1 00:00:02,400 --> 00:00:09,960 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:11,680 --> 00:00:15,480 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,520 --> 00:00:18,720 Speaker 2: with Lisa Bromwitz and Amerie Hordern. Join us each day 4 00:00:18,760 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,440 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,960 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,319 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,960 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:35,880 Speaker 2: Terminal and the Bloomberg Business app. 10 00:00:36,360 --> 00:00:39,000 Speaker 3: Stoxslawer Is Investors wait a crucial week of data, Alistair 11 00:00:39,040 --> 00:00:41,720 Speaker 3: Pinder and the team at HSBC setting their twenty twenty 12 00:00:41,760 --> 00:00:44,240 Speaker 3: six S and P five hundred target at seventy five hundred. 13 00:00:44,320 --> 00:00:44,680 Speaker 4: Writing. 14 00:00:44,920 --> 00:00:48,199 Speaker 3: AI has carried equity markets throughout twenty twenty five. We 15 00:00:48,280 --> 00:00:51,120 Speaker 3: believe it will drive both equities and credit in twenty 16 00:00:51,159 --> 00:00:54,360 Speaker 3: twenty six, though in different ways. Alistair joins us now 17 00:00:54,400 --> 00:00:57,280 Speaker 3: after a refreshing Thanksgiving brae that all of us cannot 18 00:00:57,280 --> 00:00:59,959 Speaker 3: relate to. But I am curious from your perspective going forward, 19 00:01:00,080 --> 00:01:02,280 Speaker 3: how come you think the AI is going to resurrect 20 00:01:02,400 --> 00:01:05,160 Speaker 3: that kind of lead higher given some of the concerns 21 00:01:05,160 --> 00:01:05,959 Speaker 3: that we've seen recently. 22 00:01:06,040 --> 00:01:07,640 Speaker 1: Well, I think if you look at the performance of 23 00:01:07,640 --> 00:01:09,520 Speaker 1: the market this year, it's been driven by the AI 24 00:01:09,600 --> 00:01:14,280 Speaker 1: infrastructure and you know the AI enablers story, you know, 25 00:01:14,319 --> 00:01:16,400 Speaker 1: going into next year, I think the big narrative for 26 00:01:16,520 --> 00:01:19,360 Speaker 1: markets is how companies are going to adopt AI and 27 00:01:19,360 --> 00:01:21,680 Speaker 1: that's going to drive earnings, and so there's loads of 28 00:01:21,720 --> 00:01:23,160 Speaker 1: data showing this. You know. Some of the ones that 29 00:01:23,200 --> 00:01:25,440 Speaker 1: we like to look is the ramp AI index shows 30 00:01:25,440 --> 00:01:28,360 Speaker 1: forty five percent of companies are adopting AI. One of 31 00:01:28,400 --> 00:01:30,280 Speaker 1: the things that we've been doing a lot on is well, 32 00:01:30,360 --> 00:01:32,720 Speaker 1: what is the actual tangible cost savings from this, and 33 00:01:32,800 --> 00:01:35,160 Speaker 1: so far we think that there can be basically one 34 00:01:35,200 --> 00:01:37,800 Speaker 1: percent of cost cuts going into next year. 35 00:01:37,880 --> 00:01:39,399 Speaker 5: That's one hundred and thirty million dollars. 36 00:01:39,560 --> 00:01:41,959 Speaker 1: We think that can basically be saved going into twenty 37 00:01:42,000 --> 00:01:44,600 Speaker 1: twenty six. And there's this amazing narrative going on right 38 00:01:44,600 --> 00:01:47,560 Speaker 1: now in the market where revenue is increasing, you've got 39 00:01:47,640 --> 00:01:50,400 Speaker 1: nine percent growth. Actually at the same time, companies are 40 00:01:50,440 --> 00:01:52,480 Speaker 1: cutting back on labor and so if you look at 41 00:01:52,520 --> 00:01:54,480 Speaker 1: the warm data from the S and P five hundred companies, 42 00:01:54,520 --> 00:01:57,400 Speaker 1: it's been shooting higher. But this is nothing, absolutely nothing 43 00:01:57,400 --> 00:01:59,760 Speaker 1: to do with them warning about the economy. Actually, their 44 00:02:00,240 --> 00:02:03,040 Speaker 1: guidance earning divisions are you know, close to all time highs. 45 00:02:03,280 --> 00:02:05,680 Speaker 1: So this almost for me feels like a Goldielock scenario 46 00:02:06,040 --> 00:02:08,480 Speaker 1: going with the you know, the AI narrative going into 47 00:02:08,520 --> 00:02:10,400 Speaker 1: next year. And my final thing, if you have a 48 00:02:10,400 --> 00:02:12,560 Speaker 1: little bit of labor weakness as a result of AI, 49 00:02:12,800 --> 00:02:15,400 Speaker 1: then going back to your conversation about the FED, might 50 00:02:15,440 --> 00:02:17,520 Speaker 1: I not keep the FED a little bit more dubvish? 51 00:02:17,800 --> 00:02:20,160 Speaker 1: And now I think again can help support the equity 52 00:02:20,200 --> 00:02:21,440 Speaker 1: market value going into next year. 53 00:02:21,440 --> 00:02:24,480 Speaker 3: Goldilocks for the equity market maybe changing economy. 54 00:02:24,120 --> 00:02:25,679 Speaker 4: Which is a sort of key distinction here. 55 00:02:25,720 --> 00:02:27,680 Speaker 3: I do wonder so this is an argument for AI 56 00:02:27,760 --> 00:02:29,720 Speaker 3: being dominant, But that means the rest of the four 57 00:02:29,840 --> 00:02:33,240 Speaker 3: hundred and ninety three outperforming playing catch up with the 58 00:02:33,280 --> 00:02:34,120 Speaker 3: Magnificent seven. 59 00:02:34,200 --> 00:02:34,720 Speaker 2: Is that correct? 60 00:02:34,760 --> 00:02:34,959 Speaker 5: Right? 61 00:02:35,240 --> 00:02:37,640 Speaker 1: And again, one of the biggest things that we've seen 62 00:02:38,200 --> 00:02:40,600 Speaker 1: over the last couple of years is that actually the 63 00:02:40,600 --> 00:02:43,160 Speaker 1: performance of the mag seven has not been driven by valuations. 64 00:02:43,240 --> 00:02:45,359 Speaker 1: It's all been by earnings growth. And now what we're 65 00:02:45,360 --> 00:02:47,840 Speaker 1: seeing is earnings growth going from roughly thirty to forty 66 00:02:47,840 --> 00:02:51,280 Speaker 1: percent on year into next year probably being in high 67 00:02:51,360 --> 00:02:53,560 Speaker 1: teens and the rest of the market actually catching up 68 00:02:53,600 --> 00:02:54,960 Speaker 1: with that, and so this will be one of the 69 00:02:54,960 --> 00:02:57,840 Speaker 1: first years really since twenty twenty one where earnings growth 70 00:02:57,840 --> 00:03:00,600 Speaker 1: between the mag seven and the four nine three are 71 00:03:00,600 --> 00:03:02,560 Speaker 1: going to be somewhat equal, and so I do see 72 00:03:02,639 --> 00:03:04,919 Speaker 1: much more scope for you know, outperformance for the rest 73 00:03:04,960 --> 00:03:05,560 Speaker 1: of the market. 74 00:03:05,600 --> 00:03:08,480 Speaker 6: What for you will be the telltale sign that actually 75 00:03:08,520 --> 00:03:11,680 Speaker 6: adoption is underway significantly in some of these industries. 76 00:03:11,960 --> 00:03:14,240 Speaker 1: Well, I mean, to be honest, I already think that 77 00:03:14,280 --> 00:03:16,160 Speaker 1: we see that. I mean, if you look at the 78 00:03:16,280 --> 00:03:18,920 Speaker 1: data from some of the consumer stocks that are basically 79 00:03:18,960 --> 00:03:22,160 Speaker 1: saying that we're using AI and becoming much more productive 80 00:03:22,200 --> 00:03:24,880 Speaker 1: in terms of you know, targeted ad sales and whatever else. 81 00:03:25,040 --> 00:03:27,240 Speaker 1: A huge number of companies on their earning schools are 82 00:03:27,240 --> 00:03:31,920 Speaker 1: discussing about how they're adopting AI and actually again replacing 83 00:03:31,960 --> 00:03:35,080 Speaker 1: that you know, labor or freezing labor as a result 84 00:03:35,120 --> 00:03:37,880 Speaker 1: of the higher productivity. To me, you know, we're already 85 00:03:37,880 --> 00:03:39,960 Speaker 1: seeing it from companies and the earning scores. Now us 86 00:03:40,000 --> 00:03:42,040 Speaker 1: to talk about the exit market and the economy. What's 87 00:03:42,160 --> 00:03:44,520 Speaker 1: very interesting is that for the broad economy, I don't 88 00:03:44,560 --> 00:03:46,600 Speaker 1: think we are seeing much productive increase. 89 00:03:46,920 --> 00:03:48,480 Speaker 5: It's really the large cap stocks. 