Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside my co host Matt Miller.
Every business day, we bring you interviews from CEOs, market pros, and Bloomberg experts, along with essential market moven news.
Find the Bloomberg Markets Podcast on Apple Podcasts or wherever you listen to podcasts, and at Bloomberg dot com slash podcast. Certainly, the big news down in Washington, DC these days is
the indictment of former President Donald Trump. We want to get the latest on how that's developing news over the weekend, so we're going to bring in a couple of smart voices here, Nick Ackerman, former assistant special Watergate prosecutor and assistant US Attorney for the Southern District of New York, so he knows his way around the legal side of it. Plus Bloomberg's Washington correspondent and Ree Horden also joined us,
and we appreciate both of them. Nick, Lex, let's start with you here, just for us, you know, kind of lay people here. I guess what's different about all of the former president's legal challenges is that this one is federal. How serious is this?
It's extremely serious. It's federal it means that the case is likely to move a lot faster. The judges, for the most part, including deciding Cannon, are normally better judges, although the judge in the state case in New York is an excellent judge. But this case will go to trial probably quicker than the state court cases, certainly quicker than the New York case, and quicker than the case that's about to be brought in Fulton County, Georgia.
Dates times, how quickly could we see that?
Oh? I mean, it depends on the prosecutor and the judge. If I were the prosecutor, I'd be telling the judge that I'm turning overall discovery by the end of next week, and that we want a quick motion date and a quick trial date. I would try and do this within ninety days if you could. Well, but that may be a bit optimate stick. I think, you know, within four or five months is certainly conceivable.
Ann Marie. What's the feeling in Washington, DC. We've had, you know, several days now to digest this news here, and I guess the political angles are starting to be kind of drawn here. What are you singing in Washington?
Well, I think a lot of people are focusing on these two polls that came out of the weekend, and this one from CBS really shull shows the control the former president has on the Republican Party and surely on his base because obviously he's being indicted, but this is all happening at the same time as he is running
to be the candidate for twenty twenty four. So most Republican primary voters seventy six percent said they're concerned that Trump's indictment was politically motivated in this poll, and then a majority ruled out that the charges would change their views of Trump, and eighty percent of them said that he should win a second term in office. So this just goes to show how this potentially can play out.
Trump can keep a really strong hold on the base even while he has this as his only Attorney General put it over the weekend, Bill Barr damning indictment. The issue, of course, is that a lot in the Republican Party are starting to look at but this what does this mean for a general election? Because the indictment might not matter for primary voters Republican Party, but what does it mean nationally for US voters overall?
Well, Nick does the federal government bring a case like this. I mean, how shorre do they have to be about their case before kind of bringing a case like this, do you think?
Well, put it this way, when you're dealing with someone with the high visibility of a former president, you make sure that you've got this button down one hundred percent solid. I mean, obviously, when you go before a jury, nothing's ever one hundred percent solid, But boy, this case is about as solid as you can possibly get. Having done this, been there before with water, you don't go about doing an indictment like this unless your evidence is spot on
one hundred percent solid. And here they've got it. They've got our witnesses. They've got a tape with Donald Trump actually talking about the fact that one of the documents was classified, that he couldn't unclassify it because he was
no longer president. They've got pictures of how this stuff was mishandled at mar A Lago, and they've got the testimony of his former lawyer, who basically will say that Trump was trying to hoodwink him and play him, and that he was being used by Donald Trump, and that thirty boxes were kept from his view, all of which contained classified information that was later recovered in the search warrant.
Well, Nick on on that point, though, you know, you mentioned these statements potentially from his former attorneys, and I look through that document, there does seem to be a lot of information that provided by people who were his attorneys. Does could attorney client privilege get in the way, particularly with maybe and a judge that's not necessarily quite as has handed down some I guess questionable rulings in the
past from the perspective of the federal government. Or are there other big challenges that you see moving forward in this prosecution.
Well, a couple of questions in there. Well, yes, sorry, the attorney client privilege. The purpose of that privilege is for a client to be able without qualification, to be able to tell his lawyer everything about a case, so that the lawyer feels comfortable in representing that person in the proper way. The purpose here was completely different. Trump was basically not using his lawyer to get legal advice.
He was using his lawyer to commit a crime. The judge, the chief judge in d C, has already determined that all of this information was admissible because it was part of the exception to the crime fraud exception to the attorney client privilege. I don't see any judge overturning that or coming up with a different view on what happened here. I mean, the facts are absolutely damning. They're all in
the indictment. Secondly, you raised the question about Judge Eileen Cannon in the in the Florida case, where yeah, she did screw up on her decision to appoint a special master.
