WEBVTT - Nvidia, Ukraine, Retail, and AI (Podcast) 0:00:00.840 --> 0:00:04.000 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:05.280 my co host Matt Miller. 0:00:05.640 --> 0:00:09.600 Every business day, we bring you interviews from CEOs, market pros, 0:00:09.720 --> 0:00:13.600 and Bloomberg experts, along with essential market moving news. 0:00:14.160 --> 0:00:17.279 Find the Bloomberg Markets podcast called Apple Podcasts or wherever 0:00:17.400 --> 0:00:20.520 you listen to podcasts, and at Bloomberg dot com slash podcast. 0:00:21.440 --> 0:00:25.480 Darkening the Door, I gotta describe here what's going on here? 0:00:25.600 --> 0:00:28.440 Pretty this is a little bit I'm thrown unnerving here. 0:00:28.440 --> 0:00:31.720 All right, let's start with anaag Rana. He walks from 0:00:31.760 --> 0:00:34.479 the door freshly shaven. Now, the reason this is important 0:00:34.479 --> 0:00:37.120 because he's had a scraggly beard. I'm calling it for 0:00:37.200 --> 0:00:38.720 a couple three years. I don't know if it was 0:00:38.760 --> 0:00:42.000 a pandemic thing, but I was petitioning from the shave 0:00:42.040 --> 0:00:44.320 it off since the first time I saw it. That's 0:00:44.360 --> 0:00:47.280 gone looks a thousand times younger. I would say, he 0:00:47.280 --> 0:00:48.440 looks him ten years younger. 0:00:48.560 --> 0:00:50.720 I gotta say, I saw him walking towards the radio 0:00:50.720 --> 0:00:51.720 studio and I see a double take. 0:00:51.720 --> 0:00:52.600 I didn't even recognize it. 0:00:52.640 --> 0:00:54.840 I know. Sorry, which we got that going for us? Yeah, 0:00:54.880 --> 0:00:57.200 and then we've got Dan ives he covers technology stuff 0:00:57.200 --> 0:01:01.120 for web Bush Security. So I think I'm scruff are you? Okay, 0:01:01.160 --> 0:01:03.760 it's just not it's not even a choice here with Ana. 0:01:03.960 --> 0:01:05.600 You gotta go. And then he's got the haircut. He's like, 0:01:05.600 --> 0:01:07.679 it's a whole new on ruck, all right. So dan 0:01:07.800 --> 0:01:10.600 Ives comes in with an summer outfit that is right 0:01:10.680 --> 0:01:14.119 on the edge of being summer cool chic. 0:01:14.319 --> 0:01:16.440 It's like fresh back from Bermuda. What's going on here? 0:01:16.560 --> 0:01:18.800 Or it's right on that line of being cool and 0:01:18.840 --> 0:01:20.920 being obscene. I don't know where we are. 0:01:21.080 --> 0:01:24.119 It's it's like a Picasso painting in a very strange way, 0:01:24.120 --> 0:01:25.520 like I can't even I don't even know what's saying. 0:01:25.520 --> 0:01:27.680 And you brought that look over to Asia because I 0:01:27.720 --> 0:01:29.680 saw your postings on social media Daan when you're over 0:01:29.760 --> 0:01:32.000 on your marketing trip to Asia. You weren't holding back, 0:01:32.040 --> 0:01:32.440 were you. 0:01:32.440 --> 0:01:32.560 No? 0:01:32.600 --> 0:01:35.200 I mean we brought it from from two to one 0:01:35.280 --> 0:01:36.399 two over to Asia. 0:01:36.480 --> 0:01:38.040 Oh that's where the color is coming from. Okay, this 0:01:38.120 --> 0:01:39.039 makes sense two one. 0:01:38.959 --> 0:01:40.720 Two color over to Asia, and I think, yeah, I 0:01:40.720 --> 0:01:42.960 think it worked well. It could be a media a trend. 0:01:43.040 --> 0:01:46.600 You've started seeing some tech investers throughout Asia. It's because 0:01:47.240 --> 0:01:50.280 I mean it could besides AI and some of the themes, 0:01:50.280 --> 0:01:51.400 you could have a all. 0:01:51.440 --> 0:01:54.160 Right, so let me here's all right, Let let me 0:01:54.200 --> 0:01:56.840 just go to anaack here, what does Nvidia do and 0:01:56.880 --> 0:02:00.360 why are they seemingly getting all these all this chip 0:02:00.440 --> 0:02:04.360 demand for AIS? Is this high bitch or is it real? 0:02:04.800 --> 0:02:07.400 Well, the high pot is will always be driven by 0:02:07.680 --> 0:02:09.840 you