90 00:03:48,640 --> 00:03:51,160 Speaker 1: And so again like where does this AI productivity come from? 91 00:03:51,400 --> 00:03:54,080 Speaker 1: It comes from companies with huge amount of employees that 92 00:03:54,200 --> 00:03:55,920 Speaker 1: need to reduce it. If you're a small company and 93 00:03:55,960 --> 00:03:58,080 Speaker 1: you have ten employees, you're not going to really replace 94 00:03:58,080 --> 00:04:00,560 Speaker 1: that with AI. But if you've got hundreds of thousand employees, 95 00:04:00,560 --> 00:04:02,360 Speaker 1: actually that's where the cost benefit comes from. 96 00:04:02,480 --> 00:04:04,800 Speaker 6: You mentioned that this means maybe the FED then has 97 00:04:04,880 --> 00:04:07,400 Speaker 6: to be dubvish. But how could a FED interest rate 98 00:04:07,520 --> 00:04:10,839 Speaker 6: cut cycle solve the problem of AI. 99 00:04:11,280 --> 00:04:13,080 Speaker 1: In terms of I mean, I mean, it doesn't really 100 00:04:13,080 --> 00:04:16,400 Speaker 1: solve the problem of AI at allah labor layer, Yeah exactly, 101 00:04:16,440 --> 00:04:18,320 Speaker 1: I mean, it doesn't solve this really, but it does 102 00:04:18,400 --> 00:04:21,360 Speaker 1: reduce some of the pressure on the labor market in 103 00:04:21,400 --> 00:04:24,400 Speaker 1: the near term, right in terms of reducing uh, you know, 104 00:04:24,520 --> 00:04:27,960 Speaker 1: credit costs, reducing interest rates, reducing some of that burden 105 00:04:28,200 --> 00:04:30,520 Speaker 1: on the low income consumer. And of course it is 106 00:04:30,560 --> 00:04:33,320 Speaker 1: the low income consumer particular which has been hardest hit 107 00:04:33,360 --> 00:04:35,240 Speaker 1: by higher interest rates, given that they have more of 108 00:04:35,279 --> 00:04:38,000 Speaker 1: their debt in sort of floating rate debt products like 109 00:04:38,040 --> 00:04:40,880 Speaker 1: you know, auto loans, credit card loans rather. 110 00:04:40,720 --> 00:04:43,400 Speaker 3: Than mortgages at this point, it sounds like everyone's banking 111 00:04:43,400 --> 00:04:45,760 Speaker 3: on stimulus coming from the fiscal side, with potentially two 112 00:04:45,800 --> 00:04:48,960 Speaker 3: thousand dollars checks or whatever else comes from the tax 113 00:04:49,000 --> 00:04:52,320 Speaker 3: refunds that we get in January. We're expecting monetary stimulus 114 00:04:52,320 --> 00:04:54,480 Speaker 3: when it comes to FED rate cuts, possible use of. 115 00:04:54,400 --> 00:04:55,039 Speaker 4: The balance sheet. 116 00:04:55,560 --> 00:04:57,479 Speaker 3: I just wonder if this makes the US a less 117 00:04:57,480 --> 00:05:00,799 Speaker 3: attractive place and a sort of currency adjust did basis 118 00:05:01,000 --> 00:05:03,679 Speaker 3: for equities based on some of what we're expecting to see. 119 00:05:03,720 --> 00:05:06,440 Speaker 1: Totally on the physical side, totally, I totally agree with that. 120 00:05:06,480 --> 00:05:08,400 Speaker 1: And actually, you know one thing that I think the 121 00:05:08,440 --> 00:05:10,520 Speaker 1: market is missing a little bit is it's not just 122 00:05:10,880 --> 00:05:13,039 Speaker 1: stimulus that's coming out from the US. Actually, you know, 123 00:05:13,120 --> 00:05:15,080 Speaker 1: China has just done a one point for trillion dollar 124 00:05:15,120 --> 00:05:17,640 Speaker 1: debt swap. Germany is coming in with one hundred and 125 00:05:17,680 --> 00:05:20,760 Speaker 1: fifty billion dollar stimulus next year. Japan is seeing up 126 00:05:20,800 --> 00:05:23,960 Speaker 1: one hundred and ten billion dollar stimulus next year. So actually, 127 00:05:23,960 --> 00:05:26,440 Speaker 1: what you could see is that you get a huge 128 00:05:26,480 --> 00:05:29,320 Speaker 1: global wave of stimulus. As you mentioned, Actually the dollar 129 00:05:29,360 --> 00:05:31,360 Speaker 1: starts to weaken and the rest of the world starts 130 00:05:31,360 --> 00:05:34,160 Speaker 1: to looking very attractive, particularly because valuations are at a 131 00:05:34,200 --> 00:05:36,640 Speaker 1: thirty forty percent discount even on the AI place you 132 00:05:36,680 --> 00:05:38,840 Speaker 1: go to Asia, you get on an AI discount there 133 00:05:39,040 --> 00:05:41,400 Speaker 1: in Europe less so, but you still got places like 134 00:05:41,480 --> 00:05:44,640 Speaker 1: Germany which are seeing fourteen fifteen percent earnings growth and 135 00:05:44,839 --> 00:05:47,599 Speaker 1: evaluation of fourteen to fifteen times earnings. To me, that 136 00:05:47,600 --> 00:05:49,200 Speaker 1: seems quite attractive at this point. 137 00:05:49,320 --> 00:05:51,559 Speaker 6: So what equity markets do you like? Germany and Asia 138 00:05:51,640 --> 00:05:52,560 Speaker 6: plus the United States? 139 00:05:52,640 --> 00:05:56,200 Speaker 1: So we are overweight emerging markets that includes Asia Latin. 140 00:05:56,720 --> 00:05:58,960 Speaker 1: I mean, that's all due to you know, huge decreases 141 00:05:58,960 --> 00:06:03,640 Speaker 1: in cost effect in interestraightcuts. But yeah, Europe Germany also 142 00:06:03,720 --> 00:06:06,200 Speaker 1: stand out as our key overweights, and the US were 143 00:06:06,240 --> 00:06:08,480 Speaker 1: neutral one. And a part of that really is because 144 00:06:08,480 --> 00:06:10,359 Speaker 1: if I was going to get my AI kind of 145 00:06:10,400 --> 00:06:12,920 Speaker 1: tech play, I'd actually rather do it with emerging markets 146 00:06:13,160 --> 00:06:15,160 Speaker 1: rather than the US at this point, again, just from 147 00:06:15,160 --> 00:06:16,960 Speaker 1: that valuation perspective. 148 00:06:16,560 --> 00:06:18,400 Speaker 6: Lisa mentioned was coming out of Washing in terms of 149 00:06:18,400 --> 00:06:21,640 Speaker 6: the fiscal stimulus, how are you thinking about the potential 150 00:06:21,839 --> 00:06:25,440 Speaker 6: tariff impact, whether it's the United States or globally because 151 00:06:25,520 --> 00:06:28,200 Speaker 6: we're still waiting on the Supreme Court decision on the 152 00:06:28,240 --> 00:06:29,520 Speaker 6: President's signature tariff. 153 00:06:29,920 --> 00:06:32,039 Speaker 1: Yeah, I mean, I think that is one of the 154 00:06:32,080 --> 00:06:34,560 Speaker 1: aspects that worries me the most going into next year. 155 00:06:34,600 --> 00:06:36,800 Speaker 1: So I mean, you know the three risks obviously AI bubble, 156 00:06:36,960 --> 00:06:39,080 Speaker 1: and you know, the thaid being more hawkish, and we 157 00:06:39,160 --> 00:06:40,960 Speaker 1: kind of discussed that the tariff on and I just 158 00:06:40,960 --> 00:06:43,080 Speaker 1: don't think we've discussed it enough. I think everyone thinks 159 00:06:43,080 --> 00:06:45,800 Speaker 1: that we've moved past tariffs and that's never going to 160 00:06:45,839 --> 00:06:47,800 Speaker 1: come to buy. I do think there's been a lot 161 00:06:47,800 --> 00:06:50,320 Speaker 1: of stocking up on inventory, and I do think we're 162 00:06:50,320 --> 00:06:53,160 Speaker 1: starting to see incremental signs of inflation actually come through. 163 00:06:53,279 --> 00:06:54,920 Speaker 1: We haven't had a lot of inflation data, and I 164 00:06:55,279 --> 00:06:56,760 Speaker 1: suspect actually, when we get it, what we're going to 165 00:06:56,800 --> 00:06:59,360 Speaker 1: find is that actually, particularly in the good side, there's 166 00:06:59,360 --> 00:07:01,560 Speaker 1: been a lot ofishing up there, and so I do 167 00:07:01,640 --> 00:07:04,680 Speaker 1: wonder whether that starts to eat a little bit into margins. 168 00:07:04,720 --> 00:07:06,520 Speaker 1: But this is where I could say AI comes to 169 00:07:06,520 --> 00:07:08,400 Speaker 1: save the day, because on the one hand, if you're 170 00:07:08,400 --> 00:07:11,000 Speaker 1: a company and you're facing higher costs, actually, I think 171 00:07:11,040 --> 00:07:14,239 Speaker 1: the big incentive as a company right now is Okay, 172 00:07:14,240 --> 00:07:16,520 Speaker 1: why don't we adopt AI and try and reduce cost 173 00:07:16,520 --> 00:07:19,160 Speaker 1: savings that way, And so much like COVID was right, 174 00:07:19,240 --> 00:07:22,080 Speaker 1: one of the biggest forces of innovation adoption for companies. 175 00:07:22,200 --> 00:07:24,160 Speaker 1: I actually wonder weather taris is one of the biggest 176 00:07:24,160 --> 00:07:27,280 Speaker 1: forces of adoption of AI this year and next year 177 00:07:27,280 --> 00:07:29,560 Speaker 1: because it forces people to become more productive. 178 00:07:29,680 --> 00:07:32,960 Speaker 3: Does it make you nervous if nobody else is parish? 179 00:07:33,320 --> 00:07:35,400 Speaker 1: I mean I talk to people that are bearsh I 180 00:07:35,400 --> 00:07:36,960 Speaker 1: think you know, I think you know, I think you 181 00:07:37,000 --> 00:07:37,559 Speaker 1: can speak. 182 00:07:37,640 --> 00:07:40,000 Speaker 3: Are they enacting their bearish beliefs or they just sort 183 00:07:40,000 --> 00:07:40,840 Speaker 3: of feel negative? 184 00:07:40,880 --> 00:07:42,520 Speaker 1: I think theo's are two things. I think the cell side, 185 00:07:42,600 --> 00:07:44,880 Speaker 1: you know, including myself, is quite bullish. I think when 186 00:07:44,880 --> 00:07:47,400 Speaker 1: I speak to investors, they're clearly a little bit worried 187 00:07:47,440 --> 00:07:50,120 Speaker 1: about this. I think there's there's definitely you know, every 188 00:07:50,560 --> 00:07:52,840 Speaker 1: room that I walk into it is are in an 189 00:07:52,840 --> 00:07:55,320 Speaker 1: AI bubble? You know, that is the number one concern. 