WEBVTT - Apple, Google AI Talks, TikTok Bill Latest, Market Outlook 0:00:01.440 --> 0:00:05.320 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:00:05.400 --> 0:00:08.479 weekdays at ten am Eastern on Apple Car playing Android 0:00:08.520 --> 0:00:11.600 Auto with the Bloomberg Business App. Listen on demand wherever 0:00:11.680 --> 0:00:15.520 you get your podcasts, or watch us live on YouTube. 0:00:16.600 --> 0:00:19.239 So here's the story of the day. First of all, John, 0:00:19.280 --> 0:00:22.200 I know you're the AI expert here at the Sloomberg Radio. 0:00:22.280 --> 0:00:24.680 But some nice news out of here. Some dude we 0:00:24.760 --> 0:00:27.920 got at Bloomberg News. He's out in California's somewhere, Mark Armern. 0:00:27.920 --> 0:00:30.400 He's pretty good on this Apple thing, which is a 0:00:30.400 --> 0:00:34.040 pretty good career move for him. And he just creates 0:00:34.040 --> 0:00:36.680 a story. You put Apple in a story with Google. 0:00:36.840 --> 0:00:39.680 This is an alphabet free zone. Apple and Google in 0:00:39.760 --> 0:00:42.879 a story that's gonna be big news. That's a lot 0:00:42.880 --> 0:00:45.639 of market characture, that's a lot of market app. Then 0:00:45.680 --> 0:00:48.240 you throw in AI. Then you got something. Then you 0:00:48.320 --> 0:00:49.879 get something that's called a green bee, which I think 0:00:49.960 --> 0:00:53.680 is good for if you're one of those reporter geeks. Right, absolutely, okay, 0:00:53.800 --> 0:00:56.280 very good, Tom Jow Speaking of reporter geeks, he joins 0:00:56.320 --> 0:00:59.840 us here. He heads up all of our technology news 0:01:00.080 --> 0:01:02.960 coverage at Bloomberg News. Huge, huge job. He's got a 0:01:03.000 --> 0:01:04.680 great team of reporters working for him. 0:01:04.760 --> 0:01:07.759 I time my visit well exactly, I time my visit 0:01:07.800 --> 0:01:09.400 around Mark German scoop Mark. 0:01:09.200 --> 0:01:11.880 German scoops Tom. What do you make of this reporting 0:01:11.880 --> 0:01:15.880 coming out of mister German here about Apple, about Alphabet 0:01:16.080 --> 0:01:17.880 and about AI. What do you think is happening here? 0:01:18.360 --> 0:01:22.520 This is Apple recognizing that it needs to weave artificial 0:01:22.560 --> 0:01:29.000 intelligence more deeply, more intelligently into its products, into the iPhone. 0:01:29.040 --> 0:01:33.360 It already has this really long standing, deep, very lucrative 0:01:33.400 --> 0:01:36.759 relationship with Google in terms of putting Google's search, making 0:01:36.800 --> 0:01:41.280 it very paramount on the iPhone. This is let's take 0:01:41.319 --> 0:01:44.200 it to the next step. Let's take this relationship further 0:01:45.120 --> 0:01:49.880 and let's weave your generative AI tools into what we 0:01:50.000 --> 0:01:51.880 have on the iPhone and make it better and make 0:01:51.920 --> 0:01:56.640 it smarter. Let's leverage this relationship. Also, it's important to 0:01:56.680 --> 0:01:59.720 note that Apple is seen as a laggard when it 0:01:59.720 --> 0:02:05.280 comes to artificial intelligence. Everyone's got something big. Every big 0:02:05.440 --> 0:02:10.760 tech company has a big AI story. Apple is seen 0:02:10.800 --> 0:02:11.919 as a laggard in that. 0:02:12.160 --> 0:02:15.399 And this is an admission in some way that AI 0:02:16.000 --> 0:02:17.760 Apple can't do it by themselves. 0:02:17.919 --> 0:02:19.760 That's right, You don't get why. 0:02:19.680 --> 0:02:20.760 Would the stock be higher. 0:02:21.280 --> 0:02:24.400 You don't get to build this from scratch. I think 0:02:24.600 --> 0:02:29.679 there's a few things that work here. One is regulators 0:02:29.720 --> 0:02:33.200 are already looking at the relationship between Apple and Google. 0:02:33.720 --> 0:02:37.000 They don't like aspects of it. DJ is looking. 