1 00:00:00,040 --> 00:00:06,720 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,640 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,919 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,000 --> 00:00:37,000 Speaker 2: Terminal and the Bloomberg Business app. We begin this out 10 00:00:37,040 --> 00:00:39,400 Speaker 2: with stocks edging lower as AI concerns way on Wall 11 00:00:39,400 --> 00:00:43,680 Speaker 2: Streetdenny Ofodenny Research remains bullish. She writes the following investors 12 00:00:43,680 --> 00:00:46,720 Speaker 2: are rotating amongst sectors of the stock market, rather than 13 00:00:46,760 --> 00:00:50,080 Speaker 2: moving from stocks to cash. The ballmarket should remain strong 14 00:00:50,479 --> 00:00:52,720 Speaker 2: as it broadens. It joins us now for more and Ed. 15 00:00:52,720 --> 00:00:54,040 Speaker 2: I've got to pick up on the question that Lisa, 16 00:00:54,040 --> 00:00:56,720 Speaker 2: when I were talking about ED the rotation. Is it 17 00:00:56,760 --> 00:00:59,080 Speaker 2: more than just that now? Is it becoming just a 18 00:00:59,080 --> 00:00:59,880 Speaker 2: little bit more defense? 19 00:01:01,440 --> 00:01:03,600 Speaker 3: Well, I think you know, if you played day by day, 20 00:01:03,600 --> 00:01:06,160 Speaker 3: it certainly felt like it last week. As you said, 21 00:01:06,840 --> 00:01:09,960 Speaker 3: I think some of this is just AI fatigue. People 22 00:01:10,000 --> 00:01:14,640 Speaker 3: are just totally tired of the AI concept. They don't 23 00:01:14,640 --> 00:01:17,039 Speaker 3: know whether they're coming or going with it, they don't 24 00:01:17,080 --> 00:01:17,959 Speaker 3: know whether it's going. 25 00:01:17,880 --> 00:01:20,240 Speaker 4: To be wildly profitable or not. 26 00:01:20,480 --> 00:01:23,800 Speaker 3: And I think another thing that's entered here is, you know, 27 00:01:23,840 --> 00:01:28,840 Speaker 3: Elon Musk has been talking about how deflationary the combination 28 00:01:29,000 --> 00:01:32,759 Speaker 3: of AI and robotics is going to be, and so 29 00:01:33,240 --> 00:01:36,760 Speaker 3: we've got all that happening. And as you folks were saying, 30 00:01:37,040 --> 00:01:43,080 Speaker 3: the geopolitical situation is also quite volatile. We've got a 31 00:01:43,120 --> 00:01:47,280 Speaker 3: situation in Japan where the government wants to stimulate and 32 00:01:47,400 --> 00:01:50,760 Speaker 3: have a larger deficit, and yet the Bank of Japan 33 00:01:50,920 --> 00:01:53,560 Speaker 3: is tightening. And then, oh, by the way, let's not 34 00:01:53,720 --> 00:01:56,760 Speaker 3: forget there's a possibility here of a war between the 35 00:01:56,840 --> 00:02:00,320 Speaker 3: United States in Iran, and that could obviously push oil 36 00:02:00,360 --> 00:02:03,960 Speaker 3: prices higher. But the bond market's kind of taking it 37 00:02:04,040 --> 00:02:08,400 Speaker 3: as maybe it's time to look for a safe haven 38 00:02:08,480 --> 00:02:11,040 Speaker 3: from all these various concerns. 39 00:02:11,200 --> 00:02:14,000 Speaker 2: So let's talk about the havens and where we're fleeing. 40 00:02:14,400 --> 00:02:16,919 Speaker 2: So the money is leaving tech. The nastacks down by 41 00:02:17,560 --> 00:02:20,160 Speaker 2: about one percent this morning. The money is going into 42 00:02:20,160 --> 00:02:23,400 Speaker 2: staples into utilities. Those two sectors at all time highst right. 43 00:02:23,480 --> 00:02:25,160 Speaker 2: Do you think the bigger risk is at the moment 44 00:02:25,200 --> 00:02:27,400 Speaker 2: where people are leaving or where they're going to. 45 00:02:29,120 --> 00:02:32,480 Speaker 3: Well at this point, I think the uncertainty in AI 46 00:02:32,960 --> 00:02:38,079 Speaker 3: suggests that that entire trade is going to remain challenging. 47 00:02:38,840 --> 00:02:43,040 Speaker 3: And meanwhile, I think investors will continue to go basically 48 00:02:43,040 --> 00:02:47,520 Speaker 3: from the virtual theme to the physical theme. They're getting 49 00:02:47,560 --> 00:02:50,280 Speaker 3: confused with all the digital technology and they're going back 50 00:02:50,280 --> 00:02:54,640 Speaker 3: to the old fashioned analog world, the physical world, and 51 00:02:54,680 --> 00:02:58,640 Speaker 3: that means materials and energy, and as you said, consumer staples. 52 00:02:59,520 --> 00:03:04,239 Speaker 3: I think financials there's one area where it's getting overdone. 