WEBVTT - PCE Reaction and US Eco Outlook 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.800 --> 0:00:17.880 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business app. 0:00:22.320 --> 0:00:25.640 Listen on demand wherever you get your podcasts, or watch 0:00:25.720 --> 0:00:27.040 us live on YouTube. 0:00:27.440 --> 0:00:30.080 Your Quick Brief with Rob sick and p Gum here. 0:00:30.640 --> 0:00:32.760 I just as a general statement, what are you going 0:00:32.840 --> 0:00:34.879 to look at within the wall of data here in 0:00:34.960 --> 0:00:37.800 four minutes? What matters to you? Well? 0:00:37.880 --> 0:00:40.120 I think the key is on the activity side. Things 0:00:40.120 --> 0:00:41.800 are holding up well, so I think we're gonna get 0:00:41.840 --> 0:00:42.440 jobless claims. 0:00:42.440 --> 0:00:43.280 Those will look good. 0:00:43.560 --> 0:00:45.680 I think on the spending side, you're seeing the consumer 0:00:45.760 --> 0:00:48.280 show some signs of strain but holding in pretty well. 0:00:48.440 --> 0:00:50.919 So it really comes down to the inflation numbers. We're 0:00:50.960 --> 0:00:53.159 looking for zero point three to five percent month over 0:00:53.240 --> 0:00:55.960 month core PC, three point four percent year every year. 0:00:56.360 --> 0:00:58.520 Looking at the details will be important. When's driving that, 0:00:58.720 --> 0:01:01.320 But that's staring stories as. 0:01:01.240 --> 0:01:04.160 Pad keeps saying, are we peaking inflation? 0:01:04.840 --> 0:01:07.199 I think at the end of the year we're closer 0:01:07.280 --> 0:01:09.160 to three percent on core PC, so you're going to 0:01:09.200 --> 0:01:12.400 get some gradual disinflation in the back half but you know, 0:01:12.440 --> 0:01:15.600 to me, the risks are heavily skewed to the upside 0:01:15.600 --> 0:01:18.440 on inflation. All the leading indicators I look at for 0:01:18.560 --> 0:01:22.760 consumer inflation, things like the producer price index, surveys of 0:01:22.840 --> 0:01:26.000 supply chain strains, survey of prices, all those things still 0:01:26.040 --> 0:01:28.240 look quite firm. So I don't have a lot of 0:01:28.280 --> 0:01:31.039 confidence that we're going to get that gradual disinflation in 0:01:31.040 --> 0:01:32.640 the back half. And if you look at the FED, 0:01:32.680 --> 0:01:34.880 they had a much higher forecast for core PC by 0:01:34.880 --> 0:01:36.880 the end of the year. I think that's quite possible 0:01:36.880 --> 0:01:38.720 with some of the leading indicators that we're seeing. 0:01:39.120 --> 0:01:42.880 Has to FED ever, address the issue of what we've 0:01:42.880 --> 0:01:47.400 seen in the last couple of years of deglobalization on shoring, 0:01:47.680 --> 0:01:52.800 friends shoring. All that trend suggests just higher overall underlying 0:01:52.840 --> 0:01:56.600 inflation going forward. Have they addressed that visa either two 0:01:56.680 --> 0:01:57.800 percent kind of target. 0:01:58.000 --> 0:02:00.320 Well, I think this gets to an important issue, which 0:02:00.360 --> 0:02:03.280 is they've been a lot of supply shocks over the 0:02:03.320 --> 0:02:05.720 last several years. Some of this is due to some 0:02:05.840 --> 0:02:08.640 of these de globalization type trends. We can look at 0:02:08.840 --> 0:02:11.600 tariffs as kind of example of that, and you saw 0:02:11.639 --> 0:02:14.560 that reflected in the last FED meeting where they said 0:02:14.800 --> 0:02:17.839 supply shocks are keeping inflation away from target, and it's 0:02:17.880 --> 0:02:20.560 not just energy. It's more broader than that, and I 0:02:20.560 --> 0:02:23.040 think that's why you're going to continue to see a 0:02:23.080 --> 0:02:26.240 hawkish FED, even with oil prices down where they are, 0:02:26.480 --> 0:02:28.960 because it's a much broader story than energy. We've missed 0:02:28.960 --> 0:02:31.639 inflation target for many years, and a lot of that's 0:02:31.680 --> 0:02:34.079 related to those deglobalization trends. 