November 24, 2025 • 30 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
US President Donald Trump and Chinese President Xi Jinping on Monday held their first talks since agreeing to a tariff truce last month, discussing trade, Taiwan and Russia’s invasion of Ukraine.
Trump said the telephone call was “very good” and that the leaders spoke about purchases of soybeans and other farm products as well as curbing shipments of illegal fentanyl. The US president said he agreed to visit Beijing in April, and that he had invited Xi for a state visit next year.
“Our relationship with China is extremely strong!” Trump posted on social media. “There has been significant progress on both sides in keeping our agreements current and accurate. Now we can set our sights on the big picture.”
But the US president’s readout of the call sidestepped one issue — the self-governing island of Taiwan — that was a central focus for Xi. The Chinese leader told Trump that the return of Taiwan to China is a key part of the post-World War II international order, according to a Chinese Foreign Ministry statement. Xi also said the two countries should keep the positive momentum generated during their meeting last month in South Korea and expand cooperation, the statement said.
The leaders also spoke about Russia’s invasion of Ukraine and Xi expressed hope for the two sides to reach a binding peace agreement, the ministry said. The call lasted an hour, White House Press Secretary Karoline Leavitt told reporters.
Today's show features:
- Bloomberg News Senior Editor for Technology & Strategic Industries Michael Shepard on the latest White House headlines as peace plans for Ukraine continue to stall, President Trump speaks with China’s Xi Jinping and the US continues to spar with the EU over tariffs.
- Jennifer Lee, Senior Economist and Managing Director of Economics at BMO Capital Markets, on expectations for this week’s late-arriving PPI and retail sales reports from September
- Bloomberg Intelligence Senior Technology Credit Analyst Robert Schiffman on Oracle investor scrutiny amid a debt spree to finance artificial intelligence investments
- Leo Kelly, CEO of Verdence Capital Advisors, on markets and the Federal Reserve’s path forward
See omnystudio.com/listener for privacy information.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg business
Week Daily reporting from the magazine that helps global leaders
stay ahead with insight on the people, companies, and trends
shaping today's complex economy. Plus global business, finance and tech
(00:23):
news as it happens. The Bloomberg Business Week Daily Podcast
with Carol Masser and Tim Stenebeck on Bloomberg Radio.
Speaker 2 (00:32):
Judge dismisses cases against former FBI director James Comey and
New York Attorney General Letitia James after finding that the
prosecutor was illegally appointed. You've got that going on. You've
got President Chump and President Ji of China talking today,
Ukraine and allies warning the United States against rushing to
end Russia's Warshow Tim, we knew we needed to kind
(00:53):
of head back to DC and do a little bit
of a round up here.
Speaker 3 (00:56):
Well, there we find Bloomberg new Senior editor for Technology
and Strategic INDO, Mike Shepherd. He's in our Bloomberg Washington
DC Bureau.
Speaker 4 (01:04):
Mike.
Speaker 3 (01:04):
First up, the judge dismissing the cases against former FBI
director James Comy in New York Attorney General Letitia James
after finding that the prosecutor was illegally appointed certainly feels
like a big setback. We spoke to June Grosso a
little earlier. Is it the end in your view of
legal woes for these.
Speaker 5 (01:21):
Two Maybe not entirely, because the Trump administration may try
to find a way to revive these in some fashion.
But the judge was firm in the dismissal of those
two proceedings, and it would certainly appear that there is
no avenue open through that. That does not mean, though,
(01:42):
that they cannot try to restart something. Yet again, we
are only in year one of the current administration, and
the President has made clear that he would like Pam
Bondi to use the authorities of her office at the
Justice Department to pursue the people who have cross Trump
in some fashion in the past, but particularly James Comy,
(02:05):
who made an enemy of the President many years ago,
even before his first administration.
Speaker 2 (02:11):
All right, but nothing from the White House or the
President so far on this So.
Speaker 5 (02:15):
Far, No, we haven't seen a truth social post, and
the President has not yet appeared in public yet, so
we'll be waiting to see. But we do get a
sense from the Justice Department that they are disgruntled and
unhappy about this finding. And yet the prosecution was riddled
with missteps from the start, especially in the case of
James Comy, in the question of what the grand jury
(02:37):
saw and whether they saw the finished indictment. It was
really a mess every step of the way procedurally. And
the question is whether the President will push his appointee,
Pam Bondi to try to resurrect a case in some fashion.
Speaker 2 (02:54):
All right, So maybe no social from the President of
the White House on that, but we did get some
not yet the day. The day is still young, but
we did get some social from President Trump talking about China, mentioning.
We got some reports initially from the Chinese Foreign Ministry
about a conversation, if you will, between President Trump and
(03:14):
President G. But President Trump on truth social coming out
and saying our relationship with China is extremely strong. This
call was a follow up to our highly successful meeting
in South Korea three weeks ago. President g invited me
to visit Beijing in April, which I accepted and I
reciprocated where he will be my guest for a state
visit in the United States later on this year. What's
(03:36):
going on right now between the two countries, where are we?
I can't even keep track between trade and tariffs and
security issues and chips and so on and so forth.
Where are we?
Speaker 5 (03:46):
Well, It's a good question, Carol, because this call was
not really on anybody's Bengo card. Really at this moment.
The two sides had just held that highly anticipated and
highly orchestrated meeting at the end of life last month
where they forged this trade truce, and it seemed a
little early to actually have the two leaders do a
(04:06):
check in call. And the message between the president's readout
of his conversation with his Chinese counterpart, Shijin Paning and
the official Chinese news agencies version was pretty stark. Donald
Trump really stressed the call was very good. He talked
about his plans for a visit to Beijing and his
(04:27):
invitation for Shi to come visit the US later next year.
He also talked about some of the key trade points
that had come up and had been agreed to during
this trade truce, namely increased purchases of soybeans by China,
efforts to curb fentanyl trafficking, and so forth. And yet
(04:47):
the version that we got from China was a very
different tone. It really stressed the conversation on Taiwan. And
we have to remember that there is a spat brewing
between Japan, a major US ally and trade partner, and
China over the island, and that is because the new
Japanese Prime Minister Sanai Takayachi had expressed that Japan might
(05:09):
leap to Taiwan's defense in the event of a hypothetical
invasion by China of the island. China views Taiwan as
its territory and has said that if necessary down the road,
it would weigh whether to take it by force. Now,
the US has maintained strategic ambiguity over this, and the
(05:30):
comments by Japan raised questions about whether the US would
side with Japan on this matter. The President was artful
in not bringing up Taiwan in his truth social post,
but the Chinese were very direct, and it does seem
that they were trying to enlist the US, or at
least warn the US to back off a little bit
(05:51):
in this confrontation with Tokyo.
Speaker 3 (05:54):
Okay, well, we said we'd go around the world with you,
and we're going to do that. Mike, I want to
talk to Ukraine because Ukraine and it's your allies signaled
that the key sticking points remained in US broker peace talks,
even as senior officials held progress into any more favorable
terms for Kiev from a proposal backed by President Trump.
Where does this leave the peace process between Russia and Ukraine.
