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 --> 00:00:37,320 Speaker 2: Terminal and the Bloomberg Business app. Joining us now a 10 00:00:37,360 --> 00:00:39,440 Speaker 2: man with experience of all of this, the former Speaker 11 00:00:39,440 --> 00:00:41,680 Speaker 2: of the House, Kevin McCarthy. Speaking McCarthy, Welcome back to 12 00:00:41,680 --> 00:00:43,760 Speaker 2: the program, sir. It's good to get your thoughts. I 13 00:00:43,800 --> 00:00:45,440 Speaker 2: want to lead with a question that a Marie asked 14 00:00:45,440 --> 00:00:48,200 Speaker 2: a little bit earlier on the program. When you're herding 15 00:00:48,280 --> 00:00:51,080 Speaker 2: cats on Capitol Hill, is it easier or harder when 16 00:00:51,120 --> 00:00:53,600 Speaker 2: the President of the United States is Donald Trump? 17 00:00:54,920 --> 00:00:56,000 Speaker 3: Oh, it's so much easier. 18 00:00:56,080 --> 00:00:59,240 Speaker 4: President Trump is stronger today than he was at any 19 00:00:59,320 --> 00:01:03,400 Speaker 4: time as career. President Trump is stronger in the House. Remember, 20 00:01:03,560 --> 00:01:05,760 Speaker 4: just to get this bill out of the House, they 21 00:01:05,800 --> 00:01:07,720 Speaker 4: all said they weren't going to vote for it. President 22 00:01:07,720 --> 00:01:10,680 Speaker 4: Trump came down to a conference, told both sides from Salt, 23 00:01:10,720 --> 00:01:12,480 Speaker 4: it's over from the Freedom Caucus. 24 00:01:12,520 --> 00:01:13,000 Speaker 3: That's over. 25 00:01:13,280 --> 00:01:14,960 Speaker 4: Everyone who said they wasn't going to vote for it 26 00:01:15,040 --> 00:01:16,600 Speaker 4: voted for it in twenty four hours. 27 00:01:16,680 --> 00:01:18,400 Speaker 3: So this bill is going to get passed. 28 00:01:18,440 --> 00:01:20,480 Speaker 4: The only thing that's holding up when this bill gets 29 00:01:20,520 --> 00:01:24,000 Speaker 4: passed is the weather in DC and the attendance of 30 00:01:24,040 --> 00:01:25,280 Speaker 4: how that people get here. 31 00:01:25,480 --> 00:01:28,400 Speaker 5: Well, yeah, people now have to come back to Washington 32 00:01:28,440 --> 00:01:30,080 Speaker 5: when they thought they were going to have this week off. 33 00:01:30,080 --> 00:01:33,640 Speaker 5: Speaking McCarthy, So you think the Freedom Caucus will fold again? 34 00:01:33,680 --> 00:01:35,480 Speaker 5: Will they fold by July fourth? 35 00:01:37,600 --> 00:01:39,600 Speaker 3: I believe so. I mean, think about this. 36 00:01:40,160 --> 00:01:44,399 Speaker 4: Mike Lee, Rick Scott, Ron John all voted for this 37 00:01:44,480 --> 00:01:47,200 Speaker 4: bill in the Senate and they're not going to vote 38 00:01:47,240 --> 00:01:47,520 Speaker 4: for it. 39 00:01:47,680 --> 00:01:48,760 Speaker 3: So if they don't want to. 40 00:01:48,760 --> 00:01:50,480 Speaker 4: Vote for and they vote no, they're sitting with the 41 00:01:50,520 --> 00:01:52,760 Speaker 4: Democrats and want to increase taxes. 42 00:01:53,000 --> 00:01:53,960 Speaker 3: They have no place to be. 43 00:01:54,240 --> 00:01:56,440 Speaker 4: What they want to do is get the attention they 44 00:01:56,480 --> 00:01:57,280 Speaker 4: always crave. 45 00:01:57,640 --> 00:01:59,000 Speaker 3: So they talk about that now. 46 00:01:59,040 --> 00:02:01,400 Speaker 4: But how many times can you cry wolf and say 47 00:02:01,400 --> 00:02:03,040 Speaker 4: you're not going to vote for something, and in twenty 48 00:02:03,080 --> 00:02:06,640 Speaker 4: four hours vote for it. They have done this numerous times. 49 00:02:06,840 --> 00:02:09,440 Speaker 4: They want the President's attention. They say this so they 50 00:02:09,480 --> 00:02:12,359 Speaker 4: can go down to the Oval Office and see the president, 51 00:02:12,360 --> 00:02:14,280 Speaker 4: then go back home and say they saw the president. 52 00:02:14,360 --> 00:02:16,520 Speaker 5: So do you think the rule vote which comes first 53 00:02:16,520 --> 00:02:18,120 Speaker 5: will pass because we can't see the bill on the 54 00:02:18,120 --> 00:02:19,360 Speaker 5: floor until that goes through. 55 00:02:20,600 --> 00:02:22,920 Speaker 4: I believe yes, it'll pass. It's all going to come 56 00:02:23,000 --> 00:02:25,720 Speaker 4: down to attendance today. How many people could make. 57 00:02:25,560 --> 00:02:26,120 Speaker 3: It to DC. 58 00:02:26,560 --> 00:02:29,000 Speaker 4: A lot of flights will were canceled. So do they 59 00:02:29,000 --> 00:02:30,919 Speaker 4: have to delay it a day or not? But this 60 00:02:31,040 --> 00:02:34,160 Speaker 4: bill will pass. Remember, it already passed the House, it 61 00:02:34,160 --> 00:02:37,080 Speaker 4: has now passed the Senate, and you've got the July 62 00:02:37,200 --> 00:02:40,520 Speaker 4: fourth deadline holding right behind you. There's a lot of 63 00:02:40,560 --> 00:02:44,079 Speaker 4: pressure mounting here. President Trump has done a tremendous job 64 00:02:44,120 --> 00:02:46,320 Speaker 4: on this, but he has become the speaker in the 65 00:02:46,360 --> 00:02:49,240 Speaker 4: same timeframe. Every time he's leaned into a bill it's 66 00:02:49,280 --> 00:02:50,079 Speaker 4: been able to pass. 67 00:02:50,160 --> 00:02:53,160 Speaker 5: He's the closer, he's the speaker in chief. How concerned 68 00:02:53,160 --> 00:02:57,800 Speaker 5: are basically just congressmen and women about being torched on truth? 