0:02:36.760 --> 0:02:37.280 Hard at that. 0:02:37.360 --> 0:02:40.679 The FDC is already looking at the relationship between Microsoft 0:02:41.000 --> 0:02:46.280 and open AI. The concern is there's innovation happening in 0:02:46.480 --> 0:02:51.440 artificial intelligence, and if you have combinations between the biggest 0:02:51.440 --> 0:02:54.360 players in tech, the most powerful players in tech, is 0:02:54.400 --> 0:02:56.880 that going to thwart innovation? And is it going to 0:02:56.960 --> 0:02:57.919 thwart competition? 0:02:58.200 --> 0:03:01.080 So how do we think the regulators might look at 0:03:01.080 --> 0:03:01.720 something like this. 0:03:02.320 --> 0:03:06.080 I think they need to figure out whether the talks 0:03:06.120 --> 0:03:09.760 are going to come to fruition first and foremost. We're 0:03:09.760 --> 0:03:13.800 definitely sending out feelers throughout the Bloomberg organization to figure 0:03:13.800 --> 0:03:16.200 out to figure out what the next step is and 0:03:16.280 --> 0:03:20.079 to assess what the argument would be for and against. 0:03:20.160 --> 0:03:22.440 If you're a regulator, but if you're ready to think 0:03:22.480 --> 0:03:24.120 about it, if you're at the DJ, if you're at 0:03:24.120 --> 0:03:29.600 the FTC, do you want to see more concentration, more 0:03:29.680 --> 0:03:32.800 collaboration between the two most powerful companies in the world, 0:03:33.000 --> 0:03:35.440 or do you want to say to them, Apple, go 0:03:35.480 --> 0:03:36.600 and build your own. 0:03:37.160 --> 0:03:40.320 How long does this relationship last? If Apple finds a 0:03:40.360 --> 0:03:42.920 better partner, could they drop Google like a hot rock. 0:03:44.440 --> 0:03:48.400 We know, as we reported, Apple held talks with Open Ai. 0:03:48.880 --> 0:03:52.360 We also know that the talks that are existing now 0:03:52.440 --> 0:03:55.720 are the ones between Apple and Google. Could you kind 0:03:55.720 --> 0:03:58.520 of rekindle something? Could you start something up with somebody else? 0:03:58.680 --> 0:04:02.720 I think the sky's the limit here. Apple needs something big. 0:04:03.560 --> 0:04:06.360 They need something new. They need the app. The iPhone 0:04:06.400 --> 0:04:09.080 has been around, as we all know, since two thousand 0:04:09.080 --> 0:04:12.720 and seven. They need a big new thing. They need 0:04:12.720 --> 0:04:15.480 that next big thing. Remember they were working on a car. 0:04:16.040 --> 0:04:19.080 As Bloomberg told you a couple of months ago. That 0:04:19.320 --> 0:04:21.920 project is actually it's just been a few weeks. That 0:04:21.960 --> 0:04:27.080 project is now being put being being being killed. They're 0:04:27.120 --> 0:04:30.039 going to redeploy some of those people into AI initiatives. 0:04:30.160 --> 0:04:33.719 But they need that next big thing, and weaving AI 0:04:33.839 --> 0:04:36.360 into your iPhone could be one of them. 0:04:37.600 --> 0:04:41.159 So Apple also has a developer conference. I believe in June. 0:04:41.440 --> 0:04:44.800 Tom and a lot of folks think that maybe that's 0:04:44.880 --> 0:04:46.960 the time Tim Coast can get up on stage and 0:04:47.000 --> 0:04:51.320 say here's our AI play. Is that is this part 0:04:51.360 --> 0:04:54.880 of it? Is this It seems like, as John was suggesting, 0:04:55.640 --> 0:04:57.840 this is kind of admission, we don't have that big 0:04:58.120 --> 0:05:01.320 a wow moment for you. How are you thinking about that? 0:05:01.560 --> 0:05:03.920 It takes a lot of time, It takes a lot 0:05:03.920 --> 0:05:07.160 of people. It takes a lot of resources to build 0:05:07.200 --> 0:05:11.440 these large language models upon which generative AI tools are based. Right, 0:05:11.720 --> 0:05:16.400 open ai was not created yesterday. You know, they've made 0:05:16.400 --> 0:05:18.960 a big splash in the last year, but that was 0:05:19.080 --> 0:05:23.360 years in the making. Microsoft's relationship with open ai works 0:05:23.400 --> 0:05:26.400 to their advantage. Google has been working on its own 0:05:26.480 --> 0:05:30.680 generative AI technology for many, many years. That was not 0:05:31.240 --> 0:05:33.760 top priority for Apple for all this time. They've been 0:05:33.760 --> 0:05:35.599 working on the phone, They've been working on the watch, 0:05:35.640 --> 0:05:37.400 they've been working on the car, They've been working all 0:05:37.440 --> 0:05:40.599 these things that we use and are very lucrative for 0:05:40.680 --> 0:05:43.080 them and are making them one of the biggest and 0:05:43.160 --> 0:05:44.719 most valuable companies. 