Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: This is the Bloomberg Surveillance Podcast. Catch us live weekdays
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Speaker 3: When you're a young cherub and you go to Colorado College,
Speaker 3: you study physics, which is what David Malpast joining as
Speaker 3: the former president of the World Bank iconic at bear
Speaker 3: Sterns years ago. David malpast darkens the door this morning.
Speaker 3: Casey has yet to concede. In Pennsylvania. Tuberville, the football coach, dragged.
Speaker 4: You into the Senate. He said, we need senate testimony.
Speaker 3: From David malpass On. You know, global economics in all that,
Speaker 3: you're one of the few people I know that's actually
Speaker 3: been in the trenches in the United States Senate. Do
Speaker 3: you see with this new administration, David, with your affiliation
Speaker 3: with the Republicans, do you see a suddenness rapid movement
Speaker 3: between the executive and the legislative.
Speaker 4: Branch or will it be slower and more iterative?
Speaker 5: Hi? Tom, And that's a great question and issue. I
Speaker 5: think it'll be pretty fast because there really is a
Speaker 5: mandate from the country to bring change.
Speaker 4: Then how do you see a mandate.
Speaker 3: I've got Vice President Harrison narrow it down to fifty
Speaker 3: forty it's something like two hundred and thirty eight thousand
Speaker 3: votes and.
Speaker 4: Three swing states.
Speaker 3: I got a guy in a San Joaquin Valley right now,
Speaker 3: Republican winning.
Speaker 4: By under three hundred votes.
Speaker 3: If the Democrats take west of Fresno, it's one more
Speaker 3: Democrat in the House.
Speaker 4: It's not a mandate, David.
Speaker 5: I beg to differ. So it means all seven of
Speaker 5: the swing states were one. And if you look at
Speaker 5: all the demographics, in other words, each but if you
Speaker 5: parse it by age, if you parsh it by by u,
Speaker 5: by by skills, you get people wanting change. And so
Speaker 5: that means the Senate is going to come Let's come
Speaker 5: to your question. There's a turnover, a very important turnover
Speaker 5: of the majority leader, and you know, the staff on
Speaker 5: all the committees turns over, and so there will be
Speaker 5: people whose lifeblood is not regulating and so that means
Speaker 5: a big change in how the Senate operates. Of course,
Speaker 5: it's the deliberative body, and it will take time to
Speaker 5: get some stuff done. But I'd imagine there's going to
Speaker 5: be a tax movement on the tax front very quickly,
Speaker 5: of course, on energy and on on on trade where
Speaker 5: the system is broken, so you'll see all of that moving,
Speaker 5: you know, month by month pretty rapidly.
Speaker 6: What do you think of some of the president's cabinet
Speaker 6: nominations to date? What is it? What have you kind
Speaker 6: of sensed?
Speaker 5: He's well, I think they're great. But what you see
Speaker 5: is him wanting change, change, change, And so that to
Speaker 5: me is the signal coming out of each area. Put
Speaker 5: strong people in that want change. Look at the energy
Speaker 5: pick so Chris, Chris, Right, Bergham are really strong, Lee's Eldon,
Speaker 5: and these are the energy side that can make you know,
Speaker 5: if you think about how do you make America strong again?
Speaker 5: And this is peace through strength? Where do you get
Speaker 5: the strength from production?
Speaker 4: How do you do that?
Speaker 5: You get the energy sector going so that you can
Speaker 5: build all the other things that go into an economy.
Speaker 3: Yeah, but we're like, aren't we like the number one
Speaker 3: energy power in the world now bigger than Saudi Arabia.
Speaker 4: There's an oversupply.
Speaker 3: McLoone says a barrel of oil is going to twelve
Speaker 3: bucks a barrel I'm.
Speaker 4: Kidding, be well, stranger.
Speaker 5: You know, remember when to ten dollars a barrel in
Speaker 5: the year two nineteen ninety nine, in two thousand, when
Speaker 5: the dollar is super strong, overly strong. So I don't
Speaker 5: know that we want that low, but it would be
Speaker 5: good if it comes down. And the bigger thing is
Speaker 5: the US could be doing so much more. You just
Speaker 5: named parts of the world that are plentifully supplied, but
Speaker 5: they are huge parts of the world that don't have
Speaker 5: enough energy. And think of the craziness that we've got
Speaker 5: because of the lack of pipelines. We've got the energy.
Speaker 5: The L and G goes through the Panama Canal. It's
Speaker 5: such a wasteful use of the water. You know, Panama
Speaker 5: Canal is driven by free flowing water that comes from rain,
Speaker 5: and you wash the ships down both sides of the canal.
Speaker 5: And you're doing it to get LNG to Asia from
Speaker 5: the unit from the East coast.
Speaker 3: Harbor overlooking they're already San Francisco Giants Stadium.
Speaker 5: There needs to be some way to get energy onto
Speaker 5: the west coast of either the US or Canada. They're
Speaker 5: building one into Mexico, but how does that really help
Speaker 5: the US? If you have to go down through Mexico
Speaker 5: to get your energy out of the out of the
Speaker 5: hymnstry too.
Speaker 3: Much geography with David Melb'll save the conversations.
Speaker 6: Down in that part of the world. The G twenty
Speaker 6: is just finishing up down in Rio here. How do
Speaker 6: you think President elect Trump views the entities organizations like
Speaker 6: the G twenty and that try to think about things
Speaker 6: on a global basis. How do you think he anticipates engaging.
