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- [00:00]
Host 1
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Host 3
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Guest 1 (Athlete)
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Host 3
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Host 1
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Reporter Ed Ludlow
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Host 3
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Host 4
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- [01:00]
Host 1
See Terms Support for the show comes from Public, the investing platform for those who take it seriously. On public you can build a multi asset portfolio of stocks, bonds, options, crypto and now generated assets which allow you to turn any idea into an investable index with AI. It all starts with your prompt. From renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20% year over year, you can literally type any prompt and put the AI to work. It screens thousands of stocks, builds a one of a kind index and lets you back test it against the S&P 500. Then you can invest in a few clicks. Generated assets are like ETFs with infinite possibilities, completely customizable and based on your thesis, not someone else's. Go to public.com podcast and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com podcast paid for by Public Investing Brokerage Services by Open to the Public Investing Inc. Member FINRA and SIPC Advisory Services by Public Advisors llc. SEC Registered Advisor Generated Assets is an interactive analysis tool. Output is for informational purposes only and is not an investment recommendation or advice. Complete Disclosures available at public.comDisclosures.
- [02:04]
Host 4
Bloomberg Audio Studios Podcasts Radio News.
- [02:10]
Host 3
This is Bloomberg.
- [02:12]
Host 1
Business Week Daily reporting from the magazine that helps global leaders stay ahead with.
- [02:17]
Host 3
Insight on the people, companies and trends.
- [02:20]
Host 1
Shaping today's complex economy. Plus global business, finance and tech news.
- [02:25]
Host 3
As it Happens the Bloomberg Business Week.
- [02:28]
Host 1
Daily podcast with Carol Massar and Tim.
- [02:31]
Host 3
Stenevak on Bloomberg Radio.
- [02:34]
Host 4
Lauria is managing director, head of technology research at D.A. davison Company. He joins us from Detroit. Nice to have you back with us.
- [02:43]
Guest 2 (JT Bhardwaj or Olympic Athlete)
Talk.
- [02:44]
Host 4
What do you make? First of all, investors seem to like what they got from Palantir. Break it down for us and what you see.
- [02:51]
Gil Luria (Tech Analyst)
Yeah, they exceeded very high expectations. Their growth accelerated from more than 60% to more than 70%. There's no other software company even close. If you look at software companies 2 through 10, they're happy to grow somewhere between 20 and 30% and they're usually decelerating. So what Palantir is doing is remarkable. We're running out of superlatives. It's remarkable and it exceeds very high expectations that came in, which is what is implied by the valuation. That's why the valuation is so high on Palantir is because there's no other company like it.
- [03:29]
Host 2
Yeah, I mean the company said we are an n of 1. Do you agree with that?
- [03:35]
Gil Luria (Tech Analyst)
Absolutely. Absolutely. The more work we do and we cover 40 something other software companies, there's nobody that's even close to what Palantir can do. It's a very unique combination of skills. They have absolute ownership of their customers data in terms of the ability to organize it in a useful way. They have an army of four deployed engineers that help companies solve problems. They have direct relationships with CEOs. They have a strong mission and sense of purpose. There's no other software company like it. And the reason that's important is that they are actually solving problems for their customers. All these companies for the last three years have been trying to figure out what can I do with AI, how can AI make my, my business better? And most have not really made much of a difference apart from Palantir's customers. That said Palantir, hey, I'll hand you the keys and about $40 million a year and you help me make my mission critical systems better with AI. And they're getting results. That's why they keep growing the business, especially the commercial business, at an increasingly fast rate. So it sounds arrogant to say you're 901, but they're delivering behind that promise.
- [04:55]
Host 4
Got to give them props on some level. But having said that, I mean, one of the things that investors have been concerned about is that more than half of their revenues, you talk about the customer base, more than half of their revenues comes from the government. And some might say that's overexposure. How do you see it?
- [05:13]
Gil Luria (Tech Analyst)
Yeah, but that won't be for long. Right. The commercial business is growing so much faster than the government. Mind you, the US government business just grew 66% year over year. It's just that the commercial grew a lot faster than that. So within a few quarters, the commercial business will be bigger than the government business in a good way because it's doubling every year now. And the government business is growing, quote, unquote, just 66%.
- [05:40]
Host 2
Just 66%. Can you explain some more of like, just translate for us a little bit. We were talking with Romain earlier and, you know, typically I would go to a press release to try to get information, but I don't understand what Alex Karp is saying here. He's the co founder and CEO of Palantir. He says, quote, Palantir's Rule of 40 score is now an incredible 127%. What does that mean?
