WEBVTT - Apple Unveils New AI Features, Operating Systems at WWDC 0:00:02.480 --> 0:00:06.800 Bloomberg Audio Studios, podcasts, radio news. 0:00:09.640 --> 0:00:12.840 This is the Bloomberg Daybreak Asia podcast. I'm Doug Krisner. 0:00:12.920 --> 0:00:15.400 You can join Brian Curtis and myself for the stories 0:00:15.440 --> 0:00:18.520 making news and moving markets in the APAC region. You 0:00:18.600 --> 0:00:21.439 can subscribe to the show anywhere you get your podcast 0:00:21.520 --> 0:00:24.919 and always on Bloomberg Radio, the Bloomberg Terminal, and the 0:00:24.920 --> 0:00:26.080 Bloomberg Business App. 0:00:26.760 --> 0:00:31.319 Apple has rolled out its new artificial intelligence platform that 0:00:31.440 --> 0:00:36.639 includes a partnership with chat GPT maker open Ai. The 0:00:36.680 --> 0:00:41.040 market was a little bit sort of underwhelmed by what 0:00:41.080 --> 0:00:43.160 they got today, and so we bring in Mark German, 0:00:43.240 --> 0:00:47.280 now Bloomberg Chief correspondent on Global Technology, to perhaps explain 0:00:47.320 --> 0:00:49.640 a little bit why the stock was down two percent. 0:00:50.320 --> 0:00:52.160 I think a lot of people said, yeah, it was fine. 0:00:52.320 --> 0:00:55.200 It just wasn't anything too new or too surprising. But 0:00:55.320 --> 0:00:57.000 let me put this to you and you can push 0:00:57.040 --> 0:00:59.960 back hard if you want that Apple is the perfect 0:01:00.120 --> 0:01:04.320 company to consumerize AI and it will get it right. 0:01:06.120 --> 0:01:08.200 I have to tell you, we have these conversations every 0:01:08.280 --> 0:01:11.280 couple weeks or so, and it's not often that I'm 0:01:11.319 --> 0:01:13.200 going to agree with you as much as I do. 0:01:13.280 --> 0:01:16.800 I think you summed it up perfectly on the first point. 0:01:17.319 --> 0:01:20.080 It was fine, right, Everything they rolled out was fine. 0:01:20.160 --> 0:01:23.319 Everything they rolled out was expected. Apple did exactly what 0:01:23.360 --> 0:01:25.679 they needed to do. They needed to show Wall Street, 0:01:26.040 --> 0:01:29.320 consumers and the industry that they're here too. When it 0:01:29.319 --> 0:01:33.160 comes to artificial intelligence embedded in its operating system. It 0:01:33.240 --> 0:01:36.520 did that. It struck the deal with chat GPT to 0:01:36.560 --> 0:01:40.560 integrate a chat GPT chatbot into Shory and other parts 0:01:40.640 --> 0:01:44.840 of the new operating systems. But it didn't reveal anything new. 0:01:45.000 --> 0:01:47.880 It didn't reveal anything that hasn't been done before. It 0:01:47.960 --> 0:01:50.520 basically did it in a more of an Apple esque way, 0:01:50.920 --> 0:01:54.279 more privacy friendly, and things that it actually believes users 0:01:54.320 --> 0:01:57.080 will want to use on a day to day basis. 0:01:57.520 --> 0:01:59.920 So that's what they did here. Now in terms of 0:02:00.080 --> 0:02:02.960 consumerizing AI, I agree with you. Apple is the company 0:02:02.960 --> 0:02:05.760 that can make AI friendly. It's so funny the slogan 0:02:05.800 --> 0:02:08.360 they're using for Apple Intelligence, which by the way, a 0:02:08.360 --> 0:02:11.359 funny name, is AI for the rest of us. It's 0:02:11.480 --> 0:02:14.160 just like with computers back in the day, Max, we're 0:02:14.360 --> 0:02:16.200 you know, computers for the rest of us when they 0:02:16.240 --> 0:02:18.520 were trying to show how the MAC is different from 0:02:18.560 --> 0:02:21.800 the PC. So this is integrated in different use cases 0:02:21.800 --> 0:02:23.720 that you might want to use. You do a voice memo, 0:02:23.800 --> 0:02:27.000 you'll get a transcription. You read an article on the web, 0:02:27.080 --> 0:02:29.960 you'll get a summary. You'll want to create emojis on 0:02:29.960 --> 0:02:32.799 your own using artificial intelligence, it can do that too. 0:02:33.120 --> 0:02:36.720 So it's a suite of features that are all aiified, 0:02:37.240 --> 0:02:39.240 that all happens in the background on its own in 0:02:39.280 --> 0:02:40.959 a privacy and personalized way. 0:02:41.080 --> 0:02:43.120 So what do we know about the cost of that 0:02:43.160 --> 0:02:46.240 Apple is going to have to incur as a result 0:02:46.320 --> 0:02:49.240 of the partnership with opeen ai, And then if the 0:02:49.280 --> 0:02:51.840 company is effective in monetizing that, is it going to 0:02:51.880 --> 0:02:54.560 cover the expense of moving into this area. 0:02:55.600 --> 0:02:57.600 You know, it's so interesting they didn't get into the 0:02:57.600 --> 0:03:02.320 financial terms. I would imagine that open ai is going 0:03:02.360 --> 0:03:06.320 to revenue share with Apple on paid subscriptions that they 0:03:06.360 --> 0:03:10.440 offer through iOS. So CHATGBT will be free, no account 0:03:10.480 --> 0:03:12.800 required on iOS, but we will also be able to 0:03:12.840 --> 0:03:16.040 do is log into your paid open ai account and 0:03:16.080 --> 0:03:18.280 that costs about twenty dollars per month depending on the 0:03:18.320 --> 0:03:20.600 type of open ai subscription you have. So I would 0:03:20.639 --> 0:03:23.240 imagine if someone signs up for that subscription on iOS 0:03:23.280 --> 0:03:26.120 and uses it through iOS eighteen or the later versions, 0:03:26.440 --> 0:03:29.680 Apple will get a slice of that. On the other hand, 0:03:29.720 --> 0:03:32.359 there's a money making opportunity for open Ai here as well, 0:03:32.400 --> 0:03:36.120 in terms of monetization on advertising and subscriptions and what 0:03:36.160 --> 0:03:38.240 else is interesting, and this didn't come up in the keynote, 0:03:38.360 --> 0:03:42.360 is that chat GPTs on Microsoft Azure. So Microsoft is 0:03:42.400 --> 0:03:46.160 sort of a third party in this whole situation as well. 0:03:46.360 --> 0:03:49.440 So never mind the stock price and the implications for it. 0:03:49.480 --> 0:03:52.480 But let me just ask you this point blank. Will 0:03:52.520 --> 0:03:55.840 people buy new iPhones because they want access to this? 0:03:56.840 --> 0:03:59.760 Not immediately, but when the next one comes out, when 0:03:59.760 --> 0:04:02.880 the the sixteen or whatever it is next comes out. 0:04:03.840 --> 0:04:06.800 That's a good question. I did not see enough here. 0:04:07.200 --> 0:04:08.560 Or let me take a step back. Do you remember 0:04:08.560 --> 0:04:11.120 when Apple launched Siri in twenty eleven. I wasn't working 0:04:11.160 --> 0:04:14.400 with you guys back then, but certainly I was around. 0:04:14.400 --> 0:04:17.000 With this launch, the iPhone fours had serious sort of 0:04:17.000 --> 0:04:19.920 its premier new feature. Now Siri was a software based 0:04:19.960 --> 0:04:23.640 feature that required the new hardware. Now the iPhone fifteen, 0:04:23.680 --> 0:04:25.760 Pro and Pro Macs will be the only iPhones that 0:04:25.800 --> 0:04:28.880 can support these new Apple Intelligence features. And so what 0:04:28.920 --> 0:04:31.760 you're going to see is sort of a test. Are 0:04:31.800 --> 0:04:33.719 people willing to buy the new hard or because of 0:04:33.760 --> 0:04:37.719 these new Apple Intelligence software and services features. My guess, 0:04:37.920 --> 0:04:41.120 unlike with Siri is now, when Siri was launched in 0:04:41.160 --> 0:04:44.200 twenty eleven, that was hugely impressive. Nobody had ever seen 0:04:44.200 --> 0:04:47.400 anything like it before. I don't believe these Apple Intelligence 0:04:47.400 --> 0:04:50.080 features are unique enough to drive sales. But they are 0:04:50.200 --> 0:04:53.040 enough is to prevent people from leaving the Apple ecosystem, 0:04:53.320 --> 0:04:55.680 and they're enough to keep people in the Apple ecosystem 0:04:55.839 --> 0:04:58.719 and add new people. But I don't think it's necessarily 0:04:58.760 --> 0:05:01.640 going to spur upgrades. If you have an iPhone fourteen pro, 0:05:02.080 --> 0:05:04.040 I'm not sure you're going to buy an iPhone sixteen 0:05:04.040 --> 0:05:06.080 pro just because of Apple Intelligence. 0:05:06.160 --> 0:05:08.000 So I just want to make sure that I understand 0:05:08.040 --> 0:05:10.400 what's going on here. So there is the AI that's 0:05:10.440 --> 0:05:14.360 happening locally on the device. Do I understand it correctly? 0:05:14.400 --> 0:05:18.960 When you referred to the Microsoft component, the Azure cloud 0:05:19.000 --> 0:05:22.560 computing component, that the other part of AI, the calculation 0:05:22.680 --> 0:05:25.360 at the data center, is going to be farmed out 0:05:25.400 --> 0:05:26.120 to Microsoft. 0:05:27.680 --> 0:05:31.160 Uh, you're partially right. So there's three there's three components here. 0:05:31.240 --> 0:05:34.640 There's the on device artificial intelligence that's processed on the 0:05:34.680 --> 0:05:38.360 iPhone itself. There's the Apple Cloud artificial Intelligence. Those are 0:05:38.360 --> 0:05:41.680 for the Apple features. Those are powered on Apple's cloud 0:05:42.200 --> 0:05:46.120 using Apple chips in Apple Data centers specific to these features. 0:05:46.680 --> 0:05:51.080 And then third there's Chat GPT, which is of course 0:05:51.080 --> 0:05:55.480 a cloud based service from open Ai. Open Ai uses 0:05:55.600 --> 0:05:58.920 Microsoft Data Centers and Microsoft Azure to power the cloud 0:05:58.960 --> 0:06:03.080 component of Chat gp So it's a trio on device, 0:06:03.279 --> 0:06:05.919 Apple Cloud, Apple Cloud. 0:06:05.640 --> 0:06:09.919 Microsoft excellent. Mark. Thank you very much, Mark German, Bloomberg 0:06:09.960 --> 0:06:13.680 Chief correspondent on Global Technology, with me Brian Curtis and 0:06:13.720 --> 0:06:16.800 Doug Krisner taking a closer look here at what Apple 0:06:16.920 --> 0:06:29.320 rolled out today at the WWDC in Coopertino, California. Joining 0:06:29.400 --> 0:06:32.480 us in our studios is Helen je, Managing director and 0:06:32.560 --> 0:06:36.000 chief investment Officer at in F Trinity. Helen, thanks very 0:06:36.080 --> 0:06:36.840 much for coming in. 0:06:36.839 --> 0:06:37.359 Good morning. 0:06:37.920 --> 0:06:41.400 Some strategists are out there saying that the FED dot 0:06:41.400 --> 0:06:44.760 plots in the meeting this week could royal markets. There's 0:06:45.000 --> 0:06:48.400 another camp that thinks that that's kind of hokey, that 0:06:48.839 --> 0:06:51.960 one or two cuts is not really a big deal 0:06:52.040 --> 0:06:54.400 for the FED, but it's interesting it makes a market. 0:06:54.680 --> 0:06:56.760 Are you expecting volatility this week? 0:06:57.800 --> 0:06:59.920 I think it's not going to be a big deal. 0:07:00.160 --> 0:07:03.040 Everybody knows that there's no rate cuts coming in June. 0:07:03.560 --> 0:07:05.560 People are expecting that Powell is going to talk a 0:07:05.600 --> 0:07:08.440 little bit more on the hawkish side and say that 0:07:08.480 --> 0:07:11.560 everything's data dependent. But you know, in effect, basically, the 0:07:11.600 --> 0:07:14.760 market's pricing in one and a half cuts this year anyway, 0:07:14.880 --> 0:07:17.080 So if the dot plot moves to that, then we're 0:07:17.080 --> 0:07:20.560 basically marking to market to some extent. The market's really 0:07:20.600 --> 0:07:23.080 ignored the dot plot already. I mean, it has been 0:07:23.120 --> 0:07:25.360 at that like two to three cuts the entire year, 0:07:25.400 --> 0:07:27.880 but initially the market was expecting six cuts, and then 0:07:27.880 --> 0:07:29.559 now the market's expecting one and a half. 0:07:29.600 --> 0:07:32.680 So I don't think the dot plot is what's driving things. 0:07:32.680 --> 0:07:34.760 It would be more like a marked to market than 0:07:34.800 --> 0:07:35.400 anything else. 0:07:35.560 --> 0:07:37.720 So if the FED is not the big big risk, 0:07:37.800 --> 0:07:38.760 what is these days? 0:07:39.960 --> 0:07:41.800 I think the big risk is a couple of things. 0:07:41.880 --> 0:07:46.240 Right. One is, obviously geopolitical noises are still abound, and 0:07:46.680 --> 0:07:48.640 previously it was a lot of US China and US 0:07:48.760 --> 0:07:52.560 geo politics. Now we have some unexpected changes on the 0:07:52.600 --> 0:07:56.240 political side in Europe et cetera, and obviously the other 0:07:56.400 --> 0:07:58.560 conflicts in the Middle East et cetera, that we still 0:07:58.560 --> 0:07:59.080 have to keep a. 0:07:59.000 --> 0:07:59.600 Close eye on. 0:08:00.200 --> 0:08:02.520 I think the other thing is that from a market's perspective, 0:08:02.520 --> 0:08:06.160 I mean, people are expecting a Goldilock scenario pretty much, 0:08:06.240 --> 0:08:09.680 especially in the US, and so the index has performed 0:08:09.720 --> 0:08:11.760 relatively well this year. That's been led by a lot 0:08:11.800 --> 0:08:14.280 of AI and related names. People think that the US 0:08:14.360 --> 0:08:16.240 economy is not going to have any kind of landing. 0:08:16.520 --> 0:08:19.520 So I think weaker US data, we've gotten to the 0:08:19.560 --> 0:08:22.040 stage of bad as bad no longer bad is good 0:08:22.120 --> 0:08:25.680 in terms of, you know, bringing on dubbish policy or 0:08:25.720 --> 0:08:28.320 if there's any kind of miss in AI expectations, and 0:08:28.360 --> 0:08:32.200 some of those large names for company specific reasons correct 0:08:32.240 --> 0:08:35.280 a significant amount that could also bring some concern into 0:08:35.280 --> 0:08:36.520 the market and bring more of all. 0:08:36.880 --> 0:08:39.840 Yeah, so the earnings really have been very important, but 0:08:40.160 --> 0:08:41.480 we're in the quiet period. 0:08:41.520 --> 0:08:41.720 Now. 0:08:41.960 --> 0:08:44.560 We'll have a couple more, but then a long period 0:08:44.559 --> 0:08:48.600 of waiting. I think the macro backdrop is kind of interesting, 0:08:48.720 --> 0:08:52.240 almost extraordinary, in that you've got these very distinct camps. 0:08:53.080 --> 0:08:56.120 A group that thinks inflation is not tamed and that 0:08:56.360 --> 0:08:59.880 rates will be higher. Another camp that thinks the FED 0:08:59.920 --> 0:09:02.960 is too slow to cut in what they see is 0:09:03.440 --> 0:09:06.439 a weakening economy, and yet we're all looking at the 0:09:06.440 --> 0:09:09.280 same data and anyway. Then there's another camp that thinks that, 0:09:09.400 --> 0:09:12.400 you know, as you said, goldilocks, this kind of relaxed 0:09:12.720 --> 0:09:15.760 kids are okay, you know, we can just continue as 0:09:15.760 --> 0:09:16.040 we are. 0:09:16.880 --> 0:09:19.520 People kind of think one and three in combination. 0:09:19.640 --> 0:09:22.920 I think people think that inflation is still not tame, 0:09:23.040 --> 0:09:26.520 but that everything's still great, and therefore that's still goldilocks. 0:09:26.600 --> 0:09:26.760 Right. 0:09:27.200 --> 0:09:28.880 Interest rates where they are, yeah, And. 0:09:28.880 --> 0:09:30.839 I think for the second scenario that you talked about 0:09:30.960 --> 0:09:32.960 is less about whether the FED is going to rush 0:09:32.960 --> 0:09:34.880 to cut or not, because everybody knows that, you know, 0:09:34.920 --> 0:09:37.120 the FED can always cut very abruptly if they wanted 0:09:37.120 --> 0:09:39.000 to or needed to. So people are more watching the 0:09:39.080 --> 0:09:42.160 data itself to see if there's any meaningful signs of weakness. 0:09:42.400 --> 0:09:44.280 We did see some over the last couple of months, 0:09:44.280 --> 0:09:47.559 definitely more mixed data versus firmly strong data. But I 0:09:47.559 --> 0:09:50.240 think the market still is pricing in a no landing 0:09:50.280 --> 0:09:53.400 scenario and just assumes that if there is any kind 0:09:53.440 --> 0:09:56.040 of meaningful weakness, they'll just rush to cut immediately. So 0:09:56.280 --> 0:09:59.000 they're not too worried about the policy response, but rather 0:09:59.040 --> 0:10:02.000 about whether there is indeed meaningfully weak data. 0:10:02.559 --> 0:10:05.920 At what point does the bond market become concerned about 0:10:05.920 --> 0:10:09.600 the fiscal situation here in the US? Could that be 0:10:10.760 --> 0:10:13.720 problematic if yields in spite of the fact that inflation 0:10:13.880 --> 0:10:16.240 is on its way down, If yields spike is a 0:10:16.280 --> 0:10:19.040 result of the bond market becoming a little bit more 0:10:19.120 --> 0:10:21.479 focused on fiscal problems in the United. 0:10:21.200 --> 0:10:26.360 States, Well, it's been on and off concern, right, and 0:10:26.400 --> 0:10:29.440 the fiscal problems are nothing new. We've certainly had numerous 0:10:29.440 --> 0:10:33.480 fiscal cliffs that didn't seem to roil the bond market 0:10:34.160 --> 0:10:36.600 as much as it should. So that is a long 0:10:36.679 --> 0:10:38.800 term concern, but it's not something that's going to near 0:10:39.320 --> 0:10:42.720 term blow up. And in fact, the expectation that Trump 0:10:42.760 --> 0:10:46.440 is going to win certainly means that the fiscal you know, 0:10:46.559 --> 0:10:49.560 discipline may not come anytime soon, and the market doesn't 0:10:49.559 --> 0:10:51.760 seem to be too concerned about that. So I think 0:10:51.760 --> 0:10:55.400 in the near term it's still less concerned about those 0:10:55.440 --> 0:10:59.360 longer term issues like you know, loss of dollars supremacy 0:10:59.440 --> 0:11:03.080 or trust in the dollar because of fiscal instability over 0:11:03.120 --> 0:11:05.800 the medium to longer term, that that's not going to 0:11:05.800 --> 0:11:09.080 be something to drive things in the immediate future. 0:11:09.280 --> 0:11:12.720 We had a couple of interesting corporate stories today, one 0:11:12.960 --> 0:11:16.000 ten for one split at Nvidia and the stock traded 0:11:16.400 --> 0:11:20.160 reasonably well today, and then the Apple event. It seems 0:11:20.200 --> 0:11:23.280 like in listening to some of the comments that investors 0:11:23.280 --> 0:11:26.040 were a bit underwhelmed, not bad, but just you know, 0:11:26.080 --> 0:11:27.160 not all that exciting. 0:11:28.640 --> 0:11:29.000 Well. 0:11:29.120 --> 0:11:32.800 I think the expectation for AI and the near term 0:11:32.840 --> 0:11:34.760 is quite high. You know. Bill Gates has this famous 0:11:34.800 --> 0:11:38.320 quote about new trend saying that things are usually overestimated 0:11:38.360 --> 0:11:40.680 in a one to two year perspective and underestimated on 0:11:40.720 --> 0:11:44.600 a ten year perspective. So expectations of AI AI have 0:11:44.640 --> 0:11:47.240 really picked up substantially, but we don't actually know whether 0:11:47.400 --> 0:11:49.640 the applications are going to come through and whether they 0:11:49.679 --> 0:11:52.760 pick up, whether for software or for hardware. The take 0:11:52.800 --> 0:11:54.960 up is going to be as rapid as what the 0:11:55.000 --> 0:11:57.400 market is pricing in so I think that does leave 0:11:57.440 --> 0:12:02.840 some room for potential negatives prizes, and some room for possible. 0:12:02.440 --> 0:12:05.320 Profit taking for certain parts of the supply chain. 0:12:06.040 --> 0:12:08.719 You know, things like you know, what Nvidia makes has 0:12:08.840 --> 0:12:11.560 very high technology barriers, but a lot of other stuff 0:12:11.600 --> 0:12:16.040 like downstream and PCs and ODM, oem et cetera. Those 0:12:16.080 --> 0:12:19.520 don't have a lot of very high technology barriers. So 0:12:19.559 --> 0:12:21.840 even if the take up for the market overall is great, 0:12:21.880 --> 0:12:24.960 there could still be more competition and more price erosion 0:12:25.040 --> 0:12:27.560 versus what people are expecting. So I think there's more 0:12:27.640 --> 0:12:30.400 room to disappoint, and that's something that we have to 0:12:30.440 --> 0:12:32.439 actually keep a close eye on because it is a 0:12:33.440 --> 0:12:36.360 kind of a signal for the entire market that the 0:12:36.360 --> 0:12:39.400 market confidence and consumer confidence is partially built on. 0:12:39.600 --> 0:12:42.720 What might the catalyst be for that type of disappointment. 