1 00:00:00,040 --> 00:00:06,720 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,640 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amerie Hordert. Join us each day 4 00:00:18,720 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,919 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,000 --> 00:00:36,919 Speaker 2: Terminal and the Bloomberg Business app. We begin this out 10 00:00:36,920 --> 00:00:39,640 Speaker 2: were Stock's pushing kaya following a boost from Micron's blowout 11 00:00:39,640 --> 00:00:42,839 Speaker 2: earnings report. Sebastian page of two, Row price writing AI 12 00:00:43,080 --> 00:00:46,200 Speaker 2: is an expanding theme from GPUs to other bottlenecks along 13 00:00:46,240 --> 00:00:49,040 Speaker 2: the data center supply chain, as buzz light Years said 14 00:00:49,159 --> 00:00:52,360 Speaker 2: to infinity and beyond. Sebastian joins us now for more. So, 15 00:00:52,440 --> 00:00:54,400 Speaker 2: welcome back to the program, Buddy. Are you just saying, 16 00:00:54,720 --> 00:00:57,120 Speaker 2: stay on grip tie, keep rounding this ball? 17 00:00:59,080 --> 00:01:01,280 Speaker 3: John? When I wrote my notes, I didn't think you'd 18 00:01:01,280 --> 00:01:03,480 Speaker 3: pick up on the buzz light year quote. I'm going 19 00:01:03,520 --> 00:01:08,320 Speaker 3: to be honest. We have an expending trade from bottlenecks 20 00:01:09,040 --> 00:01:14,959 Speaker 3: to more and more bottlenecks. You look at cooling, at electrification, 21 00:01:15,640 --> 00:01:20,880 Speaker 3: at aerospace, at gas turbines, We're invested in those bottlenecks. 22 00:01:21,080 --> 00:01:23,160 Speaker 3: We think it's a trade that has legs. Look the 23 00:01:23,200 --> 00:01:25,759 Speaker 3: AI build out. A lot of people mentioned those forecasts 24 00:01:25,840 --> 00:01:29,560 Speaker 3: on your show, but we're looking at three trillion by 25 00:01:30,240 --> 00:01:33,840 Speaker 3: twenty twenty eight. So it's a trade and it's going 26 00:01:33,920 --> 00:01:37,640 Speaker 3: to continue to go. In my mind, the key question 27 00:01:37,880 --> 00:01:41,520 Speaker 3: right now is when is this going to show in 28 00:01:41,720 --> 00:01:47,360 Speaker 3: AI users' margins. Now we have three hundred analysts on 29 00:01:47,400 --> 00:01:50,520 Speaker 3: our platform. I read their notes, but now I use 30 00:01:50,600 --> 00:01:53,760 Speaker 3: AI to read their notes, and I ask AI, where 31 00:01:53,760 --> 00:01:57,760 Speaker 3: are we seeing companies in our own proprietary research that 32 00:01:57,800 --> 00:02:02,320 Speaker 3: are increasing their margins because they're using AI. Now I've 33 00:02:02,360 --> 00:02:06,000 Speaker 3: seen estimates out there John that are I think exaggerated, 34 00:02:06,560 --> 00:02:10,760 Speaker 3: but anecdotally we're starting to see this as well in 35 00:02:10,800 --> 00:02:13,440 Speaker 3: the users of AI. This will be the next leg. 36 00:02:13,720 --> 00:02:16,919 Speaker 3: So I think that technology revolution will continue. I'm conscious 37 00:02:16,919 --> 00:02:18,680 Speaker 3: as I say this I sound a little bit like 38 00:02:18,760 --> 00:02:22,040 Speaker 3: Dan Ives, but yeah, this we're long US large cap 39 00:02:22,080 --> 00:02:22,720 Speaker 3: growth stocks. 40 00:02:22,880 --> 00:02:24,760 Speaker 2: So I'll push back just a little bit and I'll 41 00:02:24,760 --> 00:02:26,720 Speaker 2: give you the alternative view on things step where the 42 00:02:26,760 --> 00:02:28,959 Speaker 2: economics of all of this get a little bit complicated. 43 00:02:29,240 --> 00:02:31,960 Speaker 2: So the cost of building capacity is increasing. We can 44 00:02:32,000 --> 00:02:34,560 Speaker 2: see that evidenced by some of the margins at some 45 00:02:34,639 --> 00:02:37,520 Speaker 2: of these companies at a time when the end user 46 00:02:37,600 --> 00:02:40,800 Speaker 2: demand is getting a little bit fragile with regards to 47 00:02:40,840 --> 00:02:45,519 Speaker 2: pricing goverall, and they're rationally spending on AI. How's that 48 00:02:45,600 --> 00:02:47,359 Speaker 2: going to make sense going forward? What we need to 49 00:02:47,440 --> 00:02:48,200 Speaker 2: rationalize here? 50 00:02:50,600 --> 00:02:53,400 Speaker 3: Look, as long as the products keep improving, and they 51 00:02:53,440 --> 00:02:57,440 Speaker 3: are there is tremendous demand for it, it looks to 52 00:02:57,480 --> 00:03:01,000 Speaker 3: me like we're still scratching the surface on demand and 53 00:03:01,200 --> 00:03:05,920 Speaker 3: usage of AI. And by the way, John, I completely 54 00:03:05,960 --> 00:03:10,919 Speaker 3: take the point that this spending is gigantic and free 55 00:03:10,960 --> 00:03:14,000 Speaker 3: cash flows are coming down really fast for a lot 56 00:03:14,040 --> 00:03:17,040 Speaker 3: of the hyper scalers. But you know, if you think 57 00:03:17,080 --> 00:03:21,520 Speaker 3: about it, the price earnings on the Russell one thousand growth, 58 00:03:21,720 --> 00:03:24,880 Speaker 3: we were in the thirty range. We peaked at thirty 59 00:03:25,000 --> 00:03:28,320 Speaker 3: several times over the last five years. John, We're at 60 00:03:28,480 --> 00:03:31,120 Speaker 3: twenty two. So there is you know, trust the market. 61 00:03:31,160 --> 00:03:35,720 Speaker 3: There is an adjustment here that's been made. You know, 62 00:03:35,800 --> 00:03:38,600 Speaker 3: this is this is in the bottom for Russell one 63 00:03:38,640 --> 00:03:41,520 Speaker 3: thousand growth valuation. This is in the bottom thirty percent 64 00:03:41,600 --> 00:03:45,240 Speaker 3: of the last ten year range. You can also play 65 00:03:45,280 --> 00:03:48,600 Speaker 3: AI bottlenecks, by the way, in other areas. You can 66 00:03:48,640 --> 00:03:51,560 Speaker 3: also play them in small and MidCap, which we're long too. 67 00:03:51,600 --> 00:03:54,520 Speaker 3: We have this barbell between US larscap growth and small 68 00:03:54,560 --> 00:03:58,160 Speaker 3: and MidCap. We're talking about the golden component. Once you 69 00:03:58,240 --> 00:04:01,040 Speaker 3: have a component that becomes a part just a bottleneck, 70 00:04:01,080 --> 00:04:05,080 Speaker 3: a part of that electrification, power supply, data center, whatever 71 00:04:05,120 --> 00:04:09,480 Speaker 3: it is, your company stock goes vertical. Also, merging markets, 72 00:04:09,560 --> 00:04:12,160 Speaker 3: A lot of people mention this on surveillance. Emerging markets 73 00:04:12,200 --> 00:04:15,680 Speaker 3: are becoming part of that trade. So yeah, I mean 74 00:04:15,720 --> 00:04:18,920 Speaker 3: it's a position you need to balance. You need to 75 00:04:18,960 --> 00:04:21,200 Speaker 3: diversify the risk in the portfolio. For example, I still 76 00:04:21,200 --> 00:04:23,680 Speaker 3: think there's inflation risk in the portfolio, and at some 77 00:04:23,760 --> 00:04:27,359 Speaker 3: point that becomes part of the supplying the energy to AI, 78 00:04:27,480 --> 00:04:29,360 Speaker 3: that becomes part of the picture. 79 00:04:29,480 --> 00:04:31,280 Speaker 2: Well, pick up on that just one second, SEB. 80 00:04:31,560 --> 00:04:34,400 Speaker 1: You're talking about trying to race to find the next 81 00:04:34,400 --> 00:04:37,039 Speaker 1: bottleneck where you can see stocks go vertical, akin to 82 00:04:37,040 --> 00:04:40,360 Speaker 1: what we're seeing with Micron this morning. I just wonder 83 00:04:40,720 --> 00:04:43,279 Speaker 1: if people truly are understanding or if it's a healthy 84 00:04:43,320 --> 00:04:45,560 Speaker 1: technical They just have a rolling ball of cash. On 85 00:04:45,560 --> 00:04:48,560 Speaker 1: one hand, people are chasing who has pricing power. On 86 00:04:48,600 --> 00:04:51,080 Speaker 1: the other hand, Google shares down eight percent this month. 87 00:04:51,240 --> 00:04:54,560 Speaker 1: Microsoft poised for its worst monthly loss going back to 88 00:04:54,600 --> 00:04:58,440 Speaker 1: twenty and eight of nineteen percent losses. The payers of 89 00:04:58,480 --> 00:05:01,080 Speaker 1: this bill are getting penal At what point is that 90 00:05:01,160 --> 00:05:03,919 Speaker 1: a warning side? 91 00:05:04,160 --> 00:05:08,440 Speaker 3: I mean, it is absolutely, Lisa. You have winners and losers. 92 00:05:08,560 --> 00:05:12,040 Speaker 3: And this is why skilled active management and fundamental research 93 00:05:12,200 --> 00:05:15,240 Speaker 3: is working here. You're going to have software companies that 94 00:05:15,279 --> 00:05:17,560 Speaker 3: are going to be disrupted, but you're going to have 95 00:05:17,600 --> 00:05:20,640 Speaker 3: companies that, I think increasingly the next leg of this 96 00:05:20,920 --> 00:05:25,159 Speaker 3: is along the bottlenecks to eventually the handoff to the 97 00:05:25,279 --> 00:05:28,760 Speaker 3: users that are going to create real efficiency. I see 98 00:05:28,760 --> 00:05:32,800 Speaker 3: it in our company. We're creating efficiency, We're improving our processes. 99 00:05:33,240 --> 00:05:35,320 Speaker 3: It's really that that's going to be the next leg, 100 00:05:35,360 --> 00:05:38,080 Speaker 3: and that's what is going to keep it going. And 101 00:05:38,120 --> 00:05:40,520 Speaker 3: again I go back to the fact that it's not 102 00:05:41,360 --> 00:05:44,080 Speaker 3: you know, a lot of this increase in leverage and 103 00:05:44,160 --> 00:05:47,600 Speaker 3: borrowing and decrease in free cash flow margins, a lot 104 00:05:47,640 --> 00:05:51,719 Speaker 3: of it has been adjusted in the price twenty two 105 00:05:52,040 --> 00:05:56,400 Speaker 3: relative to the thirty range. In prior episodes over the 106 00:05:56,440 --> 00:05:58,599 Speaker 3: last five years, I think is pretty good for Russell 107 00:05:58,640 --> 00:05:59,760 Speaker 3: one thousand growth. 108 00:06:00,120 --> 00:06:03,840 Speaker 1: Se could you justify the investment and further AI, if 109 00:06:03,839 --> 00:06:07,080 Speaker 1: the borrowing costs were higher in the face of inflation, 110 00:06:07,360 --> 00:06:09,560 Speaker 1: in the face of some of this acceleration that we're 111 00:06:09,560 --> 00:06:13,159 Speaker 1: seeing in other components and price components that everyone's trying 112 00:06:13,200 --> 00:06:13,640 Speaker 1: to chase. 113 00:06:15,920 --> 00:06:19,160 Speaker 3: Well, the reality is that this three trillion is spending. 114 00:06:19,480 --> 00:06:22,960 Speaker 3: A lot of it is generating, generated by companies that 115 00:06:23,200 --> 00:06:25,719 Speaker 3: still have a ton of cash. I don't like the 116 00:06:25,760 --> 00:06:28,440 Speaker 3: comparisons to the Duck Humbubble, but we're nowhere near the 117 00:06:28,600 --> 00:06:32,520 Speaker 3: level of corporate leverage and aggregate that we had. So yes, 118 00:06:32,560 --> 00:06:34,599 Speaker 3: there is some borrowing, but if you look at the 119 00:06:34,640 --> 00:06:40,000 Speaker 3: metrics by historical standards, it's not a very high level 120 00:06:40,600 --> 00:06:45,200 Speaker 3: of leverage by historical standards, And there is tremendous capital 121 00:06:45,279 --> 00:06:48,560 Speaker 3: that's available, as we're seeing with IPOs and you know 122 00:06:48,600 --> 00:06:52,760 Speaker 3: those issues. I think there is there is demand for 123 00:06:52,800 --> 00:06:55,080 Speaker 3: the end product at the end of the day, that's 124 00:06:55,120 --> 00:06:58,480 Speaker 3: what really matters. People want to use it. They're billions 125 00:06:58,480 --> 00:07:02,080 Speaker 3: of users already, they're just scratching the surface. I'm doing 126 00:07:02,200 --> 00:07:06,080 Speaker 3: roundtables with investors and I realize a lot of them, 127 00:07:06,279 --> 00:07:08,960 Speaker 3: my peers, a lot of them are just starting. It 128 00:07:09,000 --> 00:07:11,360 Speaker 3: makes me happy because I feel like we're really ahead 129 00:07:11,360 --> 00:07:13,440 Speaker 3: and how we're using agents and so on in our 130 00:07:13,440 --> 00:07:16,560 Speaker 3: investment process. But also it makes me think that as 131 00:07:16,600 --> 00:07:18,880 Speaker 3: long as the demand for the end product is there, 132 00:07:19,080 --> 00:07:20,800 Speaker 3: people are willing to pay for it. We'll go through 133 00:07:20,840 --> 00:07:23,160 Speaker 3: ups and downs. We'll go through episodes where tokens get 134 00:07:23,200 --> 00:07:25,960 Speaker 3: more expensive and people go to cheaper models and so on, 135 00:07:26,280 --> 00:07:27,520 Speaker 3: But the trend is our friend. 136 00:07:27,560 --> 00:07:27,720 Speaker 4: Here. 137 00:07:27,760 --> 00:07:31,080 Speaker 3: Three trillion spending by twenty eight. Again, Lisa, I didn't 138 00:07:31,080 --> 00:07:33,200 Speaker 3: think I come in this morning and sound like dan Ives, 139 00:07:33,240 --> 00:07:36,200 Speaker 3: but we do have a long position in US large 140 00:07:36,240 --> 00:07:40,000 Speaker 3: gap growth, and we do believe in the AI bottlenecks 141 00:07:40,000 --> 00:07:41,600 Speaker 3: and the expansion of that trade. 142 00:07:41,720 --> 00:07:45,760 Speaker 5: You also are concerned that even with oil prices becoming lower, 143 00:07:45,760 --> 00:07:47,600 Speaker 5: that you actually think there's still a lot of inflation 144 00:07:47,680 --> 00:07:50,920 Speaker 5: baked into the system. Is a fed potentially having to 145 00:07:51,040 --> 00:07:53,920 Speaker 5: maybe hike going to be an issue for where you 146 00:07:53,960 --> 00:07:57,440 Speaker 5: see the market going and your dan Ives bullishness this morning. 147 00:07:59,360 --> 00:08:02,320 Speaker 3: Yeah, Look, I'm Marie. If we like twenty five base 148 00:08:02,400 --> 00:08:05,160 Speaker 3: points fifty base points of hikes, I don't think that's 149 00:08:05,160 --> 00:08:09,559 Speaker 3: a big issue for markets. I do think generally though, 150 00:08:09,720 --> 00:08:13,720 Speaker 3: inflation right now is underestimated as a risk. You had 151 00:08:13,720 --> 00:08:18,360 Speaker 3: the Torsten Slock quote earlier, I would argue that he's right. 152 00:08:18,520 --> 00:08:21,239 Speaker 3: I would agree with that, Yes, oil prices are coming 153 00:08:21,320 --> 00:08:24,240 Speaker 3: back down really quickly. My view is that there's spent 154 00:08:24,400 --> 00:08:28,480 Speaker 3: up inflation. There are lots of lags in inflation data 155 00:08:28,520 --> 00:08:32,199 Speaker 3: and in inflation itself. You have from fertilizer to food, 156 00:08:32,720 --> 00:08:36,840 Speaker 3: from freight and insurance to transportation, to industrial production to 157 00:08:36,880 --> 00:08:41,160 Speaker 3: the final goods, from fiscal stimulus to demand. There's lots 158 00:08:41,200 --> 00:08:44,160 Speaker 3: of lags that are working their way through. By the way, 159 00:08:44,400 --> 00:08:47,280 Speaker 3: the last three months on the rolling basis, the headline 160 00:08:47,280 --> 00:08:50,480 Speaker 3: CPI is up eight percent. If you annualize it, you're 161 00:08:50,480 --> 00:08:53,320 Speaker 3: not supposed to analyze three months. You know it's noisy data, 162 00:08:53,360 --> 00:08:56,640 Speaker 3: but still eight percent. But the shelter for the last 163 00:08:56,679 --> 00:08:59,120 Speaker 3: three months is four point eight percent. There's also a 164 00:08:59,240 --> 00:09:03,160 Speaker 3: lag de fact here with prior rent increases. Now, put 165 00:09:03,160 --> 00:09:05,400 Speaker 3: all of this in context of the fact that the 166 00:09:05,440 --> 00:09:08,559 Speaker 3: break even for the one year horizon is one point 167 00:09:08,600 --> 00:09:11,800 Speaker 3: seven percent and the one year inflation swap is two 168 00:09:11,880 --> 00:09:14,800 Speaker 3: point two percent. So my mind is still an underestimated 169 00:09:14,880 --> 00:09:17,640 Speaker 3: risk especially for the next three to six months. In 170 00:09:17,679 --> 00:09:20,440 Speaker 3: the long run, yeah, will normalize, but I think the 171 00:09:20,480 --> 00:09:23,160 Speaker 3: market is underpricing the inflation risk. I guess we have 172 00:09:23,200 --> 00:09:26,439 Speaker 3: a print this morning, We'll see I watch surveillance often 173 00:09:26,480 --> 00:09:29,640 Speaker 3: with a twelve or twenty four hour lag, and I 174 00:09:29,720 --> 00:09:32,320 Speaker 3: always I'm mindful that some people come in and make 175 00:09:32,400 --> 00:09:35,319 Speaker 3: forecasts a few minutes before the data release. I'm not 176 00:09:35,360 --> 00:09:37,440 Speaker 3: going to make that. I'm I'm not going to do 177 00:09:37,520 --> 00:09:40,400 Speaker 3: that this morning. It's always interesting to listen to it 178 00:09:40,480 --> 00:09:43,360 Speaker 3: after the fact when you know what happened. But as 179 00:09:43,400 --> 00:09:46,400 Speaker 3: a general trend, I'm not talking necessarily PC maybe four 180 00:09:46,440 --> 00:09:49,520 Speaker 3: percent this morning, but as a general trend, the inflation 181 00:09:50,080 --> 00:09:53,360 Speaker 3: here is underestimated by the market based on the pricing 182 00:09:53,400 --> 00:09:56,040 Speaker 3: you've seen in break evens and inflation swap. 183 00:09:56,280 --> 00:09:59,720 Speaker 2: Stay with us, Mulblinberg, Savana's coming up off to this, 184 00:10:09,120 --> 00:10:12,360 Speaker 2: Micron's share searching on its blockbus to forecast. Hey, Terry 185 00:10:12,400 --> 00:10:14,520 Speaker 2: of City Research right in the health of the AI 186 00:10:14,640 --> 00:10:17,880 Speaker 2: trade will continue to be defined by the irresistible force 187 00:10:17,920 --> 00:10:22,480 Speaker 2: of enterprise demand meeting the immovable object of inference capacity. 188 00:10:22,760 --> 00:10:24,600 Speaker 2: Heith joins us now for more. Hath good morning, good 189 00:10:24,640 --> 00:10:24,920 Speaker 2: to see it. 190 00:10:25,080 --> 00:10:25,440 Speaker 6: Good morning. 191 00:10:25,520 --> 00:10:27,560 Speaker 2: Let's pick up on that enterprise demand. Just how robust 192 00:10:27,600 --> 00:10:28,280 Speaker 2: is that right now? 193 00:10:28,520 --> 00:10:31,000 Speaker 7: Look, it's incredibly robust. We'll get Q two numbers in 194 00:10:31,040 --> 00:10:32,600 Speaker 7: a few weeks. But if you look at what we've 195 00:10:32,640 --> 00:10:34,560 Speaker 7: seen over the last the last few quarters, we've gone 196 00:10:34,600 --> 00:10:36,400 Speaker 7: from twenty eight percent year over your growth in Q 197 00:10:36,480 --> 00:10:39,240 Speaker 7: one of last year to thirty three percent in Q two, 198 00:10:39,679 --> 00:10:42,240 Speaker 7: to fifty three percent in Q three, to ninety one 199 00:10:42,240 --> 00:10:44,160 Speaker 7: percent to one hundred and forty one percent in Q 200 00:10:44,240 --> 00:10:47,080 Speaker 7: one of this year. Like that kind of bend in 201 00:10:47,120 --> 00:10:49,240 Speaker 7: the S curve that we're that we're seeing here and 202 00:10:49,240 --> 00:10:51,840 Speaker 7: we believe it's going to accelerate again in Q two. 203 00:10:52,160 --> 00:10:54,600 Speaker 7: That's the best proxy for what's happening in enterprise demand. 204 00:10:54,600 --> 00:10:57,319 Speaker 7: And anybody who works at a Fortune five hundred type 205 00:10:57,360 --> 00:11:01,439 Speaker 7: company that is pushing this into products could can tell 206 00:11:01,480 --> 00:11:02,720 Speaker 7: you they're seeing it in real time. 207 00:11:02,800 --> 00:11:04,559 Speaker 2: There is a rush to build out capacity to make 208 00:11:04,559 --> 00:11:07,440 Speaker 2: all this demand. Some companies are benefiting both than others 209 00:11:07,440 --> 00:11:10,719 Speaker 2: Microme with eighty five percent margins. Other companies that are 210 00:11:10,720 --> 00:11:12,960 Speaker 2: doing a lot of the spending right now being punished. 211 00:11:13,000 --> 00:11:14,760 Speaker 2: The stocks are being punished. This is a thing we 212 00:11:14,840 --> 00:11:17,600 Speaker 2: keep bringing up that changes the trajectory for spending. 213 00:11:18,040 --> 00:11:21,960 Speaker 7: Look, no, I mean not anytime soon, because the companies 214 00:11:21,960 --> 00:11:25,720 Speaker 7: are getting real returns on this. The market right now 215 00:11:25,880 --> 00:11:27,840 Speaker 7: is not giving the companies that are spending on this, 216 00:11:27,880 --> 00:11:31,160 Speaker 7: the hyperscalers the kind of credit that they normally would 217 00:11:31,200 --> 00:11:33,120 Speaker 7: for a couple of different reasons, but the biggest one 218 00:11:33,160 --> 00:11:35,599 Speaker 7: is there is this gap between when you have to 219 00:11:35,640 --> 00:11:37,520 Speaker 7: start spending and building all of this out when you 220 00:11:37,520 --> 00:11:39,600 Speaker 7: actually start seeing the returns on it. If you look 221 00:11:39,600 --> 00:11:42,160 Speaker 7: at cash return on cash invested, which we believe is 222 00:11:42,200 --> 00:11:44,400 Speaker 7: sort of the best gauge of the returns that they're 223 00:11:44,400 --> 00:11:47,360 Speaker 7: actually generating on this, hyper scalers are generating twenty nine 224 00:11:47,360 --> 00:11:51,160 Speaker 7: percent returns on this investment, very stable. It was twenty 225 00:11:51,240 --> 00:11:53,040 Speaker 7: nine percent in Q one, is twenty nine percent in 226 00:11:53,120 --> 00:11:55,640 Speaker 7: Q four. If you have the ability to borrow at 227 00:11:55,679 --> 00:11:58,760 Speaker 7: six percent or to issue equity and get a twenty 228 00:11:58,840 --> 00:12:01,120 Speaker 7: nine percent return on it, you're supposed to do that 229 00:12:01,200 --> 00:12:03,120 Speaker 7: regardless of what your stock price is doing. And while 230 00:12:03,160 --> 00:12:06,240 Speaker 7: the stock prices aren't doing what Micron stock price is doing, 231 00:12:06,840 --> 00:12:09,439 Speaker 7: they're hanging in there enough that investors haven't rejected this. 232 00:12:09,600 --> 00:12:09,840 Speaker 3: Right. 233 00:12:10,880 --> 00:12:14,320 Speaker 7: Google issued eighty five billion dollars worth of equities the 234 00:12:14,360 --> 00:12:15,680 Speaker 7: market didn't really blink. 235 00:12:15,800 --> 00:12:17,800 Speaker 1: Well, just to build on though what John is talking about, 236 00:12:18,080 --> 00:12:19,959 Speaker 1: maybe people are still lending and they're. 237 00:12:19,760 --> 00:12:20,960 Speaker 2: Still able to raise cash. 238 00:12:21,000 --> 00:12:23,679 Speaker 1: Nonetheless, it's getting a little bit hairy for the likes 239 00:12:23,679 --> 00:12:27,319 Speaker 1: of Microsoft down eighteen percent for this worst monthly performance 240 00:12:27,360 --> 00:12:29,920 Speaker 1: going back to two thousand and eight. You see Oracle 241 00:12:29,960 --> 00:12:32,000 Speaker 1: down more than thirty percent. Are we starting to see 242 00:12:32,000 --> 00:12:35,199 Speaker 1: the beginnings of investor pushback that maybe hasn't put teeth 243 00:12:35,240 --> 00:12:38,600 Speaker 1: in this trade by withdrawing cash, but certainly has put 244 00:12:38,679 --> 00:12:40,840 Speaker 1: a little bit of notice around that capital. 245 00:12:41,000 --> 00:12:44,480 Speaker 7: Well, the thing that we have to remember, particularly when 246 00:12:44,480 --> 00:12:47,400 Speaker 7: it comes to Microsoft and Oracle, is those are both 247 00:12:47,440 --> 00:12:50,599 Speaker 7: software companies. Look at everything else in software and what 248 00:12:51,320 --> 00:12:56,320 Speaker 7: those stocks have done. The market's not responding negatively to 249 00:12:56,360 --> 00:12:58,640 Speaker 7: the acceleration and growth that you're seeing at Azure, the 250 00:12:58,679 --> 00:13:01,240 Speaker 7: returns you're seeing at Azure. It's responding to the other 251 00:13:01,720 --> 00:13:05,640 Speaker 7: seventy percent of Microsoft's business that is software. It's responding 252 00:13:05,640 --> 00:13:08,600 Speaker 7: to the biggest part of Oracle's business, which is software. 253 00:13:09,240 --> 00:13:14,800 Speaker 7: And so I think that's that, if anything, should encourage 254 00:13:14,840 --> 00:13:17,600 Speaker 7: more investment in this area, particularly as we start to 255 00:13:17,640 --> 00:13:21,240 Speaker 7: see the acceleration in Azure revenues through through the end 256 00:13:21,280 --> 00:13:23,720 Speaker 7: of this year, which we believe the market will respond 257 00:13:23,760 --> 00:13:24,400 Speaker 7: positively to. 258 00:13:24,640 --> 00:13:26,680 Speaker 1: We've seen this rolling ball of cash, and as we 259 00:13:26,720 --> 00:13:29,360 Speaker 1: heard from Sebastian Page earlier, everyone's looking for the choke points. 260 00:13:29,720 --> 00:13:32,240 Speaker 1: The next place where you're going to see things just 261 00:13:32,280 --> 00:13:35,800 Speaker 1: sort of shoot exponentially higher because of this insatiable demand 262 00:13:36,040 --> 00:13:39,160 Speaker 1: and a limited supply. After memory, what's next, I mean, 263 00:13:39,200 --> 00:13:41,440 Speaker 1: do you have your eye on kind of those choke points. 264 00:13:41,840 --> 00:13:42,560 Speaker 2: I mean we do. 265 00:13:42,640 --> 00:13:44,560 Speaker 7: I mean the choke points sort of exist throughout the 266 00:13:44,559 --> 00:13:48,079 Speaker 7: supply chain right now, Memories obviously the biggest one. Anthropic 267 00:13:48,120 --> 00:13:50,440 Speaker 7: told you that very loudly a few weeks ago when 268 00:13:50,480 --> 00:13:53,800 Speaker 7: they raised their most recent round. They have the opportunity 269 00:13:53,840 --> 00:13:57,320 Speaker 7: to choose strategic partners. They could have picked anyone they wanted. 270 00:13:57,480 --> 00:14:00,800 Speaker 7: They chose three, Samsung, Micron, and Heinex, and so like 271 00:14:01,120 --> 00:14:04,720 Speaker 7: if anyone who's surprised by what's happening with Micron today 272 00:14:04,760 --> 00:14:07,240 Speaker 7: and what's been happening with high bandwidth memory didn't pay 273 00:14:07,240 --> 00:14:11,720 Speaker 7: attention to what Anthropic told them, the next point after 274 00:14:11,760 --> 00:14:16,280 Speaker 7: that is it's at interconnect, it's in storage, it's in 275 00:14:16,400 --> 00:14:18,760 Speaker 7: labor in a very big way, and of course it's 276 00:14:18,800 --> 00:14:21,120 Speaker 7: in power. We've been talking about that for so long. 277 00:14:21,400 --> 00:14:23,680 Speaker 7: It's also because of what you see with Micron. It's 278 00:14:23,800 --> 00:14:26,760 Speaker 7: very much in semicap equipment because we do have to 279 00:14:26,800 --> 00:14:28,560 Speaker 7: make more memory, we do have to make more chips, 280 00:14:28,560 --> 00:14:31,720 Speaker 7: We need more compute, we need more storage and memory. 281 00:14:31,920 --> 00:14:34,240 Speaker 5: Do you think some of these companies along the supply 282 00:14:34,320 --> 00:14:36,920 Speaker 5: chain we could potentially see these issues emerged later in 283 00:14:36,920 --> 00:14:38,680 Speaker 5: the year or next year as they build this out. 284 00:14:38,720 --> 00:14:40,040 Speaker 5: Are undervalued right now? 285 00:14:40,400 --> 00:14:40,560 Speaker 4: Well? 286 00:14:40,600 --> 00:14:44,880 Speaker 7: I mean, so we've been saying this, like from I 287 00:14:45,040 --> 00:14:47,520 Speaker 7: started at City a year ago. The first thing that 288 00:14:47,560 --> 00:14:49,000 Speaker 7: we said is you want to be where the model 289 00:14:49,000 --> 00:14:51,160 Speaker 7: necks are, and that has continued to be the case, 290 00:14:51,200 --> 00:14:54,000 Speaker 7: and we sort of stuck with that. This is where 291 00:14:54,040 --> 00:14:56,280 Speaker 7: pricing goes. You were talking about sort of the underperformance 292 00:14:56,280 --> 00:14:59,200 Speaker 7: of the hyperscalers. You want to be where people are 293 00:14:59,240 --> 00:15:01,680 Speaker 7: spending money, not necessarily with the people who are spending 294 00:15:01,720 --> 00:15:04,600 Speaker 7: the money, and so that's going to continue to be 295 00:15:04,640 --> 00:15:06,480 Speaker 7: the case. We would argue it's not even so much 296 00:15:06,560 --> 00:15:10,720 Speaker 7: undervalued as just estimates are too low, Consensus numbers aren't 297 00:15:10,840 --> 00:15:13,880 Speaker 7: high enough. Because the amount of infrastructure that is going 298 00:15:13,920 --> 00:15:15,960 Speaker 7: to get built, the amount of pricing increases that you're 299 00:15:16,000 --> 00:15:20,480 Speaker 7: going to see that, you know, irresistible demand, immovable supply. 300 00:15:20,800 --> 00:15:23,360 Speaker 7: The only thing that breaks in that is price. You 301 00:15:23,400 --> 00:15:25,720 Speaker 7: saw in the Micron number eighty five percent gross margins. 302 00:15:25,760 --> 00:15:28,080 Speaker 7: Memory companies are not supposed to have eighty five percent 303 00:15:28,120 --> 00:15:31,840 Speaker 7: gross margins. Eventually, that will settle out because that's what 304 00:15:31,880 --> 00:15:35,640 Speaker 7: cyclicals do. But we're a long way away from that happening. 305 00:15:35,680 --> 00:15:37,840 Speaker 1: You said that one of the choke points was in labor. 306 00:15:37,880 --> 00:15:40,480 Speaker 1: Are you talking about Jonas Adler Are you talking about 307 00:15:40,560 --> 00:15:43,320 Speaker 1: Dave who constructs some of what we're seeing with the 308 00:15:43,480 --> 00:15:44,560 Speaker 1: hyperscaler buildings. 309 00:15:44,600 --> 00:15:47,360 Speaker 7: So it's certainly both. There is not a lot of 310 00:15:47,360 --> 00:15:50,400 Speaker 7: talent out there that has the capability of advancing these 311 00:15:50,440 --> 00:15:53,000 Speaker 7: models the way that level of sort of the Jonas 312 00:15:53,040 --> 00:15:54,160 Speaker 7: Addlers of the world do. 313 00:15:54,920 --> 00:15:55,880 Speaker 6: I have no idea, but. 314 00:15:55,880 --> 00:15:58,360 Speaker 7: I mean, if you look at some of the stuff 315 00:15:58,360 --> 00:16:00,560 Speaker 7: that was announced last summer, right when Meta was doing 316 00:16:00,560 --> 00:16:03,040 Speaker 7: these deals, right, Anthropic is doing these deals now, Meta 317 00:16:03,120 --> 00:16:05,120 Speaker 7: was doing them last summer, it was six and in 318 00:16:05,120 --> 00:16:05,840 Speaker 7: some cases, you know. 319 00:16:05,800 --> 00:16:06,640 Speaker 6: I mean it was it was. 320 00:16:08,360 --> 00:16:11,960 Speaker 7: Very large sort of you know, in some cases billion 321 00:16:12,040 --> 00:16:14,960 Speaker 7: dollar kind of pay packages over multi multi years. And 322 00:16:15,000 --> 00:16:16,840 Speaker 7: when you look at sort of the acquisition hires that 323 00:16:16,880 --> 00:16:19,400 Speaker 7: many companies have done. It falls into that hundreds of 324 00:16:19,400 --> 00:16:24,080 Speaker 7: millions and beyond kind of level. That said, what I 325 00:16:24,120 --> 00:16:28,400 Speaker 7: was referring to is very much it's the electricians, the plumbers, 326 00:16:28,400 --> 00:16:31,160 Speaker 7: the construction people that actually have to build these data centers. 327 00:16:31,280 --> 00:16:33,080 Speaker 7: There are very few people in the world that have 328 00:16:33,160 --> 00:16:36,280 Speaker 7: the skills to be able to build at the level 329 00:16:36,320 --> 00:16:39,120 Speaker 7: that these data centers require. And those people are in 330 00:16:39,480 --> 00:16:42,120 Speaker 7: massive demand right now, and deservedly they're getting paid a 331 00:16:42,160 --> 00:16:43,600 Speaker 7: lot more to stay with us. 332 00:16:43,920 --> 00:16:56,680 Speaker 2: Mult Bloomberg surveyance coming up after this check Kevin Walsh 333 00:16:57,080 --> 00:17:00,560 Speaker 2: making changes at the Central Bank limited forward guidance task 334 00:17:00,600 --> 00:17:04,040 Speaker 2: forces and putting even more way on signals from financial markets. 335 00:17:04,080 --> 00:17:06,399 Speaker 2: The former New York Fed President Bill do be Wang 336 00:17:06,440 --> 00:17:09,720 Speaker 2: in writing this a fresh look is appropriate, but this 337 00:17:09,760 --> 00:17:11,760 Speaker 2: needs to be done with greater care than w WASSH 338 00:17:11,880 --> 00:17:14,360 Speaker 2: is shown to date. Bill joins us now for more. Bill, 339 00:17:14,400 --> 00:17:16,280 Speaker 2: welcome to the show. It's nice to reflect on these 340 00:17:16,359 --> 00:17:18,040 Speaker 2: kind of things with you, So thanks for being with us. 341 00:17:18,359 --> 00:17:19,800 Speaker 2: What are you reflecting on right now? What are you 342 00:17:19,840 --> 00:17:21,240 Speaker 2: concerned about? Is this comes together? 343 00:17:22,119 --> 00:17:22,239 Speaker 6: Well? 344 00:17:22,240 --> 00:17:25,199 Speaker 4: What I'm concerned about is that I'm perfectly fine with 345 00:17:25,200 --> 00:17:27,639 Speaker 4: it getting rid of four guns. But what I'm concerned 346 00:17:27,640 --> 00:17:30,800 Speaker 4: about is worsh is not disclosing what is monetary policy 347 00:17:30,840 --> 00:17:33,119 Speaker 4: reaction functions. In other words, how would the FED adjust 348 00:17:33,200 --> 00:17:36,480 Speaker 4: policy as the economic environment changes. And I think that's 349 00:17:36,480 --> 00:17:38,160 Speaker 4: a big mistake and the idea that you can rely 350 00:17:38,240 --> 00:17:40,080 Speaker 4: on financial markets to tell you what you should do 351 00:17:40,080 --> 00:17:43,040 Speaker 4: in terms of monetary policy, that won't work because markets 352 00:17:43,040 --> 00:17:45,040 Speaker 4: priced to what they think the FED will do. So 353 00:17:45,119 --> 00:17:46,920 Speaker 4: if the Fed's looking at the markets and the markets 354 00:17:46,960 --> 00:17:49,359 Speaker 4: are looking at the FED, how is policy actually set. 355 00:17:50,200 --> 00:17:53,080 Speaker 4: It's really important in the United States that markets understand 356 00:17:53,200 --> 00:17:57,200 Speaker 4: how the Feds could react, because monetary policy works mainly 357 00:17:57,240 --> 00:17:59,879 Speaker 4: through financial conditions, the effect of short term rates on 358 00:18:00,080 --> 00:18:03,919 Speaker 4: bond stocks, credit spreads, the dollar. So if the markets 359 00:18:03,920 --> 00:18:06,960 Speaker 4: don't understand what the FED is doing, uh, those markets 360 00:18:07,000 --> 00:18:09,080 Speaker 4: aren't going to be priced appropriately relative to what the 361 00:18:09,080 --> 00:18:11,200 Speaker 4: FED is actually going to do. And that's going to 362 00:18:11,359 --> 00:18:14,280 Speaker 4: both slow down the transmission of mandre policy to the 363 00:18:14,320 --> 00:18:16,840 Speaker 4: real economy, but it's also going to make it less, 364 00:18:16,920 --> 00:18:19,160 Speaker 4: you know, less less efficient. 365 00:18:19,760 --> 00:18:21,320 Speaker 6: So it seems to me like you've. 366 00:18:21,160 --> 00:18:23,879 Speaker 4: Got to provide more guidance about how you're actually going 367 00:18:23,920 --> 00:18:27,200 Speaker 4: to react if things evolve differently than you anticipate. 368 00:18:27,320 --> 00:18:29,159 Speaker 2: To your point, Bet, I think you're picking up on attention. 369 00:18:29,320 --> 00:18:31,520 Speaker 2: We are witnessed in the news conference he seemed to 370 00:18:31,520 --> 00:18:36,960 Speaker 2: find difficult to separate forward guidance from communicating articulating a 371 00:18:37,000 --> 00:18:38,960 Speaker 2: reaction function. Where do you think that came from? Why 372 00:18:39,040 --> 00:18:40,840 Speaker 2: is that difficult? Do you think it's straightforward? 373 00:18:41,840 --> 00:18:42,680 Speaker 6: I think it's straightforward. 374 00:18:42,720 --> 00:18:45,280 Speaker 4: I mean, I think Ford guidance is really basically saying, 375 00:18:45,520 --> 00:18:48,640 Speaker 4: here's what we expect to do next. The madre policy 376 00:18:48,640 --> 00:18:50,640 Speaker 4: reaction function isn't about what we're going to do next. 377 00:18:50,640 --> 00:18:53,080 Speaker 4: It's about how we would react to different sorts of 378 00:18:53,200 --> 00:18:54,200 Speaker 4: incoming information. 379 00:18:54,520 --> 00:18:57,000 Speaker 6: So I think he needs to distinguish between those two things. 380 00:18:57,200 --> 00:18:59,600 Speaker 4: Right now, I don't really understand how much how he 381 00:18:59,640 --> 00:19:02,800 Speaker 4: expects to set mandreate policy. The job of mandre policy 382 00:19:02,840 --> 00:19:04,560 Speaker 4: is the fedest job, not the market job, and so 383 00:19:04,640 --> 00:19:05,920 Speaker 4: the FEDS needs to do its job. 384 00:19:06,200 --> 00:19:09,919 Speaker 1: Part of his argument, perhaps just being generous, might be 385 00:19:10,119 --> 00:19:13,280 Speaker 1: that their task forces for that, and essentially they have 386 00:19:13,320 --> 00:19:16,240 Speaker 1: to understand what data they're looking for at before they 387 00:19:16,320 --> 00:19:18,520 Speaker 1: understand exactly how they should react. 388 00:19:18,880 --> 00:19:22,840 Speaker 4: Do you buy that argument, Well, obviously it makes sense 389 00:19:22,840 --> 00:19:24,960 Speaker 4: to take a fresh look at what data is available, 390 00:19:25,680 --> 00:19:27,280 Speaker 4: but at the end of the day, these task forces 391 00:19:27,320 --> 00:19:29,159 Speaker 4: have a finite life. I mean, the FED has basically 392 00:19:29,160 --> 00:19:31,480 Speaker 4: got to conduct mandre policy not just over the next 393 00:19:31,520 --> 00:19:34,040 Speaker 4: six months, but over the next number of years. So 394 00:19:34,080 --> 00:19:36,480 Speaker 4: I think the reliance on task forces maybe it buys 395 00:19:36,520 --> 00:19:38,560 Speaker 4: him some time to think about what he really wants 396 00:19:38,560 --> 00:19:40,440 Speaker 4: to do. But at the end of the day, these 397 00:19:40,440 --> 00:19:44,320 Speaker 4: task forces are not a replacement for the FED communicating 398 00:19:44,359 --> 00:19:47,880 Speaker 4: about how it's going to act as economic conditions change. 399 00:19:48,119 --> 00:19:49,879 Speaker 1: Right now, BO, when you take a look at the 400 00:19:50,000 --> 00:19:52,240 Speaker 1: inflation ry, when you take a look at the oil input, 401 00:19:52,280 --> 00:19:55,960 Speaker 1: but also the broadening as we're seeing it in core PCEE, 402 00:19:56,040 --> 00:19:58,480 Speaker 1: which we're going to get in about nine minutes time, 403 00:19:58,760 --> 00:20:00,240 Speaker 1: do you think it is appropriate for them to high 404 00:20:00,280 --> 00:20:02,600 Speaker 1: at least once, if not twice or three times this year. 405 00:20:03,600 --> 00:20:07,320 Speaker 4: Well, I think that the case for monetary policy becoming 406 00:20:07,440 --> 00:20:10,680 Speaker 4: a bit tighter is pretty compelling to mebe for two reasons. 407 00:20:10,720 --> 00:20:13,119 Speaker 4: Number One, we've been at this level of rates or 408 00:20:13,160 --> 00:20:15,239 Speaker 4: higher for three years and the economy is still at 409 00:20:15,240 --> 00:20:17,840 Speaker 4: a four point three percent unemployment rates, So what's the 410 00:20:17,880 --> 00:20:21,880 Speaker 4: evidence that monetary policy is restrictive? And second, financial conditions 411 00:20:21,880 --> 00:20:25,920 Speaker 4: are really accommodative. The board has a model of financial conditions, 412 00:20:25,960 --> 00:20:28,600 Speaker 4: and right now it shows the impulse to growth over 413 00:20:28,640 --> 00:20:32,000 Speaker 4: the next year is over one percent positive on GDP growth. 414 00:20:32,080 --> 00:20:34,920 Speaker 4: That's the highest since late two thousand and one early 415 00:20:34,960 --> 00:20:39,520 Speaker 4: twenty twenty two. So I think that easy financial conditions, 416 00:20:39,600 --> 00:20:42,520 Speaker 4: no evidence that monetary policy is restrictive at the time 417 00:20:42,560 --> 00:20:45,520 Speaker 4: that you've missed your target for more than five years 418 00:20:46,119 --> 00:20:49,800 Speaker 4: does create a strong argument for tightening montary policy. 419 00:20:49,800 --> 00:20:51,920 Speaker 6: I'm aligned with you know, Alberto Missal and Lori. 420 00:20:51,960 --> 00:20:55,560 Speaker 4: Logan, But what I think doesn't really matter is really 421 00:20:55,600 --> 00:20:57,919 Speaker 4: what Kevin Warish is ultimately going to do. One thing 422 00:20:58,040 --> 00:20:59,840 Speaker 4: is going to help a little bit in his you know, 423 00:21:00,280 --> 00:21:02,159 Speaker 4: giving them a little bit more time. Is this is 424 00:21:02,160 --> 00:21:05,320 Speaker 4: probably the really last bad headline inflation report we're going 425 00:21:05,359 --> 00:21:07,520 Speaker 4: to have for a while, because with the decline and 426 00:21:07,640 --> 00:21:10,280 Speaker 4: l prices, when we get the inflation data for June, 427 00:21:10,800 --> 00:21:13,560 Speaker 4: headline inflation at both the CPI and PC level is 428 00:21:13,560 --> 00:21:14,960 Speaker 4: going to decline quite significantly. 429 00:21:15,320 --> 00:21:17,520 Speaker 5: But what about the housing market. Isn't it still fair 430 00:21:17,560 --> 00:21:20,400 Speaker 5: to say who we have is highly restrictive for housing. 431 00:21:21,400 --> 00:21:23,919 Speaker 4: Well, I think housing is not doing well for a 432 00:21:23,960 --> 00:21:27,080 Speaker 4: couple of reasons. The main reason though, is lack of 433 00:21:27,160 --> 00:21:30,199 Speaker 4: demand because we don't have any labor force growth. So 434 00:21:30,440 --> 00:21:32,159 Speaker 4: if you don't have labor force growth, you don't have 435 00:21:32,200 --> 00:21:34,600 Speaker 4: household formation. If you don't have househole formation, you don't 436 00:21:34,600 --> 00:21:37,080 Speaker 4: have a lot of demand for houses. There's also an 437 00:21:37,119 --> 00:21:40,280 Speaker 4: affordability issue in terms of what level of income you 438 00:21:40,280 --> 00:21:43,399 Speaker 4: have to achieve to be able to buy a house. 439 00:21:44,000 --> 00:21:45,720 Speaker 4: But I don't think you know, you look at mortgage rates. 440 00:21:45,760 --> 00:21:48,720 Speaker 4: Our mortgage rates particularly high. I mean they're high relatives 441 00:21:48,720 --> 00:21:51,119 Speaker 4: the last fifteen years or so. But if you go 442 00:21:51,200 --> 00:21:53,879 Speaker 4: back prior to the Great Financial Crisis, you know, mortgage 443 00:21:53,920 --> 00:21:55,520 Speaker 4: rates in the six and a half a percent range. 444 00:21:55,560 --> 00:21:57,280 Speaker 6: No one would view that as particularly high. 445 00:21:57,359 --> 00:21:58,840 Speaker 5: Well, it is high, though, if you're sitting on a 446 00:21:58,880 --> 00:22:01,879 Speaker 5: three percent rate and fuse to move because then it 447 00:22:01,880 --> 00:22:06,520 Speaker 5: doesn't offer up a lot more housing for everyone else, well. 448 00:22:06,320 --> 00:22:09,320 Speaker 4: There's a lock in effects that people are deciding not 449 00:22:09,359 --> 00:22:11,520 Speaker 4: to move because they don't want to lose the advantage 450 00:22:11,520 --> 00:22:13,520 Speaker 4: of those very low mortgage rates. But if they move, 451 00:22:13,920 --> 00:22:16,480 Speaker 4: they're they're demanding another house. So I'm not sure that 452 00:22:16,920 --> 00:22:18,160 Speaker 4: you know that really is going to have a big 453 00:22:18,160 --> 00:22:20,959 Speaker 4: effect on housing affordability. A big, big question I think 454 00:22:21,000 --> 00:22:22,480 Speaker 4: if for a house of affordability is what can you 455 00:22:22,520 --> 00:22:25,440 Speaker 4: do about zoning, what can you do about land use 456 00:22:26,000 --> 00:22:29,880 Speaker 4: to basically allow more homes to actually be produced. Increasing 457 00:22:29,880 --> 00:22:33,119 Speaker 4: the supply of housing would then weigh on housing prices, 458 00:22:33,320 --> 00:22:35,160 Speaker 4: and that would make housing more affordable. But I don't 459 00:22:35,160 --> 00:22:37,200 Speaker 4: think it's really a big interest rate problem, frankly. 460 00:22:37,400 --> 00:22:39,560 Speaker 2: But just a final thread, a few questions just on 461 00:22:39,560 --> 00:22:42,360 Speaker 2: this institution. You've worked at it a long time, from 462 00:22:42,359 --> 00:22:44,280 Speaker 2: your position at the New York FED, going down to 463 00:22:44,359 --> 00:22:47,439 Speaker 2: Washington on so many occasions, how easy is it to 464 00:22:47,520 --> 00:22:48,520 Speaker 2: change this institution? 465 00:22:50,000 --> 00:22:53,080 Speaker 4: Well, there's certainly a lot of inertia in the sense 466 00:22:53,119 --> 00:22:54,879 Speaker 4: that do you have staff that are there going to 467 00:22:54,880 --> 00:22:56,600 Speaker 4: be there a lot longer than Kevin Wosh is going 468 00:22:56,640 --> 00:23:00,200 Speaker 4: to be there, for example. And the staff has a 469 00:23:00,200 --> 00:23:03,080 Speaker 4: lot of pride in their work, and deservedly so because 470 00:23:03,119 --> 00:23:05,800 Speaker 4: they have a tremendous amount of expertise. But you can 471 00:23:05,800 --> 00:23:08,480 Speaker 4: definitely move things if you have a better mousetrap. And 472 00:23:08,560 --> 00:23:10,159 Speaker 4: when I went when I went down to the near 473 00:23:10,280 --> 00:23:12,639 Speaker 4: FED after the first day, when the second day I 474 00:23:12,680 --> 00:23:15,159 Speaker 4: was president of the r FEDI basically said my mantra, 475 00:23:15,359 --> 00:23:17,439 Speaker 4: best idea wins. The best idea that people come up 476 00:23:17,480 --> 00:23:20,679 Speaker 4: with should actually dominate, regardless of where it comes from. 477 00:23:20,960 --> 00:23:24,000 Speaker 4: And I think the board staff, the staff of the 478 00:23:24,040 --> 00:23:26,600 Speaker 4: federals or banks really subscribe to that. So if Kevin 479 00:23:26,800 --> 00:23:29,359 Speaker 4: Warrish and the task forces come up with better ideas, 480 00:23:29,640 --> 00:23:31,560 Speaker 4: I think those best ideas will actually win. 481 00:23:32,440 --> 00:23:36,000 Speaker 2: This is the Bloomberg Survendment's podcast, bringing you the best 482 00:23:36,000 --> 00:23:39,560 Speaker 2: in markets, economics, angiopolitics. You can watch the show live 483 00:23:39,680 --> 00:23:42,640 Speaker 2: on Bloomberg TV weekday mornings from six am to nine 484 00:23:42,720 --> 00:23:46,439 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 485 00:23:46,480 --> 00:23:49,040 Speaker 2: anywhere else you listen, and as always, on the Bloomberg 486 00:23:49,160 --> 00:23:51,040 Speaker 2: Terminal and the Bloomberg Business app