This is Bloomberg Business Wait inside from the reporters and editors who bring you America's most trusted business magazine, plus global business finance and tech news. The Bloomberg Business Week podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.

This is Bloomberg Business Wait inside from the reporters and editors who bring you America's most trusted business magazine, plus global business finance and tech news. The Bloomberg Business Week podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.

You are listening and watching Bloomberg Business Week. Carol Master along at just Matten. She is in for Tim steneviek on this Friday? Is it Friday?

You are listening and watching Bloomberg Business Week. Carol Master along at just Matten. She is in for Tim steneviek on this Friday? Is it Friday?

Just?

Just?

I think it's Friday?

I think it's Friday?

It is?

It is?

It's been every week.

It's been every week.

I hope it is.

I hope it is.

Either way, Folks, everybody in that control room, we're leaving after this show. I'm just telling you we're counting it a Friday. It is Friday, of course, it's just been a busy dance week. We have, though, a really interesting next segment coming up because you know Jess. Earlier this year McKenzie came out there, of course, the Consulting Giant, and they wrote about quantum technology and they noted, and this is a quote, quantum computers represent a completely new approach to computing. And while they won't replace today's computers, by using the principles of quantum physics, they will be able to solve very complex statistical problems that today's computers cannot.

Either way, Folks, everybody in that control room, we're leaving after this show. I'm just telling you we're counting it a Friday. It is Friday, of course, it's just been a busy dance week. We have, though, a really interesting next segment coming up because you know Jess. Earlier this year McKenzie came out there, of course, the Consulting Giant, and they wrote about quantum technology and they noted, and this is a quote, quantum computers represent a completely new approach to computing. And while they won't replace today's computers, by using the principles of quantum physics, they will be able to solve very complex statistical problems that today's computers cannot.

And quantum computing has so much potential and momentum that McKinsey has identified it as one of the next big trends in tech. Quantum computing alone, just one of the three main areas of emerging quantum technology, could account Carol for nearly one point three trillion dollars in value by twenty thirty five.

And quantum computing has so much potential and momentum that McKinsey has identified it as one of the next big trends in tech. Quantum computing alone, just one of the three main areas of emerging quantum technology, could account Carol for nearly one point three trillion dollars in value by twenty thirty five.

So do you think we've got everybody's attend to now? I think we do, all right, So let's get into it. We welcome Raj Hasra, president and CEO at Quantinum. I hope I'm saying it correctly. There's a lot of us in there. He's with us on zoom from Portland, Oregon. Raj, nice to have you here with us. Say the name of your company. I want to make sure we've got it correctly.

So do you think we've got everybody's attend to now? I think we do, all right, So let's get into it. We welcome Raj Hasra, president and CEO at Quantinum. I hope I'm saying it correctly. There's a lot of us in there. He's with us on zoom from Portland, Oregon. Raj, nice to have you here with us. Say the name of your company. I want to make sure we've got it correctly.

That's great to be here, and it is. You got it almost ninety percent right. It's Quentinumum quantin Yes, there are a couple of skis in there.

That's great to be here, and it is. You got it almost ninety percent right. It's Quentinumum quantin Yes, there are a couple of skis in there.

Okay, we want to make sure we had it right. Listen, I'm so glad that we have you here. First, I'll tell us a little bit about what your scientists and your team and your company are working on what's the mission, what's the core business?

Okay, we want to make sure we had it right. Listen, I'm so glad that we have you here. First, I'll tell us a little bit about what your scientists and your team and your company are working on what's the mission, what's the core business?

You put Quantinuum is the world's largest full stack hardware plus software quantum focus company. We have only one singular focus, and that is to accelerate quantum computing technologies and its commercialization to solve as you've were noting just now, some of those society's largest challenges around inside generation, around cybersecurity. It is the next big thing because it is what's going to cause the next big value to society and value in economics. So our job is future.

You put Quantinuum is the world's largest full stack hardware plus software quantum focus company. We have only one singular focus, and that is to accelerate quantum computing technologies and its commercialization to solve as you've were noting just now, some of those society's largest challenges around inside generation, around cybersecurity. It is the next big thing because it is what's going to cause the next big value to society and value in economics. So our job is future.

In So help me out here because we're all saying the next big thing in technology is AI Artificial intelligence. Is there a connective tissue between AI and quantum technology? They should? We be thinking about them as two different things are highly connected.

In So help me out here because we're all saying the next big thing in technology is AI Artificial intelligence. Is there a connective tissue between AI and quantum technology? They should? We be thinking about them as two different things are highly connected.

Absolutely done. You hit it on the head. AI is a huge force. Think of it as an algorithm set, think of it as a methodology, think of it as as working on data. The key to it is what infrastructure does it run on? So if you not AI is all about data, more data every day, you know GPT three four five, The training models are getting huge lots of data and it's going to run into, and it's running into two specific challenges, how do you compute with this fast amount of data in a sustainable and efficient manner? And number two, which I think you've you've seen quite a bit in recent talk about AI being trustable by being interpretable and transparent. That is the decisions it makes. How do you know it's right? How do you know it's the right thing. So quantum computing is very relevant to both. There are places in classical AI techniques today that quantum is a better way to compute from either data storage perspective or data you know compassion perspective, or just the raw processing of it. And the more exciting part of it is quantum allows things like languages to be represented in these models in such a way that you can actually make them transparent and interpretable, that you can say why, you know exactly why it made the decisions and told you what answers it did. And that is huge because it not lets those kinds of AI techniques be brought into the realm of regulated industries. Imagine it's not just chat GPD, you know, helping you write an email to your friend. It is chat GPD or large language models making large decisions in industrial workflows, in banking and finance, in linguistics of you know, trying to decide what RNA is and DNA modeling can do. So that the application is huge for AI to benefit from quantum computing as the next generation computing infrastructure that not only makes it more powerful and efficient, but also makes it interpretable and transparent, thereby making bigger use of it for society.

Absolutely done. You hit it on the head. AI is a huge force. Think of it as an algorithm set, think of it as a methodology, think of it as as working on data. The key to it is what infrastructure does it run on? So if you not AI is all about data, more data every day, you know GPT three four five, The training models are getting huge lots of data and it's going to run into, and it's running into two specific challenges, how do you compute with this fast amount of data in a sustainable and efficient manner? And number two, which I think you've you've seen quite a bit in recent talk about AI being trustable by being interpretable and transparent. That is the decisions it makes. How do you know it's right? How do you know it's the right thing. So quantum computing is very relevant to both. There are places in classical AI techniques today that quantum is a better way to compute from either data storage perspective or data you know compassion perspective, or just the raw processing of it. And the more exciting part of it is quantum allows things like languages to be represented in these models in such a way that you can actually make them transparent and interpretable, that you can say why, you know exactly why it made the decisions and told you what answers it did. And that is huge because it not lets those kinds of AI techniques be brought into the realm of regulated industries. Imagine it's not just chat GPD, you know, helping you write an email to your friend. It is chat GPD or large language models making large decisions in industrial workflows, in banking and finance, in linguistics of you know, trying to decide what RNA is and DNA modeling can do. So that the application is huge for AI to benefit from quantum computing as the next generation computing infrastructure that not only makes it more powerful and efficient, but also makes it interpretable and transparent, thereby making bigger use of it for society.