Speaker 5 (06:15):
It is still ongoing, and it is probably not moving
nearly as quickly as President Donald Trump and his advisors
would like. They had given authorities in Kiev, including President
Volodimir Zelensky, until Thursday of this week, to accept the
proposal that they had presented last week. But that version
(06:35):
really contained a lot of the demands and desires of
the Russian government. It was forged in conversations between Moscow
and officials from Moscow and Washington and present it without
much consultation at all with officials in Kiev and in
European capitals, and they have since met with the US
(06:57):
side to express their reservations and concern and those specifically
center on questions of territorial concessions that kid might be
expected to make in any peace agreement and also the
security guarantees that might be baked into any final accord.
The European allies of Ukraine and Ukraine have expressed concern
that those provisions were not nearly strong enough and they
(07:20):
needed to be discussed now. The proposal was presented last
week has now been whittled down to nineteen points from
the twenty eight that were framed originally last week, and
the conversation is ongoing. And we heard Frederick Murraz, the
German Chancellor, express some optimism, guarded optimism about progress having
been made, but he did see that things were a
(07:43):
long way off. So we'll have to see where this
actually goes and if it does bear fruit ultimately in
a further conversation about how to end the war.
Speaker 4 (07:52):
There.
Speaker 2 (07:53):
Yeah, and where are we, like in our third year?
I believe at this point are we in our third year?
We're approaching four right, four in February.
Speaker 5 (08:02):
It will be four years in February.
Speaker 2 (08:04):
Amazing. All right, Mike, thank you so much. Around the
world of Washington, we went Bloomberg News Senior editor for
Technology and Strategic Industries, Mike Sheppard. Thanks to him, we
did that. He is there, of course, in the Bloomberg
News Washington DC bureau.
Speaker 4 (08:19):
Stay with us.
Speaker 3 (08:20):
More from Bloomberg Business Week Daily coming up after this.
Speaker 1 (08:26):
You're listening to the Bloomberg Business Week Daily podcast. Catch
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Listen on Applecarplay and Android Auto with the Bloomberg Business app,
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Speaker 3 (08:40):
As we get ready for a US government read on
retail sales for the month of September. The data that's
coming out tomorrow that may give the US bond markets
some direction, Carol. It's on track for a small gain
in November after rising in eight of the prior ten months,
even as the market is miired below October's price size
and yields.
Speaker 2 (08:56):
They're range bound, they are, indeed, let's get to it.
Let's continue on the US economy and US treasuries. Back
with us as Jennifer Lee. She's senior economist and managing
director of economics there at PEMO Capital Markets. They've got
just over a trillion dollars in assets. That was as
the end of the second quarter. Jennifer joining us once
again from Toronto. Jennifer, great to have you here. We
did talk last on September tenth. It was just before
(09:20):
the longest US government shutdown began. It's now over. The
data desert is no more what's you read on the
US economy as we start to get some data points.
Speaker 6 (09:31):
Well, first of all, God have to thank you for
having very much for having me on. And by the way,
my head is spinning thinking about all the politics that's
going on and all those ALI productivity stuff. And now
we've got all the data, so there's gonna be a
lot of more spinning and going around. And I mean,
so far, we haven't had a very clear read on
the economy from some of the data that we've seen
so far. I mean, I guess I could say that
it's been pretty still steady resilient, if you will, But
(09:54):
you know, the data, we're kind of old, right, and
I sort of have to wonder, you know, how much
we're going to see terms of revisions and coming months
as well, just given that the shutdown seems like it
just ended and everyone was like, hustle back to work
and let's start getting the little surveys and all the data
points out. So I think we had to take everything
with a grain of salt. Plus, all of this data
(10:15):
is coming before the shutdown, before that forty three day
long shutdown, so we're going to see some highs. We're
probably going to see some lows. So we're going to
have to probably go into towards the new year before
we start seeing some cleaner data, cleaner data because the
shutdown will be over unless it starts to get on
January thirtieth, and of course we're going to see some revisions.
So so far, I will say that's a long wigged
way I'm answering your question. So far seems like it's okay.
Speaker 3 (10:37):
Not ready to start talking about another government shutdown at
this point, Jennifer. Before we get there, we'll get some
other data. Even even during the shutdown, we did get
some alternative data and it seemed to indicate and also
commentary coming from companies that the labor market in the
US is weakening. And I'm wonder which part of the
wonder from you, which part of the feds dual mandate
the FED should be more focused on right now? Is
it stable prices or is it maximum employment?
Speaker 6 (11:01):
I think right now the focus is on the job market.
If you had asked me this like a month ago
or so, I would have said inflation. And I would
have been very lonely, I think saying that because at
that point I was still quite concerned about inflation, and
I was saying that it's still too early, even though
we were like in October and all that, but just
the fact that we are seeing some deals being made.
We were seeing terrafts being lowered, you know. I think
(11:22):
it was like this morning or over the weekend, you know,
with some terists of forty percent being brought down from
Brazil for example. So well, that will help food food prices
come down a little bit in the US. So that
gives me some comfort that we are seeing inflation, you know,
will wish you to be seeing inflation moderate in the
months ahead. So because of that, now I'm thinking that
(11:43):
the FED is probably rightfully focusing on the jobs front,
and we'll have to see how that happens. I think,
you know, we are. It's basically a coin coss, a
coin toss at this point with the December meeting, between
inflation and all that, but I think they're going to
air on the side of caution and focus on jobs
and probably go for another twenty five basis point cut
on December tenth.
Speaker 2 (12:03):
Do you have any clarity when it comes to twenty
twenty six.
Speaker 6 (12:07):
We are still seeing and again this is all hopefully
like a lot of these terrorists and all these deals
will be settled by earlier in the year, and we'll
have hopefully see inflation a moderating further. And because we'll
see some clarity on the trade front, we shall hopefully
see some of the job market indicators leveling of off
as well being a little bit more steady, because I
(12:28):
think a lot of the worker or employers earlier in
the year did not do not know what was going
on on the trade front, so they were holding off
on hiring and firing or laying off workers. But they
held off for a long time, and now we're starting
to see some of those layoffs come into play. We
saw like a big increase in the number of permanent layofs,
for example, in that September jobs report. So hopefully with
(12:50):
some clarity on that front, some clarity on the fiscal front,
and then now we're going to be focusing on the USMCA,
We're going to be focusing on the midterms, which is
not until November. But you know, time just goes by
just like that, right, So with some clarity again on
the trade front, tars coming down, I think that would
hopefully be a little bit better for jobs in the meantime,
we still look for after a December rate cut, we
(13:11):
still look for about three more rate cuts to come
from the Fed. Just kind of spaced out on a
quarterly basis.
Speaker 2 (13:16):
All right, Just want to mention ten year note at
four point zero three percent to your note short end
of the ELK curve three point five zero Gen Jennifer
Leech's senior economist Managing director of Economic Servor at BMO
Capital Markets.
Speaker 7 (13:29):
This is the Bloomberg Business Week Daily Podcast. Listen live
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Speaker 3 (13:47):
We're trying to make sense of the AI trade and
how companies are funding their AI investments, because in the
last few weeks there have been some observers who argue
that the important company to look.
Speaker 4 (13:56):
At is Oracle.
Speaker 3 (13:57):
Sure Shares of Oracle are up twenty percent so far
this year, but they're close to forty percent since that
all time high reached back in September. And then there
are the credit default swaps, the cost of protecting Oracle's
debt against default reached a fresh multi year high on Monday,
amid investor scrutiny of the debt spree of finance AI investments.