53 00:03:04,320 --> 00:03:07,200 Speaker 3: I think they're clearly the large banks and even the 54 00:03:07,240 --> 00:03:10,280 Speaker 3: regional banks are going to do just fine in this environment. 55 00:03:11,760 --> 00:03:14,280 Speaker 3: And I think healthcare, which was a laggard last year, 56 00:03:15,000 --> 00:03:18,160 Speaker 3: is also an area that's going to clearly benefit from 57 00:03:18,200 --> 00:03:22,600 Speaker 3: AI technology. I don't see a situation where AI robots 58 00:03:22,880 --> 00:03:26,040 Speaker 3: do surgery, though Elon Musk has been talking about that 59 00:03:26,120 --> 00:03:26,560 Speaker 3: as well. 60 00:03:27,080 --> 00:03:31,320 Speaker 5: Is there a contradiction in the idea of materials, metals, commodities, 61 00:03:31,360 --> 00:03:34,239 Speaker 5: the idea of the physical world continuing to gain favor 62 00:03:34,760 --> 00:03:39,480 Speaker 5: and also liking government bonds that are somehow implying inflation 63 00:03:39,600 --> 00:03:40,400 Speaker 5: remains subdued. 64 00:03:41,960 --> 00:03:47,560 Speaker 3: Well, I think the thing that's important to recognize is 65 00:03:47,640 --> 00:03:51,640 Speaker 3: things do change, and in our world, their wealth has 66 00:03:51,680 --> 00:03:55,760 Speaker 3: increased strateg dramatically. There's a lot of wealth that needs 67 00:03:55,800 --> 00:04:00,720 Speaker 3: to be that creates investment demand. A lot of it 68 00:04:00,760 --> 00:04:05,200 Speaker 3: doesn't want to be diversified, and so it's perverse. As 69 00:04:05,200 --> 00:04:07,920 Speaker 3: the stock market's gone up, people have felt a little 70 00:04:08,000 --> 00:04:10,680 Speaker 3: bit more anxious about it and said, well, maybe it's 71 00:04:10,680 --> 00:04:15,480 Speaker 3: time to rebalance. So that's why I recommended rebalancing in 72 00:04:15,520 --> 00:04:18,240 Speaker 3: early December of last year. I actually said it's time 73 00:04:18,279 --> 00:04:21,560 Speaker 3: to underweight the Magnificent Seven because I felt that there 74 00:04:21,600 --> 00:04:25,200 Speaker 3: was too much uncertainty related to their capital spending, their 75 00:04:25,279 --> 00:04:29,280 Speaker 3: rate of return, the arms race that they were engaging in, 76 00:04:29,360 --> 00:04:31,799 Speaker 3: and I did for the first time in many years, 77 00:04:31,800 --> 00:04:36,400 Speaker 3: suggests maybe it's time to look overseas. Maybe I don't 78 00:04:36,440 --> 00:04:41,839 Speaker 3: know safe havens, but there's cheaper havens overseas, and that 79 00:04:42,160 --> 00:04:44,839 Speaker 3: worked out very well last year. I only jumped on 80 00:04:44,960 --> 00:04:47,240 Speaker 3: to it in December, but I think it's going to 81 00:04:47,279 --> 00:04:49,960 Speaker 3: continue to jump to do well. 82 00:04:50,080 --> 00:04:54,560 Speaker 5: Our international stocks a better diversifier than US bonds. 83 00:04:56,560 --> 00:05:01,359 Speaker 3: Well, I'm not going to answer your question with either or. 84 00:05:01,440 --> 00:05:04,640 Speaker 3: I think goal has been the really good diversifier for 85 00:05:04,760 --> 00:05:07,479 Speaker 3: the stock market. If you put the S and P 86 00:05:07,600 --> 00:05:11,240 Speaker 3: five hundred on the same chart as the price of gold, 87 00:05:11,360 --> 00:05:14,839 Speaker 3: same scale, you'll see that they're adversely related on a 88 00:05:14,880 --> 00:05:18,440 Speaker 3: cyclical basis. So it's really gold is a very good diversifier. 89 00:05:18,480 --> 00:05:22,679 Speaker 3: It's inversely correlated with stocks, but the trends are the same. 90 00:05:22,800 --> 00:05:25,720 Speaker 3: So if I'm right and we're still very much in 91 00:05:25,760 --> 00:05:32,280 Speaker 3: a bull market in stocks, just rebalancing diversification is going 92 00:05:32,320 --> 00:05:34,480 Speaker 3: to benefit gold. But I think it's also we're seeing 93 00:05:34,480 --> 00:05:38,120 Speaker 3: here it's benefiting bonds, and it's benefiting emergency markets. 94 00:05:38,120 --> 00:05:38,520 Speaker 4: Look, the. 95 00:05:40,080 --> 00:05:42,560 Speaker 3: MSCI US got to be sixty five percent of the 96 00:05:42,600 --> 00:05:47,200 Speaker 3: market cap of the global MSCI and that's you know, 97 00:05:47,279 --> 00:05:50,400 Speaker 3: it's hard to overweight something that's already so overweight, and 98 00:05:50,440 --> 00:05:54,200 Speaker 3: so that's a good reason for diversifying globally. And a 99 00:05:54,240 --> 00:05:58,880 Speaker 3: similar story can be told about information technology and communication services. 