But keep in mind, you know, even though she did that, she did it in the context where a special master had been appointed for two of two search warrants relating to two Trump lawyers, Michael Cohen and Rudy Giuliani, and she was basically overturned by the Eleventh Circuit, of which you know two of those judges were also appointed by Trump. So look, judges, screw up, that's what she did. And the fact that she did it once and she's been chasing on it, I think, look, we have to give
her the benefit of the doubt. I mean, there's every reason to believe that she's a totally competent jurist. She went to Michigan Law School, a top tier law school. She worked in a respective law firm, She worked for the US Attorney's office for a number of years.
So maybe.
We've got to be real careful here not to be trashing as judge, because we're falling into the same trap that the Trump supporters are doing and trashing the Department of Justice.
Hey, so yeah, yeah, I just want to get the Anne Marie here. We've got a presidential election coming up next year and there seems to be no shortage of Republican challengers to the president. What's the feeling in DC and Mary is to how this is all shaping up given the backdrop of this federal indictment.
So what's interesting is there's been some mixed feelings in terms of how Republicans are responding to this indictment. You had Governor Ron De Santis, for example, tweeting after the indictment that it was a weaponization of federal law enforcement
and it's a mortal threat to free society. Then you had others like Mike Pence, you know, he was Obviously, all these people are out and about and you're able to get access to them because they're in New Hampshire or Iowa, and at times they could be critical, but at the same time they do call what's happening as unprecedented, Like Mike Pence for a vice president, he's running, and he says it's a politicization of the Justice Department, although
he also added he's deeply troubled to see this indictment move forward.
Then you have others like Chris Christi.
He continuously say no one is above the law, no matter how much they wish they were, and they want
to wait to see how the facts are revealed. So this is a moment where you're going to see each candidate really try to walk a fine line because a lot of them want to talk about how they think it's politicized yep, And they don't want to ostracize the base that Trump has a hold on, which is why I keep going back to that CBS News poll because it really does show if the election were today, he would be the nominee.
Yep.
Absolutely all right, fascinating. Nick Ackerman, former assistant special Watergate prosecutor, thank you so much. We appreciate getting your time on the legal side. Bloomberg Washington correspondent and Marie Hordern get into political angle. There some fascinating discussion.
You're listening to the team Ken's are live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot Com, the iHeartRadio app and the Bloomberg Business App, or listen on demand wherever you get your podcasts.
Simoan Foxman, Paul Sweeney here in the Bloomberg Interactive Brokers studio. Lots of economic data this week, so on your Bloomberg terminal type in eco go give you all the data and kind of the forecast, that consensus, all that kind of stuff. We have cpippi of course, we have got retail sales and then of course Wednesday the FED meeting in the press, coperts and all that. So that is kind of driving the market action this week. Let's check in with somebody who can We found this very closely
ifan debit chief investment officer for the Menetic Group. So thanks so much for joining us here. What are you looking from the FED this Wednesday?
Well, we're expecting a pause. I think like most other observers at this point, we're not seeing We also would agree with your previous guests around the direction of inflation. We're not seeing that same stickiness that's been present in the UK. Although there's always the potential for surprise, of course, and those numbers the backshop of what the Canadian Central
Bank did. There is always precedent for surprise, but I don't think our US FED is so inclined at the moment, so it's likely to be a pause we expect, you know, Ethan, we have.
A story out this morning. FED backs away from wages focus, bolstering case for rate pause. I just want to get your sense. Our reporters, Janelle Martin and Augustasarrievas say that FED officials are rethinking their view that wage gains are fueling inflation. Your take on this is, we are we how much are wage gains factoring into their discussion or going to factor into their discussion this week?
A very interesting discussion, and I would agree with that because wages will be perhaps the most lagging of all indicators. So the difference between fueling inflation when it comes to wages and being a symptom of inflation, a reaction to inflation, a desire to really make employees even or whole with along with the rate of inflation, and that's what we're seeing, so as opposed to actually driving inflation, I think wage gains are a response to inflation. And the core drivers
getting around that. We talked about supply chain issues before, we talked about the push on energy and some of that filtering into energy and food and the services again which have the lagging effects. I think they're absolutely right to take the focus off wage gains because that would just be more looking in the rear view mirror.
Ethan. You know, one of the that I know has some folks concerned is the lack of breadth in the market we've seen so far this year with the SPX, you know, up twenty percent off of the lows, but really if you look at the you know, the equal weighted in the nextra is really no movement at all. How much of a concern is that for you?
Yeah, that's actually been a concern. It was the siren call has been going out now for months, and it's really got more traction and more widespread appeals the longer it has persisted. And I'd say, what it is, It really is underscoring the FOMO of not being an equity market.
So when you are sitting in cash or in money market funds and you're not doing as badly as you were before, is it's not that same drag you're still not looking at positive real rates in those funds if we're dealing with five percent inflation, so we're barely breaking even in a money market fund. So when you see that going on, you're going to want it to follow the action, which is inequities, and you're going to want
to send money that way. And clearly, as I've mentioned before, I think big tech is now the safety trade essentially because there is very just like you can't get goot fired for buying IBA, the old adage, buying big tech stocks a pretty safe play at the moment because they're supported by the markets themselves as well as this AI story. We're seeing some of the exuberants around they just driving cars and electrical cars, et cetera. So clearly quite a
lot of height in that number. And where I would see the issue is, yes, that it is not broad based. It is not filtering into small caps into some of the valued stocks. We expect that to follow though, because and we're seeing little bit of signs of that. We've seen a bit of a pickup as this market strength gained some momentum, you know, technically hitting a bull market. That's obviously a nice syndicator that sends a good signal. So I'd say that we've always had a core approach.
