1 00:00:02,400 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,680 --> 00:00:15,480 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,520 --> 00:00:18,720 Speaker 2: with Lisa Bromwitz and Amrie Hordernt. Join us each day 4 00:00:18,760 --> 00:00:22,320 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,440 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,960 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,319 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,960 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:37,400 Speaker 2: Terminal and the Bloomberg Business App. The investors pricing at 10 00:00:37,400 --> 00:00:39,640 Speaker 2: a quarter point cord from the FMC at two pm 11 00:00:39,680 --> 00:00:43,159 Speaker 2: Eastern Time. Blake Gwinno RBC Capital Markets. Right in the following, 12 00:00:43,200 --> 00:00:46,360 Speaker 2: the Economic Bankdroop continues to provide the FMC with a 13 00:00:46,440 --> 00:00:49,480 Speaker 2: window for delivering interest rate cards. They're going to take it. 14 00:00:49,600 --> 00:00:51,479 Speaker 2: Blake joins us now for more Blake and morning, Good 15 00:00:51,479 --> 00:00:51,839 Speaker 2: to see you. 16 00:00:51,880 --> 00:00:52,320 Speaker 1: Good to see you. 17 00:00:52,600 --> 00:00:54,360 Speaker 2: The last time the Fed made a decision, you made 18 00:00:54,400 --> 00:00:57,400 Speaker 2: a very important point that the outlook hadn't changed so much, 19 00:00:57,520 --> 00:01:00,280 Speaker 2: but the risks around the outlook have What are the 20 00:01:00,360 --> 00:01:02,480 Speaker 2: risks around the outlook now and have they developed since 21 00:01:02,480 --> 00:01:03,120 Speaker 2: the Fed last. 22 00:01:03,040 --> 00:01:05,240 Speaker 1: May exactly the same as they were in September. 23 00:01:05,920 --> 00:01:07,440 Speaker 3: I mean, part of that is obviously because we're not 24 00:01:07,440 --> 00:01:09,720 Speaker 3: getting the official sector data. But even if you look 25 00:01:09,720 --> 00:01:11,880 Speaker 3: at what we have, we have received so the CPI 26 00:01:11,959 --> 00:01:14,399 Speaker 3: that they decided to release the private sector data, and 27 00:01:14,400 --> 00:01:16,080 Speaker 3: I would say also the Beige book that they had, 28 00:01:16,560 --> 00:01:18,360 Speaker 3: you know, the Beage Book really kind of characterized things 29 00:01:18,400 --> 00:01:21,200 Speaker 3: as largely in the same place as they were in September. 30 00:01:21,280 --> 00:01:23,279 Speaker 3: So I don't think the Fed's really gotten any information 31 00:01:23,319 --> 00:01:25,880 Speaker 3: that's really going to change our outlook. I would expect Pale, 32 00:01:26,200 --> 00:01:27,600 Speaker 3: you know, any comments that he's going to make on 33 00:01:27,640 --> 00:01:31,479 Speaker 3: the macro economic outlook you know this afternoon are probably 34 00:01:31,520 --> 00:01:33,240 Speaker 3: going to be largely what he made in September. 35 00:01:33,280 --> 00:01:35,760 Speaker 4: So it cuts twenty five. Can a guide to December? 36 00:01:36,200 --> 00:01:38,000 Speaker 3: I don't think he does, And I think, if anything, 37 00:01:38,080 --> 00:01:39,319 Speaker 3: I think the markets are going to be much more 38 00:01:39,360 --> 00:01:41,440 Speaker 3: focused around some of the meta conversation about what are 39 00:01:41,440 --> 00:01:43,679 Speaker 3: they looking at. I mean, if this continues for another 40 00:01:43,680 --> 00:01:46,720 Speaker 3: two months, if this continues in the December meeting, I 41 00:01:46,720 --> 00:01:49,440 Speaker 3: think what I'm most interested in are any questions around 42 00:01:49,480 --> 00:01:51,240 Speaker 3: what data are you putting most. 43 00:01:51,080 --> 00:01:52,240 Speaker 1: Important on one of the metrics? 44 00:01:52,280 --> 00:01:55,000 Speaker 3: Yeah, We know their reaction function to some degree around 45 00:01:55,160 --> 00:01:57,480 Speaker 3: the official sector data, and we know how they're thinking about, 46 00:01:57,760 --> 00:02:01,000 Speaker 3: you know, an unemployment rate or about PE levels, but 47 00:02:01,400 --> 00:02:04,400 Speaker 3: we don't really know how they're using the data that 48 00:02:04,440 --> 00:02:06,400 Speaker 3: they do have right now, And I think it'd be 49 00:02:06,400 --> 00:02:08,240 Speaker 3: interesting to hear how they're kind of thinking about things, 50 00:02:08,280 --> 00:02:10,480 Speaker 3: what metrics they're looking at, and what's going to make 51 00:02:10,480 --> 00:02:12,240 Speaker 3: that decision around December. 52 00:02:12,280 --> 00:02:13,560 Speaker 1: Well, wasn't that a risk in itself? 53 00:02:13,600 --> 00:02:15,400 Speaker 5: The fact that they don't have data and we have 54 00:02:15,440 --> 00:02:19,160 Speaker 5: this data desert. How much can they lean on September 55 00:02:19,639 --> 00:02:22,079 Speaker 5: going forward if you're a data dependent. 56 00:02:21,639 --> 00:02:24,360 Speaker 1: FED Well, it does make things interesting. 57 00:02:24,360 --> 00:02:26,520 Speaker 3: And I'm a little bit torn about what the base 58 00:02:26,600 --> 00:02:29,720 Speaker 3: case into December is if we don't get data, because 59 00:02:29,720 --> 00:02:31,960 Speaker 3: on the one hand, you kind of have this do 60 00:02:32,080 --> 00:02:34,160 Speaker 3: no harm type of idea where I could see the 61 00:02:34,160 --> 00:02:36,600 Speaker 3: hawks on the committee saying, hey, look, we cut the 62 00:02:36,720 --> 00:02:39,760 Speaker 3: last two meetings. We did get inflation data, which shows 63 00:02:40,000 --> 00:02:42,840 Speaker 3: the services side of things a little more pressure than 64 00:02:42,840 --> 00:02:45,239 Speaker 3: we'd like to see. Maybe we should just play it 65 00:02:45,280 --> 00:02:47,160 Speaker 3: safe and not do anything. But you can also make 66 00:02:47,200 --> 00:02:48,880 Speaker 3: the case on the other side, which is that those 67 00:02:48,960 --> 00:02:51,840 Speaker 3: labor market risks are still apparent ADP is still showing 68 00:02:51,840 --> 00:02:54,880 Speaker 3: this low hiring, slow firing mode. So I'm not even 69 00:02:54,960 --> 00:02:57,480 Speaker 3: really sure what the base case is into December if 70 00:02:57,520 --> 00:03:00,399 Speaker 3: we have no new government data coming out. 71 00:03:00,480 --> 00:03:03,040 Speaker 4: Is it possible the descent could come both ways? And 72 00:03:03,120 --> 00:03:03,640 Speaker 4: this may thing? 