69 00:02:57,880 --> 00:03:03,320 Speaker 6: Social like Thomas Massey, Well, you look at Tom Tillis, 70 00:03:03,360 --> 00:03:07,080 Speaker 6: I mean Tom Tillis, who had a lot inside this bill, 71 00:03:07,200 --> 00:03:09,880 Speaker 6: was pushing people to put more inside the bill, turns 72 00:03:09,919 --> 00:03:10,919 Speaker 6: around and decides not. 73 00:03:10,919 --> 00:03:11,960 Speaker 3: To run for reelection. 74 00:03:12,639 --> 00:03:14,520 Speaker 4: I think that plays on the mind of a lot 75 00:03:14,520 --> 00:03:18,079 Speaker 4: of individuals, and people are now being able to look 76 00:03:18,120 --> 00:03:20,959 Speaker 4: at the bill. At first, they're always arguing about what's wrong, 77 00:03:21,040 --> 00:03:24,040 Speaker 4: what's they're not really looking at what's positive. That you're 78 00:03:24,040 --> 00:03:27,200 Speaker 4: not raising taxes, You're actually getting the economy moving again. 79 00:03:27,280 --> 00:03:29,880 Speaker 4: You're keeping your promises for those who are sitting in 80 00:03:29,919 --> 00:03:31,760 Speaker 4: salt districts. And you had a list of there are 81 00:03:31,800 --> 00:03:35,120 Speaker 4: people who are leaning no. Nick Layloda, he said he's 82 00:03:35,200 --> 00:03:38,280 Speaker 4: for this bill. That's a big movement for because he 83 00:03:38,360 --> 00:03:41,480 Speaker 4: actually improved salt for his district when it was ten 84 00:03:41,560 --> 00:03:44,480 Speaker 4: thousand is now forty thousand. He can go back home 85 00:03:44,720 --> 00:03:47,200 Speaker 4: and champion what he was able to achieve. 86 00:03:47,360 --> 00:03:49,640 Speaker 3: At the same time, he votes as a victory. 87 00:03:49,720 --> 00:03:51,960 Speaker 5: At the same time, though there really won't be a cap. 88 00:03:52,120 --> 00:03:54,120 Speaker 5: The cap expires at the end of the year. So 89 00:03:54,480 --> 00:03:56,240 Speaker 5: don't you think the salt calcius does have some. 90 00:03:56,280 --> 00:03:59,120 Speaker 3: Level goes after five years. 91 00:03:59,160 --> 00:04:02,520 Speaker 4: No, from the same standpoint, it wouldn't go totally go away, 92 00:04:02,640 --> 00:04:04,800 Speaker 4: or people going to let these taxes all go away. 93 00:04:05,040 --> 00:04:08,720 Speaker 4: He'd been able to achieve something while keeping taxes low. 94 00:04:09,040 --> 00:04:11,560 Speaker 4: If he wanted salt to go away, raise taxes on 95 00:04:11,600 --> 00:04:13,600 Speaker 4: all of his individuals and play that way, that's not 96 00:04:13,640 --> 00:04:16,479 Speaker 4: why people elect him. They elect him there to go legislate, 97 00:04:16,640 --> 00:04:19,680 Speaker 4: and that's exactly what he did. He improved the life 98 00:04:19,720 --> 00:04:23,000 Speaker 4: of his constituents, and he can champion that and actually 99 00:04:23,000 --> 00:04:24,440 Speaker 4: be celebrated back home. 100 00:04:24,760 --> 00:04:27,720 Speaker 7: Each of the constituents were trying to improve the life 101 00:04:27,760 --> 00:04:32,240 Speaker 7: of their region from an overarching federal perspective, which is 102 00:04:32,440 --> 00:04:33,160 Speaker 7: a federal law. 103 00:04:33,200 --> 00:04:34,440 Speaker 8: Do you think that this is a good bill. 104 00:04:35,960 --> 00:04:38,279 Speaker 4: Yes, this is a very good bill, because what would 105 00:04:38,320 --> 00:04:41,120 Speaker 4: happen if you did not pass this bill. Your taxes 106 00:04:41,160 --> 00:04:44,919 Speaker 4: would go up, the economy would spur a little down. 107 00:04:45,200 --> 00:04:47,760 Speaker 4: I mean, this is exactly keeping the promise. And if 108 00:04:47,800 --> 00:04:50,320 Speaker 4: you want to put it in perspective, this bill is 109 00:04:50,400 --> 00:04:52,400 Speaker 4: exactly what President Trump campaigned on. 110 00:04:52,640 --> 00:04:54,200 Speaker 3: So the American people voted for that. 111 00:04:54,480 --> 00:04:58,040 Speaker 4: He won the popular vote, something a Republican president has 112 00:04:58,040 --> 00:05:00,400 Speaker 4: not done in more than thirty years. He says, no 113 00:05:00,520 --> 00:05:03,800 Speaker 4: tax on tips. It's keeping his promise and it's the 114 00:05:03,839 --> 00:05:05,080 Speaker 4: first thing people look at. 115 00:05:05,200 --> 00:05:06,280 Speaker 3: And even if you didn't. 116 00:05:06,080 --> 00:05:08,760 Speaker 4: Vote for him, you respect that you kept your promise. 