1 00:00:05,120 --> 00:00:08,480 Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along 2 00:00:08,520 --> 00:00:12,360 Speaker 1: with Jonathan Farrell and Lisa Abramowitz. Join us each day 3 00:00:12,400 --> 00:00:16,880 Speaker 1: for insight from the best and economics, geopolitics, finance and investment. 4 00:00:17,280 --> 00:00:22,119 Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and 5 00:00:22,320 --> 00:00:26,600 Speaker 1: anywhere you get your podcasts, and always on Bloomberg dot Com, 6 00:00:26,640 --> 00:00:30,320 Speaker 1: the Bloomberg Terminal and the Bloomberg Business app List. 7 00:00:30,400 --> 00:00:32,479 Speaker 2: On the conversation with Lori Cavassin, a head of US 8 00:00:32,479 --> 00:00:36,360 Speaker 2: Secretary Strategy at RBC Capital Markets, lor the headline in 9 00:00:36,400 --> 00:00:38,720 Speaker 2: your most recent piece gif for a pause, Giff for 10 00:00:38,720 --> 00:00:39,960 Speaker 2: a pause. What does that mean, Laurie. 11 00:00:40,120 --> 00:00:42,159 Speaker 3: So look, I don't want anyone to come away from 12 00:00:42,200 --> 00:00:44,920 Speaker 3: this thinking that Lori Caalvasin is turning super bearish. But 13 00:00:45,400 --> 00:00:47,159 Speaker 3: we don't like where we are, you know, sort of 14 00:00:47,159 --> 00:00:49,519 Speaker 3: in the intermediate term, and we're seeing a couple of 15 00:00:49,560 --> 00:00:52,199 Speaker 3: things we went you know, every few months, right, we 16 00:00:52,240 --> 00:00:54,440 Speaker 3: make sure we publish an update on our targets, our 17 00:00:54,480 --> 00:00:56,560 Speaker 3: price target for the SMP. A couple of my cross 18 00:00:56,560 --> 00:01:00,520 Speaker 3: asset models are deteriorating. They were improving back in so, 19 00:01:00,640 --> 00:01:03,360 Speaker 3: in other words, the appeal of stocks relative to bonds 20 00:01:03,400 --> 00:01:03,959 Speaker 3: is worstening. 21 00:01:04,640 --> 00:01:06,959 Speaker 4: And also our sentiment model is really bothering us. 22 00:01:07,360 --> 00:01:10,040 Speaker 3: It's really back at one standard deviation above its long 23 00:01:10,120 --> 00:01:11,959 Speaker 3: term average. If you look at that fullishness on the 24 00:01:11,959 --> 00:01:15,320 Speaker 3: AAII survey, typically you see you know, kind of mid 25 00:01:15,400 --> 00:01:17,679 Speaker 3: to low single digit gains in the SMP over the 26 00:01:17,680 --> 00:01:20,080 Speaker 3: next twelve months when that happens, and this just feels to. 27 00:01:20,040 --> 00:01:20,920 Speaker 4: Me like a market. 28 00:01:21,319 --> 00:01:23,679 Speaker 3: While I think everything has been deserved in terms of 29 00:01:23,720 --> 00:01:25,920 Speaker 3: what we've done so far, it just feels like this 30 00:01:26,000 --> 00:01:28,840 Speaker 3: market needs to stop, pause, have a little moment of digestion, 31 00:01:28,959 --> 00:01:29,679 Speaker 3: and catch its fross. 32 00:01:29,720 --> 00:01:30,000 Speaker 2: Okay. 33 00:01:30,120 --> 00:01:32,200 Speaker 1: I like the analysis, and the idea is you got 34 00:01:32,240 --> 00:01:33,800 Speaker 1: to pull back to get things, you know, like get 35 00:01:33,800 --> 00:01:35,440 Speaker 1: the fear click in and you know, you know, we've 36 00:01:35,480 --> 00:01:38,000 Speaker 1: all done this and studied it. Can you just stay 37 00:01:38,080 --> 00:01:39,760 Speaker 1: flat out or through the bear market? 38 00:01:41,440 --> 00:01:45,160 Speaker 3: I never really subscribed to that thesis to begin with. Tom, 39 00:01:45,400 --> 00:01:47,600 Speaker 3: You know, I never liked this whole concept of we're 40 00:01:47,600 --> 00:01:49,520 Speaker 3: in a bear market, therefore we have to do X. 41 00:01:49,520 --> 00:01:52,200 Speaker 3: We're having a bear market rally, it's faults, don't believe it. 42 00:01:52,840 --> 00:01:54,800 Speaker 3: I just was never in that camp. I think we 43 00:01:54,920 --> 00:01:57,560 Speaker 3: priced in a recession last October, and we've basically been 44 00:01:57,600 --> 00:02:00,560 Speaker 3: having a plain old fashioned recovery trade, and now we're 45 00:02:00,600 --> 00:02:02,920 Speaker 3: seeing some of the things that we're really telling us 46 00:02:02,920 --> 00:02:04,480 Speaker 3: to hold your nose and buy. At the beginning of 47 00:02:04,480 --> 00:02:06,520 Speaker 3: the year, I go back to that sentiment model is 48 00:02:06,560 --> 00:02:08,040 Speaker 3: telling us we need to calm down. 49 00:02:07,840 --> 00:02:08,359 Speaker 4: For a little while. 50 00:02:08,520 --> 00:02:10,680 Speaker 1: Ben Ladler over to Etro writes up on the Lord 51 00:02:10,720 --> 00:02:14,600 Speaker 1: Calvacina World this morning. He talks about value, talks about 52 00:02:14,600 --> 00:02:17,600 Speaker 1: what's out there away from seven Chosen stocks as well 53 00:02:18,120 --> 00:02:21,600 Speaker 1: color or shape the value of mid caps right now. 54 00:02:23,040 --> 00:02:23,840 Speaker 4: So it's interesting. 55 00:02:23,880 --> 00:02:24,079 Speaker 5: Tom. 56 00:02:24,520 --> 00:02:26,120 Speaker 3: We do a lot of work on small caps, but 57 00:02:26,160 --> 00:02:29,320 Speaker 3: we've also been getting increasing questions on midcaps. In our 58 00:02:29,320 --> 00:02:31,440 Speaker 3: big chart deck we published this morning, we actually added 59 00:02:31,480 --> 00:02:33,760 Speaker 3: a midcaps section for the first time in quite some time, 60 00:02:34,160 --> 00:02:37,000 Speaker 3: and it's a pretty similar story to small caps. They 61 00:02:37,000 --> 00:02:37,360 Speaker 3: tend to. 62 00:02:37,400 --> 00:02:39,280 Speaker 4: Benefit when you're in recovery mode. 63 00:02:39,800 --> 00:02:41,520 Speaker 3: They started to do that a little bit, but not 64 00:02:41,560 --> 00:02:44,799 Speaker 3: as much as we would have expected. The valuation story 65 00:02:44,919 --> 00:02:47,799 Speaker 3: is pretty reasonable if you look at the multiples versus history, 66 00:02:48,080 --> 00:02:52,160 Speaker 3: the midcaps look very cheap versus the megacaps right now, 67 00:02:52,560 --> 00:02:55,040 Speaker 3: and if we get a recovery in twenty twenty four, 68 00:02:55,120 --> 00:02:57,640 Speaker 3: there should be more upside there, so we do feel like, 69 00:02:57,680 --> 00:02:59,680 Speaker 3: similar to how we feel in small caps, we feel 70 00:02:59,720 --> 00:03:01,720 Speaker 3: like that MidCap part of the market where large cap 71 00:03:01,800 --> 00:03:05,079 Speaker 3: managers actually can gravitate down to, we feel like that's 72 00:03:05,160 --> 00:03:06,600 Speaker 3: right for a catch up trade as well. 73 00:03:06,720 --> 00:03:08,320 Speaker 5: Laurie, We're going to be speaking with Michael Soon of 74 00:03:08,320 --> 00:03:10,520 Speaker 5: Morgan Stanley later in this morning, which I'm really looking 75 00:03:10,520 --> 00:03:10,960 Speaker 5: forward to. 76 00:03:11,360 --> 00:03:12,760 Speaker 4: He has a no doubt. 77 00:03:12,600 --> 00:03:15,360 Speaker 5: Talking about the fiscal backdrop and how much of a 78 00:03:15,440 --> 00:03:18,919 Speaker 5: variable that is with respect to stock performance. How does 79 00:03:18,960 --> 00:03:22,120 Speaker 5: that factor into what you're expecting going into an election 80 00:03:22,200 --> 00:03:23,720 Speaker 5: year which tends to be tumultuous. 81 00:03:25,280 --> 00:03:27,639 Speaker 3: So, you know, when we were going through this targeting, 82 00:03:27,680 --> 00:03:30,000 Speaker 3: you know, kind of refresh last weekly, so we looked 83 00:03:30,040 --> 00:03:32,240 Speaker 3: at one of our political tests, which is just a 84 00:03:32,280 --> 00:03:34,480 Speaker 3: simple election cycle test, and one of the things we 85 00:03:34,560 --> 00:03:36,240 Speaker 3: noticed is that the current year that we're intends to 86 00:03:36,280 --> 00:03:38,320 Speaker 3: be one of the strongest for the markets, so it's 87 00:03:38,320 --> 00:03:42,000 Speaker 3: been you know, kind of one of the more positive signals. 88 00:03:42,280 --> 00:03:45,440 Speaker 3: And next year, the election year itself, for a presidential year, 89 00:03:45,760 --> 00:03:47,440 Speaker 3: tends to be one of the weaker years in the 90 00:03:47,480 --> 00:03:50,080 Speaker 3: election cycle. And I just juxtapose that with what I've 91 00:03:50,120 --> 00:03:52,600 Speaker 3: been hearing from investors. They keep asking me, well, when 92 00:03:52,640 --> 00:03:54,720 Speaker 3: are people going to start paying attention to the election. 93 00:03:54,800 --> 00:03:56,280 Speaker 3: There are a lot of questions that are starting to 94 00:03:56,320 --> 00:03:58,840 Speaker 3: come up, And my response to the investors I'm speaking 95 00:03:58,880 --> 00:04:00,920 Speaker 3: with is, I think it's starting now because you're all 96 00:04:00,960 --> 00:04:03,520 Speaker 3: asking me about it, and it seems to me that 97 00:04:03,600 --> 00:04:06,160 Speaker 3: this is emerging as just a very very big source 98 00:04:06,200 --> 00:04:08,400 Speaker 3: of uncertainty as to what is going to happen with 99 00:04:08,440 --> 00:04:10,680 Speaker 3: the election next year, both in terms of the presidential 100 00:04:10,760 --> 00:04:11,640 Speaker 3: race and Congress. 101 00:04:11,720 --> 00:04:14,560 Speaker 5: So then, what is the election cycle playbook? What is 102 00:04:14,960 --> 00:04:17,800 Speaker 5: how you played this particular type of uncertainty versus the 103 00:04:17,880 --> 00:04:20,480 Speaker 5: uncertainty of where we are in the inflation cycle and 104 00:04:20,520 --> 00:04:21,280 Speaker 5: the federal reserve. 