WEBVTT - Russia Sanctions, Recession Forecasts, Nvidia Rally 0:00:00.080 --> 0:00:12.879 Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg 0:00:12.960 --> 0:00:16.960 Surveillance Podcast. I'm Tom Keene along with Paul Sweeney. Join 0:00:17.040 --> 0:00:21.000 us each day for insight from the best in economics, finance, investment, 0:00:21.200 --> 0:00:24.840 and international relations. You can also watch the show live 0:00:25.079 --> 0:00:29.400 on YouTube. Visit the Bloomberg Podcast channel on YouTube to 0:00:29.520 --> 0:00:32.920 see the show weekday mornings from seven to ten am 0:00:32.960 --> 0:00:37.000 Eastern from our global headquarters in New York City. Subscribe 0:00:37.000 --> 0:00:40.760 to the podcast on Apple, Spotify, or anywhere else you listen, 0:00:41.080 --> 0:00:44.720 and always I'm Bloomberg Radio, the Bloomberg Terminal, and the 0:00:44.760 --> 0:00:48.520 Bloomberg Business App. It's been a great honor to know him, 0:00:48.720 --> 0:00:51.440 his public commitment to the United States from coming out 0:00:51.440 --> 0:00:54.680 of San Diego. Is a young buck out of Annapolis. 0:00:54.760 --> 0:00:58.000 James Travetus joins us now and addmirl and of course 0:00:58.040 --> 0:01:02.840 his work Carlisle is noted Emeralds Tavitas. I want to 0:01:02.880 --> 0:01:05.000 get down to the granular because I don't think enough 0:01:05.040 --> 0:01:09.440 of the granulars talked. Somebody has to pay for a 0:01:09.560 --> 0:01:15.080 Magura V five drone so it can sink a modestized 0:01:15.120 --> 0:01:19.640 ship of the Russian Navy. Is Washington saying to Ukraine 0:01:19.680 --> 0:01:23.160 as a generalization that we're not going to pay for 0:01:23.280 --> 0:01:27.520 a Magura V five drone or whatever so that we 0:01:27.600 --> 0:01:28.360 can assist you. 0:01:29.480 --> 0:01:32.520 Yeah, that's the message being delivered to Kiev right now. 0:01:32.840 --> 0:01:37.560 It's immensely frustrating to anybody who cares about the security 0:01:37.560 --> 0:01:41.200 of the country. Tom And it's not just drones, it's 0:01:41.400 --> 0:01:46.480 artillery shells, it's eight tacums long range missiles, it's getting 0:01:46.080 --> 0:01:51.440 the F sixteens onto the battlefield. All of that, we 0:01:51.560 --> 0:01:56.320 are failing the cause of freedom. Final thought, it's sixty 0:01:56.360 --> 0:02:01.120 billion dollars. That's okay an amount of money. Our defense 0:02:01.160 --> 0:02:05.400 budget is nine hundred billion dollars. So for five percent 0:02:05.440 --> 0:02:08.320 of our defense budget we break the Russian armed forces 0:02:08.400 --> 0:02:11.840 defeat Vladimir Putin. There's a business show that sounds like 0:02:11.880 --> 0:02:13.639 a pretty good ROI to me. 0:02:14.360 --> 0:02:17.920 How close are we to lend lease or before lend 0:02:17.960 --> 0:02:23.520 Lea's nineteen thirty eight, nineteen thirty nine, we're basically isolationists. 0:02:23.680 --> 0:02:26.880 America said we don't want to participate at that time 0:02:27.200 --> 0:02:30.280 in a European war. Is this just nothing more than 0:02:30.320 --> 0:02:33.400 an isolationist debate of a global America? 0:02:34.400 --> 0:02:35.079 I think it is. 0:02:35.200 --> 0:02:38.680 It feels eerily like the nineteen thirties. Go back and 0:02:38.720 --> 0:02:44.200 read the first volume of Winston Churchill's magisterial six volume 0:02:44.400 --> 0:02:48.519 set the Second World War. It's called The Gathering Storm. 0:02:49.000 --> 0:02:50.200 That's what it feels like. 0:02:50.160 --> 0:02:51.960 To me, and it feels like to me folks if 0:02:52.000 --> 0:02:53.680 you want to read it, particularly the kids out there. 0:02:53.680 --> 0:02:57.480 Warren Remembrance Hermann Valuk, which is just shocking on nineteen 0:02:57.520 --> 0:03:00.160 thirty eight, is a fiction. Paul jump in here, withever. 0:03:00.680 --> 0:03:03.160 Admiral, can you give us, based upon your sourcing kind 0:03:03.200 --> 0:03:07.000 of the latest on the battlefield in Ukraine today? 