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Joining us now in studio. Man Deep Sync senior technology industry analyst over at Bloomberg Intelligence. So this is a headline that Lisa talked to us about earlier in the morning and we were both like, hint, no, that's not for us. So apparently Uber strikes in a chord with GM Cruise in terms of Uber's going to have self driving cars roaming around. Do I want this in my life?
Well, I think it's just a function of how technology gets rolled out.
So that's a yes for Man Deep.
Yes, Okay, he's a forward looking guy.
We see that already in three cities in the US. San Francisco, Phoenix and you know La. And what Vemo has shown is they have the technology to have the car right on its own and even though the scale is very small, they're doing one hundred k rides per week. Compare that to Uber, which does ten billion rides in a year globally.
Well, what kind of rides are we talking about.
God, so Veimo compared to that is doing one hundred k rides of five million annually if you run rate that. But look, what they have shown is this is the future. And Uber is trying to figure out where they fit in this future because they don't have their own autonomous technology, so they have to partner with someone. It's not going to be Tesla. Tesla has told us they want to do right sharing via their own app. They don't want a ride sharing intermediary. They have the fleet, they have
the software, they have the app. Why use somebody else's app. And in the case of Weveimo, even though they have a partnership with Uber, bulk of their rights are through their own app. So that's where Uber doesn't have a choice. It partners with Cruise Cruises. I mean in terms of the technology, I would say way behind Tesla and Vemo.
But at the same time with Uber, like I said, they divested their own autonomous R and D division back during the pandemic, so they are not developing anything in house. And in this case, it's just a matter of getting what they have in the market.
You know, my first reaction is like a hard no, I'm not getting to an autonomous vehicle. But I get into a vehicle every morning at four p thirty morning with some dude. I don't know.
Yeah, we're just not the early adopters.
It's all right, I mean, but what's better than the other I don't know. So how does Uber view?
You know?
The driver list technology is a long term net positive or I.
Mean it's definitely a negative simply because Uber operates on an asset light model, and even then it struggled to reach profitability. Right now, it's at a point where they incremental margin is positive. What happens with the autonomous rights is the incremental margin goes much lower because one, you have to license the technology from somebody, in this case
Cruise or Vemo, so you have to pay them. And then the take rates go down because the autonomous rides have a much different unit economics then ride with a driver, so instead of getting that thirty percent take rate, their take rate goes lower.
But eventually don't the I guess that's not true. And to say eventually the money that they'd have to pay to say GM Cruise, does that decrease But no, it probably increases, right because GM's gonna want to get more for their PA exactly.
So if you don't own the technology, why would a GM or a Wemo or Tesla want one more intermediary when they could do their own app with the fleet. So Uber has two choices, either they license the technology or they start buying the cars. And if they start buying the cars, it's not an asset model anymore. So they have to buy the cars from Tesla, buy the cars from Veimo and these are so yeah.
Why then did they divest their R and D back in the pandemic? It seems like now I understand the long term. Oh that's a problem.
Yeah it is. And back then they were under pressure. Remember when you went into the pandemic, all these companies had cash flow issues. They were burning cash every month. So the best option for them was to divest this raise cash. And you know, it was never part of their long term plans when it comes to developing this in house. And I think right now it's proving to be a wrong decision.
So how then does Ruber If you're an investor and you're looking at Uber stock, how does that have to be re rated?
Then?
Longer term?
Like short term forget it?
So look at what we have now, Uber is still the scale player. I mentioned ten billion rides, and right now they are the ones who have the most supplied. Now, if this thing scales up very quickly, which I don't think anyone is betting on right now, that autonomous skills, there's a lot of skepticism around taking these rides, so this will be more graduate.
Front and center, right there in front of you.
Yeah. So in that case, I think Uber has more time on hand. Like nobody is thinking of a next twelve month scenario where Uber loses, you know, thirty percent of their volume. We're talking about a gradual shift towards autonomous, and in that case, Uber has more time to do
these kind of partnerships. I think Cruise is one. They'll probably try to partner with Tesla, if that would be my guess, Even if it comes at the expense of gross margin, they'll take the hit because it's all about existence and you know, maintaining the platform.
And yeah, all right, Mandy, we appreciate it. You here next week.
Oh yeah.
In video intelligence, in video has changed everyone's vacation schedule, Man deep saying joining us a senior technology analyst at Bloomberg.
