WEBVTT - Nouriel Roubini Talks Tech Led Boom, Geopolitics

0:00:02.520 --> 0:00:07.320
<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

0:00:07.800 --> 0:00:10.640
<v Speaker 2>So here's the latest. This morning, US productivity accelerating at

0:00:10.720 --> 0:00:13.280
<v Speaker 2>his fastest placed in two years, fueling hopes for further

0:00:13.360 --> 0:00:16.479
<v Speaker 2>AI driven gains. Norian Rabini is the chairman of Rabbini

0:00:16.520 --> 0:00:19.120
<v Speaker 2>Macro associate to me, writes the following, The US remains

0:00:19.160 --> 0:00:21.840
<v Speaker 2>at the center of a technology driven positive supply shock,

0:00:22.120 --> 0:00:25.600
<v Speaker 2>the racist growth and lowest inflation over time. No real

0:00:25.720 --> 0:00:27.320
<v Speaker 2>joint is now for more, no real good morning, good

0:00:27.320 --> 0:00:29.840
<v Speaker 2>to see you, great, seeing you fantastically catch up with you, sir.

0:00:29.960 --> 0:00:32.400
<v Speaker 2>You're bullish, not just for the year ahead, but three

0:00:32.440 --> 0:00:34.720
<v Speaker 2>to twenty thirty. Can you flash that out for us

0:00:34.840 --> 0:00:35.560
<v Speaker 2>a little bit more?

0:00:36.360 --> 0:00:40.159
<v Speaker 3>Yes, I mean everybody's talking about Ai jen Ai, but

0:00:40.240 --> 0:00:43.920
<v Speaker 3>this is only one of the fifteen technology of the future.

0:00:43.960 --> 0:00:47.839
<v Speaker 3>They're all rated to AI. But is AI semiconductor, by

0:00:47.880 --> 0:00:53.160
<v Speaker 3>medical research, quantum infusion, the fans, tech, fintech, new material signs,

0:00:53.560 --> 0:00:57.240
<v Speaker 3>you name it, and it's there is between US and China.

0:00:57.560 --> 0:00:59.520
<v Speaker 3>I don't think it's a zero sum game. US is

0:00:59.560 --> 0:01:01.800
<v Speaker 3>going to do China's going to do well. But my

0:01:02.000 --> 0:01:05.039
<v Speaker 3>estimate is that the US potential growth is estimated today

0:01:05.080 --> 0:01:08.520
<v Speaker 3>to be only one point eighty percent could be as

0:01:08.600 --> 0:01:10.720
<v Speaker 3>I as four percent by the end of the decade.

0:01:10.880 --> 0:01:12.880
<v Speaker 3>And I've done a bit of a bottom up analysis.

0:01:12.920 --> 0:01:16.040
<v Speaker 3>And by the way, the data productivity after the GFC

0:01:16.120 --> 0:01:19.120
<v Speaker 3>average productivity between two thousand and nine and nineteen was

0:01:19.160 --> 0:01:23.560
<v Speaker 3>only one percent. Since twenty nineteen, in spite of the

0:01:23.600 --> 0:01:26.200
<v Speaker 3>deep during COVID, has doubled to almost two percent. One

0:01:26.240 --> 0:01:29.400
<v Speaker 3>point nine in twenty twenty four was two point four percent,

0:01:29.800 --> 0:01:33.080
<v Speaker 3>and the number from Q three suggests was almost five percent.

0:01:33.120 --> 0:01:35.959
<v Speaker 3>And by the way, the Atlanta Fed no cast for

0:01:36.120 --> 0:01:39.480
<v Speaker 3>Q four GDPs today is five point one percent. Probably

0:01:39.560 --> 0:01:42.080
<v Speaker 3>too high, but given that one, given the job number,

0:01:42.080 --> 0:01:44.440
<v Speaker 3>you ele have another high productivity growth. Now, I don't

0:01:44.440 --> 0:01:46.720
<v Speaker 3>think the PRODUCTI growth is four percent or five percent,

0:01:47.040 --> 0:01:48.400
<v Speaker 3>but there's definitely acceleration.