0:03:07.960 --> 0:03:13.519 I can no surprise as supplies dwindle to the Ukrainians. 0:03:13.880 --> 0:03:18.520 It puts real lift in the Russian armed forces, so 0:03:18.560 --> 0:03:22.440 they're moving forward. It's not yet the end of the 0:03:22.520 --> 0:03:26.320 road for Ukraine, but you can feel the wind behind 0:03:26.360 --> 0:03:29.919 the sales of Vladimir Putin. And by the way, it's 0:03:29.960 --> 0:03:35.000 all connected to his arrogance, his impunity and killing Alexander 0:03:35.120 --> 0:03:38.920 Navalni over the last few days. All of this is 0:03:38.960 --> 0:03:42.240 giving real lyft on the battlefield to the Russians. We 0:03:42.440 --> 0:03:45.880 better get this military aid to the Ukrainians or we're 0:03:45.880 --> 0:03:48.640 going to see more losses and the hole that's being 0:03:48.800 --> 0:03:52.680 dug will be much harder to get out of, Admiral. 0:03:52.720 --> 0:03:56.320 I think most students of history take away that boy. 0:03:56.480 --> 0:04:00.400 The Russian people, the Russian army can take un told 0:04:00.400 --> 0:04:04.080 amounts of pain and time. Is there any sense that 0:04:04.760 --> 0:04:08.160 Russia will bend here at all other than you know, 0:04:08.240 --> 0:04:10.720 I guess superior military. 0:04:11.320 --> 0:04:15.800 I think it's going to require a continued significant aid 0:04:15.880 --> 0:04:16.640 from the West. 0:04:16.839 --> 0:04:20.000 And yes, Russians can take a lot of pain. 0:04:20.080 --> 0:04:22.520 Go back and read One Day in the Life of 0:04:22.560 --> 0:04:26.880 Ivan Denisovich by the Nobel Laureate Alexander Solzanis. 0:04:26.920 --> 0:04:28.520 It's someone in goolag. 0:04:28.839 --> 0:04:32.760 These are tough people, and Putin is a tough long 0:04:32.880 --> 0:04:36.880 range player, but his soldiers are dying. 0:04:37.000 --> 0:04:38.640 In the hundreds of thousands. 0:04:39.400 --> 0:04:42.600 Hundreds of thousands of young men have departed the country 0:04:42.680 --> 0:04:45.839 Russia to avoid the draft long term. It's not a 0:04:45.839 --> 0:04:48.520 good hand of cards. We just need to keep our 0:04:48.560 --> 0:04:50.080 foot on the accelerator. 0:04:50.839 --> 0:04:54.800 James Trevitis with US the former NATO Supreme Commander program 0:04:54.839 --> 0:04:58.839 Note here the new Foreign Affairs magazine is extraordinary. Neil Ferguson, 0:04:59.360 --> 0:05:04.200 the and controversial historian, with a definitive essay there on 0:05:04.400 --> 0:05:07.680 just what the Edmund was talking about. Which is the 0:05:07.760 --> 0:05:10.520 detent the new kind of theme that's out there of 0:05:10.560 --> 0:05:14.479 a Kissinger realist policy versus whatever the new policy is 0:05:14.480 --> 0:05:16.960 that we're making up as we go. I want to 0:05:16.960 --> 0:05:20.160 go to our conversation Admiral on Bloomberg surveillance moments ago 0:05:20.360 --> 0:05:23.839 with a member of the Biden administration, and John Farrell 0:05:23.960 --> 0:05:28.279 asked the money question, what about India? I have hockey 0:05:28.360 --> 0:05:33.719 stick charts of exports from Kazakhstan in India into Russia. 0:05:34.360 --> 0:05:39.720 What is our political and military leverage with mister Mody 0:05:39.800 --> 0:05:41.640 as he faces a new election. 0:05:43.160 --> 0:05:45.960 First, let's let him get through his election. You know, 0:05:46.120 --> 0:05:49.120 nine hundred million people literally are going to go to 0:05:49.160 --> 0:05:51.000 the polls and vote in India. 0:05:51.080 --> 0:05:55.239 I think he'll win a strong, strong poll. 0:05:55.800 --> 0:05:59.320 Then he'll come back with real confidence in his third term. 0:05:59.680 --> 0:06:02.200 I think that's when we can go to him off 0:06:02.200 --> 0:06:05.839 stage and say, what will it take? Can we pull 0:06:05.920 --> 0:06:09.919 you away from this support line you are providing to Russia? 