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Speaker 2: Join us down what a privileged in studio here Semashaw,
Speaker 2: who really has had an impact on the view of
Speaker 2: global economics, I should say from London, from the United Kingdom.
Speaker 2: She's probably here in pre prep for the president's trip
Speaker 2: do some little protocol and that kind of thing. I
Speaker 2: can understand it. Welcome, Thank you so much for joining today.
Speaker 2: I see your lengthy note here. But what we really
Speaker 2: want to know is how does this equity market keep
Speaker 2: on going? Do you buy the gloom sell the news
Speaker 2: Wednesday at two pm.
Speaker 3: Thanks about having me, it's great to be here. Well,
Speaker 3: we're still positive on the acuity market. I mean, I
Speaker 3: think it's more of a muddling through. There's no it's
Speaker 3: difficult to see any major catalyst which is going.
Speaker 4: To create this very big upward leg from here.
Speaker 3: But as long as the economy is chugging along, and
Speaker 3: yes it's slowing, but we're not expecting recession, you know,
Speaker 3: and its speech is still pretty positive. It can keep
Speaker 3: going up. I just don't expect to see very significant.
Speaker 2: Returns from the animal spirit of nominal GDP. The ECB
Speaker 2: has to confront certainly a sub four percent nominal GDP.
Speaker 2: What's that statistic versus America? There's a huge difference in
Speaker 2: the growthiness of America versus Europe, isn't it? Yeah?
Speaker 4: There is.
Speaker 3: There is a really significant difference. And I think what's
Speaker 3: been interesting is that for this year you've seen that
Speaker 3: investors almost turned away from that very significant difference and
Speaker 3: putting a lot more focus on Europe. That seems like
Speaker 3: it's faded a bit in the last few months, and
Speaker 3: certainly from our analysts, they're looking and saying, look, the
Speaker 3: fundamental picture for Europe.
Speaker 4: Is not as good as the US.
Speaker 3: Yes, there's a slow down in the US, there's likely
Speaker 3: to be slow down in Europe at the same time.
Speaker 4: It's difficult to avoid that.
Speaker 3: So how can you continue to be very positive on
Speaker 3: Europe versus US?
Speaker 2: Will you tell Chairman Paul the operative word? At the
Speaker 2: press conference on Wednesday? Solid he love saying that it's
Speaker 2: a solid economy. It sucks like solid. Last night, did
Speaker 2: they win? I went to they were the same, they won.
Speaker 4: Sem told me the idea I do.
Speaker 3: I do have a tendency to use the word solid
Speaker 3: as well. Yeah, I think that's a good description for
Speaker 3: the US at the moment. You know, we're expecting, as
Speaker 3: I said, slow down the trough in the in the
Speaker 3: growth picture around Q four, Q one, and then a rebound,
Speaker 3: a gentle rebound through twenty twenty six, but not really
Speaker 3: going above tun trend growth in the US.
Speaker 4: So it's it's a picture.
Speaker 3: It's nothing particularly exciting, but you don't necessarily need to
Speaker 3: have exciting to see equity markets continue to rally.
Speaker 5: We wait with baited breath for that statement and whatever
Speaker 5: adject title descriptive that the chair uses to describe the economy.
Speaker 5: There is this debate, as I mentioned, between twenty five
Speaker 5: or fifty at this meeting, how do you see that
Speaker 5: shaking out? Can you understand the ration now? For those
Speaker 5: who do think that the Fed might want to go
Speaker 5: bigger at this.
Speaker 3: Point in time, I mean, I'm sending very heavily in
Speaker 3: the twenty five base point camp. I've been saying that
Speaker 3: a fifty would be really about politics more than economics.
Speaker 3: Having said that, I guess I do have to pay
Speaker 3: some kind of lip service to the fact that, look,
Speaker 3: once the unemployment rate starts to rise in a normal environment,
Speaker 3: take out the labor supply issues, then it does typically spiral,
Speaker 3: so you do want to.
Speaker 4: Get ahead of it.
Speaker 3: But at this phase, looking across the broad set of
Speaker 3: economic data, earnings, credit spreads, there is very little here
Speaker 3: at this point in time to justify that kind of
Speaker 3: emergency sized cut. So I would have to say there's
Speaker 3: something political if you get a fifty base puish, did you.
Speaker 5: Then interpret what we've seen over the last week or
Speaker 5: so in terms of labor market data? So first that
Speaker 5: monthly jobs report, the Revision's weekly claims which which surprits
Speaker 5: the downside as well. Taking all of that and nargrogant,
Speaker 5: what's your sense of where this labor market is and
Speaker 5: where it's going.
Speaker 3: I think there is a slowdown and labor demand. I
Speaker 3: think we can clearly see that, but the labor supply
Speaker 3: issue is almost offsetting the magnitude of that weakness.
Speaker 4: So there is something underway. It does need to be getting,
Speaker 4: you know, the FED does need to get in front
Speaker 4: of it.
Speaker 3: But are we moving to a point where we can
Speaker 3: start talking about recession realistically. I don't think we're there,
Speaker 3: but the Fed does need to come in now in
Speaker 3: order to stop it from deteriorating to that point where
Speaker 3: you do become you know, recession does become the keyword again.
Speaker 2: How does a dollar fold into this? I mean, I know,
Speaker 2: I did one chart today, folks, in the in betweenness
Speaker 2: of the dollar right now is remarkable. I guess it's resilient.
Speaker 2: That's the way the street's looking at it. But are
Speaker 2: you looking for a catalyst for dollar movement or do
Speaker 2: we just get used to sleepy dollar.