73 00:03:03,880 --> 00:03:06,120 Speaker 3: Absolutely? I think that was true last meeting as well. 74 00:03:06,160 --> 00:03:07,720 Speaker 3: I was actually curious to see if we got two 75 00:03:07,760 --> 00:03:09,800 Speaker 3: descents at the last meeting, because I think you have 76 00:03:09,919 --> 00:03:13,359 Speaker 3: some members, like you know, Hammick Schmid who have come 77 00:03:13,400 --> 00:03:17,680 Speaker 3: out and now, you know, not everybody can descent, so 78 00:03:17,680 --> 00:03:21,040 Speaker 3: we're just talking about the voting members. Schmid could certainly descent, 79 00:03:21,960 --> 00:03:23,920 Speaker 3: and we have heard those members kind of take a 80 00:03:23,919 --> 00:03:25,760 Speaker 3: harder stance on the inflation side and said, you know, 81 00:03:26,120 --> 00:03:28,960 Speaker 3: unlike Waller and I would say, now pale at this point, 82 00:03:29,240 --> 00:03:31,040 Speaker 3: not so quick to kind of dismiss some of the. 83 00:03:30,960 --> 00:03:33,200 Speaker 1: Inflation pressure we're seeing. They're not ready to write. 84 00:03:33,040 --> 00:03:35,400 Speaker 3: It off as only a tear iff problem, you know, 85 00:03:35,440 --> 00:03:38,280 Speaker 3: something that's going to dissipate as that one time price 86 00:03:38,280 --> 00:03:39,640 Speaker 3: shot kind of moves through the system. 87 00:03:39,680 --> 00:03:42,480 Speaker 2: I believe that Hammock can descent next year, and the 88 00:03:42,520 --> 00:03:44,600 Speaker 2: mix next year maybe gets a little bit more interesting. 89 00:03:44,640 --> 00:03:46,320 Speaker 2: So let's talk about that. We're going to get a 90 00:03:46,400 --> 00:03:49,720 Speaker 2: change of leadership in May. How easy is it just 91 00:03:49,760 --> 00:03:51,400 Speaker 2: to lead the committee and say, you know what we're 92 00:03:51,400 --> 00:03:53,400 Speaker 2: going to get in this direction given the mix we 93 00:03:53,440 --> 00:03:54,680 Speaker 2: might say in twenty six. 94 00:03:55,000 --> 00:03:56,520 Speaker 1: It really depends on the personnel. 95 00:03:56,600 --> 00:03:58,640 Speaker 3: And I think this is you know, one conversation I've 96 00:03:58,640 --> 00:04:00,400 Speaker 3: had a lot with clients who have kind of said, well, 97 00:04:00,400 --> 00:04:02,840 Speaker 3: we're going to get a very dubvish FED share from 98 00:04:02,880 --> 00:04:04,720 Speaker 3: Trump and they're going to come in and you know, 99 00:04:04,800 --> 00:04:06,560 Speaker 3: we're going to slash rates one hundred basis points to 100 00:04:06,560 --> 00:04:07,360 Speaker 3: do when they want FED shair. 101 00:04:07,440 --> 00:04:09,720 Speaker 1: Yeah, that's just not how things work. And I think. 102 00:04:09,600 --> 00:04:13,160 Speaker 3: We're you know, we're kind of a product of this 103 00:04:13,280 --> 00:04:15,880 Speaker 3: last forty years where we've had very strong FED shairs 104 00:04:15,880 --> 00:04:18,240 Speaker 3: who I think have a very good give and take 105 00:04:18,279 --> 00:04:21,479 Speaker 3: with the rest of the committee. They're respected by the committee, 106 00:04:21,480 --> 00:04:24,440 Speaker 3: They're taking information from the Committee incorporating that into their 107 00:04:24,480 --> 00:04:28,360 Speaker 3: own views, and so, yeah, the chair has spoken for 108 00:04:28,440 --> 00:04:31,800 Speaker 3: the direction of policy. If we get somebody who is 109 00:04:31,960 --> 00:04:34,560 Speaker 3: very outside of that consensus, who's to say the chair 110 00:04:34,640 --> 00:04:36,640 Speaker 3: isn't a descent at every meeting. I mean, it could 111 00:04:36,640 --> 00:04:38,919 Speaker 3: be very interesting. But what if we have mirror and 112 00:04:38,960 --> 00:04:40,960 Speaker 3: the new chair dissenting at every meeting. 113 00:04:41,040 --> 00:04:42,760 Speaker 2: For the record, I saw this in the UK more 114 00:04:42,760 --> 00:04:44,960 Speaker 2: than ten years ago. I remember when Governor King wont 115 00:04:45,000 --> 00:04:48,040 Speaker 2: another round of q E and kept dissenting and voting 116 00:04:48,040 --> 00:04:49,920 Speaker 2: for it. So we've seen that happen in the UK. 117 00:04:50,240 --> 00:04:52,640 Speaker 2: You suggested we might see a UK type scenario. 118 00:04:53,520 --> 00:04:54,440 Speaker 1: It's just not what we're used to. 119 00:04:54,560 --> 00:04:56,760 Speaker 4: We used to the green spans of this world. 120 00:04:56,839 --> 00:04:59,480 Speaker 3: Yeah, And I think if we're thinking about how dubbish 121 00:04:59,480 --> 00:05:01,760 Speaker 3: the FED is next year, it's not just about how 122 00:05:01,800 --> 00:05:04,560 Speaker 3: dubvish the new chair is, it's also about how effective 123 00:05:04,560 --> 00:05:07,240 Speaker 3: they're going to be a delivering on that dubbishness. 124 00:05:07,320 --> 00:05:09,120 Speaker 5: Well, who's the most dubbish center of this lift? Would 125 00:05:09,120 --> 00:05:10,360 Speaker 5: you say that's Kevin Hassett? 126 00:05:10,680 --> 00:05:12,640 Speaker 3: I would say you'd look at somebody who is closer 127 00:05:12,680 --> 00:05:16,080 Speaker 3: to the administration, so HEYESI or a worsh you know, but. 128 00:05:16,160 --> 00:05:20,160 Speaker 1: Somebody he's a hawk. He was, Let's be very clear, 129 00:05:20,200 --> 00:05:22,520 Speaker 1: he was not anymore. 130 00:05:22,600 --> 00:05:24,640 Speaker 3: So I think you'd look at somebody who was much 131 00:05:24,640 --> 00:05:27,360 Speaker 3: closer to the administration is probably arguing for the most cuts, 132 00:05:27,600 --> 00:05:30,200 Speaker 3: but also in the same you know, in the same respect, 133 00:05:30,279 --> 00:05:32,000 Speaker 3: also maybe not being able to sway the rest of 134 00:05:32,000 --> 00:05:32,800 Speaker 3: the committee, but. 135 00:05:32,760 --> 00:05:36,159 Speaker 5: It'll be transparent. If it is someone like Kevin Hassett, 136 00:05:37,000 --> 00:05:40,120 Speaker 5: it'll be transparent. It's not like author Burns and Nixon, 137 00:05:40,160 --> 00:05:43,159 Speaker 5: where the market didn't really understand how close that relationship is. 138 00:05:43,240 --> 00:05:45,920 Speaker 5: It'll be very transparent to the market that, Okay, this 139 00:05:46,080 --> 00:05:49,200 Speaker 5: policy could be heavily influenced by Trump himself. 140 00:05:49,400 --> 00:05:51,359 Speaker 3: Well, I think it will be clear that that person 141 00:05:51,360 --> 00:05:54,880 Speaker 3: could be heavily influenced. But then that comes That's where 142 00:05:54,880 --> 00:05:57,040 Speaker 3: the question of how much control over the rest of 143 00:05:57,040 --> 00:05:58,680 Speaker 3: the committee they have comes in, because that's where I 144 00:05:58,680 --> 00:06:00,880 Speaker 3: think somebody like a Waller who may not be as 145 00:06:00,920 --> 00:06:02,880 Speaker 3: close to the administration, who may kind of go off 146 00:06:02,880 --> 00:06:05,640 Speaker 3: on their own, and you know, he's leaving leaning dubbish now, 147 00:06:05,720 --> 00:06:08,600 Speaker 3: but maybe that framework changes. He's going to be much 148 00:06:08,600 --> 00:06:10,679 Speaker 3: more effective and I think you know has that respect, 149 00:06:10,720 --> 00:06:14,680 Speaker 3: he has a very understandable framework for where that dubbishness 150 00:06:14,760 --> 00:06:17,960 Speaker 3: is coming from, and so may actually deliver more cuts 151 00:06:18,000 --> 00:06:19,479 Speaker 3: than somebody who you would expect to be a more 152 00:06:19,520 --> 00:06:20,200 Speaker 3: dubbish member. 