October 9, 2025 • 38 mins
Watch Tom and Paul LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg Surveillance hosted by Tom Keene & Paul Sweeney - October 13th, 2025
Featuring:
1) Sebastien Page, Head of Global Multi-Asset and Chair of the Asset Allocation Steering Committee at T. Rowe Price, talks asset allocation and the bearish and bullish growth frame.
2) Jay Timmons, President and CEO at the National Association of Manufacturers, discusses how the shutdown is affecting of manufacturing, deregulation, and tariffs.
3) James Steel, Chief Commodities Analyst at HSBC, joins to breakdown the safe haven rally into gold and silver.
4) Nelson Yu, Head of Equities at AllianceBernstein, talks about the risk of complacency and the AI investment theme.
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 (00:02):
Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg
Surveillance Podcast. Catch us live weekdays at seven am Eastern
on Apple CarPlay or Android Auto with the Bloomberg Business app,
Listen on demand wherever you get your podcasts, or watch
(00:25):
us live on YouTube.
Speaker 2 (00:27):
The hallmark of Bloomberg's surveillance is we rip up the
script when we have to.
Speaker 3 (00:31):
We do that now.
Speaker 2 (00:32):
I was going to go to Sebastian Page and something
else towards to the slack of Apollo Publishing. Moments ago,
Sebastian Page a tiro price with US. Yours workers contributed
eighty five hundred to their four oh one k accounts,
seventy one percent of the assets allocated to equities the
Magnificent Seven I have a forty percent weight SMP five hundred.
(00:52):
The bottom line is that each worker in the US
puts an estimated two three hundred dollars into mag seven
stocks every year. The dangers are passive investing. How do
we have a perfect guest for this subgest to discuss.
Speaker 4 (01:07):
Well, we're at an all time high or close to
it in terms of the concentration of the markets, and
that is a risk. I think Torsen makes a point
here where you keep getting inflows into market capitalization weights
and in the sense itself reinforcing. My view is it
is in part contributing to this all time high market concentration,
(01:29):
except those companies are pretty great.
Speaker 2 (01:31):
On a physics basis, like in your fabulous book on diversification.
On a physics basis basis, it's an inertial force. How
much of a draw down do we need to see
where we break that inertial constructive force five percent ten
percent bear market?
Speaker 4 (01:50):
Well, it's interesting the way you phrased the question, how
much of a draw down do we need to get
the market broadening? That's an assumption we're making, and I
think it's the right one that in a drawdown we
will see broadening. If you look at how value stocks
have been behaving over the last two three years, every
time we get a three to four percent move daily
on the downside, value stocks outperform. So my view is
(02:14):
that a big drawdout in the markets would be almost
mathematically has to be driven by maybe an AI scare
something going on to unwine market concentration.
Speaker 2 (02:26):
By the way, right now, in.
Speaker 4 (02:28):
Our scation portfolios, we're long diversification. What's that So we
have an overweight to non US stocks. We like US
stocks for the long run, but right now, if you
look at the fundamentals outside the US, the valuation and
some macro catalysts, increased spending in Europe, still duvish central banks,
it all lines up for a continued performance over the say,
(02:51):
the next six to twelve months of non US stocks.
We also like the value in schmid sectors outside the US.
That's how we're playing most of our diversification in credit.
We also like a broad set of credit exposures on
the fixed income side.
Speaker 5 (03:05):
And just going on the fixed income space, on the
credit side, the best performing sector has been u US
high yield. So it doesn't seem like the market's too
concerned about, at least in the fixed income market, the
highild market, about the reception scenarios out there.
Speaker 4 (03:18):
It's fascinating how tight spreads are. And as valuation sensitive investors,
we still have a long credit exposure because and our
head of high yield keeps reminding our asset allocation committee
every time. This is not the same asset class that
it used to be. So if you draw a chart
of high yield spreads over time, and you look at
(03:40):
where spreads were in prior market cycles. You're looking at
a different index. You're looking at an index that is
lower quality, more energy sensitive. We do at thial price
a bottom up analysis of sure level default probabilities, so
we build it up for the entire index, and those numbers,
based on our assumptions are lower than the norm, slightly
(04:04):
lower than the Norman, definitely not recession level.
Speaker 3 (04:08):
I know.
Speaker 5 (04:08):
I'm just looking at your notes that you've been traveling
a lot, meeting with your t row too much rice clients.
Speaker 2 (04:13):
I'm guessing he's trying to find middle relief for the
Baltimore Orioles exactly.
Speaker 5 (04:17):
I'm guessing one of the questions you get is are
we in a bubble in the US equity markets? How
do you respond to them?
Speaker 4 (04:24):
I saw That's what Demo darn, who's I think a
reference in terms of valuation in the media saying I'm
not using the B word, And his argument is the
earnings are there, the earnings growth is there. As we
go into the third quarter. I get my Jonathan Gollub
earnings email this morning. If he's eating but he's he's
(04:45):
looking at he goes nine percent your verear growth still
and with twelve percent he's expecting with the surprises. So
the earnings are there. So Demo Darn's out there saying
we're not in a bubble. I'm not using that word yet.
Speaker 2 (05:00):
I see we got to run here. But Sebastian, we
alught to get you back for a long, long segment
highlighting the intelligence of your book. But let me cut
to the chase. The uproar of the anti worry crew
of AI. Was there an equivalent in two thousand, I
don't recall it.
Speaker 4 (05:18):
See that is such an interesting point about sentiment when
I was thinking about this in my way here this morning,
what everybody thinks we might be in a bubble. Counternatively,
that's kind of a good thing. It means there's some conservatives.
Late nineties, it was really you have to travel back
in time and put yourself there. Just remove the hindsight
(05:40):
bias that all this went berserk and it blew up.
In the late nineties, people believed it. People believed it,
and so now it's so different in a way, similar
in certain ways, but different in the sense that those
are cash flow generating businesses, not finance.
Speaker 2 (05:57):
With that come back soon, Sebastian page with this price here.
Stay with us. More from Bloomberg Surveillance coming up after this.
Speaker 1 (06:12):
You're listening to the Bloomberg Surveillance Podcast. Catch us Live
weekday afternoons from seven to ten am Eastern Listen on
Applecarplay and Android Otto with the Bloomberg Business app, or
watch us live on YouTube.
Speaker 2 (06:24):
Joining us Jake Timmins, President, chief executive Officer of the
National Association of Manufacturers. And this is great, folks. He's
got this bio that's like six pages long. And Lisa
just like, I mean, this is what Sweeney would expect. Paragraph, paragraph, paragraph,
and then there's a single line and then there's more paragraphs.
(06:45):
The single line as I went to the Ohio State
Ohio State University. You know, Jake, the last time you
were in was ride. We've got a huge response and
the bottom line is you are hardwired. You're in Virginia now.
The corporate thing and that with the National Association of Manufacturers,
but you understand the tradition of Detroit down the interstates
(07:07):
in manufacturing America. What's a number one myth that the
public gets wrong about manufacturing in America.
Speaker 6 (07:15):
Well, that it's taken for granted, right that that we're
always going to be making things, and that's not necessarily
the case. You got to have the right policies in place.
And we've had a we've had a run of really
good policies this year that that has helped manufacturers have
more confidence in investing and hiring in America. But those
(07:36):
things aren't you know, those things aren't given. Uh, it
should never be taken for granted.
Speaker 5 (07:41):
So talk to us about the manufacturing economy in the
US right now. It's in contraction, it's been for a while.
Talk to us about what you're seeing at there.
Speaker 6 (07:50):
Yeah, you know, it's funny because you do see that
that data, there's no question about that, Paul. But I
hear from my members. We just had a board meeting
last week. I've got a very small, discrete board of directors,
two hundred and fifty members of.
Speaker 2 (08:04):
America's industrial It's a lot of art.
Speaker 6 (08:08):
It's like a little congress, but you get a lot of.
Speaker 2 (08:11):
Great We call it the French government actually continue.
Speaker 6 (08:15):
Well, I'm hoping we have more stability than that one.
So what I'm hearing from them is a lot of optimism.
Right that we have the conditions that are ripe for
investment and job creation, but there is still some pause
in that, and especially when it comes to tariffs and
workforce policies.
Speaker 5 (08:35):
So how are the manufacturers out there dealing with the
uncertainty with teriffs, maybe the workforce issues with migrant labor
no longer being a supply of labor, how are they
dealing with that?
Speaker 6 (08:48):
Yeah, So it's an interesting conundrum for manufacturers because manufacturers
by and large, certainly from what I've seen, and of
course there are always options, but I've always seen manufacturers
following the rules there by the book.
Speaker 2 (09:05):
They're hiring legal.