0:12:42.800 --> 0:12:45.480 Would it be in Vidia saying that revenue is beginning 0:12:45.520 --> 0:12:47.480 to slow a bit, or might it be something else. 0:12:49.040 --> 0:12:51.200 It's not necessarily going to be from the Nvidia front. 0:12:51.200 --> 0:12:53.000 I think people are going to be looking at the 0:12:53.000 --> 0:12:55.760 downstream as well. You know, if you're shipping a lot 0:12:55.800 --> 0:12:59.720 of stuff throughout the supply chain, is all the build 0:12:59.720 --> 0:13:00.840 out for so. 0:13:00.760 --> 0:13:02.800 The ROI just doesnt manifest. 0:13:03.320 --> 0:13:07.400 Yeah, is the actual implementation and installation happening, and more importantly, 0:13:07.480 --> 0:13:11.160 is the downstream software and application take up happening because 0:13:11.200 --> 0:13:14.480 that's the end driver of this whole thing, right, whether 0:13:14.600 --> 0:13:17.120 people are using it day to day and whether they 0:13:17.160 --> 0:13:18.440 can derive revenue from. 0:13:18.320 --> 0:13:22.120 It just quickly on China. Helen sneak this one in. 0:13:22.320 --> 0:13:25.480 We did have some domestic tourism spending numbers out from 0:13:25.800 --> 0:13:29.640 CCTV up pretty nicely, more than eight percent or so. 0:13:30.960 --> 0:13:33.520 Is the consumer alive and well or stunted? 0:13:34.320 --> 0:13:38.240 The consumer is not doing as great as it has 0:13:38.320 --> 0:13:40.800 done in the past, But I think one is that 0:13:40.840 --> 0:13:42.840 it's coming off a low base. 0:13:44.679 --> 0:13:45.640 Of expectations. 0:13:45.920 --> 0:13:47.680 And two, I do think that there's going to be 0:13:47.760 --> 0:13:51.680 more focus on consumption in the services and tourism front. 0:13:51.720 --> 0:13:53.520 It's very similar to what we saw in the US 0:13:53.559 --> 0:13:55.280 for a couple of years, right, all that pent up 0:13:55.320 --> 0:13:56.960 demand and less on goods. 0:13:57.160 --> 0:14:00.120 Yeah, all right, well that's one to watch, Helen. Thanks 0:14:00.200 --> 0:14:02.520 very much for coming into our studios. Helen Ju Managing 0:14:02.520 --> 0:14:13.280 director CIO at NF Trinity. Joining us now is Mary 0:14:13.320 --> 0:14:17.240 Nicola Bloomberg, m Live strategist with us in our studios 0:14:17.760 --> 0:14:20.920 in Singapore. So I know you've been a little cautious 0:14:21.360 --> 0:14:23.200 of late, Mary, So let me give you a question 0:14:23.280 --> 0:14:28.320 that's probably red meat to you. Are you concerned about 0:14:28.400 --> 0:14:32.240 complacency in markets? Is risk asleep at the wheel? 0:14:33.440 --> 0:14:35.600 Yeah, there is a bit of that, especially when you 0:14:35.840 --> 0:14:40.280 have the FED coming up and CPI coming so there 0:14:40.360 --> 0:14:42.920 is that risk of the FED coming out and saying 0:14:42.960 --> 0:14:46.440 that we're moving to likely to be two cuts rather 0:14:46.480 --> 0:14:49.200 than one cut. It wouldn't move so aggressively in one 0:14:49.240 --> 0:14:52.120 direction just within one meeting. But even if it moves 0:14:52.160 --> 0:14:54.480 to two cuts, there's still a likelihood that it could 0:14:54.520 --> 0:14:57.360 shift yet again if the data continues to move in 0:14:57.400 --> 0:15:00.440 that direction, and of course you have CPI data, if 0:15:00.440 --> 0:15:04.720 it shows its resilience, especially after average hourly earnings, there 0:15:04.800 --> 0:15:09.160 is still that risk for assets. But meanwhile it looks 0:15:09.200 --> 0:15:11.040 like equities continue to ignore it. 0:15:11.520 --> 0:15:13.880 So here we are talking about two rate cuts between 0:15:13.880 --> 0:15:15.280 now and the end of the year from the Fed, 0:15:15.760 --> 0:15:19.800 perhaps third quarter, definitely in the third quarter. Where are 0:15:19.840 --> 0:15:22.880 you with the dollar's strength? I mean, does that surprise 0:15:22.920 --> 0:15:24.520 you at all? That the dollar has been holding up 0:15:24.520 --> 0:15:25.720 as well as it has been. 0:15:27.000 --> 0:15:29.720 It's likely that the dollar strength is going to persist, 0:15:29.880 --> 0:15:32.920 And it is really about the fact that the Fed, 0:15:33.040 --> 0:15:36.320 of all the central banks, is maintaining that higher for longer. 0:15:36.360 --> 0:15:40.040 Mantra other central banks, whether it's the ECB, Bank of Canada, 0:15:40.320 --> 0:15:43.600 they've started cutting. Yes, the ECB hasn't told us what's 0:15:43.600 --> 0:15:46.440 going to happen thereafter, But the fact is that they're 0:15:46.480 --> 0:15:49.760 moving in that direction, while the FED is standing and 0:15:49.920 --> 0:15:52.320 is being a lot more resilient and looking at where 0:15:52.360 --> 0:15:55.280 inflation is headed, and that's what's going to keep the 0:15:55.360 --> 0:15:57.640 dollar pretty resilient going forward. 0:15:58.800 --> 0:16:02.320 So, Mary, there's several camps out there, and I'd like 0:16:02.360 --> 0:16:04.240 to get your view on which one do you believe 0:16:04.320 --> 0:16:07.640 is the most accurate assessment of what's happening. Because one 0:16:07.720 --> 0:16:10.920 camp thinks that inflation is just not tamed and it's 0:16:10.960 --> 0:16:13.720 going to be a feature for a long period of time. 0:16:14.080 --> 0:16:17.160 Another camp thinks that just the opposite is really happening, 0:16:17.160 --> 0:16:20.320 that the economy is weakening so dramatically that the FED 0:16:20.440 --> 0:16:23.520 is behind the curve and too slow in addressing it 0:16:23.560 --> 0:16:26.680 by cutting interest rates. And then there's the soft landing camp, 0:16:26.720 --> 0:16:30.680 that sort of complacent perhaps complacent camp, where you know, 0:16:30.720 --> 0:16:33.280 we sort of like the environment here and we're slowly 0:16:33.360 --> 0:16:34.640 edging into the stock market. 0:16:35.720 --> 0:16:38.360 I think more on the side of the fact that 0:16:38.400 --> 0:16:41.640 inflation is going to remain sticky and there is no 0:16:41.760 --> 0:16:44.000 signs that the inflation is coming off. If you look 0:16:44.040 --> 0:16:47.160 to average hourly earnings, let's say that is the projection 0:16:47.280 --> 0:16:51.960 of how prices evolve, that's not showing any signs of 0:16:52.000 --> 0:16:56.200 really coming off, and that's holding up fairly well, and 0:16:56.240 --> 0:16:59.280 if that continues, it's hard to see how the inflation 0:16:59.360 --> 0:17:02.480 trajectory hums off. But then there's also a part of 0:17:02.720 --> 0:17:06.240 inflation where you wonder where is the chicken. It's like 0:17:06.240 --> 0:17:08.960 a chicken and egg problem where there is the resilience 0:17:09.040 --> 0:17:12.479 of rents, and the resilience of rents really does have 0:17:12.520 --> 0:17:15.000 to do with higher interest rates. So how do you 0:17:15.359 --> 0:17:17.720 buy a house when rates are so high? So you'd 0:17:17.840 --> 0:17:20.840 rather instead of taking out a really high mortgage, you 0:17:20.880 --> 0:17:23.399 would prefer to rent. So it doesn't it's hard to 0:17:23.440 --> 0:17:26.320 assess which one would. It would have FED rate cut 0:17:26.400 --> 0:17:31.120 actually ease the impact of rents on inflation. 0:17:31.320 --> 0:17:34.080 So if you're right, if it's higher for longer, maybe 0:17:34.119 --> 0:17:36.320 there's a case to be made for a little bit 0:17:36.320 --> 0:17:39.280 of corrective behavior in the equity market. I think it 0:17:39.359 --> 0:17:42.800 was interesting today you have two key risk events on 0:17:42.840 --> 0:17:46.679 the horizon, the CPI print on Wednesday morning, and then 0:17:46.760 --> 0:17:49.600 later that same day the Fed decision. I mean, if 0:17:49.760 --> 0:17:52.240 CPI comes in on the hot side and the Feds 0:17:52.320 --> 0:17:54.760 dot plot maybe is a little more hawkish than the 0:17:54.800 --> 0:17:59.240 market is prepared for, could that destabilize things in some way. 0:18:00.480 --> 0:18:00.840 I think. 