153 00:06:20,520 --> 00:06:24,120 Speaker 4: Stay with us. More Bloomberg surveillance coming up after this. 154 00:06:32,800 --> 00:06:35,719 Speaker 2: Start setting fresh records ahead of a Max seven earnings test. 155 00:06:35,920 --> 00:06:38,599 Speaker 2: Gagi Chantry of Black Rock writing. Investors are looking for 156 00:06:38,680 --> 00:06:42,680 Speaker 2: proof that cloud growth is reaccelerating and the massive AI 157 00:06:42,800 --> 00:06:47,400 Speaker 2: campex is converting into real paying workloads. Gargee Joints US 158 00:06:47,400 --> 00:06:49,680 Speaker 2: now for more. Garkiy Cadmonic, Hi, good morning, it's. 159 00:06:49,520 --> 00:06:50,000 Speaker 4: Going to see you. 160 00:06:50,040 --> 00:06:52,440 Speaker 2: So out of the three, then this week FED decision 161 00:06:52,600 --> 00:06:53,760 Speaker 2: Trade talks earnings. 162 00:06:53,960 --> 00:06:55,359 Speaker 4: Does earnings take number one spot? 163 00:06:55,640 --> 00:06:57,880 Speaker 6: Well, the volatility Markets team to think soon if you 164 00:06:57,880 --> 00:07:00,400 Speaker 6: look at what's priced in in terms of moves per day, 165 00:07:00,440 --> 00:07:02,839 Speaker 6: it certainly seems like the earnings are what's going to 166 00:07:02,839 --> 00:07:06,080 Speaker 6: be a bigger driver. But certainly with the FLED, I 167 00:07:06,120 --> 00:07:09,680 Speaker 6: think we should pay particular attention to what happens with 168 00:07:09,760 --> 00:07:12,160 Speaker 6: the balance sheet. I do think that the twenty five 169 00:07:12,240 --> 00:07:15,880 Speaker 6: basis point rate cut is very well advertised and very 170 00:07:15,920 --> 00:07:19,080 Speaker 6: well priced, but it's really about if they do do 171 00:07:19,200 --> 00:07:21,800 Speaker 6: something with the balance sheet runoff and if that gets 172 00:07:21,840 --> 00:07:25,160 Speaker 6: announced today. Obviously we heard from chair Powell earlier in 173 00:07:25,200 --> 00:07:27,600 Speaker 6: the month which was about in the coming months, but 174 00:07:27,640 --> 00:07:30,160 Speaker 6: the market is expecting for some sound, some sort of 175 00:07:30,200 --> 00:07:32,840 Speaker 6: announcement today, so that would be important. And then of 176 00:07:32,880 --> 00:07:35,040 Speaker 6: course for the rest of the week it's earnings. And 177 00:07:35,080 --> 00:07:37,440 Speaker 6: then finally the New York Marathon, the New York Marathon. 178 00:07:37,480 --> 00:07:38,760 Speaker 4: For you do you want do you want to share it? 179 00:07:38,800 --> 00:07:41,000 Speaker 4: Up front? How many marathons? If you wrote run many 180 00:07:41,040 --> 00:07:43,240 Speaker 4: in the numbers, many in the twenties. Now we're in 181 00:07:43,280 --> 00:07:45,320 Speaker 4: the twenties, okay. And what charity are supporting. 182 00:07:45,640 --> 00:07:48,840 Speaker 6: It's called Shoe for Africa. It's a charity for children 183 00:07:48,840 --> 00:07:50,480 Speaker 6: in Kenya and it's building a hospital. 184 00:07:50,640 --> 00:07:53,160 Speaker 4: Very cool. So if anyone wants to donate, of course, reach. 185 00:07:52,960 --> 00:07:55,679 Speaker 5: Out modest it's twenty six that is insane. 186 00:07:55,720 --> 00:07:58,440 Speaker 2: Twenty six is absolutely unreal. We're going to talk about 187 00:07:58,480 --> 00:08:01,320 Speaker 2: that later. Let's focus on this if we can QT. 188 00:08:01,680 --> 00:08:03,960 Speaker 2: What are the implications of backing off from QT? 189 00:08:04,280 --> 00:08:07,760 Speaker 6: Absolutely so a couple of things. First, recognizing if that 190 00:08:07,920 --> 00:08:11,880 Speaker 6: does happen, where does the where do the reinvestments go? 191 00:08:12,040 --> 00:08:13,040 Speaker 7: I think that's the main thing. 192 00:08:13,120 --> 00:08:16,840 Speaker 6: Does it get reinvestment reinvested back into bills only? Or 193 00:08:16,920 --> 00:08:20,200 Speaker 6: is it along all tenors off the curve? And obviously 194 00:08:20,240 --> 00:08:22,000 Speaker 6: if it is a long all tennors of the curve, 195 00:08:22,080 --> 00:08:24,320 Speaker 6: that's more demand coming in for treasuring markets. And I 196 00:08:24,400 --> 00:08:26,920 Speaker 6: do think if we look at what the long end, 197 00:08:26,920 --> 00:08:29,000 Speaker 6: the very long end thirty years or so have done 198 00:08:29,360 --> 00:08:31,880 Speaker 6: over the past month I think there is a little 199 00:08:31,920 --> 00:08:35,040 Speaker 6: bit of expectation of that coming back into the market. 200 00:08:35,200 --> 00:08:38,679 Speaker 6: So if we don't get anything at all, maybe at 201 00:08:38,760 --> 00:08:40,600 Speaker 6: least in the very long end of the curve, we 202 00:08:40,640 --> 00:08:43,280 Speaker 6: could get a little bit more of that steepening that 203 00:08:43,360 --> 00:08:45,400 Speaker 6: we began to see earlier this year and then it 204 00:08:45,520 --> 00:08:48,120 Speaker 6: sort of stopped for the moment. But at the same time, 205 00:08:48,200 --> 00:08:50,280 Speaker 6: you know, we've talked about this for a while, this 206 00:08:50,440 --> 00:08:54,120 Speaker 6: is a really good opportunity in the markets to clip coupon, 207 00:08:54,640 --> 00:08:56,960 Speaker 6: especially if you're in that belly, maybe that three to 208 00:08:57,040 --> 00:08:59,800 Speaker 6: ten year part of the market that still remains. We're 209 00:09:00,040 --> 00:09:02,199 Speaker 6: still in a path for the FED to cut now 210 00:09:02,600 --> 00:09:06,440 Speaker 6: and again in December, so very clearly that's going to 211 00:09:06,480 --> 00:09:09,760 Speaker 6: be another boost to equity as well as income markets. 212 00:09:09,800 --> 00:09:12,240 Speaker 5: The FED cutting in December. Are they basically accepting that 213 00:09:12,320 --> 00:09:13,840 Speaker 5: three percent is the new two percent? 214 00:09:14,360 --> 00:09:16,800 Speaker 6: I don't know that it's three percent per se. If 215 00:09:16,880 --> 00:09:20,240 Speaker 6: you think about especially with this last CPI print, what 216 00:09:20,280 --> 00:09:23,760 Speaker 6: we saw was that very sharp and clear deceleration in 217 00:09:23,840 --> 00:09:27,640 Speaker 6: oeer and where we saw the inflation was in much 218 00:09:27,679 --> 00:09:32,240 Speaker 6: more of the temporary area such as teriff related goods, 219 00:09:32,240 --> 00:09:35,080 Speaker 6: a parallel, et cetera. If we continue to see that 220 00:09:35,640 --> 00:09:39,360 Speaker 6: deceleration in OER in shelter. More broadly, I think you 221 00:09:39,400 --> 00:09:41,439 Speaker 6: can reach a world by the end of twenty twenty 222 00:09:41,480 --> 00:09:43,559 Speaker 6: six when you're seeing sort of that two and a 223 00:09:43,679 --> 00:09:47,120 Speaker 6: half percent core CPI, and I think that is something 224 00:09:47,200 --> 00:09:50,600 Speaker 6: that the FED will accept and be able to at 225 00:09:50,720 --> 00:09:53,840 Speaker 6: least the FED, you know, the future FED probably will 226 00:09:53,880 --> 00:09:57,320 Speaker 6: be able to live with in a world where some 227 00:09:57,400 --> 00:10:00,640 Speaker 6: of the inflation that is coming through its probably more 228 00:10:00,679 --> 00:10:03,480 Speaker 6: transitory in nature. I think it's all about shelter, and 229 00:10:03,520 --> 00:10:06,120 Speaker 6: it's all about OAR, and we've seen some very good 230 00:10:06,200 --> 00:10:07,040 Speaker 6: numbers on that front. 