May 26, 2025 • 38 mins
On this special holiday edition of Bloomberg Daybreak US edition, host Nathan Hager speaks with Bloomberg Opinion columnist Barry Ritholtz on what he's watching in markets for the rest of 2025. Also, Mandeep Singh looks at Nvidia and the Magnificent 7 and Mike McGlone breaks down the ceiling for Bitcoin.
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Speaker 1 (00:02):
Thank you so much for joining us on this special
edition of Bloomberg Daybreak. US markets are closed for the
Memorial Day holiday. I'm Nathan Hager, and coming up this hour,
we'll look ahead to earnings from one of the so
called Magnificent Seven in videos out with its quarterly report
on Wednesday, we get a preview with Ban Deep Saying,
Global head of Tech research at Bloomberg Intelligence. Plus bitcoins
(00:25):
back at record levels. We'll ask Bloomberg Intelligence Senior commodity
strategist Mike mcgloon where he thinks the crypto currency is headed,
and p JIM Fixed Income Chief US economist Tom Porcelli
will join us with his thoughts on how long the
FED can stay on hold. But we want to begin
with a look at the stock market. After a turbulent
few months, stocks have basically recovered their losses since President
(00:48):
Trump's Liberation Day tariff announcement in early April. So we
thought now would be a good time to bring you
a special roundtable on equities, and for that we're pleased
to welcome Invesco Global Markets strat just Brian Levitt and
Barry Ritholts, the founder of ritt Holt's Wealth management and
host of Bloomberg's Masters in Business podcast. It is great
to have the both of you with us. Barry, I'll
(01:11):
start with you.
Speaker 2 (01:12):
Is this just.
Speaker 1 (01:13):
A Washington dependent equity market at this point?
Speaker 3 (01:18):
Well, no doubt, Washington policy decisions are having an big
impact on the market's expectations for the economy and corporate
revenue and profit. Look, the President calls himself tariff man,
says tariff's are the most beautiful word in the dictionary.
We know what he did in the first term, and
(01:41):
so the consensus seem to have been pre April, Hey,
we'll get some ten percent tariffs here and there, and
that's already built into our models. But when you suddenly
and unexpectedly drop one hundred percent tariffs on one hundred
and eighty two countries plus penguins in the Antarctica, the
(02:03):
market has to stop and say, oh, we failed. You know,
this is a failure of our imagination. We did not
anticipate tariffs this large. This is going to take ten
twenty percent off of corporate revenues. And profits always fall
faster than revues. Maybe this is twenty thirty percent off
of corporate profits four quarters from now. We have to
(02:25):
adjust our prices down and what will you off like
fourteen percent twelve percent? When the ninety day pause came in,
that was on the way to going much lower as
a discounting mechanism. The pause gave everybody some help that
all right, maybe our original assessment was correct, but it's
(02:46):
still very much up in the air.
Speaker 1 (02:49):
Brian, I'll turn it over to you. Has the market
sort of shaken out where the policy direction is going now?
Have we adjusted to the second term of President Trump?
Speaker 4 (03:03):
Not entirely. Barry makes a great point about it.
Speaker 5 (03:06):
I mean, we remember we had a tarif rate that
was quite low a year ago, and now we're talking
about fifteen eighteen percent average effective rates. So, yes, we've
had a pause. Yes we've seen tower freights come down
on countries such as China, but it's still not entirely
clear where this is ultimately heading. Now, what's good for
(03:28):
the market, or what the market is at least expecting,
is that things are going to get incrementally better from
here on the policy front. There's no guarantee, but that
seems to be the market's expectation and does seem to
be the modus operandi of President Trump. I look back
to the twenty eighteen environment. If you remember the fourth
(03:49):
quarter of twenty eighteen, stocksfell twenty percent during the US
China trade war, you got a ninety to eight pause.
You did not get a Phase one China trade deal
for really another year, but the markets continued to perform
well amid expectations that policy was going to get better.
Speaker 1 (04:09):
We are under a ninety day pause, as you mentioned,
we're heading toward what I think a lot of lawmakers
in Washington are hoping to be a big tax and
spending cut bill around ninety days or so from now.
Is July turning into a pivot point for the equity market?
Speaker 4 (04:26):
Berry?
Speaker 3 (04:28):
Maybe you know I love to do the compare and
contrast with how the FED communicates changes in policy with
how this White House does. You know, before the Fed
says we're going to shift our regime, and now we're
either raising rates or cutting rates. You get to notice
six meetings in advance, three meetings in advance. Hey, we're
(04:49):
tracking PCE and CPI. The month before the meeting, all
the FED governors and presidents fan out and they speak
at the Petroleum Club of Houston and the Economic a
Club of New York and everywhere else, and so when
the change happens, it's not a shock. You don't surprise
the markets. I think part of the problem here is
(05:11):
not just the policy itself, but how completely shocking and
surprising it was to markets. As it turns out, mister
market doesn't care for surprises, and that's something that I
wish the White House would take a page from the
Federal Reserve's communication strategy.
Speaker 4 (05:32):
Yeah. Look, the S and P five hundred, as everyone knows,
is overvalue compared to its long term average, driven primarily
by a handful of names. Other markets are not as overvalued,
particularly non US markets obviously value in disease MidCap stock.
So it's one of these times where it may make sense.
(05:53):
It probably does make sense to lower the valuation of
the portfolio as we nab gate this period of policy
uncertainty and as we grapple with higher interest rates.
Speaker 1 (06:05):
We're speaking with Brian Levitt. He is the global market
strategist at Invesco, and Barry Ridtholtz is with us as well,
founder of Ridolts Wealth Management, host of Bloomberg's Master's in
Business podcast. Barry, we have had a lot of attention
on the bond market particularly with the yields going up
(06:25):
in response to what's happening out of Washington, d C.
Where do you see the bond market going and could
it potentially pose a headwind for equities going forward?
Speaker 3 (06:36):
Sure, always the bond markets are the adult in the room.
But let me throw a little bit of a curve
ball at you. I think Carvel was right in the
nineteen eighties and the nineteen nineties. Once the new millennium started,
it seemed like leadership in terms of influencing DC policy
(06:58):
moved to the equity mark mart So let me give
you just three quick examples. I have a vivid recollection
of FED Chairman Ben Bernanke testifying in October eight to Congress,
and after a few fiery speeches, they voted down money
and authority to the FED. Market sold off really hard.
By that Friday, everybody reconvened and they gave the Fed
(07:22):
everything they wanted. So ten twelve thirteen percent gets DC's attention.
I love what happened in March twenty twenty during the pandemic.
Republicans and Democrats couldn't agree on renaming a library in Washington, DC.
Talk about something with so minor Then the NBA canceled
(07:48):
the schedule after a thunder Jazz game where the center
tested positive for COVID. Once the NBA canceled their season,
the dominos all began to fall. And it was a
week or two later we passed the single biggest fiscal
stimulus as a percentage of GDP since World War Two,
the Cares Act. And now we see the same thing
(08:11):
that took place in April twenty twenty. The bond market
has certainly been driving the debate about the dollar and
fiscal policy and deficits, But it was the stock market
sell off hey down five percent, down five percent, down
five percent, three days in a row that got the
(08:33):
White House's attention. And that's when the President called uncle,
not rising yields, but falling equity prices. I want to
be reincarnated as the stock market, not the bond market.
Speaker 4 (08:46):
Yeah.
Speaker 1 (08:46):
I mean that raises the question the whole idea that
the president uses the stock market as a scorecard for
how his policies are going. So, Brian, as we head
into the second half, where do you see things going
for the stock market? Could it sway what happens in Washington, DC.
Speaker 6 (09:07):
Yeah. Our leading indicators of the economy are still pointing
to below trend and lower growth, and the inflation momentum
is picking up, So that's a little bit of a
more challenged environment.
Speaker 4 (09:19):
You're not there that often. Most of the time. You're
more in a recovery expansion or slow down field in
which stocks can do quite well. So in an environment
where leading indicators are pointing lower, you tend to want
to be a little bit more defensive, expect more volatility
in the markets. I think you're right, and I think
Barries right that ultimately we will get a better policy response.
