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Speaker 3: As Amy was just reporting Apple moving higher, it's now
Speaker 3: intra day all time record. Good for them. It's taken
Speaker 3: the lead over in Nvidia as the second most valuable
Speaker 3: company in the world while also reclaiming the three trillion
Speaker 3: dollar market cap valuation.
Speaker 2: So big day for.
Speaker 3: Apple stocks shareholders. Good news for them. Let's break it
Speaker 3: down a little bit here. Angelo Zeno joins US vice
Speaker 3: president and senior equity analyst at c FR A Research
Speaker 3: journey US from Nueva York via zoom Angel.
Speaker 2: Thanks so much for joining us here.
Speaker 3: How did you take How did you interpret yesterday's news
Speaker 3: from Apple? How big of a deal or not was
Speaker 3: their announcements?
Speaker 1: Yeah?
Speaker 4: I mean thanks for having me, guys, So you know,
Speaker 4: as far as you know how a good deal it is,
Speaker 4: we think it's a big deal to us. You know,
Speaker 4: Siri probably just got its biggest upgrade ever since it's
Speaker 4: you know, original kind of appearance back in twenty eleven.
Speaker 4: And you kind of look at what they've done across
Speaker 4: the ecosystem and the new you know, the new AI
Speaker 4: capabilities and tools that they're going to push out to developers. Now,
Speaker 4: there's going to be a lot that they can do
Speaker 4: with these tools, and you know, in terms of upgrading
Speaker 4: their apps and providing new capabilities out there to the
Speaker 4: consumer may not necessarily be something you see over the
Speaker 4: next kind of three to six months, may take you know,
Speaker 4: may take some time here. That's why we told investors
Speaker 4: out there this is going to be more evolutionary than
Speaker 4: it is some sort of super cycle that you're going
Speaker 4: to see later this year. But that said, I mean,
Speaker 4: I think what's really important here is you kind of
Speaker 4: look at most consumers out there today. Most consumers aren't
Speaker 4: using kind of AI in the sense of chat, GPT
Speaker 4: among other type of you know, large language models out
Speaker 4: there to the extent that they possibly can. And when
Speaker 4: you kind of think about what Apple is doing is
Speaker 4: they're probably they're throwing that kind of you know, ability
Speaker 4: out there for consumers to have it directly in their hands.
Speaker 4: So we think that's a big deal, and we think
Speaker 4: that's going to cause consumers out there to ultimately upgrade.
Speaker 4: May not be the sixteen, it might be the seventeen,
Speaker 4: but ultimately it's a very positive thing for the evolution
Speaker 4: of Apple.
Speaker 5: You maintained a by rating on this stock after yesterday's
Speaker 5: news following the conference, but then also if you look
Speaker 5: at the an R function, I know Paul likes to
Speaker 5: look at this. In the terminal, there's forty buys, fifteen holes,
Speaker 5: five cells. And Paul and I were just chatting about
Speaker 5: how this stock when you're looking at Apple up more
Speaker 5: than two twenty percent, is that April nineteenth low. How
Speaker 5: much more room do you think the shares have to
Speaker 5: run now?
Speaker 4: Yeah, suggest I think I think that's a great point.
Speaker 4: So you kind of look at the move that they
Speaker 4: had going into the announcement here, right, I mean, it's
Speaker 4: a fantastic move though the stock was actually down I
Speaker 4: think about fourteen percent on a year to date basis
Speaker 4: into late April, right, And I think that's kind of
Speaker 4: the story from January to April was, Hey, listen, we've
Speaker 4: got some China issues. Expectations in the second half of
Speaker 4: this year may not be able to be met. Now
Speaker 4: you kind of change the narrative around since kind of
Speaker 4: their earnings were released in early May, as well as
Speaker 4: kind of the developer's conference here to one, whereas, hey,
Speaker 4: those numbers may not be attainable to You know, we've
Speaker 4: gotten now six percent expected growth for the iPhone sixteenth cycle.
Speaker 4: There's probably upside to that number instead of downsides. So
Speaker 4: in argue, the narrative has changed. It's all about whether
Speaker 4: or not or how much upside can we see from
Speaker 4: that iPhone sixteenth cycle. At this point in time, we
Speaker 4: think there's upside to the six plus six percent number,
Speaker 4: probably at least eight to ten percent. It'll all be
Speaker 4: sighted also on whether or not Apples can kind of
Speaker 4: or Apple looks to increase prices in the next cycle.
Speaker 4: That remains to be seen. But in our view, there's
Speaker 4: upside potential that still remains despite the move that we've
Speaker 4: seen here over the last five to six weeks.
Speaker 3: So Angel, I'm out there in the marketplace sporting in
Speaker 3: Apple iPhone eleven.
Speaker 2: So I'm guessing I'm right for the upgrade eleven. Yeah,
Speaker 2: I guess I have a fourteen.
Speaker 5: I guess mine's a few years old.
Speaker 2: Here's this sex. It's ridiculous.
