Global Bond Anxiety Builds on Long-Term Debt Cost Increase

19:10Carol Massar:Does it ever matter? Because we always talk about Chinese deep pockets, right? And the government's always there to either boost up a company or boost up a sector, those pockets are still pretty deep, right? The pockets are still pretty deep. And whereas their traditional way of doing stimulus isn't working, we have to remember they haven't really attempted household-style side stimulus at all. So that's a whole other playbook that they could resort to. Will they? They just don't ideologically like to do that. It is ironic. It's the Communist Party. They don't like to do welfare. But they could if they wanted to push, come to shove.

19:43I mean, all of this comes down to job. That's the power that the Politburo, that the Communist Party has within China. Of course, I mean, the growing middle class since Deng Xiaoping, I mean, just speaks volumes to that. But as you embark on this AI transition, like what does that do to what is still a very deeply industrial-based jobs economy? Yeah, I think that is a big, big challenge for them. They do not have an answer for this as yet. They're already staring at, obviously, a very large youth unemployment problem. These young people will eventually become older. So you have to do something about them, plus the new entrance.

20:18The Communist Party certainly has a big challenge ahead of itself from that.

20:21Carol Massar:Yeah, where are they in this transformation? We talk about whether it's EVs or, you know, pick even AI, like how advanced they are certainly when it comes to robotics and so on and so forth. So it sounds like they're so advanced and that we should be worried. But is that true? They are advanced. And we have to remember that we're talking about... And a risk to the U.S. in terms of high tech and so on. Well, certainly. I mean, we can't compete with them at this point when it comes to things like robotics. There is no factory in America that could just say, oh, yeah, we're competing with the Chinese when it comes to automation and robotics and such.

20:52And you have to remember, we're talking about AI-related job losses a lot in this country now. That transition to automation, especially in the manufacturing side, has been happening for a long time in China. So they sort of know how to deal with it by now a little bit also compared to maybe other economies. But they are certainly very far ahead. It's incredible.

21:11Carol Massar:So what should investors be thinking about? You know, we've been talking about China forever. And for such a long time, I know when I started my career like decades ago, you know, it was all about having access to the Chinese market. That's what was important to every global multinational company. We think differently post-COVID, post what have you. And so I do wonder how investors have to think about China's relationship with the world. We know China is friends with Iran, with Russia. You know, we talk about this other kind of axis of power, North Korea. What is their role? I think their role from an economic standpoint is that you have to look at what China is becoming as a state, which is that they want to be this high-tech superpower.

21:56They want to be this industrial giant. They say, well, we'll make the cheap goods and we'll make the advanced sophisticated goods. And the Chinese commodity story is incredibly interesting still. I mean, what's happening with oil, but even what's happening in other places. Steel demand is down, yet China's buying up all the iron ore it can, right? So those relationships have broken down. They're not what they used to be. And so there are some interesting things happening inside the economy. And the traditional model of thinking about China just doesn't apply anymore. You really do have to kind of watch it at a granular level.

22:25Yeah, you know, the trade hawks still are stuck on overcapacity and subsidies, right? And we even saw Peter Navarro put out a report that's made the rounds in the past week. I mean, what do you make of all that still hanging? My message to my friends in D.C. has always been that you can talk about Chinese overcapacity all day long. It's not going to make an inch of a difference until unless you can compel American companies to rethink their supply chain strategy in a very, very holistic and broad way.

22:50Carol Massar:As long as though the government now, here's here's the funny part, right? Because you have the U.S. government getting involved in our companies now. So I do wonder, you know, kind of how ironic that this is. But as long as we know the Chinese government can actively and aggressively get involved, is it not ever going to be a market that investors, global investors, really want to embrace? Well, if you're going, aligning yourself with companies that are in the state's favor, sectors that the state is favoring, then there's a pretty good chance that you could get in there and you can make money, especially with the plethora of companies that are IPOing out of Hong Kong now, including Shanghai, of course, as well.

23:28So you've got that. But yes, you have to be very, very careful because, you know, look at what happened to Baba and so forth. The state decides the winners and losers at the end of the day. Just a real quick one here. What is the one thing through the end of the year that you think investors should be paying most attention to with China? Right now, I would say figure out what could break this truce maybe past November.

