Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amerie Hordern. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
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Speaker 2: Terminal and the Bloomberg Business App. Going into the FED
Speaker 2: decision with a quarter point cut expected, the path forward
Speaker 2: is much much murkier, Lisa Shalladan Morgan Stanley saying, the
Speaker 2: implication of twenty twenty five is that it will be
Speaker 2: tough for more cuts and disinflationary growth acceleration to both
Speaker 2: play out. We believe that growth will likely disappoint first,
Speaker 2: and further FED action will be constrained. Lisa joins us,
Speaker 2: now for more. Lisa, It's good to see you.
Speaker 3: Great to see you, Jonathan.
Speaker 2: Let's build on that. Why will further FAT action be
Speaker 2: constrained in twenty twenty five?
Speaker 4: So our perspective is we're already seeing inflationary pressures built.
Speaker 4: You know again, I know that the traditional economists among
Speaker 4: us like to you know, take apart the data to
Speaker 4: fit the narrative that you know that they've assumed. But
Speaker 4: when we just look at the top line data, we've
Speaker 4: had four months of accelerating core CPI data, flat flat out.
Speaker 4: And that's with the advantage and the tailwind of a
Speaker 4: twenty percent drop in oil prices year over year. If
Speaker 4: in fact, oil prices have bottomed out because global growth
Speaker 4: has bottomed out, and that if we assume that some
Speaker 4: of the cuts that have been put put into the
Speaker 4: global system start to take effect in twenty twenty six,
Speaker 4: if we get a little bit of stimulus out of China,
Speaker 4: if oil starts coming back, and we look at some
Speaker 4: of the dynamics and inflation, we could have very sticky inflation.
Speaker 3: Last year.
Speaker 4: I mean this last print, you had goods prices up,
Speaker 4: and food and grocery prices led the way.
Speaker 2: Bigger not hatsa was a thing for twenty twenty four. Yes,
Speaker 2: you've referenced that in your note. Yes, why do you
Speaker 2: think that changes? What underpins that change going into next year?
Speaker 2: Bigger and hatsa.
Speaker 3: Yeah.
Speaker 4: So you know, our senses that animal spirits are real clearly,
Speaker 4: you know, there's an enthusiasm and an expectation.
Speaker 3: You know that folks should be investing.
Speaker 4: But at the same time our senses that demand can
Speaker 4: out strip supply. Here we continue to have this have
Speaker 4: and have not economy where you know, the the largest corporations,
Speaker 4: the richest households are somewhat you know, interest rate insensitive,
Speaker 4: and they've been powering consumption in this economy really for
Speaker 4: two and a half to three years now. And the
Speaker 4: sentiment among those two cohorts is pretty strong right now.
Speaker 1: So when you start to talk about this idea that
Speaker 1: we could see downside to growth and that we could
Speaker 1: see more weakness than people expect with ongoing stickiness to inflation,
Speaker 1: I mean that kind of sounds like dreaded stagflation. Is
Speaker 1: that kind of where you're going with us?
Speaker 4: It is, and it's one of the things you know
Speaker 4: that we've kind of said a sequencing will matter.
Speaker 3: You know, we expect that that we're.
Speaker 4: Going to get a barrage literally a machine gun of
Speaker 4: policy proposals, right you guys, you know, as journalists are
Speaker 4: accustomed to the ten headlines a day and he tries
Speaker 4: to figure out, okay, which four stick of the ten,
Speaker 4: and then he goes with those four in another six
Speaker 4: the next day.
Speaker 3: Our best guess is that that barrage.
Speaker 4: Is going to create a level of noise that does
Speaker 4: undermine some of that animal spirits and creates uncertainty for
Speaker 4: the other sixty percent of the economy, the low end consumer,
Speaker 4: the smaller cap companies, because they can't figure it out.
