1 00:00:02,529 --> 00:00:05,370 Speaker 1: Bloomberg Audio Studios. Podcasts. 2 00:00:05,690 --> 00:00:06,210 Speaker 2: Radio. 3 00:00:06,660 --> 00:00:07,040 Speaker 3: News. 4 00:00:12,520 --> 00:00:16,660 Speaker 1: This is the Bloomberg Surveillance Podcast. Catch us live weekdays 5 00:00:16,720 --> 00:00:20,220 Speaker 1: at 7 a.m. Eastern on Apple CarPlay or Android Auto 6 00:00:20,280 --> 00:00:23,880 Speaker 1: with the Bloomberg Business app. Listen on demand wherever you 7 00:00:23,900 --> 00:00:26,980 Speaker 1: get your podcasts or watch us live on YouTube. 8 00:00:27,960 --> 00:00:30,270 Speaker 2: We have our advantage with Daryl Crock with us as 9 00:00:30,290 --> 00:00:33,190 Speaker 2: we pick up the pieces of a swath of economic 10 00:00:33,909 --> 00:00:37,930 Speaker 2: data as well. So, Daryl, I got real GDP first look, 11 00:00:37,930 --> 00:00:41,489 Speaker 2: 3.4 percent, a little above where we were, guesstimate. I 12 00:00:41,510 --> 00:00:47,920 Speaker 2: got the price index. It's nicely lower, almost by a stick, 2.3%. 13 00:00:47,920 --> 00:00:52,019 Speaker 2: So my Darrell Crock math is 3.4 plus 2.3. I 14 00:00:52,680 --> 00:00:57,420 Speaker 2: got nominal GDP popping sort of high fives or six. 15 00:00:57,820 --> 00:01:00,710 Speaker 2: Is that still a boom economy? It absolutely is. 16 00:01:00,990 --> 00:01:05,570 Speaker 4: I mean, people don't talk enough about nominal GDP at 6%, 7%. 17 00:01:05,569 --> 00:01:06,630 Speaker 2: They just don't. 18 00:01:07,230 --> 00:01:09,450 Speaker 4: We live in a nominal economy. We don't live in 19 00:01:09,470 --> 00:01:13,390 Speaker 4: a real economy. Companies spend money on a nominal basis. 20 00:01:13,560 --> 00:01:15,420 Speaker 4: Consumers consume on. 21 00:01:15,319 --> 00:01:15,979 Speaker 2: A nominal basis. 22 00:01:16,000 --> 00:01:19,459 Speaker 4: So it is real. But I think what the interesting 23 00:01:19,800 --> 00:01:24,420 Speaker 4: juxtaposition there is you say, okay, 3.6% PCE deflator, Fed's 24 00:01:24,480 --> 00:01:30,110 Speaker 4: preferred measure, 3.4% GDP growth, right? Unemployment at 4.2 with 25 00:01:30,190 --> 00:01:35,410 Speaker 4: no claims, that's not a recipe for easy policy, right? 26 00:01:35,750 --> 00:01:38,250 Speaker 4: And what we heard yesterday in the press conference, right? 27 00:01:38,290 --> 00:01:40,270 Speaker 4: I mean, so I think the Fed needs to get 28 00:01:40,350 --> 00:01:43,780 Speaker 4: on with it. He keeps saying we're going to deliver 2%, right? 29 00:01:43,810 --> 00:01:47,500 Speaker 4: This committee will deliver price stability, and he defines that 30 00:01:47,580 --> 00:01:50,680 Speaker 4: as 2% very clearly. And that's not what we're getting today. 31 00:01:50,820 --> 00:01:52,060 Speaker 4: So it's time to move on. 32 00:01:52,560 --> 00:01:54,420 Speaker 5: And that where we see is Thomas is saying close 33 00:01:54,440 --> 00:01:56,570 Speaker 5: to right around 6%. 34 00:01:56,570 --> 00:01:58,870 Speaker 6: Nominal GDP, what do we do in the credit markets here? 35 00:01:58,890 --> 00:02:00,310 Speaker 6: What do we do in the bond markets? Because, I mean, 36 00:02:00,510 --> 00:02:02,690 Speaker 6: Microsoft says, we're coming. Yeah. 37 00:02:03,070 --> 00:02:03,810 Speaker 3: Well, it'll be interesting. 38 00:02:03,910 --> 00:02:08,549 Speaker 4: Microsoft, because the issuance is two to 40 years, you know, 39 00:02:08,570 --> 00:02:10,970 Speaker 4: they're going to compete with the U.S. Treasury auction in 40 00:02:11,150 --> 00:02:13,750 Speaker 4: the seven-year today that is going to probably have to 41 00:02:13,790 --> 00:02:16,190 Speaker 4: be a few basis points higher just because, you know, 42 00:02:16,210 --> 00:02:17,970 Speaker 4: the market will look at, do I want Microsoft or 43 00:02:17,990 --> 00:02:19,870 Speaker 4: do I want a U.S. Treasury in seven years, right? 44 00:02:20,990 --> 00:02:22,840 Speaker 4: You know, I still think on credit. 45 00:02:22,850 --> 00:02:24,190 Speaker 2: You've got to be up in quality. 46 00:02:24,690 --> 00:02:28,669 Speaker 4: And we have now been for 16 straight months, short duration. 47 00:02:28,710 --> 00:02:31,970 Speaker 4: We think the long side of the curve, notwithstanding the 48 00:02:32,030 --> 00:02:33,550 Speaker 4: move of the last week and a half where you 49 00:02:33,570 --> 00:02:35,250 Speaker 4: had a bunch of short covering and pushed the 10-year 50 00:02:35,280 --> 00:02:38,800 Speaker 4: down to 5%, we think next year, the 10-year is 51 00:02:39,560 --> 00:02:43,100 Speaker 4: north of 550, probably more like 575. 52 00:02:43,100 --> 00:02:47,120 Speaker 2: So six is possible. Six is possible, yes. Okay, the 53 00:02:47,180 --> 00:02:49,579 Speaker 2: reality here, folks, and I got to do this nicety 54 00:02:49,620 --> 00:02:52,760 Speaker 2: before we drag ourselves over to Ira Jersey. Commercial free 55 00:02:52,820 --> 00:02:56,080 Speaker 2: folks at this moment for Bloomberg Surveillance after Key at 56 00:02:56,200 --> 00:03:01,399 Speaker 2: Economic Data. Thank you so much to IBKR for this 57 00:03:01,520 --> 00:03:05,519 Speaker 2: moment for you across America. Darrell Crock with us out 58 00:03:05,560 --> 00:03:08,660 Speaker 2: of the huge Ames. Did you wrestle in Iowa State? 59 00:03:08,740 --> 00:03:09,200 Speaker 3: I did not. 60 00:03:09,260 --> 00:03:10,120 Speaker 2: Were you a wrestler? 61 00:03:10,460 --> 00:03:12,720 Speaker 4: I'm not gifted enough to do anything like that, Tom. 62 00:03:12,820 --> 00:03:15,660 Speaker 2: I got out of a hockey bus in Ames, Iowa. Yeah. 63 00:03:16,080 --> 00:03:18,179 Speaker 2: And as a joke, they took us because we thought 64 00:03:18,220 --> 00:03:20,560 Speaker 2: we were hockey studs. We were a big deal. And 65 00:03:20,620 --> 00:03:25,389 Speaker 2: I walk in. Who's the Olympian, Dan, at Iowa State? 66 00:03:25,550 --> 00:03:30,270 Speaker 2: I walk in, and it's 18,000 people watching wrestling. 67 00:03:30,310 --> 00:03:30,549 Speaker 5: I know. 68 00:03:30,590 --> 00:03:31,530 Speaker 3: They take it seriously. 69 00:03:31,590 --> 00:03:33,840 Speaker 2: They take it seriously. But then you go to BU 70 00:03:34,320 --> 00:03:37,620 Speaker 2: to party and with Zvi Bodi and all that. Do 71 00:03:37,660 --> 00:03:40,580 Speaker 2: you have a clue what the chairman was talking about 72 00:03:40,660 --> 00:03:47,980 Speaker 2: yesterday about protocol forward? He talked about a new monetary medicine. 73 00:03:48,460 --> 00:03:51,540 Speaker 2: Zvi Bodi would have thrown him out of class. Help 74 00:03:51,600 --> 00:03:53,810 Speaker 2: me with what protocol is. 75 00:03:54,090 --> 00:03:56,870 Speaker 4: Well, I think he's referring to protocol there as being 76 00:03:57,390 --> 00:04:01,980 Speaker 4: changing the narrative of how we define forward-looking monetary policy, 77 00:04:02,020 --> 00:04:05,800 Speaker 4: which is all the fade the dots, shorter press conferences. 78 00:04:06,300 --> 00:04:09,060 Speaker 4: Each reporter gets one question and one question only, not 79 00:04:09,100 --> 00:04:10,120 Speaker 4: two questions, right? 80 00:04:10,160 --> 00:04:13,970 Speaker 2: It's childish. It's kid stuff. What about rules versus discretion? 81 00:04:14,430 --> 00:04:17,370 Speaker 2: New Zealand has rules. John Taylor has a rule out 82 00:04:17,410 --> 00:04:23,070 Speaker 2: at Stanford. Okay. He wants rules that he's in charge of. 83 00:04:23,900 --> 00:04:25,219 Speaker 2: Is that an interpretation? 84 00:04:25,870 --> 00:04:26,550 Speaker 3: Possibly. 85 00:04:26,630 --> 00:04:27,890 Speaker 4: I don't think he would agree with that if he 86 00:04:27,930 --> 00:04:31,330 Speaker 4: were sitting here in the chair, but I don't think 87 00:04:31,370 --> 00:04:33,830 Speaker 4: that's doable. I mean, I don't see how you can 88 00:04:33,870 --> 00:04:38,370 Speaker 4: be so rules-based that it defines the action, whether it's Taylor. 89 00:04:38,150 --> 00:04:40,589 Speaker 2: Rule or anything else. A rigidity we can't do. That's right. 90 00:04:40,630 --> 00:04:44,210 Speaker 2: But does he want a pseudo rigidity? I can't tell. 91 00:04:44,810 --> 00:04:47,849 Speaker 4: I think his definition of that is he wants more 92 00:04:47,990 --> 00:04:51,190 Speaker 4: structure and more data dependent. And the data to him 93 00:04:51,250 --> 00:04:54,050 Speaker 4: is not a single data point that was last month's 94 00:04:54,070 --> 00:04:56,330 Speaker 4: data point. It's a trend line data, which is why 95 00:04:56,350 --> 00:05:00,000 Speaker 4: you're seeing the market price out September, December, and March, 96 00:05:00,040 --> 00:05:02,300 Speaker 4: which are quarterly hikes, not monthly hikes. 97 00:05:02,500 --> 00:05:05,020 Speaker 2: Can you say the show right now, please? Sure. I 98 00:05:05,040 --> 00:05:08,600 Speaker 2: just had a beverage of my choice in my hands. 