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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business Week Daily reporting from the magazine that helps global leaders stay ahead with insight on the people, companies, and trends shaping today's complex economy. Plus global business, finance and tech news as it happens. The Bloomberg Business Week Daily Podcast with Carol Masser and Tim Stenebeck on Bloomberg Radio.
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Speaker 2: Carol Master, Tim Staneviek live here at Bloomberg Headquarters in New York City, tw just minutes away from that closing bell. We've got stocks lower, US yields are higher, as bet Youer. J. Powell said, higher energy prices will push up overall inflation, and as expected, the Fed leaving interest rates unchanged once again.
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Speaker 3: Here Teddy, Yeah, I continue to expect one rate cut this year due to increase uncertainty from the war in the Middle East. I think the big takeaway that I had was just how muddled of a view. Yeah, everybody on the FMC has moving forward. It's just like us, truly, there's a lot of us in everybody we talked to.
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Speaker 2: There's a lot of unknowns we should put out. Officials raise both their growth and inflation forecast for the year, FED Governor and Trump ally, I think it's safe to say FED Governor Steven Meyron only to center at this meeting, and I feel like we kind of buried the lead.
00:01:16
Speaker 4: Here's Fedchair J. Powell at the press conference.
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Speaker 5: I have no intention of leaving the board until the investigation is well and truly over, with transparency and finality, and I would refer you to the statement that was in the fed's brief that you all have seen, and I won't have anything more for you on that. On the question of whether I will then continue to serve as a governor after my term ends and after the investigation is over, I have not made that decision yet, and I will make that decision based on what I think is best for the institution and for the people we serve.
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Speaker 3: Well, there you have it. Fedchair J. Powell earlier today at the FOMC press conference that next FOMC decision, by the way, April twenty ninth, twenty twenty six, with more on today's FED decision and market reaction, Let's bring in Greg Peters, PGM Fixed Income Co Chief Investor an officer. PGM as a whole is approximately one point five at trillion dollars in assets under management about a trillion, and fixed income alone. Greg joins us here in a Bloomberg Interactive broker's studio. Okay, so we'll talk about the decision. We'll talk about the market reaction, but first on the sound that we just played from J. Powell, just the idea that he will stay at the Central Bank until after the Justice Department's investigation is complete. That was some of the biggest news that that we heard today, or was it in your view?
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Speaker 6: No, I think it was the clarity. It was something that was hanging over the market. But I think the insider review was that he would stay on because he cares about the institution. But the pointedness and the clarity in which he made that statement was somewhat surprising. So I do think that was a big market mover today. And you know, instead of Lower for longer, it's Powell for longer, and it's that's what the market is trading on.
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Speaker 3: I like that power for longer, Carol.
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Speaker 7: I love.
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Speaker 3: I love when he was like, I know you guys are going to ask about this. Yeah, here's what I have to say, and that's all I'm going to say. On the matter.
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Speaker 2: But what's interesting is he actually did say something. A lot of times, he's like, folks, we're here to talk, you know, basic stuff like we're here to talk about the economy and rates, and he went for it.
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Speaker 6: It's great, right clear speaking out of a FED chair. I think is maybe a trend.
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Speaker 4: Greig, Why are we though?
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Speaker 2: I'm looking at what's happened in terms of the trade, we're pretty much hovering neur lows. We've seen stocks certainly sell off rather dramatically. S and P was off about forty right after the decision. We're now off about eighty seven points, down one point three percent.
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Speaker 4: Let's talk to your world.
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Speaker 2: In terms of what we see in the fixed income and treasury trade. I'm looking at a tenure with the yield of four to twenty five. It was about four to twenty one right after the decision, shorter end three seventy six. We're at about three seventy so we've definitely seen a change in the yields.
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Speaker 4: Why is it?
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Speaker 2: Is it because specifically what FED said about maybe the potential for energy prices and the push on inflation, or what.
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Speaker 6: I think was a twofold the the Powell announcement definitely had an impact. So that is, you know, power for longer is higher rates, right, that is the perception, rightly or wrongly, you know, from the marketplace. And the second was on less what he basically said, he's not overly worried about the labor market, which is, you know, means that he can keep rates higher and watching inflation, which is basically once again code for keeping rates higher. So I think the interpretation from the market was just exactly that rates are higher, and it's being priced in the front end as you see, and the curve exactly modest, modestly flattening, steepening, otherwise it'd be a big steeper.
00:04:46
Speaker 3: As Carolyn I huddled after his press conference and before the program, we both pointed out the tariffs making sort of a big, big presence in the speech today given and then press conference today too, and in his answers today. Were you surprised about his commentary regarding tariffs that.
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Speaker 2: You know it's inflation, right, should we be worried about Still?
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Speaker 3: I thought the impact had hit, and I think a lot of economists thought the impact had hit, and it was I'm not going to say transitory, but it's like it wasn't as big as people thought it would be.
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Speaker 6: Well, you know, if you look back in twenty twenty five, the biggest mistake that market players and economists made was thinking it would be a one time hit, And what we learned is that it's a it's a kind of a continuous kind of hit. Right, It's not a one time shock. It just leaks out over time. And I still think that's in the system. So the way we think about the way I think about it is that that goods inflation is still coming through the system. For example, at the end of last year, or just in course of talking to over a thousand companies last year, Yeah, they basically all total told us the same thing, which is, you know, they haven't moved prices up yet yet, but we will do so in the first quarter first half of twenty twenty six. So I think he's reflecting that reality. Honestly.
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Speaker 2: Well, I keep thinking about I mean, you know me, I'm kind of obsessed with earnings reports, but I do think about, you know, C suite commentary and what we hear from them. Mind you, it'll be you know, obviously the last quarter, but it'll also be the outlook and whether or not. They are saying they're feeling pressures, whether it's on margins and so on and so forth, and so what do they do to compensate for that?
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Speaker 6: Well, I think you see that in the labor market, right, So you're not seeing a shedding of jobs in labor, but you have this incredibly stagnant labor market. So you could blame AI. You could blame on protecting margins. I'm not really sure, but you know that is a kind of a reflexive response from corporations, right, So they'll defend margins, they'll raise prices, they and they'll kind of keep labor flat. And that's what you see.
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Speaker 3: Yeah, what does AI do to the economy? He was asked, He's asked about this every time. Yeah, and I think I mean, and I think his answer again it's it's it's sort of like it's kind of the question that I would ask him if I had a chance to sit down with him and the caremeras weren't on. He said, you can't really make a call at this point about whether Jenna I will lead to lower inflation, but over the long term it's possible it expands us output and productivity. What's your view on it.
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Speaker 6: My view comports with his. A lot of investors think it's just a media kind of disinflationary effect. The way he described it and which I agree with, is that the spend and the draw on resource that you're seeing today is actually inflationary. So it's a two step process.
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Speaker 3: Yeah, and those things cost a lot of money and the demand is high.
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Speaker 6: Exactly. Think about trying to get an electrician as an example. Right, So we just did this so so and I bet you've paid more for it is a joy. So it's inflationary over the near term. Over time, the expectation is that it is disinflationary, but we have to ride ride the wave, and you know, it's hard to make that timing assessment.
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Speaker 4: J Powell did well, I thought he did.
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Speaker 6: Actually, you know, this was supposed to be a complete non event in a way, right, I mean, this is we were talking at a risk meeting this morning, and this is the first time that we can recall in years and years that, like the FED meeting wasn't even like a topic of conversation, right, and now it's a topic of conversation. So I actually think it was a pretty good meeting. Yeah, what I liked is directness, and you know, the market's less so clearly, but you know, I think the markets are somewhat in kind of fantasy land here as well, So it's it's kind of a kind of an eye opening type of environment.
00:08:47
Speaker 3: Stay with us. More from Bloomberg Business Week Daily coming up after this.
