1 00:00:02,360 --> 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 Hordernt. 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 --> 00:00:36,959 Speaker 2: Terminal and the Bloomberg Business app. We begin this hour 10 00:00:36,960 --> 00:00:39,599 Speaker 2: with stocks pulling back after snapping a three day slide. 11 00:00:39,680 --> 00:00:43,040 Speaker 2: Max Kanner of HSBC suggesting warning signs of building. He 12 00:00:43,120 --> 00:00:45,640 Speaker 2: writes the following, it may well be time to reduce 13 00:00:45,720 --> 00:00:49,720 Speaker 2: risk in portfolios after the pea cerning season in two 14 00:00:49,760 --> 00:00:52,320 Speaker 2: weeks time, Max joins us. Now for more, Max, Welcome 15 00:00:52,360 --> 00:00:55,320 Speaker 2: to the program, Buddy. This one surprised me. Hello, I 16 00:00:55,360 --> 00:00:57,600 Speaker 2: get your research every week. I was going through the 17 00:00:57,640 --> 00:01:00,280 Speaker 2: note and I'm always looking for it. When is Max 18 00:01:00,680 --> 00:01:04,320 Speaker 2: turning less bullish? This note came really really close. Max. 19 00:01:04,319 --> 00:01:04,919 Speaker 1: What's changed? 20 00:01:06,720 --> 00:01:08,200 Speaker 3: I think there's a couple of things that changed. Now 21 00:01:08,240 --> 00:01:09,920 Speaker 3: when we look at the price action just the last 22 00:01:09,959 --> 00:01:13,600 Speaker 3: six seven weeks. Of course, that's been largely the Semion wine. 23 00:01:13,600 --> 00:01:15,560 Speaker 3: So let's be honest. If you had told me semis 24 00:01:15,560 --> 00:01:18,560 Speaker 3: are going to go down into actually a bear market 25 00:01:18,680 --> 00:01:22,679 Speaker 3: and the overall SMP is actually flat, I would have 26 00:01:22,720 --> 00:01:25,160 Speaker 3: taken it any day. So that still looks pretty good. 27 00:01:25,160 --> 00:01:28,440 Speaker 3: But we've got to face it that actually outside of that, 28 00:01:28,480 --> 00:01:31,480 Speaker 3: the rest of the SP isn't yet participating so much. 29 00:01:31,760 --> 00:01:34,560 Speaker 3: So I would say now with peak earning season coming 30 00:01:34,920 --> 00:01:37,720 Speaker 3: in the next to the two weeks, there's two possibilities. 31 00:01:37,760 --> 00:01:41,679 Speaker 3: Either the earning season propels us even higher, particularly from 32 00:01:41,680 --> 00:01:45,160 Speaker 3: a broad based perspective, so the equal weight SMP really 33 00:01:45,200 --> 00:01:49,000 Speaker 3: performing well that means things like breadth measures, like things 34 00:01:49,040 --> 00:01:51,760 Speaker 3: like members of the SP above fifty or two a 35 00:01:51,800 --> 00:01:55,040 Speaker 3: day moving averages that really going to the highest from 36 00:01:55,120 --> 00:01:57,440 Speaker 3: where we were in twenty twenty three and twenty twenty four. 37 00:01:57,960 --> 00:02:00,000 Speaker 3: That then would say, hey, you know what, what else 38 00:02:00,240 --> 00:02:02,960 Speaker 3: is there to buy? That there's no more marginal stuff 39 00:02:03,000 --> 00:02:06,600 Speaker 3: that is actually lagging that I can buy. And that's 40 00:02:06,680 --> 00:02:10,440 Speaker 3: one possibility. The other possibility is we don't see actually 41 00:02:10,880 --> 00:02:14,480 Speaker 3: that even broad based earning surprises propel the market higher. 42 00:02:14,639 --> 00:02:17,040 Speaker 3: Both of which would be pretty bad. The other thing 43 00:02:17,080 --> 00:02:20,160 Speaker 3: that's clearly changed is sentiment and positioning. When we look 44 00:02:20,200 --> 00:02:24,239 Speaker 3: at our measure of particularly sentiment among long own the investors, 45 00:02:24,639 --> 00:02:28,400 Speaker 3: that's now starting to push towards where we were during 46 00:02:28,560 --> 00:02:31,919 Speaker 3: your reopening trade, that sort of peak bullishness in twenty 47 00:02:32,000 --> 00:02:34,880 Speaker 3: twenty one, and that surely from a positioning, from a 48 00:02:34,919 --> 00:02:38,360 Speaker 3: sentiment perspective, when everyone's getting so pulled up, is not 49 00:02:38,440 --> 00:02:39,520 Speaker 3: a positive going forward. 50 00:02:39,639 --> 00:02:41,440 Speaker 2: Max, I just want to highlight something you're saying here. 51 00:02:41,480 --> 00:02:44,080 Speaker 2: I think it's important. What I'm hearing from you is 52 00:02:44,160 --> 00:02:46,440 Speaker 2: don't look for the earnings. Look for how the market 53 00:02:46,480 --> 00:02:48,440 Speaker 2: responds to the earnings. That's going to be far more 54 00:02:48,480 --> 00:02:50,520 Speaker 2: important to you over the next two weeks. 55 00:02:51,760 --> 00:02:55,040 Speaker 3: Yeah, absolutely, I think absolutely, particularly when you compare Q 56 00:02:55,080 --> 00:02:57,400 Speaker 3: two versus Q one. Let's face it that when you 57 00:02:57,480 --> 00:03:02,520 Speaker 3: can compare and look at year of a year earnings expectations, 58 00:03:02,520 --> 00:03:04,320 Speaker 3: of course everyone says, oh my god, the bar is 59 00:03:04,360 --> 00:03:05,120 Speaker 3: so much higher. 60 00:03:05,280 --> 00:03:06,080 Speaker 1: That's not true. 61 00:03:06,080 --> 00:03:08,000 Speaker 3: It's just the year of a year that is higher, 62 00:03:08,080 --> 00:03:11,720 Speaker 3: and that is largely a result of the really, really 63 00:03:11,760 --> 00:03:14,000 Speaker 3: good earning season that we had in Q one. Let's 64 00:03:14,040 --> 00:03:16,960 Speaker 3: remember that in Q one we had the highest earnings 65 00:03:16,960 --> 00:03:19,040 Speaker 3: beat rate in the S and P five hundred really 66 00:03:19,320 --> 00:03:22,200 Speaker 3: since the second quarter of twenty twenty one, and we 67 00:03:22,280 --> 00:03:25,680 Speaker 3: had the highest average earning surprise right across the S 68 00:03:25,720 --> 00:03:29,119 Speaker 3: and P five hundred companies since Q one twenty twenty one. Really, 69 00:03:29,160 --> 00:03:32,120 Speaker 3: since that reopening trade, we had an average earning surprise 70 00:03:32,160 --> 00:03:33,160 Speaker 3: of almost twenty percent. 