realization on the part of even environmentally focused investors that 649 00:34:43,640 --> 00:34:45,799 Speaker 4: we're going to need oil and gas for at least 650 00:34:45,800 --> 00:34:50,000 Speaker 4: a little while. Is there an overall framework in which, 651 00:34:50,400 --> 00:34:52,799 Speaker 4: you know, investors are changing their minds a little bit 652 00:34:52,800 --> 00:34:53,960 Speaker 4: about these oil majors. 653 00:34:54,200 --> 00:34:54,439 Speaker 9: Yeah. 654 00:34:54,640 --> 00:34:57,960 Speaker 10: One is we can reduce the carbon footprint without changing 655 00:34:57,960 --> 00:35:00,200 Speaker 10: all of the infrastructure, carbon capture being one one of 656 00:35:00,200 --> 00:35:04,640 Speaker 10: those ways, renewable fuels being another. We need to find 657 00:35:05,800 --> 00:35:11,520 Speaker 10: an equilibrium between energy security, affordability, and environmental impacts. 658 00:35:11,880 --> 00:35:14,760 Speaker 1: All right, Fernando, thanks so much for joining us. Fernando Vale. 659 00:35:14,880 --> 00:35:20,040 Speaker 1: He covers all things global energy for Bloomberg Intelligence. And again, 660 00:35:20,280 --> 00:35:23,440 Speaker 1: you know, as Fernando said, it's supply and demand, and 661 00:35:23,480 --> 00:35:25,840 Speaker 1: we know we've got maybe a little bit of declining 662 00:35:25,880 --> 00:35:28,520 Speaker 1: supply with the Saudi's cutting a million barrels per day 663 00:35:28,560 --> 00:35:31,920 Speaker 1: of production, but I guess not enough to offset declining 664 00:35:31,960 --> 00:35:35,560 Speaker 1: demand around the world, particularly in the US and some 665 00:35:35,640 --> 00:35:38,520 Speaker 1: other Western markets. But also you get a factor in Japan, 666 00:35:39,040 --> 00:35:42,640 Speaker 1: is they're reopening as robust as maybe we initially thought, 667 00:35:42,680 --> 00:35:46,160 Speaker 1: perhaps not. WTI crude oil off three point twenty four 668 00:35:46,200 --> 00:35:50,240 Speaker 1: percent right now sixty seven dollars in ninety one cents 669 00:35:50,320 --> 00:35:50,800 Speaker 1: per power. 670 00:35:51,040 --> 00:35:54,160 Speaker 7: You're listening to the tape. Catch our live program Bloomberg 671 00:35:54,200 --> 00:35:58,120 Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, tune 672 00:35:58,120 --> 00:36:01,040 Speaker 7: in app, Bloomberg dot Com, and the Bloomberg Business App. 673 00:36:01,120 --> 00:36:03,920 Speaker 7: You can also listen live on Amazon Alexa from our 674 00:36:03,960 --> 00:36:07,960 Speaker 7: flagship New York station, Just Say Alexa, play Bloomberg eleven 675 00:36:08,040 --> 00:36:10,680 Speaker 7: thirty Small. 676 00:36:10,400 --> 00:36:12,520 Speaker 1: And Floxman and Paul Sweeney here in the Bloomberg Interactive 677 00:36:12,520 --> 00:36:15,759 Speaker 1: Broker Studio. I don't know. I got the SPX up 678 00:36:15,840 --> 00:36:18,480 Speaker 1: twenty percent off of that October low last year, but 679 00:36:18,480 --> 00:36:20,600 Speaker 1: I've also got an inverted yield curve telling me the 680 00:36:20,600 --> 00:36:22,120 Speaker 1: world's coming to an end. I don't know how you 681 00:36:22,120 --> 00:36:24,719 Speaker 1: square those two things, but fortunately I don't have to 682 00:36:24,760 --> 00:36:28,040 Speaker 1: know that anymore. But our next guest does, Hans Olsen, 683 00:36:28,200 --> 00:36:32,479 Speaker 1: cio at Fiduciary Trust Company out of Boston. He joins 684 00:36:32,480 --> 00:36:35,600 Speaker 1: his live here in our Bloomberg Interactive Broker studio. So, Hans, again, 685 00:36:35,640 --> 00:36:38,120 Speaker 1: I've kind of got a stock market that's rallying. I 686 00:36:38,160 --> 00:36:41,000 Speaker 1: guess off off of those lows, but i've got the 687 00:36:41,080 --> 00:36:43,000 Speaker 1: fed down. I'm not sure they're going to pause. I've 688 00:36:43,000 --> 00:36:45,279 Speaker 1: got people tell me there's a recession either here now 689 00:36:45,360 --> 00:36:48,000 Speaker 1: or coming very soon. How do you kind of square 690 00:36:48,040 --> 00:36:49,400 Speaker 1: all that out for your outlook? 