Markets, Elon Musk, And Bank Earnings (Podcast)

at Bloomberg dot com slash podcast. Let's check in with Adam Gold, founder and Chief investment Officer Acadam l L c Adam Again, kind of a boring day today, but when you talk to your clients, what's your number one message these days? Good morning, guys, Thanks for having me back on. We think boring days are fun. They may not be fun for for the news cycles, but generally speaking, things don't change that much day today in the long term, in the big scheme of things, any given days something

might change that. But generally, since we last spoke a few months ago, things have gotten, you know, extremely worse across so many investor sentiments, inflation numbers, interest rates, rysing and all of that is already priced in. We think a lot of that is what's caused the markets to sell off here the last few months. So people who talk and we speak with clients every day and they're very concerned about where they are, and we say that

that's the opportunity to be deploying capital. To be concerned now. To sell now feels like you're a few months behind the curve um And somebody argue that's where the fete is. But the fet is you know, trying to react to to what they see every day. And so we think the opportunity is for people who have a long term horizon, which is multi years, which is the only kind of investors investors and investments we try to focus on. Then we think this is a time when other people are selling,

you should be buying. And it's not easy, it's not fun day to day, and things may continue to you know, to get worse on a daily sort of return basis, But that's where the opportunity is because long term, there's still extremely large, glowing, growing trends around technology, around population growth. There there's just a lot of underlying tailings here in

the long term. So I mean, we're we I know that we're not trading for undred, but we are at forty four D on the S and P. It's it's not so far off from the high are you saying, are you saying it's just um, you know, gonna look like we'll look like in the rear view mirror five ten years from now, such an opportunity that you should buy now, regardless of what we do in the next few weeks or months. That's our viewpoint. When I was

born in three the Dow was eleven hundred. When I started my career in two thousand one, the Dow is ten thousand. We're at thirty four thousand now. And if you look forward a couple of years by a couple I mean, you know, a couple of decades, rather you know, we're going to have a Dow at a hundred thousand, and that keger. That annual growth rate is sort of

in the low mid single digits. It's not in the teams anymore, because you know, when you have a large numbers, there's it's hard to continue to grow at that pace. But if inflation is in the mid single digits and fixed interest rates are in the low single digits before tax, we still believe equities are the only place to be invested over long term to have any chance of beating inflation.

All right, So what are some of the sectors that you think we should be looking at here as we go into or as we you know, we certainly are in the beginning of a rising interest rate environment. Yep. So I think historically financials, you know, there's sectors. Now what's now we're refocused. This is what I think generally. The opportunity that people may think is well with rising rates,

banks can get paid more. But then of course we have inflation concerns, and so there's obviously recession risk, and so banks do not do very well during recessions because there's a lot of loans and there's bad debt, revisions and things that cost their earnings to go away to take away some of that. You know, interest rates increased opportunities. So we've only focused on technology for over twenty years. The reason is that innovation and new product cycles, these

are not priced into stocks today. The only thing that analysts can do is project forward for what they see in front of them. I don't give the example of Apple. When I started investing the company with the iPod, people thought the iPod was going to go the way of the Mac, Windows and Microsoft, We're going to take them out. And then a few years later that hadn't happened. So the company grew very nicely, but then they introduced the iPhone and that none that there was no revenue or

profits based into those estimates. And we think about are their innovative companies today that are doing exciting things And that's where the technology world is so great, because there are companies working on internal innovation and new products where analysts cannot price them in, and so we're starting to

see downgrades. You know, it's funny, is you know, back in November always saw our upgrades of companies, example like Navidia three forty share, we were seeing upgrades, analysts were chasing each other with targets that were higher, and now at to twenty the stocks down thirty cent, same company,

same business, same innovation, we're seeing downgrades. There were no downngrades at three forty and so it just seems like the Wall Street and some of the analysts that are focused on generating commissions around trading, they do the exact opposite of what you should do for a long term investing. You guys get commissions, Paul, You we should definitely get I mean, you get ranked by your salesforce and stuff, and you know, making some big calls and things like that.