23:53Carol Massar:OK, that's that's a big one to keep on our radar. Always important to China. And we were remarking, it's been a while since we've talked to you and how the news flow and certainly out of the White House has had us so focused on the Middle East as of late. But you can never, ever forget what's going on in China. Shahzad, thank you so much. Let's make it sooner. Shahzad Qazi, he's chief operating officer and managing director for China Beige Book International, joining us right here in studio. Stay with us. More from Bloomberg Businessweek Daily coming up after this.

24:27Quick one before you jump back in. You're listening for ways to help teams move faster, make sharper decisions, and turn scattered context into work they can use. ChatGPT for Business can help. ChatGPT for Business gives teams a shared workspace with admin controls, permissions, and access to work and codecs in ChatGPT. This means your business can move from question to answer and code to rollout quicker. Join over 10 million business and enterprise users worldwide already using ChatGPT for work. Download the ChatGPT desktop app or contact sales to learn more. At Radiolab, we love nothing more than nerding out about science, neuroscience, chemistry.

25:09Carol Massar:But we do also like to get into other kinds of stories. Stories about policing or politics, country music, hockey, sex of bugs. regardless of whether we're looking at science or not science. We bring a rigorous curiosity to get you the answers. And hopefully make you see the world anew. Radiolab, adventures on the edge of what we think we know. Wherever you get your podcasts. You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business App. Or watch us live on YouTube. Hey, got to talk a little bit more about that sell-off in chip stocks.

25:49Carol Massar:We've definitely seen almost, I think earlier in the session, we had every name in the stocks lower today. Now there's about 28 to the downside. Yeah, I mean, this is just building on, yesterday we were talking about, well, things are looking up. And, you know, there's a lot of discussion over the demand that is in AI and chips. I'm today going the opposite way, and I'm curious to hear a little more about it. Yeah, and I've got to say, whenever there's a question about any development and there's been nonstop, we always lean on Ian King. He is U.S. Semiconductor Reporter for Bloomberg News. He's out there in our San Francisco Bureau.

26:22Carol Massar:I will remind everybody, with the socks down about 5.5%, it is still up nearly 70 % year-to-date. Earlier, though, in the year, it had more than doubled. So, ups and downs. That's pretty normal, I think, for the semiconductor space. Right, Ian? Absolutely. Yeah, no, you make a good point. I mean, end of April, we were at 7 ,000 points. Currently, we're at, what, 12 ,000 points for the Philadelphia Semiconductor Index. So, yeah, we're still a long way up. Is it just a risk-off day today? I mean, how do you read the ups and downs here? I know we've talked to you about the cycles in the space overall.

26:59Carol Massar:We've talked to you a lot about the AI impact on that. Is this just maybe a risk-off day because of rising yields and, you know, rethinking of maybe some valuations or the move up that we've seen? Or is there some fundamentals or fundamental problems or concerns in the space as you see it? Well, I think you identified it correctly there. We're seeing sort of fairly exaggerated movements even on a daily basis. And that's because so much money has been put to work here. This is such a big part of the market. So whatever the overall market is doing is going to be reflected in you selling those that you've made the most money out of.

27:38So profit-taking, you could argue, has become a bigger factor than ever. But also, fundamentally, there's a daily kind of navel-gazing examination of what is all this built upon? Is AI going to pay off? So there's certainly that going on as well. Yeah, I feel like yesterday we were talking about how all the indicators were that AI, it's even better than we understand, and we're not fully grasping, wrapping our minds around it. I mean, we even have this B of A note saying that NVIDIA could be trading at a discount of as much as 50%. So, Ian, you spend most of your time living through the weeds.

28:14I mean, how do you, when you kind of look through the end of the week, like, what are you really looking at moving ahead in the chip space? Is this just a one-day thing to say, okay, it is what it is. Let's look at the bigger deal. Well, I mean, we've got NVIDIA earnings next week, which will give us a very concrete signpost in terms of where we are in terms of fundamental demands. Either they're continuing to grow at the pace that we expect or they're not. And that will tell you a lot, given how important they are. But what's the consideration in the short term is really what's going on with the financing of all of this AI build out.

28:48But on a daily basis, investors change their mind as to whether these giant deals are a good thing or a sign of an iceberg on the horizon that we need to be scared about. And that is a real focus for investors right now, I think.