105 00:04:23,360 --> 00:04:25,160 Speaker 3: Well, I think there's a lot of, you know, questions 106 00:04:25,160 --> 00:04:27,200 Speaker 3: that are starting to emerge about the outcome. One of 107 00:04:27,240 --> 00:04:29,719 Speaker 3: the things I'm hearing from investors are, you know, they're 108 00:04:29,720 --> 00:04:31,040 Speaker 3: trying to probe whether or not. 109 00:04:30,960 --> 00:04:32,279 Speaker 4: They're alternatives to Biden. 110 00:04:32,320 --> 00:04:34,760 Speaker 3: I'm hearing a lot of questions about that from international 111 00:04:34,760 --> 00:04:37,960 Speaker 3: investors in particular. You know, I think there's a lot 112 00:04:37,960 --> 00:04:40,320 Speaker 3: of head scratching over what's going going on on the 113 00:04:40,360 --> 00:04:42,599 Speaker 3: Republican spide especially with DeSantis. 114 00:04:43,160 --> 00:04:44,680 Speaker 4: There was some excitement there early on. 115 00:04:44,760 --> 00:04:47,159 Speaker 3: Now that seems to have faded a bit, but I 116 00:04:47,160 --> 00:04:49,680 Speaker 3: think this is just really an air pocket of uncertainty 117 00:04:49,720 --> 00:04:52,520 Speaker 3: that's starting to emerge. We're not even really having detailed 118 00:04:52,520 --> 00:04:55,360 Speaker 3: conversation with clients yet about what either side would want 119 00:04:55,400 --> 00:04:58,240 Speaker 3: to do policy measures. It's really you know, I think 120 00:04:58,360 --> 00:05:01,839 Speaker 3: just frankly, this over of not knowing what the outcome 121 00:05:01,920 --> 00:05:03,599 Speaker 3: is going to be that could push investors to the 122 00:05:03,640 --> 00:05:05,320 Speaker 3: sidelines for a little bit, and I think that's going 123 00:05:05,360 --> 00:05:07,320 Speaker 3: to weigh heavily once we get to the fourth quarter, 124 00:05:07,680 --> 00:05:10,840 Speaker 3: when everyone starts putting their outlook discussions out right, they're 125 00:05:10,839 --> 00:05:12,440 Speaker 3: going to be talking about bed cuts in the back 126 00:05:12,440 --> 00:05:14,080 Speaker 3: half of the year, but they're also going to be 127 00:05:14,080 --> 00:05:16,440 Speaker 3: talking about the election, so we kind of see those 128 00:05:16,480 --> 00:05:18,080 Speaker 3: things starting to come into the conversation. 129 00:05:18,360 --> 00:05:19,840 Speaker 1: We have more outlooks to come. 130 00:05:20,040 --> 00:05:22,520 Speaker 2: Oh joy, Well, some of those outlooks are being revised 131 00:05:22,520 --> 00:05:25,400 Speaker 2: pretty quickly. The recession calls on Wall Street dropping like 132 00:05:25,480 --> 00:05:29,080 Speaker 2: f ck Mike Gapan in the last week, Mike Feroli, 133 00:05:29,200 --> 00:05:31,880 Speaker 2: JP Morgan gone into the weekend dropping his recession call too. 134 00:05:32,120 --> 00:05:35,440 Speaker 1: Can you see Calvacina on the deck with a fam 135 00:05:35,600 --> 00:05:38,120 Speaker 1: working on her outlook? Gin and Tonic on the table 136 00:05:38,200 --> 00:05:38,839 Speaker 1: next door. 137 00:05:38,839 --> 00:05:42,000 Speaker 2: In the summer, the summer, the mid year, the mid year, 138 00:05:42,200 --> 00:05:46,760 Speaker 2: the summer, the summer time, summer, the summer time outlook, Laurie, 139 00:05:46,760 --> 00:05:48,800 Speaker 2: can I finish on a single name? Forgive me? What 140 00:05:48,839 --> 00:05:51,520 Speaker 2: does it say about the market when the biggest waiting 141 00:05:51,560 --> 00:05:53,760 Speaker 2: on the S and P five hundred has had three 142 00:05:53,880 --> 00:05:58,320 Speaker 2: quarters of declining sales, trades at thirty times earnings and 143 00:05:58,480 --> 00:06:01,760 Speaker 2: is up forty percent yeah today? What can you take 144 00:06:01,800 --> 00:06:03,640 Speaker 2: away from that? What's the signal you take from that. 145 00:06:04,920 --> 00:06:05,360 Speaker 4: One of the. 146 00:06:05,320 --> 00:06:08,080 Speaker 3: Reasons why I think people have been gravitating towards these 147 00:06:08,080 --> 00:06:11,200 Speaker 3: megacap growth stocks is that we are in recovery mode 148 00:06:11,240 --> 00:06:13,800 Speaker 3: and the shape of that recovery doesn't look so fantastic. 149 00:06:13,839 --> 00:06:16,080 Speaker 3: I think the price we're going to pay for a short, shallower, 150 00:06:16,160 --> 00:06:18,920 Speaker 3: skipped recession is subpar economic growth for a few years. 151 00:06:19,120 --> 00:06:21,839 Speaker 3: If you look at consensus forecast is tracked by Bloomberg, 152 00:06:22,640 --> 00:06:25,840 Speaker 3: basically for next year and twenty twenty five, GDP is 153 00:06:25,920 --> 00:06:27,839 Speaker 3: expected to be in kind of that zero to two 154 00:06:27,839 --> 00:06:31,000 Speaker 3: percent range. Well, guess what growth stocks typically do well 155 00:06:31,000 --> 00:06:33,840 Speaker 3: when economic growth is scarce. And I think that's one 156 00:06:33,880 --> 00:06:36,560 Speaker 3: of the reasons why people have been just plowing so 157 00:06:36,720 --> 00:06:39,839 Speaker 3: much money into these big megacap names because despite some 158 00:06:39,920 --> 00:06:42,120 Speaker 3: of the near term challenges, they have faith that the 159 00:06:42,120 --> 00:06:44,080 Speaker 3: longer term growth opportunities are still there. 160 00:06:44,320 --> 00:06:47,680 Speaker 2: Lurie, thank you. Lori Cavasena of MBC on somebody Tech 161 00:06:47,800 --> 00:06:48,960 Speaker 2: stories so far this year. 162 00:06:53,000 --> 00:06:56,000 Speaker 1: Our Conversation of the Day now on the equity markets 163 00:06:56,000 --> 00:06:58,640 Speaker 1: of stock Market with Michael Wilson, Mike Wilson's CIO and 164 00:06:58,720 --> 00:07:02,720 Speaker 1: chief US Equity strategy at Morgan Stanley. Mike, you go 165 00:07:02,800 --> 00:07:05,400 Speaker 1: over and you study Ellen Zettner's notes and you look 166 00:07:05,440 --> 00:07:10,320 Speaker 1: at fiscal tightening. Describe fiscal tightening, Describe what it means 167 00:07:10,640 --> 00:07:12,640 Speaker 1: for the standard im ploors five hundred. 168 00:07:14,120 --> 00:07:17,080 Speaker 6: Yeah, good morning guys. Yeah, look, I think you know, 169 00:07:17,120 --> 00:07:19,600 Speaker 6: I don't think we've hit a wall completely here, but 170 00:07:19,880 --> 00:07:22,960 Speaker 6: I think it's fair to say that the physical impulse 171 00:07:23,040 --> 00:07:26,080 Speaker 6: that we've experienced over the last twelve months caught a 172 00:07:26,080 --> 00:07:29,560 Speaker 6: lot of people off guard, including ourselves, and it has 173 00:07:29,640 --> 00:07:32,360 Speaker 6: really kept the economy going in a way that most 174 00:07:32,360 --> 00:07:35,520 Speaker 6: people were not projecting, and that has led people to 175 00:07:35,640 --> 00:07:38,960 Speaker 6: believe that this can continue. Now, there's been a confluence 176 00:07:38,960 --> 00:07:42,080 Speaker 6: of events for why interest rates have risen. I wouldn't 177 00:07:42,120 --> 00:07:44,240 Speaker 6: blame it all on the downgrade last week. In fact, 178 00:07:44,280 --> 00:07:46,600 Speaker 6: probably none of it is. I think the bigger issue 179 00:07:46,600 --> 00:07:49,360 Speaker 6: is just simple supply and demand. We have an enormous 180 00:07:49,360 --> 00:07:52,920 Speaker 6: amount of supply. The fund all is spending at a 181 00:07:53,040 --> 00:07:56,440 Speaker 6: time when perhaps some of the natural buyers are not 182 00:07:56,480 --> 00:08:00,800 Speaker 6: there anymore. For example, the banking system pretty full fun treasuries, 183 00:08:01,160 --> 00:08:03,640 Speaker 6: and of course the Bank of Japan's changed last week, 184 00:08:03,720 --> 00:08:05,920 Speaker 6: So you know, I think the interest rate move. Look, 185 00:08:05,960 --> 00:08:09,080 Speaker 6: first of all, stocks are already expensive on their own 186 00:08:09,120 --> 00:08:11,280 Speaker 6: cost of capital going up now think about it this way. 187 00:08:11,480 --> 00:08:15,680 Speaker 6: The the the recovery we've had since COVID has been 188 00:08:15,720 --> 00:08:18,800 Speaker 6: funded by the government for the most part, okay, and 189 00:08:18,880 --> 00:08:21,880 Speaker 6: now their cost to capital is going up, So that 190 00:08:21,960 --> 00:08:24,000 Speaker 6: has to have some sort of a you know, some 191 00:08:24,040 --> 00:08:27,000 Speaker 6: sort of a knock on effect evaluation. If we were 192 00:08:27,000 --> 00:08:29,880 Speaker 6: trading at a lower valuation here, I wouldn't be so 193 00:08:30,200 --> 00:08:33,360 Speaker 6: concerned about the growth outlook. But you know, given our growth, 194 00:08:33,600 --> 00:08:36,520 Speaker 6: our growth outlook, which is more customistic than most, that's 195 00:08:36,640 --> 00:08:38,880 Speaker 6: where the that's where we have a real issue. And look, 196 00:08:38,920 --> 00:08:41,160 Speaker 6: you can still make money picking stocks. It's just a 197 00:08:41,200 --> 00:08:43,800 Speaker 6: harder game, and I think that's what most clients are 198 00:08:43,840 --> 00:08:44,440 Speaker 6: having trouble with. 199 00:08:44,920 --> 00:08:46,640 Speaker 1: That's where I wanted to go, Michael, So, I think 200 00:08:46,679 --> 00:08:48,720 Speaker 1: this is so important. If we get a fiscal tightening 201 00:08:48,800 --> 00:08:54,520 Speaker 1: and whatever your matrix is of equity dynamics folded into economics, 202 00:08:54,760 --> 00:08:58,400 Speaker 1: if you will, does it lead to a more aggregate 203 00:08:58,679 --> 00:09:03,120 Speaker 1: summed index or is it where sectors and selected stocks, 204 00:09:03,200 --> 00:09:07,480 Speaker 1: including the glorious eight tech stocks, they're partitioned out, they 205 00:09:07,520 --> 00:09:09,520 Speaker 1: do great while everybody else struggles. 