You worked at Intel for about twenty five years, and when you're there, you obviously also were incorporating AI and machine learning there that really helped revitalize Intel's growth after obviously a prolonged period of decline there. What did you learn from what when it came to AI, and how are you going to end up utilizing that in your role at this point.

You worked at Intel for about twenty five years, and when you're there, you obviously also were incorporating AI and machine learning there that really helped revitalize Intel's growth after obviously a prolonged period of decline there. What did you learn from what when it came to AI, and how are you going to end up utilizing that in your role at this point.

That's a great question. As you noted, I was at Intel for twenty five years and what we saw the growth of classical computing CPU or central processing INNIT based computing, dive expand to heterogeneous compute where you had accelerators for various workloads. AI was an emerging workload, and what I learned was there is you have to do a few things in order to successfully deliver the customer expectations. You have to build the right infrastructure for the right workload. Number two is you have to work with the software industry or the software portion and not just build hardware and build them in lockstep. So there's a complete solution available. There isn't just a hardware asking for software to be written for it. And the third thing is what we learned is patients in adoption and patience and integrity in stating what the results are fundamentally important, so you don't create a hip cycle that collapses on you. That is exactly what I bring to continue. We are working on innovative hardware, but we are a full stack company and we are developing hardware and software in concert so we can actually build solutions for our customers. I'll give you an example. Just last week we announced that names like Airbus and BMW are working to incorporate quantum technology into their standard workflows that exist today to look at next generation fuels or what's called new energy. They're using quantum computing technology from US, working with us both our hardware and our software to look at better ways and more efficient batteries and fuels of the future. That's something they cannot do with classical computing for very long, if at all. So Yeah, the lessons learned are customer relationships, early and closed relationships between hardware and software, and working together to build out true economic use cases.

That's a great question. As you noted, I was at Intel for twenty five years and what we saw the growth of classical computing CPU or central processing INNIT based computing, dive expand to heterogeneous compute where you had accelerators for various workloads. AI was an emerging workload, and what I learned was there is you have to do a few things in order to successfully deliver the customer expectations. You have to build the right infrastructure for the right workload. Number two is you have to work with the software industry or the software portion and not just build hardware and build them in lockstep. So there's a complete solution available. There isn't just a hardware asking for software to be written for it. And the third thing is what we learned is patients in adoption and patience and integrity in stating what the results are fundamentally important, so you don't create a hip cycle that collapses on you. That is exactly what I bring to continue. We are working on innovative hardware, but we are a full stack company and we are developing hardware and software in concert so we can actually build solutions for our customers. I'll give you an example. Just last week we announced that names like Airbus and BMW are working to incorporate quantum technology into their standard workflows that exist today to look at next generation fuels or what's called new energy. They're using quantum computing technology from US, working with us both our hardware and our software to look at better ways and more efficient batteries and fuels of the future. That's something they cannot do with classical computing for very long, if at all. So Yeah, the lessons learned are customer relationships, early and closed relationships between hardware and software, and working together to build out true economic use cases.

All right, well listen, We're going to have to continue this conversation another time. We have run out of time, but we really appreciate it. Continuum CEO and President Raj Howzar joining us from Portland, Oregon. You are listening and watching Bloomberg BusinessWeek, and this is Bloomberg Radio.

All right, well listen, We're going to have to continue this conversation another time. We have run out of time, but we really appreciate it. Continuum CEO and President Raj Howzar joining us from Portland, Oregon. You are listening and watching Bloomberg BusinessWeek, and this is Bloomberg Radio.

You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern Listen.

You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern Listen.

On Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business app, or watch just Live on YouTube.

On Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business app, or watch just Live on YouTube.

All right, guys, we are going to wrap up. We're not quite done. We still a couple of hours here on Bloomberg Business Week, but I do feel like we started the week, and Jess, we several times came back to what was one of the big stories. Yes, the move that we saw along the US Treasury curve and really among global sovereign dead if you will, in terms of yields moving up. But China every day, there was a stack of new headlines.

All right, guys, we are going to wrap up. We're not quite done. We still a couple of hours here on Bloomberg Business Week, but I do feel like we started the week, and Jess, we several times came back to what was one of the big stories. Yes, the move that we saw along the US Treasury curve and really among global sovereign dead if you will, in terms of yields moving up. But China every day, there was a stack of new headlines.

There definitely wasn't especially because this is the world's second largest economy behind the US and then obviously the third one is Japan. But this is really crucial to see how that economy, if you're seeing, particularly especially this year is supposed to be this big rebound year for the economy. What does that mean when you have different trajectories for both of their central banks.

There definitely wasn't especially because this is the world's second largest economy behind the US and then obviously the third one is Japan. But this is really crucial to see how that economy, if you're seeing, particularly especially this year is supposed to be this big rebound year for the economy. What does that mean when you have different trajectories for both of their central banks.

It's been tough going and we saw that in certainly the economic data points a deflation feear, is a weekending housing market, a crisis in the shadow lending sector, so much, a surprise rate cut. So let's get to it. Shazad Kazi is back with us. We're so delighted he's got to report out a new note and he asks, is China starting to collapse? Chazad, of course, is managing director at China Facebook International. They were founded over a decade ago and really to work with and help institutional investors and corporate CEOs navigate China's notoriously black box economy. That's how they write it on their website. It's so well said. He joins us on this Friday afternoon. Shazad the report you ask, is China's starting to collapse?

It's been tough going and we saw that in certainly the economic data points a deflation feear, is a weekending housing market, a crisis in the shadow lending sector, so much, a surprise rate cut. So let's get to it. Shazad Kazi is back with us. We're so delighted he's got to report out a new note and he asks, is China starting to collapse? Chazad, of course, is managing director at China Facebook International. They were founded over a decade ago and really to work with and help institutional investors and corporate CEOs navigate China's notoriously black box economy. That's how they write it on their website. It's so well said. He joins us on this Friday afternoon. Shazad the report you ask, is China's starting to collapse?

Is it?

Is it?

Or is that just ridiculous?

Or is that just ridiculous?

No, in China is not collapsing at all. The market is just so disappointed at the way twenty twenty three is unfolded. They were expecting a big boom basket recovery. We always argue that was very unrealistic. That has not happened, and so the investor in community has settled on the narrative that China's on the version of collapse and the only thing that can save the day now is a big bang stimulus. We of course argue back and push back against that whole thesis.