So kindly. Yeah, but I think the exact opposite of how to compound wealth. You want to buy low and sell high. To be downgrading stocks that are down thirty out of cash flows, that of, you know, exciting opportunities in the future. That doesn't seem like the great long term decisions. I hear you, all right, good stuff. I mean, I don't know. I mean, I guess I kind of did that back in the day on the cell side, Adam Gold, founder and chief investment officer Cantampent. That's the

sin he's telling us. That's the wrong thing, that's not serving your customers. I was a big investment banker as an analyst. We did tons of deals in my space. I'll mention if I'm still on, I'll mention one more example of a great investor. The Oracle from Omaha has deployed over thirty in the last month. Yea, I know he's been putting money to work. We appreciate that. Adam Gold, thank you so much. Founder in chief investment Officer Cadam LLC. Matt,

you have any idea what Elon Musk is doing with Twitter? I? Uh, well, you know, what we watched. We all watched that Ted talk thing last week, and I thought it was really fascinating. Um, he says this is something that he wants to do for democracy, for society. It's a free speech issue and

not an economic move. Okay, A lot of people aren't going to take that at face value, and especially you know, on the left, there's a lot of concern that he wants to I don't know why there is this concern, but everyone's saying that he's kind of coming to the rescue of pro Trump people or I have no idea about that. He seemed genuine and uh, I think it's fascinating to watch. It's fascinating to watch, and fortunately for us.

Matt Winkler, the founder of Bloomberg News, editor in chief emeritus of Bloomberg News, he's paying attention to this, uh so he can share his thoughts. Matt. You know, we we look at Elon Muskin. I as a traditional investor am uncom table with this guy, particularly if I were a shareholder of one of his companies, even though the stock has done so great and he's made so many investors so much money. How do you think about Elon musk These days. You have to think about him in

the context of maximizing shareholder value. And if you go back to the initial public offering of Tesla in two thousand ten, Uh, to understand what has happened to Tesla, you have to put an exponent next to Tesla, so it's Tesla to the twelfth power. So this is a company that's gone from a billion dollars to UH a trillion today. And um, it wasn't luck. It was if you think about it, two thousand and ten, virtually nobody

took electric vehicles seriously, today everybody does. And disclosure mat you are a Tesla driver owner, right I am, and a happy one. Yeah, And I can attribute that that to uh combination of meeting Musk for an interview at Bloomberg and SpaceX headquarters back in two thousand fourteen, and after we got done, h he invited us to try a Tesla or two, and uh, you know that's where

it started. But you know, really all kidding aside. What is relevant about Tesla is that it has been very methodical and very disciplined about growth and that's the something that's the one thing that gets investors excited. And Tesla's had growth that has been unequaled by any of the top largest companies today. And Tesla got to its one trillion market capitalization in eleven years sooner, if you like, than any of the companies were familiar with, whether it's

Microsoft or Amazon. Facebook got there briefly, but it didn't last very long. This the Tesla evaluation is sticky. And you may have noticed that last Thursday, Uh, one of Tesla's champions, arc Cathy would Um, increased her target more than to forty dollars a share. So that's an indication of just where testing she's Tesla. I mean, you point out in your column that she um forecast I think it's trillion dollar valuation before anyone else did and stuck

to her guns. Yeah and uh. And there's a reason for that, is that why is Tesla done as well as it done, because it actually anticipates the things that it needs before everybody else does. And what I mean by that is Musk was very concerned about vertical integration

long before COVID nineteen became a problem for every company worldwide. Uh. He did things to achieve supply security, if you like Nicol for example, very important essential component in electric vehicles, and he made several agreements to get nick Um so that the supply would not be disruptive for UH Tesla. And the latest quarter, for example, show the deliveries were much better than what people anticipated, even though he said

it was a very difficult quarter. So this is a company that actually has been very strategic in the way it goes about UH manufacturing vehicles. Their factories are built from the ground up, whether it's Berlin, Austin, Texas, UH Fremont, California. UM. And he's done incredible. Look he I still use PayPal. I noticed this weekend. I was like, wow, I'm still

using PayPal and we saw him last week. I think send for civilian citizens to the I S S which is like mind blowing Lee, just unbelievable how well he's done in SpaceX. Why do you think he um makes all this noise on Twitter and challenges the SEC? I mean, is it just because he can? You know, I don't actually spend a lot of time thinking about what you

and others would consider his eccentricities. Otherwise smoking a joint on Joe Rogan's podcast, Are there other than to say this that he isn't the first brilliant chief executive officer, founder of a company if you like, to have attributes that people have considered socially questionable. And that's just has

