Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordernt. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
Speaker 2: from our global headquarters in New York City. We are
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Speaker 2: Terminal and the Bloomberg Business app. We begin the sout
Speaker 2: with stocks, Agenkaiah on the Hills and videos, earnings report,
Speaker 2: Mark Leman of Citizens Commercial Bank, writing, it's not just
Speaker 2: a company print, it's a real time read on AI
Speaker 2: demand and the health of the entire ecosystem. Mark joins
Speaker 2: us now for more. Mark, welcome to the program. Let's
Speaker 2: get the health check. How is the health of the
Speaker 2: entire ecosystem?
Speaker 3: It's definitely healthy, Jonathan. It's headlines every single day. Obviously
Speaker 3: we have been We're three days from the Trial of
Speaker 3: the Century, I guess, and it came and went. But
Speaker 3: it's still the most important story in the marketplace outside.
Speaker 4: Of oil, and we're going to learn a lot.
Speaker 2: Today outside of markets. Mark, AI's got a big PR problem.
Speaker 2: You would have seen the booze over the weekend, the
Speaker 2: clumsy comments coming from a bank CEO that we've covered
Speaker 2: extensively in the last twenty four hours. You and I
Speaker 2: have had this conversation. Is that becoming a bigger and
Speaker 2: bigger issue? And how do they address this?
Speaker 3: You know, we did talk about it, and it does
Speaker 3: not seem to have abated at all. Like you said,
Speaker 3: it was the bank ceo, it was some graduation speeches.
Speaker 3: They do have a PR problem, and they've hired the
Speaker 3: best in the world, and that hasn't actually helped. I
Speaker 3: think unfortunately, as my kids would say, it is what
Speaker 3: it is in a way. I think there are some
Speaker 3: issues as it relates to messaging. There are some issues
Speaker 3: that relates to what's going on in corporate America. But
Speaker 3: this freight train is moving as fast as power and
Speaker 3: actually it's accelerating and it's not going to slow down.
Speaker 2: It's the policy story, though, Mark on the horizon, and
Speaker 2: maybe I'm thinking a little bit too further out a year,
Speaker 2: two years into twenty twenty eight and the next general
Speaker 2: if the public are booing and they're pushing back, and
Speaker 2: they can't get the message on track. I just wonder
Speaker 2: when the policy story starts to become a stock market problem.
Speaker 3: Well, I analogized it to what happened four and eight
Speaker 3: and ten years ago when we had Mark raise his
Speaker 3: hand in front of Congress and all the Internet people
Speaker 3: raise their hands in front of Congress and begged them
Speaker 3: to regulate them. And I remember watching Orange Hatch and
Speaker 3: other people talk about the Internet as if they didn't
Speaker 3: understand it. And unfortunately, I think we're going to see
Speaker 3: Dejabu all over again, and that we don't have Congress
Speaker 3: really understanding if what is actually going on every single
Speaker 3: day in corporate America. And you're right, the messaging in
Speaker 3: the general is going to be really.
Speaker 4: Really important.
Speaker 3: But think about that two years from now, two and
Speaker 3: a half years from now, in the big election in
Speaker 3: twenty twenty eight, we do have one obviously in the fall.
Speaker 3: What's going to happen in the next two and a
Speaker 3: half years is going to be We're going to look
Speaker 3: back and say, oh, my god, we knew this was coming,
Speaker 3: but it's.
Speaker 4: Actually more than we even thought then. Well, so that's
Speaker 4: what's going to happen.
Speaker 1: Forget regulation, what about just a massive tax on these companies.
Speaker 1: What's the impact of that on the stock market.
Speaker 4: I don't see it.
Speaker 3: I think there's going to be local jurisdictions that obviously
Speaker 3: make some big moves on that.
Speaker 4: We saw it overseas in Europe.