Speaker 3: I think that the dollar can move a little bit
Speaker 3: lower over the coming months simply just you know, just
Speaker 3: from a central bank perspective, globally, the US is the
Speaker 3: one which is still cutting rates. You're seeing a lot
Speaker 3: of the other central banks at least coming to a
Speaker 3: pause or if not a complete halt. So from a
Speaker 3: fundamental perspective, I should put a little bit further down
Speaker 3: the pressure on the dollar. I think the key question
Speaker 3: is is you know, as we know about you know,
Speaker 3: the smile for the dollar when you do see that
Speaker 3: global weakness, so US weakness, so typically the dollars tends
Speaker 3: to strengthen. That's what we've seen in the last week
Speaker 3: or two. I don't necessarily think that's going to hold,
Speaker 3: especially if you continue to see this pressure on Lisa
Speaker 3: Cooke on FED independence. Those are all things which are
Speaker 3: slowly eating away at the other strength.
Speaker 5: Talk a bit about that, because we're this kind of
Speaker 5: pivotal moment where we don't really know which personnel they
Speaker 5: are going to be around the table when this decision
Speaker 5: is made this week. Lisa Cooke fighting to be there
Speaker 5: is kind of a normal governor fighting that out in
Speaker 5: the courts. The government course pushing against her. The administration
Speaker 5: is Steph Muren has a vote tonight in the Senate.
Speaker 5: Will he make it in time? We'll see, seems likely.
Speaker 5: How much does personnel matter as the FED gets together
Speaker 5: to make this policy decision.
Speaker 3: I don't think it necessarily matters for the great decision
Speaker 3: on Wednesday. I think it's when when you get further
Speaker 3: out into questions really about the independence. You know, how
Speaker 3: quickly can a FED government bee be fired at will?
Speaker 3: But also at some point in time the numbers game
Speaker 3: starts to really play through, and I think that for
Speaker 3: twenty twenty five, I think the forecast is fairy clears,
Speaker 3: you know, two or three cuts. It's when you get
Speaker 3: into twenty twenty six and you can't forget about the politics.
Speaker 3: And I think that's where the muddiness of the forecasts
Speaker 3: are really sitting Semashaw with.
Speaker 2: Us to get a started today. A good conversation here
Speaker 2: with the Principal group. Futures up thirteen, Death Features up
Speaker 2: seventy five. Good morning across awaking America. Good morning to
Speaker 2: the nation. Henrietta Treys will be with us here in
Speaker 2: a bit on Washington on YouTube. Subscribe to Bloomberg Podcasts
Speaker 2: out on YouTube. But it has been an extraordinary three
Speaker 2: or four days here. Thank you for your support, David.
Speaker 2: How about this, Seema Shaw, June of gloom June of
Speaker 2: twenty twenty in the FT. I got to read it
Speaker 2: in entirety, folks, because it's shocking when apparently positive signals
Speaker 2: can turn negative June of twenty twenty, big negative and
Speaker 2: back again in a short time frame. It makes sense
Speaker 2: to wait portfolios with a high quality defensive assets such
Speaker 2: as megacap, tex, tax and investment grade credit with a
Speaker 2: bias towards the United States. Anything much riskier than that
Speaker 2: looks set for a white knuckle ride. You crushingly nailed
Speaker 2: it there. I mean, just do you just reprint that
Speaker 2: paragraph again here?
Speaker 3: I should, I should have it plastered on my forehead,
Speaker 3: not though, do mean? Well, but I think you know
Speaker 3: that in twenty twenty not many people got it wrong,
Speaker 3: right either you if you got on the market about
Speaker 3: the book, you know, I think there's a really big
Speaker 3: learning there from twenty twenty, which is that, look, we
Speaker 3: it looked horrific the global economy went through so much,
Speaker 3: and yet in terms of the US dynamics, US market,
Speaker 3: it recovered really really quickly. And to me, that's one
Speaker 3: of the key things there is it it's very difficult
Speaker 3: for the US to have a prolonged recession. It's very
Speaker 3: difficult unless you know, have major colleges because of the chase.
Speaker 2: In June of twenty twenty, you said free casual is
Speaker 2: going to sustain in the United States of America, including
Speaker 2: mega cap. Can you say the same thing today?
Speaker 3: Yeah, I think with slightly less enthusiasm per Suddenly we
Speaker 3: are long term holders of that megacap tech trade.
Speaker 4: We believe that you know, there will be volatility.
Speaker 3: That'll be question marks about her earnings, there'll be moments
Speaker 3: where the market will be rattled, but we do generally
Speaker 3: believe that that is the frontier of productivity for the world,
Speaker 3: and so you want to keep having exposure. I think
Speaker 3: maybe the thing that investors really need to not thinking
Speaker 3: about is where next, Where beyond the megacap tech trade
Speaker 3: do you want to be looking? And then I think
Speaker 3: there are lots of opportunities to cross all sectors, and
Speaker 3: that's what's going to really set apart the winners from
Speaker 3: the losers.
Speaker 5: I've seen a string of these stories casting doubt on
Speaker 5: the viability of the AI narrative. There was the study
Speaker 5: out of MIT ninety five percent of whatever isn't working
Speaker 5: out in the way that people thought it would. I
Speaker 5: saw this latest thing from Anthropic that we're not using
Speaker 5: it to sort of do anything more than boost or
Speaker 5: individual productivity. It's maybe a dumb question, but do you
Speaker 5: as an investor have to buy into that narrative fully
Speaker 5: or you just look at the way that these megacaps
Speaker 5: are performing and take the right In other words, how
Speaker 5: much conviction do you have to have in the story itself?
Speaker 3: I think you need to have some kind of conviction
Speaker 3: in what the future of the world is. But I
Speaker 3: think it's fair to have your moments where you become
Speaker 3: a little bit cynical.
Speaker 4: Do you look at evaluation, Yes, exactly.
Speaker 3: You look at those valuations, you say, how much longer
Speaker 3: can they can really continue to deliver these kind of
Speaker 3: revenue growth.
Speaker 4: And these growth So I think that's fair.
Speaker 3: But I do think that for some companies, for some strategies,
Speaker 3: that is very much a long term theme. You know,
Speaker 3: we're not talking about one or two years. We're looking
Speaker 3: at from a five to ten year perspective. So you
Speaker 3: have to be able to be willing to live through
Speaker 3: some of those dips.
