Financial markets often exhibit 'exuberance' characterized by low credit spreads and high stock valuations, which may not be fully justified by underlying fundamentals; investors must carefully assess geopolitical risks (such as Middle East tensions, inflation concerns, and supply chain disruptions) alongside economic indicators like corporate profits and consumer spending to make informed investment decisions.
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than private credit. And so within our own portfolios, we've we have a preference for equity over credit risk for this exact reason. Are you getting compensated for that risk? Whether that's in more kind of traditional fixed income or whether it's in more liquid parts of the market, when you look at that full spectrum of yield, if you can get an attractive yield, say relatively light in duration and very high in quality, on a relative basis, you're going to stay in that part of the market as opposed to an area where spreads are really tight and you're sacrificing liquidity.
>> So who is it for beyond the institutions? Like where where does a BDC for example make sense in a portfolio or does it not?
>> Great. Well, there's great examples like broadening out like I the big question was when software took a hit, right? So when software took a hit and then all of a sudden people are like wait software seems to be about 20% >> of the overall credit market and then the argument there is like well these companies would have to go to zero before there would be a default event within within the credit market. So are there wonderful opportunities to get above market yields where you're compensated for that risk? Yes. But you have to be very selective in terms of the sectors that you're exposed to and also just making sure you're getting paid for illquidity and the risk premium.
>> All right, smart conversation. Really appreciate you coming in. Kristen bitterly there from City Wealth. Let's get a check on what's going on in the stock market right now. Um we are just about 10 minutes into the session and we do see the S&P 500 off about 4/10en of 1% right now. 738 uh4 is your level. So, coming off the all-time high that we closed at yesterday, tech stocks taking an even bigger hit. Who are the the winners and losers here today, D?
>> Uh, Nvidia is actually having a pretty good day, but that's that's not enough to lift us higher. Um, healthcare doing well. To the downside, though, it's some of the big tech names and a lot of chip makers, and that's why this market is off. So, if you look on the other column, it's Amazon, um, Micron is down, Broadcom, Alphabet, Qualcomm. Again, nothing in particular moving that. It's just what happened in um in South Korea and I should note JP Morgan is down despite them having very good numbers and very good projections coming ahead >> and despite uh our exclusive interview >> yes >> with JP Morgan >> CEO uh Jamie Diamond coming up take a look at the uh sectors here that are moving today uh healthcare consumer staples and energy so pretty defensive uh look there industrials and consumer discretionary on the downside let's go to Paris though now where Bloomberg Francine Laqua is standing by with JP Morgan CEO Jamie Diamond. Francine.
>> Yeah, I could not be more happy to be here in Paris with Jamie Diamond, of course, at JP Morgan Global Markets Conference. Mr. Diamond, thank you for having us. Thank you for being our host here in Paris. I mean, there's a lot riding. Look, the markets are optimistic. They're optimistic that there's some kind of resolution in the Middle East. Are they overlooking the worries about inflation?
>> Yeah. So, welcome. Happy to be here. I think there's a little bit too much exuberance out there. It's not just the Middle East. It's, you know, it's Ukraine, Russia still there, America, China. There a lot of these complex issues which may or may not affect the market, but then there issues like inflation. You know, the today's print wasn't so good. So, yeah, I think the market's kind of exuberant and it may not be completely justified.
>> So, why are they so exuberant? If they're exuberant, are you expecting a correction? And is it because they're looking at AI?
>> No, I don't think it's AI. I think corporate profit is doing very well. AI will be a plus. So this year it's just a lot more spending which may be a little inflationary too. Uh but it's more corporate profits. You know we we're doing a little bit more QE. Government still spend a lot of money. The one big beautiful bill is kicking in. Stimulus offsetting a lot of the uh uh the g I think the gas increase a dollar gas is $100 million. The big one big beautiful bill is 100 billion that consumers pay.
The one big bill is 300 billion. Uh deregulation is real. There are these things which are causing you know pretty good market right now.
>> But when you talk about exuberance it means that there's a market dislocation.
>> Where do you see that?
>> Means the stock market's in the top 10 15% credit spreads are very low. The general assumption that things that these things are all going to resolve and I'm just I'm kind of a skeptic. I don't know. I hope they do but I don't know that they will.
>> Okay. What do chief executives worry about in private that they tell you that they won't tell us?
>> Not much.
trade, you know, America, NATO, the wars, oil prices. I mean, the same stuff you hear about all the time.
>> But capex, I know, you know, we had a great earning season.
>> Is the next one going to be less good?
>> I don't know yet. It's very hard to tell. You know, I think the deficit spending drives a lot of drives a lot of corporate earnings, too. So, it's and drives a lot of capex. And, you know, will capex create productivity before it creates inflation? I don't know that. I think one of the risks is inflation.
I've always thought that. And so, >> but also, how do you think of oil and how do you think about what's happening in the Middle East? If this lasts 3 weeks, four weeks, even like 2 months, are we going to be in trouble?
>> It's a big deal. And every day it gets a little bit worse. I don't know how it's be resolved. I hope it gets resolved in the interest of the United States and against the Iranian regime, not the Iranian people. Uh, but I don't know.
But I read something today was very interesting that China reduced their demand by 5 billion by by 5 million barrels a day. America increases exports by 3 million barrels a day. That 8 million has made me for a lot of what was lost and which is maybe why it hasn't been as severe as people think.
On the other hand, inventories are coming down. You know, uh gas wells may have to be closed and stuff like that.
So it it gets a little more serious every day. that day that becomes a disaster has been pushed out quite further than we thought at the beginning.
>> Do you worry about the US consumer? Are you see are you seeing signs of stress anywhere?
>> No, I I think the upper end, the top 50% lots of money, jobs, wages going up, home prices going up, stock price going up. They're spending like they should, you know, like they're buying, they're traveling. The bottom 30% is I'm I'm going to say it's struggling a little bit. It's not a massive downturn. And of course, we'd like to help them, but their wages have not gone up. But more important than that, they still have jobs and they don't have too much debt.
They still have jobs. And that, you know, at the end of the day, what's going to drive consumer spending, consumer sentiment, that part of corporate profits will be jobs.
>> What do you worry about? I know there's also the the president is meeting with President AI uh tomorrow in Beijing. I mean, does that have implications for the trajectory of America?
Look, I I I don't know, but I would suspect they'll come up with some that'll be a friendly meeting with some positives from both sides. I don't think China is going to give into any major demands. I don't think we're going to make major demands. You know, we both have a lot of common interest. You know, uh uh anti-terrorism, anti-uclear proliferation. You know, China is stealing its oats. You know, now you have to deal with President Trump. So, we'll see how it turns out.
>> You had an amazing trading actually results. Trading was amazing in the last quarter. How's it going now?
>> Well, I can't comment on that, but uh I mean, from the last time Troy spoke publicly, uh it was fine so far, but I I can't give you other information than that. So, >> give me a sense.
>> But when you you guys can see every day volumes >> are high.
>> Yeah. And when volumes are high, all things being equal, it will be good for trading.