190 00:07:55,680 --> 00:07:59,680 Speaker 1: And then again, actually this conversation about the impact on 191 00:07:59,760 --> 00:08:02,960 Speaker 1: lead the consumer role over more aggresively next year is 192 00:08:02,960 --> 00:08:07,120 Speaker 1: probably the second biggest concern for people's investors at this point. So, 193 00:08:07,400 --> 00:08:09,720 Speaker 1: you know, do I think everyone's bullish? No. I think 194 00:08:09,760 --> 00:08:11,720 Speaker 1: there's actually a huge amount of money on the sidelines. 195 00:08:11,800 --> 00:08:13,320 Speaker 1: And one of the things that I think is again 196 00:08:13,640 --> 00:08:15,200 Speaker 1: really important here is that this three and a half 197 00:08:15,240 --> 00:08:18,880 Speaker 1: trillion dollars of cash sitting in time deposits, just retail 198 00:08:18,920 --> 00:08:21,280 Speaker 1: investors cash three and a half trillion dollars. And as 199 00:08:21,320 --> 00:08:23,360 Speaker 1: the FED cuts interest rates, that's going to unlock a 200 00:08:23,400 --> 00:08:26,360 Speaker 1: lot of that cash which can go into the equity market. Still, so, 201 00:08:26,640 --> 00:08:29,640 Speaker 1: I still think there's a lot more buying opportunities and 202 00:08:29,720 --> 00:08:31,200 Speaker 1: money to go into the equity markets here. 203 00:08:32,280 --> 00:08:34,920 Speaker 2: Stay with US mult Blomberg Surveillance coming. 204 00:08:34,760 --> 00:08:47,199 Speaker 3: Up after this, Ian hearted of Absolute Strategy Research, writing, 205 00:08:47,440 --> 00:08:50,520 Speaker 3: America is in a race to dominate AI. We see 206 00:08:50,520 --> 00:08:53,640 Speaker 3: this as part of a broader objective to bruce productivity keeping. 207 00:08:53,679 --> 00:08:54,559 Speaker 2: The US is one of. 208 00:08:54,480 --> 00:08:55,839 Speaker 4: The world's richest economies. 209 00:08:56,040 --> 00:08:57,840 Speaker 3: Ian joins US now and I think that the most 210 00:08:57,840 --> 00:09:01,480 Speaker 3: controversial question to you is will at work? Is the 211 00:09:01,559 --> 00:09:04,200 Speaker 3: US stilobastion of returns and safety? 212 00:09:04,400 --> 00:09:06,160 Speaker 7: Well, I think you know what we're looking at is 213 00:09:06,200 --> 00:09:09,439 Speaker 7: an environment where President Trump is determined to win the midterms. 214 00:09:09,600 --> 00:09:11,680 Speaker 7: You know they're going to work whatever they can do 215 00:09:11,880 --> 00:09:15,360 Speaker 7: to avoid recession. I think you know, our chief rates 216 00:09:15,400 --> 00:09:19,480 Speaker 7: economist Ebra Harby wrote a great piece about Kevin Hasset, 217 00:09:19,600 --> 00:09:22,560 Speaker 7: you know, looking at his voting profile that potentially would 218 00:09:22,640 --> 00:09:25,480 Speaker 7: lead to FED rates being seventy five basis points lower 219 00:09:25,480 --> 00:09:26,560 Speaker 7: than they might have been otherwise. 220 00:09:26,760 --> 00:09:27,959 Speaker 4: This is a really yeah, and so. 221 00:09:28,040 --> 00:09:30,320 Speaker 7: You know that's one of the things that we're starting 222 00:09:30,360 --> 00:09:32,559 Speaker 7: from definitely recovery rather than recession. 223 00:09:32,559 --> 00:09:33,480 Speaker 5: I think, Lisa, this is. 224 00:09:33,440 --> 00:09:35,520 Speaker 3: The reason why a lot of people are expecting an 225 00:09:35,520 --> 00:09:37,920 Speaker 3: easier monetary policy, the reason why you're seeing that baked 226 00:09:37,920 --> 00:09:40,520 Speaker 3: into FED fund's futures, as well as the sort of 227 00:09:40,559 --> 00:09:43,400 Speaker 3: optimistic tone for the forgotten four hundred and ninety three. 228 00:09:43,920 --> 00:09:45,240 Speaker 3: Do you think that that is the right way of 229 00:09:45,280 --> 00:09:47,679 Speaker 3: looking at this, that either one way or another, the 230 00:09:47,720 --> 00:09:50,040 Speaker 3: rest of the universe, the equal weighted universe, is going 231 00:09:50,040 --> 00:09:50,679 Speaker 3: to outperform. 232 00:09:50,800 --> 00:09:53,959 Speaker 7: Yeah, that we're certainly expecting that broadening out with seeing 233 00:09:54,000 --> 00:09:56,400 Speaker 7: that in some of the data. But the real question 234 00:09:56,559 --> 00:09:59,679 Speaker 7: that investors have to answer for twenty twenty six is 235 00:10:00,000 --> 00:10:03,800 Speaker 7: this is a really unusual balance, really strong earnings growth 236 00:10:03,920 --> 00:10:07,000 Speaker 7: and expectations of rate cuts that isn't going to survive 237 00:10:07,080 --> 00:10:09,360 Speaker 7: probably the whole of the year. So is it going 238 00:10:09,400 --> 00:10:11,480 Speaker 7: to be the growth in the earnings coming down or 239 00:10:11,559 --> 00:10:14,040 Speaker 7: is it going to be those raid expectations starting to 240 00:10:14,040 --> 00:10:17,160 Speaker 7: get raised Even with a more dubbish FED chair. 241 00:10:17,200 --> 00:10:19,880 Speaker 6: Should we say, well, you think that Ai Capex and 242 00:10:20,080 --> 00:10:23,440 Speaker 6: game is coming and you think there are signs of 243 00:10:24,040 --> 00:10:24,440 Speaker 6: a bubble. 244 00:10:24,440 --> 00:10:27,040 Speaker 7: B Absolutely, the AI is a bubble, you know, and 245 00:10:27,120 --> 00:10:30,400 Speaker 7: so let's in terms of AI stocks and that is 246 00:10:30,440 --> 00:10:31,480 Speaker 7: going to be the problem. 247 00:10:31,920 --> 00:10:34,040 Speaker 5: You know that, But why does it stop? 248 00:10:34,280 --> 00:10:36,560 Speaker 7: And I think the thing that we see is that 249 00:10:36,720 --> 00:10:39,839 Speaker 7: the end of bubbles typically comes because cash flows start 250 00:10:39,880 --> 00:10:42,199 Speaker 7: to get strained, and that can be the cash flows 251 00:10:42,240 --> 00:10:45,200 Speaker 7: of the producers themselves. And we're starting to see that 252 00:10:45,200 --> 00:10:47,880 Speaker 7: cash flow headroom coming down. Our Quarantinum have done some 253 00:10:47,920 --> 00:10:50,920 Speaker 7: great work. But where we're going to see that is 254 00:10:50,920 --> 00:10:53,640 Speaker 7: that it won't be capex that gets cut first. It'll 255 00:10:53,640 --> 00:10:56,760 Speaker 7: actually be buybacks, so watch out for those. But historically 256 00:10:56,840 --> 00:10:59,400 Speaker 7: when bubbles burst, it tends to be that the people 257 00:10:59,520 --> 00:11:02,959 Speaker 7: buying goods the services they run out of cash, and 258 00:11:03,080 --> 00:11:05,199 Speaker 7: that's going to be the thing. So, yeah, AI can 259 00:11:05,240 --> 00:11:08,440 Speaker 7: be a structural story, but are those banks really sicklical 260 00:11:09,040 --> 00:11:09,880 Speaker 7: rather than structural? 261 00:11:10,280 --> 00:11:12,280 Speaker 6: Has it all been exacerbated by the fact that we 262 00:11:12,320 --> 00:11:14,400 Speaker 6: see a lot of circular financing in this space. 263 00:11:14,520 --> 00:11:17,920 Speaker 7: This is a very classic bubble experience. So we're seeing 264 00:11:17,920 --> 00:11:21,560 Speaker 7: all the classic signs. We're getting exponential share prices, the 265 00:11:21,720 --> 00:11:24,160 Speaker 7: companies are using those share prices to buy each other. 266 00:11:24,480 --> 00:11:26,800 Speaker 7: They're buying each other's goods, they're doing it on vendor 267 00:11:26,840 --> 00:11:30,000 Speaker 7: financing that circularity that you're talking about, and then this 268 00:11:30,400 --> 00:11:34,320 Speaker 7: capex blowout as the cost of capital comes down for 269 00:11:34,400 --> 00:11:37,680 Speaker 7: these AI companies, everybody tries to crowd into that space. 270 00:11:38,120 --> 00:11:40,719 Speaker 5: That accelerates the build out. But the trouble is. 271 00:11:40,679 --> 00:11:43,120 Speaker 7: The capex goes on like that and if your sales 272 00:11:43,280 --> 00:11:46,160 Speaker 7: just start to tail off, then the margins get hit. 273 00:11:46,440 --> 00:11:48,760 Speaker 7: That's when the challenge is going to come for this market, 274 00:11:48,840 --> 00:11:51,000 Speaker 7: and that's when we get more of a shop. 275 00:11:51,480 --> 00:11:53,120 Speaker 3: And this is coming up a moment where chat ChiPT 276 00:11:53,280 --> 00:11:55,120 Speaker 3: is turning three. This is the reason why a lot 277 00:11:55,160 --> 00:11:57,920 Speaker 3: of people are wondering is on its birthday, Happy birthday, 278 00:11:58,160 --> 00:12:00,000 Speaker 3: good luck trying to survive for the right next time. 279 00:12:00,080 --> 00:12:02,199 Speaker 3: Three years, there's this question of how much death's been 280 00:12:02,200 --> 00:12:05,160 Speaker 3: built out with data centers tied to chat GPT to 281 00:12:05,240 --> 00:12:08,160 Speaker 3: open AI incurring one hundred billion dollars of debt in 282 00:12:08,240 --> 00:12:11,080 Speaker 3: that period. At what point can you see the overall 283 00:12:11,120 --> 00:12:13,960 Speaker 3: market in US economy continue to grind higher If you 284 00:12:14,040 --> 00:12:17,560 Speaker 3: do have a busting of the AI bubble in a significant. 