71 00:03:33,240 --> 00:03:35,240 Speaker 1: Well, of course the year of a year. 72 00:03:35,120 --> 00:03:37,720 Speaker 3: Eight expectations are going to be high then, but the 73 00:03:37,920 --> 00:03:40,320 Speaker 3: sequential ones the quarter of a quarter ones. When you 74 00:03:40,360 --> 00:03:43,600 Speaker 3: strip out energy and materials, you end up with net 75 00:03:43,600 --> 00:03:46,640 Speaker 3: income expectations from consensus and about minus three and a 76 00:03:46,640 --> 00:03:49,400 Speaker 3: half percent. So I do think we can get pretty 77 00:03:49,440 --> 00:03:52,880 Speaker 3: broad based earning surprises. Again, I wouldn't be surprised if 78 00:03:52,920 --> 00:03:56,640 Speaker 3: we get similar magnitude of earning surprises in the broad 79 00:03:56,680 --> 00:04:00,480 Speaker 3: based sense media and earnings growth compare to what we 80 00:04:00,520 --> 00:04:02,960 Speaker 3: had in Q one, And then it really depends what the. 81 00:04:02,880 --> 00:04:03,600 Speaker 1: Market is doing. 82 00:04:03,800 --> 00:04:06,440 Speaker 3: Are we going to go and get a broad based rally, 83 00:04:06,520 --> 00:04:08,440 Speaker 3: Then you want to take some risk off because probably 84 00:04:08,480 --> 00:04:12,120 Speaker 3: positioning and sentiment goes even closer to our sales signal. 85 00:04:12,400 --> 00:04:15,040 Speaker 3: If we don't see that coming, then I'm afraid to 86 00:04:15,040 --> 00:04:17,279 Speaker 3: say it's like, well, what's going to propel us even higher. 87 00:04:17,279 --> 00:04:20,640 Speaker 3: Here we're flat even we continue to prove flat even 88 00:04:20,680 --> 00:04:23,800 Speaker 3: with broad based earning surprises in both cases. I think 89 00:04:23,839 --> 00:04:26,360 Speaker 3: then into September October, you want to take a bit 90 00:04:26,400 --> 00:04:27,239 Speaker 3: of risk off the table. 91 00:04:27,480 --> 00:04:27,640 Speaker 4: MAX. 92 00:04:27,680 --> 00:04:29,080 Speaker 1: You're in an uncomfortable situation. 93 00:04:29,279 --> 00:04:33,040 Speaker 5: Waiting is not something that seems like traders enjoy when 94 00:04:33,040 --> 00:04:35,680 Speaker 5: they're looking at markets and saying, we don't know exactly 95 00:04:35,839 --> 00:04:37,400 Speaker 5: how this is going to play out. 96 00:04:37,560 --> 00:04:39,360 Speaker 1: What are you doing in the next two weeks? 97 00:04:39,360 --> 00:04:41,159 Speaker 5: So are you just sitting on your hands, biting your 98 00:04:41,240 --> 00:04:42,680 Speaker 5: nails and watching the earnings? 99 00:04:43,720 --> 00:04:46,960 Speaker 3: I mean, hopefully not biting my nails, But I'm waiting, 100 00:04:47,040 --> 00:04:51,200 Speaker 3: and I'm still MAX overweight stocks. So we are, you know, 101 00:04:51,279 --> 00:04:53,800 Speaker 3: leaning ready still into that broadening of the market. Will 102 00:04:53,800 --> 00:04:56,920 Speaker 3: still overweight the equal weight SMP, We'll still overweight Europe. 103 00:04:56,920 --> 00:05:00,440 Speaker 3: So we're already been rotating out out of emergent market 104 00:05:00,440 --> 00:05:02,760 Speaker 3: equity is in the last couple of weeks out of Asia, 105 00:05:03,160 --> 00:05:06,440 Speaker 3: more into the likes of the mag seven, where again 106 00:05:06,560 --> 00:05:10,039 Speaker 3: the earnings bar of bar to beat, both in terms 107 00:05:10,040 --> 00:05:11,919 Speaker 3: of the numbers but also in terms of the narrative 108 00:05:11,920 --> 00:05:14,800 Speaker 3: are solo. It's leaning into the equal weight A weighted 109 00:05:14,880 --> 00:05:18,359 Speaker 3: s andp leaning into value more so down Jones, So 110 00:05:18,520 --> 00:05:22,039 Speaker 3: a little bit still away from momentum. That also means Europe, 111 00:05:22,080 --> 00:05:24,359 Speaker 3: It means European banks. It also means the dip that 112 00:05:24,400 --> 00:05:27,440 Speaker 3: we've seen in Japan, particularly things like Japanese banks, that 113 00:05:27,480 --> 00:05:29,279 Speaker 3: really doesn't make sense. So those are the sorts of 114 00:05:29,320 --> 00:05:32,400 Speaker 3: things that in our ass allocation we're still really, really 115 00:05:32,400 --> 00:05:33,880 Speaker 3: heavily overweight. In the next few. 116 00:05:33,720 --> 00:05:36,560 Speaker 5: Weeks, Max john was doing a great job of laying 117 00:05:36,560 --> 00:05:38,800 Speaker 5: out the boiling the frog scenario that's happening in the 118 00:05:38,800 --> 00:05:41,440 Speaker 5: oil markets and how that's bleeding into yields and just 119 00:05:41,560 --> 00:05:45,159 Speaker 5: valuation expectations going forward. When you look at something like 120 00:05:45,200 --> 00:05:47,720 Speaker 5: the ten year US real yield at the highest level 121 00:05:47,720 --> 00:05:50,880 Speaker 5: going back to October of twenty twenty three, what do 122 00:05:50,960 --> 00:05:52,960 Speaker 5: you do with that? At what point does that start 123 00:05:53,040 --> 00:05:56,440 Speaker 5: to offer its own pressure to the bullish narrative separate 124 00:05:56,520 --> 00:05:58,839 Speaker 5: to potentially earnings and the reaction in markets. 125 00:06:00,120 --> 00:06:01,760 Speaker 3: Yeah, I think you said it rightly, So I think 126 00:06:01,760 --> 00:06:03,560 Speaker 3: the first step is really going to be earning. So 127 00:06:03,720 --> 00:06:05,720 Speaker 3: we are what we call that danger zone. I've been 128 00:06:05,720 --> 00:06:07,880 Speaker 3: talking about it in this program quite a lot in 129 00:06:07,920 --> 00:06:09,920 Speaker 3: the last six months as well. We are actually in 130 00:06:09,960 --> 00:06:11,840 Speaker 3: the middle of that danger zone. But as long as 131 00:06:11,880 --> 00:06:16,159 Speaker 3: you've got these really really low sequential earnings growth expectations 132 00:06:16,320 --> 00:06:18,760 Speaker 3: for the next two to three weeks, it doesn't matter. Then. 133 00:06:18,839 --> 00:06:22,000 Speaker 3: I think if real rates really continue to push a 134 00:06:22,040 --> 00:06:24,520 Speaker 3: little bit higher, then that's going to be an issue. 135 00:06:24,520 --> 00:06:27,640 Speaker 3: But for now, it's really the earnings expectations the earning season. 