August 26, 2025 • 32 mins
Watch Bloomberg Businessweek Daily LIVE every day on YouTube: http://bit.ly/3vTiACF.
President Donald Trump said he was prepared for a legal fight with Federal Reserve Governor Lisa Cook after he moved to oust her from her post following allegations that she falsified mortgage documents.
The Fed, weighing in for the first time this week, said it would abide by any court decision in Cook’s legal challenge of her dismissal by Trump. A Fed spokesperson added the central bank has deferred any decision on Cook’s current working status, and noted there is no official business before the Fed board this week.
“Lisa Cook has indicated through her personal attorney that she will promptly challenge this action in court and seek a judicial decision that would confirm her ability to continue to fulfill her responsibilities as a Senate-confirmed member of the Board of Governors of the Federal Reserve System,” the Fed said in a statement.
Trump, speaking at a Cabinet meeting on Tuesday, said he was also prepared to abide by any court decision, but indicated he was not concerned about Cook’s challenge.
Today's show features:
- Kathryn Judge, Harvey J. Goldschmid Professor of Law at Columbia Law School, on the legal battle between the White House and the Federal Reserve
- Bloomberg News Equities Reporter Bailey Lipschultz on the Tuesday trade
- Que Nguyen, Partner and Chief Investment Officer, Equity Strategies at Research Affiliates on markets and investing in Big Tech, as well as the Federal Reserve
- Bloomberg Intelligence Senior Defense Analyst Wayne Sanders on US Commerce Secretary Howard Lutnick suggesting that the US government is looking at the defense sector for potential stakes in companies
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg business
Weekdaily 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 news
(00:23):
as it happens. The Bloomberg Business Week Daily Podcast with
Carol Masser and Tim Stenebeck on Bloomberg Radio.
Speaker 2 (00:32):
President Trump said he was prepared for a legal fight
with Federal Reserve Governor Lisa Cook after he moved to
oust her from her post following allegations that she falsified
mortgage documents. The ved said it would abide by any
court decision in Cook's legal challenge of her dismissal by Trump,
and has deferred any decision on Cook's current working status.
We should remind everybody that her lawyer vowed to file
(00:55):
a lawsuit over the President's maneuver to oust her for
cause from the Fed Border Governors, with Lisa Cook saying
she would not resign and would continue to carry out
her duties. For the legal side of this, I want
to bring in Catherine Judge. She's the Harvey J. Goldsmith
Professor of lawt Columbia Law School, where she does research
on banking, regulatory architecture, financial crises, and more. She's the
(01:16):
author of direct The Rise of the Middleman Economy and
the Power of Going to the Source. Professor Judge good
to have you back on the program. Does the president
have a legal basis at this point for firing Federal
Reserve Governor Lisa Cook?
Speaker 3 (01:32):
It's dubious.
Speaker 4 (01:34):
I mean, the challenge is this notion of cause is
not well developed in the law. No other president has
actually tried to fire a governor for cause. There's some
things that obviously would be justifiable bases for removing somebody.
If she was derelecting her duties or abusing her position,
it would very easily justify this type of dismissal. Here
all we have our allegations, we don't actually have a
(01:55):
fully developed record because there's been no due process, and
there is a possibility that this is in that gray
space which just not clear if the types of actions,
even if true, would justify a firing.
Speaker 5 (02:09):
What legal arguments is Cook's team likely to make in
defense of her position. What grounds that she and her
legal team have under existing statutes?
Speaker 4 (02:18):
Yeah, I mean, so the statutory scheme provides that a
governor of the Federal Reserve can only be removed for
a cause. They otherwise have fourteen year terms. And we
actually have seen recently the Supreme Court make it shed
a lot of light suggesting it's about to overrule earlier
precedent allowing other independent agencies to actually be independent. So
(02:40):
we see this very broad reading of the president's executive authority.
Speaker 3 (02:43):
But the Court said, well, the FED is different.
Speaker 4 (02:45):
You know, the Court went out of its way in
a very sure opinion to say the FED is different,
the different history, and we know that, and the Congress
has gone on its way.
Speaker 3 (02:53):
To create these types of protections.
Speaker 4 (02:54):
So I think what she's going to argue is that
this has nothing to do with mortgage fraud. This is
everything to do with President Trump wanting to pack the
FED with his chosen appointees.
Speaker 3 (03:06):
And that's the one thing the law is clear that
he's not allowed to do.
Speaker 4 (03:09):
He's not allowed to move somebody just because of policy differences.
Speaker 2 (03:12):
But what if she did falsify mortgage documents? What if
what Bill Poulte, who had FHFA, has alleged that she
did falsify mortgage documents? What if she did that I mean, so.
Speaker 3 (03:26):
The law here just isn't developed.
Speaker 4 (03:27):
Again, Like, this is a hard thing so generally speaking,
cause most of the time arises because of shortcomings and
how somebody is performing their duties. This is something that
happened before she joined the FED. And we also don't
know the intent whether the term mortgage fraud.
Speaker 2 (03:44):
Does intent matter with this, Yes, it does, actually explained
Explain explain how that works here, because maybe she made
a mistake, is what you're saying.
Speaker 3 (03:52):
Yeah, we just don't know.
Speaker 4 (03:53):
Again, intent a core element of fraud, any type of fraud,
is a requirement of the person intended to defraud a party.
Speaker 3 (04:00):
And so that's again it's an issue.
Speaker 4 (04:03):
That we just don't know yet. But I think you're
getting to a bigger issue, which is it two different
she's won? Is you know what's really going on here?
Is this a justifiableasis for removing her? But too, Like,
let's look at the general context in which this is happening.
I think the bigger point here is that President Trump
clearly is not going to tolerate an independent bed. I mean,
(04:24):
this isn't coming out of the blue. This is coming
less than a month after he similarly ledged that he
was going to try to fire current chair Jay Powell
because of cost over runs associated with the renovations. I
think he realized there that his case was thin, and
so ultimately he walked away on that.
Speaker 3 (04:42):
But this doesn't look like what he's really trying to
do is.
Speaker 4 (04:45):
Just to make sure that he has a team of
people that are fulfilling their duties under the law, but
instead that he has his team in place. And so
it's going to be hard for court to completely ignore
the environment in which this is happening.
Speaker 5 (05:01):
And based on my understanding, establishing a fore cost removal
usually requires some type of proceeding that would allow Cook
to answer questions and answer to charges and present evidence.
Cooke's lawyer said that this lacks any factual or legal basis.
By this, I mean the challenge of Trump's action. Do
you agree with that.
Speaker 4 (05:21):
Yeah, So normally you would have to have some type
of due process for that fore cause protection to have
any bite. If you say, like, they can only be
remove a cause, but all you need are allegations in
somebody's job could be terminated, then as a practical matter,
you haven't given any teeth to that fore cost requirement,
and we can go back to nineteen thirty five when
(05:42):
Congress created this particular version of the Federal Reserve, and
throughout the debates there is repeated references to the fact
that they don't want the president to have too much
ability to control the Federal Reserve.
Speaker 3 (05:55):
This was during FDR's reigns.
Speaker 4 (05:57):
Was another period where you had a very strong presentident
that was trying to increase his control and Congress refuse
to give FDR really the proposal that FDR put forward
in the form that he wanted it to be passed
because they were worried about too much presidential control. So
Congressional intent here is very clear that what they were
(06:18):
trying to guard against was a president. And again the
reason they're worried about that is presidents consistently want slightly
more accommodative monetary policy, and sometimes it's warranted, but allowing
monetary policy more commodative than is warranted does lead to
a higher likelihood of inflation and other significant cost for
(06:38):
the long term health of the economy.
Speaker 2 (06:40):
We're speaking with Catherine Judge. She's the HARVJ. Goldschman Professor
of Law at Columbia Law School. She's the author of
direct The Rise of the middleman economy and the power
of going to the source. She joins us right now
from Oxford.