100 00:05:59,120 --> 00:06:01,279 Speaker 3: They got to forty five percent of the market cap 101 00:06:01,320 --> 00:06:04,280 Speaker 3: of the sm P five hundred, and maybe that's hitch 102 00:06:04,360 --> 00:06:07,960 Speaker 3: for a while, and we are seeing rebalancing. So I 103 00:06:08,000 --> 00:06:10,680 Speaker 3: think the rebalancing trade is a sensible one. I would 104 00:06:10,720 --> 00:06:11,320 Speaker 3: stick with it. 105 00:06:11,480 --> 00:06:14,039 Speaker 2: So, ed, what's the argument for the index for the SMP, 106 00:06:14,279 --> 00:06:17,000 Speaker 2: for the market cap sm P five hundred, what's the 107 00:06:17,040 --> 00:06:19,120 Speaker 2: ball case earnings? 108 00:06:19,200 --> 00:06:22,960 Speaker 3: Earnings have been phenomenal and they're going to be you know, 109 00:06:22,960 --> 00:06:25,080 Speaker 3: when all the data comes in for the fourth quarter 110 00:06:25,400 --> 00:06:28,040 Speaker 3: earning reporting season is going to be at an all 111 00:06:28,120 --> 00:06:31,400 Speaker 3: time record high. I thought that we're going to get 112 00:06:31,440 --> 00:06:33,760 Speaker 3: something like three hundred and ten dollars a share for 113 00:06:33,839 --> 00:06:35,839 Speaker 3: the S and P five hundred this year, but the 114 00:06:35,880 --> 00:06:40,159 Speaker 3: analyst already up to about almost three hundred and twenty 115 00:06:40,240 --> 00:06:43,360 Speaker 3: dollars a share. And then for next year, I thought 116 00:06:43,360 --> 00:06:45,880 Speaker 3: three point fifty and the analysts already talking about three 117 00:06:45,960 --> 00:06:50,559 Speaker 3: hundred and sixty. So the analysts are getting pretty pretty 118 00:06:50,560 --> 00:06:54,160 Speaker 3: whipped up about the outlook for earnings. And it's not 119 00:06:54,360 --> 00:06:58,359 Speaker 3: just technology, which I think will continue to be a 120 00:06:58,480 --> 00:07:01,320 Speaker 3: very profitable area, and that was adding the concerns about 121 00:07:01,720 --> 00:07:06,840 Speaker 3: return on capital, but it's broader than that. And not 122 00:07:06,880 --> 00:07:09,479 Speaker 3: only that, but I think the fact that revenues of 123 00:07:09,520 --> 00:07:11,800 Speaker 3: the S and P five hundred all time record I 124 00:07:11,880 --> 00:07:14,680 Speaker 3: speaks to the fact that the global economy is doing 125 00:07:14,760 --> 00:07:18,559 Speaker 3: remarkably well. I mean, it's really quite quite amazing. Given 126 00:07:18,640 --> 00:07:21,360 Speaker 3: the stress tests that the global economy had with the 127 00:07:21,400 --> 00:07:22,320 Speaker 3: tariffs last year. 128 00:07:23,200 --> 00:07:25,600 Speaker 5: Ed you nailed it when you called this the Roaring 129 00:07:25,600 --> 00:07:28,320 Speaker 5: twenty twenties. We're already in twenty twenty six. Does it 130 00:07:28,360 --> 00:07:30,240 Speaker 5: still feel like the Roaring twenties to you or does 131 00:07:30,280 --> 00:07:33,400 Speaker 5: it feel like it's kind of entering its later stages? 132 00:07:35,320 --> 00:07:36,800 Speaker 4: Well, I don't think so. 133 00:07:36,960 --> 00:07:40,240 Speaker 3: I'm already starting to think that, you know, if this 134 00:07:40,320 --> 00:07:43,800 Speaker 3: works out, I'll talk about the Roaring twenty thirties. The 135 00:07:43,880 --> 00:07:46,080 Speaker 3: twenty thirties is going to be a little bit tougher 136 00:07:46,120 --> 00:07:48,040 Speaker 3: because the nineteen thirties were really. 137 00:07:47,800 --> 00:07:49,239 Speaker 4: Just plain ugly. 138 00:07:49,920 --> 00:07:52,680 Speaker 3: But let's stand in the decade that we have right now, 139 00:07:53,120 --> 00:07:56,240 Speaker 3: and as you said, you know, we're we've got a 140 00:07:56,280 --> 00:07:59,440 Speaker 3: few more years into the Roaring twenty twenties. I don't 141 00:07:59,440 --> 00:08:03,640 Speaker 3: think that it's it's showing signs of. 142 00:08:05,080 --> 00:08:05,640 Speaker 4: Fatigue. 143 00:08:05,680 --> 00:08:09,000 Speaker 3: I think the Roaring twenty twenties is still very much intact. 