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This is the Bloomberg Surveillance Podcast. I'm Paul Sweeney along with Tom Keene. Join us each day for insight from the best in economics, geopolitics, finance, and investment. 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 Eastern Remark Global Headquarters at New York City. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen, and as always on Bloomberg Radio,
the Bloomberg Terminal, and the Bloomberg Business App. Let's check in with somebody who knows what's going on out there in the Market's Christina Hooper. She's a chief global market strategist for Investco. Christina, it's been a busy week here. I mean, we've had a lot of central bank movement here. We've had a lot of IPO markets or activity in the markets as well. Let's start with the Federal Reserve
here and some of the other central banks. Quite frankly, what did you take from the Fed and the other central banks?
Commentary this week?
Paul, we are headed to an easier environment for monetary policy, and as I think you know, I've been a big believer that monetary policy has and will continue to drive markets, and that's why I think we've had such a good week. Even in terms of IPOs, Sentiment has gotten more positive because we know the end is insight and that we're going to start to see rate cuts. In fact, the Swiss National Bank gave us a nice surprise this week, our first present from major developed central banks in terms
of cutting. But this is just the beginning, and this is so different than the environment we saw in twenty twenty two, where we had surprise rate hikes, a whole flurry of them, so much so that the World Bank warned in September of twenty twenty two that this synchronized tightening was something we hadn't seen in many decades. Well, now we're getting to see what I think will be synchronized cuts over the course of this year, which should be very supportive for markets.
Yeah, could you talk a little bit more about what you see as the markets play here, because we've talked so frequently on this radio program about how frothy equity markets are getting. So where does an investor go here?
Well, I think an investor needs to be well diversified. We shouldn't ignore the US, but we do know that valuations are much higher here than elsewhere, and so this is a great opportunity to sharpen pencils and look around the world for potential, and that potential can come from Japan. Interestingly, their central bag is in a different place, just beginning tightening, normalizing monetary policy. But that is a vote of confidence in the Japanese economy, and I think well really spur
attention more investor interest in the Japanese stock market. Emerging markets valuation opportunity abound, and in particular Asia em looks attractive right now. There's growth potential there as well as valuations, and against supportive monetary policy, we're likely to see a weakening US dollar, which should help going outside the US. But again there's still opportunity in the US, so investors shouldn't ignore it, and I shouldn't be just talking about equities.
There are opportunities in fixed income. We're in a different place than than where we've been for years in terms of yield. We had lived in a yield scarce environment. We're not there. I wouldn't say it's a golden age of fixed income. But fixed income looks very attractive, and there are a whole variety of areas that we can choose from to make a diversified portfolio. Investment great credit looks very attractive to me, but certainly opportunities in emerging markets,
high yield municipals. Again, there is so much an abundance. So if you think about twenty twenty two as an anis horribilis for markets, I think that it's something different, a very different today and much better environment.
I kin I want to go to fixed income because I'm wondering. I'm just looking at my screen here, Christina, and I can just go over to a two year United States Treasury and get four points six percent. That seems pretty darn good. I mean, is that the trade in fixing com or do I try to take some credit risk here and think about investment grade credit or maybe even what really has been the best performer in fixing them, which is high yield.
How do I think about credit risk?
Well, I'm a big believer in diversification and thinking for the longer term. I don't think it should be about treasuries. I think there's a lot of opportunity moving out on the risk spectrum, investment grade credit to me is a sweet spot. But certainly high yield has been a strong performer. And given what we're seeing in the US economy, how it looks like a softer landing than we had died. I think that makes the case for moving out having
exposure to high yield. Don't forget Muni's where there's some very attractive yeals right now. So there is a lot of opportunity. And of course don't forget emerging market. It's dead in there.
Is there anything that you like in particular in emerging markets? I mean you mentioned earlier Asia, but anything in Latin America, anything in Africa.
Well, certainly Mexico benefits from a US economy, and so I think what we're going to see in the US is a pleasant surprise this year. I've been a believer that we'd see a bumpy landing. I don't think it's going to be as bumpy as I had anticipated, and that should be good news for country like Mexico.
All right, Christina, thank you so much for joining us. Christina Hooper. She is the chief Global market strategist for Investco.