We've got Robert Schiffman with us. He's Bloomberg Intelligence senior
(14:18):
tech credit analyst. He joins us here in the Bloomberg
Interactive broker's studio.
Speaker 4 (14:22):
Okay, so we'll go.
Speaker 3 (14:23):
I'm gonna go over some numbers here, but then I'm
gonna ask you a really basic question about this. So
the price of five year credit default swaps on the
company's debt rose to the highest in October of twenty
twenty two. It amounts to around one hundred nineteen thousand
dollars for every ten million dollars of principal protected.
Speaker 4 (14:38):
So those are the numbers for.
Speaker 3 (14:40):
People who don't know, why do we care so much
about the price of credit default swaps and how can
they give us some insight into the health of a company.
Speaker 8 (14:47):
Well, this must actually be the top of the market.
There has to be a bubble because you've got the
tech credit guy sitting on the right signal. Even though
tech credit spreads are near their all time.
Speaker 4 (14:59):
Sights, we have some people from the GFC.
Speaker 8 (15:02):
Also obviously some pany he called it. I'm going to
answer an oracle, but let me start off just quickly
by saying it's okay, don't panic. The markets are holding
up reasonably well. There is a little bit of weakness,
and there are some yellow flags out there, and there
is some company specific information that's concerning that. Being said,
(15:24):
this whole AI trade, it's not a one month, two month,
three year trade. This is a ten year trade. And
right now we're in a building phase spending a lot
of money without a lot of revenues coming in, so
it takes time. I can't disprove a negative. I can't
disprove that money is not going to come into Oracle
(15:45):
or Amazon or Alphabet or Meta, but I think it
is now that being said, why is something like orac
cale CDs concerning people welch Because single names CDs, particularly
for investment, great names generally don't trade. They do trade.
In the Triple B universe, Oracle has been a name
that hasn't traded. And then the reason why is that
(16:07):
there hasn't been a reason to hedge in the past.
All of a sudden there's a reason to hedge. Oracle
issued eighteen billion dollars of public bonds. On top of that,
they're in the process of syndicating thirty eight billion of
private credit. That what I think is really driving this
move and what is that? Why was CDs originally created?
It was for banks to hedge their loans. It became
(16:29):
a trading vehicle for a while for a long time.
And when we hear CDs nowadays, we think about the
financial crisis. We think there's a name that's wider. We're
blowing up, Triple a's are going to are defaulting, and
I just think we couldn't be that far from the truth.
There's a combination of fundamental but I think more technical
reasons why this is happening. So you have banks that
(16:52):
have tremendous amount of exposure to data centers, not just Oracle,
but a lot of these data centers that are not
investment grade like Core Weave a lot of other data
center builds that they don't have the ability to properly
hedge because there's not active CDs. So how do you
hedge your positions? Well, what you do is you hedge
(17:13):
via the higher rated credits where you can potentially buy
CDs that costs next to nothing. Twenty thirty fifty basis points,
even one hundred and twenty basis points is not very
much because that's how you can hedge your data center risk,
and you can do it really cheaply. Then on top
of that, what happens is hedge funds join in. You
have a momentum trait here that goes on where somebody
(17:35):
sees whoa wait, whoa Bloomberger to report on Oracle CDs.
We haven't seen CDs in the headlines in ten years.
What's going on. First thing for a hedge fund manager
to do is to say, I'm going to buy CDs.
I'll ask, I'll get the answers later. And on the
back of that, what ends up happening is where do
you find the natural sellers of CDs? Where do you
(17:55):
find somebody that says, oh, you know what, Oracle at
sixty over seventy also you protection? Because what's what's my
upside to doing that? And I think, what's what's happened
now is that you've got fundamentals that are not great.
In the near term. Oracle's free cash flow is going
to be massively negative for the next few years. They're
going to have to fund that with even more debt,
(18:16):
which is going to have to be hedged, both in
the public and private markets. So you get this cycle
of people coming to try to buy ces. There's not
a lot of sellers. It pushes it wider. That being said,
Oracle is sort of standing a little bit alone. You
really need to go down the curve to more liquid
names like core Weave, where you're seeing big moves like this.
When you look at the names like what I call
(18:38):
them mount rushmore of credits, you know, the Microsoft's apples, Amazons, alphabets,
We're seeing a little bit of spread widening. You're seeing
people starting to try to buy some protection, particularly from Meta.
And why on Meta. It's not that that Meta has
underperformed from a credit from both the credit and a
in equity perspective, but it's because Meta did a twenty
(19:00):
seven billion dollar private data center deal and that's the
way that the banks are able to hedge that. Now,
there are some large asset managers that bought that deal,
but there's still a lot of banks that are involved
with that that are hedging their that are hedging their position.
So it's a little bit of fundamentals and a little
bit of.
Speaker 2 (19:17):
Technicals, So don't be worried.
Speaker 8 (19:20):
Well as bond people.
Speaker 2 (19:21):
I mean, what would you have to see to say, okay,
we've got some problems here.
Speaker 8 (19:25):
So the reason why I'm a little bit less worried,
First of all, the big names that I mentioned, we
barely see any sort of spread movement. And quite frankly,
when I mean you mentioned Oracle stock, Orkle stock is
still up twenty percent. All these other names other than
Meta are up significantly this year as well. So it's
also from a starting point, right, they're.
Speaker 3 (19:42):
Still down forty Oracle's down forty percent from I mean,
Carol and I were sitting on the beach in September
at an event and Oracle was just surging higher. I mean,
this was likest run.
Speaker 4 (19:51):
There's more equity after.
Speaker 3 (19:52):
The company reported earnings that day.
Speaker 8 (19:54):
Yeah, research doesn't get to go to the beach, you know.
But that being said, we were going to see that.
But you got to remember we're coming off of all
time highs, so equity valuations listen, stocks could be down
fifty percent. I still don't think that would mean there'd
be any fundamental change in what expectations are. So I
(20:15):
just think when you look at credit markets again, credit
spreads for the investment grade tech sector year to date
are fifteen wider or about five wider on the entire
high grade sector. We've primarily underperformed because of a couple
of names like Oracle, and there's been a lot of
bond issuance that have pushed spreads a little wider because
there's more bonds that are trading. But there is no
(20:36):
panic in our market. There's a worry that a name
like Oracle, as they continue to fund, could in theory,
go to non investment grade. What would happen. They have
one hundred plus billion dollars of public debt outstanding. It's
non economic. You can't run a high yield business like that.
So one is I think there.
Speaker 2 (20:55):
Is about twenty twenty five seconds here.
Speaker 8 (20:57):
The rating agencre are going to give them room. I
think they're going to give them time, even though there's
negative outlooks at SMP and Moodies. I do not see
Oracle going to junk. I also think there's a huge
backing in the capital markets as well as the US government.
If Oracle were to need capital, and if Larry Ellison
needed some sort of favors, it would happen.
Speaker 2 (21:15):
I know, but that doesn't necessarily make me comfortable. It
should make you comfortable, all right, all right, Robert Schiffman,
this was so good. Thank you so much. Bloom Are
Intelligence Senior Technology credit analyst. We'll be reaching out to him,
I know. Again, stay with us.
Speaker 3 (21:29):
More from Bloomberg Business Week Daily coming up after this.