691 00:36:49,600 --> 00:36:51,279 Speaker 11: Yeah, I mean, if you look at the the S 692 00:36:51,320 --> 00:36:53,920 Speaker 11: and P five hundred, it seems to be signaling all 693 00:36:54,000 --> 00:36:57,759 Speaker 11: is clear, don't worry right onto the next narrative. But 694 00:36:57,840 --> 00:37:01,280 Speaker 11: if you look at that same market a little differently 695 00:37:01,320 --> 00:37:03,480 Speaker 11: from an equal weighted view, then it all starts to 696 00:37:03,680 --> 00:37:04,799 Speaker 11: foot a lot more. 697 00:37:04,880 --> 00:37:05,040 Speaker 9: Right. 698 00:37:05,080 --> 00:37:07,560 Speaker 12: So, if you equal weighted S and P or really 699 00:37:07,560 --> 00:37:07,920 Speaker 12: which is. 700 00:37:07,840 --> 00:37:11,799 Speaker 11: A proxy for the average stock, right, that's what three 701 00:37:11,840 --> 00:37:16,880 Speaker 11: percent this year, which is signaling sort of uncertainty and concern. 702 00:37:17,280 --> 00:37:21,040 Speaker 11: That reflects an inverted deal curve, tightening credit conditions, weak 703 00:37:21,120 --> 00:37:24,600 Speaker 11: business surveys like the ism. So I think it's all 704 00:37:24,640 --> 00:37:27,080 Speaker 11: about how you define the market this year. You know, 705 00:37:27,239 --> 00:37:31,320 Speaker 11: you look at the NASZAC up eighty basis points today. 706 00:37:31,719 --> 00:37:34,120 Speaker 11: Really you're talking about two stocks, right, which is about. 707 00:37:33,880 --> 00:37:36,480 Speaker 12: Twenty five percent of the index. 708 00:37:36,560 --> 00:37:40,320 Speaker 11: So it's really it's really become such a narrow market, 709 00:37:40,600 --> 00:37:44,719 Speaker 11: you know, and any pyramid that's inverted is inherently unstable. 710 00:37:45,360 --> 00:37:48,280 Speaker 4: Well, before we get to some of these stock names, 711 00:37:48,640 --> 00:37:51,240 Speaker 4: tell me your predictions. We all eyes on the FED, 712 00:37:51,760 --> 00:37:53,799 Speaker 4: and all eyes as well on the CPI print that's 713 00:37:53,800 --> 00:37:57,879 Speaker 4: going to come out. How hot or how slow would 714 00:37:57,920 --> 00:38:01,440 Speaker 4: we need for a surprise in either direction? And what 715 00:38:01,520 --> 00:38:02,480 Speaker 4: do you expect to see? 716 00:38:02,880 --> 00:38:06,880 Speaker 11: So the Fed decision, I think the skip is the 717 00:38:06,880 --> 00:38:09,680 Speaker 11: new word that people are using because it's sort of. 718 00:38:11,239 --> 00:38:11,800 Speaker 6: Still pause. 719 00:38:12,600 --> 00:38:13,320 Speaker 12: You know, when you look. 720 00:38:13,160 --> 00:38:18,480 Speaker 11: At it, short rates now are slightly above the inflation rate, 721 00:38:18,840 --> 00:38:21,040 Speaker 11: so you know, I look at it rather simply, right, 722 00:38:21,480 --> 00:38:25,600 Speaker 11: trailing twelve month CPI over the short rate, we're about 723 00:38:25,640 --> 00:38:30,120 Speaker 11: what twenty five thirty basis points over. That's kind of 724 00:38:30,120 --> 00:38:32,439 Speaker 11: what normal looks like over a very long period of time. 725 00:38:32,680 --> 00:38:35,239 Speaker 11: Maybe a little more fifty basis points, but a real 726 00:38:35,440 --> 00:38:40,200 Speaker 11: rate of interest on money represents I think what good 727 00:38:40,239 --> 00:38:42,920 Speaker 11: looks like, a sharp departure from what it's been for 728 00:38:42,960 --> 00:38:45,120 Speaker 11: the last twelve thirteen years. 729 00:38:45,200 --> 00:38:45,399 Speaker 12: Right. 730 00:38:45,680 --> 00:38:47,960 Speaker 11: But the point is is that the Fed can simply 731 00:38:48,000 --> 00:38:50,640 Speaker 11: do nothing. You know, the act of doing nothing is 732 00:38:50,640 --> 00:38:53,759 Speaker 11: an act itself, right, It's an action itself. And let 733 00:38:54,000 --> 00:38:56,440 Speaker 11: it settled in with this real rate of money for 734 00:38:56,480 --> 00:38:58,160 Speaker 11: a while and let the market acclimate. 