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Speaker 1: You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from two to five East during Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
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Speaker 3: In an exclusive interview with Bloomberg, call She co founder Tark Monsieur vowed to fight criminal charges against the prediction market Exchange, calling Arizona's recent movie quote total overstep as legal battles with states escalate beyond civil enforcement.
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Speaker 2: Yeah, it was just tuesday that Arizona filed criminal charges against Calshi for operating an illegal gambling business, signing misdemeanors that carry less serious penalties than felonies. Arizona's criminal complaint follows Calshi's move last week to block the state's gaming department from taking enforcement action against the company.
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Speaker 3: I spoke with cal She, co founder and CEO Tark Monsieur on Bloomberg Radio and TV about the charges.
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Speaker 8: I mean, these chargers have nothing to do with gambling or the merits. If it was about gaming on the marriage, they would let the judicial process rights course in the federal courts. You know, five days ago on Thursday, CALCI filed suit against Arizona in federal courts on the mets on whether Calshi is subject to exclusive jurisdiction of the CFTC. And you know, we're confident opposition and wanted to let the court process play out. And instead of letting that happen, the Arizona Attorney General decided to subvert the judicial process and weaponize it and go to state court and file these criminal charges, which you know we view as merit lists and basis. We see this as a total overstep and we look forward to fighting it in court.
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Speaker 3: Well, experts are saying this could be the first of many charges such as these from other states too. How does it change your legal strategy, Well.
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Speaker 8: This is the whole point of federal preemption. So this is not about camera. The charges that the attorney general filed are not about Gambley, They're not even about sports only they're about prediction markets writ large. It's just you know, attacking the entire business model. And nothing prevents from the same attorney general or others from fighting the same criminal charges against derivatives markets writ large. They could file the same exact charges under the same analysis against CME, or Ice or NASTAC.
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Speaker 4: And that's the whole point.
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Speaker 8: Point of federal regulation of these financial exchanges is to prevent this sort of chaos and these sort of attacks on these businesses that could be political in nature or other. And that's a very important distinction.
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Speaker 3: Well, I read the charging document from the Attorney General has twenty charges. They're mostly about betting and wagering when it comes to sports, there's some election stuff in there. Would you ever consider limiting your business in Arizona or other states to things that these ags don't seem to have problems with, like economic data, the price of bitcoin, what markets are going to do predictions around those things.
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Speaker 8: Look, I mean the AGA also claimed that we have war markets, which is incorrect. It's either flat out to lie or it's misinformed take which is unfortunate for someone, you know, filing criminal charges against the company. What's more important here, again is This is not about the merits. If it's about the merits, let's let the judicial process run its course in federal courts. This is about something other than the merits, which is what I'm focused on. I don't know what the ag is focused on, but you know is off for reelection. You know it did some press, it does seem to be making some buzz. But what I'm really focused on is building a great product from lens of customers, out of which goes to four hundred thousand are in Arizona, and fighting any of these baseless cases in courts, which was which we're going to continue doing.
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Speaker 3: So you're fighting the cases. As I mentioned, Arizona is not the only state to take issue with your business. What happens ultimately if courts do side with states, what does it mean for the future of your company.
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Speaker 8: We believe in the rule of law. Right, we will always abide by court decisions. The law applies to us, but it also applies to the government, including state governments, and that's a very important thing.
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Speaker 5: Right.
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Speaker 8: This is really not about our business model. Again, if it was about our business model, we would be focused on the federal courts and the lawsuit about the merits. This is a broader attack, and you know many states have sided with us and have granted us a preliminary in junction, agreeing with our legal analysis. We have spent four years getting regulated by the federal government, and we have a federal government in the CFTC that is coming strongly in favor of our position. Following these charges is a total total overstep and an overreach from an AG that's up for reelection, and we find that unfortunate. But we will stay focused on what we do best, which is building a great product.
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Speaker 3: So certainly the CFTC. We know where the CFTC stands, and we know where Michael Mike Selig stands on this. We don't know where courts stand on this.
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Speaker 8: And I'm wondering.
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Speaker 3: If if we see a state like Nevada, for example, block access to your business, what will you do? Will you continue to operate or will you will you say, Okay, we're not going to operate in Nevada.
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Speaker 8: Well, first of all, let's get to that point, and you know, we'll have to make a decisions the company. What we do, what I can reiterate is we will one hundred percent about by the law. That's what we will do as a company. It's always been our position. That's why we spend four years getting ready dad upfront, regulatory first as a company and.
00:14:03
Speaker 4: Always abide by the law. But what I always say, the law applies to us.
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Speaker 8: As much as it applies to the government, and when government oversteps the law and goes out of bound, we're going to fight that in court, which we look forward to.
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Speaker 3: How long does that process take, because it seems like there's a regulatory limbo happening. You're you're it's almost like your legal team is going to have to play whack a mole with all these states that are that are filing suit or bring in criminal charges. How long is this going to take?
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Speaker 8: And gladly we have a legal team to handle these types of things and they're going to be focused on and you know, maybe it's it's a question for them. I mean, look, whatever whatever long it takes, we're going to fight for prediction markets. I spent eight years building this company, four out of which have a which are getting regulated upfront. I really believe in this marketplace. I'm very excited about the growth that we're seeing. Some of the fast growing company companies in America right now, and so what I'm going to be focused on is keep building a great product, and that's what's sort of most important for me. The more important sort of question is, you know, when it comes to this is not really a you know, whether this is gambling or not. It's not really about state versus federal, which are both co existing and both growing, both models. This really is turning into sort of some special interests that like the status quo. The status alo is worked very well for monopolies, but not for the consumers that are flocking to prediction markets right now, which we're going to keep pidding for Tark.
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Speaker 3: There is this perception, though that people think this is gambling. An ipso's survey from just a few weeks ago, for example, show sixty one percent of adults safe prediction market trading is closer to gambling. Eight percent say it's closer to investing. So there is this public perception that doesn't necessarily match with what you say. The platform is how do you respond to that and how do you battle that?
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Speaker 8: Like?
00:15:41
Speaker 3: How is this not gambling?
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Speaker 8: I haven't really looked at these polls, you know. The thing I will say is there's always been a battle of whether financial derivatives are gambling. Green features were called gambling and the eighteen hundreds, and there was a Supreme Court decision that you know, said, even though there is speculation, these you know products have financial our structures the financial markets, and thus are going to fall under financial market jurisdiction. So I always say this, you know, whether something feels and looks like gambling doesn't necessarily make it gambling. Speculation exists in all financial markets. If we're going to take a line that speculation is gambling, then the stock market with retail participation is gambling. Then buying options for retail or zero data to expire options is gammling. Then retail buying crypto is gambling. The more important line in the historical line that we've been taking under the law. But also you know, as you think about it societally, is the business model a gambling business model, which is a model where the revenue of the business and the profits are equal to the customer's losses, in which case the incentive is to promote more losses and blog the winners. Or is it an open, free and fair marketplace where people can enter in and out freely and transparently, which is a financial exchange which Calci falls under.
00:16:51
Speaker 3: That's call She co founder and CEO Tark Monsieur an exclusive interview on Bloomberg. Let's stay on call. She and Prediction Markets overall here with us. A member of our team who keeps track of them. She reports on them. She's Bloomberg News cross ass that reported DENISEA. Saccova. She's here in our Bloomberg Interactive Brokers studio. Deny to the last question about gambling. That this When I got off air after this interview, I had ibs from customers, from our colleagues. Some people came up to me. Every single one of them said to me, how is it not gambling? That seems to be the question that will be the biggest uphill battle for this company, because that's what the courts are going to decide.
