WEBVTT - Israel Strike Raises Tensions & a Fed Preview 0:00:00.080 --> 0:00:12.879 Bloomberg Audio Studios, Podcasts, radio News. This is the Bloomberg 0:00:12.960 --> 0:00:16.960 Surveillance Podcast. I'm Tom Keene along with Paul Sweeney. Join 0:00:17.040 --> 0:00:21.000 us each day for insight from the best in economics, finance, investment, 0:00:21.200 --> 0:00:24.840 and international relations. You can also watch the show live 0:00:25.079 --> 0:00:29.400 on YouTube. Visit the Bloomberg Podcast channel on YouTube to 0:00:29.520 --> 0:00:32.920 see the show weekday mornings from seven to ten am 0:00:32.960 --> 0:00:37.000 Eastern from our global headquarters in New York City. Subscribe 0:00:37.000 --> 0:00:40.360 to the podcast on Apple, Spotify, or anywhere else you 0:00:40.440 --> 0:00:44.600 listen and always I'm Bloomberg Radio, the Bloomberg Terminal, and 0:00:44.640 --> 0:00:49.000 the Bloomberg Business App. Joining us now for three hour conversation. 0:00:49.159 --> 0:00:52.879 Tina Fordham with Fordham Global Insights. Last time she's on, 0:00:53.200 --> 0:00:56.640 It's a blur, Folks. She was like, absolutely outstanding, Tana. 0:00:56.720 --> 0:00:59.520 I don't even know where to begin this morning, but 0:00:59.640 --> 0:01:02.240 let's begin. And I had the honor of talking to 0:01:02.280 --> 0:01:05.039 Ethan Browner this morning, and I know David Gerro Folks 0:01:05.520 --> 0:01:09.560 is working on a big take. Tina Fordham on the 0:01:09.760 --> 0:01:14.200 state of Israel. I go back to the assassination of 0:01:14.200 --> 0:01:18.520 Izak Rabin to look at a new more angry Israel. 0:01:19.240 --> 0:01:25.720 How angry is Israel? This morning with these two assassination murders, deaths. 0:01:27.920 --> 0:01:34.080 The assassinations of the Hamas official, the political leader of 0:01:34.160 --> 0:01:39.440 Hamas in Tehran where he was attending the inauguration of 0:01:39.480 --> 0:01:44.640 the new Iranian president, was a very bold step and 0:01:45.200 --> 0:01:49.760 signal for Israel to take. And then was it yesterday 0:01:49.880 --> 0:01:53.880 or it's just as you said, a blur another assassination 0:01:54.000 --> 0:01:59.440 in Beirut. Does Israel want to expand the war or 0:02:00.040 --> 0:02:05.760 as some have suggested, is Israel is Nata Naho taking 0:02:06.520 --> 0:02:09.400 these bold steps so that he can claim victory and 0:02:09.560 --> 0:02:12.519 end the war. I am not an optimist on this though, 0:02:12.560 --> 0:02:13.720 Tom all. 0:02:13.760 --> 0:02:15.799 Right, Tina, So that kind of brings you to I 0:02:16.080 --> 0:02:19.160 think one of the questions today, certainly from a lot 0:02:19.200 --> 0:02:21.680 of viewers, is I thought we were maybe on a 0:02:21.760 --> 0:02:26.119 path to some type of peace negotiations and then out 0:02:26.120 --> 0:02:30.240 of the blue, it seems these two high profile assassinations. 0:02:30.280 --> 0:02:33.120 Where do you think the Israeli government is these really 0:02:33.160 --> 0:02:35.440 people are? In terms of next steps. 0:02:36.760 --> 0:02:39.480 I think we've got to look at this and the 0:02:39.600 --> 0:02:44.280 Venezuela developments in Ukraine for that matter, in the context 0:02:44.400 --> 0:02:49.119 of our elections coming up in November. Last week, Natagna, 0:02:49.200 --> 0:02:53.880 who had what fore standing ovations. In his address to Congress, 0:02:54.280 --> 0:02:58.920 he visited Trump and mar A Lago. The Harris juggernaut 0:02:58.960 --> 0:03:03.400 is continuing. Could it be the Netza Yahu feels that 0:03:03.480 --> 0:03:08.560 he's got a window, very narrow window to accomplish some 0:03:09.200 --> 0:03:13.640 goals and take out more of the Hamas leadership, or 0:03:13.639 --> 0:03:15.880 does he want to drag the United States into war. 0:03:16.240 --> 0:03:19.880 I'm more inclined to the former that he the idea 0:03:19.880 --> 0:03:24.919 of having a narrow window to accomplish some big strategic objectives. 