1 00:00:02,520 --> 00:00:08,600 Speaker 1: Bloomberg Audio Studios, podcasts, radio News. One of our faith 2 00:00:08,840 --> 00:00:11,600 Speaker 1: guests on these markets is Lisha's Shalott. She's a chief 3 00:00:11,600 --> 00:00:15,600 Speaker 1: investment officer for Morgan Stanley Investment Management. You've heard of them. 4 00:00:15,640 --> 00:00:18,360 Speaker 1: They're pretty good over there. I've competed against in my 5 00:00:18,400 --> 00:00:20,759 Speaker 1: whole career. I had some wins, I had some losses 6 00:00:20,800 --> 00:00:23,560 Speaker 1: over the years, but they're pretty good. Lisa, we got 7 00:00:23,560 --> 00:00:26,040 Speaker 1: to start with gold. I don't know what's going on. 8 00:00:26,120 --> 00:00:27,640 Speaker 1: Do you have any idea what's going on? I mean, 9 00:00:27,640 --> 00:00:28,640 Speaker 1: who's behind this stuff? 10 00:00:29,400 --> 00:00:31,560 Speaker 2: So I don't know if we have an idea, we 11 00:00:31,640 --> 00:00:35,800 Speaker 2: have a hypothesis, right, So, you know, I know, over 12 00:00:35,840 --> 00:00:37,479 Speaker 2: the last couple of weeks, a lot of folks have 13 00:00:37,520 --> 00:00:40,800 Speaker 2: talked about gold as maybe a hedge to some of 14 00:00:40,840 --> 00:00:44,720 Speaker 2: the frauthiness in the equity market, et cetera. But we've really, 15 00:00:44,880 --> 00:00:47,440 Speaker 2: you know, been on this extraordinary run for the past 16 00:00:47,640 --> 00:00:52,239 Speaker 2: quite frankly three years since the bullmarket began in the 17 00:00:52,240 --> 00:00:57,400 Speaker 2: fall of twenty twenty two, with gold massively outperforming stocks. 18 00:00:57,480 --> 00:00:59,640 Speaker 2: And so one of the things that you know, we've 19 00:00:59,680 --> 00:01:03,560 Speaker 2: begun to think about is not just dollar debasement, but 20 00:01:03,680 --> 00:01:07,360 Speaker 2: whether or not folks are really worried about fiat currencies 21 00:01:07,400 --> 00:01:11,680 Speaker 2: more broadly around the world, and as folks really truly 22 00:01:11,800 --> 00:01:16,600 Speaker 2: think about whether or not there is a credible, reliable 23 00:01:16,680 --> 00:01:21,319 Speaker 2: future for stable coins and for crypto whether some of 24 00:01:21,360 --> 00:01:26,920 Speaker 2: this ecosystem needs to collateralize itself with gold away from 25 00:01:27,240 --> 00:01:30,200 Speaker 2: fiat currencies. And so one theory we have is that 26 00:01:30,520 --> 00:01:33,520 Speaker 2: some of these players may be trying to build some 27 00:01:33,600 --> 00:01:35,920 Speaker 2: reserves in the yellow metal. 28 00:01:35,760 --> 00:01:38,679 Speaker 3: Gold massively outperforming stocks. I wanted to go there because 29 00:01:38,680 --> 00:01:40,720 Speaker 3: this is not the correlation that we're accustomed to. And 30 00:01:40,720 --> 00:01:42,840 Speaker 3: as we talk about kind of the uniqueness of this moment, 31 00:01:42,840 --> 00:01:46,200 Speaker 3: perhaps the weirdness of this moment, what does that tell you? 32 00:01:46,280 --> 00:01:47,760 Speaker 3: How does that kind of shape the way that you're 33 00:01:47,800 --> 00:01:48,720 Speaker 3: looking at these markets? 34 00:01:49,120 --> 00:01:53,360 Speaker 2: Well, it really requires some creativity because a lot to 35 00:01:53,400 --> 00:01:57,200 Speaker 2: your point, all of these correlations are breaking down. And 36 00:01:57,240 --> 00:01:59,840 Speaker 2: so one of the hypotheses that we have is that, 37 00:02:01,000 --> 00:02:03,800 Speaker 2: you know, we've got this scenario where, yes, we haven't 38 00:02:03,800 --> 00:02:07,760 Speaker 2: seen inflation in the real economy, but perhaps we're really 39 00:02:07,800 --> 00:02:11,480 Speaker 2: starting to see inflation in financial assets. Just too much 40 00:02:11,560 --> 00:02:16,320 Speaker 2: liquidity from everywhere around the world slashing around looking for 41 00:02:16,400 --> 00:02:21,800 Speaker 2: places to go, and in the everything rally, you know, 42 00:02:21,840 --> 00:02:25,120 Speaker 2: we're seeing you know, folks by you know, everything from 43 00:02:25,160 --> 00:02:28,079 Speaker 2: from gold to stocks, to bonds to currencies. 44 00:02:28,520 --> 00:02:31,240 Speaker 1: I was like this quote in your notes, Lisa Booth. 