0:05:44.279 --> 0:05:45.040 In the world. 0:05:45.560 --> 0:05:48.560 But this was not the biggest area of concentration for them, 0:05:48.560 --> 0:05:51.239 at least not as much as other companies. It takes time. 0:05:51.839 --> 0:05:54.400 My sense is you can you can, even if you 0:05:54.520 --> 0:05:57.839 haven't nailed down all of your details on a relationship 0:05:57.880 --> 0:06:01.320 what like this, you can still use your developer conference 0:06:01.640 --> 0:06:05.040 to drop hints, to say, here's what's coming down the pike. 0:06:05.360 --> 0:06:07.799 Here's a taste of it, even if it's not completely 0:06:08.000 --> 0:06:10.800 They like to have stuff that's pretty baked before they 0:06:10.839 --> 0:06:14.400 start talking about it publicly. So I don't think they're 0:06:14.400 --> 0:06:16.839 gonna jump the gun here, but it would be nice 0:06:16.839 --> 0:06:19.480 to have this in your back pocket to at least 0:06:19.560 --> 0:06:20.239 drop some hints. 0:06:20.320 --> 0:06:23.320 Okay, so what does it do to my iPhone? And 0:06:23.560 --> 0:06:25.200 do I now have to go out and buy a 0:06:25.240 --> 0:06:27.520 new model iPhone? What does it do for sales? And 0:06:27.960 --> 0:06:31.400 you know, what's the practical impact for an iPhone user? 0:06:31.720 --> 0:06:36.120 Look, we're already using our phones for virtually everything throughout 0:06:36.160 --> 0:06:39.560 the day. These are like, it's the one thing that 0:06:39.600 --> 0:06:42.080 you would take if you're running out of the house 0:06:42.120 --> 0:06:45.400 with the fire right you know, it would be things 0:06:45.640 --> 0:06:49.600 like creating images, writing essays, the things that we are 0:06:49.680 --> 0:06:55.240 already using tools like open AI for. Could you more 0:06:55.360 --> 0:06:58.560 easily incorporate those into your iPhone so that you don't 0:06:58.560 --> 0:07:01.080 have to fire up the laptop, so that you don't 0:07:01.120 --> 0:07:06.000 have to delve into a different app. Could you weave 0:07:06.080 --> 0:07:09.560 this into the tools that you already have right on 0:07:09.600 --> 0:07:10.880 your phone It's. 0:07:10.760 --> 0:07:13.080 Not like five G like everybody told me I had 0:07:13.120 --> 0:07:15.080 to upgrade my phone to go to five G. I 0:07:15.120 --> 0:07:17.000 don't even notice it. It's like, I don't know what 0:07:18.360 --> 0:07:18.840 this is different. 0:07:18.840 --> 0:07:20.560 All right, Tom Giles, thanks so much for joining us. 0:07:20.560 --> 0:07:23.000 Tom's based in San Francisco. We got him in your 0:07:23.080 --> 0:07:25.160 four weeks. We pulled him into the studio here, Tom Giles, 0:07:25.440 --> 0:07:28.480 Bloomberg News, Senior executive editor for Global Technology. There we go. 0:07:28.480 --> 0:07:31.200 He's got a whole bunch of great technology reporters on 0:07:31.280 --> 0:07:32.640 his team, and they're doing some good stuff. 0:07:34.080 --> 0:07:37.960 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:07:38.040 --> 0:07:41.080 weekdays at ten am Eastern on Apple card Play and 0:07:41.080 --> 0:07:44.000 Android Otto with the Bloomberg Business App. You can also 0:07:44.080 --> 0:07:47.560 listen live on Amazon Alexa from our flagship New York station. 0:07:47.960 --> 0:07:50.720 Just say Alexa play Bloomberg eleven thirty. 0:07:52.200 --> 0:07:54.440 Let's talk fixed income, shall we Let's go from skiing 0:07:54.840 --> 0:07:56.920 to the bond market. Ur J Gallow he could do that. 0:07:57.520 --> 0:08:01.200 Senior portfolio manager for fixed and fixing. It's Federated Hermes 0:08:01.600 --> 0:08:05.080 joining us via zoom here. Hey, you know RJ. Since 0:08:05.120 --> 0:08:08.239 the last time we spoke to you, yields are moving higher. 