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Bloomberg News is now reporting that the board has forced out Intel's CEO Gelsinger. So definitely some concerns there at Intel as it tries to play catch up on the AI game against the videos of the world. Man Deep Sing joins his senior technology Industrynals for Bloomberg Intelligence joins us here on our Bloomberg Interactor Brokers studio. So again, Mandy, by the reporting we're seeing out of Bloomberg News now was that it was kind of the board forcing at
mister Gelsinger. And that kind of makes sense because you know, as you mentioned earlier, board concern, investor concern about the pace of which Intel was trying to, you know, really become a bigger player in AI. What do you think is going on.
And the overall strategy for turnaround like this, I mean, we know turnarounds are rare in tech, and in this case, I think the doubling down on the foundry side was a big mistake in hindsight, I would be very surprised if whoever their point, whether it's internal or external, really wants to focus on the foundry side as opposed to their core chip business, which is where they still generate bulk of their operating free cash flow.
And you know, when you look at.
The PC business, it's a thirty billion dollar business, generates ten billion dollars in free cash flow, and it's still there. I mean, they're not gaining any share, but there's still the dominant force when it comes to the client PC desktop business, and I think that's the path to turn around this company.
Were you surprised by this in that this happened before there was a successor actually announced, considering that it meaning that, like what's going to happen in the next, say, two months while they were looking for a successor, that would have meant that Pat Gelsinger had to leave.
I mean, this reminds me a little bit about Microsoft, the way Steve Balmer left and the way Satya Nadella was appointed. I wouldn't be surprised if one of the co CEOs, Michelle Johnson, like she ends up being elevated to the CEO. But when I look at the turnaround prospects, I think this is a much harder turnaround than a Microsoft simply because you've got a player in Nvidia that's really taking share on the server side and then TSMC on the foundry side. So on both the fronts, Intel
is really losing share. The only front where they still have, you know, steady share is the client PC business, And that's why I think breaking up the company is probably the likely scenario here. I would be surprised if anyone tries to turn this around as is.
So, I mean, it's just an attractive job for sir, an external person. Let's say I'm a senior person in n vidio, I can get the big chair at Intel.
Is that attractive?
It could be, but it sounds more like a Pe playbook here. You know, look at the entity as a whole, figure out the strategic options, lever up and look the foundry business outside of Intel may actually end up doing well. And the reason I say that is right now, no one from an Amazon or a Microsoft, or Google or Nvidia wants to use Intel foundry because they know Intel
is a competitor on the chip design side. Well, once you take out the company and you know it's an independent entity, everyone wants to have some onshore manufacturing of chips. That's what the government wants. So these companies may be forced and with the incoming administration, I won't be surprised if they say, Okay, you guys have to use some of the foundry options.
Within the US.
At TSMC or Samsung don't have that kind of capacity that Intel has within the US.
So would the pitch be to spin off the foundry business kind of thing and then keep the chips and the AI chips.
Yeah, I mean, look, the foundry business is an eighteen billion dollar revenue business, although most of it is Intel outsourcing their business and counting as revenue, so it's not external foundry revenue. But it's negative gross margins. So the core PC business is about a forty to forty five percent gross margin. The foundry business is negative gross margin, and they're spending twenty five billion dollars a year on capex just to buy the machines to keep up with the advancement in nodes.
Why do I have a business that has negative gross margins?
Because it's it's like Intel is the vertical integrated player in chip design and manufacturing, so they do it all in house, and for a while, that's why Intel's gross margins were the best because they were doing everything in house. But the moment they missed out on that node advancement where TSMC leap rocked against them, that's when it all started to go wrong.
Amazing stuff, all right, Andy, thanks a lot, really appreciate it. We'll clearly be talking to you every day on this.
For a while.
Mandu Seing Bloomberg Intelligence senior technology analyst joining us on Intel and reportedly Pat Gelsinger being asked to leave by the board.
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We bring you all the top news, business, economic and finance through our lens of our Bloomberg Intelligence folks. They cover two thousand companies and one hundred and thirty industries all around the world. All right, let's get to one of them right now, super Micro devices. Super Micro, I should say, up solidly.
At some point it was up.
Like thirty percent today, up twenty two percent now at this point, the super Micro reviews finds no evidence of fraud and the CFO was replaced. Let's get more on this. Ujin hoo boom. Bring intelligence and your technology analysts, joins us. Now, remind us what the problem is that super Micro is trying to create too correct.
