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Speaker 3: We do begin with that payroll report, hiring advancing at
Speaker 3: the slowest pace since twenty twenty in October. The unemployment
Speaker 3: rate did remain low. A lot of distortions, though, severe hurricanes,
Speaker 3: that major strike at Boeing weighing on those figures.
Speaker 4: As far as numbers go.
Speaker 3: Non Farm payrolls increasing at twelve thousand last month, hiring
Speaker 3: over the previous two months weaker than previously thought. The
Speaker 3: unemployment rate held steady at four point one percent. Hourly
Speaker 3: earnings ticked up. Acting Labor Secretary Julie Sue commented on
Speaker 3: today's report earlier on Bloomberg TV.
Speaker 5: We don't have granular data about that, but I think it's,
Speaker 5: you know, it's a rational conclusion that the impacts of
Speaker 5: the hurricanes were devastating. I mean they were devastating to
Speaker 5: human life. They were devastating to those communities in the southeast,
Speaker 5: but they also are showing up in the jobs report.
Speaker 5: Having said that, the overall labor force participation rate also remains.
Speaker 6: You know, it's steady.
Speaker 3: I was Acting Labor Secretary Julie Sue earlier on a
Speaker 3: Bloomberg TV. We got Michael McKee with us. He's Bloomberg
Speaker 3: News International Economics and Policy correspondent. He joins us here
Speaker 3: in the Bloomberg BusinessWeek studio, Mike, that headline number coming
Speaker 3: in way below estimates of one hundred thousand. How much
Speaker 3: of this can we attribute to hurricanes and to the
Speaker 3: strike versus an actual slowdown in the economy.
Speaker 7: Well, as Julie Sue said, it's really hard to tell
Speaker 7: because we don't have the granular data. We do know
Speaker 7: that we lost forty six thousand manufacturing jobs and there
Speaker 7: were forty four thousand workers on strike in the manufacturing sector,
Speaker 7: both Boeing and a textra in factory during the month.
Speaker 7: So that's pretty accurate there. You can add those back in,
Speaker 7: at least some thirty eight thousand of them for Boeing,
Speaker 7: because they're back there in theory going to go back
Speaker 7: to work if they approve the contract. The hurricanes is
Speaker 7: the hard part and part of it is that we
Speaker 7: had a very low response rate from companies who might
Speaker 7: have been busy sweeping the water out of their factories
Speaker 7: rather than filling out the form for the Department of Labor,
Speaker 7: and so it's hard to know how accurate these numbers are.
Speaker 7: We do expect a big revision up once companies start
Speaker 7: sending in their accurate numbers, and so for the next
Speaker 7: two months we'll probably see the numbers revised up.
Speaker 8: So you kind of have to.
Speaker 7: Look through the headline number. I know your question is
Speaker 7: going to be what is the FED thing. FED is
Speaker 7: going to think exactly that, but they're going to pay
Speaker 7: attention to the unemployment rate, which on a two decimal
Speaker 7: number was basically unrevised at four point one percent.
Speaker 8: So it doesn't look like the labor market it's getting any.
Speaker 9: Worse, So especially when you have next week, of course,
Speaker 9: we have the US election just a few days before
Speaker 9: the FED decision. So how much does this number end
Speaker 9: up being political? And if it does, what do people
Speaker 9: need to keep in mind?
Speaker 7: It's going to be interesting to see if it has
Speaker 7: any political impact. It took about ten seconds for the
Speaker 7: Trump campaign to send out their first negative comments on it,
Speaker 7: and they've been doing that all day, and we don't
Speaker 7: know how that's going to affect Americans.
Speaker 8: In part, it'll depend on how the media play this.
Speaker 7: If they play up the idea that we lost a
Speaker 7: lot of jobs, it plays into the Republican narrative. If
Speaker 7: they say hurricanes cost a lot of jobs, then it
Speaker 7: may not really resonate with people. Obviously, if they lead
Speaker 7: with the unemployment rate, it won't have much of an
Speaker 7: effect at all.
Speaker 8: But that's I mean, that's politics.
Speaker 7: You're going to have people always trying to accentuate the negative.
Speaker 3: Well, that's what I wanted to focus on, actually, because
Speaker 3: last month you were sitting in the studio with us
Speaker 3: and I had you weigh in on a tweet from
Speaker 3: a post on x from Marco Rubio, Senator of Florida,
Speaker 3: a state that was severely affected by hurricanes in the
Speaker 3: last month. He called the September jobs numbers a fake
Speaker 3: jobs report. He got a lot of pushback from a
Speaker 3: lot of professional economists who and people within the government,
Speaker 3: people who understand where this data comes from. He posted
Speaker 3: that they revised the estimated job gains in both August
Speaker 3: and September by a combined one hundred and twelve thousand,
Speaker 3: and he reiterated the idea that the jobs report he
Speaker 3: calls it the Biden Harris Jobs Report were fakes used
Speaker 3: by the media to give them positive headlines, saying I
Speaker 3: told you so. He obviously didn't learn his lesson. But
Speaker 3: what do you make of What do you make of
Speaker 3: what he said and what he's saying, because a lot
Speaker 3: of people point to these.
Speaker 7: Backwards revisions, Well, he either doesn't understand statistics or he's
Speaker 7: a politician, and a far be it for me to
Speaker 7: say that politicians would not tell the absolute truth or
Speaker 7: explain things in nuanced to people. But the number for
Speaker 7: September originally was two fifty four, came out at two
Speaker 7: twenty three. So if that's a significantly terrible change, I'm
Speaker 7: not sure people are going to see it quite the
Speaker 7: same way. The Bureau of Labor Statistics does the absolute
Speaker 7: best with what they can.
Speaker 8: They are not biased at all.
Speaker 7: This comes up every so often where somebody will say
Speaker 7: that they're manipulating the statistics to help one side or
Speaker 7: the other. But if you look, if people want to
Speaker 7: go to my ex account economy.
Speaker 8: On X, I just posted a short time.
Speaker 7: Ago a graph that shows the revisions during the Biden years,
Speaker 7: and sometimes they're up and sometimes there down, and.
Speaker 8: There's no pattern to it.
Speaker 7: So at this point you have to say, why are
Speaker 7: you doing that other than you're just trying to confuse people.
Speaker 9: Of course, next week we're not going to have DOP
Speaker 9: plots or the economic projections from the FED statement just
Speaker 9: given that they are quarterly, So we'll get those again
Speaker 9: in December, as you knew. But what do you expect
Speaker 9: FED Chair Pow to say in that statement as far
Speaker 9: as when it comes to that forward guidance, and especially
Speaker 9: once a tricky week, because we rarely do see a
Speaker 9: FED decision happen the same week as a US presidential election.
