April 30, 2025 • 24 mins
Watch Alix and Paul LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg Intelligence hosted by Paul Sweeney and Alix Steel
Today’s Podcast Features are:
Michael McKee, Bloomberg International Economics and Policy Correspondent, discusses U.S economic data. The US economy contracted at the start of the year, and traders are betting that the Federal Reserve will cut interest rates this year to prevent a recession. The S&P 500 cut losses after separate data showed US consumer spending jumped in March.
Woo Jin Ho, Bloomberg Intelligence Senior Technology Analyst, discusses Super Micro Preliminary results. Super Micro Computer shares tumbled Wednesday after giving preliminary results that fell well short of analysts’ estimates, a sign its comeback plan has been slow to gain traction.
Christopher Ciolino, Bloomberg Intelligence Senior US Machinery Analyst, discusses Caterpillar earnings. Caterpillar expects slightly lower sales this year if Trump administration tariffs remain in place and the economy dips into a recession in the second half.
Ann Miletti, Head of Equity Investments at Allspring Global Investments, discusses her outlook for the markets. Evidence that the world’s largest economy is at risk of buckling under the weight of President Donald Trump’s tariff war whipped up fresh volatility on Wall Street.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. You're listening to the
Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
Eastern on Applecarplay and Android Auto with the Bloomberg Business App.
Listen on demand wherever you get your podcasts, or watch
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Speaker 2 (00:23):
All right, you hit eco, go on your Bloomberg terminal,
and you see a lot of economic data coming out today.
Speaker 3 (00:30):
I don't know.
Speaker 2 (00:30):
One of the ones that kind of jumped out of
me is is GDP annualized quarter to quarter?
Speaker 4 (00:36):
The forecast was.
Speaker 2 (00:37):
For a decline of zero point two percent, came in
a decline of zero point three percent. That's versus a
gain of two point four percent last period. That kind
of gets my attention. So we said, hey, let's ask
Michael McKee. Does this stuff for a living international economics
and policy correspondent for Bloomberg Newsy joints us here in
our studio, Mike, is that a big deal that number
(00:58):
that print?
Speaker 5 (01:00):
Yes, it's a big deal, but not for the reasons
you might think. And I'm going to say something you've
never heard me say that. Matt Miller just accused me
of He said, I sound like Peter Navarro.
Speaker 4 (01:13):
Today. Yeah, I see. Did you see Alex's face when?
Speaker 5 (01:18):
Because I agreed with what Navarro's sentiment was on television
a few minutes ago where he said.
Speaker 4 (01:25):
That this was not a bad report.
Speaker 5 (01:27):
I'm summarizing because the three tenths decline doesn't tell.
Speaker 4 (01:31):
The whole story.
Speaker 5 (01:32):
I mean, the story underneath GDP today is all tariffs.
What happened. We saw tariffs bring in tariffs, get people
to import a lot of stuff to try to get
ahead of the tariff price increases, and that has totally
distorted the numbers here. What we've seen is that imports
(01:53):
subtracted five percent from GDP, A record inventories added to
it a quarter percent because the jump in inventories was
a record during the month and they didn't quite offset.
But we did see all of this distortion in the numbers.
That doesn't tell you the real story. If you look
(02:13):
at consumer spending, it was up one point eight percent,
which was a little more than expected. And business spending
distorted by tariffs up nine point eight percent, well twenty
two point five percent gain in imports of equipment. So
it's really hard to tell. So what you do if
you're an economists as you look at real final sales
(02:35):
to domestic purchasers which takes out inventory and trade, and
that was up by two point three percent. It's a
little lower that it was in prior quarters, but that
is still showing growth in the overall consumption economy.
Speaker 6 (02:51):
Well to that point. If we are seeing consumption okay
and now you have incomes being okay, is consumption also
being driven by pre buying tariffs or is this real
underlying straight.
Speaker 4 (03:01):
No doubt, because people bought a lot of cars, and
they've bought at least they've.
Speaker 5 (03:07):
Bought other things that we didn't see a big increase
in durable goods spending, but there was a big increase
in services spending, a relatively big increase, So Americans were
out spending money. Now the question is where do they
go from here? And for that you're what you're looking
at is the other data we just got at ten o'clock,
(03:29):
which is the PCEE data.
Speaker 6 (03:31):
Is this the one we care about?
Speaker 4 (03:32):
Is this the one get? This is the one we
care about?
Speaker 5 (03:33):
This this is the monthly This is the monthly number,
so it's the most recent data. This is if you're
following the trend, which is what the Fed wants to do.
We were up seven tents of eight percent, which is
up from half a percent in February. So Americans spent
more in March. The numbers were weighed down by what
(03:54):
we got in January. In February, in the quarterly numbers
and incomes were relatively strong. They're still up half a
percent after a seven tenths rise the month before. If
you look at the wages and salaries in that report,
which is the most important thing because people spend what
they make, they were up half a percent, which was
up from February's four tenths and January's two tenths. So
(04:17):
as the month went on, people got more money, they
spent more money, and so it doesn't suggest we go
into the second quarter with a real problem in terms
of consumer momentum.
Speaker 4 (04:30):
That's my read.
Speaker 2 (04:30):
It seems like the consumer mic is still pretty good.
Speaker 5 (04:32):
When you're when you're looking at the consumer confidence numbers,
it looks really terrible. But the numbers that we're seeing
from consumers in terms of what they do, rather, that's
a treasure.
Speaker 2 (04:45):
Secretary Bestin's been saying, I mean, you can look at
all the survey numbers you want something.
Speaker 4 (04:50):
Like best into along with Navarro.
Speaker 2 (04:51):
Yes, exactly, but I mean that's what he's been saying
and say, you can look at all the sentiment data
you want, but people are still out there spending money.
Speaker 4 (04:58):
Well, the question now still backward looking.
Speaker 6 (05:01):
I mean, this is still from March. April was when
we saw the tariff headlines and the volatility in the market.