We don't target call sectors. We've never been out of tech, but we are. We are reassured now to see markets getting that broader basis, because too much concentration will lead to too much volatility.
Kiffn you know you mentioned in some notes you sent across before this interview that there's this concern from the SEC regulatory action around binance and coinbase, and maybe potentially this could factor into AI as well. I mean obviously different kind of questions here, but you know, two regulatory concerns in tech. You look at the best performing in the SP Nvidia number one, up one hundred and sixty seven percent this year. AMD also among the top five
buzz performing. Are AI driven names like this overvalued at this point?
It's a really interestant point. Certainly, the heights is they're around AI, the same heights that was there around blockchain and digital assets two years ago. So I think what's really notable is just we have to have that time lag between regulators getting winds of a new trend and
actually getting the teeth behind the enforcement. They see they've really now got teeth in this particular wave of enforcement that they're kind of woken up to some of the lack of transparency, the lack of disclosure that's been around some of these exchanges. Perhaps they're going about it with a blood instrument, which is by forcing these exchanges into the classifications of other securities. But they're they're certainly asserting themselves in that way. When it comes to AI, it
is completely uncharted territory. This explosion has been such a short time of a history so far we're speaking of the last six months through this explosion of usage around AI tools and the rolling out of all of them. I'm not sure that this will affect that those makers of chips, because in the sense the demand for AI is going to be burgeoning. But I think perhaps has been overstated is the impact is going to have on business models some of those names that just ticked up
because AI was simply mentioned in an earnings release. We have to understand what is AI actually going to generate more revenue streams? Is going to bolster the efficiency or the capital structure, perhaps the earning structure of this company. And the question is, we don't know how regulation is going to look in AI. I don't doubt it's coming. I think though, because it's all so new, it'll take the regulators probably another year or two to figure out
where they're going to go around copyright protection. But I look at the music industry, just how easily that industry when you ramped up its ability to capture royalties. When streaming came about, there was some loss of ground, but a real catch up by the music industry. So I think there's going to be a catch up around those generators of content. We just have to see where it goes.
And remember, the regulators still have to sort out the regional banks in the US first, so we will probably have a couple more waves of regulations before we get to AI.
You can just want to talk a little bit on the fixed income side. Any reason I shouldn't just stick my money into your paper and get four point six one percent.
That's not the only reason is that inflation is still at five percent right now. It may be heading downwards, but if you're looking to make some kind of a real return, it's certainly more interesting than you made in the past, and you have a two year timeframe. You could do a lot worse sticking it in paper like that.
But ultimately you put your time horizon is probably longer than two years you want to be looking at if you're trying to roll that investment just so you stuck it all in there in two years, what would you potentially be getting in two years? We still have this inversion yeel curve probably not the same. So if you want to invet us for the long term, you need to be looking at at a real rate of return after inflation, and that's where we get to aiming higher.
I would say, also, we don't need to aim for the riskiest part of the capital structure any longer to get returns that are in excess of inflation.
All right, Evan, thank you so much for joining us. Always appreciate getting your perspective. Evan Debit. She's a chief investment officer of Moneta Group.
If you're listening to the tape, catch our live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and 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.
The latest update on what's happening out there in those markets. Let's get to the deal of the day, Nasdak. Nasdak to acquire a Denza for ten point five billion dollars in cash and stock. That is your deal of the day. Let's bring in Paul Berg. He covers all the financial stuff for Bloomberg Intelligence. So Paul, what's NASDAK doing here? Number one? Well, first of all, number one, what is a Denza? And then why is NASDA buying a Denza?
H Paul, thank you by having me. A Denza is a financial solutions company. It's a combination of two prior companies, Calypso and Axiom. Lipsa was involved in derivatives a lot in terms of the basically financial software companies, and Axiom is mostly risk management.
So why purchase this? From Nasdaq's perspective, we get the whole idea that they want to move beyond, you know, the exchange themselves. But doesn't the purchase of this sort of put them in competition with other financial services software products or No? Is this sort of a standout kind of acquisition?
No, I think it's actually not a standard at all. Nasdaq is actually very much a financial services company. Already almost three quarters of the revenue comes from financial software, not from the exchange commissions. And they've been buying companies like the Logos Investment over time that provide financial software services to the financial industry. So that's not unique and I think it's very strategically complementary for that. So in
terms of competition question, yes, it is. They do compete with the companies, including the likes of trust banks and such that offers similar services, so it gets them more competitive against them.
