1 00:00:00,080 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:11,680 --> 00:00:15,480 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,520 --> 00:00:18,720 Speaker 2: with Lisa Bromwitz and Amrie Hordert. Join us each day 4 00:00:18,760 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,440 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,960 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,319 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,960 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:37,400 Speaker 2: Terminal and the Bloomberg Business App. Julian and Manuel of 10 00:00:37,479 --> 00:00:40,479 Speaker 2: Evercore maintaining a seventy seven fifty s and P year 11 00:00:40,560 --> 00:00:43,839 Speaker 2: end price target, writing stocks have become more volatile as 12 00:00:43,920 --> 00:00:47,720 Speaker 2: the wall of worry is large around AI adoption, spend, regulation, profits, 13 00:00:47,720 --> 00:00:51,279 Speaker 2: the sustainability and capital raised. Julian joined us now for more. 14 00:00:51,360 --> 00:00:53,920 Speaker 2: Junin Good morning, Good morning. We often say on this program, 15 00:00:53,960 --> 00:00:56,520 Speaker 2: you can learn something about the data, and you can 16 00:00:56,600 --> 00:00:59,560 Speaker 2: learn something from how the market responds to the data. 17 00:00:59,640 --> 00:01:03,640 Speaker 2: This mor owning numbers from Samsung fantastic record quarterly profits, 18 00:01:03,640 --> 00:01:06,280 Speaker 2: stock gets hammered. What can you learn from that this morning? 19 00:01:06,640 --> 00:01:10,039 Speaker 3: So what you can learn is the sentiment around the 20 00:01:10,080 --> 00:01:15,240 Speaker 3: AI trade, in our view, is probably as cautious as 21 00:01:15,240 --> 00:01:18,520 Speaker 3: it was in the first quarter of the year coming 22 00:01:18,560 --> 00:01:23,280 Speaker 3: into the reporting season in April. That actually caused the 23 00:01:23,319 --> 00:01:28,399 Speaker 3: market to pivot higher. It really is this every one 24 00:01:28,480 --> 00:01:31,560 Speaker 3: of these aspects has now become a glass half empty 25 00:01:32,200 --> 00:01:33,959 Speaker 3: type of view. But at the end of the day, 26 00:01:34,000 --> 00:01:37,119 Speaker 3: what we think that this earning season will show is that, 27 00:01:37,720 --> 00:01:41,480 Speaker 3: like this report last night, there is incredible strength and 28 00:01:41,840 --> 00:01:45,760 Speaker 3: you know, if positioning gets to one way, it gets 29 00:01:45,800 --> 00:01:46,399 Speaker 3: taken off. 30 00:01:46,600 --> 00:01:49,000 Speaker 4: But the longer term trend. 31 00:01:49,200 --> 00:01:53,920 Speaker 3: The fact that these stocks and this theme is driving 32 00:01:54,040 --> 00:01:57,880 Speaker 3: financial markets in the global economy higher in. 33 00:01:57,800 --> 00:01:59,680 Speaker 2: The shortter, medium term, it does feel like there's been 34 00:01:59,680 --> 00:02:01,960 Speaker 2: a term though off the back of the micro numbers 35 00:02:01,960 --> 00:02:05,160 Speaker 2: eighty five percent march in, Samsung, record quarterly profits, and 36 00:02:05,240 --> 00:02:08,000 Speaker 2: yet the market is punishing some of those stories and 37 00:02:08,040 --> 00:02:10,160 Speaker 2: you're start to see a rotation back to the big spenders, 38 00:02:10,200 --> 00:02:12,720 Speaker 2: the hyperscalets. We've heard from multiple people in the last 39 00:02:12,720 --> 00:02:15,320 Speaker 2: twenty four hours that's the trait they like now, leading 40 00:02:15,400 --> 00:02:17,760 Speaker 2: into the so called Lag seven, not the Mac seven 41 00:02:18,040 --> 00:02:20,560 Speaker 2: part of the market that has struggled METSA, Microsoft and 42 00:02:20,639 --> 00:02:22,760 Speaker 2: leaning away from some of the chip makers, which you 43 00:02:22,760 --> 00:02:23,040 Speaker 2: make of. 44 00:02:23,000 --> 00:02:24,600 Speaker 4: That cool, I'm going to have to use that one. 45 00:02:24,720 --> 00:02:25,239 Speaker 2: It's not mine. 46 00:02:25,360 --> 00:02:27,200 Speaker 4: It's not mine for what. I kind of like that. 47 00:02:29,800 --> 00:02:32,920 Speaker 3: If you look at the last two and a half years, 48 00:02:33,080 --> 00:02:37,320 Speaker 3: as particularly in the earning season, it's much more about 49 00:02:37,360 --> 00:02:40,120 Speaker 3: positioning in terms of short term reactions. 50 00:02:40,800 --> 00:02:41,360 Speaker 4: And in that. 51 00:02:41,360 --> 00:02:44,079 Speaker 3: Respect, Look, we know where all the money and all 52 00:02:44,120 --> 00:02:47,200 Speaker 3: the profit has been this last two or three months. 53 00:02:47,480 --> 00:02:49,600 Speaker 3: Look at some of these names, how much they've run 54 00:02:49,680 --> 00:02:52,480 Speaker 3: up two hundred and three hundred percent off of the 55 00:02:52,560 --> 00:02:57,240 Speaker 3: March thirtieth low. This kind of digestion is completely normal, 56 00:02:57,320 --> 00:03:01,160 Speaker 3: and frankly, we'd argue it's healthy, as is the rotation 57 00:03:02,080 --> 00:03:04,959 Speaker 3: into some of these names which are going to report 58 00:03:05,000 --> 00:03:07,720 Speaker 3: stellar earnings and oh, by the way, because they've been 59 00:03:07,720 --> 00:03:11,400 Speaker 3: punished so much our training at pretty reasonable valuations. 60 00:03:11,720 --> 00:03:13,600 Speaker 1: On top of that, you have the headwind of higher 61 00:03:13,639 --> 00:03:16,600 Speaker 1: oil prices now put to the side, right because oil 62 00:03:16,600 --> 00:03:18,400 Speaker 1: prices have made a round trip back to where they 63 00:03:18,440 --> 00:03:21,560 Speaker 1: were before the start of the Iran war. How positive 64 00:03:21,600 --> 00:03:23,240 Speaker 1: of a talking point is that going to be for 65 00:03:23,400 --> 00:03:26,359 Speaker 1: the companies and sectors outside of tech. 66 00:03:26,440 --> 00:03:31,680 Speaker 3: I think it's very underappreciated as a profound positive. We 67 00:03:31,720 --> 00:03:34,800 Speaker 3: went back and we looked at you know, we started 68 00:03:34,800 --> 00:03:37,680 Speaker 3: the war in March by doing this analysis of when 69 00:03:38,680 --> 00:03:42,880 Speaker 3: oil price went above the twenty four month moving average 70 00:03:43,560 --> 00:03:46,520 Speaker 3: by thirty or forty percent, that that would be a 71 00:03:46,560 --> 00:03:51,120 Speaker 3: market disruption event. The retreat back to seventy dollars in 72 00:03:51,240 --> 00:03:55,160 Speaker 3: below is almost one of the fastest spike on wines 73 00:03:55,160 --> 00:03:59,960 Speaker 3: on record, and it's absolutely unequivocally positive. The market average 74 00:04:00,120 --> 00:04:04,080 Speaker 3: is