99 00:05:08,700 --> 00:05:08,980 Speaker 3: I know. 100 00:05:09,120 --> 00:05:11,550 Speaker 2: On the living room couch. I'm talking to the dog 101 00:05:11,610 --> 00:05:13,210 Speaker 2: about this last night. 102 00:05:13,750 --> 00:05:15,870 Speaker 5: So bottom line, Darrell, is I guess we're now, you know, 103 00:05:16,170 --> 00:05:18,750 Speaker 5: given what you just commented on about the Fed, higher 104 00:05:18,790 --> 00:05:22,310 Speaker 5: rates for longer, maybe a more normalized rate environment relative 105 00:05:22,330 --> 00:05:24,310 Speaker 5: to where we were the last 15 years. What's that 106 00:05:24,330 --> 00:05:26,470 Speaker 5: mean for stocks? What are you telling your clients these days? 107 00:05:27,470 --> 00:05:29,490 Speaker 4: We still think stocks can do well. Even if you 108 00:05:29,510 --> 00:05:32,410 Speaker 4: got to a 555, 75, 10 year on the long side, 109 00:05:32,830 --> 00:05:36,510 Speaker 4: we still think stocks can do well because the earnings 110 00:05:36,650 --> 00:05:38,910 Speaker 4: are so strong. You guys know this well. This is 111 00:05:38,950 --> 00:05:42,090 Speaker 4: the third quarter in a row we'll have 25% earnings growth. 112 00:05:42,370 --> 00:05:44,090 Speaker 4: And the eighth quarter in a row we'll have double 113 00:05:44,110 --> 00:05:47,650 Speaker 4: digit earnings growth. Like it's unchartered, right? So as long 114 00:05:47,690 --> 00:05:52,090 Speaker 4: as that stays consistent and on trend, then stocks can 115 00:05:52,130 --> 00:05:52,570 Speaker 4: do fine. 116 00:05:52,610 --> 00:05:56,789 Speaker 2: In fact, multiples have contracted. So hugely valuable. Darrell Cronk, 117 00:05:56,890 --> 00:06:00,680 Speaker 2: thank you so much. Really appreciate it this morning. Of course, 118 00:06:00,839 --> 00:06:03,320 Speaker 2: all of his work at Wells Fargo. And thank you. 119 00:06:03,360 --> 00:06:05,460 Speaker 2: Shout out as well to Tom Purcelli, who joined us 120 00:06:06,140 --> 00:06:10,239 Speaker 2: recently as well from Wells Fargo. here on this interesting economy. 121 00:06:10,300 --> 00:06:14,620 Speaker 2: Futures negative 35 off the economic data. Bonds don't do much. 122 00:06:14,680 --> 00:06:17,830 Speaker 2: I mean, it was, as Alexis brilliantly said, pretty much 123 00:06:18,110 --> 00:06:21,010 Speaker 2: on plan. We go full faith and credit now. Ira 124 00:06:21,029 --> 00:06:26,250 Speaker 2: Jersey joins us from Bloomberg Intelligence. Ira, your interpretation of 125 00:06:26,310 --> 00:06:33,050 Speaker 2: the combination of the inflation data and the GDP data. Yeah, 126 00:06:33,070 --> 00:06:33,810 Speaker 2: so I agree with you. 127 00:06:33,890 --> 00:06:37,250 Speaker 7: You know, Krishnamamani, when I worked for him 20-odd years ago, 128 00:06:38,070 --> 00:06:40,870 Speaker 7: used to say that the world's not real, it's nominal. And, 129 00:06:40,950 --> 00:06:43,010 Speaker 7: you know, you guys just had that great discussion about it. 130 00:06:43,050 --> 00:06:46,410 Speaker 7: And that's very true. And when we think about 10-year 131 00:06:46,430 --> 00:06:49,859 Speaker 7: bond yields, you know, we start all of our analysis 132 00:06:49,940 --> 00:06:52,040 Speaker 7: with what do we think nominal GDP is going to 133 00:06:52,070 --> 00:06:55,240 Speaker 7: be for the next two or three years? Because that 134 00:06:55,339 --> 00:06:58,380 Speaker 7: kind of sets the baseline for where long-term interest rates 135 00:06:58,420 --> 00:07:02,089 Speaker 7: are going to be. and we're right there, right? So 136 00:07:02,250 --> 00:07:06,030 Speaker 7: for something like treasuries, because they do have a lot 137 00:07:06,050 --> 00:07:08,410 Speaker 7: of liquidity, there's going to be a liquidity premium. If 138 00:07:08,450 --> 00:07:14,150 Speaker 7: you have 6% nominal GDP, you expect 5-ish percent treasury yields, 139 00:07:14,170 --> 00:07:16,830 Speaker 7: and then you expect corporate bond yields to be right 140 00:07:16,890 --> 00:07:20,250 Speaker 7: at six, maybe a little bit north of six in 141 00:07:20,330 --> 00:07:24,020 Speaker 7: aggregate for the non-AAA portion of the curve. So that's 142 00:07:24,040 --> 00:07:26,720 Speaker 7: why this data that we received this morning is so important, right? 143 00:07:26,760 --> 00:07:30,370 Speaker 7: Just going through a We want to see, is this sustainable? 144 00:07:30,550 --> 00:07:34,250 Speaker 7: Is this repeatable quarter after quarter? And will we continue 145 00:07:34,270 --> 00:07:36,150 Speaker 7: to have this 6% GDP environment? 146 00:07:37,060 --> 00:07:40,300 Speaker 5: So with a core PCE price index at 3.1% year 147 00:07:40,380 --> 00:07:46,100 Speaker 5: over year, how concerning is that to this Fed here? 148 00:07:47,840 --> 00:07:52,300 Speaker 7: Well, obviously, we've heard him say since his very first 149 00:07:52,400 --> 00:07:55,780 Speaker 7: press conference and certainly at the Humphrey Hawkins testimony and 150 00:07:55,800 --> 00:07:58,370 Speaker 7: Jackson Hall testimony Kevin Morse keeps saying, look, we're going 151 00:07:58,390 --> 00:08:00,310 Speaker 7: to get back to 2%. So that means that they're 152 00:08:00,330 --> 00:08:04,530 Speaker 7: going to continue to hike. And even yesterday, his prepared remarks. 153 00:08:04,570 --> 00:08:07,090 Speaker 7: And look, obviously the Q & A is interesting and 154 00:08:07,110 --> 00:08:09,710 Speaker 7: there's a lot of volatility around that. But we focus 155 00:08:09,800 --> 00:08:13,560 Speaker 7: in on the prepared remarks because that is the committee's view, 156 00:08:13,640 --> 00:08:17,480 Speaker 7: like in general, for what happened at that meeting. And 157 00:08:18,060 --> 00:08:20,740 Speaker 7: it did give us some forward guidance, which is we're 158 00:08:20,760 --> 00:08:23,360 Speaker 7: going to remain hawkish. We're going to continue to increase 159 00:08:23,420 --> 00:08:26,860 Speaker 7: interest rates at this– you know, slowish pace, but they're 160 00:08:26,880 --> 00:08:30,710 Speaker 7: going to keep going until they see inflation trends lower. 161 00:08:30,730 --> 00:08:33,010 Speaker 7: You know, in fact, and, you know, we have to 162 00:08:33,050 --> 00:08:35,150 Speaker 7: key in on this, you know, come 2028, we're only 163 00:08:35,230 --> 00:08:37,890 Speaker 7: going to have six policy meetings a year instead of 164 00:08:38,010 --> 00:08:42,859 Speaker 7: eight like we have now. So ultimately, like these hikes, 165 00:08:42,920 --> 00:08:45,360 Speaker 7: this is the pace of hikes that we're probably going 166 00:08:45,380 --> 00:08:47,220 Speaker 7: to get or pace of moves, I should say, in general, 167 00:08:47,540 --> 00:08:50,380 Speaker 7: that we're going to get going forward from a worse Fed. 168 00:08:51,360 --> 00:08:53,280 Speaker 5: So, I mean, if you look out there in the economy, 169 00:08:54,860 --> 00:08:57,480 Speaker 5: What can the Fed do? I mean, we've got, you know, 170 00:08:57,580 --> 00:09:01,730 Speaker 5: energy prices still elevated, maybe even more so. We've got 171 00:09:01,750 --> 00:09:04,370 Speaker 5: AI spending all over the place. Who knows how that's 172 00:09:04,429 --> 00:09:07,970 Speaker 5: impacting inflation? I mean, one could argue there's not much 173 00:09:08,010 --> 00:09:08,530 Speaker 5: they can do here. 174 00:09:09,840 --> 00:09:10,740 Speaker 3: Well, there is. 175 00:09:10,820 --> 00:09:10,980 Speaker 2: Right. 176 00:09:11,000 --> 00:09:14,449 Speaker 7: So so, you know, the Federal Reserve can crimp demand 177 00:09:14,530 --> 00:09:18,650 Speaker 7: very significantly from both the business sector and the and 178 00:09:18,670 --> 00:09:21,520 Speaker 7: the household sector. But they would have to be but 179 00:09:21,540 --> 00:09:23,439 Speaker 7: they would have to be doing it hiking at a 180 00:09:23,500 --> 00:09:24,559 Speaker 7: much more aggressive pace. 181 00:09:24,600 --> 00:09:24,740 Speaker 5: Right. 182 00:09:24,760 --> 00:09:26,240 Speaker 7: And I think that that's a lot what a lot 183 00:09:26,260 --> 00:09:28,250 Speaker 7: of people are wondering, like. hey, if you really want 184 00:09:28,270 --> 00:09:32,750 Speaker 7: to get inflation down and down quickly, why don't you 185 00:09:32,870 --> 00:09:36,840 Speaker 7: hike interest rates much more quickly? I think the risk 186 00:09:36,929 --> 00:09:38,640 Speaker 7: is for them is that they do have the other 187 00:09:38,679 --> 00:09:40,319 Speaker 7: side of their mandate. They do have to worry about 188 00:09:40,360 --> 00:09:42,860 Speaker 7: the jobs market. And when you have this low hire, 189 00:09:42,900 --> 00:09:45,640 Speaker 7: low fire environment, it doesn't take much to start to 190 00:09:45,679 --> 00:09:49,980 Speaker 7: have negative payroll prints. So they don't want to be 191 00:09:50,020 --> 00:09:53,560 Speaker 7: the cause of the next recession without there needing to 192 00:09:53,620 --> 00:09:57,290 Speaker 7: be some type of more major policy adjustment. 