WEBVTT - Inflation Data and Market Bullishness 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business app. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.040 us live on YouTube. 0:00:27.440 --> 0:00:29.680 We get lucky. Jay Hatfield joins us to get us 0:00:29.720 --> 0:00:32.680 the PPI here in a moment. I mean you're making 0:00:32.720 --> 0:00:35.960 a moment to moment in your note. You have an 0:00:36.080 --> 0:00:40.040 optimistic tone on the opening of the Gulf of our MOUs. 0:00:40.600 --> 0:00:43.920 You're beholden to whatever the headlines are. Like everyone else. 0:00:44.960 --> 0:00:47.360 What We've had a non consensus view that the Iranians 0:00:47.400 --> 0:00:50.960 would not come to the table, just using common sense. 0:00:51.720 --> 0:00:54.360 I didn't study Iranian studies at Wharton. 0:00:54.440 --> 0:00:55.920 But they've been. 0:00:56.440 --> 0:00:58.640 Warring with the US for forty seven years, So why 0:00:58.800 --> 0:01:00.800 all of a sudden, after we killed the top leaders 0:01:00.800 --> 0:01:04.399 that they go into capitulate. So we actually view this 0:01:04.440 --> 0:01:07.240 more aggressive move as bullish. We think the Strait's going 0:01:07.319 --> 0:01:09.320 to have to be reopened by force and it's going 0:01:09.360 --> 0:01:10.600 to require boots on the ground. 0:01:11.040 --> 0:01:14.560 Wow, okay, maybe we're moving there today. You've also got 0:01:14.560 --> 0:01:19.520 a nine thousand target on the SMP five hundred. That's 0:01:19.800 --> 0:01:21.440 non consents. How do you get there? 0:01:22.800 --> 0:01:25.560 Well, this is not an Internet style. You know aol 0:01:25.640 --> 0:01:28.720 time warners worth two thousand dollars. All we did is 0:01:28.800 --> 0:01:33.280 just mark our original forecast to market. So we're in 0:01:33.360 --> 0:01:36.080 an earnings bubble. And in fact, you have to be 0:01:36.200 --> 0:01:42.039 on SPX EEO Go Index Go every day because the 0:01:42.080 --> 0:01:44.320 twenty seven earnings are going up every day, so they're 0:01:44.400 --> 0:01:46.800 up twelve percent since we started very eight thousand tarks, 0:01:46.800 --> 0:01:49.840 so we're using twenty three times twenty seven to get 0:01:49.840 --> 0:01:51.840 to twenty three. You need lower rates, you need the 0:01:51.920 --> 0:01:52.559 war to end. 0:01:52.560 --> 0:01:55.400 And the interpolation that posts of the Dow, which I 0:01:55.480 --> 0:01:58.440 just did is now sixty one thousand, which is not 0:01:58.560 --> 0:02:03.480 in anybody's framework. When you say earnings bubble to find 0:02:03.480 --> 0:02:07.000 what the bubble is, is it not legitimate that the 0:02:07.000 --> 0:02:09.000 earnings will be there in eighteen months. 0:02:09.440 --> 0:02:11.720 No, it's just rising so fast you can't keep tracking it. 0:02:11.720 --> 0:02:14.280 It's a bubble that it's just moving, but it could 0:02:14.320 --> 0:02:17.000 be moving constructively with free caps development. 0:02:17.080 --> 0:02:20.160 Absolutely, and we're one hundred percent earnings given. So that's 0:02:20.160 --> 0:02:21.480 why we're bullish on the market. 0:02:21.560 --> 0:02:23.120 I got a time this to get to the PPI. 0:02:23.200 --> 0:02:27.160 But this is critical, Jay, with your wonderful foundational economics. 0:02:27.160 --> 0:02:30.440 The heart and soul of this is, for whatever reason, 0:02:30.520 --> 0:02:35.519 a buoyant nominal GDP which starts with okay revenues at least. 0:02:35.320 --> 0:02:39.079 Right, absolutely, although it's important to note that you don't 0:02:39.160 --> 0:02:43.320 need super strong GDP to get earnings growth. Earnings growth 0:02:43.320 --> 0:02:47.520 comes from retained earnings and strong return on investment capital. 0:02:47.600 --> 0:02:50.400 So most analysts are too negative bet earning because they say, oh, well, 0:02:50.520 --> 0:02:54.280 GDP's only one percent, so it doesn't really require a 0:02:54.320 --> 0:02:55.799 really reor best economy. 0:02:55.919 --> 0:02:59.200 I can't spell it, but Paul Sweeny pression here to 0:02:59.280 --> 0:03:01.840 say least we were talking about, like, is this the 0:03:01.840 --> 0:03:05.680 inflation top four point two percent? Select people, including Mic 0:03:05.720 --> 0:03:10.200 read RBC say no, And there's PPI final demand year 0:03:10.240 --> 0:03:15.400 over year six point zero, the next month survey six 0:03:15.520 --> 0:03:19.280 point four and it came into an enjoyable six point 0:03:19.360 --> 0:03:23.640 five percent. You know, I'm sorry, that's an inflation. It 0:03:23.720 --> 0:03:25.560 maybe only for one months, but there it is. 0:03:25.840 --> 0:03:27.760 How do you view inflation? Here? Is it? 0:03:28.280 --> 0:03:30.080 You know, to use a word that people don't like 0:03:30.080 --> 0:03:32.480 any more, transitory is or something more fundamental out there? 0:03:32.480 --> 0:03:35.480 Do you think, well, there's two critical leading indicators of 0:03:35.520 --> 0:03:38.320 inflation the money supply, which is negative, so we have 0:03:38.360 --> 0:03:42.120 a very very tight fed and oil prices which are 0:03:42.240 --> 0:03:47.000 horrendously higher. So not surprisingly it's bleeding through already the 0:03:47.080 --> 0:03:51.120 PPI that has not fled through to PC core yet, 0:03:51.680 --> 0:03:54.320 only in airline fares, which is the most obvious, but 0:03:54.400 --> 0:03:57.680 usually it bleeds through to everything. But surprisingly the pc 0:03:57.880 --> 0:04:01.360 core was really team because you are seeing some pandemic 0:04:01.360 --> 0:04:04.520 inflation come out like insurance. So we're still bullis we're 0:04:04.520 --> 0:04:06.600 going to get three cuts that as soon as the 0:04:06.600 --> 0:04:11.000 war ends, PCE should go close to target. And if 0:04:11.280 --> 0:04:14.119 also we have a competent FED chair now and he 0:04:14.160 --> 0:04:16.360 does adjust. He doesn't use our numbers. I guess he's 0:04:16.360 --> 0:04:18.680 not aware of him, but he does trim mean into 0:04:18.720 --> 0:04:21.920 other adjustments, because if you really look under the hood, 0:04:22.200 --> 0:04:26.320 PCE is a horrible, horrible measure. They don't use market rates, 0:04:26.320 --> 0:04:30.480 They impute a lot of rates. Shelter is just ridiculous. 0:04:30.520 --> 0:04:33.640 It should not exist. It's six months delayed on purpose, 0:04:33.800 --> 0:04:35.880 terrible measure of inflation. 0:04:36.279 --> 0:04:39.320 Jay's laughing. You can't see the folks on radio and YouTube. 0:04:39.320 --> 0:04:43.039 You can see that Alanis Moris set irony in his 0:04:43.200 --> 0:04:47.320 voice there. I mean, come on, Cleveland, the University of 0:04:47.400 --> 0:04:52.880 Michigan in Kansas City revolutionized how we measure inflation. And 0:04:52.960 --> 0:04:55.880 there's a select group out there stuck in a time 0:04:56.240 --> 0:04:58.760 long ago and far away. That's all there is to it. 0:04:59.200 --> 0:05:04.000 Absolutely complete, a horrible thing that caused our fed to 0:05:04.080 --> 0:05:06.360 completely miss the inflation of twenty one. 0:05:06.640 --> 0:05:09.720 I mean, Paul, I can't tell you the revolution. It 0:05:09.800 --> 0:05:13.840 was called Cleveland CPI, and there's gone to many other improvements. 0:05:14.080 --> 0:05:17.880 A guy named Matt Shapiro at Michigan O the Claudiusum studied, Yeah, 0:05:18.200 --> 0:05:18.880 among others. 0:05:19.120 --> 0:05:23.000 What do you make of a seventy five billion dollar IPL. 0:05:22.640 --> 0:05:25.600 Think, Well, we'll see. 0:05:26.560 --> 0:05:27.920 Did you get your allocation? 0:05:28.480 --> 0:05:31.760 We didn't indicate because we don't pay a lot of commissions, 0:05:31.960 --> 0:05:34.160 So we get a lot when the deal does poorly 0:05:34.240 --> 0:05:35.760 and get nine when it does well. 0:05:36.040 --> 0:05:38.919 So you got to play the commission, folks. That's the 0:05:39.040 --> 0:05:41.960 single smartest thing work continue. 0:05:42.120 --> 0:05:44.159 But so I think there's three people in the world 0:05:44.240 --> 0:05:46.520 who know we all work in equity capital markets at 0:05:46.560 --> 0:05:50.360 Golden Sacks. But our guests is there's more than seventy 0:05:50.360 --> 0:05:54.160 five billion a musk acolytes and if you look at Tesla, 0:05:54.360 --> 0:05:57.400 it's about three hundred percent overvalued in our models, and 0:05:57.440 --> 0:05:59.720 this is only about fifty percent overvalued, so it could 0:05:59.760 --> 0:06:02.920 double triple and I'll have that Musk premium out there. 0:06:03.120 --> 0:06:05.160 Unfortunately, Jay, I have to go to break. We got 0:06:05.200 --> 0:06:07.560 to get you back in here. S just to talk 0:06:07.760 --> 0:06:11.080 about what you two know far better than me, which 0:06:11.120 --> 0:06:15.760 is the body language of a transaction. In Paul, it's 0:06:15.760 --> 0:06:17.520 about future business, isn't it. 0:06:17.839 --> 0:06:18.080 Yeah? 0:06:18.120 --> 0:06:19.280 Oh yeah, and it's pain. 0:06:19.480 --> 0:06:19.680 You know. 0:06:20.680 --> 0:06:24.560 Jay doesn't pay commissions. He's not getting a love he He's. 0:06:25.120 --> 0:06:28.799 The loveless Jay Hatfield makes a smarter off inflation. Stay 0:06:28.800 --> 0:06:32.680 with us. More from Bloomberg Surveillance coming up after this. 0:06:39.920 --> 0:06:43.520 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:06:43.600 --> 0:06:46.719 weekday afternoons from seven to ten am Eastern Listen on 0:06:46.839 --> 0:06:50.200 Apple Karplay and Android Otto with the Bloomberg Business app, 0:06:50.400 --> 0:06:52.000 or watch us live on YouTube. 0:06:52.040 --> 0:06:55.160 Ian stally sure that he could join us here international 0:06:55.200 --> 0:06:58.640 had fixed income. Thank you so much for joining us. 0:06:59.640 --> 0:07:04.600 This is this morning. The newsflow is just nuts. I 0:07:04.760 --> 0:07:09.840 was actually almost shaking yesterday coming out of the the studio. 0:07:10.320 --> 0:07:13.240 How do you how do you do a mid year review? 0:07:13.840 --> 0:07:16.520 Given this madness with difficulty. 0:07:17.480 --> 0:07:19.880 Look, there's this huge amounts going on, and actually I 0:07:19.920 --> 0:07:21.200 think the market's very well behaved. 0:07:21.280 --> 0:07:21.480 Yep. 0:07:21.680 --> 0:07:24.160 So if you look at everything that it's been thrown 0:07:24.200 --> 0:07:27.840 at it, whether it's the oil price moves, whether it's 0:07:27.840 --> 0:07:31.440 now the expectation of central banks possibly hiking rates. Obviously 0:07:31.480 --> 0:07:33.240 ECB is going to start that process. 0:07:33.280 --> 0:07:33.640 Today. 0:07:34.160 --> 0:07:37.080 Market's very well behaved. And you know, even though we've 0:07:37.080 --> 0:07:40.720 seen yields move significantly higher on kind of core fixed income, 0:07:40.720 --> 0:07:42.440 you're talking thirty five basis points. Also on the ten 0:07:42.520 --> 0:07:45.840 year treasury. I look at a US agg today, it's flat. Yeah, 0:07:45.920 --> 0:07:49.640 And that benefit of having that yield that carry you know, 0:07:49.800 --> 0:07:52.840 steep yeeld curves or upward sloping year curves, maybe not 0:07:52.880 --> 0:07:56.480 that steep. It's all beneficial. So actually, the actual overall 0:07:56.480 --> 0:07:59.160 impact that the market hasn't been as dramatic as maybe 0:07:59.280 --> 0:08:01.160 was feared come and a first of March when it's 0:08:01.160 --> 0:08:01.760 all kicked off. 0:08:02.480 --> 0:08:04.160 How much credit risk are you taking at there in 0:08:04.160 --> 0:08:05.880 the marketplace? And well, you can sit there in a 0:08:05.960 --> 0:08:08.440 US treasure you can get hit a very nice coupon 0:08:08.560 --> 0:08:09.880 these days, you can do. 0:08:09.920 --> 0:08:12.080 But you can get an even nicer coopon Okay, in 0:08:12.200 --> 0:08:15.560 credit and I think what we've learned over the sort 0:08:15.560 --> 0:08:18.120 of you know, Q one is that corporates are in 0:08:18.160 --> 0:08:21.680 pretty good health. You know, corporate fundamentals look great. Everything 0:08:21.720 --> 0:08:23.640 that when I talk to all of our credit analysts 0:08:23.680 --> 0:08:26.600 I hear is the corporate America and actually corporates around 0:08:26.600 --> 0:08:29.440 the world are in a pretty good spot. So yes, 0:08:29.600 --> 0:08:32.640 I fully understand that spreads are tight and everyone's looking 0:08:32.679 --> 0:08:35.560 at that, but I don't see a real risk of 0:08:36.040 --> 0:08:39.720 a big widening there unless you're talking recession, and again 0:08:39.760 --> 0:08:42.120 that feels a long way off, even with oil doing 0:08:42.120 --> 0:08:43.560 what what oil has been doing. 0:08:44.400 --> 0:08:46.320 The Federal Reserve, we're going to hear from them next week. 0:08:46.360 --> 0:08:49.600 I mean, presumably this our US Federal Reserve chair has 0:08:49.640 --> 0:08:52.120 some pressure to cut rates, but the data is just 0:08:52.160 --> 0:08:52.760 not there, is it. 0:08:53.080 --> 0:08:55.920 No, definitely not. So I think, you know, you saw 0:08:55.960 --> 0:08:58.040 the move start at the last meeting. They're going to 0:08:58.160 --> 0:09:00.480 have more of a neutral bias. I think, you know, 0:09:00.520 --> 0:09:02.920 the labor market is obviously in a better position. I 0:09:03.400 --> 0:09:05.480 go back and look at where we were in February. 0:09:05.480 --> 0:09:07.240 The three month run rate for non farm jobs was 0:09:07.280 --> 0:09:10.000 actually marginally negative. We're now one hundred and eighty eight thousand, 0:09:10.280 --> 0:09:11.840 and again if you look at them sort of the 0:09:11.840 --> 0:09:15.720 mosaic of labor data and not everything's pointing, you know, flashing, 0:09:15.880 --> 0:09:18.960 flashing green. If you look at the unemployment rate, obviously 0:09:18.960 --> 0:09:22.480 that's stable. If you look at wage growth, that's not reaccelerating. 0:09:22.520 --> 0:09:26.320 Some of the small business surveys, tensions to hire aren't 0:09:26.360 --> 0:09:28.720 looking great. But there's there's no question that we've seen 0:09:28.720 --> 0:09:30.320 a bit of a looks like we've seen a bit 0:09:30.320 --> 0:09:32.920 of a pickup. So for me, you know, from a 0:09:32.960 --> 0:09:35.400 credibility standpoint, I think we've got to be neutral. 0:09:35.280 --> 0:09:37.920 Instantly with this international I have a fixed income at 0:09:38.080 --> 0:09:42.760 JP Morgan this morning, you go into endless meetings. Is 0:09:42.800 --> 0:09:45.439 there an appetite for bonds with all this issue and 0:09:45.600 --> 0:09:48.440 the tech thing and you know SpaceX and all that, 0:09:48.880 --> 0:09:52.640 But is there is there just still in a wall 0:09:52.720 --> 0:09:56.480 of international money looking for a warm spot and bills, 0:09:56.520 --> 0:09:57.360 notes and bonds. 0:09:57.800 --> 0:09:58.400 I think there is. 0:09:58.440 --> 0:10:01.120 You just need to look at the huge amounts of 0:10:01.160 --> 0:10:03.480 supply that we've had in the US corporate mark. 0:10:03.360 --> 0:10:05.720 Exactly this year. It's all been very well observed. 0:10:05.880 --> 0:10:10.959 Kelsey Bureau has aged ke never ages no, but you 0:10:11.280 --> 0:10:12.920 just look at it and we see it from our 0:10:12.920 --> 0:10:16.720 client base. Everyone wants to own the fixed income market 0:10:16.720 --> 0:10:19.120 with yields where they are. Everyone's sitting on too much 0:10:19.200 --> 0:10:23.439 cash at the moment, and we're seeing that flow come in. 0:10:23.559 --> 0:10:25.480 And I think the market as a whole when I 0:10:25.520 --> 0:10:30.280 look at the demand for the issuance within the corporate space, 0:10:30.360 --> 0:10:33.839 the concessions are small, the demand the over subscriptions are elevated. 0:10:34.200 --> 0:10:36.040 There's phenomenal demand of bonds out there. 0:10:36.679 --> 0:10:39.960 This to me is just a huge deal. Is you know, 0:10:40.280 --> 0:10:44.040 Scarlett Truez talking eight trillion in money market funds and 0:10:44.120 --> 0:10:45.920 the question to me is like, Okay, do they go 0:10:45.960 --> 0:10:48.880 to a cash equivalent And the answer is no, they're 0:10:48.920 --> 0:10:51.439 looking at the Sweeney out there. 0:10:51.520 --> 0:10:54.600 Yeah, two percent? You have four point one two percent Europe. 0:10:54.640 --> 0:10:57.280 What's the fixed income call in Europe these days? 0:10:57.880 --> 0:11:01.480 So we've had a big shift in market expectations in Europe. 0:11:01.840 --> 0:11:03.640 The US is actually is catching up a little bit now. 0:11:03.840 --> 0:11:06.199 But obviously that the sort of the highlight of where 0:11:06.240 --> 0:11:10.080 the problem was was Europe UK massive repricing in the 0:11:10.080 --> 0:11:13.200 front ends very early on in the conflict. I think 0:11:13.200 --> 0:11:14.920 there's some value to be had there. I think ECV 0:11:14.960 --> 0:11:17.160 obviously they're going to hike rates today. I'm not sure 0:11:17.200 --> 0:11:19.000 they're going to be able to hike rates three times 0:11:19.040 --> 0:11:22.000 over the next year or so. And I think talks 0:11:22.000 --> 0:11:24.280 to the Bank of England, they're not that keen on 0:11:24.679 --> 0:11:25.920 hiking hiking rates. 0:11:25.960 --> 0:11:26.880 They see this more. 0:11:27.400 --> 0:11:29.320 You know, Yes, it's a near term inflation shop, but 0:11:29.360 --> 0:11:32.040 it's a tax and an economies that aren't particularly strong 0:11:32.080 --> 0:11:34.360 at the moment. They haven't got all the good stuff 0:11:34.360 --> 0:11:38.480 you've got over here when AI tech what's really driving 0:11:38.800 --> 0:11:42.600 driving the economy? So for me, yes, the market's repriced, 0:11:42.600 --> 0:11:44.160 but I think there's a bit of an opportunity there. 0:11:44.720 --> 0:11:48.160 Harry McGuire, are you kid me? Did he just lose 0:11:48.200 --> 0:11:50.880 out on the England team because of his age? Is 0:11:50.920 --> 0:11:51.800 it just that simple? 0:11:52.080 --> 0:11:53.160 I think he should be there. 0:11:53.440 --> 0:11:56.760 Should he's done enough? Absolutely disgusted? 0:11:57.080 --> 0:11:57.480 Is that right? 0:11:58.760 --> 0:11:59.920 Religion over there? Right? 0:12:00.240 --> 0:12:00.520 I don't. 0:12:00.679 --> 0:12:03.079 I mean a lot of people were left off the team. 0:12:03.200 --> 0:12:05.840 I mean there's a real shock in England, isn't there? 0:12:05.880 --> 0:12:06.440 There has been. 0:12:07.000 --> 0:12:09.840 I think ultimately you've got a manager that wants the 0:12:09.960 --> 0:12:12.640 team as a whole to do well rather than individual players. 0:12:12.640 --> 0:12:13.800 So let's see if that works out. 0:12:13.960 --> 0:12:17.240 So what is the expectation in England for your team 0:12:17.280 --> 0:12:17.680 this year? 0:12:18.960 --> 0:12:21.800 I think it's difficult to look away from France in 0:12:21.840 --> 0:12:26.520 all honesty, but you guys, look, we've got a very 0:12:26.520 --> 0:12:28.480 good team, you know, on that day, I think they 0:12:28.520 --> 0:12:31.280 can probably be anyone so pretty excited about it. 0:12:31.760 --> 0:12:33.080 I don't even know what the feeling is for the 0:12:33.160 --> 0:12:36.240 US team, Like, are we what we're getting there? What 0:12:36.280 --> 0:12:37.000 are the expectations? 0:12:37.000 --> 0:12:41.120 We're doing three teams a day. Christmas we'll be talking. 0:12:41.360 --> 0:12:43.800 It's turned to do are you really just like you 0:12:43.920 --> 0:12:45.760 over here just to see the World Cup? Is that 0:12:46.360 --> 0:12:48.160 you know? Did you just bring a deal here with 0:12:48.240 --> 0:12:49.800 Mary or nose or something here. 0:12:49.679 --> 0:12:51.920 To I'm flying home this evening. Unfortunately in our first 0:12:51.920 --> 0:12:54.079 game is not still next week, so that's not the case. 0:12:54.760 --> 0:12:55.760 Get one more in here. 0:12:55.840 --> 0:12:58.280 So what are we doing here outside of the US, 0:12:58.400 --> 0:12:59.160 outside of Europe? 0:12:59.160 --> 0:13:01.640 Talk to us about Asia? 0:13:02.000 --> 0:13:04.360 What's the call there from your perspective, because I mean, 0:13:04.600 --> 0:13:08.000 we've hear a lot of concern about energy for that 0:13:08.160 --> 0:13:10.000 part of the world, given what's going on. 0:13:10.080 --> 0:13:12.480 With Yeah, and I think if you think maybe maybe 0:13:12.480 --> 0:13:14.320 Europe's in the spotlight, Asia is probably even more so 0:13:14.440 --> 0:13:18.000 in the spotlight from from an energy standpoint, And actually 0:13:18.000 --> 0:13:21.240 what you had there was very very low yields to 0:13:21.360 --> 0:13:25.400 start with. Now the central banks have tried to sort 0:13:25.400 --> 0:13:29.400 of maybe avoid having to move and they're now playing 0:13:29.440 --> 0:13:30.600 a bit of catch up if you look at what's 0:13:30.600 --> 0:13:33.959 happened in sort of Indonesia, although there's there's other kind 0:13:34.000 --> 0:13:37.080 of political ramifications that are going on there, So I 0:13:37.160 --> 0:13:40.199 do think that's a more challenging environment for us. Though 0:13:40.240 --> 0:13:42.360 when I look across other parts of emerging markets, if 0:13:42.400 --> 0:13:44.000 I look at sort of latter and the Brazils and 0:13:44.000 --> 0:13:46.280 New Mexico's, well that's where that's where we see the 0:13:46.280 --> 0:13:49.040 opportunity to get much more attractive nominal yields, much more 0:13:49.040 --> 0:13:51.160 attractive real yields than you can get over in Asia. 0:13:51.320 --> 0:13:54.079 Within the politics of the United Kingdom, I haven't talked 0:13:54.120 --> 0:13:56.439 to France in like quite a week so and not 0:13:56.559 --> 0:13:58.280 at the speed on this, but we have a headline 0:13:58.320 --> 0:14:03.160 here across the Bloomberg out of Queen Victoria's Street in London. 0:14:03.600 --> 0:14:08.760 The Secretary Heally has resigned from the Starmar government, the 0:14:08.800 --> 0:14:11.440 Defense Secretary here. I don't want you to do the 0:14:11.480 --> 0:14:15.480 International Relations Act, that's not appropriate with compliance, but what 0:14:15.640 --> 0:14:18.520 is a state of guilt? Does JP Morgan look at 0:14:18.800 --> 0:14:22.800 the trauma of UK politics in say UK Full Faith 0:14:22.800 --> 0:14:25.440 and Credit paper is an opportunity here. 0:14:25.960 --> 0:14:29.320 I think there is an opportunity with in the guilt market. Ultimately, 0:14:29.760 --> 0:14:33.800 there is definitely political questions coming up. We're obviously got 0:14:33.840 --> 0:14:36.360 the by election and ultimately that's probably going to lead to, 0:14:37.200 --> 0:14:41.240 you know, a possible shift in leadership, and the market's 0:14:41.360 --> 0:14:45.000 very focused on what that would mean for the guilt market. Ultimately, 0:14:45.040 --> 0:14:47.920 we're you know, an economy at the moment that has 0:14:47.960 --> 0:14:51.240 a lot of debt and how will the fiscal rules 0:14:51.280 --> 0:14:54.200 be adhered adhere to? But I think what we've heard 0:14:54.640 --> 0:14:57.160 is that there's not much wiggle room, you know, the 0:14:57.440 --> 0:14:59.680 UK government is going to have to sort of, you know, 0:15:00.080 --> 0:15:02.480 all in line with what the markets is is after 0:15:02.880 --> 0:15:06.560 your guilts do look attractive relative to other core fixed 0:15:06.560 --> 0:15:09.000 income markets around the world, but there's going to be 0:15:09.040 --> 0:15:11.360 some volatility as we go through these political headlines. 0:15:11.920 --> 0:15:15.680 Your first three games are Croatia, Ghana and Panama. 0:15:16.240 --> 0:15:16.960 That's not easy. 0:15:17.040 --> 0:15:18.920 Who made the schedule of the king. 0:15:19.760 --> 0:15:20.800 Croatia could be a tough game. 0:15:20.880 --> 0:15:22.720 Yeah, an interesting opener, YEP. 0:15:22.800 --> 0:15:24.120 I agree, I'm watching it. 0:15:24.160 --> 0:15:26.080 I think it's gonna be good here. I think are 0:15:26.200 --> 0:15:27.000 faking this, like. 0:15:28.520 --> 0:15:31.840 Still no idea. The level of dumbness here, Yeah, I'd 0:15:31.880 --> 0:15:34.960 be Christy. I'm a I'm a Tots fan. That's dumb, 0:15:35.360 --> 0:15:38.320 Dumbiami and Steely, thank you so much for Chicken Morgan. 0:15:38.760 --> 0:15:42.960 Stay with us. More from Bloomberg Surveillance coming up after this. 0:15:50.200 --> 0:15:53.760 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:15:53.840 --> 0:15:57.000 weekday afternoons from seven to ten am Eastern Listen on 0:15:57.080 --> 0:16:00.720 Applecarplay and Android Otto with the bloombergs us up, or 0:16:00.920 --> 0:16:02.360 watch us live on YouTube. 0:16:02.520 --> 0:16:05.400 This is my conversation of the day. No question about 0:16:05.400 --> 0:16:09.040 a Bailey Lipschaltz with this. Senior reporter of Bloomberg News 0:16:09.080 --> 0:16:15.080 barely describes his competency on the IPO dynamics going on 0:16:15.240 --> 0:16:18.080 right now. In your wonderful story this morning, there's a 0:16:18.120 --> 0:16:21.160 single sentence and on the back of it you link 0:16:21.320 --> 0:16:26.480 open Ai and anthropic in the Wall Street Journal bombshell 0:16:26.520 --> 0:16:29.760 on pricing of tokens, and you bring that over to 0:16:29.880 --> 0:16:33.200 rocket ships and Elon Musk. How in God's name do you. 0:16:33.200 --> 0:16:36.160 Do that working hard in a lot of coffee, I guess, 0:16:36.240 --> 0:16:39.440 but I mean, Tom, this is something we've been waiting for. 0:16:39.560 --> 0:16:42.160 Everyone's been waiting for any of these companies to go public. 0:16:42.160 --> 0:16:45.080 Anthropics obviously much younger than SpaceX, which is more than 0:16:45.120 --> 0:16:48.160 two decades old. But this is the moment we've been 0:16:48.280 --> 0:16:50.480 waiting for, and we're going to see how this actually 0:16:50.680 --> 0:16:53.160 shakes out today, tomorrow, and through the next few weeks. 0:16:53.240 --> 0:16:58.120 The common theme is nobody's making megda desiah Ls's keyword 0:16:58.680 --> 0:17:02.080 profit where on the xxs. 0:17:01.720 --> 0:17:05.400 Is profit for the companies for all of them. Well, so, 0:17:05.600 --> 0:17:09.520 SpaceX before it merged with Xai elon Musk kind of 0:17:10.400 --> 0:17:15.080 x Twitter rock component, the company was quite profitable. They 0:17:15.240 --> 0:17:18.720 dominate launch. They essentially have a space monopoly. Now, analysts 0:17:18.720 --> 0:17:21.560 aren't expecting free cash flow positivity for a number of years. 0:17:22.160 --> 0:17:25.479 Anthropic on their latest run rate Bloomberg reported that they 0:17:25.520 --> 0:17:27.640 actually are a profitable on a monthly basis. What does 0:17:27.640 --> 0:17:30.000 that mean for an annual basis TBD And I think 0:17:30.040 --> 0:17:32.840 open Ai, depending who you talk to, is a much 0:17:32.920 --> 0:17:37.800 more long term thesis for that company to really turn profitable. 0:17:38.240 --> 0:17:41.320 SpaceX we have a fixed price for the IPO. It 0:17:41.320 --> 0:17:45.640 was one hundred and thirty five. What's the thought here? 0:17:45.640 --> 0:17:47.679 Are we going to price at that number below it 0:17:47.840 --> 0:17:48.360 above it? 0:17:49.080 --> 0:17:54.320 Our expectation is this price is sticking to it, size 0:17:54.320 --> 0:17:56.520 is sticking to it. Elon Musk and the team at 0:17:56.520 --> 0:17:58.399 SpaceX came out and treated it kind of like a 0:17:58.440 --> 0:18:01.040 private fundraising ground and said we're raising money. 0:18:01.040 --> 0:18:02.879 We're raising seventy five billion, Are you in? 0:18:02.960 --> 0:18:03.440 Are you out? 0:18:03.480 --> 0:18:05.879 One point seven to seven trillion? Show us what you 0:18:05.880 --> 0:18:08.000 want and that's the expectation. So it's going to be 0:18:08.000 --> 0:18:11.080 an interesting dynamic how they allocate the shares later today 0:18:11.160 --> 0:18:13.040 and then what we see with trading tomorrow. 0:18:13.160 --> 0:18:16.160 Do we think we're going to have any surprising investors, 0:18:16.200 --> 0:18:21.399 whether it's a technology company, a list private equity firm, 0:18:21.880 --> 0:18:23.200 or is it just going to be a run of 0:18:23.200 --> 0:18:25.560 the middle institutional IPO with some retail component. 0:18:25.680 --> 0:18:27.240 I think there's a lot of interest if there is 0:18:27.280 --> 0:18:30.520 a strategic component, just given the announcements we've seen between 0:18:30.520 --> 0:18:34.520 the company and anthropic companies, a Google. 0:18:34.240 --> 0:18:36.600 For example, might to step in and buy something. 0:18:36.480 --> 0:18:38.000 Here at the IPO. Yeah. 0:18:38.080 --> 0:18:40.720 Yeah, we saw that with core Weave. 0:18:40.760 --> 0:18:44.359 Core Weave's IPO really only happened because Nvidia showed up 0:18:44.520 --> 0:18:46.560 in huge size and was able to get that deal 0:18:46.600 --> 0:18:49.240 done because there's such a close partner. So that's just 0:18:49.320 --> 0:18:50.560 another dynamic track. 0:18:51.240 --> 0:18:53.800 Now you've got to report out here today. 0:18:53.880 --> 0:18:56.720 From reporting, SpaceX tells investors it has lined up a 0:18:56.800 --> 0:18:59.000 blue chip credit ratings. Are they going to come to 0:18:59.040 --> 0:19:00.480 the botmarket after this? 0:19:00.800 --> 0:19:00.840 You? 0:19:01.080 --> 0:19:02.119 That is the expectation. 0:19:02.200 --> 0:19:04.840 One of the things we've been hearing is that there's 0:19:04.880 --> 0:19:08.000 a view from SpaceX that this is the only equity 0:19:08.040 --> 0:19:11.360 financing they will do. Everything from now on will be kay. 0:19:11.760 --> 0:19:15.080 So the expectation in these meetings is we've got ig 0:19:15.240 --> 0:19:16.320 rating from the three firms. 0:19:16.560 --> 0:19:18.000 We're going to tap the debt markets. 0:19:18.240 --> 0:19:21.239 We can do that no one else can from an 0:19:21.240 --> 0:19:24.920 AI perspective. When you look at some of the cell 0:19:24.960 --> 0:19:27.480 side expectations, hundreds of billions of dollars have to come 0:19:27.520 --> 0:19:29.680 from somewhere, so seemingly the debt market. 0:19:29.560 --> 0:19:32.480 What does the selling start? Like Toby Nangel and the 0:19:32.560 --> 0:19:35.920 Ft and Isabelle Leave for Bloomberg talked a lot about 0:19:36.000 --> 0:19:39.879 all the index dynamics and all that like restricted stock 0:19:39.960 --> 0:19:45.080 and other things. Maybe I understand in July, August, September, 0:19:45.160 --> 0:19:48.480 are there people out there ready to sell who are insiders? 0:19:48.720 --> 0:19:51.680 So they have an interesting lock up structure. 0:19:51.760 --> 0:19:55.320 After their second quarter earnings, which realistically could come anytime 0:19:55.359 --> 0:19:58.360