Speaker 2: On a Monday, Can we do an audible Sure? You
Speaker 2: know it's still you know, we're not deep into Tuesday
Speaker 2: yet I won't be here. I see it like the
Speaker 2: chart this weeknd that France has a worse fixed in
Speaker 2: compositions in Spain just exam from the city in London.
Speaker 2: Are you are you watching the tumult of Europe and
Speaker 2: saying it's over there, it's distant, it's not going to
Speaker 2: upset the apple cart or is it inextricaly part of
Speaker 2: what's going on?
Speaker 4: I think that they are two separate situations.
Speaker 3: But the UK has its own very meaningful fiscal situation
Speaker 3: which has nothing to do with France, cannot be rectified
Speaker 3: by maybe France resolving its own situation. I think this
Speaker 3: is a global theme, but they're all very kind of
Speaker 3: individual stories which are going on around the world. For
Speaker 3: the UK, I you know, obviously for France and the UK,
Speaker 3: these are quite urgent situations.
Speaker 4: I struggle to see.
Speaker 3: How, for example, the UK can emerge from this completely unscathed.
Speaker 3: The budget is going to be a very very difficult
Speaker 3: moment for Rachel Ruves and for me for when I
Speaker 3: look across the UK to the guilt market, I do
Speaker 3: have genuine concerns about where we go from here.
Speaker 4: For the UK.
Speaker 2: Is that a traditional concern or it's just out longer
Speaker 2: duration or can it really upset the entire curve?
Speaker 3: I think it could upset the entire curve. I think
Speaker 3: there's enough concerns about the credibility of the government. Essentially,
Speaker 3: what is the escape route for the UK? And I
Speaker 3: think it's very difficult to know what that is because
Speaker 3: the typical drivers of that would be productivity, growth, immigration.
Speaker 4: Those are two things that we seem to close the
Speaker 4: door on.
Speaker 2: But am I correct to those of us distracted by
Speaker 2: the Detroit Lions scoring fifty two points this weekend. One
Speaker 2: hundred thousand plus people protested in London this weekend. That
Speaker 2: is correct if we have a Trump I'm being very simplistic, Seema.
Speaker 2: If we had a Trump moment in reform one, how
Speaker 2: would that change finance and fixed income in the United Kingdom.
Speaker 3: I think what we could see is again you have
Speaker 3: to take a long term perspective from a political perspective
Speaker 3: for the UK, and you do get to a point
Speaker 3: where the productivity concerns really do start to explode. Once
Speaker 3: you have these kind of movements, there's a very potential
Speaker 3: change for the government. Change of government at the next
Speaker 3: election to that far right movement, a ton of implications
Speaker 3: for the long term growth of the UK.
Speaker 2: I spent on please I wanted tone about tott Nanda
Speaker 2: before we get there.
Speaker 5: Many of us here became familiar with Minutia Fique when
Speaker 5: she was at Columbia University. Some of us know of
Speaker 5: her from her tenure at LC before that. She's now
Speaker 5: back in government, has this role as economic advisor to
Speaker 5: the to the Prime Minister. What does that dynamic look
Speaker 5: like between her and Rachel reaps going forward here? How
Speaker 5: is she how is her expertise going to be used?
Speaker 5: Are we just setting the stage here for a conflict
Speaker 5: or she stands some key role here in trying to
Speaker 5: write the ship that you're describing.
Speaker 4: I think she does have a key role here.
Speaker 3: But I think that the UK it goes beyond just
Speaker 3: the kind of the simple economics for the and I
Speaker 3: don't know if she can genuinely push this narrative of
Speaker 3: changing the entire makeup of the UK.
Speaker 4: Where is it heading?
Speaker 3: So I think they're really deeper almost you know, introspective
Speaker 3: questions that the UK needs to be asking that goes
Speaker 3: beyond economics. So I think it's great and it's great
Speaker 3: to have a credible, absolutely have incredible policy makers like
Speaker 3: that really does help the UK at a time when
Speaker 3: there's so many question marks about who is in government
Speaker 3: and who is you know, who's essentially ruling.
Speaker 4: But I think they have the challenges ready cut up,
Speaker 4: it's your questions.
Speaker 2: I guess two lates, we'll do it next time. We'll
Speaker 2: do it next time. After they lost four.
Speaker 4: In a row, I'm happy about that.
Speaker 2: Yeah, I know, you know, you know all the fine
Speaker 2: you know, it's like.
Speaker 5: You're you're all alone in your a Tottenham fandom.
Speaker 2: Wait a lawyer. Well, I had no idea how Lona was.
Speaker 2: I was having a cigar at some fancy London hotel.
Speaker 2: Everyone in a room was an Arsenal fan. Yeah, like
Speaker 2: one hundred and ten percent. It's ridiculous. Missus Keene had
Speaker 2: the tot name had. So we got the bad service,
Speaker 2: we got semen show. Thank you stay one of us.
Speaker 2: More from Bloomberg Surveillance coming up after this.
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Speaker 2: Showings on Henrietta Trey's Veda Partners on Your Washington, Henriette,
Speaker 2: I want to do an audible here. David's got a
Speaker 2: lot of smart things to talk about. But I noticed
Speaker 2: ten US senators twenty seven House members already have announced
Speaker 2: their retirements into next year's election. Why are we seeing
Speaker 2: so many retire as the two this weekend.
Speaker 6: Yeah, they're dropping like flies. I have the benefit of
Speaker 6: having this incredible mentor. A woman named Ashley Miller back
Speaker 6: at the US Chamber of Commerce and she told me
Speaker 6: several years ago that Senators and congressmen are.
Speaker 7: Heading for the exits.
