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

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

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Speaker 2: Joining us for extensive comments is loud brainer. We are

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Speaker 2: thrilled that she is here, young duty at Wesleyan in

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Speaker 2: Connecticut and up to Harvard and her public service, and

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Speaker 2: really were the more policy effort? Well, I'm dying to

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Speaker 2: ask you this question. We just head on the show

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Speaker 2: Magnificent Stephanie Stancheva out of Harvard, and then I see

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Speaker 2: a Nobel Prize of Claudia Golden out of Harvard. What

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Speaker 2: was it like for you to have the courage to

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Speaker 2: do economics a number of years ago? How lonely was

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Speaker 2: it to be a woman in economics back in the

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Speaker 2: time of Laurence Summer at the school.

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Speaker 3: Well, I would say that by the time I got

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Speaker 3: to Harvard, obviously we did have some women on the faculty.

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Speaker 3: Claudia Golden arrived while I was there, Susan Collins was

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Speaker 3: there for a period of time. There were some really

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Speaker 3: outstanding young women professors, and you know, it was an

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Speaker 3: exciting time. I care a lot, of course about how

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Speaker 3: we use economics to better outcomes in policy, and so

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Speaker 3: it was just great to be studying with some of

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Speaker 3: the people who have really shaped economic policy making in

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Speaker 3: the preceding decades.

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Speaker 2: Doctor Braner, I was laying out the differences between a

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Speaker 2: Clarida and a Brainer, where you look at Dsge and

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Speaker 2: all the mathewness of Clarida and Gertler, and you were

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Speaker 2: the really historic policy the effort of getting things done

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Speaker 2: in economics color. The nature of the uncertainty now that

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Speaker 2: the FED has to face is we bounce from copper

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Speaker 2: down the most in forty years to a non printed

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Speaker 2: India trade agreement. What's the nature of our present uncertainty?

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Speaker 3: So, on the one hand, we know a lot about

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Speaker 3: how tariffs generally affect the economy. We had a little

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Speaker 3: trial run back in twenty eighteen when Trump, the first

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Speaker 3: Trump administration, imposed tariffs on China, mostly on China as

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Speaker 3: well as steel and aluminum. We do know that tariffs

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Speaker 3: raise prices. Ultimately, that that time between when tariffs are

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Speaker 3: imposed and when you can see it actually in prices

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Speaker 3: varies a great deal, but the last time through four

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Speaker 3: to six months. And we also know that tariffs are

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Speaker 3: like a supply shock and they can disrupt the labor market.

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Speaker 3: So we know all of that. What we don't know,

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Speaker 3: and where this uncertainty is so important is twofold. First

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Speaker 3: of all, we have not seen tariffs at these levels

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Speaker 3: for decades. These are smooth, holly level tariffs in many cases,

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Speaker 3: and so the extent of the changes we just haven't seen.

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Speaker 3: And secondly, of course, the administration is still in the

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Speaker 3: process of telling us what those tariff levels are in

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Speaker 3: those trade agreements are not yet very firm or very clear.

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Speaker 4: Low. What did you take away from the FED minutes

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Speaker 4: yes the FED news yesterday, the meeting yesterday from Fed

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Speaker 4: Chairman Jpow What was your takeaway?

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Speaker 3: So the takeaway I think was that the large majority

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Speaker 3: of members of the Open Markets Committee want two more

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Speaker 3: months of data and they will get it before the

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Speaker 3: next meeting in September. That they are still quite concerned

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Speaker 3: about potential risks to the upside to inflation, which has

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Speaker 3: been running high over the last few years, and of

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Speaker 3: course that means they have to be particularly attentive to

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Speaker 3: inflation expectations. But that they're also attentive to potential weakening.

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Speaker 3: And of course we got the GDP report on the

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Speaker 3: same day, and if you look underneath the hood, there

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Speaker 3: has been quite a bit of moderation in those core

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Speaker 3: domestic components, particularly the consumer, over the first half of

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Speaker 3: the year. So they are balancing those two potential risks,

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Speaker 3: and they really want that additional data before they make

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Speaker 3: a decision to move further potentially on cutting rates.

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Speaker 4: You know, LOI, We've had a number of guests over

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Speaker 4: the last several days, maybe even weeks, say, well, it

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Speaker 4: just kind of feels like a year ago, or maybe

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Speaker 4: the Fed decided not to move in July when the

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Speaker 4: data suggested maybe they should, and then they were forced

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Speaker 4: to maybe go a little bit more than they wanted

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Speaker 4: to do in September. You feel like the Fed might

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Speaker 4: be behind the times here a little bit in terms

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Speaker 4: of cutting rates.

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Speaker 3: So I think there is always that risk that the

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Speaker 3: Federal Reserve, in the effort to get more data to

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Speaker 3: be more certain, waits a little longer than would have

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Speaker 3: been ideal with the benefit of hindsight. But we already

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Speaker 3: were talking about just how much uncertainty the evolving tariff

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Speaker 3: landscape is injecting into the outlook for the dual mandate

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Speaker 3: for both inflation and unemployment, and that explains, I think

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Speaker 3: why they are stuck waiting.

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Speaker 2: I've got two things to talk about here, doctor brainer

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Speaker 2: that I think are important. What a nasty I'll ed

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Speaker 2: by you in the Washington Boast a few weeks ago

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Speaker 2: it was the close ara out Low Brainerd going after

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Speaker 2: the president. The treatment of chair of Chair Pole love Brainerd.

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Speaker 2: Is things smoothed down a little bit even with Trump

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Speaker 2: treats even the morning is well, does the industry have

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Speaker 2: mister Powell's back?

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Speaker 3: Well, Look, I think what has been surprising to me

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Speaker 3: is to hear the President talk about lowering rates as

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Speaker 3: though it is the Federal Reserves responsibility to lower rates

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Speaker 3: for US Treasury debt management. And that, of course is

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Speaker 3: exactly how central banks go wrong in emerging markets like Turkey.

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Speaker 3: When the President the administration lean on a central bank

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Speaker 3: to prioritize lowering the cost of borrowing to the government,

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Speaker 3: it undermines the inflation control credibility of the central bank,

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Speaker 3: and so for me, of course, what is very important

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Speaker 3: is that the Federal Reserve continue to have that credibility

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Speaker 3: for inflation fighting. Now it's more important than ever, having

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Speaker 3: just come off period of high inflation and of course

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Speaker 3: facing some inflation from tariff, so that independence is more

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Speaker 3: important than ever.

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Speaker 2: Well, I look at the tariff you know what's changed

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Speaker 2: since your Washington Post op ed. I look at the

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Speaker 2: tariff debate, erning Tedesky doing great work at the budget

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Speaker 2: lab at Yale, allile Yale's to college in New Haven.

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Speaker 2: I don't know if you're familiar with that, but you know,

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Speaker 2: I look lol at the tariffs now, JP Morgan modeling

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Speaker 2: eighteen percent, clearly Smoot Hawley nineteen thirty three, maybe back

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Speaker 2: to the Gilded Age. Will the president be overcome by

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Speaker 2: events if we see job jobless increase, if we see

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Speaker 2: GDP decrease, do you just assume at some point, like

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Speaker 2: mckinnley adjusted, and I think it was nineteen oh one,

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Speaker 2: is Trump going to have to adjust to the failure

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Speaker 2: of the magnitude move in tariffs?

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Speaker 3: Well, it's very hard to say right now. Of course

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Speaker 3: I don't have any insights into that, but I would

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Speaker 3: say what is clear to me, because I have been

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Speaker 3: listening carefully to the Treasury Secretary and the President, is

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Speaker 3: that they see tariffs as a way of raising revenues,

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Speaker 3: and they have a very aggressive revenue target for tariffs.

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Speaker 3: They want to raise hundreds of billions, three hundred billion

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Speaker 3: dollars a year in tariff revenues, which is an order

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Speaker 3: of magnitude larger than what we have seen recently, and

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Speaker 3: that means that tariff rights have to be at those

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Speaker 3: high smooth Haley levels with the attendant potential effects on

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Speaker 3: the labor market. And we've already seen substantial slowing in

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Speaker 3: the second quarter in terms of underlying private domestic final demand.

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Speaker 3: Consumers look like they are feeling a little bit cautious.

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Speaker 3: We can see that even in today's personal consumption expenditures day,

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Speaker 3: which really was very modest growth. So yes, I do

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Speaker 3: believe there's some risk that by trying to achieve those

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Speaker 3: very aggressive tariff revenue goals, they really are putting a

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Speaker 3: big dampener on what could be a very dynamic and

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Speaker 3: exciting period in American growth.

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Speaker 4: Lyle, the FED has that dual mandate, of course, of

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Speaker 4: full employment and price stability. Do you think one is

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Speaker 4: taking a precedent over the other these days within the Fed?

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Speaker 3: Well, I think we heard the chair talk about both

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Speaker 3: sides of the dual mandate yesterday risks to the upside

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Speaker 3: potentially on inflation, and we see it in this morning's

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Speaker 3: preferred Fed inflation gauge. You see those core goods going

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Speaker 3: back up again after a long period where they had

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Speaker 3: been coming down. But of course you also see it

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Speaker 3: in the labor market, where private hiring has really ground

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Speaker 3: to a halt. Now super market is in balance. As

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Speaker 3: the chair told everyone yesterday multiple times, the unemployment rate

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Speaker 3: has remained low, and that in part reflects the fact

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Speaker 3: that labor demand is falling at the same time that

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Speaker 3: labor supply is also being constricted on the immigration front.

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Speaker 3: So it remains in balance. But I do worry about

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Speaker 3: downside risks to employment.

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Speaker 2: Love bringing it a young upstart economist up at Harvard.

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Speaker 2: His name is let me look here, Jason Furman. I

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Speaker 2: think you may be familiar with Jason Furman. I love

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Speaker 2: what he's doing onannualized analysis. Folks out moments ago on

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Speaker 2: Twitter from Professor Firman driving x ten up at Harvard.

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Speaker 2: One month core PCE three point one percent, three months

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Speaker 2: two point six percent, six months annualize three point two percent,

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Speaker 2: twelve months two point nine percent, I'm sorry, Rick Michigan

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Speaker 2: and John B. Taylor at Stanford, those guys maybe policy

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Speaker 2: they're on different pages. They're in the same page that

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Speaker 2: core pc inflation all is too high, isn't it.

