WEBVTT - Bloomberg Wall Street Week - March 22nd, 2024 0:00:00.240 --> 0:00:02.440 This is Bloomberg Wall Street Week. 0:00:02.480 --> 0:00:04.400 I mean may not have an overall recession, We're having 0:00:04.400 --> 0:00:06.720 a rolling recession. To kind of roll looks pretty strongly. 0:00:06.720 --> 0:00:08.840 It is when it comes to jobs. The financial stories 0:00:08.920 --> 0:00:11.960 that shape our world. Three major regional bank failures send 0:00:12.000 --> 0:00:14.680 shockwaves through the banking system. We're all trying to figure 0:00:14.680 --> 0:00:17.000 out what to make of generative AI. 0:00:16.920 --> 0:00:19.320 Through the eyes of the most influential voices. 0:00:19.440 --> 0:00:22.400 Welcome down, Doctor Paul Krugman, Bryan moynihan, a Bank of America, 0:00:22.560 --> 0:00:25.279 deebro Lair of the Paulson Institute, well Then Hubbard of 0:00:25.280 --> 0:00:26.280 the Columbia Business School. 0:00:26.280 --> 0:00:30.160 Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 0:00:30.320 --> 0:00:34.080 The Fed decides not to decide, Reddit goes public and 0:00:34.159 --> 0:00:37.640 former President Trump faces foreclosure. This is Bloomberg Wall Street Week. 0:00:37.760 --> 0:00:41.720 I'm David Weston. This week, Brian dies on what's really 0:00:41.760 --> 0:00:43.200 going on with electric vehicles? 0:00:43.320 --> 0:00:46.000 I think those headlines would make you more concerned than 0:00:46.000 --> 0:00:48.960 you should be. The demise of electric vehicles has greatly exaggerated. 0:00:49.080 --> 0:00:51.839 And Kristin Roth, the Clark of Barclays, on a comeback 0:00:51.960 --> 0:00:53.200 for tech IPOs. 0:00:53.520 --> 0:00:56.120 Investor appetite is as strong as it's been in a 0:00:56.240 --> 0:01:09.479 very long time for IPOs. 0:01:10.720 --> 0:01:13.200 But we begin with our very special contribut Larry Summers 0:01:13.240 --> 0:01:15.600 of Harvard, as we address what the FED decided is 0:01:15.600 --> 0:01:17.480 a week, what we've heard from JPOM, and also maybe 0:01:17.520 --> 0:01:20.240 a little microeconomics before we're done. So Lari, thanks for 0:01:20.240 --> 0:01:22.119 being back with us. Let's start with the FED. Though 0:01:22.319 --> 0:01:26.480 what we heard, I heard more growth, less inflation, low unemployment. 0:01:26.520 --> 0:01:28.319 That sounds pretty good to me. Is it too good 0:01:28.400 --> 0:01:29.920 to be true? 0:01:30.200 --> 0:01:30.840 I don't know. 0:01:31.040 --> 0:01:35.080 Certainly there's been some encouraging data flow during twenty twenty three, 0:01:35.200 --> 0:01:38.920 though the last two months haven't been quite so encouraging. 0:01:39.480 --> 0:01:42.319 It's great and right to hope for the best, but 0:01:42.880 --> 0:01:47.880 hoping isn't planning, And certainly, from that scenario laid out 0:01:47.920 --> 0:01:50.440 in the dot plots, I think there's more room for 0:01:50.520 --> 0:01:54.760 things to surprise on the bad side than to surprise 0:01:55.160 --> 0:02:00.840 on the better side. We may have the path that's 0:02:00.920 --> 0:02:05.440 described there materialized. It's certainly got to be recognized as 0:02:05.480 --> 0:02:10.760 a very real possibility. My sense is still that the 0:02:10.760 --> 0:02:15.560 Fed is itchy fingers to start cutting rates, and I 0:02:15.600 --> 0:02:21.080 don't fully get it. We've got unemployment, if anything, below 0:02:21.160 --> 0:02:26.720 what they think is full capacity, we've got inflation clearly 0:02:26.800 --> 0:02:31.079 even in their forecast for the next two years above target. 0:02:31.520 --> 0:02:36.839 We've got GDP growth rising, if anything, faster than potential. 0:02:37.320 --> 0:02:41.840 We have financial conditions the holistic measure of monetary policy 0:02:42.360 --> 0:02:45.560 at a very loose level. I don't know why we're 0:02:45.760 --> 0:02:49.120 in such a hurry to be talking about moving to 0:02:49.400 --> 0:02:52.320 moving towards the accelerator. 