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Speaker 2: So let's get to the consumer confidence numbers coming in
Speaker 2: for July at one hundred point three, although you had
Speaker 2: June revised slightly lower. We're going to get the read
Speaker 2: now with Dana Peterson, Chief Economists at the Conference Board.
Speaker 2: I labeled this good but with a question mark. Can
Speaker 2: you help me understand if this is a good report
Speaker 2: bad report? What this means? I think it's kind of
Speaker 2: a mixed report.
Speaker 3: Yes, the headline ticked up a bit, but if you
Speaker 3: look over the last two years, it's been basically been
Speaker 3: moving around in the same range, it's been moving sideway.
Speaker 3: So and really that headline is made up of five
Speaker 3: different indicators, including thoughts about business environment, employment, and also income.
Speaker 3: And certainly when you look at the present situation, consumers
Speaker 3: are becoming less optimistic about the present situation, and they
Speaker 3: have been kind of dour on expectations, even though the
Speaker 3: expectations index ticked up a bit, it's still below eighty,
Speaker 3: and eighty is kind of a signal of trouble.
Speaker 4: So what is the history? What does it tell us
Speaker 4: what consumers are going to actually do.
Speaker 5: Well?
Speaker 3: I think it's good to look at the guts of
Speaker 3: the report where we ask them what are you planning
Speaker 3: on doing about spending on goods and services? So with
Speaker 3: respect to goods, for the most part, they are not
Speaker 3: interested in buying homes or cars.
Speaker 2: They were a little bit more.
Speaker 3: Interested in buying appliances and also electronics like PCs and laptops.
Speaker 3: But when it comes to spending on services, they're definitely downtrading,
Speaker 3: and they're saying we're going to spend mainly on services
Speaker 3: we need, not things we want, and we'll go to
Speaker 3: will stream instead of going to the movies.
Speaker 2: Oh that's interesting, Okay, So when except for Deadpool obviously,
Speaker 2: when did you get an indication the survey of when
Speaker 2: that stops, like how sensitive that reading in terms of
Speaker 2: spending on services and downtrading might be to a rate
Speaker 2: cut for example?
Speaker 6: Well, we look at.
Speaker 3: These measures on a six month moving average, because from
Speaker 3: months to month they're pretty voluable, volatile and over the
Speaker 3: last six months, it continues to weaken in terms of
Speaker 3: buying durables. That makes sense because we know that durables
Speaker 3: are expensive and also you have to finance them. We
Speaker 3: did see in the Q two GDP report a pickup
Speaker 3: in spending on durables, but I think it was also
Speaker 3: because prices were lower, so consumers kind of jumped in there.
Speaker 3: But really we're not seeing much in terms of a
Speaker 3: big desire to buy durables, and certainly with services, they're
Speaker 3: buying cheaper services.
Speaker 2: All right, Danny, we appreciate thanks for the incident analysis. Aanipeterston,
Speaker 2: chief economist at the Conference Board of joining US. No
Speaker 2: table saws yet for John Tucker.
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Speaker 2: Thirty Alex alongside John Tucker. Paulsweeny is off today. This
Speaker 2: is Bloomberg Intelligence Radio. We bring you all the top
Speaker 2: news and business, economics and finance through are lens of
Speaker 2: our Bloomberg Intelligence folks. They cover two thousand companies and
Speaker 2: a one hundred and thirty industries all around the world.
Speaker 2: We also have an amazing print team here at Bloomberg,
Speaker 2: and they literally cover everything around the world, particularly when
Speaker 2: it comes to money and politics. What's not to like
Speaker 2: about that? Combo? Michael Smith is joining us now, senior
Speaker 2: reporter on Bloomberg's national team is joining us on Ken
Speaker 2: Griffin spending boatloads of money to put his stamp on
Speaker 2: Trump's goop. Michael, walk me through what.
Speaker 7: You learned, Well, what we learned is that Ken Griffin
Speaker 7: is one of the most influential donors to the Republican
Speaker 7: Party in America. In the last ten years or so,
Speaker 7: he's donated almost two hundred and fifteen million dollars to
Speaker 7: Republican causes and candidates, and this year alone, he's spending
Speaker 7: tens of millions of dollars to back the Republican primary
Speaker 7: candidates that he really likes that sort of share his conservative,
Speaker 7: pro business views and sometimes that sort of clashes with
Speaker 7: the Republican Party that Trump has has shaped, which is
Speaker 7: much more populist in orientation.
Speaker 4: Just to remind everybody who Ken Griffin is where he
Speaker 4: gets his money from.
Speaker 7: Yeah, so Ken Griffin is he's He's worth about forty
Speaker 7: two billion dollars as of late. He's the founder and
Speaker 7: owner of Citadel, which is a one of the largest
Speaker 7: hedge fund and securities trading firms on Wall Street in
Speaker 7: the world. Actually, and he's incredibly influential or in terms
Speaker 7: of philanthropy, he gives a lot of money to a
Speaker 7: lot of different causes. And in terms of politics, he's
Speaker 7: quite outspoken Republican publican uh back or so to speak.
Speaker 7: And he he he regularly zooms in on political issues
Speaker 7: that he cares about and he backs it up with
Speaker 7: his money.
Speaker 2: Is this just a Trump thing or is this a
Speaker 2: Republican ticket thing for Ken Griffin.
Speaker 7: Well, it's really, he says. His goal is to get
Speaker 7: people who elected, who will govern well, who will get
Speaker 7: things done along, you know, in the areas that he's
Speaker 7: that he's really interested in, like defense, promoting the American Dream,
Speaker 7: he likes to say, which is a whole sort of
Speaker 7: coterie of of economic policies that he believes in, and
Speaker 7: not obstructing good legislation like he's he's given the candidates
Speaker 7: who have challenged a lot of the you know, Freedom
Speaker 7: Caucus members in the House who have been sort of
Speaker 7: disruptive over the last few years. He doesn't seem to
Speaker 7: want that kind of legislature in the Congress, so he's
Speaker 7: directed his money at candidates along those lines a lot
Speaker 7: of times. It it jibes with what Trump wants. He's
Speaker 7: he's backed a lot of Trump endorsed candidates, but not
Speaker 7: all the time. So he really seems to be forging
Speaker 7: and says he's forging.
