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the Bloomberg Terminal, and the Bloomberg Business App. You got to get an audible questionnaires. Do this, as Ivan finds it perfectly timed. Senior partner grizzled veteran, first heard of at bear Sterns years ago, Tigers Financial Partners. Then I got to go to SMCAI Hindenberg puts out a short report of to stock. Twenty four hours later, the company comes out with OOPS to ten K doesn't look good. What does the fine seth radars say about SMCI going
from Hindenburg tank to oops? The ten K doesn't work well?
Not good, But they recently switched in twenty three, they switched to de luyteen too, so I guess they're going through the filings again to make sure that there are no issues. I mean Hiddenberg does have a short position in the stock, and then they do publish research that recommends that shortening the stock based on accounting irregularities. So I mean it is Hiddenenberg's work has been questionable. However,
I do like super Micro. It is part of the AI play, So I right now feel this weakness is a buying opportunity and they are a tremendous partner with Nvidia so to manage outsourced data centers. So hopefully there are no regularities and we look back and this will have a buying opportunity.
You've been doing this forever and you've got a wonderful skepticism built into your securities analysis. I got sixty six buys eight holds no cells on the juggernaut known as Nvidia. What does the ivan radars say when you see everybody on board?
Well, I think back in the olden days, I used to view a lot of buy ratings as being a contrarian indicator. Yet it has not been the case with Nvidia. You can see on Bloomberg that my split adjusted initial buy rating going back, I think the twenty fifteen is now like fifty cents. But Invidia is at the core of this products of being able. Originally they were able to take digital information and turn it into visual information
at a faster level through their graphics processors. And now they are taking visual information and turning it into digital information, which is really the driver of this oll AI large
language or machine learning process. I mean that our brains are analog computers that see things and process visually based on an analog basis, and they give you an example, a computer learning the difference between a cat and a dog is a visual process and that's what Nvidia is enabling these computers to do as we adopt AI to handle data processing.
So in terms of what Nvidia needs to do today after the closed Ivan, I guess that is it has to be another beaten raise or the stocks are.
Well absolutely well.
First of all, there's expectations that the revenue will be up seventy to eighty percent year over year and the earnings will be up almost one hundred percent, and that they will guide higher again for the next quarter. And more importantly, there's been this controversy around whether the next generation processor, the Blackwell, will be delayed or not, which is kind of funny because they haven't. They said it's coming,
and they never gave a specific date. So I don't know if it's delayed if you don't really have a specific date, but it will be. There'll be a focus on a discussion of when the Blackwell processor will start to ship. And they already have the next generation Ruben processor that they announced in March of this year that
will come out next year. So they continue to make faster and more powerful processor and combining now GPU and CPUs, so the Ruben processor is a major leap forward and they continue to drive this this whole process.
Ivan, do you believe, as others have said to us, that basically Nvidia says you're not going to get the Rubin or the Blackwell unless you buy the present ship in that they're basically almost creating a luxury stock scarcity by saying you don't get the twenty twenty six chip unless you load the boat with the twenty twenty four chip. Is there veracity to that?
Well, they can.
They control the market, and you know there is a huge demand for processors even the CEO of super Micro, who's friends with Jason, I mean Jensen Wong, continues to ask him for more and more chips. You have Mark
Zuckerberg at Meta asking for more and more processors. There's huge demand, and the data centers are being built based on each level of the processor, while you're building out the current processor based on the hopper, which is the current processor then will be followed by the blackwell the end in Nvidia has to, like any company, take care of their best customers first.
Hey, i'van a very intelligent investor asked me earlier this morning, why aren't some of these other chip companies more competitive with in vidio? Why does the Nvidia have such a strong position in this part of the market.
Because they're multiple steps ahead of everybody else. And you know the quote the while everybody's playing checkers, Jensen Wong is playing three D chess. So they pioneered the graphics processor and invented I'm sorry from the beginning, have pioneered it and continue to leapfrog and be just way ahead
of anybody else. So and if your business is dependent on this, like the hyperscalers and the cloud service providers, businesses are you want to go with the best, the most reliable, of fastest, and even Jensen Wong has said the more you spend, the more you save, so it also has the cost in processing does present a saving, so that is a factor.
There too, Ivan, thank you so much. I really appreciate the comments and smcis the news breaks of questions over their ten K filing and mister Finesith mentioning Deloyte Touche involved there as well. Evan, don't be a stranger. Thank you. With Tigris just incredibly well time. Marilyn Watson is it Blackrock? She got a fancy title. She demanded this title when she came over from JP Morgan Global Fundamental Fixed Income Strategy.
