Speaker 1: Bloomberg, Audio studios, podcasts, radio news. US firms racing for
Speaker 1: cash to fund the AI build out. Big tech spending
Speaker 1: on artificial intelligence expected to pass seven hundred billion for
Speaker 1: the year from just a handful of companies. Noriaan Rabinia
Speaker 1: Rubini Macro Associates writing on this trajectory, UX exceptionalism strengthens
Speaker 1: rather than fades. Equity valuations need not rest on bubble
Speaker 1: dynamics and should deliver solid returns despite episodic volatility. No
Speaker 1: real do you understand for more? Noriam, good morning, good morning,
Speaker 1: really beautiful moment was sending a bit Dave McCormick leaving
Speaker 1: the studio. You comeing in and he said, you're no
Speaker 1: longer doctor Doom any more. Your Doctor Boom was changed.
Speaker 2: What change has been essentially the most important technological innovation
Speaker 2: in human history. While everybody's talking about AI and JENNYI,
Speaker 2: this is only one of the twelve or more industries
Speaker 2: of the future. You have AI, you have a semiconductors,
Speaker 2: you have robotic automation and human robots. You have fusion energy,
Speaker 2: you have quantum, you have defence tech, you have space exploration, fintech,
Speaker 2: art tech, you have new material science, New cryptography really
Speaker 2: is the Cambrian explosion of innovations. Each one of them
Speaker 2: have to say powered by I. But there are separate verticals,
Speaker 2: very separate industry, space exploration, exploitation is separate from a I,
Speaker 2: even if it's fed by I. So I'm going to
Speaker 2: see US potential growth for the last two decades has
Speaker 2: been barely two percent. I expected that by the end
Speaker 2: of this decade is going to be at least four percent.
Speaker 2: And the data already suggests that productivity since COVID has
Speaker 2: doubled in spite of COVID, is already closer to two
Speaker 2: percent plus, and we have potential growth higher. There will
Speaker 2: be a significant increase also in equity market returns.
Speaker 3: How turn are you about bumps along the way? Christian
Speaker 3: Laguard are talking about the financial risk that comes along
Speaker 3: with the likes of Mythos or some of the technological advancements.
Speaker 3: They could potentially torpedo the financial system, the payment system
Speaker 3: as we know it. I mean, how much is that
Speaker 3: potentially a risk on the way to this much more
Speaker 3: prosperous future.
Speaker 2: Well, there are two types of risks. Onto a book
Speaker 2: in twenty twenty two about megatrides. Where I spoke about
Speaker 2: circuflationary risk, things that reduce growth and increase inflation. What
Speaker 2: technology does the opposite, increases growth, reduces inflation. Of course,
Speaker 2: having tariffs, having restriction to migration, having large budget deficits,
Speaker 2: claim within pendents of the federal of law, you name it.
Speaker 2: All those things can be actually reducing growth and increasing inflation.
Speaker 2: And the risk coming from a IE existential risk or
Speaker 2: is having financial attapt types of instability. You know, I've
Speaker 2: said since April last year that tech tramps stariffs because
Speaker 2: the impact on growth of tech is two hundred business
Speaker 2: points my view, going from two to four percent. And
Speaker 2: if you add in a realistic scenario where market discipline
Speaker 2: constrains bad policies, because it did constrain them, then the
Speaker 2: downside from bad policies at b fifty business points. So
Speaker 2: is the ratio of two hundred to fifty four to one.
Speaker 2: So tech tramps Sariff, and I said also tech trams
Speaker 2: tramps temper tantrums two because all those things are constrained
Speaker 2: again by market discipline. Every time is in tallow mode
Speaker 2: flashes out, then the market punishes him and it goes
Speaker 2: back to chickening out. It happened after April. A second,
Speaker 2: it happened after Greenland. It has en after the war
Speaker 2: with Iran. So market discipline is a very powerful force
Speaker 2: to considering that policies.
Speaker 3: Do you think's appropriate for the FED to hike once
Speaker 3: or even twice?
Speaker 2: It's possible. I would say the economy is going to
Speaker 2: ask strengthen. Inflation probably is going to slow down because
Speaker 2: now all prices and not one hundred are close to eighty,
Speaker 2: and for food prices, fertilizer, things going to gradually fall
Speaker 2: him and there'll be multilnecks. So it's kind of like
Speaker 2: a close call. But I would say it doesn't really
Speaker 2: matter very much because you know, the economy is powered
Speaker 2: by AI and technology and these massive tailwinds. They don't
Speaker 2: depend very much on polystrates. A polystrate is a fifty
Speaker 2: business once high or lower. I don't think the tech
Speaker 2: woman is going to really matter very much. And were
Speaker 2: already saw doing the world we run then when all
Speaker 2: was at one hundred the stock markeroage old hamahis in
Speaker 2: spite of that, inspite of the words about what the
Speaker 2: FED does, So I would say people obsessed with the FED,
Speaker 2: whether it's fifty business points higher. Whether it's right now,
Speaker 2: what's the difference. The key story is tech boom and
Speaker 2: that's going to be the most important first order impact
Speaker 2: of anything else.
Speaker 1: That's the headline from this conversation. Narea always fantastic to
Speaker 1: catch up with this, just apect the obvious question, what
Speaker 1: is high? Can interest rates actually achieve well?
Speaker 3: And right now stock markets seem to be moving on
Speaker 3: does it actually slow anything down? Ultimately, a task force
Speaker 3: will answer that question, John.
Speaker 1: You want to run a task first? You fancy that?
Speaker 2: Oh you know he wants to change things. But I
Speaker 2: would say one important point.
Speaker 1: Yeah, twenty seconds and one very quick and okay point.
Speaker 2: He argues that because of growth fed funds, it should
Speaker 2: be lower because the inflictions will be lower, but the
Speaker 2: potential growth is higher. They could live in a real
Speaker 2: rate what short and long is higher? So a bit
Speaker 2: of a wash on the policy rates and on a
Speaker 2: long rate.
Speaker 1: Norean Web said, as always, it's going to say thank
Speaker 1: you everybody that every Pinny Macro associates