Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keene along
Speaker 1: with Paul Sweeney. Join us each day for insight from
Speaker 1: the best in economics, finance, investment, and international relations. You
Speaker 1: can also watch the show live on YouTube. Visit the
Speaker 1: Bloomberg Podcast channel on YouTube to see the show weekday
Speaker 1: mornings from seven to ten am Eastern from our global
Speaker 1: headquarters in New York City. Subscribe to the podcast on Apple, Spotify,
Speaker 1: or anywhere else you listen and always I'm Bloomberg Radio,
Speaker 1: the Bloomberg Terminal, and the Bloomberg Business ass You know
Speaker 1: you make it the economics, Paul. When you have your
Speaker 1: own website, you know. Bernanke doesn't have his own website,
Speaker 1: Powell doesn't, you know? I mean Ken Roguff, I don't
Speaker 1: think does. Claudia Sam does? She's large? Why is she large?
Speaker 1: She's been hugely influential this year in the discussion of
Speaker 1: the gloom of recession, and she is intelligently and day
Speaker 1: by day tick bake tick pushed against the gloom of
Speaker 1: the financial zeitgeist. She said, it's wrong. I'm gonna give
Speaker 1: you one paper. It's on a beautiful new website. Claudia
Speaker 1: Sum and it's like one word, you know, they squeeze it,
Speaker 1: and it's like she hired a consultant to do that.
Speaker 1: You know, don't say, Claudia, don't say some And I
Speaker 1: love this paper from eleven years ago, Shapiro summer out
Speaker 1: and some checking the mail or more in the paycheck.
Speaker 1: Does the effectiveness a fiscal stimulus depend on how it
Speaker 1: is delivered? That's where're gonna go with Claudia Son. Claudia,
Speaker 1: good morning, good morning, thank you. How'd your website go?
Speaker 1: Was it like pulling teeth to get a website up?
Speaker 2: Oh?
Speaker 3: No, I had the very best helping me get it up.
Speaker 3: So I'm very excited. So some consulting, it's all all legit.
Speaker 1: Now it's beautiful. So it's simple, beautiful and it really
Speaker 1: puts forward her intellectual input. This triple pandemic stimulus. I'm
Speaker 1: going to put it in three waves. Are we through it?
Speaker 1: And is it going? Like you and Shapiro wrote about
Speaker 1: years ago, into our paychecks? Is a stimulus why we're
Speaker 1: having a roaring twenties throughout this cycle.
Speaker 3: I have been a fierce advocate for the stimulus checks,
Speaker 3: particularly with the Rescue plan, and that came from research
Speaker 3: the paper you cited. This is pure reviewed, well cited.
Speaker 3: Looking at does it matter how we get money to
Speaker 3: people stimulus checks or like what Obama did, little dribs
Speaker 3: and drabs and text credits. You know, both makes sense.
Speaker 3: But when we really want to get it cranking, give
Speaker 3: people money, give it in a good slug, let them
Speaker 3: get spending this, get the jobs back. And for a
Speaker 3: lot of reasons. I mean, in a lot of ways,
Speaker 3: we did big fiscal. Those stimulus checks, they mattered, and
Speaker 3: we are enjoying a recovery that. Frankly, even I as
Speaker 3: the real optimist on big fiscal I'm like, wow, this
Speaker 3: is good.
Speaker 4: Yeah, we saw a GDP print that just kind of
Speaker 4: came in a week or so ago, well above expectations
Speaker 4: at three point three percent.
Speaker 5: Here.
Speaker 4: If I'm the Fed, I mean, that's an argument you
Speaker 4: made that inflation is tamed, economy's doing okay. If I mean,
Speaker 4: I see in one of your recent notes you say
Speaker 4: the FED is afraid.
Speaker 3: What do you mean by that, Well, the Fed's always afraid.
Speaker 3: They don't want to make a mistake. We're kind of
Speaker 3: hard on them if they do. Now to me, and
Speaker 3: the argument has been made, Chris Waller bost It that, oh,
Speaker 3: we have the luxury of time. The economy is really strong.
Speaker 3: We can wait and see what happens with inflation. And
Speaker 3: Frank I absolutely firmly disagree. They do not have the
Speaker 3: luxury of time. They have a dual mandate. And once
Speaker 3: we are headed towards it, and we definitely are headed
Speaker 3: towards two percent, they need to start cutting. I'm not
Speaker 3: looking for two hundred basis points on Wednesday. It's just like,
Speaker 3: let's get going. So you can do this gradually and carefully.
Speaker 3: And yet the demons of the nineteen seventies with Arthur
Speaker 3: Burn's cutting, then inflation got out of control and it
Speaker 3: was an election year. It's like, oh wow, here we are.
Speaker 3: So I expect them to really drag their feet, and
Speaker 3: we better get real lucky that financial markets hold together
Speaker 3: until the FED starts.
