WEBVTT - Markets, PCE, and Obama Endorsement 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.960 --> 0:00:15.560 This is the Bloomberg Surveillance Podcast. I'm Tom Keene along 0:00:15.600 --> 0:00:18.960 with Paul Sweeney. Join us each day for insight from 0:00:18.960 --> 0:00:23.160 the best in economics, finance, investment, and international relations. You 0:00:23.160 --> 0:00:26.520 can also watch the show live on YouTube. Visit the 0:00:26.520 --> 0:00:31.280 Bloomberg Podcast channel on YouTube to see the show weekday 0:00:31.320 --> 0:00:34.320 mornings from seven to ten am Eastern from our global 0:00:34.360 --> 0:00:39.000 headquarters in New York City. Subscribe to the podcast on Apple, Spotify, 0:00:39.360 --> 0:00:42.920 or anywhere else you listen and always I'm Bloomberg Radio, 0:00:43.080 --> 0:00:46.280 the Bloomberg Terminal, and the Bloomberg Business App. 0:00:46.520 --> 0:00:49.080 Cam Dawson joining us now chief Investment Officer at New Edgewealth. 0:00:49.120 --> 0:00:51.479 Great to have you with us here in studio. Let 0:00:51.520 --> 0:00:53.120 me just get your reaction to these numbers and what 0:00:53.159 --> 0:00:55.520 we heard from Neil there just a moment ago. It 0:00:55.600 --> 0:00:59.440 sounds like the trajectory seems smooth, the glide path is smooth. 0:01:00.000 --> 0:01:03.360 You're destined for this phantom soft landing. Your reaction to 0:01:03.400 --> 0:01:05.399 the numbers we've got and how does that dovetail with 0:01:05.440 --> 0:01:08.080 what you're strategizing and thinking about investments? 0:01:08.319 --> 0:01:11.000 The data continues to thread this needle where it's not 0:01:11.200 --> 0:01:13.440 hot enough that we need to take rate cuts off 0:01:13.480 --> 0:01:16.440 the table, but it's also not cool enough to suggest. 0:01:16.160 --> 0:01:17.080 That gold blocked. 0:01:17.400 --> 0:01:19.920 Yeah, it's right in line in the sense that we 0:01:20.000 --> 0:01:22.039 don't have to pull forward rate cuts. We don't have 0:01:22.080 --> 0:01:25.200 to do fifty bases points in September. So it does 0:01:25.319 --> 0:01:28.119 give the FED the ability to have a certain degree 0:01:28.120 --> 0:01:31.440 of patients, which we think is actually good for equities. 0:01:31.800 --> 0:01:34.440 Urgency would be bad if you're cutting because you have 0:01:34.520 --> 0:01:36.760 to you have to get those cuts in. That would 0:01:36.800 --> 0:01:39.640 be something we don't think risk assets would like game. 0:01:39.480 --> 0:01:41.120 This out for us. Neil Dudda is saying, the next 0:01:41.120 --> 0:01:43.120 stage of this is for the FED to figure out 0:01:43.200 --> 0:01:45.800 what that cut cycle is going to be, like, how 0:01:45.800 --> 0:01:48.080 do you navigate that, how do you think about equities 0:01:48.120 --> 0:01:50.520 within the context of that uncertainty? What the FED is 0:01:50.560 --> 0:01:52.440 going to do here after this begins. 0:01:52.640 --> 0:01:55.800 The big, huge question mark is not when they start 0:01:55.840 --> 0:01:57.960 in what they do in twenty four, it's how this 0:01:58.080 --> 0:02:01.440 progresses in twenty five. You look through twenty six, there 0:02:01.480 --> 0:02:04.520 is nine cuts priced in which, if you don't have 0:02:04.560 --> 0:02:07.800 a recession, that's a really deep cutting cycle. Regardless of 0:02:07.840 --> 0:02:10.200 what you think about where the rate real FED funds 0:02:10.280 --> 0:02:12.880 rate should be. So when we think about the path 0:02:12.919 --> 0:02:15.280 into twenty five, we think the FED will still be 0:02:15.360 --> 0:02:18.240 data dependent, which is why we think that they want 0:02:18.280 --> 0:02:20.919 to keep their options open in twenty four. Don't cut 0:02:20.960 --> 0:02:24.280 it every meeting, don't accelerate cuts, because that then allows 0:02:24.320 --> 0:02:26.800 them to be patient and see how the data comes 0:02:26.800 --> 0:02:27.480 in in twenty