0:08:08.280 --> 0:08:12.360 Here I guess the market's kind of losing its enthusiasm 0:08:12.400 --> 0:08:15.080 for I guess aggressive rate cutting. What do you make 0:08:15.080 --> 0:08:16.560 of this market? 0:08:17.760 --> 0:08:23.360 Well, it's good to see you again on YouTube. I 0:08:23.400 --> 0:08:27.720 would say that the market ended twenty twenty three, which 0:08:27.760 --> 0:08:29.760 seems quite a while ago, but it wasn't that long 0:08:29.760 --> 0:08:32.439 ago when the markets were priced for almost seven eases 0:08:33.440 --> 0:08:35.760 in the calendar twenty twenty four, and the markets had 0:08:35.800 --> 0:08:39.720 just gotten way ahead of themselves. There was excessive confidence 0:08:39.720 --> 0:08:43.800 at the time that the dubvish tone of the December 0:08:43.880 --> 0:08:47.760 FMC meeting opened the door for the following argument. Inflation 0:08:47.880 --> 0:08:52.840 will continue to fall. Therefore, the Fed must ease nominal 0:08:52.920 --> 0:08:56.640 rate targets so that real rates, real policy rates don't 0:08:56.800 --> 0:09:01.360 inadvertently or undesirably rise. For that to work, you needed 0:09:01.360 --> 0:09:04.959 inflation to continue to fall, and that just hasn't happened. 0:09:05.040 --> 0:09:09.000 The inflation data has been sticky or buoyant at well 0:09:09.000 --> 0:09:14.080 above target levels. The economic data, both jobs and growth 0:09:14.160 --> 0:09:17.120 data have been pretty good. Not as good maybe as 0:09:17.360 --> 0:09:21.200 some prior quarters that were stronger, but still nowhere near 0:09:22.240 --> 0:09:24.760 probably a sufficient slowdown to get the Fed to be 0:09:24.840 --> 0:09:27.800 concerned that we're heading towards harder landing. 0:09:27.880 --> 0:09:28.280 Or something. 0:09:28.360 --> 0:09:31.760 So since the data didn't cooperate with the argument that 0:09:31.800 --> 0:09:34.320 the FED had to ease to prevent real rates from rising, 0:09:35.040 --> 0:09:37.719 the Fed didn't have to ease, and that came out 0:09:37.760 --> 0:09:38.400 of the markets. 0:09:38.960 --> 0:09:39.560 Now we've got a. 0:09:39.520 --> 0:09:42.840 Little less than three eases priced in cumulatively up until 0:09:42.840 --> 0:09:46.600 the December twenty twenty four meeting, very consistent with the 0:09:46.600 --> 0:09:49.679 Fed's dots, just in time for the dots to maybe change. 0:09:49.920 --> 0:09:53.000 Okay, what you got to explain to the dummies out there, 0:09:53.000 --> 0:09:56.840 including me, the real rate? Just how significant that is 0:09:56.880 --> 0:09:59.960 in terms of doing some or all of the heavy lift. 0:10:02.120 --> 0:10:04.199 It's a good question, you know, real rate. 0:10:04.240 --> 0:10:07.199 Simply take a nominal yield or a nominal rate target, 0:10:08.000 --> 0:10:10.280 use the upper end of the FED funds rage right 0:10:10.320 --> 0:10:13.880 now at five point fifty, and subtract off, you know, 0:10:13.960 --> 0:10:16.040 a four percent inflation rate, you've got a one point 0:10:16.080 --> 0:10:18.400 five percent real rate. If you subtract off a three percent, 0:10:18.720 --> 0:10:20.959 you've got a two point five percent real rate. If 0:10:20.960 --> 0:10:23.680 inflation keeps going down to two and you don't move 0:10:23.720 --> 0:10:26.360 your five point fifty upper end of your FED funds target, 0:10:26.800 --> 0:10:28.560 you know, the Fed now has a three would end 0:10:28.640 --> 0:10:30.600 up having in that scenario a three and a half 0:10:30.640 --> 0:10:36.600 percent real FED funds rate, that's historically pretty hot. That's 0:10:36.600 --> 0:10:41.160 the kind of constrictive or restrictive policy that could precipitate 0:10:41.480 --> 0:10:44.120 a real economic downturn, a recession that the FED doesn't want. 0:10:45.280 --> 0:10:48.119 But again, they don't need to move. If inflation itself 0:10:48.640 --> 0:10:49.439 is stuck. 