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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern

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Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business app.

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Speaker 1: Listen on demand wherever you get your podcasts, or watch

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Speaker 1: us live on YouTube.

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Speaker 2: And right now we're gonna slide in quick, quick, quick

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Speaker 2: to Sarah Hunt, chief market strategist Alpine Sex and Woods

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Speaker 2: is as well. I guess we're distant from June thirty

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Speaker 2: nine or two. Do you rewrite your midyear review?

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Speaker 3: Well, you refinalize or you can add a codicil to

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Speaker 3: your twenty to your midiar review. I think that there

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Speaker 3: was obviously a feeling and you can see where oil

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Speaker 3: how fast it moved this morning versus yesterday, because even

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Speaker 3: yesterday it was up a little bit, but not it

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Speaker 3: wasn't it wasn't.

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Speaker 4: Moving as much. I think that this does.

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Speaker 3: You add this to the AI story and all of

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Speaker 3: a sudden, I think you have a more stormy summer

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Speaker 3: than we were looking at even a week and a

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Speaker 3: half ago.

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Speaker 4: So I think it does.

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Speaker 3: It makes a difference because all of these things play

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Speaker 3: into how portfolios are going to roll out and the

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Speaker 3: expectation was the FEDNAW had some cover to say we

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Speaker 3: can wait and see, and.

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Speaker 4: Now with this moving around, that might change that math

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Speaker 4: as well.

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Speaker 5: So how do we thinking about I guess the AI

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Speaker 5: trade in general here. I mean, you own the chips, okay,

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Speaker 5: I get that.

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Speaker 6: What else are you doing here with this with your

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Speaker 6: AI trade these days?

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Speaker 4: Well, it's going to be interesting to see how this

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Speaker 4: plays out.

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Speaker 3: And this is part of a discussion the other day

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Speaker 3: as well, which is now that you have some of

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Speaker 3: these chip stocks and some of the questions about what's

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Speaker 3: going on, is there a rotation back to some of

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Speaker 3: the LAG seven this year because you've seen some potential

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Speaker 3: movement there, But you look at the bond sale yesterday

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Speaker 3: and you think maybe not. I mean, it's going to

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Speaker 3: be a question about what happens with capex.

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Speaker 4: Meta maybe one off, it may not be. I don't know.

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Speaker 4: We're going to have to see how that plays too.

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Speaker 7: That's software.

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Speaker 5: I mean, you know we saw that sell off in

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Speaker 5: a lot of software names, including such Bellweather's this Microsoft

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Speaker 5: down twenty five percent year to date.

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Speaker 6: I mean, how are you.

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Speaker 5: Guys thinking about some of those big Bellweather software names

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Speaker 5: that have been so good and so beloved by the

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Speaker 5: marketplace because of the recurring revenue, the high free cash

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Speaker 5: flow and great margins.

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Speaker 6: Anything about some of those names, you say.

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Speaker 3: Well, you guys had an excellent guest on earlier this

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Speaker 3: morning who was talking about that specifically and about how

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Speaker 3: some of the larger software names are going to end

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Speaker 3: up getting more there's more work to.

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Speaker 5: Be done, So that was a you kind of think

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Speaker 5: that's the way you kind of kind of pick some

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Speaker 5: winners and losers.

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Speaker 3: Well, you know, it depends a lot on the model,

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Speaker 3: because I think part of the biggest issue with software

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Speaker 3: that started was if you're growing your headcount and everyone

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Speaker 3: and you're growing your user base and that starts to shrink,

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Speaker 3: that's a problem for the cash flow for the other things.

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Speaker 3: Do we really think that you're going to disintermediate Microsoft?

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Speaker 3: And I don't think that we do. I think the

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Speaker 3: question is going to be how does it all work together?

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Speaker 3: And you're going to still be using it, So it's

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Speaker 3: really it's on the margins. Is the growth going to

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Speaker 3: slow down in some places?

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Speaker 4: Probably?

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Speaker 3: In some places maybe not. But now it's a wait

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Speaker 3: and see, and people were willing to first asked.

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Speaker 2: Questions, wait outside your remit, but I'm going to go here.

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Speaker 2: We saw the Xbox rationalization. The woman running Xbox I

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Speaker 2: thought was a breath of fresh air, just saying like,

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Speaker 2: this is where we are. I would assume, given you know,

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Speaker 2: there's there's new words, organizational words for all this AI ballet,

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Speaker 2: We're going to see a lot of right sizing. We're

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Speaker 2: going to see a lot of do we need this

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Speaker 2: division or not? Or spinning it off. I just think

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Speaker 2: we're going to see a lot of restructuring, aren't we.

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Speaker 3: I think we're going to see a lot of changes.

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Speaker 3: I think we're going to see a lot of restructuring.

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Speaker 3: You've already seen some companies go back on. We got

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Speaker 3: rid of a bunch of people, and now actually we're

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Speaker 3: gonna have to bring some people back because what we

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Speaker 3: realized when they were gone was that we weren't in

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Speaker 3: the space that we thought we were with the ability

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Speaker 3: for AI to solve all these problems. There's a lot

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Speaker 3: of questions about how when AI writes its own stuff,

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Speaker 3: who's checking to see what the redundancies are and how

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Speaker 3: that works.

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Speaker 4: So I think it's going to be a lot of change.

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Speaker 2: This is I love having you in Microsoft two hundred

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Speaker 2: and twenty eight thousand employees. Then I typed up Oracle,

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Speaker 2: you can do this folks on the Bloomberg Professional Services

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Speaker 2: Paul taught me thedes screen Oracle down thirty nine percent

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Speaker 2: twelve months trailing. They have one hundred and forty one

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Speaker 2: thousand employees. I never would have guessed that.

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Speaker 6: Yeah, yeah, these monster companies.

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Speaker 2: You know, you pop off fourteen thousand people, you're ten

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Speaker 2: percent down.

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Speaker 5: Yeah, exactly right, Sarah, How are we thinking about just earnings?

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Speaker 5: We're coming into next week, we'll start another earning cycle,

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Speaker 5: and the boy, the first quarter was so so strong

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Speaker 5: in terms.

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Speaker 6: Of earnings growth. How do you think about this second

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Speaker 6: quarter coming up here?

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Speaker 4: I think you're going to see continued strength.