206 00:09:10,880 --> 00:09:12,880 Speaker 6: Well, that's been the bet that has worked so far 207 00:09:12,960 --> 00:09:15,360 Speaker 6: this year. But now even those stocks seem to be tiring. 208 00:09:15,400 --> 00:09:17,400 Speaker 6: I mean this, you know, this earning season has been 209 00:09:17,440 --> 00:09:19,959 Speaker 6: to sell the news so to speak, if you want 210 00:09:19,960 --> 00:09:22,120 Speaker 6: to call it that, even though even with companies that 211 00:09:22,120 --> 00:09:24,120 Speaker 6: put up good numbers, it's been kind of a faded 212 00:09:24,640 --> 00:09:28,160 Speaker 6: because the market anticipated, you know, kind of this stronger 213 00:09:28,280 --> 00:09:30,520 Speaker 6: economic bounce this year and perhaps earning is not being 214 00:09:30,559 --> 00:09:32,880 Speaker 6: as bad as people were thinking, and then we kind 215 00:09:32,880 --> 00:09:35,560 Speaker 6: of muddle through. So now the question I think for 216 00:09:35,600 --> 00:09:38,120 Speaker 6: the you know, for this rally to continue, it has 217 00:09:38,160 --> 00:09:40,480 Speaker 6: to happen internally, right, We have to have breath improve. 218 00:09:40,920 --> 00:09:42,800 Speaker 6: We need to see a rotation into some of these 219 00:09:42,880 --> 00:09:45,760 Speaker 6: lagging areas. We've started to see that. We're not convinced 220 00:09:45,840 --> 00:09:47,800 Speaker 6: yet that the breath. That way we measure breadth is 221 00:09:47,840 --> 00:09:50,439 Speaker 6: not convincing to us yet, but we're open minded to it. 222 00:09:50,760 --> 00:09:52,559 Speaker 6: But that's that would be the next stage of the 223 00:09:52,559 --> 00:09:54,240 Speaker 6: bull market. If you want to be bullish, you have 224 00:09:54,320 --> 00:09:56,920 Speaker 6: to be buying laggers here. You can't just keep chasing, 225 00:09:57,280 --> 00:09:59,600 Speaker 6: you know, the magnificent seven and forget about everything else. 226 00:09:59,600 --> 00:10:01,079 Speaker 6: That's not a healthy outcome. 227 00:10:01,200 --> 00:10:03,520 Speaker 5: What about what Kareron Dawson was talking about, especially at 228 00:10:03,520 --> 00:10:05,960 Speaker 5: a time of rising yields in part due to the 229 00:10:05,960 --> 00:10:08,600 Speaker 5: fiscal backdrop, the supply and demand that you're talking about, 230 00:10:09,000 --> 00:10:11,400 Speaker 5: It turns out that stocks become not a teen of 231 00:10:11,480 --> 00:10:14,520 Speaker 5: trade but a little bit. There isn't another alternative that's 232 00:10:14,600 --> 00:10:18,560 Speaker 5: much better. Revenues are going up in an inflationary environment. Yes, 233 00:10:18,640 --> 00:10:20,520 Speaker 5: multiples look high. Well what are you going to do 234 00:10:20,679 --> 00:10:23,840 Speaker 5: go into bonds that are losing value at this point? 235 00:10:24,080 --> 00:10:26,360 Speaker 5: I mean, how much do you buy that type of argument? 236 00:10:27,880 --> 00:10:30,440 Speaker 6: Well, we don't buy it because our view is that 237 00:10:30,480 --> 00:10:34,120 Speaker 6: inflation's coming down much more rapidly from you know, at 238 00:10:34,120 --> 00:10:36,480 Speaker 6: the company level than it is and the government statistics. 239 00:10:36,520 --> 00:10:38,000 Speaker 6: And this is where I think it can get really 240 00:10:38,160 --> 00:10:40,120 Speaker 6: interesting in this or tricky in the second half of 241 00:10:40,160 --> 00:10:44,120 Speaker 6: the year. Which is we have government statistics reporting inflation 242 00:10:44,280 --> 00:10:46,480 Speaker 6: still at three or four percent, So the FED is 243 00:10:47,280 --> 00:10:50,280 Speaker 6: going to continue to hold or maybe even raise more. Yet, 244 00:10:50,320 --> 00:10:53,320 Speaker 6: what companies are actually seeing in their businesses least that are, 245 00:10:53,679 --> 00:10:56,240 Speaker 6: you know, deterioration, Like we have negative price now in 246 00:10:56,240 --> 00:10:59,240 Speaker 6: many of the good sectors. Right the PPI finished goods 247 00:10:59,280 --> 00:11:02,439 Speaker 6: is in negative tearatory export pricing, import pricing. So it's 248 00:11:02,440 --> 00:11:04,800 Speaker 6: the opposite of twenty twenty one. Think of it this way. 249 00:11:05,040 --> 00:11:07,160 Speaker 6: In the back and half of twenty twenty one, companies 250 00:11:07,200 --> 00:11:10,200 Speaker 6: were getting fifteen to twenty percent price if the FED 251 00:11:10,320 --> 00:11:12,920 Speaker 6: was on hold, because they were saying, well, we're not 252 00:11:12,960 --> 00:11:15,319 Speaker 6: sure yet this is going to be permanent. Of course 253 00:11:15,320 --> 00:11:18,199 Speaker 6: they relate to the party, and companies got to overearn 254 00:11:18,320 --> 00:11:19,960 Speaker 6: at a very low interest rate. Now you have the 255 00:11:19,960 --> 00:11:22,600 Speaker 6: exact opposite. Interest rates are being held very very high 256 00:11:22,920 --> 00:11:25,640 Speaker 6: at a time when company earnings for the majority, not all, 257 00:11:25,720 --> 00:11:28,160 Speaker 6: but the majority of companies is deteriorating. I means sales 258 00:11:28,160 --> 00:11:31,000 Speaker 6: growth is not increasing, especially going down, and we have 259 00:11:31,120 --> 00:11:33,480 Speaker 6: zero percent sales growth in the second quarter. And if 260 00:11:33,520 --> 00:11:36,079 Speaker 6: we're right on this pricing dynamic, then that's going to 261 00:11:36,080 --> 00:11:38,000 Speaker 6: be something that catches folks off guard. That's why we're 262 00:11:38,000 --> 00:11:40,440 Speaker 6: not going into small caps and the lower quality parts 263 00:11:40,440 --> 00:11:42,360 Speaker 6: in the market. If you're going to go to the laggers, 264 00:11:42,400 --> 00:11:44,080 Speaker 6: make sure you go to the laggers that have good balance 265 00:11:44,080 --> 00:11:46,559 Speaker 6: sheets and good margin structures. Okay, so it's still a 266 00:11:46,640 --> 00:11:50,160 Speaker 6: quality play, just you know, just different quality names. 267 00:11:50,400 --> 00:11:53,560 Speaker 5: If inflation is going to come down and come down rapidly, 268 00:11:53,960 --> 00:11:57,000 Speaker 5: then why wouldn't that really favor a FED rate cut 269 00:11:57,160 --> 00:12:00,079 Speaker 5: that could turbo charge some of the trade into big. 270 00:12:01,720 --> 00:12:04,760 Speaker 6: Well, because I think I mean the FED no, I mean, 271 00:12:04,760 --> 00:12:08,000 Speaker 6: they know they made a mistake, and they've said it right. 272 00:12:08,000 --> 00:12:09,920 Speaker 6: They know they were a little bit laid on the 273 00:12:09,960 --> 00:12:13,160 Speaker 6: transitory call. Okay, fine there. I mean, why would they 274 00:12:13,200 --> 00:12:15,720 Speaker 6: cut rates if we have full employment? I mean, there's 275 00:12:15,720 --> 00:12:17,880 Speaker 6: no reason to do that. Unemployment is three and a 276 00:12:17,920 --> 00:12:21,600 Speaker 6: half percent, you have inflation still north of three percent, 277 00:12:21,679 --> 00:12:22,920 Speaker 6: so now anywhere near their goal? 278 00:12:23,480 --> 00:12:23,920 Speaker 2: Just hold. 279 00:12:23,960 --> 00:12:26,120 Speaker 6: I mean, I'm not making the case they need a 280 00:12:26,200 --> 00:12:28,120 Speaker 6: raise race here. I don't think they need to do that, 281 00:12:28,400 --> 00:12:29,880 Speaker 6: but I think they're going to want to see the 282 00:12:29,880 --> 00:12:32,080 Speaker 6: whites of the eyes to make sure that things are down. 283 00:12:32,320 --> 00:12:33,640 Speaker 6: I'm not I don't work at the BED. I don't 284 00:12:33,679 --> 00:12:36,080 Speaker 6: know what they're going to do. But my prudence would 285 00:12:36,080 --> 00:12:38,240 Speaker 6: say that's what they should do. They should they should 286 00:12:38,280 --> 00:12:41,840 Speaker 6: pause and see what happens and not try to anticipate 287 00:12:41,840 --> 00:12:43,360 Speaker 6: too much here because that's gonna be in trouble. 288 00:12:43,440 --> 00:12:45,960 Speaker 2: Last time, Mike, can we just finish with your framework 289 00:12:46,000 --> 00:12:50,040 Speaker 2: post pandemic framework? We'll remember it well, it was hot 290 00:12:50,280 --> 00:12:53,000 Speaker 2: and short. The cycle would be hot, but ultimately it 291 00:12:53,040 --> 00:12:55,640 Speaker 2: would be shorter than what we'd seen previously. Now, Mike, 292 00:12:55,679 --> 00:12:58,280 Speaker 2: it certainly was hot, and you've got the equity market 293 00:12:58,280 --> 00:13:01,600 Speaker 2: call coming out of the pandemic dead on. But Mike, 294 00:13:01,760 --> 00:13:04,880 Speaker 2: does anything lead you to question the short part? Because 295 00:13:04,880 --> 00:13:07,280 Speaker 2: I think that's where the conversation is quickly shifting, as 296 00:13:07,320 --> 00:13:09,080 Speaker 2: you know, over the last couple of weeks. 