Speaker 5: I don't know how he thinks about it, but it
Speaker 5: should be clear to everyone that the globalism isn't working.
Speaker 5: This is the giant conferences. Think of that ten literally
Speaker 5: tens of thousands of people. I've had to go to
Speaker 5: these conferences. We recently saw the one in Baku. Think
Speaker 5: of the absurdity of having the climate conference in Baku, Azerbaijan,
Speaker 5: which is the conduit for Russian oil coming under the
Speaker 5: sanctions out into the rest of the world. So you've
Speaker 5: got this and literally it's ten thousand people from that
Speaker 5: are all trying to get government contracts. So it's a
Speaker 5: climate industrial complex, just like the military industrial complex that's
Speaker 5: so expensive. You need to have defense for the US,
Speaker 5: but you need to have it in a way that's
Speaker 5: that's competitive in that world.
Speaker 3: David Malpass, for the former President of the World Bank,
Speaker 3: thrilled that he could join us this morning.
Speaker 4: We welcome all.
Speaker 3: Of you on your commute across the nation and of
Speaker 3: course on YouTube subscribe to Bloomberg Podcast. I have literally
Speaker 3: on the desk at home Lightheiser, No Trade is Free.
Speaker 3: I'm going to read it cover to cover just to
Speaker 3: get an understanding of Lightheiser economics. You're at Colorado College
Speaker 3: lecturing EC one O two macroeconomics. David Malpass discussed the
Speaker 3: efficacy of tariffs.
Speaker 5: The system is broken in the world. It was set
Speaker 5: up at a time before China was the number.
Speaker 4: Two world power.
Speaker 5: You had a concept in the sixties and seventies that
Speaker 5: somehow there could be kumbaya that everybody could cover together.
Speaker 5: Everyone formed a deal and everybody lower.
Speaker 4: Vice President Harris would agree with you.
Speaker 5: And it's completely broken down because you have this giantly
Speaker 5: aggressive commercial power that's not playing by the rules on
Speaker 5: intellectual property, on their overcapacity of manufactured goods.
Speaker 4: So it's a it's.
Speaker 5: A you know, taking away markets from the rest.
Speaker 4: Of Do we need tariffs?
Speaker 3: Did are gradual and marginal or do we need the
Speaker 3: jump condition that the President elect talks about a magnitude
Speaker 3: of tariffs that haven't seen in generations.
Speaker 5: You need to get the world's attention that what they're
Speaker 5: doing is broken. I don't know if you saw, but
Speaker 5: President she was in South America last week and he
Speaker 5: was making the case to all the other world leaders
Speaker 5: to go gradual. And so China is kind of bidding
Speaker 5: for time. They're saying, oh, this is gonna you know,
Speaker 5: we're moving in your direction. And so whether the rest
Speaker 5: of the world buys that, and you know, China often
Speaker 5: pays for it with contracts, with with UH gifts, gifts
Speaker 5: that can be UH shared in families and UH. And
Speaker 5: so how do you stop that and really get onto
Speaker 5: a new wavelength with China and with the rest of
Speaker 5: the world in fairness.
Speaker 6: Should the US approach to chrying to be one of
Speaker 6: engagement or one of you know, just trying to really
Speaker 6: step back from China. How do you think the approach
Speaker 6: should be?
Speaker 5: I think there has so for too many years now,
Speaker 5: China has been getting what it wants. I saw that
Speaker 5: in the World conferences. They really are winning on the
Speaker 5: on the soft power. And so you have to take
Speaker 5: that back because the US has all the all the
Speaker 5: ability to do this, it just has been choosing not
Speaker 5: to do it. You know, we've been trying to get
Speaker 5: peace through weakness, and so if you switch to peace
Speaker 5: through strength, China is going to change its side of
Speaker 5: the of the discussion as well. They're not they're not.
Speaker 5: I mean, they've followed very closely what's what's going on
Speaker 5: in the US and will be responding to it. So
Speaker 5: then you've got to say, Okay, we've got a bunch
Speaker 5: of problems. Here's our list of problems. You're producing too
Speaker 5: much steal with too much coal, with and claiming and
Speaker 5: then pushing climate agenda through the Paris Agreement that you're
Speaker 5: not complying with.
Speaker 4: We don't like that.
Speaker 5: Intellectual property you're stealing. You've never let down on stealing
Speaker 5: the intellectual property.
Speaker 3: David, I got one final question, with great respect Tom
Speaker 3: Nichols the Death of Expertise Profound book. I interviewed him
Speaker 3: when it came out. We're trying to get mister Nichols
Speaker 3: on again to talk about it. This is an administration.
Speaker 3: David Malpass has the best English skills of anyone I've
Speaker 3: ever known.
Speaker 4: On Wall Street.
Speaker 3: You and John Writing were prodigious in your economic output
Speaker 3: for Alan Schwartz at bear Sterns Physics, Colorado Collegey. You're
Speaker 3: the real deal on a conservative tone. Some of these
Speaker 3: people have zero expert piece. What would you say to
Speaker 3: the President elect right now if these people are pushed
Speaker 3: aside by Senate?
Speaker 5: Well, I don't think that'll happen. But what I think
Speaker 5: what the president can see is that he's clearly on
Speaker 5: the He's got a powerful path that's taxes, energy, that's making.
