March 13, 2025 • 41 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg International Economics and Policy Correspondent Michael McKee discusses news that wholesale inflation stagnated in February thanks to a sharp decline in trade margins, though one measure of goods prices jumped and details were also less favorable for the Federal Reserve’s preferred inflation gauge.
The producer price index was unchanged from a month earlier following a revised 0.6% increase in January, according to a Bureau of Labor Statistics report released Thursday. Excluding food and energy, the PPI declined for the first time since July.
Brian Vendig, CIO at MJP Wealth Advisors, explains how to take advantage of the market correction. Bloomberg News US Semiconductor & Networking Reporter Ian King discusses Intel naming chip industry veteran Lip-Bu Ta as new CEO. Andrew Durgee, Co-CEO of Republic, talks about attending the White House Digital Assets Summit and what President Trump’s creation of a US Crypto Strategic Reserve could mean for the crypto market. And Drive to the Close with Lyle Fitterer, Co-Lead Municipal Sector & Senior Portfolio Manager at Baird Funds.
Hosts: Carol Massar and Matt Miller. Producer: Paul Brennan.
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2 (00:08):
This is Bloomberg Business Week Insight from the reporters and
editors that bring you America's most trusted business magazine, plus
global business, finance and tech news. The Bloomberg Business Week
Podcast with Carol Masser and Tim Stenovek On Bloomberg.
Speaker 3 (00:25):
Radio Carol Master along with Matt Miller. Hey, we did
get another inflation print this morning. US wholesale inflation for
the month of February stagnating thanks to a sharp decline
in trade margins. We wanted to get into that with
our own Michael McKey, Bloomberg News International Economics and Policy correspondent.
It is our second read on US inflation, so Mike's
second one on inflation. I don't know, how do you
(00:48):
put this together with the CPI report today and is
this kind of what the Fed is looking for?
Speaker 4 (00:52):
Well, this was a little bit better in terms of
the overall numbers for the Fed. However, you said the
decline of the flatness was thanks to the trade numbers
in there. Don't refer to international trade. It refers to
the margins for wholesalers and retailers and if their margins
are going down, that's not good for profits, and Matt
(01:12):
was talking when we were off the air about profit
analysts marking down profit forecast. So that's a little bit
of bad news in there. Other than that, the parts
of the PPI that get folded into the PCE, which
is the Fed inflation indicator, we're stronger in most cases
(01:33):
than anticipated. So it looks like between the CPI and
the PPI, PCE is actually going to rise this month.
Speaker 5 (01:42):
This is what I think is fascinating because I've been
noticing lately that you and other economists, when you get
CPI and PPI, you can start to put together the
pp PCE number, and that's what the Fed cares about, right,
And last time we saw it was much weaker. But
now this seems to be showing that maybe the prices
will firm up in the PCE.
Speaker 4 (02:02):
Yes, not that much, maybe fifty basis points not a
huge rise. But what it does is tell the Fed
they have more work to do, and it ratifies if
doesn't necessarily encourage them to keep rates at unchanged. Now
we know they're not going to change rates next week,
but this just gives a more runway to say, we
(02:25):
don't know what's going on in the economy, So let's
just sit here and inflation gives us the reason.
Speaker 6 (02:29):
What do we need to know about the weekly jabas
claims number?
Speaker 4 (02:32):
Jobs claims is still a surprise that it stays so low.
A lot of talk about the economy maybe slowing down,
but we're not seeing any evidence in terms of layoffs.
Federal initial claims went up, but not even as much
as last week, so we're not getting a clean read
on that yet and it'll be a while until we do,
(02:52):
probably because of the back and forth on whether you're
fired or not if you work for the federal government.
But the number you want to watch, and we'll be
putting this out on Bloomberg a lot over the coming weeks,
is the continuing claims for federal workers, because that'll be
the adding them all up and we'll get a better
(03:12):
idea we did we did. Don't have any idea right
now exactly how many people have been fired or let go.
Speaker 5 (03:19):
Yeah, I thought it was interesting when we were talking
this morning. Mike was on my television show Bluebet Open
Interest every day from nine to eleven, and.
Speaker 4 (03:28):
The greatest show.
Speaker 5 (03:30):
It's the best show in the history of telling Nobody's
made a better show. In fact, not that we were
talking about whether or not this economy really belongs to
President Trump or whether or not we're still seeing the
after effects of the Biden economy.
Speaker 7 (03:44):
I guess that's debatable.
Speaker 5 (03:45):
But it seems to me that you will start to
see the inflation from the trade concerns come in in
the next slew of reports, or that you'll start to
see the effects of the federal government firings in the
next slew of reports.
Speaker 8 (04:00):
Is that right.
Speaker 4 (04:01):
It'll take a little while for all these numbers to
get in there, especially the inflation ones that go through middleman,
like you know, the steel and aluminum tariffs. Now, in
this month's PPI, we saw prices rise a lot for
steel and for aluminum, and it clearly the companies were
anticipating these tariffs and raised prices ahead of it. So
(04:23):
we may see that, but then you know, the stuff
gets used and put into other things, uh, cars being
a big example, and it'll take a while for prices
to go up because of that, and or motorcycles people have,
or motorcycles people have in this month, and yeah, they
use a lot of steel.
Speaker 9 (04:43):
Yeah.
Speaker 4 (04:43):
So yet you could say we'll notice it in a while,
it doesn't really matter whose economy it was.
Speaker 9 (04:51):
It's funny the administration has been saying.
Speaker 4 (04:53):
This is Biden's economy, except yesterday and today when inflation
was lower, and they said, oh, CPI PPI, this is
Trump's academy. But it's the voters who make.
Speaker 3 (05:04):
The decision really quickly twenty seconds. Do the tariffs have
to roll back in order for there to be a
strong US economy later this year? With the Commerce Secretary
Howard Lutnik seemed to say to Bloomberg surveillance this morning,
do we have to see the tariffs roll back though
in order to get there?
Speaker 4 (05:19):
I would guess so, But we don't know what the
tariffs are going to be yet exactly, so it's hard
to make a definitive prediction.
Speaker 3 (05:25):
All right, good stuff, Mike, Thank you so much. Bloomberg
News International Economics and Policy Correspondent Michael McKee.
Speaker 2 (05:31):
You're listening to the Bloomberg Business Week podcast. Catch US
live weekday afternoons from two to five pm Eastern. Listen
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Business app, or watch US Live on YouTube.
Speaker 3 (05:44):
President Trump's trade war chaos has led to growing calls
to lock in profits sit on the sidelines, replacing the
buy the mentality that dominated Wall Street for decades, and
despite some attempts to snap up discounted stocks, S and
P five hundred hasn't noted two consecutive days of gains
since its February peak, and market watchers say they do
not see signs of a meaningful rebound rally yet, which
(06:07):
can definitely make it tricky for someone who has more
than a billion dollars in assets under management, which is
the case of our next guest. Let's add to you Scottsdale, Arizona,
and to Brian Vendig, chief investment officer at MJP Wealth Advisors.
As we mentioned they have exactly are around one point
two billion in assets under management.
Speaker 6 (06:23):
Brian, good to have you here.
Speaker 1 (06:26):
S and P.
Speaker 3 (06:26):
Continuing to flirt around correction territory. Curious about your clients.
Have they been reaching out over the last couple of
weeks as stocks have sold off?
Speaker 10 (06:37):
Hey, Carol, great to speak with you again.
Speaker 11 (06:39):
Yes, I mean the outreach from clients has been intense,
and I think that intensity has picked up over the
last couple of weeks. And look at the end of
the day from an investor's point of view, not having
that certainty to know how the extent of these policies
decisions might go on varying degrees. Here, plus hearing that
(07:00):
economists are talking about stagflation recession concerns, and couple that
with outlooks changing for S and P five hundred growth
this year and revisions to us GDP Carol. People need guidance,
People need clarity to know what is the extent of
this correction. And I will just say that the setup
(07:21):
was there for some volatility going into this year as well.
This is not necessarily all just policy driven. I think
there's some fundamental valuation concerns about different parts of the market,
because when you look under the hood, you see that
there is a rotation going on between growth and value,
and I think that has a lot to do with
how much investors want to pay for growth right now.
Speaker 5 (07:40):
Well, and the tech earnings may not be exactly what
we expected. It's not unusual, right I was looking at
the queues last year and we had a summer swoon
that was I think a discount of thirteen or fourteen
percent in July to August on the Nasdaq one hundred.
But the concern is is you don't get the fourteen
(08:03):
percent growth everyone was expecting this year because you just
don't have to pay as much to make a deep
seek AI model work.
Speaker 10 (08:12):
No, that's fair, Matt.
Speaker 11 (08:13):
I mean I think when you look at the quality
of earnings over the last couple of years, I mean,
the outlooks for this year was that tech would grow
about somewhere between sixteen to twenty percent on average, and
you'd get a bigger push from earnings coming from areas
outside of tech, which we've talked about with our clients
and investors and still believe that that's going to be
one of the main themes over the.
Speaker 10 (08:32):
Balance of the year.
Speaker 11 (08:33):
But I think to your point, the reaction of Deep Seek,
I think was a little bit of a knee jerk
because as innovation normally happens, price and cost does go down,
but then that improves productivity and a wider adoption. So
for our clients, we are cautious in this environment for sure,
because we were lowering our expectations of growth because of
(08:57):
the uncertainty around policy.
Speaker 10 (08:59):
But I also still see that there are.
Speaker 11 (09:01):
Opportunities in tech when you think about the expansion and
adoption through through software, and maybe it's not so much
of that hardware conversation that you're you're implying that.
Speaker 5 (09:11):
So all right, first of all, where do you see
those opportunities and is it enough to make up for
a drop in the massive hardware games. I mean, if
you look at the three trillion dollar companies, you know,
Apple and and Video. You know, if those lose their mojo,
(09:32):
can we make it back with Microsoft or you know,
more of a software play.
Speaker 10 (09:39):
Well.
Speaker 11 (09:40):
I think this correction and this reevaluation of earnings multiples
going forward, it's really a case by case basis. I
think you're seeing more of active management, you know, helping
us work portfolios and making those choices between company names
and growth versus value.
Speaker 10 (09:55):
Let me give you an example.
Speaker 11 (09:57):
I mean Apple for recently pulling back because as it's
delaying a launch of an AI innovation tool that surprise investors.
That's a different story than possibly what we're going to
hear next week from Navidia regarding the adoption and the
ramping up of Blackwell and the next version of Blackwell,
which might be even more efficient to implement from a
(10:19):
server perspective, and what the adoption rate might be in
their ecosystem going forward, So I think it's a case
by case and looking at things on.