(09:43):
Ultimately as the economy weakends, Federal Reserve will be able
to lower interest rates. When that happens is probably not
as soon as people think, and the administration will likely
continue to move away from its worst impulses on trades.
So you could be in a channel lenging short term
period here, because typically when you're leading indicators are rolling over,
(10:07):
you need a policy response, and for the first time
in a very long time, it's going to be a
challenge in the United States to get that policy response.
On the other side, in Europe, China, the UK, you
will be getting that policy response, which is why you're
starting to see or you have been seeing momentum pick
up in non US assets.
Speaker 1 (10:27):
And Barry, are you looking for a challenging environment as well.
I mean, we've heard from the likes of Jamie Diamond
and JP Morgan Chase saying he can't take stagflation off
his table into the second half.
Speaker 3 (10:39):
Well, well, Jamie reversed his views. Not too long ago.
He had said, Eh, you know, tas will be fine,
We'll work a way through it, before we had that
big surprise. My expectations really are dependent on who is
the potus whisperer, Who is the last person that the
president here before he goes into making a key decision.
(11:04):
If it turns out that the majority of the times,
the last person to influence President Trump is Treasury Secretary
Scott Besson, well we'll be fine. He's a Wall Street guy.
He understands how markets, dollars, bonds work. I'm comfortable with
him as the potus whisperer. If, on the other hand,
(11:29):
it's Peter Navarro, who is you know, one and only
one economist who seems to think that tariffs are a
fantastic idea. Hey, that little smooth holy thing, all right,
that was a one off. That didn't work, but we
should try it now. If he's the most influential advisor
that the president listens to, well, then you know the
(11:51):
worst case scenario is, yeah, we're gonna get rate cuts,
but it's going to be in response to a stagflationary
maybe even a recessionary environment.
Speaker 1 (12:04):
To be a fly on the wall in Washington, d C.
Thank you for this to the both of you, Berry
Ridtholtz of Ridtholtz Wealth Management in Bloomberg's Master's and Business podcast,
and thanks as well to Investco Global market strategist Brian Levitt.
Up next, we're going to preview earnings this week from Nvidia.
Bloomberg Intelligence Global head of Tech Research Mandeep Sing will
join us as the special Memorial Day edition of Bloomberg
(12:26):
Daybreak continues. It's twenty minutes past the hour. I'm Nathan Hager.
This is Bloomberg. Welcome back to this special edition of
Bloomberg day Break. US markets are closed for the Memorial
(12:48):
Day holiday. I'm Nathan Hager. Wall Street gets back to
work this week with a key earnings report on the docket.
On Wednesday, after the close of trading, we get the
latest quarterly numbers from Nvidia, So what should we expect
from the AI chip giant. Let's bring in man Deep
Singh for se mencers in that regard. Mandeep of course,
as the global head of Tech research at Bloomberg Intelligence.
(13:11):
Man Deep, it's great to have you on with us.
And you know, Nvidia investors have kind of gotten used
to blowout results quarter after quarter, So is that the
expectation this time around?
Speaker 2 (13:23):
I think there are a few variables to keep in mind.
So the first one is on the demand side. Everything
really looks strong when it comes to the commentary from
hyperscalers that we've heard around CAPEX. I mean pretty much
everyone raised their CAPEX slightly. They had positive outlook on
(13:45):
even the early twenty twenty six view. So the US
hyperscaler spin really strong. The one area that obviously will
be a slight head wind is the China exposure. And
we know in Nvidia wrote down about fifteen billion dollars
of their inventory of H twenties because of the restrictions.
(14:07):
So the most likely scenario right now is they may
not be able to sell to China anytime soon, even
if they come up with a different variant. I think
chances are they'll find it hard to overcome the restrictions,
so that's a negative. At the same time, they had
(14:29):
new sovereign deals in the Middle East a couple of
weeks back, UAE and I think Qatar, and just overall,
the sentiments seems to be improving when it comes to
sovereign demand outside of China. So there are different sort
of variables driving the demand side, but overall, look, the
(14:52):
market is still undersupplied and in video chips are still
the most performant when it comes to accelerators that you
need for AI. So from that perspective, I mean in
Nvidia still has that mode when it comes to the
AI accelerator market.
Speaker 1 (15:10):
Yeah, to your point, it really has been a busy
quarter leading up to these results from Nvidia, a lot
of headlines coming out for the AI chip company, and
including some headlines from the CEO himself, Jensen Wong. He
was at the computechs AI event in Taipei last week
unveiling his latest raft of technologies aimed at keeping the
(15:32):
AI demand boom going. Here he is talking about the
latest in Vidia accelerator chips. Let's listen.
Speaker 7 (15:38):
In this year in Q three will upgrade to Grace
Blackwell GB three hundred. The GB three hundred will increase.
Is the same architecture, same physical footprint, same electrical mechanicals,
but the chips inside have been upgraded.
Speaker 1 (15:57):
So what kind of further commentary could we get from
from Jensen Wong on the GB three hundred when we
get these earnings this week.
Speaker 2 (16:05):
Yeah, the big thing that the street is focused on
is what does the GB three hundred do in terms
of the gross margins, because remember in Vidia's gross margins
have come down slightly with this Blackwell launch compared to
the Hopper architecture, which was the prior architecture, and the
expectation is that gross margins go back to mid seventy percent.
(16:29):
This quarter there'll be more like seventy one seventy two percent,
but in the second half everyone is expecting those gross
margins to go up, primarily diriven in by GB three hundred.
Ass your clip just noted so clearly. You know they
are talking about bigger scale of these compute architectures that
(16:53):
all the hyperscalers are looking to use, and the reasoning models,
which really I think took off post Deep Seek earlier
in the year, do require much more compute than the
you know, the previous sort of way of using AI
when it comes to just giving in your prompt in
chatbot and getting a response. So the reasoning models have
(17:16):
driven up the consumption of compute and that will be
a key driver of the outlook that Nvidia is going
to give in their earnings report.
Speaker 1 (17:26):
And we're speaking with man Deep Singhy's the global head
of Tech research at Bloomberg Intelligence as we look ahead
to in Vidia's latest earnings report coming up later this week.
You mentioned the importance of Nvidia broadening its market beyond
the hyperscalers, these deals that we saw in the Gulf
in recent weeks in Saudi Arabia, the United Arab Emirates.
(17:50):
How important is it for Nvidia to capture that market
those sovereign investors into the A boom.
Speaker 2 (18:01):
Yeah, I mean, I look at it this way. When
you look at the five hyperscalers here in the US,
they are growing their capex by about forty to forty
five percent this year, and Nvidia's data center revenue is
expected to grow about fifty five percent this year. So
you can see how Nvidia is still so much exposed
(18:25):
to the hyperscale capex growth.
Speaker 1 (18:28):
Now.
Speaker 2 (18:29):
You know, there are obviously buyers of Nvidia chips outside
of hyperscale, the US hyperscalers, but you know, you need
bigger entities. We're talking about a company that is almost
going to do two hundred billion dollars in revenue this year,
and for that number to keep growing even at a
(18:50):
twenty five to thirty percent clip, you need to find
those large incremental buyers. You can't just have, you know,
enterprises with five to ten million dollars of IT budgets
spending on GPU compute. You need much bigger because we're
talking much bigger numbers now, and so sovereigns do kind
of come across as entities that can spend big on
(19:13):
capex and they can spend for a few years. It
won't be just a one and done sort of thing.
And so from that perspective, it's huge that you know,
Nvidia is exposed to these sovereign buyers. I'm more curious
to see what sort of llms or products come out
of the spend from the likes of Saudi Arabia or
(19:35):
UAE who plan to spend big on Nvidia accelerators, because
at the end of the day, you have to have
something unique then what OpenAI or Gemini is offering in
terms of chatblock functionality.
Speaker 1 (19:47):
Yeah, and I guess you have to wonder as well
whether those sovereigns can come through on some of the
pledges they've made around the deals that were announced in
recent days. I mean, we've been talking about multi hundreds
of billions, if not multiple trillions of dollars in announcements
coming out of that event.