Speaker 3: If you remember what they did with Google and some
Speaker 3: other things. We saw that in the EU. I just
Speaker 3: don't see that here here in the States. I think
Speaker 3: it's a big messaging issue. I think it's a big
Speaker 3: issue as it relates to corporate America. But I just
Speaker 3: don't see the wherewithal for Congress in the federal government
Speaker 3: getting involved.
Speaker 1: John mentioned the standard Charter CEO very clumsy language talking
Speaker 1: about AI and displacement of employees and basically to just
Speaker 1: use AI instead.
Speaker 2: How do you talk about it.
Speaker 3: I don't see it as just wholesale displacement of employees.
Speaker 3: What we're seeing is the empowerment of employees, and we're
Speaker 3: seeing the ability for people to just do more with
Speaker 3: the kind of tools that we're creating.
Speaker 4: Citizens.
Speaker 3: We have this reimagine the bank here and we're showing
Speaker 3: use cases that are very very powerful for people. I
Speaker 3: think it does question how many people you're going to
Speaker 3: need to do that. But I remember when I started
Speaker 3: on Wall Street a long time ago, I was the
Speaker 3: first person to get a BlackBerry. I was the first
Speaker 3: person to get email broadly. And it sounds so archaic
Speaker 3: right now, but boy, I taught a lot of people
Speaker 3: back then what it was like and what power it was,
Speaker 3: and so to not be afraid of it. And I
Speaker 3: think we're seeing that here at Citizens So this, Oh
Speaker 3: my god, everyone's going to be home using AI for
Speaker 3: their career.
Speaker 4: I just don't see it.
Speaker 3: I see the empowerment more than I see the problems
Speaker 3: as it relates to total wholesale changes in employment.
Speaker 2: Well, Mark, that's the important distinction, empowerment or replacement. The
Speaker 2: blank Arry was to help you. It was to empower you.
Speaker 2: It wasn't to replace you. And when we talk about
Speaker 2: agent KI, typically we're talking about replacement and not empowerment.
Speaker 2: Are we getting it wrong?
Speaker 3: Well?
Speaker 4: I think, as I always say, always and never are
Speaker 4: rarely true.
Speaker 3: I think everybody being replaced because of AGENTIC I think
Speaker 3: is unlikely. I think that empowerment is really important. And
Speaker 3: you're right, Jonathan, the BlackBerry seems so archaic and novel,
Speaker 3: but back then it didn't. I will also say for
Speaker 3: the power of some of our early young staff members
Speaker 3: and some of the people who really understand the power
Speaker 3: of this to really make important strategy within our company
Speaker 3: and all companies around and show the power of it
Speaker 3: as opposed to the fear is really as important.
Speaker 2: As anything in old school. I wish we never had
Speaker 2: the day where we started taking our work home with us,
Speaker 2: but that's another problem. Let's talk about the opportunity in
Speaker 2: video reporting after the closing bow. I've mentioned this a
Speaker 2: few times in the last hour. This used to be
Speaker 2: the blockbuster earnings report. Still is to some extent largest
Speaker 2: company on the planet. Of course, as some of its glitter.
Speaker 2: I think over the last month or so, because within
Speaker 2: the rally in chips, the explosive moves have been elsewhere. Mark,
Speaker 2: what do you think is changing.
Speaker 3: I think it is still the most important company in
Speaker 3: the world. It shows because it really does power. It's
Speaker 3: the fuel for the AI and fuel for corporate America
Speaker 3: right now. I think part of it is just the
Speaker 3: bigger they are. A little bit is sort of the
Speaker 3: messaging here. You've talked a little bit about the broadening
Speaker 3: of the chip market and what Intel and AMD have done.
Speaker 3: As it relates to Intel, it made the stock may
Speaker 3: have doubled in the last few months, but it's still
Speaker 3: relative to that market cap. That's a one day move
Speaker 3: in in Nvidia, so I'm a little less worried that
Speaker 3: that move is.
Speaker 4: In Vidia underperforming. I do think it's the most important company.