0:02:53.280 --> 0:02:55.840 So we heard from a chair pal that in fact 0:02:55.880 --> 0:02:58.920 he thinks these conditions are restrictive. Right now they are 0:02:58.960 --> 0:03:01.360 decidedly justking even if we're not seeing a lot of restriction. 0:03:01.880 --> 0:03:04.120 But that depends in part on where the neutral rate is, 0:03:04.160 --> 0:03:05.840 something we've talked about before. 0:03:06.320 --> 0:03:07.720 I still don't get a sense. 0:03:07.480 --> 0:03:09.200 From the FED that they figured out where they think 0:03:09.240 --> 0:03:11.280 the neutralit is, and do they need to know that 0:03:11.360 --> 0:03:13.160 before they can decide where they're going. 0:03:13.840 --> 0:03:16.760 They need to take a view, because if you don't 0:03:16.800 --> 0:03:21.280 know what's neutral, you don't know how expansionary or restrictive 0:03:22.200 --> 0:03:26.280 your being. And I find their view that the ultimate 0:03:26.440 --> 0:03:31.440 neutral rate is two point six to be bizarre. In 0:03:32.400 --> 0:03:37.720 current circumstances. Here's what we have relative to a few 0:03:37.840 --> 0:03:40.720 years ago when they said it was two point five. 0:03:41.440 --> 0:03:45.280 We've got fiscal policy in a much much more expansionary 0:03:45.400 --> 0:03:50.240 place with much higher deficits, much larger role of debt 0:03:50.600 --> 0:03:54.360 that puts pressure on credit markets. We've got a huge 0:03:54.560 --> 0:03:59.120 set of new private sector investments going on with respect 0:03:59.200 --> 0:04:04.600 to green investment in the IRA going on with respect 0:04:04.680 --> 0:04:12.960 to resilience and reducing dependence on single sources. We've got 0:04:13.040 --> 0:04:18.279 a potential huge source of demand for chips and for 0:04:18.600 --> 0:04:24.720 electricity coming out of the AI Revolution. And we've got 0:04:24.760 --> 0:04:29.000 a huge wealth effect as markets in for both housing 0:04:29.040 --> 0:04:32.840 and stocks have run way up for the last few years. 0:04:33.520 --> 0:04:38.440 So with all of those impulses to demand, I cannot 0:04:38.560 --> 0:04:44.280 understand why someone would form the view that the neutral 0:04:44.360 --> 0:04:48.960 rate was essentially the same as they thought it was 0:04:49.880 --> 0:04:53.719 four years ago. And I think the neutral rate is 0:04:53.839 --> 0:04:56.560 far more likely to have a fore handle on it 0:04:56.680 --> 0:04:59.560 right now than it is to have a two handle 0:05:00.600 --> 0:05:03.880 on it. And from that perspective, I'm not at all 0:05:04.040 --> 0:05:09.640 sure how restrictive monetary policy really is, and the proofs 0:05:09.680 --> 0:05:12.960 really in the putting monetary policies by now had a 0:05:13.120 --> 0:05:17.080 very long time for the lags to work through. The 0:05:17.200 --> 0:05:23.640 transmission variables, stock prices, interest rates, long term interest rates, 0:05:24.080 --> 0:05:32.200 credit spreads are flashing green and loose, and the economy 0:05:32.360 --> 0:05:34.480 keeps surprising on the high side. 0:05:35.000 --> 0:05:38.239 So either if you look at the fundamental. 0:05:37.640 --> 0:05:42.360 Determinants of neutral interest rates or you look at how 0:05:42.520 --> 0:05:46.000 fast the economy is growing, seems to me you've got 0:05:46.000 --> 0:05:51.240 to read a high neutral interest rate. And I just 0:05:51.320 --> 0:05:55.160 can't understand why the FED is talking about two point 0:05:55.200 --> 0:05:56.719 six as a best guess. 0:05:57.279 --> 0:05:58.560 I would be the first to. 0:05:58.520 --> 0:06:02.560 Recognize that this is a number that fluctuates, that we 0:06:02.640 --> 0:06:08.520 can't gauge it precisely that economists don't have great models. 0:06:08.560 --> 0:06:10.680 So I'm not saying that I'm. 0:06:10.560 --> 0:06:12.520 Sure that they're wrong. 