Speaker 3: So Angelo, do you think there can be people like
Speaker 3: me that are gonna take this AI features that will
Speaker 3: be coming out in the in the iPhone sixteen, I
Speaker 3: guess in mid September. Are there gonna be people like
Speaker 3: me that are going to go out and upgrade? Is
Speaker 3: this gonna be a real driver of unit sales?
Speaker 2: Do you think?
Speaker 1: Yeah?
Speaker 4: I mean, listen, I think, well, first off, you know,
Speaker 4: there's not much of a bar to be here because
Speaker 4: the iPhone's fifteen cycle is a down cycle. If you
Speaker 4: actually look at the four teen cycle, it was relative
Speaker 4: relatively flat cycle as well as well. So we've kind
Speaker 4: of had this kind of pause here over the last
Speaker 4: kind of two cycles in terms of on a unit basis, right,
Speaker 4: Whereas the twelve and thirteen really took a lot of
Speaker 4: kind of upside there because of some of the you know,
Speaker 4: the China market share gains because of the five G cycle,
Speaker 4: upgrade cycle and what have you. So as we kind
Speaker 4: of now here look here into the sixteen cycle, I
Speaker 4: think a number of things here, as far as kind
Speaker 4: of the fact that the iPhone twelve was that that
Speaker 4: last big upcycle. You're now looking at four years past that.
Speaker 4: So a lot of the twelve consumers out there are
Speaker 4: going to potentially look to upgrade. But for someone like
Speaker 4: you or even someone like myself that haven't upgraded in years,
Speaker 4: this is I mean, forget about the AI capability.
Speaker 6: It's just the camera.
Speaker 4: Capabilities that we've seen since the iPhone eleven. It should
Speaker 4: kind of you're going to see some notable enhancements, but
Speaker 4: I do think kind of that the new AI capabilities
Speaker 4: out there will drive some of those older consumers to upgrade.
Speaker 4: I think all so listen, this is these AI capabilities
Speaker 4: don't work on anything kind of outside of the fifteen
Speaker 4: uh pro devices kind of, so so you can even
Speaker 4: potentially see some you know, iPhone thirteen users or fourteen
Speaker 4: users out there look to upgrade as well.
Speaker 5: Talk to us more about when we're saying AI capabilities,
Speaker 5: what exactly are we going to be able to use
Speaker 5: on those devices that's going to be different from before.
Speaker 4: Yeah, I mean listen, I think most of it is
Speaker 4: pretty basic in nature versus kind of what we've seen
Speaker 4: thus far, and some of the announcements we've seen right
Speaker 4: in terms of what Samsung has announced at the S
Speaker 4: twenty four, what we've seen Alphabet with the Google Pixel.
Speaker 5: And what have you.
Speaker 4: But you know, clearly Theories getting its upgrade is the
Speaker 4: big thing out there. You know, embedding chat GP functionality
Speaker 4: in there as well as a big deal. But you know,
Speaker 4: they showcase capabilities, rewrite, summarization, gen Moji might be a
Speaker 4: cool thing with you know, some of the the younger
Speaker 4: users out there. They showed some you know, cool stuff
Speaker 4: on the photo side of things. So they're going to
Speaker 4: be incremental additions in terms of AI across their ecosystem
Speaker 4: that you're going to be able to kind of use
Speaker 4: and just ultimately kind of make yourself just more efficient
Speaker 4: in nature. I mean, if there was something in an
Speaker 4: email that you had forgotten to put in your calendar,
Speaker 4: that's something that kind of theory is going to be
Speaker 4: able to help you with, whereas you do no longer
Speaker 4: have to kind of go back and search that in
Speaker 4: your email box. So a lot of kind of small
Speaker 4: useful information. We'll see how how well this works once
Speaker 4: it actually comes out and it's exactly in the hands
Speaker 4: of consumers out there. But that said, you know, I
Speaker 4: think a lot of it is incremental. But I think
Speaker 4: the way Apple kind of markets their iPhone devices and
Speaker 4: older devices in general, when you kind of throw the
Speaker 4: Aire storyline on top of it, on top of that,
Speaker 4: I think that's really what kind of is going to
Speaker 4: capture the appeal of a lot of those consumers out there.
Speaker 3: All right, Angela, thank you so much for joining us.
Speaker 3: Angelo Zeno us a vice president and senior equity annals
Speaker 3: at cfr A Research.
Speaker 2: I actually think I will go and get a new iPhone.
Speaker 3: With the new one in September, look at you, and
Speaker 3: I'm not for Ai'm not for the camera, and I
Speaker 3: just I don't know.
Speaker 5: I kind of need a new care. I don't know
Speaker 5: if my mine's a little too fuzzy and granny. However,
Speaker 5: I have dropped my phone many times, so that's not
Speaker 5: Apple's pot that's actually my own.
Speaker 2: Well, my thing is it's all about the battery.
