Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg business
Speaker 1: Week Inside from the reporters and editors who bring you
Speaker 1: America's most trusted business magazine, plus global business, finance and
Speaker 1: tech news. The Bloomberg Business Week Podcast with Carol Messer
Speaker 1: and Tim Stenebeck from Bloomberg Radio.
Speaker 2: Let's get to something else that is important on our radar,
Speaker 2: and that is the US Central Bank, which kicked off
Speaker 2: its two day meeting on monetary policy today. That FED decision,
Speaker 2: of course, comes tomorrow at two pm Wall Street time.
Speaker 3: Well earlier today, we got two data points. US consumer
Speaker 3: confidence fell in April to the lowest since mid twenty
Speaker 3: twenty two, as Americans view of the labor market in
Speaker 3: their outlook for the economy deteriorated and a broad gauge
Speaker 3: of labor costs Carol closely watched by the FED, increase
Speaker 3: the most in a year, illustrating persistent wage pressures that
Speaker 3: are keeping inflation elevators.
Speaker 2: It ain't easy, That's the bottom line on all of this.
Speaker 2: To put it all into perspective and how it may
Speaker 2: impact potentially how the FED is thinking about US monetary policy.
Speaker 2: Back with us is Steve Skanke he's chief economic advisor
Speaker 2: at Killpoint, former US Treasury in White House National Security
Speaker 2: Council staff member, and then also with US, of course,
Speaker 2: is Yolena Schaletchiva, senior US economist ever at BNP Pariba
Speaker 2: Yolena in New York City and Steve in DC. Elena,
Speaker 2: I want to kick it off with you, if we may,
Speaker 2: today's data once again reminding us that it is kind
Speaker 2: of a bit of a tricky spot sometimes for the
Speaker 2: FED to be in right now in terms of mixed
Speaker 2: consumer data. That maybe makes it a little bit more
Speaker 2: difficult to find the right way forward, if you will,
Speaker 2: when it comes to monetary policy, what do you make
Speaker 2: of the data and what is your economic forecast right now?
Speaker 4: So I think today's data really supports our call for
Speaker 4: the FED to stay on hold until December, but for
Speaker 4: the next move to be a cut. So if you
Speaker 4: look at inflation data today, wage inflation is still elevated,
Speaker 4: so that does not give it enough confidence that they
Speaker 4: can start moving anytime soon. So at the same time,
Speaker 4: you look at the Conference Board data and in particular
Speaker 4: the labor market differential, and that tells you that the
Speaker 4: labor market is rebalancing. It's not overheating, and it's not
Speaker 4: going back out of balance, it's actually getting back into balance.
Speaker 4: And if you look at jobs are getting a little
Speaker 4: bit harder to get. They're not as plentiful as just
Speaker 4: a few months ago. So consumers are taking a signal
Speaker 4: from what they hear, what they see in the labor market,
Speaker 4: and they're telling us that. So I think the FED
Speaker 4: is still going to cut rates, that's the next move,
Speaker 4: not a hike, but I think they will have to
Speaker 4: be patient and see how inflation subsides.
Speaker 3: And Steve is that also your position over at kill
Speaker 3: Point is that what you think is going to happen,
Speaker 3: The Fed's next move will be a cut, but they
Speaker 3: will stay on hold until while at the end of
Speaker 3: this year December, like Jolena just spoke about.
Speaker 5: Yeah, absolutely, Tim, I mean, the FED very much wants
Speaker 5: to start cutting rates, but starter inflation and even strong
Speaker 5: economic activity just have them in a holding pattern. The
Speaker 5: FED is sort of stuck with a couple of things.
Speaker 5: They need to have confidence that inflation is coming down,
Speaker 5: and right now it's stall. The employment cost index is
Speaker 5: annualizing at four point four percent, and the VET has
Speaker 5: to depend on productivity growth, which has been annualizing around
Speaker 5: two and a half percent, which gets them toward their
Speaker 5: two percent inflation with wage growth, but that's a little
Speaker 5: bit hard to depend on. The Other thing is, you know,
Speaker 5: consumer competences has been up quite eight percent the last
Speaker 5: two months, which is which is record growth. But from
Speaker 5: the Copter Board numbers today, consumers are weary. They've been
Speaker 5: they've been reducing savings to continue spending, and they continue
Speaker 5: to be overwhelmed by high prices even though the rate
Speaker 5: of inflation has been had been moving lower. And tell
Speaker 5: a sort of got stuck.
Speaker 3: Okay, so yeah, come on in you Lena, and talk
Speaker 3: a little bit about where you think the Fed. How
Speaker 3: do you think the Fed kind of deals with this,
Speaker 3: because okay, Steve said, things are kind of stuck right now.
Speaker 3: From you know, getting that last mile of inflation under control,
Speaker 3: is it proving to be even stickier than the Fed
Speaker 3: thought it would be.
Speaker 4: Well, I think we will see continued deceleration in inflationary pressures.
Speaker 4: We may even see some like two and a half
Speaker 4: percent on core PC by Q three, which technically would
Speaker 4: allow the IT to start easing. But then you know
Speaker 4: election comes into play, and for you know, risk management purposes.
Speaker 4: You may want to wait till December. I think we
Speaker 4: will continue to see inflation to decelerate. Consumers as pending. Yes,
Speaker 4: but they're spending because the labor market is doing great
Speaker 4: and because their balance sheets are so healthy since they
Speaker 4: deleveraged so much. But nonetheless there are some you know,
Speaker 4: pockets of weakness here and there. So we mentioned consumer
Speaker 4: confidence data today pointing to some signs of deceleration in
Speaker 4: the labor market. We also see some pickup in delinquencies.
Speaker 4: All these things that's pooked recessionary you know, fears last year.
Speaker 4: They're still there. It's just not we're not talking recession
Speaker 4: any but we are talking about some moderation in economic growth,
Speaker 4: and we are talking about continued progress on inflation. The
Speaker 4: FID just needs to be patient. They just need to
Speaker 4: not overreact to one data point here and there, and
Speaker 4: I think the conditions will be appropriate for them to
Speaker 4: start adjusting rates slightly by the end of the year.
Speaker 2: One thing I wanted to bring up, and I've been
Speaker 2: thinking about this a lot, is you know, we keep saying, oh, no,
Speaker 2: we need pressures. Oh my god, people are being paid
Speaker 2: more money. How terrible that is because of the impact
Speaker 2: on inflation. Isn't there some balance and Steve, let's bring
Speaker 2: you back into the conversation. Isn't there some balance of like, no,
Speaker 2: this is a good thing, and maybe we're moving more
Speaker 2: towards a livable wages, especially for some hourly workers where
Speaker 2: this isn't just a job for a teenager. They're supporting
Speaker 2: their families and that ability then they can spend on things.