>> But but you're part of I mean it's it's you think it's going okay because it depends on on the kind of trading that you put, right? benefit is going to be very good.
>> Um, talk to me about AI.
>> Yeah.
>> So, I don't know whether you've also played around with my thoughts. What did you see?
>> So, AI big picture AI is going to cure cancers and reduce work weeks and kids will live longer and uh planes will be safer, cars will be safer and less people die and uh you'll have new drugs.
It's it's going to be good. Uh, and you know, but there and we we've been using it now for 13 years. It does an amazing job at a various different things. And so we're going to deploy it to help our customers. There are two attributes that people worry about. One is mythos. It's legitimate that this this is so powerful and covers a lot of vulnerabilities and we're all trying to figure out how to deal with it. Not just for ourselves, but with all of our friends, big banks, small banks, you know, uh telecom, the government's on top of it, but a lot of the work's got to be done by enterprise.
They don't have the ability to do a lot of that. So I think, you know, Scott Bess is running it for banks and I assume they've done it for other people elsewhere. So we're all getting our hands around. It is risky. Everyone and we actually publish and people should look at this like a list of what you can do now. Don't wait to get mitos because everyone's going to get it at one point but you can't give it to everyone. If they can't handle it or if it gets leaked out it could be used by bad guys before we protected open source code and all our code. And so we need a little work to do to get it done right. Right.
>> And the other one is this job disruption where you know I just that and that may be true. We should get prepared for it.
We should be breathless you know and that to me is how do you create skills and reskilling there will be a lot of jobs and AI cyber advanced manufacturing the trades you know and then we should make sure locally and this I mean between government and business kind of collaboration that we are prepared if it happen too much stop talking about it have a plan but >> my thoughts what does it change the way that banks have to defend themselves are you thinking about cyber security differently sidewall banks have always been un on top of the top of the heat in terms of cyber security. I wrote about in my gem's letter cyber is our biggest risk made worse by AI and that was before mythos. So this yeah this does make it more dangerous. That's why banks are are really working this thing right now and all of us not and together we're collaborating. We're not like arguing with each other.
>> What does that mean? What does that actually look like concretely in five six months? Yeah, we're >> all going through all our own applications >> with my I was patching them up. We're all going through open source code. A lot of flaws in open source code. We don't need to all fix the same open source code. If you fix one, I can fix the other. C collaborations trying to figure out how to form utilities to help third parties going to our critical vendors, you know, including uh we're hooked into exchanges around the world, making sure they're doing it properly.
Uh, and there are other things like how do you, you know, a patch used to be posted publicly. You patch that fix that patch. Now you have to be able to fix a patch in hours and some you can't make public. If you make it public, the bad guys will get it, reverse engineer and get through. So if we're doing all that stuff, it's serious work. I think hundreds of people doing it full-time now.
>> Look, hyperscalers and also funding of hyperscalers is really propping up the economy. Do you have any worries about getting that money back or you know some of the funding of what's being constructed?
>> The way I look at it is that AI is real.
A lot of money is going to go into it.
That doesn't mean everyone who does it is going to be a winner. Like go back to the internet. A lot of people lost a lot of people won. And so you know and the hypers skills will those data centers not find use? They probably will. But is it possible that some do it badly, design it badly? Didn't get the right Yeah, of course it's possible. Yeah.
Does it does AI change the way you recruit, the way you hire, and and the way you work?
>> I I think it's going to change almost everything. And I I I've done my own stuff and getting reports in the morning. I have a Jamie strategic intelligence report. It's getting better. So I could say, "What did Francine say yesterday?" And every morning at 5 a.m. will tell me what you had on your people that might be significant to me. And then you can keep on educating it. That's not important.
This is important. What's significant?
So yeah, we're all going to use it in different ways, but we will use it. It won't change my my dayto-day and it will inside the company because we're deploying it, you know, in a thousand different use cases today.
>> You're much better off just watching Bloomberg. Talk to me about the UK. So there's a lot of, you know, the markets are on tent hooks to know whether the prime minister survives. We don't exactly know what comes next. The markets are nervous. What does it mean for JP Morgan in London?
Well, look, we've had ups and downs in markets and ups and down politicians.
So, it's not going to change our fundamental strategy. I would say that Europe including uh the UK know what to do and it's the draggy report. There are 300 items in there, common capital markets, common regulations allowing crossborder in this in in the EU competition. There's huge regulatory not tariff but regulatory burdens. They need to do the same thing UK. I think Kier Stormer is a very smart guy. Politics is really tough. They're in a bind because of debts and deficits and you know not they inherited a lot of that. I think the world of racial reeves and it's they got to be tough. They got to say we're going to do these things and the short term may not be great but you know governments have to get the stuff done right that grows the economy and militarily. And I think they need to work closer with Europe. And you know, if you if you remember Kirst Dmer and President Mcronone, they were going to work closer, not reversing Brexit, but you know, military alliances, intelligence alliances, making sure the economies, you know, have economic relations, which are good for both the continent and good for Europe, good for the UK.
>> You're building a a big mega project in Canary War that everyone is quite excited about. Does this potential politically instability actually change your view on everything or, you know, do you see costs going up? Are you worried about taxation? political instability, but if they become hostile to banks again, yes. I mean, I've always objected to the fact, you know, we didn't damage the UK in any way and we paid probably $10 billion of extra taxes by now. I don't think that's right or fair. If that happens too much, we will reconsider. Yeah.
>> Look, I I know you've also looked a lot at Europe and funding and, you know, especially when it comes to security. I how much time are you spending making sure that defense companies that companies in Europe have enough funding from JP Morgan to make sure that they can I guess defend a lot?
>> So we have this huge effort you know we deploy uh over the years $1.5 trillion uh to help it's not just it's resiliency so it's even medicines and rare earth which would be defense semiconductor defense uh but it's anything you need.
So you Europe needs LG. So we we look at that as resiliency for Europe. Not LG in America but shipping here as resiliency.
So we we have professionals doing we got unbelievable advisory group. We've dedicated you know 30 40 people. We're doing research now which you might be interested in across the ship building ecosystem across the active pharmaceutical system the rare earth system and then having public policy which puts us in a better position. We the democratic world should never have gotten here. were so reliant on other people, potential adversaries, rarers, and we did. So, don't cry over spilled milk, but let's fix it. And we got to fix it right away.
>> And this is good for the US. Does does the US need stronger allies?
>> This is good for the US. And I think having strong allies is good for the US.
So, my view is we need a stronger NATO.
They're doing that, by the way. So, you know, our president pushed them a lot.
Well, they're all doing it, which is a good thing. We want to keep it together.
The goal of it should be to have a stronger NATO, not a weaker NATO. The goal in my view if I if you ask me what the goal should be of our economic relation with Europe should be have a stronger Europe to get you to help you do the draggy report and I wrote my chair maybe a pipe dream that if you did the draggy report I would give you one big beautiful free trade bill that's what I would do and you know and then fix some there are some stupid trade issues and fix them but we both the economies would go better if they grew better be good for all the citizens not just good for the big companies and so and I think those two things are pillars of keeping the world safe and free for democracy. So they're not a minor thing, they're a major thing if you look at over 20 or 30 years.