Speaker 10 (10:27):
A four to pe perspective.
Speaker 11 (10:29):
In the video, it's a lot more attractive now obviously
than it did at the beginning of the year. I
think the opportunities still exist in those aspects of that
AI innovation trend because it's still going to play out
over the next five years. But you just got to
be patient. It's not going to happen all one year.
And on the value side, we still like those names
that can participate in growth moving forward, healthcare industrials, some
(10:52):
elements of financials. But you've got to be cautious that
the economic environment is changing in the short term because
the administration is looking to decouple the United States and
some aspects of the global economy. So you have to
be sensitive to small caps right now. You have to
be sensitive to some of these companies that will get
caught up in the tariff conversations, like autos and others,
(11:13):
where there is a lot of this cross border exchange
issues that companies pay for. And that's the part that
I think investors don't realize with some of these conversations,
is that it's not that this extra tariff money is
going to go back to the government. It's actually being
absorbed by companies, and companies now are making a decision
on how they're going to try to protect margins, and then,
of course the concern is how does that play out
(11:34):
to consumers. So we're cautious in this environment, Matt, but
we're also not giving up the US capital market system.
Speaker 3 (11:41):
Yeah, I'm looking at the wrestle down about ten percent
so far this year. Hey, Brian just got about thirty
seconds here. We talked earlier with our Ed Harrison about
money moving from the US to Europe. We've seen the
European markets outperform easily by wide margin. US DOXS is
measured by the S and P five hundred. Are you
moving money outside the US for your clients Europe or
(12:03):
elsewhere just quickly?
Speaker 10 (12:06):
Yeah, sure.
Speaker 11 (12:06):
I mean we've had we have an exposure to international
most of our portfolios, and we are evaluating adding to
that because it seems like the investment in countries right
now are being bolstered, and you think about what's coming
out of China and Europe being less reliant on the
US and looking to invest more domestically.
Speaker 10 (12:25):
I think we want to get through the next.
Speaker 11 (12:26):
Couple of weeks on the tariff conversations and where these
policy decision are going to go in the beginning of
April and getting a little bit more there. But I
think there is an opportunity that international equities could be
a good spot for your portfolio and also comes with
a more attractive PA.
Speaker 3 (12:42):
All right, good stuff, Hey Brian, thanks so much. Good
to see you again and talk with you again. Brian Vendi,
Chief investment Officer at MJP Wealth Advisors, joining us from Scottsdale, Arizona.
Speaker 2 (12:53):
This is the Bloomberg Business Week Podcast. Listen live each
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Speaker 6 (13:11):
Got to talk.
Speaker 3 (13:11):
About Intel jumping the most and I think more than
five years. I got to check my numbers right now,
It's up about fourteen percent, was up almost nineteen percent
of its highs. Today, company naming Lipbutan as its next
chief executive officer and trusting a former board member and
semiconductor veteran with one of the toughest jobs, safe to say,
in the chip industry with what you need to know
back with us, as Bloomberg News US Semiconductor and networking
(13:33):
reporter Ian King, he's out there in our San Francisco bureau.
I'm guessing you've had a pretty busy twenty four hours
or so.
Speaker 6 (13:39):
Ian who is Lipbutan.
Speaker 12 (13:42):
Yeah, Liputan is obviously, as you said, an industry veteran.
He's kind of sixty five years old, got into the
industry really as a sort of bunch of capitalists, then
migrated to become the CEO of an electronic design company
called Cadence. Arguably rescued that company from a difficult situation
and built his career there. I think the defining characteristic,
(14:05):
according to everybody we're speaking to, is that he's renowned
as somebody who has the biggest network, all of the contacts,
knows everybody knows, every company, knows what's going on in
the industry, and they're hoping that that will be of
use to Intel.
Speaker 5 (14:18):
In a sense I was thinking this morning, he's kind
of like the Kamala Harris of Intel.
Speaker 6 (14:25):
Wait a minute, so much what you mean?
Speaker 5 (14:26):
Tell me if I'm wrong, But it seems like he
plans on keeping pretty much the same strategy as Pat Gelsinger.
Is is he going to do something different that we
know of or do you think he has maybe an
ace up as sleeve.
Speaker 12 (14:43):
Yeah, I mean that's a very good question. So to
address that directly, we don't know yet. I mean, from
what was publicly put out there yesterday was as you
just indicated, very much, Well, you know, we're going to
stay the course here. But the I think, and you're
seeing that reaction in the market today, a lot of
investors would quite like to see some value realize from
(15:06):
this asset in the form of splitting it up. Maybe,
you know, as we know his predecessor, Pat Gelsinger was
variently opposed to that idea. Maybe he isn't. So that's
one of the plays that's going on here. And also
perhaps are more realistic. Maybe he uses this great contacts
network that he's got to bring in some of those
outside customers that Intel needs. I mean, these are all
(15:28):
of the things that are going on in people's minds
right now. But to your point, we.
Speaker 9 (15:32):
Don't know yet.
Speaker 12 (15:32):
We're going to see him face direct questions once he
gets his kind of feet under the table next week.
Speaker 6 (15:38):
Well, that's what I was going to also wonder, or
I wondered Ian.
Speaker 3 (15:41):
Because he has such great contacts across the industry, Jesse
helped facilitate some deals. I know that we've seen Intel
move higher on maybe some kind of deal with his foundry.
We've seen headlines about TSMC pitching Intel Foundry as a
joint venture to Nvidia and Broadcom.
Speaker 6 (15:57):
That was a Reuter story.
Speaker 3 (15:58):
But like you've been focused on this too, about you know,
kind of what iteration of Intel going forward and is
he the guy to kind of get it done and
get it done?
Speaker 6 (16:07):
Well, yeah, I.
Speaker 12 (16:09):
Mean again, I think you're going to the heart of
the matter here. If Intel is to stay the course,
it needs outside customers. It needs orders from Nvidia, from Apple,
from AMD, from everybody else. So you need somebody who
knows how to talk to them and persuade them that
Intel is no longer the big vibe wolf, that it's
here to help you and you should use its factories
(16:31):
that would help Intel to become what it wants to become,
what it says it should be.
Speaker 9 (16:36):
On the flip side of it, if you're.
Speaker 12 (16:38):
Going to split Intel up, it's an enormously important and
complex set of dependencies, set of requirements, whether it's government,
whether it's customers. So there's a lot going to have
to go into a deal. If it's going to be
split up, whether it's for the product side or whether
it's for the factory side, that would require somebody who
knows how to pull on these various threads and dance
(16:59):
through the various corridors of power and boardrooms to make
this happen.
Speaker 9 (17:03):
So maybe that's who he is as.
Speaker 12 (17:04):
Well, So could work either way, but Intel certainly has
a lot of work to do ahead of it.
Speaker 5 (17:11):
You know, my biggest worry is the great state of Ohio.
Here Intel was going to invest I think thirty billion
dollars in a new fab right in between Granville and Columbus.
So many businesses and and and consumers there had been
preparing for the big winfall that that would be.
Speaker 8 (17:33):
Are they still going to be able to do that?
Speaker 5 (17:36):
Is it dependent on billions of dollars in the federal government?
Is Trump going to put an end to that with
the sort of cancelation of the Chips Act.
Speaker 12 (17:45):
Yeah, So what Intel have said is, look, we'll build
it when it makes sense, and it doesn't make sense
right now. Okay, we don't need the capacity, we're not
going to build it. So in theory, if they do
get some of the orders from outside companies, if they
do realize you know, some engagements, they do get better
products out there, they have more demand, then it makes
(18:06):
sense to build Ohio. The project could come back online.
And as you know from the Chips Act as it stands,
is basically an achievement based system where you do a
certain thing, you get a certain amount of money, you
move on to the next stage and you get the
money for that. So it all could come back together.
But the chip industry is littered in history with what
(18:28):
are called shells, the plants built but no equipment in them.
Without the equipment, they're meaningless. Companies throughout history have built
these things thinking maybe on need, this is kind of
an option, and then it never comes to pass, and
that could be Ohio's fate.
Speaker 6 (18:44):
Hey, I in horrible care, I know, I'm sorry for that. Well,
you know, right, poor book guys, I.
Speaker 3 (18:49):
Know, I know, right, And the expectations of what that
would do, certainly for local economies. Hey, ian Ton, I
mean there's naming a CEO and then there's making sure
that you've got kind of the key senior people in
place for wherever the company's going. Do you anticipate that
he's going to be bringing in other people? Does he
need to change some teams around, or is it enough
just to have the CEO with maybe be you know,
(19:11):
a different background and just kind of taking the company
on his own forward.
Speaker 12 (19:16):
There was a sense under his predecessor, Pat Gelsinger that
you know, things got shaken up at the top. There
were a lot of you know, comings and goings of executives.
And there was also the same thing under their predecessor,
you know, Brian Krasanich and Bob Swans.
Speaker 9 (19:32):
It's hard.
Speaker 12 (19:33):
Intel used to be a company that grew its own
and had a very clear succession plan and everything would
filter up. Now we're really not sure whether it's internal
folks that are the answer, whether they need talent from outside.
Going to be hard to do that though.
Speaker 3 (19:48):
So how much time does Intel have or how much
time does time have in other words, how much time
do investors give him to kind of figure this out?
Speaker 9 (19:57):
Again?
Speaker 12 (19:57):
I think the very important question you the doom and
gloom talk is all Intel's finished, Oh dear, you know,
it's going to fade away. It's still a very big company.
If they cut back on the spending, if they cut
back on this a plan to return to being what
they were. It's a profitable company. It's a smaller company.
It's not the Intel that it used to be, but
(20:17):
it's it's a viable company. So there are a lot
of decisions to be made here. If they still go
for it, it doesn't have a lot of time, right, because
the numbers don't add up. If they retrench, if they
are less ambitious, it's there's no time with it.
Speaker 5 (20:31):
Yeah, two billion dollar company right now?
Speaker 7 (20:37):
Yeah?
Speaker 5 (20:38):
And videos two trillion, eight hundred and fifty billion dollar company.
Speaker 8 (20:44):
There's a big.
Speaker 5 (20:45):
Discrepancy there, right, and the and the and by the way,
the estimated PE for in video is twenty five. The
estimated PE for Intel's fifty.
Speaker 6 (20:51):
I got about twenty seconds.
Speaker 12 (20:52):
Any thoughts, Yeah, you're absolutely right.
Speaker 9 (20:55):
I mean, the numbers do not lie.