Speaker 4 (21:35):
I've been driving on that man's went on the wheel. Drive.
Speaker 5 (21:39):
Drive, yeah, drive, and you just focus on driving, focus
on the growth.
Speaker 4 (21:46):
Driving your car, would drive, boss, because I'm asking you.
Speaker 7 (21:50):
Just taking just drive baby.
Speaker 1 (21:55):
See this is the drive to the clothes.
Speaker 2 (21:58):
But we're going.
Speaker 1 (21:58):
We don't need on Bloomberg Radio.
Speaker 2 (22:02):
All right, TikTok everybody, About eighteen nineteen minutes to go
until we wrap up the trade on this Monday, November
twenty fourth, Carol Master to instat Ofic live in our
Bloomberg Interactive Broker studio, And as you just heard from
Bill and Amy, we are kind of hovering near our
best levels of the session. Feels like another leg up
here for the Nasdaq one hundred up two point six percent,
a rally underway s and P five hundred again of
(22:24):
about one and a half percent here as we are
getting closer to the closing belt, but tim still kind
of almost and even split a little bit of a
more risk on trade. If I look at the SMP
two hundred and eighty three names to the upside, two
hundred and eighteen to the downside to unchanged.
Speaker 3 (22:39):
Yeah, that's pretty wild to me given the magnitude of
the rally that we're seeing. But it speaks to the
fact that it's the big stocks that are making the
big moves, at least to the upside. I want to
bring in Leo Kelly of Verdant's Capital Advisors. He's founder
in CEO. The firm has more than four billion dollars
in assets under management. Leo is back with us from
Hunt Valley, Maryland. Leo, we were having this conversation last week.
I mean, we're we're not quite back to where we
(23:01):
were at all time highs, but we're that's the direction
we've been moving in. On Friday and then today we
kind of thought, I think a lot of people thought
something was happening with the equity market. There was weakness
starting to be exposed. There were concerns about the labor market.
There was concerns about the financing of the way that
these companies are spending on and investing in AI.
Speaker 4 (23:19):
How do you see it? Well, you have to break
that question down a couple pieces.
Speaker 9 (23:24):
The first is, I know there was a lot of
conversation around the bubble bursting, and then I think you
guys might recall we've been talking about elevated valuations and
being very disciplined in your asset allocation.
Speaker 4 (23:37):
To burst a real bubble.
Speaker 9 (23:39):
And with the valuations we were seeing today and the
extent that these stocks have run, that's a process.
Speaker 4 (23:46):
That's not an event.
Speaker 9 (23:48):
It takes time to break down the enthusiasm and optimism
of investors, and you hit a bottom when you've extracted
all of that enthusiasm out and everybody is in panic.
And we're a long way from that, so I think
there's still going to be rallies along the way. I
think we're going to see a lot of volatility in
the first and second quarter of next year. I would
(24:09):
say remember in two thousand, we saw these eight ten
percent movements in ninety nine and people were getting concerned.
In March we went into a full bear market, and
then it rallied all the way back by July of
two thousand, before we actually had the real bear market,
which lasted two years, so we have a long way
to go. We're going to see a lot of rallies
here in terms of investing overall. I do think the
(24:33):
government shutdown has ended, so now we're going to you know,
that'll cost us a little bit of GDP this quarter.
But outside of that, jobs have been weak, but they're
still fine. The consumer has slowed but is still fine.
Speaker 4 (24:47):
I think.
Speaker 9 (24:47):
I think as we go into twenty twenty six, we're
going to find we're going to find some strength again
going into the early part of next year.
Speaker 2 (24:53):
The notes you shared with us, Leo, you know, you
talk about the implications of an bubble lasting for decades.
From an investment standpoint, investors will learn valuable lessons about
overallocating to hot stocks and to listening to stories as
absolute truth versus considering evaluation. From an economic standpoint, excess
capital turns into rapid infrastructure development. That's the good side
(25:16):
of a bubble. Is it just timing here? I mean,
is do you buy that this is going to be
and is already starting to be transformative and it's going
to impact every industry and it's going to change just
to everything. But maybe the timing and all of this,
and maybe that's why we feel so uncomfortable about the
(25:36):
massive spend right now, that we might have to wait
a little bit for the payoff and the disruption and
the innovation happening.
Speaker 4 (25:46):
Yeah.
Speaker 9 (25:47):
Yeah, as the old saying goes, I have good time
being So the timing is going to be obviously difficult. Now,
what happens historically with generational change like this, whether it's
the Internet, or it's mobile social or railroads or cars
or you name it. The infrastructure development side of this,
(26:10):
the buildout is where all the enthusiasm is present and
you get massive capital infusions.
Speaker 4 (26:16):
And this is what I mean by some bubbles are good.
Speaker 9 (26:19):
The investment side will teach valuable lessons, but it brings
capital to the needed infrastructure developments. Point now, the real
money making comes in the application of the infrastructure, and
we're not there yet. To your point, Carol, that's when
we get over the hump, is when the applications start
to hit. So think of it this way. Cisco was
(26:41):
the Nvidia of the Internet. They were at the center
of everything, and they were very powerful. Didn't stop them
from going down eighty percent in the bubble crash but
still a great company, and everything they said about Cisco
came true.
Speaker 4 (26:54):
It's a great company even today.
Speaker 9 (26:56):
But really what drove the Internet was applications, Google, Amazon,
et cetera. They weren't there during the crash or when
they were in their nascent phase. When you think about mobile,
you think about Uber, great example, it was AT and
T and it was Apple that built the infrastructure, but
really it was the Ubers of the world that created
(27:17):
what is today the productive side of mobile.
Speaker 4 (27:19):
Same thing with AI.
Speaker 9 (27:20):
We think quite frankly, where the AI application is going
to come from doesn't even exist today. I think it's
going to happen today in the venture capital world. The
companies that are going to build the applications to put
on the infrastructure. Just like Uber didn't exist when the
when the mobile phone came out, the application companies are coming.
Speaker 3 (27:43):
So LEO, is that is that a nod to alternatives
in a portfolio, alternatives that invest in venture capital? I mean,
how do you how do you your clients get exposure
to this?
Speaker 4 (27:52):
Yes?
Speaker 9 (27:53):
Absolutely, Well, First of all, we're big private equity users
across a very diversified portfolio. First things, for no investors
to just go off and try to chase one private
equity discipline. That's no different than just going out and
buy one stock. But that said, Tim, to answer your
question directly, Yes, we are invested in venture, we're invested
(28:14):
in cyber defense, and we're invested in AI application companies
that are developing the apps that will create the productivity
that's in front of us. Again, historically, these infrastructure companies
try to create applications, but that's not their expertise. The
expertise comes from the companies that will be developed soon.
Speaker 3 (28:34):
You know, if you look at the landscape right now,
and you know you're thinking about this, like the Uber
Corolara you mentioned with smartphones, what's the type of company
that would exist in this post AI world? Just give
us some examples.
Speaker 9 (28:47):
Yeah, I think I think it's anything that creates productivity.
So anything that, for example, starts to create agency for
users that allows them to go off and then create
processes that make everybody more productive. Frankly, and this is
this is one of the great dichotomies of progress, is
(29:09):
it's the applications that take jobs away that will be
the most successful. Now, this is where we all gasp
and say Leo said, for it to work, everybody lose their.