0:06:12.640 --> 0:06:16.840 I'm not, but I think the challenge in policy making 0:06:17.000 --> 0:06:21.120 is to try to make best estimates where you're equally 0:06:21.279 --> 0:06:23.480 likely to be wrong in both directions. 0:06:23.920 --> 0:06:27.160 Larry accurs me, there are policies going beyond monetary policy 0:06:27.160 --> 0:06:30.160 that could well affect future inflation. Now I'll mention a 0:06:30.200 --> 0:06:33.039 couple of them, trade and tariffs. What are the other 0:06:33.120 --> 0:06:34.839 factors that might be driving inflation. 0:06:35.600 --> 0:06:39.320 Part of the story of the great moderation of low 0:06:39.360 --> 0:06:42.839 inflation for forty years hash to have been the ways 0:06:42.880 --> 0:06:48.640 in which globalization held down prices, flows of capital that 0:06:48.760 --> 0:06:56.480 promoted productivity, enhancing investment flows of workers, that enhanced labor supply, 0:06:57.200 --> 0:07:02.640 lower priced goods that provided competition. The best forms of 0:07:02.720 --> 0:07:07.080 competition we get in the US economy are often from 0:07:07.279 --> 0:07:13.600 imported goods, and so if globalization held prices down, it 0:07:13.680 --> 0:07:18.400 follows the deglobalization will tend to push prices up, which 0:07:18.440 --> 0:07:23.560 will mean for some interval higher rates of inflation. And 0:07:23.760 --> 0:07:31.120 I don't think the prospects of tariffing, creases of reductions 0:07:31.160 --> 0:07:39.080 and immigration, of more restriction on foreign foreign investment and 0:07:39.120 --> 0:07:41.920 what that means for the dollar. I don't think that's 0:07:42.120 --> 0:07:48.800 reflected in consensus inflation views, and so I think that's 0:07:48.840 --> 0:07:53.680 another upside risk to inflation, and frankly, it's one that 0:07:53.720 --> 0:07:59.960 would be substantially exacerbated if the Trump program economic program, 0:08:00.120 --> 0:08:04.120 at least as it's been described in recent months, were 0:08:04.200 --> 0:08:06.120 to be implemented. 0:08:06.520 --> 0:08:08.640 Larry, thank you so much for being with us. As always, 0:08:08.760 --> 0:08:12.720 that's our special contributor to Larry Summers of Harvard. Higher 0:08:12.760 --> 0:08:16.360 interest rates have taken momentum away from tech IPOs, but 0:08:16.440 --> 0:08:18.440 we've read it up this week and asked Sarah on 0:08:18.560 --> 0:08:21.120 Deck twenty twenty four may be the year of the 0:08:21.160 --> 0:08:24.440 comeback for tech companies going public to take us through it. 0:08:24.480 --> 0:08:27.760 We welcome back Kristin Roth to Clark Barclay's global head 0:08:27.760 --> 0:08:30.200 of Technology Investment Banking. So welcome. It's great to have 0:08:30.240 --> 0:08:32.599 you here in person, say San Francisco. Yes, great to 0:08:32.640 --> 0:08:34.080 be here. So give us a sense we do have 0:08:34.080 --> 0:08:36.320 read It and Asteria right right in front of us 0:08:36.360 --> 0:08:39.400 as we speak this week. But are we seeing perhaps 0:08:39.440 --> 0:08:42.400 a break in the log jam in tech? IPOs? 0:08:42.880 --> 0:08:45.520 Investor appetite is as strong as it's been in a 0:08:45.640 --> 0:08:48.560 very long time for IPOs. Part of that is because 0:08:48.840 --> 0:08:51.959 there really is a dearth of growth technology assets in 0:08:52.000 --> 0:08:55.160 the public market that are at scale today. And if 0:08:55.200 --> 0:08:58.280 you look at all of the public tech companies over 0:08:58.400 --> 0:09:01.520 two billion dollar market cap, less than thirty have growth 0:09:01.559 --> 0:09:05.640 rates over thirty percent. So investors are looking for opportunities 0:09:05.679 --> 0:09:07.720 for growth in the IPO market. 0:09:08.000 --> 0:09:08.880 So is there a. 0:09:08.880 --> 0:09:12.040 Profile for the companies they're most likely be successful. Reddit's 0:09:12.120 --> 0:09:14.520 very different from Astera. Those are two very different companies 0:09:14.600 --> 0:09:15.200 right well. 0:09:15.240 --> 0:09:16.880 Scale matters to investors. 