00:17:33
Speaker 9: It has been the big question we have been covering for months. If you speak to a lot of those CEOs, they're going to tell you we're a truth machine. We go we're so important from probability hedgphnes. We were able to hedge those super niche markets. But if you look at the volumes, it's often sixty eighty percent in certain cases ninety percent sports bets, and then it becomes really hard to explain to people how this will have economic hedging or any other value. That said, every profit different couches, especially strong when it comes to sports betting. Public market is seeing slightly different breakdown there, but for example, crypto markets are really big there, political markets are really big there, and of course sports is big there. But so far they've seen all that pushback. It's not gambling. We're regulated by the CFTC. Like in the interview, he talked a lot about oh, if they see us, they can see the CME, and I think that's kind of a complicated argument to make, considering there aren't really other companies oftening anything like that. Obviously they were under a lot of scrutiny for sports, but we got scrutiny for war contracts, for a lot of things.
00:18:37
Speaker 3: There are other companies that offer this. It's like Fandruel and DraftKings exactly exactly. Those are regulated by states exactly.
00:18:43
Speaker 4: That's where what.
00:18:45
Speaker 2: Do these states wants, I mean, is it that they want to be able to regulate these companies under state gambling rules?
00:18:50
Speaker 4: What is it? I mean?
00:18:51
Speaker 9: Of course, those don't have the same protections as sports markets. But you can also imagine that states are losing a lot of revenue that usually they take from those companies. Nevertheless, we've seen some of the sports betting activity foe in some states. We've seen a really.
00:19:07
Speaker 2: Response about that the traditional gambling set.
00:19:10
Speaker 4: Are they losing some activity.
00:19:12
Speaker 9: Yeah, we've definitely seen that. And when it comes to up downloads, it's really cow. She's soaring. It's like, I don't know, three million downwodes a week month and that has nothing to do with like the numbers we've seen, for example from Draft Kings, which was kind of a leader in that space. So they're definitely taking over. But at the same time we're seeing kind of states combined forces and file all those lawsuits at the same time, so there is a lot of unity on the state side comes so there response.
00:19:36
Speaker 2: I thought it was interesting too, Tim your question about like if they limit their what type of activities? So maybe they walk away from the sports gambling, right, and then it's economic like is that still a viable business?
00:19:47
Speaker 3: I mean, look what Tanisa said, sixty to eighty percent in some cases some cases up to ninety percent of the activity on these platforms. I'm not going to say call she specifically, and it varies based on what's going on in the news, but that is the bulk of the activity on the platform. So if they were to do that, Denise, it would really limit what they offered.
00:20:07
Speaker 4: Yeah, for sure.
00:20:07
Speaker 9: And even you can see a lot of their marketing campaign at campaign there is a whole new campaign house. You can win one billion if you get all the brackets in March madness. And I don't know, how can you explain that this is like a truth machine if you're if you're offering a contract like that, and you're really emphasizing those super long short bits like it's one in one hundred and twenty billion chance thirty seconds.
00:20:29
Speaker 2: Got to ask both of you, is this something that ultimately makes its way to the Supreme Court? Like?
00:20:33
Speaker 4: Where does it?
00:20:33
Speaker 2: Because the momentum seems to be building, certainly the legal momentum.
00:20:36
Speaker 9: Yeah, I think that's pretty much the consensus. We have a pretty good estimate by the bloom by Bloomberg Intelligence, they say pretty much headed there. That said, they give Kaushi's sixty percent chance of winning in high court.
00:20:48
Speaker 1: You're listening to the Bloomberg Business week daily podcast. Catch us Live weekday afternoons from two to five ees during Listen on Applecarplay and Android Otto with the Bloomberg Business app, or watch us Love I've on YouTube.
00:21:01
Speaker 2: All right, everybody, we are watching Micron here in the aftermarket.
00:21:05
Speaker 4: It's been bouncing around.
00:21:06
Speaker 2: We saw kick up a couple percentage points.
00:21:07
Speaker 4: Right now it is just up about.
00:21:09
Speaker 2: Four tenths of an percentage points. The numbers look certainly pretty strong here. But we as we just you know, talked about with Romaine, this dock's on a tear up more than sixty percent year to date, and that's after a triple digit percentage gain last year.
00:21:24
Speaker 3: Expectations were high. Sand Disk is following Micron stock lower in the after hours, down about eight tenths of one percent. Worth repeating some of those headlines. Carol third quarter adjusted revenue forecast did beat estimates thirty two point seventy five billion dollars to thirty four point twenty five billion dollars. The aestimum was for twenty three point six six adjusted EPs eighteen seventy five to nineteen fifty five estimates for eleven to twenty. When I see numbers like something, I have to check this again because these are so different than what the estimates said.
00:21:58
Speaker 2: But the expectation like sometimes these numbers are just off the charts. Micron also saying that AI server demand continues to be strong, so we're going to continue to track this here in the aftermarket. Let's get to our guest, Hendy Susanto. He's a portfolio manager at a Belly Funds. They've got about thirty five billion in assets under management and they also of course hold Micron shares. Handy, so glad that you could join Tim and myself.
00:22:22
Speaker 4: What do you make of this report?
00:22:25
Speaker 7: I guess this is I believe this is the strongest record performance of Micron, and then looking at the way to share trade, I think going to this earning, I did think that the biggest risk is in fast high expectation, and then physical third quarter guidance is very strong, is way surpassing analyst expectation, and then my own expectation as well. And then gross margin is the strongest in the history of Micron. And then we are still in the early innings of HBM as like precious semi have precious metals, and then now we have pricious temiconductors.
00:23:05
Speaker 3: So handy then why, I mean, the stock reaction is only up eight tens of one percent despite the fact that, like you said, this is such a record, you know, I think many people would say this was an incredible beat. I want to go to the conversation that we were just having with our colleague Romaine a few minutes ago, which is about how much pricing power and how much sort of runway does Micron have to continue with to raise prices and to continue to have these margins, Like how long does that last?
00:23:33
Speaker 7: Yeah, so interntal pricing power, I think we can start based on the fact that they are only like three dram manufacturer, sk Heinix, Samsung and Micron, So like, structurally Micron is in good positions. And then we believe that pricing is now based on quarterly negotiation, so companies like Micron, they will try to capitalize on the pricing trend. The pricing trend is still going up at least until the until the June quarter, and then companies like Micron will try to balance between taking the pricing advantage and managing long term customer relationship while also trying to manage customer diversification as well.
00:24:29
Speaker 2: Yeah, yeah, right, because we do know that in terms of who are their big customers, it's definitely skewed.
00:24:36
Speaker 4: Is it towards video? It's kind of a lot handy. One thing I want to ask you.
00:24:41
Speaker 2: As the headlines continue to cross, Micro says NAN demand to stay well above our available supply. AI other server demand constrained by memory supply, and says AI server demand continues to be strong. So this is kind of a mixed blessing. Demand is there, but they're having trouble meeting that to Is that the right.
00:25:01
Speaker 4: Read on this?
00:25:03
Speaker 7: That's the right read. And then I think what investors should keep in mind is that this calendar year twenty twenty six, all the memory makers we rely on migration of their process technology. So in other words, there won't be any new capacity expansion. And then capacity expansion we are expecting that to come in twenty twenty seven. So I think for the twenty twenty six when companies said that they are sold out on capacity, that will be indeed through and then that will come with favorable pricing as well.
00:25:40
Speaker 3: The company also flicking at this idea that they're going to build out to match expectations and match demand. You did say that we're in the early innings of this, and I'm going to get right here. It says we are investing in global manufacturing, in our global manufacturing footprint to support they're growing demand referring to customers. That's the word Sanjay ma Roach or the president, chairman and CEO of Micron, How long does it take to build that out?
00:26:07
Speaker 7: So I think in general the rule of thumb in the industry is, if you have the shell or the fab buildings and structure, you can expect new capacity within like six to twelve months, and then after that then you will have to work on the yields optimization. Okay, so that is the sort of time frame that we are looking.