Speaker 2 (20:06):
Yeah. Absolutely, I mean the numbers are big, and these
are multi year commitments, as has been the case even
in the US. We know about the project's target. You know,
even Apple has talked about investing up to five hundred
billion dollars here in the US. I'll be curious to
kind of learn more about what Apple plans to invest
(20:26):
on because so far, Apple has been the one large
tech company that has not invested big when it comes
to the GPU and the accelerated compute infrastructure. So that
could be a positive for Nvidia if Apple comes in
as another hyperscaler who wants to stand you know, this
big GPU infrastructure. But clearly that hasn't happened, and that's why,
(20:50):
you know, you need the bigger entities like the four
or five existing hyperscalers to come in to sustain this
revenue growth that we've seen out of Nvidia.
Speaker 1 (21:03):
Do you see Nvidia sustaining the growth of its valuation
given the news that's come out in recent months, We've
been talking about the deep Seek breakthrough in China, so
much competition in the space. Now, can investors continue to
drive up the value of this company into the next
(21:23):
few quarters.
Speaker 2 (21:24):
I Mean, the good thing for Innvidia is it's been
growing nicely into its multiple, so it's never really traded
at a crazy multiple. And that's still the case because
you know when a company is growing over fifty percent,
I mean you know, it's almost doubling its revenue in
less than two years, So clearly you know it's growing
(21:46):
nicely into the valuation. And look, when it comes to Nvidia,
like they have a very successful mode in terms of
having the most performant chip, they have the scale, they have,
the high margins, I mean gross margins in excess of
seventy percent is something desirable for any company, and they're
(22:08):
doing it as a semiconductor company. So there are a
lot of things that are working well for them. And
if AI is this secular trend and I think everyone
sort of agrees on that this is a you know,
a fifteen to twenty year trend and videos is still
most exposed to kind of growth in that AI infrastructure.
(22:29):
Is just a question of can it happen in a sustainable,
you know, twenty five to thirty percent every year growth
type of scenario from here on or will there be
you know, peaks and troughs in terms of a capeic
digestion period and then you know, things picking back. So
that's the sort of question that everyone is trying to
(22:51):
grapple with. But there is no doubt that Nvidia has
almost got a monopoly when it comes to training work cloths,
and even on the inference side, they continue to have
a dominant chare right now.
Speaker 1 (23:04):
Yeah, and I wanted to ask you if you think
Nvidia maintains that monopolistic position that mote when you know
it's facing competition from the likes of Advanced micro Devices
and you know so many other competitors that want to
chip away at this chip giant.
Speaker 2 (23:20):
Yeah, look, there is competition from AMD or Google's TPUs
or even now we've started hearing Huawei being a potential competitor.
But when it comes to price, you know, performance as
well as you know the power aspect of their chips.
They are still way above everyone else, and that's why
(23:43):
you know, these AI workloads are pretty demanding when it
comes to the floating point operations that are required and
the power efficiency that's required. Nvidia has so far managed
to say at least you know, a year or two
ahead of everyone else in terms of what they are
able to offer versus the competition. And then they also
(24:04):
have this software mode that others are still developing when
it comes to their chips. So I do think their mode,
at least for now, seems sustainable. But you know, we're
talking big numbers, and when everyone is fixated on this
multi year opportunity, there will be workarounds. And their customers
(24:25):
are also potential competitors. When you think about the likes
of Google and Amazon. I mean, these are the biggest
customers of Invidia chips, but they're also developing their own chips.
So clearly there is that threat that over time they'll
try to reduce their dependency on Nvidia, and I think
it will happen. It's just a question of how long
(24:46):
will it take them to develop their own chips so
that you know they can completely move out of that
Nvidia dependency.
Speaker 1 (24:53):
Well, we don't have too long to wait for those
latest numbers on in Vidia's latest quarter. We get the
results Wednesday after the close. Thanks for the preview ahead
of it, Man Deep Saying, the global head of Tech
research at Bloomberg Intelligence. Up next, the big move to
the upside for bitcoin. We look ahead at what's a
head for crypto with Bloomberg Intelligence Senior Commodity strategist Mike mcgloone.
(25:17):
It's thirty seven minutes past the hour. I'm Nathan Hager,
and this is Bloomberg. Welcome back to the special edition
of Bloomberg Daybreak. I'm Nathan Hager. The US stock market
(25:37):
course is closed for the Memorial Day holiday, and much
like the stock market, the trajectory of bitcoin has reversed
over the past couple months and taken off. It was
just over a month ago the crypto currency was trading
under seventy seven thousand. Last week it surged to a
record well into six figures. For more on where the
(25:58):
original digital token go from here, we are pleased to
welcome Blueberg Intelligence Senior Commodity strategist Mike mcgloon Mike, it's
good to have you with us. I mean, we've had
some bullish crypto investors talking about lots more upside from here.
Where do you see bitcoin going?
Speaker 8 (26:15):
I guess that's part of the problem, Nathan. It's had
a very good run, but now it seems like the
consensus for bullishness to be complete. Certainty is what really
scares me. So that you know, so bitcoin's a new record,
that's a wonderful thing. It's very impressive, but it has
basically Pilon effect kicking in now, and I'm concerned that
(26:36):
one thing it did prove in Q one certainly to
that bottom in April when the stock market went down,
it went down with it what it knows it neally does.
It went down a lot harder. Now we're at the
situation a lot of people says it's people say it's
not as highly correlated to the stock market, it's an alternative,
but it's proving it actually is more correlated to the
stock market than things like gold. So for on the year,
(26:59):
gold is still way up performing bitcoin. Questions can Bitcoin
catch up? And I think a key pre vacuu is
requisite for bitcoin to outperform gold this year. The old
rock is US stock market properly probably has to go higher.
So at this point, from the last sixteen quarters, the
correlation with bitcoin the S and P five hundred I
(27:19):
use sixteen quarters because bitcoin works in a four year cycle,
is about point seven. That's almost the highest ever. Yet
the correlation of bitcoin to gold is about zero. So
I like to say some points bitcoin is digital gold
and some kins it's leverage beta, And so far this
year is proving its leverage beta. But the good news
is so far it's way out perform a stock market
(27:40):
in just sense. I have a sense that there's just
so much just complete certainty it's going to go higher.
This one I have to pull back into a bit
of a contrarian.
Speaker 1 (27:47):
So are you thinking then that bitcoin isn't quite the
mature asset that some might think it's at least trying
to be now with so much more institutional interest in cryptocurrency.
Speaker 8 (28:00):
It's actually more the latter it's become. It's gained so
much maturity. Last year was a benchmark year for bitcoin.
The ETFs and those of us who were in the
space were a long time waited for for ten years
finally launch, so that brought in you know a lot
of those type of investors we had the having and
the major, most significant pivot was the Trump and mistation
(28:21):
President candidate Trump at the time switching over his narrative
to being favorable.
Speaker 1 (28:27):
I really liked.
Speaker 8 (28:27):
Writing bulls things about it when most of the masses
hated it like a first Trump administration. They were not
noticing what was happening in crypto dours and the base
layer being the door and a lot of crypto stable
coins investing in US trasure traasies. Now they do. And
here's one big problem, Nathan, is the animal spirits are
in the space. In the past, there was maybe a
(28:48):
couple thousand, couple up to a million cryptocurrencies. Now on
coin marketcap dot com there's sixteen million cryptocurrencies listed and
that can be traded for me. It's the example of
the broomsticks that Scott Present uses from the Fantasia where
Mickey Mouse creates the spell and then you can't stop it,
you know, the Sorcerer's Apprentice. This is the situation now.