Speaker 12 (20:57):
There's been a massive transfer of wealth, not only in
the stock market, but reflecting where the industry has gone
away from.
Speaker 9 (21:03):
Intel into Nvidia.
Speaker 12 (21:05):
And unless Intel can do something about that, then the
numbers are still going to be ugly, all.
Speaker 6 (21:09):
Right, Ian, thanks so much.
Speaker 3 (21:10):
We know it's been a busy week for you, so
appreciate getting some time and getting you to weigh in it.
Speaker 6 (21:15):
We actually Tim and I read.
Speaker 3 (21:17):
Ian story as soon as it hit the terminal yesterday
because we wanted to make sure we shared it with
everybody in king usmconductor and networking reporter at Bloomberg News.
As we said, shares of intel Man, they are just
soaring in today's session. I think it's a top gainer
in the S ANDP of the nawstetain since February.
Speaker 13 (21:32):
Yeah.
Speaker 6 (21:33):
Huge.
Speaker 2 (21:34):
You're listening to the Bloomberg Business Week podcast. Catch us
live weekday afternoons from two to five pm Eastern. Listen
on Apple CarPlay and the Android Auto with the Bloomberg
Business app, or watch us live on YouTube.
Speaker 6 (21:48):
You might recall last week we did see a.
Speaker 3 (21:51):
Visit to the White House by executives in the crypto
industry falling President Trump's executive order creating a strategic Bitcoin
reserve and a national stockpile of other tokens. Guest was
at the White House Digital Assets Summit last week. Joining
us is Andrew Dirgy. He's go CEO of Republic. It's
a private investing platform for crypto for startups, gaming and
real estate. The Lore Equity, Galaxy Interactive, and Morgan Stanley
(22:13):
are among its factors. Andrew joining us from Florida. Hey, Andrew,
good to have you here with Matt and myself. Hey
take us to that meeting last week? Kind of how
it all went down.
Speaker 7 (22:23):
Yeah, you know, it really was a special experience.
Speaker 13 (22:26):
Overall, for fifteen years that I've been in the space,
every day has been nothing but headwinds, particularly from the
US government or what I would say felt like getting
punched in the face over and over again. And me
and a variety of close friends and partners that have
been in the trenches in the industry for a long
time show up and we got a hug from the government.
So that was a very emotionally confusing moment, I think
(22:48):
for a variety of us. But you know, it really
showed how serious the administration is at not only looking
at the space of what's coming in the future, but
making sure that we can event what has previously happened
in the past. And they really gave a form for
the industry leaders to all come together and have an
opportunity to have a speaking moment and have requests and
(23:10):
figure out what's going to be the right path over
the next four years to make sure that change happens
and change stays.
Speaker 5 (23:18):
Hopefully, the getting punched in the face over the last
fifteen years, the blow was softened as you got richer
and richer if you held bitcoin. I mean, it hasn't
been that bad, right for those who hold these digital assets.
At one point I bought a bitcoin for six hundred
dollars and a couple weeks ago it crossed over one
hundred thousand. Is that a directional? Is that direction going
(23:41):
to continue to be up, up up? You know.
Speaker 7 (23:45):
I love what you said there.
Speaker 13 (23:48):
Oftentimes people will associate the you know, happiness with the
economic growth. But that's assuming that people held the asset
like indefinitely, right, And usually what I'd tell people I
got involved in twenty ten. The only different between me
and someone who got involved in twenty nineteens, I just
suffered a lot more, right.
Speaker 7 (24:03):
A lot of people didn't understand what was going on.
Speaker 13 (24:05):
A lot of people were concerned this with a scam
or ponds he or whatever.
Speaker 7 (24:10):
And you know, now we see institutions.
Speaker 13 (24:11):
That are very much involved as it relates to bitcoin,
and it's just an entirely different veil that we get
to wear, and that's exciting.
Speaker 7 (24:19):
And what was this like a part of your question?
Speaker 5 (24:21):
Well, I was just wondering if you can, if you
expect bitcoin to continue to move in that direction. I mean,
it has been astounding to me. I remember Joe Wisenthal.
I told him I loved it at two fifty and
he messaged me at seventy five and said, you've got to,
you know, double up now, and I wish I had.
Speaker 6 (24:39):
Obviously you're still here, so I'm guessing you didn't.
Speaker 5 (24:42):
Yeah, I spent I was transacting with my bitcoin, which
is ridiculous. I bought a beer with bitcoin and you
could buy a car with that now. But do you
think we're going to go to two hundred thousand to
five hundred thousand, and what's your time frame for that?
Speaker 8 (24:57):
What are your expectations?
Speaker 13 (25:00):
Yeah, listen, the reality is there's only ever going to
be twenty one million bitcoin, right, That's it. And in
twenty thirty four, I think twenty thirty five, ninety nine
percent of that bitcoin will be in circulation nine nine
point nine percent. So there is a real scarcity around it.
And now you know the comparison we always like to
draw up the firm is, you know, what is the
(25:21):
if we're looking at bitcoin as an actual gold competitor
and we compare it to what is the actual size
the gold market. Bitcoin has a long way to go
still to this day, and if as we're moving through
it's already been announced that there's a strategic bitcoin reserve coming,
and it's been announced that they are going to be
buying bitcoin, you know, there is a scenario here, not
(25:42):
just in the US by the way, obviously we're talking
about the US, but it will expand far beyond that
where governments we'll print money to buy bitcoin. Now, ultimately,
the US commitment is it's not going to cost tax
payers any dollars, right, They're going to build a strategic
reserve with additional cost to the citizens here. But every
other country may not operate that way. So you're looking
at a really unique dynamic again where governments will be
(26:05):
printing fee I be printing money and ultimately to build
up their bitcoin reserves.
Speaker 7 (26:10):
So yes, I think it's very much still directional.
Speaker 3 (26:13):
But were you so much I want to go back
to the White House meeting. Weren't you somewhat disappointed. It
seemed like the crypto industry was overall. I think they expected,
you know, the administration, the government to be active buyers
and not just bitcoin but other currencies.
Speaker 6 (26:26):
So weren't you disappointed a little bit?
Speaker 5 (26:30):
You know?
Speaker 13 (26:30):
I think the industry itself definitely has very much knee
jerky reactions. It's that the nature of the space in
and of itself. But I think that event was a
very big symbol, and symbols can be powerful. It would
not ignore that, right Camervo was Tyler or Cameron winkleboss
had a really great quote, and I told them I
was going to steal this in the future, so I'm
(26:51):
doing it now.
Speaker 7 (26:52):
Guys.
Speaker 13 (26:52):
Sorry, They said, you know, a year ago, they thought
it would be more likely that you know, they could
be in prison rather than in the White House, right,
and that that that's a wild thought. And they continued
on beyond that to even say, you know, right now,
crypto businesses are born in law firms rather than being
born inside dorm rooms and garages, right, and so that
(27:14):
that that is a real problem.
Speaker 5 (27:16):
So that's crazy because those are a couple of the
most respectable people, I think in the crypto industry.
Speaker 3 (27:23):
But wait, wait wait, but were you disappointed? Did you
expect to get more in terms?
Speaker 5 (27:27):
No?
Speaker 7 (27:27):
Yeah, okay, what was going to happen? Like what what?
Speaker 4 (27:30):
You know?
Speaker 13 (27:30):
It's not like their bills were going to be passed
in that room, right, But we had a room with
all we had there was about thirty people. You had
six or so cabinet cabinet members and legislators. You had
four regulators, and you had twenty industry people give or
take something like that. Everyone had a moment to make
a request and ask for something, and those asks were very,
very powerful and one of the more common ones that
(27:51):
took place that you know, the twenty probably eight to
ten people asked, is they want to see legislation. The
real fear is that we're going to make these executive
orders and we are going to make these these big moves,
but four years from now that those can be undone
and we don't want to see that happen. We want
whatever we do ultimately to have long standing, you know,
(28:13):
long standing power on a go for so we can
build a business around it.
Speaker 7 (28:17):
You know.
Speaker 5 (28:17):
To me, the fear is a lot of people in
the crypto industry have worked for over a decade tirelessly
to build a respectable industry, and obviously there have been
some mean coins and I won't even say s coins
along the way that kind of ruin that. And when
(28:39):
you see a rug pole like trump coin or Milania coin,
that's got to be concerning as well. Right the president
of the United States States issuing a meme coin and
then you know it was trading at seventy five dollars
and then dumped everybody involved and now it's ten. Isn't
that a concern for you? Don't you want someone who's
(29:01):
a little bit more consistent, and you know, someone who
has it kind of a different image than Donald Trump
to be backing this up.
Speaker 13 (29:14):
I think the thing that people need to recognize is
a lot of promises are made in presidential campaigns all
the time, and they're often not kept. And people will
make commitments and when you call in those commitments, it's oh, yeah,
we'll we'll get to that. I got to take care
of this other thing, regardless of where you sit politically.
Donald Trump came in, he made a commitment to make
(29:34):
a variety of changes, and in like the first couple
of months, those things are happening, right. David Sacks had
a really great quote during the Wayoff event. He said,
the administration is moving faster than most startups that David
Sacks has worked with, Right, And that's a wild idea. Like,
we're already this far in a very very short window.
What will be longer?
Speaker 7 (29:53):
Now?
Speaker 13 (29:53):
You know, yes, there is there other things going on
and Trump coin and you know, and other distractions, certainly,
but like, will I take those things to also get
something in the longer vision?
Speaker 7 (30:05):
Absolutely?
Speaker 13 (30:05):
I think, you know, the alternative to what is happening
now was unthinkable, And so now we're in a position
where we have leaders and legislators that really want to
figure out how to make this work and bring innovation
back to the US. One of the largest capital flights,
human capital flights that I know of, was when we
(30:26):
basically eliminated the industry from the US, and you all
the money and all the incredibly intelligent developers had were
forced ultimately to leave the country. We have an opportunity
to bring them back, right, And people who I thought
would never.
Speaker 7 (30:39):
Move back to the US.
Speaker 13 (30:40):
So the smartest people I've ever met my entire life
are now making their way back, and they're bringing the
capital with them and that's going to have a real
impact on not only the industry, but just the economy
in and of itself.
Speaker 8 (30:52):
But you think they'll shake.
Speaker 5 (30:53):
I talked to the CEO of Tether today. Yeah, it
came to us live from El Salvador and well, you know.
Speaker 13 (30:59):
We used was flowing back and it was just a
new Well he you know, he did his first trip
to to the US ever last week in this week,
so he was in DC and then he was in
New York for a Cantor event over the past couple
of days, and that was his first time in the US.