0:02:34.120 --> 0:02:38.359 What year over year CPI is optimal for equity markets? 0:02:38.760 --> 0:02:41.360 Well, that's a great question because your equity markets are 0:02:41.440 --> 0:02:43.919 balancing a lot of factors here. On the one hand, 0:02:44.280 --> 0:02:47.160 hotter inflation means the Fed's going to stay higher for longer. 0:02:47.160 --> 0:02:49.480 Things arena be hawkish on the back of it, though, 0:02:49.560 --> 0:02:51.639 you have this AI story, which we think is. 0:02:51.720 --> 0:02:55.160 Largely orthogonal to rates. Yeah. Yeah, So what's your statistic 0:02:55.280 --> 0:02:56.840 on that before we go to the reporting. 0:02:57.120 --> 0:03:00.799 Well, I think that you know, if we get softer inflation, 0:03:00.960 --> 0:03:03.720 that would be ideal for equity markets, because I think 0:03:03.760 --> 0:03:07.440 net net rates moving up is negative for for for rates. 0:03:07.480 --> 0:03:09.880 So I think if we start to see you know, 0:03:09.919 --> 0:03:13.960 a miss on PCE here something below point three, that 0:03:14.000 --> 0:03:16.359 would be quite favorable month over month. I think that's 0:03:16.480 --> 0:03:19.799 unlikely given some of the data that we've already had at. 0:03:19.560 --> 0:03:22.800 Services and goods. Do we return to a vector of 0:03:22.880 --> 0:03:24.000 goods disinflation. 0:03:24.520 --> 0:03:27.400 Well, that's what's in our forecast, But there too, I 0:03:27.400 --> 0:03:30.600 think there's a lot of risks for these deglobalization trends. Also, 0:03:30.840 --> 0:03:33.320 you know what was driving goods inflation over the last 0:03:33.400 --> 0:03:36.280 year was tariffs. Right now, that's good looks more muted, 0:03:36.360 --> 0:03:38.800 that's mostly played through. We could get more tariffs later 0:03:38.840 --> 0:03:42.640 this year, leading to an entire round of new goods inflation. 0:03:42.840 --> 0:03:45.880 So the base case, yes, we'll see disinflation and goods, 0:03:46.080 --> 0:03:47.880 but I think the risks there are also skewed to 0:03:47.920 --> 0:03:48.520 the upside. 0:03:48.640 --> 0:03:51.760 Rob sackins with this here Marcus lift up fifty futures, 0:03:51.800 --> 0:03:55.240 now up sixty, nasak up two point one percent, now 0:03:55.320 --> 0:03:58.080 up two point four percent. You get the picture what 0:03:58.280 --> 0:04:01.000 I see here in Rob's can help me here because 0:04:01.000 --> 0:04:05.040 I'm doing amateur math. I got a GDP shot Q 0:04:05.120 --> 0:04:08.000 one from one point six. It came in a two 0:04:08.080 --> 0:04:11.800 point one. I got a GDP Price Index three point 0:04:11.840 --> 0:04:15.760 five came in a higher three point six. Rob, get ready, 0:04:16.080 --> 0:04:19.200 if I add two point one and three point six, 0:04:19.520 --> 0:04:23.760 I get a five point seven percent quick nominal GDP eyeball, 0:04:24.000 --> 0:04:25.640 that's all I need to know, right. 0:04:25.800 --> 0:04:28.080 I mean, that's been the story for us all year. 0:04:28.080 --> 0:04:31.000 We've been calling this the overheating economy. That's been our 0:04:31.040 --> 0:04:34.640 base case, and that's nominal GDP grow five and a 0:04:34.680 --> 0:04:36.920 half six percent or higher. And that feels like where 0:04:36.920 --> 0:04:39.800 we're landing. And if you look at cut China like, 0:04:40.080 --> 0:04:41.279 it's very strong. 0:04:41.200 --> 0:04:44.000 Yellow numbers here in the screen, folks are yellow. It's 0:04:44.400 --> 0:04:46.000 Banana Republic yellow. 0:04:46.279 --> 0:04:46.559 Yeah. 0:04:46.920 --> 0:04:50.040 Is that good that we have a five plus percent nominal? 