Big Week in Technology let's get a couple of our top technology analysts.
We got them together here on a Rock.
Na joins us via zoom from Chicago, and Man Deep saying he's here in a Bloomberg interactor broker's studio on Rock. Let's start with you here. I want to start with Apple here. The more I read about this, I'm just you know about Apple have facing these anti trust suits both here in the US and abroad, have some regulatory challenges.
I'm not sure if this is a Microsoft thing from kind of the nineties whereby I was kind of a casting a pall over the stock that just couldn't get out of or is it something that this story can power through. What's the early read when you talked to investors these days?
Yeah, I mean I mouse confess I was surprised by the stock reaction yesterday. I mean, everybody knew this was going to happen, so why the surprise And that was a bit confusing. But having said that, you know, Apple generates so much for a cash flow. It is truly the bohemoth when it comes to their operating system, and people are taking shots at it and this is not going to end and it's a big overhang for the
stock over the next Cinnicks several years. You know, this is not going to go through in the next six months or twelve months. This is a multi year problem now, I guess.
Mandy, could you talk a little bit about another issue that Apple's been facing. It's had a string of pretty bad news about where it is on AI. We have these headlines that just have crossed that Apples and talks to use bydos Ai and it's Chinese iPhones. You know, we had this scoop earlier about the potential tie up with Google for AI. I mean, it doesn't look like it's really anywhere and the thing that is most hot among investors, I.
Won't characterize it that way. I think in the end, Jenni is still so early that you know, when we think about who is the real beneficiary, obviously it's Nvidia, and when it comes to on device Jenni, which is where Apple plays in, nobody is a standout. Yes, Google has a model, and obviously Apple is talking about leveraging Google Gemini. But maybe it's a sound strategy to have a Chinese vendor provide the LM for the Chinese phones,
because when it comes to LM chatbot functionality. It's all about the local language, the local knowledge that the LLLM embeds, and it may actually turn out to be a good strategy to use local llms wherever Apple has an install base.
LLM definition Large Language model, which I know that because I read the research coming from nDEP and on a rock an rag another Apple issue here, and then maybe we can broad it out a little bit. But again I think I probably speak for most Apple investors is I'm still trying to get my head around China. What is the risk there for me China, both from a demand for my products in China and maybe to a lesser extent to supply chain, But that supply chain issue
still on the table. Where are you where? Where's the street on kind of sussing out the China risk for Apple.
So when you look at you know, Apple, let's over a ten year history. It really made inroads in the US and the Western world, controlling market share. But the next big market is China and that's they were doing well. The phone came out last year. It really underscored that there was refresh cycle for that particular phone that hasn't
happened in years. Consumer weakness in China, and Apple's just losing market share at this point in terms of you know, every quarter when they come out, and it's been a very tough market. I don't see that changing at least this year. They really need a catalyst to really go out and say that, you know, we can we can really work in China. Maybe the LLM, maybe the bartorship
with Baido is one of them. But having said that, I don't see any chances that they're going to have a big rebound in China at least this year, barning.
It out a little bit. Another really big tech story this week is the Reddit IPO. I mean, that's gone incredibly well. Mandy, canase start with you just to talk about what your read is on how enthusiastic investors have been for this, and like, do you think that this is really an AI play? Paul is skeptical.
So, I mean, as I mentioned yesterday when I was on your show, that look, Reddit has got something unique when it comes to the user data and you know, having the wide breadth of online communities, and that is I think, really something that stands out versus other social media platforms which are far bigger than Reddit. So the criticism that I get from investors is it's an eighteen year old company that it's not profitable, and for the first ten years of its existence it didn't even have
an ADS model. So it's really in the last five years they've started layering ADS and the IPO is coming at a good time with this whole JENNYI wave because everybody needs to train their models and if you're looking for tech's corpus, Reddit is the go to place. So to my mind, any product with stickiness where users come to your platform every day, and in reddits case, they need to boost their daily active users. Their monthly active
users is far higher than their daily active users. If they're able to execute on that, I think they'll do quite well in terms of the first six months of the IPO.
Yeah, and you were dead on yesterday.