0:03:25.520 --> 0:03:28.840 All right, so Tina, let's go down to Venezuela here. 0:03:29.639 --> 0:03:33.240 Can you put into context what's happening down there and 0:03:33.280 --> 0:03:36.560 what do you think will eventually kind of fall out 0:03:36.560 --> 0:03:37.080 from all of this. 0:03:39.760 --> 0:03:43.640 So, after many many efforts in the past, it had 0:03:43.680 --> 0:03:48.640 looked like the opposition in Venezuela was ready to, you know, 0:03:48.720 --> 0:03:52.400 to take power in an election. They were pulling with 0:03:52.480 --> 0:03:57.480 a huge lead, something like plus thirty points, you know, 0:03:58.080 --> 0:04:01.720 such a margin that it would be difficult they thought 0:04:01.920 --> 0:04:08.160 to have these election results falsified. What's happened Maduro, who's 0:04:08.200 --> 0:04:11.800 been in power for thirteen years since the death of 0:04:11.880 --> 0:04:17.640 Hugo Chavez, who was popularly elected for his part, has 0:04:17.720 --> 0:04:22.120 falsified the results. Either that or he's just taking a 0:04:22.160 --> 0:04:24.919 long time to count them. Because it's been three days. 0:04:25.400 --> 0:04:29.360 About a dozen protesters have been killed, huge crowds in 0:04:29.440 --> 0:04:35.520 the streets, and the Organization of American States has said 0:04:34.720 --> 0:04:41.000 that Maduro's response bears all the hallmarks of a falsified election. 0:04:41.240 --> 0:04:44.520 So it's not too you know, it's not too late 0:04:44.600 --> 0:04:47.880 for a democratic transition, but it might get worse before 0:04:47.920 --> 0:04:48.599 it gets better. 0:04:49.520 --> 0:04:51.240 Let's stay on this. I just don't want to jump 0:04:51.279 --> 0:04:53.440 there's so much news, Latina. I had a spin in 0:04:53.480 --> 0:04:57.479 here on a you know, almost into August summer morning 0:04:57.640 --> 0:05:01.040 on Venezuela Tina. Do you detect in the American Latin 0:05:01.040 --> 0:05:06.600 American foreign policy? Does Washington have a Latin policy? 0:05:07.400 --> 0:05:11.080 Well, we haven't heard from the Biden administration, and you know, 0:05:11.160 --> 0:05:13.880 I return you to that idea of a of a 0:05:13.960 --> 0:05:16.919 narrow window. And I think I said on the last program, 0:05:17.000 --> 0:05:20.279 one of my you know, Fordham geopolitical raisers, that governments 0:05:20.279 --> 0:05:23.640 can only concentrate on one thing at a time. I 0:05:23.680 --> 0:05:26.680 think eventually we'll hear something from from the State Department 0:05:26.720 --> 0:05:30.480 and the Biden administration, but so far we've heard from 0:05:30.600 --> 0:05:34.479 you know, from from Lula in Brazil being cautious from 0:05:34.560 --> 0:05:39.400 from Borwich in Chule, but Russia and Iran and the 0:05:39.520 --> 0:05:43.119 United States are also linked on this one. The last 0:05:43.120 --> 0:05:46.960 thing the Kremlin wants or Tehran wants to see is 0:05:47.000 --> 0:05:50.680 a successful popular democratic transition. 0:05:51.920 --> 0:05:54.000 So, Tina, as Tom's mentioned, there's a million ways to 0:05:54.040 --> 0:05:56.080 go here, and I apologize for jumping all around. But 0:05:56.200 --> 0:05:59.560 while we have you, what's the latest coming out of 0:05:59.640 --> 0:06:01.760 Ukraine and it seems like a little bit momentum going 0:06:01.800 --> 0:06:03.000 back to Russia. 0:06:03.839 --> 0:06:05.880 Any updated thoughts to how this plays out? 0:06:07.320 --> 0:06:11.520 Yeah, this is the danger zone summer. I think yesterday 0:06:12.080 --> 0:06:16.640 Russia launched its sort of biggest drone attack on Ukraine 0:06:17.560 --> 0:06:21.480 for some months. It's also the height of the summer 0:06:21.560 --> 0:06:25.440 fighting season, and I'm arguing that the period between now 0:06:25.640 --> 0:06:30.040 and November and maybe until Inauguration Day in January next 0:06:30.120 --> 0:06:32.960 year is going to see an uptick in geopolitical risk. 0:06:33.279 --> 0:06:37.040 And that matters for your listeners because they're all watching 0:06:37.080 --> 0:06:41.839 the FED. Conflicts are inflationary and this is the time 0:06:42.400 --> 0:06:43.920 you know to go for it. 0:06:44.480 --> 0:06:49.520 Hugely valuable, Tina Fordham, thank you so much for Global advisors. 