WEBVTT - Bloomberg Surveillance TV: May 29, 2025 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.239 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.680 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.280 --> 0:00:33.919 anywhere else you listen, and as always on the Bloomberg 0:00:34.000 --> 0:00:37.600 Terminal and the Bloomberg Business App. President Donald Trump's Liberation 0:00:37.760 --> 0:00:40.360 Day tariffs joining us now to Discussely Senior White House 0:00:40.400 --> 0:00:44.080 Trade Advisor Piter Navarro dot Navara, Welcome back to the program, Sir. 0:00:44.240 --> 0:00:45.639 First of all, I think we've got to get into 0:00:45.640 --> 0:00:48.080 the rule in room overnight. Have you spoken to the 0:00:48.080 --> 0:00:51.160 President and ultimately what's this reaction to what we heard? 0:00:53.360 --> 0:00:55.720 Haven't forggned with the President yet, but they've forgned with 0:00:55.800 --> 0:00:57.720 people who have spocused to the president. 0:00:57.960 --> 0:00:59.760 Lord, We're in. 0:00:59.680 --> 0:01:00.680 A situation now. 0:01:00.760 --> 0:01:03.960 Big picture here is i EPA. 0:01:04.120 --> 0:01:07.920 We were using the International Emergency Economic Powers Act. There's 0:01:07.959 --> 0:01:11.720 no question that there's an economic emergency. With respect to 0:01:11.800 --> 0:01:17.360 both uses that we had. One is we are in 0:01:17.400 --> 0:01:24.160 a world where China has killed over a million Americans 0:01:25.640 --> 0:01:31.000 with fentanyl poison, and we took this step to stop that. 0:01:31.160 --> 0:01:34.240 We will continue to press on that. At the same time, 0:01:35.040 --> 0:01:39.800 we invoke that rule to stop what has been twenty 0:01:39.880 --> 0:01:43.840 million illegal abling streaming into our country, driving down wages, 0:01:43.959 --> 0:01:47.960 taking jobs away. That's an economic emergency. On top of that, 0:01:48.880 --> 0:01:53.640 the world continues to steal about a trillion dollars a 0:01:53.720 --> 0:01:59.160 year and is measured by the trade deficit, and that's 0:01:59.240 --> 0:02:04.000 an economic emergency because it's transferring our wealth abroad. So 0:02:04.040 --> 0:02:07.800 we think we have a strong case. Yes, we will 0:02:07.880 --> 0:02:11.799 immediately appeal and try to stay the ruling. But at 0:02:11.800 --> 0:02:16.560 the same time, the court, interestingly enough, basically said we 0:02:16.560 --> 0:02:22.240 were right, just use different rules and laws. So nothing 0:02:22.320 --> 0:02:26.800 has really changed here in that sense. We're still as 0:02:26.840 --> 0:02:30.600 we speak, having countries call us and tell us they 0:02:30.720 --> 0:02:33.640 want a deal. So these deals are going to happen. 0:02:35.280 --> 0:02:38.400 So that's kind of where we're at. And it's troublesome 0:02:38.560 --> 0:02:42.560 here because if you look broadly at the pattern, we've 0:02:42.560 --> 0:02:48.840 got courts in this country who are basically engaged in 0:02:48.960 --> 0:02:53.440 attacks on the American people. The President ran on stopping 0:02:53.520 --> 0:02:58.960 the Fennel poison, stopping international trade unfair practices from stealing 0:02:59.000 --> 0:03:02.280 our factories in jobs, and courts keep getting in the 0:03:02.320 --> 0:03:05.000 way of that. The courts get in the way of 0:03:05.040 --> 0:03:07.560 our trying to deal with the border issues. Now they're 0:03:07.600 --> 0:03:10.200 getting in the way of our trying to deal with 0:03:10.240 --> 0:03:14.720 the phantodol crisis. And that's where we stand here. And 0:03:14.760 --> 0:03:17.400 I think part of what's going to be important about 0:03:17.400 --> 0:03:22.560 this ruin demonstrates yet again to the American people that 0:03:22.680 --> 0:03:26.880 the judiciary in this country has been weaponized in ways 0:03:27.000 --> 0:03:28.760 which are contrary to their interests. 