You're bullsh yesterday you're against my skepticism here. Stock rallied just big time there, So good news for the redifilks, good news for the IPO market, even after we had that astera of the day before. Also a big aiplan net stock is training really well on the IPO market. Hey Anna Rod, I think you know the name that I know you've been panning the table on a lot. Is Microsoft here? What's the latest call here?
On?
Microsoft is still firmly in that magnificent I don't know whether it's five or seven, what it is these days, but what's the call here?
I think in the software world, if you want to just pick one company that is truly exposed to AI in the most direct way, it is Microsoft right now. And I don't see anything changes. I'm actually surprised they can go out and pays sic center fifteen million and hire so many people and nobody says anything about it. I mean, maybe this is the new way of acquiring companies. I mean, it is remarkable the amount of money they're spending on both on expanding their data centers for cloud
as well as AI. I see them, you know, differentiating their more compare to others over the next few years.
But I guess one thing, can we just can I just keep with this point any ark, because with Microsoft they're spread across so many different areas. I mean, you start to feel like that old anti trust sort of vibe is starting to come back for Microsoft, that regulators might start getting really really worried.
Yeah, as soon as you get a decent amount of free cash flow. You will see the regulators come in. But I mean, this is nothing that they haven't dealt with in the past. There's not one tech company right now that's not dealing with them, and I don't think that's going to change.
I mean, it stocks up. I mean, first of all, it's a three point two trillion dollar market cap company.
It's just amazing.
Year to date, the stocks up fourteen percent, trailling twelve months, up sixty percent pe on the June twenty four it's thirty.
Six times, you know. But you know a lot of folks will tell you, hey, we'll grow into that. All right.
Mandy, you cover so much in the tech space. What's your top idea here? What are you guys talking about the most these days?
I mean, right now, our top focus idea is Alphabet because all the criticism they've been getting and you know the fact that everyone is talking about them losing share and search. We got one validation that there are no more behind in terms of large anglid model race with Apple considering you know, Google Gemini to be the model and not Open AI or any other models out there. And look, when it comes to search, I think Google has the best platform when it comes to add tech
and time and again we see that. You know, with other social media platforms, they're not able to monetize their user base and engagement as well as Google does. And you see that with Reddit, you see that with Twitter. That's why Google search is so unique, because they're able to monetize it far better than everyone else. So I'm in the camp that they will hold on to their search share. In fact, the search market will grow as a result of the large anglid models, and Google will be a beneficiary.
All right, Google, googg I'm sorry. Goog l is a ticker for the pros out there. It's got a market cap at one point eight billion dollars.
The stuck is trillion. Thank you very much for that correction. Thank you. You even beat out Rich Truman on that.
Stocks up five percent year to date, up forty two percent trailing twelve month. Anurag Ran A man Deep Singh a couple of our top top leaders in technology research for Bloomberg Intelligence.
They drive the business.
Let's talk energy here and sustainable energy, and to do that, one of the folks we like to check in with is Jonathan Maxoy. He's a CEO and co founder of sustainable development capital. The name says it all. He joins us here on a Bloomberg Interactive Brokers studio. He was also the author of a new book which I will Plug the Edge, How competition for resources is pushing the world and its climate to the brink, and what we can do about it. Jonathan, thanks so much for joining
us here. Did we have President Biden in the administration do something with liquefied natural gas and people in the energy patch? An, I'm so happy about it. What's going on there?
Yeah, So, a couple of weeks ago there was a moratorium on exports new export licenses though export of liquefied natural gas to Europe. I'm in putting this into context. Europe had to scramble for gas after Russia's invasion of Ukraine. And where do you get it from? Well, you know, Kata, Norway. But actually one of the biggest, if not the biggest
exporters is the United States. Right So now, having said all of that, we had an announcwerment this week from the White House to say, don't worry, you know it will be within a year. We'll let these new export licenses come back. There was already just to put this into context, about fifty billion cubic feet per day authorized. That's three times the level of today's exports. So this isn't anything to panic about in the short run. Now
this was dressed or explained as a climate initiative. Now I'm in the sustainability business, I would love to think that. I'm also expecting having said that, that some thought has had to be given to what it could do to US prices. Do you know how much more expensive it is to buy gas in the versus the United States? A lot four to eight times on average over the last five years or so, And it's never really over the last decade been cheaper other than in one month,
which was in COVID when everything went upside down. So you know, this is a big issue for Europe. It's a huge opportunity for the United States to step into Russia's shoes here.
