WEBVTT - Bloomberg Surveillance TV: August 6th, 2025 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.680 with Lisa Bromwitz and Amerie Hordern. Join us each day 0:00:18.720 --> 0:00:22.239 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.680 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify, or 0:00:31.280 --> 0:00:33.919 anywhere else you listen, and as always on the Bloomberg 0:00:34.000 --> 0:00:35.840 Terminal and the Bloomberg Business app. 0:00:36.520 --> 0:00:40.080 Stephen Arthur federated Hermes, writing this, we remain optimistic. 0:00:40.159 --> 0:00:41.240 This season has been. 0:00:41.120 --> 0:00:44.919 Exceptionally positive, with earnings running eight percent year over year 0:00:44.960 --> 0:00:48.720 and upward revisions running higher than usual. Stephen joins us. Now, Stephen, 0:00:48.880 --> 0:00:51.040 wonderful to see you. Thank you so much for coming back. 0:00:51.159 --> 0:00:54.600 You're right, earnings have been surprising to the upside. Why 0:00:54.720 --> 0:00:57.280 are stock traders not necessarily impressed? 0:00:57.640 --> 0:01:00.320 Lisa? Could you repeat that again? Your right? I loved that? 0:01:00.640 --> 0:01:03.040 All right, all right, you're right, ste This sounds like 0:01:03.080 --> 0:01:04.240 a home squabble, Evehn. 0:01:04.280 --> 0:01:06.240 You're right, so carry on. 0:01:07.920 --> 0:01:09.880 At least that these stocks have had big run like, 0:01:09.920 --> 0:01:12.119 look at Disney, it's almost doubled over the last year. 0:01:12.160 --> 0:01:14.480 A lot of these stocks have run into earnings, and 0:01:14.560 --> 0:01:19.080 so you know, traders are taking profit. That's pretty normal, actually, 0:01:19.840 --> 0:01:23.160 and we tend not obviously we're too big to trade 0:01:23.200 --> 0:01:25.520 the day, we don't really do that. But we look 0:01:25.520 --> 0:01:28.400 at the longer term picture, the next twelve months, we 0:01:28.440 --> 0:01:31.440 see a broad rotation out into everything else. 0:01:31.560 --> 0:01:32.680 Just starting to see it already. 0:01:33.080 --> 0:01:35.520 Disney's not like on our by list per se, but 0:01:35.560 --> 0:01:38.400 it's one of those stocks that probably is going to 0:01:38.480 --> 0:01:39.840 participate in that rotation. 0:01:40.200 --> 0:01:40.360 Right. 0:01:40.400 --> 0:01:44.800 It's relatively inexpensive. It's really been in a doghouse for 0:01:44.800 --> 0:01:46.840 a long time. It's starting to come to life. It's 0:01:46.880 --> 0:01:48.240 got a long way to go to get back to 0:01:48.240 --> 0:01:49.960 where it used to be three four years ago. 0:01:50.320 --> 0:01:52.920 So the numbers allow people who like to spend narratives 0:01:52.960 --> 0:01:54.440 to spend them in any which way they want to, 0:01:54.520 --> 0:01:56.040 and so it's kind of a field day for people 0:01:56.080 --> 0:01:58.480 who have lots of creativity and some time to do so. 0:01:58.640 --> 0:02:02.000 I'm curious if you look at the earnings, it does 0:02:02.040 --> 0:02:04.920 look like any mention of uncertainty is punished at a 0:02:04.920 --> 0:02:07.440 time where there's a lot of uncertainty, and some of 0:02:07.440 --> 0:02:10.960 the economic data has pointed to a potential stagflationary type 0:02:11.000 --> 0:02:13.680 of mix that definitely surprised markets. 0:02:13.680 --> 0:02:14.799 So which is it. 0:02:14.880 --> 0:02:18.080 Are people responding to that and penalizing that. Have people 0:02:18.240 --> 0:02:21.080 recognized those risks in valuations? 0:02:21.720 --> 0:02:22.040 Well? 0:02:22.320 --> 0:02:25.239 Yeah, I mean, the overall market's really not that expensive 0:02:25.280 --> 0:02:27.600 once you take out the MAC seven, which are kind 0:02:27.600 --> 0:02:31.280 of special exceptional companies globally, right, you take them out, 0:02:31.320 --> 0:02:33.920 the rest of the market's trading around nineteen twenty times. 