0:04:50.240 --> 0:04:52.320 Well, if we look at the real side, you know, 0:04:52.440 --> 0:04:55.479 that's a good story. We've had a pretty resilient economy 0:04:55.560 --> 0:05:00.400 driven by AI capax a resilient upper income consumer fiscal 0:05:00.400 --> 0:05:03.120 support in the first half. But that worrying part is 0:05:03.160 --> 0:05:06.560 the inflation of that nominal GDP story, you know, far 0:05:06.600 --> 0:05:09.200 above the Fed's target, far too high, as we talked 0:05:09.240 --> 0:05:12.479 about earlier. We think that's going to moderate gradually, but 0:05:12.760 --> 0:05:14.960 you know, risks here to the upside and looks like 0:05:15.000 --> 0:05:17.680 this morning's print came in right in line with expectations. 0:05:17.680 --> 0:05:20.120 You're running near three and a half percent on core 0:05:20.160 --> 0:05:23.200 PC inflation. When you know the FED target's two percent. 0:05:23.520 --> 0:05:25.240 It's going to take a lot of work and a 0:05:25.279 --> 0:05:28.880 lot of disinflation across categories to get back down to target. 0:05:29.040 --> 0:05:32.000 And I think that's Kevin Warsh's focus is getting back 0:05:32.000 --> 0:05:35.000 down to two percent without rounding, not in the vicinity 0:05:35.040 --> 0:05:36.200 of two, but back down to two. 0:05:36.960 --> 0:05:37.200 Tom. 0:05:37.279 --> 0:05:40.200 The two year treasury is down two basis points four 0:05:40.200 --> 0:05:41.679 point one two percent on. 0:05:41.880 --> 0:05:42.560 The news here. 0:05:42.680 --> 0:05:47.120 So, Rob, based upon what you heard from Kevin Walsh 0:05:47.279 --> 0:05:49.480 last week with his first meeting, Yeah, how do you 0:05:49.520 --> 0:05:52.400 think he's going to interpret it? Interpret this data here? 0:05:52.640 --> 0:05:55.400 I think what we saw from Kevin Warsh in his 0:05:55.480 --> 0:05:58.880 first meeting is at the moment, this is a FED 0:05:58.920 --> 0:06:01.600 with a one sided man date it was price stability. 0:06:01.720 --> 0:06:03.400 You saw that in the statement, you saw that in 0:06:03.400 --> 0:06:05.800 his comments, you saw that in the balance of risks 0:06:05.839 --> 0:06:09.000 in the Fed's SEP. Not much focus or worry about 0:06:09.000 --> 0:06:13.400 activity or GDP, GDP or the labor market, lots of 0:06:13.440 --> 0:06:16.440 worry about inflation. And so I think here this is 0:06:16.480 --> 0:06:19.760 going to be in line with their concerns that inflation 0:06:20.000 --> 0:06:22.120 is running well above target and they're going to have 0:06:22.160 --> 0:06:24.760 to hike rates to bring inflation back down. 0:06:25.200 --> 0:06:27.279 Tom, you got to pay attention to these Wall Street guys. 0:06:27.320 --> 0:06:30.800 They just switch jobs left and right. There's no loyalty whatsoever. 0:06:31.040 --> 0:06:32.400 They just go for the big check. 0:06:32.720 --> 0:06:33.000 Rob. 0:06:33.080 --> 0:06:36.280 I just noticed that Rob, who was at City for 0:06:36.320 --> 0:06:38.320 a long time, he's now at p JIM. 0:06:38.839 --> 0:06:42.520 So I'm like two three times a year and make 0:06:42.560 --> 0:06:43.080 a mistake. 0:06:43.160 --> 0:06:45.400 And then so I'm like, so, where did Tom Percelly go? 0:06:45.520 --> 0:06:46.320 He was a p JIM. 0:06:46.640 --> 0:06:50.040 I look at him. He's at Wills Fargo. I mean no, 0:06:50.279 --> 0:06:54.960 just like Anthropic's and they're going for anthropic salaries. 0:06:55.160 --> 0:06:56.000 I know, I know this. 0:06:56.200 --> 0:06:58.159 Well, Rob, I got one more question and we got 0:06:58.160 --> 0:07:01.000 to keep it going. Scissorowski from Morgan's Aly is on 0:07:01.120 --> 0:07:04.440 deck right now. I'm sorry, I got to go back. Folks, 0:07:04.480 --> 0:07:08.440 help me here, mister Walsh. Chairman Walsh, as we're doing 0:07:08.440 --> 0:07:11.400 a special on green Span tomorrow with Abby, Joseph Cohen 0:07:11.440 --> 0:07:15.560 and Bloomberg Money Chairman worsh has got to look at 0:07:15.560 --> 0:07:21.120 a nominal GDP that none of these chairmen have ever 0:07:21.280 --> 0:07:25.880 really seen. Because we had stimulus, President Trump would say 0:07:25.880 --> 0:07:29.280 the Biden stimulus, we had a medical event, we had 0:07:29.280 --> 0:07:31.680 more stimulus, and then Trump put it on you know, 0:07:31.720 --> 0:07:34.640 whatever you're thinking about the politics, folks, I mean there's 0:07:34.720 --> 0:07:38.000 no other topic to me than Banana Republic nominal GDP. 0:07:38.840 --> 0:07:41.280 What's the harm of that to our listeners and viewers? 