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Speaker 3: Well, the core PCE inflation is too high, and it's going,

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Speaker 3: unfortunately in the wrong direction. That is the bind. So

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Speaker 3: you know what we were seeing before a lot of

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Speaker 3: the tariffs started to get imposed was actually, finally services

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Speaker 3: inflation were coming down. Core goods had already come down,

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Speaker 3: and so core inflation was trending down towards the target.

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Speaker 3: Now it is detouring with those core goods lifting it again.

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Speaker 3: And core services actually in the last two months were

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Speaker 3: a little stronger than we had previously seen. So it's

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Speaker 3: moving in the wrong direction, and of course that's a concern.

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Speaker 2: And Paul I can't emphasize enough the granularity of these

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Speaker 2: are full time pros, heavyweights analyzing the tariff impact, guessing

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Speaker 2: out to Labor Day, guessing out to Christmas, guessing into

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Speaker 2: next year. And the answer is nobody's talking disinflation.

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Speaker 4: Disinflation. How about the consumer, lyle, how do you, given

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Speaker 4: the backdrop, so to Tom just outlined here, how do

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Speaker 4: you think the consumer is these days.

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Speaker 3: Well, we've got some insights into consumers and their feelings

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Speaker 3: about both the economy currently and their expectations through some

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Speaker 3: of the consumer surveys, and of course a little bit

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Speaker 3: less negative, but still quite negative relative to where it

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Speaker 3: had been before the tariff agenda started rolling out. They

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Speaker 3: seem to be worried that prices just are still too high,

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Speaker 3: and of course that now is creeping back into more goods.

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Speaker 3: But housing has been a problem for a while, and

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Speaker 3: that goes to the President's concerns, valid concerns. I think

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Speaker 3: that mortgage rates are quite high and then the housing

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Speaker 3: market is frozenly.

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Speaker 2: One more thing, I'll be quick here. This is the

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Speaker 2: magic of Twitter, if they would get if they get

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Speaker 2: their ex straightened out. I've got Jason Furman, Steve Rattner,

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Speaker 2: and Ernie Tedesky back to back to back in my feed. Lyle,

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Speaker 2: this is stunning from Ernie Tedesky. Now at Yale, durable

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Speaker 2: goods have risen by one point seven percent other than

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Speaker 2: the depths of COVID. That's the strongest six months rise

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Speaker 2: since nineteen eighty seven. Does Washington understand that, Lyle brainerd So,

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Speaker 2: I think Ernie is doing a great job pointing out

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Speaker 2: the granular.

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Speaker 3: Effects which have to be in part reflecting tariff effects.

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Speaker 3: And when we get pronouncements from the White House, sweeping

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Speaker 3: pronouncements that a country is going to see twenty five

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Speaker 3: percent tariffs, nineteen percent tariffs, you really wonder whether they've

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Speaker 3: had the time and the bandwidth to do the kind

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Speaker 3: of detailed analysis that would allow them to see that

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Speaker 3: some of those tariffs they're imposing are actually going to

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Speaker 3: disadvantage American producers because input prices are going up. It's

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Speaker 3: going to actually not only hurt American consumers, but in

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Speaker 3: many cases, like in US domestic auto producers, is actually

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Speaker 3: making their supply chains more expensive and will make them

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Speaker 3: less competitive.

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Speaker 2: This has been fabulous. I got goosebumps right, that's great. Love, Brainerd,

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Speaker 2: thank you so much with Richard Clarita in this hour

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Speaker 2: on our nation's economy and what it means for us.

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Speaker 2: Thank you to ninety two nine FM Boston or Boston

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Speaker 2: News Bureau for bringing us doctor Brainerd. This morning.

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

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Speaker 1: weekday after noons from seven to ten am Eastern. Listen

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Speaker 1: on Applecarplay and Android otto with the Bloomberg Business app

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Speaker 1: or watch us live on YouTube.

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Speaker 2: We are honored to have with us Richard clarda always

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Speaker 2: with Columbia University, with Pimco as well. The former Vice

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Speaker 2: chairman of the Fed, Ian Lincoln at Bank of Montreal,

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Speaker 2: the iconic Bank of Canada, just published and he said,

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Speaker 2: I'm sorry, every inflation series is ticking up. Do we

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Speaker 2: see tariffs in the minutia of price change already? Do

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Speaker 2: we see tariffs now?

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Speaker 5: Sure, they're starting to show up to some extent in

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Speaker 5: the inflation data, in particular in those sectors exposed to tariff.

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Speaker 5: Goods prices are moving up. The overall indexes are are

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Speaker 5: coming in more or less in line with expectations because

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Speaker 5: services inflation continues to fall.

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Speaker 4: So if you're the Fed, yeah, what did you hear

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Speaker 4: yesterday from our chairman? Yes, he send it a little

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Speaker 4: bit more hawkish than maybe the statement.

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Speaker 5: I don't know, Harry Truman. I think once said he

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Speaker 5: wanted he wanted to meet the one armed economist because

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Speaker 5: he kept getting on the one hand, on the other hand,

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Speaker 5: I think that was that's what we got yesterday from

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Speaker 5: from chair Powe. You know, very balanced. I think the

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Speaker 5: revealing moment was when he was asked by a reporter

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Speaker 5: about whether or not the dots at the June meeting

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Speaker 5: were indicative of where the committee was where they showed

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Speaker 5: two cuts this year. He basically said, look, that was

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Speaker 5: six weeks ago. We're not paying attention to that. So

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Speaker 5: he clearly, I think, came in with the goal of

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Speaker 5: giving himself and the committee optionality in September to pause

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Speaker 5: or to cut, and I think I think he achieved

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Speaker 5: that for sure.

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Speaker 2: I got to get this side of the way. I

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Speaker 2: have to ask, have you been contacted by the Trump

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Speaker 2: administration about future employment in our central Bank? I have not. Okay,

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Speaker 2: we're waiting on it. There was Psias Glenn Ubberd the

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Speaker 2: same question at the same silence treatment as well. In

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Speaker 2: your work in folks, this is wicked fancy mathematics called

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Speaker 2: dynamic stochastic general equilibrium theorem. Uncertainty is outside the system.

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Speaker 2: It's what we call exogenous. Our listeners, our viewers are

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Speaker 2: living indgenous uncertainty right now with all of these shocks

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Speaker 2: to the system led by tariffs. How do you color

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Speaker 2: the uncertainty that the PhDs, the FED face.

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Speaker 5: It is elevated. I think perhaps less elevated than it

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Speaker 5: may have been after Liberation Day. I think, in particular,

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Speaker 5: I think we have a better sense and firms have

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Speaker 5: a better sense of where we're going to end up

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Speaker 5: in terms of the new trade regime. And importantly also

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Speaker 5: we now sort of know the parameters of fiscal policy,

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Speaker 5: tariff revenue, the deals that are being caught in terms

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Speaker 5: of investment in the US. So there is uncertainty, but

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Speaker 5: I think it's moving in both directions. For the economy,

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Speaker 5: do we have clarity?

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Speaker 2: I mean, I look at the Yell budget lab Ernie

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Speaker 2: Tanowsky and that crew yesterday, Bob Michael modeling eighteen percent

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Speaker 2: blended work at JP Morgan maybe up to twenty percent

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Speaker 2: as well. How do people like you that have actually

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Speaker 2: studied the history give us I like to say, there's

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Speaker 2: Hubert Heaver tariffs, we're back to the thirties, We're back

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Speaker 2: to FDR and some you look at the series, we're

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Speaker 2: back late McKinley like, how do you process the magnitude

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Speaker 2: change in tariffs?

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Speaker 5: Well, sure, and we haven't seen we haven't seen trade

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Speaker 5: policy like this in a very long time. I think

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Speaker 5: right now I would say the economy's shown good resilience

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Speaker 5: so far, both both in the labor market and on

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Speaker 5: the GDP side. But I think anyone who pretends to

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Speaker 5: have a precise model or estimate. But I think importantly

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Speaker 5: what's going on here, Tom is you know that the

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Speaker 5: Trump folks are really trying to change the trading regime,

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Speaker 5: and it's early days in that, but I think that's

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Speaker 5: an important part of the story as well.

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Speaker 4: So, Richard, we had two FED Board governors dissented yesterday.

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Speaker 5: Both very good friends of mine and former colleagues.

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Speaker 4: So I FED people tell me that's kind of something

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Speaker 4: we should pay attention to that.

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Speaker 2: What did you make of it?

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Speaker 5: It's the first time I think in thirty plus years

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Speaker 5: that two governors have dissented. Reserve Bank presidents dissent more

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Speaker 5: and more frequently. Both Chris Waller and Mickey Bowman, I

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Speaker 5: think before the meeting indicated that that was going to

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Speaker 5: be their preference, and I think that I'm sure they

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Speaker 5: came into the meeting with sound and reasonable arguments for

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Speaker 5: beginning rate cuts right now. We'll probably hear from them

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Speaker 5: after the blackout is over as well. But share Powell

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Speaker 5: also acknowledged that he thought it was a good discussion

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Speaker 5: at the committee.

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Speaker 2: Do they negotiate descents like if there's someone who's the

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Speaker 2: third descent? Did they say, now you can wait to

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Speaker 2: the next meeting. Come on, you know, not at the

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Speaker 2: table in the Eckles building. Wait the tables under construction

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Speaker 2: fore right now? But is there a discussion within the

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Speaker 2: propriety of American we're all on the same page economics

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Speaker 2: that we almost negotiate who and who does not dissent?

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Speaker 5: I wouldn't, I wouldn't call the negotiation. What does happen?

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Speaker 5: And I think this happened under Bernanki and yelling as well.

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Speaker 5: But certainly during my time at the Palfeed, the chair

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Speaker 5: before each meeting had individual conversations with all all eighteen people.

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Speaker 5: Interesting and so there's there. You know, no one gets

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Speaker 5: blindsided going into the meeting about about the views on

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Speaker 5: the on the outlooks.

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Speaker 2: This is original. This goes back to Larry Myers and

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Speaker 2: Green spent in that meeting. Is it a courtesy that

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Speaker 2: you tell the chairman where you're heading?

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Speaker 5: Again, those conversations were typically by the.

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Speaker 2: Share really unhappy and showed ups today. No, no, no.

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Speaker 5: The During my time there, the chair did have individual

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Speaker 5: conversations with all eighteen folks. Obviously they were nineteen total,

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Speaker 5: and the purpose of those conversations was so that both

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Speaker 5: sides had a sense of where policy makers were heading

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Speaker 5: going into the meeting, and then during the meeting, which

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Speaker 5: go on for a day and a half. Sometimes minds

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Speaker 5: change as well during the meeting, but at least going

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Speaker 5: into the meeting, people all have a sense of where

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Speaker 5: other folks are.