Speaker 6: DC is incredibly unpleasant to be and we are knocking
Speaker 6: at the door of eliminating the filibuster, which any Senate
Speaker 6: staff or will tell you is what keeps the Senate
Speaker 6: from being the House, and they mean that as an insult.
Speaker 6: So it's definitely not a good time to be down
Speaker 6: there right now. I think the assassination of Charlie Kirk
Speaker 6: is certainly in forefront of people's minds. The physical violence
Speaker 6: component of it really can't be under stressed.
Speaker 5: I saw Michael McCall also announcing his resignation or not resignation,
Speaker 5: but not seeking reelection once again. So this is happening
Speaker 5: in the House as well, isn't it.
Speaker 6: Yeah, it absolutely is happening in the House. We're up
Speaker 6: to two House Republicans from Texas if I'm not mistaken.
Speaker 7: The one that was.
Speaker 6: Really surprising to me is some of the farms take
Speaker 6: members I'm thinking of like Joni Ernst for example. Those
Speaker 6: members should be in really safe re elections, but you
Speaker 6: know the potential for having to vote on tariffs the
Speaker 6: trade wars, the discontent with farmers are all issues that
Speaker 6: are plaguing them, aside from just the general lack of
Speaker 6: comedy in DC.
Speaker 2: Range are grizzled pros of this. I'm the heck David,
Speaker 2: they're just retiring because they're getting out front of Democrats
Speaker 2: winning the House? Am I too simplistic?
Speaker 5: That might be a little too simplistic, I think, But Henrietta,
Speaker 5: you bring up the kind of difficulty in farm country especially,
Speaker 5: and I think there's been a theme to the newspapers
Speaker 5: and news sites I've looked at over the course of
Speaker 5: the last week, and that is this level of dissatisfaction
Speaker 5: and worry amongst soybean farmers in particular about their prospects
Speaker 5: in light of these trade policies, not having a buyer
Speaker 5: in China. How does all of this sort itself out?
Speaker 6: This needs to be sorted out at the top levels,
Speaker 6: like this needs to be a prominent topic of conversation
Speaker 6: between Bessett and jameson Greer in Spain today with their
Speaker 6: Chinese counterparts. We need to be talking about sey purchases. Unfortunately,
Speaker 6: when we start inserting Nvidia and tiktoking and the conversation
Speaker 6: I don't think there's a place for any kind of
Speaker 6: give on soy purchases, and we're seeing in the farmer's
Speaker 6: main concern is that they are permanently losing market share
Speaker 6: to Brazil and Argentina from the world's largest purchaser of.
Speaker 7: Soybeans and sixty one percent.
Speaker 6: So the farming community is doing something that really you
Speaker 6: don't see from a lot of other businesses. I would
Speaker 6: talk about, you know, car dealerships, for example. They're a
Speaker 6: huge political donor base, and they're being really quiet about
Speaker 6: the tariffs. They're only hiking new car prices by one percent,
Speaker 6: but used car prices, which is the bulk of their sales,
Speaker 6: are up six percent as they try to stay on
Speaker 6: Trump's good side. The farmers, though, are putting out public
Speaker 6: letters and they have been for several weeks now and
Speaker 6: giving a lot of news interviews on the record saying
Speaker 6: how problematic the president's trade war is for them. They
Speaker 6: do not have any sales to China going forward, and
Speaker 6: that's that's a death now for them.
Speaker 5: I look at this and wonder is a bailout inevitable?
Speaker 5: So I gather that Trump one isn't prologue for all
Speaker 5: the farm made, farm made yelling also good play as
Speaker 5: he is. I think, I think tonight. But you know, Henry,
Speaker 5: I'm curious, is that where all of this is headed?
Speaker 5: Are we going to see a twenty thirty billion dollars
Speaker 5: bail out the likes of which we saw the last
Speaker 5: time around?
Speaker 6: Yeah, we got three of them last time around. I
Speaker 6: suspect we'll get another one this time around. There's already
Speaker 6: rumblings from members, specifically on the House side and the
Speaker 6: agriculture committees, calling for the insertion of a farm aid
Speaker 6: package in the upcoming cr that will have a government shutdown,
Speaker 6: so it's definitely already part of it.
Speaker 7: There was some of that in the One Big Beautiful Bill.
Speaker 6: There was some rejiggering of some of the methodologies and
Speaker 6: accounting for how farmers get subsidized, and that's going to
Speaker 6: be branded on in the next package.
Speaker 2: I again, another dumb question. Only handring out of trades
Speaker 2: would know this. When there's a farm bailout, who gets
Speaker 2: a check? A mom and pop farmer with two hundred
Speaker 2: pigs on a ranch and you know, I don't know
Speaker 2: Kansas or or is it like corporate America gets the check?
Speaker 6: It's both and it's usually run through the Department of Agriculture,
Speaker 6: through a really small entity there that was heavily accessed
Speaker 6: during the president's first term. Is the US trying to
Speaker 6: trade war kicked off, they replenish this fund that goes
Speaker 6: specifically to commodity purchases, and that's how the money gets bundled.
Speaker 7: And I suspect that's what they'll do again.
Speaker 6: That's they're having like pretty advanced talks about it now,
Speaker 6: but still relatively rudimentary.
Speaker 7: There's no text, but I would imagine that's what they do.
Speaker 2: If we're growing tomatoes on the deck, do I get
Speaker 2: a farmer tom sacks on the deck?
Speaker 5: Yeah, Henrietta, we have this irregular series with you where
Speaker 5: we ask you what a recess is going to be
Speaker 5: like for lawmakers when they go home to their district.
Speaker 5: So let's let's pick that up again. Let's do another
Speaker 5: edition of it as we face a ten day recess
Speaker 5: here starting at the end of the week. In the past,
Speaker 5: there have been these town hall meetings where there's been
Speaker 5: a lot of commotion and outrage as we look toward
Speaker 5: this one and on the heels of that two legislative
Speaker 5: days to hammer out some sort of deal here on
Speaker 5: whether or not to averted government shutdown. What does that
Speaker 5: recess look like for members of the House in the Senate.