Speaker 2: So what is that balance economically that you think about
Speaker 2: or maybe you don't think about it, but I do
Speaker 2: in terms of we're paying maybe workers maybe what they
Speaker 2: at least should pay or are long overdue that they
Speaker 2: haven't had the ability to have higher wages, and then
Speaker 2: that translates into economic activity. That's a good thing.
Speaker 5: Well that you're absolutely right, Carol, And Jerome Powell actually
Speaker 5: thinks about that a lot. If you sort of go
Speaker 5: back a couple of years, maybe three or four years,
Speaker 5: even before the pandemic, he was talking about wage growth
Speaker 5: being more broadly distributed throughout the labor force, and that
Speaker 5: only sort of happens at as you come to at
Speaker 5: the end of the economic cymcle. So for wages on
Speaker 5: average to be up almost four and a half percent,
Speaker 5: that is a good thing. And if we can rely
Speaker 5: on productivity growth to continue in the neighborhood at two
Speaker 5: and a half percent, that's how you actually raise standards
Speaker 5: of living, particularly for some of the lower income groups.
Speaker 5: But the FED is is flummixed by what's happening with
Speaker 5: the metric for housing inflation for shelter. You know, if
Speaker 5: you look at course course CPI inflation three point eight
Speaker 5: percent twelve months ending in March, you can take out shelter,
Speaker 5: it's two point four core PCEE inflation saying two point
Speaker 5: eight percent twelve months ending in March. You take out
Speaker 5: housing it was two point two percent. And not that
Speaker 5: they can ignore housing inflation or shelter inflation, but we
Speaker 5: all know that there's just some funniness about how that
Speaker 5: gets calculated and how that factors in and the and
Speaker 5: while the FED would like to cut rates to get
Speaker 5: that economic benefit broadly distributed, they're sort of stuck with
Speaker 5: the number that they've got.
Speaker 2: I want to say thirty seconds for you, Elena, in
Speaker 2: terms of this concept of higher wages, and you know,
Speaker 2: some of that's good that people are finally maybe making
Speaker 2: more money.
Speaker 4: More money is good for sure, but you know you
Speaker 4: need to have productivity growth and this is I totally agree,
Speaker 4: uh that that's an essential part. So if you have productivity,
Speaker 4: growing wage is not a problem. Unfortunately, I think productivity
Speaker 4: growth is not going to accelerate here and not until
Speaker 4: we get some AI enhancements. We have to rely on
Speaker 4: label roles for now, and that's the issue at this point.
Speaker 2: Well, the White has correspondence. They made a joke and
Speaker 2: just said he journalists, get ready to your place.
Speaker 3: I wasn't going to make that joke. I was just
Speaker 3: gonna ask for the AI enhancement for doing the dishes.
Speaker 2: That would about the product innovation and disruptions. Steve Skanky
Speaker 2: and ITVA, thank you so much.
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Speaker 2: So let's get to ONSTOT. That is definitely a standout
Speaker 2: performer in today's overall lower trade equity trade ELI Lilly's
Speaker 2: share soaring up the most in more than nine months,
Speaker 2: hitting an intry day record high. This as a brighter
Speaker 2: outlook for twenty twenty four raise the potential ceiling for
Speaker 2: new weight loss drugs even further in the eyes of
Speaker 2: Allison investors. It's just on a tear.
Speaker 3: It really is back with more on the company and
Speaker 3: this investment play that continues to just dominate this year.
Speaker 3: We got Bloomberg News health reporter Madison Muller here in
Speaker 3: the studio. Madison, I'm wondering, what was the surprise here
Speaker 3: when it came to Uh, it's a good question weight
Speaker 3: loss drugs, because this doesn't surprise me, and I'm not
Speaker 3: following this company as closely as.
Speaker 6: These investors are. Yeah, we knew these things were gangbusters.
Speaker 2: Yeah.
Speaker 7: I think it's what's interesting is like I wasn't really
Speaker 7: surprised by this either, given how much demand there is
Speaker 7: for these products.
Speaker 2: But I guess there was some investor and.
Speaker 7: Analyst concern going into earnings because the shortages have been
Speaker 7: so bad, and so they needed some reassurance that even
Speaker 7: though there are widespread shortages, I mean people are driving
Speaker 7: like three four hours to go to a pharmacy that
Speaker 7: has zeb bound in stock, that Lily is still able
Speaker 7: to sell enough of it, and to also see supply
Speaker 7: getting better in the second half of the year and
Speaker 7: into next year, you know, enough so that they can
Speaker 7: raise their revenue guidance for the full year, raise their
Speaker 7: profit guidance for the full year as well.
Speaker 2: So there was I.
Speaker 7: Think at first a little bit of relief and then
Speaker 7: continue to optimism, Like any good news for Lily is
Speaker 7: like great news automatically, So I think it it automatically
Speaker 7: just pushed.
Speaker 2: What do you say that more? Any good news is
Speaker 2: great news for Lily.
Speaker 7: The margin for error is so slim with them, like
Speaker 7: if there is bad news, it really could affect them.
Speaker 7: But I think it goes the opposite way too. There's
Speaker 7: just there come everything the company does is so closely
Speaker 7: watched and the smallest news is like ends up being
Speaker 7: a big deal, especially when it comes to these weight
Speaker 7: loss drugs, because so much is riding on them. So
Speaker 7: it's just this is seen as you know, a great thing.
Speaker 6: What's the risk there?
Speaker 3: And I know that's where your head was going, Carol,
Speaker 3: because if this is we're talking about.
Speaker 2: Scale of zepbound on one side and all the other
Speaker 2: drugs on the other, does.
Speaker 6: A lot more than just GLP ones.
Speaker 7: Here, Yeah, And that and that was the other really
Speaker 7: interesting thing is even though they missed estimates in most
Speaker 7: of their other key drugs, including Manduro, which is the
Speaker 7: diabetes drug, diabetes version of zep bound, Trulicity, a diabetes
Speaker 7: drug that's been a bestseller for several years now, for Xenio,
Speaker 7: which is a breast cancer drug. They still raise their
Speaker 7: revenue guidance, and you know, it was still seen as
Speaker 7: like a very good result because the story is just
Speaker 7: zet bound.
Speaker 3: How much of their revenue comes from this class of drugs.
Speaker 7: We know actually not, I would have to pull that up.
Speaker 7: Zepbound is still I mean, Monduro is like in the billions.