Speaker 2: You know, there's.
Speaker 6: Exactly there's your stock report.
Speaker 1: That's your stock report for the day. Better Marcus strategist Claudius.
Speaker 7: Yeah, sorry, I got to get really lucky here, So.
Speaker 4: Claudia, I mean, you know, I'm looking at the w
Speaker 4: I RP function here is kind of the world interest
Speaker 4: rate probability still looking forward five or six cuts this year.
Speaker 6: How do you how do you view that?
Speaker 3: I hope they're right. There's a lot of daylight between
Speaker 3: what I think the FED should do, and that's they
Speaker 3: should start cutting right away, and what I think the
Speaker 3: FED will likely do, and that's starting at the earliest
Speaker 3: in May and that and obviously when you start is
Speaker 3: going to make a big difference on how many cuts
Speaker 3: you do for the year. So I think what's most
Speaker 3: likely is something closer to four cuts, take a percentage
Speaker 3: point off. And yet you know markets have pushed the
Speaker 3: FED around before in this cycle, so they just might
Speaker 3: get it.
Speaker 1: The Bloomberg financial conditions and exposed the word is I'm
Speaker 1: using the judiciously massively accommodative at the show where they
Speaker 1: are Claudia and the debt and the deficit issue, and
Speaker 1: it's an ax of all of our listeners on CarPlay,
Speaker 1: Apple car Play and all of you watching on YouTube
Speaker 1: Bloomberg podcasts. Claudia Sam is just as simple as this,
Speaker 1: Joe Stiglitz says, you can do all this fancy debt
Speaker 1: and deficit, but you got to have an underlying growth
Speaker 1: rate to solve it over time. Do you have a
Speaker 1: confidence with the new boom that we have an embedded
Speaker 1: underlying growth rate that can extract us from this debt crisis.
Speaker 1: I wrote a.
Speaker 3: Piece recently for Bloomberg Opinion about this question of the
Speaker 3: deficit the debt. Should we be worried. I come down
Speaker 3: in the place of no, we should not be. On
Speaker 3: a lot of like, we're in a good place financing
Speaker 3: the dead things are, and as you said, we're in
Speaker 3: a good growth position. I mean, I ever want to
Speaker 3: say we're going to grow our way out of the debt.
Speaker 3: I think that's too optimistic. And yet what I say
Speaker 3: is like, step back, look at the context. What are
Speaker 3: we doing with all of this government tax and spending policy.
Speaker 3: And that's the conversation we should have is bottom up,
Speaker 3: not get obsessing over some top line number. And yet
Speaker 3: I will absolutely affirm Stiglitz that this growth piece is
Speaker 3: so important. And these productivity numbers we've gotten, which you know,
Speaker 3: productivity can disappear on us. But if we even get
Speaker 3: a quarter percentage point on trend productivity growth, like all
Speaker 3: sins are forgiven for any mistake made in this cycle.
Speaker 3: So that's so important.
Speaker 1: That is the economic insight today, Paul, how doctor somem
Speaker 1: there went to such a narrow incremental growth. People think
Speaker 1: you got to have a ginormous growth. Even just a
Speaker 1: little bit of a growth gets it done over ten.
Speaker 4: Years, Claudy, the conversation when we had the FED pivot
Speaker 4: late last year seemed to really migrate from you know,
Speaker 4: is there a recession in the scenario to I guess
Speaker 4: the consensus was very much a soft landing.
Speaker 6: Is that where you are?
Speaker 4: You think that this FED is just about done its
Speaker 4: job here and negoti shading a soft landing.
Speaker 3: I've been calling us soft landing this entire time.
Speaker 1: YEP.
Speaker 3: That inflation was in fact, dare I say the word transitory.
Speaker 3: We don't need to argue about that one today. But
Speaker 3: inflation went up, there was a lot of COVID disruptions,
Speaker 3: and Putin showed up. He caused a lot of disruptions,
Speaker 3: and we got many things under control, and inflation has
Speaker 3: come down. I don't give the FED a whole bunch
Speaker 3: of credit for that. They're in the mix and they
Speaker 3: needed to be in terms of, you know, going after
Speaker 3: the inflation that surged in twenty twenty two, and yet
Speaker 3: everything I am still a purist. It is until we
Speaker 3: get inflation twelve months on two percent. I'm not calling
Speaker 3: the soft landing here, but whow we can see the
Speaker 3: runway right like this is just we're so close and
Speaker 3: this was not supposed to happen, and it happened.
Speaker 1: How X post is the fed right now? X Post,
Speaker 1: folks is after the fact x antes where it's what
Speaker 1: the media wants, if financial media wants them to get
Speaker 1: out front. Yeah, right, there's no history that they do that.
Speaker 1: But I mean, what's the level of X posts here?
