Broadcasting Live from Bloomberg Invest

Bloomberg Audio Studios, Podcasts, radio news.

This is Bloomberg business Week inside from the reporters and editors who bring you America's most trusted business magazine plus global business, finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.

Carol Master along with Tim Stenovik, live at Bloomberg invest in downtown Manhattan. Well, the nowzech one hundred. You know some of the numbers. It's up nearly forty percent from the late October low and video is up more than one hundred and fifty percent this year, one five h percent this year. Super micro computers up two hundred percent, Metas up more than forty Netflix is up forty.

I mean, we could go.

On and on and on.

Alphabet thirty percent so far this year.

Even better, Let's get to someone who is constantly tracking the global equity market and patterns, who earlier at Bloomberg invest talked about tech, talked about the tech bubble two point zero or nuts with us as Bomberg Intelligence Global had a portfolio strategy and chief equity strategist, Gina mard Adams. She's here on site at Bloomberg invest So a bubble, yeah your name?

Well did you first of all, did you ask the audience if they thought no, okay, good, okay?

I had no time only only to share all of my immense amount of slides.

And the research shows that yeah.

So look, a lot of the research we did really just compared the current environment to nineteen ninety nine, which I think most people think of as the classic bubble. But we do look at three really key differences between today's market environment and bubbles of the past. The first is sentiment and price trend. What we've seen in the market over the last five years is an eighty five

You're just back from traveling, yes, and I'm sure you've been talking about this. Yes, Are there believers? Are people more skeptical about the runout?

You know, I think there are a lot of skeptics. There are a lot of people that are just very worried. The concern really really emanates from concentration risk, though, which is the third kind of third point of how this environment is different, because we're incredibly sensitive today to what goes on in tech. I mean, before the advent of even the AI acceleration, tech was thirty percent of the market cap of the S and P five hundred back in the peak of the market bubble in ninety nine

You gave us questions that we should probably ask can we trust? Can you make money? Yeah?

You can?

But it's very narrow, okay, right, And it's very difficult to beat the index. Think about across markets. Most major markets have stronger index level returns down in the United States over this quarter, yet the index is up. It's the same in many markets around the world. So it's really difficult if you're an active manager to be the index without leaning really heavily into AI in tech right now. And that makes folks fair, which.

Just kind of feeds thing, right, The momentum.

It does.

I think that there has been this very big earnings case for tech stocks, though in AI stocks at large, and that's going to change in the second half of this year. And this is what we spend a lot of our time talking about, is can we get that incremental change in fundamentals that can support rotation into other parts of the market. We've been waiting and waiting and waiting for it. We've also been contending with this rolling

Gina, How are you in the team thinking about productivity growth as a result of AI being implemented at companies that are not tech companies.

Yeah, we think about it. It's not in any numbers yet. No, it's not in any numbers. It's not even mentioned by companies.

So the way that you work on it, But how do you think about that that it's like, Okay, we're talking about all the AI. Yeah, that's happening in terms of the training of these lams, all the chips that Nvidia is selling all the chips that folks are buying, but what's the ultimate.

It's all inside tech and communications. So far, it's like this one little unit inside very big unit actually inside the broader market. So we're seeing implementation, we're seeing buying, We're seeing all of the AI impact occur inside tech and communications or TMT industries with some consumer discretionary because Amazon is a consumer discretionary company, right.

So that's why.

Yeah, So it's really it's very centered right now. Now, will it SPA. You know, we're tracking a number of things. We look at transcripts from companies every quarter and we track their mentions of AI and their degree of optimism around AI. We look at the Census Bureau does a lovely survey of all industries and they are planned and implementation and impacts from AI. So we look at that

So that's fascinating because at milk and that was a big play. It wasn't Nvidia and the chips necessarily that was interesting tools, but it was and the energy needed for data centers.

You know.

One of the things that was interesting yesterday is pul Quirk came out corporation. They do polls, and they were talking about, yes, they were still doing maintenance, sales and stuff, but people weren't spending so much. It was another consumer discretionary or sign of a consumer discretionary slowdown. How are you thinking about that space and maybe what it tells us about those companies.