seventeen percent gains in the twelve months following that 75 00:04:04,280 --> 00:04:07,000 Speaker 3: return to earth of the oil got here, it's. 76 00:04:06,840 --> 00:04:09,520 Speaker 1: A huge relief for the consumer, especially since we had 77 00:04:09,560 --> 00:04:12,440 Speaker 1: seen pressure on the consumer, both high income as well 78 00:04:12,440 --> 00:04:14,720 Speaker 1: as lower income. I'm curious to get your take on 79 00:04:14,800 --> 00:04:19,200 Speaker 1: whether the change in oil makes the Fed minutes that 80 00:04:19,240 --> 00:04:23,920 Speaker 1: we're going to get next tomorrow almost obsolete, because you know, 81 00:04:24,040 --> 00:04:25,480 Speaker 1: we're not going to get a whole lot of information 82 00:04:25,680 --> 00:04:27,640 Speaker 1: anyway from Kevin Marsh, because he's not one to be 83 00:04:27,839 --> 00:04:30,359 Speaker 1: totally communicative. But does it matter as much what the 84 00:04:30,360 --> 00:04:32,840 Speaker 1: Fed says now that oil prices have come down so much. 85 00:04:33,839 --> 00:04:34,920 Speaker 4: It matters less. 86 00:04:35,480 --> 00:04:38,719 Speaker 3: But what will be interesting is how much of a 87 00:04:38,800 --> 00:04:42,280 Speaker 3: read we get or don't get into that closed door 88 00:04:42,360 --> 00:04:47,839 Speaker 3: family fight that share Warsh keeps talking about Look, but 89 00:04:48,480 --> 00:04:50,479 Speaker 3: in our view, we don't think the FED is going 90 00:04:50,560 --> 00:04:52,720 Speaker 3: to move this year, and we don't think that there 91 00:04:52,720 --> 00:04:53,480 Speaker 3: are hold why. 92 00:04:55,200 --> 00:04:55,760 Speaker 4: Two things. 93 00:04:55,839 --> 00:05:00,000 Speaker 3: Number one, the oil price can have very salutary, disinfled 94 00:05:00,040 --> 00:05:03,680 Speaker 3: zationary effects throughout the rest of the economy. Look, we 95 00:05:03,760 --> 00:05:07,520 Speaker 3: saw the world's largest retailer make that announcement. Whether it 96 00:05:07,560 --> 00:05:11,400 Speaker 3: was prompted or not prompted, but that did happen and 97 00:05:11,440 --> 00:05:14,720 Speaker 3: that is real. And then the other aspect of it 98 00:05:14,760 --> 00:05:19,040 Speaker 3: is is the AI driven inflation is something if you 99 00:05:19,200 --> 00:05:22,520 Speaker 3: listen to Share Walsh, he said, we're going to give 100 00:05:22,600 --> 00:05:23,000 Speaker 3: it time. 101 00:05:23,080 --> 00:05:25,080 Speaker 4: We're going to you know, we. 102 00:05:25,000 --> 00:05:27,880 Speaker 3: Don't want to make the mistake that was made in 103 00:05:27,960 --> 00:05:32,640 Speaker 3: late nineteen ninety nine by assessing the technological revolution as 104 00:05:32,680 --> 00:05:35,280 Speaker 3: a bubble and raising rates when it wasn't. 105 00:05:35,080 --> 00:05:37,920 Speaker 2: Necessarily raises a good question the disconnect Deltcha Bank's written 106 00:05:37,920 --> 00:05:39,520 Speaker 2: about it in the last twenty four hounds. That still 107 00:05:39,600 --> 00:05:41,000 Speaker 2: is a bit of a disconnect here. We've had a 108 00:05:41,040 --> 00:05:44,039 Speaker 2: reset in crude prices from triple digits down to the 109 00:05:44,080 --> 00:05:47,839 Speaker 2: sixties on WTI Brent in the low seventies, but we 110 00:05:47,880 --> 00:05:50,440 Speaker 2: haven't reset the FED hike debate. In fact, this market 111 00:05:50,440 --> 00:05:53,360 Speaker 2: is still primed for FED hikes. What's going on there 112 00:05:53,400 --> 00:05:53,839 Speaker 2: and why? 113 00:05:54,880 --> 00:05:57,880 Speaker 3: I think it is this sort of getting used to 114 00:05:57,960 --> 00:06:06,160 Speaker 3: the discomfort of less transparency, less communication from the fact, do. 115 00:06:06,120 --> 00:06:10,279 Speaker 2: You see at tension reduced communication equally increased talkishness? Is 116 00:06:10,320 --> 00:06:12,200 Speaker 2: that the right way to look at this. I've heard 117 00:06:12,200 --> 00:06:13,680 Speaker 2: pushback from some people to that. 118 00:06:14,200 --> 00:06:15,800 Speaker 4: In our mind it isn't. 119 00:06:16,800 --> 00:06:21,080 Speaker 3: But given the fact that that initial press conference used, 120 00:06:22,200 --> 00:06:26,160 Speaker 3: you know, was really a primer on fighting inflation and 121 00:06:26,240 --> 00:06:31,240 Speaker 3: the concept of price stability being you know, number one mandate, 122 00:06:32,680 --> 00:06:36,400 Speaker 3: it's understandable. But again in our view, the market's misreading 123 00:06:37,000 --> 00:06:40,919 Speaker 3: the intention and I like it more to the Green 124 00:06:41,000 --> 00:06:42,120 Speaker 3: Spanner era. 125 00:06:41,960 --> 00:06:44,280 Speaker 4: Which a lot of people talked about the. 126 00:06:44,279 --> 00:06:48,480 Speaker 3: Concept of jaw owning the markets into where you wanted 127 00:06:48,480 --> 00:06:49,040 Speaker 3: them to go. 128 00:06:49,440 --> 00:06:52,760 Speaker 1: Or does a decreased communication lead to increased volatility? The 129 00:06:52,839 --> 00:06:56,359 Speaker 1: Vicks closing below sixteen for a second straight day, but 130 00:06:56,520 --> 00:06:58,760 Speaker 1: we might get more volatility in the rates market, which 131 00:06:58,800 --> 00:07:01,000 Speaker 1: will then of course trickle into the equity market. 132 00:07:01,040 --> 00:07:04,480 Speaker 3: Well, there's a lot of things going on, of course, 133 00:07:04,480 --> 00:07:08,040 Speaker 3: and I think again oil where it is, certainly helps 134 00:07:08,080 --> 00:07:11,800 Speaker 3: the rest of asset market volatility. It's also the summer 135 00:07:12,240 --> 00:07:16,120 Speaker 3: where we're digesting the markets rotating. And then the other 136 00:07:16,160 --> 00:07:19,160 Speaker 3: part of this volatility is the fact that even though 137 00:07:19,200 --> 00:07:23,240 Speaker 3: you're seeing more volatility in the tech sector, you're seeing 138 00:07:23,400 --> 00:07:27,840 Speaker 3: less volatility elsewhere. In fact, you're seeing an entire cohort 139 00:07:27,880 --> 00:07:31,000 Speaker 3: of stocks on a day to day basis move inversely 140 00:07:31,080 --> 00:07:33,760 Speaker 3: to the S and P five hundred, the likes of 141 00:07:33,800 --> 00:07:36,400 Speaker 3: which we haven't seen in twenty five years. 142 00:07:36,480 --> 00:07:38,920 Speaker 2: Negative mita stokest it's been a call for you wok 143 00:07:38,960 --> 00:07:39,440 Speaker 2: us through it. 144 00:07:40,480 --> 00:07:45,200 Speaker 3: So basically what it means is it's a variety of industries. 145 00:07:45,600 --> 00:07:45,960 Speaker 4: Energy. 