1 00:00:02,400 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,680 --> 00:00:15,480 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,520 --> 00:00:18,720 Speaker 2: with Lisa Bromwitz and Amerie Hordern. Join us each day 4 00:00:18,760 --> 00:00:22,320 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,440 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,960 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,319 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,960 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:35,880 Speaker 2: Terminal and the Bloomberg Business app. 10 00:00:36,400 --> 00:00:39,559 Speaker 3: Stocks cutting into gains of more than seventeen percent for 11 00:00:39,720 --> 00:00:42,920 Speaker 3: this year. Michael Purvis of Taubuck and Capital Advisors writing, 12 00:00:43,159 --> 00:00:45,120 Speaker 3: the biggest threat to the S and P next year 13 00:00:45,400 --> 00:00:48,120 Speaker 3: is the AI spend will be considered not to generate 14 00:00:48,159 --> 00:00:52,000 Speaker 3: compelling returns. This means multiple contraction for a key part 15 00:00:52,080 --> 00:00:52,640 Speaker 3: of the market. 16 00:00:52,640 --> 00:00:55,000 Speaker 4: Michael joins us. Now, Michael, thank you so much for 17 00:00:55,040 --> 00:00:56,720 Speaker 4: being with us. Happy New Year to you. 18 00:00:57,360 --> 00:01:00,319 Speaker 3: Let's start with this idea of how much AI really 19 00:01:00,440 --> 00:01:02,400 Speaker 3: upheld the rally so far this year. 20 00:01:02,880 --> 00:01:04,440 Speaker 4: Can you take a look back and give us a. 21 00:01:04,400 --> 00:01:07,560 Speaker 3: Sense of how dominant that theme was and how that 22 00:01:07,680 --> 00:01:09,920 Speaker 3: might be poised to shift in twenty twenty six. 23 00:01:11,280 --> 00:01:15,240 Speaker 5: Well, Lisa, you know, if you look at the large 24 00:01:15,319 --> 00:01:21,200 Speaker 5: tech relative to cyclical value pair over the last not year, 25 00:01:21,319 --> 00:01:25,760 Speaker 5: but the last six or seven years, that line goes 26 00:01:26,000 --> 00:01:28,760 Speaker 5: up to the right, just like the overall market does. 27 00:01:28,800 --> 00:01:30,000 Speaker 6: It's sort of one and the same. 28 00:01:30,040 --> 00:01:32,000 Speaker 7: And what I've argued for years now is that. 29 00:01:31,920 --> 00:01:35,720 Speaker 5: The big tech rally is kind of the broader SPX rally. 30 00:01:36,600 --> 00:01:36,839 Speaker 7: There. 31 00:01:36,880 --> 00:01:39,960 Speaker 5: There's just consistent of performance in almost every year, except 32 00:01:39,959 --> 00:01:43,759 Speaker 5: when you have bear markets like twenty twenty two, and 33 00:01:43,840 --> 00:01:47,600 Speaker 5: even that it wasn't really that ferociously sold off there. 34 00:01:47,640 --> 00:01:49,640 Speaker 5: There's very good reasons for that, which is that they 35 00:01:49,800 --> 00:01:54,560 Speaker 5: generate not only superior quantity of earnings, but the quality, 36 00:01:54,640 --> 00:01:58,520 Speaker 5: meaning the volatility of those earnings is remarkably low, and 37 00:01:58,600 --> 00:02:03,000 Speaker 5: so compared to cyclical value earning streams, they're just a 38 00:02:03,040 --> 00:02:06,080 Speaker 5: lot more superior. What I'm really the question I think 39 00:02:06,120 --> 00:02:09,400 Speaker 5: that I have as we look into twenty twenty six 40 00:02:09,600 --> 00:02:14,120 Speaker 5: is that you have these giant companies you have you know, Microsoft, Meta, Amazon, 41 00:02:14,120 --> 00:02:16,919 Speaker 5: and so forth. All of them are very distinct business models, 42 00:02:17,560 --> 00:02:20,360 Speaker 5: and many of these companies are really now converging in 43 00:02:20,400 --> 00:02:23,320 Speaker 5: a very massive way on this AI spend, which is 44 00:02:23,880 --> 00:02:26,240 Speaker 5: that they're taking their business models from a very distinct place, 45 00:02:26,280 --> 00:02:29,640 Speaker 5: almost too somewhat similar place in some respects, right you 46 00:02:29,680 --> 00:02:31,959 Speaker 5: know that, you know, we're talking about a trillion dollars 47 00:02:31,960 --> 00:02:34,000 Speaker 5: of cash out of four companies over the next twenty 48 00:02:34,000 --> 00:02:38,639 Speaker 5: four months here there. So just to finish the thought, 49 00:02:38,720 --> 00:02:42,240 Speaker 5: he said, I think the question that I'm really asking 50 00:02:42,320 --> 00:02:45,480 Speaker 5: is that if the return on invested capital is not there, 51 00:02:45,880 --> 00:02:47,880 Speaker 5: and if you look at the free cashlow yield on 52 00:02:47,919 --> 00:02:51,320 Speaker 5: stocks like Microsoft, there are you know, record lows right now, 53 00:02:51,360 --> 00:02:57,200 Speaker 5: so the price earnings and earnings growth ratios looking very compelling. 54 00:02:57,400 --> 00:03:00,200 Speaker 5: The free cash flow is the problem. And so it 55 00:03:00,200 --> 00:03:03,560 Speaker 5: all works if the returns are there, but if it's not, 56 00:03:03,960 --> 00:03:06,280 Speaker 5: you're going to see a real rerate in the big 57 00:03:06,320 --> 00:03:07,840 Speaker 5: tech pillar of the market. 58 00:03:07,960 --> 00:03:09,800 Speaker 3: Is there a signal that you're getting, Michael, just to 59 00:03:09,800 --> 00:03:12,560 Speaker 3: sort of build up this idea from the race of 60 00:03:12,919 --> 00:03:14,799 Speaker 3: some of the acquisitions that we've seen to close out 61 00:03:14,800 --> 00:03:17,639 Speaker 3: the year, whether it's in Vidia with Grock, whether it's 62 00:03:17,639 --> 00:03:20,760 Speaker 3: what we saw with Meta and that Singapore based company 63 00:03:20,800 --> 00:03:22,679 Speaker 3: having to do with AI, whether it's what we see 64 00:03:22,760 --> 00:03:26,239 Speaker 3: right now with Nvidia potentially acquiring an Israeli based tech company. 65 00:03:26,240 --> 00:03:29,000 Speaker 4: I mean, they're using their free cash flow to do something. 