Speaker 7: Well, he will dodge all the questions of the presidential
Speaker 7: election because the FED doesn't know. First of all, we
Speaker 7: may not know who won, and second of all, they
Speaker 7: don't know what policies will actually be enacted. The candidates
Speaker 7: make their pledges, but as they say, the President proposes,
Speaker 7: Congress disposes, so we aren't going to know for a
Speaker 7: while what the actual policies are going to be. So
Speaker 7: if they can't do anything about it, so he'll pass
Speaker 7: on that kind of question. But in terms of trying
Speaker 7: to deal with this employment report. He'll say, we're going
Speaker 7: to look past the headline number because of the distortions.
Speaker 7: We'll look at the unemployment rate, we look at average
Speaker 7: hourly earnings, which were not terrible, and we're looking at
Speaker 7: a lot of data. We're looking at the GDP report,
Speaker 7: which was very strong. We're looking at the Employment Cost Index,
Speaker 7: which showed no real inflation worries. We're looking at the
Speaker 7: PCE inflation numbers, which weren't a real problem. We're looking
Speaker 7: at the fact that consumer spending went up strongly last month,
Speaker 7: and they'll say, it doesn't appear to us that the
Speaker 7: economy has really changed. So we were looking at under
Speaker 7: these circumstances at twenty five basis point cut, and I
Speaker 7: think that's what we get. And he'll say, so, that's
Speaker 7: what we did. We'll wait and see on what we're
Speaker 7: going to do for December, to see what the spending
Speaker 7: and growth and inflation numbers are, and we get another
Speaker 7: employment report before the next FED meeting.
Speaker 3: Okay, before the next FED meeting, we have an election.
Speaker 3: Forgive me for harping on this, but I'm going to
Speaker 3: throw a curveball at you. Mike We've heard from Donald
Speaker 3: Trump and Elon Musk about the idea of cutting government programs,
Speaker 3: cutting spending in the government if Trump does win. One
Speaker 3: thing that I haven't heard a lot about, though, is
Speaker 3: how cutting several trillion dollars from the budget might affect employment,
Speaker 3: given that the federal govern is such a big employer
Speaker 3: of Americans.
Speaker 8: Well, it depends on how they do it.
Speaker 4: That's what I was going to ask you.
Speaker 7: And much of what happens in Washington in terms of
Speaker 7: the budget is sort of just moving pieces around. It
Speaker 7: doesn't really have an impact, probably doesn't mean that much.
Speaker 8: I'll give you a caveat in just a second.
Speaker 7: Interestingly enough, the Bureau Labor Statistics was going to cut
Speaker 7: back on the sample size for the Household Survey, the
Speaker 7: Unemployment Report survey, and in the Continuing Resolution, the government
Speaker 7: put more money back into it. So now they don't
Speaker 7: have to cut back, so they will in terms of
Speaker 7: the statistics for the economy.
Speaker 8: That's good news.
Speaker 7: Now, if you're cutting back on spending, are you cutting
Speaker 7: back on contracts for work done for the federal government
Speaker 7: or airplanes built or things like that that will be
Speaker 7: in the future. Right now, it probably doesn't have as
Speaker 7: much to do with it. If you did start cutting significantly,
Speaker 7: then over time it would have an effect on jobs. Now,
Speaker 7: the big effect on jobs might be if Donald Trump
Speaker 7: is elected and he tries to reinstate Schedule F which
Speaker 7: changes a significant portion of the civil service into immediately
Speaker 7: fireable positions, and he immediately fires them, then you could
Speaker 7: lose thirty or fifty thousand employees from the government payrolls.
Speaker 8: And that would have an immediate effect.
Speaker 7: But we don't know that a he will do that,
Speaker 7: and b how that would be received. And obviously you
Speaker 7: know the federal unions would take that to court, et cetera.
Speaker 4: All right, we're gonna have to leave it there.
Speaker 3: Michael McKee international economics and policy correspondent for Bloomberg and
Speaker 3: is giving us an overview of the data, the big
Speaker 3: picture to understand how companies are hiring or not hiring
Speaker 3: in this environment. Let's bring in Martha Heller. She's founder
Speaker 3: in CEO of Heller Search and it's an executive search
Speaker 3: firm that specialized this is in leadership roles in technology.
Speaker 3: She joins us from Massachusetts. Martha, good to have you
Speaker 3: back on the program. There's no single category in the
Speaker 3: BLS data that says tech workers. But we did see
Speaker 3: a decline of two thousand jobs and telecommunications in addition
Speaker 3: of about fourteen hundred jobs and information services and computing
Speaker 3: infrastructure providers in.
Speaker 4: The month of October. What are you seeing on your end?
Speaker 1: You know, on our end, we're seeing a lot of
Speaker 1: change happening in executive technology leadership positions.
Speaker 10: And whenever that happens, there's a lot of hiring.
Speaker 1: So you know, some companies are laying off technology people.
Speaker 1: But the overall story is a story about an investment
Speaker 1: in AI. And in order for us to recoup our
Speaker 1: tremendous investment that all of our companies are making in AI, ironically,
Speaker 1: we need people. We must hire people who can make
Speaker 1: all of our AI dreams come true. Now, so far,
Speaker 1: we're seeing some disappointing results from our AI investments. Microsoft
Speaker 1: is reporting disappointing sales and pro Pilot. We're hearing this
Speaker 1: fun term called productivity leakage where we initially got some
Speaker 1: gains from AI, but now we seem to be losing them.
Speaker 1: And then finally, eighty percent of most AI projects are
Speaker 1: still in testing things. So if we are able to
Speaker 1: get a return on our AI investment. We are promised
Speaker 1: lots of technology hiring in the future, but if we
Speaker 1: don't and some of our AI investments wind up not
Speaker 1: paying off at all, then we have a much larger
Speaker 1: hiring situation, a challenge on our hands because we're going
Speaker 1: to wind.
Speaker 10: Up in a bust situation.
Speaker 1: So I think there's hurricanes, there's elections, But to me,
Speaker 1: the big story in technology hiring is AI investment. The
Speaker 1: people we need to invest in to give us the return,
Speaker 1: and whether or not we're going to get that return.
Speaker 10: To me, that's what's happening in technology.
Speaker 9: I'm glad you brought up some of those technology companies
Speaker 9: because we did get earnings reports from a number from
Speaker 9: them as you know this week, including Meta and Microsoft,
Speaker 9: and of course they're still boosting spinning when it comes
Speaker 9: to artificial intelligence. So when you're looking toward when it
Speaker 9: comes to acquiring types of skills for AI, when you're
Speaker 9: talking with your clients, how does one acquire skills? What
Speaker 9: are those typical industries that you would go to for that?
Speaker 1: So to get what's interesting is AI skills are strategic thinking,
Speaker 1: their processed expertise, their innovation, they are technical, they are development.
Speaker 10: So there's a whole range of AI skills.
Speaker 1: Or if you want to go work in high tech
Speaker 1: developing AI solutions, you are likely going to get most
Speaker 1: of your training on the job. What companies like Microsoft
Speaker 1: and Meta like to do is they like to hire
Speaker 1: the athletes. They're not necessarily worried about who's got the
Speaker 1: top PhD in computer science.
Speaker 10: What they want to hire are people who.