So what are what are exchanges today? Paul? I mean again, I kind of think about Nasdaq NYSA as places where you trade securities and they make the commissions, and that's the business. But that's a little data, isn't What did these exchanges do today?
The exchangessforming themselves to become software companies. So it's not just now it's the obviously Eyes that's in the process of trying to buy Black Night to expand into a mortgage service and business and mortgage data business. And then companies even like Cboat that's been buying auxiliary businesses. They're
even fast growing the exchange business. But then if you look across the pond, the LC and affinity if they've been huge in terms of moving away from the exchange products to being a software provider.
Does this get into you know, I think back to these stories about speed training high frequency traders and such. It does becoming a software services company for the financial services sector get in the way in any way from sort of developing these broader market making activities, or I guess how do these two things go together?
Also? I think in terms of getting a way of market making activities, these things they are only a handful of exchanges, right, they're dark food, a handful of dark pools, they're smaller exchanges. But really there are three large exchange operators SIBONNAS that can ice in the US, and then you have a handful of market makers like Virtual Citadel that operate most of the market. So the margins are extremely thing. They really dependent on market activity in the volume.
So what the exchanges are trying to do, they're trying to walk away from it to more recurrent revenue. And this is one of the things that NASDEK is doing here. They said that are about eighty percent of the revenue that can come from adesthma is recurring, So they're looking for more recurrent revenue, more stable revenue stream that hopefully gets multiple from the market.
Eighteen time revenue USA a huge, huge multiple.
Now it is eighteen times revenue, thirty one times that before the cost synergy. So yes, it's expensive. They're buying the software company. And I chatted earlier this morning with OURMBI Colics Power Software, and I think the question and why the market.
Is not.
Being so warmed to the deal is if you buying a software company, the high fly or high growth company that grows twenty thirty fifty percent a year, Yes, the outlook for growth here is about fifteen percent, so it's a modest growth. It's an established financial services sector, and yet they're paying them multiple for those high flying software tech companies.
So Toma Brasow has owned a Denza and it is going to get a steak in NASDAC, like a very large stake in NASDAC. As was a scene on the board. Does that private equity firms participation in Nasdaq? Does that say anything to you as you analyze the ongoing few future of NASDAC.
Probably not immediately. I mean it's a fifteen percent stake, so they'll have a boat, they'll have a port seat, but they're probably gonna not gonna impose their views and strategy on nas that. I think nasdeg is operating reasonably well.
Uh.
In part it's a lock up for the top of brower, right, so they can't just dump the shares and run away from the company if the deal is not working well.
So I'm looking at some of these exchanges here and the stocks have their are kind of single digits. What's the feel for this exchange business these days? The market doesn't seem to be fully embracing these names.
I'm assuming we're not talking about today, we're talking about like year today.
Yeah, yeah, just kind of the year today. Cebo's up seven percent, seeing ME up six percent, Intercontinental five percent, So really not great performance given where the market's done. I'm wondering if there's a what what the concern might be out there for these names.
I think there are two concerns. One concern is on the trading side, and it's been a mixed bag. So you have in the ex options that's really benefiting CBO. You have energy that picked up a little bit from sluggish last year that's helping CEME and at the same time you have pretty sluggish equity trading compared to last year, so you do have a mix of products and activity
that we see in here. And then if you think of exactly where Nastic is going right now with the acquisition the software solution services, so there is a lot of uncertainty in the market that elongates the sales cycle.
So whatever they typically sell, their pipelines are very strong still, but it takes longer to close the transactions for those recurrent venues, and typically those are three to five year contracts, so it takes a while, and that's what makes the investors a bit that nervous, but I think a little bit reserved.
Yep, all right, Paul, thanks so much for joining us. Really appreciate it. Paul Goldberg. He covers some of these financial stocks that the exchanges, all that kind of fun stuff, as well as the Canadian banks. He does all that for Bloomberg Intelligence and again Nasdak acquire a Denza for ten point five billion dollars in cash and stock. What got my attention, Smoan was at the multiple to paying eighteen times revenue, and I guess you know, is Paul
suggesting for a fast growing software company. Okay, but as Paul pointed out, this thing's kind of growing fifteen percent doesn't really I don't know. I guess that's one of the reasons why NASDAK is off eleven point seven percent.
Yeah, and I wonder too, you know how much of this sort of stuff can ultimately be automated to some degree. I know we have these discussions ongoing discussions about AI, but you know, some compliance stuff, some things like that. You know, one thing there might be an opening there.
Yeah, exactly. So anyway, we'll keep an eye on that one big big trade in the exchange business.
Today you're listening to the Team Ken's are Live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg, the iHeartRadio app and the Bloomberg Business app, or listening on demand wherever you get your podcast.
And Paul Sweene here in the Bloomberg Interactive Brookers Studio. So, simon, I'm looking at wtacrude oil off three percent today, just just a sixty eight dollars a barrel. And you know, all these commodity people have always taught me it's just supply and demand. Well, didn't they cut supply.
