00:00:02 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg Surveillance Podcast. Catch us live weekdays at seven am Eastern on Apple CarPlay or Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube. 00:00:27 Speaker 2: Perfect time now to recalibrate. He wrote four hundred pages June twenty ninth. He's ripped it up. Change it. Investco asked for a rewrite. How do you rewrite your mid year Brian Leavitt, I would change it all that significantly. After the inflation reports, Yeah, I mean our view. 00:00:41 Speaker 3: Was that inflation expectations were already falling. Our view was that the Federal Reserve was not going to raise interest rates, and our view was that would be supportive of this broadening in markets that we've seen, and I don't see any need to change that. In fact, the inflation reports were favorable to that view. We saw this week and a little bit of the chatter out of the FOMC was favorable to that view, at least sounding a little bit less hawkish. 00:01:07 Speaker 2: This week is a disinflation vector in place. 00:01:10 Speaker 3: To me, it is I believe I don't know how long it's gonna take but yeah, I believe it is. I mean, look, you're gonna have some disruption with regards to the Middle East, but I'm not setting monetary policy based on where the price of oil is going, based on where. 00:01:23 Speaker 2: Supply shocks are. 00:01:25 Speaker 3: Goods prices are relatively contained, shelters coming down, wages aren't robust, So to me, that's not an environment you want to raise interest rates. 00:01:34 Speaker 4: Brian, we did hear from a FED chairman warsh over the past couple of days in front of the House and the Senate. 00:01:39 Speaker 5: Here any takeaways for you. 00:01:40 Speaker 3: Here, Yeah, my view is that the Federal reserve will be on hold this year. I think actually the next move would be a cut. I do think that the economy slows a bit here with higher commodity costs back again, you're seeing slow down in the emerging markets in China, and that's not the environment you want. 00:02:01 Speaker 2: To raise interest rates into. 00:02:03 Speaker 4: We're getting rid into the teeth of the earnings we had the big banks earlier this week. First quarter is a tough act to follow. 00:02:11 Speaker 5: What's your expectations for the second quarter and kind of the back half guidance. 00:02:14 Speaker 6: It's a tough act to follow. 00:02:15 Speaker 3: But so far, so good, and it looks like we're on pace for the fifteenth consecutive quarter of double digit earnings growth, which is just remarkable. You don't get that typically in the middle part of a cycle. You usually get that coming out of a recession. So what we're seeing has been nothing short of remarkable. And it's not just the tech sector. Of course, tech and energy will lead this time, but it is broad based. Like you said, it's across financials, it's going to be across most sectors. 00:02:42 Speaker 2: Positive for markets, How does a retirement plan do higher highs? How do you do momentum in a long term conservative plan? 00:02:53 Speaker 3: The reality is if you look at markets. You know, everybody always says by low, sell high. The reality of markets is by high, sell higher. If you look at broad markets, you're hitting new all time highs pretty much once once every fifteen sixteen days, going back to nineteen fifty seven. So that's the way markets historically move, typically seventy five to eighty five percent of the time. You should be positive on markets unless the economy is meaningfully deteriorating, or central banks. 00:03:22 Speaker 2: Or raising rates significantly. 00:03:24 Speaker 3: We've actually tom had a little bit of a momentum sell off since June twenty second momentum high beta down sixteen seventeen percent. 00:03:33 Speaker 2: That's pretty big. See how he does that. If you go to Michigan, you just throw around elphas in Bata and my daughter's joining in August. 00:03:42 Speaker 5: Oh is that right? 00:03:43 Speaker 4: Yeah? 00:03:43 Speaker 5: That's awesome? 00:03:44 Speaker 2: Next generation for next generation? 00:03:46 Speaker 5: All right, Brian? So what are we doing here? 00:03:49 Speaker 2: US? 00:03:49 Speaker 7: WRO? 00:03:50 Speaker 2: You miss a punchl is she getting name image like this one? 00:03:55 Speaker 5: For the economics degree? 00:03:56 Speaker 4: What are we doing US versus non US? 00:03:58 Speaker 5: Brian? 