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Seem Ashaw with us right now. Thrilled to ever with us from London. Always here on the shifting tides that we see with Principal Asset Management, their chief global strategies. See I look at the discussion of the last forty eight hours, maybe seventy two hours, and there seems to be a threat to technology, a threat that takes risk, risk loving out of the markets.
Is that shiftable?
Do you think that there can be a rebuttal where we get back on board and optimism about software, AI and technology.
Yeah, Hi Todd, I certainly think that this is a fleeting moment. I mean, I do think that the narrative around tech, the potential displacement from which would come from AI, is something which is going to be lingering in the market for a while.
But overall, I do think that.
That sense of risk on can return. The macro backdrop is pretty strong. There's a lot of concerns at the moment about what I could do two jobs. I think a lot of that is a little bit misplaced, very very forward looking. So I think as time goes and the market should settle down and start to really refocus on those fundamentals. But I would continue to expect shopping markets going forward.
So Sima, we've seen that rotation out of some of the high growth, higher multiple stocks really starting kind of late last year into this year. Is that a short term trade? Is that something a longer term theme for twenty twenty six, maybe into more value, into maybe wall or in mid camp.
Yeah, Sidy, we.
Have increasingly light small cups since around Q three of last year, and there's you know, there's a couple of really key reasons. One is you need to have constructive growth backjobs only that's something that we're seeing or just in the US for globally. You need to have rate cuts. You need to have ideally signs of deregulation. So these three things are all coming and then especially at a time when valuations are really very favorable for small cups,
so that continue to be the case. And similar to value as well, like a lot of the stuff which has been somewhat unloved, has been shifting towards looking at other parts of the market, such as value. I think that's been interesting is that there's a number of different themes going on in the market though, so of course there's a shift towards small cap and value. There's also been this kind of really strong performance from some of the defensives and then at times really strong performance from
deep cycles. So this is a confusing market. There's a lot of different cross currents going on at the moment.
I mean, this really caught my intention lesson right. Netflix's forward pe on the Bloomberg is higher, larger than Microsoft's forward welling.
Okay, that is how things have shifted.
That's how it has Seema.
We've seen, you know, as we look back to twenty twenty five and so far this year in twenty twenty six, non US equity markets perform outperforming the US here across the board in a lot of key, key geographical markets. How do you think about the US versus rest of the world.
Yeah, you know, this is I mean, this is one of those those trades that started last year there were question marks around whether it's going to be sustained for twenty twenty six. But as we've seen you go into this year and actually it seems like it's gaining momentum. We've actually seen more and more clients really becoming more interested in the national into the international trade. And again there's a couple of reasons for that.
I mean, I think the.
Global micro performance continues to be pretty strong. You've got good, I guess, supportive fiscal emunctory cycles, and a number of different parts of the world, there's a week dollar and then on top of that, I think the lack of certainty with regards to US policy is really starting to
grate on a lot of investors. And so when you have got these cheap evaluations in international markets, when ernest growth for these markets is also performing fairly well, and then you have the policy uncertainty you thrown into there, Certainly that international space is looking more and more interesting, and you know, you can point in parts of Europe, you can point parts of Asia emerging markets, so a ton of other opportunities beyond the US.
We continue with Seema Shure, a chief global strategiest principal, said Management Sam, I look at one of the great thoughts out there and what I've seen in the zeitgeist. Is Europe still wants to invest in America? Is the flow of equity purchase still coming into America?
Yeah?
I mean, you know, it's not like the tap has been completely switched off. European investors are still looking for where there's innovation and growth. But I guess I think the opportunities have been really compelling in order to offset the currency respects, offset their policy uncertainty, So it has
to be a very interesting trade. Whereas before just buying into the US was almost enough to get that pickup, there's just a lot more differentiation, and there's also stronger performance out of Europe.
So I think the hurdle.
For insting in the US is a little bit higher, and it's probably more that the hurdle for investing domestically is that much lower.
The bond market, we've seen bonds, you know, give you some solid returns in twenty twenty five, solid returns so far here in the start twenty twenty six, radious. The opportunities in the bond market.
Look, we continue to have a fairly constructive outlook for US growth, for global growth, so that means that we can still be really focused on credit and still focus on segments of high yield, but really focusing within the higher quality segments of high yield. Probably more than anything, there is emerging market debt which continues to look really strong for US, and actually emerging markets both across the
equity space and bond markets. You know, we have a belief that the dollar is going to continue to weaken, and that certainly helps out that narrative. But certainly we do think fixed income is interesting. It's just that we would have a probably greater preference for exits in other parts of the market.
Seem very quickly here.