Speaker 7: Zepbound is still I think it was half a billion
Speaker 7: this quarter. It was five hundred million, but it just
Speaker 7: launched in December, so it's ramping up really quickly. And Trulicity,
Speaker 7: which is also it's an earlier GLP one drug that
Speaker 7: we don't really talk that much about. It's not very
Speaker 7: good for weight loss, but it's great for glycemic control
Speaker 7: and you know, helping control blood sugar for people with
Speaker 7: type two diabetes. That drug is in shortage also in
Speaker 7: the US and in Europe because there's they've been prioritizing
Speaker 7: the newer medications.
Speaker 2: Where is the supply chain.
Speaker 7: It's I mean, they have supply I think they were
Speaker 7: talking today on the call that there's like seven plants,
Speaker 7: eight plants, and there's a lot in the US. There's
Speaker 7: a plant in Ireland, but it is mostly in the US, actually,
Speaker 7: and it is mostly They work with some contract manufacturers,
Speaker 7: but most of the supply chain is controlled by Lily.
Speaker 6: And are these for Eli Lilly.
Speaker 3: I'm just looking at the FA page, the financial analysis
Speaker 3: page in the Bloomberg terminal. Are they classified into the
Speaker 3: diabetes category? Both of these even though one of them's
Speaker 3: weight loss.
Speaker 7: Zep bound shouldn't be okay, Yeah, because it's interesting because
Speaker 7: now the diabetes category is now fifty seven point six
Speaker 7: percent of revenue, right versus a couple of years ago
Speaker 7: is forty six percent. Yeah, And Lily has always been,
Speaker 7: I mean, diabetes is their bread and butter. They've always
Speaker 7: been in diabetes. I think they were the first They
Speaker 7: were the first US company to commercialize insulin, so like
Speaker 7: this has been their story for a long time.
Speaker 2: But I mean, insulin wasn't.
Speaker 7: Really like a super profitable drug, and GLP ones are.
Speaker 2: So that the two billion kickup in annual sales Madison
Speaker 2: one thing I was curious about does that mean the
Speaker 2: demand is that much more or the drug is costing more.
Speaker 7: It's going to mostly be I think a result of
Speaker 7: increased supply. So like they are selling everything that they
Speaker 7: can make, and they set this goal of increasing like
Speaker 7: the number of sellable do by one and a half
Speaker 7: times whatever that means. But they're hoping that they can
Speaker 7: make more sellable doses in the second half of the year.
Speaker 2: The dosage, from what I understand, like you get different dosages,
Speaker 2: I think, yes, well, individual pens, right, yeah, so in
Speaker 2: in outside of the US, they have multi dose pens,
Speaker 2: which you would think that they would roll that out
Speaker 2: in the US because it helps with the number of
Speaker 2: pens that they're making, which is holding up.
Speaker 7: Like that's one of the reasons why they have these
Speaker 7: supply bottlenecks, because the plastic injector pens are like so
Speaker 7: complicated to make. But they're only doing these multi dose
Speaker 7: pens outside of the US, which doesn't really make a
Speaker 7: ton of sense. But yeah, so the doses those have
Speaker 7: multiple doses obviously in them in the US, you have
Speaker 7: four pens and each one contains one dose.
Speaker 3: Who's coming for Eli Lilly at this point We talk
Speaker 3: a lot about Novo, the European sort of sort of
Speaker 3: counterpart the competitor here with Oozepic, But who in the
Speaker 3: US is coming for Eli Lily?
Speaker 7: So we have Bohringer Englheim, which is a private company
Speaker 7: it's a little bit of a mouthful to say, but
Speaker 7: they are also outside of the US. They're private company
Speaker 7: Zeland Pharma as well. They're close behind. Then there's am Gen,
Speaker 7: which is a US company. There's been a lot of
Speaker 7: excitement about Amjin's drug because it's taken less frequently, It's
Speaker 7: taken once a month instead of once a week. However,
Speaker 7: they are still very far behind these other companies, you know,
Speaker 7: behind Novo and Lily, and then Pfizer is still pretty
Speaker 7: far behind as well. So like they do have a
Speaker 7: really good head start on everyone else that's trying to
Speaker 7: get into this market. And you know they're also trying
Speaker 7: to develop a pill and different formulations, so like they
Speaker 7: really they have a jump on everyone.
Speaker 2: How is the focus on these which I get why
Speaker 2: every drug company would be chasing it, right, I mean
Speaker 2: you think about market size and just oh my god,
Speaker 2: but what does it means not getting done? Or maybe
Speaker 2: the focus isn't there.
Speaker 7: It's a good point. I mean, we were looking recently
Speaker 7: at like it's just interesting to see how the attention
Speaker 7: has switched from COVID to GLP want totally covid to
Speaker 7: weight loss. And this happens in the pharmaceutical industry. It's
Speaker 7: like you know, when one company has success in a
Speaker 7: certain area, then everyone sort of chases and follows behind.
Speaker 7: And we are actually seeing this, which this is a
Speaker 7: good thing. We're seeing this right now in heart disease
Speaker 7: and in neurodegeneration as well. So there's been some advancements
Speaker 7: in drugs for like Alzheimer's and Parkinson's and some mental
Speaker 7: health conditions that now there's like a rush to to
Speaker 7: innovate in that field again too, and same with heart disease.
Speaker 7: So like there is actually some other advancements, but we're
Speaker 7: just not talking about that.
Speaker 3: We only have like thirty seconds madicone And this is question,
Speaker 3: yeah that has requires a longer answer. But there has
Speaker 3: been some pushback to these drugs. Not everybody sort of
Speaker 3: on board, pointing outside effects and stuff. What's the latest there.
Speaker 7: I think one of the biggest pushbacks recently has been price.
Speaker 7: Like the Senator Bernie Sanders. We talked to him a
Speaker 7: couple of weeks ago and he was saying that he
Speaker 7: was gonna which I guess he did. Actually end up
Speaker 7: calling the CEO of Nova Noordiskin talking to him about
Speaker 7: the price of Ozembic and Wagovi. And now he's opening
Speaker 7: a Senate committee investigation into the price. So that's been
Speaker 7: a big area of pushback recently.
Speaker 2: All right, great stuff, Hazoways Madison. Thanks, Bloomberg News Health
Speaker 2: reporter Madison Muller a must read here at Bloomberg.
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Speaker 2: Now, we want to shift gears a little bit because
Speaker 2: we will be shifting gears big time after the close
Speaker 2: when Amazon reports its latest earnings, and we are going
Speaker 2: to be looking for a show me moment, especially when
Speaker 2: it comes to what they are doing in AI, because
Speaker 2: we've seen a play out, whether it was Google or Microsoft,
Speaker 2: investors wanted to see and we saw some payoff.