Yeah, hey, Alex, thanks for having me on a couple couple of things. There was a short sell of report back in August citing that there was some fraud you know, with internally, and essentially because of that, there was an internal investigation and they delighted their ten K and ten Q filings. And what super Micro is essentially saying their internal investigation has found nothing or no evidence of fraud. But the ten K and ten Q filing still have yet to be filed.
But it's not every day that a big four accounting firm does what happened here basically says, you know, they really can't rely upon the management team and they and they just walk away from an account that doesn't happen.
Yeah, problem, No, Paul, I think between your lifetime and my lifetime in the financial industry, probably four or five times, right, So, yeah, it doesn't happen. It doesn't happen. They did find an alternative BDO USA, and you know, quite quite frankly, with the special investigation you know, being completed without evidence of fraud, it actually almost gives them a BDO a safety net to actually expedite the ten Q and ten K filing sign off in my opinion.
So does this put all the questions to bed at this point?
No, not necessarily, quite frankly. I mean, let's see what BDO says. I do think they're going to try to push along the filings as quickly as possible, possibly by year end. You know, the deadline is sometime in late February. But you know, I do think they'll try to push it along now, I will tell you.
Uh.
The other question is is that was there so much reputation damaged because of this? Did they lose business? And if you think about where the shares are today, it's still well off the peaks.
So assuming they can put this issue behind them, what is the story for this company here, super Micro News, how do you position it within your tech stocks?
Yeah?
Look, super Micro has been one of the hottest companies within the hardware industry. They were on the forefront or the poster child of AI servers, and you've seen a rapid rise in sales, going from a billion dollars or three billion dollars in annual sales, and they were on track to about twenty six to thirty billion dollars in annual sales in fiscal twenty twenty five. Right, and this is over a span of four years. Now, they didn't
retract a guidance, but they didn't affirm guidance either. So the question is is that, look, what is the real sales going into fiscal twenty five. We do have a scenarios scenario analysis that in a draconian way, it's going to be sixteen billion dollars in sales.
Right.
That's far off of the twenty six on the low end, but you know, it's still sixteen billion dollars in sales that super Micro could deliver on the AI story alone.
And this is AI netlike hardware right, versus AI chips for example from in video, right, So a competitor would be like Dell, right, like an.
AI server play exactly.
So if I was a customer and I was like, you know what, super Micro, I need to go somewhere else.
Is the only other option Dell? Or are there other players out there?
Oh?
Yeah, Look, if we go back to last May at Video's conference, there were a host of AI server companies that were willing to partner with Dell, I mean, with Nvidia. So super Micro is not the only game in town.
Now.
There is Dell nor Hpe. There are some Taiwanese ODMs that are more than happy to assemble AI servers out there. So we've seen the because of the growing competitive pressure, we've seen margins compress as a result for the industry.
So they sacrifice. It feels like this. How does the street feel about the rest of the management team, the leadership as well as the board.
Well, look, the main issue in my mind was not only the CFO, but also the board. When you have the wife of the CEO as a member of the board and a seventeen year old a person on the board who's been on for about seventeen years, there's very limited independence. Quite frankly, I do think there needs to be some sort of overhaul of the board. And I've said in the past on this show, and I have written that I think the CEO may need to be promoted to a chairman role and I may need a new CEO.
Now, is this what part of all of this has to do with just going from a company in the Russell to the company in the S and P and is growing super fast and having different kind of analysts coverage And how much of this was going to come kind of no matter what.
Yeah, you know, that's a good question, Alex. You know, look, this used to be a Russell company or a mid cap company and it was under the radar for a lot of analysts. And now we're talking about being in the S and P five hundred index and you're gonna have a lot of magnifying glasses on the financials. And keep in mind, you know, it's only been about five to six years back where they were delicted from from the NASDAC and for them to do this again, it's
quite frankly shameful in my mind. Now, if there is, if there is no wrongdoing here, shame on me, right, But you know, Fumi wants, you know, shame on them, fully twice shame on me. So you know you're gonna see a lot of scrutiny going forward. I don't know if they'll come back after this.
Have they lost have they lost customers to any material basis?
Nothing reported as of yet. What they said on the last earnings call was that there were a couple of customers who you know, they're trying to retain.
That's a nice way of saying not yet. I think from a CEO speak, how much more?