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Speaker 4: I tell you what's changed this in the last couple

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Speaker 4: of days, Richard is. I think after yesterday's discussion, the

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Speaker 4: market's kind of pulling back a little bit on the

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Speaker 4: two rate cuts this year. I don't know before between

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Speaker 4: now in September, the Fed's going to get some more

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Speaker 4: inflation data. They're going to get some more labor market data.

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Speaker 2: Yeah. Are they just going to wait for that?

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Speaker 5: I guess.

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Speaker 4: I mean that's being data dependent. I guess right.

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Speaker 5: The chair indicated that yesterday. I think that that would

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Speaker 5: make sense. He'll also have another bite at the communications

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Speaker 5: apple to mixed metaphors at Jackson Hole in three weeks

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Speaker 5: and not always, but oftentimes the chairs do use Jackson

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Speaker 5: Hole as a way to preview the September meeting. So

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Speaker 5: perhaps another motivation for the two handed economist. Yesterday from

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Speaker 5: Jay Powell is I'll have the stage to himself at

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Speaker 5: the end of the month.

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Speaker 2: For all of you on your commute across the nation.

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Speaker 2: A wonderful treat today within the technology earnings allow Brainer

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Speaker 2: scheduled to be with us here later on in this

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Speaker 2: half hour, of course, all every work with our central bank,

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Speaker 2: and now Richard Clarida with us with Pimco, a former

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Speaker 2: vice chairman. I hate torst and Slock because on a

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Speaker 2: Wednesday he sends me an email from Apollo Global Management

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Speaker 2: with six seven things to read, and usually the top

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Speaker 2: ones are a little light quick reads. Here's what he

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Speaker 2: sends today. Clarida post pandemic, global inflation, disinflation and central

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Speaker 2: Bank policy responses, goes on, It's like a movie. It's

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Speaker 2: got a British movie. It's got a long title. Yeah,

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Speaker 2: Nber a paper you just published with your thoughts on

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Speaker 2: twenty one and twenty two. Take this important paper that

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Speaker 2: Torsten Slock mentions and bring it forward to present day

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Speaker 2: policy making.

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Speaker 5: I'll give you the quick elevator version. Please, global surgeon inflation,

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Speaker 5: Where did it come from? How do we think about it?

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Speaker 5: And what are the lessons learned, and the basic point

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Speaker 5: of that paper is essentially to summarize a lot of

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Speaker 5: sort of one stop shopping. If you don't read fifty papers,

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Speaker 5: you can read my summary of the papers. And the

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Speaker 5: basic story is the inflation came from three factors. A

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Speaker 5: once in a century pandemic which led to a shock

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Speaker 5: to supply, triggered a fiscal and monetary policy response, and

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Speaker 5: then on top of that, of course, you had the

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Speaker 5: Russian invasion of Ukraine. Policy reacted right, rates, inflation came down,

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Speaker 5: central banks were confident enough to cut rates. So I

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Speaker 5: think the lessons learned to me is once in a

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Speaker 5: century pandemic shocks are very challenging for policy, and on

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Speaker 5: the other side of it, inflation expectations are anchored. And

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Speaker 5: that's where we are.

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Speaker 2: Peter Orzag at Lazard Now I'm in a shop at

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Speaker 2: Lazard and also working and Brookings really emphasize the supply

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Speaker 2: side shocks that we had. Are we there now? Is

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Speaker 2: the tariff uncertainty now one big supply side shock. I mean,

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Speaker 2: witness copper, biggest drop for years that yesterday. Sure.

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Speaker 5: The other thing I'd like to emphasize as well is

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Speaker 5: the unemployment rate is low.

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Speaker 2: And that is great.

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Speaker 5: It's at a very low historical level, but there's still

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Speaker 5: room for the labor market to expand. In terms of

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Speaker 5: labor force participation, it's about a point below where it

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Speaker 5: was decades ago, especially among men prime age male. So

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Speaker 5: a low unemployment rate is good, but the economy's capacity

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Speaker 5: depends upon labor force as well, and I think there's

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Speaker 5: still room to run there.

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Speaker 4: President Trump continues his pressure on this fetter reserves, saying

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Speaker 4: that they should be cutting rates. But we have folks

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Speaker 4: that we really respect come through the studio that's say

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Speaker 4: that is behind again. It really needs to cut rates.

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Speaker 4: I mean, whether you look at real rents or whatever.

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Speaker 4: I mean, if you look at the real time data,

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Speaker 4: it's already there. The conditions are already there.

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Speaker 2: The cut rates.

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Speaker 4: How do you think about that?

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Speaker 5: I think a straight reading of sort of standard monetary

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Speaker 5: policy rules, including the ones I worked on with Girtler

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Speaker 5: and Galley, for a pretty wide range of assumptions, would

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Speaker 5: indicate that there's some room to cut rates from current levels.

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Speaker 5: The details will depend on the model and your views

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Speaker 5: of inflation, but anywhere in the range of you know,

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Speaker 5: of fifty to seventy five basis points from here under

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Speaker 5: the view that Waller and Embowman of express that the

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Speaker 5: tariffs are not really an inflation shock, they're a price

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Speaker 5: level shock. And so I think that is the case,

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Speaker 5: and I think Chirpell himself a month or so ago

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Speaker 5: indicated the butt for the trade policy uncertainty, they would

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Speaker 5: probably be cutting rates now.

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Speaker 2: But this is important, Richard. Yeah, I really can't say enough.

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Speaker 2: We are slaves to trend? Oh shuret for we cut rates.

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Speaker 2: It establishes a vector. Oh yeah, that we must follow.

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Speaker 2: Why I'm speaking for President Trump now, good morning, mister president.

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Speaker 2: If you'd like to call in, we'd love to talk

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Speaker 2: to you. Why in God's name can we just announce

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Speaker 2: let's just do a one off rate cut and see

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Speaker 2: where we stand in September or end of October. Why

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Speaker 2: are we slaves to trend?

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Speaker 5: I think that's the sixty four billion dollar question, and

438
00:26:44,000 --> 00:26:48,879
Speaker 5: it reflects the evolution in monetary policy. If you go

439
00:26:49,000 --> 00:26:51,080
Speaker 5: back to when Tom, you and I start our careers

440
00:26:51,119 --> 00:26:54,640
Speaker 5: in the in the eighties with with Vulgar, Vulgar would

441
00:26:54,680 --> 00:26:56,680
Speaker 5: never give you an indication of where rates we're going.

442
00:26:56,640 --> 00:26:58,399
Speaker 2: To be, Thank you, thank you. Years.

443
00:26:58,440 --> 00:27:00,560
Speaker 5: It was one meeting at a time, and for the

444
00:27:00,560 --> 00:27:02,760
Speaker 5: first half of green Span it was one meeting then

445
00:27:02,840 --> 00:27:03,359
Speaker 5: at a time.

446
00:27:03,400 --> 00:27:05,159
Speaker 2: But this is really important, folks.

447
00:27:05,280 --> 00:27:08,080
Speaker 5: Well, two things happened. The academic literature to which I

448
00:27:08,119 --> 00:27:11,720
Speaker 5: contributed said there can be benefits to providing guidance on

449
00:27:11,760 --> 00:27:15,720
Speaker 5: the rate path, and so I think policymakers fall in

450
00:27:15,760 --> 00:27:18,520
Speaker 5: love with that idea. They doubled down on it when

451
00:27:18,560 --> 00:27:21,200
Speaker 5: we hit the zero lower bound, and it made sense

452
00:27:21,240 --> 00:27:23,600
Speaker 5: to do that. But one of the points I make

453
00:27:23,640 --> 00:27:26,440
Speaker 5: in the paper that you nicely plugged, Tom, is that

454
00:27:26,960 --> 00:27:31,000
Speaker 5: monetary policy is not immune from the laws of economics.

455
00:27:31,200 --> 00:27:33,800
Speaker 5: There are benefits and cost to decisions, and there are

456
00:27:33,800 --> 00:27:37,159
Speaker 5: benefits in cost and diminishing returns. And I think you

457
00:27:37,280 --> 00:27:40,480
Speaker 5: raise a very good point. We could be in a

458
00:27:40,520 --> 00:27:43,800
Speaker 5: different world if basically the FED and other central banks said,

459
00:27:44,160 --> 00:27:45,560
Speaker 5: you know, there's a lot of uncertain we're going to

460
00:27:45,600 --> 00:27:47,000
Speaker 5: do one meeting at a time.

461
00:27:47,119 --> 00:27:49,080
Speaker 2: Let me cut to the chase. Are we live in

462
00:27:49,200 --> 00:27:53,000
Speaker 2: physics envy. We have a lot of fancy people, including

463
00:27:53,000 --> 00:27:56,919
Speaker 2: Clareness math folks. It's world class. I can't taste their shoelaces.

464
00:27:57,160 --> 00:28:00,600
Speaker 2: I can't tell you I'm a dinosaur. There's not a

465
00:28:00,640 --> 00:28:05,160
Speaker 2: dinosaur you're a dinaso. But are we slaves to the

466
00:28:05,160 --> 00:28:08,600
Speaker 2: certitude of inertial force where we set up a vector

467
00:28:09,040 --> 00:28:12,920
Speaker 2: and we've got a momentum of something. Are you kidding me?

468
00:28:13,240 --> 00:28:14,159
Speaker 2: We can't, wouldn't.

469
00:28:14,440 --> 00:28:17,960
Speaker 5: I wouldn't say we're slaves. But that mindset has a

470
00:28:18,080 --> 00:28:20,840
Speaker 5: very very powerful hold on a lot of thinking in

471
00:28:20,960 --> 00:28:22,879
Speaker 5: markets and in policy making.

472
00:28:23,320 --> 00:28:24,480
Speaker 2: Paul, get one more question.

473
00:28:24,560 --> 00:28:26,960
Speaker 4: In I'm going to take a million dollar cowboy bar

474
00:28:27,200 --> 00:28:32,920
Speaker 4: out out west somewhere next month, what should the FED

475
00:28:33,000 --> 00:28:36,359
Speaker 4: chairman say in Jackson Hole? Should he change his tune,

476
00:28:36,359 --> 00:28:39,000
Speaker 4: should he try to set up the market for September?

477
00:28:39,040 --> 00:28:41,040
Speaker 4: What do you think we will hear when Tom's out

478
00:28:41,040 --> 00:28:42,440
Speaker 4: there in a million dollar caboy bore.

