Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordert. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
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Speaker 2: Terminal and the Bloomberg Business app. We begin this out
Speaker 2: with stocks a little change following two weeks of games,
Speaker 2: heading into this week's inflation data. Lori Cavasina of RBC
Speaker 2: writing the sentiment story has been one of mixed emotions,
Speaker 2: with takeaways varying depending on which data set one is
Speaker 2: looking at. Lori joins us now for more. Louri, good morning,
Speaker 2: to see you, Good morning. Does the bullcase stand up
Speaker 2: to the rate high debate at the moment?
Speaker 3: I think so, as long as you have a moderate
Speaker 3: amount of rate hikes. We talked about this in our
Speaker 3: Weekly few weeks ago, that whether you're looking at it
Speaker 3: from the perspective of the FED taking rate, taking their
Speaker 3: interest right up, or ten year bond yields moving up.
Speaker 3: That when we go back and we look at the
Speaker 3: history both since twenty twenty two on the bond yield side,
Speaker 3: or if we look back to nineteen ninety and look
Speaker 3: at sort of FED moves over the context of twelve
Speaker 3: month moves in the market, everything in moderation seems like
Speaker 3: something the equity market can handle. If you go back
Speaker 3: to twenty twenty one, twenty twenty two, we priced an
Speaker 3: enormous amount of hikes, we had a massive move up
Speaker 3: in ten year bond yields.
Speaker 1: It was a real regime change.
Speaker 3: We've been sort of stuck in this bond yield environment
Speaker 3: on the ten year yield side between sort of three
Speaker 3: point three to five percent. If we stay contained in
Speaker 3: that range, I think that we could have some short
Speaker 3: term indigestion in markets, but still have a fairly good
Speaker 3: outlook over the next twelve months. Similarly, if you go
Speaker 3: back and you look at how stocks perform in different
Speaker 3: hiking and cutting cycles, your best environment is when the
Speaker 3: FED does absolutely nothing. So we can keep our fingers
Speaker 3: crossed for that scenario. But you tend to get like
Speaker 3: thirteen to fourteen percent returns on both the hiking side
Speaker 3: and the cutting side when you're seeing moves and the
Speaker 3: zero to one hundred basis point range. As long as
Speaker 3: we stay within say two ish hikes over the next
Speaker 3: twelve months of twenty five basis points, I think stocks
Speaker 3: will ultimately be okay.
Speaker 1: They may not like it in the short term.
Speaker 2: Lisa mentioned Deutsche Bank looking for a call right hikes
Speaker 2: lantor this year Bank of America doing the same. That
Speaker 2: note just drop earlier on this morning, this call, this
Speaker 2: conversation accelerated by this move and energy, but energy drop
Speaker 2: back to the seventies. When you speak to the team
Speaker 2: at RBC, how dependent is the outlook for interest rates
Speaker 2: on what's happening in the commodity mail kit?
Speaker 3: So Blake went on our US rates strategy team handles
Speaker 3: the FED call for us. He's not currently looking for
Speaker 3: any FED moves, though he has also written that his
Speaker 3: conviction and that has come down, and our econ team
Speaker 3: has talked about how the next move may be a
Speaker 3: hike rather than a cut. I think there's a lot
Speaker 3: of fluidity in the situation right now. One of the
Speaker 3: things that came out in my meetings with investors last week.
Speaker 3: Is just a lot of uncertainty is in the air,
Speaker 3: whether you're looking at the path of the FED going forward,
Speaker 3: how the FED is going to operate going forward, and frankly,
Speaker 3: also this situation in the Middle East in terms of
Speaker 3: what that means for oil prices, what should your assumption
Speaker 3: be over the next twelve months. I don't think a
Speaker 3: lot of people know that, but that does have reverberations
Speaker 3: and headline inflation. One thing that Blake has really emphasized
Speaker 3: to us internally is that he hasn't really viewed the
Speaker 3: FED policy rate as the appropriate path or the appropriate
Speaker 3: tool really to combat any get inflation emanating from oil prices.
Speaker 3: But we do know, of course that we have inflation
Speaker 3: emanating from other sources as well.
Speaker 4: What's more important for the equity market Core PCE coming
Speaker 4: out on Thursday, or Micron.
Speaker 1: Earning is coming out on Wednesday.
Speaker 3: I think that this is a situation in the equity
Speaker 3: market where we have very very strong earnings tailwinds that
Speaker 3: are running up against very stiff headwinds on the PE side,
Speaker 3: and you tend to get compression in the PE right
Speaker 3: when you have higher inflation, higher interest rates but so
Speaker 3: far in our modeling, it looks like the earning story
Speaker 3: is strong enough to offset those headwinds from compression. So
Speaker 3: I would say, right now, earnings matter more at this point.
Speaker 4: A lot of people keep talking about that, and yet
Speaker 4: you take a look at some of the earnings, they've
Speaker 4: been driven by names that have pricing power.
Speaker 5: There is a bit of pushback on.
Speaker 4: The pricing side in a significant way, from hyperscalers and
Speaker 4: from other companies that are realizing that there are some
Speaker 4: limits we might be bumping up against. At what point
Speaker 4: is that a tension that needs to get resolved that
Speaker 4: could potentially be a risk factor.
Speaker 3: So look, I think it is something that investors are
Speaker 3: already thinking about and digesting, which takes some of the
Speaker 3: edge off. Frankly, I think we just have to go
Speaker 3: through reporting season right and hear what the latest commentary
Speaker 3: is from companies.
Speaker 1: One of the things we've talked.
Speaker 3: About is the capex cycle, and we're doing a lot
Speaker 3: of questions on this last week.
Speaker 1: A lot of that is hyperscaler driven, is AI driven.
Speaker 3: If you look at rates of change on S and
Speaker 3: P five hundred capex, you're kind of hovering around peaklike
Speaker 3: type levels. But if you x out the top ten names,
Speaker 3: we're in the very early stages of.
Speaker 1: A capex recovery cycle.
Speaker 3: So can you elongate the cycle as you get more
Speaker 3: companies participating in the capex boom. That's something we have
Speaker 3: to think about given the tax bill that we saw
Speaker 3: last year, so we're still sorting through a lot of
Speaker 3: these issues.
Speaker 6: Our come more companies are going to be participating when
Speaker 6: it comes to doing better in the stock market, given
Speaker 6: they could put the Iron War behind them. Prices are
Speaker 6: moving much lower.
Speaker 3: So I'll tell you Marie, last week on the Business
Speaker 3: Roundtable put out the CEO confidence survey that they run,
Speaker 3: and we actually saw that tick up, and it was
Speaker 3: on the strength of capex expectations, sales expectations, hiring expectations
Speaker 3: were pretty neutral. But there's just really been a clear
Speaker 3: contrast between say, investor sentiment, which has been kind of
Speaker 3: weak or meh, it's gotten a little bit better recently,
Speaker 3: but hasn't been that fantastic. And then if you look
Speaker 3: at the corporate side, I wouldn't say they're off to
Speaker 3: the races, but are still generally optimistic. So I think
Speaker 3: we have to take some comfort from that, especially as
Speaker 3: we head into this next reporting season.
Speaker 2: Can I answer the question, Can I just say Micron? Yeah, right, Micron,
Speaker 2: probably because I think most economists understand where PCEA will
Speaker 2: probably come in after seeing CPI and PPM the last week.
Speaker 4: Yeah, and how high expectations are from Micron given the
Speaker 4: fact that it's rallied like some eight hundred percent scot
Speaker 4: last year.
Speaker 5: I mean, it's insane.
Speaker 4: You started wondering can they keep having this transfer of
Speaker 4: wealth coming from hyperscalers to them. There was a chart
Speaker 4: showed the divergency performance between the hyperscalers and the.
Speaker 5: Chip makers, and it's bonkers.
Speaker 4: I mean, it just shows what's going on right now,
Speaker 4: and it.
Speaker 5: Feels like maybe not totally sustainable in perpetuity.
Speaker 2: Sometimes you just can't please some people and they'll say
Speaker 2: things like this is as good as it gets, even
Speaker 2: it is so good, have we seen peak?
Speaker 5: As good as it gets?
Speaker 3: So if you look at the rate of upward revisions
Speaker 3: for either the semiconductor companies or the S and P
Speaker 3: five hundred in general, it does look like we've sort
Speaker 3: of hit those peak levels of earnings enthusiasm. If we
Speaker 3: looked at the SMP five hundred, the rate of upward revisions.
Speaker 3: I think it got to around eighty nine ninety percent
Speaker 3: recently at the high. The high tends to be kind
Speaker 3: of in that ninety to ninety four percent range, and
Speaker 3: in our latest update at tick down to eighty six percent.
Speaker 1: So these are all very good numbers.
Speaker 3: Right. You're still generally seeing upgrades, just slightly slightly slower pace.
Speaker 3: If you look at the semiconductors, we're still sort of
Speaker 3: sitting at peak levels of upward revisions. And so we've
Speaker 3: been talking a lot to clients about this because I've
Speaker 3: talked to a lot of people who have been in
Speaker 3: the semi's names, who have been in the AI theme.
Speaker 3: You know, a fair number of people doing well with that,
Speaker 3: but they're saying, maybe I should be looking around at
Speaker 3: other opportunities. So we look at that chart and I say,
Speaker 3: you know, this is a risk factor, but I can't
Speaker 3: just tell you to sit here and hold your nose
Speaker 3: and sell because if you go back and look in
Speaker 3: the past, sometimes you sit at these peak levels of
Speaker 3: upward revision for multiple years.
Speaker 1: So we have to watch how.
Speaker 3: They move in time. And I know that's not a
Speaker 3: satisfactory answer. We're all supposed to have crystal balls in
Speaker 3: this business and predict what's going to happen six months
Speaker 3: down the road.
Speaker 2: With certainty and conviction, righty, But I.
Speaker 3: Do think in this plus yeah, but I do think
Speaker 3: in this particular situation, we kind of have to take
Speaker 3: it day by day.
Speaker 7: Stay with us.
Speaker 2: More Bloomberg surveillance coming up after this. The UK Prime
Speaker 2: Minister Kase Tharmas stepping down after two years in the role.
Speaker 8: The question my party is asking now is whether I
Speaker 8: am best placed to lead us into the next general election.
Speaker 8: That is why I will resign as leader of the
Speaker 8: Labor Party.
Speaker 2: Sama's exit opening the door for Britain's fifth prime minister
Speaker 2: since twenty twenty two, the former Manchester mayor Andy Burnham,
Speaker 2: putting himself forward with a backing of former Health Secretary
Speaker 2: Where Streeting Jordan Rochester of MISSOUI right. In the following,
Speaker 2: Burnham wins either way according to polling. His policy positions
Speaker 2: are clearly to the left of Starmer, but lack detail
Speaker 2: on how they would be achieved. Jord and Rochester joined
Speaker 2: us now for more. Welcome to the program sir, As
Speaker 2: you know, the nervousness in UK markets was less about
Speaker 2: secure Starmer leaving. It was always about the worries about
Speaker 2: what would replace him, Jordan, what comes.
Speaker 9: Next well, as you said John earlier in your previous section,
Speaker 9: was about their chancellor choice too. I think Burnham's positions
Speaker 9: the market knows they're quite expensive, some of them, especially
Speaker 9: the full nationalization. But in terms of the next step, John,
Speaker 9: it's about how soon does this contest take place. We're
Speaker 9: kind of get in the details of that, and when
Speaker 9: will it finish, and how quickly could a new PM
Speaker 9: be in place, and if it is a coronation, essentially
Speaker 9: it's going to be around three to four weeks, similar
Speaker 9: timelines to when Theresa May took over from David Cameron.
Speaker 9: If there is a longer drawn out contest, then you're
Speaker 9: talking the sort of August period into September. And there's
Speaker 9: some commentary commentary this morning suggesting that Andy Burnham hasn't
Speaker 9: yet got all of his plans in place, so it
Speaker 9: doesn't really want to be a prime minister within three weeks.
Speaker 9: He'd rather be a little bit longer and perhaps even
Speaker 9: in fruit to September. So those are the timelines, but
Speaker 9: let's just imagine it's in three weeks. Then it's about
Speaker 9: who the cabinet choices are and we get that within
Speaker 9: a twenty four to forty our well wind of news
Speaker 9: And as add Marieves suggested earlier, if Streeting has put
Speaker 9: and he has he's put his name behind Andy Burnham,
Speaker 9: does that make him more Likelyp's chancellor.
Speaker 7: It could be a Vet Cooper as well. She about
Speaker 7: my mood.
Speaker 9: These are of the names that were being considered, as
Speaker 9: well as the sort of the dark horse, Ed Milliband,
Speaker 9: which is Edmndiband was once considered for prime minister. So
Speaker 9: he's not the end of the world for UK rates markets,
Speaker 9: but that's kind of how the commentary kind of frames it.
Speaker 9: But he is definitely to the left of most of
Speaker 9: those other candidates, so that is the one which leads
Speaker 9: to and that sort of outcome a guilt sell.
Speaker 5: Off Jordan, what's priced in?
Speaker 4: Because ultimately it seems like there's not a lot of
Speaker 4: action on the heels of some pretty signsificate headlines.
Speaker 9: This morning well indeed, so essentially the price action took
Speaker 9: place towards the end of last week. We had a
Speaker 9: UK rate started to sell off as it started to
Speaker 9: seem quite likely after the Make a Field result, which
Speaker 9: was a very strong result for Andy Burnham, it was
Speaker 9: supposed to be a tight contest between him and Reform
Speaker 9: and it was actually pretty gangbusters over twenty percent lead.
Speaker 9: That suggests that as a leader he could boost the
Speaker 9: Labor Party's fortunes, because that's what politics is all about,
Speaker 9: it about getting elected, and the party is going behind
Speaker 9: that sort of Burnham momentum that if you look back
Speaker 9: over the past few months, the writing has been on
Speaker 9: the wall for Keir Starmer. In the public opinion polls,
Speaker 9: he was deemed to be the most sort of unpopular
Speaker 9: prime minister in UK modern history. So the writing down
Speaker 9: the war should been a matter of time. And the
Speaker 9: main reason why Guilt's move last week was because of
Speaker 9: that lead that Andy Burnham had in the makefield. But
Speaker 9: apart from that, the bigger picture is Okay, that's the politics,
Speaker 9: but what about the data?
Speaker 7: What about the Bank of England?
Speaker 9: Where's oil price is going and helping rates a little bit?
Speaker 7: This morning? Is oil coming off the.
Speaker 9: Sort of recent level slightly thanks to progress being made
Speaker 9: in US around.
Speaker 4: Talks well Jordan To that point, how much is this
Speaker 4: story a very specific story for a political sort in
Speaker 4: the UK versus a broader macro story that suggests something
Speaker 4: bigger about bond and FX markets.
Speaker 9: Well, the specific part is for all these policy details
Speaker 9: and how much guilts can sell off versus treasuries versus buns.
Speaker 9: So I think going forward, if you want to take
Speaker 9: a burriage fee on the UK, you need to do
Speaker 9: it as a spread versus US or Europe, because the
Speaker 9: broader picture is that yields have come down thanks to
Speaker 9: the US around war ending.
Speaker 7: But the broader picture the.
Speaker 9: UK slots into actually something that's quite similar, which is
Speaker 9: fiscal spending is now potentially being entertained again. Even though
Speaker 9: the UK has been boxed in by these fiscal rules,
Speaker 9: could they be redefined And the policy agenda that Andy
Speaker 9: Burnham has probably needs the fiscal rules to be tweaked
Speaker 9: in a way, at least on capital expenditure.
Speaker 7: So that feeds in through to the bigger picture.
Speaker 9: US is spending on the one big beautiful bill, Japan's
Speaker 9: doing a consumption tax on food. Potentially you've got Germany's
Speaker 9: defense spending from just the pre this year, an infrastructure
Speaker 9: feeing through to the UK thinking about a public utility nationalization,
Speaker 9: better spending on NHS, healthcare, etc. So more physical spending.
Speaker 9: It definitely starts into a broader theme.
Speaker 6: The head of one of Britain's biggest trade unions had
Speaker 6: said that Ed Miliban would be a quote noose around
Speaker 6: the neck of job creation if he became the chancellor.
Speaker 5: Could we see some sort of market.
Speaker 6: Reaction to the downside in the United Kingdom if we
Speaker 6: were to see Miliban become chancellor.
Speaker 9: It's definitely the scenario that most analysts would say that
Speaker 9: leads to a guilt sell off, and it's because of
Speaker 9: a position on for more fiscal spending. But he has
Speaker 9: also outlined that he would respect the fiscal rules. So
Speaker 9: I think the sort of dramatic Liz Trust moves that
Speaker 9: you've got in twenty twenty two you're not really going
Speaker 9: to get as long as all the candidates on potential
Speaker 9: candidates for a chancellor say we'll respect the fiscal rules,
Speaker 9: so that kind of boxes them in. If they don't
Speaker 9: say that, then you do get the bigger moves. And
Speaker 9: I don't believe edmundband had so I think it's the
Speaker 9: scenarios leads to weaker performance of UK gilts. I'm not
Speaker 9: talking about twenty twenty two sell off, but the other
Speaker 9: points I'm guessing from the Union leader.
Speaker 7: I have to look at the quote exactly.
Speaker 9: It's because of the views of north sea drilling and
Speaker 9: this is why admit a band maybe is a little
Speaker 9: bit less likely because the reindustrialization plans that Andy Burnham
Speaker 9: has for the north of England kind of don't tie
Speaker 9: the net zero agenda, and of course the north sea drilling.
Speaker 7: Stay with us.
Speaker 2: More Bloomberg surveillance coming up after this. Negotiators for te
Speaker 2: Run and Washington continue building the roadmap for reaching a
Speaker 2: final deal. The president facing some pushback from his own party.
Speaker 10: History demonstrates that giving billions of dollars to theocratic lunatics
Speaker 10: who want to murder us is an exceptionally bad idea,
Speaker 10: and I think unfortunately the President is receiving some really
Speaker 10: bad advice on this deal.
Speaker 2: The Republican Senator Take comic joins us now for most
Speaker 2: and it's a good morning going to see us, say
Speaker 2: with sending the negoshiandam face. So it's difficult to judge
Speaker 2: a deal that we haven't gone yet. What are your thoughts,
Speaker 2: your assessment of the process and how does this coming
Speaker 2: Togainda Well, let.
Speaker 11: Me let me start by just a word on al
Speaker 11: Greenspan who I knew I know was wife Andrey Mitchell.
Speaker 11: So I really today we celebrate a great a great life.
Speaker 11: And I introduced Kevin Warsh at his hearing, and Kevin
Speaker 11: is a big admirer of Allen's as well, and he
Speaker 11: does it'll be a different challenge, but we have the
Speaker 11: right man for the job. He's he's he's going to
Speaker 11: help lead the FED. I think in a time of
Speaker 11: great change and uncertainty with regard to the release, I
Speaker 11: think you have to start with the beginning of this
Speaker 11: is that the President Trump took a series of actions
Speaker 11: which puts US in a position for a set of negotiations,
Speaker 11: so enormous progress, taking the nuclear program way back under,
Speaker 11: reducing their missile capability their launchers, so AARAN is in
Speaker 11: economic difficult straits and militarily has been and dramatically affected.
Speaker 11: Now as we think about this, MoU there's three things
Speaker 11: that have to be achieved through this sixty day negotiation,
Speaker 11: which I think a critical on the President has more
Speaker 11: or less said this. Number one, the strait has to
Speaker 11: be open with an unhindered by Iran, there can be
Speaker 11: no control. Second, they have to give up their enrich
Speaker 11: uranium and there has to be a path to no
Speaker 11: nuclear program. We may have a step forward on this
Speaker 11: with the new core inspectors. And the third thing is
Speaker 11: needs to be paid for performance. In other words, each
Speaker 11: step along the way in terms of sanctioned relief has
Speaker 11: to be only coming when there's actual movement on the
Speaker 11: part of the Iranians. I think it's too early to
Speaker 11: tell whether that's happening or not, and we'll see as
Speaker 11: these negotiations proceed. But the President's goals were clear from
Speaker 11: the beginning, and I think that's what we have to
Speaker 11: stay true to.
Speaker 6: But there are two of President's goals that are not
Speaker 6: being addressed in this MoU and as the blistic missile program,
Speaker 6: and that's the money to running proxies. Do you expect
Speaker 6: the president to somewhere address these red lines that he
Speaker 6: has had for years since going back to his first term.
Speaker 11: Well, the first one we've made a lot of progress on.
Speaker 11: So I mean the missile attacks that we've done on
Speaker 11: and the air attacks we've done on their missile program,
Speaker 11: on their drones, on their manufacturing capacity, on their launchers
Speaker 11: have been extraordinarily successful. So their capability is a fraction
Speaker 11: of what it was. How far along we are I
Speaker 11: think remains to be seen, but there's been big progress.
Speaker 11: This second issue is whether they're going to actually stop
Speaker 11: the funding for Hesbela and others. We've also made huge
Speaker 11: progress in taking down Hesbela and Hamas. If we move
Speaker 11: forward on this path, we'll see whether there can be
Speaker 11: a future commitment on financing of the terrorist groups. Right now,
Speaker 11: I think the focus on the nuclear program.
Speaker 5: What role do you.
Speaker 6: See Congress playing in all of this, especially when it
Speaker 6: comes to the sanctions relief that the MoU addresses for the.
Speaker 5: Regime, Well, it depends.
Speaker 11: It depends what the agreement turns out to be, but
Speaker 11: I expect Congress will have a role, and for this
Speaker 11: to be lasting and meaningful, Congresses need to be involved
Speaker 11: and hopefully have something that we can approve leading into
Speaker 11: the next administration. I think part of the reason the
Speaker 11: Obama deal was ineffectual was that it was never assigned
Speaker 11: deal and was never passed by Congress.
Speaker 4: I want to go back to Ellen Greenspan for a minute,
Speaker 4: because this is a really pivotal moment, given that we're
Speaker 4: ushering into Kevin Warsh era that potentially is going to
Speaker 4: be very different from what we've seen, Given where inflation
Speaker 4: is currently in Pennsylvania, given what you're seeing in markets,
Speaker 4: do you think it's appropriate to be hiking rates at
Speaker 4: this point? Do you think that this is something that
Speaker 4: even the president would welcome.
Speaker 11: Well, I think Kevin what was wise in the companies.
Speaker 11: You have two big forces coming out the economy at
Speaker 11: the same time. You have what's happening in Middle East.
Speaker 11: You have the oil shock and how that's affecting pricing,
Speaker 11: particularly in energy pricing, but it's affecting everything. We've seen
Speaker 11: a lot of relief on that recently, which is a
Speaker 11: huge deal for Pennsylvania's working families. Gas under four bucks.
Speaker 11: It makes a big difference. I was just a Pennsylvania
Speaker 11: for three days. They talked about it. The second thing
Speaker 11: is this enormous capital investment in AI and infrastructure, which
Speaker 11: can have a significant deflationary impact and a huge increase
Speaker 11: in productivity. So I think it's going to take a
Speaker 11: while to sort that through, and I think Kevin's being
Speaker 11: very wise in the federal I think we'll wait until
Speaker 11: it has a little more insight into which way things
Speaker 11: are headed. You made the point about a single voice.
Speaker 11: I think Kevin will be an incredibly articulate voice. But
Speaker 11: he talked and his hearing about family fights and the
Speaker 11: idea that there's going to be a real open exchange
Speaker 11: at the table with conflicting views on the table. He's
Speaker 11: got some very strong views on the data and the
Speaker 11: data models and how they need to be updated. So
Speaker 11: I think it's gonna be a different feed than under
Speaker 11: Alan Greenspan. But one more stuited for the moment is the.
Speaker 4: Narrative that AI is just inflationary. Does that work with voters?
Speaker 4: It might not be working with markets right now, but
Speaker 4: does it work with voters? Well, listen with the.
Speaker 11: Challenge and I see this every day is there's an
Speaker 11: enormous amount of misinformation, and make no mistake, the Chinese
Speaker 11: are behind a lot of that. Look at the hearings
Speaker 11: that are being conducted in the House and the Senate.
Speaker 11: There's been a lot of reporting on this. AI and
Speaker 11: data centers in China have an eighty five percent popularity.
Speaker 11: In America they have about a twenty percent. A lot
Speaker 11: of that's based on misinformation. So one of the responsibilities
Speaker 11: I think we have in the public realm is to
Speaker 11: make sure people understand AIS offers enormous benefits enormous opportunity.
Speaker 11: A lot of it still remains to be seen, and
Speaker 11: it has huge risk, and it's our job to guide
Speaker 11: this incredible moment of change in a way that lifts
Speaker 11: all boats, make sure that we mitigate the downsides to it.
Speaker 11: So it's too early to tell, I think, is the
Speaker 11: short answer. There was all these predictions about huge job loss.
Speaker 11: Certainly it'll be disruptive, but in Pennsylvania there's enormous growth
Speaker 11: and these skilled labor electricians, welders, you can't get enough
Speaker 11: of them. And the white collar job loss has not
Speaker 11: materialized yet. So too early to tell in terms of
Speaker 11: what the impact is going to be. But I think
Speaker 11: because of the uncertainty, that'll hopefully lead to do you know,
Speaker 11: careful decision making before we make any moves.
Speaker 6: But center the job of couple lips that everyone was
Speaker 6: worried about apocalyse.
Speaker 11: How did you make that up?
Speaker 5: Yeah?
Speaker 6: No, no, that came from AI companies themselves, not China.
Speaker 6: They were the ones that are saying that this is
Speaker 6: going to more.
Speaker 11: I think this go through every moment of profound change,
Speaker 11: technological change in history. There's a doomer narrative, which I
Speaker 11: think is very misplaced. I think it's scared a lot
Speaker 11: of people, but I also think we shouldn't be too pollyanish.
Speaker 11: This is a moment of a lot of change, and
Speaker 11: we have to guide it. It has huge national security implications.
Speaker 11: We have to we have to be in the lead
Speaker 11: from a US perspective visa via China. It offers enormous
Speaker 11: opportunity and life sciences and health, and on the productivity
Speaker 11: and job front, I think we're learning a lot as
Speaker 11: we go. Literally, the job creation that I'm seeing on
Speaker 11: the ground from energy infrastructure, from data centers is just
Speaker 11: absolutely remarkable. And and I lived through the I lived
Speaker 11: through the Internet boom, and what we saw there there
Speaker 11: were some of the same predictions that wasn't quite as consequential,
Speaker 11: but there was predictions about how this would destroy certain
Speaker 11: business models. That was true, but it also created all
Speaker 11: sorts of new business models. I suspect we're going to
Speaker 11: see that as people become more comfortable with all the
Speaker 11: power that comes with AI, there's going to be new businesses,
Speaker 11: a new job creation that it comes along with it,
Speaker 11: in addition to people that build things, because people that
Speaker 11: build things are in high demand. It's the great irony
Speaker 11: of this moment of technological change, it's putting more and
Speaker 11: more emphasis on people who can actually create the infrastructure
Speaker 11: of the future.
Speaker 2: So I'm a race pointing that this narrative has come
Speaker 2: from the likes of anthropic what's in it for them?
Speaker 2: What do you think is in it for them?
Speaker 11: Well, I'm not going to speculate on motivations of any
Speaker 11: particular player, but I think.
Speaker 2: I need to interrogate the potential motivations though, of these
Speaker 2: individuals that run very launch companies that can have launch
Speaker 2: consequences for this economy.
Speaker 11: Well, you could you could imagine, you could imagine efforts
Speaker 11: to shape the regularatry landscape. Depending on what relative position
Speaker 11: someone's in, you could imagine that by positioning yourself as
Speaker 11: someone who's seeking to protect against the downside, there's benefit
Speaker 11: from a strategic perspective, from a marketing perspective. So I'm
Speaker 11: not going to pugne anybody's motives. I will say I
Speaker 11: think I think a one sided story about AI is
Speaker 11: really both misguided and really damaging to America's ability to
Speaker 11: lead and compete. And that's not to say that we
Speaker 11: shouldn't have a fully rich and honest conversation about all
Speaker 11: the possibilities, but it offers enormous potential. And in the
Speaker 11: history of humankind, these moments have created unbelievable prosperity. And
Speaker 11: I think this is another But this may be, you know,
Speaker 11: in all of our lifetime, is certainly the most consequential
Speaker 11: thing that's happening, but it may be the most consequential
Speaker 11: thing that's happened in humankind. I mean, this is amazing,
Speaker 11: the pace of change.
Speaker 6: I know you're a free market supporter. What do you
Speaker 6: make of this administration weigh and taking equity stakes in
Speaker 6: some of these AI companies.
Speaker 11: Well, I think the you know, I'm a markets person,
Speaker 11: a free market person, but I think we sort of
Speaker 11: lost the narrative to some degree. And I saw that
Speaker 11: particularly during COVID, when we were dependent on others for semiconductors,
Speaker 11: for pharmaceuticals. We had let our commitment to markets essentially
Speaker 11: make us dependent. And so I think that there are
Speaker 11: certain industries, certain technologies, certain capabilities that we really do
Speaker 11: need to have control of, need to have at home,
Speaker 11: and so the government playing a role in ensuring that's
Speaker 11: the case is I think is good makes sense, good
Speaker 11: common sense. I think the problem is the slippery slope.
Speaker 11: So you have to be very thoughtful about where those
Speaker 11: lines are, what really is a necessity from a national
Speaker 11: security perspective, and what is ultimately can be done in
Speaker 11: contributing quickly.
Speaker 6: They're talking about taking an equity stake when maybe anthropic,
Speaker 6: but the d D has it supply chain risk.
Speaker 5: How does this make any sense?
Speaker 11: Well, you have a pace of change where new models
Speaker 11: are being created that pose new challenges and new risks.
Speaker 11: So I think the government is quite rightly wrestling in
Speaker 11: the Trump administrations, wrestling with how to play a constructive
Speaker 11: role in the safeguards at the same time not standing
Speaker 11: in the way of this remarkable innovation which is so
Speaker 11: critical to our future. So it's a balancing Actually it
Speaker 11: takes a little bit while to get it right. The
Speaker 11: thing I always say is we shouldn't be setting precedents
Speaker 11: or putting any policies in place that we as Republicans
Speaker 11: or Conservatives wouldn't be comfortable with the next team if
Speaker 11: the next team isn't aligned ideologically. So we need to
Speaker 11: think about this in nonpartisan a political terms. How should
Speaker 11: the government engage in such a way to maintain leadership,
Speaker 11: protect innovation, guard against the worst impulses with a healthy
Speaker 11: recognition that Ronald Reagan's line about the scariest words that
Speaker 11: you could ever hear is I'm here from the government.
Speaker 5: I'm here to help you.
Speaker 11: We need to recognize the government's probably not equipped to
Speaker 11: get to actively engage in some of these topics.
Speaker 2: Sent it's a one fund of word if you can.
Speaker 2: We brought up Kevin Walsh new FED chat. What do
Speaker 2: you think people are getting wrong about this guy? Because
Speaker 2: the auditoring conclusions about what this FED will deliver in
Speaker 2: the coming months. What do you think people are getting wrong?
Speaker 11: Well, he is a very very gifted person and he
Speaker 11: understands markets, but understands the FED. I think he has
Speaker 11: a reformer's heart, a reformers instinct. So if you look
Speaker 11: at the ideas that he's put for he's been talking
Speaker 11: about this for years. He's I got a big vision
Speaker 11: I think for the future FED. And he's also very
Speaker 11: astute politically, So for example, the task forces that were
Speaker 11: set up, I think is a mechanism for creating a
Speaker 11: blueprint for the future, but also bringing people on board.
Speaker 11: So reformer a change agent, but someone who's going to
Speaker 11: do it with a lot of political agility and success.
Speaker 2: Would I'd like to run one of those tasks, Foss.
Speaker 5: I've got my hands for this.
Speaker 7: He enough.
Speaker 2: This is the Bloomberg's Events podcast, bringing you the best
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