0:06:09.960 --> 0:06:12.240 You're right, Tom, India is the key. 0:06:12.480 --> 0:06:16.680 China is going to continue to support Putin. India is 0:06:16.720 --> 0:06:18.800 the swing vote here we need to focus on. 0:06:18.920 --> 0:06:21.120 Okay, I'm going to go there, folks. You're gonna rip 0:06:21.160 --> 0:06:24.279 up the scripture with James Trubus. Ramatana Guoh's, a definitive 0:06:24.320 --> 0:06:30.400 Gandhi biographer, has a blistering essay here begging the United 0:06:30.400 --> 0:06:34.600 States to impart its policy over to India. Is they 0:06:34.640 --> 0:06:38.800 actually become somewhat dominant with the struggling China. Do we 0:06:38.839 --> 0:06:42.040 have any military presence over there, Admiral? Do we exist 0:06:42.520 --> 0:06:46.760 in the Indian Sea of the South whatever this ocean 0:06:46.880 --> 0:06:50.039 is there from South Africa Durban on the way over 0:06:50.200 --> 0:06:51.479 to Indonesia. 0:06:52.400 --> 0:06:56.120 Yeah, Tom, that would be the Indian Ocean, the largest ocean. 0:06:56.279 --> 0:06:59.240 That's why I will you were on the boat and 0:06:59.360 --> 0:07:00.919 I was driving the taxicab. 0:07:01.960 --> 0:07:06.560 So we have a strong level of presence there because 0:07:06.680 --> 0:07:09.480 we sail through it both from the Pacific side and 0:07:09.680 --> 0:07:13.480 from the Red Sea side into the Arabian Gulf. We 0:07:13.640 --> 0:07:16.480 could do a lot more militarily with the Indians and 0:07:16.600 --> 0:07:20.520 the Indian military. I assure you would like to come 0:07:20.960 --> 0:07:24.400 more into focus with the United States by more of 0:07:24.520 --> 0:07:28.760 our systems. For decades they've been reliant on Russia. That's 0:07:28.880 --> 0:07:32.880 another piece of this. If we can insert US military 0:07:32.960 --> 0:07:36.360 cooperation with our Indian colleagues, I think we would go 0:07:36.520 --> 0:07:39.040 a long way toward pulling India in our direction. 0:07:39.520 --> 0:07:43.080 Ada, Well, let's pivot slightly to the Middle East. Boy, 0:07:43.720 --> 0:07:47.040 talk about another challenging situation there. What is your most 0:07:47.160 --> 0:07:49.440 up to date view of how this is playing out 0:07:49.840 --> 0:07:51.520 as likely to play out over the coming weeks. 0:07:52.800 --> 0:07:57.840 Humanitarian crisis most obviously hostages on top of it, that 0:07:58.560 --> 0:08:01.920 is going to continue to fester for probably two to 0:08:02.080 --> 0:08:07.080 three more months while the Israelis fully consolidate control. They're 0:08:07.280 --> 0:08:12.040 trying to reduce collateral damage. They're succeeding somewhat in doing so. 0:08:13.120 --> 0:08:16.320 That frame is going to freeze in two to three months, 0:08:16.360 --> 0:08:19.480 than a peacekeeping force will come in. Things will de 0:08:19.680 --> 0:08:22.720 accelerate at that point. The one I'm watching from an 0:08:22.760 --> 0:08:26.800 investment perspective are the attacks the Red Sea the potential 0:08:26.880 --> 0:08:30.280 effective closure of the Suez Canal by the Hoothys. 0:08:30.560 --> 0:08:31.720 We're going to need to put. 0:08:31.680 --> 0:08:37.840 More military missiles on targets ashore in order to stop 0:08:38.000 --> 0:08:40.800 that and keep the global commerce open. 0:08:41.120 --> 0:08:43.280 Those are the two main things I'm watching. 0:08:43.520 --> 0:08:46.680 Are you surprised that maybe we haven't had more success 0:08:47.200 --> 0:08:51.240 in that area in gaining greater control over the Red 0:08:51.320 --> 0:08:52.600 Sea and its shipping lanes. 0:08:53.520 --> 0:08:59.600 I'm not surprised, simply because Iran continues to refuel, recharge, organize, 0:08:59.640 --> 0:09:03.680 training and equip. The houthis right now, we're striking Kuthy 0:09:03.840 --> 0:09:04.720 targets ashore. 