0:02:34.280 --> 0:02:36.960 We don't think that's an unreasonable level, and we think 0:02:37.000 --> 0:02:39.000 it's the rest of the market where there's value right 0:02:39.040 --> 0:02:42.560 now in the market. So you know, I would call 0:02:42.600 --> 0:02:45.800 it it's an environment where there's short term certainty and 0:02:45.880 --> 0:02:48.560 long term less uncertainty. I mean, if you look at 0:02:48.560 --> 0:02:52.200 the pattern of what's happening right now as an example, 0:02:52.680 --> 0:02:54.760 when I was on a few months ago, we were 0:02:54.800 --> 0:02:59.680 talking about this, the soft soft data is signaling a 0:02:59.720 --> 0:03:00.359 slow down. 0:03:00.360 --> 0:03:02.160 The hard data is still good. When is it going 0:03:02.200 --> 0:03:02.799 to catch up? 0:03:03.200 --> 0:03:05.839 The hard data by virtue of the fact that it's 0:03:05.880 --> 0:03:09.760 hard is rear view mirror stuff. It's what the FED 0:03:09.919 --> 0:03:11.240 uses as an example. 0:03:11.280 --> 0:03:13.120 I call it the cracked rear view mirror. 0:03:13.760 --> 0:03:17.320 We're in a news cycle here that's twenty four to 0:03:17.360 --> 0:03:21.320 seven now more than ever. Trying to make forecasts bake 0:03:21.560 --> 0:03:26.280 based on hard data is you're fighting yesterday's war. So 0:03:26.320 --> 0:03:28.679 the FED is now coming around because the hard data 0:03:28.720 --> 0:03:31.320 is finally softening up. We've been screaming that they should 0:03:31.320 --> 0:03:33.920 be cutting way back in the spring. They're now going 0:03:34.000 --> 0:03:36.720 to do that. We're entering a cutting cycle. But the 0:03:36.800 --> 0:03:39.760 soft data is starting to turn. Look at things like 0:03:39.880 --> 0:03:44.200 air travel boom, it's spiking. The Dallas Fed's real time 0:03:44.240 --> 0:03:47.120 economic indicators, it's up one hundred basis points in the 0:03:47.200 --> 0:03:50.840 last month. You look at consumer sentiment surveys up ten 0:03:50.920 --> 0:03:54.720 points in the last couple of months. You got small 0:03:54.720 --> 0:03:59.200 business confidence indicators up ten percent last couple of months. 0:03:59.360 --> 0:04:02.320 You look at the market and the industrials, the cyclicals 0:04:02.360 --> 0:04:04.880 are starting to lead. You know, we do a lot 0:04:04.920 --> 0:04:08.680 of bipos and federate hermes. Right, I got I'm teasing 0:04:08.680 --> 0:04:11.200 the guys in the office. I've become the office receptionist 0:04:11.320 --> 0:04:14.200 after five PM. I mean, like, I get these companies 0:04:14.240 --> 0:04:17.839 all showing up, right, I mean that market is really 0:04:17.880 --> 0:04:21.360 picked up. That's not a sign that confidence is falling 0:04:21.400 --> 0:04:24.599 over amongst the people that actually make decisions in the economy. 0:04:24.680 --> 0:04:28.479 So we see all the soft indicators picking here most 0:04:28.520 --> 0:04:32.320 of them, and uh, you know, we're pretty optimistic, as 0:04:32.320 --> 0:04:32.479 you know. 0:04:32.560 --> 0:04:35.040 But we're all our good news though. What's been pricing 0:04:35.080 --> 0:04:37.560 in is the uncertainty of tariffs. They're actually going to 0:04:37.560 --> 0:04:39.440 bite and we're going to have an average terif rate 0:04:39.480 --> 0:04:42.080 about fifteen to twenty percent this time last year was 0:04:42.160 --> 0:04:43.320 two point five percent. 