0:07:41.480 --> 0:07:41.680 Yeah? 0:07:41.720 --> 0:07:45.800 Absolutely, And I mean you're seeing that reflected in many areas, 0:07:45.840 --> 0:07:48.640 this affordability issue that we keep talking about. Even though 0:07:48.680 --> 0:07:52.600 growth has been strong, the labor market's been relatively solid, 0:07:52.840 --> 0:07:54.800 you know, inflation has been high, and you're seeing that 0:07:54.840 --> 0:07:59.680 reflected in concerns about affordability. And I agree with you. 0:07:59.760 --> 0:08:03.080 I think for War she's looking at five plus years 0:08:03.080 --> 0:08:05.720 of missing the inflation target and saying, this is job 0:08:05.800 --> 0:08:08.800 number one. We're missing. You know, three percent is not 0:08:08.840 --> 0:08:11.080 two percent, even two and a half percent is not 0:08:11.120 --> 0:08:13.360 two percent, and we have to hike rates. And we 0:08:13.360 --> 0:08:15.400 think they're going to hike three times this year to 0:08:15.440 --> 0:08:16.960 help bring some of those pressures down. 0:08:17.000 --> 0:08:19.360 When you come from Pigiam, do you get in the 0:08:19.360 --> 0:08:23.240 Greg Peters Hinkley picnic boat when you come across Hdson. 0:08:23.120 --> 0:08:24.080 Yes, well exactly. 0:08:24.160 --> 0:08:24.320 Yeah. 0:08:24.400 --> 0:08:26.680 We work closely with Greg and Deleep and then you're 0:08:26.760 --> 0:08:28.040 just the teen over there, Robert. 0:08:27.840 --> 0:08:30.600 Tips and it's got the side thrusters, you know. Then 0:08:31.040 --> 0:08:33.319 Rob Stock and thank you so much. A terrific brief 0:08:33.360 --> 0:08:37.400 there and a wall of economic data. Stay with us. 0:08:37.640 --> 0:08:40.839 More from Bloomberg Surveillance coming up after this. 0:08:48.080 --> 0:08:51.680 You're listening to the Bloomberg Surveillance podcast. Catch us Live 0:08:51.760 --> 0:08:54.880 weekday afternoons from seven to ten am Eastern Listen on 0:08:55.000 --> 0:08:58.400 Apple Karplay and Android Otto with the Bloomberg Business app, 0:08:58.559 --> 0:08:59.800 or watch us Live on. 0:08:59.800 --> 0:09:02.880 You Shoining us on Sebastian at page all that he 0:09:02.960 --> 0:09:07.920 does for Tierro Price, it is wonderful, wonderful effort on diversification. 0:09:08.040 --> 0:09:11.480 His book was really quite important, Sebastian audible. Paul and 0:09:11.520 --> 0:09:14.840 I were bedazzled by your father's day. This is your father, 0:09:15.200 --> 0:09:19.000 You and your son going four hundred and twenty miles 0:09:19.160 --> 0:09:23.640 north of Montreal up. I were like in X Files 0:09:23.679 --> 0:09:27.160 and Asteroid hit in Quebec and you were out there fishing. 0:09:27.360 --> 0:09:30.880 What sturgeon, Sebastian, were you attempting to catch? 0:09:33.160 --> 0:09:36.160 You know, Tommy and I have talked about the mean 0:09:36.240 --> 0:09:38.880 flies that you get in the wilderness. There are lots 0:09:38.920 --> 0:09:40.920 of flies over there. You take a prop plane to 0:09:40.960 --> 0:09:45.760 bake AMOI drive three hours north into the wilderness. The 0:09:45.840 --> 0:09:50.160 experience was wonderful because my son, who speaks mainly English, 0:09:50.200 --> 0:09:52.680 had to improve his French and my dad, who speaks 0:09:52.880 --> 0:09:55.720 mainly French, had to improve his English. We had a 0:09:55.720 --> 0:09:59.760 great time. I'm not going to lie. The fish was small. 0:10:00.040 --> 0:10:01.160 I thought it was delicious. 0:10:01.520 --> 0:10:03.600 Well, I did one more question in this because there's 0:10:03.640 --> 0:10:06.800 so much to talk about, Sebastian. Tell me there was 0:10:06.840 --> 0:10:11.679 no cell phone for your son. He couldn't use his iPhone. 