1 00:00:02,400 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,600 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,440 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,239 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,680 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,280 --> 00:00:33,919 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,000 --> 00:00:35,840 Speaker 2: Terminal and the Bloomberg Business App. 10 00:00:36,400 --> 00:00:38,559 Speaker 3: We'll begin this hour with SMP five hundred set for 11 00:00:38,560 --> 00:00:41,440 Speaker 3: a weekly gain. Savita Supermanian, a Bank of America writing 12 00:00:41,800 --> 00:00:44,760 Speaker 3: sentiment is far from uphork. The consensus Wall Street broker 13 00:00:44,880 --> 00:00:48,720 Speaker 3: is recommending an average at location of just fifty six percent. 14 00:00:49,120 --> 00:00:53,400 Speaker 3: To US docs, this is not euphoria, Siviita joins us. Now, 15 00:00:53,440 --> 00:00:55,880 Speaker 3: thank you so much, good morning, Thanks thanks for joining us. 16 00:00:56,040 --> 00:00:58,520 Speaker 3: So it's not euphoria. What are we in right now? 17 00:00:58,520 --> 00:01:00,640 Speaker 4: What is this world? Yeah, the world. 18 00:01:00,480 --> 00:01:02,800 Speaker 5: Feels weird, but I think we're in that sort of 19 00:01:02,880 --> 00:01:07,160 Speaker 5: wall of worry stage where there are certain themes that 20 00:01:07,200 --> 00:01:10,040 Speaker 5: are getting a lot of credence and credibility like AI. 21 00:01:10,640 --> 00:01:12,840 Speaker 5: Other themes are kind of falling out of bed like 22 00:01:12,920 --> 00:01:17,160 Speaker 5: GLP one, and then you've got this potential broadening of 23 00:01:17,200 --> 00:01:20,120 Speaker 5: the market that we've all been waiting for with baited breath, 24 00:01:20,560 --> 00:01:24,080 Speaker 5: that I think is at a moment where it's it's 25 00:01:24,120 --> 00:01:27,320 Speaker 5: actually in the work. So if you read the transcripts, 26 00:01:27,319 --> 00:01:30,320 Speaker 5: and I love Lori's quote, but I think that when 27 00:01:30,360 --> 00:01:34,280 Speaker 5: you read the transcripts, companies are worried, but they're also 28 00:01:34,720 --> 00:01:38,600 Speaker 5: talking about the fact that they've delayed a lot of projects. 29 00:01:38,600 --> 00:01:41,800 Speaker 5: They haven't canceled them, they've delayed them. That means there's 30 00:01:41,840 --> 00:01:45,240 Speaker 5: a lot of pent up activity, business activity in the 31 00:01:45,319 --> 00:01:48,760 Speaker 5: pipes that is likely to be unfurled over the next 32 00:01:48,760 --> 00:01:51,600 Speaker 5: couple of quarters. And I think what really stemied that 33 00:01:51,720 --> 00:01:55,480 Speaker 5: pickup in broadening and you know kind of other companies 34 00:01:55,520 --> 00:01:59,720 Speaker 5: actually moving from you know they're very low low multiples 35 00:01:59,760 --> 00:02:03,280 Speaker 5: and low low levels, is the idea that we're past 36 00:02:03,360 --> 00:02:06,240 Speaker 5: a lot of the tariff uncertainty. I mean, granted, there 37 00:02:06,240 --> 00:02:08,400 Speaker 5: are curveballs that are thrown at us every day, but 38 00:02:08,480 --> 00:02:10,760 Speaker 5: we do know what's going on with Europe. You know, 39 00:02:10,760 --> 00:02:14,359 Speaker 5: we've got a better handle on how companies can actually 40 00:02:14,400 --> 00:02:17,400 Speaker 5: plan and do business. We're also starting to see I 41 00:02:17,400 --> 00:02:20,360 Speaker 5: think the beginnings of this m and A cycle, even 42 00:02:20,400 --> 00:02:23,560 Speaker 5: cross border MNA, so I think those are other animal spirits. 43 00:02:23,560 --> 00:02:27,000 Speaker 5: I could on LESHA a broader pickup in economic activity. 44 00:02:27,639 --> 00:02:29,920 Speaker 5: And then when we look at things like you know, 45 00:02:30,440 --> 00:02:35,280 Speaker 5: companies reporting, I think what's really noteworthy is that at 46 00:02:35,280 --> 00:02:39,320 Speaker 5: this point about eighty percent of companies have beat on revenue. 47 00:02:39,639 --> 00:02:40,360 Speaker 4: That's new. 48 00:02:40,560 --> 00:02:43,400 Speaker 5: We haven't seen this revenue surprise in a while. 49 00:02:43,919 --> 00:02:45,080 Speaker 4: So what that means is that. 50 00:02:45,000 --> 00:02:49,560 Speaker 5: Analysts mark down expectations very low for sales and demand, 51 00:02:50,000 --> 00:02:52,840 Speaker 5: and they're beating those lowered expectations. So I think this 52 00:02:52,960 --> 00:02:55,320 Speaker 5: all bodes well for a broader market. 53 00:02:55,440 --> 00:02:56,240 Speaker 4: I would stick with. 54 00:02:56,280 --> 00:02:59,760 Speaker 5: Large cap value stocks, companies that are you know, really 55 00:02:59,760 --> 00:03:02,760 Speaker 5: in the penalty box but could actually start to work 56 00:03:02,800 --> 00:03:05,360 Speaker 5: in an environment where you know, we do see earnings 57 00:03:05,360 --> 00:03:07,120 Speaker 5: broaden in a bigger pickup. 58 00:03:07,160 --> 00:03:09,960 Speaker 6: What happens if you add in rate cuts to all 59 00:03:10,000 --> 00:03:12,200 Speaker 6: of that, is that just jet fuel for the broadening 60 00:03:12,200 --> 00:03:14,080 Speaker 6: out and even maybe for some of the smaller companies. 61 00:03:14,160 --> 00:03:16,760 Speaker 5: I think it's jet fuel for small caps. I don't 62 00:03:16,840 --> 00:03:19,600 Speaker 5: know if large caps need a rate cut. I mean, 63 00:03:19,880 --> 00:03:21,320 Speaker 5: the thing that I like about the S and P 64 00:03:21,400 --> 00:03:23,880 Speaker 5: five hundred is it's kind of immune to the FED 65 00:03:24,480 --> 00:03:26,680 Speaker 5: because a lot of these stocks really move more on 66 00:03:26,800 --> 00:03:29,800 Speaker 5: long rates rather than short rates. So I think that, 67 00:03:30,200 --> 00:03:33,560 Speaker 5: you know, the refinancing risk is really firmly in the 68 00:03:33,639 --> 00:03:36,120 Speaker 5: Rustle two thousand rather than the S and P five hundred. 69 00:03:36,560 --> 00:03:38,560 Speaker 4: But I do think that a FED cutting. 70 00:03:38,240 --> 00:03:40,880 Speaker 5: Rates from these levels would be sort of a driver 71 00:03:41,000 --> 00:03:44,320 Speaker 5: for more positive sentiment on stocks, a shift out of 72 00:03:44,400 --> 00:03:48,480 Speaker 5: cash into stocks if inflation remains high. 73 00:03:48,800 --> 00:03:49,880 Speaker 4: I think there's one. 74 00:03:49,840 --> 00:03:53,920 Speaker 5: Pocket that the bulk of individual investors have to go to. 75 00:03:54,160 --> 00:03:57,360 Speaker 5: So think about individual investors that are mostly retirees. They're 76 00:03:57,400 --> 00:04:01,000 Speaker 5: sitting in big tech stocks and cash. If cash shields 77 00:04:01,000 --> 00:04:04,760 Speaker 5: are coming down but inflation is still relatively. 