WEBVTT - Nvidia Reports as SpaceX & OpenAI IPOs Gain Steam 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 --> 0:00:26.920 us live on YouTube. 0:00:27.040 --> 0:00:30.440 Okay, two hour conversation Frankly got Man Deep coming in 0:00:30.480 --> 0:00:34.800 a moment. Frankly is with hs BC. Frank what did 0:00:34.840 --> 0:00:40.519 the Nvidia earnings say to Microsoft? What did they tell Apple? 0:00:40.880 --> 0:00:42.640 What did they tell Amazon? 0:00:44.840 --> 0:00:49.199 I think the key messaging is that Nvideo needs to 0:00:49.479 --> 0:00:52.239 change up their narrative a bit, right. I think you 0:00:52.280 --> 0:00:55.240 know what they did here this quarter was quite interesting 0:00:55.320 --> 0:00:58.960 is how they reclassified their data center revenues. They broke 0:00:59.000 --> 0:01:02.240 it down between the hyperscalers and the non hyperscalers, and 0:01:02.280 --> 0:01:04.600 I think this is what investors ultimately want to see, 0:01:04.680 --> 0:01:07.680 is you know, the growth in the non hyperscalers continue 0:01:07.720 --> 0:01:10.600 to show that they're gaining share there. And I think 0:01:10.680 --> 0:01:13.640 that's the next big narrative that really that the stock 0:01:13.720 --> 0:01:15.360 needs to really see a bigger rerating. 0:01:16.120 --> 0:01:18.560 I'm looking at a Nvidia here again. I thought the 0:01:18.600 --> 0:01:21.880 results were just really solid. The stock's pretty much unchanged 0:01:21.959 --> 0:01:24.240 on the market here on the day here pre market 0:01:24.240 --> 0:01:26.960 trading two hundred and twenty three dollars pretty much unchanged. 0:01:27.200 --> 0:01:30.360 But stocks had obviously a good run of twenty percent 0:01:30.440 --> 0:01:33.720 year to date seventy percent of trailing twelve months. So, Frank, 0:01:33.760 --> 0:01:36.600 I mean, what's the next step for a story like 0:01:37.400 --> 0:01:39.880 in Vidia here, because I look out there and I 0:01:39.920 --> 0:01:43.680 see competition building, whether it's a MD of the world 0:01:43.800 --> 0:01:45.640 or some other players, even Intel. 0:01:45.720 --> 0:01:47.880 What's what's the next step for this story here? 0:01:49.000 --> 0:01:49.200 Yeah? 0:01:49.280 --> 0:01:51.120 So I think that's exactly the point is that the 0:01:51.200 --> 0:01:54.800 beaten raised numbers don't really do much anymore. You know, 0:01:54.920 --> 0:01:58.920 the you know, a strong AI GP ROWMP doesn't do 0:01:59.000 --> 0:01:59.800 that much anymore. 0:02:00.040 --> 0:02:01.120 So what they need to do is. 0:02:01.160 --> 0:02:05.600 Really focus on growth in non hyperscillar customers. And so 0:02:05.680 --> 0:02:07.640 I think you know, they talked about it last year 0:02:07.840 --> 0:02:10.680 with the enterprise and sovereignty I but they didn't break 0:02:10.720 --> 0:02:13.360 down revenues for people that get much comfort around you know, 0:02:13.400 --> 0:02:15.760 how much step business is really growing now it's almost 0:02:15.760 --> 0:02:16.799 fifty to fifty split. 0:02:17.040 --> 0:02:17.959 So that's a good start. 0:02:18.240 --> 0:02:20.120 But I think from here, you know, what they need 0:02:20.160 --> 0:02:23.160 to show is, you know that the non hyperscalers continue 0:02:23.160 --> 0:02:25.440 to grow more because, as you said, competition on a 0:02:25.480 --> 0:02:28.360 humpy scare copex is intense. They need to compete with 0:02:28.440 --> 0:02:32.280 memory networking service CPUs, A bunch of people. 0:02:32.160 --> 0:02:33.840 Frank for Global Wall Street. They got a way to 0:02:33.880 --> 0:02:36.040 average cost to camp I got, I got debt costs 0:02:36.040 --> 0:02:40.000 three tenths of a percent ninety nine point seven percent equity. 