Speaker 6 (09:08):
You know, labor that has all the bright papers. But
when other sectors of the economy see a hollowing out
of some of their workers, we're suddenly competing for labor.
And today we've got four hundred thousand open jobs in
the sector. And we've talked about in the past, Tom
and we're always trying to attract that next generation. That
number is going to grow to two million by the
(09:28):
year twenty three.
Speaker 2 (09:29):
This is the heart of the matter. I interviewed Senator
Grassley years ago. I think he was young then. He
was like a two at the time. He's a former
welder out of Iowa and World War Two, and the
cliche is we don't have enough welders. The politicians are
signing deals saying we're going to take high manufacturing Asia
and bring it over here, Jay Timmins, Do we have
(09:50):
the warm bodies to build an Asia like manufacturing force today?
Speaker 6 (09:56):
No, but that doesn't mean we can't get there, and
we have to again, we have to prioritize the right things.
You and I have talked about trade schools in the
past and the importance of trade schools and community colleges
and really orienting.
Speaker 2 (10:09):
Are they doing that? I mean there was both season
in New York State BOC.
Speaker 6 (10:13):
I think yes, it's it's growing right, it's getting this,
it's cooling there.
Speaker 2 (10:19):
That is the challenge we have.
Speaker 6 (10:20):
It's important to make sure that young people know what
cool opportunities. Use the word cool, I say sexy. You
know opportunities are available in manufacturing today. More importantly, it's
telling getting their parents to understand that as well, because
oftentimes parents will say, hey, we want you to go
in this direction or that direction. That realize what great
opportunities exist in manufacture.
Speaker 2 (10:41):
I mean, Paul, this is the heart of the matter,
the parents want them to take Lockey in philosophy at
Duke and the kids. What's the average salary with one
of those kids five years out?
Speaker 6 (10:51):
Yeah, so it's like, well, it's run one hundred thousand dollars.
Speaker 2 (10:54):
So they're talking six figure incomes. Moving a ranch.
Speaker 5 (10:57):
Yep, no college, no stereotysably, So, Jay, what are the
key challenges for you and for manufacturers today?
Speaker 6 (11:05):
So let's start with the opportunities, right, So, we had
great we had great news this year when we got
the tax reforms made permanent. That really helps supercharge I
think optimism. Regulatory modernization has been good for manufacturing. The
President's focus in the administration's focus on energy dominance has
(11:25):
been very positive. But the greatest challenges are as we
just talked about, workforce, but also the uncertainty of the
current tariff policies that are happening in this country and
the added costs that come with that. I would tell
you the one thing that we're really watching closely. The
President clearly wants to grow manufacturing capacity in this country.
Well so do we, Right, that's our that's sure, that's
(11:46):
my job. In order to do that, We've had our
economists to crunch some numbers. If we had every machine
running in this country today, we would only be able
to make eighty four percent of the critical inputs necessary
to build that new factory.
Speaker 2 (12:02):
So what would you say to Donald Trump? I mean,
what would you say to the president about this? I
don't want a photo shoot in the White House lawn
of some big tractor trailer like we're manling and we're
going to get the vote in Ohio. You're the reality.
What do you say to the president or the next president? Yeah,
help us, help us, help you do this? Right? So,
(12:23):
and the way to DOLBJ text credits.
Speaker 6 (12:26):
The way to do it is is to look at
those critical inputs that you need. So think in terms
of machines, right, and the administration just announced a two
thirty two investigation on machinery that would add tariffs. Well,
if you're if you're tariffing that that product and the
purpose of that product is helped build new manufacturing capacity,
(12:48):
that doesn't seem to add up. So if we have
some sort of a speed PAS that allows us to
bring that equipment in duty free to build manufacturing capacity,
we think that it's a win win for both.
Speaker 3 (13:00):
You don't see that common sense. Well, we've been talking
about listen, listen, We've been talking to the administration. We're
getting some good response about exactly that targeted, targeted focus
on making sure that we can bring in the right
things to build manufacturing.
Speaker 2 (13:14):
Please come back again. I mean, you know, we start
strong in this our Sebastian Page and Jay Timmins, and
we should have had both of them for like an hour.
Speaker 6 (13:21):
I'll always come back if you always say the Ohio State.
Speaker 2 (13:25):
University, Ohio, they did pretty good this year. There's always
upsets in this Well in Ohio State is just like
normal Ohio State.
Speaker 6 (13:34):
We got a wait to see what happens with the
big game right after when.
Speaker 2 (13:37):
You were an undergraduates. This is like what Michael Barr
used to do in Detroit. Did you drink in every
bar in that corridor of bars?
Speaker 6 (13:45):
So there was a bar o Larry's there that I
did once in a while frequently.
Speaker 2 (13:50):
What was the beverage?
Speaker 6 (13:51):
Sadly, sadly, sadly, Well, I was young and I'm old
enough that legal age was eighteen, so I drank tequila.
Speaker 2 (14:00):
But I have to label.
Speaker 6 (14:02):
But I have to tell you, what do you let
the chief the cheapest Tess, I have to tell you
I was a geek. So I went around the state
starting young Republican clubs, so you.
Speaker 2 (14:11):
Know, very good. Didn't really have fun. Jay, Lisa and
I surveillance correction, folks, MATEO and I. It saw us
a white label. It's more chewy than the green. The
rich kids had the green label and we had the
white label.
Speaker 6 (14:24):
We also had grain alcohol, which was a really bad Timmis,
thank you so much.
Speaker 2 (14:32):
Stay with us. More from Bloomberg Surveillance coming up after this.
Speaker 1 (14:43):
This is the Bloomberg Surveillance Podcast. Listen live each weekday
starting at seven am Eastern on Apple Corplay 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 ele where you get.
Speaker 2 (15:00):
Right to it for the last week or so and
I with great guidance to Dennis Gartman and this amazing
call on Gold in Yen really a call of a decade.
When are you going to have the gold guy in?
When are you going to have the guy with the
affable British voice on? When are you going to have
James Steele on in the studio now worldwide. James Steele,
(15:23):
chief of Commodities for HSBC, wonderful to have you here.
How is this gold move, this silver move different from
my ute where I'd go to cocktail parties with my
parents and see Jenny Kremaals and everybody was gold and
silver crazy. How's it different from nineteen eighty?
Speaker 7 (15:43):
Well, thank you, Tom, thank you for having me. I
think one of the difference is that we've hit real highs.
You know, the market was talking about a series of
highs for the last year and a half, but really
it wasn't until April that we hit real highs. That
we hit highs in real terms. In January of nineteen eighty,
(16:05):
gold hit eight hundred and fifty dollars an ounce, and
that is a little bit shy of thirty four hundred
dollars in today's money, So we didn't pop that figure
until April. And I think what makes it different now
is that we have a different monetary regime Voker, and
it was just coming into power, and that's why the
market dropped after that. Also, the geopolitical risk climate is different.
(16:31):
We have more entrance and we have a different very
types of entrance into the market, and we just have
a lot of elevated risk. And what is interesting is
that this is occurring aside very powerful equities, so a
lot of the buyer and gold is safe haven.
Speaker 2 (16:48):
Paul's got any questions from a center around what to
buy next at the jewelry store, let me just ask
a dumb question. In everything else in the world, if
price goes up, we make more of it. That's the
way Adam's Smith told us things work. Alfred Marshall told
us that if the price is up, are we mining
more gold?
Speaker 7 (17:08):
Well we can't. Well we are mining a bit more.
But mining is a very long process, and it depends
on a very long investment cycle. Say, by the time
a couple of geologists say I think there's some gold here,
it can be ten years before it goes round your finger.
It used to be five. Sometimes it's much much longer
than that, and so there are constrictions to how quickly
(17:32):
you can raise production, you can change grading and things
like that. But really it's said on these long term cycles,
what is flexible is recycling. And I think all the
time I've been covering gold, the recycling market has steadily
risen as a greater percentage of the share of supply.
And I would bet that at this price we've got
(17:53):
some potentially significant recycling that could come online.
Speaker 2 (18:00):
Is that work?
Speaker 5 (18:01):
Where do we see recycling? How does that happen? I
just go to the guy on the corner and you
give them my ring for cash.
Speaker 7 (18:08):
It goes from that level. It goes from gathering up
all the jewelry in your house because where record highs
or it goes right up to old bars that may
be cracked that may not be London what we call
London good delivery, okay, which is the only type of
bar the HSBC and other CLI London good Delivery.
Speaker 5 (18:30):
That means it's a high quality bar.
Speaker 7 (18:32):
That means it's been assayed and produced by a verified
l b M, a London Buoyant Market Association entity and
they've said this refinery is correct and and and therefore
you know what you're getting. Uh So it goes from
there right up. But there is a lot of gold
in the world and it can be mobilized at high prices.
