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Bloomberg Audio Studios, podcasts, radio news.

This is the Bloomberg Daybreak Aisia podcast. I'm Doug Krisner. You can join Brian Curtis and myself for the stories, making news and moving markets in the APAC region. You can subscribe to the show anywhere you get your podcast and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business app.

This is the Bloomberg Daybreak Aisia podcast. I'm Doug Krisner. You can join Brian Curtis and myself for the stories, making news and moving markets in the APAC region. You can subscribe to the show anywhere you get your podcast and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business app.

Joining us now is Mark Matthews, Managing Director and head of Asia Research at Julius. Bear with us in our studios in Singapore. Mark, look at you in our studios at seven in the morning.

Joining us now is Mark Matthews, Managing Director and head of Asia Research at Julius. Bear with us in our studios in Singapore. Mark, look at you in our studios at seven in the morning.

Excellent.

Excellent.

Well, listen, you know we've had this rally in tech shares that has helped trim the drop of the little mini correction that we had to only two point seven percent now, So is the correction over?

Well, listen, you know we've had this rally in tech shares that has helped trim the drop of the little mini correction that we had to only two point seven percent now, So is the correction over?

I don't know, but I would say that the consensus was looking for earnings growth back in the beginning of this year for the fourth quarter of last year to be slightly negative, and the actual earnings growth for that quarter turned about out to be four percent, and so going into the first quarter, the consensus was only looking for about a three percent earnings growth and I could be wrong, but I think we might be on track to be close to double that because these with the exception of Netflix and Meta, generally, these big tech companies have been coming up with good results.

I don't know, but I would say that the consensus was looking for earnings growth back in the beginning of this year for the fourth quarter of last year to be slightly negative, and the actual earnings growth for that quarter turned about out to be four percent, and so going into the first quarter, the consensus was only looking for about a three percent earnings growth and I could be wrong, but I think we might be on track to be close to double that because these with the exception of Netflix and Meta, generally, these big tech companies have been coming up with good results.

It's kind of interesting too when you consider the rates environment. Obviously we have a higher neutral rate now with the economy able to support earnings growth, even though rates remain elevated. Putting aside for the moment that really kind of tepid reading on first quarter GDP, how would you assess the American economy right now? Do you think it's pretty strong?

It's kind of interesting too when you consider the rates environment. Obviously we have a higher neutral rate now with the economy able to support earnings growth, even though rates remain elevated. Putting aside for the moment that really kind of tepid reading on first quarter GDP, how would you assess the American economy right now? Do you think it's pretty strong?

Well?

Well?

I don't think we can put that first quarter GDP aside, actually because it was an important number, and if you exclude inventories and exports, which are volatile series, the number would have been two point eight percent. So I think the economy is strong, and I think that's the reason why market rates are high. I would say we don't see the ten year going back to you know, five percent thereabouts where it got to October last year, but I think it will stay high as long as the economy is running hot. And we're looking for the ten year at about four point five percent in three months, which definitely offers competition for stocks The only thing I would say is just thinking back to the nineteen nineties, the ten year yield was always over five percent, and the stock market managed just fine. Not everybody wants to own bonds.

I don't think we can put that first quarter GDP aside, actually because it was an important number, and if you exclude inventories and exports, which are volatile series, the number would have been two point eight percent. So I think the economy is strong, and I think that's the reason why market rates are high. I would say we don't see the ten year going back to you know, five percent thereabouts where it got to October last year, but I think it will stay high as long as the economy is running hot. And we're looking for the ten year at about four point five percent in three months, which definitely offers competition for stocks The only thing I would say is just thinking back to the nineteen nineties, the ten year yield was always over five percent, and the stock market managed just fine. Not everybody wants to own bonds.

Yeah, we're back to the old normal in a sense. But you know, if growth remains reasonably strong, doesn't have to be very strong in the US, but reasonably strong. It seems that, you know, the companies are doing their thing and it's helping us offset these higher rates in that Now. In terms of China, because we had that pretty solid GDP, Bloomberg Economics is raising its forecast on China's growth for this year, but it still sees China's missing the target five percent, but it has raised it. It sees a lot of aggressive government investment mark and it says, you know that that could catalyze some sort of stronger recovery. It's not jumping up and down, but it looks like the environment is sort of okay in China at the moment. I note that you are tactically bullish.