0:06:49.520 --> 0:07:03.200 Really can't say forda global insight. Emily Rowland saying why 0:07:03.200 --> 0:07:05.520 am I here? She's a Johnnie a Cock and a 0:07:05.600 --> 0:07:09.800 major victory lab for Hancock, who have said quality big, 0:07:10.240 --> 0:07:14.600 stay with it. So I see the hysteria over Microsoft yesterday. 0:07:14.800 --> 0:07:17.120 I'm looking at the four accounting statements. I don't have 0:07:17.160 --> 0:07:22.480 every answer, but Jesus looked at pretty goods up sixteen percent, right. 0:07:22.960 --> 0:07:26.000 Absolutely, and the guidance was really strong too. Heading into 0:07:26.000 --> 0:07:28.520 twenty twenty five. And you look at earnings for tech 0:07:28.520 --> 0:07:31.880 companies this quarter, they're tracking to me up about eighteen percent. 0:07:32.040 --> 0:07:33.440 You're o rear, I'll take it. 0:07:33.920 --> 0:07:37.640 Meanwhile, you look at this massive rotation into small cap stocks, those. 0:07:37.480 --> 0:07:40.080 Earnings are down eighteen percent. Well get it. 0:07:40.080 --> 0:07:42.200 Paul's got any questions because he's got a triple as 0:07:42.240 --> 0:07:45.640 in video holding. But let me get one more in here, Emily. 0:07:45.720 --> 0:07:48.680 What I see is we're trying to figure out our 0:07:48.720 --> 0:07:52.080 new discounted cash flow. And the answer is with Microsoft, 0:07:52.120 --> 0:07:55.239 nobody's looking out seven years. What are they doing now? 0:07:55.800 --> 0:07:59.600 And as Nodella nailed yesterday, what are we doing next year? 0:08:00.120 --> 0:08:02.520 Maybe what we're doing twenty six is the perspective. 0:08:03.560 --> 0:08:05.920 Yeah, that's right. I mean, it's show me the money 0:08:07.000 --> 0:08:09.880 kind of period right now. For tech companies, and again 0:08:09.920 --> 0:08:13.040 the earnings are there. Yes, it's a multi year process 0:08:13.120 --> 0:08:16.200 to fully monetize the investment that many of these companies 0:08:16.240 --> 0:08:19.320 are making an AI, but we're going to get there. 0:08:19.400 --> 0:08:21.880 A lot was in the price, the valuations were extended. 0:08:21.920 --> 0:08:24.040 It doesn't surprise me that there's a little bit of 0:08:24.040 --> 0:08:26.840 profit taking in tech right now. But we remain overweight 0:08:26.840 --> 0:08:30.080 and we think it's a healthy little mini correction here. Again, 0:08:30.240 --> 0:08:31.920 as there was a lot in the price. It's an 0:08:31.960 --> 0:08:33.199 overowned part of the market. 0:08:33.280 --> 0:08:36.000 And we'll be Okay, what do you make of this? 0:08:36.320 --> 0:08:39.320 I guess what is really a rotation into some of 0:08:39.360 --> 0:08:43.040 these small cap sectors, just maybe some sectors that were 0:08:43.240 --> 0:08:45.720 maybe underloved here, what do you make of this rotation. 0:08:45.480 --> 0:08:46.840 Plut It's been really interesting. 0:08:46.920 --> 0:08:49.160 Small caps, as measured by the S and P six 0:08:49.280 --> 0:08:52.360 hundred are now up about ten percent on the month YEAP, 0:08:52.480 --> 0:08:54.440 while the S and P five hundred is flat, and 0:08:54.480 --> 0:08:56.600 if you look under the hood, it's all been driven 0:08:56.640 --> 0:09:00.760 from multiple expansion. The entire ten percent is p E expansion. 0:09:00.760 --> 0:09:02.920 And so I have like a little checklist for small 0:09:02.960 --> 0:09:04.839 caps what are some of the things that could be 0:09:05.200 --> 0:09:06.280 kind of supporting them? 0:09:06.320 --> 0:09:08.079 And I think about inflation. 0:09:08.200 --> 0:09:12.000 Well, we've seen two consecutive months of low inflation reading, 0:09:12.080 --> 0:09:13.199 so that doesn't make sense. 