Speaker 3: When the battery starts to die, that's my clue upgrade
Speaker 3: and it has been kind of losing its right.
Speaker 5: I keep having to charge mine multiple times.
Speaker 2: So I think that's kind of the way that's historically
Speaker 2: been so you know.
Speaker 5: What, maybe you and I both will have new phones
Speaker 5: walk over.
Speaker 3: I mean, the good news is we have a huge
Speaker 3: Apple store just you know, right down the block here.
Speaker 2: It's right Fifth Avenue.
Speaker 3: Across from the plaza, across from the plaza, and I
Speaker 3: walk past the pen station every day. Sometimes is going
Speaker 3: there with the other throngs of billions tourists go to
Speaker 3: that show.
Speaker 5: Oh it's it's always packed.
Speaker 2: It's always packed. Crazy. So maybe I'll go there.
Speaker 3: And that's where Tim Cook comes when he comes into
Speaker 3: the city. Does some of his product launches there?
Speaker 5: That's right, that's stock trading above two hundred and two
Speaker 5: dollars right now, still trading at an intra day wreck,
Speaker 5: so clipsing those December all time highs.
Speaker 2: Paul, good good news for our friends in Cooper Tina.
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Speaker 3: Tomorrow Again, all eyes turned to the Federal Reserve as
Speaker 3: it tends to do from time to time. We have
Speaker 3: the statement coming out of two PM press conference at
Speaker 3: two thirty Michael McKee, Bloomberg's own Michael McKee probably hopping
Speaker 3: on the asella later second and hitting down to DC
Speaker 3: so he can badger FED Chairman Jay Palill in our studio.
Speaker 5: Oh so exciting to suspend the soccer.
Speaker 3: He must have found the Jersey transit train station which
Speaker 3: he lost forgot about for a long time. I hered
Speaker 3: Jersey Chief US interest rate strategies for Bloomberg and College
Speaker 3: studio in studio with the soccer carball suspenders, which just loves.
Speaker 3: I guess tomorrow our expectations should be low for market
Speaker 3: moving news coming from the FED is how we should
Speaker 3: approach it.
Speaker 2: Well, not necessarily.
Speaker 7: You know that there's the possibility that the FED will
Speaker 7: shift its dots not only for this year, but more importantly,
Speaker 7: at least from my perspective, will be the twenty twenty
Speaker 7: five and twenty twenty six dots. So if the FED
Speaker 7: were to move those up because they think that maybe
Speaker 7: the economy is going to be a little bit more robust,
Speaker 7: they won't have to cut interest rates quite as aggressively
Speaker 7: as the prior top plot from the March meeting, then
Speaker 7: the back end of the yield curve in treasuries could
Speaker 7: potentially move quite a bit.
Speaker 2: We don't see.
Speaker 7: Liquidity isn't great right now in the treasury market, so
Speaker 7: you can easily have a ten or fifteenity.
Speaker 3: Great, it's the biggest market of anything.
Speaker 7: Well, but that's the reason, right we've been issuing a
Speaker 7: whole lot of debt and there's only a limited number
Speaker 7: of buyers. So you know, just because you have a
Speaker 7: lot of debt doesn't necessarily mean that there's going to
Speaker 7: be an equal number of buyers out there. So it's
Speaker 7: more it's not that the market's not owned, right that
Speaker 7: So the Treasury Department issues bonds every single almost every
Speaker 7: week now but but basically all the time, and those
Speaker 7: get purchased. Now, the question is in the secondary market,
Speaker 7: how easy it is to sell those bonds into the
Speaker 7: into the market and is there a natural buyer on
Speaker 7: the other side, And the answer is sometimes yes, but
Speaker 7: but occasionally in order to find those buyers, the price
Speaker 7: has to move quite significantly to you know, to entice
Speaker 7: people into the market.
Speaker 5: What do you think bond investors want to hear from
Speaker 5: FED chair pal versus what you think we actually will
Speaker 5: hear in his commentary.
Speaker 7: Well, you know, bond investor, if you're long, you want
Speaker 7: to hear them say that, hey, we're going to cut
Speaker 7: interest rates, you know, starting in July, and and you
Speaker 7: know that that's certainly what what the longs would like
Speaker 7: to see, right, We're not going to hear hear anything
Speaker 7: like that. In fact, we might just hear the opposite.
Speaker 7: And I think that's one of the reasons why the
Speaker 7: people in the treasury market have been pretty cautious. There's
Speaker 7: positioning is now much. You had a lot of people
Speaker 7: who were short. They kind of exited those positions when
Speaker 7: we were actually near current levels or even with the
Speaker 7: yields maybe ten or fifteen base points higher.
Speaker 8: But the.
Speaker 7: Sell off that they think is constrained because it does
Speaker 7: seem like the Fed believes and is trying to convince
Speaker 7: everyone that at some point we're going to cut interest rates.
Speaker 7: So it's going to be hard for sell offs to
Speaker 7: be maintained for a very long period of time. Particularly
Speaker 7: now going back to that supply story, the Treasury Department
Speaker 7: is not issuing more debt than it had been before.