>> So Jimmy, today how would you fix the Middle East?
>> I that I do not know. You know, I I but the my when I hear a lot of politicians say there was no imminent threat from Iran, I'm like that immediately gets my backup because a threat is when I'm threatening to do something to you.
They've been raping, killing, and murdering for 47 years. why the western world allowed proxy wars. I mean, we've learned a lesson that we should have gone years ago at the head of the snake.
We should have killed the head of the snake, you know, and so now that so now you have more risk, but maybe more opportunity because people want peace in the Middle East. You know, we have this it's a terrible situation. I don't know the outcome. I hope there's a plan C or a plan B. I want us to prevail in the way that makes sense. I don't know what the right thing to do was, but I'm not going to sit and say they weren't a threat and we should have done nothing.
But but today does the straight of Hormuzz reopen almost at any cost.
>> I don't I it will eventually be reopened. I don't know. I don't know.
You know, you're talking about the milit military has been planning for things like this for 40 years. They have plans.
I don't know what those plans are and I, you know, I hope it works. I just don't know.
>> I mean, what is the one thing you you you wish you knew now given I mean, there's a lot of uncertainty in the world, right? Geopolitics, markets. If you could know one thing for certain from the president, what would it be?
Well, I don't know about that. I just want to I look I just roll up my sleeves and try to make it better than than it was. So, uh I don't guess for about one good thing or something like that.
>> It's a complex. This is so noisy. It's like speaking to you at a Mets game or it's like it's it's quite fun.
>> You're doing a good job though.
>> You too. Thank you so much for joining us today. That was of course the chief executive officer of JP Morgan. I'm going to send it back to you in New York with that Matt and we'll have plenty more throughout the day here in Paris.
>> All right, Francine, excellent interview. Uh really fantastic Francine Laqua there with JP Morgan CEO Jamie Diamond at the JP Morgan Global Markets Conference in Paris. Let's discuss with Bloomberg's chief Wall Street correspondent Sriar Nadar Rajan. He joins us here on set and you know I thought it was interesting the way he kicked off straight out of the gates. He said this market is too exuberant. Um I guess we have come pretty far pretty fast. Yeah, he did talk about irrationally exuberant markets. But more interesting is when you listen to the entirety of Diamond's comments. There is this constant push and pull where he's bullish on a lot of things. He's still confident that the underlying consumer economy is good, that the banking business is kicking on all gears and is doing great. At the same time, the Middle East situation is worrying. You have to worry about some of the other geopolitical threats that are hanging out there. So that was traditional typical Diamond, but it seems with a more heightened note on all of these concerns and promises ahead, he still continues to be extremely bullish on AI as well. Um, and so it will be interesting to see which way the market turns from here. But whichever way it goes, Diamond has probably got us covered because he has touched all bases >> and and bullish on the UK too. You you particularly noted that you thought those comments were interesting. Yeah, that was interesting because when Francine talked to him about the political instability, so this is a great day to be out there across the Atlantic and we know what's happening in the United Kingdom, the situation that Kirst is facing and he talked about the fact that with JP Morgan building a big office that having a big presence there, it's not the political instability that worries him as much as whether the next political stance from that country will be hostile towards banks. If that's the case, he was very explicit that that would force them to reconsider their plans in that city and in that country.
>> Which, you know, Matt makes sense because what we're seeing in bond yields, it's not like a Liz Trust thing where because of her yields are rising higher. It's the threat of losing Kier Starmer that has been pushing bond yields higher. So, it's like kind of an anti-L trust, the bond market once, >> right? And you don't see either the same levels. Um, >> oh yeah, we're far from that. Uh although 10 5.1% um on the 10-year uh and 5.7% well they have a uh 30 and on the 40-year um and they have a 50-year bond. Wow. Guilts are really exciting.
Um I JP JP Morgan is obviously a beneficiary of uh deregulation that everyone I think corporate America or most in corporate America were hopeful for under President Trump. And you heard Jamie Diamond kind of giving President Trump a shout out there saying, "Hey, you got to remember there's good things like deregulation, right?" How um how material is the deregulation that they've seen so far? Oh, >> it's a definitely incredibly material.
Just look at the way the bank stocks have performed since the election in 2024. They have been on a tear. They've all been doing really well. At the same time, while he's talked about the benefits of deregulation, I think it's important for us to remember that they're still finalizing the bank capital rules and where things stand today, there is still a bit of a gulf between Wall Street and Washington, between New York and DC. They're not entirely thrilled about the state of affairs. Even though I think some of the regulators in Washington would be saying this is not the time that you keep pushing for more. You should be happy with what you got. Well, the other way that Washington is benefiting the big banks and JP Morgan being the biggest, one of the biggest beneficiaries of this is indirectly causing volatility, meaning their markets and trading businesses are doing well. And it was those same conversations in Paris. We heard from some of the JP Morgan executives saying, "Yeah, this quarter it's been looking pretty good, too."
>> Yeah. And we're just fresh of the first quarter results. And that was a phenomenal quarters for all bank trading bets. There were a couple of banks that actually breached the $5 billion mark for the quarter in equities trading. And then when you hear some of the senior executives in the JP Morgan trading division this morning talking about the fact that this has been a booming market this quarter. So a month and a half into the second quarter it seems that that trend is not slowing down.
>> Street thank you so much for joining.
Always a pleasure to catch up with you.
That is Bloomberg's street natan. Now from Jamie Diamond to the economic data which he called the uh skunk at the party. That is inflation. It continued to accelerate in April. Gas rent and food prices all climbing. Let's break it down with Michael McKe, Bloomberg's international economics and policy correspondent. Probably important to note that uh about 30 minutes into the trade, I mean markets don't really seem to care about the inflation figure. I mean, does it seem like this was all kind of expected? The kind of stickier numbers that we got?
>> I think so. I mean, the numbers came in pretty much as expected. A little hotter for core. Uh but the markets don't seem to care about anything these days except except AI. So, I'm not sure what what that means. Um it is sort of a bad moon rising on inflation though even if you expected it look at the uh superlatives here the uh comparisons historical comparisons we're seeing uh highs in uh headline core services and services xousing which is what Jal always said uh they watch because housing had been unusual uh coming out of the pandemic and it is uh not a good picture going forward. We uh had a comment from Austin Goulby, the Chicago Fed president, who was speaking on NPR shortly after, and he said, "We have an inflation problem in this country. Uh the inflation problem is uh going to be Kevin Wars's problem coming up uh pretty soon."
>> I I So I just want to step back and look at their goal. They want to average 2% over the long run, right? In terms of inflation, they they're talking about core PCE specifically. Is that right?
No, they're talking about headline PC for the 2%. That's their target. They do watch core and and basically talk about core much more, but the target is the headline >> because on CPI the headline number was also hotter than anticipated, right?