285 00:12:17,000 --> 00:12:19,240 Speaker 7: Way, I think at that point you'll be looking for 286 00:12:19,240 --> 00:12:22,480 Speaker 7: those interest rates to coming down. But historically, when interest 287 00:12:22,559 --> 00:12:25,280 Speaker 7: rates come down because things go wrong, that's bad news 288 00:12:25,280 --> 00:12:27,600 Speaker 7: for equities. And that's the point where you could start 289 00:12:27,640 --> 00:12:29,400 Speaker 7: to see the change, and that's probably going to be 290 00:12:29,480 --> 00:12:32,280 Speaker 7: later in the year rather than earlier in the year. Actually, 291 00:12:32,280 --> 00:12:35,000 Speaker 7: the biggest risk that we see for AI is that 292 00:12:35,160 --> 00:12:39,600 Speaker 7: energy component that you know if you America has decided 293 00:12:39,679 --> 00:12:43,560 Speaker 7: to use fossil fuel hydrocarbon energy, and that's going to 294 00:12:43,600 --> 00:12:47,400 Speaker 7: be expensive, much more expensive than renewables that China is using. 295 00:12:47,640 --> 00:12:51,679 Speaker 7: And it's also there's something called the food water energy nexus. 296 00:12:52,120 --> 00:12:54,360 Speaker 7: If you want to have more energy for AI, that's 297 00:12:54,360 --> 00:12:56,160 Speaker 7: going to cost you something in terms of water, which 298 00:12:56,200 --> 00:12:57,520 Speaker 7: are going to cost you something in food. Do you 299 00:12:57,520 --> 00:12:59,520 Speaker 7: want to faster search engine or do you want to 300 00:12:59,559 --> 00:13:02,040 Speaker 7: still get you the food on you play? Those are 301 00:13:02,080 --> 00:13:04,520 Speaker 7: the kind of decisions that we're going to see study 302 00:13:04,600 --> 00:13:06,120 Speaker 7: to come to the fore as we see more of 303 00:13:06,160 --> 00:13:07,000 Speaker 7: these issues raised. 304 00:13:07,000 --> 00:13:09,079 Speaker 3: I think, Lisa think it's a great question at this point. 305 00:13:09,120 --> 00:13:10,719 Speaker 3: I think some people, after spending all the time on 306 00:13:10,760 --> 00:13:13,040 Speaker 3: the phone might choose their phones. I am curious from 307 00:13:13,040 --> 00:13:16,560 Speaker 3: your perspective going forward, if this is the little landscape, 308 00:13:16,720 --> 00:13:19,320 Speaker 3: do you think that the chance of a negative return 309 00:13:19,520 --> 00:13:21,520 Speaker 3: on the S and P five hundred than Nasdaq next 310 00:13:21,559 --> 00:13:25,079 Speaker 3: year and a more negative economic outlook in the United 311 00:13:25,120 --> 00:13:26,319 Speaker 3: States looks. 312 00:13:26,040 --> 00:13:26,920 Speaker 4: More likely because that. 313 00:13:26,920 --> 00:13:28,199 Speaker 5: Seems to be what you're describing. 314 00:13:28,400 --> 00:13:30,880 Speaker 7: I think when we go into twenty twenty seven, then 315 00:13:30,920 --> 00:13:33,040 Speaker 7: it gets much more cloudy. You know, you have to 316 00:13:33,080 --> 00:13:36,200 Speaker 7: take that decision about lower rates, a sorry, higher rates, 317 00:13:36,360 --> 00:13:40,600 Speaker 7: or lower earnings. The big thing that we can see 318 00:13:40,920 --> 00:13:44,160 Speaker 7: is that short term, these markets are being driven by momentum, 319 00:13:44,160 --> 00:13:47,320 Speaker 7: they're being driven by liquidity, they're being driven by algorithmic trading. 320 00:13:48,080 --> 00:13:50,600 Speaker 7: Longer term, what we know is that valuations matter, and 321 00:13:50,679 --> 00:13:53,960 Speaker 7: so we just published report recently about the Lost decade 322 00:13:54,120 --> 00:13:57,559 Speaker 7: for investors. If you are really investing for the long run, 323 00:13:57,800 --> 00:14:01,720 Speaker 7: your long run earning equity returns probably about three percent 324 00:14:01,800 --> 00:14:03,679 Speaker 7: over the next decade. That means you're going to get 325 00:14:03,720 --> 00:14:07,080 Speaker 7: most of your returns from income, not from growth here 326 00:14:07,840 --> 00:14:10,680 Speaker 7: and that is going to be the biggest challenge for investors. 327 00:14:10,840 --> 00:14:14,680 Speaker 7: So recognize this as a trading market, a momentum market, 328 00:14:15,000 --> 00:14:18,360 Speaker 7: and AI is a big part of that. Investing for 329 00:14:18,400 --> 00:14:21,400 Speaker 7: the long run, that's a difficult game. Let's go back 330 00:14:21,440 --> 00:14:24,480 Speaker 7: to two thousand. It was the digital age. We're living 331 00:14:24,520 --> 00:14:27,280 Speaker 7: that digital age today. The big players today are the 332 00:14:27,280 --> 00:14:32,320 Speaker 7: big players that they were there, Microsoft, Oracle, Apple, all 333 00:14:32,360 --> 00:14:35,720 Speaker 7: of those companies lost between sixty five and ninety seven 334 00:14:35,800 --> 00:14:38,960 Speaker 7: percent of their value their peak value and took between 335 00:14:39,000 --> 00:14:42,400 Speaker 7: five and thirteen years to regain that value. 336 00:14:43,360 --> 00:14:47,920 Speaker 5: Digital it was the structural story. AI is a structural story. 337 00:14:48,120 --> 00:14:50,440 Speaker 7: But there's the right price to pay for everything in 338 00:14:50,440 --> 00:14:51,320 Speaker 7: the equity market. 339 00:14:51,440 --> 00:14:53,440 Speaker 6: Could put two of your thoughts together, that the Trump 340 00:14:53,440 --> 00:14:55,520 Speaker 6: administration stock and want to see your recession before the 341 00:14:55,520 --> 00:14:58,480 Speaker 6: midterm elections, and this idea that you think the AI 342 00:14:58,720 --> 00:15:02,320 Speaker 6: story is start to fade. How does the Trump administration 343 00:15:02,440 --> 00:15:05,040 Speaker 6: make sure that the AI story does not fade before 344 00:15:05,040 --> 00:15:07,680 Speaker 6: the midterm elections given how much of the equity market 345 00:15:07,720 --> 00:15:08,480 Speaker 6: is propped up by it. 346 00:15:08,560 --> 00:15:10,800 Speaker 7: So I think you've got two leavers that you can 347 00:15:10,920 --> 00:15:13,800 Speaker 7: or a couple of levers that they can operate through. 348 00:15:14,080 --> 00:15:17,160 Speaker 7: First of all, Secretary vest And made it very clear 349 00:15:17,200 --> 00:15:19,760 Speaker 7: that he's very, very keen to keep rates as well 350 00:15:19,800 --> 00:15:21,880 Speaker 7: as they possibly can. You know, so, whether that's the 351 00:15:21,920 --> 00:15:24,440 Speaker 7: new FED chair, whether it's using stable coin to try 352 00:15:24,480 --> 00:15:29,720 Speaker 7: and inflate demand for bills or redistribute the demand for bills, 353 00:15:30,240 --> 00:15:32,600 Speaker 7: then that will be one mechanism. What they have to 354 00:15:32,600 --> 00:15:37,320 Speaker 7: do is to reinflate assets across the economy. The household 355 00:15:37,320 --> 00:15:39,840 Speaker 7: sector needs to take on leverage, the corporate sector needs 356 00:15:39,840 --> 00:15:42,160 Speaker 7: to be encouraged to take on leverage. That's the way 357 00:15:42,160 --> 00:15:44,600 Speaker 7: you get the debt back under control. So what does 358 00:15:44,600 --> 00:15:47,160 Speaker 7: that mean. They're going to be pumping the housing market. 359 00:15:47,360 --> 00:15:50,160 Speaker 7: They're going to be trying to unlock There's thirty six 360 00:15:50,280 --> 00:15:55,240 Speaker 7: trillion dollars of positive equity in houses that can't be 361 00:15:55,320 --> 00:15:58,560 Speaker 7: accessed at the current time. Assumable mortgage is something like that. 362 00:15:58,720 --> 00:16:01,760 Speaker 7: So some kind of innovation, privatization of Fanny and Freddie. 