Speaker 2 (18:54):
Bloomberg Surveillance James Steele of HSBC, where there's a definitive
on gold ready green in the screen right now, the
metal swinging filing is tick by tick four and seventy
three up three dollars amazing.
Speaker 5 (19:07):
Who's buying gold at these levels?
Speaker 2 (19:08):
Do you think?
Speaker 5 (19:09):
Is it just the ETFs, is it central banks? Is
it all the above?
Speaker 7 (19:14):
Well, I think what we have seen is less retail demand.
Small bars and coins have suffered greatly under the higher prices. Say,
for example, if you'd bought a coin at fifteen hundred
dollars an ouncer you could have just a few years ago,
you probably won't buy another one or at this price,
(19:34):
or you may even hand that in. So if you
look at what's being produced by the Mints, it's quite
quite quite low, and a lot of coins are coming
onto the secondary markets. And also small bars. I mean
the ten grand bar is the favorite bar in India,
a very small bar, well over one hundred thousand rupees.
It was thirty five thousand rupees just a few years ago.
(19:57):
But to say who's buying, it's institutional asset managers, all
range of people who are seeking diversification.
Speaker 2 (20:09):
Giboni Brissacci was on your Today on Gaza in Israel
and President Trump and from Dubai, and I once visited
quickly the Dubai Gold souk, which is how you consume
in the Middle East. It's totally different, folks than the
jewelry district in Manhattan, Tiffany's you know, et cetera, et cetera,
(20:29):
in Asia, in South Asia at the Dubai gold Souk.
How is gold at four thousand changed the cadence?
Speaker 7 (20:38):
Well, about about fifty percent of all gold that's bought
in the world is in jewelry form and physical gold,
and seventy percent of that is in the non OECD
world and that demand is down double digit and it
was down double digit last year. So we have this
severe reaction and the jewelry market, as one.
Speaker 2 (20:59):
Would my head. You just said, seventy sixty percent, which
is forty percent of the gold consumption is Nana OECD jewelry.
That is correct.
Speaker 7 (21:12):
And half of all the jewelry bought, half of all
the physical gold bought in the world is divided between
India and China.
Speaker 5 (21:23):
And what did they they buy it us a store
of value? Do they buy it us a hedge? Do
they buy it as well?
Speaker 7 (21:29):
There's a traditional historic relationship with gold. I mean traditionally
gold has been more popular in places. And I'm not
saying India or China have weak institutions, so please don't
don't think that. But historically gold has been more popular
in places that have had higher inflation, less stable governments,
things like that.
Speaker 2 (21:48):
How does James Steele link the debate, I mean, Ken
Griffith's with Francy Laqua, the debasement debate, dollars going a weekend,
We're all going to die by gold in the geo
politics that you mentioned at the top, is that over
emphasized in your analysis or germane?
Speaker 7 (22:06):
It might be, well, it is Germane, but it might
be somewhat exaggerated at the moment. Now in all the years,
in the years that I've been covering gold, the same
twelve or fifteen factors covered it from the day I
started looking at it until now. The trick to analyzing it,
or the trick to having some idea about where the
(22:28):
crisis might go is the ranking and geopolitics has risen.
Speaker 2 (22:33):
Let me cut to the chases Ken Griffin Wright about
his ranking and worries handeringing worries about the global financial system.
Speaker 7 (22:44):
Well, I wouldn't comment. I don't think I'm allowed to
comment on Ken specifically. But if you look at the
geopolitical risk Index and the Economic policy Uncertainty Index. They're
both very, very high, and gold has a nice running
regression analysis link to that. We've gone back years and
seen this relationship.
Speaker 2 (23:05):
It's James Steele. I mean, that's why here James Steele, HSBC.
We continue with this important conversation. Welcome all of you
across the nation, around the world. Good morning on YouTube.
Subscribe to Bloomberg Podcast. Paul Sweeney.
Speaker 5 (23:19):
Do commodities investors, particularly in gold, do they think about
or how do they think about valuation? Just do they
think about valuation? If so, how do they think about valuation?
Speaker 7 (23:29):
I don't think you can look at gold and valuation
in the same way as you can other things. For example,
it's well above the cost of production, okay double in
most cases, so I don't think that really works. You
also have to take into account reserves and things like that,
so it is a more complicated So.
Speaker 5 (23:51):
People don't typically and say, well, I think gold's expensive,
but they will say as it run too far maybe
or is.
Speaker 2 (23:58):
It yes, that's right, that's right.
Speaker 7 (24:00):
You wouldn't You wouldn't get many places by by saying
by comparing the cost of production and and and supply
alone to how the price would how the price would go.
Speaker 2 (24:11):
If you're doing a weekend, you're not being the social
James Steele And somebody says I need to buy gold.
What is the most what's the James Steel way to
acquire gold? At least a step in yours at IL
six or seven where you can buy gold bars at
costco Hey help me here? What's the best what's the
most intelligent way to buy gold?
Speaker 7 (24:30):
Well, I think it depends on I always think the
ETFs are a good are good play because you you
can buy any any any amount you can, you don't
have the problems of storage or insurance, and so I
think I think that's the best.
Speaker 2 (24:44):
I think that's that that's amongst the best Krugerians.
Speaker 7 (24:49):
They are on the market. I don't think they're being produced.
But the big coin producers are the US Mint and
the Royal Canadian Mint and and the Royal Mint in
the US and the UK and Austria and Australia.
Speaker 2 (25:01):
So right now the United States of America is making
gold coins.
Speaker 7 (25:06):
Well, yes, but I've just been looking at the data
and it just doesn't apply to the US Mint. But
the amount of coins sold in August was a tiny
fraction of what was sold in August twenty twenty four.
The high prices, the price. Yes, do you have a
gold coin? I do not have a gold coin.
Speaker 5 (25:28):
No, I don't think I do. And my question is,
historically speaking, what's caused gold to go down and go down?
Speaker 2 (25:35):
A great question.
Speaker 7 (25:36):
Well, you know that's what we're examining now. Something that
might surprise some people is an equity correction could trigger
a gold correction. And the reason for that. You would
think if equities go down, the gold market would go up.
But what happens is that those who bought gold as
a hedge against an equity correction, which is a significant
(25:59):
level a number, they liquidate either end of that day
or the next day in the following day, so inequity
correction could very well trigger a knee jerk reaction in
the gold market.
Speaker 2 (26:13):
The other thing, too, is these.
Speaker 7 (26:17):
Geopolitical risk levels are high, and I mean I don't
predict the future, of course, but a settlement in Ukraine,
and I'm not saying there will be one or there
won't be one, but some reproche moment between the West
and Russia possibly better US Sino relations. There's a number
(26:39):
of things that could feed into a de escalation and risk.
Speaker 2 (26:43):
I love this pot. I'm learning so much. How about
this Walmart? Have you ever been to Walmart? Least of course? Okay,
thank you? Gold coin Canadian gold may belief one ounce
gold coin random year and seventy eight dollars twenty four
sense but every time they may please lose you buy
(27:03):
one exactly something like that.
Speaker 5 (27:05):
All right, So gold up fifty year to date, I
can do you one better. Silver up seventy six percent
fifty one dollars an ounce.
Speaker 2 (27:14):
What's going on with silver?
Speaker 5 (27:15):
Do you think that?
Speaker 2 (27:16):
Is that just a I don't know how to do well?
This is where I mean.
Speaker 7 (27:19):
One of our research pieces was Silver's golden chariot. Okay,
that you know that the silver has been buoyed by
the gold, and when gold rises, some people don't participate
fully in the move. They would like to be in
precious metals and they'll go into silver, they'll go into platinum.
Typically they will not do it, and pladium now the
(27:40):
other so that's been a big plus. The other thing, though,
is more technical. There is less gold in London in
the London warehouses right now. Okay, London is the Center
for Cash Spot Physical Trading. New York is the Center
for Futures and Options at the CME, the old CORMEX. Now,
(28:00):
when we had the tariff concern and I was on
this program and spoke about that, we saw an enormous
amount of bullion come across the ocean towards New York
in case the tariffs were put on. Well, a lot
of that silver is still here, and so there's a
I wouldn't say there's a shortage, but there's less of
it in London. It keeps brushing up the spot price
(28:23):
and until the stocks get leveled out again, which may
take some time, this silver has been buoyed by it.
Speaker 2 (28:30):
Does silver have the biblical emotional value of gold? I
mean this sounds like eighteen eighty William Jennings Bryan the
silver coin debate. But like if somebody perchance had a
silver tiffany bangle like Paloma. Lisa helped me here, who
is it? Paloma Picasso. It's one of those modern things
(28:53):
that you see. It's silver, Okay, people collect them from
time to time. Does that silver have relative value to gold?