five. 0:02:27.520 --> 0:02:30.239 Yeah, I'm telling me to ignore the real rates. I think, yeah, 0:02:30.400 --> 0:02:31.280 you love the real rate. 0:02:31.440 --> 0:02:34.639 Well, no, I just look at it as range bound. Yes, 0:02:34.760 --> 0:02:38.280 what I put Kim. The thing here with Kim Dawson 0:02:38.440 --> 0:02:41.680 is there fluidity across the four accounting statements is an 0:02:41.760 --> 0:02:44.639 act of God. We're starting to see earnings and it's 0:02:44.680 --> 0:02:47.200 like the worry is OMG. Revenues aren't going to be 0:02:47.280 --> 0:02:49.840 where they are free cash? How growth is not going 0:02:49.840 --> 0:02:53.920 to be there? I'm saying, blowney, it's one by one 0:02:54.160 --> 0:02:58.880 every stock matters. Do you detect a trend to day 0:02:59.560 --> 0:03:04.000 in the dynamics of Kim Dawson ratios across seeing the 0:03:04.120 --> 0:03:05.760 accounting statements. 0:03:05.400 --> 0:03:07.840 There is a very important thing that we're seeing with 0:03:08.000 --> 0:03:12.440 revenues versus earnings. Revenues aren't beating at a very high pace. 0:03:12.560 --> 0:03:15.119 Only about forty percent of companies are beating on revenues, 0:03:15.840 --> 0:03:18.840 but they're beating on earnings, which means companies are pulling 0:03:18.919 --> 0:03:21.280 all these levers below the line in order to make 0:03:21.360 --> 0:03:24.959 earnings materialize. And some of those are the quality, which 0:03:25.000 --> 0:03:27.160 is why stocks haven't necessarily been reacting. 0:03:27.160 --> 0:03:29.840 Well, well, she knows, she's laughing at me. 0:03:29.919 --> 0:03:30.560 Can you see there? 0:03:31.160 --> 0:03:33.720 Knows you know she's she's just laughing at me. Cam. 0:03:34.000 --> 0:03:38.360 The bottom line is that theories there, But the key 0:03:38.440 --> 0:03:42.160 thing is forty percent of stocks are getting it done. 0:03:42.280 --> 0:03:45.840 How do you discern those forty percent of stocks that 0:03:45.920 --> 0:03:50.840 are delivering unit and price revenue mix that gets it done. 0:03:50.960 --> 0:03:54.040 It's pricing power. And I think this is the biggest 0:03:54.040 --> 0:03:56.400 theme in question mark over the next World six. 0:03:56.720 --> 0:03:59.520 I've written in the next week this is coming Jack Welch, 0:04:00.000 --> 0:04:00.560 coming back. 0:04:00.680 --> 0:04:03.480 Well, you were hearing from companies time and time again 0:04:03.560 --> 0:04:07.040 that they're having trouble passing on higher cost to customers. 0:04:07.360 --> 0:04:09.960 And this is because inflation is falling. When you see 0:04:09.960 --> 0:04:13.840 CPI fall, that's effectively saying that companies aren't able to 0:04:13.880 --> 0:04:18.240 pass on these higher prices. That translates to margin pressure 0:04:18.600 --> 0:04:21.599 if this continues, and I think that that would be 0:04:21.640 --> 0:04:24.200 the question for twenty five. Maybe the FED like said 0:04:24.240 --> 0:04:28.200 inflation's falling, Maybe consumers like it. Corporate profits might not 0:04:28.360 --> 0:04:29.040 like it as much. 0:04:29.240 --> 0:04:31.240 Cam situate this for us and what we've seen over 0:04:31.279 --> 0:04:34.159 the course of this week last week as well, everyone 0:04:34.240 --> 0:04:38.680 is so blinded buyer distracted by handful of companies, by AI, 0:04:38.839 --> 0:04:42.400 these megacap companies. How do you see through that? What's 0:04:42.440 --> 0:04:45.200 your counsel to those who just have been distracted by 0:04:45.240 --> 0:04:47.720 that for so long now and at this point seeing 0:04:47.720 --> 0:04:49.440 the kind of rotation that we've seen or beginning to 0:04:49.480 --> 0:04:50.360 look elsewhere. 