231 00:10:07,240 --> 00:10:10,439 Speaker 5: Just have the trade talks happening, the possible lowering rate 232 00:10:11,000 --> 00:10:13,160 Speaker 5: of the US tariff level on China. 233 00:10:13,240 --> 00:10:14,760 Speaker 1: Is that helpful for the Federal Reserve? 234 00:10:14,920 --> 00:10:16,679 Speaker 6: I think it has to be. Again when we talk 235 00:10:16,720 --> 00:10:20,960 Speaker 6: about what is the transitory, temporary drivers of inflation, some 236 00:10:21,000 --> 00:10:23,079 Speaker 6: of those, as we have seen in the core goods 237 00:10:23,160 --> 00:10:26,200 Speaker 6: data over the last three months, are very much related 238 00:10:26,280 --> 00:10:29,600 Speaker 6: to those tariff inputs. So to the extent we now 239 00:10:29,920 --> 00:10:33,199 Speaker 6: can live in a world where that tariff rate is 240 00:10:33,320 --> 00:10:36,439 Speaker 6: severely higher than last year, but not as high as 241 00:10:36,440 --> 00:10:39,280 Speaker 6: we had expected. It's not in the twenties, maybe in 242 00:10:39,320 --> 00:10:42,400 Speaker 6: the mid teens, and it's passing through slowly. I think 243 00:10:42,400 --> 00:10:45,760 Speaker 6: that's another important point. How much is the consumer bearing 244 00:10:45,800 --> 00:10:49,040 Speaker 6: and so far we've only we haven't seen as much 245 00:10:49,080 --> 00:10:52,560 Speaker 6: as perhaps feared in Q one and Q two. All 246 00:10:52,600 --> 00:10:55,560 Speaker 6: of those I think that that rate coming lower, maybe 247 00:10:55,679 --> 00:10:59,360 Speaker 6: settling in the mid teens, as well as the transmission 248 00:10:59,440 --> 00:11:02,679 Speaker 6: mechanism being lower than originally feared, are good for a 249 00:11:02,720 --> 00:11:05,320 Speaker 6: FED that wants to keep interest rates more moderate. 250 00:11:05,400 --> 00:11:07,560 Speaker 2: So that's the framework for thinking about this market. Let's 251 00:11:07,559 --> 00:11:10,240 Speaker 2: talk about this market how to express risks. So yesterday 252 00:11:10,320 --> 00:11:12,880 Speaker 2: was an odd session, three hundred and ninety eight decliners 253 00:11:12,880 --> 00:11:15,120 Speaker 2: on the S and P five hundred, only one hundred 254 00:11:15,120 --> 00:11:16,200 Speaker 2: and four stocks advance. 255 00:11:16,480 --> 00:11:18,400 Speaker 4: This was very top heavy, led by tech. 256 00:11:18,600 --> 00:11:20,240 Speaker 2: Don't ask me why it doesn't add up to five 257 00:11:20,280 --> 00:11:22,200 Speaker 2: hundred on the S and P five hundred, Complain to 258 00:11:22,240 --> 00:11:25,640 Speaker 2: someone else. This came from Deutsche banker Jim Reid, and 259 00:11:25,760 --> 00:11:28,400 Speaker 2: he put up these numbers and said they're only one 260 00:11:28,480 --> 00:11:30,240 Speaker 2: hundred and four advances on the S and P, the 261 00:11:30,280 --> 00:11:32,360 Speaker 2: fewest in over two weeks and actually the fewest on 262 00:11:32,400 --> 00:11:35,040 Speaker 2: an update as far back as my data on advances 263 00:11:35,040 --> 00:11:39,160 Speaker 2: and decliners goes, thanks to nineteen ninety what's the takeaway 264 00:11:39,280 --> 00:11:40,520 Speaker 2: from the last twenty four hours. 265 00:11:40,640 --> 00:11:42,600 Speaker 6: I think the takeaway maybe not just for the last 266 00:11:42,640 --> 00:11:45,160 Speaker 6: twenty four hours, I would say the last year is 267 00:11:45,240 --> 00:11:48,920 Speaker 6: that earnings growth is driving as in p performance, and 268 00:11:48,960 --> 00:11:51,280 Speaker 6: you want to be where the earnings growth is and 269 00:11:51,360 --> 00:11:54,760 Speaker 6: where is that earnings growth. It is in those hyperscalar names. 270 00:11:55,040 --> 00:11:57,880 Speaker 6: It is in AI and frankly it is broadening out 271 00:11:57,880 --> 00:12:00,760 Speaker 6: a little bit too broad, large gap, and I think 272 00:12:00,840 --> 00:12:03,400 Speaker 6: that's where you want to be. You know, could we 273 00:12:03,559 --> 00:12:06,400 Speaker 6: get a few negative surprises of the course of the 274 00:12:06,440 --> 00:12:09,520 Speaker 6: next three days and could that maybe bring a little 275 00:12:09,520 --> 00:12:12,439 Speaker 6: bit of volatility, some down days in the market. Absolutely, 276 00:12:12,760 --> 00:12:17,439 Speaker 6: But is there a structural story here, especially around AI monetization. 277 00:12:17,960 --> 00:12:20,040 Speaker 6: We think so. We've been talking about this from the 278 00:12:20,040 --> 00:12:23,120 Speaker 6: start of the year with respect to our positive view 279 00:12:23,160 --> 00:12:26,040 Speaker 6: around AI, and we think as long as we see 280 00:12:26,040 --> 00:12:30,040 Speaker 6: that demand as well as their monetization, as well as 281 00:12:30,120 --> 00:12:33,559 Speaker 6: the user actually being able to benefit from AI, we 282 00:12:33,640 --> 00:12:36,640 Speaker 6: might see that in ad revenues and such. I think 283 00:12:36,640 --> 00:12:40,480 Speaker 6: this continues. I think it might broaden out to more 284 00:12:40,600 --> 00:12:42,960 Speaker 6: of the larger cap names instead of just the four 285 00:12:43,080 --> 00:12:46,240 Speaker 6: or five hyperscalers. I think that's something we're looking forward 286 00:12:46,320 --> 00:12:50,120 Speaker 6: to and telling investors to focus on. But the point 287 00:12:50,320 --> 00:12:53,280 Speaker 6: about yesterday and a very small percentage of the index 288 00:12:53,320 --> 00:12:55,199 Speaker 6: being up is not a new story. It is a 289 00:12:55,240 --> 00:12:58,200 Speaker 6: feature of this market, not a bug. That is where 290 00:12:58,200 --> 00:12:59,160 Speaker 6: the earnings growth is. 291 00:12:59,280 --> 00:13:01,360 Speaker 2: So let's look at the black recommend you you're familiar 292 00:13:01,360 --> 00:13:03,120 Speaker 2: with it more than I am. Is this just a 293 00:13:03,200 --> 00:13:06,600 Speaker 2: vanilla sm P five hundred market camp whited index story? 294 00:13:06,600 --> 00:13:08,920 Speaker 2: Express risk that way or is it more optimal waite 295 00:13:08,920 --> 00:13:10,439 Speaker 2: to express risk in the secuity market. 