Bloomberg Brief (04/23/2024)

Bloomberg Brief (04/23/2024)

Good morning.
From our global headquarters in new
york, i’m Manus Cranny with Dani Burger.
Welcome to bloomberg brief.
Let’s set your agenda.
It’s musk’s moment of truth.
Tesla kicks earnings season into high
gear after the market close.
More bad news for Apple.
iPhone sales in China fell 19% during
the March quarter, the worst performance
since 2020.
And the FTC sues to stop TAPESTRY’S $8.5
billion takeover of Capri, alleging the
deal will harm the luxury goods market.
You ready?
For the busiest day of this week, Nearly
$17 trillion worth of equity will report
the stock market just clinging by its
fingernails.
We’ve done the Bloomberg poll on two
thirds of the respondents of over 400
respondents say the earnings will give
us a nice kick.
Goldman Sachs, they’ve been doing the
hedge fund analysis.
The hedge funds have been the biggest
notional buyer of equities in more than
a year.
As the rest of you were selling, the
hedge funds were getting in there and
betting up.
Are you ready for a two year auction
today?
$69 billion worth of tools will come to
the street today.
It’s not expected to see any
indigestion.
I love above Michael had to say
yesterday, which was he’s hanging on
with his fingers and his toes in terms
of his long bond positions.
But he wants to see a little bit more
inflation print before you add duration.
You’re always bid this morning up an 8
to 1%.
The French PMIs show a little bit of
price pressure and German manufacturing
back in the expansion territory.
Keep an eye on Apple downing.
We’ve just had a little bit more data in
terms of the shipments in China.
They are down over sales in China, down
19%.
The stock is down half of 1%.
Good morning.
Earnings I this is one of those things
that if you told me the news before, I
would have assumed apple would have been
down a lot more.
But.
Perhaps it’s because this is nothing
new.
We learned from idc not that long ago
that their overall shipments had fallen
by 10% in the first quarter.
But this is the bad news.
So many people had pinned this earnings
season on the growth and the revival of
tech.
That would be the thing that would save
this equity market.
Already we have a blow to Apple.
If you strip it in video, you’re left
with a very different complexion in
terms of the technology earnings.
It is Nvidia that was skew the earnings,
by the way, on Apple.
What poor timing for Bank of America.
What a tragic timing for Bank of
America.
But they’re there which is it’s still
their topic they talk about the cash
flow and don’t forget this is a stock
that does dividend and buybacks and it’s
got a gusher of money on its balance
sheet.
They do.
They are among those that stand alone on
the sell side.
Both Morgan Stanley and our Bloomberg
intelligence analysts say China is the
reason that Apple cannot be as strong as
it once was.
But as I said, it’s a big week for
earnings, a big week for tech earnings.
More than 40% of the S&P is market cap
is going to be reporting.
We’re going to have a spotlight on the
Magnificent Seven.
Joining us now is Kevin Madden,
president and CEO of Henson and Walsh
Asset Management.
Kevin, I love during the break when we
were talking about Apple, you were like,
maybe we’re down to Mad Mad five now.
I mean, how much shine has been taken
out of these stocks like Apple Tesla,
especially as we’re about to hear their
numbers.
The Mac seven is very important to the
psyche of the investor because most
individual investors hold one of those
seven positions, as do fund companies.
And I think, too, this earnings season,
how important it really is.
According to FactSet, the information
technology sector is expected to grow
their earnings by 20% year over year,
communication services by 20% year over
year.
But the rest of the S&P 500 by just one
half of 1%.
Tech earnings are incredibly important
to the psyche of the market and where we
go from here.
Of course, we have to talk about the
Fed, too, because they’re pretty
important.
Yeah, I mean, there’s the macro.
But since we started on on I love you’re
going to both going to have to help me
now with it with with the sport
analogies.
Yes.
I don’t know whether you’re on cricket.
Our bet are baseball.
Yeah, I don’t think it is cricket guy.
I’m not a cricket guy.
So as far as air is concerned, we are in
the artificial.
So what inning are we in within the
artificial Intelligence A.I.
game.
This is what you had to say.
I would suggest that we are just in the
batting practice and that A.I.
before the A.I.
doubleheader.
So what exactly is you know, if we’re in
batting practice, what is the double
header?
Yeah, there’s so much more runway ahead
for what artificial intelligence can
actually accomplish in our society.
Last quarter, we learned that 36% of all
S&P 500 companies actually use the
terminology artificial intelligence or
AI in their quarterly earnings reports,
the most on record.
We’ve learned that Blackstone and
Digital Realty have announced a $7
billion joint venture to build data
centers all across the world in cities
such as Paris, Frankfurt and even the
northern parts of Virginia.
We heard Microsoft announced that
they’re building over $2 billion worth
of data centers in Japan by the end of
2025.
Artificial intelligence isn’t just some
hot new fad.
It truly is transformative.
And there’s going to be more and more
investment dollars chasing that elusive
technology.
But maybe Tesla a lesson not necessarily
an A.I., but you can promise all the
growth you want, all the spending you
want.
And if you don’t come through with
profits, that’s.
It’s not going to benefit you.