0:04:50.600 --> 0:04:53.160 So if we think about the rotation in the terms 0:04:53.279 --> 0:04:55.960 of the accounting statements, I think it's actually an important 0:04:55.960 --> 0:04:59.440 way to view things. Right now, lower quality companies are 0:04:59.560 --> 0:05:02.800 rallying because they're getting balance sheet relief. What you're seeing 0:05:02.839 --> 0:05:05.120 is that interest rates are falling, and people are hoping 0:05:05.160 --> 0:05:08.240 that interest expense for those small caps, mostly those that 0:05:08.279 --> 0:05:11.560 are unprofitable, will be easier. The thing that is the 0:05:11.640 --> 0:05:15.320 question mark is if you continue to see this deceleration 0:05:15.560 --> 0:05:19.200 and growth, do you get income statement pressure? So balance 0:05:19.200 --> 0:05:21.200 sheet relief is one thing, but does it come with 0:05:21.240 --> 0:05:24.120 income statement pressure, which is why we think you can 0:05:24.200 --> 0:05:28.279 buy left behind areas like small caps, like international, like value, 0:05:28.600 --> 0:05:31.320 but you have to focus on the high quality portions 0:05:31.360 --> 0:05:34.760 of that market. Don't taste junk because junk will reverse 0:05:35.040 --> 0:05:36.440 if you start to see softer growth. 0:05:36.440 --> 0:05:37.440 Is junk. 0:05:37.839 --> 0:05:41.040 No, Big tech isn't junk. But just because it's not 0:05:41.120 --> 0:05:44.599 junk doesn't mean it necessarily was properly priced. If you 0:05:44.640 --> 0:05:47.760 look at the valuations, they of the overall Tech index, 0:05:47.839 --> 0:05:50.599 it was trading higher than it was in twenty twenty 0:05:50.600 --> 0:05:52.839 one at the peak and twenty one. So we do 0:05:52.880 --> 0:05:55.400 see valuation as a risk, as a thing that could 0:05:55.400 --> 0:05:58.440 be reset, but that can be reset in the context 0:05:58.600 --> 0:06:01.760 of a broader medium from uptrend. These areas are still 0:06:01.800 --> 0:06:05.560 in uptrends, which we think need to be respected. At 0:06:05.600 --> 0:06:08.280 a point. If you start to see earning's weakness, that's 0:06:08.320 --> 0:06:10.360 when we'll change our mind and say you should trend 0:06:10.400 --> 0:06:11.839 back on risk in some of these areas. 0:06:11.839 --> 0:06:13.760 The key thing you're on a Friday or everybody's going 0:06:13.800 --> 0:06:16.480 to cash to keep up with me. The bottom line 0:06:16.520 --> 0:06:18.239 is you're still in a bullmarket mode. 0:06:18.440 --> 0:06:19.760 Can anyone keep up now? 0:06:20.160 --> 0:06:23.159 No, I'm trying to make the first folks, I'm looking 0:06:23.200 --> 0:06:25.400 at an odd lot in Apple. I'm thinking like thirty 0:06:25.400 --> 0:06:28.359 two shares, Yeah, Monday morning. But the answers, we're in 0:06:28.360 --> 0:06:30.360 a bullmarket, get over it. 0:06:30.360 --> 0:06:33.240 It is a market that has been absolutely demanding that 0:06:33.279 --> 0:06:36.839 you respect the trend, and we still aren't oversold yet. 0:06:36.880 --> 0:06:39.520 I think that is important to note. We've had this volatility, 0:06:39.880 --> 0:06:41.800 but we're still in an up trend, which I think 0:06:41.880 --> 0:06:44.560 should be respected until that changes. 0:06:44.720 --> 0:06:47.600 Okay, the highlight of the week right well, right now, 0:06:47.720 --> 0:06:51.279 we did led Zepplguy Okay, Lizzie Sauders is doing led Zeppelin. 0:06:51.360 --> 0:06:53.920 Somebody else is doing led Zeppelin. Carl up in New 0:06:53.960 --> 0:06:57.719 Hampshire emails in he's doing led Zeppelin. Madison Square Gardens 0:06:57.960 --> 0:07:01.040 nineteen seventy three. Ken Dawson, you listen and do this 0:07:01.080 --> 0:07:03.039 weekend led Zeppelin? 0:07:03.320 --> 0:07:05.760 Wow, everyone is How did you know that? I just 0:07:05.839 --> 0:07:08.159 know I've got his finger on the pul the Zeitgey's 0:07:08.160 --> 0:07:08.680 on the pulse. 