Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: So here's the latest. This morning, US productivity accelerating at
Speaker 2: his fastest placed in two years, fueling hopes for further
Speaker 2: AI driven gains. Norian Rabini is the chairman of Rabbini
Speaker 2: Macro associate to me, writes the following, The US remains
Speaker 2: at the center of a technology driven positive supply shock,
Speaker 2: the racist growth and lowest inflation over time. No real
Speaker 2: joint is now for more, no real good morning, good
Speaker 2: to see you, great, seeing you fantastically catch up with you, sir.
Speaker 2: You're bullish, not just for the year ahead, but three
Speaker 2: to twenty thirty. Can you flash that out for us
Speaker 2: a little bit more?
Speaker 3: Yes, I mean everybody's talking about Ai jen Ai, but
Speaker 3: this is only one of the fifteen technology of the future.
Speaker 3: They're all rated to AI. But is AI semiconductor, by
Speaker 3: medical research, quantum infusion, the fans, tech, fintech, new material signs,
Speaker 3: you name it, and it's there is between US and China.
Speaker 3: I don't think it's a zero sum game. US is
Speaker 3: going to do China's going to do well. But my
Speaker 3: estimate is that the US potential growth is estimated today
Speaker 3: to be only one point eighty percent could be as
Speaker 3: I as four percent by the end of the decade.
Speaker 3: And I've done a bit of a bottom up analysis.
Speaker 3: And by the way, the data productivity after the GFC
Speaker 3: average productivity between two thousand and nine and nineteen was
Speaker 3: only one percent. Since twenty nineteen, in spite of the
Speaker 3: deep during COVID, has doubled to almost two percent. One
Speaker 3: point nine in twenty twenty four was two point four percent,
Speaker 3: and the number from Q three suggests was almost five percent.
Speaker 3: And by the way, the Atlanta Fed no cast for
Speaker 3: Q four GDPs today is five point one percent. Probably
Speaker 3: too high, but given that one, given the job number,
Speaker 3: you ele have another high productivity growth. Now, I don't
Speaker 3: think the PRODUCTI growth is four percent or five percent,
Speaker 3: but there's definitely acceleration.
Speaker 2: Jobs is key. Is a jobless growth so called jobless growth?
Speaker 3: Yeah, well, it's a jobless growth. There are three stories.
Speaker 3: One is that the GDP number are wrong and the
Speaker 3: GDP number are going to be revised towards the weaker
Speaker 3: labor numbers. The other one is that now the gp
Speaker 3: groad is strong and you're going to have some adjustment
Speaker 3: upard of the revised data. I think the third explanation
Speaker 3: is the more correct one. You can have strong GDP
Speaker 3: growth and having weak labor growth because we're having a
Speaker 3: productivity revolution. If you're looking, for example, at the revenue
Speaker 3: or real revenue per worker of SMP five hundred firms
Speaker 3: since the launch of chad GPT in November twenty twenty two,
Speaker 3: the average has increased for SMP five hundred firms by
Speaker 3: fifteen percent in the last three years, so it's almost
Speaker 3: five percent per year. And if you look at the
Speaker 3: bi sector, of course a lot of it is closer
Speaker 3: to twenty percent in tech and communications services, but it's
Speaker 3: very large also across the board. So both at the
Speaker 3: micro data level SMP five firms and a macro one number,
Speaker 3: we're seeing a productive revolution. Lad in the numbers.
Speaker 1: I'm kind of dealing with whiplash right now because we
Speaker 1: just had the Roy Mettel CEO on defense sector in
Speaker 1: Europe booming for all the wrong reasons, this idea that
Speaker 1: he's more worried about the state of the world ever before,
Speaker 1: and here doctor doom is coming on to tell us
Speaker 1: about how productivity boom is going to bring everything to
Speaker 1: a better place. Why are you less concerned about this
Speaker 1: overlay of rearmament and militarization that is also coming in
Speaker 1: tandem with this productivity boom.
Speaker 3: Well, there are geopolitical risk in the world, and I'm
Speaker 3: aware of them. The question is whether they're going to
Speaker 3: have a significant economic and market effect. Look at the
Speaker 3: biggest one, where the twelve day were between Isaly and
Speaker 3: Iran last June. All prices went up a little bit,
Speaker 3: stock markets wobbled, and then given the Iran did not
Speaker 3: attack the old facility of the golfis or block the
Speaker 3: street of Frmos, it went away and that was a big,
Speaker 3: big deal Venezuela. You know, we can discuss the length,
Speaker 3: but the macro and market implications are close to zero.