297 00:13:10,320 --> 00:13:12,600 Speaker 6: Yeah, I mean this is going to sound ironic, Okay, So, 298 00:13:13,240 --> 00:13:16,440 Speaker 6: as you remember back in January, I was concerned that 299 00:13:16,480 --> 00:13:20,520 Speaker 6: everybody was too bearish, including ourselves, and that proved to 300 00:13:20,559 --> 00:13:22,400 Speaker 6: be the right. You know, I should have gone with 301 00:13:22,400 --> 00:13:26,520 Speaker 6: my instinct. And now though, I think the fact that 302 00:13:26,640 --> 00:13:29,720 Speaker 6: everybody is saying that the recession risk is eliminated for 303 00:13:29,760 --> 00:13:32,040 Speaker 6: the most part, including the FED itself. Right, they had 304 00:13:32,040 --> 00:13:34,120 Speaker 6: called for recession back in March. They just staffed it, 305 00:13:34,480 --> 00:13:37,200 Speaker 6: and they backed off that too. I don't know if 306 00:13:37,240 --> 00:13:39,320 Speaker 6: we need a full blown recession, but I'm pretty convinced 307 00:13:39,320 --> 00:13:41,679 Speaker 6: that growth is still flowing like we're in a down 308 00:13:42,000 --> 00:13:45,120 Speaker 6: cycle now. Whether that leads to a full blown labor 309 00:13:45,160 --> 00:13:47,680 Speaker 6: cycle or not remains to be seen. I think most 310 00:13:47,679 --> 00:13:49,920 Speaker 6: people have pushed out the recession called the twenty four 311 00:13:49,920 --> 00:13:53,280 Speaker 6: Ilean day set. It's eliminated, so it may be a 312 00:13:53,280 --> 00:13:55,480 Speaker 6: four year cycle as opposed to a three year cycle. 313 00:13:55,600 --> 00:13:59,760 Speaker 6: That's very plausible. I still really, I really like our boombust, 314 00:14:00,160 --> 00:14:02,440 Speaker 6: you know, short cycle thesis based on the forties, because 315 00:14:02,440 --> 00:14:04,920 Speaker 6: I've seen the data really supporting that. John and part 316 00:14:04,960 --> 00:14:07,720 Speaker 6: of our note over the weekend, and you can appreciate 317 00:14:07,800 --> 00:14:10,520 Speaker 6: this because you've followed it the whole time, is that 318 00:14:10,640 --> 00:14:13,200 Speaker 6: we you know, we got you know, we kind of 319 00:14:13,240 --> 00:14:15,560 Speaker 6: missed this fiscal impulse, right. That was a big miss 320 00:14:15,559 --> 00:14:17,640 Speaker 6: on our part. We thought the fiscal impulse would come 321 00:14:18,040 --> 00:14:20,440 Speaker 6: at the time that they really needed it. And think 322 00:14:20,440 --> 00:14:23,160 Speaker 6: about this way they're doing. They're doing eight percent budget 323 00:14:23,160 --> 00:14:25,880 Speaker 6: deficits spending when you have three and a half percent unemployment. 324 00:14:25,920 --> 00:14:29,360 Speaker 6: I mean that's really unprecedented. So what's going to happen 325 00:14:29,400 --> 00:14:31,480 Speaker 6: if we do get a slowdown next year, And I 326 00:14:31,520 --> 00:14:34,160 Speaker 6: just think that I just think this boom bust thesis 327 00:14:34,200 --> 00:14:36,840 Speaker 6: is so correct, and maybe the market's looking through it 328 00:14:36,880 --> 00:14:39,720 Speaker 6: to the to the other side. Look, that's that's a 329 00:14:39,840 --> 00:14:42,880 Speaker 6: risky proposition given where valuations are. It was a great 330 00:14:42,920 --> 00:14:46,000 Speaker 6: idea to buy stocks last fall. We traded it. We 331 00:14:46,000 --> 00:14:48,440 Speaker 6: didn't stick with it long enough, Okay, But I think 332 00:14:48,440 --> 00:14:51,160 Speaker 6: at this stage you need to be very selective, very 333 00:14:51,200 --> 00:14:53,800 Speaker 6: selective for some sort of retlacement, at least back to 334 00:14:53,840 --> 00:14:55,120 Speaker 6: the tuner day moving average. 335 00:14:55,200 --> 00:14:57,560 Speaker 2: Mike Wander for to get your thoughts. An update on 336 00:14:57,600 --> 00:15:00,440 Speaker 2: the team at Morgan Stanley and Equity Research. Mike Wilson 337 00:15:00,520 --> 00:15:01,760 Speaker 2: there of Morgan Stanley. 338 00:15:12,480 --> 00:15:15,640 Speaker 1: Apple had a solid two standard deviation, moved to a 339 00:15:15,720 --> 00:15:18,840 Speaker 1: lower weaker price, unlike some of the success stories that 340 00:15:18,920 --> 00:15:21,640 Speaker 1: were out there last week. But with that, you know, 341 00:15:21,720 --> 00:15:23,920 Speaker 1: it's not like it's a technical breakdown. I thought Sarah 342 00:15:24,000 --> 00:15:26,160 Speaker 1: Hunt when we spoke to her, was on fire. I 343 00:15:26,240 --> 00:15:27,080 Speaker 1: thought she was just great. 344 00:15:27,240 --> 00:15:29,360 Speaker 2: Dan I was of Wetbush still bullish, Tom still bullish 345 00:15:29,440 --> 00:15:32,040 Speaker 2: on the start. Despite a week Earning's report raising their 346 00:15:32,040 --> 00:15:35,120 Speaker 2: price target from two twenty to two thirty. iPhones and 347 00:15:35,200 --> 00:15:38,440 Speaker 2: services will accelerate in the June quarter with the softness 348 00:15:39,440 --> 00:15:43,000 Speaker 2: OL Mac and iPad driven when excluding FX and focusing 349 00:15:43,080 --> 00:15:45,960 Speaker 2: on the hearts and lungs, iPhones and services. This was 350 00:15:46,000 --> 00:15:49,080 Speaker 2: a strong performance and guidance in our view, and we 351 00:15:49,120 --> 00:15:51,720 Speaker 2: would be strong buyers on any weakness with Tom. I 352 00:15:51,760 --> 00:15:53,200 Speaker 2: can tell you in the last week we've had some 353 00:15:53,320 --> 00:15:54,720 Speaker 2: of that. We've had some weakness. 354 00:15:54,600 --> 00:15:58,000 Speaker 1: Doing some important research. Now joining us from hirsh gibu 355 00:15:58,200 --> 00:16:04,600 Speaker 1: Leedspillion twenty five ten seventeen PS Amsterdam, where Apple says 356 00:16:05,120 --> 00:16:09,440 Speaker 1: vil javent and vat vor Joe. The best scus East 357 00:16:10,160 --> 00:16:13,000 Speaker 1: is Daniel ives he is in Amsterdam and joins us 358 00:16:13,040 --> 00:16:16,560 Speaker 1: by phone this morning. Dan, I does Apple sell in 359 00:16:16,680 --> 00:16:19,880 Speaker 1: Amsterdam like it sells in New York, like it sells 360 00:16:19,960 --> 00:16:23,960 Speaker 1: in Chicago, like it sells in La They do? 361 00:16:24,360 --> 00:16:26,960 Speaker 7: I mean, I can tell you by what I've seen 362 00:16:27,080 --> 00:16:31,280 Speaker 7: here and what Apple has always had, the presence, not 363 00:16:31,480 --> 00:16:34,280 Speaker 7: just an Ansen, but across Europe. And I think if 364 00:16:34,320 --> 00:16:37,720 Speaker 7: you look at the quarter, like Pharaoh was talking, I 365 00:16:37,880 --> 00:16:42,920 Speaker 7: focus on iPhones, services, China, grouse margin. That was all 366 00:16:43,000 --> 00:16:46,240 Speaker 7: better than expected, Mac and iPad. We have viewers noise 367 00:16:46,800 --> 00:16:47,760 Speaker 7: Dan in Europe. 368 00:16:48,080 --> 00:16:49,960 Speaker 1: They want to go after Google. They want to go 369 00:16:50,040 --> 00:16:53,800 Speaker 1: after Microsoft. Indeed the evil Apple as well. Let's say 370 00:16:53,880 --> 00:16:57,280 Speaker 1: that they are in a sense anti technology. That's the 371 00:16:57,400 --> 00:17:01,760 Speaker 1: political elites. Are the people of Amsterdam, the people of Berlin, 372 00:17:01,880 --> 00:17:07,600 Speaker 1: et cetera. Oslo Are they anti Apple, anti Google, anti technology? 373 00:17:09,160 --> 00:17:12,080 Speaker 7: They're not an anti Apple. They're actually pro Apple, and 374 00:17:12,160 --> 00:17:14,280 Speaker 7: I think investors are pro Apple. I think when it 375 00:17:14,400 --> 00:17:17,080 Speaker 7: comes to the EU and when we see from a 376 00:17:17,160 --> 00:17:20,359 Speaker 7: regulatory that's a whole nother situation. But I think it 377 00:17:20,520 --> 00:17:24,359 Speaker 7: just comes down to find for big tech companies like Apple, 378 00:17:24,520 --> 00:17:27,880 Speaker 7: Google at this point, that's like drinking a cup of coffee, 379 00:17:28,000 --> 00:17:30,280 Speaker 7: and I think the investors are going to continue vida 380 00:17:30,280 --> 00:17:33,880 Speaker 7: as background or is even though the heat gets hotter. 381 00:17:33,760 --> 00:17:35,760 Speaker 2: In the kitchen, Let's talk about the hot and lungs 382 00:17:35,760 --> 00:17:37,399 Speaker 2: of it. Dan. I think over the weekend someone at 383 00:17:37,440 --> 00:17:41,640 Speaker 2: Parents said something like iPhone zero zero growth. Now, Dan, 384 00:17:41,680 --> 00:17:44,080 Speaker 2: we've had three quarters of that. The stock's training at 385 00:17:44,119 --> 00:17:47,120 Speaker 2: a multiple thirty thirty times earnings, and is that forty 386 00:17:47,160 --> 00:17:50,520 Speaker 2: percent year today? What's the argument still that this is 387 00:17:50,560 --> 00:17:51,160 Speaker 2: a growth stock? 388 00:17:52,880 --> 00:17:55,480 Speaker 7: Well, first, you have four hundred bibs of that back sidewind, 389 00:17:55,640 --> 00:17:58,120 Speaker 7: So the zero per se when I view it from 390 00:17:58,119 --> 00:18:02,400 Speaker 7: a concurrency perspective where they're growing, and then you look 391 00:18:02,480 --> 00:18:05,240 Speaker 7: at now what goes into the iPhone fifteen, which i've 392 00:18:05,320 --> 00:18:09,119 Speaker 7: used basic Mini supercycle. You have twenty five percent of 393 00:18:09,119 --> 00:18:12,320 Speaker 7: the install based that's not upgrade four plus years. So 394 00:18:12,520 --> 00:18:16,800 Speaker 7: even though they've gone through what what i'll call conservative growth, 395 00:18:17,920 --> 00:18:20,359 Speaker 7: that's going to now start to be high single digit, 396 00:18:20,800 --> 00:18:24,679 Speaker 7: potentially double digit. And then at the same time services 397 00:18:25,000 --> 00:18:29,040 Speaker 7: that is the key to the rereading. Now you're starting 398 00:18:29,080 --> 00:18:32,600 Speaker 7: to see double digit services growth, and I think that's 399 00:18:32,640 --> 00:18:36,360 Speaker 7: the perfect storm positive that I see going twenty twenty four. 400 00:18:36,640 --> 00:18:38,840 Speaker 2: Part of your bullish theasis for a long time has 401 00:18:38,920 --> 00:18:41,959 Speaker 2: been this base that haven't upgraded their phone down. At 402 00:18:42,040 --> 00:18:45,520 Speaker 2: some point, does that base get big enough that actually 403 00:18:45,600 --> 00:18:48,000 Speaker 2: that's no longer a bullish thesis, that they've just been 404 00:18:48,040 --> 00:18:51,080 Speaker 2: sitting there and they're not upgrading year after year after 405 00:18:51,200 --> 00:18:53,000 Speaker 2: year after year. Do you start to chraine your mind 406 00:18:53,040 --> 00:18:54,760 Speaker 2: about why they're not upgrading. 