0:03:28.760 --> 0:03:30.200 Well, Pety, he would have had a lot of people 0:03:30.200 --> 0:03:32.640 come on this program and ultimately say, you still have 0:03:32.680 --> 0:03:35.119 tons of options, and you've alluded to one of them. 0:03:35.360 --> 0:03:37.640 You will, of course appeal, but could you describe what 0:03:37.680 --> 0:03:39.840 you might do in the interim the way you might 0:03:39.880 --> 0:03:42.680 pursue your ultimate objective anyway with the tools you have 0:03:42.760 --> 0:03:44.040 still available to you. 0:03:46.160 --> 0:03:51.800 I'm gonna let Jamison Greer, the USTR, inform you on that, 0:03:52.000 --> 0:03:57.200 and you'll be hearing from him soon on that. But look, 0:03:57.480 --> 0:04:00.480 any trade lawyer knows is just a number of different 0:04:00.520 --> 0:04:03.200 options we can take. If you look at the kind 0:04:03.200 --> 0:04:05.800 of things we've already done. It kind of give you 0:04:06.880 --> 0:04:11.000 a roadmap on that. There's all sorts of numbers out there. 0:04:11.040 --> 0:04:14.560 There's one twenty two, there's three ozho one, there's two 0:04:14.600 --> 0:04:18.000 thirty two, there's three three eight, There's all sorts of 0:04:18.040 --> 0:04:21.400 things we can do well within the law. But look, 0:04:21.600 --> 0:04:27.480 we think that what we've done already is perfectly appropriate. 0:04:27.680 --> 0:04:30.760 So that's why the appeal will take case. 0:04:30.839 --> 0:04:33.839 But you know, it's like, interestingly enough, I was scheduled 0:04:33.839 --> 0:04:37.640 to come on the program today to talk about the 0:04:37.680 --> 0:04:40.200 bond market and the Big Beautiful Tax Bill, but there 0:04:40.279 --> 0:04:43.560 is a there is a bridge to that, and if 0:04:43.600 --> 0:04:48.040 I may, we have a situation where the bond market 0:04:48.040 --> 0:04:50.920 we've seen like a fifty to fifty basis point increase 0:04:50.960 --> 0:04:56.080 in yields in the ten year since April second, And 0:04:56.880 --> 0:04:59.760 a lot of the hysteria around the Big Beautiful Tax 0:04:59.760 --> 0:05:05.359 Bill centers on the Congressional Budget Office scoring that bill 0:05:05.400 --> 0:05:07.599 in a way which says there's going to be a 0:05:07.720 --> 0:05:13.560 three point seven trillion dollar addition to America's national debt 0:05:13.600 --> 0:05:15.800 over the next ten years, and so of course you 0:05:15.880 --> 0:05:18.640 got to finance that, and that drives interest rates up 0:05:18.640 --> 0:05:22.760 and heads explode, when in fact, if you do the 0:05:22.800 --> 0:05:27.640 math properly and you look at the history of the 0:05:27.680 --> 0:05:32.320 CBO forecast, you actually see about a five trillion dollar 0:05:32.480 --> 0:05:37.200 swing to a two trillion dollar surplus from the bill. 0:05:37.240 --> 0:05:39.640 And I'd like to get you walk you through the 0:05:39.640 --> 0:05:44.279 math there. It's like the CBO, the Congressional Budget Office 0:05:44.800 --> 0:05:51.400 historically has been very bad at estimating impacts of tax bills. 0:05:51.440 --> 0:05:55.640 In the twenty seventeen tax cut that President Trump did. 0:05:56.400 --> 0:05:58.679 They got that totally wrong. 0:05:58.800 --> 0:06:03.640 They underestimated the GDP growth by a full percentage point. 0:06:03.920 --> 0:06:09.680 And what that does if they make that same mistake here, 0:06:09.800 --> 0:06:12.680 which they have done, will you add that that's about 0:06:12.680 --> 0:06:15.719 two trillion dollars of additional revenue because you got greater 0:06:15.800 --> 0:06:17.040 economic activity. 0:06:17.480 --> 0:06:20.400 And then, Peter, you also have the revenue from the tariffs, 0:06:20.400 --> 0:06:23.000 which I saw your opinion piece in the Hill. 0:06:23.400 --> 0:06:24.440 I just want to get back. 0:06:24.279 --> 0:06:25.600 To the tar I just want to get back to 0:06:25.600 --> 0:06:27.120 the tariff because you don't have that revenue. 