66 00:03:29,360 --> 00:03:31,359 Speaker 3: What's the signal for how much this is a shift 67 00:03:31,360 --> 00:03:33,160 Speaker 3: and narrative going into twenty twenty six. 68 00:03:34,720 --> 00:03:38,560 Speaker 5: Well, yeah, I mean I think there it does remind 69 00:03:38,600 --> 00:03:40,680 Speaker 5: me of a little bit of nineteen ninety eight, nineteen 70 00:03:40,720 --> 00:03:44,400 Speaker 5: ninety nine, two thousand, when telecom and tech we're converging 71 00:03:44,720 --> 00:03:49,640 Speaker 5: and frantically there was frantic deal activity and frantic cap 72 00:03:49,800 --> 00:03:53,280 Speaker 5: x activity as well there and of course there were 73 00:03:53,320 --> 00:03:56,160 Speaker 5: some ultimately great winners and there was a lot of 74 00:03:56,240 --> 00:03:59,080 Speaker 5: ride hosts as well. I don't think, you know, like 75 00:03:59,120 --> 00:04:01,160 Speaker 5: we talked about foam in the stock market, and I 76 00:04:01,160 --> 00:04:03,800 Speaker 5: think there's fomo in the c suite here too, Which 77 00:04:03,840 --> 00:04:05,920 Speaker 5: is that all these you know, all these giant companies 78 00:04:05,960 --> 00:04:10,200 Speaker 5: are frantically trying to position themselves, uh, you know, for 79 00:04:10,280 --> 00:04:12,960 Speaker 5: the long haul here, and in that process you're going 80 00:04:13,000 --> 00:04:18,120 Speaker 5: to see a lot of narrative rewrites going on and 81 00:04:18,160 --> 00:04:20,480 Speaker 5: a lot of people speculating as to who are the 82 00:04:20,520 --> 00:04:24,640 Speaker 5: winners and losers ultimately are? You know, I go back to, 83 00:04:24,720 --> 00:04:26,520 Speaker 5: you know, three years ago when Google had that all 84 00:04:26,560 --> 00:04:30,560 Speaker 5: hands on deck meeting because they were frantically behind an 85 00:04:30,600 --> 00:04:33,320 Speaker 5: AI and open Aye was going to clean the clock, 86 00:04:33,360 --> 00:04:35,919 Speaker 5: and you know, here we are, and that narrative seems 87 00:04:35,920 --> 00:04:38,320 Speaker 5: to have just twisted on its head here. I still 88 00:04:38,320 --> 00:04:40,480 Speaker 5: think it's still so early in this game that it's 89 00:04:40,600 --> 00:04:45,520 Speaker 5: very hard to declare, you know, where the ultimate. 90 00:04:47,120 --> 00:04:48,120 Speaker 6: Winners are going to be. 91 00:04:48,400 --> 00:04:49,800 Speaker 5: I mean I think that, you know, I talked to 92 00:04:49,880 --> 00:04:52,359 Speaker 5: a lot of tech executives there that are on the 93 00:04:52,400 --> 00:04:54,520 Speaker 5: fort on the front lines of AI, and they are 94 00:04:54,560 --> 00:04:57,760 Speaker 5: just sort of bewildered. I have the stuff is going 95 00:04:57,800 --> 00:05:01,680 Speaker 5: to shake out, uh themselves, and they're in this market 96 00:05:01,720 --> 00:05:02,120 Speaker 5: every day. 97 00:05:02,160 --> 00:05:04,159 Speaker 3: Well, to me, this really goes to the question of 98 00:05:04,279 --> 00:05:06,680 Speaker 3: how do you broaden out what does it mean to diversify. 99 00:05:06,760 --> 00:05:08,640 Speaker 3: Everyone who has come on this show to end the 100 00:05:08,720 --> 00:05:11,520 Speaker 3: year has said that diversification is the key for next year. 101 00:05:11,560 --> 00:05:13,520 Speaker 3: We've seen that in the precious metals trail, though it's 102 00:05:13,640 --> 00:05:17,279 Speaker 3: arguable that that's not exactly diversification, particularly like when it 103 00:05:17,279 --> 00:05:20,680 Speaker 3: comes to silver. How much do you see equal weight 104 00:05:20,760 --> 00:05:23,680 Speaker 3: as being true diversification in this type of backdrop. 105 00:05:23,880 --> 00:05:28,640 Speaker 5: Well over the really since last January, I started pushing 106 00:05:28,640 --> 00:05:30,880 Speaker 5: this narrative that you know, as much as I love 107 00:05:30,960 --> 00:05:33,279 Speaker 5: the big tech story as the core part of the portfolio, 108 00:05:33,360 --> 00:05:36,320 Speaker 5: if you want to rotate and diversify, not to go 109 00:05:36,360 --> 00:05:39,040 Speaker 5: into US cyclicals and values. So obviously there's a lot 110 00:05:39,080 --> 00:05:42,240 Speaker 5: of specific sectors and specific stocks that have done incredibly 111 00:05:42,240 --> 00:05:44,640 Speaker 5: well this year in the United States, but thematically at 112 00:05:44,640 --> 00:05:48,040 Speaker 5: the index level, what I'd advocated for was a rotation 113 00:05:48,200 --> 00:05:53,240 Speaker 5: into European equities, which were sort of the ugly ducklings. 114 00:05:54,400 --> 00:05:56,640 Speaker 6: For so long, and some respects they still are. 115 00:05:56,720 --> 00:06:00,719 Speaker 5: But I think where I am right now is that, Look, 116 00:06:00,720 --> 00:06:03,320 Speaker 5: you know, we've got the SX five I call it 117 00:06:03,360 --> 00:06:08,039 Speaker 5: the SPX for the European continent that has outperformed most 118 00:06:08,080 --> 00:06:11,919 Speaker 5: every US index in local terms, almost caught up with 119 00:06:11,960 --> 00:06:17,839 Speaker 5: the MAGS seven index, and on a currency j justment basis, 120 00:06:17,880 --> 00:06:21,400 Speaker 5: it's blown away most of the US major equity index. 121 00:06:22,000 --> 00:06:25,719 Speaker 5: So looking forward into twenty twenty six, where I'm at 122 00:06:25,800 --> 00:06:27,880 Speaker 5: right now is I think that's going to happen. It's 123 00:06:27,880 --> 00:06:30,839 Speaker 5: a very different set of dynamic. So I think, look, 124 00:06:31,000 --> 00:06:33,719 Speaker 5: if the Germans really are going to start of committing 125 00:06:33,800 --> 00:06:36,120 Speaker 5: to the stimulus, and I think that's happening, It's hard 126 00:06:36,160 --> 00:06:38,800 Speaker 5: to tell, but that is sort of a massive and 127 00:06:38,880 --> 00:06:42,120 Speaker 5: a very different type of force than say the AI force. Right, 128 00:06:42,160 --> 00:06:46,000 Speaker 5: you know, when You're talking about this pretty significant economy 129 00:06:46,040 --> 00:06:49,279 Speaker 5: really pushing stimulus to a place and it's never been 130 00:06:49,640 --> 00:06:52,080 Speaker 5: They have the fiscal space to do it, unlike many 131 00:06:52,120 --> 00:06:56,680 Speaker 5: other sovereign nations in the developed world, and that will 132 00:06:56,720 --> 00:06:59,599 Speaker 5: be really resonate there. 133 00:07:00,000 --> 00:07:01,120 Speaker 7: Meanwhile, I think. 134 00:07:01,240 --> 00:07:03,920 Speaker 5: For the US colclal and value trade, well, there's still 135 00:07:03,960 --> 00:07:05,800 Speaker 5: a lot of I think sentiment tied to that. So 136 00:07:05,839 --> 00:07:09,320 Speaker 5: if you are concerned about the tech I don't want 137 00:07:09,320 --> 00:07:12,120 Speaker 5: to use the word bubble, but you know, the tech theme, 138 00:07:13,680 --> 00:07:15,560 Speaker 5: the dominance of tech them if you're sort of worried 139 00:07:15,600 --> 00:07:19,760 Speaker 5: about that kind of not really working next year. To me, 140 00:07:19,880 --> 00:07:22,480 Speaker 5: I think it's it's I sort of see Europe as 141 00:07:22,480 --> 00:07:25,120 Speaker 5: as a pretty good place, with a caveat that. The 142 00:07:25,240 --> 00:07:28,400 Speaker 5: rally this year has been driven largely by pe expansion 143 00:07:28,600 --> 00:07:31,920 Speaker 5: and the relative tope from Europe to say their US 144 00:07:32,040 --> 00:07:36,360 Speaker 5: counterparts are in a less compelling place than they were 145 00:07:36,440 --> 00:07:37,160 Speaker 5: twelve months ago. 146 00:07:38,400 --> 00:07:41,840 Speaker 2: Stay with US multplempeg's Survinmon's coming up off to this. 147 00:07:50,960 --> 00:07:53,960 Speaker 3: Investors are waiting the last read unemployment in twenty twenty five. 148 00:07:54,040 --> 00:07:57,120 Speaker 3: Java's claims do at eight thirty am Eastern for the 149 00:07:57,160 --> 00:07:58,240 Speaker 3: holiday shortened week. 150 00:07:58,320 --> 00:07:59,960 Speaker 4: Michael Reid of ARBC capital market. 