Speaker 3: Why is he running then from expertise because there are
Speaker 3: conservatives like you that have their head screwed on.
Speaker 5: A problem is expertise often has meant your inside the
Speaker 5: belt Way with their models, and so if we really
Speaker 5: have to have an upheaval where you shake it up
Speaker 5: with people that have views from outside, I got to make.
Speaker 4: Some news today.
Speaker 3: Have you been called by the president by Susan Are
Speaker 3: you going to serve within the Trump administration? Come on news, okay,
Speaker 3: David Malpas, thank you so much. Formerly with the World Bank.
Speaker 2: You're listening to the Bloomberg Surveillance podcast. Catch us Live
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Speaker 3: Michael Darta with Roth Campbell and I don't think I've
Speaker 3: ever seen as political a note Washington. A note out
Speaker 3: of data is what I've got in front of me
Speaker 3: in italics. To simply keep current law in place, new
Speaker 3: revenue sources will be needed, Michael Data, what do you
Speaker 3: expect in January, February and beyond.
Speaker 7: Hi, Tom, thanks for having me on. Look, the Administration
Speaker 7: and Congress are going to have to work through the
Speaker 7: confines of budget reconciliation, and that's really just a technical
Speaker 7: term for saying that they're not going to be able
Speaker 7: to increase the fiscal deficit outside of a ten year window,
Speaker 7: and that means they're going to need some revenue in
Speaker 7: order to either make parts or the entirety of the
Speaker 7: twenty seventeen ten A law permanent, or if you know,
Speaker 7: the idea is to to cut new taxes, They're going
Speaker 7: to need revenues for that, and I think we know
Speaker 7: where those revenues are going to come from. The attempt
Speaker 7: is going to be to generate them from tariffs, potentially
Speaker 7: a fairly significant across the board tariff increase, and you know,
Speaker 7: I think the notion that this is just a bluff
Speaker 7: or a negotiating tactic is simply incorrect.
Speaker 4: Yeah.
Speaker 3: Greg Valier really emphasizes that from AGF this morning.
Speaker 4: He says, this is not a bluff.
Speaker 3: What do Trump tariffs do to the stock market?
Speaker 7: You know, it's a great question, Tom. You know, I
Speaker 7: think we have some risks here because the equity market
Speaker 7: valuations are quite high. On any measure. If you look
Speaker 7: at forward earnings estimates, which are quite optimistic, we're in
Speaker 7: a twenty two plus multiple that's historically high. The so
Speaker 7: called buffet indicator that just looks at market cap or
Speaker 7: the stock market itself relative to the nominal GDP or
Speaker 7: at the highest level since nineteen twenty nine, which, by
Speaker 7: the way, was the year that smooth Hally passed Congress,
Speaker 7: cleared the Senate the following year, and was signed into law,
Speaker 7: and that made it, you know, infamous because that was
Speaker 7: the beginning of the Great Depression. So I think we're
Speaker 7: playing with fire a little bit here if we're going
Speaker 7: to experiment with potential shocks to the supply side of
Speaker 7: the economy when equity market valuations are as high as
Speaker 7: they are, and you know, the FED is so far
Speaker 7: successfully soft landed the nominal economy. If you look at
Speaker 7: nominal GDP growth, you know, we've settled into just over
Speaker 7: a five percent zone and that's happened with productivity rebounding
Speaker 7: over the last six quarters. So anything that potentially disturbs
Speaker 7: the supply side with a relative price shock from tariffs
Speaker 7: or a slower growth growth shocked to the labor force
Speaker 7: could end up being a problem for corporate profit margins
Speaker 7: and these super high equity market valuations that are in
Speaker 7: place today.
Speaker 6: Michael, could you explain the math associate it with tariffs?
Speaker 6: Is that direct revenue to the US government number number
Speaker 6: one and number two? Do those increases in cost do
Speaker 6: they get passed along to consumers and maybe cause of inflation?
Speaker 8: Yeah?
Speaker 7: Absolutely so, I mean the you know, the tariffs are
Speaker 7: simply a tax. You know, they would be equivalent to
Speaker 7: raising sales taxes, but they're not across the board, so
Speaker 7: you know, it's a it's a narrow tax base relative
Speaker 7: to the total consumption tax base, so total imports of
Speaker 7: goods are around three trillion. You know, there's been some
Speaker 7: discussion on the campaign trail of using tariffs to get
Speaker 7: rid of the income tax, and that's just not going
Speaker 7: to be doable because you know, the tax base is
Speaker 7: simply not wide en up. So one principle of good
Speaker 7: tax policy is to have the broadest possible base with
Speaker 7: the lowest possible rates, and you know, trying to raise
Speaker 7: a lot of revenue from tariffs does not meet that test,
Speaker 7: so it will cause distortions. You know, the late great
Speaker 7: Milton Friedman, I think put it best when he said
Speaker 7: that the problem with protectionism is that the beneficiaries are concentrated,
Speaker 7: visible and vocal, but the costs are very diffuse, right,
Speaker 7: And that's examply right. So from that perspective, you know,
Speaker 7: I think this is a risk to the market and
Speaker 7: the business side.
Speaker 3: I like what George Will said in the Washington Post.