Speaker 1: Is it like Claudia? Is it like Richie Timberlake and
Speaker 1: the Georgia school, which is they're going to wait and
Speaker 1: wait and wait and wait. You mentioned Arthur Burns earlier
Speaker 1: and the political soup he had to live in. What's
Speaker 1: their level of X post right now?
Speaker 3: They are going to wait as long as humanly possible,
Speaker 3: and that actually might hit them pretty soon. I mean
Speaker 3: the three month changes in inflation, the six months, I
Speaker 3: mean they're at two of course, so like they really
Speaker 3: got to get going. We can still have some turbulence,
Speaker 3: we have some bumps in the road, and yet the
Speaker 3: stories they're telling about why they're not so sure about
Speaker 3: it OCA.
Speaker 1: It's like we got to run, but I just can
Speaker 1: you tell me what your own Paul does with Dow
Speaker 1: Jones Industrial average round number forty thousand. I mean that
Speaker 1: alone has to change his strategy, right A boom like that.
Speaker 3: No, it's all about the due mandate. I mean, frankly,
Speaker 3: the wealth effects aren't that big in terms of going
Speaker 3: into the FED is on the real economy.
Speaker 8: And it's good.
Speaker 1: It's great because when she disagrees with me, we can
Speaker 1: just hang up on her.
Speaker 6: Claud Us up.
Speaker 1: Thank you so much, just Treasury claud Us with all
Speaker 1: our work at the Federal Reserve and of course out
Speaker 1: of the University of Michigan joining us now. James Stravetis
Speaker 1: with a blistering essay in Bloomberg Opinion, made more blistering
Speaker 1: by his public service to the nation with the United
Speaker 1: States Navy. Of course, his effort is Supreme Commander of NATO.
Speaker 1: Were thrilled that Edmundstervetus could join us this morning, Jim,
Speaker 1: I want to go to your wonderful book, the Leader's bookshelf, folks.
Speaker 1: I'll put it out on Twitter and LinkedIn. He sent
Speaker 1: me a royalty check once. I mean, I've sold so
Speaker 1: many copies of this, mister is like, thank you. The
Speaker 1: Leader's bookshelf is brilliant. It's forty to fifty chapters from
Speaker 1: military experts about the book that changed your life, including
Speaker 1: for example, a Connecticut Yankee and King Arthur's Court. Here's
Speaker 1: the first sentence. Are the very best leaders born or
Speaker 1: made and most Javitas? Do you have confidence in our
Speaker 1: leadership after what we've witnessed in Jordan?
Speaker 2: I'm worried.
Speaker 5: Let's be honest, because what we're doing is not working.
Speaker 5: And we see in the world of business the concerns
Speaker 5: we have about who these attacking shipping in the Red Sea,
Speaker 5: driving prices of oil and goods. We see terrorist attacks
Speaker 5: against Israel. We see most recently tom As you allude
Speaker 5: to the attack that killed three brave American servicemen and
Speaker 5: womenmen in Jordan. So we are not deterring Iran. What
Speaker 5: the article I wrote for Bloomberg Opinion does is sketch
Speaker 5: out a campaign that we need to undertake that I
Speaker 5: am hopeful will ultimately deter Iran.
Speaker 1: Paul wants to get into that, But Jim, you've been
Speaker 1: so so so far out front on a game theory basis.
Speaker 1: In folks, a cliche is expect the unexpected, But you
Speaker 1: have stated that in our complexity of military force, technology
Speaker 1: and politics, that it's the unexpected, like mixing up drones
Speaker 1: coming in or out of a base in Jordan. It's
Speaker 1: the unexpected that will kill us, that will harm us,
Speaker 1: that will put us at risk. How do we defend
Speaker 1: against the next unexpected?
Speaker 5: For Starters, Tom, we look back at history and identify
Speaker 5: those moments, those hinge moments. In the case we're discussing
Speaker 5: of military operations, the Battle of Agincourt where English long
Speaker 5: bowmens slaughter French knights in their supposedly impervious armor of
Speaker 5: Pearl Harbor, where we are stunned by a Japanese surprise attack.
Speaker 5: We look at those hinge moments when airplanes radar came
Speaker 5: on the scene and changed everything. We are in that
Speaker 5: moment now, and we're talking about the Middle East. But
Speaker 5: I would argue equally, so what's happening on the battlefields
Speaker 5: of Ukraine?
Speaker 2: So Connecticut, Yankee and King.
Speaker 5: Arthur's Court is a book about innovation and leading through
Speaker 5: these kind of pivot moments. We are definitely in one
Speaker 5: where technology and security are coming together.
Speaker 4: Adamiral, I want to go right to your Bloomberg opinion
Speaker 4: piece yesterday because it had such an impact that I'm
Speaker 4: sure it had quite the impact in Washington at Depentagon,
Speaker 4: at the White House. But basically the summary is from
Speaker 4: your opinion piece, a deadly drone attack that cost American
Speaker 4: lives requires a swift, precise, and meaningful military response. Could
Speaker 4: you summarize what type of response you think this attack warrants.