45 00:02:31,280 --> 00:02:34,720 Speaker 1: Markets are meant to be written, not timed. That's very 46 00:02:34,720 --> 00:02:39,200 Speaker 1: good what we have heard, you know, maybe over the 47 00:02:39,240 --> 00:02:40,880 Speaker 1: last year or two, but really the last two, three, 48 00:02:40,919 --> 00:02:44,639 Speaker 1: four weeks. It's just the concern about AI and it's 49 00:02:44,680 --> 00:02:48,720 Speaker 1: been such a big catalyst for the broader equity markets overall, 50 00:02:48,800 --> 00:02:51,560 Speaker 1: not just the tech space. But now we're starting to 51 00:02:51,560 --> 00:02:55,560 Speaker 1: see some of these circular deals where this company's investing 52 00:02:55,600 --> 00:02:58,160 Speaker 1: in open AI, who's then investing back and buying stuff 53 00:02:58,160 --> 00:03:01,080 Speaker 1: and doing all that kind of circular stuff kind of feels. 54 00:03:00,800 --> 00:03:01,800 Speaker 3: A little odd. 55 00:03:03,160 --> 00:03:05,760 Speaker 1: Is it odd to you? Does it feel frothy to you? 56 00:03:06,200 --> 00:03:06,959 Speaker 1: How do you think about that? 57 00:03:07,240 --> 00:03:13,520 Speaker 2: It does? And you know, for us, whenever these trends 58 00:03:13,600 --> 00:03:17,280 Speaker 2: are transparent and trackable, which they really were for the 59 00:03:17,400 --> 00:03:20,160 Speaker 2: last three or four years, you could say, I see 60 00:03:20,160 --> 00:03:23,519 Speaker 2: the order book, I see the cash flow. I understand 61 00:03:23,520 --> 00:03:26,400 Speaker 2: how they're going to fund these cap X plans. But 62 00:03:26,600 --> 00:03:29,400 Speaker 2: in the literally in the last eight to ten weeks, 63 00:03:30,200 --> 00:03:33,640 Speaker 2: the deal making, the pace of the deal making and 64 00:03:33,680 --> 00:03:38,200 Speaker 2: the interconnectedness of all of it is starting to suggest 65 00:03:38,240 --> 00:03:41,040 Speaker 2: to us that we're getting to that part of the 66 00:03:41,120 --> 00:03:45,480 Speaker 2: cycle where you know, the analysts start making up new terms. 67 00:03:45,560 --> 00:03:50,120 Speaker 2: You know, this RPO and revenue that's been accounted for 68 00:03:50,320 --> 00:03:52,880 Speaker 2: that's still to be accounted for. It, you know, kind 69 00:03:52,920 --> 00:03:57,040 Speaker 2: of hearkens back to the eyeballs and and you know 70 00:03:57,760 --> 00:04:00,880 Speaker 2: some of the words we made up during the peak 71 00:04:00,920 --> 00:04:03,240 Speaker 2: of the Internet. And so what our hope is here 72 00:04:04,080 --> 00:04:07,600 Speaker 2: is that as these deals are rolled out, that the 73 00:04:07,680 --> 00:04:11,560 Speaker 2: companies are making the effort to really help us map 74 00:04:12,000 --> 00:04:15,280 Speaker 2: what is real, what is on the come and what 75 00:04:15,400 --> 00:04:19,719 Speaker 2: is you know, potentially just a promise that could vaporize 76 00:04:19,440 --> 00:04:21,520 Speaker 2: if the demand isn't there. 77 00:04:21,640 --> 00:04:24,799 Speaker 3: As we think about the potential for froth or bubbles, 78 00:04:25,960 --> 00:04:28,200 Speaker 3: what's the time horizon that you're looking at. What's what's 79 00:04:28,240 --> 00:04:30,640 Speaker 3: the time by which these companies have to kind of 80 00:04:30,720 --> 00:04:32,600 Speaker 3: prove find the proof and the putting here that what 81 00:04:32,600 --> 00:04:35,599 Speaker 3: they're doing is actually leading to something that's that's beyond 82 00:04:35,680 --> 00:04:37,679 Speaker 3: just significant cap backs over and over again. 83 00:04:38,000 --> 00:04:41,760 Speaker 2: Yeah, So what we've you know, talked about is how 84 00:04:41,800 --> 00:04:44,800 Speaker 2: critical twenty twenty six is, and probably the second half 85 00:04:44,839 --> 00:04:47,360 Speaker 2: of twenty twenty six. And the reason is because the 86 00:04:47,400 --> 00:04:50,880 Speaker 2: gains that we can really, you know, credibly get from 87 00:04:50,960 --> 00:04:54,600 Speaker 2: multiple expansion. Feels like we're getting to that point of 88 00:04:54,640 --> 00:04:59,279 Speaker 2: exhaustion and earnings need to come through. The controversy is not, 89 00:04:59,800 --> 00:05:03,480 Speaker 2: you know, are their earnings for you know, the hyper scalers. 