A couple of weeks ago.
Yeah, but I mean we have Russia potentially working against this, and I mean, but it's this interesting feeling, right because you talk to so many commodity people, You talk to the energy ministers of various countries, and they look out a couple of years and say, supply is going to be really short. But at the same time you have Jeff Curry, head of Commodities research at Golden and Sacks on BTV last week. We have never been this wrong for this long without seeing evidence to change our views.
So he's clearly as start.
As we are. All right, So some of the extra stuffed. We have our own expert here, Fernando Valley, your analysts for Bloomberg Intelligence, joining us live here in our Bloomberg Interactive Broker studio. So, Fernando, the Saudis cannot be happy with what's happening here. Why do you think crude oil is declining despite a reduced output by Saudi Arabia.
Well, you said it it's supply or demand, So it's not supply, it's demand. Okay, So it's you know, we said it before when the first cut in April. You can't fight the FED and they're trying to fight the FED, and the FED is telling you know, we're going to crush demand, and here we are. I mean, imports in China are down seven and a half percent in May. Logistic manager indexes in the US are down third consecutive
month that they make their lowest ever readings. So demand is weak and that's that's what the price is telling you is you can cut supply, but we're not buying it.
Well. On the demand side, we had some headlines out of China. We're seeing some of the highest rates in terms of COVID nineteen testing since at the end of twenty twenty two. Remember when all those things go away. I don't know that that's the story leading China for oil traders. Give me your thinking there. I guess how much pessimism is there around this China side of the equation.
Well, I think China, the COVID part of it is still fairly new. But when you think about the recession fears in the Western world, who is China's biggest trading partners if not the Western world. It is an export nation. It can't continue exporting if we're not buying. I think the US and European consumer are still the bigger story. Of course, they're domestic markets a lot bigger, a lot more important today, and so the COVID story is important,
it's not irrelevant. But the biggest tissue is their exports are down and so far, you know, as we look at the numbers in the US as the bell weather, they're not showing a lot of improvement. Credit card spending is down as well, So all of those signs point to weak demand, which is weak of demand for their exports as well.
So as I look at the daily national average gasoline price for regular unleaded three dollars and fifty nine cents, why isn't that closer to three bucks? If oil is coming.
Down, well, there's going to be a little bit bit of a lag. Remember last week it was still in the seventies. So we're going to see that filter through. So hopefully for your Fourth of July, maybe the Juneteenth holiday, we're gonna get a little bit cheaper gas out in Jersey. But then the crackspread are still elevated. If you look at the crackspread for gasoline, still over thirty dollars a barrow.
That is a combination of factors. But we shut down a lot of refining capacities we talked about, and then just the type of gasoline is still not the right type of gasoline. We do think that, especially for next year, the renewable fuels component of it is actually going to
make gasoline structurally cheaper. It's only a few cents a gallon, but it's probably a structurally cheaper gasoline for several years because, uh, there is a drop into renewable fuel credits that we expect will come through next year.
I'll take that couple of cents, but I have a hybrid now. So are you trying to yet? Wow, cut my gas, cut my gas?
Do you like it?
Yeah?
It's really nice?
Cool?
Okay, yeah, don't have to rely on those charging stations. We were talking about Tesla earlier. Don't have to try and rely on those charging stations.
Is it a.
Quiet no, no, hudai Okay, anyway, it's very neat. But you know, one of the reasons that you know, Goldman downgrading it's it's forecasts. And I guess they're they've just been so bullish for so long that this is really kind of getting, you know, getting people's attention.
It is because they.
See supply increases from sanctioned countries Russia.
You're on Venezuela.
How significant are those supply increases?
You know?
Can that make us focus a little bit more on the supply side of the story or what's what's your take there?
I think it definitely in the world where we're seeing weaker demand, any little bit of supply helps bridge that gap. And it's not just those sanctioned countries. It's also strategic petroleum reserves. And we talked about the US last year, but China has over one billion barrels of strategic petroleum reserves. They can crush that price too in the short term.
So there is plenty of supply, even if it's not daily output from Saudi Arabia, from other sources, the sanctioned countries, strategic reserves, Russia.
Can you explain to me, is there oil getting out to the market and if so, how's that happening.
By a lot of ships and yes. And then to Asia. It was very interesting to see Saudi Arabia raising their official selling prices, especially to Asia, because there's still plenty of Russian crude making its way to India, Pakistan, China. It seems like they're trying to shore up their revenues per barrel by raising the official selling price. But they're going to seed market share because the sanctions are impacting the price that Russia gets for its barrow, but not the overall volume.
All right, so they're still getting this stuff out by ship, not by pipeline, right.
Some pipeline, but ships, okay, but at a lower price.
Yes, okay, I guess that's why Saudi Arabia is, you know, taking these unilateral moves because clearly Russia and maybe not holding up, well, maybe maybe not holding up. It's under the bargain. Can we shift to the micro a little bit?