0:06:27.200 --> 0:06:29.640 Well that's another two trillion if you. 0:06:29.600 --> 0:06:33.360 Don't have the authority to use it, though, But can 0:06:33.400 --> 0:06:35.680 I just ask you mentioned j Ambassadord Greer. We're going 0:06:35.720 --> 0:06:37.760 to hear from him soon, are we going to hear 0:06:37.760 --> 0:06:41.800 from USTR about the bridge potentially what John was talking about. 0:06:41.880 --> 0:06:44.480 If you can't use AEPA, potentially you're going to come 0:06:44.520 --> 0:06:47.080 out the administration say we're going to use one twenty 0:06:47.080 --> 0:06:48.480 two in the interim. 0:06:49.760 --> 0:06:52.760 Well, the court did in some sense tell us to 0:06:52.839 --> 0:07:01.919 do that, which is interesting. But look, here's the thing, mean, Fennyl, 0:07:02.480 --> 0:07:05.240 I just people need to wrap their heads around the 0:07:05.320 --> 0:07:13.680 fact that every day here in America people die because communists. 0:07:13.800 --> 0:07:19.080 China puts fifty gallon barrel, fifty gallon drums full of 0:07:19.120 --> 0:07:22.600 these chemicals that come over to the Mexican cartels and 0:07:22.680 --> 0:07:26.080 then are made not just into fentanyl. They use the 0:07:26.120 --> 0:07:30.760 fentanyl to spike heroin, to spike meth amphetamines, to spike ecstasy, 0:07:31.040 --> 0:07:34.960 and they're eating putting it in prescription drugs like xanax 0:07:35.040 --> 0:07:38.680 and valium, and people are dying. It's been over a 0:07:38.840 --> 0:07:43.640 million people, a million Americans, and it's an economic emergency 0:07:44.120 --> 0:07:47.080 because a lot of those people are prime age working 0:07:47.160 --> 0:07:51.080 force here in America. So this kind of court ruling 0:07:51.440 --> 0:07:53.160 the judge, I mean, look, the lead. 0:07:53.400 --> 0:07:56.120 Court said, if the ruling said, Peter, and we've been 0:07:56.120 --> 0:07:59.400 talking about this page thirty four to thirty five. They say, basically, 0:07:59.720 --> 0:08:02.400 you're in your right if you use section one twenty two. 0:08:02.560 --> 0:08:04.360 Why didn't you guys do that from the beginning? 0:08:06.800 --> 0:08:09.160 Well, Section one twenty two only gives you one hundred 0:08:09.160 --> 0:08:13.280 and fifty days, So there's your answer right there. 0:08:13.560 --> 0:08:14.080 So are you. 0:08:14.080 --> 0:08:16.160 Section one twenty two if you use this now for 0:08:16.160 --> 0:08:18.200 one hundred years, got to be a bridge to three 0:08:18.320 --> 0:08:20.360 oh one or a bridge to two thirty two. 0:08:20.680 --> 0:08:21.360 What are you thinking? 0:08:21.400 --> 0:08:22.120 More long term? 0:08:22.400 --> 0:08:25.440 You can be the strategist on that, but those are 0:08:25.480 --> 0:08:28.880 the kinds of thoughts. And look, look, if anybody thinks 0:08:28.920 --> 0:08:32.760 this caught the administration by a surprise, think again, okay, 0:08:32.840 --> 0:08:37.960 because you could see in the oral arguments where those 0:08:38.040 --> 0:08:41.440 judges were going and the lead judging this, I mean, 0:08:41.480 --> 0:08:45.120 the problem with that court. It's so such an obscure court, 0:08:45.400 --> 0:08:50.520 but it's consistently been globalist pro importer giving us bad rules. 0:08:50.520 --> 0:08:54.240 The lead judge there ruled against the two thirty two's 0:08:54.760 --> 0:08:59.120 originally and had to get overturned by the appeals court. 0:08:59.240 --> 0:09:04.000 So that gives you an idea of the bias against 0:09:04.040 --> 0:09:07.679 the president's tariff policy right on that court. But I 0:09:08.760 --> 0:09:11.640 think the big picture here is we've got a very 0:09:11.640 --> 0:09:15.120 strong case with AIPA, but the court basically tells us 0:09:15.160 --> 0:09:18.199 if we lose that, we just do some other things. 