No, in China is not collapsing at all. The market is just so disappointed at the way twenty twenty three is unfolded. They were expecting a big boom basket recovery. We always argue that was very unrealistic. That has not happened, and so the investor in community has settled on the narrative that China's on the version of collapse and the only thing that can save the day now is a big bang stimulus. We of course argue back and push back against that whole thesis.

What's been the catalyst to prevent us seeing a bigger rebound here in China's economies? And so many people were expecting that to happen in twenty twenty three.

What's been the catalyst to prevent us seeing a bigger rebound here in China's economies? And so many people were expecting that to happen in twenty twenty three.

I think some of the assumptions going into twenty twenty three were just misplaced. You know, we had two years of a very bad economic shock because of zero COVID policies and of course the deflating of the property bubble, which really you know, not only destroyed household wealth but really crushed consumer confidence. So expecting the Chinese households to come strongly into twenty twenty three and spending left and right was very, very unrealistic. Couple that with the fact that you know, there is slow down in the external environment for China as reflected and its export orders as seen through you know, sort of the manufacturing recession, if you will, that we're seeing take place in Europe. We're certainly seeing pretty you know, slow down in manufacturing out here in the United States. Those are starting to add on. And of course the critical thing the property market, which is in a multi year restructure phase and will be a problem story I think for the Chinese economy for several more years to go.

I think some of the assumptions going into twenty twenty three were just misplaced. You know, we had two years of a very bad economic shock because of zero COVID policies and of course the deflating of the property bubble, which really you know, not only destroyed household wealth but really crushed consumer confidence. So expecting the Chinese households to come strongly into twenty twenty three and spending left and right was very, very unrealistic. Couple that with the fact that you know, there is slow down in the external environment for China as reflected and its export orders as seen through you know, sort of the manufacturing recession, if you will, that we're seeing take place in Europe. We're certainly seeing pretty you know, slow down in manufacturing out here in the United States. Those are starting to add on. And of course the critical thing the property market, which is in a multi year restructure phase and will be a problem story I think for the Chinese economy for several more years to go.

Just forgive me, I mean, Shazad, go back to what you said, did you say? What did you say about the big banks in China? What was needed?

Just forgive me, I mean, Shazad, go back to what you said, did you say? What did you say about the big banks in China? What was needed?

The idea right now, the consensus is that, you know, China needs to unleash big fiscal stimulus projects, the kind that they did in the aftermath of the global financial crisis. And only can big bang physcal stimulus save the Chinese economy. But that's not going to happen. Chinese policy makers are looking to de risk the system. They wanted to bring down this whole you know, this over leveraged problem that they have in the economy. They're not going to, i think, add further fuel to fire.

The idea right now, the consensus is that, you know, China needs to unleash big fiscal stimulus projects, the kind that they did in the aftermath of the global financial crisis. And only can big bang physcal stimulus save the Chinese economy. But that's not going to happen. Chinese policy makers are looking to de risk the system. They wanted to bring down this whole you know, this over leveraged problem that they have in the economy. They're not going to, i think, add further fuel to fire.

So then what Okay, So it's great that it's kind of contained domestically, all right, or at least how you're seeing it. But I mean, if if what's needed is not going to be done, then what's I mean? You know, I think we talked with you earlier in the week, like what do we need to in terms of a reset think about the China growth engine?

So then what Okay, So it's great that it's kind of contained domestically, all right, or at least how you're seeing it. But I mean, if if what's needed is not going to be done, then what's I mean? You know, I think we talked with you earlier in the week, like what do we need to in terms of a reset think about the China growth engine?

Yeah?

Yeah?

I think you know, as we discussed the other day. First of all, investors need to understand that they're looking at a structural slowdown in China. They're looking at the economic management of the country depart from the model that they're used to where we used to get high rates of growth. Now China is actually paying the price for some of it. The political leadership in China has decided that they have the appetite to pay the political price because they see it as short term pain and a much you know, they're time horizon is a lot longer than the markets and investors, I think, and they're willing to pay the price today in order to set the economy on a more healthy, sustainable pace of growth, even though it's going to be a much slower pace of growth than anybody I think anticipated China hitting you know, they're going to potentially do five percent this year, We're looking at sub five percent for sure moving forward, maybe even one percent or no growth down the line if things continue to deteriorate and they're unsuccessful transitioning the economy.

I think you know, as we discussed the other day. First of all, investors need to understand that they're looking at a structural slowdown in China. They're looking at the economic management of the country depart from the model that they're used to where we used to get high rates of growth. Now China is actually paying the price for some of it. The political leadership in China has decided that they have the appetite to pay the political price because they see it as short term pain and a much you know, they're time horizon is a lot longer than the markets and investors, I think, and they're willing to pay the price today in order to set the economy on a more healthy, sustainable pace of growth, even though it's going to be a much slower pace of growth than anybody I think anticipated China hitting you know, they're going to potentially do five percent this year, We're looking at sub five percent for sure moving forward, maybe even one percent or no growth down the line if things continue to deteriorate and they're unsuccessful transitioning the economy.

All right, not apples to apples, But is this kind of a kin if I think about Paul Volker when you had to rain and inflation in the seventies, like you had to do something that was going to make it very uncomfortable, but was going to put the US economy on the right trajectory. Is that kind of where China is, and it's kind of the responsible way of you know, managing your economy.

All right, not apples to apples, But is this kind of a kin if I think about Paul Volker when you had to rain and inflation in the seventies, like you had to do something that was going to make it very uncomfortable, but was going to put the US economy on the right trajectory. Is that kind of where China is, and it's kind of the responsible way of you know, managing your economy.

Within the property market. And the way they deflated the bubble, I agree with that completely. They you know, pain, it has to be endured because that's what happens when you deflate bubbles. But that's exactly what they're trying to do. And this year, I think is a great example of the fact that they haven't jumped in to do massive bailouts. The last two years, they haven't done massive bailouts, so I think that's indicative of the fact that they are willing to put the economy on the right track and to avoid what could potentially have been a much worse hard landing. We may, I think, have gotten the Chinese hard landing that everybody predicted this whole time. Over the last couple of years, with the evergrand crisis and the property crisis that we've seen, you.

Within the property market. And the way they deflated the bubble, I agree with that completely. They you know, pain, it has to be endured because that's what happens when you deflate bubbles. But that's exactly what they're trying to do. And this year, I think is a great example of the fact that they haven't jumped in to do massive bailouts. The last two years, they haven't done massive bailouts, so I think that's indicative of the fact that they are willing to put the economy on the right track and to avoid what could potentially have been a much worse hard landing. We may, I think, have gotten the Chinese hard landing that everybody predicted this whole time. Over the last couple of years, with the evergrand crisis and the property crisis that we've seen, you.

See any sort of red flag's brewing when it comes to their property market.

See any sort of red flag's brewing when it comes to their property market.