00:04:00 Speaker 3: I would be still favoring the US here because of some weakness, because of some slowdown here. You're still a little bit of strong dollar on the macro side. So that's a short term view. Ultimately, I think the dollar is going to moderate. Investors are still overweight the US. What really stopped that dollar weakness story was the war in Iran. If you get the FED back on its easing path, I think the dollar can moderate. What that starts to do is unlock more of the value outside the US. 00:04:35 Speaker 2: Right now, that's a little bit challenged in here, but ultimately I think we're back on that path. Brian. Thank you so much. Brian. Let it investco with us today. Your daughter's in Michigan, thank you. She in coming freshmen. 00:04:47 Speaker 6: And what's the major we're going to do broadcast journalism. 00:04:50 Speaker 2: You're looking for someone always four years I'll ask you, he said. Okay, everybody has have a dream. She got to do a double minor. Come on, you gotta get her, and like you'll get her in marketing or something. Yeah, you know, yeah, I remember when the middle child took microeconomics. Dad, this is really hard. It is really hard. I like when people ask me to tutor, they are I haven't nailed it. Stay with us. More from Bloomberg Surveillance coming up after this. 00:05:27 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live weekday afternoons from seven to ten am Eastern Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us Live on YouTube. 00:05:39 Speaker 2: It's a lot of good conversations today, but I saw that this may be the most important one. She has a psychology degree from the University of Damien sass Hour yep, I mean, that's just it's incredible. 00:05:49 Speaker 5: I was on campus for the first time about a year ago. 00:05:53 Speaker 2: It's unbelievable. Book so no one does not have a BMW yet. That's on. Look at Ryan Mitchell and Jones's now call family office down in West Palm something or other. If I read Justin Beer's Fidelity House of Fidelity, it's fabulous. No one sees the next bear market coming. How all in are your clients on the Great American bull market? 00:06:16 Speaker 8: Good morning. It's been obviously a great last few years, and there are a lot of reasons why it can continue. But there are also parts of the market that, do you look a little bit frothy, have been extended. So our clients are having some of those concerns. We are having those conversations around what can we be doing, how can we protect But overall we're still pretty optimistic. 00:06:39 Speaker 2: Do you light nump on those or do you outright hedge, because what I see in Bear's book is nobody's hedging. It's all in the bull market. It's great, let's go, let's go. Are you hedging into a slowdown? 00:06:51 Speaker 8: We're not necessarily hedging. We are view is we don't see a slowdown coming, So we do see the broadening out to potentially continue. Expect that other parts of the market could do better going forward. Rather than the tech that we've seen really really leading the market recently. So we're moving into areas like small caps, emerging markets, shifting into value. I mean, looking across sectors, there's more of a than a thirty percent differential between the best performing sector and the SMP and the worst right now. 00:07:20 Speaker 4: So there are a lot of parts of the market that. 00:07:21 Speaker 8: Are high quality companies that have really been left behind, and we do think there's opportunity for some of that rotation to continue. 00:07:28 Speaker 4: What's your I don't know if you have a model asset allocation or something you kind of start with when you sit down with a client. 00:07:33 Speaker 5: How do you think that asset allocation these days? 00:07:35 Speaker 8: Yeah, a lot of it starts with risk tolerance and really having conversations. Every client has a different circumstance, so everything's customized. 00:07:42 Speaker 6: But we do like to. 00:07:43 Speaker 8: Have a broad, diversified portfolio, and so if you come in and have maybe a moderate aggressive profile, we'll have a good portion in public equities that we have a tax efficient overlay too, as well as pairing that with fixed income with a lot in private markets and other alternatives, and really just kind of building that out so that we have a diverse fied portfolio. 00:08:06 Speaker 5: I'm moly surprised that alternatives. 