193 00:09:57,970 --> 00:09:58,790 Speaker 2: Now, will that work? 194 00:09:58,809 --> 00:09:59,670 Speaker 3: I don't know. 195 00:09:59,760 --> 00:10:01,339 Speaker 7: I think they're trying to bide a little bit of 196 00:10:01,380 --> 00:10:04,730 Speaker 7: time here too, Paul, because one of the things is, 197 00:10:04,780 --> 00:10:06,810 Speaker 7: is that just on base effects, we're going to be 198 00:10:06,850 --> 00:10:10,450 Speaker 7: at 2% headline CPI at this time next year and 199 00:10:10,510 --> 00:10:14,370 Speaker 7: actually even next summer. So I think in a way 200 00:10:14,410 --> 00:10:16,429 Speaker 7: they're saying, okay, we're going to hike a little bit 201 00:10:16,490 --> 00:10:19,600 Speaker 7: now because we know that come May, June, we're going 202 00:10:19,620 --> 00:10:21,040 Speaker 7: to be pretty close to our time. 203 00:10:21,059 --> 00:10:22,719 Speaker 2: Okay, so I don't want to turn this into a 204 00:10:22,720 --> 00:10:24,660 Speaker 2: history lesson, Ira, because I know you're in the real 205 00:10:24,720 --> 00:10:28,020 Speaker 2: world of getting things done. But the bottom line is 206 00:10:28,220 --> 00:10:31,480 Speaker 2: you've got regret where they're scared stiff of making a mistake. 207 00:10:32,220 --> 00:10:37,380 Speaker 2: So explain this. They can't raise rates and say it's 208 00:10:37,670 --> 00:10:40,469 Speaker 2: one and done or we're really going to turn around 209 00:10:40,550 --> 00:10:43,210 Speaker 2: on a dime if we have to. That's not part 210 00:10:43,250 --> 00:10:44,200 Speaker 2: of the game, is it? 211 00:10:45,270 --> 00:10:47,439 Speaker 7: Well, I think at this point, Tom, to your point, 212 00:10:47,480 --> 00:10:49,860 Speaker 7: like once they hike, they're going to need to stay 213 00:10:50,100 --> 00:10:53,960 Speaker 7: at that, whatever that elevated level ends up being. for 214 00:10:54,679 --> 00:10:58,260 Speaker 7: a decent period of time. You could argue, and we've 215 00:10:58,280 --> 00:11:01,560 Speaker 7: been arguing that, and we did think that they would 216 00:11:01,600 --> 00:11:04,770 Speaker 7: take back the cuts that they made last year and 217 00:11:04,809 --> 00:11:07,089 Speaker 7: do that a little bit more quickly than they have 218 00:11:07,130 --> 00:11:10,550 Speaker 7: done so far. But we adjusted that when we heard 219 00:11:10,610 --> 00:11:13,099 Speaker 7: Kevin Morse basically saying, look, we want to do this 220 00:11:13,700 --> 00:11:17,250 Speaker 7: at a deliberate pace, which doesn't mean every single meeting, right? 221 00:11:17,290 --> 00:11:20,370 Speaker 7: You remember, you know, Alan Greenspan's measured pace where they 222 00:11:20,490 --> 00:11:23,160 Speaker 7: increase interest rates 25 basis points every single meeting for, 223 00:11:23,460 --> 00:11:25,240 Speaker 7: you know, going on like two and a half years. 224 00:11:25,260 --> 00:11:28,420 Speaker 7: You know, this is similar to that. It's just that 225 00:11:28,460 --> 00:11:32,680 Speaker 7: the cadence is a little bit slower than you might want. And, 226 00:11:32,760 --> 00:11:36,300 Speaker 7: you know, interestingly, you definitely have members that want to 227 00:11:36,340 --> 00:11:39,100 Speaker 7: hike interest rates a little bit more because they continue 228 00:11:39,120 --> 00:11:41,330 Speaker 7: to be worried about those underlying inflation trends. 229 00:11:41,350 --> 00:11:43,250 Speaker 2: I got to get this in, Eric. We got a 230 00:11:43,290 --> 00:11:45,480 Speaker 2: technology block coming up, and you know how they are. 231 00:11:46,120 --> 00:11:48,900 Speaker 2: I mean, Gil Lurie and Robert Schiffman, they're so impatient. 232 00:11:48,920 --> 00:11:53,030 Speaker 2: You just, you know, Ira, they're not like you. Okay, 233 00:11:53,150 --> 00:11:55,770 Speaker 2: Tottenham finally won a game. Are they back? 234 00:11:58,040 --> 00:12:03,679 Speaker 7: Well, I hope not because I'm a Villa supporter. It's 235 00:12:03,740 --> 00:12:06,960 Speaker 7: very early in the season. Tottenham needs to do something. 236 00:12:07,179 --> 00:12:10,780 Speaker 7: Tottenham was one of the potential Super League clubs back 237 00:12:11,120 --> 00:12:13,590 Speaker 7: a few years ago when they were talking about breaking 238 00:12:13,650 --> 00:12:16,970 Speaker 7: away from the domestic leagues over in Europe. So having 239 00:12:17,030 --> 00:12:20,590 Speaker 7: one of the big six English clubs actually get relegated 240 00:12:20,650 --> 00:12:24,150 Speaker 7: would be pretty astounding. I know what that feels like 241 00:12:24,170 --> 00:12:26,219 Speaker 7: because Aston Villa got relegated a few years ago and 242 00:12:26,240 --> 00:12:30,880 Speaker 7: they were a Premier League original. But at the same time, 243 00:12:30,900 --> 00:12:31,920 Speaker 7: that would be pretty astounding. 244 00:12:32,020 --> 00:12:35,480 Speaker 2: I remember you aged. I remember this very, very clearly here. 245 00:12:35,720 --> 00:12:38,580 Speaker 2: Ira Juzzi, thank you so much. And I should point out, folks, 246 00:12:38,620 --> 00:12:42,199 Speaker 2: his huge commitment to youth soccer across America and in 247 00:12:42,220 --> 00:12:48,170 Speaker 2: New Jersey. Stay with us. More from Bloomberg Surveillance coming 248 00:12:48,290 --> 00:12:49,250 Speaker 2: up after this. 249 00:12:56,530 --> 00:13:00,120 Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live 250 00:13:00,200 --> 00:13:03,380 Speaker 1: weekday afternoons from 7 to 10 a.m. Eastern. Listen on 251 00:13:03,480 --> 00:13:07,100 Speaker 1: Apple CarPlay and Android Auto with the Bloomberg Business app 252 00:13:07,120 --> 00:13:08,660 Speaker 1: or watch us live on YouTube. 253 00:13:09,059 --> 00:13:11,400 Speaker 2: We are honored and I have a question. I'm embarrassed 254 00:13:11,420 --> 00:13:14,429 Speaker 2: for this question, but I got to ask it. Edward Morris, 255 00:13:14,990 --> 00:13:20,010 Speaker 2: Special Advisor at Heart Tree Partners is definitive on hydrocarbons 256 00:13:20,630 --> 00:13:25,030 Speaker 2: and our international relations and joins us this morning, I've 257 00:13:25,050 --> 00:13:28,290 Speaker 2: got to ask the question, they're telling me oil's flowing 258 00:13:28,330 --> 00:13:32,190 Speaker 2: through the Persian Gulf, but they got $ 114 a barrel 259 00:13:32,270 --> 00:13:35,969 Speaker 2: on the screen. Why hasn't oil come down if we're 260 00:13:36,010 --> 00:13:37,090 Speaker 2: solving Hormuz? 261 00:13:38,490 --> 00:13:40,589 Speaker 8: Well, we don't know whether we're solving Hormuz. We don't 262 00:13:40,630 --> 00:13:43,730 Speaker 8: know whether the U.S. is going to war the hour 263 00:13:43,850 --> 00:13:48,460 Speaker 8: after the midterm elections. And, um, We don't know how 264 00:13:48,500 --> 00:13:51,100 Speaker 8: much oil is really getting out of the market into 265 00:13:51,140 --> 00:13:54,900 Speaker 8: where it has to go. And the refining system isn't 266 00:13:54,920 --> 00:13:59,230 Speaker 8: getting enough to make enough diesel. And diesel prices keep 267 00:13:59,250 --> 00:13:59,620 Speaker 8: going up. 268 00:14:00,570 --> 00:14:06,030 Speaker 2: Have we lost control of our sanctions and hydrocarbons with 269 00:14:06,050 --> 00:14:07,809 Speaker 2: these agreements with Mr. Putin? 270 00:14:08,570 --> 00:14:10,910 Speaker 8: Well, I think we have to take a look back 271 00:14:11,190 --> 00:14:13,370 Speaker 8: and think about where things have been in the past. 272 00:14:13,390 --> 00:14:16,490 Speaker 8: So the closest we can come to the last couple 273 00:14:16,530 --> 00:14:23,950 Speaker 8: of years... is 1978-9 to 1981-2. And then we had 274 00:14:24,190 --> 00:14:26,970 Speaker 8: not a closure of the Strait of Hormuz, but an 275 00:14:27,010 --> 00:14:31,130 Speaker 8: Iranian revolution. And we had a little war between Iraq 276 00:14:31,170 --> 00:14:36,330 Speaker 8: and Iran. And we had a little war between Russia 277 00:14:36,490 --> 00:14:39,350 Speaker 8: and Afghanistan. And the price of oil went from $ 14 278 00:14:39,310 --> 00:14:45,570 Speaker 8: a barrel in 19... set in 20, whatever that year was. 279 00:14:45,590 --> 00:14:49,370 Speaker 2: Yeah, nailed it. That's a Milton Berle answer, whatever that 280 00:14:49,410 --> 00:14:51,030 Speaker 2: year was. Four years later. 281 00:14:52,130 --> 00:14:54,550 Speaker 8: And it went, in the meantime, you know, it more 282 00:14:54,570 --> 00:14:58,360 Speaker 8: than doubled. It went from 14 to 40. And then, 283 00:14:58,400 --> 00:15:00,660 Speaker 8: by the way, shortly thereafter, when people thought it was 284 00:15:00,700 --> 00:15:04,600 Speaker 8: going up a lot more, it went down another 10 bucks. 