151 00:08:00,040 --> 00:08:02,920 Speaker 3: It's writing we maintain our view that tariffs will weigh 152 00:08:02,960 --> 00:08:05,840 Speaker 3: on the labor market and put upward pressure on inflation, 153 00:08:06,240 --> 00:08:11,040 Speaker 3: reinforcing that the US economy is experiencing stagflation light. Michael 154 00:08:11,120 --> 00:08:13,280 Speaker 3: joins us now in the flesh in New York. Thank 155 00:08:13,320 --> 00:08:16,080 Speaker 3: you so much for being here on this New Year's eve. 156 00:08:16,200 --> 00:08:19,320 Speaker 3: I'm just wondering, from your perspective, stagflation light, what does 157 00:08:19,360 --> 00:08:21,280 Speaker 3: that mean? And why do you see that taking hold 158 00:08:21,520 --> 00:08:22,480 Speaker 3: in twenty twenty six? 159 00:08:22,680 --> 00:08:23,880 Speaker 7: Sure, and thanks for having me. 160 00:08:24,320 --> 00:08:27,600 Speaker 8: So what we are expecting is generally below trend growth 161 00:08:27,640 --> 00:08:31,960 Speaker 8: that means below two percent, and inflation that remains uncomfortably high, 162 00:08:32,000 --> 00:08:33,960 Speaker 8: really in that core space. So when you think about 163 00:08:34,000 --> 00:08:35,959 Speaker 8: some of the dynamics, and it's not just tariffs, I 164 00:08:35,960 --> 00:08:38,400 Speaker 8: should add, we just think it's going to be really 165 00:08:38,400 --> 00:08:41,160 Speaker 8: hard to get back to two percent, even if you 166 00:08:41,200 --> 00:08:42,520 Speaker 8: take tariffs off the table. 167 00:08:42,760 --> 00:08:45,160 Speaker 3: Does it seem like FED officials really care? I mean, 168 00:08:45,200 --> 00:08:47,319 Speaker 3: based on the meeting minutes, there was a priority on 169 00:08:47,480 --> 00:08:49,640 Speaker 3: the labor market, not necessarily inflation. 170 00:08:50,240 --> 00:08:51,040 Speaker 7: I think they do care. 171 00:08:51,080 --> 00:08:53,160 Speaker 8: And what's really interesting is if you look at what 172 00:08:53,200 --> 00:08:57,160 Speaker 8: they've said, especially in the last meeting, you know, you 173 00:08:57,240 --> 00:09:00,000 Speaker 8: include the fact that they view tariffs as being traned. 174 00:09:00,880 --> 00:09:04,120 Speaker 8: Yet they're starting to take that cautious approach. They think 175 00:09:04,120 --> 00:09:07,360 Speaker 8: they've gotten to a place that is much more closer 176 00:09:07,360 --> 00:09:12,199 Speaker 8: to neutral. So they're concerned about the inflationary pressure not 177 00:09:12,320 --> 00:09:14,520 Speaker 8: just from terrafts but coming from other places. And we 178 00:09:14,520 --> 00:09:17,400 Speaker 8: think that's showing up in the services space in particular 179 00:09:17,800 --> 00:09:19,320 Speaker 8: as it relates to labor supply. 180 00:09:20,000 --> 00:09:22,319 Speaker 3: So where exactly are you seeing this inflationary pressure. I 181 00:09:22,360 --> 00:09:24,520 Speaker 3: can hear Neil Datta in my head saying, look at housing, 182 00:09:24,559 --> 00:09:26,680 Speaker 3: you're not seeing any inflationary pressure there. In fact, the 183 00:09:26,679 --> 00:09:29,840 Speaker 3: housing data yesterday we did get some signs that maybe 184 00:09:29,960 --> 00:09:31,960 Speaker 3: is picking up, but otherwise you've seen pretty much flat 185 00:09:31,960 --> 00:09:34,800 Speaker 3: home prices across the country. At what point do you 186 00:09:34,840 --> 00:09:37,720 Speaker 3: see some sort of inflationary pressure that could be sticky. 187 00:09:38,320 --> 00:09:40,640 Speaker 8: We see it in the wage space, and you know, 188 00:09:40,640 --> 00:09:42,439 Speaker 8: when you think about some of the dynamics that we're 189 00:09:42,480 --> 00:09:47,319 Speaker 8: seeing in terms of supply, we have immigration that's falling, 190 00:09:47,720 --> 00:09:52,160 Speaker 8: we have retirements that we think continue to accelerate. At 191 00:09:52,200 --> 00:09:56,600 Speaker 8: the same time, your demand for labor, while slowing, still 192 00:09:56,880 --> 00:09:59,280 Speaker 8: hanging in there. So what that means is you're going 193 00:09:59,320 --> 00:10:02,080 Speaker 8: to have a situation where the need for workers is 194 00:10:02,120 --> 00:10:05,600 Speaker 8: still there, it's just showing up as replacement demands. So 195 00:10:05,640 --> 00:10:08,000 Speaker 8: payrolls aren't going to look great by any means, But 196 00:10:08,640 --> 00:10:11,280 Speaker 8: we are going to expect an environment where the unemployment 197 00:10:11,360 --> 00:10:14,319 Speaker 8: rate remains low and we think at plateaus around four 198 00:10:14,320 --> 00:10:16,480 Speaker 8: and a half percent for most of this year, and 199 00:10:16,520 --> 00:10:18,959 Speaker 8: that just means you're going to have an environment where 200 00:10:19,080 --> 00:10:20,920 Speaker 8: wage pressures, say, elevated. 201 00:10:21,640 --> 00:10:23,760 Speaker 3: Yeah, so this is definitely the truth. When it comes 202 00:10:23,760 --> 00:10:26,079 Speaker 3: to healthcare. We've seen the bulk of hiring so far 203 00:10:26,120 --> 00:10:27,840 Speaker 3: this year in healthcare. We're getting older, are we still 204 00:10:27,840 --> 00:10:30,480 Speaker 3: need to be taken care of? This is the raise 205 00:10:30,520 --> 00:10:33,760 Speaker 3: of question about other sectors and what that means about 206 00:10:33,760 --> 00:10:36,040 Speaker 3: the strength of the labor market. I mean, how durable 207 00:10:36,320 --> 00:10:37,880 Speaker 3: is some of the strength that we've seen if it 208 00:10:37,920 --> 00:10:41,440 Speaker 3: is concentrated in a completely recessioned proof area like healthcare. 209 00:10:41,800 --> 00:10:43,000 Speaker 7: I mean, healthcare is a big one. 210 00:10:43,040 --> 00:10:45,360 Speaker 8: So again going back to this demographic story, you think 211 00:10:45,400 --> 00:10:49,040 Speaker 8: about the sheer size of the population that's now over 212 00:10:49,120 --> 00:10:52,439 Speaker 8: sixty five. You have about just one undred and forty 213 00:10:52,440 --> 00:10:54,680 Speaker 8: million people in the workforce right now who are fifty 214 00:10:54,679 --> 00:10:58,120 Speaker 8: five plus, so they're approaching that retirement age. That's who 215 00:10:58,160 --> 00:11:00,520 Speaker 8: we're really focused on. Those are theolks who are going 216 00:11:00,559 --> 00:11:04,760 Speaker 8: to continue to use healthcare services across the board. So 217 00:11:04,840 --> 00:11:08,040 Speaker 8: that's a sector that we expect both will continue to 218 00:11:08,120 --> 00:11:09,920 Speaker 8: hire at a very healthy clip. 219 00:11:10,120 --> 00:11:11,240 Speaker 7: Fifty to sixty. 