I just looked at two standard deviation chart of the standard of course five hundred. We haven't even had a correction. I mean, where we are now, we've barely nudge. Should our listeners and viewers focus on the larger index or the uproar over technology and software?
I mean, you're right, it's interesting because there's been so much noise and yet absolutely indexes it's very much pretty much unchanged. But I do think investors can be looking beyond the tech side. There's been a broadening of earnings growth to a number of different sectors. We're looking at which of the sectors that can benefit from from AI and not really be disrupted by AI. So there's a lot of opportunities and of course valuations and more compelling outside of the tech sector.
So I think for investors look beyond.
The index, you know, look to you know, where can and this really provide the additional information and sophistication.
Thank you for the brief to get to start and see Mishaw with us with Principal Asset Management.
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Snow the Sire Franklin Templeton. But let's secuw you into it. Robert Schiffman. I don't think he went home for the storm.
No, he stays, he's got like a pop ten, you know, like back on the food court. Yep, down at one twenty park. Schiffman just publishes second sense. He notices it's snowing today. Second sentence, maybe a bond deal today? Question mark? Oh okay, and it's like totally out in the zeitgeist. It is.
I mean, and we've seen you know, Rob Schiffman covers all them names, the tech names from a credit perspective, and he's been writing about all these big bond deals. We've seen, Tom, from the big tech companies and he says, the market's still up and bring.
Them inside baseball. We go to Franklin Templeton today.
The woman that picks up the phone at Franklin Templeton when Google or microsoftware ampletool bond deal, sonew de Side joins the CIO fixed income Franklin Templeton. So how does it work? Like, I get there's a bond deal, like John Dee does the thing? Okay, fine, But if a big tech company does an offering, a trunch offering six seven eight trunches?
Do they call Franklin Templeton? Do you call them? Do you meet it a Starbucks? How does it work?
No?
It doesn't put that way, Tom, I wish you did. I'd say that. The first instance, what we have observed is.
That very large institutional bias tend to have there are discussions which take place. I'm talking about large pension funds and so on, and so forth. But we absolutely thought up as the deals come to market.
They do they listen to you?
I mean the heritage of Franklin on the West Coast and Templeton and the Bahamas and the huge emotional merger decades ago.
Do they listen to your experts?
Or is it almost a bond deal of a hyperscaler is dictated to the street?
Which is it?
You know I had currently in the recent past, I would say that these hyperscalers essentially are dictating to the street. And this is the truth over the last year when we look at the shar volume of debt which has been issued, that there is a certain amount of expectation of some indigestion as we go further into this year, because even those initial assumptions that we would have around OLF a trillion of issues this year has now picked up to over seven hundred billion this year itself.
I'd say that we're watching all this with some question.
It's not that we think the deals will go bad, but spreads are likely to take a bit of a hit from the quantity of just the share volume.
It's absorbable, absolutely, but.
I would anticipate that spreads take a bit of a hit on this quantity of supply.
So we've seen such a tremendous supply of new issuance come out of the tech space, which is a little bit unusual because the tech companies historically have had great cash character, which is great free cash, so it didn't really need the bond market.
At what point do you think the.
Bond market starts pushing back a little.
Bit, maybe on the rates, maybe on some covenant language. When do you think that it may shift a little bit towards the buyer gets a little bit more power here?
I think the buyer this is the year that happens, right, just given again the volume, and I think the first elements of pushback are coming. You see it in equity markets, and I think you also are seeing it broadly in fixed inco markets in the sense that when we looked at these issues, they are the picks and shovels piece of AI.
Right.
For a few years, everything was about mag seven and people were super excited and everything looked wonderful, and then a lot of the tech companies who did in fact have all of that free cash flow, we are now observing that the cash flow is not quite as free anymore. It's drying up a little bit. They're coming to the
market for very big tapics. So I think what we might start seeing is more of more of the industry treating these growth firms, if you will, more like traditional, which means show us the money, show us the returns. And I think you're beginning to see a little bit of that. And since we had the bigs and trouvels, then we were looking where is the return that showed me the money? Couldn't find it, and therefore I think the market switched to saying, so who's losing? And that's
what's hitting software right now. We're still in a bit of a gap, which is, show me the big winners, and we don't have them yet, we can't know. And I think that's a little bit of almost cognitive dissonance right now in the market, which is we all a create AI as transformative, but who is it transforming in a positive sense?
So now let's just step back a little bit here. In twenty twenty five, fixed income had a very very solid year of high single digit all in total returns. Here in twenty twenty six, should I be content with just clipping coupons here? And if so, where.
Yes, the answer is yes.