3.8% and we were looking for 3.7%. So, we're going the wrong direction here.
>> Oh, clearly. And that's one of the issues for Kevin Walsh coming in because uh the president has told him to lower rates and there's no way he's going to be able to lower rates with uh the he the inflation numbers where they are because even if he could convince 18 other people that he was right. He's not going to convince the markets that they should lower interest rates when inflation is rising like this. Uh we should see Worsh sometime soon. He hasn't been able to talk because he's been uh in the confirmation process.
>> But previous to this administration, he has been hawkish, right?
>> He had been hawkish, especially coming out of uh the great financial crisis when inflation was uh still uh really low. He was wanting to raise interest rates at that point, thinking it would break out. It never did over that period. So, we don't know exactly what he's thinking right now. Now, today uh the Senate is expected to vote on his confirmation to be a governor on the board and then invoke Cloer, end the debate over whether he should be chair and then either tomorrow or Thursday vote on him as chair. Pal's term ends on Friday. Uh we're not sure if Kevin Walsh can be can be sworn in yet because he has to do some uh divevestature of stuff, but then uh by Monday he could possibly be sworn in if not late Friday.
And in the small devestatures.
>> Yeah, just some small devestatures. The guy has no portfolio at all. Uh >> is he going to be the wealthiest? No, he can't be. Might he be the wealthiest Fed chair? Is that >> according to the people who have looked at his financial disclosures? Yes, he is the wealthiest Fed chair by far. Uh and that doesn't include his wife. So, we put the two together and it's going to be a long time till somebody can match that.
>> Very interesting. Mike, just quickly, um retail sales data, we also get that this week. What do expectations look like?
expectations are it's still going to be hanging in there, that people are still spending money, but there is a downside element to it and that uh the people at the lower income levels are starting to run out of money according to the CEOs in their uh earnings calls and according to the consumer confidence numbers that that is going to be a growing problem.
>> All right, Mike, thanks very much.
Bloomberg's Mike McKe talking to us about inflation and uh retail sales to come. Of course, we're going to get another CPI reading as well before the next uh Fed meeting, which isn't until I think June 16th. Joining us now is Paisley Nardini, head of multiasset solutions at Simplify Asset Management.
Paisley, there's a lot to digest um in today's market, but I think it's fair to kick it off with inflation. We continue to see um those numbers going the wrong direction as the straight of horm um continues to uh be closed. This market doesn't seem to care though in terms of equities, right? We we we hit another record high yesterday at the close.
>> Yeah, I would just echo some of Michael McKe's comments that he just made in regards to the market being prepared for today's slightly hotter than anticipated report. A lot of this of course is driven by oil gas prices and I think that's what concerns me is that the markets are of course are always forward-looking and the data that we have is backward-looking and so whether it's inflation report we saw today or even some of the earnings reports from first quarter which just showed a lot of market exuberance I think the the risks ahead of us might be slightly different from those behind us but you're right the inflation report is definitely giving markets pause but I would also say looking at Treasury yields today they only backed up by a couple basis points as of this morning. So I think markets were kind of wildly anticipating uh the hotter than anticipated report.
>> Isn't there a way in which this market is very forwardlooking at this moment on on just the semis ch trade Paisley? I mean you could argue that it's run too far too fast but it feels like we've only now just woken up to the microns of the world and the huge earning potential it has going forward.
>> Yeah, you're right. Right. I mean, looking at the earnings reports, especially coming out of first quarter, there's still this tech trade. There's the excitement around earnings. I think more importantly, the expansion of margins is what really propelled stocks and equities higher coming coming off the bottom in March. Um, so as we look forward, is tech going to continue to lead the pack? I would say yes for the foreseeable. Um, but I think we're going to start to see some dispersion within that sector more broadly. We've already started to see that. Um, and so as we look at, you know, opportunities from an investment perspective, I think there is still a case for being diversified. Um, but I don't think we're at any point where we're throwing in the towel on the tech trade. I think there's still a lot of steam left in that >> where where um in terms of that dispersion, you know, who are the winners and losers to come because I look at uh you know, obviously the the memory chip makers have absolutely soared doubled in value essentially year to date and um something like Nvidia hasn't been on that trajectory of late.
So where do you see the next um you know bottlenecks that investors are going to pile into? Yeah, I might take a bit of a contrarian view on this. I think the opportunities might actually exist outside the borders of the US and then within the US and more of the hard asset. I think we've been hyperfocused on assetike companies versus asset heavy companies and just thinking about where we are in the state of the economy in the world and thinking about some of the reshoring and the infrastructure buildout. I do think there could be a continuation of even what we've seen year to date whether it's more industrials, materials and even the energy sector from an opportunity perspective and that also kind of trans uh transpires back to valuations. I think as we look at the opportunity set today some of these more tech heavy companies that we just mentioned some of the discretionary uh sectors as well I think there's still a lot of strong earnings potential um over the next couple quarters. So, it's not to say it's time to sell those sectors or those companies in particular, but I think from a an opportunity perspective, I do think that some of these unloved uh sectors that are more asset heavy could prove to be good diversifiers in a portfolio.
>> Paisley, it's also just such an interesting shift that's happened in this market. Um, you know, whether you look at private or public markets, the thing that was prized was um asset light, a lot of free cash flow and really strong margins. you have seen a turn to say, okay, these big tech companies, we like it that they're spending on capex as long as they're getting a return and being asset heavy is an advantage right now. I wonder how much of that is just kind of the flavor of the month as we're doing this AI buildout or whether something has actually changed that asset light, I mean, we've certainly seen it with software companies, but but isn't a defendable moat that you need asset heavy companies that can withstand time and withstand the AI disruption. Yeah, I would say I don't think it is a temporary theme in the markets from that asset heavy focus. I think as we as we focus on the tech sector and a lot of the AI data center buildouts, those take years and years to build out. So from a longer term more strategic or secular play from an investment perspective, I think we're just starting to see that shift. Um we've seen little pockets here and there. So yes, I would say in the kind of narrow view that we've looked at over the last say 6 to 12 months, I think it is maybe more short-term thematic, but I think we're just starting to get the wheels turning on what could be a multi-year buildout and more of that asset heavy space. Um, so definitely something to keep our eye on.
>> Just want to quickly ask, I mean, uh, when I think multi-asset, uh, my mind goes, um, across equities and and, uh, fixed income to commodities. Gold has been having a difficult period right now. 4600. Although, you know, if I told you that, you know, a year ago or two years ago, it would seem incredibly expensive, but it hasn't been helped at all by what's going on in Iran. What do you think about gold right now?