735 00:38:59,160 --> 00:39:00,640 Speaker 12: So I think that's it's okay. 736 00:39:00,680 --> 00:39:03,440 Speaker 11: They can they can go a couple of meetings without 737 00:39:03,480 --> 00:39:08,080 Speaker 11: doing anything and let this new sort of price structure 738 00:39:08,120 --> 00:39:11,800 Speaker 11: of money sink in. As far as the CPI is concerned, 739 00:39:11,960 --> 00:39:14,800 Speaker 11: I think the estimate for core is what four percent 740 00:39:15,560 --> 00:39:16,160 Speaker 11: for yeah. 741 00:39:16,000 --> 00:39:21,320 Speaker 4: Four point one believe we're sorry that the core number 742 00:39:21,400 --> 00:39:23,360 Speaker 4: I think is a little higher. And then the headline 743 00:39:23,400 --> 00:39:24,600 Speaker 4: is four point one four. 744 00:39:24,520 --> 00:39:27,200 Speaker 12: Point one, and but that's down from roughly five. That'd 745 00:39:27,239 --> 00:39:29,480 Speaker 12: be a big drop, you know. 746 00:39:29,600 --> 00:39:32,000 Speaker 11: So I think the surprise will be if if it 747 00:39:32,040 --> 00:39:35,080 Speaker 11: actually just stays where it is, it would be a 748 00:39:35,200 --> 00:39:36,600 Speaker 11: bit of a hit to the markets. 749 00:39:36,680 --> 00:39:37,840 Speaker 4: Would that change the Feds? 750 00:39:38,400 --> 00:39:40,479 Speaker 11: No, I don't think it should. I don't I don't 751 00:39:40,760 --> 00:39:44,359 Speaker 11: necessarily should. Again, this takes time. These as we all know, 752 00:39:44,480 --> 00:39:49,440 Speaker 11: these uh these policy decisions act with very long and 753 00:39:49,520 --> 00:39:54,120 Speaker 11: variable effects, as we've seen in the in the first quarter, right, all. 754 00:39:54,080 --> 00:39:57,120 Speaker 1: Right, So if we don't own these seven names that 755 00:39:57,160 --> 00:40:01,000 Speaker 1: have been just magnificent, the Magnificent Seven. All right, I 756 00:40:01,040 --> 00:40:02,840 Speaker 1: missed that trade. Now what do I do? 757 00:40:03,239 --> 00:40:05,600 Speaker 12: Yeah, let's focus on that for a second. The Magnificent Seven. 758 00:40:06,200 --> 00:40:08,480 Speaker 11: You know, I don't know if you guys watched the 759 00:40:08,520 --> 00:40:11,279 Speaker 11: original or the remake, but you know the rest of 760 00:40:11,280 --> 00:40:14,440 Speaker 11: that story was most of those guys die, yeah by 761 00:40:14,440 --> 00:40:16,440 Speaker 11: the end of the movie. So, and it kind of 762 00:40:16,480 --> 00:40:19,239 Speaker 11: reminds you all back. You know, the last time the 763 00:40:19,239 --> 00:40:23,000 Speaker 11: market was this concentrated, back in the late nineteen nineties 764 00:40:23,000 --> 00:40:25,400 Speaker 11: and the run up to the tech bubble. 765 00:40:25,200 --> 00:40:27,520 Speaker 12: You had, you know, incredibly narrow markets. 766 00:40:28,040 --> 00:40:33,280 Speaker 11: Valuations of those of those favored Few were incredibly high 767 00:40:33,360 --> 00:40:37,120 Speaker 11: and simply unsustainable. So if you look at you know, 768 00:40:37,160 --> 00:40:40,319 Speaker 11: if you look at the average stock, I think there's 769 00:40:40,320 --> 00:40:41,920 Speaker 11: some pretty good value to we had there. So it's 770 00:40:41,920 --> 00:40:43,520 Speaker 11: a question of where do you want to place the 771 00:40:43,560 --> 00:40:46,720 Speaker 11: money if it's that Favorite Few or the Magnificent Seven. 772 00:40:47,440 --> 00:40:49,120 Speaker 11: You know, a lot has to go right if you're 773 00:40:49,160 --> 00:40:53,560 Speaker 11: playing twenty times sales for company like Nvidio, right your 774 00:40:53,600 --> 00:40:55,320 Speaker 11: price for perfection? 775 00:40:55,800 --> 00:40:59,040 Speaker 12: And no question, you. 776 00:40:58,960 --> 00:41:01,160 Speaker 4: Know, one of the things sent across the notes earlier, 777 00:41:01,360 --> 00:41:02,840 Speaker 4: one of the things you point out is you like 778 00:41:02,960 --> 00:41:07,480 Speaker 4: energy and materials for the energy green transition teams. I think, 779 00:41:07,560 --> 00:41:09,680 Speaker 4: you know, energy has been one of those most pressured 780 00:41:10,239 --> 00:41:13,000 Speaker 4: places in the stock market so far this year. 781 00:41:13,480 --> 00:41:15,600 Speaker 11: How do you play this kind of interesting where you 782 00:41:15,719 --> 00:41:18,840 Speaker 11: have energy