Speaker 3 (05:05):
Right.
Speaker 5 (05:05):
Yeah, the PCE numbers are March that I'm talking about,
and the rest of it is first quarter through the
end of March. So what's happened in April that we
don't know yet, We're going to have We're going to
have to see. We have the sentiment indicators, and March
was really the first month when there were.
Speaker 4 (05:22):
Any tariffs, and they weren't really tariffs on you and me.
Speaker 5 (05:25):
They were tariffs on the steel companies and things like that.
So if people are paying more from for what they're getting,
if they can get anything from China, now, maybe that
does affect what they're going to be spending on. So
somebody said to me this morning, this makes the fence
job easy harder because you had higher inflation and lower growth.
(05:47):
But I think it makes it easier. It just cements
the case for doing nothing because this report is so
distorted by the tariff stuff that it's impossible to say
what it's going to mean going forward.
Speaker 6 (06:00):
Such a good point. He's so smart.
Speaker 4 (06:01):
That's when we get them on talking about a this time.
So just like Peter Navarro.
Speaker 6 (06:04):
Yeah, Samesy, certainly the same. Michael McKee, Bloomberg International Economics
and Policy correspondent, joining us in studio.
Speaker 4 (06:10):
Thank you so very much.
Speaker 1 (06:12):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on Apple, Coarclay, and Android
Auto with the Bloomberg Business App. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 6 (06:26):
Alex still here alongside Paul Sweeney. This is Bloomberg Intelligence Radio.
We bring you all the top news in business, economics,
and finance through our lens of our Bloomberg Intelligence folks.
They cover two thousand companies in one hundred and thirty
industries all around the world. Want to get an update
here on super Micro. The stock gets hammered here after
preliminary earnings results that fell well short of analyst estimates.
Remember this was a darling that went into the mid
(06:49):
cap stocks and had lots of issues with kind of
revamping its accounting, etc. And they were trying to really
find their footing. Bou Jinho is Bloomberg Intelligence and your
technology analyst joins us now trying to find their footing
then maybe pushed back a bit. What happened in their
prilminary announcement.
Speaker 7 (07:04):
Yeah, hey, Alex, thanks for having me on. It looks like,
you know, when you go big whale hunting and you
miss those whales, you're going to miss results. Right, They
essentially miss sales by about one billion dollars versus the
midpoint of their guidance. And the fact of the matter
is these AI deals are monster deals. That's why I'm
saying it's big whale hunting. One hundred thousand GPU cluster
(07:28):
that XAI or open Ai. Those are three point five
billion dollar deals. So if you miss on you know,
one or two of these, that accounts for easily a
billion dollars.
Speaker 2 (07:39):
So is this a super micro computer specific issue or
is this big tech spending kind of slung down here?
Speaker 7 (07:49):
Well, it's a product transition issue, right, So if we
look at the Nvidia GPUs, they transitioned over from the
last generation Hopper series to the next generation. Uh, the
the Blackwell series and given the greater capacity and the
(08:10):
more the stronger, the better computational power. The customers were
actually waiting for this for quite some time now, and
now they're clamoring for it. So essentially what customers appear
to be doing is canceling their Hopper orders and moving
over to Blackwell. Now, I will tell you they weren't
the only one that had this issue. HPE a couple
of months ago. Uh, they missed their expectations primarily because
(08:34):
of this product transition as well. And it's biting super
Micro now.
Speaker 6 (08:38):
So based on that, the chip cycles moving really fast
for AI. So what's next after Blackwell? This is just
going to keep happening and kind of rolling it downhill.
Speaker 7 (08:50):
Yeah, I mean, it's still probably a couple of years
before we start seeing the new the newer series of
chips really ramping up, So we probably have a two
year product cycle before we get to that, Alex, I mean,
let's see how the cloud Capex holds up in twenty
(09:10):
six and twenty seven. But for now, you know, right
now we have a neartim product cycle issue for at
least super Micro and HPE.
Speaker 2 (09:18):
Which what are your companies kind of the tech hardware companies,
what are they saying about this whole tariff climate, what
is it going to be an issue for them?
Speaker 7 (09:29):
Yes, well, we published an update to our tariff note
and surprisingly they've actually done a good job navigating the
tariff issues. So far, I've had three companies report related
that's hardware related. There's a couple of things we need
to take into consideration. One, a lot of them are
outside of China in terms of the manufacturing scope, so
(09:52):
the tariff impact is fairly minimal. Two, there's a lot
of manufacturing that comes out of Mexico. So you know,
because of the US Mexico and Canadian Trader agreementt U
S m c A, they're exempt for tariffs. So if
you have anything that's built out of Mexico or Canada,
whatever it's assembled there, you're except for tariffs. A lot
(10:12):
of my company, the companies that have reported, uh, they're
they're using your U S m c A to their
advantage to win deals. And three and this is this
was somewhat interesting to me. I thought there would have
been some pull in deals because of tariff concerns in
the second quarter. Uh, the guidance thus far, Uh, Yeah,
(10:34):
Western Digital as well as Seagate, which manufactured hard drives.
They don't see any pull in in deals. So the
second half of the year, which was a concern of mine,
we don't. We don't see a you know, we see
actually smooth demand going into the second half in.
Speaker 6 (10:49):
Terms of spending from super Micro's customers. I know we're
in the product cycle part, but are we seeing any
change in customer spend, Like maybe they're spending the same amount,
they're spending in different areas or are they holding spend
all together or pulling back.
Speaker 5 (11:05):
Yeah.
Speaker 7 (11:06):
So, and let me let me clarify who super Micro
sells to.
Speaker 1 (11:10):
They don't.
Speaker 7 (11:11):
They don't sell to the Metas or the Googles or
the Amazon or the Microsofts of the world. I mean,
there's some of that, but the bulk of their spend
goes to Tesla, musks x AI or the core weaves
of the world. This classification of neo clouds and for
all intented purposes, it seems as if they're spending, they're
(11:34):
maintaining their level of spend. They're not spending more. The
one overhang or one concern that I do have is
because of the tariff issue. So far, if they're not
going to spend more. Are they going to buy less?