Speaker 5 (06:52):
You mentioned that it could be politically motivated. Why do
you think it's, Lisa Cook specifically, We know that's a
term doesn't expire until twenty thirty eight.
Speaker 4 (07:02):
So again, I think that might you might have just
been looking for any of the Biden appointees where there
happen to be something colorable, And it is important to
acknowledge that there's at least a colorable claim here, right.
Speaker 3 (07:15):
We do want federal Reserve.
Speaker 4 (07:16):
Governors to be credible individuals who are respected and who
are doing their utmost to fully comply with the law.
And so it could be and it looks like this
might be the case that they were looking around for
dirt on any of the current governors. I mean, another
aspect of this that is really disturbing is just that
the government has all kinds of information about all of us. Right,
So we have all the mortgage documents, you have tax filings,
(07:40):
banks file suspicious activity reports, and you don't even know
one who's been filed about you, And so the Treasury
is just this boatload of information that banks have provided
about transactions their customers have engaged in and so there's
also this real question over does all of that information
suddenly become available for partisan purposes? And so that's a
(08:01):
separate issue that seems related.
Speaker 2 (08:03):
What's the position that the Federal Reserve find itself finds
itself in right now? The full statement from the Federal Reserve,
it's five paragraphs, and the Federal Reserve said, as always,
the Federal Reserve will abide by any court decision. It
seems like the Fed is actually threading this needle pretty
well and saying, look, we'll do whatever the courts tell
(08:25):
us to do, but the courts haven't spoken yet.
Speaker 3 (08:29):
Yeah, I think it's prudent in some ways.
Speaker 4 (08:32):
They're trying very hard, I think not to alienate the
president more than necessary. On the other hand, it is
a somewhat weak position because again, there hasn't been any
due process yet, and they know that there hasn't been
any due process yet. So there was a question of like,
do they even allow this decision to stand and wait
(08:55):
for the courts, or do they opposite and say, look,
until there's been some due process, we're still going to
treat her as governor cook with all of the rights
associated with that position. But once the court is spoken,
then we're going to defer to that decision. So, even
though I think the FED is very careful here, they
did take a posture that was more deferential to the
(09:17):
President than the one they might have taken.
Speaker 5 (09:21):
Based in all the facts that's hand, And given your
really impressive background, what is your best guess and how
this situation will end up being?
Speaker 4 (09:31):
I mean, so I think the biggest lesson here is
it's not about Governor Cook, It's about Feddan independence. And
so when I look at what's happening right now, I
think the days of FED independence are numbered. It's already
been whittled down meaningfully through the repeated attacks on Powell.
But I think we see something much more pernicious going on,
which not just these individual attacks, but a president signaling
(09:54):
fundamental discomfort with there being such a powerful arm of
government that that he doesn't have control over. And so
if he's willing to whip out every stop imaginable until
the FED is really willing to do his biting, that's
going to be a very different world than the one
that we've lived in for the past like five or
six decades.
Speaker 2 (10:15):
So in your view, What should Congress do?
Speaker 3 (10:20):
I think Congress.
Speaker 4 (10:21):
Ideally should uniformly come out and condemn the decision as
inconsistent with the statutory scheme that was created. And again
it's hard. They didn't specify any procedures or process, but
inherent in that term cause suggests there has to be
something more than a mere allegation. So I think the
most heartening thing would be to say, like, look, the
(10:43):
President does have the ability to make these allegations, and
perhaps there's even the possibility that there should be some
type of hearing on these allegations.
Speaker 3 (10:52):
But I think Congress.
Speaker 4 (10:54):
Ideally should stand by the statutory language that they put
into place in nineteen are fine, right, It's really important
for the.
Speaker 3 (11:03):
Fed to remain independent.
Speaker 4 (11:04):
And that's because, again, there can be meaningful short term
economic gains from more accommodation monetary policy. So there's reasons
the President wants to do this. It's a very smart move,
a shrewd move on his part. That doesn't mean it's
the long term best health of the interests of the
economy or the contry.
Speaker 2 (11:21):
You clerk for Justice Stephen Bryer on the Supreme Court,
just we have five seconds, yes or no? Does it
go to the Supreme Court. Yes, all right, there it is,
Catherine Judge. Always good when you join us on a
Bloomberg Business Week Daily. Thank you so much for taking
the time, Catherine Judge of Columbia University, where she's the
Harvey J. Gold Schmidt Professor of Law. This is Bloomberg.
(11:43):
Stay with us. More from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (11:51):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five yeas during
Listen on Apple, Karplay and Android with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 2 (12:05):
A lot of headlines crossing the Bloomberg terminal just in
the last couple of minutes. I want to bring some
of them in. Elon Musk's to Starlink and T Mobile,
I Echo Stars Spectrum. That's according to Semiform. Also, the
Trump administration is reviewing options to influence FED banks. The
Trump administration aims to scrutinize FED president's selection. And then
there's this one crossing from the Wall Street Journal. The
(12:27):
Journal reporting that Trump weighs quickly announcing a replacement for
the Fed's Lisa Cook. That's the backdrop for the trade
after hours and heading into tomorrow, I want to bring
in Bailey Lipschultz. He's Bloomberg News Equities reporter. He joins
us here in the Bloomberg Interactive Brokers studio. I bring
up everything that's happening right now, Bailey, because that's what
(12:48):
traders and investors are going to have on their radar tomorrow.
Today the trade was surprising to me because I thought
there would be a bigger reaction to a thread of
the Feds into Mints. But maybe it's not over until
it's over, and the market's saying we don't really see
that being in reality anytime soon.
Speaker 6 (13:07):
I think the big thing, tim when you talk to
investors is that if you are looking for a reason
to sell in this market, you've been wrong. So if
you're saying that these latest headlines are a reason to
take chips off the table tidy up your portfolio, maybe
that is a smart move given the low volume and
low volatility we've been seeing. But the broader kind of
backdrop is this is a market that has been trying
(13:28):
to find reasons to go higher. So to your point,
if there's no actual kind of decision that is fundamentally
being implemented.
Speaker 7 (13:38):
It's a lot of headline risk.
Speaker 6 (13:39):
We've seen a market, whether you want to say taco trade,
really shrug off reasons or threats or or realize kind
of actions from the White House to kind of dial
back exposure. And one thing I just want to call
out is we did see volumes down about twenty five
to thirty percent relative to a normal trading day in
the last month. And when we do look at using
(13:59):
the terminal factors to watch that function is FTW momentum outperforming,
as was growth, as was highly shorted, names, under performers,
dividend and you low volatility stocks. So this is a
market that whether you're kind of covering some of your
shorts or leaning into momentum. That's kind of been the
backdrop with DC.
Speaker 7 (14:17):
Aside, we have.
Speaker 5 (14:19):
David Morgan's Michael Furley, he's an economist there saying that
if the president were successful, the outcome would be momentous
and he also said that given all the above risks,
this would be an upset inflation risk. What are you
hearing from your sources? Are they I know many of
them might not be short term traders, but are they
thinking of shifting their allocations, how are they positioning, what
are they watching.
Speaker 7 (14:39):
It's new, but it's not new to an extent.
Speaker 6 (14:42):
We've seen Trump time and time again kind of browbeating,
whether it's j.
Speaker 7 (14:47):
Powell or someone else, kind of pushing for the FED
to cut.
Speaker 6 (14:49):
When you look at what's being implied right now, we're
at eighty nine percent chance of a FED cut next month.
Speaker 2 (14:55):
Was that a lot different than what it was on
the Lundrade a little while ago. So we're come back.
Speaker 6 (15:00):
So it's actually it comes back to kind of this
debate of what's actually baked in. You look back August thirteenth,
we were at one hundred and six percent chance of
a FED cut.
Speaker 2 (15:08):
So, well, hold on. I was taught by my math teacher.
I'm not joking, Fred Coleman. Okay, what great is this?
This was freshman year of high school and he was
a he's a coach. We called him dirf It's Fred Backwards,
and he would get very angry with anyone who said,
(15:31):
any I'm giving it one hundred and ten percent. He said,
there's no such thing as more than one hundred percent.