the energy sector weak this year, but the 783 00:41:18,920 --> 00:41:22,360 Speaker 11: overall market seem suggesting that the economy is fine. 784 00:41:22,640 --> 00:41:24,040 Speaker 12: That doesn't quite foot, does it. 785 00:41:26,239 --> 00:41:30,360 Speaker 11: I think the you know, again, the money is going 786 00:41:30,440 --> 00:41:32,520 Speaker 11: after the story and the narrative, and the narrative is 787 00:41:32,560 --> 00:41:35,640 Speaker 11: all about generative AI and the like, and you'll see 788 00:41:35,640 --> 00:41:38,360 Speaker 11: more and more companies I think, sort of attach AI 789 00:41:38,600 --> 00:41:40,760 Speaker 11: to whatever they're doing in order to get the multiple 790 00:41:40,800 --> 00:41:44,520 Speaker 11: uplift with respect to earning energy. I mean, I think 791 00:41:44,680 --> 00:41:49,800 Speaker 11: for us, we're playing it for a longer dated theme, 792 00:41:50,160 --> 00:41:53,400 Speaker 11: which is a transition from fossil fuels to green And 793 00:41:53,440 --> 00:41:56,480 Speaker 11: the reality is is that the infrastructure and just the 794 00:41:56,600 --> 00:42:01,520 Speaker 11: energy ratios energy into energy out on renewables of various 795 00:42:01,600 --> 00:42:06,520 Speaker 11: forms or fusion simply aren't there yet, and all the 796 00:42:06,560 --> 00:42:08,359 Speaker 11: infrastructure that will be needed to. 797 00:42:08,320 --> 00:42:09,040 Speaker 12: Be built out. 798 00:42:09,760 --> 00:42:15,799 Speaker 11: We'll all favor both carbons and materials for us to 799 00:42:15,800 --> 00:42:18,600 Speaker 11: get to that greener future, and it's going to take longer, 800 00:42:18,760 --> 00:42:23,560 Speaker 11: more expensive, and the technology simply isn't there to create 801 00:42:23,560 --> 00:42:28,000 Speaker 11: the excess of supply of energy for our needs at 802 00:42:28,000 --> 00:42:28,440 Speaker 11: this point. 803 00:42:28,760 --> 00:42:31,080 Speaker 1: Structured credit, what does that mean to you? What is 804 00:42:31,120 --> 00:42:34,120 Speaker 1: the structured credit investment in? Why do you guys like those? 805 00:42:34,160 --> 00:42:39,360 Speaker 11: So it could be seasoned mortgages, right, really well seasoned mortgages. 806 00:42:39,400 --> 00:42:41,920 Speaker 12: Maybe non agency r mbs and the like. 807 00:42:42,239 --> 00:42:47,000 Speaker 11: We've stayed away from commercial credit, but really our focus 808 00:42:47,000 --> 00:42:51,760 Speaker 11: has been in the non agency residential mortgage back market 809 00:42:51,760 --> 00:42:54,120 Speaker 11: where we're we're not taking really anything in the way 810 00:42:54,120 --> 00:42:57,719 Speaker 11: of duration risk per se, and we're getting nice ye'll 811 00:42:57,760 --> 00:42:58,160 Speaker 11: pick up. 812 00:42:58,280 --> 00:43:00,320 Speaker 12: So you know, it's been a. 813 00:43:00,160 --> 00:43:04,080 Speaker 11: Very nice corner of the market to collect a cupeon. 814 00:43:05,120 --> 00:43:07,640 Speaker 4: You know, it was interesting to me Paul was asking 815 00:43:07,719 --> 00:43:09,680 Speaker 4: with a previous guest earlier, do you just get into 816 00:43:09,719 --> 00:43:12,880 Speaker 4: the two year treasuries because they're getting close to inflation? 817 00:43:13,360 --> 00:43:15,920 Speaker 4: I mean, but hedge funds boosting their nets short to 818 00:43:16,000 --> 00:43:19,319 Speaker 4: your positions for the eleventh straight weeks. What's your take 819 00:43:19,640 --> 00:43:20,759 Speaker 4: get in stay out? 820 00:43:21,200 --> 00:43:21,319 Speaker 3: Ye? 821 00:43:21,719 --> 00:43:25,960 Speaker 11: Yeah, you know, look, I think if you believe that 822 00:43:26,160 --> 00:43:29,200 Speaker 11: getting the last bit of inflation, so. 823 00:43:29,239 --> 00:43:30,840 Speaker 12: We were at nine, we're down at five. 824 00:43:31,239 --> 00:43:33,760 Speaker 11: We got to get to two according to what central 825 00:43:33,800 --> 00:43:36,799 Speaker 11: bankers are telling us. You know, those those last three 826 00:43:36,840 --> 00:43:39,920 Speaker 11: percentage points could be the most difficult percentage points to 827 00:43:40,680 --> 00:43:42,839 Speaker 11: transit of all right, And so if you think, if 828 00:43:42,840 --> 00:43:45,719 Speaker 11: you believe that in the develop economies, to get it 829 00:43:45,800 --> 00:43:49,200 Speaker 11: back there, it's it's harder and it takes longer, and 830 00:43:49,360 --> 00:43:52,040 Speaker 11: that means that rates are stuck at a higher level 831 00:43:52,120 --> 00:43:56,160 Speaker 11: for a bit longer. And you know, I think that 832 00:43:56,239 --> 00:43:57,919 Speaker 11: you have a choice now when you have a real 833 00:43:58,160 --> 00:44:00,560 Speaker 11: rate of money, and it's really important to think how 834 00:44:00,680 --> 00:44:03,720 Speaker 11: radical that is where the price of money in relation 835 00:44:03,840 --> 00:44:07,359 Speaker 11: to the price of things is back to something that 836 00:44:07,640 --> 00:44:09,600 Speaker 11: most of us would say. 837 00:44:09,880 --> 00:44:10,839 Speaker 12: Is the order of things? 838 00:44:10,920 --> 00:44:11,400 Speaker 1: Is it order thing? 839 00:44:11,520 --> 00:44:11,680 Speaker 7: Yep? 840 00:44:11,719 --> 00:44:14,040 Speaker 1: Absolutely, it's a new world order the last twelve years 841 00:44:14,040 --> 00:44:17,479 Speaker 1: maybe a little bit unusual in hindsight. Hans Olsen he's 842 00:44:17,520 --> 00:44:22,879 Speaker 1: the chief investment officer Fiduciary Trust Company based in Boston, Massachusetts. 843 00:44:22,920 --> 00:44:25,200 Speaker 1: He joins us here in a Bloomberg Interactive Broker studio. 844 00:44:25,400 --> 00:44:29,000 Speaker 7: You're listening to the tape cat'sur live program Bloomberg Markets 845 00:44:29,040 --> 00:44:32,480 Speaker 7: weekdays at ten am Eastern on Bloomberg Radio, the tune 846 00:44:32,480 --> 00:44:35,439 Speaker 7: in app, Bloomberg dot Com, and the Bloomberg Business app. 847 00:44:35,480 --> 00:44:38,279 Speaker 7: You can also listen live on Amazon Alexa from our 848 00:44:38,320 --> 00:44:43,520 Speaker 7: flagship New York station Just Say Alexa playing Bloomberg eleven thirty. 849 00:44:44,440 --> 00:44:48,560 Speaker 1: Jen Reachie does all the anti stuff, antitrust legislation and 850 00:44:48,600 --> 00:44:50,920 Speaker 1: all the work there when we have big deals and 851 00:44:50,960 --> 00:44:53,280 Speaker 1: anti trust issues come up and the lawyers get involved. 852 00:44:53,640 --> 00:44:56,000 Speaker 1: She does all that for Bloomberg Intelligence. He joins us 853 00:44:56,000 --> 00:44:59,640 Speaker 1: here in a Bloomberg Interactive broker studio. So, Jen, it 854 00:44:59,719 --> 00:45:02,640 Speaker 1: does it seem like it's just, you know, at first, 855 00:45:02,680 --> 00:45:04,680 Speaker 1: blush that it seems like Microsoft's kind of a really 856 00:45:04,680 --> 00:45:06,520 Speaker 1: tough time getting this deal done. What's the latest. 857 00:45:07,040 --> 00:45:10,400 Speaker 6: Oh, yeah, They've really had a tough haul. So obviously 858 00:45:10,440 --> 00:45:14,280 Speaker 6: the FTC must be concerned about a Microsoft and activision 859 00:45:14,320 --> 00:45:16,440 Speaker 6: going ahead and closing their deal despite the fact that 860 00:45:16,520 --> 00:45:19,200 Speaker 6: right now they're facing a UK opposition right and they're 861 00:45:19,239 --> 00:45:22,360 Speaker 6: fighting in court with the UK. But they have talked about, 862 00:45:22,520 --> 00:45:25,920 Speaker 6: you know, looking at all possibilities and the FTC's obviously 863 00:45:25,960 --> 00:45:28,759 Speaker 6: heard that. So they have to protect themselves because they 864 00:45:28,800 --> 00:45:31,240 Speaker 6: have an in house process set to start in August, 865 00:45:31,520 --> 00:45:34,319 Speaker 6: but a decision from that in house process probably won't 866 00:45:34,360 --> 00:45:37,000 Speaker 6: come out to one queue. In the meantime, they may 867 00:45:37,040 --> 00:45:39,200 Speaker 6: need to stop the companies from closing the deal, because 868 00:45:39,200 --> 00:45:41,800 Speaker 6: it's a lot harder to unwind a deal that's already 869 00:45:41,800 --> 00:45:43,920 Speaker 6: been closed and consummated than it is to stop it 870 00:45:43,960 --> 00:45:46,640 Speaker 6: from closing to begin with. So this would be going 871 00:45:46,640 --> 00:45:49,200 Speaker 6: to court to seek a preliminary injunction just to stop 872 00:45:49,239 --> 00:45:52,160 Speaker 6: them from closing, pending that in house process that starts 873 00:45:52,160 --> 00:45:52,680 Speaker 6: in August. 