Speaker 4: And so I think it's that that we're going to
Speaker 4: see early in year. There's an unbelievable, you know sense that, hey,
Speaker 4: consumers are going to get tax cuts now, they're not
Speaker 4: not in twenty twenty five, where it's going to be
Speaker 4: on a on a on a derivative basis, on you know,
Speaker 4: the first and second derivative or the rates of change.
Speaker 5: Right, your taxes are going to be exactly the same.
Speaker 4: In twenty twenty five. Right, there's no talwind. Right, that's
Speaker 4: all coming in twenty twenty six.
Speaker 1: And this is the reason why in some ways you're
Speaker 1: advocating to unwind some of the Trump trades that.
Speaker 5: People have put on.
Speaker 3: Can you talk about.
Speaker 1: Which you think are most vulnerable to the reality check
Speaker 1: of sequencing to the reality check of the delay of
Speaker 1: how long it will take to implement.
Speaker 4: So look, I think that you know, some of these
Speaker 4: Trump trades have been so staggering it's almost obvious.
Speaker 3: Uh So, uh, you know, the the.
Speaker 4: Cryptocurrency trades, you know, up fifty percent in fifty trading days, extraordinary.
Speaker 6: Uh.
Speaker 4: You know, we have you know, Taesla similar type of move.
Speaker 7: Uh.
Speaker 4: You know, I think some of the small cap move
Speaker 4: has begun to fade.
Speaker 7: Uh.
Speaker 3: You know, in the last ten days.
Speaker 4: Our best gas is that that will that's the fading
Speaker 4: of that small cap trade is what reflects this potential
Speaker 4: stagflation that hey, wait a minute, everything's great, but maybe
Speaker 4: it's not great for us, you know, because we're still
Speaker 4: you know, broadly a set of unprofitable companies that have
Speaker 4: you know, struggled to deliver upside surprise and earnings.
Speaker 5: So do you still like gold?
Speaker 4: We still do like gold here and and and the
Speaker 4: for us, the gold story really is about inflation and
Speaker 4: dollar debasement. It's it's a lot about this debt and
Speaker 4: deficit story. Again, the bond market it has sniffed out
Speaker 4: this joke and on various days, you see, you know,
Speaker 4: you know, uh, some folks trying to express a desire
Speaker 4: for term premium in the long end to the curve.
Speaker 4: Our best guess is, as these debates get underway, the
Speaker 4: debt and deficit storyline is going to have to So
Speaker 4: do you think get higher probra.
Speaker 8: The peak dollar right now?
Speaker 4: I don't know if we're probably close to peak dollar,
Speaker 4: but look, I think a lot of things are at
Speaker 4: play here, and one of the things that I think
Speaker 4: is a profound risk. Again, this is not a market
Speaker 4: that's pricing many risks, but we have an extraordinarily bifurcated
Speaker 4: currency market around the world where the dollar is strong
Speaker 4: versus virtually every other currency.
Speaker 3: If in fact, you know, we come out, you know.
Speaker 4: On day one after the inauguration and are extraordinarily aggressive
Speaker 4: with China. I think that there's a non zero risk
Speaker 4: that China could come back and say, okay, we're devaluating.
Speaker 3: A devaluation of.
Speaker 4: The room and bee would be hugely destabilizing across the
Speaker 4: global trade. And you know, those types of risks are
Speaker 4: just not being priced right here. So, you know, is
Speaker 4: the dollar at peak at peak strength? I'm not sure,
Speaker 4: but I think we're getting close and we're just at
Speaker 4: this very fragile and unstable place.
Speaker 1: If someone were to hear everything that you put together,
Speaker 1: they would say, wow, what a raging bear. Oh my god,
Speaker 1: you must be predicting forty two hundred for next year.
Speaker 3: You're out at all.
Speaker 1: Okay, So let's talk about why not, because basically you're
Speaker 1: talking about debasement of the dollar and the end of
Speaker 1: the Trump trade and sagflationd.
Speaker 5: So give us where you really are with this.