Speaker 5 (31:15):
Is that because Andrew You think he was afraid in
you know, before this administration of the same thing as
the Winkleby, that that he would end up in jail.
Speaker 13 (31:26):
I mean, I can't put words in his mouth, but
I can't imagine that that wouldn't have been a thought,
right that happened with others.
Speaker 7 (31:32):
Let me ask that's a real fear.
Speaker 8 (31:33):
Yeah, I know, I get that.
Speaker 5 (31:35):
Let me ask you a question that you're probably asked
a lot. But Karl was asking me about this during
the break as well. And now I'm getting a listener
who writes in and says, when will we see any
real utility use for bitcoin besides just a proxy for
beta risk taking.
Speaker 8 (31:52):
That's a little bit flipant.
Speaker 5 (31:53):
I think of it as digital gold, but it's a
valid question. We really do transactions, and I'm sure, well,
is that the ultimate goal is transactions? What what you
think we eventually want to be doing with this or
how do you see it?
Speaker 13 (32:07):
I mean for the industry, payments is a is a
real use case and it's being done now at scale
in multiple places.
Speaker 7 (32:14):
Bitcoin. You don't want to buy.
Speaker 8 (32:15):
Anything with right, I mean no?
Speaker 5 (32:19):
And he says, only if you're crazy.
Speaker 7 (32:21):
Yeah, yeah, yeah.
Speaker 13 (32:22):
And you know, my sailor is very much in the
cant that bitcoin is a commodity, even though it's not
taxed appropriately as a commodity, but that it is a commodity.
Speaker 1 (32:30):
Uh.
Speaker 13 (32:31):
And you know from a transactional perspective, in its native state,
it's not great for that.
Speaker 7 (32:36):
Fundamentally it's a store of value.
Speaker 13 (32:38):
But other things built on Bitcoin, like bitcoin lightning, Tether's
building an L two on bitcoin as well.
Speaker 7 (32:44):
You know, that's all moving now which will allow it
to be very transactional.
Speaker 13 (32:48):
But Bitcoin in its native state is very much a
store of value, or like that digital gold idea, which
is why a strategic reserve for that actually makes a
lot of sense.
Speaker 6 (32:56):
All right, we gott to leave it there. Interesting stuff.
You know, I didn't even get to the headline.
Speaker 3 (33:00):
Did you see the journal at the Trump family holding
talks to take a financial stake in Binance?
Speaker 8 (33:04):
Yes, along with the Melania Coin.
Speaker 3 (33:09):
Our Andrew Jurgy, Co, CEO of Republic, joining us from Florida.
Speaker 1 (33:14):
You're listening to the Bloomberg Business Week Podcast. Catch us
live weekday afternoons from two to five these during this
listen on Applecarplay and Android autto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 3 (33:28):
All right, folks, we are just about eighteen minutes away
from the closing bell on Wall Street. I want to
point out a story in the Bloomberg today just reminded
us about what we've seen in the municipal bond market.
Biggest sell off in more than two years, causing valuations
to tumble, opening a buying window for investors able to
withstand the volatility. Welcome to our new reality. Our next
guest invest in the meunia market with us as we
(33:49):
drive to the closed Lyle Fitterer, Co Lead Municipal Sector
and senior portfolio manager over at Bear joining us right
here in our Bloomberg Interactor broker studio.
Speaker 14 (33:57):
How are you good, How are you guys doing? Thanks
for having me.
Speaker 3 (34:00):
It's good to have you here, you know, trying to
keep up with the headlines. How do you kind of
pull in everything that we're getting out of Washington and
just geopolitics, trying to figure out kind of what it
means for the US economy, what it means for state
and local governments, how it impacts the communi market.
Speaker 14 (34:15):
Yeah, I think what you're seeing going on right now
is in obviously every market, right is that people are
reassessing risk in the marketplace. You know, it's the same
thing in the municipal market where what sort of federal
support are you going to get on a go forward basis,
What programs are they going to cut, what's going to
happen to medicate? How's that going to impact a healthcare organization?
So for us, it means you got to take down risk,
(34:37):
which we had already been doing in our portfolios. Probably
take up liquidity in your portfolios to really, from our perspective,
provide ammunition for and dry powder to invest when the
market gets cheaper, and we're seeing that now.
Speaker 5 (34:52):
And it makes a lot of sense that the muni
market would feel it worse than others because you need
that federal backing in a lot of situations. And you know,
the dose has shown that it could get act.
Speaker 8 (35:06):
At a moment's notice.
Speaker 5 (35:08):
Where are the biggest dislocations in the market right now?
Speaker 14 (35:12):
Again, it's interesting what happens in our market is the
high grade part of the market actually reacts first, so
you know, because things trade and so therefore they get
remarked in people's portfolios. The high yield sectors actually usually
that reaction takes a little bit longer. So whereas in
the corporate market you're seeing corporate credit spreads widen, you're
seeing you know, structured product widen not a little bit.
(35:34):
In our market, actually, higher quality names are actually leading
the way as the market has sold off, which again
isn't unusual, but again I think it's actually providing an
opportunity where you can go out and you know, there
were deals priced today. I think with five coupons double
A rated that we're pricing out a four and three
quarter yield on the long end, which again, yeah, that's
pretty attractive for a tax exempt buyer. Again, assuming that
(35:57):
tax exemption continues.
Speaker 3 (35:59):
I mean, is it a safe assumption, Lele that with
what's going on with the US federal government that less
money if we continue along this path, is going to
be going to states, and they have mandates right often
right to they've got to get balance budgets, So somewhere
things are going to be cut.
Speaker 14 (36:16):
Yeah, and again I think they were. They're dealing with
the reality already that the stimulus money has run out now,
so a lot of those were still it was part
of their budget last year and potentially this year that
they still had some of those funds left over. So
many states and local governments didn't necessarily build that into
their budget forecasting. They had it built in as if
(36:36):
that money was going to continue into perpetuity. So they're
dealing with that now. They have to deal with the
uncertainty surrounding are they going to get cuts to other
federal programs.
Speaker 8 (36:45):
In the end.
Speaker 14 (36:45):
Again, maybe I'm too much of an optimist. I think
they're going to realize that the impacts of this, especially
for smaller state and local governments and smaller issuers in
the UNI market, would be substantial, and so the funding
will come through. But again there's going to be a
peer ate of volatility, and that that volatility and that
kind of unknown out there is what causes you know,
(37:06):
markets to sell off.
Speaker 5 (37:09):
If we have a government shutdown, how does that affect
the sector? You've seen it before, right, So what's the
playbook look like?
Speaker 14 (37:16):
Yeah, again, I don't know that it necessarily has spilled
over hugely into the UNI market before. I think, you know,
there used to be you had the pre refunded market
that you couldn't do deals that would get pre refunded
because you didn't have access to treasury strips to for
the to fund those refundings. You don't have that anymore,
So it would be just like any other market, where
(37:37):
again the uncertainty of okay, how long are we going
to shut down? What does that mean for payments that
are going to state and local governments? What does that
mean the payments that are going to social security beneficiaries?
You know, So it's the trickle down of impact. And again,
all it means is uncertainty. What does the market do
with uncertainty? It creates volatility. It means things probably have
to get cheaper.
Speaker 5 (37:57):
What if we have a recession I mean there's some yeah,
somewhat of a growth scare over the last few weeks,
and I'm not saying that a recession is forecast, right.
Speaker 6 (38:06):
But people are talking about them a lot more. So
you wonder, I.
Speaker 14 (38:09):
Think a recession actually means that treasury market probably rallies,
So while muni's maybe lag in that scenario, it still
means that high quality MUNI prices go up and yields
come down, which for most buyers that means their portfolio
is actually appreciate in that environment. But it also means
that people start to reassess then credit risk, so your
(38:31):
lower quality issuers then start to get impacted more in
that type of scenario. But again, historically what happens in
those scenarios is when interest rates come down, a recession hits,
the price impact of lower yields in the treasury market overwhelms,
maybe that spread widening. If you understand that so effectively,
you actually have a portfolio that could actually appreciate in value.
Speaker 12 (38:55):
You know, we had a.
Speaker 3 (38:55):
Great segment yesterday where we're kind of going through thing
by thing, the equity market, the bond market, credit spreads,
a lot of different factors to see whether or not
they were pointing to recession because you can focus and
kind of obsessed with one indicator and say, oh my god,
a recession's coming. And this was a Bloomberg opinion column
by New York sar and it was just in totality, no,
(39:17):
it doesn't seem like recession.
Speaker 6 (39:18):
But I do want to ask from.
Speaker 8 (39:19):
Your by the way, that was a great interview.
Speaker 3 (39:21):
I know it was, But from your advantage point, do
you see anything that says to you recession?
Speaker 14 (39:27):
Not at this point. So again I think you mentioned,
you know, corporate credit spreads have held in extremely well.
Now they're off thirteen basis points or something I think
off their lows on a year to date basis. High
yields probably off a little bit more than that, but
still well through their long term averages. If you look
at the muni market even you know, if you look
at where credit spreads are in the muni market, they're
(39:49):
you know, they're tighter than their long term averages, especially
within high yields. So again, all those markets I think
are saying, hey, we're not headed into a recession, but
they're quickly reeventedvaluating. And that's why you're starting to see
credit spreads widen. That's why you're starting to see people reassess, Okay,
how long is this volatility going to be out there?
When are we going to get some certainty from the
(40:09):
administration to kind of understand what's going on and give
us the confidence that we can then make a rational
decision and put money to work in our portfolios.
Speaker 5 (40:20):
Just got thirty seconds here, but got a bond trader
on the horn. He says, what's a catalyst to take risk?
Speaker 8 (40:27):
Here?
Speaker 5 (40:27):
Every day's a tate bomb or a war headline.
Speaker 14 (40:31):
Again, I think it's you've got to just look at
the long term. What are you getting paid in the
fixed income market to take risk? And again, I think
if you look at it, you would say, buy higher
quality securities on a treasury right now on the long end,
it's what foreig and three quarters somewhere around that on
a thirty year MUNI I think you heard me say
it earlier. I think some stuff traded today at around
(40:52):
foreign three quarters tax exempt if you adjusted pretty.
Speaker 8 (40:55):
Attrax hell is pretty attractive.
Speaker 6 (40:57):
So that tax remutings before we get stuck.
Speaker 5 (41:00):
Yeah, fal Sweeney just goes home and swims in a
pool of munies every day after work.
Speaker 6 (41:04):
We still have a reporty or of years ago and
she's like, you win the lottery.