Or does a guy like you look at and go
you fool? Oh no, no, it does.
Speaker 7 (29:06):
There's just a lot more silver in the world than
there is gold. An interesting historical thing that your listeners
may may enjoy. For thousands of years, the ratio for
gold to silver was ten to one. You go back
to the Bible, Persia, China, India, et cetera, et cetera.
When the Spanish and the Portuguese went to the Americas,
(29:27):
it wasn't so much gold they brought back as silver,
And they brought back so much silver from the New
World to the Old world that it irrevocably altered the
gold silver ratio.
Speaker 2 (29:39):
So like an Alsa Peretti small bone cuff and sterling
eighteen hundred dollars at Tiffany, Do you, James Steele, look
at that like the same as you look at gold.
Speaker 7 (29:51):
Well, you would, But that high end of the jewelry
market is not important to us because not much of
it is sold and there's no relationship to the price.
That's why jewelry demand moves in the East, because the
markup is lower and the hedging practices are different.
Speaker 2 (30:08):
Which geography do you mostly? We got to go. Which
geography do you look at? Most of the East?
Speaker 7 (30:13):
China, India, Oh, I thought you were say the Hampton's.
Speaker 2 (30:17):
China, India. Can you give me a savy cape cod.
Speaker 7 (30:22):
Look look look at the Mumbai premium or discount and
the Shanghai premium or disc There.
Speaker 2 (30:26):
You go news you can use absolutely was this great?
Perfect for three hours?
Speaker 5 (30:32):
Wherever they keep yourselves?
Speaker 2 (30:33):
Can we do a remote from the anxious VC vault
We're going there? That would be cool. I mean there's
no Wi Fi right exactly, small detail. James Steele and
you are a trooper with the Hong Kong Shanghai and
Banking Corporation HSBC. Stay with us. More from Bloomberg Surveillance
coming up after this.
Speaker 1 (30:58):
This is the Bloomberg Serre Allen's podcast. Listen live each
weekday starting at seven am Eastern on Applecarplay and Android
Auto with the Bloomberg Business app. You can also watch
us live every weekday on YouTube and always on the
Bloomberg terminal for.
Speaker 2 (31:12):
Global Wall Street. This is a treat. He's got one
of the great double majors of America Systems, engineering, Economics,
Wharton joining us Nelson You he holds court an alliance Bernstein.
A single sentence of absolute brilliance in your note. We
have shifted from a self financing AI capex over to
(31:35):
getting financing outside other sources discuss.
Speaker 8 (31:41):
So I've been really worried about some of the enthusiasm
that's going on across this AI investment that's going on.
If you look at, especially in the small caps, some
of this energy infrastructure that's being built out, they're putting
in capex that's not going to come online for another
ten years, and we're seeing more more debt financing starting
(32:01):
to creep up.
Speaker 2 (32:02):
Boston University, v body he owns this territory. You do
financing outside the companies and everything gets trunch like complex
Paul I still do this day. Don't understand mezzanine mesa financing.
Do you see parallels here to the indacy the idiocy
(32:25):
of previous upsets.
Speaker 8 (32:27):
I think it's early, so we're just starting to see
this start to happen and come in where more debt
is being used. But there's still a lot of cash
and revenues that's available. The big companies still have lots
of revenue that they can apply to this capex. But
what we are seeing across the megacaps is while earnings
(32:50):
continues to go up, we're seeing free cash flows starting
to plateau because the amount of capex it needs to
go into these into these investments.
Speaker 5 (32:58):
But the bulls will tell you they've got literally ninety billion,
one hundred billion of freak cash flow. You know, maybe
that's down from one twenty one thirty, but their returns
are going to be so great. So it's a little
bit of a show me story. Well maybe it's more
than a little bit of a show me story. It's
a pretty big show me story for a lot of
these expenditures. But the market seems to be well then
(33:19):
to make that bet. For now, we're okay, okay, So.
Speaker 8 (33:22):
As long as we continue to be able to fund
this through revenues, we're starting to see yellow flags. But
it's something to watch.
Speaker 5 (33:29):
I was looking through your notes. I know you spend
the last couple of weeks visiting your clients in Asia.
What's some of your takeaways.
Speaker 8 (33:36):
I think it's really interesting and actually goes to what
we just talked about. There's a fatigue across this AI
story with US growth equities, and while I'm in Asia,
the number one thing they wanted to talk to me
about was international investing, not global investing, which is what
they normally want to talk about But really, how do
we separate US from international equities?
Speaker 2 (33:58):
Well, it's a distinction between international and global investing.
Speaker 8 (34:02):
International just doesn't include the US, Okay, So when they
talk global, it's we just want it all in one portfolio.
When they want international, they control the US allocation and
the non US allocation separately. What they've come to realize
is with the run up of US equities, and especially
US growth equities, their portfolios are massively overweight growth and technology. Right,
(34:26):
So if you go outside of the US, you start
to get exposure to many different types of themes. You've
got industrials, financials, consumer that's available, and the correlations are following.
Speaker 2 (34:36):
Like Brian Adams run to you in the last hour,
I feel like I'm may having a conversation when that
record came out. Okay, let's go right there, Robert Mondel,
we mentioned it with Richard Clair to the vice chairman yesterday.
I'm sorry, currency is litmus paper. Well, how does nobody's
talked about this in the zeitgeist of the last twenty years.
All of a sudden, dollar dynamics yen you wan, yen
(35:02):
you wan. Dynamics really matter, don't they? They do?
Speaker 8 (35:05):
And look I did currencies about ten years ago, and
back then we always talked about these long cycles of
dollar strengthening the dollar weaknesses. Back then it was about
seven years in that cycle. I think the worry is,
are we just at the beginning of a dollar weekening cycle,
and given all the dynamics on the macro front, you
(35:27):
could see that there's reason to think about the dollar
could weaken from here.
Speaker 2 (35:32):
Now.
Speaker 8 (35:32):
That being said, with dollar weakening, that's really supportive for
things like emerging markets, which depends on dollar financing.
Speaker 5 (35:41):
So dollar bulls which come back and say, hey, we're
still the most profitable, most country out there, the most efficient,
and so on and so forth, which has been I
guess the one of the underpinnings of the dollar ball
case for a long time. Have those things changed, aren't,
maybe even on a relative basis.
Speaker 8 (35:58):
If you're talking about companies, I would agree with you
that the US companies remains an anchor for your portfolio.
It's such an important part of having those companies that
have those strong profitability deep motes that protect that self
generating profitability.
Speaker 2 (36:13):
So now, so we've got to go in a moment
Lisa Harn beyond holders Schroeders. But and Nelson, you what
I mean hearing here is a partition of MAG like
MAG seven versus what MAG one hundred. There seems to
be a partition between the juggernaut cash flow generation of
Microsoft in six companies. I don't know there's what there is.
Speaker 8 (36:35):
I think there's a much broader set of opportunities outside
of the MAG seven. And what people are forgetting is
the opportunity that exists outside of AI. You've got in
the US restoring of manufacturing, logistics and even the supply
chain that has to that needs a lot of investments.
And you've got very profitable companies that generate strong returns.
(36:57):
And then you look outside of Europe and you got
many macro lines themes in Europe and Japan and even
in China that you can invest in.
Speaker 5 (37:05):
Earlier this year, when we had the tumult, I guess
when the launch of the tariffs, a lot of money
moved out of the US, A lot of it went
to European equities. What are you seeing there? Was that
a short term trade? Does that money come back or
is that kind of sticky over there?
Speaker 2 (37:20):
Do you think? Oh?
Speaker 8 (37:21):
I think there is some stickiness here and what you've
got in Europe is you've got financial stimulus. You've got
fiscal stimulus, you've got monetary stimulus going on. You've got
a trillion dollars of investment going on for Europe, and
that's triggering, triggering profits worldwide. Actually, what we're seeing in
Asia is defence companies in Asia are profiting massively from
(37:44):
Europe's need for defense spending.
Speaker 2 (37:46):
We got to leave it there. Come again. I just
really appreciate it. That's a crazy day, Nelson, you were
this head of equities Alliance burns the thrill that you
can join us.
Speaker 1 (37:55):
This is the Bloomberg Surveillance Podcast, available on Apple, Spot,
of and anywhere else you get your podcasts. Listen live
each weekday, seven to ten am 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
(38:15):
and always on the Bloomberg terminal
Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg
Surveillance Podcast. Catch us live weekdays at seven am Eastern
on Apple CarPlay or Android Auto with the Bloomberg Business app,
Listen on demand wherever you get your podcasts, or watch
(00:25):
us live on YouTube.