Right because of the increase in taps. Now, if I'm right,
we shouldn't see that much of a price increase from
(11:58):
the server vendors or the GPU vendors because of some
of the ways that they can avoid the tariffs. And
you know, spending should be okay to the second half,
and if the black wall cycle works out for them,
super Micro should get back some of the law sales.
Speaker 2 (12:15):
So prior to three months ago, all we were talking
about in the marketplace broadly defined was AI. Now I've
gone three months really without really talking about AI because
it's all about Terriss. Have your clients kind of are
they still as enthusiastic about the real opportunities for a
transformation in technology coming from AI? Is that still on
(12:36):
the front burner?
Speaker 7 (12:37):
Well, so again, I'm gonna I'm gonna, I'm gonna bifurcate
that from the cloud guys and as well as the
enterprise guys. From the cloud perspective, they're continuing to spend.
Speaker 6 (12:48):
Right.
Speaker 7 (12:50):
If anything, there's a lot more excitement to spend, primarily
because of some of these smaller language models like a
deep seek.
Speaker 4 (12:58):
Up we have a blackout like a deep seek.
Speaker 6 (13:03):
Right, the studio light went out just for those of
you be on radio, so your light went out on
mujin Hell, there is no broad blackout space go ahead.
Speaker 7 (13:10):
Yes, like a deep seek. Or they are looking for
dinner models. If anything, there's going to be higher demand
for some of the products itself altogether, so there actually
is a lot of excitement now on the enterprise side.
If anything, there might be a pause on the enterprise
side because of the high cost of acquisition. So the
(13:33):
cycles for AI adoption may be more on twenty twenty
later in twenty twenty six and into twenty twenty seven
versus the second half of this year and into twenty
twenty six on the enterprise side.
Speaker 6 (13:46):
All Right, Weich thanks a lot usenhel Bloomberg Intelligence senior
technology analyst in the dark, but helping us illuminate what
we're seeing when it comes to some tech names like
super micro.
Speaker 1 (13:57):
You're listening to the Bloomberg Intelligence Pod. Catch us live
weekdays at ten am Eastern on Apple Coarcklay and Android
Auto with the Blueberg Business App. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 6 (14:11):
Your Caterpillar down by about half of percent, looking at
slightly lower sales this year if Trump administration tear US
remain in place. That's including an economy that dips into
a recession in the second half. Chris Chiolino, Bloomberg Intelligence
senior US machinery analyst joins US. Now, Chris, how do
you look at this company then when there's like a
huge variable, I'll throw off its earnings for the rest
(14:33):
of the year.
Speaker 8 (14:34):
Yeah. So, I think the release really isn't as bad
as initially feared, and there's actually a number of positive
takeaways here. The quarter was weak, and we knew that
going in, volumes were going to be down, pricing was
gonna be under pressure, But the outlook is actually better
than I think many had anticipated. Their two Q sales
guide was actually above the street. We saw backlog improved
(14:54):
to a record thirty five billion dollars, Orders were up
double digits both year over year and sequentially. And really,
if you look at their outlook X tariffs, it was
really better than what they had expected prior so, and
the tariff impact as of now at least the peers manageable.
So I think the release, you know, should at least
help delay some of those concerns over a more pronounced
(15:15):
slowdown this year.
Speaker 2 (15:17):
Christa's kind of pillar build their equipment in the US.
Is that where the manufacturing is?
Speaker 1 (15:22):
How do they do that?
Speaker 8 (15:25):
Short answer, they build everywhere. They are a net exporter
out of the US. But you have to remember this
is a large global manufacturer. They have manufacturing footprint and
and supply base that really spans the globe. But if
we're thinking about net exports, yes, they export more out
of the US than they do import from a From
(15:45):
a revenue perspective, you know, the US is you know,
almost half their revenue today.
Speaker 4 (15:51):
What about for its peers?
Speaker 6 (15:53):
What does this mean for some of its peers and
the trading environment that they were previously in.
Speaker 8 (15:59):
Yes, so, at least for some of the domestic US
based manufacturers, I think this is maybe a little bit
of a sigh of relief. By no means or we
have the woods yet, but it certainly seems that the tariffs,
as at least how they stand right now, are somewhat manageable.
You know, cats expecting a net cost headwind of about
two hundred and fifty is three hundred and fifty million
(16:22):
dollars next quarter. If you kind of extrapolate that out
over the balance of the year, you're talking you know,
maybe somewhere in the one hundred hundred and fifty basis
point headwinded margins. But that may even prove, you know,
overly pessimistic, because you know, cats still evaluate and get implement,
implement implementing some of these mitigation actions, so we could
(16:42):
even see that come down from here.
Speaker 2 (16:45):
I was kind of surprised, I guess positively, Chris, that
their backlog looks pretty darn good. It's not like their
customers are saying are canceling orders or anything.
Speaker 8 (16:55):
Now, and it's it's a record backlog, right, So you know,
we have coverage. You know, if you look at consensus revenue,
you know, whether we call it flatter down slightly this year,
they've got coverage for you know, nearly seventy percent of
the year already. So I think that does help provide
some kind of buffer. You know, there was a concern
out there that do we see this pre buy you know,
(17:16):
ahead of some of the tariff implementation, and KAT really
kind of downplay that in conversations they're having with their
dealers and with their customers. They're really not seeing any
evidence of that. So yeah, these do seem like, you know,
true orders and really a really healthy backlog, which you know,
I think helps support you know, that flatish type revenue
outlook that they're putting out there.
Speaker 6 (17:39):
All right, thanks a lot, Chris, really appreciate appreciate it,
Chris Chile. You know, Bloomberg Intelligence Senior US machinery analyst.