>> Yeah, we did see a pullback in gold, I think, in kind of the midst of the crisis back in March. Uh, for the sheer fact, it was one of the strongest assets or securities in many people's portfolio. So, they sold that for liquidity purposes. The pressure I think we've seen in gold since then is kind of a reflection of this back up in rates. I mean the historical pattern and I I say that with a caveat because of course gold has performed pretty uniquely over the last 12 months. But historically uh gold does not love higher yields because gold does not kick off income. And so from a kind of trade-off perspective investors prefer higher yields. And so I think some of the backup we've seen since um kind of the bottom of March selloff has been driving kind of gold prices maybe sideways. I think longer term there's still a lot of kind of bigger picture tailwinds whether it's foreign central bank buying and really just the the belief from a lot of uh investors and adviser clients in particular that this is a strong kind of long-term hard asset that they can hold in their portfolio that's tangible and that they can understand. So I do think it's going to be probably a little bit more choppy sideways movement for gold and precious metals broadly over the next couple months. Uh but I do think I do still think that deserves a place in a portfolio longer term. Um, what just about yields and and government bonds because there seems to be a rethink in a lot of areas. So, you have stocks trading at all-time highs. Maybe your desire to use bonds to hedge that aren't as attractive because we're pricing in higher energy prices. We're not doing that for stocks, but we are doing that in yields, two-year yields, for example, or something at a six week high. Plus, you have the spillover effect from places like the UK where politics has also been moving bonds higher. Does that still exist as a hedge? Paisley, it feels like a question we've been asking at least for years now. If you want something because you feel uncomfortable about stocks at an all-time high, where do you turn to? Yeah, we've been on a bit of a roller coaster over the last couple months. I think uh really since 2022, there's been this anti-bond or anti-duration trade for very good reason. Rates have been stubbornly high.
Um the tenure in particular in the US Treasury market continues to bounce between four and four and a half. Right now, as we sit this morning, we are closer to that 4 and a half kind of technical threshold on the 10-year. And I do think that markets are kind of dislocated. What equity markets are looking forward looking through the noise and the higher inflation print this morning from kind of what is likely to be a temporary rise in oil and gas prices and bond yields are kind of doing their own thing. And I think a lot of this has been driven by the fact that this anti-bond narrative has transcended across the marketplace. And so if we really think about what's priced in and from what I would consider to be an asymmetric payoff profile, I do think that the the direction of rates over the next 6 months is likely lower from here.
Um it's not recessionary growth concern lower. Um but I do think that range has been pretty uh strong over the last couple years. And so with the again the tenure around four and a half, I'd be adding a little bit of duration right here. Um I do think that as long as inflation is persistently high say two and a half to 3% or higher uh the stock bond correlation historically has shown that it it is a little bit troublesome.
So is duration the best hedge for your equity portfolio today? No. It's a diversifier for your hedge. I think the better hedge is probably the hard assets and those kind of real real asset plays that are tied more closely to inflation.
>> Paisley, thank you so much for joining us. Wonderful stuff. Paisley Nardini of Simplify Asset Management. Let's get a check on your equity markets. About 45 minutes into your trading day, we are looking at losses being led by tech down 8/10en of a percent. The rupture seemed to have started in Korea with an official floating the idea of a citizens dividend over AI. Those comments are walked back, which just shows the fragility of this trade. We're finding reasons to sell this morning. The breath of the S&P has been pretty bad. Uh despite the fact that it is 7.8% 8% above its 50-day trading average. The majority of constituents are below the 50-day DMA. So, that tells you something. Yields continue to move higher, pressured by higher oil prices.
They are up about 3.4% and commodities higher everywhere. Copper moments ago, hitting $14,000 a ton and that is nearing an all-time high. Matt, >> wow, a lot going on. Uh, well put. Let's get a look at some of the single stock stories at this hour. We're watching AI stocks after that post from the South Korean policy maker suggesting a windfall tax would be used to pay a citizens dividend. As uh Danny just said, he kind of walked that back to some extent, but maybe that portends uh uh a buildup in political pressure around the world for the future. You can see Intel, Micron, and Advanced Micro Devices all down. Meanwhile, eBay rejected GameStop's $56 billion takeover, uh, calling it neither credible nor attractive. Something we likely expected, but does maybe set the scene for for a proxy fight. So, one to keep watching.
>> Under Armour delivering a disappointing forecast for sales and profit, citing a financial hit from the conflict in the Middle East, and it brings the stock down almost 20%.
>> Yeah, I mean, it kind of is rough for them. They said, "We're doing better because we're getting the um tariff refunds because of that EPA ruling." and then was like, "But we're taking a $53 million hit because of supply chain issues around the war in the Middle East."
>> Tough. Over the last 5 years, Under Armour stock is down 77%.
>> Yeah, that's not great.
>> Coming up, UK Prime Minister Kier Starmer, his stock also has dropped tremendously, but he's clinging to his premiership despite so many calls from within his own party for him to step down. We'll get an update from London next. This is Bloomberg Open Interest.
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It's getting out of high interest. Look what's making headlines around the world. CME and Silicon Data are teaming up to create a futures market for computing power. A key factor needed to help power the AI boom. company saying in a statement that the futures will help traders, financial firms, AI builders, and cloud providers to manage volatility and price risk. The project is still pending regulatory review. Now, New York City Mayor Zoron Mani has ditched his plan to raise New Yorkers property taxes. It was an unpopular measure he threatened to use to help close a 2-year deficit. The decision to drop the tax hike is expected to be included in Mandani's executive budget today, according to a person familiar with the matter. That marks the latest version of the mayor's spending plan for the fiscal year that begins uh July 1st.
UK Prime Minister Kier told his cabinet he will not resign despite so many calls for him to do so from within his own Labor party. He appeared to buy himself a reprieve from efforts to oust him following a highstakes cabinet meeting this morning that resulted in a public show of support from a handful of key allies. But still 70 members of parliament from Labor had called for his ouster. Let's get more on Starmer's comments with Bloomberg UK government reporter Joe Maize in London. Uh Joe, it's just a shocking number because if we had 70, for example, Republican congressmen calling um for the impeachment of President Trump, that would definitely happen. How can he survive? Kier Starmer survived this.
>> Yeah, it's looking very very difficult at this stage. He's saying he's carrying on, but you have more than 20% of his MPs calling him to go. You have senior ministers, even in his own cabinet, saying he should set out a timetable for his departure. And so we're in this moment of real political crisis where the prime minister is saying he can carry on, but most people around him think, well, no, you can't. And we have a stasis really until someone comes out and formally challenges him and tries to trigger a leadership contest. That would require 81 Labour MPs lining up behind a specific individual candidate and then we'd be in the realm of a contest. But no one yet is willing to make that move.
We also have someone Andy Burnham, the Greater Manchester Mayor. He would like to make a challenge for the prime ministership, but he doesn't have a seat in parliament, so he can't. And he's trying to get a seat in Westminster, but he doesn't have one yet, so that could take many months. So, really a per period of stasis right now. The the irony in all of this, Joe, and irony is actually probably the wrong word, but we've seen guilt yields start to push higher because of the fear of Star leaving and what comes on the other side of it. just just how difficult is it in the UK right now for the budget and to try to rein in some of the deficits and what does other leadership potentially threaten?