146 00:07:46,080 --> 00:07:49,240 Speaker 3: You can understand intuitively why it would move inversely to 147 00:07:49,280 --> 00:07:53,640 Speaker 3: the S and P five hundred, utilities, consumer staples, and 148 00:07:53,760 --> 00:07:56,080 Speaker 3: strangely enough, insurance stocks. 149 00:07:57,320 --> 00:07:59,040 Speaker 4: We scratch our heads as to why. 150 00:07:59,240 --> 00:08:01,360 Speaker 3: But if you look at the last six months and 151 00:08:01,520 --> 00:08:04,960 Speaker 3: a day in and day out basis, this group of stocks, 152 00:08:05,440 --> 00:08:08,760 Speaker 3: a number larger than you've seen in twenty five years, 153 00:08:09,120 --> 00:08:12,680 Speaker 3: move inversely to the S and P five hundred. Last Thursday, 154 00:08:12,760 --> 00:08:16,160 Speaker 3: with NAZAC selling off, you had all of those sectors 155 00:08:16,240 --> 00:08:20,120 Speaker 3: that I mentioned. Insurance stocks were up three percent yesterday 156 00:08:20,240 --> 00:08:23,160 Speaker 3: the exact opposite happened. But what it tells you is 157 00:08:23,560 --> 00:08:30,080 Speaker 3: a people are trying to diversify the fact that AI 158 00:08:30,320 --> 00:08:34,360 Speaker 3: is everywhere now, it's in bonds, it's in gold, it's 159 00:08:34,400 --> 00:08:37,199 Speaker 3: in emergent I mean, is Korea an emerging market anymore? 160 00:08:37,320 --> 00:08:37,800 Speaker 4: We don't know. 161 00:08:37,840 --> 00:08:42,360 Speaker 3: These still measures by some measures, but it also tells 162 00:08:42,400 --> 00:08:45,680 Speaker 3: you that the demand for stocks remains very high. 163 00:08:45,679 --> 00:08:47,679 Speaker 2: Feel's not one trade in the market right now, which 164 00:08:47,720 --> 00:08:48,959 Speaker 2: is what you're getting out, and people are looking for 165 00:08:49,040 --> 00:08:52,080 Speaker 2: alternatives increasingly as well. Typically we'd sit on the programming 166 00:08:52,080 --> 00:08:54,000 Speaker 2: like this and we'd say, the market is not the economy. 167 00:08:54,040 --> 00:08:56,240 Speaker 2: The economy is not the market, but the economy increasingly 168 00:08:56,320 --> 00:08:57,040 Speaker 2: is find on one. 169 00:08:56,960 --> 00:09:01,040 Speaker 5: Engine is the same thing at the moment, and that's 170 00:09:01,080 --> 00:09:06,040 Speaker 5: the problem for investors really, and that's why again, these 171 00:09:06,120 --> 00:09:09,480 Speaker 5: negative beta stocks are getting as much attention as they 172 00:09:09,520 --> 00:09:13,960 Speaker 5: are because you do want to you know, portfolio theory tells. 173 00:09:13,679 --> 00:09:15,440 Speaker 3: You you don't want to put all. 174 00:09:15,320 --> 00:09:16,760 Speaker 4: Your eggs in one basket. 175 00:09:17,160 --> 00:09:22,440 Speaker 3: Nevertheless, the market has gravitated, as has the economy, to 176 00:09:22,520 --> 00:09:25,920 Speaker 3: putting most of its eggs in the AI basket. We 177 00:09:26,040 --> 00:09:29,520 Speaker 3: think there's more room to run, to be clear, but again, 178 00:09:30,040 --> 00:09:36,280 Speaker 3: you know, diversified portfolio is something most investors are hoping 179 00:09:36,320 --> 00:09:36,720 Speaker 3: to achieve. 180 00:09:36,920 --> 00:09:40,520 Speaker 2: Jill the geopolitics. Ukraine was a market story three four 181 00:09:40,600 --> 00:09:43,160 Speaker 2: years ago. It's not anymore. The Middle East was a 182 00:09:43,200 --> 00:09:46,640 Speaker 2: market story three four months ago. It's not anymore. Have 183 00:09:46,720 --> 00:09:48,960 Speaker 2: we been conditioned to ignore all of this is a 184 00:09:49,000 --> 00:09:52,160 Speaker 2: question asked to Mike Wilson and Morgan Stanley just yesterday. 185 00:09:52,200 --> 00:09:54,439 Speaker 2: It feels that way you condition just to ignore whatever 186 00:09:54,440 --> 00:09:56,080 Speaker 2: happens in the next twenty four hours. 187 00:09:56,240 --> 00:09:59,960 Speaker 3: Well, it goes back to the bigger picture of equity 188 00:10:00,080 --> 00:10:04,560 Speaker 3: markets and investing is earnings driven. We know that we're 189 00:10:04,640 --> 00:10:07,480 Speaker 3: very fond of showing the S and P five hundred 190 00:10:07,800 --> 00:10:11,360 Speaker 3: versus earnings going back thirty years in the correlation. There 191 00:10:11,360 --> 00:10:14,120 Speaker 3: are years where it doesn't work, but in general it 192 00:10:14,200 --> 00:10:18,920 Speaker 3: works very well, and there are times when in terms 193 00:10:18,960 --> 00:10:23,160 Speaker 3: of valuation, in terms of volatility, geopolitics matters. I mean, 194 00:10:23,600 --> 00:10:27,520 Speaker 3: could we have been having this conversation in the middle 195 00:10:27,559 --> 00:10:28,000 Speaker 3: of March. 196 00:10:28,880 --> 00:10:29,560 Speaker 4: I don't think so. 197 00:10:30,120 --> 00:10:32,520 Speaker 3: But then again, oil was one hundred and ten dollars 198 00:10:32,520 --> 00:10:34,880 Speaker 3: a barrow at that point, and now we're at a 199 00:10:34,920 --> 00:10:40,720 Speaker 3: price where we know that the economy can function perfectly well. 200 00:10:41,480 --> 00:10:44,120 Speaker 3: And in fact, when you think of something like the 201 00:10:44,200 --> 00:10:47,720 Speaker 3: rally that we've seen in small cap stocks, much more 202 00:10:47,800 --> 00:10:54,280 Speaker 3: sensitive to macroeconomic inputs like the price of oil, and 203 00:10:54,400 --> 00:10:58,760 Speaker 3: much more of price takers than price makers. It really 204 00:10:58,800 --> 00:11:04,360 Speaker 3: tells you that geopolitics is on the back burner. Now 205 00:11:04,559 --> 00:11:06,640 Speaker 3: that's not to say that it won't. And look, we've 206 00:11:06,640 --> 00:11:10,160 Speaker 3: got midterms coming up in November. We won't talk about those. 207 00:11:10,440 --> 00:11:15,080 Speaker 3: That's a famous line there, But again you will have 208 00:11:15,320 --> 00:11:20,280 Speaker 3: bouts of volatility surrounding both politics and geopolitics. 209 00:11:20,559 --> 00:11:21,800 Speaker 4: And as much as we love the. 210 00:11:21,760 --> 00:11:25,080 Speaker 3: Summer, we remember what tends to happen in September and October. 211 00:11:25,120 --> 00:11:28,400 Speaker 1: Anyway, geopolitics matter for earnings of defense companies. 212 00:11:28,440 --> 00:11:29,520 Speaker 6: We've seen that in Europe. 213 00:11:29,559 --> 00:11:32,120 Speaker 1: Does it matter for defense companies in the US because 214 00:11:32,160 --> 00:11:34,840 Speaker 1: increasingly you're seeing the European countries choose to buy local, 215 00:11:37,080 --> 00:11:38,360 Speaker 1: and you know. 216 00:11:38,480 --> 00:11:45,080 Speaker 3: Given the dialogue and the difficulty of the relationship, it 217 00:11:45,200 --> 00:11:49,840 Speaker 3: certainly makes sense. But again, remember that the president is 218 00:11:50,120 --> 00:11:53,160 Speaker 3: you know, actively, I think he tweeted it last night 219 00:11:54,000 --> 00:11:57,040 Speaker 3: about building the defense budget here and we know they're 220 00:11:57,080 --> 00:11:59,760 Speaker 3: going to be buying from US defense companies. 