407 00:18:56,359 --> 00:18:58,880 Speaker 7: Yeah, it's a great question. I think the other thing 408 00:18:59,240 --> 00:19:02,399 Speaker 7: is they're they're adding iPhone. I mean, they've added over 409 00:19:02,760 --> 00:19:05,440 Speaker 7: one hundred and fifty million iPhone user. It's just a 410 00:19:05,520 --> 00:19:08,200 Speaker 7: view of the last eighteen months. So I think what's 411 00:19:08,240 --> 00:19:11,240 Speaker 7: starting to happen Now that's one point two million, which 412 00:19:11,240 --> 00:19:14,040 Speaker 7: to one point was blow a billion before COVID. So 413 00:19:14,119 --> 00:19:16,520 Speaker 7: I think what's starting to happen is they're gaining more 414 00:19:16,520 --> 00:19:19,200 Speaker 7: and more share in China. They've gained three hundred bits 415 00:19:19,240 --> 00:19:21,240 Speaker 7: of market share in China in the last two years, 416 00:19:21,359 --> 00:19:24,520 Speaker 7: despite the geopolitical and I think it just comes down 417 00:19:24,640 --> 00:19:28,560 Speaker 7: to you'll see the bears come out on Apple, especially 418 00:19:28,600 --> 00:19:31,080 Speaker 7: over the last week, but I believe this is just 419 00:19:31,200 --> 00:19:36,879 Speaker 7: a pause selling Apple into this iPhone fifteen cycle. In 420 00:19:37,000 --> 00:19:39,240 Speaker 7: my opinion's leaving the super Bowl at half time. 421 00:19:40,200 --> 00:19:42,720 Speaker 5: I love I love iPhone zero. I've got to say, John, 422 00:19:42,760 --> 00:19:44,479 Speaker 5: I'm still thinking about that. Are you going to get 423 00:19:44,480 --> 00:19:47,119 Speaker 5: an iPhone fifteen? No, I'm going to get an iPhone 424 00:19:47,160 --> 00:19:49,760 Speaker 5: zero zero growth. That's sort of what a Barrs was 425 00:19:49,840 --> 00:19:53,000 Speaker 5: going after them for. There is a question, though, Dan, 426 00:19:53,280 --> 00:19:56,119 Speaker 5: of what you do with the multiples, with the valuation 427 00:19:56,480 --> 00:19:58,760 Speaker 5: of a stock at a time where some people are 428 00:19:58,840 --> 00:20:01,639 Speaker 5: speculating that there is a lot of growth in the 429 00:20:01,680 --> 00:20:06,080 Speaker 5: smartphone industry and nothing really wrong against Apple just in general, 430 00:20:06,240 --> 00:20:09,119 Speaker 5: there has been this real slowdown. At what point can 431 00:20:09,200 --> 00:20:12,040 Speaker 5: you continue to be bullish on Apple shares if you 432 00:20:12,119 --> 00:20:15,440 Speaker 5: continue to see longer term rates creep higher, if you 433 00:20:15,680 --> 00:20:19,639 Speaker 5: continue to see the valuation proposition challenged on a more 434 00:20:19,720 --> 00:20:20,359 Speaker 5: macro front. 435 00:20:21,640 --> 00:20:24,920 Speaker 7: Sure and an excellent point. I'd also say it's some 436 00:20:25,160 --> 00:20:28,560 Speaker 7: key and I've talked about a lot the grows margin store, 437 00:20:28,560 --> 00:20:31,960 Speaker 7: I mean the highest gross margins ever, because what we 438 00:20:32,080 --> 00:20:34,760 Speaker 7: see on the M two chip and the innovation, the 439 00:20:34,840 --> 00:20:37,120 Speaker 7: margin there, and that's going to continue to go higher. 440 00:20:37,480 --> 00:20:40,879 Speaker 7: That's just hire from a margin perspective, and I believe 441 00:20:41,040 --> 00:20:44,960 Speaker 7: services is the key. Services, in my opinion, is worth 442 00:20:45,040 --> 00:20:48,200 Speaker 7: one point three to one point four trillion alone. And 443 00:20:48,320 --> 00:20:52,480 Speaker 7: even though we have this from a tech multiple headwind perspective, 444 00:20:52,880 --> 00:20:55,640 Speaker 7: I think it starts to abate, and I think service 445 00:20:55,760 --> 00:20:59,240 Speaker 7: is ultimately key to how this thing re retire. Along 446 00:20:59,320 --> 00:21:02,120 Speaker 7: with an I and fifteen cycle that i'd be it's 447 00:21:02,160 --> 00:21:02,919 Speaker 7: going to be massive. 448 00:21:03,840 --> 00:21:07,000 Speaker 5: This really speaks in this question around what the content 449 00:21:07,119 --> 00:21:09,600 Speaker 5: will be that really feeds some of their services. This 450 00:21:09,760 --> 00:21:12,600 Speaker 5: idea that Lyle no Messi was name checked on the 451 00:21:12,720 --> 00:21:15,560 Speaker 5: call as one of the reasons why they've seen a 452 00:21:15,640 --> 00:21:18,200 Speaker 5: real increase in subscribers. So what are they going to 453 00:21:18,280 --> 00:21:20,679 Speaker 5: use with that cash pile to acquire more content? Are 454 00:21:20,680 --> 00:21:23,200 Speaker 5: they going to buy you know, I don't know a 455 00:21:23,280 --> 00:21:24,200 Speaker 5: Loton football team. 456 00:21:26,240 --> 00:21:28,560 Speaker 7: Well, I mean I think and I think you've seen 457 00:21:28,680 --> 00:21:30,960 Speaker 7: it a bit in terms of some of the things 458 00:21:31,000 --> 00:21:34,240 Speaker 7: that they've talked about. They're going to continue expand Apple TV. 459 00:21:34,320 --> 00:21:36,320 Speaker 7: I think from a streaming perspective, they're going to go 460 00:21:36,359 --> 00:21:39,240 Speaker 7: after more right job Snake pac twelve story that we 461 00:21:39,359 --> 00:21:41,400 Speaker 7: solved with the last week. But I think the big 462 00:21:41,520 --> 00:21:43,440 Speaker 7: thing is going to be AI. I mean, I think 463 00:21:43,560 --> 00:21:45,960 Speaker 7: ultimate They're going to further build out this AI what 464 00:21:46,119 --> 00:21:47,960 Speaker 7: I believe is going to be an AI app store, 465 00:21:48,600 --> 00:21:51,080 Speaker 7: and that is going to be the next wave of 466 00:21:51,240 --> 00:21:56,440 Speaker 7: growth as they further monetized and unparalleled install based in Kupertino. 467 00:21:56,960 --> 00:21:59,800 Speaker 2: MESSI making the mlslate like chance play you see that 468 00:22:00,240 --> 00:22:03,879 Speaker 2: we can't honestly thinks I saw someone tweet something like 469 00:22:03,920 --> 00:22:06,600 Speaker 2: it's like easy mode. It's like cheap mode for Messy 470 00:22:06,880 --> 00:22:11,480 Speaker 2: in the MLS, just different standard. Dan, Thank you, sir, Dan. 471 00:22:11,520 --> 00:22:14,280 Speaker 2: I've a webber's still constructive optimistic on this name. Head 472 00:22:14,280 --> 00:22:14,720 Speaker 2: of the launch. 473 00:22:14,800 --> 00:22:23,239 Speaker 1: Tom Lisa on the American economy, I think it's real 474 00:22:23,320 --> 00:22:26,040 Speaker 1: simple as to say, the biggest part of the algebraic 475 00:22:26,160 --> 00:22:30,440 Speaker 1: function is a consumer and our guest is definitive on 476 00:22:30,640 --> 00:22:32,240 Speaker 1: consumer dynamics. 477 00:22:31,880 --> 00:22:34,480 Speaker 5: Which is really the key mystery point that people are 478 00:22:34,560 --> 00:22:36,840 Speaker 5: trying to hook into. So there is no one better 479 00:22:36,920 --> 00:22:40,119 Speaker 5: to speak to the Michelle Meyer, who has grown up 480 00:22:40,280 --> 00:22:43,200 Speaker 5: under Ethan Harris at Bank of America during the whole 481 00:22:43,280 --> 00:22:47,440 Speaker 5: mortgage situation. Currently chief Economist for North America at the 482 00:22:47,520 --> 00:22:51,040 Speaker 5: MasterCard Economics Institute. Michelle always wonderful to see you. I 483 00:22:51,119 --> 00:22:55,119 Speaker 5: want to start there are people overestimating or under estimating 484 00:22:56,000 --> 00:22:57,320 Speaker 5: the strength of the consumer. 485 00:22:58,000 --> 00:23:00,440 Speaker 8: Well, I think that was the story for the past 486 00:23:00,560 --> 00:23:03,000 Speaker 8: year and a half has been this underestimation of the 487 00:23:03,080 --> 00:23:06,800 Speaker 8: US consumer. The consumer has been able to spend, the 488 00:23:06,880 --> 00:23:11,040 Speaker 8: consumer's been willing to spend. The consumer's been eager to 489 00:23:11,200 --> 00:23:14,359 Speaker 8: engage in the economy and come back after this pandemic. 490 00:23:15,080 --> 00:23:17,640 Speaker 8: And you think about why, it's actually pretty simple. There's 491 00:23:17,680 --> 00:23:19,879 Speaker 8: been a lot of purchasing power. Whether it's the strength 492 00:23:19,920 --> 00:23:21,879 Speaker 8: of the labor market that's continued we saw that in 493 00:23:21,960 --> 00:23:24,920 Speaker 8: Friday's jobs report, or it's been the health of the 494 00:23:25,000 --> 00:23:31,119 Speaker 8: balance sheet, which was really improved in the pandemic period 495 00:23:31,240 --> 00:23:34,560 Speaker 8: as households paid down their debt, and even now in 496 00:23:34,640 --> 00:23:38,679 Speaker 8: a higher rate environment, debt service ratios are still fairly 497 00:23:38,800 --> 00:23:40,680 Speaker 8: reasonable and kind of back to where we were prior 498 00:23:40,760 --> 00:23:41,360 Speaker 8: to the pandemic. 