Speaker 14 (41:06):
You put it in text remuties like yeah, and just
go home and relax exactly. I'm Lyle.
Speaker 6 (41:12):
Thanks great to get some time with you.
Speaker 2 (41:14):
This is the Bloomberg Business Week podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live weekday
afternoons from two to five pm Eastern on Bloomberg dot com,
the iHeartRadio app, tune In, and the Bloomberg Business App.
You can also watch us live every weekday on YouTube
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Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2 (00:08):
This is Bloomberg Business Week Insight from the reporters and
editors that bring you America's most trusted business magazine, plus
global business, finance and tech news. The Bloomberg Business Week
Podcast with Carol Masser and Tim Stenovek On Bloomberg.
Speaker 3 (00:25):
Radio Carol Master along with Matt Miller. Hey, we did
get another inflation print this morning. US wholesale inflation for
the month of February stagnating thanks to a sharp decline
in trade margins. We wanted to get into that with
our own Michael McKey, Bloomberg News International Economics and Policy correspondent.
It is our second read on US inflation, so Mike's
second one on inflation. I don't know, how do you
(00:48):
put this together with the CPI report today and is
this kind of what the Fed is looking for?
Speaker 4 (00:52):
Well, this was a little bit better in terms of
the overall numbers for the Fed. However, you said the
decline of the flatness was thanks to the trade numbers
in there. Don't refer to international trade. It refers to
the margins for wholesalers and retailers and if their margins
are going down, that's not good for profits, and Matt
(01:12):
was talking when we were off the air about profit
analysts marking down profit forecast. So that's a little bit
of bad news in there. Other than that, the parts
of the PPI that get folded into the PCE, which
is the Fed inflation indicator, we're stronger in most cases
(01:33):
than anticipated. So it looks like between the CPI and
the PPI, PCE is actually going to rise this month.
Speaker 5 (01:42):
This is what I think is fascinating because I've been
noticing lately that you and other economists, when you get
CPI and PPI, you can start to put together the
pp PCE number, and that's what the Fed cares about, right,
And last time we saw it was much weaker. But
now this seems to be showing that maybe the prices
will firm up in the PCE.
Speaker 4 (02:02):
Yes, not that much, maybe fifty basis points not a
huge rise. But what it does is tell the Fed
they have more work to do, and it ratifies if
doesn't necessarily encourage them to keep rates at unchanged. Now
we know they're not going to change rates next week,
but this just gives a more runway to say, we
(02:25):
don't know what's going on in the economy, So let's
just sit here and inflation gives us the reason.
Speaker 6 (02:29):
What do we need to know about the weekly jabas
claims number?
Speaker 4 (02:32):
Jobs claims is still a surprise that it stays so low.
A lot of talk about the economy maybe slowing down,
but we're not seeing any evidence in terms of layoffs.
Federal initial claims went up, but not even as much
as last week, so we're not getting a clean read
on that yet and it'll be a while until we do,
(02:52):
probably because of the back and forth on whether you're
fired or not if you work for the federal government.
But the number you want to watch, and we'll be
putting this out on Bloomberg a lot over the coming weeks,
is the continuing claims for federal workers, because that'll be
the adding them all up and we'll get a better
(03:12):
idea we did we did. Don't have any idea right
now exactly how many people have been fired or let go.
Speaker 5 (03:19):
Yeah, I thought it was interesting when we were talking
this morning. Mike was on my television show Bluebet Open
Interest every day from nine to eleven, and.
Speaker 4 (03:28):
The greatest show.
Speaker 5 (03:30):
It's the best show in the history of telling Nobody's
made a better show. In fact, not that we were
talking about whether or not this economy really belongs to
President Trump or whether or not we're still seeing the
after effects of the Biden economy.
Speaker 7 (03:44):
I guess that's debatable.
Speaker 5 (03:45):
But it seems to me that you will start to
see the inflation from the trade concerns come in in
the next slew of reports, or that you'll start to
see the effects of the federal government firings in the
next slew of reports.
Speaker 8 (04:00):
Is that right.
Speaker 4 (04:01):
It'll take a little while for all these numbers to
get in there, especially the inflation ones that go through middleman,
like you know, the steel and aluminum tariffs. Now, in
this month's PPI, we saw prices rise a lot for
steel and for aluminum, and it clearly the companies were
anticipating these tariffs and raised prices ahead of it. So
(04:23):
we may see that, but then you know, the stuff
gets used and put into other things, uh, cars being
a big example, and it'll take a while for prices
to go up because of that, and or motorcycles people have,
or motorcycles people have in this month, and yeah, they
use a lot of steel.
Speaker 9 (04:43):
Yeah.
Speaker 4 (04:43):
So yet you could say we'll notice it in a while,
it doesn't really matter whose economy it was.
Speaker 9 (04:51):
It's funny the administration has been saying.
Speaker 4 (04:53):
This is Biden's economy, except yesterday and today when inflation
was lower, and they said, oh, CPI PPI, this is
Trump's academy. But it's the voters who make.
Speaker 3 (05:04):
The decision really quickly twenty seconds. Do the tariffs have
to roll back in order for there to be a
strong US economy later this year? With the Commerce Secretary
Howard Lutnik seemed to say to Bloomberg surveillance this morning,
do we have to see the tariffs roll back though
in order to get there?
Speaker 4 (05:19):
I would guess so, But we don't know what the
tariffs are going to be yet exactly, so it's hard
to make a definitive prediction.
Speaker 3 (05:25):
All right, good stuff, Mike, Thank you so much. Bloomberg
News International Economics and Policy Correspondent Michael McKee.
Speaker 2 (05:31):
You're listening to the Bloomberg Business Week podcast. Catch US
live weekday afternoons from two to five pm Eastern. Listen
on Apple CarPlay and the Android Auto with the Bloomberg
Business app, or watch US Live on YouTube.
Speaker 3 (05:44):
President Trump's trade war chaos has led to growing calls
to lock in profits sit on the sidelines, replacing the
buy the mentality that dominated Wall Street for decades, and
despite some attempts to snap up discounted stocks, S and
P five hundred hasn't noted two consecutive days of gains
since its February peak, and market watchers say they do
not see signs of a meaningful rebound rally yet, which
(06:07):
can definitely make it tricky for someone who has more
than a billion dollars in assets under management, which is
the case of our next guest. Let's add to you Scottsdale, Arizona,
and to Brian Vendig, chief investment officer at MJP Wealth Advisors.
As we mentioned they have exactly are around one point
two billion in assets under management.
Speaker 6 (06:23):
Brian, good to have you here.
Speaker 1 (06:26):
S and P.
Speaker 3 (06:26):
Continuing to flirt around correction territory. Curious about your clients.
Have they been reaching out over the last couple of
weeks as stocks have sold off?
Speaker 10 (06:37):
Hey, Carol, great to speak with you again.
Speaker 11 (06:39):
Yes, I mean the outreach from clients has been intense,
and I think that intensity has picked up over the
last couple of weeks. And look at the end of
the day from an investor's point of view, not having
that certainty to know how the extent of these policies
decisions might go on varying degrees. Here, plus hearing that
(07:00):
economists are talking about stagflation recession concerns, and couple that
with outlooks changing for S and P five hundred growth
this year and revisions to us GDP Carol. People need guidance,
People need clarity to know what is the extent of
this correction. And I will just say that the setup
(07:21):
was there for some volatility going into this year as well.
This is not necessarily all just policy driven. I think
there's some fundamental valuation concerns about different parts of the market,
because when you look under the hood, you see that
there is a rotation going on between growth and value,
and I think that has a lot to do with
how much investors want to pay for growth right now.
Speaker 5 (07:40):
Well, and the tech earnings may not be exactly what
we expected. It's not unusual, right I was looking at
the queues last year and we had a summer swoon
that was I think a discount of thirteen or fourteen
percent in July to August on the Nasdaq one hundred.
But the concern is is you don't get the fourteen
(08:03):
percent growth everyone was expecting this year because you just
don't have to pay as much to make a deep
seek AI model work.
Speaker 10 (08:12):
No, that's fair, Matt.
Speaker 11 (08:13):
I mean I think when you look at the quality
of earnings over the last couple of years, I mean,
the outlooks for this year was that tech would grow
about somewhere between sixteen to twenty percent on average, and
you'd get a bigger push from earnings coming from areas
outside of tech, which we've talked about with our clients
and investors and still believe that that's going to be
one of the main themes over the.
Speaker 10 (08:32):
Balance of the year.
Speaker 11 (08:33):
But I think to your point, the reaction of Deep Seek,
I think was a little bit of a knee jerk
because as innovation normally happens, price and cost does go down,
but then that improves productivity and a wider adoption. So
for our clients, we are cautious in this environment for sure,
because we were lowering our expectations of growth because of
(08:57):
the uncertainty around policy.
Speaker 10 (08:59):
But I also still see that there are.
Speaker 11 (09:01):
Opportunities in tech when you think about the expansion and
adoption through through software, and maybe it's not so much
of that hardware conversation that you're you're implying that.
Speaker 5 (09:11):
So all right, first of all, where do you see
those opportunities and is it enough to make up for
a drop in the massive hardware games. I mean, if
you look at the three trillion dollar companies, you know,
Apple and and Video. You know, if those lose their mojo,
(09:32):
can we make it back with Microsoft or you know,
more of a software play.
Speaker 10 (09:39):
Well.
Speaker 11 (09:40):
I think this correction and this reevaluation of earnings multiples
going forward, it's really a case by case basis. I
think you're seeing more of active management, you know, helping
us work portfolios and making those choices between company names
and growth versus value.
Speaker 10 (09:55):
Let me give you an example.
Speaker 11 (09:57):
I mean Apple for recently pulling back because as it's
delaying a launch of an AI innovation tool that surprise investors.
That's a different story than possibly what we're going to
hear next week from Navidia regarding the adoption and the
ramping up of Blackwell and the next version of Blackwell,
which might be even more efficient to implement from a
(10:19):
server perspective, and what the adoption rate might be in
their ecosystem going forward, So I think it's a case
by case and looking at things on.
Speaker 10 (10:27):
A four to pe perspective.
Speaker 11 (10:29):
In the video, it's a lot more attractive now obviously
than it did at the beginning of the year. I
think the opportunities still exist in those aspects of that
AI innovation trend because it's still going to play out
over the next five years. But you just got to
be patient. It's not going to happen all one year.