221 00:12:00,320 --> 00:12:02,800 Speaker 1: So going forward, how do you see the strong dollar 222 00:12:02,920 --> 00:12:07,559 Speaker 1: affecting defense companies their ability to sell to overseas customers. 223 00:12:08,760 --> 00:12:12,000 Speaker 3: Well, again, this goes back to the whole, you know, 224 00:12:12,040 --> 00:12:17,560 Speaker 3: the geopolitical relationship, and to your point that people will 225 00:12:17,559 --> 00:12:21,439 Speaker 3: probably have a tendency to buy local currency. It's one 226 00:12:21,440 --> 00:12:25,400 Speaker 3: of these kind of odd times where currency has really 227 00:12:25,440 --> 00:12:30,040 Speaker 3: been taken out of the equation for for the meantime, yes, 228 00:12:30,080 --> 00:12:33,080 Speaker 3: it's rallied a little, but if you look back, it's 229 00:12:33,160 --> 00:12:37,000 Speaker 3: essentially gotten nowhere for a year at the broader dollar 230 00:12:37,080 --> 00:12:42,320 Speaker 3: index level. And we think that the down trend that 231 00:12:42,480 --> 00:12:45,720 Speaker 3: started a year and a half ago is intact. But 232 00:12:45,880 --> 00:12:48,959 Speaker 3: with the dollar, you know, things don't tend to move 233 00:12:49,000 --> 00:12:49,640 Speaker 3: in a straight line. 234 00:12:49,679 --> 00:12:51,959 Speaker 2: You want to finish on the banks record highs the 235 00:12:52,040 --> 00:12:54,800 Speaker 2: close yesterday, that will reporting this time, next way, this time, 236 00:12:54,800 --> 00:12:55,120 Speaker 2: next way. 237 00:12:55,160 --> 00:12:55,400 Speaker 6: That's all. 238 00:12:55,400 --> 00:12:58,280 Speaker 2: We'll be talking about the financials once that trade's starting 239 00:12:58,320 --> 00:13:01,000 Speaker 2: to work outside of goverment, outside of and Stanley for 240 00:13:01,040 --> 00:13:03,439 Speaker 2: the others, because. 241 00:13:03,360 --> 00:13:07,640 Speaker 3: Again there's this understanding that people are at the moment 242 00:13:07,720 --> 00:13:11,079 Speaker 3: taking chips off the table in AI and oh, by 243 00:13:11,120 --> 00:13:14,280 Speaker 3: the way, the earnings power of financial companies is just 244 00:13:14,960 --> 00:13:18,920 Speaker 3: absolutely record and the valuations look, the valuations and a 245 00:13:18,960 --> 00:13:23,200 Speaker 3: lot of things are stretched by historical standards, but relatively 246 00:13:23,440 --> 00:13:24,959 Speaker 3: there's plenty of attractive operatity. 247 00:13:25,000 --> 00:13:27,080 Speaker 2: We found that strange that the financials didn't keep pace 248 00:13:27,120 --> 00:13:29,200 Speaker 2: with the text story for much of this year. It 249 00:13:29,240 --> 00:13:30,679 Speaker 2: was odd to me because they were making so much 250 00:13:30,760 --> 00:13:33,319 Speaker 2: money from the text story, from the IPOs, from the 251 00:13:33,360 --> 00:13:34,440 Speaker 2: amount of money being raised. 252 00:13:35,280 --> 00:13:40,520 Speaker 3: But again, if you're an active manager looking for multi 253 00:13:40,559 --> 00:13:45,400 Speaker 3: week or month two month performance, you're going to have 254 00:13:45,440 --> 00:13:48,120 Speaker 3: a tendency to go with where the momentum has been. 255 00:13:48,360 --> 00:13:50,840 Speaker 3: And actually, if you read about some of the hedge 256 00:13:50,840 --> 00:13:54,679 Speaker 3: front performance in the last few days, you actually use 257 00:13:54,760 --> 00:13:56,199 Speaker 3: shorts where. 258 00:13:56,040 --> 00:13:57,640 Speaker 4: The negative momentum has been. 259 00:13:58,559 --> 00:14:01,000 Speaker 3: There's been a lot of a lot added churn in 260 00:14:01,080 --> 00:14:04,839 Speaker 3: the markets within the context of this ongoing Ballmark. 261 00:14:04,520 --> 00:14:08,240 Speaker 2: Jillian going to see it, stay with us more Bloomberg 262 00:14:08,280 --> 00:14:20,600 Speaker 2: Surveillance coming up after this. Apollo noting a lack of 263 00:14:20,640 --> 00:14:24,240 Speaker 2: profit margin gains due to AI outside of the tech sector. 264 00:14:24,520 --> 00:14:27,560 Speaker 2: Torston's slock of Apollo, writing, there's a mismatch between current 265 00:14:27,600 --> 00:14:31,640 Speaker 2: earnings expectations and the actual time firms need to generate 266 00:14:31,800 --> 00:14:36,080 Speaker 2: ROI on AI investments, and it could have significant implications 267 00:14:36,080 --> 00:14:39,440 Speaker 2: for many AI company valuations. Torston joins us now for 268 00:14:39,520 --> 00:14:41,440 Speaker 2: more Torston can want and good to see you. Let's 269 00:14:41,440 --> 00:14:43,120 Speaker 2: build on that quote. What are you tracking right now, 270 00:14:43,120 --> 00:14:43,960 Speaker 2: what do you think. 271 00:14:43,840 --> 00:14:46,440 Speaker 7: Well, what's really really important to this discussion is, of 272 00:14:46,480 --> 00:14:49,640 Speaker 7: course profit minders have been phenomenal in the Magnificent seven, 273 00:14:49,920 --> 00:14:51,680 Speaker 7: but what really is critical is that now we need 274 00:14:51,720 --> 00:14:54,520 Speaker 7: to see profit margers grow up outside the Magnificent seven. 275 00:14:54,520 --> 00:14:55,480 Speaker 7: In other words, what's going. 276 00:14:55,320 --> 00:14:55,800 Speaker 6: On with this in p. 277 00:14:55,880 --> 00:14:59,080 Speaker 7: Four ninety three becomes very very critical because at this 278 00:14:59,080 --> 00:15:00,360 Speaker 7: point profit manders is a P. 279 00:15:00,400 --> 00:15:02,360 Speaker 6: Four ninety three have just not gone up. 280 00:15:02,560 --> 00:15:05,160 Speaker 7: So therefore, one very important conclusion, and one very important 281 00:15:05,160 --> 00:15:08,200 Speaker 7: place to look for signs of AI beginning to have 282 00:15:08,280 --> 00:15:10,840 Speaker 7: an impact is to look at what's going on in 283 00:15:10,880 --> 00:15:14,320 Speaker 7: earnings growth, profit margins, and overall the health of this. 284 00:15:14,400 --> 00:15:14,600 Speaker 2: In p. 285 00:15:14,640 --> 00:15:17,400 Speaker 7: Four ninety three, as a result of the technological improvements 286 00:15:17,440 --> 00:15:18,480 Speaker 7: we're seeing at the moment. 