Here's what you need to know, tour duty at her Bank of England and also a parchment from the University of Cambridge. Marylynd been dying to talk to you about. What I leave is a reset after the Powell speech. When I look at full faith and credit yields today, it just looks like a massive Dare I say, permanent reset to lower yields? Do you buy that idea?
Well?
I certainly agree that we have seen a big research in terms of the pricing obviously for you know, treasuries, but the fix income as well. When you look at the roller coaster that you know, fixed income yields have been on, prices have been on this year from pricing at the beginning of the year to then a lot of cuts, then at one point even pricing a further hike. And now I do think, you know, finally after Powell speech at Jackson Hole, then the scene is definitely you know, set for the Fed to.
Start cutting rates in September.
I think when you look at yields, when you look at also all in rates, you know, I do still think in this environment while we do think obviously the Federal cut in September and they will continue to cut perhaps for the next few meetings. And you know, Powell made it very clear he said that the direction of travel is that you know, rates will be going down.
When you look at the all in yiels that you can also get in credit and elsewhere, then they're still very very attractive, I think, particularly when you look at an economy that is still pretty robust, when you look at obviously the labor market is softening, and the said has sort of pivoted now from focusing on prices to focusing on the labor market, and you know, the overall growth of the economy, it is softening, but the US economy is still at this point in time, still doing pretty well.
So I think we have seen a big shift.
We've seen a shift towards seeing lower rates, you know, commencing next month. But I do still think that now we can see some continue to see very attractive yels in fixed income.
Marilyn, what do you expect from our European friends? The ECB in a Bank of England have already begun cutting rates, and will they take a little bit more confidence to continue that trend given that we've heard Chairman Jpal say that the US FED is ready to start cutting rates.
Yeah, that's right. So they both already began to cut rates.
Obviously, the Bank of we're going to cut them at the beginning of this month, the ECB a little bit before that, and we think that they're going to continue to cut rates, but probably in a little bit more of a gradual fashion, probably about once a quarter. So we do think in September that the ECB will cut rates again. Obviously at the end of this week, we do get the flash HICP, the inflation data coming out of the Eurozone, we think it's going to keep them
on track to cut rates again in September. In terms of the Bank of England, we heard from Governor Andrew Bailey also at Jackson Hall, and he was also very clear that you know, the direction of travel is that rates will probably go lower, but again he's in no hurry and we do think that he will probably also around once a quarter. So we expect that the Bank
of England may cut rates again in November. I think when you look at the starting point, as you say, both the ECB and the Bank of England already started there, you know, easing cycle. The FED I think has a little bit of catshup to do. It's a little obviously a bit later than them, and so we do think the FED maybe a little bit more aggressive aggressive in terms of the next few cuts, whereas the Bank of
England the ECB will be more gradual. And also their economies are in a different place to the US as well.
All right, Maryland, so you're a black rock. You guys are everywhere given that backdrop of global rate declines, where do you guys see value these days?
Yeah?
So we're in when you look at government once first of all, then we still like some Spanish duration. We're also long UK duration, a bit a little bit in the US, and then we're short duration in Japan because you know, we do think that the Bank of Japan is actually going to continue to hyh rate this year. But we do, like you know, at the front end of the curve, we do like attractive names in investment
grade credit in Europe. In the Eurozone, for example, we still think that you can find some very attractive all in yields and some very attractive valuations, particularly when you then hedge that back into the dollar.
We think that's pretty attractive. In many cases.
We continue to like some securitized assets, some very liquid, very cashionative names as well, where we think, you know, you get decent yields, you know, a decent all in carry, but you also do have I think a lot of flexibility, and where we are now, we want to make sure that we really understand on a risk adjusted level, right. We also do like areas of measure markets. For example, we're long still.
Too Maryland, and we've got to be quick here, but this is too important. I just put on Twitter my Marylyn Watson chart of the day. I'm going to discuss it. Marylyn. This is an adult chart. It's global Wall Street talk.
Folks.
Stay with me, Marylyn. I went back to Paul Voker, and I looked at the Bloomberg Corporate Total returns series not full faith in credit, and I took the regression from nineteen ninety out to the present day. The bond tobacle that you and Blackrock have lived was a three standard deviation move, really elegant. The fact is, with a power speech, I'm back to a negative two standard deviations.