Speaker 5: It's kind of the Goldilocks phenomena, Paul. In other words,
Speaker 5: we've been trying to retain this by pinprick attacks, by
Speaker 5: tit for tat small beer. At the other end of
Speaker 5: that spectrum is whistling jets overhead Tehran. I don't think
Speaker 5: we're there yet. We need to be in the middle
Speaker 5: that Goldilocks place. And here's what it includes. Cyber attacks,
Speaker 5: better intelligence collection, going after Iranian assets, but not inside
Speaker 5: Iran yet. We can still go after the Iranian Revolutionary
Speaker 5: Guard at Sea Asure they are training, organizing, equipping and
Speaker 5: directing who they's Hezbollah, the Iraqi Shia who.
Speaker 2: Have killed our American soldiers.
Speaker 5: We need to go after Iran directly, but not yet
Speaker 5: inside Iran.
Speaker 2: That's the essence of the article.
Speaker 4: And Admiral I know you said even suggesting perhaps eight
Speaker 4: five to eight day concerted campaign.
Speaker 6: What would that can pain entail in your estimation.
Speaker 5: I think we'd bring a second US aircraft carrier back
Speaker 5: into the region. Recall we had two there right after
Speaker 5: October seventh, we pulled one out. Iranian bad behavior continues,
Speaker 5: So maritime assets. We have a lot of air power
Speaker 5: in the Gulf, in Guitar and the base near Doha Aludid.
Speaker 5: We would bring more refueling aircraft, more fighter jets, bring
Speaker 5: our allies into this, and then it would be I'd
Speaker 5: say one to two weeks of sustained bombing against Iranian
Speaker 5: targets again outside Iran at this point, and then finally, Paul,
Speaker 5: we would be preparing the battle plan if we have
Speaker 5: to go inside Iran.
Speaker 2: Let's hope we don't get to that point.
Speaker 5: I think the Iranians would back down in the face
Speaker 5: of a truly strong US respond James Savetis.
Speaker 1: I want to go to Brett Krazer, a captain in
Speaker 1: your magnificent book, Folks, I can't say enough about to
Speaker 1: risk it all nine conflicts in the crucible of our
Speaker 1: leadership in the Navy. Yes, it has admirals in it,
Speaker 1: but as Travitas does, there's a Lieutenant Commander in there
Speaker 1: as well in a cook third class. I love that.
Speaker 1: Let's go to Brett Krozer and this is the reality
Speaker 1: of his career ended with COVID in the Uproar and
Speaker 1: the Theodore Roosevelt. But tell us about Brett Krozer as
Speaker 1: a kind of preparation, James travitas that we need if
Speaker 1: we're going to take on Iran.
Speaker 5: Brett Krozer a fighter pilot, also a superb targeteer. He
Speaker 5: worked for me as a captain selecting the targets we
Speaker 5: struck in Libya. So a consummate combat pilot and operator,
Speaker 5: also a terrific leader. He, unfortunately and with bad luck,
Speaker 5: became the captain of an aircraft carrier at the very
Speaker 5: beginning of COVID. He sacrificed his career to protect his crew.
Speaker 5: He's someone extremely admirable. And if we read the story
Speaker 5: of Brettkrozier into Risk at All, you'll see how we
Speaker 5: can and must take care of our people while we
Speaker 5: conduct these kind of operations.
Speaker 1: Are we too extended? Ian Bremer and Eurasia Group Admiral
Speaker 1: had a spectacular chart on the dispersion, including reservists from
Speaker 1: Georgia across all of the Middle East. It's almost as
Speaker 1: if the Bremer worry in his top risk can do.
Speaker 1: Are we too naive in our unprotected dispersion across a
Speaker 1: broader Eastern Mediterranean?
Speaker 5: Now, I think this brings us back to where we
Speaker 5: started this conversation, Tom, which is to say, if we've
Speaker 5: recognized the technology of the moment and are aware of it,
Speaker 5: we can do a better job defending ourselves.
Speaker 2: Point one.
Speaker 5: Point two A lot of this can be done from
Speaker 5: the sea. Our carriers are invulnerable essentially. And point three
Speaker 5: we can fuse together to work with our allies, partners
Speaker 5: and friends in the region, so we're not alone and
Speaker 5: afraid out there. We are with allies, partners and friends.
Speaker 5: We need to leverage that in a better fashion.
Speaker 4: Admiral, Again, I'm just going to reference your opinion piece
Speaker 4: from yesterday, and again you can read it on the
Speaker 4: Bloomberg terminal, certainly, and you can go to Bloomberg Opinion
Speaker 4: dot com slash opinion Bloomberg dot com slash opinion to
Speaker 4: find it on the website. Do you believe, Admiral that
Speaker 4: some of the steps and policies you laid out in
Speaker 4: your opinion piece, does that have a welcome reception with
Speaker 4: this administration.
