WEBVTT - Bloomberg Surveillance TV: January 29, 2025 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.360 with Lisa Bromwitz and a Marie Hordern. Join us each 0:00:18.480 --> 0:00:21.360 day for insight from the best in markets, economics, and 0:00:21.400 --> 0:00:24.720 geopolitics from our global headquarters in New York City. We 0:00:24.760 --> 0:00:27.400 are live on Bloomberg Television weekday mornings from six to 0:00:27.480 --> 0:00:31.000 nine am Eastern. Subscribe to the podcast on Apple, Spotify, 0:00:31.200 --> 0:00:33.479 or anywhere else you listen, and as always, on the 0:00:33.479 --> 0:00:36.639 Bloomberg Terminal and the Bloomberg Business App for. 0:00:36.640 --> 0:00:38.640 Those of you just joining us. Looking at the markets, 0:00:38.680 --> 0:00:41.560 equity futures doing okay. We begin this out with stocks 0:00:41.600 --> 0:00:44.239 relatively higher as we get results from both Meta and 0:00:44.280 --> 0:00:47.280 a bullish outlook from Tesla, supporting equities. Mike Wilson and 0:00:47.320 --> 0:00:49.839 Morgan Stanley saying in the near term, the best outcome 0:00:49.960 --> 0:00:52.600 for equities is that rates continued to decline. In the 0:00:52.640 --> 0:00:55.480 longer term, the best outcome for stocks is a reacceleration 0:00:55.560 --> 0:00:58.840 in earnings, growth and macro indicators. Mike joins us now 0:00:58.840 --> 0:01:00.000 for more. Mike, good morning to you, sir. 0:01:00.040 --> 0:01:00.520 Good morning. 0:01:00.600 --> 0:01:02.840 Let's try and put those two points together. Shall we 0:01:03.440 --> 0:01:05.840 yeos need to come down the wise impultan. But in 0:01:05.840 --> 0:01:08.520 the longest term, we need economic growth to performance wound 0:01:08.600 --> 0:01:11.640 for earnings to re accelerrate. Does that come with higher 0:01:11.640 --> 0:01:13.959 and just rights with high yields, with hot sound premium. 0:01:14.000 --> 0:01:14.920 Well, this is the game. 0:01:14.959 --> 0:01:16.399 I mean, you know four point fifty is that we're 0:01:16.440 --> 0:01:18.080 right at it right now as we speak, which is 0:01:18.160 --> 0:01:20.319 kind of interesting. I mean, that's the kind of line 0:01:20.360 --> 0:01:22.560 in the sand where you know, if rates go higher, 0:01:22.800 --> 0:01:26.000 even if growth is better, it's going to restrain multiples. 0:01:26.040 --> 0:01:27.520 So what we really need is that sort of that 0:01:28.000 --> 0:01:30.480 sweet spot between four four and a half where growth 0:01:30.560 --> 0:01:31.960 is not falling off a cliff. 0:01:32.160 --> 0:01:33.280 The FED is doing their thing. 0:01:33.360 --> 0:01:35.280 It's you know, I think people are talking about what 0:01:35.360 --> 0:01:37.720 the Fed's not cutting. Well, they cut one hundred basis 0:01:37.720 --> 0:01:39.600 points and back end rates one up. So I'm not 0:01:39.640 --> 0:01:42.160 so sure that pausing is really all that bad for 0:01:42.240 --> 0:01:43.959 stocks in the short term. And now, of course we're 0:01:44.000 --> 0:01:47.520 an earning season, right, so it's all about idiosyncratic behavior 0:01:47.600 --> 0:01:48.320 in the short term. 0:01:48.360 --> 0:01:50.720 Well, you say earnings, they need to show, they need 0:01:50.760 --> 0:01:53.280 to deliver. What does that mean at a time where 0:01:53.280 --> 0:01:56.840 storytelling is so important and it's not just the actual numbers. 0:01:57.200 --> 0:01:59.920 It's what you say about them, your tone, how many 0:02:00.000 --> 0:02:01.120 exclamation points you use. 0:02:01.360 --> 0:02:02.880 Well, it's showed me time, right, So there has been 0:02:02.920 --> 0:02:04.800 a lot of storytelling going on and I think we're 0:02:04.800 --> 0:02:07.800 seeing a separation of the winners and losers even last night, right, 0:02:08.320 --> 0:02:11.560 And that's good. I mean that creates opportunity for stock picking. 