Speaker 1 (17:47):
You're listening to the Bloomberg Intelligence podcast. Catch us Live
weekdays at ten am Eastern on Applecarplay and Android Auto
with the Bloomberg Business app. Listen on demand wherever you
get your podcasts, or watch US live on to just get.
Speaker 2 (18:01):
Back to these markets we have as all offware. You're
off the lows of the morning. The S and p's
off eighty two points, that's one and a half percent.
And Malletti joins us here, old buddy of mine. We've
been into business a long time. She's head of equity
investments in all Spring Global Investments. Dude, you're grinding it.
Speaker 4 (18:18):
Still working hard.
Speaker 2 (18:19):
And Malletti joins us here in studio and you and
your colleagues at all Spring, I mean a lot of
folks that have been in the market for a while.
You've seen, you know, lots of different markets, whether it's
the you know, the dot com bust or the you know,
the financial crisis or the pandemic, A little bit of
uncertain to hear this year in the market. How are
you guys thinking about some of the very I guess
the volatility we're seeing in a lot of these markets.
Speaker 3 (18:41):
Yeah, I mean, I think, Paul, you're right. There's when
you when you have moments like this, you kind of
always look back and you look at what rhymes to
the past, and you know, even during COVID, that was
something we never lived through before. So while history does
kind of rhyme, it never perfectly repeats itself. And here
we are again in something we've never lived through before.
(19:02):
But there are lessons from the past that you definitely
take forward. And some of those lessons really are like,
look in the moment, it feels awful and uncomfortable, but
history does suggest that equity market returns for those who
stay invested and really think about bottom up fundamentals and
companies that really can control their own destiny, those investors
(19:26):
do well over a cycle. And so that's what our
investment teams are focused on looking at trying to take
advantage of emotion and take advantage of uncertainty and volatility.
Speaker 6 (19:36):
So is that on a sector level, an index level,
or a stock specific level.
Speaker 3 (19:40):
It's more on you from a bottom up stock selection basis.
And there certainly are, depending on the environment, different industries
that might fare better than others. But I would say
even within almost any industry, there are going to be
companies that do better than others.
Speaker 2 (19:56):
How do your portfolio managers, how do your analysts, you know,
assess a company when a lot of times these companies
are coming on their conference calls and saying we're withdrawing
guidance or we can't give guidance because we don't know
what's happening in our business, or if they don't know
how our investors supposed to know.
Speaker 3 (20:12):
Yeah, I mean, Paul, this is something you spent a
lot of your career doing and our teams too too.
So while the calls are critically important, as you know,
kind of during reporting season, most of the past is
the past. We're not focused on that. We're focused on
going forward. And on the calls, they may not be
able to give guidance, But if you know that company
really well, and our teams do have deep expertise and
(20:35):
fundamental research. They understand the model and they can kind
of walk through with the management teams where do they
have levers to pull if things get worse or if
things get better? And how quickly can those levelers be
pull and then asking them the same question you asked me,
how do you look at this environment versus other environments?
(20:55):
How can you manage through those? And understanding where they
have control of their own versus where macro can kind
of push them is really really important, and you will
see some companies actually do have more control in this
environment than others.
Speaker 6 (21:10):
What do you do about finding safety in the middle
of that? Right, Like in other cycles, you can make
an argument that maybe the dollar a treasury market, it's
okay to hide out there a little bit.
Speaker 4 (21:20):
Is that still the case?
Speaker 6 (21:21):
Do you guys see that Mark Mobius is like all
his funds are like ninety five percent in cash? Wow?
Speaker 3 (21:25):
Yeah, yeah. Look, I think we tend to be and
think about being invested for the long term. And you know,
look I manage our equity business, our fixed income team,
you know, they believe it's a it's a good time
for fixed income to focusing on the income component of that.
But on the equity side, you know, you gotta be
(21:47):
right twice if you're going to sell and then predict
when is the right timing to come back. And again
history would suggest that if you just wait out these
periods and stay invested, you're going to do better in
the long run.
Speaker 2 (22:02):
I never thought i'd be talking to you about this
topic because usually and and I talk about radio stocks,
TV stocks, billboard companies.
Speaker 4 (22:09):
That's kind of back in the day, billboard companies. What's
that great business?
Speaker 2 (22:12):
By the way, you can't fast forward through a billboard.
Just remember that your second traffic exactly emerging markets. How
do you guys approach emerging markets?
Speaker 3 (22:22):
You know, I think you know we We're lucky. We
have two great emerging markets teams. One that has a
focus on providing equity i'm sorry, income along with the
equity returns, so equity and income focused, and the other
one that's a little bit more kind of focused on,
you know, more growth at a reasonable price and a
(22:43):
little bit more emerging market like with real growth behind it.
And so in this environment, you are seeing a natural
lyft to EM and I think it's because obviously the weakness,
and the dollar has propelled those markets. Again. We kind
(23:03):
of predicted that in our outlook piece in October that
whether we saw a dollar weakness, we might see the
strength of other current currencies happen, and investors have been
long under allocated in emerging markets, so you're seeing kind
of a natural lift in some of those areas with
real opportunity. The other thing I would say, Paul is
(23:25):
it's pretty apparent that we're kind of tapped out on
the fiscal spend here in the US. There's a lot
of other countries that have the ability to really spend.
Speaker 6 (23:33):
So do you guys like hang out all the time
and like talk about stocks, Like like in the.
Speaker 2 (23:37):
Day when conferences you get the cool kids will go
to the table.
Speaker 6 (23:40):
You know, oh okay, and if they're not cool, you're like,
no thanks, yeah.
Speaker 4 (23:43):
You take your stocks.
Speaker 2 (23:45):
And group of former media analysts on Wall Street fun
and all these Drew Marcus says high Rich Rosen says
high go name dropping dropping. I mean, they're all just
they all know Ann Meletti. So that's in my studio
on my shape.
Speaker 1 (24:00):
How cool is that?
Speaker 4 (24:00):
That's really cool?
Speaker 3 (24:01):
They were the all stars back in the day. I
was the little kid on the block.
