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Speaker 1: Bloomberg Audio Studios. Podcasts.

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Speaker 2: Radio.

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Speaker 3: News.

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Speaker 4: This is the Bloomberg Surveillance Podcast. Catch us live weekdays

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Speaker 4: at 7 a.m. Eastern on Apple CarPlay or Android Auto

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Speaker 4: with the Bloomberg Business app. Listen on demand wherever you

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Speaker 4: get your podcasts or watch us live on YouTube.

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Speaker 2: I am laughing. It is a jewel, folks. Into the

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Speaker 2: economic data here in a moment. Just out, smart investing

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Speaker 2: in real life from two grizzled pioneers of the business,

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Speaker 2: David Katz. Steven Weinberger, I love what you've got on

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Speaker 2: page 167. It's the husband and the wife. They're at dinner.

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Speaker 2: They're having wine and candlelight. It's beautiful. He's on the phone.

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Speaker 2: And to think, if I hadn't been having dinner, I

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Speaker 2: might have missed this wonderful investment opportunity. Boy, does that

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Speaker 2: sum it up as well. There's an old way that

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Speaker 2: we used to do this. What does David Katz say

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Speaker 2: is the new way to do investment if I'm not

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Speaker 2: picking up the phone at dinner on an investment opportunity?

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Speaker 3: What the book focuses on is the old way. We

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Speaker 3: think setting up a long-term plan, sticking to that plan,

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Speaker 3: trying to keep costs low is the best way to

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Speaker 3: increase wealth, not getting obsessed with the day-to-day volatility. And

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Speaker 3: it's really a guide on how to do that.

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Speaker 2: Are we over diversified today? Are we doing too many things?

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Speaker 2: Steve Ballmer bought Microsoft, said that's it. That's what I'm doing.

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Speaker 2: Are we over diversified?

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Speaker 3: Well, certain investor portfolios that might have 20 different funds

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Speaker 3: are over diversified. But you'll also see right now you're

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Speaker 3: talking about the AI implosion. A lot of investors put

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Speaker 3: a lot of eggs in that AI basket and they're

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Speaker 3: a little bit too concentrated. So there's some sort of

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Speaker 3: balance in between.

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Speaker 5: So dig into that a little bit, because a lot

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Speaker 5: of the indices that people invest in in markets is

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Speaker 5: market cap weighted. So when you get these mega cap

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Speaker 5: names in there, you tend to be very concentrated in

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Speaker 5: your investing. So are these doing a disservice to some

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Speaker 5: investors in the long term?

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Speaker 3: Well, the S & P 500 is a living index.

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Speaker 3: And right now, you're right. It's probably the most overweighted

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Speaker 3: to growth that it's been in some time. So you

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Speaker 3: do have to understand that as an investor. You just

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Speaker 3: don't want to put all your eggs in the S &

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Speaker 3: P basket and think you're most diversified. There are other

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Speaker 3: areas to be. There's small cap, mid cap, international.

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Speaker 2: What about 60-40? I asked that survivor in Jersey earlier,

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Speaker 2: Waylia Blackrock.

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Speaker 3: Again, there will always be times when it doesn't work,

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Speaker 3: but for long-term investors, having a 60-40 or 70-30 asset

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Speaker 3: allocation is going to allow you to grow with the

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Speaker 3: stock market over time, but be a little bit more

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Speaker 3: protected on the bond side.

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Speaker 2: What do you do with the impatient investor? They're not

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Speaker 2: long-term investors. They're behind actuarially to their retirement. They're not there.

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Speaker 2: What do you do to that person?

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Speaker 3: So we keep talking about that in the book. The

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Speaker 3: key to success is taking that long-term approach.

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Speaker 2: Yeah, but they don't. What percentage of people come into

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Speaker 2: the door, David, don't have a matrix asset? They haven't

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Speaker 2: done that.

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Speaker 3: So a lot of people don't do that. So we're

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Speaker 3: sort of, the lesson is you got to do that

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Speaker 3: to be successful. We think if you're trying to chase

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Speaker 3: the past trends, you don't do as well. And all

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Speaker 3: of these studies show that if the average mutual fund

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Speaker 3: makes 10%, the average investor in that fund makes 7%,

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Speaker 3: that's because they're trading in and out at the wrong times.

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Speaker 5: So some of the sectors that you like currently, right,

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Speaker 5: you like staples, discretionary, interestingly, utilities. And, you know, utilities

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Speaker 5: are one of those sleepy sectors that, you know, you

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Speaker 5: think about buying for income and for dividends, not necessarily

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Speaker 5: for growth. So talk about why maybe you like some

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Speaker 5: of these sectors.

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Speaker 6: More than others.

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Speaker 3: So the stock market has been a risk on, risk

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Speaker 3: off stock market, winners and losers. And the stuff that

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Speaker 3: we highlighted there have really been done poorly this year.

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Speaker 3: They've lagged the market. And we think some of the

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Speaker 3: better opportunities on a go-forward basis, where is the puck

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Speaker 3: going to go, is in these places. Consumer staples, there

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Speaker 3: are a lot of good businesses at 14 times earnings.

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Speaker 3: Utilities had a great run, gave it all back when

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Speaker 3: you had the AI sell-off take hold. There are a

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Speaker 3: lot of utilities right now that are paying a 3.5%, 4%

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Speaker 3: yield It's 16 times earnings that are going to benefit

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Speaker 3: by the AI build-out and more electrical usage.

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Speaker 2: David Katz, please stay with us here as we celebrate

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Speaker 2: his wonderful new book. And we come up on the

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Speaker 2: economic data this morning. Red and green on the screen,

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Speaker 2: but the VIX over two days shows that. AI tensions

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Speaker 2: 17.48 on the VIX. You see price up and yield down.

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Speaker 2: There is a flight to quality into this important economic

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Speaker 2: data of retail sales in initial jobless claims and PPI.

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Speaker 2: Let's go to the data. Here is Alexis Christophorus.

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Speaker 7: Wholesale prices for the month of September are out, and

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Speaker 7: they show a month-over-month increase of 0.8%, much hotter than expected. Actually,

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Speaker 7: they are up 1.3%, so much hotter than estimates of 0.6%.

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Speaker 7: And hotter than the 0.4% we saw the prior month.

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Speaker 7: We also saw year-over-year wholesale prices rallying to 6.3%. Estimates

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Speaker 7: were for 5.4%. And the prior month was 5.4%. Let's

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Speaker 7: take out volatile food and energy for a moment. And month-over-month,

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Speaker 7: PPI up 0.7%. That is hotter than the 0.3% expected

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Speaker 7: and more than an acceleration, really, from the 0.2% we

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Speaker 7: saw in August. And if we take out food and

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Speaker 7: energy year over year, PPI up 5%. Estimates were for 4.4%.

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Speaker 7: This compares to 4.6%.

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Speaker 6: In August.

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Speaker 7: So we're seeing on every measure inflation at the wholesale

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Speaker 7: level coming in stronger than expected. Elevated prices for crude, gas,

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Speaker 7: diesel continuing to drive wholesale and manufacturing input costs higher.

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Speaker 7: Of course, this report coming a day after a hotter

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Speaker 7: than expected September consumer price index. Let's get to those

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Speaker 7: retail sales numbers now. Month over month, up 0.8%. So

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Speaker 7: consumers continuing to spend despite higher inflation. The pace of spending, though,

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Speaker 7: was slowed a little bit because retail sales were up 1.2%.

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Speaker 7: The prior month, if we take out auto and gas

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Speaker 7: on retail sales, up a scant two-tenths of a percent,

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Speaker 7: right in line with estimates and a lot lower than

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Speaker 7: that 1.2% we saw the prior month. But I just

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Speaker 7: want to repeat one more time that wholesale inflation month

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Speaker 7: over month up 1.3% and year over year up a

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Speaker 7: hot 6.3%.

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Speaker 2: Guys, Alexis, thanks so much. Ira Juzzi with us. What

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Speaker 2: a joy that is this morning. Paul Sweeney, I believe,

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Speaker 2: in tomorrow. And basically, bonds crush yields lower prices higher

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Speaker 2: as well. I'm looking at this. And first of all,

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Speaker 2: you need to leave the studio and go to work.

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Speaker 2: I mean, does this do we actually begin discussing with

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Speaker 2: this inflation print? an October increase?

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Speaker 6: Well, I don't think so.

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Speaker 5: I still think December is most likely. The interesting thing

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Speaker 5: about here is margins, right? So when PPI goes up

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Speaker 5: faster than CPI, that means that margins theoretically should be compressing.

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Speaker 5: And that's something that we look at at the aggregate

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Speaker 5: level quite often. So that's something I'm going to be

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Speaker 5: looking at. But interestingly, behind all of this, there's this

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Speaker 5: little wonky data print called the Retail Sales Control Group,

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Speaker 5: which is all those pieces of retail sales that go

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Speaker 5: into GDP, and that's weaker than expected. And 0.1%, that's

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Speaker 5: actually pretty low.

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Speaker 2: I agree. That's the line that I went to as

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Speaker 2: an amateur. Explain to us what that means. I mean,

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Speaker 2: this is Where Whaley was, which is that GDP is

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Speaker 2: just not as solid as it's been.

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Speaker 5: Yeah, so basically when you think about the personal consumption expenditures, right,

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Speaker 5: that's personal consumption is about two-thirds of GDP.

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Speaker 6: The retail sales control.

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Speaker 5: Group are the pieces of this report that go into

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Speaker 5: that reading. And this is relatively weak. Now, granted, it's

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Speaker 5: one number and it's only one month. But the question is,

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Speaker 5: is this going to be a trend that we see?

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Speaker 5: That sounds like David Katz talking.

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Speaker 2: Let's go back to David Katz, Matrix Asset Advisors, as

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Speaker 2: we celebrate a really useful book on Investing 101, Smart

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Speaker 2: Investing in Real Life. What's changed is the media focus.

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Speaker 2: It's Tom Keen's fault. We have this media frenzy of

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Speaker 2: looking at economic data. How do you listen to Tom

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Speaker 2: Keen but ignore him for the sanctity of your long-term plan?

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Speaker 3: And for your long-term sanity. It's very important to know

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Speaker 3: what's going on.

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Speaker 2: You talk to Mrs. Keene?

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Speaker 3: It's very important to know what's going on on a

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Speaker 3: daily and monthly basis, but we think that from an

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Speaker 3: investment perspective, you want to take a longer-term view.

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Speaker 2: How do you divide the two? This is the heart

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Speaker 2: of the matter. How do you divide the two?

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Speaker 3: Set up a long-term plan, stick with that plan, be

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Speaker 3: aware of what's going on. So we would not react

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Speaker 3: to today's print and all of a sudden change your

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Speaker 3: asset allocation and and change your equity exposures based on that.

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Speaker 3: But be aware of what's going on.

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Speaker 2: What do you see in the David Katz world of

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Speaker 2: consumption right now? Do you see an exhausted America?