Speaker 3: He said, what are tariffs? They're like putting a blockade
Speaker 3: around your own harbors. I thought that sort of summed
Speaker 3: it up in a nice vignette as well. Michael Data,
Speaker 3: then are you I want to talk to markets when
Speaker 3: we come back and fed But Michael Darta, are you
Speaker 3: advocating that people who are measured conservative like John Tucker,
Speaker 3: they're in there tirement plan. There are days from retiring
Speaker 3: that they lighten up on equities.
Speaker 7: Well, look, Tom, obviously, trying to time the stock market
Speaker 7: typically does not work out for folks, so I think
Speaker 7: we have to be really careful with that. A slow
Speaker 7: and steady approach is the way to go. If John's
Speaker 7: very close to retirement, then you know, I'm assuming that
Speaker 7: he's already got it all planned out in terms of
Speaker 7: becoming more conservative over time. But what I would say
Speaker 7: is this, I think these high equity valuations make a
Speaker 7: very strong case for value investing, which is, you know,
Speaker 7: kind of gone by the wayside as we've been in
Speaker 7: the throes of this AI tech frenzy over the last
Speaker 7: few years, and you could do a Barbell approach. So
Speaker 7: if there's a small portfolio that you are going to manage,
Speaker 7: and it shouldn't be the whole portfolio, I would say
Speaker 7: defensives on one side. So if we get these rate
Speaker 7: shocks like we have over the last two months, that's
Speaker 7: a time to lean into the cases.
Speaker 3: Should we continue with Michael dart a rough Capital this morning? Michael,
Speaker 3: I want to talk about the FED and let's just
Speaker 3: begin with the beginning idea of a nonlinear move to
Speaker 3: wherever we're going is the FED restrictive right now?
Speaker 4: Boy?
Speaker 7: Tom, that's the one hundred million dollar question. You know,
Speaker 7: fedhare Powell, I think would admit that they don't really
Speaker 7: know the answer that question. I think they're probably still
Speaker 7: modestly restrictive, but certainly less so than they were before
Speaker 7: the first fifty basis point rate cut, followed up by
Speaker 7: twenty five basis points, and now markets expect you know,
Speaker 7: one more twenty five basis point cut. I think we
Speaker 7: might be close to a potential FED pause. And the
Speaker 7: reason I say that is when fedhare Powell and company
Speaker 7: started this cutting effort, what he said was, we don't
Speaker 7: know where the R star is, we don't know where
Speaker 7: neutral is, but we're pretty confident that we're above neutral
Speaker 7: based on all of the mainstream estimates. That is no
Speaker 7: longer the case with seventy five bases nominal rate cuts
Speaker 7: in the bag and a modest bump hire in bond
Speaker 7: market inflation experts.
Speaker 4: Oh, Michael, what's so important to me?
Speaker 3: And this goes back to your work with jud Waitinsky
Speaker 3: right out of Wisconsin Whitewater is do you aggregate the nation?
Speaker 3: And can Powell aggregate our policy?
Speaker 4: Or witness the.
Speaker 3: Election and all attention. Are there two Americas where the
Speaker 3: FED has to somehow make policy around those two Americas?
Speaker 7: Yeah, well, the FED does have to deal with aggregates,
Speaker 7: you know, inflation, total spending, nominal growth in the economy,
Speaker 7: of the labor market. It can't target sectors. That's not
Speaker 7: the role of the Federal Reserve. If we're talking about,
Speaker 7: you know, issues in terms of redistribution and taxation and regulation,
Speaker 7: that really falls on in Congress and elected officials to
Speaker 7: deal with. And in terms of fiscal policy, you know,
Speaker 7: the FED has to just operate with what it's given.
Speaker 7: And there's a tremendous amount of uncertainty ahead as we
Speaker 7: move into twenty twenty five. The conventional wisdom is that,
Speaker 7: you know, we're moving into a more accommodative fiscal environment.
Speaker 7: But for the reasons that we discussed at the opening, Tom,
Speaker 7: I think that may be incorrect. So, you know, if
Speaker 7: you go back to the strictures of budget reconciliation, the
Speaker 7: administration is going to have to find revenue to permanently
Speaker 7: extend any of these tax cuts, and if that means
Speaker 7: big tariff increases, and the view is that those are
Speaker 7: not contractionary and don't hurt the US economy. Not my view,
Speaker 7: but you know, obviously that's the view of the incoming president.
Speaker 7: You could end up with a substantial fiscal heightening, and
Speaker 7: so this is a tricky environment for the FED. If
Speaker 7: that tightening disrupts the productivity rebound that's underway, that's going
Speaker 7: to make the Fed's job harder. So you know, there's
Speaker 7: a substantial amount of uncertainty going forward.
Speaker 6: Michael. There are some market observers that as they try
Speaker 6: to parse through President Electrump's some of his economic policies,
Speaker 6: whether it be lower taxes, higher tariffs, that they might
Speaker 6: be inflationary.
Speaker 7: Do you share that concern, Well, it's sort of a hodgepodge, Paul.
Speaker 7: So you know, a big jump in tariffs would be
Speaker 7: equivalent to a relative price shock, so it would tend
Speaker 7: to push up inflation on a one time basis and
Speaker 7: retard real growth. That is not a recurring thing, so
Speaker 7: it's not a monetary inflation. Typically, central banks would try
Speaker 7: to look past that and beyond that, you know, could
Speaker 7: actually lower the neutral interest rate that hurts the supply side.