144 00:08:09,080 --> 00:08:12,840 Speaker 3: We've got the economy doing extremely well. Real GDP all 145 00:08:12,880 --> 00:08:17,800 Speaker 3: time record high, consumption spending, all time record high capital spending, 146 00:08:17,800 --> 00:08:22,440 Speaker 3: all time record high. Stock market not too long ago 147 00:08:22,640 --> 00:08:24,960 Speaker 3: was at an all time record high. And I think 148 00:08:25,000 --> 00:08:27,800 Speaker 3: now is just a pullback so I think it's still 149 00:08:27,880 --> 00:08:30,760 Speaker 3: very much their warring twenty twenties, and it's earnings led, 150 00:08:30,840 --> 00:08:32,320 Speaker 3: which is which is a good way. 151 00:08:32,160 --> 00:08:32,800 Speaker 4: To keep it going. 152 00:08:32,880 --> 00:08:35,720 Speaker 3: If it's all valuation, I'd be concerned, But I think 153 00:08:35,720 --> 00:08:41,120 Speaker 3: the fact that earnings are validating this bull market, that's 154 00:08:41,160 --> 00:08:41,640 Speaker 3: a good thing. 155 00:08:42,440 --> 00:08:55,840 Speaker 2: Stay with us. Multpl imperg survenance coming up after this tensions, 156 00:08:55,840 --> 00:08:59,800 Speaker 2: imagine between Anthropic and the Trump administration. Defense Secretary hast 157 00:08:59,840 --> 00:09:02,439 Speaker 2: cansidering cunning ties with the firm and dem we get 158 00:09:02,440 --> 00:09:05,760 Speaker 2: a quote supply chain risk, but disagreements on using its 159 00:09:05,760 --> 00:09:09,080 Speaker 2: aiol cloud. Terry Haynes and Pang your policy joined us. 160 00:09:09,080 --> 00:09:11,240 Speaker 2: Now for more, Terry, do we have a deep understanding 161 00:09:11,280 --> 00:09:12,920 Speaker 2: of the consequences if you get on the wrong side 162 00:09:12,960 --> 00:09:15,120 Speaker 2: of this administration and your attech. 163 00:09:14,840 --> 00:09:19,600 Speaker 6: Firm Under the fabulous world of defense contracting, John Ben, 164 00:09:19,679 --> 00:09:23,520 Speaker 6: welcome Anthropic more and more importantly, you know this strikes 165 00:09:23,520 --> 00:09:26,680 Speaker 6: me as being about two things. One is it's about 166 00:09:27,320 --> 00:09:31,880 Speaker 6: who decides to make the rules to utilize the thing 167 00:09:32,000 --> 00:09:34,960 Speaker 6: that is being provided to the Defense Department, and the 168 00:09:35,000 --> 00:09:38,120 Speaker 6: other is a supply chain issue. I'm not competent to 169 00:09:38,120 --> 00:09:40,160 Speaker 6: talk about the supply chain issue, but I can talk 170 00:09:40,200 --> 00:09:44,240 Speaker 6: about the first issue all day, and the bottom line 171 00:09:44,320 --> 00:09:47,520 Speaker 6: is is that if you want your thing to be 172 00:09:47,640 --> 00:09:49,920 Speaker 6: used by the Defense Department, no matter what the thing is, 173 00:09:49,960 --> 00:09:52,720 Speaker 6: and you've contracted to provide the thing, then you don't 174 00:09:52,720 --> 00:09:57,760 Speaker 6: get to decide how how the Defense Department uses it. 175 00:09:58,080 --> 00:10:01,360 Speaker 6: You know, it might be nice to think or pretend otherwise, 176 00:10:01,360 --> 00:10:03,120 Speaker 6: but that's just not the way that's going to operate. 177 00:10:03,240 --> 00:10:05,920 Speaker 6: So seems to me Anthropic has more of a decision 178 00:10:05,920 --> 00:10:07,720 Speaker 6: to make here than the Defense Department does. 179 00:10:08,200 --> 00:10:08,640 Speaker 4: It felt a. 180 00:10:08,600 --> 00:10:11,520 Speaker 5: Little bit terry, like Anthropics becoming or trying to become 181 00:10:11,600 --> 00:10:14,120 Speaker 5: the anti Palanteer, and they're trying to take lessons some 182 00:10:14,200 --> 00:10:16,960 Speaker 5: of the controversy that Palenteer has invited elsewhere. Is there 183 00:10:16,960 --> 00:10:17,800 Speaker 5: another way to read this? 184 00:10:19,320 --> 00:10:23,120 Speaker 6: Yeah, I think that's I think it's a savvy comment, Lisa. 185 00:10:23,000 --> 00:10:25,400 Speaker 6: You know, you know, it seems to me that a 186 00:10:25,400 --> 00:10:28,680 Speaker 6: lot of this, based on your conversation and what Tyler 187 00:10:28,720 --> 00:10:31,880 Speaker 6: said and your own reporting at Bloomberg, has been a 188 00:10:31,920 --> 00:10:36,400 Speaker 6: lot about internal struggles at Anthropic to define itself more 189 00:10:36,440 --> 00:10:39,600 Speaker 6: than anything else. And as I say, I think they're 190 00:10:39,640 --> 00:10:42,280 Speaker 6: crashing up against the reality of being a major vendor 191 00:10:42,320 --> 00:10:43,439 Speaker 6: to the United States government. 