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Speaker 3: We think the consumer has been surprisingly strong. We think

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Speaker 3: the economy has been shockingly strong and we think that

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Speaker 3: it's going to continue to be OK. We do think

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Speaker 3: in terms of today's hot inflation number, if there's ever

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Speaker 3: sort of an exit ramp out of Iran, oil prices

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Speaker 3: will come down sharply. And the inflation numbers, which have

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Speaker 3: been pretty negative, will cool down a lot. And then

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Speaker 3: we think that's going to take pressure off the Fed.

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Speaker 3: And that would be bullish for the market.

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Speaker 2: Do you agree with that, old wise one? Well, yeah.

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Speaker 5: I mean, if oil prices come down, ironically, you know,

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Speaker 5: oil and gas prices being where they are is a

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Speaker 5: tax on the consumer. So, you know, if those go down,

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Speaker 5: growth should be better.

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Speaker 2: Is the tariff a tax on a consumer?

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Speaker 6: Absolutely.

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Speaker 2: You can stay. David Katz, thank you. Thanks a lot.

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Speaker 2: I want to get you, Scarlett, for your email. We

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Speaker 2: need to get David Katz on Bloomberg Money. The book

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Speaker 2: is a celebration. Smart investing in real life. Can't say

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Speaker 2: enough about it. I'll do that on Twitter and LinkedIn today.

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Speaker 2: David Katz, Matrix. Thank you so much as well. Let

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Speaker 2: me look at the market right now with Ira Jersey

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Speaker 2: because our next guest is beyond esteemed. I mean, David,

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Speaker 2: let's move aside for Dana Telsey as we get her

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Speaker 2: in here. I'm looking, Ira, at the yield space. And

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Speaker 2: I mean, it's not often that you see yields gyrate around.

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Speaker 2: What's your interpretation of the curve right now?

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Speaker 5: Yeah, so actually, since these data came out, the 30-year

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Speaker 5: has actually rallied, right? So we've actually seen lower yields

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Speaker 5: than where we were before.

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Speaker 6: And I think it is.

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Speaker 5: People are focusing on that control group, number one. And

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Speaker 5: then number two, with PPI being so high that people

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Speaker 5: are maybe thinking that margins are going to compress, at

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Speaker 5: least at the high-level macro level here.

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Speaker 2: We'll have to see. Thank you for the way you

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Speaker 2: choose to listen to us. Good morning. 99.1 FM, Nathan

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Speaker 2: Hager Radio with that wonderful midterm seminar yesterday in Washington.

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Speaker 2: A huge success. 92.9 FM up in Boston. Good morning.

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Speaker 2: And of course, Bloomberg 1130 here. in New York. Particularly

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Speaker 2: good morning in continental Europe here. Where is euro off

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Speaker 2: of this?

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Speaker 8: 111.99.

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Speaker 2: Euro churning this morning is how I'd put it. Our

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Speaker 2: economic data to do that with IRA, Jersey, a privilege.

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Speaker 2: Our economic indicators brought to you by IBKR. For the

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Speaker 2: past three years, interactive brokers, individual clients averaged 24.3% annually,

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Speaker 2: to 170 plus global markets that matters. Visit ibkr.com slash performance.

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Speaker 2: As we begin today, really our midterm coverage, we begin

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Speaker 2: today our Q4 consumer dash. Dana Telsey is definitive at

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Speaker 2: Telsey Advisory Group. We're thrilled she's here. It's like a

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Speaker 2: hit record. It's like when something's magical in the movies.

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Speaker 2: There's a destroyed brand, a brand, a guy named Blasey

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Speaker 2: shows up and Chanel is like, I was going back

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Speaker 2: and forth with Debra Aiken in London. Have you ever

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Speaker 2: seen a recovery of a house like Chanel in the

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Speaker 2: last year?

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Speaker 9: It's been amazing, and thank you for having me here, Tom.

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Speaker 9: It's absolutely been amazing. And what's so interesting about it,

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Speaker 9: his impact on the clothing impacted every other part of

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Speaker 9: the company. I mean, even their makeup. You try to

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Speaker 9: get the Chanel Crush lipstick, it's sold out everywhere. So

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Speaker 9: Chanel is back in vogue, and it's something that Gucci

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Speaker 9: would only like to see, given that they haven't had

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Speaker 9: the star power.

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Speaker 2: How does Gucci, carrying a destroyed brand, how do they

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Speaker 2: find this guy, Blazy?

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Speaker 9: They need to find someone, too. And some of it's

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Speaker 9: just connecting with, frankly, their customer, but also the next

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Speaker 9: generation of customers and doing it globally.

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Speaker 2: One more fancy social. I got two more fancy social

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Speaker 2: luxury questions. Deborah A. can make it clear to me

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Speaker 2: that the magic is social. Getting out on YouTube, getting

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Speaker 2: out on Twitter, TikTok and all this stuff Alexis Christophers

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Speaker 2: looks at. That's the new messaging, isn't it?

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Speaker 9: It goes viral and it goes global. And it also

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Speaker 9: crosses generations. So the ability to have that appeal is

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Speaker 9: that is that's I have this theme of the letter A.

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Speaker 9: What are the topics of 2026? AI, affordability, activation, assortment

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Speaker 9: and agility.

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Speaker 8: Right.

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Speaker 9: Think about what activation is. That's what social does.

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Speaker 2: One more snobby question. Ira Jersey wants to talk about

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Speaker 2: Home Depot and Target. Dana Telsey, I look at this

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Speaker 2: and I see something that I still think is totally nuts.

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Speaker 2: Hermes in Brooklyn and Williamsburg. What does that signal to

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Speaker 2: you about the spirit here of high-end consumption?

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Speaker 9: Williamsburg is where high-end consumers are living, where high-end consumers

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Speaker 9: are going, and it's new neighborhoods that are being activated.

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Speaker 1: Look at the.

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Speaker 9: Rents overall, even in Williamsburg and Brooklyn compared to Manhattan.

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Speaker 9: It's not cheap.

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Speaker 2: Jonathan Miller with this Bloomberg Money with Scarlett Fu Friday. Alexis,

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Speaker 2: get in here a question. with Dana Telsey.

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Speaker 7: Well, I'm just trying to absorb what you just said.

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Speaker 7: I grew up in Williamsburg, Brooklyn in the 70s and

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Speaker 7: 80s when it was a very different place than it.

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Speaker 7: I mean, if we had a sushi restaurant come in,

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Speaker 7: that was like stop the presses, right? Why are people

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Speaker 7: continuing to spend despite this high inflation? I guess my

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Speaker 7: question is, where are they putting their money? Are they

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Speaker 7: buying the necessities? Is there discretionary money out there? Are

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Speaker 7: they going out and buying the fun stuff?

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Speaker 9: There's discretionary money out there for upper income. But even

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Speaker 9: when you're looking at lower and middle income consumers... They're

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Speaker 9: choosing what to spend on. So they'll choose the experience.

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Speaker 9: They'll choose what they see virally. But then what are

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Speaker 9: they going to buy? The other change in buying patterns

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Speaker 9: is about GLP-1s. GLP-1s are causing new apparel wardrobe changes,

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Speaker 9: new apparel wardrobe purchases. And they're not done because the

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Speaker 9: impact that it has... basically extends. So I think there's

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Speaker 9: different reasons for consumption, but higher interest rates is a

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Speaker 9: headwind to housing.

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Speaker 2: We got a surveillance GLP correspondent, Ira Jersey here with

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Speaker 2: Data Telsey.

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Speaker 5: So let's talk about the other end of the consumer, right?

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Speaker 5: So let's talk about the big box stores, or even

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Speaker 5: the home improvement stores, right? The Targets and the Walmarts

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Speaker 5: of the world too. How are they doing? I mean,

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Speaker 5: presumably some of them are picking up and.

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Speaker 6: Maybe others aren't.

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Speaker 9: You must have been at our conference last week. I

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Speaker 9: had my conference last week. And basically, whether it was Lowe's,

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Speaker 9: whether it was Target, Nike, they were all there. And

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Speaker 9: so what you're seeing out there on the big boxes,

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Speaker 9: look at Target this year. Target's up over 50%. The

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Speaker 9: newness in the assortment, the new collaborations. Look at Hollister

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Speaker 9: and Home that's in Target. Look at Warby Parker, Shop

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Speaker 9: and Shops and Target. There's newness there. There's that search

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Speaker 9: for value. You look at Walmart. The fastest part of

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Speaker 9: Walmart's growth is coming from household incomes that are at

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Speaker 9: their highest level for Walmart. Home Depot and Lowe's, they're

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Speaker 9: waiting for that spigot to get turned on for improved housing.

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Speaker 9: But they're both enhancing their business models in order that

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Speaker 9: when it does, there'll be an acceleration.

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Speaker 2: Go ahead, Harry.

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Speaker 5: Yeah, I just want to tell you in the retail

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Speaker 5: sales report, you see that Home Depot and the Home

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Speaker 5: Improvement did okay.

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Speaker 8: Yeah.

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Speaker 2: How do you do that? I don't even know how

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Speaker 2: to look that up.

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Speaker 6: Oh, it's in the Bloomberg Terminal.

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Speaker 2: There's lots of tables in there. I'm learning every day here. Oh, Lex,

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Speaker 2: there's another question with Dana Telsey here.

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Speaker 7: What are we not buying? Do you track that?

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Speaker 8: Yes.

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Speaker 9: So where the headwinds are lately, look at active footwear,

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Speaker 9: the athletic footwear. That category has been very tough. It's

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Speaker 9: been promotional, and you need the newness from Nike to

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Speaker 9: resuscitate the category at the same time.

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Speaker 2: Really? You need Nike... Hasn't the industry moved on from Nike?

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Speaker 9: Well, you know why? They've moved on because post-COVID, now

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Speaker 9: people are getting dressed up to go to events. They're

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Speaker 9: wearing bow ties to go to work. They're wearing brown

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Speaker 9: suede boots.

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Speaker 2: She can come back anytime. Here I am. Okay, here's

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Speaker 2: the reality. I am honored that Ralph Fitzgerald puts the

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Speaker 2: suit on me. I happen to see Ralph. yesterday. He's

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Speaker 2: on a huge role helping people with their suits and all.

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Speaker 2: And he was talking about the suit is back. Why

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Speaker 2: is the suit back, Dana Tulsi?

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Speaker 9: I think people want to look differentiated. I think people

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Speaker 9: want to be not formal, but they want to look

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Speaker 9: good again. They take pride in their appearance. And there's

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Speaker 9: more meetings. There's more events. There's more conferences that people

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Speaker 9: are going to. Watch what's on people's feet. Watch what

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Speaker 9: they're wearing. They may not wear ties, but they're wearing

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Speaker 9: a suit without a tie. They are wearing dresses again.

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Speaker 9: Dresses is huge. Bottoms are selling well. Denim is being

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Speaker 9: worn to work, to events, and on the weekends at

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Speaker 9: the same time.

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Speaker 2: What's the holiday season look like? First time I've asked

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Speaker 2: this question.

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Speaker 9: I think the holiday season is going to be okay.