Speaker 3: Yeah, the world is, as it often seems, all about
Speaker 3: jen Ai and machine learning and LMS. Is that enough
Speaker 3: for you? Jenai machine learning LMS? Right, It's also its
Speaker 3: evolution and next steps. Was this theme at a recent
Speaker 3: BI event here at Bloomberg HQ that you moderated.
Speaker 6: That was really cool.
Speaker 2: It was a really fun panel. I learned a lot
Speaker 2: and that was thanks to our next guest and who
Speaker 2: was on the panel. We welcome Rouchie R. Puri, chief
Speaker 2: scientist at IBM Research. He's here in our Bloomberg and
Speaker 2: director Broker Studio. He's an inventor over seventy US patents,
Speaker 2: has authored over one hundred scientific publications on AI for
Speaker 2: code responsible AI, semi chip design, and so much more.
Speaker 2: He also led IBM Watson as CTO and Chief Architect.
Speaker 2: I could go on, but then we'd be done here.
Speaker 2: I'm so glad you came in because I said to
Speaker 2: you when we finished the panel that I kind of
Speaker 2: learned a lot and I feel like I wanted to
Speaker 2: kind of pick your brain a little bit more about
Speaker 2: what are the smart conversations to be having about AI
Speaker 2: that we have every day? What are the ones you're
Speaker 2: having with your team back at IBM. What is it
Speaker 2: that clients and customers are thinking about about where jen
Speaker 2: ai takes them in the future.
Speaker 8: So, first of all, Carol and Tim, thank you for
Speaker 8: hosting me. I think this is We had a wonderful conversation,
Speaker 8: but it's a pleasure to continue that conversation as well.
Speaker 8: I would really say we are seeing infection point in
Speaker 8: AI because we are seeing the sort of people playing
Speaker 8: with things to now show me the money.
Speaker 6: It's where is the value?
Speaker 8: And that's exactly the narrative you are seeing roll out
Speaker 8: and the rise of open not just open AI, but
Speaker 8: the rise of open in movement, no Meta, many others.
Speaker 8: IBM and many others are involved in it as well.
Speaker 8: But small to medium size models are where things are
Speaker 8: leading to because when you start to really scale AI
Speaker 8: out in real production use cases, cost is certainly very
Speaker 8: very important because the narrative becomes about scale and volumes,
Speaker 8: and then you also start to look at.
Speaker 6: Where is my data?
Speaker 8: Because AI and data are very closely integrated together, you
Speaker 8: want to bring AI to the data and the data
Speaker 8: is kind of very heavy.
Speaker 3: Actually, Richure, well, I just want to jump in here
Speaker 3: because as Carol was introducing you, and I was reading
Speaker 3: a bit about you earlier.
Speaker 6: Today, I gotta.
Speaker 3: Wonder professionally what this moment means for you, because this
Speaker 3: is something that you've worked on for so many years
Speaker 3: and it's now finally something that everybody's talking about. The
Speaker 3: Wall Street is really taking seriously right now. I mean
Speaker 3: fifteen years ago you were probably like baying your head
Speaker 3: against the wall, being like, pay attention to this stuff.
Speaker 8: We were in a winter. Actually you're all wearing parkas
Speaker 8: and really in the deep of winter.
Speaker 2: What change was it the first and capability? What was
Speaker 2: it that changed? Like I keep saying this.
Speaker 8: Point, Yeah, I would really say usually say it when
Speaker 8: we started Jeopardy. Yeah, that was the start of the moment.
Speaker 8: I say it honestly.
Speaker 6: So you're talking about Watson on Jeopardy whats Poparty?
Speaker 8: And that was the moment where I would say we
Speaker 8: caused a spring of AI. We brought it from winter
Speaker 8: to spring. We didn't result in summer. I think that
Speaker 8: summer didn't arrive until that seventeen character URL and a
Speaker 8: single tweet which had GPT that really brought this to
Speaker 8: everyone's sort of desktop phone and so on, and that
Speaker 8: to me is the summer where people really realized what
Speaker 8: are the implications of this technology? Because we are now
Speaker 8: introducing a new abstraction level in how people can interact
Speaker 8: with miss genes, which is natural language, and that sort
Speaker 8: of the narrative becomes so ubiquitous that it intersects with
Speaker 8: every enterprise and every consumer use case.
Speaker 2: At this point, is it all about chatch gypt? I mean,
Speaker 2: is everybody that in your sphere, whether it's the client's
Speaker 2: customers playing around with that? Is that the starting point?
Speaker 8: I would say less so chat GPT, but definitely generative
Speaker 8: AI itself is the starting point. But very soon the
Speaker 8: conversation goes to I love it, but I need to
Speaker 8: fit it in my use case? Can you bring it
Speaker 8: in my hybrid environments? Because customers are or enterprises are
Speaker 8: in a very hybrid environment. They've got a couple of
Speaker 8: public clouds where their workloads are running, they've got their
Speaker 8: own premises where workloads are running. And then they start
Speaker 8: to worry about where do you run this stuff, how
Speaker 8: do you on it, whether where my data is? Do
Speaker 8: you bring it to my data or do I bring
Speaker 8: data to you in the public cloud. And it's becoming
Speaker 8: clear that hybrid cloud and AI are so closely tied
Speaker 8: to each other.
Speaker 2: Well, and I think about this for our audience. You know,
Speaker 2: it was interesting yesterday when last week excuse me, when
Speaker 2: medicine we're spending so much on AI, writ our capex
Speaker 2: and everything was more and that they got penalized for
Speaker 2: that the build out. And yet those companies that they're
Speaker 2: going to be spending money with, whether it's chip makers
Speaker 2: or that they were benefiting. And I keep thinking about
Speaker 2: the investment landscape, like as you are working your way
Speaker 2: through this, and obviously I am IBM rather is very
Speaker 2: involved in this space. And certainly we talked about on
Speaker 2: premise building out your own AI. That's that's you know,
Speaker 2: your own offices or you know where you are working
Speaker 2: versus having it up in the cloud. But having said that,
Speaker 2: how are you thinking about it? Like who does is
Speaker 2: it the build out? People that are really going to
Speaker 2: initially and as we've.