479
00:28:44,000 --> 00:28:46,440
Speaker 5: I think he's probably going to devote his remarks to

480
00:28:48,000 --> 00:28:51,280
Speaker 5: previewing or laying out what they've decided in terms of

481
00:28:51,320 --> 00:28:53,960
Speaker 5: their framework. And I think what he will do is

482
00:28:54,040 --> 00:28:58,200
Speaker 5: embrace more or less traditional inflation targeting, saying we're not

483
00:28:58,480 --> 00:29:01,800
Speaker 5: close to the zero bound now, and policy will act

484
00:29:01,840 --> 00:29:05,120
Speaker 5: symmetrically in terms of what he does in terms of

485
00:29:05,160 --> 00:29:09,080
Speaker 5: the next meeting in September or the rest of the year.

486
00:29:09,240 --> 00:29:11,160
Speaker 5: I think it will depend in part on the data

487
00:29:11,160 --> 00:29:14,520
Speaker 5: that we get between now and then, and it will

488
00:29:14,560 --> 00:29:18,920
Speaker 5: depend as well on his assessment of his understanding of

489
00:29:19,680 --> 00:29:22,120
Speaker 5: the current trade regime.

490
00:29:22,240 --> 00:29:26,280
Speaker 2: Ye, I will read your paper and they'll have Can

491
00:29:26,320 --> 00:29:30,560
Speaker 2: I do a report card on a three by five card? Exactly,

492
00:29:30,920 --> 00:29:34,320
Speaker 2: Richard Claire to thank you so much, Absolutely brilliant, folks.

493
00:29:34,320 --> 00:29:37,880
Speaker 2: That was an absolute clinic on some of the trends,

494
00:29:38,320 --> 00:29:42,520
Speaker 2: the physics, the background of how these officials, saying Richard

495
00:29:42,520 --> 00:29:45,040
Speaker 2: Claire to the former vice chairman of the FED.

496
00:29:45,600 --> 00:29:49,520
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

497
00:29:49,520 --> 00:29:52,560
Speaker 1: starting at seven am Eastern on Apple Corplay and Android

498
00:29:52,560 --> 00:29:55,600
Speaker 1: Auto with the Bloomberg Business app. You can also listen

499
00:29:55,680 --> 00:29:58,960
Speaker 1: live on Amazon Alexa from our flagship New York station,

500
00:29:59,480 --> 00:30:03,640
Speaker 1: Just say Alexa Play Bloomberg eleven thirty A Mere Panda.

501
00:30:03,400 --> 00:30:06,200
Speaker 2: Joins us from JP Morgan, where they're looking at the

502
00:30:06,280 --> 00:30:10,800
Speaker 2: tech juggernaut from sixty thousand feet. How does tech in

503
00:30:10,880 --> 00:30:13,760
Speaker 2: America in this clear you know, I'm going to take

504
00:30:13,760 --> 00:30:18,160
Speaker 2: the ego of dish exceptionalism. How does it affect an

505
00:30:18,240 --> 00:30:19,960
Speaker 2: overall investment outlook?

506
00:30:20,600 --> 00:30:22,960
Speaker 6: When we think about the history of US exceptionalists and

507
00:30:23,000 --> 00:30:25,800
Speaker 6: over the last call it decade fifteen years. It's been

508
00:30:25,840 --> 00:30:29,200
Speaker 6: about economic exceptionalism when we think about this miracle of

509
00:30:29,600 --> 00:30:34,120
Speaker 6: high growth, relatively low inflation, relatively low interest rates as well,

510
00:30:34,680 --> 00:30:38,080
Speaker 6: but it's also been about corporate exceptionalism. And going forward,

511
00:30:38,120 --> 00:30:41,800
Speaker 6: we may have some deterioration in some of that economic exceptionalism,

512
00:30:42,200 --> 00:30:45,480
Speaker 6: but certainly you still have that corporate exceptionalism, and it's

513
00:30:45,560 --> 00:30:49,200
Speaker 6: rebirthing itself. It's just reviving itself time after time, in

514
00:30:49,240 --> 00:30:52,520
Speaker 6: twenty twenty three with the Ai Revolution, but also much

515
00:30:52,560 --> 00:30:55,440
Speaker 6: before that in the first phase of some of these companies.

516
00:30:55,440 --> 00:30:58,280
Speaker 6: So it has been spectacular to watch some of these

517
00:30:58,680 --> 00:31:01,240
Speaker 6: very mature companies reinvent them themselves and grow profits as

518
00:31:01,240 --> 00:31:01,520
Speaker 6: they have.

519
00:31:02,120 --> 00:31:05,000
Speaker 2: I just plugged into the Total Return Index five five

520
00:31:05,160 --> 00:31:08,080
Speaker 2: five on Microsoft. Yeah, which is where it's going to open.

521
00:31:08,120 --> 00:31:14,440
Speaker 2: I guess last ten years twenty nine percent per year, And.

522
00:31:14,160 --> 00:31:15,720
Speaker 4: I'm looking at it today and I'm like, how do

523
00:31:15,760 --> 00:31:17,680
Speaker 4: you not own it? Even today?

524
00:31:17,840 --> 00:31:20,360
Speaker 2: I don't own it? Thank you. Triple Lover's dog cash

525
00:31:20,520 --> 00:31:24,000
Speaker 2: mirror up to be asleep like a baby. All good, Mira.

526
00:31:24,880 --> 00:31:26,440
Speaker 4: What have we seen from earnings? What have you guys

527
00:31:26,480 --> 00:31:28,280
Speaker 4: seen from earning so far? And what do you what

528
00:31:28,280 --> 00:31:29,920
Speaker 4: do you think of the market needs to see from

529
00:31:29,960 --> 00:31:30,720
Speaker 4: earnings cycle.

530
00:31:31,160 --> 00:31:34,040
Speaker 6: Earnings have been pretty healthy, but also remember the fact

531
00:31:34,080 --> 00:31:36,680
Speaker 6: that estimates for earnings were basically cut in half for

532
00:31:36,760 --> 00:31:39,520
Speaker 6: this quarter since the beginning of the second quarter and

533
00:31:39,600 --> 00:31:42,000
Speaker 6: over the course there so the bar was relatively low.

534
00:31:42,240 --> 00:31:45,360
Speaker 6: We're seeing earnings surpass that you are seeing the MAG seven,

535
00:31:45,400 --> 00:31:47,960
Speaker 6: of course so far blowing the lice out on earnings,

536
00:31:48,200 --> 00:31:52,440
Speaker 6: expected to contribute about two thirds overall to earnings growth

537
00:31:52,480 --> 00:31:54,880
Speaker 6: over the course of this quarter, but that should broaden

538
00:31:54,960 --> 00:31:57,680
Speaker 6: out over the next couple of quarters. So the good

539
00:31:57,760 --> 00:32:00,840
Speaker 6: news is that we are not only hanging our hat

540
00:32:00,920 --> 00:32:06,160
Speaker 6: on MAG seven. Profits across the board story is improving incrementally,

541
00:32:06,400 --> 00:32:08,680
Speaker 6: But when you think about how that passes through to markets,

542
00:32:08,920 --> 00:32:11,360
Speaker 6: the MAG seven are driving about a third of the

543
00:32:11,400 --> 00:32:15,720
Speaker 6: returns in markets. So the market does not does demand

544
00:32:15,920 --> 00:32:18,800
Speaker 6: that the MAG seven continue to post these types of profits.

545
00:32:19,040 --> 00:32:21,160
Speaker 6: When I think about it from a broader allocation perspective

546
00:32:21,160 --> 00:32:23,000
Speaker 6: in terms of what clients do and don't own, we

547
00:32:23,040 --> 00:32:25,360
Speaker 6: should also remember that given the comeback in the MAG

548
00:32:25,400 --> 00:32:28,320
Speaker 6: seven itself, you probably already own a lot, so it's

549
00:32:28,360 --> 00:32:31,520
Speaker 6: not necessarily requiring us to double down on it. There

550
00:32:31,520 --> 00:32:33,160
Speaker 6: are names that you want to have in your portfolio,

551
00:32:33,440 --> 00:32:35,960
Speaker 6: but also think about broadening out beyond that. Given the

552
00:32:36,000 --> 00:32:37,960
Speaker 6: fact that this year, for the first time in a while,

553
00:32:38,160 --> 00:32:39,520
Speaker 6: we've got choices.

554
00:32:39,280 --> 00:32:41,440
Speaker 4: Well, one of the choices is, and we saw people

555
00:32:41,600 --> 00:32:43,680
Speaker 4: make this choice earlier in the year, is they move

556
00:32:43,760 --> 00:32:46,920
Speaker 4: money out of the US into rest of world, maybe

557
00:32:46,960 --> 00:32:51,480
Speaker 4: even European equities for example. How did you guys view

558
00:32:51,480 --> 00:32:53,720
Speaker 4: that kind of trend and did you guys participate.

559
00:32:54,160 --> 00:32:57,680
Speaker 6: We did see investors, at least at a headline level,

560
00:32:57,800 --> 00:33:01,120
Speaker 6: more interested outside of the US, but also didn't necessarily

561
00:33:01,160 --> 00:33:04,840
Speaker 6: see investors actually selling the US. You still have foreign

562
00:33:04,880 --> 00:33:07,440
Speaker 6: investors owning about a quarter of the treasury market at

563
00:33:07,440 --> 00:33:10,520
Speaker 6: about twenty percent of the equity market, and you also

564
00:33:10,560 --> 00:33:14,680
Speaker 6: see Americans and foreigners doubling down not only the retail segment,

565
00:33:14,760 --> 00:33:17,640
Speaker 6: but also increasingly the institutional segment. So I don't think

566
00:33:17,640 --> 00:33:21,360
Speaker 6: that sell America narrative is intact. However, I do think

567
00:33:21,400 --> 00:33:24,240
Speaker 6: that people are putting that incremental dollar towards some of

568
00:33:24,240 --> 00:33:28,080
Speaker 6: the other more diversified opportunities across the board internationally, and

569
00:33:28,120 --> 00:33:30,920
Speaker 6: it's not just the dollar. We're seeing the dollar move

570
00:33:30,920 --> 00:33:33,440
Speaker 6: a little bit higher, as Tom pointed out, and yet

571
00:33:33,720 --> 00:33:37,640
Speaker 6: international equities have survived on a number of different catalysts.