Speaker 3: The bigger story, I think, Jonathan, is what's going on
Speaker 3: with the big AI companies and the share that's going on,
Speaker 3: the jockeying between Anthropic, open Ai and the others. There's
Speaker 3: plenty of market caap and there's plenty of investments still
Speaker 3: going on. That to me is still the biggest story
Speaker 3: in Nvidia is going to power all of.
Speaker 2: Them follow the talent. Mark I'm following the talent, and
Speaker 2: I seem to be going to one and not the other.
Speaker 2: What's gone wrong at open Ai, well.
Speaker 3: I think, like a lot of success stories, I think
Speaker 3: big management issues internally. Obviously, there's been some stories that
Speaker 3: we've all read about what's going on inside of open Ai.
Speaker 3: Anthropic has been really mighty in the last few months.
Speaker 3: They did, i think in terms of pr and in
Speaker 3: terms of their quality of their chips. I'm sorry their
Speaker 3: quality of their offering. They seem to have won. We
Speaker 3: saw that with the Iran and Warren some of the
Speaker 3: inner fighting that happened with the federal government.
Speaker 4: That news certainly has seemed to die down.
Speaker 3: And Therapic has done an incredible job obviously over the
Speaker 3: last year of their story, of their success, of their offering,
Speaker 3: it's second to none right now. I won't count open
Speaker 3: Ai out by any stretch. It's an enormous market. There's
Speaker 3: too many winners that we mentioned right here, but yes,
Speaker 3: things are Every single day we hear a different story,
Speaker 3: but Anthropic has definitely carried the last few months.
Speaker 2: Stay with us. More Bloomberg surveillance coming up after this.
Speaker 2: So here's the latest this morning. President Donald Trump want
Speaker 2: to get fresh strikes on Iran in the coming days,
Speaker 2: as the White House pushes Tehran to return to the
Speaker 2: negotiating table. Katherine Thompson at the Cato Institute writing, the
Speaker 2: US is teetering on a knife edge of not only
Speaker 2: resumption of hostilities with Iran, but long term entanglement in
Speaker 2: both this conflict and the regent. Catherine joins us now
Speaker 2: for more. Catherine, welcome to the program. Are we running
Speaker 2: out of options to maintain the status quo.
Speaker 5: You know, I think we are. I think we're reaching
Speaker 5: that point. I don't think we're anning closer to a
Speaker 5: deal than when the President was speaking about a week ago.
Speaker 5: And I think that you know, in that time, particularly
Speaker 5: the foreign powers that are involved in this conversation. You know,
Speaker 5: on our side of these bilateral engagements, the UAE in particular,
Speaker 5: has taken a more emboldened stance. This puts more foreign
Speaker 5: interest on our side of the table, where Iran is
Speaker 5: just contending with largely itself. And I think that this
Speaker 5: sets up a really dangerous dynamic going into conversations on
Speaker 5: a deal that now has a deadline of two to
Speaker 5: three days.
Speaker 1: Well, Catherine, when it comes to this deal, I mean,
Speaker 1: the Wall Street journals reporting with Base, we all know
Speaker 1: that Iran's position of negotiations hasn't changed at all. As
Speaker 1: much as the Vice President and the President say that
Speaker 1: they want to make a deal, if their positions haven't changed,
Speaker 1: is the United States willing to give up some major
Speaker 1: concessions at the negotiating table or do you think the
Speaker 1: President will actually take the strikes?
Speaker 5: I mean, I tend to think that given what we've
Speaker 5: seen from the President so far, the strikes are very
Speaker 5: very much the option that he's going to do as
Speaker 5: the best lover of pressure. The problem, as was pointed
Speaker 5: out in the previous segment, is the threat of Iranian retaliation.
Speaker 5: We know that that's the case, of course, we know
Speaker 5: that the Iranians would plan to retal if they're attacked again.
