Good morning.
I'm Brian Curtiz and I'm Doug Krisner. Here are the stories we're following today.
Amazon has been hit with an anti trust lawsuit from the Federal Trade Commission the FTC, alleging that the tech giant monopolized online marketplace services by degrading quality for shoppers and overcharging sellers. Ftcchair Lina Khan is vowing to take action, but stopped short of calling for a breakup of Amazon.
Con spoke earlier with Bloomberg.
We believe that this lawsuit, if we're successful, will actually entirely restore the promise of free competition. Our free enterprise system is one where companies should be competing on the merits and not be able to protect their monopoly power through illegal tactics.
FTC chair Lina Khan. In the meantime, Amazon is arguing that consumers will be the ones that pay the price. They'll see prices go up and product selection come down if the FTC gets its way.
We go next to artificial and tells open Ai you know it as the creator of chat gpd well. Reportedly, the company is talking to investors about a potential share sale. The Wall Street Journal is saying the sale would give the startup a valuation of between eighty to ninety billion dollars, and that would make open ai one of the most highly valued startups in the world. Here's Bloomberg, said Ludlow.
In April, the valuation was around twenty nine billion dollars, So this is a significant jump. But part of what the Wall Street Journal was talking about is something Bloomberg's already reported that open ai is on track to around a billion dollars of revenue this year, a lot greater
than that in twenty twenty four. So while it's a jump up in valuation, and this is based on an insider share sale, by the way, not issuing new shares or a new round of equity with vcs, you know, they seem to be doing real business.
That is Bloomberg's ed Ludlow. Now, separately, we learned today that the Central Intelligence Agency is looking to roll out its own version of chat GPD. It would be a tool able to sift through public data. It's part of a broader government push to harness the power of artificial intelligence and compete with China.
Brian well Fed Governor Michelle Bowman says that increased rent burdens are spotlighting the significance of the FEDS fighted on inflation. Bowman spoke Tuesday at a virtual event hosted by the FED.
These increased costs and these cost pressures underscore the importance of the Federal reserves efforts to fight inflation, which can complement efforts to address other factors affecting rent prices, including increasing the supply of rental housing.
FED Governor Michelle Bowman.
She went on to say that rent increases have outstripped wage gains and that increases the share of renters who spend thirty percent or more of their income on rent. In remarks last week, Bowmen signaled that she favors raising interest rates again and likely more than just once we.
Go to Europe, next to where the European Union's investigation into ill doctric vehicle imports from China has expanded beyond Chinese automakers, US based Tesla now finding itself in the probe's crosshairs. Here is Bloomberg Global Autos editor Craig Trudell.
This is a company that opened a plant in Germany in March of last year, but it continues to supplement the output from that plant with production from a lower cost facility in Shanghai, and Tesla has been taking advantage of that and shipping quite a lot of evs into the EU.
That is Bloomberg's Craig Trudell. Now, the aim of this EU probe is to determine whether China has subsidized not only Tesla but the domestic Chinese manufacturers like BYD and Neo, and then whether or not to take any necessary measures.
Brian Well Ali Baba's logistics armed Chiniow has filed for a Hong Kong IPO. Bloomberg Juan Wang has the story from Hong Kong.
The Hong Kong Stock Exchange confirmed to thee La ali Baba can proceed with a proposed It's High Yell spinoff and IPO that will potentially make tinyal the first of Alibaba's units to go public. Sources say the IPO could raise at least one billion dollars. The stock exchange website says CTIC Securities, City Group and JP Morgan are joint sponsors of the offering.
Ali Baba intends to retain.
More than fifty percent of the unit shares and keep Tanyo as a subsidiary in Hong Kong joined Wong Bloomberg Radio, Doug, I love.
It at Bookends. There we have a connection.
The FTC action on Amazon actually brings to mind what happened at Ali Baba in China. Now the FTC chair Alina Khan is not calling for a breakup, but that's exactly what is happening with Baba.
We report there today. You just heard that from Juan Wong.