Speaker 2 (29:18):
Jobs, right, but Wenny not funny?
Speaker 4 (29:20):
Is right? Funny not funny?
Speaker 9 (29:23):
But what happens is the new jobs come and we
start to see jobs in areas that we don't even
know exist. For example, how many computer scientists work at
Google today that didn't exist pre Internet. And so you
start to transition the economy and yes, that's always a challenge,
(29:43):
but on the other side, the productivity is substantially higher
and that usually helps us catapult to another level of
economic benefit.
Speaker 2 (29:52):
Well, it's a timely chat because it's kind of tying
all these things that we've been talking about. I feel
like the last few weeks in a big way. Leo,
So great. Great to get some time with you on
this Monday. Hey have a great Thanksgiving. Leo Kelly, founder
and CEO of Verdants Capital Advisors, joining us from Hunt Valley, Maryland.
Speaker 1 (30:10):
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(30:31):
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(00:23):
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with Carol Masser and Tim Stenebeck on Bloomberg Radio.
Speaker 2 (00:32):
Judge dismisses cases against former FBI director James Comey and
New York Attorney General Letitia James after finding that the
prosecutor was illegally appointed. You've got that going on. You've
got President Chump and President Ji of China talking today,
Ukraine and allies warning the United States against rushing to
end Russia's Warshow Tim, we knew we needed to kind
(00:53):
of head back to DC and do a little bit
of a round up here.
Speaker 3 (00:56):
Well, there we find Bloomberg new Senior editor for Technology
and Strategic INDO, Mike Shepherd. He's in our Bloomberg Washington
DC Bureau.
Speaker 4 (01:04):
Mike.
Speaker 3 (01:04):
First up, the judge dismissing the cases against former FBI
director James Comy in New York Attorney General Letitia James
after finding that the prosecutor was illegally appointed certainly feels
like a big setback. We spoke to June Grosso a
little earlier. Is it the end in your view of
legal woes for these.
Speaker 5 (01:21):
Two Maybe not entirely, because the Trump administration may try
to find a way to revive these in some fashion.
But the judge was firm in the dismissal of those
two proceedings, and it would certainly appear that there is
no avenue open through that. That does not mean, though,
(01:42):
that they cannot try to restart something. Yet again, we
are only in year one of the current administration, and
the President has made clear that he would like Pam
Bondi to use the authorities of her office at the
Justice Department to pursue the people who have cross Trump
in some fashion in the past, but particularly James Comy,
(02:05):
who made an enemy of the President many years ago,
even before his first administration.
Speaker 2 (02:11):
All right, but nothing from the White House or the
President so far on this So.
Speaker 5 (02:15):
Far, No, we haven't seen a truth social post, and
the President has not yet appeared in public yet, so
we'll be waiting to see. But we do get a
sense from the Justice Department that they are disgruntled and
unhappy about this finding. And yet the prosecution was riddled
with missteps from the start, especially in the case of
James Comy, in the question of what the grand jury
(02:37):
saw and whether they saw the finished indictment. It was
really a mess every step of the way procedurally. And
the question is whether the President will push his appointee,
Pam Bondi to try to resurrect a case in some fashion.
Speaker 2 (02:54):
All right, So maybe no social from the President of
the White House on that, but we did get some
not yet the day. The day is still young, but
we did get some social from President Trump talking about China, mentioning.
We got some reports initially from the Chinese Foreign Ministry
about a conversation, if you will, between President Trump and
(03:14):
President G. But President Trump on truth social coming out
and saying our relationship with China is extremely strong. This
call was a follow up to our highly successful meeting
in South Korea three weeks ago. President g invited me
to visit Beijing in April, which I accepted and I
reciprocated where he will be my guest for a state
visit in the United States later on this year. What's
(03:36):
going on right now between the two countries, where are we?
I can't even keep track between trade and tariffs and
security issues and chips and so on and so forth.
Where are we?
Speaker 5 (03:46):
Well, It's a good question, Carol, because this call was
not really on anybody's Bengo card. Really at this moment.
The two sides had just held that highly anticipated and
highly orchestrated meeting at the end of life last month
where they forged this trade truce, and it seemed a
little early to actually have the two leaders do a
(04:06):
check in call. And the message between the president's readout
of his conversation with his Chinese counterpart, Shijin Paning and
the official Chinese news agencies version was pretty stark. Donald
Trump really stressed the call was very good. He talked
about his plans for a visit to Beijing and his
(04:27):
invitation for Shi to come visit the US later next year.
He also talked about some of the key trade points
that had come up and had been agreed to during
this trade truce, namely increased purchases of soybeans by China,
efforts to curb fentanyl trafficking, and so forth. And yet
(04:47):
the version that we got from China was a very
different tone. It really stressed the conversation on Taiwan. And
we have to remember that there is a spat brewing
between Japan, a major US ally and trade partner, and
China over the island, and that is because the new
Japanese Prime Minister Sanai Takayachi had expressed that Japan might
(05:09):
leap to Taiwan's defense in the event of a hypothetical
invasion by China of the island. China views Taiwan as
its territory and has said that if necessary down the road,
it would weigh whether to take it by force. Now,
the US has maintained strategic ambiguity over this, and the
(05:30):
comments by Japan raised questions about whether the US would
side with Japan on this matter. The President was artful
in not bringing up Taiwan in his truth social post,
but the Chinese were very direct, and it does seem
that they were trying to enlist the US, or at
least warn the US to back off a little bit
(05:51):
in this confrontation with Tokyo.
Speaker 3 (05:54):
Okay, well, we said we'd go around the world with you,
and we're going to do that. Mike, I want to
talk to Ukraine because Ukraine and it's your allies signaled
that the key sticking points remained in US broker peace talks,
even as senior officials held progress into any more favorable
terms for Kiev from a proposal backed by President Trump.
Where does this leave the peace process between Russia and Ukraine.
Speaker 5 (06:15):
It is still ongoing, and it is probably not moving
nearly as quickly as President Donald Trump and his advisors
would like. They had given authorities in Kiev, including President
Volodimir Zelensky, until Thursday of this week, to accept the
proposal that they had presented last week. But that version
(06:35):
really contained a lot of the demands and desires of
the Russian government. It was forged in conversations between Moscow
and officials from Moscow and Washington and present it without
much consultation at all with officials in Kiev and in
European capitals, and they have since met with the US
(06:57):
side to express their reservations and concern and those specifically
center on questions of territorial concessions that kid might be
expected to make in any peace agreement and also the
security guarantees that might be baked into any final accord.
The European allies of Ukraine and Ukraine have expressed concern
that those provisions were not nearly strong enough and they
(07:20):
needed to be discussed now. The proposal was presented last
week has now been whittled down to nineteen points from
the twenty eight that were framed originally last week, and
the conversation is ongoing. And we heard Frederick Murraz, the
German Chancellor, express some optimism, guarded optimism about progress having
been made, but he did see that things were a
(07:43):
long way off. So we'll have to see where this
actually goes and if it does bear fruit ultimately in
a further conversation about how to end the war.
Speaker 4 (07:52):
There.
Speaker 2 (07:53):
Yeah, and where are we, like in our third year?
I believe at this point are we in our third year?
We're approaching four right, four in February.