Speaker 2 (00:27):
The hallmark of Bloomberg's surveillance is we rip up the
script when we have to.
Speaker 3 (00:31):
We do that now.
Speaker 2 (00:32):
I was going to go to Sebastian Page and something
else towards to the slack of Apollo Publishing. Moments ago,
Sebastian Page a tiro price with US. Yours workers contributed
eighty five hundred to their four oh one k accounts,
seventy one percent of the assets allocated to equities the
Magnificent Seven I have a forty percent weight SMP five hundred.
(00:52):
The bottom line is that each worker in the US
puts an estimated two three hundred dollars into mag seven
stocks every year. The dangers are passive investing. How do
we have a perfect guest for this subgest to discuss.
Speaker 4 (01:07):
Well, we're at an all time high or close to
it in terms of the concentration of the markets, and
that is a risk. I think Torsen makes a point
here where you keep getting inflows into market capitalization weights
and in the sense itself reinforcing. My view is it
is in part contributing to this all time high market concentration,
(01:29):
except those companies are pretty great.
Speaker 2 (01:31):
On a physics basis, like in your fabulous book on diversification.
On a physics basis basis, it's an inertial force. How
much of a draw down do we need to see
where we break that inertial constructive force five percent ten
percent bear market?
Speaker 4 (01:50):
Well, it's interesting the way you phrased the question, how
much of a draw down do we need to get
the market broadening? That's an assumption we're making, and I
think it's the right one that in a drawdown we
will see broadening. If you look at how value stocks
have been behaving over the last two three years, every
time we get a three to four percent move daily
on the downside, value stocks outperform. So my view is
(02:14):
that a big drawdout in the markets would be almost
mathematically has to be driven by maybe an AI scare
something going on to unwine market concentration.
Speaker 2 (02:26):
By the way, right now, in.
Speaker 4 (02:28):
Our scation portfolios, we're long diversification. What's that So we
have an overweight to non US stocks. We like US
stocks for the long run, but right now, if you
look at the fundamentals outside the US, the valuation and
some macro catalysts, increased spending in Europe, still duvish central banks,
it all lines up for a continued performance over the say,
(02:51):
the next six to twelve months of non US stocks.
We also like the value in schmid sectors outside the US.
That's how we're playing most of our diversification in credit.
We also like a broad set of credit exposures on
the fixed income side.
Speaker 5 (03:05):
And just going on the fixed income space, on the
credit side, the best performing sector has been u US
high yield. So it doesn't seem like the market's too
concerned about, at least in the fixed income market, the
highild market, about the reception scenarios out there.
Speaker 4 (03:18):
It's fascinating how tight spreads are. And as valuation sensitive investors,
we still have a long credit exposure because and our
head of high yield keeps reminding our asset allocation committee
every time. This is not the same asset class that
it used to be. So if you draw a chart
of high yield spreads over time, and you look at
(03:40):
where spreads were in prior market cycles. You're looking at
a different index. You're looking at an index that is
lower quality, more energy sensitive. We do at thial price
a bottom up analysis of sure level default probabilities, so
we build it up for the entire index, and those numbers,
based on our assumptions are lower than the norm, slightly
(04:04):
lower than the Norman, definitely not recession level.
Speaker 3 (04:08):
I know.
Speaker 5 (04:08):
I'm just looking at your notes that you've been traveling
a lot, meeting with your t row too much rice clients.
Speaker 2 (04:13):
I'm guessing he's trying to find middle relief for the
Baltimore Orioles exactly.
Speaker 5 (04:17):
I'm guessing one of the questions you get is are
we in a bubble in the US equity markets? How
do you respond to them?
Speaker 4 (04:24):
I saw That's what Demo darn, who's I think a
reference in terms of valuation in the media saying I'm
not using the B word, And his argument is the
earnings are there, the earnings growth is there. As we
go into the third quarter. I get my Jonathan Gollub
earnings email this morning. If he's eating but he's he's
(04:45):
looking at he goes nine percent your verear growth still
and with twelve percent he's expecting with the surprises. So
the earnings are there. So Demo Darn's out there saying
we're not in a bubble. I'm not using that word yet.
Speaker 2 (05:00):
I see we got to run here. But Sebastian, we
alught to get you back for a long, long segment
highlighting the intelligence of your book. But let me cut
to the chase. The uproar of the anti worry crew
of AI. Was there an equivalent in two thousand, I
don't recall it.
Speaker 4 (05:18):
See that is such an interesting point about sentiment when
I was thinking about this in my way here this morning,
what everybody thinks we might be in a bubble. Counternatively,
that's kind of a good thing. It means there's some conservatives.
Late nineties, it was really you have to travel back
in time and put yourself there. Just remove the hindsight
(05:40):
bias that all this went berserk and it blew up.
In the late nineties, people believed it. People believed it,
and so now it's so different in a way, similar
in certain ways, but different in the sense that those
are cash flow generating businesses, not finance.
Speaker 2 (05:57):
With that come back soon, Sebastian page with this price here.
Stay with us. More from Bloomberg Surveillance coming up after this.
Speaker 1 (06:12):
You're listening to the Bloomberg Surveillance Podcast. Catch us Live
weekday afternoons from seven to ten am Eastern Listen on
Applecarplay and Android Otto with the Bloomberg Business app, or
watch us live on YouTube.
Speaker 2 (06:24):
Joining us Jake Timmins, President, chief executive Officer of the
National Association of Manufacturers. And this is great, folks. He's
got this bio that's like six pages long. And Lisa
just like, I mean, this is what Sweeney would expect. Paragraph, paragraph, paragraph,
and then there's a single line and then there's more paragraphs.
(06:45):
The single line as I went to the Ohio State
Ohio State University. You know, Jake, the last time you
were in was ride. We've got a huge response and
the bottom line is you are hardwired. You're in Virginia now.
The corporate thing and that with the National Association of Manufacturers,
but you understand the tradition of Detroit down the interstates
(07:07):
in manufacturing America. What's a number one myth that the
public gets wrong about manufacturing in America.
Speaker 6 (07:15):
Well, that it's taken for granted, right that that we're
always going to be making things, and that's not necessarily
the case. You got to have the right policies in place.
And we've had a we've had a run of really
good policies this year that that has helped manufacturers have
more confidence in investing and hiring in America. But those
(07:36):
things aren't you know, those things aren't given. Uh, it
should never be taken for granted.
Speaker 5 (07:41):
So talk to us about the manufacturing economy in the
US right now. It's in contraction, it's been for a while.
Talk to us about what you're seeing at there.
Speaker 6 (07:50):
Yeah, you know, it's funny because you do see that
that data, there's no question about that, Paul. But I
hear from my members. We just had a board meeting
last week. I've got a very small, discrete board of directors,
two hundred and fifty members of.
Speaker 2 (08:04):
America's industrial It's a lot of art.
Speaker 6 (08:08):
It's like a little congress, but you get a lot of.
Speaker 2 (08:11):
Great We call it the French government actually continue.
Speaker 6 (08:15):
Well, I'm hoping we have more stability than that one.
So what I'm hearing from them is a lot of optimism.
Right that we have the conditions that are ripe for
investment and job creation, but there is still some pause
in that, and especially when it comes to tariffs and
workforce policies.
Speaker 5 (08:35):
So how are the manufacturers out there dealing with the
uncertainty with teriffs, maybe the workforce issues with migrant labor
no longer being a supply of labor, how are they
dealing with that?
Speaker 6 (08:48):
Yeah, So it's an interesting conundrum for manufacturers because manufacturers
by and large, certainly from what I've seen, and of
course there are always options, but I've always seen manufacturers
following the rules there by the book.
Speaker 2 (09:05):
They're hiring legal.
Speaker 6 (09:08):
You know, labor that has all the bright papers. But
when other sectors of the economy see a hollowing out
of some of their workers, we're suddenly competing for labor.
And today we've got four hundred thousand open jobs in
the sector. And we've talked about in the past, Tom
and we're always trying to attract that next generation. That
number is going to grow to two million by the
(09:28):
year twenty three.
Speaker 2 (09:29):
This is the heart of the matter. I interviewed Senator
Grassley years ago. I think he was young then. He
was like a two at the time. He's a former
welder out of Iowa and World War Two, and the
cliche is we don't have enough welders. The politicians are
signing deals saying we're going to take high manufacturing Asia
and bring it over here, Jay Timmins, Do we have
(09:50):
the warm bodies to build an Asia like manufacturing force today?
Speaker 6 (09:56):
No, but that doesn't mean we can't get there, and
we have to again, we have to prioritize the right things.