- [06:06]
Gil Luria (Tech Analyst)
He's adding revenue growth with operating margin. And if you think about most companies, the term rule of 40 was coined as the trade off between revenue growth and profitability. And most software companies hover somewhere around that. If they're growing 10%, they have 30% profitability, that's 40. If they're growing 30% and have 10% operating margins, that's 40. So that's the yardstick that the industry has created for itself. And this is the yardstick that Dr. Karp likes to measure because it shows how much farther ahead he Palantir is ahead of any software company. Again, the second highest company is probably half their rate. So they are growing faster than any software company at a higher margin than any software. They are more profitable than even the largest software companies. Microsoft, Adobe, Oracle, Salesforce, they're more profitable than those companies, and they're growing three or four times faster than those companies. So I think that's what Dr. Karpen Joy is pointing out to everybody else.
- [07:13]
Host 4
Is this one quarter or is there enough there that says to you that commercial revenue growing 137% year over year, that that is something. That's a significant shift and something that we can assume will continue, or that's what's got to be grilled, you know, with the C suite on the call.
- [07:31]
Gil Luria (Tech Analyst)
Well, we think it'll continue, but realistically speaking, we thought 20% would continue and then 30% and then 40 and then 50 and then 60. And here we are, they're growing 70%. So we think that, you know, we'd expect that to continue, but it may actually even be higher next quarter. Again, this is when you deliver results at the level they deliver to their customers. Customer acquisition becomes a no brainer because one CEO and CFO tell another CEO, cfo, you know what, we just handed the keys to Palantir and they made our business better. And that seems to be working really well right now. So it looks like they should be able to grow at least that fast for the rest of the year.
- [08:14]
Host 2
Is there political risk long term with this company? This was seen last year as part of the Trump trade. And certainly the DNA of this company shares elements with this Trump administration. Certain people moving back and forth, certain people in power, certainly. And no question that, you know, this administration supports the work that Palantir is doing. What happens when or if this administration changes?
- [08:44]
Gil Luria (Tech Analyst)
That is a risk because to your point, there's a, there's an ideological alignment. I would say that it's probably not about personalities because the personalities have changed a lot year to date in terms of who's involved in the administration. Mr. Musk is out of the administration, for instance. But the company, again, I talked about a very clear mission. They believe their mission is to help defend Western civilization. That resonates very well. That's very ideologically aligned with this administration. But to your point, we may have a different president three years from now who may have different ideology and may see Palantir as linked to this administration. And that would be a risk three years from now if there was to be a change in, in the US Government.
- [09:30]
Host 4
Hey, listen, one of the things, and forgive me, I'm going to spring this on you, you are head of technology Research, so forgive me if this isn't, you know, one of the companies that you cover. But I'm sure you have software.
- [09:41]
Host 2
He's a software guy.
- [09:42]
Host 4
He is. We did get a story that broke across the Bloomberg that Elon does plan to merge Space X with X. That's according to people familiar with, with the matter. And this has been, you know, kind of hovering around, I feel last week and then of course this morning. So I'm just curious. It's a deal that could encompass Elon's ambitions to dominate AI and space exploration. Do you have any thoughts on this?
- [10:09]
Gil Luria (Tech Analyst)
I have a lot of thoughts on it. So we always looked at it as Elon Inc. Elon has different commercial entities right now, but a really unified set of principles and goals that he is pursuing. And at some points it made more sense for him for Tesla to be public and for other companies not to be public. The capital demands of the XAI business are Very substantial. Let's not forget he needs to build data centers as fast as Google and Meta and Amazon and Microsoft are doing. And he doesn't have the cash flow that those companies have. So he needs more capital. SpaceX right now is a much bigger, better situation to raise capital. So is Tesla. I would think of the end game as having one, Elon Inc. So Xai and SpaceX merging would actually lay the groundwork for him to merge that into Tesla as well. Because again, the goals are the same goals. We want to send optimus robots to Mars so our neuralinks can control them and we can do the searches on Grok. That's Elon's plan right now. It's several commercial entities, but long term, he has the one vision.
- [11:24]
Guest 1 (Athlete)
Yeah.
- [11:25]
Gil Luria (Tech Analyst)
And it makes more sense for him to just fold that into one entity, the entity that can get him the capital to pursue those opportunities.
- [11:33]
Host 4
Which really kind of fits into a conversation we had with Ross Gerber earlier. He had put out something on of Gerber. Kawasaki owns these companies, the private Elon entities as well as the public. But he said X was out of money.
- [11:44]
Host 2
He just said this on X, by the way.
- [11:46]
Host 4
Yeah, he said this on X. And he said X was out of. Of money, merge with Xai. Xai was out of money, merge with Space X, SpaceX out of money, merge with Tesla when they're all out of money. And then it's like. But it's interesting how you say that SpaceX, we constantly talk about the value in this company, right? And Tesla, increasingly everyone's saying, well, the value will be in the future, whether it's robotics or autonomous driving and autonomous systems, if you will. And so how you're saying Tesla's were the. Excuse me, SpaceX is the value so you can raise money off of it and then eventually fold it all into one, into that. Elon Inc. That's what this is in your view?