0:10:49.160 --> 0:10:52.720 In the threes, you know, generally, looking whether at the 0:10:52.720 --> 0:10:57.080 CPI or the or the PC deflator, then the Fed 0:10:57.160 --> 0:10:59.040 might not need to be in such a rush to 0:10:59.480 --> 0:11:02.960 reduce rates to prevent that real rate from rising. Secondly, 0:11:03.240 --> 0:11:05.360 I think it's important to note that, you know, the 0:11:05.400 --> 0:11:08.040 Fed doesn't really know where the equilibrium Fed funds rate 0:11:08.160 --> 0:11:10.679 is the long term dot, and of course we're going 0:11:10.679 --> 0:11:12.200 to get updates on the dots this week. 0:11:12.520 --> 0:11:13.800 Is it two and a half percent? 0:11:14.320 --> 0:11:16.800 The market if you look at so for futures out 0:11:16.840 --> 0:11:19.079 three to five years, the market seems to think that 0:11:19.120 --> 0:11:22.079 the that the long run equilibrium FED funds rate is 0:11:22.120 --> 0:11:24.040 more like three and a half or three seven maybe. 0:11:25.280 --> 0:11:28.240 So the Fed isn't going to ease based upon a 0:11:28.320 --> 0:11:32.160 model if the data is still strong, labor markets tight, 0:11:32.480 --> 0:11:34.800 and inflation not falling rapidly. 0:11:35.440 --> 0:11:38.200 All right, So r J, given that kind of background, top, 0:11:39.520 --> 0:11:41.600 how are you positioning your portfolio, what are you telling 0:11:41.640 --> 0:11:45.319 your your teams to really look for sure? 0:11:45.400 --> 0:11:47.839 Sure, so first of all, looking at sort of the 0:11:47.840 --> 0:11:50.240 different lever levers than an active manager, which is what 0:11:50.280 --> 0:11:53.199 we are can can do in a fixing income portfolio. 0:11:53.840 --> 0:11:57.559 On duration, you know, once the market started to get 0:11:58.000 --> 0:11:59.840 sort of disabused of the notion that we were going 0:11:59.880 --> 0:12:04.560 to get seven eases, you know, we waited and took 0:12:04.600 --> 0:12:07.960 a tactical long at times, we've gone back to neutral. 0:12:08.760 --> 0:12:11.360 We went back to neutral before the most recent selloff. 0:12:12.200 --> 0:12:13.960 We took a little bit of profits on what we 0:12:14.000 --> 0:12:16.040 had as a very you know, temporary long position. 0:12:16.960 --> 0:12:17.640 So that's worked. 0:12:17.640 --> 0:12:20.320 We're at neutral now heading into the f MC meeting, 0:12:20.800 --> 0:12:23.319 we're apt to stay there. I think the Fed there 0:12:23.360 --> 0:12:25.000 is some risk that the Fed will move the dots 0:12:25.080 --> 0:12:28.320 up a little bit. Abgail was mentioning that could be 0:12:28.360 --> 0:12:31.520 a challenge for risk assets. We think that could be 0:12:31.559 --> 0:12:34.120 a challenge for rates to get a little lifts to 0:12:34.160 --> 0:12:37.480 the rates market. So that's on the duration front. On 0:12:37.679 --> 0:12:39.880 other levers that we can push and pull and fixed income. 0:12:40.400 --> 0:12:44.280 When it comes to credit sector allocation, we're overweight mortgages. 0:12:44.320 --> 0:12:47.880 We think they still look cheap we'd like the extra 0:12:47.920 --> 0:12:51.319 carrier given us. We're much more cautious and underweight high 0:12:51.360 --> 0:12:54.400 yield corporates. We think that the spreads are very tight there, 0:12:54.760 --> 0:12:57.760 compensation for the risk isn't so great. The fault risk 0:12:58.240 --> 0:13:02.040 still rising incrementally. That's not to say that we're underweight 0:13:02.080 --> 0:13:04.320 high because we think a recessions coming. It's really a 0:13:04.400 --> 0:13:08.920 question of valuation and compensation for risk at the current levels. 