0:09:05.240 --> 0:09:06.840 If Iran does not get the. 0:09:06.920 --> 0:09:09.760 Message to cease and desist, we're going to have to 0:09:09.840 --> 0:09:15.920 start going after Iranian maritime targets, their ships, their warships, 0:09:16.080 --> 0:09:19.880 their platforms. I hope we don't get there, but that 0:09:20.080 --> 0:09:22.520 message has to get to Tayron. It's not going to 0:09:22.559 --> 0:09:24.440 get solved in Yemen, Edmirald, with. 0:09:24.559 --> 0:09:28.440 Great respect to the British, their ships can't get out 0:09:28.480 --> 0:09:31.320 of the harbor. I mean, I'm not going to mince words. 0:09:31.320 --> 0:09:34.160 And we have a prime Minister out of Southampton with 0:09:34.320 --> 0:09:37.640 all that heritage, our pride going and this goes to 0:09:37.720 --> 0:09:41.599 the Admirals Book of Stravetas. I'm so sorry. Remind me 0:09:41.600 --> 0:09:43.400 of the name of your book where you line up 0:09:43.440 --> 0:09:45.080 ten admirals in a row. 0:09:45.920 --> 0:09:47.880 It's called Sailing True North. 0:09:48.040 --> 0:09:50.920 Sailing True North. Rickover sail True North because he had 0:09:50.960 --> 0:09:55.000 a budget. Zoom, weall sail True North because he had 0:09:55.040 --> 0:09:58.079 a budget. Does our present navy have a budget? Are 0:09:58.120 --> 0:10:01.000 we going to be stuck in Southampton or Portsmouth like 0:10:01.080 --> 0:10:02.839 the British Navy? Yeah? 0:10:02.960 --> 0:10:07.959 On a scale that runs from the British challenges you're 0:10:08.000 --> 0:10:12.640 talking about, which are very real, to a fully sourced 0:10:13.000 --> 0:10:16.880 US Navy that can undertake its global mission. We're about 0:10:17.040 --> 0:10:19.400 three quarters of the way to where we should be, 0:10:19.720 --> 0:10:22.880 meaning we have about three hundred warships. I'll put it 0:10:22.880 --> 0:10:25.880 in really round numbers. We need about three hundred and 0:10:26.040 --> 0:10:29.959 fifty warships that would match what China has. China has 0:10:30.040 --> 0:10:32.199 the largest fleet in the world. If you ask me, 0:10:32.280 --> 0:10:34.920 as an admiral, which fleet would I rather have in 0:10:35.040 --> 0:10:38.000 a fight, I'd still take the American fleet because of 0:10:38.080 --> 0:10:41.520 our experience, our nuclear carriers, our submarine technology. 0:10:41.920 --> 0:10:44.120 But that edge we have is dwindling. 0:10:44.240 --> 0:10:44.440 Tom. 0:10:44.840 --> 0:10:48.080 We need to put emphasis on the maritime because everything 0:10:48.200 --> 0:10:51.559 we've talked about goes back to the sea and the 0:10:51.720 --> 0:10:55.000 oceans and the ability to keep global commerce moving. 0:10:55.280 --> 0:10:57.840 And that's the subject of a recent column of yours. Admiral. 0:10:57.960 --> 0:11:01.319 Russia's new threat is under not in space. Can you 0:11:01.360 --> 0:11:01.800 explain that. 0:11:02.760 --> 0:11:05.920 Yeah, we had a week where we were all shocked 0:11:06.080 --> 0:11:11.000 to hear from the intelligence community that Russia's thinking about 0:11:11.040 --> 0:11:12.760 putting a nuclear weapon in space. 0:11:13.120 --> 0:11:16.080 That would be bad. They haven't done it yet. They 0:11:16.120 --> 0:11:17.880 don't really have that technology. 0:11:18.000 --> 0:11:20.800 Yet what they do have is the ability to disrupt 0:11:21.120 --> 0:11:26.319 underwater cables that carry the entire Internet. Only five hundred 0:11:26.400 --> 0:11:31.040 cables carried the entire global Internet, all the commerce ten 0:11:31.120 --> 0:11:33.760 trillion transactions a day. 0:11:34.400 --> 0:11:37.200 Those are vulnerable targets on the bottom of the sea. 0:11:37.559 --> 0:11:39.320 Russia could go after them today. 0:11:39.800 --> 0:11:42.960 I have to end with a delicate question in given 0:11:43.040 --> 0:11:46.479 his public service for all Americans, whatever their political persuasion, 0:11:46.559 --> 0:11:51.120 it's delicate. Should the Secretary of Defense Admiral's so ill? 0:11:51.960 --> 0:11:52.800 Should he resign? 0:11:54.600 --> 0:11:58.200 He should do what his health demands. If he has 0:11:58.280 --> 0:12:01.120 the health and the vigor to act as Secretary of Defense. 