0:01:48.800 --> 0:01:52.200
<v Speaker 2>Jobs is key. Is a jobless growth so called jobless growth?

0:01:52.480 --> 0:01:55.480
<v Speaker 3>Yeah, well, it's a jobless growth. There are three stories.

0:01:55.560 --> 0:01:58.200
<v Speaker 3>One is that the GDP number are wrong and the

0:01:58.240 --> 0:02:00.360
<v Speaker 3>GDP number are going to be revised towards the weaker

0:02:00.440 --> 0:02:03.480
<v Speaker 3>labor numbers. The other one is that now the gp

0:02:03.600 --> 0:02:06.760
<v Speaker 3>groad is strong and you're going to have some adjustment

0:02:06.800 --> 0:02:09.480
<v Speaker 3>upard of the revised data. I think the third explanation

0:02:09.520 --> 0:02:11.600
<v Speaker 3>is the more correct one. You can have strong GDP

0:02:11.760 --> 0:02:14.880
<v Speaker 3>growth and having weak labor growth because we're having a

0:02:14.960 --> 0:02:18.520
<v Speaker 3>productivity revolution. If you're looking, for example, at the revenue

0:02:18.560 --> 0:02:22.760
<v Speaker 3>or real revenue per worker of SMP five hundred firms

0:02:22.800 --> 0:02:26.239
<v Speaker 3>since the launch of chad GPT in November twenty twenty two,

0:02:26.800 --> 0:02:29.680
<v Speaker 3>the average has increased for SMP five hundred firms by

0:02:29.960 --> 0:02:32.800
<v Speaker 3>fifteen percent in the last three years, so it's almost

0:02:32.840 --> 0:02:34.840
<v Speaker 3>five percent per year. And if you look at the

0:02:34.880 --> 0:02:37.200
<v Speaker 3>bi sector, of course a lot of it is closer

0:02:37.240 --> 0:02:41.040
<v Speaker 3>to twenty percent in tech and communications services, but it's

0:02:41.120 --> 0:02:43.920
<v Speaker 3>very large also across the board. So both at the

0:02:44.000 --> 0:02:47.359
<v Speaker 3>micro data level SMP five firms and a macro one number,

0:02:47.360 --> 0:02:50.360
<v Speaker 3>we're seeing a productive revolution. Lad in the numbers.

0:02:50.680 --> 0:02:52.800
<v Speaker 1>I'm kind of dealing with whiplash right now because we

0:02:52.880 --> 0:02:55.720
<v Speaker 1>just had the Roy Mettel CEO on defense sector in

0:02:55.760 --> 0:02:58.640
<v Speaker 1>Europe booming for all the wrong reasons, this idea that

0:02:58.639 --> 0:03:01.400
<v Speaker 1>he's more worried about the state of the world ever before,

0:03:01.400 --> 0:03:03.320
<v Speaker 1>and here doctor doom is coming on to tell us

0:03:03.320 --> 0:03:05.960
<v Speaker 1>about how productivity boom is going to bring everything to

0:03:06.040 --> 0:03:09.920
<v Speaker 1>a better place. Why are you less concerned about this

0:03:10.120 --> 0:03:15.160
<v Speaker 1>overlay of rearmament and militarization that is also coming in

0:03:15.200 --> 0:03:16.919
<v Speaker 1>tandem with this productivity boom.

0:03:17.760 --> 0:03:20.959
<v Speaker 3>Well, there are geopolitical risk in the world, and I'm

0:03:21.040 --> 0:03:23.320
<v Speaker 3>aware of them. The question is whether they're going to

0:03:23.360 --> 0:03:26.840
<v Speaker 3>have a significant economic and market effect. Look at the

0:03:26.840 --> 0:03:29.600
<v Speaker 3>biggest one, where the twelve day were between Isaly and

0:03:29.600 --> 0:03:33.200
<v Speaker 3>Iran last June. All prices went up a little bit,

0:03:33.280 --> 0:03:36.320
<v Speaker 3>stock markets wobbled, and then given the Iran did not

0:03:36.440 --> 0:03:39.680
<v Speaker 3>attack the old facility of the golfis or block the

0:03:39.720 --> 0:03:42.240
<v Speaker 3>street of Frmos, it went away and that was a big,

0:03:42.400 --> 0:03:46.280
<v Speaker 3>big deal Venezuela. You know, we can discuss the length,

0:03:46.320 --> 0:03:49.600
<v Speaker 3>but the macro and market implications are close to zero.