Speaker 6: With Congress, I.
Speaker 2: Think it will.
Speaker 5: And as usual with any issue in today's America, there'll
Speaker 5: be plenty of folks who are advocating very radical go
Speaker 5: downtown Tayron tonight strike. I think that's premature. We might
Speaker 5: get there, let's writ not. On the other side, there
Speaker 5: will be those who say, just pull out of the
Speaker 5: Middle East, let all of that just fall apart. I
Speaker 5: think what I've laid out is something in the middle
Speaker 5: that makes sense, that will avoid a wide regional war,
Speaker 5: but will cause Iran to back down.
Speaker 1: Okay, you know we're going to run out of time
Speaker 1: here in a bit. I want you to sell right
Speaker 1: now to this nation, and everybody's listening. The one guy
Speaker 1: in Congress that actually probably can talk about this and
Speaker 1: calm down, let's bomb Tehran Crewe And that's a senator
Speaker 1: from Rhode Island, Jack Reid. How important is Jack Reid
Speaker 1: in this debate?
Speaker 2: Well?
Speaker 5: I love Jack Reid because, first of all, he's a
Speaker 5: man of normal height about five feet five inches called
Speaker 5: my height number two. He's a military guy, he's a veteran,
Speaker 5: he went to West Point. I'll forgive him that. He
Speaker 5: is at the top of the list. Tommy, You're absolutely
Speaker 5: correct in his strategic vision, his understanding of the balance
Speaker 5: we need to strike here. And I think the more
Speaker 5: we listen to the jack reads of the Congress, the
Speaker 5: better our chances are of steering through these rough waters where.
Speaker 1: We are now as a nation. Does it have elements
Speaker 1: that you and Elliott Ackerman wrote about in two thousand
Speaker 1: and thirty four my book of the Summer Paul A
Speaker 1: couple summers ago. What's so frightening folks about the book
Speaker 1: two thousand and thirty four to zero three four is
Speaker 1: the unexpected? Are we getting elements of that right now?
Speaker 5: Ed must vetus one hundred percent, tom And we've talked
Speaker 5: a lot about drones, unmanned new uses for unmanned surface
Speaker 5: vehicles on the sea.
Speaker 2: All of that is happening.
Speaker 5: I would argue the next step is going to be
Speaker 5: the addition of artificial intelligence to how those unmanned systems
Speaker 5: are used. That's what we need to be looking ahead
Speaker 5: toward and think how can we reverse it and hear
Speaker 5: it and stop it.
Speaker 1: James Travitas, thank you so much, folks. I'll put it
Speaker 1: out on Twitter LinkedIn the Leader's bookshel he's upset. I'm
Speaker 1: selling this because he's got fourteen other books after this.
Speaker 1: But the Leader's bookshelf shelf absolutely iconic as well. Amstervitis,
Speaker 1: thank you for that briefing. It's great about Natia Level
Speaker 1: and all of her you know, efforts with us. Is
Speaker 1: is she really nailed the market? So she's looking at
Speaker 1: the Hinckley picnic boat, the thirty seven s nice you know,
Speaker 1: the things like a nice boat. It's got the jet
Speaker 1: little jetty thing. He's out the side, Nadi. I can
Speaker 1: just see Nattia a Level with a beverage of her
Speaker 1: choice in hand with the Hinkley Picnic vote this summer.
Speaker 1: And of course the name of her boat is the
Speaker 1: heart of her work. Is why she's in the market
Speaker 1: and you're not. You're the name of her boat what
Speaker 1: with upside potential?
Speaker 6: Yes, I mean that's the name of the.
Speaker 1: Boat, Nadia. And you have absolutely killed you gotta be
Speaker 1: in the market. Why are you still in the market
Speaker 1: after the October run we've had.
Speaker 9: It's the economy and the earnings potential that is there.
Speaker 9: I mean you saw that the economy continues to define expectations.
Speaker 9: I mean we had strong GDP last week, and sort
Speaker 9: of this question is can that continue? And is this
Speaker 9: immaculate disinflation for real? I mean, we'll get more data,
Speaker 9: you know, when we get CPI on February thirteen, and
Speaker 9: of course the seasonal adjustment, but.
Speaker 8: We think that it is.
Speaker 9: I mean, we do think the economy will slow, but
Speaker 9: we think that it returns more to trend line about
Speaker 9: two percent GDP growth for this year, and that's a
Speaker 9: positive for the markets.
Speaker 1: Top of the income statement, what does nominal GDP do?
Speaker 1: How does that fold into revenues? If I've got to
Speaker 1: give an organic revenue growth of six percent, what's the
Speaker 1: new organic revenue growth look like at one year, two years?
Speaker 9: I mean, for us we're looking for in terms of
Speaker 9: EPs growth, we're looking for nine percent for this year,
Speaker 9: and we think that twenty twenty five I can also
Speaker 9: produce a similar sort of EPs.