So if it's a huge opportunity for the United States, it does still seem to me that President brien has just kind of completely undercut that potential advantage, or am I missing something?
I think there's a moratorium. The White House has effectively said the moratorium is pretty short lived, and it won't really affect anything in the short run. I think the bigger picture really for the US, it's an extraordinary energy position. It's energy independent, it's the largest largest exporter actually potentially of oil and gas in the world. So this is quite a challenge. Actually, this is now a big Petra state. What do you do in a changing environmental and climate world?
All right, so we're a sustainable development capital. Where are you guys deploying your capital these day? Is where do you think is some of the greatest opportunities.
So look, half of half of our investment, maybe more, is actually coming into the United States, So we invest in a different type of solution to everybody else, whether most of the money is focused. This is big business. Energy is one of the biggest business in the world. Nine trillion has been invested in renewables. So if you think of US as somebody in the clean energy sector, you would expect as maybe to be building wind farms
or sellar parks and plugging it into the grid. The place that we get excited actually is what with the customer rather than the grid. You're going to have to spend California alone is going to have to spend eighty billion to build out its grid over the next decade,
just to transport the existing energy systems. If I told you as I do when I come on your show, how nuts it is that in the United States in Europe about two thirds to seventy percent of the primary energy is wasted or lost before it gets to the point.
I never understood that again, So after seventy percent of the energy produced just gets wasted, it goes up into the right the air, of the atmosphere, of the everywhere else.
Yeah, I'll unpack it very quickly, but because it is extraordinary, it's the biggest dirty secret of the energy sector, and I'll just unpack it to begin. It's why I wrote the book actually, and thousands of people read it, and if anybody would like to take casure with it, I'd love to get your email. So the biggest loss of
energy happens actually in centralized energy systems. Gas and nuclear are two of the largest other than coal, and the two of the largest producers of electricity, for example, in the United States. The problem is when you put either a gas molecule in a turbine or frankly nuclear fuel and a power station, only about half of it turns into electricity. What happens to the other half, it turns
into heat. Now, if that heat is being produced very far away from the energy load, in other words, where the demand is what happens to it, well, not nothing, it gets it just disappears into the atmosphere. Ultimately, the bits that do escape into space, they don't need it up there. So that's the biggest part of the loss. It's what they call thermal loss is at the point of generation. The solution to that is to generate closer to where you need the energy, and then you could
use the heat, but we don't. There are other bits of loss which happen. You lose about ten percent on extracting and converting oil and gas, for example, into pipelines. Why do I talk about oil and gas as a sustainability guy, because eighty percent of the world's energy still fossil fuels or oil, gas and coal. And then the
last piece of it is transmission and distribution systems. Washington, I was there yesterday and I'm unbelievably happy to see that they're looking on the demand side of this too. Now because everything's been about grid, good grid, you know, we need to invest in more in the grid. That's just to get the energy for miles away into town. But do you know what, five to ten percent of
it gets lost through transmission and distribution system. So you added out ten percent plus fifty percent plus ten percent. And the Lawrences live in more national laboratories. Numbers they produce every July show that now in the United States, seventy percent of primary energy is lost before it gets to the point of use.
It's incredible, that's an incredible statistic.
Well, we have just got back.
But you know, I think, as I said I was in DC yesterday, I'm not going to give away in particular confidences, but I'm I think this is now the big story of the next decade. You know, here we've what do we do? You know we've got.
Are there technologies to reduce that number?
Absolutely, Technologies that have existed for a decade, that are cost competitive and that are cheaper, cleaner, and more reliable. I'll give you a few examples in the United States, and we're one of the biggest investors in this space. Rooftop solar and storage car ports where you can plug directly to the buildings, on site generation. We run on site generation for some of the biggest and most important
steel mills in the United States. So not all of this, and that's basically using recycled gases, same stuff turbines and engines that people use to generate energy in the middle of nowhere. Instead we capture the waste gases and we make energy for power and steel on site. Cutting cost, cubon and improving reliability data centers is a huge issue, right, I mean, it can't go a conversation without talking AI.