Speaker 8: Seen some I would really say real value will be
Speaker 8: derived clearly so far in two places, one place where
Speaker 8: one company in the world is minting money at this
Speaker 8: point and VIDIA clear and sort of money flows to
Speaker 8: the bottom because it's like you know, you're selling the shovels,
Speaker 8: as they say at that point, and the second one
Speaker 8: will be in the use cases, so it flows up
Speaker 8: in the use cases or it flows to the bottom
Speaker 8: in infrastructure. Those two places are clear winners actly, And
Speaker 8: I would really say, from the point of view of
Speaker 8: even on the infrastructure, we are in the early innings,
Speaker 8: and I think I give this example when we sat
Speaker 8: down last as well. The accelerators for AI are a
Speaker 8: fast evolving space. And I usually say it whenever anybody
Speaker 8: raises this word or says this word of artificial intelligence,
Speaker 8: it always occurs to me, if something is artificial, there
Speaker 8: must be something real, and that real is certainly among
Speaker 8: three room in this room, and that consumes VOTs, lives
Speaker 8: in a twelve hundred centimeter cube and runs on sandwiches
Speaker 8: versus a single Nvidia GPU or any other GPU consumes
Speaker 8: the latest one announced consumes one thousand warts, and you
Speaker 8: need literally thousands of these. So I think just the
Speaker 8: sheer energy efficiency of acceleration should be put in perspective
Speaker 8: that we are in the early innings, and I'm extremely
Speaker 8: excited about where this technology is going to take us.
Speaker 3: One thing that I think in the early innings that
Speaker 3: has gotten a lot of attention is how these models
Speaker 3: are trained, and I'm wondering at IBM how you train
Speaker 3: your AI models.
Speaker 8: So for us, obviously we are closely partnered with Nvidia.
Speaker 8: From a research point of view, we are doing significant
Speaker 8: amount of research in this area in terms of as
Speaker 8: we look into accelerators that will be evolving, and I
Speaker 8: just talked about the energy efficiency. Our focus is on
Speaker 8: energy efficiency, cost of deployment, and we are starting with
Speaker 8: inferencing first because that's really the volumes game. And our
Speaker 8: training is a lot on the Nvidia stack. But from
Speaker 8: a hardware perspective and from a software perspective, we have
Speaker 8: we have brought our own software stack. And this is
Speaker 8: where I say it's about the hybrid cloud platform, that
Speaker 8: layer that spreads across and makes the underlying hardware, if
Speaker 8: I may say, ubiquitous from a consumption perspective.
Speaker 2: Which here we only have about a minute left. Unfortunately,
Speaker 2: I always feel like this is a topic that we
Speaker 2: could spend a lot of time on it, but as
Speaker 2: we kind of day in day out, we're talking about
Speaker 2: a lot in earning season, whether it's a tech company
Speaker 2: or not, of just how different companies are putting it
Speaker 2: to work, or at least doing their spend. What do
Speaker 2: you think is the smart kind of conversation we must
Speaker 2: be having around AI, in addition to just the headlines
Speaker 2: that keep coming at us how we look at things.
Speaker 8: I would really say the first one should be around
Speaker 8: I'd say responsible use of it like that's to me
Speaker 8: is the most critical elements.
Speaker 2: Does it terrify you a little bit?
Speaker 8: I know it too well, so it terrifies me less.
Speaker 8: I would say, there's a long pause, it terrifies me less.
Speaker 8: Having said that, I think there are clear implications of
Speaker 8: this technology and its responsible use and ethical use. That's
Speaker 8: the first thing. So what I call governance of AI
Speaker 8: right is critical to enterprise use cases. And then obviously
Speaker 8: the bread and butter of productivity scale out of AI.
Speaker 8: You know, really where of deployed, wherever I want it deployed,
Speaker 8: and so on. But I would say I would put
Speaker 8: at the top of the list the governance of AI
Speaker 8: as it percolates across enterprise use cases.
Speaker 2: Just twenty seconds, you think we're gonna get it right
Speaker 2: considering kind of the some of the troubles we've had
Speaker 2: with social media really quickly, I.
Speaker 8: Would say I'm an optimistic person by choice.
Speaker 2: Okay, we would get it right. Okay, Well I'm optimistic too,
Speaker 2: so figures cross as well. Richard, thanks so much for
Speaker 2: taking the trip and coming in. Richier Priory, his chief
Speaker 2: scientist over at IBM Research.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 3: A lot of headlines out of Chattanooga, Tennessee over the
Speaker 3: last few weeks.
Speaker 6: He're just one of them, Carol.
Speaker 3: Earlier this month, Volkswagen employees over at a Tennessee factory
Speaker 3: voted to join the UAW that's in Chattanooga, a landmark
Speaker 3: victory for the union organizing in the long hostel US South.
Speaker 6: That vote certified today, by.
Speaker 2: The way, interesting day and a lot happening generally in
Speaker 2: Tennessee's fourth largest city. We've got back with us. Delighted
Speaker 2: to have him, Tim Kelly, He's the Mayor of Chattanooga.
Speaker 2: Right here in our Bloomberg Interactive Broker studio. We should
Speaker 2: note last month Bloomberg Philanthropies naming Chattanooga one of twenty
Speaker 2: five cities selected for its American Sustainable Cities Program. Bloomberg Philanthropies,
Speaker 2: of course, founded and supported by Michael R. Bloomberg, founder
Speaker 2: and majority owner of Bloomberg LP. Mayor Kelly, Nice to
Speaker 2: have you in the house once again. How are you
Speaker 2: in house?
Speaker 9: Tele pleasure. We're We're doing great. Thank you. Yeah, things
Speaker 9: are Things are great in Chattanooga. And again we'll just.
Speaker 10: Always start as always do thanking Bloomberg because we are.
Speaker 10: We've got a lot going on, particularly around the area
Speaker 10: of energy management with EPBR or utility, and the Sustainable
Speaker 10: Cities program is going to be hopefully really transformative for us.
Speaker 2: All Right, we're hoping we can keep you in the
Speaker 2: city for a moment and talk about something that's going
Speaker 2: on uptown.
Speaker 3: Yeah, you went to Columbia. You were there in the
Speaker 3: nineteen eighties. If I did my math.
Speaker 6: Correctly, that's correct for this. Okay, Yeah, so potentially you saw.
Speaker 3: Some of the apartheid protests that were absolutely with this.
Speaker 3: Then yeah, what do you think of what's going on
Speaker 3: right now?
Speaker 10: Well, it's it's predictable, but we were talking about that
Speaker 10: all morning in a Strong Cities meeting and I think that,
Speaker 10: you know, the challenges for mayors.
Speaker 9: To to bring people together right.
Speaker 10: And I don't think you can talk about this current
Speaker 10: situation without thinking about the structural changes that have happened
Speaker 10: in society since since then, since the eighties, namely social media, right,
Speaker 10: And we've got to figure out a way to have
Speaker 10: a constructive dialogue right together. And cities have I think
Speaker 10: a very important part to play in that. But again,
Speaker 10: I think it was Oh, I can't remember which former
Speaker 10: president was that said, you know, it could be worse.
Speaker 9: I could be a mayor. Well, it could be worse.
Speaker 9: I could be a college president.
Speaker 10: So there's always something right, there's always some.
Speaker 2: Well, how do we create a better a world where
Speaker 2: we can all have a conversation? You know, It's interesting.