00:26:35
Speaker 3: So six months until if the shell is there, they can be up and running and they can know like.
00:26:41
Speaker 7: If you have the shell, it can be done as short as like six months.
00:26:45
Speaker 4: Yeah.
00:26:46
Speaker 3: Yeah, Well, I guess there's another way of asking. Look, you said, we're in early innings, but we always talk to Ian King, who covers chips for semiconductors for Bloomberg News, and he reminds us this is all cyclical, but we're just trying to figure out where we are in the cycle. So where do you think we are in the cycle.
00:27:03
Speaker 7: So I still think that we are still in the early innings. Many major customers their priority is to secure supply and then pricing secondary and then if somehow there's a disruption within one customers, companies have said that they can find other major takers easily. And then on the other hand, I do think that it is the best of interduts of customers to secure long term supply agreement. Let's say, when you build a large AI data centers, or when you want to spend on like GPUs, you want to make sure that you will have supplies of memory memory chips for you handy.
00:27:46
Speaker 2: It's been an interesting week, right, and I feel like we've talked about a lot of things when it comes to AI, but and chips and semiconductors. Because Nvidia, of course it's GtC meeting this week. Got to read certainly on the AI spend and build and what's going on here. We have Micron, and of course Micron, as Tim you know, reminded us, seventy percent of their business goes is from Nvidia. Is there a read through for you when it comes to that AI spend and build out?
00:28:14
Speaker 7: So the AI spending built out. I think it will benefit all the major players. And then I would also emphasize that all the capital equipment that have major exposure to DRAM.
00:28:27
Speaker 6: We'll see like.
00:28:29
Speaker 7: Strong year in twenty twenty seven driven by new capacity and then capital spending on the on the web site.
00:28:38
Speaker 2: Yeah, so I'm just curious, are you would you buy more shares of Micron on this earnings reporter me?
00:28:45
Speaker 4: Or are you waiting for the call? I'm just curious what do you think?
00:28:48
Speaker 7: Uh, Micron is definitely a strong buy here. We can see Micron earning about like forty dollars on like in this cuton physically and growing to at least like fifty dollars. So if someone wants to apply like than to fifteen times of price to earnings ratio, there is still like meaningful upside based on that folluation approach.
00:29:12
Speaker 2: All right, interesting, think fifteen seconds, what are you listening for on the call? What do you need to hear really quickly?
00:29:18
Speaker 7: I think like pricing negotiation, and then what the latest thought on the capacity expansion, like how soon new capacity can come to the to like Micron fabs.
00:29:29
Speaker 4: Stay with us.
00:29:30
Speaker 2: More from Bloomberg Business Weekdaily coming up After this.
00:29:37
Speaker 1: You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from two to five eas during Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch.
00:29:48
Speaker 4: Us live on YouTube.
00:29:51
Speaker 2: Hey, let's get more on the energy markets and really the economic and geopolitical implications. Back with us is Bloomberg Economics Chief geoeconomics Analyst.
00:29:59
Speaker 4: She's Jennifer, and she's live from the Bloomberg Washington, DC Bureau.
00:30:03
Speaker 2: Jenny Good to keep checking in with you, because I do feel like there's so much to keep track of, and it does kind of shift a little bit. First and foremost Iran's hold on the energy markets right now and how it impacts the world differently, which brings us kind of to China. They continue to get oil from Iran, that's true.
00:30:22
Speaker 10: Yeah, it does seem like some of the tankers that have been able to make their way out of the strait of her moves once the war started have been linked to Iran but also potentially linked to China and delivering oil there. We suspect Beijing is probably negotiating behind closed doors Tehran to keep that oil flowing and for its part. Iran seems willing to work with China, but also other countries India and Pakistan have also potentially been beneficiaries here to essentially allow their vessels to come through in order to pick up oil and other resources and transport it back to those economies that are facing a real need for that supply.
00:30:57
Speaker 3: Right now, it seems like Iran and Israel are are trading strikes on key energy facilities in the Middle East, And I wonder, Jenny, to what extent this makes it more complicated or challenging or difficult for markets to sort of go back to where they were when or if I should say, when this conflict ends. Guitar's ross Laffin industrial city suffered extensive damage after an Iranian attack and facilities and cutters. Saudi Arabia and the UAE run a list of sites at risk of Iranian air strikes. How do you watch that from a geoeconomics perspective.
00:31:28
Speaker 10: Yeah, so this seems to be Tehran making good on its threat falling and Israeli strike on its gas fields earlier today to hit other facilities in the golf. So it's more that the Israelis are hitting Iran and Iran is hitting golf rather than Israelis and Iran directly trading strikes. The golfs are kind of taking some incoming even though they're not directly party to this conflict yet. I think what this highlights is that even though we're three weeks into this war, it doesn't show any signs of de escalating anytime soon, and we predict that this higher level of intensity of conflict could continue for at least another week or two and then potentially subside, although we don't anticipate a ceasefires anywhere close. Rather, what we anticipate is that maybe, for example, the United States will pull out. President Trump does seem to be looking for an exit ramp, and that could take some of the intensity out of the conflict, but by no means necessarily put it to an end, and indeed we're likely to see a risk continue to not just traffic in the straight up from Moves, but also to the Gulf and energy infrastructure there. Iran realizes now it has a rather powerful toolkit that it can play, and it's likely to continue leveraging that whenever it feels that it's being threatened.
00:32:38
Speaker 3: Jenny, you mentioned something that really raised my eyebrows just now, and it was the idea that some of these geographical neighbors aren't part of the war. Yet you use the word yet. Are you implying that you think that other countries will enter this war?
00:32:54
Speaker 10: I think that other countries as well. They might define it differently. Some of them might say that they've been dragged into it because they've been to shoot down projectiles coming out of Tehran. I think they are receiving pressure from the United States to enter in some way, shape or form. We've seen President Trump and talk about not just trying to enlist US allies in other countries like China and reopening the strait of her moves, but having rather positive things to say about the prospect for golf countries to assist with that. Now, our assessment is that the vast majority do not want to be parties to this conflict. They don't certainly want to get directly involved. Maybe some of them are allowing US forces to, for example, use their airspace, but they're very wary of giving Tehran any additional reason to target them.
00:33:36
Speaker 4: Hey, one thing I want to get to before we wrap up here.
00:33:39
Speaker 2: China watching very closely, as Bloomberg has reported China's military has been studying President Trump's worn around for lessons that could prove helpful in any future conflict of its own. That's according to Western officials familiar with the matter. Gosh, what do we need to know about this?
00:33:54
Speaker 10: I think the main thing to know is that China watches every conflict very closely, as do many users as well. But what China is watching for is lessons on how to defeat the US military. And here I think that they've probably taken away that this was obviously, especially at its initial stages, a very impressive display of firepower from the US military. But now what they're probably noticing is that the US is using, especially at the higher end, a lot of munitions that would theoretically be useful in any fight with China, and I think that's what they're tracking closely. I think also at a strategic level, what they're watching is, especially with all this debate over reopening the strait of her moves, that this is creating friction points between the US and its allies, and that the US is, especially when it comes to Asian partners, having to withdraw some assets from that theater in order to back up what it's trying to do in the Middle East. So those are some of the dynamics that Beijing is going to be watching very closely in the week.
00:34:46
Speaker 2: So Jenny five seconds advantage to China, perhaps just quickly.
00:34:50
Speaker 10: I think strategically. Yes.
00:34:53
Speaker 1: This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify, and anywhere else U get your podcasts. Listen live weekday afternoons from two to five pm Eastern on Bloomberg dot 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
Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business Week Daily reporting from the magazine that helps global leaders stay ahead with insight on the people, companies, and trends shaping today's complex economy. Plus global business, finance and tech news as it happens. The Bloomberg Business Week Daily Podcast with Carol Masser and Tim Stenebeck on Bloomberg Radio.