0:02:11.600 --> 0:02:14.440 And like one theme we've had is sort of the 0:02:14.560 --> 0:02:17.840 you know, adopters versus the enablers within AI and very 0:02:17.880 --> 0:02:21.080 simplistically don't want to oversimplify it, but that's basically software 0:02:21.440 --> 0:02:24.280 over semiconductors. And that's been working, not just since Monday, 0:02:24.320 --> 0:02:26.239 that's been working for three to six months. 0:02:26.280 --> 0:02:27.680 So as usual, the market's gotten ahead of it. 0:02:28.160 --> 0:02:29.920 There's going to be themes I think that pop new 0:02:29.960 --> 0:02:32.000 themes that pop up this year, and that's really our job. 0:02:32.200 --> 0:02:34.840 Has that pivot happened? Can you say that essentially the 0:02:34.880 --> 0:02:38.360 tipping point at least in the market zeitgeist was on Monday, 0:02:38.680 --> 0:02:42.320 where really the adopters are now going to absolutely rip 0:02:42.360 --> 0:02:45.520 while the videos and the Microsofts, the enablers are going 0:02:45.560 --> 0:02:46.480 to take a leg behind. 0:02:46.720 --> 0:02:48.040 Well, like I said, it's already happened. 0:02:48.040 --> 0:02:49.960 So the question is is it does it persist, Well, 0:02:49.960 --> 0:02:51.960 we're really excited about it is not even that trade. 0:02:52.040 --> 0:02:56.000 But when does the technology get diffused into the broader economy. 0:02:56.000 --> 0:02:58.320 That's the true broadening out story where you can get 0:02:58.320 --> 0:03:01.360 small MidCap companies performing. We're not there yet, okay, because 0:03:01.360 --> 0:03:04.239 we don't have the solutions right. That's what the application 0:03:04.440 --> 0:03:06.880 layer is, where the solutions are going to be built 0:03:06.919 --> 0:03:09.519 on the compute platforms, so that that could take a 0:03:09.600 --> 0:03:10.960 year or two, you know what I'm saying. Now markets 0:03:10.960 --> 0:03:12.919 will get ahead of that, but in our view, that's 0:03:12.919 --> 0:03:15.200 really a second half story, or a twenty six twenty 0:03:15.240 --> 0:03:18.120 seven story. So that's why our view on the index 0:03:18.160 --> 0:03:20.200 has been We're probably going to be choppy here for 0:03:20.240 --> 0:03:22.120 the next three to six months. A lot of anasma's 0:03:22.160 --> 0:03:26.200 coming out, Fed's on pause, still about uncertainty around you know, 0:03:26.440 --> 0:03:29.320 the implication of these policies, both globally and domestically. 0:03:29.560 --> 0:03:30.480 So we take a break here. 0:03:31.120 --> 0:03:33.600 This is curious to me. Tesla actually warned about the 0:03:33.600 --> 0:03:36.800 potential for tariffs and the potential for that to hamper 0:03:37.120 --> 0:03:40.040 some of their revenues. Didn't seem to dent their stock 0:03:40.080 --> 0:03:42.240 at all. GM talked about it. 0:03:42.800 --> 0:03:43.280 That was it. 0:03:43.320 --> 0:03:45.640 I mean, they basically delivered. They had the forecast, but 0:03:46.320 --> 0:03:47.080 shares tanked. 0:03:47.320 --> 0:03:48.240 What did you learn from that? 0:03:48.600 --> 0:03:51.960 Well confirmed what we already knew, which is the retail 0:03:52.040 --> 0:03:55.720 community is very active right now, very active, and we 0:03:55.800 --> 0:03:58.600 see it in our data. And they just love these 0:03:58.600 --> 0:04:02.120 stocks test Law. You know, you can name, you can 0:04:02.160 --> 0:04:04.920 name a bunch of stocks that they just buy every day. 0:04:05.560 --> 0:04:07.360 Not just not because they're dumb or they don't know 0:04:07.360 --> 0:04:09.880 what they're doing. It's just they're buying into these themes 0:04:10.040 --> 0:04:12.120 and and and then of course that you know, creates 0:04:12.120 --> 0:04:14.880 demand from institutional investors too, So don't I don't think 0:04:14.880 --> 0:04:17.240 it teaches anything new. Last night, that's a that's a 0:04:17.240 --> 0:04:19.440 continuation of something that's been going on for six months. 0:04:19.480 --> 0:04:21.640 But these are things you would site down fight because 0:04:21.680 --> 0:04:23.520 the towl wents behind them, at least the buying behind 0:04:23.520 --> 0:04:24.719 them is that powerful. 