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Speaker 3: I mean, I think that the issues we were all

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Speaker 3: hoping that the oil situation would start to back down,

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Speaker 3: and it looked like it did for a while and

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Speaker 3: only went right back down to seventy. The problem for

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Speaker 3: that is going to be for some people, it's going

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Speaker 3: to be an issue higher energy prices. But I think

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Speaker 3: you're going to see already in the second quarter as

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Speaker 3: people report, everyone's going to be looking forward to the

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Speaker 3: second half of the year because it we say, oh great,

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Speaker 3: we already knew the second quarter was good because everything

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Speaker 3: was looking pretty good except for energy prices.

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Speaker 5: So what are we thinking here. We've got I'm going

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Speaker 5: to switch over to the FED here because we've got

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Speaker 5: a new chairman. We've heard from them a couple of times. Now,

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Speaker 5: what's your view of the FED and kind of interest rates?

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Speaker 6: And is that going to be a friend or a

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Speaker 6: foe for this market?

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Speaker 4: Well, in the last two weeks it's been both, right.

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Speaker 3: So you saw the original coming that the original speeches

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Speaker 3: on the two percent target, and the market started to

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Speaker 3: think that that was very hawkish, oil prices back down.

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Speaker 3: Came out and said that oil prices are down. That's

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Speaker 3: somewhat helpful. I think the question is going to be

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Speaker 3: the cadence of communication and how much time or how

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Speaker 3: much information we're going to get and what information they're

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Speaker 3: going to be using. And I think that there's some

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Speaker 3: room in there to see what happens over the summer,

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Speaker 3: even with the elevated oil prices. But I think that

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Speaker 3: the market isnee jerked back into putting rate heights on

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Speaker 3: the table, rate hikes on the table towards the end

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Speaker 3: of the year, whereas even yesterday that wasn't necessarily looking

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Speaker 3: to be such a strong percentage. I think that's going

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Speaker 3: to continue to move around.

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Speaker 5: Well in a bond market, I can sit there in

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Speaker 5: a two year piece of US government paper, which I

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Speaker 5: think is pretty safe. I think they're going to pay

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Speaker 5: me back in two years and clip a four point

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Speaker 5: two percent coupon. Is that my fixed income strategy?

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Speaker 3: Well, I think that people have been looking at and

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Speaker 3: we have continued to look at the short end of

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Speaker 3: the curve for that reason.

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Speaker 4: Because you've got reasonable You've had some very.

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Speaker 3: Good opportunities to get in at good short term rates,

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Speaker 3: and you think that those are in pretty good shape,

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Speaker 3: you start talking about raising rates again, that gets a

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Speaker 3: little dice yer, but not on the very short end.

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Speaker 3: So I think that there is a cluster towards that

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Speaker 3: because it makes sense and it's also easy to have

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Speaker 3: some visibility.

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Speaker 2: Are we away from where the top ten holdings of

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Speaker 2: funds are thirty or forty or dare I say fifty

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Speaker 2: five percent of their portfolio? Are we diversifying away from

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Speaker 2: that twenty twenty three twenty four reality.

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Speaker 3: Well, it's it's it's been tough, right because the smp

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Speaker 3: is market cap weighted and most people are benching against

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Speaker 3: the SMP, and even if they're using a different benchmark,

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Speaker 3: people look at the SMP and think of that as

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Speaker 3: the market, so it becomes something where it's hard to

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Speaker 3: see how you get around that. On the other hand,

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Speaker 3: you've had some big laggards in the SMP this year too,

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Speaker 3: so I think that people had branched out. I think

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Speaker 3: that people continue to branch out, and it's really a

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Speaker 3: question of talking to people about what a good portfolio

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Speaker 3: really looks like and saying, this is what the index

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Speaker 3: looks like. Would you really want your portfolio to look

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Speaker 3: at and people need to People are getting better educated

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Speaker 3: about that, but that is definitely a change.

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Speaker 2: This is again I don't want to catch you unawares,

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Speaker 2: but this was in a zeitgeist. Just today, Bank of America,

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Speaker 2: I believe, hit a record high, probably because they're sponsoring

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Speaker 2: a World Cup.

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Speaker 7: You know whatever.

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Speaker 2: You should see where Savita sits. It's just unbanking area

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Speaker 2: and killing it. I look at Bank of America, which

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Speaker 2: means I look at Warren Buffet and the following on

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Speaker 2: from Berkshire Hathaway as well. Berkshire Hathaway. Is that an

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Speaker 2: opportunity as a diversified like old school conglomerate.

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Speaker 3: I think that there's also there's a transition there, right,

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Speaker 3: So people are looking to see how that is going

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Speaker 3: to go because that's a lot of history and a

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Speaker 3: lot of shoes to fill, and so I think that

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Speaker 3: there is it's certainly possibly, and the holdings that they

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Speaker 3: have are starting to look in those areas where people

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Speaker 3: are looking at what's going on here, the insurance areas,

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Speaker 3: the financial areas. In some of those places, I think

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Speaker 3: that there is a desire for investors to have a

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Speaker 3: broader portfolio than just technology because you can see when

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Speaker 3: there is wobbles and technology, you need them both.

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Speaker 5: What's screen's well for you guys these days, whether it's

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Speaker 5: a sector or a factor, what's screen.

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Speaker 4: So there are several things that screen well.

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Speaker 3: I mean healthcare is one of those areas where people

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Speaker 3: have talked a long time like it should be healthcare's time,

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Speaker 3: because we think that there is a lot of room there.

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Speaker 3: Looking at some of the areas where you have excuse me,

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Speaker 3: instruments something like a danaher, some of the companies that

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Speaker 3: have been sort of left behind as money has moved

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Speaker 3: into other sectors we think that to your point on

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Speaker 3: Bank of America financials also look interesting. You start to

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Speaker 3: see the IPO market open up. Now we'll see whether

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Speaker 3: or not that continues because these are massive IPOs, but

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Speaker 3: you've had that window close. That's a leg of earnings

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Speaker 3: for that group that they haven't seen in quite some time.

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Speaker 3: So there are places that we like, their places in

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Speaker 3: industrials that we like too. It's just a question of

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Speaker 3: trying to find things at the right valuation because this

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Speaker 3: market is moving around, and it's moving pretty.

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Speaker 2: Quickname of Her was a beauty stock X number of

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Speaker 2: quarters ago.

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Speaker 3: God's name happened well, there was a lot of moving

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Speaker 3: around to parts because they spun off some pieces too.

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Speaker 3: There was a lot of things that happened to Danaher

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Speaker 3: that was that historically they'd been more of a conglomerator

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Speaker 3: and not an exclomerator as it were. But if you

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Speaker 3: look at what's left in Danaher now, there's some really

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Speaker 3: interesting growth stories there on the instrument side. So I

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Speaker 3: think that there's places again where you had these glamorous

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Speaker 3: stocks previously and they sort of fell off the radar screen,

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Speaker 3: and I think that there's opportunity.

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Speaker 2: Simple dhr in your vailue line.

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Speaker 7: Sure yeah.

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Speaker 2: Series two Land to Remember Sarah, Thank you so much,

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Speaker 2: Alpine Sex and Woods.

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Speaker 7: Stay with us.

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Speaker 2: More from Bloomberg Surveillance coming up after this.

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Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live

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Speaker 1: weekday afternoons from seven to ten am Eastern Listen on

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Speaker 1: Apple Karplay and Android Otto with the Bloomberg Business app,

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Speaker 1: or watch us live on YouTube.

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Speaker 2: This is our tech Congress of the day, and you

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Speaker 2: just really can't convey the eclectic nature of our research.

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Speaker 2: It's on software and I really don't even know what

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Speaker 2: it's on, but it's sort of on software, but away

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Speaker 2: from all the hyper scale. And we're going to do

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Speaker 2: twenty five kajillion and bonds with City Group. Fatima Boulani

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Speaker 2: darkens the Door today. What was it like your first

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Speaker 2: day at the iconic time Thomas was sell in San Francisco.

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Speaker 2: You walk in the door, You're seventeen years old. What

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Speaker 2: was it like to be in that tech.

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Speaker 8: Juggernaut, bright eye, bushy tailed.

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Speaker 2: I mean, I just can't imagine what describe the fervor

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Speaker 2: that was going on then.

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Speaker 4: It was a different era.

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Speaker 8: I mean, software was simple, We didn't have the juggernaut

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Speaker 8: that is, a generational computing shift called AI taking over

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Speaker 8: our organizations. It was a simpler time and really a

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Speaker 8: formative experience for me. But yeah, in the halls of

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Speaker 8: sort of gallowed halls of a very remarkable deal maker

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Speaker 8: as it was an interesting time and my claim to

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Speaker 8: fame as we were the I was the last incoming

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Speaker 8: analyst class at Thomas Wise.

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Speaker 2: Okay before it all blew up. But the basic idea is, Paul,

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Speaker 2: help me here. Then less profit or no profit, and

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Speaker 2: now everybody's making a ton of money.

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Speaker 5: The software comes and making a ton of money.

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Speaker 2: What's the call here?

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Speaker 5: Just on your coverage of the software space that you

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Speaker 5: guys cover as it relates to AI, because we have

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Speaker 5: gone through a period where it seems like the market

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Speaker 5: was just kind of selling software in general here and

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Speaker 5: asking questions later, where are we now?

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Speaker 8: We're continuing to see the bifurcation in software. So you

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Speaker 8: have the two neighborhoods the application software names, so the

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Speaker 8: Bellweather's there would be the Salesforce dot COM's and the Adobe's,

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Speaker 8: and then you've got the infrastructure neighborhood, which by and

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Speaker 8: large would include the hyperscalers, but I'll keep those separate

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Speaker 8: because they're kind of a beast of their own in

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Speaker 8: terms of how we think about them in the AI

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Speaker 8: life cycle and value chain. But the infrastructure names continue

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Speaker 8: to get bid up, and that's functionally because it's the

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Speaker 8: most immediate and we think the most correct way to

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Speaker 8: express the you know, veritable AI winners and the software stock.

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Speaker 8: I think you sort of were dancing around this, but

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Speaker 8: software has sort of been uh dained as this red

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Speaker 8: headed step child of tech, if you will, as the

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Speaker 8: frontier labs you know absolutely, you know, you know, express

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Speaker 8: their might in terms of the type of innovation that

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Speaker 8: they're you know, putting putting out there and you know,

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Speaker 8: disrupting existing business models, you know, software companies. You know, arguably,

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Speaker 8: in retrospect, we're looking fat and happy and now you know,

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Speaker 8: those those builds are coming due and where we're excuse me,

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Speaker 8: seeing a sort of different cadence of both UH innovation

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Speaker 8: operational improvement. And so infrastructure is the place to be

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Speaker 8: because uh infrastructure software generally example, it would be a

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Speaker 8: company like a data Dog or a cli outflare, right,

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Speaker 8: So it's not terribly household names in the sense that

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Speaker 8: we're used to like we are in the application realm.

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Speaker 8: So it's essentially companies that are enabling or providing scaffolding

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Speaker 8: or visibility around the types of AI systems that you're

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Speaker 8: an average organization's irect.

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Speaker 2: The New York Yankees blue Light for n rehording, the

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Speaker 2: Data Dog, which I know nothing about. Do they provide

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Speaker 2: services to say Microsoft.

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Speaker 8: No, What they provide is effectively the equivalent of an

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Speaker 8: MRI scan for your entire it architectural topology, right, And

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Speaker 8: that's important Wild Cornell.

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Speaker 7: Right, it's just it.

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Speaker 8: Hurts doctor, just a renaissance woman with all my analogies.

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Speaker 8: And so what the value they provide in the context

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Speaker 8: they provide for AI, is AI systems, in the way

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Speaker 8: they're constructed, in the novel capabilities that they're providing, you know,

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Speaker 8: brick to break.

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Speaker 4: These are just.

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Speaker 8: Very sophisticated systems and pieces of technology, right, and they're

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Speaker 8: ever changing. And we were offline talking about how the

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Speaker 8: frontier is changing so dramatically that six months from now

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Speaker 8: we could be in yet another brave new world as

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Speaker 8: it relates to you know, technological proficiency with respective models

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Speaker 8: and what the labs are doing. And so what Data

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Speaker 8: Dog provides is, Hey, you're going to build out these

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Speaker 8: systems of agents that are going to run workflows for you. Well,

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Speaker 8: guess what, There's a million things that could go wrong.

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Speaker 8: The agents could hallucinate, the agents could spin up a

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Speaker 8: wrong answer, they could outright fail.

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Speaker 4: And so data Dog is that.

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Speaker 8: MRI scan where your in nerds are effectively becoming so

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Speaker 8: complex that your points of failure are just becoming infinitely

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Speaker 8: more or diffuse. And that sort of value they provide ultimately.

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Speaker 5: So data Dog Infrastructure Software, I get that. And the

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Speaker 5: stocks up eighty eight percent year to date. Wow, what

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Speaker 5: else is a data dog comp?

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Speaker 6: Would you say?

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Speaker 8: You know, we're very positively aligned on cloud flair right,

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Speaker 8: cloud Flair that's also in similar echelon of our performance

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Speaker 8: call here is cloud flair is basically the backbone of

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Speaker 8: the internet. Right, It's the easy pass equivalent for organizations

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Speaker 8: to run their business on the Internet. Right, Okay, And

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Speaker 8: the way they play in the AI theme is you've

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Speaker 8: got these agents, they've got to run somewhere.

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Speaker 2: I've got a non an acquaintance with Matthew Prince going

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Speaker 2: way back to some fun days in Davas. What is

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Speaker 2: Matthew Prince doing differently at cloud fair flair versus everyone else.

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Speaker 8: Oh, he's tinkering with a lot of interesting ideas as

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Speaker 8: it relates to what the agentic Internet is going to

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Speaker 8: look like. You know, one of the founding sort of

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Speaker 8: principles around his view, and we tend to agree because

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Speaker 8: a lot of the data points are supportive of this is.

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Speaker 8: You know, there's human generated internet traffic, but hold the phone.

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Speaker 8: There's going to be an absolute parabolic explosion in agenic

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Speaker 8: internet traffic. So you know, six months from now, twelve

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Speaker 8: months from now, if I'm booking a family vacation agentic commerce,

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Speaker 8: I want.

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Speaker 7: You to answer.

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Speaker 2: I do not want you to answer this question. But

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Speaker 2: in your head, I don't want to get you in

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Speaker 2: compliance issues. Are you sorting out winners and losers of

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Speaker 2: the big people, the hyperscalers, Like in your head, don't

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Speaker 2: Heathterial put me in the time out here? But in

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Speaker 2: the Fatima mind space do you sort out winners and

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Speaker 2: losers of the big people?

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Speaker 8: Absolutely, there is a gradient. But in the infrastructure realm,

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Speaker 8: I directionally say there are when we kind of cross

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Speaker 8: over the rubicon, the infrastructure software names are generally going

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Speaker 8: to be beneficiaries of the computing shift right, So that's

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Speaker 8: why I bring up data doc. That's why I bring

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Speaker 8: it clad flair. We didn't really touch on the beast

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Speaker 8: of a complex that is a cybersecurity universe. But as

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Speaker 8: sure as death and taxes are, cybersecurity investments and budgets

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Speaker 8: are going to follow. What is going to end up

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Speaker 8: being a much more nefarious cyber attack environment as it

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Speaker 8: relates to AI technology, So we tend to also be

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Speaker 8: bullish there.

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Speaker 7: I love AI. I go.

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Speaker 2: Can you swim the rubicon out to out at Lake Tahoe?

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Speaker 7: You can, there's a rubicure.

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Speaker 2: This has been great. Thank you so much, Fatima, and

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Speaker 2: thank you to everybody sitting just publishing like crazy. We

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Speaker 2: didn't ask about Microsoft. That's mister Radkes. He's got like

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Speaker 2: a huge target in Microsoft.

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Speaker 6: Feel like I won't be careful.

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Speaker 2: Now, stay with us. More from Bloomberg Surveillance coming up

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Speaker 2: after this.

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Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live

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00:17:56,280 --> 00:17:59,280
Speaker 1: weekday afternoons from seven to ten am. E's durn listen

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Speaker 1: on Applecar playing Android Otto with the Bloomberg Business up,

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Speaker 1: or watch us live on YouTube.

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Speaker 2: This is a joy because it's not happening in three

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Speaker 2: zip codes in Manhattan, it's happening across Ohio. You go

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Speaker 2: out I ninety Okay, and you turn left, like in

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Speaker 2: case Western Reserve. In Cleveland, there's this wicked turn on

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Speaker 2: the pike and you turn left there and all of

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Speaker 2: a sudden, it's the Midwest. Afron Kaplan knows. It's cold,

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Speaker 2: absolutely cold, with brown gibbons laying. Is the Midwest build

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Speaker 2: out for real? Yeah, all the infrastructure manufacturing, the Eastern

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Speaker 2: crew doesn't know this. I mean they just don't know it.

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Speaker 7: They totally don't know it.

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Speaker 9: It's funny you say this because I have this theory

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Speaker 9: the Midwest starts in downtown Cleveland, So you have the

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Speaker 9: you have sort of like the foothills of the Appalachians.

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Speaker 9: You're going into Cleveland, and the right at dead Man's Curve,

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Speaker 9: as you mentioned, that's where Cleveland starts going west. But yes,

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Speaker 9: there's tons of data centers being built at Ohio. You're

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Speaker 9: driving on and you're like, should we stop at the

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Speaker 9: Rock and Roll Hall of Fame and the road turns left.

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Speaker 7: It's very true, very true.

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Speaker 5: Talk to us about just how you guys are viewing

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Speaker 5: this infrastructure build how you when.

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Speaker 6: You talk to your clients, how are they trying to

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Speaker 6: play it here?

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Speaker 7: It's fascinating.

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Speaker 9: So you know, after a morning of drama or an

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Speaker 9: evening of drama into today with volatility in the markets,

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Speaker 9: infrastructure is a little bit more less volatile. And you've

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Speaker 9: seen this massive amount of capital primarily from nations and

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Speaker 9: sovereign wealth nations that understand how to invest in infrastructure,

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Speaker 9: whether it be Australia or frankly Europe, okay, throwing a

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Speaker 9: lot of capital.

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Speaker 7: Into the US over the past five years.

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Speaker 9: I think two hundred million dollars was raised in twenty

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Speaker 9: twenty five. And so why is that, Well, infrastructure is

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Speaker 9: a is a much more steady downside protected limit upside

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Speaker 9: type growth investment opportunity. And in a market of volatility

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Speaker 9: where frankly a lot of capital has gone into tech

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Speaker 9: and you've seen this volatility, capital is getting a little

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Speaker 9: bit more conservative and looking for consistency. And so when

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Speaker 9: we think about power, and we think about waste, and

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Speaker 9: we think about water all these natural resources, capital is

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Speaker 9: going that way and it's much more consistent than it's

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Speaker 9: got a much in my view, a.