(29:10):
I see in cryptos we have an unlimited supply of
dependence on bitcoin going higher. So bitcoin, yes, it has
that limited supply factor, but now we have so much
leverage in this space. There's a story on the Bloomberg
terminal on this week that sat and pointed out that
we have people leveraging forty to one to get long
and they put in stops. And the unique thing about
(29:30):
the space is those of us who've traded in the
past is a lot of times you can run through
stops on gaps, meaning when markets are closed when they're open,
but bitcoin never closes. So I think what that does
is incentive ives is as sentitizes many people to use
a lot x of a lot more risk than they
should be. So I'm very concerned at these levels. I'm
concerned that the US stock markets are going to roll
over for that recession we didn't have in two thousand
and twenty three. And that's somewhat that can the views
(29:53):
of Ona Wong or chief economists in Jena, Martin Adams,
or senior equity strategist. And the key thing I'm pointed
out for a while is that bitcoin to gold ratio,
the amount of gold ounces equal to one bitcoin right
now is about thirty three now that was first traded
in twenty twenty one. So I'm really concerned that you
(30:14):
know this, this space has got to become very mature.
It's got the masses in it. And now we have
a lot of lambs. Look at me. I can make
money too. Who are doing things that I've heard about
in nineteen twenty nine in the stock market, and I
remember in nineteen eighty nine in Japan, in nineteen nine,
in ninety nine US And I'll just mention that unlimited
supply and then a lot of these things, like the
(30:35):
eighth largest cryptocurrency is dogecoin. It's worth only thirty six
billion dollars and it's basically a joke, attracts nothing. Some
of that stuff I'm just waiting to get purged out
and then I can get really bullish again.
Speaker 1 (30:45):
So are you concerned? Does your concern build when we're seeing,
you know, some of these regulations looking like they're going
to be loose, and particularly around the stable coin legislation
that was just move forward in Washington, d C. You know,
feeding into some of those animal spirits.
Speaker 8 (31:02):
Well, there you go, exactly. That's the key phrase. I
think the key nomenclature animal spirits have been released. The
key thing I find about stable coins is number one,
the technology is awesome. The ability that's The most enduring
bull market I like pointing out in twenty eighteen when
it was quite the bare market, was the increasing market
campalisation of stable coins. At that time, it was only tether,
it's only about two billion. Now Tether is about one
(31:23):
hundred and fifty billion, and there's about two hundred and
fifty billion tracking stable coins and they're all invested in treasuries.
This is good for the US. The thing about that
I think that's disconcerning for me is it's that tokenization process.
Once we begin to extract or expand this tokenization, we
can tokenize and trade assets on chain like treasuries and stocks.
(31:45):
I think that's going to put things like dosee coin
that are just silly, expensive speculative excesses as shortbait. So
right now, overall the government's going to finally figure this out.
But just that we realize the technology that uses a
US dollars a base layer and track things like stable
claims is awesome.
Speaker 1 (32:05):
It's quite the market to watch and really good to
get your insights on it. Mike, thank you for this.
That's Mike mcglohon, senior commodity strategist at Bloomberg Intelligence. We
now turn our attention to the economy. We're just over
three weeks away from the next FED decision. What will
j Powell and company do in June? In light of
uncertainty over tariffs? Let's ask p Jim Fixed income chief
(32:28):
US economist Tom Porcelli, Tom, what will the FED do?
They haven't done much this year.
Speaker 9 (32:35):
I think they're going to do much of what they've done,
but wish just to say not much. Yeah, I just
you know, I see, I see very limited scope for
the FED to really do much at this juncture. I mean,
I think that there are a couple of challenges sort
of lingering in the air for them. So one is
that inflation is still above target. Two is that inflation
(32:56):
expectations are starting the process of becoming unanchored. In three,
we're waiting for the the you know, the the inflation
related to tariffs to kick in. So so all of
that means that the Feed is on the sidelines now.
We don't think that they will be on the sidelines
the entire year. We do think that they will cut rates,
(33:18):
but I think for at least the next you know,
call it two or three meetings, I think it's going
to be incredibly challenging for them to do much.
Speaker 1 (33:26):
Where do you see inflation expectations going? As you mentioned,
they do look like they're starting to become unanchored. Do
they become fully unanchored?
Speaker 9 (33:35):
So here here's the Here's I guess the thing that
we all need to keep in mind. It's it's not
that what the consumer says is going to happen to
inflation ever really materializes, right, I mean, I think that's
an important idea. But but but I think you know,
the sort of the rhythm of what's happening matters. You know,
they're braced for higher prices, So I don't think that
you know them looking for you know, four or five
(33:56):
percent inflation, which you know, depending which measure of inflation
expectations you're looking at. You know, that's what some consumers
are thinking. We don't think it gets even remotely close
to that high. I mean, we think you could drift,
you know, sort of closer to three percent, which in
fairness is not far from where we are now. But
having said that, the reality for the consumer is if
(34:18):
the consumer is already being pinched right by already higher prices,
and you're going to layer on higher prices on top
of these already higher prices, and you have real incomes
that are starting the process of slowing down, especially relative
to real consumption. You know, that for us really suggests that,
you know, economic activity is going to continue the process
(34:39):
of slowing as the year progresses. I mean, I think
that to me is the right sort of channel through
which you need to think about higher prices.
Speaker 1 (34:46):
We've heard the FED thinking about waiting for clarity around
where trade policy is going to go before they act.
But can we paid out a scenario where the Fed
could at least game out something of an impact from
tariffs based on the idea that they're not going to
be at the same levels that they have been in
(35:07):
the past.
Speaker 9 (35:08):
Yeah, Nathan, I think we have to consider that we
may never have a period of total certainty as it
relates to trade. I mean, we you know, we keep
on moving the goalposts, we keep on kicking the can
down the road, and I think even when we finally
do get to the goalpost, I can see the threat
of terraffs remaining in place. And if that is true,
then the uncertainty, right, I mean, how many times it
(35:29):
will we all use the word uncertainty. Then I think
that then I think the uncertainty sort of dynamic will
also remain in place, you know. So so let's just
you know, let me paint a very quick scenario. Let's
say that, you know, we settle on ten percent you know,
across the board baseline tarrafs. Right, let's just say we
settle on that. But if the threat of tariff remains
over then, you know, called the next three and a
(35:49):
half years, then I think what that does is it
pushes corporations to the sidelines as it relates to capex,
and it pushes the consumers to the sidelines as it
relates to going out and spending. And I think that's
the real risk. And I would I would add this
very quick idea for anyone thinking, oh, well, you know
that that's like a you know, that's a theoretical idea,
(36:11):
it's actually not. It's entirely practical. Just look back at
what happened during Trump one point zero, when we had
tariffs put on, even in the face of corporate tax
cuts that were also put on right around the same time,
KAPEC slowed down. I mean, companies like certainty and uncertainty
is sort of you know, gonna gonna thrust them to
(36:34):
the sidelines.
Speaker 1 (36:34):
And as far as the t tariff impact, do you
see tariffs as sort of a one off in terms
of what they do for inflation or could they have
more of a longer term inflationary impact.
Speaker 9 (36:45):
It does tend to represent a one time shift tire
in the price level. That's a that's an important idea
now again for you know, an economist lingo, you know
that one time shift tire means that you'll get you know,
the sort of the acceleration in the in the inflation
rate will we'll linger for about a year. Once you
(37:06):
get beyond that year point, then the inflation rate will
fall back to where it was. But in main street parlance,
it doesn't matter. Prices will be higher. You'll have that
that that that permanent shift higher in the price level.
And that's what matters to most most of main street,
most of everyone.
Speaker 1 (37:22):
So as we get to this next FED meeting, what
would you say, just to button this up, are your
expectations for June?
Speaker 9 (37:30):
I think very similar to what you know you heard
from him, what you heard from Powelling company at the
main meeting. I think it's you know, they're in this
wait and see mode. They want to see how things
are going to unfold, and that you know they're not
going to be you know, in a rush to engage
in any policy action until it's necessary.
Speaker 1 (37:50):
Always good to get your thoughts Tom again, thanks for
being with us on this holiday. That's Tom Porcelly, chief
US economist at p JIM Fixed Income. Thanks as well,
Mike mcglohon and the sing of Bloomberg Intelligence, Brian Levitt
and Invesco Barry Ridtholtz of Ridtholts Wealth Management in Bloomberg's
Masters in Business, And thanks to you as well for
taking time out to join us on this Memorial Day.