Speaker 4: His own way. What does he say about Donald Trump
Speaker 4: or does the money do the talking for him?
Speaker 7: Well, according to the most recent disclosures that we've been
Speaker 7: able to find, which are as of this month, actually
Speaker 7: he hasn't given any money to directly to Trump, and
Speaker 7: historically he's not He hasn't given money to Trump, and
Speaker 7: he's you know, but he had you know, it's not
Speaker 7: he hasn't come out directly against Trump. Uh he says
Speaker 7: he's still deciding, I think, and still sort of to
Speaker 7: be to be to be announced whatever stiff he takes
Speaker 7: by election day. Uh So, but he's been quite careful
Speaker 7: not to directly financed Trump's campaign, at least so far
Speaker 7: from what we can see now.
Speaker 2: It's easy to talk about, you know, Ken Griffin supporting
Speaker 2: the GOP, but you know there's some billionaires also on
Speaker 2: the Democratic side that also put a lot of money
Speaker 2: into these super packs and stuff, right, that's correct.
Speaker 7: This is not a Republican thing. And ever since, you know,
Speaker 7: the Supreme Court made some rulings in the mid two
Speaker 7: thousands that basically allowed individuals or to give as much
Speaker 7: money as they want to so called super packs. These
Speaker 7: are political action committees that back a cause or find
Speaker 7: ways to support candidates. You know, you've got money pouring
Speaker 7: it from both sides, so this is quite common. And
Speaker 7: Ken Griffin just happens to be one of the biggest
Speaker 7: ones on the Republican side.
Speaker 4: So what's his track record of the candidates received his money?
Speaker 4: Has he been successful in getting them elected?
Speaker 7: Well, our reporting shows that he's supported about sixty candidates,
Speaker 7: either via these massive infuses of money to super packs
Speaker 7: that in terms support them, or directly as an individual
Speaker 7: supporting a candidate's campaign. Under federal law, you can give
Speaker 7: up to sixty six hundred dollars per cycle to a
Speaker 7: candidate directly, but you can give unlimited amounts in support
Speaker 7: of a candidate through a pack that targets that campaign.
Speaker 7: So anyway, he's he's supported about sixty candidates, and roughly
Speaker 7: two thirds of those have won their election. The others
Speaker 7: will see what happens.
Speaker 2: Is he a single issue kind of donor? Like, is
Speaker 2: there one thing that he really stands for that he's
Speaker 2: pushing for all the candidates that he's supporting.
Speaker 7: Kind of thing, Yeah, he says he Well, no, it's
Speaker 7: not single issue. I would say it's sort of a
Speaker 7: a package of things. I mean, he cites a number
Speaker 7: of different things, and you know, in his comments to us,
Speaker 7: for example, and just sort of through the reporting that
Speaker 7: we were able to do, you know, securing the borders,
Speaker 7: halting and reversing inflation, protecting young people from war from
Speaker 7: going to war, and also encouraging the American dream. So
Speaker 7: those are pretty sweeping concepts.
Speaker 5: Yeah, it was like that's not very specific, but sure,
Speaker 5: but you know so, But that's that's how he describes
Speaker 5: what he's looking for, and in effect, that's kind of
Speaker 5: the kind of candidates.
Speaker 7: You're seeing, traditional conservative Republicans that he believes fit that
Speaker 7: mold that I just described.
Speaker 4: And money left over to buy a stegosaurus, and didn't.
Speaker 2: You buy something in the south of France. Wasn't it
Speaker 2: a boatload of millions or something? Probably?
Speaker 7: Yes, he just bought a modest home in Santrepez I
Speaker 7: think worth more than a million dollars. And he yes,
Speaker 7: he just bought an auction a complete Stegosaurus skeleton for
Speaker 7: forty five million dollars.
Speaker 2: We just don't know if the Stegosaurus is going in
Speaker 2: his enterpez No.
Speaker 4: I think he's actually donating that to a museum.
Speaker 2: Yes, yeah, Michael, he.
Speaker 7: Is going to exactly he's going to donate to a museum.
Speaker 2: Michael. We got to leave it there. We really appreciated
Speaker 2: Michael Smith joining us from the Bloomberg National team. I
Speaker 2: should put out it's not a big take, my bad,
Speaker 2: but it is a Bloomberg little Bee, which means it's
Speaker 2: an exclusive to Bloomberg News. Definitely check it out by
Speaker 2: Michael Smith and Bill Allison about Ken Griffin and his
Speaker 2: contributions to the GOP and really shaping that party.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on Effo CarPlay and then
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Speaker 1: wherever you get your podcasts. Or watch us live on YouTube.
Speaker 2: I'm Alex Steel here alongside John Tucker. This is Bloomberg
Speaker 2: Intelligence Radio. We bring you all the top news and business,
Speaker 2: economics and finance. There are lens of our Bloomberg Intelligence analysts.
Speaker 2: They cover two thousand companies and one hundred and thirty
Speaker 2: industries worldwide. So our next guest is going to give
Speaker 2: us a great perspective sort of inside the mind of
Speaker 2: hedge funds and institutional investors and other clients. Joining us
Speaker 2: now is Sarah Samuel's head of Investment Manager Strategy at NEPC.
Speaker 2: Any PC is one of the industry's largest independent, full
Speaker 2: service investment consulting firms. They serve more than four hundred
Speaker 2: clients with over one point six trillion dollars in assets
Speaker 2: under advisement. Sarah joins us now. Sarah, great to have
Speaker 2: you joining us from Boston. Thanks for joining us.
Speaker 6: Alex, it's great to see you again.