296 00:13:10,559 --> 00:13:13,440 Speaker 6: It can be depending on who the investor is. And 297 00:13:13,480 --> 00:13:16,079 Speaker 6: again some people just want you know, you're stepping into 298 00:13:16,120 --> 00:13:18,000 Speaker 6: the market for the first time and you want something 299 00:13:18,040 --> 00:13:20,800 Speaker 6: easy and IVV will do the job for you. What 300 00:13:20,880 --> 00:13:23,840 Speaker 6: we are telling investors though, this is the time to 301 00:13:23,920 --> 00:13:27,600 Speaker 6: focus on things like BAI, which is our actively managed 302 00:13:27,679 --> 00:13:32,640 Speaker 6: AI ETF, which again gives you some of those very 303 00:13:32,679 --> 00:13:36,320 Speaker 6: specific earning story in the AI space. We think you 304 00:13:36,440 --> 00:13:39,679 Speaker 6: should have that satellite allocation. The other thing that we're 305 00:13:39,720 --> 00:13:43,240 Speaker 6: talking about is if you're thinking about the broadening out 306 00:13:43,480 --> 00:13:47,320 Speaker 6: theme with respect to large caps. Again, that is something 307 00:13:47,360 --> 00:13:50,400 Speaker 6: you can do again with a black Rock large gap 308 00:13:50,520 --> 00:13:53,520 Speaker 6: value or a black Rock large gap It's called blc 309 00:13:53,840 --> 00:13:55,480 Speaker 6: R fund, which is sort of the rest of the 310 00:13:55,559 --> 00:13:57,920 Speaker 6: market with a focus as well on a. 311 00:13:57,960 --> 00:13:58,800 Speaker 7: Large cap deck. 312 00:13:59,240 --> 00:14:02,760 Speaker 6: And then I'd think for many investors out there right now, 313 00:14:02,880 --> 00:14:05,880 Speaker 6: especially you're getting that six six and a half seven 314 00:14:05,920 --> 00:14:07,920 Speaker 6: percent income, you no longer have to wait Toll You're 315 00:14:07,960 --> 00:14:11,400 Speaker 6: eighty five years old for fixed income. I own fixed income. 316 00:14:11,440 --> 00:14:13,760 Speaker 6: I hope you guys do again focusing on something like 317 00:14:13,840 --> 00:14:18,000 Speaker 6: bink earning that six percent coupon, it's a really great opportunity, 318 00:14:18,160 --> 00:14:20,680 Speaker 6: especially with the Fed boys, to cut more. 319 00:14:20,640 --> 00:14:21,280 Speaker 4: Stay with us. 320 00:14:21,600 --> 00:14:34,200 Speaker 2: More Bloomberg surveillance coming up after this. So here's the 321 00:14:34,240 --> 00:14:37,480 Speaker 2: latest this morning in video, extending gains after President Trump 322 00:14:37,480 --> 00:14:40,640 Speaker 2: said he will discuss the chip makers Blackwell Ai processes 323 00:14:40,680 --> 00:14:43,560 Speaker 2: with the Chinese leader pre Fedogho of News Street Research, 324 00:14:43,680 --> 00:14:45,800 Speaker 2: keeping a buy rating on the stock with a price 325 00:14:45,880 --> 00:14:49,000 Speaker 2: target of two thirty five. Pierre, that quote from the 326 00:14:49,000 --> 00:14:51,240 Speaker 2: president overnight and welcome to the program. Let me read 327 00:14:51,280 --> 00:14:53,680 Speaker 2: it out for you. It's very basic, very simple. It's 328 00:14:53,680 --> 00:14:56,000 Speaker 2: worth a few hundred billion, apparently to this market camp. 329 00:14:56,240 --> 00:15:00,240 Speaker 2: We'll be speaking about Blackwell's Pierre. How important is that 330 00:15:00,240 --> 00:15:02,800 Speaker 2: that we're opening the door to Infinia being app to 331 00:15:02,840 --> 00:15:05,520 Speaker 2: sell the high end ships into China? 332 00:15:06,800 --> 00:15:10,520 Speaker 8: Well, John's thinking about it in absolute terms, Nvidia historically 333 00:15:11,200 --> 00:15:13,960 Speaker 8: hard like twenty twenty five percent of their revenues coming 334 00:15:13,960 --> 00:15:17,240 Speaker 8: from China, so we are talking like a fifty. 335 00:15:16,920 --> 00:15:20,840 Speaker 9: Billion dollar annual revenue opportunity. 336 00:15:20,920 --> 00:15:23,880 Speaker 8: So yes, as you said, easily worth a few hundred 337 00:15:23,880 --> 00:15:25,080 Speaker 8: billion dollars. 338 00:15:26,200 --> 00:15:29,960 Speaker 9: Now, if you take a step back, the almost. 339 00:15:29,680 --> 00:15:34,800 Speaker 8: Like like the surprising perspective is that given the scale 340 00:15:34,800 --> 00:15:37,440 Speaker 8: of the success of Nvidia, it's actually a relatively small 341 00:15:37,480 --> 00:15:41,520 Speaker 8: moving part when you compare that to what Jansen said 342 00:15:41,600 --> 00:15:44,880 Speaker 8: yesterday in Washington. He said he was expecting like a 343 00:15:44,880 --> 00:15:48,680 Speaker 8: half a trillion dollars of cumulated revenue for the black 344 00:15:48,720 --> 00:15:52,040 Speaker 8: Well and Ravine product cycles this year and next year. 345 00:15:52,960 --> 00:15:55,400 Speaker 8: We are talking here numbers that are like fifty percent 346 00:15:55,480 --> 00:15:59,640 Speaker 8: above what consensus expectations are today. So it's a very 347 00:15:59,760 --> 00:16:02,720 Speaker 8: very nice comments from the President on the on the 348 00:16:02,840 --> 00:16:06,560 Speaker 8: diverse super chips is actually a small moving part this 349 00:16:06,640 --> 00:16:11,680 Speaker 8: morning compared to what Insten said yesterday yesterday, and then 350 00:16:11,760 --> 00:16:15,800 Speaker 8: said the market is still accelerating, which is very very impressive. 351 00:16:16,440 --> 00:16:19,120 Speaker 5: He also said that China has made it clear they 352 00:16:19,200 --> 00:16:22,480 Speaker 5: don't want Nvidia there right now, even though the President 353 00:16:22,520 --> 00:16:27,440 Speaker 5: has allowed some licensing for some chips. If China can 354 00:16:27,440 --> 00:16:29,840 Speaker 5: get their hands on blackwell, well they then want video 355 00:16:30,080 --> 00:16:31,000 Speaker 5: in their marketplace. 356 00:16:32,800 --> 00:16:35,760 Speaker 9: Yes, of course, what you're say in the market is that. 357 00:16:36,480 --> 00:16:38,840 Speaker 8: And you know, we could talk about China this morning, 358 00:16:38,880 --> 00:16:43,600 Speaker 8: we talk about Microsoft, Opena, about Amazon. 359 00:16:44,280 --> 00:16:45,720 Speaker 9: Nobody wants in VideA. 360 00:16:45,800 --> 00:16:48,640 Speaker 8: Everybody is worried about like the market power they have, 361 00:16:49,040 --> 00:16:52,560 Speaker 8: but nobody can afford not to use that VideA if 362 00:16:53,280 --> 00:16:56,040 Speaker 8: they can, because today being able to use in video 363 00:16:56,160 --> 00:17:01,200 Speaker 8: chips gives you an this is youve advantage in terms 364 00:17:01,240 --> 00:17:04,640 Speaker 8: of time to markeage. You can get going immediately as 365 00:17:04,640 --> 00:17:07,800 Speaker 8: the highest visible performance. But everybody in the long term 366 00:17:07,880 --> 00:17:11,400 Speaker 8: is working on you know, as donatives to in Vidia 367 00:17:11,520 --> 00:17:14,040 Speaker 8: to keep in Vida's market bower in check. And so 368 00:17:14,080 --> 00:17:17,000 Speaker 8: you see opening I signing giant deals with AMD. You 369 00:17:17,040 --> 00:17:19,720 Speaker 8: see everybody doing being their own eysics and China is 370 00:17:19,760 --> 00:17:23,119 Speaker 8: no different are donatives. But if to more they can 371 00:17:23,160 --> 00:17:25,560 Speaker 8: get a few blackwords, it would take them immediately. 