0:12:01.559 --> 0:12:06.160 Lloyd Austin, a contemporary of mine, he should remain in 0:12:06.440 --> 0:12:09.040 office as long as his health permits. 0:12:09.600 --> 0:12:12.120 James Trevitis, thank you so much. Can't say enough about 0:12:12.200 --> 0:12:15.640 Leader's bookshelf. It's just one of my favorite favorite books. 0:12:15.679 --> 0:12:18.040 I'll put that out here in the blur today is 0:12:18.080 --> 0:12:21.560 well the former Supreme NATO commander. Just a terrific brief 0:12:21.600 --> 0:12:34.920 there joining us now the tennis player from Princeton, Andrew 0:12:34.960 --> 0:12:37.880 Howsby here on the economics of the moments of a 0:12:37.960 --> 0:12:40.559 small French trin do you get, Andrew? I'm going to 0:12:40.640 --> 0:12:42.680 cut to the chase. Forget about the b MP Perry 0:12:42.720 --> 0:12:46.720 By US Open tickets. Are you over in Paris at 0:12:46.760 --> 0:12:49.800 the best tennis court in the world. Are you watching 0:12:50.040 --> 0:12:54.480 out of the BMP perry By box the French Open 0:12:54.640 --> 0:12:56.400 with a just gorgeous green that they have. 0:12:58.880 --> 0:13:03.559 Unfortunately, Tom, I'm not but certainly missing out on that 0:13:03.640 --> 0:13:04.400 experience right now. 0:13:04.640 --> 0:13:07.800 It's great. I wandered into the courts one day when 0:13:07.840 --> 0:13:10.440 I was like fifteen years old. It's like magical, It's 0:13:10.480 --> 0:13:13.679 like surreal. Would be of us in Carl Ricadonna, Andrew 0:13:13.760 --> 0:13:16.719 Husby with us this morning. Andrew, Paul and I have 0:13:17.000 --> 0:13:20.400 completely ignored the parlor game. Give us an update on 0:13:20.520 --> 0:13:23.000 what you believe this FED would do? 0:13:26.080 --> 0:13:28.800 Sure well, thanks Tom So. At the moment, we think 0:13:29.240 --> 0:13:31.040 this is a FED and we're hearing it in the 0:13:31.080 --> 0:13:34.360 FED speak we've seen really since the December meeting, this 0:13:34.559 --> 0:13:37.920 is a FED that is very cautious about cutting too 0:13:38.040 --> 0:13:41.200 early here coming into this year. Think about the narrative. 0:13:41.520 --> 0:13:43.000 A lot of folks were thinking we might get a 0:13:43.040 --> 0:13:46.040 cut as soon as March, maybe even January, but the 0:13:46.120 --> 0:13:50.280 narrative is really shifted here. Our team did not subscribe 0:13:50.320 --> 0:13:53.560 to the March cut view. Yes, we had been up 0:13:53.640 --> 0:13:57.240 until last year, been up until last week rather been 0:13:57.440 --> 0:14:00.880 in the May camp. But we do think the January 0:14:00.960 --> 0:14:06.040 CPI report, along with the accumulation of stronger data, really 0:14:06.360 --> 0:14:08.040 does make us think that the Fed is going to 0:14:08.080 --> 0:14:09.880 move even a bit later than that. So we think 0:14:10.240 --> 0:14:13.720 ultimately it will be a June cut and a shallower 0:14:13.840 --> 0:14:16.280 path this year of cuts than we had previously envisioned. 0:14:16.320 --> 0:14:18.319 We see about one hundred basis points of cuts this 0:14:18.480 --> 0:14:22.760 year as the FED kind of eyes again the stronger 0:14:22.800 --> 0:14:27.160 inflation backdrop and most importantly, a stronger economic growth backdrop, 0:14:27.240 --> 0:14:29.920 which you know, there's an argument to be made that 0:14:30.400 --> 0:14:33.480 stronger growth itself can be disinflationary if the supply side 0:14:33.520 --> 0:14:36.240 is coming back, but it's hard to bet too strongly 0:14:36.320 --> 0:14:38.880 on that. So we think in that environment, the FED 0:14:38.960 --> 0:14:39.840 stays pretty cautious. 0:14:39.840 --> 0:14:39.960 Here. 0:14:40.080 --> 0:14:42.800 Well, what's so important here, folks, is the overlay of stimulus. 0:14:43.120 --> 0:14:46.080 Are we through the stimulus? Because I've had whispers this week. 0:14:46.560 --> 0:14:49.920 You know, I'm sorry, Andrew, we're distracted with Nvidia. I apologize, 0:14:50.400 --> 0:14:54.560 but with it, and Andrew, are we beyond the stimulus? 