Intelligence you're listening to the Bloomberg and Tell Elligence 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 playing Bloomberg eleven thirty.
All right, Today's focus on munis is brought to you by Bam Mutual. Bam Bam Bam Bam Bam Mutual insures municipal bonds that financial es central infrastructure and provides guaranteed income to provide to improve any portfolio. Be part of
building America. Invest in BAM in short bonds. Our next guest joins us Amanda Albright, municipal financi reporter for Bloomberg News, also formerly of the Daily tar Heel, which means she went to the University of North Carolina, which means somehow she got through my screen of no tar heels on this program. But she's pretty solid there man to talk to us about the municipal bond market. You guys have
a lot of great stories out recently. The one that really grabbed my attention is college's need up to one trillion dollars of campus upgrades to lure students, and I guess they're coming to the munis will bond market for that.
Yes, So Moody's put out this estimate that colleges and universities might need seven hundred and fifty to nine hundred and fifty billion of spending on infrastructure, facilities, dorms, classrooms over the next decade in order to essentially stay competitive. The interesting thing about that number is that only encompasses their universe of credits that they rate, so the actual number could be even higher. It was interesting this story
came out. Basically, the argument that Moody's is laying out is that colleges need to have really pretty campuses in order to attract customers, their students, and their students' parents who want their kids to go to a really pretty
looking school and have kind of that pride. But interestingly enough, after the story came out, I got some messages from readers that disagreed with this premise and think that schools need to focus on teaching students and providing a good academic experience and they don't need to think about facilities.
So it's an interesting topic within higher ed and that kind of balancing act that colleges are facing right now, trying to invest in facilities, trying to lure students, but also keep cost low and focus on their core mission. It's kind of one of those core debates in the higher ed world at the moment.
Well, also, isn't it true that, like the tuition, even though tuition's insane and we're talking like eighty thousand dollars like that doesn't cover at all necessarily one person's entire education.
There too, That's true. I think the interesting thing that I think colleges will need to grapple with, and something I'm interested in, is how much they kind of break down those costs for future students. You know, how much of tuition dollars are going to facilities. I think that's an interesting question.
All Right, more money going to universities, less money going to municipal funded detention centers on feur inmates, what's going on there?
Yeah, this is a classic political situation in the muni market. We've seen with changes in political control, different approaches to detentions and corrections policies, and so I think really that story, which was a great story that came out I think yesterday it highlights this growing risk that MUNI investor any to talk to any MUNI investor right now, and politics are at the forefront of everything, especially the presidential election. The corporate tax rate could be in play, individual tax
rates could be in play. All of that will kind of affect muni's and then you have all these other kind I guess lower impacts as well, such as corrections, projects like. All of that is very affected by politics. So that's why MUNI investors are very focused on the election these days, along with everyone else.
All right, Amanda, Yeah, everybody else, all right, Amanda, thanks a lot. Amanda all Bright, Bloomberg Community finance reporter, joining us from Kansas.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple car Playing and broyd Outo with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
I'm looking at the screen, lots of things moving all over the place. Stocks up, yields down. I'm looking at gold up one and a quarter percent, oil up one point nine percent on wtacrude oil. Is there a correlation there? I think our next guest has some thoughts on that. Mike McLoone, senior commodity strategist for Bloomberg Intelligence, zooming in from Miami, Florida. Mike, what's going on with gold and crude?
Paul, Hello.
We have the difference between an enduring bull market that's gold right now it said if you end the week the month now, it's at a record high, and an enduring bear market that's Crudeill The price in the screen you see right now WTI seventy four dollars a barrow about there was first traded in two thousand and six. That's almost twenty years ago. And as we tilt towards this easing cycle, kipically that spread with gold outperforming Crudeli widens and it looks like it's just getting started.
First of all, you bury the lead. We're not coming to Miami, Mike, so you can you can stop looking for fun things for us to do. You cannot worry about your guest rooms like we're good. So the record high though that we saw back in gold, that we keep hitting here, I'm really struggling as to what is actually leading it, because you know, the last ten years and we had low rates and all that gold did a whole lot of nothing, and it has just been feeling like a NonStop tear in the last few years.
Yeah, let's start with two things.
The unstoppable rise in US debt to GDP, the very expensive US stock market, the Federal Reserve tilting towards easing. And the most significant outfit in the room is the unlimited friendship between President Zy and President Putin that shifted the world order in favor of gold. And it looks like it's yourself and so the biggest deepest pockets on that planet I starting with China, have been buying the metal.