78 00:04:04,240 --> 00:04:06,720 Speaker 4: High, what are you going to do for real yield? 79 00:04:06,960 --> 00:04:10,119 Speaker 5: This is where I think that dividends, cash return, etc. 80 00:04:10,560 --> 00:04:13,720 Speaker 4: Come in. What worries me a little bit. 81 00:04:13,680 --> 00:04:15,880 Speaker 5: About the big ballast of the S and P five 82 00:04:15,960 --> 00:04:19,359 Speaker 5: hundred the AI spenders is that these guys are becoming 83 00:04:19,520 --> 00:04:24,479 Speaker 5: more capital intensive and that might not be great for 84 00:04:24,880 --> 00:04:25,960 Speaker 5: multiples for. 85 00:04:26,240 --> 00:04:27,599 Speaker 4: Cash return, et cetera. 86 00:04:27,800 --> 00:04:30,919 Speaker 5: In fact, we wrote a note this morning highlighting that 87 00:04:31,000 --> 00:04:34,600 Speaker 5: the magnificent six if you take out Tesla is growing 88 00:04:34,760 --> 00:04:38,440 Speaker 5: much more capital intensive and less R and D focused, 89 00:04:38,480 --> 00:04:41,800 Speaker 5: and I think that's something to watch because we're sort 90 00:04:41,800 --> 00:04:45,400 Speaker 5: of in the middle innings. I think of an AI 91 00:04:45,560 --> 00:04:50,640 Speaker 5: spend cycle, and if that continues, the asset lightness of 92 00:04:50,720 --> 00:04:53,760 Speaker 5: these megacap tech stocks is potentially compromised. 93 00:04:54,000 --> 00:04:54,720 Speaker 4: Your note you have. 94 00:04:54,800 --> 00:04:57,840 Speaker 3: We are moving from quote everyone spending on tech to 95 00:04:57,960 --> 00:04:59,720 Speaker 3: tech spending on everything data. 96 00:05:00,000 --> 00:05:01,679 Speaker 4: This has been a story of the entire quarter. 97 00:05:01,800 --> 00:05:03,760 Speaker 6: Yeah, it has been the story, and it's been a 98 00:05:03,760 --> 00:05:05,760 Speaker 6: lot of the reason why it's hard to be bearished. 99 00:05:05,760 --> 00:05:08,080 Speaker 6: But I do think this idea of the business model 100 00:05:08,160 --> 00:05:11,200 Speaker 6: changing is so interesting Cevita, because part of the thing 101 00:05:11,320 --> 00:05:14,360 Speaker 6: that people bought tech for was because they were capital 102 00:05:14,440 --> 00:05:17,880 Speaker 6: lights and you could get those really high valuations. 103 00:05:17,320 --> 00:05:20,039 Speaker 5: And great growth and yeah, great growth and free cash level. 104 00:05:20,120 --> 00:05:22,520 Speaker 6: So is there now a ceiling or will there start 105 00:05:22,560 --> 00:05:26,040 Speaker 6: to be a ceiling on multiples on valuations if it's 106 00:05:26,040 --> 00:05:27,360 Speaker 6: a different business model and. 107 00:05:27,279 --> 00:05:29,120 Speaker 4: All of a sudden they're capital intensive. 108 00:05:28,800 --> 00:05:31,080 Speaker 5: Well, I think you need to see the revenue beats 109 00:05:31,120 --> 00:05:34,200 Speaker 5: for these companies, because if you don't see top line 110 00:05:34,400 --> 00:05:38,520 Speaker 5: really accelerate along with capex, you're cutting into that earnings. 111 00:05:38,520 --> 00:05:40,120 Speaker 4: You're cutting into that free cash flow. 112 00:05:40,400 --> 00:05:44,240 Speaker 5: We've already seen the total shareholder return for the Magnificent 113 00:05:44,400 --> 00:05:49,360 Speaker 5: six drop since twenty fifteen. We've seen capex to sales 114 00:05:49,400 --> 00:05:51,880 Speaker 5: pick up, We've seen R and D to sales decline. 115 00:05:52,120 --> 00:05:55,480 Speaker 5: It's all happening. The question is when will it get 116 00:05:55,480 --> 00:05:58,120 Speaker 5: priced in? Because these stocks are trading near their all 117 00:05:58,200 --> 00:06:00,719 Speaker 5: time highs in terms of multiples. I think what we 118 00:06:00,800 --> 00:06:04,000 Speaker 5: start to see is a tradeoff where old economy stocks 119 00:06:04,200 --> 00:06:07,240 Speaker 5: are getting all these new tools to get more efficient 120 00:06:07,520 --> 00:06:12,160 Speaker 5: asset light, labor light, et cetera, whereas tech companies are 121 00:06:12,200 --> 00:06:15,440 Speaker 5: starting to get more asset intensive. It's a very sort 122 00:06:15,440 --> 00:06:20,919 Speaker 5: of slow burn shift or handing off of you know, 123 00:06:21,000 --> 00:06:22,920 Speaker 5: multiple expansion to multiple contraction. 124 00:06:23,000 --> 00:06:24,520 Speaker 4: But I think it's something to keep an eye on. 125 00:06:24,560 --> 00:06:26,320 Speaker 3: When it comes to policy. We have the one big, 126 00:06:26,320 --> 00:06:29,040 Speaker 3: beautiful bill. There is a little bit more of an understanding. 127 00:06:29,600 --> 00:06:31,800 Speaker 3: What's going on with terras? Yeah, what are you waiting 128 00:06:31,800 --> 00:06:33,880 Speaker 3: for out of Washington? What's the next shoot to drop? 129 00:06:34,200 --> 00:06:36,920 Speaker 5: You know, I think right now there's there are not 130 00:06:37,120 --> 00:06:39,640 Speaker 5: a lot of catalysts, and maybe you know the FED obviously, 131 00:06:39,760 --> 00:06:42,440 Speaker 5: but I think that you know, we're in an environment 132 00:06:42,480 --> 00:06:44,200 Speaker 5: where our near turn out look. 133 00:06:44,000 --> 00:06:45,279 Speaker 4: On equities isn't great. 134 00:06:45,360 --> 00:06:47,440 Speaker 5: I mean, we think a lot of the good news 135 00:06:47,520 --> 00:06:50,920 Speaker 5: is priced into the market. If you look at reactions 136 00:06:50,960 --> 00:06:53,640 Speaker 5: to beats, they were pretty good, but reactions to missues 137 00:06:53,720 --> 00:06:59,000 Speaker 5: were terrible. In fact, the worst downdraft to earnings missues 138 00:06:59,000 --> 00:07:01,400 Speaker 5: and sales missus in the history of our data since 139 00:07:01,760 --> 00:07:04,280 Speaker 5: reg FD back in two thousand and one. So this 140 00:07:04,360 --> 00:07:06,640 Speaker 5: means the good news is probably more than priced in 141 00:07:06,720 --> 00:07:08,920 Speaker 5: in the near term. I do think if we see 142 00:07:08,960 --> 00:07:11,440 Speaker 5: this broadening of earnings growth and we see a pickup 143 00:07:11,480 --> 00:07:14,960 Speaker 5: in some of the economic indicators, maybe the FED cut 144 00:07:15,000 --> 00:07:18,320 Speaker 5: is compromised or a continued cutting cycle is compromised, but 145 00:07:18,400 --> 00:07:20,360 Speaker 5: I think that's the driver for better earnings. 