Speaker 5: But the problem with this poses for the United States,
Speaker 5: who's in the midst of ammunitions crisis, is that Iranian
Speaker 5: retaliation would likely come on US basis and personnel throughout
Speaker 5: the rest of the region. That's going to require more
Speaker 5: of our most exquisite and expensive air defense air defense
Speaker 5: platforms to support a defense of our own personnel should
Speaker 5: that retaliation come, and that's something that we can't afford
Speaker 5: to treat lightly on our side as a strategic consideration.
Speaker 2: That's the retaliation.
Speaker 1: But what do you think the president will target if
Speaker 1: he's going to resume attacks.
Speaker 5: That's hard to say, right. I mean, limited strikes, especially
Speaker 5: as was sort of outlined in the previous segment, could
Speaker 5: mean a lot of things. I mean, I don't know
Speaker 5: if that includes more energy infrastructure. I mean, I don't
Speaker 5: think it would include you know, leadership again or anything
Speaker 5: like that that we saw towards the beginning of the war.
Speaker 5: But so it's hard to tell, like what could be
Speaker 5: considered limited to sort of get the Iranians to the table,
Speaker 5: that wouldn't you know, trigger again large scale retaliation that
Speaker 5: that that hurts our bases and our personnel in the region.
Speaker 1: There seems to be two different negotiations going on in
Speaker 1: Jonathan spoke about this earlier this week. There's a negotiation
Speaker 1: to open up the strain of removes and then there's
Speaker 1: a real nuclear negotiation when it comes to opening up
Speaker 1: the strain of removes. Do you think that Trump administration
Speaker 1: has now convinced allies to come help?
Speaker 5: You know, I think that this is a tricky one.
Speaker 5: As you guys pointed out in the in the segment
Speaker 5: prior right, NATO requires consensus to come to the table
Speaker 5: and to provide any support for out of area operations.
Speaker 5: The other, you know, sticky point of this situation for
Speaker 5: the Trump administration is that basically the Trump administration spent
Speaker 5: the first year in office, you know, berating the Europeans
Speaker 5: about doing out of area operations. They want focus on convention.
Speaker 5: The Europeans focused on conventional defense and deterrence of the continent,
Speaker 5: which is absolutely something that that that is needed to
Speaker 5: keep you know, NATO sustainable for the future. But that's
Speaker 5: in direct conflict with this ask of now NATO putting
Speaker 5: together an out of area operation and out of area
Speaker 5: mission to go support the US efforts in Iran. That's
Speaker 5: going to be a really really heavy lift for consensus,
Speaker 5: and I think.
Speaker 6: That we are.
Speaker 5: I think we're quite far from it. I know we've
Speaker 5: got some time until the Angora Summit, but I think
Speaker 5: we're going to have a really hard time convincing some
Speaker 5: of those hold out NATO countries to come to our
Speaker 5: aid because politically it's very, very toxic for them.
Speaker 2: Stay with us. Mulblinderg. Savanna's coming up off to this
Speaker 2: AI facing a massive week of backlash.
Speaker 3: Today we stand on this edge of another technological transformation.
Speaker 3: It will touch every profession, every classroom, every hospital.
Speaker 4: I know what many of you are feeling about that.
Speaker 4: I can hear you. There is a fear.
Speaker 2: University graduates booming commencement speakers across the country when discussing
Speaker 2: the technology now the standard shout at c walking back
Speaker 2: commens after saying AI could replace quote lower value human capital.
Speaker 2: The Oxford Economics CEO in a s McFee pushing back
Speaker 2: on the negative AI narrative, writing, the speed of adoption
Speaker 2: is critical and it's assumed to be oddly enough for
Speaker 2: new jobs to be created to absorb those lost in
Speaker 2: ex choined us. Now for more and it's good morning,
Speaker 2: good to see you.
Speaker 4: Good morning.
Speaker 2: Let's get into the pushback, the backlash we've got right now.
