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Speaker 2: Back to earnings under Armour shares. Let's take a look.
Speaker 2: They are down eighteen percent. They forecast worse than expected
Speaker 2: sales and profit for the current quarter. Here to break
Speaker 2: it all down for us, as Poohim Goyle, senior US
Speaker 2: e commerce and retail analysts at Bloomberg Intelligence poon em
Speaker 2: thanks for coming out this morning. So weren't they just
Speaker 2: I'm confused because it wasn't under Armour just starting to
Speaker 2: make this turnaround planned.
Speaker 3: Yeah, you know what, We've seen under Armour make several
Speaker 3: attempts at a turnaround in the last decade. So this
Speaker 3: is another attempt. And they do have the right pillars
Speaker 3: in place, you know, focusing on brand equity, forocusing on
Speaker 3: full price sales. The issue is that the macro's not cooperating.
Speaker 3: We have one hundred million dollar impact on their costs
Speaker 3: from tariffs that they're expecting. We're seeing that they want
Speaker 3: to push full price in an environment where promotions are
Speaker 3: picking up, so that's going to cost them sales net net. Basically,
Speaker 3: that means that sales are going to be down mid
Speaker 3: to high single digits in the next fiscal quarter, and
Speaker 3: North America, which is a clear key region for them,
Speaker 3: could be down low double digits. So the turnaround isn't
Speaker 3: shaping up like we expected, and I just think it
Speaker 3: needs a lot more time right now.
Speaker 4: That is actually what caught my eye to the weak
Speaker 4: North America outlook. I think they're forecasting a fourteen percent
Speaker 4: to sixteen percent drop in North America sales, which is massive.
Speaker 4: So what then, is your view of under Armour's strategy,
Speaker 4: especially compared to its peers like Nike or Adidas or
Speaker 4: Adidas depending on who you're speaking with.
Speaker 3: Yeah, so I think each of them are pursuing the
Speaker 3: strategy in a similar way in that they're focusing on
Speaker 3: the profitable channels to drive growth. So when you look
Speaker 3: at Adidas, you know they've been doing really well for
Speaker 3: the last few years, and it's in part by their
Speaker 3: effort to really push innovation and product to the consumer
Speaker 3: in the right channels, and really they've done a great
Speaker 3: job When it comes to Nike, they're clearly in turnaround mode.
Speaker 3: They are moving forward with their turnaround. We are starting
Speaker 3: to see signs of you know, things getting better, especially
Speaker 3: on their new products. That said, Nike hasn't reported yet.
Speaker 3: And Nike too has exposure to Vietnam when it comes
Speaker 3: to their production, so they will to be under pressure.
Speaker 3: But we don't think that promotions go away completely.
Speaker 2: Right.
Speaker 3: Nike is liquidating a lot of inventory throats direct channel
Speaker 3: and the promotions are very high. So when you think
Speaker 3: about the customer, they're going to see Nike being discounted
Speaker 3: aggressively because they're trying to liquidate inventory, and then you
Speaker 3: see under Armour going at full price what our customer
Speaker 3: is going to buy, right, it just means that under
Speaker 3: Armour isn't going to be able to delay over the
Speaker 3: growth that they're expecting to because of the current promotional environment.
Speaker 2: So with that said, I mean, the CEO was talking
Speaker 2: and said that they want to focus on strengthening the brand,
Speaker 2: positioning right premium products. They came out with this U
Speaker 2: a halo footwear you know line, is that the answer
Speaker 2: for them?
Speaker 3: The answer is, in part, yes, you need to have
Speaker 3: you know what he talked about on the call, which
Speaker 3: I think every brand needs to do, is they need
Speaker 3: to have a good, better, best positioning within their product lineup.
Speaker 3: So yes, you can go ahead and introduce premium product,
Speaker 3: but remember under Armour isn't really viewed as a premium
Speaker 3: brand like Nike is, right, So you're trying to change
Speaker 3: customer perception here, and that doesn't happen overnight, so it'll
Speaker 3: take time. I think the value chained that under Our
Speaker 3: plays and is still very very important to their brand
Speaker 3: and their ability to keep prices low there is going
Speaker 3: to be critical. It'll be nice to see what they
Speaker 3: do on the premium side, but I don't think they
Speaker 3: can hang their hat on that for a turnaround just yet.