So in this earnings season, if we are
just at batting practice, how much can
you really trade on it?
Do you need to see the actual fruition
of some of these projects before you say
those valuations are worth it?
You can’t wait too long.
NVIDIA is an excellent example of that
and 14 video doesn’t report to me, but I
do think that will be the tide that
lifts all the other ships as well.
Once we get to May, Tesla can’t seem to
get out of their own way, right?
They’ve cut jobs, they’ve cut prices,
they’ve abandoned the production of
their lower cost vehicle.
And now we’ve learned at least last
quarter that global deliveries fell for
the first time in four years.
Their stock doesn’t meet our selection
criteria.
Let’s then take them out of the Mag
seven altogether.
I still think Apple has a lot of promise
going forward, but Microsoft, Nvidia,
those are some pretty strong names and
they’re going to compete and probably be
two of the winners in the overall Irish.
I like your punch punchy approach.
Just got a check them later Come out of
that Mike later.
You talk about your analogy.
I was just listening to Jeff Cory there
just before we came to air and he’s
talking about the commodity evolution Co
joined with A.I..
But when you look at a you talk about
the brain, the heart, the limbs and the
nervous system equally allocate across
the functional body or work are where do
you see I mean, I hope I hope I’ll be
give a little bit more
so to kind of expand upon that.
The brain, that’s the software, the
algorithms in the models that A.I.
uses, Right?
Yeah.
Then you have the chips in the
semiconductor, everyone talks about
NVIDIA, but how about Taiwan
Semiconductor?
60% of the global market share and the
world’s largest chip foundry.
And they also just got a grant from the
Chips and Science Act because of their
Arizona subsidiary.
Then you look at the hardware companies
like Vertov, who’s ever heard of Vertov?
They’re industrial companies, but you
know what they do?
They provide the power, the
infrastructure and the cooling solutions
to the all important data centers.
And the data centers are really the
nervous system that make all of this
work.
Companies such as Equinox, Iron Mountain
and of course, Digital Realty.
And guess what?
All those data centers come from the
Reed Asset class, which are actually
paid pretty attractive dividend yields.
And Digital Realty has a 3.4% dividend
yield.
So you get to play in the ecosystem, but
you also get some income too.
Kevin As you said, it’s not just the
earnings, it’s not just tech, it’s also
what the Fed does.
Yeah, and here there does seem to be a
divide as to whether or not the
correction correction, I mean, we’re
only down like 3% in the past six days.
It feels like a correction given how
comments.
Ben but whether or not it will endure.
On one side you have Marco Milanovic who
basically says it will endure because
you have the issue of higher yields, you
have the issues of complacency.
Exactly.
And then on the other side of that, you
have Citi.
You say earnings are going to save us
our side.
Are you on?
I’m in the camp that the Fed hasn’t
changed since we started this year other
than raising their inflation forecast.
They actually raised their inflation
forecast for the end of this year, core
PC to 2.6%.
And they don’t believe inflation comes
back to their 2% target until the end of
2026.
Yet they’re still forecasting as of
March 20th, three rate cuts this year,
three rate cuts next year, and another
three rate cuts in 2026.
That tells me that the Federal Reserve
is more concerned with this economic
slowdown potentially dipping into a
recession than they are with inflation
staying above 2%.
Will they go through with those three
interest rate cuts?
I don’t know.
But there’s still a path forward.
The way I see it, they don’t cut in
April.
They don’t cut June.
Perhaps they cut for the first time by
25 basis points the end of July.
They don’t meet in August.
Their last meeting before the
presidential election is in September.
They don’t want to appear to political.
They pause in September, they don’t mean
October.
And then their next meeting is two days
after the presidential election.
One more cut there and perhaps one more
cut in December, and they get to their
three interest rate cuts.
Again, I’m not suggesting that’s going
to be the path forward, but there is
still a path forward.
Well, as you say, this market still has
a set of rose tinted glasses on a little
bit hope rather than delivery.
Great to have you with us this morning.
That was Kevin Mann of KENYON Walsh
Asset Management, our guest on the
markets.
Other stories trending on your Bloomberg
timeline this morning.
This is what we got for your area.
Private sector activity advanced to the
highest level in almost a year, driven
by a buoyant services sector and
Germany’s return to growth.
The April composite PMI index increased
to 51.4 in April, stronger than the 50.7
predicted by the economists and above
the 50 important 50 level that
indicating the difference between
expansion and contraction.
For a second month, US campus
demonstrations are spreading as the
Passover holiday begins.
Columbia University moved its classes
online after days of protests roiled its
New York City campus.
pro-Palestinian demonstrators want the
school to exit all investments that
benefit Israel’s government.
The Wall Street Journal reports the US
is drafting sanctions that threaten to
cut Chinese banks off from the global
financial system.
It’s part of the efforts to stop
Beijing’s commercial support of Russia’s
military production.
Secretary of State Antony Blinken is
heading to Beijing today, Tuesday.
Coming up, the US FTC attempts to block
a merger between owners of the fashion
brands coach and Versace.
We’re going to more on that still ahead.
And the TV maker is consumed by chaos.