Speaker 4 (24:04):
Now don't say that please, all right, and thanks a lot.
Well you can tag her out. Yeah.
Speaker 2 (24:10):
And Malletti, head of an equity Is this a new
role for you.
Speaker 4 (24:13):
About five years?
Speaker 1 (24:14):
Oh?
Speaker 2 (24:14):
Okay, all right, yeah, she's always like the media analyst.
It's strong. And Malletti, head of equity Investments Offspring Global Investments,
joining us live here in our Bloomberg Interactive Brokers. We
appreciate getting a few minutes of your time.
Speaker 1 (24:25):
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Listen on demand wherever you get your podcasts, or watch
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Speaker 2 (00:23):
All right, you hit eco, go on your Bloomberg terminal,
and you see a lot of economic data coming out today.
Speaker 3 (00:30):
I don't know.
Speaker 2 (00:30):
One of the ones that kind of jumped out of
me is is GDP annualized quarter to quarter?
Speaker 4 (00:36):
The forecast was.
Speaker 2 (00:37):
For a decline of zero point two percent, came in
a decline of zero point three percent. That's versus a
gain of two point four percent last period. That kind
of gets my attention. So we said, hey, let's ask
Michael McKee. Does this stuff for a living international economics
and policy correspondent for Bloomberg Newsy joints us here in
our studio, Mike, is that a big deal that number
(00:58):
that print?
Speaker 5 (01:00):
Yes, it's a big deal, but not for the reasons
you might think. And I'm going to say something you've
never heard me say that. Matt Miller just accused me
of He said, I sound like Peter Navarro.
Speaker 4 (01:13):
Today. Yeah, I see. Did you see Alex's face when?
Speaker 5 (01:18):
Because I agreed with what Navarro's sentiment was on television
a few minutes ago where he said.
Speaker 4 (01:25):
That this was not a bad report.
Speaker 5 (01:27):
I'm summarizing because the three tenths decline doesn't tell.
Speaker 4 (01:31):
The whole story.
Speaker 5 (01:32):
I mean, the story underneath GDP today is all tariffs.
What happened. We saw tariffs bring in tariffs, get people
to import a lot of stuff to try to get
ahead of the tariff price increases, and that has totally
distorted the numbers here. What we've seen is that imports
(01:53):
subtracted five percent from GDP, A record inventories added to
it a quarter percent because the jump in inventories was
a record during the month and they didn't quite offset.
But we did see all of this distortion in the numbers.
That doesn't tell you the real story. If you look
(02:13):
at consumer spending, it was up one point eight percent,
which was a little more than expected. And business spending
distorted by tariffs up nine point eight percent, well twenty
two point five percent gain in imports of equipment. So
it's really hard to tell. So what you do if
you're an economists as you look at real final sales
(02:35):
to domestic purchasers which takes out inventory and trade, and
that was up by two point three percent. It's a
little lower that it was in prior quarters, but that
is still showing growth in the overall consumption economy.
Speaker 6 (02:51):
Well to that point. If we are seeing consumption okay
and now you have incomes being okay, is consumption also
being driven by pre buying tariffs or is this real
underlying straight.
Speaker 4 (03:01):
No doubt, because people bought a lot of cars, and
they've bought at least they've.
Speaker 5 (03:07):
Bought other things that we didn't see a big increase
in durable goods spending, but there was a big increase
in services spending, a relatively big increase, So Americans were
out spending money. Now the question is where do they
go from here? And for that you're what you're looking
at is the other data we just got at ten o'clock,
(03:29):
which is the PCEE data.
Speaker 6 (03:31):
Is this the one we care about?
Speaker 4 (03:32):
Is this the one get? This is the one we
care about?
Speaker 5 (03:33):
This this is the monthly This is the monthly number,
so it's the most recent data. This is if you're
following the trend, which is what the Fed wants to do.
We were up seven tents of eight percent, which is
up from half a percent in February. So Americans spent
more in March. The numbers were weighed down by what
(03:54):
we got in January. In February, in the quarterly numbers
and incomes were relatively strong. They're still up half a
percent after a seven tenths rise the month before. If
you look at the wages and salaries in that report,
which is the most important thing because people spend what
they make, they were up half a percent, which was
up from February's four tenths and January's two tenths. So
(04:17):
as the month went on, people got more money, they
spent more money, and so it doesn't suggest we go
into the second quarter with a real problem in terms
of consumer momentum.
Speaker 4 (04:30):
That's my read.
Speaker 2 (04:30):
It seems like the consumer mic is still pretty good.
Speaker 5 (04:32):
When you're when you're looking at the consumer confidence numbers,
it looks really terrible. But the numbers that we're seeing
from consumers in terms of what they do, rather, that's
a treasure.
Speaker 2 (04:45):
Secretary Bestin's been saying, I mean, you can look at
all the survey numbers you want something.
Speaker 4 (04:50):
Like best into along with Navarro.
Speaker 2 (04:51):
Yes, exactly, but I mean that's what he's been saying
and say, you can look at all the sentiment data
you want, but people are still out there spending money.
Speaker 4 (04:58):
Well, the question now still backward looking.
Speaker 6 (05:01):
I mean, this is still from March. April was when
we saw the tariff headlines and the volatility in the market.
Speaker 3 (05:05):
Right.
Speaker 5 (05:05):
Yeah, the PCE numbers are March that I'm talking about,
and the rest of it is first quarter through the
end of March. So what's happened in April that we
don't know yet, We're going to have We're going to
have to see. We have the sentiment indicators, and March
was really the first month when there were.
Speaker 4 (05:22):
Any tariffs, and they weren't really tariffs on you and me.
Speaker 5 (05:25):
They were tariffs on the steel companies and things like that.
So if people are paying more from for what they're getting,
if they can get anything from China, now, maybe that
does affect what they're going to be spending on. So
somebody said to me this morning, this makes the fence
job easy harder because you had higher inflation and lower growth.