0:07:09.440 --> 0:07:13.120 Told you Ki Ki, Kim won some LEDs upon love. 0:07:13.200 --> 0:07:15.240 Kim Dawson, thank you so much to see you. But 0:07:15.400 --> 0:07:28.080 do it's really really appreciate it. The politics of this 0:07:28.680 --> 0:07:32.520 of this July is simple gir and izing Hail Mary's 0:07:32.520 --> 0:07:35.480 that we won't have to work on Sunday. Also, Greg 0:07:35.520 --> 0:07:37.720 Valier may not have to work on Sunday. Why don't 0:07:37.720 --> 0:07:40.720 you bring in the exhausted Greg Valier of AGF. 0:07:40.920 --> 0:07:43.440 Yes, Greg Valier joining us now with this important perspective 0:07:43.480 --> 0:07:46.560 on what's happening in Washington, indeed, with this campaign overall, 0:07:46.560 --> 0:07:49.080 and Greg, we're going to see this short video shot 0:07:49.120 --> 0:07:51.840 of Kamala Harris taking a phone call from former President 0:07:51.920 --> 0:07:55.400 Obama and Michelle Obama over and over and over again 0:07:55.400 --> 0:07:59.120 at the last one hour is prologue here, explain the 0:07:59.160 --> 0:08:02.000 significance of it. We have seen an incredibly rapid run 0:08:02.080 --> 0:08:04.520 here since Joe Biden dropped out of the run for 0:08:04.560 --> 0:08:08.040 reelection of Democrats getting in line to support him. What 0:08:08.200 --> 0:08:10.239 is your sense of the significance here of this last 0:08:10.280 --> 0:08:12.880 piece going into that puzzle, the Obama's throwing their support 0:08:13.000 --> 0:08:14.000 behind the vice president. 0:08:14.880 --> 0:08:17.280 Yeah, the party all of a sudden is looking pretty good, 0:08:17.320 --> 0:08:21.000 pretty unified on a lot of issues. I think that 0:08:21.280 --> 0:08:24.600 Obama coming on board is crucial, and I think the 0:08:24.680 --> 0:08:27.200 Republicans have not had a good week at the polls, 0:08:27.520 --> 0:08:29.920 and they definitely have not had a good week with 0:08:30.520 --> 0:08:33.720 Taylor Swift and jd Vance and Katz, which is one 0:08:33.760 --> 0:08:36.360 of the craziest issues I've ever seen in my career. 0:08:36.840 --> 0:08:39.160 And Vance, I think is on the wrong side of 0:08:39.160 --> 0:08:39.880 this issue. 0:08:40.400 --> 0:08:41.760 On the Wright side of kats issues. 0:08:41.760 --> 0:08:46.200 Anna Wong Chief Economists Bloomberg sent me a photo of 0:08:46.280 --> 0:08:50.920 George Washington's painting in the National Gallery on this topic. 0:08:51.880 --> 0:08:54.439 Yeah, and we're supposed to hear from Jade Vance later. 0:08:54.600 --> 0:08:56.400 I think he's on Megan Kelly's show and she promises 0:08:56.440 --> 0:09:01.280 she will ask the public comedy about his comment. 0:09:02.920 --> 0:09:03.439 Offspring. 0:09:03.520 --> 0:09:08.240 Yes, the thing is there's a there's a deeper story here, 0:09:08.240 --> 0:09:10.760 as you guys of course know, and that is they 0:09:10.800 --> 0:09:15.880 want to mock Kamala Harris as somebody who never got married, 0:09:15.960 --> 0:09:19.320 never really had her own biological kids. I think that's 0:09:19.360 --> 0:09:22.240 a it's a pretty dirty trick, and I think they 0:09:22.320 --> 0:09:26.480 are trying to make an argument that childless, cat owning 0:09:26.840 --> 0:09:30.360 women are hurting the country. I mean, if that's just 0:09:30.640 --> 0:09:32.800 crazy stuff, you can't make this stuff up. 0:09:33.800 --> 0:09:35.960 Craig, what is sticking you know? I think that this 0:09:36.080 --> 0:09:39.120 threw everything out of whack. Of course, the departure of 0:09:39.200 --> 0:09:41.600 Joe Biden in this race, the introduction of Kamala Harris's 0:09:41.679 --> 0:09:46.240 as the presumptive nominee. You see the Trump campaign fumbling 0:09:46.240 --> 0:09:48.200 a bit here. We got this statement last night saying 0:09:48.200 --> 0:09:50.480 they're not going to commit to a debate later this 0:09:50.640 --> 0:09:53.960 later this year until Kamala Harris gets the official nomination 0:09:54.040 --> 0:09:56.400 from the Democratic Party. What does all this say to 0:09:56.440 --> 0:09:58.839 you and what's your sense of how that line of 0:09:58.880 --> 0:10:01.160 attack is coming focus so much as it is? 0:10:02.000 --> 0:10:04.680 Yeah, you know, it's still