Speaker 1: Are innovative, they can think they can collaborate because AI
Speaker 1: is less about technology, ironically than it is about capabilities
Speaker 1: and efficiencies and processes and people. So it depends on
Speaker 1: the skills you can learn, you know, development languages in
Speaker 1: computer science programs, but it's really more about how does
Speaker 1: your company work and how can you use AI to
Speaker 1: do that better.
Speaker 10: It's usually on the job train.
Speaker 3: Remind everyone, Martha, where where in sort of the ecosystem
Speaker 3: the executives you find in place are geographically salary wise,
Speaker 3: because we're not talking you know, you're you're going after
Speaker 3: the folks who are making significant amount of money and
Speaker 3: the positions they have are kind of few and far between.
Speaker 10: That's right.
Speaker 1: So the population that we focus on our technology executives
Speaker 1: across all industries. So insurance in retail and airlines and
Speaker 1: what is happening in those companies. So those technology executives
Speaker 1: are starting to run their businesses more like soil companies,
Speaker 1: more like Microsoft, more like Meta. Because in order to
Speaker 1: make use of AI, we need the culture, we need
Speaker 1: the technologies, we need the talent that we have in
Speaker 1: some of these high tech companies. So the challenge is,
Speaker 1: how do you a head of technology an insurance company
Speaker 1: find the AI skills that you need when you're competing
Speaker 1: with Microsoft.
Speaker 10: That is the real challenge.
Speaker 1: So our senior technology executives are really across every industry,
Speaker 1: but the talent that they need is actually not from
Speaker 1: their own industry.
Speaker 10: It's from the high tech companies.
Speaker 9: And especially when you're thinking about moving ahead and looking
Speaker 9: at how when you are acquiring the skills that you
Speaker 9: were talking about earlier. Speaking to us more broadly, just quickly,
Speaker 9: because we only have about a minute left when you're
Speaker 9: looking at the outlook as we head into twenty twenty
Speaker 9: five when it comes to these positions.
Speaker 1: Sure, so the outlook is there is much more demand
Speaker 1: than there is supply. We are not training our people
Speaker 1: in AI skills. So I would say broadly for divided companies,
Speaker 1: still to still invest in as heavily an AI as
Speaker 1: they've done in twenty twenty four. We're going to see
Speaker 1: a upward pressure on companies to hire these people. So broadly,
Speaker 1: I think we're going to have a supply demand problem
Speaker 1: where we are going to need more tech skills than
Speaker 1: we currently have on the market.
Speaker 10: That's really going to be a CEOs challenge going forward.
Speaker 3: Martha, just ten seconds left. What's the meat of the
Speaker 3: conversation we have with you a month from now if
Speaker 3: you join us.
Speaker 1: A meet of the conversation is now that the election
Speaker 1: is behind us and we know who our president is.
Speaker 1: The analysis paralysis that keeps people from making keeps companies
Speaker 1: from making real investment decisions, particularly in growth, will be
Speaker 1: behind us, and I predict that we are all going
Speaker 1: to be looking forward to a very busy first quarter
Speaker 1: with hiring.
Speaker 3: Okay, so not a repeat of two thousand and when
Speaker 3: we didn't know for many weeks when the who the
Speaker 3: winner was of that electtion from Martha Heller, founder and
Speaker 3: CEO of Heller Search, the executive search firm.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 3: The Apple shares down about one point six percent, not
Speaker 3: taking part in that relatively broad rally, the company sparking
Speaker 3: fresh concerns about revenue growth and lingering weakness in an
Speaker 3: intensely competitive China market. We got Mark German with us.
Speaker 3: He's a Bloomberg News Chief technology correspondent. He joins us
Speaker 3: from La Mark. We heard yesterday from Apple the company
Speaker 3: expects total sales in the current quarter will rise by
Speaker 3: a percentage in the low to middle single digits. Analysts
Speaker 3: wanted to see seven percent. We also saw a decline
Speaker 3: in China revenue last quarter that fell short of estimates.
Speaker 3: Help us make sense of how weakness in China is
Speaker 3: linked to weakness and total sales.
Speaker 11: When they said the guidance for the first quarter on
Speaker 11: the earnings call, I did a double take. I wasn't
Speaker 11: exactly sure that I heard it correctly. Low single digits
Speaker 11: is below expectations, especially all the hype that they're pushing
Speaker 11: for AI and this latest iPhone, all the new products
Speaker 11: they've rolled out that seemed really low, but that is
Speaker 11: the reality sometimes they guide under. But you know, they
Speaker 11: said last quarter it would be a five percent increase
Speaker 11: in revenue y earvery year, and this quarter ended up
Speaker 11: being a six percent year of year increase. So they're
Speaker 11: pretty much lately at least on the money with their guidance.
Speaker 11: So yeah, it'll probably be in the in the you know,
Speaker 11: round five percent or less range for Q one in
Speaker 11: terms of how China plays into this. So China has
Speaker 11: skipped again, right for the fourth quarter. It was a
Speaker 11: year of a year decline, but that decline has improved.
Speaker 11: It's not as bad as it was. We were getting
Speaker 11: used to two three billion dollar a year year of
Speaker 11: the year shortfalls. Right now we're in the half a
Speaker 11: billion dollar range, so you are seeing some improvement there.
Speaker 11: Apple is trying to imply to the street that the
Speaker 11: issues in China are not related to the iPhone, but
Speaker 11: everything that we've seen and heard indicates that the iPhone
Speaker 11: is probably not doing as well as Apple would want.
Speaker 11: In Greater China, you're seeing a lot of new competition
Speaker 11: from Shao Mii and Huawei. More importantly, you're seeing some
Speaker 11: of these other smartphone makers trying new things. Right, I'm
Speaker 11: not saying they're selling well, I'm not saying that they're
Speaker 11: extraordinarily feasible, but at least they're trying new things, whereas
Speaker 11: Apple is sticking to the same formula, the same design,
Speaker 11: many of the same features that they've had for a
Speaker 11: number of years now. And I think that's why you're
Speaker 11: seeing a little bit of softness in China in addition
Speaker 11: to people wanting to buy homegrown products.
Speaker 9: Mark When it comes to other big tech companies, obviously
Speaker 9: Microsoft and Meta is still facing sort of wary investors
Speaker 9: after reporting that rising in AI spending, but it seems
Speaker 9: like Apple's been a bit more cautious when it comes
Speaker 9: to spinning when it comes to AI. Where does it
Speaker 9: stand on this?
Speaker 11: Yeah, I'm not sure that they've been cautious on spending
Speaker 11: on AI because they are trying to be conservative.
Speaker 6: I think that's part of it.
Speaker 11: I think the other component is there's not a ton
Speaker 11: that they need to be spending on AI right now
Speaker 11: because they just don't have the feature set that requires
Speaker 11: the big spending Microsoft, OpenAI, Google, Amazon, They're requiring a
Speaker 11: lot more spend than Apple and artificial intelligence because they
Speaker 11: have a lot more to offer.
Speaker 6: Right That's one part of it.