0:13:10.320 --> 0:13:11.160 We're a little more. 0:13:11.080 --> 0:13:13.760 Constructive on ig Yes, we're a little underweight, but not 0:13:13.920 --> 0:13:18.280 as much so, and we've added to emerging markets. I 0:13:18.280 --> 0:13:21.680 think it's true that the market's base case of a 0:13:21.720 --> 0:13:26.640 soft landing has become more compelling. If the FED walks 0:13:26.679 --> 0:13:31.520 back tightening easing expectations aggressively, then I think that could 0:13:31.520 --> 0:13:34.240 be a challenge for risk assets and it would start 0:13:34.240 --> 0:13:37.120 to raise questions about whether or not the Fed can 0:13:37.320 --> 0:13:39.240 ease into that soft lanning. What we think the Fed 0:13:39.320 --> 0:13:42.120 is going to continue to signal easing just less than 0:13:42.120 --> 0:13:44.800 they have been, and it's quite possible that they might 0:13:44.840 --> 0:13:47.439 be considered the long run dot right now with the 0:13:47.480 --> 0:13:50.800 way the markets are priced, that might be an opportunity 0:13:50.800 --> 0:13:53.320 for them to walk through that door and maybe move 0:13:53.320 --> 0:13:56.040 it from two to fifty median, maybe a little. 0:13:55.840 --> 0:13:57.400 Higher two seventy five or something like that. 0:13:57.480 --> 0:14:00.240 So we're watching that more of an academic exercise maybe, 0:14:00.320 --> 0:14:02.200 but that affects expectations in the market. 0:14:02.440 --> 0:14:04.719 Why has the last mile been so difficult to get 0:14:04.760 --> 0:14:05.360 to the target? 0:14:08.440 --> 0:14:12.160 I think the inflation problem which was so challenging, which 0:14:12.280 --> 0:14:15.720 caused the FED to completely abandon the transitory argument and 0:14:15.760 --> 0:14:18.880 get very aggressive, historically aggressive in the pace of tightening. 0:14:19.640 --> 0:14:24.600 That inflation was born of a surge in aggregate demand 0:14:25.200 --> 0:14:31.400 amid numerous supply problems, supply shocks, supply chain kinks, inadequate 0:14:31.480 --> 0:14:32.160 labor supply. 0:14:32.680 --> 0:14:35.720 So when demand rose for many things coming. 0:14:35.480 --> 0:14:38.440 Out of the pandemic, especially services, travel and things like that, 0:14:38.800 --> 0:14:42.600 and we had such constrained supply, including labor supply, the 0:14:42.640 --> 0:14:45.720 only answer in any normal economic model is price must 0:14:45.840 --> 0:14:49.120 rise to invite entry, to get people back to work, 0:14:49.160 --> 0:14:52.240 to get firms to work out the kinks. So that 0:14:52.400 --> 0:14:56.960 supply response is the first order aspect of the improvement 0:14:57.080 --> 0:15:00.000 that brought the inflation down that has been addressed. 0:15:00.800 --> 0:15:01.080 Now. 0:15:01.160 --> 0:15:04.320 I think we're in a world where inflation expectations are 0:15:04.360 --> 0:15:07.640 relatively well contained and benign, and that's because the Fed 0:15:07.680 --> 0:15:09.120 acted as aggressively as they did. 0:15:09.400 --> 0:15:12.000 Had they not done so, inflation expectations might have release searched. 0:15:12.880 --> 0:15:17.560 This last mile of getting inflation back to target is tougher. 0:15:18.240 --> 0:15:20.760 It's we have a better functioning economy, we have a 0:15:20.800 --> 0:15:25.520 tight labor market. Sort of more traditional non dislocation models 0:15:25.560 --> 0:15:28.760 of economics would suggest that maybe the economy does need 0:15:28.800 --> 0:15:32.520 to slow down in order to get inflation to continue 0:15:32.560 --> 0:15:36.239 to fall. The argument that the first mile was successful 0:15:36.280 --> 0:15:39.360 on supply is very true, but the last mile might 0:15:39.440 --> 0:15:41.880 require more of a slowdown, and that suggests the FED 0:15:41.960 --> 0:15:43.600 might not ease as aggressively as once thought. 0:15:43.640 --> 0:15:46.000 Ye all right, r J. Great stuff. Has always really 0:15:46.040 --> 0:15:48.080 appreciate getting some of your time, r J. Gallow He's 0:15:48.080 --> 0:15:51.080 a senior portfolio manager Federator Hermes. Joining us via. 0:15:51.080 --> 0:15:56.600 Zoom You're listening to the Bloomberg Intelligence Podcast. Catch us 0:15:56.640 --> 0:15:59.520 live weekdays at ten am Eastern on fo car Play 0:15:59.560 --> 0:16:02.720 and then with the Bloomberg Business app. Listen on demand 0:16:02.760 --> 0:16:07.080 wherever you get your podcasts, or watch us live on YouTube. 