136 00:06:27,800 --> 00:06:30,320 Speaker 3: What I would also say, however, on the real rates side, 137 00:06:30,560 --> 00:06:33,919 Speaker 3: I'd be actually more concerned if real rates were still lower, 138 00:06:33,960 --> 00:06:38,080 Speaker 3: because in reality, that means the market has now already 139 00:06:38,160 --> 00:06:41,520 Speaker 3: turned hawkish, It has already priced in those rate types, 140 00:06:41,600 --> 00:06:44,960 Speaker 3: it has reacted to better data to you know, consens 141 00:06:45,080 --> 00:06:48,200 Speaker 3: is now really starting to believe into in that US 142 00:06:48,320 --> 00:06:51,120 Speaker 3: exceptionalism picture. What I would say, when you look at 143 00:06:51,240 --> 00:06:54,359 Speaker 3: you know, something like fit sentiment on non fed minutes, 144 00:06:54,560 --> 00:06:59,120 Speaker 3: or things like fit speeches, sentiment that's already pushing towards 145 00:06:59,120 --> 00:07:01,680 Speaker 3: really the most hawk since twenty twenty two. So I 146 00:07:01,720 --> 00:07:03,680 Speaker 3: do want that going forward now into the next four 147 00:07:03,720 --> 00:07:06,640 Speaker 3: or five months, that actually, aren't we all be leaving 148 00:07:06,680 --> 00:07:08,960 Speaker 3: a little bit too much into that US exceptional picture? 149 00:07:08,960 --> 00:07:11,000 Speaker 3: Are we? Are we not extrapolating a little bit too 150 00:07:11,080 --> 00:07:15,000 Speaker 3: much the strength in age one, This fiscal impulse strength 151 00:07:15,080 --> 00:07:18,160 Speaker 3: that you know, the almost twenty percent higher taxtra funds 152 00:07:18,200 --> 00:07:20,960 Speaker 3: that we had in age one, are we not extrapolaking 153 00:07:21,000 --> 00:07:23,840 Speaker 3: that too much into age two? And isn't there then 154 00:07:23,880 --> 00:07:27,640 Speaker 3: a bit of a downside surprise potential, nothing recessionary, but 155 00:07:27,880 --> 00:07:31,200 Speaker 3: just the US not being as exceptional. Just great, but 156 00:07:31,280 --> 00:07:34,000 Speaker 3: not as exceptional. And that of course actually from a 157 00:07:34,040 --> 00:07:37,280 Speaker 3: real rate and then from a risk acid valuation standpoint, 158 00:07:37,680 --> 00:07:40,280 Speaker 3: you know, perhaps after the midterms would be really good 159 00:07:40,360 --> 00:07:42,680 Speaker 3: in a classic sort of bad news is good news regime, 160 00:07:42,840 --> 00:07:45,360 Speaker 3: because we could price out the threat of rate tips. 161 00:07:45,160 --> 00:07:46,600 Speaker 2: Then and MAXI it sounds like you're on the edge 162 00:07:46,600 --> 00:07:47,720 Speaker 2: of buy in Europe at the end there. 163 00:07:48,800 --> 00:07:51,680 Speaker 3: Yeah, absolutely, I mean it it is. I think, you know, 164 00:07:51,840 --> 00:07:54,680 Speaker 3: now a picture of okay, maybe into the midterms, you know, 165 00:07:54,760 --> 00:07:58,640 Speaker 3: with a little bit of too bullish positioning behind the 166 00:07:58,920 --> 00:08:03,560 Speaker 3: earning season behind maybe and obviously seasonality right septem October, 167 00:08:03,640 --> 00:08:05,320 Speaker 3: maybe you'll take a bit of a risk off. But 168 00:08:05,400 --> 00:08:07,800 Speaker 3: I think after that that sets off us up then 169 00:08:08,160 --> 00:08:11,600 Speaker 3: for a really nice renewed rally again stay with us. 170 00:08:11,920 --> 00:08:24,240 Speaker 2: More Bloomberg surveillance coming up after this. So here's the 171 00:08:24,280 --> 00:08:27,200 Speaker 2: laces this morning rising goal price is renewing inflation fares. 172 00:08:27,200 --> 00:08:29,760 Speaker 2: With the Federal Reserve July interest rate decision only one 173 00:08:29,800 --> 00:08:32,439 Speaker 2: week away, Treasury yields hovering near highs of the year, 174 00:08:32,480 --> 00:08:35,280 Speaker 2: putting last week's call. Inflation prints very much in the 175 00:08:35,280 --> 00:08:38,000 Speaker 2: rear view mirror, Sabattery chapter of self gen writing. While 176 00:08:38,000 --> 00:08:40,439 Speaker 2: we continue to expect the Fed to keep policy on hold, 177 00:08:40,679 --> 00:08:44,800 Speaker 2: persistent market pricing reinforces the possibility of a hike by 178 00:08:44,840 --> 00:08:46,960 Speaker 2: the end of the year, likely after the mid term 179 00:08:47,000 --> 00:08:49,280 Speaker 2: Sapatri joint Just now for more Sapatrick, Good morning morning. 180 00:08:49,320 --> 00:08:50,800 Speaker 2: Let's start with the base case. Base case for you 181 00:08:50,840 --> 00:08:53,400 Speaker 2: as a hold. So let's start with why why hold? 182 00:08:54,320 --> 00:08:56,200 Speaker 4: Only because of the fact that we thought that so 183 00:08:56,320 --> 00:09:00,160 Speaker 4: far the data has not sent a clear signal that 184 00:09:00,240 --> 00:09:03,760 Speaker 4: the Fed should hike immediately. And then you have the 185 00:09:03,840 --> 00:09:07,839 Speaker 4: dynamics with the midterms and Kevin wash taking his job 186 00:09:08,559 --> 00:09:10,200 Speaker 4: just a month ago. He probably doesn't want to come 187 00:09:10,200 --> 00:09:13,679 Speaker 4: in and raise rates as soon as he's been appointed 188 00:09:14,000 --> 00:09:16,640 Speaker 4: as chair. So those were kind of some of the motivations. 189 00:09:17,520 --> 00:09:19,960 Speaker 4: And then you got the two software the CPI prins, 190 00:09:20,000 --> 00:09:22,640 Speaker 4: the PPI prints, core PC is probably going to be 191 00:09:23,200 --> 00:09:25,559 Speaker 4: you know, also somewhat on the software side, we're expecting 192 00:09:25,559 --> 00:09:27,400 Speaker 4: point one to eight for you know, a month of 193 00:09:27,400 --> 00:09:30,200 Speaker 4: a month, so that brings core PC at three point 194 00:09:30,240 --> 00:09:30,679 Speaker 4: three percent. 