Look, we are looking at incredibly tight spreads. Everything that we see wants us to be a little bit cautious in terms of additional spread tightening and in terms of where in the fixed income space you look for a terms, I'd say look at emergent markets, look a little more global, because those areas are still underinvested for most US investors.
I think it's a good time to start looking at some of this again.
And I also think I would not say don't look at high yield. You should be looking at high You should be looking at all of these sectors. Because the market typically throws a baby out with the bath water. All software is not in. It's in a death spiral, and you might think it is based on what we're seeing. So we are trying to look very carefully to find things which might in fact be mispriced at the current market.
A question from the time where Franklin literally invented folks triple tex free. We make a joke about it, but somebody had to first do that, and I give Franklin all that Dreyfus was there as well. I really give Franklin all the credit. Sonew it's just as simple as I can. Are the hybrid kind of debt like convertible bonds or equity preferreds?
Are they attractive? Here?
Are they a legacy from another time and place.
Common they go?
And I think converts are still attractive. You have to just be careful about which points you pick them right. And I think that the question of whether you should be looking at interesting triplecs should you be looking at converts, that's always going to be from and I think that continues to be the case. I think it's definitely premature to say that their day is over.
Hugely valuable. Thank you so much for those comments, Tonew. I hope compliance wasn't listening talking about like how do you digest a bond deal? That was really informative. Sonel Deci with the CIO fixed in at Franklin at Temper and we hope she keeps your job.
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Mandy sing with us here this morning. Of course, on Nvidia. The cell side's all in on this. I looked at the A and R function. No one's not in love with this thing. Some of the you know, they're popping up forty two percent return out twelve months. Where is the confidence in Nvidia given the tech crisis that we.
Have, And you're right, I think the tech crisis points to the fact that this disruption is real when it comes to the AI impact, and Nvidia is the poster child when it comes to the demand that they have seen for their chips and look all the hyperscalers. We started the year thinking they're going to grow their capex
thirty percent. Now that number is sixty percent. Some of that increases because of memory prices, but then you are also seeing an increased plans to add capacity, and that's where an Nvidia will likely have upside to their numbers tonight. The question still remains around the sustainability of growth, because when you are growing seventy percent at the scale that Nvidia is at, you know, three hundred billion dollars round rate for twenty twenty six, the numbers, the growth rates will taper.
It's a given. So that's the part that I think.
The visibility is what you want to figure out in terms of how much visibility the company has and what that means in terms of growth rates.
I mean, again I'm looking at the FA function, which is a consensus of all the analysts forecasts here and again in Counter twenty six or Counter really twenty six fifty percent revenue growth. I mean, it's just extraordinary here. What does the street need to hear from Nvidia tonight? What's the what are they focusing on these days?
I mean, Jensen has called out demand being stronger at least ten times, you know, since the start of the year Cees Davos, and yesterday, you know the fact that AMD had this deal with Meta where they ended up giving away ten percent of the stock as warrants. To me, that's a sign Invidia still is the leader when it comes to you know, everyone clamoring to get their chips and everyone else is trying to make sure they stay in the race, which is what the move I thought AMD had yesterday.
Yesterday, I mean basically put the surveillance cork in my mouth and man, he lectured me on the use of AI. I look at it as a twenty dollars subscription. How God's name did they pay for the billions of data centers with twenty dollars from Alexis, twenty dollars from Paul, and twenty dollars from Time.
So right now they are subsidizing it and it is being priced below the costs that you know, these hyperscalers have to pay to Nvidia to get the chips because Nvidia clearly is not taking a hit on their margins. They still have that mid seventy percent margins, So prices will go up, that twenty dollars subscription will go up, and extreme I know, and also the enterprise API usage that's a big part of adoption.
Don't just focus on the corporation. That's corporation.
They don't pay twenty dollars a bag person.
Yeah, they're signing multimillion dollar deals right now.
I mean in Nvidia, you just mentioned three hundred million dollars in revenue. I just went on to look at AMD forty five billion dollars in revenue. It's not even.
Close, dude.
So is Nvidia that much ahead of everybody else in terms of this story?
They are?
And and that Blackwell chip ramp, that they showed last quarter. I mean you will see it in full gear and the results tonight. Now they have announced it in next architecture, the Ruben architecture. So that's how far ahead there at least, you know, eighteen months ahead of everyone in terms off the efficiency and the compute capacity and power that they are able to show with their.