been something that we've seen in history. And so what is far more important, the context that I think everybody misses is this company, Tesla, has transformed the world's view of vehicles to the extent that Tesla itself is a robotic company if you like, you know it's not a car company. How do you view by the way. I also, I don't want to sound too naive, but you have to give it to him that he's on so much

to fight climate change. He at least says he wants to buy Twitter right now to support free speech and democracy. I mean, this is a guy who has big ideas about helping the world right. So people can be cynical about that because he's made so much money doing it, um, but you can't deny the fact that he's changed the

way we think about the future of transportation. Yeah, and if you consider all the obstacles a raid against him, remember a lot of states wouldn't let Tesla's sell its vehicles the way it wanted to because the car dealer lobby, if you like, was so powerful. Um, and he somehow

got through that. The fact that now everybody's in this market and Tesla has been able to hold its market share consistently even though the market has expanded dramatically tells you something about the quality of the vehicles that he has. And and Cathy would for example, says that in battery tech knowledge, he alone Tesla is at least three years ahead of its competitors. Matt Um, your column today has

got the headline in defense of Elon Musk managerial excellence. Uh. Tesla CEO's track record proves he's a pretty eminent builder of businesses and maximizer shareholder value. He retweeted that out today. Did you see that? Somebody told me that your column formed. He's got a couple of followers, so I'm thinking, I think this might get Mr Winklers some notoriety because nobody let's let's just founded Bloomberg News, you know, I mean, but Musk does have eighty two point four million followers.

That's big. I'm just a reporter trying. You're just a reporter. You and Chinpeg and your team doing great stuff as always, lots of data in your column here. So again, check it out on Bloomberg dot com. Uh, and on the Bloomberg terminal and on Twitter apparently and on Twitter want a switch to crypto? Taxes? You have to pay taxes apparently meant on your crypto gains. Tom, we'll write founder of Wealth Ability Joints us here. Tom, give us your overview.

What do you what do you tell your clients about crypto and the tax implications of crypto and all things crypto? Thanks, Matt. Well, what you have to realize is that every time you use crypto, you've sold it and it's treated as a taxabull transaction. So you have to keep track not just when you actually sell it. Let's say you're you know, selling to Bitcoin went up and so you're selling something, but you're actually using it. When you use it, you also have to pay tax on that. And losses are

capital losses, so they're limited. Gains are capital gains, and so if you hold it for more than a year you actually get a tax benefits. Wait, uh, capital losses are limited. They can only upset capital gains. Ah, that is such a huge bummer. Um, I'm sure that no one's keeping track of bitcoin. They're using when they buy something. Um. In fact, this whole area is so new. Do you get a lot of people coming to you saying like, I just need uh you know crypto tax rules one

oh one? Because how how would you have any idea what kind of tax burden coin or or an n f T is going to generate for you? Well? Yeah, totally. Because you know, if you if you spend money, you don't typically think, oh I've got a tax taxical transaction there I have to track when I spend money. You don't think that. But with crypto you do. It's like it's like if you actually, um use the stock. Let's say you use some of your apple stock to buy something,

it would be the same thing. Uh. That's the way the I R S treats it. So tracking it is the actually the number one issue right now is how do you track all of your crypto transactions. I'm just guessing the I R S has no idea what to do with crypto? Are they tracking this stuff closely? Did they know what they're doing? No? I don't think so. I actually don't think anybody really knows what they're doing from a tax standpoint. Let's never stopped the I R

s yep. That's the point that has never stopped the irs. What However, in the in the Infrastructure bill last year, they did they are going to require crypto exchanges to track. So at least the crypto exchanges will have to track. This is kind of like back in the early um nineties. UM, I recall when people were day trading and they had to track every single day trade. But now the brokers do it, right, that's what's going on in crypto. All right, Tom,

thanks very much, appreciative. Tax Day wasn't confusing enough. Now we've got crypto, you have to you know, track the taxable uh transactions that you have with crypto. Tom will right, he's a founder of wealth Ability giving us some thoughts here on crypto when I don't know, I don't I don't think I've ever claimed anything on my tax returns for crypto at this point, and I you know what,

I don't plan on doing it ever. About that you're gonna have to do really yeah, I mean, at some point it's going to become, um, just like any other asset, or you're gonna have to have regulators to declare it like a currency. Wad of cash in my pocket I'm showing Matt, that's how we roll here. Matt. Back in the summer of before between my first and second year business school, Duke did an internship at Merrill Lynch Investment Bank.

