WEBVTT - Bloomberg Surveillance TV: October 6th, 2025 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.680 --> 0:00:15.480 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.720 with Lisa Bromwitz and Amrie Hordernt. Join us each day 0:00:18.760 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.960 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.319 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:37.440 Terminal and the Bloomberg Business App. To extend the conversation. 0:00:37.560 --> 0:00:40.640 Joining us now is Jordan Rochester of Mazoo. Jordan, Welcome 0:00:40.680 --> 0:00:42.880 to the program, sir. Let's get into this. This could 0:00:42.880 --> 0:00:44.800 be a big moment, and I think the market's trying 0:00:44.840 --> 0:00:46.760 to work out what kind of moment. Is this an 0:00:46.920 --> 0:00:49.479 r Bay like type moment for the FX market or 0:00:49.560 --> 0:00:52.200 dare I say a trust like moment for the bond market? 0:00:52.320 --> 0:00:55.760 Which one it's not trus but it could be. Is 0:00:56.040 --> 0:00:59.440 what the market's saying. This is sanaomics, This is the 0:00:59.440 --> 0:01:02.080 new Verde of arbonomics, is what the market's thinking. But 0:01:02.120 --> 0:01:04.160 I think John, we need to have some level of 0:01:04.200 --> 0:01:07.919 caution's what politicians say, and there's what they do. And 0:01:08.000 --> 0:01:10.399 what she can do with this current setup is pretty 0:01:10.400 --> 0:01:13.840 difficult because the Arbe Nomics faction, the Arbe faction of 0:01:13.840 --> 0:01:17.320 the LDP is much weaker after a lot of election 0:01:17.560 --> 0:01:20.160 defeats in their seats, so roughly half the size of 0:01:20.200 --> 0:01:22.800 what they were a year ago. So the message we've 0:01:22.800 --> 0:01:24.800 been giving clients just now, this morning and over the 0:01:24.800 --> 0:01:28.200 weekend is that Takeichi whilst she stands for a lot 0:01:28.200 --> 0:01:31.039 of the policies that Arbinomics had, so that would lead 0:01:31.080 --> 0:01:34.200 to looser monetary policy for sure than what should be 0:01:34.200 --> 0:01:36.360 the case, and that would lead to a WEEKI yin 0:01:36.800 --> 0:01:38.960 It's not really clear cut to me, because in order 0:01:39.000 --> 0:01:42.800 to win the LDP election, she needed other factions to 0:01:42.840 --> 0:01:44.880 help her get over the line, and a key part 0:01:44.880 --> 0:01:47.560 of that was the Asso faction, who are more fiscally prudent, 0:01:47.960 --> 0:01:51.000 and the intervention from the former Prime Minister Asso himself 0:01:51.200 --> 0:01:55.240 to arguing to respect of the party member vote where 0:01:55.280 --> 0:01:57.560 Takeichi overwhelmingly. 0:01:56.960 --> 0:01:59.440 Won, is the key reason why she won this weekend. 0:01:59.560 --> 0:02:01.920 But it also means that she'll probably have to point 0:02:01.920 --> 0:02:05.240 appoint a finance minister who might actually see the market 0:02:05.240 --> 0:02:07.880 move the of way, John, we might see the end 0:02:07.960 --> 0:02:09.600 sell off and the sort of long end sell off 0:02:09.600 --> 0:02:12.200 in Jdb's relax a bit once we know who the 0:02:12.240 --> 0:02:15.280 finance minister is, if they are fiscally prudent and a 0:02:15.320 --> 0:02:19.799 sort of continuation candidate for that role from the previous administration. 0:02:20.320 --> 0:02:22.800 Jordan, how high is your conviction level that what she 0:02:22.960 --> 0:02:26.200 does is somewhat different from what she says? Meaning are 0:02:26.200 --> 0:02:28.760 you recommending the clients that they buy the yend here 0:02:29.600 --> 0:02:32.440 with the dollar at one point fifty, surpassing that one 0:02:32.440 --> 0:02:34.919 to fifty level versus the Japanese currency. 