192 00:10:43,679 --> 00:10:46,800 Speaker 5: It feels like there is a lot of angst within 193 00:10:47,160 --> 00:10:50,000 Speaker 5: the walls of anthropic We're hearing about people quitting to 194 00:10:50,040 --> 00:10:52,400 Speaker 5: go write poetry in the UK countryside. But at the 195 00:10:52,440 --> 00:10:55,440 Speaker 5: same time, there is a sort of an angst developing 196 00:10:55,520 --> 00:10:58,920 Speaker 5: in Washington, d C. About how they regulate some of 197 00:10:58,960 --> 00:11:02,360 Speaker 5: these technologies given that a we don't understand fully how 198 00:11:02,360 --> 00:11:04,400 Speaker 5: they're going to iterate what they're going to disrupt and 199 00:11:04,440 --> 00:11:06,600 Speaker 5: what the implication is going to be for the labor market. 200 00:11:06,600 --> 00:11:09,360 Speaker 5: I mean, how much does Bernie Sanders have company on 201 00:11:09,400 --> 00:11:12,040 Speaker 5: the far right of the spectrum based on some of 202 00:11:12,080 --> 00:11:14,160 Speaker 5: the expectations of what AI could. 203 00:11:14,000 --> 00:11:16,199 Speaker 4: Do well A couple of things. 204 00:11:16,440 --> 00:11:16,640 Speaker 5: Uh. 205 00:11:16,800 --> 00:11:19,599 Speaker 6: You know, Bernie Sanders gets treated as a canary in 206 00:11:19,640 --> 00:11:22,160 Speaker 6: the coal mine, Uh, you know a lot of times. 207 00:11:22,840 --> 00:11:26,920 Speaker 6: And at the same time, Bernie Sanders has no legislative accomplishments. 208 00:11:27,559 --> 00:11:31,800 Speaker 6: Bernie Sanders is somebody who you know generally generally agitates 209 00:11:31,800 --> 00:11:33,240 Speaker 6: and points in a particular direction. 210 00:11:33,880 --> 00:11:34,080 Speaker 2: Uh. 211 00:11:34,200 --> 00:11:37,840 Speaker 6: You know, the Democratic Party has got the Democratic Party 212 00:11:37,880 --> 00:11:40,000 Speaker 6: has got a problem here because they're they're going to 213 00:11:40,000 --> 00:11:42,720 Speaker 6: have to figure out whether the Sanders vision or somebody 214 00:11:42,760 --> 00:11:46,480 Speaker 6: else's vision, a more business friendly centric uh uh direction 215 00:11:46,679 --> 00:11:47,920 Speaker 6: is going to be the way that they go. 216 00:11:48,440 --> 00:11:48,960 Speaker 4: Uh. 217 00:11:49,120 --> 00:11:52,320 Speaker 6: That's that's been a perpetual problem since Sanders has been 218 00:11:52,360 --> 00:11:55,000 Speaker 6: a major voice in the party. Uh, you know, it's 219 00:11:55,080 --> 00:11:57,520 Speaker 6: kind of on the administration side, it's been very clear 220 00:11:57,960 --> 00:12:01,400 Speaker 6: they you know, they consider to they consider AI to 221 00:12:01,440 --> 00:12:02,880 Speaker 6: be a core. 222 00:12:04,480 --> 00:12:06,000 Speaker 4: Matter of national security. 223 00:12:06,960 --> 00:12:09,960 Speaker 6: We need to fight and win on all at all costs, 224 00:12:10,400 --> 00:12:14,040 Speaker 6: and they don't particularly care about the consequences. And that's 225 00:12:14,679 --> 00:12:18,240 Speaker 6: very similar I think to the old Manhattan Project days, 226 00:12:18,840 --> 00:12:21,040 Speaker 6: you know, kind of damn the torpedoes. We're going to 227 00:12:21,080 --> 00:12:23,840 Speaker 6: go forward and deal with this and figure it out 228 00:12:23,920 --> 00:12:27,600 Speaker 6: because we've got existential problems if we lose terry. 229 00:12:27,720 --> 00:12:30,760 Speaker 2: Until their jobs are threatened, because this is a democracy. 230 00:12:31,440 --> 00:12:34,240 Speaker 2: TikTok was once a national security threat, and then their 231 00:12:34,320 --> 00:12:36,880 Speaker 2: jobs were threatened, and quickly their minds started to change 232 00:12:37,040 --> 00:12:39,800 Speaker 2: down in Washington, d C. Now, I want to understand 233 00:12:39,840 --> 00:12:41,880 Speaker 2: from you, a man who has lived to breathe Washington 234 00:12:41,880 --> 00:12:45,360 Speaker 2: for decades, what would happen and how they'd respond if 235 00:12:45,400 --> 00:12:48,240 Speaker 2: the Microsoft AI chief is right and what he telled, 236 00:12:48,280 --> 00:12:51,760 Speaker 2: the ft materializes that in the next twelve to eighteen months, 237 00:12:51,760 --> 00:12:54,920 Speaker 2: as quickly as that, we can automate basically all white 238 00:12:54,920 --> 00:12:57,640 Speaker 2: collar jobs, and you started to see the unemployment rate 239 00:12:57,679 --> 00:13:01,480 Speaker 2: go through five and approach six and people leaving university 240 00:13:01,559 --> 00:13:04,040 Speaker 2: like right now they can't get jobs, Terry, How would 241 00:13:04,040 --> 00:13:05,640 Speaker 2: they respond down in Washington? 242 00:13:06,360 --> 00:13:08,040 Speaker 4: Well, I think two things, John. 243 00:13:08,120 --> 00:13:12,120 Speaker 6: One is that you know, putting aside the putting aside 244 00:13:12,200 --> 00:13:17,360 Speaker 6: the self promotion of the Microsoft AI guy. What you know, 245 00:13:17,480 --> 00:13:21,200 Speaker 6: the Washington has two reactions. One is to treat with 246 00:13:21,559 --> 00:13:26,480 Speaker 6: great skepticism whatever the whatever the perceived crisis of the 247 00:13:26,480 --> 00:13:29,480 Speaker 6: moment is in the markets. What Washington sees, frankly, is 248 00:13:29,520 --> 00:13:32,320 Speaker 6: the longer game where there have been huge, huge upticks 249 00:13:32,360 --> 00:13:34,800 Speaker 6: in the markets, and now you see a little bit 250 00:13:34,800 --> 00:13:39,280 Speaker 6: of wobble. You know, Washington saw wobble in tech stocks 251 00:13:39,360 --> 00:13:43,080 Speaker 6: last November for different reasons, but it did. So you know, 252 00:13:43,120 --> 00:13:46,440 Speaker 6: they'll let that play out a little bit. Firstly. Secondly, 253 00:13:46,480 --> 00:13:48,800 Speaker 6: it's going to get a whole lot, a whole lot 254 00:13:48,920 --> 00:13:55,080 Speaker 6: more worse bad, sorry, a whole lot worse before Washington 255 00:13:55,120 --> 00:13:58,480 Speaker 6: reacts at all. And then the playbook always is, you 256 00:13:58,480 --> 00:14:01,040 Speaker 6: know what I view as kind of scraps training programs 257 00:14:01,040 --> 00:14:04,720 Speaker 6: and the like that didn't really move the employment needed 258 00:14:04,800 --> 00:14:08,240 Speaker 6: a lot in the nineties for blue collar jobs. But 259 00:14:08,480 --> 00:14:11,440 Speaker 6: Washington I will tell you, generally speaking, particularly in an 260 00:14:11,440 --> 00:14:14,000 Speaker 6: election year, is not going to shed a single tier 261 00:14:14,080 --> 00:14:18,280 Speaker 6: for white collar jobs going away. That's not beneficial to 262 00:14:18,920 --> 00:14:22,320 Speaker 6: either party, and you know they will look at it 263 00:14:22,320 --> 00:14:24,200 Speaker 6: as an outlier compared to the kind of things that 264 00:14:24,240 --> 00:14:25,760 Speaker 6: happened over the last half century. 265 00:14:26,440 --> 00:14:29,920 Speaker 2: Stay with us more Bloomberg surveillance coming up after this 266 00:14:39,360 --> 00:14:42,720 Speaker 2: AI disruption rippling through markets, with the NASAK one hundred 267 00:14:42,760 --> 00:14:45,800 Speaker 2: coming off three consecutive weeks of declients, Mama qu of 268 00:14:45,840 --> 00:14:48,680 Speaker 2: PSP growth writing the reasons cause in the selloff seems 269 00:14:48,680 --> 00:14:51,080 Speaker 2: to be at odds with each other. Painting all tank 270 00:14:51,120 --> 00:14:53,800 Speaker 2: with a broadbrush is not rational. Mamy joins us. Now 271 00:14:53,800 --> 00:14:55,800 Speaker 2: for more, Mammy, welcome to the program. Let's just take 272 00:14:55,800 --> 00:14:57,720 Speaker 2: it from the top once again and think about what's 273 00:14:57,720 --> 00:15:00,360 Speaker 2: been announced over the past few weeks. A massive map 274 00:15:00,560 --> 00:15:04,240 Speaker 2: of Campex intentions across just four companies, and yet Amphidias 275 00:15:04,240 --> 00:15:08,000 Speaker 2: started to try softer of the past two consecutive weeks. Mammy, 276 00:15:08,040 --> 00:15:09,320 Speaker 2: what do you think is behind that? Why are we 277 00:15:09,400 --> 00:15:12,080 Speaker 2: seeing a decampling from one of the biggest picks and 278 00:15:12,120 --> 00:15:15,320 Speaker 2: shovels and the Campex intentions some of the biggest companies 279 00:15:15,520 --> 00:15:16,160 Speaker 2: on the Planet. 280 00:15:16,680 --> 00:15:17,560 Speaker 7: Yeah, good morning. 281 00:15:18,200 --> 00:15:20,200 Speaker 1: Yeah, there's definitely a lot of fears in the market 282 00:15:20,280 --> 00:15:22,200 Speaker 1: right now, and not everything's really rational. 