(38:12):
I'm Nathan Hager.
Speaker 6 (38:13):
Stay with us.
Speaker 1 (38:14):
Today's top stories and global business headlines are coming up
right now
Thank you so much for joining us on this special
edition of Bloomberg Daybreak. US markets are closed for the
Memorial Day holiday. I'm Nathan Hager, and coming up this hour,
we'll look ahead to earnings from one of the so
called Magnificent Seven in videos out with its quarterly report
on Wednesday, we get a preview with Ban Deep Saying,
Global head of Tech research at Bloomberg Intelligence. Plus bitcoins
(00:25):
back at record levels. We'll ask Bloomberg Intelligence Senior commodity
strategist Mike mcgloon where he thinks the crypto currency is headed,
and p JIM Fixed Income Chief US economist Tom Porcelli
will join us with his thoughts on how long the
FED can stay on hold. But we want to begin
with a look at the stock market. After a turbulent
few months, stocks have basically recovered their losses since President
(00:48):
Trump's Liberation Day tariff announcement in early April. So we
thought now would be a good time to bring you
a special roundtable on equities, and for that we're pleased
to welcome Invesco Global Markets strat just Brian Levitt and
Barry Ritholts, the founder of ritt Holt's Wealth management and
host of Bloomberg's Masters in Business podcast. It is great
to have the both of you with us. Barry, I'll
(01:11):
start with you.
Speaker 2 (01:12):
Is this just.
Speaker 1 (01:13):
A Washington dependent equity market at this point?
Speaker 3 (01:18):
Well, no doubt, Washington policy decisions are having an big
impact on the market's expectations for the economy and corporate
revenue and profit. Look, the President calls himself tariff man,
says tariff's are the most beautiful word in the dictionary.
We know what he did in the first term, and
(01:41):
so the consensus seem to have been pre April, Hey,
we'll get some ten percent tariffs here and there, and
that's already built into our models. But when you suddenly
and unexpectedly drop one hundred percent tariffs on one hundred
and eighty two countries plus penguins in the Antarctica, the
(02:03):
market has to stop and say, oh, we failed. You know,
this is a failure of our imagination. We did not
anticipate tariffs this large. This is going to take ten
twenty percent off of corporate revenues. And profits always fall
faster than revues. Maybe this is twenty thirty percent off
of corporate profits four quarters from now. We have to
(02:25):
adjust our prices down and what will you off like
fourteen percent twelve percent? When the ninety day pause came in,
that was on the way to going much lower as
a discounting mechanism. The pause gave everybody some help that
all right, maybe our original assessment was correct, but it's
(02:46):
still very much up in the air.
Speaker 1 (02:49):
Brian, I'll turn it over to you. Has the market
sort of shaken out where the policy direction is going now?
Have we adjusted to the second term of President Trump?
Speaker 4 (03:03):
Not entirely. Barry makes a great point about it.
Speaker 5 (03:06):
I mean, we remember we had a tarif rate that
was quite low a year ago, and now we're talking
about fifteen eighteen percent average effective rates. So, yes, we've
had a pause. Yes we've seen tower freights come down
on countries such as China, but it's still not entirely
clear where this is ultimately heading. Now, what's good for
(03:28):
the market, or what the market is at least expecting,
is that things are going to get incrementally better from
here on the policy front. There's no guarantee, but that
seems to be the market's expectation and does seem to
be the modus operandi of President Trump. I look back
to the twenty eighteen environment. If you remember the fourth
(03:49):
quarter of twenty eighteen, stocksfell twenty percent during the US
China trade war, you got a ninety to eight pause.
You did not get a Phase one China trade deal
for really another year, but the markets continued to perform
well amid expectations that policy was going to get better.
Speaker 1 (04:09):
We are under a ninety day pause, as you mentioned,
we're heading toward what I think a lot of lawmakers
in Washington are hoping to be a big tax and
spending cut bill around ninety days or so from now.
Is July turning into a pivot point for the equity market?
Speaker 4 (04:26):
Berry?
Speaker 3 (04:28):
Maybe you know I love to do the compare and
contrast with how the FED communicates changes in policy with
how this White House does. You know, before the Fed
says we're going to shift our regime, and now we're
either raising rates or cutting rates. You get to notice
six meetings in advance, three meetings in advance. Hey, we're
(04:49):
tracking PCE and CPI. The month before the meeting, all
the FED governors and presidents fan out and they speak
at the Petroleum Club of Houston and the Economic a
Club of New York and everywhere else, and so when
the change happens, it's not a shock. You don't surprise
the markets. I think part of the problem here is
(05:11):
not just the policy itself, but how completely shocking and
surprising it was to markets. As it turns out, mister
market doesn't care for surprises, and that's something that I
wish the White House would take a page from the
Federal Reserve's communication strategy.
Speaker 4 (05:32):
Yeah. Look, the S and P five hundred, as everyone knows,
is overvalue compared to its long term average, driven primarily
by a handful of names. Other markets are not as overvalued,
particularly non US markets obviously value in disease MidCap stock.
So it's one of these times where it may make sense.
(05:53):
It probably does make sense to lower the valuation of
the portfolio as we nab gate this period of policy
uncertainty and as we grapple with higher interest rates.
Speaker 1 (06:05):
We're speaking with Brian Levitt. He is the global market
strategist at Invesco, and Barry Ridtholtz is with us as well,
founder of Ridolts Wealth Management, host of Bloomberg's Master's in
Business podcast. Barry, we have had a lot of attention
on the bond market particularly with the yields going up
(06:25):
in response to what's happening out of Washington, d C.
Where do you see the bond market going and could
it potentially pose a headwind for equities going forward?
Speaker 3 (06:36):
Sure, always the bond markets are the adult in the room.
But let me throw a little bit of a curve
ball at you. I think Carvel was right in the
nineteen eighties and the nineteen nineties. Once the new millennium started,
it seemed like leadership in terms of influencing DC policy
(06:58):
moved to the equity mark mart So let me give
you just three quick examples. I have a vivid recollection
of FED Chairman Ben Bernanke testifying in October eight to Congress,
and after a few fiery speeches, they voted down money
and authority to the FED. Market sold off really hard.
By that Friday, everybody reconvened and they gave the Fed
(07:22):
everything they wanted. So ten twelve thirteen percent gets DC's attention.
I love what happened in March twenty twenty during the pandemic.
Republicans and Democrats couldn't agree on renaming a library in Washington, DC.
Talk about something with so minor Then the NBA canceled
(07:48):
the schedule after a thunder Jazz game where the center
tested positive for COVID. Once the NBA canceled their season,
the dominos all began to fall. And it was a
week or two later we passed the single biggest fiscal
stimulus as a percentage of GDP since World War Two,
the Cares Act. And now we see the same thing
(08:11):
that took place in April twenty twenty. The bond market
has certainly been driving the debate about the dollar and
fiscal policy and deficits, But it was the stock market
sell off hey down five percent, down five percent, down
five percent, three days in a row that got the
(08:33):
White House's attention. And that's when the President called uncle,
not rising yields, but falling equity prices. I want to
be reincarnated as the stock market, not the bond market.
Speaker 4 (08:46):
Yeah.
Speaker 1 (08:46):
I mean that raises the question the whole idea that
the president uses the stock market as a scorecard for
how his policies are going. So, Brian, as we head
into the second half, where do you see things going
for the stock market? Could it sway what happens in Washington, DC.
Speaker 6 (09:07):
Yeah. Our leading indicators of the economy are still pointing
to below trend and lower growth, and the inflation momentum
is picking up, So that's a little bit of a
more challenged environment.
Speaker 4 (09:19):
You're not there that often. Most of the time. You're
more in a recovery expansion or slow down field in
which stocks can do quite well. So in an environment
where leading indicators are pointing lower, you tend to want
to be a little bit more defensive, expect more volatility
in the markets. I think you're right, and I think
Barries right that ultimately we will get a better policy response.
(09:43):
Ultimately as the economy weakends, Federal Reserve will be able
to lower interest rates. When that happens is probably not
as soon as people think, and the administration will likely
continue to move away from its worst impulses on trades.