363 00:16:01,840 --> 00:16:03,480 Speaker 7: Those are the kind of things I think we'll see 364 00:16:03,520 --> 00:16:05,760 Speaker 7: up open up. The other thing is crypto. You know, 365 00:16:05,840 --> 00:16:09,880 Speaker 7: they will continue this willingness to lend against crypto to 366 00:16:10,320 --> 00:16:16,400 Speaker 7: keep the economy going. And you know, however they manage that, 367 00:16:17,840 --> 00:16:21,080 Speaker 7: then we will see stay. 368 00:16:20,800 --> 00:16:24,040 Speaker 2: With us mult Bloomberg surveillance coming up after this. 369 00:16:32,840 --> 00:16:35,760 Speaker 3: Private credit concerns continuing to weigh on investors, even as 370 00:16:35,840 --> 00:16:39,040 Speaker 3: losses from defaults are staying low. Amanda Linum of Blackrock 371 00:16:39,200 --> 00:16:41,600 Speaker 3: writing this, we believe the peak and defaults in the 372 00:16:41,600 --> 00:16:45,240 Speaker 3: public credit market is behind us. Amanda joins us. Now, Amanda, 373 00:16:45,240 --> 00:16:46,560 Speaker 3: thank you so much for being with us. Thank you 374 00:16:46,560 --> 00:16:48,600 Speaker 3: for having me. This is the big question, right, how 375 00:16:48,720 --> 00:16:51,600 Speaker 3: much are people pricing to perfection credit at a time 376 00:16:51,680 --> 00:16:55,240 Speaker 3: when potentially defaults are going to inflect upward. There's been 377 00:16:55,240 --> 00:16:57,160 Speaker 3: a lot of issuance in the tech space, and there's 378 00:16:57,200 --> 00:17:00,640 Speaker 3: a feeling that private credit has gotten a little bit heady. 379 00:17:00,960 --> 00:17:03,000 Speaker 8: Okay, So I think there are a couple things to note. 380 00:17:03,040 --> 00:17:05,919 Speaker 8: One is we often get asked in the corporate default 381 00:17:05,960 --> 00:17:09,000 Speaker 8: market or corporate credit market when the peak in defaults 382 00:17:09,040 --> 00:17:11,480 Speaker 8: is actually going to arrive. And what we point investors 383 00:17:11,480 --> 00:17:13,440 Speaker 8: too is the data that actually shows. 384 00:17:13,280 --> 00:17:14,240 Speaker 4: In the leverage loan market. 385 00:17:14,320 --> 00:17:17,680 Speaker 8: For example, defaults peaked in November of twenty twenty four 386 00:17:17,760 --> 00:17:20,240 Speaker 8: at seven point seven percent, which is actually a fairly 387 00:17:20,359 --> 00:17:24,080 Speaker 8: high number. That's using Moody's data issuer weighted trailing twelve months. 388 00:17:24,359 --> 00:17:26,719 Speaker 8: But the point is is that we think the peak 389 00:17:26,800 --> 00:17:29,120 Speaker 8: in trade policy uncertainty is likely behind us. 390 00:17:29,359 --> 00:17:32,080 Speaker 4: We think the peak in growth concerns. 391 00:17:31,680 --> 00:17:34,440 Speaker 8: Is behind us, and we think the peak in debt 392 00:17:34,520 --> 00:17:37,280 Speaker 8: service costs headwinds from higher interest rates is behind us. 393 00:17:37,359 --> 00:17:39,439 Speaker 8: So when you put those three things together, coupled with 394 00:17:39,520 --> 00:17:42,240 Speaker 8: a good enough growth BACKDRUP in twenty twenty six, it's 395 00:17:42,280 --> 00:17:45,560 Speaker 8: hard for us to envision a new peak in corporate 396 00:17:45,600 --> 00:17:48,200 Speaker 8: credit defaults, and again keeping in mind that we've already 397 00:17:48,200 --> 00:17:51,439 Speaker 8: had kind of this flush in twenty twenty four because 398 00:17:51,480 --> 00:17:54,080 Speaker 8: of the high borrowing cost. I think, coupled with that, 399 00:17:54,160 --> 00:17:56,760 Speaker 8: our review for corporate credit, both liquid and private, is 400 00:17:56,760 --> 00:18:00,480 Speaker 8: one of dispersion, but not widespread market disruption, and I 401 00:18:00,520 --> 00:18:02,240 Speaker 8: think that's really the key point to keep in mind. 402 00:18:02,320 --> 00:18:04,840 Speaker 3: So a positive outlook, a constructive outlook, as long as 403 00:18:04,880 --> 00:18:08,000 Speaker 3: you're careful and you don't get some of the bad stuff. 404 00:18:08,119 --> 00:18:10,960 Speaker 3: A real question though about just the spreads are pretty tight, 405 00:18:11,119 --> 00:18:13,560 Speaker 3: but you have had a pretty loose market, and there 406 00:18:13,640 --> 00:18:16,800 Speaker 3: is a feeling that maybe the appetite is waning for 407 00:18:16,880 --> 00:18:19,040 Speaker 3: some of the tech related debt in a sense that 408 00:18:19,160 --> 00:18:21,320 Speaker 3: maybe things have gotten gone a little bit too far 409 00:18:21,359 --> 00:18:21,760 Speaker 3: too fast. 410 00:18:21,920 --> 00:18:22,680 Speaker 4: It's a great point. 411 00:18:22,960 --> 00:18:25,200 Speaker 8: Our view on credit is that if you're owning credit, 412 00:18:25,200 --> 00:18:28,400 Speaker 8: you should be owning credit for income and yield, not 413 00:18:28,480 --> 00:18:31,719 Speaker 8: necessarily because there's room for spreads to move materially tighter, 414 00:18:31,800 --> 00:18:34,359 Speaker 8: and actually not because we think intermediate or long end 415 00:18:34,440 --> 00:18:35,359 Speaker 8: rates are going lower. 416 00:18:35,840 --> 00:18:37,720 Speaker 4: So that's really the view that's. 417 00:18:37,560 --> 00:18:40,080 Speaker 8: A different way of thinking about credit versus past regimes 418 00:18:40,080 --> 00:18:42,240 Speaker 8: when you had kind of a total return boost from 419 00:18:42,280 --> 00:18:44,760 Speaker 8: tighter spreads and lower rates. It's really that income component. 420 00:18:45,040 --> 00:18:47,080 Speaker 8: I would say to your second point part of your question, 421 00:18:47,119 --> 00:18:49,920 Speaker 8: we're not really seeing on the ground that appetite is 422 00:18:50,000 --> 00:18:52,639 Speaker 8: waning to a large degree in credit. In fact, a 423 00:18:52,680 --> 00:18:55,040 Speaker 8: lot of these episodes of widening, and by the way, 424 00:18:55,080 --> 00:18:57,640 Speaker 8: we think episodic volatility is a feature, not a bug 425 00:18:57,680 --> 00:19:00,359 Speaker 8: of this market, but those periods of episotic widening, they're 426 00:19:00,359 --> 00:19:03,320 Speaker 8: getting bought and so we're high. Old spreads are actually 427 00:19:03,400 --> 00:19:06,479 Speaker 8: back below two seventy five using your Bloomberg index. So 428 00:19:07,000 --> 00:19:09,520 Speaker 8: it's really to us, I think pretty evident that there 429 00:19:09,560 --> 00:19:11,560 Speaker 8: is a fair amount of capital on the sidelines. It's 430 00:19:11,640 --> 00:19:14,960 Speaker 8: income and yield based. There is demand, and I think 431 00:19:15,000 --> 00:19:18,040 Speaker 8: wild spreads are tight. Our view is that the bar 432 00:19:18,280 --> 00:19:20,960 Speaker 8: for a sustained sell off in credit spreads is. 433 00:19:20,920 --> 00:19:21,879 Speaker 4: Also quite high. 434 00:19:22,040 --> 00:19:24,280 Speaker 8: To get that, you would really need a severe deterioration 435 00:19:24,320 --> 00:19:26,359 Speaker 8: in the growth backdrop, and we're really not seeing that, 436 00:19:26,480 --> 00:19:28,400 Speaker 8: which goes back to this point of there's a lot 437 00:19:28,440 --> 00:19:31,520 Speaker 8: of dispersion. There will be winners and losers, not every 438 00:19:31,560 --> 00:19:33,840 Speaker 8: part of the credit market is keeping paced with this tightening, 439 00:19:33,840 --> 00:19:36,560 Speaker 8: but we don't see an environment of widespread market disruption 440 00:19:36,760 --> 00:19:37,359 Speaker 8: when you look. 441 00:19:37,200 --> 00:19:40,000 Speaker 6: At the uncertainty though you named policy like tariffs and 442 00:19:40,000 --> 00:19:41,399 Speaker 6: certainty being one of them that you feel like you 443 00:19:41,440 --> 00:19:43,680 Speaker 6: are past. Does it bother you that we still don't 444 00:19:43,680 --> 00:19:45,919 Speaker 6: have a decision from the Supreme Court on AEPA. 445 00:19:46,080 --> 00:19:49,240 Speaker 8: I think our view is that if the Supreme Court 446 00:19:49,240 --> 00:19:52,199 Speaker 8: does strike down the IEPA tariffs, that the administration has 447 00:19:52,240 --> 00:19:54,560 Speaker 8: been pretty clear that they have other tools in their toolkits, 448 00:19:54,560 --> 00:19:57,320 Speaker 8: such as sector specific tariffs. So our view is basically 449 00:19:57,359 --> 00:19:59,960 Speaker 8: that tariffs and in this regime are likely to remain 450 00:20:00,520 --> 00:20:01,840 Speaker 8: in place in some form. 451 00:20:01,960 --> 00:20:04,720 Speaker 4: The key question is are corporates adapting to that? 452 00:20:05,160 --> 00:20:07,520 Speaker 8: And actually what we see in the margin perspective is 453 00:20:07,520 --> 00:20:11,240 Speaker 8: that actually margins are holding in relatively well and corporates 454 00:20:11,240 --> 00:20:14,160 Speaker 8: have been forced to find other ways to protect their 455 00:20:14,160 --> 00:20:17,760 Speaker 8: bottom line, whether that's through operational efficiencies that were originally 456 00:20:17,760 --> 00:20:19,560 Speaker 8: supposed to take place over a couple of years, maybe 457 00:20:19,560 --> 00:20:23,280 Speaker 8: they're front loaded, changing product mix, eliminating some skws. So 458 00:20:23,320 --> 00:20:25,639 Speaker 8: it's really a bed on the management teams to figure 459 00:20:25,680 --> 00:20:28,560 Speaker 8: this out. Just like during the pandemic, the trend of 460 00:20:28,600 --> 00:20:30,960 Speaker 8: corporate resilience was actually much more pronounced than I think 461 00:20:31,000 --> 00:20:32,439 Speaker 8: many market participants feared. 