know, a little bit of valuation. But I think 0:02:09.880 --> 0:02:11.480 one of the things you have to think about when 0:02:11.520 --> 0:02:13.880 you run some of the very large workloads, even on 0:02:13.919 --> 0:02:17.040 the cloud, you need really fast computers and you really 0:02:17.080 --> 0:02:21.040 need faster chips. And Nvidia is the leader in those 0:02:21.120 --> 0:02:23.480 chips out there, and they really posted good numbers, which 0:02:23.520 --> 0:02:27.280 basically tells us that the world is investing a lot 0:02:27.320 --> 0:02:30.440 more in high powered computers right now because of all 0:02:30.440 --> 0:02:31.320 the AI frenzy. 0:02:32.160 --> 0:02:32.840 Before I go to. 0:02:32.880 --> 0:02:34.840 Dan, can I just point out that the reason an 0:02:35.040 --> 0:02:37.600 rag has haircut and fresh shave and all that because 0:02:37.600 --> 0:02:41.280 there's an event happening this evening, afternoon, afternoon, slush evening 0:02:41.600 --> 0:02:42.520 it is, I argue. 0:02:42.320 --> 0:02:44.359 Went to tell them, Yeah, there'll be a big semiconductory 0:02:44.400 --> 0:02:47.839 event we are having in the one twenty park about well, 0:02:47.840 --> 0:02:51.960 have Micron, Intel and Global founderies. They're talking about, you know, 0:02:52.080 --> 0:02:54.799 the the making of the chips in the US from 0:02:54.880 --> 0:02:57.240 an executive from Department of Commerce. 0:02:57.400 --> 0:02:58.760 Yeah, perfect suite of. 0:02:58.760 --> 0:03:00.480 Some of the Yeah, some of the some the biggest 0:03:00.480 --> 0:03:03.280 and some of the best. Very excited about that. Yeah, 0:03:03.320 --> 0:03:05.400 they are on top of it. Somean deep thing. Bloomberg 0:03:05.400 --> 0:03:07.560 Intelligence will be there on ROG of course leading the charge. 0:03:08.800 --> 0:03:09.120 Yeah. 0:03:09.280 --> 0:03:10.960 Good, good lineup, Dan, talk. 0:03:10.880 --> 0:03:12.959 To us a little bit about this trade here the 0:03:13.080 --> 0:03:17.680 idea that kind of AI is driving in video shares 0:03:17.720 --> 0:03:21.440 and video isn't a pure play on AI necessarily. So 0:03:22.040 --> 0:03:24.720 how quickly does this thirty percent move in the stock 0:03:24.800 --> 0:03:25.560 get walked back? 0:03:26.000 --> 0:03:29.280 Look, this is historic. I mean in covering tech stocks 0:03:29.320 --> 0:03:32.560 twenty two years, I've never seen anything in my career 0:03:32.960 --> 0:03:35.760 where you have a guidance raise sixty percent in the quarter. 0:03:35.840 --> 0:03:38.560 And I think the difference and why this is I 0:03:38.600 --> 0:03:40.960 think the ripple effects here in terms of this goal 0:03:41.080 --> 0:03:42.080 rushers happen in AI. 0:03:42.520 --> 0:03:43.480 It validates it. 0:03:43.600 --> 0:03:47.080 Demand is Eshian's real because ultimately, as that Aerog talks about, 0:03:47.240 --> 0:03:50.160 they're the ones that see at first. I believe, in 0:03:50.200 --> 0:03:50.920 my view. 0:03:50.920 --> 0:03:51.840 This is just a start. 0:03:51.840 --> 0:03:54.720 I think it's a revolution that's playing out and in 0:03:55.040 --> 0:03:59.400 my view, Microsoft, Google, across the board. It's just the 0:03:59.440 --> 0:04:02.640 start of what I view is probably the biggest transformational 0:04:02.720 --> 0:04:04.480 theme that I've ever seen. 0:04:04.520 --> 0:04:05.800 Cortentions, You've been. 0:04:05.680 --> 0:04:08.280 A techable for ages, so this is this is pretty 0:04:08.680 --> 0:04:10.280 This makes a lot of sense that you would say 0:04:10.280 --> 0:04:11.640 that what flips your view? 0:04:11.640 --> 0:04:12.760 What gets in the way of us? 0:04:12.800 --> 0:04:14.560 It's when I talked and I can tell you the 0:04:14.640 --> 0:04:17.160 last three weeks, like whether it's asier whether us when 0:04:17.160 --> 0:04:20.960 I talk to CIOs, when I talked to product managers, 0:04:21.120 --> 0:04:23.440 and