287 00:15:18,280 --> 00:15:20,440 Speaker 2: METS are also making a call potentially as well that 288 00:15:20,520 --> 00:15:23,800 Speaker 2: the ROI on selling access capacity might be hard in 289 00:15:23,960 --> 00:15:27,320 Speaker 2: using it internally. Does that reinforce some of this message 290 00:15:27,320 --> 00:15:27,520 Speaker 2: for you? 291 00:15:28,000 --> 00:15:28,840 Speaker 6: Well, the issue, of. 292 00:15:28,800 --> 00:15:30,960 Speaker 7: Course is that there is a huge of course built 293 00:15:30,960 --> 00:15:33,440 Speaker 7: out of capacity and compute, and there will literally be 294 00:15:33,640 --> 00:15:35,080 Speaker 7: unlimited demand for compute. 295 00:15:35,200 --> 00:15:37,640 Speaker 6: The question is just at what price and who will. 296 00:15:37,520 --> 00:15:40,080 Speaker 7: The bias be and where is that capacity coming from 297 00:15:40,280 --> 00:15:42,760 Speaker 7: and the big picture still remains that AI is a 298 00:15:42,880 --> 00:15:44,280 Speaker 7: very revolutionary technology. 299 00:15:44,440 --> 00:15:45,520 Speaker 6: Everyone agrees on that. 300 00:15:45,760 --> 00:15:47,520 Speaker 7: But the key question now is how long time is 301 00:15:47,520 --> 00:15:50,160 Speaker 7: it going to take before this shows up, especially in 302 00:15:50,160 --> 00:15:53,480 Speaker 7: profit margins outside the Magnificent seven, Because if there's a 303 00:15:53,560 --> 00:15:55,680 Speaker 7: P four ninety three, let's say that it takes several 304 00:15:55,800 --> 00:15:58,320 Speaker 7: years before profit margins begin to go up. The question 305 00:15:58,440 --> 00:16:01,880 Speaker 7: is whether the implicit earnings assumptions in the Magnificent seven 306 00:16:02,200 --> 00:16:05,320 Speaker 7: are too high or too fast relative to what's actually 307 00:16:05,400 --> 00:16:08,640 Speaker 7: going to happen. So that mismatch between are we going 308 00:16:08,680 --> 00:16:12,000 Speaker 7: to see profit margins earnings growth go up outside this 309 00:16:12,240 --> 00:16:13,200 Speaker 7: the Magnificent seven? 310 00:16:13,440 --> 00:16:15,280 Speaker 6: Is that going to come slower? Is it going to 311 00:16:15,320 --> 00:16:15,840 Speaker 6: come faster? 312 00:16:16,240 --> 00:16:18,840 Speaker 7: Is absolutely critical for a conversation about what should the 313 00:16:18,920 --> 00:16:21,280 Speaker 7: value be of the Magnificent seven Today. 314 00:16:21,840 --> 00:16:24,040 Speaker 1: In exactly one week's time, as John was reminding us, 315 00:16:24,080 --> 00:16:26,040 Speaker 1: the big banks begin reporting earning, so we have the 316 00:16:26,080 --> 00:16:28,120 Speaker 1: kickoff of the earning season. There's going to be a 317 00:16:28,160 --> 00:16:30,480 Speaker 1: lot of discussion on AI and what it means for 318 00:16:30,720 --> 00:16:33,760 Speaker 1: jobs in the banking sector. How do you parse through 319 00:16:33,840 --> 00:16:37,000 Speaker 1: what the companies say to really understand what it means 320 00:16:37,000 --> 00:16:38,920 Speaker 1: in terms of whether they're going to cut jobs or not. 321 00:16:39,240 --> 00:16:42,160 Speaker 7: What's really challenging about this is to talk about AI 322 00:16:42,240 --> 00:16:44,960 Speaker 7: exposure because there's a lot of different studies already that 323 00:16:45,080 --> 00:16:48,560 Speaker 7: look at what is the exposure meaning AI exposure in 324 00:16:48,600 --> 00:16:53,000 Speaker 7: different occupations two these markets, these two studies fall into 325 00:16:53,040 --> 00:16:56,520 Speaker 7: different markets of one saying what is the actual exposure 326 00:16:56,520 --> 00:16:59,320 Speaker 7: in terms of actual AI usage? So this is trying 327 00:16:59,320 --> 00:17:01,440 Speaker 7: to menas a say, what are people using clode for 328 00:17:01,840 --> 00:17:05,240 Speaker 7: what tasks and what request did they get and therefore 329 00:17:05,280 --> 00:17:09,400 Speaker 7: measuring and quantifying the actual uses of AI. Another bucket 330 00:17:09,480 --> 00:17:13,000 Speaker 7: is studies that look at, well, let's theoretically assume what 331 00:17:13,119 --> 00:17:15,879 Speaker 7: is the economist exposure to AI and then try to 332 00:17:15,960 --> 00:17:19,280 Speaker 7: match that with occupations and figure out what is employment. 333 00:17:18,800 --> 00:17:19,480 Speaker 6: In those sexes. 334 00:17:19,800 --> 00:17:22,440 Speaker 7: And those studies, of course, are what you call more theoretical. 335 00:17:22,760 --> 00:17:24,920 Speaker 7: So the challenge is that there is not an agreement 336 00:17:24,960 --> 00:17:27,840 Speaker 7: about what does AI exposure mean. So that's raising all 337 00:17:27,880 --> 00:17:29,840 Speaker 7: these questions around, well, what does it even mean when 338 00:17:29,880 --> 00:17:31,680 Speaker 7: we say that a certain part of the economy is 339 00:17:31,720 --> 00:17:34,080 Speaker 7: exposed to AI, because that's just not at this point 340 00:17:34,119 --> 00:17:36,120 Speaker 7: in the studies that look at this a really good 341 00:17:36,160 --> 00:17:38,880 Speaker 7: way to quantify what AI exposure means, and that means 342 00:17:38,880 --> 00:17:41,040 Speaker 7: also for the financials, that means for legal. 343 00:17:40,840 --> 00:17:42,320 Speaker 6: Services, that means for consultants. 344 00:17:42,560 --> 00:17:45,159 Speaker 7: That we're having some challenges figuring out how do we 345 00:17:45,200 --> 00:17:47,679 Speaker 7: even quantify what is the impact of AI. We all 346 00:17:47,720 --> 00:17:49,480 Speaker 7: know that it's going to make a big difference, but 347 00:17:49,600 --> 00:17:52,000 Speaker 7: to speak with which this difference comes along? How many 348 00:17:52,000 --> 00:17:55,240 Speaker 7: people is impacting today, next month, next year. It becomes 349 00:17:55,280 --> 00:17:57,800 Speaker 7: absolutely critical when you again to think about that company 350 00:17:57,840 --> 00:18:00,840 Speaker 7: valuations today are the net present value of the cashflows 351 00:18:00,840 --> 00:18:02,040 Speaker 7: that these companies get in the future. 