146 00:07:20,360 --> 00:07:21,640 Speaker 4: And you still think we're going to be at sixty 147 00:07:21,640 --> 00:07:22,600 Speaker 4: three hundred year end. 148 00:07:22,920 --> 00:07:25,600 Speaker 5: So sixty three one hundred is our year end forecast. 149 00:07:25,640 --> 00:07:28,240 Speaker 5: I think it's tricky because we've also got the mid 150 00:07:28,360 --> 00:07:32,200 Speaker 5: term elections coming up, So our twelve month forecast, which 151 00:07:32,240 --> 00:07:36,920 Speaker 5: is probably more important or relevant, is really for more 152 00:07:37,080 --> 00:07:40,760 Speaker 5: like five percent gains from here. I think what's interesting, though, 153 00:07:40,840 --> 00:07:43,320 Speaker 5: is that the years where you've seen the biggest earnings 154 00:07:43,320 --> 00:07:47,560 Speaker 5: recoveries haven't necessarily seen the strongest market returns. So that's 155 00:07:47,600 --> 00:07:49,760 Speaker 5: kind of what we're operating on, is the idea. 156 00:07:49,520 --> 00:07:50,840 Speaker 4: That earnings are coming back. 157 00:07:51,080 --> 00:07:56,600 Speaker 5: We're exiting a manufacturing recession, but market returns aren't necessariarily 158 00:07:56,600 --> 00:07:57,560 Speaker 5: going to be blockbuster. 159 00:07:57,720 --> 00:07:59,440 Speaker 4: Tavita, thank you so much for your time this morning. 160 00:07:59,440 --> 00:08:00,600 Speaker 4: Thank you, fantastics. 161 00:08:00,680 --> 00:08:13,160 Speaker 3: Vita Supermanian of a Bank of America. We're joined by 162 00:08:13,160 --> 00:08:17,160 Speaker 3: former Chief International Trade Counsel for the Senate Finance Committee, 163 00:08:17,200 --> 00:08:20,240 Speaker 3: Bruce Hirsch, and he writes, our trading partners have had 164 00:08:20,280 --> 00:08:22,880 Speaker 3: to adjust to the idea that these deals need to 165 00:08:22,880 --> 00:08:26,560 Speaker 3: include offers to purchase specific US goods or commit to 166 00:08:26,640 --> 00:08:30,119 Speaker 3: invest in the United States. The bigger the number, the better. Bruce, 167 00:08:30,160 --> 00:08:32,320 Speaker 3: thank you so much for joining us. This is exactly 168 00:08:32,360 --> 00:08:35,040 Speaker 3: what Danny and Oliver were just getting at. The issue 169 00:08:35,080 --> 00:08:37,760 Speaker 3: I have with this premise for Switzerland is that they 170 00:08:37,760 --> 00:08:41,880 Speaker 3: are top five foreign direct investor already into the United States. 171 00:08:43,080 --> 00:08:45,680 Speaker 1: Well, they certainly are, and we have a close trading 172 00:08:45,720 --> 00:08:48,240 Speaker 1: relationship with them, but we also have a trade deficit 173 00:08:48,280 --> 00:08:50,280 Speaker 1: with them, and a large part of that deficit is 174 00:08:50,320 --> 00:08:53,840 Speaker 1: on pharmaceuticals, and pharmaceuticals is one of the areas of 175 00:08:53,920 --> 00:08:57,319 Speaker 1: great concern that President Trump he wants to onshore that manufacturing. 176 00:08:57,640 --> 00:08:59,240 Speaker 1: So he's going to look at that deal perhaps a 177 00:08:59,280 --> 00:09:00,960 Speaker 1: little bit differently, and he looks at some of the 178 00:09:01,000 --> 00:09:05,200 Speaker 1: others also. He's really been counting on our trading partners 179 00:09:05,200 --> 00:09:07,600 Speaker 1: to reduce their terrorists the close to zero and that's 180 00:09:07,640 --> 00:09:11,680 Speaker 1: difficult politically for a country like Switzerland are doing agricultural products. 181 00:09:12,040 --> 00:09:14,640 Speaker 3: So what do you think Switzerland can offer at this point, 182 00:09:14,679 --> 00:09:17,800 Speaker 3: given the fact that Oliver just outlined how difficult these 183 00:09:17,800 --> 00:09:19,080 Speaker 3: negotiations have become. 184 00:09:20,559 --> 00:09:23,439 Speaker 1: Well, I mean, there's the possibility that they'll make some 185 00:09:23,559 --> 00:09:28,520 Speaker 1: very tough decisions on agricultural terriffs. Beyond that, you know, 186 00:09:28,600 --> 00:09:31,959 Speaker 1: if there have any other investments in the bank to 187 00:09:33,040 --> 00:09:35,480 Speaker 1: put on the table here, that probably is going to 188 00:09:35,480 --> 00:09:38,320 Speaker 1: be critical. I mean, I suspect that President Trump is 189 00:09:38,320 --> 00:09:42,120 Speaker 1: looking for some sort of investments in domestic manufacturing here 190 00:09:42,200 --> 00:09:45,560 Speaker 1: of pharmaceuticals, because that, again is what he cares about. 191 00:09:45,800 --> 00:09:48,280 Speaker 1: But it's hard to say, and they really are between 192 00:09:48,280 --> 00:09:49,240 Speaker 1: a rock and hard place. 193 00:09:49,520 --> 00:09:52,040 Speaker 6: Bruce Amory's have done really great reporting on this that 194 00:09:52,280 --> 00:09:54,800 Speaker 6: it did look like the Swiss and the US had 195 00:09:54,840 --> 00:09:57,760 Speaker 6: a deal before all of this unraveled. It's a less 196 00:09:57,800 --> 00:10:01,680 Speaker 6: traditional type of negotiation that you need to satisfy the 197 00:10:01,720 --> 00:10:05,640 Speaker 6: President himself rather than a coalition of stakeholders or the 198 00:10:05,679 --> 00:10:08,200 Speaker 6: Senate itself. You've been in the room under more traditional 199 00:10:08,240 --> 00:10:11,000 Speaker 6: trade frameworks. How does it change the negotiation when you're 200 00:10:11,000 --> 00:10:14,280 Speaker 6: really trying to favor a party of one instead of 201 00:10:14,320 --> 00:10:15,199 Speaker 6: more stakeholders. 202 00:10:16,080 --> 00:10:17,840 Speaker 1: Well, it's going to lead to a bit of confusion 203 00:10:17,880 --> 00:10:20,120 Speaker 1: on both sides at the table because I mean, as 204 00:10:20,160 --> 00:10:22,440 Speaker 1: you mentioned at one point, the question was, how do 205 00:10:22,480 --> 00:10:25,160 Speaker 1: you satisfy Congress? They're the ones who have to approve 206 00:10:25,200 --> 00:10:27,240 Speaker 1: the deal. With the end of the day, the groundwork 207 00:10:27,280 --> 00:10:30,640 Speaker 1: will have been done with Congress, with stakeholders to develop 208 00:10:30,679 --> 00:10:33,520 Speaker 1: a US position. Consultations will continue, your good sense of 209 00:10:33,520 --> 00:10:36,400 Speaker 1: what you need to do. Now you're trying to satisfy 210 00:10:36,400 --> 00:10:39,320 Speaker 1: a party of one. And because President Trump has a 211 00:10:39,360 --> 00:10:42,880 Speaker 1: number of objectives and they can shift whether it's revenue 212 00:10:43,000 --> 00:10:46,640 Speaker 1: or industrial policy, or leverage for trade or non trade objectives, 213 00:10:46,840 --> 00:10:48,520 Speaker 1: you just don't know. So both sides are at the 214 00:10:48,520 --> 00:10:51,000 Speaker 1: table and they're trying to figure out what will satisfy 215 00:10:51,080 --> 00:10:52,959 Speaker 1: President Trump, and they're not really quite sure. 216 00:10:53,280 --> 00:10:55,480 Speaker 6: Well to that point, we're in this environment where it 217 00:10:55,520 --> 00:10:57,320 Speaker 6: has been figured out the top line of the deal 218 00:10:57,679 --> 00:11:00,920 Speaker 6: first and then the details later bruce to what grief, 219 00:11:00,960 --> 00:11:04,559 Speaker 6: does that actually give the US more leverage as things progress. 