0:09:16.920 --> 0:09:19.559 We saw, you know, some of the carnage a little 0:09:19.559 --> 0:09:22.480 bit from the twenty twenty and twenty twenty one IPO 0:09:22.600 --> 0:09:27.840 classes where IPOs were priced at pretty significant premiums to 0:09:28.000 --> 0:09:30.840 where the you know multiples have been on a historical 0:09:30.880 --> 0:09:34.559 basis and then traded down significantly. The ones that had 0:09:35.120 --> 0:09:39.800 the you know, smaller market caps, smaller float were disproportionately impacted. 0:09:39.840 --> 0:09:43.280 And for that reason, you know, the scale really matters 0:09:43.760 --> 0:09:49.240 in terms of revenue scale. The second piece is you know, 0:09:49.360 --> 0:09:52.319 growth rate and the interplay between growth rate and profitability. 0:09:52.760 --> 0:09:55.960 So it's important to be to have kind of a 0:09:56.040 --> 0:09:57.080 balance that works. 0:09:57.320 --> 0:09:57.640 Growth. 0:09:57.679 --> 0:10:00.839 You get paid more for growth, but that's only if 0:10:01.000 --> 0:10:04.439 the unit economics work and there is a either a 0:10:04.520 --> 0:10:07.960 break even or a very strong near term path the profitability. 0:10:08.040 --> 0:10:11.760 You'll get paid more for growth. If the business is 0:10:11.760 --> 0:10:14.680 not growing you know, thirty percent or north of even 0:10:14.720 --> 0:10:21.040 twenty percent, then having very significant margins and visibility and 0:10:21.120 --> 0:10:22.840 durability of those margins. 0:10:22.679 --> 0:10:25.720 Has the definition of significant growth change. I mean, given 0:10:26.200 --> 0:10:28.200 when you see some of like an Nvidia, some of 0:10:28.200 --> 0:10:31.400 these growth stocks in tech have just been really really strong. 0:10:31.679 --> 0:10:34.560 Yeah, so I think for an IPO, I would say 0:10:34.559 --> 0:10:37.880 a growth stock is something north of twenty percent thirty 0:10:37.920 --> 0:10:42.000 percent plus is really very you know, differentiated growth rate. 0:10:42.160 --> 0:10:43.079 But that's how I would. 0:10:42.920 --> 0:10:45.080 Think about it today. What's your sense of the pipeline 0:10:45.080 --> 0:10:48.480 out there for perspective IPOs in the tech era, I will. 0:10:48.280 --> 0:10:51.600 Tell you we're tracking over two hundred companies that we 0:10:51.800 --> 0:10:56.400 really think have a credible exit in the public market 0:10:56.440 --> 0:10:59.200 or entry into the public market. I guess over the 0:10:59.240 --> 0:11:04.000 next two years they could also be sold to strategics 0:11:04.160 --> 0:11:08.480 or to sponsors. But that's kind of the cohort of 0:11:08.559 --> 0:11:12.040 the private companies that were highly focused on for potential 0:11:12.080 --> 0:11:13.400 IPOs over the next two years. 0:11:13.400 --> 0:11:16.400 Structure, we might be looking at two very different revenue models. 0:11:16.559 --> 0:11:19.320 If you have a consumer facing products such as Reddit, 0:11:19.360 --> 0:11:22.560 for example, what the consumer can do, what they can afford, 0:11:22.559 --> 0:11:24.199 how much they spend could really affect it. On the 0:11:24.240 --> 0:11:26.560 other hand, if you're over in the artificial intelligence if 0:11:26.559 --> 0:11:29.400 I can mentioned that term area that's more of a 0:11:29.440 --> 0:11:32.560 business of business and need for semiconductors and things, are 0:11:32.559 --> 0:11:34.120 there two different revenue models here? 0:11:34.400 --> 0:11:37.959 Yeah, I'd say that the I mean investors right now 0:11:38.040 --> 0:11:42.480 are anything that's AI and anything that is security related 0:11:42.559 --> 0:11:46.800 are probably the two areas that have the strongest bid. 0:11:46.920 --> 0:11:49.680 The consumer facing stuff is a little bit more challenged 0:11:50.000 --> 0:11:51.880 in terms of a multiple. You're just not getting the 0:11:51.920 --> 0:11:54.079 same multiple as you get for an enterprise sale that 0:11:54.679 --> 0:11:59.080 has those two kind of end markets AI. We're just 0:11:59.120 --> 0:12:02.360 at the beginning of a decade long you know, shift 0:12:02.480 --> 0:12:06.439 and change to what we can do from a productivity standpoint. 