>> Yes. So Britain's public finances are very fragile. The debt to GDP ratio is high historic highs and the tax burden is also near post World War II high and that's what this Labor government have been trying to grapple with with some quite unpopular tax decisions, spending decisions and that's led to a lot of the anger that Stalm is now facing. So the question is if someone were to replace him, what will they do differently? And investors do fear there would be a leftward push by a successor under pressure from that leftwing Labor party and that could mean more damage to the public finances if the borrowing costs go up further, if yields spike and that would mean a bit a loop really of of negative feedback for the British economy and the British government. So yeah, these are really febral times in UK politics.
>> All right, Joe, thanks very much. Joe May there uh covering the um drama around the premiership in the UK and uh in guilt yields. We'll continue to cover that story for you. Still ahead, the reindustrialization of America. Tom Gil Bane, the co-CEO of real estate PE firm Rockpoint and a board member of the construction giant Gil Bane joins us on the show to talk about what's hot and what's not, to talk about a comeback potentially in office, if you have the right address, and to talk about um if people are moving from New York to Florida. We'll get it all with Tom next. This is Bloomberg Open Interest.
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This is Bloomberg Open interest. I'm Matt Miller. Quick check on what's going on in the stock market after closing again yesterday at all-time highs. Uh we're giving up some of those gains today. Maybe taking some profits on the S&P 500 down a half a percent to 7375.
The NASDAQ down 1% right now as tech stocks lead the selloff after what we saw happen in South Korea yesterday.
Little bit of a drop there on concerns about uh the potential of a windfall tax, but again they've run so far so fast. The Cosby is up 80% year to date.
uh it's tripled in the last year. You can see that Nvidia is up right now but only onetenth of 1%. So without that support obviously we uh have the ability to fall further. Micron also down uh 5% today. GameStop and eBay off after that is potentially off that potential deal for now. Uh Lowe's and Under Armour falling as well. When we come back we'll talk to Tom Gil Bane of Rockpoint.
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You've been reporting about an activist investor coming up and trying to shake things up. What's the latest?
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>> This is a moment in time. We'll see how long we're here. It's far too early to call.
>> There is an underinvestment in what's going on in private markets because everyone's looking for additional AI cloud capacity and it's very tough to build.
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Private equity is becoming more selective, especially in real estate.
Rockpoint is putting money to work across a diversified portfolio spanning residential industrial office and hospitality assets. And joining us now is the co-CEO of Rockpoint, Tom Gilbane.
He also serves on the board of Gil Bane.
Uh an historic really family-owned construction giant here in America. So Tom, great to have you on the program.
Um especially on a day when we get a headline like this. Uh Mayor Manni scrapping a plan New York City property tax uh hike. This isn't the sort of Ken Griffin PA tear tax, but it's still um a move that he's not able to put through.
Are you still confident in the future of New York even with M Donnie as mayor? I think New York has continued to get better day by day since co and uh one of the stats that we have come up with that we think is really shows how is what is driving New York and why New York is thriving is if you look at the metriculation in the top 100 universities in America 15% of those students are coming to New York City that's the biggest gain precoid of any city in America and it's 25% from the Ivy League so it's the young people that want to be here that are really driving New York and that's driving the employers to come to New York whether it's Amazon, Google, you've seen open AAI and Anthropic recently pop up here.
So New York is firing on all cylinders.
I know there's a lot of bad headlines about people leaving but we're seeing more than enough people coming and it's that young talent that the great companies need to be uh successful in this world and and in the future. I was going to ask about the sustainability of it because you also note that yes, young talent comes but then wealth leaves.
Once people have made their fortune, they tend to leave New York City. What does that sort of cycle do to the city?
If yes, you have people coming in contributing to businesses, but then the money flees eventually.
>> You know, it's a great question. I think as long as the city stays safe, uh, and it's they've done a great job on under Jesse Tish and and we had John Waldron at our annual meeting two weeks ago and he's a great obviously employer and inquisitor of talent. They have to be here and they will obviously have people move out, move to different places, tax reasons, lifestyle reasons, but these young kids want the experience of New York City. They're willing to pay the price of higher taxes, higher rents to get this once in a lifetime experience.
And you've got world-class suburbs around here that you really can't, you know, it's hard to compete with the schools and the sports and and the lifestyle here. So, uh, as long as it stays safe and within reason, New York City's got a very, very bright future >> and the professional life as well. I mean, there's something to be said for coming to the office and kids are coming are going back to the office four or five days a week. You have recently invested in a building with SL Green um, just south of Grand Central Station, which has to be prime real estate, right? Because, well, at least for a commuter like me, that would be perfect.
Um talk to us about office because for a long time it was in doubt uh whether people would even return.
>> Yeah, it's a great question. Obviously uh the pandemic hit office hard. Um there's 3.2 billion square feet of office space in America and we've gone building by building and we think there's about 450 million square feet that you'd want to own. And what that means is assets that you have supply, demand, and pricing power in your favor today. uh 100 Park Avenue, which we were lucky enough to buy a 49% interest in with SL Green, is currently 100% occupied, and rents are up 10% 15% year-over-year. That segment of the market is as strong as it's ever been.
So, you're in that 450 million feet where you have strong durable cash flows. Cash flows are growing. The other thing you got to really think about office and the market's really telling us you got to think about this in office is AI. And what effect is AI going to have on your office building? And I think our belief is the prime New York office will be boyed by AI. It will be not affected by AI. But there's a lot of office buildings in America that are doing well today that have a lot of people that work there that their job may be disrupted by AI. So you got to put that into the mix as you decide what you want to buy.
>> By the way, it makes complete sense to me that somewhere like Grand Central would be attractive office real estate.
But I was reading the story in the Wall Street Journal basically saying um the area that Kathy Hokll once called a hell hole um Hell's Kitchen and around Penn Station all of a sudden is starting to look really attractive. Um Major League Soccer is there sporting goods. I mean what's happening with this neighborhood?
Apparently it's >> something that's all of a sudden attractive.
>> Well, everyone knows about Flight to Quality and Flight to Trophy and New York Trophy Hudson Yards and what what the related companies have built or the Prime Park Avenue is through the roof, right? one Vanderbilt SL green belt but there's also flight to location people left during co people moved to different locations now you have to come back to the office and so you want to be on top of public transportation and Penn Station is a great spot to be on public on top of public transportation so Grand Central has been the big winner in the first derivative the second derivative would be Penn Station in Boston interesting enough it's south station you know it was you know downtown Boston was always a lagard u and you're seeing tenants from Cambridge, the innovation capital of the world, moving to downtown Boston because they want to be close to South Station. So there's both flight to quality and flight to location is what's making this kind of 450 million top 15% of office in America viable on a going forward basis. So, you're running uh Rock Point, but you also sit on the board at Gilbane, which is a construction company that has, you know, built the World's Fair and the Smithsonian and the stadiums that we uh all go watch our favorite teams in. How are you experiencing the the kind of reindustrialization of America, you know, that we're witnessing? Because like capex from hyperscalers has doubled from last year and tripled from two years ago. So it's like uh an a massive amount of money poured into construction.