285 00:15:04,880 --> 00:15:10,900 Speaker 8: So that was another crazy time. But the market value 286 00:15:10,950 --> 00:15:13,170 Speaker 8: of oil went up a lot more then. than it 287 00:15:13,210 --> 00:15:16,330 Speaker 8: has now with the total closure of the Strait of Hormuz. Why, 288 00:15:16,450 --> 00:15:18,990 Speaker 8: one might ask. And the closest I can come to 289 00:15:19,010 --> 00:15:23,310 Speaker 8: an answer is that a very simple factor. The oil 290 00:15:23,350 --> 00:15:28,140 Speaker 8: intensity of GDP has fallen dramatically. Go back to the 291 00:15:28,180 --> 00:15:32,290 Speaker 8: quadrupling of oil prices with the Arab oil embargo in 73, 74, 292 00:15:32,260 --> 00:15:33,300 Speaker 8: prices went up 400%. But then, for every 1% of 293 00:15:33,320 --> 00:15:43,260 Speaker 8: growth of global GDP, there was 1.2%. 4% growth in 294 00:15:43,300 --> 00:15:47,790 Speaker 8: oil demand. Today, for every 1% growth in GDP, well, 295 00:15:47,830 --> 00:15:49,950 Speaker 8: last year we had negative growth in oil demand. 296 00:15:50,710 --> 00:15:54,210 Speaker 5: So, Ed, talk to us about once the oil somehow 297 00:15:54,270 --> 00:15:58,320 Speaker 5: gets out, and talk to us about the refining situation 298 00:15:58,480 --> 00:16:00,600 Speaker 5: in the global energy markets today, because we've. 299 00:16:00,560 --> 00:16:02,560 Speaker 2: Heard obviously some capacity issues. 300 00:16:04,190 --> 00:16:07,130 Speaker 6: You know, in Ukraine, in Russia. 301 00:16:07,550 --> 00:16:08,530 Speaker 2: Talk to us about what's happening. 302 00:16:08,550 --> 00:16:12,660 Speaker 8: And don't forget the Middle East. Because while crude oil 303 00:16:12,720 --> 00:16:16,660 Speaker 8: is flowing, products are not flowing. And there are multiple 304 00:16:16,700 --> 00:16:21,560 Speaker 8: reasons for that, including the better ability to get it 305 00:16:21,640 --> 00:16:26,270 Speaker 8: through the Strait of Hormuz and the Bab el-Mandeb. So 306 00:16:26,850 --> 00:16:32,190 Speaker 8: we have a market in which inventories are strikingly low. 307 00:16:32,930 --> 00:16:36,490 Speaker 8: In terms of days of forward demand cover, they're lower 308 00:16:37,030 --> 00:16:40,050 Speaker 8: in almost all cases, whether it's crude or petroleum product 309 00:16:40,100 --> 00:16:42,300 Speaker 8: of one sort or another. It's about as low as 310 00:16:42,380 --> 00:16:45,800 Speaker 8: it's been in the last decade, days of forward demand cover. 311 00:16:46,060 --> 00:16:51,440 Speaker 8: And it's harsher on the product side because of the 312 00:16:51,500 --> 00:16:54,920 Speaker 8: refineries that are not delivering out of the Middle East, 313 00:16:55,600 --> 00:16:59,500 Speaker 8: out of Russia, and the closures of refineries in California 314 00:17:00,570 --> 00:17:00,970 Speaker 8: and in Europe. 315 00:17:02,140 --> 00:17:04,030 Speaker 6: It doesn't sound like there's a quick fix there anywhere. 316 00:17:04,130 --> 00:17:05,490 Speaker 6: So how do we deal with that? 317 00:17:07,170 --> 00:17:09,830 Speaker 8: There's no quick fix, and you can't bring refining back 318 00:17:09,910 --> 00:17:12,810 Speaker 8: because people don't want to do it, and it's a 319 00:17:13,030 --> 00:17:18,260 Speaker 8: dicey investment to make. So I think it'll be a 320 00:17:19,540 --> 00:17:22,080 Speaker 8: period of time in which we'll have to wait and 321 00:17:22,140 --> 00:17:24,139 Speaker 8: see what actually happens. Is there going to be a 322 00:17:26,420 --> 00:17:29,359 Speaker 8: diplomatic solution between Washington and Tehran? 323 00:17:30,070 --> 00:17:32,090 Speaker 2: Well, that's right where I wanted to go. Edward Morse 324 00:17:32,109 --> 00:17:34,970 Speaker 2: with us with Hartree Partners, definitive at the Council on 325 00:17:35,010 --> 00:17:39,210 Speaker 2: Foreign Relations and Citigroup for decades here on this moment 326 00:17:39,350 --> 00:17:43,090 Speaker 2: at hand. Look out past the midterms, I guess a 327 00:17:43,130 --> 00:17:47,960 Speaker 2: lame duck president in some form. Look out post-Trump. And 328 00:17:48,000 --> 00:17:51,540 Speaker 2: if we get back to some kind of diplomatic normality, 329 00:17:51,660 --> 00:17:56,610 Speaker 2: Republican or Democrat, whatever the flavor is, How do we 330 00:17:56,730 --> 00:18:01,679 Speaker 2: reaffirm our relationships with the Persian Gulf states and with 331 00:18:02,000 --> 00:18:05,520 Speaker 2: the family of Saudi Arabia? Where do you see us 332 00:18:06,240 --> 00:18:07,520 Speaker 2: after the Trump era? 333 00:18:08,359 --> 00:18:11,700 Speaker 8: Yeah, I'll go to Ian Bramworth to start with and say, 334 00:18:11,840 --> 00:18:14,919 Speaker 8: as he has said, that we're in a G-Zero world. 335 00:18:15,760 --> 00:18:17,520 Speaker 3: We don't get that. 336 00:18:17,640 --> 00:18:22,619 Speaker 8: That's globalization leadership or global leadership, and we have none 337 00:18:22,800 --> 00:18:23,340 Speaker 8: in the world. 338 00:18:24,119 --> 00:18:24,540 Speaker 2: The U.S. 339 00:18:24,580 --> 00:18:31,810 Speaker 8: Has abandoned leadership has irritated foe and friend and neighbor 340 00:18:31,990 --> 00:18:36,540 Speaker 8: and far distant country. And I don't know how we 341 00:18:36,580 --> 00:18:39,320 Speaker 8: do that. It's going to take more than a little 342 00:18:39,340 --> 00:18:42,899 Speaker 8: bit of begging on the knees. It's a return to 343 00:18:42,960 --> 00:18:45,940 Speaker 8: soft power. We have a president who simply doesn't believe 344 00:18:45,980 --> 00:18:49,429 Speaker 8: in soft power. Soft power worked dramatically for the U.S. 345 00:18:49,440 --> 00:18:52,960 Speaker 2: You sound like Michael O'Hanlon at Brookings, who owns his phrase, 346 00:18:53,440 --> 00:18:55,980 Speaker 2: On hard power, if we're going to prosecute soft power, 347 00:18:56,160 --> 00:18:58,419 Speaker 2: I'm only doing this because Tyler Kendall just walked in 348 00:18:58,440 --> 00:19:01,860 Speaker 2: the studio. Tyler Kendall with his folks, with Edward Morris, 349 00:19:01,880 --> 00:19:03,919 Speaker 2: of course, she's looking at the elections. We'll get to 350 00:19:03,980 --> 00:19:06,710 Speaker 2: that in a moment. If we have to shift back 351 00:19:06,770 --> 00:19:10,470 Speaker 2: to soft power, is there an American analog where we've 352 00:19:10,510 --> 00:19:14,129 Speaker 2: had to do this before? I mean, we're in original 353 00:19:14,230 --> 00:19:15,710 Speaker 2: territory here, aren't we, Tucker? 354 00:19:16,310 --> 00:19:19,730 Speaker 8: We're in original territory. It's not just the loss of 355 00:19:19,830 --> 00:19:25,070 Speaker 8: willingness to exercise soft power by far the strongest economy, 356 00:19:25,150 --> 00:19:28,090 Speaker 8: the strongest country in the world. But we're in a 357 00:19:28,130 --> 00:19:30,290 Speaker 8: new situation where the Strait of Hormuz has actually been 358 00:19:30,350 --> 00:19:33,470 Speaker 8: closed by a country in the region. And that's a 359 00:19:33,510 --> 00:19:36,210 Speaker 8: precedent that will never be wiped out. 360 00:19:36,270 --> 00:19:38,770 Speaker 2: I'm going to correct you. The Strait of Hormuz was 361 00:19:38,850 --> 00:19:41,869 Speaker 2: closed by a country in the region that was attacked 362 00:19:41,910 --> 00:19:44,980 Speaker 2: by the United States of America. Did we close the 363 00:19:45,000 --> 00:19:46,900 Speaker 2: Strait of Hormuz or did Iran? 364 00:19:46,920 --> 00:19:49,930 Speaker 8: Iran took the opportunity to what it had always wanted. 365 00:19:50,240 --> 00:19:50,560 Speaker 2: To do. 366 00:19:51,260 --> 00:19:52,580 Speaker 8: We closed the Strait of Hormuz. 367 00:19:52,619 --> 00:19:54,600 Speaker 2: Are you optimistic we can open it again? 368 00:19:54,619 --> 00:19:59,399 Speaker 8: I'm optimistic we could open it again. Part of that 369 00:19:59,480 --> 00:20:04,240 Speaker 8: optimism at the extreme is to remember that Iran is 370 00:20:04,280 --> 00:20:08,060 Speaker 8: in a very difficult situation. And if you go back historically, uh, 371 00:20:09,280 --> 00:20:13,899 Speaker 8: the original Supreme Leader almost called it quits. We don't 372 00:20:13,920 --> 00:20:17,680 Speaker 8: have anybody calling it quits today. The country has a 373 00:20:17,940 --> 00:20:21,600 Speaker 8: split leadership. The elected officials are in a different position. 374 00:20:22,480 --> 00:20:25,980 Speaker 8: We have a secretary of the Supreme National Security Council 375 00:20:26,080 --> 00:20:29,860 Speaker 8: in Iran who's from the very first generation. He's from 376 00:20:29,880 --> 00:20:33,320 Speaker 8: the generation of IRGC people who were selected by the 377 00:20:33,359 --> 00:20:36,880 Speaker 8: Supreme Leader, got rich, got to control the Supreme Leader. 