July, you know, and I 0:10:04.720 --> 0:10:08.360 don't want to over emphasize. I've never believed a campaign 0:10:08.640 --> 0:10:11.800 really got underway until after Labor Day, so it's a 0:10:11.880 --> 0:10:14.280 time for them to iron out their soundbites and to 0:10:14.559 --> 0:10:17.600 get things in line for September. But it's not a 0:10:17.600 --> 0:10:20.400 fatal week for the Republicans, but they can't keep having 0:10:20.440 --> 0:10:22.280 weeks like this over and over. 0:10:22.559 --> 0:10:25.360 Should they do the VP thing before the Sunday talk 0:10:25.440 --> 0:10:29.600 shows or should they really wait till August fourth before 0:10:29.760 --> 0:10:31.000 virtual anointment. 0:10:32.320 --> 0:10:35.240 I would advise them to tease it like Trump has. 0:10:35.440 --> 0:10:37.640 There's no need to come out with it right away. 0:10:37.679 --> 0:10:40.120 I think it's down to two candidates. Tom It would 0:10:40.160 --> 0:10:43.040 either be Mark Kelly of Arizona, who I think will 0:10:43.040 --> 0:10:46.320 be the pick, or maybe Josh Shapiro, who's very good 0:10:46.360 --> 0:10:48.440 also help us with. 0:10:48.360 --> 0:10:51.400 That calculus there, You look at those two very capable 0:10:51.440 --> 0:10:54.840 candidates for that position. Give us the pluses and minuses 0:10:54.840 --> 0:10:57.560 for each, if you would, Greg Well. 0:10:57.520 --> 0:11:01.680 I would say, for Kelly, he's not in a state 0:11:01.679 --> 0:11:04.880 with a huge amount of Electoral College votes, a state 0:11:04.920 --> 0:11:08.640 the Democrats probably going to lose anyway, so that's a factor. 0:11:09.240 --> 0:11:13.160 And for Shapiro, he's very young, he's not totally experienced, 0:11:13.600 --> 0:11:16.840 but I think he is. He has a lot of upside. 0:11:16.880 --> 0:11:20.800 He's a quality candidate who could maybe make the difference 0:11:20.840 --> 0:11:21.800 of a point or two. 0:11:22.600 --> 0:11:25.120 Greg, I want to get your observations of how these 0:11:25.200 --> 0:11:27.960 last few days have gone. I think what's really fascinating 0:11:28.000 --> 0:11:30.040 to me is, you know, Joe Biden has a very 0:11:30.080 --> 0:11:33.239 close inner circle, but he had a pretty sprawling campaign apparatus, 0:11:33.320 --> 0:11:36.160 and really in a matter of hours they took out 0:11:36.160 --> 0:11:38.480 the candidate and put a new one in. And it 0:11:38.559 --> 0:11:42.120 seems like that mechanism is working pretty seamlessly with that 0:11:42.240 --> 0:11:45.280 new candidate. That's a surprise to me. I wonder if 0:11:45.320 --> 0:11:47.240 it is to you, And I'd love your counsel with 0:11:47.320 --> 0:11:48.960 the campaign of what they need to continue to do 0:11:49.000 --> 0:11:50.160 to keep it running efficiently. 0:11:50.200 --> 0:11:53.720 And Well, it's a good question, David, and it is 0:11:53.760 --> 0:11:55.800 a bit of a surprise. I do think there'll be 0:11:55.880 --> 0:12:01.680 more legal action with the Republican saying that the Democrats 0:12:01.720 --> 0:12:04.000 didn't have the right to transfer all of this money. 0:12:04.280 --> 0:12:07.079 There's talk of trying to impeach Kamala Harris. I mean, 0:12:07.080 --> 0:12:09.520 that's not going to happen. But the one thing that 0:12:09.559 --> 0:12:13.600 stands out for me is that the Republicans still really 0:12:13.640 --> 0:12:16.960 don't have an angle to attack her on. I don't 0:12:16.960 --> 0:12:20.720 think they're quite sure yet where their strongest point is, 0:12:21.000 --> 0:12:23.080 and they got to get that decided pretty soon. 0:12:23.240 --> 0:12:26.960 Are they having meetings now in mar Laga wherever? Are 0:12:27.040 --> 0:12:31.120 they having meetings in weeks where they say we've got 0:12:31.160 --> 0:12:33.679 to move to the middle where they do a Reagan 0:12:34.280 --> 0:12:36.319 or is that just not part of the vocabulary. 