00:00:32
Speaker 2: Carol Master, Tim Staneviek live here at Bloomberg Headquarters in New York City, tw just minutes away from that closing bell. We've got stocks lower, US yields are higher, as bet Youer. J. Powell said, higher energy prices will push up overall inflation, and as expected, the Fed leaving interest rates unchanged once again.
00:00:48
Speaker 3: Here Teddy, Yeah, I continue to expect one rate cut this year due to increase uncertainty from the war in the Middle East. I think the big takeaway that I had was just how muddled of a view. Yeah, everybody on the FMC has moving forward. It's just like us, truly, there's a lot of us in everybody we talked to.
00:01:04
Speaker 2: There's a lot of unknowns we should put out. Officials raise both their growth and inflation forecast for the year, FED Governor and Trump ally, I think it's safe to say FED Governor Steven Meyron only to center at this meeting, and I feel like we kind of buried the lead.
00:01:16
Speaker 4: Here's Fedchair J. Powell at the press conference.
00:01:19
Speaker 5: I have no intention of leaving the board until the investigation is well and truly over, with transparency and finality, and I would refer you to the statement that was in the fed's brief that you all have seen, and I won't have anything more for you on that. On the question of whether I will then continue to serve as a governor after my term ends and after the investigation is over, I have not made that decision yet, and I will make that decision based on what I think is best for the institution and for the people we serve.
00:01:47
Speaker 3: Well, there you have it. Fedchair J. Powell earlier today at the FOMC press conference that next FOMC decision, by the way, April twenty ninth, twenty twenty six, with more on today's FED decision and market reaction, Let's bring in Greg Peters, PGM Fixed Income Co Chief Investor an officer. PGM as a whole is approximately one point five at trillion dollars in assets under management about a trillion, and fixed income alone. Greg joins us here in a Bloomberg Interactive broker's studio. Okay, so we'll talk about the decision. We'll talk about the market reaction, but first on the sound that we just played from J. Powell, just the idea that he will stay at the Central Bank until after the Justice Department's investigation is complete. That was some of the biggest news that that we heard today, or was it in your view?
00:02:26
Speaker 6: No, I think it was the clarity. It was something that was hanging over the market. But I think the insider review was that he would stay on because he cares about the institution. But the pointedness and the clarity in which he made that statement was somewhat surprising. So I do think that was a big market mover today. And you know, instead of Lower for longer, it's Powell for longer, and it's that's what the market is trading on.
00:02:56
Speaker 3: I like that power for longer, Carol.
00:02:57
Speaker 7: I love.
00:02:59
Speaker 3: I love when he was like, I know you guys are going to ask about this. Yeah, here's what I have to say, and that's all I'm going to say. On the matter.
00:03:04
Speaker 2: But what's interesting is he actually did say something. A lot of times, he's like, folks, we're here to talk, you know, basic stuff like we're here to talk about the economy and rates, and he went for it.
00:03:14
Speaker 6: It's great, right clear speaking out of a FED chair. I think is maybe a trend.
00:03:20
Speaker 4: Greig, Why are we though?
00:03:22
Speaker 2: I'm looking at what's happened in terms of the trade, we're pretty much hovering neur lows. We've seen stocks certainly sell off rather dramatically. S and P was off about forty right after the decision. We're now off about eighty seven points, down one point three percent.
00:03:34
Speaker 4: Let's talk to your world.
00:03:35
Speaker 2: In terms of what we see in the fixed income and treasury trade. I'm looking at a tenure with the yield of four to twenty five. It was about four to twenty one right after the decision, shorter end three seventy six. We're at about three seventy so we've definitely seen a change in the yields.
00:03:51
Speaker 4: Why is it?
00:03:52
Speaker 2: Is it because specifically what FED said about maybe the potential for energy prices and the push on inflation, or what.
00:03:58
Speaker 6: I think was a twofold the the Powell announcement definitely had an impact. So that is, you know, power for longer is higher rates, right, that is the perception, rightly or wrongly, you know, from the marketplace. And the second was on less what he basically said, he's not overly worried about the labor market, which is, you know, means that he can keep rates higher and watching inflation, which is basically once again code for keeping rates higher. So I think the interpretation from the market was just exactly that rates are higher, and it's being priced in the front end as you see, and the curve exactly modest, modestly flattening, steepening, otherwise it'd be a big steeper.
00:04:46
Speaker 3: As Carolyn I huddled after his press conference and before the program, we both pointed out the tariffs making sort of a big, big presence in the speech today given and then press conference today too, and in his answers today. Were you surprised about his commentary regarding tariffs that.
00:05:03
Speaker 2: You know it's inflation, right, should we be worried about Still?
00:05:07
Speaker 3: I thought the impact had hit, and I think a lot of economists thought the impact had hit, and it was I'm not going to say transitory, but it's like it wasn't as big as people thought it would be.
00:05:15
Speaker 6: Well, you know, if you look back in twenty twenty five, the biggest mistake that market players and economists made was thinking it would be a one time hit, And what we learned is that it's a it's a kind of a continuous kind of hit. Right, It's not a one time shock. It just leaks out over time. And I still think that's in the system. So the way we think about the way I think about it is that that goods inflation is still coming through the system. For example, at the end of last year, or just in course of talking to over a thousand companies last year, Yeah, they basically all total told us the same thing, which is, you know, they haven't moved prices up yet yet, but we will do so in the first quarter first half of twenty twenty six. So I think he's reflecting that reality. Honestly.
00:06:06
Speaker 2: Well, I keep thinking about I mean, you know me, I'm kind of obsessed with earnings reports, but I do think about, you know, C suite commentary and what we hear from them. Mind you, it'll be you know, obviously the last quarter, but it'll also be the outlook and whether or not. They are saying they're feeling pressures, whether it's on margins and so on and so forth, and so what do they do to compensate for that?
00:06:26
Speaker 6: Well, I think you see that in the labor market, right, So you're not seeing a shedding of jobs in labor, but you have this incredibly stagnant labor market. So you could blame AI. You could blame on protecting margins. I'm not really sure, but you know that is a kind of a reflexive response from corporations, right, So they'll defend margins, they'll raise prices, they and they'll kind of keep labor flat. And that's what you see.
00:06:55
Speaker 3: Yeah, what does AI do to the economy? He was asked, He's asked about this every time. Yeah, and I think I mean, and I think his answer again it's it's it's sort of like it's kind of the question that I would ask him if I had a chance to sit down with him and the caremeras weren't on. He said, you can't really make a call at this point about whether Jenna I will lead to lower inflation, but over the long term it's possible it expands us output and productivity. What's your view on it.
00:07:19
Speaker 6: My view comports with his. A lot of investors think it's just a media kind of disinflationary effect. The way he described it and which I agree with, is that the spend and the draw on resource that you're seeing today is actually inflationary. So it's a two step process.
00:07:38
Speaker 3: Yeah, and those things cost a lot of money and the demand is high.
00:07:41
Speaker 6: Exactly. Think about trying to get an electrician as an example. Right, So we just did this so so and I bet you've paid more for it is a joy. So it's inflationary over the near term. Over time, the expectation is that it is disinflationary, but we have to ride ride the wave, and you know, it's hard to make that timing assessment.
00:08:07
Speaker 4: J Powell did well, I thought he did.
00:08:10
Speaker 6: Actually, you know, this was supposed to be a complete non event in a way, right, I mean, this is we were talking at a risk meeting this morning, and this is the first time that we can recall in years and years that, like the FED meeting wasn't even like a topic of conversation, right, and now it's a topic of conversation. So I actually think it was a pretty good meeting. Yeah, what I liked is directness, and you know, the market's less so clearly, but you know, I think the markets are somewhat in kind of fantasy land here as well, So it's it's kind of a kind of an eye opening type of environment.