372 00:17:26,440 --> 00:17:29,320 Speaker 2: And Video is clearly looking for an opportunity here pre 373 00:17:29,800 --> 00:17:32,240 Speaker 2: and an opportunity that the President is offering them. But 374 00:17:32,280 --> 00:17:34,560 Speaker 2: I just wondered to what extent China has been successful 375 00:17:34,760 --> 00:17:37,719 Speaker 2: without access to the highest chips the high end chips. Pierre, 376 00:17:37,920 --> 00:17:40,280 Speaker 2: it feels like deep Sink was a moment that happened. 377 00:17:40,280 --> 00:17:42,520 Speaker 2: We wrestled with it and just moved on. But from 378 00:17:42,520 --> 00:17:44,640 Speaker 2: the people we speak to, Pierre, it looks like China 379 00:17:44,640 --> 00:17:47,399 Speaker 2: has been hyper focused on efficiency and the US is 380 00:17:47,440 --> 00:17:49,679 Speaker 2: going in a different direction. But if you look at 381 00:17:49,720 --> 00:17:52,800 Speaker 2: the strategies of either the US and China at the moment, 382 00:17:52,960 --> 00:17:55,960 Speaker 2: who's got the lead, even before discussing access to the 383 00:17:56,040 --> 00:17:58,119 Speaker 2: highest end in video chips, who's got the lead at 384 00:17:58,160 --> 00:17:58,520 Speaker 2: the moment? 385 00:18:00,040 --> 00:18:02,480 Speaker 8: Well, the lead, it's a great question. The lead is 386 00:18:02,480 --> 00:18:05,439 Speaker 8: definitely at the frontier. It's being first to market with 387 00:18:05,520 --> 00:18:08,359 Speaker 8: the most advanced models. And on that front, there is 388 00:18:08,400 --> 00:18:12,359 Speaker 8: absolutely no question the US is in a very strong 389 00:18:12,440 --> 00:18:16,920 Speaker 8: leadership position. Then now if you look at so that's 390 00:18:16,960 --> 00:18:19,600 Speaker 8: like the technological leads. So the technological lead is very 391 00:18:19,600 --> 00:18:21,880 Speaker 8: clearly in the US. Now you have the industrial lead, 392 00:18:21,960 --> 00:18:25,800 Speaker 8: you have like the efficiency lead. Players like Diepsick are 393 00:18:25,880 --> 00:18:30,600 Speaker 8: very are y are very good at making models more efficient, 394 00:18:30,600 --> 00:18:34,840 Speaker 8: at distilling models, and so they player a very significant role. 395 00:18:34,920 --> 00:18:37,680 Speaker 9: But when it comes to getting. 396 00:18:37,359 --> 00:18:41,000 Speaker 8: Access to the largest clusters and running the most advanced models, 397 00:18:41,240 --> 00:18:43,360 Speaker 8: all that is happening in the us for sure. 398 00:18:43,480 --> 00:18:45,320 Speaker 2: So clearly we're getting a move in the pre market 399 00:18:45,320 --> 00:18:46,960 Speaker 2: off the back of the story Stuck is up quite 400 00:18:46,960 --> 00:18:48,640 Speaker 2: close to four percent. P I need to talk about 401 00:18:48,680 --> 00:18:51,480 Speaker 2: the ANX with you as well. So tech stories of 402 00:18:51,520 --> 00:18:54,679 Speaker 2: today is going to be Microsoft Meta and Alphabet tomorrow, 403 00:18:54,960 --> 00:18:58,600 Speaker 2: Apple and Amazon pre looking across those names, any vulnerabilities 404 00:18:58,760 --> 00:18:59,600 Speaker 2: for you in the same. 405 00:19:02,040 --> 00:19:05,840 Speaker 8: So well, I think the street is still digesting what 406 00:19:05,920 --> 00:19:09,119 Speaker 8: Jansen said yesterday in terms of like the twenty twenty 407 00:19:09,240 --> 00:19:12,359 Speaker 8: six outlook in terms of AI infrasta you're spending. So 408 00:19:12,400 --> 00:19:16,000 Speaker 8: really what we're going to look at is all comments 409 00:19:16,040 --> 00:19:20,000 Speaker 8: from a perscadoes do we see like a consummation of 410 00:19:20,200 --> 00:19:23,040 Speaker 8: ensense forecast in the ways they talk about their capex 411 00:19:23,040 --> 00:19:27,800 Speaker 8: and their spending spending plans, and then in terms of 412 00:19:27,840 --> 00:19:30,480 Speaker 8: vulnerable it is now very difficult to see that we 413 00:19:30,560 --> 00:19:33,520 Speaker 8: were definitely like in the bulwick where everything seems to 414 00:19:33,560 --> 00:19:36,199 Speaker 8: be like accelerating, and even when you look at Apple, 415 00:19:37,080 --> 00:19:40,320 Speaker 8: who is not the best best position player in the 416 00:19:40,920 --> 00:19:43,800 Speaker 8: AI race, they have a lot of tailwind at the 417 00:19:43,800 --> 00:19:48,040 Speaker 8: moment the iPhone cycle is actually playing relatively well for them, 418 00:19:48,080 --> 00:19:51,600 Speaker 8: which has generated some very positive vibes and should turn 419 00:19:51,640 --> 00:19:54,000 Speaker 8: into a stronger inings report. 420 00:19:54,240 --> 00:19:57,200 Speaker 2: If I remember waiting for amples across that one, suly 421 00:19:57,240 --> 00:19:59,520 Speaker 2: intil a lane in the sand. Can we just reflect 422 00:19:59,560 --> 00:20:04,400 Speaker 2: on your career per five trillion dollar market caps, Pierre, 423 00:20:04,440 --> 00:20:06,399 Speaker 2: how do you sort of internalize that number? 424 00:20:06,880 --> 00:20:07,879 Speaker 4: Just how big that is? 425 00:20:08,680 --> 00:20:10,720 Speaker 8: Yeah, it's like if you had asked me at the time, 426 00:20:10,800 --> 00:20:12,440 Speaker 8: it's it's it's like unbelievable. 427 00:20:12,720 --> 00:20:14,360 Speaker 9: And and the thing is that. 428 00:20:15,840 --> 00:20:19,560 Speaker 8: It's part of a border of course, of a border 429 00:20:19,720 --> 00:20:23,600 Speaker 8: border phenomenon, and like the number of multitude dollar market 430 00:20:23,640 --> 00:20:27,200 Speaker 8: gaps that we have now in technology, it's it's mind 431 00:20:27,200 --> 00:20:32,280 Speaker 8: blowing of growth and of like also concentration of economic 432 00:20:32,359 --> 00:20:33,960 Speaker 8: value in tech names. 433 00:20:34,000 --> 00:20:35,680 Speaker 9: It's like really mind blowing. 434 00:20:36,160 --> 00:20:39,960 Speaker 8: And specifically on Apple, Apple like it's a very low growth, 435 00:20:40,520 --> 00:20:45,119 Speaker 8: very like legacy type of franchise. Now in the AI world, 436 00:20:46,400 --> 00:20:48,880 Speaker 8: it's difficult for them to find the right grip on AI, 437 00:20:49,320 --> 00:20:53,080 Speaker 8: but it remains a very very high multiple expensive stock 438 00:20:53,200 --> 00:20:57,120 Speaker 8: because the market is still valuing the quality of the franchise. 439 00:20:57,200 --> 00:21:00,600 Speaker 8: So so I didn't think one on. 440 00:21:00,560 --> 00:21:01,080 Speaker 9: Top of the other. 441 00:21:01,240 --> 00:21:03,439 Speaker 8: Yes, you like, I almost five durin the lod of 442 00:21:03,480 --> 00:21:04,600 Speaker 8: market just amazing. 