874 00:45:53,160 --> 00:45:56,279 Speaker 4: So this is more of an insurance policy that they 875 00:45:56,280 --> 00:45:57,880 Speaker 4: can't move ahead. And you know what, this may be 876 00:45:57,960 --> 00:46:01,239 Speaker 4: why we're not seeing shares of either company moved too 877 00:46:01,280 --> 00:46:07,200 Speaker 4: much today, Activision down just less than a point a 878 00:46:07,239 --> 00:46:11,479 Speaker 4: tenth of a percentage point, Microsoft up to two tens 879 00:46:11,480 --> 00:46:15,719 Speaker 4: of one percent. You know, what's the path forward for 880 00:46:16,000 --> 00:46:18,759 Speaker 4: Microsoft and Activision? They want to complete this deal, but 881 00:46:18,800 --> 00:46:20,440 Speaker 4: they've gotten a lot of. 882 00:46:22,120 --> 00:46:22,759 Speaker 6: Pushback. 883 00:46:23,560 --> 00:46:25,359 Speaker 4: Where do we go? What's how did the next couple 884 00:46:25,440 --> 00:46:26,000 Speaker 4: months play out? 885 00:46:26,120 --> 00:46:26,279 Speaker 12: Right? 886 00:46:26,280 --> 00:46:28,560 Speaker 6: And that's the issue because and I think that maybe 887 00:46:28,560 --> 00:46:30,680 Speaker 6: that's part of the reason the stock hasn't reacted much, 888 00:46:30,760 --> 00:46:32,600 Speaker 6: is because no matter what happens in the US, there's 889 00:46:32,600 --> 00:46:34,920 Speaker 6: still this big hurdle in the UK, right that has 890 00:46:34,960 --> 00:46:38,200 Speaker 6: to be overcome. And if Microsoft they have an appeal 891 00:46:38,200 --> 00:46:41,879 Speaker 6: pending right that it's a very high standard to win 892 00:46:42,120 --> 00:46:44,920 Speaker 6: and get the reversal of a decision by the Competition 893 00:46:45,000 --> 00:46:48,040 Speaker 6: Markets Authority. So that's going to be a difficult path. 894 00:46:48,360 --> 00:46:51,680 Speaker 6: So we have heard Microsoft talking about other potential options, 895 00:46:51,680 --> 00:46:54,400 Speaker 6: which could be closing and just continuing to fight in 896 00:46:54,400 --> 00:46:57,720 Speaker 6: court and face whatever sanctions they might face, or perhaps 897 00:46:57,719 --> 00:47:00,000 Speaker 6: closing and pulling the activision business out of the US. 898 00:47:00,480 --> 00:47:02,919 Speaker 6: I mean, we've heard them talk about these things. I'm 899 00:47:02,920 --> 00:47:05,040 Speaker 6: not sure how they would do that. It would be complicated, 900 00:47:05,600 --> 00:47:09,200 Speaker 6: but they are thinking about those options. Then they'd have 901 00:47:09,280 --> 00:47:11,640 Speaker 6: to win in the US as well and not you know, 902 00:47:11,920 --> 00:47:14,680 Speaker 6: be the recipient of an injunction blocking them. I think 903 00:47:14,680 --> 00:47:17,200 Speaker 6: they do have a better shot in the US, not 904 00:47:17,239 --> 00:47:21,640 Speaker 6: only in court, but also before the FTC's administrative law 905 00:47:21,680 --> 00:47:24,400 Speaker 6: judge the process that's starting in August. So if they 906 00:47:24,440 --> 00:47:26,600 Speaker 6: can manage to succeed in the US, which I think 907 00:47:26,600 --> 00:47:29,680 Speaker 6: they can, and that'll play out this year and into 908 00:47:29,760 --> 00:47:32,280 Speaker 6: the first quarter, we'll have all those decisions I think 909 00:47:32,560 --> 00:47:35,640 Speaker 6: court probably in four Q alj probably in one Q 910 00:47:36,120 --> 00:47:39,319 Speaker 6: If this companies continue down this path, and then they 911 00:47:39,320 --> 00:47:41,080 Speaker 6: have to decide what they want to do about the UK. 912 00:47:41,960 --> 00:47:45,960 Speaker 1: So is this just the Democrats being democrats? Kind of 913 00:47:45,960 --> 00:47:49,000 Speaker 1: anti deal or are the regulars like the FTC, the 914 00:47:49,080 --> 00:47:53,160 Speaker 1: DJ Are they kind of pursuing novel law