Speaker 2: Thanks for having me on the show, you bet. I
Speaker 2: also should point out John Tucker that Sarah wrote a
Speaker 2: children's book about financial literacy for kids. Really yes, which
Speaker 2: you know what you and I could probably use.
Speaker 8: I could probably use that.
Speaker 2: I definitely could have used.
Speaker 4: That is still telling kids to save, actually to go a.
Speaker 6: Step further than saving. It's telling them to be brave,
Speaker 6: take some risks and try their hand at investing.
Speaker 4: I think given the current rate environment, you probably have
Speaker 4: to go out a little.
Speaker 2: Yeah. Yeah, we'll get to that too, because my daughter
Speaker 2: very much enjoyed that book. But Sarah, for the pros
Speaker 2: for the profession in the market, what are people thinking
Speaker 2: and doing right now?
Speaker 6: So the big theme that we're seeing among our clients
Speaker 6: at any PC and we work with endowments and foundations,
Speaker 6: we work with family offices, we work with public and
Speaker 6: corporate pension funds, We work with lots of different clients,
Speaker 6: and we help manage their entire portfolios across private markets,
Speaker 6: private equity, page funds, and anything publicly traded. So the
Speaker 6: big theme that we're seeing in our clients' portfolios today
Speaker 6: is that investors are getting less money back from their
Speaker 6: private market investments than they had expected and budgeted. And
Speaker 6: for distributions and dal activity to pick up, we really
Speaker 6: need to see valuations reset further or for the cost
Speaker 6: of capital to come down, which we're beginning to see recently.
Speaker 6: And you know, what we're really telling our clients is
Speaker 6: that this could be a great time to put capital
Speaker 6: to work.
Speaker 4: Okay, So well, let's focus on the liquidity picture right now.
Speaker 8: What is it?
Speaker 4: What are the implications?
Speaker 6: Okay, So when we think about why does liquidity matter,
Speaker 6: especially from private markets investments, because capital and liquidity for
Speaker 6: institutional investors is really necessary to fund their operations and
Speaker 6: to help these institutions achieve their missions. What are their missions?
Speaker 6: You know, this is something where an endowment will send
Speaker 6: college kids to school, a hospital system helps take care
Speaker 6: of the sick, a public fund or a retirement system
Speaker 6: helps retirees live comfortably. And these big money institutions like
Speaker 6: public funds, endowments, foundations, family offices, they might have twenty
Speaker 6: up to forty or maybe even fifty percent of their
Speaker 6: portfolios and private equity and venture capital and private debt
Speaker 6: and real assets. And so this drop in liquidity that
Speaker 6: we've seen, this drop in distributions relative to what they've modeled,
Speaker 6: is really impacting their ability to support their missions. So
Speaker 6: why are these exits lower? Why is there less liquidity today?
Speaker 6: It really has to do with a few things. One
Speaker 6: is the cost of financing so used to be four
Speaker 6: to five percent to take on debt, in a lower
Speaker 6: rate environment for a buyout, for example, and buyout debt
Speaker 6: is typically floating rate, so now it's eight, nine or
Speaker 6: ten percent, and that really eats into the profitability of
Speaker 6: these underlying portfolio companies and buyers and sellers cannot meet
Speaker 6: on price.
Speaker 2: So that's a lot though. I wasn't really aware that
Speaker 2: some of these foundations and family offices have as much
Speaker 2: as forty percent or more like twenty Okay, maybe less,
Speaker 2: but forty percent. Does that number change now that they're
Speaker 2: having a hard time getting those getting their money back?
Speaker 2: In essence, does it change that they allocate.
Speaker 6: You might think that they would be backing off. These
Speaker 6: are really smart investors though, and they're very extremely long
Speaker 6: term oriented. So one study by Polar Capital found at
Speaker 6: over eighty percent of investors plan to increase or hold
Speaker 6: steady their private markets exposure in the next several years.
Speaker 6: And so investors are showing that they really still believe
Speaker 6: in private markets. They are getting frustrated with a lack
Speaker 6: of distributions.
Speaker 4: Does everybody agree on the valuations?
Speaker 6: No, no, we do not agree on the valuations. And
Speaker 6: so we are seeing the m and A market begin
Speaker 6: to warm up again. As I'm sure you've been talking
Speaker 6: about on the show, and that's a function of a
Speaker 6: couple of things. But it's really starting to loosen up
Speaker 6: this transaction capability in the marketplace. And what's happening is
Speaker 6: that banks are beginning to re enter the market, which
Speaker 6: is providing more capital at potentially a lower rate. And
Speaker 6: there's been a bevy of dollars raise for private debt funds,
Speaker 6: and private debt has been lending to these portfolio companies
Speaker 6: at nine or ten percent. Now there's competition for capital.
Speaker 6: So in a way, there's been a sneaky rate cut
Speaker 6: just found its way into the cost of debt financing.
Speaker 6: So it instead of costing nine percent or ten percent
Speaker 6: to take on debt for these types of strategies, it's
Speaker 6: more like eight or nine percent. And the cost of
Speaker 6: financing really has a lot to do with where we're
Speaker 6: able to exit a company and what we do to
Speaker 6: agree upon price. So there are a lot of buyers
Speaker 6: and sellers who are not able to meet in the middle.
Speaker 6: I believe we're going to get there, but the sellers
Speaker 6: may need to come down a little bit.
Speaker 2: This feels like a good moment though, to pivot to
Speaker 2: your book, So I mentioned that you were a children's
Speaker 2: book for literacy for kids, Braving Our Savings. Can you
Speaker 2: tell us like what it's about and how you deal
Speaker 2: with with savings when it comes to your kids, because man,
Speaker 2: when she put me to shame, when when she's telling
Speaker 2: me about this earlier.
Speaker 6: Well, thank you so much Alex for bringing it up.