0:02:35.880 --> 0:02:38.160 I'd say it depends on the timeline, so medium to high. 0:02:38.560 --> 0:02:41.440 I'd say high conviction that with the current setup in 0:02:41.480 --> 0:02:44.440 the Parliament, the LDP don't have a mandate, they don't 0:02:44.440 --> 0:02:47.320 have a majority, They rely on a coalition part to 0:02:47.360 --> 0:02:49.720 comito that doesn't even get them over the line. So 0:02:49.960 --> 0:02:52.440 they're entering into coalition talks. So I've got a pretty 0:02:52.480 --> 0:02:56.280 high conviction she can't suddenly do very large, bold policies 0:02:56.320 --> 0:02:59.120 because she might lose members of her own party or 0:02:59.360 --> 0:03:03.000 make those code talks quite difficult. For example, the consumption 0:03:03.120 --> 0:03:05.520 tax cut, which is all the talk last time around, 0:03:05.639 --> 0:03:08.200 in the elections last year. When it comes to take 0:03:08.240 --> 0:03:11.239 Eachi's own beyond that watered down significantly. So I don't 0:03:11.240 --> 0:03:14.360 think we're going to have a big fiscal agenda, that is, 0:03:14.919 --> 0:03:16.280 until we see her polling. 0:03:16.840 --> 0:03:18.320 Once we see the polling. 0:03:18.120 --> 0:03:20.560 If the LDP shoots up to something of a forty 0:03:20.600 --> 0:03:24.400 to fifty handle, if you see her own personal ratings improve, 0:03:24.960 --> 0:03:27.600 then we can't rule out elections. And once she if 0:03:27.600 --> 0:03:30.359 that happens, Lisa, if we get an election this time 0:03:31.080 --> 0:03:34.119 or early next year, let's say, then I can't rule 0:03:34.120 --> 0:03:34.560 that out. 0:03:34.680 --> 0:03:36.520 It feels so much different though, even than a Liz 0:03:36.560 --> 0:03:39.320 Trust moment Jordan, or potentially what could become a Liz 0:03:39.360 --> 0:03:42.240 Trust moment, because this is global, this is Japan, this 0:03:42.400 --> 0:03:44.640 is France, this is the United States. For the government 0:03:44.680 --> 0:03:47.560 to shut down, where a lot of governments are showing 0:03:47.600 --> 0:03:50.680 a real reluctance to climb down on deficits that have 0:03:50.760 --> 0:03:51.400 been climbing. 0:03:51.600 --> 0:03:54.400 They want to still lean on that deficit lever. 0:03:54.280 --> 0:03:56.920 Which is the reason why you see bond yields creeping higher, 0:03:56.920 --> 0:03:59.760 particularly in the thirty year denomination. At what point does 0:03:59.800 --> 0:04:02.360 the collective story taken on a life of its own. 0:04:03.480 --> 0:04:05.640 It already is I think it is happening right now. 0:04:05.680 --> 0:04:08.200 So as you mentioned, the US with its own fiscal issuance, 0:04:08.240 --> 0:04:10.840 Germany with its own fiscal issuance, and now France of 0:04:10.880 --> 0:04:13.360 course has been with the largest death sit in the 0:04:13.720 --> 0:04:16.320 euro area or flagging that point. So the only one 0:04:16.360 --> 0:04:18.440 that stands out as not actually joining in with the 0:04:18.440 --> 0:04:21.120 party is the UK because of the fiscal rules that 0:04:21.120 --> 0:04:23.960 the chance has thrown on themselves. But Japan is very 0:04:23.960 --> 0:04:26.640 acutely aware of this problem. The Ministry of Finance has 0:04:26.680 --> 0:04:28.880 been reducing the auction sizes in the long end to 0:04:28.920 --> 0:04:32.000 try and deal with that. But what's changed in the 0:04:32.040 --> 0:04:35.159 sort of functioning of the Japanese JGB market is the 0:04:35.200 --> 0:04:38.560 demand from life insurance insurers for long end jgbs has 0:04:38.600 --> 0:04:41.359 collapsed versus what it used to be. And actually the 0:04:41.400 --> 0:04:44.200 majority of the trading volumes in jgbs from the ten 0:04:44.279 --> 0:04:47.480 year onwards is from foreigners, and so this means that 0:04:47.560 --> 0:04:49.400 you get these sort of big moves as you've seen 0:04:49.440 --> 0:04:52.479 today thanks to foreigners being the overwhelmingly large share of 0:04:52.520 --> 0:04:56.400 trading volume in ultra long end jgb's, but also around 0:04:56.400 --> 0:04:59.280 the tenure bucket onwards as well. So all in all, 0:04:59.400 --> 0:05:02.280 when everyone's suing at the same time, something will break. 