1 00:00:02,400 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:11,600 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,440 --> 00:00:18,400 Speaker 2: with Lisa Bromwitz and am Marie Hordern. Join us each 4 00:00:18,480 --> 00:00:21,360 Speaker 2: day for insight from the best in markets, economics, and 5 00:00:21,400 --> 00:00:24,720 Speaker 2: geopolitics from our global headquarters in New York City. We 6 00:00:24,760 --> 00:00:27,400 Speaker 2: are live on Bloomberg Television weekday mornings from six to 7 00:00:27,480 --> 00:00:31,000 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify, 8 00:00:31,200 --> 00:00:33,479 Speaker 2: or anywhere else you listen, and as always on the 9 00:00:33,479 --> 00:00:35,840 Speaker 2: Bloomberg Terminal and the Bloomberg Business App. 10 00:00:36,680 --> 00:00:40,479 Speaker 1: Jamison Greer is joining us now, Jamison, Ambassador, Thank you 11 00:00:40,520 --> 00:00:42,360 Speaker 1: so much for being with us. I know you've been 12 00:00:42,400 --> 00:00:45,839 Speaker 1: incredibly busy. I can imagine you haven't slept much. I 13 00:00:45,880 --> 00:00:49,520 Speaker 1: am curious how much we're seeing the end of negotiations 14 00:00:49,840 --> 00:00:52,400 Speaker 1: or the beginning of the end, as there still seem 15 00:00:52,440 --> 00:00:54,440 Speaker 1: to be some loose ends to be tied up. 16 00:00:56,080 --> 00:00:58,360 Speaker 3: Well, I would say that, you know, we've spent the 17 00:00:58,400 --> 00:01:02,000 Speaker 3: past one hundred and twenty days negotiating with dozens and 18 00:01:02,040 --> 00:01:05,120 Speaker 3: dozens of countries, and with some of these countries, the 19 00:01:05,120 --> 00:01:07,039 Speaker 3: deals have been good enough that the President's been willing 20 00:01:07,080 --> 00:01:09,920 Speaker 3: to accept them. With other countries, they're just going have 21 00:01:10,000 --> 00:01:13,160 Speaker 3: a tariff. But we have you know, you can look 22 00:01:13,160 --> 00:01:14,840 Speaker 3: at some of the information that's gone out there. We 23 00:01:14,880 --> 00:01:16,959 Speaker 3: have fact sheets, we have a joint statement with Indonesia 24 00:01:17,000 --> 00:01:19,160 Speaker 3: that give some details. You know, we'll be finishing the 25 00:01:19,160 --> 00:01:22,119 Speaker 3: paperwork in the next weeks and maybe a couple of months, 26 00:01:22,400 --> 00:01:24,479 Speaker 3: but these deals are pretty much set. 27 00:01:25,120 --> 00:01:26,000 Speaker 4: They are set, right. 28 00:01:26,000 --> 00:01:28,160 Speaker 3: We wouldn't make an agreement unless we all knew the 29 00:01:28,160 --> 00:01:30,280 Speaker 3: contours of it and the countries knew it. And it's 30 00:01:30,280 --> 00:01:32,840 Speaker 3: an exciting time because the president has essentially reset the 31 00:01:32,840 --> 00:01:36,039 Speaker 3: global trading system, and so we'll be you know, finalizing 32 00:01:36,080 --> 00:01:39,040 Speaker 3: everything that's been agreed to on paper and then monitoring 33 00:01:39,040 --> 00:01:40,040 Speaker 3: compliance going forward. 34 00:01:40,080 --> 00:01:42,319 Speaker 5: And Messagre, Can you help us understand how you landed 35 00:01:42,360 --> 00:01:45,200 Speaker 5: on some of these rates, Specifically a country like Switzerland, 36 00:01:45,240 --> 00:01:48,480 Speaker 5: it went from thirty one percent on Liberation Day, April 37 00:01:48,520 --> 00:01:51,600 Speaker 5: second to now thirty nine percent, even though you and 38 00:01:51,960 --> 00:01:56,920 Speaker 5: your colleagues were in negotiations with the Swiss trading partners. 39 00:01:58,120 --> 00:01:58,720 Speaker 6: Sure well. 40 00:01:58,720 --> 00:02:01,920 Speaker 3: So, first of all, the rates are largely determined by 41 00:02:01,960 --> 00:02:04,720 Speaker 3: the trade deficit of a country with the United States 42 00:02:04,960 --> 00:02:06,920 Speaker 3: and what the country is willing to do to address 43 00:02:06,960 --> 00:02:10,400 Speaker 3: that trade deficit Switzerland. You know, this is surprising to 44 00:02:10,440 --> 00:02:12,600 Speaker 3: some to hear, but we have nearly forty billion dollar 45 00:02:12,720 --> 00:02:15,800 Speaker 3: trade deficit with Switzerland for a country of nine million. 46 00:02:16,320 --> 00:02:19,440 Speaker 3: Now we value our relationship with Switzerland certainly, but during 47 00:02:19,440 --> 00:02:22,120 Speaker 3: our discussions with them, you know, we weren't able to 48 00:02:22,520 --> 00:02:24,720 Speaker 3: reach agreement on the best way to reduce that trade 49 00:02:24,720 --> 00:02:28,680 Speaker 3: deficit at all. Right, they ship enormous amounts of pharmaceuticals 50 00:02:28,720 --> 00:02:31,120 Speaker 3: to our country. We want to be making pharmaceuticals in 51 00:02:31,120 --> 00:02:34,640 Speaker 3: our country. So this is a challenging situation. And so 52 00:02:34,720 --> 00:02:36,760 Speaker 3: we have, you know, high tariffs not just on Switzerland, 53 00:02:36,800 --> 00:02:39,320 Speaker 3: but many countries where we weren't able to fully resolve 54 00:02:39,320 --> 00:02:41,960 Speaker 3: a path forward on reducing the trade deficit and opening markets. 55 00:02:42,120 --> 00:02:44,799 Speaker 5: My understanding was that the US in Switzerland actually had 56 00:02:44,840 --> 00:02:47,480 Speaker 5: a negotiated text and it was just waiting on sign 57 00:02:47,520 --> 00:02:48,720 Speaker 5: off from President Trump. 58 00:02:48,800 --> 00:02:49,520 Speaker 1: Is that accurate? 59 00:02:50,440 --> 00:02:51,720 Speaker 4: I think that's an overstatement. 60 00:02:51,919 --> 00:02:53,880 Speaker 3: I mean, the reality is all of these countries you 61 00:02:53,919 --> 00:02:56,760 Speaker 3: trade back and forth paperwork and then you take it 62 00:02:56,800 --> 00:02:59,600 Speaker 3: back to your leaders to get guidance from them, and 63 00:02:59,760 --> 00:03:02,239 Speaker 3: so nothing's agreed, and tell everything's agreed. That's what every 64 00:03:02,240 --> 00:03:05,480 Speaker 3: trade negotiator knows. So you know, the reality is we 65 00:03:05,560 --> 00:03:07,480 Speaker 3: negotiate with lots of countries. Listen, there are a lot 66 00:03:07,480 --> 00:03:08,840 Speaker 3: of countries that didn't get a deal that we've been 67 00:03:08,880 --> 00:03:11,119 Speaker 3: negotiating with, and they, of course, they all want a deal. 68 00:03:11,240 --> 00:03:13,760 Speaker 3: They all want to deal with the United States. So 69 00:03:13,800 --> 00:03:16,680 Speaker 3: I can understand that. You know, folks may want to 70 00:03:16,720 --> 00:03:19,560 Speaker 3: try to manifest a deal in the last minutes, but 71 00:03:19,600 --> 00:03:21,040 Speaker 3: we just have to do it's right for America, and 72 00:03:21,040 --> 00:03:22,080 Speaker 3: the President stands that too. 73 00:03:22,280 --> 00:03:24,600 Speaker 5: I'm thinking of other countries like Taiwan, which that rate 74 00:03:24,639 --> 00:03:28,240 Speaker 5: went down, India, Switzerland. Of course we know you are 75 00:03:28,240 --> 00:03:32,200 Speaker 5: in negotiations with So between now and August seventh, could 76 00:03:32,280 --> 00:03:34,320 Speaker 5: some of these countries that you spent a lot of 77 00:03:34,360 --> 00:03:36,800 Speaker 5: time with your counterparts get a deal. 78 00:03:38,040 --> 00:03:39,760 Speaker 4: Well, that's not my focus. 