Speaker 6: So the book is called Braving Our Savings and it's
Speaker 6: a children's book. It's available on Amazon. It's available and
Speaker 6: giving it away to lots of kids. If you know
Speaker 6: of any organizations that are serving underrepresented kids, please let
Speaker 6: me know. But the goal of Braving Our Savings is
Speaker 6: to empower kids from all economic backgrounds to invest and
Speaker 6: be brave. And we've had great support from really a
Speaker 6: trifecta from We've had endorsements from the investment community, so
Speaker 6: folks at Nasdaq for example, and any PC. We've had
Speaker 6: lots of partnerships over twenty with nonprofits, and then the
Speaker 6: pro sports community has really stepped up in endorsing the
Speaker 6: book like Alex Rodriguez, Kyle Arrington, Brandon Copeland, Jonathan Jones.
Speaker 6: These are Patriots players and we all know Alex Rodriguez
Speaker 6: and this has really helped to amplify the message and
Speaker 6: broaden our reach. So we've given over twenty five hundred
Speaker 6: books away to kids at this point, and we're just
Speaker 6: getting started.
Speaker 4: Where is financial literacy right now? Just how big of
Speaker 4: a gap is there?
Speaker 6: Just to it's getting a lot better. So many more
Speaker 6: states are beginning to have it as an essential. Yes,
Speaker 6: it is promising, but the reality is that there's a
Speaker 6: lot of shame and fear around money when you get
Speaker 6: to the individual family level, and that because it's not
Speaker 6: taught in schools, it leaves the discussion to the dinner table,
Speaker 6: and many families just aren't equipped to have these conversations.
Speaker 6: So we want to sort of expand kids families and
Speaker 6: become part of them and begin to show them things
Speaker 6: that maybe their their core tribes aren't able to.
Speaker 2: But what's so interesting, Sarah, is like you talk about
Speaker 2: taking risk, like kids investing in stocks like that. I mean,
Speaker 2: you know, not on like a large scale, but like
Speaker 2: learning how to not only manage money but make money.
Speaker 6: That's right, And you know, it's a really important skill
Speaker 6: to learn. And especially if you come from a place
Speaker 6: of not having much money as a child, you may
Speaker 6: be less likely to take risks, which just extends bad
Speaker 6: cycle and making ends meet, because if you don't take risks,
Speaker 6: then you may not be able to sort of change,
Speaker 6: have a step function change. And I've taught seventeen hundred
Speaker 6: kids alive in the last three months, and I can
Speaker 6: tell you that they get it, even at a very
Speaker 6: young age.
Speaker 4: They talk about day traders.
Speaker 2: Right, Yeah, that's right.
Speaker 5: We need to be careful of that.
Speaker 2: No, no day traders, Like there's still a risk element
Speaker 2: that we want to protect. But it's super awesome us.
Speaker 2: Thank you, Sarah, Thanks a lot, We really appreciate it.
Speaker 2: Thank you for the perspective head of investment Manager Research
Speaker 2: over at any PC. But also thank you for the book,
Speaker 2: Sarah Braving Our Savings. I'll be buying one for John
Speaker 2: Tucker just after the break. Sarah Samuels joining us from Boston, Massachusetts.
Speaker 2: But it's such an interesting point. I mean, I remember
Speaker 2: I didn't know anything about budgeting or savings or how
Speaker 2: to manage anything until I bought like a book in
Speaker 2: my late twenties. When I was in debt. It was
Speaker 2: like how to get out of debt? And that's when
Speaker 2: I started to learn stuffy.
Speaker 4: I would argue a lot of small business owners don't
Speaker 4: know it either, especially those like doctors and dentists. They
Speaker 4: don't teach you business in those schools.
Speaker 2: Which you really should. And I like the idea that
Speaker 2: you're actually sort of investing to grow, not just putting
Speaker 2: money in a city bank savings account, no offensive city bank,
Speaker 2: but actually like trying to think about wealth in a
Speaker 2: different way. I thought that was really cool.
Speaker 8: Great.
Speaker 2: You know you gotta save up to by that table saw.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 2: Alex Stee alongside John Tucker. Paul Sweeni's off today. It's
Speaker 2: a Bloomberg Intelligence Radio. We bring you all the top
Speaker 2: news and business and finance and economics to your lens
Speaker 2: of our Bloomberg Intelligence folks. They cover two thousand companies
Speaker 2: and one hundred and thirty industries around the world, and
Speaker 2: one of them is on a rag run up Bloomberg
Speaker 2: Intelligence senior technology analyst, and he's joining us to look
Speaker 2: ahead to Microsoft earnings, but also like what is happening
Speaker 2: right now? Microsoft is down almost two percent in Nvidia
Speaker 2: is off by over six percent. Tech is starting to
Speaker 2: get hit very hard on arag what's going on?
Speaker 9: So I think if you look at it, you know,
Speaker 9: since the launch of Chat GPT, you know, a year
Speaker 9: and a half ago or so almost two years ago,
Speaker 9: we have seen a massive run up in all technology stocks,
Speaker 9: except especially the largest and the biggest ones. And what
Speaker 9: we've sawday and what we've been seeing for the last
Speaker 9: two to three weeks is just a big rotation from
Speaker 9: the large cap into the small cap. And I think
Speaker 9: that's really what's driving a lot of this thing. I
Speaker 9: don't think there is anything more than that particular element.
Speaker 4: So what's the key number when Microsoft delivers results, say
Speaker 4: after the close?
Speaker 9: Yeah, see Azure cloud growth remains the most important factor
Speaker 9: for Microsoft when they report tonight. This figure grew thirty
Speaker 9: one percent last quarter, and streets expecting between thirty and
Speaker 9: thirty one percent right now. So I think that's the
Speaker 9: first number we will look for, and the second part
Speaker 9: would be what kind of guidance they give on the
Speaker 9: conference call as to what would be this number for
Speaker 9: next quarter. Frankly speaking, this is the only thing that matters.
Speaker 9: There is discussions about how much capex is going to
Speaker 9: go up as well, but I think this is still
Speaker 9: the most important thing.