0:10:12.559 --> 0:10:16.920 You know what's disappointing is just recently my father. It's 0:10:17.000 --> 0:10:17.800 in the wilderness. 0:10:17.880 --> 0:10:18.200 Tom. 0:10:18.440 --> 0:10:21.640 He got starlink and let me tell you, it works, 0:10:22.480 --> 0:10:25.080 So it kind of ruined a little bit of the experience. 0:10:25.280 --> 0:10:27.760 Okay, let's seegwy here. I'll get what Barty Paul wants 0:10:27.800 --> 0:10:30.760 to jump in. Let me do this quickly. Sebastian page 0:10:31.160 --> 0:10:35.560 on the event of SpaceX and Starlink anthropic to follow 0:10:35.559 --> 0:10:38.359 on and arrest your take on SpaceX. 0:10:40.480 --> 0:10:44.559 Look, in general, those IPOs are being very well absorbed. 0:10:45.160 --> 0:10:48.760 We believe in the AI trade. We're bullish. We're long 0:10:49.120 --> 0:10:54.120 us large gap growth. Tom. Interestingly, people worry about debt 0:10:54.240 --> 0:10:58.600 levels and the sustainability of earnings. The Russell one thousand 0:10:58.760 --> 0:11:02.240 large gap growth over the last five years at times 0:11:02.679 --> 0:11:06.720 has traded as high as thirty price earnings ratio. We're 0:11:06.720 --> 0:11:10.200 at twenty two, so we've actually moved money there. We're 0:11:10.320 --> 0:11:15.920 following the AI bottleneckt it's about cooling, it's about electrification, 0:11:16.280 --> 0:11:20.280 it's about the component you're missing, it's about emerging markets. 0:11:20.320 --> 0:11:24.439 Now it's an expanding trade. We believe in this fundamentally 0:11:24.840 --> 0:11:28.280 because we're doing the research three hundred analysts at tiro price, 0:11:28.920 --> 0:11:33.040 but also because the end user demand is there. They're 0:11:33.080 --> 0:11:36.600 billions of users. Yes, they balk at some times more 0:11:36.640 --> 0:11:41.120 expensive tokens. It goes up and down, but generally there 0:11:41.200 --> 0:11:45.840 is demand and application for AI and we're in that trade. 0:11:46.120 --> 0:11:49.080 Sebastian talk to us about momentum trading here. It seems 0:11:49.120 --> 0:11:52.000 like we're seeing that in this market here, kind of 0:11:52.080 --> 0:11:54.600 following some of the big cap growth names that have 0:11:54.720 --> 0:11:58.959 been winners. Talked to us about how you think about momentum. 0:12:00.000 --> 0:12:03.679 And this is a huge debate on our investment platform, 0:12:03.880 --> 0:12:09.600 Paul's it's unbelievable how strong momentum has been. I wanted 0:12:09.640 --> 0:12:12.520 to illustrate this for our investors, and I created this 0:12:12.840 --> 0:12:18.079 very simple return chasing strategy where you buy the top 0:12:18.120 --> 0:12:21.840 ten stocks based on the prior returns for twelve months 0:12:22.400 --> 0:12:25.040 every month on the S and P five hundred, and 0:12:25.080 --> 0:12:27.000 you go back in time and you see how well 0:12:27.080 --> 0:12:33.040 this return chasing momentum trade has worked. And I was 0:12:33.200 --> 0:12:36.000 just almost fell off my chair. The profits if you 0:12:36.040 --> 0:12:40.960 exclude transaction costs from this dumb momentum chasing just buy 0:12:41.000 --> 0:12:43.520 the top ten performing stocks over the last twelve months. 0:12:43.600 --> 0:12:47.120 Rebalance every month is forty percent annualize over the S 0:12:47.160 --> 0:12:49.800 and P five hundred for the last three years. This 0:12:49.840 --> 0:12:53.040 is how strong momentum has been, strongest than any time 0:12:53.120 --> 0:12:55.880 over the last twenty five years. So what do you do? 0:12:55.920 --> 0:12:58.880 You either neutralize the risk. You need to be aware 0:12:59.440 --> 0:13:02.280 of the risk if you're looking for mean reversion, if 0:13:02.280 --> 0:13:05.840 you're looking for things to normalize. But either way, in 0:13:05.880 --> 0:13:09.600 our portfolios, we've got to manage this risk inflation. 0:13:10.280 --> 0:13:13.400 We're seeing oil coming down pretty dramatically here as we 0:13:13.440 --> 0:13:16.920 appear to have some movement towards peace in Iran. Here, 0:13:17.120 --> 0:13:20.520 does that take away the inflation risk in this marketplace? 