352 00:18:02,160 --> 00:18:04,920 Speaker 1: We're also hearing a changing story, a changing narrative from 353 00:18:04,920 --> 00:18:07,560 Speaker 1: AI companies themselves. There's a Wall Street Journal story about 354 00:18:07,560 --> 00:18:10,200 Speaker 1: how the narrative has shifted, at least from open AI 355 00:18:10,440 --> 00:18:13,480 Speaker 1: and anthropic, from these doomsday scenarios to a future where 356 00:18:13,560 --> 00:18:15,920 Speaker 1: workers actually keep their jobs but just do it better 357 00:18:15,960 --> 00:18:16,560 Speaker 1: thanks to AI. 358 00:18:16,720 --> 00:18:17,520 Speaker 6: What does that tell you? 359 00:18:17,600 --> 00:18:20,280 Speaker 7: Yeah, and Ramp had a really interesting study over the 360 00:18:20,359 --> 00:18:22,640 Speaker 7: last week that they put out where they basically look 361 00:18:22,760 --> 00:18:26,040 Speaker 7: at what has been the cost and the spending on 362 00:18:26,200 --> 00:18:29,040 Speaker 7: AI among different companies and what they did that they 363 00:18:29,080 --> 00:18:31,360 Speaker 7: looked at, well, what was the job growth in those 364 00:18:31,400 --> 00:18:33,800 Speaker 7: companies that had more spending on AI? And they did 365 00:18:33,840 --> 00:18:37,160 Speaker 7: indeed find that more spending on AI, it actually resulted 366 00:18:37,200 --> 00:18:39,399 Speaker 7: in more job growth. So one way of looking at 367 00:18:39,440 --> 00:18:42,000 Speaker 7: this is one dimension of saying, what's the actual spending 368 00:18:42,280 --> 00:18:46,280 Speaker 7: relative to the more theoretical matching of occupations with what's 369 00:18:46,280 --> 00:18:48,080 Speaker 7: been going on with job growth in those sectors that 370 00:18:48,119 --> 00:18:49,160 Speaker 7: also have been spending on AI. 371 00:18:49,320 --> 00:18:51,119 Speaker 2: To listen to your points for this all together, this 372 00:18:51,280 --> 00:18:54,080 Speaker 2: is a potential risk of valuations, which is an obvious 373 00:18:54,119 --> 00:18:56,720 Speaker 2: market risk. Is it a macro risk as well? In 374 00:18:56,840 --> 00:18:59,800 Speaker 2: Central Portugal I believe you were there big conversation about this. 375 00:19:00,320 --> 00:19:02,320 Speaker 2: We've got a story in the market right now that 376 00:19:02,320 --> 00:19:05,120 Speaker 2: feels like one trade and increasingly a story in the economy. 377 00:19:05,160 --> 00:19:07,280 Speaker 2: The fils like we're firing on one engine. How much 378 00:19:07,359 --> 00:19:08,320 Speaker 2: is it one and the other? 379 00:19:08,520 --> 00:19:10,280 Speaker 6: Absolutely, it's actually three different things. 380 00:19:10,320 --> 00:19:12,440 Speaker 7: First of all, it's of course everywhere in markets because 381 00:19:12,440 --> 00:19:15,200 Speaker 7: the concentration to the AI story is so strong. 382 00:19:15,240 --> 00:19:15,800 Speaker 6: Think about it. 383 00:19:15,880 --> 00:19:18,160 Speaker 7: For the last fifteen years, the main lesson in finance 384 00:19:18,240 --> 00:19:21,040 Speaker 7: is factor investing, and now we're staring at one factor 385 00:19:21,040 --> 00:19:22,680 Speaker 7: that's driving all financial markets. 386 00:19:22,680 --> 00:19:24,960 Speaker 6: In equities, the concentration is very high in AI. 387 00:19:25,240 --> 00:19:28,000 Speaker 7: You also look at IG issuance, high yield issuance, even 388 00:19:28,080 --> 00:19:28,800 Speaker 7: venture capusal. 389 00:19:29,000 --> 00:19:30,960 Speaker 6: The concentration in AI is very very strong. 390 00:19:31,000 --> 00:19:33,680 Speaker 7: So in markets, let's just agree the AI exposure or 391 00:19:33,680 --> 00:19:35,080 Speaker 7: the AI factor plays a. 392 00:19:35,080 --> 00:19:37,040 Speaker 6: Very very critical role at the moment when it comes 393 00:19:37,080 --> 00:19:37,760 Speaker 6: to the economy. 394 00:19:38,040 --> 00:19:40,800 Speaker 7: Also, if you look at actual spending on data centers 395 00:19:40,800 --> 00:19:43,119 Speaker 7: and energy, if you add up what that contributes to 396 00:19:43,200 --> 00:19:45,840 Speaker 7: GDP this year, it's roughly about zero point seven percent 397 00:19:46,000 --> 00:19:47,880 Speaker 7: out of a two percent GDP growth this year. 398 00:19:48,000 --> 00:19:49,120 Speaker 6: If you add about zero. 399 00:19:48,960 --> 00:19:51,280 Speaker 7: Point three coming from the wealth effect because of I stock. 400 00:19:51,160 --> 00:19:52,960 Speaker 6: Prices, that's also very important. 401 00:19:53,160 --> 00:19:56,000 Speaker 7: And finally, let's also not forget that the hyperscalers are 402 00:19:56,000 --> 00:19:59,560 Speaker 7: issuing so much IG corporate debt that this is crowding 403 00:19:59,560 --> 00:20:02,600 Speaker 7: out in and for US treasuries. Because if you are 404 00:20:02,640 --> 00:20:05,000 Speaker 7: bunt manager and investment great credit, you could either buy 405 00:20:05,119 --> 00:20:07,960 Speaker 7: sovereigns US treasuries. You can buy financials, that's what you've 406 00:20:07,960 --> 00:20:09,479 Speaker 7: been doing for a long time, but now you can 407 00:20:09,480 --> 00:20:11,440 Speaker 7: also buy seven hundred billion hyperscalers. 408 00:20:11,520 --> 00:20:12,120 Speaker 6: So it's not. 409 00:20:12,080 --> 00:20:14,359 Speaker 7: Only that it has an impact on markets overall and 410 00:20:14,400 --> 00:20:16,560 Speaker 7: has an impact on GDP, but it actually also has 411 00:20:16,600 --> 00:20:19,360 Speaker 7: an impact on demain for treasury. So yes, the conversation 412 00:20:19,440 --> 00:20:21,919 Speaker 7: and the panel Amazon in CenTra was exactly around this 413 00:20:22,080 --> 00:20:24,840 Speaker 7: risk that AI is indeed now and more and more 414 00:20:24,840 --> 00:20:27,760 Speaker 7: prominent factor basically not only the economy but also in 415 00:20:27,760 --> 00:20:28,480 Speaker 7: financial markets. 416 00:20:28,480 --> 00:20:30,320 Speaker 2: What's the consensus on how to manage that risk? 417 00:20:30,760 --> 00:20:33,399 Speaker 6: Well, the challenge is page one in your finance textbook. 418 00:20:33,440 --> 00:20:35,320 Speaker 7: And if there's one factor you're trying to avoid is 419 00:20:35,320 --> 00:20:37,719 Speaker 7: to try to pick another factor. But the question is 420 00:20:37,840 --> 00:20:39,440 Speaker 7: what is that other factor of momentum? 421 00:20:39,640 --> 00:20:40,920 Speaker 6: Is a growth? Is a value? 422 00:20:41,160 --> 00:20:44,479 Speaker 7: Value has some opportunities because it's not growth. 423 00:20:44,760 --> 00:20:46,399 Speaker 6: So that's why ways of looking. 424 00:20:46,160 --> 00:20:49,080 Speaker 7: At parts of the private markets, public markets that is 425 00:20:49,200 --> 00:20:52,199 Speaker 7: value investing is indeed one place to hide, but it 426 00:20:52,240 --> 00:20:54,920 Speaker 7: has to be value investing that's indeed protecting you against 427 00:20:54,920 --> 00:20:55,760 Speaker 7: the downside risk. 428 00:20:55,720 --> 00:20:59,000 Speaker 6: That come along if AI does not deliver in the. 429 00:20:59,040 --> 00:21:03,600 Speaker 2: End, stay with us Multiple impact surveillance coming up after this. 430 00:21:12,880 --> 00:21:15,280 Speaker 8: President Trump has arrived here on the tarmac and Turkey 431 00:21:15,359 --> 00:21:17,840 Speaker 8: preparing for those meetings of thirty two leaders of those 432 00:21:17,920 --> 00:21:19,960 Speaker 8: NATO allies. Were very pleased to be joined by one 433 00:21:19,960 --> 00:21:23,119 Speaker 8: of them, the Prime Minister Sweden Wolf Christmerson. Thank you 434 00:21:23,160 --> 00:21:25,280 Speaker 8: so much for us speaking to us here on the 435 00:21:25,280 --> 00:21:27,600 Speaker 8: sidelines of the NATO summit. As we've just been saying, 436 00:21:27,680 --> 00:21:30,359 Speaker 8: President Trump has just landed here in Turkey. What is 437 00:21:30,400 --> 00:21:32,480 Speaker 8: the message from the European arm of NATO to the 438 00:21:32,520 --> 00:21:34,120 Speaker 8: President of the United States. 