Nvidia and Geopolitics Impact on Markets

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Joins us right now. He's a the UBS.

He's out of America's tactical asset worst worst job at UPS.

It's like being in charge with Frank.

What are you tactically asset allocating into twenty twenty five? With everything that's going on, you just pull aside and stay in cash.

I know, we actually upgraded equities about a month ago, make them attractive. Still kind of have confidence in the macro. Look at that hasn't changed with the election. It's added some volatility the outcome certainly to the potential paths the by lunch we think this is bull market in equities keep going higher.

So, I mean, what changed for you a two weeks ago election day? Did anything change for you guys as you think about allocating assets, stocks, bonds, alternatives, US non US?

Has anything change for you guys?

Not fundamentally so the way I would kind of describe it is that our expected value stayed the same. The variants and distribution probably got wider of different outcomes. So certain positions that we've kind of recommended, like gold, which has actually pulled back that somebody thought as a hedging, that's actually become more attractive since that time. The view on rates ultimate kind of drifting lower. That has not

Did you take your expectation for earnings higher thinking that taxes are coming down potentially under a Trump administration.

We have not adjusted our earnings ultimately. Look, we think they'll extend their personal tax cuts. I think anything beyond extension of existing tax cuts that seems I would make that the base case. You know, just there's not a lot of fiscal scope for further expansion for the task cuts. That's our view at this point.

You don't think they'll be further very.

Like something along the lines of reinstituting the sort of accelerated depreciation, you know, things that were actually discussed earlier this year and part of the budget deal, but not further taking down of tax cuts, not as the base case.

How do you think about the allocation stocks, bonds, alternatives. I think Tom and I grew up in a sixty forty era. You know that's not a thing anymore, is it.

Well, it's not a bad starting point, you know. The question is like, how do you improve on that? And I think that the key thing about the sixty to forty what works so well for you know, decades, a couple of decades for sure, is that stocks and bonds had have negative correlation, and that was because I think part inflation was contained. When inflation is contained, it can sort of have that negative correlation when you're worried about inflation.

Jackson Yale University. There's always a fun This is Bob Schuler's legacy. There's always a fundamental of finance over your economics.

The what's the.

Track record of rebalancing and asset allocation in recent years? Granted we've had three once in a lifetime events, but do you still have a theoretical confidence in rebalancing or do you tilt more to a longer buy an old strategy.

Well, rebalancing and on a regular basis, that is becomes a little bit more systematic. I think that the deity would show that actually adds value. There's a rebalancing alpha.

So to speak.

I think where the tricky part comes in is that markets move very fast, and now they move very quickly. I think about what happened in the summer when the S and P was down almost ten percent in about two and a half weeks, and then it almost fully recovered in two weeks. So the question is like do you rebalance then and not rebalunance? And that's kind of complicated matters, But conception and rebalancing is adds value over time.

You guys have a S and P price target of sixty six hundred. Tom likes these round numbers. By December twenty twenty five. Is that earning's driven, multiple driven a little bit of both.

Mostly earning is driven because I think about where we are right now, it's roughly six thousand. If we open up and where the futures are ten percent upside, we're looking at eight nine percent earnings grow, so and the risk I th thing is probably that number might get, you know, taken higher. Multiple Basically stay is kind of constant to give or take a little bit. So it's really mostly an orning story for next year.

Are there sectors that screen better for you? Guys here at this point, like a lot of folks are saying, if we're going to get some of this proeconomic agenda, maybe some deregulation, maybe in taxes, I want to be in cyclicals. Do you kind of fall to that camp? Are you saying, I'm just sticking with my technology names.

Well, we like technology. We still think that's a secular story, right, It's kind of agnostic to some extent of the policy. He'll come that's what makes it attractive on the cyclical front. I think financials that's one of our attractive sectors. And you can kind of kind of multiple reasons why, you know, deregulation or less sort of owner's regulation that will kind of come down the pipeline, likely pick up in corporate activity M and A. I pos against certainly the big

That's what we like.