0:18:00.920 --> 0:18:01.160 So. 0:18:01.240 --> 0:18:03.720 I think the fact that if you see inflation coming 0:18:03.760 --> 0:18:06.560 on the hot side, and even if the Fed comes 0:18:06.600 --> 0:18:09.280 out as two rate cuts and they say, you know, 0:18:09.320 --> 0:18:12.640 we have to still see things and how prices evolve, 0:18:13.080 --> 0:18:16.040 and we're not seeing as much progression, although we did 0:18:16.160 --> 0:18:19.000 have a really good month last month, but you will 0:18:19.000 --> 0:18:21.960 need to see at least three consecutive months of the 0:18:22.040 --> 0:18:25.440 deceleration and inflation to really convince the Fed that it's 0:18:25.480 --> 0:18:28.359 time to take action. And we're still not there yet. 0:18:28.720 --> 0:18:32.440 So there's a lot of volatility that can come through. 0:18:32.520 --> 0:18:35.720 That was probably the main theme for us within Markets Live, 0:18:35.920 --> 0:18:39.080 is that there's going to be volatility that persists this week, 0:18:39.240 --> 0:18:42.320 especially with things like you know, the mounting risks not 0:18:42.480 --> 0:18:45.200 from CPI, from the Fed, and of course from what's 0:18:45.200 --> 0:18:46.560 happening in Europe as well. 0:18:47.600 --> 0:18:50.399 I was listening to Mark x Andy on Bloomberg Surveillance 0:18:50.640 --> 0:18:53.119 last night before going to bed, and you know, he 0:18:53.160 --> 0:18:56.720 talks about harmonized CPI, which is actually a thing, and 0:18:56.760 --> 0:19:00.960 they strip out ohe are owner's equivalent rents and you 0:19:01.080 --> 0:19:04.280 touched on it a few moments ago. Most other jurisdictions 0:19:04.320 --> 0:19:08.000 eure up. For instance, they don't use OEI, and if 0:19:08.000 --> 0:19:11.600 you do strip it out, then apparently CPI is around 0:19:11.720 --> 0:19:13.760 two percent. It's right around the target, and it's been 0:19:13.800 --> 0:19:17.119 there for a while. I know that that's an argument 0:19:17.200 --> 0:19:21.159 that the doves make and some people kind of slough 0:19:21.160 --> 0:19:23.040 it off a little bit. But does he have a point. 0:19:23.960 --> 0:19:27.359 Well, it's interesting because it's however you slice and dice 0:19:27.440 --> 0:19:30.920 the data, you can make the data come to your narrative, right. 0:19:31.000 --> 0:19:33.919 So I think it's important to look at what is 0:19:33.960 --> 0:19:36.480 the FED looking at, and the FED is looking at PCE, 0:19:36.880 --> 0:19:39.240 and that's what we should be focused on. And so 0:19:39.480 --> 0:19:43.680 if the PCE is not giving us that that narrative, 0:19:44.040 --> 0:19:47.320 it's hard to look at something else and try and say, 0:19:47.520 --> 0:19:49.679 oh yeah, but if we strip this out then it 0:19:49.800 --> 0:19:55.280 actually is okay. So there's a lot of hidden, i think, 0:19:55.400 --> 0:19:59.720 hidden issues behind looking at it in that direction, and 0:19:59.760 --> 0:20:01.120 we have to focus on PCE. 0:20:01.520 --> 0:20:03.840 So what take a step back and give us a 0:20:03.920 --> 0:20:06.600 little bit of insight into what you believe what we've 0:20:06.640 --> 0:20:10.440 been describing means for Asia and markets in your neck 0:20:10.480 --> 0:20:10.960 of the woods. 0:20:11.840 --> 0:20:12.080 Yeah. 0:20:12.160 --> 0:20:14.199 I think the main thing is the fact that the 0:20:14.240 --> 0:20:17.040 dollar's going to stay higher for longer and that US 0:20:17.119 --> 0:20:20.800 treasury yields just continue to inch higher. That puts a 0:20:20.840 --> 0:20:23.520 lot of pressure on central banks in this region and 0:20:23.560 --> 0:20:26.080 on the currencies as well. So central banks in this 0:20:26.119 --> 0:20:28.320 region are not going to be looking to cut even 0:20:28.320 --> 0:20:31.160