Speaker 7: It looks bad.
Speaker 6: I mean, they are getting increased funding for military productive
Speaker 6: police protection.
Speaker 7: They're going to need all of that.
Speaker 6: I suspect most of the events would be inside, if
Speaker 6: they're held at all. I imagine we hear a lot
Speaker 6: more about like virtual town halls. We had already seen
Speaker 6: so much democratic outcry, sorry from democratic constituents at Republican
Speaker 6: town halls across the country that a lot of members
Speaker 6: had been putting up placards about the rules of civility
Speaker 6: and canceling events outright. I think you've seen a lot
Speaker 6: of cancelations and a lot of concern about political violence,
Speaker 6: and there's an undercurrent feeling that this is going to
Speaker 6: lead somewhere else there will be another Political Violence Act.
Speaker 7: So I know that's top of mind for a lot
Speaker 7: of members.
Speaker 5: Henriya, last question. In your most recent note, you put
Speaker 5: twenty five percent odds on a shutdown here. What gives
Speaker 5: you the confidence here to keep it? What is relatively low?
Speaker 5: I think by a lot of standards, there been there
Speaker 5: have been many people who think that Democrats are going
Speaker 5: to allow them to happen this time? Why do you
Speaker 5: feel like it's unlikely?
Speaker 7: Sure?
Speaker 6: And I'm usually on the low end, and I don't
Speaker 6: put a lot of stock in the narrative that there's
Speaker 6: going to be a shutdown, especially when we're fifteen days
Speaker 6: out from the thirtieth.
Speaker 7: It's like a lifetime in DC language.
Speaker 6: I get my information from staff, which I think differentiates
Speaker 6: me from some other folks. I don't really talk to
Speaker 6: members all that often. I really very much care what
Speaker 6: staff has to say because they're the ones with the
Speaker 6: finger on the pulse. And the read that I get
Speaker 6: is that House members are much more inclined to encourage
Speaker 6: your shut down. The Senators just aren't there. And until
Speaker 6: that changes, I'm going to keep my low odds of
Speaker 6: twenty five percent. We're probably going to take this into
Speaker 6: September twenty ninth and thirtieth.
Speaker 7: Things will look funky this week.
Speaker 6: It'll be a lot of drama, but with a ten
Speaker 6: day race, that's a lot can change.
Speaker 2: Henrietta, thank you so much. Look forward to speaking to
Speaker 2: you again soon, soon soon. Henrietta Treys with Beta Partners,
Speaker 2: just terrific perspective on Washington stay with us. More from
Speaker 2: Bloomberg's Surveillance coming up after this.
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Speaker 2: Good lucky with the timing. Annas Jamroso with us this morning,
Speaker 2: and that is a wonderful thing. She is at partners
Speaker 2: and of course has been just incredibly pression about the
Speaker 2: need to be in the market. I have to read
Speaker 2: this tweet in full from the President of the United States, Anastasia.
Speaker 2: Listen carefully. It's detailed. Subject to SEC approval. Companies and
Speaker 2: corporations should no longer be forced to quote report unquote
Speaker 2: on a quarterly basis, but rather to report a six
Speaker 2: month basis. I would note, folks, very much like most
Speaker 2: European companies, this will save money and allow managers to
Speaker 2: focus on properly running their companies. Did you ever hear
Speaker 2: the statement that quote China has a fifty one hundred
Speaker 2: year view on management of a company, whereas we run
Speaker 2: our companies on a quarterly basis. Question marks not good
Speaker 2: three exclamation points. You and I know this has been
Speaker 2: a raging debate since you were an undergrad at in
Speaker 2: New Mexico a million years ago. Should we go like
Speaker 2: year up to twice a year reporting.
Speaker 4: A million years Indeed?
Speaker 8: Look, I think there are some sympathizers with that in
Speaker 8: public markets that maybe quarterly reporting can be made more
Speaker 8: efficient by stretching that out. And I sort of think
Speaker 8: about JP Morgan and Jamie Dimond periodically talking about that
Speaker 8: as well. So, look, I we now focus our time
Speaker 8: on private markets, Tom, and we're certainly sympathetic to making
Speaker 8: changes over the course of many, many years that I
Speaker 8: think there are great benefits to that, for sure.
Speaker 2: The history of this, folks, is in the old days,
Speaker 2: you had a value line on your floor that was
Speaker 2: eight inches thick, and you trip over it about once
Speaker 2: every ten days, and you at the back of the
Speaker 2: Wall Street Journal which showed revenues, net income and shares
Speaker 2: that the earning season. Now anastasia, it's a parler game,
Speaker 2: it's a frenzy. I'm as guilty of it as anybody else.
Speaker 2: Should we get away from that frenzy?
Speaker 8: Well, I don't think we should completely get away from that.
Speaker 8: I do think it's important to keep investors abreast of
Speaker 8: what's happening, and you know, it has become I guess,
Speaker 8: a bit of a game though, because you set the expectations,
Speaker 8: you reset them lower, you beat the lower bar. But
Speaker 8: I do think we are part of the reason why
Speaker 8: there's still the existence of public versus private markets is
Speaker 8: some investors like that transparency, and I think the lines
Speaker 8: would get.
Speaker 4: Too blurred if we were to go to any less cadence.
Speaker 8: Now, I will say in private markets, you know, if
Speaker 8: we don't have the scrutiny of the quarterly reporting, there's
Speaker 8: so much more that we can do in terms of
Speaker 8: transforming supply chains, building out margins over a course of time.
Speaker 4: So I think that's where that belongs.
Speaker 2: David, the cutcher that drives people nuts as you're on
Speaker 2: the conference call with eighty five analysts and they go
Speaker 2: and now the guy from Dad, and you go, great
Speaker 2: quarter drives me insane. We'll continue. Maybe we should talk
Speaker 2: about the markets right now, mister Barra.