00:08:09 Speaker 4: I would think the allocation I kind of grew up in the allocation of kind of five percent, maybe ten, But I hear a lot of registered nuts advisors take that much higher. 00:08:18 Speaker 5: How do you guys think about. 00:08:18 Speaker 4: Alternatives in terms of a portfolio? 00:08:21 Speaker 8: Yeah, so our client base is primarily ultra high networth, so we work with ultra high net worth, multi generational type time horizons, so you're able to really dial that up a little bit and benefit from the return premiums that you can get in those illoquoid markets. So we do, in a lot of cases have maybe twenty to thirty percent in alternatives for the right clients. 00:08:42 Speaker 5: Yep, that's all right. 00:08:43 Speaker 2: Are people over diversified? I mean I just see everybody and all the wealth managers in that and they're doing do this, do this, do this. Shouldn't we just be a little more concentrated and have confidence in our bets. 00:08:55 Speaker 8: I mean, hindsight's twenty twenty. If you've been concentrated the last few years, obviously that would have been in a better place to be. It's the problem of being concentrated is you have to make the right bets. So the way we like to play it on the equity side is pair of tax efficient, low cost passive allocation with some concentrated active satellite managers that are investing in a portfolio of maybe twenty to thirty companies that they. 00:09:19 Speaker 2: Do have work. God, is that an active approach beating passive? 00:09:23 Speaker 8: Not recently. Quality has certainly been underperforming, so we're seeing a little bit of the rotation and broadening out could help that, and it's been difficult. 00:09:33 Speaker 2: In the Justin Baier book, guess who shows up like page forty two? Is that Jeck Bogel's right? 00:09:40 Speaker 7: Oh? 00:09:40 Speaker 2: Hello, yeah, exactly there it is passive. 00:09:45 Speaker 6: What are you doing in the. 00:09:46 Speaker 5: Fixingcome market here? 00:09:47 Speaker 4: Are you taking credit risk to your are you suggesting your clients take credit risk here? Or do you just sit and clip those treasury coupons, which is they've been as good as they've been in a long time. 00:09:56 Speaker 2: Yeah. 00:09:56 Speaker 8: Most of our fixed income allocations on the traditional side really our high quality investment grade. A lot of it's in unibonds. Given that we work with taxable investors, we do have some exposure in the high yield within that space, and then we do pairt some with private credit opportunities where we think we can get an incremental benefit and get some diverse fied exposure there. 00:10:17 Speaker 4: So what's the what's the number one top of your clients call you about? You don't call them, they call you right now. 00:10:25 Speaker 8: A lot of it really is talking about the momentum trade and like should we be concerned about these these chip stocks and the tech exposure, and should we be rebalancing our portfolios, which we have been doing, but there's still some concern about how much more room there is to run in that space. 00:10:40 Speaker 2: How often do you rebalance? Do you do it formulaic or is it at hoc? 00:10:44 Speaker 8: No, it's it's really I mean we do do it periodically, I'd say probably once a quarter, but it's not formulaic. So's we take into account a lot of the tax consequences and the benefits from doing it and each individual client. So a lot of it really is done with the tax. 00:10:59 Speaker 2: The media is a Floorida booms off. Come on, you're in the heart of it. Okay, here, I mean she were when she's not here, she's wearing Lily Poulitzer. Yeah, but is the Florida boom off? 00:11:09 Speaker 6: It's tapering off. I'd say it's still crowded down there. 00:11:12 Speaker 8: We still have a lot of businesses there, but we're seeing it's definitely been slowing down. 00:11:17 Speaker 2: Okay, this has been great. Don't be a stranger, Rayham, Mitrid and thank you so much. Kell on Family and Office in our studios. Stay with us. More from Bloomberg Surveillance coming up after this. 00:11:34 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live weekday afternoons from seven to ten am Eastern Listen on Applecarplay and Android Atto with the Bloomberg Business app, or watch us live on YouTube. 