0:12:06.559 --> 0:12:08.880 And so we've seen a lot of the stocks that 0:12:08.920 --> 0:12:12.120 are being you know, that are really being driven by 0:12:12.200 --> 0:12:16.439 the advancements in AI trade up significantly and that will continue. 0:12:16.480 --> 0:12:18.319 I think there are going to be the fits and 0:12:18.360 --> 0:12:20.560 starts and play times where investors think, Okay, this has 0:12:20.559 --> 0:12:22.720 been a little bit overbought take, you know, a little 0:12:22.720 --> 0:12:24.839 bit of profit taking. But I think by and large, 0:12:24.880 --> 0:12:29.560 this is a decade long plus shift. 0:12:29.760 --> 0:12:31.719 Kristin, really great to have you on and particularly here 0:12:31.720 --> 0:12:33.240 in New York. Thank you for coming to New York. 0:12:33.440 --> 0:12:38.080 That is Kristin Roth to Clark of Barclay's. Coming up, 0:12:38.160 --> 0:12:39.920 we go through the week in the Markets with Chris 0:12:39.960 --> 0:12:43.440 Harvey of Wells Fargo. That's next on Wall Street Week 0:12:43.600 --> 0:12:44.400 on Bloomberg. 0:12:45.679 --> 0:12:49.920 This is Bloomberg Wells Street Week with David Weston from 0:12:50.040 --> 0:12:50.960 Bloomberg Radio. 0:12:57.040 --> 0:12:59.559 This is Wall Street Week. I'm David Weston. Market's found 0:12:59.559 --> 0:13:01.600 a lot to like and what the Fed did and 0:13:01.720 --> 0:13:04.000 said this week as the SMP five hundred was up 0:13:04.040 --> 0:13:06.400 another two point three percent to end at fifty two 0:13:06.520 --> 0:13:09.240 thirty four, saying well above the medium projection of the 0:13:09.280 --> 0:13:11.720 Bloomberg ls for a year and number of only fifty 0:13:11.760 --> 0:13:15.640 one hundred. The Nasdaq added two point sixty five percent, 0:13:15.720 --> 0:13:18.760 while the yield on the tenure was down sixteen basis 0:13:18.760 --> 0:13:21.520 points to end the week at four point four point 0:13:21.559 --> 0:13:24.120 two percent. To take us through where we are, welcome 0:13:24.160 --> 0:13:26.840 back now one of the Bloomberg Alves himself, Chris Harvey, 0:13:26.840 --> 0:13:29.840 Wells Fargo's securities equity analysts. Great to have you back, Chris, 0:13:29.880 --> 0:13:32.320 good to be back. So give us your sense of 0:13:32.320 --> 0:13:35.120 how the markets interpreted what they heard from J Powell 0:13:35.200 --> 0:13:35.600 this week. 0:13:35.640 --> 0:13:40.120 Oh, it was game on. So what they heard was, Hey, 0:13:40.160 --> 0:13:44.000 the macro backdrop is hotter than we expected on a 0:13:44.040 --> 0:13:46.480 growth and an inflation side, but we're going to keep 0:13:46.520 --> 0:13:50.319 the same accommodation we had before. So the only thing 0:13:50.360 --> 0:13:52.920 that's going to change are equity prices, and they're going 0:13:52.920 --> 0:13:55.240 to move higher. What that was is to a lot 0:13:55.280 --> 0:13:57.520 of investors, I need to put on I'm not going 0:13:57.600 --> 0:13:59.000 to be penalized for risks, so I'm going to put 0:13:59.040 --> 0:14:01.760 more risk on. I probably won't be penalized for leverage. 0:14:01.760 --> 0:14:04.520 I'm going to put more leverage on and things got 0:14:05.640 --> 0:14:07.520 We had a pretty healthy move, let's just say that. 0:14:07.960 --> 0:14:10.240 So one of the things that I find surprising is 0:14:10.280 --> 0:14:12.120 at the beginning of the year we expected something like 0:14:12.160 --> 0:14:15.200 six countries. We've gone from six to three. I feel 0:14:15.200 --> 0:14:17.360 there may be less than that, and yet the equity 0:14:17.360 --> 0:14:19.840 markets didn't really discount to that. And why is that? 0:14:20.160 --> 0:14:20.240 So? 0:14:21.120 --> 0:14:24.320 I agree with that, and that's something we've been talking about, 0:14:24.360 --> 0:14:27.720 but there's more than one equity market. So higher rates 0:14:27.720 --> 0:14:30.640 did affect smaller caps, it affected value, and it held 0:14:30.640 --> 0:14:32.560 those back. But when you look at the S and 0:14:32.600 --> 0:14:34.920 P five hundred, the S and P five hundred is 0:14:34.920 --> 0:14:38.080 really a growth index, and growth has just been lackluster. 