220 00:11:04,679 --> 00:11:06,880 Speaker 6: The fact that we don't have these details, and it 221 00:11:06,960 --> 00:11:09,760 Speaker 6: is something that Washington can push back on because you 222 00:11:09,800 --> 00:11:13,400 Speaker 6: don't have the details in the fine print yet, well. 223 00:11:13,360 --> 00:11:15,880 Speaker 1: Well, you know, it certainly gives the opportunity for leverage. 224 00:11:15,920 --> 00:11:18,920 Speaker 1: It also gives the opportunity to disrupt the deals that 225 00:11:18,960 --> 00:11:21,959 Speaker 1: you've just cut. We've already seen in some of the 226 00:11:22,320 --> 00:11:25,360 Speaker 1: deals both with the EU and Japan. You know, they're 227 00:11:25,400 --> 00:11:28,079 Speaker 1: concerned about when certain parts of the deal with regard 228 00:11:28,120 --> 00:11:31,720 Speaker 1: to Section two thirty two National Security Secral tariffs, when 229 00:11:31,720 --> 00:11:33,360 Speaker 1: they're going to be implemented. They were expecting them to 230 00:11:33,400 --> 00:11:37,080 Speaker 1: be implemented right away and that hasn't happened. So, yes, 231 00:11:37,240 --> 00:11:40,160 Speaker 1: it gives leverage, but you know, the question is at 232 00:11:40,160 --> 00:11:43,120 Speaker 1: what cost and will it blow up the deal? So 233 00:11:43,160 --> 00:11:47,080 Speaker 1: it's a great challenge. It also sort of undermines a 234 00:11:47,120 --> 00:11:50,000 Speaker 1: lot of what these countries are looking for and what 235 00:11:50,000 --> 00:11:52,920 Speaker 1: the markets you're looking for, which is stability, because to 236 00:11:52,960 --> 00:11:56,240 Speaker 1: the extent that there are things like that, there are 237 00:11:56,240 --> 00:11:59,640 Speaker 1: these opportunities to disrupt the deals by continuing to push 238 00:11:59,720 --> 00:12:01,880 Speaker 1: after the top line has been agreed to. You know, 239 00:12:01,920 --> 00:12:05,360 Speaker 1: that can undermine that sense of stability that everybody's seeking. 240 00:12:05,720 --> 00:12:08,480 Speaker 3: Mody is looking for stability right now, Bruce. What's going 241 00:12:08,480 --> 00:12:10,880 Speaker 3: on with India and that trade negotiation. 242 00:12:12,440 --> 00:12:15,600 Speaker 1: Well, again, this really highlights the fact that the deals 243 00:12:15,600 --> 00:12:17,640 Speaker 1: are made at the top. And you know, we had 244 00:12:17,640 --> 00:12:19,920 Speaker 1: a situation in which the negotiators are right up to 245 00:12:20,000 --> 00:12:22,200 Speaker 1: the cabinet level thought they had a deal with India. 246 00:12:22,520 --> 00:12:25,200 Speaker 1: It was presented to President Trump and he looked at 247 00:12:25,240 --> 00:12:29,160 Speaker 1: it eventually and decided not enough. Again, a lot of 248 00:12:29,200 --> 00:12:31,400 Speaker 1: countries are going to zero. India wasn't willing to go 249 00:12:31,440 --> 00:12:35,199 Speaker 1: to zero on their agricultural goods, and so he just 250 00:12:35,240 --> 00:12:38,160 Speaker 1: said no. And this is going to create a real 251 00:12:38,320 --> 00:12:41,640 Speaker 1: challenge for a number of reasons. You know, we have 252 00:12:41,720 --> 00:12:43,800 Speaker 1: to India is going to have to make some tough choices. 253 00:12:43,840 --> 00:12:47,560 Speaker 1: Potentially they may have themselves kind of check of some sort. 254 00:12:47,880 --> 00:12:50,920 Speaker 1: But politically it's very difficult for Prime Minister Moti because 255 00:12:50,960 --> 00:12:54,240 Speaker 1: he presents himself as a strong leader and having to 256 00:12:54,559 --> 00:12:57,040 Speaker 1: appear to cave to pressure is really going to be 257 00:12:57,120 --> 00:13:00,800 Speaker 1: very difficult for him, either on these tariffs or on 258 00:13:00,840 --> 00:13:03,880 Speaker 1: the relationship with Russia. So it's going to be a challenge. 259 00:13:03,640 --> 00:13:05,599 Speaker 3: On that one, and he's even go out with the 260 00:13:05,679 --> 00:13:08,880 Speaker 3: rhetoric saying this is going to be challenging, but I'm 261 00:13:08,920 --> 00:13:10,560 Speaker 3: going to have to do it. He doesn't want to 262 00:13:10,559 --> 00:13:13,120 Speaker 3: cave at this moment. We're gonna be watching those trade 263 00:13:13,160 --> 00:13:17,160 Speaker 3: negotiations very carefully. Former Chief International Trade Council for the 264 00:13:17,200 --> 00:13:18,000 Speaker 3: Senate Finance. 265 00:13:17,840 --> 00:13:20,240 Speaker 4: Committee, Bruce Hirsh, thank you so much for joining us. 266 00:13:30,040 --> 00:13:32,840 Speaker 3: Don Vin of Key Bank has a sector weight rating 267 00:13:32,880 --> 00:13:33,880 Speaker 3: on Intel's shares. 268 00:13:33,960 --> 00:13:34,960 Speaker 4: John joins us now. 269 00:13:35,160 --> 00:13:37,920 Speaker 3: John Mandeep is really outlining here that it's not just 270 00:13:37,960 --> 00:13:40,040 Speaker 3: the President of the United States. He might be the 271 00:13:40,080 --> 00:13:43,000 Speaker 3: final nail in the coffin, but actually there is the 272 00:13:43,160 --> 00:13:46,839 Speaker 3: board that's pushing back on the CEO strategy right now 273 00:13:46,880 --> 00:13:47,840 Speaker 3: when it comes to Intel. 274 00:13:47,920 --> 00:13:50,480 Speaker 4: Do you think he can stay in the top position? 275 00:13:53,200 --> 00:13:56,000 Speaker 7: I think he can, right. I think if you kind 276 00:13:56,000 --> 00:13:59,120 Speaker 7: of take a step back, there's only a handful of 277 00:13:59,520 --> 00:14:02,840 Speaker 7: executive is out there that are capable of leading Intel. 278 00:14:03,000 --> 00:14:07,000 Speaker 7: And clearly during the search he was their top pick, 279 00:14:07,240 --> 00:14:10,520 Speaker 7: right he was on the board of Intel's deeply familiar 280 00:14:10,640 --> 00:14:14,120 Speaker 7: with the challenges that they had. He's had a lot 281 00:14:14,160 --> 00:14:20,120 Speaker 7: of success historically, He's been successfully run Cadence. So I 282 00:14:20,160 --> 00:14:21,920 Speaker 7: think he's you know, I think there's a lot of 283 00:14:21,960 --> 00:14:24,880 Speaker 7: noise going on right now. But you know, taking a 284 00:14:24,920 --> 00:14:28,240 Speaker 7: step back, he's the right person to kind of run 285 00:14:28,280 --> 00:14:29,080 Speaker 7: Intel at this point. 