Speaker 7: The issuance pace is basically constant, where as you go
Speaker 7: back six nine months ago, they were continuing to increase
Speaker 7: the amount of debt that they were issuing, and that's
Speaker 7: actually slowed down quite a lot.
Speaker 3: What does a government bond trader do today before a
Speaker 3: FED meeting? Did they make sure they're flat, they're fully hedged?
Speaker 2: Do they know? Did they play their gut and go
Speaker 2: long or short? Here a little bit? What do you
Speaker 2: tip if you do?
Speaker 7: Yeah, I it's a good question. So I've talked to
Speaker 7: some some folks on the cell side, uh in the
Speaker 7: last couple of days, and and a lot of them
Speaker 7: are are dis confused, so they are relatively short or
Speaker 7: relatively flat, I should say. That being said, if you
Speaker 7: look at the positioning data, so the Federal Reserve every
Speaker 7: single week actually pulls the dealers and gets the primary
Speaker 7: dealer positioning data there.
Speaker 2: Are they honest when they're responding to them?
Speaker 7: Well, well they have to be, because if they're audited
Speaker 7: when they're audited annually by the FED, and if they're
Speaker 7: if they don't do their.
Speaker 2: Job there and okay, get in trouble.
Speaker 7: So the but but but dealers in aggregate or as
Speaker 7: long treasuries as they've ever been, it's almost record longs
Speaker 7: in terms of the notional amount outstanding, So so dealers
Speaker 7: are long. But on the other sides, they're also not
Speaker 7: quite record short, but they are. They're hedged a lot
Speaker 7: with futures, so it's like they're long the cash and
Speaker 7: they're short to future. So they're in what we call
Speaker 7: a basis trade where where they're playing some relative value,
Speaker 7: not taking a ton of risk. But but but they
Speaker 7: still have a lot of cash that that they cash,
Speaker 7: securities that they have on their books.
Speaker 5: I track a lot of the big banks and obviously
Speaker 5: their outlooks for when the potential of the first rate
Speaker 5: could happen. So gold min Sacks, for instance, over the
Speaker 5: weekend they still reiterated that they were thinking it was
Speaker 5: going to happen in September, but then they thought a
Speaker 5: second cut would happen in December rather than November. When
Speaker 5: you're looking at the bond market, what is that really
Speaker 5: telling us as far as what the consensus on the
Speaker 5: potential timing is. But because it is an interesting dynamic
Speaker 5: because you have September and then November, actually that interest
Speaker 5: rate decision is the same week as the election, so
Speaker 5: the meeting starts that Wednesday, not that Tuesday.
Speaker 7: They actually moved right to avoid the election. So the
Speaker 7: meeting now the release will be on Thursday, be the
Speaker 7: first time we've had a Thursday US that I can remember, not.
Speaker 5: Quite some time twenty years, so that a lot of
Speaker 5: people have been looking that far ahead to the calendar,
Speaker 5: but I have it circled on my desk, so I
Speaker 5: wanted to ask you your thought process about the timing there.
Speaker 7: So I actually suspect at this point that the Fed,
Speaker 7: you know, unless the CPI data really comes down massively
Speaker 7: and we start to have job losses in the next
Speaker 7: two months, which doesn't seem likely, I doubt that the
Speaker 7: Fed's going to do anything prior to the election. So
Speaker 7: I think September. While it's not a zero percent probability,
Speaker 7: I'll almost never say that, but although tomorrow's zero, well,
Speaker 7: I think that it's very possible that if the FED
Speaker 7: starts to cut rates, it'll be in November or December.
Speaker 7: And there's a growing possibility of my mind that the
Speaker 7: FED might not start cutting rates at all this year. Right,
Speaker 7: it might not cut rates until twenty twenty five, because
Speaker 7: the economy, even though it's slowing, is still reasonably robust,
Speaker 7: and when you look at a lot of the preponderance
Speaker 7: of the data that we look at, particularly the hard
Speaker 7: data like retail sales and even the job market, although
Speaker 7: you know, Anamog and our colleagues at Bloomberg Economics certainly
Speaker 7: see some cracks there as well.
Speaker 5: What is it about September in particular, while you're seeing
Speaker 5: kind of more firms expecting it that month in particular
Speaker 5: versus others.
Speaker 7: Because they're just moving it from July, right, you keep
Speaker 7: pushing it out.
Speaker 8: Yeah, they're just.
Speaker 6: Pushing it out.
Speaker 7: I think that the Fed will still avoid September, even
Speaker 7: though they'll always say that like, we'll do what we
Speaker 7: have to do regardless of the election. This would actually
Speaker 7: be the second closest to an election that they've made
Speaker 7: an initial move. If they were to move in September,
Speaker 7: they basically will say it would say to themselves, you
Speaker 7: know they they'll never say this publicly, but hey, you know,
Speaker 7: why don't we just wait six weeks? You know that realistically,
Speaker 7: we don't have a lot of data, and if the
Speaker 7: data is not absolutely crashing, there's not a there's not
Speaker 7: a fundamental need for us to cut this moment. We
Speaker 7: could just cut a little bit faster later.