Yeah, we're back to the old normal in a sense. But you know, if growth remains reasonably strong, doesn't have to be very strong in the US, but reasonably strong. It seems that, you know, the companies are doing their thing and it's helping us offset these higher rates in that Now. In terms of China, because we had that pretty solid GDP, Bloomberg Economics is raising its forecast on China's growth for this year, but it still sees China's missing the target five percent, but it has raised it. It sees a lot of aggressive government investment mark and it says, you know that that could catalyze some sort of stronger recovery. It's not jumping up and down, but it looks like the environment is sort of okay in China at the moment. I note that you are tactically bullish.

Why. One of the reasons is precisely what you just said, Brian, that the economy is either in my opinion, slowly troughing or beginning to rise. I know there were a few weak numbers for March, like retail sales, but there were other numbers that were strong, like fixed asset investment. And to my mind, the most important thing is what's going on the property market, and what I've noticed there is transaction volumes are rising, and price discovery between buyers and sellers usually signals that prices are finding some kind of equilibrium. So property is the largest asset of Chinese people. If the price stops falling, it will be a great boost to sentiment. And yes, we are tactically bullish on that market. It is up fifteen percent from the low in late January, it's still down forty percent from its peak in twenty twenty one. It's a very inexpensive market, hangsaying on eight times versus the long term average of eleven times, and every negative has a positive. And in the case of the Chinese stock market today, all the problems that the China has gone through over the last few years, one of the positives you can take out of that is it's forced state owned enterprises to become better run, and so also the regulators are borrowing a page from Japan's book. But whatever is happening. Companies are becoming more efficient, they're increasing dividends and buybacks, and that's not something I think that's imbued in prices currently.

Why. One of the reasons is precisely what you just said, Brian, that the economy is either in my opinion, slowly troughing or beginning to rise. I know there were a few weak numbers for March, like retail sales, but there were other numbers that were strong, like fixed asset investment. And to my mind, the most important thing is what's going on the property market, and what I've noticed there is transaction volumes are rising, and price discovery between buyers and sellers usually signals that prices are finding some kind of equilibrium. So property is the largest asset of Chinese people. If the price stops falling, it will be a great boost to sentiment. And yes, we are tactically bullish on that market. It is up fifteen percent from the low in late January, it's still down forty percent from its peak in twenty twenty one. It's a very inexpensive market, hangsaying on eight times versus the long term average of eleven times, and every negative has a positive. And in the case of the Chinese stock market today, all the problems that the China has gone through over the last few years, one of the positives you can take out of that is it's forced state owned enterprises to become better run, and so also the regulators are borrowing a page from Japan's book. But whatever is happening. Companies are becoming more efficient, they're increasing dividends and buybacks, and that's not something I think that's imbued in prices currently.

A big question though, in my mind, is the persistent weakness of the Chinese currency right now offshore we're just under on the strong side of seven spot two seven against the greenback. Yes, much of this is a strong dollar story. But will China continue to benefit from a cheap currency or a less expensive currency as a way of sustaining the export driven part of the economy.

A big question though, in my mind, is the persistent weakness of the Chinese currency right now offshore we're just under on the strong side of seven spot two seven against the greenback. Yes, much of this is a strong dollar story. But will China continue to benefit from a cheap currency or a less expensive currency as a way of sustaining the export driven part of the economy.

It's certainly something that is being talked a lot about in the context of the Japanese yen. And you can China keep the renmn b where it is where when the yen is is where it is, I think they will not allow it to go down a lot more, or at least if it goes down in a very slow and orderly fashion. And the reason I say that is because they are worried about capital outflow. And as much as they sealed, they've sealed all the you know, the doors as much as they can. If you remember twenty fifteen when there was a mini devaluation and the panic that caused. I don't think they want to repeat of that. So so you could look at you know, when a currency goes down in one of two ways. Either you could say, oh, it's already gone down, I won't sell anymore, it's already cheap enough, or you could or you could say, oh it's gone down. That means it's going to go down even more, and you panic and you just get out whatever way you can. I think most Chinese would be kind of the second way. They would panic, and I think the government knows that and for that reason it won't let the currency go down.