Speaker 4: So look, I think that there are risks out there
Speaker 4: that we want to see priced. At the same time,
Speaker 4: there is value because this is an extraordinarily bifurcated market.
Speaker 4: So we're saying that this is going to be an
Speaker 4: environment where there are winners and losers. So we do
Speaker 4: see some winners, right, So we see financials, we see
Speaker 4: domestic industrials, We see portions of consumer services that again
Speaker 4: are domestically based as big winners here. We recently upgraded
Speaker 4: mid cap growth companies as areas. We're you know, we've
Speaker 4: built some diversification. We're owning, you know, Japan, we're owning
Speaker 4: some parts of emerging markets. So we think that there
Speaker 4: are things to do out there. We think that this
Speaker 4: is a index that next year can chug along at
Speaker 4: at the index level, maybe give you five to seven percent.
Speaker 4: But at the same time, what we're saying is, if
Speaker 4: you're getting five to seven percent in a stock market
Speaker 4: that is extraordinarily richly priced on extraordinarily ambitious expectations, why
Speaker 4: not own a better risk adjusted return and an investment
Speaker 4: grade bond and clip the coup and just you know,
Speaker 4: make it to the end of the year.
Speaker 2: You mentioned them what you like in the m which you.
Speaker 4: So so so we've we've been long bulls on India.
Speaker 3: We know India has stalled out.
Speaker 4: We think Mexico is way over sold, and that by
Speaker 4: the end of the year, you know, we're going to
Speaker 4: a better footing there and some of the tensions.
Speaker 3: With the US will be mitigated.
Speaker 5: You know.
Speaker 4: Brazil obviously, you know now significantly tightening. We believe that
Speaker 4: that's going to get priced and that there's going to
Speaker 4: be opportunities, you know, to buy some value in Brazil.
Speaker 2: I've got the foreign exchange screen in front of me.
Speaker 2: Yees today, imagine markets. It's amazing. The peso in Mexico.
Speaker 2: You have sixteen percent in Brazil, the currency down by
Speaker 2: more than twenty Likewise, in Argentina go up to Russia
Speaker 2: down thirteen percent, in Hungary down eleven, Colombia down eleven,
Speaker 2: double digit moves in foreign exchange in AM.
Speaker 1: You have to wonder at what point you hit sort
Speaker 1: of a bottom.
Speaker 3: Given the fact that you have a lot of.
Speaker 1: Potential trade wars being priced in.
Speaker 2: Yeah, Lisa Schanott, it's going to see it as We
Speaker 2: appreciate your time. Thank you, Thank you, Lisa Shanott. There
Speaker 2: of Morgan Stanley, we began at this hour, which stocks
Speaker 2: hire ahead of the final FED decision of the year.
Speaker 2: Victoria fanatis a cross mark, saying the problem is that
Speaker 2: both sides of the dual mandate are hating up. The
Speaker 2: question comes down to is the Fed still restrictive? And
Speaker 2: according to Powell, the answer is yes. Victoria joins us
Speaker 2: now for more. What's the answer, recording.
Speaker 7: To you, I don't think we're as restrictive as the
Speaker 7: FED wants us to believe.
Speaker 5: I mean, you look at growth.
Speaker 7: You've got Atlanta Fed GDP.
Speaker 5: Now what three point three percent? You've got inflation?
Speaker 7: We had CPI and PPI reports come out, big revisions there,
Speaker 7: inflation being sticky, and you have really high centiment right now.
Speaker 5: Look at NFIB small business three year high on cinniment.
Speaker 7: You've got bull bear ratios very strong on the bulls. Now,
Speaker 7: that can be a contrarian signal. I get that, but
Speaker 7: you still have really strong sentiment that.
Speaker 5: Is out there.
Speaker 7: With these elements, I don't know how you can say
Speaker 7: this economy feels restrictive. I say, yes, there are underlying
Speaker 7: elements right under the surface that I think will start
Speaker 7: bubbling up that I don't think it will be until
Speaker 7: early next year.