79 00:03:40,040 --> 00:03:42,840 Speaker 3: I feel like we've been able to get everything set 80 00:03:42,880 --> 00:03:45,840 Speaker 3: on August first. Of course, any country that wants to 81 00:03:45,880 --> 00:03:47,360 Speaker 3: talk to us, they can always talk to us, and 82 00:03:47,400 --> 00:03:49,160 Speaker 3: I'm sure some will be eager to find ways to 83 00:03:49,200 --> 00:03:51,080 Speaker 3: reduce the deficit, open their markets, etc. 84 00:03:51,880 --> 00:03:55,640 Speaker 4: But we're really focused right now on implementing the deals 85 00:03:55,640 --> 00:03:57,080 Speaker 4: that have been reached, well. 86 00:03:57,000 --> 00:04:01,080 Speaker 7: On implementing those deals. Representative, you meant that you would 87 00:04:01,080 --> 00:04:04,480 Speaker 7: be looking and monitoring them for any violations. How will 88 00:04:04,520 --> 00:04:07,000 Speaker 7: this administration judge what is a violation and what the 89 00:04:07,040 --> 00:04:08,440 Speaker 7: consequences of that would be. 90 00:04:09,520 --> 00:04:13,520 Speaker 3: So, for example, you know, we put out a fairly 91 00:04:13,560 --> 00:04:17,600 Speaker 3: detailed joint statement with Indonesia and we're finalizing the underlying agreement, 92 00:04:17,760 --> 00:04:19,839 Speaker 3: and in there you can see that they've made commitments 93 00:04:19,839 --> 00:04:22,080 Speaker 3: on tariff levels where they're going to remove all of 94 00:04:22,120 --> 00:04:25,039 Speaker 3: their tariffs. They've made commitments on non tariff barriers with 95 00:04:25,080 --> 00:04:28,480 Speaker 3: respect to you know, agricultural inspections and the way they 96 00:04:29,400 --> 00:04:31,919 Speaker 3: treat certain digital trade. And so our office, which has 97 00:04:32,040 --> 00:04:34,320 Speaker 3: hundreds of people, the Office of the gust Trade Representative, 98 00:04:34,760 --> 00:04:36,920 Speaker 3: they watch this and they make sure that Indonesia actually 99 00:04:36,920 --> 00:04:39,120 Speaker 3: does what it's supposed to do, and if they don't, 100 00:04:39,160 --> 00:04:41,520 Speaker 3: the President has his teriff authority. I mean, all of 101 00:04:41,560 --> 00:04:44,440 Speaker 3: the deals are premised and the modified rates for these 102 00:04:44,440 --> 00:04:47,880 Speaker 3: countries are premised on them actually opening their market, making 103 00:04:47,880 --> 00:04:50,400 Speaker 3: the investment and purchase commitments they've agreed to, and if 104 00:04:50,440 --> 00:04:52,559 Speaker 3: you don't, you can have the tariffs go back into place. 105 00:04:52,680 --> 00:04:55,159 Speaker 4: This is basic trade enforcement. That's what we intend to 106 00:04:55,160 --> 00:04:56,240 Speaker 4: do here, Ambassador. 107 00:04:56,279 --> 00:04:58,039 Speaker 1: Right now, there are a number of countries coming out 108 00:04:58,080 --> 00:05:00,320 Speaker 1: and saying this is part of a negotiation, and they 109 00:05:00,360 --> 00:05:04,039 Speaker 1: plan to keep talking with the team over in the 110 00:05:03,520 --> 00:05:07,240 Speaker 1: Trade Organization and trade representatives from the United States. Is 111 00:05:07,279 --> 00:05:10,760 Speaker 1: that just messaging to their own political constituents or is 112 00:05:10,760 --> 00:05:11,479 Speaker 1: that reality? 113 00:05:12,440 --> 00:05:16,080 Speaker 3: Well, listen, they certainly have their domestic constituents they have 114 00:05:16,680 --> 00:05:19,880 Speaker 3: to talk to. You can be sure that I woke 115 00:05:19,960 --> 00:05:23,240 Speaker 3: up this morning to a number of trade ministers texting 116 00:05:23,240 --> 00:05:25,360 Speaker 3: me and emailing me, and I'm sure they're reaching out 117 00:05:25,400 --> 00:05:28,640 Speaker 3: to my colleague, Secretary LATINX, Secretary Beston, et cetera. 118 00:05:29,640 --> 00:05:31,040 Speaker 4: And my job is to talk to these folks. 119 00:05:31,080 --> 00:05:33,000 Speaker 3: I'm always going to talk to these folks, and you know, 120 00:05:33,000 --> 00:05:34,920 Speaker 3: if they have proposals, you know, I'll talk to them 121 00:05:34,920 --> 00:05:37,560 Speaker 3: and I'll brief the president. You know, we're focused on 122 00:05:37,560 --> 00:05:40,880 Speaker 3: implementation and doing, you know, what's right to change the 123 00:05:40,880 --> 00:05:43,040 Speaker 3: trading system to one that benefits American workers. 124 00:05:43,360 --> 00:05:46,400 Speaker 1: How much are you also hearing from US companies concerned 125 00:05:46,400 --> 00:05:49,719 Speaker 1: about certainty and whether they're going to get clarity on 126 00:05:49,839 --> 00:05:52,000 Speaker 1: exactly what the rates are going to be, whether they 127 00:05:52,040 --> 00:05:54,440 Speaker 1: will stick, whether there will be adjustments, and how some 128 00:05:54,520 --> 00:05:57,839 Speaker 1: of these things will work with transcenational shipments of getting 129 00:05:57,839 --> 00:05:59,560 Speaker 1: penalized forty percent. 130 00:06:00,400 --> 00:06:04,000 Speaker 3: So So with respect to certainty, you know, President Trump 131 00:06:04,080 --> 00:06:07,160 Speaker 3: has been talking about a new tariff program. 132 00:06:06,960 --> 00:06:09,719 Speaker 4: For for literally years, decades. 