Speaker 2: And what kind of labor market do you think we
Speaker 2: need to confront in the next several years.
Speaker 6: Well, I think the near term picture is not one
Speaker 6: of you know, mass unemployment and rising layoffs and things
Speaker 6: that gets a lot of attention. But I think it's
Speaker 6: also important to note that if you look at let's
Speaker 6: say the information sector, you're also seeing higher hiring.
Speaker 4: Rates as well.
Speaker 6: So what that tells me is there's a lot of
Speaker 6: churn in the in the job market at the moment,
Speaker 6: but not a big net loss of jobs. So you know,
Speaker 6: for a lot of people, it's going to be about
Speaker 6: what the skills that are needed to navigate this labor
Speaker 6: market over.
Speaker 2: What skills do you think will be needed? And do
Speaker 2: you think we face the same kind of thing that
Speaker 2: we had to face with globeation, except this time it's
Speaker 2: why color workers are not blue color.
Speaker 6: Well, I think when you look at AI adoption at
Speaker 6: the moment, what is actually being used at in the surveys,
Speaker 6: it is things like drafting, It's things like you know,
Speaker 6: automating relatively simple tasks. And really I think what will
Speaker 6: end up happening is that there's more emphasis on you know,
Speaker 6: kind of the more critical appraisal, the more insights those
Speaker 6: sorts of factors, and that will be what's really critical
Speaker 6: for people to be able to demonstrate because AI will
Speaker 6: be able to help with the sort of more day
Speaker 6: to day tasks.
Speaker 1: What about the political economy, this is one area where
Speaker 1: you see the very far right, the Steve Bannons, and
Speaker 1: the very far left like Senator Bernie Sanders, actually agree
Speaker 1: on what these companies should be doing because of the
Speaker 1: potential job losses they're going to mean for the economy.
Speaker 6: Yeah, well, I think you know this is there's no
Speaker 6: doubt this is a huge structural change for the economy
Speaker 6: of the next few years. We've not yet seen the
Speaker 6: big productivity gains, but we are like to see over
Speaker 6: the next couple of years. I think a bit of
Speaker 6: shift in that skills mix, and what we would expect
Speaker 6: is that you end up with as you lower the
Speaker 6: prices some of these tasks actually demand goes up. Is
Speaker 6: what's called Jevens paradox. You know, you start to see
Speaker 6: more demand coming through. But the phasing of these things.
Speaker 6: As ever, with economics, we talk a lot about long
Speaker 6: and variable lags and things like that. Well, actually, in
Speaker 6: this context that's going to be really important because you're
Speaker 6: talking about you know, potentially a couple of years in
Speaker 6: the labor market where we have to navigate those shifting plates.
Speaker 6: So I think policy does have to play a role there.
Speaker 2: That's political policy.
Speaker 1: But if we're seeing potentially shifting labor market and it's
Speaker 1: going to be bumpy if we have higher unemployment because
Speaker 1: of AI, could federal reserve ratecut or any central bank
Speaker 1: ratecut actually solve that problem.
Speaker 6: Well, I don't think it can solve the problem. As ever,
Speaker 6: Monetary policy is going to be one of those things
Speaker 6: that actually just tries to help mitigate some of the impacts,
Speaker 6: offset some of them. But I don't think that's what
Speaker 6: we're seeing at the moment. We're seeing some churn. We
Speaker 6: eventually will see, you know, AI adoption spread we'll see
Speaker 6: the types of tasks that AI can help with sort
Speaker 6: of move up a little bit the value chain, and
Speaker 6: that will ultimately, you know, maybe even mean a sort
Speaker 6: of disinflationary task.
Speaker 1: Do you think to help current workers or task to
Speaker 1: eliminate current workers?
Speaker 6: So I think it'll be very much labor augmenting. It'll
Speaker 6: help current workers. I think that's the sort of thing
Speaker 6: that over time you'll see real wage gains because productivity rises.