286 00:14:29,920 --> 00:14:31,240 Speaker 4: He's the right person John. 287 00:14:31,400 --> 00:14:33,760 Speaker 6: But what happens if it's a White House that is 288 00:14:33,880 --> 00:14:37,120 Speaker 6: unsatisfied if he stays on as CEO, Just how painful 289 00:14:37,160 --> 00:14:38,440 Speaker 6: could they make things for Intel? 290 00:14:40,600 --> 00:14:44,000 Speaker 7: Yeah, I think he's got to learn to kind of 291 00:14:44,040 --> 00:14:47,560 Speaker 7: manage up, if you will, to the White House. Obviously, 292 00:14:47,760 --> 00:14:52,320 Speaker 7: this is an uncharted territory for public company CEOs if 293 00:14:52,360 --> 00:14:55,480 Speaker 7: you are singled out by the President of the United States. 294 00:14:55,520 --> 00:14:59,920 Speaker 7: But yes, this would be extremely difficult if he doesn't 295 00:15:00,360 --> 00:15:02,440 Speaker 7: figure out how to kind of manage up to the 296 00:15:02,440 --> 00:15:06,120 Speaker 7: White House. You know, a big beneficiary Intel is of 297 00:15:06,160 --> 00:15:07,960 Speaker 7: the of the Chips Act, Right, They're going to get 298 00:15:07,960 --> 00:15:11,720 Speaker 7: a significant amount of funding from the US government to 299 00:15:11,760 --> 00:15:15,960 Speaker 7: support their manufacturing initiatives. And if he's not willing to 300 00:15:16,520 --> 00:15:20,520 Speaker 7: play nice and manage manage up, you know, a lot 301 00:15:20,560 --> 00:15:22,760 Speaker 7: of that funding could be at the at risk. 302 00:15:23,240 --> 00:15:25,760 Speaker 6: Well, he wrote a note made it public as well, 303 00:15:25,800 --> 00:15:27,600 Speaker 6: basically saying that they're trying to work with the White 304 00:15:27,640 --> 00:15:30,280 Speaker 6: House to alleviate any concerns John, what would it look 305 00:15:30,360 --> 00:15:33,680 Speaker 6: like to manage up how would Intel get out of 306 00:15:33,720 --> 00:15:36,520 Speaker 6: the situation in the ire of the president that they 307 00:15:36,520 --> 00:15:37,160 Speaker 6: have right now. 308 00:15:38,600 --> 00:15:41,480 Speaker 7: Yeah, I think at this point, I think the tension 309 00:15:41,840 --> 00:15:46,800 Speaker 7: between the administration and Lipu right now is how much 310 00:15:46,880 --> 00:15:50,640 Speaker 7: they're willing to commit to manufacturing the US. I think 311 00:15:50,680 --> 00:15:54,320 Speaker 7: if you look at Lipwui's predecessor, Pat he kind of 312 00:15:55,120 --> 00:15:57,000 Speaker 7: maybe was a little bit too aggressive in terms of 313 00:15:57,000 --> 00:16:01,160 Speaker 7: building out capacity to manufacture in the US is of 314 00:16:01,200 --> 00:16:03,960 Speaker 7: the mindset of if we build out this capacity, they 315 00:16:03,960 --> 00:16:07,720 Speaker 7: will come. Lippoo, as we've seen, has taken a much 316 00:16:07,760 --> 00:16:11,760 Speaker 7: more discipline approach at spending. He's come out and he said, 317 00:16:11,800 --> 00:16:15,080 Speaker 7: you know, we are very excited about our next process 318 00:16:15,120 --> 00:16:18,080 Speaker 7: Note fourteen A, but we are going to be much 319 00:16:18,120 --> 00:16:21,720 Speaker 7: more disciplined about it. Right if fourteen A doesn't pan 320 00:16:21,840 --> 00:16:26,480 Speaker 7: out as we'd like, I'm not ready at this point 321 00:16:26,520 --> 00:16:31,320 Speaker 7: to fully commit to fourteen A, which is leading manufacturing 322 00:16:31,320 --> 00:16:34,520 Speaker 7: in the US. So I think he's got to carefully 323 00:16:34,600 --> 00:16:38,520 Speaker 7: choose his words and commit communicate to the White House 324 00:16:38,760 --> 00:16:41,720 Speaker 7: that he's fully committed to US manufacturing, but he's got 325 00:16:41,720 --> 00:16:46,880 Speaker 7: to be very careful about committing the full amount there 326 00:16:46,960 --> 00:16:49,240 Speaker 7: and just be very careful about how he selects his words. 327 00:16:49,360 --> 00:16:51,600 Speaker 3: John, How can he be explicit to the President of 328 00:16:51,600 --> 00:16:53,560 Speaker 3: the United States when the Wall Street Journal this morning 329 00:16:53,640 --> 00:16:57,200 Speaker 3: is saying that he and some Intel directors have disagreed 330 00:16:57,520 --> 00:17:00,280 Speaker 3: about simple questions as whether or not the company should 331 00:17:00,320 --> 00:17:03,080 Speaker 3: stay in the manufacturing business or exit entirely. 332 00:17:03,360 --> 00:17:04,600 Speaker 4: Doesn't he need to shore. 333 00:17:04,440 --> 00:17:08,480 Speaker 3: Up his own company, the directors the board before he 334 00:17:08,600 --> 00:17:11,159 Speaker 3: starts making matter of fact statements to the President of 335 00:17:11,160 --> 00:17:11,800 Speaker 3: the United States. 336 00:17:14,320 --> 00:17:18,199 Speaker 7: Yes, I do agree that he's got to kind of 337 00:17:18,200 --> 00:17:22,480 Speaker 7: figure out also how to manage the board. But it's 338 00:17:22,480 --> 00:17:25,800 Speaker 7: not a surprise that they're having differences. But I think 339 00:17:25,800 --> 00:17:27,600 Speaker 7: this is why they needed to bring them in, you know, 340 00:17:27,600 --> 00:17:31,240 Speaker 7: I'll pat the previous YEO had the full support of 341 00:17:31,240 --> 00:17:35,600 Speaker 7: the board, and obviously that strategy wasn't working, so they 342 00:17:35,640 --> 00:17:38,560 Speaker 7: had to bring somebody in to kind of change up 343 00:17:38,600 --> 00:17:41,200 Speaker 7: the strategy. And I think that's that's what the board 344 00:17:41,359 --> 00:17:43,520 Speaker 7: and Laboo are going through it now. They're going through 345 00:17:43,560 --> 00:17:45,320 Speaker 7: some of those growing pains. 346 00:17:45,680 --> 00:17:47,080 Speaker 6: John, I would love to get your read on the 347 00:17:47,080 --> 00:17:48,879 Speaker 6: wider chip sector now that we've had some of their 348 00:17:48,920 --> 00:17:49,960 Speaker 6: earnings under our belt. 349 00:17:50,000 --> 00:17:50,480 Speaker 4: It was an. 350 00:17:50,400 --> 00:17:54,480 Speaker 6: AMD that was punished for voicing uncertainty when it comes 351 00:17:54,480 --> 00:17:56,159 Speaker 6: to whether or not they'll be able to sell some 352 00:17:56,200 --> 00:17:58,840 Speaker 6: of their key technology in China. You had the lights 353 00:17:58,880 --> 00:18:01,600 Speaker 6: of NXP for exams Semple saying they were uncertain of 354 00:18:01,640 --> 00:18:03,800 Speaker 6: how much of a pull forward they had in terms 355 00:18:03,800 --> 00:18:06,359 Speaker 6: of orders. Just how much clarity do you have on 356 00:18:06,359 --> 00:18:08,520 Speaker 6: the sector as a whole for where we move from 357 00:18:08,520 --> 00:18:11,119 Speaker 6: here with some of these tensions still very front and center. 