It's certainly something that is being talked a lot about in the context of the Japanese yen. And you can China keep the renmn b where it is where when the yen is is where it is, I think they will not allow it to go down a lot more, or at least if it goes down in a very slow and orderly fashion. And the reason I say that is because they are worried about capital outflow. And as much as they sealed, they've sealed all the you know, the doors as much as they can. If you remember twenty fifteen when there was a mini devaluation and the panic that caused. I don't think they want to repeat of that. So so you could look at you know, when a currency goes down in one of two ways. Either you could say, oh, it's already gone down, I won't sell anymore, it's already cheap enough, or you could or you could say, oh it's gone down. That means it's going to go down even more, and you panic and you just get out whatever way you can. I think most Chinese would be kind of the second way. They would panic, and I think the government knows that and for that reason it won't let the currency go down.

Well, that kind of leads me into a question I put to Mark Luceini earlier about how with the FED tight, Asian central banks will likely tighten policy to protect their currencies, which on it's a little different with Japan, it's a little bit different. But for other Asian markets that might not be good for Asian equities, but it might be pretty good for local currency bonds.

Well, that kind of leads me into a question I put to Mark Luceini earlier about how with the FED tight, Asian central banks will likely tighten policy to protect their currencies, which on it's a little different with Japan, it's a little bit different. But for other Asian markets that might not be good for Asian equities, but it might be pretty good for local currency bonds.

Do you see it that way, and if so, what do you like?

Do you see it that way, and if so, what do you like?

Well, we like dollar denominated Asian investment grade bonds and the reason is that they have a higher yield than their US counterparts. Yield on average for our portfolios, I think is about six point eight percent now, and the duration is about half what the US investment grade bonds are. So US investment grade bonds have an average duration of around eight years seven or eight years, and here in Asia it's more like four and a half.

Well, we like dollar denominated Asian investment grade bonds and the reason is that they have a higher yield than their US counterparts. Yield on average for our portfolios, I think is about six point eight percent now, and the duration is about half what the US investment grade bonds are. So US investment grade bonds have an average duration of around eight years seven or eight years, and here in Asia it's more like four and a half.

Mark. Before we let you go, you mentioned Japan earlier, and i'd like to get your views on what's happening, not just with BOJ but whether or not there continues to be opportunity in the equity market.

Mark. Before we let you go, you mentioned Japan earlier, and i'd like to get your views on what's happening, not just with BOJ but whether or not there continues to be opportunity in the equity market.

Yes, I think there is, and the currencies related to that. I must say, the way the yen has been dropping has to be a concern to the authorities, but I think the overall direction is probably lower. It makes Japan extremely competitive. For example, minimum wage in Japan, which is eight hundred yen is five US dollars. That's less than a third of California. So I think that it's become a very competitive economy. And they have the best brand names in Asia, and many of those companies that have good brand names have returns on equity in the high teens or above. I do believe it is a market that will continue to do well.

Yes, I think there is, and the currencies related to that. I must say, the way the yen has been dropping has to be a concern to the authorities, but I think the overall direction is probably lower. It makes Japan extremely competitive. For example, minimum wage in Japan, which is eight hundred yen is five US dollars. That's less than a third of California. So I think that it's become a very competitive economy. And they have the best brand names in Asia, and many of those companies that have good brand names have returns on equity in the high teens or above. I do believe it is a market that will continue to do well.

Yes, yeah, And in twenty seconds, Korea maybe doing some of the same things with governance.

Yes, yeah, And in twenty seconds, Korea maybe doing some of the same things with governance.

Yes they are. They don't have nearly the same kind of returns on equity or brand names that the Japanese do. Must be, it's not a market. We spend a lot of time looking at it because our clients don't have single stock access.

Yes they are. They don't have nearly the same kind of returns on equity or brand names that the Japanese do. Must be, it's not a market. We spend a lot of time looking at it because our clients don't have single stock access.