now they're looking to spend for every one hundred 0:04:23.480 --> 0:04:27.960 dollars in cloud, spend thirty five to forty dollars incremental 0:04:28.000 --> 0:04:31.040 for AI. To me, that that's the game changing. That's 0:04:31.080 --> 0:04:35.920 why like, look those if your valuation centric and we've 0:04:35.920 --> 0:04:38.880 talked about this, you would have missed the Facebook's Netflix, 0:04:38.960 --> 0:04:41.880 has it? I feel like this is one where we're 0:04:41.920 --> 0:04:45.400 talking conservatively eight hundred billion over the next decade incremental 0:04:45.440 --> 0:04:49.640 spend and mebe aggressively in the trillions with the amount 0:04:49.680 --> 0:04:52.920 of names you count on two hands, all. 0:04:52.839 --> 0:04:57.480 Right, so Anurag explain to me, I mean every company 0:04:57.480 --> 0:04:59.960 in yester p. Five hundred and the last quarterly earnings 0:05:01.440 --> 0:05:06.280 mentioned AI Yeah, for the average company, average person, what 0:05:06.400 --> 0:05:06.839 is AI. 0:05:07.480 --> 0:05:09.839 So it's you get trying to get a lot more 0:05:09.839 --> 0:05:12.840 insights from what you're doing already and try to make 0:05:12.880 --> 0:05:15.200 better decisions either on the revenue side or the cost site. 0:05:15.200 --> 0:05:18.520 Because you have data, You have data, another way to analyze, 0:05:18.760 --> 0:05:20.640 organize and analyze data. 0:05:20.800 --> 0:05:23.760 So you know, it's much easier to do on the 0:05:23.760 --> 0:05:26.120 consumer front because it's you know, we have all the 0:05:26.120 --> 0:05:28.640 consumer data, you have the Internet, you can feed off that. 0:05:29.000 --> 0:05:31.200 It's a little bit harder on the enterprise side because 0:05:31.200 --> 0:05:34.600 your data is extremely disaggregated in multiple systems, so it's 0:05:34.640 --> 0:05:36.880 a little bit of a longer process. Means you have 0:05:36.920 --> 0:05:39.560 to buy the computers which we we're looking at, or 0:05:39.600 --> 0:05:41.560 the chips. Then you've got to figure out how to 0:05:41.600 --> 0:05:44.280 put the data in a common data platform where you're 0:05:44.279 --> 0:05:46.480 going to bring all the data together from let's say 0:05:46.560 --> 0:05:49.000 hundreds of systems. Then you got to analyze it, and 0:05:49.040 --> 0:05:51.000 then you put the algorithm on top of it to 0:05:51.040 --> 0:05:53.120 get you insights. So it's a little bit more longer 0:05:53.440 --> 0:05:56.240 term view when it comes to enterprises, but a lot 0:05:56.320 --> 0:05:58.160 faster when it's it's a consumer application. 0:05:58.720 --> 0:06:01.320 Well, explain to me, like put put some numbers on it. 0:06:01.360 --> 0:06:03.880 For us, if we're looking at what do you say 0:06:03.920 --> 0:06:04.440 in it was an eight. 0:06:04.480 --> 0:06:08.120 Hundred eight hundred billion or eight hundred billion an incremental 0:06:08.200 --> 0:06:10.320 spend that basically six months ago, wasn't there? 0:06:10.400 --> 0:06:12.720 Okay, eight hundred billion over the next decade. And Dan, 0:06:12.720 --> 0:06:14.240 I'm going to come to you next on this, but 0:06:15.040 --> 0:06:17.240 explain how the math works here, because if you're looking 0:06:17.240 --> 0:06:19.440 at Nvidia, I think that this data right or something 0:06:19.520 --> 0:06:21.000 was like the share price a loan or the market 0:06:21.040 --> 0:06:23.720 cap alone off this rally has risen like one am 0:06:23.800 --> 0:06:25.360 D or something like that. 0:06:25.720 --> 0:06:26.960 It's most direct competitor. 0:06:27.320 --> 0:06:32.400 How do you price in eight hundred million worth of 0:06:32.520 --> 0:06:34.680 market over the next ten years. 0:06:34.920 --> 0:06:36.480 So one of the things you have to see is 0:06:36.520 --> 0:06:38.839 you know what kind of applications are going to be created. 