Speaker 2: You sound constructive, Yeah, you really do.
Speaker 4: Yeah.
Speaker 2: Do you get much pushback when you make this pitch?
Speaker 6: Well, it does get you know, some people agree with me,
Speaker 6: and then others violently disagree with me. You know, I
Speaker 6: think that if you go back a couple of a
Speaker 6: couple of months and we had this kind of AI
Speaker 6: dystopian narrative really take hold, and this kind of idea
Speaker 6: that we would end up with, you know, the labor
Speaker 6: share really falling, and the you know, we're ultimately going
Speaker 6: to see a fall in demand. But the thing that
Speaker 6: I say is name another technology where that has happened.
Speaker 6: You know, we have not seen historically a technology that
Speaker 6: has led to kind of lower demand. We obviously see
Speaker 6: resources moving around the economy, and that can be painful,
Speaker 6: and there'll be a role for policy in that.
Speaker 2: This is a big picture question. What do you think
Speaker 2: the Industrial revolution would have looked like if the age
Speaker 2: of social media looked like can you imagine what the
Speaker 2: pushbank would have been like to that?
Speaker 6: Yeah, well, I think that's one of the issues here,
Speaker 6: isn't it That you've got this narrative where you know,
Speaker 6: it's possible for really people to focus in on just
Speaker 6: one lens of bit and I think you know, what
Speaker 6: we try to do is step back and have a
Speaker 6: broader take on Yeah, some areas of the economy are
Speaker 6: going to face real disruption, others are going to pick
Speaker 6: up and move and with.
Speaker 2: You think ultimately, as you know, though, there's a sequencing
Speaker 2: problem at least up front. Always see is the higher
Speaker 2: costs and the risk of job loss associated with this technology.
Speaker 2: What happens next? I don't know. You're constructive, and I
Speaker 2: hope you're right, But in the near term we've got
Speaker 2: a bit of an inflation problem already. Does this big
Speaker 2: push contribute to it?
Speaker 6: It does, But I think in ways that probably people
Speaker 6: don't really understand people. A lot of people focus on
Speaker 6: the investment side and think Okay, that's pushing up demand.
Speaker 6: Remember there's a big import story that's associated, But that's
Speaker 6: the net impact on the economy now go good terms
Speaker 6: is only a few tenths from the big investment boom.
Speaker 6: Where I think it is having an impact, particularly on
Speaker 6: the consumer basket, is that the push towards higher memory,
Speaker 6: higher value add chips is actually sort of crowding out,
Speaker 6: particularly in an environment where we're seeing some supply constraints
Speaker 6: via the Middle East situation. That's where we're crowning out
Speaker 6: a little bit those lower endships, which are of course
Speaker 6: in lots of consumer goods, and we think that's probably
Speaker 6: going to add at peak something like three tenths to
Speaker 6: core PCE over the next couple of cours.
Speaker 2: Where's you've got inflamation peak in at one number.
Speaker 6: So we've got four percent for headline PC and sticking
Speaker 6: around three for a while in the core.
Speaker 2: Can you cut with core around three? If you're Kevin Wash,
Speaker 2: can you make that push well?
Speaker 6: I think one of the things that he's been very
Speaker 6: clear on is the forward look, which I think is
Speaker 6: right because remember, munty policy is not going to affect
Speaker 6: much today. It's going to affect things in two years time.
Speaker 6: His big idea, his big theme is that the course
Speaker 6: AI is going to be very disinflationary. They need to
Speaker 6: look to that and respond to that. So I think
Speaker 6: that's the narrative that we'll see. It made warble at times,
Speaker 6: but you know, I think in the near term we
Speaker 6: see them just staying pat There's not much. There's not
Speaker 6: much to be gained from cutting right now, just as
Speaker 6: you're seeing inflation peak.
Speaker 2: This is the Bloomberg Surveillance Podcast, bringing you the best
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