- [12:26]
Gil Luria (Tech Analyst)
That's what it looks like to us. Again, for him, commercial entities are just a way to get to the goal and he'll keep them as separate as long as that's the best way to pursue the goals. But right now, SpaceX is the most valuable property in the sense that there's nobody that does what they do and there isn't going to be anybody that does what they do for decades. So that creates a tremendous amount of economic value that they can raise capital with. And on the Tesla side, the stock is still very well priced, considering again, the car business. You just talked about this earlier. The car business is a Declining business. Yes, we're done with that business now. We're doing self driving and we're doing robots. And again, it's the same thing. All this information that he's capturing through self driving won't just make a great business, will also help Optimus robots function in the world because they'll have those billions and billions of hours of video to analyze in order to help those robots function in the real world. So again, a business where he's at least multiple years ahead of anybody else, at least in the west, at least outside of China, so there's a capability to raise capital there. He's just going to go where he can raise capital to stay competitive in AI because again, that still feeds into Optimus robot functioning in the world. Because the Optimus robot will need the best AI model in order to do that. It's all one thing to him.
- [13:55]
Host 4
Gil, sit tight for a second. This is fascinating and hopefully our Ed Ludlow has been listening as well, who covers Tesla and Elon closely. Gil, don't go anywhere. Ed Ludlow, of course, co host of Bloomberg Tech on Bloomberg Television. Ed, I hope you have been listening. I'm just curious this story by you and Lauren that Elon does plan to merge SpaceX with Xai according to folks familiar. Get us up to speed on the latest.
- [14:19]
Reporter Ed Ludlow
Yeah, so our understanding is two memos went out, one from Elon Musk to staff at Space X and I think it actually as well, and it basically explains that the merger or combination is happening. And the rationale is, you know, first integration. This is something that's kind of been hiding in plain sight, right? And the three of us have discussed quite a lot in the last week. But the idea, you know, Space X provides the launch capacity and together the two companies design satellite form factor data centers very focused on inference. And so you know, the models that the XI is developing can be run in space. And you know, maybe if we had time today or later in the month we can talk about the technicalities of why space based data centers are supposed to work. Then separately, Brett Johnson, who is the CFO of Space X has sent a memo out explaining that the combined entity of SpaceX Next AI has this valuation of $1.25 trillion, which the math kind of maps, right? Because SpaceX is lost valuation on the 10 with 800 billion and Xi's last on its primary was 230 billion. And the only thing to add to get you up to speed, I guess is that my understanding from from sources and throughout this whole process is that this IPO is still on. It's still going in June.
- [15:45]
Host 2
Ed, should we, should we think about Tesla joining the likes of SpaceX? I.
- [15:55]
Reporter Ed Ludlow
This is the hypothesis, right, that that in the, in the end, in the long run, that it becomes a conglomerate and Elon Inc. What we reported at the end of last week was that there were two distinct scenarios being considered. A combination between public Tesla and private Space X and then a completely different and alternative scenario of SpaceX and X AI. And obviously this has moved quite quickly. SpaceX and XAI, you know, based on the reporting of the last 30 minutes, it's happened, it's got, you know, it's done. My understanding, though, is that there are a lot of concerns, particularly from some of the biggest SpaceX investors on space X, combining with a company that's losing $1 billion a month and has a very large pile of debt on its balance sheet. And those investors saw the economics of the Tesla tie up being much more sensible. But then, you know, the thing is, right, the, the unanswered question was, well, hold on. If Space X were to merge or reverse merge or whatever, the end, the final transaction would be with Tesla, then there wouldn't be an ipo, right? So the whole point on the IPO is that, you know, even now this X AI combination is done, they're going to need tens of billions of dollars literally, just to buy the GPUs, because the GPUs that go into space data centers, as abstract as that sounds, are the same as those that go into a data center on Earth, and they're going to cost a lot of money.
- [17:28]
Host 4
So, Gil Edla though, sit tight for a second. Gil. Laurie, I want to bring you back into this. Head of Tech Research and Managing director over at DA Davison. So, Gil Ed made the point that SpaceX investors might not be so happy. Xai losing $1 billion a month pile of debt on its balance sheet. So how do you see this? Do you still see a SpaceX IPO or no, that they ultimately just fold Tesla in that it changes the dynamics of what this company is to our fundamentals.