220 00:11:10,960 --> 00:11:14,040 Speaker 8: Thousand jobs per month over the next five years seems 221 00:11:14,120 --> 00:11:17,320 Speaker 8: very reasonable to us. And in addition, you do have 222 00:11:17,360 --> 00:11:20,400 Speaker 8: that price pressure, so when you think about some of 223 00:11:20,160 --> 00:11:24,760 Speaker 8: the factors impacting prices in terms of tariffs, but as 224 00:11:24,760 --> 00:11:27,600 Speaker 8: well as supply chains, that's going to continue to put 225 00:11:27,640 --> 00:11:32,040 Speaker 8: upward pressure on services. So for healthcare, which is a 226 00:11:32,160 --> 00:11:39,160 Speaker 8: very service intensive type of sector, there's very little relief 227 00:11:39,240 --> 00:11:40,440 Speaker 8: that we expect to see there. 228 00:11:40,600 --> 00:11:42,360 Speaker 3: There's a theory that the FED is trying to run 229 00:11:42,360 --> 00:11:45,520 Speaker 3: the economy hot to keep people employed as we get 230 00:11:45,520 --> 00:11:49,000 Speaker 3: this structural shift with artificial intelligence, that as people become 231 00:11:49,040 --> 00:11:51,000 Speaker 3: less necessary, you want to keep as many people as 232 00:11:51,040 --> 00:11:55,320 Speaker 3: possible employed before we get to whatever that next future is. 233 00:11:55,840 --> 00:11:57,840 Speaker 4: How much credence do you see in that? 234 00:11:57,920 --> 00:12:00,520 Speaker 3: Do you think that that is wise for them to 235 00:12:00,600 --> 00:12:04,200 Speaker 3: take that approach given some of the cannibalization from human jobs. 236 00:12:04,360 --> 00:12:07,960 Speaker 8: I mean, look, their dual mandate is low prices and 237 00:12:08,000 --> 00:12:11,800 Speaker 8: stable employment, So I think that aligns to what they're 238 00:12:11,920 --> 00:12:13,439 Speaker 8: trying to do in terms of the mandate. 239 00:12:14,200 --> 00:12:17,079 Speaker 7: Now, the outcomes for AI are still very early. 240 00:12:17,600 --> 00:12:20,800 Speaker 8: Could we see a productivity boost, Absolutely, we expect that. 241 00:12:21,320 --> 00:12:23,040 Speaker 8: Do we expect to see in twenty twenty six, Not 242 00:12:23,080 --> 00:12:26,480 Speaker 8: so much. But when you think about some of the 243 00:12:26,559 --> 00:12:28,679 Speaker 8: dynamics that are going on right now over the next 244 00:12:28,800 --> 00:12:33,000 Speaker 8: four to five years, when you account for that retirement 245 00:12:33,080 --> 00:12:37,160 Speaker 8: boom that we continue to see and the slowdown in immigration, 246 00:12:37,640 --> 00:12:39,760 Speaker 8: you're going to need more workers. And if you don't 247 00:12:39,760 --> 00:12:44,480 Speaker 8: have it coming from the outside that immigration story, AI 248 00:12:44,559 --> 00:12:46,800 Speaker 8: is going to have a very very important role to 249 00:12:46,840 --> 00:12:50,440 Speaker 8: play there to help supplement the falling labor supply. So 250 00:12:51,080 --> 00:12:54,319 Speaker 8: that could help offset some of those inflationary pressures coming 251 00:12:54,400 --> 00:12:55,640 Speaker 8: in the wage space. 252 00:12:55,640 --> 00:12:57,760 Speaker 4: Just in a shorter term TIMESPRAE. 253 00:12:57,760 --> 00:12:59,760 Speaker 3: So we are going to get some real data in 254 00:13:00,000 --> 00:13:03,400 Speaker 3: Manuary that people think will be some cleaner data points 255 00:13:03,440 --> 00:13:06,160 Speaker 3: to look at when the Fed meets on January twenty eighth. 256 00:13:06,360 --> 00:13:08,559 Speaker 3: What are you expecting when it comes to both CPI 257 00:13:09,000 --> 00:13:11,680 Speaker 3: and of course the jobs report from the month of December. 258 00:13:12,000 --> 00:13:17,040 Speaker 8: So we're going to get a lot of mixed signals here. Again, 259 00:13:17,240 --> 00:13:23,040 Speaker 8: even in December Q one for the jobs report, you know, 260 00:13:23,480 --> 00:13:27,000 Speaker 8: like the Fed, we expect that the number will be 261 00:13:27,040 --> 00:13:29,640 Speaker 8: you know, look okay at face value, but you have 262 00:13:29,720 --> 00:13:32,439 Speaker 8: to subtract out the benchmark revisions that are going to 263 00:13:32,480 --> 00:13:35,559 Speaker 8: come from QCW. So already you have to take out 264 00:13:35,559 --> 00:13:39,280 Speaker 8: fifty to seventy thousand jobs per month based on that revision. 265 00:13:39,320 --> 00:13:42,680 Speaker 8: So that's a big part of I think how the 266 00:13:42,679 --> 00:13:45,600 Speaker 8: Fed is thinking about this, especially as it relates to 267 00:13:45,600 --> 00:13:47,920 Speaker 8: that break even pace of employment. That's why we've seen 268 00:13:47,920 --> 00:13:52,240 Speaker 8: that unemployment rate rise despite rather healthy job job gains 269 00:13:52,559 --> 00:13:55,680 Speaker 8: from the Paywell report in terms of CPI, you know, 270 00:13:55,760 --> 00:13:59,360 Speaker 8: for December, we think we continue to see kind of 271 00:13:59,400 --> 00:14:02,560 Speaker 8: a modest slow down in terms of the pace, but 272 00:14:03,480 --> 00:14:06,200 Speaker 8: it's really t one that's our concern. We've seen these 273 00:14:06,200 --> 00:14:10,679 Speaker 8: seasonal quirks, notably in January, and we think that could 274 00:14:10,679 --> 00:14:14,840 Speaker 8: be more pronounced as tar pressure starts to add up. 275 00:14:15,520 --> 00:14:19,120 Speaker 2: Stay with US multiple INPEX Savana's coming up off to this. 276 00:14:27,840 --> 00:14:31,160 Speaker 3: Enhanced Affordable Care Act subsidies are so to expire tonight, 277 00:14:31,480 --> 00:14:35,240 Speaker 3: sending premium skyrocketing and impacting coverage for millions of Americans. 278 00:14:35,280 --> 00:14:39,320 Speaker 3: Congress failing to find a resolution before the deadline. Joining 279 00:14:39,360 --> 00:14:42,800 Speaker 3: US now is George Pollock of Signal Global, Can you 280 00:14:42,800 --> 00:14:44,200 Speaker 3: just give us a sense and great to see you, 281 00:14:44,240 --> 00:14:46,880 Speaker 3: George stepping back, how much of a focus this is 282 00:14:46,920 --> 00:14:50,800 Speaker 3: for Republicans to keep some sort of healthcare solution. How 283 00:14:50,880 --> 00:14:53,120 Speaker 3: much it is a popular thing for them to do 284 00:14:53,200 --> 00:14:54,600 Speaker 3: heading into the midterm elections. 285 00:14:55,560 --> 00:14:57,960 Speaker 9: Well, the biggest issue for Republicans is healthcare. Is are 286 00:14:58,000 --> 00:15:00,920 Speaker 9: the one issue where Democrats pull better than Republicans. 287 00:15:01,200 --> 00:15:01,680 Speaker 2: This is the. 288 00:15:01,640 --> 00:15:03,720 Speaker 6: Issue where Democrats can. 289 00:15:03,680 --> 00:15:06,040 Speaker 9: Really go on offense and say we have the better ideas, 290 00:15:06,160 --> 00:15:08,640 Speaker 9: or at least the more popular ideas. And going into 291 00:15:08,680 --> 00:15:10,720 Speaker 9: a midterm election that's already going to be a challenge 292 00:15:10,720 --> 00:15:11,600 Speaker 9: when they've. 293 00:15:11,480 --> 00:15:12,640 Speaker 6: Had the trifecta in DC. 294 00:15:13,400 --> 00:15:17,360 Speaker 9: Allowing these subsidies to expire and exposing people to doubling 295 00:15:17,360 --> 00:15:20,440 Speaker 9: of healthcare premiums is just not sustainable, especially if they 296 00:15:20,480 --> 00:15:21,320 Speaker 9: want to keep the House. 