Right when you did your PhD at Yale, you did it on IPOs. Paul and I were live in lunches. There'd be three lunches in one day. There was this eff vescence on the street which you wrote about authoritatively.

It yeah, okay, great.

Do we want to go back to that millu or are we lucky that we're here where Paul's going to one lunch every ninety days?

Well, I can't speak to punch of Paul's lunch preferences. While you were at doing the three lunches, I was in the bowels of Barneaky Library kind of working the matter is.

And we a guy in from Black Rock celebrity earlier.

We're now at a point where there's four phone calls made on an IPO, do you want it or not?

Yes or no.

So I don't think we're going to go back to what it was in the nineties. I mean, there's just regulation ngels that that will sift you all that. But also like you know, sorry benz Oxley, like there's there's fewer companies that want to go public. We did see frothiness back in the second half of twenty twenty, in the first half twenty one the spacmania, So there's definitely that is possible to kind of come back. But I think the closest we've seen for IPOs is you go

All right, the PhD I from economics from Yale. I don't know why you would ever do that. The undergraduate tom He goes to the University of Manitoba. So I have to google maps Manitoba. That's how ignorant I am of Canada, the geography of Canada. If you're not in Winnipeg, there's nowhere to be in that province. I mean, right, I mean it is. I mean I'm looking at this map here. If you're not in Winnipeg, where are you.

Well, Winnipeg is the big city's table city. The next biggest city is going to be more like about fifty thousand. But it's a lot of beautiful wilderness if you love to fish. Fantastic for fishing. Fantastic for lakes.

Hudson Bay up on the Upper Head.

How low of cold?

The record cold I have is twenty one degrees below zero Plymouth, New Hampshire.

How cold did it ever get in Winnipeg where you were up there?

I mean the coldest days will be below minus thirty celsius. So look, I'm around minus twenty five with a wind, so the windshill is worse.

Is anybody going to beat the Winnipeg Jets this year? That's all we want to know.

I'm your fingers crossing, looking really good. But there's you know, Florida is a tough team. The Rangers are our tough teams.

The Rangers, we can always lose it. About the third week of March to go to like the Maple leaves.

Tell us still remote from Winnipeg in January, We'll get Lisa Matato.

I will join you if you get that in Winnipeg.

Promise if we go to Winnipeg, Dreo will be the andrel Thank you so much, really important conversation on asset allocation and reb Sen.

There he is with UBS.

You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from seven to ten am. Easter Listen on Apple car Play and Android Auto with a Bloomberg Business app, or watch US live on YouTube.

Wendy Schiller, as the professor from Brown University, joins us. I'm listening to Nicki Haley Wendy Schill yesterday and as far as I'm concerned, Lisa, don't let the mess Scarra run lissus crying, Professor Schiller. The campaign for twenty twenty eight did it start last night? With Nicki Haley going after irf K Junior and Tulsi Gabbard.

Well, it's certainly an indication that she's not going anywhere, and that she feels like she got some votes when she ran against Trump in the primary. She has a constituency, and she's trying to position herself as viable. It's a long time to work, you know, the next couple of years. But you know the first eight months of this administration may be successful and accomplishing some of the President elect's stated goals, but after that, you know, parties fall apart a little bit.

Majority is of hert.

To sustain and so she's positioning herself with somebody who looks viable very early on.

So DNI is intelligence and this is the former governor of the Carolinas. Quote d and I is not a place for a Russian, Iranian, Syrian, Chinese sympathizer when they get in front of the Senate or the House, or just they're working in the machinery. Wendy Schiller of your Washington, how's that going to play with the middle of the Road America.

Well, I mean, I think the calculation that Republican senators have to make is which of these nominees and their issues and.

We know we have sexual assault allegations.