Speaker 11: The other part of it is, as opposed to all
Speaker 11: these other providers of AI technologies, Apple does a lot
Speaker 11: on device. Their large language model, for the most part,
Speaker 11: can do a lot on the phone itself. It doesn't
Speaker 11: require as much movement to the cloud as some of
Speaker 11: these other providers. So I think it's a mix of that,
Speaker 11: trying to be conservative, not having as much to offer,
Speaker 11: not as much as server centric capabilities. And then the
Speaker 11: third thing, because they're actually able to do a lot
Speaker 11: on the phone itself, which is great from a privacy
Speaker 11: and actually a performing standpoint.
Speaker 6: So it's a mixture there.
Speaker 3: Hey, Mark, iPhone revenue coming in at forty six point
Speaker 3: two billion dollars. It beat estimates of forty five billion dollars.
Speaker 3: How do we know how well the iPhone's sixty is
Speaker 3: selling China?
Speaker 11: Notwithstanding we wait until the end of January or early
Speaker 11: February when Apple announces its first quarter numbers. Don't forget
Speaker 11: a large portion or the majority portion of that forty
Speaker 11: six billion is going to be non iPhone sixteens. You know,
Speaker 11: the quarter is three months long, and you only had
Speaker 11: about a week and a half of sales of those
Speaker 11: latest iPhones, including pre orders as well from the prior
Speaker 11: way to that in the fourth quarter window. So I
Speaker 11: think we need to wait until the first quarter results
Speaker 11: are presented for us to really have a strong idea
Speaker 11: on how the iPhone sixteen is doing. I don't think
Speaker 11: there's going to be a supercycle. What I'm seeing is
Speaker 11: that things are going to be about the same, if
Speaker 11: not a little bit better than the iPhone fifteen Pro.
Speaker 11: And I don't really think a lot of that has
Speaker 11: to do with Apple Intelligence. I think consumers are seeing
Speaker 11: through the marketing engine that Apple is pushing right now
Speaker 11: for Apple Intelligence. I think a lot of it has
Speaker 11: to do with pent up demand. There's a lot of
Speaker 11: folks still on an iPhone ten, a iPhone eleven or
Speaker 11: twelve in earlier, and they need to get a new phone.
Speaker 11: It's not necessarily features driving phone sales.
Speaker 6: At this point.
Speaker 11: It's that people need a new phone every few years because,
Speaker 11: let's just be frank, the battery stops working properly, apps
Speaker 11: lose compatibility, and just overall things just stop working. And
Speaker 11: I think there's a lot of pent up demand and
Speaker 11: a lot of an upgrade cycle for new iPhones are
Speaker 11: driven by the fact that people just need a new phone,
Speaker 11: not because they want one necessarily, but because they need one.
Speaker 11: There are also these just awesome installment plans that many
Speaker 11: of these companies are offering right now. All the carriers
Speaker 11: do it. Apple does it through retail, Apple does it
Speaker 11: through the Apple credit card with Goldman. You have these
Speaker 11: upgrade programs through trade in packages. So there are lots
Speaker 11: of reasons to get an iPhone that have nothing to
Speaker 11: do with the new iPhone's functionality. In years when they
Speaker 11: actually present a major new design or a major new
Speaker 11: set of features that just sets you know, light lights
Speaker 11: that on fire, puts more on the engine there for
Speaker 11: consumers to want to upgrade, so they're getting those phones
Speaker 11: sold no matter why.
Speaker 9: I'm glad you brought that up, Mark, that was something
Speaker 9: I was going to ask you, because it does appear
Speaker 9: that those iPhone sales for Apple were a positive surprise.
Speaker 9: So it does indicate that people with iPhones were that
Speaker 9: potentially were three to four years old, like myself, might
Speaker 9: be ready for an upgrade. I don't know about you,
Speaker 9: tim but what do we know about the timeline?
Speaker 11: Right?
Speaker 9: I think I'm going to hold off maybe potentially to
Speaker 9: next year, But what do we know, Mark? When it
Speaker 9: comes to the timeline of those AI features that people
Speaker 9: are really eager about when it comes to the phones.
Speaker 11: So the first features, which are essentially worthless, they launched
Speaker 11: on Monday.
Speaker 6: Earlier this week. There's quite a few people who are.
Speaker 11: Still complaining on social media that they can't get past
Speaker 11: the wait list. These are features like rewriting messages on
Speaker 11: your behalf notification summaries. Those work about eighty percent of
Speaker 11: the time. The other twenty percent you can get some
Speaker 11: quite hilarious responses. The real stuff, the real Apple Intelligence,
Speaker 11: as I like to call it, that's launching in December.
Speaker 11: That's going to include integration with Chat GPT. I've been
Speaker 11: using that on my Mac. It's terrific. You're getting like
Speaker 11: image playground.
Speaker 3: Wait wait, wait, sorry, I want to cut in here.
Speaker 3: How are you using it on your Mac?
Speaker 4: Right now?
Speaker 3: Mark explain the functionality of it.
Speaker 11: So Apple Intelligence is available on the iPhone, iPad, and
Speaker 11: Mac and on the map. When you get Apple Intelligence,
Speaker 11: you have a new Serie button on the top right
Speaker 11: of your display and you click it and you can
Speaker 11: type in a Serie query. But if you type something
Speaker 11: that Siri doesn't know, which is probably going to be
Speaker 11: most of the time you get routed to chat GPT,
Speaker 11: and basically you get an endless array of potential responses
Speaker 11: and things you can do Chat GPT. Everyone listening to
Speaker 11: this and probably use it. It's awesome. And now it's
Speaker 11: integrated super deeply into the Apple ecosystem, or it will
Speaker 11: be in December when eighteen point two launches on the
Speaker 11: iPad and the iPhone fifteen point two launches from macals Saquoia.
Speaker 11: So I think the chat GPT integration is just terrific
Speaker 11: and I think people are really going to like.
Speaker 3: That is the is the We talked yesterday with Ed
Speaker 3: Ludlow about the search functionality improving on chat GPT as
Speaker 3: a hit to Google. Ed actually has access to it
Speaker 3: because pays for chat GPT. Can you get access to
Speaker 3: it if you don't pay for it through Apple and
Speaker 3: Apple Ai, So.
Speaker 11: You can integrate the paid chat GPT into your account
Speaker 11: on your Apple account, or you can add your free account,
Speaker 11: or you cannot sign in with your open Ai account period.
Speaker 11: So it's totally anonymous what you're doing in terms of
Speaker 11: the queries you're putting into chat GPT, the user interface
Speaker 11: being used right now, at least in this beta period
Speaker 11: is the non search chat GPT, but I would imagine
Speaker 11: over time maybe they'll integrate that. But who knows Apple
Speaker 11: has a Google Search deal to protect, so maybe they
Speaker 11: won't accept that.
Speaker 9: When it comes to some of those base effects that
Speaker 9: a lot of people like to blame, especially when you're
Speaker 9: thinking about big tech earnings, not just Apple but others,
Speaker 9: because there is such a high bar. Obviously in twenty
Speaker 9: twenty two, as you know, there's a beer market at
Speaker 9: US stocks, and obviously the earnings OUTLOK wasn't as strong.