00:11:47 Speaker 2: This is a great joy to have Dan Eaves with us with all he's done in this huge bull market and technology, and Brian Belski with an incredibly terse, superior note. I'm courage to be in the market. To have them in you're together is wonderful. Dan. I gotta start with you. George Steer going after you last night in the Financial Times. It was a love note about your New Yorkville Ives investment company. Two questions to get that out of the way. Are you going to do only research at this company? Are you going to be involved in merchant banking. Oh no, just in research. 00:12:20 Speaker 9: I mean, like my role is going to be as head of tech research doing what I've done. 00:12:26 Speaker 2: You know what you've done my whole career. 00:12:28 Speaker 9: And again, as we always say, look, haters hate, you know, you're gonna have the hall hate, You're gonna have the Hallmark cards. They but the reality that for me, my role is essentially unchanged in terms of what we'll do as research. 00:12:40 Speaker 2: I gotta get this final question because Sweeney's dying to talk to Belski about the market. Dan, what's so important here is George correctly looks if the manufactured moonshot of memes, stocks and specs they go up and then they come down, how do our listeners avoid that madness? 00:13:00 Speaker 9: To me, it's like, and it's really what we're going to build as a modern merchant bank. It's looking at companies that are growth and it's separating the ones that ultimately say their AI from ones that. 00:13:12 Speaker 2: Really have the products. 00:13:14 Speaker 9: And I think in terms of Memestocks and some of the stuff that we've seen in the market, look at everything we've talked about for years. It's trying to understand where the trends are, what the themes are, and to make sure our clients are investors, are the ones that they're in the right the winners in this AI regu. 00:13:29 Speaker 2: One final news question I've got to ask, have you and your pieces together have you done any discussions with any of the Trump family or their business interests. Are they separate from this or are they intimately involved? No. 00:13:42 Speaker 9: First of all, if you look at Yorkville, I think it's six percent of deals that they've done since inception or related in some ways to Trump. 00:13:49 Speaker 2: There. 00:13:49 Speaker 9: On the other hand, look at hydrogen themes like plug power four hundred million in terms of what they're on the other side of it. Look, we're capitalistic. You know that that's separate from from ultimately Yorkville lives, right, But but it speaks to our view like we're apolitical. We're going to go after deals across the board. And to me, it's one where I'm doing this with partners that I've known for decades to create what I believe is going to be a modern merchant bank that's going to change Wall Street ran on. 00:14:19 Speaker 4: These markets here. What are we doing here? Are we brought this this thing out? 00:14:24 Speaker 2: Here? 00:14:24 Speaker 4: Are we focusing on a handful of chip names? What are we doing here in the back half of the year. 00:14:30 Speaker 7: Uh, we're investing. And I think that's the difference between what we've seen. 00:14:34 Speaker 2: Really. 00:14:34 Speaker 7: You know, if you think about the month of June, let's go chase up, let's chase up memory, and then then July opens up, let's sell memory, and that's not investing to us. I think that you don't have to own everything. That's the key thing in tech especially, you got to be selective. And when we've had the very good fortune of all performing in our S and P five hundred focused portfolio, is that because we don't own everything number one, number two, we are broadening out. That's the answer your question. We are a small cap stocks are for real. 00:15:02 Speaker 2: Uh. 00:15:02 Speaker 6: If you take a look at inherent fundamentals with respect to. 00:15:05 Speaker 7: Cash flow, in earnings, in earnings discernibility, in terms of how consistent they are, Paul, it's amazing. They look amazing still and there's still a long runway to go. 00:15:14 Speaker 2: Well, let me interrupt. Oil lifts fractionally up to eighty five oh four. The headline Iran and so who these of Yemen to shut Red Sea? Distant west from the Persian Gulf to shut Red Sea? If us hits power network that from Royers this morning, back and forth, back and forth. 