So you could be in a channel lenging short term
period here, because typically when you're leading indicators are rolling over,
(10:07):
you need a policy response, and for the first time
in a very long time, it's going to be a
challenge in the United States to get that policy response.
On the other side, in Europe, China, the UK, you
will be getting that policy response, which is why you're
starting to see or you have been seeing momentum pick
up in non US assets.
Speaker 1 (10:27):
And Barry, are you looking for a challenging environment as well.
I mean, we've heard from the likes of Jamie Diamond
and JP Morgan Chase saying he can't take stagflation off
his table into the second half.
Speaker 3 (10:39):
Well, well, Jamie reversed his views. Not too long ago.
He had said, Eh, you know, tas will be fine,
We'll work a way through it, before we had that
big surprise. My expectations really are dependent on who is
the potus whisperer, Who is the last person that the
president here before he goes into making a key decision.
(11:04):
If it turns out that the majority of the times,
the last person to influence President Trump is Treasury Secretary
Scott Besson, well we'll be fine. He's a Wall Street guy.
He understands how markets, dollars, bonds work. I'm comfortable with
him as the potus whisperer. If, on the other hand,
(11:29):
it's Peter Navarro, who is you know, one and only
one economist who seems to think that tariffs are a
fantastic idea. Hey, that little smooth holy thing, all right,
that was a one off. That didn't work, but we
should try it now. If he's the most influential advisor
that the president listens to, well, then you know the
(11:51):
worst case scenario is, yeah, we're gonna get rate cuts,
but it's going to be in response to a stagflationary
maybe even a recessionary environment.
Speaker 1 (12:04):
To be a fly on the wall in Washington, d C.
Thank you for this to the both of you, Berry
Ridtholtz of Ridtholtz Wealth Management in Bloomberg's Master's and Business podcast,
and thanks as well to Investco Global market strategist Brian Levitt.
Up next, we're going to preview earnings this week from Nvidia.
Bloomberg Intelligence Global head of Tech Research Mandeep Sing will
join us as the special Memorial Day edition of Bloomberg
(12:26):
Daybreak continues. It's twenty minutes past the hour. I'm Nathan Hager.
This is Bloomberg. Welcome back to this special edition of
Bloomberg day Break. US markets are closed for the Memorial
(12:48):
Day holiday. I'm Nathan Hager. Wall Street gets back to
work this week with a key earnings report on the docket.
On Wednesday, after the close of trading, we get the
latest quarterly numbers from Nvidia, So what should we expect
from the AI chip giant. Let's bring in man Deep
Singh for se mencers in that regard. Mandeep of course,
as the global head of Tech research at Bloomberg Intelligence.
(13:11):
Man Deep, it's great to have you on with us.
And you know, Nvidia investors have kind of gotten used
to blowout results quarter after quarter, So is that the
expectation this time around?
Speaker 2 (13:23):
I think there are a few variables to keep in mind.
So the first one is on the demand side. Everything
really looks strong when it comes to the commentary from
hyperscalers that we've heard around CAPEX. I mean pretty much
everyone raised their CAPEX slightly. They had positive outlook on
(13:45):
even the early twenty twenty six view. So the US
hyperscaler spin really strong. The one area that obviously will
be a slight head wind is the China exposure. And
we know in Nvidia wrote down about fifteen billion dollars
of their inventory of H twenties because of the restrictions.
(14:07):
So the most likely scenario right now is they may
not be able to sell to China anytime soon, even
if they come up with a different variant. I think
chances are they'll find it hard to overcome the restrictions,
so that's a negative. At the same time, they had
(14:29):
new sovereign deals in the Middle East a couple of
weeks back, UAE and I think Qatar, and just overall,
the sentiments seems to be improving when it comes to
sovereign demand outside of China. So there are different sort
of variables driving the demand side, but overall, look, the
(14:52):
market is still undersupplied and in video chips are still
the most performant when it comes to accelerators that you
need for AI. So from that perspective, I mean in
Nvidia still has that mode when it comes to the
AI accelerator market.
Speaker 1 (15:10):
Yeah, to your point, it really has been a busy
quarter leading up to these results from Nvidia, a lot
of headlines coming out for the AI chip company, and
including some headlines from the CEO himself, Jensen Wong. He
was at the computechs AI event in Taipei last week
unveiling his latest raft of technologies aimed at keeping the
(15:32):
AI demand boom going. Here he is talking about the
latest in Vidia accelerator chips. Let's listen.
Speaker 7 (15:38):
In this year in Q three will upgrade to Grace
Blackwell GB three hundred. The GB three hundred will increase.
Is the same architecture, same physical footprint, same electrical mechanicals,
but the chips inside have been upgraded.
Speaker 1 (15:57):
So what kind of further commentary could we get from
from Jensen Wong on the GB three hundred when we
get these earnings this week.
Speaker 2 (16:05):
Yeah, the big thing that the street is focused on
is what does the GB three hundred do in terms
of the gross margins, because remember in Vidia's gross margins
have come down slightly with this Blackwell launch compared to
the Hopper architecture, which was the prior architecture, and the
expectation is that gross margins go back to mid seventy percent.
(16:29):
This quarter there'll be more like seventy one seventy two percent,
but in the second half everyone is expecting those gross
margins to go up, primarily diriven in by GB three hundred.
Ass your clip just noted so clearly. You know they
are talking about bigger scale of these compute architectures that
(16:53):
all the hyperscalers are looking to use, and the reasoning models,
which really I think took off post Deep Seek earlier
in the year, do require much more compute than the
you know, the previous sort of way of using AI
when it comes to just giving in your prompt in
chatbot and getting a response. So the reasoning models have
(17:16):
driven up the consumption of compute and that will be
a key driver of the outlook that Nvidia is going
to give in their earnings report.
Speaker 1 (17:26):
And we're speaking with man Deep Singhy's the global head
of Tech research at Bloomberg Intelligence as we look ahead
to in Vidia's latest earnings report coming up later this week.
You mentioned the importance of Nvidia broadening its market beyond
the hyperscalers, these deals that we saw in the Gulf
in recent weeks in Saudi Arabia, the United Arab Emirates.
(17:50):
How important is it for Nvidia to capture that market
those sovereign investors into the A boom.
Speaker 2 (18:01):
Yeah, I mean, I look at it this way. When
you look at the five hyperscalers here in the US,
they are growing their capex by about forty to forty
five percent this year, and Nvidia's data center revenue is
expected to grow about fifty five percent this year. So
you can see how Nvidia is still so much exposed
(18:25):
to the hyperscale capex growth.
Speaker 1 (18:28):
Now.
Speaker 2 (18:29):
You know, there are obviously buyers of Nvidia chips outside
of hyperscale, the US hyperscalers, but you know, you need
bigger entities. We're talking about a company that is almost
going to do two hundred billion dollars in revenue this year,
and for that number to keep growing even at a
(18:50):
twenty five to thirty percent clip, you need to find
those large incremental buyers. You can't just have, you know,
enterprises with five to ten million dollars of IT budgets
spending on GPU compute. You need much bigger because we're
talking much bigger numbers now, and so sovereigns do kind
of come across as entities that can spend big on
(19:13):
capex and they can spend for a few years. It
won't be just a one and done sort of thing.
And so from that perspective, it's huge that you know,
Nvidia is exposed to these sovereign buyers. I'm more curious
to see what sort of llms or products come out
of the spend from the likes of Saudi Arabia or
(19:35):
UAE who plan to spend big on Nvidia accelerators, because
at the end of the day, you have to have
something unique then what OpenAI or Gemini is offering in
terms of chatblock functionality.
Speaker 1 (19:47):
Yeah, and I guess you have to wonder as well
whether those sovereigns can come through on some of the
pledges they've made around the deals that were announced in
recent days. I mean, we've been talking about multi hundreds
of billions, if not multiple trillions of dollars in announcements
coming out of that event.