297 00:15:21,760 --> 00:15:23,360 Speaker 3: We were talking at the end of last year or 298 00:15:23,400 --> 00:15:25,040 Speaker 3: the beginning of a lot of this year, excuse me, 299 00:15:25,360 --> 00:15:29,920 Speaker 3: about cutting the budget deficit and about cutting expenses. Dose 300 00:15:30,080 --> 00:15:32,560 Speaker 3: was a big effort. Now there is a question of 301 00:15:32,760 --> 00:15:34,760 Speaker 3: how much of those custom are going to basically come 302 00:15:34,800 --> 00:15:36,960 Speaker 3: back onto the balance sheet, whether it's AEBA or whether 303 00:15:37,040 --> 00:15:39,600 Speaker 3: it's some of these subsidies that get passed over. I'm 304 00:15:39,600 --> 00:15:42,120 Speaker 3: just wondering, from your perspective, how much of a focus 305 00:15:42,360 --> 00:15:45,560 Speaker 3: cutting the budget deficit still is in Washington, DC. 306 00:15:46,560 --> 00:15:47,920 Speaker 6: Look, I think it's a great line. 307 00:15:47,960 --> 00:15:49,760 Speaker 9: I think when you're the party out of power, it's 308 00:15:49,760 --> 00:15:52,480 Speaker 9: something you discussed and you've seen moderate Democrats talk about it, 309 00:15:52,560 --> 00:15:54,520 Speaker 9: and you've seen most Republicans talk about it. But the 310 00:15:54,560 --> 00:15:57,480 Speaker 9: reality is when they pass to one big, beautiful bill, yes, 311 00:15:57,560 --> 00:15:59,760 Speaker 9: that made tax cuts and a tax system permanent and 312 00:15:59,800 --> 00:16:02,680 Speaker 9: may you know, gave businesses and Americans a dea of permanence, 313 00:16:02,720 --> 00:16:05,600 Speaker 9: but it also cost billions, and it costs a significant 314 00:16:05,560 --> 00:16:07,080 Speaker 9: amount of money and added to the deficit. 315 00:16:07,440 --> 00:16:08,239 Speaker 6: It's a great. 316 00:16:08,000 --> 00:16:11,360 Speaker 9: Campaign line, but unless there's no real appetite for embracing 317 00:16:11,360 --> 00:16:13,400 Speaker 9: a talent and reform or anything like that, because it 318 00:16:13,480 --> 00:16:15,880 Speaker 9: really is the third rail of US politics, how do. 319 00:16:15,840 --> 00:16:18,760 Speaker 3: You see twenty twenty six being different politically than twenty 320 00:16:18,840 --> 00:16:21,040 Speaker 3: twenty five. Given the fact that the midterm elections are 321 00:16:21,040 --> 00:16:23,920 Speaker 3: coming up and what happened in the mid midterm elections 322 00:16:23,960 --> 00:16:25,040 Speaker 3: that we just saw. 323 00:16:25,840 --> 00:16:27,520 Speaker 9: I think what you're really going to see is these 324 00:16:27,640 --> 00:16:30,480 Speaker 9: moderate Republicans who voted for things like the one big 325 00:16:30,520 --> 00:16:33,320 Speaker 9: beautiful Bill, who have defended the president, who are facing 326 00:16:33,360 --> 00:16:36,000 Speaker 9: a very tough reelect, and with Democrats getting some pretty 327 00:16:36,000 --> 00:16:39,200 Speaker 9: strong recruits and moderate districts, they're going to really try 328 00:16:39,200 --> 00:16:41,440 Speaker 9: to separate themselves from the administration, and they're going to 329 00:16:41,440 --> 00:16:46,720 Speaker 9: really try to stake out themselves as independent, focus oriented 330 00:16:47,080 --> 00:16:49,200 Speaker 9: members of Congress who just want to do what's best 331 00:16:49,200 --> 00:16:51,680 Speaker 9: for American And I think we're Speaker Johnson having a 332 00:16:51,760 --> 00:16:54,000 Speaker 9: very narrow majority, that's going to be something that he 333 00:16:54,040 --> 00:16:56,160 Speaker 9: struggles to navigate, especially if he wants to do a 334 00:16:56,160 --> 00:16:57,360 Speaker 9: second reconciliation Bill. 335 00:16:57,520 --> 00:16:59,120 Speaker 3: George, There's something that not a lot of people are 336 00:16:59,120 --> 00:17:02,560 Speaker 3: talking about is coming up increasingly on talk shows as 337 00:17:02,600 --> 00:17:05,680 Speaker 3: well as just a not ed pages across the country, 338 00:17:05,680 --> 00:17:07,800 Speaker 3: across the world. How much of a focus there's going 339 00:17:07,840 --> 00:17:11,000 Speaker 3: to be an artificial intelligence and either regulating it or 340 00:17:11,040 --> 00:17:13,600 Speaker 3: providing some sort of safety net should there be some 341 00:17:13,640 --> 00:17:16,479 Speaker 3: sort of mass job loss in the wake of a 342 00:17:16,520 --> 00:17:19,720 Speaker 3: real adoption that does mean that certain humans are not 343 00:17:19,800 --> 00:17:22,879 Speaker 3: needed anymore. How much of a discussion is there in Washington, 344 00:17:22,960 --> 00:17:25,960 Speaker 3: DC about this as we head into twenty twenty six. 345 00:17:26,880 --> 00:17:28,600 Speaker 9: I think what you're going to see is the Republican 346 00:17:28,800 --> 00:17:31,640 Speaker 9: the administration has fully embraced AI as the next great 347 00:17:31,640 --> 00:17:33,600 Speaker 9: thing for the US economy. And what you're going to 348 00:17:33,600 --> 00:17:35,600 Speaker 9: see is the likes of both Republicans, so like Governor 349 00:17:35,680 --> 00:17:38,080 Speaker 9: Roland Descantis or Governor of Spencer Cox, and you're going 350 00:17:38,119 --> 00:17:41,080 Speaker 9: to see Democrats as well campaign against the administration's whole 351 00:17:41,119 --> 00:17:44,200 Speaker 9: hog embrace. You've already seen Senator Bernie Sanders talk about 352 00:17:44,240 --> 00:17:45,800 Speaker 9: suspending data center construction. 353 00:17:46,200 --> 00:17:48,000 Speaker 6: I think what I put in at parallel. 354 00:17:47,640 --> 00:17:50,280 Speaker 9: To is when they were negotiating the original NAFTA and 355 00:17:50,320 --> 00:17:53,120 Speaker 9: that trade disruption in the job disruption. I think Democrats 356 00:17:53,160 --> 00:17:57,200 Speaker 9: are going to say, you're disrupting American jobs, you're threatening 357 00:17:57,400 --> 00:18:00,520 Speaker 9: social stability, and you're increasing cost and things like energy, 358 00:18:00,560 --> 00:18:02,000 Speaker 9: and they're going to use it as a huge attack 359 00:18:02,040 --> 00:18:05,719 Speaker 9: line for the president, especially because Americans are pretty divided. 360 00:18:05,760 --> 00:18:07,920 Speaker 9: I think there was a recent poll out that only 361 00:18:07,960 --> 00:18:10,159 Speaker 9: by five percent are they really positive about AI. And 362 00:18:10,200 --> 00:18:12,520 Speaker 9: that's really people who haven't yet learned all the details. 363 00:18:12,680 --> 00:18:15,480 Speaker 9: And I think as Democrats hit the administration in the 364 00:18:15,600 --> 00:18:17,320 Speaker 9: likes of David Sachs, I think that's going to be 365 00:18:17,359 --> 00:18:19,280 Speaker 9: a very potent issue for Democrats in particular. 