0:14:54.920 --> 0:14:55.840 I'm not so sure. 0:14:58.720 --> 0:15:02.280 It doesn't feel like it's all fully run off, whether 0:15:02.360 --> 0:15:06.560 you're thinking about the excess savings built up over the pandemic, Yes, 0:15:06.640 --> 0:15:08.440 a lot of that is run down, but you look 0:15:08.480 --> 0:15:12.040 at the after effects on say the equity market, there's 0:15:12.080 --> 0:15:17.240 a tendant wealth effect still coming through there. And as 0:15:17.280 --> 0:15:20.480 we're looking ahead to you know, just again where deficits are, 0:15:20.920 --> 0:15:23.360 they're still high. And as we come look ahead to 0:15:23.400 --> 0:15:26.600 the election, you're still looking at potential catalysts that could 0:15:26.640 --> 0:15:31.360 catalyze a more expansionary fiscal policy after the election too. 0:15:31.480 --> 0:15:34.000 So all of that suggests, you know, it certainly hasn't 0:15:34.080 --> 0:15:35.400 all run out just yet. 0:15:35.840 --> 0:15:38.680 Hey, Andrew, I think since the January inflation data, the 0:15:38.760 --> 0:15:41.440 CPI and a PPI data came out, we've actually had 0:15:41.520 --> 0:15:44.040 some people come into the studio and say, hey, you 0:15:44.280 --> 0:15:47.360 have to have in your scenario analysis a scenario where 0:15:47.400 --> 0:15:50.720 the Fed actually hikes rates this year. What do you 0:15:50.760 --> 0:15:51.160 think about that? 0:15:53.480 --> 0:15:55.920 Yeah, so, certainly at the moment, you know, we're thinking 0:15:57.080 --> 0:16:01.280 that sort of a scenario involves the just staying on 0:16:01.480 --> 0:16:05.560 hold for longer unless we really think that the so 0:16:05.760 --> 0:16:09.080 called neutral rate in the economy is really substantially higher 0:16:09.120 --> 0:16:12.720 and really remains substantially higher for this year next year. 0:16:13.560 --> 0:16:16.320 You know, it still feels as though policy is restrictive. 0:16:16.400 --> 0:16:18.880 We're seeing it in the data flow. We're seeing it, 0:16:19.760 --> 0:16:22.880 certainly in the inflation data itself. Inflation has come down 0:16:23.040 --> 0:16:25.720 pretty substantially, so it tells us that things are moving 0:16:26.080 --> 0:16:28.920 in the right direction. But certainly, you know, could the 0:16:28.960 --> 0:16:32.360 Fed hike again. You can entertain scenarios, but that's far 0:16:32.480 --> 0:16:34.560 from our base case at the moment. Again, we're focused 0:16:34.560 --> 0:16:38.640 on duration at the current level, not added hikes. 0:16:38.840 --> 0:16:41.800 So how about the one of the aspects of this 0:16:41.920 --> 0:16:44.200 economy that continues to amaze me as the labor market. 0:16:44.320 --> 0:16:48.440 How strong the labor market remains. Some are saying that 0:16:48.520 --> 0:16:51.080 the Fed really needs to see the unemployment rate, you know, 0:16:51.160 --> 0:16:53.880 maybe move above four percent, maybe four and a half percent. 0:16:54.760 --> 0:16:56.640 How are you guys thinking about this US labor market. 0:16:58.640 --> 0:17:02.760 Yeah, it's been surprised both in terms of the strength 0:17:02.840 --> 0:17:04.760 we saw in the last two jobs reports, are seeing 0:17:04.840 --> 0:17:08.000 job growth above three hundred thousand a month, and it's 0:17:08.080 --> 0:17:10.760 also surprising in that some of the revisions we've seen 0:17:10.840 --> 0:17:13.400 kind of reshape the path. So not only is recent 0:17:13.480 --> 0:17:15.399 job growth stronger, but it was stronger at the end 0:17:15.400 --> 0:17:18.600 of last year, and that's meant more income more spending 0:17:18.640 --> 0:17:20.800 and the like. Now the question for us, you know, 0:17:20.840 --> 0:17:24.160 when you look at factors like labor supply, we've seen 0:17:24.200 --> 0:17:28.960 a pretty substantial rebound in labor supply, and recently even 0:17:29.000 --> 0:17:31.240 the CBO had come out with a report saying, actually 0:17:31.320 --> 0:17:34.760 the labor force potential labor force is actually potentially much 0:17:34.840 --> 