I mean, this year has been, you know, a very disappointing story for those who bet on the fact that property was on a steady road to recovery. You know, you're getting sales weakness, you're getting price weakness. Anytime you see an improvement in the numbers, it's not at all sustainable. And it may very well just be the fact that year over year results are so distorted this year, given the on again, off again switch that the economy was put on last year, the property market and specifically the residential market, the housing market, you know, has I think a lot more disappointment. I had sort of like a one step forward, two steps back type of scenario. We'll see what happens, by the way, on the commercial real estate side of the economy, which oftentimes will escape attention. The commercial property developers are also suffering, as we've seen in China pagebooks numbers over the last couple of months.

I mean, this year has been, you know, a very disappointing story for those who bet on the fact that property was on a steady road to recovery. You know, you're getting sales weakness, you're getting price weakness. Anytime you see an improvement in the numbers, it's not at all sustainable. And it may very well just be the fact that year over year results are so distorted this year, given the on again, off again switch that the economy was put on last year, the property market and specifically the residential market, the housing market, you know, has I think a lot more disappointment. I had sort of like a one step forward, two steps back type of scenario. We'll see what happens, by the way, on the commercial real estate side of the economy, which oftentimes will escape attention. The commercial property developers are also suffering, as we've seen in China pagebooks numbers over the last couple of months.

All right, So I'm thinking about our audience, who, just like the rest of us, over the last couple of weeks, are feeling a little overwhelmed by all of the headlines coming out of China. As you say, China is not starting to collapse, and maybe and what's going on is really kind of the responsible thing in terms of getting the Chinese economy back on track. So what should we keep on our radar? And just got about forty seconds.

All right, So I'm thinking about our audience, who, just like the rest of us, over the last couple of weeks, are feeling a little overwhelmed by all of the headlines coming out of China. As you say, China is not starting to collapse, and maybe and what's going on is really kind of the responsible thing in terms of getting the Chinese economy back on track. So what should we keep on our radar? And just got about forty seconds.

So don't fall for the China's Leman moment story. It's not happening.

So don't fall for the China's Leman moment story. It's not happening.

As we said.

As we said.

If there is a larger crisis that begins to brew, I would expect more policy support and banks to step in, potentially taking over certain companies and certain projects. But at the same time, don't go to the other end of the spectrum and start thinking there's going to be big, big bailouts taking place, big fiscal projects being announced. A lot more nuanced and sophisticated tracking is needed this time around.

If there is a larger crisis that begins to brew, I would expect more policy support and banks to step in, potentially taking over certain companies and certain projects. But at the same time, don't go to the other end of the spectrum and start thinking there's going to be big, big bailouts taking place, big fiscal projects being announced. A lot more nuanced and sophisticated tracking is needed this time around.

But there might be more stuff that goes that falls down, more bankruptcies, but that's going to be okay. Just really quickly.

But there might be more stuff that goes that falls down, more bankruptcies, but that's going to be okay. Just really quickly.

We will continue to get mini crisis along the way. Absolutely. I don't foresee this turning into a big Leman moment. You can get Leman moments in a non commercial financial system, which is what you have in Chi.

We will continue to get mini crisis along the way. Absolutely. I don't foresee this turning into a big Leman moment. You can get Leman moments in a non commercial financial system, which is what you have in Chi.

So great to check in with you two times this week. Shazad Kazi over at China Bacebook International, he's the managing director. Have a great weekend. This is Bloomberg.

So great to check in with you two times this week. Shazad Kazi over at China Bacebook International, he's the managing director. Have a great weekend. This is Bloomberg.

You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern on Bloomberg Radio, the Bloomberg Business app, and YouTube. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa playing Bloomberg eleven thirty.

You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern on Bloomberg Radio, the Bloomberg Business app, and YouTube. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa playing Bloomberg eleven thirty.

We are living in unusual times. I feel like we can't say that enough. Having said that, the macro impacting everything, and that includes cryptoes. We had a period of unusual calm in the crypto markets and that kind of came to an end abruptly this week. The notion of higher for longer interest rates, sparking a sell off and risk assets, and that included bitcoin. It led to mass liquidations of bullish bets. And then there was the Wall Street jonal report about SpaceX writing down the value it's bitcoin holding, so it was.

We are living in unusual times. I feel like we can't say that enough. Having said that, the macro impacting everything, and that includes cryptoes. We had a period of unusual calm in the crypto markets and that kind of came to an end abruptly this week. The notion of higher for longer interest rates, sparking a sell off and risk assets, and that included bitcoin. It led to mass liquidations of bullish bets. And then there was the Wall Street jonal report about SpaceX writing down the value it's bitcoin holding, so it was.

Just a lot, right, And then you're also seeing risk, so it's like you're talking about when it comes to Bigcoorn sliding as much as eight percent, so clearly under pressure. And then everybody's still watching that thirty thousand dollars threshold.

Just a lot, right, And then you're also seeing risk, so it's like you're talking about when it comes to Bigcoorn sliding as much as eight percent, so clearly under pressure. And then everybody's still watching that thirty thousand dollars threshold.

When it comes to big but we're below it, right, correct, All right, So let's get to it our weekly crypto segment back or with us, I should say's Frank Holmes. He's executive chairman and at the small cap publicly held High Digital Technologies. It's a crypto mining company, roughly three hundred and twenty onine, three hundred and twenty one million in market cap. It's up one hundred and sixty three percent year to date. He is on Zoom from San Antonio, Texas from Jessics home state. Yes, Frank, nice to have you here, Happy Friday.

When it comes to big but we're below it, right, correct, All right, So let's get to it our weekly crypto segment back or with us, I should say's Frank Holmes. He's executive chairman and at the small cap publicly held High Digital Technologies. It's a crypto mining company, roughly three hundred and twenty onine, three hundred and twenty one million in market cap. It's up one hundred and sixty three percent year to date. He is on Zoom from San Antonio, Texas from Jessics home state. Yes, Frank, nice to have you here, Happy Friday.

How are you outstanding in a bear market?

How are you outstanding in a bear market?

Well, tell us about that? What do you make kind of the recent trade, it is a bear market, although we're I guess what, we're about sixty percent above where it started the year on bitcoin, So we have had a pop this year.

Well, tell us about that? What do you make kind of the recent trade, it is a bear market, although we're I guess what, we're about sixty percent above where it started the year on bitcoin, So we have had a pop this year.

Yeah, that's true, That's absolutely true. But after a brutal sell off last year. Well, what's interesting to me is that the dollar is is up almost we do this rolling twenty day standard deviation movement off the dollar versus ten yure government versus gold, and versus bitcoin, and what we're seeing right now going to the Jackson Hall meeting next week, is the dollar's up almost two standard deviations. That's a huge move on the upside. And this week we saw a goal break below the two hundred day moving average, and naturally yesterday was bitcoin took it on the chin. And I think these collateral assets are moving in opposite directions and direction to the dollar. So I think that that's what we're living with. But I.