Okay?
So, just pure valuation perspective, how do we know how to value this company when they're all these questions.
Look at the end of the day, you know, and Paul taught me, well, it's all about cash flow and earnings. Nice John, And I don't know what. I don't know what earnings is. In our scenario model, we have a buck sixty in earnings go going forward, and hardware companies of this ilk AI companies are ranging anywhere between ten to fifteen times. So if my buck sixty is right and it's going at around let's just say at the
high end, fifteen to sixteen times. No, it seems like from a valuation standpoint, it's training at the fundamentals.
All right, Wujin, thank you so much.
We appreciate it.
Wujin Home senior technolog channels for Bloomberg Intelligence down there in Princeton, New Jersey, super Micro, they're trying to make
some headway here. They let go of their CFO, but it looks like they're going to get their accounts to sign off on some of the financial statements that allow them to file their k's and queues and maybe get some of this accounting issues behind them, because, as Wujin was saying, before this accounting issue there was a high flying stock and really believed to be in discount of by the market is one of the plays for AI.
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Let's get more on the manufacturing data because for the first time in eight months, new orders entered expansion territory. Joining us for now is Tim Fiori, chair of the Institute for Supply Managements Manufacturing Business Survey Committee, and he joins US now Hey, Tim, what drove that expansion?
A couple of things, Alex.
First off, the new order number finally broke fifty. I mean, we broke fifty before in the last couple of years, but we've broken fifty here for a good reason. It feels like the man is starting to come back now that the uncertainty around the election is behind us.
That's a good thing.
The other thing that validates that is that our manufacturing inventory number actually rose five point five points, which would also indicate that companies are more willing to invest in working capital to get ready for the twenty twenty five business here.
So overall, a good report. I think. The other point here is our employment.
Although we're still destaffing, we're not destaffing as strongly.
You know, we came into forty eight point one.
So the three of those together got us close to forty nine. And I'll tell you if the supplier delivery number, which surprisingly actually got faster, if it had remained slower, we would have broke forty nine and gotten closer to the fifty.
So overall, a good report from November.
A little bit surprising, a little bit more positive than I would have thought this early, but very consistent with the fact that.
Rate we're on a rate reduction cycle.
The election is behind us, it's obviously going to be a positive thing for the economy, and off we go into twenty twenty five.
Tim, great to have you with us.
Tim Fury, chairman of the Manufacturing Business Survey for the Institute for Supply Management, zipping in here with some economic data. For word came in a little bit better and expected, so we'll take that. I wonder how much of that has to do with the election and some of the economic optimism that has felt in a lot of parts well.
And also I wonder how that winds up looking as we go into twenty twenty five, because it will we see stockpiling ahead of any tariffs well, and will that change the inventory in new orders? That could be interesting to figure out too.
Yep, very good.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 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, Play Bloomberg eleven thirty.
Alex steal here alongside Paul Sweeney.
This is Bloomberg Intelligence Radio. We bring you all the top news.
And business, economics and finance and politics from our lens of our Bloomberg Intelligence folks. They cover two thousand companies in one hundred and thirty industries all around the world world. We also tap wonderful guests outside of Bloomberg Intelligence for their broader take on the market, particularly after a really stellar year.
Here's some facts for you.
SMP is up almost twenty seven percent on the year, the best performance through November since nineteen ninety seven, and going back fifty years, the SMP has always gained in December after rising twenty five percent or more in the first eleven months. That's a technical way of saying the rally could continue.
I'll joining us more.
For his take is David Awaddell, CEO and chief investment strategist at Waddell and Associates. He joins us now in the studio. David, good to see you, Thanks for joining.
Good morning.
Now.
Is that the deal? Like, Hey, we're up just to keep buying it?
Why not?
I think the number of occurrence is in that sample space was rather small, but we'll go with him. Okay, I think the Santa claus rally can continue. And you know what's amazing is that earnings are accelerating from here, right, So as we look out over the next twenty four months, earnings grow fifteen percent next year, maybe fifteen percent the
following year. And so with that as a backdrop, and by the way, here's a nice stat In years where there's not a recession, markets are higher eighty six percent of the time. So it bodes well for next year. And I think people are squaring that going into the end of this year.
We're almost a month of past the election. When you look up the day after the election, did you and your team did you rethink maybe your outlook for asset allocation or maybe how you think about investing. Did the change in administration and the Republican controlled Congress did that changed how you looked at it?