And it looks like once we get a little bit of a version in lower yields i e. T Bills not at five percent anymore, and maybe just a little back and fill in the stock market, gold will shine.
It looks like it's continuing to that now. Right now, it's a little bit overdone.
Manage money net positions IE futures are really long for a reason. It's a bull market. But the narrative for gold is quite strong. And I'll just meant and with is gold is historically very cheap versus SEP five hundred. If you just take it divided by the ounces divided by the index, particularly when you enter recessions. What oftentimes happens when you enter recession and fetis is that that spread just kind of narrows a little bit.
What would take what would change this seems to be a structural bullish call on gold. Mike, what would need to change that?
I think the first thing is the US stock markets stay resilient. Well, why by golden when it's that resilient. The most significant thing was kind of some kind of unexpected dayton ie President Zy picking up the phone saying yeah, we're done with this unlimited friendship. The dayton that's happening
globally is part of what's really driving gold. He's somewhat getting away from the dollar, looking for an altern to US treasuries, particularly with yields dropping and the death the GDP just continuing to rise, So that to me would be in one of the most significant things. Otherwise, it looks to me, once you get a little bit of a version lower in the stock market, which at some point will happen, gold will probably shine like long bonds, like on the month, now on the quarter. Now, gold's
up about eight percent in the US Treasury. The Bloomberg twenty plus long bond indexes up about the same, about eight percent.
What about positioning at this point, Like I know in the central banks are buyers, et cetera, and that in price spikes, you're not going to see a lot of physical buying also, et cetera. But who's left to buy in the futures market.
It's that's the key thing. It's a good point.
About forty four percent of total co mix futures positions are speculative longs.
It's very high.
The high it really gets much higher than forty eight. But what's really happening is we've had significant outflows in gold dtfs since that peak in twenty twenty. They're just starting turned inflows and I think that is part of that alternative. You see people going to cash and bonds. They're looking for alternatives to expensive stock market. So that looks it's just rolling over. But if you got a day like we had in August fifth, when markets go down, yeah,
you hit you sell what you can. And there's a lot of specative lungs in goal at the moment for a good reason. Though it's a bull market.
That's a trader's term. You sell what you can. Yeah, you have on those days. Hey, Mike, thanks so much for joining us. I appreciate it very much. As always, Mike mcloone's Cedar Commodity Strategists for Bloomberg Intelligence, I'm looking at like some of the Whenever you talk to Mike, I put up g LCO the Global Commodity Price screen.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecard Play and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station, just say Alexa playing Bloomberg eleven thirty.
So let's get to the markets here. Equities rally, you haven't been to the bond market, and the dollars lower. It's classic.
The Fed is going to cut.
I guess the question is by how much? And then how does that affect your positioning? And the why they're cutting too very much important. Dana Duoria, Co, Chief Investment Officer of Investment joins us. Now, Dana, how did you view the jackson Hole speech by Powell? Was that twenty five cuts for you in September or was that fifty.
I think it's twenty five. Look, I think that you could not ask for more dubvish comments from Powell this week. You know, I think he knew that the market needed to hear something like that in order not to react negatively. We've obviously been pricing in significant it decreases, and so he delivered, right, and he gave us a speech that said yep, I'm there, you know, I think, and even words like ensuring that inflation is anchored. You know, it
was not only a dubbish speech. It was sort of a victory lap, right for him to say, Hey, our monetary policy worked out, We've tamed inflation. Now it's time to turn to unemployment and we are going to cut. But I don't think that means, you know, all that excitement means that were necessarily getting fifty. I think it's his way of saying, you know, yes we can all the sigh of relief. I think he still gives himself the twenty five In September.
Hey, Dana, just looking at the price action today, the russell is up three point three percent versus a one percent for the S and P five hundred. So I guess that rotation trade into maybe smaller mid cap stocks out of you know, some of the other big cap names. Maybe that's really a thing. How do you guys think about that?
Yeah, look, I mean, obviously small caps more interest rates sensitive, and you know, this is great news. And certainly as you go into an interest rate reducing cycle, you know you're you're looking at benefits to small caps. You're looking at benefits obviously in the real estate sector already somewhat expecting that and pricing that in. So not surprising to see that, you know, and then you mentioned even in your intro, but what is the reason.