0:09:18.200 --> 0:09:21.000 So nothing's really changed. I want to say this to 0:09:21.120 --> 0:09:25.400 the world, you're cheating us. We're coming after you deal 0:09:26.240 --> 0:09:29.520 and let's make this right because ultimately what's at stake 0:09:29.559 --> 0:09:33.880 here is the global international environment getting in in a 0:09:33.920 --> 0:09:38.840 way where it's fair to America. And thereby, if it's 0:09:38.880 --> 0:09:42.520 fair to America and we westructure this thing in a way, 0:09:42.840 --> 0:09:46.400 we'll have just more stability in terms of financial flows 0:09:46.440 --> 0:09:47.960 and capital and everything like that. 0:09:48.120 --> 0:09:51.000 Nothing ifietly out of balance. Now we're going to run, 0:09:51.000 --> 0:09:52.480 but it's quite to catch up the sm We look 0:09:52.480 --> 0:09:54.160 forward to singing next step. So just got a tiny 0:09:54.200 --> 0:09:56.719 one thing, you know, a lot of high on the rate. 0:09:56.920 --> 0:09:59.120 She's with us. So right the sty in White House tried, 0:09:59.200 --> 0:10:01.880 it's not is a fit of Peter. Thank you, Sir Dobavarad. 0:10:11.600 --> 0:10:13.640 So here's the laces this morning and versus a waiting 0:10:13.640 --> 0:10:15.600 another read on the state of the labor market with 0:10:15.679 --> 0:10:17.720 initial job less claims you out in just under two 0:10:17.720 --> 0:10:20.839 hours time. But Michael A JP Morgan Asset Management right 0:10:20.880 --> 0:10:23.160 in the following. In the end, it's all about jobs 0:10:23.400 --> 0:10:26.240 and the labor market. With a FED generally looking past 0:10:26.280 --> 0:10:30.320 near term inflation data, the labor data becomes the motivating factor. 0:10:30.440 --> 0:10:32.280 Bob John just now for more, Bob, good morning. 0:10:32.240 --> 0:10:32.720 Good morning. 0:10:32.840 --> 0:10:34.120 See we've got a lot to get through. So let's 0:10:34.160 --> 0:10:35.880 start with growth. Do you think this bond market should 0:10:35.920 --> 0:10:38.280 be pricing in a step down in growth or a 0:10:38.320 --> 0:10:39.280 step up in growth? 0:10:40.040 --> 0:10:42.920 I think probably a step up in growth, and that 0:10:43.080 --> 0:10:46.160 seems to be what they're pricing in today. We were 0:10:46.200 --> 0:10:51.120 looking at effective tariff rates yesterday morning. We're about fifteen 0:10:51.200 --> 0:10:55.520 percent today. When I read Mike symbol of stuff and 0:10:55.760 --> 0:11:00.640 you look at where the courts came in. You assume 0:11:00.720 --> 0:11:04.960 the two thirty two section tariffs go through, you're talking 0:11:05.040 --> 0:11:08.960 about ten percent effective rate. The economy could absorb that. 0:11:09.400 --> 0:11:13.800 And then you've got Congress. You've got the budget Reconciliation package, 0:11:14.120 --> 0:11:17.560 which we estimate adds another three trillion to the deficit 0:11:17.640 --> 0:11:21.440 over the next ten years. So there's an upward impulse 0:11:21.480 --> 0:11:22.600 to growth today. 0:11:22.880 --> 0:11:25.720 Does that make you revise some of your expectations for 0:11:25.760 --> 0:11:28.079 how high yields can go, because what you just expressed 0:11:28.559 --> 0:11:31.080 was resilient growth. The idea that the FED can't cut 0:11:31.160 --> 0:11:33.120 rights as easily if the data doesn't roll over as 0:11:33.200 --> 0:11:35.320 quickly and the idea that supply is going to be 0:11:35.320 --> 0:11:38.319 coming out at a time or inflation could potentially say sticky. 0:11:38.880 --> 0:11:42.400 Yeah. Let's start with the FED. We looked at the 0:11:42.440 --> 0:11:47.359 minutes yesterday our AI program, let's call it. Kelsey determined 0:11:47.400 --> 0:11:53.320 that there were thirteen references to inflation expectations, whereas there 0:11:53.360 --> 0:11:56.880 were three a couple months ago at the March meeting. 