(05:47):
But I think it makes it easier. It just cements
the case for doing nothing because this report is so
distorted by the tariff stuff that it's impossible to say
what it's going to mean going forward.
Speaker 6 (06:00):
Such a good point. He's so smart.
Speaker 4 (06:01):
That's when we get them on talking about a this time.
So just like Peter Navarro.
Speaker 6 (06:04):
Yeah, Samesy, certainly the same. Michael McKee, Bloomberg International Economics
and Policy correspondent, joining us in studio.
Speaker 4 (06:10):
Thank you so very much.
Speaker 1 (06:12):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on Apple, Coarclay, and Android
Auto with the Bloomberg Business App. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 6 (06:26):
Alex still here alongside Paul Sweeney. This is Bloomberg Intelligence Radio.
We bring you all the top news in business, economics,
and finance through our lens of our Bloomberg Intelligence folks.
They cover two thousand companies in one hundred and thirty
industries all around the world. Want to get an update
here on super Micro. The stock gets hammered here after
preliminary earnings results that fell well short of analyst estimates.
Remember this was a darling that went into the mid
(06:49):
cap stocks and had lots of issues with kind of
revamping its accounting, etc. And they were trying to really
find their footing. Bou Jinho is Bloomberg Intelligence and your
technology analyst joins us now trying to find their footing
then maybe pushed back a bit. What happened in their
prilminary announcement.
Speaker 7 (07:04):
Yeah, hey, Alex, thanks for having me on. It looks like,
you know, when you go big whale hunting and you
miss those whales, you're going to miss results. Right, They
essentially miss sales by about one billion dollars versus the
midpoint of their guidance. And the fact of the matter
is these AI deals are monster deals. That's why I'm
saying it's big whale hunting. One hundred thousand GPU cluster
(07:28):
that XAI or open Ai. Those are three point five
billion dollar deals. So if you miss on you know,
one or two of these, that accounts for easily a
billion dollars.
Speaker 2 (07:39):
So is this a super micro computer specific issue or
is this big tech spending kind of slung down here?
Speaker 7 (07:49):
Well, it's a product transition issue, right, So if we
look at the Nvidia GPUs, they transitioned over from the
last generation Hopper series to the next generation. Uh, the
the Blackwell series and given the greater capacity and the
(08:10):
more the stronger, the better computational power. The customers were
actually waiting for this for quite some time now, and
now they're clamoring for it. So essentially what customers appear
to be doing is canceling their Hopper orders and moving
over to Blackwell. Now, I will tell you they weren't
the only one that had this issue. HPE a couple
of months ago. Uh, they missed their expectations primarily because
(08:34):
of this product transition as well. And it's biting super
Micro now.
Speaker 6 (08:38):
So based on that, the chip cycles moving really fast
for AI. So what's next after Blackwell? This is just
going to keep happening and kind of rolling it downhill.
Speaker 7 (08:50):
Yeah, I mean, it's still probably a couple of years
before we start seeing the new the newer series of
chips really ramping up, So we probably have a two
year product cycle before we get to that, Alex, I mean,
let's see how the cloud Capex holds up in twenty
(09:10):
six and twenty seven. But for now, you know, right
now we have a neartim product cycle issue for at
least super Micro and HPE.
Speaker 2 (09:18):
Which what are your companies kind of the tech hardware companies,
what are they saying about this whole tariff climate, what
is it going to be an issue for them?
Speaker 7 (09:29):
Yes, well, we published an update to our tariff note
and surprisingly they've actually done a good job navigating the
tariff issues. So far, I've had three companies report related
that's hardware related. There's a couple of things we need
to take into consideration. One, a lot of them are
outside of China in terms of the manufacturing scope, so
(09:52):
the tariff impact is fairly minimal. Two, there's a lot
of manufacturing that comes out of Mexico. So you know,
because of the US Mexico and Canadian Trader agreementt U
S m c A, they're exempt for tariffs. So if
you have anything that's built out of Mexico or Canada,
whatever it's assembled there, you're except for tariffs. A lot
(10:12):
of my company, the companies that have reported, uh, they're
they're using your U S m c A to their
advantage to win deals. And three and this is this
was somewhat interesting to me. I thought there would have
been some pull in deals because of tariff concerns in
the second quarter. Uh, the guidance thus far, Uh, Yeah,
(10:34):
Western Digital as well as Seagate, which manufactured hard drives.
They don't see any pull in in deals. So the
second half of the year, which was a concern of mine,
we don't. We don't see a you know, we see
actually smooth demand going into the second half in.
Speaker 6 (10:49):
Terms of spending from super Micro's customers. I know we're
in the product cycle part, but are we seeing any
change in customer spend, Like maybe they're spending the same amount,
they're spending in different areas or are they holding spend
all together or pulling back.
Speaker 5 (11:05):
Yeah.
Speaker 7 (11:06):
So, and let me let me clarify who super Micro
sells to.
Speaker 1 (11:10):
They don't.
Speaker 7 (11:11):
They don't sell to the Metas or the Googles or
the Amazon or the Microsofts of the world. I mean,
there's some of that, but the bulk of their spend
goes to Tesla, musks x AI or the core weaves
of the world. This classification of neo clouds and for
all intented purposes, it seems as if they're spending, they're
(11:34):
maintaining their level of spend. They're not spending more. The
one overhang or one concern that I do have is
because of the tariff issue. So far, if they're not
going to spend more. Are they going to buy less?
Right because of the increase in taps. Now, if I'm right,
we shouldn't see that much of a price increase from
(11:58):
the server vendors or the GPU vendors because of some
of the ways that they can avoid the tariffs. And
you know, spending should be okay to the second half,
and if the black wall cycle works out for them,
super Micro should get back some of the law sales.
Speaker 2 (12:15):
So prior to three months ago, all we were talking
about in the marketplace broadly defined was AI. Now I've
gone three months really without really talking about AI because
it's all about Terriss. Have your clients kind of are
they still as enthusiastic about the real opportunities for a
transformation in technology coming from AI? Is that still on
(12:36):
the front burner?