0:06:38.839 --> 0:06:41.320 Who's going to be the big beneficiary? Now we talked 0:06:41.360 --> 0:06:44.200 about a chip manufacturer. For our point of view, the 0:06:44.279 --> 0:06:46.880 cloud players are going to be the biggest beneficiary because 0:06:47.320 --> 0:06:49.359 you have to build this thing on a cloud. You 0:06:49.400 --> 0:06:51.680 can't really run it in your basement and come up 0:06:51.720 --> 0:06:55.440 with applications. These are things that require very fast computation 0:06:55.520 --> 0:06:58.640 and very large memory needs. So you need very very 0:06:58.720 --> 0:07:02.120 large you know, cloud hyperscale cloud wider, So that's one 0:07:02.160 --> 0:07:05.520 big beneficiary. We also think, you know areas where such 0:07:05.520 --> 0:07:07.520 as you have a lot of consulting companies are going 0:07:07.560 --> 0:07:10.520 to come out and help out to create these applications. 0:07:10.520 --> 0:07:13.840 So that's very downstream work. But it really starts with 0:07:14.280 --> 0:07:16.840 the chip and the hardware level. Then it trickles down 0:07:16.840 --> 0:07:19.880 to software, then it trickles down to services. Everybody in 0:07:19.920 --> 0:07:22.720 the ecosystem will get some piece of it. And we've 0:07:22.760 --> 0:07:25.200 seen every company service now just had their analysts day. 0:07:25.200 --> 0:07:27.960 They spent entires analysts day talking about, you know, how 0:07:27.960 --> 0:07:31.680 they're going to improve their product portfolio through it. Adobe 0:07:31.760 --> 0:07:33.560 did the same thing, you know, a few weeks ago. 0:07:33.760 --> 0:07:36.960 So everybody is spending crazy amount of money trying to 0:07:37.120 --> 0:07:39.920 make their products a lot more smarter for the users 0:07:39.920 --> 0:07:40.480 to use it. 0:07:40.640 --> 0:07:42.600 All right, Dan, your turn. What's your price target? By 0:07:42.600 --> 0:07:43.080 the way, on in. 0:07:43.160 --> 0:07:46.200 Video, Yes, well, I mean we think the video right here, 0:07:46.200 --> 0:07:48.880 I mean five hundred hours when you start to work 0:07:48.880 --> 0:07:50.920 at where this could be fat to six hundred hours 0:07:51.000 --> 0:07:54.600 could be fair value based on the income and opportunity, 0:07:54.720 --> 0:07:58.120 and then you even stream it to Microsoft Poe case. 0:07:58.240 --> 0:07:59.920 I mean you could have a start with a foreign 0:08:00.040 --> 0:08:04.200 front of it, because now all that incremental spend, it's 0:08:04.240 --> 0:08:06.960 going to Microsoft, it's going to Alphabet, it's going to 0:08:06.960 --> 0:08:10.320 potential to Amazon and others. In my view to your question, 0:08:10.960 --> 0:08:15.120 I view it that now, look execution is clearly there 0:08:15.120 --> 0:08:18.080 will be issues. Now there's gonna be losers. There's gonna 0:08:18.080 --> 0:08:22.200 be AI roadkill as well. Yeah, but this goes back 0:08:22.240 --> 0:08:25.000 to basically a late nineties type feel in terms of 0:08:25.040 --> 0:08:28.640 trying trying to identify the winners. There will be losers. 0:08:29.120 --> 0:08:32.719 From evaluation perspective, I think it's sort of the it's 0:08:32.760 --> 0:08:35.760 a goal rush because now it really changes the whole 0:08:35.800 --> 0:08:38.480 paradigm in terms of what the revenue opportunity Paul. 0:08:38.520 --> 0:08:40.520 For a radio audience, it's worth saying, he said, a 0:08:40.559 --> 0:08:43.080 four handle on Microsoft shares Microsoft shares are training at 0:08:43.080 --> 0:08:45.520 three twenty one right now, and a five handle on 0:08:45.679 --> 0:08:48.199 end Video training about three eighty a share. 0:08:48.400 --> 0:08:50.480 Here's what I see, having been in this market for 0:08:50.520 --> 0:08:53.720 more than thirty years, I see the average portfolio manager 0:08:53.840 --> 0:08:58.439 anywhere in the world saying I have to have exposure 0:08:58.480 --> 0:09:02.080 to AI, calls up as tech analyst. Tech anist comes 0:09:02.120 --> 0:09:05.240 back with the NVDA. That's what we're seeing here today. 