0:04:24.760 --> 0:04:25.600 It's very consistent. 0:04:25.640 --> 0:04:27.840 I mean, you come in every day and the same 0:04:27.920 --> 0:04:31.359 names are kind of are you swooped up? And I 0:04:31.360 --> 0:04:34.920 don't see that changing unless there's a real, a real 0:04:35.200 --> 0:04:36.080 you know kind of event. 0:04:36.320 --> 0:04:37.200 So if rates were go to. 0:04:37.120 --> 0:04:39.080 Five percent, I think that would change. Okay, if we 0:04:39.080 --> 0:04:41.919 were to get you know, some sort of an indication 0:04:42.080 --> 0:04:45.120 that oh my goodness, unemployment's going up again and the 0:04:45.240 --> 0:04:47.599 recession risks come back on to the table, or there's 0:04:47.680 --> 0:04:50.400 an international event, a geopolitical event, something like that. But 0:04:50.440 --> 0:04:53.159 in the absence of something a real gross shock, I 0:04:53.200 --> 0:04:55.800 don't see the demand for those types of stocks waning 0:04:55.800 --> 0:04:56.400 in a short term. 0:04:56.440 --> 0:04:58.440 What if a Chinese ai lap comes out and says 0:04:58.480 --> 0:05:00.800 we can do something that you've spent Indians on five 0:05:01.240 --> 0:05:02.200 minion talis. 0:05:02.160 --> 0:05:05.120 Right, So what happened is that what happened is some 0:05:05.160 --> 0:05:07.799 stocks got punished and then the money, but the money 0:05:07.800 --> 0:05:10.920 moved back into the kind of fan favorites. And look, 0:05:10.960 --> 0:05:12.920 this is the theme for twenty twenty five. I think 0:05:12.960 --> 0:05:15.039 this is a good thing. We're going to see this 0:05:15.080 --> 0:05:18.480 capital concentration, right, that money can now go to other places. Right, 0:05:18.520 --> 0:05:20.640 So financials have done extremely well. That's a new area 0:05:20.680 --> 0:05:23.640 where there seems to be a perpetual bid. Software is 0:05:23.680 --> 0:05:26.279 a new area. Consumer services have done extremely well. And 0:05:26.279 --> 0:05:28.400 then even areas like media and entertainment. Those have been 0:05:28.440 --> 0:05:31.080 our four sectors that have shown the relative earnings. Your 0:05:31.120 --> 0:05:33.640 vision breath, there's some thematics in there as well, and 0:05:33.720 --> 0:05:36.200 we think that probably continues just to broaden out. 0:05:36.200 --> 0:05:38.640 And I understand it's a stock pickers market, But do 0:05:38.680 --> 0:05:40.560 you think that you've seen enough to say that the 0:05:40.560 --> 0:05:44.440 equal weight will significantly outperform the market cap weight S 0:05:44.440 --> 0:05:45.560 and P five hundred this year? 0:05:45.720 --> 0:05:48.040 Not yet, And I won't I want to caveat this 0:05:48.120 --> 0:05:51.320 because typically when you go from a period of market 0:05:51.320 --> 0:05:54.960 cap outperformance market cap weighted out performance, you usually get 0:05:55.000 --> 0:05:58.480 the relative outperformance in a down tape. Right, So if 0:05:58.520 --> 0:06:00.440 you get if you get the S and P market 0:06:00.480 --> 0:06:02.839 cap waited to go down, then you can see that 0:06:03.000 --> 0:06:05.839 spreading of wealth if you will, to other areas. Now, 0:06:05.839 --> 0:06:07.919 I don't want to compare us to two thousand completely, 0:06:08.000 --> 0:06:10.800 but it's that's the most similar period. In two thousand, 0:06:11.000 --> 0:06:12.640 we had a you know, a lot of these text 0:06:12.640 --> 0:06:16.320 stacks came off in the SMP equal way was basically flat, 0:06:16.360 --> 0:06:18.039 a lot of indices were you know, a lot of 0:06:18.080 --> 0:06:19.599 sub indicies were actually up. 0:06:19.960 --> 0:06:21.200 So that's what we're looking for. 0:06:21.720 --> 0:06:23.000 I think in the first half of this year is 0:06:23.000 --> 0:06:24.720 the best chance that I can say that could happen, 0:06:25.160 --> 0:06:27.800 you know, and since twenty twenty two, I like. 0:06:27.760 --> 0:06:28.680 To bring this up to people. 