Speaker 5: But let's detail your work in the private markets with
Speaker 5: the public ones. And I'm curious of how you look
Speaker 5: at the enthusiasm that we've noted over the last few
Speaker 5: days initial public offerings, companies wanting to merge with one another.
Speaker 5: I think there have been a number of days over
Speaker 5: the last week or so when we've headlined AIG, a
Speaker 5: big deal merger that's happened here. How do you see
Speaker 5: that atmosphere of that environment right now?
Speaker 8: Right Well, it is kind of a title change, to
Speaker 8: be honest, in terms of the activity that we've seen
Speaker 8: in M and A and IPO markets, and I'll focus
Speaker 8: on IPOs in particular because that's where we've seen sort
Speaker 8: of the most notable pickup. Global EPO volumes are up
Speaker 8: about twenty five percent year over year, but we've had
Speaker 8: in America especially, we've had an incredibly robust August and
Speaker 8: incredibly robust September, and it's sort of been a long
Speaker 8: time coming. Now I guess the question is does it continue?
Speaker 8: And our answer is yes, and most likely does because
Speaker 8: you've got a comeback of CEO confidence. You got now
Speaker 8: the rate cut of course that we're anticipating, and a
Speaker 8: few more this year which should support valuations, and that
Speaker 8: if you look at the performance of the IPOs this year,
Speaker 8: the SMP is up about eleven twelve percent depending on
Speaker 8: the day. The average performance of an IPO stock today
Speaker 8: this year, I should say it's about thirty eight percent.
Speaker 4: So all of that.
Speaker 8: Should continue to be the incentive, I will say, David,
Speaker 8: this has obviously been supportive for the public markets, has
Speaker 8: been supportive for private market managers. It's certainly been supportive
Speaker 8: for our platform as well. And we're seeing of the
Speaker 8: top twenty five IPOs, we've participated close to half of those,
Speaker 8: so clearly as significant value on lock for the industry.
Speaker 5: You mentioned that uncertainty abating. I wonder what is still
Speaker 5: stuff that needs to be figured out, as you said,
Speaker 5: So we've got the Treasury sectory in the US Trade
Speaker 5: representative in Spain right now still haggling with China trying
Speaker 5: to fund find some resolution to what seems like a
Speaker 5: very difficult situation to Brook, where is the uncertainty? What
Speaker 5: needs to be resolved for this to kind of come
Speaker 5: into its own more more fully?
Speaker 6: Right?
Speaker 8: I think when you think about it tactically, some of
Speaker 8: the trade negotiations, and also do we actually have the
Speaker 8: legal authority to impost hariiffs in the fashion that there
Speaker 8: were imposed? You know, obviously some court decisions are still
Speaker 8: pending there. That's kind of the tactical side of it.
Speaker 8: But I think, to me, the bigger uncertainty that needs
Speaker 8: to be settled and resolved is look at the label market.
Speaker 8: It is weakening and we see more and more signs
Speaker 8: of that. So obviously the markets are exuberant about the
Speaker 8: rate cuts and supporting the economy. But what if we
Speaker 8: don't get enough FED action quickly enough. What if the
Speaker 8: labor market does actually sort of turn before the fat
Speaker 8: can can support it. That's sort of the biggest uncertainty
Speaker 8: in my mind as I look into twenty twenty six.
Speaker 4: Yes, the outlook is.
Speaker 8: Supportive because we got the tax cuts that come in,
Speaker 8: but the biggest uncertain for me will the FED act
Speaker 8: quickly enough to cush in the labor market now?
Speaker 2: But you say the market, this came up like eight
Speaker 2: times this weekend. It's not the market anymore. And you
Speaker 2: nailed this six months, eight months, a year ago. We
Speaker 2: have this one parcel of the market. MAG seven whatever
Speaker 2: tech it's doing exceptionally well and everything else is really mediocre.
Speaker 2: How do you play it? At Partners Are you still
Speaker 2: MAG seven Tech focus? Large cap focused?
Speaker 4: Right?
Speaker 2: Well?
Speaker 8: At Partners Group, we look at large mega trends, and
Speaker 8: we also look at some of the four sectors along
Speaker 8: which we invest and it's looking of course to technology.
Speaker 8: We certainly are investing in artificial intelligence, not only investing
Speaker 8: in it but also thinking about who might be disrupted
Speaker 8: by it. We look at things like goods and products,
Speaker 8: so then consumer products, think industrial products.
Speaker 4: Services.
Speaker 8: Let's say we like utilities, but we also like servicing
Speaker 8: utilities companies, and of course life sciences and pharmaceutical services
Speaker 8: is the other pillar that we look at. So that's
Speaker 8: how we look at it in private markets. In public markets,
Speaker 8: I would say, you know, Tom, the conversation continues. Is
Speaker 8: the AI momentum still there? For us the Answered Partners Group,
Speaker 8: it's still very much. And just look at what happened
Speaker 8: with the Oracle, for example, last week and the fact
Speaker 8: that they went from guiding you've ever seen it then,
Speaker 8: well not since nineteen ninety two, right, And you know
Speaker 8: the fact that they went from revising their cloud infrastructure
Speaker 8: revenue from eighteen billion to one hundred and forty four
Speaker 8: billion over the next five years. That's monumental and that
Speaker 8: really tells you that the AI momentum is continuing.
Speaker 4: So a partners group.
Speaker 8: We think about investing it obviously in application software, but
Speaker 8: also in infrastructure. And there's probably three, four or five
Speaker 8: ways in which you can invest in AI in infrastruture
Speaker 8: some window.
Speaker 2: Into that for private market stuff, I wouldn't understand how
Speaker 2: do you do AI data, electricity, generation, infrastructure away from
Speaker 2: the Dow Jones industrial average.