Speaker 5 (08:02):
It will be four years in February.
Speaker 2 (08:04):
Amazing. All right, Mike, thank you so much. Around the
world of Washington, we went Bloomberg News Senior editor for
Technology and Strategic Industries, Mike Sheppard. Thanks to him, we
did that. He is there, of course, in the Bloomberg
News Washington DC bureau.
Speaker 4 (08:19):
Stay with us.
Speaker 3 (08:20):
More from Bloomberg Business Week Daily coming up after this.
Speaker 1 (08:26):
You're listening to the Bloomberg Business Week Daily podcast. Catch
US Live weekday afternoons from two to five eas during
Listen on Applecarplay and Android Auto with the Bloomberg Business app,
or watch US Live on YouTube.
Speaker 3 (08:40):
As we get ready for a US government read on
retail sales for the month of September. The data that's
coming out tomorrow that may give the US bond markets
some direction, Carol. It's on track for a small gain
in November after rising in eight of the prior ten months,
even as the market is miired below October's price size
and yields.
Speaker 2 (08:56):
They're range bound, they are, indeed, let's get to it.
Let's continue on the US economy and US treasuries. Back
with us as Jennifer Lee. She's senior economist and managing
director of economics there at PEMO Capital Markets. They've got
just over a trillion dollars in assets. That was as
the end of the second quarter. Jennifer joining us once
again from Toronto. Jennifer, great to have you here. We
did talk last on September tenth. It was just before
(09:20):
the longest US government shutdown began. It's now over. The
data desert is no more what's you read on the
US economy as we start to get some data points.
Speaker 6 (09:31):
Well, first of all, God have to thank you for
having very much for having me on. And by the way,
my head is spinning thinking about all the politics that's
going on and all those ALI productivity stuff. And now
we've got all the data, so there's gonna be a
lot of more spinning and going around. And I mean,
so far, we haven't had a very clear read on
the economy from some of the data that we've seen
so far. I mean, I guess I could say that
it's been pretty still steady resilient, if you will, But
(09:54):
you know, the data, we're kind of old, right, and
I sort of have to wonder, you know, how much
we're going to see terms of revisions and coming months
as well, just given that the shutdown seems like it
just ended and everyone was like, hustle back to work
and let's start getting the little surveys and all the data
points out. So I think we had to take everything
with a grain of salt. Plus, all of this data
(10:15):
is coming before the shutdown, before that forty three day
long shutdown, so we're going to see some highs. We're
probably going to see some lows. So we're going to
have to probably go into towards the new year before
we start seeing some cleaner data, cleaner data because the
shutdown will be over unless it starts to get on
January thirtieth, and of course we're going to see some revisions.
So so far, I will say that's a long wigged
way I'm answering your question. So far seems like it's okay.
Speaker 3 (10:37):
Not ready to start talking about another government shutdown at
this point, Jennifer. Before we get there, we'll get some
other data. Even even during the shutdown, we did get
some alternative data and it seemed to indicate and also
commentary coming from companies that the labor market in the
US is weakening. And I'm wonder which part of the
wonder from you, which part of the feds dual mandate
the FED should be more focused on right now? Is
it stable prices or is it maximum employment?
Speaker 6 (11:01):
I think right now the focus is on the job market.
If you had asked me this like a month ago
or so, I would have said inflation. And I would
have been very lonely, I think saying that because at
that point I was still quite concerned about inflation, and
I was saying that it's still too early, even though
we were like in October and all that, but just
the fact that we are seeing some deals being made.
We were seeing terrafts being lowered, you know. I think
(11:22):
it was like this morning or over the weekend, you know,
with some terists of forty percent being brought down from
Brazil for example. So well, that will help food food prices
come down a little bit in the US. So that
gives me some comfort that we are seeing inflation, you know,
will wish you to be seeing inflation moderate in the
months ahead. So because of that, now I'm thinking that
(11:43):
the FED is probably rightfully focusing on the jobs front,
and we'll have to see how that happens. I think,
you know, we are. It's basically a coin coss, a
coin toss at this point with the December meeting, between
inflation and all that, but I think they're going to
air on the side of caution and focus on jobs
and probably go for another twenty five basis point cut
on December tenth.
Speaker 2 (12:03):
Do you have any clarity when it comes to twenty
twenty six.
Speaker 6 (12:07):
We are still seeing and again this is all hopefully
like a lot of these terrorists and all these deals
will be settled by earlier in the year, and we'll
have hopefully see inflation a moderating further. And because we'll
see some clarity on the trade front, we shall hopefully
see some of the job market indicators leveling of off
as well being a little bit more steady, because I
(12:28):
think a lot of the worker or employers earlier in
the year did not do not know what was going
on on the trade front, so they were holding off
on hiring and firing or laying off workers. But they
held off for a long time, and now we're starting
to see some of those layoffs come into play. We
saw like a big increase in the number of permanent layofs,
for example, in that September jobs report. So hopefully with
(12:50):
some clarity on that front, some clarity on the fiscal front,
and then now we're going to be focusing on the USMCA,
We're going to be focusing on the midterms, which is
not until November. But you know, time just goes by
just like that, right, So with some clarity again on
the trade front, tars coming down, I think that would
hopefully be a little bit better for jobs in the meantime,
we still look for after a December rate cut, we
(13:11):
still look for about three more rate cuts to come
from the Fed. Just kind of spaced out on a
quarterly basis.
Speaker 2 (13:16):
All right, Just want to mention ten year note at
four point zero three percent to your note short end
of the ELK curve three point five zero Gen Jennifer
Leech's senior economist Managing director of Economic Servor at BMO
Capital Markets.
Speaker 7 (13:29):
This is the Bloomberg Business Week Daily Podcast. Listen live
each weekday starting at two pm Eastern on Apple car
Play and the Android Auto with the Bloomberg Business App.
You can also listen live on Amazon Alexa from our
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Speaker 3 (13:47):
We're trying to make sense of the AI trade and
how companies are funding their AI investments, because in the
last few weeks there have been some observers who argue
that the important company to look.
Speaker 4 (13:56):
At is Oracle.
Speaker 3 (13:57):
Sure Shares of Oracle are up twenty percent so far
this year, but they're close to forty percent since that
all time high reached back in September. And then there
are the credit default swaps, the cost of protecting Oracle's
debt against default reached a fresh multi year high on Monday,
amid investor scrutiny of the debt spree of finance AI investments.
We've got Robert Schiffman with us. He's Bloomberg Intelligence senior
(14:18):
tech credit analyst. He joins us here in the Bloomberg
Interactive broker's studio.
Speaker 4 (14:22):
Okay, so we'll go.
Speaker 3 (14:23):
I'm gonna go over some numbers here, but then I'm
gonna ask you a really basic question about this. So
the price of five year credit default swaps on the
company's debt rose to the highest in October of twenty
twenty two. It amounts to around one hundred nineteen thousand
dollars for every ten million dollars of principal protected.
Speaker 4 (14:38):
So those are the numbers for.
Speaker 3 (14:40):
People who don't know, why do we care so much
about the price of credit default swaps and how can
they give us some insight into the health of a company.
Speaker 8 (14:47):
Well, this must actually be the top of the market.
There has to be a bubble because you've got the
tech credit guy sitting on the right signal. Even though
tech credit spreads are near their all time.