0:13:20.559 --> 0:13:22.920 Do you think? No? 0:13:23.200 --> 0:13:25.560 I think for the next three to six months, the 0:13:25.600 --> 0:13:28.760 inflation risk is still there. It could still surprise on 0:13:28.800 --> 0:13:33.400 the upside. Counterintuitively, it might surprise on the upside even 0:13:33.440 --> 0:13:37.080 more because oilists come down. What I mean by that is, 0:13:37.120 --> 0:13:40.280 the market's pricing of inflation is quite low. The break 0:13:40.320 --> 0:13:43.520 even one year right now is one point seven percent. 0:13:44.200 --> 0:13:48.000 The swap rate for one year on inflation is two 0:13:48.080 --> 0:13:51.800 point two two point three percent. Meanwhile, if you analyze 0:13:51.800 --> 0:13:56.000 the last three months the headline print, it's eight percent 0:13:56.360 --> 0:14:00.800 even the shelter component last three months analyzes four eight percent. 0:14:01.520 --> 0:14:03.720 So yes, all prices are coming down, but you have 0:14:03.960 --> 0:14:08.480 a lot of lag defects Paul on inflation from insurance 0:14:08.520 --> 0:14:12.360 and freight costs going up to transportation to industrial production 0:14:12.520 --> 0:14:17.760 to final goods, from fiscal to stimulus to demand increasing 0:14:18.360 --> 0:14:23.000 from fertilizer to food price Inflation moves with lags, and 0:14:23.080 --> 0:14:25.120 I think market's underestimating those lags. 0:14:25.600 --> 0:14:28.480 Should our listeners and viewers Sebastian, I mean, you wrote 0:14:28.520 --> 0:14:31.760 the definitive book on this. Should they be concerned about 0:14:31.840 --> 0:14:36.560 concentration in their large cap four one K portfolio? 0:14:38.680 --> 0:14:42.320 You know, interestingly those companies, Yes, there's concentration if you 0:14:42.360 --> 0:14:46.120 look at the handful of CEOs that controls so much 0:14:46.200 --> 0:14:49.440 of the market cap, but their revenues are quite diversified 0:14:49.480 --> 0:14:52.680 and quite robust. So I'm actually giving you a nuancedence 0:14:52.800 --> 0:14:56.040 or tom for someone who's written a book on diversification. 0:14:56.600 --> 0:14:58.880 It might not be as big a risk as people think. 0:14:58.920 --> 0:15:01.240 If you look at the ec and I'll make diversification 0:15:01.600 --> 0:15:05.480 of the revenues and the sustainability of the cashflow generation 0:15:06.040 --> 0:15:10.200 from those big companies. But the nuances it's pretty extreme 0:15:10.480 --> 0:15:14.120 biohistorical standards is basically near an all time high in concentration. 0:15:14.320 --> 0:15:17.120 Sebastian, your trooper hauling your son up there halfway to 0:15:17.160 --> 0:15:19.920 the north Pole. Greatly appreciate he is the t row 0:15:20.000 --> 0:15:23.800 Price sponsoring the Baltimore Orioles. Sebastian Page joins us how 0:15:23.800 --> 0:15:26.480 good his book out on Twitter and LinkedIn. It's really 0:15:26.520 --> 0:15:31.240 extraordinary on this idea of diversification. Stay with us. More 0:15:31.360 --> 0:15:34.280 from Bloomberg Surveillance coming up after this. 0:15:41.520 --> 0:15:45.080 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:15:45.160 --> 0:15:48.320 weekday afternoons from seven to ten am Eastern Listen on 0:15:48.400 --> 0:15:52.080 Applecarplay and Android Auto with the Bloomberg Business app, or 0:15:52.200 --> 0:15:53.840 watch us live on YouTube. 0:15:54.040 --> 0:15:57.080 What a joy to have in the studio. Definitive and 0:15:57.160 --> 0:16:01.360 I mean definitive on all of commodities in the frontier world, 0:16:01.400 --> 0:16:04.840 the third world. Her leadership is standard. Charter Bank with 0:16:04.960 --> 0:16:08.600 their understanding of Southeast Asia. I think a Freeport mcmarine 0:16:08.640 --> 0:16:11.960 in Indonesia and all that, we are thrilled. Suki Cooper 0:16:12.040 --> 0:16:15.160 joins us this morning with a standard charter bank. She 0:16:15.160 --> 0:16:18.680 gets to work with Steve Anglider. It's pretty good. So 0:16:18.680 --> 0:16:22.520 other is to it gold? You look tigging Freeport bank 0:16:22.600 --> 0:16:26.640 Marine in Indonesia. Every central bank wants to buy gold. 0:16:26.720 --> 0:16:29.320 Let's start with the why. Why do they want to 0:16:29.320 --> 0:16:31.000 buy gold at the margin. 