00:08:47
Speaker 3: Stay with us. More from Bloomberg Business Week Daily coming up after this.
00:08:55
Speaker 1: You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from two to five East during Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
00:09:08
Speaker 3: In an exclusive interview with Bloomberg, call She co founder Tark Monsieur vowed to fight criminal charges against the prediction market Exchange, calling Arizona's recent movie quote total overstep as legal battles with states escalate beyond civil enforcement.
00:09:22
Speaker 2: Yeah, it was just tuesday that Arizona filed criminal charges against Calshi for operating an illegal gambling business, signing misdemeanors that carry less serious penalties than felonies. Arizona's criminal complaint follows Calshi's move last week to block the state's gaming department from taking enforcement action against the company.
00:09:41
Speaker 3: I spoke with cal She, co founder and CEO Tark Monsieur on Bloomberg Radio and TV about the charges.
00:09:48
Speaker 8: I mean, these chargers have nothing to do with gambling or the merits. If it was about gaming on the marriage, they would let the judicial process rights course in the federal courts. You know, five days ago on Thursday, CALCI filed suit against Arizona in federal courts on the mets on whether Calshi is subject to exclusive jurisdiction of the CFTC. And you know, we're confident opposition and wanted to let the court process play out. And instead of letting that happen, the Arizona Attorney General decided to subvert the judicial process and weaponize it and go to state court and file these criminal charges, which you know we view as merit lists and basis. We see this as a total overstep and we look forward to fighting it in court.
00:10:25
Speaker 3: Well, experts are saying this could be the first of many charges such as these from other states too. How does it change your legal strategy, Well.
00:10:33
Speaker 8: This is the whole point of federal preemption. So this is not about camera. The charges that the attorney general filed are not about Gambley, They're not even about sports only they're about prediction markets writ large. It's just you know, attacking the entire business model. And nothing prevents from the same attorney general or others from fighting the same criminal charges against derivatives markets writ large. They could file the same exact charges under the same analysis against CME, or Ice or NASTAC.
00:10:59
Speaker 4: And that's the whole point.
00:11:00
Speaker 8: Point of federal regulation of these financial exchanges is to prevent this sort of chaos and these sort of attacks on these businesses that could be political in nature or other. And that's a very important distinction.
00:11:11
Speaker 3: Well, I read the charging document from the Attorney General has twenty charges. They're mostly about betting and wagering when it comes to sports, there's some election stuff in there. Would you ever consider limiting your business in Arizona or other states to things that these ags don't seem to have problems with, like economic data, the price of bitcoin, what markets are going to do predictions around those things.
00:11:36
Speaker 8: Look, I mean the AGA also claimed that we have war markets, which is incorrect. It's either flat out to lie or it's misinformed take which is unfortunate for someone, you know, filing criminal charges against the company. What's more important here, again is This is not about the merits. If it's about the merits, let's let the judicial process run its course in federal courts. This is about something other than the merits, which is what I'm focused on. I don't know what the ag is focused on, but you know is off for reelection. You know it did some press, it does seem to be making some buzz. But what I'm really focused on is building a great product from lens of customers, out of which goes to four hundred thousand are in Arizona, and fighting any of these baseless cases in courts, which was which we're going to continue doing.
00:12:18
Speaker 3: So you're fighting the cases. As I mentioned, Arizona is not the only state to take issue with your business. What happens ultimately if courts do side with states, what does it mean for the future of your company.
00:12:30
Speaker 8: We believe in the rule of law. Right, we will always abide by court decisions. The law applies to us, but it also applies to the government, including state governments, and that's a very important thing.
00:12:42
Speaker 5: Right.
00:12:43
Speaker 8: This is really not about our business model. Again, if it was about our business model, we would be focused on the federal courts and the lawsuit about the merits. This is a broader attack, and you know many states have sided with us and have granted us a preliminary in junction, agreeing with our legal analysis. We have spent four years getting regulated by the federal government, and we have a federal government in the CFTC that is coming strongly in favor of our position. Following these charges is a total total overstep and an overreach from an AG that's up for reelection, and we find that unfortunate. But we will stay focused on what we do best, which is building a great product.
00:13:22
Speaker 3: So certainly the CFTC. We know where the CFTC stands, and we know where Michael Mike Selig stands on this. We don't know where courts stand on this.
00:13:31
Speaker 8: And I'm wondering.
00:13:32
Speaker 3: If if we see a state like Nevada, for example, block access to your business, what will you do? Will you continue to operate or will you will you say, Okay, we're not going to operate in Nevada.
00:13:47
Speaker 8: Well, first of all, let's get to that point, and you know, we'll have to make a decisions the company. What we do, what I can reiterate is we will one hundred percent about by the law. That's what we will do as a company. It's always been our position. That's why we spend four years getting ready dad upfront, regulatory first as a company and.
00:14:03
Speaker 4: Always abide by the law. But what I always say, the law applies to us.
00:14:06
Speaker 8: As much as it applies to the government, and when government oversteps the law and goes out of bound, we're going to fight that in court, which we look forward to.
00:14:14
Speaker 3: How long does that process take, because it seems like there's a regulatory limbo happening. You're you're it's almost like your legal team is going to have to play whack a mole with all these states that are that are filing suit or bring in criminal charges. How long is this going to take?
00:14:28
Speaker 8: And gladly we have a legal team to handle these types of things and they're going to be focused on and you know, maybe it's it's a question for them. I mean, look, whatever whatever long it takes, we're going to fight for prediction markets. I spent eight years building this company, four out of which have a which are getting regulated upfront. I really believe in this marketplace. I'm very excited about the growth that we're seeing. Some of the fast growing company companies in America right now, and so what I'm going to be focused on is keep building a great product, and that's what's sort of most important for me. The more important sort of question is, you know, when it comes to this is not really a you know, whether this is gambling or not. It's not really about state versus federal, which are both co existing and both growing, both models. This really is turning into sort of some special interests that like the status quo. The status alo is worked very well for monopolies, but not for the consumers that are flocking to prediction markets right now, which we're going to keep pidding for Tark.
00:15:19
Speaker 3: There is this perception, though that people think this is gambling. An ipso's survey from just a few weeks ago, for example, show sixty one percent of adults safe prediction market trading is closer to gambling. Eight percent say it's closer to investing. So there is this public perception that doesn't necessarily match with what you say. The platform is how do you respond to that and how do you battle that?
00:15:41
Speaker 8: Like?
00:15:41
Speaker 3: How is this not gambling?
00:15:43
Speaker 8: I haven't really looked at these polls, you know. The thing I will say is there's always been a battle of whether financial derivatives are gambling. Green features were called gambling and the eighteen hundreds, and there was a Supreme Court decision that you know, said, even though there is speculation, these you know products have financial our structures the financial markets, and thus are going to fall under financial market jurisdiction. So I always say this, you know, whether something feels and looks like gambling doesn't necessarily make it gambling. Speculation exists in all financial markets. If we're going to take a line that speculation is gambling, then the stock market with retail participation is gambling. Then buying options for retail or zero data to expire options is gammling. Then retail buying crypto is gambling. The more important line in the historical line that we've been taking under the law. But also you know, as you think about it societally, is the business model a gambling business model, which is a model where the revenue of the business and the profits are equal to the customer's losses, in which case the incentive is to promote more losses and blog the winners. Or is it an open, free and fair marketplace where people can enter in and out freely and transparently, which is a financial exchange which Calci falls under.
00:16:51
Speaker 3: That's call She co founder and CEO Tark Monsieur an exclusive interview on Bloomberg. Let's stay on call. She and Prediction Markets overall here with us. A member of our team who keeps track of them. She reports on them. She's Bloomberg News cross ass that reported DENISEA. Saccova. She's here in our Bloomberg Interactive Brokers studio. Deny to the last question about gambling. That this When I got off air after this interview, I had ibs from customers, from our colleagues. Some people came up to me. Every single one of them said to me, how is it not gambling? That seems to be the question that will be the biggest uphill battle for this company, because that's what the courts are going to decide.