Yeah, that's true, That's absolutely true. But after a brutal sell off last year. Well, what's interesting to me is that the dollar is is up almost we do this rolling twenty day standard deviation movement off the dollar versus ten yure government versus gold, and versus bitcoin, and what we're seeing right now going to the Jackson Hall meeting next week, is the dollar's up almost two standard deviations. That's a huge move on the upside. And this week we saw a goal break below the two hundred day moving average, and naturally yesterday was bitcoin took it on the chin. And I think these collateral assets are moving in opposite directions and direction to the dollar. So I think that that's what we're living with. But I.

That's interesting because Carol and I were talking about how that had a correlation with the dollar as well, when you're talking about what that means for stock prices too, but for bitcoin in particular, because earlier this year, especially when it came in March, that turned into one of those particular assets that we're actually rallying in addition to technology stocks. But I'm curious as far as the dynamic right now between what's happening with bitcoin and obviously what we're seeing with the bond market at this point.

That's interesting because Carol and I were talking about how that had a correlation with the dollar as well, when you're talking about what that means for stock prices too, but for bitcoin in particular, because earlier this year, especially when it came in March, that turned into one of those particular assets that we're actually rallying in addition to technology stocks. But I'm curious as far as the dynamic right now between what's happening with bitcoin and obviously what we're seeing with the bond market at this point.

Well, we had the two year, the five year, ten year, and the twenty year government bond yields all screaming this week, and that makes it very difficult for alternative asset classes. And I think that sort of risk off is clearly is the trade rate now, and that's part of that contagion. But bitcoin did take off after Silicon Valley bankruptcy. We did see that. What's interesting to me is that it's not as over sold as it was a year ago in May of twenty twenty two. Is actually when you look at the elasticity, the movement, the bands of how much it goes up over twenty days versus down twenty days, it was actually more over sold last year or when FTX blew up.

Well, we had the two year, the five year, ten year, and the twenty year government bond yields all screaming this week, and that makes it very difficult for alternative asset classes. And I think that sort of risk off is clearly is the trade rate now, and that's part of that contagion. But bitcoin did take off after Silicon Valley bankruptcy. We did see that. What's interesting to me is that it's not as over sold as it was a year ago in May of twenty twenty two. Is actually when you look at the elasticity, the movement, the bands of how much it goes up over twenty days versus down twenty days, it was actually more over sold last year or when FTX blew up.

Hey, listen, if you can, Frank, tell us little bit about your business, because you guys are certainly you know, involved in I feel like you know so much that we talk about, whether it's the connection of AI the web three digital transformation. I'll look a little bit at your website in terms of of the things that you guys are involved in. You're operating massive data centers, are you building new ones? Give me an idea of the business environment and where you guys are spending the most money and the most time in the most effort.

Hey, listen, if you can, Frank, tell us little bit about your business, because you guys are certainly you know, involved in I feel like you know so much that we talk about, whether it's the connection of AI the web three digital transformation. I'll look a little bit at your website in terms of of the things that you guys are involved in. You're operating massive data centers, are you building new ones? Give me an idea of the business environment and where you guys are spending the most money and the most time in the most effort.

The biggest growth is AI, clearly, and we have the most experience. High was the first to use GPU chips and has first actually crypto money company ever go public in twenty seventeen, and it ushered in many other companies coming into the space. Well, we've been taking our data centers and slowly been building out and last year we purchased almost seventy million dollars of these high performance and VIDIA chips, and now we're building out the expansion of that. And we see that as much more stable, high profit margin business than actually bitcoin mining. Bitcoin mining has these incredible moves to it where your profit margin expands dramatically and then all of a sudden it contracts. So our focus clearly for bitcoin mining. We will double our footprint over the next six months, but they're real growth opportunity is clearly the reconfiguring of our data centers into AI take a little.

The biggest growth is AI, clearly, and we have the most experience. High was the first to use GPU chips and has first actually crypto money company ever go public in twenty seventeen, and it ushered in many other companies coming into the space. Well, we've been taking our data centers and slowly been building out and last year we purchased almost seventy million dollars of these high performance and VIDIA chips, and now we're building out the expansion of that. And we see that as much more stable, high profit margin business than actually bitcoin mining. Bitcoin mining has these incredible moves to it where your profit margin expands dramatically and then all of a sudden it contracts. So our focus clearly for bitcoin mining. We will double our footprint over the next six months, but they're real growth opportunity is clearly the reconfiguring of our data centers into AI take a little.

Bit deeper into those numbers for us. So give us an idea bitcoin mining, which has been your big business. How much is that still your big business? But give us an idea of the AI side of the business and the kind of growth you're seeing, and does that essentially become the business in three years, five years? Tenure help us out here.

Bit deeper into those numbers for us. So give us an idea bitcoin mining, which has been your big business. How much is that still your big business? But give us an idea of the AI side of the business and the kind of growth you're seeing, and does that essentially become the business in three years, five years? Tenure help us out here.

You looked at it today, it would be ten million, say eight million a month, and you're making about two million a month. With AI that number would be making six million a month on eight million dollars. So it's a ninety eighty to ninety percent groast margin business and you're actually less expensive than the AWS or the Google, et cetera. And so the whole chat GBT is exploded. That demand for are a four These are four thousand, five thousand and six thousand chips.

You looked at it today, it would be ten million, say eight million a month, and you're making about two million a month. With AI that number would be making six million a month on eight million dollars. So it's a ninety eighty to ninety percent groast margin business and you're actually less expensive than the AWS or the Google, et cetera. And so the whole chat GBT is exploded. That demand for are a four These are four thousand, five thousand and six thousand chips.

Who are your clients that are using this?

Who are your clients that are using this?

Mind, it's a great question. We're B to B so we do not deal with the public, and there are other service providers. Even in bitcoin mining, we do not deal with the public. We will hotle some of our position that has put it in the bank. Others will sell to turn around and expand the operation. But when it comes to the AI, there are service providers to do all the KYCAML do all the client handholding, and they take a fee off the top for doing that. We provide all the infrastructure and the latest of chips and they rent basically on an hourly basis.

Mind, it's a great question. We're B to B so we do not deal with the public, and there are other service providers. Even in bitcoin mining, we do not deal with the public. We will hotle some of our position that has put it in the bank. Others will sell to turn around and expand the operation. But when it comes to the AI, there are service providers to do all the KYCAML do all the client handholding, and they take a fee off the top for doing that. We provide all the infrastructure and the latest of chips and they rent basically on an hourly basis.

So when you say KYC, is that you know your customer? What does that mean? Break it down for folks, folks laundry.

So when you say KYC, is that you know your customer? What does that mean? Break it down for folks, folks laundry.

When you're deal directly with a business, you have to have people on staff that are expertise in anti money laundering, know your client rules, KYC and a m L. That is when you have a B two C business model. When you have a B to B, that's not what we have to worry about. That's one reason why I'm a fund manager and launching of Hive was was we couldn't launch a bitcoin ETF six years ago. So we end up co founding the creation of Hive because we basically mine the coins we create that original coin.