Our?
Javier Blass has a great column today from Bloomberg Opinion saying that Exxon should be included in the Dow Jones Industrial Average. Remember it was expelled back in August.
For Salesforce went in there for it.
Yes, I believe Salesforce went that. That sounds about right. There were about six names in there, three A and three out.
Your take, Fernando, I mean you should never have left. It's only what four hundred and fifty billion dollars in market cap significance four volume, it's four and a half percent of global oil supply. It's a very important company no matter how you skew it. And at the end of the day, oil and gas is a significant cornerstone of our energy matrix and it will be, regardless of scenario, for the next thirty to forty years and next all is an important part of that.
What did the company say about This is a topic we talked about, I don't know several years ago, but maybe not as much now about peak oil. What's the where's the market on the discussion about peak oil?
Here's a lot of debate from twenty thirty to twenty forty as the target date for peak oil, some more aggressive saying that was twenty twenty, which is not proven to be the case. You know, our view is it's probably closer to the twenty forty benchmarkting that depends on a lot of innovation. Reason being, you have five billion people in the emerging markets that consume a fraction of what we do in consumption. The only way to improve
their standard of living is I consuming more energy. You can look at how any country developed and their energy per capital rose. Most sub Saharan Africans consume less energy than one American refrigerator, so a year, So that can't
happen without you increasing their energy consumption. And it's it's very you know, hypocritical of us to say you can industrialize how we did, but you know, we're going to continue living in these various plush offices and commuting in our nicely made test lists were built using coal power plants in China.
You know, we only have about thirty seconds here. But you know, one of Javier's arguments was that there's this realization on the part of even environmentally focused investors that we're going to need oil and gas for at least a little while. Is there an overall framework in which, you know, investors are changing their minds a little bit about these oil majors.
Yeah.
One is we can reduce the carbon footprint without changing all of the infrastructure, carbon capture being one one of those ways, renewable fuels being another. We need to find an equilibrium between energy security, affordability, and environmental impacts.
All right, Fernando, thanks so much for joining us. Fernando Vale. He covers all things global energy for Bloomberg Intelligence. And again, you know, as Fernando said, it's supply and demand, and we know we've got maybe a little bit of declining supply with the Saudi's cutting a million barrels per day of production, but I guess not enough to offset declining demand around the world, particularly in the US and some
other Western markets. But also you get a factor in Japan, is they're reopening as robust as maybe we initially thought, perhaps not. WTI crude oil off three point twenty four percent right now sixty seven dollars in ninety one cents per power.
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And Floxman and Paul Sweeney here in the Bloomberg Interactive Broker Studio. I don't know. I got the SPX up twenty percent off of that October low last year, but I've also got an inverted yield curve telling me the world's coming to an end. I don't know how you square those two things, but fortunately I don't have to know that anymore. But our next guest does, Hans Olsen, cio at Fiduciary Trust Company out of Boston. He joins
his live here in our Bloomberg Interactive Broker studio. So, Hans, again, I've kind of got a stock market that's rallying. I guess off off of those lows, but i've got the fed down. I'm not sure they're going to pause. I've got people tell me there's a recession either here now or coming very soon. How do you kind of square all that out for your outlook?
Yeah, I mean, if you look at the the S and P five hundred, it seems to be signaling all is clear, don't worry right onto the next narrative. But if you look at that same market a little differently from an equal weighted view, then it all starts to foot a lot more.
Right.
So, if you equal weighted S and P or really which is.
A proxy for the average stock, right, that's what three percent this year, which is signaling sort of uncertainty and concern. That reflects an inverted deal curve, tightening credit conditions, weak business surveys like the ism. So I think it's all about how you define the market this year. You know, you look at the NASZAC up eighty basis points today. Really you're talking about two stocks, right, which is about.
Twenty five percent of the index.
So it's really it's really become such a narrow market, you know, and any pyramid that's inverted is inherently unstable.
Well, before we get to some of these stock names, tell me your predictions. We all eyes on the FED, and all eyes as well on the CPI print that's going to come out. How hot or how slow would we need for a surprise in either direction? And what do you expect to see?
So the Fed decision, I think the skip is the new word that people are using because it's sort of.
Still pause.
You know, when you look.
At it, short rates now are slightly above the inflation rate, so you know, I look at it rather simply, right, trailing twelve month CPI over the short rate, we're about what twenty five thirty basis points over. That's kind of what normal looks like over a very long period of time. Maybe a little more fifty basis points, but a real rate of interest on money represents I think what good looks like, a sharp departure from what it's been for the last twelve thirteen years.
Right.
But the point is is that the Fed can simply do nothing. You know, the act of doing nothing is an act itself, right, It's an action itself. And let it settled in with this real rate of money for a while and let the market acclimate.
So I think that's it's okay.
