Speaker 1: Good morning.
Speaker 2: I'm Brian Curtiz and I'm Doug Krisner. Here are the
Speaker 2: stories we're following today.
Speaker 3: Amazon has been hit with an anti trust lawsuit from
Speaker 3: the Federal Trade Commission the FTC, alleging that the tech
Speaker 3: giant monopolized online marketplace services by degrading quality for shoppers
Speaker 3: and overcharging sellers. Ftcchair Lina Khan is vowing to take action,
Speaker 3: but stopped short of calling for a breakup of Amazon.
Speaker 1: Con spoke earlier with Bloomberg.
Speaker 4: We believe that this lawsuit, if we're successful, will actually
Speaker 4: entirely restore the promise of free competition. Our free enterprise
Speaker 4: system is one where companies should be competing on the
Speaker 4: merits and not be able to protect their monopoly power
Speaker 4: through illegal tactics.
Speaker 3: FTC chair Lina Khan. In the meantime, Amazon is arguing
Speaker 3: that consumers will be the ones that pay the price.
Speaker 3: They'll see prices go up and product selection come down
Speaker 3: if the FTC gets its way.
Speaker 2: We go next to artificial and tells open Ai you
Speaker 2: know it as the creator of chat gpd well. Reportedly,
Speaker 2: the company is talking to investors about a potential share sale.
Speaker 2: The Wall Street Journal is saying the sale would give
Speaker 2: the startup a valuation of between eighty to ninety billion dollars,
Speaker 2: and that would make open ai one of the most
Speaker 2: highly valued startups in the world. Here's Bloomberg, said Ludlow.
Speaker 5: In April, the valuation was around twenty nine billion dollars,
Speaker 5: So this is a significant jump. But part of what
Speaker 5: the Wall Street Journal was talking about is something Bloomberg's
Speaker 5: already reported that open ai is on track to around
Speaker 5: a billion dollars of revenue this year, a lot greater
Speaker 5: than that in twenty twenty four. So while it's a
Speaker 5: jump up in valuation, and this is based on an
Speaker 5: insider share sale, by the way, not issuing new shares
Speaker 5: or a new round of equity with vcs, you know,
Speaker 5: they seem to be doing real business.
Speaker 2: That is Bloomberg's ed Ludlow. Now, separately, we learned today
Speaker 2: that the Central Intelligence Agency is looking to roll out
Speaker 2: its own version of chat GPD. It would be a
Speaker 2: tool able to sift through public data. It's part of
Speaker 2: a broader government push to harness the power of artificial
Speaker 2: intelligence and compete with China.
Speaker 3: Brian well Fed Governor Michelle Bowman says that increased rent
Speaker 3: burdens are spotlighting the significance of the FEDS fighted on inflation.
Speaker 3: Bowman spoke Tuesday at a virtual event hosted by the FED.
Speaker 6: These increased costs and these cost pressures underscore the importance
Speaker 6: of the Federal reserves efforts to fight inflation, which can
Speaker 6: complement efforts to address other factors affecting rent prices, including
Speaker 6: increasing the supply of rental housing.
Speaker 1: FED Governor Michelle Bowman.
Speaker 3: She went on to say that rent increases have outstripped
Speaker 3: wage gains and that increases the share of renters who
Speaker 3: spend thirty percent or more of their income on rent.
Speaker 3: In remarks last week, Bowmen signaled that she favors raising
Speaker 3: interest rates again and likely more than just once we.
Speaker 2: Go to Europe, next to where the European Union's investigation
Speaker 2: into ill doctric vehicle imports from China has expanded beyond
Speaker 2: Chinese automakers, US based Tesla now finding itself in the
Speaker 2: probe's crosshairs. Here is Bloomberg Global Autos editor Craig Trudell.
Speaker 7: This is a company that opened a plant in Germany
Speaker 7: in March of last year, but it continues to supplement
Speaker 7: the output from that plant with production from a lower
Speaker 7: cost facility in Shanghai, and Tesla has been taking advantage
Speaker 7: of that and shipping quite a lot of evs into
Speaker 7: the EU.
Speaker 2: That is Bloomberg's Craig Trudell. Now, the aim of this
Speaker 2: EU probe is to determine whether China has subsidized not
Speaker 2: only Tesla but the domestic Chinese manufacturers like BYD and Neo,
Speaker 2: and then whether or not to take any necessary measures.