Speaker 8: We need to focus on.
Speaker 4: What was the contribution to Azure am I saying that
Speaker 4: right from artificial intelligence?
Speaker 9: Yeah, so what we have calculated now, remember for Microsoft's case,
Speaker 9: they do not publicly disclose the dollar number of Azure
Speaker 9: growth the Azure sales, but they only give the growth rates.
Speaker 9: What we have done is come to backward calculations is
Speaker 9: in the last quarter, contribution from all AI was roughly
Speaker 9: around a billion dollars or which an annualized basis is
Speaker 9: about four billion dollars. So in terms of the contribution
Speaker 9: in percentage points, they grew thirty one percent last year
Speaker 9: last quarter, and out of that seven percentage points of
Speaker 9: growth was because of AI. So that's another metric we're
Speaker 9: going to look for, is what kind of contribution they
Speaker 9: get this time and what could we expect next time.
Speaker 2: Today the news is that Microsoft is reporting an outage
Speaker 2: of some office and cloud services. That doesn't feel good
Speaker 2: into earnings, particularly after the crowd strike incident. Why is
Speaker 2: this stuff happening?
Speaker 9: See One of the things is to remember is this
Speaker 9: thing is so big right now, and they these guys,
Speaker 9: you know, you could say whether it's a software update
Speaker 9: or cyber attack. I'm not saying in this case it
Speaker 9: is a cyber attack. But there are so much pressure
Speaker 9: on a lot of these larger cloud vendors to make
Speaker 9: sure their services are up and which should be because
Speaker 9: these need to be up ninety nine point ninety nine
Speaker 9: percent of the time because so much depends on it.
Speaker 9: So there is always going to be scrutiny anytime there
Speaker 9: is any disruption in services. But I have a feeling
Speaker 9: that Microsoft will get a lot of questions on the
Speaker 9: car today about not just this outage, but what happened
Speaker 9: with cloud strike and how could let Microsoft let you
Speaker 9: know something like that happen.
Speaker 4: How much does Microsoft depend on other companies like in
Speaker 4: Nvidia for.
Speaker 9: Instance, Well, they do depend on it because at the
Speaker 9: end of the day, if they are getting a lot
Speaker 9: of AI demand coming in let's say from open ai,
Speaker 9: because open AI is back end is Microsoft Clouds infrastructure services,
Speaker 9: if they are not able to get GPUs from Nvidia,
Speaker 9: they can't expand at that same rate at which the
Speaker 9: growth is coming. So there is a bottleneck over there
Speaker 9: when it comes to chip supply, when it comes to
Speaker 9: just the expansion of the data center architecture or the infrastructure,
Speaker 9: those are very important things, and you know that could
Speaker 9: also be a concern for expansion of AI into next year.
Speaker 4: Does at some point they say to themselves, Hey, we
Speaker 4: don't want to be dependent on in video, Let's do
Speaker 4: it ourselves, or is that even a threat in other
Speaker 4: parts of the industry.
Speaker 9: Well, most cloud companies are working on their own chips,
Speaker 9: their own design that works in their own data centers.
Speaker 9: But frankly speaking, at this point in video is the
Speaker 9: person or the company that can give them those GPU
Speaker 9: chips that are needed to train some of these large
Speaker 9: language models down the road. Yeah, anything can happen, but
Speaker 9: that's not you know, you know, unlike just creating a
Speaker 9: new building, this is not that easy. It takes years
Speaker 9: to build up a capacity and even come up with
Speaker 9: anything close to what in Video is doing.
Speaker 2: We heard well is the NBC reported that Delta's sort
Speaker 2: of looking at CrowdStrike for some compensation based on the
Speaker 2: outages and how much money they had to put out
Speaker 2: to manage their clients. Is Microsoft going to see the
Speaker 2: same thing from companies or does Microsoft go to CrowdStrike,
Speaker 2: how does all that interaction work?
Speaker 9: Yeah, this is where the lawyers are going to get
Speaker 9: really creative because Microsoft is much much deeper pockets than
Speaker 9: anybody else out there. And one of the things we
Speaker 9: think what's going to happen down the road, this is
Speaker 9: going to force companies to work with larger vendors because
Speaker 9: they have deeper pockets when it comes to business interruption.
Speaker 9: You know, large companies can go after the likes offt
Speaker 9: you know, whether it's Microsoft or Amazon or Google, if
Speaker 9: they are buying more technology products from them. So we
Speaker 9: think there is going to be a movement, but I
Speaker 9: am dead shure we're going to see so many more
Speaker 9: claims coming in, not just on CrowdStrike, but Microsoft as well.
Speaker 9: Down the road. Now what happens with that, you know,
Speaker 9: that's I'm sure is going to be a lengthy battle.
Speaker 4: If I use their office applications and I want to
Speaker 4: protect myself, do I have to do I get less cloudy?
Speaker 4: Not really.
Speaker 9: In fact, the more you are in public cloud, the
Speaker 9: safer it is, just because the dollar amount of money
Speaker 9: that's going to protect those services, you may be worse
Speaker 9: off if you just have you know, your own device
Speaker 9: without any extra protection on it, and you're you know,
Speaker 9: don't have that level of third party you know, firewalls.
Speaker 2: Protecting it all right, an arag We're really excited to
Speaker 2: see this play out over the next few hours and
Speaker 2: then into earnings. We're looking forward to your analysis on
Speaker 2: that as well as anarag Rana Bloomberg Senior Technology analyst
Speaker 2: for Bloomberg Intelligence, joining us on Microsoft. That's dock heading
Speaker 2: lower into the earnings report, where it's going to be
Speaker 2: about the Azure growth, makeup of AI and then that
Speaker 2: Capex and sort of how all three of them work together.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 2: Malex Stee alongside John Tucker PELSWEENI is op today. This
Speaker 2: is Bloomberg Intelligence Radio. We bring you all the top
Speaker 2: news and business and finance and economics and commodities because
Speaker 2: you know me, I love commodities. Looking at the oil
Speaker 2: market here, it's down by over one percent. You also
Speaker 2: have aluminum down by over one percent. Overall, this sector
Speaker 2: has been hit quite hard. I mean, oil is near
Speaker 2: a seven week low. It really does feel like the
Speaker 2: likes we've heard from sey Heineken, the weaker readings over
Speaker 2: in GDP in Germany, all of that circles around China
Speaker 2: and the lack of demand there. There's also, though, some
Speaker 2: still interesting investment opportunities within the sector.
