1 00:00:05,120 --> 00:00:07,119 Speaker 1: This is the Bloomberg Surveillance Podcast. 2 00:00:07,160 --> 00:00:11,080 Speaker 2: I'm Tom Keane, along with Jonathan Farrow and Lisa Abramowitz. 3 00:00:11,280 --> 00:00:15,760 Speaker 2: Join us each day for insight from the best an economics, geopolitics, 4 00:00:15,760 --> 00:00:20,720 Speaker 2: finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, 5 00:00:20,960 --> 00:00:25,400 Speaker 2: Spotify and anywhere you get your podcasts, and always on 6 00:00:25,520 --> 00:00:29,880 Speaker 2: Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business App. 7 00:00:30,080 --> 00:00:32,320 Speaker 3: With us around the table and please to say Jack Caffrey, 8 00:00:32,400 --> 00:00:36,120 Speaker 3: Equity portfolio manager at JP Morgan Asset Management, Mornajack. 9 00:00:35,720 --> 00:00:36,240 Speaker 1: Good morning. 10 00:00:36,360 --> 00:00:38,480 Speaker 3: What do we need to see to get this rally 11 00:00:38,520 --> 00:00:40,000 Speaker 3: to broaden out it's next year? 12 00:00:40,640 --> 00:00:44,040 Speaker 4: Well, I think let's break this down into three steps, 13 00:00:44,080 --> 00:00:47,800 Speaker 4: if you will. The holiday rally is certainly very much 14 00:00:47,800 --> 00:00:50,479 Speaker 4: in force. As Tom just mentioned, It's November has been 15 00:00:50,520 --> 00:00:52,960 Speaker 4: a really good year. I think against the context of 16 00:00:52,960 --> 00:00:55,360 Speaker 4: what most people would have been putting forth as an 17 00:00:55,400 --> 00:00:58,600 Speaker 4: idea of what to expect with the end of say 18 00:00:59,160 --> 00:01:01,400 Speaker 4: tex selling, with the return of the corporate bid, with 19 00:01:01,600 --> 00:01:04,280 Speaker 4: earnings actually now being positive year on ear you have 20 00:01:04,360 --> 00:01:08,040 Speaker 4: the ingredients of the next month two three of things 21 00:01:08,080 --> 00:01:10,600 Speaker 4: being able to I think move a bit higher, you know, 22 00:01:10,760 --> 00:01:13,440 Speaker 4: turning to what gets you a broader market rather than 23 00:01:13,520 --> 00:01:16,920 Speaker 4: an extraordinarily narrow market, I think is a I hate 24 00:01:16,920 --> 00:01:19,360 Speaker 4: to say, we stop kicking the can down the road 25 00:01:19,520 --> 00:01:22,360 Speaker 4: in terms of what a continuing resolution turns into. How 26 00:01:22,400 --> 00:01:25,200 Speaker 4: do we actually get some clarity on what federal spending 27 00:01:25,280 --> 00:01:28,480 Speaker 4: might look like for a long enough time that we 28 00:01:28,520 --> 00:01:30,760 Speaker 4: can then just worry about the election rather than how 29 00:01:30,760 --> 00:01:31,959 Speaker 4: we're going to finance. 30 00:01:31,600 --> 00:01:32,920 Speaker 1: The election and our government. 31 00:01:33,760 --> 00:01:35,399 Speaker 4: And then I do think you're going to have a 32 00:01:35,440 --> 00:01:39,640 Speaker 4: continued tug of war between the earnings outlook and the 33 00:01:39,800 --> 00:01:44,080 Speaker 4: multiple where what happens in bond markets becomes really important. 34 00:01:44,400 --> 00:01:46,320 Speaker 3: It's interesting that the first thing that you pointed to 35 00:01:46,480 --> 00:01:49,680 Speaker 3: was the political calendar in twenty twenty four. Is it 36 00:01:49,800 --> 00:01:50,640 Speaker 3: that important for you? 37 00:01:53,120 --> 00:01:56,040 Speaker 4: Equity markets want to find something to worry about. And 38 00:01:56,200 --> 00:02:00,320 Speaker 4: to the extent that most economics students chose to away 39 00:02:00,320 --> 00:02:02,840 Speaker 4: from political science for a reason. We wanted to pretend 40 00:02:02,840 --> 00:02:07,360 Speaker 4: we understood the math rather than understanding the psychology. And 41 00:02:07,760 --> 00:02:10,200 Speaker 4: what we come back to and and and where you know, 42 00:02:10,240 --> 00:02:13,120 Speaker 4: I actually have a degree, quote a formerly in political economy, 43 00:02:13,639 --> 00:02:16,119 Speaker 4: and at that point in time, like why, I'm like, well, 44 00:02:16,160 --> 00:02:18,160 Speaker 4: I kind of think government writes the rules under which 45 00:02:18,200 --> 00:02:20,680 Speaker 4: the economy operates. So it would help me to understand 46 00:02:20,919 --> 00:02:23,000 Speaker 4: who's writing those rules and what they're going to set 47 00:02:23,040 --> 00:02:25,600 Speaker 4: them up to be. So, you know, paying for all 48 00:02:25,639 --> 00:02:26,520 Speaker 4: of it kind of matters. 49 00:02:26,880 --> 00:02:28,760 Speaker 2: Jack, What do people do with that have single digit 50 00:02:28,840 --> 00:02:31,600 Speaker 2: returns this year? You've been doing this for ages, and 51 00:02:31,639 --> 00:02:34,679 Speaker 2: there's those certain years where we're all behind. 52 00:02:35,480 --> 00:02:36,560 Speaker 1: How do you catch up? 53 00:02:37,080 --> 00:02:39,200 Speaker 4: I'm trying to figure that out because I'm behind this year. 54 00:02:41,520 --> 00:02:43,079 Speaker 1: Answer. We want an answer now? 55 00:02:43,280 --> 00:02:45,120 Speaker 4: Oh okay, well I should have bought a lot more 56 00:02:45,120 --> 00:02:47,720 Speaker 4: in Nvidia would have been an important thing, but it 57 00:02:47,760 --> 00:02:51,400 Speaker 4: doesn't really fit in a divid and growth mandate. I 58 00:02:51,400 --> 00:02:53,720 Speaker 4: think ultimately it comes back to that question of broadening 59 00:02:54,400 --> 00:02:57,080 Speaker 4: A and B. I think, you know, if you look 60 00:02:57,120 --> 00:02:59,720 Speaker 4: at a strategy, earnings are supposed to be down this year, 61 00:02:59,720 --> 00:03:03,480 Speaker 4: they want that being up. Dividends are up mid single digits. 62 00:03:03,520 --> 00:03:05,360 Speaker 4: You know, you can find portfolios of stock set of 63 00:03:05,360 --> 00:03:07,119 Speaker 4: dividends that are up low double digit. 64 00:03:07,240 --> 00:03:10,440 Speaker 2: Do you fault big tech because they don't pay big 65 00:03:10,520 --> 00:03:13,680 Speaker 2: dividends or establish double digit dividend growth? 66 00:03:14,160 --> 00:03:16,720 Speaker 4: I don't think you can fault big tech for behaving 67 00:03:16,720 --> 00:03:19,520 Speaker 4: in a way that they're rewarded. So to the extent 68 00:03:19,560 --> 00:03:21,680 Speaker 4: that you can have companies that are valued on a 69 00:03:21,680 --> 00:03:24,320 Speaker 4: price to sales basis. What everyone is telling you is, 70 00:03:24,320 --> 00:03:27,440 Speaker 4: we're not actually asking you to have earnings, so to 71 00:03:27,480 --> 00:03:30,360 Speaker 4: the extent that you can have an entire you know, 72 00:03:30,400 --> 00:03:32,799 Speaker 4: almost thirty percent of a market which doesn't have to 73 00:03:32,880 --> 00:03:37,040 Speaker 4: manage itself from an earnings perspective to a consistent cash 74 00:03:37,120 --> 00:03:40,880 Speaker 4: return to its investors. You know, those management teams are 75 00:03:40,920 --> 00:03:43,160 Speaker 4: going to do what they've done and continue to do that. 76 00:03:43,880 --> 00:03:46,640 Speaker 4: I think, you know, dividends offer a real check on 77 00:03:46,680 --> 00:03:48,760 Speaker 4: earnings and a real return of investors and let them 78 00:03:48,800 --> 00:03:49,720 Speaker 4: decide where to reinvest. 79 00:03:49,760 --> 00:03:53,360 Speaker 2: Lisa, Nvidia drowning in debt one point one percent. 80 00:03:53,840 --> 00:03:56,440 Speaker 5: Well, this is a cash flow just bonanza, right, And 81 00:03:56,480 --> 00:04:00,800 Speaker 5: at what point are we pricing in a potential continuation 82 00:04:01,200 --> 00:04:03,920 Speaker 5: of the pace of acceleration of that cash bonanza into 83 00:04:03,920 --> 00:04:05,640 Speaker 5: the future. How do you even game out what we're 84 00:04:05,680 --> 00:04:08,720 Speaker 5: pricing in given some of the moonshots we've seen. 85 00:04:09,200 --> 00:04:11,400 Speaker 4: In Nvidia today reminds me a lot of Cisco in 86 00:04:11,440 --> 00:04:15,120 Speaker 4: the late nineties as having been that defining stock that 87 00:04:15,360 --> 00:04:18,200 Speaker 4: somehow sat in the middle. So what Cisco was to 88 00:04:18,240 --> 00:04:21,960 Speaker 4: the Internet and the completely network world, everyone hung on 89 00:04:21,960 --> 00:04:24,560 Speaker 4: what John Chambers would say at four oh one, where 90 00:04:24,560 --> 00:04:27,479 Speaker 4: he would shockingly manage to beat earnings time after time 91 00:04:27,520 --> 00:04:29,840 Speaker 4: after time, and ultimately it came down to when his 92 00:04:29,920 --> 00:04:33,360 Speaker 4: customers ran out of money to keep buying his servers. 93 00:04:34,080 --> 00:04:37,320 Speaker 4: Nvidia now sits in that particular position where they can 94 00:04:37,360 --> 00:04:40,160 Speaker 4: sit there and look at the capital spending of Microsoft, 95 00:04:40,240 --> 00:04:45,800 Speaker 4: of Amazon, of Alphabet with some reworkschips, of what China 96 00:04:45,839 --> 00:04:47,920 Speaker 4: intends to do in AI, what certain countries in the 97 00:04:47,920 --> 00:04:51,200 Speaker 4: Middle East seem to be doing in order to actually 98 00:04:51,240 --> 00:04:54,000 Speaker 4: build up their own AI equivalent. And you'll come back 99 00:04:54,040 --> 00:04:56,720 Speaker 4: to you at what point does the investments as other 100 00:04:56,760 --> 00:05:00,719 Speaker 4: people are making start actually becoming more challenged? What's different 101 00:05:00,800 --> 00:05:03,280 Speaker 4: now versus the nineties example, where I have to admit 102 00:05:03,320 --> 00:05:07,440 Speaker 4: there's a difference. Cisco's customers were all detfinanced, and so 103 00:05:07,480 --> 00:05:11,400 Speaker 4: what the FED wound up doing draining liquidity, taking down 104 00:05:11,440 --> 00:05:13,440 Speaker 4: the concerns and the flood of liquidity for Y two 105 00:05:13,480 --> 00:05:16,479 Speaker 4: K for people who remember ancient history, is very different 106 00:05:16,800 --> 00:05:20,400 Speaker 4: than an extraordinarily powerful base of very profitable cash flow 107 00:05:20,480 --> 00:05:23,960 Speaker 4: generating companies, which for the most part aren't being asked 108 00:05:24,040 --> 00:05:26,760 Speaker 4: or pressed to return cash to their investors. Some cases 109 00:05:26,800 --> 00:05:28,920 Speaker 4: thanks to dual voting stock that they're not ever going 110 00:05:28,920 --> 00:05:29,440 Speaker 4: to be pressed. 111 00:05:29,680 --> 00:05:32,240 Speaker 5: This is a fascinating point. In other words, it's how 112 00:05:32,279 --> 00:05:35,240 Speaker 5: long do the customers have open pocketbooks and plenty of 113 00:05:35,240 --> 00:05:39,279 Speaker 5: cash and their customers have big open pocketbooks and massive 114 00:05:39,360 --> 00:05:41,800 Speaker 5: quantities of cash. So how much can you see the 115 00:05:41,839 --> 00:05:44,119 Speaker 5: moonshot continuing in some of these names that we didn't 116 00:05:44,120 --> 00:05:46,560 Speaker 5: appreciate perhaps at the beginning of the year. 117 00:05:46,800 --> 00:05:47,760 Speaker 1: Well, I think. 118 00:05:49,440 --> 00:05:53,320 Speaker 4: Wall Street loves an easy store to understand. AI is 119 00:05:53,360 --> 00:05:56,479 Speaker 4: conceptually really hard to understand. But if everyone wants to 120 00:05:56,520 --> 00:05:59,599 Speaker 4: do it, everyone is going to keep spending. And certainly 121 00:05:59,680 --> 00:06:01,919 Speaker 4: right now, you know, the cost of capital is higher, 122 00:06:01,920 --> 00:06:05,679 Speaker 4: but it's still not all that burdensome against a longer 123 00:06:05,760 --> 00:06:09,159 Speaker 4: term history of what money should cost, to the extent 124 00:06:09,200 --> 00:06:12,440 Speaker 4: that the companies which are really driving that spending either 125 00:06:12,440 --> 00:06:14,480 Speaker 4: have access to a blank check if you're in China 126 00:06:14,600 --> 00:06:20,000 Speaker 4: effectively from state financing or personal financing and ultimately coming through. 127 00:06:20,520 --> 00:06:22,400 Speaker 4: But you know, when you look through Whire, people somewhat 128 00:06:22,400 --> 00:06:25,159 Speaker 4: disappointed in Nvidia. I think this morning it's oh, okay, 129 00:06:25,240 --> 00:06:28,520 Speaker 4: that's all you've done for me, Like, yeah, what's double digit? 130 00:06:28,600 --> 00:06:30,960 Speaker 4: What's a you know, effectively a two hundred percent gain 131 00:06:31,040 --> 00:06:31,760 Speaker 4: year on year. 132 00:06:31,640 --> 00:06:33,680 Speaker 3: Shipped in revenue in a year or something. It's it's 133 00:06:33,720 --> 00:06:34,320 Speaker 3: kind of nuts. 134 00:06:36,040 --> 00:06:37,960 Speaker 4: It kind of speaks to being a unique company and 135 00:06:38,839 --> 00:06:41,560 Speaker 4: unique place in time. But that comes back to at 136 00:06:41,560 --> 00:06:44,359 Speaker 4: some point, what have you done for really lately? 137 00:06:44,640 --> 00:06:46,400 Speaker 3: And that's where we are this morning, Lisa. I think 138 00:06:46,520 --> 00:06:49,720 Speaker 3: investors also they sort of gravitate towards stories they believe 139 00:06:49,720 --> 00:06:51,400 Speaker 3: a divorce from the cycle because they don't want to 140 00:06:51,400 --> 00:06:53,600 Speaker 3: talk about the cycle anymore. And this is one of 141 00:06:53,640 --> 00:06:55,600 Speaker 3: those trends that you can just see out beyond a 142 00:06:55,640 --> 00:06:58,120 Speaker 3: recession a year, two, three, four, five years down a road. 143 00:06:58,240 --> 00:07:01,120 Speaker 5: Well said, it also doesn't necessarily have a cyclical feel, 144 00:07:01,160 --> 00:07:03,720 Speaker 5: since we're looking right now at something that is a 145 00:07:03,760 --> 00:07:06,720 Speaker 5: moonshot in a very specific slice of history and has 146 00:07:06,760 --> 00:07:08,440 Speaker 5: the dominant, dominant footprint. 147 00:07:08,640 --> 00:07:13,080 Speaker 2: Quickly, Jack, I'm calling the bullmarket the income poor Yourdenni 148 00:07:13,120 --> 00:07:17,160 Speaker 2: bullmarket two fossils from the past like you. And the 149 00:07:17,240 --> 00:07:20,840 Speaker 2: answer here is is this a legit bull market? And 150 00:07:20,880 --> 00:07:23,320 Speaker 2: are we a seventy seven analog where this is the 151 00:07:23,360 --> 00:07:25,640 Speaker 2: second leg of a bull market? You got a lot 152 00:07:25,680 --> 00:07:29,560 Speaker 2: of scared people over at JP Morgan, don't you. 153 00:07:29,560 --> 00:07:31,680 Speaker 4: You've got some really enthusiastic people. You've got some really 154 00:07:31,680 --> 00:07:33,280 Speaker 4: scared people. That's the beauty of having. 155 00:07:33,960 --> 00:07:35,760 Speaker 2: Is it the second leg of a bull market? 156 00:07:37,120 --> 00:07:39,440 Speaker 4: Yea, we've had a great year this month, and if 157 00:07:39,480 --> 00:07:41,080 Speaker 4: we go back and look back two years, we're still 158 00:07:41,080 --> 00:07:43,560 Speaker 4: down two percent. So you know, we haven't really re 159 00:07:43,720 --> 00:07:46,760 Speaker 4: entered that bull market because we're still not back too highs. 160 00:07:47,560 --> 00:07:49,880 Speaker 4: To really make the sustainable highs, you actually need more 161 00:07:49,880 --> 00:07:52,640 Speaker 4: people playing along than what I call the sacred seven, 162 00:07:52,960 --> 00:07:55,920 Speaker 4: not the magnificent seven, because I'm trying to avoid theological 163 00:07:55,920 --> 00:07:59,480 Speaker 4: belief in terms of growth rate. But I do come 164 00:07:59,520 --> 00:08:01,520 Speaker 4: back to you. You know, what we had was a 165 00:08:01,560 --> 00:08:04,560 Speaker 4: good growth quarter. It seems like we got that because 166 00:08:04,600 --> 00:08:08,239 Speaker 4: the inventory supply chain finally got fixed. Companies could actually 167 00:08:08,280 --> 00:08:10,760 Speaker 4: fill the orders right and right now the concern is, well, 168 00:08:10,840 --> 00:08:13,880 Speaker 4: orders are seemingly drying up a little bit because you 169 00:08:13,880 --> 00:08:15,800 Speaker 4: don't have to double order anymore because you actually get 170 00:08:15,800 --> 00:08:16,120 Speaker 4: your stuff. 171 00:08:16,200 --> 00:08:18,480 Speaker 2: John, did you see this percent change on the standard 172 00:08:18,520 --> 00:08:19,880 Speaker 2: of four or five hundred. 173 00:08:19,720 --> 00:08:20,480 Speaker 1: The canon it now? 174 00:08:21,200 --> 00:08:23,440 Speaker 3: Yeah, today we're at big time month to day, up 175 00:08:23,480 --> 00:08:26,760 Speaker 3: something like eight percent. Amazing on a session at the moment, 176 00:08:26,760 --> 00:08:29,920 Speaker 3: we're positive by zero zero point two percent Jack, you 177 00:08:30,000 --> 00:08:31,400 Speaker 3: and I have had the privilege of talking together for 178 00:08:31,400 --> 00:08:32,880 Speaker 3: a long long time. I just wanted to squeeze in 179 00:08:32,880 --> 00:08:34,920 Speaker 3: your call on housing because you've had some interesting calls 180 00:08:34,920 --> 00:08:37,160 Speaker 3: associated with that part of the economy. What's the call now? 181 00:08:37,880 --> 00:08:42,160 Speaker 4: You know it's certainly last several months. My bias has 182 00:08:42,200 --> 00:08:45,480 Speaker 4: been we're living in the renovation nation, the idea that 183 00:08:45,720 --> 00:08:48,640 Speaker 4: you know, with an eight percent mortgage rate, people are 184 00:08:48,720 --> 00:08:52,920 Speaker 4: almost trapped concept trapped in your thirty year mortgage at 185 00:08:52,920 --> 00:08:56,400 Speaker 4: two and three quarters percent. The shame, the shame. But 186 00:08:56,520 --> 00:08:59,960 Speaker 4: you're certainly going to see I think some freeing up 187 00:09:00,679 --> 00:09:03,840 Speaker 4: of housing activity. I do think that comes back to, 188 00:09:04,559 --> 00:09:06,400 Speaker 4: you know, will the bond traders finally be right and 189 00:09:06,400 --> 00:09:08,839 Speaker 4: we start getting some ray cuts next year rather than 190 00:09:08,960 --> 00:09:12,079 Speaker 4: this permanently high plateau that the Fed is talking about, 191 00:09:12,080 --> 00:09:14,160 Speaker 4: which kind of reminds me of Irving Fisher about nineteen 192 00:09:14,160 --> 00:09:17,199 Speaker 4: twenty nine, except now it's bonds not stocks. 193 00:09:17,679 --> 00:09:20,200 Speaker 3: This was a clinic Jack, Thank you, Jack Cash so 194 00:09:20,280 --> 00:09:21,760 Speaker 3: much of JP morgan esimage. 195 00:09:32,120 --> 00:09:32,640 Speaker 1: This is a. 196 00:09:32,640 --> 00:09:36,000 Speaker 2: Joy and away from the horror of the Eastern Mediterranean. 197 00:09:36,040 --> 00:09:39,240 Speaker 2: To have Aaron David Miller with us is wonderful. He 198 00:09:39,280 --> 00:09:42,840 Speaker 2: wrote a book in twenty fourteen, which ought to be 199 00:09:42,880 --> 00:09:46,640 Speaker 2: reissued this morning. He's senior fellow Carnegie Endowment for a 200 00:09:46,760 --> 00:09:50,840 Speaker 2: National Peace and aaron with respect to our president, and 201 00:09:50,920 --> 00:09:55,559 Speaker 2: to take your wonderful book here on the end of Greatness, 202 00:09:55,720 --> 00:09:59,520 Speaker 2: I want you to describe how you perceive any given president, 203 00:09:59,559 --> 00:10:04,439 Speaker 2: but in this case President Biden with mister net Yahoo, 204 00:10:04,840 --> 00:10:09,240 Speaker 2: how should we interact? How should our president lead? Dare 205 00:10:09,280 --> 00:10:12,400 Speaker 2: I say, Israel to a better future? 206 00:10:13,800 --> 00:10:16,120 Speaker 6: That's a very good question. And the president has been 207 00:10:16,160 --> 00:10:19,040 Speaker 6: roundly criticized by just about everybody who with the exception 208 00:10:19,200 --> 00:10:21,640 Speaker 6: of the Republican Party that has sort of emerged as 209 00:10:21,679 --> 00:10:25,640 Speaker 6: the Israel Can Do No Wrong party for restraining Israel 210 00:10:25,760 --> 00:10:30,000 Speaker 6: from not cracking down on the exponential rise in Palestinian 211 00:10:30,040 --> 00:10:33,959 Speaker 6: deaths and the humanitarian catstroe in Gaza. You know, I mean, 212 00:10:34,240 --> 00:10:37,440 Speaker 6: I'm you know, a pithy of the Oracle at Delphi 213 00:10:37,520 --> 00:10:40,000 Speaker 6: reading the best of Golden Trails. Can't tell you how 214 00:10:40,040 --> 00:10:42,560 Speaker 6: this content is going to end. But I will say 215 00:10:42,559 --> 00:10:45,160 Speaker 6: one thing is predictable, and that is Joe Biden's response 216 00:10:45,200 --> 00:10:49,600 Speaker 6: to this crisis. For three reasons, his persona, the fact 217 00:10:49,600 --> 00:10:52,080 Speaker 6: that the presidential model here is Bill Clinton, though a 218 00:10:52,120 --> 00:10:54,520 Speaker 6: generation of part. Both of these men have this peter 219 00:10:54,640 --> 00:10:58,040 Speaker 6: natural love. I would say, I use the word intentionally 220 00:10:58,440 --> 00:11:01,480 Speaker 6: for Israel in a high regard for its security. President 221 00:11:01,520 --> 00:11:05,000 Speaker 6: reacted to October seven in a powerful speech on October tenth, 222 00:11:05,000 --> 00:11:08,479 Speaker 6: was set to frame for his reaction. Second is politics. 223 00:11:08,559 --> 00:11:12,439 Speaker 6: You have a deeply divided Democratic Party, progressives and even 224 00:11:12,520 --> 00:11:17,120 Speaker 6: mainstream Democrats, some of whom are calling for more restraint. 225 00:11:18,320 --> 00:11:21,040 Speaker 6: But again in twenty twenty four, I don't think the 226 00:11:21,040 --> 00:11:24,320 Speaker 6: president wants to leave himself vulnerable to Republican charges that 227 00:11:24,360 --> 00:11:28,160 Speaker 6: he's weak on his role. And the third p persona 228 00:11:28,440 --> 00:11:33,120 Speaker 6: politics is policy constraints. The fact is Biden doesn't have 229 00:11:33,160 --> 00:11:36,080 Speaker 6: any better answers to the three cruel dilemmas that the 230 00:11:36,120 --> 00:11:41,199 Speaker 6: Israelis face. Number One, prosecute a war against Tamas and 231 00:11:41,240 --> 00:11:45,679 Speaker 6: eradicate it in a densely populated urban area without endangering 232 00:11:45,720 --> 00:11:48,440 Speaker 6: and killing large numbers of Palestinians. And then what do 233 00:11:48,480 --> 00:11:50,199 Speaker 6: you do about the day after. I don't think the 234 00:11:50,360 --> 00:11:52,760 Speaker 6: nutrition that are sensing the is rallies eron. 235 00:11:52,840 --> 00:11:55,000 Speaker 2: You know, I look at the collective memory loss, and 236 00:11:55,040 --> 00:11:57,560 Speaker 2: it may be as far back beyond nineteen forty eight, 237 00:11:58,160 --> 00:12:01,320 Speaker 2: or certainly nineteen sixty seven. We have a youth of 238 00:12:01,360 --> 00:12:05,080 Speaker 2: America that seems removed from our collective memories of the 239 00:12:05,120 --> 00:12:06,359 Speaker 2: Eastern Mediterranean. 240 00:12:06,920 --> 00:12:09,360 Speaker 1: How do either political party. 241 00:12:09,720 --> 00:12:14,680 Speaker 2: Corral the youth of America towards an understanding of America's 242 00:12:14,760 --> 00:12:17,640 Speaker 2: effort in diplomacy in the Eastern Mediterranean. 243 00:12:18,400 --> 00:12:23,559 Speaker 6: I think it's virtually given the generational divides identity politics 244 00:12:24,400 --> 00:12:27,600 Speaker 6: the sort of a symmetry of power where the stronger party, 245 00:12:27,640 --> 00:12:31,000 Speaker 6: regardless of its motivations or context, is perceived to be 246 00:12:31,120 --> 00:12:35,080 Speaker 6: the goliath and the smaller party perceived to be the David. 247 00:12:35,600 --> 00:12:38,959 Speaker 6: I'm not sure that's possible. I mean, I would argue 248 00:12:38,960 --> 00:12:44,200 Speaker 6: public service, but then again, I'm old and probably out 249 00:12:44,200 --> 00:12:47,000 Speaker 6: of touch with this generation. You know, when it comes 250 00:12:47,000 --> 00:12:49,480 Speaker 6: to foreign policy, I think George Will was right for 251 00:12:49,600 --> 00:12:52,880 Speaker 6: most Americans, and I think even for young Americans they 252 00:12:52,920 --> 00:12:55,839 Speaker 6: want as little of it as possible. So the fight, 253 00:12:55,920 --> 00:13:00,640 Speaker 6: the struggle, the focus is here at home. I worry 254 00:13:00,640 --> 00:13:03,160 Speaker 6: about that young generation. I have two forty year old 255 00:13:03,559 --> 00:13:06,320 Speaker 6: kids who I think are committed trying to leave the 256 00:13:06,360 --> 00:13:09,120 Speaker 6: world a better place. They are interested in foreign policy. 257 00:13:10,160 --> 00:13:12,920 Speaker 6: My bias has become theirs to a degree. I think 258 00:13:12,920 --> 00:13:14,480 Speaker 6: it's hard, it's really hard. 259 00:13:14,760 --> 00:13:18,240 Speaker 2: I'm depressed when somebody young is forty, Okay, I just 260 00:13:18,240 --> 00:13:19,200 Speaker 2: want to let you know that. 261 00:13:19,480 --> 00:13:22,040 Speaker 5: But Erin, I am curious how you see this evolving 262 00:13:22,080 --> 00:13:24,480 Speaker 5: in terms of if we've been all talking about what 263 00:13:24,960 --> 00:13:27,640 Speaker 5: some sort of humanitarian pause or cease fire or whatever 264 00:13:27,679 --> 00:13:30,040 Speaker 5: you want to call it, a cessation in fighting for 265 00:13:30,080 --> 00:13:32,960 Speaker 5: four or five days to allow the hostages to go 266 00:13:33,000 --> 00:13:36,480 Speaker 5: home to their families, to allow for humanitarian aid to 267 00:13:36,600 --> 00:13:39,360 Speaker 5: enter Gaza, what does that lead to? Do we have 268 00:13:39,440 --> 00:13:42,280 Speaker 5: a sense of what different camps want after that? 269 00:13:43,120 --> 00:13:44,880 Speaker 1: I think that's the broke the code. 270 00:13:44,880 --> 00:13:47,040 Speaker 6: I think that's the key question is what we're win 271 00:13:47,160 --> 00:13:50,640 Speaker 6: the scene within the next twenty four hours, when fifty 272 00:13:51,679 --> 00:13:55,200 Speaker 6: Israeli women and children will be released, hopefully three Americans, 273 00:13:55,240 --> 00:13:59,600 Speaker 6: including a three year old that Bob to celebrate birthday. 274 00:14:00,440 --> 00:14:02,480 Speaker 6: Is this a headline or is this a trend line. 275 00:14:03,000 --> 00:14:06,720 Speaker 6: Hamas took prisoners for two reasons. Number one, to trade 276 00:14:06,760 --> 00:14:11,840 Speaker 6: them for asymmetrical number of Palestinians released from Israeli jays 277 00:14:11,880 --> 00:14:15,720 Speaker 6: one hundred and fifty in this trade, because this resonates 278 00:14:15,760 --> 00:14:19,480 Speaker 6: deeply into Palestinian street. Hamas also took hostages in order 279 00:14:19,480 --> 00:14:25,040 Speaker 6: to constrain and delay an Israeli ground campaign. The hope 280 00:14:25,160 --> 00:14:28,280 Speaker 6: is that pressurable amount. A four day pause will turn 281 00:14:28,320 --> 00:14:31,600 Speaker 6: into a six, seven, eight, ten day pause, pressurable amount 282 00:14:31,640 --> 00:14:35,240 Speaker 6: for what Hamas really wants, which is extended in prolonged 283 00:14:35,280 --> 00:14:40,720 Speaker 6: cease fire. That is going to be extremely problematic an 284 00:14:40,760 --> 00:14:45,800 Speaker 6: Israeli government that seems to have no intention of stopping 285 00:14:46,000 --> 00:14:49,040 Speaker 6: its military campaign. But pressure is going to rise. And 286 00:14:49,080 --> 00:14:52,360 Speaker 6: we have two clocks sticking. The Israeli operational clock which 287 00:14:52,400 --> 00:14:56,880 Speaker 6: is ticking much slower weeks, perhaps months biden than the 288 00:14:56,920 --> 00:15:02,640 Speaker 6: international community's political clock. She's taking much faster under the 289 00:15:02,760 --> 00:15:06,360 Speaker 6: humanity pressure of the humanitarian catastrophe in Carza and the 290 00:15:06,440 --> 00:15:08,640 Speaker 6: exponential rise in Palestinian deaths. 291 00:15:09,560 --> 00:15:11,960 Speaker 7: Seems to me this situation. 292 00:15:11,840 --> 00:15:14,280 Speaker 6: Is going to get worse before it gets much worse. 293 00:15:14,480 --> 00:15:15,040 Speaker 6: I'm afraid. 294 00:15:15,600 --> 00:15:18,160 Speaker 3: Back to back clinics on this program in the last 295 00:15:18,160 --> 00:15:21,400 Speaker 3: thirty minutes, Aaron David Mela that of the canagiantownment for 296 00:15:21,520 --> 00:15:23,720 Speaker 3: international pace just phenomenal. 297 00:15:28,120 --> 00:15:30,840 Speaker 2: It is a wonderful tradition for us to write size 298 00:15:30,880 --> 00:15:34,440 Speaker 2: the airline industry all that we hated joining us now. 299 00:15:34,440 --> 00:15:38,600 Speaker 2: Helene Becker, senior research analyst at tid Cohen Halene, let 300 00:15:38,640 --> 00:15:41,800 Speaker 2: me just start with the basic idea, when does it 301 00:15:41,840 --> 00:15:47,680 Speaker 2: get better? When does American aviation not so much nostalgically 302 00:15:47,840 --> 00:15:51,480 Speaker 2: harken back to what we remember, but gets to a new, 303 00:15:51,800 --> 00:15:53,040 Speaker 2: more constructive model. 304 00:15:54,760 --> 00:15:58,040 Speaker 8: Thanks Tom So. I think we're in this period of 305 00:15:58,080 --> 00:16:00,960 Speaker 8: time now for a few years where we don't have 306 00:16:01,120 --> 00:16:05,760 Speaker 8: enough air traffic controllers, So anytime there's a rain cloud 307 00:16:05,840 --> 00:16:08,720 Speaker 8: in the area, and a lot of the controllers we 308 00:16:08,840 --> 00:16:12,080 Speaker 8: have are less experienced than the ones who are retiring. 309 00:16:13,400 --> 00:16:16,440 Speaker 8: They slow things down, and they do it for safety purposes, 310 00:16:16,480 --> 00:16:20,040 Speaker 8: but it's frustrating for passengers. You've seen in the New 311 00:16:20,120 --> 00:16:24,000 Speaker 8: York area especially, but it will occur in other markets. 312 00:16:25,680 --> 00:16:29,040 Speaker 8: The FAA asking the airlines that serve the market to 313 00:16:29,080 --> 00:16:32,800 Speaker 8: cut capacity, so we've seen this trend to more seats 314 00:16:32,800 --> 00:16:36,600 Speaker 8: per departure and fewer departures per day in an effort 315 00:16:36,760 --> 00:16:40,720 Speaker 8: to smooth things out. And then just in terms of 316 00:16:40,760 --> 00:16:44,760 Speaker 8: people traveling, I think people are tired of not being 317 00:16:44,800 --> 00:16:47,360 Speaker 8: able to go away. And you've seen that, right, You 318 00:16:47,400 --> 00:16:50,360 Speaker 8: saw it in twenty twenty two. You're seeing it really 319 00:16:50,440 --> 00:16:54,440 Speaker 8: aggressively as people travel in twenty three, and we definitely 320 00:16:54,480 --> 00:16:56,600 Speaker 8: expect it to continue. 321 00:16:56,480 --> 00:16:59,120 Speaker 1: On this weekend with this weather. What do you focused 322 00:16:59,200 --> 00:17:00,040 Speaker 1: on in the team. 323 00:17:00,080 --> 00:17:04,359 Speaker 8: Cohen, We're looking at the traffic numbers, and we're looking 324 00:17:04,400 --> 00:17:08,119 Speaker 8: at where people are going, and what we're seeing is 325 00:17:08,119 --> 00:17:13,479 Speaker 8: an increasing increasingly number, increasing number of people going outside 326 00:17:13,520 --> 00:17:18,240 Speaker 8: the country actually for the holidays with their family. I 327 00:17:18,240 --> 00:17:21,320 Speaker 8: don't think people may be tired of cooking at home, 328 00:17:21,760 --> 00:17:23,480 Speaker 8: they don't want to go to a restaurant for their 329 00:17:23,520 --> 00:17:26,960 Speaker 8: Thanksgiving dinner, so they change their mind and they go traveling. 330 00:17:27,200 --> 00:17:29,760 Speaker 8: And we're seeing an awful lot of that, and again, 331 00:17:29,840 --> 00:17:30,800 Speaker 8: I think that's a good thing. 332 00:17:31,119 --> 00:17:33,360 Speaker 5: I'm looking right now in some prices to a couple 333 00:17:33,440 --> 00:17:35,800 Speaker 5: of places, and they've come down really markedly. I mean, 334 00:17:35,840 --> 00:17:39,439 Speaker 5: I'm actually surprised by how much lower they are this 335 00:17:39,560 --> 00:17:41,560 Speaker 5: time of the year than last time of the year. 336 00:17:41,800 --> 00:17:44,120 Speaker 5: There was a story on the Bloomberg talking about how 337 00:17:44,240 --> 00:17:47,800 Speaker 5: airplanes have been actually increasing capacity in response to what 338 00:17:47,800 --> 00:17:49,840 Speaker 5: you're talking about the demand from the consumers, but they're 339 00:17:49,840 --> 00:17:52,639 Speaker 5: having trouble now filling the seats. Are we seeing the 340 00:17:52,760 --> 00:17:55,399 Speaker 5: shift that could really change the picture in a more 341 00:17:55,440 --> 00:17:56,600 Speaker 5: material way for next year? 342 00:17:58,400 --> 00:18:01,200 Speaker 8: I think we are. Actually what we're saying for next 343 00:18:01,280 --> 00:18:05,439 Speaker 8: year is that domestic is going to be normal, whatever 344 00:18:05,520 --> 00:18:09,200 Speaker 8: that is. But it will be normal seasonal travel patterns, 345 00:18:09,240 --> 00:18:11,200 Speaker 8: more so than we've seen in the last few years. 346 00:18:12,119 --> 00:18:15,000 Speaker 8: I call it for as the new three. Lisa, your 347 00:18:15,040 --> 00:18:17,160 Speaker 8: boss wants you back in the office three or four 348 00:18:17,240 --> 00:18:19,359 Speaker 8: days a week instead of two or three days a week, 349 00:18:19,760 --> 00:18:23,120 Speaker 8: so makes it harder to take that long weekend. Kids 350 00:18:23,119 --> 00:18:25,320 Speaker 8: are back in school five days a week, so again 351 00:18:25,400 --> 00:18:27,000 Speaker 8: it makes it hard to just pull them out and 352 00:18:27,040 --> 00:18:31,159 Speaker 8: go somewhere. So we're seeing that more normalized travel pattern 353 00:18:31,200 --> 00:18:33,359 Speaker 8: in the domestic market. I think what you're going to 354 00:18:33,359 --> 00:18:38,240 Speaker 8: see internationally is increased capacity because that's where the demand was. 355 00:18:38,280 --> 00:18:41,640 Speaker 8: So you'll see fears coming down, especially in the North 356 00:18:41,680 --> 00:18:45,359 Speaker 8: Atlantic and the Caribbean, Mexico as well. Those are three 357 00:18:45,400 --> 00:18:48,480 Speaker 8: of the biggest markets where we see declines and then 358 00:18:48,520 --> 00:18:50,440 Speaker 8: we think there will be a ship to Asia Pacific. 359 00:18:50,480 --> 00:18:51,720 Speaker 8: Oh sorry, Tom No. 360 00:18:51,840 --> 00:18:53,119 Speaker 1: I think this is important, Lisa. 361 00:18:53,160 --> 00:18:55,239 Speaker 2: You and I have been following selected flights and I 362 00:18:55,280 --> 00:18:56,679 Speaker 2: just look at one Newark to Paris. 363 00:18:56,680 --> 00:18:59,359 Speaker 1: It's what everybody takes and the answers is one third, 364 00:19:00,080 --> 00:19:00,400 Speaker 1: it's one. 365 00:19:00,680 --> 00:19:03,600 Speaker 2: It's you can fly three people now business class for 366 00:19:03,640 --> 00:19:06,080 Speaker 2: what one business class ticket costs eighteen months ago. 367 00:19:06,280 --> 00:19:06,800 Speaker 1: It's stunning. 368 00:19:06,960 --> 00:19:09,359 Speaker 5: I love at lines Denver theoretically because some of the 369 00:19:09,400 --> 00:19:15,159 Speaker 5: snow has started and it's really nice. Well, okay, Helene, 370 00:19:15,200 --> 00:19:17,679 Speaker 5: I am curious as you talk about the potential for 371 00:19:17,880 --> 00:19:21,000 Speaker 5: prices to go lower where the breaking point is for 372 00:19:21,040 --> 00:19:22,840 Speaker 5: some of these airlines. We talked about some of the 373 00:19:22,880 --> 00:19:27,199 Speaker 5: contracts with pilots, with other staff, all the prices are 374 00:19:27,240 --> 00:19:30,679 Speaker 5: going up dramatically of the work staff. The base costs 375 00:19:30,720 --> 00:19:33,640 Speaker 5: are going up as well. Put oil aside for one second, 376 00:19:34,280 --> 00:19:36,720 Speaker 5: how difficult is it to make that break point for 377 00:19:36,800 --> 00:19:39,920 Speaker 5: some of these airlines as prices start to come in. 378 00:19:40,880 --> 00:19:44,320 Speaker 8: Yeah, we're going to see margins get squeezed. No choice 379 00:19:44,320 --> 00:19:48,160 Speaker 8: but to raise your revenue. And it's hard to raise 380 00:19:48,200 --> 00:19:51,840 Speaker 8: revenue because, especially in the domestic market, people will opt 381 00:19:51,840 --> 00:19:55,360 Speaker 8: out and you can't. I've done this for a long 382 00:19:55,359 --> 00:19:58,040 Speaker 8: time as you're not and you can never lower fares 383 00:19:58,119 --> 00:20:01,720 Speaker 8: to offset volume declients. It just doesn't work that way. 384 00:20:01,920 --> 00:20:04,680 Speaker 8: And so we'll see margin pressure and we don't think 385 00:20:04,720 --> 00:20:07,119 Speaker 8: airlines will make as much money on twenty twenty fours 386 00:20:07,160 --> 00:20:10,199 Speaker 8: they earned in twenty twenty three as we revert to 387 00:20:10,240 --> 00:20:15,320 Speaker 8: a more seasonal and normal pattern. I liken it to 388 00:20:15,400 --> 00:20:17,760 Speaker 8: the cargo industry. Look at what happened with FedEx and 389 00:20:17,840 --> 00:20:20,080 Speaker 8: ups over the last year and a half or two years. 390 00:20:20,320 --> 00:20:23,919 Speaker 8: Volumes are down and revenues are not up as much. 391 00:20:24,119 --> 00:20:26,879 Speaker 8: Revenues are down, costs of rep and margins are under pressure. 392 00:20:26,920 --> 00:20:28,320 Speaker 1: Well, that's sad happen. 393 00:20:28,359 --> 00:20:30,160 Speaker 2: Do you run away from the industry? I mean, I'm 394 00:20:30,160 --> 00:20:32,320 Speaker 2: trying to get my airline stocks back to where they 395 00:20:32,320 --> 00:20:35,040 Speaker 2: were pre COVID. Good luck with that dream. Is there 396 00:20:35,040 --> 00:20:37,239 Speaker 2: a single best buyer? Do you just walk away from 397 00:20:37,280 --> 00:20:37,760 Speaker 2: the sector. 398 00:20:38,680 --> 00:20:42,719 Speaker 8: It's really hard, Tom, because the stocks are at twenty 399 00:20:42,880 --> 00:20:48,320 Speaker 8: twenty lows or below. Our best idea for twenty twenty 400 00:20:48,359 --> 00:20:51,600 Speaker 8: three was United. We had some good success with that 401 00:20:51,800 --> 00:20:55,480 Speaker 8: most of the year until we didn't and then we 402 00:20:55,520 --> 00:20:58,679 Speaker 8: really like Copa CPA, which is kind of not based. 403 00:20:58,720 --> 00:21:02,520 Speaker 8: Everybody thinks own Panama, but there's actually a lot of 404 00:21:02,520 --> 00:21:05,760 Speaker 8: really good things. It's a three billion dollar market cap company. 405 00:21:06,440 --> 00:21:08,840 Speaker 8: Panama is a sea level airport, so you don't have 406 00:21:08,880 --> 00:21:11,920 Speaker 8: the weather related delays. There are a lot of usx 407 00:21:11,920 --> 00:21:14,240 Speaker 8: Pats who live there. They rely on the US dollar. 408 00:21:14,320 --> 00:21:16,560 Speaker 8: They don't have their own currency, so they can only 409 00:21:17,240 --> 00:21:21,240 Speaker 8: spend what they earn. The Canal would be the largest employer, 410 00:21:21,280 --> 00:21:23,320 Speaker 8: as you would imagine, and then COPA would be the 411 00:21:23,359 --> 00:21:26,560 Speaker 8: second largest private employer, followed by the airport. So it's 412 00:21:26,600 --> 00:21:30,879 Speaker 8: a really well run, well positioned airline with a dividend 413 00:21:32,440 --> 00:21:35,040 Speaker 8: around a three or four percent dividend yield, and that 414 00:21:35,119 --> 00:21:40,480 Speaker 8: dividend goes up almost every years. The family the shareholders 415 00:21:41,320 --> 00:21:45,400 Speaker 8: get pay or the company rather pays out fifty percent 416 00:21:45,440 --> 00:21:49,720 Speaker 8: of ads net income. So that's a that's a good 417 00:21:49,960 --> 00:21:52,440 Speaker 8: that's a good one to look at a couple of others. 418 00:21:52,640 --> 00:21:55,160 Speaker 5: Yeah, Helene, thank you. We are so grateful that you're 419 00:21:55,160 --> 00:21:58,280 Speaker 5: here on Thanksgiving, and I am wondering, are you traveling 420 00:21:58,520 --> 00:22:00,520 Speaker 5: on Thanksgiving? Do you ever travel on Thanksgiving? 421 00:22:01,280 --> 00:22:04,359 Speaker 8: That's so funny, Lisa. Normally we do, but I couldn't 422 00:22:04,359 --> 00:22:08,520 Speaker 8: take it this year. I've been on the road every 423 00:22:08,600 --> 00:22:12,760 Speaker 8: single week since August first. And when I looked at 424 00:22:12,840 --> 00:22:17,280 Speaker 8: my all our kids are traveling, they're all gotten. My 425 00:22:17,320 --> 00:22:20,240 Speaker 8: son and daughter are together with my son's baby and 426 00:22:20,600 --> 00:22:24,960 Speaker 8: his wife, and my step kids are visiting their in laws. 427 00:22:25,040 --> 00:22:28,520 Speaker 8: So it's like I looked at my husband. I said, no, 428 00:22:28,800 --> 00:22:31,160 Speaker 8: we're staying home and I'm not eating turkey. 429 00:22:32,080 --> 00:22:35,560 Speaker 9: Elaine Becker of td COWED, thank you so much for 430 00:22:35,680 --> 00:22:42,440 Speaker 9: being with us. 431 00:22:46,520 --> 00:22:50,320 Speaker 2: This is a really important conversation right now. It was 432 00:22:50,359 --> 00:22:53,640 Speaker 2: important thirty days ago, but it is important into two 433 00:22:53,680 --> 00:22:57,159 Speaker 2: thy and twenty five. Earl Davis has had a fixed 434 00:22:57,160 --> 00:23:01,040 Speaker 2: income BEMA Global Asset Management, and I can't say enough 435 00:23:01,160 --> 00:23:04,240 Speaker 2: about the controversy of his call that your own Powell 436 00:23:04,560 --> 00:23:08,960 Speaker 2: will stay the moment and keep rates higher for longer. 437 00:23:09,119 --> 00:23:10,680 Speaker 1: Earl, do you stick with that call? 438 00:23:13,000 --> 00:23:14,680 Speaker 7: And that's one of the things we're looking at in 439 00:23:14,720 --> 00:23:17,840 Speaker 7: the market now in regards to how many eases are 440 00:23:17,920 --> 00:23:19,920 Speaker 7: being discounted for next year. We see, you know, we're 441 00:23:19,920 --> 00:23:22,240 Speaker 7: on our way to one hundred basic points of eases 442 00:23:22,960 --> 00:23:24,520 Speaker 7: by the end of next year, which we think that 443 00:23:24,640 --> 00:23:27,080 Speaker 7: you know what, you know, I always believe the market, 444 00:23:27,280 --> 00:23:29,840 Speaker 7: but in regards to the pricing and the moment, but 445 00:23:29,880 --> 00:23:32,400 Speaker 7: it's our belief that they'll be firmly on hold next year. 446 00:23:32,520 --> 00:23:35,640 Speaker 2: You're out of Western Ontario, the land of perfect statistics. 447 00:23:35,640 --> 00:23:39,320 Speaker 2: What's the correlation of your FED call you're higher for 448 00:23:39,520 --> 00:23:41,680 Speaker 2: longer call to the equity markets. 449 00:23:43,000 --> 00:23:46,800 Speaker 7: Oh, that's that's a great, great question. You know that 450 00:23:46,960 --> 00:23:49,359 Speaker 7: the higher for longer doesn't matter to the equity markets. 451 00:23:49,359 --> 00:23:52,280 Speaker 7: You know their discount rates the long term rate right 452 00:23:52,359 --> 00:23:55,719 Speaker 7: the ten to thirty year real rate. So what happens 453 00:23:55,720 --> 00:24:00,280 Speaker 7: on overnight won't impact, won't impack equities unless they do ease, 454 00:24:00,320 --> 00:24:04,280 Speaker 7: then it's just a euphoric buying of equities. But from 455 00:24:04,320 --> 00:24:07,040 Speaker 7: a quantitative perspective, it's the ten to thirty year real 456 00:24:07,119 --> 00:24:08,719 Speaker 7: rate that matters for equities. 457 00:24:09,040 --> 00:24:11,080 Speaker 5: We talk about the ten to thirty year rate. We 458 00:24:11,080 --> 00:24:13,520 Speaker 5: were talking yes day with Michael Collins of PEGM fixed income. 459 00:24:14,000 --> 00:24:16,800 Speaker 5: He said he could see a material further decline in 460 00:24:16,880 --> 00:24:19,680 Speaker 5: real yields just based on the fact that people are 461 00:24:19,720 --> 00:24:22,240 Speaker 5: expecting this growth to continue, and that he thinks we're 462 00:24:22,240 --> 00:24:24,240 Speaker 5: seeing the signs of a more material slow down. 463 00:24:24,520 --> 00:24:25,240 Speaker 10: Do you agree? 464 00:24:26,480 --> 00:24:30,719 Speaker 7: I agree eventually. I think the real rate is sayles now. 465 00:24:30,880 --> 00:24:33,600 Speaker 7: The economy remains resilient. I know we're getting mixed numbers, 466 00:24:33,600 --> 00:24:35,840 Speaker 7: but the economy o we're all still doing well. You know, 467 00:24:36,000 --> 00:24:38,520 Speaker 7: less and less calls for a recesion during twenty twenty four. 468 00:24:38,840 --> 00:24:41,040 Speaker 7: As long as we have that real rates will stay 469 00:24:41,040 --> 00:24:43,960 Speaker 7: five because that's the counterbalance to the economy doing well. 470 00:24:44,520 --> 00:24:47,160 Speaker 7: You need to drive take money out of the growth 471 00:24:47,200 --> 00:24:50,119 Speaker 7: economy into the savings economy, which is real rates, and 472 00:24:50,200 --> 00:24:52,520 Speaker 7: to fight inflation, which you know it seems like people 473 00:24:52,520 --> 00:24:54,920 Speaker 7: are forgotten. You get part of the fighting that's keeping 474 00:24:54,920 --> 00:24:55,720 Speaker 7: the real rate high. 475 00:24:56,000 --> 00:24:58,320 Speaker 5: So in otherwids, you're saying you don't think that the 476 00:24:58,359 --> 00:25:00,640 Speaker 5: slowdown that we're seeing on the margins enough to bring 477 00:25:00,680 --> 00:25:03,280 Speaker 5: inflation lower, and that currently the nine tenths of a 478 00:25:03,280 --> 00:25:06,600 Speaker 5: percentage point decline in benchmark rates, the cuts that people 479 00:25:06,640 --> 00:25:09,440 Speaker 5: are pricing into the market next year are overstated. 480 00:25:10,440 --> 00:25:13,120 Speaker 7: So I'll say two things. It's not necessarily the slowdown 481 00:25:13,160 --> 00:25:15,760 Speaker 7: that we're seeing, it's the pace of the slowdown. Is 482 00:25:15,800 --> 00:25:18,760 Speaker 7: growth declining fast enough? You know, there's still a lot 483 00:25:18,800 --> 00:25:21,440 Speaker 7: of excess demand in the economy. I see it when 484 00:25:21,440 --> 00:25:23,959 Speaker 7: I still go to the stores and restaurants. Yes, it 485 00:25:23,960 --> 00:25:25,680 Speaker 7: may be savings and maybe credit. 486 00:25:25,400 --> 00:25:27,720 Speaker 1: That we're seeing that retail sales people are still buying. 487 00:25:27,840 --> 00:25:29,960 Speaker 7: That is excess demand. That's a big driver of the 488 00:25:29,960 --> 00:25:32,760 Speaker 7: growth in our economy, and that's what leads to inflation. 489 00:25:33,960 --> 00:25:37,080 Speaker 7: So I don't see it on that part. On inflation front, 490 00:25:37,119 --> 00:25:39,600 Speaker 7: you know, we're getting constructive numbers, but we are still 491 00:25:39,680 --> 00:25:43,280 Speaker 7: very warned about wage inflation that passes into in pricing. 492 00:25:43,560 --> 00:25:45,679 Speaker 2: It's right where we wanted to go. You really center 493 00:25:45,720 --> 00:25:49,359 Speaker 2: out wage inflation. How sixties are we I mean the 494 00:25:49,440 --> 00:25:51,879 Speaker 2: idea of you know, you know, forget about cost push, 495 00:25:51,920 --> 00:25:53,760 Speaker 2: demand pulling the rest of it. 496 00:25:53,800 --> 00:25:54,760 Speaker 1: Is it just plain and. 497 00:25:54,760 --> 00:25:59,040 Speaker 2: Simple wage inflation that we remember forty fifty years ago. 498 00:26:00,480 --> 00:26:02,600 Speaker 7: I think we're getting there. The difference between now and 499 00:26:02,880 --> 00:26:05,080 Speaker 7: the sixties or forties and fifties years ago is the 500 00:26:05,119 --> 00:26:08,640 Speaker 7: amount of unionized employees. You know, it's significantly lower now 501 00:26:08,640 --> 00:26:11,760 Speaker 7: than it was before, but that trend is increasing. And 502 00:26:11,800 --> 00:26:14,320 Speaker 7: what happens when that trend increases and we're seeing the 503 00:26:14,320 --> 00:26:18,320 Speaker 7: wage increases UAW ups, you know, you look abroad in 504 00:26:18,320 --> 00:26:21,720 Speaker 7: Canada as well, what happens is the people who are 505 00:26:21,720 --> 00:26:24,440 Speaker 7: non unionized have to get wage increases. And we saw 506 00:26:24,440 --> 00:26:28,760 Speaker 7: that with Honda and Toyota. So we're not quite sixty 507 00:26:28,840 --> 00:26:31,359 Speaker 7: seventies because we're not as unionized, but that trend is 508 00:26:31,400 --> 00:26:35,840 Speaker 7: increasing and the wages will remain a pressure on inflation. 509 00:26:36,000 --> 00:26:38,199 Speaker 7: I think it leads to secular higher inflation, you know, 510 00:26:38,320 --> 00:26:40,840 Speaker 7: three four percent instead of two to three percent. 511 00:26:41,200 --> 00:26:43,399 Speaker 5: So what's your highest conviction? Earl's heading into next year 512 00:26:43,400 --> 00:26:44,800 Speaker 5: at a time where people seem to be moving in 513 00:26:44,800 --> 00:26:48,639 Speaker 5: the opposite direction, celebrating soft landing, celebrating maybe the return 514 00:26:48,680 --> 00:26:51,240 Speaker 5: to the old normal where's your conviction line. 515 00:26:52,000 --> 00:26:54,480 Speaker 7: The highest conviction is that there's no eases until at 516 00:26:54,520 --> 00:26:58,040 Speaker 7: least Q four. So that means just by shortening two 517 00:26:58,080 --> 00:27:00,800 Speaker 7: year bonds or any part of the curve, you make 518 00:27:00,880 --> 00:27:03,800 Speaker 7: money if nothing happens, because the overnight rates still five 519 00:27:03,800 --> 00:27:05,840 Speaker 7: in a quarter. And you know, we saw where ten 520 00:27:05,920 --> 00:27:08,440 Speaker 7: year bonds are right now, right, so that's negative carry 521 00:27:08,480 --> 00:27:12,000 Speaker 7: trades owned those versus overnight. So highest conviction trade is 522 00:27:12,640 --> 00:27:16,399 Speaker 7: no eases, fed on hold till at least after the election. 523 00:27:17,040 --> 00:27:20,080 Speaker 3: Wow, fed on hold until after the election. Oh, that 524 00:27:20,160 --> 00:27:23,000 Speaker 3: runs counter to a lot of people. What do clients 525 00:27:23,000 --> 00:27:23,960 Speaker 3: say when you tell them that? 526 00:27:24,920 --> 00:27:27,199 Speaker 7: Well, first I tell them, following of winners is a 527 00:27:27,240 --> 00:27:29,280 Speaker 7: loser's game, you know, so when if we try to 528 00:27:29,320 --> 00:27:31,520 Speaker 7: follow what the crowd's is doing, we're always coming in second. 529 00:27:31,880 --> 00:27:35,199 Speaker 7: So we've based our views on tailwinds, on fundamentals, on 530 00:27:35,320 --> 00:27:39,640 Speaker 7: quantitative numbers, and that's what gives us, that's what has 531 00:27:39,680 --> 00:27:41,600 Speaker 7: proven to be successful in the past. We just show 532 00:27:41,640 --> 00:27:45,040 Speaker 7: our results and we say, what's our markers? So for example, 533 00:27:45,520 --> 00:27:47,560 Speaker 7: where would we advance our eases? Where would do we 534 00:27:47,560 --> 00:27:49,040 Speaker 7: start believing what the market's saying? 535 00:27:49,359 --> 00:27:49,719 Speaker 8: For us? 536 00:27:49,760 --> 00:27:52,639 Speaker 7: The key number to look at is unemployment rate above 537 00:27:52,680 --> 00:27:55,560 Speaker 7: four percent? As soon as it gets above, then you know, 538 00:27:55,880 --> 00:27:59,440 Speaker 7: I think the safety's off, so to speak, in regards 539 00:27:59,440 --> 00:28:02,120 Speaker 7: to eases. We're not even closer. We're three seven still, 540 00:28:02,160 --> 00:28:03,800 Speaker 7: so we still have a waste to go, and I 541 00:28:03,840 --> 00:28:05,359 Speaker 7: think the FED would like to see it closer to 542 00:28:05,400 --> 00:28:08,560 Speaker 7: four to five before they start using. So that's our trigger, 543 00:28:08,600 --> 00:28:10,320 Speaker 7: and that's what we tell clients what we're looking at 544 00:28:10,359 --> 00:28:12,320 Speaker 7: and what will help us change. And they know our 545 00:28:12,320 --> 00:28:14,880 Speaker 7: results and they know this is the most volatile year 546 00:28:14,880 --> 00:28:16,800 Speaker 7: and fixed income and we're aut performing in it. 547 00:28:16,800 --> 00:28:19,919 Speaker 3: It's nice to get an original thought. Oh, we appreciate it. Oh, Davis, 548 00:28:19,960 --> 00:28:22,240 Speaker 3: there a female global asset management. 549 00:28:26,480 --> 00:28:28,080 Speaker 1: What are we going to talk to Man Deep sing 550 00:28:28,080 --> 00:28:32,280 Speaker 1: about that stuffing? It's like video AI or in video? 551 00:28:32,600 --> 00:28:33,600 Speaker 1: Which would you like to go? 552 00:28:34,320 --> 00:28:36,000 Speaker 3: To be honest with you would prefer to talk about 553 00:28:36,000 --> 00:28:38,760 Speaker 3: in video because I think it's more material to do there. 554 00:28:38,840 --> 00:28:41,720 Speaker 2: Right now, Mandy's enjoys a Cera and in Vidia and 555 00:28:41,720 --> 00:28:43,920 Speaker 2: what we saw yesterday, what is the legs on this, 556 00:28:44,080 --> 00:28:46,239 Speaker 2: Man Deep? I mean, you know, we all get the 557 00:28:46,280 --> 00:28:49,640 Speaker 2: moonshot and units and the fervor, and I saw the 558 00:28:49,680 --> 00:28:51,200 Speaker 2: two hundred and forty percent. 559 00:28:51,080 --> 00:28:53,520 Speaker 1: Blah blah blah. Do you look at it as a 560 00:28:53,560 --> 00:28:56,640 Speaker 1: three quarter thing or can it be a thirty year thing? 561 00:28:58,000 --> 00:29:01,320 Speaker 10: I mean, look, we are witnessing the biggest data center 562 00:29:01,560 --> 00:29:06,880 Speaker 10: expansion right now, and data center it market was about 563 00:29:06,920 --> 00:29:10,360 Speaker 10: you know, eight to ten percent rower historically, and when 564 00:29:10,400 --> 00:29:13,680 Speaker 10: you look at the numbers that Invidia is printing, clearly 565 00:29:14,120 --> 00:29:18,560 Speaker 10: there's insatiable demand. Yes, they will be affected by China restrictions, 566 00:29:18,560 --> 00:29:22,440 Speaker 10: but they're still undershipping demand. And that was the message. 567 00:29:22,480 --> 00:29:25,200 Speaker 10: And this is a near monopoly at this point of time. 568 00:29:25,600 --> 00:29:27,960 Speaker 10: The question that you have to ask yourself is will 569 00:29:27,960 --> 00:29:31,640 Speaker 10: it remain a monopoly like Intel was over the last 570 00:29:31,680 --> 00:29:34,960 Speaker 10: twenty five years in the CPU market or will there 571 00:29:35,000 --> 00:29:38,560 Speaker 10: be more players that can develop chips? And right now, 572 00:29:38,840 --> 00:29:41,560 Speaker 10: you know, the customers that are buying these chips are 573 00:29:41,680 --> 00:29:44,680 Speaker 10: very concentrated. It's the hyperscalers that are buying you know, 574 00:29:44,720 --> 00:29:48,000 Speaker 10: fifty percent of in Vidia's capacity. Will they continue to 575 00:29:48,040 --> 00:29:50,280 Speaker 10: do that, you know, for the foreseable future? 576 00:29:50,320 --> 00:29:52,640 Speaker 2: Okay, well, you know you're an expert on this, and 577 00:29:52,680 --> 00:29:54,360 Speaker 2: I guess Allman's back at open AI. 578 00:29:54,720 --> 00:29:57,000 Speaker 1: How long does it take to make a competitive chip? 579 00:29:58,360 --> 00:30:01,360 Speaker 10: Well, so that's what in Vidia has showed that they 580 00:30:01,440 --> 00:30:05,600 Speaker 10: can pivot much quicker, they can ship products much quicker 581 00:30:05,640 --> 00:30:09,560 Speaker 10: than anyone else. Look, AMD and Intel have the capability 582 00:30:09,640 --> 00:30:13,120 Speaker 10: to make a GPU, but it's not as productive and 583 00:30:13,160 --> 00:30:16,720 Speaker 10: efficient as an Nvidia GPU is, and that's what we 584 00:30:16,760 --> 00:30:19,000 Speaker 10: are seeing. That's why I say it's still a monopoly. 585 00:30:19,040 --> 00:30:23,120 Speaker 10: And until you see proof that companies can train as 586 00:30:23,160 --> 00:30:29,080 Speaker 10: effectively their models on alternative chips, I think Nvidia will 587 00:30:29,120 --> 00:30:32,000 Speaker 10: continue to have this kind of esp growth which we saw. 588 00:30:31,840 --> 00:30:34,600 Speaker 5: Last night, Mandy. One aspect of the earning support that 589 00:30:34,640 --> 00:30:37,240 Speaker 5: I thought was probably most interesting was the drop off 590 00:30:37,280 --> 00:30:40,400 Speaker 5: they signaled in Chinese demand for their GPUs for some 591 00:30:40,520 --> 00:30:42,680 Speaker 5: of their products. And this comes at a time where 592 00:30:42,680 --> 00:30:45,880 Speaker 5: they're still able to beat expectations on revenue. They can 593 00:30:45,920 --> 00:30:49,000 Speaker 5: still ship those chips elsewhere. What does that tell us 594 00:30:49,120 --> 00:30:51,720 Speaker 5: about both what's going on in China but also more 595 00:30:51,760 --> 00:30:54,800 Speaker 5: broadly what's going on with just the glood of demand. 596 00:30:56,080 --> 00:30:59,760 Speaker 10: Yeah, Look, there was certainly some pull forward in China 597 00:31:00,040 --> 00:31:03,800 Speaker 10: because they anticipated these restrictions, and you could argue and 598 00:31:03,920 --> 00:31:07,480 Speaker 10: VideA was probably over earning in that region, but there 599 00:31:07,640 --> 00:31:10,280 Speaker 10: is that demand. You know that they can ship their 600 00:31:10,400 --> 00:31:14,000 Speaker 10: chips elsewhere, and that is what gives I think the 601 00:31:14,080 --> 00:31:17,000 Speaker 10: confidence that this company is way ahead in terms of 602 00:31:17,400 --> 00:31:20,440 Speaker 10: not only just developing a GPU, but bundling it. They 603 00:31:20,560 --> 00:31:23,600 Speaker 10: highlighted networking is a ten billion dollar run RAG business. 604 00:31:23,920 --> 00:31:26,880 Speaker 10: Software is a billion dollar run RAG business. They have 605 00:31:27,040 --> 00:31:29,880 Speaker 10: the perfect mousetrap right now in terms of bundling these 606 00:31:29,960 --> 00:31:32,640 Speaker 10: chips to train large annguage models and that's huge. 607 00:31:32,760 --> 00:31:33,080 Speaker 6: All right. 608 00:31:33,120 --> 00:31:35,479 Speaker 5: So, Mandy, if we were talking about open ai and 609 00:31:35,600 --> 00:31:37,880 Speaker 5: not trying not to talk about open ai and the 610 00:31:37,960 --> 00:31:41,239 Speaker 5: relevance of that to this story, how much is there 611 00:31:41,280 --> 00:31:44,920 Speaker 5: a relationship in terms of Microsoft's desire to create some 612 00:31:44,960 --> 00:31:48,240 Speaker 5: sort of rival chip with respect to the AI development 613 00:31:48,280 --> 00:31:50,600 Speaker 5: more broadly and what the future is for open ai 614 00:31:50,760 --> 00:31:51,920 Speaker 5: as an independent agency. 615 00:31:53,080 --> 00:31:53,280 Speaker 1: Yeah. 616 00:31:53,320 --> 00:31:57,160 Speaker 10: Look, open ai and in video are the face of 617 00:31:57,280 --> 00:32:00,120 Speaker 10: generative AI, you know, if you think about the and 618 00:32:00,280 --> 00:32:03,320 Speaker 10: that has played out this year, and I think with 619 00:32:03,520 --> 00:32:08,280 Speaker 10: open ai going through this turmoil, Microsoft driving those changes 620 00:32:08,320 --> 00:32:11,680 Speaker 10: has steadied the ship. But I would be surprised if 621 00:32:11,720 --> 00:32:14,720 Speaker 10: they can, you know, ship out the next version of 622 00:32:14,840 --> 00:32:19,200 Speaker 10: GPT as quickly as they intended to be, because there 623 00:32:19,240 --> 00:32:21,640 Speaker 10: will be some talent loss as a result of this. 624 00:32:21,760 --> 00:32:26,720 Speaker 10: And I think Sam coming back to open ai may 625 00:32:26,800 --> 00:32:30,400 Speaker 10: drive some people out, and I can't imagine things will 626 00:32:30,400 --> 00:32:32,200 Speaker 10: go back the way they were last week. 627 00:32:32,600 --> 00:32:35,840 Speaker 2: What do those people actually do, man, Deep, I'm serious. 628 00:32:35,880 --> 00:32:39,200 Speaker 2: Do they sit at a desk with what a sun 629 00:32:39,280 --> 00:32:43,200 Speaker 2: Spark station, a Mac what computers in front of them? 630 00:32:43,560 --> 00:32:46,080 Speaker 2: And are they doing the coding like the coders do 631 00:32:46,160 --> 00:32:46,800 Speaker 2: at Bloomberg? 632 00:32:46,880 --> 00:32:48,600 Speaker 1: Is it just as romantic as that? 633 00:32:50,000 --> 00:32:53,600 Speaker 10: I mean, Look, this generative AI wave is built on 634 00:32:53,680 --> 00:32:57,880 Speaker 10: a transformer model, and that is built on you know, 635 00:32:58,120 --> 00:33:01,960 Speaker 10: ingesting large amounts of data. There is a human feedback 636 00:33:02,000 --> 00:33:06,160 Speaker 10: element to train these algorithms and put those guardrails, and 637 00:33:06,280 --> 00:33:09,080 Speaker 10: training is a constant process. That's what we learned from 638 00:33:09,160 --> 00:33:11,920 Speaker 10: Nvidia last night that you're not one and done with training. 639 00:33:12,240 --> 00:33:14,880 Speaker 10: You're constantly training your model. That's why you need the 640 00:33:14,960 --> 00:33:18,000 Speaker 10: GPUs and the data center build out. So there's a 641 00:33:18,040 --> 00:33:21,240 Speaker 10: lot that's going on in terms of understanding the algorithms 642 00:33:21,280 --> 00:33:24,320 Speaker 10: and then obviously putting the guardrails to make sure you 643 00:33:24,360 --> 00:33:25,520 Speaker 10: know the results are correct. 644 00:33:25,560 --> 00:33:27,479 Speaker 3: A mande just to find a question from me, And 645 00:33:27,560 --> 00:33:30,720 Speaker 3: certainly I would never criticize sat In Adella. I think 646 00:33:30,720 --> 00:33:32,760 Speaker 3: have said on this programmed in the last twenty four 647 00:33:32,840 --> 00:33:36,240 Speaker 3: as one of if not the best COO in corporate America, 648 00:33:36,320 --> 00:33:39,080 Speaker 3: but clearly some missteps along the white Here, Mandy, what 649 00:33:39,080 --> 00:33:40,520 Speaker 3: do you think the lesson to the last week will 650 00:33:40,560 --> 00:33:42,800 Speaker 3: be for him and for Microsoft. 651 00:33:43,320 --> 00:33:46,920 Speaker 10: Away, When you make a thirteen billion dollar investment and 652 00:33:47,040 --> 00:33:49,760 Speaker 10: you know, take a forty nine percent take in a company, 653 00:33:49,800 --> 00:33:51,840 Speaker 10: you take a board seat as well so that you 654 00:33:51,960 --> 00:33:53,880 Speaker 10: know what's going on. I think in this case they 655 00:33:53,880 --> 00:33:56,959 Speaker 10: were blindsided by the developments, and he mentioned that, and 656 00:33:57,040 --> 00:34:00,000 Speaker 10: clearly I think that was the lesson for Microsoft. 657 00:34:00,480 --> 00:34:03,480 Speaker 3: Mandave. Thank you, sir, Mandy Sink a Bloombeg Intelligence. 658 00:34:03,560 --> 00:34:07,400 Speaker 2: Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify and 659 00:34:07,520 --> 00:34:11,719 Speaker 2: anywhere else you get your podcasts. Listen live every weekday 660 00:34:11,960 --> 00:34:15,480 Speaker 2: starting at seven am Eastern. I'm Bloomberg dot Com, the 661 00:34:15,600 --> 00:34:20,120 Speaker 2: iHeartRadio app, tune In, and the Bloomberg Business app. You 662 00:34:20,160 --> 00:34:24,200 Speaker 2: can watch us live on Bloomberg Television and always I'm 663 00:34:24,239 --> 00:34:25,320 Speaker 2: the Bloomberg Terminal. 664 00:34:25,680 --> 00:34:29,920 Speaker 1: Thanks for listening. I'm Tom Keen and this is Bloomberg