Speaker 9: But once in Vidio had that blockbuster revenue forecast last May,
Speaker 9: obviously that kind of skyrocket the earnings growth for the
Speaker 9: Magnificent seven. But as we go throughout the year, obviously
Speaker 9: the use of the base effects aren't quite as strong
Speaker 9: as a year of a year basis. So how much
Speaker 9: when you're talking with your sources, especially if they're traders
Speaker 9: and investors, kind of look past some of those types
Speaker 9: of issues when it comes to some of the growth
Speaker 9: numbers from a quarter and then a year year basis.
Speaker 11: Yeah, I mean, certainly the AI story plays very deeply
Speaker 11: into the Apple stock price. I mean, I think some
Speaker 11: people won't believe believe this, but I think the Wall
Speaker 11: Street effect played a significant hand. Maybe not in the
Speaker 11: development of Apple's AI features or the reason for moving
Speaker 11: into artificial intelligence in a deeper way, but the way
Speaker 11: they're marketing it. I mean, they essentially lied that that
Speaker 11: the new iPhone was built for the ground up for
Speaker 11: Apple Intelligence, right. The new iPhone essentially support AI the
Speaker 11: same way the prior iPhones did. They essentially were dishonest
Speaker 11: with the rollout timing for many of these features. They
Speaker 11: were dishonest about they're marketing. When these new phones went
Speaker 11: on sale, they marketed them for Apple Intelligence. But Apple
Speaker 11: Intelligence launched a month and a half after they went
Speaker 11: on sale. You know, you can make the argument that
Speaker 11: they're saying it was built for AI, so people knew
Speaker 11: that they would support AI. But I don't think anyone's
Speaker 11: under the impression that Apple wasn't trying to imply that
Speaker 11: they were ready for AI when they simply weren't.
Speaker 6: Now, I'm not going to criticize them for coming out a.
Speaker 11: Month and a half after the new iPhones, right, But
Speaker 11: I do think that you can make a safe argument
Speaker 11: that Wall Street and the way that AI impacts stock
Speaker 11: price and the way AI gets people to invest in
Speaker 11: the company and have interest in the company, played a
Speaker 11: major hand, and then marketing the new phones this way.
Speaker 3: Is that a departure mark from how they've marketed in
Speaker 3: the past.
Speaker 11: I think it's a departure from let's say Steve Jobs
Speaker 11: with CEO of Apple, and Apple was several years behind
Speaker 11: in an extraordinarily core and key technology. I think he'd
Speaker 11: be ripping the company to shreds over this, right. The
Speaker 11: good news is is that Tim Cook is perhaps not
Speaker 11: as volatile as Jobs may have been on these types
Speaker 11: of matters, and he is allowing this thing to roll out,
Speaker 11: and in six months from now there will probably be
Speaker 11: the perception that Apple is in the upper echelon of AI,
Speaker 11: obviously not the leader.
Speaker 6: I do think it's going to take them.
Speaker 11: Five years to become the world leader in AI if
Speaker 11: they ever reached that point. Obviously, the amount of money
Speaker 11: and resources they have the goals to become the number
Speaker 11: one player and AI. I think if they play their
Speaker 11: cards right with making acquisitions that could be helpful, there
Speaker 11: an investment that could be helpful there, they'll get there,
Speaker 11: but it's going to take a while. The good news
Speaker 11: for everyone involved is that the arc of time is
Speaker 11: extraordinarily long, and if Apple becomes number one in five
Speaker 11: years from now, all these conversations, unfortunately, including the ones
Speaker 11: with me, will all.
Speaker 6: Have been moved.
Speaker 8: Mark.
Speaker 3: Before we let you go, we got thirty seconds left
Speaker 3: to talk about pixel Mater.
Speaker 4: What's going on with this acquisition?
Speaker 6: Yeah, this is great.
Speaker 11: Pixel Mater is just simply the best photo editing application
Speaker 11: you can.
Speaker 6: Get across Apple devices.
Speaker 11: If you're an Apple fan and you like photo editing,
Speaker 11: it is extraordinarily well integrated. In fact, some probably would
Speaker 11: argue that they had no idea that pixel Mater wasn't
Speaker 11: an Apple offering. These two companies have been circling each other,
Speaker 11: and it makes so much sense, and this was just.
Speaker 6: A matter of time.
Speaker 11: Anyone who's used pixel Mater, you feel right at home
Speaker 11: as an Apple device user.
Speaker 6: So this is great.
Speaker 11: Aperture was discontinued a decade ago. Now they're back in
Speaker 11: the photo editing business.
Speaker 3: Bloomberg a News chief technology correspondent Mark German out there
Speaker 3: in La Mark, thank you.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Listen live
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Speaker 2: Play and Android Auto with the Bloomberg Business app. You
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Speaker 2: New York station. Just say Alexa, play Bloomberg eleven thirty.
Speaker 9: So, of course, ten millions of Americans can't afford, unfortunately,
Speaker 9: to buy a home or rent a suitable apartment, making
Speaker 9: housing of course a key and central issue for voters
Speaker 9: in the US presidential election coming up on next Tuesday.
Speaker 9: And the biggest reason home ownership is out of reach
Speaker 9: for many is there aren't nearly enough home for sales
Speaker 9: to balance out the market between buyers and seller, something
Speaker 9: that's been exacerbated especially after the pandemic. But the election
Speaker 9: may still not have an immediate impact on the housing
Speaker 9: market in the short run, even with the Fed's latest
Speaker 9: rate cut, as mortgage rates still keep many home shoppers
Speaker 9: on the sidelines. So let's deep diver with Jenna Stoffer,
Speaker 9: global real estate advisor at Fossilby's International Realty, joining us
Speaker 9: from Key West, Florida. Thanks so much, Jennifer joining us.
Speaker 9: And I was just looking at the Freddie Mac data.
Speaker 9: Of course we get weekly here. If you look at
Speaker 9: the thirty year fixed rate mortgage actually went higher about
Speaker 9: six point seven percent, and then the fifteen year, he
Speaker 9: also rose to about six percent. Of course, even despite
Speaker 9: the fact that we did just see the FED cut
Speaker 9: rates by about fifty basis points back in September, so
Speaker 9: kind of set up the dynamic for us when you
Speaker 9: have the situation where we did see some of the
Speaker 9: mortgage rates come down for a little bit, but now
Speaker 9: they're starting to creep up higher and obviously keeping people
Speaker 9: on the sidelines here.
Speaker 12: Absolutely. Unfortunately, these rates have gone higher, and I think
Speaker 12: there were a lot of perspective home buyers out there.
Speaker 12: They were hoping that these rates were going to go lower.