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Speaker 7: Better risk reward.

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Speaker 9: Calculus than some of these AI trades that we're talking.

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Speaker 5: About, what is the environment for environmental services these days?

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Speaker 6: I'm thinking waste recycling, remediation.

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Speaker 5: We have an administration on is this administration supportive of that?

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Speaker 5: Are your clients feeling like this is a place they

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Speaker 5: want to allocate capital?

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Speaker 9: You know, it's interesting if you think from a regulatory

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Speaker 9: perspective the waste and environmental services businesses, there's been some

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Speaker 9: restrictions in the ability to extend permits for landfill to

442
00:21:00,800 --> 00:21:04,480
Speaker 9: put up more facilities to process waste. So frankly, it's

443
00:21:04,520 --> 00:21:07,520
Speaker 9: been a little bit challenging for the waste businesses. On

444
00:21:07,560 --> 00:21:13,119
Speaker 9: the contrary, the infrastructure money which again looks for really

445
00:21:13,200 --> 00:21:18,040
Speaker 9: nice risk reward mathematics, very calculus. These are incredible business

446
00:21:18,080 --> 00:21:20,360
Speaker 9: models that it's an essential service.

447
00:21:20,480 --> 00:21:21,880
Speaker 7: And so as you've seen whether.

448
00:21:21,680 --> 00:21:25,159
Speaker 9: Again the AI trade environmental services can benefit from the

449
00:21:25,200 --> 00:21:25,720
Speaker 9: AI trade.

450
00:21:25,760 --> 00:21:28,440
Speaker 2: I'm a little biased on this, folks, because the fam

451
00:21:28,600 --> 00:21:31,600
Speaker 2: goes back to McDonald and company and Key Bank of

452
00:21:31,640 --> 00:21:35,920
Speaker 2: a million years ago. The stereotype of Ohio and britically

453
00:21:35,960 --> 00:21:42,040
Speaker 2: Northern Ohio is just comical how people miss the durability

454
00:21:42,080 --> 00:21:45,800
Speaker 2: of it. They have no idea of John Hay and

455
00:21:46,160 --> 00:21:49,760
Speaker 2: the standard oil of eighteen ninety and nineteen hundred. Arguably

456
00:21:49,800 --> 00:21:53,439
Speaker 2: the richest land on the planet, the richest society on

457
00:21:53,480 --> 00:21:56,400
Speaker 2: the planet. What is the state of Cleveland right now?

458
00:21:57,520 --> 00:22:00,840
Speaker 9: You know you're talking to a loyalist. Tom said, you know,

459
00:22:00,920 --> 00:22:03,760
Speaker 9: I'm an I don't know how objective or how I

460
00:22:03,800 --> 00:22:06,159
Speaker 9: probably will be subjective, but I'm a big fan. We

461
00:22:06,240 --> 00:22:10,040
Speaker 9: talk we talk about blue collar labor. We talk about

462
00:22:10,040 --> 00:22:13,840
Speaker 9: people that grind, we talk about people that work really hard. Uh,

463
00:22:13,920 --> 00:22:16,240
Speaker 9: that is Cleveland, that is Ohio.

464
00:22:16,840 --> 00:22:18,399
Speaker 7: We we are driven people.

465
00:22:18,640 --> 00:22:21,000
Speaker 2: We have huge fans in Cleveland and they're driven. I

466
00:22:21,000 --> 00:22:22,960
Speaker 2: mean down to Youngstown and all that, and you know

467
00:22:23,000 --> 00:22:26,679
Speaker 2: it researches abstinent flows. But the problem is right now,

468
00:22:26,720 --> 00:22:30,080
Speaker 2: I mean, you know, I mean the Indians are the Indians.

469
00:22:30,200 --> 00:22:32,760
Speaker 2: But the only question that matters is Lebron coming back?

470
00:22:32,760 --> 00:22:32,879
Speaker 9: Well?

471
00:22:32,920 --> 00:22:38,040
Speaker 7: Are they the Indians or are I'll go with the Indians.

472
00:22:38,400 --> 00:22:40,720
Speaker 2: What are you thinking on Lebron here? I mean, does

473
00:22:40,800 --> 00:22:41,720
Speaker 2: Lebron come back?

474
00:22:43,080 --> 00:22:46,199
Speaker 9: You know, frankly, that's a tough question because you know,

475
00:22:46,320 --> 00:22:48,359
Speaker 9: does Donovan really want to win this on his own

476
00:22:48,520 --> 00:22:50,359
Speaker 9: or does he want Lebron to help him win it?

477
00:22:50,480 --> 00:22:54,240
Speaker 9: So if you're if you're a team player and you

478
00:22:54,320 --> 00:22:56,800
Speaker 9: want to win the championship. Lebron can help.

479
00:22:57,280 --> 00:22:59,840
Speaker 2: I mean, Mitchell, you know it works, I mean.

480
00:23:00,119 --> 00:23:02,119
Speaker 9: Ron, And I know I'm bringing up a sour subject

481
00:23:02,160 --> 00:23:04,520
Speaker 9: with Donovan here in New York and you're where we did.

482
00:23:04,560 --> 00:23:06,119
Speaker 7: Okay, yeah, No, I.

483
00:23:06,680 --> 00:23:10,240
Speaker 9: Put my foot in my mouth right there, Yes, and

484
00:23:10,280 --> 00:23:14,040
Speaker 9: all that, But I mean, look, Ohio is the center

485
00:23:14,200 --> 00:23:15,520
Speaker 9: of AI right now.

486
00:23:15,520 --> 00:23:17,040
Speaker 7: With data center build out, there's a lot.

487
00:23:17,200 --> 00:23:20,879
Speaker 2: Can you people look west and invest in the rebuild

488
00:23:21,000 --> 00:23:21,600
Speaker 2: of O'Hare?

489
00:23:22,480 --> 00:23:25,840
Speaker 7: Can we look west and invest in.

490
00:23:24,840 --> 00:23:26,800
Speaker 2: The rebuild of O'Hare.

491
00:23:27,320 --> 00:23:30,399
Speaker 9: We are rebuilding Cleveland Hopkins right now, so I guess

492
00:23:30,440 --> 00:23:31,320
Speaker 9: we can take somewhere.

493
00:23:31,359 --> 00:23:33,840
Speaker 2: How do you use the LaGuardia template to do that?

494
00:23:34,200 --> 00:23:34,400
Speaker 7: Oh?

495
00:23:34,440 --> 00:23:39,240
Speaker 9: Well, if you ever walked inside Cleveland Hopkins Airport, you

496
00:23:39,400 --> 00:23:42,199
Speaker 9: just have to look inside LaGuardia and realize that the

497
00:23:42,240 --> 00:23:44,520
Speaker 9: only way to go is up when you walk inside Hopkins.

498
00:23:44,520 --> 00:23:47,359
Speaker 9: Because it is back in the sixties and so you

499
00:23:47,560 --> 00:23:52,400
Speaker 9: you don't really have much more, it's hard not to improve.

500
00:23:53,320 --> 00:23:56,239
Speaker 5: So what's the next part of growth for you?

501
00:23:56,240 --> 00:23:56,560
Speaker 6: Guys?

502
00:23:56,800 --> 00:24:01,240
Speaker 5: In your practice you focus on infrastructure and environment. I mean,

503
00:24:01,520 --> 00:24:05,240
Speaker 5: utility business has become sexy now because of all the AI,

504
00:24:05,720 --> 00:24:07,119
Speaker 5: where do you guys see the opportunity.

505
00:24:07,320 --> 00:24:13,440
Speaker 9: Well, frankly, so we're a Cleveland based firm. Yes we've

506
00:24:13,440 --> 00:24:15,840
Speaker 9: got offices here. Yes we've got offices at Chicago. But

507
00:24:15,880 --> 00:24:19,120
Speaker 9: just because we're Cleveland based, we're industrials.

508
00:24:19,560 --> 00:24:20,960
Speaker 7: Are you hear a.

509
00:24:20,880 --> 00:24:23,479
Speaker 9: Lot about picks and shovels and investments going into those

510
00:24:23,520 --> 00:24:28,360
Speaker 9: types of businesses. That's a lot of where we see opportunity.

511
00:24:28,480 --> 00:24:31,119
Speaker 9: And so when we talk about infrastructure, yes, listen this.

512
00:24:31,880 --> 00:24:34,320
Speaker 9: I know we talk about a lot this AI trade,

513
00:24:34,600 --> 00:24:39,360
Speaker 9: but that's the sexy stuff. The boring stuff is the

514
00:24:39,359 --> 00:24:42,920
Speaker 9: infrastructure world. The boring stuff is essential services. We have

515
00:24:43,000 --> 00:24:46,280
Speaker 9: not reinvested into our wastewater treatment facilities or our sewer

516
00:24:46,320 --> 00:24:50,120
Speaker 9: systems for fifty or sixty years. We have this incessant

517
00:24:50,200 --> 00:24:53,840
Speaker 9: need for data and communication in the not only here

518
00:24:53,840 --> 00:24:56,160
Speaker 9: in the US, but the globe and an increasing population

519
00:24:56,280 --> 00:24:59,679
Speaker 9: to use that. And so we're really excited about not

520
00:24:59,720 --> 00:25:02,399
Speaker 9: only a core infrastructure, and all this capital is going

521
00:25:02,480 --> 00:25:06,080
Speaker 9: with the essential services which provide more alpha in these

522
00:25:06,119 --> 00:25:09,440
Speaker 9: integrated business models. So, if you look at deal counts,

523
00:25:09,680 --> 00:25:14,280
Speaker 9: the services deal count has I think it's tenfold since

524
00:25:14,320 --> 00:25:16,000
Speaker 9: ten years ago in terms of how many deals are

525
00:25:16,000 --> 00:25:18,399
Speaker 9: happening in the services world, and that's really one of

526
00:25:18,440 --> 00:25:20,880
Speaker 9: our strongest practices at the firm. So when we think

527
00:25:20,920 --> 00:25:26,080
Speaker 9: about services, essential services, utility power, there is a very

528
00:25:26,119 --> 00:25:26,960
Speaker 9: long runway for that.

529
00:25:27,040 --> 00:25:28,160
Speaker 2: Mark, this has been wonderful.

530
00:25:28,160 --> 00:25:28,359
Speaker 7: Thank you.

531
00:25:28,840 --> 00:25:30,960
Speaker 2: Don't be a stranger. This has been great effran Capital.

532
00:25:31,000 --> 00:25:34,840
Speaker 2: We love doing this folks Co Chief executive officer ahead

533
00:25:34,840 --> 00:25:38,760
Speaker 2: of all Infrastructure at Brown Gibbons and Laying. We love,

534
00:25:39,040 --> 00:25:44,400
Speaker 2: love love hearing from informed individuals outside the three zip codes.

535
00:25:44,440 --> 00:25:48,200
Speaker 2: We're addicted to stay with us. More from Bloomberg Surveillance

536
00:25:48,280 --> 00:25:49,600
Speaker 2: coming up after this.

537
00:25:56,840 --> 00:26:01,480
Speaker 1: You're listening to the Bloomberg Surveillance Podcast live weekday afternoons

538
00:26:01,480 --> 00:26:04,680
Speaker 1: from seven to ten am Eastern Listen on Applecarplay and

539
00:26:04,680 --> 00:26:08,000
Speaker 1: Android Otto with the Bloomberg Business app, or watch us

540
00:26:08,080 --> 00:26:09,240
Speaker 1: live on YouTube.

541
00:26:09,800 --> 00:26:12,600
Speaker 2: Mark McCormick is a wonderful student of the markets. The

542
00:26:12,680 --> 00:26:17,840
Speaker 2: synthesis is Chief FX strategy for Bemont Capital Marcuts, but

543
00:26:17,920 --> 00:26:20,840
Speaker 2: he does so much more as well. When you come

544
00:26:20,880 --> 00:26:24,240
Speaker 2: in the morning, Mark McCormick, on your four Bloombergs, what's

545
00:26:24,280 --> 00:26:25,920
Speaker 2: the first thing you look at.

546
00:26:27,640 --> 00:26:31,560
Speaker 10: I'm still a WCRS guy, so that's still my top

547
00:26:31,600 --> 00:26:33,840
Speaker 10: go to I like the bond curve function as well,

548
00:26:33,880 --> 00:26:37,640
Speaker 10: But say it's been fifteen years of wcrs and look

549
00:26:37,640 --> 00:26:39,600
Speaker 10: at what's kind of driving FX, because I think it

550
00:26:39,640 --> 00:26:41,320
Speaker 10: tells us a story about what's going on in the

551
00:26:41,320 --> 00:26:41,840
Speaker 10: whole world.

552
00:26:42,040 --> 00:26:45,120
Speaker 2: Is it dollar strength or everybody else weakness?

553
00:26:46,240 --> 00:26:48,199
Speaker 10: I think this is dollar strength. I think there was

554
00:26:48,240 --> 00:26:50,439
Speaker 10: a there's a piece of this story that it was

555
00:26:50,480 --> 00:26:53,720
Speaker 10: partly a multiphase dollar where it's week Asia, it's week

556
00:26:53,840 --> 00:26:56,639
Speaker 10: G ten and it's strong Lattam. I think now that

557
00:26:56,720 --> 00:26:59,159
Speaker 10: the Fedish turn hawkish and we're really focused on a

558
00:26:59,240 --> 00:27:02,359
Speaker 10: rates factor other than some of these other drivers, Latam's

559
00:27:02,359 --> 00:27:04,439
Speaker 10: starting to crack as well, So it's becoming a strong

560
00:27:04,480 --> 00:27:06,480
Speaker 10: dollar move mark.

561
00:27:06,520 --> 00:27:06,680
Speaker 7: Here.

562
00:27:06,720 --> 00:27:08,679
Speaker 5: We kind of came into the year, I think the

563
00:27:08,720 --> 00:27:12,600
Speaker 5: consensus was for a weaker US dollar, and then of

564
00:27:12,600 --> 00:27:16,119
Speaker 5: course the war in Iran started and that changed the

565
00:27:16,200 --> 00:27:18,119
Speaker 5: dynamic quite a bit. And now we've got the DX

566
00:27:18,119 --> 00:27:20,639
Speaker 5: why you know, well over one hundred once again and

567
00:27:20,720 --> 00:27:23,040
Speaker 5: one on one spot one. How do you think this

568
00:27:23,080 --> 00:27:25,520
Speaker 5: plays out over the next six months here in the

569
00:27:25,560 --> 00:27:26,080
Speaker 5: currency world?

570
00:27:26,080 --> 00:27:27,040
Speaker 6: Where where is their value?

571
00:27:27,080 --> 00:27:27,480
Speaker 7: Perhaps?

572
00:27:29,280 --> 00:27:29,440
Speaker 9: Yeah?

573
00:27:29,520 --> 00:27:31,560
Speaker 10: I think I think what's interesting is right is we're

574
00:27:31,600 --> 00:27:34,480
Speaker 10: finally kind of catching up to I think a storyline

575
00:27:34,520 --> 00:27:37,359
Speaker 10: that reinforces the things that we've been pushing for months,

576
00:27:37,359 --> 00:27:40,080
Speaker 10: which is the FED didn't need to cut. Now it's

577
00:27:40,320 --> 00:27:43,000
Speaker 10: very arguable that the FED does need to hike at

578
00:27:43,080 --> 00:27:44,960
Speaker 10: least once, or at least pull some of the cuts

579
00:27:44,960 --> 00:27:48,320
Speaker 10: out from last year and move towards tighter financial conditions.

580
00:27:48,359 --> 00:27:51,359
Speaker 10: The second thing is US economy has been quite strong

581
00:27:51,600 --> 00:27:54,280
Speaker 10: coming into twenty twenty six, and it's picking up further

582
00:27:54,359 --> 00:27:57,800
Speaker 10: strength into twenty twenty into the second quarter of twenty

583
00:27:57,840 --> 00:28:00,719
Speaker 10: twenty six. So our growth signals we track, which are

584
00:28:00,840 --> 00:28:03,800
Speaker 10: very high frequency leading indicators, tell us the US economy

585
00:28:04,400 --> 00:28:07,480
Speaker 10: is doing better than every other major economy which we attract.

586
00:28:07,800 --> 00:28:11,880
Speaker 10: We tracked the other thing, US equities out performing most

587
00:28:11,880 --> 00:28:14,119
Speaker 10: major markets maybe besides a n K and a couple

588
00:28:14,119 --> 00:28:17,560
Speaker 10: of emerging markets. So you add all these things together.

589
00:28:17,720 --> 00:28:21,320
Speaker 10: The dollar wins on Carrie, it wins on economic performance,

590
00:28:21,400 --> 00:28:23,600
Speaker 10: it wins on mostly on equities, and it's on the

591
00:28:23,640 --> 00:28:26,600
Speaker 10: right side of the terms of trade shock. So you

592
00:28:26,720 --> 00:28:28,960
Speaker 10: pull all these together and I feel like the market's

593
00:28:29,000 --> 00:28:31,960
Speaker 10: finally catching up to this story. And the thing that

594
00:28:32,000 --> 00:28:34,520
Speaker 10: I think actually moves the needle a little bit further

595
00:28:34,560 --> 00:28:36,480
Speaker 10: because we've been looking for d x Y at one

596
00:28:36,560 --> 00:28:39,320
Speaker 10: o three for this quarter for a while. Is the

597
00:28:39,360 --> 00:28:43,080
Speaker 10: trend following models the CTAs, they're the ones that are

598
00:28:43,080 --> 00:28:45,680
Speaker 10: flipping a long the dollar. Now, they're the ones that

599
00:28:45,720 --> 00:28:46,280
Speaker 10: take us there.

600
00:28:46,440 --> 00:28:48,760
Speaker 2: Okay, So if we get a Mark McCormick one oh

601
00:28:48,840 --> 00:28:51,800
Speaker 2: one or one hundred to one oh three, that's a booth.

602
00:28:51,800 --> 00:28:55,080
Speaker 2: Paul and I said at the same time, Wow, that

603
00:28:55,320 --> 00:29:00,800
Speaker 2: means the other currencies go down on a domestic basis. McCormick,

604
00:29:01,080 --> 00:29:04,880
Speaker 2: what does it mean to businesses in Japan, businesses in

605
00:29:04,920 --> 00:29:10,160
Speaker 2: the Philippines, businesses in Malaysia, businesses in Egypt. If we

606
00:29:10,280 --> 00:29:12,400
Speaker 2: see this one oh three d x Y.

607
00:29:15,280 --> 00:29:17,600
Speaker 10: I don't know if it's going to have a massive

608
00:29:17,680 --> 00:29:21,000
Speaker 10: impact on, you know, the local businesses. I think, you know,

609
00:29:21,120 --> 00:29:23,800
Speaker 10: part of what's so complicated about FX and what's so

610
00:29:23,880 --> 00:29:26,520
Speaker 10: interesting about how the way world works is it's it's

611
00:29:26,560 --> 00:29:29,680
Speaker 10: an integrated global supply chain. So there's no longer like

612
00:29:29,760 --> 00:29:32,120
Speaker 10: my currency goes up and I don't export as much.

613
00:29:32,600 --> 00:29:34,520
Speaker 10: But I think what's very clear is that when the

614
00:29:34,560 --> 00:29:38,760
Speaker 10: dollar goes up, it's basically assigned the global economy's week

615
00:29:39,120 --> 00:29:42,120
Speaker 10: rates are higher, liquidity is tighter. So I think, what

616
00:29:42,200 --> 00:29:44,360
Speaker 10: these other countries are going to be dealing with our

617
00:29:44,440 --> 00:29:46,680
Speaker 10: higher interest rates, even though they wouldn't want to deal

618
00:29:46,680 --> 00:29:49,320
Speaker 10: with higher interest rates. So that's what the you know,

619
00:29:49,360 --> 00:29:51,760
Speaker 10: the FED curve is basically to impose this onto the

620
00:29:51,800 --> 00:29:54,480
Speaker 10: rest of the world. So US yields going up, I

621
00:29:54,600 --> 00:29:57,120
Speaker 10: just think is kind of a very tightening shock for

622
00:29:57,160 --> 00:30:00,080
Speaker 10: global growth, which in an environment where global growth is

623
00:30:00,080 --> 00:30:03,400
Speaker 10: already kind of turned negative, which reflects the stronger dollar.

624
00:30:03,840 --> 00:30:05,520
Speaker 10: Are some of the things they're going to hurt Japan,

625
00:30:05,560 --> 00:30:08,400
Speaker 10: It's gonna hurt Korea, It's going to hurt these countries

626
00:30:08,440 --> 00:30:10,560
Speaker 10: around the world. It's just going to tighten their financial

627
00:30:10,600 --> 00:30:13,240
Speaker 10: conditions and make the economy a little bit weaker.

628
00:30:13,800 --> 00:30:16,240
Speaker 5: Mark, you mentioned Japan, Tom, and I keep a keen

629
00:30:16,320 --> 00:30:19,240
Speaker 5: eye on the end here one sixty two spot five

630
00:30:19,320 --> 00:30:20,000
Speaker 5: to three.

631
00:30:20,480 --> 00:30:21,440
Speaker 6: What's going on there?

632
00:30:23,120 --> 00:30:25,640
Speaker 10: I think it's the last time we spoke, we were

633
00:30:25,680 --> 00:30:27,280
Speaker 10: talking about the red lines in the sand at one

634
00:30:27,440 --> 00:30:29,960
Speaker 10: sixty Again we kind of like came to the point

635
00:30:30,000 --> 00:30:32,880
Speaker 10: that we one sixty three is not aligne in the sand. Again,

636
00:30:32,920 --> 00:30:35,479
Speaker 10: I would highlight some of the things that are driving

637
00:30:35,560 --> 00:30:38,760
Speaker 10: dollar yen here is even before we have that conversation.

638
00:30:39,080 --> 00:30:41,920
Speaker 10: The FED is now turning hawkish. The rates factor is

639
00:30:41,920 --> 00:30:44,560
Speaker 10: the most dominant factor in currencies, and you could argue

640
00:30:44,560 --> 00:30:47,880
Speaker 10: in Marcus, this isn't just goldilocks, This isn't risk on,

641
00:30:48,040 --> 00:30:50,600
Speaker 10: risk off. It's something that's new. This is a new

642
00:30:50,600 --> 00:30:54,160
Speaker 10: policy driven environment where we're going to have more macro volatility.

643
00:30:54,440 --> 00:30:57,160
Speaker 10: The boj is absolutely behind the curve and they're not

644
00:30:57,200 --> 00:30:59,040
Speaker 10: going to get ahead of the curve. So now you

645
00:30:59,120 --> 00:31:02,360
Speaker 10: have rate different along with you know, this is also

646
00:31:02,440 --> 00:31:06,440
Speaker 10: for Japan, not crude oil story. It's natural gas. So

647
00:31:06,440 --> 00:31:08,600
Speaker 10: if you look at the contract that's traded in Asia

648
00:31:08,600 --> 00:31:11,960
Speaker 10: on liquefied natural gas, it hasn't come down. So you're

649
00:31:12,000 --> 00:31:14,160
Speaker 10: still dealing with a terms of trade shock, You're dealing

650
00:31:14,160 --> 00:31:17,040
Speaker 10: with higher rates, and you're dealing with an environment where

651
00:31:17,040 --> 00:31:20,440
Speaker 10: dollar yen should would be between one sixty and one

652
00:31:20,520 --> 00:31:23,400
Speaker 10: sixty five. I think the new redline in the sand

653
00:31:23,480 --> 00:31:26,360
Speaker 10: for intervention maybe is one sixty five, because I think

654
00:31:26,400 --> 00:31:28,360
Speaker 10: they'd like to keep it from going to one seventy.

655
00:31:28,840 --> 00:31:32,320
Speaker 10: But again my view here is Asian currencies remain weak.

656
00:31:33,000 --> 00:31:35,440
Speaker 2: Mark, thank you so much. Just a terrific brief with

657
00:31:35,520 --> 00:31:39,720
Speaker 2: the Bank of Montreal, Vemo Capital Markets Mark McCormick, the

658
00:31:39,800 --> 00:31:41,840
Speaker 2: chief FX strategist.

659
00:31:41,960 --> 00:31:46,800
Speaker 1: This is the Bloomberg Surveillance Podcast, available on apples, Spotify,

660
00:31:46,920 --> 00:31:51,200
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661
00:31:51,360 --> 00:31:54,800
Speaker 1: seven to ten am Eastern on Bloomberg dot com, the

662
00:31:54,880 --> 00:31:58,920
Speaker 1: iHeartRadio app tune In, and the Bloomberg Business app. You

663
00:31:58,960 --> 00:32:02,320
Speaker 1: can also watch a live every weekday on YouTube and

664
00:32:02,520 --> 00:32:04,240
Speaker 1: always on the Bloomberg terminal