572
00:33:37,640 --> 00:33:40,560
Speaker 2: Bob Michael stopped me cold yesterday. It was a single

573
00:33:40,640 --> 00:33:44,680
Speaker 2: sentence of the Fed decides show Parole and Casman are

574
00:33:44,720 --> 00:33:49,320
Speaker 2: modeling now as earning. Tedeski at Yell budget lab eighteen

575
00:33:49,560 --> 00:33:54,160
Speaker 2: percent tariffs back to thirty three, thirty four, and Bob

576
00:33:54,200 --> 00:33:58,120
Speaker 2: even goes up to twenty percent, which to me is unimaginable. Folks,

577
00:33:58,160 --> 00:34:01,720
Speaker 2: this is like McKinley terrorists in the Gilded Age. If

578
00:34:01,720 --> 00:34:06,080
Speaker 2: we get that, what happens to an investment strategy in America.

579
00:34:06,720 --> 00:34:09,120
Speaker 6: We do have to be mindful that if we get that,

580
00:34:09,200 --> 00:34:13,440
Speaker 6: it's probably going to result in higher inflation and slower growth.

581
00:34:13,560 --> 00:34:15,360
Speaker 6: But we also have a little bit of a wrench

582
00:34:15,480 --> 00:34:17,400
Speaker 6: in the works here when we think about where we

583
00:34:17,440 --> 00:34:19,480
Speaker 6: get to in the beginning of next year, in that

584
00:34:19,520 --> 00:34:22,200
Speaker 6: we're going to start to see the impacts of fiscal stimulus.

585
00:34:22,200 --> 00:34:24,400
Speaker 6: When it comes to some of those tax cuts, some

586
00:34:24,520 --> 00:34:26,719
Speaker 6: of them are extensions, but there are some sweeteners in

587
00:34:26,760 --> 00:34:28,600
Speaker 6: there that are going to add some fiscal stimulus to

588
00:34:28,640 --> 00:34:31,800
Speaker 6: the economy that could potentially keep inflation a little bit higher.

589
00:34:31,880 --> 00:34:33,360
Speaker 6: It could also boost growth.

590
00:34:33,920 --> 00:34:37,200
Speaker 2: Do rate cuts come to rescue? Are rate cuts just

591
00:34:37,239 --> 00:34:40,960
Speaker 2: to normalize, or can they actually add on to the

592
00:34:41,000 --> 00:34:44,920
Speaker 2: stimulus of the huge fiscal bill. They could.

593
00:34:45,040 --> 00:34:47,480
Speaker 6: I'm not sure that rate cuts are actually as relevant

594
00:34:47,760 --> 00:34:49,440
Speaker 6: when we think about the fact that over the last

595
00:34:49,480 --> 00:34:52,040
Speaker 6: couple of years you've actually had even higher interest rates,

596
00:34:52,040 --> 00:34:55,239
Speaker 6: and you've had twenty plus percent markets even outside of

597
00:34:55,280 --> 00:34:57,000
Speaker 6: the mag seven. The S and P was up eight

598
00:34:57,000 --> 00:35:00,480
Speaker 6: percent ten percent over the last two years perspectively. So

599
00:35:00,520 --> 00:35:02,719
Speaker 6: we don't need rate cuts to save the market. I mean,

600
00:35:02,800 --> 00:35:04,919
Speaker 6: the market doesn't look like it needs any saving at all.

601
00:35:05,320 --> 00:35:07,719
Speaker 2: Have you been in the new building, not yet.

602
00:35:07,920 --> 00:35:10,320
Speaker 6: I've seen it. You can see in through the windows

603
00:35:10,360 --> 00:35:13,480
Speaker 6: from the building across the street. Very exciting, very exciting.

604
00:35:13,520 --> 00:35:15,360
Speaker 2: It's just, you know, then, all that's going on in

605
00:35:15,400 --> 00:35:17,640
Speaker 2: New York City in this tragedy is just great to

606
00:35:17,680 --> 00:35:22,200
Speaker 2: see the leadership at JP Morgan and Sitadel and others

607
00:35:22,200 --> 00:35:25,520
Speaker 2: on Kevin, I really can't say enough about it. You're Panda,

608
00:35:25,560 --> 00:35:29,320
Speaker 2: Thank you so much. Global Market Strategist JP Morgan, Investment

609
00:35:29,719 --> 00:35:30,480
Speaker 2: not Management.

610
00:35:36,760 --> 00:35:40,640
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

611
00:35:40,680 --> 00:35:43,720
Speaker 1: starting at seven am Eastern on Apple Coarclay and Android

612
00:35:43,719 --> 00:35:46,760
Speaker 1: Auto with the Bloomberg business app. You can also watch

613
00:35:46,800 --> 00:35:49,759
Speaker 1: us live every weekday on YouTube and always on the

614
00:35:49,760 --> 00:35:50,760
Speaker 1: Bloomberg terminal.

615
00:35:50,880 --> 00:35:54,560
Speaker 2: Now we go ever stronger market. Lehman is with Citizens,

616
00:35:54,840 --> 00:36:00,640
Speaker 2: JMP Securities. He is definitive on the culture of San

617
00:36:00,680 --> 00:36:05,839
Speaker 2: Francisco in Silicon Valley. This goes way back to Montgomery

618
00:36:06,400 --> 00:36:08,799
Speaker 2: and other aims in the past. This is a guy

619
00:36:08,960 --> 00:36:12,920
Speaker 2: with sell side, get out the Excel spreadsheet, cred but

620
00:36:13,080 --> 00:36:15,720
Speaker 2: also done em and A. I want to talk about

621
00:36:15,719 --> 00:36:19,680
Speaker 2: picking up the pieces off of First Republic May of

622
00:36:19,760 --> 00:36:23,839
Speaker 2: twenty twenty three. You've been intimately involved, not so much

623
00:36:23,840 --> 00:36:27,640
Speaker 2: in the details, but his San Francisco and Silicon Valley

624
00:36:27,760 --> 00:36:31,520
Speaker 2: recovered from that tobacco recovering.

625
00:36:33,719 --> 00:36:37,439
Speaker 7: And it's a good theme with what we talked about today,

626
00:36:37,440 --> 00:36:39,800
Speaker 7: and we'll talk about with Meta because it's about AI

627
00:36:40,440 --> 00:36:44,680
Speaker 7: and it starts with the election we had last year

628
00:36:45,000 --> 00:36:48,120
Speaker 7: and Daniel Lurie becoming mayor. So a year ago the

629
00:36:48,200 --> 00:36:51,480
Speaker 7: mayor Lendon Breed had about a thirty percent positive and

630
00:36:51,520 --> 00:36:54,360
Speaker 7: a seventy percent negative. Today Daniel Lurie is a seventy

631
00:36:54,360 --> 00:36:56,960
Speaker 7: percent positive and a thirty percent You probably couldn't get

632
00:36:57,000 --> 00:36:59,120
Speaker 7: a seventy percent positive on anything today.

633
00:36:59,320 --> 00:37:03,400
Speaker 2: You're Buch Frank Cautron yesterday. Yeah, this guy is like Frank,

634
00:37:03,800 --> 00:37:06,200
Speaker 2: you're more qualified than anybody I know to give me

635
00:37:06,239 --> 00:37:11,200
Speaker 2: the X axis on AI. Is AI equivalent to anything

636
00:37:11,280 --> 00:37:14,400
Speaker 2: in the past? And how far out do you see this?

637
00:37:15,400 --> 00:37:17,640
Speaker 2: As I'm speaking as an amateur, this boom.

638
00:37:18,480 --> 00:37:20,520
Speaker 7: It's I hate to say it because the stocks have

639
00:37:20,560 --> 00:37:22,759
Speaker 7: moved so much, but it's early and Met is a

640
00:37:22,760 --> 00:37:25,360
Speaker 7: perfect example of that. Some of the things that they're

641
00:37:25,400 --> 00:37:28,759
Speaker 7: starting to work on and starting to see are showing

642
00:37:28,840 --> 00:37:31,080
Speaker 7: in the numbers, but it's really just the beginning. And

643
00:37:31,239 --> 00:37:34,160
Speaker 7: I'll give you one example, Tom. They they even talked

644
00:37:34,160 --> 00:37:37,040
Speaker 7: about some of the the using large language models for

645
00:37:37,080 --> 00:37:39,640
Speaker 7: the first time, and as you know, those have been

646
00:37:39,760 --> 00:37:41,920
Speaker 7: we've been talking about those for a bit. But they're

647
00:37:42,080 --> 00:37:45,880
Speaker 7: starting to use those for some of their offerings. And

648
00:37:45,960 --> 00:37:48,120
Speaker 7: so we've already seen the numbers show up. We're already

649
00:37:48,120 --> 00:37:50,799
Speaker 7: seen what they're doing with Capax, but it's showing up

650
00:37:50,800 --> 00:37:52,960
Speaker 7: with the numbers already, and we're just at the beginning.

651
00:37:53,080 --> 00:37:54,399
Speaker 8: So as much as these.

652
00:37:54,320 --> 00:37:57,680
Speaker 7: Stocks have run in, as much as we've seen great

653
00:37:57,719 --> 00:38:00,520
Speaker 7: gains in the stock market, I hate to say this

654
00:38:00,560 --> 00:38:01,960
Speaker 7: because it's going to spook some people.

655
00:38:02,239 --> 00:38:03,400
Speaker 8: We may be early.

656
00:38:03,440 --> 00:38:06,640
Speaker 4: Interesting and Mark, I mean you're responsible for the state

657
00:38:06,640 --> 00:38:11,000
Speaker 4: of California, the business, investment, banking business for citizens in Californa.

658
00:38:11,000 --> 00:38:13,560
Speaker 4: That's like one of the biggest economies in the world.

659
00:38:14,239 --> 00:38:17,640
Speaker 4: Talk to us about California writ large, because we've heard

660
00:38:17,680 --> 00:38:19,719
Speaker 4: so many stories about people leaving New York, people leaving

661
00:38:19,719 --> 00:38:22,560
Speaker 4: California for Texas and Florida and so on. So how

662
00:38:22,680 --> 00:38:24,000
Speaker 4: is the economy in California.

663
00:38:24,120 --> 00:38:26,000
Speaker 7: So it's gone from the fifth biggest economy of the

664
00:38:26,000 --> 00:38:29,800
Speaker 7: world the fourth biggest. Citizens has now a major footprint

665
00:38:29,800 --> 00:38:31,960
Speaker 7: there where before it had a minor footprint. As you know,

666
00:38:31,960 --> 00:38:36,920
Speaker 7: they bought my predecessor firm, JMP, but they've gone in

667
00:38:36,960 --> 00:38:40,040
Speaker 7: a variety of markets, whether San Francisco, Silicon Valley, Orange County,

668
00:38:40,080 --> 00:38:43,040
Speaker 7: Los Angeles, San Diego. Citizens now is a footprint and

669
00:38:43,080 --> 00:38:45,920
Speaker 7: private banking and some of the halo that First Republic

670
00:38:46,040 --> 00:38:48,960
Speaker 7: had we've been fortunate to garner because we've just hired

671
00:38:48,960 --> 00:38:51,200
Speaker 7: some of these people who are really how many.

672
00:38:51,040 --> 00:38:54,160
Speaker 8: People say they love their bank and young people.

673
00:38:53,880 --> 00:38:56,040
Speaker 7: At First Republic love their bank, and we've been able

674
00:38:56,080 --> 00:38:57,960
Speaker 7: to garner some of that halo because it's all about

675
00:38:58,000 --> 00:39:01,760
Speaker 7: service and it's all about coordinating. We're coordinating across the platform,

676
00:39:01,800 --> 00:39:04,600
Speaker 7: so of our mid tier piers, we're coordinating across a

677
00:39:04,640 --> 00:39:06,920
Speaker 7: private bank and investment bank of commercial and consumer.

678
00:39:07,120 --> 00:39:11,719
Speaker 2: How will Silicon Valley defend against Lord Dell down in

679
00:39:11,800 --> 00:39:14,960
Speaker 2: Texas and Texas building out they're doing with the New

680
00:39:15,000 --> 00:39:19,239
Speaker 2: York Stock Exchange in Texas. Y'all Street, y'all street, what

681
00:39:19,280 --> 00:39:24,440
Speaker 2: are you watching land? How does California strategically defend against

682
00:39:24,440 --> 00:39:26,720
Speaker 2: the Dell juggernaut in Texas?

683
00:39:27,760 --> 00:39:30,319
Speaker 8: I think it's a big pie. I think we have

684
00:39:30,360 --> 00:39:31,440
Speaker 8: some things going for us.

685
00:39:32,080 --> 00:39:35,600
Speaker 7: Obviously we are as I'd like to say, the Golden

686
00:39:35,600 --> 00:39:36,600
Speaker 7: Gate Bridge isn't leaving.

687
00:39:36,840 --> 00:39:38,879
Speaker 8: Cal's not leaving. Stanford's probably not.

688
00:39:38,880 --> 00:39:40,640
Speaker 2: Leaving, so educational funding.

689
00:39:40,680 --> 00:39:43,640
Speaker 7: When I hear everybody's leaving San Francisco, I just have

690
00:39:43,800 --> 00:39:45,920
Speaker 7: my best guess is Call and Stanford are staying and

691
00:39:46,000 --> 00:39:48,279
Speaker 7: yet and the talent and the dollars that are being

692
00:39:48,280 --> 00:39:50,440
Speaker 7: spent on AI. You can look at the statistics the

693
00:39:50,560 --> 00:39:53,759
Speaker 7: dollars that are being spent in San Francisco, that's a

694
00:39:53,800 --> 00:39:54,279
Speaker 7: big number.

695
00:39:54,719 --> 00:39:58,719
Speaker 2: The horrific tragedy in New York City we're living in

696
00:39:58,760 --> 00:40:02,960
Speaker 2: the last seventy two hours with Blackstone, their commitment before

697
00:40:03,000 --> 00:40:06,920
Speaker 2: all of this horror to Western Pennsylvania is just absolutely

698
00:40:06,960 --> 00:40:11,840
Speaker 2: extraordinary again Carnegie Mellon University of Pittsburgh and that so

699
00:40:11,960 --> 00:40:15,480
Speaker 2: are we going to see a greater at the margin

700
00:40:15,640 --> 00:40:17,680
Speaker 2: cash commitment into Silicon Valley.

701
00:40:17,960 --> 00:40:19,360
Speaker 7: I think what you're going to see is a public

702
00:40:19,400 --> 00:40:22,360
Speaker 7: private partnership, and San Francisco is leading that. Like I

703
00:40:22,360 --> 00:40:25,680
Speaker 7: said at the top, Daniel Luriy and the business leaders

704
00:40:25,719 --> 00:40:29,600
Speaker 7: in San Francisco are committed to finding ways to exploit

705
00:40:29,840 --> 00:40:30,640
Speaker 7: the talent.

706
00:40:30,360 --> 00:40:32,400
Speaker 8: Base that we have. Some of the ills that we

707
00:40:32,440 --> 00:40:33,400
Speaker 8: have are being fixed.

708
00:40:33,800 --> 00:40:37,240
Speaker 7: And I think there's nothing we like more in this country.

709
00:40:37,640 --> 00:40:40,000
Speaker 7: To kind of denigrate things, but there's nothing we like

710
00:40:40,080 --> 00:40:43,040
Speaker 7: even greater that than a resurrection story. And I think

711
00:40:43,040 --> 00:40:45,400
Speaker 7: you're seeing that real time in San Francisco. And I

712
00:40:45,440 --> 00:40:48,080
Speaker 7: think that public private partnership is the most important thing.

713
00:40:48,520 --> 00:40:51,320
Speaker 4: Mark we heard from some of the big banks reported

714
00:40:51,360 --> 00:40:53,960
Speaker 4: earnings last week. We heard some pretty positive rhetoric from

715
00:40:53,960 --> 00:40:56,439
Speaker 4: the Jamie Diamonds of the world, the Brian Morny hands

716
00:40:56,440 --> 00:40:59,960
Speaker 4: of the world, talking about the big global capital markets business,

717
00:41:00,120 --> 00:41:02,000
Speaker 4: global banking business. How are you seeing it in the

718
00:41:02,000 --> 00:41:04,560
Speaker 4: mid market in California.

719
00:41:05,000 --> 00:41:06,359
Speaker 8: It's definitely picking up.

720
00:41:06,440 --> 00:41:09,400
Speaker 7: I think you're seeing the first signs of a resurrection

721
00:41:09,520 --> 00:41:14,239
Speaker 7: of the IPO market. It has not been like we

722
00:41:14,320 --> 00:41:16,480
Speaker 7: saw in twenty twenty one, and I will not predict that.

723
00:41:16,600 --> 00:41:18,239
Speaker 7: But you're going to see the back half of this

724
00:41:18,320 --> 00:41:20,600
Speaker 7: year a bunch of tech companies and a bunch of.

725
00:41:20,520 --> 00:41:22,320
Speaker 4: Who saw Figma price last night exactly?

726
00:41:22,320 --> 00:41:24,239
Speaker 7: And you're going to see several after Labor Day, and

727
00:41:24,239 --> 00:41:26,799
Speaker 7: you're gonna see more going out of twenty twenty six.

728
00:41:27,080 --> 00:41:30,560
Speaker 2: Tell us about electric generation, you know there's there's an

729
00:41:30,600 --> 00:41:33,759
Speaker 2: angst about it. I think nationwide. I'll say in Virginia

730
00:41:34,120 --> 00:41:36,440
Speaker 2: leading the way. But is there going to be a

731
00:41:36,480 --> 00:41:38,360
Speaker 2: power suck with the lights don't go on in the

732
00:41:38,400 --> 00:41:41,960
Speaker 2: Golden gate Bridge because of all the AI wrapped around

733
00:41:42,239 --> 00:41:43,680
Speaker 2: the San Francisco Giants.

734
00:41:43,880 --> 00:41:45,640
Speaker 8: Yeah, not.

735
00:41:47,200 --> 00:41:50,600
Speaker 7: As going to an eight and the postly All Star break.

736
00:41:50,640 --> 00:41:52,880
Speaker 7: There's two and eight after they also, right, but it's painful.

737
00:41:53,000 --> 00:41:54,799
Speaker 2: I traded with the Red Sox.

738
00:41:55,040 --> 00:41:56,720
Speaker 8: I did, and I'm not sure Devers is happy.

739
00:41:56,760 --> 00:42:00,000
Speaker 2: But his new homes have to see that, thank you.

740
00:42:00,120 --> 00:42:03,200
Speaker 7: But my hunch is no, I think there's going to

741
00:42:03,200 --> 00:42:07,160
Speaker 7: be the kind of innovation that we're seeing in technology.

742
00:42:07,200 --> 00:42:09,480
Speaker 7: You're going to see in power generation and it is

743
00:42:09,520 --> 00:42:12,040
Speaker 7: a land grab right now. And the Warren talent for

744
00:42:12,120 --> 00:42:16,640
Speaker 7: that is real. With the kind of AI purchase that

745
00:42:16,680 --> 00:42:18,640
Speaker 7: we've seen Matta make and Microsoft make, can we.

746
00:42:18,560 --> 00:42:21,759
Speaker 2: Go back to Mark Leman old school forget about this

747
00:42:21,840 --> 00:42:24,880
Speaker 2: executive m and a bank backed and all that. The

748
00:42:25,040 --> 00:42:29,680
Speaker 2: cash use of these juggernauts that we all own, we're

749
00:42:29,719 --> 00:42:33,120
Speaker 2: all living. Did they understand they have to deploy cash

750
00:42:33,239 --> 00:42:38,360
Speaker 2: to shareholders within buybacks or as Paul mentions always dividend growth.

751
00:42:40,320 --> 00:42:42,479
Speaker 7: If you're talking about the Big seven or Big eight,

752
00:42:43,280 --> 00:42:46,279
Speaker 7: I think, like we said, it is kind of a

753
00:42:46,320 --> 00:42:50,160
Speaker 7: Warren talent right now. And when you see the headlines

754
00:42:50,200 --> 00:42:52,520
Speaker 7: that Meta got for spending fifteen billion dollars for half

755
00:42:52,520 --> 00:42:54,719
Speaker 7: a company, they really spend fifteen billion dollars on a

756
00:42:54,719 --> 00:42:57,440
Speaker 7: bunch of talent and it barely is you know, it's

757
00:42:57,440 --> 00:42:59,520
Speaker 7: not one percent of the company, right so it looks

758
00:42:59,520 --> 00:43:01,680
Speaker 7: like an enormous number in an enormous bet, but it's

759
00:43:01,719 --> 00:43:04,000
Speaker 7: really not. And when you see the kind of returns

760
00:43:04,000 --> 00:43:06,399
Speaker 7: that the companies get on their investments and their investments.

761
00:43:06,080 --> 00:43:09,040
Speaker 8: Are people I think right now they think a bigger.