0:12:37.440 --> 0:12:39.719 I don't think it's part of the vocabulary, Tom. I 0:12:39.800 --> 0:12:42.200 think this is a group that is going to move 0:12:42.240 --> 0:12:45.240 to the right, just as the Democrats eventually probably will 0:12:45.240 --> 0:12:48.040 move to the left. But I don't see any sign 0:12:48.080 --> 0:12:50.319 in the Republican Party that they're going to try to 0:12:50.360 --> 0:12:53.679 win over, for example, Nicky Haley voters. I think that's 0:12:53.720 --> 0:12:54.480 a big mistake. 0:12:54.760 --> 0:12:56.920 Woll Greg Value, you think it's so much eventful. I 0:12:56.920 --> 0:13:00.840 hope we do not talk to you Sunday afternoon or evening, 0:13:00.920 --> 0:13:08.040 mister Valier with AGF it's a mustard morning note and 0:13:08.120 --> 0:13:11.760 now an important conversation. I want to drive the conversation forward, 0:13:12.280 --> 0:13:15.720 which you can always do with gene Monster deepwater asset Management. 0:13:15.760 --> 0:13:18.000 One of the high points of the summer was a 0:13:18.120 --> 0:13:21.960 lengthy Nathan Hager conversation with Dan Ives and gene Monster 0:13:22.679 --> 0:13:28.040 that was to be kind informative Gene Monster. Brent Braselin 0:13:28.320 --> 0:13:31.960 over at Piper Sandler Year Old Watch has an overweight 0:13:32.080 --> 0:13:41.079 on Microsoft. Loop has a strong strong effort there as well. Over. 0:13:41.800 --> 0:13:44.319 You know where you were years ago, You're now at 0:13:44.320 --> 0:13:46.959 deep water and I don't think you're doing by holds sell, 0:13:47.600 --> 0:13:51.160 but everybody else is saying if you're going to do AI, 0:13:51.600 --> 0:13:55.960 Microsoft is a conservative play, are they? 0:13:56.880 --> 0:13:58.840 I think there's a lot of better places to be 0:13:58.960 --> 0:14:02.200 and maybe taking a step back, is that the first 0:14:02.320 --> 0:14:05.040 question that we should ask is do you believe or 0:14:05.400 --> 0:14:08.359 to what degree do you believe that AI will be transformative? 0:14:08.360 --> 0:14:09.880 And if you're in the camp that this is going 0:14:09.960 --> 0:14:13.880 to be something that comes close, meets or exceeds the hype, 0:14:14.280 --> 0:14:16.480 then Microsoft is going to go up. There's no doubt 0:14:16.520 --> 0:14:20.480 about it. I think there are better places to invest 0:14:20.640 --> 0:14:24.600 related to AI, which just given their pole position, may 0:14:24.600 --> 0:14:27.000 seem a little bit out of touch. But the simple 0:14:27.080 --> 0:14:31.280 reason is that Microsoft doesn't have full control of their 0:14:31.360 --> 0:14:34.720 AI destiny. Is that they of course work closely with 0:14:34.840 --> 0:14:39.440 open AI, but their ownership is not in equity ownership. 0:14:39.440 --> 0:14:42.040 It's related to revenue, so they open EI can do 0:14:42.120 --> 0:14:45.560 things like do a deal with Apple, and ultimately is 0:14:46.280 --> 0:14:48.760 Microsoft has worked more, is building more of these small 0:14:48.840 --> 0:14:52.360 language models to try to diversify, and so I think 0:14:52.400 --> 0:14:55.800 that they will clearly benefit. But we think that the 0:14:55.880 --> 0:14:59.720 best position company, despite the news yesterday around search GPT, 0:15:00.520 --> 0:15:02.840 is Google. And just to put that into the contrast 0:15:02.840 --> 0:15:07.320 to Microsoft is Google. They own their foundation, large language model, 0:15:07.520 --> 0:15:11.120 they have advanced Silicon, and they have distribution of six 0:15:11.160 --> 0:15:13.920 products that have a billion or more daily active users. 