117 00:05:08,800 --> 00:05:09,480 Speaker 3: That's a change. 118 00:05:09,600 --> 00:05:11,839 Speaker 4: You said you'd secure the border, you secured the board 119 00:05:11,880 --> 00:05:13,320 Speaker 4: with all the respects, said you would move it to 120 00:05:13,360 --> 00:05:15,760 Speaker 4: make sure the tax would done. Yes, whatever respect you 121 00:05:15,760 --> 00:05:16,680 Speaker 4: want to give me, I'll take. 122 00:05:17,560 --> 00:05:19,080 Speaker 3: I'll give you loads of respect. 123 00:05:19,400 --> 00:05:22,920 Speaker 7: There's a real question right now about the deficit increasing 124 00:05:23,120 --> 00:05:25,240 Speaker 7: and the fact that there is a perception and it 125 00:05:25,320 --> 00:05:28,799 Speaker 7: was edified by the Congressional Budget Office saying that essentially 126 00:05:28,839 --> 00:05:30,640 Speaker 7: this would take money out of the pockets of the 127 00:05:30,680 --> 00:05:34,200 Speaker 7: lowest income individuals in the United States and it would 128 00:05:34,240 --> 00:05:37,920 Speaker 7: add to the higher income individuals significantly in the form 129 00:05:38,000 --> 00:05:41,960 Speaker 7: of tax cuts and other potential benefits. That isn't necessarily 130 00:05:42,040 --> 00:05:44,599 Speaker 7: one of the agenda items that was promised on the 131 00:05:44,600 --> 00:05:45,320 Speaker 7: campaign trail. 132 00:05:45,400 --> 00:05:45,760 Speaker 8: Correct. 133 00:05:46,960 --> 00:05:47,560 Speaker 3: Well, all due. 134 00:05:47,480 --> 00:05:49,440 Speaker 4: Respect to you, if you look back at the tax 135 00:05:49,440 --> 00:05:52,080 Speaker 4: bill that we're keeping in place, what happened after it 136 00:05:52,160 --> 00:05:56,679 Speaker 4: was placed. People actually got more income, Companies gave thousand 137 00:05:56,760 --> 00:06:00,320 Speaker 4: dollars checks to their employees. So the CBO can score 138 00:06:00,320 --> 00:06:02,359 Speaker 4: it one way, but we know what reality is. We 139 00:06:02,440 --> 00:06:04,520 Speaker 4: know what we're seeing right now as well, where the 140 00:06:04,600 --> 00:06:06,560 Speaker 4: S and P five hundred set a new record. So 141 00:06:07,279 --> 00:06:10,320 Speaker 4: I think that lives much stronger to the American public 142 00:06:10,360 --> 00:06:13,600 Speaker 4: than anything else. When they keep their promise, the economy stronger, 143 00:06:13,760 --> 00:06:16,600 Speaker 4: the border is secure. You're watching the Middle East go 144 00:06:16,680 --> 00:06:18,640 Speaker 4: to a place we haven't seen in a long time, 145 00:06:18,880 --> 00:06:21,640 Speaker 4: trying to end war in Ukraine. Yes, the world is 146 00:06:21,720 --> 00:06:24,880 Speaker 4: a much better place because we elected President Trump, and 147 00:06:25,000 --> 00:06:27,800 Speaker 4: yes he is keeping his promise and this aligns exactly 148 00:06:27,839 --> 00:06:30,200 Speaker 4: with that, and America will be stronger for it. 149 00:06:30,279 --> 00:06:32,520 Speaker 5: Speaking McCarthy, I'd love to talk to you about your 150 00:06:32,520 --> 00:06:37,800 Speaker 5: relationship with both President Trump and your friend Elon Musk. 151 00:06:37,839 --> 00:06:40,480 Speaker 5: Are you being called in to try to mediate this 152 00:06:40,600 --> 00:06:41,840 Speaker 5: feud we see? 153 00:06:43,000 --> 00:06:44,560 Speaker 4: I have not been called in, and I just know 154 00:06:44,600 --> 00:06:46,839 Speaker 4: when two bulls fight, the only people who lose is 155 00:06:46,880 --> 00:06:48,719 Speaker 4: the ground underneath it, and I don't want to be 156 00:06:48,760 --> 00:06:51,600 Speaker 4: that turf. One thing I do know is when those 157 00:06:51,640 --> 00:06:54,080 Speaker 4: two work together, there's nothing we can't achieve. 158 00:06:54,480 --> 00:06:57,039 Speaker 3: So in the same mindset, I think. 159 00:06:56,880 --> 00:06:59,560 Speaker 4: People need to take a deep breath. Let's get back 160 00:06:59,560 --> 00:07:02,560 Speaker 4: to where we were before. Let's put America first and 161 00:07:02,640 --> 00:07:04,920 Speaker 4: find the way that we make everybody stronger. 162 00:07:05,080 --> 00:07:07,839 Speaker 2: Speaking McCarthy with respect and thanks, Thank you, sir. 163 00:07:07,880 --> 00:07:09,159 Speaker 8: I appreciate your time as all. 164 00:07:09,320 --> 00:07:11,520 Speaker 2: Thank you, Thank you, buddy, Thank you very much. The 165 00:07:11,560 --> 00:07:24,200 Speaker 2: former Speaker of the House, Kevin McCarthy that Cisco's president 166 00:07:24,280 --> 00:07:26,400 Speaker 2: and chief Product Office a G two ptal, saying we're 167 00:07:26,400 --> 00:07:28,880 Speaker 2: on the verge of a second major inflection in the 168 00:07:28,920 --> 00:07:33,280 Speaker 2: development writing AI. Agents will produce original insights and help 169 00:07:33,320 --> 00:07:35,720 Speaker 2: us solve problems that we might never have dreamed of 170 00:07:35,760 --> 00:07:39,160 Speaker 2: solving before. In this sense, I think agentic AI is 171 00:07:39,160 --> 00:07:43,520 Speaker 2: the single most important technology leap of our lifetime so far. 172 00:07:44,160 --> 00:07:46,920 Speaker 2: G two joined us now for more from Cisco, and 173 00:07:46,960 --> 00:07:50,080 Speaker 2: he's quickly becoming like AI therapist Guto. Welcome back to 174 00:07:50,120 --> 00:07:54,760 Speaker 2: the program, sir. That last line is pretty strong, G two. 175 00:07:54,800 --> 00:07:57,600 Speaker 2: Bigger than the Internet, Bigger than that that big. 176 00:08:00,000 --> 00:08:02,600 Speaker 9: That's one of these technology. Firstly, Jonathan, thank you for 177 00:08:02,640 --> 00:08:04,960 Speaker 9: having me. I am sorry I couldn't be there in person. 178 00:08:05,040 --> 00:08:10,120 Speaker 9: I'm in these beautiful London Bloomberg offices. So let me 179 00:08:10,160 --> 00:08:11,880 Speaker 9: just say, if you take a step back, we are 180 00:08:11,920 --> 00:08:14,640 Speaker 9: in the second major phase of AI. Where we used 181 00:08:14,640 --> 00:08:16,360 Speaker 9: to be the past two and a half years. What 182 00:08:16,440 --> 00:08:21,280 Speaker 9: we've experienced is chatbots intelligently answering questions for us. We're 183 00:08:21,320 --> 00:08:24,040 Speaker 9: now squarely in the second phase, where agents will be 184 00:08:24,040 --> 00:08:28,720 Speaker 9: able to conduct tasks and jobs almost fully autonomously. On 185 00:08:28,800 --> 00:08:32,480 Speaker 9: behalf of humans, and it's going to completely unlocked potential 186 00:08:32,480 --> 00:08:36,520 Speaker 9: that we haven't seen before. And I'm pretty excited about 187 00:08:36,559 --> 00:08:38,319 Speaker 9: the potential of what this is going to be able 188 00:08:38,320 --> 00:08:40,920 Speaker 9: to do to solve problems that we have not been 189 00:08:40,960 --> 00:08:43,680 Speaker 9: able to tackle as of yet. That's probably the most 190 00:08:43,760 --> 00:08:45,840 Speaker 9: under hyped part of AI in my opinion. 191 00:08:45,920 --> 00:08:48,719 Speaker 2: Well, let's get into that that phrase unlocked potential. I'm 192 00:08:48,720 --> 00:08:52,000 Speaker 2: thinking about unlocking potential for who people who are in 193 00:08:52,080 --> 00:08:54,640 Speaker 2: the stocks, people who run the companies, or people who 194 00:08:54,640 --> 00:08:57,240 Speaker 2: actually work at the companies and run the operations. The 195 00:08:57,280 --> 00:09:01,640 Speaker 2: difference between say, job replacement and job enhancement. G two, 196 00:09:01,720 --> 00:09:02,920 Speaker 2: what's the difference between the two? 197 00:09:04,800 --> 00:09:05,000 Speaker 3: You know? 198 00:09:05,080 --> 00:09:07,440 Speaker 9: So, the way I think about it is there's a 199 00:09:07,640 --> 00:09:11,640 Speaker 9: definitive pattern and history of the way that technologies get 200 00:09:12,600 --> 00:09:15,440 Speaker 9: to get adopted. First, the first phase is when people 201 00:09:15,480 --> 00:09:17,840 Speaker 9: are fearful of the technology, and then they flourish with them. 202 00:09:18,360 --> 00:09:22,520 Speaker 9: And we are currently in this mode of largely being 203 00:09:22,559 --> 00:09:25,079 Speaker 9: skeptical of AI, thinking it's going to take our jobs. 204 00:09:25,080 --> 00:09:26,640 Speaker 9: And like I said to you the last time I 205 00:09:26,640 --> 00:09:30,480 Speaker 9: saw you, Jonathan, I worry less about AI taking my job. 206 00:09:30,520 --> 00:09:33,960 Speaker 9: I worry about someone using AI better than me. That's 207 00:09:34,000 --> 00:09:36,000 Speaker 9: probably going to take my job. And we should make 208 00:09:36,000 --> 00:09:38,959 Speaker 9: sure that we democratize the use of AI for every 209 00:09:39,000 --> 00:09:42,160 Speaker 9: person so that we can actually unleash our potential. And that, 210 00:09:42,360 --> 00:09:45,400 Speaker 9: in my mind is an area that we don't talk 211 00:09:45,520 --> 00:09:48,400 Speaker 9: enough about right now, which is what are the unsolved 212 00:09:48,480 --> 00:09:50,680 Speaker 9: problems that we have not been able to solve because 213 00:09:50,720 --> 00:09:53,480 Speaker 9: of original insights of AI that we will be able 214 00:09:53,520 --> 00:09:57,880 Speaker 9: to solve today. Think about the kind of new businesses 215 00:09:57,920 --> 00:09:59,640 Speaker 9: that people will be able to start, the kind of 216 00:10:00,320 --> 00:10:02,800 Speaker 9: you know, diseases we'll be able to solve for now. 217 00:10:02,880 --> 00:10:05,840 Speaker 9: I'm not delusional. It's not that this comes without any risk. 218 00:10:06,160 --> 00:10:08,840 Speaker 9: Security and safety is a huge risk. We ought to 219 00:10:08,880 --> 00:10:12,000 Speaker 9: make sure that we actually get all over that and 220 00:10:12,559 --> 00:10:15,600 Speaker 9: band together as a community to make sure that we 221 00:10:15,640 --> 00:10:20,120 Speaker 9: can solve those risks. But I'm a net optimist of 222 00:10:20,160 --> 00:10:22,520 Speaker 9: AI rather than thinking that it's going to take every 223 00:10:22,600 --> 00:10:24,880 Speaker 9: job that's available for humans right now. 224 00:10:25,160 --> 00:10:28,480 Speaker 7: G Two that's pretty extreme prediction. There is this question 225 00:10:28,640 --> 00:10:31,720 Speaker 7: of who potentially benefits within the labor market and who 226 00:10:31,840 --> 00:10:34,839 Speaker 7: is left behind. And I wonder at Cisco, you talk 227 00:10:34,920 --> 00:10:37,679 Speaker 7: to a lot of companies, how are they preparing their 228 00:10:37,720 --> 00:10:41,000 Speaker 7: workforces and are they aware of how much retraining is 229 00:10:41,080 --> 00:10:43,559 Speaker 7: necessary to keep their humans relevant. 230 00:10:44,760 --> 00:10:48,920 Speaker 9: Yeah, I think there's You know, the most organizations right 231 00:10:48,960 --> 00:10:53,000 Speaker 9: now are thinking about how is each job going to 232 00:10:53,080 --> 00:10:55,160 Speaker 9: get reconfigured and what are we going to need to 233 00:10:55,200 --> 00:10:58,080 Speaker 9: do to make sure that the augmentation of AI to 234 00:10:58,200 --> 00:11:01,079 Speaker 9: a human makes the human more productive. What we want 235 00:11:01,120 --> 00:11:03,800 Speaker 9: to do ultimately is make sure that AI can reach 236 00:11:03,840 --> 00:11:06,600 Speaker 9: its full potential the humans can reach their full potential 237 00:11:06,640 --> 00:11:12,000 Speaker 9: with AI. So, for example, at Cisco, we are hoping 238 00:11:12,080 --> 00:11:14,360 Speaker 9: that there's going to be a lot of code that 239 00:11:14,400 --> 00:11:16,880 Speaker 9: gets written autonomously. That doesn't mean that we're going to 240 00:11:16,920 --> 00:11:20,880 Speaker 9: have less engineers. That means that the engineers will provide 241 00:11:20,880 --> 00:11:24,160 Speaker 9: more insight, more oversight, and they'll actually think about new 242 00:11:24,240 --> 00:11:29,760 Speaker 9: ideas because we are currently so constrained with engineering talent 243 00:11:29,800 --> 00:11:31,920 Speaker 9: that we're not able to prosecute all the ideas that 244 00:11:31,960 --> 00:11:33,800 Speaker 9: we have. And now we'll be able to actually get 245 00:11:33,840 --> 00:11:36,839 Speaker 9: more through put capacity as a result of having AI 246 00:11:36,920 --> 00:11:39,440 Speaker 9: being a companion for every engineer. And so I feel 247 00:11:39,480 --> 00:11:43,360 Speaker 9: like every single job will need to get reconfigured slightly, 248 00:11:43,440 --> 00:11:46,440 Speaker 9: will need to have be adjusted. But this is no 249 00:11:46,559 --> 00:11:50,480 Speaker 9: different from any other previous technological revolution that we've had. 250 00:11:50,559 --> 00:11:52,319 Speaker 9: With the Internet, you had to have the same with 251 00:11:52,440 --> 00:11:56,160 Speaker 9: the personal computer. There was the same kind of reconfiguration 252 00:11:56,200 --> 00:12:00,360 Speaker 9: of jobs. And yes, some of those will those will 253 00:12:00,360 --> 00:12:03,480 Speaker 9: go away, and there'll need to be some retraining, but frankly, 254 00:12:03,559 --> 00:12:06,000 Speaker 9: there'll be new jobs that emerge that we haven't seen 255 00:12:06,080 --> 00:12:09,680 Speaker 9: up until now that allow us to actually move even faster. 256 00:12:09,960 --> 00:12:10,400 Speaker 8: One of the. 257 00:12:10,360 --> 00:12:13,360 Speaker 7: Issues, and one of the differences now versus the Internet 258 00:12:13,559 --> 00:12:17,000 Speaker 7: or the industrialization or even the engine when it came out, 259 00:12:17,480 --> 00:12:19,760 Speaker 7: is the speed of how quickly this is getting implemented, 260 00:12:19,760 --> 00:12:21,880 Speaker 7: of how quickly the development is going. And we're getting 261 00:12:21,920 --> 00:12:25,000 Speaker 7: to phase two before some people even understand the potential 262 00:12:25,000 --> 00:12:27,280 Speaker 7: of phase one. By the time we get to phase three, 263 00:12:27,280 --> 00:12:28,680 Speaker 7: they're going to be a whole host of people that 264 00:12:28,720 --> 00:12:32,240 Speaker 7: don't even realize how behind they are. Just how big 265 00:12:32,280 --> 00:12:34,080 Speaker 7: is that mismatch in terms of the speed of the 266 00:12:34,120 --> 00:12:37,480 Speaker 7: evolution and how behind a lot of the workforce is 267 00:12:37,520 --> 00:12:38,000 Speaker 7: to meet it. 268 00:12:39,640 --> 00:12:41,840 Speaker 9: This is actually a really important point, Lisa, because the 269 00:12:41,920 --> 00:12:45,360 Speaker 9: speed of the pace of change is something that we've 270 00:12:45,400 --> 00:12:48,400 Speaker 9: never seen before. And frankly, that's why sitting on the 271 00:12:48,480 --> 00:12:51,560 Speaker 9: sidelines and waiting for this thing to kind of play 272 00:12:51,559 --> 00:12:54,400 Speaker 9: out before you jump in is exactly the wrong strategy. 273 00:12:54,440 --> 00:12:56,439 Speaker 9: What we need to do is make sure that everyone's 274 00:12:56,480 --> 00:12:59,760 Speaker 9: actually getting dextrous with the use of AI, because there's 275 00:12:59,760 --> 00:13:01,960 Speaker 9: only two kinds of companies in my mind, those that 276 00:13:02,000 --> 00:13:04,280 Speaker 9: are going to be extremely dexterous with the use of 277 00:13:04,320 --> 00:13:06,800 Speaker 9: AI and others that will actually really struggle for relevance. 278 00:13:07,320 --> 00:13:09,400 Speaker 9: And we want to make sure that there's more and 279 00:13:09,400 --> 00:13:11,880 Speaker 9: more companies that are in the first category, not for second. 280 00:13:12,320 --> 00:13:15,120 Speaker 9: And so I do feel like speeds an important dimension 281 00:13:15,640 --> 00:13:19,360 Speaker 9: and in order to tackle that, every company just needs 282 00:13:19,360 --> 00:13:22,480 Speaker 9: to make sure that they're actually thinking about getting and 283 00:13:22,520 --> 00:13:26,559 Speaker 9: not sitting on the sidelines, but immersing themselves and experimenting 284 00:13:26,600 --> 00:13:28,959 Speaker 9: with AI as quickly as possible so that they can 285 00:13:28,960 --> 00:13:31,160 Speaker 9: get an instinct, they can get some kind of judgment 286 00:13:31,520 --> 00:13:33,240 Speaker 9: of what this is going to look like over time. 287 00:13:33,400 --> 00:13:35,520 Speaker 5: T Two, You're not just working with companies, you're also 288 00:13:35,600 --> 00:13:38,120 Speaker 5: working with governments. From page of Wall Street Journal today 289 00:13:38,160 --> 00:13:41,839 Speaker 5: is talking about how China's AI companies are basically challenging 290 00:13:41,920 --> 00:13:44,880 Speaker 5: US superiority. Who is doing it well, who do you 291 00:13:44,880 --> 00:13:46,040 Speaker 5: think is winning this race? 292 00:13:47,559 --> 00:13:47,719 Speaker 3: Well? 293 00:13:47,760 --> 00:13:50,840 Speaker 9: I think right now, you know, while US is in 294 00:13:50,880 --> 00:13:53,720 Speaker 9: the lead, China is actually catching up fast. And so 295 00:13:53,760 --> 00:13:56,880 Speaker 9: we need to make sure that we continue the base 296 00:13:56,920 --> 00:13:59,600 Speaker 9: of innovation that's there, and what you want to see 297 00:13:59,679 --> 00:14:03,600 Speaker 9: is that the US companies are becoming some of the 298 00:14:03,679 --> 00:14:07,240 Speaker 9: standards for infrastructure buildout that might be all around the 299 00:14:07,240 --> 00:14:09,440 Speaker 9: world for safety and security all around the world. 300 00:14:09,480 --> 00:14:10,120 Speaker 3: You want to make. 301 00:14:10,040 --> 00:14:12,560 Speaker 9: Sure that that happens. And that's why it's so important 302 00:14:12,600 --> 00:14:15,640 Speaker 9: that you know the companies that win and the countries 303 00:14:15,679 --> 00:14:17,439 Speaker 9: that win with the AI race are the ones that 304 00:14:17,480 --> 00:14:19,560 Speaker 9: are also going to win economically. They're also going to 305 00:14:19,600 --> 00:14:22,520 Speaker 9: win from a national security standpoint, So there's a lot 306 00:14:22,560 --> 00:14:25,040 Speaker 9: of benefit to making sure that you're kind of immersing 307 00:14:25,080 --> 00:14:29,040 Speaker 9: yourselves in an AI. I was recently in the Middle East, 308 00:14:29,600 --> 00:14:35,520 Speaker 9: Lisa and we announced a partnerships with the Saudi government, 309 00:14:36,680 --> 00:14:38,600 Speaker 9: with the Kingdom of Saudi Arabia as well as with 310 00:14:38,640 --> 00:14:41,400 Speaker 9: the United Arab Emirates, where we're going to help with 311 00:14:41,520 --> 00:14:43,560 Speaker 9: data center buildouts. And if you think about what the 312 00:14:43,600 --> 00:14:46,400 Speaker 9: constraints of AI are, there are three things. There's power, 313 00:14:46,840 --> 00:14:49,960 Speaker 9: there's compute, and there's networking capacity. Those are the constraints, 314 00:14:49,960 --> 00:14:52,760 Speaker 9: and we need to make sure that this infrastructure gets 315 00:14:52,840 --> 00:14:56,160 Speaker 9: modernized and that we have American companies that are helping 316 00:14:56,480 --> 00:15:00,960 Speaker 9: in participating in these massive data center buildouts, which actually 317 00:15:00,960 --> 00:15:03,720 Speaker 9: provide the infrastructure necessary for everyone to be able to 318 00:15:03,720 --> 00:15:04,960 Speaker 9: have access to AI. 319 00:15:04,920 --> 00:15:07,440 Speaker 2: GT just before you go, we're focused on payross this 320 00:15:07,520 --> 00:15:09,920 Speaker 2: week at least has been doing a great job over 321 00:15:09,920 --> 00:15:13,200 Speaker 2: the last week or so just bringing up highlighting continuously repeatedly, 322 00:15:13,520 --> 00:15:15,360 Speaker 2: how difficult it is for graduates to get a roll 323 00:15:15,400 --> 00:15:17,160 Speaker 2: at the moment. And I just wonder how this is 324 00:15:17,160 --> 00:15:19,720 Speaker 2: going to impact high rink at the entry level over 325 00:15:19,720 --> 00:15:22,480 Speaker 2: the next several years or so. As companies figure this out, 326 00:15:22,720 --> 00:15:25,400 Speaker 2: then invest a lot in software, invest in the current 327 00:15:25,480 --> 00:15:28,000 Speaker 2: staff to learn how to use some of these things. 328 00:15:28,360 --> 00:15:29,760 Speaker 2: But I'm not sure they're going to hire up the 329 00:15:29,800 --> 00:15:31,840 Speaker 2: same pace G two. And I wonder what your experience 330 00:15:31,920 --> 00:15:34,480 Speaker 2: is now, both within Cisco and looking out speaking to 331 00:15:34,560 --> 00:15:35,200 Speaker 2: other companies. 332 00:15:36,680 --> 00:15:39,000 Speaker 9: You know, John, you and I talked about this last 333 00:15:39,040 --> 00:15:41,520 Speaker 9: time as well. I actually tend to learn so much 334 00:15:41,560 --> 00:15:44,600 Speaker 9: from the people that are AI natives that are just 335 00:15:44,680 --> 00:15:47,840 Speaker 9: coming out of them out of the educational system, because 336 00:15:47,840 --> 00:15:51,440 Speaker 9: they think they use AI very differently than folks that 337 00:15:51,440 --> 00:15:53,880 Speaker 9: have been around for a while. And so I actually 338 00:15:54,040 --> 00:15:56,480 Speaker 9: don't think it's a good strategy to not hire entry 339 00:15:56,520 --> 00:15:58,520 Speaker 9: level candidates and just think that AI is going to 340 00:15:58,560 --> 00:16:01,120 Speaker 9: replace those jobs. Frankly, I feel that you have an 341 00:16:01,200 --> 00:16:04,360 Speaker 9: entry level candidate. With AI as a companion, you can 342 00:16:04,400 --> 00:16:08,040 Speaker 9: start to see meaningful levels of compounding of value. And 343 00:16:08,080 --> 00:16:11,240 Speaker 9: so I do feel like there's two categories of people 344 00:16:11,280 --> 00:16:13,920 Speaker 9: that are actually doing really well with AI. The early 345 00:16:14,080 --> 00:16:17,120 Speaker 9: entrants who've actually been AI native that know and have 346 00:16:17,160 --> 00:16:19,120 Speaker 9: a very different instinct for how to use AI. And 347 00:16:19,880 --> 00:16:22,840 Speaker 9: then the second ones are the highly experienced group of 348 00:16:22,840 --> 00:16:24,920 Speaker 9: people that are using it well. What we need to 349 00:16:24,920 --> 00:16:26,520 Speaker 9: do is we need to make sure that we train 350 00:16:27,280 --> 00:16:30,200 Speaker 9: the people in the middle so that they're all not 351 00:16:30,440 --> 00:16:32,640 Speaker 9: fearful of AI, but they're in fact starting to think 352 00:16:32,640 --> 00:16:35,640 Speaker 9: about this as an accelerant to their personal productivity as 353 00:16:35,680 --> 00:16:37,479 Speaker 9: well as the productivity of the companies. 354 00:16:37,200 --> 00:16:38,200 Speaker 2: You're slowly converting. 355 00:16:38,240 --> 00:16:38,440 Speaker 8: Me G. 356 00:16:38,520 --> 00:16:41,400 Speaker 2: So it's wonderful to catch up. Enjoy London, So glad John, 357 00:16:41,520 --> 00:16:43,680 Speaker 2: We'll see with New York soon. GT for town there 358 00:16:43,800 --> 00:16:55,760 Speaker 2: at Cisco, Welly of black Rock Rights. In a world 359 00:16:55,760 --> 00:16:59,600 Speaker 2: of weak macro anchors, mega forces like artificial intelligence are 360 00:16:59,600 --> 00:17:02,680 Speaker 2: the new long term anchor for achieving durable returns. 361 00:17:02,960 --> 00:17:05,320 Speaker 8: Why joint us now for more? Wykenmonic, good morning. 362 00:17:05,440 --> 00:17:07,240 Speaker 2: Is it getting harder to find a long term macro 363 00:17:07,320 --> 00:17:09,000 Speaker 2: anchor in this environment. 