0:04:43.640 --> 0:04:45.920 Yeah, I think you got to check the math on that, 0:04:46.120 --> 0:04:50.839 because the actual remember that a lot of the goods 0:04:50.839 --> 0:04:53.600 that come in that come into the US come through 0:04:53.680 --> 0:04:56.760 Canada and Mexico. The goods that come in there through 0:04:56.880 --> 0:05:01.480 USMCA are zero percent. So when Trump talks about these 0:05:01.480 --> 0:05:05.120 massive tarifs on canemas are he's talking about trade that 0:05:05.200 --> 0:05:09.120 they've brought across the border that doesn't conform with USMCA, 0:05:09.320 --> 0:05:11.280 which in the case of Europe, if they were doing that, 0:05:11.320 --> 0:05:14.279 they'd throw them out of the union. So you've got 0:05:14.279 --> 0:05:16.760 to make you've got to account for that zero part 0:05:16.760 --> 0:05:19.560 of the thing. The actual tariff rate on average right 0:05:19.600 --> 0:05:22.719 now as we know it is about thirteen percent. We 0:05:22.839 --> 0:05:24.840 figure about half of that's going to be paid by 0:05:24.839 --> 0:05:28.040 the foreign importers. So you're looking at fifteen percent of 0:05:28.080 --> 0:05:30.800 the economy's imports. Half of that is not going to 0:05:30.800 --> 0:05:33.240 be you work out the math, it's about an eighty 0:05:33.480 --> 0:05:39.000 or ninety basis point price increase, probably spread over six months. 0:05:39.680 --> 0:05:45.320 There's all these other things that are decreasing in price, commodities, steel, oil, 0:05:46.960 --> 0:05:52.520 regulatory costs, taxes. Another way to think about what Trump 0:05:52.600 --> 0:05:56.440 is doing here is he's increasing a consumption tax, a 0:05:56.480 --> 0:05:59.120 prely efficient one, by the way, because it's partly paid 0:05:59.160 --> 0:06:02.880 by foreigners, and he's using it to fund an investment 0:06:02.960 --> 0:06:08.200 tax reduction. With all these accelerated, the multiplier on investment 0:06:08.320 --> 0:06:12.239 spending is multiples of what it is on consumption spending. 0:06:12.360 --> 0:06:15.360 So there's a kind of shift going on in the economy. 0:06:15.600 --> 0:06:18.360 I get the tariff thing is not that positive, but 0:06:18.440 --> 0:06:21.279 it's not as big of a deal. It's the one 0:06:21.279 --> 0:06:23.320 thing everyone can hang on to. So it's a good 0:06:23.360 --> 0:06:24.080 discussion point. 0:06:24.320 --> 0:06:25.880 You mentioned the president a few times. 0:06:25.880 --> 0:06:27.960 He thinks you have great analysis, by way, because I 0:06:28.000 --> 0:06:30.680 follow his truth social and he has treated about you 0:06:31.240 --> 0:06:34.360 right now. He has what some would say, undermined market 0:06:34.360 --> 0:06:37.480 credibility when it comes to hard data releases by firing 0:06:37.480 --> 0:06:40.760 the commissioner at the BLS continually going after the FED, 0:06:40.839 --> 0:06:42.600 and some are saying maybe it's going to be very 0:06:42.600 --> 0:06:45.760 overtly political individual he'll put at the FED. 0:06:46.200 --> 0:06:49.760 Do you think he's undermining market confidence a little bit? 0:06:49.760 --> 0:06:53.360 I'm my advice to him, not that he takes my advice, 0:06:53.400 --> 0:06:56.840 but I don't think it's necessary to pound the FED 0:06:56.960 --> 0:06:59.960 chair as an example. On that case, I would just say, look, 0:07:00.120 --> 0:07:05.000 the FED chair is a rear view mirror looking guy. 0:07:04.880 --> 0:07:08.120 He simply is going stop listening to what he says 0:07:08.120 --> 0:07:10.280 he's going to do, and just think about what he's 0:07:10.440 --> 0:07:13.120 likely to do. And we think we've been saying for 0:07:13.160 --> 0:07:15.720 a while he's going to start cutting in September. Now 0:07:15.720 --> 0:07:17.920 that the rearview mirror is looking like it should, he 0:07:18.040 --> 0:07:22.440 will on the labor secretary. One reason that storm is passed, 0:07:22.600 --> 0:07:25.200 and I don't necessarily agree with the pressure there either, 0:07:25.320 --> 0:07:28.280 but one reason that storm is passed is because the 0:07:28.320 --> 0:07:31.760 reality is, let's face it, I've heard you complain on 0:07:31.800 --> 0:07:32.960 the air about the labor numbers. 