But the economy, Yeah, sure, we talked about this a lot coming into twenty twenty four because we are anticipating seeing a consumer slowdown in twenty twenty four and the consumer sectors do look somewhat vulnerable to that slowdown, consumer discretionary and consumer staples. Now, what's really interesting about this is this could have very small impacts on the s and P five hundred at large. And this goes to the concentration of market cap in the S and P

But what about a company like meta platforms it's suppor or alphabet that are supported through advertising right now?

Yes, if those companies that are.

Paying to advertise are not seeing their customers show up, then they're going to pull back on advertising.

Well, let's think about the companies that are paying for advertising. Are they car companies? Are they housing companies? What kind of companies pay for advertising?

Now?

And you need That's where I think we need to do the mental gymnastics, because we make the presumption that we live in this environment that existed ten or fifteen years ago. But what if Netflix is the primary buyer of ads? What if Disney is the primary buyer of ads and those expenditures are no longer discretionary expenditures for the consumer, They're staples, right, So I think you have to you have to do the work to think through the impacts of all of these economic indicators that and

So just got about thirty seconds. The lifeblood of the equity market is what then? Now? Tech?

That's it.

I mean forty percent of the market cap of the index is tech plus Meta and Google and Amazon.

And Tesla and justifiably.

And that is what drives the US equity market from large cap perspective. Now small cups is a very different animal, and I think we should be watching this pretty carefully because small caps is more about healthcare and financials, a little bit of energy industrials. Small caps have been basically flatlining for three years running, we keep talking about and it may be more reflective of what's going on in the broader economy than the large cup index.

Such good stuff. Thank you so much, so appreciate it. We know you've been traveling a lot, so good to get some time. Bloomberg Intelligence Global of Portfolio Strategy and Chief Equity Strategist Gina Martin Adams.

Here at Bloomberg invest you're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern. Listen on Apple car Play and then brout Auto with a Bloomberg Business app, or watch us live on YouTube.

You are listening and watching Bloomberg BusinessWeek. We're live at Bloomberg invest in downtown Manhattan. And what's interesting about Bloomberg invest is that you end up getting to hear from people from all of the investment world, really just different types of investing, different types of investing platforms. And that really brings us to our next guest, and she happens to be one of Bloomberg Business week's ones to watch.

We're talking about Elise Colleen, who founded the venture capital's firm still Mark five years ago, offering up both institutional venture capital and knowledge and expertise in Bitcoin. At Last joins us more for more on her journey in today's landscape here at bloom Burg invest Atleast.

How are you, I'm well, thank you for having me.

Well, thanks so much for joining us. Before we get into what you guys are doing, I just got to get your comments on what we heard from SEC chair Gary Gensler. I don't know if you were in there listening, of course, okay, because he spoke a little earlier and he declined to give a timeline for launching spot Ether ETF, but did say that it's going smoothly, and he said there's also significant non compliance when it comes to crypto.

How do you take us comments?

So Gensler has been very consistent in the guidance that he's provided to the crypto and bitcoin ecosystems, and I thought that his comments today we were consistent with comments of the past. We know that many operators in the crypto sphere are operating in a non compliant way. Still, Mark, of course, is focused on the Bitcoin landscape, so that falls outside of our mandate, though we're tracking it nonetheless.

You know, if you could talk to Share Gensler right now, what would you ask him or what would you want to discuss with him?

I think where we're curious how he will move forward is around issues related to money transmission and how that

Be you're making investments in that air, of course, said where you know when you look at the VC landscape or what you guys are involved in, is that where a lot of the money's going in the opportunistic aspect of the crypto world or Bitcoin specifically.

So in Bitcoin, about half of our current investments is in the payment space. Right We've invested heavily in Lightning network infrastructure, so both at the core protocol level, in companies that are developing sort of the AWS model to the payments network, and then in data companies that provide compliance so KYCML services for payments on Lightning as well as routing across this payment channel network.

While that's an.

Opportunity, there's a breadth of opportunities in the Bitcoin private market space. We invest in payments, of course, but we've also invested in opportunities around Bitcoin as an asset and have been really excited to see that ecosystem so quickly mature, including upon the tailwinds of the robustness of activity for the Bitcoin ETF.