358 00:18:12,840 --> 00:18:14,920 Speaker 7: Yeah, there are clearly a lot of cross currents right now. 359 00:18:15,280 --> 00:18:17,800 Speaker 7: I think the trend that we are seeing Last night 360 00:18:17,840 --> 00:18:21,680 Speaker 7: we had Marketship, which was a great print. Stocks down 361 00:18:23,000 --> 00:18:25,119 Speaker 7: eight percent pre market today. I think what we're seeing 362 00:18:25,200 --> 00:18:28,240 Speaker 7: right now is it doesn't matter how good your print 363 00:18:28,320 --> 00:18:31,440 Speaker 7: is and how good your results and guidance is, everything's 364 00:18:31,440 --> 00:18:33,720 Speaker 7: getting sold in this market. I think people are very 365 00:18:33,760 --> 00:18:37,000 Speaker 7: nervous that a lot of the strong results that we're 366 00:18:37,000 --> 00:18:40,520 Speaker 7: getting in this environment is a function of pull forward 367 00:18:40,560 --> 00:18:43,200 Speaker 7: demand related to tariffs. I think there's a lot of 368 00:18:43,240 --> 00:18:46,879 Speaker 7: concerns that this could result in a weaker second half. 369 00:18:46,960 --> 00:18:49,560 Speaker 7: There's a lot of concerns that this could undermine kind 370 00:18:49,560 --> 00:18:51,840 Speaker 7: of the cyclical recovery that we're seeing in the broader 371 00:18:52,600 --> 00:18:54,560 Speaker 7: chip sector. And then on top of that, right, you've 372 00:18:54,600 --> 00:18:59,040 Speaker 7: got these geopolitical uncertainty that is layering on top of that. Right, 373 00:18:59,240 --> 00:19:02,240 Speaker 7: just the other day in the middle of the earning period, 374 00:19:02,760 --> 00:19:05,480 Speaker 7: you know, you have the Trumpet administration levy one hundred 375 00:19:05,480 --> 00:19:10,280 Speaker 7: percent check tariff on companies that aren't willing to commit 376 00:19:10,359 --> 00:19:12,159 Speaker 7: to building in the US. 377 00:19:12,359 --> 00:19:14,720 Speaker 4: Right, and then potentially export controls. 378 00:19:14,760 --> 00:19:17,760 Speaker 3: And do they actually mean that they're going to be 379 00:19:18,040 --> 00:19:20,200 Speaker 3: licenses that are going to be taken back or will 380 00:19:20,240 --> 00:19:21,760 Speaker 3: they just be you turned like we saw at the 381 00:19:21,800 --> 00:19:23,800 Speaker 3: age twenty, John, thank you so much for your time 382 00:19:23,840 --> 00:19:37,639 Speaker 3: this morning, John Vin of key Bank Capital Markets, Colin Marker, 383 00:19:37,760 --> 00:19:40,560 Speaker 3: Charles Schwab writing the need for new FED chair to 384 00:19:40,600 --> 00:19:41,440 Speaker 3: cut rates. 385 00:19:41,240 --> 00:19:42,640 Speaker 4: Could be a point. 386 00:19:42,760 --> 00:19:45,120 Speaker 3: By the time FED chair pals term is up next year, 387 00:19:45,440 --> 00:19:48,040 Speaker 3: the FED may have cut three or four times. 388 00:19:48,400 --> 00:19:50,600 Speaker 4: Colin joins us now for more. Is this the irony 389 00:19:50,640 --> 00:19:50,919 Speaker 4: of all this? 390 00:19:51,000 --> 00:19:53,480 Speaker 3: The President is really job boning the FED and wants 391 00:19:53,520 --> 00:19:56,080 Speaker 3: to talk about maybe regime change at the FED by 392 00:19:56,119 --> 00:19:57,360 Speaker 3: time to get some of these appointments. 393 00:19:57,400 --> 00:19:58,639 Speaker 4: They were dumb what he wants. 394 00:19:58,920 --> 00:20:00,640 Speaker 8: I think Sid, I don't think it's going to matter 395 00:20:00,680 --> 00:20:03,760 Speaker 8: because what we saw with obviously the headline about the 396 00:20:03,760 --> 00:20:06,480 Speaker 8: weakening labor market. Now, there was already some support for 397 00:20:06,560 --> 00:20:09,040 Speaker 8: RAID cuts. It seems like there's even more support for 398 00:20:09,119 --> 00:20:11,719 Speaker 8: RAID cuts based on comments from various FED officials, and 399 00:20:11,960 --> 00:20:13,879 Speaker 8: the data basically says that if we do get that 400 00:20:13,920 --> 00:20:17,840 Speaker 8: weakening labor market, and if we look forward to say April, 401 00:20:17,840 --> 00:20:19,600 Speaker 8: May June of next year, the markets are pricing in 402 00:20:19,640 --> 00:20:22,760 Speaker 8: three or four RAID cuts. So even without the headlines 403 00:20:22,960 --> 00:20:25,159 Speaker 8: of a new FED chair, who's it going to be, 404 00:20:25,160 --> 00:20:28,120 Speaker 8: how dubbish are they going to be, we might see 405 00:20:28,280 --> 00:20:30,879 Speaker 8: a FED funds rate one hundred basis points lower than where. 406 00:20:30,760 --> 00:20:31,320 Speaker 4: We are right now. 407 00:20:31,359 --> 00:20:34,480 Speaker 8: That doesn't mean that the jaw boning might end. It 408 00:20:34,520 --> 00:20:36,720 Speaker 8: doesn't mean that we might not get a new FED 409 00:20:36,840 --> 00:20:40,199 Speaker 8: chair who is as dubbish as the administration wants. But 410 00:20:40,240 --> 00:20:42,320 Speaker 8: we have to remember that it's a committee, and I 411 00:20:42,320 --> 00:20:45,639 Speaker 8: think most committee members, whether it's a governor or a 412 00:20:46,160 --> 00:20:49,400 Speaker 8: district bank president, they look at their dual mandate and 413 00:20:49,480 --> 00:20:52,040 Speaker 8: they I think they're more methodical about how they're going. 414 00:20:52,000 --> 00:20:52,520 Speaker 4: To go about it. 415 00:20:52,560 --> 00:20:55,400 Speaker 8: So even the headlines might not stop, but I think 416 00:20:55,440 --> 00:20:56,439 Speaker 8: cooler heads will prevail. 417 00:20:56,560 --> 00:20:58,479 Speaker 6: Some people have made the point, though, and Paul Donovan 418 00:20:58,520 --> 00:21:01,920 Speaker 6: at UBS included that Waller's actually the most dubbish pick 419 00:21:01,960 --> 00:21:03,800 Speaker 6: you could have for a FED chair because he has 420 00:21:03,960 --> 00:21:07,040 Speaker 6: credibility with the rest of the committee and could sway 421 00:21:07,080 --> 00:21:08,359 Speaker 6: them to more dubbish. 422 00:21:08,440 --> 00:21:11,000 Speaker 4: Outlook is that, right would a Waller be. 423 00:21:11,000 --> 00:21:15,840 Speaker 6: The most dubbish pick over the Kevins, over anyone else based. 424 00:21:15,600 --> 00:21:16,080 Speaker 4: On what we've seen. 425 00:21:16,119 --> 00:21:17,879 Speaker 8: I don't know if he'd be the most dubbish pick, 426 00:21:18,080 --> 00:21:20,680 Speaker 8: but he's clearly dubbish. We could argue he's the most 427 00:21:20,720 --> 00:21:24,359 Speaker 8: dubbish member of the committee right now governors and district 428 00:21:24,359 --> 00:21:27,720 Speaker 8: bank presidents. But he's not out there talking about the 429 00:21:27,720 --> 00:21:30,720 Speaker 8: need for a three percentage point raidcut or something like that. 430 00:21:31,400 --> 00:21:34,760 Speaker 8: If the data were to change, maybe his tune or 431 00:21:34,760 --> 00:21:37,880 Speaker 8: tone would change, but right now we're not seeing that. 432 00:21:37,960 --> 00:21:40,600 Speaker 8: So it seems like he could be in line to 433 00:21:40,600 --> 00:21:42,960 Speaker 8: be the next FED chair. There's a lot going on, 434 00:21:43,000 --> 00:21:46,320 Speaker 8: you know. We have the temporary announcement for Myron because 435 00:21:46,359 --> 00:21:48,520 Speaker 8: we don't really know what Powell's going to do. So 436 00:21:48,600 --> 00:21:52,719 Speaker 8: if Powell stays on and Waller's already in there, he 437 00:21:52,800 --> 00:21:55,760 Speaker 8: could be a logical choice without making too many headlines, 438 00:21:55,960 --> 00:21:58,440 Speaker 8: without having to worry about the confirmation process. 439 00:21:58,480 --> 00:22:02,199 Speaker 6: Well, so, when Stephen I was announced, the market reaction 440 00:22:02,359 --> 00:22:04,000 Speaker 6: was slight, but there was one there, a little bit 441 00:22:04,000 --> 00:22:06,840 Speaker 6: of curve steepening. If you get someone like a Myron 442 00:22:06,920 --> 00:22:09,320 Speaker 6: or again one of the Kevins, a less traditional sort 443 00:22:09,359 --> 00:22:11,760 Speaker 6: of appointment to the FED chair, would. 444 00:22:11,560 --> 00:22:13,640 Speaker 4: You put on steepeners? Does that trade make sense? 445 00:22:14,240 --> 00:22:17,920 Speaker 8: We think steepeners make sense regardless, because we think short 446 00:22:18,000 --> 00:22:19,840 Speaker 8: term rates are likely coming down based on the data 447 00:22:19,840 --> 00:22:22,480 Speaker 8: we're seeing. But at the same time, we have fiscal 448 00:22:22,520 --> 00:22:25,600 Speaker 8: concerns that likely aren't going away anytime soon, and the 449 00:22:25,640 --> 00:22:29,240 Speaker 8: idea that inflation might stay elevated. We're not expecting a reacceleration, 450 00:22:29,359 --> 00:22:31,399 Speaker 8: but the idea that with the tariffs in place right 451 00:22:31,440 --> 00:22:34,359 Speaker 8: now at relatively high levels, we can see it stay 452 00:22:34,880 --> 00:22:37,320 Speaker 8: higher than we would have expected if we talked. 453 00:22:37,160 --> 00:22:38,440 Speaker 7: About this, say six months ago. 454 00:22:38,800 --> 00:22:41,680 Speaker 8: So we think maybe long term rates stay where they are, 455 00:22:41,720 --> 00:22:43,439 Speaker 8: maybe come down a little bit, but likely not as 456 00:22:43,520 --> 00:22:46,040 Speaker 8: much as short term rates. So I think whoever is 457 00:22:46,080 --> 00:22:47,679 Speaker 8: in charge of the Fed over the next six to 458 00:22:47,680 --> 00:22:49,919 Speaker 8: twelve months, we think the curve should continue to. 459 00:22:49,880 --> 00:22:52,400 Speaker 3: Steep In talking to Neil Dudda yesterday and he joined 460 00:22:52,400 --> 00:22:53,960 Speaker 3: the program this morning. He was talking with the fact 461 00:22:53,960 --> 00:22:57,119 Speaker 3: that Powell basically holds the cards if it is someone 462 00:22:57,160 --> 00:23:00,440 Speaker 3: that seems overtly political that the top administry wants to 463 00:23:00,440 --> 00:23:01,320 Speaker 3: put as a FED chair. 464 00:23:01,640 --> 00:23:02,679 Speaker 4: Do you think he stays on. 465 00:23:03,800 --> 00:23:06,160 Speaker 8: I don't know, and I say that because because it's 466 00:23:06,400 --> 00:23:08,399 Speaker 8: anybody's guess right now, and I think he's in a 467 00:23:08,440 --> 00:23:12,280 Speaker 8: really difficult position. On the one hand, he doesn't want 468 00:23:12,320 --> 00:23:13,760 Speaker 8: to or I think he does a really good job 469 00:23:13,880 --> 00:23:16,760 Speaker 8: of not politicizing it because he basically doesn't say much. 470 00:23:17,040 --> 00:23:20,440 Speaker 8: Anytime someone asks him a question or someone brings it 471 00:23:20,520 --> 00:23:22,320 Speaker 8: up at the press conference, he just defers and says, 472 00:23:22,320 --> 00:23:25,320 Speaker 8: we're looking at the data now. If there's a push 473 00:23:25,680 --> 00:23:30,240 Speaker 8: for someone who is, you know, very partisan, very political, 474 00:23:30,680 --> 00:23:33,840 Speaker 8: and is very loud about the need to cut rates sharply, 475 00:23:33,880 --> 00:23:37,640 Speaker 8: which the data right now doesn't support, maybe he stays 476 00:23:37,680 --> 00:23:40,920 Speaker 8: on because his term as governor doesn't end for another 477 00:23:40,960 --> 00:23:41,560 Speaker 8: few years. 478 00:23:41,760 --> 00:23:42,480 Speaker 4: But I think he's in a. 479 00:23:42,440 --> 00:23:45,440 Speaker 8: Really difficult position because that makes it seem like he's 480 00:23:45,640 --> 00:23:48,040 Speaker 8: politicizing it, when at the end of the day, I 481 00:23:48,040 --> 00:23:51,720 Speaker 8: think he's just trying to uphold the integrity of the committee, 482 00:23:51,720 --> 00:23:53,600 Speaker 8: because I really think he's trying to do the best 483 00:23:53,640 --> 00:23:53,960 Speaker 8: he can. 484 00:23:54,160 --> 00:23:57,000 Speaker 3: So you think he's trying to protect the institution, But 485 00:23:57,240 --> 00:23:59,080 Speaker 3: he in the end, if he were to do that, 486 00:23:59,160 --> 00:24:01,680 Speaker 3: he would end up become almost a shadow fed chair. 487 00:24:02,000 --> 00:24:04,880 Speaker 3: How can the market deal with that? 488 00:24:04,880 --> 00:24:06,920 Speaker 8: That's a great question. I think we just have to 489 00:24:07,000 --> 00:24:09,280 Speaker 8: understand that. Again, there's a lot of committee members, so 490 00:24:09,320 --> 00:24:11,880 Speaker 8: whether he's I wouldn't say he'd be a shadow fed chair. 491 00:24:11,960 --> 00:24:14,960 Speaker 8: He would just be one other voting member. I think 492 00:24:14,960 --> 00:24:17,120 Speaker 8: he has the respect of a lot of his colleagues 493 00:24:17,119 --> 00:24:17,399 Speaker 8: out there. 494 00:24:17,480 --> 00:24:20,040 Speaker 3: We're a senator saying that they're going to run for Congress, 495 00:24:20,160 --> 00:24:20,760 Speaker 3: for the House. 