- [18:01]
Gil Luria (Tech Analyst)
Yeah, it could be a matter of sequencing. I want to add a couple of things here. One is Elon Musk controls these entities and he set the price. So that valuation we just talked about for XAI is a price that he said when he merged X and X AI. The Space X investors may feel like that's too high of a valuation, especially considering they're losing a billion dollars a month and therefore they'd be getting the raw end of the deal. These are things Mr. Musk controls. He can give a better deal to SpaceX shareholders, especially if the goal is ultimately to IPO this, which is very still. It is still very much possible is to IPO the joint entity. He can just adjust the relative valuations. Again, he's in control. He can adjust the relative valuations to make it so SpaceX shareholders don't feel quite as bad about it and then position the overall financials in a way that would still make for an attractive ipo. And then again, he could still merge two public entities together. He's done that in the past, too. Remember, there was a Solar City before there was Tesla and Solar, there was SolarCity as an independent family affair. Also, he merged those two. So it's just one path towards colonizing Mars.
- [19:20]
Host 2
Gil, Good place to end it on, Carol. How's that for a guy who doesn't cover Tesla? Oh my God, that's pretty awesome. Gil Luria, so great. Managing director and head of technology research at D.A. davison Company, joining us from Portland. Gil, thanks a lot. He's a software guy, but obviously watching what's happening over at Elon Inc. And closely.
- [19:37]
Host 4
Ed Ludlow still with us. Ed, come on in on what you just heard and any other thoughts that you want to share with the Bloomberg audience.
- [19:43]
Reporter Ed Ludlow
Yeah, I mean, again, you know, what we're reporting is our best understanding from, from sources and the comms that we've seen. Right. And it is, you know, that SpaceX and Xia combining and that the valuation is $1.25 trillion of that private company. And my understanding and, you know, Lauren's understanding and those other reporters that have been on this the last few days is we're still headed towards a significant IPO at the midpoint or later in this year. The one thing I would say is, you know, Max Trafkin and I wrote about this in some detail in the August edition. August seems a long time ago, but the August edition of BusinessWeek. You know, Musk knows that the combined, the combination of all of his companies is going to face a serious hurdle, regulatory hurdle, you know, on antitrust and review. But at the end of the day, the mission statements of those companies are now much more closely aligned in what he calls amazing abundance. But yeah, I don't know how much of this is a surprise.
- [20:53]
Host 4
Yeah, maybe this is a stupid question, but I'll just go there.
- [20:57]
Host 2
Go there, Carol.
- [20:58]
Host 4
So why on antitrust, what is the concern?
- [21:02]
Reporter Ed Ludlow
Well, the main thing I suppose is, is that they Occupy the entirety of one single market, which would be data centers in space, for example. Yeah, you know, I think one thing we're going to, you know, again, I go back to some of the other concern that this is not sort of a plan that is universally adored by all the people that are invested in Elon Musk's various companies. And the one thing I would say is that Elon Musk does not hold the majority of Space X financially speaking, but he does have completely outsized voting power due to the multi class share structure. And so in the first instance, you know, this is, this is being done, but I think it's just a very simple terms that having every single branch of the Elon Musk universe under one holding company is going to be difficult to do. And generally speaking, you know, there's an acknowledgment in the market that that's the case.
- [22:01]
Host 2
Hey Ed, one thing that we've been hearing over and over again since last week is that Tesla's car business is in decline and now there's this view, hey, don't look at the cars, don't look at the number of cars that we're selling. Look at the areas of growth for our business. Do you agree that that's the right area that people should look to?
- [22:17]
Reporter Ed Ludlow
That was. Yeah, it was, it was certainly the reaction of the market from Tesla's earnings last week. Right. You know that the car business, we knew about the sort of deliveries picture because they come out ahead of earnings and investors largely looked past that to this next phase that Elon Musk is talking about. The main, the main issue is that, you know, tied to Elon Musk's compensation, which is still the mandatory goal of 20 million EVs to consumers a year.
- [22:50]
Host 2
Yeah.
- [22:51]
Host 1
Oh, okay.
- [22:52]
Guest 1 (Athlete)
Yeah.
- [22:52]
Reporter Ed Ludlow
So you still have to sell them. It's not just stop doing, but they.
- [22:55]
Host 2
Can be robo taxis.
- [22:57]
Host 4
So it's about.
- [22:58]
Reporter Ed Ludlow
Well, yes.
- [22:59]
Host 4
Was there a couple metrics to it, like market value and so on and so forth? Like does he have to get all of these metrics in order to get that pay package? I was thinking about that too.
- [23:08]
Guest 1 (Athlete)
Yeah.