You know, we have child sex trafficking, drug use, we have sympathizing with her on in Russia. We have a whole list of things which will catch fire, which will actually resonate in their voting constituents community. You know, which will voters care about right now? Voters sent a signal saying fix inflation, you know, fix our cost of living and make sure that we have a future in.

Terms of economic growth. That's what they've said. Will they care about this now? Probably not?

Could they care about it later if these people get confirmed.

Possibly surveillance correction, it's an important one.

It's tassa gabbert o gabert I'm mispronounced it because I'm an idiot. I wasn't trying to be Snyder or something. I don't want people to read anything in them.

Not excuse me, yelled at me.

She did.

Well, she's she's on top of these things. So, Professor Schiller here, give us a sense of how you think this Republican Senate is going to view some of these nominations here, particularly some of the ones that have been flagged as maybe troublesome, such as you know, mister Gates and uh, miss Gabbard.

Well, we're obviously seeing some attempts by the you know, the administration elect to you know, get Gates through. It's typical to have nominees meet with senators. I'm just looking you know, for Lisa Rakowski, Susan Collins, you know, particularly for Headset and Gates.

You know, what happens? Do they vote for them?

And if there are cracks in the coalition and they get through, will those cracks grow as each nominee is voted on? So which of the most problematic nominees do you put first?

That's going to be.

John Thune's problem, right and his challenge which one does he get through first? If the most problematic one gets through first, then you don't have a lot of big problems. But you know, I'm going to be looking at those two senators and senators who are.

Thinking of running for reelection in twenty twenty six.

And because Kamala Hawers lost, there seems to be some impression that the female vote isn't going to respond to these kinds of things.

No, women are like everybody else. They prioritize what they worry about. In this case, it was budgets. It was schooling.

It was all sorts of things that hit close to home, but behavior still might matter. And so this is the calculation that Republican senators have to make, which are thin on some of these nominations. Telsey gab You know, Nikki Haley was former ambassador of the UN. She does know the international community, and I think if she's raising alarms, then I think some Republican senators.

May be listening.

Professor Schiller is just all this a precursor for every single Minutia decision, not Minuchin Minusia decision.

Like it's Latin. You gotta do that with your Brown University.

Every single minusia decision, Wendy's going to be made out of sixteen hundred Pennsylvania Avenue.

Oh, it's very difficult to do.

I keep reciting this with you about Ronald Reagan, right he said, I would you know, issue a decision or a request. It would take a week to get a response in the White House. The federal government is massive, you know, to move it quickly is very difficult to do, even for the Trump administration. But the question of Congress, with that very slim majority in the House, we have to see what happens when they start really making cuts

How that DAMA plays out, We're going to see it probably in the summer.

Philip Bump killing it in the post yesterday. On the mandate, I went nuts yesterday with David Melpass, professor Schiller, Trumps supporter, when he said this was.

A mandate election.

You're expert at this, back to eighteen eighty three, if not back to Adams Jefferson.

Was that a mandate election? Professor, Well, it's tough.

I mean, I think by my calculations, he's just under fifty percent. That's what I think we have right now in terms of the vote tallies. So under fifty percent is typically not thought to be a mandate. It would have been a stronger argument had the House Republicans picked up any number of seats, but it looks like they'll have the same exact vote majority that they had in last session. That does not suggest, as I thought earlier that Trump's cotails would be long and strong.

I'm wrong about that. They were not that long and strong. And that's the big tests usually with a mandate.

And then you know, getting people back in the office is something private sector has been wanting to do. It is true that, you know, you could have expected Trump to say everybody come back to work. That's something the musk, you know musk, they're they're right about that in the sense of that was always going to happen. And so I think that's something that will be really interesting to see and its impact on DC, by.

The way, as a city.

The irony is that it could resurrect downtown d C, which would be something I think most people would agree is a good thing.

Yeah, it feels like it the thing they proposed.

Not everything they proposed will be met with opposition, and not everything will be successful or a failure.

Twenty seconds. Professor Schiller is a Talban center at Brown, going to five days a week in the office.