0:09:13.600 --> 0:09:15.920 Maybe some changes in earnings trends we just. 0:09:15.880 --> 0:09:18.640 Talked about that that's not happening. Maybe a shift in 0:09:18.679 --> 0:09:21.800 the macro backdrop. Nope, we're still in a late cycle environment. 0:09:22.080 --> 0:09:24.960 Maybe the bond market still pricing in two cuts. So 0:09:25.240 --> 0:09:28.400 nothing's really changed except maybe one thing, which is the 0:09:28.440 --> 0:09:31.560 odds of a Trump presidency have increased over the course 0:09:31.559 --> 0:09:33.680 of the month. So I think there's a sentiment driven 0:09:33.800 --> 0:09:38.440 rally that's politically driven around potential outcomes regarding the election 0:09:38.559 --> 0:09:40.120 that's causing sentiment to soar. 0:09:40.440 --> 0:09:41.120 We would fade it. 0:09:41.520 --> 0:09:43.880 Wells Thomas just mentioned the news flow is so heavy, 0:09:43.960 --> 0:09:46.160 we're barely touched on the fact that we've got a 0:09:46.160 --> 0:09:48.720 FED meeting today and we're going to hear from Chairman 0:09:48.800 --> 0:09:49.320 j Pal. 0:09:50.679 --> 0:09:50.959 Again. 0:09:50.960 --> 0:09:53.760 You mentioned the market's pricing in a couple of cuts 0:09:53.760 --> 0:09:56.839 this year. Is that enough for this market or how 0:09:56.840 --> 0:09:57.959 do you view the FED and what do you want 0:09:57.960 --> 0:09:58.520 to hear today? 0:09:58.600 --> 0:10:00.880 Yeah, it's whether or not Power is going to commit 0:10:01.360 --> 0:10:03.760 or whether he's going to keep playing the field if 0:10:03.760 --> 0:10:05.560 you will, So, is he going to commit to the 0:10:05.600 --> 0:10:08.280 September cut or is he going to wait until there's 0:10:08.320 --> 0:10:09.319 even more evidence? 0:10:09.360 --> 0:10:11.880 So, like the red Sox with the trading deadline. 0:10:11.840 --> 0:10:13.280 You knew you were going to go to the red 0:10:13.320 --> 0:10:17.040 sox at the Fed. Yeah, so it's real. That's what 0:10:17.080 --> 0:10:17.920 it's about right now. 0:10:17.920 --> 0:10:20.040 It's like, is Powell going to tell us with more 0:10:20.080 --> 0:10:23.120 certainty that he's confident that inflation is decelerating, that are 0:10:23.160 --> 0:10:26.000 more cracks in the labor mark market? September is a 0:10:26.040 --> 0:10:28.240 done deal? We think it should be. You know, the 0:10:28.240 --> 0:10:30.360 Fed funds rates at five and a half percent, core 0:10:30.440 --> 0:10:34.439 pcees at two point six percent. You're seeing again more 0:10:34.520 --> 0:10:39.480 and more evidence that deflation is presenting itself. But you 0:10:39.480 --> 0:10:43.320 know how how hawkish or dubbish is that message going 0:10:43.360 --> 0:10:44.840 to come across. 0:10:44.640 --> 0:10:46.440 The backdrop of this? And Paul and I have been 0:10:46.480 --> 0:10:49.199 waiting for the Sweeney's nailed. This is the two years 0:10:49.240 --> 0:10:52.680 coming in to four decimal points, the nominal ten years 0:10:52.720 --> 0:10:56.680 breaking down four point one two nine seven. I'm going 0:10:56.760 --> 0:10:59.120 to sell that as a four to twelve handle and 0:10:59.200 --> 0:11:02.199 the real yield elegantly comes in now a one eighty 0:11:02.280 --> 0:11:07.080 seven handle. What does that yield breakdown and fixed in 0:11:07.200 --> 0:11:09.120 come mean for the stock market. 0:11:09.480 --> 0:11:10.640 Yeah, it's interesting. 