Yeah, all right, well, thank you very much, Mark, I jumped you to the head of the line, and thank you very much for joining us here live on the program. Mark Matthews, Managing director and head of Asia Research at Julius Bear. Elon Musk making a surprise trip to China. He's trying to get approval for driver assistant software in the country, something that a lot of analysts think might help the carmakers decline in revenues, and he immediately met with Premier Lee Chiang. We bring in Danny Lee now Bloomberg Asia Transport reporter. There is some connection with Lee Chiang in that when he was the Chinese Communist Party Secretary for Shanghai, he helped Tesla set up that plant there in Shanghai. Is this a close relationship.

Yeah, all right, well, thank you very much, Mark, I jumped you to the head of the line, and thank you very much for joining us here live on the program. Mark Matthews, Managing director and head of Asia Research at Julius Bear. Elon Musk making a surprise trip to China. He's trying to get approval for driver assistant software in the country, something that a lot of analysts think might help the carmakers decline in revenues, and he immediately met with Premier Lee Chiang. We bring in Danny Lee now Bloomberg Asia Transport reporter. There is some connection with Lee Chiang in that when he was the Chinese Communist Party Secretary for Shanghai, he helped Tesla set up that plant there in Shanghai. Is this a close relationship.

Yeah, absolutely, This is a meeting of two allies. And of course that Elil Musk, who is stay fairly friendly with China, and so this meeting is so important for Tesla because of the fundamental value of the idea that his initiative on rolling out of so called full self driving will actually help the company and China's critical part of that market, where in terms of electric vehicles, this is you know, electric vehicles being a pop steller. Everyone likes to tech if your drive, So therefore this could be a potential gold mine. But those are regulatory hurdles that EEL must really need to have become So a meeting with Premier league challenge. Yeah, very very important.

Yeah, absolutely, This is a meeting of two allies. And of course that Elil Musk, who is stay fairly friendly with China, and so this meeting is so important for Tesla because of the fundamental value of the idea that his initiative on rolling out of so called full self driving will actually help the company and China's critical part of that market, where in terms of electric vehicles, this is you know, electric vehicles being a pop steller. Everyone likes to tech if your drive, So therefore this could be a potential gold mine. But those are regulatory hurdles that EEL must really need to have become So a meeting with Premier league challenge. Yeah, very very important.

Absolutely, Danny. Let's take a closer look at what you're referring to, I mean, the sensitivities around some of the cameras that are part of the full self driving system. That's a big objection I would imagine on the part of Beijing, right.

Absolutely, Danny. Let's take a closer look at what you're referring to, I mean, the sensitivities around some of the cameras that are part of the full self driving system. That's a big objection I would imagine on the part of Beijing, right.

Yes, that and also just fundamentally dated because as we've known for some time now, China is cracking down on data data showing where the data leaves China and goes to and so you know going data from the Chinese United States for example, is clearly oft sensitive issue. So this meeting go from eln Musk and then this meeting, maybe we'll see some movement on all self driving in China in the near future, because that would be the clear object and outcome of this visit in particular. And so you know, with ETL. Musk visiting China, especially only a week after deferring his India trip, it clearly shows his priorities, particularly after recent Turmo for Tesla's.

Yes, that and also just fundamentally dated because as we've known for some time now, China is cracking down on data data showing where the data leaves China and goes to and so you know going data from the Chinese United States for example, is clearly oft sensitive issue. So this meeting go from eln Musk and then this meeting, maybe we'll see some movement on all self driving in China in the near future, because that would be the clear object and outcome of this visit in particular. And so you know, with ETL. Musk visiting China, especially only a week after deferring his India trip, it clearly shows his priorities, particularly after recent Turmo for Tesla's.

It's pretty interesting how mister Musk operates because we thought that he might turn up at the auto show China instead all of a sudden he was going to go to India, and then the India trip got postponed and then you know, right away he turns up back in China, so that that's pretty interesting. And also it's interesting that Chinese policymakers, if you look at the report and CCTV, they're talking about how, you know, this shows how it should should work between US China relations.

It's pretty interesting how mister Musk operates because we thought that he might turn up at the auto show China instead all of a sudden he was going to go to India, and then the India trip got postponed and then you know, right away he turns up back in China, so that that's pretty interesting. And also it's interesting that Chinese policymakers, if you look at the report and CCTV, they're talking about how, you know, this shows how it should should work between US China relations.