462 00:20:33,000 --> 00:20:35,720 Speaker 3: There's a physical side of this, and the administration side 463 00:20:35,720 --> 00:20:37,240 Speaker 3: of this, and then there's the monetary side of this. 464 00:20:37,320 --> 00:20:39,639 Speaker 3: And we've been talking about the expected rates coming this 465 00:20:39,760 --> 00:20:41,720 Speaker 3: month as well as potentially next year, and you said 466 00:20:41,720 --> 00:20:43,879 Speaker 3: that you do think that some of the peak rates 467 00:20:43,880 --> 00:20:46,960 Speaker 3: and peak uncertainty around that has faded. At what point 468 00:20:47,119 --> 00:20:50,760 Speaker 3: is that sort of a necessary ingredient for your constructive 469 00:20:50,800 --> 00:20:52,080 Speaker 3: outlook on credit next year? 470 00:20:52,160 --> 00:20:52,360 Speaker 4: Sure? 471 00:20:52,400 --> 00:20:55,080 Speaker 8: So, I think our view on the monetary policy path 472 00:20:55,119 --> 00:20:57,920 Speaker 8: from here is that there's probably one or two more 473 00:20:58,000 --> 00:21:00,520 Speaker 8: rate cuts in the pipeline, but as we get closer 474 00:21:00,520 --> 00:21:03,080 Speaker 8: to neutral, and Shapal has said we're probably already at 475 00:21:03,080 --> 00:21:05,560 Speaker 8: the high end of some estimates of neutral, that will 476 00:21:05,600 --> 00:21:08,040 Speaker 8: become a more delicate balance between their dual mandate. And so, 477 00:21:08,359 --> 00:21:11,000 Speaker 8: really what we've been emphasizing is the depth and the 478 00:21:11,119 --> 00:21:13,000 Speaker 8: drivers of this rate cutting cycle. 479 00:21:12,760 --> 00:21:14,919 Speaker 4: Are far more important than the timing of this. 480 00:21:15,280 --> 00:21:17,679 Speaker 8: And if the drivers of the rate cutting cycle are 481 00:21:17,760 --> 00:21:20,680 Speaker 8: driven by a significant deterioration in the labor market, that's 482 00:21:20,680 --> 00:21:23,000 Speaker 8: not a great outcome for credit. By contrast, if the 483 00:21:23,080 --> 00:21:26,480 Speaker 8: drivers of the rate cutting cycle are ongoing improvement and inflation, 484 00:21:26,640 --> 00:21:29,240 Speaker 8: then that's a more benign outcome for credit. That said, 485 00:21:29,359 --> 00:21:32,400 Speaker 8: it's hard for us to see rates going below neutral. 486 00:21:32,560 --> 00:21:36,200 Speaker 8: We're expecting a normalization of monetary policy, not a sharp easing. 487 00:21:36,359 --> 00:21:39,920 Speaker 8: So I think that income play on credit remains intact 488 00:21:39,960 --> 00:21:42,040 Speaker 8: to a certain degree. It's moderated, of course, from the 489 00:21:42,080 --> 00:21:44,240 Speaker 8: peak as rates have come down, but again that's a 490 00:21:44,240 --> 00:21:47,440 Speaker 8: double edged sword. The yield backdrop for investors has moderated, 491 00:21:47,480 --> 00:21:49,920 Speaker 8: but so too there's been some relief and debt servicing 492 00:21:49,960 --> 00:21:51,560 Speaker 8: costs for corporate borrowers. 493 00:21:51,240 --> 00:21:52,000 Speaker 4: Which is important. 494 00:21:52,160 --> 00:21:54,960 Speaker 3: You're talking about being selective, and I do wonder, happy birthday, 495 00:21:55,000 --> 00:21:58,360 Speaker 3: chatchybt third birthday. We should just touch on how much 496 00:21:58,400 --> 00:22:00,919 Speaker 3: debt has been issued from the tech giants. We have 497 00:22:00,920 --> 00:22:04,280 Speaker 3: seen one hundred billion dollars of debt tied to open 498 00:22:04,359 --> 00:22:07,640 Speaker 3: AI and data centers that do provide services to them 499 00:22:07,960 --> 00:22:09,399 Speaker 3: over the past number of months. 500 00:22:09,400 --> 00:22:10,959 Speaker 4: I just wonder, does that make you nervous? 501 00:22:11,000 --> 00:22:12,679 Speaker 3: Does that make you want to stay away from that 502 00:22:12,720 --> 00:22:16,320 Speaker 3: debt as a potential pothole in otherwise pretty bright backdrop. 503 00:22:16,400 --> 00:22:17,800 Speaker 8: So I think we view this as a bit of 504 00:22:17,800 --> 00:22:20,600 Speaker 8: a regime shift in terms of the leadership of issuance 505 00:22:20,640 --> 00:22:24,160 Speaker 8: at the sector level. As you noted, technology issuance actually 506 00:22:24,520 --> 00:22:27,679 Speaker 8: months ago outpaced all other full years on record in 507 00:22:27,720 --> 00:22:29,760 Speaker 8: the USIG market. So it's been kind of a real 508 00:22:29,760 --> 00:22:32,680 Speaker 8: paradigm shift in the way that the market is absorbing 509 00:22:32,720 --> 00:22:34,879 Speaker 8: tech issuance. We think there's a lot more room for 510 00:22:34,960 --> 00:22:37,439 Speaker 8: this to play out. Actually, if you just look at 511 00:22:37,440 --> 00:22:40,840 Speaker 8: a very modest estimate of increasing gross leverage by half 512 00:22:40,840 --> 00:22:44,320 Speaker 8: a turn for the mag seven X Tesla, so excluding autos, 513 00:22:44,400 --> 00:22:47,199 Speaker 8: there's hundreds of billions of debt capacity that could be added. 514 00:22:47,280 --> 00:22:49,399 Speaker 8: So that's a large amount of debt actually upwards a 515 00:22:49,400 --> 00:22:52,200 Speaker 8: four hundred billion, and again a modest tweak and leverage. 516 00:22:52,240 --> 00:22:54,520 Speaker 8: We don't expect all of that to be used immediately. 517 00:22:54,600 --> 00:22:58,040 Speaker 8: We think more likely it will be gradual over time. 518 00:22:58,560 --> 00:23:01,200 Speaker 8: But I think the market is adapting to a realization 519 00:23:01,359 --> 00:23:04,119 Speaker 8: that tech will be a larger contributor to issuance. But again, 520 00:23:04,480 --> 00:23:06,679 Speaker 8: the demand for this has been very robust, and I 521 00:23:06,720 --> 00:23:09,399 Speaker 8: think just like in sectors like biotech, where there are 522 00:23:09,480 --> 00:23:13,639 Speaker 8: drug discoveries that happen years after bonds mature, it's almost 523 00:23:13,640 --> 00:23:15,160 Speaker 8: a similar butt on the management teams. 524 00:23:15,200 --> 00:23:17,160 Speaker 4: So you'd be patient, you'd be buying. 525 00:23:17,359 --> 00:23:19,480 Speaker 8: I think from our perspective, we think that this is 526 00:23:19,520 --> 00:23:22,760 Speaker 8: actually a regime shift that has been met with a 527 00:23:22,800 --> 00:23:24,280 Speaker 8: significant amount of investor demand. 528 00:23:25,840 --> 00:23:28,520 Speaker 2: Stay with US multile IMPEG surveillance coming up. 529 00:23:28,840 --> 00:23:40,440 Speaker 3: Off to this, Shoppers spent billions on Black Friday and 530 00:23:40,480 --> 00:23:43,880 Speaker 3: could break Cyber Monday records today, Luisy and a Senator 531 00:23:44,000 --> 00:23:46,920 Speaker 3: Bill Cassidy joins us now for more. Senator Cassidy, thank 532 00:23:46,920 --> 00:23:49,359 Speaker 3: you so much for being here. Could you square this 533 00:23:49,520 --> 00:23:54,200 Speaker 3: idea of incredible spending and the ongoing American consumer continuing 534 00:23:54,200 --> 00:23:57,680 Speaker 3: to uphold the underlying economy and this real feeling the 535 00:23:57,800 --> 00:24:00,000 Speaker 3: cost of living is becoming unsustainable. 536 00:24:00,359 --> 00:24:03,639 Speaker 9: Well, there's obviously segments within our society, and there's a 537 00:24:03,640 --> 00:24:05,679 Speaker 9: group of people who are still managing to do well. 538 00:24:05,840 --> 00:24:07,760 Speaker 5: There's another group of people who are really hurting. 539 00:24:08,119 --> 00:24:09,439 Speaker 9: Now they may have the money to go out and 540 00:24:09,440 --> 00:24:12,640 Speaker 9: buy their children the gift for Christmas. On the other hand, 541 00:24:12,680 --> 00:24:15,920 Speaker 9: there is an increasing cost of insurance, whether it's health, 542 00:24:15,960 --> 00:24:18,840 Speaker 9: property and casualty or flood insurance, as well as increasing 543 00:24:18,840 --> 00:24:22,760 Speaker 9: costs and groceries. They have extra money but up here, 544 00:24:22,880 --> 00:24:24,160 Speaker 9: but there's a lot of folks down here. 545 00:24:24,040 --> 00:24:24,639 Speaker 5: Who are hurting. 