Speaker 2: All right, you said it all. Under Armour share still
Speaker 2: down nineteen percent. That's Punam Gooyle, senior US e Commerce
Speaker 2: and retail analysts Over at Bloomberg Intelligence.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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Speaker 2: And welcome back to Bloomberg Intelligence. I'm Lisa Matteo sitting
Speaker 2: alongside Isabelle Lee. Paul Sweeney has the day off. All right,
Speaker 2: we're going to get back to earnings. Wendy's cut their
Speaker 2: full year sales guidance. They posted a bigger than expected
Speaker 2: quarterly decline. So what is going on at the burger chain. Well,
Speaker 2: let's bring in Michael Hallin. He's Bloomberg Intelligence senior restaurant
Speaker 2: and food service analysts joining us live from Princeton. Mike's
Speaker 2: thanks for coming in. What can you tell us about Wendy's.
Speaker 2: What was the big sticking point for them?
Speaker 5: Oh, listen, the previous management team through a lot of
Speaker 5: promotions at the wall and none of them are really stuck.
Speaker 5: So you know, the danger of you know, promoting a
Speaker 5: lot of different products is twofold.
Speaker 2: You know.
Speaker 5: Number one, it makes the operations suffer, right, So it's
Speaker 5: it's harder to execute in the kitchens, it's harder to
Speaker 5: execute at the front of the house. Speed of service
Speaker 5: ends up slipping, you know, quality of the food could
Speaker 5: suffer because it's it's not served hot, right, and then
Speaker 5: marketing so consumers get confused, right, Like what we saw
Speaker 5: at McDonald's was run two promotions over the quarter, right,
Speaker 5: Wendy's ran a handful. So when you're putting what do
Speaker 5: you put the marketing dollars behind?
Speaker 6: Right?
Speaker 5: But if you start promoting something for a couple of
Speaker 5: weeks and then switch your message, people don't really know
Speaker 5: why they're coming to your store, don't have a good
Speaker 5: reason to come to your stores. And so that's why
Speaker 5: we saw this massive underperformance in the second quarter, about
Speaker 5: four hundred basis points versus the rest of quick service restaurants.
Speaker 4: And what is your take on when they's decision to
Speaker 4: cut it's twenty twenty five EPs outlook below the prior
Speaker 4: range and analyst expectation. Is it more structural weakness like
Speaker 4: consumer trends or is it really more one off pressures
Speaker 4: and how long do you think those issues might last?
Speaker 5: So this is one off pressures. I mean you saw
Speaker 5: McDonald's outperform the market by two hundred basis points, right,
Speaker 5: and so this is primarily self inflicted. You know, restaurant
Speaker 5: consumers are spending money. They're more discerning, however, right, and
Speaker 5: so the chains that are providing a good, consistent experience,
Speaker 5: good value for the money, that's where people are spending
Speaker 5: their money. They don't want to go out and spend
Speaker 5: a lot of money and have a bad night, a
Speaker 5: bad lunch, a bad dinner, whatever it is, right, And
Speaker 5: so that's why we're seeing this huge bifurcation and there's
Speaker 5: a widening gap between winners and losers. And so for Wendys,
Speaker 5: when you have bad operations, right, and when you have
Speaker 5: bad service, it takes time to regain that customer trust. So,
Speaker 5: you know, they got it to pretty terrible SAMSAR sales
Speaker 5: here in the US for the rest of the year.
Speaker 5: They were down five to six percent in July, which
Speaker 5: is a horrific number, you know, way underperforming. The street,
Speaker 5: which is over was just about a one and a
Speaker 5: half percent increase. So this is going to take time to.
Speaker 2: Fix now, Mike. One of the things you mentioned these promotions, right,
Speaker 2: but Wendy's has also done things like expanded their operating hours.
Speaker 4: Right.
Speaker 2: They're making this push for breakfast late night business. I'm
Speaker 2: guessing that's not working. I don't think breakfast when I
Speaker 2: think Wendy's.
Speaker 5: I don't know, Well, this breakfast has been an issue
Speaker 5: for years now since they debuted it right there, and
Speaker 5: they debuted breakfast into it, you know, at a time
Speaker 5: when breakfast sales have been slipping, and they're slipping even
Speaker 5: more this year because it's just an easy meal to skip.
Speaker 5: You can grab a bagel and a coffee and easily
Speaker 5: make it to lunch, right, And so they've been trying
Speaker 5: to gain steam in this daypart, and so they've been
Speaker 5: actually spending corporate dollars in addition to the franchise e
Speaker 5: dollars to try to expand that day part at a
Speaker 5: time when people are pulling back at breakfast and it's
Speaker 5: been a disaster for their lunch and their dinner business.