Speaker 2: One of the things I've loved about newsrooms, and maybe
Speaker 2: I've been lucky to be in some really great newsrooms
Speaker 2: where there's lots of smart people. Not everybody has the
Speaker 2: same perspective, And as journalists, we coome on air and
Speaker 2: we just listened to everybody else's perspectives, but we have conversations.
Speaker 2: How do we get that again back?
Speaker 9: Well again, I think we have We're up against.
Speaker 10: It because you do in your city well building community.
Speaker 10: I mean, I know it sounds very coomb by a
Speaker 10: and I mean, but every city, the cities that are
Speaker 10: doing a good job are i think, being more and
Speaker 10: more intentional about bringing people together and counteracting that device
Speaker 10: of narrative.
Speaker 9: And again, what we've.
Speaker 10: Seen is the cities were the strongest senses of place
Speaker 10: are the places where you know, college campus is notwithstanding,
Speaker 10: are the places that are most immune to this. Right,
Speaker 10: So we do a lot of work, you know, on
Speaker 10: parks and outdoors, stuff that used to seem trivial, but
Speaker 10: I mean our social media channel for parks and outdoors
Speaker 10: has the second biggest following of any parks and outdoors
Speaker 10: department in the country. And you know, we do we
Speaker 10: try to get people to think of Chattanooga's first and
Speaker 10: foremost and think of them, you know, their neighbors and
Speaker 10: what they have in common, not what divides them. And
Speaker 10: again sounds very prosaic, but I think it's really really important.
Speaker 10: And you know, the mayors I talk to spend more
Speaker 10: and more time thinking about, you know, the things that
Speaker 10: bring residents together and really doubling down on those things.
Speaker 3: We talked to yesterday about crime, here in New York
Speaker 3: coming down on the subways, Yeah, which is finally a
Speaker 3: little bit of good news. But one thing we have
Speaker 3: seen post pandemic, not just in New York but in
Speaker 3: cities around the country is a rise in crime. Give
Speaker 3: us an update on Chattanooga how it's looking, because that
Speaker 3: goes hand in hand with the economic.
Speaker 6: Development that you're trying to do. And absolutely well.
Speaker 10: The statistics are all moving in the right direction. But
Speaker 10: what we've seen, unfortunately, is this very strange disconnect where
Speaker 10: people feel less safe in cities and that the feelings
Speaker 10: are that crimes getting worse, and the stats are are
Speaker 10: demonstrably that they're getting better. Right, And so I think
Speaker 10: some of that goes back to the media environment, right,
Speaker 10: because fear does sell better, and you know, certain I
Speaker 10: don't think Bloomberg is particularly guilty of it, but certain
Speaker 10: media outlets have leaned into that more than others, and
Speaker 10: so we have to combat that. I mean, I will
Speaker 10: say we have a we've had a rash of shootings
Speaker 10: in Chattanooga. You know, again, I'm a member of Mayors
Speaker 10: Against Illegal Guns and stolen guns account for a tremendous
Speaker 10: disproportionate percentage of shootings in Chattanooga, and we still haven't
Speaker 10: done anything meaningful at the state level.
Speaker 9: About that, and we continue to have dialogue about how
Speaker 9: we might change it.
Speaker 2: You know, I was thinking about that conversation we had
Speaker 2: with Joseph Stieglitz last week of Columbia. Of course no
Speaker 2: Bel Lauria, but this concept of freedom, and he kind
Speaker 2: of brought up Mayor Kelly, this idea that maybe we
Speaker 2: have to broaden out how we think about freedom because
Speaker 2: right now freedom folks who want to own guns say, well,
Speaker 2: it's my right, it's my freedom, or you know, I
Speaker 2: have the right to own guns. But at the same time,
Speaker 2: potentially by using that gun, you take away somebody's freedom,
Speaker 2: you take away their life.
Speaker 3: Maybe kids don't have the freedom to go to school
Speaker 3: without being fearful of guns.
Speaker 2: And schools well exactly, you know what I mean. And
Speaker 2: so you know, we've got to kind of figure out
Speaker 2: how to do.
Speaker 10: We have to figure we have to navigate it. I mean,
Speaker 10: the you know, second moment, the second moment that you
Speaker 10: know we're it.
Speaker 2: Could be guns, it could be something else I think
Speaker 2: we can.
Speaker 10: Carry, but we are we're still trying to navigate that.
Speaker 10: But you know, gun ownership comes with comes with a
Speaker 10: heavy responsibility, and frankly where I'm focused is on more
Speaker 10: practical ways that we can secure guns to keep them
Speaker 10: out of the hands of because look, a stolen gun
Speaker 10: is going to be used in a crime almost certainly, right,
Speaker 10: So you know we're still working on but I will
Speaker 10: emphasize Chattooga is a safe city. Again, if you look
Speaker 10: at any measure that you want to look at homicide,
Speaker 10: it's per per thousand or you know we are.
Speaker 9: We're our a safe city.
Speaker 10: But we do battle that the perception and we continue
Speaker 10: to do that by again focusing on community and making
Speaker 10: sure that we have a vibrant downtown.
Speaker 3: Hey, I want to talk economic more on economic development
Speaker 3: because Chattooga, Tennessee one of those places that you want
Speaker 3: to make attractive to for remote workers. Yes, at the
Speaker 3: same time, we've seen companies crack down on remote work.
Speaker 3: Are you seeing that show up in your numbers at all?
Speaker 7: No?
Speaker 3: Are people having to leave because they get called back
Speaker 3: to the office twice a week and they're like, I
Speaker 3: can't live here anymore.
Speaker 6: I have to go back to a different city.
Speaker 10: We have not seen that yet. I do think, you know,
Speaker 10: labor has a lot more power as you started the segment,
Speaker 10: then we may realize And so even our big anchor
Speaker 10: employers are really either two on three off, three on
Speaker 10: two off, something like that.
Speaker 2: So we're not they weren't before a pandemic, which they.
Speaker 10: Were not before the pandemic, and so we're still trying
Speaker 10: to again find the balance. Mean, look from the stampone
Speaker 10: of downtown vitality. I'd love to see all the major employers.
Speaker 9: Call everybody back in selfishly.
Speaker 10: But at the same time, as you say, we have
Speaker 10: a lot of remote workers because of our super fast
Speaker 10: fiber in Chattanooga. So we're finding the equilibrium. But I
Speaker 10: have not seen a dramatic shift in that regard.
Speaker 2: You could change one thing right now in your city,
Speaker 2: what would it be.