We are excited.

We're launching a school public policy ju Live for us, so we are excited to really be all of us on our game.

That's my answer.

There.

There was a sophisticate the General Counsel pass that at Brown University. Wendy Shower, thank you so much, particularly those comments on our constitution and our civics that is out there.

This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven 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 joining us.

Now the conversation of the day and technology. We had Dan Ey's earlier with us from his Sikorski Gene Munster joins us now really pleased with that of course, with Deepwater.

Asset management, Jane, What is the moment we're in?

Paul Swede and I did important AI seminars for aniog Run and Man Deep sing yesterday with Adobe with Salesforce, there's Nvidia earnings in the rest. You've been doing this forever. What moment are we in in the next year in American technology?

We're in what is going to be the more I think exciting year and innovation over the last fifty years. And it's hard to really put a language on it to capture what the concept of infinite intelligence or close to infinite intelligence at almost no cost means for humanity. And so as someone who has been around for the Internet and saw the boom and bust of that, I

Four more years.

It's going to end in a spectacular bursting of the bubble. But I think next year, from just a broader market perspective, I think we're going to see another incredible year. And I think that it's driven by substance around AI going from a build out to starting to move to more application since we saw a little bit of that with

It's just a really special moment.

Hey, Gene, When I talk to people about AI, I often quote you because I remember talking to you maybe eighteen months ago on this program, and you put into content into a kind of a framework of a companium of kind of where you view AI relative to, say, the Internet to electricity. Can you just review that for us, because it's so powerful to give people a sense of how you view the potential impact of AI.

So it's a zero to one hundred scale, and one hundred is the most impactful, most transformative. But at twenty five, I would put mobile at about thirty five forty. I would have the PC the Internet at fifty. And obviously these all build on themselves, but if you look at them as a standalone, So the Internet is fifty, I think AI is probably ninety and electricity would be one hundred. And I think AI would be greater than electricity if not for the fact that you need electricity to run

There's a lot of hype in that.

I think the substance will exceed that hype.

Yeah, but you're gene when someone like you makes that analysis. A lot of people like myself, we pay attention here as we try to get our minds around AI. What's the next step here? At it feels like we're we're so early innings on this, but it feels like we're now at the discussion point where.

The next step is one of your kids needs in Mac.

It's a new left, new laptop with the AX just so you know, that's the next steps this weekend exactly, Geene, are we at the point now where we really have to make the use case for AI applications? Maybe the return on all this investment that we've seen.

I don't think we're at that point. I think we're going to start to see some of that next year. And that has been the hesitancy around this whole AI trade is that the I think the skeptics would say that we just really haven't seen those incredible bread taking use cases yet, but they will ultimately come. And I think that what we saw with the Nvidia earnings last night and specifically this demand, I mean, this is incredible. I've never seen a story like this. They did twenty

First single work gene Munster with us here right now, folks thrill these with us, Danizer with US earlier as we look at technology in America, Munster with deep water asset management, Gene Muster. I look at the Apple A and R used to be part of the cellside racket. Loved to Piper Jeff for years ago in Minnesota. But Gina, I'm looking at Okay, I got forty buys, but the fact is.

They got eighteen holds. I got Apple in a trading range since June. It's butchers up now near new highs.

I assume Gene Munster thinks Apple's going to break out, How is it going to break out?

What will be the catalyst at the top of the income statement or on downward.

It's going to be at the top, and it's it's going to be either later this fiscal year, kind of the June quarter ish of next year, I think is a potential breakout or in fiscal twenty six. And I think it's inevitable that this happens. And to put some numbers around it, what that breakout is is that the streets looking for or iPhone growth in fiscal twenty five to be around six percent and for fiscal twenty six a pretty similar number. I think that that can be

Don't light up your life.

I think that as they roll more of them out, it will become more clear to people that they have to upgrade.