546 00:24:24,800 --> 00:24:26,560 Speaker 3: This is the reason why a lot of people are expecting, 547 00:24:26,640 --> 00:24:29,640 Speaker 3: even though we are seeing profits at companies continue to increase, 548 00:24:29,800 --> 00:24:32,120 Speaker 3: they're expecting the FED to cut rates to respond to 549 00:24:32,160 --> 00:24:35,600 Speaker 3: that case shaped economy or the massive people who really 550 00:24:35,640 --> 00:24:38,480 Speaker 3: aren't feeling the gains. And I'm just wondering how much 551 00:24:38,680 --> 00:24:41,000 Speaker 3: you're prepared to step in that you think that it's 552 00:24:41,000 --> 00:24:44,480 Speaker 3: a government's job on the fiscal side to really support 553 00:24:44,800 --> 00:24:48,200 Speaker 3: that lower tier of consumers that are really feeling the pain. 554 00:24:48,359 --> 00:24:51,040 Speaker 9: I would argue that in the tax cut for workings, 555 00:24:51,080 --> 00:24:53,679 Speaker 9: families are the one big beautiful bill we attempted to 556 00:24:53,720 --> 00:24:56,639 Speaker 9: do that. We did it both by no tax on overtime, 557 00:24:56,840 --> 00:24:59,680 Speaker 9: no tax on tips for seniors, eliminating the tax that 558 00:24:59,720 --> 00:25:02,560 Speaker 9: most would pay on their Social Security, but also putting 559 00:25:02,600 --> 00:25:07,879 Speaker 9: in some some pro business efforts that would encourage business 560 00:25:07,920 --> 00:25:11,280 Speaker 9: to reshore to build out their manufacturing. Lastly, I will 561 00:25:11,280 --> 00:25:13,679 Speaker 9: say there's a lot of money taking place on infrastructure 562 00:25:13,720 --> 00:25:17,400 Speaker 9: right now, and that infrastructure creates jobs. AI cannot swing 563 00:25:17,400 --> 00:25:20,040 Speaker 9: a hammer, and so AI is not swinging in a hammer. 564 00:25:20,160 --> 00:25:21,480 Speaker 5: Those folks will being employed. 565 00:25:21,720 --> 00:25:25,000 Speaker 9: I would say that there is a business strategy to 566 00:25:25,400 --> 00:25:28,080 Speaker 9: help those folks who are in the kind of struggling 567 00:25:28,080 --> 00:25:29,520 Speaker 9: area of the economy centator. 568 00:25:29,560 --> 00:25:32,399 Speaker 6: There's one area when it comes to affordability that actually 569 00:25:32,440 --> 00:25:35,160 Speaker 6: might become a lot more expensive next year if Congress 570 00:25:35,200 --> 00:25:37,919 Speaker 6: does not act, and that's the enhanced premiums when it 571 00:25:37,920 --> 00:25:40,280 Speaker 6: comes to Affordable Care Act. You have a hearing this 572 00:25:40,320 --> 00:25:42,760 Speaker 6: week regarding this. Do you think we can get to 573 00:25:42,800 --> 00:25:44,240 Speaker 6: a decision before the deadline? 574 00:25:44,520 --> 00:25:45,600 Speaker 5: Yeah? I think we can. 575 00:25:46,040 --> 00:25:48,200 Speaker 9: I have a plan, but it's one that other Republicans 576 00:25:48,200 --> 00:25:50,840 Speaker 9: have reposed some form of, and we take that enhanced 577 00:25:50,840 --> 00:25:53,800 Speaker 9: premium tax credit and instead of giving it to insurance 578 00:25:53,800 --> 00:25:56,840 Speaker 9: companies where they take twenty percent for a profit and overhead, 579 00:25:57,080 --> 00:25:59,359 Speaker 9: we give one hundred percent to the patient in the 580 00:25:59,400 --> 00:26:02,280 Speaker 9: form of a deposit within a health savings account. This 581 00:26:02,359 --> 00:26:05,240 Speaker 9: allows her not to buy the more expensive silver plan, 582 00:26:05,920 --> 00:26:08,280 Speaker 9: but also get a cheaper plan called the Bronze Plan. 583 00:26:08,800 --> 00:26:12,600 Speaker 9: Now did I say it's cheaper. It's cheaper, and so 584 00:26:12,640 --> 00:26:15,240 Speaker 9: we're helping her own our affordability. By the way, the 585 00:26:15,280 --> 00:26:18,280 Speaker 9: money in our health savings account also gives her first 586 00:26:18,280 --> 00:26:20,760 Speaker 9: dollar coverage for a child's trip to the er. You know, 587 00:26:20,800 --> 00:26:22,920 Speaker 9: I practiced for twenty years as a doctor, caring for 588 00:26:22,960 --> 00:26:25,560 Speaker 9: the uninsured and the poorly insured. I learned that if 589 00:26:25,560 --> 00:26:28,200 Speaker 9: you give power to the patient, you can lower health 590 00:26:28,200 --> 00:26:30,679 Speaker 9: care cost. So we're giving power to the patient, not 591 00:26:30,760 --> 00:26:32,119 Speaker 9: profit to the insurance company. 592 00:26:32,160 --> 00:26:34,920 Speaker 6: Well, democrats come on board with this plan, it doesn't 593 00:26:34,920 --> 00:26:37,400 Speaker 6: seem like they're interested in this. They want at minimum 594 00:26:37,440 --> 00:26:40,600 Speaker 6: and extension for a year or two of the extended premiums. 595 00:26:40,680 --> 00:26:41,440 Speaker 5: So think about it. 596 00:26:41,480 --> 00:26:43,280 Speaker 9: We are we would actually be if you will, in 597 00:26:43,280 --> 00:26:44,679 Speaker 9: one sense extending the. 598 00:26:46,160 --> 00:26:47,439 Speaker 5: Enhanced premium tax credit. 599 00:26:47,680 --> 00:26:50,480 Speaker 9: But instead of giving one hundred percent to insurance companies, 600 00:26:50,640 --> 00:26:52,680 Speaker 9: they take twenty percent for profit and overhead. 601 00:26:52,880 --> 00:26:54,479 Speaker 5: We're given one hundred percent to the patient. 602 00:26:54,840 --> 00:26:57,440 Speaker 6: So you're getting the extension, but the pool shrinks that money. 603 00:26:57,520 --> 00:27:01,080 Speaker 4: So to shrink it does not shrink well for the insurance. 604 00:27:01,080 --> 00:27:02,600 Speaker 4: Are they going to have to pay more? 605 00:27:02,640 --> 00:27:04,480 Speaker 6: Are you going to have to say you're on say 606 00:27:04,520 --> 00:27:07,320 Speaker 6: the premium plan or is your plan going to be 607 00:27:07,400 --> 00:27:11,399 Speaker 6: even more expensive. It's not being subsidized by those in 608 00:27:11,480 --> 00:27:12,120 Speaker 6: the lower end. 609 00:27:12,240 --> 00:27:15,439 Speaker 9: No, again, going back to this, if you got this 610 00:27:15,520 --> 00:27:18,200 Speaker 9: amount of money and currently under the current plan, you 611 00:27:18,240 --> 00:27:20,399 Speaker 9: give one hundred percent to insurance companies and they take 612 00:27:20,440 --> 00:27:23,520 Speaker 9: twenty percent for overhead and profit. Instead you give one 613 00:27:23,560 --> 00:27:26,040 Speaker 9: hundred percent to patients. In terms of deposits within a 614 00:27:26,080 --> 00:27:30,240 Speaker 9: health savings account. First, you're lowering their deductible. And because 615 00:27:30,320 --> 00:27:33,240 Speaker 9: you have lowered their deductible, they can take a cheaper 616 00:27:33,320 --> 00:27:36,800 Speaker 9: bronze plan. No, normally you don't because your deductible is higher. 617 00:27:37,000 --> 00:27:40,360 Speaker 9: We just lowered their deductible. They're getting a cheaper bronze plan. 618 00:27:40,480 --> 00:27:42,840 Speaker 9: By the way, when you get power to the patient, 619 00:27:43,119 --> 00:27:45,080 Speaker 9: she gets the health care she chooses to have that 620 00:27:45,160 --> 00:27:47,679 Speaker 9: she knows she needs, as opposed to the healthcare the 621 00:27:47,680 --> 00:27:50,639 Speaker 9: insurance company permits her to have a lot of wins 622 00:27:50,640 --> 00:27:52,520 Speaker 9: in here for the patient who would. 623 00:27:52,280 --> 00:27:54,920 Speaker 5: Not be for that. Whether you're a Republican or a Democrat. 624 00:27:54,600 --> 00:27:56,320 Speaker 3: Do you think that this is enough to prevent the 625 00:27:56,359 --> 00:28:00,360 Speaker 3: government from shutting a shutting down again in January when 626 00:28:00,359 --> 00:28:01,120 Speaker 3: this comes back up. 627 00:28:01,359 --> 00:28:06,000 Speaker 9: Absolutely, Why, Because we've actually addressed affordability in the exchanges, 628 00:28:06,440 --> 00:28:09,880 Speaker 9: I would argue, we also begin to address the overall 629 00:28:09,880 --> 00:28:12,720 Speaker 9: increase in healthcare cost. When you give that woman, and 630 00:28:12,760 --> 00:28:15,800 Speaker 9: women make all the decisions in healthcare, When you give 631 00:28:15,840 --> 00:28:18,200 Speaker 9: her the power of the purse and you say listen, 632 00:28:18,240 --> 00:28:20,160 Speaker 9: if you go here, you save money. If you go there, 633 00:28:20,200 --> 00:28:23,040 Speaker 9: you don't, everybody begins to lower their cost to where 634 00:28:23,040 --> 00:28:24,240 Speaker 9: they can attract her business. 635 00:28:24,520 --> 00:28:26,200 Speaker 3: You know, you said something earlier that I think is 636 00:28:26,240 --> 00:28:29,280 Speaker 3: really important. You said that businesses have a role in 637 00:28:29,520 --> 00:28:33,879 Speaker 3: creating jobs and creating a better landscape for the lower 638 00:28:33,920 --> 00:28:37,080 Speaker 3: core tiles and de siles of the US economy and 639 00:28:37,119 --> 00:28:40,520 Speaker 3: the US earners. I just wonder what policies you think 640 00:28:40,640 --> 00:28:42,920 Speaker 3: need to be implemented to do that, because right now 641 00:28:42,960 --> 00:28:44,360 Speaker 3: it doesn't seem to be working. 642 00:28:44,600 --> 00:28:46,800 Speaker 5: Are you talking about in terms of overall business through business? 