Speaker 3: Brian Well Ali Baba's logistics armed Chiniow has filed for
Speaker 3: a Hong Kong IPO. Bloomberg Juan Wang has the story
Speaker 3: from Hong Kong.
Speaker 8: The Hong Kong Stock Exchange confirmed to thee La ali
Speaker 8: Baba can proceed with a proposed It's High Yell spinoff
Speaker 8: and IPO that will potentially make tinyal the first of
Speaker 8: Alibaba's units to go public. Sources say the IPO could
Speaker 8: raise at least one billion dollars. The stock exchange website
Speaker 8: says CTIC Securities, City Group and JP Morgan are joint
Speaker 8: sponsors of the offering.
Speaker 1: Ali Baba intends to retain.
Speaker 8: More than fifty percent of the unit shares and keep
Speaker 8: Tanyo as a subsidiary in Hong Kong joined Wong Bloomberg Radio, Doug,
Speaker 8: I love.
Speaker 1: It at Bookends. There we have a connection.
Speaker 3: The FTC action on Amazon actually brings to mind what
Speaker 3: happened at Ali Baba in China. Now the FTC chair
Speaker 3: Alina Khan is not calling for a breakup, but that's
Speaker 3: exactly what is happening with Baba.
Speaker 1: We report there today. You just heard that from Juan Wong.
Speaker 3: This would be the first spin off of one of
Speaker 3: the six units tiny how Originally we thought it would
Speaker 3: be Fresh Shippo, but it is SiNW And if you
Speaker 3: go back to the FTC, it hasn't had a great
Speaker 3: track record of late in court in targeting big tech.
Speaker 3: It's different in China where the party and the government
Speaker 3: can push through its dictates. But of course in the
Speaker 3: US you need to pass muster in front of the court.
Speaker 2: Yeah, billion dollar IPO for sign o, that would be
Speaker 2: quite something. Brian, I just want to touch very quickly
Speaker 2: on the fact that I was struck by a report
Speaker 2: today from s and P Global Market Intelligence. We were
Speaker 2: talking about the soft read and consumer confidence earlier. Well now,
Speaker 2: according to s and P, the US banking industries total
Speaker 2: deposits declined year over year for the first time in
Speaker 2: data going back to nineteen ninety four. So we'll have
Speaker 2: to see whether this has a material impact on American
Speaker 2: economic growth. But it's something to be aware of, to
Speaker 2: say the least.
Speaker 3: Yeah, And what's curious is it's another one of these
Speaker 3: cases where you have sort of sentiment maybe a little
Speaker 3: different from action, because consumers have not really peeled back
Speaker 3: their spending that much yet. The last retail sales report
Speaker 3: was pretty firm the reasons we keep squawking about how
Speaker 3: strong US economy remains, but obviously sentiment tells you what
Speaker 3: could be happening in the future.
Speaker 1: So it'll be a very interesting one to watch. Now
Speaker 1: it's time for global news.
Speaker 3: President Biden is backing the w worker demands of a
Speaker 3: forty percent pay hike. Let's get one on that at
Speaker 3: Baxter is tracking this story in others from the nine
Speaker 3: to sixty newsroom in San Francisco.
Speaker 9: Ed.
Speaker 10: Yeah, that's right, Brian.
Speaker 11: Thanks.
Speaker 10: President Joe Biden out with UAW workers today at a
Speaker 10: rally at on the lines that UAW President Sean Fain
Speaker 10: says is very historic.
Speaker 11: You know, this is a historic moment.
Speaker 10: The first time in our country's history that is sitting
Speaker 10: USA president has came out and stood on the pecking line,
Speaker 10: and it's characterized a strike as a battle, akin to
Speaker 10: building bombers for the US and World War Two.
Speaker 3: Today, the enemy isn't some foreign country miles away.
Speaker 1: It's right here in our own in our own area.
Speaker 11: It's corporate greed.
Speaker 10: And the president banking the workers forty percent wage demand increase.
Speaker 8: All Street didn't build the country. The middle class built.
Speaker 1: The country.
Speaker 4: Built the middle class the fact.
Speaker 11: So let's keep going.
Speaker 8: You deserve what you heard.
Speaker 10: And Bloomberg's Jordan Fabian says, an important time for the industry,
Speaker 10: for the economy, and for politics.