0:05:02.680 --> 0:05:05.080 I'm not sure how when politicians will take note, but 0:05:05.080 --> 0:05:06.919 I think they are already, and I think that's why 0:05:07.120 --> 0:05:10.920 the LDP's fiscal prudence wing has played a large influence 0:05:11.120 --> 0:05:13.520 in Takhi's changed in her opinions Jordan. 0:05:13.600 --> 0:05:15.760 In addition to that, the role of the central bank, 0:05:15.800 --> 0:05:17.120 I think there's a big question up in the air 0:05:17.160 --> 0:05:19.680 about that, so let's discuss it. Traditionally, if this was 0:05:19.720 --> 0:05:22.560 the United States, we'd be talking about a pro fiscal 0:05:22.640 --> 0:05:26.000 stimulus party or leader. We'd be talking about title monetary 0:05:26.040 --> 0:05:28.480 policy to offset some of dan. That wasn't a conversation 0:05:28.520 --> 0:05:31.480 in Japan overnight. In fact, the pricing of rate hikes 0:05:31.520 --> 0:05:34.240 in the future actually came in now Jord And I wonder, 0:05:34.680 --> 0:05:37.800 is this really a unique independent central bank? What is 0:05:37.839 --> 0:05:40.240 going on with a central bank story in the relationship 0:05:40.240 --> 0:05:41.800 between the government and the BOJ. 0:05:42.800 --> 0:05:45.960 All these independent central banks all they are, for example, 0:05:46.000 --> 0:05:47.640 the FED, they answer to Congress, so there is a 0:05:47.680 --> 0:05:49.839 political sort of influence on all of them. 0:05:50.360 --> 0:05:51.880 A Bank of England, ECB, etc. 0:05:52.520 --> 0:05:55.040 When it comes to the BOJ, there is a pretty 0:05:55.080 --> 0:05:58.640 strong level of political cooperation. It's written into the bank 0:05:58.680 --> 0:06:02.680 Coajapan's charter. Now this we've seen this before. Arbenomics is 0:06:02.720 --> 0:06:05.760 a clear case of this, where most people assume that 0:06:05.880 --> 0:06:09.040 Arbenomics was both fiscal easing and monetary Sure, it was, 0:06:09.240 --> 0:06:12.719 but Arbenenomics actually leaned heavily on the monetary policy side 0:06:13.000 --> 0:06:15.440 of that story, and we saw the Bank Japan expand 0:06:15.440 --> 0:06:18.600 the QE and so forth, eventually going negative rates too. 0:06:18.960 --> 0:06:21.320 So there is the potential for Takeiachi to play a 0:06:21.360 --> 0:06:23.760 large role. If you think back to last year, Prime 0:06:23.760 --> 0:06:26.719 Minister sheba this history behind this. John one day after 0:06:26.760 --> 0:06:28.840 becoming Prime minister, he said now is probably not the 0:06:28.920 --> 0:06:31.160 right time for the BOJA to raise rates, and they 0:06:31.200 --> 0:06:34.839 delayed that rate hike from October through to January. 0:06:35.040 --> 0:06:36.720 So tak Each you might say the same thing. 0:06:37.400 --> 0:06:39.279 We've only had one tweet from her and one victory 0:06:39.320 --> 0:06:42.000 speech so far, and so we haven't got enough information. 0:06:42.120 --> 0:06:44.520 But what I will say is it's very different to Arbonomics. 0:06:44.520 --> 0:06:47.359 When inflation was that near zero. Inflation has been above 0:06:47.360 --> 0:06:49.239 two for the past two to three years in Japan, 0:06:49.480 --> 0:06:51.080 and the aim of this government is to try and 0:06:51.080 --> 0:06:54.360 bring inflation down. You don't really achieve that by stopping 0:06:54.360 --> 0:06:56.520 the Bank Japan from raising rates, So John, I think 0:06:56.680 --> 0:06:57.800 they still raise rates. 0:06:58.000 --> 0:06:59.680 October is clearly. 0:06:59.440 --> 0:07:01.680 Much less likely now because the BOJ might want to 0:07:01.680 --> 0:07:03.760 wait and see what the budget will be. So that 0:07:03.839 --> 0:07:07.200 makes December or January still live meetings. But if you're 0:07:07.200 --> 0:07:09.400 to ask me, John, I'd be paid the October meeting. 