Tesla gets ready to report its results
after the bell.
Context matters on Bloomberg.
This is the period for Musk.
Lay it out.
Don’t just talk.
Talk.
Walk the walk.
Because the benefit of the doubt is not
there.
And this has gone from a Cinderella
story to essentially a Friday the 13th.
Dan Ives saying it like it is at Wedbush
there, the analyst on Tesla.
That was last week on Bloomberg brief.
So we’re kicking off with the earnings
today for Tesla after the market closes.
Joining us now is Oliver Cook.
Cook, Good morning to you.
I mean, we just had a guest on the show
who said Tesla just cannot get out of
its own way.
There’s many threads to follow in this
story.
What do you think will be the most
pivotal for the market to focus on?
Good morning.
Yeah.
Good morning, Manners.
I mean, listen, you have to deal with
the numbers first, as is sort of the
anchor to begin the conversation.
And we know that in the first quarter,
they had the first sales decreased since
the pandemic.
In four years, we’re likely to see
revenue drop for the first time in as
long this quarter.
We’re also expecting sort of the sort of
profit outlook, operating profit to drop
as much as 40%.
And yes, we’re going to care about the
outlook and all that sort of thing.
But as you know, the guests have been
saying, it’s really a question of what
is the story of Tesla right now.
The answer to that earlier this year was
we’re going to build a cheaper car.
We’re going to actually take a look at
the manufacturing process.
We’re going to do something very
different to get that cheaper car to
market.
And that is how we’re going to win.
Then we understand Elon Musk basically
shelved that idea and say, no, we’re
actually going to go quote unquote,
balls to the wall on autonomous driving.
And that is what he put forward for
these robo taxis.
And that is a sort of a musk and way of
doing things right.
There’s a lot of competition for cheaper
EVs, A fully autonomous robotaxi would
be something entirely different as these
sort of initial initial Tesla car was.
But again, that is very speculative at
the moment.
So what we’re all looking forward to is,
yes, the earnings out after market
today, but really that earnings call
where Elon Musk will have to lay out and
sort of get a bit of silence and control
to try to tell the story going forward
for Tesla.
Oliver, some people could argue this
isn’t just a Tesla story.
It’s not just chaos at Tesla.
The reason that they’re having to cut
these prices, the reason they’re having
this issue is that EV demand in general
has been struggling.
People don’t want to pay up for EVs.
I know the IEA had an outlook for the
sector for electric vehicles.
What does it say whether this is a Tesla
problem or an EV problem?
Yeah, Danny, there’s certainly elements
of truth to that.
But overall, in aggregate, in the first
quarter, they said that EV sales across
the world rose by 25%.
They expect, you know, one in five cars
to be sold this year to Bevs.
So that is still a growth story overall.
What is interesting is that it is a
China story.
Almost half of the EVs, 45% that will be
sold this year in China are going to be
of all the cars are going to be EVs.
And that is because they’re just a lot
cheaper in China overall.
Again, they look at the numbers, 60% as
overall EVs are cheaper than they are of
combustion engine cars in China.
That is very, very rare.
You don’t have that in Europe.
You do not have that in the United
States.
And what it means is that last year,
China became the biggest exporter of
autos, overtaking Japan, overtaking
Germany.
And so all of this is coming to the
fore.
But yes, it is a China story, and that
is what all of these carmakers are
really competing against.
That price point where China is just is
basically a full head of head.
Yeah.
Both in terms of quality delivery in the
EV space in your backyard.
If you get into a German EV relative to
a Tesla, if the difference in quality is
manifest, let’s talk about some of the
Americans.
GM is going to report their numbers.
Now, look, it’s not just let’s be fair,
it’s not just Tesla that’s got problems
in China.
GM’s also under a bit of pressure there
as well.
Entirely.
It’s their second biggest market.
And there actually have been years when
GM, they outsold the United States in
terms of China being that significant
market.
I mean, last year about a third of their
sales came from China, but they’ve
really been losing a lot of ground
there.
Right.
And that is in part, you know, just that
EV story in that China has really dumped
so much resource into their domestic
market and really is funneling the
consumers towards that.
So we’re expecting to watch this the
Chinese market very closely.
But pricing is going to be key, right?
We had a sort of a sort of a record for
pricing last year.
That is certainly coming down.
The question is how soft is it?
And in terms of the outlook, I mean, the
German car executives I’ve spoken to
throughout this year, they’re very
reticent in terms of giving clarity on
what the back end of the year looks
like.
Yes, that is a rate story, but it’s, as
you know, a very cyclical sector.
So it’s hard to know exactly what’s
coming.
And we’re going to earnings out at about
6:30 a.m.
New York and the earnings call it about
830.
So we’re watching those points very
closely.
Oliver, appreciate it.
We’ll be watching with you.
Bloomberg’s Oliver Crook there.
Now to other earnings.
Novartis raised its forecast as sales of
blockbuster medicines for heart disease
and psoriasis outpaced expectations.
It’s giving the stock its biggest boost
in nine months, up more than seven and a
third percent.
Bloomberg’s Anna Edwards spoke with the
CEO earlier today.