762
00:43:08,760 --> 00:43:12,319
Speaker 7: Investment is in that race, and it is a race

763
00:43:12,640 --> 00:43:14,720
Speaker 7: and there's four or five incumbents, and then there's obviously

764
00:43:14,800 --> 00:43:17,720
Speaker 7: open Ai, which we saw their valuation recently, and others.

765
00:43:17,760 --> 00:43:19,960
Speaker 7: But there aren't going to be twenty of these. And

766
00:43:20,960 --> 00:43:22,800
Speaker 7: there's one other thing that I think is really important

767
00:43:22,800 --> 00:43:25,160
Speaker 7: to know is that there are a couple of companies

768
00:43:25,200 --> 00:43:27,279
Speaker 7: that have resurrected. I have said for a very long

769
00:43:27,320 --> 00:43:29,440
Speaker 7: time there's only two tech companies who reinvent in themselves.

770
00:43:29,480 --> 00:43:30,600
Speaker 2: It's App on Microsoft.

771
00:43:30,800 --> 00:43:33,040
Speaker 7: But look at the market cap ascent of Oracle, look

772
00:43:33,040 --> 00:43:36,320
Speaker 7: at the market cap acent of IBM, and these companies

773
00:43:36,320 --> 00:43:40,680
Speaker 7: were left for dead basically obviously they really are. So

774
00:43:41,040 --> 00:43:44,279
Speaker 7: when you it's about leadership, and it's about talent, and

775
00:43:44,320 --> 00:43:46,800
Speaker 7: it's about drive in future.

776
00:43:46,440 --> 00:43:51,280
Speaker 2: Twenty seconds, Intel helpless.

777
00:43:51,080 --> 00:43:53,160
Speaker 7: You know, uh and video is going to market cap

778
00:43:53,200 --> 00:43:55,040
Speaker 7: is going to go out more than into three intels

779
00:43:55,040 --> 00:43:59,120
Speaker 7: today and I just I hate to be pessimistic.

780
00:43:59,160 --> 00:44:01,200
Speaker 8: It's really hard to find to wait that path for that.

781
00:44:01,280 --> 00:44:03,799
Speaker 2: I got goosebumps this week of technology, Mark Lehman with

782
00:44:03,880 --> 00:44:07,680
Speaker 2: his CEO citizens at JMP. That's a great brief before

783
00:44:07,719 --> 00:44:09,000
Speaker 2: we speak with enerrog Rana.

784
00:44:09,320 --> 00:44:13,240
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

785
00:44:13,280 --> 00:44:16,600
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto

786
00:44:16,680 --> 00:44:19,680
Speaker 1: with the Bloomberg Business app. You can also listen live

787
00:44:19,719 --> 00:44:23,319
Speaker 1: on Amazon Alexa from our flagship New York station. Just

788
00:44:23,360 --> 00:44:26,040
Speaker 1: say Alexa play Bloomberg eleven thirty the.

789
00:44:26,080 --> 00:44:27,960
Speaker 2: Way we roll. We got Mark Lehman with us here

790
00:44:27,960 --> 00:44:32,480
Speaker 2: with citizens JMP and anrog Rana on the physics of

791
00:44:32,520 --> 00:44:36,120
Speaker 2: this AI moment. He's with Bloomberg Intelligence and has been

792
00:44:36,440 --> 00:44:40,560
Speaker 2: absolutely dead on and I have courage for a long

793
00:44:40,680 --> 00:44:45,719
Speaker 2: tail of AI excellence ANIAG after what we saw yesterday.

794
00:44:45,800 --> 00:44:49,760
Speaker 2: I want you to frame out capital spending for twenty six,

795
00:44:50,400 --> 00:44:54,959
Speaker 2: twenty seven, and even twenty eight. Is it a linear expansion,

796
00:44:55,480 --> 00:44:59,040
Speaker 2: does it accelerate into the coming years, or is this

797
00:44:59,080 --> 00:45:01,399
Speaker 2: as good as a get.

798
00:45:01,760 --> 00:45:03,640
Speaker 9: So at least for the next two years, we think

799
00:45:03,760 --> 00:45:06,239
Speaker 9: the number are numbers are going to go up, the

800
00:45:06,320 --> 00:45:08,319
Speaker 9: rate of growth is going to slow down. But it's

801
00:45:08,360 --> 00:45:10,800
Speaker 9: tough to call out twenty seven and twenty eight because

802
00:45:11,320 --> 00:45:13,920
Speaker 9: right now we have just started to see the benefits

803
00:45:13,960 --> 00:45:17,640
Speaker 9: of all these investments that, for example, Microsoft has made.

804
00:45:17,960 --> 00:45:20,480
Speaker 9: So I think a lot depends on the pace of

805
00:45:20,520 --> 00:45:23,640
Speaker 9: adoption and more so on the enterprise side. To see

806
00:45:23,640 --> 00:45:25,920
Speaker 9: what twenty seven and twenty eight looks like. But at

807
00:45:25,920 --> 00:45:28,400
Speaker 9: this point we feel very confident about twenty five and

808
00:45:28,440 --> 00:45:29,000
Speaker 9: twenty six.

809
00:45:30,000 --> 00:45:30,840
Speaker 2: So I mean, for.

810
00:45:30,960 --> 00:45:34,120
Speaker 4: Microsoft, give us the two or three things that the

811
00:45:34,160 --> 00:45:36,480
Speaker 4: bulls are really hanging their hat on here. Again, we're

812
00:45:36,480 --> 00:45:39,280
Speaker 4: gonna looks like we're going to hit four trillion dollar

813
00:45:39,400 --> 00:45:40,440
Speaker 4: market cap here today.

814
00:45:41,600 --> 00:45:43,960
Speaker 9: So patly, I mean the simple you know, basics is

815
00:45:43,960 --> 00:45:47,439
Speaker 9: when when a company's size gets bigger, the growth rates

816
00:45:47,520 --> 00:45:50,600
Speaker 9: stops or slows down. In the Microsoft's case, you could

817
00:45:50,640 --> 00:45:53,600
Speaker 9: see that growth in Azure is accelerating. This is now

818
00:45:53,600 --> 00:45:55,960
Speaker 9: a seventy five billion dollar business as of the end

819
00:45:56,000 --> 00:45:59,279
Speaker 9: of lean a lost quarter. So in that case, when

820
00:45:59,280 --> 00:46:03,520
Speaker 9: you see growth rate in the thirties accelerating, that basically

821
00:46:03,560 --> 00:46:06,239
Speaker 9: shows that the AI adoption rate is picking up. And

822
00:46:06,600 --> 00:46:09,040
Speaker 9: you know, people just assume that this is just the

823
00:46:09,080 --> 00:46:12,200
Speaker 9: beginning of the adoption curve. Right now, all we're seeing

824
00:46:12,239 --> 00:46:15,319
Speaker 9: is the infrastructure spending and that's the benefit everybody's seeing,

825
00:46:15,360 --> 00:46:18,040
Speaker 9: whether it's Nvidia or you know, Dell servers, et cetera.

826
00:46:18,400 --> 00:46:20,320
Speaker 9: But now what we're seeing is adoption rate on the

827
00:46:20,360 --> 00:46:22,839
Speaker 9: cloud side, and I think that is really what is

828
00:46:22,880 --> 00:46:24,359
Speaker 9: exciting a lot of people out there.

829
00:46:25,719 --> 00:46:28,040
Speaker 4: So on argument, Well, take a look at Microsoft here,

830
00:46:28,120 --> 00:46:34,000
Speaker 4: I mean, what percentage of the cloud an AI do

831
00:46:34,040 --> 00:46:37,000
Speaker 4: you feel like is their market share versus some of

832
00:46:37,000 --> 00:46:39,640
Speaker 4: the competitors, because we still have to hear from Amazon.

833
00:46:40,640 --> 00:46:43,319
Speaker 9: Yeah, so when you look at just the cloud infrastructure site,

834
00:46:43,320 --> 00:46:46,160
Speaker 9: you know, they are the second biggest player after Amazon.

835
00:46:46,239 --> 00:46:48,600
Speaker 9: Amazon's you know rund rate as well, over one hundred billion.

836
00:46:49,040 --> 00:46:51,439
Speaker 9: But Amazon's growing in the you know, let's say around

837
00:46:51,480 --> 00:46:54,439
Speaker 9: the eighteen to twenty percent range. Microsoft now is showing

838
00:46:54,480 --> 00:46:56,880
Speaker 9: that they're growing, you know, thirty eight thirty nine percent.

839
00:46:57,120 --> 00:47:00,160
Speaker 9: That's a very big difference between the two. So, I mean,

840
00:47:00,320 --> 00:47:03,360
Speaker 9: just imagine as seventy five billion dollar business growing in

841
00:47:03,400 --> 00:47:06,600
Speaker 9: the mid thirties. And that's because they have that direct

842
00:47:06,640 --> 00:47:09,600
Speaker 9: relationship with open ai where they're getting the direct benefit

843
00:47:09,680 --> 00:47:11,799
Speaker 9: of U and B using more chat, GBT.

844
00:47:11,800 --> 00:47:13,680
Speaker 2: And right, let's do a two part question. I'll get

845
00:47:13,680 --> 00:47:16,520
Speaker 2: the apple on the back end of this color out

846
00:47:17,080 --> 00:47:21,279
Speaker 2: the nature of their businesses. Dani's is very big that

847
00:47:21,440 --> 00:47:27,440
Speaker 2: Microsoft is the enterprise cloud a person. What is Amazon?

848
00:47:27,640 --> 00:47:32,680
Speaker 2: What is Oracle in the rest? What's the character of

849
00:47:32,719 --> 00:47:34,200
Speaker 2: those cloud businesses?

850
00:47:35,320 --> 00:47:37,360
Speaker 9: I think that's probably one of the most important questions

851
00:47:37,400 --> 00:47:39,400
Speaker 9: for people to think about it right now, when you

852
00:47:39,440 --> 00:47:42,040
Speaker 9: look at somebody like an article there, I would say

853
00:47:42,080 --> 00:47:46,200
Speaker 9: primarily an infrastructured AI infrastructure player at this point, which

854
00:47:46,239 --> 00:47:48,399
Speaker 9: means you want to go there, you want to rent

855
00:47:48,400 --> 00:47:51,759
Speaker 9: out the GPUs and you are training your models. Microsoft

856
00:47:51,800 --> 00:47:54,520
Speaker 9: is basically said, that's the business they're not so keen on.