You and I have talked about trade schools in the
past and the importance of trade schools and community colleges
and really orienting.
Speaker 2 (10:09):
Are they doing that? I mean there was both season
in New York State BOC.
Speaker 6 (10:13):
I think yes, it's it's growing right, it's getting this,
it's cooling there.
Speaker 2 (10:19):
That is the challenge we have.
Speaker 6 (10:20):
It's important to make sure that young people know what
cool opportunities. Use the word cool, I say sexy. You
know opportunities are available in manufacturing today. More importantly, it's
telling getting their parents to understand that as well, because
oftentimes parents will say, hey, we want you to go
in this direction or that direction. That realize what great
opportunities exist in manufacture.
Speaker 2 (10:41):
I mean, Paul, this is the heart of the matter,
the parents want them to take Lockey in philosophy at
Duke and the kids. What's the average salary with one
of those kids five years out?
Speaker 6 (10:51):
Yeah, so it's like, well, it's run one hundred thousand dollars.
Speaker 2 (10:54):
So they're talking six figure incomes. Moving a ranch.
Speaker 5 (10:57):
Yep, no college, no stereotysably, So, Jay, what are the
key challenges for you and for manufacturers today?
Speaker 6 (11:05):
So let's start with the opportunities, right, So, we had
great we had great news this year when we got
the tax reforms made permanent. That really helps supercharge I
think optimism. Regulatory modernization has been good for manufacturing. The
President's focus in the administration's focus on energy dominance has
(11:25):
been very positive. But the greatest challenges are as we
just talked about, workforce, but also the uncertainty of the
current tariff policies that are happening in this country and
the added costs that come with that. I would tell
you the one thing that we're really watching closely. The
President clearly wants to grow manufacturing capacity in this country.
Well so do we, Right, that's our that's sure, that's
(11:46):
my job. In order to do that, We've had our
economists to crunch some numbers. If we had every machine
running in this country today, we would only be able
to make eighty four percent of the critical inputs necessary
to build that new factory.
Speaker 2 (12:02):
So what would you say to Donald Trump? I mean,
what would you say to the president about this? I
don't want a photo shoot in the White House lawn
of some big tractor trailer like we're manling and we're
going to get the vote in Ohio. You're the reality.
What do you say to the president or the next president? Yeah,
help us, help us, help you do this? Right? So,
(12:23):
and the way to DOLBJ text credits.
Speaker 6 (12:26):
The way to do it is is to look at
those critical inputs that you need. So think in terms
of machines, right, and the administration just announced a two
thirty two investigation on machinery that would add tariffs. Well,
if you're if you're tariffing that that product and the
purpose of that product is helped build new manufacturing capacity,
(12:48):
that doesn't seem to add up. So if we have
some sort of a speed PAS that allows us to
bring that equipment in duty free to build manufacturing capacity,
we think that it's a win win for both.
Speaker 3 (13:00):
You don't see that common sense. Well, we've been talking
about listen, listen, We've been talking to the administration. We're
getting some good response about exactly that targeted, targeted focus
on making sure that we can bring in the right
things to build manufacturing.
Speaker 2 (13:14):
Please come back again. I mean, you know, we start
strong in this our Sebastian Page and Jay Timmins, and
we should have had both of them for like an hour.
Speaker 6 (13:21):
I'll always come back if you always say the Ohio State.
Speaker 2 (13:25):
University, Ohio, they did pretty good this year. There's always
upsets in this Well in Ohio State is just like
normal Ohio State.
Speaker 6 (13:34):
We got a wait to see what happens with the
big game right after when.
Speaker 2 (13:37):
You were an undergraduates. This is like what Michael Barr
used to do in Detroit. Did you drink in every
bar in that corridor of bars?
Speaker 6 (13:45):
So there was a bar o Larry's there that I
did once in a while frequently.
Speaker 2 (13:50):
What was the beverage?
Speaker 6 (13:51):
Sadly, sadly, sadly, Well, I was young and I'm old
enough that legal age was eighteen, so I drank tequila.
Speaker 2 (14:00):
But I have to label.
Speaker 6 (14:02):
But I have to tell you, what do you let
the chief the cheapest Tess, I have to tell you
I was a geek. So I went around the state
starting young Republican clubs, so you.
Speaker 2 (14:11):
Know, very good. Didn't really have fun. Jay, Lisa and
I surveillance correction, folks, MATEO and I. It saw us
a white label. It's more chewy than the green. The
rich kids had the green label and we had the
white label.
Speaker 6 (14:24):
We also had grain alcohol, which was a really bad Timmis,
thank you so much.
Speaker 2 (14:32):
Stay with us. More from Bloomberg Surveillance coming up after this.
Speaker 1 (14:43):
This is the Bloomberg Surveillance Podcast. Listen live each weekday
starting at seven am Eastern on Apple Corplay 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 ele where you get.
Speaker 2 (15:00):
Right to it for the last week or so and
I with great guidance to Dennis Gartman and this amazing
call on Gold in Yen really a call of a decade.
When are you going to have the gold guy in?
When are you going to have the guy with the
affable British voice on? When are you going to have
James Steele on in the studio now worldwide. James Steele,
(15:23):
chief of Commodities for HSBC, wonderful to have you here.
How is this gold move, this silver move different from
my ute where I'd go to cocktail parties with my
parents and see Jenny Kremaals and everybody was gold and
silver crazy. How's it different from nineteen eighty?
Speaker 7 (15:43):
Well, thank you, Tom, thank you for having me. I
think one of the difference is that we've hit real highs.
You know, the market was talking about a series of
highs for the last year and a half, but really
it wasn't until April that we hit real highs. That
we hit highs in real terms. In January of nineteen eighty,
(16:05):
gold hit eight hundred and fifty dollars an ounce, and
that is a little bit shy of thirty four hundred
dollars in today's money, So we didn't pop that figure
until April. And I think what makes it different now
is that we have a different monetary regime Voker, and
it was just coming into power, and that's why the
market dropped after that. Also, the geopolitical risk climate is different.
(16:31):
We have more entrance and we have a different very
types of entrance into the market, and we just have
a lot of elevated risk. And what is interesting is
that this is occurring aside very powerful equities, so a
lot of the buyer and gold is safe haven.
Speaker 2 (16:48):
Paul's got any questions from a center around what to
buy next at the jewelry store, let me just ask
a dumb question. In everything else in the world, if
price goes up, we make more of it. That's the
way Adam's Smith told us things work. Alfred Marshall told
us that if the price is up, are we mining
more gold?
Speaker 7 (17:08):
Well we can't. Well we are mining a bit more.
But mining is a very long process, and it depends
on a very long investment cycle. Say, by the time
a couple of geologists say I think there's some gold here,
it can be ten years before it goes round your finger.
It used to be five. Sometimes it's much much longer
than that, and so there are constrictions to how quickly
(17:32):
you can raise production, you can change grading and things
like that. But really it's said on these long term cycles,
what is flexible is recycling. And I think all the
time I've been covering gold, the recycling market has steadily
risen as a greater percentage of the share of supply.
And I would bet that at this price we've got
(17:53):
some potentially significant recycling that could come online.
Speaker 2 (18:00):
Is that work?
Speaker 5 (18:01):
Where do we see recycling? How does that happen? I
just go to the guy on the corner and you
give them my ring for cash.
Speaker 7 (18:08):
It goes from that level. It goes from gathering up
all the jewelry in your house because where record highs
or it goes right up to old bars that may
be cracked that may not be London what we call
London good delivery, okay, which is the only type of
bar the HSBC and other CLI London good Delivery.
Speaker 5 (18:30):
That means it's a high quality bar.
Speaker 7 (18:32):
That means it's been assayed and produced by a verified
l b M, a London Buoyant Market Association entity and
they've said this refinery is correct and and and therefore
you know what you're getting. Uh So it goes from
there right up. But there is a lot of gold
in the world and it can be mobilized at high prices.
Speaker 2 (18:54):
Bloomberg Surveillance James Steele of HSBC, where there's a definitive
on gold ready green in the screen right now, the
metal swinging filing is tick by tick four and seventy
three up three dollars amazing.
Speaker 5 (19:07):
Who's buying gold at these levels?
Speaker 2 (19:08):
Do you think?
Speaker 5 (19:09):
Is it just the ETFs, is it central banks? Is
it all the above?
Speaker 7 (19:14):
Well, I think what we have seen is less retail demand.
Small bars and coins have suffered greatly under the higher prices. Say,
for example, if you'd bought a coin at fifteen hundred
dollars an ouncer you could have just a few years ago,
you probably won't buy another one or at this price,
(19:34):
or you may even hand that in. So if you
look at what's being produced by the Mints, it's quite
quite quite low, and a lot of coins are coming
onto the secondary markets. And also small bars. I mean
the ten grand bar is the favorite bar in India,
a very small bar, well over one hundred thousand rupees.