We’re broadly more positive about the
momentum we’re seeing in the business.
One, we saw very good performance across
our growth drivers, both established
medicines like trust own percentage, but
very strong growth from our recent
launches.
Content Tiscali.
But they still lack both.
When you have that broad base of
medicines all growing really well, it
gives us confidence for this year, but
also for the years to come.
In addition, we saw our performance
broad based from a geographical
perspective, very strong performance US,
ex-U.S., Europe, China, Japan also
giving us a lot of confidence.
So while there was a small contribution
from generics getting pushed out, we’re
reiterating our confidence in our 5%
plus sales growth guidance up to 2028
and our 40% plus margin guidance up to
2027 along with the various guidance
raises you just mentioned.
Can I ask about perfect then as this
clearly one of the one of the drugs
accounts, cancer drugs that you have
high hopes for?
It does seem as if sales came in,
perhaps just a little shy of
expectations.
But I wonder if this reflects a broader
concern about convincing the market to
pivot towards a new type of a targeted
radioactive therapy.
And are you concerned about how long
it’s taking to convince the market that
this is the way forward, or do you not
have concerns there?
No concerns.
We feel very confident about the
political outlook.
We saw a strong quarter over quarter
growth.
And it’s important to note we’re just
now coming out of a supply disruption we
had last year.
Now in the first quarter, we had 99.5%
on time delivery of the medicines.
We’re seeing a broad and base of growth
in the United States from treating
centers that are getting comfortable
with this new technology.
It is a very novel approach and so
oncologists need to understand they can
refer patients for this therapy, really
like a therapy for prostate cancer
patients.
The other opportunity we have in the
second half of this year is this
medicine will go global.
We’ll have the opportunity to take
Plavix now outside of the U.S.
at scale.
That will give us further growth.
The most exciting part of the Invictus
story and a really big story therapy
story in general is moving into new
cancers and new cancer settings.
So with Pluto, we confirmed earlier this
year that we will file for the PSC, for
setting for Pluto that will allow us to
broaden the indication base.
And we’ve also done a number of deals
and having in-house programs to bring
more radio like therapy forward
therapies forward.
So we think this will be a significant
market opportunity for the company.
That was the Novartis CEO that advised
Naresh, I’m catching up with Anna
Edwards earlier on.
I mean, it seems as if that company has
been on a transition, a metamorphosis
year after year.
I met that CEO on his first interview
many years ago, and he is perhaps one of
the most convincing CEOs that you ever
meet, completely committed to the change
program.
He is, and this is what I would say.
It’s great to see a pharma company do
well, not just based off of weight loss
lost drugs.
There you go.
I bring in at home the stock is up and
whoever christened the phrase bolt on
M&A.
Well done.
The CFO says they’re still in the market
for bolt on M&A.
Quick snapshot of markets, 5:20.
We’re counting down to titles that we’re
all excited about.
That’s busiest earnings day on the
street so far this quarter.
Spurs are up a 10th of 1%.
It’s bloomberg, Sandy Berger and Manus
Cranny in New York.
Manish Yep.
Let’s get into the front pages.
This is what we’re taking a look at
headlines around the world.
First up, Donald Trump’s first criminal
trial began on Monday.
Danny, prosecutors and the defense team
making the cases on the former
president’s hush money payments to the
porn star Stormy Daniels.
Court proceedings are scheduled to
continue later today.
Next up, manage.
The US Supreme Court signaled sympathy
for cities struggling with homelessness.
This coming from the Wall Street
Journal.
The court’s conservative majority
suggested Monday that their current
approach intrudes on the discretion
local officials need to address the
issue.
A decision is expected before July, and
investors have slashed the size of their
guess what risk parity fund.
She’s written about it for years by by
over 70 billion.
This was from their peak three years
ago.
And who is the one that’s perhaps taking
the biggest thing?
Danny, it’s Ray Dalio.
Right.
Well, the man essentially invented risk
parity.
They don’t call it risk parity.
They call it all weather.
But quants have looked at it from that
and said, these are the market all
weather.
Is it risk parity doesn’t the same
thing.
But what it does is it essentially over
weights and it’s over leveraged bonds.
So the thing worked really well post GFC
because bonds did really well.
But what happens when the bull bond bull
market is no longer with us?
Can this strategy survive?
That’s been the criticism for a long
time.
And now that it’s happened, now that the
bond market has turned, people are
saying say, look, this was just an
overleveraged bond portfolio.
Yeah, but I mean, this is the third year
in which bonds have simply just not
delivered is supposed to be the year of
the bond.
But of course, the stiff competition for
the theoretical risk parity is, of
course, the other favorite theme of this
show, which is private credit.
And in terms of diverting your money, if
you’re not getting your return on your
equity within the risk parity funds, you
probably see something a little bit more
tantalizing with private credit.
But it’s all about
Tesla.
Tesla.
I was just thinking, am I a bandwagon
reporter?
I did risk parity and then no, I would
never accuse you of being wagon.
Reporter You’re zeitgeisty reporter
That’s what you are, not bandwagon.
I’ll take it.
Okay.
Tesla coming up.