Speaker 10: Wow, that's a great one. I would I would preserve
Speaker 10: more park space. I think our competitive advantage in Chattanooga
Speaker 10: really is our outdoors, phenomenal outdoor space, and we're growing fast,
Speaker 10: but we really only get one chance to preserve the
Speaker 10: stuff that really is our competitive advantage, and so we're
Speaker 10: in a kind of a race against the clock in
Speaker 10: that regard.
Speaker 2: Is it the pressure to develop it and build.
Speaker 10: Well, yes, yes, that before it gets to unaffordable right,
Speaker 10: and we are trying to set us out as much
Speaker 10: capital as we can, but we almost can't do it
Speaker 10: fast enough.
Speaker 6: I don't know if you know this, but we're in
Speaker 6: an election year.
Speaker 9: I've heard somebody mentioned that too.
Speaker 3: Yeah, And I'm we're asking a lot of our guests
Speaker 3: who come on the program questions about this, because whether
Speaker 3: they're in politics or not, they're in politics, you're.
Speaker 2: Going to run for the White House or something.
Speaker 3: Well, I am curious, you're an independent, yes, So do
Speaker 3: you find that you still get stuck in the national
Speaker 3: politics the dialogue that happened of course.
Speaker 10: Of course, and so my and there are a lot
Speaker 10: of other really great mayors. I was just with Ron Nurrenberg,
Speaker 10: who was one of my favorite other mayor's, the mayor
Speaker 10: of San Antonio, who has a very similar approach, and
Speaker 10: I think what he would say and what I would
Speaker 10: say is that our job is to translate back into
Speaker 10: the practical terms of what makes a policy makes sense
Speaker 10: or doesn't make sense.
Speaker 9: I was also just with Bill Padudo.
Speaker 10: A former mayor of Pittsburgh who famously said there are
Speaker 10: really three political parties here said this. I think on
Speaker 10: my last appearance for Republicans, Democrats and mayors. Right, So
Speaker 10: it's not that it doesn't matter.
Speaker 6: I mean, we will.
Speaker 10: I mean again, I'm a big fan of what the
Speaker 10: bid administration has done with then IJA and BIL. These
Speaker 10: are really important infrastructure programs that have that are going
Speaker 10: to pay dividends in terms of GDP growth for for years.
Speaker 10: I'm an OECD champion, mayor, and they just did a
Speaker 10: really interesting white paper about how the United States is
Speaker 10: behind our OECD peers in terms of infrastructure investment and Tennessee,
Speaker 10: by the way, is below the national average. Right, and
Speaker 10: this is what drives GDP growth. So if you're worried
Speaker 10: about retiring debt, ironically right this these are the programs
Speaker 10: that we that this country needs in order to really
Speaker 10: be in good stead and in.
Speaker 2: The long term for in terms of promoting longer term growth.
Speaker 9: Correct.
Speaker 2: Ultimately, yeah, many would argue or continue to argue it's
Speaker 2: way overdue. Tim Kelly, thank you so much, of course,
Speaker 2: Mayor of Chattanooga, joining us right here in studio, Marc.
Speaker 5: A journal Now about you.
Speaker 11: Let me drive?
Speaker 10: No, no, no, honey, please gravel great, I want to drive.
Speaker 3: It's a good question.
Speaker 6: This is the drive to the clothes doing well.
Speaker 9: By on Bloomberg Radio.
Speaker 2: All right, everybody, just by eighteen minutes left in today's
Speaker 2: trading session, getting ready to wrap up the Tuesday trade.
Speaker 2: Bit of a corse. We have a bunch of earnings
Speaker 2: coming your way after the closing fouls.
Speaker 3: Okay, So the one that we're all waiting for is Amazon. Yeah,
Speaker 3: sent across just after four o'clock. I think it'll happen. Yeah,
Speaker 3: I think it'll happen too. Caesar's Entertainment is going to happen. Pinterest,
Speaker 3: we get Starbucks, Mandolei's as well, among many others.
Speaker 2: Amazon's at eighteen percent so far here in twenty twenty four.
Speaker 2: But it'll be interesting. Certainly, cloud always important, right. They
Speaker 2: are the largest when it comes to the cloud services industry,
Speaker 2: of course, though we've seen a lot of competition from
Speaker 2: the likes of Microsoft and also Alphabet's Google, which of
Speaker 2: course we got their results last week, and safe to
Speaker 2: say that they've set the bar really high, especially when
Speaker 2: it comes to the AI spending or using jen Ai
Speaker 2: ai if you will to actually, you know, create some
Speaker 2: business and move some of the numbers to the upside
Speaker 2: on the balance sheet.
Speaker 3: I think also worth remembering what happened to Meta platforms,
Speaker 3: the parent company of Facebook last week. You mentioned this
Speaker 3: a couple of times already today, Carol, when it said
Speaker 3: that it was making a big investment.
Speaker 6: We got punished. She just got punished.
Speaker 2: Absolutely. They're like, Okay, I get it, but you know,
Speaker 2: we just want to see the payoff and what if
Speaker 2: you spend too much? So this is why it'll be
Speaker 2: interesting to see the kind of payoff, particularly when it
Speaker 2: comes to AI, specifically on Amazon.
Speaker 9: All right.
Speaker 2: In the meantime, we've got a down date, Charlie breaking
Speaker 2: down the numbers. We're down more than one percent across
Speaker 2: the board on all of the major equity averages. So
Speaker 2: let's get to it. Our drive to the closed guest
Speaker 2: on this Tuesday, Michael Sheldon. He's executive director over at
Speaker 2: our DM Financial Group. Michael, great to be talking with
Speaker 2: you once again. A lot of earnings. We're going to
Speaker 2: get a big one after the closing bell.
Speaker 6: How are you?
Speaker 2: Thank you looking at the market against the backdrop and
Speaker 2: fundamentals of earning so far.
Speaker 11: Hi, thanks very much for having me.
Speaker 5: So.
Speaker 11: About fifty percent of the S and P five hundred
Speaker 11: earnings are companies in the S and P five hundred
Speaker 11: are reported so far, and a majority of actually beating
Speaker 11: estimates by more than the average beat that we've seen
Speaker 11: over the past several years. So earnings are coming through
Speaker 11: better than expected. I think the issue with the markets today, Unfortunately,
Speaker 11: the markets are under pressure because the inflation data we
Speaker 11: got in the ECI this morning. The employee cost index
Speaker 11: once again was another indicator that inflation is a little
Speaker 11: bit hotter than expected. So I wouldn't be surprised to
Speaker 11: see a little bit of a pullback maybe or a
Speaker 11: high trading range within the market. We could go back
Speaker 11: and test maybe the forty eight hundred level for the
Speaker 11: S and P five hundred, which was the breakout level
Speaker 11: back in January, over the next few months or so.