Can you envision price up, yield down, where we could get back to twenty and thirty year log trend on the price of bonds.
So I think when you look at the corporate market, I mean, we certainly could expect to see yields come a little bit down from here.
I certainly think that's possible.
I think also when you look at the overall economy, when you look at what is being priced in in terms of then shear number of cuts first of all by the FED, the market is actually pricing in a lot of pretty negative news that we don't necessarily see coming through next year. We do think the lead market will continue to soften, or do you think activity will continue to soften? But we don't see a strong catalyst for certainly for any sort of like you know, sharp
procession or anything like that. So when you look at the overall backdrop in terms of corporates, when you look at particularly in the US as well, we do continue to see a pretty strong backdrop in terms of economic activity when it is slowing.
But again we do think you know, yields will come down.
We do think that prices, however, will remain pretty pretty attractive.
So is the clinic. Marilyn Watson, thank you so much, greatly appreciate it. With Black Rocket Emily Rowland Joints from the Johina Hancock Company with the clarity of her belief, Emily, you have nailed by American by MidCap. Do you still believe that?
Yeah, we do, Tom, And the way we think about this is you want to identify where are the best earnings trends and where are the best economic trends, as simple as that, a lot of people will tell you the valuations are the key in but for us, we want to look at the denominator of the PE ratio. Is the key here, and the US has simply been able to generate better earnings results. Just this year. We're looking at about eleven percent in the US versus about
half that in international markets. High quality stocks, guess where you find those in the United States. Those are ones with great balance sheet, They've got tons of cash. They're going to do a better job defending their margins in an environment where the late cycle dynamics continue to play out very quickly.
Our SMCI opening here at nine point thirty two, Paul, I'm going to go back four days before the Hindenburg news, down twenty one percent from where it was August twenty three into a Friday of last week right now, four seventy one worse than it was pricing before the market opened.
Absolutely, tom right, thank you for that, Emily. We're just finishing up earnings period here. What did you take away from the earning cycle and maybe the guidance that we saw from some of these companies.
Yeah, earnings this quarter, of course, much better than expected. Of course, we have a behemoth after the close today which is going to be highly influential. Hard to forget that that's coming later on today. But better than expected. Technology in particular saw that double the earnings growth as the broad market. So I think, you know, there's so many smoking guns out there that investors are pointing to. Is as you know, negatives. You look at some of
the economic data that's coming in worse than expected. You look at especially the labor market data, which is showing some cracks. Earnings is not one of them. The earnings backdrop has been robust, and again that's a key reason that we've continued to emphasize US equities given those positive earnings trends.
So we heard from the Fed chairman on Friday pretty clearly looking to cut rates. They're assuming that actually takes place here, maybe beginning in September. What sector's screen well, few in a market where you know, earnings, I mean, the rates seem to be coming down.
Yeah, I think you know, the Jackson role speech, by the way, was pretty interesting. You know, we saw exactly what was expected. You know, Powell obviously confirmed that cuts are coming, but I always watched the market reaction, and
you know, we saw bonds move a little bit. Market expectations of a rate cut didn't change really one hundred basis points penciled in for this year, but we saw huge moves and equities and in currencies, with the dollar plunging to near two year low, So I think it was a big sort of sentiment driven mood there moved. There is nothing to me really seemed to change in terms of the expectation, So I think that was notable in terms of sectors and parts of the market that
we think should do well. It's sort of the opposite of the market reaction that we've seen with areas like small cap value stocks doing the best since that day, areas like international value stocks which have benefited from that week or dollar. We actually think that the FED is probably going to be cutting because something's wrong. Maybe it's as simple as margins are getting compressed and the unemployment rates going up. You know, growth is slowly slowing, so
in that case, byclical assets wouldn't be rewarded. This is like the secret life of acid allocators and the way that we think about these process that moves it doesn't really make sense. You have this odd kind of partnership right now of long dated treasuries and gold in international value and small cap stocks being the best performing things out there. It actually doesn't really make a ton of sense. When you open up your textbooks.
Emily Roland, stay with us, don't go away. We've got to follow SMCI where they're having ten K issues. Thank you Ivan find such perspective her moments ago opening can't find a bid. It was a five point fifty and it's now four five nine, four fifty nine off of where it was six fourteen a couple of days ago before the Hindenburg short report. It is down twenty five
up percent. Still can't find a bid four fifty six right now, Emily Rowland, when we look at the market, and this is something you can do from old John Hancock or new John Hancock in Boston, you can say, when does the money move? Are we getting near a yield as we see thirty year mortgage down? Are we getting near a cash equivalent out three months or two years where we see money supporting equities?