29:01Carol Massar:You know, Ian, NVIDIA, man, there is always so much coming out, I feel like, on a daily basis about this company. And either it's something Jensen says or it's something NVIDIA does. As we talked about, they had agreed to spend as much as$105 billion to support a massive new data center campus in Ohio, set to be released by OpenAI. You know, this non-stop spend. This is the story, I believe, that you and Will Wade did. You know, and I just, there's already a big commitment by OpenAI to buy NVIDIA gear, which could represent about$600 billion of revenue for NVIDIA through 2030. Does all of this make sense to you?

29:43Carol Massar:I mean, it's just nonstop, this news. And I think about, you're smiling. But I mean, when it comes to earnings next week, I mean, what is it that we need to hear that says all of this that you're doing that feels so cozy, as I like to say, that it is based on fundamentals? It makes sense. No, I mean, again, you've nailed it. There are two ways to look at this financing effort. The one is the NVIDIA viewpoint, which is, look, this is just a good use of our cash. Anything that accelerates the uptake of our products, anything that accelerates the uptake of AI is money well spent. It's just like R &D.

30:21It's just like developing new products. The flip side is, hold on a minute. If all of these companies have got so much demand, if AI is now so important, if it's already contributing to everybody's earnings, why do they need your help to raise money? And, you know, the truth probably lies somewhere in between those two. And it really depends on the day as to how investors feel about this. Yeah, I don't know how you do it on a daily basis, Ian. I mean, there's so much out there. There's so much being discussed. I mean, we must have talked to five different analysts yesterday who were speaking on both sides of this.

30:53But when you just cut through all of it, and like you said, you're just looking at the hard numbers. I mean, it is in fact difficult for the human brain to really wrap its mind around how much of a step change we're talking about in these markets because of this space. No, you're absolutely right. The scale that we're talking about, whether it's investments, amounts, whether it's revenue, for example, next year, if Wall Street is right, NVIDIA will have half a trillion dollars of sales. right that's more than the entire chip industry was managing in sales three years ago so we've come a long way very fast and of course given the history of the chip industry people are naturally saying is this too far too fast i'm given their penchant for these giant swings between oversupply and undersupply you know disaster got to be a bad sign and so that all of these concerns are absolutely natural given the basic patent recognitions that you have to apply to this industry.

31:55Carol Massar:You know, it's interesting too, and you mentioned the B of A call, Joe, and I'm sure you saw it, that NVIDIA, you know, shares could be trading at a discount of as much as 50 percent according to B of A. And they suggest that NVIDIA could ease worries over lower earnings quality by committing a greater share of its free cash flow to buybacks. You know, whenever I hear that, I'm like, that's just math, right? You're reducing the amount of shares, you're going to improve the earnings per share. That to me, I don't know. I read that as more of a warning sign, but I don't know. How do you read it?

32:26I mean, all I can tell you is NVIDIA have been very clear. What comes first is spending on the business. Anything that we think will help us down the line, we're going to spend on that first and then investor returns and everything else comes after that. And in the past, I think you're right. People have looked at, for example, IBM and massive buyback programs there is financial engineering is what it was criticized. When you don't have growth, you change the denominator and you make P &E look better by reducing the share count. So, you know, there is a bit of a history and a bit of a psychosis there.

33:04I think among some investors, oh, this is a bad thing, this is a bad thing. Others would say, no, no, this is if you really believe in your earnings and your future, then you pay us now. So, depends on what day you're on as to what's the prevalent opinion, I think.

33:18Carol Massar:I'm going to squeeze you. 20 seconds. What could Jensen say that would just blow your mind next week, real quickly? I think, you know, if he comes in and shows even more growth than is expected, I think that will have a profound effect. Well, you always have a profound effect on us. We love you. Ian King, you're incredible. Bloomberg News, U.S. semiconductor reporter, Ian King, in our San Francisco News Bureau. He always just gives us like the smart perspective on a space. Right? This is what Bloomberg is about. It is. Exactly. Stay with us. More from Bloomberg Businessweek Daily coming up after this.