Speaker 7: So it's not just straightforward in terms of oh, this
Speaker 7: might push inflation up, and so you know, the FED
Speaker 7: should tighten monetary policy into that kind of a shock.
Speaker 7: Some of the other proposals may boost the supply side,
Speaker 7: talking about uh, you know, deregulation, if we're talking about
Speaker 7: other tax changes or tax reforms that can boost efficiency.
Speaker 7: So I think we're dealing with a bit of a
Speaker 7: hodgepodge of potential supply side changes and or shocks, and
Speaker 7: you know, we're going to have to have more information
Speaker 7: and more details to figure out. You know, the over
Speaker 7: riding trend is going to be whether you know it's
Speaker 7: more of a headwind or a tailwind.
Speaker 6: Michael, the FED feels like it's got inflation generally under control.
Speaker 6: What's focusing on the labor market what's your view of
Speaker 6: the US labor market these days?
Speaker 7: Well, the US labor market has been hanging in there. Obviously,
Speaker 7: we've got a very weak report for October, and the
Speaker 7: pattern has been, you know, one in which we've had
Speaker 7: a fairly gentle deceleration. But I think we're going to
Speaker 7: need some more data to really come to a decisive conclusion.
Speaker 7: As we moved into the summer, we were getting signals
Speaker 7: from the unemployment rate that were very consistent with a
Speaker 7: business cycle that had stalled or even started to enter recession,
Speaker 7: and now the apoment rate is pulled back a few
Speaker 7: tenths and essentially stabilized. So there's a big question mark
Speaker 7: up there.
Speaker 3: Michael, thank you so much and said go feed close Kloses.
Speaker 3: You know klauses vegeance. Klaus is a dog. Michael Darta,
Speaker 3: thank you so much for Roth Capital.
Speaker 2: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 2: live on Amazon Alexa from our flagship New York station.
Speaker 2: Just say Alexa playing Bloomberg eleven thirty Paul, what time.
Speaker 3: Are you speaking today at this Ai Men Deep sing
Speaker 3: Aniragrana Extravagance, are you at four o'clock four thirty Tom?
Speaker 6: I'm on the twelve forty three train to the Jersey
Speaker 6: Shore every single day. I don't stay in New York
Speaker 6: after twelve o'clock.
Speaker 4: But you are too.
Speaker 6: But for these two guys on Agrana, Man Deep sing
Speaker 6: I said yes, because you have to. Because they're the
Speaker 6: leaders of our technology research of Bloomberg Intelligence. They have
Speaker 6: this nominal conference today some of the real leaders Tom
Speaker 6: and his generative AI think which I'm trying to learn about,
Speaker 6: I'm trying to get smart about. But they've got a
Speaker 6: lot of the leaders in that industry coming to the
Speaker 6: Bloomberg egequ today.
Speaker 3: Yeah, Wayne Barrow getting it started global ahead of core
Speaker 3: product like a real job at Bloomberg, unlike what Paulin
Speaker 3: and I do. This is gonna be a great panel,
Speaker 3: except at four thirty, everybody's going to turn to.
Speaker 4: Their cell phones and ignore Wah or Matt.
Speaker 3: Miller because they're gonna be looking at a video in
Speaker 3: the same room together for the first time since Nixon
Speaker 3: was president. Man Deep Singh and Anda Abrana, what do
Speaker 3: you guys see each other?
Speaker 8: Like?
Speaker 4: What twice a year? Is it that rare?
Speaker 3: No?
Speaker 9: No, no, we see it far more than that. But
Speaker 9: we talk at least three to four times a day.
Speaker 4: Yeah, what are you talking about right now?
Speaker 3: What is the conversation within the madness of technology right now?
Speaker 8: Mind and Vidio print? I mean it has to be right.
Speaker 8: It's reporting tonight and all eyes are on Nvidia and
Speaker 8: that's what the themo for a conference is, you know,
Speaker 8: just to connect the dots in terms of what is
Speaker 8: the flow through when it comes to companies that are
Speaker 8: buying these GPUs, what are the use cases that are emerging?
Speaker 8: And is it really living up to the productivity promise.
Speaker 8: That's the theme of.
Speaker 9: The we know, we know that, yet it's too soon,
Speaker 9: And that's what we've been talking about. Right now the
Speaker 9: whole buzzes expand the infrastructure, expand the infrastructure.
Speaker 4: But today we're going to.
Speaker 9: Ask these executives tell us the use cases of these
Speaker 9: productivity because then the audience can gauge whether some of
Speaker 9: these use cases are worth the investment or not. Like,
Speaker 9: does it save you ten minutes to write emails? That's
Speaker 9: not going to drive the needle. It has to be
Speaker 9: far more than that for people to invest on the
Speaker 9: software side, on the application side.
Speaker 6: Is there real concern from the clients the investors you
Speaker 6: talk to that maybe this techn isstry, is going the
Speaker 6: spending is too much too fast, or is it one
Speaker 6: of Hey, you guys can spend whatever you want because
Speaker 6: we think the opportunity is that big.
Speaker 8: I mean, everyone agrees on the fact that this is
Speaker 8: the biggest secular trend that we're seeing, you know, this decade,
Speaker 8: and clearly it's got ramifications in terms of disrupting certain industries.
Speaker 8: No one knows exactly when we'll hit the cafex digestion phase,
Speaker 8: and that's.