Now that we cover equity markets, we do sometimes have
stocks that go up more than one hundred percent. But
my math teacher always reminded us and coach said, you
can only give one hundred percent. How can there be
more more than one hundred percent chance of a rate cut?
Speaker 6 (15:51):
It's just the number of cuts baked in, so it's
not necessarily one hundred and eight percent chance, though the
terminal will show that. It's more that the swaps market
is implying we're there to be a decision now. Investors
are betting that they're pricing in one point zero eight
rate cuts. Again, though there's no inter like rate cuts.
You either cut twenty five to fifty, et cetera, not
(16:13):
twelve and a half bases point.
Speaker 7 (16:14):
Okay, so that's kind of the backdrop.
Speaker 5 (16:17):
We also have a story from your team. I think
that says Goldman saccess a Goldilock summer is all but over,
and mounting concern about the US economy is Yankee markets
from their seasonal slumber. But you made a point earlier
that this is a market that almost threatens you to sell,
but investors still don't. What are you hearing on your
end from traders and portolo managers? What are their reasons
(16:38):
for still believing in the US market when We have
international portfolio managers earlier saying that, you know, this is
why we're in the international trade.
Speaker 6 (16:46):
I will say this is it feels to me when
I talk to investors short term, long onlies.
Speaker 7 (16:51):
This is the most hated bull market in quite some time.
Speaker 6 (16:54):
This is a market that fundamental investors are saying, we're
trading it knows.
Speaker 7 (16:59):
Sweed valuations, but yet we keep going higher.
Speaker 6 (17:01):
We see the market finally taking what would be seen
as a healthy correction, and then investors step in and
by the dip one and a half percent is not
really a dip in my view. When you look at
a gauge like the Vicks sitting below fifteen, you look
at the dispersion between market volatility being low and single
stock volatility being high, whether that's momentum or some of
these heavily shorted or growthier names. Investors are picking their spots.
(17:25):
But the thing that has been learned, or the thing
that's been playing out so far this summer, especially when
you look at kind of how quickly the market snap
back from those April lows, is that the promise of
earning's growth tomorrow is still stronger than the fears of
missing So you still are dealing with I don't want
to call it a foam mo trade, but you're still
(17:46):
dealing with that.
Speaker 2 (17:47):
This is the perfect segue to talk about a story
that I've wanted to speak to you about for more
than a week at this point. It's about your story
last week on Chamath poly Hostia so one of the
most read on the Bloomberg Terminal last week.
Speaker 7 (17:59):
He is.
Speaker 2 (18:01):
Who calls him the SPAC King? Does he call himself
the spec Kings?
Speaker 7 (18:05):
Known as the he was known as the SPAC King.
The origins are debated.
Speaker 2 (18:10):
You might know him as a podcaster these days.
Speaker 6 (18:12):
He's all in podcast Yeah, according to the Terminal, was
not a millionaire, at least according to rich Go he's
not one as far as our data are concerned as
of the time of publication.
Speaker 2 (18:20):
As okay, well, maybe that will change once he gets
back into SPACs. What's he doing?
Speaker 6 (18:24):
He filed so you file fifteen day lag before you
can actually raise an IPI. But he filed to raise
two hundred and fifty million dollars SPAC targeting pretty much
everything that's been working in the SPAC market. I'm talking
about AI, clean Energy, defy aka crypto and defense.
Speaker 7 (18:42):
So kind of all of the buzzwords.
Speaker 6 (18:44):
But in that filing, the most interesting thing was he
warned outright retail investors that you can lose all of
your money, and that was the big critique back in
twenty one.
Speaker 2 (18:53):
This is a guy who compared himself to Warren Buffett
years ago. How has it turned out?
Speaker 6 (18:59):
Of his six spacks, I haven't looked at it today,
five of them are below the ten dollars, So IPO's
price at ten dollars so far is up more than doubled.
But the median loss, I want to say, was north
of seventy percent seventy five percent, so if you bought
and held, you lost money. The thing that also is interesting,
this is a financier, if you want to call him that,
(19:20):
that wanted to have a spac for every letter of
the alphabet, so we wanted twenty six spacks. He had
SPACs the price at ten dollars that were trading north
of twenty dollars, So people were paying twenty dollars for
a ten dollars piece of paper back in the zero
interest rate mania spackcraze and had quite a reckoning.
Speaker 5 (19:37):
Can you reminder viewers and listeners, why does he prefer
a SPAC. I feel like this is a pandemic story.
We've written tons and tons of stories about him in
this back craze. But why SPACs.
Speaker 6 (19:47):
The main argument is that capital markets are inefficient, depending
who you talk to, IPOs are not the best way
to take a company public. You leave money on the
table for kind of investors flippers. So if you price
an ipot twenty dollars, it opens at twenty five. He
left money on the table. You made hedge funds money.
So the argument is that there is a more efficient
way to go public. Also an argument from spackbackers that
(20:11):
if you're going to use a SPAC deal, there's specialist
kind of flavor. So you're partnering with an experience management
team who will strike a good deal. They have a
vested interest in this new company, newly listed company performing well,
and they're going to stick in it for the long haul.
Speaker 2 (20:27):
Bailey Lipshaltz, he covers it all here in the Bloomberg
Interactive Brokers studio. He's Bloomberg News Equities reporter. Check out
all of his coverage on the Bloomberg terminal. Stay with us.
More from Bloomberg Business Week Daily coming up after this.
Speaker 1 (20:44):
This is the Bloomberg Business Week Daily Podcast. Listen live
each weekday starting at two pm Eastern on Applecarplay and
Android Auto with the Bloomberg Business App. You can also
listen live on Amazon Alexa from our flagship New York station,
Just say Alexa Play Bloomberg eleven thirty.
Speaker 8 (21:05):
Marco, I'll about you. Let me drive.
Speaker 2 (21:07):
Oh no, no, no no, this is not a twin.
Speaker 8 (21:11):
Alright, please, I'll travels.
Speaker 7 (21:14):
Excuse great, I want to drive.
Speaker 8 (21:16):
It's a good question. Good try. This is the Drive
to the Clothes.
Speaker 7 (21:25):
Pungs to music.
Speaker 8 (21:25):
Well, Brad it down on Bloomberg Radio.
Speaker 2 (21:31):
All right, hard to believe it's that time already, isn't
it Drive to the Clothes.
Speaker 8 (21:37):
It's hard to believe, but it also felt long.
Speaker 2 (21:41):
I allot to honesty. Isabel Lee. She's in for Carol
Masser and she is honest. Hey, we got a great
guest for our Drive to.
Speaker 5 (21:49):
The Clothes exactly because it's a big day tomorrow. We
have in video set to report and for now. In
video comprises eight percent of the S and P five
hundred ten percent for the NASDAC and tech more Bral
is at record concentration, but tim are we in a bubble,
This is the big question.
Speaker 3 (22:04):
And for that we have Quean Win.
Speaker 5 (22:06):
She's chief investment Officer Equity Strategies at Research Affiliates. This
is a firm that oversees around one hundred and fifty
nine billion dollars in assets. So, Quai, you said, we
can never be sure if we are in a bubble
until it pops. But what's your best guest at the moment.
Speaker 9 (22:23):
My best guest right now is that we are building
into a.
Speaker 8 (22:28):
Bubble.
Speaker 9 (22:29):
I can hardly even say that right because I work
for a value oriented firm with fear bubbles like you
would not believe. But I think that what we are
doing is building into a bubble, driven by a lot
of the AI enthusiasm. I mean, you're seeing a lot
of that right now, all the CAPEX spending, not just
the CAPEX spending, but the salary is being paid to
(22:50):
AI executives and AI researchers.
Speaker 2 (22:53):
Well, okay, so let's talk about that because we've got
Nvidia reporting after the belt tomorrow. On any other day
that you know, we wouldn't have all the news emanating
from Washington, I think we'd spend a good portion of
today thinking about and talking about that report and the
importance of that report in an environment where you've been
focused on value, how much have you missed out in
(23:15):
recent years in the amazing growth that we've seen in
US mag seven.