439 00:21:34,760 --> 00:21:39,320 Speaker 9: Well, the basic message, I believe and I hope is 440 00:21:39,440 --> 00:21:43,680 Speaker 9: to confirm what we decided last year. We're all committed 441 00:21:43,760 --> 00:21:49,720 Speaker 9: to an increase in European defense investments, this burden shifting 442 00:21:50,160 --> 00:21:53,639 Speaker 9: in an orderly way, but very decisive way. That we 443 00:21:53,720 --> 00:21:57,320 Speaker 9: can prove that decisions have been made already and we 444 00:21:57,359 --> 00:22:01,000 Speaker 9: see good result from it. As one I hope is 445 00:22:01,040 --> 00:22:06,840 Speaker 9: to confirm our commitment to Ukraine. Ukraine is not losing 446 00:22:06,880 --> 00:22:09,679 Speaker 9: this war, but they still need our help to be 447 00:22:09,720 --> 00:22:11,080 Speaker 9: able to win. 448 00:22:10,920 --> 00:22:11,800 Speaker 4: A decent piece. 449 00:22:12,280 --> 00:22:14,959 Speaker 9: And of course what we've discussing today to increase the 450 00:22:15,320 --> 00:22:18,840 Speaker 9: not at least the European capabilities of having a big, 451 00:22:19,440 --> 00:22:23,800 Speaker 9: a good defense industrial base, which we have proven quite 452 00:22:23,840 --> 00:22:25,000 Speaker 9: significantly here today. 453 00:22:25,200 --> 00:22:26,760 Speaker 8: And of course there are things that can go wrong 454 00:22:26,800 --> 00:22:29,879 Speaker 8: in these meetings, as they offer, they sometimes do. I mean, 455 00:22:29,960 --> 00:22:31,600 Speaker 8: one of the things that has been highlighted by the 456 00:22:31,720 --> 00:22:34,960 Speaker 8: US administration is that not everybody is necessarily moving at 457 00:22:35,000 --> 00:22:37,320 Speaker 8: the same case in terms of that burden sharing. The 458 00:22:37,400 --> 00:22:39,920 Speaker 8: United States has indicated that potentially you could get a 459 00:22:39,960 --> 00:22:43,440 Speaker 8: tiered system within NATO of rewards and consequences for those 460 00:22:43,440 --> 00:22:45,280 Speaker 8: that don't. Do you agree with that in terms of 461 00:22:45,320 --> 00:22:47,879 Speaker 8: a sort of method to put pressure for NATO allies 462 00:22:47,920 --> 00:22:49,080 Speaker 8: to reach those targets. 463 00:22:49,560 --> 00:22:56,480 Speaker 9: I think everybody expects a quite thorough assessment of how 464 00:22:56,640 --> 00:23:00,760 Speaker 9: well we have achieved what we decide did last year, 465 00:23:00,840 --> 00:23:05,240 Speaker 9: and there are no secrets behind you between NATAL members, 466 00:23:05,240 --> 00:23:07,960 Speaker 9: so I think that would be a bit tough discussions 467 00:23:08,000 --> 00:23:09,960 Speaker 9: on that, but that's that's the name of the game. 468 00:23:10,400 --> 00:23:13,120 Speaker 9: But still I think that Mark Rutez, the General Secretary 469 00:23:13,119 --> 00:23:15,800 Speaker 9: General's basic message is that we are stepping up, but 470 00:23:15,880 --> 00:23:19,720 Speaker 9: we are doing it decisively, and Europe is and Canada 471 00:23:20,200 --> 00:23:24,199 Speaker 9: we are taking a big share of the of the 472 00:23:24,240 --> 00:23:26,040 Speaker 9: overall responsibility, which we should. 473 00:23:26,240 --> 00:23:27,879 Speaker 8: And of course, one of the issues that the President 474 00:23:27,920 --> 00:23:31,120 Speaker 8: of United States has demonstrated some dissatisfaction with was NATO's 475 00:23:31,200 --> 00:23:33,840 Speaker 8: role in any sort of way on the conflict and Iran. 476 00:23:33,880 --> 00:23:36,760 Speaker 8: We now have had this news crossing that a tanker 477 00:23:36,760 --> 00:23:40,000 Speaker 8: has been shipped hit, a Katari tanker that obviously has 478 00:23:40,080 --> 00:23:42,080 Speaker 8: great consequences. 479 00:23:41,359 --> 00:23:42,159 Speaker 4: For the Europeans. 480 00:23:42,280 --> 00:23:44,000 Speaker 8: Do you believe that the Europeans should be playing a 481 00:23:44,080 --> 00:23:44,840 Speaker 8: role at this stage? 482 00:23:44,840 --> 00:23:45,000 Speaker 6: Here? 483 00:23:45,080 --> 00:23:46,800 Speaker 8: Is this a conversation that will be fleshed out for 484 00:23:46,880 --> 00:23:48,560 Speaker 8: the President of the United States. 485 00:23:49,080 --> 00:23:51,480 Speaker 9: I'm not that sure that that will be a discussion 486 00:23:51,560 --> 00:23:54,760 Speaker 9: having here, but you've obviously had it over the last months, 487 00:23:54,760 --> 00:23:58,080 Speaker 9: and Sweden is among the many European countries said that 488 00:23:58,160 --> 00:24:02,480 Speaker 9: we are willing and able to to do efforts to 489 00:24:02,960 --> 00:24:10,840 Speaker 9: safeguard freedom of navigation after reasonable ceasefire has been has 490 00:24:10,880 --> 00:24:13,000 Speaker 9: been reached and we are committed to that. 491 00:24:13,080 --> 00:24:14,640 Speaker 8: Can you say a little bit more about what those 492 00:24:14,680 --> 00:24:16,920 Speaker 8: things could include and what and how you know, because 493 00:24:16,920 --> 00:24:19,280 Speaker 8: obviously we're in a ceasefire now, it's not exactly a piece. 494 00:24:19,320 --> 00:24:21,160 Speaker 8: At what stage you think the Europeans would be willing 495 00:24:21,160 --> 00:24:23,720 Speaker 8: to engage me, Well, that is an ongoing discussion between 496 00:24:23,760 --> 00:24:27,720 Speaker 8: different European partners, so I cannot be too precise on that, 497 00:24:27,760 --> 00:24:31,919 Speaker 8: but we have different capabilities that could be could be 498 00:24:33,119 --> 00:24:37,520 Speaker 8: well used in that region, and of course for all European. 499 00:24:37,080 --> 00:24:40,639 Speaker 9: Countries, freedom of freedom of navigation is an extremely important 500 00:24:41,200 --> 00:24:45,240 Speaker 9: virtue in itself, so we we fully acknowledge that we 501 00:24:45,320 --> 00:24:47,400 Speaker 9: also have a responsibility into that and. 502 00:24:47,359 --> 00:24:49,600 Speaker 8: Of course, as you mentioned, the conflict in Ukraine still 503 00:24:49,640 --> 00:24:51,400 Speaker 8: top of the agenda for the Europeans. 504 00:24:51,400 --> 00:24:52,679 Speaker 4: Olenski will be speaking. 