0:03:49.640 --> 0:03:52.480
<v Speaker 3>It's just less than a million barrels a day. Russia

0:03:52.560 --> 0:03:54.480
<v Speaker 3>Ukraine is a mess, but it's not going to have

0:03:54.520 --> 0:03:57.000
<v Speaker 3>an impact on global market economy the way it did

0:03:57.000 --> 0:04:00.240
<v Speaker 3>in twenty twenty two. So and usked China. They are

0:04:00.600 --> 0:04:04.200
<v Speaker 3>of course in a competitive strategic competition, but right now

0:04:04.400 --> 0:04:07.080
<v Speaker 3>the trade tension for all the reasons we know, are

0:04:07.080 --> 0:04:09.960
<v Speaker 3>somewha limited. So every time there is a geopoligal risk,

0:04:10.000 --> 0:04:13.520
<v Speaker 3>people say stuff could happen, But so far, those that

0:04:13.600 --> 0:04:16.400
<v Speaker 3>we've seen in the last few decades, living aside the

0:04:16.440 --> 0:04:19.840
<v Speaker 3>seventies with the shocks of Yom Kipur and the a

0:04:19.920 --> 0:04:21.920
<v Speaker 3>Islamic Revolution have not a market effect.

0:04:22.160 --> 0:04:23.840
<v Speaker 1>Do you think, though, that the United States is going

0:04:23.880 --> 0:04:26.760
<v Speaker 1>to lose some of its luster as an investment haven

0:04:27.160 --> 0:04:31.120
<v Speaker 1>in terms of the ongoing conflict between the US and

0:04:31.360 --> 0:04:33.760
<v Speaker 1>traditional allies like Europe. I mean, have you seen anything

0:04:33.800 --> 0:04:35.599
<v Speaker 1>like that or do you think that's oversaid in productivity

0:04:35.640 --> 0:04:36.640
<v Speaker 1>really is going to rule the roost.

0:04:36.760 --> 0:04:39.920
<v Speaker 3>You know, I've been saying since last year that tech

0:04:40.240 --> 0:04:43.120
<v Speaker 3>trump stariffs, because I think that the upside coming from

0:04:43.160 --> 0:04:45.760
<v Speaker 3>tech is two hundred business points. Well, if you add

0:04:45.839 --> 0:04:49.720
<v Speaker 3>all the impacts of the bad circulationary policies of Trump trade,

0:04:49.720 --> 0:04:53.320
<v Speaker 3>the restrictions of migration, physical depity, trying to affect the

0:04:53.320 --> 0:04:56.640
<v Speaker 3>independence of the Fed, the rule of law, the maximum

0:04:56.839 --> 0:04:58.880
<v Speaker 3>from an Empedia point of view, it could be a

0:04:58.920 --> 0:05:02.040
<v Speaker 3>negative fifty b these points downside to potential growth. So

0:05:02.120 --> 0:05:04.520
<v Speaker 3>you have an upside of two hundred from technology, you

0:05:04.560 --> 0:05:06.760
<v Speaker 3>have a downside of fifty is a ratio four to one,

0:05:06.960 --> 0:05:10.320
<v Speaker 3>So tech trum starff. So the stuff that this technology

0:05:10.360 --> 0:05:14.599
<v Speaker 3>is first or everything else including geopolitics is second order?

0:05:14.760 --> 0:05:17.120
<v Speaker 1>Is this why the AI trade. The market pretty much

0:05:17.120 --> 0:05:20.280
<v Speaker 1>shrugged off at independence yesterday as a serious concern.