Speaker 2: Once they do start cutting, what happens then?
Speaker 3: Did they cut every month there other than the month
Speaker 3: twenty five basis points? Fifty basis points? That does the
Speaker 3: five and a half percent discount rate go to where?
Speaker 1: I don't know.
Speaker 7: Yeah, well it would depend in the economic situation. But
Speaker 7: at the end of the day, I think they would
Speaker 7: like to cut in twenty fives. And certainly that's one
Speaker 7: big reason to look at the twenty twenty five and
Speaker 7: twenty twenty six dots because that'll give you a hint
Speaker 7: test of case. Right, So at this point it looks
Speaker 7: like every other Ish meeting is what they're thinking that
Speaker 7: they'll cut.
Speaker 2: What's a big soccer story in the world.
Speaker 7: Oh, we real Central New Jersey has a home match tomorrow,
Speaker 7: so we have our beer garden getting ready and where Yeah,
Speaker 7: we play at Ryder University. Yeah, in Marsville, New Jersey,
Speaker 7: which is but you know, right in between Princeton and
Speaker 7: Trent And so we get a pretty we've gotten pretty
Speaker 7: good crowds. We actually have record attendance this year, so.
Speaker 2: He pretty excited about it.
Speaker 7: And who do you play tomorrow? We played Lehigh Valley United.
Speaker 2: Rush, which is and where do you get players.
Speaker 7: Almost all of our players are Division one collegiate athletes.
Speaker 2: Okay, Paul, do you want to join in? Might I
Speaker 2: might join in on the beer bash.
Speaker 7: I've been joked around about that, and I'm like, I
Speaker 7: don't want to pull a hamstring like the first fifteen
Speaker 7: seconds I'm on the pitch.
Speaker 3: Anything on the professional level that reach paint. Well.
Speaker 7: You know, one of our local teams here in New
Speaker 7: York is doing really well in Major League Soccer, Soka
Speaker 7: New York Red Bulls is doing great. They got a
Speaker 7: player named Emil Forstburg from from RBI Leipzig and uh
Speaker 7: and and he's been tearing things up along with some homegrowns.
Speaker 2: And then a great stadium, the Red over there in Jersey.
Speaker 3: All right, Ira Jersey, thanks so much for joining us,
Speaker 3: Ira Jersey Chief US Interest Rate Strategic Just Bloomberg Intelligence
Speaker 3: joining us here on our Bloomberg Interactive Broker's studio.
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Speaker 3: Surprising News in the financial markets, and I learned something.
Speaker 3: You need me to look at the gap between the
Speaker 3: ten year French yields and their German counterparts to see
Speaker 3: kind of where the relative risk is in the marketplace,
Speaker 3: and the gap between the ten year French yields and
Speaker 3: their German counterparts climb to the highest this year in
Speaker 3: the wake of Macrone's snap election. I'm not really sure why,
Speaker 3: but we have somebody who does.
Speaker 5: Who can talk to us about this.
Speaker 4: Ashworth.
Speaker 3: He covers all that European stuff with an acerbic wit
Speaker 3: and that I mean that the nicest way. But we
Speaker 3: love talking to Marcus because he spares, you know, note
Speaker 3: bones here, Marcus, what was your reaction to what we
Speaker 3: saw out of the European Union and then the subsequent
Speaker 3: decision by mister Macron?
Speaker 8: Hi, guys, I was thinking that, you know, this was
Speaker 8: a long time coming, but it was worse than perhaps
Speaker 8: everyone including Macrol, had expected, and therefore it put him
Speaker 8: in a very difficult situation with I guess his main
Speaker 8: opera opposition holding more than twice which his party got.
Speaker 6: Then he got like fifteen percent or something.
Speaker 8: So though he had another three years as president, if
Speaker 8: he wants to, I don't think he'll resigned, but there
Speaker 8: was some question about that.
Speaker 6: Today he means he won't.
Speaker 8: Have the ability to a quim of Congress to be
Speaker 8: able to do very much.
Speaker 6: He can still do a lot of.
Speaker 8: Presidential decrees, but nonetheless it's boxed him in, and more
Speaker 8: importantly he can he can't run again. His by then,
Speaker 8: you know, in by twenty twenty seven is ten year
Speaker 8: leg would be pretty poor. So I think what he's
Speaker 8: decided to now is gamble on a political swing which
Speaker 8: has gone to the right wing that perhaps the French
Speaker 8: people they're challenged again may.
Speaker 6: Push back against that.