0:07:33.000 --> 0:07:33.800 They've been terrible. 0:07:34.000 --> 0:07:38.000 Yeah, there needs to be an overhaul of that department. 0:07:39.280 --> 0:07:40.360 The physician did. 0:07:40.520 --> 0:07:43.600 From that perspective, it probably would have not even been 0:07:43.640 --> 0:07:46.080 a news story. But the end of the day, people 0:07:46.120 --> 0:07:48.360 are saying, yeah, the labor numbers aren't really good. Yeah, 0:07:48.360 --> 0:07:50.160 the Fed, No, they've been in a lot of bad 0:07:50.240 --> 0:07:54.560 calls here, So he's not completely off base with the 0:07:54.600 --> 0:07:55.880 pressure in these areas. 0:07:56.080 --> 0:07:58.520 How concerned are you about inflation given the fact that 0:07:58.640 --> 0:08:01.040 right now you look at backward looking numbers that might 0:08:01.080 --> 0:08:04.440 constrain the economy, but the forward look is pretty rosy 0:08:04.560 --> 0:08:06.560 at a time where you do have some input pressures 0:08:06.760 --> 0:08:07.480 with prices. 0:08:07.640 --> 0:08:10.160 Yeah, but the Fed's not looking forward so bad. 0:08:11.120 --> 0:08:12.360 That's fine. 0:08:12.000 --> 0:08:15.200 And the other thing is that, you know, I look 0:08:15.240 --> 0:08:18.600 at the actual ongoing inflation rate here, it's kind of 0:08:18.680 --> 0:08:22.000 stabilizing around two point five to two point well, it's right, 0:08:22.160 --> 0:08:23.640 two point six, two point seven, but it's going to 0:08:23.680 --> 0:08:26.200 stabilize by next year two point five. That's really the 0:08:26.200 --> 0:08:28.520 feds informal target. I think they figured out a long 0:08:28.560 --> 0:08:32.560 time ago two is too close to zero for government work. 0:08:33.120 --> 0:08:36.920 So assuming that, right, shouldn't the FED funds rate, if 0:08:36.960 --> 0:08:39.480 you look at history, should be about fifty basis points 0:08:39.520 --> 0:08:40.520 above that. 0:08:40.520 --> 0:08:41.320 That's three. 0:08:41.679 --> 0:08:44.040 So we have FED funds going to three over the 0:08:44.040 --> 0:08:46.520 next eighteen months. I think that's where we're heading. Here, 0:08:47.120 --> 0:08:49.080 and so I would just say I got six cuts 0:08:49.120 --> 0:08:50.559 coming against a backdrop. 0:08:50.600 --> 0:08:51.320 That's pretty good. 0:08:51.679 --> 0:08:54.199 We have the FED cutting not because they need to, 0:08:54.880 --> 0:08:58.360 but because they can. And now that they think they 0:08:58.400 --> 0:09:01.559 need to, they'll start doing it. And once they realize 0:09:01.760 --> 0:09:02.800 they can, they will. 0:09:03.559 --> 0:09:07.160 Stephen as he is the receptionist at Federated Armies where 0:09:07.240 --> 0:09:09.640 he offers lots of pigs in a blanket. Do you 0:09:09.640 --> 0:09:11.440 have your your your different facts? 0:09:12.280 --> 0:09:13.160 Ye? Yeah, exactly. 0:09:13.600 --> 0:09:16.640 Stephen off Cio of Equity is a Federated Armies. 0:09:16.640 --> 0:09:16.920 Thank you. 0:09:26.280 --> 0:09:28.480 Turning back to markets, we are seeing stocks looking through 0:09:28.480 --> 0:09:30.680 all of this looking to rebound after the S and 0:09:30.679 --> 0:09:32.880 P five hundred posted its fifth down day in the 0:09:32.960 --> 0:09:36.440 last six Anastasia and Moroso Partners Group writing this, this 0:09:36.600 --> 0:09:39.360 is a long awaited quarter of adjustment and the market 0:09:39.480 --> 0:09:41.080 may need to act accordingly. 0:09:41.160 --> 0:09:43.000 Expect expecting less. 0:09:42.880 --> 0:09:46.120 Upside and more choppiness in Q three and the Stasia 0:09:46.200 --> 0:09:49.040 joins us, now, great to see it morning. All right, 0:09:49.080 --> 0:09:51.080 So this is the adjustment that everyone is expecting, that 0:09:51.120 --> 0:09:52.360 everyone's looking to buy into. 0:09:52.440 --> 0:09:53.480 How do you get an adjustment? 