>> Yeah. It's incredible what you're seeing in the construction industry today, particularly on the large scale. You've got advanced manufacturing, whether you're creating compute, autos, airplanes, GLP1s, right? So you've got a tremendous amount of manufacturing coming back to the US and that creates a lot of downstream demand. And there's obviously a lot of equity invested in private real estate in in the data spinner space. We don't have the technological background to understand data centers. So how we'll play it at Rock Point. So how we'll play it is we will uh by industrial in those neighborhoods that's going to service those data centers that get stronger, right? So we're kind of playing the second derivative. But on the construction side, if you're a large-scale builder and you have the ability to build these advanced manufacturing facilities, chip plants, uh it's absolutely incredible what's happening in America today, the re-industrialization and it it's creating it will create a lot of down downstream real estate investment as well. Uh particularly where you can find locations that have advanced manufacturing plus a quality of life where people are moving there.
You're seeing domestic net migration.
>> Tom, how sustainable is that? And what are going to be the second and third and fourth derivatives of that? I mean, um, when you build it, then you have all of a sudden a huge ecosystem sprout up around it, right? I mean, I've I've witnessed it with the Intel factory in central Ohio.
>> Yeah. No, absolutely. I mean, Micron is going to build a hundred billion dollar chip plant in Syracuse, New York, right?
So, and the excitement in Syracuse around that is palpable. We've invested in Richmond, Virginia. Why Richmond, Virginia? Because if you look, you're an hour and a half from Washington DC and everything between Richmond, Virginia and Washington DC that what used to be industrial is now a data center, right?
And Richmond is Virginia itself is becoming a data center. So you if you invest down there in industrial, not only supply going down, demand's going up because they have to service these uh facilities that are going there. And then also you see Eli Liy building, you see Lego building, you see a lot of these companies coming to America and deciding to create products here. Uh and it makes a lot of sense and it's it's creating a lot of growth.
>> By the way, I know that area very well.
I'm from Northern Virginia. I went to UVA. So understand that part of of Virginia. But the other thing you've seen in that area specifically more in Northern Virginia, but is is push back.
This nimism of people saying we don't want construction of data centers here.
We don't want our energy buildup bills to go up. We don't want the eyesore of these huge data centers. H how big of a roadblock is that to some of this construction and to some of the projects that you're undergoing your thinking to to get this sort of reindustrialization done?
>> Well, there's plenty of parts of the country that are open for business, right? You saw related just announced a hu huge data center in Michigan, right?
And so the the beauty of Northern Virginia was the winner in the beginning because they had May East which was the eastern internet portal entrance. And so latency was very important. But now as you see power water are more and more important. You see people going to Cheyenne Wyoming. You see people going to uh Michigan. You see people going to Abalene Texas. You see people going to New Mexico. Right. So, uh, it can be spread out and there's a lot of different places that can be winners from this trend. Um, and, uh, and if you're if you're helping build these data centers, it's a great business. You know, Blackstone talks about their picks and shovels. Our picks and shovels, how we're really been playing is buying a a jacent industrial. That's a winner.
>> Tom, this has been so interesting.
You're going to have to come back and join us. Really, really love this conversation. That is the Rock Point co-CEO Tom Gilbane. Let's get a check on your equity markets just over an hour into your trading day and tech taking another leg lower this morning. Some of the momentum running out of steam at least for today specifically in the high-flying chip stocks down 1.1%. The S&P 500 down 610 of 1% both of those coming off a record high built on very thin breath. So that breath turns i.e. semis and you get today's trade. Also not helping our higher yields after stickier inflation and higher energy prices. Brent crude above $107 a barrel this morning up 3.4%. 4%. Matt, >> let's get a look on the single stock stories that we're following for you this hour. Sneaker company on raising its profit outlook for the year as it sees higher demand for new designs targeting younger consumers.
>> Wendy's shares are surging after report that Nelson Peltz's try is looking into a bid to take the fast food chain private up 15% this morning.
>> And shares of GoPro are coming back to earth after rallying more than 20% in the extended trade yesterday. Today, the company announcing a strategic review of its alternatives, including a possible sale or merger.
>> Coming up on the show, on natural gas is becoming the world's most strategic fuel. We're going to speak with the LG pioneer Share Suki. That's coming up next on Bloomberg Open Interest.
Heat. Heat.
in case you missed it on Balance of Power. Obviously, the aim ultimately of this mission is to make advancement enough that this becomes something that is much more frequent, that we have a permanent base on the moon, that people are constantly shuttling uh back and forth. Would you describe this mission as having been a major step forward? How much faster will things be able to move from here?
>> Well, I hope a lot faster. Finally, we're flying again. The new NASA administrator had a I thought a great kind of light of fire speech under folks at NASA. we're going to start flying a lot more often. And he's absolutely right about that. Hopefully NASA's date is next year. Next flight will be with the landers in Earth orbit and then the flight after that will be with a moon lander that will actually go to the moon and land on the moon. SpaceX and Blue Origin are the two contractors for those landers. But this is a great first step.
There's going to be a lot more test flights and then finally landing on the moon. And I think we have some momentum.
Like Austin Power said, we have our mojo back.
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Brent moving higher this morning as President Trump cast doubts on the Iran ceasefire putting energy markets back on edge. That's also bringing renewed focus to the natural gas trade. Joining us now is a legend in LG Sheriff Suki. He founded Shener Energy which again he and Shaneer pioneered this idea of exporting LG and completely reshaped the global gas market. Thank you so much for joining us, Sharief. Great to have you on and to have your expertise. And look, this is something that you have been talking about this idea that energy markets are really constrained. It's obviously hitting Asia the harder than it is the US, but here we are in May and still the straight of Hormuse is closed.
It is a reality this disruption. Just how concerned and constrained is this global energy market right now?
>> Not really.
But why why is that the worst the worst case scenario has happened Sheree?
>> Well, I don't think that is correct. I think what has happened in the last that's become evident in the last few months is that there's a shift in the center of gravity of energy from the Arabian Gulf to the Gulf of America. And I think when we started using the name Gulf of America, people didn't understand the symbolism behind it. But it's true that from Alaska to Argentina, production of uh oil and gas is more significant than anywhere else in the world today. So you're talking about roughly 40 million barrels a day, by far the largest block anywhere and by far uh more important than anything else. And you've seen recently a realignment of America's plus GCC which has undermined the strength of OPEC and the thing that we feared most in the past. So the straight of Hormuz is not necessarily something that is that should be a surprise.
>> But is it but is it crippling if the straight of Hormuz remains shut or are you saying we'll be fine without it?
>> It's too soon to tell. But I would tell you that the first two or 3 months that uh this has been happening, you have a number of things that have happened. The first one is a supply response. Uh people who were able to produce more have produced more including the United States that increased its export in a dramatic fashion. The second thing that has happened is a realignment of logistics. So people who could use pipelines or could use some additional storage. You're talking about huge storage available on a global basis today. and that has been used. And then finally, there's been a demand response which has been one from China that for a year, strangely enough, have been buying a million barrels a day that they didn't need just to put it in storage. So, you may ask yourself, did they know something? Did they expect something?