Chair accrossination today, Mandy Singe, So then are on ground. I just can't say enough about Bloomberg intelligence ability on technology. We threaten they have both of them on together, but they can't be in the same room at the same time. Okay, Mandy, here's the real world on depreciation. I had a twenty nineteen Intel cheese grater, fancy fancy Mac computer, fancy people like me can buy. It is a depreciated value of
under four hundred dollars. The fancy Nvidia chip in the bottom of my cheese grater is now holding up a martini at five PM. I mean, tell us about the depreciation and the technological pressure that mister Winning is under to get better, better, better, and everything else becomes a coffee table for a martini.
Yes, and that's a great point about the long term. You know, multiple that this company can get despite its growth is because of that aspects. But right now, the real constraint is power. So everyone has a finite amount of power, and you want the best compute and that's why people are willing to upgrade to Invidia's latest architecture because they can't add more power.
They want to use the chip that is.
Best optimized for the power they have available, which is why Nvidia is releasing their new generations so quickly within a year.
In some cases it's blackwell it is I don't know, I get.
The rental pricing of the older versions of their chips.
They are pricing rental, yes, I mean they're still off the charge.
Everyone wants to get a hold of whatever the market has to offer in terms of the rental price.
All right, so in the last three, four, five, six weeks we've had to sell off in software stocks. What are you and onnrock tone institutional investors these days about that.
That it's going to take a while to clear this out in terms of these companies adapting, you know, the LM's situation.
Now they have to integrate llms, they.
Have to offer you know, functionality that's built on top of llms and it's going to take a while too.
But day run, don't I just run out and buy Salesforce dot com? Hand over fist here? I mean, is this is AI going to put a Salesforce dot Com.
Not out of business?
The terminal value is not in question, but it's going to take a while to figure out the margin impact when the grow to a rebound, and it's not going to happen within Finally.
Tom, these tech analysts investors actually have to do some work before they could just sit back and say, my business is going twenty thirty He's built his career on just my.
Business and girl twenty.
Thirty percent a year in Rocky you just plug it in. Now, I think they got it, like, oh boy.
Okay, find Christian and why it's waiting for us here?
We gotta we gotta get them on man deep saying Microsoft AI transform with Microsoft AI where trust meets innovate. Great NBA statement. Okay, wonderful. What's the level of panic at Microsoft right now? Good question in the AI wars.
I mean, look, the whole Open AI situation is what's really causing the panic. Microsoft is still deeply embedded to Paul's point, you know they are a system of record and a lot of the cases and most likely you are going to add AI on top of Microsoft software. You're not going to rewrite you know what Microsoft is doing with Office or Windows or all the other software
they have. The question is they don't have the own LLLM and that's where the reliance on open ai is hurting them because open ai wants to get into applications themselves, and that whole thing is not panning out.
I thought l was a law degree out of the United king I have no idea. We got to thank you so much, appreciate it.
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This is going to be a delicate conversation. Here's respect for Patrick McHenry. I mean, he said, you know, it's like North Carolina and it's Winston Salem and some of the world. These are close events, like he won by seventy percent. He won by seventy one percent. Seventy two percent. But Patrick mcchenry, when you were serving in the House, with all of your leadership, House, financial Services and all that, all that, you knew Republicans that were winning by two
percent or two tenths of a percent. I look last night, it's a State of the Union. The judges have to show up the winning team. In this case, your Republicans have to show up. Some of the Democrats didn't show up. Elizabeth Warren from the Commonwealth of Massachusetts is sitting there all by yourself.
Is a generalization? What does it mean?
What's a symbolism when elected officials don't show up for the state of the Union.
Well, first of all, what the Democratic Party did, the Democratic leaders in the House and the Senate did was effectively give over the state of Union to a rally of Republicans. And then they left the gadflies of the Democratic Party the far left to make a scene.
And so Rakim.
Jefferies was trying to manage his members and say, don't take de bay, don't don't fight Trump, don't yell at them, don't do stupid things, because our voters that we need to win the midterms are people in the middle let's not tick them off. And yet we still saw the outburst. We saw the outburst of members getting out, getting pulled out. We saw the outburst with Democratic members using profanity in the middle of the State of Union.
I mean, this is just gotten out of hand.
A bad look for the Democratic Party, huge missed opportunity for them in trying to give some balance to what President Trump said last time.
It's been wonderful having you as a Bloomberg contributor because you're really looking at both sides, even though you're diehard. I get a GOP. He was like twelve years old when he entered Congress. Yeah, I mean no, you know, it's amazing, you know, thinking about that. Folks, John Tucker, what were you doing when you were twenty one?
I was in this seat?
Okay, right here, Matt.
Patrick Henry at twenty one says I want to serve America. I think that's really cool. Patrick McHenry. The congresswoman from the first District of Iowa isn't as lucky as you.
Miller Meeks.