00:17:33
Speaker 9: It has been the big question we have been covering for months. If you speak to a lot of those CEOs, they're going to tell you we're a truth machine. We go we're so important from probability hedgphnes. We were able to hedge those super niche markets. But if you look at the volumes, it's often sixty eighty percent in certain cases ninety percent sports bets, and then it becomes really hard to explain to people how this will have economic hedging or any other value. That said, every profit different couches, especially strong when it comes to sports betting. Public market is seeing slightly different breakdown there, but for example, crypto markets are really big there, political markets are really big there, and of course sports is big there. But so far they've seen all that pushback. It's not gambling. We're regulated by the CFTC. Like in the interview, he talked a lot about oh, if they see us, they can see the CME, and I think that's kind of a complicated argument to make, considering there aren't really other companies oftening anything like that. Obviously they were under a lot of scrutiny for sports, but we got scrutiny for war contracts, for a lot of things.
00:18:37
Speaker 3: There are other companies that offer this. It's like Fandruel and DraftKings exactly exactly. Those are regulated by states exactly.
00:18:43
Speaker 4: That's where what.
00:18:45
Speaker 2: Do these states wants, I mean, is it that they want to be able to regulate these companies under state gambling rules?
00:18:50
Speaker 4: What is it? I mean?
00:18:51
Speaker 9: Of course, those don't have the same protections as sports markets. But you can also imagine that states are losing a lot of revenue that usually they take from those companies. Nevertheless, we've seen some of the sports betting activity foe in some states. We've seen a really.
00:19:07
Speaker 2: Response about that the traditional gambling set.
00:19:10
Speaker 4: Are they losing some activity.
00:19:12
Speaker 9: Yeah, we've definitely seen that. And when it comes to up downloads, it's really cow. She's soaring. It's like, I don't know, three million downwodes a week month and that has nothing to do with like the numbers we've seen, for example from Draft Kings, which was kind of a leader in that space. So they're definitely taking over. But at the same time we're seeing kind of states combined forces and file all those lawsuits at the same time, so there is a lot of unity on the state side comes so there response.
00:19:36
Speaker 2: I thought it was interesting too, Tim your question about like if they limit their what type of activities? So maybe they walk away from the sports gambling, right, and then it's economic like is that still a viable business?
00:19:47
Speaker 3: I mean, look what Tanisa said, sixty to eighty percent in some cases some cases up to ninety percent of the activity on these platforms. I'm not going to say call she specifically, and it varies based on what's going on in the news, but that is the bulk of the activity on the platform. So if they were to do that, Denise, it would really limit what they offered.
00:20:07
Speaker 4: Yeah, for sure.
00:20:07
Speaker 9: And even you can see a lot of their marketing campaign at campaign there is a whole new campaign house. You can win one billion if you get all the brackets in March madness. And I don't know, how can you explain that this is like a truth machine if you're if you're offering a contract like that, and you're really emphasizing those super long short bits like it's one in one hundred and twenty billion chance thirty seconds.
00:20:29
Speaker 2: Got to ask both of you, is this something that ultimately makes its way to the Supreme Court? Like?
00:20:33
Speaker 4: Where does it?
00:20:33
Speaker 2: Because the momentum seems to be building, certainly the legal momentum.
00:20:36
Speaker 9: Yeah, I think that's pretty much the consensus. We have a pretty good estimate by the bloom by Bloomberg Intelligence, they say pretty much headed there. That said, they give Kaushi's sixty percent chance of winning in high court.
00:20:48
Speaker 1: You're listening to the Bloomberg Business week daily podcast. Catch us Live weekday afternoons from two to five ees during Listen on Applecarplay and Android Otto with the Bloomberg Business app, or watch us Love I've on YouTube.
00:21:01
Speaker 2: All right, everybody, we are watching Micron here in the aftermarket.
00:21:05
Speaker 4: It's been bouncing around.
00:21:06
Speaker 2: We saw kick up a couple percentage points.
00:21:07
Speaker 4: Right now it is just up about.
00:21:09
Speaker 2: Four tenths of an percentage points. The numbers look certainly pretty strong here. But we as we just you know, talked about with Romaine, this dock's on a tear up more than sixty percent year to date, and that's after a triple digit percentage gain last year.
00:21:24
Speaker 3: Expectations were high. Sand Disk is following Micron stock lower in the after hours, down about eight tenths of one percent. Worth repeating some of those headlines. Carol third quarter adjusted revenue forecast did beat estimates thirty two point seventy five billion dollars to thirty four point twenty five billion dollars. The aestimum was for twenty three point six six adjusted EPs eighteen seventy five to nineteen fifty five estimates for eleven to twenty. When I see numbers like something, I have to check this again because these are so different than what the estimates said.
00:21:58
Speaker 2: But the expectation like sometimes these numbers are just off the charts. Micron also saying that AI server demand continues to be strong, so we're going to continue to track this here in the aftermarket. Let's get to our guest, Hendy Susanto. He's a portfolio manager at a Belly Funds. They've got about thirty five billion in assets under management and they also of course hold Micron shares. Handy, so glad that you could join Tim and myself.
00:22:22
Speaker 4: What do you make of this report?
00:22:25
Speaker 7: I guess this is I believe this is the strongest record performance of Micron, and then looking at the way to share trade, I think going to this earning, I did think that the biggest risk is in fast high expectation, and then physical third quarter guidance is very strong, is way surpassing analyst expectation, and then my own expectation as well. And then gross margin is the strongest in the history of Micron. And then we are still in the early innings of HBM as like precious semi have precious metals, and then now we have pricious temiconductors.
00:23:05
Speaker 3: So handy then why, I mean, the stock reaction is only up eight tens of one percent despite the fact that, like you said, this is such a record, you know, I think many people would say this was an incredible beat. I want to go to the conversation that we were just having with our colleague Romaine a few minutes ago, which is about how much pricing power and how much sort of runway does Micron have to continue with to raise prices and to continue to have these margins, Like how long does that last?
00:23:33
Speaker 7: Yeah, so interntal pricing power, I think we can start based on the fact that they are only like three dram manufacturer, sk Heinix, Samsung and Micron, So like, structurally Micron is in good positions. And then we believe that pricing is now based on quarterly negotiation, so companies like Micron, they will try to capitalize on the pricing trend. The pricing trend is still going up at least until the until the June quarter, and then companies like Micron will try to balance between taking the pricing advantage and managing long term customer relationship while also trying to manage customer diversification as well.
00:24:29
Speaker 2: Yeah, yeah, right, because we do know that in terms of who are their big customers, it's definitely skewed.
00:24:36
Speaker 4: Is it towards video? It's kind of a lot handy. One thing I want to ask you.
00:24:41
Speaker 2: As the headlines continue to cross, Micro says NAN demand to stay well above our available supply. AI other server demand constrained by memory supply, and says AI server demand continues to be strong. So this is kind of a mixed blessing. Demand is there, but they're having trouble meeting that to Is that the right.
00:25:01
Speaker 4: Read on this?
00:25:03
Speaker 7: That's the right read. And then I think what investors should keep in mind is that this calendar year twenty twenty six, all the memory makers we rely on migration of their process technology. So in other words, there won't be any new capacity expansion. And then capacity expansion we are expecting that to come in twenty twenty seven. So I think for the twenty twenty six when companies said that they are sold out on capacity, that will be indeed through and then that will come with favorable pricing as well.
00:25:40
Speaker 3: The company also flicking at this idea that they're going to build out to match expectations and match demand. You did say that we're in the early innings of this, and I'm going to get right here. It says we are investing in global manufacturing, in our global manufacturing footprint to support they're growing demand referring to customers. That's the word Sanjay ma Roach or the president, chairman and CEO of Micron, How long does it take to build that out?