0:11:10.760 --> 0:11:15.120 You know, markets are still reacting and fairly positive way 0:11:15.240 --> 0:11:19.760 to lower bondylds. So there's still a kind of bad 0:11:19.800 --> 0:11:22.880 news for the economy is good news for market scenario, 0:11:22.920 --> 0:11:25.920 and there markets are still kind of sunning themselves on 0:11:26.040 --> 0:11:29.240 soft landing island right now. You know, you talk about 0:11:29.320 --> 0:11:32.000 vacation time, that's what it feels like because we have 0:11:32.120 --> 0:11:35.200 this kind of slow down in the economy that's not 0:11:35.559 --> 0:11:38.600 super slow, and there's nothing sinister that looks like is 0:11:38.679 --> 0:11:41.280 happening right now, So the Fed can do this kind 0:11:41.280 --> 0:11:42.640 of like I kind of think of it as like 0:11:42.679 --> 0:11:47.200 a nice guy cut starting in September, just because they can. Now, 0:11:47.240 --> 0:11:49.400 if you think that the Fed we can have this 0:11:49.520 --> 0:11:52.360 soft landing, that's fine, but you're kind of betting against 0:11:52.360 --> 0:11:54.360 the odds in a way because there's really only ever 0:11:54.400 --> 0:11:57.600 been one example of these kind of preemptive cuts, which 0:11:57.640 --> 0:12:00.240 was in the mid nineteen nineties. So we want to 0:12:00.280 --> 0:12:03.559 think about any backup in bond yield is an opportunity 0:12:03.640 --> 0:12:06.960 to lean in and lock in this elevated yield because 0:12:06.960 --> 0:12:10.480 we don't think bonds are priced for an economic contraction. 0:12:10.600 --> 0:12:13.839 So there's a nice opportunity there to get paid income. 0:12:13.480 --> 0:12:14.040 While you wait. 0:12:14.280 --> 0:12:16.920 Yeah, absolutely, so how much I mean again, on the 0:12:16.960 --> 0:12:19.720 two year treasury four point three five percent? Do I 0:12:19.760 --> 0:12:21.679 sit there and be quite comfortable or do I take 0:12:21.679 --> 0:12:22.560 some credit risk here? 0:12:22.840 --> 0:12:26.680 Yeah, we're underweight credit within fixed income just because there's 0:12:26.800 --> 0:12:29.880 really no risk being priced in. High yield bond spreads 0:12:29.880 --> 0:12:31.680 are at three hundred and six basis. 0:12:31.360 --> 0:12:32.240 Points this morning. 0:12:32.600 --> 0:12:35.480 That is well below the twenty year average of five 0:12:35.559 --> 0:12:38.000 hundred basis points, so there's not much being priced in. 0:12:38.080 --> 0:12:40.840 We looked at some data when we've been at spreads 0:12:40.840 --> 0:12:44.480 this tight. The forward looking returns are about flat on 0:12:44.520 --> 0:12:47.200 a twelve month basis. There's just not a lot to 0:12:47.240 --> 0:12:51.000 say about the return opportunity based on the fundamentals there. 0:12:51.400 --> 0:12:54.160 Why did the red Sox not pick up ges Chisholm 0:12:54.760 --> 0:12:57.880 and you're wired in it old and new, John Hancock. 0:12:58.040 --> 0:13:00.360 So the biggest mistake I made coming in here today, 0:13:00.400 --> 0:13:03.200 I studied everything from the Fed to the BOJ to 0:13:03.200 --> 0:13:04.040 the earnings. 0:13:04.080 --> 0:13:04.960 I have my number one. 0:13:05.080 --> 0:13:08.679 I forgot to study baseball, and that was the biggest 0:13:08.679 --> 0:13:09.640 mistake that I made. 0:13:09.520 --> 0:13:12.079 This regard to this is the trade deadlines over its 0:13:12.280 --> 0:13:15.000 exciting and the Yankees won four in a row. Against 0:13:15.160 --> 0:13:23.560 Philadelphia our conversation of the day on this tech frenzy. 0:13:23.760 --> 0:13:27.839 Aniragrana joins us from Chicago. Microsoft down seven percent now 0:13:27.880 --> 0:13:31.599 down three point four at percent. I found anerog the 0:13:31.760 --> 0:13:35.880 hysteria out on Twitter yesterday over a little bit of 0:13:35.920 --> 0:13:38.320 a miss and Azure, and then I see I think 0:13:38.360 --> 0:13:42.960 from amy hood that on Microsoft eight percent of capax 0:13:43.800 --> 0:13:48.320 is AI type. Does the public understand all of their 0:13:48.360 --> 0:13:51.319 capax is not going into artificial intelligence? 0:13:54.200 --> 0:13:56.160 It may not be directly tied to it, but at 0:13:56.160 --> 0:13:58.120 the end of the day, they have to increase cloud 0:13:58.160 --> 0:14:01.640 capacity for those workloads, even if it's not directly tied. 0:14:01.920 --> 0:14:05.079 Think about it this way. You have to digitize your processes. 