0:09:05.320 --> 0:09:07.480 I don't see. I don't see a seven hundred and 0:09:07.480 --> 0:09:10.560 fifty billion dollar market cap stock up twenty five percent 0:09:10.920 --> 0:09:14.400 on anything more than just panic buying. 0:09:14.440 --> 0:09:16.960 Almost But to your point, I mean, you call it FOMA, 0:09:17.000 --> 0:09:19.760 but so many investadors that sit there in debt ceiling, 0:09:19.920 --> 0:09:25.040 macro evaluation, you're you missed these moves in the video 0:09:25.160 --> 0:09:29.520 in Microsoft and Alphabet in terms of institutional speaking, you're 0:09:29.520 --> 0:09:31.240 trying to figure out what fond to use on the 0:09:31.240 --> 0:09:34.199 resume this year. And I think that's that's sort of 0:09:34.240 --> 0:09:36.040 the issue. You could sit there, well, you could talk 0:09:36.160 --> 0:09:39.120 valuation till you're blue in the face. That in three 0:09:39.160 --> 0:09:40.960 bucks gets you. He is not a coffee don't get 0:09:40.960 --> 0:09:42.439 all right, So when. 0:09:42.120 --> 0:09:45.320 You're in Asia talking to clients and they say I 0:09:45.360 --> 0:09:47.440 want to get exposure to AI, what do you tell them? 0:09:47.760 --> 0:09:50.640 So on the China side, clearly there's there's bob about 0:09:50.720 --> 0:09:53.520 ten cent by do you know from a China perspective, 0:09:53.520 --> 0:09:55.760 But more and more they're looking for us, and I 0:09:55.840 --> 0:09:59.400 viewed as the basket. It's it's Microsoft, it's Alphabet. I 0:09:59.520 --> 0:10:03.960 view powervolunteers and name that's a play here Salesforce dot Com. 0:10:04.280 --> 0:10:07.280 You have the chip players navidian a MD and then 0:10:07.280 --> 0:10:10.520 you kind of go down stream data dog, Snowflake, Mango dB. 0:10:10.679 --> 0:10:13.360 I mean you're really now starting to look at baskets 0:10:13.960 --> 0:10:17.000 and that's why today it all changes. I mean, I 0:10:17.120 --> 0:10:20.800 view this as historic. If there was an earnings Hall 0:10:20.800 --> 0:10:23.000 of Fame, this would be historic in terms of what 0:10:23.080 --> 0:10:24.440 it means for broader tech. 0:10:24.920 --> 0:10:29.000 An a quick question here on the infrastructure investment dan 0:10:29.040 --> 0:10:30.600 Way and if you have any thoughts. One of the 0:10:30.640 --> 0:10:33.200 things that overnight, I promise they're connected, but overnight one 0:10:33.200 --> 0:10:34.640 of the things that was so shocking was kind of 0:10:34.640 --> 0:10:38.680 the DeSantis going on Twitter thing. Trust me this connects, 0:10:39.040 --> 0:10:41.480 but Twitter essentially crashed and a lot of people said, look, 0:10:41.760 --> 0:10:44.240 they were preparing for a bigger fallout without having the 0:10:44.240 --> 0:10:47.199 infrastructure to do it. Could a similar thought be applied 0:10:47.240 --> 0:10:49.760 to this kind of AI boom that everyone's ready for AI, 0:10:49.840 --> 0:10:51.520 but the infrastructure can't catch up. 0:10:51.880 --> 0:10:53.920 See that's why I'm saying the hyper schedus love provider 0:10:53.960 --> 0:10:56.319 us at the right place to be because you don't 0:10:56.320 --> 0:10:58.640 have a bigger computer than Amazon across the world. 0:10:58.800 --> 0:10:59.000 Yeah. 0:10:59.040 --> 0:11:01.800 Now Amazon doesn't having you know, partnerships with some of 0:11:01.800 --> 0:11:04.560 these leading AI. I'll goithm companies right now. But I 0:11:04.559 --> 0:11:06.160 can bet you in the next twelve months all of 0:11:06.200 --> 0:11:09.600 that changes. It is just going to happen. So you 0:11:09.640 --> 0:11:12.440 can't run this thing, you know, in somebody's back office. 