Speaker 3 (23:21):
So I think depends on what kind of value you're
talking about.
Speaker 9 (23:24):
I think that if you're invested in the Russell one
thousand value indecks, we've missed out a lot. But research
affiliates are approached to value, which is really through the
fundamental Index, doesn't really miss out on nearly as much. Clearly,
you don't participate as much as you do with the
S and P or even owning the NASDAC right owning
(23:45):
the cues. But our recommendation has always been to own
everything but in rational economic weights. So we would own
Nvidia just as we would own Tesla, we just don't
own them at the same weights that the SMP does.
Speaker 5 (24:05):
So you hold Alphabet and Apple in your value portfolios,
what makes them quote value in this environment? And how
do you assess their AI positioning?
Speaker 9 (24:15):
So you know, in terms of Apple and Google, I'm
an Alphabet.
Speaker 3 (24:20):
We like both of those stocks.
Speaker 9 (24:22):
If you look at Alphabet, it's trading at a multiple
of around twenty times that's not more expensive than what
you get in the SMP and substantially less expensive than
the Max seven and other technology companies. And then if
you look at Google, They've made a lot of investments
in AI. Everybody's excited about Tesla and self driving cars,
(24:43):
but I think Weamo has many more miles and any
more rides under its belt.
Speaker 4 (24:48):
Yeah.
Speaker 2 (24:48):
I mean, if you are in our studio, you have
a lot more experience with Weaimo than you have with
Tesla in terms of self driving.
Speaker 3 (24:57):
That's absolutely right.
Speaker 9 (24:58):
I mean everybody does, right, Yeah, and there's going to
be you know, there's going to be debate over you know,
this or that technology, what's safer, what's less expensive, what's
more scalable, But just it's it's very clear that Google
has spent money on AI, but they've spent that money wisely, right,
(25:21):
And I think that's what's really going to drive the
success of AI investment. You need to spend the money,
you need to take the risk, but you need to
take the right risks. In terms of Apple, their AI
strategy is under a lot of scrutiny, or their rather
their lack of AI strategy is under a lot of scrutiny,
But I think Google, what Apple's faced is focused on
(25:42):
is really the consumer experience and consumer privacy, and so
their focus on AI is a combination of how do
we do this safely and how do we make it
a good experience for the user. I don't necessarily see
people saying I don't want to buy an IP because
it doesn't have an AI strategy. The iPhone, the you know,
(26:07):
all the ecosystem surrounding that remains relatively unchallenged and a
reasonably wide moot for Apple at the moment, so they
have some time to get that in gear.
Speaker 7 (26:21):
Uh.
Speaker 9 (26:21):
They are spending money on innovation on R and D,
and so far their track record has been very successful
at monetizing that. So you know, we don't really know.
I don't think anybody really knows where AI is going
to go. But you know, with these two names, I
(26:43):
think that we have very good growers at very reasonable valuations.
Speaker 2 (26:49):
Quenuin, We're gonna have to leave it there, but you
got to come back soon. We know you are trying
to enjoy a little end of the summer in Jackson Hole,
so we appreciate you taking a little break from that
to spend some time with us. This app aternoon. Quai Nuen,
chief investment Officer Equity Strategies at Research Affiliates. Stay with us.
More from Bloomberg Business Week Daily coming up after this.
Speaker 1 (27:14):
You're listening to the Bloomberg Business Week Daily podcast. Catch
us live weekday afternoons from two to five Easter and
listen on Apple Karplay and Android Auto with the Bloomberg
Business app, or watch US.
Speaker 8 (27:26):
Live on YouTube.
Speaker 2 (27:28):
Among the headlines, the President says he wants to stay
in DC longer than thirty days, referring to National Guard
troop presence in Washington, DC. Speaking of defense, we're watching
companies in aerospace and defense. This is the S fifteen
Aerospace SMB five hundred aerospace companies. It's up one point
seven percent. Twenty three names in there. Twenty one are higher.
(27:52):
As we speak, close to every name higher. This after
Commerce Secretary Howard Lutnix suggested the government is looking at
the defense sector for potential stakes in companies for more.
We bring in Wayne Sanders. He's Bloomberg Intelligence senior defense
analysts who before joining Bloomberg was a colonel in the
US Army. He specialized in technology, intelligence, operational planning, and
counter insurgency, and Wayne joins us from our bureau in Washington, DC. Wayne,
(28:17):
the Secretary singled out Lockheed Martin, claiming the company makes
much of its revenue because of the US government. He said,
quote on CNBC, quote they are basically an arm of
the US government. Is that a fair assessment in your view?
Are they an arm of the US government?
Speaker 10 (28:33):
Well, I think it's fair to say that they're driven
by the demand that comes from the Pentagon, Right, So
when you look at their long range missile capabilities, air defense,
all of those things, it's being driven by one customer,
and that is the US government, and they're backed by
their contracts that they end up getting awarded at that time.
Speaker 5 (28:51):
If the government were to take stakes and defense contractors
like Lockheed Martin, how might this reshape the economics of
the defense industry and how will it affect R and
D investment to profit Margins.
Speaker 10 (29:02):
Well, I think that one of the things you really
have to look at is the way that the market's
set up for the DoD already is something that is
already a long poll in the tent.
Speaker 7 (29:11):
Right.
Speaker 10 (29:11):
You look at things that they call the value of death.
To be able to survive the market, and that's why
you see a lot of the defense primes. They have
the money necessary to be able to say I have
this capability two years, when Congress gives me the money
for it, I'll be able to put it towards that
defense contractor if you put something in like this, you're
going to start to politicize part of that market competition.
(29:32):
You're going to start to run into some problems where
you're looking at there's normally like nineteen checks and balances
within the acquisition program the DoD that allows to make
sure that there's no conflict of interest, and you're going
to potentially run into some of that. I see that
it would work well in areas where the defense industrial base,
like critical minerals and shipbuilding and potentially even munitions production
(29:55):
where it would make sense, but that's not specific to
a company.
Speaker 7 (29:59):
Right you know.
Speaker 10 (30:00):
MP Minerals was one of the ones that started this
from a critical minerals perspective. But you're you're seeing that
it's trying to focus on a specific area in which
the industry is harder to invest in, but areas where
there's plenty of competition, like long range munitions and ground ground.
Speaker 2 (30:20):
Vehicles and fighter jets.
Speaker 10 (30:21):
Those are some of the areas where I think the
market already competes well in that, and I don't think
that getting involved in that would would play well for
the market.
Speaker 5 (30:30):
What kind of influence would government gain on company strategy
and governance by holding significant stakes? And how do you
think this will affect perhaps management decision making?
Speaker 2 (30:40):
Can you say that again? Sorry, I can't hear you.
Speaker 5 (30:42):
How do you think government owning a significant stake will
affect decision making in the company or just a company
strategy in general?
Speaker 2 (30:49):
Well, I think I think both.
Speaker 10 (30:51):
Right, if you look at how you're actually setting it up,
if you have that government stake in that, then you're
obviously going to have an inside view of what's going on.
So I think that plays a piece of it. I
think from the government decision perspective is one of the
risks that you need to worry about is when you
look at a program that may not be going well
right in the current construct. If you look at something
(31:11):
like the future attack reconnaissance aircraft to something like that,
right the Army came in and said this isn't a
good investment. We're going to go in a different direction.
It's built to be able to cut that tie. But
if the government owns ten percent, are they going to
be even willing to do that? And who actually makes
that cut? Where's the definition? Where's the legal definition that's
going to come in to say? As mister Latin I
(31:32):
talked about today, was where is America adding fundamental value
to your business? That specific statement? Okay, well, then most
of the areas within the defense capacity somewhat falls within that.
So it would have to be a clearly defined thing
in order for the market to understand where to go
from there.