The second thing is switching fuels, which has happened kind of painlessly because the rest of energy complex is not affected. We don't have an energy crisis. We have an oil interruption but coal, gas, electricity has all remained relatively stable. And the third thing that has happened is the easy demand destruction is happening. So you're starting to see a weakening in demand in China, a weakening in demand on a global basis. Whether all of this is enough to uh balance the markets, it's too soon to tell. We need to wait and see what the numbers are going to look We do though see um undeniably inflation, right? I mean gas at on the national average more than $4.50 which for Americans is expensive and we had the CPI numbers in today 3.8% year-over-year. So we're seeing a lift in inflation. It's going the wrong direction. Um that doesn't bother you?
Of course, but if you look at the early numbers and again we're very early.
Americans have not stopping stopped buying uh gasoline. Gasoline demand is still the same.
>> Uh we have not stopped traveling.
>> Is it super elastic gasoline demand?
>> I don't think it affects us enough yet.
It the news is bad but the reality is not that bad yet. So if you look at 450, we in the United States consume use about 6% of our disposable income on energy. China in contracts uh uses 18% of their disposable income on energy. So it doesn't affect us as much as other things.
>> You mentioned anyone that can get more energy out of the ground is is trying to do so. And I know this was not because of the Middle East. In fact, it was in October you started to talk about Phoenix Energy, your latest venture of um a new upstream natural gas venture.
Has the war in the Middle East changed anything? Has it accelerated your timeline?
>> Again, it's too soon to tell. I don't think this is the fundamental. I think it became very very clear that the US is now producing uh 20% of the world's liquid and 25% of the world's gas. So it's become a very very important component on of what is happening and that trend needed to continue. We have enormous resources in the United States and we keep discovering more with technology.
>> By the way, is there a way that we can look at this as almost like a geopolitical weapon that the US has? Do you think that that's where we start to evolve into that we can use this as a tool as a negotiating tool? You mean our energy independence?
>> Yes. Exactly. But also our exports of LG and the importance that it served in the globe. So if you look at the latest interview President Trump gave uh he talked about in his ineable ineitable fashion I did Venezuela first it was a raving success and now I'm doing homos so clearly this is something this was on 60 minutes so clearly uh this is done consciously we understand from a geopolitical basis how important the United States has become and how we are at the center of the Americas. So the Canadians have been kind enough to bring their oil and their gas south to us. Uh the Gulf of Mexico depends on us for refining and for being able to export product. So we really are at the heart of this new geopolitical reality now that has moved the center of gravity here as opposed to the Arabian Gulf. By the way, Sharief, we were listening to Jamie Diamond earlier from JP Morgan talk about the progress that's been made in terms of deregulation under this this administration. And I wonder what more progress you think needs to be made in the oil patch because I know you know the Jones Act is one thing that to some extent has been holding us back.
Laying pipelines is is difficult to say the least, right? What still needs to be done in terms of deregulation? So from my perspective as an immigrant in this country, the ability of this country to self-correct is amazing. So I have never found a regulatory issue if I had a case to make. And this is going through eight secretaries of energy in my career. So I've dealt with Democrats, Republicans, and I found it always possible to make your case and very often to prevail. uh what I think is important now is the capital formation because all of all that we talking about now requires a tremendous amount of capital and it this is for me more important than the regulatory reform the way we put capital to work for the critical industries whether it's nuclear oil and gas or all the things that are going to be needed.
The real issue that we're going to have the real energy crisis is going to come from electricity not from oil and gas.
And when we the electricity demand is going at 4% per year and if that continues to be sustained, it's going to be very difficult to address this growth in demand. And it's not just artificial intelligence. It's also air conditioning. It's also electric vehicles. It's also the billion people around the world today that don't have electricity. So when you put that into the equation and you look at the possibilities, you don't find them. It it's very difficult. that riddle is going to have to be solved.
>> Sh, it's been great to get your intel.
Really appreciate your time. Thank you so much for joining us. Shener Energy uh founder uh Phoenix Energy founder Ajax Holdings chairman Shener Suki. This is Bloomberg.
Hey, hey, hey.
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President Trump meets China's Xihinping in Beijing on Thursday with trade tensions and the Iran war expected to take center stage. Tesla's Elon Musk, Apple's Tim Cook, and Boeing CEO Kelly Ortberg are among the executives invited to accompany the president, though notably Nvidia CEO Jensen Wong is not making the trip. Joining us now is Bloomberg's senior editor, Mike Shepard.
And Shep, you know, to me, the most interesting thing will be to find out what China can do to help us out of the pickle we've found ourselves in um concerning the straight of Hormuz and Iran. What's expected there? What's the range of options?
>> Well, we're going to see really, Matt, is China pressing the US and Donald Trump in particular to find a way to end this conflict quickly. Remember that China really depends on the Middle East as a source of energy. China is the top buyer of oil from Iran, and they've also been a strategic partner to Thyron over the years. So this uh conflict that the president uh touched off uh at the end of February really has not sat well in Beijing and in fact it prompted a delay in the originally planned timing of the summit between President Trump and President Xi uh that was supposed to have taken place back in March. But here we are. They are going to sit down and meet and really Iran is going to be center uh at the center of the discussions even with all the other issues on the table between the US and China in this summit. And what we will also see though is the president of the United States in turn pressing China for efforts on its part to stop support for Iran. And that would include reducing purchases of Iranian oil and halting any sort of strategic support. We saw that the US has sanctioned uh some Iranian uh Chinese oil refiners and providers of sat satellite imagery as part of this >> chef. Thank you so much for that. That is Bloomberg's Michael Shepard. So conversation to look out for this week, but in the meantime tomorrow we're going to speak with Anberry Thread Needle, Amy Woo Silverman of RBCC and Mera CEO Hey, hey, hey.
Tariffs, I think, are probably the first time in my career I've had to deal with like a fundamental change in government policy in terms of how we think about how markets work. The challenge especially within my supply chain is now how do you have enough productivity initiatives to offset the the increased cost of of all the product.
>> Can you just move your >> supply chain out of China and into the US or out of Mexico and up to Canada? Is it that easy?
>> It's not that easy but we do have flexibility. uh and we had been prior to terrorists, prior to any of this, we had been on a journey to diversify our footprint out of out of China. So probably twoish years ago, roughly 60 65% of our toy and game volume was coming from China. Today, as we entered into 2025, that was around 50%. All we've done is really accelerate the path to get down to roughly call it 30% by the time we enter into into 2027.
For us, I mean, if tariffs stay, if tariffs go, it's never good to have so much of your manufacturing base centered on one geography. We think the diversification is good, but it does take a bit of time to get vendors and suppliers up to speed. Quality is a is a big deal, especially when you're dealing with toys and and kids. It's not an instantaneous thing, but it's not also a five-year have to build a new plant from scratch.
Bringing you up tothem minutee geopolitical news wherever and whenever it happens. I'm Annie Hordern in Guayakil Ecuador and this is Bloomberg.
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