A great question. So to a certain extent, we were all so already anticipating a.
Move down the cap spectrum.
You know, I don't think the mag seven go to the LAG seven, but other people should participate, and they have in the second half of the year. So we'd already sort of moved down the cap spectrum, which is part of the Trump trade. The part I hadn't really anticipated was how strong the currency reaction was going to be, So our offshore holdings currently are unheedged. That's up for discussion now in terms of because the move in the currency has been dramatic, and that may be the big
story for next year. Less so interest rates, since it pears that the markets like our new treasury nominee. But that's up for discussion. On the investment com me is whether it a hedge currency or not.
Well, that's actually quite interesting because President elect Donald Trump has made no bones about the fact that he wants a week er dollar. But then the thread over the weekend to the bricks Nations about you has still have to use the dollar, and we know that tariffs are coming.
How does that square itself?
I don't know, and I keep going through that gymnastics in my head. But I'll tell you the most interesting thing to me is US imports are four trillion dollars. If Trump slaps ten percent tariff on that, you know, it's four hundred billion dollars in potential tax revenue. Now, my economics textbook says, well, that just means that ford producers are just going to raise their price is ten percent. Well, the dollars appreciated eight percent since the end of September,
which almost negates that in the marketplace. So I think the interplay between the tariffs and the movement and the currents may be the most interesting thing going into next year. And again that may just be you know, state craft and jaw owning and not really policy but more negotiating positions.
We won't know.
But I think the currency is the most interesting.
US versus non US. How do you guys position that generally speaking?
Well, so we benchmark against the all world the ACLEE, and we've been tilted towards the US, but the valuations overseas are much more compelling. The earnings growth is okay, but Europe seems anemic and continues to struggle. I think, you know, the stock market in Germany and if you look at earnings in Germany and the size, that economy hadn't done anything in the past few years, and so
it makes it somewhat challenging to defend that position. But right now, at the moment, with policy being so uncertain, you know, I don't think it's time to be making large transitions, either on shore or offshore. But obviously the bias is towards the US right now, and that's reflected in the currency markets.
So what do you think it's.
Going to take for you guys to make it as a and whether to hedge your XUS exposure? Like, what's going to take the scales for you guys?
I would never fully hedge it, probably because again, currency markets are fickle and challenging, and things can change a lot with policy proclamations. Right now, we're fully unhedged. In terms of what portion of that to hedge.
I don't know.
That'd be a position by position decision.
Okay, it seems like ever since I've been in this marketplace June sixteenth, nineteen eighty six, by the way, growth has been the story. Yeah, howpen if you're a value investor, what do you do here? How does this new world that we're kind of entering?
How does that?
You know?
I've been making the standard deviation argument for a while, which is that performance and valuations have reached extreme levels. That is true, But if you look at this year, utilities have outperformed technology, right, Financials have outperformed, industrials have outperformed, and if you look at at the trade since Trump.
You know, value has done very well. I mean the mag seven's done five but mid caps, for instance, which are more value latent, have outperformed small caps, which obviously have a lot more financials since June thirtieth, or up twice as much. So I think I hate to say, you know, we're overdue, because we've been overdue for a while, but I do think the value trade has some substance
to it. And if what we're trying to do is drill another three million barrels of oil per day, which is a ton because we're drilling what thirteen and change, that's going to benefit materials companies, that's going to benefit
industrials companies. And a lot of the Inflation Reduction Act infrastructure spending hasn't even come out yet, So I think industrials end up being kind of the darling you know in Trump one point zero energy actually was negative even though the S and P five hundred was up seventy percent over that period of time. So, you know, I'm not sure all value sectors benefit, but I would say industrials look good, Financials can continue to look good, especially
with less regulatory pressures, and materials should look good. So and utilities. You know, the earnings, they are pretty substantial, and there's some obvious link with what's going on in AI. So it may be that values overdue and that twenty twenty five will be the year of value.
We'll see, we'll see exactly.
I was going to say, you know, who doesn't like three million barrels of oil a day? Extra oil oil company?
That's right, the industrials.
Exactly what do you do then? With tech?
You said, you know, earnings earnings outlook for technology is definitely going to be lower next year, right, but it's not nothing. It's gonna be double digit's probably the mid teens. How do you invest in big tech currently?