499 00:23:41,600 --> 00:23:45,320 Speaker 5: That said, that said, you have seen a decrease in 500 00:23:45,480 --> 00:23:48,040 Speaker 5: income relative to spending. In other words, people are spending 501 00:23:48,080 --> 00:23:49,480 Speaker 5: more than they're bringing in at this point, and a 502 00:23:49,520 --> 00:23:51,000 Speaker 5: lot of it has to do with credit cards. They're 503 00:23:51,040 --> 00:23:54,119 Speaker 5: increasing the amount of revolving debt, credit card debt that 504 00:23:54,240 --> 00:23:57,000 Speaker 5: they have outstanding. How long can that continue? 505 00:23:57,720 --> 00:24:00,320 Speaker 8: Well, the way I think about it is, throughout last year, 506 00:24:00,400 --> 00:24:03,359 Speaker 8: when we had high inflationary environment, it was certainly the 507 00:24:03,440 --> 00:24:07,080 Speaker 8: case that consumers were augmenting their income with other sources, 508 00:24:07,119 --> 00:24:10,080 Speaker 8: whether that's drawing down savings or taking on more debt, 509 00:24:10,680 --> 00:24:13,119 Speaker 8: and that was to help support the inflationary environment. But 510 00:24:13,320 --> 00:24:16,720 Speaker 8: now inflation is a lot more subdued. So if you 511 00:24:16,880 --> 00:24:19,800 Speaker 8: look at real wages or real purchasing power, it has 512 00:24:19,880 --> 00:24:23,440 Speaker 8: certainly turned positive where consumers now have a lot of 513 00:24:23,520 --> 00:24:26,600 Speaker 8: support simply from the lab of marketing. They don't necessarily 514 00:24:26,720 --> 00:24:29,639 Speaker 8: need that same buffer that they needed when they were 515 00:24:29,680 --> 00:24:31,200 Speaker 8: facing such high inflation. 516 00:24:31,720 --> 00:24:34,440 Speaker 1: No doubt. It just puts out on is it Twitter? 517 00:24:34,640 --> 00:24:36,120 Speaker 1: We call it something different. 518 00:24:35,880 --> 00:24:38,840 Speaker 5: Now X the platform formally known as Twitter. 519 00:24:38,960 --> 00:24:41,480 Speaker 1: The platform formally known as Twitter, and he does what 520 00:24:41,600 --> 00:24:43,520 Speaker 1: I like to do, which is take three months data, 521 00:24:44,080 --> 00:24:46,760 Speaker 1: ninety days of data and annualize it. And the real 522 00:24:46,840 --> 00:24:51,040 Speaker 1: GDP statistic, the American consumer statistic looking three months back, 523 00:24:51,600 --> 00:24:54,600 Speaker 1: is extraordinary. It's a five point three percent number. That's 524 00:24:54,680 --> 00:24:58,399 Speaker 1: just absolutely stunning as well. Does your consumer data and 525 00:24:58,560 --> 00:25:03,600 Speaker 1: MasterCard validate a resiliency to that ginormous five point three 526 00:25:03,640 --> 00:25:04,280 Speaker 1: percent trend? 527 00:25:04,520 --> 00:25:06,560 Speaker 8: Yeah, you guys are throwing out all my old colleagues, 528 00:25:06,600 --> 00:25:08,280 Speaker 8: Ethan Neil. It's a party here. 529 00:25:11,040 --> 00:25:14,600 Speaker 1: We'll get to that. Tell me about real g got 530 00:25:14,640 --> 00:25:15,440 Speaker 1: some persistency? 531 00:25:15,760 --> 00:25:18,240 Speaker 8: Yeah, I think it does. I mean, if you look 532 00:25:18,280 --> 00:25:20,120 Speaker 8: at the first half of the year and you think 533 00:25:20,119 --> 00:25:24,320 Speaker 8: about GDP growth and consumer spending, even measures of business investment, 534 00:25:25,560 --> 00:25:29,080 Speaker 8: it's been above expectations, which is partly I think because 535 00:25:29,119 --> 00:25:32,760 Speaker 8: expectations were set too low, but also showed a consumer 536 00:25:33,000 --> 00:25:37,000 Speaker 8: that does have this persistence. Look, the consumer shifting, the 537 00:25:37,080 --> 00:25:39,720 Speaker 8: economy is shifting. We're entering a different stage in this 538 00:25:39,880 --> 00:25:43,200 Speaker 8: business cycle. It is a stage where there's more of 539 00:25:43,280 --> 00:25:46,200 Speaker 8: a moderation, there's more of a normalization. There's still a 540 00:25:46,240 --> 00:25:48,600 Speaker 8: debate of what trend growth is or potential growth is 541 00:25:48,640 --> 00:25:51,400 Speaker 8: coming out of the pandemic, but it's not an economy 542 00:25:51,600 --> 00:25:55,800 Speaker 8: that is moving towards, you know, a proper deceleration, which 543 00:25:55,920 --> 00:25:58,080 Speaker 8: was the fear of a lot of people earlier in 544 00:25:58,119 --> 00:25:58,399 Speaker 8: the year. 545 00:25:58,600 --> 00:26:01,119 Speaker 5: So given that, do you stand on the side of 546 00:26:01,240 --> 00:26:03,400 Speaker 5: soft landing or do you side is on the side? 547 00:26:03,640 --> 00:26:06,560 Speaker 5: Do you stand on the side where we're underestimating how 548 00:26:06,640 --> 00:26:09,360 Speaker 5: much strength there is and how much potential for inflation 549 00:26:10,000 --> 00:26:12,080 Speaker 5: to keep going at really elevated levels. 550 00:26:13,040 --> 00:26:15,600 Speaker 8: So we've been in this soft landing camp and I 551 00:26:15,760 --> 00:26:17,879 Speaker 8: still hold to that view. And I think when you 552 00:26:17,920 --> 00:26:20,280 Speaker 8: think about soft there's going to be bumps, and for 553 00:26:20,440 --> 00:26:23,520 Speaker 8: certain sectors it could look bumpier than others. Right when 554 00:26:23,520 --> 00:26:25,959 Speaker 8: you think about the manufacturing sector that's struggling a bit 555 00:26:26,040 --> 00:26:28,040 Speaker 8: more when you think about housing, which was in a 556 00:26:28,080 --> 00:26:31,840 Speaker 8: big adjustment throughout this year and this year, is actually reaccelerating, 557 00:26:31,880 --> 00:26:35,680 Speaker 8: which is somewhat problematic for the Federal Reserve. But yeah, 558 00:26:35,720 --> 00:26:38,520 Speaker 8: it does seem like this is an economy that's readjusting, 559 00:26:38,680 --> 00:26:41,120 Speaker 8: and it's doing so in a way that has been 560 00:26:41,280 --> 00:26:45,399 Speaker 8: a lot less problematic than I think people feared. 561 00:26:45,760 --> 00:26:48,280 Speaker 5: We were talking earlier with Mike Wilson and Morgan Stanley 562 00:26:48,560 --> 00:26:51,919 Speaker 5: and talking about the fiscal impulse, and that has been 563 00:26:52,000 --> 00:26:53,720 Speaker 5: one of the drivers of the strength that we've seen, 564 00:26:53,760 --> 00:26:55,920 Speaker 5: the resilience, this belief in a soft landing that we 565 00:26:56,040 --> 00:26:58,600 Speaker 5: have currently in the market. How much do you lean 566 00:26:58,680 --> 00:27:00,880 Speaker 5: into that that what we're seeing, this strength of the consumer, 567 00:27:00,960 --> 00:27:03,560 Speaker 5: the strength of the economy has been driven entirely by 568 00:27:03,640 --> 00:27:07,199 Speaker 5: fiscal spending that has been delayed and has really come 569 00:27:07,280 --> 00:27:09,440 Speaker 5: into effect after the pandemic was over. 570 00:27:10,200 --> 00:27:12,399 Speaker 8: Well, look, there was an extraordinary amount of fiscal and 571 00:27:12,600 --> 00:27:15,960 Speaker 8: monetary stimulus that boosted the economy. So when I think 572 00:27:15,960 --> 00:27:19,359 Speaker 8: about the stages, you had a pandemic that created an 573 00:27:19,440 --> 00:27:24,120 Speaker 8: abrupt shutdown of the economy, a reopening stage that was hot. 574 00:27:24,240 --> 00:27:26,280 Speaker 8: The economy was red hot because you had this pent 575 00:27:26,440 --> 00:27:30,520 Speaker 8: up demand, fiscal stimulus, monetary policy. And now we're in 576 00:27:30,600 --> 00:27:33,399 Speaker 8: a stage where the economy is creating more of a 577 00:27:33,960 --> 00:27:39,879 Speaker 8: normalization of rebalancing, an adjustment, pick your phrase. But whichever 578 00:27:39,960 --> 00:27:43,920 Speaker 8: way you cut it, I think there is still some 579 00:27:44,240 --> 00:27:47,920 Speaker 8: support from the stimulus that we had enjoyed, and that 580 00:27:47,960 --> 00:27:50,280 Speaker 8: could be from the consumer with a household balance sheet 581 00:27:50,280 --> 00:27:52,800 Speaker 8: that's been improved, or could even be part of the 582 00:27:52,880 --> 00:27:56,080 Speaker 8: manufacturing sector. When you think about the infrastructure spending that's 583 00:27:56,119 --> 00:27:58,360 Speaker 8: going through the economy now, which is quite important. 584 00:27:58,680 --> 00:28:02,040 Speaker 1: Without giving away the crown jewels. You at master Card 585 00:28:02,160 --> 00:28:07,440 Speaker 1: have incredible consumer data. Is there resistance to twenty nine 586 00:28:07,720 --> 00:28:13,240 Speaker 1: or thirty percent credit card interest rates? Do people go no, 587 00:28:13,400 --> 00:28:14,119 Speaker 1: I don't want to do that. 588 00:28:15,000 --> 00:28:17,880 Speaker 8: Well, you know, we're every we're kind of the economy 589 00:28:17,920 --> 00:28:20,560 Speaker 8: in general. Is figuring out what that level of interest 590 00:28:20,640 --> 00:28:24,320 Speaker 8: rates is. That is a challenge, right. So when you 591 00:28:24,359 --> 00:28:26,880 Speaker 8: think about the FED bringing interest rates close to six 592 00:28:27,000 --> 00:28:30,679 Speaker 8: percent on the policy rate beginning of this cycle, there 593 00:28:30,760 --> 00:28:32,720 Speaker 8: was a view that was impossible. You can't have a 594 00:28:32,760 --> 00:28:36,440 Speaker 8: six percent policy rate and the economy will break under 595 00:28:36,480 --> 00:28:38,920 Speaker 8: that environment, and it hasn't because you also have to 596 00:28:38,960 --> 00:28:40,880 Speaker 8: think about in terms of real rates, not just that 597 00:28:41,040 --> 00:28:44,600 Speaker 8: nominal rate. So that, I think is what the FED 598 00:28:44,720 --> 00:28:46,520 Speaker 8: is trying to engineer and figure out, is what is 599 00:28:46,600 --> 00:28:48,840 Speaker 8: the level of interest rates that's the appropriate level that 600 00:28:48,920 --> 00:28:51,640 Speaker 8: doesn't cause the economy to roll over, but does cause 601 00:28:51,680 --> 00:28:55,240 Speaker 8: the economy to slow down, because that moderation is important. 