283 00:15:22,400 --> 00:15:23,960 Speaker 7: So if you look at some of the. 284 00:15:23,880 --> 00:15:28,360 Speaker 1: Main reasons for the cellos last week, in the weeks prior, 285 00:15:28,680 --> 00:15:30,560 Speaker 1: I think some of them are actually at odds with 286 00:15:30,600 --> 00:15:33,360 Speaker 1: one another. You're seeing softness in some of the MAC 287 00:15:33,480 --> 00:15:37,240 Speaker 1: seven due to the massive spending in cab X and 288 00:15:37,560 --> 00:15:40,280 Speaker 1: the concern that maybe those investments are not going to 289 00:15:40,280 --> 00:15:43,240 Speaker 1: make a return. But yet at the same time, software 290 00:15:43,280 --> 00:15:47,160 Speaker 1: stocks are being hit because of the exact Ai disruption. 291 00:15:46,960 --> 00:15:50,400 Speaker 7: That's happening that might threaten them. 292 00:15:50,560 --> 00:15:53,560 Speaker 1: So in my head, those two are actually at odds 293 00:15:53,600 --> 00:15:56,040 Speaker 1: with one another, which makes me think that there's a 294 00:15:56,160 --> 00:15:59,240 Speaker 1: broad fear in the market that's not very irrational. So 295 00:15:59,280 --> 00:16:00,920 Speaker 1: I think if you look at in Video with the 296 00:16:01,000 --> 00:16:05,880 Speaker 1: other bigger companies, there's probably a lot of not rationality 297 00:16:05,920 --> 00:16:08,480 Speaker 1: in those either, in that people might think in Video 298 00:16:08,560 --> 00:16:13,600 Speaker 1: has been overpriced. People are already thinking the promises have 299 00:16:13,640 --> 00:16:14,560 Speaker 1: been made too high. 300 00:16:14,800 --> 00:16:17,960 Speaker 7: So as of now, in VideA can. 301 00:16:18,240 --> 00:16:20,560 Speaker 1: Be earnings, they can do everything right, but yet the 302 00:16:20,600 --> 00:16:22,880 Speaker 1: expectations are so high that the market is not being 303 00:16:23,000 --> 00:16:23,520 Speaker 1: very rational. 304 00:16:23,600 --> 00:16:25,400 Speaker 4: Right now, Let's take those two extremes. 305 00:16:25,480 --> 00:16:27,920 Speaker 2: Either it's going to disrupt everything and crush a lot, 306 00:16:28,200 --> 00:16:30,200 Speaker 2: or it's a waste of money. Do you pick one 307 00:16:30,280 --> 00:16:31,680 Speaker 2: or the other or as there something in between. 308 00:16:32,200 --> 00:16:33,320 Speaker 7: I think it's something in between. 309 00:16:33,560 --> 00:16:36,360 Speaker 1: I think one of the fears that's causing all the 310 00:16:36,480 --> 00:16:39,240 Speaker 1: fear in the market is we think I do think 311 00:16:39,240 --> 00:16:41,240 Speaker 1: there's going to be quite a few losers in the 312 00:16:41,280 --> 00:16:45,520 Speaker 1: AI race. You're not going to have every company become 313 00:16:45,560 --> 00:16:48,200 Speaker 1: the next big giant and AI. But I do think 314 00:16:48,280 --> 00:16:51,240 Speaker 1: painting everything with a broad brush is also not rational. 315 00:16:51,520 --> 00:16:54,360 Speaker 1: If you look at sectors that have more verticalized knowledge, 316 00:16:54,440 --> 00:16:57,440 Speaker 1: that have more verticalized processes, those who are not going 317 00:16:57,440 --> 00:16:59,320 Speaker 1: to be disrupted the same way as the rest of 318 00:16:59,360 --> 00:17:02,120 Speaker 1: the market. For example, we see that pro Core and 319 00:17:02,200 --> 00:17:06,200 Speaker 1: Autodesk has been hit pretty hard in the construction software stock. 320 00:17:06,760 --> 00:17:07,640 Speaker 7: We own two. 321 00:17:07,440 --> 00:17:10,800 Speaker 1: Construction tech companies in our portfolio, Open Space. 322 00:17:10,480 --> 00:17:13,560 Speaker 7: And High Art. They're doing quite well. They're very resilient. 323 00:17:13,880 --> 00:17:16,879 Speaker 1: We're seeing the customers they have general contractors on the 324 00:17:16,960 --> 00:17:20,879 Speaker 1: job sites. Those general contractors working every day is not 325 00:17:21,000 --> 00:17:22,840 Speaker 1: going to all of a sudden wake up and find 326 00:17:22,840 --> 00:17:25,480 Speaker 1: a way to find engineering talent to work with Open 327 00:17:25,520 --> 00:17:29,080 Speaker 1: AI and anthropic and build their own AI tools. So 328 00:17:29,119 --> 00:17:31,320 Speaker 1: we think for some of those industries are going to 329 00:17:31,320 --> 00:17:33,479 Speaker 1: be a little more shielded than the rest of the market, 330 00:17:33,520 --> 00:17:36,280 Speaker 1: and painting them with a broad brush is not rational. 331 00:17:36,600 --> 00:17:38,600 Speaker 5: Well, Mata, how do you know, though, what's rational and 332 00:17:38,680 --> 00:17:40,359 Speaker 5: what's not rational. On one hand, you've got a lot 333 00:17:40,359 --> 00:17:42,800 Speaker 5: of people talking about what you're saying. Who has a 334 00:17:42,880 --> 00:17:46,320 Speaker 5: mote around them that can be protected from AI disruption? 