Well, it's kind of curious, you know, if you look at the socks, like.
Half the Semi index, Yeah.
Half the stocks in there are negative this year, and I think the index itself is up about thirteen percent. So it had a great twenty twenty three. It did not really have a great twenty twenty four. But if corporate taxes are four hundred and fifty billion, and Trump's going to cut them by another thirty three percent, that's going to create a lot of ammunition for CAPET. So I don't think the tech trade is over. It's just more fun when other people participate as well. So I think everything you.
Don't like cell tech.
No, I don't think you sell tech, but I do think you start moving towards more mid gap small cap exposures. In fact, since Trump, I think was elected, the number one performing factor was small cap growth, so MidCap tech, small cap tech, you know a lot of cap X. I see that all of that is bullish.
Bond market to your treasury four point two percent, or take some credit risk here.
You know.
Here's the thing. So during Trump one point zero, nominal GDP was four point eight percent, Real GDP grew two point eight percent. Inflation was two point one. So we're sitting on the ten year, which is where the equity market really prices at four twenty two or something, call it whatever it says. That means that we're priced appropriately from a pe perspective for the stock market. So I
think things have got it right. What'll be curious is when the Fed comes out on the eighteenth, they'll release their summary of economic projections and we'll see where they think the neutral is. You know, obviously the number of rate cuts has come off the table to about two and a half over the next twelve months. And so there's a lot more tensile strength in the economy that people thought. And we'll get I guess the isms this morning I'm looking for.
Yeah, they're actually pretty good. Yeah, mana fashioning.
So the new orders went into expansion territory for the first time in eight months. The other parts of the indices didn't, but it was close, and we heard the inventory started.
To rise again. So really gearing up for a business cycle in twenty twenty five.
Yeah, and where was service? I guess we'll get services there later. So if manufacturing turns the corner and starts being expansive, then where should the neutral rate be? So I think that's the big question mark. But I think I think we're back to two two and a half rate cuts, although you know, i'd love a Christmas cut on the eighteenth.
Do you think we're going to get that?
I mean, I don't know where the the CME tool is. It was at sixty six percent when I looked over the weekend.
It looks like we are priced in for at least one but it'd be great, Okay, you like that? And im Services is coming up on Wednesdays. You'll break that down to you as well.
David. You're based in Memphis, Tennessee, right Memphis in Nashville. Memphis talked to us about Memphis. I haven't been to Memphis. I don't think I've been to Memphis. Talk U about economy down there.
What drives Memphis?
Well?
Right now Elon Musk because he just decided to build his AI data center in Memphis, Tennessee, Yes, exactly, and doubled the capacity immediately. And you know, they continue to raise money for XAI, which means more capital expenditures. So there's a lot of industrial you know, expansion going on right now. Because we have a great power grid, We've got a great logistics network. You know, our anchor tenant is FedEx, which is the you know, the global nervous
system from a trade perspective. And so I would say Memphis is a value stock right with an opportunity to buy it you run three hours up the road. Nashville is a growth stock and headquarters just continue to move there almost every single day. So it's it's an age of renaissance in the state of Tennessee. Right now.
I'll tell you, I mean, you read about it. I'm just looking around here. I mean's just yeah, Memphis, Nashville. You hear so much about Tennessee. It seems like every car company. What's it about Tennessee.
Well, Corker was good at that too. Yeah, So we had great political leadership. Brettison was amazing, Corker was amazing, and Nashville has been very aligned on a growth agenda politically, philanthropically, you know, in the private sector obviously, and so it's just, you know, it's a great time to Nashville has.
Become the which I don't know why, the bachelorette party capital of the world, you know, surpassing Vegas.
I was in Nashville, was with you with radio, but I was so sick. I didn't leave the hotel like the whole time for three days.
So it's good times.
That hotel was nice, they had nice Starbucks. Sorry, we appreciate your time.
Thank you so much.
David Wodell, a CEO and chief investment strategist at Wodell and Associates.
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The political news today is coming out of France. The far right National Party of Marine Le penn will back a motion to topple the French government after Prime Minister Michel Barnier failed to agree to all of its demands on next year's budget. Let's get the latest reporting there with Ben Sill's Bloomberg Managing editor for European Economy and Government. Ben, do you educate us as to what's happening in Paris right now?
Yeah?
Well, you know, it's difficult to keep up, to be honest, We've got the headlines breaking on the terminal right now.