195 00:09:30,720 --> 00:09:32,000 Speaker 1: So there's not an urgency for. 196 00:09:31,960 --> 00:09:35,560 Speaker 4: The FED to hike, but the market is fully pricing 197 00:09:35,600 --> 00:09:36,840 Speaker 4: in a hike by the end of the year. So 198 00:09:36,880 --> 00:09:39,280 Speaker 4: at some point the market's going to dictate to the 199 00:09:39,280 --> 00:09:41,800 Speaker 4: FED what the FED should do. If the market is 200 00:09:41,800 --> 00:09:44,440 Speaker 4: fully priced for a hike and the FED doesn't deliver, 201 00:09:45,080 --> 00:09:47,760 Speaker 4: then the Fed's going to be inducing volatility. 202 00:09:48,040 --> 00:09:49,640 Speaker 1: So that's kind of the the you. 203 00:09:49,600 --> 00:09:52,520 Speaker 4: Know, the spot that we're trying to navigate here. 204 00:09:52,800 --> 00:09:55,000 Speaker 5: Can you unpack the move and yields in the US? 205 00:09:55,000 --> 00:09:57,200 Speaker 5: How much is oil? How much is the Bank of Japan? 206 00:09:57,440 --> 00:10:00,480 Speaker 5: How much is just deficit concerns as we can hearing 207 00:10:00,600 --> 00:10:03,199 Speaker 5: about the mounting bills from the conflict to the Middle East. 208 00:10:03,960 --> 00:10:04,520 Speaker 1: So when we. 209 00:10:04,480 --> 00:10:06,720 Speaker 4: Don't have a midior outlook, I thought maybe the conflict 210 00:10:06,760 --> 00:10:09,720 Speaker 4: was almost over. The Iron Wars is fully back on. 211 00:10:10,120 --> 00:10:14,559 Speaker 4: You have higher oil prices. You're looking at the impact 212 00:10:14,559 --> 00:10:17,240 Speaker 4: of higher oil prices kind of feeding through to all 213 00:10:17,240 --> 00:10:19,760 Speaker 4: of the other economies in the world. Europe and Japan 214 00:10:19,760 --> 00:10:22,200 Speaker 4: are extremely impacted by that. So you start to see 215 00:10:22,240 --> 00:10:25,719 Speaker 4: those economies start to markets I should say, start to 216 00:10:25,800 --> 00:10:29,200 Speaker 4: price in more hikes and higher yields, and then you're 217 00:10:29,240 --> 00:10:33,120 Speaker 4: seeing the route in the In the end, inflation expectations 218 00:10:33,360 --> 00:10:36,480 Speaker 4: in the US have been somewhat contained, but I am 219 00:10:36,600 --> 00:10:40,040 Speaker 4: concerned about the trajectory for debt and deficits. The Trumpet 220 00:10:40,120 --> 00:10:42,520 Speaker 4: mutations asked for eighty seven bit an extra and supplemental 221 00:10:42,559 --> 00:10:47,120 Speaker 4: funding for the war as well as for the Farm bill, 222 00:10:47,960 --> 00:10:54,280 Speaker 4: and you're looking at refunds from MAIPA also contributing to 223 00:10:54,360 --> 00:10:56,960 Speaker 4: higher deficits in the month of June. So all of 224 00:10:57,000 --> 00:10:59,560 Speaker 4: that put together, you have a dynamic where you have 225 00:10:59,600 --> 00:11:03,040 Speaker 4: not high inflation, but investors are starting to get a 226 00:11:03,080 --> 00:11:05,240 Speaker 4: little bit concerned about the trajectory for debt and deficits. 227 00:11:05,280 --> 00:11:07,600 Speaker 5: And the best evidence for this is real yields, because 228 00:11:07,600 --> 00:11:09,680 Speaker 5: you're seeing that right now, yields are not climbing higher 229 00:11:09,679 --> 00:11:11,280 Speaker 5: as a result of inflation expectations. 230 00:11:11,320 --> 00:11:12,640 Speaker 1: They're actually relatively muted. 231 00:11:12,920 --> 00:11:15,240 Speaker 5: But you are seeing real yields on US tenure treasure 232 00:11:15,320 --> 00:11:18,280 Speaker 5: is reaching the highest levels since twenty twenty three, two 233 00:11:18,280 --> 00:11:20,679 Speaker 5: point three four percent. How high do you see that 234 00:11:20,760 --> 00:11:23,480 Speaker 5: getting if the FED does not high rates, if the 235 00:11:23,480 --> 00:11:26,360 Speaker 5: FED remains on hold despite what the market seems to 236 00:11:26,400 --> 00:11:27,079 Speaker 5: be suggesting. 237 00:11:27,760 --> 00:11:29,800 Speaker 1: So, I mean we are near the highs. 238 00:11:30,000 --> 00:11:33,200 Speaker 4: Is it possible for real years to push higher? Yes, 239 00:11:33,400 --> 00:11:36,000 Speaker 4: You're starting to see some of the correlations that you 240 00:11:36,040 --> 00:11:38,800 Speaker 4: typically see between gold and real yields start to come 241 00:11:38,840 --> 00:11:42,640 Speaker 4: back and play. That inverse relationship is starting to come 242 00:11:42,679 --> 00:11:47,960 Speaker 4: back into the front. Typically investors start to come, you know, 243 00:11:48,040 --> 00:11:51,160 Speaker 4: buy or enter into the bond market when real yields 244 00:11:51,160 --> 00:11:55,040 Speaker 4: look attractive and move away from gold. But I don't 245 00:11:55,040 --> 00:11:57,560 Speaker 4: know if you're going to see that backstop bid in 246 00:11:57,600 --> 00:12:01,320 Speaker 4: an environment where the concern is for debton deficits, and 247 00:12:01,360 --> 00:12:04,439 Speaker 4: debton deficits is not just a US problem. You're seeing 248 00:12:04,440 --> 00:12:07,640 Speaker 4: this in Europe as well as in Japan. And that's 249 00:12:07,640 --> 00:12:11,400 Speaker 4: really where I think the global bond market dynamic starts 250 00:12:11,440 --> 00:12:14,000 Speaker 4: to push come into play and push yields higher. 251 00:12:14,120 --> 00:12:16,960 Speaker 6: What's the window the Fed has to act when the 252 00:12:17,000 --> 00:12:19,280 Speaker 6: market actually continues to believe them, and it's not just 253 00:12:19,360 --> 00:12:21,360 Speaker 6: empty threats, given the fact that the market's pricing in 254 00:12:21,480 --> 00:12:24,320 Speaker 6: hikes and officials continuously talk about how they're concerned about 255 00:12:24,360 --> 00:12:25,000 Speaker 6: higher inflation. 256 00:12:26,000 --> 00:12:29,439 Speaker 4: So historically, if it's like seventy eighty percent priced in 257 00:12:29,679 --> 00:12:33,920 Speaker 4: to the market. The FED typically tends to deliver. You know, 258 00:12:34,040 --> 00:12:39,880 Speaker 4: we saw a lot of volatility in the July meeting pricing, right, 259 00:12:39,920 --> 00:12:42,280 Speaker 4: I mean, we went from almost being fully priced in 260 00:12:42,320 --> 00:12:45,360 Speaker 4: early last week to not being priced into now yesterday, 261 00:12:45,600 --> 00:12:47,080 Speaker 4: you start to see that come back. 262 00:12:46,960 --> 00:12:48,240 Speaker 1: Into into play. 263 00:12:48,640 --> 00:12:50,480 Speaker 4: That's one of the reasons why I had added that 264 00:12:50,600 --> 00:12:52,240 Speaker 4: maybe the FED might have to act by the end 265 00:12:52,240 --> 00:12:54,280 Speaker 4: of the year because it's more than fully priced in 266 00:12:54,720 --> 00:12:55,959 Speaker 4: for the end of the year. It's the question of 267 00:12:55,960 --> 00:12:59,280 Speaker 4: whether they delivered before the midterms, are after the midterms. 268 00:12:58,880 --> 00:13:00,600 Speaker 2: Do we need to rethink them. Let me say things 269 00:13:00,640 --> 00:13:04,080 Speaker 2: like typically they usually is this a different Fed where 270 00:13:04,200 --> 00:13:06,600 Speaker 2: typically and usually it doesn't really apply anymore. 271 00:13:07,000 --> 00:13:09,360 Speaker 4: And that's what makes it all the more confusing because 272 00:13:09,640 --> 00:13:11,760 Speaker 4: there is no forward guidance. I mean, this is not 273 00:13:12,120 --> 00:13:15,360 Speaker 4: you know, business as usual for the FED, and it's 274 00:13:15,400 --> 00:13:17,560 Speaker 4: hard to know if kind of the market's going to 275 00:13:17,600 --> 00:13:20,400 Speaker 4: dictate to the Fed and the Fed is going to 276 00:13:20,440 --> 00:13:25,000 Speaker 4: ignore the markets pricing. But you know, as a point earlier, 277 00:13:25,000 --> 00:13:29,040 Speaker 4: I think that that typically tends to to lead to 278 00:13:29,120 --> 00:13:32,720 Speaker 4: volatility when the FED doesn't follow through on market expectations. 279 00:13:33,080 --> 00:13:34,760 Speaker 4: So the FED has to decide if they want to 280 00:13:34,800 --> 00:13:38,800 Speaker 4: comply or or be the inducer of volatility in the market. 281 00:13:39,040 --> 00:13:42,559 Speaker 2: Stay with us, mul Bloomberg Surveillance coming up after this. 282 00:13:51,800 --> 00:13:55,360 Speaker 2: AT and C shares gaining after crushing uestimates on mobile 283 00:13:55,400 --> 00:13:58,120 Speaker 2: subscriber gains. Joining us now to discuss the amount of 284 00:13:58,160 --> 00:14:01,040 Speaker 2: staff the boss, the AT and C C John Stankey, John, 285 00:14:01,040 --> 00:14:04,359 Speaker 2: Welcome to the programs, sir. I want to talk about execution. 286 00:14:04,440 --> 00:14:06,559 Speaker 2: There's so many issues to talk about with your company, 287 00:14:06,559 --> 00:14:09,560 Speaker 2: but just execution. These numbers this morning, John, the streets 288 00:14:09,600 --> 00:14:12,400 Speaker 2: looking for like three hundred and twenty five thousand, and 289 00:14:12,440 --> 00:14:15,439 Speaker 2: you deliver four hundred and thirty two thousand monthly wireless 290 00:14:15,440 --> 00:14:18,960 Speaker 2: phone subscribers in two Q. What went right, John, What 291 00:14:19,080 --> 00:14:21,360 Speaker 2: was the strategy behind again that big. 292 00:14:21,720 --> 00:14:24,120 Speaker 7: Well, I think going into the break, Jonathan, you referred 293 00:14:24,120 --> 00:14:27,120 Speaker 7: to the results as fantastic and I would agree with you, 294 00:14:27,200 --> 00:14:29,480 Speaker 7: and I think the team did an excellent job executing, 295 00:14:30,040 --> 00:14:33,720 Speaker 7: as you said, and it's not just in our wireless business. 296 00:14:33,720 --> 00:14:36,880 Speaker 7: It was nearly three hundred and seventy thousand fiber net ads. 297 00:14:36,880 --> 00:14:41,400 Speaker 7: That's a record for us in this quarter. Look, what 298 00:14:41,440 --> 00:14:43,680 Speaker 7: went right is what we told people was going to 299 00:14:43,720 --> 00:14:45,880 Speaker 7: happen this year, as we gave guidance for the next 300 00:14:45,920 --> 00:14:49,360 Speaker 7: three years. We said, because of the investments we've been 301 00:14:49,360 --> 00:14:52,120 Speaker 7: making in this business over the last five years at 302 00:14:52,200 --> 00:14:55,600 Speaker 7: a sustained and targeted level in the m and a 303 00:14:55,720 --> 00:14:58,400 Speaker 7: work that we had done acquiring more spectrum and picking 304 00:14:58,440 --> 00:15:01,560 Speaker 7: up some additional footprint from Loom, that you should see 305 00:15:01,600 --> 00:15:04,000 Speaker 7: a step up in growth as a result of those things. 306 00:15:04,120 --> 00:15:06,800 Speaker 7: The team had the asset base it needed to execute 307 00:15:07,240 --> 00:15:09,240 Speaker 7: and drive growth at a faster level. And you saw 308 00:15:09,280 --> 00:15:12,760 Speaker 7: the manifestation of that's starting to happen here in this quarter, 309 00:15:13,000 --> 00:15:16,600 Speaker 7: and it's showing up in an accelerated service revenue growth. 310 00:15:17,040 --> 00:15:20,120 Speaker 7: It's showing up and accelerated ebit of growth. I would 311 00:15:20,160 --> 00:15:22,480 Speaker 7: even go into our business segment and point out that 312 00:15:22,560 --> 00:15:26,400 Speaker 7: we had growth and our strategic services for business for 313 00:15:26,440 --> 00:15:29,720 Speaker 7: the first time in a very very long time, and 314 00:15:29,840 --> 00:15:31,680 Speaker 7: as a result of that, we expect that that's going 315 00:15:31,720 --> 00:15:35,400 Speaker 7: to sustain itself through twenty eight. So we're executing well, 316 00:15:35,480 --> 00:15:38,360 Speaker 7: we're hitting on all the cylinders and the engine, and 317 00:15:38,480 --> 00:15:40,960 Speaker 7: when that happens, the business can deliver the kind of 318 00:15:41,000 --> 00:15:43,400 Speaker 7: results you're scene and I'm pretty confident we can keep 319 00:15:43,400 --> 00:15:44,480 Speaker 7: that moving going forward. 320 00:15:44,600 --> 00:15:46,160 Speaker 2: John, there's a number that jumped off the page for 321 00:15:46,200 --> 00:15:48,160 Speaker 2: me this morning as well. It's forty two point five 322 00:15:48,480 --> 00:15:51,360 Speaker 2: forty two point five percent of households that purchase the 323 00:15:51,360 --> 00:15:55,000 Speaker 2: broadband service from you also by mobile phone service too. 324 00:15:55,240 --> 00:15:57,920 Speaker 2: How important has that convergence model been just behind the 325 00:15:57,960 --> 00:16:00,160 Speaker 2: success you're having and how important will it be for 326 00:16:00,160 --> 00:16:00,960 Speaker 2: the reminds of the year. 327 00:16:01,320 --> 00:16:04,840 Speaker 7: It's extremely important. It's actually that number is forty five percent. 328 00:16:04,960 --> 00:16:07,560 Speaker 7: If you were to normalize it for the Luman footprint 329 00:16:07,600 --> 00:16:10,680 Speaker 7: that we just recently brought in, that's diluting the number 330 00:16:10,720 --> 00:16:13,360 Speaker 7: a little bit, and as you see in our report, 331 00:16:14,000 --> 00:16:17,360 Speaker 7: that's been ticking up steadily. And it's important because one, 332 00:16:17,400 --> 00:16:21,520 Speaker 7: those customers are more lucrative customers. When they buy multiple 333 00:16:21,560 --> 00:16:24,960 Speaker 7: products and services from US. Two, churn goes down, and 334 00:16:25,000 --> 00:16:27,760 Speaker 7: that's one reason why you're starting to see our chur 335 00:16:27,920 --> 00:16:31,240 Speaker 7: numbers improve this quarter, because we're starting to get that 336 00:16:31,360 --> 00:16:34,480 Speaker 7: benefit of that base that is buying both together from 337 00:16:34,560 --> 00:16:39,400 Speaker 7: US and three brand affinity, the customer's happiness with AT 338 00:16:39,480 --> 00:16:41,920 Speaker 7: and T and their impression of the brand as much 339 00:16:42,000 --> 00:16:44,320 Speaker 7: higher as a result of that because the products are 340 00:16:44,320 --> 00:16:48,400 Speaker 7: better together. So it's really important we continue down that path, 341 00:16:48,440 --> 00:16:51,200 Speaker 7: and it's frankly one of the most important things is 342 00:16:51,280 --> 00:16:55,120 Speaker 7: you think about our competitive positioning moving forward. Because we 343 00:16:55,240 --> 00:16:58,920 Speaker 7: can provide world class networks and both wireless and fix 344 00:16:59,480 --> 00:17:03,480 Speaker 7: that tackle ninety eight percent of what a customer needs 345 00:17:03,520 --> 00:17:06,600 Speaker 7: to do on the Internet. Occasionally they walk off one 346 00:17:06,640 --> 00:17:09,080 Speaker 7: of our networks, and as you look at our partnerships 347 00:17:09,080 --> 00:17:11,920 Speaker 7: that we're working with the satellite industry, by this time 348 00:17:11,960 --> 00:17:14,040 Speaker 7: next year, we'll be able to solve that problem. And 349 00:17:14,080 --> 00:17:16,520 Speaker 7: so we're the natural place for people to come and 350 00:17:16,640 --> 00:17:19,080 Speaker 7: meet their needs on the Internet and do it easily 351 00:17:19,280 --> 00:17:22,400 Speaker 7: on one bill, with one set of services and one 352 00:17:22,440 --> 00:17:25,320 Speaker 7: support infrastructure. We think we're in a great position as 353 00:17:25,320 --> 00:17:26,040 Speaker 7: a result of that. 354 00:17:26,119 --> 00:17:27,840 Speaker 5: And John, this is a reason why there has been 355 00:17:28,040 --> 00:17:32,040 Speaker 5: really a price war between different different providers, simply because 356 00:17:32,080 --> 00:17:34,760 Speaker 5: everybody wants that package, right, they want to get everybody. 357 00:17:34,960 --> 00:17:38,280 Speaker 5: How has the competitive landscape changed though over the past 358 00:17:38,280 --> 00:17:42,040 Speaker 5: couple of years with the introduction of satellite services, of 359 00:17:42,160 --> 00:17:44,760 Speaker 5: what we're seeing with Starlink, of what we're seeing. 360 00:17:44,600 --> 00:17:48,960 Speaker 7: Elsewhere, I don't characterize it as a price war. I 361 00:17:49,000 --> 00:17:52,600 Speaker 7: think there's been a stratification of pricing for customers depending 362 00:17:52,640 --> 00:17:55,040 Speaker 7: on what kind of services they want to buy. There's 363 00:17:55,160 --> 00:17:59,440 Speaker 7: the segment of the market that needs high performings, symmetrical 364 00:17:59,480 --> 00:18:04,439 Speaker 7: gigabits services, very robust wireless plans. That segment of the 365 00:18:04,440 --> 00:18:06,879 Speaker 7: market is willing to pay for that, and they pay 366 00:18:07,640 --> 00:18:10,480 Speaker 7: a premium as a result of that exceptional value that 367 00:18:10,520 --> 00:18:13,280 Speaker 7: they get back. We've played very very well in that 368 00:18:13,359 --> 00:18:16,080 Speaker 7: space given our asset base. But there's also a segment 369 00:18:16,160 --> 00:18:19,320 Speaker 7: of the market that's more value oriented, and I would 370 00:18:19,359 --> 00:18:22,200 Speaker 7: say choices have come into the market because of good 371 00:18:22,240 --> 00:18:26,360 Speaker 7: regulatory posture that have allowed investment that weren't there before, 372 00:18:26,680 --> 00:18:30,439 Speaker 7: and those choices are putting more value oriented products and 373 00:18:30,480 --> 00:18:33,520 Speaker 7: services at more attractive price points, but the product and 374 00:18:33,600 --> 00:18:37,159 Speaker 7: service maybe isn't as robust and at AT and T 375 00:18:37,600 --> 00:18:40,080 Speaker 7: we've played really well up market, but not as well 376 00:18:40,119 --> 00:18:42,320 Speaker 7: down on the value space, and we've been working hard 377 00:18:42,760 --> 00:18:45,439 Speaker 7: to get our product portfolio so that it matches up 378 00:18:45,520 --> 00:18:48,840 Speaker 7: across the entire continuum of the market. You saw that 379 00:18:48,920 --> 00:18:52,440 Speaker 7: in the results this quarter because our account additions new 380 00:18:52,440 --> 00:18:55,920 Speaker 7: accounts to AT and T hit like a three year high, 381 00:18:56,200 --> 00:18:58,120 Speaker 7: and that's because we're doing a lot better. 382 00:18:58,000 --> 00:18:58,879 Speaker 1: Job down market. 