If I were to put together kind of an ETF for AI, because I'm trying to get some exposure to AI, but maybe I feel like I've missed the Nvidia trade. Are you asking for one of your kids emailed in for one of your kids need a basket of AI? How else are you thinking about kind of getting exposure to Again, this is really seminal shift in technology.

Paul, I'd be remiss not to mention we have an ETF the tickers LOUP. It is frontier tech and it basically gives exposure to AI themes that are outside of the megacap So if you're looking for some smaller companies like Verted, for example, that does cooling, it was mentioned on the call, these are the sub kind of two hundred billion dollars, So I have to mention that LOUP. But I would say that more broadly, I still think we're in a period where the hardware piece.

This is a contrarian view.

I think the hardware trade is going to continue to be stronger than expected over the next several quarters, and then as I mentioned, kind of exiting end of next year. I think, you know what we're seeing with Snowflake. I think you're going to see more and more of that in software land kind of later next year. But that's kind of how I think about it, still in the hardware piece and then moving to software later on.

Okay, lup up to thirty five percent, three five up, thirty five percent.

One year trail. Robinhood's you're number one holding?

How do you have?

Robinhood is part of AI.

So what they're using is as part of how they assess risk with customers, they use AI. They also use AI as a means to go and generate new customers so for doing outreach. So they've been pretty they've been proactive at doing that. So it's companies like Robinhood is. Another company that we looked at recently to add to this was like Crispin Green. It sounds crazy, but they have a big robotics initiative going on. So it is these companies that are studying to implement AI kind of under the hood.

Hey, Gene Snowflake, I am looking at Snowflake stocks up twenty five percent. Can you tell us what Snowflake does and why the stock is up so much today?

So what Snowflake does.

It's called a data warehouse, which means that you take data. It could be anything from structured data inside of a business. Structured data would be data that is in like an Oracle database, and it warehouses it so AI models can train on it. It basically makes data more accessible and usable for training. So that is what they're benefiting from is just more training and more enterprises starting to use this. Their biggest competitor where they've been losing share, the reason

But that's what's going on with Snowflake.

Jane.

First question to Eli Greenfield yesterday at Adobe is all this fancy gene monster data ives talk.

Is it going to take our jobs away from us?

Well?

As an asset manager, I think that that's a very real potential. I think as an ANALYSTI it's a little different. At deep Water, we launched an affiliate company a few months ago called Intelligent Alpha, and it basically is machines picking. It's just machines picking stocks, just an et F L I v R livermore. But I think it is. It's something I just mentioned that in context too. It's one of two things is going to happen. Either it's going

Well, we have community, do we have empathy? Lisa, I don't you know.

That's a stretch.

You know, it's like pushing the envelope here a little to its gene monster hugely valuable.

We get a huge signs.

This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Applecarplay and Android Auto with the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal.

You better not have Chris.

Sale on this, Lisa, I'll tell you that your daily look at the front pages of Lisa Mateo hour anticipated Lisa Mateo.

Okay, it's the end of the year, right, Accounting departments racing to close the books, so they have all these expenses to go through, and they got to get them through. So now what they're finding out is a lot of workers are pushing the limits with those company credit cards. They're finding things, they're telling them Wester Journal. People are buying things like Christmas gifts, jet skis, cruises, plastic surgery.

Would not allow this, I don't think here at Bloomberg he would not. All right, interesting, I mean, I know people got like some of the spending accounts and they gotta flush the money before they lose it and all that kind of stuff.

I had a beverage of my choice ones for the evil Laura, she's in charge of all of our auditing, and she told me a couple of stories own.

And Laura told me, you know, she said, time you competing. Yeah, exactly, next it's on the hand.

No, seriously, it's and you look, we're like everybody else. We monitor it is, you know, we do, we do, we do.