And on the value side, we still like those names
that can participate in growth moving forward, healthcare industrials, some
(10:52):
elements of financials. But you've got to be cautious that
the economic environment is changing in the short term because
the administration is looking to decouple the United States and
some aspects of the global economy. So you have to
be sensitive to small caps right now. You have to
be sensitive to some of these companies that will get
caught up in the tariff conversations, like autos and others,
(11:13):
where there is a lot of this cross border exchange
issues that companies pay for. And that's the part that
I think investors don't realize with some of these conversations,
is that it's not that this extra tariff money is
going to go back to the government. It's actually being
absorbed by companies, and companies now are making a decision
on how they're going to try to protect margins, and then,
of course the concern is how does that play out
(11:34):
to consumers. So we're cautious in this environment, Matt, but
we're also not giving up the US capital market system.
Speaker 3 (11:41):
Yeah, I'm looking at the wrestle down about ten percent
so far this year. Hey, Brian just got about thirty
seconds here. We talked earlier with our Ed Harrison about
money moving from the US to Europe. We've seen the
European markets outperform easily by wide margin. US DOXS is
measured by the S and P five hundred. Are you
moving money outside the US for your clients Europe or
(12:03):
elsewhere just quickly?
Speaker 10 (12:06):
Yeah, sure.
Speaker 11 (12:06):
I mean we've had we have an exposure to international
most of our portfolios, and we are evaluating adding to
that because it seems like the investment in countries right
now are being bolstered, and you think about what's coming
out of China and Europe being less reliant on the
US and looking to invest more domestically.
Speaker 10 (12:25):
I think we want to get through the next.
Speaker 11 (12:26):
Couple of weeks on the tariff conversations and where these
policy decision are going to go in the beginning of
April and getting a little bit more there. But I
think there is an opportunity that international equities could be
a good spot for your portfolio and also comes with
a more attractive PA.
Speaker 3 (12:42):
All right, good stuff, Hey Brian, thanks so much. Good
to see you again and talk with you again. Brian Vendi,
Chief investment Officer at MJP Wealth Advisors, joining us from Scottsdale, Arizona.
Speaker 2 (12:53):
This is the Bloomberg Business Week Podcast. Listen live each
weekday starting a two pm Eastern up on Apple Car
Play Android Auto with the Bloomberg Business app. You can
also listen live on Amazon Alexa from our flagship New
York station, Just Say Alexa played Bloomberg eleven thirty.
Speaker 6 (13:11):
Got to talk.
Speaker 3 (13:11):
About Intel jumping the most and I think more than
five years. I got to check my numbers right now,
It's up about fourteen percent, was up almost nineteen percent
of its highs. Today, company naming Lipbutan as its next
chief executive officer and trusting a former board member and
semiconductor veteran with one of the toughest jobs, safe to say,
in the chip industry with what you need to know
back with us, as Bloomberg News US Semiconductor and networking
(13:33):
reporter Ian King, he's out there in our San Francisco bureau.
I'm guessing you've had a pretty busy twenty four hours
or so.
Speaker 6 (13:39):
Ian who is Lipbutan.
Speaker 12 (13:42):
Yeah, Liputan is obviously, as you said, an industry veteran.
He's kind of sixty five years old, got into the
industry really as a sort of bunch of capitalists, then
migrated to become the CEO of an electronic design company
called Cadence. Arguably rescued that company from a difficult situation
and built his career there. I think the defining characteristic,
(14:05):
according to everybody we're speaking to, is that he's renowned
as somebody who has the biggest network, all of the contacts,
knows everybody knows, every company, knows what's going on in
the industry, and they're hoping that that will be of
use to Intel.
Speaker 5 (14:18):
In a sense I was thinking this morning, he's kind
of like the Kamala Harris of Intel.
Speaker 6 (14:25):
Wait a minute, so much what you mean?
Speaker 5 (14:26):
Tell me if I'm wrong, But it seems like he
plans on keeping pretty much the same strategy as Pat Gelsinger.
Is is he going to do something different that we
know of or do you think he has maybe an
ace up as sleeve.
Speaker 12 (14:43):
Yeah, I mean that's a very good question. So to
address that directly, we don't know yet. I mean, from
what was publicly put out there yesterday was as you
just indicated, very much, Well, you know, we're going to
stay the course here. But the I think, and you're
seeing that reaction in the market today, a lot of
investors would quite like to see some value realize from
(15:06):
this asset in the form of splitting it up. Maybe,
you know, as we know his predecessor, Pat Gelsinger was
variently opposed to that idea. Maybe he isn't. So that's
one of the plays that's going on here. And also
perhaps are more realistic. Maybe he uses this great contacts
network that he's got to bring in some of those
outside customers that Intel needs. I mean, these are all
(15:28):
of the things that are going on in people's minds
right now. But to your point, we.
Speaker 9 (15:32):
Don't know yet.
Speaker 12 (15:32):
We're going to see him face direct questions once he
gets his kind of feet under the table next week.
Speaker 6 (15:38):
Well, that's what I was going to also wonder, or
I wondered Ian.
Speaker 3 (15:41):
Because he has such great contacts across the industry, Jesse
helped facilitate some deals. I know that we've seen Intel
move higher on maybe some kind of deal with his foundry.
We've seen headlines about TSMC pitching Intel Foundry as a
joint venture to Nvidia and Broadcom.
Speaker 6 (15:57):
That was a Reuter story.
Speaker 3 (15:58):
But like you've been focused on this too, about you know,
kind of what iteration of Intel going forward and is
he the guy to kind of get it done and
get it done?
Speaker 6 (16:07):
Well, yeah, I.
Speaker 12 (16:09):
Mean again, I think you're going to the heart of
the matter here. If Intel is to stay the course,
it needs outside customers. It needs orders from Nvidia, from Apple,
from AMD, from everybody else. So you need somebody who
knows how to talk to them and persuade them that
Intel is no longer the big vibe wolf, that it's
here to help you and you should use its factories
(16:31):
that would help Intel to become what it wants to become,
what it says it should be.
Speaker 9 (16:36):
On the flip side of it, if you're.
Speaker 12 (16:38):
Going to split Intel up, it's an enormously important and
complex set of dependencies, set of requirements, whether it's government,
whether it's customers. So there's a lot going to have
to go into a deal. If it's going to be
split up, whether it's for the product side or whether
it's for the factory side, that would require somebody who
knows how to pull on these various threads and dance
(16:59):
through the various corridors of power and boardrooms to make
this happen.
Speaker 9 (17:03):
So maybe that's who he is as.
Speaker 12 (17:04):
Well, So could work either way, but Intel certainly has
a lot of work to do ahead of it.
Speaker 5 (17:11):
You know, my biggest worry is the great state of Ohio.
Here Intel was going to invest I think thirty billion
dollars in a new fab right in between Granville and Columbus.
So many businesses and and and consumers there had been
preparing for the big winfall that that would be.
Speaker 8 (17:33):
Are they still going to be able to do that?
Speaker 5 (17:36):
Is it dependent on billions of dollars in the federal government?
Is Trump going to put an end to that with
the sort of cancelation of the Chips Act.
Speaker 12 (17:45):
Yeah, So what Intel have said is, look, we'll build
it when it makes sense, and it doesn't make sense
right now. Okay, we don't need the capacity, we're not
going to build it. So in theory, if they do
get some of the orders from outside companies, if they
do realize you know, some engagements, they do get better
products out there, they have more demand, then it makes
(18:06):
sense to build Ohio. The project could come back online.
And as you know from the Chips Act as it stands,
is basically an achievement based system where you do a
certain thing, you get a certain amount of money, you
move on to the next stage and you get the
money for that. So it all could come back together.
But the chip industry is littered in history with what
(18:28):
are called shells, the plants built but no equipment in them.
Without the equipment, they're meaningless. Companies throughout history have built
these things thinking maybe on need, this is kind of
an option, and then it never comes to pass, and
that could be Ohio's fate.
Speaker 6 (18:44):
Hey, I in horrible care, I know, I'm sorry for that. Well,
you know, right, poor book guys, I.
Speaker 3 (18:49):
Know, I know, right, And the expectations of what that
would do, certainly for local economies. Hey, ian Ton, I
mean there's naming a CEO and then there's making sure
that you've got kind of the key senior people in
place for wherever the company's going. Do you anticipate that
he's going to be bringing in other people? Does he
need to change some teams around, or is it enough
just to have the CEO with maybe be you know,
(19:11):
a different background and just kind of taking the company
on his own forward.
Speaker 12 (19:16):
There was a sense under his predecessor, Pat Gelsinger that
you know, things got shaken up at the top. There
were a lot of you know, comings and goings of executives.
And there was also the same thing under their predecessor,
you know, Brian Krasanich and Bob Swans.
Speaker 9 (19:32):
It's hard.
Speaker 12 (19:33):
Intel used to be a company that grew its own
and had a very clear succession plan and everything would
filter up. Now we're really not sure whether it's internal
folks that are the answer, whether they need talent from outside.
Going to be hard to do that though.
Speaker 3 (19:48):
So how much time does Intel have or how much
time does time have in other words, how much time
do investors give him to kind of figure this out?
Speaker 9 (19:57):
Again?
Speaker 12 (19:57):
I think the very important question you the doom and
gloom talk is all Intel's finished, Oh dear, you know,
it's going to fade away. It's still a very big company.
If they cut back on the spending, if they cut
back on this a plan to return to being what
they were. It's a profitable company. It's a smaller company.
It's not the Intel that it used to be, but
(20:17):
it's it's a viable company. So there are a lot
of decisions to be made here. If they still go
for it, it doesn't have a lot of time, right, because
the numbers don't add up. If they retrench, if they
are less ambitious, it's there's no time with it.
Speaker 5 (20:31):
Yeah, two billion dollar company right now?
Speaker 7 (20:37):
Yeah?
Speaker 5 (20:38):
And videos two trillion, eight hundred and fifty billion dollar company.
Speaker 8 (20:44):
There's a big.
Speaker 5 (20:45):
Discrepancy there, right, and the and the and by the way,
the estimated PE for in video is twenty five. The
estimated PE for Intel's fifty.
Speaker 6 (20:51):
I got about twenty seconds.
Speaker 12 (20:52):
Any thoughts, Yeah, you're absolutely right.
Speaker 9 (20:55):
I mean, the numbers do not lie.
Speaker 12 (20:57):
There's been a massive transfer of wealth, not only in
the stock market, but reflecting where the industry has gone
away from.
Speaker 9 (21:03):
Intel into Nvidia.
Speaker 12 (21:05):
And unless Intel can do something about that, then the
numbers are still going to be ugly, all.
Speaker 6 (21:09):
Right, Ian, thanks so much.