- [23:08]
Reporter Ed Ludlow
It's why even in the context of what we reported about the idea of a Tesla and Space X combination, the compensation package is worth studying those goals that the board sets for Elon Musk on either or. It's not this one, but not this one. It's all of them. You know, they're all mandatory and correspond to one another. So you know, Tim is right that robotaxis a part of it one of the goals was to build the Robotaxi fleet to a certain size. The other was to hit a certain number of subscriptions for full self driving. But still is the requirement to sell 20 million consumer EVs. And so you know what we learned about through the capital expenditures commitment that Tesla has. It's just where it's emphasizing and clearly you know the consumer car is not that the biggest point of emphasis right now going forward.
- [23:58]
Host 4
We know you're not feeling well. We so sound good.
- [24:01]
Host 2
You sound good.
- [24:01]
Host 4
Yeah. We are so appreciative of getting your voice on this and all of the reporting that you've been doing even when you're not feeling well. Ed Ludlow, thank you. Thank you. Feel better.
- [24:10]
Host 1
Support for the show comes from Public, the investing platform for those who take it seriously. On Public you can build a multi asset portfolio of stocks, bonds, options, crypto and now generated assets which allow you to to turn any idea into an investable index. With AI, it all starts with your prompt. From renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20% year over year, you can literally type any prompt and put the AI to work. It screens thousands of stocks, builds a one of a kind index and lets you back test it against the S&P 500. Then you can invest in a few clicks. Generated assets are like ETFs with infinite possibilities, completely customizable and based on your thesis, not someone else's. Go to public.com podcast and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com podcast paid for by Public Investing Brokerage Services by Open to the Public Investing Inc. Member FINRA and SIPC Advisory Services by Public Advisors, llc. SEC Registered Advisor. Generated Assets is an interactive analysis tool. Output is for informational purposes only and is not an investment recommendation or advice. Complete disclosures available at public.com disclosures this.
- [25:10]
Host 3
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- [25:43]
Guest 2 (JT Bhardwaj or Olympic Athlete)
Hey, this is US Olympic gold medalist.
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Host 2
Tara Davis Woodhull and I'm US Paralympic.
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Gil Luria (Tech Analyst)
Gold medalist Hunter Woodhull.
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Guest 1 (Athlete)
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Host 2
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Gil Luria (Tech Analyst)
Best mortgage, we chose PennyMac.
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Guest 1 (Athlete)
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Host 3
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Host 3
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Host 1
Conditions and restrictions may apply. You're listening to the Bloomberg Businessweek Daily Podcast. Catch us live weekday afternoons from 2 to 5pm Eastern. Listen on Apple CarPlay and Android Auto.
- [26:23]
Host 3
With the Bloomberg Business app or watch.
- [26:25]
Host 1
Us live on YouTube.
- [26:28]
Host 4
All right, so we have seen dollar weakness though for a while, but it's been an interesting week. No, no doubt, to say the least. All of this got us wondering about what is really the trade for the US Dollar short and longer term. To do that back with us is JT Bhardwaj, she's director of Strategy at TD securities. She joins us in studio. I do not, I'm not jealous of you having to figure out the dollar tree right now, the position you're in. You know, we've seen dollar weakness for a while. Last week was interesting, right. We had the President talking down the dollar over the last week or so and then kind of backing off of it.
- [27:03]
Host 3
Right.
- [27:04]
Guest 2 (JT Bhardwaj or Olympic Athlete)
Strong dollar policy.
- [27:05]
Host 4
Yes.
- [27:05]
Guest 2 (JT Bhardwaj or Olympic Athlete)
The one line we keep hearing and.
- [27:08]
Host 4
The way the appointment of or the nomination of Kevin Wash to head up the Fed and the thinking is maybe more hawkish, so maybe more inclined to fight inflation, which could mean higher rates which would be supportive of the dollar is what we're seeing some strength today in the dollar index, a short term trade in your view, before it resorts back to some more weakness.
- [27:27]
Guest 2 (JT Bhardwaj or Olympic Athlete)
Absolutely. It's been quite the start of the year. You are absolutely right. It was a reversal of the debasement trade. Let's say the debasement trade has had the strongest legs in precious metals and the second asset class after that which has been pricing, that is effects. Bond markets and Treasuries thankfully have been spared from that. That which is why moves in Treasuries have been a lot more contained. But precious metals followed by effects have been the largest absorbed harbor of the debasement trade which with Kevin Wash over recreate or you got a little bit repricing off, which is why precious metals fells and the dollar rallied a little bit. Tactically, we do think the dollar has room to continue to strengthen a little bit. You know, January and February tend to be very strong from a US Data strength, seasonality. So we do think Jan Feb, if the focus remains on US Data, you could see a little bit of a strength. But any such strength we think could would be very temporary.
- [28:17]
Host 2
So you think the debasement rate has come and gone at this point?