0:11:56.960 --> 0:12:00.800 So the FED is clearly focused on inflation and keeping 0:12:00.840 --> 0:12:05.600 inflation expectations anchored. As you think about the way things 0:12:05.920 --> 0:12:10.360 could play out, you're looking at higher prices first. That 0:12:10.559 --> 0:12:15.400 may create demand destruction, which then causes you to raise 0:12:15.440 --> 0:12:18.280 the probability of recession. But you have to get through 0:12:18.280 --> 0:12:21.880 the higher prices and see how businesses and households react 0:12:21.920 --> 0:12:25.120 to that. Now you've got to enter Congress, and Congress 0:12:25.200 --> 0:12:28.400 is trying to push through not only extension of the 0:12:28.440 --> 0:12:32.280 Tax Cutting Jobs Act, but incremental spending, and you have 0:12:32.360 --> 0:12:35.480 to gauge will that offset some of the impact of 0:12:35.559 --> 0:12:38.840 the tariffs, And it looks like it probably will. 0:12:38.960 --> 0:12:41.440 I don't know how Kelsey Baro feels about being sort 0:12:41.440 --> 0:12:44.679 of connected to a chat GPT program. Kelsey, if you're watching, 0:12:44.760 --> 0:12:46.320 please write in and let us know what you think. 0:12:46.559 --> 0:12:50.440 I am curious, though, whether you have upgraded your expectation 0:12:50.520 --> 0:12:52.920 for yields. You didn't answer nex you'd expected yields to 0:12:52.960 --> 0:12:55.520 be going down much more significantly when there was this 0:12:55.640 --> 0:12:59.040 overhag of potentially slower growth, the drag from tariffs, the 0:12:59.120 --> 0:13:00.720 drag from policy uncertainty. 0:13:01.440 --> 0:13:04.760 Yeah, I'd be happy if yields held in Around here. 0:13:05.200 --> 0:13:07.840 I think there is going to be an upward impulse 0:13:07.960 --> 0:13:12.240 because first we're going to see higher prices, and then 0:13:13.040 --> 0:13:16.120 it does feel that businesses and households can absorb that, 0:13:16.200 --> 0:13:19.800 and you're going to get some package out of Congress 0:13:20.120 --> 0:13:23.679 which will help to offset some of that. I would 0:13:23.679 --> 0:13:27.679 say my greatest frustration of the last year is we 0:13:27.800 --> 0:13:30.719 hadn't actually been higher. I would have loved the two 0:13:30.800 --> 0:13:33.400 year to have been anchored around the Fed Funds rate 0:13:33.760 --> 0:13:35.960 four and three eight percent. I would have loved the 0:13:36.040 --> 0:13:39.560 ten year to be at five percent. To me, that 0:13:39.600 --> 0:13:43.079 would have been a relatively normal curve. And yet we 0:13:43.120 --> 0:13:46.120 still have the two year and the five year trading 0:13:46.160 --> 0:13:49.640 below the Fed Funds rate. So it makes it challenging 0:13:49.679 --> 0:13:52.200 for clients who want to get into the bond market. 0:13:52.240 --> 0:13:55.680 I'm still not having a single conversation with clients about 0:13:55.679 --> 0:13:57.800 wanting to get out of the bond market. It's all 0:13:57.840 --> 0:14:00.360 about where do we get into the bomb line market 0:14:00.400 --> 0:14:01.000 and how. 0:14:00.960 --> 0:14:02.840 And it's all about the belly of the curve, which 0:14:02.880 --> 0:14:04.600 is what we saw yesterday in the auction. So it 0:14:04.640 --> 0:14:07.079 went very well yesterday for the five year. Today we've 0:14:07.080 --> 0:14:09.719 got seven year. How closely are you watching to see, 0:14:09.760 --> 0:14:12.320 particularly with longer duration, whether you see a repeat of 0:14:12.320 --> 0:14:14.840 what happened in Japan in the United States with real 0:14:14.880 --> 0:14:17.000 pushback about long term bonds. 0:14:17.800 --> 0:14:21.600 So far, we're not seeing that. We're seeing flows coming 0:14:21.680 --> 0:14:25.520 in to the US bond market firum overseas, and we 0:14:25.560 --> 0:14:29.080 are seeing the long duration buyers, pension funds and insurance 0:14:29.080 --> 0:14:33.200 companies get interested, particularly in longer credit. So we're not 0:14:33.280 --> 0:14:37.960 seeing it, certainly. Secretary Bessett has a couple tools. One 0:14:38.080 --> 0:14:42.480 is to either cancel or dial down the thirty year auctions, 0:14:42.720 --> 0:14:45.120 and that's something we heard out at Japan. It's something 0:14:45.200 --> 0:14:47.800 we saw out of the UK that would certainly help 0:14:47.840 --> 0:14:49.040 to stabilize. 