366 00:18:19,320 --> 00:18:20,360 Speaker 6: In twent twenty six, you. 367 00:18:20,280 --> 00:18:23,320 Speaker 3: Mentioned Senator Bernie Sanders of Vermont. He is going to 368 00:18:23,320 --> 00:18:27,280 Speaker 3: be at the inauguration of Zoro and Mam Donnie, I believe, tonight, 369 00:18:27,359 --> 00:18:31,960 Speaker 3: along with AOC, along with a host of other progressive Democrats. 370 00:18:32,080 --> 00:18:35,080 Speaker 3: I just wonder what this really signifies for the Democratic 371 00:18:35,080 --> 00:18:38,480 Speaker 3: Party in twenty twenty six, Not necessarily Zora Mam Donnie's inauguration, 372 00:18:38,640 --> 00:18:40,840 Speaker 3: but just is this going to be the mainstream of 373 00:18:40,880 --> 00:18:44,879 Speaker 3: the Democratic Party heading into the next presidential election season. 374 00:18:45,640 --> 00:18:47,280 Speaker 6: Look, I think that's a fantastic question. 375 00:18:47,359 --> 00:18:49,639 Speaker 9: If you were a tri state Democrat like Laura Gillen 376 00:18:49,760 --> 00:18:52,439 Speaker 9: or Tom Swazi, you're not happy about this because you're 377 00:18:52,480 --> 00:18:54,040 Speaker 9: going to have to run against Mom Donni and you're 378 00:18:54,040 --> 00:18:55,600 Speaker 9: going to have to deal with the after effects of 379 00:18:55,640 --> 00:18:58,760 Speaker 9: Mam Donnie's policies. But I think in reality, this midterm 380 00:18:58,800 --> 00:19:00,639 Speaker 9: election is going to be a referendum on the president, 381 00:19:00,680 --> 00:19:03,680 Speaker 9: a referendum on the Republicans, And when the Democratic Party 382 00:19:03,720 --> 00:19:06,680 Speaker 9: has legs of Marie losing camp Paris in Washington, Jaca 383 00:19:06,720 --> 00:19:10,720 Speaker 9: Anceloss in Massachusetts, and formably Jared Golden in Maine, it's 384 00:19:10,760 --> 00:19:13,719 Speaker 9: really just going to be. Yeah, the Republicans will try 385 00:19:13,760 --> 00:19:15,920 Speaker 9: to make it circa Nancy Pelosi two thousand and six, 386 00:19:15,960 --> 00:19:17,840 Speaker 9: two thousand and eight. But it's really not going to 387 00:19:17,880 --> 00:19:20,800 Speaker 9: fly when Americans are more concerned about increasing health premiums, 388 00:19:20,960 --> 00:19:23,440 Speaker 9: increasing energy costs, and the potential threat of AI. 389 00:19:24,760 --> 00:19:25,400 Speaker 7: Stay with us. 390 00:19:25,720 --> 00:19:37,560 Speaker 2: Maulblindex Saveland's coming up after this, And. 391 00:19:37,520 --> 00:19:39,480 Speaker 3: I just learned that Matt Miller is also wearing a 392 00:19:39,560 --> 00:19:44,359 Speaker 3: kilt because he is celebrating Hogmanay, which is the Scottish 393 00:19:44,400 --> 00:19:46,840 Speaker 3: New Year. That is what we learned from Lizzie Burton 394 00:19:46,960 --> 00:19:47,760 Speaker 3: over in London. 395 00:19:47,760 --> 00:19:50,600 Speaker 4: Thank you for that. I'm glad to see that it's 396 00:19:50,640 --> 00:19:52,600 Speaker 4: not true true. 397 00:19:53,040 --> 00:19:54,840 Speaker 6: I wish, I wish, well. 398 00:19:54,640 --> 00:19:56,200 Speaker 4: You know, maybe next year, if they get. 399 00:19:56,040 --> 00:19:58,719 Speaker 3: Another double as your return, Matthew Miller will show up 400 00:19:58,760 --> 00:20:00,840 Speaker 3: in a cult. Barbara Durant, it's not wearing a kult 401 00:20:01,080 --> 00:20:02,360 Speaker 3: of a BD eight capital. 402 00:20:02,480 --> 00:20:02,920 Speaker 4: She wrote. 403 00:20:03,000 --> 00:20:05,560 Speaker 3: The FED could be stingy on rate cuts unless labor 404 00:20:06,119 --> 00:20:09,760 Speaker 3: takes a big dive. Barbara joins us now for more. Barbara, 405 00:20:09,960 --> 00:20:12,000 Speaker 3: thank you so much for being here. Really appreciate it. 406 00:20:12,320 --> 00:20:15,359 Speaker 3: On this New Year's Eve, A real question about the 407 00:20:15,400 --> 00:20:17,640 Speaker 3: FED and how much they can cut given the dual 408 00:20:17,680 --> 00:20:19,960 Speaker 3: manded they have of a labor market that they seem 409 00:20:19,960 --> 00:20:21,280 Speaker 3: to be prioritizing right now. 410 00:20:21,440 --> 00:20:25,199 Speaker 1: Yeah, they definitely are because the labor numbers have been soft. 411 00:20:25,440 --> 00:20:27,840 Speaker 1: You saw that in the ADP number a few weeks ago, 412 00:20:28,000 --> 00:20:30,240 Speaker 1: and of course jobs, but what we're not seeing is 413 00:20:30,280 --> 00:20:32,600 Speaker 1: any really follow through in jobless claims. They are still 414 00:20:32,640 --> 00:20:35,480 Speaker 1: not signaling, you know, any danger there, and that obviously 415 00:20:35,520 --> 00:20:37,639 Speaker 1: is a leading indicator. But I think that's where the 416 00:20:37,640 --> 00:20:41,399 Speaker 1: emphasis because inflation seems to have stabilized. I think somewhere 417 00:20:41,440 --> 00:20:43,160 Speaker 1: around here two point nine, I think it could creep 418 00:20:43,280 --> 00:20:45,919 Speaker 1: up a little bit higher because even though the tariff 419 00:20:45,960 --> 00:20:48,840 Speaker 1: impact has not as been as severe as they already expected, 420 00:20:48,840 --> 00:20:51,600 Speaker 1: including myself, you know, there's still it's still feeding through 421 00:20:51,640 --> 00:20:53,359 Speaker 1: now that there seems to be some stability in the 422 00:20:53,400 --> 00:20:56,359 Speaker 1: outlook for tariffs. So I think you could see it 423 00:20:56,359 --> 00:20:58,199 Speaker 1: inch a little higher, but you're certainly not going to 424 00:20:58,200 --> 00:21:00,840 Speaker 1: see it as it happened at post COVID for opening up. 425 00:21:01,080 --> 00:21:03,280 Speaker 1: So I think they are right to focus on labor 426 00:21:03,359 --> 00:21:05,800 Speaker 1: and what that means. And right now we know what's 427 00:21:05,800 --> 00:21:10,639 Speaker 1: happening in terms of lower immigration, baby boomers retiring, and so, 428 00:21:10,760 --> 00:21:13,840 Speaker 1: but it looks imbalance. So you could see lower job creation, 429 00:21:14,000 --> 00:21:16,399 Speaker 1: but that's because the demand will be lower. So but 430 00:21:16,480 --> 00:21:18,840 Speaker 1: that's the key thing, and the economic data has been 431 00:21:18,880 --> 00:21:21,520 Speaker 1: a little bit behind, and we know there's problems with 432 00:21:21,560 --> 00:21:24,280 Speaker 1: a recent CPI number, so I think it continues. The 433 00:21:24,280 --> 00:21:26,520 Speaker 1: fit is still going to be data dependent, but I 434 00:21:26,520 --> 00:21:28,480 Speaker 1: don't see them cutting in the next month or so, 435 00:21:28,600 --> 00:21:30,840 Speaker 1: because they need to see really if the trend in 436 00:21:30,920 --> 00:21:33,240 Speaker 1: labor is going to continue to gradually go down or 437 00:21:33,320 --> 00:21:34,480 Speaker 1: it's going to be much stronger. 438 00:21:34,720 --> 00:21:35,640 Speaker 4: What do you expect there? 