This would be the first spin off of one of the six units tiny how Originally we thought it would be Fresh Shippo, but it is SiNW And if you go back to the FTC, it hasn't had a great track record of late in court in targeting big tech. It's different in China where the party and the government can push through its dictates. But of course in the US you need to pass muster in front of the court.
Yeah, billion dollar IPO for sign o, that would be quite something. Brian, I just want to touch very quickly on the fact that I was struck by a report today from s and P Global Market Intelligence. We were talking about the soft read and consumer confidence earlier. Well now, according to s and P, the US banking industries total deposits declined year over year for the first time in data going back to nineteen ninety four. So we'll have to see whether this has a material impact on American
economic growth. But it's something to be aware of, to say the least.
Yeah, And what's curious is it's another one of these cases where you have sort of sentiment maybe a little different from action, because consumers have not really peeled back their spending that much yet. The last retail sales report was pretty firm the reasons we keep squawking about how strong US economy remains, but obviously sentiment tells you what could be happening in the future.
So it'll be a very interesting one to watch. Now it's time for global news.
President Biden is backing the w worker demands of a forty percent pay hike. Let's get one on that at Baxter is tracking this story in others from the nine to sixty newsroom in San Francisco.
Ed.
Yeah, that's right, Brian.
Thanks.
President Joe Biden out with UAW workers today at a rally at on the lines that UAW President Sean Fain says is very historic.
You know, this is a historic moment.
The first time in our country's history that is sitting USA president has came out and stood on the pecking line, and it's characterized a strike as a battle, akin to building bombers for the US and World War Two.
Today, the enemy isn't some foreign country miles away.
It's right here in our own in our own area.
It's corporate greed.
And the president banking the workers forty percent wage demand increase.
All Street didn't build the country. The middle class built.
The country.
Built the middle class the fact.
So let's keep going.
You deserve what you heard.
And Bloomberg's Jordan Fabian says, an important time for the industry, for the economy, and for politics.
It's important for the UAW, and it's also important for Joe Biden. Joe Biden, as you said, his campaign on being the most pro union president. Guess what, there's an election coming up next year and those union workers are going to be crucial for his re election chances in a key state like Michigan, and the UAW has yet
to endorse Biden. So him showing up today, you heard Sean Fain speak very positively about the president, saying he's standing up for working people and so this could be a big thaw in the relations between the President and that union ahead of his re election push.
Jordan says President doesn't really have much leverage to solve it, but he can use a bully pulpit. New York judge's rule that Donald Trump is liable for fraud for exaggerating his net worth by billions of dollars in financial records
to banks and insurers. South Korea warning Kim Jong On that it would end if it uses nukes's regime, President EU and Suk Yule saying Korea and the US would end the regime in an overwhelming response, House Speaker Kevin McCarthy saying today is Caucus will make progress tonight on funding the government.
At night, we're back in session.
We will vote on a rude to bring up four.
More appropriation bills that will be a total of five more than the sentiments to be able to pass in that if we get through these next four, that would be seventy two percent of all the discretionaries.
There and the Senate also working on bills set up. Majority Leader Chuck Schumer saying what McCarthy is doing as appropriations has nothing to do with avoiding a shutdown.
So this week the Senate will move forward first.
We are very close to finishing our work and hope to release text very soon.
We are told it has aid for Ukraine and the Senate version that's been rejected by the far right of the Republican Party. Global News powered by more than twenty seven hundred journalists and analysts in over one hundred and twenty countries in San Francisco. I'm Ed Baxter, and this is Bloomberg.
This is Bloomberg Daybreak Asia.
I'm Brian Curtis in Hong Kong, along with Fonny Quinn in New York, and we will be getting updates on markets all throughout the hour, including against now.
Michael Green, who is the chief strategist.
At Simplify Asset Management, can't wait to hear you simplify some of these complicated inputs into the markets, Michael. So, we had this little correction that's underway, it's not quite to the level of being an official correction outside of tech. Does this continue and does it get a lot bigger or are we almost at a point where the buyers come back in Well.