Speaker 7 (12:37):
Well, so again, I'm gonna I'm gonna, I'm gonna bifurcate
that from the cloud guys and as well as the
enterprise guys. From the cloud perspective, they're continuing to spend.
Speaker 6 (12:48):
Right.
Speaker 7 (12:50):
If anything, there's a lot more excitement to spend, primarily
because of some of these smaller language models like a
deep seek.
Speaker 4 (12:58):
Up we have a blackout like a deep seek.
Speaker 6 (13:03):
Right, the studio light went out just for those of
you be on radio, so your light went out on
mujin Hell, there is no broad blackout space go ahead.
Speaker 7 (13:10):
Yes, like a deep seek. Or they are looking for
dinner models. If anything, there's going to be higher demand
for some of the products itself altogether, so there actually
is a lot of excitement now on the enterprise side.
If anything, there might be a pause on the enterprise
side because of the high cost of acquisition. So the
(13:33):
cycles for AI adoption may be more on twenty twenty
later in twenty twenty six and into twenty twenty seven
versus the second half of this year and into twenty
twenty six on the enterprise side.
Speaker 6 (13:46):
All Right, Weich thanks a lot usenhel Bloomberg Intelligence senior
technology analyst in the dark, but helping us illuminate what
we're seeing when it comes to some tech names like
super micro.
Speaker 1 (13:57):
You're listening to the Bloomberg Intelligence Pod. Catch us live
weekdays at ten am Eastern on Apple Coarcklay and Android
Auto with the Blueberg Business App. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 6 (14:11):
Your Caterpillar down by about half of percent, looking at
slightly lower sales this year if Trump administration tear US
remain in place. That's including an economy that dips into
a recession in the second half. Chris Chiolino, Bloomberg Intelligence
senior US machinery analyst joins US. Now, Chris, how do
you look at this company then when there's like a
huge variable, I'll throw off its earnings for the rest
(14:33):
of the year.
Speaker 8 (14:34):
Yeah. So, I think the release really isn't as bad
as initially feared, and there's actually a number of positive
takeaways here. The quarter was weak, and we knew that
going in, volumes were going to be down, pricing was
gonna be under pressure, But the outlook is actually better
than I think many had anticipated. Their two Q sales
guide was actually above the street. We saw backlog improved
(14:54):
to a record thirty five billion dollars, Orders were up
double digits both year over year and sequentially. And really,
if you look at their outlook X tariffs, it was
really better than what they had expected prior so, and
the tariff impact as of now at least the peers manageable.
So I think the release, you know, should at least
help delay some of those concerns over a more pronounced
(15:15):
slowdown this year.
Speaker 2 (15:17):
Christa's kind of pillar build their equipment in the US.
Is that where the manufacturing is?
Speaker 1 (15:22):
How do they do that?
Speaker 8 (15:25):
Short answer, they build everywhere. They are a net exporter
out of the US. But you have to remember this
is a large global manufacturer. They have manufacturing footprint and
and supply base that really spans the globe. But if
we're thinking about net exports, yes, they export more out
of the US than they do import from a From
(15:45):
a revenue perspective, you know, the US is you know,
almost half their revenue today.
Speaker 4 (15:51):
What about for its peers?
Speaker 6 (15:53):
What does this mean for some of its peers and
the trading environment that they were previously in.
Speaker 8 (15:59):
Yes, so, at least for some of the domestic US
based manufacturers, I think this is maybe a little bit
of a sigh of relief. By no means or we
have the woods yet, but it certainly seems that the tariffs,
as at least how they stand right now, are somewhat manageable.
You know, cats expecting a net cost headwind of about
two hundred and fifty is three hundred and fifty million
(16:22):
dollars next quarter. If you kind of extrapolate that out
over the balance of the year, you're talking you know,
maybe somewhere in the one hundred hundred and fifty basis
point headwinded margins. But that may even prove, you know,
overly pessimistic, because you know, cats still evaluate and get implement,
implement implementing some of these mitigation actions, so we could
(16:42):
even see that come down from here.
Speaker 2 (16:45):
I was kind of surprised, I guess positively, Chris, that
their backlog looks pretty darn good. It's not like their
customers are saying are canceling orders or anything.
Speaker 8 (16:55):
Now, and it's it's a record backlog, right, So you know,
we have coverage. You know, if you look at consensus revenue,
you know, whether we call it flatter down slightly this year,
they've got coverage for you know, nearly seventy percent of
the year already. So I think that does help provide
some kind of buffer. You know, there was a concern
out there that do we see this pre buy you know,
(17:16):
ahead of some of the tariff implementation, and KAT really
kind of downplay that in conversations they're having with their
dealers and with their customers. They're really not seeing any
evidence of that. So yeah, these do seem like, you know,
true orders and really a really healthy backlog, which you know,
I think helps support you know, that flatish type revenue
outlook that they're putting out there.
Speaker 6 (17:39):
All right, thanks a lot, Chris, really appreciate appreciate it,
Chris Chile. You know, Bloomberg Intelligence Senior US machinery analyst.
Speaker 1 (17:47):
You're listening to the Bloomberg Intelligence podcast. Catch us Live
weekdays at ten am Eastern on Applecarplay and Android Auto
with the Bloomberg Business app. Listen on demand wherever you
get your podcasts, or watch US live on to just get.
Speaker 2 (18:01):
Back to these markets we have as all offware. You're
off the lows of the morning. The S and p's
off eighty two points, that's one and a half percent.
And Malletti joins us here, old buddy of mine. We've
been into business a long time. She's head of equity
investments in all Spring Global Investments. Dude, you're grinding it.
Speaker 4 (18:18):
Still working hard.
Speaker 2 (18:19):
And Malletti joins us here in studio and you and
your colleagues at all Spring, I mean a lot of
folks that have been in the market for a while.