- [28:21]
Guest 2 (JT Bhardwaj or Olympic Athlete)
It's not seen the end of it's not it's not seen the end of its last legs. Just think about the number of Supreme Court decisions which are still pending. Kevin Walsh, markets are assuming, is going to be hawkish, given that he used to be in his erstwhile Fed days as Fed governor, he used to be hawkish. Talk about cutting down the balance sheet. But he has now been appointed by a president who wants him to slash interest rates heavily. So we still don't know to this date if Kevin Walsh will play that hawkish profile, which markets are expecting him to play or really have to, you know, balance the two profiles. He cannot just bite the hand which is feeding him.
- [28:56]
Host 1
Right.
- [28:56]
Guest 2 (JT Bhardwaj or Olympic Athlete)
He cannot just talk about a hawkish policy right off the bat.
- [29:00]
Host 4
Why? Well, it's interesting that you say that because we did have the president at that dinner in Washington. I think press weren't open, but he apparently made some comments about Kevin Warsh and maybe, you know, having to sue him or go after him. So I mean, if we should assume Kevin Warsh is Fed chair, is he going to be one that is going to be constantly on the radar of President Trump, especially if he does, if.
- [29:24]
Guest 2 (JT Bhardwaj or Olympic Athlete)
He is more hawkish, unfortunately, that's the job that's any Fed chair is going to be on the target of Trump, whoever it is, and now it's going to be washed. Wash will likely be nominated. We don't think it's going to go through any problems in his nomination going through. The next big question would be would share Powell then step down. Odds of power stepping down have increased a little bit. But that's the same assumption that markets think that Wash will be reasonable going in line with data and nothing to do with what the administration almost like.
- [29:56]
Host 4
Does the adult in the room need to be there or the babysitter need to be there? Right. To some extent, yeah.
- [30:00]
Guest 2 (JT Bhardwaj or Olympic Athlete)
Yeah, absolutely. It's and we don't even there's even outside of this, we still are pending decisions on Lisa Cook's trial.
- [30:07]
Host 3
Right.
- [30:08]
Guest 2 (JT Bhardwaj or Olympic Athlete)
On IPA being legal or not on Powell on the renovation charges.
- [30:13]
Host 2
But don't you think those is Powell safe as a result of Thom Tillis, Senator Thom Tillis?
- [30:19]
Guest 2 (JT Bhardwaj or Olympic Athlete)
That is the assumption because a lot of senators, including him have come out saying that we're not going to approve any nomination for Fetcher unless you get that sorted, which definitely does increase, thankfully, the odds of that being swamped out and that basically being done and dusted. And that's why also polymarket odds of Powell stepping down as Fed Chair have also, you know, increased a little bit. But it all depends upon the timing. I think timing is very critical, but the number of cases is still many fold, which is why we don't think that the dollar is out of the woods yet.
- [30:51]
Host 4
When you said the debasement trade is not over, is it largely because of the US Fiscal House, the US White House, creating kind of uncertainty on a geopolitical level? Is that part of it?
- [31:03]
Guest 2 (JT Bhardwaj or Olympic Athlete)
It's many fold. That is definitely one big aspect. The second big aspect is of the dollar as a safe haven. That's no longer working out to be true. The dollar, in fact, has been behaving like a high beta currency. Its correlation with rates has broken. Its correlation with equities is, is broken. And now the global portfolio manager or the global foreign investor is now looking to invest outside the U.S. i'm not saying they're selling U.S. assets, they're not. But the marginal wallet they're now allocating to commodities are now allocating to global equities outside the US which is also weighing on the dollar. And the last thing which I think is really playing out here is that the world outside the US is holding up really well.
- [31:40]
Host 4
Yeah, it's, it's such an interesting story in terms of what's going on outside the United States States. Jt, thank you so much. Really appreciate it.
- [31:48]
Host 1
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- [32:48]
Host 3
This is Jacob Goldstein from what's yous Problem? When you buy business software from lots of vendors, the costs add up and it gets complicated and confusing. Odoo solves this. It's a single company that sells a suite of enterprise apps that handles everything from accounting to inventory to sales. Odoo is all connected on a single platform in a simple and affordable way. You can save money without missing out on the features you need. Check out odoo@o-o o.com that's o d.
- [33:19]
Guest 2 (JT Bhardwaj or Olympic Athlete)
O o.com hey, this is US Olympic.
- [33:23]
Guest 1 (Athlete)
Gold medalist Tara Davis Woodhull and I'm.
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Host 2
US Paralympic gold medalist Hunter Woodhull.
- [33:27]
Guest 1 (Athlete)
As athletes, our lives are about having.
- [33:29]
Gil Luria (Tech Analyst)
A clear path and a team that.
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Host 2
You can absolutely trust.