505 00:24:52,400 --> 00:24:54,360 Speaker 8: With President Trump trying to bring that up the agenda 506 00:24:54,480 --> 00:24:57,120 Speaker 8: for the President of the United States. There's a real 507 00:24:57,200 --> 00:24:59,800 Speaker 8: sense that there's a momentum shift on the battlefield st 508 00:25:00,280 --> 00:25:02,639 Speaker 8: deep within Russia, a sense that we could maybe a 509 00:25:02,680 --> 00:25:06,400 Speaker 8: little bit more on the ropes, particularly economically, given that opportunity. 510 00:25:06,480 --> 00:25:08,960 Speaker 8: What is it appropriate for Europe to do to try 511 00:25:08,960 --> 00:25:10,800 Speaker 8: to escalate that pressure and try to help. 512 00:25:11,200 --> 00:25:14,840 Speaker 9: Yeah, honestly, to step up, because what we are doing 513 00:25:15,119 --> 00:25:19,440 Speaker 9: other basically the right things, supporting Ukraine and pressurizing Russia. 514 00:25:19,920 --> 00:25:21,040 Speaker 4: And we should not. 515 00:25:21,240 --> 00:25:25,159 Speaker 9: Take these the latest success for Ukraine as a reason 516 00:25:25,240 --> 00:25:29,679 Speaker 9: to decrease our support. Quite the opposite, you know, to 517 00:25:29,880 --> 00:25:34,520 Speaker 9: make it super clear for Russia that time is not 518 00:25:34,720 --> 00:25:38,360 Speaker 9: on their side. With a ninety billion euros loan from 519 00:25:38,440 --> 00:25:45,920 Speaker 9: Europe to Ukraine, that also creates a trustworthy long term 520 00:25:46,720 --> 00:25:49,800 Speaker 9: commitment for Ukraine. So I think we are on the 521 00:25:49,880 --> 00:25:53,920 Speaker 9: right track. What we see right now is actually increasing Russia, 522 00:25:54,000 --> 00:25:59,320 Speaker 9: increasing their attacks on big cities like Kiev. That also 523 00:25:59,480 --> 00:26:03,479 Speaker 9: gives us a good reason to provide more of the 524 00:26:03,640 --> 00:26:07,800 Speaker 9: kind of air defense needed in Ukraine to be able 525 00:26:07,800 --> 00:26:14,520 Speaker 9: for them to defend themselves while they also are defending themselves. 526 00:26:14,000 --> 00:26:17,240 Speaker 8: On Russian soil, And there's been an increasing debate about 527 00:26:17,280 --> 00:26:20,280 Speaker 8: diplomatic engagement on the European side with the Russians. 528 00:26:20,280 --> 00:26:21,520 Speaker 4: Where do you fall on the debate? 529 00:26:21,560 --> 00:26:23,760 Speaker 8: Do you think that we're any more closer at the 530 00:26:23,760 --> 00:26:26,919 Speaker 8: European side have a collective person willing to put forward 531 00:26:26,960 --> 00:26:29,280 Speaker 8: in a really sort of serious engagement with the Russians. 532 00:26:30,000 --> 00:26:32,920 Speaker 9: While I normally think that discussion starts at the wrong 533 00:26:33,080 --> 00:26:36,440 Speaker 9: place to speak, It starts with who should represent I mean, 534 00:26:37,080 --> 00:26:40,720 Speaker 9: the big thing is that Russia Ukraine is willing to 535 00:26:40,760 --> 00:26:46,520 Speaker 9: negotiate a decent peace Europe, both EU Europe and broader Europe. 536 00:26:46,720 --> 00:26:48,400 Speaker 2: We are perfectly. 537 00:26:48,160 --> 00:26:54,000 Speaker 9: Willing to support Ukraine in that difficult task. It is 538 00:26:54,280 --> 00:26:59,040 Speaker 9: obviously Russia who is not willing to in any way 539 00:26:59,560 --> 00:27:02,679 Speaker 9: in nego shape. They have a maximalistic view on the 540 00:27:02,720 --> 00:27:06,439 Speaker 9: war against Ukraine. And as long as Russia is the 541 00:27:07,080 --> 00:27:08,960 Speaker 9: is the obstacle for negotiations. 542 00:27:09,119 --> 00:27:11,760 Speaker 4: The question needs to be to Russia. 543 00:27:11,800 --> 00:27:15,440 Speaker 9: Of course, if the situation comes where Russia is willing 544 00:27:15,480 --> 00:27:19,919 Speaker 9: to negotiate on decent preconditions, Ukraine wants to negotiate and 545 00:27:19,960 --> 00:27:22,960 Speaker 9: they want the European support for that, then we will 546 00:27:23,000 --> 00:27:23,680 Speaker 9: sort that out. 547 00:27:23,840 --> 00:27:26,320 Speaker 8: And also thinking about the pressure that is building on Russia. 548 00:27:26,359 --> 00:27:29,360 Speaker 8: We've had more and more warnings and discussions from European 549 00:27:29,440 --> 00:27:32,479 Speaker 8: leaders concerned that there could be a direct confrontation between 550 00:27:32,520 --> 00:27:33,760 Speaker 8: Europe and Russia. 551 00:27:33,840 --> 00:27:35,040 Speaker 6: Where do you sort of put. 552 00:27:34,840 --> 00:27:37,760 Speaker 8: That in sort of the risk assessment as today, particularly 553 00:27:37,800 --> 00:27:39,720 Speaker 8: as the newest member of NATO. 554 00:27:41,400 --> 00:27:50,160 Speaker 9: Well, nothing new really. We all realize that Russia. There 555 00:27:50,200 --> 00:27:52,080 Speaker 9: is a battle of pressure on Russia. They are having 556 00:27:52,240 --> 00:27:55,239 Speaker 9: very very little success on the battlefield. They have a 557 00:27:55,480 --> 00:27:59,560 Speaker 9: severely hit economy, and they refuse to negotiate. What would 558 00:27:59,560 --> 00:28:02,520 Speaker 9: they do? And right now they increase their attacks on Kiev. 559 00:28:03,359 --> 00:28:07,159 Speaker 9: All the countries in Russia's neighborhoods or in the region 560 00:28:07,240 --> 00:28:12,360 Speaker 9: are well prepared for different kind of hybrid threats against 561 00:28:12,440 --> 00:28:17,600 Speaker 9: our countries. They can take a variety of forms. I 562 00:28:17,640 --> 00:28:22,080 Speaker 9: think Russia is very well aware of that attacking in 563 00:28:22,200 --> 00:28:25,840 Speaker 9: native country will be an extremely bad idea. We don't 564 00:28:25,840 --> 00:28:27,879 Speaker 9: see any science of that, but we do see a 565 00:28:27,960 --> 00:28:33,080 Speaker 9: lot of signs of different kinds of hybrid threats and activities. 566 00:28:33,960 --> 00:28:38,360 Speaker 9: Undersea cables being destroyed and the Russian shadow Fleet acting 567 00:28:38,400 --> 00:28:41,360 Speaker 9: in a reckless way, and all of these things. I 568 00:28:41,360 --> 00:28:44,000 Speaker 9: think we have never been as well prepared as we 569 00:28:44,040 --> 00:28:44,720 Speaker 9: are right now. 570 00:28:45,840 --> 00:28:49,400 Speaker 2: This is the Bloomberg Sevenments podcast, bringing you the best 571 00:28:49,440 --> 00:28:52,760 Speaker 2: in market economics, antient politics. You can watch the show 572 00:28:52,800 --> 00:28:55,760 Speaker 2: live on Bloomberg TV weekday mornings from six am to 573 00:28:55,880 --> 00:28:59,640 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify, 574 00:28:59,760 --> 00:29:02,000 Speaker 2: or anywhere else you listen, and as always on the 575 00:29:02,040 --> 00:29:04,440 Speaker 2: Bloomberg Terminal and the Bloomberg Business opp 576 00:29:08,560 --> 00:29:09,000 Speaker 7: Mm hmm