Chapter 1: What is the main topic discussed in this episode?
Hello and welcome. This is The Michelle Hussein Show. I'm Michelle Hussein. I speak with people like Elon Musk. I think I've done enough. And Shonda Rhimes. That's so cute. This will be a place where every weekend you can count on one essential conversation to help make sense of the world.
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You certainly ask interesting questions.
Bloomberg Audio Studios. Podcasts, radio, news.
One of our fave guests on these markets is Lisa Shalit. She's a chief investment officer for Morgan Stanley Investment Management. You've heard of them. They're pretty good over there. I've competed against them my whole career. I had some wins. I had some losses over the years, but they're pretty good. Lisa, we got to start with gold. I don't know what's going on.
Do you have any idea what's going on? I mean, who's buying this stuff?
So I don't know if we have an idea. We have a hypothesis, right? So I know over the last couple of weeks, a lot of folks have talked about gold as maybe a hedge to some of the frothiness in the equity market, et cetera. But we've really been on this extraordinary run for the past, quite frankly, three years since the bull market began in the fall of 2022 with gold massively outperforming stocks.
Yeah, wow. And so one of the things that we've begun to think about is not just dollar debasement, but whether or not folks are really worried about fiat currencies more broadly around the world. And as folks really truly think about whether or not there is a credible, reliable future for stable coins and for crypto, whether some of this ecosystem needs to collateralize itself
with gold away from fiat currencies. And so one theory we have is that some of these players may be trying to build some reserves in the yellow metal.
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Chapter 2: What insights does Lisa Shalett offer about current Federal Reserve policies?
Just too much liquidity from everywhere around the world sloshing around, looking for places to go. And in the everything rally, we're seeing folks buy everything from gold to stocks to bonds to currencies.
I like this quote in your notes, Lisa. Bull markets are meant to be ridden, not timed. That's very good. What we have heard, you know, maybe over the last year or two, but really over the last two, three, four weeks, it's just the concern about AI. And it's been such a big catalyst for the broader equity markets overall, not just the tech space.
But now we're starting to see some of these circular deals where this company's investing in open AI, who's then investing back and buying stuff and doing all that kind of circular stuff, kind of feels a little odd. Is it odd to you? Does it feel frothy to you? How do you think about that?
It does. And for us, whenever these trends are transparent and trackable, which they really were for the last three or four years, you could say,
Chapter 3: How is gold viewed as a hedge in today's market?
I see the order book. I see the cash flow. I understand how they're going to fund these CapEx plans. But literally in the last eight to 10 weeks, the deal making, the pace of the deal making, and the interconnectedness of all of it is starting to suggest to us that we're getting to that part of the cycle where the analysts start making up new terms, this RPO and revenue cycle.
that's been accounted for, that's still to be accounted for. It kind of harkens back to the eyeballs and some of the words we made up during the peak of the internet. And so what our hope is here,
is that as these deals are rolled out, that the companies are making the effort to really help us map what is real, what is on the come, and what is potentially just a promise that could vaporize if the demand isn't there.
As we think about the potential for froth or bubbles, What's the time horizon that you're looking at? What's the time by which these companies have to kind of find the proof in the pudding here that what they're doing is actually leading to something that's beyond just significant capex over and over again?
Yeah, so what we've talked about is how critical 2026 is and probably the second half of 2026. And the reason is because the gains that we can really credibly get from multiple expansion feels like we're getting to that point of exhaustion and earnings need to come through. The controversy is not, you know, are there earnings for, you know, the hyperscalers? I think everyone believes that.
The question is, are there productivity improvements from some of the folks who are implementing? And again, I think we're willing to hold our breath for another six to nine months. But I think by next summer, people are going to start saying, hey, show me the money.
Yep, yep.
how about in are there certain sectors that screening well for you guys right now and we're in stanley investment management uh yeah i mean obviously i need to be careful about uh you know not talking my book but um you know our favorite sector for the last 18 months has been financials uh i obviously you know maybe a tough tape um to report into this morning but these numbers
I think, from the sector look reasonably strong to us. They obviously will have the tailwind of likely a steeper yield curve next year of some deregulation in addition to a decent deal backdrop. So I think that that's kind of an ideal environment for them. And financials should be a place where we start to see stories, at least, of Gen AI implementation driving margin expansion.
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