0:16:08.160 --> 0:16:10.640 John, I know you're not on TikTok. 0:16:11.080 --> 0:16:14.880 Can you just imagine, like the intersection of John Tucker 0:16:14.920 --> 0:16:18.840 and TikTok? What a disaster. That would be stop laughing, Lisa. 0:16:19.440 --> 0:16:21.480 Are you aware that there is this thing called TikTok. 0:16:21.800 --> 0:16:23.840 Yeah, Charlie Pellett in the office shows it to me 0:16:23.880 --> 0:16:27.280 all the time, so it's great, look you want videos 0:16:27.320 --> 0:16:29.600 of I'm like, this is the stupidest thing I've ever seen. 0:16:29.720 --> 0:16:32.600 But the big issue here for a lot of folks 0:16:32.720 --> 0:16:35.160 is the ownership of TikTok owned my Byte Dance, which 0:16:35.160 --> 0:16:38.480 has Chinese ownership. So now there's a whole thing about 0:16:38.880 --> 0:16:42.200 do you want these TikTok company and Byte Dance having 0:16:42.280 --> 0:16:45.880 so much consumer information for Americans? And that's kind of 0:16:45.920 --> 0:16:49.520 the big issue here. So Matt Sheltenhelm he joins us. 0:16:49.520 --> 0:16:52.240 He's a mediate litigation analyst, so he kind of does 0:16:52.280 --> 0:16:54.960 all the legal side for all this stuff in the 0:16:55.000 --> 0:16:58.120 media telecommunication space. He's a Bloomberg intelligence. He spaced down 0:16:58.120 --> 0:17:01.720 in Washington, DC. Where else? Hey, Matt, give us the 0:17:01.800 --> 0:17:05.480 latest on what's coming out of Washington, either from a 0:17:05.480 --> 0:17:09.560 regulatory standpoint or maybe some movements up from Congress about 0:17:09.680 --> 0:17:15.000 either forcing Bite Dance to cease operations here or you know, 0:17:15.040 --> 0:17:17.119 maybe force the Chinese to sell it. Where are we? 0:17:18.000 --> 0:17:21.639 Yeah, Paul, So some surprising momentum here on this issue. 0:17:21.720 --> 0:17:24.280 This first came up about a year ago in March 0:17:24.359 --> 0:17:27.000 when you when you'll remember, Congress had had a big 0:17:27.040 --> 0:17:31.760 hearing with with TikTok. CEO showed Chew. It was really 0:17:31.800 --> 0:17:34.399 a tough hearing, and I think a lot of people 0:17:34.440 --> 0:17:38.120 thought it might lead to some drastic action sooner rather 0:17:38.200 --> 0:17:43.040 than later. And then everything slowed down. But then sort 0:17:43.040 --> 0:17:46.920 of out of nowhere, about ten days ago, the House 0:17:47.920 --> 0:17:52.840 introduced a new bill, then quickly passed that bill out 0:17:52.880 --> 0:17:56.240 of committee, and then passed it through the on the 0:17:56.280 --> 0:18:02.320 whole House floor by a huge bipartisan majority. And basically 0:18:02.400 --> 0:18:04.760 what this bill would do, if it were to clear 0:18:04.880 --> 0:18:07.600 Congress and President Biden were to sign it, and if 0:18:07.600 --> 0:18:10.359 it were to get through the courts, is to say 0:18:10.400 --> 0:18:17.879 that unless Byteedance divest TikTok to a less sensitive owner, 0:18:18.880 --> 0:18:23.879 that the application couldn't be be hosted by Internet hosts 0:18:23.920 --> 0:18:26.680 in the United States, it couldn't be on app stores 0:18:26.840 --> 0:18:30.480 in the United States, and there would be significant financial 0:18:30.560 --> 0:18:33.280 penalties not for TikTok, but for those companies that would 0:18:33.320 --> 0:18:36.080 host it or that would include it in its app 0:18:36.200 --> 0:18:39.719 store if they were to ignore the legislation. 0:18:40.280 --> 0:18:42.800 Well, we'll put on your Congress watching half for a moment. 0:18:42.840 --> 0:18:45.600 What's the hold up in the Senate? What's the objection there? 