378 00:20:37,600 --> 00:20:40,720 Speaker 8: And they're in a dicier position now than they've been before. 379 00:20:40,940 --> 00:20:42,960 Speaker 2: Paul, get one more question in here with Dr. Morris. 380 00:20:43,240 --> 00:20:46,650 Speaker 5: If the Strait of Hormuz is never fully reopened, maybe 381 00:20:46,690 --> 00:20:49,350 Speaker 5: like the way it was before January, does that suggest 382 00:20:49,810 --> 00:20:53,010 Speaker 5: there's going to be a premium associated with global crude 383 00:20:53,690 --> 00:20:54,669 Speaker 5: for the foreseeable future? 384 00:20:55,250 --> 00:20:58,629 Speaker 8: Yes and no. So you have to remember that, as 385 00:20:58,690 --> 00:21:03,070 Speaker 8: I said earlier, we're seeing a lower global oil intensity 386 00:21:03,109 --> 00:21:06,720 Speaker 8: of GDP. And we may have seen... an acceleration of 387 00:21:06,760 --> 00:21:09,040 Speaker 8: that decline of oil intensity of GDP in the last 388 00:21:09,060 --> 00:21:11,919 Speaker 8: few years, led by China, which has found, and the 389 00:21:11,960 --> 00:21:14,080 Speaker 8: world as a whole has found, substitutes for oil as 390 00:21:14,100 --> 00:21:18,700 Speaker 8: a transport fuel. Very important to remember. So we could 391 00:21:18,770 --> 00:21:21,470 Speaker 8: be in a position, we know that OPEC is dead. 392 00:21:22,070 --> 00:21:24,709 Speaker 8: It's very hard to put OPEC together again. But we 393 00:21:24,750 --> 00:21:27,710 Speaker 8: now have the largest members of OPEC that want to 394 00:21:27,830 --> 00:21:32,300 Speaker 8: all produce more oil. And that can balance out the 395 00:21:32,600 --> 00:21:33,619 Speaker 8: risk that you just talked about. 396 00:21:33,640 --> 00:21:35,920 Speaker 2: Tyler Kendall's people are in my ears saying, let's go 397 00:21:35,940 --> 00:21:39,109 Speaker 2: with the old guy. Dr. Morris, as simple as I can, 398 00:21:39,200 --> 00:21:42,210 Speaker 2: don't you agree with me that Tyler Kendall needs to 399 00:21:42,270 --> 00:21:47,450 Speaker 2: recover to cover the 912 pages of Daniel Yerkin's surprise? 400 00:21:49,000 --> 00:21:49,960 Speaker 8: I won't comment on that. 401 00:21:50,400 --> 00:21:53,140 Speaker 2: Okay. I think she has to read all 900 pages. 402 00:21:53,540 --> 00:21:56,149 Speaker 8: Well, I read, you know, the 3,000 pages of the 403 00:21:56,210 --> 00:21:56,770 Speaker 8: original manuscript. 404 00:21:56,790 --> 00:22:00,170 Speaker 2: Of the original manuscript. We just cut that. Edward Morse, 405 00:22:00,230 --> 00:22:05,359 Speaker 2: thank you. Thank you so much to Hartree Partners. Stay 406 00:22:05,400 --> 00:22:09,260 Speaker 2: with us. More from Bloomberg Surveillance coming up after this. 407 00:22:16,530 --> 00:22:20,109 Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live 408 00:22:20,190 --> 00:22:23,369 Speaker 1: weekday afternoons from 7 to 10 a.m. Eastern. Listen on 409 00:22:23,470 --> 00:22:26,760 Speaker 1: Apple CarPlay and Android Auto with the Bloomberg Business app. 410 00:22:26,950 --> 00:22:28,680 Speaker 1: Or watch us live on YouTube. 411 00:22:29,560 --> 00:22:33,680 Speaker 2: So this is the basic idea. Switches, routers, wireless networks, 412 00:22:33,760 --> 00:22:37,609 Speaker 2: data center. AI fabric. How about that? It must be 413 00:22:37,670 --> 00:22:41,109 Speaker 2: Cisco Systems. Good morning, Mr. Chambers, if you're listening. Jita 414 00:22:41,150 --> 00:22:45,080 Speaker 2: Patel is Chief Product Officer at Cisco. The Royal Bank 415 00:22:45,119 --> 00:22:49,199 Speaker 2: of Canada says we don't trust our walls. Is the 416 00:22:49,280 --> 00:22:54,040 Speaker 2: next step in AI this massive security risk that Paul 417 00:22:54,080 --> 00:22:56,640 Speaker 2: Sweeney's checking account is on clawed? 418 00:22:57,530 --> 00:23:00,369 Speaker 9: It is, Tom, the central issue of our time at 419 00:23:00,410 --> 00:23:03,679 Speaker 9: this point, because these agents that we're moving into, so 420 00:23:03,700 --> 00:23:06,860 Speaker 9: we're in the second phase of AI where you've got 421 00:23:06,920 --> 00:23:10,680 Speaker 9: this moment, just like chat GPT that's happening with personal agents. 422 00:23:10,900 --> 00:23:13,810 Speaker 9: The difference between a chatbot and an agent is a chatbot, 423 00:23:13,830 --> 00:23:16,240 Speaker 9: you just ask it a question and get an answer 424 00:23:16,280 --> 00:23:19,159 Speaker 9: with an agent, you actually can give it tasks and 425 00:23:19,200 --> 00:23:22,119 Speaker 9: jobs it can conduct on your behalf fully autonomously. 426 00:23:22,780 --> 00:23:24,380 Speaker 3: And one of the biggest. 427 00:23:24,140 --> 00:23:26,399 Speaker 9: Challenges you have with agents right now are people are 428 00:23:26,420 --> 00:23:29,149 Speaker 9: concerned about how much you can trust these agents because 429 00:23:29,850 --> 00:23:33,350 Speaker 9: there's a paradox of a sort because with agents, they're 430 00:23:33,390 --> 00:23:35,550 Speaker 9: not that useful if you don't give it access to 431 00:23:35,590 --> 00:23:38,429 Speaker 9: your tools, your email, your calendar, your credit card. But 432 00:23:38,450 --> 00:23:40,609 Speaker 9: the moment you give that access, your risk goes up 433 00:23:40,869 --> 00:23:43,520 Speaker 9: quite dramatically. And so we have to make sure that 434 00:23:43,560 --> 00:23:45,920 Speaker 9: we address Okay. 435 00:23:47,660 --> 00:23:49,330 Speaker 6: How do we do that? And who does that? 436 00:23:49,910 --> 00:23:51,790 Speaker 3: Well, we are spending billions at Cisco. 437 00:23:51,810 --> 00:23:54,710 Speaker 9: Cisco is one of the largest security and safety companies 438 00:23:54,750 --> 00:23:57,189 Speaker 9: in the world, and we're doing that. But the way 439 00:23:57,230 --> 00:23:59,690 Speaker 9: you should think about how we do it is pretty important. 440 00:24:00,750 --> 00:24:05,820 Speaker 9: The difference is that these agents are like teenagers. They're 441 00:24:05,900 --> 00:24:09,940 Speaker 9: supremely intelligent. They have no fear of consequence, and they 442 00:24:10,100 --> 00:24:13,399 Speaker 9: exercise poor judgment far more frequently, Paul, than you and 443 00:24:13,440 --> 00:24:13,820 Speaker 9: I would like. 444 00:24:13,840 --> 00:24:14,280 Speaker 6: That's great to know. 445 00:24:14,720 --> 00:24:17,730 Speaker 9: Now, the way that you have to think about this 446 00:24:17,869 --> 00:24:20,570 Speaker 9: is it's going to get harder and harder to distinguish 447 00:24:20,670 --> 00:24:23,270 Speaker 9: when there's a malicious attack that's altering the behavior of 448 00:24:23,310 --> 00:24:27,669 Speaker 9: an agent versus an agent just exercising poor judgment because 449 00:24:28,040 --> 00:24:31,860 Speaker 9: it's very fastidiously just following a goal that you gave 450 00:24:31,900 --> 00:24:34,220 Speaker 9: it to do, right? And so the way that you 451 00:24:34,240 --> 00:24:35,980 Speaker 9: have to do it is you have to monitor an 452 00:24:36,040 --> 00:24:40,369 Speaker 9: agent's behavior continuously and And when you start seeing drift 453 00:24:40,810 --> 00:24:45,330 Speaker 9: and misalignment between human expectations and the agent's behavior, You 454 00:24:45,369 --> 00:24:47,730 Speaker 9: have to be able to intercept right away. And so 455 00:24:47,770 --> 00:24:50,290 Speaker 9: there's a whole set of technologies around that. And then 456 00:24:50,310 --> 00:24:53,130 Speaker 9: the other area that people don't talk about as much 457 00:24:53,380 --> 00:24:58,320 Speaker 9: is this notion of your ability as an organization to 458 00:24:58,520 --> 00:25:05,140 Speaker 9: efficiently manage and use tokens is directly proportionate to your 459 00:25:05,160 --> 00:25:09,210 Speaker 9: security posture, which means the lower and the more efficient 460 00:25:09,230 --> 00:25:12,649 Speaker 9: you are with using tokens, the better your security posture. 461 00:25:13,670 --> 00:25:14,240 Speaker 3: Where is. 462 00:25:14,770 --> 00:25:20,690 Speaker 5: the average corporate American enterprise with AI just in general, 463 00:25:20,710 --> 00:25:24,770 Speaker 5: including using it wisely, protecting its safeguards, all that. 464 00:25:24,830 --> 00:25:25,690 Speaker 2: Where are we today? 465 00:25:25,710 --> 00:25:27,800 Speaker 6: It feels like we're super, super early. 466 00:25:27,880 --> 00:25:28,780 Speaker 3: We're very early. 467 00:25:28,880 --> 00:25:32,680 Speaker 9: I think what has started getting diffused is a lot 468 00:25:32,700 --> 00:25:36,980 Speaker 9: of people within the enterprise now use chatbots just like 469 00:25:37,020 --> 00:25:37,600 Speaker 9: they use. 470 00:25:37,460 --> 00:25:38,180 Speaker 3: The search engine. 