I think the key thing to remember is is that the equities are a side show to this event. What we're really seeing is an increasingly worried response to the behavior the bond market, where ten year yields thirty year yields have sold off sharply in the past couple of weeks.
Until that question is resolved, I.
Think it's going to be challenging for equity markets to take the lead again and move higher.
Michael, you're going to be hosting these fireside chats at your entering the Fall your ETF conference at the NYSE this coming week. I'm curious as to what your question, your main question is for somebody like Boas Weinstein who runs a hedge fund, and who you know, maybe among those that are not in the market anymore or like at least sort of cutting back.
Well, so, first, I think there's very few who actually fit that description. I think the evidence is that we continue to have high levels of investment. Most investment programs, you know, when you consider for oh, one K programs or pension plans, et cetera, they largely adopt a policy that is fully invested at all times under a fixed portfolio construction. The good news is that actually that we
actually had the event today. I know exactly the key question that I have both, which which was and by the way, it is available on the Blueberg terminal and
on the simplified website. But the real key question that I was focused on with both is the dynamics of what's happening with credit spreads and the high yield market and general pricing of risk and fixed income, which he obviously is extraordinarily facile and known for the work in and he comes to some of the same conclusions I do in my work, which is that you're being compensated very little for taking additional risk, either in high yield or in equities, and that you know, the very high
level of interest rates that we're actually experiencing right now tells you that cash is a pretty attractive place to be. Some components of the long end are becoming really, really attractive. But I think we both see and are mystified by the behavior of credit spreads in an environment that looks challenging.
But then just how do you then square that with being fully invested?
Well, I think is actually pretty straightforward.
That's exactly why we're seeing those levels of relatively tight credit spreads and relatively high levels of equities is that people are by and large fully invested so very little discretion and available to most people today.
Michael, outside of the Magnificent seven, or even if we stretch it to say, the top twelve to fifteen tech stocks. So where are you seeing, you know, wild enthusiasm or overvalue.
In the equity market?
Well, I think you actually just described it extraordinarily well, right, which is is that we're actually seeing as an index led market. So when you buy the S and P five hundred, or you buy the Nasdaq one hundred, the QQQ, you're effectively leveraging into the magnificent seven those names that have worked extraordinarily Well, you're one hundred percent correct in your observation. By the way, I mean, the majority of stocks on a year today basis are now actually down.
If you look at something like the Russell three thousand on an equal weighted basis, Yep.
It's actually down, right.
I mean, but you're in the business I would think of advising clients on where they can find value to be overly cautious in this kind of environment. I mean, I think anybody can understand it. But if there are opportunities with undervalued stocks, take a company like Cisco at seventeen times earnings with a dividend a three percent, it's really hard to feel like it's about ready to fall off the cliff. The thing just turns out money.
So I think you're one hundred percent correct that when you look at these companies that they, particularly the large technology companies, that they're generating an unbelievable amount of cash, but there's also very little growth behind something like that.
So trading at eighteen times with a three percent dividend yield, when you get five and a half percent out of cash in a money market fund or a thirty year tip that's currently offering a real yield north of two percent, which would be a historically unusual level, it seems to me that you're not actually being particularly well compensated for taking that additional risk of is Cisco actually going to be the continued network, you know, continued preferred network provider,
particularly in a world in which it's becoming very you know, very questionable what the additional tech spend actually looks like in that space.
All right, Michael, we're almost out a time, but best idea then for all of us out there.
I got to tell you one of the craziest things to have to stay is that you can get a you can get a really attractive yield on CAF right now, And I honestly think that you're reasonably well compensated to sit by the sidelines and wait.
All right, Michael, thanks very much. I don't own Cisco, I never owned Cisco. I just like to challenge the guests, and thanks very much for joining us. A good session, Michael Green, Chief Strategist, Simplify Asset Management. This is Bloomberg Daybreak Asia, your morning brief on the stories making news from Hong Kong to Singapore and Wall Street.
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I'm Brian Curtis.
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