0:06:28.720 --> 0:06:31.839 Twenty twenty two, right, everybody you know, you know, thinks 0:06:31.839 --> 0:06:34.039 it was a terrible year for the market. A lot 0:06:34.080 --> 0:06:35.880 of stacks were up in twenty twenty two. That was 0:06:35.920 --> 0:06:38.559 the best breaths that we had. So it's a similar 0:06:38.600 --> 0:06:40.200 setup where I don't think the market's went on twenty 0:06:40.240 --> 0:06:42.400 five percent. But the point is if the index can 0:06:42.440 --> 0:06:45.640 give it up, then that capital can allocate to other areas. 0:06:45.760 --> 0:06:47.960 They rustle right now by point nine percent on the 0:06:47.960 --> 0:06:49.480 small caps might good to say it. Good to say 0:06:49.480 --> 0:06:52.479 always thank you, buddy, Mike Wilson that alf Mulkin standard 0:07:01.000 --> 0:07:03.880 in the markets this morning, Equities are pretty steady. BONDSAR 0:07:03.920 --> 0:07:06.440 two as FED Chair Jaypowse signals the Central Bank will 0:07:06.440 --> 0:07:09.479 hold rates study for the foreseeable future. Cameron Dawson of 0:07:09.560 --> 0:07:12.280 New Edge Wealth writing, further interest rate cuts will likely 0:07:12.320 --> 0:07:15.440 need to come with incremental weakness in the economy, transforming 0:07:15.480 --> 0:07:19.240 further cuts from because they can to, because they shirt. 0:07:19.520 --> 0:07:21.880 Cameron joins us now for more. Cameron Goo mornick Ye's greeting, 0:07:22.120 --> 0:07:23.960 what's your big takeaway from Chem and Pound in that 0:07:24.000 --> 0:07:25.400 news conference yesterday. 0:07:25.280 --> 0:07:28.600 That the recalibration phase is clearly over. He called it 0:07:29.080 --> 0:07:32.520 that recalibration phase, not this one, which just means that 0:07:32.600 --> 0:07:35.080 the interest rate cuts that we had which were tweaking 0:07:35.120 --> 0:07:37.960 policy rates lower in order to get to closer to 0:07:38.040 --> 0:07:41.280 this idea of neutral is likely behind us, meaning that 0:07:41.400 --> 0:07:43.840 you'll have to see an uptick in the unemployment rate, 0:07:44.120 --> 0:07:46.920 You'll have to see an uptick in or a weakening 0:07:47.040 --> 0:07:49.320 in the overall growth rate in order to suggest that 0:07:49.360 --> 0:07:50.440 they could cut rates further. 0:07:50.920 --> 0:07:53.560 Is this actually a really good signal that essentially the 0:07:53.640 --> 0:07:56.960 economy is robust and they're basically just taking a back 0:07:57.040 --> 0:07:59.760 seat and being as boring as they possibly could, exactly 0:07:59.840 --> 0:08:00.440 as desired. 0:08:00.880 --> 0:08:01.440 We think that the. 0:08:01.520 --> 0:08:04.800 Fed this year is going to be less consequential than 0:08:04.840 --> 0:08:06.680 they have been, meaning that they're going to be more 0:08:06.800 --> 0:08:09.720 reacting to growth. They're going to be more reacting to 0:08:09.880 --> 0:08:13.480 policy versus driving markets as they have over the last 0:08:13.560 --> 0:08:16.200 couple of years, as they started the hiking cycle then 0:08:16.240 --> 0:08:20.120 started the cutting cycle. We think overall that the FED 0:08:20.280 --> 0:08:22.920 hasn't been nearly as tight as they think that they are. 0:08:23.360 --> 0:08:26.520 We think that the evidence of growth remaining so resilient, 0:08:26.640 --> 0:08:29.520 being above trend the entire time that the FED has 0:08:29.640 --> 0:08:32.920 been in a tight situation, meaning with the real FED 0:08:33.000 --> 0:08:36.520 funds rate being above zero, just suggests that we are 0:08:36.880 --> 0:08:40.199 likely closer to neutral at this point than having those 0:08:40.240 --> 0:08:42.600 further cuts, which just suggests that this economy is more 0:08:42.640 --> 0:08:45.240 resilient to interest rates than it was in prior cycles. 0:08:45.320 --> 0:08:48.120 If the Fed's taking a backseat, let's take another tack, 0:08:48.200 --> 0:08:50.000 because frankly, I think a lot of people would rather 0:08:50.040 --> 0:08:52.200 talk about earnings than the FED at this time, given 0:08:52.240 --> 0:08:54.200 the fact that the FED is following rather than leading. 0:08:54.520 --> 0:08:57.320 What was your takeaway yesterday to not just the earnings 0:08:57.440 --> 0:09:02.280 of Microsoft and Tesla and and Meta, but the reaction 0:09:02.520 --> 0:09:05.400 to them and what actually gave investors confidence. 0:09:05.679 --> 0:09:08.240 I think investors are still willing to dream the dream 0:09:08.480 --> 0:09:11.400 and have this blank check mentality when it comes to 0:09:11.520 --> 0:09:14.960 AI and CAPEX spending. But the thing that jumped out 0:09:15.000 --> 0:09:18.199 to us most in Microsoft's earnings was this use of 0:09:18.280 --> 0:09:23.120 the word commoditized, that some of this AI will become commoditized. 0:09:23.160 --> 0:09:26.520 It will become something that everybody has. And the question 0:09:26.679 --> 0:09:29.120 that we have is that what will the return on 0:09:29.240 --> 0:09:33.920 invested capital be for a commoditized product? Very very different 0:09:34.080 --> 0:09:37.400 than the monopolized businesses that you think of Microsoft with 0:09:37.600 --> 0:09:40.640 in word processing, or you think of Google within search 0:09:40.880 --> 0:09:45.280 or Meta within social networking. These are monopolized businesses or 0:09:45.360 --> 0:09:49.160 near monopolies that deliver huge returns on invested capital have 0:09:49.320 --> 0:09:53.040 eighty percent gross margins fifty percent operating margins, nearly from Meta, 0:09:53.320 --> 0:09:57.679 which just suggests that maybe AI roics could be lower. 0:09:57.880 --> 0:09:59.920 It's been a long week for this market, Sunny third, 0:10:00.120 --> 0:10:01.520 they still can We go back to Monday. 0:10:01.600 --> 0:10:02.080 Just briefly. 0:10:02.520 --> 0:10:05.240 On Monday, Lisa me, pretty much everyone in the show 0:10:05.360 --> 0:10:07.959 was talking about whether the capex narrative would be challenged. 0:10:08.320 --> 0:10:11.040 METSA came out and basically doubled down on the whole thing. Now, 0:10:11.080 --> 0:10:13.000 I didn't expect the c suite to change. The question 0:10:13.120 --> 0:10:15.599 we asked is whether investors would lose patients. There's no 0:10:15.679 --> 0:10:17.760 sign of that. This morning, the stock is up. We'll 0:10:17.800 --> 0:10:21.319 investors keep patient with these companies as they spend tons 0:10:21.360 --> 0:10:22.760 of money on these projects. 0:10:22.880 --> 0:10:25.520 I think as long as they can keep googling Jevn's paradox, 0:10:25.640 --> 0:10:28.720 maybe they'll keep being patient. I think what's giving people 0:10:29.000 --> 0:10:32.400 the ability to give Meta the benefit of the doubt 0:10:32.559 --> 0:10:35.160 on this capex is because their top line is growing 0:10:35.240 --> 0:10:37.599 so much. And the key story for Meta is that 0:10:37.720 --> 0:10:40.520 they're using AI in order to be able to drive 0:10:40.640 --> 0:10:44.840 top line faster. Look at the growth in advertising pricing. 0:10:45.080 --> 0:10:47.439 It was up fourteen percent. That's more than double what 0:10:47.520 --> 0:10:50.800 the street expected, and that likely is a function of 0:10:50.840 --> 0:10:53.599 the fact that they're using AI to monopolize more of 0:10:53.640 --> 0:10:56.920 our eyeballs, to demand more of our attention. Now, if 0:10:57.040 --> 0:11:01.359 top line begins to slow and META is eight percent advertising, 0:11:01.400 --> 0:11:04.319 which means it's a cyclical business. If top line begins 0:11:04.400 --> 0:11:07.720 to slow, I likely think that you will see less 0:11:07.760 --> 0:11:10.280 benefit of the doubt on this capex because it won't 0:11:10.320 --> 0:11:12.640 be able to be absorbed as much given this strong 0:11:12.679 --> 0:11:13.160 profit growth. 0:11:13.240 --> 0:11:14.920 Comen Dawson and you ch Wealth is still with us 0:11:15.040 --> 0:11:16.880 around a table. So Cameron, we've got a threat at 0:11:16.880 --> 0:11:20.199 twenty five percent on Mexico and Canada, ten percent potentially 0:11:20.280 --> 0:11:22.160 on China. Europe's going to get it too. That could 0:11:22.160 --> 0:11:24.600 be a universal tariff. You have a working assumption going 0:11:24.640 --> 0:11:25.280 into the weekend. 0:11:25.520 --> 0:11:28.480 Well, we think this notion that tariffs aren't inflationary or 0:11:28.559 --> 0:11:33.200 disruptive because of what happened in twenty eighteen is limited 0:11:33.360 --> 0:11:36.440 in the sense that twenty eighteen terraffs were so targeted 0:11:36.800 --> 0:11:39.680 and they were on certain items, certain things within supply 0:11:39.840 --> 0:11:43.559 chains that eventually didn't get all the way through to consumers, 0:11:43.880 --> 0:11:46.880 which just means that if you're talking about blanket teriffs 0:11:46.880 --> 0:11:49.319 across the board, we think that this could actually be 0:11:49.480 --> 0:11:53.439 highly disruptive to supply chains, potentially inflationary because of that 0:11:53.640 --> 0:11:57.000 disruption as people are trying to move things around, which 0:11:57.120 --> 0:12:00.600 just suggests that this could weigh on growth and inflation 0:12:00.840 --> 0:12:01.800 in a more meaningful way. 0:12:01.960 --> 0:12:05.240 That sounds like stagflationhin is that what you'd be expecting. 0:12:06.360 --> 0:12:07.520 It's definitely a risk. 0:12:07.679 --> 0:12:10.120 And when you also throw on top of that the 0:12:10.559 --> 0:12:14.120 potential for the labor force growth to slow down because 0:12:14.160 --> 0:12:17.760 of immigration, both of these things suggest that a potential 0:12:17.960 --> 0:12:21.959 upward pressure on inflation, potential downward pressure on growth. The 0:12:22.120 --> 0:12:24.920 question is how far do they actually push these through. 0:12:25.040 --> 0:12:29.319 Tariffs for negotiating purposes are very very different than tariffs 0:12:29.360 --> 0:12:31.760 that are pay force. Teriffs that are paid for is 0:12:31.840 --> 0:12:35.120 because you want to use tariff revenue to offset tax cuts, 0:12:35.160 --> 0:12:37.920 for example, would have to be far more sweeping, would 0:12:37.960 --> 0:12:40.160 have to be far more static, meaning once you put 0:12:40.200 --> 0:12:42.679 them in place, even if people say, hey, well we're 0:12:42.720 --> 0:12:45.240 going to be nicer to you going forward, it just 0:12:45.400 --> 0:12:47.719 means that there is that risk that we have that 0:12:47.920 --> 0:12:50.560 upward pressure on inflation, downward pressure on growth. 0:12:50.760 --> 0:12:52.800 I'm glad you mentioned that what the purpose of some 0:12:52.920 --> 0:12:55.559 of these tariffs are, how realistic it is that they're 0:12:55.640 --> 0:12:59.199 going to be deployed. You saw the testimony from Howard Lutnik. 0:12:59.280 --> 0:13:02.079 He also talked about the twenty five percent tariffs that 0:13:02.160 --> 0:13:05.240 are set to go on Canada and Mexico on Saturday, 0:13:05.360 --> 0:13:08.199 saying this is a separate tariff to create action. He 0:13:08.280 --> 0:13:10.440 was talking about the border, he was talking about fentanyl. 0:13:10.800 --> 0:13:13.400 He's saying, if they comply, there will be no tariff. 0:13:13.800 --> 0:13:16.520 How do you, as an investor take different signals from 0:13:16.559 --> 0:13:19.400 different places and understand how to price in and whether 0:13:19.480 --> 0:13:21.920 to price in some of these potential levies. 0:13:22.240 --> 0:13:24.760 I think the way to approach it as an investor 0:13:25.040 --> 0:13:28.160 is how you think businesses are going to be able 0:13:28.200 --> 0:13:30.880 to operate in this environment. If a business doesn't know 0:13:31.160 --> 0:13:32.960 what tariffs are going to be and if they're going 0:13:33.040 --> 0:13:35.679 to last for two weeks, because then you see a 0:13:35.760 --> 0:13:38.959 response from Mexico and Canada, it really is hard to 0:13:39.040 --> 0:13:41.960 be able to plan in that environment. And the question 0:13:42.080 --> 0:13:44.319 would be our businesses trying to get ahead of this? 0:13:44.720 --> 0:13:45.880 Are consumers trying. 0:13:45.720 --> 0:13:46.360 To get ahead of this? 0:13:46.760 --> 0:13:49.080 And this means that you could see disruption to supply 0:13:49.240 --> 0:13:51.880 chains even if the tariffs don't stick around. 0:13:52.000 --> 0:13:54.000 Which is the point that John was making yesterday. I'm 0:13:54.080 --> 0:13:55.760 totally going to steal from him when he was basically 0:13:56.040 --> 0:13:58.240 he was basically asking, you know, have we reached a 0:13:58.280 --> 0:14:01.560 point where the auto manufacturers other than Tesla are basically 0:14:01.640 --> 0:14:04.640 uninvestable because of the pipeline from Mexico and how many 0:14:04.679 --> 0:14:08.079 imports they really have been controlling from that region. 0:14:08.440 --> 0:14:12.400 Well, auto manufacturers have not necessarily been the most investable 0:14:12.440 --> 0:14:16.160 companies even without tariffs, because they're so very capital intensive 0:14:16.200 --> 0:14:20.440 and low margin. But it does add that layer of uncertainty. 0:14:20.560 --> 0:14:23.320 And it is interesting that Tesla calls out tariffs being 0:14:23.360 --> 0:14:25.720 an uncertainty for them in their earnings report. But I 0:14:25.760 --> 0:14:27.520 guess at the end of the day, Tesla isn't a 0:14:27.800 --> 0:14:28.440 car company. 0:14:28.600 --> 0:14:31.240 Is a state of mind I'm selling. I agree with that. 0:14:32.400 --> 0:14:35.400 I'm a seller of any guidance that is dependent on tariffs. 0:14:35.880 --> 0:14:37.800 I'm a seller of the guidance from the Federal Reserve. 0:14:37.880 --> 0:14:39.840 This market was a sealer of the guidance from GM. 0:14:40.240 --> 0:14:43.880 The Bank ACCOUNTA didn't even provide any anyone providing guidance 0:14:44.760 --> 0:14:47.080 when that's dependent on what happens over the weekend, and 0:14:47.120 --> 0:14:49.320 what happens going forward from tariffs, I think you have 0:14:49.400 --> 0:14:51.720 to take with a very very big grain of cell, 0:14:51.760 --> 0:14:52.120 which is what. 0:14:52.120 --> 0:14:54.280 We're seeing in the market. So at a certain point, 0:14:54.800 --> 0:14:57.840 just to Cameron's issue here, if you see even the 0:14:57.960 --> 0:15:00.440 threat of tariffs on a prolonged level, could you see 0:15:00.480 --> 0:15:03.840 those disruptions to supply chains, disruptions to profitability for specific 0:15:03.920 --> 0:15:07.760 companies just simply by virtue of the specter of that happening. 0:15:07.920 --> 0:15:09.840 So this is a difficult moment in many ways because 0:15:09.880 --> 0:15:12.840 parts of this market, the multiple evaluations might be capped 0:15:12.880 --> 0:15:15.280 if you are exposed to a tariff story. Some of 0:15:15.280 --> 0:15:17.840 the automobile makers, the auto manufacturers that likes a GM, 0:15:17.920 --> 0:15:19.840 we saw that earlier in the week, and then certain 0:15:19.880 --> 0:15:22.000 parts of the equy market exposed to the AI story. 0:15:22.000 --> 0:15:23.800 I think that's a sense that the perceived value is 0:15:23.800 --> 0:15:26.560 shifted away from maybe the energy plays of the last 0:15:26.640 --> 0:15:28.960 year or so. Do you think valuations are capped there too? 0:15:29.600 --> 0:15:32.760 Physical over digital or digital over physical really? And I 0:15:32.800 --> 0:15:35.200 think that that's what the market is coming around to, 0:15:35.480 --> 0:15:38.600 is that that you have had this big surgeon optimism 0:15:38.760 --> 0:15:41.560 that the digital world would drive a lot of physical investment. 