00:15:33 Speaker 4: All right, so again Brian here we're getting into the teeth of earnings here. Yeah, that's a tough The first quarter is a tough bar to exceed. I mean, earnings in the first quarter at guess me five D were so strong anything about this. 00:15:46 Speaker 6: It is a tough bar. 00:15:47 Speaker 7: And there was many people talking about that potentially being in earnings peak and then the next move in earnings would be the second drivative, less positive. I think that still could be the case in terms of having this trend of less positive but positive, still positive, double digit earnings grow, still double digit earnings growth. And what we've shown in our history in terms of studying markets, we have a double digit we have a double digit performance in the market coming following this type of move. 00:16:10 Speaker 9: In Earningsski's it comes down to it's about the second, third, fourth riders of AI now playing out in the market. 00:16:17 Speaker 2: Tech is ultimately going to lead in two kids, you know, the two of them, the way they go after calculus. Butki is a better dresser. 00:16:25 Speaker 4: Okay, it just. 00:16:27 Speaker 2: Help me here with my buying SpaceX. I loaded the boat at two oh eight. Okay, help me here with a round trip on IPO, SpaceX damnives. 00:16:38 Speaker 9: You look when Amazon when public, look when Facebook when public. It's my view that if you take the narrow view over months or six months or nine, these are names that are transformational names that are gonna be a huge part of the fourth nutional revolution. When you look at space X, I get the volatility and what obviously what we've seen in terms of the headwinds. The reality is longer term investors that own this, they own it for what's going to be AI data, They own it for what's really going to be in terms of starlink and to really what must broader vision we've said, I mean there's an over an eight percent chance that they ultimately acquired Tessa. 00:17:18 Speaker 4: So Brian, what are we doing here just in terms of, you know, thinking about opportunities out of AI? Can we even think about opportunities out of AI? Do I go out and buy healthcare banks? I mean the banks put up some monster numbers or else in this market? 00:17:32 Speaker 2: Do we look? 00:17:32 Speaker 7: You know, you think about a day like today or the United Healthcare right, everybody thought United Healthcare was was done and we were very patient in fact, I think it was on your broadcast talking about the new CEO coming in and bringing more discipline, and that's exactly what happened. So United Healthcare would be one of them that we stuck with and we're a long term investor and kind of like what Dan talks about, you got to believe in the stories and proceed with your fundamentals. Healthcare is going to think be pockets of their financials look amazing. You don't need a direct for AI for financials. But I think you're going to see a broadening out of financials into the small banks and insurance companies and the asset managers. This financial move is still very very early. We're talking the next several years financially. 00:18:12 Speaker 2: Let's I wanted to go. Let me go to you, Brian Belski first on this, and we've all experienced this. It's a party, it's great, and then it ends. I don't see the framework where it ends for Wall Street other than the Feds screwing up. I mean, other than a high interest rate regime or as you mentioned, calculus the first derivative of the real yield. I mean, this just keeps on going right. 00:18:37 Speaker 9: Br in A's eleven PM at the party that goes to four am. 00:18:40 Speaker 7: That that goes to four am, and everyone's waiting for the last shot at three. But everyone's going to look teeing this up, Tommy to blame the Fed. 00:18:50 Speaker 6: It's easy to blame the Fed. Everyone's waiting for it. 00:18:53 Speaker 2: Wait the Fed. The Dow futures are popping fifty three. 00:18:57 Speaker 6: That's what I'm talking about. That's what I'm talking about. 00:19:00 Speaker 7: Guess what, this bullmarket, this big giant, secular bullmarket that we've been talking about since two thousand and nine, is not going to be is not going to be ended by AI bubble. 00:19:09 Speaker 6: It's not. It's going to be something else, And I don't know. 00:19:12 Speaker 2: What it is. 00:19:12 Speaker 6: Gonna be a new emerging market. 00:19:14 Speaker 7: It's going to be a commodity supercycle, something that we're not expecting. 