Speaker 3 (21:10):
We know it's been a busy week for you, so
appreciate getting some time and getting you to weigh in it.
Speaker 6 (21:15):
We actually Tim and I read.
Speaker 3 (21:17):
Ian story as soon as it hit the terminal yesterday
because we wanted to make sure we shared it with
everybody in king usmconductor and networking reporter at Bloomberg News.
As we said, shares of intel Man, they are just
soaring in today's session. I think it's a top gainer
in the S ANDP of the nawstetain since February.
Speaker 13 (21:32):
Yeah.
Speaker 6 (21:33):
Huge.
Speaker 2 (21:34):
You're listening to the Bloomberg Business Week podcast. Catch us
live weekday afternoons from two to five pm Eastern. Listen
on Apple CarPlay and the Android Auto with the Bloomberg
Business app, or watch us live on YouTube.
Speaker 6 (21:48):
You might recall last week we did see a.
Speaker 3 (21:51):
Visit to the White House by executives in the crypto
industry falling President Trump's executive order creating a strategic Bitcoin
reserve and a national stockpile of other tokens. Guest was
at the White House Digital Assets Summit last week. Joining
us is Andrew Dirgy. He's go CEO of Republic. It's
a private investing platform for crypto for startups, gaming and
real estate. The Lore Equity, Galaxy Interactive, and Morgan Stanley
(22:13):
are among its factors. Andrew joining us from Florida. Hey, Andrew,
good to have you here with Matt and myself. Hey
take us to that meeting last week? Kind of how
it all went down.
Speaker 7 (22:23):
Yeah, you know, it really was a special experience.
Speaker 13 (22:26):
Overall, for fifteen years that I've been in the space,
every day has been nothing but headwinds, particularly from the
US government or what I would say felt like getting
punched in the face over and over again. And me
and a variety of close friends and partners that have
been in the trenches in the industry for a long
time show up and we got a hug from the government.
So that was a very emotionally confusing moment, I think
(22:48):
for a variety of us. But you know, it really
showed how serious the administration is at not only looking
at the space of what's coming in the future, but
making sure that we can event what has previously happened
in the past. And they really gave a form for
the industry leaders to all come together and have an
opportunity to have a speaking moment and have requests and
(23:10):
figure out what's going to be the right path over
the next four years to make sure that change happens
and change stays.
Speaker 5 (23:18):
Hopefully, the getting punched in the face over the last
fifteen years, the blow was softened as you got richer
and richer if you held bitcoin. I mean, it hasn't
been that bad, right for those who hold these digital assets.
At one point I bought a bitcoin for six hundred
dollars and a couple weeks ago it crossed over one
hundred thousand. Is that a directional? Is that direction going
(23:41):
to continue to be up, up up? You know.
Speaker 7 (23:45):
I love what you said there.
Speaker 13 (23:48):
Oftentimes people will associate the you know, happiness with the
economic growth. But that's assuming that people held the asset
like indefinitely, right, And usually what I'd tell people I
got involved in twenty ten. The only different between me
and someone who got involved in twenty nineteens, I just
suffered a lot more, right.
Speaker 7 (24:03):
A lot of people didn't understand what was going on.
Speaker 13 (24:05):
A lot of people were concerned this with a scam
or ponds he or whatever.
Speaker 7 (24:10):
And you know, now we see institutions.
Speaker 13 (24:11):
That are very much involved as it relates to bitcoin,
and it's just an entirely different veil that we get
to wear, and that's exciting.
Speaker 7 (24:19):
And what was this like a part of your question?
Speaker 5 (24:21):
Well, I was just wondering if you can, if you
expect bitcoin to continue to move in that direction. I mean,
it has been astounding to me. I remember Joe Wisenthal.
I told him I loved it at two fifty and
he messaged me at seventy five and said, you've got to,
you know, double up now, and I wish I had.
Speaker 6 (24:39):
Obviously you're still here, so I'm guessing you didn't.
Speaker 5 (24:42):
Yeah, I spent I was transacting with my bitcoin, which
is ridiculous. I bought a beer with bitcoin and you
could buy a car with that now. But do you
think we're going to go to two hundred thousand to
five hundred thousand, and what's your time frame for that?
Speaker 8 (24:57):
What are your expectations?
Speaker 13 (25:00):
Yeah, listen, the reality is there's only ever going to
be twenty one million bitcoin, right, That's it. And in
twenty thirty four, I think twenty thirty five, ninety nine
percent of that bitcoin will be in circulation nine nine
point nine percent. So there is a real scarcity around it.
And now you know the comparison we always like to
draw up the firm is, you know, what is the
(25:21):
if we're looking at bitcoin as an actual gold competitor
and we compare it to what is the actual size
the gold market. Bitcoin has a long way to go
still to this day, and if as we're moving through
it's already been announced that there's a strategic bitcoin reserve coming,
and it's been announced that they are going to be
buying bitcoin, you know, there is a scenario here, not
(25:42):
just in the US by the way, obviously we're talking
about the US, but it will expand far beyond that
where governments we'll print money to buy bitcoin. Now, ultimately,
the US commitment is it's not going to cost tax
payers any dollars, right, They're going to build a strategic
reserve with additional cost to the citizens here. But every
other country may not operate that way. So you're looking
at a really unique dynamic again where governments will be
(26:05):
printing fee I be printing money and ultimately to build
up their bitcoin reserves.
Speaker 7 (26:10):
So yes, I think it's very much still directional.
Speaker 3 (26:13):
But were you so much I want to go back
to the White House meeting. Weren't you somewhat disappointed. It
seemed like the crypto industry was overall. I think they expected,
you know, the administration, the government to be active buyers
and not just bitcoin but other currencies.
Speaker 6 (26:26):
So weren't you disappointed a little bit?
Speaker 5 (26:30):
You know?
Speaker 13 (26:30):
I think the industry itself definitely has very much knee
jerky reactions. It's that the nature of the space in
and of itself. But I think that event was a
very big symbol, and symbols can be powerful. It would
not ignore that, right Camervo was Tyler or Cameron winkleboss
had a really great quote, and I told them I
was going to steal this in the future, so I'm
(26:51):
doing it now.
Speaker 7 (26:52):
Guys.
Speaker 13 (26:52):
Sorry, They said, you know, a year ago, they thought
it would be more likely that you know, they could
be in prison rather than in the White House, right,
and that that that's a wild thought. And they continued
on beyond that to even say, you know, right now,
crypto businesses are born in law firms rather than being
born inside dorm rooms and garages, right, and so that
(27:14):
that that is a real problem.
Speaker 5 (27:16):
So that's crazy because those are a couple of the
most respectable people, I think in the crypto industry.
Speaker 3 (27:23):
But wait, wait wait, but were you disappointed? Did you
expect to get more in terms?
Speaker 5 (27:27):
No?
Speaker 7 (27:27):
Yeah, okay, what was going to happen? Like what what?
Speaker 4 (27:30):
You know?
Speaker 13 (27:30):
It's not like their bills were going to be passed
in that room, right, But we had a room with
all we had there was about thirty people. You had
six or so cabinet cabinet members and legislators. You had
four regulators, and you had twenty industry people give or
take something like that. Everyone had a moment to make
a request and ask for something, and those asks were very,
very powerful and one of the more common ones that
(27:51):
took place that you know, the twenty probably eight to
ten people asked, is they want to see legislation. The
real fear is that we're going to make these executive
orders and we are going to make these these big moves,
but four years from now that those can be undone
and we don't want to see that happen. We want
whatever we do ultimately to have long standing, you know,
(28:13):
long standing power on a go for so we can
build a business around it.
Speaker 7 (28:17):
You know.
Speaker 5 (28:17):
To me, the fear is a lot of people in
the crypto industry have worked for over a decade tirelessly
to build a respectable industry, and obviously there have been
some mean coins and I won't even say s coins
along the way that kind of ruin that. And when
(28:39):
you see a rug pole like trump coin or Milania coin,
that's got to be concerning as well. Right the president
of the United States States issuing a meme coin and
then you know it was trading at seventy five dollars
and then dumped everybody involved and now it's ten. Isn't
that a concern for you? Don't you want someone who's
(29:01):
a little bit more consistent, and you know, someone who
has it kind of a different image than Donald Trump
to be backing this up.
Speaker 13 (29:14):
I think the thing that people need to recognize is
a lot of promises are made in presidential campaigns all
the time, and they're often not kept. And people will
make commitments and when you call in those commitments, it's oh, yeah,
we'll we'll get to that. I got to take care
of this other thing, regardless of where you sit politically.
Donald Trump came in, he made a commitment to make
(29:34):
a variety of changes, and in like the first couple
of months, those things are happening, right. David Sacks had
a really great quote during the Wayoff event. He said,
the administration is moving faster than most startups that David
Sacks has worked with, Right, And that's a wild idea. Like,
we're already this far in a very very short window.
What will be longer?
Speaker 7 (29:53):
Now?
Speaker 13 (29:53):
You know, yes, there is there other things going on
and Trump coin and you know, and other distractions, certainly,
but like, will I take those things to also get
something in the longer vision?
Speaker 7 (30:05):
Absolutely?
Speaker 13 (30:05):
I think, you know, the alternative to what is happening
now was unthinkable, And so now we're in a position
where we have leaders and legislators that really want to
figure out how to make this work and bring innovation
back to the US. One of the largest capital flights,
human capital flights that I know of, was when we
(30:26):
basically eliminated the industry from the US, and you all
the money and all the incredibly intelligent developers had were
forced ultimately to leave the country. We have an opportunity
to bring them back, right, And people who I thought
would never.
Speaker 7 (30:39):
Move back to the US.
Speaker 13 (30:40):
So the smartest people I've ever met my entire life
are now making their way back, and they're bringing the
capital with them and that's going to have a real
impact on not only the industry, but just the economy
in and of itself.
Speaker 8 (30:52):
But you think they'll shake.
Speaker 5 (30:53):
I talked to the CEO of Tether today. Yeah, it
came to us live from El Salvador and well, you know.
Speaker 13 (30:59):
We used was flowing back and it was just a
new Well he you know, he did his first trip
to to the US ever last week in this week,
so he was in DC and then he was in
New York for a Cantor event over the past couple
of days, and that was his first time in the US.
Speaker 5 (31:15):
Is that because Andrew You think he was afraid in
you know, before this administration of the same thing as
the Winkleby, that that he would end up in jail.
Speaker 13 (31:26):
I mean, I can't put words in his mouth, but
I can't imagine that that wouldn't have been a thought,
right that happened with others.