So yesterday we talked about the Comcast spinoff right of the cable channels, and Paul, it's funny because you and Alex and I were talking about this. What about these MSNBC staffers like they're going to start to be in a panic? Well, sources actually telling you The New York Post, MSNBC start, Rachel Maddock, Chris Jansen, Kitty Tour. They had this tense meeting at thirty Rock led by NBC Universal chairman Mark Lazarus, who's going to lead the company, and

There's the financial side which is always interesting, but the editorial side will be very very interesting. In the heritage going back, pushing thirty years back when it was Microsoft NBC. I mean, there's a lot of heritage here.

Yep, absolutely, I mean, and again you just think kind of where the country is these days? Where is MSNBC and it's editorial background. Where does that kind of stand up? And again it's a standalone company. You can't hide behind the compcast, broadband and cable television number.

Its fascinating and of course we're all looking at this folks on the island of Manhattan.

I mean, it only focuses on three zip codes. Right, there's a zip code of Sunset Boulevard and here in New York. Next, Li said, all.

Right, if you're going shopping New York City's fifth Avenue, it is no longer the world's most expensive shopping street. Okay, this is according to a new list from Cushman and Wakefield. The number one is now Milan's let me see if I say this right, via Montenna Napoleon. Enough, it has the first but the first time a European city topped the list. So it gets the rents globally from about one hundred and thirty eight luxury shopping districts, so this

Street that ubon. Okay, that's right. Well Milan, I mean one of my favorite hotels in the world, Hotel Pinchy Pey Savoy.

Oh yeah, can I tell you where growing zeros on the three three via Monte Napoleon and that would be Fendi Milano monten Napoleon.

And yes, it's two thousand dollars per square foot. Every time you walk a square.

Foot it goes k ching, nice, you love me.

Next, and finally here's our kicker.

So this piece of artwork a duct tape Banantic. So he's six point million dollars at Southerb's in New York. Six minutes of fear spitting, and yes we did have it. It's called the Comedian, okay. It's a sculpture artist Marizio Catilan. The buyers is China born crypto entrepreneur. He's going to consider lending it out to people, he said. Even if Elon mus wants to take it to the moon, he's more than welcome.

In twenty nineteen, if it was one and a half million and they popped the sucker at six million, I mean, Tang is our.

You know, I'm drinking Tang zero this morning.

But you know, if you were to duct tape and orange onto a wall, I mean, that's gotta be worth eight hundred dollars and you have done.

It of our YouTube viewers who can actually.

Mister full disclosure, folks, mister Bloomberg, with his wonderful philanthropy, is expanding out on Madison Avenue to the Gagosian Gallery building, which is I gets right across from the Carlisle. It's a spectacular building and Mike and the architects are doing it justice. And I think it's some of those galleries in Gagosian's building.

I mean, I'm sorry the orange tape to the wall.

You know, folks on YouTube, we have an orange tape to the wall in homage to the banana. What do we get for the orange? Do you think it's.

Called still tank at the end of it. It's a still life.

I just want to know if it's the same banana from twenty nineteen.

Exactly.

You don't know.

It doesn't say.

It's what we call installation.

If you read art news, Okay, the latest.

It came from Art Basel, Basil. I don't know my name, Damien Goes, Alex Steele. I think Goes. Probably I've never gone to Art Basel. No, no, mclone. Yes, he is so tasteful when he goes. He wears socks exactly. That's it.

It's formal.

Are you done?

I love your edition with the orange tape to.

The Okay, I got a live chat here YouTube that Wicked is going to flop. I mean, what do you think, Lisa, Oh, I don't telegraph butchered it in London.

Don't Ariana. All all the kids are talking about going. They're dressing up, some of them, so yeah, it's an event.

Like how Lisa Matteo, are you going dressed.

Like I'm going to Gladiator?

You're going Gladiator?

I don't.

I just love that. Denzel Washington's big.

Lisa Mateo, thank you so much. Our newspaper segment.

This is the Bloomberg Surveillance Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, seven to ten a m. Eastern on Bloomberg dot Com, the iHeartRadio app, tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal