WEBVTT - Bloomberg Surveillance TV: July 31st, 2025 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.360 with Lisa Bromwitz and am Marie Hordern. Join us each 0:00:18.480 --> 0:00:21.360 day for insight from the best in markets, economics, and 0:00:21.400 --> 0:00:24.720 geopolitics from our global headquarters in New York City. We 0:00:24.760 --> 0:00:27.400 are live on Bloomberg Television weekday mornings from six to 0:00:27.480 --> 0:00:31.000 nine am Eastern. Subscribe to the podcast on Apple, Spotify, 0:00:31.200 --> 0:00:33.479 or anywhere else you listen, and as always on the 0:00:33.479 --> 0:00:37.040 Bloomberg Terminal and the Bloomberg Business app. Joining us now 0:00:37.080 --> 0:00:39.839 to discuss is the former Kansas City Fed President Esther. 0:00:39.920 --> 0:00:42.479 George Esther, Welcome back to the program. I remember your 0:00:42.520 --> 0:00:45.519 descent in twenty nineteen. I remember your descent. I think 0:00:45.520 --> 0:00:47.760 it was in twenty twenty two. You've got some experience. 0:00:47.800 --> 0:00:50.880 Can you describe for us what it's like entering the room, 0:00:51.120 --> 0:00:53.440 the committee has a conversation and you say, you know what, 0:00:53.800 --> 0:00:55.760 I disagree, I think we should be going in a 0:00:55.760 --> 0:00:56.480 different direction. 0:00:58.400 --> 0:01:02.240 Well, it is and parcel of decision making in a 0:01:02.320 --> 0:01:07.959 large committee, in my view, and you approach those conversations, 0:01:08.000 --> 0:01:11.720 those decisions in a way that I think is respectful 0:01:11.760 --> 0:01:14.280 of what you're hearing around the table, that you've taken 0:01:14.280 --> 0:01:18.840 into account, agree with the chairman. You want to acknowledge 0:01:18.880 --> 0:01:22.720 that you are listening and understand what the arguments are. 0:01:22.760 --> 0:01:26.280 But at the end of the day, decision making is difficult, 0:01:26.319 --> 0:01:29.679 and I would argue it is particularly difficult in times 0:01:29.800 --> 0:01:33.120 when the read of the data is not so clear 0:01:33.240 --> 0:01:36.800 across the table, and I always felt it was as 0:01:36.880 --> 0:01:40.840 much an obligation to the public to express. 0:01:40.360 --> 0:01:42.640 Those views, to be. 0:01:42.680 --> 0:01:45.760 Respectful again of what you've heard, but at the end 0:01:45.800 --> 0:01:49.240 of the day, to really voice how you see the 0:01:49.280 --> 0:01:51.680 economy and the appropriate stance of policy. 0:01:51.920 --> 0:01:54.880 We saw a pretty big divide represented by the views 0:01:55.040 --> 0:01:59.440 of FED Governor Member Chris Waller as well as FED 0:01:59.520 --> 0:02:02.160 chair Jap Powell. Both have a very different view of 0:02:02.160 --> 0:02:04.880 the labor market, and John's been really good about accentuating 0:02:04.880 --> 0:02:06.720 the point that we only have two months of data. 0:02:07.280 --> 0:02:10.480 Do we have enough time to really bridge that gap 0:02:10.520 --> 0:02:13.800 between the two men to really understand whether this labor 0:02:13.840 --> 0:02:17.240 market truly is stable and solid or whether there are cracks. 0:02:19.040 --> 0:02:22.520 Well, I heard earlier a comment on your program that 0:02:22.600 --> 0:02:25.440 talked about each time you finish up one meeting and 0:02:25.520 --> 0:02:27.680 think you have plenty of time to see the data 0:02:27.760 --> 0:02:29.320 for the next that. 0:02:29.360 --> 0:02:30.600 Is never conclusive. 0:02:30.760 --> 0:02:33.840 You will always face uncertainty around what the data is 0:02:33.880 --> 0:02:37.120 telling you and whether the trends you're relying on are 0:02:37.160 --> 0:02:40.240 about to shift or whether they will continue. And so 0:02:40.400 --> 0:02:42.480 that of course is going to be the focus in 0:02:42.520 --> 0:02:47.080 bringing these two views to some kind of consensus. I'd 0:02:47.080 --> 0:02:51.840 be surprised if two months resolves that, but obviously both 0:02:52.000 --> 0:02:56.959 we'll be looking very carefully to try to reconcile how 0:02:56.960 --> 0:02:58.960 the economy's unfolding by that time. 0:02:59.280 --> 0:03:01.640 Is your sense there's quite a bit of disagreement on 0:03:01.720 --> 0:03:04.079 the ending point, because certainly on Wall Street there's a 0:03:04.080 --> 0:03:06.800 great deal of uncertainty about whether the neutral rate is 0:03:06.840 --> 0:03:09.320 something closer to four percent or whether it's closer to 0:03:09.360 --> 0:03:11.840 three percent. Do you get the sense that there's that 0:03:12.040 --> 0:03:15.320 type of disagreement just among FED members. 0:03:16.240 --> 0:03:21.440 Well, at some level, Lisa, It is absolutely the issue 0:03:21.639 --> 0:03:26.640 at hand, because when you are trying to specify your policy, 0:03:26.760 --> 0:03:30.080 when you're trying to describe it, particularly after a time 0:03:30.639 --> 0:03:34.400 when you brought down rates by one hundred basis points, 0:03:34.880 --> 0:03:38.120 trying to calibrate around what is an equilibrium, what we 0:03:38.160 --> 0:03:41.600 should we be expecting that the endgame is and so 0:03:41.680 --> 0:03:44.440 you see that in a long run sense in the 0:03:44.480 --> 0:03:48.120 dot plots. But of course, for any given stage in 0:03:48.160 --> 0:03:51.360 the economic cycle, you'd be very hard pressed to know 0:03:51.440 --> 0:03:54.640 exactly what you're looking for. So that I think, at 0:03:54.680 --> 0:03:56.680 the end of the day is really the question is 0:03:56.720 --> 0:04:00.560 this mildly restricted policy? Is it restrictive? Is it not 0:04:00.640 --> 0:04:04.240 restrictive at all relative to the outcomes we're getting? Is 0:04:04.840 --> 0:04:07.200 at the heart of what the committee is debating. 0:04:07.440 --> 0:04:09.800 There seems to be disagreements on both sides of the 0:04:09.840 --> 0:04:12.160 mandate as the not just on the inflation story, but 0:04:12.200 --> 0:04:15.600 also on the labor market. We have payrolls tomorrow. We've 0:04:15.640 --> 0:04:17.720 heard from Governor Waller. He was pretty explicit. He came 0:04:17.760 --> 0:04:19.360 on this program and said the same thing. He thinks 0:04:19.360 --> 0:04:21.480 the labor market is on the edge. That was like 0:04:21.560 --> 0:04:24.000 day and night compared to what we heard from Chairman 0:04:24.080 --> 0:04:26.520 Pow yesterday when he talked about the labor market and 0:04:26.600 --> 0:04:29.960 the Committee continues to call it solid. Can we get 0:04:30.000 --> 0:04:32.279 your opinion how you view the labor market at the 0:04:32.279 --> 0:04:34.719 moment and whether you'd characterize it as solid. 0:04:36.240 --> 0:04:38.760 Well, I think this is a labor market that's shifting 0:04:39.480 --> 0:04:44.080 and obviously in a macro sense. This is a committee 0:04:44.080 --> 0:04:46.760 that is making macro policy has to rely on a 0:04:46.760 --> 0:04:49.120 macro number, which the chairman said is going to be 0:04:49.200 --> 0:04:53.000 the unemployment rate. So in that sense, they have explained 0:04:53.040 --> 0:04:57.159 clearly in a broad sense, what they're looking at as 0:04:57.240 --> 0:05:01.760 things move around. Though underneath the of that unemployment rate, 0:05:02.320 --> 0:05:04.719 I think you have to be mindful that the Fed's 0:05:04.839 --> 0:05:10.400 reaction to that cannot be a direct response. In other words, 0:05:10.440 --> 0:05:12.920 if you're going to lower rates thinking you will arrest, 0:05:13.600 --> 0:05:16.600 the changes that are going on under the covers not 0:05:16.839 --> 0:05:19.520 likely to happen. And so in a time when your 0:05:19.560 --> 0:05:23.000 backdrop is coming off of high inflation trying to get 0:05:23.080 --> 0:05:28.000 back to that two percent target, it creates this weight 0:05:28.200 --> 0:05:30.680 and see it creates a real sense of having to 0:05:30.720 --> 0:05:34.800 have conviction around the next move in your policy rate 0:05:34.920 --> 0:05:36.839 to know what you are responding to. 0:05:37.440 --> 0:05:39.320 Esther, thanks for sharing some of your experience with us 0:05:39.320 --> 0:05:41.400 this morning. We appreciate it as the judge that the 0:05:41.400 --> 0:05:55.039 former Kansas City FED president to extend the conversation. Jason Furman, 0:05:55.120 --> 0:05:58.000 the former economic advisor to President Obama, joins us now 0:05:58.040 --> 0:06:00.760 for more. Jason, welcome back to the program. The data 0:06:00.800 --> 0:06:03.800 seems to be okay. The Utning's from Corporate America better 0:06:03.839 --> 0:06:05.640 than good. We're a few months into this process, and 0:06:05.640 --> 0:06:07.279 I just wonder, from your point of view, Jason, whether 0:06:07.320 --> 0:06:09.479 you believe it's premature to sound the or clear. 0:06:11.520 --> 0:06:13.640 I don't think the data is that terrific. 0:06:14.040 --> 0:06:16.159 In the first half of this year, the economy grew 0:06:16.160 --> 0:06:19.240 at a one point two percent annual rate, that is 0:06:19.320 --> 0:06:22.880 way below where we should be. Core inflation was a 0:06:22.960 --> 0:06:26.839 three point zero percent annual rate. That's way above where 0:06:26.880 --> 0:06:29.640 we should be. So no, it's not a catastrophe by 0:06:29.680 --> 0:06:33.479 any stretch of the imagination. But you know, there's more 0:06:33.520 --> 0:06:36.440 than a hint of stagflation in the numbers we saw 0:06:36.480 --> 0:06:37.680 in the first half of this year. 0:06:37.760 --> 0:06:39.279 Looking at it together, it. 0:06:39.360 --> 0:06:41.600 Was something Jason that Bob Michael was talking about. The 0:06:41.680 --> 0:06:44.360 key question for a lot of people is how big 0:06:44.440 --> 0:06:46.880 is the stag and how big is the flation? What 0:06:46.920 --> 0:06:50.400 are you looking for to determine the answer to that question. 0:06:51.640 --> 0:06:55.040 Look, one of the confusing signals here is the disconnect 0:06:55.080 --> 0:06:57.640 between GDP growth, which has been weak. It was even 0:06:57.680 --> 0:06:59.600 negative in the first corridor, although some of that I 0:06:59.600 --> 0:07:03.599 think was furious measurement issue, and the job market, which 0:07:03.839 --> 0:07:06.919 if you look at the unemployment rate, which Jay Powell 0:07:07.000 --> 0:07:12.520 rightly emphasized yesterday, has held up quite well. And you know, 0:07:12.600 --> 0:07:16.200 you see consumers cutting their spending back but continuing to 0:07:16.240 --> 0:07:19.760 get jobs, continuing to get raises, and that on the 0:07:19.800 --> 0:07:24.240 stag side of the ledger is making things even more unclear. 0:07:24.720 --> 0:07:27.200 Well on the flation side of things right now, there's 0:07:27.200 --> 0:07:30.240 a question about the trickle out effects of the tariffs, 0:07:30.240 --> 0:07:33.440 whether we've seen the ramifications yet. A lot of economists 0:07:33.480 --> 0:07:36.040 have been saying, wait until the third quarter, wait into 0:07:36.080 --> 0:07:39.880 the fourth quarter, and see exactly how companies really managed 0:07:39.880 --> 0:07:42.200 through this. Who do you think is a good example, 0:07:42.280 --> 0:07:43.800 or is there an industry that you think is a 0:07:43.800 --> 0:07:46.200 good example that might have given us an early look 0:07:46.480 --> 0:07:50.080 at how this trickles out and what consumer receptivity is 0:07:50.120 --> 0:07:51.840 to absorbing those price increases. 0:07:52.760 --> 0:07:56.120 Look, some of the lowest margin businesses like toys, you 0:07:56.160 --> 0:07:59.280 see that passed on very quickly. At the other end 0:07:59.280 --> 0:08:02.440 of the spectrum, cars where you have the President telling 0:08:02.440 --> 0:08:06.360 them not to raise prices, their prices are very visible. 0:08:06.680 --> 0:08:08.160 They've been reluctant to do it. 0:08:08.400 --> 0:08:10.640 But it's not like General Motors is going to continue 0:08:10.640 --> 0:08:14.360 to sell cars at a loss indefinitely. They're eventually going 0:08:14.400 --> 0:08:16.240 to have to raise those prices. 0:08:16.760 --> 0:08:19.400 Jason, do you see this being offset by what's developing 0:08:19.400 --> 0:08:22.320 in services inflation at the moment? How are you reading 0:08:22.520 --> 0:08:24.320 what's happening in one side versus the other? 0:08:26.040 --> 0:08:28.400 I mean, services is continuing to come down, but we 0:08:28.480 --> 0:08:30.640 sort of always thought that was going to happen. That 0:08:30.800 --> 0:08:33.000 was our path to two percent. That was the part 0:08:33.040 --> 0:08:36.440 we were counting on. The problem is that the goods 0:08:36.440 --> 0:08:40.560 deflation has reversed, and now we have goods inflation again. 0:08:41.000 --> 0:08:43.240 And so one of those I take for granted doesn't 0:08:43.240 --> 0:08:45.440 seem to me like the news. The other one the 0:08:45.480 --> 0:08:49.280 good side. That's the unpleasant surprise here. Now, the idea 0:08:49.320 --> 0:08:51.959 that it's transitory is not at all crazy. I think 0:08:52.000 --> 0:08:54.600 there's even a very good chance it's true. But if 0:08:54.600 --> 0:08:56.840 you're the Fed, do you want to bet everything on 0:08:56.880 --> 0:08:59.960 a very good chance when you're definitely not sure? 0:09:00.240 --> 0:09:01.760 With that in mind, do you think two months of 0:09:01.840 --> 0:09:04.840 dankster is enough danta to draw any conclusions before you 0:09:04.880 --> 0:09:05.560 make a decision. 0:09:06.960 --> 0:09:07.640 I mean, you. 0:09:07.640 --> 0:09:09.920 Always think the two months from now everything's going to 0:09:09.920 --> 0:09:12.360 be clear, and then two months from now everything is 0:09:12.400 --> 0:09:15.439 still muddy, so it's going to be money two months 0:09:15.480 --> 0:09:19.080 from now, they're going to be getting conflicting data, but yeah, 0:09:19.200 --> 0:09:22.200 maybe it'll be a tiny bit clearer than it is now. 0:09:22.640 --> 0:09:24.520 I keep going back to the way that John opened 0:09:24.520 --> 0:09:26.920 the show, which was Jay Who, and it raises the 0:09:27.000 --> 0:09:29.840 question implicitly about how relevant the FED is at a 0:09:29.880 --> 0:09:32.959 time of massive technological explosion, and we're seeing that in 0:09:33.000 --> 0:09:36.319 the tech earnings. I mean, how much does the advancement, 0:09:36.400 --> 0:09:39.240 the investment coming from some of the tech giants in 0:09:39.240 --> 0:09:42.480 the United States overwhelm some of this discussion has certainly 0:09:42.520 --> 0:09:45.880 overwhelmed the negative consequences from the tariffs, so a lot 0:09:45.880 --> 0:09:46.960 of people had expected. 0:09:48.120 --> 0:09:49.320 It depends what you're talking about. 0:09:49.800 --> 0:09:52.680 If you're talking about the stock market, Yeah, a lot 0:09:52.720 --> 0:09:55.199 of what's going on in the numerator, which is earnings, 0:09:55.320 --> 0:09:56.680 rather than the denominator. 0:09:56.720 --> 0:09:59.520 The discount rate is what matters right now. 0:10:00.040 --> 0:10:03.320 If you're talking about GDP, we're not seeing a lot 0:10:03.320 --> 0:10:05.800 of tech at least in the supply side. Frankly, we're 0:10:05.800 --> 0:10:08.079 actually seeing it more on the demand side right now, 0:10:08.559 --> 0:10:12.359 and so if anything, it might be inflationary. Upfront productivity 0:10:12.400 --> 0:10:15.360 growth is basically right on the track we thought it 0:10:15.400 --> 0:10:20.440 would be prior to the pandemic. So tech is helping 0:10:20.440 --> 0:10:23.959 the stock market quite a lot. I'm optimistic and hopeful 0:10:23.960 --> 0:10:27.120 it will help GDP, but right now it is not 0:10:27.160 --> 0:10:30.040 having any real material impact. 0:10:30.120 --> 0:10:32.480 There, Jason, that's a strong fund of point. We'll leave 0:10:32.480 --> 0:10:34.559 it there, Thank you, sir, Jason Furman. That at the 0:10:34.600 --> 0:10:47.920 Harvard Kennedy School, Gagi Chantry with blankcropt writing, AI and 0:10:48.000 --> 0:10:51.120 Tech continues to lead here pushing back on the broadening 0:10:51.120 --> 0:10:55.120 out narrative yet again, as underpinned by strong beats from METSA, Microsoft, 0:10:55.440 --> 0:10:58.080 and Google. Gagie joint is now for more Gaki, good. 0:10:57.920 --> 0:10:59.040 Monic, Hi, good morning. 0:10:59.120 --> 0:11:01.760 Just phenomenal beats from these companies. How difficult is it 0:11:01.800 --> 0:11:04.040 to leave the US behind and just pile into this 0:11:04.120 --> 0:11:07.559 europe trade, pile into this everything else tride you now. 0:11:07.559 --> 0:11:10.160 One of the things that we've been talking to clients 0:11:10.200 --> 0:11:13.319 about is the need for diversification, but at the same 0:11:13.400 --> 0:11:18.000 time not giving up on the US dec AI theme. 0:11:18.600 --> 0:11:22.360 And I think to the extent that investors have not 0:11:22.640 --> 0:11:27.840 had any international exposure or massively underweight. For those investors, 0:11:27.920 --> 0:11:32.079 having some exposure to quality international names does make sense. 0:11:32.600 --> 0:11:36.800 But so important, as was made evident by yesterday's earnings. 0:11:37.720 --> 0:11:40.720 What you need in your portfolio is parts of the 0:11:40.720 --> 0:11:45.079 equity market that are continuing to have revenue growth, continuing 0:11:45.120 --> 0:11:47.840 to throw out amazing amounts of free cash flow. And Chathan, 0:11:47.880 --> 0:11:50.600 I think you made that point earlier that we're finally 0:11:50.720 --> 0:11:55.079 getting an ROI on all of the capex that has 0:11:55.120 --> 0:11:57.720 gone in over the last year, and we're seeing the 0:11:57.760 --> 0:12:03.680 world's largest companies grow growing revenue at the high double digits, 0:12:03.720 --> 0:12:05.200 which is amazing. 0:12:04.960 --> 0:12:07.160 In some ways. The least interesting thing about this week 0:12:07.240 --> 0:12:09.320 is Tariff's at the trade deadline. Now, if you'd ask 0:12:09.400 --> 0:12:12.040 me that on hyproback in July, whether that would be 0:12:12.080 --> 0:12:14.520 the case July ninth, going into that deadline, I would 0:12:14.520 --> 0:12:16.880 have said, well, you're talking about tariff is like the story. 0:12:17.080 --> 0:12:19.120 Do you think that's going to reassert itself in a 0:12:19.160 --> 0:12:19.720 month's account. 0:12:20.200 --> 0:12:22.320 I think we're all and I know I follow your show. 0:12:22.400 --> 0:12:26.079 You're focusing in it as well. Obviously, some of the 0:12:26.120 --> 0:12:31.480 headlines yesterday around copper, around India tariffs, those idiosyncratic stories 0:12:31.559 --> 0:12:35.200 are going to drive certain markets and eventually in time, 0:12:35.480 --> 0:12:38.520 when we realize what the landing zone of tariffs will be, 0:12:38.640 --> 0:12:41.880 whether that's closer to a fifteen percent or a twenty percent, 0:12:42.320 --> 0:12:45.760 Eventually we will see that feed through, and we're already 0:12:45.880 --> 0:12:48.920 kind of seeing that in goods inflation, certain components of 0:12:48.960 --> 0:12:51.600 goods inflation. So it will appear, it won't disappear. It 0:12:51.640 --> 0:12:54.360 will appear in data, and it will appear in margins, 0:12:54.440 --> 0:12:58.520 or it will appear in certain foreign companies reducing their prices. 0:12:59.320 --> 0:13:02.439 But of right now, I think the bigger theme is 0:13:02.600 --> 0:13:06.160 the two things. Number one, the ROI on Capex coming 0:13:06.200 --> 0:13:09.160 through and large cap deck really a large cap deck 0:13:09.240 --> 0:13:12.800 and AI really being the story that's going to propel 0:13:12.960 --> 0:13:16.559 us exceptionalism forward. And I think the second one, which 0:13:17.000 --> 0:13:20.360 is also less exciting this morning, which is that the Fed, 0:13:20.920 --> 0:13:24.560 while I think they're both quite hawkish, they're still telling 0:13:24.640 --> 0:13:27.800 us in their own way that if things wobble, especially 0:13:27.840 --> 0:13:31.480 in the unemployment rate front, they are here to start 0:13:31.520 --> 0:13:33.760 cutting rates. And I think that's something else that the 0:13:34.240 --> 0:13:36.160 market will eventually care about as well. 0:13:36.200 --> 0:13:39.040 When you put these stories together, there's sort of this 0:13:39.559 --> 0:13:42.160 big question underputting the market. What are we going to 0:13:42.160 --> 0:13:45.080 get the trickling out of some of the benefits that 0:13:45.120 --> 0:13:48.120 the hyperscalers are experiencing to the rest of the market. 0:13:48.120 --> 0:13:49.720 When are you going to see a broadening out where 0:13:49.960 --> 0:13:53.200 their leadership isn't just a ballast amid a storm, but 0:13:53.320 --> 0:13:56.920 really something that is driving gains an efficiency and profitability 0:13:56.960 --> 0:14:00.400 across corporate America. How far away from that away? 0:14:01.320 --> 0:14:04.000 So, I think depending on what people mean when they 0:14:04.080 --> 0:14:07.640 mean broadening out, I would argue you're seeing some and 0:14:07.679 --> 0:14:10.400 then at the same time you're obviously continuing to see 0:14:10.400 --> 0:14:14.280 the largest companies throughout the largest revenue growth. So when 0:14:14.320 --> 0:14:16.599 I say there is some amount of broadening out, I 0:14:16.640 --> 0:14:19.360 would say when you look at something like financials, when 0:14:19.400 --> 0:14:22.120 you look at different sectors or sub sectors within the 0:14:22.160 --> 0:14:25.800 equity market, this year, you are seeing more of those 0:14:25.920 --> 0:14:29.520 sectors being in positive territory. That could be called one 0:14:29.800 --> 0:14:31.920 that could be one way of thinking about broadening. But 0:14:32.040 --> 0:14:36.040 at the same time, obviously you have the largest hyperscalers 0:14:36.080 --> 0:14:38.960 being the largest revenue growers, and I think that that 0:14:39.160 --> 0:14:42.880 probably pushes back against the broadening out narrative. I think 0:14:42.880 --> 0:14:45.960 the theme is clear. It is one of moving away 0:14:46.040 --> 0:14:51.920 from small cap, unprofitable companies to large cap quality companies. 0:14:52.160 --> 0:14:54.680 And that's what we've been talking about and many you know, 0:14:54.720 --> 0:14:56.720 you guys have been having a lot of people on 0:14:56.760 --> 0:14:59.920 your show. They've talked about that theme of large cap. 0:15:00.480 --> 0:15:03.520 Perhaps it doesn't feel as comfortable to talk about it 0:15:03.520 --> 0:15:06.280 it being also talked about it last year, but it's 0:15:06.320 --> 0:15:09.040 still working and it will continue to work. I think 0:15:09.080 --> 0:15:12.240 the theme going forward for the next six month is 0:15:12.320 --> 0:15:16.920 finding pockets of diversification in your portfolio. In addition to 0:15:16.960 --> 0:15:20.120 this AI and tech trade, international plays a role there. 0:15:20.440 --> 0:15:24.600 Fixed income plays a role there, assets like inflation link bonds, gold, 0:15:24.760 --> 0:15:28.600 and certainly market neutral strategies that aren't giving you too 0:15:28.640 --> 0:15:31.000 much beta but at the same time giving you alpha 0:15:31.080 --> 0:15:31.520 makes sense. 0:15:31.600 --> 0:15:34.640 International plays role and John was alluding to this earlier. 0:15:35.040 --> 0:15:38.240 There was this belief that international was going to outperform 0:15:38.280 --> 0:15:40.400 the US earlier this year, and it did, and a 0:15:40.400 --> 0:15:42.200 lot of it was pegged the dollar, and when we 0:15:42.240 --> 0:15:45.800 saw the weakening, there's been a huge and violent about face. 0:15:46.040 --> 0:15:47.960 Do you think that there is staying power where the 0:15:48.000 --> 0:15:50.080 first half was the rest of the world and the 0:15:50.080 --> 0:15:52.680 second half is back to US exceptionalism. 0:15:53.640 --> 0:15:57.400 I think that a lot of that violent move that 0:15:57.480 --> 0:16:01.840 you mentioned was very much around the underperformance, and obviously 0:16:01.880 --> 0:16:05.560 with July, with the dollar coming back, rallying back has 0:16:05.680 --> 0:16:08.040 led to a little bit of that reversal. I think 0:16:08.040 --> 0:16:10.600 the path forward a big part of that story will 0:16:10.600 --> 0:16:14.280 be what happens with the dollar. Frankly, what we're seeing 0:16:14.320 --> 0:16:17.480 in flows and what we're seeing when we pull our 0:16:17.560 --> 0:16:22.560 investors and our clients is a recognition of the need 0:16:22.680 --> 0:16:27.720 to diversify away from a large gap because that's all 0:16:27.760 --> 0:16:30.720 they have, not because it's not going to generate returns, 0:16:31.000 --> 0:16:33.640 but because there is a need for getting that value 0:16:33.720 --> 0:16:38.560 component into portfolios and getting that from international to the extent, 0:16:38.720 --> 0:16:43.280 not just US investors, but global investors continue to move 0:16:43.440 --> 0:16:46.760 away from US into going back to their home countries. 0:16:47.000 --> 0:16:49.600 So we look at European investors and APAC investors, and 0:16:49.640 --> 0:16:52.960 many of those investors are just being a little bit 0:16:53.040 --> 0:16:56.120 more diversified away from the US. To the extent that happens, 0:16:56.720 --> 0:16:59.720 I think that the international story can certainly have some legs, 0:16:59.760 --> 0:17:03.760 but not at the expense of US large cap quality 0:17:03.800 --> 0:17:04.200 and growth. 0:17:04.320 --> 0:17:06.520 Let's just say, on the US, when you set diversify, 0:17:06.640 --> 0:17:08.960 you set diversify the equity. So if I'm in the 0:17:09.040 --> 0:17:11.760 US right now, I diversify my equity exposure to the 0:17:11.760 --> 0:17:14.520 international story. Given where we are right now with the dollar, 0:17:14.760 --> 0:17:16.400 is that something I need to currency hedge? 0:17:16.920 --> 0:17:19.080 You know, that's an interesting question, like a lot of 0:17:19.440 --> 0:17:21.919 right now. The view for our firm is still that 0:17:22.000 --> 0:17:25.200 the dollar can continue to depreciate. Usually, what we've seen 0:17:25.480 --> 0:17:30.080 is that the dollar depreciations happen in these long cycles. 0:17:30.119 --> 0:17:32.520 It's not just for one month or a week. It 0:17:32.600 --> 0:17:35.679 happens over many months, eighteen to twenty four months, and 0:17:35.720 --> 0:17:38.560 we're just in the beginning of that. In that case, 0:17:38.680 --> 0:17:42.399 obviously you want some of those foreign exposures. You want 0:17:42.440 --> 0:17:44.800 that exposure to some of the you know em as 0:17:44.840 --> 0:17:49.199 well as DM currencies. Fixed income, though, is another story, 0:17:49.320 --> 0:17:52.199 right So, usually what we've seen our clients do is 0:17:52.320 --> 0:17:57.520 in fixed income allegations not necessarily taking the FCS risk, 0:17:57.680 --> 0:18:03.040 actually hedging it back into US for that enhanced yield. 0:18:03.160 --> 0:18:06.440 And that's something that you know, some of our portfolio managers, 0:18:06.560 --> 0:18:10.000 especially in fixed income with products like bink, are doing 0:18:10.080 --> 0:18:14.640 taking advantage of the hedged costs for European and other 0:18:14.760 --> 0:18:16.120 areas credit markets. 0:18:16.160 --> 0:18:18.040 Gaky appreciate it. It's got to see you. Thanks for 0:18:18.040 --> 0:18:30.040 breaking it down, Gagy Chuntry there of Black Crook, what 0:18:30.160 --> 0:18:33.040 pic of life Shed Partners has a neutral racing on Apple. 0:18:33.359 --> 0:18:35.320 He came out in front in the last few months 0:18:35.400 --> 0:18:37.280 or so, and so the tech gig I should also 0:18:37.400 --> 0:18:40.600 consider a new CEO. What joins us now for more Well, 0:18:40.640 --> 0:18:42.840 welcome back to the program. Let's talk about what you're 0:18:42.840 --> 0:18:45.160 expecting from Apple later on this afternoon. 0:18:46.200 --> 0:18:48.000 Well, first, Jonathan, I just want to comment on your 0:18:48.080 --> 0:18:51.480 last segment. The two things about those high moving stocks 0:18:51.720 --> 0:18:54.879 is that they're investing in AI and that's really the 0:18:54.920 --> 0:18:57.200 issue that we have with Apple in terms of the quarter. 0:18:58.160 --> 0:19:00.639 You know, look there's a pull forward right and had 0:19:00.640 --> 0:19:03.160 to announced tariffs. I think people went out and bought 0:19:03.240 --> 0:19:06.120 iPhones ahead of the time. We've already seen this commentary 0:19:06.600 --> 0:19:09.440 out of the major distribution channel for Apple, which is 0:19:09.480 --> 0:19:12.399 the wireless operators for Verizon AT and T T Mobile 0:19:12.440 --> 0:19:14.720 and others. So you are going to see a pull 0:19:14.800 --> 0:19:18.240 forward of iPhone revenue this quarter. So then the question, 0:19:18.400 --> 0:19:20.919 as it always is for Apple, is you know, what 0:19:21.040 --> 0:19:23.399 is the guidance for next quarter? But again that's that 0:19:23.680 --> 0:19:26.760 focuses on I think, you know the near term where 0:19:26.800 --> 0:19:30.119 what investors are really wanting a note to know about 0:19:30.400 --> 0:19:32.560 is what is the AI strategy for this company for 0:19:32.640 --> 0:19:35.400 the long term because clearly the companies that are succeeding 0:19:35.840 --> 0:19:39.640 in the markets today and seeing investor dollars flow into them. 0:19:39.920 --> 0:19:42.119 Are those that have a clear AI strategy. 0:19:42.440 --> 0:19:44.880 Well, this just points to the idea that we might 0:19:44.960 --> 0:19:48.520 see their expense costs go down because they've lost a 0:19:48.520 --> 0:19:53.000 couple of pretty high profile AI technicians and strategists to 0:19:53.040 --> 0:19:56.320 the likes of Meta, which is offering one hundred million 0:19:56.359 --> 0:19:59.200 dollar payouts. I just wonder how important it's going to 0:19:59.240 --> 0:20:02.240 be for investors to see spending by Apple, to see 0:20:02.240 --> 0:20:04.600 that they are working on getting back some of that 0:20:04.720 --> 0:20:06.840 promise from this latest technology. 0:20:07.520 --> 0:20:09.080 I mean, there's two lines of spending. 0:20:09.160 --> 0:20:12.119 You have capital investment, where they're investing in the stuff 0:20:12.119 --> 0:20:15.520 that supports in LLM. It's probably too late for Apple 0:20:15.600 --> 0:20:17.879 to do that now. But there's another line of spending, 0:20:17.960 --> 0:20:20.960 and that's R and D which is over thirty billion 0:20:21.000 --> 0:20:23.760 dollars a year that the company invests. In the old days, 0:20:23.920 --> 0:20:26.720 when they would have analysts on that would ask tough questions, 0:20:26.720 --> 0:20:29.440 you would have people ask and say like, hey, where 0:20:29.440 --> 0:20:31.840 are you spending the thirty billion? There'd be some response 0:20:31.920 --> 0:20:34.400 in terms of the mix of R and D investment 0:20:34.480 --> 0:20:36.920 in new products versus old products, and there'd be some 0:20:37.000 --> 0:20:39.760 indication to give investors some hope that there would be 0:20:39.840 --> 0:20:43.040 new products or services incoming. Then we know what happened, right, 0:20:43.200 --> 0:20:45.880 Things like Project Titan that would have gotten them into 0:20:45.920 --> 0:20:49.600 autonomy were killed, and we saw other products products that 0:20:49.840 --> 0:20:52.639 came to market like the Vision pro that really didn't 0:20:52.640 --> 0:20:55.919 find a market opportunity. So I think hopefully we have 0:20:56.000 --> 0:20:59.000 some analysts on the call tonight during that Q and 0:20:59.040 --> 0:21:02.000 A session that will ask about where are you investing 0:21:02.040 --> 0:21:03.679 that thirty billion in R and D, what are some 0:21:03.760 --> 0:21:05.719 of the new products we can invest in? What is 0:21:05.760 --> 0:21:08.000 the AI strategy for the company going forward? 0:21:08.119 --> 0:21:09.760 Well, you've mentioned this a couple of times, so we 0:21:09.840 --> 0:21:11.720 have to go there. You think that the analyst community 0:21:11.720 --> 0:21:13.480 hasn't done a good enough job holding the feet to 0:21:13.480 --> 0:21:16.240 the fire of Apple at a time when it seems 0:21:16.280 --> 0:21:18.720 like maybe some of their strategies were overly complacent. 0:21:19.960 --> 0:21:22.080