0:16:31.880 --> 0:16:35.800 Historically there's three golds and gold achieves that they want stability, 0:16:35.840 --> 0:16:38.960 they want liquidity, they want returns. But what we've seen 0:16:38.960 --> 0:16:41.160 over the past four years is that there are additional 0:16:41.160 --> 0:16:44.120 reasons to want to buy gold in addition to diversification. 0:16:44.240 --> 0:16:47.400 It's concerns around geopolitical risks. It's wanting to have a 0:16:47.440 --> 0:16:50.200 store of value. It's wanting to have that hedge. And 0:16:50.240 --> 0:16:52.480 it's not just central banks. We've seeing that play out 0:16:52.480 --> 0:16:55.400 through the investors side as well. But for central banks 0:16:55.400 --> 0:16:58.440 in particular, they've been the marginal buyers. 0:16:58.480 --> 0:17:01.960 How did a return to the name teen thirties, nineteen twenties, 0:17:02.480 --> 0:17:03.720 the nineteen tens. 0:17:04.280 --> 0:17:07.879 It's not so much a return to the wanting to 0:17:07.880 --> 0:17:10.520 have that monetary stability. It's more so one to strengthen 0:17:10.560 --> 0:17:14.520 balance sheets and have optionality, but also wanted to diversify 0:17:14.560 --> 0:17:16.919 at the same time, so some of the There's a 0:17:16.920 --> 0:17:20.000 Central Bank gold survey that was released last week and 0:17:20.040 --> 0:17:22.399 this is i'd say the best survey for us to 0:17:22.400 --> 0:17:25.119 be looking at because it signals from seventy six different 0:17:25.160 --> 0:17:28.000 central banks what their intentions are. And we had a 0:17:28.040 --> 0:17:31.480 record forty five percent saying that they intended to increase 0:17:31.520 --> 0:17:34.320 their own gold reserves over the next twelve months. And 0:17:34.400 --> 0:17:36.320 that's the highest we've had and when we had such 0:17:36.320 --> 0:17:40.920 strong figures in the past, it's translated into record value terms. 0:17:41.000 --> 0:17:44.720 In additions, since the end of January of this year, 0:17:44.800 --> 0:17:48.080 gold's down about twenty five percent, where now we're below 0:17:48.359 --> 0:17:50.879 four thousand dollars per ounce. What's going on there. 0:17:51.520 --> 0:17:54.119 It's a historic day and that we've seen the lowest 0:17:54.160 --> 0:17:58.119 settlement since November twenty twenty five. We've seen a huge 0:17:58.119 --> 0:18:02.880 pivot from January now to what the gold market's focused on. Yes, 0:18:02.920 --> 0:18:05.560 there was over positioning at the start of the year, 0:18:05.880 --> 0:18:07.680 but there was also more of a focus on the 0:18:07.680 --> 0:18:12.240 structural drivers behind gold. Now there's been that pivot towards less, 0:18:12.240 --> 0:18:15.480 so the debasement, trade, concerns around real yels rising, the 0:18:15.560 --> 0:18:19.119 Dotland being much stronger. So we've seen this macro headwinds developing, 0:18:19.400 --> 0:18:24.080 but it's come at a time when we've seen a 0:18:24.119 --> 0:18:26.879 need for liquidity really pressuring the gold market. So it's 0:18:26.920 --> 0:18:29.600 a combination of factors, a combination of headwinds that we 0:18:29.640 --> 0:18:31.879 think they're going to keep gold price fagrile in the 0:18:31.920 --> 0:18:34.240 near turn. But beyond that we was still positive. 0:18:34.320 --> 0:18:35.879 Yeah, because I mean, I'm just looking back at my 0:18:35.920 --> 0:18:38.320 gold chart here on my Bloomberg terminal here, it's been 0:18:38.720 --> 0:18:42.480 for several years nothing but up. So this turned down 0:18:42.560 --> 0:18:45.680 is really something different. And I'm wondering because it seems 0:18:45.720 --> 0:18:47.440 like when we were talking about gold over the last 0:18:47.440 --> 0:18:49.760 four or five years, it was just everybody was buying. 