Speaker 11: But earnings overall have come in better than expected so far.
Speaker 6: Ay buying opportunity. If we do go back to that
Speaker 6: forty eight hundred level.
Speaker 11: Yeah, I think that's likely the case. The economy overall
Speaker 11: has been very resilient over the past three months. We've
Speaker 11: generated I think about two hundred and seventy six thousand
Speaker 11: jobs per month, unless the consumer really starts to turn lower,
Speaker 11: and we haven't seen that yet. Again, remember consumer spending
Speaker 11: represents about two thirds of the economy. The economy should
Speaker 11: be okay, and the real question is what does the
Speaker 11: FED do about all this? So I think right now
Speaker 11: the timing of future rate cuts is somewhat uncertain. I
Speaker 11: think the Fed really does want to cut rates, and
Speaker 11: the Fed shifted policy in the fall of last year,
Speaker 11: if remember, and that sort of helped the economy and
Speaker 11: the markets go on this five month winning streak. So
Speaker 11: we're sort of working off a little bit of that
Speaker 11: right now, and that could just take a little time.
Speaker 2: Does it really matter for do you believe in equity?
Speaker 2: For investment equity investors, whether or not the Fed really
Speaker 2: ultimately cuts this year is a few basis points or
Speaker 2: a quarter of a point or a half a point,
Speaker 2: is it going to really make that much of a difference,
Speaker 2: especially if consumers continue to spend Wages are you know,
Speaker 2: workers are making more money. That that's a good thing
Speaker 2: and it'll keep some economic momentum. And as long as
Speaker 2: people stay employed, that's a good thing.
Speaker 5: Yeah.
Speaker 11: I think that's the most important factor. Individuals have jobs
Speaker 11: or wages rising. So wages are rising but less than
Speaker 11: they were before. But as long as the consumers have
Speaker 11: jobs for the most part. I think that should continue
Speaker 11: to help support the economy. Ultimately, I think the issue
Speaker 11: for the market maybe if the two year is back
Speaker 11: above five percent, and I think the ten years around
Speaker 11: four seventy five or so, So I mean, if the
Speaker 11: ten year gets above five percent or starts to rise rapidly,
Speaker 11: that'll probably cause some concern, especially for over leveraged companies
Speaker 11: or companies that have floating rate debt. But I think
Speaker 11: overall the economy can continue to do well as long
Speaker 11: as interest rates sort of stabilize or don't go up
Speaker 11: too rapidly.
Speaker 3: Do you think I mean that is that something we
Speaker 3: could test in the next few months. Five percent on
Speaker 3: the tenure again.
Speaker 11: I wouldn't be overly surprised. At this point. We get
Speaker 11: a couple more big economic data points this week, we
Speaker 11: get the jobs report coming out on Friday. Everybody keeps
Speaker 11: thinking the employment data is going to slow. One thing
Speaker 11: that people aren't encounter aren't thinking about is the fact
Speaker 11: that immigration numbers have really gone up a lot over
Speaker 11: the past twelve months or so, so that's helping generate
Speaker 11: increased job growth that we haven't had before. I think overall,
Speaker 11: interest rates probably have a ceiling, because, believe it or not,
Speaker 11: everyone's people have been talking about the lagged impact of
Speaker 11: all the rate increases we've already had, and some of
Speaker 11: that really probably hasn't made it into the system yet.
Speaker 11: So inflation has come down a lot, and that ultimately
Speaker 11: should allow the Fed to gently start to lower rates.
Speaker 11: The perfect scenario would be sort of nineteen ninety four
Speaker 11: ninety five, So we'll see if that plays out.
Speaker 2: Yeah, it's kind of interesting that we're thinking, all right,
Speaker 2: wait a minute. You know, we were talking about the
Speaker 2: FED raising rates for so long and in this rate
Speaker 2: hiking cycle for so long that you forget that weight.
Speaker 2: It's working its way through the economy and certainly through
Speaker 2: the financial system. So it's something to kind of keep
Speaker 2: in mind.
Speaker 3: By the way, Carol, the employment report on Friday, Yeah,
Speaker 3: two hundred and forty thousand is what economists surveyed by
Speaker 3: Bloomberg are expecting for a change in non firm payils
Speaker 3: last month three oh three.
Speaker 2: But see, this is where I would go back to
Speaker 2: Michael and something I've been thinking a lot about in
Speaker 2: terms of wage increases. I get how that plays into
Speaker 2: the inflationary picture, but I also think good for workers
Speaker 2: who maybe haven't been working making a lot of money
Speaker 2: for a long time. But that also means that they
Speaker 2: have money to spend and kick it back into the economy.
Speaker 2: That's a good thing.
Speaker 11: You're absolutely right. People having jobs and people having wages
Speaker 11: that are rising, that's a positive thing for you and
Speaker 11: me and everybody else's listening. Having money to spend on things.
Speaker 11: I think the worry is when wages are rising too fast.
Speaker 11: That's what causes Powell Hodjuediz, So, I think that before
Speaker 11: the COVID crisis, wages were ring at about a two
Speaker 11: or two and a half percent rate for several years,
Speaker 11: and now they're right around four percent. So I think
Speaker 11: if those numbers could come down a little bit, I
Speaker 11: think that would provide ultimately provide Chairman Powell with the
Speaker 11: cover to gradually start to reduce rates. I think when
Speaker 11: the FED meets tomorrow. Today, Fed's meeting today and tomorrow.
Speaker 11: I think tomorrow the Fed, I think Powell is probably
Speaker 11: going to say that he's not quite confident that inflation
Speaker 11: has returned to the levels that he's comfortable with, which
Speaker 11: will probably mean that rate cuts are probably somewhere off
Speaker 11: in the distance. But he'll also be data dependent, So
Speaker 11: if inflation does fall or we start to see some
Speaker 11: weakness in the consumer or jobs for some reason, that
Speaker 11: could provide him the cover he needs.
Speaker 2: Now listen, I feel like it right. It all goes
Speaker 2: back to that, and the data can change if it
Speaker 2: does change dramatically, although it's I think safe to say
Speaker 2: that in terms of inflation, they want to see a
Speaker 2: sticky trend line. So we've got to get through a
Speaker 2: couple of months reports, maybe even three or four, before
Speaker 2: the Fed may may back off. Michael Sheldon, thank you,
Speaker 2: and we had some technical difficulties. Thanks for picking up
Speaker 2: the phone so we could hear you. And of course
Speaker 2: we've been seeing you and watching you on YouTube and
Speaker 2: Bloomberg Originals. Michael Sheldon, Executive directed at our DM Financial Group,
Speaker 2: joining us from Westport, Connecticut. You are listening and watching
Speaker 2: Bloomberg Radio.
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