What do you make of the politics of this?

What do you make of the politics of this?

Yeah, I mean it's an extraordinary time, particularly just coming hot off the heels of the US looking to get TikTok, the vestors from Byke Dance, and they have this separation. And so with someone like your Musk backing the likes of TikTok staying with doing Chinese hands for example, Clearly Mask has his stare out and that is kind of mark out of how he wants to pursue business because clearly anything that China does in the US have and disagreements if delay the risks, particularly given China is Tessa's biggest foreign market.

Yeah, I mean it's an extraordinary time, particularly just coming hot off the heels of the US looking to get TikTok, the vestors from Byke Dance, and they have this separation. And so with someone like your Musk backing the likes of TikTok staying with doing Chinese hands for example, Clearly Mask has his stare out and that is kind of mark out of how he wants to pursue business because clearly anything that China does in the US have and disagreements if delay the risks, particularly given China is Tessa's biggest foreign market.

We were talking about Tesla's full self driving and the hurdles that the company is likely going to encounter in the China market. But when you get a look at what's happening right now with the Chinese manufacturers and how they're using advanced driver assistance systems, is that becoming a lot more common right now.

We were talking about Tesla's full self driving and the hurdles that the company is likely going to encounter in the China market. But when you get a look at what's happening right now with the Chinese manufacturers and how they're using advanced driver assistance systems, is that becoming a lot more common right now.

Or Tesla it needs to maintain some kind of competitive a bunch on the technology something that Chinese drivers discerning. Chinese drivers want more technology and particularly at.

Or Tesla it needs to maintain some kind of competitive a bunch on the technology something that Chinese drivers discerning. Chinese drivers want more technology and particularly at.

At less costs.

At less costs.

So but Tesla this is critical because it's been trumpting its own version of effectively this assisted or ton the style driving. Other Chinese makers or bbs have this in trial at the moment, and it's tested to kind of catch up in a market like China is a big playground for it to test and potentially deliver some of the results and analysis of that globally.

So but Tesla this is critical because it's been trumpting its own version of effectively this assisted or ton the style driving. Other Chinese makers or bbs have this in trial at the moment, and it's tested to kind of catch up in a market like China is a big playground for it to test and potentially deliver some of the results and analysis of that globally.

Yeah, all right, Danny, thank you so much for joining us here. Danny Lee Bloomberg Asia Transport reporter. Joining us now on the program is Dave dagl Cio of Twin Focus with us live here on the program. So Dave, nice to have you with us. It's good to have a big, sort of lofty discussion about markets. You know, at the beginning of the week, we have slightly different theories out there. I mean, why we had this risk off period, and part of that is fed hawkishness and tighter and sticky inflation, also tighter liquidity, high valuations also in some people's minds, and then of course geopolitics. But it seems pretty clear that for the reversal, the big rally that we got at the end of the week, that came down two earnings. So my question to you is is the die cast on this being a strong earning season or you know, will it be a little bit more of some good some bad.

Yeah, all right, Danny, thank you so much for joining us here. Danny Lee Bloomberg Asia Transport reporter. Joining us now on the program is Dave dagl Cio of Twin Focus with us live here on the program. So Dave, nice to have you with us. It's good to have a big, sort of lofty discussion about markets. You know, at the beginning of the week, we have slightly different theories out there. I mean, why we had this risk off period, and part of that is fed hawkishness and tighter and sticky inflation, also tighter liquidity, high valuations also in some people's minds, and then of course geopolitics. But it seems pretty clear that for the reversal, the big rally that we got at the end of the week, that came down two earnings. So my question to you is is the die cast on this being a strong earning season or you know, will it be a little bit more of some good some bad.

The market is up. We had one of the greatest non recessionary rallies of all time. I think a pause made sense. We had, you know, he had some play expectations move up a little bit. That's not good news obviously, geopolitics.

The market is up. We had one of the greatest non recessionary rallies of all time. I think a pause made sense. We had, you know, he had some play expectations move up a little bit. That's not good news obviously, geopolitics.

Going the wrong way.

Going the wrong way.

What is working in the favor though, of earnings is that, you know, leading economic indicators are stabilizing here.

What is working in the favor though, of earnings is that, you know, leading economic indicators are stabilizing here.