Speaker 8: Right, Let's talk about infrastructure, and let's talk about the
Speaker 8: three or four or five ways. I mean, the first
Speaker 8: one was how about well data centers, which I realized Tom,
Speaker 8: it's a theme that's well talked about and at the
Speaker 8: same time, if you look at and at the growth
Speaker 8: in data centers, it's still forecasted to be fourteen percent
Speaker 8: per annum for the next number of years. So data centers,
Speaker 8: and I will say building a traditional data center versus
Speaker 8: building an AI data center are two very different things.
Speaker 4: And what you need for an.
Speaker 8: AI data center, First of all, you need a lot
Speaker 8: more power capacity, power density, So that's a different requirement.
Speaker 8: If you're going to run those racks of GPUs that
Speaker 8: require a whole lot more power, that's a whole different
Speaker 8: cooling requirement, So we have to think about that. And
Speaker 8: then also you know Tom especially if you're not doing training,
Speaker 8: if you're doing AI, inference latency and that you know,
Speaker 8: speed of transferring data is really paramount. So building out
Speaker 8: the fiber capabilities five G capabilities is all that we
Speaker 8: think about in terms of the data center design. So
Speaker 8: quite different than just the traditional stuff and certainly quite
Speaker 8: different than just semiconductors.
Speaker 5: How about electricity generation, and we were talking about builds
Speaker 5: are going up, the demand for electricity is going up.
Speaker 5: Over who gets the electricity is certainly becoming a roiling
Speaker 5: debate as well. How do you see all of that
Speaker 5: laying out? Are you someone who sees nuclear is the
Speaker 5: solution here? How is that going to sort of shape
Speaker 5: the way this arc with AI continues to do.
Speaker 4: Yeah? Well, first of all, some kind of big picture stats.
Speaker 8: If you look at the electricity generation for the last
Speaker 8: twenty five years, it has not grown. But if you
Speaker 8: look at the electricity generation forecasts for the next twenty
Speaker 8: five years, it is forecast to grow at thirty eight percent.
Speaker 4: That's in terms of demand for electricity.
Speaker 8: Some of it comes from AI, some of it comes
Speaker 8: from just the electrification of transportation.
Speaker 4: But here's the status.
Speaker 8: Something like seven hundred terawat hours is what's required in
Speaker 8: terms of additional capacity that we have to build out.
Speaker 8: So that's why I think in public markets, utilities, for example,
Speaker 8: have done fairly well this year, and that is a
Speaker 8: trend that we certainly see continuing because they'll be at
Speaker 8: the forefront of bridging that gap.
Speaker 5: Well, thinks back here to the FED meeting this week,
Speaker 5: when I get a sense of what you expecting out
Speaker 5: of that, but also what that decision and I suppose
Speaker 5: subsequent decisions, the way that they unfold, how they're sequenced,
Speaker 5: is likely to mean for investors.
Speaker 8: Right, I mean, twenty five basis points is obviously has
Speaker 8: it is about to decide, But I do really hope
Speaker 8: that not only do they decide on the twenty five
Speaker 8: basis points now, but also another in the end of
Speaker 8: October and another one in December. And you know, again,
Speaker 8: I say that is because the labor market is sort
Speaker 8: of on the verge of slipping into further weakness, and
Speaker 8: if they worry about inflation, that's sort of a backwards
Speaker 8: looking worry because if all of a sudden, you don't
Speaker 8: have the labor market, you don't have the consumer spending
Speaker 8: four or five percent year over year as we are
Speaker 8: doing today, then that inflationary concern can very quickly pivoted
Speaker 8: to a deflationary concern. So I do hope that not
Speaker 8: only do we get the ray cut this week, but
Speaker 8: we get a pretty.
Speaker 4: Strong indication that this is a beginning.
Speaker 5: Of a rate cut aside forecast.
Speaker 8: That's right, that's I think that's really key to the
Speaker 8: market because think about it, twenty five basis points a
Speaker 8: doesn't really push in the economy. Seventy five basis points
Speaker 8: that could translate to economic benefit. And you know, one
Speaker 8: example I would give you is, obviously tariffs are a
Speaker 8: cost for corporations. They're absorbing them in their margins. But
Speaker 8: what are they doing instead. They're maybe laying off workers,
Speaker 8: maybe they're not hiring workers. But if you can free
Speaker 8: up seventy five basis points of interest expense that can
Speaker 8: be used for other purposes, and that's the support for
Speaker 8: the economy.
Speaker 2: I look at the Santastasian. I'm just I think of
Speaker 2: other guests we've had have just said, look, invest in America,
Speaker 2: and you've been one of the most strident voices that
Speaker 2: say you have to participate in American capitalists. Yeah, talk
Speaker 2: to people that are still scared stiff. They see the
Speaker 2: political trauma of this nation that we talked about earlier
Speaker 2: with the Henrietta state. Again the case to invest in America.
Speaker 4: Right, well, let's talk about the facts.
Speaker 8: And I was never in the camp of the American
Speaker 8: exceptionalism is over and the reason for that. Let's just
Speaker 8: talk about the backdrop forward corporate in America. And one
Speaker 8: of the things that the tax bill did is solidify
Speaker 8: the fact that corporate tax rate in the United States
Speaker 8: is going to be twenty one percent. After accounting for
Speaker 8: certain deductions, it's probably close to about nineteen percent. The
Speaker 8: big deal about that time is if you look at
Speaker 8: some of the other develop market economies, the average is
Speaker 8: twenty five percent or higher in some instances. So all
Speaker 8: of a sudden, you have an incredibly friendly corporate tax
Speaker 8: regime that on top of that, there's a couple of
Speaker 8: things in the tax building it even more friendly. And
Speaker 8: I'm talking about the one hundred percent bonus depreciation. So
Speaker 8: if you invest today in America, you get that one
Speaker 8: hundred percent bonus depreciation in year one that has been permanent.
Speaker 8: So that is a long term boost to us GDP.
Speaker 8: If you invest in R and D in the United states.