335 00:17:46,400 --> 00:17:48,919 Speaker 5: Then you've got an AI safety researcher over at Anthropic 336 00:17:49,240 --> 00:17:51,240 Speaker 5: quitting and saying that the world is in peril and 337 00:17:51,280 --> 00:17:52,320 Speaker 5: going to write poetry. 338 00:17:52,480 --> 00:17:53,080 Speaker 4: Which is it? 339 00:17:53,280 --> 00:17:55,560 Speaker 1: That's a million dollar question, and I think it's going 340 00:17:55,600 --> 00:17:58,120 Speaker 1: to shake out differently in different parts of the sector. 341 00:17:58,760 --> 00:18:00,280 Speaker 7: Some sectors, as I mentioned, be. 342 00:18:00,240 --> 00:18:04,879 Speaker 1: More resilient and others with more simpler workflows, like you 343 00:18:04,920 --> 00:18:08,560 Speaker 1: see a higher disruption in SACRM and the legal space 344 00:18:08,640 --> 00:18:09,240 Speaker 1: because those. 345 00:18:09,119 --> 00:18:11,920 Speaker 7: Are more structured data. Those are more prone to. 346 00:18:11,880 --> 00:18:15,359 Speaker 1: Disruption with large language models. I think on the safety side, 347 00:18:15,440 --> 00:18:18,320 Speaker 1: that's an interesting trend that we're seeing too. In my head, 348 00:18:18,320 --> 00:18:21,439 Speaker 1: it's actually a maturity of the market, the maturity that 349 00:18:21,480 --> 00:18:23,920 Speaker 1: the market thinks AI is going to be more mainstream 350 00:18:23,960 --> 00:18:28,000 Speaker 1: than before. If something is simply experimental you're not even 351 00:18:28,080 --> 00:18:32,000 Speaker 1: going to have AI researchers at the company's nevermind safety 352 00:18:32,000 --> 00:18:35,320 Speaker 1: researchers that are ringing alarm bells that something needs to 353 00:18:35,320 --> 00:18:37,800 Speaker 1: be done about the guardrails. So I think it's good 354 00:18:38,160 --> 00:18:42,760 Speaker 1: that we're paying more attention to safety and security and regulations. 355 00:18:42,800 --> 00:18:45,000 Speaker 1: And I think those are both the public markets and 356 00:18:45,040 --> 00:18:47,120 Speaker 1: the private markets. Those are the companies that are going 357 00:18:47,160 --> 00:18:48,520 Speaker 1: to show more resilience as well. 358 00:18:48,520 --> 00:18:49,240 Speaker 7: In this market. 359 00:18:49,440 --> 00:18:51,639 Speaker 5: We're seeing more of a focus on safety in the 360 00:18:51,760 --> 00:18:55,439 Speaker 5: United States in particular, also in Europe. How much is 361 00:18:55,480 --> 00:18:58,040 Speaker 5: this a reason that people are going toward Asia tech 362 00:18:58,040 --> 00:19:00,000 Speaker 5: where it seems like there is more of an emphasis 363 00:19:00,160 --> 00:19:02,359 Speaker 5: on growth and less on the potential constraints. 364 00:19:02,840 --> 00:19:04,600 Speaker 7: I think definitely part of the reason. 365 00:19:04,720 --> 00:19:08,280 Speaker 1: And I think you're definitely seeing more activity in Asia 366 00:19:08,359 --> 00:19:12,560 Speaker 1: now right like we're seeing all this activity within India. 367 00:19:12,480 --> 00:19:15,000 Speaker 7: Investing all these dollars in AI. 368 00:19:15,119 --> 00:19:17,120 Speaker 1: So I think safety is one reason, but I also 369 00:19:17,240 --> 00:19:21,000 Speaker 1: think it's momentum. You've seen a lot of activity already 370 00:19:21,040 --> 00:19:25,240 Speaker 1: from the US and the Europe market investing in mainstream AI. 371 00:19:25,440 --> 00:19:29,440 Speaker 1: In Asia, is now all of a sudden announcing that 372 00:19:29,440 --> 00:19:32,840 Speaker 1: you're investing heavily in mainstream AI. So I think it's 373 00:19:32,840 --> 00:19:35,640 Speaker 1: both the safety piece as well as the momentum piece 374 00:19:35,680 --> 00:19:36,240 Speaker 1: that we're seeing. 375 00:19:37,320 --> 00:19:40,879 Speaker 2: This is the Bloomberg Survendons podcast, bringing you the best 376 00:19:40,880 --> 00:19:44,200 Speaker 2: in markets, economics, angio politics. You can watch the show 377 00:19:44,280 --> 00:19:47,199 Speaker 2: live on Bloomberg TV weekday mornings from six am to 378 00:19:47,320 --> 00:19:51,119 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify 379 00:19:51,240 --> 00:19:53,480 Speaker 2: or anywhere else you listen, and as always, on the 380 00:19:53,480 --> 00:19:55,920 Speaker 2: Bloomberg Terminal and the Bloomberg Business app.