0:17:38.000 larger on account of immigration and the like. So you know, 0:17:38.160 --> 0:17:41.000 to us it says strong job growth. It's in part 0:17:41.080 --> 0:17:44.320 a function of businesses being a bit more confident as 0:17:44.560 --> 0:17:48.160 recession risk has faded, as the risk of further FED 0:17:48.240 --> 0:17:51.360 hikes has faded, so there's an incentive to potentially hire 0:17:51.359 --> 0:17:51.960 a bit more here. 0:17:52.800 --> 0:17:55.920 Yeah, go ahead, Well, I mean to go ahead, but 0:17:56.000 --> 0:17:59.320 the research node is extraordinary. I mean the ricodonic, you know, 0:17:59.440 --> 0:18:02.320 the concision of what Husby's doing with Rick and Donna 0:18:02.320 --> 0:18:06.399 and the team over there is extraordinary. Into the weekend, Andrew, 0:18:06.880 --> 0:18:09.920 what's the item of inflation that we need to think 0:18:09.960 --> 0:18:14.080 about when you sort out X number of components? What's 0:18:14.160 --> 0:18:16.480 the one year watching into March? 0:18:19.640 --> 0:18:21.679 So at the moment, you know, I know it's been 0:18:21.800 --> 0:18:23.760 a refrain for some time now, but it is really 0:18:23.840 --> 0:18:28.199 that services number x X. Housing. We've seen a lot 0:18:28.240 --> 0:18:30.480 of progress on goods. We expect that to continue through 0:18:30.480 --> 0:18:32.760 the first part of this year. But we think that 0:18:32.840 --> 0:18:37.040 there is a relationship between labor slack and that core 0:18:37.119 --> 0:18:40.359 services component of inflation, and in the January report that 0:18:40.640 --> 0:18:43.320 was quite strong pointing to you know, there may be 0:18:43.440 --> 0:18:46.840 some quirks here. It's the start of the year, businesses 0:18:46.920 --> 0:18:48.640 reset prices and the like, so we'll need to see 0:18:48.640 --> 0:18:51.240 a few more reports here to really be thinking about 0:18:51.240 --> 0:18:53.960 a dramatically different outlook here. But it really is services 0:18:54.040 --> 0:18:55.719 prices for us. 0:18:56.000 --> 0:18:58.320 I can't sign up about this. Interhusby, thank you so much, 0:18:58.400 --> 0:19:01.040 don't be a stranger with BMV Pery, their senior US 0:19:01.480 --> 0:19:08.800 economist with our question for Global Wall Street. This is 0:19:08.880 --> 0:19:12.520 the conversation of the day gene Monster with us across 0:19:12.880 --> 0:19:16.720 the next half hour. I can't say enough about his 0:19:16.960 --> 0:19:20.680 work from Piper Jeffrey long ago. It was research that 0:19:20.840 --> 0:19:23.680 made you stop, and we're thrilled that he could join 0:19:23.800 --> 0:19:27.960 us today from deep Water Asset Management Gene I quote 0:19:28.000 --> 0:19:34.719 from pre pandemic, pre pandemic capex Microsoft fifteen billion, twenty one, 0:19:34.840 --> 0:19:38.159 twenty three, twenty eight thirty five and they're going to 0:19:38.200 --> 0:19:41.240 buy from Nvidia enough where we've got a modeled CAPEX 0:19:41.320 --> 0:19:45.920 out fourteen months, fifteen months of forty five billion dollars. 0:19:46.760 --> 0:19:49.240 Do you have a vision of how that money spent, 0:19:49.960 --> 0:19:53.399 the efficacy of it, the safety of it. For our 0:19:53.520 --> 0:19:58.000 listeners and viewers, this global capex off Nvidia. 0:20:00.119 --> 0:20:03.639 Topic time, and it's not just Microsoft, it's Google, it's Apple. 0:20:03.880 --> 0:20:06.919 They haven't said as much. Meta has said this thirty percent. 0:20:07.040 --> 0:20:10.400 That's kind of the benchmark. Thirty percent increase, and they compute. 0:20:11.119 --> 0:20:14.800 And so when we think about this these layers of AI, 0:20:15.280 --> 0:20:17.639 there's two parts of the question. One is what does 0:20:17.720 --> 0:20:20.439 the ramp look like? And this is a thirty percent 0:20:20.760 --> 0:20:24.159 step up. If you look at Jensen Wong's comments from 0:20:24.240 --> 0:20:27.960 Nvidia this week, he talked about the chip, the GPU 0:20:28.680 --> 0:20:31.680 market being several hundred billion dollars over the next few years. 