Speaker 2: Isn't that disconnect just super boolished So long as the
Speaker 2: Federal Reserve chair thinks they're restrictive and keeps kind of
Speaker 2: interest rights, isn't that just the green light just to
Speaker 2: keep on buying?
Speaker 7: It is for now, and I think that's why you're
Speaker 7: seeing the market.
Speaker 5: Continue to move up.
Speaker 7: Yes, the past few days we've had a little bit
Speaker 7: more volatility in play, but the market is going and
Speaker 7: you've got.
Speaker 5: The seasonality along with it. You've got earnings.
Speaker 7: Expectations that people think, I think a little optimistic, but
Speaker 7: double digit growth.
Speaker 5: Again next year in earnings.
Speaker 7: You're not having the labor market completely fall apart. So
Speaker 7: I do think there's elements that are tail winds to
Speaker 7: this economy, and you add Powell in which I know
Speaker 7: you said you think it'll be boring Amory, but I
Speaker 7: do think he's going to come out and say the
Speaker 7: same we're data dependent, recalibration, blah blah blah, and everyone's
Speaker 7: just going to look to the dot plot. Regardless of
Speaker 7: what Jim Bullard said earlier. They're going to look to
Speaker 7: that dot plot and go, what are you really thinking.
Speaker 7: I don't think it's going to be boring. I think
Speaker 7: it's going to be fascinating.
Speaker 1: And I cannot wait for the meeting and the dot
Speaker 1: plot and the press conference afterwards.
Speaker 5: In particular because.
Speaker 1: As you're saying that this is a tailwind essentially the
Speaker 1: idea of a FED cutting.
Speaker 5: There is a question of for what assets.
Speaker 2: Is it a.
Speaker 1: Tailwind for stocks, is it a tailwind for bonds at
Speaker 1: a time or you have a real discussion longer term
Speaker 1: about whether this actually increases the chance of stickier inflation
Speaker 1: over twenty twenty five and twenty twenty six. What do
Speaker 1: you expect to be the reaction in the bond market,
Speaker 1: particularly the longer end.
Speaker 5: Should this be a FED that does lean more.
Speaker 1: Duvish than say, what the market is expecting Yeah.
Speaker 7: If you get a more duvish feel to the press conference,
Speaker 7: I do think you'll have equity markets rally a little
Speaker 7: bit and bond yields will probably come down, at least
Speaker 7: in the near term. I think they come down a
Speaker 7: little bit with the expectation that the Fed will continue
Speaker 7: to cut. However, bond vigilanes are not going to be
Speaker 7: happy with that, so let's give it a little bit
Speaker 7: of time. I think they'll come in, they'll start singing,
Speaker 7: and we'll see yields move up intermediate term from there.
Speaker 7: But the initial reaction if the Fed is devish, I
Speaker 7: think you'll see yields come down a little bit.
Speaker 1: That raises this question about whether the market does not
Speaker 1: believe inflation to actually be a real threat.
Speaker 5: I mean, which is it.
Speaker 1: It seems like there are different messages from different asset classes.
Speaker 1: In the bond market, it seems like there isn't a
Speaker 1: great deal of concern, but it's definitely a sense that
Speaker 1: things are stickier. And then the stock market, they're just saying,
Speaker 1: we don't care. If it's mildly inflationary, that's great, let's
Speaker 1: go right.
Speaker 7: And there's other elements that could cause inflation to go high.
Speaker 7: It's why it's such a difficult story right now. I mean,
Speaker 7: we don't know what tariffs are going to do exactly.
Speaker 7: We don't know what kind of corporate tax cuts or
Speaker 7: individual tax cuts are coming in, and is that going
Speaker 7: to be inflationary. I think the key to a lot
Speaker 7: of this, though, is productivity. That can really be the
Speaker 7: element that comes in and buffers inflation and helps growth
Speaker 7: move higher. So if the expectation is that you're going
Speaker 7: to get some productivity coming in, maybe that's one reason
Speaker 7: why the markets are not as concerned right now with
Speaker 7: what inflation is saying.
Speaker 3: Well, J.
Speaker 8: Powell won't assume what Trump two point zero will look like,
Speaker 8: but the market certainly is what sectors do you think
Speaker 8: will do well next year?
Speaker 7: A lot of it depends on the policies that we
Speaker 7: see come through, but I think you can imagine we'll
Speaker 7: probably have capex.
Speaker 5: Stronger going forward.
Speaker 7: If you have federal spending come down, that helps on capex,
Speaker 7: It helps corporations in regards to margin. So I think
Speaker 7: you'll see industrials do well. I've liked financials all year.
Speaker 7: It's been a story we've had. I think you'll continue
Speaker 7: to see financials do well. They've had a little bit
Speaker 7: of consolidation, but you have that deregulation story coming in.
Speaker 7: You have a positive yield curve lone growth should grow
Speaker 7: M and A should grow. So that gives you some
Speaker 7: bumps there. On financials as well. We don't invest in crypto,
Speaker 7: so I'm not going to say that, but it's been
Speaker 7: going a little crazy.
Speaker 8: You like indust Fill's because potentially the tax rate story right,
Speaker 8: tax rate in Capex, I think we continue to see
Speaker 8: growing onshoring.
Speaker 5: Well, what about tariffs, Yeah, I mean I think we.
Speaker 7: Have to separate the tariff story out, and you probably
Speaker 7: know better than I do when we look at the
Speaker 7: history of this. I think when you're talking about tariffs
Speaker 7: as it relates to China, that's one story. I think
Speaker 7: we can assume that that's going to be pretty quickly
Speaker 7: after January twentieth, we're going to see some movement there.
Speaker 5: When you're looking at tariffs for the rest of the world.
Speaker 7: I know there's been a lot of talks in the
Speaker 7: conversations with Canada and the conversations with Mexico, but I
Speaker 7: think that's a different story and I wouldn't anticipate we're
Speaker 7: going to see those come to fruition as quickly or
Speaker 7: maybe as high a level of tariff is what we're
Speaker 7: hearing right now.
Speaker 3: Let's talk about breath, bad breath.
Speaker 1: We've been seeing a lot of bad breath over the
Speaker 1: past twelve days, throughout the entire month of December, and
Speaker 1: it raises a question, is this a taste of what's
Speaker 1: to come next year or if this basically is just
Speaker 1: a breather of the Trump trade and it will reassert
Speaker 1: itself come twenty twenty five.
Speaker 5: Where do you fall on that.
Speaker 7: I think we do have to be a little bit
Speaker 7: concerned here. I know we're having a little revival here
Speaker 7: and tech names are doing well, yes, and videos pulling back,
Speaker 7: but Broadcom's stepping in, so we're seeing those go. But
Speaker 7: then you look at how much concentration there is in
Speaker 7: these names. I mean top ten names are thirty seven
Speaker 7: thirty eight percent of the weight of the S and
Speaker 7: P five hundred, so you don't have that diversification. You're
Speaker 7: seeing a little bit more breadth down cap But I
Speaker 7: think we have to be concerned when we hit next
Speaker 7: year and you have the debt sealing crisis come in
Speaker 7: and we start to see tariffs go into play. I
Speaker 7: think we have a little more volatility next year. I
Speaker 7: don't think this is just a small pause and then
Speaker 7: we're going to go full on bowl market from here.
Speaker 7: I do think there are some concerns that we have
Speaker 7: to be leary about.
Speaker 1: What's the hedge at a time where there's equal risks
Speaker 1: of both some sort of acceleration and inflation or a downturn.
Speaker 7: For us and for our clients, it's really being diversified.
Speaker 7: So not just in your stock picks that you have,
Speaker 7: but yes, we want to be in the market. You've
Speaker 7: got tail when's going right now. I mean path of
Speaker 7: least resistance is higher for now, So you don't want
Speaker 7: to ignore that you want to be.
Speaker 5: In that market.
Speaker 7: But we like those areas we talked about put some
Speaker 7: names in financials, look at some of the industrial's longer
Speaker 7: term play. You know, I'm a fixed income person, so
Speaker 7: I think you still lock in some of these rates.
Speaker 7: We maybe go up to a four seventy five or
Speaker 7: so on the tenure. I think you can lock that
Speaker 7: in because with global rates as low as they are,
Speaker 7: I mean you look at Germany like two and a half, right,
Speaker 7: we look and see what's happening in China.
Speaker 5: I think you can capture some of that as well
Speaker 5: and have some.
Speaker 8: Exposure to SMB talking about how negative rates do work.
Speaker 8: Do you like anything when you're looking at diversifying outside
Speaker 8: of the United States, It's tough right now.
Speaker 7: I would have said a few months ago, Yes, put
Speaker 7: your toe into Europe. I think that they're going to
Speaker 7: start to see things with the ECB cutting rate.
Speaker 5: But the issues that we're.
Speaker 7: Seeing out of France, the issues that we're seeing out
Speaker 7: of Germany, the poor manufacturing there. I mean, we have
Speaker 7: it here, but it's even worse there. We're seeing a
Speaker 7: two hundred and thirty basis point differential between UK and
Speaker 7: German ten years.
Speaker 5: I think you have to be concerned.
Speaker 7: I need to see a little bit more positive movement
Speaker 7: coming out of Europe before I think you go there
Speaker 7: and Asia. I think you know there's some concerns there.
Speaker 7: In China as well, domestic demand is really slow. We
Speaker 7: saw it in retail sales. They had the highest month
Speaker 7: of outflow, its like forty six billion last month, So
Speaker 7: I think there's some concern there.
Speaker 5: I think you got to stick with you for now.
Speaker 2: Disinflation redflation rey traps are difficult to get out of.
Speaker 2: Japan lift it went through it for a while. We've
Speaker 2: seen that start to take place in China. Is that
Speaker 2: what that shot of Chinese government bond yot is all about?
Speaker 2: Somebody says, I think that's part of it.
Speaker 7: But I also think when they're looking at tariffs that
Speaker 7: could be coming, you see some flight out for that
Speaker 7: reason too.
Speaker 5: There's some concern you have China.
Speaker 7: Saying that they're going to be more proactive in regards
Speaker 7: to the stimulus that they put forward.
Speaker 5: They OpEd their federal deficit.
Speaker 7: They're saying it's going to be four percent now next
Speaker 7: year instead of three percent. Not a huge move, but
Speaker 7: they're trying to do some things. There is somewhat of
Speaker 7: a trap there. You have to be Laria.
Speaker 2: Bond market doesn't believe them, looking at that shop doesn't
Speaker 2: believe them.
Speaker 5: Untill and neither do a lot of other people.
Speaker 1: I mean that there is sort of a sugar high
Speaker 1: the equity markets perhaps, but realistically, are they going to
Speaker 1: be able to juice growth at a time or consumers
Speaker 1: are reluctant to spend that ultimately is the question.
Speaker 2: Victoria good to say to catch out. Thanks for being here,
Speaker 2: Victory Ferinandez, there a Crossmark Global. Anna Nikolaevsky is the
Speaker 2: founder and CIO of long short firm Axle Capital Management
Speaker 2: and has been bending on the name since twenty twenty
Speaker 2: three and place to say that Ana's with us now
Speaker 2: and a good morning.
Speaker 5: Good morning, how are you? Thanks for having me to you.
Speaker 2: It's been a great year for sun chip makers, but
Speaker 2: not all true. It depends what you're exposed to PC,
Speaker 2: smartphone data centers. When we talk about Micron, what kind
Speaker 2: of exposure are we talking about.
Speaker 6: I think at the moment, people are expecting the quarter
Speaker 6: to have up asps in the five percent range. I
Speaker 6: think the XP's are going forward may actually be flat
Speaker 6: to down and you're probably not going to see your
Speaker 6: recovery until the back half of twenty twenty five because
Speaker 6: there are going to be a little bit of a
Speaker 6: push out for smartphones and PCs at the moment.
Speaker 2: What is it about the back end of twenty five
Speaker 2: where you start to get a better tail went for
Speaker 2: those kind of businesses.
Speaker 6: There's going to be a replacement cycle across smartphones.
Speaker 5: Across smartphones and PC.
Speaker 6: I think at the moment you are not seeing one
Speaker 6: hundred percent adoption by the consumer of AI PCs I
Speaker 6: think Best Buy has hired several thousands of people to
Speaker 6: help train consumers on the aipcs. But there's no major
Speaker 6: major uptake right now for the Christmas season as far
Speaker 6: as I'm hearing, So there may be an uptick later
Speaker 6: on next year when there's a natural upgrade cycle for
Speaker 6: enterprise and consumer.
Speaker 1: What's fascinating to me is that people have been trying
Speaker 1: to pick the next Nvidia, the next big winner from
Speaker 1: the whole chip cycle, and the fact that we've seen
Speaker 1: some real massive winners. Broadcom seems to be the latest superstar.
Speaker 1: We've just seen this moonshot in the shares with them
Speaker 1: falling right behind Tesla as sort of the Magnificent eight,
Speaker 1: and people are playing around with what the name could be.
Speaker 1: What gives you confidence that Micron's growth has that type
Speaker 1: of moonshot at a time where people are trying to
Speaker 1: imagine what the sort of evolution of AI adoption looks like.
Speaker 6: I think when I think of Micron, I think of DRAM.
Speaker 6: I think of a global commodity that is actually going
Speaker 6: to be benefiting.
Speaker 5: From some of the US chip stimulus.
Speaker 6: But I think long term, you're going to see more
Speaker 6: and more DRAM across the board and everything.
Speaker 5: Memory is extremely important.
Speaker 6: So I think about Micron in terms of that long
Speaker 6: term cycle that right now probably is going to decline
Speaker 6: a little bit, but will come back up again later,
Speaker 6: although last year Micron was telling us that twenty twenty
Speaker 6: five will be the peak. So it's a function of
Speaker 6: what overall tech adoption will be like in terms of hardware.
Speaker 1: When you talk about your investments, you're investing on the
Speaker 1: tech side with Micron, but you're also very low tech
Speaker 1: with respect.
Speaker 3: To just what people buy every day.
Speaker 1: Maybe some of the nature Valley bars that some people
Speaker 1: like and hogandize that some people like and enjoy. Its thankful,
Speaker 1: Actually in our household it is a staple.
Speaker 2: And we got a lot of suce across the amount
Speaker 2: of snice for America, and that's okay, that's what they
Speaker 2: want to hear.
Speaker 1: Some people grow up with lucky charms and turn out
Speaker 1: just fine.
Speaker 5: But I will just say, how much are you.
Speaker 1: Really going towards some of these staples and why now.
Speaker 6: We've taken a very conservative approach to investing right now
Speaker 6: where we have large holdings in BJ in Costco, in
Speaker 6: Walmart across the board. One of the reasons for that is,
Speaker 6: we're trying to go to where the puck is going,
Speaker 6: and at the moment we're seeing a slowdown in AI adoption.
Speaker 6: I think we're seeing the opposite of the FOMO that
Speaker 6: we saw in the beginning of last year, where managements
Speaker 6: were virtually throwing money at GPUs. It was all about
Speaker 6: speed and scale, and this year I think we've seen
Speaker 6: a significant transition in terms of how are you going
Speaker 6: to monetize this AI?
Speaker 5: What is really what is it.
Speaker 6: Going to cost, what is the must have app and
Speaker 6: what is it going to cost on a long run
Speaker 6: basis to operate the AI once you get past the
Speaker 6: training part.
Speaker 8: These names Cosco, Walmart, Target, it's where you can find
Speaker 8: good deals precisely.
Speaker 5: Do you see you slow down in the consumer?
Speaker 6: I think we're seeing a slow down to the consumer already.
Speaker 6: I went to buy some coffee the other day and
Speaker 6: a pack of twenty Starbucks CA cups cost me forty dollars,
Speaker 6: So I think that everyone's kind of migrating towards cost saving.
Speaker 6: But I'm literally thinking about what's going to happen to
Speaker 6: the S and P If there is a slow down
Speaker 6: in tech, where will that money migrate and to me,
Speaker 6: that's going the money is going to migrate towards more conservative,
Speaker 6: stable cash flow generating areas of the market. That being said,
Speaker 6: I think that Trump is one hundred percent pro the market,
Speaker 6: and he's surrounded by extremely, extremely smart people. I think
Speaker 6: very highly of Scott Bessont. I think Elon Musk is
Speaker 6: one of the greatest innovators just beyond this generation obviously,
Speaker 6: maybe of all time. So I'm very impressed by the
Speaker 6: team that he's assembled. But that being said, I think
Speaker 6: that technology is on a cycle of its own, and
Speaker 6: we're seeing changes in terms of focus ROI. We're looking
Speaker 6: at intellectual property and security issues to consider, and also
Speaker 6: in terms of AI data governance also needs to be addressed.
Speaker 2: You've been super gracious with your time already this morning,
Speaker 2: but this is not the reason you're with us. You're
Speaker 2: with us because you're passive supplying the robin hood. Stop
Speaker 2: picking contest whereby I have to pick one long one
Speaker 2: shot and see who wins out of six months, we
Speaker 2: can put the later board up on the screen. Can
Speaker 2: you share with us your longer shot and what's behind
Speaker 2: each one of those pegs?
Speaker 6: So my long is BJ just primarily generates a lot
Speaker 6: of cash flow, and I think that if GDP does
Speaker 6: slow down, I think the stock will be pretty resilient.
Speaker 6: My short is in technology. As I said, I think
Speaker 6: you're going to see a slow down. I think right now,
Speaker 6: when you're looking at prices of GPU rentals, they've come
Speaker 6: down pretty considerably because there's a lot of server optimization,
Speaker 6: and once you've stopped trying to train your AI, you
Speaker 6: may have excess GPUs that now you're starting to re
Speaker 6: rent to other people. So now it looks like there's
Speaker 6: a lot more competition on the GPU rental front. It's
Speaker 6: a longer term that's extremely positive because it's going to
Speaker 6: lower the barriers to entry for new companies to come
Speaker 6: to train and create new business models.
Speaker 5: But in the short term.
Speaker 6: That may create some pressure for data centers and the
Speaker 6: chip manufacturers.
Speaker 1: That is fascinating to me. How much do you think
Speaker 1: that that is underappreciated right now? I mean that sort
Speaker 1: of speaks to the short position. Why do you think
Speaker 1: that's overlooked?
Speaker 6: I think the CEO of Microsoft mentioned it last week
Speaker 6: when he said there's no longer a chip shortage. I
Speaker 6: think we were chip constraint for eighteen months. But I
Speaker 6: think that started to resolve itself probably in the middle
Speaker 6: of this year, and now I think volumes are coming
Speaker 6: to the market and you're seeing a large reseller market
Speaker 6: in supply. Come on to eBay and Ali Baba of
Speaker 6: entire GPU clusters, which is going to depress pricing.
Speaker 2: And it's all for a worthy cause.
Speaker 5: So it's good to see you and thank you for
Speaker 5: Shane so much.
Speaker 2: Thank you very much. That was Anna Nikola Yeskivi of
Speaker 2: Axel Capital Management. This is the Bloomberg Surveillance podcast, bringing
Speaker 2: you the best in markets, economics, and geopolitics. You can
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