0:07:09.680 --> 0:07:11.600 I think the risk reward is still there. The Bank 0:07:11.640 --> 0:07:14.520 Japan has lined up loads of speeches this month. We'll 0:07:14.520 --> 0:07:16.520 hear from Governor you Wade to himself later this week 0:07:16.560 --> 0:07:19.840 as well. The data is strong in Japan. It all 0:07:19.840 --> 0:07:22.040 adds up to a rate hike. John, Apart from the 0:07:22.080 --> 0:07:24.239 politics and the uncertainty. 0:07:25.080 --> 0:07:25.720 Stay with us. 0:07:26.040 --> 0:07:38.640 More Bloomberg surveillance coming up after this. Another week of 0:07:38.680 --> 0:07:41.360 economic data at risk as the government shut down enters 0:07:41.440 --> 0:07:44.679 it's sixth day. Paul Donovan of UBS Global Wealth Management 0:07:44.720 --> 0:07:47.280 right in the following. The problem is that alternatives like 0:07:47.360 --> 0:07:50.520 sentiment surveys are even worse, and that's all the markets 0:07:50.560 --> 0:07:52.480 will be left to work with. Paul joined us now 0:07:52.480 --> 0:07:54.480 for more. Paul, you're one of our favorites. It's great 0:07:54.480 --> 0:07:57.360 to finally catch up with you after a period of time. Paul, 0:07:57.400 --> 0:07:59.400 I wanted to get your opinion on this. I've heard 0:07:59.400 --> 0:08:02.200 a lot of people's say, we're flying blind without the data. 0:08:02.280 --> 0:08:03.679 Were we flying blind already? 0:08:05.240 --> 0:08:08.320 We were flying blind, we were perhaps flying quite a 0:08:08.360 --> 0:08:13.360 thick fog. So for about fifteen years, economists have been 0:08:13.800 --> 0:08:18.360 complaining about the deteriorating quality of economic data. Nobody fills 0:08:18.360 --> 0:08:23.320 in surveys anymore. Structural change means that we're missing parts 0:08:23.360 --> 0:08:25.680 of the economy. You know, where in the employment report 0:08:25.760 --> 0:08:29.880 is the TikTok content creator and parties and bias. The 0:08:29.920 --> 0:08:33.160 political bias in the States is getting extreme, and people 0:08:33.160 --> 0:08:36.640 are answering according to their political views, not according to 0:08:37.000 --> 0:08:39.800 what's happening actually happening in their lives. So we've had 0:08:39.800 --> 0:08:43.679 this problem for some time. But the official data did 0:08:44.120 --> 0:08:46.440 the best of a bad job. It did the best 0:08:46.480 --> 0:08:50.200 that it could in order to filter out some of 0:08:50.240 --> 0:08:52.800 this noise and give us an idea about where the 0:08:52.880 --> 0:08:55.120 economy was performing in real time. 0:08:55.480 --> 0:08:56.240 So how does it. 0:08:56.240 --> 0:08:59.079 Change going forward that we don't even have that right 0:08:59.200 --> 0:09:02.520 that we end up in the realm of speculation and 0:09:02.679 --> 0:09:04.800 rumor at a time where people just take all of that, 0:09:04.840 --> 0:09:06.400 put it together and say, well, stocks have to just 0:09:06.480 --> 0:09:07.120 keep going up. 0:09:08.320 --> 0:09:10.440 So this is where I think things do start to 0:09:10.440 --> 0:09:13.760 get tricky. Pads a little bit less for the equity 0:09:13.840 --> 0:09:17.600 market than for the bond market. Because of course, corporate data, 0:09:18.160 --> 0:09:20.800 as long as companies are honest, is going to be 0:09:21.000 --> 0:09:24.480 still reliable. So the earnings reports that come out, the 0:09:24.520 --> 0:09:27.520 corporate announcements that are legally obliged the companies are legally 0:09:27.559 --> 0:09:30.240 obliged to put out, that should all be okay. But 0:09:30.400 --> 0:09:33.480 the bigger macro picture is getting more confused, and some 0:09:33.559 --> 0:09:37.360 of it is reliant on what we're seeing elsewhere in 0:09:37.360 --> 0:09:40.320 the world. You know, how do we judge US trade data? Well, 0:09:40.400 --> 0:09:42.680 let's see what other countries are saying when they're talking 0:09:42.720 --> 0:09:45.000 about exports to the States, for example, we're having to 0:09:45.000 --> 0:09:47.440 back out data some of the time. 0:09:48.360 --> 0:09:50.400 You made a really good point, Paul in your recent 0:09:50.480 --> 0:09:53.120 notes that right now the market is treating the shutdown 0:09:53.200 --> 0:09:57.200 it's going on in Washington, DC as negligible, something that 0:09:57.280 --> 0:09:59.200 will maybe cause a loss of economic activity. 