0:14:38.520 --> 0:14:40.640 And the fact that you're actually pulling it back to 0:14:40.760 --> 0:14:44.760 an odd degree actually helps because you're not accelerating the economy. 0:14:44.760 --> 0:14:46.240 You're keeping the economy right where it. 0:14:46.240 --> 0:14:48.200 Is, which is perfect for gross stocks. 0:14:48.480 --> 0:14:50.280 And the last thing I would say is that you 0:14:50.440 --> 0:14:53.640 have this amazing secular growth story in AI that's not 0:14:53.680 --> 0:14:54.600 going anywhere fast. 0:14:54.640 --> 0:14:56.440 Well, that's what exactly what I was going to ask about, 0:14:56.480 --> 0:14:58.840 because it's great we have AI, at least for the moment. 0:14:58.880 --> 0:15:01.560 We hope it's all going to improve out as brilliantly 0:15:01.600 --> 0:15:03.680 as people think it is. But is there a risk 0:15:03.760 --> 0:15:05.600 there in the narrowness of the market because it's so 0:15:05.680 --> 0:15:08.440 tied into high tech and AI. 0:15:09.040 --> 0:15:10.360 There is a risk to it. 0:15:10.480 --> 0:15:10.680 Right. 0:15:10.760 --> 0:15:12.800 We don't like to see the market this narrow, but 0:15:12.840 --> 0:15:15.720 it does make sense. Right when we see a market 0:15:15.760 --> 0:15:18.440 that's a bit broader, typically see different things. We see 0:15:18.440 --> 0:15:21.920 an economy that's moving from contraction to expansion. We're pretty 0:15:22.000 --> 0:15:24.680 much in this what I would call economic malaise where 0:15:24.720 --> 0:15:27.160 things aren't great, but they're not terrible, and you should 0:15:27.200 --> 0:15:30.320 expect a pretty narrow market. And again, the real story here, 0:15:30.320 --> 0:15:32.440 and I don't want to be too repetitive with it, 0:15:32.480 --> 0:15:35.000 is this this secular growth story that's in play, and 0:15:35.040 --> 0:15:37.760 the fact that the FED is adding a significant amount 0:15:37.760 --> 0:15:40.520 of accommodation to a period or a situation that really 0:15:40.520 --> 0:15:41.320 doesn't need it. 0:15:41.360 --> 0:15:45.360 So you like momentum, we do explain that to us. 0:15:45.400 --> 0:15:47.560 What do you like in this picture that really tells 0:15:47.600 --> 0:15:48.840 you momentum is a way to go. 0:15:49.120 --> 0:15:52.840 So it's not what do we really like about it? 0:15:52.920 --> 0:15:55.320 Because the market's so narrow, because there's not a ton 0:15:55.320 --> 0:15:58.640 of opportunities, everyone's chasing the same names, and so what 0:15:58.800 --> 0:16:03.080 happens is you get stocks that do well continue to 0:16:03.120 --> 0:16:05.640 do well, and people say, well, Chris, that's kind of 0:16:05.640 --> 0:16:08.320 a silly way to invest, and it's kind of naive, 0:16:08.360 --> 0:16:10.280 and I understand that. But if you look at the 0:16:10.320 --> 0:16:13.720 fundamentals for the stocks that are doing very well, the fundamentals. 0:16:13.240 --> 0:16:14.520 Are actually quite good. 0:16:14.640 --> 0:16:16.760 And what we keep saying is people are very scared 0:16:16.760 --> 0:16:18.160 about momentum because momentum. 