Yeah, you know, I think we're there right now. One of the you know, we think about these sort of timely indicators in the markets that we watch, and right now to us, it's really about initial jobleslans and high yield bond spreads, initial claims. You know, they picked up a little bit last week, they're still in this range of two hundred to two hundred and sixty thousand. High yield bond spreads extremely tame at about three hundred and
ten basis points over treasury. That's well below the average over the last twenty years of five hundred basis points. So I think until you see movement on that front, I think markets are going to continue to reward equities. We want to think about again leaning into higher quality stocks,
maybe sprinkling in some more defensive equities. But now is the time to think about leaning into high quality bonds because once those two things happen, breads blowout and initial claims rise, it's often too late to capture the income that's available in bonds. So you probably remember, you know, down the street from John Hancock, John F. Kennedy once said that the time to repair the roof is when
the sun is shining. And we think this is the time to think about emphasizing bonds, you know, before it's too late to get these great yields.
She's going to.
Quote Ted Williams next time.
She's exactly so Emily, I mean, again, we're in a fixed income space. You can sit there in the treasury two years, get three point eight seven percent. It's not where we were just a little while ago, north of four percent, but still decent. Or do I take credit risk? How much creditrisk should I be taking here?
Yeah? So our favorite areas in terms of you know, the risk return trade off right now, or investment grade corporate bonds, which you're yielding you know, four to five percent, and I'm talking about like a single a investment grade corporate bond that's very elevated versus history. We like areas like agency mortgage backed securities, which are also you know, showing solid fundamentals and good valuations there. Even treasuries, hihold's tricky.
You know, when you go down the credit spectrum right now with spreads is contained as tight as they are historically when spreads have been at this level of around three hundred basis points, your twelve month forward looking return is around zero to one percent, with a range of positive ten percent to negative ten percent. To us, the
risks aren't worth it there. And by the way, you don't even need to go down the credit spectrum in order to generate an elevated road right now, which we think is pretty exciting.
Emily, Thank you so much, Emily Rolling with Portant up to co chief investment strategist John Hancock. People go, how do I do it? They're asking me how did to sign autographs? And that's all because of John Tucker. Because John Tucker taught me everything he knows.
You know.
It was great And with wind Thin it's the same way Audrey Child Freeman was in tears Yep and London. She goes, Win's on after me. We're going from Audrey Child Freeman to win Thinn. That's very cool.
She was.
He was a great mentor to Audrey years ago. Doctor Finn. Thank you so much for joining from Brown Brothers Harriman. When I don't want to reducts like what's the euro call it Brown Brothers harman I want to take your just a high ownership of Pacific rim Dynamics. What does a China slow down mean for Burma? What does it mean for Singapore? What does it mean for Vietnam and up to Japan?
Well, first of all, Tom Paul, thanks for having me. It's always a pleasure. And Audrey is a tough fact to follow. Im misworking with her. She has a pleasure to work with and you guys are locked out and laying her So to me, the China story is just bubbling in the background, and we have some headlines here and there, but we look through all the noise the fact of the matters. They really haven't done much to address the the underlying problem, which is a huge dead
overhand that GDP is almost three hundred percent. You know, they've tweaked policy. They're pushing on a string right now and trying to support the housing market. But to me, it's a net negative in sense for a lot of
the export oriented countries that just Singapore, Taiwan. But at the same time it's a slow in China and sort of a rotation out of China is a net benefit for some of its rivals such as India, Vietnam and other countries that are that are sort of picking up the near shoring the French shore.
So it's it's a mixed bag.
But I think in general the world has to come to grips for the fact that China is growing two three percent.
You know, I think it's going to continue to struggle.
Can you be long Pacific rim Can you be long as a talking point Vietnam.
Absolutely? For instance, you mentioned Vietnam.
It's it's it's you know, one of the beneficiaries of the of the of the French shoring.
India is another one of them.
But even the countries such as Korea, Taiwan, Singapore, look, they have great fundamentals.
They just have a solid uh manufacturing.