0:09:59.240 --> 0:10:00.599 It will just be hooped. 0:10:00.320 --> 0:10:04.120 Potentially in a couple weeks, in months time. Why do 0:10:04.200 --> 0:10:06.200 you think this time really could be different? 0:10:07.600 --> 0:10:09.840 So as a baseline, I don't think it is going 0:10:09.920 --> 0:10:12.440 to be different. We get this with every shutdown, you 0:10:12.520 --> 0:10:18.280 get a period where data economic activity is suppressed and 0:10:18.280 --> 0:10:22.160 then you get a period where you rebound, the back 0:10:22.200 --> 0:10:25.800 pay is paid back, that kind of thing. The only 0:10:25.960 --> 0:10:29.520 real difference this time is that US President Trump has 0:10:30.120 --> 0:10:34.559 talked about possibly firing some more government employees. 0:10:34.800 --> 0:10:35.400 Now that is. 0:10:35.400 --> 0:10:38.680 Different because then, of course you're not getting the rebound 0:10:38.760 --> 0:10:42.840 from those employees. You are also potentially creating some fear 0:10:42.880 --> 0:10:47.319 of unemployment amongst people both in and outside the government sector. 0:10:47.720 --> 0:10:51.560 That would be a more troubling situation because you would 0:10:51.559 --> 0:10:54.840 get the slowdown, but the rebound that we normally would 0:10:54.880 --> 0:10:57.840 see would be a lot more muted. I would regard 0:10:57.880 --> 0:10:59.560 that very much as the risk case, not as the 0:10:59.559 --> 0:11:01.680 base case. The base case, I think is this is 0:11:01.679 --> 0:11:04.079 going to be like every other shutdown, you know, down 0:11:04.080 --> 0:11:06.360 in week one, up in week two, that kind of thing. 0:11:06.600 --> 0:11:11.079 But there is that risk if some employees are going 0:11:11.120 --> 0:11:13.840 to lose their jobs permanently as a result of the shutdown. 0:11:14.000 --> 0:11:16.040 Paul, I think we all hope you're absolutely right and 0:11:16.080 --> 0:11:17.640 we do bounce back and just get back to work, 0:11:17.640 --> 0:11:19.840 get back to business, and this economy grows. The other 0:11:19.880 --> 0:11:21.920 thing we wanted to talk to you about was inflation, 0:11:22.440 --> 0:11:25.840 market based expectations of inflation, how the FED measures things, 0:11:25.920 --> 0:11:28.800 and ultimately how consumers experience it. Paul, I've heard you 0:11:28.840 --> 0:11:31.560 in the past talk about frequency bias. Could you explain 0:11:31.600 --> 0:11:34.560 that as a concept in economics and why that's important 0:11:34.559 --> 0:11:38.320 to the difference between how consumers feel and what the 0:11:38.360 --> 0:11:39.199 FED is tracking. 0:11:40.760 --> 0:11:42.840 So this is a very important point. 0:11:43.040 --> 0:11:47.560 Everybody is guilty of frequency bias. That is to say, 0:11:47.760 --> 0:11:49.960 you know, you remember the price is the Snickers bar 0:11:50.120 --> 0:11:52.840 you buy every day. You do not remember the price 0:11:52.880 --> 0:11:56.400 of a television you buy every three, four or five years. 