0:11:12.480 --> 0:11:15.760 It just doesn't work that way. Now, we will over time, 0:11:16.160 --> 0:11:18.560 at any given time, we will see crashes in the 0:11:18.559 --> 0:11:21.400 cloud infrastructure, just because that's the nature of it. It's 0:11:21.400 --> 0:11:24.680 a bunch of computers connected together. You know, somebody somewhere 0:11:24.679 --> 0:11:26.959 it is going to do something stupid that will crash 0:11:27.000 --> 0:11:27.319 this thing. 0:11:27.559 --> 0:11:31.040 I'd also say it is Andy Jasey right now has 0:11:31.120 --> 0:11:34.079 a number of people in some room somewhere in Seattle, 0:11:34.640 --> 0:11:37.400 and they're looking at it like they see Microsoft, they 0:11:37.440 --> 0:11:41.119 see Alphabet. They got to figure out their AI strategy, 0:11:41.160 --> 0:11:43.320 and that right now, I think is probably the biggest 0:11:43.320 --> 0:11:44.120 person need there. 0:11:44.160 --> 0:11:46.800 All right, guys on ock ten seconds. What's your conference 0:11:46.800 --> 0:11:47.360 again today? 0:11:47.760 --> 0:11:50.120 Semigindert conference. You can see it on Life Go. 0:11:50.480 --> 0:11:52.920 Live, Go okay, And two of the best dressed tech 0:11:52.960 --> 0:11:55.560 analysts on Wall Street right here on a rag Rana 0:11:55.559 --> 0:11:58.280 from Bloomberg Intelligence, Dan Eyes from what Bush Securities joining 0:11:58.360 --> 0:12:00.280 us here to help us put in perspective kind of 0:12:00.280 --> 0:12:02.480 what we're seeing out there on as Dan was suggesting 0:12:02.559 --> 0:12:04.320 kind of a historic day here for tech, and you've 0:12:04.320 --> 0:12:07.000 got it. Seems like the markets is opening its eyes 0:12:07.160 --> 0:12:10.200 today to what AI could mean across the tech stack, 0:12:10.200 --> 0:12:11.800 and that's what we're seeing. So we thank those gentlemen 0:12:12.040 --> 0:12:13.320 coming in. This is Bloomberg. 0:12:15.080 --> 0:12:17.840 You're listening to the team. Ken's a our live program, 0:12:17.960 --> 0:12:21.920 Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot com, 0:12:22.000 --> 0:12:25.120 the iHeartRadio app and the Bloomberg Business app, or listen 0:12:25.200 --> 0:12:27.520 on demand wherever you get your podcasts. 0:12:29.559 --> 0:12:32.520 Let's get off the Nvidia trail for just a second, 0:12:32.520 --> 0:12:34.520 go little macro here and we could do that with 0:12:34.559 --> 0:12:37.080 one of our all time faves here, Danielle di Martino, Booth, 0:12:37.520 --> 0:12:41.560 CEO and chief strategists at QI Research. She was also 0:12:41.559 --> 0:12:44.319 a former advisor at the Federal Reserve Bank of Dallas, 0:12:44.320 --> 0:12:47.520 so we always appreciate getting her thoughts and her insight there. Danielle, 0:12:47.559 --> 0:12:50.280 Let's just start with our good friends Dan in Washington, 0:12:50.400 --> 0:12:53.160 d C. Trying to figure out a way to pay 0:12:53.160 --> 0:12:55.800 the bills and everything. How does that hold I guess 0:12:55.920 --> 0:12:58.520 uncertainty factory and kind of to your outlook and your. 0:12:58.400 --> 0:13:03.920 Work, Well, it factors in pretty largely given I was 0:13:03.920 --> 0:13:07.160 around in twenty eleven, and you know now that we're 0:13:07.200 --> 0:13:11.000 talking about Fitch possibly downgrading the nation's credit it's kind 0:13:11.000 --> 0:13:14.040 of getting real. And you know, for all of the 0:13:14.120 --> 0:13:18.520 headlines that speak of progress, that's the one thing that 0:13:18.559 --> 0:13:22.000 doesn't seem to be getting made is progress. So you 0:13:22.080 --> 0:13:23.120 have to stuff in wonder right. 0:13:24.040 --> 0:13:27.160 Well, Danille, talk to us a little bit about the 0:13:27.200 --> 0:13:32.839 fundamental agreement here, because the formula for GDP is to 0:13:32.960 --> 0:13:35.640 econ one oh one. A big part of that is 0:13:35.679 --> 0:13:40.319 government spending. If you were looking at even the flatline 0:13:40.320 --> 0:13:43.040 offer from the Biden adminstiration, which is just to keep 0:13:43.080 --> 0:13:45.920 spending the same as it is right now, that's still 0:13:45.960 --> 0:13:49.640 got to take some sort of toll on economic growth. 