Talk a little bit about the opportunity you see when it comes to the payments network and Lightning specifically here, because I'm curious about the way that people buy bitcoin right now and sort of how you think about somebody who is quote unquote investing in bitcoin. Sure, because it seems like still it's looked at as something that will increase in value, and it's the type of thing that will go up in value to a lot of the

Yes, that's changing. So we know that over the twenty more twenty four month period between twenty twenty one and twenty twenty three, ending August twenty twenty three, there was a twelve hundred percent growth in Bitcoin's payment network. We know that about seven hundred thousand monthly active users are leveraging the network and they're using it to make payments

To chase small payments.

Exactly fifty percent of payments on the Lightning network are micro payments in fact, so they're transacting at pennies, quarters, fifty cents.

Mostly we don't know where they are or do we know where they're happening.

We do know where they're happening. So there's a lot of Lightning Network adoption in emerging markets, as you've begun to say, but we're also seeing payments in gaming, and we will see payments in the AI and LLM space. That's been relevant to today's conversations across money managers on stage. We've heard a lot about the most important investment opportun news of the next ten years being the energy transition

It's such a volatile currency though, in the sense that you know, up four percent today but could be down you know, twenty percent from just recent highs as of yesterday. Does that hold it back as something to be used for payments?

Well, so for payments, and especially if we're talking about micro transactions, we're talking about short duration hold we're really talking about using bitcoin as an infrastructure rather than as an asset, so you're.

Not holding it for long. You can exactly to fiat currency very quickly.

That's exactly right. But there's something else happening in Lightning beyond its match to AI and LM activity, and that is that stable coins are coming to Lightning network, so soon, as soon as the end of this year, you'll be able not just to transact bitcoin, but to transact digital dollars on Lightning, and that solves the pain point that you addressed of bitcoin's volatility, which is relevant to certain populations for sure.

At least just got about a minute left. What does a mature bitcoin payment world look like? In your view, a.

Mature bitcoin payment world looks like reliable payments, payments that can meet Visa's threshold of ninety nine point ninety nine percent payment reliability. It looks like businesses and enterprise being able to operate payments in a compliant way that's consistent with their existing payment operations. And we're seeing the ecosystem developed to introduce enterprise tools that allow that, including through portfolio companies of ours such as Ambus Technologies.

When does it happen.

It's happening now.

But in a real wide mass adoption.

I see so first first movers have adopted lightning for payments. Those with the most acute pain points, like those sending cross border payments, have begun to adopt. And from the learnings of those pilots and early movements, we will see other businesses follow that are seeking more efficient and cheaper payments.

Very cool stuff, really fascinating. Thank you so much. We totally get why you are one of the ones to watch by Bloomberg Business Week. At least Colleen, thank you so much. Thank you so much, really appreciate. She's founding partner at still Mark. Here at Bloomberg in Bath.

You're listening to the Bloomberg Business Week Podcast. Listen live each weekday starting at two pm Eastern on applecar Play 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 playing Bloomberg eleven thirty.

Larrah alligans with them. She's Steve, investment officer at Neuveen. Talk about man, They've got so much under management, see so much when it comes to investor, think if you will. Sarah is chief investment officer and she also manages more than one hundred billion dollars in equity strategies. She joins us here from Bloomberg invest Hello, Helo, Hi.

Good to see you.

It's been that kind of weekday year, you know, the momentum. How do you see the environment right now? When there is it feels like Sarah like some conflicting signals out there.

Well, first of all, just looking at the markets with the consolidation that we're seeing in stocks like in Vidio. I mean, markets were up something like eight out of nine days just recently. In Nvidia has been just flag bearer stock for the rally we've seen year to date. Nvidia is just back at early June level. So this consolidation in the market cap loss for that stock is not a huge deal.

It's just raising a couple.

Of weeks cosses in your view.

And I think what we need to focus on on the second half is three things that see economy, election, and earnings. So first looking at the economy, the news is not all great. Both the consumer and employment markets are starting to show signs of a slowdown. Consumers, we're seeing higher delinquencies. We're seeing discounting at fast food restaurants, lower foot traffic. Consumer is starting to feel the pain

Okay, you gave us a lot to think about in a short time, So I just want to focus on the consumer because I have also.