here? I mean, 915 00:47:53,280 --> 00:47:54,040 Speaker 1: what's going on? 916 00:47:54,200 --> 00:47:56,560 Speaker 6: I think it's both, you know, I really think it's 917 00:47:56,600 --> 00:47:59,160 Speaker 6: it's both. There's really just been a big push ever 918 00:47:59,200 --> 00:48:01,920 Speaker 6: since the executive order that was issued by President Biden 919 00:48:02,000 --> 00:48:04,799 Speaker 6: back in July of twenty twenty one, kind of instructing 920 00:48:04,840 --> 00:48:08,200 Speaker 6: all agencies, not just the primary anti trust agencies that 921 00:48:08,280 --> 00:48:10,600 Speaker 6: are Trade Commission and Department of Justice, but across the 922 00:48:10,640 --> 00:48:13,920 Speaker 6: whole government to try to slow down consolidation. You know, 923 00:48:13,960 --> 00:48:16,799 Speaker 6: there's this belief, I think right now by this administration 924 00:48:17,160 --> 00:48:20,040 Speaker 6: that we have had lacks anti trust enforcement for years, 925 00:48:20,080 --> 00:48:23,040 Speaker 6: and we've landed today in twenty twenty three with a 926 00:48:23,040 --> 00:48:26,080 Speaker 6: bunch of industries that are too consolidated, and as a result, 927 00:48:26,120 --> 00:48:29,839 Speaker 6: we have low innovation, low quality, and high prices. Right, 928 00:48:29,920 --> 00:48:32,360 Speaker 6: So they're trying to stem that tide. So it's both 929 00:48:32,880 --> 00:48:36,160 Speaker 6: trying to slow down the deal making but also trying 930 00:48:36,200 --> 00:48:40,080 Speaker 6: to expand anti trust law using novel concepts. So it's 931 00:48:40,080 --> 00:48:42,719 Speaker 6: a combination, and in some ways they have to use 932 00:48:42,760 --> 00:48:45,880 Speaker 6: novel concepts in order to slow deal making, right, because 933 00:48:45,920 --> 00:48:48,279 Speaker 6: they're trying to go after deals that would have likely 934 00:48:48,360 --> 00:48:49,560 Speaker 6: closed a few years ago. 935 00:48:49,960 --> 00:48:54,319 Speaker 4: Yeah, these novel concepts, though, I mean, what things could 936 00:48:54,480 --> 00:48:58,719 Speaker 4: ultimately end up ahead of a judge and the judge 937 00:48:58,800 --> 00:49:01,680 Speaker 4: rules you can't use concepts. You know, this deal should 938 00:49:01,719 --> 00:49:04,279 Speaker 4: move forward. I guess what are the pieces that are 939 00:49:04,320 --> 00:49:04,960 Speaker 4: most at play? 940 00:49:05,400 --> 00:49:05,560 Speaker 3: You know. 941 00:49:05,640 --> 00:49:07,960 Speaker 6: The thing that's difficult about the novel concepts is that 942 00:49:07,960 --> 00:49:11,160 Speaker 6: they're difficult to prove, which is why perhaps they haven't 943 00:49:11,200 --> 00:49:13,680 Speaker 6: worked in the past. So let's say one thing that 944 00:49:13,680 --> 00:49:17,040 Speaker 6: they're going after our deals where an incumbent is buying 945 00:49:17,160 --> 00:49:20,080 Speaker 6: what looks like an up and coming potential rival as startup, 946 00:49:20,120 --> 00:49:24,640 Speaker 6: a scrappy startup, and it's called nascent competition. They don't 947 00:49:24,680 --> 00:49:27,160 Speaker 6: necessarily compete today, but we think you're going to compete 948 00:49:27,200 --> 00:49:29,200 Speaker 6: in a fulsome way in the future. That's kind of 949 00:49:29,239 --> 00:49:31,719 Speaker 6: a new novel concept that both the FDC and the 950 00:49:31,800 --> 00:49:34,239 Speaker 6: DOJ are going after. And the issue they have with 951 00:49:34,280 --> 00:49:36,560 Speaker 6: it is that that's something very very hard to prove. 952 00:49:36,680 --> 00:49:38,800 Speaker 6: I mean, you're saying, here's what we think might happen 953 00:49:38,800 --> 00:49:41,799 Speaker 6: in the future if this big incumbent doesn't buy this 954 00:49:41,840 --> 00:49:45,200 Speaker 6: scrappy startup. And right now, as a matter of fact, 955 00:49:45,239 --> 00:49:48,640 Speaker 6: the Federal Trade Commission is trying to unwind Facebook's acquisitions 956 00:49:48,640 --> 00:49:52,200 Speaker 6: of Instagram and WhatsApp because they believe this is exactly 957 00:49:52,400 --> 00:49:54,600 Speaker 6: what we let through that we shouldn't have when Facebook 958 00:49:54,640 --> 00:49:57,480 Speaker 6: bought these scrappy startups when they were kind of, you know, 959 00:49:57,600 --> 00:50:00,399 Speaker 6: on their way to being bigger competitors, and had book 960 00:50:00,480 --> 00:50:03,160 Speaker 6: not bought them, they would have posed, you know, a 961 00:50:03,360 --> 00:50:07,600 Speaker 6: bigger rival to Facebook and social networking. So that's one 962 00:50:07,640 --> 00:50:09,600 Speaker 6: of the types of concepts and it's just difficult to 963 00:50:09,640 --> 00:50:10,600 Speaker 6: prove in court. 