0:09:53.480 --> 0:09:55.400 And I asked this question yesterday, how do you get 0:09:55.400 --> 0:09:56.760 a sell off if everyone's looking to. 0:09:56.720 --> 0:09:57.240 Buy the dip. 0:09:57.760 --> 0:09:59.680 Well, I think the newsflow is going to dictate that, 0:10:00.040 --> 0:10:03.280 and we need to have more Caterpillar like reports that 0:10:03.440 --> 0:10:05.800 talk about the tariff hit that some of these companies 0:10:05.840 --> 0:10:07.839 are going to have to absorb, and some of them 0:10:07.880 --> 0:10:10.199 may be in line with consensus expectations and some of 0:10:10.240 --> 0:10:11.960 it may not. You know, I think that could be 0:10:12.000 --> 0:10:15.000 one trigger for a potential pullback as we really do 0:10:15.080 --> 0:10:17.840 realize the tariff hit. The other trigger, of course, is inflation, 0:10:18.080 --> 0:10:21.600 and inflation and expectations for next week are somewhat subdued, 0:10:21.679 --> 0:10:25.680 but could we see some potential surprises there, so you know, maybe, Lisa, 0:10:25.920 --> 0:10:29.320 the move here in the market is not necessarily tremendous downside, 0:10:29.360 --> 0:10:32.080 because I think some level of expectations already baked in. 0:10:32.360 --> 0:10:34.080 But that's why I really kind of call it the 0:10:34.200 --> 0:10:37.440 quarter of choppiness, because on the one hand, we need 0:10:37.480 --> 0:10:39.800 to mark to market some of these tariffs, and at 0:10:39.800 --> 0:10:41.840 the same time, we also know that if the label 0:10:41.880 --> 0:10:44.520 market weakness weakens as a result of that, then that 0:10:44.600 --> 0:10:47.000 sets us up for a September cut. And I think 0:10:47.040 --> 0:10:50.240 that's what the markets are caught in between, and that's 0:10:50.240 --> 0:10:52.440 why we sort of get the back to back days 0:10:52.440 --> 0:10:54.560 of selling and buying and selling and buying, and I 0:10:54.559 --> 0:10:55.400 think that could continue. 0:10:55.520 --> 0:10:57.679 That's the reason why you're seeing some selling even on 0:10:57.720 --> 0:11:00.360 the heels of earning supports that are really positive, which 0:11:00.360 --> 0:11:03.559 we've seen increases to forecasts that beat expectations, and then 0:11:03.720 --> 0:11:06.240 the likes of AMD selling off. 0:11:06.360 --> 0:11:07.840 I'm just wondering, what do you do with the job? 0:11:08.880 --> 0:11:12.680 Well, I think for public market investors, if you have 0:11:12.840 --> 0:11:14.960 any sort of pullback, of course, you step in and 0:11:15.000 --> 0:11:17.720 you sort of buy your favorite names, and I would say, 0:11:17.720 --> 0:11:19.840 you know, for us, it's really about long term investing 0:11:19.880 --> 0:11:23.439 at Partners Group and focusing on thematic investing and really 0:11:23.520 --> 0:11:24.600 aligning yourself with some. 0:11:24.559 --> 0:11:26.000 Of the key secular growth themes. 0:11:26.120 --> 0:11:27.800 You know, as much as we worry about the next 0:11:27.800 --> 0:11:30.600 inflation report or the next you know, rate cut or not, 0:11:30.760 --> 0:11:34.120 what truly determines whether the company is going to outperform 0:11:34.200 --> 0:11:36.080 or not is whether it's aligned with the lawng term 0:11:36.120 --> 0:11:39.640 trend of let's say, artificial intelligence or perhaps healthcare innovation 0:11:40.440 --> 0:11:43.079 or new way of living, and whether you align with. 0:11:43.080 --> 0:11:44.600 That and benefiting from that. 0:11:44.800 --> 0:11:47.760 So, you know, if there is an opportunity to buy 0:11:47.800 --> 0:11:51.480 into that in public markets, that's great for us. I 0:11:51.480 --> 0:11:55.360 think there's a lot of delectivity that we're looking at, 0:11:55.440 --> 0:11:59.800 and given the clarity of tariffs that is emerging, I 0:11:59.840 --> 0:12:03.040 think for the private equity industry in general, the deal 0:12:03.040 --> 0:12:04.559 activity is likely to pick up. 0:12:04.840 --> 0:12:07.560 Is it the clarity because the rates are set, or 0:12:07.600 --> 0:12:10.079 is it the clarity that they're not as bad as 0:12:10.080 --> 0:12:11.360 some would expect. 