They can they can go a couple of meetings without doing anything and let this new sort of price structure of money sink in. As far as the CPI is concerned, I think the estimate for core is what four percent for yeah.
Four point one believe we're sorry that the core number I think is a little higher. And then the headline is four point one four.
Point one, and but that's down from roughly five. That'd be a big drop, you know.
So I think the surprise will be if if it actually just stays where it is, it would be a bit of a hit to the markets.
Would that change the Feds?
No, I don't think it should. I don't I don't necessarily should. Again, this takes time. These as we all know, these uh these policy decisions act with very long and variable effects, as we've seen in the in the first quarter, right, all.
Right, So if we don't own these seven names that have been just magnificent, the Magnificent Seven. All right, I missed that trade. Now what do I do?
Yeah, let's focus on that for a second. The Magnificent Seven.
You know, I don't know if you guys watched the original or the remake, but you know the rest of that story was most of those guys die, yeah by the end of the movie. So, and it kind of reminds you all back. You know, the last time the market was this concentrated, back in the late nineteen nineties and the run up to the tech bubble.
You had, you know, incredibly narrow markets.
Valuations of those of those favored Few were incredibly high and simply unsustainable. So if you look at you know, if you look at the average stock, I think there's some pretty good value to we had there. So it's a question of where do you want to place the money if it's that Favorite Few or the Magnificent Seven. You know, a lot has to go right if you're playing twenty times sales for company like Nvidio, right your price for perfection?
And no question, you.
Know, one of the things sent across the notes earlier, one of the things you point out is you like energy and materials for the energy green transition teams. I think, you know, energy has been one of those most pressured places in the stock market so far this year.
How do you play this kind of interesting where you have energy the energy sector weak this year, but the overall market seem suggesting that the economy is fine.
That doesn't quite foot, does it.
I think the you know, again, the money is going after the story and the narrative, and the narrative is all about generative AI and the like, and you'll see more and more companies I think, sort of attach AI to whatever they're doing in order to get the multiple
uplift with respect to earning energy. I mean, I think for us, we're playing it for a longer dated theme, which is a transition from fossil fuels to green And the reality is is that the infrastructure and just the energy ratios energy into energy out on renewables of various forms or fusion simply aren't there yet, and all the infrastructure that will be needed to.
Be built out.
We'll all favor both carbons and materials for us to get to that greener future, and it's going to take longer, more expensive, and the technology simply isn't there to create the excess of supply of energy for our needs at this point.
Structured credit, what does that mean to you? What is the structured credit investment in? Why do you guys like those?
So it could be seasoned mortgages, right, really well seasoned mortgages.
Maybe non agency r mbs and the like.
We've stayed away from commercial credit, but really our focus has been in the non agency residential mortgage back market where we're we're not taking really anything in the way of duration risk per se, and we're getting nice ye'll pick up.
So you know, it's been a.
Very nice corner of the market to collect a cupeon.
You know, it was interesting to me Paul was asking with a previous guest earlier, do you just get into the two year treasuries because they're getting close to inflation? I mean, but hedge funds boosting their nets short to your positions for the eleventh straight weeks. What's your take get in stay out?
Ye?
Yeah, you know, look, I think if you believe that getting the last bit of inflation, so.
We were at nine, we're down at five.
We got to get to two according to what central bankers are telling us. You know, those those last three percentage points could be the most difficult percentage points to transit of all right, And so if you think, if you believe that in the develop economies, to get it back there, it's it's harder and it takes longer, and that means that rates are stuck at a higher level
for a bit longer. And you know, I think that you have a choice now when you have a real rate of money, and it's really important to think how radical that is where the price of money in relation to the price of things is back to something that most of us would say.
Is the order of things?
Is it order thing?
Yep?
Absolutely, it's a new world order the last twelve years maybe a little bit unusual in hindsight. Hans Olsen he's the chief investment officer Fiduciary Trust Company based in Boston, Massachusetts. He joins us here in a Bloomberg Interactive Broker studio.
You're listening to the tape cat'sur live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and 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.
Jen Reachie does all the anti stuff, antitrust legislation and all the work there when we have big deals and anti trust issues come up and the lawyers get involved. She does all that for Bloomberg Intelligence. He joins us here in a Bloomberg Interactive broker studio. So, Jen, it does it seem like it's just, you know, at first, blush that it seems like Microsoft's kind of a really tough time getting this deal done. What's the latest.
Oh, yeah, They've really had a tough haul. So obviously the FTC must be concerned about a Microsoft and activision going ahead and closing their deal despite the fact that right now they're facing a UK opposition right and they're fighting in court with the UK. But they have talked about, you know, looking at all possibilities and the FTC's obviously
heard that. So they have to protect themselves because they have an in house process set to start in August, but a decision from that in house process probably won't come out to one queue. In the meantime, they may need to stop the companies from closing the deal, because it's a lot harder to unwind a deal that's already been closed and consummated than it is to stop it
from closing to begin with. So this would be going to court to seek a preliminary injunction just to stop them from closing, pending that in house process that starts in August.