0:16:18.200 --> 0:16:19.080 If you go back to. 0:16:20.880 --> 0:16:24.840 Financial crisis, say March of nine, momentum or momentum factors 0:16:24.840 --> 0:16:27.000 turned on their head and people lost a lot of 0:16:27.000 --> 0:16:30.280 money playing momentum. Same thing with the pandemic. But what 0:16:30.280 --> 0:16:32.440 we're saying right here, right now, a lot of the 0:16:32.520 --> 0:16:35.640 macro factors that would cause a point of inflection just 0:16:35.720 --> 0:16:38.480 aren't there be a credit spreads, be the economy going 0:16:38.520 --> 0:16:42.080 from contraction to expansion, or the fact that the contrarian 0:16:42.160 --> 0:16:44.440 basket or a lot of broken stocks just don't have 0:16:44.600 --> 0:16:46.960 very good valuations and good fundamentals. 0:16:47.120 --> 0:16:49.880 So momentum is good, tell me about valuation, at what 0:16:49.920 --> 0:16:51.920 point are they fully valued? And tie that back in 0:16:51.960 --> 0:16:53.800 if you would to earnings, what we're expecting out of 0:16:53.800 --> 0:16:56.040 earnings is that could take care of the valuation problem. 0:16:56.120 --> 0:16:58.560 So, David, what I would say is that we don't 0:16:58.720 --> 0:17:01.200 have I talk a lot of about valuation, but our 0:17:01.200 --> 0:17:04.280 clients aren't talking about valuation all that much. And I 0:17:04.359 --> 0:17:06.760 understand why we're in a relative We're in a chart 0:17:06.760 --> 0:17:10.560 looks good relative growth type market, and so if growth 0:17:10.600 --> 0:17:12.800 is going higher, you're going to be rewarded by that. 0:17:13.200 --> 0:17:16.480 At some point valuation will matter. But because growth is 0:17:16.520 --> 0:17:19.840 moving so quickly for a select number of stocks, there's 0:17:19.880 --> 0:17:22.440 really just one game in town and that will continue. 0:17:22.080 --> 0:17:22.560 For a while. 0:17:23.280 --> 0:17:25.240 What I think, and what you have to worry about 0:17:25.320 --> 0:17:27.760 with the rotation or brought out in the market is 0:17:27.840 --> 0:17:31.560 will the economy accelerate faster than we expect and that 0:17:31.600 --> 0:17:33.480 could cause a rotation and we just don't see that 0:17:33.560 --> 0:17:34.000 right now. 0:17:34.040 --> 0:17:36.399 One last one with another game in town coming out 0:17:36.400 --> 0:17:38.960 with in November. It's called an election. Do we take 0:17:38.960 --> 0:17:40.600 that into account at all as we take a look 0:17:40.600 --> 0:17:42.040 at investing in the stock market right now? 0:17:42.080 --> 0:17:42.440 We do. 0:17:42.960 --> 0:17:46.679 I don't know how to handicap the presidential election, and 0:17:46.760 --> 0:17:49.080 luckily I don't have to. The real game in town 0:17:49.160 --> 0:17:52.439 here is the Senate. Who wins the Senate, and it 0:17:52.480 --> 0:17:54.680 looks like the GOP has a better than a fifty 0:17:54.720 --> 0:17:57.720 to fifty chance at winning the Senate. Why is this important? 0:17:58.000 --> 0:18:01.280 This is important because this could chase is a regulatory environment. 0:18:02.119 --> 0:18:04.960 The M and A market is improving, and if the 0:18:05.000 --> 0:18:07.680 GOP does take the Senate, we would expect an acceleration 0:18:08.200 --> 0:18:09.880 of the M and A market later on the year 0:18:09.960 --> 0:18:12.320 because of the potential change with regulation. 0:18:12.520 --> 0:18:14.760 So you think the antitrust enforcement policy of the BODOM 0:18:14.800 --> 0:18:16.159 is to have held back some M and A. 0:18:16.240 --> 0:18:19.080 That's part of the reason we've seen is absolutely there's 0:18:19.080 --> 0:18:21.800 not a question. It has absolutely held back some m and. 0:18:21.760 --> 0:18:24.639 A last one taxes because there's a question we're renewing 0:18:24.640 --> 0:18:26.840 the Trump's tax cuts. How important is that in the Senate. 0:18:27.840 --> 0:18:29.840 It's important, but it's not something a lot of people 0:18:29.880 --> 0:18:31.600 are talking to us right now. So I think it's 0:18:31.720 --> 0:18:34.520 more of a twenty five to twenty six issue. It's 0:18:34.600 --> 0:18:36.960 not really a big issue in top of mind for 0:18:37.040 --> 0:18:38.680 many investors at this point in time. 0:18:38.840 --> 0:18:41.080 Infascinating, but you don't want to handicap the election. You sure, 0:18:42.000 --> 0:18:43.359 we can still do that if you want. You can 0:18:43.359 --> 0:18:44.119 tell us who's going to win. 0:18:44.160 --> 0:18:46.919 If you want, I'll just say we'll have we'll have 0:18:46.960 --> 0:18:47.480 a president. 