00:26:07
Speaker 7: So I think in general the rule of thumb in the industry is, if you have the shell or the fab buildings and structure, you can expect new capacity within like six to twelve months, and then after that then you will have to work on the yields optimization. Okay, so that is the sort of time frame that we are looking.
00:26:35
Speaker 3: So six months until if the shell is there, they can be up and running and they can know like.
00:26:41
Speaker 7: If you have the shell, it can be done as short as like six months.
00:26:45
Speaker 4: Yeah.
00:26:46
Speaker 3: Yeah, Well, I guess there's another way of asking. Look, you said, we're in early innings, but we always talk to Ian King, who covers chips for semiconductors for Bloomberg News, and he reminds us this is all cyclical, but we're just trying to figure out where we are in the cycle. So where do you think we are in the cycle.
00:27:03
Speaker 7: So I still think that we are still in the early innings. Many major customers their priority is to secure supply and then pricing secondary and then if somehow there's a disruption within one customers, companies have said that they can find other major takers easily. And then on the other hand, I do think that it is the best of interduts of customers to secure long term supply agreement. Let's say, when you build a large AI data centers, or when you want to spend on like GPUs, you want to make sure that you will have supplies of memory memory chips for you handy.
00:27:46
Speaker 2: It's been an interesting week, right, and I feel like we've talked about a lot of things when it comes to AI, but and chips and semiconductors. Because Nvidia, of course it's GtC meeting this week. Got to read certainly on the AI spend and build and what's going on here. We have Micron, and of course Micron, as Tim you know, reminded us, seventy percent of their business goes is from Nvidia. Is there a read through for you when it comes to that AI spend and build out?
00:28:14
Speaker 7: So the AI spending built out. I think it will benefit all the major players. And then I would also emphasize that all the capital equipment that have major exposure to DRAM.
00:28:27
Speaker 6: We'll see like.
00:28:29
Speaker 7: Strong year in twenty twenty seven driven by new capacity and then capital spending on the on the web site.
00:28:38
Speaker 2: Yeah, so I'm just curious, are you would you buy more shares of Micron on this earnings reporter me?
00:28:45
Speaker 4: Or are you waiting for the call? I'm just curious what do you think?
00:28:48
Speaker 7: Uh, Micron is definitely a strong buy here. We can see Micron earning about like forty dollars on like in this cuton physically and growing to at least like fifty dollars. So if someone wants to apply like than to fifteen times of price to earnings ratio, there is still like meaningful upside based on that folluation approach.
00:29:12
Speaker 2: All right, interesting, think fifteen seconds, what are you listening for on the call? What do you need to hear really quickly?
00:29:18
Speaker 7: I think like pricing negotiation, and then what the latest thought on the capacity expansion, like how soon new capacity can come to the to like Micron fabs.
00:29:29
Speaker 4: Stay with us.
00:29:30
Speaker 2: More from Bloomberg Business Weekdaily coming up After this.
00:29:37
Speaker 1: You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from two to five eas during Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch.
00:29:48
Speaker 4: Us live on YouTube.
00:29:51
Speaker 2: Hey, let's get more on the energy markets and really the economic and geopolitical implications. Back with us is Bloomberg Economics Chief geoeconomics Analyst.
00:29:59
Speaker 4: She's Jennifer, and she's live from the Bloomberg Washington, DC Bureau.
00:30:03
Speaker 2: Jenny Good to keep checking in with you, because I do feel like there's so much to keep track of, and it does kind of shift a little bit. First and foremost Iran's hold on the energy markets right now and how it impacts the world differently, which brings us kind of to China. They continue to get oil from Iran, that's true.
00:30:22
Speaker 10: Yeah, it does seem like some of the tankers that have been able to make their way out of the strait of her moves once the war started have been linked to Iran but also potentially linked to China and delivering oil there. We suspect Beijing is probably negotiating behind closed doors Tehran to keep that oil flowing and for its part. Iran seems willing to work with China, but also other countries India and Pakistan have also potentially been beneficiaries here to essentially allow their vessels to come through in order to pick up oil and other resources and transport it back to those economies that are facing a real need for that supply.
00:30:57
Speaker 3: Right now, it seems like Iran and Israel are are trading strikes on key energy facilities in the Middle East, And I wonder, Jenny, to what extent this makes it more complicated or challenging or difficult for markets to sort of go back to where they were when or if I should say, when this conflict ends. Guitar's ross Laffin industrial city suffered extensive damage after an Iranian attack and facilities and cutters. Saudi Arabia and the UAE run a list of sites at risk of Iranian air strikes. How do you watch that from a geoeconomics perspective.
00:31:28
Speaker 10: Yeah, so this seems to be Tehran making good on its threat falling and Israeli strike on its gas fields earlier today to hit other facilities in the golf. So it's more that the Israelis are hitting Iran and Iran is hitting golf rather than Israelis and Iran directly trading strikes. The golfs are kind of taking some incoming even though they're not directly party to this conflict yet. I think what this highlights is that even though we're three weeks into this war, it doesn't show any signs of de escalating anytime soon, and we predict that this higher level of intensity of conflict could continue for at least another week or two and then potentially subside, although we don't anticipate a ceasefires anywhere close. Rather, what we anticipate is that maybe, for example, the United States will pull out. President Trump does seem to be looking for an exit ramp, and that could take some of the intensity out of the conflict, but by no means necessarily put it to an end, and indeed we're likely to see a risk continue to not just traffic in the straight up from Moves, but also to the Gulf and energy infrastructure there. Iran realizes now it has a rather powerful toolkit that it can play, and it's likely to continue leveraging that whenever it feels that it's being threatened.
00:32:38
Speaker 3: Jenny, you mentioned something that really raised my eyebrows just now, and it was the idea that some of these geographical neighbors aren't part of the war. Yet you use the word yet. Are you implying that you think that other countries will enter this war?
00:32:54
Speaker 10: I think that other countries as well. They might define it differently. Some of them might say that they've been dragged into it because they've been to shoot down projectiles coming out of Tehran. I think they are receiving pressure from the United States to enter in some way, shape or form. We've seen President Trump and talk about not just trying to enlist US allies in other countries like China and reopening the strait of her moves, but having rather positive things to say about the prospect for golf countries to assist with that. Now, our assessment is that the vast majority do not want to be parties to this conflict. They don't certainly want to get directly involved. Maybe some of them are allowing US forces to, for example, use their airspace, but they're very wary of giving Tehran any additional reason to target them.
00:33:36
Speaker 4: Hey, one thing I want to get to before we wrap up here.
00:33:39
Speaker 2: China watching very closely, as Bloomberg has reported China's military has been studying President Trump's worn around for lessons that could prove helpful in any future conflict of its own. That's according to Western officials familiar with the matter. Gosh, what do we need to know about this?
00:33:54
Speaker 10: I think the main thing to know is that China watches every conflict very closely, as do many users as well. But what China is watching for is lessons on how to defeat the US military. And here I think that they've probably taken away that this was obviously, especially at its initial stages, a very impressive display of firepower from the US military. But now what they're probably noticing is that the US is using, especially at the higher end, a lot of munitions that would theoretically be useful in any fight with China, and I think that's what they're tracking closely. I think also at a strategic level, what they're watching is, especially with all this debate over reopening the strait of her moves, that this is creating friction points between the US and its allies, and that the US is, especially when it comes to Asian partners, having to withdraw some assets from that theater in order to back up what it's trying to do in the Middle East. So those are some of the dynamics that Beijing is going to be watching very closely in the week.
00:34:46
Speaker 2: So Jenny five seconds advantage to China, perhaps just quickly.
00:34:50
Speaker 10: I think strategically. Yes.
00:34:53
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