443 00:21:04,960 --> 00:21:05,600 Speaker 4: Stay with us. 444 00:21:05,920 --> 00:21:18,080 Speaker 2: More Bloomberg Surveillance coming up. After this, President Trump planning 445 00:21:18,080 --> 00:21:20,959 Speaker 2: to lower tariffs on China over the fentinal crisis, as 446 00:21:21,040 --> 00:21:24,119 Speaker 2: China buys its first US soybeans in months ahead of 447 00:21:24,160 --> 00:21:27,280 Speaker 2: tomorrow's face to face meeting with President she let's stick 448 00:21:27,320 --> 00:21:31,000 Speaker 2: with the US and China. Mary Lovely of the Peterson Institute, writing, 449 00:21:31,080 --> 00:21:33,840 Speaker 2: systemic issues will not be addressed in this round. We're 450 00:21:33,920 --> 00:21:37,160 Speaker 2: unlikely to see much progress. Mary joins us now for more. Mary, 451 00:21:37,200 --> 00:21:39,480 Speaker 2: welcome to the program. Just first question, what do you 452 00:21:39,520 --> 00:21:42,240 Speaker 2: regard as a systemic issue with regards to the US 453 00:21:42,240 --> 00:21:42,680 Speaker 2: and China. 454 00:21:44,080 --> 00:21:46,879 Speaker 10: Well, we see some of these systemic issues in trump 455 00:21:46,960 --> 00:21:51,840 Speaker 10: One treatment of US intellectual property, but there's a whole 456 00:21:51,840 --> 00:21:55,440 Speaker 10: host of issues having to do with what the US 457 00:21:55,480 --> 00:22:02,480 Speaker 10: perceives as ex bands or barriers that prevent US exports 458 00:22:02,520 --> 00:22:06,920 Speaker 10: into the country and contribute to the lopsided trade balance 459 00:22:06,960 --> 00:22:12,120 Speaker 10: between the two. We have questions from businesses that American 460 00:22:12,160 --> 00:22:15,520 Speaker 10: businesses operating in China in terms of export bands and 461 00:22:15,600 --> 00:22:19,080 Speaker 10: other things that prevent them from having their own personnel 462 00:22:19,119 --> 00:22:19,600 Speaker 10: in place. 463 00:22:20,440 --> 00:22:22,080 Speaker 7: There's a whole variety. 464 00:22:21,680 --> 00:22:26,119 Speaker 10: Of issues that have contributed this tension, including older issues 465 00:22:26,160 --> 00:22:28,280 Speaker 10: which you will remember from the first trade War, John, 466 00:22:28,680 --> 00:22:35,120 Speaker 10: things like industrial subsidies China support for firms through their 467 00:22:35,119 --> 00:22:39,800 Speaker 10: state banking system, other things that make Chinese exports uber 468 00:22:39,840 --> 00:22:41,080 Speaker 10: competitive in the West. 469 00:22:41,400 --> 00:22:42,680 Speaker 1: Mary the President. 470 00:22:42,440 --> 00:22:44,879 Speaker 5: Tyling reporters that they're going to be speaking about Blackwell, 471 00:22:44,960 --> 00:22:47,480 Speaker 5: this is one of the most advanced AI chips the 472 00:22:47,520 --> 00:22:50,639 Speaker 5: United States has access to. Is the president if he 473 00:22:50,640 --> 00:22:53,240 Speaker 5: allows Beijing to buy these chips? Is the President rewarding 474 00:22:53,280 --> 00:22:54,000 Speaker 5: bad behavior? 475 00:22:56,400 --> 00:22:58,320 Speaker 7: Well, I guess it depends on how you look at it. 476 00:22:58,400 --> 00:23:01,680 Speaker 10: I think there is a bigger issue, which is how 477 00:23:01,720 --> 00:23:04,879 Speaker 10: do we protect US national security? And as you know, 478 00:23:05,520 --> 00:23:09,040 Speaker 10: there is some contention within the Trump administration as to 479 00:23:09,119 --> 00:23:12,000 Speaker 10: how best that can be done. There of course continue 480 00:23:12,040 --> 00:23:14,879 Speaker 10: to be so called China hawks who want the US 481 00:23:15,080 --> 00:23:18,120 Speaker 10: to do everything it can to prevent the most advanced 482 00:23:18,160 --> 00:23:21,640 Speaker 10: technologies from falling into Chinese hands. There are others who 483 00:23:21,640 --> 00:23:24,320 Speaker 10: believe that, and this has been said by the President 484 00:23:24,359 --> 00:23:26,200 Speaker 10: that one of the things we might want we want 485 00:23:26,240 --> 00:23:29,199 Speaker 10: to do is to get the Chinese addicted to US chips, 486 00:23:29,320 --> 00:23:32,760 Speaker 10: US tech. So I think that we're seeing some difference 487 00:23:32,800 --> 00:23:35,080 Speaker 10: in opinion. We always knew it was going to come 488 00:23:35,119 --> 00:23:39,760 Speaker 10: down to President Trump's decision. President Trump is a deal maker. 489 00:23:39,880 --> 00:23:42,600 Speaker 10: He would like to see an increase in US commerce 490 00:23:42,720 --> 00:23:45,800 Speaker 10: US sales to China, and of course these ships are 491 00:23:45,800 --> 00:23:46,760 Speaker 10: a primary way that. 492 00:23:46,720 --> 00:23:47,560 Speaker 7: Can be done. 493 00:23:47,840 --> 00:23:50,160 Speaker 5: How much influence do you think someone like Jensen Wong 494 00:23:50,320 --> 00:23:51,480 Speaker 5: has had on the president. 495 00:23:52,920 --> 00:23:55,560 Speaker 10: I think the tech community in general has had an 496 00:23:55,600 --> 00:24:00,560 Speaker 10: outsize influence on the president, not only lead through this, 497 00:24:00,680 --> 00:24:04,400 Speaker 10: but in terms of his behavior toward crypto and crypto 498 00:24:04,440 --> 00:24:09,359 Speaker 10: regulation and other issues. For example, and these trade deals 499 00:24:09,359 --> 00:24:12,760 Speaker 10: that he's signing with other countries. We're seeing a promise 500 00:24:12,800 --> 00:24:15,840 Speaker 10: by other countries that they won't levy digital service taxes 501 00:24:15,840 --> 00:24:18,960 Speaker 10: and other kinds of taxes that might impede US tech 502 00:24:19,040 --> 00:24:21,880 Speaker 10: rollout to other countries. So in general, I think he's 503 00:24:21,880 --> 00:24:23,720 Speaker 10: been a very tech friendly president. 504 00:24:23,960 --> 00:24:25,920 Speaker 5: We have the contours of some sort of agreement that 505 00:24:25,960 --> 00:24:28,120 Speaker 5: they're going to reach tomorrow. 506 00:24:28,160 --> 00:24:29,119 Speaker 1: What comes next. 507 00:24:29,119 --> 00:24:31,480 Speaker 5: Where does this leave the relationship for twenty twenty six. 508 00:24:33,040 --> 00:24:37,119 Speaker 7: Well, it reduces the tensions and potentially restores some market 509 00:24:37,160 --> 00:24:38,440 Speaker 7: access to China. 510 00:24:39,200 --> 00:24:43,080 Speaker 10: For example, by rolling back those ventanyl taxes by ten 511 00:24:43,119 --> 00:24:46,720 Speaker 10: percentage points, China will get down closer to forty five 512 00:24:47,560 --> 00:24:51,639 Speaker 10: percent or even forty percent average teriffrey, which means that 513 00:24:51,680 --> 00:24:55,360 Speaker 10: the pressure on Chinese companies to go out build their 514 00:24:55,359 --> 00:24:58,240 Speaker 10: factories and other countries will be lessened, So we're going 515 00:24:58,320 --> 00:25:01,879 Speaker 10: to see a significant decrease in tensions. Then I think 516 00:25:01,920 --> 00:25:04,440 Speaker 10: there's a hope on the US side that we can 517 00:25:04,480 --> 00:25:09,240 Speaker 10: turn to issues which have prevented US exporters from gaining 518 00:25:09,280 --> 00:25:13,880 Speaker 10: more of the Chinese market. So I think probably or surely, 519 00:25:14,200 --> 00:25:17,720 Speaker 10: Secretary Investent Trade Representative Greer have a whole host of 520 00:25:17,800 --> 00:25:21,400 Speaker 10: issues that they want to discuss with the Chinese, including, 521 00:25:21,440 --> 00:25:26,240 Speaker 10: as I mentioned before, industrial subsidies, subsidies that come through 522 00:25:26,280 --> 00:25:29,560 Speaker 10: the Chinese state banking system included. 