Speaker 9: It's important for the UAW, and it's also important for
Speaker 9: Joe Biden. Joe Biden, as you said, his campaign on
Speaker 9: being the most pro union president. Guess what, there's an
Speaker 9: election coming up next year and those union workers are
Speaker 9: going to be crucial for his re election chances in
Speaker 9: a key state like Michigan, and the UAW has yet
Speaker 9: to endorse Biden. So him showing up today, you heard
Speaker 9: Sean Fain speak very positively about the president, saying he's
Speaker 9: standing up for working people and so this could be
Speaker 9: a big thaw in the relations between the President and
Speaker 9: that union ahead of his re election push.
Speaker 10: Jordan says President doesn't really have much leverage to solve it,
Speaker 10: but he can use a bully pulpit. New York judge's
Speaker 10: rule that Donald Trump is liable for fraud for exaggerating
Speaker 10: his net worth by billions of dollars in financial records
Speaker 10: to banks and insurers. South Korea warning Kim Jong On
Speaker 10: that it would end if it uses nukes's regime, President
Speaker 10: EU and Suk Yule saying Korea and the US would
Speaker 10: end the regime in an overwhelming response, House Speaker Kevin
Speaker 10: McCarthy saying today is Caucus will make progress tonight on
Speaker 10: funding the government.
Speaker 12: At night, we're back in session.
Speaker 1: We will vote on a rude to bring up four.
Speaker 12: More appropriation bills that will be a total of five
Speaker 12: more than the sentiments to be able to pass in
Speaker 12: that if we get through these next four, that would
Speaker 12: be seventy two percent of all the discretionaries.
Speaker 10: There and the Senate also working on bills set up.
Speaker 10: Majority Leader Chuck Schumer saying what McCarthy is doing as
Speaker 10: appropriations has nothing to do with avoiding a shutdown.
Speaker 1: So this week the Senate will move forward first.
Speaker 13: We are very close to finishing our work and hope
Speaker 13: to release text very soon.
Speaker 10: We are told it has aid for Ukraine and the
Speaker 10: Senate version that's been rejected by the far right of
Speaker 10: the Republican Party. Global News powered by more than twenty
Speaker 10: seven hundred journalists and analysts in over one hundred and
Speaker 10: twenty countries in San Francisco. I'm Ed Baxter, and this
Speaker 10: is Bloomberg.
Speaker 1: This is Bloomberg Daybreak Asia.
Speaker 3: I'm Brian Curtis in Hong Kong, along with Fonny Quinn
Speaker 3: in New York, and we will be getting updates on
Speaker 3: markets all throughout the hour, including against now.
Speaker 1: Michael Green, who is the chief strategist.
Speaker 3: At Simplify Asset Management, can't wait to hear you simplify
Speaker 3: some of these complicated inputs into the markets, Michael. So,
Speaker 3: we had this little correction that's underway, it's not quite
Speaker 3: to the level of being an official correction outside of tech.
Speaker 3: Does this continue and does it get a lot bigger
Speaker 3: or are we almost at a point where the buyers
Speaker 3: come back in Well.
Speaker 14: I think the key thing to remember is is that
Speaker 14: the equities are a side show to this event. What
Speaker 14: we're really seeing is an increasingly worried response to the
Speaker 14: behavior the bond market, where ten year yields thirty year
Speaker 14: yields have sold off sharply in the past couple of weeks.
Speaker 11: Until that question is resolved, I.
Speaker 14: Think it's going to be challenging for equity markets to
Speaker 14: take the lead again and move higher.
Speaker 13: Michael, you're going to be hosting these fireside chats at
Speaker 13: your entering the Fall your ETF conference at the NYSE
Speaker 13: this coming week. I'm curious as to what your question,
Speaker 13: your main question is for somebody like Boas Weinstein who
Speaker 13: runs a hedge fund, and who you know, maybe among
Speaker 13: those that are not in the market anymore or like
Speaker 13: at least sort of cutting back.
Speaker 14: Well, so, first, I think there's very few who actually
Speaker 14: fit that description. I think the evidence is that we
Speaker 14: continue to have high levels of investment. Most investment programs,
Speaker 14: you know, when you consider for oh, one K programs
Speaker 14: or pension plans, et cetera, they largely adopt a policy
Speaker 14: that is fully invested at all times under a fixed
Speaker 14: portfolio construction. The good news is that actually that we
Speaker 14: actually had the event today. I know exactly the key
Speaker 14: question that I have both, which which was and by
Speaker 14: the way, it is available on the Blueberg terminal and
Speaker 14: on the simplified website. But the real key question that
Speaker 14: I was focused on with both is the dynamics of
Speaker 14: what's happening with credit spreads and the high yield market
Speaker 14: and general pricing of risk and fixed income, which he
Speaker 14: obviously is extraordinarily facile and known for the work in
Speaker 14: and he comes to some of the same conclusions I
Speaker 14: do in my work, which is that you're being compensated
Speaker 14: very little for taking additional risk, either in high yield
Speaker 14: or in equities, and that you know, the very high
Speaker 14: level of interest rates that we're actually experiencing right now
Speaker 14: tells you that cash is a pretty attractive place to be.