0:20:31.720 --> 0:20:35.240 It's about one hundred billion dollars today. So that kind 0:20:35.240 --> 0:20:38.119 of plays along this trajectory of twenty five percent growth. 0:20:38.600 --> 0:20:41.480 I think what your listeners should take away here is 0:20:41.600 --> 0:20:46.000 that there is a significant investment, a massive investment going 0:20:46.040 --> 0:20:49.840 on from these hyperscalers, these big tech companies. This is 0:20:50.000 --> 0:20:53.360 the first of four waves of investment that will probably 0:20:53.480 --> 0:20:56.399 last a decade and as far as what it means 0:20:56.520 --> 0:20:58.520 for our lives. I think it's going to be the 0:20:58.560 --> 0:21:01.840 most profound change, much more than what the Internet was 0:21:01.960 --> 0:21:04.960 last time we spoke about this. The spectrum that I 0:21:05.040 --> 0:21:07.960 have in terms of how to think about AI relative 0:21:08.040 --> 0:21:10.760 to our lives, I put a spectrum of zero one 0:21:10.840 --> 0:21:15.280 hundred electricities one hundred. The PC was a twenty mobile, 0:21:15.320 --> 0:21:19.399 twenty five Internet fifty and AI's ninety nine, and it 0:21:19.440 --> 0:21:21.879 would be one hundred if not for needing electricity. So 0:21:23.119 --> 0:21:25.240 it's a big This is a big deal, and I'm 0:21:25.880 --> 0:21:28.560 I think that your listeners just take away that the 0:21:28.960 --> 0:21:32.760 significance of this change is going to be more profound 0:21:32.800 --> 0:21:33.320 than the Internet. 0:21:33.600 --> 0:21:36.960 Jane. I want to frame this as something maybe we understand, 0:21:37.119 --> 0:21:39.480 unlike experts like you. I think of all the other 0:21:39.600 --> 0:21:43.080 compatriots and tech dana ives and such, and that is. 0:21:43.359 --> 0:21:45.679 There was the Model T, which was like, okay, well 0:21:45.720 --> 0:21:48.919 that's a fad, and then in nineteen twenty seven, nineteen 0:21:49.080 --> 0:21:52.919 thirty ish, the Model A showed up and Alfred Sloan 0:21:53.080 --> 0:21:56.080 was over at GM trying to make magic happen, and 0:21:56.200 --> 0:21:58.680 it was like, whoa wait, this automobile is going to 0:21:58.720 --> 0:22:02.240 be a real deal. It's actually going to work. Where 0:22:02.320 --> 0:22:05.080 are we within that continuum? Are we looking at AI 0:22:05.200 --> 0:22:08.440 as a fad? Are we to the model A, Are 0:22:08.480 --> 0:22:10.880 we to the Ford F one fifty pickup truck where 0:22:10.880 --> 0:22:14.000 it's entrenched. AI is entrenched in society. 0:22:16.280 --> 0:22:19.600 So from the impact of society right now, it's a 0:22:19.800 --> 0:22:24.320 model T and it is we're just still scratching the surface. 0:22:24.359 --> 0:22:26.760 And just to put some context on that, is that 0:22:27.000 --> 0:22:29.560 most of that spend when we see this just breath 0:22:29.640 --> 0:22:32.399 taking change in vidious business. And I want to just 0:22:32.520 --> 0:22:35.240 take a pause for a moment and put how breathtaking 0:22:35.280 --> 0:22:38.520 of a change this is. In Vidia's business for the 0:22:38.680 --> 0:22:43.000 previous three quarters before the AI lift off was down 0:22:43.040 --> 0:22:46.520 in averages seventeen percent per quarter. This business was in 0:22:46.840 --> 0:22:50.119 the toilet. And it has now since the three quarters 0:22:50.160 --> 0:22:52.399 that it's taken a step up. It is up two 0:22:52.520 --> 0:22:55.720 hundred percent on average per quarter. And so what we're 0:22:55.760 --> 0:22:58.720 seeing is this dramatic step up. And when we think 0:22:58.760 --> 0:23:01.080 about most of that spend, and the vast majority of 0:23:01.119 --> 0:23:04.280 it has been related to those hyperscalers building the Model T. 0:23:04.840 --> 0:23:09.120 It's related to but there has been an important data 0:23:09.160 --> 0:23:11.440 point that Jensen Wong talked about in the Nvidia call 0:23:11.960 --> 0:23:14.880