Speaker 4: What everyone is trying to figure out.
Speaker 8: What we are doing in this summit is bringing together
Speaker 8: both the large company perspective as well as the startup perspective,
Speaker 8: and we've got some really interesting startups have the summer.
Speaker 3: How do you guys, A dainty frances Covid business insider
Speaker 3: making a splash four or five days ago, Microsoft's co
Speaker 3: pilots underperformance is the latest red flag for investments in AI.
Speaker 4: You guys are grizzled pros. I look at that tremble
Speaker 4: in a rock.
Speaker 3: What do you look at the legitimate worry about is
Speaker 3: this gonna work out?
Speaker 9: I think it's all a matter of how much it's
Speaker 9: It's not so much that this is not going to work.
Speaker 9: We are already at a phase that the top tech
Speaker 9: companies are going to spend close to ninety billion extra
Speaker 9: in a two year period compared to what they were before.
Speaker 9: So now the question is what is the output of that,
Speaker 9: What is the.
Speaker 3: What is the okay, okay, right, guys, what is the
Speaker 3: do you realize the easiest course these two guys took
Speaker 3: in college was harder.
Speaker 4: Than anything we do. Oh of course.
Speaker 5: Yeah.
Speaker 4: I mean, what's the what's the outcome of this cap bax?
Speaker 9: But that's the whole issue. The software and the services
Speaker 9: companies are saying. Oh, the companies are saying, is it's
Speaker 9: going to take several years for this to show up
Speaker 9: in the revenue stream, and all of us are trying
Speaker 9: to figure out how true it is at this point,
Speaker 9: because if you don't see that productivity benefit that we
Speaker 9: are trying to unlock today in our conference, then you
Speaker 9: will then the companies will say, well, we don't have
Speaker 9: to spend as much, and that then puts a completely
Speaker 9: different multiple or compression to all these stocks. And that's
Speaker 9: what everybody wants to avoid.
Speaker 6: So, Mandy, what are you going to be looking for
Speaker 6: here from Nvidia? After the close here to you know,
Speaker 6: Dan Ives was out from what Bus Security is saying.
Speaker 6: He thinks that they're going to beat the current revenue
Speaker 6: by a couple of billion, take the guidance up, buy
Speaker 6: a couple of billion A do you think that could happen?
Speaker 6: And is that enough for the stock?
Speaker 4: Yeah?
Speaker 8: I mean, clearly investors have become less sensitive to the
Speaker 8: valuation that this company trades, that because they are so
Speaker 8: good in terms of, you know, beating their numbers. And look,
Speaker 8: when it comes to the future of generative AI, if
Speaker 8: there's one thing that is for sure is and video
Speaker 8: is at the heart and center of it. Whether they're
Speaker 8: going to miss their numbers three quarters from now, that
Speaker 8: will have, you know, I mean, an implication for their valuation.
Speaker 8: But beyond that, I think they just have that lead
Speaker 8: when it comes to chip makers that is unassailable.
Speaker 4: Right now. Tell us about this word ecosystem.
Speaker 3: I mean it's identified with the Apple and Services and
Speaker 3: that is there a I'm speaking with Adobe today. Is
Speaker 3: there an Adobe ecosystem? Is there a Microsoft ecosystem in ug?
Speaker 4: Yeah?
Speaker 9: So that is exactly the argument what these companies are saying.
Speaker 9: Adobe is basically arguing that our ecosystem is that strong
Speaker 9: that that no matter if there are open source tools
Speaker 9: out there that can do something.
Speaker 4: So old or whatever, Yeah.
Speaker 9: That's not going to disrupt our business. And there is
Speaker 9: a bold and bad argument against it. The same argument
Speaker 9: you can make for other companies such as Salesforce or
Speaker 9: Workday or Microsoft. Somebody is saying, well, I can just
Speaker 9: use open AI and do my work. Why do I
Speaker 9: need to you know, need this package software industry? And
Speaker 9: that is the push and pull at this point.
Speaker 6: So Man, Man Deep, what's the what's the next thing
Speaker 6: for AI?
Speaker 4: Do you think?
Speaker 6: I mean, what are some of these startups that are gonna
Speaker 6: come to your conference today? What's kind of the next
Speaker 6: iteration of it?
Speaker 8: I guess I'm sure they're gonna give us the message
Speaker 8: they want some of this profit pool that Nvidia has.
Speaker 8: And even if you get a small slice of you know,
Speaker 8: this large addressable market that everyone believes is there in
Speaker 8: data centers. These companies could you know, have a very
Speaker 8: successful IPO down the line.
Speaker 4: Man from an office upstairs is fancier than mine.
Speaker 3: Email's in and says, where's the copyright protection for all
Speaker 3: the intellectual capital? These animals like aniog Rana and Man
Speaker 3: Deep singers stealing from us?
Speaker 4: How's this gonna work out?
Speaker 3: I mean, well, how they gonna pay the New York
Speaker 3: Times or the Times of London? Man?
Speaker 8: And yeah, we have a company called Runway that's in
Speaker 8: that lineup today, which does you know video rendering based
Speaker 8: on prompts and they are training their models based on
Speaker 8: all the content, content that's out there when it comes
Speaker 8: to you know, Hollywood and stuff like that.
Speaker 4: And they're actually using it.