439 00:21:35,680 --> 00:21:41,040 Speaker 10: Because we've had incredible growth, right four percent essentially in 440 00:21:41,119 --> 00:21:45,080 Speaker 10: Q three, We're expecting, you know, above trend growth in 441 00:21:45,160 --> 00:21:47,320 Speaker 10: Q four as well, or at least at three percent. 442 00:21:47,880 --> 00:21:51,760 Speaker 10: And it's not like the labor pool is getting any bigger. 443 00:21:51,800 --> 00:21:53,720 Speaker 10: We don't have any immigration. 444 00:21:53,320 --> 00:21:53,840 Speaker 1: To speak of. 445 00:21:53,920 --> 00:21:57,280 Speaker 10: Demographics are going the wrong way. So do you expect 446 00:21:57,480 --> 00:21:59,640 Speaker 10: unemployment to rise in twenty twenty six? 447 00:22:00,000 --> 00:22:01,600 Speaker 1: I could go up a tad more, but no, I 448 00:22:01,600 --> 00:22:03,680 Speaker 1: don't see why it would go up. You know, people 449 00:22:03,720 --> 00:22:05,960 Speaker 1: are still spending, and obviously we know that's a major 450 00:22:06,040 --> 00:22:08,879 Speaker 1: driver three quarters of the economy, and certainly some of 451 00:22:08,880 --> 00:22:11,639 Speaker 1: the expectations for holiday spending is four to five percent, 452 00:22:12,200 --> 00:22:15,080 Speaker 1: and some of the recent data consumers are spending, and 453 00:22:15,119 --> 00:22:17,200 Speaker 1: I think big part of that is still there's forty 454 00:22:17,200 --> 00:22:20,280 Speaker 1: to fifty trillion in wealth. At fifty trillion of wealth 455 00:22:20,320 --> 00:22:23,359 Speaker 1: that's been created since twenty nineteen. That's out there, and 456 00:22:23,400 --> 00:22:26,640 Speaker 1: people are still employed. Wages you know, are not going 457 00:22:26,720 --> 00:22:28,920 Speaker 1: up as fast, but they're still there. And that four 458 00:22:28,920 --> 00:22:31,240 Speaker 1: point three percent, which was we know was a percentage 459 00:22:31,280 --> 00:22:35,399 Speaker 1: point higher for the third quarter GDP is really interesting 460 00:22:35,600 --> 00:22:38,040 Speaker 1: because that means the one point nine percent that the 461 00:22:38,080 --> 00:22:40,480 Speaker 1: FED is estimating for next year could be low, and 462 00:22:40,720 --> 00:22:43,680 Speaker 1: that obviously is a question then where do you invest? 463 00:22:43,960 --> 00:22:47,040 Speaker 1: And that could be more cyclical rotation, you know, in 464 00:22:47,160 --> 00:22:50,960 Speaker 1: financial should continue to be strong. Industrial, certain industrials really 465 00:22:51,000 --> 00:22:54,760 Speaker 1: tied to data center build out and on reshoring, all 466 00:22:54,760 --> 00:22:57,200 Speaker 1: that sort of thing. So that GDP number is very 467 00:22:57,240 --> 00:22:59,639 Speaker 1: interesting and I think that strength could continue well in 468 00:22:59,720 --> 00:23:02,119 Speaker 1: early continue to look strong as well. 469 00:23:02,160 --> 00:23:05,160 Speaker 10: I mean, forecasts are for double digit earnings gains again 470 00:23:05,240 --> 00:23:06,399 Speaker 10: in twenty twenty six. 471 00:23:06,920 --> 00:23:08,960 Speaker 4: Do we finally get the broadening out? 472 00:23:09,440 --> 00:23:12,360 Speaker 10: Is it, you know, a substantial broadening out of the 473 00:23:12,400 --> 00:23:14,600 Speaker 10: rest of the S and P rather than just these 474 00:23:15,040 --> 00:23:16,639 Speaker 10: mega cap text docs. 475 00:23:16,720 --> 00:23:18,680 Speaker 1: And I think that is that's the question at the moment. 476 00:23:18,720 --> 00:23:20,200 Speaker 1: I think part of what we're seeing why it's been 477 00:23:20,280 --> 00:23:21,919 Speaker 1: soft this last few days. I mean, we had the 478 00:23:21,960 --> 00:23:24,280 Speaker 1: market making new high. So the classic Santa rally, which 479 00:23:24,320 --> 00:23:26,560 Speaker 1: is the last five days, you know, is doesn't seem 480 00:23:26,560 --> 00:23:28,439 Speaker 1: to be happy. But I think that's because you know, 481 00:23:28,480 --> 00:23:30,639 Speaker 1: there's a lot of tax laws selling people trying to 482 00:23:30,680 --> 00:23:33,639 Speaker 1: figure out where to rotate into. Because I think the 483 00:23:33,680 --> 00:23:36,040 Speaker 1: strength will be higher, and the estimates for next year 484 00:23:36,119 --> 00:23:39,760 Speaker 1: twelve to fifteen percent in earnings doing bottoms up, you know, measuring, 485 00:23:40,160 --> 00:23:42,040 Speaker 1: and so that goes very well. We've been seeing this 486 00:23:42,160 --> 00:23:44,919 Speaker 1: quarterly increase. So what I think it does mean is 487 00:23:44,960 --> 00:23:47,359 Speaker 1: this broadening out. I think you continue to have the 488 00:23:47,359 --> 00:23:50,760 Speaker 1: so called mag seven be strong, and you've seen only 489 00:23:50,800 --> 00:23:53,280 Speaker 1: two have outperformed this year, but you'll continue to see 490 00:23:53,320 --> 00:23:55,639 Speaker 1: profit taking and then moments where they continue and they 491 00:23:55,680 --> 00:23:58,480 Speaker 1: will move higher. These are you know, compounders, you know, 492 00:23:58,520 --> 00:24:00,720 Speaker 1: I mean, you look at Nvidia, for instance, twenty six 493 00:24:00,760 --> 00:24:03,199 Speaker 1: times next year's earnings, and those earnings will continue to 494 00:24:03,240 --> 00:24:05,320 Speaker 1: come up. So I think you stay in a MAG 495 00:24:05,400 --> 00:24:08,040 Speaker 1: seven that's going to be coore and obviously given the 496 00:24:08,440 --> 00:24:10,879 Speaker 1: percentage of there, you know it's thirty percent of the 497 00:24:10,880 --> 00:24:13,680 Speaker 1: market cap of the SMP forty plus percent of profits, 498 00:24:13,760 --> 00:24:17,080 Speaker 1: you stay there, but you should see financials industrials. I 499 00:24:17,080 --> 00:24:20,119 Speaker 1: don't think small cap perform continues to perform, you know. 500 00:24:20,160 --> 00:24:21,840 Speaker 1: I think that was a trade and part of that's 501 00:24:21,840 --> 00:24:24,480 Speaker 1: because interest rates. You know, right now, I see maybe 502 00:24:24,480 --> 00:24:27,720 Speaker 1: one were cut the Feds signaling too, but I don't 503 00:24:27,720 --> 00:24:29,240 Speaker 1: see it. It's going to be very dependent. 504 00:24:29,440 --> 00:24:31,959 Speaker 3: So we were speaking earlier with Michael Purvis about some 505 00:24:32,040 --> 00:24:34,120 Speaker 3: of the transactions that we've seen to end the year, 506 00:24:34,200 --> 00:24:37,280 Speaker 3: whether it's in video going after Grok, whether it's in 507 00:24:37,359 --> 00:24:41,480 Speaker 3: video's transaction with an Israeli AI company this morning, whether 508 00:24:41,520 --> 00:24:43,760 Speaker 3: it's something that we saw with Meta having to do 509 00:24:43,840 --> 00:24:46,440 Speaker 3: with a Singapore based AI company. And he was saying, 510 00:24:46,480 --> 00:24:49,960 Speaker 3: this kind of resembles nineteen ninety nine, two thousand, where 511 00:24:49,960 --> 00:24:52,320 Speaker 3: they're just having this sort of fomo and the C 512 00:24:52,440 --> 00:24:54,800 Speaker 3: suite try to get as much as they possibly can. 513 00:24:55,200 --> 00:24:56,880 Speaker 4: Sounds like you see it a little differently. 