0:14:05.360 --> 0:14:08.240 You have to upgrade to the cloud because without that 0:14:08.280 --> 0:14:10.480 you won't be able to run some of those workloads 0:14:10.600 --> 0:14:12.160 or analytics on top of it. 0:14:13.080 --> 0:14:14.440 So anurrag what's the street? 0:14:15.240 --> 0:14:17.079 Give us a sense of what the street's really thinking 0:14:17.080 --> 0:14:21.960 about Microsoft and the cloud and AI and Microsoft's position. 0:14:22.240 --> 0:14:26.320 Is the street generally confident that Microsoft is in a 0:14:26.680 --> 0:14:29.280 good position, maybe or maybe faces some risks. 0:14:30.480 --> 0:14:32.600 Yeah, I think from an analyst community point of view, 0:14:32.600 --> 0:14:35.400 we have a very good understanding of what's happening at Microsoft. 0:14:35.600 --> 0:14:38.400 Sometimes what happens is you have momentum investors who get 0:14:38.440 --> 0:14:40.600 in and they want an nvideo like wa are coming 0:14:40.640 --> 0:14:43.200 out of Microsoft. Now, that's not going to happen because 0:14:43.560 --> 0:14:45.960 for Microsoft it's a long journey. It's not going to 0:14:45.960 --> 0:14:48.360 be certainly somebody is going to buy so many chips 0:14:48.360 --> 0:14:51.680 and your revenue gets a boost. They have to build capacity. 0:14:51.960 --> 0:14:54.080 Then people are going to build workloads on it. And 0:14:54.120 --> 0:14:57.960 that's exactly what Microsoft explained yesterday that they will increase 0:14:58.280 --> 0:15:01.600 their capax and the second half of their fiscal year 0:15:02.320 --> 0:15:04.760 you will see an improvement in the cloud growth rate, 0:15:04.920 --> 0:15:07.880 and I think that pacified a lot of investors. Stock 0:15:08.080 --> 0:15:10.520 was down seven eight nine percent, but it's only down 0:15:10.520 --> 0:15:12.120 two and a half three percent at this point. 0:15:12.920 --> 0:15:14.480 What else are you looking for when when you see 0:15:14.480 --> 0:15:16.960 a Microsoft number cross the tape Aside from kind of 0:15:17.000 --> 0:15:19.600 this AI angle, I. 0:15:19.560 --> 0:15:22.400 Think this so far the biggest contribution for AI has 0:15:22.440 --> 0:15:25.440 been coming from open AI relationship and the workloads that 0:15:25.480 --> 0:15:28.400 are going on it. We really want to see how 0:15:28.480 --> 0:15:32.600 AI gets infused in other products across the Microsoft portfolio. 0:15:32.720 --> 0:15:35.400 We already know, you know a product like gethub copilot 0:15:35.600 --> 0:15:38.640 or office copilot, but we really need to see stronger 0:15:38.680 --> 0:15:41.760 adoption numbers from there, because down the road that's going 0:15:41.800 --> 0:15:44.120 to be the key bread and butter for Microsoft, and 0:15:44.160 --> 0:15:46.600 perhaps not so much directly coming from Open AI. 0:15:47.560 --> 0:15:49.840 Can we go to Meta? I mean, I guess metas 0:15:49.840 --> 0:15:52.520 we're not really on your watch, Enterog, but lump it 0:15:52.640 --> 0:15:56.560 any here with the knowledge you want to receive from 0:15:56.600 --> 0:15:57.840 Meta this afternoon. 0:15:59.360 --> 0:16:01.440 I think it's going to be a combination of capital 0:16:01.440 --> 0:16:04.200 expenditures and what they are doing for their AI and 0:16:04.560 --> 0:16:07.960 large language models as well as their ad revenue. I 0:16:07.960 --> 0:16:11.080 think this you can extend this discussion to not just Meta, 0:16:11.160 --> 0:16:14.160 but also on Amazon on Thursday, because even they will 0:16:14.200 --> 0:16:17.000 come out and say they are increasing the capital expenditures. 0:16:17.320 --> 0:16:20.200 But I think everybody really needs to recognize this thing. 0:16:20.560 --> 0:16:24.840 The capex expansion is happening now and the revenue will follow, 0:16:25.040 --> 0:16:26.880 and there is going to be a lag and mismatch 0:16:26.920 --> 0:16:30.120 between the two. You know, you could say capital outlays. 0:16:30.400 --> 0:16:31.680 So that kind of goes to the issue. 