00:19:18 Speaker 2: What you just heard their folks bronze it. I forget about Ives what Belski just said, you never know what it's going to be. Boy, is that just the truth? Paul Sweeting with Dan Ives. 00:19:30 Speaker 5: Dan. 00:19:30 Speaker 4: One of the names in your space that just fascinates me is a kind of an old born one, which is Microsoft. This seems sold off hard with a lot of the other software stocks. I've noticed it's kind of climbing its way back here, up thirteen to fourteen percent off of that June low here. 00:19:44 Speaker 5: What's the story of the Microsoft. 00:19:45 Speaker 9: We and we've talked about it, you know, for really for months. This is one major penalty box stock. I think investor have viewed it, you know, the relationship with the open AI competition from Google and everyone else in terms of the hyper scours. The reality is is the AI revolution doesn't happen without Microsoft with Nedella, because if you look at it, it's their core backyard as enterprises move to AI deployments. And I just think a big focus in this earning season is going to be the hyperscaler growth that we see from Amazon, Google and Microsoft because right now, look the New York City cab drivers, Parish and the hyperscalers. 00:20:21 Speaker 2: But that it comes down to earnings, and. 00:20:23 Speaker 6: They're Jason Micron still right exactly. 00:20:26 Speaker 9: Look, and I think to that point, memory stocks are the golden childs. But it spread to the second, third, fourth derivative and it goes to what me and you've talked. 00:20:34 Speaker 2: I got to wrap up with two key questions, one to mister Ice. One to mister Belski, when are you going to publish at your new affair everybody? Are you going to be like normal Cell Side publications, normal cell Side? When do we see that over the. 00:20:47 Speaker 9: Time months, you know, as as I ultimately launch and all the names? 00:20:50 Speaker 7: Are you going to have? 00:20:51 Speaker 2: People? Have hired people? 00:20:52 Speaker 9: Yeah, we've already We've already hired a handful of people. Obviously, the inbound interest is, you know, is insane in terms of great because what we're trying to you know, I try to get Boalski one come, you know whatever, but to read. But the reality is we want to build a modern merge by I found great partners to do with and it's something we're in twenty five plus years on Wall Street to create and I think it's gonna transform in terms of the research bang into everything else. 00:21:18 Speaker 2: Okay, So I got I got the kid over there. Here's eight year old kid, and I go, you gotta go to the Yankees. So we're sitting by the dugout of the Minnesota Twins. 00:21:27 Speaker 10: Oh yeah, and they was they won this series and they're rocking, and like now we're going to the aulstar Break and theyre where the Red Sox are they're like one or two games bull of five hundred. 00:21:37 Speaker 2: You gotta play to win. You're not gonna trade it away totally. 00:21:41 Speaker 6: Here's the speculation. I'll be at the target field next Friday night. 00:21:43 Speaker 2: I have to watch the game. 00:21:44 Speaker 11: But are they gonna buy because they need they need to have room in the bullpen. They traded everybody away last year in the bullpen, and they've got this beautiful core of of great young players akin to the early two thousands, I would say, and they've got a shot. 00:22:01 Speaker 6: They've got a shot, but they need something. 00:22:05 Speaker 9: Belski's Belski's Minnesota to what you wear to the games. I think we can do an instagram. 00:22:11 Speaker 6: On yeah, home opener. 00:22:14 Speaker 9: Unbelievable. He's a fashion icon. 00:22:17 Speaker 2: I have to say, folks, for those of you worldwide, there's stars in their stars. Josh Bell comes out of the dugout and he's just spectacular. Can he carry them when he swings? 00:22:30 Speaker 6: I think it's probably. I think it's going to be Buckston Bucks. 00:22:33 Speaker 7: And when he comes back, he is reaffirmed that he never wants to be traded. He said, I want to be Joe Mauer. I want to be Derek Jeter. I want to stay with one ball club. He's the true leader of that club. And now with Correagan obviously the trade him last year. He is the true leader. So you get bucks and back and you get this Luke Keyshaw guy. Watch him because they moved him out of the infield put him in the outfield. 00:22:54 Speaker 6: He is going to be a player. 00:22:55 Speaker 7: He can hit the ball. 00:22:55 Speaker 2: It's like MLB work listening to you. Yes, it's fascinating. It's Swiss harmon. 00:23:00 Speaker 4: All right, Sis, we're talking sports. It's it's July. 00:23:03 Speaker 5: Summer. 