Speaker 2 (31:48):
Wayne, appreciate you joining us. Always great to get some
time with you. Also appreciate your patients standing by in
DC as the President was speaking. That's Wayne Sanders, these
Bloomberg Intelligence defense analysts joining us from a Washington, DC.
Speaker 1 (32:00):
This is the Bloomberg Business Weekdaily 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
(32:21):
and always on the Bloomberg terminal
Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg business
Weekdaily 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 news
(00:23):
as it happens. The Bloomberg Business Week Daily Podcast with
Carol Masser and Tim Stenebeck on Bloomberg Radio.
Speaker 2 (00:32):
President Trump said he was prepared for a legal fight
with Federal Reserve Governor Lisa Cook after he moved to
oust her from her post following allegations that she falsified
mortgage documents. The ved said it would abide by any
court decision in Cook's legal challenge of her dismissal by Trump,
and has deferred any decision on Cook's current working status.
We should remind everybody that her lawyer vowed to file
(00:55):
a lawsuit over the President's maneuver to oust her for
cause from the Fed Border Governors, with Lisa Cook saying
she would not resign and would continue to carry out
her duties. For the legal side of this, I want
to bring in Catherine Judge. She's the Harvey J. Goldsmith
Professor of lawt Columbia Law School, where she does research
on banking, regulatory architecture, financial crises, and more. She's the
(01:16):
author of direct The Rise of the Middleman Economy and
the Power of Going to the Source. Professor Judge good
to have you back on the program. Does the president
have a legal basis at this point for firing Federal
Reserve Governor Lisa Cook?
Speaker 3 (01:32):
It's dubious.
Speaker 4 (01:34):
I mean, the challenge is this notion of cause is
not well developed in the law. No other president has
actually tried to fire a governor for cause. There's some
things that obviously would be justifiable bases for removing somebody.
If she was derelecting her duties or abusing her position,
it would very easily justify this type of dismissal. Here
all we have our allegations, we don't actually have a
(01:55):
fully developed record because there's been no due process, and
there is a possibility that this is in that gray
space which just not clear if the types of actions,
even if true, would justify a firing.
Speaker 5 (02:09):
What legal arguments is Cook's team likely to make in
defense of her position. What grounds that she and her
legal team have under existing statutes?
Speaker 4 (02:18):
Yeah, I mean, so the statutory scheme provides that a
governor of the Federal Reserve can only be removed for
a cause. They otherwise have fourteen year terms. And we
actually have seen recently the Supreme Court make it shed
a lot of light suggesting it's about to overrule earlier
precedent allowing other independent agencies to actually be independent. So
(02:40):
we see this very broad reading of the president's executive authority.
Speaker 3 (02:43):
But the Court said, well, the FED is different.
Speaker 4 (02:45):
You know, the Court went out of its way in
a very sure opinion to say the FED is different,
the different history, and we know that, and the Congress
has gone on its way.
Speaker 3 (02:53):
To create these types of protections.
Speaker 4 (02:54):
So I think what she's going to argue is that
this has nothing to do with mortgage fraud. This is
everything to do with President Trump wanting to pack the
FED with his chosen appointees.
Speaker 3 (03:06):
And that's the one thing the law is clear that
he's not allowed to do.
Speaker 4 (03:09):
He's not allowed to move somebody just because of policy differences.
Speaker 2 (03:12):
But what if she did falsify mortgage documents? What if
what Bill Poulte, who had FHFA, has alleged that she
did falsify mortgage documents? What if she did that I mean, so.
Speaker 3 (03:26):
The law here just isn't developed.
Speaker 4 (03:27):
Again, Like, this is a hard thing so generally speaking,
cause most of the time arises because of shortcomings and
how somebody is performing their duties. This is something that
happened before she joined the FED. And we also don't
know the intent whether the term mortgage fraud.
Speaker 2 (03:44):
Does intent matter with this, Yes, it does, actually explained
Explain explain how that works here, because maybe she made
a mistake, is what you're saying.
Speaker 3 (03:52):
Yeah, we just don't know.
Speaker 4 (03:53):
Again, intent a core element of fraud, any type of fraud,
is a requirement of the person intended to defraud a party.
Speaker 3 (04:00):
And so that's again it's an issue.
Speaker 4 (04:03):
That we just don't know yet. But I think you're
getting to a bigger issue, which is it two different
she's won? Is you know what's really going on here?
Is this a justifiableasis for removing her? But too, Like,
let's look at the general context in which this is happening.
I think the bigger point here is that President Trump
clearly is not going to tolerate an independent bed. I mean,
(04:24):
this isn't coming out of the blue. This is coming
less than a month after he similarly ledged that he
was going to try to fire current chair Jay Powell
because of cost over runs associated with the renovations. I
think he realized there that his case was thin, and
so ultimately he walked away on that.
Speaker 3 (04:42):
But this doesn't look like what he's really trying to
do is.
Speaker 4 (04:45):
Just to make sure that he has a team of
people that are fulfilling their duties under the law, but
instead that he has his team in place. And so
it's going to be hard for court to completely ignore
the environment in which this is happening.
Speaker 5 (05:01):
And based on my understanding, establishing a fore cost removal
usually requires some type of proceeding that would allow Cook
to answer questions and answer to charges and present evidence.
Cooke's lawyer said that this lacks any factual or legal basis.
By this, I mean the challenge of Trump's action. Do
you agree with that.
Speaker 4 (05:21):
Yeah, So normally you would have to have some type
of due process for that fore cause protection to have
any bite. If you say, like, they can only be
remove a cause, but all you need are allegations in
somebody's job could be terminated, then as a practical matter,
you haven't given any teeth to that fore cost requirement,
and we can go back to nineteen thirty five when
(05:42):
Congress created this particular version of the Federal Reserve, and
throughout the debates there is repeated references to the fact
that they don't want the president to have too much
ability to control the Federal Reserve.
Speaker 3 (05:55):
This was during FDR's reigns.
Speaker 4 (05:57):
Was another period where you had a very strong presentident
that was trying to increase his control and Congress refuse
to give FDR really the proposal that FDR put forward
in the form that he wanted it to be passed
because they were worried about too much presidential control. So
Congressional intent here is very clear that what they were
(06:18):
trying to guard against was a president. And again the
reason they're worried about that is presidents consistently want slightly
more accommodative monetary policy, and sometimes it's warranted, but allowing
monetary policy more commodative than is warranted does lead to
a higher likelihood of inflation and other significant cost for
(06:38):
the long term health of the economy.
Speaker 2 (06:40):
We're speaking with Catherine Judge. She's the HARVJ. Goldschman Professor
of Law at Columbia Law School. She's the author of
direct The Rise of the middleman economy and the power
of going to the source. She joins us right now
from Oxford.
Speaker 5 (06:52):
You mentioned that it could be politically motivated. Why do
you think it's, Lisa Cook specifically, We know that's a
term doesn't expire until twenty thirty eight.
Speaker 4 (07:02):
So again, I think that might you might have just
been looking for any of the Biden appointees where there
happen to be something colorable, And it is important to
acknowledge that there's at least a colorable claim here, right.
Speaker 3 (07:15):
We do want federal Reserve.
Speaker 4 (07:16):
Governors to be credible individuals who are respected and who
are doing their utmost to fully comply with the law.
And so it could be and it looks like this
might be the case that they were looking around for
dirt on any of the current governors. I mean, another
aspect of this that is really disturbing is just that
the government has all kinds of information about all of us. Right,
So we have all the mortgage documents, you have tax filings,
(07:40):
banks file suspicious activity reports, and you don't even know
one who's been filed about you, And so the Treasury
is just this boatload of information that banks have provided
about transactions their customers have engaged in and so there's
also this real question over does all of that information
suddenly become available for partisan purposes? And so that's a
(08:01):
separate issue that seems related.
Speaker 2 (08:03):
What's the position that the Federal Reserve find itself finds
itself in right now? The full statement from the Federal Reserve,
it's five paragraphs, and the Federal Reserve said, as always,
the Federal Reserve will abide by any court decision. It
seems like the Fed is actually threading this needle pretty
well and saying, look, we'll do whatever the courts tell
(08:25):
us to do, but the courts haven't spoken yet.