When you're deal directly with a business, you have to have people on staff that are expertise in anti money laundering, know your client rules, KYC and a m L. That is when you have a B two C business model. When you have a B to B, that's not what we have to worry about. That's one reason why I'm a fund manager and launching of Hive was was we couldn't launch a bitcoin ETF six years ago. So we end up co founding the creation of Hive because we basically mine the coins we create that original coin.

But it sounds like you're increasingly moving away from that business because the AI side of it is much more productive. Is that fair?

But it sounds like you're increasingly moving away from that business because the AI side of it is much more productive. Is that fair?

It's it's fair because it's two parts. You know, it's a good question because we have we're mining ethereum, and Ethereum was a very high margin business just like AI is. Uh And so with that, I think the volatility of bitcoin will maintain itself and it'll be an ongoing business. But the real growth and big potential are these data centers that we built and own and we continue to expand on and the applications that are necessary with these chips that are out there. So I think AI, there's no doubt, is high margin, high growth, and data centers have huge valuations versus crypto mining stocks really don't have the big valuation that AI has.

It's it's fair because it's two parts. You know, it's a good question because we have we're mining ethereum, and Ethereum was a very high margin business just like AI is. Uh And so with that, I think the volatility of bitcoin will maintain itself and it'll be an ongoing business. But the real growth and big potential are these data centers that we built and own and we continue to expand on and the applications that are necessary with these chips that are out there. So I think AI, there's no doubt, is high margin, high growth, and data centers have huge valuations versus crypto mining stocks really don't have the big valuation that AI has.

Are you able to use whenever you're talking about some of the data and tracking your customers as far as inflection points and how that can affect maybe the crypto space and the prices.

Are you able to use whenever you're talking about some of the data and tracking your customers as far as inflection points and how that can affect maybe the crypto space and the prices.

No, we don't. We really don't get into that. Where we use AI would be on if you're mining any of the alternative coins and a proof of work scenario, you use AI to maximize your returns what you want to mine, But no, we don't. That's all. It's a B to B business model.

No, we don't. We really don't get into that. Where we use AI would be on if you're mining any of the alternative coins and a proof of work scenario, you use AI to maximize your returns what you want to mine, But no, we don't. That's all. It's a B to B business model.

Yeah, it's really interesting, so cap x that you guys, data centers are expensive if you're building them out, but you know AI is going to need them. You what are your expectations for capex over the next six to twelve months and are you raising it? Do you feel confident enough to raise it in today's environment?

Yeah, it's really interesting, so cap x that you guys, data centers are expensive if you're building them out, but you know AI is going to need them. You what are your expectations for capex over the next six to twelve months and are you raising it? Do you feel confident enough to raise it in today's environment?

We do. We feel very confident. We have a strong balance sheet, we have positive cash flow, even with bitcoin where it is today, and we think that the industry itself is going to go through a big reckoning in the bitcoin industry because a lot of the machines that are mining today are not as energy is efficient and what's called a having next May and that's basically going to say you're going to earn half the amount of rewards of bitcoin, So bitcoin's going to have to be over sixty thousand dollars to cover your costs. So I don't think it's going to work out perfectly for a lot of those inefficient miners, and so we want to make sure that HIVE is in a position that we can deal with that, and that's what we've been doing. So our expansion there in ASEX and along with AI will probably be in the tune of one hundred million dollars.

We do. We feel very confident. We have a strong balance sheet, we have positive cash flow, even with bitcoin where it is today, and we think that the industry itself is going to go through a big reckoning in the bitcoin industry because a lot of the machines that are mining today are not as energy is efficient and what's called a having next May and that's basically going to say you're going to earn half the amount of rewards of bitcoin, So bitcoin's going to have to be over sixty thousand dollars to cover your costs. So I don't think it's going to work out perfectly for a lot of those inefficient miners, and so we want to make sure that HIVE is in a position that we can deal with that, and that's what we've been doing. So our expansion there in ASEX and along with AI will probably be in the tune of one hundred million dollars.

All right, Well, good to check in with you and Frank, you get a t rex behind you, so you better be careful. I think it's a t rex. It's a red one.

All right, Well, good to check in with you and Frank, you get a t rex behind you, so you better be careful. I think it's a t rex. It's a red one.

It's it's right. It's a political statement that came out of China by a sculpture that China's trying to eat the world.

It's it's right. It's a political statement that came out of China by a sculpture that China's trying to eat the world.

It's a fascinating sculpture.

It's a fascinating sculpture.

Listen.

Listen.

Good to check in with you look forward to doing again in the future. Frank Homes, executive chairman at Hive Digital Technologies, on Zoom from San Antonio, Texas.

Good to check in with you look forward to doing again in the future. Frank Homes, executive chairman at Hive Digital Technologies, on Zoom from San Antonio, Texas.

I'm brother Marco, a journal How about you let me drive?

I'm brother Marco, a journal How about you let me drive?

Oh no, no, no no, who's going to honey?

Oh no, no, no no, who's going to honey?

Please? I'll do the riding gravels.

Please? I'll do the riding gravels.

Let's mate, I want to drive.

Let's mate, I want to drive.

It's a good question.

It's a good question.

That tis This is the drive to the clothes.

That tis This is the drive to the clothes.

Down cons me think well by around.

Down cons me think well by around.

Yelling on on Bloomberg Radio.

Yelling on on Bloomberg Radio.

All right, tiktack everybody, Just about fifteen minutes to go until the closing bell. Carol Master along with Just met in live in our Bloomberg Get Directive studio on YouTube in Bloomberg Originals. As we said, Jess is in for Tim Stenevik, who's off today, and Jess, I'm looking at an equity trade here in the US little change a little bit higher, but we're seeing some buying into the close. Go figure.

All right, tiktack everybody, Just about fifteen minutes to go until the closing bell. Carol Master along with Just met in live in our Bloomberg Get Directive studio on YouTube in Bloomberg Originals. As we said, Jess is in for Tim Stenevik, who's off today, and Jess, I'm looking at an equity trade here in the US little change a little bit higher, but we're seeing some buying into the close. Go figure.

And now the S and P five hundred on pace for its worst weeks since early August. It had been the worst care March.

And now the S and P five hundred on pace for its worst weeks since early August. It had been the worst care March.

So hey, there we go.

So hey, there we go.

But yeah, you'd think for a Friday afternoon, but things coming off the lows there for the broader market.

But yeah, you'd think for a Friday afternoon, but things coming off the lows there for the broader market.

Yeah, And if my understanding was volume up a little bit today.

Yeah, And if my understanding was volume up a little bit today.

Yes it was. And also you'd think a summer Friday, right where volume tends to be lighter.

Yes it was. And also you'd think a summer Friday, right where volume tends to be lighter.