514 00:24:56,920 --> 00:24:57,399 Speaker 1: Right I do. 515 00:24:57,600 --> 00:24:57,840 Speaker 5: I do. 516 00:24:57,960 --> 00:25:01,159 Speaker 1: I mean, there's there is always the potential for overbuilding. 517 00:25:01,200 --> 00:25:03,879 Speaker 1: Everybody sees the same opportunity. We know, this happens in 518 00:25:03,920 --> 00:25:07,480 Speaker 1: a capitalist society. You know that always happens. But I 519 00:25:07,520 --> 00:25:12,479 Speaker 1: think it's we're far away from the moment. Nineteen is not. 520 00:25:12,680 --> 00:25:15,040 Speaker 1: I think a good analogy because so many of those 521 00:25:15,040 --> 00:25:17,560 Speaker 1: companies did not have earnings. You know, it's just like 522 00:25:18,040 --> 00:25:20,480 Speaker 1: you know, invest in it was wild, you know, it 523 00:25:20,560 --> 00:25:22,840 Speaker 1: was a free for all, and so here it's very different. 524 00:25:22,880 --> 00:25:24,760 Speaker 1: I mean, the companies, the Hyperscales, et cetera. They have 525 00:25:24,880 --> 00:25:27,520 Speaker 1: huge cash flow, and it's Onny Oracle that is really 526 00:25:27,560 --> 00:25:30,200 Speaker 1: dipping deep into the death side of things. The others 527 00:25:30,200 --> 00:25:32,560 Speaker 1: are excuse me, are using their free cash flow. So 528 00:25:32,600 --> 00:25:35,160 Speaker 1: I think it's very different. So at some point, yes, 529 00:25:35,200 --> 00:25:36,920 Speaker 1: it will end, but I don't think we have to 530 00:25:36,920 --> 00:25:37,359 Speaker 1: worry about that. 531 00:25:37,400 --> 00:25:40,560 Speaker 3: This year you were talking about diversification and how it's 532 00:25:40,560 --> 00:25:42,840 Speaker 3: not going to come from small caps, how it's probably 533 00:25:43,040 --> 00:25:44,480 Speaker 3: not going to come from the other four hundred and 534 00:25:44,520 --> 00:25:47,800 Speaker 3: ninety three necessarily. Is it going to come from Europe? 535 00:25:48,040 --> 00:25:50,000 Speaker 3: Is it going to come from overseas? That's what we've 536 00:25:50,000 --> 00:25:50,760 Speaker 3: seen this here. 537 00:25:50,720 --> 00:25:53,400 Speaker 1: Right, I mean, you've seen outperformance in the emerging markets, 538 00:25:53,640 --> 00:25:56,560 Speaker 1: certain emerging markets. Certainly things seem to be stabilizing with 539 00:25:56,640 --> 00:25:58,880 Speaker 1: China in terms of the rhetoric between US and them, 540 00:25:59,320 --> 00:26:01,199 Speaker 1: which is a good thing. You've also had with the 541 00:26:01,240 --> 00:26:03,719 Speaker 1: dollar down ten percent, the question is does it continue 542 00:26:03,720 --> 00:26:05,200 Speaker 1: to go down or is it stable? Here, and of 543 00:26:05,240 --> 00:26:07,320 Speaker 1: course that is tied interest rates and how much the 544 00:26:07,600 --> 00:26:09,919 Speaker 1: FED will cut or not cut. So I think you 545 00:26:09,960 --> 00:26:12,760 Speaker 1: probably still have an EEM. You know, the emerging markets 546 00:26:13,280 --> 00:26:15,600 Speaker 1: earnings are better, this more stable, so I think you've 547 00:26:15,600 --> 00:26:18,679 Speaker 1: got opportunities there. And certainly we know the European defense 548 00:26:18,720 --> 00:26:21,679 Speaker 1: filed out and fiscal spending is not over in six months, 549 00:26:21,720 --> 00:26:24,480 Speaker 1: so you probably do have more upside. So diversification, yeah, 550 00:26:24,480 --> 00:26:25,400 Speaker 1: you can look abroad. 551 00:26:25,560 --> 00:26:28,520 Speaker 10: I have a sports question maybe Lisa can weigh into 552 00:26:28,560 --> 00:26:31,760 Speaker 10: because she's got kids in this age range. I was 553 00:26:31,760 --> 00:26:34,560 Speaker 10: having discussion with people last night who have teenagers that 554 00:26:34,640 --> 00:26:38,639 Speaker 10: aren't playing football, and I'll get to why in a second. 555 00:26:39,280 --> 00:26:43,159 Speaker 10: You know, and where I live in Edgemont and Scarsdale, 556 00:26:43,560 --> 00:26:45,600 Speaker 10: there are years where we can't feeld a team anymore 557 00:26:45,680 --> 00:26:48,480 Speaker 10: just because parents don't want to risk the brain injuries. 558 00:26:48,520 --> 00:26:51,399 Speaker 10: And I noticed looking at your CV that you're on 559 00:26:51,480 --> 00:26:56,720 Speaker 10: Lacrosse Association and the Field Hockey Association. I wonder if 560 00:26:56,800 --> 00:27:00,199 Speaker 10: those sports are any safer? Are those sports? I mean, 561 00:27:00,240 --> 00:27:04,080 Speaker 10: I know they're picking up massive amounts of popularity. Do 562 00:27:04,080 --> 00:27:06,600 Speaker 10: you think we're going to see the same trend in 563 00:27:06,640 --> 00:27:08,840 Speaker 10: football happen there or is it different? 564 00:27:09,160 --> 00:27:12,520 Speaker 1: These these are always interesting questions. You know, lacrosse there's 565 00:27:12,560 --> 00:27:14,399 Speaker 1: men's and women who are very different. Women aren't now 566 00:27:14,440 --> 00:27:16,679 Speaker 1: but hit each other. Men can, but they've got a 567 00:27:16,720 --> 00:27:17,119 Speaker 1: lot too. 568 00:27:17,240 --> 00:27:19,359 Speaker 2: But I imagine they happy. 569 00:27:19,640 --> 00:27:21,080 Speaker 1: I have a plate in this hand as a result 570 00:27:21,119 --> 00:27:23,720 Speaker 1: of that, but you know it does. And also field 571 00:27:23,720 --> 00:27:26,280 Speaker 1: hockey you've got mouthguards, you've got this and that, and 572 00:27:26,320 --> 00:27:29,840 Speaker 1: there is real real awardeness and consciousness, certainly in high school, 573 00:27:30,000 --> 00:27:32,320 Speaker 1: you know area. But so there's a weirdness. But I 574 00:27:32,359 --> 00:27:35,120 Speaker 1: don't think it's rises to level football, which has such 575 00:27:35,200 --> 00:27:37,240 Speaker 1: well documented serious injuries. 576 00:27:37,320 --> 00:27:39,760 Speaker 10: So maybe lacrosse and field hockey take market share. 577 00:27:39,960 --> 00:27:42,240 Speaker 1: I mean it would be nice. No, but I think 578 00:27:42,240 --> 00:27:43,200 Speaker 1: it's two different things. 579 00:27:43,800 --> 00:27:48,280 Speaker 3: Field hockeydia capital indeed, and I we'll just say thank 580 00:27:48,320 --> 00:27:48,840 Speaker 3: you so much. 581 00:27:50,160 --> 00:27:53,720 Speaker 2: This is the Bloomberg Sevendans podcast, bringing you the best 582 00:27:53,720 --> 00:27:57,040 Speaker 2: in markets, economics, anchio politics. You can watch the show 583 00:27:57,080 --> 00:28:00,080 Speaker 2: live on Bloomberg TV weekday mornings from six am to 584 00:28:00,200 --> 00:28:03,920 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify 585 00:28:04,080 --> 00:28:06,320 Speaker 2: or anywhere else you listen, and as always on the 586 00:28:06,320 --> 00:28:08,760 Speaker 2: Bloomberg Terminal and the Bloomberg Business app.