00:23:03 Speaker 4: Camps are going to be opening up for football. Talk to Penn State gives thirty seconds. 00:23:06 Speaker 9: Look, I was there last week, you know. I mean, I just love what Campbell and the staff have done. And I think we are going to shock college football world because these are guys that are phenomenal evaluators of talent. I think we're going to actually contend for Big Ten championship this year. They will like and then when Belski's at a game for the white out usc be we'll be stelling I remember, not official. 00:23:31 Speaker 6: But I believe that will maybe kind of sort of We're. 00:23:34 Speaker 2: Gonna go to Scott Kirby here of United era. It's great, he's a pilot, you know, a bastion on the other Jay, the airlines is something that everybody in America is repped into. I remember the day they took Northwest out of Minneapolis. I can't remember the exact story, but you know the airlines are they investible? 00:23:52 Speaker 7: Brian Belski Man, it's really hard not to say it's different this time, but you think about the structural changes that the airlines have made. Number one, number two, like Delta for instance, Bottter Refiner over a decade ago. United has done an amazing job. Kirby's done an amazing job with that. Delta's number one, the United it's a close number two. They've done great. Now what's gonna happen with American will be interesting. 00:24:14 Speaker 2: I mentioned this yesterday and I thought of you are the big banks basically technology companies that happen to have Christmas Club accountsil I mean, they're winning on technology. 00:24:24 Speaker 9: Right And I think that's the thing that I think a lot of investors have really overlooked is in terms of what they're doing. When you talk about AI revolution, about this fourth industrial everything, it's really financials that are leading and you're seeing across the board it's just to start. 00:24:40 Speaker 2: And for the first time in thirty years, the. 00:24:41 Speaker 9: US has headed China when it comes to tech. 00:24:45 Speaker 2: Gay, this has been wonderful. Data I thank you so much. Congratulations on your new if. Ryan Belski, thank you so much. To have the two of you together's great. Can we be sure, Eric, can you be sure that we have the Bloomberg of the official photo, the one that has a hassleblaed you know media this format, so the lens, you know, the only one with the lens won't break with ives. Maybe we get a photo opportunity, he says. It'll be like Ives pale, pasty, white, Belski, canned and rested. It'll be a great photo. 00:25:13 Speaker 9: We'll see the Naples head, the Nieples Belski ten. 00:25:16 Speaker 2: That's right, Enabled, Thank you so much. Thank you. Stay with us. More from Bloomberg Surveillance coming up after this. 00:25:32 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live weekday afternoons from seven to ten am Eastern Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube. 00:25:44 Speaker 2: Love having her in the studio. ETSI Chef joins chief credit Officer Moody's here right now. When you guys look at the social security angst or just simply the debt and deficit angst, how do you process that? Well? 00:25:59 Speaker 12: Two ways is one we look at it from the sertifiscal perspective and what it means for the US government, And what it means is that the US government is on the hook for payments to people that were promised and does not have all the funding that it needs to do that. So that's one way to look at it. The other way to look at it is from the perspective of people who are today eligible for Social Security and are getting the payments, but the ones who will be eligible a decade from now, and that's where the real angst is that if the funding isn't there, will the payments actually come. 00:26:33 Speaker 4: How do you and your colleagues and Moodies view this technology wave of new issuance because there's a lot of companies that historically have not accessed the debt markets, or if they did it, they did it just because they could. Now they need to, so it's a little bit different metric there. How do you guys view that, Yeah. 00:26:51 Speaker 12: This is and we're seeing this that On the one side, there is the demand from the hyperscalers and the issuers of this debt, but on the supply side, the market is willing to fund this. So I think the underlying story here is that both those who are issuing the debt and those who are buying it really believe in this technology. They believe that this kind of capex, which is billions moving to trillions, will generate the kind of productivity and revenue needed to repay that debt and justify that capex. We think that's a chance it will, but we don't know for sure that it will. So that's how we're looking at it, and we're monitoring very closely. 