0:15:13.960 --> 0:15:16.680 And that's something. Those are three things that Microsoft can 0:15:16.760 --> 0:15:17.880 only claim two of. 0:15:18.520 --> 0:15:20.640 Geane, there's so much of this that's hoping, a prayer 0:15:20.680 --> 0:15:23.000 and a promise when it comes to AI. So, picking 0:15:23.080 --> 0:15:24.760 up on what you said, and Tom's good counsel that 0:15:24.760 --> 0:15:26.960 we should look forward, let me look back only briefly 0:15:27.000 --> 0:15:29.240 to say, what can we take away from what we 0:15:29.280 --> 0:15:32.800 heard from Google, from Alphabet this week and layer that 0:15:32.840 --> 0:15:34.200 onto what we're going to hear next week from these 0:15:34.240 --> 0:15:36.520 other companies. I hear what you're saying about Microsoft in 0:15:36.560 --> 0:15:39.120 the way that they're approaching AI. But is there the 0:15:39.120 --> 0:15:41.360 potential that this is perhaps a savvy move in that, 0:15:41.440 --> 0:15:44.200 you know, if this doesn't pan out to be as transformed, 0:15:44.280 --> 0:15:47.800 as widely transformative as many people think, not being all 0:15:47.840 --> 0:15:49.520 in on it might in fact be a good thing 0:15:49.560 --> 0:15:50.120 going forward. 0:15:52.280 --> 0:15:56.440 Well, I think it would be a historical mistake if 0:15:56.440 --> 0:15:58.600 they're not in that. That's my opinion. But let's take 0:15:58.640 --> 0:16:03.440 the approach that the approach that they're spending a lot 0:16:03.440 --> 0:16:06.080 of money and it may be not money well spent. 0:16:06.120 --> 0:16:08.400 So just quickly to kind of frame that in is 0:16:08.440 --> 0:16:11.960 that these companies are spending about fifty billion a year 0:16:12.000 --> 0:16:13.880 on capex. So you figure over a three year period, 0:16:13.920 --> 0:16:17.040 one hundred and fifty billion, they're generating about one hundred 0:16:17.040 --> 0:16:20.440 billion a year in income. Of that cappex. By the way, 0:16:20.480 --> 0:16:23.040 about half of it is related to AI. So said 0:16:23.080 --> 0:16:26.600 another way, seventy five billion over three years. Their market 0:16:26.640 --> 0:16:30.560 caps are two plus trillion dollars, and as Zuckerberg said 0:16:30.800 --> 0:16:34.920 this weekend, is Bloomberg podcast that there's just too much 0:16:35.040 --> 0:16:38.320 risk if they don't pursue this, because it is the 0:16:38.840 --> 0:16:40.760 biggest changes he talked about in the next ten to 0:16:40.800 --> 0:16:42.360 fifteen years. I think it's the biggest change in the 0:16:42.360 --> 0:16:45.920 next fifty. But the point is is that I think 0:16:46.000 --> 0:16:49.960 that if one of these companies takes the approach of 0:16:50.440 --> 0:16:53.520 let's save ten billion dollars here, ten billion dollars there 0:16:53.920 --> 0:16:56.680 over a over a year period, I think it could 0:16:56.760 --> 0:17:00.880 be just a historic mistake. And so they get it. 0:17:01.200 --> 0:17:03.480 Google set it, Sundar set on their call that they 0:17:03.520 --> 0:17:07.520 have to continue to embrace capex and ultimately David that 0:17:07.520 --> 0:17:10.359 that is the that's the central question of what AI 0:17:10.400 --> 0:17:12.480 investors should focus in on, at least over the next 0:17:12.560 --> 0:17:15.359 year or two years, is what does that capex pace 0:17:15.440 --> 0:17:15.840 look like. 0:17:16.080 --> 0:17:18.840 I mean, the zuck is with Emily, Okay, fine, we 0:17:18.920 --> 0:17:20.760 got to get gene Monster on the big take with 0:17:20.840 --> 0:17:21.440 David Gura. 0:17:22.080 --> 0:17:24.080 I mean, you know, I'd love it. 0:17:24.160 --> 0:17:25.160 You know, I think we can't. 0:17:25.200 --> 0:17:27.000 We can't shoot it as beautiful as Emily shot that 0:17:27.000 --> 0:17:27.800 interview with Zuckerberg. 0:17:27.840 --> 0:17:31.159 No, we can't. So that's great. Gene Monster. Tell me 0:17:31.240 --> 0:17:34.600 about Apple. I guess they're doing Apple intelligence. It's not 0:17:34.720 --> 0:17:38.919 really AI, it's pretend AI. Forget about it. Everybody in 0:17:38.960 --> 0:17:41.560 this room are going to have to buy six, seven, 0:17:41.720 --> 0:17:47.840 eight iPhones come September October? Are we all sleeping into September? 