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Speaker 9: And you know why? I think the advertising and the

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Speaker 9: activation is moving that holiday season. It's already gotten started

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Speaker 9: because Amazon Prime Day kicks it off. And you saw

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Speaker 9: the targets and everyone else do events surrounding that. So

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Speaker 9: I think it'll be a decent holiday season.

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Speaker 2: I think you're hedging it. I think it could be greater.

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Speaker 2: than what we expect because of nominal GDP.

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Speaker 9: Well, we're coming out with our holiday forecast next week,

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Speaker 9: so we'll tease it for next week.

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Speaker 2: Oh, come on. There's only 42 people listening. Go ahead.

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Speaker 9: Only a couple, but I think it'll be a decent

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Speaker 9: holiday season.

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Speaker 2: What is Louis Vuitton doing? I mean, they came out.

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Speaker 2: They were really soggy, to say the least. You know,

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Speaker 2: for those of you, it's Mr. Arnaud, and there's like

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Speaker 2: 42 children. They bought Tiffany's in that. I mean, they

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Speaker 2: should make a TV show about the succession, right?

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Speaker 1: They should.

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Speaker 9: And you saw the numbers that came out on Monday. Yep, Monday. Basically,

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Speaker 9: fashion and leather goods, which is 45% of the business,

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Speaker 9: was weaker than expected.

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Speaker 6: Why?

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Speaker 1: China.

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Speaker 9: Chinese consumer demand was weaker. It was down mid-teens. That

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Speaker 9: was the headwind. At the same time... Sephora is still

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Speaker 9: growing and growing very successfully.

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Speaker 2: Yeah.

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Speaker 9: And that's doing well. Watches and jewelry, also jewelry doing well.

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Speaker 9: And jewelry has been doing well in all categories lately.

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Speaker 9: But the fashion and leather goods part of the business,

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Speaker 9: you see how important the Chinese consumer is.

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Speaker 2: The youngest daughter has the daily Sephora. She's figured out

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Speaker 2: that instead of going once and killing me, She goes daily.

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Speaker 2: Did you know this, Ira? It's a daily Sephora.

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Speaker 6: I did not know that.

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Speaker 2: You go daily, and then it's less pain.

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Speaker 9: It's death by a thousand cuts.

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Speaker 2: Come back next week with your new report. Eric, did

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Speaker 2: you see that? She's like selling her new report a

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Speaker 2: week out to come back. It's a shrewd move by

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Speaker 2: Dana Telsey. Thank you so much. And thank you, Joe Feldman,

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Speaker 2: for the big box analysis, Telsey advisor. Group. Ross Mayfield

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Speaker 2: with us right now. with Baird. Thrilled he could join

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Speaker 2: us this morning. I got a couple charts up as

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Speaker 2: an amateur. And I know you got 42 charts up

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Speaker 2: and Ira Jersey has 78 charts up. Sweeney even has

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Speaker 2: more charts up than me. And I'm looking at core

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Speaker 2: weave debt just made down to new lows. Can't find

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Speaker 2: a bid. I got a NASDAQ on economics when Alexis

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Speaker 2: did it. Came down to new lows. It's recovered a

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Speaker 2: little bit, but it's soggy. What do you as a strategist,

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Speaker 2: an arching strategist, how do you synthesize the immediate today

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Speaker 2: AI angst?

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Speaker 10: I think you say, all right, it's clear that yields

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Speaker 10: are higher for longer. This inflation data, there's nothing good

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Speaker 10: to find in it. You've got a Fed that's clearly

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Speaker 10: back hiking, bonds at the long end going higher. And

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Speaker 10: so it means investors have to be more discerning. So

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Speaker 10: a core weave, which is kind of on the higher

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Speaker 10: risk spectrum of the AI trade, gets hit. And I

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Speaker 10: think quality and this rising tide that lifts all boats

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Speaker 10: in AI, I think that's a story kind of of

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Speaker 10: the past. So it doesn't mean- Do you see.

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Speaker 2: That in the tech earnings in two weeks that they

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Speaker 2: will generate free cash flow growth to calm everybody down.

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Speaker 10: I think the big ones will. And I think the

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Speaker 10: big ones will continue to catch a bid. The mag

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Speaker 10: seven has looked fine while the semis and the Cosby

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Speaker 10: have sold off. So I think it's just you focus

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Speaker 10: on quality and there's quality in tech. Valuations are not

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Speaker 10: super stretched because those earnings have been so strong, but

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Speaker 10: it's going to take a more discerning investor than we've

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Speaker 10: seen for most of this bull market.

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Speaker 5: So think about the downstream of this AI investment boom, right?

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Speaker 5: So there's obviously going to be some firms that win

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Speaker 5: that may be aren't really on the radar of the

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Speaker 5: general public. Are there any names like that that you

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Speaker 5: guys are looking at? Or are you just sticking with

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Speaker 5: the top line, those firms making the investments?

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Speaker 2: Well, no.

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Speaker 10: I think the picks and shovel names, to your point,

433
00:21:42,440 --> 00:21:46,500
Speaker 10: the companies providing cooling or storage or a lot of

434
00:21:46,520 --> 00:21:48,220
Speaker 10: the things that you need to build a data center.

435
00:21:49,320 --> 00:21:51,199
Speaker 10: I think at this point in the cycle, too, you

436
00:21:51,240 --> 00:21:54,310
Speaker 10: can start to think about, especially with Muse being so popular,

437
00:21:54,369 --> 00:21:56,669
Speaker 10: who are the Who are the winners that get to

438
00:21:56,950 --> 00:21:59,870
Speaker 10: use AI and boost productivity without being levered to the

439
00:22:00,910 --> 00:22:03,889
Speaker 10: trillion dollars in spending? So we look at something like

440
00:22:03,930 --> 00:22:06,730
Speaker 10: health care. I think financials are a place that could benefit.

441
00:22:06,790 --> 00:22:09,080
Speaker 10: So I think there's still a lot of ways to

442
00:22:09,119 --> 00:22:11,820
Speaker 10: play this. But in this rate environment, you want to

443
00:22:11,859 --> 00:22:14,700
Speaker 10: focus on quality, strong balance sheets, not too much debt.

444
00:22:15,380 --> 00:22:18,300
Speaker 10: And I think, you know, winners and losers get separated

445
00:22:18,320 --> 00:22:18,619
Speaker 10: a little more.

446
00:22:20,080 --> 00:22:24,409
Speaker 5: So in these winners and losers, you mentioned some sectors

447
00:22:24,430 --> 00:22:27,490
Speaker 5: like financials. And when I think about financials and I

448
00:22:27,510 --> 00:22:30,889
Speaker 5: think about the Fed potentially hiking interest rates another 50

449
00:22:30,890 --> 00:22:34,260
Speaker 5: to 100 basis points, depending on your view and obviously

450
00:22:34,280 --> 00:22:36,450
Speaker 5: what the market's pricing, that tends not to be good

451
00:22:36,470 --> 00:22:37,090
Speaker 5: for financials.

452
00:22:37,250 --> 00:22:38,270
Speaker 6: So why financials here?

453
00:22:38,670 --> 00:22:41,050
Speaker 10: I think they're, well, just from a price perspective, they're

454
00:22:41,210 --> 00:22:44,429
Speaker 10: a bit oversold, but they've had a nice year. The

455
00:22:44,450 --> 00:22:47,060
Speaker 10: consumer remains strong. If you listen to Wells Fargo or

456
00:22:47,080 --> 00:22:49,080
Speaker 10: some of the other banks talking about it, the consumer

457
00:22:49,100 --> 00:22:51,460
Speaker 10: piece of the business is solid. The wealth management piece

458
00:22:51,480 --> 00:22:54,100
Speaker 10: of the business is solid. There's still pretty strong capital

459
00:22:54,119 --> 00:22:57,359
Speaker 10: markets activity. And again, I think if you look at

460
00:22:57,400 --> 00:23:00,879
Speaker 10: the kinds of companies that should benefit, if AI is

461
00:23:01,040 --> 00:23:05,280
Speaker 10: what we've been promised, the productivity enhancer, financials stand to benefit.

462
00:23:05,320 --> 00:23:08,919
Speaker 10: I think there's a lot of fraud and waste that

463
00:23:08,940 --> 00:23:11,760
Speaker 10: can be rooted out with strong productivity from AI. So

464
00:23:12,119 --> 00:23:14,240
Speaker 10: we like the financials here. I also think for the

465
00:23:14,300 --> 00:23:17,480
Speaker 10: average investor, it's a nice hedge to being super overweight

466
00:23:17,500 --> 00:23:21,020
Speaker 10: tech if you just have an ETF. So we continue

467
00:23:21,040 --> 00:23:22,239
Speaker 10: to like it. Deregulation as well.

468
00:23:22,359 --> 00:23:25,869
Speaker 2: Russ Mayfield, one of the investment strategists, Baird Private Wealth.

469
00:23:26,070 --> 00:23:30,550
Speaker 2: We had in the Baird crew yesterday on technology and

470
00:23:31,150 --> 00:23:33,710
Speaker 2: on the bank's is, well, what is the mood of

471
00:23:33,750 --> 00:23:36,810
Speaker 2: your security analysts about this earnings season? What are they

472
00:23:36,830 --> 00:23:38,899
Speaker 2: going to see? You know, they're on the conference calls.

473
00:23:38,940 --> 00:23:40,899
Speaker 2: What's the view forward as a general tone?

474
00:23:41,450 --> 00:23:44,020
Speaker 10: I think the view on earnings still remains really positive.

475
00:23:44,040 --> 00:23:47,640
Speaker 10: For all the other headwinds out there, the earnings are

476
00:23:48,260 --> 00:23:51,040
Speaker 10: the great lifter of this market and puts a floor

477
00:23:51,080 --> 00:23:53,680
Speaker 10: under it. So the optimism around earnings is still there.

478
00:23:53,700 --> 00:23:56,420
Speaker 10: I think the question is, what happens when you get

479
00:23:56,460 --> 00:24:00,619
Speaker 10: to 2027 and you circle the base rates and the

480
00:24:00,680 --> 00:24:02,879
Speaker 10: earnings growth slows to 10%, 15% rather than 30 plus percent?

481
00:24:04,880 --> 00:24:08,290
Speaker 10: So that's kind of the... The optimism is there for

482
00:24:08,310 --> 00:24:09,630
Speaker 10: Q3 for the rest of the year.

483
00:24:09,730 --> 00:24:10,530
Speaker 6: Right.

484
00:24:10,990 --> 00:24:13,320
Speaker 10: But looking out to 2027, can it continue, right?

485
00:24:13,880 --> 00:24:16,439
Speaker 2: That's the heart of the matter. Ira Jersey with Ross Mayfield.

486
00:24:17,020 --> 00:24:17,520
Speaker 8: Yeah, so.

487
00:24:18,770 --> 00:24:22,830
Speaker 5: I'm harping on this financials theme and the bank. So

488
00:24:22,850 --> 00:24:26,710
Speaker 5: you mentioned some things like capital markets. We've seen obviously

489
00:24:27,330 --> 00:24:32,030
Speaker 5: significant debt capital market activity with the AI spend and

490
00:24:32,050 --> 00:24:35,409
Speaker 5: the like. That can't last forever though, right? So how

491
00:24:35,450 --> 00:24:39,390
Speaker 5: do we think about maybe the profit mix for some

492
00:24:39,430 --> 00:24:43,780
Speaker 5: of these financial institutions, particularly those that are reliant on

493
00:24:43,840 --> 00:24:44,969
Speaker 5: their capital markets businesses?

494
00:24:45,670 --> 00:24:48,409
Speaker 10: Well, I think for one thing, the tail end for

495
00:24:48,430 --> 00:24:50,930
Speaker 10: the capital markets business is still there. When we think

496
00:24:50,970 --> 00:24:54,159
Speaker 10: about comparing today to the late 90s where there was

497
00:24:54,160 --> 00:24:56,740
Speaker 10: 50 IPOs a day, I mean, this is not a

498
00:24:56,800 --> 00:25:00,700
Speaker 10: robust capital markets, IPO, M & A environment.

499
00:25:01,080 --> 00:25:01,760
Speaker 2: It's recovering.

500
00:25:01,840 --> 00:25:02,460
Speaker 10: It's a little better.

501
00:25:02,800 --> 00:25:03,220
Speaker 2: Thank you.

502
00:25:03,400 --> 00:25:06,220
Speaker 10: And certainly rates are a headwind.

503
00:25:06,900 --> 00:25:10,169
Speaker 2: I was in the absolute heart of that. Ross is

504
00:25:10,210 --> 00:25:13,929
Speaker 2: too young, Ira, to understand how correct he is. People

505
00:25:13,990 --> 00:25:18,830
Speaker 2: here have no idea what the frenzy was like, 98,

506
00:25:18,830 --> 00:25:22,629
Speaker 2: coming out of August 98, and the resurgence of equity. Remember,

507
00:25:23,150 --> 00:25:26,600
Speaker 2: in 98, Ira, nobody thought equities would move forward, and

508
00:25:26,640 --> 00:25:27,780
Speaker 2: they boomed.

509
00:25:27,920 --> 00:25:28,020
Speaker 8: Yep.

510
00:25:29,270 --> 00:25:31,430
Speaker 2: The IPO issuance was insane.

511
00:25:31,450 --> 00:25:33,229
Speaker 5: You had a ton of IPOs, and at the same time,

512
00:25:33,250 --> 00:25:35,170
Speaker 5: you had a lot of debt being issued as well, right?

513
00:25:35,190 --> 00:25:39,220
Speaker 5: So you had things like the tech and TMT bubble, right?

514
00:25:39,240 --> 00:25:42,280
Speaker 5: So you had Deutsche Telekom coming out with a $ 32

515
00:25:41,840 --> 00:25:46,980
Speaker 5: billion deal, which was not dissimilar to the AI trade today.

516
00:25:47,140 --> 00:25:51,189
Speaker 2: I agree, but the distinction here this morning with the

517
00:25:51,250 --> 00:25:54,470
Speaker 2: Corweave piece just moments ago making a new low, this

518
00:25:54,550 --> 00:26:00,899
Speaker 2: is the 15.4% yielding. I can't believe I'm saying it,

519
00:26:00,900 --> 00:26:04,180
Speaker 2: 15 point. In two years, I can make 30% with CoreWeave.

520
00:26:04,600 --> 00:26:07,659
Speaker 2: It's great. Ross, I'm looking at this and still, as

521
00:26:07,700 --> 00:26:11,460
Speaker 2: you mentioned, in the earnings season, it's a reaffirmation of

522
00:26:11,500 --> 00:26:13,960
Speaker 2: the profitability. That's really what we're talking about.

523
00:26:14,240 --> 00:26:16,460
Speaker 10: That's the story, right? And I do think to your

524
00:26:16,500 --> 00:26:19,359
Speaker 10: point about CoreWeave and some of the companies underneath the

525
00:26:19,400 --> 00:26:21,800
Speaker 10: hood that are taking it on the chin. The other

526
00:26:21,840 --> 00:26:23,790
Speaker 10: comparison to the late 90s, and you tell me if

527
00:26:23,850 --> 00:26:25,690
Speaker 10: I'm right or wrong, there doesn't seem to be a

528
00:26:25,750 --> 00:26:28,989
Speaker 10: complacency about this market yet. There is a real kind

529
00:26:29,010 --> 00:26:32,230
Speaker 10: of discerning nature to picking winners and losers rather than

530
00:26:32,270 --> 00:26:35,530
Speaker 10: just ignore all the macro, bid up everything related to AI.

531
00:26:35,930 --> 00:26:38,830
Speaker 10: Anybody knew the market we bid up. So, you know,

532
00:26:38,869 --> 00:26:40,889
Speaker 10: it's not that sentiment is in the dumps, although for

533
00:26:40,910 --> 00:26:43,820
Speaker 10: the consumers it is, but there's not a complacency that

534
00:26:43,900 --> 00:26:45,000
Speaker 10: gets you super worried yet.

535
00:26:45,100 --> 00:26:47,760
Speaker 2: Okay, Ross, thank you so much. Ross Mayfield with Baird

536
00:26:47,800 --> 00:26:53,340
Speaker 2: this morning. Stay with us. More from Bloomberg Surveillance coming

537
00:26:53,440 --> 00:26:54,400
Speaker 2: up after this.

538
00:27:01,660 --> 00:27:05,260
Speaker 4: You're listening to the Bloomberg Surveillance Podcast. Catch us live

539
00:27:05,340 --> 00:27:07,420
Speaker 4: weekday afternoons from 7 to 10 a.m.

540
00:27:07,460 --> 00:27:07,870
Speaker 1: Eastern.

541
00:27:07,970 --> 00:27:11,270
Speaker 4: Listen on Apple CarPlay and Android Auto with the Bloomberg

542
00:27:11,290 --> 00:27:13,790
Speaker 4: Business app or watch us live on YouTube.

543
00:27:14,150 --> 00:27:18,030
Speaker 2: Joining us, Whaley of BlackRock, absolutely definitive of taking her

544
00:27:18,050 --> 00:27:22,030
Speaker 2: acclaimed mathematics into the market. What's the single distinction of

545
00:27:22,670 --> 00:27:27,060
Speaker 2: first-second derivative dynamics now that you see in the markets?

546
00:27:28,119 --> 00:27:33,619
Speaker 8: Well, what's happening in markets right now is significant repricing

547
00:27:33,750 --> 00:27:37,050
Speaker 8: relative between bonds and equities.

548
00:27:37,070 --> 00:27:39,170
Speaker 2: Is it abrupt or is it controlled?

549
00:27:39,210 --> 00:27:41,590
Speaker 8: You tell me if it has been abrupt so far

550
00:27:42,010 --> 00:27:42,550
Speaker 8: this week.

551
00:27:42,670 --> 00:27:45,430
Speaker 9: It's been pretty dramatic. Okay, okay.

552
00:27:45,730 --> 00:27:51,619
Speaker 8: So on Monday, we put out a note essentially upgrading treasuries,

553
00:27:51,900 --> 00:27:57,260
Speaker 8: front-end and back-end. and downgrading U.S. equities to manage risk

554
00:27:57,619 --> 00:28:01,780
Speaker 8: and just thinking about the potential focus on AI policy

555
00:28:01,940 --> 00:28:05,580
Speaker 8: and AI build-out. And subsequently, we have seen what's happening

556
00:28:05,600 --> 00:28:10,490
Speaker 8: in market pretty dramatic, really. But ultimately, the big picture

557
00:28:10,630 --> 00:28:16,169
Speaker 8: is that after years of yield repricing in the U.S.

558
00:28:16,210 --> 00:28:19,930
Speaker 8: Treasury market. We think bonds back. We first went underweight

559
00:28:19,990 --> 00:28:23,170
Speaker 8: long duration treasuries. It was more than six years ago

560
00:28:23,230 --> 00:28:26,640
Speaker 8: when U.S. 10-year was below 90 basis points. And now

561
00:28:27,160 --> 00:28:27,820
Speaker 8: look at where we are.

562
00:28:27,920 --> 00:28:30,760
Speaker 6: Yeah, it was hard to like yields five, six years ago, right?

563
00:28:31,220 --> 00:28:33,840
Speaker 8: Yeah, there was so little room for it to come down.

564
00:28:33,859 --> 00:28:34,240
Speaker 3: Yeah, exactly.

565
00:28:34,580 --> 00:28:36,720
Speaker 5: And now, so I know that one of your focuses

566
00:28:36,740 --> 00:28:38,650
Speaker 5: is on the front end of the curve. And when

567
00:28:38,670 --> 00:28:42,010
Speaker 5: I look at the two-year and two-year break-even, right, we'd

568
00:28:42,050 --> 00:28:44,230
Speaker 5: have to double the yield.

569
00:28:43,930 --> 00:28:46,150
Speaker 6: In a year's time for you to lose money buying

570
00:28:46,190 --> 00:28:46,850
Speaker 6: a two-year note, right?

571
00:28:46,870 --> 00:28:48,070
Speaker 9: That is exactly how we think about it.

572
00:28:48,110 --> 00:28:50,630
Speaker 5: Yeah, so when I look at the Bloomberg function here,

573
00:28:51,120 --> 00:28:58,980
Speaker 5: CT2 government FAHZ, the fixed income hedge horizon, analysis is

574
00:28:59,080 --> 00:29:02,260
Speaker 5: key on this. But talk about then the duration side

575
00:29:02,300 --> 00:29:04,740
Speaker 5: of things, right? So you like long duration now too.

576
00:29:04,780 --> 00:29:06,800
Speaker 5: There's a lot less wiggle room for error there.

577
00:29:07,440 --> 00:29:07,780
Speaker 2: Yeah.

578
00:29:07,820 --> 00:29:12,040
Speaker 8: So we're actually neutral long duration having closed our long

579
00:29:12,100 --> 00:29:16,370
Speaker 8: held underweight, but we pushed the front end to overweight.

580
00:29:16,450 --> 00:29:19,010
Speaker 8: So if you bring the two together, we still prefer

581
00:29:19,030 --> 00:29:19,750
Speaker 8: the front end over.

582
00:29:19,690 --> 00:29:20,120
Speaker 6: The long end.

583
00:29:20,130 --> 00:29:22,050
Speaker 5: So that would be then bull steepening of the yield

584
00:29:22,090 --> 00:29:23,510
Speaker 5: curve is what your expectation is.

585
00:29:24,110 --> 00:29:24,870
Speaker 9: So that's one.

586
00:29:24,790 --> 00:29:27,510
Speaker 8: Way to look at it. But ultimately, actually, the duration

587
00:29:27,590 --> 00:29:30,580
Speaker 8: move trumps curve move, as we have seen so far

588
00:29:30,620 --> 00:29:33,300
Speaker 8: this year, both on the way up, yields pushing higher

589
00:29:33,380 --> 00:29:37,050
Speaker 8: and also on the way down. So ultimately, this is

590
00:29:37,170 --> 00:29:41,260
Speaker 8: an expectation for yields to to to. to give you

591
00:29:41,280 --> 00:29:42,500
Speaker 8: very good income.

592
00:29:42,520 --> 00:29:46,600
Speaker 2: This is absolute gold, folks. Weili in Ira, Jersey, with

593
00:29:46,640 --> 00:29:49,800
Speaker 2: the most jargon I've heard in six months. This is

594
00:29:49,840 --> 00:29:53,150
Speaker 2: a family radio station. There's kids listening on their way

595
00:29:53,530 --> 00:29:56,330
Speaker 2: to school. Weili, I want you to translate this back

596
00:29:56,350 --> 00:30:00,880
Speaker 2: to people going, hey, yields are up. I should jump in,

597
00:30:01,470 --> 00:30:03,980
Speaker 2: but I'm worried that they go upper. When you look

598
00:30:04,000 --> 00:30:06,959
Speaker 2: at the economic mix, do you worry about a 5.3%

599
00:30:06,960 --> 00:30:08,700
Speaker 2: yield becoming price down, yield up a 5.5% yield?

600
00:30:14,380 --> 00:30:15,510
Speaker 9: Well, if the U.S.

601
00:30:15,530 --> 00:30:20,890
Speaker 8: 10-year go from 5.3, but actually now it's close to

602
00:30:20,890 --> 00:30:25,190
Speaker 8: 5.1 to 5.5, actually the total return on the year

603
00:30:25,370 --> 00:30:27,710
Speaker 8: is still going to be positive.

604
00:30:27,730 --> 00:30:29,070
Speaker 11: You are still up 2%, 3% on the year.

605
00:30:31,560 --> 00:30:34,360
Speaker 8: So the bigger picture is that so far this year,

606
00:30:34,500 --> 00:30:39,800
Speaker 8: in particular, competition for capital intensified, and that pushed up

607
00:30:39,920 --> 00:30:40,719
Speaker 8: real rates.

608
00:30:41,780 --> 00:30:45,090
Speaker 2: Are you in speaking terms with Rosenberg and Kosterich at BlackRock?

609
00:30:45,180 --> 00:30:45,660
Speaker 8: Of course.

610
00:30:45,770 --> 00:30:48,950
Speaker 2: Okay, when you three sit there, what do you think

611
00:30:48,990 --> 00:30:52,890
Speaker 2: of a 60-40 portfolio? It's like back in vogue, right?

612
00:30:53,750 --> 00:30:57,630
Speaker 8: Well, 60-40 doesn't necessarily include private markets, so we have

613
00:30:57,650 --> 00:31:01,590
Speaker 8: to increasingly consider the role private markets play in portfolios.

614
00:31:01,670 --> 00:31:02,930
Speaker 9: But what we.

615
00:31:02,870 --> 00:31:05,989
Speaker 8: Have seen so far is that because bonds are back,

616
00:31:06,100 --> 00:31:12,120
Speaker 8: having greater allocation to income-generating assets, even though its diversification-balanced

617
00:31:12,340 --> 00:31:17,040
Speaker 8: properties have decreased, having more bonds makes sense, as evidenced

618
00:31:17,380 --> 00:31:19,800
Speaker 8: in our asset allocation views this week.

619
00:31:20,240 --> 00:31:21,960
Speaker 5: You know, I've been on the show for 30 minutes

620
00:31:22,000 --> 00:31:24,620
Speaker 5: and we have not mentioned the Federal Reserve yet, which is,

621
00:31:24,940 --> 00:31:25,810
Speaker 5: I think, pretty interesting.

622
00:31:26,220 --> 00:31:27,650
Speaker 6: You're waiting for me.

623
00:31:28,810 --> 00:31:30,410
Speaker 2: Exactly. So what are.

624
00:31:30,350 --> 00:31:34,310
Speaker 5: Your thoughts there at BlackRock concerning the Fed? Where will

625
00:31:34,350 --> 00:31:36,730
Speaker 5: we be going? And, you know, are you worried about

626
00:31:36,770 --> 00:31:39,370
Speaker 5: any of these major changes in communications policy and the like?

627
00:31:40,130 --> 00:31:42,990
Speaker 8: Oh, wow. You know, I focus on the bigger macro

628
00:31:43,070 --> 00:31:47,060
Speaker 8: picture and markets are currently pricing, I think, more than

629
00:31:47,140 --> 00:31:51,670
Speaker 8: three hikes for until the end of next year. If

630
00:31:51,690 --> 00:31:55,370
Speaker 8: you look at CPI prints yesterday, it was quite hot

631
00:31:55,610 --> 00:31:58,800
Speaker 8: across the board, broad-based, and that kind of added to

632
00:31:58,820 --> 00:32:02,090
Speaker 8: the hiking case. But the reality is also that, you know,

633
00:32:02,110 --> 00:32:05,430
Speaker 8: look at the labor market. It gave them some kind

634
00:32:05,450 --> 00:32:07,850
Speaker 8: of room to wait as well. The bigger picture is that,

635
00:32:08,230 --> 00:32:12,590
Speaker 8: you know, like people interpret the September hike as the

636
00:32:12,630 --> 00:32:16,290
Speaker 8: beginning of a sustained series of hikes. But ultimately, that

637
00:32:16,430 --> 00:32:20,600
Speaker 8: also was down to preserve credibility. And that was important.

638
00:32:20,660 --> 00:32:23,280
Speaker 8: So we don't think that in itself necessarily is the

639
00:32:23,300 --> 00:32:25,340
Speaker 8: beginning of like a sustained hike.

640
00:32:25,560 --> 00:32:27,980
Speaker 2: In the time that we have left, the IMF in

641
00:32:28,000 --> 00:32:30,920
Speaker 2: Bangkok and Chairman Warr speaking tomorrow, I believe it is,

642
00:32:31,020 --> 00:32:33,980
Speaker 2: or with a 12-hour time zone, I can't remember where

643
00:32:34,020 --> 00:32:36,440
Speaker 2: it is. I have to ask you, Wei Li, about

644
00:32:36,510 --> 00:32:41,470
Speaker 2: your China. I am distressed by the general essays I

645
00:32:41,510 --> 00:32:46,410
Speaker 2: get of a lethargy in China. The kids can't get jobs.

646
00:32:46,570 --> 00:32:49,610
Speaker 2: I mean, forget about the politics of it, but do

647
00:32:49,650 --> 00:32:54,850
Speaker 2: you see a dampening... of nominal GDP and a dampening

648
00:32:54,890 --> 00:32:59,840
Speaker 2: of mood across China, where they're boxed into a societal

649
00:32:59,900 --> 00:33:00,880
Speaker 2: lethargy right now?

650
00:33:01,560 --> 00:33:03,940
Speaker 8: Well, there are really two Chinas. There is the part

651
00:33:03,960 --> 00:33:08,979
Speaker 8: of China that is doing well because of AI and.

652
00:33:09,060 --> 00:33:10,120
Speaker 10: The exports.

653
00:33:10,140 --> 00:33:12,610
Speaker 8: The exports that is really flying. And then there are

654
00:33:12,670 --> 00:33:16,070
Speaker 8: structurally challenged part of China. You talked about the low

655
00:33:17,750 --> 00:33:23,970
Speaker 8: employment of youth, but then more broadly, the property situation

656
00:33:24,050 --> 00:33:26,620
Speaker 8: is still kind of playing out, right? The overhang is

657
00:33:26,650 --> 00:33:29,100
Speaker 8: still playing out. And then on top of kind of the...

658
00:33:29,340 --> 00:33:32,860
Speaker 8: employment picture, aging population is plaguing China too, which is

659
00:33:32,900 --> 00:33:35,900
Speaker 8: why when it comes to China, we are quite selective.

660
00:33:35,960 --> 00:33:38,480
Speaker 8: We're neutral, but we prefer the part of the market

661
00:33:38,520 --> 00:33:41,700
Speaker 8: that is actually driving growth right now. And there is

662
00:33:41,740 --> 00:33:44,870
Speaker 8: the bigger picture, which is also in terms of translating

663
00:33:45,550 --> 00:33:50,970
Speaker 8: the market share into profitability. It's less straightforward in China,

664
00:33:51,010 --> 00:33:52,770
Speaker 8: so it requires an active approach.

665
00:33:52,810 --> 00:33:55,370
Speaker 2: Wei Li, thank you so much. Well, BlackRock, can't say

666
00:33:55,390 --> 00:33:58,170
Speaker 2: enough about our impact on LinkedIn, folks. One of the

667
00:33:58,190 --> 00:34:01,170
Speaker 2: reasons just to go to LinkedIn is to follow Wei

668
00:34:01,190 --> 00:34:07,080
Speaker 2: Li at BlackRock where she is a global chief investment

669
00:34:07,100 --> 00:34:09,810
Speaker 2: strategist as well. Thank you so much for being with us.

670
00:34:11,660 --> 00:34:15,810
Speaker 2: Stay with us. More from Bloomberg Surveillance coming up after this.

671
00:34:23,060 --> 00:34:26,660
Speaker 4: You're listening to the Bloomberg Surveillance Podcast. Catch us live

672
00:34:26,739 --> 00:34:28,799
Speaker 4: weekday afternoons from 7 to 10 a.m.

673
00:34:28,860 --> 00:34:29,260
Speaker 1: Eastern.

674
00:34:29,360 --> 00:34:32,670
Speaker 4: Listen on Apple CarPlay and Android Auto with the Bloomberg

675
00:34:32,690 --> 00:34:33,290
Speaker 4: Business app.

676
00:34:33,489 --> 00:34:35,190
Speaker 1: Or watch us live on YouTube.

677
00:34:35,570 --> 00:34:38,230
Speaker 2: For Ira Jersey, we had to bring someone that looks

678
00:34:38,250 --> 00:34:40,589
Speaker 2: at the short-term paper like Ira does. That would be

679
00:34:40,630 --> 00:34:45,530
Speaker 2: Winnie Caesar. Global head of strategy at Credit Suisse. I'm

680
00:34:45,550 --> 00:34:48,730
Speaker 2: thrilled she's in the studio today. Is there still trust

681
00:34:48,870 --> 00:34:51,020
Speaker 2: in the bond market? When you look at the plumbing

682
00:34:51,440 --> 00:34:55,480
Speaker 2: of the market, is there still an integrity to short-term paper?

683
00:34:55,790 --> 00:34:58,530
Speaker 12: I think that there's definitely still an integrity to short-term paper,

684
00:34:58,590 --> 00:35:01,839
Speaker 12: but we've noticed that the sensitivity to things that were

685
00:35:01,880 --> 00:35:05,980
Speaker 12: maybe second-tier economic data or a little bit less of

686
00:35:06,040 --> 00:35:08,970
Speaker 12: a market mover in the past tend to have amplified

687
00:35:09,110 --> 00:35:13,969
Speaker 12: effects more recently. And of course, recent Fed speak is

688
00:35:14,030 --> 00:35:17,010
Speaker 12: kind of ratcheting up some of the sensitivity to short-term

689
00:35:17,030 --> 00:35:17,689
Speaker 12: paper as well.

690
00:35:19,400 --> 00:35:22,489
Speaker 5: So we have to talk, since you're with credit sites,

691
00:35:22,530 --> 00:35:23,890
Speaker 5: we have to talk a little bit about credit.

692
00:35:23,969 --> 00:35:26,210
Speaker 6: So obviously we've had a lot of corporate.

693
00:35:25,910 --> 00:35:29,290
Speaker 5: Issuance, and we were just talking this morning before you

694
00:35:29,310 --> 00:35:32,810
Speaker 5: came in studio about something like CoreWeave's bonds being at

695
00:35:32,810 --> 00:35:36,910
Speaker 5: 1,200 basis points now in terms of option-adjusted spread. Talk

696
00:35:36,950 --> 00:35:41,049
Speaker 5: about your view, personal or via credit sites, of the

697
00:35:41,200 --> 00:35:45,660
Speaker 5: credit market now, and specifically these hyperscaler AI-related debt.

698
00:35:45,840 --> 00:35:48,200
Speaker 12: Yeah, so the credit markets have been really interesting this year.

699
00:35:48,790 --> 00:35:51,969
Speaker 12: really until the past few weeks, in aggregate, they had

700
00:35:52,010 --> 00:35:55,219
Speaker 12: looked rock solid. But when you started to decompose and

701
00:35:55,320 --> 00:35:58,040
Speaker 12: peel back the layers, there are some sectors that have

702
00:35:58,080 --> 00:36:01,440
Speaker 12: performed really well, obviously energy and basics, it's the commodities

703
00:36:01,480 --> 00:36:05,800
Speaker 12: inflation trade, whereas the hyperscalers, the technology, the triple Cs

704
00:36:06,200 --> 00:36:10,190
Speaker 12: have been decompressing. And there's that kind of reassortment of

705
00:36:10,770 --> 00:36:13,729
Speaker 12: valuations and what looks cheap and what doesn't look cheap.

706
00:36:13,770 --> 00:36:16,890
Speaker 12: And it's very unusual relative to history, especially in the

707
00:36:16,910 --> 00:36:20,210
Speaker 12: investment grade market. Some of this is fundamental in that

708
00:36:20,270 --> 00:36:23,739
Speaker 12: people are worried about the outlook for inflation, the Fed

709
00:36:23,760 --> 00:36:27,020
Speaker 12: hiking outlook. What are these lower rated issuers going to do?

710
00:36:27,440 --> 00:36:29,160
Speaker 12: But some of it is very technical in terms of

711
00:36:29,200 --> 00:36:30,180
Speaker 12: portfolio construction.

712
00:36:30,770 --> 00:36:32,350
Speaker 2: Okay, I got to ask it to you. I mean, folks,

713
00:36:32,610 --> 00:36:35,109
Speaker 2: they're like talking to each other. I have no clue

714
00:36:35,130 --> 00:36:38,050
Speaker 2: what they're talking about, but there they are. I want

715
00:36:38,180 --> 00:36:40,719
Speaker 2: to talk CDS right now, which is completely away from

716
00:36:40,780 --> 00:36:43,580
Speaker 2: both of you. I bring up the Oracle CDS, which

717
00:36:43,600 --> 00:36:46,580
Speaker 2: is to get people going right now. I bring up

718
00:36:46,620 --> 00:36:49,850
Speaker 2: a trading envelope of that. And the answer is we've

719
00:36:49,870 --> 00:36:52,710
Speaker 2: got some substantial moves here. I'm eyeballing it as a

720
00:36:52,950 --> 00:36:58,180
Speaker 2: two-standard deviation move, worse, sir, for Oracle. To grizzled short-term

721
00:36:58,239 --> 00:37:00,580
Speaker 2: pros like you, Ira, what does that mean for you?

722
00:37:01,000 --> 00:37:04,469
Speaker 6: Well, you know, when... Credit default swaps, right? They're just

723
00:37:04,530 --> 00:37:05,490
Speaker 6: a spread, right?

724
00:37:05,770 --> 00:37:08,250
Speaker 5: So I actually wrote the Credit Suisse handbook on credit

725
00:37:08,270 --> 00:37:09,270
Speaker 5: default swaps back in 2005.

726
00:37:09,250 --> 00:37:12,020
Speaker 6: That helped the bank. Well, we did OK in 2007

727
00:37:12,020 --> 00:37:12,219
Speaker 6: to 2009.

728
00:37:12,219 --> 00:37:13,200
Speaker 9: It was after that.

729
00:37:19,489 --> 00:37:22,310
Speaker 5: Credit default swaps, as they widen it, they are a

730
00:37:22,350 --> 00:37:26,670
Speaker 5: signal that you're going to have wider and higher borrowing

731
00:37:26,690 --> 00:37:29,460
Speaker 5: costs for these firms. But one of the things that

732
00:37:29,480 --> 00:37:33,500
Speaker 5: I want to ask you, Winnie, is when we look

733
00:37:33,520 --> 00:37:35,320
Speaker 5: at all of this issuance, and we do have a

734
00:37:35,340 --> 00:37:38,940
Speaker 5: lot of corporate issuance, how.

735
00:37:38,860 --> 00:37:42,640
Speaker 6: Well digested is it really being? We do see new names, right?

736
00:37:42,660 --> 00:37:46,650
Speaker 5: So obviously there's diversification factors that are at play. But

737
00:37:46,730 --> 00:37:49,950
Speaker 5: when we, you know, is there that much depth in

738
00:37:50,010 --> 00:37:51,820
Speaker 5: demand for this paper overall?

739
00:37:52,710 --> 00:37:56,089
Speaker 12: Yeah, what's interesting is we are seeing deals get digested, right?

740
00:37:56,110 --> 00:37:59,549
Speaker 12: Like we haven't seen a hyperscaler deal fail to clear

741
00:37:59,570 --> 00:38:02,160
Speaker 12: the market. We haven't seen a high yield bond deal

742
00:38:02,280 --> 00:38:06,000
Speaker 12: in the data center infrastructure space really have a massive

743
00:38:06,040 --> 00:38:08,980
Speaker 12: failure as well. Things are pricing at wider levels across

744
00:38:09,040 --> 00:38:12,540
Speaker 12: investment grade and high yield. So things are definitely getting digested.

745
00:38:12,900 --> 00:38:16,200
Speaker 12: But the analysis that investors are having to run is, okay,

746
00:38:16,640 --> 00:38:19,890
Speaker 12: I know more is coming. what is the appropriate yield

747
00:38:19,910 --> 00:38:22,190
Speaker 12: to compensate me today when I know that there's a

748
00:38:22,270 --> 00:38:22,910
Speaker 12: lot more coming?

749
00:38:22,930 --> 00:38:25,230
Speaker 2: Okay, so here's the, I brought this up, folks. Ira

750
00:38:25,250 --> 00:38:27,840
Speaker 2: Jersey taught me how to do this. Winnie didn't. The

751
00:38:27,920 --> 00:38:32,660
Speaker 2: Amazon 6% way out, 2076. The only one in the

752
00:38:32,700 --> 00:38:34,300
Speaker 2: room that's going to see the end of that is...

753
00:38:34,730 --> 00:38:39,450
Speaker 2: Alexis Christophorus. And the reality is Amazon, which is doing

754
00:38:39,489 --> 00:38:44,330
Speaker 2: better than good, has gone from 100 to 89. I mean,

755
00:38:44,410 --> 00:38:48,440
Speaker 2: even if that's a good quality, that's quite a price decline, Ira, right? Yeah.

756
00:38:48,840 --> 00:38:50,980
Speaker 5: And a lot of that's going to be because of rate, right?

757
00:38:51,020 --> 00:38:52,460
Speaker 5: That's not only because of credit spread.

758
00:38:52,480 --> 00:38:53,839
Speaker 2: Or they're readjusting to the future.

759
00:38:53,860 --> 00:38:55,460
Speaker 5: Part of it's credit spread and part of it's the

760
00:38:55,480 --> 00:38:58,070
Speaker 5: fact that when that bond was issued, we were at 5%,

761
00:38:58,070 --> 00:38:58,450
Speaker 5: 30-year yields.

762
00:38:58,489 --> 00:38:58,969
Speaker 2: Not 5.5%, right?

763
00:38:59,010 --> 00:38:59,190
Speaker 8: Yeah.

764
00:39:02,530 --> 00:39:08,910
Speaker 5: So you can't completely disconnect, particularly from IG names, the

765
00:39:08,950 --> 00:39:13,500
Speaker 5: rate component of that. As we think when we hear

766
00:39:13,640 --> 00:39:19,860
Speaker 5: about credit quality and aggregate, how concerned are you about earnings,

767
00:39:20,020 --> 00:39:21,259
Speaker 5: about credit quality?

768
00:39:22,660 --> 00:39:24,670
Speaker 6: Obviously, there's still demand, as you mentioned.

769
00:39:25,090 --> 00:39:28,190
Speaker 5: But are we going to see a deterioration as companies

770
00:39:28,330 --> 00:39:32,080
Speaker 5: either have to pay more wages or maybe growth slows?

771
00:39:32,320 --> 00:39:32,560
Speaker 8: Yeah.

772
00:39:32,680 --> 00:39:34,879
Speaker 12: I think that from a credit quality perspective, the first

773
00:39:34,920 --> 00:39:37,719
Speaker 12: thing we are always looking at as credit people is

774
00:39:37,780 --> 00:39:40,219
Speaker 12: the interest coverage levels. And that is going to be

775
00:39:40,300 --> 00:39:43,010
Speaker 12: under pressure as borrowing costs are higher. And we've seen

776
00:39:43,030 --> 00:39:47,410
Speaker 12: a wave of intentional re-leveraging across some cohorts of the market.

777
00:39:47,770 --> 00:39:50,450
Speaker 12: When you go down into the leverage finance space, we've

778
00:39:50,469 --> 00:39:54,200
Speaker 12: seen much less of that intentional leveraging, but it's been

779
00:39:54,219 --> 00:39:57,120
Speaker 12: a bit problematic more recently because there's no sponsor to

780
00:39:57,140 --> 00:39:59,799
Speaker 12: sponsor M & A. There's no exit opportunities for some

781
00:39:59,820 --> 00:40:01,100
Speaker 12: of these smaller cap companies.

782
00:40:01,180 --> 00:40:03,850
Speaker 2: What's the integrity you see in money market funds right now?

783
00:40:04,860 --> 00:40:07,190
Speaker 12: I think that I'm never going to bet against money

784
00:40:07,210 --> 00:40:10,650
Speaker 12: market funds. I mean, and especially as we are seeing

785
00:40:10,910 --> 00:40:16,110
Speaker 12: more rate hikes and cash is, you know, yielding again.

786
00:40:16,130 --> 00:40:18,950
Speaker 2: We're up to $ 8 trillion. Do you just go to

787
00:40:18,950 --> 00:40:20,590
Speaker 2: $ 9 trillion or $ 10 trillion?

788
00:40:20,650 --> 00:40:22,930
Speaker 12: I mean, when you think about the cash that that

789
00:40:22,969 --> 00:40:27,279
Speaker 12: cash generates, there is just this tremendous compounding effect, even

790
00:40:27,340 --> 00:40:30,600
Speaker 12: as you see amazing numbers. muni etf inflows over the

791
00:40:30,640 --> 00:40:33,339
Speaker 12: past few weeks people are trying to reallocate but like

792
00:40:33,800 --> 00:40:36,840
Speaker 12: that compounding effect cannot be underestimated.

793
00:40:36,260 --> 00:40:38,280
Speaker 2: Winnie thank you so much winnie caesar with his global

794
00:40:38,300 --> 00:40:43,069
Speaker 2: head strategy at credit sites in studio with us stay

795
00:40:43,090 --> 00:40:47,170
Speaker 2: with us more from bloomberg surveillance coming up after this.

796
00:40:54,239 --> 00:40:57,830
Speaker 4: You're listening to the Bloomberg Surveillance Podcast. Catch us live

797
00:40:57,910 --> 00:40:59,989
Speaker 4: weekday afternoons from 7 to 10 a.m.

798
00:41:00,050 --> 00:41:00,430
Speaker 1: Eastern.

799
00:41:00,530 --> 00:41:03,830
Speaker 4: Listen on Apple CarPlay and Android Auto with the Bloomberg

800
00:41:03,860 --> 00:41:06,380
Speaker 4: Business app or watch us live on YouTube.

801
00:41:06,739 --> 00:41:08,680
Speaker 2: Let me catch up with us right now. I want

802
00:41:08,700 --> 00:41:11,399
Speaker 2: to get to the midterm elections and how many business days?

803
00:41:11,460 --> 00:41:15,960
Speaker 2: It's like 13 business days. until we get to the midterms.

804
00:41:16,239 --> 00:41:18,280
Speaker 2: If you look at the weekends, that's just a focus

805
00:41:18,700 --> 00:41:22,120
Speaker 2: on the Denver Broncos. Cantrell here because she can't concentrate.

806
00:41:22,180 --> 00:41:22,660
Speaker 6: Tonight, Broncos.

807
00:41:22,680 --> 00:41:23,720
Speaker 2: We're going to come back.

808
00:41:23,800 --> 00:41:26,540
Speaker 13: We've had a really difficult season so far, but we're

809
00:41:26,560 --> 00:41:26,960
Speaker 13: going to come back.

810
00:41:26,980 --> 00:41:30,340
Speaker 2: But this is like a real football game tonight. I mean, Broncos, Seattle.

811
00:41:30,360 --> 00:41:30,799
Speaker 3: Oh, my God.

812
00:41:30,880 --> 00:41:33,239
Speaker 11: We're just like fingers crossed that Bo Nix.

813
00:41:33,120 --> 00:41:35,969
Speaker 2: Delivers, honestly. That's like late season football tonight.

814
00:41:35,989 --> 00:41:38,530
Speaker 13: I really do appreciate that we're leading with this, Tom.

815
00:41:38,570 --> 00:41:40,890
Speaker 13: This has actually been more of a center of focus

816
00:41:40,930 --> 00:41:41,490
Speaker 13: in the midterms.

817
00:41:41,670 --> 00:41:43,969
Speaker 2: But it's a focus. But do you seriously and the

818
00:41:44,010 --> 00:41:47,930
Speaker 2: folks after this is after Libby's contribution yesterday with Nathan

819
00:41:47,950 --> 00:41:51,680
Speaker 2: Hager to money markets in the midterms in Washington. What

820
00:41:51,739 --> 00:41:55,080
Speaker 2: was the body language at that seminar yesterday?

821
00:41:55,219 --> 00:41:58,480
Speaker 13: Well, yeah, I would say just in general in Washington,

822
00:41:58,500 --> 00:42:01,200
Speaker 13: I was on the Hill afterward. And, you know, Republicans

823
00:42:01,340 --> 00:42:03,660
Speaker 13: are pretty down and out on the House. I think

824
00:42:03,700 --> 00:42:07,770
Speaker 13: that they've just almost capitulated. that they are going to

825
00:42:08,050 --> 00:42:10,270
Speaker 13: likely the House will flip. Of course, Republicans will have

826
00:42:10,290 --> 00:42:12,850
Speaker 13: a three seat majority, as you know. So Democrats don't

827
00:42:12,890 --> 00:42:14,810
Speaker 13: need to do much to take it back. But it

828
00:42:14,850 --> 00:42:17,900
Speaker 13: did feel like this sort of resignation was setting in.

829
00:42:17,920 --> 00:42:20,779
Speaker 13: I think the Senate, people still think that Republicans can

830
00:42:20,820 --> 00:42:22,879
Speaker 13: pull it out on the Senate. I think regardless, though,

831
00:42:22,900 --> 00:42:24,580
Speaker 13: it's going to be a very small majority.

832
00:42:24,600 --> 00:42:28,129
Speaker 2: Within your holistic research at PIMCO, Do you have any

833
00:42:28,310 --> 00:42:32,970
Speaker 2: measurement of turnout now? To me, that's the immense mystery.

834
00:42:33,140 --> 00:42:36,959
Speaker 13: Yeah, I think it's easy to read too much into

835
00:42:37,080 --> 00:42:40,220
Speaker 13: early vote. I mean, you are seeing some states that.

836
00:42:40,100 --> 00:42:41,339
Speaker 11: Have started the early vote.

837
00:42:41,360 --> 00:42:43,560
Speaker 13: Of course, about half of the electorate will have voted

838
00:42:43,640 --> 00:42:47,180
Speaker 13: before the actual election. And the turnout is high. But

839
00:42:47,219 --> 00:42:48,529
Speaker 13: I would just say there have been a lot of

840
00:42:48,590 --> 00:42:51,910
Speaker 13: sort of false positives in terms of the early vote.

841
00:42:51,950 --> 00:42:53,350
Speaker 13: You know, what you're just seeing, though, in terms of

842
00:42:53,370 --> 00:42:56,390
Speaker 13: the enthusiasm gap, Tom, so it's You can look at

843
00:42:56,410 --> 00:42:58,690
Speaker 13: prediction markets, but we also like to look at sort

844
00:42:58,730 --> 00:43:02,390
Speaker 13: of old school economy, old economy metrics. One is the

845
00:43:02,430 --> 00:43:05,370
Speaker 13: generic ballot, just the difference between general view of one

846
00:43:05,390 --> 00:43:08,950
Speaker 13: party over another. Democrats lead by D plus eight, D

847
00:43:08,969 --> 00:43:12,340
Speaker 13: plus nine. And then the enthusiasm gap, and that oftentimes

848
00:43:12,390 --> 00:43:16,839
Speaker 13: has translated into voter turnout. That's a Democrat plus 11.

849
00:43:16,840 --> 00:43:21,020
Speaker 13: So those are both in wave territory. They're consistent with 2010.

850
00:43:21,020 --> 00:43:24,540
Speaker 13: They're consistent with 2006. Those were those were waves.

851
00:43:24,620 --> 00:43:26,660
Speaker 2: And in terms of the midterms, the real problem here

852
00:43:26,700 --> 00:43:30,500
Speaker 2: is I have no enthusiasm this morning. Canadians lost last

853
00:43:30,580 --> 00:43:34,549
Speaker 2: night to the Capitals with enthusiasm as Ira Jersey of

854
00:43:34,590 --> 00:43:37,530
Speaker 2: Bloomberg Intelligence with Libby Cantrell of PIMCO.

855
00:43:37,710 --> 00:43:37,810
Speaker 6: So.

856
00:43:38,469 --> 00:43:40,529
Speaker 5: Libby, we're talking a lot about the federal government and

857
00:43:40,550 --> 00:43:42,610
Speaker 5: the federal elections, but there's a lot of other state

858
00:43:42,900 --> 00:43:46,319
Speaker 5: elections and the like that are also going on. And

859
00:43:46,660 --> 00:43:50,609
Speaker 5: some of the major investment in AI is really being

860
00:43:50,640 --> 00:43:54,310
Speaker 5: affected by decisions at the local and state levels. Talk

861
00:43:54,350 --> 00:43:57,610
Speaker 5: about those dynamics and how you're thinking about it at

862
00:43:58,450 --> 00:44:00,850
Speaker 5: you know, your firm from an investment perspective? Like, are

863
00:44:00,890 --> 00:44:03,600
Speaker 5: there other things that we should be paying attention to

864
00:44:03,719 --> 00:44:05,919
Speaker 5: outside of who holds the House and the Senate?

865
00:44:06,160 --> 00:44:08,700
Speaker 13: Yeah, I mean, at least for the foreseeable future, we

866
00:44:08,739 --> 00:44:11,600
Speaker 13: think that, you know, policy will really be a state

867
00:44:11,680 --> 00:44:15,520
Speaker 13: issue in terms of AI, not a federal one, particularly

868
00:44:15,540 --> 00:44:18,750
Speaker 13: if Donald, if President Trump sort of stays consistent with

869
00:44:18,770 --> 00:44:20,750
Speaker 13: what he's been talking about and how he doesn't want

870
00:44:20,770 --> 00:44:21,710
Speaker 13: to necessarily regulate.

871
00:44:21,750 --> 00:44:22,630
Speaker 9: That could obviously change.

872
00:44:22,969 --> 00:44:25,190
Speaker 11: But the state level, this is absolutely on the ballot.

873
00:44:25,570 --> 00:44:29,330
Speaker 13: And you're seeing 36 of 50 states are going to

874
00:44:29,370 --> 00:44:33,719
Speaker 13: vote for their future governors. Many governors are running on

875
00:44:33,760 --> 00:44:38,900
Speaker 13: an anti-data center in particular platform. Many candidates in these races,

876
00:44:38,960 --> 00:44:40,980
Speaker 13: both Democrat and Republican, I think this is the most

877
00:44:41,060 --> 00:44:43,520
Speaker 13: interesting dynamic of all of this issue. This issue is

878
00:44:43,660 --> 00:44:47,700
Speaker 13: so bipartisan that now you're seeing, you know, the gubernatorial

879
00:44:47,760 --> 00:44:51,180
Speaker 13: candidates on both sides of the aisle advocate for pretty

880
00:44:51,219 --> 00:44:56,690
Speaker 13: draconian policy responses. Lots of candidates, particularly in Ohio, where

881
00:44:56,710 --> 00:44:58,930
Speaker 13: there's a lot of capacity that's sort of in the hopper,

882
00:44:58,969 --> 00:45:02,410
Speaker 13: if you will. Both governor candidates are advocating for a

883
00:45:02,510 --> 00:45:05,830
Speaker 13: full statewide moratorium. So I think that what we're going

884
00:45:05,850 --> 00:45:08,810
Speaker 13: to see in 2027, I would expect, I just was

885
00:45:08,830 --> 00:45:09,469
Speaker 13: saying this on air.

886
00:45:09,850 --> 00:45:13,250
Speaker 11: Politics leads policy. Policy follows politics.

887
00:45:13,290 --> 00:45:15,549
Speaker 13: The politics of this are very bad. And we're not

888
00:45:15,590 --> 00:45:18,760
Speaker 13: necessarily endorsing that, but they're very bad. And so we're

889
00:45:18,800 --> 00:45:24,020
Speaker 13: expecting more friction, more moratoria, more restrictions just in general.

890
00:45:24,100 --> 00:45:27,719
Speaker 13: And that could definitely at least put some potholes in

891
00:45:27,739 --> 00:45:28,520
Speaker 13: this AI story.

892
00:45:28,640 --> 00:45:31,969
Speaker 2: What I hear interview to interview is, is that Democrats

893
00:45:32,030 --> 00:45:35,029
Speaker 2: are challenged to come up with a theme. What does

894
00:45:35,090 --> 00:45:39,390
Speaker 2: Speaker Jeffries do the first Wednesday of November when he

895
00:45:39,450 --> 00:45:40,250
Speaker 2: takes the House?

896
00:45:40,610 --> 00:45:43,610
Speaker 13: Yeah, so one staffer told me yesterday, he said the

897
00:45:43,660 --> 00:45:46,020
Speaker 13: real challenge for Democrats is will they want to make

898
00:45:46,080 --> 00:45:48,360
Speaker 13: a point or will they want to make laws? And

899
00:45:48,380 --> 00:45:50,720
Speaker 13: I think that is really the issue.

900
00:45:50,739 --> 00:45:52,500
Speaker 2: And what's your study of that right now?

901
00:45:52,980 --> 00:45:54,580
Speaker 13: Well, I don't think they're going to impeach the president.

902
00:45:54,660 --> 00:45:57,719
Speaker 13: I think they've learned that lesson that just takes up

903
00:45:57,760 --> 00:46:02,430
Speaker 13: way too much airtime, politically doesn't really deliver. the intended results.

904
00:46:02,810 --> 00:46:05,310
Speaker 13: They may impeach, you know, Secretary Hegseth or what have you. That,

905
00:46:05,350 --> 00:46:07,930
Speaker 13: of course, conviction takes two-thirds of the Senate.

906
00:46:07,969 --> 00:46:08,630
Speaker 11: That won't happen.

907
00:46:09,219 --> 00:46:11,419
Speaker 13: But I think they're, you know, it sounds like they're

908
00:46:11,460 --> 00:46:13,940
Speaker 13: really going to try to focus on two or three

909
00:46:14,040 --> 00:46:17,279
Speaker 13: issues where they're actually, they could actually get over the

910
00:46:17,320 --> 00:46:22,549
Speaker 13: finish line with the president. Affordability, so healthcare, housing could

911
00:46:22,570 --> 00:46:25,029
Speaker 13: be part of this. Data centers could be also. They

912
00:46:25,770 --> 00:46:28,569
Speaker 13: the House has already passed this data center bill. The

913
00:46:28,590 --> 00:46:30,640
Speaker 13: Senate failed to pass that. We'll see if they've been

914
00:46:30,660 --> 00:46:32,580
Speaker 13: the lame duck. If they don't, you could see.

915
00:46:32,480 --> 00:46:33,320
Speaker 11: That in the new Congress.

916
00:46:33,600 --> 00:46:35,430
Speaker 13: So I think they're going to try to pick kind

917
00:46:35,450 --> 00:46:38,430
Speaker 13: of the low-hanging fruit, if you will, things that actually

918
00:46:38,810 --> 00:46:41,410
Speaker 13: could get the president's signature. I will just say the

919
00:46:41,469 --> 00:46:45,160
Speaker 13: big open question is, do Democrats take back control of

920
00:46:45,200 --> 00:46:46,860
Speaker 13: the Senate? Not to be too wonky here, but I

921
00:46:46,900 --> 00:46:47,899
Speaker 13: know I can.

922
00:46:47,820 --> 00:46:48,700
Speaker 11: Walk out with you guys.

923
00:46:49,380 --> 00:46:52,780
Speaker 13: Because for most legislation, you need 60 votes in the Senate.

924
00:46:52,840 --> 00:46:55,020
Speaker 13: Democrats will not get that even if they take back

925
00:46:55,080 --> 00:46:59,629
Speaker 13: the Senate. However, reconciliation, it's a specific type of bill

926
00:46:59,670 --> 00:47:01,270
Speaker 13: that they can pass with just 50 votes.

927
00:47:01,290 --> 00:47:02,750
Speaker 11: So if If the.

928
00:47:02,650 --> 00:47:05,870
Speaker 13: Democrats take back both chambers, then you could actually see

929
00:47:05,890 --> 00:47:09,230
Speaker 13: them try to pass legislation around a couple of issues

930
00:47:09,690 --> 00:47:12,430
Speaker 13: and with the hopes that President Trump signs into law

931
00:47:12,550 --> 00:47:13,990
Speaker 13: or at least daring him not.

932
00:47:13,810 --> 00:47:14,910
Speaker 11: To sign it into law.

933
00:47:14,930 --> 00:47:16,069
Speaker 9: So, well, you know, we'll see.

934
00:47:16,130 --> 00:47:18,430
Speaker 13: This is still obviously a real work in progress and

935
00:47:18,469 --> 00:47:20,570
Speaker 13: the election still needs to happen in the first place.

936
00:47:20,890 --> 00:47:22,899
Speaker 6: So one of the things. that I hate.

937
00:47:22,920 --> 00:47:25,000
Speaker 5: I think it's the, the dumbest debate that Congress has

938
00:47:25,060 --> 00:47:28,400
Speaker 5: is over the debt limit. And with the, you and

939
00:47:28,420 --> 00:47:28,860
Speaker 5: me both.

940
00:47:29,340 --> 00:47:29,820
Speaker 2: Okay.

941
00:47:30,200 --> 00:47:31,359
Speaker 1: I'm glad I have that.

942
00:47:31,450 --> 00:47:32,089
Speaker 9: Oh my goodness.

943
00:47:32,290 --> 00:47:34,009
Speaker 13: The amount of work that we have to do at

944
00:47:34,030 --> 00:47:35,930
Speaker 13: PIM go, uh, in advance of that.

945
00:47:36,010 --> 00:47:36,290
Speaker 3: Yeah.

946
00:47:36,390 --> 00:47:36,990
Speaker 6: It's crazy.

947
00:47:37,030 --> 00:47:37,230
Speaker 8: Right.

948
00:47:37,250 --> 00:47:39,270
Speaker 5: We wind up having to do these daily models. What

949
00:47:39,330 --> 00:47:40,430
Speaker 5: is the X date and all this other stuff?

950
00:47:40,450 --> 00:47:42,009
Speaker 11: You have to take it seriously too, of course. And

951
00:47:42,030 --> 00:47:44,259
Speaker 11: we're fiduciaries. So it does affect the way that we

952
00:47:44,320 --> 00:47:45,720
Speaker 11: invest in bills, for instance.

953
00:47:46,160 --> 00:47:46,580
Speaker 2: Yeah.

954
00:47:46,860 --> 00:47:49,080
Speaker 5: And so obviously you see that, right? Those T bills

955
00:47:49,160 --> 00:47:51,600
Speaker 5: that are kind of in the crosshairs always trade cheap.

956
00:47:53,140 --> 00:47:55,620
Speaker 2: Tom, I feel like I'm in the fixed income cafe.

957
00:47:55,660 --> 00:47:55,990
Speaker 8: I love it.

958
00:47:56,020 --> 00:47:57,180
Speaker 9: I'm here for the Broncos and Bonds.

959
00:47:57,200 --> 00:47:58,620
Speaker 2: I mean, please guys, have me back. Let me take

960
00:47:58,660 --> 00:48:00,620
Speaker 2: over here. What does President Trump need to do to

961
00:48:00,680 --> 00:48:19,360
Speaker 2: help his GOP In the next 13 business days.

962
00:48:19,420 --> 00:48:22,580
Speaker 13: I mean, I think he has to honestly pivot this rhetoric.

963
00:48:22,640 --> 00:48:26,399
Speaker 13: I mean, he really needs to take the affordability issue seriously.

964
00:48:26,840 --> 00:48:29,870
Speaker 13: He needs to, you know, assuage people that he's going

965
00:48:29,930 --> 00:48:32,610
Speaker 13: to do a bunch of things. And, you know, when

966
00:48:32,630 --> 00:48:35,790
Speaker 13: he comes back in a new Congress, I just think

967
00:48:35,830 --> 00:48:37,690
Speaker 13: that as we've talked about, lots of folks.

968
00:48:37,550 --> 00:48:39,969
Speaker 11: Have already voted. The sentiment is incredibly calcified.

969
00:48:40,170 --> 00:48:42,029
Speaker 13: And the other thing, Tom, I'll just say is that

970
00:48:42,090 --> 00:48:46,820
Speaker 13: this angst among voters is has been brewing since COVID.

971
00:48:46,880 --> 00:48:47,819
Speaker 11: So, you know, the.

972
00:48:47,800 --> 00:48:51,900
Speaker 13: Democrats were the casualty of this in 2022 and 2024.

973
00:48:51,900 --> 00:48:56,109
Speaker 13: Now Republicans will be. I think Democrats could over-interpret their

974
00:48:56,150 --> 00:48:58,690
Speaker 13: mandate here. Think it more as an endorsement of their

975
00:48:58,750 --> 00:49:01,969
Speaker 13: own party versus a protest vote. And especially in 2028,

976
00:49:01,969 --> 00:49:02,850
Speaker 13: voters will be shopping.

977
00:49:02,969 --> 00:49:04,970
Speaker 2: I hope I see you five more times in the

978
00:49:04,989 --> 00:49:07,879
Speaker 2: next 13 business days. Good luck to the Broncos tonight.

979
00:49:07,900 --> 00:49:08,310
Speaker 13: Thank you.

980
00:49:08,320 --> 00:49:09,290
Speaker 1: We need it. We need it.

981
00:49:09,300 --> 00:49:09,980
Speaker 2: Fingers crossed.

982
00:49:10,080 --> 00:49:15,009
Speaker 4: This is the Bloomberg Surveillance Podcast, available on Apple, Spotify,

983
00:49:15,130 --> 00:49:17,270
Speaker 4: and anywhere else you get your podcasts.

984
00:49:17,830 --> 00:49:19,450
Speaker 1: Listen live each weekday, 7 to 10.

985
00:49:20,200 --> 00:49:20,419
Speaker 8: A.m.

986
00:49:20,500 --> 00:49:25,980
Speaker 4: Eastern, on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg

987
00:49:26,020 --> 00:49:29,380
Speaker 4: Business app. You can also watch us live every weekday

988
00:49:29,460 --> 00:49:32,280
Speaker 4: on YouTube and always on the Bloomberg Terminal.