133 00:06:09,760 --> 00:06:12,039 Speaker 3: In some instances, you know, he has tariffs from his 134 00:06:12,080 --> 00:06:14,320 Speaker 3: first term that are still in place. So sometimes when 135 00:06:14,360 --> 00:06:16,440 Speaker 3: companies say we want certainty, what they mean is we 136 00:06:16,480 --> 00:06:20,320 Speaker 3: want a different outcome, right, And you know by by 137 00:06:20,680 --> 00:06:23,320 Speaker 3: putting you know, the market has baked in a lot 138 00:06:23,360 --> 00:06:25,520 Speaker 3: of the tariffs we put in. You know, the new 139 00:06:25,520 --> 00:06:27,760 Speaker 3: tariffs that we issued last night are firm. That's why 140 00:06:27,800 --> 00:06:29,560 Speaker 3: we put it out in a very clear list. Everyone 141 00:06:29,600 --> 00:06:32,640 Speaker 3: can see it and understand. With surotect a transhipment that's 142 00:06:32,640 --> 00:06:34,920 Speaker 3: always been illegal, and so we're just going to put 143 00:06:34,920 --> 00:06:38,440 Speaker 3: an additional forty percent tariff on that. So, you know, 144 00:06:38,920 --> 00:06:40,839 Speaker 3: I understand that there are going to be edge cases 145 00:06:40,880 --> 00:06:43,200 Speaker 3: where companies have to change their supply chains and no 146 00:06:43,200 --> 00:06:45,120 Speaker 3: one wants to do that. They just want status quo. 147 00:06:45,440 --> 00:06:47,600 Speaker 3: But we can't have the status quo. The status quo 148 00:06:47,720 --> 00:06:49,440 Speaker 3: is what led to offshoring and the loss of some 149 00:06:49,520 --> 00:06:52,480 Speaker 3: of our key industries. So during that supply chain shift, 150 00:06:52,720 --> 00:06:54,919 Speaker 3: you know, that can be challenging for some companies. And 151 00:06:55,000 --> 00:06:56,520 Speaker 3: I talk to a lot of these folks. I wanted 152 00:06:56,520 --> 00:06:59,040 Speaker 3: to understand the president's trade policy. I want to hear 153 00:06:59,080 --> 00:07:01,560 Speaker 3: about any you know on in tended consequences. But the 154 00:07:01,600 --> 00:07:04,640 Speaker 3: presence trade policy is moving forward and we're shifting from 155 00:07:04,680 --> 00:07:07,919 Speaker 3: a seventy year policy based on purely efficiency to a 156 00:07:07,960 --> 00:07:09,000 Speaker 3: new policy based. 157 00:07:08,800 --> 00:07:11,000 Speaker 4: On fair and bounce trade, and the world is agreeing 158 00:07:11,000 --> 00:07:11,480 Speaker 4: with US. 159 00:07:11,400 --> 00:07:12,000 Speaker 1: Investor agree. 160 00:07:12,040 --> 00:07:14,720 Speaker 5: What about the unintended consequences of what's going on with 161 00:07:14,800 --> 00:07:17,800 Speaker 5: the sectoral tariffs on autos? The Ford CEO was on 162 00:07:17,800 --> 00:07:22,600 Speaker 5: Bloomberg Television yesterday talking about the price disadvantage compared to 163 00:07:22,840 --> 00:07:26,760 Speaker 5: auto companies if they're making a car in Japan because 164 00:07:26,800 --> 00:07:29,440 Speaker 5: of the input costs of twenty five percent on those 165 00:07:29,440 --> 00:07:31,800 Speaker 5: inputs that they need to make the car coming into 166 00:07:31,800 --> 00:07:35,360 Speaker 5: the United States versus the fifteen percent right that Japan 167 00:07:35,520 --> 00:07:38,760 Speaker 5: now has. What's the point of the auto sectoral tariff 168 00:07:39,040 --> 00:07:42,360 Speaker 5: if basically it's going to be bilateral now with country 169 00:07:42,360 --> 00:07:44,200 Speaker 5: by country. 170 00:07:44,040 --> 00:07:47,720 Speaker 3: So first of all, you know, there are only a 171 00:07:47,760 --> 00:07:50,960 Speaker 3: handful of countries that export cars to US, right essentially, 172 00:07:51,120 --> 00:07:53,560 Speaker 3: you know Germany, Japan, in a couple of countries of 173 00:07:53,600 --> 00:07:56,440 Speaker 3: the European Union. We also have Canada, Mexico, and we 174 00:07:56,480 --> 00:07:59,280 Speaker 3: had our domestic producers. You know, choose over a couple 175 00:07:59,320 --> 00:08:01,760 Speaker 3: of decades off for a lot of that production to Mexico, 176 00:08:02,160 --> 00:08:05,560 Speaker 3: and so naturally there is some some challenge as they 177 00:08:05,720 --> 00:08:09,000 Speaker 3: as they continue to reshure that and we understand that, right, 178 00:08:09,200 --> 00:08:11,400 Speaker 3: I mean, our goal is long term. We're not looking 179 00:08:11,440 --> 00:08:14,000 Speaker 3: at quarterly earnings as policy makers. We're looking at a 180 00:08:14,000 --> 00:08:16,080 Speaker 3: way to make sure that we have a strong, robust 181 00:08:16,120 --> 00:08:19,080 Speaker 3: industrial base here that provide good jobs for our workers 182 00:08:19,320 --> 00:08:22,120 Speaker 3: and support the national security. So you know, we're in 183 00:08:22,160 --> 00:08:25,920 Speaker 3: constant contact with the domestics, with the unions and everybody. 184 00:08:26,280 --> 00:08:28,880 Speaker 3: And you know, I understand that the that the auto 185 00:08:28,920 --> 00:08:33,200 Speaker 3: companies are receiving a credit for content that's made in America, 186 00:08:33,559 --> 00:08:34,400 Speaker 3: which is how it should be. 187 00:08:34,400 --> 00:08:35,880 Speaker 4: That's what we're trying to incentivize. 188 00:08:35,920 --> 00:08:38,160 Speaker 5: When you're looking and you're thinking long term, are you 189 00:08:38,240 --> 00:08:43,199 Speaker 5: preparing for Supreme Court ruling against using IEPA for these tariffs? 190 00:08:43,240 --> 00:08:45,160 Speaker 5: And if so, what's the plan be. 191 00:08:46,960 --> 00:08:49,040 Speaker 3: So the case is at the Federal Circuit right now. 192 00:08:49,080 --> 00:08:52,160 Speaker 3: We had the arguments yesterday. You know, lots of questions, 193 00:08:52,200 --> 00:08:54,760 Speaker 3: a lot of preparation. Dog did a great DJ did 194 00:08:54,760 --> 00:08:56,959 Speaker 3: a great job. We had a great team out there. 195 00:08:57,160 --> 00:08:59,960 Speaker 3: We feel very confident in the case. You know, if 196 00:09:00,040 --> 00:09:02,240 Speaker 3: if there's still questions coming out of the Federal Circuit 197 00:09:02,360 --> 00:09:04,760 Speaker 3: or further litigation that goes to the Supreme Court, we're 198 00:09:04,760 --> 00:09:08,120 Speaker 3: confident there that this statue clearly says the President has 199 00:09:08,120 --> 00:09:09,680 Speaker 3: the authority to regulate imports. 200 00:09:09,800 --> 00:09:10,559 Speaker 4: That's the language. 201 00:09:10,640 --> 00:09:13,439 Speaker 3: No, not my words, it's a statute statutes language. 202 00:09:14,000 --> 00:09:14,160 Speaker 4: You know. 203 00:09:14,320 --> 00:09:17,040 Speaker 3: In case there's a national emergency, the Presence declared a 204 00:09:17,120 --> 00:09:20,280 Speaker 3: national emergency, So we feel confident, you know, if it 205 00:09:20,320 --> 00:09:22,800 Speaker 3: goes the other way, then we'll manage that. The reality is, 206 00:09:23,240 --> 00:09:25,880 Speaker 3: the countries understand the type of leverage that President Trump 207 00:09:25,920 --> 00:09:28,080 Speaker 3: has created. That's why they're doing these deals, and they're 208 00:09:28,120 --> 00:09:30,240 Speaker 3: going to stick regardless of what happens in litigation. 209 00:09:30,800 --> 00:09:32,320 Speaker 1: That's where I wanted to finish, And we just have 210 00:09:32,360 --> 00:09:34,320 Speaker 1: a couple of minutes. We are out of time with you, 211 00:09:34,440 --> 00:09:36,720 Speaker 1: I know, but I am curious what the game plan 212 00:09:36,960 --> 00:09:40,160 Speaker 1: is should there be some sort of overruling of IEPA. 213 00:09:40,240 --> 00:09:42,400 Speaker 1: Do you already have section two thirty two and others 214 00:09:42,440 --> 00:09:42,960 Speaker 1: lined up? 215 00:09:44,400 --> 00:09:46,960 Speaker 3: Well, well, listen, we always have all kinds of plans. 216 00:09:47,000 --> 00:09:49,800 Speaker 3: And I'm not going to go deep into our strategy here, 217 00:09:50,000 --> 00:09:53,480 Speaker 3: mostly because we're pretty confident on the current plan. But 218 00:09:53,559 --> 00:09:55,520 Speaker 3: we will do whatever it takes to make sure that 219 00:09:55,559 --> 00:09:58,440 Speaker 3: the President can continue to rectify the trade deficit and 220 00:09:58,520 --> 00:10:01,079 Speaker 3: change the global trading system. This is a historic thing. 221 00:10:01,600 --> 00:10:02,920 Speaker 3: This is once in a hundred years that you have 222 00:10:02,960 --> 00:10:05,280 Speaker 3: the chance to reorder global trade like this, and we're 223 00:10:05,280 --> 00:10:07,360 Speaker 3: doing it, and we'll use whatever tools are necessary to 224 00:10:07,360 --> 00:10:07,640 Speaker 3: do it. 225 00:10:07,840 --> 00:10:10,440 Speaker 1: US Trade Representative Jamison Greer, thank you so much for 226 00:10:10,440 --> 00:10:23,320 Speaker 1: being with it. Stephanie Rothawolf research still here and I'm 227 00:10:23,320 --> 00:10:25,720 Speaker 1: looking right now at some of the internals of this data, 228 00:10:25,760 --> 00:10:28,920 Speaker 1: and it includes average hourly earnings that ticked up to 229 00:10:29,000 --> 00:10:33,000 Speaker 1: three point nine percent from the previous three point seven percent. 230 00:10:33,080 --> 00:10:36,000 Speaker 1: You can see right now across the board there are 231 00:10:36,080 --> 00:10:38,840 Speaker 1: still signs that things are solid, you know, even the 232 00:10:38,880 --> 00:10:41,320 Speaker 1: unemployment rate. Yes, it ticked up, but not to the 233 00:10:41,400 --> 00:10:44,400 Speaker 1: significant degree that some people were worried about. What is 234 00:10:44,400 --> 00:10:47,839 Speaker 1: the inflationary risk here longer term at a time when 235 00:10:47,880 --> 00:10:50,280 Speaker 1: the Fed is being prompted to cut from a number 236 00:10:50,280 --> 00:10:53,440 Speaker 1: of different reasons, and there still are these tariffs in 237 00:10:53,440 --> 00:10:53,959 Speaker 1: the system. 238 00:10:54,600 --> 00:10:56,640 Speaker 4: Yeah, this is a challenge. 239 00:10:57,400 --> 00:10:59,240 Speaker 8: The data that we're seeing is largely appears to be 240 00:10:59,320 --> 00:11:02,160 Speaker 8: rifferent by immigrat and that actually tightens the labor market 241 00:11:02,160 --> 00:11:03,160 Speaker 8: for blue collar workers. 242 00:11:03,400 --> 00:11:04,560 Speaker 1: So what we might. 243 00:11:04,440 --> 00:11:06,880 Speaker 8: See is a labor market, which is something that was 244 00:11:06,960 --> 00:11:09,480 Speaker 8: kind of known heading into this event, but it's now 245 00:11:09,520 --> 00:11:12,640 Speaker 8: the reality. It's kind of painful because what we're seeing 246 00:11:12,760 --> 00:11:16,120 Speaker 8: is job gains that have slowed down tremendously. It results 247 00:11:16,120 --> 00:11:19,520 Speaker 8: in upward pressure on wages and then upward pressure from tariff. 248 00:11:19,600 --> 00:11:22,679 Speaker 8: So it's like a stagflationary type of thoughts shop, which 249 00:11:22,679 --> 00:11:25,120 Speaker 8: we're starting to see play out in the data. It's 250 00:11:25,200 --> 00:11:27,720 Speaker 8: just a really complicated mix for the FED to kind 251 00:11:27,720 --> 00:11:29,240 Speaker 8: of deal with from here. So it looks like the 252 00:11:29,320 --> 00:11:32,600 Speaker 8: labor market is okay, it's not as weak as these 253 00:11:32,679 --> 00:11:36,480 Speaker 8: numbers today suggest. This is largely different by immigration in 254 00:11:36,480 --> 00:11:38,400 Speaker 8: an economy that's hanging in there. 255 00:11:38,679 --> 00:11:41,600 Speaker 1: Mike, to that point, maybe the economy is hanging in there, 256 00:11:41,640 --> 00:11:44,480 Speaker 1: but on the margins, this is by government bonds sell 257 00:11:44,559 --> 00:11:45,400 Speaker 1: corporate bonds. 258 00:11:46,600 --> 00:11:49,520 Speaker 9: You know, corporate bond spreads, as you know, as we've 259 00:11:49,520 --> 00:11:52,079 Speaker 9: all been talking about, are really tight. I mean, you're 260 00:11:52,080 --> 00:11:54,960 Speaker 9: not getting a lot of extra yield to buy corporates 261 00:11:55,000 --> 00:11:57,680 Speaker 9: and high yield bonds, and obviously you're seeing a little 262 00:11:57,679 --> 00:12:00,520 Speaker 9: bit of a knee jerk reaction negative action in the 263 00:12:00,520 --> 00:12:03,120 Speaker 9: stock market as well, and this, you know, this whole 264 00:12:03,160 --> 00:12:07,400 Speaker 9: tariff theme is definitely one of of not only inflationary, 265 00:12:07,640 --> 00:12:09,760 Speaker 9: you know, is you know we just talked about the 266 00:12:10,240 --> 00:12:14,520 Speaker 9: stagflationary risk is real, but it can certainly result in 267 00:12:14,920 --> 00:12:18,520 Speaker 9: margin pressures for companies and I think that is still 268 00:12:18,559 --> 00:12:21,080 Speaker 9: to come, and I think we are starting to see 269 00:12:21,080 --> 00:12:23,839 Speaker 9: some early evidence of that. And obviously that could put 270 00:12:23,840 --> 00:12:26,920 Speaker 9: some pressure on corporate earnings, that could put some pressure 271 00:12:26,920 --> 00:12:30,280 Speaker 9: on credit quality and and on corporate spread. So yeah, 272 00:12:30,320 --> 00:12:34,200 Speaker 9: I think higher quality bonds and adding duration are the 273 00:12:34,200 --> 00:12:36,520 Speaker 9: two themes we've we've been sticking here. The big question 274 00:12:36,600 --> 00:12:38,560 Speaker 9: for the FED, right, and Stephan you kind of talked 275 00:12:38,559 --> 00:12:41,320 Speaker 9: about this. I let's say growth is zero and the 276 00:12:41,400 --> 00:12:43,720 Speaker 9: unemployment rate is you know, four and a half or five, 277 00:12:44,240 --> 00:12:47,320 Speaker 9: but inflation is at three. You know, what does the 278 00:12:47,360 --> 00:12:49,800 Speaker 9: FED do in that world? Right, that that kind of 279 00:12:49,800 --> 00:12:53,720 Speaker 9: stagflationary world. And and my gut is, you know, the 280 00:12:53,800 --> 00:12:56,800 Speaker 9: FED and even Powell, who is is a labor market dove, 281 00:12:57,000 --> 00:13:01,560 Speaker 9: would err on the side of saving the economy, saving jobs, 282 00:13:01,640 --> 00:13:06,800 Speaker 9: saving the labor market and write off this inflationary risk 283 00:13:07,080 --> 00:13:08,720 Speaker 9: as being a one off. So I think that's the 284 00:13:08,840 --> 00:13:12,400 Speaker 9: kind of the risks the way they're skewed. 285 00:13:12,600 --> 00:13:14,800 Speaker 1: My colin Symphijian fixed Income, thank you so much for 286 00:13:14,840 --> 00:13:17,920 Speaker 1: your time. And before we got this number, we saw 287 00:13:18,000 --> 00:13:21,880 Speaker 1: a forty percent chance of a rate cutpying bike bakes 288 00:13:21,880 --> 00:13:25,319 Speaker 1: into the market if for the month of September, And 289 00:13:25,600 --> 00:13:28,280 Speaker 1: right now we have a seventy one percent chance of 290 00:13:28,320 --> 00:13:31,560 Speaker 1: a rate of a rate cut in September. Joining us 291 00:13:31,559 --> 00:13:33,720 Speaker 1: now is Jeff Rosenberg of a Black Rock we heard 292 00:13:33,720 --> 00:13:36,440 Speaker 1: there from Mike Collins by Bonds. Is that your takeaway? 293 00:13:38,400 --> 00:13:42,160 Speaker 10: Well, certainly the market takeaway because the market's repricing September 294 00:13:42,160 --> 00:13:43,520 Speaker 10: and it makes a lot of sense, and you guys 295 00:13:43,800 --> 00:13:46,040 Speaker 10: hit on it, and I think it is the takeaway 296 00:13:46,120 --> 00:13:49,200 Speaker 10: from today's report, which is it's the revision's story. 297 00:13:49,480 --> 00:13:52,000 Speaker 6: Remember there's been this undercurrent. 298 00:13:51,600 --> 00:13:55,160 Speaker 10: Of a debate about whether non farm payrolls in the 299 00:13:55,200 --> 00:14:00,760 Speaker 10: labor market report is really mismeasuring the deterioration, and you 300 00:14:00,920 --> 00:14:03,680 Speaker 10: see that in these first prints versus the revisions. 301 00:14:04,000 --> 00:14:05,280 Speaker 6: Wallers talked about it. 302 00:14:05,280 --> 00:14:09,599 Speaker 10: It's a little bit of vindication here, and that's basically 303 00:14:09,720 --> 00:14:15,000 Speaker 10: saying his argument may hold sway or convince more people 304 00:14:15,040 --> 00:14:18,120 Speaker 10: to come on his side of the argument. And you know, 305 00:14:18,120 --> 00:14:20,880 Speaker 10: maybe they missed the opportunity in July, but it certainly 306 00:14:21,240 --> 00:14:23,880 Speaker 10: raises the odds that you get it in September. And 307 00:14:23,920 --> 00:14:26,320 Speaker 10: that's why you're seeing the big move. As you pointed 308 00:14:26,360 --> 00:14:27,240 Speaker 10: out in the front end. 309 00:14:27,120 --> 00:14:27,520 Speaker 6: Of the curve. 310 00:14:27,680 --> 00:14:28,840 Speaker 1: Well, the President agrees with you. 311 00:14:28,960 --> 00:14:31,520 Speaker 5: He took to true socials had strong descents on the 312 00:14:31,520 --> 00:14:34,880 Speaker 5: FED board and will only get stronger given the revisions. 313 00:14:34,920 --> 00:14:37,480 Speaker 5: The downside revisions, Is this now a trend of this 314 00:14:37,560 --> 00:14:39,880 Speaker 5: fragility we're seeing in the labor market. 315 00:14:40,960 --> 00:14:43,040 Speaker 10: Well, it was one of the numbers that Mike highlight 316 00:14:43,080 --> 00:14:44,920 Speaker 10: it at the beginning. You know, when you take the 317 00:14:45,040 --> 00:14:49,720 Speaker 10: revisions into account, you know, the three month average change 318 00:14:49,840 --> 00:14:53,080 Speaker 10: in non for barrows drops from one hundred and fifty 319 00:14:53,120 --> 00:14:56,680 Speaker 10: thousand average. There's just really a very you know, pretty 320 00:14:56,680 --> 00:14:59,800 Speaker 10: strong labor market to thirty five thousand, which is which 321 00:14:59,800 --> 00:15:02,720 Speaker 10: is you know, a dramatic shift. Now, as Mike just mentioned, 322 00:15:02,880 --> 00:15:05,120 Speaker 10: you know, maybe we need to reset what we think 323 00:15:05,240 --> 00:15:08,880 Speaker 10: is break even. But with the revisions, it's a dramatically 324 00:15:08,920 --> 00:15:12,640 Speaker 10: different picture to what the labor market is saying. And 325 00:15:12,680 --> 00:15:15,400 Speaker 10: as also Mike was talking about, you know, you have 326 00:15:15,640 --> 00:15:20,360 Speaker 10: a pretty strong year over year average hourly earnings figure, 327 00:15:20,560 --> 00:15:24,160 Speaker 10: wage inflation. You know, the market is not caring about 328 00:15:24,160 --> 00:15:26,800 Speaker 10: that because I agree with Mike. I think in the 329 00:15:27,040 --> 00:15:32,800 Speaker 10: debate between the dual mandate of inflation versus full employment, 330 00:15:33,840 --> 00:15:36,239 Speaker 10: they're going to air on the side of full employment. 331 00:15:36,280 --> 00:15:38,520 Speaker 10: And that's why, again, I think you're seeing this big 332 00:15:38,560 --> 00:15:40,680 Speaker 10: move in the front end of the curve despite you 333 00:15:40,720 --> 00:15:42,560 Speaker 10: know what we're not really talking a lot about, which 334 00:15:42,600 --> 00:15:43,320 Speaker 10: is the wage number. 335 00:15:43,560 --> 00:15:45,880 Speaker 7: Jeff, I just wanted to jump in because we had 336 00:15:45,920 --> 00:15:49,920 Speaker 7: heard from Powell this week who de emphasized the nonfarm 337 00:15:49,960 --> 00:15:54,200 Speaker 7: payroll numbers themselves and said pay attention to the unemployment rate, 338 00:15:54,560 --> 00:15:56,480 Speaker 7: and we were just talking with Stephanie about this idea 339 00:15:56,520 --> 00:15:59,440 Speaker 7: of it being impacted more by labor supply and things 340 00:15:59,480 --> 00:16:02,920 Speaker 7: like imm So given that, couldn't you say maybe for 341 00:16:03,000 --> 00:16:05,560 Speaker 7: this bond market, I shouldn't get over my skis in 342 00:16:05,640 --> 00:16:08,600 Speaker 7: joining this rally because we did have things like PCE 343 00:16:08,920 --> 00:16:11,320 Speaker 7: yesterday which showed a stubborn rate of inflation. 344 00:16:13,080 --> 00:16:15,920 Speaker 10: Yeah, it's a really good point, and he did focus 345 00:16:15,960 --> 00:16:18,880 Speaker 10: on that, and the unemployment rate, you know, ticked up 346 00:16:19,320 --> 00:16:23,240 Speaker 10: one tenth and that was kind of aligned with expectations. 347 00:16:23,920 --> 00:16:28,600 Speaker 10: But he also said in that press conference that the 348 00:16:28,720 --> 00:16:33,400 Speaker 10: slowing in the labor markets even if it's both demand 349 00:16:33,480 --> 00:16:38,320 Speaker 10: and supply with the equilibrium raises the risk that the 350 00:16:38,840 --> 00:16:41,440 Speaker 10: downside risk would be to labor markets. 351 00:16:41,520 --> 00:16:43,280 Speaker 6: It was a little bit of a tell on. 352 00:16:44,000 --> 00:16:47,640 Speaker 10: Yes, we're in equilibrium now because you're getting both the 353 00:16:47,680 --> 00:16:51,040 Speaker 10: supply and the demand side falling. But the risk is 354 00:16:51,040 --> 00:16:54,080 Speaker 10: that the supply side sort of stops falling and the 355 00:16:54,120 --> 00:16:57,000 Speaker 10: demand side continues. And I think that's kind of what 356 00:16:57,120 --> 00:17:01,200 Speaker 10: the market is looking through here, particularly around this trend 357 00:17:01,400 --> 00:17:05,560 Speaker 10: with the revisions, you know, more accelerated than say what 358 00:17:05,600 --> 00:17:08,119 Speaker 10: we've seen in terms of labor force participation which you 359 00:17:08,119 --> 00:17:11,320 Speaker 10: mentioned a minute ago, which actually tacked down here again 360 00:17:11,480 --> 00:17:15,280 Speaker 10: a tenth. But maybe you start to see that stabilize 361 00:17:15,280 --> 00:17:16,880 Speaker 10: while the demand side doesn't stabilize. 362 00:17:16,920 --> 00:17:19,080 Speaker 6: And that's the risk that the market's pricing in right now. 363 00:17:19,200 --> 00:17:19,520 Speaker 4: Jeff. 364 00:17:19,600 --> 00:17:22,280 Speaker 7: Not all markets are pricing in things equally. I just 365 00:17:22,320 --> 00:17:24,719 Speaker 7: pulled up what the future session is doing. You actually, 366 00:17:24,760 --> 00:17:26,760 Speaker 7: just looking at the line chart would not even have 367 00:17:26,840 --> 00:17:29,560 Speaker 7: any idea that we had any big economic piece of 368 00:17:29,640 --> 00:17:32,159 Speaker 7: data come out s and P five hundred futures are 369 00:17:32,200 --> 00:17:34,760 Speaker 7: basically at the level they were before. Is this a 370 00:17:34,800 --> 00:17:37,960 Speaker 7: market that's not paying attention to the jobs numbers or 371 00:17:38,080 --> 00:17:40,520 Speaker 7: it's just not bad enough for them to react, or 372 00:17:40,680 --> 00:17:42,760 Speaker 7: maybe it's smooth sailing because it means that we could 373 00:17:42,800 --> 00:17:45,400 Speaker 7: get cuts. What do you make of how risk is not. 374 00:17:45,440 --> 00:17:50,040 Speaker 10: Reacting well, you know, and I looked at some of 375 00:17:50,080 --> 00:17:53,320 Speaker 10: the futures and they looked like they were reacting and down. 376 00:17:53,359 --> 00:17:56,399 Speaker 10: I think when you look cross market, you know, we 377 00:17:56,440 --> 00:17:59,679 Speaker 10: talked a little better about this earlier this week. You've 378 00:17:59,680 --> 00:18:01,760 Speaker 10: got to be a little bit careful about reading into 379 00:18:01,800 --> 00:18:04,600 Speaker 10: the equity market. You know, this is very much sort 380 00:18:04,640 --> 00:18:10,960 Speaker 10: of a macro conversation fed policy macroeconomic performance. The stock 381 00:18:11,000 --> 00:18:13,879 Speaker 10: market is not the economy, and the stock market is 382 00:18:13,880 --> 00:18:15,800 Speaker 10: not even the S and P five hundred. It's really 383 00:18:15,880 --> 00:18:18,320 Speaker 10: the S and P seven or six, and then you've 384 00:18:18,320 --> 00:18:19,040 Speaker 10: got the. 385 00:18:18,920 --> 00:18:21,800 Speaker 6: Four ninety three. There's tremendous differential. 386 00:18:21,880 --> 00:18:24,800 Speaker 10: Look at sort of small cap performance versus you know, 387 00:18:24,960 --> 00:18:26,960 Speaker 10: S and P five hundred performance, which is again it's 388 00:18:27,000 --> 00:18:28,440 Speaker 10: sort of more dominated. 389 00:18:27,960 --> 00:18:28,840 Speaker 6: By the tech story. 390 00:18:29,160 --> 00:18:32,240 Speaker 10: So those stories and we're in the middle of earning season, 391 00:18:32,480 --> 00:18:36,120 Speaker 10: you know, they can be much more dominant and reflective 392 00:18:36,160 --> 00:18:39,200 Speaker 10: of those issues than they are what we're talking about 393 00:18:39,240 --> 00:18:40,160 Speaker 10: here in the macro data. 394 00:18:40,200 --> 00:18:41,480 Speaker 6: I think when you look at the. 395 00:18:41,520 --> 00:18:45,359 Speaker 10: Two year that's mapping to FED expectations, and that's a 396 00:18:45,359 --> 00:18:46,600 Speaker 10: pretty good message. 397 00:18:46,680 --> 00:18:48,520 Speaker 6: I think when you start looking across. 398 00:18:48,160 --> 00:18:49,840 Speaker 10: Into the equity market, you've got to be a little 399 00:18:49,880 --> 00:18:53,240 Speaker 10: bit more aware that you know there's other factors going 400 00:18:53,280 --> 00:18:58,240 Speaker 10: on in this environment of very concentrated equity valuation within 401 00:18:58,280 --> 00:19:01,600 Speaker 10: the indices that can kind of lead to a misread 402 00:19:01,640 --> 00:19:02,960 Speaker 10: across from the macro data. 403 00:19:03,119 --> 00:19:05,440 Speaker 1: Jeff Rosenberg of Blackrock, thank you so much for being 404 00:19:05,480 --> 00:19:08,359 Speaker 1: with us. And as Jeff was talking about the chances 405 00:19:08,440 --> 00:19:10,960 Speaker 1: of a September a FED rate cut, we're increasing it 406 00:19:11,160 --> 00:19:14,200 Speaker 1: again to seventy six percent now from forty percent. Stephanie 407 00:19:14,280 --> 00:19:17,240 Speaker 1: Rotha full Research here with us for a final thought. 408 00:19:17,240 --> 00:19:20,720 Speaker 1: You've been parsing through all of this. Notably, the three 409 00:19:20,880 --> 00:19:23,320 Speaker 1: month average of the net change in jobs has fallen 410 00:19:23,400 --> 00:19:26,520 Speaker 1: to its lowest level going back to July of twenty 411 00:19:26,520 --> 00:19:29,200 Speaker 1: twenty or June of twenty twenty. What's your takeaway. 412 00:19:29,880 --> 00:19:32,560 Speaker 8: I think the labor market has softened. Part of it 413 00:19:32,600 --> 00:19:34,200 Speaker 8: is a big part of it has to do with immigration. 414 00:19:34,280 --> 00:19:35,879 Speaker 8: Another big part of it has to do with government. 415 00:19:35,880 --> 00:19:38,719 Speaker 8: About half of the revisions are driven by the government sector. 416 00:19:39,200 --> 00:19:42,639 Speaker 8: So we're looking at an economy that's holding up, labor 417 00:19:42,640 --> 00:19:45,080 Speaker 8: market has cooled down, and inflation is going to be 418 00:19:45,119 --> 00:19:47,919 Speaker 8: heating up. This is a really challenging backdrop for August 419 00:19:47,920 --> 00:19:48,560 Speaker 8: for risk markets. 420 00:19:48,640 --> 00:19:49,000 Speaker 6: And Marie. 421 00:19:49,080 --> 00:19:51,960 Speaker 1: The President's responding, he's coming out on truth social. 422 00:19:51,720 --> 00:19:54,359 Speaker 5: Yeah, he's not exactly saying what's happening in the jobs market, 423 00:19:54,359 --> 00:19:56,840 Speaker 5: but he's signaling. This is the reason why he thinks 424 00:19:56,920 --> 00:20:00,000 Speaker 5: the Fed is quote his words too little, too late. 425 00:20:00,440 --> 00:20:02,320 Speaker 6: Powell is a disaster. Dropped the rate. 426 00:20:02,480 --> 00:20:04,920 Speaker 1: I Meanwhile, the SMP not even responding. It's all about 427 00:20:04,920 --> 00:20:05,400 Speaker 1: big tech. 428 00:20:05,520 --> 00:20:06,920 Speaker 6: No, not responding at all. 429 00:20:06,960 --> 00:20:08,879 Speaker 7: Again, you would have no idea that this piece of 430 00:20:08,920 --> 00:20:11,520 Speaker 7: data came out. It is the bond market that is responding, 431 00:20:11,880 --> 00:20:14,080 Speaker 7: sending us to a more than seventy percent odds that 432 00:20:14,119 --> 00:20:15,880 Speaker 7: we will get that rate cut next decision. 433 00:20:16,160 --> 00:20:28,920 Speaker 1: Stephanie Roth of Wolf Research, thank you so much. Apple 434 00:20:28,960 --> 00:20:32,320 Speaker 1: reporting is best quarter in over three years. Is iPhone 435 00:20:32,320 --> 00:20:36,480 Speaker 1: demand picked up worldwide, including in China. Amazon shares and 436 00:20:36,520 --> 00:20:41,480 Speaker 1: meanwhile falling after reporting the tech client underwhelming cloud growth. 437 00:20:41,680 --> 00:20:44,639 Speaker 1: Joining us now is Tom Forte of the Maxim Group. Tom, 438 00:20:45,080 --> 00:20:50,119 Speaker 1: how bad really was Amazon versus just not absolutely moonshot 439 00:20:50,640 --> 00:20:54,159 Speaker 1: blowing out expectations like some of the other tech giants. 440 00:20:54,560 --> 00:20:58,560 Speaker 11: Yeah, I definitely think that Amazon was a victim of expectations. 441 00:20:59,000 --> 00:21:03,359 Speaker 11: Had the company reports before Microsoft instead of after, we 442 00:21:03,480 --> 00:21:07,720 Speaker 11: might be talking differently without downplaying investor concerns about the 443 00:21:07,760 --> 00:21:12,240 Speaker 11: competitive landscape in cloud computing and artificial intelligence. But I 444 00:21:12,320 --> 00:21:16,640 Speaker 11: do see the market's reaction to Amazon as more reflection 445 00:21:16,760 --> 00:21:21,120 Speaker 11: of high expectations than poor performance. Sales and profits were 446 00:21:21,160 --> 00:21:23,199 Speaker 11: better for the quarter, and if you look at the 447 00:21:23,320 --> 00:21:26,680 Speaker 11: ranges for the outlook for next quarter, they were better 448 00:21:26,720 --> 00:21:27,200 Speaker 11: as well. 449 00:21:27,480 --> 00:21:29,720 Speaker 1: So tob Before we get to Apple, there is this 450 00:21:29,800 --> 00:21:32,520 Speaker 1: issue of what the constraint is for Amazon's AWS, their 451 00:21:32,520 --> 00:21:35,480 Speaker 1: cloud computing unit, which has really been their main profitability driver. 452 00:21:36,080 --> 00:21:38,359 Speaker 1: Is it just capacity? Is it that they can't build 453 00:21:38,400 --> 00:21:40,840 Speaker 1: out quickly enough to meet demand, or is it that 454 00:21:40,880 --> 00:21:43,480 Speaker 1: they're losing share that they don't have the same kind 455 00:21:43,520 --> 00:21:47,399 Speaker 1: of AI advancement that's say the Googles and the Microsoft have. 456 00:21:48,240 --> 00:21:50,960 Speaker 11: Yeah, so I would argue that it's more about capacity. 457 00:21:51,640 --> 00:21:56,040 Speaker 11: So Microsoft is working closely with OpenAI, Amazon's working closely 458 00:21:56,080 --> 00:21:59,680 Speaker 11: with anthropic. Amazon is the market leader as far as 459 00:21:59,760 --> 00:22:03,679 Speaker 11: market share. Google to their credit and Microsoft, to its credit, 460 00:22:04,000 --> 00:22:07,040 Speaker 11: are growing at faster rates off smaller bases, but I 461 00:22:07,040 --> 00:22:10,040 Speaker 11: would argue that of those choices, it's more about capacity 462 00:22:10,400 --> 00:22:11,919 Speaker 11: than necessary market share. 463 00:22:12,359 --> 00:22:15,639 Speaker 7: Tom, how do you understand whether we reward these companies 464 00:22:15,760 --> 00:22:18,840 Speaker 7: or punish them for the capital expenditures that they're doing. 465 00:22:19,000 --> 00:22:21,240 Speaker 7: Is there a hint of that in Amazon, that they're 466 00:22:21,280 --> 00:22:24,240 Speaker 7: spending too much to justify what isn't as strong growth 467 00:22:24,320 --> 00:22:26,640 Speaker 7: as the other mag seven in big hyperscalers. 468 00:22:27,240 --> 00:22:27,440 Speaker 6: Yes. 469 00:22:27,480 --> 00:22:29,639 Speaker 11: So I think the beauty of Andy Jassey as CEO 470 00:22:29,800 --> 00:22:32,639 Speaker 11: versus Jeff Bezos is Andy's fond a way for the 471 00:22:32,680 --> 00:22:36,720 Speaker 11: company to continue to generate strong profits and free cash 472 00:22:36,760 --> 00:22:39,840 Speaker 11: flow and invest So I think that if we were 473 00:22:39,880 --> 00:22:43,119 Speaker 11: talking about a Jeff Bezos led Amazon, there would be 474 00:22:43,200 --> 00:22:46,560 Speaker 11: kind of ebbs and flows of investment spending. Andy has 475 00:22:46,600 --> 00:22:50,800 Speaker 11: figured out a way to unlock sustain profitability even with 476 00:22:50,880 --> 00:22:54,720 Speaker 11: heightened investment. And I think Amazon, both under Bezos and 477 00:22:54,920 --> 00:22:58,600 Speaker 11: under Jasse has investors trust that the investments will ultimately 478 00:22:58,600 --> 00:23:00,960 Speaker 11: pay off, including for our official intelligence. 479 00:23:01,160 --> 00:23:03,879 Speaker 7: And then there was Apple, Tom, And one of the 480 00:23:03,880 --> 00:23:06,240 Speaker 7: more interesting things that Tim Cook said on the call 481 00:23:06,640 --> 00:23:09,600 Speaker 7: was that he thinks only one percentage point of the 482 00:23:09,680 --> 00:23:13,040 Speaker 7: ten percentage growth in revenue was due to a pull 483 00:23:13,080 --> 00:23:16,320 Speaker 7: forward effect. Tom, is that even measurable. How much faith 484 00:23:16,320 --> 00:23:17,320 Speaker 7: do you put in that number? 485 00:23:17,840 --> 00:23:18,080 Speaker 6: Yeah. 486 00:23:18,080 --> 00:23:21,120 Speaker 11: So they looked at their sales trends in April as 487 00:23:21,160 --> 00:23:25,639 Speaker 11: it pertained to iPhones and max and discerned that consumers, 488 00:23:25,640 --> 00:23:29,600 Speaker 11: hearing all the chatter on tariffs, bought ahead of concerns 489 00:23:29,600 --> 00:23:32,800 Speaker 11: that tariffs would raised the prices of those products, and 490 00:23:32,840 --> 00:23:35,600 Speaker 11: as you pointed out, it contributed to about one hundred 491 00:23:35,600 --> 00:23:39,760 Speaker 11: basis points of growth on a ten percentage point growth. 492 00:23:40,280 --> 00:23:40,760 Speaker 11: So I think that. 493 00:23:40,800 --> 00:23:42,360 Speaker 6: Pull forward was a factor. 494 00:23:42,960 --> 00:23:46,359 Speaker 11: The concerning thing to me in Apple's results is that 495 00:23:46,440 --> 00:23:50,880 Speaker 11: they're acknowledging that they're behind on artificial intelligence. The good 496 00:23:50,920 --> 00:23:54,440 Speaker 11: news is they're taking action. They're raising their capex, which 497 00:23:54,480 --> 00:23:57,760 Speaker 11: is much more modest versus Amazon, and they even hinted 498 00:23:57,800 --> 00:24:00,920 Speaker 11: at strategic M and A, which I thought highly unusual 499 00:24:01,000 --> 00:24:01,560 Speaker 11: for Apple. 500 00:24:01,960 --> 00:24:03,640 Speaker 5: Is it a little too late though, when it comes 501 00:24:03,680 --> 00:24:05,560 Speaker 5: to what Apple's doing in terms of AI, given the 502 00:24:05,560 --> 00:24:08,320 Speaker 5: fact that we see Meta basically go in take their 503 00:24:08,320 --> 00:24:11,320 Speaker 5: top talent and leave Apple still struggling. 504 00:24:12,040 --> 00:24:13,600 Speaker 11: Yeah, I think I don't know that I would say 505 00:24:13,600 --> 00:24:14,240 Speaker 11: it's too late. 506 00:24:14,640 --> 00:24:15,560 Speaker 6: It's definitely late. 507 00:24:16,040 --> 00:24:18,320 Speaker 11: So the good news is now we know that we 508 00:24:18,320 --> 00:24:23,800 Speaker 11: should expect an elevated Sirian next year enhanced by artificial intelligence. 509 00:24:24,200 --> 00:24:27,680 Speaker 11: That was a question mark even into the Developers conference. Recently, 510 00:24:28,560 --> 00:24:32,000 Speaker 11: I think Apple has shown a consistent ability to play 511 00:24:32,080 --> 00:24:35,240 Speaker 11: catch up. They're not always first, but their best. Maybe 512 00:24:35,280 --> 00:24:37,600 Speaker 11: they won't be the best in AI, but certainly they 513 00:24:37,600 --> 00:24:39,080 Speaker 11: can be better than what they are today. 514 00:24:39,720 --> 00:24:42,680 Speaker 5: Does this show you the fact that Apple is saying 515 00:24:42,680 --> 00:24:45,919 Speaker 5: that potentially is going to have to look elsewhere for AI, 516 00:24:46,119 --> 00:24:49,159 Speaker 5: that they're just changing their strategy for a company that 517 00:24:49,200 --> 00:24:50,760 Speaker 5: we know loves to build in house. 518 00:24:51,600 --> 00:24:54,439 Speaker 11: I think they're saying that everything's on the table. So 519 00:24:54,520 --> 00:24:56,840 Speaker 11: I don't think they're saying, hey, we're going to lean 520 00:24:56,880 --> 00:24:59,960 Speaker 11: into strategic m and A unlike we've done in the past. 521 00:25:00,480 --> 00:25:02,440 Speaker 11: I think that they're going to pull every lever they 522 00:25:02,480 --> 00:25:07,919 Speaker 11: can to materially enhance the artificial intelligence experience on their products. 523 00:25:08,040 --> 00:25:09,840 Speaker 11: That's how I view that statement, Tom forty. 524 00:25:09,880 --> 00:25:12,439 Speaker 1: This past week has been about American exceptionalism driven by 525 00:25:12,480 --> 00:25:15,879 Speaker 1: big tech, and we've certainly seen some blockbuster results. We're 526 00:25:15,920 --> 00:25:18,680 Speaker 1: quibbling with the details about Amazon, but still a pretty 527 00:25:18,680 --> 00:25:21,080 Speaker 1: solid set of numbers. And I just wonder when you 528 00:25:21,119 --> 00:25:22,800 Speaker 1: have the likes of Michael hartnant Over at Bank of 529 00:25:22,840 --> 00:25:26,400 Speaker 1: America talking about a bubble in tech stocks and evaluation 530 00:25:26,600 --> 00:25:28,720 Speaker 1: that just seems to have gotten over the skis even 531 00:25:28,840 --> 00:25:31,919 Speaker 1: of all of the optimism that you saw in the earnings. 532 00:25:32,200 --> 00:25:33,119 Speaker 1: What's your response. 533 00:25:34,000 --> 00:25:37,320 Speaker 11: Yeah, So if you looked at the peer set for Apple, 534 00:25:38,160 --> 00:25:41,399 Speaker 11: the PE went to about thirty five times from closer 535 00:25:41,480 --> 00:25:44,080 Speaker 11: to twenty eight times between last quarter and this quarter. 536 00:25:44,680 --> 00:25:47,959 Speaker 11: So I think there's a lot of high expectations in 537 00:25:48,040 --> 00:25:50,200 Speaker 11: big tech that they're going to lay in the plane 538 00:25:50,240 --> 00:25:51,840 Speaker 11: or however you want to think about it when it 539 00:25:51,840 --> 00:25:55,480 Speaker 11: comes to both tariffs, AI investment and getting a return 540 00:25:55,520 --> 00:25:58,200 Speaker 11: on the AI investment. So, as a long time followed 541 00:25:58,200 --> 00:26:01,240 Speaker 11: the industry, going back to ninety six, having survived the 542 00:26:01,280 --> 00:26:04,400 Speaker 11: dot com bubble, I do think that there's a lot 543 00:26:04,400 --> 00:26:08,000 Speaker 11: of high expectations. It's reflected in the big PE multiples 544 00:26:08,000 --> 00:26:08,960 Speaker 11: you're seeing in big tech. 545 00:26:09,600 --> 00:26:12,200 Speaker 1: Tom Forte of Maxim Group, thank you so much for that. 546 00:26:13,119 --> 00:26:16,640 Speaker 2: This is the Bloomberg Surveillance Podcast, bringing you the best 547 00:26:16,720 --> 00:26:20,040 Speaker 2: in markets, economics, and geopolitics. You can watch the show 548 00:26:20,080 --> 00:26:23,040 Speaker 2: live on Bloomberg TV weekday mornings from six am to 549 00:26:23,160 --> 00:26:26,920 Speaker 2: nine am Eastern. 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