Been interested, not any calmer after that.

To see the discounting that we've seen at some of the fast food restaurants. And you're mentioning some softness when it comes to the labor market. How does that then play into tech companies and tech earnings. We just had this conversation with Gina Martin Adams and our chief equity strategy here at Bloomberg Intelligence, and she talked to us about the disconnect between what the can consumer's doing and what happens at tech companies with this economy.

Well, tech companies are all different animals. Let's just start everyone talks about the tech sector. Let's look at semiconduction versus software. You're to date the gap and perform. This is something like forty five percent with semis dominating and crushing.

Software as a sector.

So it's all different tech companies that have strong AI tailwinds. Of course, we're going to continue to do well because AI is here to say it's not just hype. Companies need to incorporate that into their business models to drive productivity. Consumer related tech companies could start to struggle more.

But again it depends.

Look at Meta, which is more of a consumer outlook. But they started cutting costs so early in the cycle that you saw their first quarter earnings, you know they were still strong for at least earning's point of view. And Apple, a very consumer driven company where so much negativity was getting baked into the stock price. It was lagging, and now we're in a cycle of seasonal trade for Apple that's been very strong.

I want to ask you.

About AI a little bit because it's been like the catchword for everyone. I'm getting ready for the next earning cycle, you know, So we count how many times executives say it having said that AI productivity, we're still figuring that out right, We're early in the game. Do you know if that starts to see a little bit of a pullback, does the market lose a lot of momentum as a result, because so much seems to be tied to that narrative.

Well, that's a great question because tech and AI has been such a driver of not owner only earnings, but market returns since the beginning of twenty twenty three. So what we need to see is for the markets to

Hey, speaking of stocks, we are still getting earnings, believe it or not. I do want to bring our viewers and listeners some news shut us A. FedEx are higher by eight percent right now in after hours. The company did report fourth quarter adjusted EPs that beat analyst estimates. Also said that it sees twenty twenty five adj justed EPs to twenty ten dollars from twenty dollars to twenty two dollars. The estimate was for twenty dollars and eighty five cents, So some optimism.

Now do you care about it? Like a transportation company and what it tells you? Do you look at that sector for clues?

I think transports can be very important clues with the sector.

I was thinking of FedEx.

If you asked my family the amount of FedEx is and ups is that come to my house? Is a telling sign that the transportation sector is still very strong. But transportation infrastructure is a sector.

That we've liked for many years.

We think it's a multi year, multi decade play for a few reasons here. Number one near shoring and on shoring of manufacturing and post covid US wants to bring manufacturing closer to home. Electrification of our grids to meet renewable energy demand. We'll have to increase our grids by over fifty percent over the next decade plus. All of this is positive for infrastructure. That's a sector which has numerous tail ones.

You're like setting me up perfectly for more breaking news, so that we have Sarah Volkswagen plans to make a five billion dollar investment into Ribban, Ribbing and Volkswagen plan a joint venture for next gen evs. I'm looking up shares of the bulk.

Companies keep spending like they have been given a boost. There's a lot of liquidity out there, whether there's government you know, infrastructure spending and different kinds of plans. But it does feel like I don't know what are we missing. What is the big risk? Is it the elections? Is it that with this, you know, near shoring onshore, and that everything is actually going to be more expensive going

Well for a market that wants its rate cuts.

We've already seen inflation reaccelerate earlier this year, so we moderated at the end of last year. It starts reaccelerating this year. Now we're seeing it moderate again. If we see a few more months of that, we could get to your first rate cut. But what if ristrates are here to stay? What does that mean for the US deficit? What does this mean for companies that are small and highly leveraged and want to go public one day if the IPO markets aren't that healthy.

I think it's just so different from where.

We were from twenty ten to twenty twenty that a lot of investors and younger investors aren't used to that. If you take a look at history though, pre the global financial crisis, going back about fifty years, interest rates were federal fund rates were on average a little bit below six percent and post the GFC, they were basically a little bit below one percent.

So it's not a new normal, it's just an old normal.

We're going back to that normal cycle that we saw pre the GSC. But I don't know if many of us in our careers or even where we are and lifespans.