I don't know, it's really kind of wacky, and right, we have seen volumes, Dan, and I'm looking at the major industry groups in the S and P five hundred, specifically energy, you're out performers. You've got more major industry groups in the S and B five hundred actually showing some gains versus those to the decline.

I don't know, it's really kind of wacky, and right, we have seen volumes, Dan, and I'm looking at the major industry groups in the S and P five hundred, specifically energy, you're out performers. You've got more major industry groups in the S and B five hundred actually showing some gains versus those to the decline.

Right, and communication services those are obviously more growth oriented sector that went down close to one percent.

Right, and communication services those are obviously more growth oriented sector that went down close to one percent.

All right, let's get to it, guys. The drive to the clothes with about fourteen minutes left in the trading session. Sam down that is with us. He's chief investment officer at Angel Capital Advisors. He joins us on zoom in Atlanta. Zim Sam, good to have you here on this Friday. It is an interesting day. We thought, we hoped, we fingers crossed after a rather dense week, that it would be a little bit quieter, but that's not the case. How are you thinking about the trade here? First of all, let's talk about the US market specifically. I think the S and P is on track. As just said, not a great week, but we're down about three weeks in a row here. What does the reset it feels like? And US equities tell you, and really the reset if you will, in US yields, it's.

All right, let's get to it, guys. The drive to the clothes with about fourteen minutes left in the trading session. Sam down that is with us. He's chief investment officer at Angel Capital Advisors. He joins us on zoom in Atlanta. Zim Sam, good to have you here on this Friday. It is an interesting day. We thought, we hoped, we fingers crossed after a rather dense week, that it would be a little bit quieter, but that's not the case. How are you thinking about the trade here? First of all, let's talk about the US market specifically. I think the S and P is on track. As just said, not a great week, but we're down about three weeks in a row here. What does the reset it feels like? And US equities tell you, and really the reset if you will, in US yields, it's.

Definitely an our view a function of yields. You know, where we focus as fixed income and not necessarily the equity markets. But I think equities have clearly been under pressure this month and this week, just given the recent rise that we've seen in risk free yields over the month. I mean just for August alone, you know, treasury yields are up four to thirty five basis points across the curve, and that's really been pressuring clearly stocks and other risk assets here. But we think it's pretty interesting as an opportunity is risk free yields and tenure note yields, for example, have reached the highest level we've seen since two thousand and seven. So risk free yields present a huge opportunity in our view. And while you know there may be further room to run here, perhaps at rates in the long end, we think it's a pretty historic opportunity, particularly in areas of mortgage backed securities, where yields are even higher even in government guaranteed mortgage backed securities today.

Definitely an our view a function of yields. You know, where we focus as fixed income and not necessarily the equity markets. But I think equities have clearly been under pressure this month and this week, just given the recent rise that we've seen in risk free yields over the month. I mean just for August alone, you know, treasury yields are up four to thirty five basis points across the curve, and that's really been pressuring clearly stocks and other risk assets here. But we think it's pretty interesting as an opportunity is risk free yields and tenure note yields, for example, have reached the highest level we've seen since two thousand and seven. So risk free yields present a huge opportunity in our view. And while you know there may be further room to run here, perhaps at rates in the long end, we think it's a pretty historic opportunity, particularly in areas of mortgage backed securities, where yields are even higher even in government guaranteed mortgage backed securities today.

And so you just mentioned the positioning there as far as what you see in opportunities when it comes to those risk free type of rates, where are you shining away from in alternatives that you don't want to necessarily advise clients to buy at this point.

And so you just mentioned the positioning there as far as what you see in opportunities when it comes to those risk free type of rates, where are you shining away from in alternatives that you don't want to necessarily advise clients to buy at this point.

Yeah, where we've been focusing is clearly in quality and shorter duration areas of fixed income where you can get these equity like returns. As I mentioned, you know, with risk free rates surging to the extent that they have after twenty twenty two and into twenty twenty three, you know, investors don't have to take a tremendous amount of credit risk here or even just convexity risk to earn you know, high current yields in the you know, six to nine percent range, So you know, we're focusing on higher quality and within the subsectors we focus on in the securitized credit space, really focused on mortgage backed securities here binds backed by residential mortgages, but definitely cautious towards areas, for example, within the CNBS space, just given some of the concerns that we have in underlying commercial real estate.

Yeah, where we've been focusing is clearly in quality and shorter duration areas of fixed income where you can get these equity like returns. As I mentioned, you know, with risk free rates surging to the extent that they have after twenty twenty two and into twenty twenty three, you know, investors don't have to take a tremendous amount of credit risk here or even just convexity risk to earn you know, high current yields in the you know, six to nine percent range, So you know, we're focusing on higher quality and within the subsectors we focus on in the securitized credit space, really focused on mortgage backed securities here binds backed by residential mortgages, but definitely cautious towards areas, for example, within the CNBS space, just given some of the concerns that we have in underlying commercial real estate.

I know you're not calling out right for a pending recession in the near term. How do you view the recent batch of economic data that we've seen that shows there's still a resilient consumer out there, especially when you're looking at those retail sales numbers and then hearing from some of the corporates, especially on the retail side with Walmart and others this week.

I know you're not calling out right for a pending recession in the near term. How do you view the recent batch of economic data that we've seen that shows there's still a resilient consumer out there, especially when you're looking at those retail sales numbers and then hearing from some of the corporates, especially on the retail side with Walmart and others this week.

Yeah, the consumer has been extraordinarily resilient and definitely you know, exceeded our expectations. This year. We've been generally favorable towards the consumer, particularly in the post COVID era. We did start, you know, getting a little more cautious h towards you know, the consumer that's been a little more impacted due due to the inflationary pressures and and the lower real wage growth that we were seeing. But that's that's really starting to change, uh, particularly as it relates to inflation coming down.

Yeah, the consumer has been extraordinarily resilient and definitely you know, exceeded our expectations. This year. We've been generally favorable towards the consumer, particularly in the post COVID era. We did start, you know, getting a little more cautious h towards you know, the consumer that's been a little more impacted due due to the inflationary pressures and and the lower real wage growth that we were seeing. But that's that's really starting to change, uh, particularly as it relates to inflation coming down.

Uh.

Uh.

You know, most recently, we expect inflation to continue to fall, which should bolster real wages looking forward.

You know, most recently, we expect inflation to continue to fall, which should bolster real wages looking forward.

Uh.

Uh.

So, you know, the consumers definitely shined. And I would say one thing that market partisemants I think are beginning to really appreciate is just a lack of interest rate sensitivity on consumers balance sheet given you know, typically the largest liability for for US borrowers is the the you know, their home.

So, you know, the consumers definitely shined. And I would say one thing that market partisemants I think are beginning to really appreciate is just a lack of interest rate sensitivity on consumers balance sheet given you know, typically the largest liability for for US borrowers is the the you know, their home.