0:05:22.520 --> 0:05:25.760
<v Speaker 3>You know, I believe that you know, there is some

0:05:25.800 --> 0:05:29.880
<v Speaker 3>fraudiness of course in the AI sector. But if you

0:05:29.920 --> 0:05:32.200
<v Speaker 3>talk to all these companies, I think that they would

0:05:32.240 --> 0:05:35.400
<v Speaker 3>all argue that we are maybe to worst five years

0:05:35.440 --> 0:05:38.480
<v Speaker 3>away or at best three years away from AGI. However

0:05:38.520 --> 0:05:41.000
<v Speaker 3>you want to define it. Now, if we are achieving

0:05:41.120 --> 0:05:45.320
<v Speaker 3>artificial general intelligence, the valuation of the say not every

0:05:45.320 --> 0:05:47.800
<v Speaker 3>of the MAC seven is going to reach AGI, but

0:05:47.839 --> 0:05:50.800
<v Speaker 3>maybe three or four will. So the value of affirm

0:05:50.839 --> 0:05:53.000
<v Speaker 3>that is going to be having AGI is going to

0:05:53.040 --> 0:05:56.120
<v Speaker 3>be five x of its current value. So that's the RaSE.

0:05:56.240 --> 0:05:58.160
<v Speaker 3>So if you think of it this way, yeah, there

0:05:58.200 --> 0:06:01.280
<v Speaker 3>is some fraudiness, there can be a correction. But with

0:06:01.480 --> 0:06:03.880
<v Speaker 3>US growth at two percent for the last few decades,

0:06:04.120 --> 0:06:07.039
<v Speaker 3>the average return on smp F abanded was twelve percent

0:06:07.600 --> 0:06:11.360
<v Speaker 3>including dividends of Nasdaq was sixteen percent, and was with

0:06:11.400 --> 0:06:14.360
<v Speaker 3>two percent. Suppose growth is not two three, let alone

0:06:14.400 --> 0:06:17.960
<v Speaker 3>three and a half four. American exceptionalism has to become

0:06:18.040 --> 0:06:20.520
<v Speaker 3>even stronger, because if it was American exception it's with

0:06:20.720 --> 0:06:23.160
<v Speaker 3>one point eight percent growth. With higher growth, it has

0:06:23.200 --> 0:06:25.359
<v Speaker 3>to be better than that on average. Now there'll be

0:06:25.400 --> 0:06:29.160
<v Speaker 3>winners and losers, both within the publicly traded firms all

0:06:29.240 --> 0:06:32.359
<v Speaker 3>the versus new economy, and among the startups. Many of

0:06:32.360 --> 0:06:34.160
<v Speaker 3>them are going to go bust. But if you're looking

0:06:34.200 --> 0:06:36.800
<v Speaker 3>at the medium term horizon with higher growth, you're going

0:06:36.839 --> 0:06:39.560
<v Speaker 3>to have higher returns. And we're seeing based on the

0:06:39.640 --> 0:06:42.160
<v Speaker 3>data on real revenue growth for a Segree avand re firms,

0:06:42.279 --> 0:06:45.560
<v Speaker 3>then most of those productivity grains are gotten by the firms.

0:06:45.920 --> 0:06:48.880
<v Speaker 3>Real wages are growing less than productivity in liberal costs

0:06:48.960 --> 0:06:51.440
<v Speaker 3>are falling. That's why there is my least, that's why

0:06:51.520 --> 0:06:54.920
<v Speaker 3>people are worrying about affordability. But from a profitability point

0:06:54.920 --> 0:06:56.960
<v Speaker 3>of view, the corporate sector is doing great.

0:06:57.320 --> 0:06:59.200
<v Speaker 2>It's a perfect frame again the last year and maybe

0:06:59.279 --> 0:07:01.040
<v Speaker 2>for the next several year. Neuria, thank you sir, it's

0:07:01.040 --> 0:07:02.919
<v Speaker 2>good to see you as always. Thank you, Nurian Rabeni

0:07:02.920 --> 0:07:04.320
<v Speaker 2>There Rabennie Macro Associates