Are used to that.

What did that normal look like?

Though?

In terms of.

Rates, I think it looks you know, if you take rates that were sub one percent below post the GFC and almost six percent pre the GFC, I think rates are probably more normally in the three to four was the yead normality post the GFC, right, yeah, right, exactly right, Yeah, and they were sub one percent. That's the abnormal period rather than the period that we're going back.

Are we wrong to have the comveration of like, oh my god, what is a higher rate environment going? You know, we talk about you know the FED, you know, the fed's target that maybe it needs to run hotter. Are there negative implications or is it?

No?

Wait a minute, that's a little bit more kin to historically how markets operate, and we do just find.

I think we just need to evolve how we think about it. So the one thing at neuvene is. We're very strong in publics and private investings. I've talked about how the sixty to forty equity fixed income portfolio will evolve to fifty thirty twenty equity fixed income twenty percent and altern I mean, sorry, equities fifty percent, fixed income thirty and alternatives twenty percent. Why do we like alternatives? One is public and private infrastructure fra structure, an area

Wait, yea, how does that work?

How does that work? Lows on farmland? Does that work?

So farmland you get two things. You get the price appreciation of the land. Obviously it only well over time. Right, the same with stocks, Right, you get it if you sell it.

But a finite there's a finite amount of farmland, whereas stocks.

You know, right, which also makes it more of an attractive asset class actually, and then the income from farmland and the crops, so it is sort of stock and bond like income from bonds stock like appreciation.

Help me out, though, So investors own the farmland, but then somebody operates and cultivates it and develops it.

Yes, And is it.

Like big companies or is it just big the big industrial farmers.

I mean, it can't be a variety.

Okay, sorry, it's just fascinating great.

I mean we have we have the author of this book that's out today. It's called Free the Land, How we Can Fight Poverty.

I feel like everything I talk about editorial.

Earlier today, I mean, this is wild.

Well they talk about, you know, land as a commodity and the commodification I was.

Talking about it's the ultimate supply demand.

Exactly right, it is the supply demand. How does climate change play into that? Because I do think climate change is certainly impacting where we can farm.

I think it is definitely can impact your crops, your yields. A lot of our crops are very concentrated in certain regions of the world, soy is concentrated, corn is concentrated.

Those are risks.

I think climate the shift to renewable energy is something that's important to talk about. I mentioned it's a tail for infrastructure. But another area I think is important is how from a commodity point of view, we're not necessarily ready to cross that bridge to renewable energy. What US has been under investing in copper for many years now. I think US copper production is down about fifty percent in the last quarter century.

So are we.

Ready copper, cobalt, lithium, all the things that go into electric vehicles, solar wind batteries. Are we ready for that? In terms of our commodities. I don't think so we are.

Does all the money come from the private markets for that? In your view? Where does it all come from?

Ultimately, the money to invest and increase our commodity production. I think it can come from a variety of places, you know. I'm just I'm more worried. Also, that's inflationary again, if we are not, if we don't have the supply of commodities to meet our demands to move towards renewable energy, then it's going to be inflationary for copper, cobalt, lithium.

I'm wondering how you're thinking about the role of alternatives in someone's portfolio right now, especially if they're not necessarily a high net worth individual, because you deal with a lot of money of folks who are you know, quote unquote normal people who are relying on you for their retirement.

Well, I think, you know, the race for alternatives is that last mile getting it into the hands of the individual investor. We are getting it, you know, institution. It's an institutional play. It is a high net worth play. It's moving in that direction. I think the final mile will be getting it into the hands.

Of institutional investors.

So that happens, then, I think it will over time and if for individual investors, and that that will provide them that less correlation in their asset classes in their portfolio and more diversification. I started in the industry as an investor almost twenty about twenty nine years ago, and back then it was, you know, you picked equity, you pick fixed income, you know, you picked.

Real estate as an asset class to work in.

And now you look today, I mean you can just in our firm farm land, at equity, infrastructure.

There's just so many interesting asset classes now.

So you've seen a bunch of market cycles. What's interesting about this market cycle today and is something different this time around?