Speaker 12: I think that there were a lot of economists at
Speaker 12: the beginning of the year too, they predicted that rates
Speaker 12: were going to be much lower than where they are
Speaker 12: right now, and unfortunately, this is where we're at. In fact,
Speaker 12: I really think that some buyers, perspective buyers out there,
Speaker 12: they need to kind of get used to the idea
Speaker 12: that I think rates are probably going to stay around
Speaker 12: this level. And you were just talking about how many
Speaker 12: people are struggling to get into the housing market, and
Speaker 12: this is what's going on in the housing market. We
Speaker 12: have an affordability and really an accessibility crisis, and there's
Speaker 12: so many people that want to get in. They're just
Speaker 12: struggling to get into the most expensive housing market. We've
Speaker 12: really watched the fastest deterioration in housing affordability that we
Speaker 12: have seen in recent history. I think it would be
Speaker 12: really hard to go back and find three consecutive years
Speaker 12: where housing has to deteriorated this quickly. And there's just
Speaker 12: a lot of challenges that that people are facing, not
Speaker 12: just rates, but but the home prices, the elevated cost
Speaker 12: of living. There's just so many factors at play that's
Speaker 12: making it really difficult for people to enter this housing market.
Speaker 3: Jess, before she did real estate, Jenna was a broadcaster.
Speaker 3: She worked at a TV station in North Carolina. So
Speaker 3: there's hope for us.
Speaker 8: There is there's hope for us. We can this life.
Speaker 4: We have other options.
Speaker 12: Later, that's right, you could join me selling real estate
Speaker 12: in Key West.
Speaker 4: Well, well, you know, I got to ask you.
Speaker 3: Obviously you're you're focused on this one geographic area, But
Speaker 3: I'm wondering how you watch real estate throughout the country,
Speaker 3: because that's one thing that I noticed these campaigns don't
Speaker 3: necessarily have a solution.
Speaker 4: For real estate is local.
Speaker 3: We know that and Just because there's a housing crisis
Speaker 3: in the country doesn't mean it can be solved in
Speaker 3: one place, or it can be solved by building in
Speaker 3: one place if that crisis doesn't exist in that single place.
Speaker 3: This is a really tough thing to do. And even
Speaker 3: though it's a folks of national politics, we know that
Speaker 3: this is much more a local issue. It involves zoning,
Speaker 3: It involves rule changes.
Speaker 12: Absolutely. I think that zoning, what you're talking about, zoning reforms,
Speaker 12: this is one of the biggest things that I think
Speaker 12: has to take place. And of course that's going to
Speaker 12: start at a local level. It's going to be on
Speaker 12: a state level too, But I think that what has
Speaker 12: to happen on a local state, even on a federal level,
Speaker 12: there has to be collaboration. There are so many barriers
Speaker 12: that builders are really facing when we really talk about
Speaker 12: that inventory crisis that we're in right now. We're short,
Speaker 12: according to some estimates, around four point five million homes.
Speaker 12: Some estimates that number is even much higher. And it
Speaker 12: took us years to get here. I mean, this has
Speaker 12: been a chronic, slow going crisis. You could take it
Speaker 12: all the way back to twenty ten. So because it
Speaker 12: took us years to get here. Of course, it was
Speaker 12: accelerated during the pandemic. It's going to take us years
Speaker 12: to get out of fear, but we have to start
Speaker 12: taking steps. I think at the local level, you've got
Speaker 12: to start removing barriers. You talk with builders and there's
Speaker 12: so many upfront costs that they're having to pay before
Speaker 12: they can even break round. So this is something we
Speaker 12: really have to address if we want to tackle the
Speaker 12: supply issue.
Speaker 9: When it comes to monetary policy, obviously, when you think
Speaker 9: about a barometer like the ten year treasure yield of
Speaker 9: what that means for barring costs, especially for mortgage rates
Speaker 9: as well, where do you think, especially because we've been
Speaker 9: in such an aggressive hiking cycle over the past few years,
Speaker 9: where would rates need to kind of neutralize at to
Speaker 9: really help more people step in and start either to
Speaker 9: refinance or step in to try to get borrowing to
Speaker 9: finance for a home.
Speaker 12: Well, I think there needs to at least be a five.
Speaker 12: I think that that. In fact, I really think the
Speaker 12: magic number would be a four because what else we're
Speaker 12: really struggling with in the housing market right now is
Speaker 12: a lock in effect, and I don't know if we're
Speaker 12: going to get to that rate. I really predict that
Speaker 12: we're probably going to stay around this rate for a while.
Speaker 12: But because the lock and effect is so real. Look
Speaker 12: at the mortgage holders right now. You have sixty percent
Speaker 12: of them they're holding onto rates that are below four percent.
Speaker 12: You have around twenty three percent of mortgage holders they're
Speaker 12: holding onto rates that are below three percent. Why are
Speaker 12: they incentivized to enter the most expensive housing market in
Speaker 12: history and let go of this rate that they might
Speaker 12: never get again in their lifetime. So this is the
Speaker 12: problem that we face, and unfortunately, I just don't think
Speaker 12: we're going to get rates to this magic number that
Speaker 12: we really need to get it to to see the
Speaker 12: housing market really start moving again.
Speaker 9: Regionally, what areas are most vulnerable? Obviously we're here in
Speaker 9: New York, so you know, me being a millennial, I
Speaker 9: still rent, but I know obviously my buddies in California
Speaker 9: have similar problems. But then what other areas beyond when
Speaker 9: you're looking at the coasts are vulnerable right now?
Speaker 12: Well, I think there's a lot of areas that are vulnerable.
Speaker 12: Obviously there's some very expensive markets in California. You know,
Speaker 12: something that we are seeing happening with real estate being
Speaker 12: so localized. There are a lot of markets where you
Speaker 12: are seeing inventory start to pick up. And I do
Speaker 12: want to bring up some positive things with the housing market,
Speaker 12: because I feel like I've been a little negative and
Speaker 12: there are some positive things happening. You are seeing inventory
Speaker 12: levels pick up, and in one of these areas where
Speaker 12: you're seeing inventory levels pick up is where I'm at
Speaker 12: here in Florida. Also Tech this is another area where
Speaker 12: you're seeing inventory levels pick up. And when you have
Speaker 12: these inventory levels pick up, what happens is you start
Speaker 12: happening a softening in home prices. So these are some
Speaker 12: areas where you're seeing a softening in home prices. And
Speaker 12: then you have other areas I would say specifically in
Speaker 12: the Midwest, the Northeast. These areas really are the supply
Speaker 12: and demand just is so out of balance. So you're
Speaker 12: seeing these prices just continue to go up because there's
Speaker 12: such a lack of supply.
Speaker 3: What happens to supply when we see demographic shift here,
Speaker 3: and what I'm talking about, to put it in another way,
Speaker 3: is when the boomers who aren't moving either move or
Speaker 3: die and this so called great wealth transfer begins, do
Speaker 3: we see a great unlocking of homes becoming available, or
Speaker 3: will supply still be lower than demand.
Speaker 12: I think it's going to take time. I know they
Speaker 12: call it the silver tsunami, and I think that it's
Speaker 12: just going to take time. Sure, some homes will come
Speaker 12: on the market with the baby boomers, I mean they
Speaker 12: do want to downsize, but you do have some of
Speaker 12: these baby boomers that if they want to.