Speaker 4 (14:59):
Sights, we have some people from the GFC.
Speaker 8 (15:02):
Also obviously some pany he called it. I'm going to
answer an oracle, but let me start off just quickly
by saying it's okay, don't panic. The markets are holding
up reasonably well. There is a little bit of weakness,
and there are some yellow flags out there, and there
is some company specific information that's concerning that. Being said,
(15:24):
this whole AI trade, it's not a one month, two month,
three year trade. This is a ten year trade. And
right now we're in a building phase spending a lot
of money without a lot of revenues coming in, so
it takes time. I can't disprove a negative. I can't
disprove that money is not going to come into Oracle
(15:45):
or Amazon or Alphabet or Meta, but I think it
is now that being said, why is something like orac
cale CDs concerning people welch Because single names CDs, particularly
for investment, great names generally don't trade. They do trade.
In the Triple B universe, Oracle has been a name
that hasn't traded. And then the reason why is that
(16:07):
there hasn't been a reason to hedge in the past.
All of a sudden there's a reason to hedge. Oracle
issued eighteen billion dollars of public bonds. On top of that,
they're in the process of syndicating thirty eight billion of
private credit. That what I think is really driving this
move and what is that? Why was CDs originally created?
It was for banks to hedge their loans. It became
(16:29):
a trading vehicle for a while for a long time.
And when we hear CDs nowadays, we think about the
financial crisis. We think there's a name that's wider. We're
blowing up, Triple a's are going to are defaulting, and
I just think we couldn't be that far from the truth.
There's a combination of fundamental but I think more technical
reasons why this is happening. So you have banks that
(16:52):
have tremendous amount of exposure to data centers, not just Oracle,
but a lot of these data centers that are not
investment grade like Core Weave a lot of other data
center builds that they don't have the ability to properly
hedge because there's not active CDs. So how do you
hedge your positions? Well, what you do is you hedge
(17:13):
via the higher rated credits where you can potentially buy
CDs that costs next to nothing. Twenty thirty fifty basis points,
even one hundred and twenty basis points is not very
much because that's how you can hedge your data center risk,
and you can do it really cheaply. Then on top
of that, what happens is hedge funds join in. You
have a momentum trait here that goes on where somebody
(17:35):
sees whoa wait, whoa Bloomberger to report on Oracle CDs.
We haven't seen CDs in the headlines in ten years.
What's going on. First thing for a hedge fund manager
to do is to say, I'm going to buy CDs.
I'll ask, I'll get the answers later. And on the
back of that, what ends up happening is where do
you find the natural sellers of CDs? Where do you
(17:55):
find somebody that says, oh, you know what, Oracle at
sixty over seventy also you protection? Because what's what's my
upside to doing that? And I think, what's what's happened
now is that you've got fundamentals that are not great.
In the near term. Oracle's free cash flow is going
to be massively negative for the next few years. They're
going to have to fund that with even more debt,
(18:16):
which is going to have to be hedged, both in
the public and private markets. So you get this cycle
of people coming to try to buy ces. There's not
a lot of sellers. It pushes it wider. That being said,
Oracle is sort of standing a little bit alone. You
really need to go down the curve to more liquid
names like core Weave, where you're seeing big moves like this.
When you look at the names like what I call
(18:38):
them mount rushmore of credits, you know, the Microsoft's apples, Amazons, alphabets,
We're seeing a little bit of spread widening. You're seeing
people starting to try to buy some protection, particularly from Meta.
And why on Meta. It's not that that Meta has
underperformed from a credit from both the credit and a
in equity perspective, but it's because Meta did a twenty
(19:00):
seven billion dollar private data center deal and that's the
way that the banks are able to hedge that. Now,
there are some large asset managers that bought that deal,
but there's still a lot of banks that are involved
with that that are hedging their that are hedging their position.
So it's a little bit of fundamentals and a little
bit of.
Speaker 2 (19:17):
Technicals, So don't be worried.
Speaker 8 (19:20):
Well as bond people.
Speaker 2 (19:21):
I mean, what would you have to see to say, okay,
we've got some problems here.
Speaker 8 (19:25):
So the reason why I'm a little bit less worried,
First of all, the big names that I mentioned, we
barely see any sort of spread movement. And quite frankly,
when I mean you mentioned Oracle stock, Orkle stock is
still up twenty percent. All these other names other than
Meta are up significantly this year as well. So it's
also from a starting point, right, they're.
Speaker 3 (19:42):
Still down forty Oracle's down forty percent from I mean,
Carol and I were sitting on the beach in September
at an event and Oracle was just surging higher. I mean,
this was likest run.
Speaker 4 (19:51):
There's more equity after.
Speaker 3 (19:52):
The company reported earnings that day.
Speaker 8 (19:54):
Yeah, research doesn't get to go to the beach, you know.
But that being said, we were going to see that.
But you got to remember we're coming off of all
time highs, so equity valuations listen, stocks could be down
fifty percent. I still don't think that would mean there'd
be any fundamental change in what expectations are. So I
(20:15):
just think when you look at credit markets again, credit
spreads for the investment grade tech sector year to date
are fifteen wider or about five wider on the entire
high grade sector. We've primarily underperformed because of a couple
of names like Oracle, and there's been a lot of
bond issuance that have pushed spreads a little wider because
there's more bonds that are trading. But there is no
(20:36):
panic in our market. There's a worry that a name
like Oracle, as they continue to fund, could in theory,
go to non investment grade. What would happen. They have
one hundred plus billion dollars of public debt outstanding. It's
non economic. You can't run a high yield business like that.
So one is I think there.
Speaker 2 (20:55):
Is about twenty twenty five seconds here.
Speaker 8 (20:57):
The rating agencre are going to give them room. I
think they're going to give them time, even though there's
negative outlooks at SMP and Moodies. I do not see
Oracle going to junk. I also think there's a huge
backing in the capital markets as well as the US government.
If Oracle were to need capital, and if Larry Ellison
needed some sort of favors, it would happen.
Speaker 2 (21:15):
I know, but that doesn't necessarily make me comfortable. It
should make you comfortable, all right, all right, Robert Schiffman,
this was so good. Thank you so much. Bloom Are
Intelligence Senior Technology credit analyst. We'll be reaching out to him,
I know. Again, stay with us.
Speaker 3 (21:29):
More from Bloomberg Business Week Daily coming up after this.
Speaker 4 (21:35):
I've been driving on that man's went on the wheel. Drive.
Speaker 5 (21:39):
Drive, yeah, drive, and you just focus on driving, focus
on the growth.
Speaker 4 (21:46):
Driving your car, would drive, boss, because I'm asking you.
Speaker 7 (21:50):
Just taking just drive baby.
Speaker 1 (21:55):
See this is the drive to the clothes.
Speaker 2 (21:58):
But we're going.
Speaker 1 (21:58):
We don't need on Bloomberg Radio.
Speaker 2 (22:02):
All right, TikTok everybody, About eighteen nineteen minutes to go
until we wrap up the trade on this Monday, November
twenty fourth, Carol Master to instat Ofic live in our
Bloomberg Interactive Broker studio, And as you just heard from
Bill and Amy, we are kind of hovering near our
best levels of the session. Feels like another leg up
here for the Nasdaq one hundred up two point six percent,
a rally underway s and P five hundred again of
(22:24):
about one and a half percent here as we are
getting closer to the closing belt, but tim still kind
of almost and even split a little bit of a
more risk on trade. If I look at the SMP
two hundred and eighty three names to the upside, two
hundred and eighteen to the downside to unchanged.
Speaker 3 (22:39):
Yeah, that's pretty wild to me given the magnitude of
the rally that we're seeing. But it speaks to the
fact that it's the big stocks that are making the
big moves, at least to the upside. I want to
bring in Leo Kelly of Verdant's Capital Advisors. He's founder
in CEO. The firm has more than four billion dollars
in assets under management. Leo is back with us from
Hunt Valley, Maryland. Leo, we were having this conversation last week.
I mean, we're we're not quite back to where we
(23:01):
were at all time highs, but we're that's the direction
we've been moving in. On Friday and then today we
kind of thought, I think a lot of people thought
something was happening with the equity market. There was weakness
starting to be exposed. There were concerns about the labor market.
There was concerns about the financing of the way that
these companies are spending on and investing in AI.
Speaker 4 (23:19):
How do you see it? Well, you have to break
that question down a couple pieces.
Speaker 9 (23:24):
The first is, I know there was a lot of
conversation around the bubble bursting, and then I think you
guys might recall we've been talking about elevated valuations and
being very disciplined in your asset allocation.
Speaker 4 (23:37):
To burst a real bubble.
Speaker 9 (23:39):
And with the valuations we were seeing today and the
extent that these stocks have run, that's a process.
Speaker 4 (23:46):
That's not an event.
Speaker 9 (23:48):
It takes time to break down the enthusiasm and optimism
of investors, and you hit a bottom when you've extracted
all of that enthusiasm out and everybody is in panic.
And we're a long way from that, so I think
there's still going to be rallies along the way. I
think we're going to see a lot of volatility in
the first and second quarter of next year. I would
(24:09):
say remember in two thousand, we saw these eight ten
percent movements in ninety nine and people were getting concerned.
In March we went into a full bear market, and
then it rallied all the way back by July of
two thousand, before we actually had the real bear market,
which lasted two years, so we have a long way
to go. We're going to see a lot of rallies
here in terms of investing overall. I do think the
(24:33):
government shutdown has ended, so now we're going to you know,
that'll cost us a little bit of GDP this quarter.
But outside of that, jobs have been weak, but they're
still fine. The consumer has slowed but is still fine.
Speaker 4 (24:47):
I think.
Speaker 9 (24:47):
I think as we go into twenty twenty six, we're
going to find we're going to find some strength again
going into the early part of next year.
Speaker 2 (24:53):
The notes you shared with us, Leo, you know, you
talk about the implications of an bubble lasting for decades.
From an investment standpoint, investors will learn valuable lessons about
overallocating to hot stocks and to listening to stories as
absolute truth versus considering evaluation. From an economic standpoint, excess
capital turns into rapid infrastructure development. That's the good side
(25:16):
of a bubble. Is it just timing here? I mean,
is do you buy that this is going to be
and is already starting to be transformative and it's going
to impact every industry and it's going to change just
to everything. But maybe the timing and all of this,
and maybe that's why we feel so uncomfortable about the
(25:36):
massive spend right now, that we might have to wait
a little bit for the payoff and the disruption and
the innovation happening.
Speaker 4 (25:46):
Yeah.
Speaker 9 (25:47):
Yeah, as the old saying goes, I have good time
being So the timing is going to be obviously difficult. Now,
what happens historically with generational change like this, whether it's
the Internet, or it's mobile social or railroads or cars
or you name it. The infrastructure development side of this,
(26:10):
the buildout is where all the enthusiasm is present and
you get massive capital infusions.
Speaker 4 (26:16):
And this is what I mean by some bubbles are good.
Speaker 9 (26:19):
The investment side will teach valuable lessons, but it brings
capital to the needed infrastructure developments. Point now, the real
money making comes in the application of the infrastructure, and
we're not there yet. To your point, Carol, that's when
we get over the hump, is when the applications start
to hit. So think of it this way. Cisco was
(26:41):
the Nvidia of the Internet. They were at the center
of everything, and they were very powerful. Didn't stop them
from going down eighty percent in the bubble crash but
still a great company, and everything they said about Cisco
came true.
Speaker 4 (26:54):
It's a great company even today.
Speaker 9 (26:56):
But really what drove the Internet was applications, Google, Amazon,
et cetera. They weren't there during the crash or when
they were in their nascent phase. When you think about mobile,
you think about Uber, great example, it was AT and
T and it was Apple that built the infrastructure, but
really it was the Ubers of the world that created
(27:17):
what is today the productive side of mobile.
Speaker 4 (27:19):
Same thing with AI.
Speaker 9 (27:20):
We think quite frankly, where the AI application is going
to come from doesn't even exist today. I think it's
going to happen today in the venture capital world. The
companies that are going to build the applications to put
on the infrastructure. Just like Uber didn't exist when the
when the mobile phone came out, the application companies are coming.
Speaker 3 (27:43):
So LEO, is that is that a nod to alternatives
in a portfolio, alternatives that invest in venture capital? I mean,
how do you how do you your clients get exposure
to this?
Speaker 4 (27:52):
Yes?
Speaker 9 (27:53):
Absolutely, Well, First of all, we're big private equity users
across a very diversified portfolio. First things, for no investors
to just go off and try to chase one private
equity discipline. That's no different than just going out and
buy one stock. But that said, Tim, to answer your
question directly, Yes, we are invested in venture, we're invested
(28:14):
in cyber defense, and we're invested in AI application companies
that are developing the apps that will create the productivity
that's in front of us. Again, historically, these infrastructure companies
try to create applications, but that's not their expertise. The
expertise comes from the companies that will be developed soon.
Speaker 3 (28:34):
You know, if you look at the landscape right now,
and you know you're thinking about this, like the Uber
Corolara you mentioned with smartphones, what's the type of company
that would exist in this post AI world? Just give
us some examples.
Speaker 9 (28:47):
Yeah, I think I think it's anything that creates productivity.
So anything that, for example, starts to create agency for
users that allows them to go off and then create
processes that make everybody more productive. Frankly, and this is
this is one of the great dichotomies of progress, is
(29:09):
it's the applications that take jobs away that will be
the most successful. Now, this is where we all gasp
and say Leo said, for it to work, everybody lose their.
Speaker 2 (29:18):
Jobs, right, but Wenny not funny?
Speaker 4 (29:20):
Is right? Funny not funny?
Speaker 9 (29:23):
But what happens is the new jobs come and we
start to see jobs in areas that we don't even
know exist. For example, how many computer scientists work at
Google today that didn't exist pre Internet. And so you
start to transition the economy and yes, that's always a challenge,
(29:43):
but on the other side, the productivity is substantially higher
and that usually helps us catapult to another level of
economic benefit.
Speaker 2 (29:52):
Well, it's a timely chat because it's kind of tying
all these things that we've been talking about. I feel
like the last few weeks in a big way. Leo,
So great. Great to get some time with you on
this Monday. Hey have a great Thanksgiving. Leo Kelly, founder
and CEO of Verdants Capital Advisors, joining us from Hunt Valley, Maryland.
Speaker 1 (30:10):
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