Speaker 8: But the consequence of this is that the bomb market
Speaker 8: in particular and the stock market and some degree the
Speaker 8: economy is going to have to take a little bit
Speaker 8: of a how can we say this bit of a shakeup,
Speaker 8: because politically this is a very aggressive move and it
Speaker 8: also puts into very much sharp contrast the financial fiscal
Speaker 8: situation of France, which is rising ever an extorably higher
Speaker 8: in debt and particularly it's budget Deficits annual spend is
Speaker 8: much more than it takes in. It's five and a
Speaker 8: half percent last year, which is pretty shocking and not
Speaker 8: likely dropped much by next year, and I think the
Speaker 8: European Union could put it into the double secret probation.
Speaker 8: They call it an emergency deficit procedure. Really what it
Speaker 8: means is that in the sin bin, and that's hugely
Speaker 8: embarrassing for MAC or any government. But the point is
Speaker 8: the rating agency, the credit rating agencies we saw S
Speaker 8: and P at the end of May knock France down
Speaker 8: to double A minus. Fitch are already there, and Moodies
Speaker 8: today came out and basically said they're one notch up
Speaker 8: at double A two, but they may be having a
Speaker 8: look at it. So it's all about a worsting credit
Speaker 8: of France, a worstening political regime, which makes the European
Speaker 8: Union very nervous because you know we've seen with the
Speaker 8: previous situations with Greece and Italy. You know they'll they'll
Speaker 8: turn the blind eye to most things, but they want
Speaker 8: everyone to be very much pro Europe. And Marie la
Speaker 8: Penn's right wing party, which is the National Rally, though
Speaker 8: they no longer argue for Frexit or France exit.
Speaker 6: They once did and then Resa.
Speaker 8: Pretty long in Brussels. So the last thing they want
Speaker 8: is a non fully backing Year style prime minister even
Speaker 8: under Mackrell's president, that will be very out and settling.
Speaker 6: For Brussels, that means us very unsettling. For credit rating agencies, panic, panic, panic.
Speaker 8: It means that French debt is perhaps a little bit
Speaker 8: more risky, still pretty safe, but a little bit more
Speaker 8: risk than it.
Speaker 6: Was before weekend.
Speaker 5: You were talking about how France has seen a sustained
Speaker 5: deterioration its fiscal position, particularly when you're looking at its
Speaker 5: debt looad. How did France get into this position.
Speaker 6: They spend more than they had or.
Speaker 8: The reason is I mean, Macrol was elected on reforming
Speaker 8: the fiscal situation, and principally one of his key things
Speaker 8: was raising the retirement age, which he raised from sort
Speaker 8: of really sixty sixty two up to about sixty four.
Speaker 8: He wanted to get it up to about sixty seven,
Speaker 8: which for instance where the UK is, but massive pushback
Speaker 8: and the fact he very basically couldn't get it through
Speaker 8: unless he pushed it through by this as I mentioned before,
Speaker 8: presidential decree worried some of the raising ainsties. Then now
Speaker 8: the fact that he has gotten really nowhere of getting
Speaker 8: stuff through the National Assembly, the Parliament or Congress is
Speaker 8: a really scary situation. So you know, that means there's
Speaker 8: even less chance of any form of fiscal improvement of
Speaker 8: getting that budget deficit down and reducing the overall debtness
Speaker 8: of France. And that's a pretty difficult situation, complete gridlock.
Speaker 8: Because if the National Rally were to become the person
Speaker 8: the party to have the Prime.
Speaker 6: Minister and try and form some form of.
Speaker 8: Coappitatial cohabitation, I think it's a in English, is that
Speaker 8: they won't get it. They won't allow any form of
Speaker 8: spending cuts or anything to reduce the benefits that a lot.
Speaker 6: Of French people.
Speaker 8: Fifty eight percent of the French economy is state spending.
Speaker 8: It's a very socialist driven state, and they don't like
Speaker 8: their benefits getting touched, which means nothing will happen at
Speaker 8: least twenty twenty, no improvement on the fiscal outlook. That's
Speaker 8: very bad news for bondholders, for credit radio season, indeed
Speaker 8: probably for European Union cohesion.
Speaker 3: So I know in your column, Marcus, perhaps one of
Speaker 3: the rationales for Mark Crohn's boldness here is that will
Speaker 3: actually force Marine la Penn to maybe reveal what her
Speaker 3: plans for the economy are.
Speaker 2: What do we know or what don't we know?
Speaker 8: Well, we they deliberately a bit like the Labor Party
Speaker 8: it's about to take power in the UK. They've been
Speaker 8: very should we say, with shurchet In telling us what
Speaker 8: they are actually going to planning to do, and Marilla
Speaker 8: Penn has basically said no to many things but hasn't
Speaker 8: told anyone really what they're they are planning to do,
Speaker 8: how she would sort the pension situation out.
Speaker 6: But the one thing we know for.
Speaker 8: Sure they are pretty anti immigration and they are pretty
Speaker 8: anti the pension changes in any other form of benefit changes.