Speaker 3 (08:29):
Yeah, I think it's prudent in some ways.
Speaker 4 (08:32):
They're trying very hard, I think not to alienate the
president more than necessary. On the other hand, it is
a somewhat weak position because again, there hasn't been any
due process yet, and they know that there hasn't been
any due process yet. So there was a question of like,
do they even allow this decision to stand and wait
(08:55):
for the courts, or do they opposite and say, look,
until there's been some due process, we're still going to
treat her as governor cook with all of the rights
associated with that position. But once the court is spoken,
then we're going to defer to that decision. So, even
though I think the FED is very careful here, they
did take a posture that was more deferential to the
(09:17):
President than the one they might have taken.
Speaker 5 (09:21):
Based in all the facts that's hand, And given your
really impressive background, what is your best guess and how
this situation will end up being?
Speaker 4 (09:31):
I mean, so I think the biggest lesson here is
it's not about Governor Cook, It's about Feddan independence. And
so when I look at what's happening right now, I
think the days of FED independence are numbered. It's already
been whittled down meaningfully through the repeated attacks on Powell.
But I think we see something much more pernicious going on,
which not just these individual attacks, but a president signaling
(09:54):
fundamental discomfort with there being such a powerful arm of
government that that he doesn't have control over. And so
if he's willing to whip out every stop imaginable until
the FED is really willing to do his biting, that's
going to be a very different world than the one
that we've lived in for the past like five or
six decades.
Speaker 2 (10:15):
So in your view, What should Congress do?
Speaker 3 (10:20):
I think Congress.
Speaker 4 (10:21):
Ideally should uniformly come out and condemn the decision as
inconsistent with the statutory scheme that was created. And again
it's hard. They didn't specify any procedures or process, but
inherent in that term cause suggests there has to be
something more than a mere allegation. So I think the
most heartening thing would be to say, like, look, the
(10:43):
President does have the ability to make these allegations, and
perhaps there's even the possibility that there should be some
type of hearing on these allegations.
Speaker 3 (10:52):
But I think Congress.
Speaker 4 (10:54):
Ideally should stand by the statutory language that they put
into place in nineteen are fine, right, It's really important
for the.
Speaker 3 (11:03):
Fed to remain independent.
Speaker 4 (11:04):
And that's because, again, there can be meaningful short term
economic gains from more accommodation monetary policy. So there's reasons
the President wants to do this. It's a very smart move,
a shrewd move on his part. That doesn't mean it's
the long term best health of the interests of the
economy or the contry.
Speaker 2 (11:21):
You clerk for Justice Stephen Bryer on the Supreme Court,
just we have five seconds, yes or no? Does it
go to the Supreme Court. Yes, all right, there it is,
Catherine Judge. Always good when you join us on a
Bloomberg Business Week Daily. Thank you so much for taking
the time, Catherine Judge of Columbia University, where she's the
Harvey J. Gold Schmidt Professor of Law. This is Bloomberg.
(11:43):
Stay with us. More from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (11:51):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five yeas during
Listen on Apple, Karplay and Android with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 2 (12:05):
A lot of headlines crossing the Bloomberg terminal just in
the last couple of minutes. I want to bring some
of them in. Elon Musk's to Starlink and T Mobile,
I Echo Stars Spectrum. That's according to Semiform. Also, the
Trump administration is reviewing options to influence FED banks. The
Trump administration aims to scrutinize FED president's selection. And then
there's this one crossing from the Wall Street Journal. The
(12:27):
Journal reporting that Trump weighs quickly announcing a replacement for
the Fed's Lisa Cook. That's the backdrop for the trade
after hours and heading into tomorrow, I want to bring
in Bailey Lipschultz. He's Bloomberg News Equities reporter. He joins
us here in the Bloomberg Interactive Brokers studio. I bring
up everything that's happening right now, Bailey, because that's what
(12:48):
traders and investors are going to have on their radar tomorrow.
Today the trade was surprising to me because I thought
there would be a bigger reaction to a thread of
the Feds into Mints. But maybe it's not over until
it's over, and the market's saying we don't really see
that being in reality anytime soon.
Speaker 6 (13:07):
I think the big thing, tim when you talk to
investors is that if you are looking for a reason
to sell in this market, you've been wrong. So if
you're saying that these latest headlines are a reason to
take chips off the table tidy up your portfolio, maybe
that is a smart move given the low volume and
low volatility we've been seeing. But the broader kind of
backdrop is this is a market that has been trying
(13:28):
to find reasons to go higher. So to your point,
if there's no actual kind of decision that is fundamentally
being implemented.
Speaker 7 (13:38):
It's a lot of headline risk.
Speaker 6 (13:39):
We've seen a market, whether you want to say taco trade,
really shrug off reasons or threats or or realize kind
of actions from the White House to kind of dial
back exposure. And one thing I just want to call
out is we did see volumes down about twenty five
to thirty percent relative to a normal trading day in
the last month. And when we do look at using
(13:59):
the terminal factors to watch that function is FTW momentum outperforming,
as was growth, as was highly shorted, names, under performers,
dividend and you low volatility stocks. So this is a
market that whether you're kind of covering some of your
shorts or leaning into momentum. That's kind of been the
backdrop with DC.
Speaker 7 (14:17):
Aside, we have.
Speaker 5 (14:19):
David Morgan's Michael Furley, he's an economist there saying that
if the president were successful, the outcome would be momentous
and he also said that given all the above risks,
this would be an upset inflation risk. What are you
hearing from your sources? Are they I know many of
them might not be short term traders, but are they
thinking of shifting their allocations, how are they positioning, what
are they watching.
Speaker 7 (14:39):
It's new, but it's not new to an extent.
Speaker 6 (14:42):
We've seen Trump time and time again kind of browbeating,
whether it's j.
Speaker 7 (14:47):
Powell or someone else, kind of pushing for the FED
to cut.
Speaker 6 (14:49):
When you look at what's being implied right now, we're
at eighty nine percent chance of a FED cut next month.
Speaker 2 (14:55):
Was that a lot different than what it was on
the Lundrade a little while ago. So we're come back.
Speaker 6 (15:00):
So it's actually it comes back to kind of this
debate of what's actually baked in. You look back August thirteenth,
we were at one hundred and six percent chance of
a FED cut.
Speaker 2 (15:08):
So, well, hold on. I was taught by my math teacher.
I'm not joking, Fred Coleman. Okay, what great is this?
This was freshman year of high school and he was
a he's a coach. We called him dirf It's Fred Backwards,
and he would get very angry with anyone who said,
(15:31):
any I'm giving it one hundred and ten percent. He said,
there's no such thing as more than one hundred percent.
Now that we cover equity markets, we do sometimes have
stocks that go up more than one hundred percent. But
my math teacher always reminded us and coach said, you
can only give one hundred percent. How can there be
more more than one hundred percent chance of a rate cut?
Speaker 6 (15:51):
It's just the number of cuts baked in, so it's
not necessarily one hundred and eight percent chance, though the
terminal will show that. It's more that the swaps market
is implying we're there to be a decision now. Investors
are betting that they're pricing in one point zero eight
rate cuts. Again, though there's no inter like rate cuts.
You either cut twenty five to fifty, et cetera, not
(16:13):
twelve and a half bases point.
Speaker 7 (16:14):
Okay, so that's kind of the backdrop.
Speaker 5 (16:17):
We also have a story from your team. I think
that says Goldman saccess a Goldilock summer is all but over,
and mounting concern about the US economy is Yankee markets
from their seasonal slumber. But you made a point earlier
that this is a market that almost threatens you to sell,
but investors still don't. What are you hearing on your
end from traders and portolo managers? What are their reasons
(16:38):
for still believing in the US market when We have
international portfolio managers earlier saying that, you know, this is
why we're in the international trade.
Speaker 6 (16:46):
I will say this is it feels to me when
I talk to investors short term, long onlies.