0:12:11.720 --> 0:12:12.559 Both both. 0:12:12.600 --> 0:12:14.560 I mean, Emory, you know, we put this chart together, 0:12:14.679 --> 0:12:16.600 you know, looking at the percent of world GDP that 0:12:16.760 --> 0:12:19.720 had a deal in place. Back in April, it was zero, 0:12:19.840 --> 0:12:21.559 you know, nobody had a trade deal done with the 0:12:21.640 --> 0:12:24.680 United States. And today, fast forward to today, in about 0:12:24.679 --> 0:12:27.280 thirty percent, about twenty eight percent of the world GDP 0:12:27.440 --> 0:12:29.560 has some sort of a deal in place, and there's 0:12:29.600 --> 0:12:32.840 still a big chunk of global GDP that's in negotiation. 0:12:33.320 --> 0:12:34.120 So that's the. 0:12:34.040 --> 0:12:37.080 First point is that you have predictability, you have some 0:12:37.160 --> 0:12:41.080 clarity for a growing share of GDP. The second point 0:12:41.120 --> 0:12:43.840 is the one you made, which is, you know, for 0:12:44.040 --> 0:12:48.200 most countries that are able to negotiate a deal, they're 0:12:48.240 --> 0:12:50.440 doing so at a lower ter afraid that could have 0:12:50.520 --> 0:12:53.000 been under the Liberation Day announcement. So I think it's 0:12:53.040 --> 0:12:55.320 both of those things. And then the third point is 0:12:55.360 --> 0:12:56.880 now that we have the numbers, Now that we have 0:12:57.080 --> 0:12:59.640 the certainty, we actually know how to price things. And 0:12:59.679 --> 0:13:01.920 this is why I say some of the delactivity can 0:13:02.040 --> 0:13:06.520 also move from being contemplated to actually being materialized because 0:13:06.520 --> 0:13:09.280 we know exactly what we have to pencil into the models. 0:13:09.280 --> 0:13:11.280 But what happens when the higher rates, which is a 0:13:11.360 --> 0:13:14.480 much higher average rate than we had last year, actually 0:13:14.520 --> 0:13:18.920 starts to get digested in this economy two point five 0:13:18.960 --> 0:13:23.160 percent versus fifteen percent, twenty percent depending on righty right. 0:13:23.520 --> 0:13:25.640 Well, that's why I call this a quarter of adjustment, 0:13:25.679 --> 0:13:28.000 and is going to happen this quarter. If you think about, 0:13:28.040 --> 0:13:30.880 for example, the tariffs that were back back in April 0:13:30.880 --> 0:13:33.480 about three percent. Now the tariffs have ratched up closer 0:13:33.520 --> 0:13:35.320 to ten percent, and I think most of that is 0:13:35.360 --> 0:13:37.600 being collected now, and in the next month or two 0:13:37.600 --> 0:13:40.760 we're going to see fifteen or sixteen percent that's collected. 0:13:41.080 --> 0:13:43.200 But one thing that I will refer back to the 0:13:43.200 --> 0:13:45.040 Caterpillar report that I found interesting. 0:13:45.320 --> 0:13:47.319 They very much talk about profit. 0:13:47.000 --> 0:13:51.559 Margins including the tariff hit, but also profit margins excluding 0:13:51.600 --> 0:13:54.040 the tariff hit, and that really suggests to me that 0:13:54.160 --> 0:13:57.320 companies as well as the FED are treating this as 0:13:57.360 --> 0:14:00.200 a one off adjustment that they need to take, they 0:14:00.240 --> 0:14:02.880 need to process, and I think it happens in Q. 0:14:02.760 --> 0:14:05.079 Three as you see the pipeline of opportunities in the 0:14:05.120 --> 0:14:08.000 private markets really build steam. You're buying it to open 0:14:08.040 --> 0:14:09.840 AI at five hundred billion dollars. 