Speaker 2 (20:06):
Yeah. Absolutely, I mean the numbers are big, and these
are multi year commitments, as has been the case even
in the US. We know about the project's target. You know,
even Apple has talked about investing up to five hundred
billion dollars here in the US. I'll be curious to
kind of learn more about what Apple plans to invest
(20:26):
on because so far, Apple has been the one large
tech company that has not invested big when it comes
to the GPU and the accelerated compute infrastructure. So that
could be a positive for Nvidia if Apple comes in
as another hyperscaler who wants to stand you know, this
big GPU infrastructure. But clearly that hasn't happened, and that's why,
(20:50):
you know, you need the bigger entities like the four
or five existing hyperscalers to come in to sustain this
revenue growth that we've seen out of Nvidia.
Speaker 1 (21:03):
Do you see Nvidia sustaining the growth of its valuation
given the news that's come out in recent months, We've
been talking about the deep Seek breakthrough in China, so
much competition in the space. Now, can investors continue to
drive up the value of this company into the next
(21:23):
few quarters.
Speaker 2 (21:24):
I Mean, the good thing for Innvidia is it's been
growing nicely into its multiple, so it's never really traded
at a crazy multiple. And that's still the case because
you know when a company is growing over fifty percent,
I mean you know, it's almost doubling its revenue in
less than two years, So clearly you know it's growing
(21:46):
nicely into the valuation. And look, when it comes to Nvidia,
like they have a very successful mode in terms of
having the most performant chip, they have the scale, they have,
the high margins, I mean gross margins in excess of
seventy percent is something desirable for any company, and they're
(22:08):
doing it as a semiconductor company. So there are a
lot of things that are working well for them. And
if AI is this secular trend and I think everyone
sort of agrees on that this is a you know,
a fifteen to twenty year trend and videos is still
most exposed to kind of growth in that AI infrastructure.
(22:29):
Is just a question of can it happen in a sustainable,
you know, twenty five to thirty percent every year growth
type of scenario from here on or will there be
you know, peaks and troughs in terms of a capeic
digestion period and then you know, things picking back. So
that's the sort of question that everyone is trying to
(22:51):
grapple with. But there is no doubt that Nvidia has
almost got a monopoly when it comes to training work cloths,
and even on the inference side, they continue to have
a dominant chare right now.
Speaker 1 (23:04):
Yeah, and I wanted to ask you if you think
Nvidia maintains that monopolistic position that mote when you know
it's facing competition from the likes of Advanced micro Devices
and you know so many other competitors that want to
chip away at this chip giant.
Speaker 2 (23:20):
Yeah, look, there is competition from AMD or Google's TPUs
or even now we've started hearing Huawei being a potential competitor.
But when it comes to price, you know, performance as
well as you know the power aspect of their chips.
They are still way above everyone else, and that's why
(23:43):
you know, these AI workloads are pretty demanding when it
comes to the floating point operations that are required and
the power efficiency that's required. Nvidia has so far managed
to say at least you know, a year or two
ahead of everyone else in terms of what they are
able to offer versus the competition. And then they also
(24:04):
have this software mode that others are still developing when
it comes to their chips. So I do think their mode,
at least for now, seems sustainable. But you know, we're
talking big numbers, and when everyone is fixated on this
multi year opportunity, there will be workarounds. And their customers
(24:25):
are also potential competitors. When you think about the likes
of Google and Amazon. I mean, these are the biggest
customers of Invidia chips, but they're also developing their own chips.
So clearly there is that threat that over time they'll
try to reduce their dependency on Nvidia, and I think
it will happen. It's just a question of how long
(24:46):
will it take them to develop their own chips so
that you know they can completely move out of that
Nvidia dependency.
Speaker 1 (24:53):
Well, we don't have too long to wait for those
latest numbers on in Vidia's latest quarter. We get the
results Wednesday after the close. Thanks for the preview ahead
of it, Man Deep Saying, the global head of Tech
research at Bloomberg Intelligence. Up next, the big move to
the upside for bitcoin. We look ahead at what's a
head for crypto with Bloomberg Intelligence Senior Commodity strategist Mike mcgloone.
(25:17):
It's thirty seven minutes past the hour. I'm Nathan Hager,
and this is Bloomberg. Welcome back to the special edition
of Bloomberg Daybreak. I'm Nathan Hager. The US stock market
(25:37):
course is closed for the Memorial Day holiday, and much
like the stock market, the trajectory of bitcoin has reversed
over the past couple months and taken off. It was
just over a month ago the crypto currency was trading
under seventy seven thousand. Last week it surged to a
record well into six figures. For more on where the
(25:58):
original digital token go from here, we are pleased to
welcome Blueberg Intelligence Senior Commodity strategist Mike mcgloon Mike, it's
good to have you with us. I mean, we've had
some bullish crypto investors talking about lots more upside from here.
Where do you see bitcoin going?
Speaker 8 (26:15):
I guess that's part of the problem, Nathan. It's had
a very good run, but now it seems like the
consensus for bullishness to be complete. Certainty is what really
scares me. So that you know, so bitcoin's a new record,
that's a wonderful thing. It's very impressive, but it has
basically Pilon effect kicking in now, and I'm concerned that
(26:36):
one thing it did prove in Q one certainly to
that bottom in April when the stock market went down,
it went down with it what it knows it neally does.
It went down a lot harder. Now we're at the
situation a lot of people says it's people say it's
not as highly correlated to the stock market, it's an alternative,
but it's proving it actually is more correlated to the
stock market than things like gold. So for on the year,
(26:59):
gold is still way up performing bitcoin. Questions can Bitcoin
catch up? And I think a key pre vacuu is
requisite for bitcoin to outperform gold this year. The old
rock is US stock market properly probably has to go higher.
So at this point, from the last sixteen quarters, the
correlation with bitcoin the S and P five hundred I
(27:19):
use sixteen quarters because bitcoin works in a four year cycle,
is about point seven. That's almost the highest ever. Yet
the correlation of bitcoin to gold is about zero. So
I like to say some points bitcoin is digital gold
and some kins it's leverage beta, And so far this
year is proving its leverage beta. But the good news
is so far it's way out perform a stock market
(27:40):
in just sense. I have a sense that there's just
so much just complete certainty it's going to go higher.
This one I have to pull back into a bit
of a contrarian.
Speaker 1 (27:47):
So are you thinking then that bitcoin isn't quite the
mature asset that some might think it's at least trying
to be now with so much more institutional interest in cryptocurrency.
Speaker 8 (28:00):
It's actually more the latter it's become. It's gained so
much maturity. Last year was a benchmark year for bitcoin.
The ETFs and those of us who were in the
space were a long time waited for for ten years
finally launch, so that brought in you know a lot
of those type of investors we had the having and
the major, most significant pivot was the Trump and mistation
(28:21):
President candidate Trump at the time switching over his narrative
to being favorable.
Speaker 1 (28:27):
I really liked.
Speaker 8 (28:27):
Writing bulls things about it when most of the masses
hated it like a first Trump administration. They were not
noticing what was happening in crypto dours and the base
layer being the door and a lot of crypto stable
coins investing in US trasure traasies. Now they do. And
here's one big problem, Nathan, is the animal spirits are
in the space. In the past, there was maybe a
(28:48):
couple thousand, couple up to a million cryptocurrencies. Now on
coin marketcap dot com there's sixteen million cryptocurrencies listed and
that can be traded for me. It's the example of
the broomsticks that Scott Present uses from the Fantasia where
Mickey Mouse creates the spell and then you can't stop it,
you know, the Sorcerer's Apprentice. This is the situation now.
(29:10):
I see in cryptos we have an unlimited supply of
dependence on bitcoin going higher. So bitcoin, yes, it has
that limited supply factor, but now we have so much
leverage in this space. There's a story on the Bloomberg
terminal on this week that sat and pointed out that
we have people leveraging forty to one to get long
and they put in stops. And the unique thing about
(29:30):
the space is those of us who've traded in the
past is a lot of times you can run through
stops on gaps, meaning when markets are closed when they're open,
but bitcoin never closes. So I think what that does
is incentive ives is as sentitizes many people to use
a lot x of a lot more risk than they
should be. So I'm very concerned at these levels. I'm
concerned that the US stock markets are going to roll
over for that recession we didn't have in two thousand
and twenty three. And that's somewhat that can the views
(29:53):
of Ona Wong or chief economists in Jena, Martin Adams,
or senior equity strategist. And the key thing I'm pointed
out for a while is that bitcoin to gold ratio,
the amount of gold ounces equal to one bitcoin right
now is about thirty three now that was first traded
in twenty twenty one. So I'm really concerned that you
(30:14):
know this, this space has got to become very mature.