00:27:27 Speaker 4: Again, I kind of look at some of these big technology issuers, and they did have some debt out there, but it was just because why not, you know, they didn't need it. They had jillions of dollars of cash on their balance sheets. But now they're coming and they kind of need it. So if I'm sitting on the other side of the table, I'm like, Okay, the last deals I did for you, those are different. 00:27:45 Speaker 5: Now. 00:27:45 Speaker 4: I want some covenants, I want some protections and things. Is that happening or is it still just whatever you guys need, here's the monthy. 00:27:52 Speaker 12: Yeah, and I think it's happening in different ways. So, first of all, you're absolutely right that the hyperscala is very low history of CAPEX need to do it, but very strong history of cash flow. So they are sitting on a pile of cash. Over time, as they keep issuing more and more, that pile of cash obviously erodes in terms of what it's promised for. So what we're seeing is very complex instruments being structured to your point, to ensure that that, you know, the debt is structured in ways that allows for the technology and the revenues to catch up to repay that debt. 00:28:25 Speaker 2: Were you in a meeting and you know, I don't want the inside dirt. It's it's the root of me. But I think our audience is fascinated where they shake when Etsy Chef walks in the room and you have to figure out what to do with SpaceX corporate paper. How does that work? 00:28:44 Speaker 12: Well, you know, it works the same way as with any other institution. In this case, we look at the various businesses that the company has. There is a telecom business that is very profitable and then there's Capex that's going into another business, the rocket business, that is expected to generate profits in the future. So we look at fashion hand, we look at the kind of leverage that's being asked for, and we look at the capacity to repay that debt. 00:29:12 Speaker 2: Okay, can you respond to the price decline that we've seen across I mean, I've been monitored day by day. Let's just let me let me paraphrase it's ugly. How does Moodies or any other credit team respond to there? 00:29:25 Speaker 12: I'm so glad you asked that because one of the things that we do, absolutely in every rating committee is we don't look at things the way they are that day or the way they were five years ago or the last year. We run scenario analysis, and one of the scenarios we run is volatility in the markets, and the rating has to be able to withstand the fact that buyers are going to choose not to buy, sellers are going to choose to sell, and that's going to have price impact. So absolutely, that's something we can. 00:29:51 Speaker 2: Can we announce a credit downgrade for SpaceX here on Bloomberg So we cannot, We have not, We will not. I was taking a chance on ed a little bit more time with the Azzi chef of Moody's here very quickly the hyperscaler bonds moved. Do you pay attention to the insatiable demand for a bond or is that just like after the fact and Moodies doesn't care that it was eight times oversubscribed. 00:30:16 Speaker 5: Yeah, we don't. 00:30:16 Speaker 12: You know, we don't care in terms of that's not a fundamental metric that we look at. But we do aim to understand the market for any particular type of instrument. And one of the reasons why I talked about sort of the way these instruments are being structured is because some of them are not just being sold to the public markets, that being sold to the private markets as well. So this insatiable demand that you speak of is coming from two different sources, and one is a newer sources. 00:30:41 Speaker 2: Thank you so much, really really appreciate it. Don't be a stranger, Osi Chef, Chief Credit Officer for Moody's Ratings. 00:30:49 Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify and anywhere else you get your podcasts. Listen live each week day seven to ten am. Me Stern on Bloomberg dot com the iHeartRadio app tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal