WEBVTT - Big Tech AI Blowout and Fed Dissent 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.040 us live on YouTube. 0:00:27.360 --> 0:00:31.680 Angel Zino with the CFII Research on Technology. Angel Paul's 0:00:31.720 --> 0:00:34.599 been preparing all morning smart questions. Let me ask you 0:00:34.640 --> 0:00:39.000 the question, do we understand the depreciation trail of all 0:00:39.040 --> 0:00:42.600 this capex? Is it six months or is it six years? 0:00:44.240 --> 0:00:45.400 So, Tom, and thanks for having me. 0:00:45.520 --> 0:00:49.320 So, I think it depends right on the actual asset 0:00:49.360 --> 0:00:52.239 we're talking about, and realistically it could be anywhere from 0:00:52.240 --> 0:00:55.200 three to fifteen years in many respects. But on average, 0:00:55.200 --> 0:00:58.760 when you're depreciating most of these assets, you're talking about 0:00:58.760 --> 0:01:01.600 five and a half six years is the average you know, 0:01:01.720 --> 0:01:06.800 depreciation depreciating time for these assets, you know, these servers 0:01:06.840 --> 0:01:08.600 and what have you, Which is you know, where most 0:01:08.600 --> 0:01:11.360 of the capex dollars go into. Obviously, if we start 0:01:11.400 --> 0:01:13.959 talking about the land and what have you, you're you're 0:01:14.000 --> 0:01:17.720 looking closer to fifteen year time horizon. But when you 0:01:17.760 --> 0:01:19.720 start thinking about you know, some of the concerns out 0:01:19.720 --> 0:01:22.640 there about depreciation and you know whether or not we're 0:01:22.680 --> 0:01:26.720 probably probably you know, properly accounting for earnings and what 0:01:26.800 --> 0:01:29.959 have you. I'd say, at this point in time, you know, 0:01:30.080 --> 0:01:32.560 things look pretty good in this sense that you know, 0:01:32.959 --> 0:01:35.840 all the capex that's been spent, you can go back to, 0:01:36.040 --> 0:01:39.280 you know, these legacy type of GPUs that are out there. 0:01:40.040 --> 0:01:44.479 Pricing still remains very firm. So from me a depreciation perspective, 0:01:44.520 --> 0:01:47.040 it's not as if, you know, we're inflating the earnings 0:01:47.040 --> 0:01:48.080 at least at this point. 0:01:47.880 --> 0:01:51.400 In time, Angela, it appears that the market's trying to 0:01:51.880 --> 0:01:55.800 differentiate between who can generate better returns on all these 0:01:56.160 --> 0:01:59.560 huge capital spending investments. And what did you take away 0:01:59.560 --> 0:02:02.559 from last night? Because I am seeing Meta shares trading 0:02:02.600 --> 0:02:06.000 down pretty sharply here this morning, what does that tell 0:02:06.000 --> 0:02:07.440 you about Meta's strategy? 0:02:08.280 --> 0:02:09.359 Yeah, I think that at. 0:02:09.360 --> 0:02:11.280 Least for today and the street has it right, I mean, 0:02:11.600 --> 0:02:15.200 going into the print, I'd say the most confidence for 0:02:15.400 --> 0:02:17.480 from us, and I think from the street was on 0:02:17.680 --> 0:02:19.920 Alphabet at least four Q one. 0:02:19.960 --> 0:02:20.960 And again, I mean we. 0:02:21.200 --> 0:02:24.000 Saw some great results out of Alphabet. You saw a 0:02:24.000 --> 0:02:26.440 doubling of the backlog. You kind of saw it. You know, 0:02:26.440 --> 0:02:29.600 they're getting into the actual hardware business in terms of selling. 0:02:29.360 --> 0:02:30.800 Those those TPUs. 0:02:30.880 --> 0:02:33.640 But the cat that you can see the visibility in 0:02:33.680 --> 0:02:36.160 terms of the cat that spend and where that's going 0:02:36.240 --> 0:02:39.000 in terms of the backlog and that revenue trajectory of 0:02:39.080 --> 0:02:40.720 the next couple of years. With Meta, it is a 0:02:40.760 --> 0:02:44.120 little bit different, right. You got the they tweak the 0:02:44.200 --> 0:02:47.160 number higher, which I don't think is necessarily an issue, 0:02:47.880 --> 0:02:49.560 you know, relatively in line. I mean, you're talking about 0:02:49.560 --> 0:02:51.280 one hundred and forty five billion at the high end 0:02:51.320 --> 0:02:54.040 of ten billion. But that being said, I think you 0:02:54.040 --> 0:02:57.240 know more importantly is Zuckenberg had a chance, I think 0:02:57.240 --> 0:02:59.000 on miss earnings call to really tell. 0:02:58.840 --> 0:03:01.399 A better story about the AI. 0:03:01.200 --> 0:03:04.480 Strategy they just announced and you sparked this month, they're 0:03:04.480 --> 0:03:07.480 going to roll that out, ramp it up. What kind 0:03:07.520 --> 0:03:09.360 of products do they have on the horizon as you 0:03:09.400 --> 0:03:12.000 get into the second half of here into twenty twenty seven, 0:03:12.200 --> 0:03:14.680 How is that AI spend going to be monetized? 0:03:14.840 --> 0:03:16.400 And they just didn't tell the story. 0:03:16.919 --> 0:03:19.560 It doesn't necessarily mean that there's not a story, but 0:03:19.840 --> 0:03:22.400 the problem is that investors don't know what the story 0:03:22.600 --> 0:03:24.120 is at this point in time where were at least 0:03:24.200 --> 0:03:26.880 can place a trajectory in terms of the spend. I 0:03:26.919 --> 0:03:28.600 think the good thing for MATA, at least at this 0:03:28.680 --> 0:03:30.640 point in time is when you look at the growth 0:03:30.680 --> 0:03:32.840 rate thirty three percent of this quarter, you know another 0:03:32.880 --> 0:03:35.440 twenty five percent year of year next quarter. At least 0:03:35.440 --> 0:03:38.960 for the time being, the core business remains extremely strong 0:03:39.200 --> 0:03:42.240 and they are leveraging AI in that core business. 0:03:42.520 --> 0:03:45.280 Angela, The CAPEX numbers are just extraordinary. That for the 0:03:45.280 --> 0:03:48.880 big four companies there that reported last night, Amazon, Microsoft, Google, 0:03:49.600 --> 0:03:52.320 and Facebook seven hundred and twenty five billion dollars in 0:03:52.360 --> 0:03:55.480 CAPEX just in twenty twenty six alone. We've never seen 0:03:55.960 --> 0:03:58.880 those kinds of numbers. Really, where are we in the 0:03:58.920 --> 0:04:02.480 investment cycle? Is this the peak investment in AI? Or 0:04:02.520 --> 0:04:03.200 is there more to come? 0:04:04.360 --> 0:04:06.280 I mean, based on what we heard last night, it 0:04:06.320 --> 0:04:08.360 looks like there's there's more to come, right. I mean, 0:04:08.640 --> 0:04:12.200 Alphabet basically came out and said, you know, twenty twenty 0:04:12.240 --> 0:04:14.480 seven is going to be much higher than twenty twenty six. 0:04:14.880 --> 0:04:17.760 If you're Microsoft, then you look at that backlog. 0:04:17.320 --> 0:04:20.320 And you like, you kind of just heard from what 0:04:20.360 --> 0:04:23.000 they've had to say, you would think that they're going 0:04:23.080 --> 0:04:25.400 to provide a higher CAPEX number as well. 0:04:25.520 --> 0:04:28.600 Maybe the unknown at this point in time is meta. 0:04:29.000 --> 0:04:32.520 My guess, just knowing how Zuckerberg works, he's not going 0:04:32.560 --> 0:04:36.360 to pull back on the capex either, and potentially. 0:04:36.000 --> 0:04:38.200 Could see a deceleration, but you know. 0:04:38.160 --> 0:04:40.760 He's not given up, and so I gotta I gotta 0:04:40.800 --> 0:04:44.360 go Apple. They're like the non capex, aren't they? 0:04:45.000 --> 0:04:47.839 Yeah? Yeah, I mean, and it's worked in their favor. 0:04:48.520 --> 0:04:50.920 You know, the capital intensity level about three percent and 0:04:50.960 --> 0:04:54.200 has been over the last decade. And you look at 0:04:54.240 --> 0:04:56.760 how the revenue trajectory is looking now, I mean, it's 0:04:56.880 --> 0:04:57.800 it's very strong. 0:04:57.920 --> 0:05:00.560 China is finally working for them. 0:05:00.640 --> 0:05:02.680 Really, the story is going to be AI at the 0:05:02.680 --> 0:05:05.760 Developer's conference and whether or not they get foldables right 0:05:05.839 --> 0:05:09.839 this fall. If they get those two stories right, you're 0:05:09.880 --> 0:05:13.960 talking of a very good revenue trajectory going into twenty 0:05:14.000 --> 0:05:18.120 twenty seven with upside potential in the areas life services. 0:05:18.240 --> 0:05:21.279 And again that stuff isn't necessarily baked into the estimates 0:05:21.320 --> 0:05:24.560 at this point in time. If you get that, we 0:05:24.640 --> 0:05:26.839 think there's some nice upside on both the free cash 0:05:26.880 --> 0:05:27.720 flow and earning side. 0:05:27.880 --> 0:05:30.880 Great prive. Angela Angela Zino, thank you so much for 0:05:31.000 --> 0:05:33.960 ce if right now, futures up twenty two. Paul and 0:05:34.000 --> 0:05:36.560 I are watching oil. It continues to send a one 0:05:36.680 --> 0:05:40.599 fourteen handle down twelve dollars from the peak one six 0:05:40.720 --> 0:05:44.760 jan Murray with the CIO, NFJA investments in studio with this, 0:05:44.880 --> 0:05:49.880 which is always a good thing. Do you overweight meg seven, 0:05:50.320 --> 0:05:53.000 say boy, I'm glad I own it at a lower price, 0:05:53.520 --> 0:05:57.440 or do you I hate this word rebalance and rebalance 0:05:57.480 --> 0:06:00.360 out of Meta, rebalance out of Amazon. 0:06:00.920 --> 0:06:03.119 You know the mag seven. I think it all comes 0:06:03.160 --> 0:06:06.320 down to what's going on with Capex. Earnings are pretty good, 0:06:06.760 --> 0:06:09.800 but it's really about Capex, and I would delineate Capex. 0:06:10.160 --> 0:06:12.760 I'll answer your question, but I'll delineate it in two ways. 0:06:13.160 --> 0:06:15.640 You've got maintenance capecks. Everyone has to spend money, right, 0:06:15.720 --> 0:06:17.680 They got to spend money on something. But then you 0:06:17.720 --> 0:06:21.760 have growth Capex. Okay, this is AI cappex. If you 0:06:21.760 --> 0:06:26.719 can textualize this, Okay, Capex pre AI for these companies 0:06:27.040 --> 0:06:29.880 was around ten to fifteen percent of revenue. It's not 0:06:30.279 --> 0:06:35.920 double that, Okay, thirty percent of their revenue is going 0:06:35.920 --> 0:06:38.960 to Capex as a percentage. Okay, this is the largest 0:06:38.960 --> 0:06:43.719 capex cycle we've seen in modern history. This is equivalent 0:06:43.800 --> 0:06:45.720 to what happened in the eighteen hundreds of the railroad, so. 0:06:45.720 --> 0:06:48.640 Like when the Cowboys rebuilt. Like when the Cowboys rebuilt. 0:06:49.040 --> 0:06:52.039 So the way I would answer this is, I think 0:06:52.080 --> 0:06:54.160 you have to be there because this is the biggest 0:06:54.279 --> 0:06:58.800 infrastructure build out we've ever seen in modern history. 0:06:58.120 --> 0:06:59.880 And so it's very unique. 0:07:00.160 --> 0:07:02.200 I love when he comes in. I know, these phrases 0:07:02.240 --> 0:07:03.800 are great. It is. 0:07:04.200 --> 0:07:06.080 It really isn't. In fact, I'll take it a step further. 0:07:06.200 --> 0:07:09.000 Let's contextualize this as a percentage of GDP. 0:07:09.680 --> 0:07:11.080 It's it's roughly seven. 0:07:10.920 --> 0:07:15.320 Hundred billion dollars with a b okay, that's two or 0:07:15.320 --> 0:07:18.600 three percent of GDP. So you think about this, You're like, 0:07:18.920 --> 0:07:21.720 why are the earnings going crazy on the semi stocks? 0:07:21.720 --> 0:07:24.240 Why are they going crazy on the memory stocks? You 0:07:24.360 --> 0:07:27.760 have massive American companies there for the first time ever, 0:07:27.880 --> 0:07:32.560 are really putting their balance sheets to work in growth form, 0:07:32.680 --> 0:07:36.320 and they're spending money, and so it's unique, and I 0:07:36.360 --> 0:07:37.880 think you got to be therefore, and a lot of 0:07:37.920 --> 0:07:40.200 the multiples aren't even not high on the big tech names, 0:07:40.200 --> 0:07:41.040 to be honest. 0:07:41.280 --> 0:07:43.840 So you're so just to put a ball on this one. 0:07:44.120 --> 0:07:47.680 You're in this AI trade across the technology substance. I 0:07:47.680 --> 0:07:49.400 mean you you have to have to be. 0:07:49.520 --> 0:07:50.200 You have to be. 0:07:50.240 --> 0:07:52.560 And it's touching every part of the economy. Yes, so 0:07:52.760 --> 0:07:56.000 you know whether it's industrials, it's going to trickle into 0:07:56.040 --> 0:07:58.920 financials it already is. It's going to touch every component. 0:07:59.280 --> 0:08:00.800 So I think you have to be there. I think 0:08:00.840 --> 0:08:03.160 the real question, the big, big, big question. We know 0:08:03.200 --> 0:08:05.400 what the spend is, but we don't know what the 0:08:05.440 --> 0:08:06.040 return is. 0:08:06.240 --> 0:08:06.920 When I look at. 0:08:06.840 --> 0:08:08.840 Earnings today, that's reflecting. 0:08:09.840 --> 0:08:12.560 It's too complicated for me. Okay, I'm getting over how 0:08:12.600 --> 0:08:14.520 bad the Mets are. They're worse than the Red sixe. 0:08:14.760 --> 0:08:17.920 Those are baseball team John up here in the Northeast. 0:08:18.200 --> 0:08:22.400 Stay with us. More from Bloomberg Surveillance coming up after this. 0:08:29.640 --> 0:08:33.200 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:08:33.280 --> 0:08:36.480 weekday afternoons from seven to ten am Eastern Listen on 0:08:36.520 --> 0:08:40.200 Applecarplay and Android Auto with the Bloomberg Business app, or 0:08:40.360 --> 0:08:41.920 watch us live on YouTube. 0:08:42.040 --> 0:08:46.760 Jonathan Gowob is with US Chief Factulty Strategies. Seaport advises, 0:08:46.760 --> 0:08:49.760 I mean reading your note and the way you write it, 0:08:49.920 --> 0:08:53.960 Meg seven. Is this island of prosperity. Is it MAG 0:08:54.080 --> 0:08:57.040 seven and everything else catches up? Or is it MEG 0:08:57.160 --> 0:08:58.280 seven alone? 0:08:58.679 --> 0:09:02.920 I actually think it's AI Semiconductors is alone and the 0:09:02.920 --> 0:09:04.880 rest of the market is something different. If you look 0:09:04.920 --> 0:09:09.800 at the hyper scalers or the you know what have you, 0:09:10.240 --> 0:09:14.800 their earnings growth looks like about two percent this quarter, 0:09:15.240 --> 0:09:19.400 and the semiconductors right now predicted ninety nine percent year 0:09:19.440 --> 0:09:22.520 over year growth and is expected to stay something close 0:09:22.559 --> 0:09:25.120 to that all year long. So there's there's a lot 0:09:25.160 --> 0:09:27.160 of haves and have nots in that group. 0:09:27.480 --> 0:09:29.880 Just broadly defined for this market. Here, we're kind of 0:09:29.880 --> 0:09:31.760 getting into the teeth of the earning season, really bit 0:09:31.760 --> 0:09:33.800 busy week this week. What have you seen from earnings 0:09:33.800 --> 0:09:36.480 and is the earnings picture for a corporate America enough 0:09:36.520 --> 0:09:37.400 to support this market? 0:09:37.440 --> 0:09:37.840 Do you think? 0:09:38.679 --> 0:09:38.920 Yeah? 0:09:38.920 --> 0:09:40.839 I mean, if if you take a look year to date, 0:09:41.320 --> 0:09:44.640 the earnings are up and the PE is down. So 0:09:45.000 --> 0:09:47.840 when people see a stock market that's that's doing okay, 0:09:47.880 --> 0:09:50.360 they just assume, well, stocks are more expensive. But if 0:09:50.360 --> 0:09:53.319 your earnings are rising faster than your price is going up, 0:09:53.640 --> 0:09:58.160 stocks are on sale. And I think that the narrative 0:09:58.200 --> 0:09:59.200 doesn't capture. 0:09:58.880 --> 0:10:02.840 That what's screening well for you guys these days. I 0:10:02.840 --> 0:10:04.600 mean it's easy for us to just kind of pour 0:10:04.640 --> 0:10:07.480 into the text dot trade because that seems to be 0:10:07.520 --> 0:10:10.680 working recently. How Else, what's the conversation you're having with 0:10:10.720 --> 0:10:11.680 your clients these days? 0:10:11.800 --> 0:10:14.240 So you almost have to look at the market in 0:10:14.880 --> 0:10:16.560 little pocket. So let's take a look at we're seeing 0:10:16.559 --> 0:10:23.040 this quarter. Financials are having a terrific earning story, and 0:10:23.800 --> 0:10:25.680 there's a couple of parts of the story. 0:10:25.720 --> 0:10:26.760 The one is that. 0:10:27.040 --> 0:10:28.720 In the lead up to the war, and it was 0:10:28.720 --> 0:10:30.640 really in the lead up rather than during the war, 0:10:30.960 --> 0:10:34.800 the amount of repositioning portfolios was high and trading profits 0:10:34.840 --> 0:10:38.680 were really strong across the board. And normally when that happens, 0:10:39.240 --> 0:10:42.439 you also see that bankstop lending money and companies are struggling, 0:10:42.640 --> 0:10:45.679 and they weren't. So the lending activity was fine, the 0:10:45.760 --> 0:10:48.920 faults were down, and trading was higher. However, all the 0:10:48.960 --> 0:10:51.440 trading happened in February, and it's been quiet in March 0:10:51.440 --> 0:10:54.560 and April, which means that the really great first quarter 0:10:54.960 --> 0:10:57.840 probably doesn't carry forward in that space. 0:10:58.200 --> 0:11:01.880 I look at where we are and it's simple, do 0:11:01.960 --> 0:11:06.480 I buy the growthiness, do I do nothing, or do 0:11:06.520 --> 0:11:09.000 I buy value? Which is it? 0:11:09.960 --> 0:11:11.600 Oh, you have to buy the you have to buy 0:11:11.640 --> 0:11:15.200 the growthiness. If you look at the AI related especially 0:11:15.200 --> 0:11:17.840 the semiconductions. But if you look at the AI related companies, 0:11:18.160 --> 0:11:21.559 they're trading at a market multiple of twenty and their 0:11:21.600 --> 0:11:24.080 expected growth in the next twelve months is sixty percent. 0:11:24.200 --> 0:11:25.719 I allowed to say you have a favorite? Do you 0:11:25.800 --> 0:11:28.200 have a single best idea? Why don't I? 0:11:28.280 --> 0:11:29.880 You know, if you look at I mean, I'll talk 0:11:29.920 --> 0:11:31.760 about you know, if I look at the names, the 0:11:31.760 --> 0:11:36.439 the Evogos, the in Vidias, the A M d s, 0:11:37.040 --> 0:11:40.960 the difference between their growth rate and their valuation is 0:11:41.040 --> 0:11:41.600 just shocking. 0:11:41.880 --> 0:11:45.120 Jonathan Dollid, Chief Equity Strategists Seaport Advisors Joints is here 0:11:45.120 --> 0:11:48.840 in our Bloomberg Interactive Brokers Studio FED chairman J. Poum. 0:11:48.960 --> 0:11:51.400 He's sticking around, what do you make of that? 0:11:52.920 --> 0:11:55.760 You know, I'm not really sure it matters that much. 0:11:56.000 --> 0:11:58.880 We've done a bunch of work on what stocks care about. 0:11:59.160 --> 0:12:01.319 They care about credit and it spreads because that really 0:12:01.360 --> 0:12:04.960 represents a downside tail risk. They care and they don't 0:12:04.960 --> 0:12:06.720 really care that much about the short read, even though 0:12:06.760 --> 0:12:08.520 that's what everybody obsesses on and. 0:12:08.440 --> 0:12:09.760 What's it mean to thank you? 0:12:10.040 --> 0:12:11.280 Thank you, thank you? 0:12:12.000 --> 0:12:14.480 And you know, Tom, you were talking about before. The 0:12:15.160 --> 0:12:18.320 credit spread is lower today than it was before the war. 0:12:18.840 --> 0:12:21.360 The vis now is lower than it was before the war. 0:12:21.400 --> 0:12:24.640 The cost of hedging downside risk is lower than it 0:12:24.679 --> 0:12:26.720 was before the war. And stocks have to be able. 0:12:26.840 --> 0:12:29.280 Let's do gallup charm here, folks on the other day, 0:12:29.360 --> 0:12:32.000 and folks, this is all I used Google Gemini. I 0:12:32.080 --> 0:12:35.160 used to perplexity. You don't I use Google Gemini religiously 0:12:35.200 --> 0:12:38.760 here with the Bloomberg ask me as well, Okay, John 0:12:38.800 --> 0:12:41.000 gottim I went back and looked at like six wars, 0:12:41.800 --> 0:12:43.680 and in the middle of the war, the stock market 0:12:43.760 --> 0:12:47.320 starts and always goes up because of the stimulus and 0:12:47.440 --> 0:12:49.760 just you know, the energy that you get out of 0:12:49.800 --> 0:12:52.520 the tragedy of a word, that's what we're living right now. 0:12:52.640 --> 0:12:55.960 I mean, there's stimulus out there. The corporations are doing 0:12:56.000 --> 0:12:59.120 business and they're creating revenue, and what I believe is 0:12:59.120 --> 0:13:01.360 a five percent nominal GDB space. 0:13:02.040 --> 0:13:04.160 Just there's something first of if you look at again, 0:13:04.240 --> 0:13:08.040 getting back to corporate profits right now, the market's expecting 0:13:08.120 --> 0:13:11.200 eight percent profits this year in the SMP, which is 0:13:11.480 --> 0:13:14.360 a crazy number before the war was fourteen and a half. 0:13:14.559 --> 0:13:16.160 Profit growth went up by three and a half. No, 0:13:16.360 --> 0:13:19.199 the big delta on that, The big difference is that 0:13:19.360 --> 0:13:22.280 energy profits were expected to go up. But what we 0:13:22.440 --> 0:13:25.199 used to think is when energy profits go up, you're 0:13:25.200 --> 0:13:27.600 going to crush the consumer, You're going to crush companies, 0:13:28.000 --> 0:13:31.160 and that has not happened. There's been no down downward 0:13:31.240 --> 0:13:33.800 pressure on corporate youre talking about corporate spending patterns in 0:13:33.840 --> 0:13:38.160 today's GDP, You're not seeing that. And until you do, 0:13:38.360 --> 0:13:38.959 things are fine. 0:13:39.360 --> 0:13:43.840 This is key. Alexis, I think mentioned this claims, Yeah, 0:13:44.520 --> 0:13:46.559 eighty nine thousand, YEP. 0:13:47.120 --> 0:13:50.160 Consensus was, you know, two hundred and twelve thousand. So 0:13:50.600 --> 0:13:53.480 came in much better there, Jonathan. We saw late last 0:13:53.559 --> 0:13:55.160 year kind of a rotation maybe out of some of 0:13:55.160 --> 0:13:57.680 those high growth tech names into some maybe some more value, 0:13:57.960 --> 0:14:00.679 some small and mid cap stocks. But boy, there's tech 0:14:00.679 --> 0:14:03.240 stocks that come ripping back here. So how has that 0:14:03.320 --> 0:14:05.360 rotation has that been? Was that just a short term 0:14:05.360 --> 0:14:06.920 trade or is that something that can play out? 0:14:08.160 --> 0:14:11.079 I think the rotation is a bit misunderstood. So if 0:14:11.120 --> 0:14:12.680 you think things are going to go bad, what you 0:14:12.720 --> 0:14:15.200 do is you sell things that are more cyclical and 0:14:15.240 --> 0:14:18.680 you go into defensive stocks. That is not what happened. 0:14:18.720 --> 0:14:23.400 What this really was was a risk reduction trade in 0:14:23.440 --> 0:14:25.960 the hedge fund community. So let's say your overweight stock 0:14:26.040 --> 0:14:28.720 A and your underway stock B. The war happens, and 0:14:28.840 --> 0:14:31.680 they don't pull out of the market. They just take 0:14:31.720 --> 0:14:34.400 all their bed sizes down and they readjust them. And 0:14:34.440 --> 0:14:37.000 when you do their overweights, all of a sudden, they're 0:14:37.040 --> 0:14:39.480 selling them. Their underrates are buying. And you see this 0:14:39.680 --> 0:14:43.640 like wicked rotation. And so tech had been out of 0:14:43.720 --> 0:14:45.560 favor at the beginning of the year when you had 0:14:45.560 --> 0:14:49.040 this software sell up, so when they readjust it snaps back. 0:14:49.120 --> 0:14:50.600 But it's really more a technical thing. 0:14:50.800 --> 0:14:53.760 What's retail doing and I don't mean retail like robin 0:14:53.760 --> 0:14:56.720 Hood and Meme stocks in that we're just adding to 0:14:56.760 --> 0:14:59.280 our four rowin case, is that the behavior you see. 0:15:00.600 --> 0:15:02.520 I'm not seeing a lot of I'm not seeing a 0:15:02.520 --> 0:15:04.360 lot of pressure. I mean, there there is a Meme 0:15:04.480 --> 0:15:07.480 basket of companies and upmarket like this that are doing 0:15:07.720 --> 0:15:11.240 really well. Last year was a great year for for 0:15:11.360 --> 0:15:15.040 those kind of companies. But there's there's really few signs 0:15:15.080 --> 0:15:17.640 that are that are telling that individual investor to be cautious. 0:15:18.360 --> 0:15:20.720 What's screening wall for you guys these days? Is there 0:15:20.720 --> 0:15:23.160 a certain industries, Is there a certain factor that you 0:15:23.160 --> 0:15:24.480 guys are focusing on these days. 0:15:24.600 --> 0:15:27.240 Yeah, there's there's a number of areas. We do a 0:15:27.280 --> 0:15:29.240 lot of work on this idea where where are the 0:15:29.280 --> 0:15:33.720 company fundamentals breaking down from the stock price action. And 0:15:33.760 --> 0:15:35.400 some of these are short ideas, some of these are 0:15:35.440 --> 0:15:39.200 long ideas. I'll give you an example restaurants, leisure, and 0:15:39.200 --> 0:15:46.360 and and and gaming. The fundamentals have largely deteriorated. And 0:15:46.400 --> 0:15:48.920 there's a whole bunch of stocks that are doing really well. 0:15:49.360 --> 0:15:50.240 And so when we're. 0:15:50.120 --> 0:15:52.760 Talking to the hedge found community, we're saying, these are 0:15:52.760 --> 0:15:57.880 companies the the the businesses are are are are rolling over, 0:15:58.520 --> 0:16:01.520 the stocks are moving up to profits. In that in 0:16:01.560 --> 0:16:04.040 the energy space, there's a whole bunch of companies that 0:16:04.120 --> 0:16:06.440 the earnings for the group look really well. So there's 0:16:06.440 --> 0:16:09.360 a lot of positive price action. And there's individual names 0:16:09.400 --> 0:16:11.600 where the fundamentals are not keeping up. 0:16:11.640 --> 0:16:13.240 So there are disruptions. 0:16:13.520 --> 0:16:16.920 One group that in particular, it's been a bloodbath in 0:16:17.040 --> 0:16:20.080 software and the good and bad are being taken down together. 0:16:20.400 --> 0:16:24.240 There's probably more opportunity on individual names in software than 0:16:24.280 --> 0:16:25.480 any other group in the market. 0:16:25.920 --> 0:16:28.600 I was looking at this John, and what I don't understand. 0:16:28.960 --> 0:16:31.880 I love the enthusiasm, and of course it's Seaport Advisors. 0:16:32.120 --> 0:16:34.720 The note is clarity. Look to Seaport Advisors, folks for 0:16:34.760 --> 0:16:37.600 the gallob research. Not he does it daily. It's really 0:16:37.680 --> 0:16:41.120 quite something that he calculates out where we are. But 0:16:41.200 --> 0:16:45.000 the X axis your enthusiasm, like, do you have a 0:16:45.040 --> 0:16:48.600 clarity on August? Do you have a clarity on your end? 0:16:48.920 --> 0:16:52.520 Can dare I say you model into two thousand twenty seven? 0:16:53.720 --> 0:16:54.840 What's what's been happening? 0:16:54.920 --> 0:16:55.200 Tom? 0:16:55.480 --> 0:16:57.520 I mean, you guys know this is that analysts are 0:16:57.520 --> 0:17:00.640 always an enthusiastic bunch. They start with their smiths do I, 0:17:01.160 --> 0:17:04.800 and over time they normally come down the last three 0:17:04.880 --> 0:17:08.159 years tech company, which which normally the estimates would fall 0:17:08.280 --> 0:17:12.480 steadily all year long because enthusiasm. It's reality, the numbers 0:17:12.480 --> 0:17:15.359 are going higher and higher and higher, and it's really 0:17:15.600 --> 0:17:18.800 broad and this is not something that I've seen in 0:17:18.840 --> 0:17:23.320 my career. And so the when when analysts underestimate, and 0:17:23.720 --> 0:17:26.440 this is about as optimistic group as you have, that 0:17:26.440 --> 0:17:28.600 that usually means that there's there's a lot more upside 0:17:28.640 --> 0:17:29.040 left in the mid. 0:17:29.960 --> 0:17:32.840 Paul helped me out here. Alex Reid working in the 0:17:32.920 --> 0:17:38.400 dark and dark and inferious Bloomberg Intelligence tech Space, Microsoft 0:17:38.480 --> 0:17:43.560 Capex Boost could be bond sale precursor. Yep, just like 0:17:43.600 --> 0:17:47.240 we're we're seeing with Meta this morning. Are bond issuances 0:17:47.280 --> 0:17:50.879 by meg seven's Are they good for their stocks? You know? 0:17:51.359 --> 0:17:55.159 Seaport Global is we're talking for the biggest private credit 0:17:55.320 --> 0:17:57.560 shopping in the world. And I talk a lot to 0:17:58.200 --> 0:18:02.600 our our credit clients. They are really concerned on fifteen 0:18:02.640 --> 0:18:05.120 year bonds, on data centers and things like that. I'm 0:18:05.119 --> 0:18:07.560 not talking with the job I'm talking about our client base. 0:18:08.320 --> 0:18:11.200 Because we have so little visibility and so much capex. 0:18:11.680 --> 0:18:15.280 We are going to see the users of this, not 0:18:15.320 --> 0:18:18.040 the chip makers, but the people who build data centers, 0:18:18.200 --> 0:18:21.399 like roughly zero profits this quarter, and those profits are 0:18:21.400 --> 0:18:24.000 going to be under pressure for several years. I know 0:18:24.000 --> 0:18:27.120 you were talking about this on an earlier slot because 0:18:27.640 --> 0:18:30.080 they haven't even begun to depreciate a lot of the 0:18:30.160 --> 0:18:31.800 data center expenditures. 0:18:32.160 --> 0:18:36.040 Okay, I gotta leave it there. Going on, Are you 0:18:36.160 --> 0:18:37.000 based in New York? 0:18:37.359 --> 0:18:38.360 I'm based in New York. 0:18:38.400 --> 0:18:41.679 I can come by any times. Jean Gollib He's on 0:18:41.720 --> 0:18:44.199 his way to a teacher's conference right now. John Gollib 0:18:44.240 --> 0:18:48.240 with us, folks with Seaport Advisors. Stay with us. More 0:18:48.359 --> 0:18:51.240 from Bloomberg Surveillance coming up after this. 0:18:58.480 --> 0:19:02.080 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:19:02.160 --> 0:19:05.280 weekday afternoons from seven to ten am Eastern Listen on 0:19:05.400 --> 0:19:08.800 Apple Karplay and Android Otto with the Bloomberg Business app, 0:19:08.960 --> 0:19:10.800 or watch us live on YouTube. 0:19:10.880 --> 0:19:13.399 You get lucky. That's what happens in this business. He 0:19:13.520 --> 0:19:16.639 was booked ages ago and then we said, well, we 0:19:16.680 --> 0:19:19.680 can't talk to Professor Hers at the University of Houston 0:19:20.000 --> 0:19:22.879 unless we blow up opek boom. There it was yesterday 0:19:23.400 --> 0:19:25.359 with us in the studio, folks. And this is the 0:19:25.440 --> 0:19:29.080 heritage of surveillance. Ed Morris at City Group and now 0:19:29.119 --> 0:19:33.639 at Hartree, Jeff Curry out of Chicago, and Golden Sachs, 0:19:33.680 --> 0:19:38.120 Francisco Blanche and all the academics across this nation. This 0:19:38.200 --> 0:19:41.560 is the foundational guy out of Yale University and all 0:19:41.600 --> 0:19:44.560 of us work at the University of Houston. Ed Hers 0:19:44.760 --> 0:19:47.560 joins this morning. We're so honored to have you here. 0:19:47.640 --> 0:19:50.600 Were you surprised to see Abu Dhabi and Dubai and 0:19:50.640 --> 0:19:53.760 the other three tribes of the UA, the Trucial States. 0:19:54.040 --> 0:19:56.960 Were you surprised to see them walk away from OPEK, No, 0:19:57.200 --> 0:19:57.720 not at all. 0:19:57.880 --> 0:20:01.920 They've been kind of leading the band of cheaters within OPEC, 0:20:02.119 --> 0:20:06.840 and as former oil minister Alonaomi of Saudi Arabia said. 0:20:06.840 --> 0:20:10.640