This is a surprise to the market. So I think it does matter, and I do think on average the earning vestments will be up into the right. I worry more about the second half of the year.

This is a surprise to the market. So I think it does matter, and I do think on average the earning vestments will be up into the right. I worry more about the second half of the year.

At some of the commodity pressers and some of the unheedged positions begin to roll in.

At some of the commodity pressers and some of the unheedged positions begin to roll in.

Brian mentioned sticky inflation, and at this point it's unclear as to whether or not we're going to even get any rate cuts this year from the Fed. Are you concerned about that, that pivot that the FED has had to engineer here, tightening at least expectations for rate cuts.

Brian mentioned sticky inflation, and at this point it's unclear as to whether or not we're going to even get any rate cuts this year from the Fed. Are you concerned about that, that pivot that the FED has had to engineer here, tightening at least expectations for rate cuts.

Yeah, boy, I think the FED is you know, like my straight a student kid that just got two f's.

Yeah, boy, I think the FED is you know, like my straight a student kid that just got two f's.

On his test.

On his test.

Yeah, you know, so ten fifteen years of straight as. You give them a hall path on the first one, but the second one you get worried. And the reason I'm worried about the Central Bank is their goal for you know, twenty five ive years has been fighting inflation. And if you had told me, the market would be a couple percent from its all time high. Leading economic indicators are accelerating. The non farm payroll prints were benign, unemployment was low.

Yeah, you know, so ten fifteen years of straight as. You give them a hall path on the first one, but the second one you get worried. And the reason I'm worried about the Central Bank is their goal for you know, twenty five ive years has been fighting inflation. And if you had told me, the market would be a couple percent from its all time high. Leading economic indicators are accelerating. The non farm payroll prints were benign, unemployment was low.

I would never think we're going to have rate cuts.

I would never think we're going to have rate cuts.

And so the entire time I've been suspicious of this, I'm glad to see the FED is getting more hawkish.

And so the entire time I've been suspicious of this, I'm glad to see the FED is getting more hawkish.

I think that's their role and I think that's what they should do.

I think that's their role and I think that's what they should do.

Well.

Well.

Things change. I mean, we did have that very long period of near zero interest rates which kind of cost everybody, I suppose by surprise, back from starting around two thousand and seven and eight, and now you have a different paradigm. I mean, if we're stuck now in the high for longer theme, if this is the new normal or the old normal that's come back, do you expect the FED to not only not re cut interest rates for the rest of this year, but maybe even alter the pace of balance sheet reduction.

Things change. I mean, we did have that very long period of near zero interest rates which kind of cost everybody, I suppose by surprise, back from starting around two thousand and seven and eight, and now you have a different paradigm. I mean, if we're stuck now in the high for longer theme, if this is the new normal or the old normal that's come back, do you expect the FED to not only not re cut interest rates for the rest of this year, but maybe even alter the pace of balance sheet reduction.

The FED.

The FED.

The Fed's job is more and more of a type rope than it used to be, and what causes them on to the narrow type rope is clearly inflation expectations and the volatility around that. If I was a central banker, particularly the United States, I'd be very worried about what's happening in the five year forward tips market, and that's a good inflation you know barometer, and the US is discounting higher inflation rates, or at least the bond traders.

The Fed's job is more and more of a type rope than it used to be, and what causes them on to the narrow type rope is clearly inflation expectations and the volatility around that. If I was a central banker, particularly the United States, I'd be very worried about what's happening in the five year forward tips market, and that's a good inflation you know barometer, and the US is discounting higher inflation rates, or at least the bond traders.

Are so well, that's my point. They could they speed up? Could they? Also? My point is could they also speed.

Are so well, that's my point. They could they speed up? Could they? Also? My point is could they also speed.

Up the pace of balance sheet reduction if it's that bad, If inflation's this high and is this sticky?

Up the pace of balance sheet reduction if it's that bad, If inflation's this high and is this sticky?

I think everything's up up? I would I would? You know, they haven't asked me. I mean I think the you know, the broader question that I would be asking today is you know, you need to give yourself some room so that if you do have an economic problem, you need to cut. And so the policy here of just letting rates list a little bit, even having a little tightening of your balance sheet allows you to respond if we were to have other prices going forward.