It was thirty five thousand rupees just a few years ago.
(19:57):
But to say who's buying, it's institutional asset managers, all
range of people who are seeking diversification.
Speaker 2 (20:09):
Giboni Brissacci was on your Today on Gaza in Israel
and President Trump and from Dubai, and I once visited
quickly the Dubai Gold souk, which is how you consume
in the Middle East. It's totally different, folks than the
jewelry district in Manhattan, Tiffany's you know, et cetera, et cetera,
(20:29):
in Asia, in South Asia at the Dubai gold Souk.
How is gold at four thousand changed the cadence?
Speaker 7 (20:38):
Well, about about fifty percent of all gold that's bought
in the world is in jewelry form and physical gold,
and seventy percent of that is in the non OECD
world and that demand is down double digit and it
was down double digit last year. So we have this
severe reaction and the jewelry market, as one.
Speaker 2 (20:59):
Would my head. You just said, seventy sixty percent, which
is forty percent of the gold consumption is Nana OECD jewelry.
That is correct.
Speaker 7 (21:12):
And half of all the jewelry bought, half of all
the physical gold bought in the world is divided between
India and China.
Speaker 5 (21:23):
And what did they they buy it us a store
of value? Do they buy it us a hedge? Do
they buy it as well?
Speaker 7 (21:29):
There's a traditional historic relationship with gold. I mean traditionally
gold has been more popular in places. And I'm not
saying India or China have weak institutions, so please don't
don't think that. But historically gold has been more popular
in places that have had higher inflation, less stable governments,
things like that.
Speaker 2 (21:48):
How does James Steele link the debate, I mean, Ken
Griffith's with Francy Laqua, the debasement debate, dollars going a weekend,
We're all going to die by gold in the geo
politics that you mentioned at the top, is that over
emphasized in your analysis or germane?
Speaker 7 (22:06):
It might be, well, it is Germane, but it might
be somewhat exaggerated at the moment. Now in all the years,
in the years that I've been covering gold, the same
twelve or fifteen factors covered it from the day I
started looking at it until now. The trick to analyzing it,
or the trick to having some idea about where the
(22:28):
crisis might go is the ranking and geopolitics has risen.
Speaker 2 (22:33):
Let me cut to the chases Ken Griffin Wright about
his ranking and worries handeringing worries about the global financial system.
Speaker 7 (22:44):
Well, I wouldn't comment. I don't think I'm allowed to
comment on Ken specifically. But if you look at the
geopolitical risk Index and the Economic policy Uncertainty Index. They're
both very, very high, and gold has a nice running
regression analysis link to that. We've gone back years and
seen this relationship.
Speaker 2 (23:05):
It's James Steele. I mean, that's why here James Steele, HSBC.
We continue with this important conversation. Welcome all of you
across the nation, around the world. Good morning on YouTube.
Subscribe to Bloomberg Podcast. Paul Sweeney.
Speaker 5 (23:19):
Do commodities investors, particularly in gold, do they think about
or how do they think about valuation? Just do they
think about valuation? If so, how do they think about valuation?
Speaker 7 (23:29):
I don't think you can look at gold and valuation
in the same way as you can other things. For example,
it's well above the cost of production, okay double in
most cases, so I don't think that really works. You
also have to take into account reserves and things like that,
so it is a more complicated So.
Speaker 5 (23:51):
People don't typically and say, well, I think gold's expensive,
but they will say as it run too far maybe
or is.
Speaker 2 (23:58):
It yes, that's right, that's right.
Speaker 7 (24:00):
You wouldn't You wouldn't get many places by by saying
by comparing the cost of production and and and supply
alone to how the price would how the price would go.
Speaker 2 (24:11):
If you're doing a weekend, you're not being the social
James Steele And somebody says I need to buy gold.
What is the most what's the James Steel way to
acquire gold? At least a step in yours at IL
six or seven where you can buy gold bars at
costco Hey help me here? What's the best what's the
most intelligent way to buy gold?
Speaker 7 (24:30):
Well, I think it depends on I always think the
ETFs are a good are good play because you you
can buy any any any amount you can, you don't
have the problems of storage or insurance, and so I
think I think that's the best.
Speaker 2 (24:44):
I think that's that that's amongst the best Krugerians.
Speaker 7 (24:49):
They are on the market. I don't think they're being produced.
But the big coin producers are the US Mint and
the Royal Canadian Mint and and the Royal Mint in
the US and the UK and Austria and Australia.
Speaker 2 (25:01):
So right now the United States of America is making
gold coins.
Speaker 7 (25:06):
Well, yes, but I've just been looking at the data
and it just doesn't apply to the US Mint. But
the amount of coins sold in August was a tiny
fraction of what was sold in August twenty twenty four.
The high prices, the price. Yes, do you have a
gold coin? I do not have a gold coin.
Speaker 5 (25:28):
No, I don't think I do. And my question is,
historically speaking, what's caused gold to go down and go down?
Speaker 2 (25:35):
A great question.
Speaker 7 (25:36):
Well, you know that's what we're examining now. Something that
might surprise some people is an equity correction could trigger
a gold correction. And the reason for that. You would
think if equities go down, the gold market would go up.
But what happens is that those who bought gold as
a hedge against an equity correction, which is a significant
(25:59):
level a number, they liquidate either end of that day
or the next day in the following day, so inequity
correction could very well trigger a knee jerk reaction in
the gold market.
Speaker 2 (26:13):
The other thing, too, is these.
Speaker 7 (26:17):
Geopolitical risk levels are high, and I mean I don't
predict the future, of course, but a settlement in Ukraine,
and I'm not saying there will be one or there
won't be one, but some reproche moment between the West
and Russia possibly better US Sino relations. There's a number
(26:39):
of things that could feed into a de escalation and risk.
Speaker 2 (26:43):
I love this pot. I'm learning so much. How about
this Walmart? Have you ever been to Walmart? Least of course? Okay,
thank you? Gold coin Canadian gold may belief one ounce
gold coin random year and seventy eight dollars twenty four
sense but every time they may please lose you buy
(27:03):
one exactly something like that.
Speaker 5 (27:05):
All right, So gold up fifty year to date, I
can do you one better. Silver up seventy six percent
fifty one dollars an ounce.
Speaker 2 (27:14):
What's going on with silver?
Speaker 5 (27:15):
Do you think that?
Speaker 2 (27:16):
Is that just a I don't know how to do well?
This is where I mean.
Speaker 7 (27:19):
One of our research pieces was Silver's golden chariot. Okay,
that you know that the silver has been buoyed by
the gold, and when gold rises, some people don't participate
fully in the move. They would like to be in
precious metals and they'll go into silver, they'll go into platinum.
Typically they will not do it, and pladium now the
(27:40):
other so that's been a big plus. The other thing, though,
is more technical. There is less gold in London in
the London warehouses right now. Okay, London is the Center
for Cash Spot Physical Trading. New York is the Center
for Futures and Options at the CME, the old CORMEX. Now,
(28:00):
when we had the tariff concern and I was on
this program and spoke about that, we saw an enormous
amount of bullion come across the ocean towards New York
in case the tariffs were put on. Well, a lot
of that silver is still here, and so there's a
I wouldn't say there's a shortage, but there's less of
it in London. It keeps brushing up the spot price
(28:23):
and until the stocks get leveled out again, which may
take some time, this silver has been buoyed by it.
Speaker 2 (28:30):
Does silver have the biblical emotional value of gold? I
mean this sounds like eighteen eighty William Jennings Bryan the
silver coin debate. But like if somebody perchance had a
silver tiffany bangle like Paloma. Lisa helped me here, who
is it? Paloma Picasso. It's one of those modern things
(28:53):
that you see. It's silver, Okay, people collect them from
time to time. Does that silver have relative value to gold?
Or does a guy like you look at and go
you fool? Oh no, no, it does.
Speaker 7 (29:06):
There's just a lot more silver in the world than
there is gold. An interesting historical thing that your listeners
may may enjoy. For thousands of years, the ratio for
gold to silver was ten to one. You go back
to the Bible, Persia, China, India, et cetera, et cetera.
When the Spanish and the Portuguese went to the Americas,
(29:27):
it wasn't so much gold they brought back as silver,
And they brought back so much silver from the New
World to the Old world that it irrevocably altered the
gold silver ratio.
Speaker 2 (29:39):
So like an Alsa Peretti small bone cuff and sterling
eighteen hundred dollars at Tiffany, Do you, James Steele, look
at that like the same as you look at gold.