471 00:25:38,200 --> 00:25:41,550 Speaker 9: So that's happening at scale. But when you start thinking 472 00:25:41,609 --> 00:25:44,020 Speaker 9: about agents, we're still in the very, very early days. 473 00:25:44,260 --> 00:25:46,280 Speaker 9: And I think part of the reason for that is 474 00:25:46,340 --> 00:25:48,360 Speaker 9: just people being fearful of trust. 475 00:25:48,500 --> 00:25:51,399 Speaker 2: G.D. Patel, have you put your checking account on Muse? 476 00:25:51,940 --> 00:25:54,619 Speaker 9: I have not put my checking account on Muse, but 477 00:25:55,080 --> 00:25:58,379 Speaker 9: I use Muse regularly. The reason I haven't put my 478 00:25:58,420 --> 00:26:00,460 Speaker 9: checking account on Muse is that's the area that I 479 00:26:00,540 --> 00:26:02,600 Speaker 9: feel like we need to make sure that we're actually 480 00:26:03,420 --> 00:26:05,040 Speaker 9: being careful before we go out and. 481 00:26:04,980 --> 00:26:05,620 Speaker 3: Give too much access. 482 00:26:05,720 --> 00:26:09,429 Speaker 2: Fancy Cisco phrases. John Chambers would have never used this language. 483 00:26:10,150 --> 00:26:17,100 Speaker 2: Ancient hallucinations. Alert fatigue. Translated, we don't trust the computer. 484 00:26:17,119 --> 00:26:19,840 Speaker 2: That's all there is to it. How does your industry, 485 00:26:19,880 --> 00:26:22,709 Speaker 2: with great respect to Mr. Chambers and all that he 486 00:26:22,770 --> 00:26:26,290 Speaker 2: invented and sustained, I should say, across some tough years, 487 00:26:26,730 --> 00:26:30,490 Speaker 2: how do we get the trust so we do transact 488 00:26:30,850 --> 00:26:32,790 Speaker 2: given hallucinations and fatigue? 489 00:26:33,380 --> 00:26:33,730 Speaker 3: I think. 490 00:26:34,460 --> 00:26:37,300 Speaker 9: What ends up happening in this market is you have 491 00:26:37,340 --> 00:26:39,919 Speaker 9: to make sure that the safety and security technology is 492 00:26:40,080 --> 00:26:44,420 Speaker 9: moving and innovating as fast as the innovation in AI. 493 00:26:45,580 --> 00:26:48,899 Speaker 9: And once that starts to happen, what you start to 494 00:26:49,340 --> 00:26:51,520 Speaker 9: see is the comfort level goes up with people. 495 00:26:51,540 --> 00:26:53,140 Speaker 3: And that's just, it's a matter of time. 496 00:26:54,119 --> 00:26:57,800 Speaker 9: And, you know, I was just with some of the 497 00:26:57,820 --> 00:27:00,060 Speaker 9: other folks on a TV show over here with Bloomberg. 498 00:27:00,440 --> 00:27:02,200 Speaker 3: And they were asking me, like, who's going to pay 499 00:27:02,260 --> 00:27:05,629 Speaker 3: for this? Well, I think... The revenue is there. 500 00:27:06,020 --> 00:27:08,800 Speaker 9: If you look at just what Anthropix revenues are, that's 501 00:27:08,859 --> 00:27:10,960 Speaker 9: the end user revenue that's being paid for. 502 00:27:11,140 --> 00:27:12,440 Speaker 3: And then if you look at what. 503 00:27:13,800 --> 00:27:16,379 Speaker 9: Both Azure and Google Reporter has revenue on the cloud, 504 00:27:16,440 --> 00:27:18,859 Speaker 9: that shows you that the infrastructure is also getting paid for. 505 00:27:19,480 --> 00:27:21,270 Speaker 9: What you need to have is the trust and safety 506 00:27:21,290 --> 00:27:24,630 Speaker 9: and security being, once that goes up a notch or two, 507 00:27:25,310 --> 00:27:27,470 Speaker 9: you'll start to see a massive kind of upsurge that 508 00:27:27,510 --> 00:27:28,430 Speaker 9: happens within usage. 509 00:27:29,270 --> 00:27:31,030 Speaker 5: I'm going to say maybe two years ago, I was 510 00:27:31,050 --> 00:27:34,250 Speaker 5: speaking with a management consultant and he was saying, His 511 00:27:34,310 --> 00:27:37,250 Speaker 5: clients every day are calling and saying, this is two 512 00:27:37,270 --> 00:27:39,470 Speaker 5: years ago, how do I implement AI into my business? 513 00:27:39,590 --> 00:27:40,950 Speaker 6: Is it a friend? Is it an enemy? 514 00:27:41,470 --> 00:27:44,410 Speaker 5: And he says, before we engage anybody, we have them 515 00:27:44,450 --> 00:27:49,240 Speaker 5: sign a document that says their C-suite, their board, commits 516 00:27:49,280 --> 00:27:52,640 Speaker 5: to implementing AI on a morally just basis and with 517 00:27:52,800 --> 00:27:56,720 Speaker 5: all the guardrails and things like that. That kind of 518 00:27:56,740 --> 00:27:58,730 Speaker 5: blew me away, but now it seems like that's kind 519 00:27:58,750 --> 00:28:00,510 Speaker 5: of what you have to do. Are you seeing corporate 520 00:28:00,530 --> 00:28:01,490 Speaker 5: America think about it that way? 521 00:28:01,950 --> 00:28:04,149 Speaker 9: You have to make sure that the way that the 522 00:28:04,210 --> 00:28:08,540 Speaker 9: guardrails and the value system that your organization has gets implemented. 523 00:28:08,580 --> 00:28:13,500 Speaker 9: And that is a prerequisite for success for enterprises, especially 524 00:28:13,560 --> 00:28:17,950 Speaker 9: the regulated ones. And so that's not really that controversial 525 00:28:17,990 --> 00:28:18,830 Speaker 9: or debatable anymore. 526 00:28:18,869 --> 00:28:19,830 Speaker 3: That's what everyone does. 527 00:28:20,310 --> 00:28:22,950 Speaker 9: The question is how and how do you implement them? 528 00:28:23,050 --> 00:28:27,350 Speaker 9: Because these agents and these models tend to be unpredictable 529 00:28:27,910 --> 00:28:29,710 Speaker 9: where you don't really know how they're going to behave. 530 00:28:30,010 --> 00:28:31,470 Speaker 9: And so you have to make sure that there's a 531 00:28:31,609 --> 00:28:36,530 Speaker 9: constant monitoring. And the moment you start seeing drift and 532 00:28:36,570 --> 00:28:39,450 Speaker 9: misbehavior in some ways, it's you have to make sure 533 00:28:39,470 --> 00:28:42,310 Speaker 9: that there's implemented guardrails that actually stop it from doing 534 00:28:42,350 --> 00:28:43,190 Speaker 9: something you don't want it to do. 535 00:28:43,350 --> 00:28:46,630 Speaker 5: So when you see a company like Anthropic file an 536 00:28:46,770 --> 00:28:50,469 Speaker 5: S1 and then the risk section is the risk is 537 00:28:50,490 --> 00:28:52,290 Speaker 5: the world's going to come to an end, AI is 538 00:28:52,310 --> 00:28:55,170 Speaker 5: going to destroy everything. I can't even imagine being the 539 00:28:55,190 --> 00:28:57,050 Speaker 5: lawyer or the banker who was tasked with writing up 540 00:28:57,090 --> 00:28:58,590 Speaker 5: that silly risk factor. 541 00:28:58,870 --> 00:28:59,910 Speaker 6: But it's not silly, is it? 542 00:29:00,550 --> 00:29:04,650 Speaker 9: Well, I think there is a considerable risk of things 543 00:29:04,710 --> 00:29:08,620 Speaker 9: going wrong I think we have to make sure that 544 00:29:09,390 --> 00:29:13,500 Speaker 9: we're careful on not being hyperbolic about it either. So 545 00:29:13,980 --> 00:29:17,500 Speaker 9: while there might, two conditions can hold true. You can 546 00:29:17,540 --> 00:29:19,500 Speaker 9: have risk and humanity does not need to come to 547 00:29:19,540 --> 00:29:19,860 Speaker 9: an end. 548 00:29:20,560 --> 00:29:23,040 Speaker 2: Do you see a roll up here? I mean, if 549 00:29:23,080 --> 00:29:28,780 Speaker 2: there's going to be transactions and combinations down the line, success, failure, 550 00:29:29,260 --> 00:29:33,810 Speaker 2: how do you see that unfolding into anything but monopoly 551 00:29:33,880 --> 00:29:36,130 Speaker 2: or even monopsony characteristics? 552 00:29:36,890 --> 00:29:41,560 Speaker 9: I think the number of players that are participating in 553 00:29:41,600 --> 00:29:46,000 Speaker 9: this market today is not one or two. There's a 554 00:29:46,020 --> 00:29:52,240 Speaker 9: fair number of players. Now, as agents come about, will 555 00:29:52,290 --> 00:29:53,930 Speaker 9: the business model shifts occur? 556 00:29:54,490 --> 00:29:55,050 Speaker 3: Absolutely. 557 00:29:55,090 --> 00:29:58,510 Speaker 9: Think about a retailer. In the past, a retailer would 558 00:29:58,550 --> 00:30:01,630 Speaker 9: typically go direct to a consumer, influence the consumer through 559 00:30:01,670 --> 00:30:04,050 Speaker 9: some advertising, and make sure that they can actually upsell 560 00:30:04,090 --> 00:30:06,530 Speaker 9: or cross-sell. Now you might have an agent that you 561 00:30:06,550 --> 00:30:09,190 Speaker 9: have to talk to. That agent aggregates the information across 562 00:30:09,210 --> 00:30:12,420 Speaker 9: a multitude of retailers and then provides an algorithm to 563 00:30:12,440 --> 00:30:15,220 Speaker 9: give it back to the consumer. That changes the business model, 564 00:30:15,240 --> 00:30:16,620 Speaker 9: and we have to make sure that we all think 565 00:30:16,640 --> 00:30:17,000 Speaker 9: through that. 566 00:30:17,840 --> 00:30:20,600 Speaker 2: Thank you so much. Greatly, greatly appreciate it. With Cisco 567 00:30:21,260 --> 00:30:26,680 Speaker 2: this morning, Jita Patel. Stay with us. More from Bloomberg 568 00:30:26,760 --> 00:30:28,760 Speaker 2: Surveillance coming up after this. 569 00:30:36,050 --> 00:30:39,630 Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live 570 00:30:39,710 --> 00:30:42,890 Speaker 1: weekday afternoons from 7 to 10 a.m. Eastern. Listen on 571 00:30:42,990 --> 00:30:46,270 Speaker 1: Apple CarPlay and Android Auto with the Bloomberg Business app 572 00:30:46,470 --> 00:30:48,190 Speaker 1: or watch us live on YouTube. 