0:15:41.680 --> 0:15:46.119 But even Microsoft said yesterday that they would be moderating 0:15:46.200 --> 0:15:49.360 capex starting in twenty twenty six. So if you're starting 0:15:49.400 --> 0:15:51.760 to see that slow down, it means that your power 0:15:51.880 --> 0:15:55.560 providers and your infrastructure providers are also going to see 0:15:55.600 --> 0:15:58.440 growth slow down. So it continues to be this world 0:15:58.440 --> 0:16:00.240 where we think that there's very little more and for 0:16:00.400 --> 0:16:02.920 error in the multiple. You're at twenty two point three 0:16:02.960 --> 0:16:06.200 times forward. That leaves no room for negative news. Doesn't 0:16:06.240 --> 0:16:08.920 mean you can't go higher. We could go into bubble territory, 0:16:09.160 --> 0:16:11.280 but you would have to see a spark of speculative 0:16:11.320 --> 0:16:12.000 fervor to get there. 0:16:12.120 --> 0:16:14.560 Do you think we did go into bubble territory with 0:16:14.680 --> 0:16:15.760 certain parts of this market? 0:16:16.320 --> 0:16:18.880 I think that we were getting close, and we still 0:16:19.000 --> 0:16:21.360 have that potential. If the FED comes out and cuts 0:16:21.400 --> 0:16:24.040 interest rates a bunch of times, and financial conditions ease 0:16:24.200 --> 0:16:27.320 even further, and liquidity becomes even more abundant, and you 0:16:27.440 --> 0:16:30.960 see this continued surge in YOLO things like meme stocks 0:16:31.080 --> 0:16:35.120 and zero data expiration options. I think that we are 0:16:35.240 --> 0:16:37.440 on the verge of that being a potential outcome for 0:16:37.520 --> 0:16:41.520 twenty twenty five, simply because any higher in the multiple poll, 0:16:41.560 --> 0:16:44.800 any higher than twenty three times that has only been 0:16:44.840 --> 0:16:46.200 achieved in true bubbles. 0:16:46.400 --> 0:16:47.720 Just before you go, we'll do this a couple of 0:16:47.800 --> 0:16:49.760 times going into the weekend. Do you say those times 0:16:49.880 --> 0:16:52.080 go on or do you think we avoid them this weekend. 0:16:52.520 --> 0:16:53.720 I'm not going to hold you to this. I just 0:16:53.760 --> 0:16:55.640 want to gauge how people think and how they fail. 0:16:55.720 --> 0:16:57.640 Let's just run out about a weekend after we get 0:16:57.640 --> 0:16:58.440 to see your decision. 0:16:59.160 --> 0:17:01.160 I think that they might go on for a period 0:17:01.200 --> 0:17:02.840 of time and then get walked back. 0:17:02.800 --> 0:17:06.960 Interesting a period of time being a week Okay, Hamon Dawson, 0:17:07.000 --> 0:17:18.560 have you edged wealth? I appreciate it. One of the 0:17:18.680 --> 0:17:20.520 best in fixed income joined us now for more so 0:17:20.640 --> 0:17:22.720 on design a Franklin Temple sense. 0:17:22.640 --> 0:17:24.239 Not good to see you, good to see you, too 0:17:24.320 --> 0:17:24.880 good to be here. 0:17:25.080 --> 0:17:28.840 The chairman said this that policy was meaningfully restrictive, and 0:17:28.960 --> 0:17:31.760 you believe actually we're now in the neutral range. What 0:17:31.880 --> 0:17:34.280 explains the difference between the two of you at the moment. 0:17:34.720 --> 0:17:37.679 No, the policy is not and has not been restrictive 0:17:38.000 --> 0:17:41.600 for a while now. And you know I did note 0:17:41.640 --> 0:17:43.359 t when he said that, it's very difficult to figure 0:17:43.359 --> 0:17:48.840 out what thel what neutral is. But you know, facts matter, 0:17:49.040 --> 0:17:51.160 and you look at what the US economy has done 0:17:51.320 --> 0:17:53.879 over the period of time that we've apparently been in 0:17:54.000 --> 0:17:58.000 extremely restrictive territory, and clearly we weren't that restrictive because 0:17:59.440 --> 0:18:03.880 the economy shows us. And i'd say that I think 0:18:04.040 --> 0:18:06.760 a part of the reason the FED cannot say that, well, 0:18:07.440 --> 0:18:10.800 you know, we're far from that, we are far from 0:18:10.880 --> 0:18:14.520 being in the neutral rate range, is because then the 0:18:14.680 --> 0:18:17.080 next step would be, well, why aren't you raising rates? 0:18:17.320 --> 0:18:19.119