0:18:47.560 --> 0:18:50.280 We'll have just go and vote. I'm going to vote. 0:18:50.600 --> 0:18:52.480 We go, I can handicap. Well, we'll have a president, 0:18:52.480 --> 0:18:54.359 which is good news. Thank you so much, Chris for 0:18:54.359 --> 0:18:57.879 being back with us. Chris Harvey of Wells Fargo. Electric 0:18:58.000 --> 0:19:00.719 vehicles are a policy priority in the United States, in Europe, 0:19:00.720 --> 0:19:03.280 and in China, even as automakers, at least the United 0:19:03.280 --> 0:19:06.639 States trim back their ambitious goals. Brian Deese has been 0:19:06.680 --> 0:19:08.879 at the center of auto policy in the United States, 0:19:08.920 --> 0:19:11.399 first as a member of the Obama administration team that 0:19:11.520 --> 0:19:14.360 rescued the industry during the Great Financial Crisis, and then 0:19:14.400 --> 0:19:17.760 more recently as director of President Biden's National Economic Council. 0:19:17.880 --> 0:19:20.000 And we welcome them down to Wall Street week. Brian, welcome. 0:19:20.000 --> 0:19:20.800 It's good to have you here. 0:19:20.920 --> 0:19:21.720 I'm happy to be here. 0:19:21.960 --> 0:19:23.960 It brings up to speed on electric vehicles, says they 0:19:24.000 --> 0:19:25.760 were all the rage just a couple of years ago, 0:19:25.920 --> 0:19:28.400 and now when you're reading the press, maybe not quite 0:19:28.440 --> 0:19:31.280 so much. Maybe the consumers are not rushing to buy them. 0:19:31.440 --> 0:19:33.840 You see some US automakers cutting back on their goals. 0:19:33.880 --> 0:19:34.480 What's going on? 0:19:34.880 --> 0:19:38.040 Well, I think those headlines would make you more concerned 0:19:38.040 --> 0:19:40.560 than you should be that the demise of electric vehicles 0:19:40.600 --> 0:19:41.640 has greatly exaggerated. 0:19:41.840 --> 0:19:43.200 So let's start with the number. 0:19:43.280 --> 0:19:46.960 So in twenty twenty three, there were about one point 0:19:47.000 --> 0:19:49.760 four million electric vehicles sold in the United States. That 0:19:49.880 --> 0:19:53.119 was almost ten percent of overall sales. That was up 0:19:53.160 --> 0:19:56.320 fifty percent from a year before, so really significant growth. 0:19:56.720 --> 0:19:57.720 First couple of months of. 0:19:57.720 --> 0:20:02.000 This year, EV sales are up about fifteen to twenty percent. 0:20:02.480 --> 0:20:06.120 So the rate of growth is slowing, but I think 0:20:06.119 --> 0:20:09.879 that that's actually reasonablely what you would expect. This is 0:20:09.920 --> 0:20:12.640 a market that as it matures and as it becomes 0:20:12.680 --> 0:20:16.960 a larger share of overall vehicle sales, expecting year on 0:20:17.119 --> 0:20:21.719 year fifty percent growth rates was never realistic, and so 0:20:21.760 --> 0:20:26.200 I think the question is where will this growth trajectory 0:20:26.760 --> 0:20:30.920 lead out, and also when will the appetite for those 0:20:30.960 --> 0:20:35.440 electric feels butt up against consumer concerns and consumer adoption. 0:20:35.720 --> 0:20:37.719 I don't think we're there yet, and so, you know, 0:20:37.760 --> 0:20:40.199 a rate of growth that's twenty percent year over year 0:20:40.240 --> 0:20:42.560 would be pretty good for a lot of industries, but 0:20:42.640 --> 0:20:45.120 we're certainly seeing a slow and compared to the rate 0:20:45.119 --> 0:20:47.000 to pick up in twenty twenty two and twenty twenty three, 0:20:47.000 --> 0:20:48.320 which was really quite extraordinary. 0:20:49.040 --> 0:20:51.920 Overall, the demand for EVS in the United States continues 0:20:51.960 --> 0:20:55.280