I'm just in the last few minutes, as you.
Say, the far right part Marine la penn has come out and announced that they are going to vote to bring down the current administration.
It's been a really dramatic few days.
The Barnier government has been walking on thin ice ever since it was formed in September. Their lack of a majority in the parliament meant that Marine la Penne effectively had the power of life and death over that government. Barnier has been desperately trying to get its budget through. Feels like every other day for the last week or so, he's been caving in to one demand or another. He's now, by my reckoning, given La penn three or four of
the main demands that she wanted. She's still not happy and so she's decided to pull the plug on the.
Government right and by forcing it through. Therefore, thus vote of no confidence can be called. Within the market, we are looking at a weaker euro. There's also been a lot of talk about how the difference between yield in Germany and yield in France, well France in Germany has blown out, and then it's at the level that we haven't seen since the European sovereign dead crisis back in
twenty twelve. It's an easy comparison to make, but it's very different when you look kind of under the hood at that.
Yeah, absolutely so.
I mean the threshold that we were struck by last week was when the French bond spread actually went wider than the Greek bond spread. You know, those of us who are around a handle fifteen years ago, when the sovereign party with sovereign crisis blew up. Got used to tracking the Greek spread, but we never really thought that France would be in the same boat.
So where do we go from here? Where did the French go from here? And kind of what's the timeframe here?
I agree, Yeah, that's a question. I mean, I think that.
In terms of the kind of the next steps, we'll be looking for the no confidence vote to happen in the next couple of days. We would expect that to go through. That doesn't really resolve anything though, because under the French constitutional rules they can't hold another election until next next July, I think, And so there's no way to put this to the vote to get a new kind of parliament there. So Macron is going to have the same complicated, divided legislature.
To work with.
The parties are going to have to try and come up with a new and a new agreement for governing.
But I think everyone's gonna be looking at La Penn. She's she's setting the agenda here. She's the one who.
Has decided to force the issue, and so it'll be there will be a sa onus on her to make the first move when we come out the other side of this crisis and one.
Of the triggers for this was, of course, this Apple election that sort of set up the government like this in the first place. Are we at risk of having that happen again, having that happen again?
Yeah, I think that. You know, this is something that's been building for a long long time in France.
The Penn has been a fixture on the political scene there for you know, more than the decade. She had her first presidential run against against against Macrow in twenty seventeen, and so the French establishment has been coming up with a series of kind of increasingly creative ways to keep her out. But her stock is higher than it's ever been before at the moment, and you can see that by the way by the way she's leveraging her power this week. The endgame really sent us on the twenty
twenty seven presidential election. That's when the Penn is really aiming to finally take power in France.
The question is.
Does Macron hold out to then There has been spect collation in France that he might quit, but you know, he's so that he's not going to do that. So that means we're kind of in this sort of slight limbog situation where no one can really government, but they can't force direction.
Ben, thank you so much for that reporting appreciated. Ben Sills, Managing editor of Bloomberg News. He is coming in from our Berlin, the Germany studio on the latest news coming out of France. Some political instability right there. We're seeing that in the euro.
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Alex Steel, Paul Swene, You're live here in our Bloomberg Interactive Broker Studio and we're streaming live on YouTube as well. So the head over Bloomberg dot I mean, I'm sorry, YouTube dot Com and search of Bloomberg Podcast, and that's where you will find us. Let's check out with our next here, because what a lot of folks are trying to do is figure out how to reposition their investment outlook, their portfolio for a second term of President elect Trump.
Any changes that need to be made. People trying to think about those right now. Peter Anderson is one of those folks, founder and chief investment officer for Anderson Capital Management, joining us from Boston, mass via zoom. So, Peter, we're almost a month removed from the election. We now have a Democrat Republican White House and a Republican Senate and Congress by thin margins.
Yes, but still there.
Given that backdrop, have you and your team made any changes to your outlook for investing?
Normally this would be kind of a textbook exercise, but with the nature of President Trump, it's very, very difficult to make any kind of projections. And you know he's thrown several monkey wrenches into the works. Now there's certainly the tariff situation has everybody running and scrambling to analyze how this is going to work out. So I would say the past playbooks, you really have to throw them out and you have to look at something totally different,
which is the dynamics of tariffs. How is that going to influence higher potentially higher interest rates, items like that. So we are looking, but I will tell you it's almost a fool's errand to try to work through all that and come out on the other end of that analysis with a highly confident, a highly confident outlook based on what the president is going to do.