33:58Quick one before you jump back in. You're listening for ways to help teams move faster, make sharper decisions, and turn scattered context into work they can use. ChatGPT for Business can help. Chat GPT for Business gives teams a shared workspace with admin controls, permissions, and access to work and codecs in Chat GPT. This means your business can move from question to answer and code to rollout quicker. Join over 10 million business and enterprise users worldwide already using Chat GPT for Work. Download the Chat GPT desktop app or contact sales to learn more. The Big Take podcast from Bloomberg News keeps you on top of the biggest stories of the day.

34:39My fellow Americans, this is Liberation Day. Stories that move markets. Chair Powell opened the door to this first interest rate cut. Impact politics. Change businesses. This is a really stunning development for the AI world and how you think about your bottom line. Listen to The Big Take from Bloomberg News every weekday afternoon on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app.

35:17Carol Massar:Or watch us live on YouTube. Well, more than 33 million people, I don't know if you know this, in the U.S. live with food allergies. That's according to FAIR's National Indicator Report on Food Allergy. They are a 5013C charitable organization. They've got a mission to improve the quality of life and health of those with food allergy through transformative research, education, and advocacy. And I have to say, I know people who've had kids with extreme allergies. It's very serious. Runs to the emergency room. These are things that can be life or death. You've got a little one. You're dealing with food.

35:55Oh, every day, right? I mean, even in the early days where it's like, okay, we're going to test all the things. Now that I'm a parent, I think more than ever about the food going into the mouths of anybody.

36:04Carol Massar:Yeah, I'm with you as well. And our next guest, too, has done her own research and education in this area. For her, it was personal. It led to the creation of a company that's helping others. And we're delighted to have with us in our Bloomberg Interactive Broker Studio, Vanessa Phillips. She's CEO and founder of Feel Good Foods. You can find them in Whole Foods, Target, Thrive Market, Stop and Shops, and more. Welcome, welcome. Nice to have you here in studio. It is personal. And time and time again, you have an individual who's got a situation or a problem, and they figure out a way to solve it.

36:38Carol Massar:That was your case. Just briefly give us your back story. Okay, well, thank you for having me. Excited to be here. So yes, I mean, Feel Good Foods is very personal for me. I grew up in New York City. my family owned restaurants. And from a very early age, I was a foodie. So loved food and was always exploring and open to eating everything. And in my teenage years, I just started having so many symptoms that were really hard to pinpoint. It just was like I was sick all the time. Everything I ate. I remember saying to my parents, maybe I'm allergic to salt. Maybe it's water. Like it was Literally everything I was eating was making me sick.

37:16And in college, I was diagnosed with celiac disease and was told that I had to go on a really strict gluten-free diet. And I had to rethink everything because to that point, I was determined to do something in the culinary world. And being on such a restrictive diet after that, I kind of had to relearn everything I knew about food up until that point. So I was really on a mission to not give up my favorite foods. I especially loved potstickers and egg rolls. My father owned Chinese restaurants. And I remember getting an endoscopy, which was how I was diagnosed with celiac disease, which was they take pictures of your stomach.

37:55And I woke up from anesthesia. And the first thing I said is, well, can I still eat potstickers? And the doctor was like, I don't think so. I actually think that that probably has gluten in it. And I was like, OK, well, then I'm going to have to figure out how to make a gluten-free potsticker. So that was, you know, the beginning of my journey. And I, you know, just started doing a lot of research. I teamed up with a chef and we just went at it. We were determined to create all of my childhood favorite foods. It was all about nostalgia, comfort foods, foods that I was craving, but in a way where I could enjoy them as an adult.

38:34So that's what feel good foods is all about. I mean, everything we do really does stem from the foods that I ate as a kid, but reimagined as an adult with simple ingredients, um, always gluten free. But interestingly enough, 70 % of our consumers today are actually not gluten free. So really, you know, I mean, really holding the bar very high for us where we are, you to be just a gluten-free food brand, but just a food brand that really focuses on comfort food with simple ingredients. On that, say the number again, how many? 70%. So, you know, listen, I know you live this every day, but in my experience with gluten-free, right, and the conversations evolved over time, it's kind of like, initially, I think a lot of people just thought it was a healthy way to eat.

39:28So I'm just wondering, like, what is the difference between the percentage who have actual gluten allergies versus the percentage who are consuming your product that are just thinking, oh, this is healthier. So there is that halo effect. And, you know, 70 % of our consumers are, you know, maybe think it's healthier, but also just might buy it based on the ingredient, you know, panel and it works for them and their lifestyle. They think it, the product looks delicious and because it tastes delicious, they come back and they repeat it. It's very convenient. You know, air fryers right now are like an all time high.