You've seen, you know, lots of different markets, whether it's
the you know, the dot com bust or the you know,
the financial crisis or the pandemic, A little bit of
uncertain to hear this year in the market. How are
you guys thinking about some of the very I guess
the volatility we're seeing in a lot of these markets.
Speaker 3 (18:41):
Yeah, I mean, I think, Paul, you're right. There's when
you when you have moments like this, you kind of
always look back and you look at what rhymes to
the past, and you know, even during COVID, that was
something we never lived through before. So while history does
kind of rhyme, it never perfectly repeats itself. And here
we are again in something we've never lived through before.
(19:02):
But there are lessons from the past that you definitely
take forward. And some of those lessons really are like,
look in the moment, it feels awful and uncomfortable, but
history does suggest that equity market returns for those who
stay invested and really think about bottom up fundamentals and
companies that really can control their own destiny, those investors
(19:26):
do well over a cycle. And so that's what our
investment teams are focused on looking at trying to take
advantage of emotion and take advantage of uncertainty and volatility.
Speaker 6 (19:36):
So is that on a sector level, an index level,
or a stock specific level.
Speaker 3 (19:40):
It's more on you from a bottom up stock selection basis.
And there certainly are, depending on the environment, different industries
that might fare better than others. But I would say
even within almost any industry, there are going to be
companies that do better than others.
Speaker 2 (19:56):
How do your portfolio managers, how do your analysts, you know,
assess a company when a lot of times these companies
are coming on their conference calls and saying we're withdrawing
guidance or we can't give guidance because we don't know
what's happening in our business, or if they don't know
how our investors supposed to know.
Speaker 3 (20:12):
Yeah, I mean, Paul, this is something you spent a
lot of your career doing and our teams too too.
So while the calls are critically important, as you know,
kind of during reporting season, most of the past is
the past. We're not focused on that. We're focused on
going forward. And on the calls, they may not be
able to give guidance, But if you know that company
really well, and our teams do have deep expertise and
(20:35):
fundamental research. They understand the model and they can kind
of walk through with the management teams where do they
have levers to pull if things get worse or if
things get better? And how quickly can those levelers be
pull and then asking them the same question you asked me,
how do you look at this environment versus other environments?
(20:55):
How can you manage through those? And understanding where they
have control of their own versus where macro can kind
of push them is really really important, and you will
see some companies actually do have more control in this
environment than others.
Speaker 6 (21:10):
What do you do about finding safety in the middle
of that? Right, Like in other cycles, you can make
an argument that maybe the dollar a treasury market, it's
okay to hide out there a little bit.
Speaker 4 (21:20):
Is that still the case?
Speaker 6 (21:21):
Do you guys see that Mark Mobius is like all
his funds are like ninety five percent in cash? Wow?
Speaker 3 (21:25):
Yeah, yeah. Look, I think we tend to be and
think about being invested for the long term. And you know,
look I manage our equity business, our fixed income team,
you know, they believe it's a it's a good time
for fixed income to focusing on the income component of that.
But on the equity side, you know, you gotta be
(21:47):
right twice if you're going to sell and then predict
when is the right timing to come back. And again
history would suggest that if you just wait out these
periods and stay invested, you're going to do better in
the long run.
Speaker 2 (22:02):
I never thought i'd be talking to you about this
topic because usually and and I talk about radio stocks,
TV stocks, billboard companies.
Speaker 4 (22:09):
That's kind of back in the day, billboard companies. What's
that great business?
Speaker 2 (22:12):
By the way, you can't fast forward through a billboard.
Just remember that your second traffic exactly emerging markets. How
do you guys approach emerging markets?
Speaker 3 (22:22):
You know, I think you know we We're lucky. We
have two great emerging markets teams. One that has a
focus on providing equity i'm sorry, income along with the
equity returns, so equity and income focused, and the other
one that's a little bit more kind of focused on,
you know, more growth at a reasonable price and a
(22:43):
little bit more emerging market like with real growth behind it.
And so in this environment, you are seeing a natural
lyft to EM and I think it's because obviously the weakness,
and the dollar has propelled those markets. Again. We kind
(23:03):
of predicted that in our outlook piece in October that
whether we saw a dollar weakness, we might see the
strength of other current currencies happen, and investors have been
long under allocated in emerging markets, so you're seeing kind
of a natural lift in some of those areas with
real opportunity. The other thing I would say, Paul is
(23:25):
it's pretty apparent that we're kind of tapped out on
the fiscal spend here in the US. There's a lot
of other countries that have the ability to really spend.
Speaker 6 (23:33):
So do you guys like hang out all the time
and like talk about stocks, Like like in the.
Speaker 2 (23:37):
Day when conferences you get the cool kids will go
to the table.
Speaker 6 (23:40):
You know, oh okay, and if they're not cool, you're like,
no thanks, yeah.
Speaker 4 (23:43):
You take your stocks.
Speaker 2 (23:45):
And group of former media analysts on Wall Street fun
and all these Drew Marcus says high Rich Rosen says
high go name dropping dropping. I mean, they're all just
they all know Ann Meletti. So that's in my studio
on my shape.
Speaker 1 (24:00):
How cool is that?
Speaker 4 (24:00):
That's really cool?
Speaker 3 (24:01):
They were the all stars back in the day. I
was the little kid on the block.
Speaker 4 (24:04):
Now don't say that please, all right, and thanks a lot.
Well you can tag her out. Yeah.
Speaker 2 (24:10):
And Malletti, head of an equity Is this a new
role for you.
Speaker 4 (24:13):
About five years?
Speaker 1 (24:14):
Oh?
Speaker 2 (24:14):
Okay, all right, yeah, she's always like the media analyst.
It's strong. And Malletti, head of equity Investments Offspring Global Investments,
joining us live here in our Bloomberg Interactive Brokers. We
appreciate getting a few minutes of your time.
Speaker 1 (24:25):
This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live each
weekday ten am to noon 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
and always on the Bloomberg terminal.
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