So all right, there's high level of uncertainty out there. We've heard that from a lot of market participants as well. Given that, where are you guys today, stocks, bonds, value, growth, How do you position right now?
Well, I just run a single strategy, and it's a growth strategy. Equities, it's an all cap strategy. So what we're doing is we're looking at the current home holdings and we're asking ourselves how vulnerable are they to policy changes? And if there are stocks, in our opinion, that are more vulnerable to the uncertainties of those policy changes, we
would probably look at selling. However, we've reviewed the entire portfolio and in our opinion, all these stocks that we hold, which are under fifteen in fact, are fairly invulnerable to tariffs, to interest rate changes, things of that matter.
How much of that is going to be, say AI and big cap tech, A.
Lot of big cap tech also. I was a big enthusiast of artificial intelligence, namely in Nvidia and super micro and some of the others. But we're thinking now that the enthusiasm is a little bit overspent. And anticipations of how much AI is going to actually accomplish and contribute to the bottom line we think is vastly, vastly exaggerated, and so we have trimmed those exposures dramatically coming into the next year.
Peter, how many stocks do you own in your portfolio today?
Roughly?
Does that in lineer a little bit different in the past strategies.
About well, actually exactly thirteen stocks. Wow, So it's fairly concentrated. I don't think you'll find another manager out there that runs a concentrated portfolio of that few numbers of stocks. So you can imagine that it takes great confidence in the holdings and understanding each one, and certainly now with the change in administration, it actually puts more of an emphasis on that and to try to play out what
we think is going to happen. So, for instance, you mentioned artificial intelligence, but cybersecurity is a major exposure in the portfolio, and we think that regardless of who is in the administration, or where interest rates are going, or if we have one hundred percent tariffs that's been made mentioned recently in certain countries, we don't think cybersecurity would be impacted by that it just makes common sense to.
Us thirteen stocks. What's your average holding period? I would think once a stock gets in your portfolio, it's not going anywhere.
That is true.
You know, the turnover is under thirty percent, averaging over the past ten years. And we really do spend a great deal of time looking at these stocks. And you know, compare we sometimes get criticism. Well, you know, it's so concentrated. What about your competitors. Your competitor is on anywhere from what's say, fifty to one hundred stocks, and we challenge them on understanding those holdings in as much detail as say a portfolio of under twenty stocks.
So do you when you talk about the AI trade, like when you said that you think that it's an over promising one. I'm paraphrasing here, but the expectations are just too high. What do you mean by that? Is it just that it's not going to be this big revolutionary thing or that money eventually will stop being spent on it.
Can you dissect that a little bit more for me?
Of course? And thank you for asking, because I really do think this is a neglected point that investors really have to spend some time on. So I think investors have gotten a little bit over their skis and thinking that AI is going to be the cure all of everything. And one thing I can just mention to you is if they think there's going to emulate human thought, the brain is about the size of two fists. Look at the real estate of chat GPT for instance. I mean,
it's enormous. And now we're thinking of dedicating nuclear power plans to powering these things. When the human brain works on a refrigerator light bulb wattage under ten watts. So we're going down the wrong path. We think in terms of formulating artificial intelligence and making it human like, we think that that's at least ten or fifteen Nobel prizes away, and investors have not caught onto that concept yet, nor
have certain CEOs. They continue to spend warm us amounts of money and when you ask them what the rationale is, they say, well, because our competitors are spending just as much money.
All right, Peter, thank you so much for joining us. A he's a pleasure chatting with you. Peter Anderson, He's a founder and chief investment officer Anderson Capital Management up there in the Boston area.
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Now.
What's interesting about gas is that we make a lot of hay some hey about US oil exports, but in actuality it's US gas esport exports in the form of LNG that is a huge transformational part of the energy story here in the US. Where do we stand now and where do you think we stand once President Trump takes office?