0:14:10.640 --> 0:14:12.720 I will defer to our investment teams on that, but 0:14:12.880 --> 0:14:15.600 you know, I think valuation is something we take very seriously. 0:14:15.960 --> 0:14:19.280 And look, I will say Lisa broadly speaking, and private markets, 0:14:19.320 --> 0:14:21.520 you know, it's where can we find the most robust 0:14:21.560 --> 0:14:24.800 margins and where can we find the fastest growth rate 0:14:24.840 --> 0:14:26.960 and EPs and how can we actually build that. 0:14:26.960 --> 0:14:29.400 That's where we're focused on building, rather than maybe buying 0:14:29.400 --> 0:14:31.280 into after the fact. You give one hundred million dollar 0:14:31.360 --> 0:14:33.240 bonuses to all the people to have them stay in place, 0:14:33.240 --> 0:14:37.479 although that might be the benefit for some of these strategies. 0:14:37.520 --> 0:14:40.160 ANC Gamors a partners group. Thank you, wonderful, Thanks to 0:14:40.160 --> 0:14:53.800 you as always. Frankly of HSBC has a buy rating 0:14:53.880 --> 0:14:55.880 on the stock and a price target of two hundred 0:14:55.960 --> 0:14:58.560 dollars from the current one hundred and sixty three, Noting 0:14:58.720 --> 0:15:01.880 a bullish AI own a need for higher conviction to 0:15:02.040 --> 0:15:03.280 drive earnings upside. 0:15:03.360 --> 0:15:05.280 Frank joins us now for more. Frank, thank you so 0:15:05.360 --> 0:15:06.160 much for being with us. 0:15:06.520 --> 0:15:09.240 How frustrating is it to get the fundamental story right 0:15:09.600 --> 0:15:11.120 and the price action wrong. 0:15:12.640 --> 0:15:14.840 Yeah, that's a good question, I think when you think 0:15:14.840 --> 0:15:17.200 about this, though, it was just really about the conviction 0:15:17.760 --> 0:15:20.240 that the management needed to give people. We had a 0:15:20.320 --> 0:15:22.920 really strong enough into results. So I think going into 0:15:22.960 --> 0:15:26.000 these results, people were looking not only for a good number, 0:15:26.160 --> 0:15:29.080 but something tangible for analysts to be able to raise 0:15:29.120 --> 0:15:32.040 their numbers significantly after these results. I don't think we 0:15:32.120 --> 0:15:35.560 got that, so I think that was why the shares 0:15:35.600 --> 0:15:37.960 didn't react so well. And I think the other point 0:15:38.160 --> 0:15:41.000 was China as well. There was a lot of expectations 0:15:41.040 --> 0:15:43.640 built into that d I threeh eight would come back, 0:15:43.880 --> 0:15:47.160 But it also shows you the complexities of the China 0:15:47.280 --> 0:15:50.000 US relationship. So I think now people are going to 0:15:50.040 --> 0:15:51.960 have to take a step back and look at whether 0:15:52.040 --> 0:15:54.520 or not how quickly these licenses can come and how 0:15:54.600 --> 0:15:57.160 quickly these revenues can come. But again, I think the 0:15:57.280 --> 0:15:59.480 market is over focusing a bit on it, because if 0:15:59.480 --> 0:16:02.160 you look at the fundamentals, there's a lot of growth 0:16:02.160 --> 0:16:04.920 still in the hyperscalers that's more than enough to go 0:16:05.040 --> 0:16:06.520 around to drive their growth, So. 0:16:06.840 --> 0:16:09.960 Our investors just sort of looking for certainty where there 0:16:10.080 --> 0:16:14.080 is none. Are the outperformers right now just giving false 0:16:14.120 --> 0:16:17.360 promises of hope or are you saying that essentially there 0:16:17.400 --> 0:16:20.400 are some companies that are more fortified against some of 0:16:20.440 --> 0:16:22.040 these uncertainties and are getting. 0:16:21.800 --> 0:16:24.200 Rewarded for that, and these others are sort of in. 0:16:24.200 --> 0:16:26.720 A weight and see mode from a stock performance standpoint. 