I think everything's up up? I would I would? You know, they haven't asked me. I mean I think the you know, the broader question that I would be asking today is you know, you need to give yourself some room so that if you do have an economic problem, you need to cut. And so the policy here of just letting rates list a little bit, even having a little tightening of your balance sheet allows you to respond if we were to have other prices going forward.

So just from a margin and.

So just from a margin and.

Safety, I'd love to see the FED, the bat size of the balance sheet, etc.

Safety, I'd love to see the FED, the bat size of the balance sheet, etc.

Get a little more hawk So.

Get a little more hawk So.

Much of the conversation we've been having here is around artificial intelligence, especially when you look at what broke last week in terms of Microsoft and Alphabet. We've got some earnings this week that may be able to clarify this theme a little more. AMD, which is one of the leading chip makers. I don't know that there is greatly exposed to this space as let's say, a company like Nvidia, clearly, but we're also going to be hearing from Apple. How are you feeling generally about, you know, this theme of artificial intelligence. I mean, we've seen such a dramatic run over the course of the last several months. Is this something that's still has legs? Do you think.

Much of the conversation we've been having here is around artificial intelligence, especially when you look at what broke last week in terms of Microsoft and Alphabet. We've got some earnings this week that may be able to clarify this theme a little more. AMD, which is one of the leading chip makers. I don't know that there is greatly exposed to this space as let's say, a company like Nvidia, clearly, but we're also going to be hearing from Apple. How are you feeling generally about, you know, this theme of artificial intelligence. I mean, we've seen such a dramatic run over the course of the last several months. Is this something that's still has legs? Do you think.

I think it has legs and we've never seen anything like this. I want to just you know, go back a year. The estimates were plus or minus you know, you know, twenty billion dollars for Nvidia on the out year. They've now increased by thirty two billion dollars. We've never seen anything like this. The demand frend, the early poll for the capital spending on the front end is truly staggering, and it does look like, you know, Google and Microsoft are going to be early winners from this. The other interesting thing is if if you had just told me what the earnings estimates would do for Microsoft and Nvidia in particular, I wouldn't be surprised where the docks are, so it doesn't look to us that they're either overvalued or undervalued. And I think all that matters is the next direction of earnings. I do think though, that on the margin, investors are looking for acceleration here. This is why SMCI came in a little bit when investors became suspicious they would not accelerate earnings and revenue this quarter with a delayed response to their press release. So, yeah, we're gonna be watching these We're looking for acceleration. If we don't see it, that is concerning.

I think it has legs and we've never seen anything like this. I want to just you know, go back a year. The estimates were plus or minus you know, you know, twenty billion dollars for Nvidia on the out year. They've now increased by thirty two billion dollars. We've never seen anything like this. The demand frend, the early poll for the capital spending on the front end is truly staggering, and it does look like, you know, Google and Microsoft are going to be early winners from this. The other interesting thing is if if you had just told me what the earnings estimates would do for Microsoft and Nvidia in particular, I wouldn't be surprised where the docks are, so it doesn't look to us that they're either overvalued or undervalued. And I think all that matters is the next direction of earnings. I do think though, that on the margin, investors are looking for acceleration here. This is why SMCI came in a little bit when investors became suspicious they would not accelerate earnings and revenue this quarter with a delayed response to their press release. So, yeah, we're gonna be watching these We're looking for acceleration. If we don't see it, that is concerning.

So it's interesting to hear you talk about your fears of higher inflation, yet you know, pretty excited about about AI, and AI is fueling the market. So that's why I opened up with that first question, which is, yeah, we're worrying about inflation, but a look bit the market did on the strength of the earnings. So do you think that, you know, there's a lot of good opportunities here even though the cost is up because inflation is high and rates are high, but that the potential gains in revenue are strong enough to offset that.

So it's interesting to hear you talk about your fears of higher inflation, yet you know, pretty excited about about AI, and AI is fueling the market. So that's why I opened up with that first question, which is, yeah, we're worrying about inflation, but a look bit the market did on the strength of the earnings. So do you think that, you know, there's a lot of good opportunities here even though the cost is up because inflation is high and rates are high, but that the potential gains in revenue are strong enough to offset that.