Speaker 4: Not if they don't have a mortgage right now, and
Speaker 4: you know that's.
Speaker 12: Right, yeah, yeah, because if they're holding onto that two
Speaker 12: or three right mortgage rate, why do they want to
Speaker 12: get rid of that right now? So sure, eventually, I
Speaker 12: mean they're going to have to move. People have to move,
Speaker 12: People need to move for a number of reasons. So
Speaker 12: it's just I think that with them coming on the market,
Speaker 12: it's just going to take time for us to get
Speaker 12: back to this healthy supply and demand balance.
Speaker 9: I'm glad you brought that up because we had some
Speaker 9: earnings from d R Horden earlier this week. Some of
Speaker 9: their outlooks kind of disappointed investors. But when it came
Speaker 9: to homebuilder stocks, I mean a typical index, they actually
Speaker 9: touched a record high back in the middle of October.
Speaker 9: But I'm kind of wondering does this open the door
Speaker 9: for potentially more homebuilding, especially because this has continued to happen.
Speaker 9: What do we seeing in that space for like first
Speaker 9: time kind of home buyers when it comes to starting
Speaker 9: homebuilding process.
Speaker 12: Well, home building new home sales specifically, they have really
Speaker 12: been at the bright spot in the housing market because
Speaker 12: these builders are able to do some buydowns of rates.
Speaker 12: So I think with new home sells, this is really
Speaker 12: where people are migrating towards because they can get lower
Speaker 12: rates than they're getting in the existing home market. Also,
Speaker 12: I think something that people really want right now is
Speaker 12: that they're going to be entering the most expensive housing market.
Speaker 12: They want the house ready to go. They don't want
Speaker 12: to be having to pay money for repairs or maintenance.
Speaker 12: So this is where new home seals. I mean, again,
Speaker 12: this is another big right spot because you have these
Speaker 12: buyers that are dealing with these high home prices. At
Speaker 12: least they know they can be moving into a brand
Speaker 12: new home and they're not going to have to be
Speaker 12: spending money down the line on a lot of maintenance costs.
Speaker 4: How's the market in Florida where you are in Key.
Speaker 12: West, So in Florida, what we're seeing here is we
Speaker 12: are seeing more in come to the market, so you
Speaker 12: are seeing some softening in the market. Absolutely in terms
Speaker 12: of single family homes. That's much different than condo sales.
Speaker 12: In fact, what's happening with condos is we're having a
Speaker 12: lot of changes that have come into place due to
Speaker 12: the surf side collapse. There's new regulation talk. Yeah, they're
Speaker 12: being faced with really high assessments, and for some of
Speaker 12: these condos owners, these assessments are just are too high.
Speaker 12: You have a lot of retirees that are on fixed incomes,
Speaker 12: so you're seeing more condos come onto the market. But
Speaker 12: in terms of single family homes, yeah, we are seeing
Speaker 12: a pickup, so we're seeing a softening. But look, Florida
Speaker 12: has really led the nation in terms of population growth.
Speaker 12: We had such a boom down here, so for us
Speaker 12: to have a little bit of a softening, it's not
Speaker 12: necessarily a horrible thing.
Speaker 3: This certainly the surf side tragedy an issue because of
Speaker 3: those assessments and regulations, but also what about insurance companies
Speaker 3: and the difficulty in getting insurance or the expense of
Speaker 3: getting insurance due to flooding.
Speaker 12: This is one of the big challenges that Florida faces
Speaker 12: is insurance. I mean, you talk with people and they
Speaker 12: are fed up with high insurance costs down here. So
Speaker 12: I know we do have some reforms that are in place,
Speaker 12: but it's going to take time for us to really
Speaker 12: get a handle on the insurance problem. But hey, this
Speaker 12: is a challenge that we face without a doubt here
Speaker 12: in Florida. Are these high insurance costs.
Speaker 4: Jenna, thanks so much for joining us. Do appreciate it?
Speaker 9: No, I mean great stuff hearing from her, but especially
Speaker 9: something I was thinking about as well, Tim when it
Speaker 9: came to the concessions in kind of the depths of COVID.
Speaker 9: When it came to people that were looking for home buying,
Speaker 9: there were so many different things people could try to get.
Speaker 9: But looking at now, it's obviously kind of a different
Speaker 9: process here. So for people like myself who eventually want
Speaker 9: to be a home buyer, eventually, right is right how
Speaker 9: that all plays out, But we'll wait and see.
Speaker 4: We will that.
Speaker 3: We were joined by Jenna Stafford, global real estate advisor
Speaker 3: over at Southeby's International Real So she was joining us
Speaker 3: from Key West, Florida.
Speaker 12: I'm brother Mack on.
Speaker 8: The journal.
Speaker 3: How about you let me drive.
Speaker 2: Oh no, no, no, no, who's going to drive home?
Speaker 9: Honey?
Speaker 8: Please I'll do the riding gravels.
Speaker 9: Let's mate, I want to try it.
Speaker 10: It's good question that time.
Speaker 2: This please the drive to the Globe dot com TM
Speaker 2: me think well, Brunelda On on.
Speaker 9: Bloomberg Radio, Jess Mitton and Tim Stenovik here in the
Speaker 9: Bloomberg Interactive Brokers studio here in New York, with less
Speaker 9: than twenty minutes to go before the closing bell on
Speaker 9: this Friday, S and P five hundred up just marginally
Speaker 9: five ten percent off a little bit of the highs here,
Speaker 9: still on pace for a weekly decline of more than
Speaker 9: one percent, but still up, of course twenty percent for
Speaker 9: the year. But as the calendar did just flip to
Speaker 9: November next week, there's a barrage of events as we know,
Speaker 9: with the US presidential election of course, also the Federal
Speaker 9: Reserve meeting next Thursday, a flurry of corporate or and
Speaker 9: eventually we'll also have at thirteen f deadline. So let's
Speaker 9: sus us more on today's trade with Carol's Life, chief
Speaker 9: investment officer at Bibo Family Office from Minneapolis. Thanks so
Speaker 9: much for joining us. Carol always great getting your perspective
Speaker 9: on all things markets, and especially as we head into
Speaker 9: next week's pivotal week. How are you positioning and how
Speaker 9: are you advising clients to position when you're going into
Speaker 9: such a contentious neck and neck race, And is the
Speaker 9: more sure bet looking maybe beyond that and instead to
Speaker 9: the Federal Reserve monetary policy.
Speaker 13: The more short bet is looking even beyond that and
Speaker 13: taking a deep breath and keeping one's head about one
Speaker 13: because this week had no lack of news either, and
Speaker 13: so staying focused on that long term is really important.