Speaker 7 (16:51):
This is the most hated bull market in quite some time.
Speaker 6 (16:54):
This is a market that fundamental investors are saying, we're
trading it knows.
Speaker 7 (16:59):
Sweed valuations, but yet we keep going higher.
Speaker 6 (17:01):
We see the market finally taking what would be seen
as a healthy correction, and then investors step in and
by the dip one and a half percent is not
really a dip in my view. When you look at
a gauge like the Vicks sitting below fifteen, you look
at the dispersion between market volatility being low and single
stock volatility being high, whether that's momentum or some of
these heavily shorted or growthier names. Investors are picking their spots.
(17:25):
But the thing that has been learned, or the thing
that's been playing out so far this summer, especially when
you look at kind of how quickly the market snap
back from those April lows, is that the promise of
earning's growth tomorrow is still stronger than the fears of
missing So you still are dealing with I don't want
to call it a foam mo trade, but you're still
(17:46):
dealing with that.
Speaker 2 (17:47):
This is the perfect segue to talk about a story
that I've wanted to speak to you about for more
than a week at this point. It's about your story
last week on Chamath poly Hostia so one of the
most read on the Bloomberg Terminal last week.
Speaker 7 (17:59):
He is.
Speaker 2 (18:01):
Who calls him the SPAC King? Does he call himself
the spec Kings?
Speaker 7 (18:05):
Known as the he was known as the SPAC King.
The origins are debated.
Speaker 2 (18:10):
You might know him as a podcaster these days.
Speaker 6 (18:12):
He's all in podcast Yeah, according to the Terminal, was
not a millionaire, at least according to rich Go he's
not one as far as our data are concerned as
of the time of publication.
Speaker 2 (18:20):
As okay, well, maybe that will change once he gets
back into SPACs. What's he doing?
Speaker 6 (18:24):
He filed so you file fifteen day lag before you
can actually raise an IPI. But he filed to raise
two hundred and fifty million dollars SPAC targeting pretty much
everything that's been working in the SPAC market. I'm talking
about AI, clean Energy, defy aka crypto and defense.
Speaker 7 (18:42):
So kind of all of the buzzwords.
Speaker 6 (18:44):
But in that filing, the most interesting thing was he
warned outright retail investors that you can lose all of
your money, and that was the big critique back in
twenty one.
Speaker 2 (18:53):
This is a guy who compared himself to Warren Buffett
years ago. How has it turned out?
Speaker 6 (18:59):
Of his six spacks, I haven't looked at it today,
five of them are below the ten dollars, So IPO's
price at ten dollars so far is up more than doubled.
But the median loss, I want to say, was north
of seventy percent seventy five percent, so if you bought
and held, you lost money. The thing that also is interesting,
this is a financier, if you want to call him that,
(19:20):
that wanted to have a spac for every letter of
the alphabet, so we wanted twenty six spacks. He had
SPACs the price at ten dollars that were trading north
of twenty dollars, So people were paying twenty dollars for
a ten dollars piece of paper back in the zero
interest rate mania spackcraze and had quite a reckoning.
Speaker 5 (19:37):
Can you reminder viewers and listeners, why does he prefer
a SPAC. I feel like this is a pandemic story.
We've written tons and tons of stories about him in
this back craze. But why SPACs.
Speaker 6 (19:47):
The main argument is that capital markets are inefficient, depending
who you talk to, IPOs are not the best way
to take a company public. You leave money on the
table for kind of investors flippers. So if you price
an ipot twenty dollars, it opens at twenty five. He
left money on the table. You made hedge funds money.
So the argument is that there is a more efficient
way to go public. Also an argument from spackbackers that
(20:11):
if you're going to use a SPAC deal, there's specialist
kind of flavor. So you're partnering with an experience management
team who will strike a good deal. They have a
vested interest in this new company, newly listed company performing well,
and they're going to stick in it for the long haul.
Speaker 2 (20:27):
Bailey Lipshaltz, he covers it all here in the Bloomberg
Interactive Brokers studio. He's Bloomberg News Equities reporter. Check out
all of his coverage on the Bloomberg terminal. Stay with us.
More from Bloomberg Business Week Daily coming up after this.
Speaker 1 (20:44):
This is the Bloomberg Business Week Daily Podcast. Listen live
each weekday starting at two pm Eastern on Applecarplay and
Android Auto with the Bloomberg Business App. You can also
listen live on Amazon Alexa from our flagship New York station,
Just say Alexa Play Bloomberg eleven thirty.
Speaker 8 (21:05):
Marco, I'll about you. Let me drive.
Speaker 2 (21:07):
Oh no, no, no no, this is not a twin.
Speaker 8 (21:11):
Alright, please, I'll travels.
Speaker 7 (21:14):
Excuse great, I want to drive.
Speaker 8 (21:16):
It's a good question. Good try. This is the Drive
to the Clothes.
Speaker 7 (21:25):
Pungs to music.
Speaker 8 (21:25):
Well, Brad it down on Bloomberg Radio.
Speaker 2 (21:31):
All right, hard to believe it's that time already, isn't
it Drive to the Clothes.
Speaker 8 (21:37):
It's hard to believe, but it also felt long.
Speaker 2 (21:41):
I allot to honesty. Isabel Lee. She's in for Carol
Masser and she is honest. Hey, we got a great
guest for our Drive to.
Speaker 5 (21:49):
The Clothes exactly because it's a big day tomorrow. We
have in video set to report and for now. In
video comprises eight percent of the S and P five
hundred ten percent for the NASDAC and tech more Bral
is at record concentration, but tim are we in a bubble,
This is the big question.
Speaker 3 (22:04):
And for that we have Quean Win.
Speaker 5 (22:06):
She's chief investment Officer Equity Strategies at Research Affiliates. This
is a firm that oversees around one hundred and fifty
nine billion dollars in assets. So, Quai, you said, we
can never be sure if we are in a bubble
until it pops. But what's your best guest at the moment.
Speaker 9 (22:23):
My best guest right now is that we are building
into a.
Speaker 8 (22:28):
Bubble.
Speaker 9 (22:29):
I can hardly even say that right because I work
for a value oriented firm with fear bubbles like you
would not believe. But I think that what we are
doing is building into a bubble, driven by a lot
of the AI enthusiasm. I mean, you're seeing a lot
of that right now, all the CAPEX spending, not just
the CAPEX spending, but the salary is being paid to
(22:50):
AI executives and AI researchers.
Speaker 2 (22:53):
Well, okay, so let's talk about that because we've got
Nvidia reporting after the belt tomorrow. On any other day
that you know, we wouldn't have all the news emanating
from Washington, I think we'd spend a good portion of
today thinking about and talking about that report and the
importance of that report in an environment where you've been
focused on value, how much have you missed out in
(23:15):
recent years in the amazing growth that we've seen in
US mag seven.
Speaker 3 (23:21):
So I think depends on what kind of value you're
talking about.
Speaker 9 (23:24):
I think that if you're invested in the Russell one
thousand value indecks, we've missed out a lot. But research
affiliates are approached to value, which is really through the
fundamental Index, doesn't really miss out on nearly as much. Clearly,
you don't participate as much as you do with the
S and P or even owning the NASDAC right owning
(23:45):
the cues. But our recommendation has always been to own
everything but in rational economic weights. So we would own
Nvidia just as we would own Tesla, we just don't
own them at the same weights that the SMP does.
Speaker 5 (24:05):
So you hold Alphabet and Apple in your value portfolios,
what makes them quote value in this environment? And how
do you assess their AI positioning?
Speaker 9 (24:15):
So you know, in terms of Apple and Google, I'm
an Alphabet.
Speaker 3 (24:20):
We like both of those stocks.
Speaker 9 (24:22):
If you look at Alphabet, it's trading at a multiple
of around twenty times that's not more expensive than what
you get in the SMP and substantially less expensive than
the Max seven and other technology companies. And then if
you look at Google, They've made a lot of investments
in AI. Everybody's excited about Tesla and self driving cars,
(24:43):
but I think Weamo has many more miles and any
more rides under its belt.