We're watching, you know, we're watching what we have seen so far, and we got good evidence of this clearly in the last twenty four months, and then we have history over the last you know, hundred years or so, is it?

We're watching, you know, we're watching what we have seen so far, and we got good evidence of this clearly in the last twenty four months, and then we have history over the last you know, hundred years or so, is it?

Equities and earnings in particular do pretty good.

Equities and earnings in particular do pretty good.

In inflationary environments. The kneesier can be detrimental to earn the multiple in the short run, but in general they do pretty well. What we've seen so far this quarter is in general companies are powering through slightly higher wage rates and things like that, so our outlook for equities is constructive.

In inflationary environments. The kneesier can be detrimental to earn the multiple in the short run, but in general they do pretty well. What we've seen so far this quarter is in general companies are powering through slightly higher wage rates and things like that, so our outlook for equities is constructive.

We're still cautious in spots.

We're still cautious in spots.

We've advised clients though that to have and out of the money call auction protection in commodities, and we've begun to look there they begin to perform better.

We've advised clients though that to have and out of the money call auction protection in commodities, and we've begun to look there they begin to perform better.

The equities in particular are still cheap.

The equities in particular are still cheap.

Relative to their nav or the long run casital potential a current spot, so we've spent more time there.

Relative to their nav or the long run casital potential a current spot, so we've spent more time there.

Dave, how are you feeling about fixed income right now? In a fairly balanced portfolio? What should that ratio be fixed income versus equities?

Dave, how are you feeling about fixed income right now? In a fairly balanced portfolio? What should that ratio be fixed income versus equities?

Yeah, on the low side of history. How's that?

Yeah, on the low side of history. How's that?

You know?

You know?

One of the famous lines from Warren Buffett is what separates good from great investors is the ability to say no. And what we've been talking to clients about is long duration treasuries, investment grade bond, I yield bonds, even a lot of private credit look pretty extended to us unless we have nirvana, which is, you know, getting back into where we were over the last fifteen years, which is no inflationary pressure, is in very low rate. Anything other than that, I think you lose money in bonds, particularly as you stretch out duration.

One of the famous lines from Warren Buffett is what separates good from great investors is the ability to say no. And what we've been talking to clients about is long duration treasuries, investment grade bond, I yield bonds, even a lot of private credit look pretty extended to us unless we have nirvana, which is, you know, getting back into where we were over the last fifteen years, which is no inflationary pressure, is in very low rate. Anything other than that, I think you lose money in bonds, particularly as you stretch out duration.

Curious what you might think about Asian markets briefly in twenty seconds or so.

Curious what you might think about Asian markets briefly in twenty seconds or so.

Yeah, you know when you're sitting at the Taylor Swift concert and you're waiting for that uber to come, and you just don't know when it's going to come, but it's going to come.

Yeah, you know when you're sitting at the Taylor Swift concert and you're waiting for that uber to come, and you just don't know when it's going to come, but it's going to come.

I think the Chinese market looks like an uber.

I think the Chinese market looks like an uber.

After a conference, and it's going to come. Those are good companies there are at very reasonable prices. We're intrigued, we just don't know when.

After a conference, and it's going to come. Those are good companies there are at very reasonable prices. We're intrigued, we just don't know when.

Yeah, yeah, interesting comments, great session today. Dave enjoyed chatting with you, Dave. Dagnio There cio it twin focus.

Yeah, yeah, interesting comments, great session today. Dave enjoyed chatting with you, Dave. Dagnio There cio it twin focus.

This has been the Bloomberg Daybreak Asia podcast, bringing you the stories, making news and moving markets in the Asia Pacific. Visit the Bloomberg Podcast channel on YouTube. To get more episodes of this and other shows from Bloomberg, subscribe to the podcast on Apple, Spotify, or anywhere else you listen and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business app.

This has been the Bloomberg Daybreak Asia podcast, bringing you the stories, making news and moving markets in the Asia Pacific. Visit the Bloomberg Podcast channel on YouTube. To get more episodes of this and other shows from Bloomberg, subscribe to the podcast on Apple, Spotify, or anywhere else you listen and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business app.