0:16:27.960 --> 0:16:28.160 Yeah. 0:16:28.200 --> 0:16:30.520 So, I think you know that the China element certainly 0:16:30.720 --> 0:16:32.800 has become a big part of the narrative this year, 0:16:33.080 --> 0:16:36.160 not only for AMD but also for Ennvidia, So I 0:16:36.200 --> 0:16:39.280 think that has complicated the AI story a bit in 0:16:39.520 --> 0:16:41.560 a way. I think you know that the expectations are 0:16:41.840 --> 0:16:44.040 probably a bit more bullish on that. But we also 0:16:44.120 --> 0:16:47.120 believe though that you don't quite need the China story 0:16:47.480 --> 0:16:49.440 for this to play out. I mean, we still see 0:16:49.600 --> 0:16:52.040 very strong demand. They highlight on the call that the 0:16:52.160 --> 0:16:54.320 Mi I three five five is doing very well, better 0:16:54.360 --> 0:16:57.400 than expected, and the pricing OUTLOAK is better, So we 0:16:57.480 --> 0:17:00.280 do think that it can continue to work. I think 0:17:00.280 --> 0:17:02.320 the narrative has been a little bit too narrowly focused 0:17:02.360 --> 0:17:04.560 on on the China part, and we've come to realization 0:17:04.680 --> 0:17:06.720 that is not going to be as easy for China 0:17:06.800 --> 0:17:08.840 revenues to come back in as people previously expected. 0:17:08.880 --> 0:17:10.720 If we get sit on China for a second, why 0:17:10.840 --> 0:17:13.119 is it so much harder for AMD than in Video. 0:17:14.760 --> 0:17:17.640 Well, we haven't seen the Nvidia numbers yet, so I guess, 0:17:17.760 --> 0:17:19.800 you know, in the next or the next month, we'll 0:17:19.840 --> 0:17:23.560 see how much Nvidia ad back comes back from China. 0:17:24.280 --> 0:17:27.320 I think AMD did disappoint the fact that they haven't 0:17:27.320 --> 0:17:30.840 started their revenues. We do expect. I think Nvidia had 0:17:31.080 --> 0:17:33.920 more inventory on hand that they could probably ship out. 0:17:34.200 --> 0:17:36.120 You also saw that AMD had a lot of work 0:17:36.160 --> 0:17:39.080 in progress inventory, so that has to be resumed. So 0:17:39.160 --> 0:17:40.920 that's going to take a bit longer versus what we 0:17:41.040 --> 0:17:44.080 saw for potentially for Nvidia, which had already built up 0:17:44.520 --> 0:17:45.680 you know, finished good inventory. 0:17:45.880 --> 0:17:47.920 But in Vidia has been, at least when it comes 0:17:47.960 --> 0:17:50.720 to the rhetoric, very bullish on getting back into China. 0:17:50.920 --> 0:17:54.720 Actually we learned of the Trump administrations you turn on 0:17:54.960 --> 0:17:58.800 these export controls because Jensen Wang was in Beijing and 0:17:58.880 --> 0:18:01.320 in video released this statement that they're going to put 0:18:01.320 --> 0:18:03.280 the age twenties back in the Chinese market. 0:18:03.600 --> 0:18:05.720 So would you say they are months ahead of where 0:18:05.760 --> 0:18:06.399 am D is. 0:18:08.080 --> 0:18:09.840 I think they you know, I guess said earlier. I 0:18:09.840 --> 0:18:12.920 think the way their product has been built out, they've 0:18:12.960 --> 0:18:15.560 already shipped out a lot more chips, so I think 0:18:15.640 --> 0:18:18.119 they are in that sense ahead, Whereas you know, AMD 0:18:18.240 --> 0:18:20.560 has admitted that they have a lot of these products 0:18:20.560 --> 0:18:23.320 are still in the building phase, so that's why it's 0:18:23.320 --> 0:18:25.680 going to take longer, as well as waiting for the licenses. 0:18:25.920 --> 0:18:28.240 So I think that's probably the one of the reasons 0:18:28.320 --> 0:18:31.800 why you see a stronger recovery for EN video from 0:18:31.840 --> 0:18:32.440 the China. 0:18:32.240 --> 0:18:34.440 Part, Frank, we hear a lot of noise about tariffs 0:18:34.480 --> 0:18:38.240 and ongoing discussions that are happening right now. The President 0:18:38.480 --> 0:18:41.639 of the United States has talked about semiconductor tariffs that 0:18:41.680 --> 0:18:43.880 could go on as soon as this week. How much 0:18:43.920 --> 0:18:45.840