0:17:48.080 --> 0:17:49.480 When Apple stuns us? 0:17:51.680 --> 0:17:53.359 I think this stunt is going to be over the 0:17:53.400 --> 0:17:57.680 next year. And ultimately is that these features, well, they've 0:17:57.720 --> 0:18:00.800 been around for a year plus. Is that the fact 0:18:00.840 --> 0:18:02.919 that Apple is going to make them just work so 0:18:03.280 --> 0:18:06.160 seamlessly together. I think this is going to expose what 0:18:06.359 --> 0:18:09.240 I estimate twenty percent of the world to these AI 0:18:09.400 --> 0:18:12.200 tools many times a day, could be ten, twenty hundreds 0:18:12.200 --> 0:18:14.560 of times a day, and that is going to create 0:18:14.600 --> 0:18:17.280 a powerful upgrade cycle. The next three years for Apple 0:18:17.560 --> 0:18:20.960 is going to be clear sailing. And I use those 0:18:21.000 --> 0:18:23.959 words with caution because you always want to have your 0:18:24.000 --> 0:18:26.560 guard open. But I think that this upgrade cycle, like 0:18:26.600 --> 0:18:30.480 you said, is going to be breathtaking. So I think 0:18:30.600 --> 0:18:32.800 that this is I own Apple, my personal account. I 0:18:32.800 --> 0:18:33.800 think it's going to continue to do. 0:18:33.880 --> 0:18:36.560 Well. What's your Some of the parts on Apple come on, 0:18:37.760 --> 0:18:40.240 so I think that they can come on. 0:18:42.200 --> 0:18:44.720 So I have to preface not investment advice, but the 0:18:44.720 --> 0:18:46.679 way I think about it is that. I think that 0:18:46.720 --> 0:18:49.119 they can earn nine dollars in about a year and 0:18:49.160 --> 0:18:52.240 a half. And I think a reasonable model is kind 0:18:52.240 --> 0:18:56.600 of a low thirties thirty multiple. At the peak of 0:18:56.640 --> 0:18:58.880 the dot com was one hundred multiples across the board. 0:18:58.880 --> 0:19:01.280 I think low thirties is very reasonable and kind of 0:19:01.320 --> 0:19:03.440 gets to about a three hundred and fifteen dollars stock. 0:19:04.119 --> 0:19:07.720 He is that good, I mean, Jean Munster perfectly. 0:19:07.960 --> 0:19:10.399 He's gonna come in here someday with a lime green 0:19:10.520 --> 0:19:13.920 jacket in a flower shirt with a pair of Nikes. 0:19:14.000 --> 0:19:17.399 Nobody in Minnesota has us, Jean Monster, thank you for 0:19:17.440 --> 0:19:20.520 being like Dan Eyes greatly appreciate that, mister. And really 0:19:20.520 --> 0:19:23.479 a high point of the summer, seriously is Deep Water's 0:19:23.520 --> 0:19:26.960 Geene Monster with Dan Eyes of Wedbush Smart. You agree 0:19:27.000 --> 0:19:38.879 or disagree, doesn't matter you, Janie. Look at the front 0:19:38.880 --> 0:19:43.520 pages the Olympic version with Lisa Matteo and Matt Aveton's 0:19:43.560 --> 0:19:46.080 premiere pa Lisa Matteo. 0:19:45.760 --> 0:19:49.120 Yeah what he said, that's right, We're talking about the 0:19:49.160 --> 0:19:53.760 Paris Olympics. Okay, so kicks off. But they wanted to 0:19:53.800 --> 0:19:56.480 make the Olympic village perfect for these athletes, right, so 0:19:56.560 --> 0:19:59.280 they invested in all these things, but one thing that 0:19:59.359 --> 0:20:02.000 they forgot was, well they didn't actually forget, but an 0:20:02.080 --> 0:20:05.200 oversight was air conditioning. No air conditions, no air conditioning, 0:20:05.480 --> 0:20:09.199 no like no. So here's what's happening. They wanted to 0:20:09.240 --> 0:20:11.760 be more friendly for the environment. That's why they chose 0:20:11.800 --> 0:20:14.720 not to do it. So they have these ruling floors. 0:20:14.800 --> 0:20:18.080 So so water goes through the floors and it, you know, 0:20:18.160 --> 0:20:20.480 drops the temperature by ten to twenty degrees, but it's 0:20:20.520 --> 0:20:23.040 still between seventy three and seventy nine degrees, so it's 0:20:23.040 --> 0:20:27.760 still warm for them. So you can purchase portable air conditions. 0:20:27.920 --> 0:20:30.960 It's an option, it's an upgrade. So guess which team 0:20:31.400 --> 0:20:32.879 has the most options. 0:20:32.920 --> 0:20:36.000