Speaker 7 (29:51):
Well, you would, But that high end of the jewelry
market is not important to us because not much of
it is sold and there's no relationship to the price.
That's why jewelry demand moves in the East, because the
markup is lower and the hedging practices are different.
Speaker 2 (30:08):
Which geography do you mostly? We got to go. Which
geography do you look at? Most of the East?
Speaker 7 (30:13):
China, India, Oh, I thought you were say the Hampton's.
Speaker 2 (30:17):
China, India. Can you give me a savy cape cod.
Speaker 7 (30:22):
Look look look at the Mumbai premium or discount and
the Shanghai premium or disc There.
Speaker 2 (30:26):
You go news you can use absolutely was this great?
Perfect for three hours?
Speaker 5 (30:32):
Wherever they keep yourselves?
Speaker 2 (30:33):
Can we do a remote from the anxious VC vault
We're going there? That would be cool. I mean there's
no Wi Fi right exactly, small detail. James Steele and
you are a trooper with the Hong Kong Shanghai and
Banking Corporation HSBC. Stay with us. More from Bloomberg Surveillance
coming up after this.
Speaker 1 (30:58):
This is the Bloomberg Serre Allen's podcast. Listen live each
weekday starting at seven am Eastern on Applecarplay and Android
Auto with the Bloomberg Business app. You can also watch
us live every weekday on YouTube and always on the
Bloomberg terminal for.
Speaker 2 (31:12):
Global Wall Street. This is a treat. He's got one
of the great double majors of America Systems, engineering, Economics,
Wharton joining us Nelson You he holds court an alliance Bernstein.
A single sentence of absolute brilliance in your note. We
have shifted from a self financing AI capex over to
(31:35):
getting financing outside other sources discuss.
Speaker 8 (31:41):
So I've been really worried about some of the enthusiasm
that's going on across this AI investment that's going on.
If you look at, especially in the small caps, some
of this energy infrastructure that's being built out, they're putting
in capex that's not going to come online for another
ten years, and we're seeing more more debt financing starting
(32:01):
to creep up.
Speaker 2 (32:02):
Boston University, v body he owns this territory. You do
financing outside the companies and everything gets trunch like complex
Paul I still do this day. Don't understand mezzanine mesa financing.
Do you see parallels here to the indacy the idiocy
(32:25):
of previous upsets.
Speaker 8 (32:27):
I think it's early, so we're just starting to see
this start to happen and come in where more debt
is being used. But there's still a lot of cash
and revenues that's available. The big companies still have lots
of revenue that they can apply to this capex. But
what we are seeing across the megacaps is while earnings
(32:50):
continues to go up, we're seeing free cash flows starting
to plateau because the amount of capex it needs to
go into these into these investments.
Speaker 5 (32:58):
But the bulls will tell you they've got literally ninety billion,
one hundred billion of freak cash flow. You know, maybe
that's down from one twenty one thirty, but their returns
are going to be so great. So it's a little
bit of a show me story. Well maybe it's more
than a little bit of a show me story. It's
a pretty big show me story for a lot of
these expenditures. But the market seems to be well then
(33:19):
to make that bet. For now, we're okay, okay, So.
Speaker 8 (33:22):
As long as we continue to be able to fund
this through revenues, we're starting to see yellow flags. But
it's something to watch.
Speaker 5 (33:29):
I was looking through your notes. I know you spend
the last couple of weeks visiting your clients in Asia.
What's some of your takeaways.
Speaker 8 (33:36):
I think it's really interesting and actually goes to what
we just talked about. There's a fatigue across this AI
story with US growth equities, and while I'm in Asia,
the number one thing they wanted to talk to me
about was international investing, not global investing, which is what
they normally want to talk about But really, how do
we separate US from international equities?
Speaker 2 (33:58):
Well, it's a distinction between international and global investing.
Speaker 8 (34:02):
International just doesn't include the US, Okay, So when they
talk global, it's we just want it all in one portfolio.
When they want international, they control the US allocation and
the non US allocation separately. What they've come to realize
is with the run up of US equities, and especially
US growth equities, their portfolios are massively overweight growth and technology. Right,
(34:26):
So if you go outside of the US, you start
to get exposure to many different types of themes. You've
got industrials, financials, consumer that's available, and the correlations are following.
Speaker 2 (34:36):
Like Brian Adams run to you in the last hour,
I feel like I'm may having a conversation when that
record came out. Okay, let's go right there, Robert Mondel,
we mentioned it with Richard Clair to the vice chairman yesterday.
I'm sorry, currency is litmus paper. Well, how does nobody's
talked about this in the zeitgeist of the last twenty years.
All of a sudden, dollar dynamics yen you wan, yen
(35:02):
you wan. Dynamics really matter, don't they? They do?
Speaker 8 (35:05):
And look I did currencies about ten years ago, and
back then we always talked about these long cycles of
dollar strengthening the dollar weaknesses. Back then it was about
seven years in that cycle. I think the worry is,
are we just at the beginning of a dollar weekening cycle,
and given all the dynamics on the macro front, you
(35:27):
could see that there's reason to think about the dollar
could weaken from here.
Speaker 2 (35:32):
Now.
Speaker 8 (35:32):
That being said, with dollar weakening, that's really supportive for
things like emerging markets, which depends on dollar financing.
Speaker 5 (35:41):
So dollar bulls which come back and say, hey, we're
still the most profitable, most country out there, the most efficient,
and so on and so forth, which has been I
guess the one of the underpinnings of the dollar ball
case for a long time. Have those things changed, aren't,
maybe even on a relative basis.
Speaker 8 (35:58):
If you're talking about companies, I would agree with you
that the US companies remains an anchor for your portfolio.
It's such an important part of having those companies that
have those strong profitability deep motes that protect that self
generating profitability.
Speaker 2 (36:13):
So now, so we've got to go in a moment
Lisa Harn beyond holders Schroeders. But and Nelson, you what
I mean hearing here is a partition of MAG like
MAG seven versus what MAG one hundred. There seems to
be a partition between the juggernaut cash flow generation of
Microsoft in six companies. I don't know there's what there is.
Speaker 8 (36:35):
I think there's a much broader set of opportunities outside
of the MAG seven. And what people are forgetting is
the opportunity that exists outside of AI. You've got in
the US restoring of manufacturing, logistics and even the supply
chain that has to that needs a lot of investments.
And you've got very profitable companies that generate strong returns.
(36:57):
And then you look outside of Europe and you got
many macro lines themes in Europe and Japan and even
in China that you can invest in.
Speaker 5 (37:05):
Earlier this year, when we had the tumult, I guess
when the launch of the tariffs, a lot of money
moved out of the US, A lot of it went
to European equities. What are you seeing there? Was that
a short term trade? Does that money come back or
is that kind of sticky over there?
Speaker 2 (37:20):
Do you think? Oh?
Speaker 8 (37:21):
I think there is some stickiness here and what you've
got in Europe is you've got financial stimulus. You've got
fiscal stimulus, you've got monetary stimulus going on. You've got
a trillion dollars of investment going on for Europe, and
that's triggering, triggering profits worldwide. Actually, what we're seeing in
Asia is defence companies in Asia are profiting massively from
(37:44):
Europe's need for defense spending.
Speaker 2 (37:46):
We got to leave it there. Come again. I just
really appreciate it. That's a crazy day, Nelson, you were
this head of equities Alliance burns the thrill that you
can join us.
Speaker 1 (37:55):
This is the Bloomberg Surveillance Podcast, available on Apple, Spot,
of and anywhere else you get your podcasts. Listen live
each weekday, seven to ten am 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
(38:15):
and always on the Bloomberg terminal
Popular Podcasts
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
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.
My Favorite Murder with Karen Kilgariff and Georgia Hardstark
My Favorite Murder is a true crime comedy podcast hosted by Karen Kilgariff and Georgia Hardstark. Each week, Karen and Georgia share compelling true crimes and hometown stories from friends and listeners. Since MFM launched in January of 2016, Karen and Georgia have shared their lifelong interest in true crime and have covered stories of infamous serial killers like the Night Stalker, mysterious cold cases, captivating cults, incredible survivor stories and important events from history like the Tulsa race massacre of 1921. My Favorite Murder is part of the Exactly Right podcast network that provides a platform for bold, creative voices to bring to life provocative, entertaining and relatable stories for audiences everywhere. The Exactly Right roster of podcasts covers a variety of topics including historic true crime, comedic interviews and news, science, pop culture and more. Podcasts on the network include Buried Bones with Kate Winkler Dawson and Paul Holes, That's Messed Up: An SVU Podcast, This Podcast Will Kill You, Bananas and more.