Speaker 5: Here.
Speaker 2: You're just looking at the S and P Energies Index
Speaker 2: over the last six months, it's up a healthy eight
Speaker 2: point six percent, and many say, you know what, the
Speaker 2: commodities may have its moment in the sun right now
Speaker 2: as we head into the back half of the year.
Speaker 2: So you wanted to talk to someone with some money
Speaker 2: in the ground. That's funny money in the ground. Yeah,
Speaker 2: let's go for it.
Speaker 8: Do we like that?
Speaker 2: Cat assets? Real assets?
Speaker 4: All right, We'll let grow Tyler in the ground.
Speaker 2: Tyler Rosenliked is head of natural resource Equities over at
Speaker 2: con and Steers. I hate joined us now in the studio.
Speaker 2: Cone and Steers is the leading global investment manager with
Speaker 2: about eighty point seven billion dollars in assets under management
Speaker 2: that looks to diversified real assets and energy broadly. Tyler, welcome,
Speaker 2: Thank you for having me. What do you make of
Speaker 2: this energy space right now?
Speaker 10: Yeah, you know, we think there's a lot of tension
Speaker 10: going on in global energy today. You know, clearly there's
Speaker 10: questions about long term demand for traditional resources and obviously
Speaker 10: all the growth that we see in alternatives as we
Speaker 10: pursue a global energy transition. You know, when you talk
Speaker 10: about oil prices here and now, you know, one thing
Speaker 10: that we've been spending a lot of time on is
Speaker 10: obviously demand does seem like it's weakening, but we think
Speaker 10: some of the weakness and crude is really more supply related.
Speaker 10: As we look at global oil supplies into twenty twenty five,
Speaker 10: we actually see a lot of supply coming not just
Speaker 10: from OPEC, but from North America and from other non
Speaker 10: OPEC producers like Guyana, like Brazil, like Namibia and so forth.
Speaker 10: So oil feels a little bit challenged here. But we
Speaker 10: all always take a step back and say, people hear
Speaker 10: the word energy and they think oil and oil is
Speaker 10: not the only part of global energy markets going forward.
Speaker 10: I mean, oil is a big driver of production and
Speaker 10: energy supply, but natural gas is growing a lot. Nuclear
Speaker 10: is growing, a lot, alternatives continue to grow, and so
Speaker 10: we think that there's things that look really good and
Speaker 10: things that look a little more challenged as we head
Speaker 10: into next year.
Speaker 4: How much does China control your life as an investor
Speaker 4: in oil and energy?
Speaker 10: You know, it's funny today it's a lot less about
Speaker 10: China as you think about energy, and way more about
Speaker 10: AI and the demand that we see for energy broadly.
Speaker 10: So when you talk about an oil molecule, clearly China
Speaker 10: is a big driver there, But when you're talking about
Speaker 10: energy broadly, it's really about all energy supply and can
Speaker 10: we provide the electricity and the other energy resources that
Speaker 10: we need to satisfy technological advances, to satisfy a rising
Speaker 10: middle class globally, urbanization, desire to travel, and so forth.
Speaker 10: So here and now I think think everybody thinks China
Speaker 10: is slowing, it's really more about, hey, is energy intensity
Speaker 10: changing in other ways and how's that going to drive things?
Speaker 2: And you brought an AI and that in essences, the
Speaker 2: data centers need a lot of energy in order to run.
Speaker 2: I keep reading information that yes, the power demand is
Speaker 2: going to be huge, but we're maybe overestimating that demand
Speaker 2: right now, how do you view it as an investor.
Speaker 10: Yeah, So we think about sort of long term cycles
Speaker 10: as much as we can, and we spend a lot
Speaker 10: of time thinking about what the future of energy is
Speaker 10: going to be, and we start with where demand is
Speaker 10: going to go in the next few decades. So we
Speaker 10: built a model that says, what is energy going to
Speaker 10: demand going to be in twenty forty, And there's only
Speaker 10: three factors that you would care about. The first is
Speaker 10: population growth, Basically, more people in twenty forty means more
Speaker 10: energy consumption. The second would be economic growth, bigger economy,
Speaker 10: more energy consumption. The third one is a trickier one,
Speaker 10: which is the energy intensity of the global economy. Basically,
Speaker 10: how efficient can we be consuming energy to generate economic growth.
Speaker 10: You know, we've been of the view that we are
Speaker 10: going to get a lot more energy efficient. Technology is changing,
Speaker 10: costs are coming down, there's desire from governments and consumers
Speaker 10: to be better users of energy. I'm a little bit
Speaker 10: worried about that assumption, to be honest. It does feel
Speaker 10: like the economic growth is becoming more energy intense as
Speaker 10: a lot of this technology technological growth is going to
Speaker 10: be really high energy usage. So you know, We've thought
Speaker 10: that the demand for energy was going to rise a lot,
Speaker 10: and candidly, we think we might have underestimated it. Now
Speaker 10: there's huge expectations for AI in the short term and
Speaker 10: what that might mean for energy demand. Are those overstated potentially?
Speaker 10: But in the very long term, we think we are
Speaker 10: in an energy addition world. We really need to add
Speaker 10: as much supply as we can.
Speaker 4: Well, we're talking about oil. We're not just talking about energy.
Speaker 4: We're talking about all the other stuff that oil make.
Speaker 4: I brushed my teeth this morning. Oil was in my
Speaker 4: toothpaste and it was used to make my tooth brush.