I think it's impolite these days. I'll do it, But that AI alone should be about three percent of global energy and I demand by the end of this decade. Right, but how are you going to get the power to the data centers? How are you going to cool them?
Did you know?
By the way, for every unit you put into a data center of electricity, only zero point sixty five units of compute come out the other side. So this is the flip side of my point. Even when energy's got there, it gets lost at the point of use. So what do you do? You improve the mechanic corner, electrical equipment, better heating, cooling, In the case of data centers lighting. This is the biggest total addressable market in the energy sector, not actually about generating more but wasting less.
See there's somebody that actually does something for a living. I mean, I'm my whole wife on wallship pushing paper around. That's not These guys actually do stuff.
Now, it's impressive.
I know. All right, So let me just let's go over this again, folks.
Jonathan Maxwell, he's a CEO, he's a co founder Sustainable Development Capital who's also the author of this book, The Edge, How competition for resources is pushing the world and it's climate to the brink, and what we can do about it. Again, this is to me, this is the energy lost guy. He's my energy lost guy. I didn't even know that was really a thing, but it's a thing. Jonathan, thanks so much for journeys. We really appreciate it. Best of
luck on that. Keep us up the date on what you guys are doing, what the investments are, and what our good friends Don and Washington could do to help us. All right, folks, you're daily look at the front pages around the world. At least miteo what he got for us from the newspapers.
So it's Friday, right, so I figured we do a getaway Friday, little travel theme going here. All right, we'll start with something on the Bloomberg Boeing directors.
They're planning to meet next week with top executives.
From some of their largest airline airline customers who are obviously frustrated, frustrated for obvious reasons. One person who won't be there though, sources a Tay Bloomberg at CEO Dave Calhoun.
So that's kind of interest.
I mean, he's they say he's supportive.
Of the sessions. Okay, but he won't be there.
Who will be there as Larry Kellner, he's the chairman of Boeing's board, two other three other directors. But it just shows that growing frustration that I guess people have with him.
Yeah.
I feel like, if you're not gonna have the CEO there, what is the benefit? What's the upside versus? What is the message? Is there a sense that he'll do more harm than good, that he's not the one that people want to see because they're so angry. What's the deal with that?
Yeah?
But I mean it's a good it is you can make spin. It is a good optical issue here, which is the board going out to the big customers saying listen. You have our attention here, you have our undivided attention. Yeah, we're not coming here telling you anything. We're coming in here to listen.
What do you need?
We'll take that back to our management team. Maybe maybe it's a good thing, but I don't know. It's just amazing how this has happened. And we remember asking George Ferguson, who covers Boeing for Bloomberg Intelligence, he's covered the company for decades. He's never seen it like this, where there are so many quality issues here. So these are unusual times and maybe some unusual strategies here.
They're definitely gonna get some unfiltered feedback. Yes, you can say, all right, So have you guys ever lost your luggage when you've traveled?
Have you?
I don't check anything, you don't check to check. Thinks since like the eighties, So you fit it all in a little back. I go to Europe for two weeks with a Duffel bag.
Oh my gosh, Oh my gosh, you're my hero.
Right, that's what I say. Have you ever lost the luggage jen.
A long time ago? Yeah, but I did get it back.
You did get Okay, that's the problem. So back in twenty twenty two, there was a rise in this right, A lot of people started losing their luggage, so airlines started working to fix the problem.
Most of them did better. In twenty twenty three.
This is according to the Transportation Department. Nine major US carriers actually did better, except four United. They mishandled bags more than eleven percent worse than in twenty twenty two.
But they still perform.
Better than American airlines, which is usually performing better. So they did worse too. A lot of people going using Apple air tags to find the rest. That's when you use you you do use that, Okay, so they use Apple air tags. Allegiant actually performed the best when it comes to not losing your luggage, but they this is all happening as you hear about, you know, the airlines raising the.
Fees for the checked bag.
So it's kind of like you're losing them, but I'm paying more exactly to jacket.
It's frustrated. I don't know.