Speaker 4: And Wendy has also reduced his dividends significantly, and it's
Speaker 4: CEO is also stepping down. So how do you think
Speaker 4: these capital allocation and leadership changes might affect the strategy
Speaker 4: moving forward?
Speaker 5: Yeah, Kirk Tanner basically lit this thing on fire and
Speaker 5: ran for the exits. It's you know, he made a
Speaker 5: lot of management switches, moved a lot of people around
Speaker 5: the organization, fired people, brought new people in, you know,
Speaker 5: and then left right before things fell apart. Right, And
Speaker 5: now they have an interim CEO who said the right
Speaker 5: things on the call, right, But he comes from ups
Speaker 5: and he's only been in the restaurant industry since December, right,
Speaker 5: so there's definitely a void at the top. We would
Speaker 5: love to see them find a good, strong restaurant operator
Speaker 5: slash marketer to run this business going forward.
Speaker 2: So what's the winning formula for them? What do they
Speaker 2: have to do?
Speaker 6: Is it?
Speaker 2: Is it more promotions and more collaborations.
Speaker 5: No, there's too many of those, So they're going to
Speaker 5: cut They're going to cut back on them and get
Speaker 5: the operations right right. And once you get the operations right,
Speaker 5: meaning people go and they have a good experience, speed
Speaker 5: of service is on point right, the food gets to
Speaker 5: you hot right, you have a good, enjoyable experience. Once
Speaker 5: they get that stuff nailed, then they can start pushing
Speaker 5: on the marketing right, because you don't want people to
Speaker 5: come back to your restaurants and then have another bad experience.
Speaker 5: Then you're really going to be up the creek without
Speaker 5: a paddle, right, And so that that's what it's going
Speaker 5: to be about. It's going to be about nailing the operations.
Speaker 5: Then once they're confident in that, then they can start
Speaker 5: pressing more, do some more collaborations, whatever, institute more menu items,
Speaker 5: and that's what management talked about on the call, they
Speaker 5: said they're going to push a lot of the initiatives
Speaker 5: they had original only planned for the second half into
Speaker 5: twenty twenty six. But you know, it was a crazy call.
Speaker 5: I mean they were talking about how a lot of
Speaker 5: these initiatives they were just basically pushing out with very
Speaker 5: little testing, which is not how you run a restaurant business.
Speaker 2: It's not I remember that Taki's collapse. They just didn't
Speaker 2: work out. Thank you Michael Hammon for joining us, the
Speaker 2: Bloomberg Intelligence senior Restaurant and food service analyst.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto
Speaker 1: with the Bloomberg Business app, Listen on demand wherever you
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Speaker 2: There has been a ton of stories in tech and
Speaker 2: the news flow is continuing. I want to start with
Speaker 2: this first one, Meta picking up Pimko blue out for
Speaker 2: a twenty nine billion dollar data center deal. So here
Speaker 2: to talk more about it, Man Deep Sink, Bloomberg Intelligence
Speaker 2: senior Tech industry analysts, Mandy, thanks for joining us. So
Speaker 2: twenty nine billion dollar data center deal. I mean that's
Speaker 2: that's pretty big.
Speaker 6: No, it's only if you don't look at their twenty
Speaker 6: twenty six CAPEX number, which could be north of one
Speaker 6: hundred billion. So look, the numbers are getting bigger and
Speaker 6: bigger in the world of AI infrastructure. And for a
Speaker 6: company like Meta, which was spending maybe thirty billion dollars
Speaker 6: in capex every year and has tripled its capex probably
Speaker 6: two one hundred plus next year, they need some external
Speaker 6: help when it comes to you know, procuring the land,
Speaker 6: getting power twenty four to seven. I mean, at the
Speaker 6: end of the day, Meta is an application company that
Speaker 6: you know does ads, and they're trying to get in
Speaker 6: their own chips as well, but that's not their core competency.
Speaker 6: So it makes sense that you know, they're partnering with
Speaker 6: these large players on the infrastructure side because it will
Speaker 6: turn out to be a supercycle, and you know, the
Speaker 6: more partners they have in terms of these AI infrastructure buildouts,
Speaker 6: I think it will help them in the long term.
Speaker 4: But is this kind of public private financial structure common
Speaker 4: for large tech infrastructures like Meta? Are they pushing into
Speaker 4: new ground and what are the benefits of using debt
Speaker 4: versus equity?
Speaker 6: Well, I mean now with one hundred billion dollar CAPEX,
Speaker 6: it's more than their free cash flow every year. So
Speaker 6: up until now, you know, we were in that thirty
Speaker 6: to sixty billion dollar range. Metas annual free cash flow
Speaker 6: is around seventy billions. So from that perspective, they could
Speaker 6: afford to fund it on their own, I mean, because
Speaker 6: the scale keeps getting bigger and bigger every year. And look,
Speaker 6: others may have the same problem. Microsoft has also talked
Speaker 6: about one hundred and twenty billion dollars run rate probably
Speaker 6: in twenty twenty six as well. So external financing will
Speaker 6: come into play because, as I said, these companies have
Speaker 6: the lllms, they have the data, the algorithm, the applications,
Speaker 6: but they don't have the expertise in terms of procuring
Speaker 6: power twenty four to seven, and you need a lot
Speaker 6: more power when it comes to AI scale that everyone
Speaker 6: is imagining, you know, twelve months from now, twenty four
Speaker 6: months from now. So from that perspective, also external expertise
Speaker 6: in terms of procuring land, setting up large clusters, how
Speaker 6: to power them, it does make sense that they have
Speaker 6: a private partnership there.
Speaker 2: Now, I always hear you're talking about capex, that's so
Speaker 2: much je, But when are we going to rese that
Speaker 2: point where peop are going to start saying, you know what,
Speaker 2: where's my return on investment? Like, I see you're spending
Speaker 2: you know this much? But when are people going to
Speaker 2: start to turn the question a little bit?
Speaker 6: So I mean, look at how far open ai and
Speaker 6: Nthropic have come. Right, So we know with open ai
Speaker 6: they are at a twelve billion dollar and we'll run
Speaker 6: rate now revenue run rate, and Thropic has five x.
Speaker 6: It went from one billion at the start of the
Speaker 6: year to five billion dollar rund rate. Look at Microsoft's
Speaker 6: cloud growth number. They went to thirty nine percent growth
Speaker 6: in Azure, seventeen percent left from AI. So look, you're
Speaker 6: not going to see a very clear distinction between what
Speaker 6: is the AI contribution. In the case of Microsoft, it's
Speaker 6: very clear. But for Meta, they talked about their ads
Speaker 6: getting better, and when you look at the growth rates,
Speaker 6: Meta grew twenty two percent in the quarter. Compare that
Speaker 6: to Snapchat four percent Pinterest and these are companies that
Speaker 6: are fifty times smaller in scale than Meta. So the
Speaker 6: fact that Meta is growing that fast, they're sort of
Speaker 6: proving to everyone that, look, there is an advantage to
Speaker 6: owning the infrastructure to investment in AI. And even though
Speaker 6: the model is not similar to a Microsoft where they
Speaker 6: are renting the cloud capacity and it's an old reredictable
Speaker 6: revenue stream meta, I think has a higher bar to
Speaker 6: prove in terms of your ROI question. But clearly, I
Speaker 6: think the fact that they did so well this earnings
Speaker 6: they already have an upper hand when it comes to
Speaker 6: digital ads.
Speaker 4: What about when it comes to soft Bank and the
Speaker 4: Stargate AI push. What's significance of soft Bank buying the
Speaker 4: fox Con plant in Ohio and can you talk about
Speaker 4: their bigger ambitions for AI?
Speaker 6: I mean soft Bank also has a big announcement from
Speaker 6: earlier in the year, you know, five hundred billion up
Speaker 6: to five hundred billion dollars in investment. So all these
Speaker 6: companies have to figure out how is it that they're
Speaker 6: going to deploy the money. So in the case of
Speaker 6: soft Bank, I mean, they either partner with TSMC or
Speaker 6: fox Con because they don't assemble their own chips. They
Speaker 6: don't do, you know, semiconductor manufacturing, So partnering makes a
Speaker 6: ton of sense here in the United States. And that's
Speaker 6: where that five hundred billion dollar number you can show
Speaker 6: that this is how much I deployed this year, and
Speaker 6: it kind of shows your roadmap for the following years
Speaker 6: as well, because now that you're investing in one facility,
Speaker 6: chances are you'll probably add to that next year and
Speaker 6: so on.
Speaker 2: All right, man deep Sing, Always a pleasure. Glad to
Speaker 2: have you here in the studio. Bloomberg Intelligence, senior tech
Speaker 2: industry analyst on the latest tech announcement.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
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Speaker 2: All eyes have been on the Central Bank and interest rates, right,
Speaker 2: but there's a new book out. It's taking a look
Speaker 2: into how decisions behind the fit, the ECB, etc. They're
Speaker 2: constrained by the natural rate of interest. So what exactly
Speaker 2: is this? What we're going to do is go to
Speaker 2: the expert. Is Tom Orlick, Bloomberg Economists chief ecomomist joins
Speaker 2: us from DC. Thanks for joining us, tom So. The
Speaker 2: book is called The Price of Money, A Guide to
Speaker 2: the past, present and future of the rate Natural rate
Speaker 2: of Interest. I got to start by asking you, what
Speaker 2: exactly is this, this natural rate of interest?
Speaker 7: So thanks for having me on, Lisa. So the natural
Speaker 7: rate of interest, it's kind of a won key concept, right,
Speaker 7: but if you're an investor in the treasury market, if
Speaker 7: you're an investor in the equity market, if you're an
Speaker 7: investor in the real estate market, it's pretty important. The
Speaker 7: natural rate of interest is the rate of interest which
Speaker 7: balances the supply of saving and the demand for investment
Speaker 7: in the economy. And for a long time, from the
Speaker 7: nineteen eighties through the twenty tens, it was falling, right.
Speaker 7: That's why Larry Summers was talking about secular stagnation. That's
Speaker 7: why the US Treasury was borrowing at such low rates
Speaker 7: for much of the last decade. The big argument that
Speaker 7: we make in our book, a book with essays by
Speaker 7: my colleagues at Bloomberg Economics, edited by Stephanie Flanders, Jamie Rush,
Speaker 7: and myself, The big argument we make is that the
Speaker 7: forces that were dragging interest rates down for much of
Speaker 7: the last four decades have now reversed, and we now
Speaker 7: have gone from a world where there's too much saving,
Speaker 7: not enough investment, and so low interest rates to a
Speaker 7: world where there's not enough saving, too much investment, and
Speaker 7: so the US Treasury and everybody else is going to
Speaker 7: be paying much more to borrow.
Speaker 4: So what are the big forces among demographics, technology, and
Speaker 4: geopolitics that you think will drive the natural rate higher
Speaker 4: in the coming decade.
Speaker 7: So it's a great question, Isabelle. So let's think about
Speaker 7: what was dragging interest rates down. So first of all,
Speaker 7: you had too much saving. The baby boomers were working
Speaker 7: and saving money for their retirement. China, Saudi Arabia, other
Speaker 7: petro states were pumping their savings into the US treasury market.
Speaker 7: And then on the investment side, well, governments had their
Speaker 7: debt under control, government deficits were low, and growth was weak,
Speaker 7: which meant the private sector didn't have a huge incentive
Speaker 7: to invest. So for a long time, from the nineteen
Speaker 7: eighties to the twenty tens, the pattern was too much saving,
Speaker 7: not enough investment, and falling interest rates. In the last decade,
Speaker 7: all of those trends have started to reverse. The baby
Speaker 7: boomers have retired, so they're not adding to their pensions,
Speaker 7: they're spending their pensions down. China, Saudi Arabia, they're not
Speaker 7: putting any money in the US treasury market anymore, and
Speaker 7: US treasury borrowing has exploded. President Trump inherited a deficit
Speaker 7: of six point four percent of GDP in twenty four
Speaker 7: and with his One Big Beautiful Bill, threatens to send
Speaker 7: that deficit higher. So the pattern is shifted from too
Speaker 7: much saving, not enough investment, and falling interest rates to
Speaker 7: not enough saving, too much investment and rising interest rates.
Speaker 7: Donald Trump wants a new FED chair to cut the
Speaker 7: short term policy rate. Even if he does that, we
Speaker 7: think these big structural forces are going to keep longer
Speaker 7: term borrowing costs elevated in the years ahead.
Speaker 2: Yeah, and you mentioned that, So your book suggests that
Speaker 2: it's not going to be that simple to just, you know,
Speaker 2: get a new FED chair.
Speaker 7: Correct, Yeah, that's right. So there's there's so much excitement
Speaker 7: around the question of who the next FED chair is
Speaker 7: going to be. Yesterday we had Stephen Myron, the head
Speaker 7: of the Counsel of Economic Advisors, nominated to the FED Board.
Speaker 7: There's talk that perhaps Kevin Hassett, the head of the NEEC,
Speaker 7: perhaps Kevin Walsh, former member of the FMC, could be
Speaker 7: the new FED chair. And the market is betting that
Speaker 7: whoever it is is going to move the dial and
Speaker 7: start delivering a lower FED policy rate. But guess what,
Speaker 7: it's not the FED which has the determining force on
Speaker 7: the cost of borrowing across the US economy. It's actually
Speaker 7: those bigger dynamics, the balance between saving and investment. And
Speaker 7: the big argument we make in our book is that
Speaker 7: that balance has shifted, and so it doesn't matter who
Speaker 7: the FED chair is, borrowing costs are going to be
Speaker 7: structurally higher.
Speaker 4: And you mentioned this earlier that if the cost of
Speaker 4: money keep rising, what then should governments, businesses, and individuals
Speaker 4: do differently to maybe adapt.
Speaker 7: So let's think about what impact very low borrowing costs
Speaker 7: have had in past decades. So first for governments, when
Speaker 7: borrowing is cheap, then governments can keep on piling on
Speaker 7: debt and it's still sustainable. Think about equity market investors
Speaker 7: or property market investors. If you've put money to work
Speaker 7: in the US stock market or in US real estate
Speaker 7: pretty much anytime over the last four decades, you've made
Speaker 7: quite a lot of money. And part of the reason
Speaker 7: for that is that interest rates have been low, So
Speaker 7: your cost of borrowing to make stock or property investments
Speaker 7: has been low. Now, with interest rates rising, all of
Speaker 7: those dynamics swing into reverse for the US, the US
Speaker 7: Treasury could be facing a world in the years ahead
Speaker 7: where the cost of interest payments on their debt is
Speaker 7: more than total US spending on the military, on defense,
Speaker 7: on the Pentagon. For investors in the stock market or
Speaker 7: the equity market, that upward pressure on asset prices from
Speaker 7: low interest rates, well, at a minimum, I think we
Speaker 7: can say that's not going to be guaranteed going forwards,
Speaker 7: and we could well be moving into a world where
Speaker 7: structurally higher borrowing costs actually mean downward pressure on stocks,
Speaker 7: downward pressure on real estate.
Speaker 2: So, Tom, what can you tell us about You know,
Speaker 2: where is the natural rate of injuries? Where is it headed?
Speaker 7: So the focus of our book is on the natural
Speaker 7: rate of the ten year horizon. Now we think it's
Speaker 7: headed up from a low of below two percent in
Speaker 7: the mid twenty tens to around two and a half
Speaker 7: percent today, and it's going to continue edging higher in
Speaker 7: the months and years ahead. Now, what does that mean
Speaker 7: for the ten year treasury the rate, which is probably
Speaker 7: the most important one in the whole global financial system. Well,
Speaker 7: we think something in the four to five percent range,
Speaker 7: something around four point five percent is going to be
Speaker 7: the new normal in the years ahead, doesn't mean there
Speaker 7: isn't going to be huge variation around that. If the
Speaker 7: Fed cuts policy rates, if that becomes the narrative for
Speaker 7: the next few months, it's going to impact long term
Speaker 7: borrowing costs. But we think the new normal around which
Speaker 7: we're going to be fluctuating in the months and years
Speaker 7: ahead for the ten year treasury is around four point five.
Speaker 4: Percent and we have less than one minute left. But
Speaker 4: you mentioned risks like AI war and climate. Give us
Speaker 4: a sense on how exactly those might drive up the
Speaker 4: natural rate.
Speaker 7: So maybe we'll just talk about the AI piece of it. So, AI,
Speaker 7: if it delivers on its promise, is going to be
Speaker 7: a game changer for growth. And if the economy starts
Speaker 7: growing faster, well that's going to create all kinds of
Speaker 7: investment opportunities. Investment in the data centers to power AI,
Speaker 7: investment in re configuration of factories and offices to take
Speaker 7: advantage of the new technology. And if investment demand goes up,
Speaker 7: well that changes the saving investment balance and that will
Speaker 7: be another force which adds pressure for interest rates to
Speaker 7: rise higher.
Speaker 2: All right, tom Orlick, thank you so much. Good look
Speaker 2: at the book Boomberg Economics, Chief economist here at Bloomberg.
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