Well, I was a small cap growth investor in the late nineties. I am still a global equity portfolio manager. So I've been investing, you know, from pre from about the mid nineties until today. So people talk about the tech bubble, what's AI? Does it look like the Internet bubble that we saw in the late nineties. I think it's different in the sense, first of all, as an investor in the late nineties, when the Internet first started to become something that was more widely known, we had

So I think we have.

A huge supply demand imbalance, which is why you've seen these huge runs in these AI so distortion in the public markets because of that huge.

Demand lack of supply.

I don't I don't if it just doesn't lead to some kind of distortion.

Well, if you look at Nvidia on a valuation basis, actually trace it a discount to the semiconductor sector average. It's not an expensive So everybody keeps saying if you look at their earnings growth and their earnings power, it's it's not actually in expensive spot. So that's I think that's what you know is the pushback on the bears.

On in video.

All right, but oh sorry, so finish.

But like we learned in.

Late nineties, consolidation phases will exist when when there's a new technology and a shift like we're seeing to AI.

I'm just going to say, this is the podcast to download on your way home. If you missed any of it came in midway, this is the one to listen to. What did jem Thank you so much? Really appreciate me? Sarah Malliks. She's chief investment officer at Nudie and joining us right here at Bloomberg invest.

You're listening to the Bloomberg Business Week podcast. Can't Us Live weekday afternoons from two to five pm Eastern Listen on Apple, card Play and and Broyt Auto with a Bloomberg Business app or want us live on YouTube?

All right, So there's headlines happening, there's people surrounding, there's a little bit of a break at Bloomberg Investment. We are here with the individual who has been working her butt off, i can say, over the last few months to put this together. Bloomberg Global Finance Correspondent Shanelli Bossik is here. She is, of course, co host to with Tim on Bloomberg Crypto Tuesdays on Bloomberg TV. How are you How are you doing in? I don't know what are you taking away from the events so far?

I think you hear the background, You're running off adrenaline a little bit here.

It feels like a.

Sports game, especially with these headsets on right.

Yeah, no, seriously, but it does feel like game time here because we're halfway through the year. Obviously a lot of concerns, you're sure you've been covering a lot of them, but there's also a lot of optimism in terms of

But next year might be a brighter year.

Okay, Paul Talbyn just one of the many folks who you've already interviewed today. Give us a rundown of some of the conversations that you've had.

Yeah, one of the.

More interesting conversations also is with Cliff Astness. Cliff Astes is the federal AQR, of course, and remember he had a couple of tough years there before the COVID pandemic hit. He's had a historic rebound, record breaking returns at his fund and he thinks the market is less efficient now. That has a lot of ramification. Why he thinks it's a few reasons. He thinks that the prolonged low interest rates could be a candidate for why this has happened.

If there's you know, it's so funny, like we'll go to some kind of event, you know this, You go to a financial event and there's like something everyone is talking about. I feel like increasingly it's been a lot of AI. Is there something In years past it's been crypto weallyk at about thirty seconds. Is there something that you feel like?

Private assets?

Private assets?

Everyone had something.

To say, meaning alternatives.

Alternatives, private, private equity, venture capital.

How do you get in and how do you not get hurt when you get They don't know yet, right, they don't know yet.

There are a lot of people who were worried about pain and private equity coming down the pipe.

Well, and I think about we just don't know in private credit. I mean, there's so much money chasing it at this point, right, Like you just don't wonder, And you do wonder when there's so much money, does it tend to take on risk your investments or so.

Doesn't Boas Weinstein has this huge activist campaign against closed down funds at black Rock, and.

These are in the equity market for the most part.

Sometimes more liquid assets you have to wonder whether you'll start seeing activists in these other funds that are being sold to retail investors for private assets too.

Such good stuff. We know you're busy, Get back to work.

No, have a drink.

I'm ready for a while, Okay, Luberg Global Finance Co Responish Sinalibosic live here from Bloomberg Investors.

This is the Bloomberg Business Week podcast, available on Apple, Spotify, and anywhere else you get your podcast. Listen live weekday afternoons from two to five pm Eastern on Bloomberg dot com, the iHeartRadio app, tune In, and the Bloomberg Business App. You can also watch us live every weekday on YouTube and always on the Bloomberg Jermale