40:02So the fact that you can get that restaurant quality experience at home in an air fryer is also like a huge, you know, selling point. And then there's more of the kind of, you know, this is fits with my lifestyle, but also this fits with the medical need that I have. So 1 % of, you know, the U.S. population has celiac disease. There's several other reasons why somebody would eat gluten free aside from celiac disease. You can have a gluten intolerance, which, you know, can be just as widespread in your body and cause so much discomfort, but you don't have the autoimmune disease. You know, you can have other autoimmune diseases that benefit from a gluten-free diet.

40:38You know, it's also an anti-inflammatory diet. So there's a lot of reasons why people are choosing to be gluten-free today, but we're really seeing more the larger consumer base is just consumers who are just looking for that delicious, simple ingredient product that they can have in their homes that just solves the problem of what to eat when you're living a very busy lifestyle that you can rely on.

41:01Carol Massar:What's the growth metrics? Talk to us about the expansion that you guys have seen since you started. I think you started back in 2012-ish? 2012, yeah. We saw a huge growth spurt during COVID, and that has really sustained since. I think that the frozen food category in general saw a huge growth spurt during COVID. People were at home a lot, restaurants were closed. So it was, you know, a really great opportunity for us to have incredible trial. We've seen a lot of sustained growth since COVID because the category is continuing to grow. Also, we're just expanding a lot. Like we started out very much as like a natural food brand, right?

41:40Like we started in Whole Foods, we were really speaking to that natural, better for you consumer and retailers were a little bit slower to adapt. And then in recent years, we've seen a ton of growth in conventional retailers, bringing on retailers like the Walmart and Target.

41:57Carol Massar:What kind of growth? I'm always curious about this space. I mean, we're up 160 % in retail sales. From when to when? In the last year. And then year over year. So top line. Yeah. But year over year, we're growing 50%. So it's definitely seen a really big surge later in our life cycle. A lot of that is coming from velocity growth, which is something that you don't always see as you're growing your distribution so much. Typically, velocity will dip a little bit as you're growing into more stores. We're not seeing that at all. A lot of that is like new to brand consumers. And then we're also seeing a lot of growth just due to new distribution.

42:34I mean, we're in 25 ,000 grocery stores, but a lot of that has been added in the last couple of years with, you know, rolling out nationally at Walmart, Target, regions of Costco, Publix. So, you know, really seeing mainstream adaption to what started out as like a very kind of like niche idea.

42:54Carol Massar:Vanessa, you bootstrapped it. We've just got about 35 seconds left here. What's your plan to continue going alone? Or I'm curious, are you getting offers or? We're right now, like we're having so much fun and we're just going to keep like continuing the mission and, you know, keep growing and get into more stores and feed more people. So that's no to any offer. That's right now. We are just continuing to have fun and do this. What about go public real quickly? No, not right now. We don't have any plans for that right now. Just do your own thing and stuff. Yeah. Come on back. Let us know how things are going.

43:27Carol Massar:Okay. I will. The food space is always interesting. I feel like there's so many newer companies that have come on to kind of go up against some of the giants. Vanessa Phillips, CEO and founder of Feel Good Foods. Thank you. Thank you. 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 5 p.m. Eastern on Bloomberg.com, the iHeart Radio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

44:09Before you sign off, you tuned in for ways to help teams move faster, make sharper decisions, and turn scattered context into work they can use. ChatGPT for Business can help. Chat GPT for Business gives teams a shared workspace with admin controls, permissions, and access to work and codecs in Chat GPT. This means your business can move from question to answer and code to rollout quicker. Join over 10 million business and enterprise users worldwide already using Chat GPT for Work. Download the Chat GPT desktop app or contact sales to learn more. The Big Take podcast from Bloomberg News keeps you on top of the biggest stories of the day.

44:49My fellow Americans, this is Liberation Day. Stories that move markets. Chair Powell opened the door to this first interest rate cut. Impact politics. Change businesses. This is a really stunning development for the AI world and how you think about your bottom line. Listen to The Big Take from Bloomberg News every weekday afternoon on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.