573 00:30:48,770 --> 00:30:52,210 Speaker 2: Brian Smith and company publishing out the Microsoft paper now 574 00:30:52,230 --> 00:30:54,210 Speaker 2: for Global Wall Street. We got to do this. Libby 575 00:30:54,230 --> 00:30:56,850 Speaker 2: Cantrell take notes on this. First of all, Paul, they're 576 00:30:56,990 --> 00:31:01,340 Speaker 2: a AAA company. We forget that. Please. They're like AAA boilerplate. 577 00:31:01,360 --> 00:31:01,880 Speaker 5: Anything you want. 578 00:31:02,160 --> 00:31:06,740 Speaker 2: JP Morgan, UBS, Wells Fargo are the chosen few. And, Paul, 579 00:31:06,780 --> 00:31:09,860 Speaker 2: I'm looking at the 40-year piece. I mean, it's just 580 00:31:09,880 --> 00:31:13,280 Speaker 2: too long for us. But for Libby Cantrell and Alexis Christophers, 581 00:31:13,360 --> 00:31:14,320 Speaker 2: it fits in nice. 582 00:31:14,420 --> 00:31:15,120 Speaker 3: Yeah, absolutely. 583 00:31:15,160 --> 00:31:18,110 Speaker 6: So, I mean, this is just a phenomenal issuer. 584 00:31:18,470 --> 00:31:20,050 Speaker 5: Not a lot of paper in the market, but you're 585 00:31:20,070 --> 00:31:22,090 Speaker 5: going to see, I guess, when you listen to Rob 586 00:31:22,110 --> 00:31:24,050 Speaker 5: Schiffman at Bloomberg Intelligence, We're going to see a lot 587 00:31:24,070 --> 00:31:24,550 Speaker 5: more of this stuff. 588 00:31:24,570 --> 00:31:27,670 Speaker 2: We go to surveillance dog and pony correspondent Paul Sweeney 589 00:31:27,690 --> 00:31:31,150 Speaker 2: on this. Seven or eight phone calls. Oh, yeah. It's 590 00:31:31,150 --> 00:31:31,410 Speaker 2: 15 minutes. 591 00:31:31,430 --> 00:31:34,090 Speaker 5: What I noticed about this is you get UBS and 592 00:31:34,130 --> 00:31:36,840 Speaker 5: Wells Fargo as a joint book running managers. What happens 593 00:31:36,890 --> 00:31:39,540 Speaker 5: on investment grade deals and bond deals in general, you 594 00:31:39,560 --> 00:31:41,660 Speaker 5: try to repay the folks that provide you with a 595 00:31:41,700 --> 00:31:41,900 Speaker 5: lot of. 596 00:31:41,880 --> 00:31:44,100 Speaker 6: Your corporate banking stuff. 597 00:31:44,520 --> 00:31:47,740 Speaker 2: Libby Cantrell's nodding. 598 00:31:48,100 --> 00:31:49,860 Speaker 6: When I was at Citi, I would say, yeah, O 599 00:31:49,920 --> 00:31:50,420 Speaker 6: is here, dude. 600 00:31:50,440 --> 00:31:51,080 Speaker 3: You got to put us in. 601 00:31:52,180 --> 00:31:55,719 Speaker 2: Joining us now before the election, Libby Cantrell of PIMCO 602 00:31:55,740 --> 00:31:58,020 Speaker 2: with all of her work on the linkage of policy. 603 00:31:58,100 --> 00:32:02,160 Speaker 2: So much of this Microsoft deal, Libby, is within the uproar. 604 00:32:02,340 --> 00:32:05,340 Speaker 2: And of course, in your world, there's massive uproar right now. 605 00:32:06,080 --> 00:32:11,420 Speaker 2: Life just goes on. What's the inertial force right now 606 00:32:11,580 --> 00:32:15,570 Speaker 2: in Washington, away from the zoo, the cacophony? What's the 607 00:32:15,650 --> 00:32:19,370 Speaker 2: inertial force where life is just going on? 608 00:32:20,500 --> 00:32:25,200 Speaker 10: Well, I mean, well, the midterm elections obviously are happening 609 00:32:25,260 --> 00:32:27,240 Speaker 10: next week. And I think that life will just go 610 00:32:27,260 --> 00:32:29,770 Speaker 10: on for lots of folks who are probably going to 611 00:32:29,810 --> 00:32:33,610 Speaker 10: be displaced. I mean, one interesting element is that you're 612 00:32:33,650 --> 00:32:35,810 Speaker 10: having people who are probably going to get kicked out 613 00:32:35,830 --> 00:32:37,170 Speaker 10: of office and they have to come back for the 614 00:32:37,230 --> 00:32:39,730 Speaker 10: lame duck session of Congress. That's supposed to be a 615 00:32:39,770 --> 00:32:43,010 Speaker 10: very productive session of Congress. It probably won't be because 616 00:32:43,070 --> 00:32:45,770 Speaker 10: a lot of if a lot of folks lose their job. 617 00:32:46,070 --> 00:32:48,290 Speaker 10: But it's obviously, you know, I was on the Hill 618 00:32:48,310 --> 00:32:50,210 Speaker 10: two weeks ago and just talking to folks on that. 619 00:32:50,250 --> 00:32:53,070 Speaker 10: There's a real capitulation among Republicans about the House. I mean, 620 00:32:53,110 --> 00:32:57,130 Speaker 10: no one really is talking about about keeping the House that, 621 00:32:57,290 --> 00:32:59,150 Speaker 10: you know, the Senate. I do think there's there is 622 00:32:59,670 --> 00:33:01,840 Speaker 10: some hope that they can keep the Senate. If you 623 00:33:01,880 --> 00:33:05,120 Speaker 10: look at the national environment, though, the national environment is just. 624 00:33:05,720 --> 00:33:08,920 Speaker 10: so bad right now for Republicans. So maybe they can 625 00:33:08,960 --> 00:33:11,680 Speaker 10: pull it out, but it would be, they would have to, 626 00:33:11,770 --> 00:33:14,010 Speaker 10: you know, do quite well. They would have to get 627 00:33:14,070 --> 00:33:17,430 Speaker 10: quite a good turnout in places like Iowa, in Alaska, 628 00:33:17,470 --> 00:33:19,170 Speaker 10: which is obviously in the news this morning, and then 629 00:33:19,210 --> 00:33:22,290 Speaker 10: also in Texas. You know, I think though, Tom, just 630 00:33:22,310 --> 00:33:24,770 Speaker 10: to relate it to your other story about Microsoft. I mean, 631 00:33:24,790 --> 00:33:26,730 Speaker 10: this is something I do think that is underappreciated by 632 00:33:26,810 --> 00:33:30,120 Speaker 10: our client base is just how bad the politics are 633 00:33:30,480 --> 00:33:34,820 Speaker 10: on AI and how oftentimes politics, you know, leads policy. 634 00:33:35,270 --> 00:33:37,870 Speaker 10: And I think people are underestimating how much friction there 635 00:33:37,950 --> 00:33:42,950 Speaker 10: could be in this AI infrastructure build out come 2027. 636 00:33:42,950 --> 00:33:45,990 Speaker 10: Because remember, not only are both chambers up for election, 637 00:33:46,370 --> 00:33:49,250 Speaker 10: it's also 36 governors. And a lot of these governors 638 00:33:49,510 --> 00:33:55,050 Speaker 10: are actually running on an anti-AI, anti-data center platform. The 639 00:33:55,130 --> 00:33:57,010 Speaker 10: easiest thing for them to do when they come into 640 00:33:57,110 --> 00:33:59,610 Speaker 10: office to sort of show that it's not just rhetoric 641 00:34:00,030 --> 00:34:01,800 Speaker 10: is just to put a moratorium on like they have 642 00:34:01,820 --> 00:34:04,140 Speaker 10: done in in New York. And even if they don't 643 00:34:04,160 --> 00:34:06,090 Speaker 10: put a moratorium on, it just means that the cost 644 00:34:06,140 --> 00:34:09,910 Speaker 10: of doing business for these hyperscalers, for these data center developers, 645 00:34:10,030 --> 00:34:11,930 Speaker 10: are just going up because they're going to have to 646 00:34:11,950 --> 00:34:14,580 Speaker 10: put a lot more money in these communities. in order 647 00:34:14,620 --> 00:34:17,239 Speaker 10: to convince them to build there. So again, I think 648 00:34:17,300 --> 00:34:19,550 Speaker 10: life will go on. The change of power is something 649 00:34:19,590 --> 00:34:23,009 Speaker 10: that folks are sort of used to in Washington. But 650 00:34:23,050 --> 00:34:25,930 Speaker 10: I do think, again, the market might be underestimating the 651 00:34:26,010 --> 00:34:30,010 Speaker 10: risk at the state level around the AI infrastructure buildup. 652 00:34:30,130 --> 00:34:32,509 Speaker 5: All right, so let's say that the Democrats do take 653 00:34:32,550 --> 00:34:35,870 Speaker 5: control of the House, maybe the Senate. So you've kind 654 00:34:35,890 --> 00:34:39,250 Speaker 5: of got a split Washington, D.C., with Republicans still. 655 00:34:39,230 --> 00:34:42,410 Speaker 6: In the administration, the Trump administration. What are you telling 656 00:34:42,450 --> 00:34:44,069 Speaker 6: clients will happen in the next two years? 657 00:34:44,670 --> 00:34:46,710 Speaker 10: So there's going to be a ton more oversight, right? 