602 00:28:55,320 --> 00:28:56,280 Speaker 8: It's part of getting over. 603 00:28:56,440 --> 00:28:58,560 Speaker 1: Very quickly here. And you mentioned Neil Dutt earlier and 604 00:28:58,680 --> 00:29:01,280 Speaker 1: all that you did at Bank of America with doctor Harris. 605 00:29:01,360 --> 00:29:05,360 Speaker 1: Ethan Harris is retiring, and I would suggest what Ethan 606 00:29:05,400 --> 00:29:08,719 Speaker 1: Harris gave you, which is a sense of look at 607 00:29:08,960 --> 00:29:12,000 Speaker 1: history and the answer is where we are now is 608 00:29:12,120 --> 00:29:14,239 Speaker 1: where we were. I'll let you decide to where are 609 00:29:14,320 --> 00:29:17,480 Speaker 1: we early two thousands? Is this a nineties analog that 610 00:29:17,520 --> 00:29:18,200 Speaker 1: we're in right now? 611 00:29:18,480 --> 00:29:23,080 Speaker 8: I mean so yes, Ethan time series, that's his thing. 612 00:29:23,280 --> 00:29:27,520 Speaker 8: That's been huge. I still't bring that back. In terms 613 00:29:27,560 --> 00:29:30,280 Speaker 8: of the comparison. You know, it'd be great if it 614 00:29:30,360 --> 00:29:32,560 Speaker 8: was a nineties comparison, because that was a cycle that 615 00:29:32,760 --> 00:29:35,320 Speaker 8: enjoyed productivity gains. It was a cycle that had a 616 00:29:35,360 --> 00:29:39,280 Speaker 8: lot longer duration than anticipated. If I was able to 617 00:29:39,320 --> 00:29:42,480 Speaker 8: hike rates and then gradually normalize or reduce interest rates 618 00:29:42,520 --> 00:29:46,239 Speaker 8: without creating a huge business cycle. So there's a lot 619 00:29:46,320 --> 00:29:49,720 Speaker 8: of parallels to that. But it's hard to just take 620 00:29:49,800 --> 00:29:51,920 Speaker 8: this business cycle and fit it into a box or 621 00:29:52,200 --> 00:29:54,520 Speaker 8: say this is exactly like this past cycle because it 622 00:29:54,640 --> 00:29:58,920 Speaker 8: was a pandemic with extraordinary stimulus. So so much has changed. 623 00:29:58,960 --> 00:30:01,320 Speaker 8: Think about the structure labor market, how much that has 624 00:30:01,440 --> 00:30:03,920 Speaker 8: changed with a more hybrid workforce. Think about how much 625 00:30:03,960 --> 00:30:07,640 Speaker 8: we've embrace technology. There's a lot that is different about this. 626 00:30:08,000 --> 00:30:10,040 Speaker 1: It'd be great to get you, Neil Dudd and Ethan 627 00:30:10,160 --> 00:30:12,560 Speaker 1: Harris on the desk at the same time, although folks 628 00:30:12,560 --> 00:30:15,480 Speaker 1: that are not in speaking terms. Oh no, no, we'resa 629 00:30:15,600 --> 00:30:29,840 Speaker 1: Meyer with us with MasterCard Economics Institute. Right now. We 630 00:30:29,920 --> 00:30:32,520 Speaker 1: are going to jem up a story here on Goldman Sachs. Yes, 631 00:30:32,560 --> 00:30:35,600 Speaker 1: it's about Jeff Curry leaving head of Commodity as a 632 00:30:35,640 --> 00:30:40,120 Speaker 1: former professor at Chicago Microeconomics. But it's far, far more 633 00:30:40,200 --> 00:30:42,440 Speaker 1: on that. And I want to go to a story 634 00:30:42,880 --> 00:30:48,040 Speaker 1: from six days ago Golden Sachs family office partner a 635 00:30:48,160 --> 00:30:52,080 Speaker 1: Poku to leave, because maybe that's a bigger story. Sheanat 636 00:30:52,080 --> 00:30:55,160 Speaker 1: a rogen for all of Global Wall Street, is expert 637 00:30:55,240 --> 00:30:58,280 Speaker 1: on this, and he joins us and reports this morning. 638 00:30:58,640 --> 00:31:02,240 Speaker 1: I'm sorry, there's some going on here. Don't give me here. Well, 639 00:31:02,320 --> 00:31:06,040 Speaker 1: we don't know. It's just speculation, blowny. They're walking out 640 00:31:06,120 --> 00:31:06,840 Speaker 1: the door, aren't they. 641 00:31:07,000 --> 00:31:09,680 Speaker 9: So let's start with some numbers. This Jeff Curry would 642 00:31:09,680 --> 00:31:11,880 Speaker 9: perhaps be the sixth partner to leave in the last 643 00:31:11,920 --> 00:31:14,440 Speaker 9: couple of weeks in late July early August. That's not 644 00:31:14,480 --> 00:31:16,760 Speaker 9: the usual time when you see a lot of partners leave. 645 00:31:17,000 --> 00:31:19,160 Speaker 9: To me, it still feels like Jeff Curry's departure might 646 00:31:19,200 --> 00:31:21,520 Speaker 9: be slightly different from some of the other recent departures 647 00:31:21,560 --> 00:31:23,560 Speaker 9: we've seen, the likes of Lisa Poku, the likes of 648 00:31:23,640 --> 00:31:25,800 Speaker 9: Julie Salisbury. These were some of the people who were 649 00:31:26,040 --> 00:31:28,600 Speaker 9: on the up and up. For them to leave was 650 00:31:28,680 --> 00:31:31,520 Speaker 9: a surprising bit. We have to remember. And over the years, 651 00:31:31,560 --> 00:31:34,160 Speaker 9: this is what Goldman has told us to maintain their 652 00:31:34,200 --> 00:31:36,800 Speaker 9: pool of four hundred or so partners. Every couple of years, 653 00:31:36,880 --> 00:31:40,360 Speaker 9: some thirty five some seventy partners leave. More recently, a 654 00:31:40,440 --> 00:31:43,480 Speaker 9: new spokesman has said that's about eighty partners every two years, 655 00:31:43,520 --> 00:31:45,520 Speaker 9: so there's clearly been some inflation in that figure. But 656 00:31:45,560 --> 00:31:47,720 Speaker 9: the fact of the matter is there's always a bunch of, 657 00:31:48,840 --> 00:31:52,240 Speaker 9: to put it politely, undesirables in the Goldman partner ranks. 658 00:31:52,400 --> 00:31:54,640 Speaker 9: They don't get fired, but they've certainly shown the door. 659 00:31:54,760 --> 00:31:57,320 Speaker 9: They walk out, they're tired, they leave. But what has 660 00:31:57,400 --> 00:31:59,880 Speaker 9: been surprising in the last year, in the last eighteen months, 661 00:32:00,000 --> 00:32:01,800 Speaker 9: in fact in the last couple of years, is the 662 00:32:02,000 --> 00:32:05,320 Speaker 9: type of partners leaving. People who were picked for better roles, 663 00:32:05,320 --> 00:32:08,400 Speaker 9: people who were picked for much greater things that Goldman 664 00:32:08,680 --> 00:32:10,800 Speaker 9: deciding to walk out the door because of some of 665 00:32:10,840 --> 00:32:11,960 Speaker 9: the issues that parmacy and. 666 00:32:11,960 --> 00:32:14,280 Speaker 1: So dark, and she is going to be reporting on 667 00:32:14,400 --> 00:32:16,600 Speaker 1: this for Global Wall Street through all of today and 668 00:32:16,680 --> 00:32:21,600 Speaker 1: then tomorrow. What's the why? What is the set of whys? 669 00:32:21,800 --> 00:32:24,280 Speaker 1: If you will, this is going on that's not going 670 00:32:24,320 --> 00:32:25,479 Speaker 1: on in Morgan Stanley right. 671 00:32:26,160 --> 00:32:28,480 Speaker 9: We certainly haven't seen anything of this space at any 672 00:32:28,520 --> 00:32:31,560 Speaker 9: other firm. It's fair to say that there is a 673 00:32:31,640 --> 00:32:33,840 Speaker 9: bit of tumult in the higher ranks of Goldman. There's 674 00:32:33,920 --> 00:32:36,960 Speaker 9: no denying that. AE are the rank and file big 675 00:32:37,040 --> 00:32:40,480 Speaker 9: fans of the CEO David Solomon. Even David Solomon probably 676 00:32:40,520 --> 00:32:42,840 Speaker 9: tell you that's not true. The reasons for that are 677 00:32:42,880 --> 00:32:45,520 Speaker 9: perhaps debatable. You have come off a great high of 678 00:32:45,600 --> 00:32:48,400 Speaker 9: twenty twenty one only to see profits and earnings just 679 00:32:48,560 --> 00:32:52,160 Speaker 9: completely get decimated in twenty two fall further in twenty three. 680 00:32:52,440 --> 00:32:54,520 Speaker 9: That could be a factor. There are others who would 681 00:32:54,560 --> 00:32:56,440 Speaker 9: say there are strategic missteps, and there are others who 682 00:32:56,520 --> 00:32:58,720 Speaker 9: say that this CEO just does not inspire faith. 683 00:32:59,440 --> 00:33:02,760 Speaker 5: Is there a certain area of the company where a 684 00:33:02,800 --> 00:33:05,240 Speaker 5: lot of the departures are focused, a certain type of 685 00:33:05,360 --> 00:33:08,520 Speaker 5: asset class, a certain type of practice. 686 00:33:08,760 --> 00:33:10,880 Speaker 9: I think we should acknowledge it front on that we 687 00:33:11,000 --> 00:33:13,880 Speaker 9: don't have full visibility into all the partner departures. What 688 00:33:14,080 --> 00:33:16,520 Speaker 9: we do see is some of the prominent names who leave. 