From our global headquarters in New
York, I’m Danny Burger with Manus
Cranny.
Let’s set your agenda.
Musk’s Moment of Truth.
Tesla kicks off the earnings season to
high gear today.
After the market closes.
More bad news for Apple iPhone sales in
China fall 19% during the March quarter.
That is the worst performance since
2020.
And the FTC sues to stop tapestry’s
eight and a half billion dollar deal to
take over Capri, alleging the deal would
harm the luxury goods market.
Handbags would become more expensive
crisis Danae Because they’re not already
expensive.
They’re so affordable now.
But there’s no let up in the calendar
today.
Yes, we might not be hearing from Fed
officials ahead of their meeting next
week, but it is a busy earnings season,
the most busy week on the calendar.
We got Tesla on deck today.
S&P cracks the six day of losses gains
yesterday potentially on some algo
buying.
We’re up higher again today, 2/10 of 1%.
You also get a let up in the bond
market, too, backing off of 5% on the
front end, we’re going to get $69
billion of two year yield on auction
today.
Again, around 5% yield.
Perhaps there will still be a healthy
demand for it at the same time.
GOLD okay, this thing has been falling a
significant amount.
It falls a further one and a third
percent this morning.
It had been up 16% year to date.
It fell significantly yesterday as well.
Some folks there’s some chatter out
there saying perhaps it’s margin calling
with the amount that Nvidia fell.
Maybe that trickles over to gold because
a lot of retail people hold it.
But there’s an overriding question of is
this the end of gold’s run or is this a
healthy correction In terms of a healthy
correction?
Manage the thing I love.
Marko Kontorovich says the US equity
correction will continue.
There’s too many stressors out there for
it not to.
In terms of macro land, can we call this
thing a correction?
I think we’re down some No.
3% in the past six days.
I’m not sure that’s a correction.
No, you can’t.
I mean, you know, when it was down five,
five and a half percent in six days, you
could say we were nervous, but we seemed
to re galvanize ourselves for this
earnings season.
You’re going to have to wait a month for
Nvidia to deliver the numbers for them.
In the meantime, we’re going to deal
with a little bit of volatility from
Tesla, from Microsoft.
ET cetera.
I find interesting, Goldman Sachs, they
look at what the hedge funds have been
doing and in the three weeks that you’ve
all been out there selling them, getting
incredibly nervous, guess what the hedge
funds have been doing?
They have been buying they have been
buying the largest notional value in
over a year.
Of course, they are fast money.
And so therefore, that leads to some of
the movements.
But it just shows you what is going on
under the hood.
And Milanovic says that this level of
complacency will not be, you know, you
will pay.
You are paying for that complacency.
The irony of hedge funds buying a lot
now is some people were saying with the
past six day sell off, you finally get
this wash out in positioning.
Finally it’s safe to jump back in.
And of course, it’s this very circular
argument because it’s safe to jump back
in.
The hedge funds go back in and, hey,
maybe this market is a little bit
overbought again.
Well, we’ll decide whether it’s retail
on the wrong side.
Our hedge funds, the that that can be
the debate, but it is going to be all
about the uncertainty and uncertainty
around the iPhone.
We just covered that.
The sales in China fell 19% during the
March quarter, making it the worst
performance since 2020.
Joining both of us on set this morning
is Mandeep Singh Greenberg Intelligence.
Look, we knew things were bad for them
in China, but, you know, things are
tough for everybody in China and a
myriad of different product areas from
autos to GM to Tesla and Apple.
But what is the root cause of the
problem?
Is it pricing is a government policy?
What is it that has caused them so much
angst in China this quarter?
Good morning.
Yes, good morning.
Manners.
And look, I think with Apple, everyone
knew that China would be bad.
But what I think investors are grappling
with is it’s not going to get better any
time soon.
And in this case, you know, Weiwei
coming out with a phone that’s
comparable to an iPhone in such a short
time just puts into focus how much of
stickiness Apple has in the region.
And look, the government policy is
playing a role over here.
But in the end, Apple’s revenue growth
is driven by iPhone and market share
gains.
And that’s not going to happen given
China is a 20% region and they are
losing market share.
Were there I mean, the irony is been, as
you and I talked about, this is
literally yesterday, Bank of America
puts out their top picks and Apple is
one of it.
Not that this would necessarily change
it because, as you said, Mandeep, we
knew that China was weak.
If it is all based on the iPhone now and
Apple keeps looking for its next big
thing, it’s clearly not cars anymore.
They’ve given that up.
They’re plowing money into robotics,
into AI.
Is it clear that there is a next big
thing, even if there is one?
And I bet you, you know, they will come
up with a device category that’s good
enough to, you know, add to their iPhone
installed base.
But China being such a big market for
them, I mean, it makes you wonder, has
Apple reach peak earnings at least for
the next two years?
And the answer probably is yes because.
How do you make for that revenue
shortfall?
Either you have to make people buy more
phones.
You and I, on one iPhone, probably we
should be owning to all the raise
prices.
That’s the only way to keep growing
revenue to make up for that shortfall in
China.
And that’s the best case I have given
enough of my life to my to my various
phones and various technology devices.