Speaker 8: Growth for the markets.
Speaker 9: Again, a lot of this is going to be contingent
Speaker 9: on the consumer. I mean, if the consumer continues to
Speaker 9: hold in there, so will this economy, and so will
Speaker 9: the equity markets. The consumer still has a fair amount
Speaker 9: of excess savings, Tommy mean, nearly a trillion dollars, and
Speaker 9: if you sort of do the math behind that fifty
Speaker 9: billion or serve burn rate. That gives a consumer pretty
Speaker 9: healthy cushion for a year plus, and so that's still
Speaker 9: a lot of firepower that the consumer has over the
Speaker 9: next couple of years, I should be able to support
Speaker 9: corporate earnance.
Speaker 4: So Nottty, a lot of folks are suggesting here as
Speaker 4: we think about maybe broadening out the performance and participation
Speaker 4: of this market beyond kind of the miracle seven, if
Speaker 4: you will, And maybe twenty twenty four is a year
Speaker 4: for small mid cap stocks. Is that something you're talking
Speaker 4: to your clients about.
Speaker 9: It is, and it doesn't necessarily mean that the tech
Speaker 9: portion of things get left behind. It just means, as
Speaker 9: you said, just a bit of a broaden out, and
Speaker 9: we think that there's a place in the portfolio for
Speaker 9: a small cap when you think about the favorable macro
Speaker 9: environment that's there. Remember, the FED is on course to
Speaker 9: cut this year and last year twenty twenty three, it
Speaker 9: was a year where people were concerned about the balance
Speaker 9: sheet for small cap companies given that they do have
Speaker 9: a nearly fifty percent.
Speaker 8: Or so of their debt and floating rate.
Speaker 9: And so as you know, rates come down this year
Speaker 9: that should help small cap and then we also are
Speaker 9: seeing some recovery on the manufacturing side. I mean last
Speaker 9: week we had pretty good numbers from the flash manufacturing PMI,
Speaker 9: reaching a fifteen or sixteen months high, and we're also
Speaker 9: starting to see finally new orders back in expansionary territory,
Speaker 9: So that should be incrementally positive a small cap and
Speaker 9: the evaluation less of a concern in a small cap
Speaker 9: space really trading at that discount, So we think that
Speaker 9: it will be paid to be nibble around at some
Speaker 9: small cap to portfolios this year.
Speaker 4: Yeah, you kind of you mentioned evaluation. I kind of
Speaker 4: wanted to go. They're just generally speaking, because we had
Speaker 4: that such a big, big move higher in the market
Speaker 4: to close out twenty twenty three, and we've continued a
Speaker 4: little bit here in January. I'm not sure if seed
Speaker 4: earnings go up a commensurate amount here, so multiple expansion
Speaker 4: here is this market getting a little long in the
Speaker 4: tooth in terms of valuation?
Speaker 9: Well, I think it depends on you know whose earnings
Speaker 9: you're talking about, right, Yes, broadly twenty twenty four essemates
Speaker 9: have come down slightly, but not anything to alarm. And
Speaker 9: I think what you have been seeing you know, the
Speaker 9: momentum and the stay in power on the tech side.
Speaker 9: So from valuation standpoint, we think that even when you
Speaker 9: strip out sort of the magnificent seven m evaluation is
Speaker 9: a lot more reasonable. And if the earnings can hole
Speaker 9: in there, some of these companies can grow into their valuations.
Speaker 9: So we're not overly concerned about valuations at this point.
Speaker 9: We think that the strong economic environment and rates coming
Speaker 9: down will be supportive to evaluation.
Speaker 1: How do you treat I don't want you to talk
Speaker 1: about individual securities. I understand the rules of the road here,
Speaker 1: but Nadia on a broader magnificent six and you know,
Speaker 1: I get the story you're going to tell me. There
Speaker 1: was multiple ex expansion land yeer blah blah blah. Microsoft's
Speaker 1: en joined a thirty six pe forward if they deliver
Speaker 1: the goods today, How do you put a thirty six
Speaker 1: multiple into a retirement plan.
Speaker 9: Well, let's talk about how tech has performed over the
Speaker 9: last decade.
Speaker 8: Us I mean exactly.
Speaker 9: I mean most of the market returns is coming from
Speaker 9: that sector, and so that's why it is important to
Speaker 9: have that sort of exposure. Despite the fact that you
Speaker 9: might have questions around valuations in the portfolios for a
Speaker 9: timement plant, because that's where the growth ultimately is coming from.
Speaker 9: I mean, when we sort of look forward to megacap
Speaker 9: tech earnings this week, we know that it was big,
Speaker 9: key and important for market sentiment, and so what we'll
Speaker 9: be looking forward to hearing from is, you know, the
Speaker 9: continuan stabilization in cloud rationalization is that behind us it
Speaker 9: does seems to be the case, and also aid monetization.