So this is more of an insurance policy that they can't move ahead. And you know what, this may be why we're not seeing shares of either company moved too much today, Activision down just less than a point a tenth of a percentage point, Microsoft up to two tens of one percent. You know, what's the path forward for Microsoft and Activision? They want to complete this deal, but they've gotten a lot of.
Pushback.
Where do we go? What's how did the next couple months play out?
Right?
And that's the issue because and I think that maybe that's part of the reason the stock hasn't reacted much, is because no matter what happens in the US, there's still this big hurdle in the UK, right that has to be overcome. And if Microsoft they have an appeal pending right that it's a very high standard to win and get the reversal of a decision by the Competition Markets Authority. So that's going to be a difficult path.
So we have heard Microsoft talking about other potential options, which could be closing and just continuing to fight in court and face whatever sanctions they might face, or perhaps closing and pulling the activision business out of the US. I mean, we've heard them talk about these things. I'm not sure how they would do that. It would be complicated, but they are thinking about those options. Then they'd have to win in the US as well and not you know,
be the recipient of an injunction blocking them. I think they do have a better shot in the US, not only in court, but also before the FTC's administrative law
judge the process that's starting in August. So if they can manage to succeed in the US, which I think they can, and that'll play out this year and into the first quarter, we'll have all those decisions I think court probably in four Q alj probably in one Q If this companies continue down this path, and then they have to decide what they want to do about the UK.
So is this just the Democrats being democrats? Kind of anti deal or are the regulars like the FTC, the DJ Are they kind of pursuing novel law here? I mean, what's going on?
I think it's both, you know, I really think it's it's both. There's really just been a big push ever since the executive order that was issued by President Biden back in July of twenty twenty one, kind of instructing all agencies, not just the primary anti trust agencies that are Trade Commission and Department of Justice, but across the
whole government to try to slow down consolidation. You know, there's this belief, I think right now by this administration that we have had lacks anti trust enforcement for years, and we've landed today in twenty twenty three with a bunch of industries that are too consolidated, and as a result, we have low innovation, low quality, and high prices. Right, So they're trying to stem that tide. So it's both trying to slow down the deal making but also trying
to expand anti trust law using novel concepts. So it's a combination, and in some ways they have to use novel concepts in order to slow deal making, right, because they're trying to go after deals that would have likely closed a few years ago.
Yeah, these novel concepts, though, I mean, what things could ultimately end up ahead of a judge and the judge rules you can't use concepts. You know, this deal should move forward. I guess what are the pieces that are most at play?
You know.
The thing that's difficult about the novel concepts is that they're difficult to prove, which is why perhaps they haven't worked in the past. So let's say one thing that they're going after our deals where an incumbent is buying what looks like an up and coming potential rival as startup, a scrappy startup, and it's called nascent competition. They don't necessarily compete today, but we think you're going to compete
in a fulsome way in the future. That's kind of a new novel concept that both the FDC and the DOJ are going after. And the issue they have with it is that that's something very very hard to prove. I mean, you're saying, here's what we think might happen in the future if this big incumbent doesn't buy this
scrappy startup. And right now, as a matter of fact, the Federal Trade Commission is trying to unwind Facebook's acquisitions of Instagram and WhatsApp because they believe this is exactly what we let through that we shouldn't have when Facebook bought these scrappy startups when they were kind of, you know, on their way to being bigger competitors, and had book not bought them, they would have posed, you know, a
bigger rival to Facebook and social networking. So that's one of the types of concepts and it's just difficult to prove in court.
All right, but this is a big deal and this is Microsoft. I can't imagine them walking away here. Do you think they fight it to the end?
And it's a really good question. You know, they have an end date in July, right, so their purchase agreement says that as of I think it's around mid July that Activision can walk away and accept their breakup fee. I think it's around three billion dollars. It's a lot of money. So we're going to have to see what happens.
Then.
They seem to me committed to fighting this out Activision as well. They've hired a lot of big guns in Europe and in London to fight that appeal. It looks like they're going forward in the US. So we'll see if they extend that agreement so that the end date is pushed further out.
So when would they negotiate extending the agreement? Is that something that they can wait till this summer or do they need to do it kind of nowish?
They probably have to do it nowish. And the thing is July could hit, the end day could hit, and Activision could just stay in. It doesn't necessarily mean that the agreement's off. It means it gives either one the ability at that point to walk away. They can just not walk away and they can continue. But Microsoft might want to protect itself more than that, right.
All right, Jen, thanks so much for joining us, jumping into the studio here, giving us the latest on the antitrust landscape. Again. Microsoft has a deal for Activision Blizzard sixty nine billion dollars and that's a big deal. To you walk away from that, I can't imagine.
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I'm Matt Miller.
I'm on Twitter at Matt Miller nineteen seventy three and I'm fall Sweeney.
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