90 00:05:03,560 --> 00:05:07,400 Speaker 2: I think everyone believes that. The question is are there 91 00:05:07,839 --> 00:05:12,200 Speaker 2: productivity improvements from some of the folks who are implementing 92 00:05:12,960 --> 00:05:16,000 Speaker 2: and and again we're I think we're willing to hold 93 00:05:16,000 --> 00:05:19,039 Speaker 2: our breath for another six to nine months, but I 94 00:05:19,080 --> 00:05:22,720 Speaker 2: think by by next summer, people are going to start saying, hey, 95 00:05:22,720 --> 00:05:23,520 Speaker 2: show me the money. 96 00:05:23,960 --> 00:05:24,600 Speaker 3: Yep, yep. 97 00:05:24,960 --> 00:05:28,279 Speaker 1: How about are there certain sectors that's screening well for 98 00:05:28,320 --> 00:05:30,280 Speaker 1: you guys right now? We're going to stand the best management. 99 00:05:30,800 --> 00:05:33,680 Speaker 2: Yeah, I mean, obviously I need to be careful about uh, 100 00:05:34,080 --> 00:05:36,800 Speaker 2: you know, not talking my book, but you know, our 101 00:05:36,839 --> 00:05:42,040 Speaker 2: favorite sector for the last eighteen months has been financials. Obviously, 102 00:05:42,160 --> 00:05:45,839 Speaker 2: you know, maybe a tough tape to report into this morning, 103 00:05:45,880 --> 00:05:49,280 Speaker 2: but these numbers I think from the sector, you know, 104 00:05:49,320 --> 00:05:52,600 Speaker 2: look reasonably strong to us. They obviously will have the 105 00:05:52,600 --> 00:05:56,200 Speaker 2: tailwind of likely a steeper yield curve next year of 106 00:05:56,279 --> 00:06:01,400 Speaker 2: some uh you know, deregulation in addition to a deal backdrop. 107 00:06:01,480 --> 00:06:04,400 Speaker 2: So I think that that's kind of an ideal environment 108 00:06:04,480 --> 00:06:08,560 Speaker 2: for them, and financials should be a place where we 109 00:06:08,640 --> 00:06:14,120 Speaker 2: start to see stories at least of Jenai implementation driving 110 00:06:14,200 --> 00:06:15,640 Speaker 2: margin expansion. 111 00:06:15,240 --> 00:06:18,040 Speaker 3: At least A few minutes ago, you mentioned dollar strength 112 00:06:18,080 --> 00:06:19,960 Speaker 3: or dollar weakness. I guess it's like glass half fuller 113 00:06:20,320 --> 00:06:23,960 Speaker 3: class empty. But I'm curious how much that has been 114 00:06:24,320 --> 00:06:27,200 Speaker 3: driving your thinking over the last few months. The weekend 115 00:06:27,240 --> 00:06:28,760 Speaker 3: dollar that we've seen, and I look at the Bloomberg 116 00:06:28,800 --> 00:06:30,680 Speaker 3: Dollar Spot Index up a little bit here today, seeing 117 00:06:30,680 --> 00:06:33,160 Speaker 3: a little bit more strength today. But the story has 118 00:06:33,160 --> 00:06:34,719 Speaker 3: been one of a weeker dollar, And how is that 119 00:06:34,760 --> 00:06:36,080 Speaker 3: shaping your view of things? 120 00:06:36,839 --> 00:06:39,400 Speaker 2: It certainly, you know, does play into it. I mean, 121 00:06:39,440 --> 00:06:43,960 Speaker 2: we've had a view that inflation is going to be sticky. 122 00:06:44,760 --> 00:06:47,320 Speaker 2: And what folks need to remember is, while you know 123 00:06:47,400 --> 00:06:51,720 Speaker 2: a weeker dollar can certainly be helpful for the earnings 124 00:06:52,080 --> 00:06:55,120 Speaker 2: dynamics for large multinationals who trade around the world and 125 00:06:55,120 --> 00:07:01,440 Speaker 2: their competitiveness, a weeker dollar actually inhibits our ability to 126 00:07:01,680 --> 00:07:05,880 Speaker 2: effectively price imports. And when you multiply that by tariffs, 127 00:07:06,600 --> 00:07:11,240 Speaker 2: it's actually an even bigger headwind. So, you know, we 128 00:07:11,360 --> 00:07:15,320 Speaker 2: do think that that weeker dollar is relevant to the 129 00:07:15,360 --> 00:07:17,920 Speaker 2: real economy into some of the forecasts here. 130 00:07:18,400 --> 00:07:20,360 Speaker 1: Las, thank you so much for joining us. Really appreciate it. 131 00:07:20,440 --> 00:07:23,760 Speaker 1: Lisa Schallee. She's a chief investment officer for Morgan Stanley 132 00:07:23,960 --> 00:07:25,920 Speaker 1: Investment Management.