Speaker 9: When we think about the productivity gains over the coming decades,
Speaker 9: I mean, I don't think that you want to miss
Speaker 9: out on that in any sort of retirement. That is
Speaker 9: going to be key for these companies going forward in
Speaker 9: the vroader economy.
Speaker 4: Not yet aside from tech, what are some of the
Speaker 4: other sectors that you're talking to your clients about that
Speaker 4: might be good performers in twenty twenty four.
Speaker 9: I mean this year we're really focused a lot on quality,
Speaker 9: not necessarily specifically sectors, I mean sectors sective wise. And
Speaker 9: we still have some exposure to energy, which has seen
Speaker 9: a lot of volatility recently just given what all prices
Speaker 9: are in all prises, not even responding to the high
Speaker 9: and geopolitical tension because there's concerns about oversupplying the market
Speaker 9: this year, we still think that there will be a
Speaker 9: deficiting in Q one. So we do think that there
Speaker 9: are still tactical opportunities and energy.
Speaker 8: But beyond sectors.
Speaker 9: I mean, like I said, quality is key because quality
Speaker 9: transcends all sectors, and we want to how.
Speaker 6: To find quality.
Speaker 8: Nadia, Oh, that's a great question.
Speaker 1: And so when never say that to me, you only
Speaker 1: say Nadia, You'll only say it's a great question. To Paul,
Speaker 1: I get no love.
Speaker 9: But when you think about quality, no, it's used very
Speaker 9: broadly and sometimes loosely. But we're focused on free cassual
Speaker 9: profitability when we think about quality and return on invested capital,
Speaker 9: and you can find quality companies that cost many different sectors.
Speaker 1: One final question, what's the analog? I don't think there
Speaker 1: is one, but the tech boom now to the tech
Speaker 1: boom of two thousand and two thousand and one when
Speaker 1: it collapsed. Does that give you any angst?
Speaker 9: It doesn't, because I think, what's a big difference here?
Speaker 9: You have possible companies that are invest in and expected
Speaker 9: to monetize AI onlike. So we don't think that this
Speaker 9: is a bubble. I mean, in fact, a lot of
Speaker 9: tech analysts, including our tech analysts in Asia, has put
Speaker 9: pen to paper and recently raised its expectations.
Speaker 8: For AI revenues globally.
Speaker 9: I mean, at over for four billion dollars by the
Speaker 9: time we get you four hundred billion dollars by the
Speaker 9: time we get to twenty twenty seven.
Speaker 8: And so I think that's the key difference. You're not
Speaker 8: you have it. You're seeing profitability.
Speaker 10: Already, and you know revenues are ready around AI onlike
Speaker 10: doing the tech bubble where everything's just sort of wind
Speaker 10: up despite the fact that you might not have been
Speaker 10: a profitable Now.
Speaker 1: Do you thank you?
Speaker 2: Nat?
Speaker 1: Your level is with UBS Wealth Management, their senior US
Speaker 1: equity strategies, and it is the front page headlines. She's
Speaker 1: going to go to the San Diego troop in this morning,
Speaker 1: back to way, what do you got, Lisa?
Speaker 11: I got the Wall Street Journal as we're starting. You
Speaker 11: guys have been talking about this.
Speaker 12: A lot this morning. General Motors feeling pressure from dealerships to.
Speaker 11: Make hybrid, so it just back and forth between electric
Speaker 11: and hybrid. So the company topped expectations. We heard about that,
Speaker 11: but they're telling the journal that the dealers they serve
Speaker 11: on these advisory committees for GM, and they're worried about
Speaker 11: losing customers like Paul who are not ready to make
Speaker 11: that full switch over. But GM they're they're listening to
Speaker 11: their concerns, but they haven't made any future hybrid commitments.
Speaker 11: I mean, would you have gone hybrid?
Speaker 4: It's definitely an option. And Matt Miller, who is our
Speaker 4: car guru, he said he would do a hybrid. He
Speaker 4: thinks that's the best way to go at this point
Speaker 4: toil get more built out charging system out there, I.
Speaker 1: Said with the Detroit International Auto Show with Ken Pruitt,
Speaker 1: I'll say twelve thirteen years ago, in the head of Mercedes,
Speaker 1: said the major engineer guy. He was like the CEO,
Speaker 1: a real auto guy, said Tom hybrids. They were way
Speaker 1: out front on this. And then it's a major, major call.
Speaker 1: And you know, I guess with Marie Barre at ten am,
Speaker 1: you know, I'll learn about this. So what's next?
Speaker 8: All right?
Speaker 12: New York Times is President Biden's aide.
Speaker 11: They're drafting up this wish list for potential endorsements, and
Speaker 11: it includes Taylor Swift.
Speaker 6: Has to she already come out and said something or no.