Speaker 13: And you know, we actually our stock at trade, if
Speaker 13: you will, is helping clients build durable portfolios, understanding what
Speaker 13: their goals are and looking through this and it's really
Speaker 13: important to remember to pull through the underlying fundamentals. And
Speaker 13: there's a lot of themes. There was a lot of
Speaker 13: themes you could pull out of the earnings of this
Speaker 13: week in the last few weeks in terms of the
Speaker 13: resiliency of the consumer, the big important secular changes we
Speaker 13: have going on in this economy, and a lot of that,
Speaker 13: and so building portfolios that have a foot in some
Speaker 13: fixed income where you're getting paid to sit on yield,
Speaker 13: but leaning into that growth trend that we do see
Speaker 13: for a longer term, and just.
Speaker 12: Trying to trying to keep an even keel.
Speaker 13: Amidst all of the volatility on a day to day
Speaker 13: basis is our key objective.
Speaker 9: Right and looking at the volatility even the vis obviously
Speaker 9: Wall Street's chief ear gauge rising back above twenty again
Speaker 9: this week. When you're looking more on a sector basis,
Speaker 9: specifically on the equity side, which sectors in particular do
Speaker 9: you like over the long term, say over the next
Speaker 9: six to twelve months, versus those that you're shying away from,
Speaker 9: And a lot of it, I'm sure is difficult because
Speaker 9: when it comes to policy proposals, I know that traders
Speaker 9: really like gridlock because that'll keep certain things in check
Speaker 9: when it comes to healthcare and tech revelation and things
Speaker 9: like that.
Speaker 13: You know, on the one hand, it is interesting because
Speaker 13: looking at those policies, it will be impactful on certain sectors.
Speaker 13: But whatever the incoming Congress is, we need them to work.
Speaker 9: I know.
Speaker 13: The theory is Wall Street enjoys a gridlock to Congress,
Speaker 13: but there's a lot of stuff that has to get
Speaker 13: passed and dealt with in the next one to two years.
Speaker 13: You've got the expiration of the tech the earlier tax
Speaker 13: cuts in twenty twenty five. You've got the renegotiation of
Speaker 13: the USMCA and trade policy in twenty twenty six.
Speaker 10: So there will be a lot to do post election.
Speaker 13: But as for the industries that we like, we really
Speaker 13: think that this industrial the reindustrialization theme that bringing key
Speaker 13: industries back here, that horse is long out of the
Speaker 13: proverbial barn, and no matter who's in power at sixteen
Speaker 13: hundred Pennsylvania Avenue next week, those trends are going to continue.
Speaker 13: When you look at part of what the markets have
Speaker 13: been grappling with this week in terms of not appreciating
Speaker 13: that we're not seeing margin improvement right away from all
Speaker 13: the AI spend, but that data center spend is being
Speaker 13: done by the private sector. The data center use cases
Speaker 13: are being built by the private sector, so that the
Speaker 13: industrial theme is very impactful, and those data centers need
Speaker 13: to be hooked to a grid, and the grid isn't
Speaker 13: substantial enough right now to be able to support that,
Speaker 13: so there's a lot of knock on effects there. In
Speaker 13: terms of reindustrialization, you've seen some iffy economic numbers out
Speaker 13: of manufacturing and construction but a lot of that is
Speaker 13: because it's waiting to see what happens in the next
Speaker 13: couple of weeks as we settle out the election, and
Speaker 13: we think there's a lot of pent up demand for
Speaker 13: those industrial sectors and the playout, and there's a variety
Speaker 13: of other industries we like as well.
Speaker 3: Carol, can you help me help me understand that, because
Speaker 3: this is something I don't understand. We know it's either
Speaker 3: going to be Trump or Harris, like that much is clear.
Speaker 3: So why is there this holdout as to investment or
Speaker 3: what people are buying or making decisions, because we know
Speaker 3: it's one of two choices, right.
Speaker 13: But I think one of the things that's really important
Speaker 13: to remember is there's this nuance between both parties. Right
Speaker 13: now are on the campaign trail making all sorts of
Speaker 13: promises about tax cuts. Well, tax policy isn't in the
Speaker 13: purview of the of the White House. It's the purview
Speaker 13: of Congress. So you've got a whole bunch of elections
Speaker 13: to resolve before you can move tax policy. On the
Speaker 13: other hand, tariffs can be moved by presidential decrees. So
Speaker 13: depending on which outcome in the White House is whether
Speaker 13: it's a Harris or Trump, there's very different tear iff
Speaker 13: policy that could impact these businesses right away. You've got
Speaker 13: some businesses already positioning presuming like the rest of the
Speaker 13: market has in the last couple of weeks, you know,
Speaker 13: discounting if you will, of red wave and assuming that
Speaker 13: we are going to see TARRAF. So you've got companies
Speaker 13: anecdotally saying that they're already prepping to raise prices in
Speaker 13: terms of as because it's a business cost and a
Speaker 13: consumer costs bringing those goods in. So everyone's looking at
Speaker 13: things getting prepped to do it. You've also got companies,
Speaker 13: you know. The parallel issue is the second big event
Speaker 13: of next week, the FED meeting, and the fact that
Speaker 13: you've got companies waiting to watch FED policy as they
Speaker 13: bring rates down, because why do m and A and
Speaker 13: fund m and A if the Fed's going to bring
Speaker 13: rates down again in the next at the next meeting.
Speaker 13: And so some of that too, just going into your
Speaker 13: end and the sheer necessity to close off this year
Speaker 13: and prep for next year. It's pretty typical from a
Speaker 13: calendar standpoint to have softer activity going into your end.
Speaker 9: So with the FED decision coming up next Thursday, what's
Speaker 9: your expectation from the decision, and what do you expect
Speaker 9: to hear from fetch your pal.
Speaker 13: Do you expect to hear the chairman? We expect them
Speaker 13: to cut by a quarter basis.
Speaker 10: Point next week.
Speaker 13: And one of the things is is it's important to
Speaker 13: remember that the policy rate right now is substant is
Speaker 13: restrictive aside from we've had good economic growth, but it's
Speaker 13: restrictive relative to where the rate of inflation is. So
Speaker 13: the Fed's got some room to start stepping it towards
Speaker 13: that more neutral rate of inflation without it being a
Speaker 13: testament to either the economy is good or the economy
Speaker 13: is bad, just to get them more aligned. And businesses
Speaker 13: have told the Fed repeatedly, if you parse through the
Speaker 13: last couple of Beige books, they've told the Fed, look,
Speaker 13: when you start, lay out a very clear path for
Speaker 13: us in terms of what that process is going to be.
Speaker 10: Don't start stop, start stop.
Speaker 13: Because that makes that business planning even more difficult. Just
Speaker 13: give us some sort of vision. So we do expect
Speaker 13: in the or in the press conference that happens after
Speaker 13: that that Chairman Pow will be very careful as he
Speaker 13: normally is laying out that path and giving us some
Speaker 13: clear site. Whether or not they cut in December is
Speaker 13: an open question, but six to twelve months from now,
Speaker 13: that path and that trajectory towards a more neutral rate
Speaker 13: should be clearer.
Speaker 3: Carol, thanks so much for joining us. That's carolsh Life,
Speaker 3: chief investment Officer over at BEMO Family Office. She joins
Speaker 3: us from Minneapolis.
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