Speaker 8: So it's gonna be almost impossible for the government to
Speaker 8: stop its welfare spending bill, and that you can only
Speaker 8: mean you know, essentially this would be a deficit and
Speaker 8: debt to GDP ratio negative scenario.
Speaker 6: I would think it'd be very hard for.
Speaker 8: But you know, Mackerel's gamble is precisely as you laid out,
Speaker 8: is that if they put them in power, at least nominally,
Speaker 8: the Prime Minister doesn't have anything like as much control
Speaker 8: as you would think, but they have ability to.
Speaker 6: Try and put some things through.
Speaker 8: If they turn out to be incompetent and they turn
Speaker 8: out not to do what they said they would go
Speaker 8: to do or anything like this. It would make the
Speaker 8: presdential elections in twenty twenty seven a bit of a
Speaker 8: little bit more anti the National Rally and approach we say
Speaker 8: Mackerels or more of more.
Speaker 6: Centrists the huge gambles. It could go the other way.
Speaker 6: These guys could turn out to be very good in power.
Speaker 8: In fact, the center right are already talking about maybe
Speaker 8: teaming up with the National Rally of the far right
Speaker 8: and creating an anti Macron coalition that can become very popular.
Speaker 8: And we could see it would be a very stupid
Speaker 8: gamble that Macrol's taken. We just don't know the is
Speaker 8: If you're a bondholder, and indeed, as you seem to,
Speaker 8: the French banks like sock Gen got hit really hard yesterday.
Speaker 8: You know, why would you want to take the risk
Speaker 8: and perhaps go to somewhere a little bit more safe
Speaker 8: like Germany or I don't know, somewhere.
Speaker 6: Else in Europe.
Speaker 5: So Mark, as you were just bringing up Shausgen, what
Speaker 5: other parts when you're looking at French equities have been
Speaker 5: hit hardest. We're other ones have been maybe more shielded
Speaker 5: right now?
Speaker 8: Well, yeah, but the banks got hit hard as they
Speaker 8: always tend to. Partly that's because you know a lot
Speaker 8: of international investors, particularly American investors, they're invested in Europe,
Speaker 8: they tend to light the banking sector mores more.
Speaker 6: Banks for the butt.
Speaker 8: They understand and can play that game much more cleanly.
Speaker 8: So you know, you should be really worrying if you
Speaker 8: start seeing things like insurance companies going because that's a
Speaker 8: credit issue. But banks are an easy, easy sell, highly liquid.
Speaker 8: I would expect if if things do calm down and
Speaker 8: the by July seventh, you know, the actual results, they
Speaker 8: aren't perhaps as bad as people expected. I wull think
Speaker 8: the banks would probably therefore do the best. But you know,
Speaker 8: industrial sector in all of Europe is in a pretty
Speaker 8: tough time at the moment. France is world leader in
Speaker 8: luxury goods, so LVMH things like that.
Speaker 6: These are companies keep us post is on.
Speaker 8: But they are right perhaps less suspect to these politics,
Speaker 8: but still not great for anyone.
Speaker 3: All right, very good, Marcus Ashwer, thank you so much.
Speaker 3: We appreciate it, folks. Marcus is a calumnist covering European
Speaker 3: markets for Bloomberg Opinion. Check out his column today. Macrome
Speaker 3: plays fast and loose with investor Faith.
Speaker 2: So very interesting. There.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 3: com search Bloomberg Podcast and that's where will find us. Well,
Speaker 3: despite the US labor market remaining tight, a new survey
Speaker 3: reveals that the recruitment and retainment challenges facing businesses have
Speaker 3: eased a little bit. So let's break that down with
Speaker 3: Robin Ericson, Vice President and Human Capital for the Conference Board,
Speaker 3: joining us.
Speaker 2: Via zoom from Chicago.
Speaker 3: So Robin talked to us about the labor market out
Speaker 3: there from the employer's perspective, how tough is it to
Speaker 3: attract and retain talent these days?
Speaker 9: Thanks so much for having me today. We did find
Speaker 9: that the challenges of recruiting and retaining employees have eased significantly.
Speaker 9: As you can imagine, during the great resignation of twenty
Speaker 9: one and twenty twenty two, it was very difficult to
Speaker 9: recruit and retain workers. But we did find that while
Speaker 9: finding talent is a challenge for more than fifty five
Speaker 9: percent of respondents, this number has decreased from a high
Speaker 9: of eighty three percent and twenty twenty two. And then
Speaker 9: retaining workers is less challenging because we found that only
Speaker 9: forty one percent of human capital leaders reported difficulty retaining
Speaker 9: workers compared to a high sixty six percent in twenty
Speaker 9: twenty two. So those are big changes.
Speaker 5: Break down what specific industries and job positions are most
Speaker 5: vulnerable right now when you're trying to find qualified workers,
Speaker 5: but they're not there to match that up.
Speaker 9: Yes, So we did look at the workforce in two categories.
Speaker 9: We looked at the workforce of mostly professional and office workers.