Speaker 14: Some components of the long end are becoming really, really attractive.
Speaker 14: But I think we both see and are mystified by
Speaker 14: the behavior of credit spreads in an environment that looks challenging.
Speaker 13: But then just how do you then square that with
Speaker 13: being fully invested?
Speaker 11: Well, I think is actually pretty straightforward.
Speaker 14: That's exactly why we're seeing those levels of relatively tight
Speaker 14: credit spreads and relatively high levels of equities is that
Speaker 14: people are by and large fully invested so very little
Speaker 14: discretion and available to most people today.
Speaker 3: Michael, outside of the Magnificent seven, or even if we
Speaker 3: stretch it to say, the top twelve to fifteen tech stocks.
Speaker 3: So where are you seeing, you know, wild enthusiasm or overvalue.
Speaker 1: In the equity market?
Speaker 14: Well, I think you actually just described it extraordinarily well, right,
Speaker 14: which is is that we're actually seeing as an index
Speaker 14: led market. So when you buy the S and P
Speaker 14: five hundred, or you buy the Nasdaq one hundred, the QQQ,
Speaker 14: you're effectively leveraging into the magnificent seven those names that
Speaker 14: have worked extraordinarily Well, you're one hundred percent correct in
Speaker 14: your observation. By the way, I mean, the majority of
Speaker 14: stocks on a year today basis are now actually down.
Speaker 14: If you look at something like the Russell three thousand
Speaker 14: on an equal weighted basis, Yep.
Speaker 11: It's actually down, right.
Speaker 3: I mean, but you're in the business I would think
Speaker 3: of advising clients on where they can find value to
Speaker 3: be overly cautious in this kind of environment. I mean,
Speaker 3: I think anybody can understand it. But if there are
Speaker 3: opportunities with undervalued stocks, take a company like Cisco at
Speaker 3: seventeen times earnings with a dividend a three percent, it's
Speaker 3: really hard to feel like it's about ready to fall
Speaker 3: off the cliff. The thing just turns out money.
Speaker 14: So I think you're one hundred percent correct that when
Speaker 14: you look at these companies that they, particularly the large
Speaker 14: technology companies, that they're generating an unbelievable amount of cash,
Speaker 14: but there's also very little growth behind something like that.
Speaker 14: So trading at eighteen times with a three percent dividend yield,
Speaker 14: when you get five and a half percent out of
Speaker 14: cash in a money market fund or a thirty year
Speaker 14: tip that's currently offering a real yield north of two percent,
Speaker 14: which would be a historically unusual level, it seems to
Speaker 14: me that you're not actually being particularly well compensated for
Speaker 14: taking that additional risk of is Cisco actually going to
Speaker 14: be the continued network, you know, continued preferred network provider,
Speaker 14: particularly in a world in which it's becoming very you know,
Speaker 14: very questionable what the additional tech spend actually looks like
Speaker 14: in that space.
Speaker 13: All right, Michael, we're almost out a time, but best
Speaker 13: idea then for all of us out there.
Speaker 14: I got to tell you one of the craziest things
Speaker 14: to have to stay is that you can get a
Speaker 14: you can get a really attractive yield on CAF right now,
Speaker 14: And I honestly think that you're reasonably well compensated to
Speaker 14: sit by the sidelines and wait.
Speaker 3: All right, Michael, thanks very much. I don't own Cisco,
Speaker 3: I never owned Cisco. I just like to challenge the guests,
Speaker 3: and thanks very much for joining us. A good session,
Speaker 3: Michael Green, Chief Strategist, Simplify Asset Management. This is Bloomberg
Speaker 3: Daybreak Asia, your morning brief on the stories making news
Speaker 3: from Hong Kong to Singapore and Wall Street.
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Speaker 1: I'm Brian Curtis.
Speaker 2: And I'm Doug Chrisner. Join us again tomorrow for all
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Speaker 2: on Bloomberg day Break Asia