My key transaulor Meryl. My key transaction from that summer was a million dollar I think that was amount liquid yield option note a lion for ker McGee, the energy company down in Texas. Uh wow, yep. We can't believe that you have trouble understanding crypto when you're dealing with such incredibly complex transactions. I have no idea what you just said. Yep, it was cool. Discounted the note for

Kirman Ghee. That was pretty cool. I can't remember the banker who I pitched it with, but anyway, that was good stuff. Anyway, they reported some numbers today. Uh Shali Bassing Joints is here in our Bloomberg in Erector Broker studio Shnale. How did my friends at Bank of America

Merrill Lynch do. It's pretty fascinating. You would not have expected this to be a quarter where anything hit a record, but advisory fees for the first quarter hit a record, equity trading hit a record, and part of that was because you have buy side clients of the likes of hedge funds and other clients, big investors still taking on financing in order to engage with these markets, more derivatives trading and so really robust trading desks there in the

face of expected high declines. Talk to me about compensation. That's my favorite topic. We talked about these investment banks. What are what are the big banks saying now because they're paying their junior bankers a lot more, I assume that means they're paying their senior bankers more. How big of an issue is this for the margins, Yeah, it

depends on who you are. For Bank of America in particular, remember their headcount has declined steadily over the last couple of quarters, so you know, you can raise prices for some bankers, but you can also not have as many of them. Bank of America is keeping control of costs. And remember it's not just the bankers, it's the investment in technology. This quarter, Bank of America generated more than

half of its total sales through digital means. Yes, fascinating, and so you are seeing they have hundreds of patents out for more you know, advanced technology and you do see them really keeping control over their costs at a time where they're willing to invest to gain more share in a tough market. So we've this is the last of the major Wall Street banks to report, right, if you step back and look at them, can you say

something universal about the banks this season? I go back to what Jamie Diamond and his executive said a couple of days ago, which is that the probability of a recession went from being low to less low. So you have all these banks that are, you know, not answering questions necessarily on what the probability of a recession is, but the fact that it may happen, and this is

what their businesses could look like in that scenario. Interestingly, in the event of an interest rate rise that's more severe than initially expected, Bank of America says that rates would have to rise a lot more in order to impact the way that people are borrowing, because right now, consumers are still pretty healthy at least how they look at it. Yeah, when I when I think about Bank

of America, I think about Wells Fargo. I think about you know, real lending to real businesses on main street, whether that's Main Street small town, you know, say main street, big city, USA, but really lending to fund growth. What are they saying about loan demanding? I mean, do you want to mortgage a five percent? That is mortgage? I mean historically, I mean it's not three percent that Matt, you know the mortgage arbitress. You're got just a couple

of months. I'll spend my easter somebody talking to mortgages somehow. But we are yes. I mean, listen, it does have an impact here on residential home loan originations, and you see it a lot of the major banks. But the thing is credit card spend and credit card borrowing is still pretty high, So there is still borrowing. It's just not everywhere necessarily. So in terms of assumptions, right, um, do we have to assume that the FED is going to drive us into a recession? And I mean because

that will change loan demand? Right, The assumption is that you can't look out past three months. The assumption is the next three months things could be okay, but after that things are very cloudy, and it's really anyone's guest where things go. Remember, Bank of America has sold off pretty heavily this year, about four cent or so so they are rising today, but it seems like these banks are trading within a range here with not too much upside on how some of those clouds leave the horizon.

When I think about the retail side of the business, Shannale, it's just I always read stories about Bank A poaching broker from Bank B. Is that still a thing? Oh? Yeah. People love the wealth business and if you look at the price to book ratios, that means a place that they're trading at. It's really JP Morgan and Morgan Stanley trading more richly than anybody else, which shows you there's a premium on wealth here. Good stuff, good stuff Wall Street.

I mean some good numbers. I think coming out of this first course, maybe the expectations were a little bit low, but we got through most of the big financials. Shale keeping us in the loop as she always does. Shanale, Basketball Street reporter for Bloomberg News. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews with Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller three.

Put on False Sweeney. I'm on Twitter at pt Sweeney before the pod cask. You can always catch us worldwide at Bloomberg Radio.