Speaker 8: And and we'll discuss exactly what you just mentioned in
Speaker 8: terms of what are their licensing, what is their own
Speaker 8: IP versus.
Speaker 4: Journalism get paid you know in our cars.
Speaker 9: So Adobe is making that argument that come work with
Speaker 9: us because we are training the models on the data
Speaker 9: we own or the assets that are part of a company.
Speaker 9: So you're not going to get sued because you're using
Speaker 9: AI generated from that trained model.
Speaker 4: And that is going to be a page. I cut
Speaker 4: to the chase. So these two movies out, what are they?
Speaker 4: Glad Wicked mandeems.
Speaker 3: Can see both of them before we do. Okay, there's
Speaker 3: two movies out. Variety does some stuff. AI steals the.
Speaker 4: Content for Variety. How does Variety get paid?
Speaker 8: Well in the this case, clearly you know they will
Speaker 8: have to license some of the content where they're you know,
Speaker 8: the same actors are being used or the same setup
Speaker 8: as being used. But beyond that, AI doesn't really replicate
Speaker 8: your content. And that's what I think these models are
Speaker 8: showing is you know, the scene that you are generating
Speaker 8: isn't an exact replica of what has been used in
Speaker 8: the past.
Speaker 4: Do you buy this pot?
Speaker 6: I don't know, but I'm gonna hopefully we're gonna get
Speaker 6: smarter here today. My my panel is raped for cocktails.
Speaker 6: That's a dangerous place.
Speaker 4: That's place to be. My word, Yes, you're brave. My
Speaker 4: people just know to say no to that.
Speaker 6: Exactly.
Speaker 4: Are you kidding your nose before?
Speaker 3: Okay, So I'm after lunch where they're already asleep when
Speaker 3: I walk in.
Speaker 4: Can you get tickets to the figure as it's sold out?
Speaker 9: It's at this point it's virtual only for anybody trying
Speaker 9: to join in because we don't have capacity now.
Speaker 4: But it will be on the terminal.
Speaker 8: It will be streamed live on the terminal live.
Speaker 6: Got It's like Taylor Swift.
Speaker 4: Yeah, exactly.
Speaker 3: So let's do this more often, you know, I mean,
Speaker 3: I know you guys are in speaking terms, but you know,
Speaker 3: let's do it more often.
Speaker 2: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 2: starting at seven am Eastern on Apple car Play and
Speaker 2: Android Auto with the Bloomberg Business app. You can also
Speaker 2: watch us live every weekday on YouTube and always on
Speaker 2: the Bloomberg.
Speaker 3: Term Tell me look at the front pages. It is
Speaker 3: Lisa Matteo, our Lisa.
Speaker 4: Please, Okay, I.
Speaker 1: Got a lot for Paul Today's okay, hear that on her?
Speaker 1: What's in the New York Post. Just when you thought
Speaker 1: you haven't heard of Sherry Redstone her name in a while,
Speaker 1: here it comes. They said that she paid off nearly
Speaker 1: two hundred million dollars in debt from cash that was
Speaker 1: mostly fronted by Larry Ellison. Now this was a loan
Speaker 1: from back in Wait twenty eighteen. She made the full payment.
Speaker 1: The bounce wasn't doing until May twenty five, so she
Speaker 1: made the payment. But it was one hundred and eighty
Speaker 1: six million dollars last month. It was owed to creditors
Speaker 1: of National Amusements.
Speaker 6: But this is just the latest thing.
Speaker 1: So they're saying Larry Elison forked up a big chunk of.
Speaker 6: The cash for I think Sherry Redstone and her family
Speaker 6: made the decision two or three years ago. This business,
Speaker 6: the Viacom powamount business is not good long term. Let's
Speaker 6: just get out sell today. She got the deal done
Speaker 6: to sky Dance, and she had a short term liquidity
Speaker 6: problem here and Larry Ellison, who's backing his son at
Speaker 6: sky Dance, says, I'll take care of that problem for you.
Speaker 6: Here's the cash, and so that's it. She's just and
Speaker 6: she'll just ride off to the sunset and take her
Speaker 6: three hundred and fifty million dollars and do what you.
Speaker 3: So the zeitgeist is they bolt off from Comcast, MSNBCCNBC
Speaker 3: and the rest Oxygen I love E I watch twenty
Speaker 3: four saying you okay, but they can't merge with Sherry
Speaker 3: Redstone's CBS.
Speaker 4: There's no way.
Speaker 6: Washington, the cable actually the cable networks could. The broadcast
Speaker 6: networks could not, So NBC, CBS because there's only for
Speaker 6: broadcast networks that they won't let for of them merge.
Speaker 6: But you can take some of the cable networks from
Speaker 6: like MSNBC USA, and you can merge that into into
Speaker 6: the new paramount whatever it is, because those are just
Speaker 6: smaller networks. Okay, And that's story number two.
Speaker 1: Okay, I didn't even realize that. So, yeah, there's MSNBC,
Speaker 1: CNBC USA.
Speaker 6: But not Bravo.
Speaker 1: But not Bravo. You got to keep the housewives.
Speaker 4: Explain why the Housewives? It's you? Is it because it
Speaker 4: makes money?
Speaker 1: It makes my peacock streaming TV also, that's not part
Speaker 1: of it, so that'll stay with the parent company.