On the apps now, at least on the United app, you can track your bag and see exactly kind.
Of where it is. Okay, yes, I really, yeah, So that's kind of new thing on the United app.
So you don't need the air tag. I would still get the air tag.
I would trust the air tag.
Yeah I do.
But does the air tag take you actually to where.
The like it does?
It does?
And I had sitting on a tarmac and like, you know, Newark. Okay, that's not good.
No, but that's that's how I managed to get my bag back when I had a delay because it was sitting at on the tarmac and they're like, they're all here. I'm like, look at my phone. I can see my bag is on the tarmac.
See. So that does work.
Okay, see, you solve it all. Right, here's something interesting. So you have you know, everybody the miles, right you join the programs. If you don't have enough miles for a free flight, you can now borrow them from your kids. This is through a new program the United Airlines. It's letting people pull share their frequent Flyer points with family and friends.
So here's how it works. Let me break it down.
So the group leader has to be over eighteen, but there is no minimum age for others. So that's how you can sign up your kids. So everyone in the pool has to have their own United Frequent Flyer account. People like you have Jet Blue, Spirit Frontier. Like the smaller airlines they do this, they do the pooling, but United this is a first airline to the first major airline to actually do this.
So well, we kind of like, you know, the Netflix password things, So the kids get get booted off of my Netflix accounts because they've been mooching off me for years. Same thing for the United miles. I mean, I've been very benevolent with my miles with the kids, but I mean I can't imagine the day when I'm going to get any of their miles.
I was about to say, I don't think they travel more than.
You wait trip, Yeah, some Christmas present if you're a little short of cash, have my miles.
Right, Oh see, there you go.
Yeah, but it's true because a lot of people have been complaining about the miles, so this might be a little.
Bit of perk.
Finally, package holidays, you know those all in packages includes flights, hotels, transfers, food, everything. They're becoming the hot new thing again. Okay, apparently it took a hit because with the Internet people put their own packages together. It was mainly a baby boomer thing, but the younger travelers they're starting to get more sophisticated. They wanted these offers and they want hassle for you vacations. They just want people to do the work for them.
Here we go in September, going back to the motherland in Ireland. They can't wait to see me, by the way, so we're gonna go over there. And we were looking at it like all the books, all the websites do and all that kind of stuff, and I'm like, we can't do this, we.
Don't want to do this.
We walked across the street and said, hey, here's how much money I have. Here's kind of where I want to go. And literally half hour later they came.
Back with a proposal. Bum I said, Okayank done.
That is fantastic. That is the way forward. That is the future.
I e.
That's beyond old.
Old fashioned travel agents, you know.
So does include the food and all that kind of transfer?
Yeah, yeah, it's a tour, so the only thing so they book you on some schlocky seats on United.
So I just use some of my mouths to upgrade because you know, I'm not sitting in the back, you know me please.
So but other than that, they took off everything and I think for some of the I don't know some of the more advanced trips.
It kind of makes sense still. I don't know.
I'm not even sure what I paid for it, but in terms of a fee, but it was definitely worth it whatever it was.
You'll be in Ireland, you'll go to a pub, but it'll be exactly.
What would go wrong.
I think it just makes sense too.
I mean, just for families traveling, it's easier to have that all inclusive, so you're not thinking about having to dish out cash and how much who I got to give this much to?
It's just all taken care of.
Yeah.
I should have done all inclusive when my kids were a little because when you check out after a week, you get a bill that's like fifty pages.
Oh yeah, long because it's.
Every smoothie, every beer, every soda, and it just kills you. As now you go to all inclusive, you literally walk out the last day, you don't do anything you've done.
You can even include gratuities in there if you want.
Yep.
Yeah, so anyway, a different way to go. So all right, good stuff there. Lisa Mitteo here traveling and between now in September. I don't travel anywhere because I'm at the Jersey Shore, people can come to meet.
There's no place in a world I'd rather be.
This is the Bloomberg Surveillance Podcast, bringing you the best in economics, geopolitics, finance, and investment. 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 Eastern from our global headquarters in New York City. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen, and as always on Bloomberg Radio, the Bloomberg Terminal, and The Bloomberg Business Apple