496 00:24:22,280 --> 00:24:26,280 Speaker 4: I think if he was there to do that, you know, he'd. 497 00:24:25,359 --> 00:24:28,119 Speaker 8: Be a voter, and he would vote based on what 498 00:24:28,560 --> 00:24:31,919 Speaker 8: the mandate suggests and what the data suggests. We have 499 00:24:31,960 --> 00:24:34,560 Speaker 8: a lot of time before next May. I think it's 500 00:24:34,560 --> 00:24:36,200 Speaker 8: going to be a really exciting couple of months. 501 00:24:36,240 --> 00:24:38,600 Speaker 6: Well, we have a lot of time, but we have 502 00:24:38,760 --> 00:24:42,360 Speaker 6: so much information to digest before that time. And this 503 00:24:42,440 --> 00:24:44,600 Speaker 6: week we had both a ten and a thirty year auction, 504 00:24:44,680 --> 00:24:47,040 Speaker 6: and both of them were pretty weak, or at least 505 00:24:47,080 --> 00:24:49,720 Speaker 6: just lackluster. Let's say, do you look at that and say, Okay, 506 00:24:49,720 --> 00:24:52,240 Speaker 6: this is real concerns about a bloting deficit and fed 507 00:24:52,280 --> 00:24:54,880 Speaker 6: independence or is it just yields have been lower. 508 00:24:54,640 --> 00:24:56,720 Speaker 4: Since the payrolls data, there was less demand. 509 00:24:57,080 --> 00:24:59,160 Speaker 8: I'd say all he above, you know, when we look 510 00:24:59,240 --> 00:25:01,719 Speaker 8: at the fifth concerns which are clearly there, and there 511 00:25:01,720 --> 00:25:04,359 Speaker 8: doesn't seem to be anyone on either side that wants 512 00:25:04,400 --> 00:25:06,320 Speaker 8: to fix this right now from in the grand scheme 513 00:25:06,359 --> 00:25:09,280 Speaker 8: of things. And if we have this you know, rising deficits, 514 00:25:09,400 --> 00:25:11,520 Speaker 8: rising debt, you know, we need to find more buyers there. 515 00:25:11,520 --> 00:25:13,639 Speaker 8: So I think that's one of the reasons why we 516 00:25:13,640 --> 00:25:15,680 Speaker 8: think yields could stay elevated for a little bit. We're 517 00:25:15,720 --> 00:25:18,359 Speaker 8: not worried that they're going to shoot significantly higher to 518 00:25:18,400 --> 00:25:22,040 Speaker 8: say six percent levels, seven percent levels, But if there 519 00:25:22,080 --> 00:25:24,160 Speaker 8: are concerns and weak auctions like we got this week 520 00:25:24,200 --> 00:25:27,160 Speaker 8: week at the margin, nothing crazy, but it shows that 521 00:25:27,200 --> 00:25:30,399 Speaker 8: maybe there is a slight pullback in demand. That's another 522 00:25:30,480 --> 00:25:32,359 Speaker 8: reason why yields can stay elevated and we see a 523 00:25:32,320 --> 00:25:33,040 Speaker 8: sleeper yield curve. 524 00:25:33,160 --> 00:25:36,400 Speaker 6: Okay, So to that point, bringing the whole conversation around, 525 00:25:36,720 --> 00:25:38,720 Speaker 6: if you have an appointment to the Fed, that in 526 00:25:38,760 --> 00:25:42,359 Speaker 6: practice doesn't matter because it's already going dubvish, but gives 527 00:25:42,359 --> 00:25:45,440 Speaker 6: that appearance, especially to foreigners, to seem to be one 528 00:25:45,440 --> 00:25:48,680 Speaker 6: that kind of chips away at the FED independence. Does 529 00:25:48,720 --> 00:25:51,520 Speaker 6: that then matter because it makes foreigners less willing to 530 00:25:51,600 --> 00:25:53,200 Speaker 6: fund the twin deficits of the US. 531 00:25:53,720 --> 00:25:55,439 Speaker 8: I think it would matter, and this is something we 532 00:25:55,440 --> 00:25:58,400 Speaker 8: talk about a lot about the idea of FED independence. 533 00:25:58,800 --> 00:26:00,879 Speaker 8: We're not worried right now now that they're going to 534 00:26:00,960 --> 00:26:02,800 Speaker 8: lose that. I mean, there's a lot of headlines about it, 535 00:26:02,840 --> 00:26:05,680 Speaker 8: but we've talked to d Nausey in this morning about it. 536 00:26:05,680 --> 00:26:07,920 Speaker 8: It's a committee, but that would be a concern for us. 537 00:26:08,000 --> 00:26:10,960 Speaker 8: You know, if there was a lack of independence, we 538 00:26:11,040 --> 00:26:13,240 Speaker 8: think we'd likely see a week er dollar. We think 539 00:26:13,359 --> 00:26:17,000 Speaker 8: we'd likely see long term meals rise because of that 540 00:26:17,240 --> 00:26:19,880 Speaker 8: loss of confidence in the markets. And when we look 541 00:26:19,920 --> 00:26:23,160 Speaker 8: at what we've seen in the TICK data, basically from 542 00:26:23,359 --> 00:26:27,560 Speaker 8: Liberation Day, initially the first month, we actually saw foreign 543 00:26:27,600 --> 00:26:30,080 Speaker 8: private investors sell a lot of a lot of their 544 00:26:30,119 --> 00:26:33,280 Speaker 8: treasury holdings that then reversed in May. So we kind 545 00:26:33,280 --> 00:26:35,520 Speaker 8: of have a cloudy picture right now. We're not really 546 00:26:35,560 --> 00:26:38,000 Speaker 8: sure what the long term trend will be. But what 547 00:26:38,040 --> 00:26:41,040 Speaker 8: that shows us is maybe more volatility, and that in 548 00:26:41,080 --> 00:26:43,399 Speaker 8: and of itself would result in kind of that higher 549 00:26:43,440 --> 00:26:44,480 Speaker 8: term premium colin. 550 00:26:44,480 --> 00:26:45,760 Speaker 3: As we close out the week, what are you looking 551 00:26:45,800 --> 00:26:48,320 Speaker 3: for next week. Is everything just gonna be dominated by CPI? 552 00:26:48,320 --> 00:26:51,400 Speaker 8: I think so. I think we'll have to look under 553 00:26:51,400 --> 00:26:53,440 Speaker 8: the surface. I mean, the headline gets a lot of 554 00:26:53,920 --> 00:26:55,919 Speaker 8: or gets a lot of headlines, but we'll have to 555 00:26:55,920 --> 00:26:59,080 Speaker 8: see what the difference is between goods and services. And 556 00:26:59,160 --> 00:27:01,320 Speaker 8: we'll have to see how much passed through we're seeing 557 00:27:01,520 --> 00:27:04,000 Speaker 8: in terms of goods, the imported goods, but are we 558 00:27:04,119 --> 00:27:06,600 Speaker 8: seeing a slowdown in services? Because I think that's the 559 00:27:06,640 --> 00:27:08,160 Speaker 8: big dichotomy right now. 560 00:27:08,000 --> 00:27:09,920 Speaker 3: Colin, thanks so much for your time this morning, Colin 561 00:27:09,960 --> 00:27:11,200 Speaker 3: Martin of Charles Schwabe. 562 00:27:11,960 --> 00:27:15,520 Speaker 2: This is the Bloomberg Surveillance podcast, bringing you the best 563 00:27:15,520 --> 00:27:18,600 Speaker 2: in markets, economics, an gio politics. You can watch the 564 00:27:18,640 --> 00:27:21,639 Speaker 2: show live on Bloomberg TV weekday mornings from six am 565 00:27:21,760 --> 00:27:24,919 Speaker 2: to nine am Eastern. 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