0:13:49.880 --> 0:13:51.079 Why aren't we worried about that? 0:13:52.760 --> 0:13:56.160 Well, you have a really fundamental question, and we should 0:13:56.240 --> 0:14:00.600 be worried about that, because once you dig into the 0:14:00.280 --> 0:14:04.080 the guts of the GDP math, we haven't been getting 0:14:04.120 --> 0:14:10.120 a lot from the biggest traditional inputs of business investment 0:14:10.280 --> 0:14:14.439 and consumption. In fact, we've been seeing just the opposite. 0:14:14.480 --> 0:14:16.839 And if you look at Bank of America proprietary credit 0:14:16.840 --> 0:14:19.800 card debit card data, that's trending in the same way 0:14:19.960 --> 0:14:24.320 as well, so these are the times when your economy 0:14:24.400 --> 0:14:28.320 is slowing into recession that you need the offset of 0:14:28.480 --> 0:14:31.440 government spending the most exactly. 0:14:31.480 --> 0:14:34.280 So we had some a little bit of economic data today. 0:14:34.280 --> 0:14:37.600 We're gonna get some more tomorrow with the PC deflator data, 0:14:37.640 --> 0:14:40.160 which is obviously real key with the Fed. But just 0:14:40.200 --> 0:14:41.720 on the job was front. I mean, I don't know 0:14:41.800 --> 0:14:42.960 how you want to look at I know we had 0:14:42.960 --> 0:14:46.120 some squirmy numbers coming out of Massachusetts, kind of stuff 0:14:46.120 --> 0:14:49.560 I usually expect to see in New Jersey. But anyway, 0:14:49.640 --> 0:14:51.440 jobs claims came in a little bit better and expected 0:14:51.480 --> 0:14:54.120 at the labor market still looks pretty solid. How do 0:14:54.160 --> 0:14:54.760 you think about it? 0:14:55.880 --> 0:14:58.080 So I don't look at the labor market in absolute 0:14:58.200 --> 0:15:02.400 numbers I research, we haven't for some time. What we 0:15:02.440 --> 0:15:04.960 look at is the number of states that we have 0:15:05.120 --> 0:15:07.040 with rising claims, and that really does take all the 0:15:07.080 --> 0:15:10.760 Massachusetts noise out of the mass and we've had at 0:15:10.840 --> 0:15:13.280 least two thirds of the states with rising initial and 0:15:13.800 --> 0:15:18.440 continuing claims here for a persistent period of time. And 0:15:18.520 --> 0:15:21.720 that tells you that while off, it is off a 0:15:21.760 --> 0:15:25.200 small base, a low base historically speaking, as it would 0:15:25.240 --> 0:15:28.600 be coming out of a pandemic that re employed people 0:15:28.600 --> 0:15:31.600 who wanted to be re employed and left people on 0:15:31.640 --> 0:15:34.160 the sidelines who were making enough from the government for 0:15:34.800 --> 0:15:37.240 a good long time. Think of how long the government 0:15:37.280 --> 0:15:40.960 was paying household rent and still is in states like California. 0:15:42.040 --> 0:15:44.920 But given the breath of states be R, E. A. 0:15:45.080 --> 0:15:50.040 D H that are seeing rising initial and continuing jobless claims, 0:15:50.480 --> 0:15:55.560 we are at or passed recessionary levels. 0:15:55.800 --> 0:15:59.400 Danille, Is there a way here to still get that 0:15:59.680 --> 0:16:03.320 shall recession or is the hard landing still the growing 0:16:03.360 --> 0:16:03.880 base case? 0:16:05.400 --> 0:16:07.720 Well, I think it grows with every day that the 0:16:07.760 --> 0:16:11.080 media tells us there's been quote unquote progress on the 0:16:11.080 --> 0:16:13.760 debt ceiling front, and we up at the end of 0:16:13.800 --> 0:16:17.080 the day without that progress. So once we can take 0:16:17.080 --> 0:16:19.520 the air quotes off progress and we actually see a 0:16:19.520 --> 0:16:23.440 deal done. And even in that case, the Terminal had 0:16:23.440 --> 0:16:26.000 a story out a few days ago that said