Base and there are a source of a lot of the world's chips, So there is still great stories there. It's just that much of the growth in em over the last ten twenty years really was really driven by China growing ten percent and that sort of turbo charged it. But again, we're sort of a new normal. But that doesn't mean these countries can't, you know, can't continue to prosper. You know, again, fundamental fundamentally story in the Pacific RIM has remains very strong ex China.
But it's again it's it's it's a new normal.
So so when I mean, I guess most of our audience just knows, as you mentioned earlier, that much of the growth coming out of Asia has been China. How about the next five to ten years. I can't imagine that they're going to be comfortable with low single digit kind of growth in their economy. Is there any way they can turbo charge that or is there there are issues just too fundamental.
No, No, I think you know, many of the countries in that region, I've been very much expert driven, right they China's growing, the US was growing, everyone's consuming. But you know we're seeing sort of cooling of global growth, you know, post Great Financial Crisis and now post pandemic.
I would say many of these countries are going to try and sort of rotate out of being so export oriented and trying to be more domestically oriented so to encourage domestic consumption, domestic prosperity, and China's trying to mix mixed bag.
You know. Given this again, is.
Heap that opening, I think other countries will start to look a little bit more inward and in a sense that they have to. Again, we're at this old world where where China's going ten percent and they could just chug and export growth and export the way to prosperity, and it's again it's just a new normal.
Uh.
I think they can containe to prosper but we have to see this rotation away from export orientation, you know totally.
Of course they're still export but more towards domestic consumption.
How consistent do you believe the Bank of Japan will be and kind of trying to raise rates in that country, support the currency. How consistent can they be?
Do you believed?
Yeah?
So, I mean I know you spend I cut the tail end of your conversation with Augia.
I know you spend all the time on so I won't sort of regurg to it.
But I do agree that with Audrey that you know they so far they've they've been able to prevent a huge major market milth down.
Yeah, we had that scared a couple of weeks ago, but here.
We are back at the highs with equities, currency are stabilizing, so they're managing. I think the bone I would have to pick with the Bank of Japan has actually admitted, hey, we're on hole because of the market. And you know they've been some editorials on your page as well. I think it was through l our Air and others, is that you know that the central banks, you know, can't always be led by the market. It's so the tail it's wagged dog, right, the central banks Bank Japans fed,
they have to lead the markets. Uh, and so far fort if you look at the US, if i'd has done a fantastic job. The market's been wrong about the easing cycle. I don't know, I've lost count I use up on my fingers, but you know, I think that's the story that the central banks have to be the one that set the theme. And so I was a little disappointed at the bank Japans sort of blinked. But they will continue to be very, very cautious. Remember the
last two times they've hyped, they've gone into recessions. So I don't blame them for being cautious, but I'm a little you know, sort of, I think they should have stood a little bit.
Stronger when there are tentative meetings an orchestrated ballet between the United States of America and China involving Jake Sullivan. This has been in the news in the last couple of days, folks. In one of the themes there, obviously, Taiwan is front and center. One of the themes is the South China. See. I think maybe more than anyone we talked to doctor Thinn, you've lived it. How do we how do we have confidence in investment in the
Pacific Rim. Well, we've got ships bumping into each other, uh, bumping into each other in the South China Sea.
Yeah, Tom that means like one of the sort of age old dilemmas as any kind of market strategies, how do you really position for some of these black swan events, you know, tail risk events on a political sphere, It's difficult. I would sort of say, point out the fact that we are basically running two ground wars in Europe and Middle East with risk of maybe three and four, and yet the markets are sort of overlooking it.
So yeah, I think a political noise, it's it's always there. It's it's I don't mean the Diminish ship Tom. I mean it's it's a serious risk. But you know, if you're an investor, if you're a multinational and portfolio manager, you sort of have to look through.
It and and really just kind of cross anders hold for the best. So to me, China is provoking, is no doubt about it. I we've had some ship as you point up ships pumping in the Philippines, then unprecedented encouraging into japan airspace A is the first time it's been confirmed. I think they're provoking. What I worry about,
and I always write, is something accidental happen? You know something I don't think China's looking to to really cause any kind of major converagation in the area they are provoking. But what if something accidentally happens where playing ghost pimps? And that's what I worry about, and so to me, I wish everyone would sort of dial back.
I think we're unfortunately far from that.
Winton, Thank you so much, greatly appreciated. This is the Bloomberg Surveillance Podcast, bringing you the best in economics, finance, investment, and international relations. You can also watch the show live on YouTube. Visit the Bloomberg Podcast channel on YouTube to see the show weekday mornings from seven to ten am
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