0:14:48.480 --> 0:14:51.320 The cam cell market. Council or dial down you think 0:14:51.400 --> 0:14:52.320 is real potential for that. 0:14:53.000 --> 0:14:55.880 You as God per se percent. 0:14:56.160 --> 0:14:58.360 There's enough in the market right now to force that 0:14:58.440 --> 0:14:59.240 kind of corrective action. 0:14:59.680 --> 0:15:03.640 Treasure are telling us if there's no demand, why am 0:15:03.640 --> 0:15:06.440 I selling? I don't need to do that, And you've 0:15:06.440 --> 0:15:09.640 got a Treasury Secretary who has put out there we're 0:15:09.680 --> 0:15:12.400 focused on the long end of the curve. We're focused 0:15:12.440 --> 0:15:15.040 on the tenure. By the way, I think he's right. 0:15:15.200 --> 0:15:18.240 I think you've got to look at the mortgage market. 0:15:18.320 --> 0:15:21.400 You've got to look at the housing data. That's another 0:15:21.520 --> 0:15:26.240 bit of data we're watching. Housing should be fairly strong 0:15:26.320 --> 0:15:28.880 at this point in the cycle. It's not because of 0:15:28.960 --> 0:15:32.200 housing affordability and mortgage rates are a big part of that. 0:15:32.320 --> 0:15:34.040 So it's got a strong congment to re engage with 0:15:34.080 --> 0:15:35.840 the long end of the curve right now. 0:15:36.880 --> 0:15:40.280 Okay, I quoted Kelseyum, I'm going to quote another one 0:15:40.320 --> 0:15:44.440 I've heard you quote, please Fria Misrae ten and thirty 0:15:44.480 --> 0:15:47.560 year part of the curve our risk assets. I don't 0:15:47.600 --> 0:15:49.440 want to be the one to stand in front as 0:15:49.440 --> 0:15:51.840 a steam roller right now, so I'm just going to 0:15:51.920 --> 0:15:54.800 pack into the intermediate part of the curve. There's lots 0:15:54.800 --> 0:15:59.440 for me to buy there in credit and in securitized 0:15:59.560 --> 0:16:02.600 and in are in bond markets. I'll let somebody else 0:16:02.640 --> 0:16:04.040 help statilize. 0:16:03.480 --> 0:16:05.320 The long end. You think it needs to get worse 0:16:05.360 --> 0:16:06.520 before it gets better. 0:16:06.920 --> 0:16:09.920 I'm concerned that it can. It's going to get worse 0:16:09.960 --> 0:16:10.880 before it gets better. 0:16:10.920 --> 0:16:12.480 Can you describe what worse looks like? 0:16:14.440 --> 0:16:18.600 Yeah, if I start with the ten year, I think 0:16:18.640 --> 0:16:21.920 going to four ninety five, we've been there. The market 0:16:21.960 --> 0:16:26.720 can support that. In my mind, where pain really starts 0:16:26.760 --> 0:16:30.960 to get felt is one hundred basis points shift up 0:16:31.280 --> 0:16:34.440 from where the steady state was. And the steady state's 0:16:34.440 --> 0:16:38.400 been around four forty. So once you break above five percent, 0:16:39.160 --> 0:16:43.200 if we get to five forty, that path between five 0:16:43.280 --> 0:16:47.640 and five forty becomes almost unbearable for bond investors. And 0:16:47.680 --> 0:16:50.960 I've lived through those hundred basis point shocks before. It 0:16:51.040 --> 0:16:53.840 always seems to be one hundred and then things tend 0:16:53.880 --> 0:16:58.040 to stabilize. Where does that put the long end? You know, 0:16:58.160 --> 0:17:00.720 add another twenty five basis points on top of that 0:17:00.800 --> 0:17:03.720 for the thirty year. To me, that would be real pain. 0:17:03.880 --> 0:17:07.760 You need to see policy response, both from the Treasury 0:17:08.200 --> 0:17:09.040 and from the Fed. 0:17:09.200 --> 0:17:12.080 But Michael, this was fantastic, deep, me thoughtful stuff, especial 0:17:12.119 --> 0:17:15.240 thanks to Bob Michael to Councy Barrow to primiser of 0:17:15.359 --> 0:17:30.679 JP Morgan Asset Management, reigniting AI optimism after beating earnings expectations. 0:17:31.920 --> 0:17:34.440 Well, we got a whole bunch of engines firing right now. 0:17:35.240 --> 0:17:39.000 The biggest one, of course, is the reasoning AI inference. 