We expect the cuts?
I think if you think that cuts are happening because you know, the feed is a little bit worried about what's going on in the economy, that's not good news for small caps.
Right.
It's short term good news, but it's not good news. You know, if you think you're looking at recession, if you think that the FED is playing this right, they're hitting the ball right down the middle. They've tamed inflation, and now they're going to prevent problems in the economy. Great news for small caps.
I guess the question, though, becomes do they wind up cutting because there is a recession. And that's kind of the unknowable because if they're cutting for that elusive soft landing or normalization, that shouldn't that be a different distribution of investment than if you are cutting because things are bad.
Yes, yeah, it would be. I mean, look a high level we advocate strategic, long term, diversified thinking. Don't try to time this.
You know.
That said, if you're thinking about tilting in a certain direction based on one of those outcomes to the other. You know, if you think recession's coming, you're tilting towards quality, right, you're tilting towards low volatility stocks stacks that sort of
act as a ballast in bad weather. If you think that the FED is getting this right, that they are cutting in time, that they're not late with this, that they're pivoting at exactly the right moment, that we are going to avert, you know, a problem with this the AI trade. Maybe maybe your thesis is the AI trade is, you know, full steam ahead, and we're even going to start to see productivity increases in the rest of the economy.
Then you know, areas like.
Small in value where they've been they've been kind of ignored from evaluation perspective, they look a lot more attractive. You're going to be leaning more heavily there, all.
Right, Dannis, So today's price action shows us that obviously the Fed still matters, The market cares what the Fed is going to do. But so to earnings, and we just kind of finished up in earnings cycle here, any takeaways for you that maybe influence the way you're thinking about opportunities.
Yeah, Look, earnings are cooperating, right, Earnings are in the plus category here. We've had a nice earning season. You know, combined S and P five hundred, earnings grew nearly eleven percent year every year. At this point, we do having VideA still to see obviously, the AI king, we want
to see where that's going to go. That's going to be meaningful for the market, potentially even on the same level as today, right to the extent that AI has been driving a lot of the market's valuation increases, the multiples that we're seeing in a big you know that big tech, heavy concentrated part of the market, communications and tech,
so that that's going to be very important. But certainly what's nice to see about you know, earnings right now is that with nearly eighty percent of the companies beating their expectations, and most of the sector is doing well, you know, sectors like financials. This is good, you know, it shows breadth, right, it's not just earnings coming from that concentrated part of the market that's highly valued.
So I'm glad you brought that up because I feel like I've been asking this question ad nauseum, which is is in video going to be a market event or is it going to be a mag seven slash chip stock event? Where do you fall on that?
I think it's going to matter, you know, because of course we already do have the news now from Powell, and obviously, notwithstanding we've got a month before these cuts actually take place, and that's a lot of time for data to shift one way or the other. But it's pretty well baked in that. You know, we get the twenty five in September, so the market's pricing that in. And now the question does become, you know, where where goes in Vidia has gone, you know, to a certain extent,
belief in the AI trade. Of course, we know that there's a whole you know, satellite system of companies around there that are AI driven and you know, carry the flag for AI. But let's face it, in Vidia is the market sort of bell weather for that. And I think that does matter a lot, because again, a lot of the valuation increases we see on the large cap side in that growth space are around.
This thesis, Dana.
On the fixed income side, where do you see opportunity?
You know, of course, obviously the expectation now with the FED decreasing rates and you start to see some movement there, I remain I am and remain you know, a candidate for just diversity across the yield curve. I don't think it's smart for the average person to be betting on interest rate cuts. I think, you know, the market is pricing in the interest rate cuts as quickly as they're
pricing in you know, equity changes. So if you're in the retail advisor area where we exist, you know, tilting one way or the other on interest rates is a thing to is a tough thing to do.
It's not just right the FED.
When you think of something like the ten year rate, which obviously we're all watching now, there's a lot that goes into that rate. You know, it's not it's not just the Fed. It's the it's the markets expectations about where the economy is going, how much growth are we're going to see in the mid term. So I say, you know, make sure you're diverse fied across the field curve. I don't even think of bar Bell. I think, you know, trying to get across the yield curve is the right place to be.
All right, Dan, And we really appreciate thanks for jumping on on this Friday, and next week definitely going to be a busy week as well. Dana Dyuoria a co Chief investment Officer at Investment.
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