It's got the masses in it. And now we have
a lot of lambs. Look at me. I can make
money too. Who are doing things that I've heard about
in nineteen twenty nine in the stock market, and I
remember in nineteen eighty nine in Japan, in nineteen nine,
in ninety nine US And I'll just mention that unlimited
supply and then a lot of these things, like the
(30:35):
eighth largest cryptocurrency is dogecoin. It's worth only thirty six
billion dollars and it's basically a joke, attracts nothing. Some
of that stuff I'm just waiting to get purged out
and then I can get really bullish again.
Speaker 1 (30:45):
So are you concerned? Does your concern build when we're seeing,
you know, some of these regulations looking like they're going
to be loose, and particularly around the stable coin legislation
that was just move forward in Washington, d C. You know,
feeding into some of those animal spirits.
Speaker 8 (31:02):
Well, there you go, exactly. That's the key phrase. I
think the key nomenclature animal spirits have been released. The
key thing I find about stable coins is number one,
the technology is awesome. The ability that's The most enduring
bull market I like pointing out in twenty eighteen when
it was quite the bare market, was the increasing market
campalisation of stable coins. At that time, it was only tether,
it's only about two billion. Now Tether is about one
(31:23):
hundred and fifty billion, and there's about two hundred and
fifty billion tracking stable coins and they're all invested in treasuries.
This is good for the US. The thing about that
I think that's disconcerning for me is it's that tokenization process.
Once we begin to extract or expand this tokenization, we
can tokenize and trade assets on chain like treasuries and stocks.
(31:45):
I think that's going to put things like dosee coin
that are just silly, expensive speculative excesses as shortbait. So
right now, overall the government's going to finally figure this out.
But just that we realize the technology that uses a
US dollars a base layer and track things like stable
claims is awesome.
Speaker 1 (32:05):
It's quite the market to watch and really good to
get your insights on it. Mike, thank you for this.
That's Mike mcglohon, senior commodity strategist at Bloomberg Intelligence. We
now turn our attention to the economy. We're just over
three weeks away from the next FED decision. What will
j Powell and company do in June? In light of
uncertainty over tariffs? Let's ask p Jim Fixed income chief
(32:28):
US economist Tom Porcelli, Tom, what will the FED do?
They haven't done much this year.
Speaker 9 (32:35):
I think they're going to do much of what they've done,
but wish just to say not much. Yeah, I just
you know, I see, I see very limited scope for
the FED to really do much at this juncture. I mean,
I think that there are a couple of challenges sort
of lingering in the air for them. So one is
that inflation is still above target. Two is that inflation
(32:56):
expectations are starting the process of becoming unanchored. In three,
we're waiting for the the you know, the the inflation
related to tariffs to kick in. So so all of
that means that the Feed is on the sidelines now.
We don't think that they will be on the sidelines
the entire year. We do think that they will cut rates,
(33:18):
but I think for at least the next you know,
call it two or three meetings, I think it's going
to be incredibly challenging for them to do much.
Speaker 1 (33:26):
Where do you see inflation expectations going? As you mentioned,
they do look like they're starting to become unanchored. Do
they become fully unanchored?
Speaker 9 (33:35):
So here here's the Here's I guess the thing that
we all need to keep in mind. It's it's not
that what the consumer says is going to happen to
inflation ever really materializes, right, I mean, I think that's
an important idea. But but but I think you know,
the sort of the rhythm of what's happening matters. You know,
they're braced for higher prices, So I don't think that
you know them looking for you know, four or five
(33:56):
percent inflation, which you know, depending which measure of inflation
expectations you're looking at. You know, that's what some consumers
are thinking. We don't think it gets even remotely close
to that high. I mean, we think you could drift,
you know, sort of closer to three percent, which in
fairness is not far from where we are now. But
having said that, the reality for the consumer is if
(34:18):
the consumer is already being pinched right by already higher prices,
and you're going to layer on higher prices on top
of these already higher prices, and you have real incomes
that are starting the process of slowing down, especially relative
to real consumption. You know, that for us really suggests that,
you know, economic activity is going to continue the process
(34:39):
of slowing as the year progresses. I mean, I think
that to me is the right sort of channel through
which you need to think about higher prices.
Speaker 1 (34:46):
We've heard the FED thinking about waiting for clarity around
where trade policy is going to go before they act.
But can we paid out a scenario where the Fed
could at least game out something of an impact from
tariffs based on the idea that they're not going to
be at the same levels that they have been in
(35:07):
the past.
Speaker 9 (35:08):
Yeah, Nathan, I think we have to consider that we
may never have a period of total certainty as it
relates to trade. I mean, we you know, we keep
on moving the goalposts, we keep on kicking the can
down the road, and I think even when we finally
do get to the goalpost, I can see the threat
of terraffs remaining in place. And if that is true,
then the uncertainty, right, I mean, how many times it
(35:29):
will we all use the word uncertainty. Then I think
that then I think the uncertainty sort of dynamic will
also remain in place, you know. So so let's just
you know, let me paint a very quick scenario. Let's
say that, you know, we settle on ten percent you know,
across the board baseline tarrafs. Right, let's just say we
settle on that. But if the threat of tariff remains
over then, you know, called the next three and a
(35:49):
half years, then I think what that does is it
pushes corporations to the sidelines as it relates to capex,
and it pushes the consumers to the sidelines as it
relates to going out and spending. And I think that's
the real risk. And I would I would add this
very quick idea for anyone thinking, oh, well, you know
that that's like a you know, that's a theoretical idea,
(36:11):
it's actually not. It's entirely practical. Just look back at
what happened during Trump one point zero, when we had
tariffs put on, even in the face of corporate tax
cuts that were also put on right around the same time,
KAPEC slowed down. I mean, companies like certainty and uncertainty
is sort of you know, gonna gonna thrust them to
(36:34):
the sidelines.
Speaker 1 (36:34):
And as far as the t tariff impact, do you
see tariffs as sort of a one off in terms
of what they do for inflation or could they have
more of a longer term inflationary impact.
Speaker 9 (36:45):
It does tend to represent a one time shift tire
in the price level. That's a that's an important idea
now again for you know, an economist lingo, you know
that one time shift tire means that you'll get you know,
the sort of the acceleration in the in the inflation
rate will we'll linger for about a year. Once you
(37:06):
get beyond that year point, then the inflation rate will
fall back to where it was. But in main street parlance,
it doesn't matter. Prices will be higher. You'll have that
that that that permanent shift higher in the price level.
And that's what matters to most most of main street,
most of everyone.
Speaker 1 (37:22):
So as we get to this next FED meeting, what
would you say, just to button this up, are your
expectations for June?
Speaker 9 (37:30):
I think very similar to what you know you heard
from him, what you heard from Powelling company at the
main meeting. I think it's you know, they're in this
wait and see mode. They want to see how things
are going to unfold, and that you know they're not
going to be you know, in a rush to engage
in any policy action until it's necessary.
Speaker 1 (37:50):
Always good to get your thoughts Tom again, thanks for
being with us on this holiday. That's Tom Porcelly, chief
US economist at p JIM Fixed Income. Thanks as well,
Mike mcglohon and the sing of Bloomberg Intelligence, Brian Levitt
and Invesco Barry Ridtholtz of Ridtholts Wealth Management in Bloomberg's
Masters in Business, And thanks to you as well for
taking time out to join us on this Memorial Day.
(38:12):
I'm Nathan Hager.
Speaker 6 (38:13):
Stay with us.
Speaker 1 (38:14):
Today's top stories and global business headlines are coming up
right now
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