643 00:28:46,880 --> 00:28:48,719 Speaker 9: Yeah? Yeah, So I think that the tax policy that 644 00:28:48,760 --> 00:28:52,160 Speaker 9: we've put in, and frankly with President Trump's tariffs, there's 645 00:28:52,200 --> 00:28:55,880 Speaker 9: an incentive for people to begin to reshore that's certainly nearshore, 646 00:28:56,280 --> 00:28:59,040 Speaker 9: and so when you reshore, you're going to create jobs. Now, 647 00:28:59,040 --> 00:29:01,280 Speaker 9: that doesn't happen like that, think how long you need 648 00:29:01,320 --> 00:29:04,320 Speaker 9: to put together your financing stack. But that's going to happen, 649 00:29:04,680 --> 00:29:06,720 Speaker 9: and so as it happens, we'll see that kind of 650 00:29:06,840 --> 00:29:11,160 Speaker 9: upswing in jobs for construction, for service, all those jobs 651 00:29:11,200 --> 00:29:15,080 Speaker 9: that are related to that reshoring of manufacturing activity, and 652 00:29:15,120 --> 00:29:18,880 Speaker 9: that'll cause a general boom. So that is long that 653 00:29:18,960 --> 00:29:21,880 Speaker 9: is a sustainable strategy to create prosperity for folks. 654 00:29:22,640 --> 00:29:24,680 Speaker 3: A lot of people are saying that the reason why 655 00:29:24,720 --> 00:29:27,960 Speaker 3: companies haven't created more jobs is because they're using artificial 656 00:29:27,960 --> 00:29:30,680 Speaker 3: intelligence for efficiencies, and you're seeing that in terms of 657 00:29:31,160 --> 00:29:33,760 Speaker 3: Amazon coming out and saying they're laying people off because 658 00:29:33,760 --> 00:29:37,400 Speaker 3: of some of the efficiencies they're getting from algorithmic learning. 659 00:29:37,520 --> 00:29:41,840 Speaker 3: I'm just wondering, from a legislation standpoint, what you think 660 00:29:41,960 --> 00:29:44,719 Speaker 3: that the government's role is and trying to make sure 661 00:29:45,160 --> 00:29:48,680 Speaker 3: that people aren't left behind in this transition, given that 662 00:29:48,720 --> 00:29:51,400 Speaker 3: a lot of these new programs can take on roles 663 00:29:51,480 --> 00:29:53,720 Speaker 3: previously done by humans and. 664 00:29:53,760 --> 00:29:56,600 Speaker 9: Techno optimist, if you've got something that's going to increase 665 00:29:56,640 --> 00:29:59,680 Speaker 9: the productivity of our nation, will increase tax revenue, not 666 00:29:59,680 --> 00:30:03,080 Speaker 9: by increasing rates, but by increasing the overall growth of 667 00:30:03,080 --> 00:30:05,520 Speaker 9: the economy. When you increase that overall growth of the 668 00:30:05,560 --> 00:30:08,320 Speaker 9: economy and you have more money, We've got like trillions 669 00:30:08,360 --> 00:30:10,640 Speaker 9: of dollars of backlog in infrastructure. 670 00:30:10,840 --> 00:30:12,360 Speaker 5: Let's just focus once we're there. 671 00:30:12,680 --> 00:30:15,560 Speaker 9: If you begin to invest that money in infrastructure, AI 672 00:30:15,640 --> 00:30:17,840 Speaker 9: does not swing a hammer, You're going to create a 673 00:30:17,880 --> 00:30:19,800 Speaker 9: lot of jobs for folks who right now are struggling 674 00:30:19,840 --> 00:30:22,280 Speaker 9: to get better jobs. By the way, we're also building 675 00:30:22,320 --> 00:30:25,160 Speaker 9: out our oil and gas industry, our energy industry, that 676 00:30:25,200 --> 00:30:27,160 Speaker 9: creates a heck of a lot of jobs. And so 677 00:30:27,360 --> 00:30:29,880 Speaker 9: everybody looks at the negative, Oh, we're going to downside. 678 00:30:29,960 --> 00:30:31,960 Speaker 9: We need to look at the positive. That would just 679 00:30:32,000 --> 00:30:34,840 Speaker 9: shift investment to a more productive area of the economy. 680 00:30:35,040 --> 00:30:37,040 Speaker 9: As we grow at the expense of other nations, or 681 00:30:37,040 --> 00:30:39,600 Speaker 9: maybe we all grow together, we'll create that employment. 682 00:30:39,880 --> 00:30:43,200 Speaker 6: Lisa started out this conversation talking about affordability. Americans are 683 00:30:43,240 --> 00:30:46,280 Speaker 6: still struggling. You're also looking at trying to address healthcare 684 00:30:46,280 --> 00:30:49,840 Speaker 6: affordability by actually having this health savings account proposal. The 685 00:30:49,880 --> 00:30:52,960 Speaker 6: President talked about two thousand dollars tariff checks. You're on 686 00:30:53,000 --> 00:30:55,120 Speaker 6: the Finance Committee, you're on the help you lead the 687 00:30:54,880 --> 00:30:58,040 Speaker 6: Health committee. Do you think that that is a good 688 00:30:58,040 --> 00:31:01,920 Speaker 6: way to address affordability right now? Putting money directly into 689 00:31:01,920 --> 00:31:03,280 Speaker 6: consumer's pockets. 690 00:31:03,360 --> 00:31:05,160 Speaker 9: So I'd like to see what the President's going to propose. 691 00:31:05,240 --> 00:31:07,960 Speaker 9: We do know that the debt and deficit eventually takes 692 00:31:07,960 --> 00:31:10,600 Speaker 9: money out of our pockets, and so we absolutely know that. 693 00:31:10,840 --> 00:31:13,440 Speaker 9: So the question is better to pay down our nation's debt. 694 00:31:13,680 --> 00:31:15,440 Speaker 9: And as you pay down our nation's debt, then it 695 00:31:15,480 --> 00:31:18,400 Speaker 9: makes it easier to lower interest rates for the Fed 696 00:31:18,400 --> 00:31:21,160 Speaker 9: to lower interest rates, which then lowers a mortgage payment, 697 00:31:21,280 --> 00:31:24,160 Speaker 9: which then maybe lower other credit forms of credit. As 698 00:31:24,160 --> 00:31:27,040 Speaker 9: you do that, you make life more affordable that way. 699 00:31:27,360 --> 00:31:28,040 Speaker 5: The other thing you. 700 00:31:28,000 --> 00:31:29,560 Speaker 9: Have to worry about is if you give everybody a 701 00:31:29,640 --> 00:31:32,680 Speaker 9: two thousand dollars check, does that bump up inflation? And 702 00:31:32,720 --> 00:31:35,560 Speaker 9: therefore the FED is inhibited on lowering their rates. So 703 00:31:35,600 --> 00:31:38,480 Speaker 9: it can't be taken in kind of isolation. It has 704 00:31:38,520 --> 00:31:40,720 Speaker 9: to be taken in context of everything we can do 705 00:31:40,840 --> 00:31:44,080 Speaker 9: to benefit that person sitting at home struggling a little bit. 706 00:31:44,160 --> 00:31:45,640 Speaker 6: It sounds like you would be a no then on 707 00:31:45,680 --> 00:31:46,520 Speaker 6: the two thousand llinos. 708 00:31:46,720 --> 00:31:50,080 Speaker 5: Sounds like I'm going to investigate so that I know, okay. 709 00:31:50,440 --> 00:31:53,000 Speaker 6: While you investigate, there's also potentially going to be another 710 00:31:53,080 --> 00:31:56,080 Speaker 6: big Senate first to hearing and then a vote when 711 00:31:56,080 --> 00:31:58,800 Speaker 6: it comes to the president's FED pick. Right now, the 712 00:31:58,800 --> 00:32:04,520 Speaker 6: front runner is his counsel and Economic Advisor's chair, Kevin Hassett. 713 00:32:04,760 --> 00:32:06,960 Speaker 6: Do you think you would say yes to him being 714 00:32:07,000 --> 00:32:07,520 Speaker 6: the FED chair. 715 00:32:08,280 --> 00:32:11,080 Speaker 9: I've been impressed with Kevin. This is the second time 716 00:32:11,120 --> 00:32:14,520 Speaker 9: around serving and Trump's administration. I think he's done a 717 00:32:14,560 --> 00:32:17,400 Speaker 9: good job. Of course, our reserve judgment until we actually 718 00:32:17,400 --> 00:32:19,840 Speaker 9: begin to look at him as FED chair we are 719 00:32:19,880 --> 00:32:22,840 Speaker 9: having this problem of inflation which just is a little 720 00:32:22,840 --> 00:32:25,760 Speaker 9: bit sticky, and yet we want to decrease rates. How 721 00:32:25,760 --> 00:32:29,000 Speaker 9: you're going to navigate that, But I'm certainly predisposed to 722 00:32:29,040 --> 00:32:29,560 Speaker 9: support him. 723 00:32:29,600 --> 00:32:31,080 Speaker 4: Are you worried about FED independence? 724 00:32:32,200 --> 00:32:34,880 Speaker 9: Fed independence is critical, you just have to have it. 725 00:32:35,080 --> 00:32:37,000 Speaker 9: But I also think that Kevin would step up and 726 00:32:37,040 --> 00:32:40,960 Speaker 9: be as aware of the importance of FED independence as anybody. 727 00:32:42,360 --> 00:32:45,920 Speaker 2: This is the Bloomberg Survendans podcast, bringing you the best 728 00:32:45,920 --> 00:32:49,280 Speaker 2: in markets, economics, ancient politics. You can watch the show 729 00:32:49,320 --> 00:32:52,240 Speaker 2: live on Bloomberg TV weekday mornings from six am to 730 00:32:52,400 --> 00:32:56,160 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify, 731 00:32:56,280 --> 00:32:58,520 Speaker 2: or anywhere else you listen, and as always on the 732 00:32:58,560 --> 00:33:00,920 Speaker 2: Bloomberg Terminal. And Buck based this out 733 00:33:05,120 --> 00:33:05,520 Speaker 8: Mm hmm.