0:18:49.760 --> 0:18:53.679 The central banks for buying, individuals were by, everybody was buying. 0:18:54.280 --> 0:18:56.840 Yeah that really I think twenty twenty five was the 0:18:56.920 --> 0:18:59.560 year where we had investors wanted to buy, ETF holders, 0:18:59.600 --> 0:19:02.920 short investors, and central banks. But before then it was 0:19:03.000 --> 0:19:06.080 largely central banks that had helped to raise the floor 0:19:06.080 --> 0:19:08.320 for gold prices. But what's changed this year is that 0:19:08.359 --> 0:19:11.359 we still have that central bank buying, but the ETFs 0:19:11.359 --> 0:19:14.160 have turned negative. We've seen significant adverts. 0:19:14.200 --> 0:19:16.400 So is that an opportunity? I mean, you know when 0:19:16.400 --> 0:19:19.240 Steve Englander leans over the desk and says, Suki, where 0:19:19.280 --> 0:19:21.680 are we going? Are you saying gold six thousand? 0:19:21.960 --> 0:19:25.119 We haven't changed our price podcast. We still have one 0:19:25.200 --> 0:19:26.000 hundred and fifty as. 0:19:26.320 --> 0:19:27.960 For our break to make sense. 0:19:29.520 --> 0:19:31.960 So but in the near term it's fired India's demand 0:19:31.960 --> 0:19:35.000 to slow down. We've got the headwinds from real yields. 0:19:35.200 --> 0:19:36.080 We've got to. 0:19:35.880 --> 0:19:39.080 Focus on the inflation data in an hour's time, where 0:19:39.240 --> 0:19:44.399 markets might be pricing in an increased ever increasing probability a. 0:19:44.480 --> 0:19:48.320 Night just finishingly equad as New Jewel eighteen seventy three. 0:19:48.440 --> 0:19:51.240 Of course, he wrote Lords of Finance eight years ago. 0:19:51.359 --> 0:19:54.719 And the arc over that is our gold and silver 0:19:54.920 --> 0:19:59.000 bounce off the mining the supply, Oh we found silver 0:19:59.520 --> 0:20:03.600 in the therefore the silver price changes. We have record 0:20:03.680 --> 0:20:05.320 gold mining now, am I right? 0:20:05.840 --> 0:20:06.240 We do? 0:20:06.359 --> 0:20:08.199 What does that mean for the price of gold? Is 0:20:08.200 --> 0:20:08.720 that bad? 0:20:09.560 --> 0:20:12.399 It hasn't been because the market's been so keen to 0:20:12.440 --> 0:20:16.040 absorb all that supply. We haven't seen recycling responding as much. Norman. 0:20:16.040 --> 0:20:18.840 It's price elastic, but we haven't seen as much distress 0:20:18.840 --> 0:20:19.359 selling when it. 0:20:19.359 --> 0:20:22.760 Comes hasn't sold. The gold is still there. 0:20:23.400 --> 0:20:25.840 So what else in the world of pressures. Models jumps 0:20:25.840 --> 0:20:27.600 out at you these days. Where is their value? 0:20:27.600 --> 0:20:29.520 Do you think? Relatively? 0:20:29.560 --> 0:20:31.439 We think going forward there's going to be much more 0:20:31.440 --> 0:20:33.920 focus on where we see demand growth. And of course 0:20:33.960 --> 0:20:38.440 there's the AI demand growth and that benefits silver, benefits platinum. 0:20:38.680 --> 0:20:40.920 And when we're looking at chips, we look at electronics 0:20:40.960 --> 0:20:44.480 hard disk drive, so that demand looks relatively, looks robust. 0:20:45.280 --> 0:20:48.040 We look for markets where we expect them to be undersupplied. 0:20:48.080 --> 0:20:50.560 We think the platinum market's life has be undersupplied for the. 0:20:50.480 --> 0:20:52.640 Next couple of years, but them come from. 0:20:52.920 --> 0:20:55.600 Largest from South Africa and then. 0:20:56.640 --> 0:21:02.120 Exactly mild exactly so platinum, and it touches about pladium 0:21:02.160 --> 0:21:06.520 as well. Listen, I got my global clod and his 0:21:06.680 --> 0:21:09.920 price thing up on the Bloomberg terminal, I courting everything. 0:21:10.160 --> 0:21:12.720