383 00:18:59,040 --> 00:19:03,560 Speaker 7: And nothing wrong with having a more affordable product that's 384 00:19:03,600 --> 00:19:05,879 Speaker 7: tuned to certain parts of the market. I don't consider 385 00:19:05,920 --> 00:19:09,119 Speaker 7: that a price war. I consider that meeting market needs 386 00:19:09,480 --> 00:19:11,360 Speaker 7: as long as you're doing the things that you can 387 00:19:11,400 --> 00:19:13,439 Speaker 7: do up market, which we've done very well. And I 388 00:19:13,440 --> 00:19:16,520 Speaker 7: think when you see margins the way they are at 389 00:19:16,560 --> 00:19:18,840 Speaker 7: at and T this is like a record for us. 390 00:19:19,920 --> 00:19:22,840 Speaker 7: That's a good sign that we're getting that balance correct 391 00:19:23,240 --> 00:19:24,000 Speaker 7: over the next. 392 00:19:23,840 --> 00:19:24,680 Speaker 1: Five to ten years. 393 00:19:24,720 --> 00:19:27,600 Speaker 5: John, how do you see the breakdown of the mix 394 00:19:27,760 --> 00:19:30,320 Speaker 5: of broadband and fiber on one hand, the wireless or 395 00:19:30,359 --> 00:19:35,119 Speaker 5: the more budget sensitive areas, and then satellite from the 396 00:19:35,240 --> 00:19:37,080 Speaker 5: likes that you're seeing from Starlink. 397 00:19:38,040 --> 00:19:41,679 Speaker 7: Look, my point of view is they have a fantastic product. 398 00:19:41,720 --> 00:19:45,199 Speaker 7: There's great innovation that's moving in that space, and it 399 00:19:45,280 --> 00:19:48,119 Speaker 7: fits part of the market that hasn't been well served, 400 00:19:48,280 --> 00:19:53,240 Speaker 7: especially in less densely populated areas. And the interesting part 401 00:19:53,280 --> 00:19:56,399 Speaker 7: about that is our investment has largely been an urban 402 00:19:56,720 --> 00:20:01,239 Speaker 7: and densely populated suburban. We haven't pushed real hard in 403 00:20:01,280 --> 00:20:04,600 Speaker 7: the rural and less densely populated areas that tends to 404 00:20:04,640 --> 00:20:08,400 Speaker 7: be more the stronghold of cable companies. I think they'll 405 00:20:08,400 --> 00:20:11,399 Speaker 7: do pretty well in that space, bringing an alternative and 406 00:20:11,440 --> 00:20:13,920 Speaker 7: competition in there. I think it's going to be very 407 00:20:13,920 --> 00:20:16,879 Speaker 7: hard to come into the more densely urban populated areas 408 00:20:17,359 --> 00:20:20,000 Speaker 7: to compete with that bundle that I just talked about 409 00:20:20,000 --> 00:20:24,200 Speaker 7: earlier of fiber that is the best product in the market, 410 00:20:24,280 --> 00:20:29,399 Speaker 7: best performing, it's the lowest marginal costs, our great wireless 411 00:20:29,400 --> 00:20:32,439 Speaker 7: density that far outstrips what you can do from directed 412 00:20:32,480 --> 00:20:35,760 Speaker 7: device and satellite. Years of investment in the hard to 413 00:20:35,760 --> 00:20:39,200 Speaker 7: reach places like stadiums. Everybody who went to a World 414 00:20:39,240 --> 00:20:42,480 Speaker 7: Cup game knows how important being able to connect in 415 00:20:42,520 --> 00:20:46,479 Speaker 7: a stadium is to experience what goes on socially and 416 00:20:46,640 --> 00:20:48,560 Speaker 7: actually in the arena so that you can see a 417 00:20:48,600 --> 00:20:51,800 Speaker 7: few replays that they're not showing there. We've been doing 418 00:20:51,880 --> 00:20:54,679 Speaker 7: that for a long long time, and it's going to 419 00:20:54,680 --> 00:20:57,000 Speaker 7: be very very hard to catch up on that infrastructure, 420 00:20:57,000 --> 00:20:59,400 Speaker 7: and I think we're going to do really really well 421 00:20:59,440 --> 00:21:02,200 Speaker 7: competing and metro and suburban areas, which is where our 422 00:21:02,200 --> 00:21:03,120 Speaker 7: investments have been. 423 00:21:03,240 --> 00:21:05,560 Speaker 5: And John, you've talked a lot about how fiber puts 424 00:21:05,600 --> 00:21:08,520 Speaker 5: you in a really good position in the AI era 425 00:21:08,600 --> 00:21:11,800 Speaker 5: and how an increasing number of businesses really do need 426 00:21:11,920 --> 00:21:15,560 Speaker 5: that kind of connectivity and the latency that's so important 427 00:21:15,600 --> 00:21:19,960 Speaker 5: to improve. And I'm just wondering, aside from the demand 428 00:21:20,080 --> 00:21:23,560 Speaker 5: side from your actual corporate side, if you've been able 429 00:21:23,600 --> 00:21:26,160 Speaker 5: to calculate any of their turn on investment of your 430 00:21:26,200 --> 00:21:28,400 Speaker 5: own uses of artificial intelligence. I know you've been really 431 00:21:28,480 --> 00:21:32,080 Speaker 5: vocal about how it has improved in efficiency dramatically. Has 432 00:21:32,119 --> 00:21:34,920 Speaker 5: there been any ROI Have there been any structural changes 433 00:21:35,119 --> 00:21:36,320 Speaker 5: that are able to disclose. 434 00:21:36,840 --> 00:21:40,840 Speaker 7: Yeah, We've been really disciplined about this, and I'm satisfied 435 00:21:40,880 --> 00:21:43,720 Speaker 7: that where we've been investing in places like in our 436 00:21:43,760 --> 00:21:47,320 Speaker 7: software development organization, what we've been doing in our customer 437 00:21:47,400 --> 00:21:52,359 Speaker 7: service channels, our applications into engineering, some of the things 438 00:21:52,359 --> 00:21:55,000 Speaker 7: that we've been doing and building the right algorithms for 439 00:21:55,119 --> 00:21:59,639 Speaker 7: pricing support that we've gotten very strong returns. And as 440 00:22:00,040 --> 00:22:02,919 Speaker 7: result of that, I would almost argue people inside of 441 00:22:02,920 --> 00:22:05,439 Speaker 7: our company maybe think we've been a little too judicious 442 00:22:05,480 --> 00:22:08,800 Speaker 7: about how we've managed investment. We're trying to find that 443 00:22:08,880 --> 00:22:12,280 Speaker 7: right balance of innovation and allowing things to run and 444 00:22:12,320 --> 00:22:15,760 Speaker 7: the discipline of ensuring that what we're doing drives return. 