Speaker 4 (24:48):
Yeah.
Speaker 2 (24:48):
I mean, if you are in our studio, you have
a lot more experience with Weaimo than you have with
Tesla in terms of self driving.
Speaker 3 (24:57):
That's absolutely right.
Speaker 9 (24:58):
I mean everybody does, right, Yeah, and there's going to
be you know, there's going to be debate over you know,
this or that technology, what's safer, what's less expensive, what's
more scalable, But just it's it's very clear that Google
has spent money on AI, but they've spent that money wisely, right,
(25:21):
And I think that's what's really going to drive the
success of AI investment. You need to spend the money,
you need to take the risk, but you need to
take the right risks. In terms of Apple, their AI
strategy is under a lot of scrutiny, or their rather
their lack of AI strategy is under a lot of scrutiny,
But I think Google, what Apple's faced is focused on
(25:42):
is really the consumer experience and consumer privacy, and so
their focus on AI is a combination of how do
we do this safely and how do we make it
a good experience for the user. I don't necessarily see
people saying I don't want to buy an IP because
it doesn't have an AI strategy. The iPhone, the you know,
(26:07):
all the ecosystem surrounding that remains relatively unchallenged and a
reasonably wide moot for Apple at the moment, so they
have some time to get that in gear.
Speaker 7 (26:21):
Uh.
Speaker 9 (26:21):
They are spending money on innovation on R and D,
and so far their track record has been very successful
at monetizing that. So you know, we don't really know.
I don't think anybody really knows where AI is going
to go. But you know, with these two names, I
(26:43):
think that we have very good growers at very reasonable valuations.
Speaker 2 (26:49):
Quenuin, We're gonna have to leave it there, but you
got to come back soon. We know you are trying
to enjoy a little end of the summer in Jackson Hole,
so we appreciate you taking a little break from that
to spend some time with us. This app aternoon. Quai Nuen,
chief investment Officer Equity Strategies at Research Affiliates. Stay with us.
More from Bloomberg Business Week Daily coming up after this.
Speaker 1 (27:14):
You're listening to the Bloomberg Business Week Daily podcast. Catch
us live weekday afternoons from two to five Easter and
listen on Apple Karplay and Android Auto with the Bloomberg
Business app, or watch US.
Speaker 8 (27:26):
Live on YouTube.
Speaker 2 (27:28):
Among the headlines, the President says he wants to stay
in DC longer than thirty days, referring to National Guard
troop presence in Washington, DC. Speaking of defense, we're watching
companies in aerospace and defense. This is the S fifteen
Aerospace SMB five hundred aerospace companies. It's up one point
seven percent. Twenty three names in there. Twenty one are higher.
(27:52):
As we speak, close to every name higher. This after
Commerce Secretary Howard Lutnix suggested the government is looking at
the defense sector for potential stakes in companies for more.
We bring in Wayne Sanders. He's Bloomberg Intelligence senior defense
analysts who before joining Bloomberg was a colonel in the
US Army. He specialized in technology, intelligence, operational planning, and
counter insurgency, and Wayne joins us from our bureau in Washington, DC. Wayne,
(28:17):
the Secretary singled out Lockheed Martin, claiming the company makes
much of its revenue because of the US government. He said,
quote on CNBC, quote they are basically an arm of
the US government. Is that a fair assessment in your view?
Are they an arm of the US government?
Speaker 10 (28:33):
Well, I think it's fair to say that they're driven
by the demand that comes from the Pentagon, Right, So
when you look at their long range missile capabilities, air defense,
all of those things, it's being driven by one customer,
and that is the US government, and they're backed by
their contracts that they end up getting awarded at that time.
Speaker 5 (28:51):
If the government were to take stakes and defense contractors
like Lockheed Martin, how might this reshape the economics of
the defense industry and how will it affect R and
D investment to profit Margins.
Speaker 10 (29:02):
Well, I think that one of the things you really
have to look at is the way that the market's
set up for the DoD already is something that is
already a long poll in the tent.
Speaker 7 (29:11):
Right.
Speaker 10 (29:11):
You look at things that they call the value of death.
To be able to survive the market, and that's why
you see a lot of the defense primes. They have
the money necessary to be able to say I have
this capability two years, when Congress gives me the money
for it, I'll be able to put it towards that
defense contractor if you put something in like this, you're
going to start to politicize part of that market competition.
(29:32):
You're going to start to run into some problems where
you're looking at there's normally like nineteen checks and balances
within the acquisition program the DoD that allows to make
sure that there's no conflict of interest, and you're going
to potentially run into some of that. I see that
it would work well in areas where the defense industrial base,
like critical minerals and shipbuilding and potentially even munitions production
(29:55):
where it would make sense, but that's not specific to
a company.
Speaker 7 (29:59):
Right you know.
Speaker 10 (30:00):
MP Minerals was one of the ones that started this
from a critical minerals perspective. But you're you're seeing that
it's trying to focus on a specific area in which
the industry is harder to invest in, but areas where
there's plenty of competition, like long range munitions and ground ground.
Speaker 2 (30:20):
Vehicles and fighter jets.
Speaker 10 (30:21):
Those are some of the areas where I think the
market already competes well in that, and I don't think
that getting involved in that would would play well for
the market.
Speaker 5 (30:30):
What kind of influence would government gain on company strategy
and governance by holding significant stakes? And how do you
think this will affect perhaps management decision making?
Speaker 2 (30:40):
Can you say that again? Sorry, I can't hear you.
Speaker 5 (30:42):
How do you think government owning a significant stake will
affect decision making in the company or just a company
strategy in general?
Speaker 2 (30:49):
Well, I think I think both.
Speaker 10 (30:51):
Right, if you look at how you're actually setting it up,
if you have that government stake in that, then you're
obviously going to have an inside view of what's going on.
So I think that plays a piece of it. I
think from the government decision perspective is one of the
risks that you need to worry about is when you
look at a program that may not be going well
right in the current construct. If you look at something
(31:11):
like the future attack reconnaissance aircraft to something like that,
right the Army came in and said this isn't a
good investment. We're going to go in a different direction.
It's built to be able to cut that tie. But
if the government owns ten percent, are they going to
be even willing to do that? And who actually makes
that cut? Where's the definition? Where's the legal definition that's
going to come in to say? As mister Latin I
(31:32):
talked about today, was where is America adding fundamental value
to your business? That specific statement? Okay, well, then most
of the areas within the defense capacity somewhat falls within that.
So it would have to be a clearly defined thing
in order for the market to understand where to go
from there.
Speaker 2 (31:48):
Wayne, appreciate you joining us. Always great to get some
time with you. Also appreciate your patients standing by in
DC as the President was speaking. That's Wayne Sanders, these
Bloomberg Intelligence defense analysts joining us from a Washington, DC.
Speaker 1 (32:00):
This is the Bloomberg Business Weekdaily 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
(32:21):
and always on the Bloomberg terminal
Hosts And Creators
Tim Stenovec
Carol Massar
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
New Heights with Jason & Travis Kelce
Football’s funniest family duo — Jason Kelce of the Philadelphia Eagles and Travis Kelce of the Kansas City Chiefs — team up to provide next-level access to life in the league as it unfolds. The two brothers and Super Bowl champions drop weekly insights about the weekly slate of games and share their INSIDE perspectives on trending NFL news and sports headlines. They also endlessly rag on each other as brothers do, chat the latest in pop culture and welcome some very popular and well-known friends to chat with them. Check out new episodes every Wednesday. Follow New Heights on the Wondery App, YouTube or wherever you get your podcasts. You can listen to new episodes early and ad-free, and get exclusive content on Wondery+. Join Wondery+ in the Wondery App, Apple Podcasts or Spotify. And join our new membership for a unique fan experience by going to the New Heights YouTube channel now!
24/7 News: The Latest
The latest news in 4 minutes updated every hour, every day.