And with that concept that this may be
peak iPhone demand.
How quickly can and will India supplant
the 20% of revenue that China delivers
at the moment?
Blow the myth apart.
So, look, I’m in the camp that Apple
will continue to gain some share from,
you know, Samsung or for others in
regions outside China.
But Apple not only has a revenue
problem, they also have a supply chain
problem in China.
Most of their manufacturing is still
done in China in terms of the assembly,
and they have to relocate the supply
chain.
That’s where India can be helpful in
terms of relocating.
But in terms of making up for that lost
share, I think it will be very hard,
especially if we are modeling.
The revenue would go to zero in China
over the next two years.
How do you make up for that revenue
shortfall in terms of, you know,
companies spending, companies spending
on a on a I know matter also.
Their whole thing is also perhaps
catching up with Tik Tok, having a video
platform that can have the same amount
of AI.
We’ve been debating a lot about this
because Ticktalk is obviously up for
sale and we want to know is the algo
going to go on sale?
So whether or not that’s included in the
next version of Ticktalk is matter all
caught up in tech talks algorithm yet
have they made the progress enough?
They have.
And look, I think when you look at the
numbers 200 billion views for reals
every day contrast that with YouTube
shorts at 70 billion and tick tock is
around that same vicinity.
It just goes to show that media has the
family of apps to showcase their short
form video product, and they’ve done
that successfully.
It’s in the numbers.
So clearly, you know, media not being
exposed to China is a good thing.
They don’t make any revenue there.
And the fact that they have caught up
with Tik Tok from a product perspective
really helps them kind of navigate this
environment much better.
It’s an amazingly interesting, you know,
differential, isn’t it?
Not exposed to China, not dependent on
revenue for China.
Therefore, the differentiator that
divergence will only ever grow.
But you talk about how they use the AI
capacity in terms of driving the
advertising narrative, and it’s so much
sharper.
It was always sharp.
Yeah, you know, Facebook and Instagram,
but it’s even more defined with the AI
iteration.
Yeah.
And look, Meta has their own large
language model.
I mean, there are only three companies
among the Hyperscalers that have their
own large language model.
Then it comes through generative A.I.
marez actually open source, their llama
model, and they are trying to build
their community.
So clearly a lot is going right for them
in terms of having that infrastructure,
the GPU allocation from NVIDIA and then
using it to build their own large
language model.
We don’t know if Amazon has one yet of
their own large language model.
We definitely know Apple doesn’t have
their own large language model and so
they are in that race where they have
caught up with Google and Microsoft Open
the AI and they’re right up there.
When it comes to generative Mandeep,
that all sounds wonderful, but the issue
with us macro obsessives is that, you
know, every time we look at an ad giant
like Metro, we think, well, surely they
will be dependent on the health of
corporate America, the health of the
corporate world.
And we have surveys showing, you know,
corporate confidence for small
businesses at multi-year lows.
Is that going to affect them this
quarter and the willingness of companies
to buy ads?
You’re right.
So meta is exposed more so to small
businesses than some of the other
hyperscalers.
So from that perspective, ad pricing
probably will be muted when it comes to,
you know, the prior comps that we have
seen.
And look, there are only two companies
where you want to spend your ad dollars.
Still it’s alphabet and meta, and that
hasn’t changed.
The smaller ones are struggling more.
The likes of SNAP and Pinterest when it
comes to ad targeting and ad pricing.
So in this case, yes, if the overall
digital ad market is down, then it will
affect meta, but they are still the best
exposed when it comes to the rebound.
That will happen at some time.
The debate in the quarterlies up until
now has been, you know, how splendid
matter is standing.
Microsoft is in their space, but perhaps
the laggard is alphabet owner of Google.
Now, what is going to drive that stock?
Is it going to be the Clyde, which is
the traditional sort of thing that they
lean on, likewise with Amazon, or are
they in the catch up game and therefore
their CapEx is going to outweigh any
alpha in the cloud?
Yeah.
So look, Alphabet is still a digital ad
company.
If the search segment doesn’t do well,
they’re going to not do very well with
their numbers in terms of where
consensus is.
So that reliance still remains.
But what they have done well is YouTube
that actually should it come out.
Better than Netflix based on our
estimates, simply because YouTube has
got a nice traction in terms of
converting their freemium users to
subscriptions.
And if the ad market is coming back,
especially on that brand advertising
side, I think YouTube should do very
well.
And then cloud, as you mentioned, they
have a lot of the Nvidia GPUs that they
can rent out because they rely on their
own chip for training, lodging with
models.
So that should actually help their cloud
revenue.
But we have to see it in the numbers.
Microsoft quantified that growth on
their cloud business about 5%.
We want to see that higher for Alphabet,
given they have more GPU allocation that
they can rent out.
Well, we’ll get both those numbers
Thursday and better tomorrow, Mandeep.
Good luck for it.
I hope you I hope you sleep well this
week because it’s a busy one for you.
Mandeep Singh there of Bloomberg
Intelligence.
Coming up, the FTC sues to block a
merger between two fashion houses.
We’re going to more on that next.
Contact matters on Bloomberg.