445 00:22:16,640 --> 00:22:19,000 Speaker 7: I would also say that I'm very well aware that 446 00:22:19,200 --> 00:22:23,240 Speaker 7: a lot of this investment is a competitive necessity when 447 00:22:23,280 --> 00:22:26,520 Speaker 7: we improve operations like customer service and call centers. I 448 00:22:26,600 --> 00:22:29,840 Speaker 7: don't know that that's necessarily sustainable. I think those are 449 00:22:29,920 --> 00:22:33,920 Speaker 7: ultimately efficiencies that get competed away in the market. They 450 00:22:34,000 --> 00:22:36,480 Speaker 7: go to the customer in the form of lower prices 451 00:22:36,600 --> 00:22:39,280 Speaker 7: or better service. They are the things that we do 452 00:22:39,320 --> 00:22:42,840 Speaker 7: that really give us strategic advantage, like maybe writing software 453 00:22:43,000 --> 00:22:46,879 Speaker 7: for capabilities that we didn't have before that make us 454 00:22:46,920 --> 00:22:49,600 Speaker 7: better at pricing or better at driving yields on the 455 00:22:49,640 --> 00:22:52,920 Speaker 7: network or more efficient. Those are the ones that maybe 456 00:22:52,960 --> 00:22:55,040 Speaker 7: we get to keep some of the benefit on. And 457 00:22:55,080 --> 00:22:56,959 Speaker 7: if I were to say that we need to do 458 00:22:57,040 --> 00:22:59,920 Speaker 7: something better moving forward, we need more of the one 459 00:23:00,160 --> 00:23:03,359 Speaker 7: that drive strategic advantage to balance out some of the 460 00:23:03,359 --> 00:23:05,439 Speaker 7: ones that we know are just the table stakes that 461 00:23:05,480 --> 00:23:08,280 Speaker 7: we need to compete in the market and drive the 462 00:23:08,320 --> 00:23:11,600 Speaker 7: great margin performance that you're seeing right now in the 463 00:23:11,720 --> 00:23:13,400 Speaker 7: quarterly results we just published. 464 00:23:13,560 --> 00:23:15,560 Speaker 2: John, I'd love to finish by talking about the stock 465 00:23:15,600 --> 00:23:18,040 Speaker 2: as well. Just listening to you speak about the degree 466 00:23:18,080 --> 00:23:20,680 Speaker 2: of investment you've put into the business to serve these areas, 467 00:23:20,920 --> 00:23:24,119 Speaker 2: densely populated urban areas across this country. And when I 468 00:23:24,119 --> 00:23:27,439 Speaker 2: think about other companies right now spending a fortune raising 469 00:23:27,480 --> 00:23:30,440 Speaker 2: loads of capital and going through this massive CAPEX cycle, 470 00:23:30,480 --> 00:23:32,800 Speaker 2: I'm thinking of tech and what's happening there. You're in 471 00:23:32,800 --> 00:23:36,280 Speaker 2: a different position. You've done some work already. Then I 472 00:23:36,320 --> 00:23:39,760 Speaker 2: see this headline. You're accelerating the pace of planned share repurchases. 473 00:23:40,000 --> 00:23:42,240 Speaker 2: Can you walk us through just the characteristic of what's 474 00:23:42,280 --> 00:23:45,240 Speaker 2: on offer now your stock and how well understood you 475 00:23:45,240 --> 00:23:46,680 Speaker 2: think it is with investors at the moment. 476 00:23:47,240 --> 00:23:50,320 Speaker 7: Well, you know, Look, I think the markets eventually get 477 00:23:50,359 --> 00:23:52,920 Speaker 7: things right. It doesn't mean that they get it right 478 00:23:53,040 --> 00:23:56,840 Speaker 7: every month, or that there isn't momentary dislocations and readjustments. 479 00:23:56,840 --> 00:24:00,439 Speaker 7: And my point of view, obviously I'm probably speaking my book. 480 00:24:01,000 --> 00:24:02,959 Speaker 7: I think we're in a little bit of a dislocation 481 00:24:03,160 --> 00:24:06,800 Speaker 7: right now, and there's certainly a desire to raise capital 482 00:24:06,840 --> 00:24:10,400 Speaker 7: to move to new opportunities in the AI space, and 483 00:24:11,160 --> 00:24:13,240 Speaker 7: I think there's been some rotation out of our stock 484 00:24:13,280 --> 00:24:15,800 Speaker 7: as a result of that. But here's what I know. 485 00:24:16,000 --> 00:24:18,880 Speaker 7: We've built this business for the future. To your point, 486 00:24:19,320 --> 00:24:22,720 Speaker 7: we're building symmetrical networks that have as much upstream bandwidth 487 00:24:22,720 --> 00:24:24,879 Speaker 7: as a have downstream bandwidth, and we think that's going 488 00:24:24,920 --> 00:24:27,520 Speaker 7: to be critical in the AI world, just like memory 489 00:24:27,600 --> 00:24:30,520 Speaker 7: is critical, just like chips are critical, just like data 490 00:24:30,600 --> 00:24:34,040 Speaker 7: center infrastructure is critical. And I do believe that the 491 00:24:34,080 --> 00:24:37,159 Speaker 7: market will eventually understand that what we have built is 492 00:24:37,280 --> 00:24:41,000 Speaker 7: indispensable for the kind of workloads we're going to see 493 00:24:41,040 --> 00:24:43,520 Speaker 7: in this AI environment working forward, and that AT and 494 00:24:43,560 --> 00:24:47,240 Speaker 7: T is uniquely positioned in the investments we've made over 495 00:24:47,280 --> 00:24:50,200 Speaker 7: the last five years to serve more of those workloads 496 00:24:50,320 --> 00:24:53,879 Speaker 7: more effectively than anybody else. And eventually the market will 497 00:24:53,920 --> 00:24:57,480 Speaker 7: figure that out, and when the cash shows up, valuation 498 00:24:57,680 --> 00:25:01,399 Speaker 7: will ultimately correct itself. And the confidence that that's the case. 499 00:25:01,760 --> 00:25:04,240 Speaker 7: Our job as a management team is to continue to 500 00:25:04,320 --> 00:25:07,360 Speaker 7: execute and stay focused on the plan that we've laid out, 501 00:25:07,400 --> 00:25:10,040 Speaker 7: and I believe this quarter as a testament that this 502 00:25:10,200 --> 00:25:11,960 Speaker 7: management team is in fact doing that. 503 00:25:12,800 --> 00:25:16,359 Speaker 2: This is the Bloomberg Surveandics podcast, bringing you the best 504 00:25:16,359 --> 00:25:19,720 Speaker 2: in markets, economics, a geopolitics. You can watch the show 505 00:25:19,760 --> 00:25:22,679 Speaker 2: live on Bloomberg TV weekday mornings from six am to 506 00:25:22,840 --> 00:25:26,600 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify 507 00:25:26,720 --> 00:25:28,960 Speaker 2: or anywhere else you listen, and as always on the 508 00:25:29,000 --> 00:25:31,400 Speaker 2: Bloomberg Terminal and the Bloomberg Business app.