- [33:32]
Host 4
So when it came to getting the.
- [33:33]
Gil Luria (Tech Analyst)
Best mortgage, we chose PennyMac.
- [33:35]
Guest 1 (Athlete)
PennyMac is proud to be the official mortgage provider of Team USA and you.
- [33:40]
Host 3
Learn more at pennymac.com PennyMac Loan Services.
- [33:42]
Host 1
LLC, Equal Housing Lender and MLS ID 35953 licensed by the Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act. Conditions and restrictions may apply.
- [33:52]
Host 3
This is the Bloomberg Business Week Daily Podcast.
- [33:55]
Host 1
Listen live each weekday starting at 2pm Eastern on Apple CarPlay and and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg 11:30.
- [34:09]
Host 2
I want to bring in Paisley Nardini, Managing Director and Head of Multi Asset Solutions at Simplify Asset Management. The firm has more than $12.46 billion in assets under management. She joins us from California. Paisley, how are you?
- [34:24]
Guest 1 (Athlete)
I'm great. Thanks for having me back.
- [34:26]
Host 2
Yeah, thanks for joining us. I just want to start with the rotation. I'm looking at the Russell 2000 right now. It's up wow year to date, more than 6% already, whereas the S&P 500 earlier in the session was up just about 2% year to date. That's nothing to shake a stick at.1.9% right now. But the rotation to small caps. Is that something you see continuing throughout this year?
- [34:50]
Guest 1 (Athlete)
As I would say initially, my reaction is no. I think what we've seen is kind of these short term blips where we'll see some small cap stocks take the lead. I think there's so many pressures and headwinds for small cap stocks ahead. Just the flows that we see into passive management alone I think is enough to kind of curtail small caps run up from here. But I do think some of the catalysts that we've seen in some of the rotation year to date is eye opening. I think a lot of investors and allocators were kind of waiting until the new calendar year to start making some trade rebalances within their portfolios due to tax reasons. I also think investors are really searching for value in this marketplace and so thinking about valuations and small caps and some of the other sectors within large caps as well has been kind of what has propelled a lot of these kind of non tech, non discretionary stocks higher this year.
- [35:38]
Host 2
So where do you find that value.
- [35:41]
Guest 1 (Athlete)
As we're seeing today? I think some of the small caps more the consumer staples I think even in within energy and industrial stocks just from a pure valuation standpoint. I do think though again these are short lived. I think where we're seeing productivity, where we're seeing margins, where we're seeing high free cash flow from a corporate perspective is still in a lot of these tech heavy, more asset light companies. And so I think this is kind of that short term blip and we do tend to see this play out. We saw this several times last year. It lasts a couple weeks and then markets really go back to the trade they're comfortable with which is the AI tech focused trade.
- [36:16]
Host 4
That's what I wanted to ask you. I always love flows of money Paisley and kind of where they're going, where they're going out of. And I'm just curious, we're now a month in, into 2026. We've had a Fed decision, we've had some policies, some volatility. Once again out of the White House. We're now thinking about midterms. Where are investors wanting to place their bets right now? Where do they not want to?
- [36:37]
Guest 1 (Athlete)
I think the volatility that we just saw towards the end of last year, although it was a pocket of the metals industry which a lot of allocators don't even have allocations to within their portfolio, I think it was a wake up call of just the fragility of the system. I think when we see these parabolic rises as we have seen in the past and the Mag 7 type stocks, it's a good reminder for the importance of diversification. And so I think investors are coming into 2026 seeing some of those unique tailwinds. Last year the Themes behind the debasement trade de dollarization and seeing more of the play in the international space within equities and the importance of alternatives in a portfolio. And so I do think that theme will persist throughout this year. And again some of that fragility we saw in markets over the last two to three trading days is a really good reminder that markets don't always run up higher forever.
- [37:28]
Host 4
No, totally get it. But it's interesting. I can't tell you how many times we've had conversations over the last three years of people saying it's time to broaden out, get off of the Mag 7 and the Big tech trade. That was really the place to be in a large way over the last three years. I was just having a discussion with someone about that that their investment advisors are always saying diversify, diversify. And yet, I mean, do I wish I was all in gold and silver probably last year or gold? Yeah, I probably wish.
- [37:54]
Host 2
Why weren't you?
- [37:55]
Host 4
Well, I wasn't because I do this for a living and I need to, you know, set it and forget it to some extent.
- [38:01]
Guest 1 (Athlete)
And you can't say we actually see the metal space broadly very under allocated to and so I think what hopefully will happen is this flush out of the system and some of these levered plays that were in the market that goes to the sidelines and some of the real money starts to come in and understanding the importance of commodities. But going back to your point on this continued topic of how do we diversify beyond the market cap despite the fact that that market cap passive within equities continues to run up. Just the last three months have been a really good observation period where we've started to see a lot of dislocation in that mag 7 and so I think we'll start to see this reshaping of the leaders within the market cap space.