Speaker 6: So I'm not sure as a as a media investor,
Speaker 6: why would I buy this new code Because I'm getting
Speaker 6: a lot of second tier cable networks that are facing
Speaker 6: the you know, the cord cutting challenges that all of
Speaker 6: traditional linear TV is facing. Where's the growth, what's the story?
Speaker 6: So this is a bad bank good banks situation. I
Speaker 6: think Comcast is simply saying, we've got a lot of
Speaker 6: good assets of Comcasts. Let's keep them in Comcasts. The
Speaker 6: stuff that is not so good will it off into it.
Speaker 3: But Paul, they get thirty eight point eight debt at Comcast,
Speaker 3: is this where they dump all the debt?
Speaker 4: No I the spin off?
Speaker 6: Now the third debt is actually fine. They actually have
Speaker 6: a very good balance eet. Their net debt to EBITDA
Speaker 6: is fine. That they have a great balance sheet. Actually
Speaker 6: it's a strategic asset of the company. But they're just
Speaker 6: simply saying, we think our stock is weighed down by
Speaker 6: these cable networks, and so let's spin them off into
Speaker 6: a separate company, get it off of our balance sheet.
Speaker 6: So maybe our then existing Comcast can trade higher.
Speaker 1: The journal thing can produce about seven billion in annual revenue.
Speaker 1: Do you think that about you?
Speaker 6: It is, but it is that revenue growing, and I
Speaker 6: would argue it's not.
Speaker 4: Or very low, it's very low synergy.
Speaker 6: This is no. I think it's simply a good bank
Speaker 6: bad bank thing. I just want to get some of
Speaker 6: these assets that I know my investors do not like
Speaker 6: and get them out of my company and put them
Speaker 6: on as a standalone company.
Speaker 1: So next, okay, we're moving on to Elon musk X.
Speaker 1: Apparently it needs to boost advertising revenue. So it's turning
Speaker 1: this is from Business Insider to an add tech company
Speaker 1: called Pubmatic. They're joining Google in moby. They're these third
Speaker 1: party vendors that allow them to sell their ads. But
Speaker 1: the thing is it's different for the company. Right, So
Speaker 1: before Musk had to take over Twitter broker deals with
Speaker 1: advertisers directly. So now you see this shift as they're
Speaker 1: turning to these like third party vendors.
Speaker 6: To help sell us advertising.
Speaker 1: So it really needs to make some money.
Speaker 3: When Paul, do you know when like they when he
Speaker 3: affected this transaction.
Speaker 4: Yeah, there was lots of debt.
Speaker 3: Wall Street, Morgan Stanley I think was involved transactions.
Speaker 6: Right, This is all on his personal personal balance sheet.
Speaker 6: And so now you know, this is just an opportunity
Speaker 6: for them to try to say, hey, I got to
Speaker 6: generate some revenue because I'm not. My advertising revenue is
Speaker 6: just not grown. We don't know it because it's not public,
Speaker 6: so we don't know what the revenue. But I suspect
Speaker 6: that there are a lot of advertisers have backed away
Speaker 6: from X for a variety of reasons, and this is
Speaker 6: just away from the track.
Speaker 3: I'm looking at the pubmatic website. I can't be on
Speaker 3: that website. It's too cool for school.
Speaker 1: The next one, quick one, okay, quick, Barbenheimer, you remember
Speaker 1: the success it did well this weekend, we're going Clicked,
Speaker 1: Gladiator and Wicked. I guess wikiator.
Speaker 6: Doesn't quite have ring to it.
Speaker 4: What do you think?
Speaker 1: I think it's gonna be phenomenal because it's the same thing.
Speaker 1: You have two completely different audiences. You know, they had
Speaker 1: the Barbie and the Oppenheimer. Now you have the Wicked
Speaker 1: and the.
Speaker 4: Glad Hollywood cheerleading.
Speaker 3: Get the Telegraph in London crushed Wicked just rushed it.
Speaker 4: I don't know. I don't have an opinion.
Speaker 1: It has the big stars already in a Grande like
Speaker 1: it has. It has that pull to it Gladiator itself.
Speaker 4: Just I mean, I readbot, Who's who's the gladiator this time?
Speaker 1: My husband is a gladiator's playing Russell Crow.
Speaker 4: I don't know Russell.
Speaker 1: Oh there's that's the new guy who's playing that the younger,
Speaker 1: the son of the ship young this whole other story. Yeah,
Speaker 1: so's I already bought because it's it's been so long
Speaker 1: since the Gladiator came.
Speaker 6: Out, you know, Paul, Paul, Yes, all right, you're on
Speaker 6: top of the time.
Speaker 4: Already saved me, saved people that I know, this stuff
Speaker 4: always in my ear. Hey, stupid, you.
Speaker 6: Know it works well, hopefully that'll be a big box
Speaker 6: office hoping so the estimates, Okay, they plan that it'll
Speaker 6: bring in Wicked at least one hundred million opening weekend.
Speaker 1: They're hoping Gladiated too could bring in eighty million. And
Speaker 1: that's kind of similar to to how Barbie and Oppenheimer open.
Speaker 4: Okaye, did we give you enough time today?
Speaker 9: We did?
Speaker 4: Thank you very much, Lisa Mateo. Thank you for the newspapers.
Speaker 2: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,
Speaker 2: and anywhere else you get your podcasts. Listen live each weekday,
Speaker 2: seven to ten am Eastern on Bloomberg dot Com, the
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