0:11:56.880 --> 0:12:01.160 And so as a result, when prices change in high 0:12:01.240 --> 0:12:04.480 frequency purchases, it sort of sticks in your mind. And 0:12:04.640 --> 0:12:07.720 every time I go to the vending machine at work, 0:12:07.760 --> 0:12:09.760 I think, oh, that price has gone up. I remember 0:12:09.800 --> 0:12:12.160 when it used to cost seventy pence and now it's 0:12:12.160 --> 0:12:14.720 costing me ninety pence, And it sticks in your mind, 0:12:15.240 --> 0:12:19.760 and that then colors the view of inflation that you have. 0:12:20.240 --> 0:12:23.880 The fact that the television is twenty percent cheaper than 0:12:24.120 --> 0:12:26.320 the last one you bought seven years ago, you don't 0:12:26.360 --> 0:12:28.960 remember that because you can't remember what you paid in 0:12:29.000 --> 0:12:29.480 the past. 0:12:29.840 --> 0:12:31.520 So the problem that. 0:12:31.440 --> 0:12:35.319 We have is that when you see basically rising food 0:12:35.480 --> 0:12:40.240 and rising fuel prices, those are prices that consumers will 0:12:40.280 --> 0:12:44.000 remember and that will create a sense of dissatisfaction when 0:12:44.040 --> 0:12:47.480 you have food and fuel inflation. If you have an 0:12:47.520 --> 0:12:51.840 overall fairly benign inflation environment and there's something weird going 0:12:51.840 --> 0:12:55.680 on with food supply, that can create a peculiar situation 0:12:55.800 --> 0:12:58.200 where the central banker is saying, no, inflation isn't a 0:12:58.240 --> 0:13:00.559 problem at all, and the consumer saying, no, the cost 0:13:00.600 --> 0:13:02.240 of living goes up. Look how much I had to 0:13:02.280 --> 0:13:06.439 pay the supermarket this week. So that's really the issue. 0:13:06.280 --> 0:13:08.680 Paul, is that the situation now is that how you 0:13:08.800 --> 0:13:11.480 describe things and does it shape consumer behavior? 0:13:12.720 --> 0:13:14.600 Well, what we've got at the moment, it's quite interesting. 0:13:14.600 --> 0:13:17.319 It's sort of a reverse of what happened under the 0:13:17.400 --> 0:13:21.000 last administration. So in the last administration, inflation was coming down, 0:13:21.240 --> 0:13:25.520 nobody really believed it because food price inflation was very high. 0:13:25.559 --> 0:13:29.439 There was an episode of profit led inflation from food retail. 0:13:30.080 --> 0:13:34.360 What has been happening this year until recently, his fuel 0:13:34.400 --> 0:13:39.240 prices have been subdued. Food prices until recently have not 0:13:39.320 --> 0:13:42.880 been a particularly big problem, but durable goods prices have 0:13:42.960 --> 0:13:46.760 gone from falling to rising. And so you've got the 0:13:46.800 --> 0:13:49.080 reverse problem there that you've got inflation that people are 0:13:49.120 --> 0:13:50.679 not necessarily. 0:13:50.080 --> 0:13:50.880 So aware of. 0:13:51.200 --> 0:13:53.880 But what we've been seeing more recently in the States 0:13:54.120 --> 0:13:57.120 is food price inflation has been ticking up. Things like 0:13:57.160 --> 0:13:59.960 the price of beef, for example, has gone up very 0:14:00.200 --> 0:14:04.400 very dramatically. Coffee prices are soaring, and that is going 0:14:04.440 --> 0:14:07.920 to be more visible. So I think the noise from 0:14:08.000 --> 0:14:13.240 consumers about inflation, the political anxiety about inflation is likely 0:14:13.280 --> 0:14:15.920 to be ramping up as we see these higher food 0:14:15.920 --> 0:14:17.320 prices starting to emerge. 0:14:18.880 --> 0:14:22.560 Stay with us more Bloomberg Surveillance coming up after this. 0:14:31.600 --> 0:14:32.400 Sick in wit tech. 0:14:32.600 --> 0:14:35.160 Jake Goldberg of Seaport calling the recent moves in AI 0:14:35.600 --> 0:14:40.040 bubble like behavior. Jake Goldberg joins us now for more. Jay, 0:14:40.040 --> 0:14:42.320 Welcome to the program, sir. You've got a rare soar 0:14:42.400 --> 0:14:45.560 rating on Nvidia. Let's just talk about that line bubble 0:14:45.760 --> 0:14:49.680 like behavior. Does the announcement from AMD and open Ai 0:14:49.960 --> 0:14:51.000 speak to some of that for you? 0:14:51.920 --> 0:14:55.120 Absolutely, It's quite an interesting thing to wake up to 0:14:55.240 --> 0:14:58.560 this morning. We have a company that's giving away ten 0:14:58.560 --> 0:15:02.520 percent of its start to to a startup that doesn't 0:15:02.560 --> 0:15:05.400 have positive free cash flow to buy tens. 0:15:05.200 --> 0:15:06.520 Of billions of dollars of their products. 