Uh.

Uh.

And the weighted average mortgage ready today is around three and a half percent, and the vast majority of that, over ninety percent is fixed rate. And I think that's provided a tremendous amount of resilience for consumers given the swift pace of FED tightening that we've seen not only on the front end but through quantitative tightening. But we are growing increasingly cautious given how fast the FED has gone, particularly as it relates to asset prices generally speaking, but we do think housing is going to be extraordinarily resilient here just amid this recent tightening we've seen really related to the stability and the mortgage rate, So that's bolstering the consumer as well.

And the weighted average mortgage ready today is around three and a half percent, and the vast majority of that, over ninety percent is fixed rate. And I think that's provided a tremendous amount of resilience for consumers given the swift pace of FED tightening that we've seen not only on the front end but through quantitative tightening. But we are growing increasingly cautious given how fast the FED has gone, particularly as it relates to asset prices generally speaking, but we do think housing is going to be extraordinarily resilient here just amid this recent tightening we've seen really related to the stability and the mortgage rate, So that's bolstering the consumer as well.

Hey, where's money flowing? Among your various investment options. You've got a bunch of mutual funds, as you said, you know, you're really all about yields or the function of yields in terms of investments. You've got an income ETF and ultra short income ETF, you've got a multi strategy income fund. Where is the money flowing? What kind of flows are we seeing money move out of the safety and security of money market are perceived safety and security of money markets? And where is it flowing?

Hey, where's money flowing? Among your various investment options. You've got a bunch of mutual funds, as you said, you know, you're really all about yields or the function of yields in terms of investments. You've got an income ETF and ultra short income ETF, you've got a multi strategy income fund. Where is the money flowing? What kind of flows are we seeing money move out of the safety and security of money market are perceived safety and security of money markets? And where is it flowing?

It's a great question. Yeah, you know, industry wide and just across the the bond complex or the fixed income complex, you really saw a huge amount of outflows in twenty twenty two, and you saw a nice surge, I would say at the beginning of this year from a flows perspective, you know, into fixed income, but the vast majority of the flows, as you well know, have really gone into the front end of the bill curve and in the money market funds. You know, I think global money market funds are approaching nine hundred and twenty five billion on a year to day basis, So the vast majority of global investors are still hiding out on the front end of the curve. But we think, you know, we are definitely in the camp that we are at or New York peak policy and encourage investors to really consider extending duration in both you know, hard think you're a.

It's a great question. Yeah, you know, industry wide and just across the the bond complex or the fixed income complex, you really saw a huge amount of outflows in twenty twenty two, and you saw a nice surge, I would say at the beginning of this year from a flows perspective, you know, into fixed income, but the vast majority of the flows, as you well know, have really gone into the front end of the bill curve and in the money market funds. You know, I think global money market funds are approaching nine hundred and twenty five billion on a year to day basis, So the vast majority of global investors are still hiding out on the front end of the curve. But we think, you know, we are definitely in the camp that we are at or New York peak policy and encourage investors to really consider extending duration in both you know, hard think you're a.

Peak policy even though the world is kind of thinking about a reset of you know, we were just talking with our Michael McKenzie. Maybe two percent inflation just doesn't make sense. Maybe it's more like a three percent inflation world. Do we need to start kind of embracing are you guys embracing the idea that maybe it's a different higher reset when it comes to inflation, and that means maybe a different different investment think, you.

Peak policy even though the world is kind of thinking about a reset of you know, we were just talking with our Michael McKenzie. Maybe two percent inflation just doesn't make sense. Maybe it's more like a three percent inflation world. Do we need to start kind of embracing are you guys embracing the idea that maybe it's a different higher reset when it comes to inflation, and that means maybe a different different investment think, you.

Know, perhaps over the medium term, I think in the law in the near term, though, you know, we expect inflation to come down pretty significantly towards the latter part of this year and into twenty twenty four. Is the shelter component of the the inflation data continues to roll over pretty hard, is you know, it's been very well publicized. It's definitely a lagging part of the inflation component and we're seeing rents falling very fast, and obviously home prices have come off the recent highs that we experienced after COVID, so as that shelter component really filters into the inflation data, we think that's going to be very supportive to you know, a FED narrative that we'll be approaching, you know, a potential slower growth scenarios we head end of this year and into early next.

Know, perhaps over the medium term, I think in the law in the near term, though, you know, we expect inflation to come down pretty significantly towards the latter part of this year and into twenty twenty four. Is the shelter component of the the inflation data continues to roll over pretty hard, is you know, it's been very well publicized. It's definitely a lagging part of the inflation component and we're seeing rents falling very fast, and obviously home prices have come off the recent highs that we experienced after COVID, so as that shelter component really filters into the inflation data, we think that's going to be very supportive to you know, a FED narrative that we'll be approaching, you know, a potential slower growth scenarios we head end of this year and into early next.

Sam, I have to ask, what's the top question you're hearing from your clients?

Sam, I have to ask, what's the top question you're hearing from your clients?

You know, the top question we're we're getting is why are mortgages generally so cheap in today's market? You know, agency mortgages in particular have gotten a lot of attention, especially on uh you know, Bloomberg News and in the headlines recently and uh, you know, agency mortgage backed securities to give you some context from a spread perspective or at the widest levels versus treasuries that you've really seen since the financial crisis, and a lot of investors are asking, you know, what are we missing here? What's going on there?

You know, the top question we're we're getting is why are mortgages generally so cheap in today's market? You know, agency mortgages in particular have gotten a lot of attention, especially on uh you know, Bloomberg News and in the headlines recently and uh, you know, agency mortgage backed securities to give you some context from a spread perspective or at the widest levels versus treasuries that you've really seen since the financial crisis, and a lot of investors are asking, you know, what are we missing here? What's going on there?

Uh?

Uh?

In an arview is purely a function of Carol's question on flows. You've seen a tremendous amount of flow into the front end of the curve. UH and you've also seen banks reducing holdings from from the highs after after COVID and QE. But you've also seen quantitative tightening implemented in earnest and it's created a pretty historic opportunity in ourview towards towards mortgages and just risk free assets generally speaking.

In an arview is purely a function of Carol's question on flows. You've seen a tremendous amount of flow into the front end of the curve. UH and you've also seen banks reducing holdings from from the highs after after COVID and QE. But you've also seen quantitative tightening implemented in earnest and it's created a pretty historic opportunity in ourview towards towards mortgages and just risk free assets generally speaking.

All right, good to get your thoughts on that, and so appreciate it. Sam, Thanks for funding time for us, and have a great week, and so I'm done. Lap CEO at angel Oakcapital Advisors, joining us on zoom in Atlanta.

All right, good to get your thoughts on that, and so appreciate it. Sam, Thanks for funding time for us, and have a great week, and so I'm done. Lap CEO at angel Oakcapital Advisors, joining us on zoom in Atlanta.

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