that 0:16:26.000 --> 0:16:28.720 that Wells Fargo figured that if the debt ceiling was 0:16:28.760 --> 0:16:31.800 resolved by Labor Day, call it, which seems like a 0:16:32.680 --> 0:16:35.240 we're not even a Memorial day, so Labor Day seems 0:16:35.240 --> 0:16:37.560 a long ways away. But Wells Fargo said that even 0:16:37.560 --> 0:16:39.720 if the debt ceiling was resolved by a memorial day 0:16:39.960 --> 0:16:42.640 that the Treasury Department would have to sell somewhere around 0:16:42.680 --> 0:16:46.720 one point five trillion dollars in treasuries between then and 0:16:47.360 --> 0:16:49.840 the end of the first quarter twenty twenty four. That's 0:16:49.880 --> 0:16:51.840 a lot of liquidity to pull out of a system 0:16:52.240 --> 0:16:56.720 that's already contending with US households pulling money out of 0:16:56.720 --> 0:17:00.600 banks and putting them into investments that pay five percent 0:17:00.680 --> 0:17:01.000 or more. 0:17:02.000 --> 0:17:04.359 Hey, Danielle. When I when I type into FED go 0:17:04.560 --> 0:17:07.320 function into the Bloomberg terminal FAD, I get a lot 0:17:07.320 --> 0:17:09.840 of information about the FED and what's going on there. 0:17:09.880 --> 0:17:12.479 One of the easiest piece of data is I got 0:17:12.480 --> 0:17:15.680 another appointment on June fourteenth, which is not only Flag Day, 0:17:15.720 --> 0:17:17.680 but it's going to be a big day for the markets. 0:17:18.280 --> 0:17:20.960 I'm guessing the Fed's going to know something about this 0:17:21.040 --> 0:17:24.720 whole debt ceiling by June fourteenth. One would think, how 0:17:24.720 --> 0:17:26.800 do you think the Fed's looking at this news every day? 0:17:26.840 --> 0:17:29.040 Are they hanging on every word like we are, or 0:17:29.040 --> 0:17:32.000 are they just maybe working under the assumption that things 0:17:32.000 --> 0:17:32.600 will be okay. 0:17:33.720 --> 0:17:36.080 So, given I used to work at the FED, I 0:17:36.200 --> 0:17:38.840 kind of know who's who. And let's just say that 0:17:38.920 --> 0:17:42.160 Christopher Waller is as close to if you can't get Waller, 0:17:42.560 --> 0:17:44.639 if you can't get Powell at a microphone, then you 0:17:44.680 --> 0:17:48.280 can substitute in Christopher Waller. He's about palace closest confidant. 0:17:48.760 --> 0:17:51.840 And yesterday he said he didn't like the position that 0:17:51.920 --> 0:17:55.280 the US government had put FED policymakers in, but that 0:17:55.280 --> 0:17:58.920 that was not formulating into his calculus. I think that's 0:17:58.960 --> 0:18:00.800 a lot of the reason that we're being the probability 0:18:00.840 --> 0:18:04.200 of a June fourteenth rate hike the highest since it's 0:18:04.240 --> 0:18:08.160 been Now we're north of forty percent there for June fourteenth. 0:18:08.240 --> 0:18:10.720 Yesterday we were talking about, oh, will we get twenty 0:18:10.720 --> 0:18:14.040 five basis points by July. At this point, we're getting 0:18:14.080 --> 0:18:16.960 really close to a toss up on June, and we've 0:18:17.000 --> 0:18:20.520 got some critical data between now and that meeting, And 0:18:20.560 --> 0:18:23.399 again Waller's saying, we are data dependent. So as we 0:18:23.440 --> 0:18:27.320 get into their hot employment report in who knows, who 0:18:27.320 --> 0:18:29.639 knows that they don't go right then on June fourteenth 0:18:30.000 --> 0:18:31.720 and raise the flag. 0:18:31.920 --> 0:18:35.600 Danielle connect those dots for us though, how does the 0:18:35.720 --> 0:18:42.040 debt ceiling affect FED policy? How much of it is inflationary? 0:18:42.600 --> 0:18:46.320 It's not inflationary, and well back in twenty eleven, the 0:18:46.440 --> 0:18:52.520 tenure bond. The benchmark tenure yield came down quite dramatically. 0:18:53.320 --> 0:18:55.920 It was a massive rally in the bond market, and 0:18:56.040 --> 0:19:00.600