Speaker 4: And that's just the start of it. I mean, are
Speaker 4: you are you smart enough to tell me what the
Speaker 4: breakdown a barrel of cruity is, how much of that
Speaker 4: is used for energy? And how much is that used
Speaker 4: to produce all the stuff that? Okay, how about you?
Speaker 10: I mean, a lot of oil demand comes from transportation, fuels,
Speaker 10: it's flying, it's driving, it's all that sort of stuff. Clearly,
Speaker 10: there's a lot of it that goes into every other
Speaker 10: product that we use. But when you talk about oil,
Speaker 10: it's not always just the oil barrel, right, You get
Speaker 10: a lot of those petrochemicals from what we call natural
Speaker 10: gas liquids NGLs. When we think about energy again, a
Speaker 10: lot of times the conversation becomes around oil prices. But
Speaker 10: as we think into the future, we think oil demand
Speaker 10: is going to keep growing a little bit and then
Speaker 10: it's sort of plateaus later this decade and declines a
Speaker 10: little bit in the twenty thirties, but huge increase in
Speaker 10: demand for natural gas for all the reasons that you
Speaker 10: laid out in terms of how it's ubiquitous in our
Speaker 10: daily lives. But then also, as you know, global consumers
Speaker 10: consume way more of.
Speaker 8: All this stuff.
Speaker 2: So what do you like right now? Like, what do
Speaker 2: you want to invest in?
Speaker 10: Yeah, so we look at the world as hey, it's
Speaker 10: not just like I said, oil and gas. It's all
Speaker 10: of the energy value chain, which includes both traditional resources
Speaker 10: and alternative resources. And I'd say we see massive winners
Speaker 10: across both sides of the table. On the traditional side,
Speaker 10: we really like us natural gas. We think LNG demand
Speaker 10: as we export to global consumers is going to rise
Speaker 10: a lot in the next few years. We also think
Speaker 10: this supply is going to be a little more curtailed
Speaker 10: into twenty twenty five and twenty twenty six. So we
Speaker 10: like natural gas. We really like the Canadian oil sands,
Speaker 10: where we think it's very low variable cost. They've built
Speaker 10: their businesses to survive sixty dollars oil, and we think
Speaker 10: they're generating a lot of free cash that they're delivering
Speaker 10: to investors. And we also like sort of integrated energy
Speaker 10: companies that are pursuing the energy transition themselves credibly, using
Speaker 10: their existing infrastructure and assets to help sort of drive
Speaker 10: emissions changes. I'd say on the alternative side, we are
Speaker 10: very bullish the companies that are building out the electrification
Speaker 10: assets and infrastructure we need to satisfy the sort of
Speaker 10: upgrowing electricity demand, Companies that build transmission wires and transmission
Speaker 10: lines and so forth. And we're also really bullish nuclear
Speaker 10: in the long run, you know, we do think it's
Speaker 10: going to be about refurbishing existing nuclear assets and building
Speaker 10: new nuclear globally to satisfy the demand for low carbon energy.
Speaker 4: Yeah. You know, Bill Gates just broke ground on his
Speaker 4: nuclear power plant a bit where a Montana I think.
Speaker 10: I remember, I think that's right.
Speaker 4: Yeah, I mean it's a sodium based nuclear power plant,
Speaker 4: which you know, sodium can capture a much more of
Speaker 4: the heat energy that is generated, and you can use
Speaker 4: it as a storage facility as well. So use that
Speaker 4: energy whenever you need it.
Speaker 2: Wait, let me ask you this question, how much petrochemicals
Speaker 2: are in your toothpaste? Because I think you might actually
Speaker 2: know this.
Speaker 4: I believe five point eight seven percent.
Speaker 8: I don't know.
Speaker 2: I was going to totally looking at me screen.
Speaker 4: Where's he getting that from? No, but it is in
Speaker 4: your toothpaste?
Speaker 2: And Tyler, when you talk about integrated companies that are
Speaker 2: really taking the energy transition seriously, well, what's your judgment
Speaker 2: case on that?
Speaker 3: Yeah?
Speaker 10: You know, we think a lot of energy companies are
Speaker 10: genering a lot of cash today, and the opportunity costs
Speaker 10: dot cash is fairly high. Investors are sort of requiring
Speaker 10: it to be paid out in dividends or via stocker purchases.
Speaker 10: But I think what people forget is energy companies own
Speaker 10: hard assets. They might own pipelines in the ground that
Speaker 10: you can convert to move hydrogen, or maybe they're experts
Speaker 10: in developing large scale infrastructure projects, which part of it
Speaker 10: is energy, but part of it is can you deal
Speaker 10: with permitting, can you deal with government regulations? Can you
Speaker 10: finance large, large wind projects and so forth. So for us,
Speaker 10: it's about, hey, what is your competitive advantage? Can you
Speaker 10: utilize your existing labor force or your existing asset base
Speaker 10: to actually pursue alternative investments at a creative returns? And
Speaker 10: we think there are some companies that definitely can. There's
Speaker 10: some that won't. There's some that will do very silly
Speaker 10: m and A. They'll destroy a lot of capital over time.
Speaker 10: But those that get it right we think will be
Speaker 10: great leaders in the next decade.
Speaker 2: All right, Tyler, thanks a lot, really appreciate its super interesting.
Speaker 2: Tyler rosenlike a head of natural resource equities over at
Speaker 2: Conan Steers, we didn't get to this point. But also
Speaker 2: how much of that's going to be dependent on policy
Speaker 2: from governments too, to know that which sort of bets
Speaker 2: you're going to make on the energy edition or transition.
Speaker 4: You're going to have an energy policy or what it
Speaker 4: is in this country.
Speaker 2: Well, for the IRA we have a everything kind of thing.