Doctor Miller Meeks of Davenport has a razor thin vote. What kind of Democrat will defeat her?
It's going to be somebody who motivates their base, consolidates their base, but also is able to reach out to the middle, just like Marionette Miller Meeks did and when she was elected with the closest election the twenty two cycle. So she's battle tests, she knows what she's doing. She's a really hard working individual. So you have to have somebody that is the Democratic equivalent of Marionette.
That's a very hard it's a very hard recruit.
To get somebody mainstream and also tenacious enough to fight in a battleground.
Congressman, this is an election year. What do you think, how do you think the President's State of the Union speech last night played for Republicans and Democrats as they enter into this election season.
Well, look, since Lincoln, the goal here, since Abraham Lincoln, the goal here is to consolidate your traditional base and then reach out to those that are persuadable. We're in an area, we're in a time frame where there are very few persuadables in America today.
So last night's State of the Union was about.
Consolidating Conservatives, consolidating Republicans, making sure that President Trump maintains this very high, historically high approval rating among his party, which I think he was able to do, and then reach out to those independents that he had in the twenty twenty four election that brought him back to the way. Okay, So that message on the economy, health, on healthcare but specifically prescription drugs, his emphasis on even smaller issues on
data and energy use around data centers. That type of targeted messaging was about bringing home those people that are the truit coalist.
Come Patrick, man, you're a beast at this. I mean you're like total grizzled pro I got eight ways to go here, Okay, as simple as I can. How does he get back the Latino vote that he shattered?
Well, first of all, the visual of Minneapolis was horrifying to the American people and it really shook the roundup approach that the tomorrowent Homeland Securities had the very high profile, out very public roundups. That is really alienated Hispanic voters that came to President Trump in the twenty twenty four elections, like, we got the biggest Hispanic vote the Republicans a Republican nominee for president's ever gotten.
So he's got to stop that.
Number One, he's got to refocus on traditional his success at the border, which he took a victory lap on last night, and get into the question of deporting criminal illegals that are of a part of crime, families in gangs. When you do that, when he does that, that is a solid immigration and immigration enforcement message. Not getting in fights with liberal protesters and sanctuary cities.
That doesn't look good.
Nobody thinks that's effective, nobody thinks that's smart use of federal law enforcement.
And so that.
Means he's got to get more Holman and less Gnome. That is going to be I think we're going to see in the coming months, and they've already made that pivot.
Congressmen, Most polling shows that these tariffs, they don't poll very well with most voters out there. Yet, are you surprised that the president after the Supreme Court ruling, effectively doubled down on the tariff narrative.
Yes, I'm well, I'm not surprised because the president loves tariffs.
Regardless of what the polling says. The winning message on tariffs is.
The geopolitical struggle with China that the West has with China. This should be the unifying element around his trade agenda, and instead of emphasizing that which will culminate in the summit with She in a month's time or in months time. Frankly, with their scheduled three scheduled meetings this year, he should He should emphasize the job lost with China and how he's trying to bring that back through the u of terifs, but tariffs as the means to the end of job
creation and wage growth in the United States. He needs more of that and less than the emphasis on the word T for tariff.
Yeah, but let's be honest, that's not working. I mean, the average person on the street has no idea what's going on in China, doesn't care about China. All that person knows is prices at the store are very high. And I've got somebody in my ear telling me tariffs are the reason. That's a tough political play there.
It is tough.
It is tough.
But what I'm saying is the overwhelmingly the bigger issue here for us with national security, with economic security is China, and the administration is de emphasize that in anticipation of a sit down with She and the hope of getting a global tariff regime and a new trading relationship with China. So they've been too quiet, and they should be stoking the American people about this challenge that we have really a generational challenge with I know, and we haven't heard
of that of that. So therefore the dominant effect is that tariffs are affiliar with price increases, which is born out in economic data, rather than tariffs being the utility to go fight the bad guys.
And we need to have a little more emphasis on fighting the bad guys.
Congress mccanney, if.
I'm strategizing for the White House, that's what I'm saying.
Okay, Congress McCanny. A couple issues here. I know you haven't been north of the Mason Dixon line since twenty twelve. If you ever get to New York, we would blow out like half an hour of the show just to talk to you. I have such respect for you what you did when you were in your early twenties. And the second thing is, if you come up here, you got to lose the fleece vest. You got to show up with a bow tie. Okay, I mean, it's all there.
Is to it.
I'm sorry I don't have the boat's eye on.
I was much more addressed for radio this morning after a late night on the city.
I'm always dress for radio. Actually my bow tie is today as well. Patrick McHenry, he is always of the Carolina as a Bloomberg.
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