0:15:06.520 --> 0:15:09.400 Somewhere down the line, and that company's stock is up 0:15:09.440 --> 0:15:13.360 thirty percent. You know, on the face of it, I 0:15:13.360 --> 0:15:14.800 haven't had time to parse it, but it looks like 0:15:14.840 --> 0:15:17.920 a great, good deal for AMD over the long term. 0:15:18.640 --> 0:15:23.800 But it just, you know, the market reaction seems to 0:15:23.880 --> 0:15:27.880 be looking at only the positives and applying a zero 0:15:27.880 --> 0:15:31.160 percent discount rate to future events, not looking through the 0:15:31.160 --> 0:15:31.600 whole deal. 0:15:31.920 --> 0:15:34.200 At the same time, Jay, in the past, we've seen 0:15:34.560 --> 0:15:38.000 earnings outperform again and again and again from these companies, 0:15:38.040 --> 0:15:39.680 and a lot of people will come on and say, 0:15:40.040 --> 0:15:44.880 if you look at the price to the actual income level, 0:15:45.200 --> 0:15:47.800 you've seen multiples come down, not go up, even with 0:15:47.880 --> 0:15:51.280 prices going up significantly. What about that story doesn't work 0:15:51.320 --> 0:15:53.000 for you in the same way that it did, say 0:15:53.240 --> 0:15:54.000 three years ago. 0:15:55.120 --> 0:15:59.720 So I think, Look, I'm not a bear on AI 0:15:59.840 --> 0:16:01.880 and general. I think AI has the potential to be 0:16:02.000 --> 0:16:05.520 very important. But no technology gets adopted in a straight line. 0:16:06.200 --> 0:16:08.920 They're always going to be fits and starts. We saw 0:16:08.960 --> 0:16:12.040 that with the Internet, we saw that with with mobile. 0:16:12.160 --> 0:16:14.080 These things go up and down, they don't just keep 0:16:14.120 --> 0:16:18.640 running forever. And I think just assuming drawing straight lines, 0:16:18.720 --> 0:16:21.600 extrapolating from where we are today into some sort of 0:16:21.640 --> 0:16:22.560 never ending future. 0:16:23.800 --> 0:16:24.960 That's not how things are going to work. 0:16:25.000 --> 0:16:28.320 And I think we need just a little degree of 0:16:28.800 --> 0:16:31.240 caution around some of this stuff, where a lot of 0:16:31.240 --> 0:16:36.280 these things are getting very extended, just based on what 0:16:36.400 --> 0:16:39.280 the actual deployments are looking like and returns that the 0:16:39.360 --> 0:16:41.480 hyperscalers are getting on their investments. 0:16:41.720 --> 0:16:43.800 What do you think is the most speculative at this point, Jay, 0:16:43.800 --> 0:16:45.680 I know that your call is on in Video, which 0:16:45.720 --> 0:16:48.880 is notable given all of the buy ratings that we 0:16:48.920 --> 0:16:51.320 see on it, But beyond that is in Vidia the 0:16:51.320 --> 0:16:52.840 biggest defender right now in your mind? 0:16:53.600 --> 0:16:54.960 Well, I think the whole thing. 0:16:55.920 --> 0:16:58.760 We have this sort of massive AI spend taking place 0:16:58.840 --> 0:17:01.240 right now, but if you boil it all down, it's 0:17:01.280 --> 0:17:07.560 really six companies that are driving all of that. Microsoft, Amazon, Google, Meta, 0:17:07.920 --> 0:17:10.480 open Ai, Microsoft, and. 0:17:12.000 --> 0:17:14.440 I understand that their. 