658 00:34:46,750 --> 00:34:48,390 Speaker 10: I mean, this is going to be, everything will be 659 00:34:48,430 --> 00:34:52,210 Speaker 10: investigated from the war on Iran to the Epstein files 660 00:34:52,310 --> 00:34:55,049 Speaker 10: to the family, you know, alleged family conflicts and what 661 00:34:55,110 --> 00:34:57,549 Speaker 10: have you to big tech. I think big tech is 662 00:34:57,590 --> 00:34:59,850 Speaker 10: going to have a huge focus in both chambers if 663 00:34:59,870 --> 00:35:02,910 Speaker 10: both chambers- Flip, there'll be a lot of obstruction, right? 664 00:35:03,410 --> 00:35:06,319 Speaker 10: Things won't get passed. The $ 5, 000 checks won't get passed. 665 00:35:06,739 --> 00:35:09,239 Speaker 10: And then I think, interestingly, there'll be more spending. And 666 00:35:09,260 --> 00:35:11,540 Speaker 10: this is something that we think there'll be more spending 667 00:35:11,640 --> 00:35:14,660 Speaker 10: regardless of who wins Congress. The composition will just be different, 668 00:35:14,680 --> 00:35:18,360 Speaker 10: more defense if it's more Republican-leaning, more health care and defense. 669 00:35:18,140 --> 00:35:18,620 Speaker 7: If it's more split. 670 00:35:19,700 --> 00:35:21,220 Speaker 10: But bottom line is a deficit. 671 00:35:21,280 --> 00:35:22,850 Speaker 2: I got eight ways to go here. I'm going to 672 00:35:22,870 --> 00:35:25,969 Speaker 2: do this. Folks, I am such a fossil that I 673 00:35:26,010 --> 00:35:29,570 Speaker 2: look at Arizona as having two congressional districts. Good morning, 674 00:35:29,590 --> 00:35:33,370 Speaker 2: Barry Goldwater. And as Libby Cantrell has tattooed on her 675 00:35:33,410 --> 00:35:37,120 Speaker 2: left arm, right below the Van Cleef bracelet, she knows 676 00:35:37,140 --> 00:35:41,420 Speaker 2: there's 11 congressional districts and growing in Arizona. New York 677 00:35:41,540 --> 00:35:45,460 Speaker 2: State used to have 45 districts. districts. Do you know 678 00:35:45,620 --> 00:35:49,580 Speaker 2: one district now, Paul, is all of the Adirondacks? I mean, 679 00:35:49,700 --> 00:35:53,080 Speaker 2: do we understand the demographic shifts here from now in 680 00:35:53,120 --> 00:35:57,510 Speaker 2: this election into 2018? into the census of 30? Do 681 00:35:57,550 --> 00:35:59,410 Speaker 2: we have any clue what's going on? 682 00:35:59,410 --> 00:36:01,390 Speaker 10: Well, no, I mean, it's an excellent point. I'm actually 683 00:36:01,410 --> 00:36:04,029 Speaker 10: from Colorado. And when I was growing up, there were 684 00:36:04,170 --> 00:36:05,820 Speaker 10: two or three congressional districts. 685 00:36:05,860 --> 00:36:07,719 Speaker 3: And now there's seven or eight. 686 00:36:08,030 --> 00:36:11,980 Speaker 10: So it is, yeah, I mean, the West has really exploded. 687 00:36:12,160 --> 00:36:14,800 Speaker 10: And as a result, the politics of the West have exploded. 688 00:36:14,840 --> 00:36:17,860 Speaker 10: I mean, or have changed quite significantly. I mean- As 689 00:36:17,900 --> 00:36:20,740 Speaker 10: you know, Arizona was a reliably Republican state and now 690 00:36:21,680 --> 00:36:25,739 Speaker 10: it's represented by two Democratic senators. So, you know, the 691 00:36:25,780 --> 00:36:28,140 Speaker 10: demographics are certainly changing. And I think you're going to 692 00:36:28,200 --> 00:36:30,799 Speaker 10: see that a little bit in this election. I think 693 00:36:31,630 --> 00:36:34,009 Speaker 10: what we're advising clients is not to do too much 694 00:36:34,050 --> 00:36:36,790 Speaker 10: of a read through in terms of the 2026 results 695 00:36:36,930 --> 00:36:39,390 Speaker 10: to the 2028 election. This will be much more of 696 00:36:39,410 --> 00:36:42,029 Speaker 10: a protest vote should Democrats win than an endorsement of 697 00:36:42,070 --> 00:36:45,890 Speaker 10: their ideology. But there might be some sort of previews 698 00:36:45,969 --> 00:36:48,830 Speaker 10: for 2028. And one is around the Hispanic vote. And 699 00:36:48,850 --> 00:36:50,450 Speaker 10: that's sort of to your point, Tom, about just the 700 00:36:50,510 --> 00:36:54,390 Speaker 10: changes in the West particularly. You know, obviously we saw 701 00:36:54,410 --> 00:36:57,100 Speaker 10: a lot of Hispanic men in particular sort of switch 702 00:36:57,420 --> 00:37:01,960 Speaker 10: to Trump in 2024. Do those folks that were reliably 703 00:37:01,980 --> 00:37:05,020 Speaker 10: a Democratic cohort switch back? And I do think that 704 00:37:05,080 --> 00:37:07,500 Speaker 10: will be important. And that will in some ways inform 705 00:37:07,940 --> 00:37:10,640 Speaker 10: maybe who the Democrats are to pick for the nomination 706 00:37:10,680 --> 00:37:11,770 Speaker 10: in 2028. 707 00:37:11,770 --> 00:37:14,799 Speaker 5: Is AI really a story for the average consumer out 708 00:37:14,840 --> 00:37:16,120 Speaker 5: there from a political perspective? 709 00:37:16,200 --> 00:37:19,400 Speaker 10: So AI, I mean, you ask 10 voters what they 710 00:37:19,440 --> 00:37:21,520 Speaker 10: mean by AI, and they'll give you 10 different answers. 711 00:37:22,000 --> 00:37:24,880 Speaker 10: But I do think that data centers are sort of 712 00:37:25,160 --> 00:37:29,830 Speaker 10: manifesting not just the existential concerns about AI, but also 713 00:37:29,890 --> 00:37:33,009 Speaker 10: about affordability and big tech. I mean, I think this 714 00:37:33,050 --> 00:37:34,969 Speaker 10: is something I think people are sort of lost. People 715 00:37:35,010 --> 00:37:37,150 Speaker 10: do not trust big tech. And I don't mean to 716 00:37:37,170 --> 00:37:39,860 Speaker 10: be hyperbolic, but... In some ways, big tech is becoming 717 00:37:39,900 --> 00:37:41,680 Speaker 10: big tobacco, like in people's minds. 718 00:37:41,719 --> 00:37:43,359 Speaker 2: Oh, well said. I steal that. 719 00:37:43,380 --> 00:37:44,180 Speaker 6: Please steal that. 720 00:37:44,219 --> 00:37:45,299 Speaker 2: You have a copyright on that? 721 00:37:45,340 --> 00:37:47,580 Speaker 10: I'm not sure if our media people will love that. 722 00:37:48,239 --> 00:37:52,399 Speaker 10: But I do think in some people's minds, it's the boogeyman, right? 723 00:37:52,480 --> 00:37:55,529 Speaker 10: And so this is like, it's a David and Goliath story. 724 00:37:55,620 --> 00:37:57,790 Speaker 10: And so they're like, I'm not going to, even if 725 00:37:57,890 --> 00:38:01,250 Speaker 10: these data centers are promising me the world, no, we're 726 00:38:01,270 --> 00:38:03,210 Speaker 10: going to like, you know, we'll sort of use the 727 00:38:03,410 --> 00:38:04,229 Speaker 10: power of the votes. 728 00:38:04,550 --> 00:38:08,260 Speaker 2: I don't care. You're not here for this. You're from Colorado. 729 00:38:08,940 --> 00:38:12,920 Speaker 2: Are you kidding me? Chiefs 5-1, Broncos 5-2? 730 00:38:13,260 --> 00:38:13,680 Speaker 10: I know. 731 00:38:13,890 --> 00:38:15,290 Speaker 2: Are you flying out for the game? 732 00:38:15,350 --> 00:38:17,750 Speaker 10: It has not been pretty, I will say. This has 733 00:38:18,090 --> 00:38:19,950 Speaker 10: been sort of a difficult season, although they looked a 734 00:38:19,950 --> 00:38:21,910 Speaker 10: little bit better than the last game. But, you know, 735 00:38:21,950 --> 00:38:24,660 Speaker 10: we're keeping the faith alive. And we do rally at 736 00:38:24,700 --> 00:38:27,739 Speaker 10: the second part of the season. I feel like, I mean, 737 00:38:27,760 --> 00:38:29,140 Speaker 10: I'm not, I'm not unfortunately going to. 738 00:38:29,120 --> 00:38:29,450 Speaker 6: Be flying out. 739 00:38:29,480 --> 00:38:31,160 Speaker 2: You're not going to get the PIMCO golf stream. 740 00:38:32,280 --> 00:38:35,980 Speaker 10: Or the PIMCO coach in the middle seat. Tom, we're 741 00:38:36,020 --> 00:38:37,980 Speaker 10: a fiduciary, right? We're not going to get to blow 742 00:38:38,020 --> 00:38:40,410 Speaker 10: our clients money on flying private. 743 00:38:40,570 --> 00:38:44,609 Speaker 2: That's part of America right there. Kansas City Chiefs Broncos. 744 00:38:44,650 --> 00:38:49,489 Speaker 2: Libby Cantrell, always orange. Thank you so much for being 745 00:38:49,530 --> 00:38:50,109 Speaker 2: with us today. 746 00:38:50,930 --> 00:38:55,850 Speaker 1: This is the Bloomberg Surveillance Podcast, available on Apple, Spotify, 747 00:38:55,969 --> 00:39:00,240 Speaker 1: and anywhere else you get your podcasts. Listen live each weekday, 748 00:39:00,239 --> 00:39:05,680 Speaker 1: 7 to 10 a.m. Eastern, on Bloomberg.com, the iHeartRadio app, TuneIn, 749 00:39:06,000 --> 00:39:09,060 Speaker 1: and the Bloomberg Business app. You can also watch us 750 00:39:09,160 --> 00:39:13,160 Speaker 1: live every weekday on YouTube and always on the Bloomberg Terminal.