689 00:33:16,680 --> 00:33:18,720 Speaker 9: That is why people inside the firm, people outside the 690 00:33:18,760 --> 00:33:21,440 Speaker 9: firm talk to us about those departures, because these are 691 00:33:21,520 --> 00:33:24,720 Speaker 9: names that are recognizable. It's hard to draw statistics from that. 692 00:33:25,120 --> 00:33:27,200 Speaker 9: We don't know that their banking and trading business has 693 00:33:27,280 --> 00:33:30,000 Speaker 9: been doing quite well. That has always been the crown 694 00:33:30,080 --> 00:33:32,400 Speaker 9: jewel of gold and Sex that has done really well. 695 00:33:32,640 --> 00:33:34,880 Speaker 9: Unfortunately for David Solman, he can't take a lot of 696 00:33:34,960 --> 00:33:37,440 Speaker 9: credit for that because that was already doing really well. 697 00:33:37,640 --> 00:33:40,040 Speaker 9: The kind of areas he tried to drive the firm 698 00:33:40,120 --> 00:33:43,560 Speaker 9: into consumer banking turned out to be a major flop, 699 00:33:43,880 --> 00:33:45,840 Speaker 9: and that unfortunately sits on his head. 700 00:33:46,360 --> 00:33:46,840 Speaker 4: If you take a. 701 00:33:46,840 --> 00:33:49,000 Speaker 5: Step back, it seems as though there are a number 702 00:33:49,040 --> 00:33:53,000 Speaker 5: of sort of big seismic changes in the banking industry. 703 00:33:53,120 --> 00:33:57,560 Speaker 5: There's Credit SUITEE that has gone away, ubs acquiring not 704 00:33:57,640 --> 00:34:00,160 Speaker 5: gone away yet, But you know what I'm saying, you 705 00:34:00,320 --> 00:34:03,320 Speaker 5: have a real kind of shifting in the baton with 706 00:34:03,480 --> 00:34:06,280 Speaker 5: respect to Gommetzas and Morgan Stanley, or at least people 707 00:34:06,360 --> 00:34:09,719 Speaker 5: are thinking about that. Where does Goldman Sachs fit into 708 00:34:09,800 --> 00:34:12,600 Speaker 5: this especially at a time very much a talent war. 709 00:34:13,000 --> 00:34:16,880 Speaker 9: I'm so glad you mentioned that because Goldman kremnolology aside, 710 00:34:17,160 --> 00:34:20,719 Speaker 9: forget the palace industrigue at Goldman sach the changes, the 711 00:34:20,840 --> 00:34:24,440 Speaker 9: structural changes we've seen in the global banking industry. You know, 712 00:34:24,560 --> 00:34:27,600 Speaker 9: what has happened with the big European banks has meant 713 00:34:27,840 --> 00:34:30,160 Speaker 9: that if you are a large US bank, if you've 714 00:34:30,160 --> 00:34:32,400 Speaker 9: been doing well, and you have a strong presence in 715 00:34:32,440 --> 00:34:35,520 Speaker 9: what you're doing, you will gain market share. The competitive 716 00:34:35,640 --> 00:34:39,240 Speaker 9: mote around the likes of JP Morgan Stanley and Goldman 717 00:34:39,320 --> 00:34:43,000 Speaker 9: Sachs continues to grow, continues to become deeper. So they 718 00:34:43,080 --> 00:34:44,239 Speaker 9: have benefited from that. 719 00:34:44,600 --> 00:34:48,560 Speaker 5: Given that, where has Goldman Sachs not benefited to the 720 00:34:48,640 --> 00:34:51,760 Speaker 5: extent where people are seeing an opportunity to leave, perhaps 721 00:34:51,840 --> 00:34:54,560 Speaker 5: to go somewhere else that is benefiting, or perhaps to 722 00:34:54,600 --> 00:34:55,359 Speaker 5: go off on their own. 723 00:34:55,760 --> 00:34:58,200 Speaker 9: Well, twenty years ago, if the bank was performing as 724 00:34:58,239 --> 00:35:00,480 Speaker 9: well as it is performing right now, would have made 725 00:35:00,520 --> 00:35:03,239 Speaker 9: a lot more money. That's not the case anymore. And 726 00:35:03,320 --> 00:35:06,840 Speaker 9: the opportunities on the buyside that kind of money Goldman's 727 00:35:06,880 --> 00:35:10,080 Speaker 9: acts just cannot throw at its top executives, and loyalty 728 00:35:10,200 --> 00:35:11,720 Speaker 9: is just not such a binding factor. 729 00:35:11,760 --> 00:35:14,480 Speaker 1: And I'm not going to mince words here. Private equity 730 00:35:14,560 --> 00:35:18,200 Speaker 1: is taking over the strena to Roger and act doctor 731 00:35:18,400 --> 00:35:22,680 Speaker 1: Curry is worth his weight in gold to some private 732 00:35:22,760 --> 00:35:23,920 Speaker 1: equity shop. Right. 733 00:35:24,320 --> 00:35:27,080 Speaker 9: Well, you've seen a prominent move like that. Remember towson' slocke, 734 00:35:27,080 --> 00:35:29,359 Speaker 9: who's now at Apollo. He moved from the cell side 735 00:35:29,360 --> 00:35:32,000 Speaker 9: to the buyside. We don't know what Jeff Curry is doing. 736 00:35:32,120 --> 00:35:34,319 Speaker 9: It would appear that he is taking some time out, 737 00:35:34,520 --> 00:35:36,600 Speaker 9: spending some time a family. He has two young kids, 738 00:35:36,800 --> 00:35:39,320 Speaker 9: so he could potentially be taking some time. He's just 739 00:35:39,360 --> 00:35:41,839 Speaker 9: fifty six, so it's hard to say that he's retiring old. 740 00:35:41,920 --> 00:35:45,239 Speaker 1: He's ancient. You nailed it this morning. You said that 741 00:35:45,320 --> 00:35:49,040 Speaker 1: Jeff Curry was tired of waiting, tired of waiting for you. 742 00:35:49,920 --> 00:35:52,279 Speaker 9: That was you talman, that you you. 743 00:35:54,440 --> 00:35:54,560 Speaker 4: King. 744 00:35:54,960 --> 00:35:57,319 Speaker 1: He financed Ray Davies's latest move. 745 00:35:57,600 --> 00:36:00,520 Speaker 9: So at least with Jeff Curry, you know about his 746 00:36:01,280 --> 00:36:03,760 Speaker 9: part time job, which is a little bit of commodities research. 747 00:36:03,800 --> 00:36:06,040 Speaker 9: But he's perhaps more famous for, at least we'd like 748 00:36:06,080 --> 00:36:10,160 Speaker 9: to think, for helping produce a movie, a documentary on 749 00:36:10,560 --> 00:36:14,000 Speaker 9: this journalist trying to reunite the King some forty years 750 00:36:14,040 --> 00:36:15,239 Speaker 9: after those guys broke up. 751 00:36:15,560 --> 00:36:17,320 Speaker 5: I love that, and I've got to say that I 752 00:36:17,400 --> 00:36:21,680 Speaker 5: love that you try to put the song into Shree's mouth, 753 00:36:21,840 --> 00:36:23,560 Speaker 5: basically saying you came here singing. 754 00:36:24,239 --> 00:36:25,319 Speaker 1: Will you look forward the. 755 00:36:25,360 --> 00:36:26,680 Speaker 5: People you talk to and you do have a lot 756 00:36:26,719 --> 00:36:28,480 Speaker 5: of sources. Are there more to come? 757 00:36:29,920 --> 00:36:30,080 Speaker 1: Yes? 758 00:36:30,200 --> 00:36:32,239 Speaker 9: Unfortunately, it doesn't look like this is something that's going 759 00:36:32,280 --> 00:36:37,480 Speaker 9: to stop again. The people exiting Goldman Sachs is the 760 00:36:37,640 --> 00:36:39,840 Speaker 9: number of people. You want to keep a track on that, 761 00:36:40,040 --> 00:36:43,720 Speaker 9: but there isn't anything in that quantity that suggests a problem. 762 00:36:43,880 --> 00:36:45,520 Speaker 9: What we want to see is the type of people 763 00:36:45,680 --> 00:36:47,600 Speaker 9: leaving the building set very quickly. 764 00:36:47,800 --> 00:36:50,840 Speaker 1: Here it's August, but it doesn't feel like August to me. 765 00:36:50,960 --> 00:36:54,520 Speaker 1: On New York Wall Street. It feels like late October, 766 00:36:55,239 --> 00:36:58,759 Speaker 1: bonus season, February they're doing fiscal planning for next year. 767 00:36:59,560 --> 00:37:03,920 Speaker 1: Mckinn like larger sixty thousand Bologne. It's out the window. 768 00:37:03,960 --> 00:37:06,400 Speaker 1: This seems to be a unique August. How unique is 769 00:37:06,480 --> 00:37:08,800 Speaker 1: this August for the players in Manhattan? 770 00:37:09,040 --> 00:37:12,399 Speaker 9: It's very important. You've had five very slow months, six 771 00:37:12,680 --> 00:37:15,359 Speaker 9: very slow months, seven very slow months to start there. Sorry, 772 00:37:15,440 --> 00:37:17,080 Speaker 9: I was just trying to figure out where July falls 773 00:37:17,120 --> 00:37:19,719 Speaker 9: in the calendar, but you've had seven slow months to 774 00:37:19,840 --> 00:37:22,439 Speaker 9: start the year. The question is now when we're seeing 775 00:37:22,480 --> 00:37:24,279 Speaker 9: a little bit of a pickup, we head into the 776 00:37:24,400 --> 00:37:27,560 Speaker 9: late summer lull. You're hoping for a pickup after Labor Day, 777 00:37:27,719 --> 00:37:32,239 Speaker 9: but then that giant US government shutdown threats start coming 778 00:37:32,239 --> 00:37:34,600 Speaker 9: into the fray again start of October, and then you're 779 00:37:34,640 --> 00:37:35,880 Speaker 9: close to the end of the year. So is there 780 00:37:36,000 --> 00:37:36,840 Speaker 9: enough time to rebound? 781 00:37:37,000 --> 00:37:39,680 Speaker 1: Ten seconds David from the Hampton's emails and goes, when's 782 00:37:39,719 --> 00:37:42,320 Speaker 1: she published it this morning? What are you publishing this morning? 783 00:37:43,000 --> 00:37:43,799 Speaker 9: Nothing else for now? 784 00:37:43,880 --> 00:37:45,520 Speaker 4: Tom the day. 785 00:37:45,680 --> 00:37:48,400 Speaker 1: Yeah, David, there you go, She'll be publishing later today. 786 00:37:48,480 --> 00:37:51,799 Speaker 1: We believe she not orogen with us Bloomberg News. Subscribe 787 00:37:51,880 --> 00:37:55,600 Speaker 1: to the Bloomberg Surveillance podcast on Apple, Spotify and anywhere 788 00:37:55,640 --> 00:37:59,960 Speaker 1: else you get your podcasts. Listen live every weekday starting 789 00:38:00,120 --> 00:38:04,520 Speaker 1: at seven am Easter. I'm Bloomberg dot Com, the iHeartRadio app, 790 00:38:04,960 --> 00:38:08,440 Speaker 1: tune In, and the Bloomberg Business app. You can watch 791 00:38:08,680 --> 00:38:12,960 Speaker 1: us live on Bloomberg Television and always I'm the Bloomberg Terminal. 792 00:38:13,400 --> 00:38:17,560 Speaker 1: Thanks for listening. I'm Tom Keen, and this is Bloomberg