0:16:31.720 --> 0:16:34.040 I mean, part of the weakness that we've seen in 0:16:34.080 --> 0:16:37.000 Magnifson seven over the past month or so on AAQ 0:16:37.080 --> 0:16:39.560 has been that question you just raised about Okay, we 0:16:39.680 --> 0:16:43.280 get all the spending for AI but what's the ROI 0:16:43.360 --> 0:16:46.120 on that. How do you answer that question from investors? 0:16:47.680 --> 0:16:49.480 I think a lot of I said long term value 0:16:49.520 --> 0:16:52.440 investors would understand that you have to build the capacity 0:16:52.520 --> 0:16:55.640 to recognize that revenue growth. In addition to what you 0:16:55.680 --> 0:16:58.520 said about CAPEX, I think there is another factor that 0:16:58.600 --> 0:17:02.040 people are looking at a possible interest rate cut and 0:17:02.120 --> 0:17:04.320 what the impact of that would have on the small 0:17:04.320 --> 0:17:07.680 cap universe. We recently did a study where we saw 0:17:07.800 --> 0:17:11.480 the gap between the large cap valuation of technology and 0:17:11.520 --> 0:17:14.600 software companies is so much wider than the small caps. 0:17:14.800 --> 0:17:17.119 And the problem with the small caps is because of 0:17:17.160 --> 0:17:20.160 the economic slowdown, they have not seen that big AI 0:17:20.240 --> 0:17:21.560 bump that the big guys have. 0:17:23.000 --> 0:17:25.160 Rana, thank you so much for joining us. The news 0:17:25.160 --> 0:17:37.600 flow today just incredible. Right now, we're gonna get a 0:17:37.640 --> 0:17:40.960 brief from the best in Washington. Nancy Cook joins us 0:17:41.400 --> 0:17:45.200 to say she's our District of Columbia reporter. Doesn't give 0:17:45.240 --> 0:17:50.920 her due credit for following the election. Grand Nancy, when 0:17:50.960 --> 0:17:56.280 you saw the Bloomberg Morning consult pole, you know there's 0:17:56.320 --> 0:18:00.880 forty other polls coming out. What's different about this poll 0:18:01.320 --> 0:18:03.920 than the others? Now and in the future. 0:18:04.280 --> 0:18:06.200 Well, thank you so much for having me. I think 0:18:06.240 --> 0:18:09.240 what is different and new is that this is one 0:18:09.280 --> 0:18:12.520 of the first polls that we have seen from swing 0:18:12.560 --> 0:18:18.760 states since Vice President Kamala Harris became the presumptive Democratic nominee. 0:18:19.119 --> 0:18:22.359 And it's just really crucial because it shows that she 0:18:22.640 --> 0:18:26.719 has really closed the gap with former President Donald Trump 0:18:26.800 --> 0:18:30.479 in these swing states. It shows us that she is 0:18:30.600 --> 0:18:34.119 getting a lot of enthusiasm from Sorburban, women, young people, 0:18:34.240 --> 0:18:34.879 black people. 0:18:34.960 --> 0:18:35.399 Go ahead. 0:18:35.680 --> 0:18:38.359 Well, the criticism of the poll was it, when you 0:18:38.480 --> 0:18:40.320 go out and you poll people, you know, you get 0:18:40.359 --> 0:18:44.440 who you get. And typically polls I believe are more 0:18:44.520 --> 0:18:49.600 Democrats than Republicans and then they adjust for that. Do 0:18:49.680 --> 0:18:52.320 you have confidence in the polls, and I mean not 0:18:52.359 --> 0:18:55.680 only the Bloomberg Morning Consult poll but the whole racket 0:18:55.760 --> 0:18:58.840 of forty five sixty polls that we have in America. 0:19:00.280 --> 0:19:02.760 Well, I think polls have been really tricky, and you know, 0:19:02.800 --> 0:19:04.920 you raise a great point. I mean, they were certainly 0:19:05.680 --> 0:19:07.920 you know, have been wrong in the past. I think 0:19:08.000 --> 0:19:09.960 that what you can look at is that, you know, 0:19:10.000 --> 0:19:12.320 the New York Times in Siana College also did a 0:19:12.320 --> 0:19:15.800 poll last week showing, you know, Vice President Harris gaining 0:19:15.840 --> 0:19:18.840 gownd on Trump. And so while I wouldn't put stock 0:19:18.920 --> 0:19:22.360 in any individual