857
00:47:54,840 --> 00:47:57,840
Speaker 9: They really want to rent out capacity for training to others.

858
00:47:58,200 --> 00:48:00,400
Speaker 9: But they are really on the infant size, which is

859
00:48:00,600 --> 00:48:03,160
Speaker 9: when an application is running, they want to run that

860
00:48:03,239 --> 00:48:06,360
Speaker 9: application because they eventually want to grow with that application.

861
00:48:06,760 --> 00:48:08,520
Speaker 9: We think that's a more high value product.

862
00:48:08,760 --> 00:48:12,279
Speaker 2: So then bring it to Apple. This afternoon, Apple and

863
00:48:12,360 --> 00:48:15,520
Speaker 2: Google have a search agreement. Do you just assume there's

864
00:48:15,560 --> 00:48:19,000
Speaker 2: going to be an announcement that Google Gemini becomes part

865
00:48:19,040 --> 00:48:23,000
Speaker 2: of the Apple family. What do you see anaragus salvation

866
00:48:23,600 --> 00:48:25,760
Speaker 2: for Apple's AI, Miss.

867
00:48:26,640 --> 00:48:29,160
Speaker 9: Tom As far as I am concerned, you know, that

868
00:48:29,280 --> 00:48:31,880
Speaker 9: is the biggest overhang on the stock that nobody talks about.

869
00:48:32,360 --> 00:48:35,520
Speaker 9: That twenty billion our payment that comes from Google is

870
00:48:35,920 --> 00:48:38,399
Speaker 9: very high margin business adds really to the free cat

871
00:48:38,400 --> 00:48:41,600
Speaker 9: flow and the valuation of the company. If they ever

872
00:48:41,840 --> 00:48:43,799
Speaker 9: make a deal on that, I think it will be

873
00:48:43,960 --> 00:48:44,840
Speaker 9: good for the company.

874
00:48:44,880 --> 00:48:45,960
Speaker 2: It will be good for the stock.

875
00:48:46,400 --> 00:48:48,840
Speaker 9: But one of the good things Mark German has reported

876
00:48:49,000 --> 00:48:51,719
Speaker 9: is Apple's ready to go out and partner with other

877
00:48:51,760 --> 00:48:54,839
Speaker 9: companies to get their AI into their ecosystem. I think

878
00:48:54,880 --> 00:48:57,759
Speaker 9: once they do that, that's another overhang that goes away from.

879
00:48:57,680 --> 00:48:59,560
Speaker 2: Its all wants to get in here, let me be quick.

880
00:49:00,080 --> 00:49:01,359
Speaker 2: What are they waiting for?

881
00:49:03,480 --> 00:49:05,759
Speaker 9: I think it's a little bit of they take their

882
00:49:05,800 --> 00:49:09,359
Speaker 9: time and making these decisions. They are not yet. They

883
00:49:09,480 --> 00:49:12,280
Speaker 9: never do things in haste, and I think that speaks

884
00:49:12,320 --> 00:49:15,200
Speaker 9: to the way they treat their user base. They want

885
00:49:15,200 --> 00:49:17,719
Speaker 9: to protect their privacy, they want to make sure things

886
00:49:17,760 --> 00:49:20,560
Speaker 9: are fine for them. So again, I'm not gonna get

887
00:49:20,640 --> 00:49:22,279
Speaker 9: rid of my phone just because the AI is a

888
00:49:22,320 --> 00:49:24,759
Speaker 9: little bit slower. I can't make some pictures, but I

889
00:49:24,760 --> 00:49:26,800
Speaker 9: think it's gonna come over the next twelve months.

890
00:49:27,040 --> 00:49:28,880
Speaker 4: I mean that kind of goes to my point on

891
00:49:28,960 --> 00:49:31,600
Speaker 4: a rogaman. Every time I hear you and other smart

892
00:49:31,600 --> 00:49:34,040
Speaker 4: people like Mandep Seing talk about AI in the context

893
00:49:34,040 --> 00:49:39,080
Speaker 4: of Amazon or Microsoft, it just the initial question is

894
00:49:39,480 --> 00:49:42,680
Speaker 4: what about Apple? So it's I kind of feel like

895
00:49:43,080 --> 00:49:45,600
Speaker 4: they don't have to be first, but boy, they just

896
00:49:45,600 --> 00:49:48,800
Speaker 4: feel like they're getting every single day farther and farther behind.

897
00:49:48,960 --> 00:49:50,759
Speaker 4: I kind of feel like time is of the essence

898
00:49:50,760 --> 00:49:52,520
Speaker 4: for them to announce something major.

899
00:49:53,680 --> 00:49:57,120
Speaker 9: Yeah, I completely agree with you. But at the same time,

900
00:49:57,320 --> 00:50:00,000
Speaker 9: this is a company that controls probably the most important

901
00:50:00,480 --> 00:50:03,879
Speaker 9: distribution system for consumers out there. I mean, people will

902
00:50:03,920 --> 00:50:06,359
Speaker 9: stick to the phone no matter what if they get

903
00:50:06,440 --> 00:50:08,840
Speaker 9: if they get it wrong, but you know, Paul, that

904
00:50:09,000 --> 00:50:11,120
Speaker 9: really makes a huge difference for them. So this is

905
00:50:11,120 --> 00:50:14,160
Speaker 9: why they're taking their time. They're using multiple models to

906
00:50:14,200 --> 00:50:15,719
Speaker 9: figure out what's best for them.

907
00:50:15,920 --> 00:50:17,680
Speaker 2: I mean an rog just to keep up with you.

908
00:50:17,760 --> 00:50:20,120
Speaker 2: This guy's physics University of Deli. You know, I know

909
00:50:20,880 --> 00:50:25,200
Speaker 2: it's amazing. I mean anerrag I did MSFT equity. Tom

910
00:50:25,200 --> 00:50:28,799
Speaker 2: Sikunda said, time you gotta do more. Turn stay with

911
00:50:28,840 --> 00:50:31,400
Speaker 2: me on this, two hands on the steering wheel, okay,

912
00:50:31,719 --> 00:50:39,279
Speaker 2: Ani rag MSFT Equity, AAPL Equity. Hs I did a

913
00:50:39,400 --> 00:50:45,200
Speaker 2: ratio spread analysis, and Apple's failing off of Microsoft by

914
00:50:45,360 --> 00:50:51,040
Speaker 2: two standard deviations, which you know is ginormous. Where's the urgency?

915
00:50:51,440 --> 00:50:54,759
Speaker 2: And Cooper Tino, Well, think about it this way.

916
00:50:55,239 --> 00:50:58,839
Speaker 9: Microsoft sales last night grew at fifteen percent. Apple's gonna

917
00:50:58,880 --> 00:51:01,759
Speaker 9: grow at five percent. I've been debating I always never

918
00:51:01,840 --> 00:51:04,960
Speaker 9: understood why there was always their you know, valuations were

919
00:51:04,960 --> 00:51:07,360
Speaker 9: at parity at that point. Now we are coming to

920
00:51:07,400 --> 00:51:10,920
Speaker 9: a point when the valuation shows the growth potential of Microsoft.

921
00:51:11,200 --> 00:51:14,000
Speaker 9: Imagine a company this size growing at fifteen percent. I

922
00:51:14,000 --> 00:51:18,120
Speaker 9: mean that's pretty big. Apple six seven percent max at

923
00:51:18,160 --> 00:51:20,040
Speaker 9: the best at this point. If they come up with

924
00:51:20,080 --> 00:51:23,040
Speaker 9: a new iPhone seventeen, maybe it goes to seven or eight,

925
00:51:23,160 --> 00:51:26,200
Speaker 9: but that's where it ends. Frankly, doesn't go in double

926
00:51:26,200 --> 00:51:29,799
Speaker 9: digits under no circumstances. Can I see Apple growing in

927
00:51:29,840 --> 00:51:30,560
Speaker 9: double digits?

928
00:51:30,719 --> 00:51:35,560
Speaker 2: Interact thirty seconds? Is elon in this discussion? Yes?

929
00:51:35,600 --> 00:51:38,360
Speaker 9: But the question I always you know, wonder whether Zelan

930
00:51:38,480 --> 00:51:40,640
Speaker 9: or Meta is how are they going to monetize their

931
00:51:40,719 --> 00:51:41,760
Speaker 9: large language models.

932
00:51:42,040 --> 00:51:42,680
Speaker 2: Now this is.

933
00:51:42,640 --> 00:51:46,480
Speaker 9: Where Microsoft really has the biggest distribution army in the

934
00:51:46,640 --> 00:51:49,360
Speaker 9: enterprise world, so they will stick there. You know, AI

935
00:51:49,440 --> 00:51:52,560
Speaker 9: products across every enterprise out there, even if it's not

936
00:51:52,640 --> 00:51:54,640
Speaker 9: the best. I do not know how the others are

937
00:51:54,680 --> 00:51:56,440
Speaker 9: going to monetize that is.

938
00:51:56,400 --> 00:51:59,880
Speaker 2: This great Mark Linman back to back with the enter Atlanta.

939
00:52:00,160 --> 00:52:03,920
Speaker 2: Yep is in the on deck. Certain, yeah he is,

940
00:52:04,000 --> 00:52:06,640
Speaker 2: He's on the subway. It's just is that how you're

941
00:52:07,239 --> 00:52:10,080
Speaker 2: it's coming in than very good interog. Thank you so much,

942
00:52:10,160 --> 00:52:14,240
Speaker 2: an rog Rana. They're with great seats for the Chicago Cubs.

943
00:52:14,320 --> 00:52:15,680
Speaker 2: Oh yeah, it's unbelievable.

944
00:52:15,680 --> 00:52:17,440
Speaker 4: It's a burgeoning tech cub Chicago.

945
00:52:17,680 --> 00:52:20,200
Speaker 2: It is. It is a tech hub. Androg Rana, thank

946
00:52:20,239 --> 00:52:23,040
Speaker 2: you so much. That was fascinating on the different ais,

947
00:52:23,080 --> 00:52:24,560
Speaker 2: I don't pretend to understand it.

948
00:52:24,760 --> 00:52:29,600
Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,

949
00:52:29,680 --> 00:52:34,000
Speaker 1: and anywhere else you get your podcasts. Listen live each weekday,

950
00:52:34,120 --> 00:52:37,360
Speaker 1: seven to ten am Easter and on Bloomberg dot com,

951
00:52:37,480 --> 00:52:41,320
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952
00:52:41,600 --> 00:52:44,719
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953
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