964 00:50:11,360 --> 00:50:13,239 Speaker 1: All right, but this is a big deal and this 965 00:50:13,280 --> 00:50:16,600 Speaker 1: is Microsoft. I can't imagine them walking away here. Do 966 00:50:16,600 --> 00:50:17,799 Speaker 1: you think they fight it to the end? 967 00:50:17,840 --> 00:50:20,640 Speaker 6: And it's a really good question. You know, they have 968 00:50:20,640 --> 00:50:23,680 Speaker 6: an end date in July, right, so their purchase agreement 969 00:50:23,760 --> 00:50:26,040 Speaker 6: says that as of I think it's around mid July 970 00:50:26,440 --> 00:50:29,000 Speaker 6: that Activision can walk away and accept their breakup fee. 971 00:50:29,080 --> 00:50:31,359 Speaker 6: I think it's around three billion dollars. It's a lot 972 00:50:31,360 --> 00:50:33,600 Speaker 6: of money. So we're going to have to see what happens. 973 00:50:33,640 --> 00:50:33,839 Speaker 9: Then. 974 00:50:34,239 --> 00:50:37,320 Speaker 6: They seem to me committed to fighting this out Activision 975 00:50:37,360 --> 00:50:39,560 Speaker 6: as well. They've hired a lot of big guns in 976 00:50:39,600 --> 00:50:43,560 Speaker 6: Europe and in London to fight that appeal. It looks 977 00:50:43,600 --> 00:50:46,359 Speaker 6: like they're going forward in the US. So we'll see 978 00:50:46,400 --> 00:50:50,120 Speaker 6: if they extend that agreement so that the end date 979 00:50:50,239 --> 00:50:51,080 Speaker 6: is pushed further out. 980 00:50:51,160 --> 00:50:54,759 Speaker 1: So when would they negotiate extending the agreement? Is that 981 00:50:54,840 --> 00:50:56,840 Speaker 1: something that they can wait till this summer or do 982 00:50:56,840 --> 00:50:58,000 Speaker 1: they need to do it kind of nowish? 983 00:50:58,120 --> 00:51:00,399 Speaker 6: They probably have to do it nowish. And the thing 984 00:51:00,480 --> 00:51:02,360 Speaker 6: is July could hit, the end day could hit, and 985 00:51:02,440 --> 00:51:05,120 Speaker 6: Activision could just stay in. It doesn't necessarily mean that 986 00:51:05,200 --> 00:51:07,799 Speaker 6: the agreement's off. It means it gives either one the 987 00:51:07,800 --> 00:51:09,960 Speaker 6: ability at that point to walk away. They can just 988 00:51:10,000 --> 00:51:12,960 Speaker 6: not walk away and they can continue. But Microsoft might 989 00:51:13,000 --> 00:51:14,879 Speaker 6: want to protect itself more than that, right. 990 00:51:14,920 --> 00:51:17,320 Speaker 1: All right, Jen, thanks so much for joining us, jumping 991 00:51:17,400 --> 00:51:19,200 Speaker 1: into the studio here, giving us the latest on the 992 00:51:19,239 --> 00:51:23,600 Speaker 1: antitrust landscape. Again. Microsoft has a deal for Activision Blizzard 993 00:51:23,719 --> 00:51:27,120 Speaker 1: sixty nine billion dollars and that's a big deal. To 994 00:51:27,160 --> 00:51:29,520 Speaker 1: you walk away from that, I can't imagine. 995 00:51:30,800 --> 00:51:33,920 Speaker 2: Thanks for listening to the Bloomberg Markets podcasts. You can 996 00:51:33,920 --> 00:51:37,720 Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever 997 00:51:37,800 --> 00:51:39,280 Speaker 2: podcast platform you prefer. 998 00:51:39,680 --> 00:51:40,480 Speaker 1: I'm Matt Miller. 999 00:51:40,719 --> 00:51:44,120 Speaker 2: I'm on Twitter at Matt Miller nineteen seventy three and 1000 00:51:44,280 --> 00:51:45,000 Speaker 2: I'm fall Sweeney. 1001 00:51:45,000 --> 00:51:47,799 Speaker 1: I'm on Twitter at Ptsweeney Before the podcast. You can 1002 00:51:47,840 --> 00:51:51,040 Speaker 1: always catch us worldwide at Bloomberg Radio