poll, I think that you know that 0:19:22.400 --> 0:19:25.920 you can draw some trend lines based on the totality 0:19:25.920 --> 0:19:27.680 of what you were seeing. I think that we saw 0:19:28.280 --> 0:19:31.760 former President Donald Trump be super dominant the first half 0:19:31.760 --> 0:19:34.440 of this year, and I think that what we're seeing now, 0:19:34.480 --> 0:19:37.080 based on our poll but also other polls that have 0:19:37.119 --> 0:19:40.000 come out recently, is that Harris is going to give him, 0:19:40.040 --> 0:19:41.680 I think, much more of a run for his money 0:19:41.720 --> 0:19:42.440 than Biden did. 0:19:43.000 --> 0:19:46.399 Is any sense to is there any ability to get 0:19:46.440 --> 0:19:47.840 a sense of whether this is just kind of the 0:19:47.880 --> 0:19:52.359 honeymoon peria euphoria driving these numbers, or whether there's something 0:19:52.400 --> 0:19:53.000 deeper there. 0:19:54.880 --> 0:19:57.479 Well, I think that we won't know that until after 0:19:57.840 --> 0:20:01.679 the Democratic National Convention, which is in a few weeks. 0:20:02.600 --> 0:20:05.160 You know, there's certainly a honeymoon period. I think Democrats 0:20:05.160 --> 0:20:08.959 are wildly enthusiastic about her candidacy, but you know, she 0:20:09.000 --> 0:20:11.480 hasn't been under a ton of scrutiny yet, she hasn't 0:20:11.480 --> 0:20:13.760 picked a running mate. You know, she has started to 0:20:13.800 --> 0:20:16.159 do some campaign events, but she's not on the campaign 0:20:16.240 --> 0:20:19.120 trail day in and day out, or being asked questions. 0:20:19.200 --> 0:20:21.720 So I feel like you know how that plays in 0:20:22.119 --> 0:20:23.840 September is really an open question. 0:20:24.920 --> 0:20:29.240 So what is I guess that who is really supporting 0:20:29.280 --> 0:20:32.960 this strength in Harris? Do we have demographics that really 0:20:33.000 --> 0:20:33.639 stand out to you? 0:20:35.320 --> 0:20:35.639 Sure? 0:20:35.840 --> 0:20:35.959 So. 0:20:36.880 --> 0:20:38.639 A bunch of the demographics that have stood out to 0:20:38.680 --> 0:20:41.199 me from our poll is that she is picking up 0:20:41.240 --> 0:20:44.200 a lot of support with young voters who were very 0:20:44.240 --> 0:20:47.480 turned off by you know, Biden's handling what was happening 0:20:47.520 --> 0:20:50.879 in Israel and Gaza. She is turning out or a 0:20:50.920 --> 0:20:54.159 lot of people who are suburban women are expressing enthusiasm 0:20:54.280 --> 0:20:56.760 for her. The Trump people have had a very hard 0:20:56.840 --> 0:21:00.480 time winning those folks over, and then the True team 0:21:00.560 --> 0:21:03.480 was really hoping to make inroads with young black men 0:21:03.520 --> 0:21:06.520 in particular, and what we're seeing as black voters are 0:21:06.640 --> 0:21:10.040 very abused by her candidacy, and so those are all 0:21:10.119 --> 0:21:14.359 ways in which she could sort of rebuild the Democratic coalition. 0:21:16.080 --> 0:21:20.199 I saw Nancy that she amended something to do with 0:21:20.240 --> 0:21:22.399 oil production. I can't remember in the last couple of 0:21:22.440 --> 0:21:24.919 days because she's got to win Wisconsin or you know, 0:21:25.040 --> 0:21:28.800 oil in Pennsylvania. The details don't matter. But what matters 0:21:28.840 --> 0:21:32.720 here is does a pro like you suggest she will 0:21:32.720 --> 0:21:36.320 be a venn diagram with Biden policy, not of one 0:21:36.359 --> 0:21:39.760 hundred percent, but will she be like eighty percent Biden policy? 0:21:39.920 --> 0:21:40.960 Can you quantify that? 0:21:42.600 --> 0:21:44.600 So it's still that's a great question, Tom. I think 0:21:44.600 --> 0:21:49.360 it's still really early to tell. What I have been 0:21:49.359 --> 0:21:52.159 told from her advisors is that she's not, for instance, 0:21:52.200 --> 0:21:54.040 going to come out with like a whole new economic 0:21:54.040 --> 0:21:57.840