Speaker 3: It's just less than a million barrels a day. Russia
Speaker 3: Ukraine is a mess, but it's not going to have
Speaker 3: an impact on global market economy the way it did
Speaker 3: in twenty twenty two. So and usked China. They are
Speaker 3: of course in a competitive strategic competition, but right now
Speaker 3: the trade tension for all the reasons we know, are
Speaker 3: somewha limited. So every time there is a geopoligal risk,
Speaker 3: people say stuff could happen, But so far, those that
Speaker 3: we've seen in the last few decades, living aside the
Speaker 3: seventies with the shocks of Yom Kipur and the a
Speaker 3: Islamic Revolution have not a market effect.
Speaker 1: Do you think, though, that the United States is going
Speaker 1: to lose some of its luster as an investment haven
Speaker 1: in terms of the ongoing conflict between the US and
Speaker 1: traditional allies like Europe. I mean, have you seen anything
Speaker 1: like that or do you think that's oversaid in productivity
Speaker 1: really is going to rule the roost.
Speaker 3: You know, I've been saying since last year that tech
Speaker 3: trump stariffs, because I think that the upside coming from
Speaker 3: tech is two hundred business points. Well, if you add
Speaker 3: all the impacts of the bad circulationary policies of Trump trade,
Speaker 3: the restrictions of migration, physical depity, trying to affect the
Speaker 3: independence of the Fed, the rule of law, the maximum
Speaker 3: from an Empedia point of view, it could be a
Speaker 3: negative fifty b these points downside to potential growth. So
Speaker 3: you have an upside of two hundred from technology, you
Speaker 3: have a downside of fifty is a ratio four to one,
Speaker 3: So tech trum starff. So the stuff that this technology
Speaker 3: is first or everything else including geopolitics is second order?
Speaker 1: Is this why the AI trade. The market pretty much
Speaker 1: shrugged off at independence yesterday as a serious concern.
Speaker 3: You know, I believe that you know, there is some
Speaker 3: fraudiness of course in the AI sector. But if you
Speaker 3: talk to all these companies, I think that they would
Speaker 3: all argue that we are maybe to worst five years
Speaker 3: away or at best three years away from AGI. However
Speaker 3: you want to define it. Now, if we are achieving
Speaker 3: artificial general intelligence, the valuation of the say not every
Speaker 3: of the MAC seven is going to reach AGI, but
Speaker 3: maybe three or four will. So the value of affirm
Speaker 3: that is going to be having AGI is going to
Speaker 3: be five x of its current value. So that's the RaSE.
Speaker 3: So if you think of it this way, yeah, there
Speaker 3: is some fraudiness, there can be a correction. But with
Speaker 3: US growth at two percent for the last few decades,
Speaker 3: the average return on smp F abanded was twelve percent
Speaker 3: including dividends of Nasdaq was sixteen percent, and was with
Speaker 3: two percent. Suppose growth is not two three, let alone
Speaker 3: three and a half four. American exceptionalism has to become
Speaker 3: even stronger, because if it was American exception it's with
Speaker 3: one point eight percent growth. With higher growth, it has
Speaker 3: to be better than that on average. Now there'll be
Speaker 3: winners and losers, both within the publicly traded firms all
Speaker 3: the versus new economy, and among the startups. Many of
Speaker 3: them are going to go bust. But if you're looking
Speaker 3: at the medium term horizon with higher growth, you're going
Speaker 3: to have higher returns. And we're seeing based on the
Speaker 3: data on real revenue growth for a Segree avand re firms,
Speaker 3: then most of those productivity grains are gotten by the firms.
Speaker 3: Real wages are growing less than productivity in liberal costs
Speaker 3: are falling. That's why there is my least, that's why
Speaker 3: people are worrying about affordability. But from a profitability point
Speaker 3: of view, the corporate sector is doing great.
Speaker 2: It's a perfect frame again the last year and maybe
Speaker 2: for the next several year. Neuria, thank you sir, it's
Speaker 2: good to see you as always. Thank you, Nurian Rabeni
Speaker 2: There Rabennie Macro Associates