0:17:39.480 --> 0:17:44.320 The demand is just off the charts. You see the 0:17:44.359 --> 0:17:46.480 popularity of all these AI services. 0:17:46.520 --> 0:17:49.240 Now joining us now to discuss. Angelo Zeno of c 0:17:49.560 --> 0:17:52.199 FRA was a by rating and a one hundred and 0:17:52.200 --> 0:17:55.080 sixty five dollars price target on the stock. Great to 0:17:55.119 --> 0:17:57.919 catch up with you, and let's just start with the basics. 0:17:57.920 --> 0:18:00.000 What jumped out for you yesterday afternoon. 0:18:01.119 --> 0:18:03.119 Yeah, I mean I actually thank you guys hit it 0:18:03.160 --> 0:18:05.359 in terms of, you know, the China side of things. 0:18:05.359 --> 0:18:07.440 I think that's that's where all eyes were going into 0:18:07.440 --> 0:18:11.520 the print, and we saw them really kind of navigating 0:18:11.840 --> 0:18:14.680 the uncertainty you know from China right now and not 0:18:14.800 --> 0:18:17.199 eight billion dollars in lost revenue in terms of the 0:18:17.200 --> 0:18:21.560 guidance extremely well. We're not necessarily surprised by the fact 0:18:21.600 --> 0:18:23.520 that they're navigating it really well, because if there was 0:18:23.560 --> 0:18:25.879 a company that could do it right now in video 0:18:25.920 --> 0:18:28.240 would be that company. Because of the immense amount of 0:18:28.280 --> 0:18:30.480 demand that they're seeing right now. And say the other 0:18:30.560 --> 0:18:33.920 thing right now, is this a commentary surrounding these reasoning models, 0:18:33.960 --> 0:18:36.960 right I think you know, back at GtC, A Jensen 0:18:37.200 --> 0:18:39.359 was talking about potentially one hundred x one hundred and 0:18:39.359 --> 0:18:42.880 fifty x, you know, increased need for compute from these 0:18:43.119 --> 0:18:45.520 reasoning models. I think even when as far as going 0:18:45.640 --> 0:18:48.280 somewhere along the lines of a thousand X on the 0:18:48.359 --> 0:18:51.800 fall last night. So you're kind of seeing the fact 0:18:51.880 --> 0:18:54.440 that there is just an enormous amount of demand from 0:18:54.760 --> 0:18:57.640 the shift to AI agents here that we think will 0:18:57.680 --> 0:18:59.960 continue to rank in twenty twenty five and into two 0:19:00.000 --> 0:19:04.040 twenty twenty six. And that is given really in Video 0:19:04.160 --> 0:19:07.200 some really strong momentum and you know, not to mention blackwealth. 0:19:07.600 --> 0:19:09.840 Is this really kind of shift towards you know, the 0:19:09.880 --> 0:19:13.560 infrastructure and the system side of things, completely different from 0:19:13.560 --> 0:19:16.880 what we saw and Hopper and I think the upside 0:19:16.880 --> 0:19:20.280 we're seeing from Blackwealth is stronger than I think most 0:19:20.560 --> 0:19:22.280 analyts here had anticipated. 0:19:22.520 --> 0:19:26.400 There was a lot of positive discussion around in Video's performance. 0:19:26.640 --> 0:19:29.040 There also is this existential threat and you talked about 0:19:29.080 --> 0:19:31.720 it with China, this question of if there isn't sort 0:19:31.760 --> 0:19:35.800 of decoupling and regulatory overhang, Can and Vidia continue and 0:19:35.880 --> 0:19:37.879 maintain its model? In Jenson wank On and said, you 0:19:37.880 --> 0:19:40.520 cannot underestimate the importance of the China market. This is 0:19:40.560 --> 0:19:43.440 a home of the world's largest population of AI researchers. 0:19:43.480 --> 0:19:46.760 The company that wins China wins this war. Do you 0:19:46.760 --> 0:19:49.480 think the market's really complacent about the risk that Video 0:19:49.520 --> 0:19:50.800 gets locked out of that country? 