Speaker 2: Let's throw money in a lot of different things and
Speaker 2: see what sticks, which makes some very nervous because if
Speaker 2: you put things in the wrong area, then you're going
Speaker 2: to be wasting time. Anyway. Much more on that coming
Speaker 2: up all right, Tyler, Thanks live.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 2: Let's get back to jet Blue. The stock still holding
Speaker 2: strong here, up by almost twenty percent. It's deepening its
Speaker 2: cost cuts in this turnaround plan that it's going through.
Speaker 6: Right.
Speaker 2: If you can't beat them, join them, and if you
Speaker 2: join them, you're cutting costs. We're going to George Ferguson
Speaker 2: now Bloomberg Intelligence, senior Aerospace, defense and airlines analysts on this.
Speaker 2: Are you surprised by the extent of the stock move
Speaker 2: here based on the news?
Speaker 8: I am a bit.
Speaker 11: So it makes you wonder too if there wasn't some
Speaker 11: a fair amount of short activity in here that's probably
Speaker 11: trying to get out of the way when things move
Speaker 11: this quickly. But still, I think that you know, what
Speaker 11: jet Blue is presenting today is definitely the right way forward, right.
Speaker 11: I mean, it's all about lowering capacity, firming up fares,
Speaker 11: and they already have the mint product, that's a premium
Speaker 11: product that ought to help them bring in some better revenues.
Speaker 11: So I think it's the right way forward. I just
Speaker 11: think the move is probably a little bit dramatic.
Speaker 4: And they've cleared a day on your calendar, George, because
Speaker 4: they've canceled Investor Day. That can't be a good sign.
Speaker 11: Well, yeah, I think when companies have less exciting things
Speaker 11: to talk about, they can investor Day. United can it
Speaker 11: early earlier, you know, before this earnings period. It made
Speaker 11: me think there's something going on. So yeah, agreed, But
Speaker 11: again my guess is we have a lot of the
Speaker 11: bad news out for the airline industry.
Speaker 8: Now.
Speaker 11: It's a function of getting people to cut capacity, which
Speaker 11: you're going to improve fares, and.
Speaker 8: So they may just short of that, they may don't
Speaker 8: have much else to talk about.
Speaker 4: So they increased to fifteen the number of cities where
Speaker 4: they're ending service, and they've already cut more than fifty roots.
Speaker 4: So you know, the growth prospects for this airline aren't
Speaker 4: that great.
Speaker 11: Well, so, and you watch them again defer airplanes, which
Speaker 11: I largely think are all about growth. There's some replacement
Speaker 11: at that, but you wouldn't defer airplanes you needed for replacement.
Speaker 11: So essentially, I think their fleet plant told us too
Speaker 11: that they're not a lot of growth. Yeah, I mean,
Speaker 11: I think we're back to that old question about what
Speaker 11: is up BLU going to be when it grows up?
Speaker 1: Right?
Speaker 11: But I think near term you've got to make sure
Speaker 11: you keep the balance sheet in good shape and and
Speaker 11: get the income statement healthy, and then you can start
Speaker 11: to think.
Speaker 8: About what are your long term options, what do.
Speaker 2: You want to be So you have the top line,
Speaker 2: and then you have the cost cutting measures in the streamlining,
Speaker 2: which is going to wind up helping to support as
Speaker 2: you mentioned, the balance sheet. When do you think that
Speaker 2: they tackle that top line question?
Speaker 8: Then, sorry, I didn't catch that the what line question?
Speaker 2: The top line like actually growing here and becoming the
Speaker 2: company is going to be.
Speaker 11: Well, look, I mean I think this summer again we
Speaker 11: just see too much capacity and so there's there's it's
Speaker 11: going to be really hard to grow that top line.
Speaker 11: I mean, and then you know, with the cuts they're bringing,
Speaker 11: my senses, they don't see this market being ripe to
Speaker 11: be growing strongly and at least strongly right, They're still
Speaker 11: they're still taking aircraft and so they're still they're still
Speaker 11: growing through a certain degree, but they're not looking to
Speaker 11: grow like they were in the past, And it tells me,
Speaker 11: you know, they think this could persist even into I
Speaker 11: guess next year and the years following.
Speaker 8: I think that's a pretty long way to look out. So,
Speaker 8: you know, I'm not sure all.
Speaker 11: The drivers behind cutting things in twenty twenty six, twenty
Speaker 11: twenty seven, But you know, when do they figure out
Speaker 11: what they want to be in the long run and
Speaker 11: how to grow that top line in a large way?
Speaker 8: I don't know, that's a good question. I don't have
Speaker 8: an answer to that one.
Speaker 4: Is Southwest something of a template for Jet Blow?
Speaker 11: I well, you know, I'd argue that Jet Blue is
Speaker 11: already further down the road on premium and on on
Speaker 11: revenue generation than probably Southwest. Southwest to me seems like
Speaker 11: an airline that needs to become more like a full
Speaker 11: service carrier.
Speaker 8: Their costs are just as high.
Speaker 11: They run the entire length of the country right and
Speaker 11: do a bunch of the you know, the near term
Speaker 11: international markets. So to me, I think Southwest started looking
Speaker 11: more towards the full service and has got to sort
Speaker 11: of keep going there. Given their footprint I Jet Blue
Speaker 11: is too small like Jeff Blue is just isn't uh.
Speaker 8: You know, they're a niche carrier. They're not. They're not
Speaker 8: a full service carrier. They you know, East Coast New York.
Speaker 11: Expensive cities in the East Coast they've got they've got
Speaker 11: this niche and it's great stuff.
Speaker 8: But yeah, again, the question is where do you go
Speaker 8: from there?
Speaker 2: All right, George, great stuff, appreciate it. They definitely don't
Speaker 2: want to be compared to.
Speaker 4: Southwest Long Island City.
Speaker 2: There you go, all right, George. I'll be talking to
Speaker 2: you later because Airbus is also reporting earnings in just
Speaker 2: about two hours time. George Ferguson and Bloomberg Intelligence, a
Speaker 2: senior aerospace, defense and airlines analysts, joining us there.
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