523 00:25:30,000 --> 00:25:33,000 Speaker 5: Do you think China is willing and ready to make 524 00:25:33,040 --> 00:25:33,760 Speaker 5: those changes. 525 00:25:36,320 --> 00:25:40,080 Speaker 10: I think China is willing to make some changes, not 526 00:25:40,200 --> 00:25:43,679 Speaker 10: all that the US wants. China right now is of 527 00:25:43,680 --> 00:25:48,280 Speaker 10: course struggling a little bit to revive its local demand. 528 00:25:49,080 --> 00:25:52,080 Speaker 10: It does not want to be as dependent on exports. 529 00:25:52,160 --> 00:25:54,720 Speaker 10: Net exports from China group by thirty six percent in 530 00:25:54,720 --> 00:25:57,040 Speaker 10: the year to date. That means that a lot of 531 00:25:57,119 --> 00:25:59,480 Speaker 10: Chinese growth is dependent on the rest of the world, 532 00:25:59,560 --> 00:26:04,359 Speaker 10: except they're exports, and for many countries that means accepting 533 00:26:04,400 --> 00:26:06,119 Speaker 10: that they'll be permanently in. 534 00:26:06,240 --> 00:26:07,680 Speaker 7: A trade deficit position. 535 00:26:08,119 --> 00:26:11,359 Speaker 10: So China knows that this reliance on net exports is 536 00:26:11,400 --> 00:26:15,080 Speaker 10: really not sustainable, and they're looking for alternatives to that. 537 00:26:15,480 --> 00:26:17,359 Speaker 7: So I think some of these changes are. 538 00:26:17,280 --> 00:26:21,359 Speaker 10: Within the realm of things that Chinese authorities want to do. 539 00:26:21,840 --> 00:26:25,280 Speaker 10: But when it comes to putting their development first, relying 540 00:26:25,320 --> 00:26:29,280 Speaker 10: on growth in their tech industry, the diffusion of AI 541 00:26:29,400 --> 00:26:36,280 Speaker 10: throughout their manufacturing, and continued emphasis on industrial development, those 542 00:26:36,320 --> 00:26:36,960 Speaker 10: are not going to. 543 00:26:36,960 --> 00:26:39,520 Speaker 2: Change very You know about these issues far out of Deny, 544 00:26:39,600 --> 00:26:41,160 Speaker 2: But this is a conversation that you and I could 545 00:26:41,200 --> 00:26:43,800 Speaker 2: have had ten years ago. And back then we were 546 00:26:43,800 --> 00:26:46,480 Speaker 2: talking about Chinese other capacity and people said the same thing, 547 00:26:46,520 --> 00:26:47,560 Speaker 2: that it wasn't sustainable. 548 00:26:47,640 --> 00:26:48,399 Speaker 4: They needed to change. 549 00:26:48,400 --> 00:26:51,080 Speaker 2: They understand that, and here we are ten years later 550 00:26:51,160 --> 00:26:53,080 Speaker 2: and they're on course to run a record surplus this 551 00:26:53,160 --> 00:26:57,480 Speaker 2: year even without stential trade with the United States. Mary, 552 00:26:57,480 --> 00:26:59,760 Speaker 2: in your mind, at the moment in the history that 553 00:26:59,800 --> 00:27:03,560 Speaker 2: you've following this, what makes this unsustainable? What would stop 554 00:27:03,600 --> 00:27:05,760 Speaker 2: them from doing what they've been doing for such a long. 555 00:27:05,600 --> 00:27:09,320 Speaker 7: Time, Well, they are really struggling. 556 00:27:09,400 --> 00:27:12,359 Speaker 10: Obviously, they need to buy more of the things they 557 00:27:12,400 --> 00:27:13,480 Speaker 10: make domestically. 558 00:27:13,680 --> 00:27:15,640 Speaker 7: Yet Chinese domestic. 559 00:27:15,200 --> 00:27:18,200 Speaker 10: Demand has really been moribund. People don't have a good 560 00:27:18,240 --> 00:27:22,360 Speaker 10: outlook for the future. Firms investment outside of the tech 561 00:27:22,400 --> 00:27:27,080 Speaker 10: sector has been lackluster as well, so they really need 562 00:27:27,119 --> 00:27:29,719 Speaker 10: to revive their own economy if they're going to, you know, 563 00:27:29,840 --> 00:27:34,200 Speaker 10: continue to have moderate growth so about five percent, and 564 00:27:34,240 --> 00:27:37,560 Speaker 10: not sell all those products to the rest of the world. 565 00:27:37,640 --> 00:27:42,080 Speaker 10: I think not only the US trade barriers, but protection 566 00:27:42,200 --> 00:27:46,439 Speaker 10: that's being imposed by other countries, including in more friendly 567 00:27:46,480 --> 00:27:50,280 Speaker 10: areas like the Southeast Asia, who are beginning to see 568 00:27:50,280 --> 00:27:53,120 Speaker 10: a flood of Chinese imports that are hurting their own 569 00:27:53,160 --> 00:27:57,920 Speaker 10: domestic producers. I think this response does have the attention 570 00:27:58,400 --> 00:28:01,760 Speaker 10: of the Chinese authorities. Question is just now, how can 571 00:28:01,800 --> 00:28:05,840 Speaker 10: they revive domestic demand. Just back from Shanghai, John and 572 00:28:05,880 --> 00:28:09,080 Speaker 10: I think that this was a major topic of discussion. 573 00:28:09,720 --> 00:28:12,960 Speaker 10: They're talking about new things. Obviously, investment in the real 574 00:28:13,080 --> 00:28:16,000 Speaker 10: estate sector is out. They have a lot of infrastructure. 575 00:28:16,040 --> 00:28:18,520 Speaker 10: They don't need more bridges and roads. They're talking about 576 00:28:18,520 --> 00:28:24,440 Speaker 10: things like social infrastructure, helping local governments to build things 577 00:28:24,440 --> 00:28:28,919 Speaker 10: that will help people's lives, including restoring old buildings that 578 00:28:29,000 --> 00:28:33,560 Speaker 10: need refurbishing, things that will help with children and the elderly, 579 00:28:33,880 --> 00:28:35,000 Speaker 10: the healthcare sector. 580 00:28:35,280 --> 00:28:37,280 Speaker 7: These are areas where they're starting to look and. 581 00:28:37,240 --> 00:28:40,320 Speaker 10: We hope we will see some action by the Chinese 582 00:28:40,360 --> 00:28:44,000 Speaker 10: authorities to do some kind of fiscal stimulus in this area. 583 00:28:45,160 --> 00:28:48,720 Speaker 2: This is the Bloombergs Events podcast, bringing you the best 584 00:28:48,720 --> 00:28:51,800 Speaker 2: in markets, economics, an gio politics. You can watch the 585 00:28:51,800 --> 00:28:54,840 Speaker 2: show life on Bloomberg TV weekday mornings from six am 586 00:28:54,960 --> 00:28:58,120 Speaker 2: to nine am Eastern. Subscribe to the podcast on Apple, 587 00:28:58,400 --> 00:29:01,800 Speaker 2: Spotify or anywhere else, and as always, on the Bloomberg 588 00:29:01,880 --> 00:29:08,360 Speaker 2: Terminal and the Bloomberg Business app. Mm hmm