0:19:52.359 --> 0:19:54.399 Well, I think there's two sides to this, right, I mean, 0:19:54.520 --> 0:19:57.760 I think one point here with regards to China, they've 0:19:57.840 --> 0:19:59.959 essentially be rich China in many respects, and I think 0:20:00.119 --> 0:20:02.040 that's the side that the market is taking right now. 0:20:02.280 --> 0:20:04.320 But it's one of those situations where, all right, we 0:20:04.600 --> 0:20:07.000 took the eight billion dollar hit. It was more than 0:20:07.040 --> 0:20:09.840 we thought was going to take place here in the 0:20:09.920 --> 0:20:12.200 July quarter, But we're not going to see another quarter 0:20:12.240 --> 0:20:14.200 where you know, China's going to be a huge negative 0:20:14.200 --> 0:20:17.280 headwind for this company looking ahead. But that said, you 0:20:17.280 --> 0:20:19.280 know the other side of this is when you kind 0:20:19.280 --> 0:20:21.879 of look here two three years down the road, it 0:20:22.000 --> 0:20:24.960 is a huge opportunity. Course if they can't get back 0:20:25.040 --> 0:20:27.760 into China, our belief is that they will be able 0:20:27.760 --> 0:20:29.960 to get back into China at some point in time. 0:20:30.200 --> 0:20:33.720 I think the market also has expectations, just giving the 0:20:33.760 --> 0:20:36.520 move we're seeing here, that eventually in Video will be 0:20:36.560 --> 0:20:38.919 able to find its way back, whether it be you know, 0:20:39.080 --> 0:20:43.800 from you know, some sort of deal that the administration creates, 0:20:43.920 --> 0:20:46.240 or whether it be some sort of you know, maybe 0:20:46.280 --> 0:20:50.080 performance laden type of chip that they can somehow find 0:20:50.080 --> 0:20:54.600 their way through into China, albeit you know, at significantly 0:20:54.680 --> 0:20:58.359 lower revenue potential than what they could have gotten. But nonetheless, 0:20:58.400 --> 0:21:01.000 I think there is you know, belief out there that 0:21:01.200 --> 0:21:05.080 eventually in Nvidia needs to find a way back into China. 0:21:05.160 --> 0:21:09.040 Jensen isn't given giving up on that hope that China 0:21:09.840 --> 0:21:12.280 will be a part of their business in the future. 0:21:12.320 --> 0:21:14.399 So I think that's why the stocket is moving the 0:21:14.400 --> 0:21:15.160 way it is as well. 0:21:15.320 --> 0:21:17.639 Do you think that the ruling that happened overnight really 0:21:17.680 --> 0:21:20.240 built on that belief in market so that Invidio will 0:21:20.240 --> 0:21:21.480 find its way back into China. 0:21:23.119 --> 0:21:23.359 Yeah. 0:21:23.440 --> 0:21:25.760 I mean, listen, I think when you when you look 0:21:25.760 --> 0:21:28.560 at the when you look at just semiconductors in general, 0:21:28.600 --> 0:21:31.679 I mean they're largely exempt from you know, all this 0:21:32.160 --> 0:21:35.240 taraff oriented stuff as well, they do fall under the 0:21:35.680 --> 0:21:39.680 more sectorial semiconductor investigation that we're waiting on right now. 0:21:39.720 --> 0:21:41.440 I think some of the comments that I mean, you 0:21:41.480 --> 0:21:45.600 guys earlier alluded to in terms of you know, Jensen 0:21:45.720 --> 0:21:50.880 making supporting the whole, you know, the the tariff situation, 0:21:51.000 --> 0:21:53.640 I think as it's partly due to the fact that 0:21:54.080 --> 0:21:56.679 he is trying to position himself really well in terms 0:21:56.720 --> 0:21:59.480 of semi conductor manufacturing in the US. Not to mention, 0:21:59.560 --> 0:22:02.560 a lot of users that he's making are coming from Mexico, 0:22:02.880 --> 0:22:06.760 So he's almost well kind of insulated at least for 0:22:06.880 --> 0:22:09.840 now from some of the uncertainty and some of the 0:22:09.840 --> 0:22:12.680 commentary that we've heard overnight or even over the last 0:22:12.800 --> 0:22:16.159 month or two tied to a lot of the country 0:22:16.240 --> 0:22:19.560 specific you know, tariffs that we've heard about. 0:22:19.640 --> 0:22:21.760 We do have the Trump administration, though, moving to restrict 0:22:21.760 --> 0:22:25.080 the sale of chip design software to China, and what 0:22:25.280 --> 0:22:26.879