0:18:46.160 --> 0:18:50.919 Yeah, So, I mean it's amazing to see the bipartisan 0:18:51.520 --> 0:18:55.399 support this has. You don't see legislation move three hundred 0:18:55.400 --> 0:18:57.840 and fifty two to sixty five like we saw last 0:18:57.840 --> 0:19:02.520 week in the House. You've seen on both sides say 0:19:02.560 --> 0:19:06.160 they want this. You've seen Chuck Schumer in the past, 0:19:06.160 --> 0:19:08.800 the Senate majority leader, say he likes the idea of 0:19:09.200 --> 0:19:14.080 requiring a change in ownership of TikTok. So that's exactly 0:19:14.200 --> 0:19:17.720 the question now. I think the hold up, though, is, Look, 0:19:17.800 --> 0:19:20.359 this is an election year, and even though you've seen 0:19:20.359 --> 0:19:22.600 President Biden say, look, get it. You know, if it 0:19:22.640 --> 0:19:25.359 comes to my desk, I'll sign it, he also has 0:19:25.400 --> 0:19:29.280 one hundred and fifty million Americans using this app, many 0:19:29.320 --> 0:19:32.280 of them young people, at a time when you have 0:19:32.320 --> 0:19:36.439 an election coming in November, when every vote matters, in 0:19:36.480 --> 0:19:41.040 particular young people to President Biden. So I think this 0:19:41.760 --> 0:19:45.560 legislation has a chance. I only give it a thirty 0:19:45.600 --> 0:19:49.879 percent chance though this year, and that's exactly because of 0:19:49.960 --> 0:19:53.080 the political risks of November. At a time when President 0:19:53.080 --> 0:19:57.760 Biden doesn't want to risk a potential backlash from those 0:19:57.800 --> 0:20:02.280 young voters. The Senate is controlled by Democrats. Senator Chuck 0:20:02.280 --> 0:20:06.320 Schumer is the majority leader. He decides how quickly this moves, 0:20:06.640 --> 0:20:09.600 and I think the looming election is a reason to 0:20:09.680 --> 0:20:13.320 move slowly. But after that, after this election is out 0:20:13.359 --> 0:20:15.280 of the way, I'd be a little more nervous if 0:20:15.280 --> 0:20:16.000 I were TikTok. 0:20:16.440 --> 0:20:20.040 So do we have any clear sense of what TikTok 0:20:20.280 --> 0:20:23.000 and Byte dance, how they're approaching this at this point, 0:20:23.160 --> 0:20:25.040 like what would they presumably do? 0:20:25.960 --> 0:20:29.200 Yeah, so that's a great question. I think we've seen 0:20:29.280 --> 0:20:34.240 indications from from China that it would not be willing 0:20:34.440 --> 0:20:37.960 to support a divestiture. Now that could be could be 0:20:38.040 --> 0:20:43.879 posturing on that end, but I think there's the possibility 0:20:43.880 --> 0:20:47.679 that if the US passes this legislation that requires a 0:20:47.760 --> 0:20:51.720 divestiture or else there's an effective ban, there's a real 0:20:51.760 --> 0:20:56.520 possibility that China wouldn't allow any sort of divestiture like 0:20:56.640 --> 0:21:00.640 that to happen. So you're inevitably in the result of 0:21:00.359 --> 0:21:04.440 of a band. Of course, you're also in courts as 0:21:04.440 --> 0:21:08.000 soon as Congress passes this, and you saw Montana pass 0:21:08.080 --> 0:21:11.159 the TikTok ban last year it got tripped up in court. 0:21:11.600 --> 0:21:14.320 You saw President Trump before he was against this, he 0:21:14.359 --> 0:21:19.119 actually signed a band of TikTok that was tripped up 0:21:19.160 --> 0:21:21.879 in the courts. So once this passes, you still have 0:21:21.920 --> 0:21:26.800 a tough court challenge coming. And so TikTok's first line 0:21:26.800 --> 0:21:28.800 of defense is going to be to see over this 0:21:29.119 --> 0:21:29.480 all right. 0:21:29.520 --> 0:21:33.920 So if this ultimately goes to the courts, You've got 0:21:33.960 --> 0:21:38.399 to explain to me, what's the legitimate national security threat 0:21:38.720 --> 0:21:42.440 of me going posting pictures of myself or a video 0:21:42.480 --> 0:21:46.800 of myself, you know, redoing my bathroom or Lisa putting 0:21:46.840 --> 0:21:47.720 on her mas scare. 0:21:48.640 --> 0:21:52.200 That's exactly the question the courts are going to be asking. 0:21:52.240 --> 0:21:54.480 And one of the curious things about when the House 0:21:54.640 --> 0:21:57.840 voted on this in committee by that fifty to zero vote, 0:21:57.880 --> 0:22:00.000