Yeah, so, as mentioned, the US is the largest exporter of LERG in the world. And in the short term, we have a considerable amount of new capacity coming online, and that was bound to happen regardless of whether we
had Trump or Camala in office. But yeah, we have Plaque and Minds and the Corpus Christie Stage three expansions coming in this December or early next year, and then the Golden Pass LNG terminal as well, so giving US more than seven bc of the seven billion cubic feed per day of export new export capacity out of the US,
so further consolidating that role. And then where the change could be more significant is in the medium term with the terminals coming later this decade for it, and especially with these discussions of Trump lifting the DOE Non Free Trade Agreement permit post because this is a key permit that the terminal terminals need to be able to reach
their final investment decision. And there's a few high profile projects there, such as the the CP two expansion from Entry Global, and then we also have a sabine Pas Corpus Christi expansion alongside other projects that are targeted for them.
So basically, if you're not exporting energy to a free trade agreement country, then you're no longer allowed to exit to do it. But many said that was like an export thing that they were doing that really wasn't going to hold. It was just an election thing. So that's what we're referring to. So that would really help get a lot more investment in.
There is the expectation in your world of natural gas that a Trump administration combined with republic controlled Congress, this is going to be the time to get stuff done, whether it's a pipeline or refinery or anything.
You know.
Going back to the idea of the LERG terminals, it's definitely, yeah, you have more support to get this project still one. I think moving to the idea of pipelines new like interstate pipelines, that's a bigger There needs to be more change, It's a bigger conversation, but it is there's definitely more momentum that we would have otherwise had.
So to that point and it's a good one that you make because a lot of the gas that we have is in Appalaysia and it's really hard to get that gas out. It's in the northeast, you don't have a lot of takeaway capacity, and you do get a ton of gas from also shale productions, so within New Mexican, within New Mexico as well as Texas. So there is that What do you think we're going to be able to do in terms of getting pipelines in to get gas out of Appalachia.
Yeah, so I would say that's not my subject matter expertise the policy behind the pipelines, but I think there is space to have more discussions about what can be done to get some more.
Gas from But if we don't, we wind up getting a glut at some point of gas because there's just too much we can't get it out. Therefore, gas prices here in the US kind of really sink.
Yeah, and when we've already seen this happen, especially this early November when the weather was pretty warm, we've seen, yeah, Appalachia can't really send more gas out, there's no internal demand in the Bay. And then we've seen producers actually Curtel production because the prices have dropped below the level they need to continue producing even from existing wells, and they're well below the break events in some cases for
new wells. So we've already seen that have an impact in production in Appalaysia and as well in other parts of the country. You have the Haynes Bill as well, that's closer to the Gulf and where a lot of the rhetoric is that we the production to meet the demand from these new Allen g terminals is going to come from there due to the location, but they do have higher break events and higher costs than in the Northeast.
Coal.
What's going on with coal and what do you expect under Trump administration? Happened to the coal industry in this country.
Yes, so there's been a lot of discussion now about potentially rolling back some rules from the e or just having being easier on pollution from coal. I've seen I think it was Duke Energy as well discuss the possibility of keeping some of their coal plants operating for longer.
So that is a possibility and what it could mean for gas and for power sector gas consumption could be pretty interesting because over the last ten years, one of the main roles of gas in the power sector has also been replacing right this retiring cult coal plants, which has been a benefit in the sense that we've seen lower emissions as well. But this could be more difficult. If the coal plants stay operating longer, you might not see gas taking over in the same way it hadn't been.
That's interesting.
That would remove like this very mechanical market function basically for gas and coal. Is the coal Is it green coal, is it like nice coal that we can all get behind, or is it still dirty coal that eventually is just going.
To have to be phased out.
Yeah, there's a lot of discussion as well about integrating carbon capture for coal, try to make make it cleaner, but yeah, the economics are difficult, and especially in the short term, we probably won't see a lot of that happen, so it could result in emissions even increasing.
Is there the expectation on our Trump administration is that just a whole move to renewables will slow down, maybe slow down materially or is it just too much momentum.
Yeah, No, definitely, parts for example, of the Inflation Reduction Act or are repealed, or there's some changes in that sense,
we could see slower deployment of renewables. My colleagues in ven f IN or Clean Energy Tea look in a lot of detail into this, but yeah, this could lead to an interesting dynamic where you have less coal retirements, but maybe you have a slower deployment of renewables where GUS maybe doesn't grow because there's a less coal, but takes over some of this generation that would be needed
that would otherwise come from renewables. So I think there's a very interesting, very interesting analysis and a conversation to have about how this gap is going to look.
All right, Amikay, thanks a lot, Arika Gonzalez, Bloomberg b Andy apphead of US Gas Research, Thank you so very much.
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