- [38:42]
Host 4
So I am, I'm curious though too when you say, you know the outperformance that we've seen in foreign markets or markets outside the US and I totally get it, we talked about it a lot last year. Having said that, when you say to a client in terms of portfolio management, yeah, you need to diversify your exposure, how much do you move away from the US and into some other sectors, whether it's European markets, whether it is gold, how much is it a small portion that you're suggesting or you know, is it a bigger move away from the United States?
- [39:11]
Guest 1 (Athlete)
Yeah, I think there's still a key importance of having a bit of a home bias as a US Investor. I think a lot of the strong growth within earnings as it relates to the equity market still resides within our borders. So it's not a, it's not an all in or all out type trade. And if we just use kind of the broad market cap passive indices that are available in the market, thinking the US is anywhere from around 65, maybe almost 70% of that market cap, that leaves another 20 to 30% in non US equities. And based on the advisor portfolios and allocator portfolios that I look at, I think investors are still a far cry from that 20 to 30% in international equity. So if they have a representation of say 10% moving that up closer to 20 so it's really at the margin making some of these tweaks. It's not a complete portfolio overhaul.
- [40:00]
Host 2
What about within fixed income allocations? Just in the last minute that we have with you, where do you want to see people this year?
- [40:06]
Guest 1 (Athlete)
Well, we saw duration play out last year despite everyone hating on bonds for some time. I do think starting yields and the new the Fed nomination, expecting rates to cut by another maybe two 25 basis points cut this year. Having duration of portfolio and interest rate risk could benefit investors. But I think it's really important to be cautious within credit sensitive sectors. Just given where we are seeing historical spreads at tights today.
- [40:31]
Host 4
Right. Where are they? What, what areas are you are curious or concerned about?
- [40:38]
Guest 1 (Athlete)
Yeah, I mean just quickly.
- [40:40]
Host 4
Yeah, high yield.
- [40:41]
Guest 1 (Athlete)
Yeah, high yield spreads are at historical tights and so you're, you're really taking on a lot of risk in a portfolio to not be compensated for it. You can still access those parts of the market to get attractive yield and distribution. But having a hedge within your portfolio I think is really important. And then looking at some areas in the market like agency mortgages, it's really little to no credit risk and getting a yield pickup over Treasuries.
- [41:03]
Host 4
Now interesting thought when you've got, you know, we had a headline today, Oracle selling $25 billion of high grade bonds for AI funding. We see that trade over and over. Good stuff, Paisley. Thanks so much. Have a great week. Paisley Nardini, she's Managing director head of Multi Asset Solutions at Simplify Asset Management, joining us from California. This is the Bloomberg Business Week daily podcast available on Apple, Spotify and anywhere else you get. Your podcasts listen live weekday afternoons from 2 to 5pm Eastern on bloomberg.com, the iHeartRadio app, tune in and the Bloomberg Business app. You can also watch us live Every weekday on YouTube and always on the Bloomberg terminal.
- [41:51]
Host 3
This is Jacob Goldstein from what's yous Problem? When you buy business software from lots of vendors, the costs add up and it gets complicated and confusing. Odoo solves this. It's a single company that sells a suite of enterprise apps that handles everything from accounting to inventory to sales. Odoo is all connected on a single platform in a simple and affordable way. You can save money without missing out on the features you need. Check out Odoo at O D O o dot com. That's O D O o dot com. This is Julian Edelman from Games With Names. As a fellow dude, do you ever get that not so fresh feeling in your butt? That's because you're probably using the dry stuff to wipe wet. Extra large flushable Dude Wipes get what toilet paper leaves behind in your behind. You wouldn't clean the tail end of your truck with dry paper towels, so why would you wipe with dry toilet paper? Wetter just cleans better. With Dude Wipes there are no more dingleberries, no more itch and irritation, just a deep down the seam. Confident clean. Plus, unlike baby wipes, dude wipes are extra big for adult hands. You're not a baby, so keep them on hand so you get nothing on your hands. And speaking of on hand, dude wipes come in different scents and pack sizes, including a single use on the go pack that you can take anywhere. For that home field advantage, stop being an A hole to your B hole. Drop the toilet paper. Available on Amazon and major retailers nationwide. Dude Wipes Best Clean Pants down it's football season and now you can get anything you need for game day delivered with Uber Eats.
- [43:44]
Gil Luria (Tech Analyst)
Well, almost. Almost anything. You can't get a running back, but baby back ribs?
- [43:49]
Host 3
Yes, Uber Eats official on demand food delivery partner of the NFL.