Speaker 12: She Well, here's the thing, she endorsed Biden in twenty twenty.
Speaker 11: Okay, okay, last year she had a single Instagram post
Speaker 11: of hers led to thirty five thousand new voter registrations.
Speaker 7: That was just from a single post. So you see
Speaker 7: the influender two hundred million songs.
Speaker 6: About guys that are losers.
Speaker 7: You know, But do you think about it?
Speaker 12: She gets the younger vote too, I mean not that young,
Speaker 12: like the young kids.
Speaker 11: But but she also gets the moms who are a
Speaker 11: fan of Swift.
Speaker 1: I guess turnout I'll give her in others like her.
Speaker 1: I guess maybe they can boost turnout. But do you
Speaker 1: think that they decide someone's vote.
Speaker 6: I can't imagine.
Speaker 4: I mean, but I mean that's but they've been doing
Speaker 4: endorsement since the beginning of time. I mean, does a
Speaker 4: matter of for a newspaper endors to somebody. And back
Speaker 4: in the day that was important, but I less today, Well.
Speaker 12: Maybe we'll see President Biden and one of the world
Speaker 12: tours coming.
Speaker 1: Look for a full cover. If Joe Matthew will weigh on,
Speaker 1: weigh in on this today with kayly Lines, no question
Speaker 1: about it. What's next?
Speaker 2: All right?
Speaker 12: This is a big one.
Speaker 11: Chiefs forty nine ers tickets at an all time high
Speaker 11: for the Super.
Speaker 7: Bowl nine thousand, eight hundred dollars.
Speaker 1: Do we know what a minute cast?
Speaker 9: You?
Speaker 2: I don't know.
Speaker 1: No, it's gonna be.
Speaker 4: You know that's a go to check what the ads are?
Speaker 4: Several million dollars for a TV ad?
Speaker 12: Yeah, for like a thirty second.
Speaker 2: Yeah.
Speaker 1: Can I just say, you know, within the madness of
Speaker 1: all this, if you want just to fall back into laughter,
Speaker 1: go to YouTube and they'll have like the ten funniest
Speaker 1: commercials from super Bowl twenty eighteen ever, and there are
Speaker 1: some just jewels of comedy in those important ads. I
Speaker 1: mean that's amazing.
Speaker 4: I mean it's a lot of folks are still I mean,
Speaker 4: you know, it's that's their advertising buy for the entire year.
Speaker 6: They put everything into it, and it's.
Speaker 1: Not owned by Morgan Stanley. I mean I said to
Speaker 1: miss Skene, I said that you just reducs a it's
Speaker 1: a ad with chimpanzees or whatever in a garage and
Speaker 1: they come up with, think, we spent two million dollars
Speaker 1: on this ad. And then they said, you know, what
Speaker 1: are you doing with your money or whatever? But what
Speaker 1: would they spend now?
Speaker 6: Paul seven million dollars sixty seconds. Yes, absolutely, I don't.
Speaker 1: Know, what do you think, Lisa, I'm.
Speaker 7: Blown away by these the price of these tickets though.
Speaker 12: I mean when you said you went to their Super Bowl.
Speaker 6: I did, yeah, I mean back way back in the day.
Speaker 4: But I mean this is just it's the perfect storm
Speaker 4: I think for the NFL, as I said before, to
Speaker 4: take you know, the biggest show to the biggest entertainment
Speaker 4: market being Vegas. You know, it's just a perfect for
Speaker 4: a combination. And I'll tell you the folks at CBS
Speaker 4: are just thrill because they have the broadcast this year
Speaker 4: just by sheer luck they do a rotation between the
Speaker 4: broadcasters and CBS folks are just because they can just
Speaker 4: bring all their clients.
Speaker 6: There doing I mean, just the greatest marketing eventable.
Speaker 12: And then you have California, who is not far from Vegas.
Speaker 11: So you have a baking flux of people who are
Speaker 11: coming for that short trip from California too.
Speaker 12: So then you just go.
Speaker 1: You know, even if you don't go to the game,
Speaker 1: you just go.
Speaker 7: Then you gotta peel like a thousand dollars a night
Speaker 7: for a hotel there.
Speaker 4: I think it's Sley South there. We'll get a my
Speaker 4: suite at the Bellagio.
Speaker 1: Listen to Thank You So Much on the newspapers. This
Speaker 1: is a Bloomberg Surveillance podcast, bringing you the best in economics, finance, investment,
Speaker 1: and international relations. You can also watch the show live
Speaker 1: on YouTube. Visit the Bloomberg Podcast channel on YouTube to
Speaker 1: see the show weekday mornings from seven to ten am
Speaker 1: Eastern from our global headquarters in New York City. Subscribe
Speaker 1: to the podcast on Spotify or anywhere else you listen,
Speaker 1: and always I'm Bloomberg Radio, the Bloomberg Terminal, and the
Speaker 1: Bloomberg Business app.