This is bloomberg Brief Dani Burger and
Manus Cranny in New York.
How about a little bit of affordable
luxury?
Well, it’s going to stay small because
the FTC has sued to stop fashion group
Tapestry from acquiring its rival Capri
for $8.5 billion.
Bloomberg’s Kimberly Adam joins us now
for more.
Kimberly, this really is, isn’t it the
first time that regulators have stepped
in to fashion, have stepped in to
luxury?
So what does it mean to have this deal
blocked?
First of all, this isn’t the first time
Tapestry has done this, believe it or
not.
So Tapestry doing this, the FCC, FTC has
ruled that they were going to block this
deal.
They filed complaints in the House and
federal court in their house.
This is going to raise prices for
handbags, accessories and luxury items.
And it’s also going to harm consumers,
believe it or not.
One other thing, it’s going to harm the
33,000 employees that work for both of
these companies because they compete
intensely on everything from design,
promotions, etc..
So it’s not necessarily a good thing.
We have tapestry they’re in charge of or
they own, at least Koch, Kate Spade,
Stuart Weitzman, Capri controls Michael
Kors, Versace and Jimmy Choo.
So one of the companies saying, I mean,
you know, the FTC, for the FTC to step
into a luxury good deal is really quite
shocking.
I was at home yesterday afternoon and
that’s why I sent it through and said,
let’s spend a little bit of time on
this.
And what is it that the FTC are accused
of not understanding?
Well, they don’t understand why this
whole deal is happening right now.
They believe that, especially when you
go down to the quote from Henry Liu, he
says this is going to further entrench
the stronghold in the fashion industry
for Tapestry.
Henry Liu, he is the FTC’s Bureau of
Competition.
He’s in charge of that.
That’s what he said.
This combined Capri thing would be the
second largest personal, personal luxury
goods company in the US behind LVMH.
So this is the thing.
Okay, not to speak ill of these brands,
but I look at them code speed.
Stuart Weitzman, That’s not exactly a
stronghold in luxury goods.
Again, if you compare it to someone like
LVMH who owns so much, I mean, is there
not an element that this deal would help
American luxury compete with European
luxury?
We’re talking about two companies and
we’re talking about this merging of all
these just one huge brand.
And it’s tapestry.
They’ve done it before.
So the FTC has had their eye on that.
So here we go again.
And they’re trying to have this strong
hold on the entire fashion industry.
It’s going to really make them strong,
the second largest brand.
Okay.
Well, let’s keep an eye on it.
I mean, the issue is this, is that when
you go into a store and you look at the
various brands, you go into various
brands of various stores.
Most people don’t actually know that
it’s one holding company that actually
owns all of them.
But yes, these guys have become like the
streaming services.
You don’t know, they’re all in bed
together.
It’s like you turn on one channel and
you don’t know who owns what.
Is the same thing now with these
companies, Right?
And you find yourself find these firms,
all the platforms, all the handbags,
shop into this shopping demise, luxury
food, never.
Whatever.
That’s not bad.
Handbag wars at dawn on Bloomberg
Daybreak.
It’s not a bad thing.
Kimberly, thank you very much.
Kimberly Adams tracking the deal
blockers at the moment.
Let’s turn our attention over to the
banks.
Goldman sachs is going through another
bit of a shake up.
This time they’re closing down an entire
unit while expanding their team in
Europe.
Bloomberg’s Charlie Wells joins us now.
So this is about robo investing.
This was all part of the great dream of
Salomon, which is going after the retail
consumer, the retail customer, and a
little bit of robo investing that is now
moving along and out of the family, so
to speak.
Good morning, Charlie.
Good morning.
Yes, man, that’s that’s exactly right.
So, you know, this represents a winding
down of that consumer effort.
Goldman has struck a deal with
Betterment, which is a $45 billion
digital investment advisory platform.
And they are going to be moving Marcus
invest over to Betterment.
And now this, as I said, represents a
winding down of an attempt that they
tried to bring the little guy into the
firm.
So with Marcus Invest, which took flight
in 2021, the idea was that customers
with as little as $1,000 could get some
investment management advice that is now
going over to Betterment.
But the more popular Marcus savings
accounts that Goldman has had, that is a
separate issue.
And those are going to stay with Goldman
for now.
Goldman actually has a $110 billion in
deposits from there, and that is a rare
success from this consumer foray because
that gives Goldman cheaper funding from
unsecured borrowing that they needed.
So this is a real boon for them.
But that investment management service
for the everyday person that’s going
over to betterment.
Yeah, I mean, I remember when they when
they did this deal, when they partnered
with Betterment and everyone was, I
mean.
Robo investing was so hot then, maybe
not so much anymore.
And Charlie, elsewhere for Goldman, I
mean, you’ll know this story so well.
The narrative goes post-Brexit.
Everyone will flee London’s financial
services.
Everybody will go to continental Europe.
Instead.
It’s been more of a drip feed, but we’re
getting more drips from Goldman.
What changes are they making?
Yeah, so this is a maybe, you know, more
of a a bigger drip, I’d say.
So they’re head hard to describe and
maybe a little bit of a drop.