Speaker 8: That's again a one hundred percent deduction in year one
Speaker 8: versus the five year stretch out before. So you package
Speaker 8: that together, that's that's an incredible incentive to invest in America.
Speaker 2: Anastasia, thanks so much. Anastasia m Roso nailed the boom
Speaker 2: market is with partners, Stay with us. More from Bloomberg
Speaker 2: Surveillance coming up after this.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Apple, Corplay and Android
Speaker 1: Auto with the Bloomberg Business app. You can also watch
Speaker 1: us live every weekday on YouTube and always on the
Speaker 1: Bloomberg Terminal.
Speaker 2: David Gurney David Gurney, Gurney, David g David, I need more,
Speaker 2: Senka David Gera in for Paul Sweeney right now, She'll
Speaker 2: save me. Let's get to the newspapers. El Matteo.
Speaker 7: I don't know if I'll save you, but I'll try.
Speaker 7: Here we go.
Speaker 9: Okay, so we've been talking about how AI is transforming
Speaker 9: corporate America, right, but this says something interesting from gold
Speaker 9: mien sacts. They say its growth is understated and government
Speaker 9: data so they say AI added one hundred and sixty
Speaker 9: billion dollars to the US economy, but only forty five
Speaker 9: billion shows up in GDP, and anils are saying that
Speaker 9: leaves about one hundred and fifteen billion dollars uncounted. For
Speaker 9: the reason how this is happening is, they say, because
Speaker 9: semiconductors treated as intermediate inputs which are only counted toward
Speaker 9: that final demand when products like things like consumer laptops
Speaker 9: that they enable our sold. So the chips in recent
Speaker 9: years they're being developed for things like training supporting AI models.
Speaker 9: So these Goldman analysts are estimating that about seventy five
Speaker 9: billion dollars spent on developing AI models and solutions in
Speaker 9: the cloud, they have not been counted in these investment statistics.
Speaker 9: So it's an interesting number to think about when all
Speaker 9: the talk we've been having about AI and its influence
Speaker 9: on corporate America, Ya's.
Speaker 5: Saying to think about that, I mean, we had that
Speaker 5: conversation last week just about productivity, and now that's still
Speaker 5: something that's so amorphous with the effect that hugely.
Speaker 2: Amorphous to go into it now because it's three ratios.
Speaker 2: Last week, that conversation with Heath Terry Studibank was extraordinary
Speaker 2: and Lisa, he said expert. It's moving so damn fast,
Speaker 2: was what mister Terry said next week.
Speaker 9: Most definitely, Okay, I want to take it to the
Speaker 9: entertainment media space. We know about David Elson right acquiring Powermount.
Speaker 9: Now he's hiring financial advisors to get ready to buy
Speaker 9: Warner Brothers Discovery. But this is an interesting reader in
Speaker 9: bloomberg screen time newsletter as to why now. So they're saying,
Speaker 9: you know what, he could have waited to do this
Speaker 9: whole paramounts guidance, and there sever things off. Warner Brothers
Speaker 9: could have even been cheaper if he waited, But if
Speaker 9: he did, he'd risk into running into a different regulatory regime,
Speaker 9: a different Yeah, that's the scene the president correct. Correct,
Speaker 9: And if he waited, he calls. He could also have
Speaker 9: other parties could have made a play for Warner Brothers.
Speaker 9: He could have had that. But now you know, Bloomberg's
Speaker 9: screen Time is saying the likely list of buyers is short.
Speaker 9: So mean now is you know possibly the right time today?
Speaker 2: I read every word of screen Time. You can't say
Speaker 2: enough about it. It's event in October is like it's
Speaker 2: got goosebumps, It's got everybody.
Speaker 5: Yeah, I know, we can't get tickets. We can't get in.
Speaker 5: You and I.
Speaker 2: You know it's you gotta be cool, you know you
Speaker 2: get in. But the basic idea here is what do
Speaker 2: you do with old media? That permeates every paragraph of
Speaker 2: the newsletter? What does Warner Brothers? What does Paramount do
Speaker 2: with I guess the movies, and I guess they're not
Speaker 2: worth all that much, right, I mean, it's it's great.
Speaker 4: It makes you think, it really does.
Speaker 2: It makes you think about where are we in five years?
Speaker 2: How much TV was watched at the girl.
Speaker 5: House quite a bit yesterday. I don't know what game
Speaker 5: we didn't watch, but Brian Weezer was so good on
Speaker 5: this last week.
Speaker 2: We didn't have enough, we got enough time with it,
Speaker 2: but he can you you know, I know it's three
Speaker 2: layers below you, but can you tell the team if
Speaker 2: you have time to go that low on a tree,
Speaker 2: that we'd like to get Ryan Weezer back again because
Speaker 2: he was shorter last week without the emergency stuff.
Speaker 4: We didn't do.
Speaker 2: You have anything else? I do? I do?
Speaker 9: And this one might touch your heartstrings a little bit. Okay,
Speaker 9: So moms and dads right for years have been taken
Speaker 9: after the kids, and now they send them off to college,
Speaker 9: and now it's setting in right, what do I do
Speaker 9: getting emotional? What do I do with this new chapter
Speaker 9: in my life? You know, it does get emotional. I
Speaker 9: got a year to go and then I'm going to
Speaker 9: be in the same spot and how you're feeling. Some
Speaker 9: are finding it liberating, but others are having a really
Speaker 9: tough time with it because.
Speaker 4: They're so used to Tom's got his heart.
Speaker 2: Apartment. Is the messaging the iPhone? Like the messing? I
Speaker 2: did this exactly fifty years ago, four a M. Did
Speaker 2: I wake you?
Speaker 9: But I bet you treasured that text message? You know,
Speaker 9: like it is, Oh shut out, I'm want to get
Speaker 9: it out of it?
Speaker 2: Show me from newspapers the newspapers with Lisa Matteo this morning.
Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,
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Speaker 1: weekday seven to ten am Eastern on Bloomberg dot Com,
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