Speaker 7 (31:32):
Let me ask that's a real fear.
Speaker 8 (31:33):
Yeah, I know, I get that.
Speaker 5 (31:35):
Let me ask you a question that you're probably asked
a lot. But Karl was asking me about this during
the break as well. And now I'm getting a listener
who writes in and says, when will we see any
real utility use for bitcoin besides just a proxy for
beta risk taking.
Speaker 8 (31:52):
That's a little bit flipant.
Speaker 5 (31:53):
I think of it as digital gold, but it's a
valid question. We really do transactions, and I'm sure, well,
is that the ultimate goal is transactions? What what you
think we eventually want to be doing with this or
how do you see it?
Speaker 13 (32:07):
I mean for the industry, payments is a is a
real use case and it's being done now at scale
in multiple places.
Speaker 7 (32:14):
Bitcoin. You don't want to buy.
Speaker 8 (32:15):
Anything with right, I mean no?
Speaker 5 (32:19):
And he says, only if you're crazy.
Speaker 7 (32:21):
Yeah, yeah, yeah.
Speaker 13 (32:22):
And you know, my sailor is very much in the
cant that bitcoin is a commodity, even though it's not
taxed appropriately as a commodity, but that it is a commodity.
Speaker 1 (32:30):
Uh.
Speaker 13 (32:31):
And you know from a transactional perspective, in its native state,
it's not great for that.
Speaker 7 (32:36):
Fundamentally it's a store of value.
Speaker 13 (32:38):
But other things built on Bitcoin, like bitcoin lightning, Tether's
building an L two on bitcoin as well.
Speaker 7 (32:44):
You know, that's all moving now which will allow it
to be very transactional.
Speaker 13 (32:48):
But Bitcoin in its native state is very much a
store of value, or like that digital gold idea, which
is why a strategic reserve for that actually makes a
lot of sense.
Speaker 6 (32:56):
All right, we gott to leave it there. Interesting stuff.
You know, I didn't even get to the headline.
Speaker 3 (33:00):
Did you see the journal at the Trump family holding
talks to take a financial stake in Binance?
Speaker 8 (33:04):
Yes, along with the Melania Coin.
Speaker 3 (33:09):
Our Andrew Jurgy, Co, CEO of Republic, joining us from Florida.
Speaker 1 (33:14):
You're listening to the Bloomberg Business Week Podcast. Catch us
live weekday afternoons from two to five these during this
listen on Applecarplay and Android autto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 3 (33:28):
All right, folks, we are just about eighteen minutes away
from the closing bell on Wall Street. I want to
point out a story in the Bloomberg today just reminded
us about what we've seen in the municipal bond market.
Biggest sell off in more than two years, causing valuations
to tumble, opening a buying window for investors able to
withstand the volatility. Welcome to our new reality. Our next
guest invest in the meunia market with us as we
(33:49):
drive to the closed Lyle Fitterer, Co Lead Municipal Sector
and senior portfolio manager over at Bear joining us right
here in our Bloomberg Interactor broker studio.
Speaker 14 (33:57):
How are you good, How are you guys doing? Thanks
for having me.
Speaker 3 (34:00):
It's good to have you here, you know, trying to
keep up with the headlines. How do you kind of
pull in everything that we're getting out of Washington and
just geopolitics, trying to figure out kind of what it
means for the US economy, what it means for state
and local governments, how it impacts the communi market.
Speaker 14 (34:15):
Yeah, I think what you're seeing going on right now
is in obviously every market, right is that people are
reassessing risk in the marketplace. You know, it's the same
thing in the municipal market where what sort of federal
support are you going to get on a go forward basis,
What programs are they going to cut, what's going to
happen to medicate? How's that going to impact a healthcare organization?
So for us, it means you got to take down risk,
(34:37):
which we had already been doing in our portfolios. Probably
take up liquidity in your portfolios to really, from our perspective,
provide ammunition for and dry powder to invest when the
market gets cheaper, and we're seeing that now.
Speaker 5 (34:52):
And it makes a lot of sense that the muni
market would feel it worse than others because you need
that federal backing in a lot of situations. And you know,
the dose has shown that it could get act.
Speaker 8 (35:06):
At a moment's notice.
Speaker 5 (35:08):
Where are the biggest dislocations in the market right now?
Speaker 14 (35:12):
Again, it's interesting what happens in our market is the
high grade part of the market actually reacts first, so
you know, because things trade and so therefore they get
remarked in people's portfolios. The high yield sectors actually usually
that reaction takes a little bit longer. So whereas in
the corporate market you're seeing corporate credit spreads widen, you're
seeing you know, structured product widen not a little bit.
(35:34):
In our market, actually, higher quality names are actually leading
the way as the market has sold off, which again
isn't unusual, but again I think it's actually providing an
opportunity where you can go out and you know, there
were deals priced today. I think with five coupons double
A rated that we're pricing out a four and three
quarter yield on the long end, which again, yeah, that's
pretty attractive for a tax exempt buyer. Again, assuming that
(35:57):
tax exemption continues.
Speaker 3 (35:59):
I mean, is it a safe assumption, Lele that with
what's going on with the US federal government that less
money if we continue along this path, is going to
be going to states, and they have mandates right often
right to they've got to get balance budgets, So somewhere
things are going to be cut.
Speaker 14 (36:16):
Yeah, and again I think they were. They're dealing with
the reality already that the stimulus money has run out now,
so a lot of those were still it was part
of their budget last year and potentially this year that
they still had some of those funds left over. So
many states and local governments didn't necessarily build that into
their budget forecasting. They had it built in as if
(36:36):
that money was going to continue into perpetuity. So they're
dealing with that now. They have to deal with the
uncertainty surrounding are they going to get cuts to other
federal programs.
Speaker 8 (36:45):
In the end.
Speaker 14 (36:45):
Again, maybe I'm too much of an optimist. I think
they're going to realize that the impacts of this, especially
for smaller state and local governments and smaller issuers in
the UNI market, would be substantial, and so the funding
will come through. But again there's going to be a
peer ate of volatility, and that that volatility and that
kind of unknown out there is what causes you know,
(37:06):
markets to sell off.
Speaker 5 (37:09):
If we have a government shutdown, how does that affect
the sector? You've seen it before, right, So what's the
playbook look like?
Speaker 14 (37:16):
Yeah, again, I don't know that it necessarily has spilled
over hugely into the UNI market before. I think, you know,
there used to be you had the pre refunded market
that you couldn't do deals that would get pre refunded
because you didn't have access to treasury strips to for
the to fund those refundings. You don't have that anymore,
So it would be just like any other market, where
(37:37):
again the uncertainty of okay, how long are we going
to shut down? What does that mean for payments that
are going to state and local governments? What does that
mean the payments that are going to social security beneficiaries?
You know, So it's the trickle down of impact. And again,
all it means is uncertainty. What does the market do
with uncertainty? It creates volatility. It means things probably have
to get cheaper.
Speaker 5 (37:57):
What if we have a recession I mean there's some yeah,
somewhat of a growth scare over the last few weeks,
and I'm not saying that a recession is forecast, right.
Speaker 6 (38:06):
But people are talking about them a lot more. So
you wonder, I.
Speaker 14 (38:09):
Think a recession actually means that treasury market probably rallies,
So while muni's maybe lag in that scenario, it still
means that high quality MUNI prices go up and yields
come down, which for most buyers that means their portfolio
is actually appreciate in that environment. But it also means
that people start to reassess then credit risk, so your
(38:31):
lower quality issuers then start to get impacted more in
that type of scenario. But again, historically what happens in
those scenarios is when interest rates come down, a recession hits,
the price impact of lower yields in the treasury market overwhelms,
maybe that spread widening. If you understand that so effectively,
you actually have a portfolio that could actually appreciate in value.
Speaker 12 (38:55):
You know, we had a.
Speaker 3 (38:55):
Great segment yesterday where we're kind of going through thing
by thing, the equity market, the bond market, credit spreads,
a lot of different factors to see whether or not
they were pointing to recession because you can focus and
kind of obsessed with one indicator and say, oh my god,
a recession's coming. And this was a Bloomberg opinion column
by New York sar and it was just in totality, no,
(39:17):
it doesn't seem like recession.
Speaker 6 (39:18):
But I do want to ask from.
Speaker 8 (39:19):
Your by the way, that was a great interview.
Speaker 3 (39:21):
I know it was, But from your advantage point, do
you see anything that says to you recession?
Speaker 14 (39:27):
Not at this point. So again I think you mentioned,
you know, corporate credit spreads have held in extremely well.
Now they're off thirteen basis points or something I think
off their lows on a year to date basis. High
yields probably off a little bit more than that, but
still well through their long term averages. If you look
at the muni market even you know, if you look
at where credit spreads are in the muni market, they're
(39:49):
you know, they're tighter than their long term averages, especially
within high yields. So again, all those markets I think
are saying, hey, we're not headed into a recession, but
they're quickly reeventedvaluating. And that's why you're starting to see
credit spreads widen. That's why you're starting to see people reassess, Okay,
how long is this volatility going to be out there?
When are we going to get some certainty from the
(40:09):
administration to kind of understand what's going on and give
us the confidence that we can then make a rational
decision and put money to work in our portfolios.
Speaker 5 (40:20):
Just got thirty seconds here, but got a bond trader
on the horn. He says, what's a catalyst to take risk?
Speaker 8 (40:27):
Here?
Speaker 5 (40:27):
Every day's a tate bomb or a war headline.
Speaker 14 (40:31):
Again, I think it's you've got to just look at
the long term. What are you getting paid in the
fixed income market to take risk? And again, I think
if you look at it, you would say, buy higher
quality securities on a treasury right now on the long end,
it's what foreig and three quarters somewhere around that on
a thirty year MUNI I think you heard me say
it earlier. I think some stuff traded today at around
(40:52):
foreign three quarters tax exempt if you adjusted pretty.
Speaker 8 (40:55):
Attrax hell is pretty attractive.
Speaker 6 (40:57):
So that tax remutings before we get stuck.
Speaker 5 (41:00):
Yeah, fal Sweeney just goes home and swims in a
pool of munies every day after work.
Speaker 6 (41:04):
We still have a reporty or of years ago and
she's like, you win the lottery.
Speaker 14 (41:06):
You put it in text remuties like yeah, and just
go home and relax exactly. I'm Lyle.
Speaker 6 (41:12):
Thanks great to get some time with you.
Speaker 2 (41:14):
This is the Bloomberg Business Week podcast, available on Apple, Spotify,
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Carol Massar
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