0:17:13.920 --> 0:17:16.800 Imperatives and why they're doing this, but I think it 0:17:16.920 --> 0:17:21.960 is worth reflecting on that it's just six companies and 0:17:22.200 --> 0:17:25.760 none of them actually have a very clear return on 0:17:25.800 --> 0:17:28.520 their investment even in the works. They're sort of spending 0:17:28.520 --> 0:17:31.280 it because everyone else is spending. And then you have 0:17:31.320 --> 0:17:35.640 open Ai, who who is an incredibly capable company coming 0:17:35.640 --> 0:17:38.000 with great models, but at the same time, you know 0:17:38.000 --> 0:17:41.280 they're free, casual, and negative. So I think that sort 0:17:41.320 --> 0:17:43.440 of calls in the question the sustainability of all this. 0:17:43.640 --> 0:17:47.760 And J's bringing in multiple sectors. It's energy, it's the 0:17:47.800 --> 0:17:51.520 capital providers, it's tech. I know based on some of 0:17:51.560 --> 0:17:54.160 your writing that you think this could exacerbate problems further 0:17:54.200 --> 0:17:55.680 down the road. Could you build on that just a 0:17:55.720 --> 0:17:59.240 little bit, that the concentration exacerbates the downside risk. 0:18:00.119 --> 0:18:01.880 I think that's that's absolutely the case. 0:18:01.920 --> 0:18:04.040 Where you know, when I hear my colleagues on the 0:18:04.040 --> 0:18:09.040 morning call talk about energy and pipelines and materials, you know, 0:18:09.640 --> 0:18:12.200 and they all talk about the AI element to their 0:18:12.359 --> 0:18:15.000 stocks growth, that just makes me pause. Like I've been 0:18:15.000 --> 0:18:18.720 covering semiconductors for over twenty years now, and I've always 0:18:18.720 --> 0:18:20.800 had good relationships with my peers, but we usually never 0:18:20.800 --> 0:18:22.520 talk about each other's stocks. There's never been a lot 0:18:22.560 --> 0:18:26.800 of overlap, and here we have everybody talking about the 0:18:27.760 --> 0:18:28.480 same themes. 0:18:29.040 --> 0:18:31.200 It makes me wonder, Jane. 0:18:31.200 --> 0:18:33.959 The energy piece of it is interesting. There has been 0:18:33.960 --> 0:18:37.040 a broader conversation people acknowledge the potential for constraints. Do 0:18:37.080 --> 0:18:39.280 you think that's going to be the first constraint the 0:18:39.320 --> 0:18:40.840 thing that shakes this up quickly. 0:18:41.640 --> 0:18:44.040 Absolutely right, I mean, and I look at in video 0:18:44.119 --> 0:18:46.000 like I'm cautious on in video. I think if my 0:18:46.320 --> 0:18:48.360 rating here is more of an underperformed than a cell, 0:18:48.400 --> 0:18:52.399 I wouldn't short in video. But the issue is at 0:18:52.400 --> 0:18:54.840 this point in videos is kind of all the good 0:18:54.840 --> 0:18:56.760 news is priced into in video and none of the 0:18:56.760 --> 0:18:59.199 potential downside is priced in. There are a lot of 0:18:59.200 --> 0:19:02.000 things that can go go wrong that are beyond their control, 0:19:02.600 --> 0:19:04.840 and you know top of that list is electricity. 0:19:05.359 --> 0:19:05.560 Right. 0:19:05.800 --> 0:19:07.960 We don't know to the extent to which Open Aye 0:19:08.040 --> 0:19:09.440 is going to be able to deliver on all these 0:19:09.960 --> 0:19:13.280 all these electricity numbers they put out there, and like 0:19:13.320 --> 0:19:16.480 in just the last week they've talked about adding sixteen 0:19:16.520 --> 0:19:21.480 gigawatts of compute capacity. I don't think anyone knows exactly 0:19:21.480 --> 0:19:23.000 where all that power is going to come from. They 0:19:23.000 --> 0:19:25.879 have maybe some rough ideas, but I don't think all 0:19:25.920 --> 0:19:28.640 those are are a lock and that that's a real 0:19:28.760 --> 0:19:30.359 that's a real problem. I think it's going to pause 0:19:30.440 --> 0:19:33.280 things somewhere down the road, Jay, how far are. 0:19:33.160 --> 0:19:36.680 We from some sort of energy related constraint on how 0:19:36.800 --> 0:19:40.160 much the promises of expansion can really meet reality. 0:19:40.920 --> 0:19:44.520 I think it's a little a little beyond my my scope, 0:19:44.720 --> 0:19:48.479 like I'm just a humble semiconductor analyst, But I do 0:19:48.480 --> 0:19:50.520 think we start to see more concerned about that in 0:19:50.640 --> 0:19:51.120 next year. 0:19:52.520 --> 0:19:54.760 At what point do you see this also being a 0:19:54.840 --> 0:19:57.920 question of the US versus China, especially given deep seek 0:19:57.960 --> 0:20:01.000