Exactly.
So Dirk Levin’s the head of financial
institutions deal making in the media is
going to be moved from London to Paris.
And we know that his team is going to
double in size in the French capital.
And Levens, in an interview said that
there was a Brexit component to this,
but this is also a part of the financial
institution dealmaking acceleration that
we’re seeing over here in Europe.
So we know here that a lot of banks, a
lot of insurers, they’ve got extra cash
from these higher rates and they want to
do something aside from buybacks.
So what they’re looking to do is to do
some M&A, to do some deals.
And actually there’s stuff to buy.
I’m thinking about some banks like
Societe Generale, which are going
through some reorganizations.
They want to sell some of those units
and they’ve got willing buyers.
So this certainly has a Brexit
component, as Levenson Self said.
But it’s also a part of that larger move
of that dealmaking acceleration on this
side of the Atlantic.
We’re also getting a little bit of news
flow on UBS in terms of strategy on
mainland China.
This time they’re going to step back
from building their home, their own
wholly owned mutual fund business.
Why is there a big crossover of the
Credit Suisse?
What is the rationale?
This is really interesting.
And look, the mutual fund market in
China is worth $3.73 trillion.
So people want to get involved here.
But what people familiar with the matter
have been saying is that UBS is going to
shelve plans to build a wholly owned
mutual fund firm.
If you look at other US financial firms
that have been trying to get into that
mutual fund space in China, you see that
this UBS move is more conservative.
And the idea here is that it’s just
incredibly expensive and that the profit
outlook is not positive going forward.
So UBS will rely more on some of its
local joint ventures.
Now, I said this was a little bit more
conservative.
When you look at Morgan Stanley, when
you look at Jp morgan, they have now
taken control, whole control over those
joint ventures.
When you think about BlackRock or
Fidelity, they built a mutual fund firms
from the ground up.
So for UBS, this is a scaling back.
And as you mentioned, Credit Suisse.
Yes, this is more of a reliance on some
of those joint ventures that both UBS
and Credit Suisse had in mainland China.
Well, you talk about them pulling back
because of the expensive ness of it
being more conservative.
But at the same time, Charlie, they’re
going to Silicon Valley, a place not
known to be cheap for both real estate
or talent or competition.
It’s going to open an office in Menlo in
the Menlo Park.
It’s going to open a menlo Park office
rather.
I mean, what do they do here?
It’s not like there’s a lack of bankers
in the area.
Huge amount of competition.
I think the word on the street is that,
look, IPOs and deal making in Silicon
Valley are going to come back.
UBS, we know Sergio or Marty has, you
know, the United States as a growth
geography in his mind.
And so we do know, according to a person
familiar with the matter that they have
hired, Sean Lynch from Barclays, who
covered Tesla and covered Uber.
And they’re going to be trying to scale
up and trying to bring in more of that
talent.
And, look, you know, UBS is a global
firm, but we also know that one way that
they could potentially differentiate
themselves in a very crowded field in
Silicon Valley, which also, I should
say, is an incredibly global space,
despite the fact that, you know, we’re
talking about Sandhill Road, which is
where a lot of venture capital firms
are.
We have a lot of us focus there, but
they could potentially really sell that
global presence.
And, you know, maybe there are some
ex-FBI bankers floating around who might
be willing to get a job.
Charlie, thank you so much.
Charlie Wells there.
Okay.
Coming up, it’s a busy day.
We’re going to look at some of their
earnings coming up.
Context matters on Bloomberg.
It’s bloomberg brief.
I’m Dani Burger alongside Manus Cranny
in new york.
Let’s get you set up for your trading
day this tuesday.
General Motors among many will be
reporting before the bell today.
And then we’re going to get some
economic data.
US new home sales at 10 a.m.
Eastern.
Then after the bell, Tesla reports its
first quarter results.
Off the back of those shares selling off
for many people losing its Mach seven
status and for, let’s be honest, managed
chaos at the company.
Yeah it can’t get out of its own way.
That was our our gas line this morning.
Some other micro movers for you to keep
an eye on.
Danny, you just mentioned there, Tesla
is up 6/10 of 1%.
Let’s see mounting pressure there.
Also, you’ve got General Motors.
They’ve got pressure in China in terms
of their sales there.
They’re going to report.
And then you’ve got PepsiCo down 8/10 of
1% coming through with their earnings a
little bit later on just before the
bell.
So we’re keeping an eye on all three of
those.
But undoubtedly it is what we hear from
Elon Musk in regards to the strategy for
Tesla and the Model two versus the
ROBOTAXI.
Danny, it certainly is massive.
Also, just want to quick check on gold
this morning, falling significantly yet
again, down more than 1%.
Yesterday was its biggest drop in two
years.
Is it a mysterious seller?
As Jeffrey Jeff Currie puts it, Is it
more calm in the Middle East either way,
selling off a lot and do keep an eye on
crude, Jeff.
Carry still call in $100 oil.
Go on the oil.

“Bloomberg Brief” delivers the market news, data and analysis you need to set your agenda. Today’s guest: Kevin Mahn, Hennion & Walsh Asset Management President & CIO.
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