Speaker 9: We had about sixty percent of our respondents from that
Speaker 9: industry or those industries. And we also then looked at
Speaker 9: mostly those organizations that had mostly industry and manual service workers,
Speaker 9: and it's definitely more difficult to recruit and retain talent
Speaker 9: in those organizations. With mostly industry and manual service workers.
Speaker 9: If you think about the difficulties that hospitality that the
Speaker 9: hospitality industry is having, especially with you know, hotels and
Speaker 9: restaurants do also have issues trying to find the you know,
Speaker 9: truck drivers remains the more difficult job to recruit for.
Speaker 3: So Robin, I guess one of the big issues that
Speaker 3: everybody's trying to continue to come to groups with is
Speaker 3: where are people working? Is it back in the office
Speaker 3: five days a week, is it hybrid? Is it work
Speaker 3: from home? How is this kind of shaking out, you know,
Speaker 3: several years past the pandemic.
Speaker 9: So obviously with the spike in remote work, there was sorry,
Speaker 9: obviously there was a big spike in remote work during
Speaker 9: the pandemic, and so we actually started with our Reimagined
Speaker 9: Workplace study looking at how many employees or workers were remote,
Speaker 9: how many were hybrid, and how many were fully on site. Interestingly,
Speaker 9: the rate of hybrid workers has remained very similar. And
Speaker 9: so what do I mean by that? It's the in
Speaker 9: our survey, we found that fifty six percent of the
Speaker 9: workers in the organizations that we surveyed are either hybrid
Speaker 9: and remote, so they're either working part time in the
Speaker 9: office and part time at home or they're full time
Speaker 9: at home. That's fifty six percent. That's down from sixty
Speaker 9: one percent, which is a difference of only five percent.
Speaker 9: And the number of workers who are fully on site
Speaker 9: has only risen by five percent since twenty twenty two,
Speaker 9: from thirty nine percent to forty four percent. And we've
Speaker 9: also done some other studies here at the Conference Board
Speaker 9: and have found that flexibility is the number one request
Speaker 9: of employees after a competitive salary.
Speaker 5: Do you find that employers are getting more strict to
Speaker 5: try to get employees back into the office. It was
Speaker 5: interesting hearing some of the stats you were just mentioning,
Speaker 5: because some of that seemed to be like potentially, but
Speaker 5: it still seemed like there still was a good amount
Speaker 5: of people working from home for various reasons.
Speaker 9: Obviously, yes, so in the conference So the Conference Board
Speaker 9: has a flagship survey and in twenty twenty four we
Speaker 9: found that only about four percent of CEOs were concerned
Speaker 9: about mandating returned to the office, so they were much
Speaker 9: more concerned about making hybrid work work for their organizations. Obviously,
Speaker 9: there are some well known organizations that have come out
Speaker 9: mandating returning to the office But one of the other
Speaker 9: interesting things that we found in our study was that
Speaker 9: those organizations that allowed their employees to choose where they
Speaker 9: worked had three times less difficulty retaining workers. So those
Speaker 9: organizations that mandated their workers to go into the office,
Speaker 9: forty five percent of our respondents said it was difficult
Speaker 9: to retain workers. Well, only fifteen percent of those organizations
Speaker 9: that had employed choice about whether or not they went
Speaker 9: into the office said it was difficult to retain workers.
Speaker 9: So clearly there is a business case for hybrid and
Speaker 9: more flexibility and more employee choice where it's possible.
Speaker 2: How about AI.
Speaker 3: A lot of folks will talk about AI in so
Speaker 3: many different parts of this economy and what it means
Speaker 3: for not just economy, but for society as well. One
Speaker 3: of the concerns is what will AI do to kind
Speaker 3: of the workforce? Well, we need fewer workers in different jobs.
Speaker 3: I know that was a big issue, for example, for
Speaker 3: the writer's strike in Hollywood. They want a language in
Speaker 3: their contracts that protected them from AI. Writers and actors
Speaker 3: talk to us about how employers think about AI, So
Speaker 3: we know that.
Speaker 9: The majority of organizations are interested in AI in some fashion.
Speaker 9: They've either adopted it already in their organizations or they're
Speaker 9: planning to adopt it. AI is here to stay and
Speaker 9: organizations can actually be more productive and more efficient with AI.
Speaker 9: To answer your question Paul around whether or not we
Speaker 9: would need fewer employees, I don't know that we will
Speaker 9: need fewer employees, but I definitely think that employees will
Speaker 9: need to have different skills. So one of the things
Speaker 9: in our survey that we found is that the majority
Speaker 9: of surveyed human capital leaders said that they were experimenting
Speaker 9: with AI pilots at not focusing on long term strategies
Speaker 9: like the job displacement that might come from AI, but
Speaker 9: the reskilling for roles that are different.
Speaker 3: Very good, Robin, thank you so much. Really appreciate getting
Speaker 3: your thoughts at Robin Rickson. She's a vice president for
Speaker 3: Human Capital at the Conference Board, joining us from Chicago here.
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