0:02:40.080 --> 0:02:43.280 You know they're popping the dividend huge. Is Jenson trying 0:02:43.320 --> 0:02:45.360 to make this a blue chip stock? I mean, if 0:02:45.400 --> 0:02:48.960 I see the share buyback in the explosive dividend growth, 0:02:49.240 --> 0:02:51.680 is he basically doing a Tim Cook act? 0:02:53.120 --> 0:02:55.920 I think, you know, I think there were some expectations 0:02:55.919 --> 0:02:57.680 going into his earnings print that there was going to 0:02:57.720 --> 0:03:01.160 be a big buyback and evidence would go up. But 0:03:01.360 --> 0:03:03.720 I think what you're talking about, though, is that it's 0:03:03.800 --> 0:03:05.680 at the end of the day, it's a tech grow stock. 0:03:06.040 --> 0:03:08.400 And if you're a tech grows stock, people aren't buying 0:03:08.440 --> 0:03:11.799 you because of buybacks and because of dividends. They want 0:03:11.840 --> 0:03:13.800 to buy you because you're investing and you're going to 0:03:13.800 --> 0:03:17.280 continue to grow. So I think we've seen companies try 0:03:17.320 --> 0:03:19.320 that in the past. But I think if you are 0:03:19.400 --> 0:03:21.680 if you are a high growth stock, as we are 0:03:21.680 --> 0:03:24.320 in a high growth area AI, I don't think it 0:03:24.520 --> 0:03:25.399 carries out much weight. 0:03:25.720 --> 0:03:30.200 Where is their constraint? Is there operating officers within the 0:03:30.240 --> 0:03:32.680 whole mix of Nvidio when they wake up, what's their 0:03:32.720 --> 0:03:33.480 biggest headache? 0:03:34.920 --> 0:03:37.280 Well, I think there's a lot of areas that continue 0:03:37.360 --> 0:03:38.240 to be bottlenecks. 0:03:38.280 --> 0:03:38.440 Right. 0:03:38.560 --> 0:03:41.960 We've talked about, you know, the packaging sign for the 0:03:42.000 --> 0:03:45.000 last few years. And what's very interesting is in Video's 0:03:45.040 --> 0:03:47.280 recent deals in the last couple of months with a 0:03:47.320 --> 0:03:51.040 lot of the optical companies like Coherent Lumentum, that illustrates 0:03:51.040 --> 0:03:52.960 that they also see a bottleneck when it comes to 0:03:53.480 --> 0:03:56.760 the optical components. So that's why I think they're locking 0:03:56.800 --> 0:03:58.600 in these deals to make sure they have supply there. 0:03:58.640 --> 0:04:01.000 I mean, Paul, I'm trying to find something negative here. 0:04:01.040 --> 0:04:04.160 I'm trying to be you know, everything's plus plus plus. 0:04:04.200 --> 0:04:07.160 The guy with the leather jacket eating noodles in Beijing, 0:04:07.200 --> 0:04:10.960 you're ready ten year return sixty eight percent of a year. 0:04:11.200 --> 0:04:12.640 I'm trying to be negative. 0:04:13.520 --> 0:04:16.040 Maybe the biggest one is just at of large numbers here. 0:04:16.839 --> 0:04:19.840 So talk to us about governments here. I mean, if 0:04:19.839 --> 0:04:24.279 I think about potential new customers, how about the United States, government, 0:04:24.440 --> 0:04:28.760 everybody's deploying AI into their business models. How about government 0:04:28.920 --> 0:04:30.640 entities around the world, how do we think about how 0:04:30.640 --> 0:04:31.680 do we size that market? 0:04:32.760 --> 0:04:34.920 Yeah, so that's that's a great point because that's the 0:04:34.960 --> 0:04:36.679 whole issue with sovereign AI. 0:04:36.680 --> 0:04:37.920 Which is government entities. 0:04:38.000 --> 0:04:40.520 Right, And so this builds into the thesis that there 0:04:40.640 --> 0:04:43.600 is a big tam out there outside of these you know, 0:04:43.800 --> 0:04:47.240 major hyper skillers, and they've been talking about it, but 0:04:47.279 --> 0:04:49.440 the market hasn't been convinced because we haven't seen the 0:04:49.520 --> 0:04:52.200 numbers to back that up. But I do think this 0:04:52.320 --> 0:04:55.039 again is reclassification is a first step. Right now we 0:04:55.080 --> 0:04:58.240 can actually see more clearly if the non hyperscilic growth 0:04:58.279 --> 0:05:00.000 is coming through. But I think on your earlier point 0:05:00.000 --> 0:05:03.080 and of you know, everything's going great, So what's the problem. 0:05:03.240 --> 0:05:05.320 I think the problem is they're the A student in 0:05:05.360 --> 0:05:08.600 the classroom, and right now the market wants to basically 0:05:08.680 --> 0:05:11.599 look at the C student that might become an A student. 0:05:11.720 --> 0:05:11.840 Right. 0:05:12.120 --> 0:05:17.000 Yeah, it's beautiful. Paul I was going to say, any 0:05:17.040 --> 0:05:18.600 A students in the room, good night. 0:05:18.640 --> 0:05:19.279 He just walked in. 0:05:19.760 --> 0:05:22.040 He'll be get one more in here with frankly. 0:05:22.080 --> 0:05:26.599 So, Frank, is there a technological threshold that we should 0:05:26.600 --> 0:05:28.960 be looking for next. Is there a new speed, Is 0:05:28.960 --> 0:05:33.000 there a new chip? Is there a new capability that we. 0:05:32.960 --> 0:05:35.160 Should be looking for in Vidia to lead the sector. 0:05:36.400 --> 0:05:39.200 I think this is a great point. The real map 0:05:39.279 --> 0:05:41.680 doesn't matter as much as it used to. It used 0:05:41.680 --> 0:05:43.479 to be that Okay and Video had the best ship, 0:05:43.560 --> 0:05:45.840 it was leading everybody. But now I think what they 0:05:45.920 --> 0:05:49.640 really need is a new narrative, right, and they spent 0:05:49.720 --> 0:05:53.280 more time talking about server CPUs now because this year 0:05:53.520 --> 0:05:56.080 the big ten, the big trend has been agentic AI 0:05:56.240 --> 0:05:59.240 and suddenly now CPU has gone from you know, a 0:05:59.360 --> 0:06:01.719 runover with nobody cared about too. Oh, this is the 0:06:01.800 --> 0:06:03.919 next big thing now with the dentak ai. And so 0:06:03.960 --> 0:06:05.919 I think in Vidia has pivoted now to talk about 0:06:05.920 --> 0:06:06.880 a CPU market. 0:06:07.680 --> 0:06:10.200 Frank really appreciate. Why don't you publish it? Frank you 0:06:10.240 --> 0:06:12.719 publishing within the hour? Can you give us a head 0:06:12.720 --> 0:06:16.600 start on it? I'm kidding, I'm kidding, Frankly, thank you 0:06:16.680 --> 0:06:20.800 so much with HSBC here on Nvidia, Stay with us. 0:06:21.040 --> 0:06:24.240 More from Bloomberg Surveillance coming up after this. 0:06:31.520 --> 0:06:35.080 You're listening to the Bloomberg Surveillance podcast. Catch us Live 0:06:35.160 --> 0:06:38.320 weekday afternoons from seven to ten am Eastern Listen on 0:06:38.400 --> 0:06:42.039 Applecarplay and Android Auto with the Bloomberg Business app, or 0:06:42.200 --> 0:06:43.680 watch us live on YouTube. 0:06:43.720 --> 0:06:49.719 This is a really, really important Conversationshelle, you can dude, 0:06:49.880 --> 0:06:54.120 excuse me, Vishal. It goes back to Calvert and then 0:06:54.120 --> 0:06:56.880 to eaton Vans and now with Morgan Stanley doing broad 0:06:56.920 --> 0:06:59.880 market fixed income with a real engineering bent to it. 0:07:00.080 --> 0:07:02.080 I love at the back end of your note you 0:07:02.120 --> 0:07:06.720 say we're slipping into our restrictive status now with a 0:07:06.760 --> 0:07:10.520 FED slip, you know, slipping in with a newslow Describe 0:07:10.560 --> 0:07:14.240 that to our audience how we can become more restrictive 0:07:14.400 --> 0:07:15.320 without a raid hike? 0:07:15.960 --> 0:07:16.560 Morning, Tom. 0:07:16.600 --> 0:07:16.960 Thanks. 0:07:17.440 --> 0:07:19.560 The rate hikes are already in the market. So if 0:07:19.600 --> 0:07:23.080 you were a home or wanting to be a homeowner today, 0:07:23.560 --> 0:07:26.400 you're already being mortgage rates as if the FED at 0:07:26.440 --> 0:07:31.120 height twice yesterday. That's what your tenure mortgage is going 0:07:31.160 --> 0:07:34.320 to be priced off of. So we believe that the market, 0:07:34.880 --> 0:07:37.440 like the old cliche goes, has already done a lot 0:07:37.480 --> 0:07:40.080 of the heavy lifting for Kevin worsh coming in on Friday. 0:07:40.680 --> 0:07:42.560 So what do you make of the bond market of 0:07:42.600 --> 0:07:45.240 the last couple weeks here we've had a big, big 0:07:45.320 --> 0:07:48.000 lift industrates that the thirty year which were going to 0:07:48.000 --> 0:07:49.640 talk about as much as you know, well North at 0:07:49.680 --> 0:07:51.520 five percent, we haven't seen that in a while. 0:07:52.240 --> 0:07:54.640 What's going on in your market quite a bit. 0:07:55.920 --> 0:07:58.520 The actually, if you go back, there were almost like 0:07:58.560 --> 0:08:01.240 three phases if you will, of the cell of starting 0:08:01.280 --> 0:08:06.040 March first, no technicals. It was a massive macro shift 0:08:06.520 --> 0:08:10.240 coming from a massive inflation shock in countries that import. 0:08:10.240 --> 0:08:12.000 The inflation shock was priced into be. 0:08:12.000 --> 0:08:16.040 Much longer lingering, and the expectations, and we were included 0:08:16.040 --> 0:08:18.600 in that, was that at these high oil prices at 0:08:18.600 --> 0:08:22.280 a sustained time, a sustained period, it will have some 0:08:22.320 --> 0:08:26.320 demand destruction of growth will be off. We're still squinting 0:08:26.320 --> 0:08:29.280 our eyes. That's start in the economic data, and then 0:08:29.320 --> 0:08:32.840 the earnings come along, and the next two phases were 0:08:32.960 --> 0:08:36.720 only led by real yields rather than break evens ex expanding. 0:08:37.200 --> 0:08:40.400 So growth has been very resilient throughout this and you 0:08:40.440 --> 0:08:43.360 can blame the case shiped economy or upper end of 0:08:43.360 --> 0:08:45.839 the KSE shaped economy, or the AI infrastructure spend. And 0:08:45.880 --> 0:08:48.320 then the last probably two days I would say that 0:08:48.440 --> 0:08:54.120 has been very clearly we've seen glimpses of technical selling 0:08:54.200 --> 0:08:57.400 where convexity headers have to reduce the duration in their 0:08:57.400 --> 0:09:00.079 book and has extended out. So you've seen some of 0:09:00.160 --> 0:09:01.320 that price action go through. 0:09:01.520 --> 0:09:02.920 All right, you're a Boston guy. 0:09:02.960 --> 0:09:05.800 You're probably heading out to your mansion on Cape con 0:09:05.840 --> 0:09:08.920 or Nantucket this weekend. People are gonna want to talk 0:09:08.920 --> 0:09:11.040 to you about clipping coupons here. You can get some 0:09:11.160 --> 0:09:14.760 really nice income. Is that what I actually be doing 0:09:14.760 --> 0:09:15.640 here in your world? 0:09:15.679 --> 0:09:17.160 Fantastic coupons right now? 0:09:17.280 --> 0:09:19.920 I think? And then the other two bits there is 0:09:19.960 --> 0:09:22.439 that you have so much question right now. Two year 0:09:23.040 --> 0:09:26.160 at the end of December twenty twenty one, just before 0:09:26.200 --> 0:09:28.520 the massive sell off in twenty two started off at 0:09:28.559 --> 0:09:31.600 seventy eight basis points. You started off end of feb 0:09:31.720 --> 0:09:35.360 here in twenty six at about three sixty somewhere around there. 0:09:36.040 --> 0:09:37.800 At this point, if you buy a two year note, 0:09:37.960 --> 0:09:40.600 you can withstand about two hundred and fifty basis points 0:09:40.640 --> 0:09:44.280 of sell off before you even get into the negative territory. 0:09:43.880 --> 0:09:45.920 Of quarter or done getting out of Gilbert was just 0:09:46.080 --> 0:09:47.719 on a TD and he says, look, he got a 0:09:47.760 --> 0:09:50.040 real yield in the thirty year back to where I 0:09:50.240 --> 0:09:52.280 was in two thousand and eight two thousand and seventy 0:09:52.280 --> 0:09:55.679 three percent. Simon White writing off our London Desk, a 0:09:55.760 --> 0:09:59.480 brilliant story that went worldwide yesterday. On these new high 0:09:59.679 --> 0:10:03.959 and f adjust yields, what's the most efficacious way to 0:10:04.120 --> 0:10:05.120 play the real yield? 0:10:05.520 --> 0:10:08.560 I think break evans have moved to a point where 0:10:08.600 --> 0:10:11.160 we don't see as much value as we saw probably 0:10:11.280 --> 0:10:14.360 four weeks back, So we've actually shifted a little bit 0:10:14.440 --> 0:10:17.760 to that nominal on the seven year point. Given there 0:10:17.840 --> 0:10:19.719 are two hikes being priced in by the end of 0:10:19.800 --> 0:10:23.000 twenty seven, and then there's probably about twenty twenty two 0:10:23.040 --> 0:10:24.920 basis points of hike being priced in by the end 0:10:24.960 --> 0:10:27.079 of this year, so we believe that there's quite a 0:10:27.120 --> 0:10:28.320 bit coming back to your first one. 0:10:28.640 --> 0:10:30.640 It's got a y you know, to Paul's point, you 0:10:30.720 --> 0:10:33.400 know you're out in Nantucket, you get to Hinckley Bermuda. Sure, 0:10:33.559 --> 0:10:36.199 you know you're hanging and you've got to clip a copot. 0:10:36.240 --> 0:10:39.000 I mean you're going to go out and grab nominal 0:10:39.240 --> 0:10:43.079 or real ten uere or twenty or thirty year or 0:10:43.120 --> 0:10:45.240 brave enough to buy Japanese forty year. 0:10:45.480 --> 0:10:49.480 In the US seven to ten years do fantastic. It's 0:10:49.640 --> 0:10:53.080 not an inflation lingering story. I do get the point 0:10:53.120 --> 0:10:55.319 that inflation will be here or at least for a 0:10:55.400 --> 0:10:57.720 quarter or two, and you'll see it in the prices, 0:10:58.040 --> 0:11:01.679 But nominals will do fantastic from that perspective. In that bit, 0:11:01.800 --> 0:11:05.920 if you're a foreign investor and have the benefit of 0:11:06.040 --> 0:11:10.800 hedging the currency back into your domestic domestic liabilities, I 0:11:10.840 --> 0:11:13.719 think Japanese long and yields also are fantastic given the 0:11:13.760 --> 0:11:14.839 steepness in the curve there. 0:11:15.160 --> 0:11:19.240 If the war ended somehow, the war ended, oil goes 0:11:19.440 --> 0:11:23.120 under ninety dollars a barrel. How many basis points does 0:11:23.160 --> 0:11:25.040 a ten year come in? Have you modeled it out 0:11:25.040 --> 0:11:25.440 in your. 0:11:25.640 --> 0:11:27.040 Twenty five approximately? 0:11:27.760 --> 0:11:32.120 We think that there is that extra bit of technical selling, 0:11:32.280 --> 0:11:35.079 extra bit of premium that is built in through the 0:11:36.520 --> 0:11:40.520 almost like malaise from lack of clarity that we are in. 0:11:40.640 --> 0:11:43.360 So four twenty five is, we think, is the first 0:11:43.360 --> 0:11:46.640 stop the moon. We get some clear clarity, not just 0:11:46.720 --> 0:11:47.480 another headline. 0:11:47.720 --> 0:11:50.120 How much credit risk should investors be taking here? 0:11:50.520 --> 0:11:53.360 I think we are much more focused on getting credit 0:11:53.520 --> 0:11:56.480 risk in the secure dice market, where you have secure 0:11:56.559 --> 0:11:59.959 balance sheets, you have something to go after because spread 0:12:00.280 --> 0:12:04.080 are not as compensatory for the risks that you're taking 0:12:04.120 --> 0:12:07.079 on spread durations increasing. You're seeing a lot of AI 0:12:07.200 --> 0:12:10.720 capex infrastructure spend coming through the investment great corporate market 0:12:10.800 --> 0:12:12.520 or the high heal market at this point as well, 0:12:12.840 --> 0:12:16.599 so secure balance sheets. That's where we find you're compensated 0:12:16.679 --> 0:12:17.360 as a fixed. 0:12:17.160 --> 0:12:18.760 Income investor for that extra premium. 0:12:18.840 --> 0:12:20.640 All right, asking for a friend in a high tax 0:12:20.760 --> 0:12:23.599 district municipal bonds, how about. 0:12:23.400 --> 0:12:27.800 That screamingly cheap at this point you go to a 0:12:27.920 --> 0:12:30.640 tax district which is taxing you a lot more. Yep, 0:12:31.280 --> 0:12:35.080 you get extra basis points apart from that twenty twenty 0:12:35.120 --> 0:12:37.679 five years high in twenty thirty year years, you are 0:12:38.440 --> 0:12:42.719 at this point versus treasuries. So yes, extremely attractive for 0:12:42.800 --> 0:12:44.280 high state, high tax states. 0:12:44.480 --> 0:12:46.719 Michelle, thank you so much as you friend, Did you 0:12:46.800 --> 0:12:50.679 get friend get enough? Yeology, Yeah, very good. Thanks Paul 0:12:51.040 --> 0:12:53.800 Ladder Sweeney we call them for sho can did you 0:12:53.880 --> 0:12:56.040 thank you so much? How to broad market's fixed income 0:12:56.440 --> 0:12:59.040 it Morgan Stanley and of course all the efforts of 0:12:59.080 --> 0:13:02.559 eating Vase up in Boston. Stay with us. More from 0:13:02.600 --> 0:13:05.160 Bloomberg surveillance coming up after this. 0:13:12.520 --> 0:13:16.080 You're listening to the Bloomberg Surveillance Podcast. Catch US live 0:13:16.200 --> 0:13:19.319 weekday afternoons from seven to ten am Eastern Listen on 0:13:19.440 --> 0:13:22.760 Apple Karplay and Android Auto with the Bloomberg Business app, 0:13:23.000 --> 0:13:24.560 or watch US live on YouTube. 0:13:24.679 --> 0:13:26.680 Let's turn Notan joins us right now for a brief 0:13:26.720 --> 0:13:30.760 for the Economic Cycle Research Institute ACARY. What did God's 0:13:30.840 --> 0:13:36.400 name to cycles say now about our enjoyable inflation? Ooh up. 0:13:36.840 --> 0:13:40.079 In a word, we're going to see a four percent print. Well, directionally, 0:13:40.160 --> 0:13:45.760 we're headed in the upward direction. And the interesting thing 0:13:46.240 --> 0:13:49.000 is that it's emphatic on the US and it was 0:13:49.080 --> 0:13:53.439 pre war. It's happening in Europe, it's happening in Asia, 0:13:54.320 --> 0:13:56.640 in Japan. And so I was listening to your segment 0:13:56.679 --> 0:14:00.280 before on currencies. Right, Look, everybody's whether they know it 0:14:00.400 --> 0:14:04.959 or not, they're underlying inflation. Cycle is up and so 0:14:05.440 --> 0:14:09.240 it's all relative after that, and you have cycles and inflation, 0:14:09.400 --> 0:14:12.080 and of course you have cycles and growth. Now the US, 0:14:12.200 --> 0:14:15.160 it's true, we're knocking it out of the park, right. 0:14:15.240 --> 0:14:17.480 I've been saying, hey, there's no window vulnerability. I've been 0:14:17.640 --> 0:14:20.920 super consistent on that, including around the Iran war, and 0:14:21.040 --> 0:14:24.480 that continues to be the case. And underneath, it gets 0:14:24.480 --> 0:14:27.480 a little messy. It's a K shaped economy. Underneath, the 0:14:27.600 --> 0:14:29.280 pain is real on the lower end of the K, 0:14:29.520 --> 0:14:33.600 they're really getting squeezed by the higher prices. What's going 0:14:33.680 --> 0:14:36.760 to happen here, I think is quite interesting because we 0:14:36.800 --> 0:14:39.240 have our cyclical view, Tom that you're just saying, what 0:14:39.280 --> 0:14:41.400 the heck the cycles say? So you have this near 0:14:41.520 --> 0:14:44.760 term cyclical view, that's what the snapshot is. But then 0:14:44.800 --> 0:14:48.400 you look at the patterns of all this mistakes in 0:14:48.600 --> 0:14:52.800 reading the cyclical stuff. And there is a hope that 0:14:53.520 --> 0:14:55.880 oil comes down, and sure, I hope it does too. 0:14:55.960 --> 0:14:58.680 It let's say it. Let's insist that it will. The 0:14:58.760 --> 0:15:01.520 price of oil will come down. Yeah, And everybody says 0:15:01.560 --> 0:15:02.200 it's temporary. 0:15:02.400 --> 0:15:05.680 Jeffrey Moore has never faced these unknown unknowns that we 0:15:05.840 --> 0:15:06.400 have right now. 0:15:07.440 --> 0:15:12.040 Well, no, I don't think that's true. We faced them, 0:15:12.720 --> 0:15:17.480 and we've seen the misread on the cycle time and 0:15:17.640 --> 0:15:22.000 time again. In two thousand and seven, the FED thought 0:15:22.080 --> 0:15:25.760 that stimulus had headed off a recession inside of a 0:15:25.840 --> 0:15:29.080 recession six months inside, the FED led the market to 0:15:29.200 --> 0:15:32.960 price in one hundred basis points of hikes. That's a 0:15:33.040 --> 0:15:36.760 huge mistake. The cycle read. That thing perfectly. In the 0:15:36.840 --> 0:15:41.040 middle of the teens twenty fifteen, twenty sixteen, the FED thought, hey, 0:15:41.120 --> 0:15:44.480 structural healing is done, we could start raising rates. 0:15:44.840 --> 0:15:45.400 Dead wrong. 0:15:45.880 --> 0:15:49.760 The FIG read that very clearly and remembered COVID twenty 0:15:49.960 --> 0:15:53.960 twenty two. That was the famous Oh it's it's temporary, 0:15:54.040 --> 0:15:57.600 don't it's transitory? Was the word, don't worry about it. No, 0:15:57.840 --> 0:16:00.600 the FIG nailed that thing, and the FED was so 0:16:00.840 --> 0:16:04.200 late they didn't start hiking until March of twenty twenty two. 0:16:04.520 --> 0:16:05.080 What a mess. 0:16:05.720 --> 0:16:07.320 Now that What did they learn from all this? This 0:16:07.440 --> 0:16:12.440 is the amazing part. Later on they do a big 0:16:12.520 --> 0:16:15.680 investigation for a couple of years and they they believe 0:16:15.840 --> 0:16:20.400 that skilled monetary policy had caused structural downshift and inflation, 0:16:21.080 --> 0:16:24.120 and so that's why they could leave a transitory. That's 0:16:24.200 --> 0:16:28.560 kind of a Bonker's conclusion. Quite frankly. Cycles happen no 0:16:28.720 --> 0:16:31.920 matter what. And so right now, what I'm worried about 0:16:32.920 --> 0:16:35.960 is we're either going to get the Maestro right the nineties, 0:16:36.000 --> 0:16:38.800 which is fun, or we're going to get Burns, which 0:16:38.920 --> 0:16:40.480 is the seventies, which is not fun. 0:16:40.560 --> 0:16:42.240 The first person, this is brilliant. 0:16:42.400 --> 0:16:45.800 Okay, We're going to get green span or Burns, and 0:16:45.920 --> 0:16:47.840 I'm not sure who right. I got to watch the 0:16:47.880 --> 0:16:50.520 thing right now, the FING is saying up. Let's say 0:16:50.560 --> 0:16:53.440 Warsh wants to as soon as he can cut if 0:16:53.520 --> 0:16:55.840 oil comes down or if AI product. 0:16:55.840 --> 0:16:56.800 Comes to interrupt. 0:16:56.880 --> 0:16:58.640 And you know this well because you live over there 0:16:58.920 --> 0:17:01.560 half the time. Are we going to get Mervyn king 0:17:02.360 --> 0:17:05.639 where the governors and presidents tells Chairman Worsh what to do. 0:17:07.560 --> 0:17:11.320 I don't think so. I think there's a huge political pressure. 0:17:11.359 --> 0:17:13.200 That's why I'm a little worried about the burn situation. 0:17:13.720 --> 0:17:15.960 If you have the FIG going up and you have 0:17:16.160 --> 0:17:20.840 huge political pressure to not hike, you get a lot 0:17:20.920 --> 0:17:25.360 of volatility because you have If you make a mistake 0:17:25.840 --> 0:17:29.200 on policy on a cyclical basis, it doesn't smooth the 0:17:29.320 --> 0:17:32.679 cycle out. It makes the cycle bigger. And so that's 0:17:33.040 --> 0:17:37.119 what I'm worried about. If Worsh starts going towards or 0:17:37.160 --> 0:17:40.240 the FED starts going towards hikes and it cuts, excuse me, 0:17:40.359 --> 0:17:44.840 and the FIG is still going up. Buckle your seat belts. 0:17:44.880 --> 0:17:47.679 That's going to get bouncy, but it could get bailed 0:17:47.720 --> 0:17:49.800 out if the FIG turns down. And I don't know, 0:17:49.880 --> 0:17:52.920 I don't predict the predictors. If the FIG should turn down, 0:17:53.920 --> 0:17:56.520 then you might get the Maestro to look like the maestro. 0:17:57.080 --> 0:18:00.320 The mistake here is if oil comes down, it doesn't 0:18:00.320 --> 0:18:03.119 mean in all clear look at core. The FIG is 0:18:03.160 --> 0:18:05.800 looking at the cycles and core. And if core keeps 0:18:05.880 --> 0:18:07.760 moving up, which is it is doing in the US, 0:18:07.880 --> 0:18:09.960 it's doing it in Europe, and is doing it in Japan. 0:18:10.440 --> 0:18:12.320 It's doing it whether you want to watch it or not, 0:18:12.480 --> 0:18:16.320 It's happening. And that's the risk here and on growth. 0:18:17.480 --> 0:18:20.720 Right now, I've been saying window vulnerability shut and that 0:18:20.880 --> 0:18:24.680 remains to be the case long leading indicators of growth. 0:18:25.000 --> 0:18:27.840 The shine has come off, so that gets interesting later. 0:18:28.160 --> 0:18:30.480 So I guess a lot of investors are just trying 0:18:30.480 --> 0:18:32.240 to figure out how much of this inflation story that 0:18:32.320 --> 0:18:34.720 we see in the US and around the world is 0:18:35.240 --> 0:18:38.240 directly from the war in Iran and all the ripple 0:18:38.240 --> 0:18:41.280 effects versus more underlying stuff. 0:18:41.600 --> 0:18:44.160 A great question, and I think everybody's missing the forest 0:18:44.240 --> 0:18:47.560 for the trees literally. I think it is not it's 0:18:47.680 --> 0:18:51.520 not about oil. Oil is moving the headline around. I 0:18:51.600 --> 0:18:54.000 think the big mistake here is if oil comes down. 0:18:54.080 --> 0:18:57.639 Let's say the sky's clear and oil comes down, or 0:18:57.680 --> 0:19:00.400 it stops rising and people get used to it and say, Okay, 0:19:00.440 --> 0:19:04.440 we're fine, it's an inflationary boom. We're fine. Right, the 0:19:04.600 --> 0:19:07.600 core is going to keep going up, and that ultimately 0:19:07.920 --> 0:19:11.119 is a problem. And you see the rate market is 0:19:11.160 --> 0:19:13.600 starting to try to wonder about this. Real rates are 0:19:14.680 --> 0:19:16.680 got to we gotta run launchman. But how do you 0:19:16.800 --> 0:19:21.359 interpret the new rate and the new real yield that 0:19:22.359 --> 0:19:26.639 they're kind of feeling that the Fed is going to 0:19:26.640 --> 0:19:28.919 make a mistake. They're going to mix up the structural 0:19:29.200 --> 0:19:32.040 with the cyclical. And that's my fear too, because they've 0:19:32.040 --> 0:19:34.639 done it five times in a row over several decades. 0:19:34.720 --> 0:19:38.520 Okay, just up at Bard College, folks doing a wonderful event. 0:19:39.320 --> 0:19:42.600 Was Sheila bar at Bard College? And we know Lachmenajathon's 0:19:42.640 --> 0:19:47.159 real commitment to that institution. The views, Okay, are you 0:19:47.320 --> 0:19:49.919 kidding me? Oh my god, it's Paul. Have you been 0:19:50.000 --> 0:19:53.960 up there? It's spectacular. It's like, you know, it's kids 0:19:54.040 --> 0:19:57.040 walking around learning Greek and Latin. 0:19:56.840 --> 0:19:59.720 And you know, the whole liberal are thing, and on 0:20:00.040 --> 0:20:02.200 the river with a beautiful house and garden. 0:20:02.440 --> 0:20:06.480 It's like tough and black flies. It's on something. Good 0:20:06.520 --> 0:20:09.040 morning to Bard College and all the good people out there. Latchman, 0:20:09.080 --> 0:20:09.320 thank you. 0:20:09.480 --> 0:20:09.800 All right. 0:20:11.760 --> 0:20:14.040 Yeah, well we'll talk about that next time. Lotch went 0:20:14.080 --> 0:20:17.040 at that greed. Thank you. Stay with us. More from 0:20:17.080 --> 0:20:19.639 Bloomberg Surveillance coming up after this. 0:20:27.000 --> 0:20:30.560 You're listening to the Bloomberg Surveillance Podcast. Catch us Live 0:20:30.680 --> 0:20:33.800 weekday afternoons from seven to ten am Eastern Listen on 0:20:33.920 --> 0:20:37.240 Apple Karplay and Android Auto with the Bloomberg Business app, 0:20:37.480 --> 0:20:39.200