364 00:17:08,760 --> 00:17:12,000 Speaker 1: Well, long term macro anchors have been lost. You look 365 00:17:12,040 --> 00:17:15,520 Speaker 1: at inflation anchors, you look at long term growth anchors, 366 00:17:15,600 --> 00:17:18,200 Speaker 1: you look at long term physical anchors, you look at 367 00:17:18,440 --> 00:17:22,719 Speaker 1: even anchors in institutional confidence like the safe haven status 368 00:17:22,800 --> 00:17:25,800 Speaker 1: of the dollar, but maybe also independence of the fact. 369 00:17:25,880 --> 00:17:28,960 Speaker 1: So it's really hard to find long term macro anchor, 370 00:17:29,000 --> 00:17:33,480 Speaker 1: which is why we actually think that it's easier to 371 00:17:33,520 --> 00:17:37,639 Speaker 1: think about tactical as a location because of the mutable 372 00:17:37,720 --> 00:17:42,360 Speaker 1: laws around us that and global supply chain. Paradoxically, there 373 00:17:42,400 --> 00:17:45,959 Speaker 1: is greater certainty in our assessment in the near term 374 00:17:46,160 --> 00:17:47,800 Speaker 1: than in the long term, which is the opposite of 375 00:17:47,840 --> 00:17:50,320 Speaker 1: what has been always the case, which is why we're 376 00:17:50,320 --> 00:17:54,320 Speaker 1: moving k targets in terms of the budget deployment from 377 00:17:54,440 --> 00:17:58,440 Speaker 1: longer term strategic as a location towards tactical as location. 378 00:17:58,520 --> 00:18:01,800 Speaker 1: This is one of the best tactical investment environments. 379 00:18:01,880 --> 00:18:04,280 Speaker 2: So what's the tactical approach currently for you and the team? 380 00:18:04,720 --> 00:18:07,560 Speaker 1: Right now? We are investing for the here and now, 381 00:18:07,640 --> 00:18:10,439 Speaker 1: which is to recognize that so far this year we 382 00:18:10,560 --> 00:18:13,400 Speaker 1: have focused a lot on tariffs, and we're still focusing 383 00:18:13,600 --> 00:18:16,280 Speaker 1: on tariffs, which is very different from Trump term one 384 00:18:16,400 --> 00:18:19,560 Speaker 1: where we had text cuts first and then we had tariffs. 385 00:18:19,560 --> 00:18:22,800 Speaker 1: But now focus is going to shift also towards text cuts, 386 00:18:22,920 --> 00:18:28,480 Speaker 1: also towards deregulation, potentially unleashing animal spirit. And yes, tariffs 387 00:18:28,480 --> 00:18:31,359 Speaker 1: headlines are still flying around. But we do think that 388 00:18:31,440 --> 00:18:33,879 Speaker 1: because of the constraints and immutable laws that I just 389 00:18:33,920 --> 00:18:37,159 Speaker 1: talked about, we're going to get to some sort of 390 00:18:37,240 --> 00:18:42,240 Speaker 1: lending spot, not likely derailing the tactical kind of risk 391 00:18:42,280 --> 00:18:44,159 Speaker 1: con view that we still have. So right now, we 392 00:18:44,280 --> 00:18:48,520 Speaker 1: still like US equities, and I would observe that at 393 00:18:48,520 --> 00:18:52,080 Speaker 1: this juncture is no longer consensus and speakture investors across 394 00:18:52,119 --> 00:18:54,840 Speaker 1: the world, Europe, the APEC. I would think that it's 395 00:18:54,880 --> 00:18:57,359 Speaker 1: more divisive right now, but we still like it. The 396 00:18:57,400 --> 00:19:01,760 Speaker 1: condition for sustained rest of the world europe outperformance over 397 00:19:02,000 --> 00:19:04,399 Speaker 1: US haven't been met, which is why we're not We 398 00:19:04,480 --> 00:19:09,760 Speaker 1: haven't chased the European equity our performance beyond closing the 399 00:19:09,840 --> 00:19:11,560 Speaker 1: underweight too neutral earlier in the year. 400 00:19:11,760 --> 00:19:14,359 Speaker 7: So you keep mentioning the immutable economic laws, and I 401 00:19:14,400 --> 00:19:16,399 Speaker 7: think this is a really important point, and in the 402 00:19:16,480 --> 00:19:19,639 Speaker 7: outlook that Black Rock put out, you did right. We 403 00:19:19,680 --> 00:19:22,199 Speaker 7: think commutable economic laws to prevent or return to a 404 00:19:22,280 --> 00:19:25,560 Speaker 7: maximal stance. How much does this just mean fade the extremes, 405 00:19:25,960 --> 00:19:28,280 Speaker 7: fade the tail risks, because they always will come back 406 00:19:28,320 --> 00:19:30,360 Speaker 7: to the center based on math. 407 00:19:30,960 --> 00:19:35,880 Speaker 1: That's exactly right. If we faded extremes, which we did 408 00:19:36,040 --> 00:19:39,240 Speaker 1: think about kind of how we up risked immediately after 409 00:19:39,600 --> 00:19:42,840 Speaker 1: April ninth, then we would have captured and we have 410 00:19:43,160 --> 00:19:47,040 Speaker 1: the twenty more than twenty percent ready from the April trove. 411 00:19:47,280 --> 00:19:50,320 Speaker 1: So it's really recognizing that even though headlines can be 412 00:19:50,520 --> 00:19:54,479 Speaker 1: very scary sometimes for markets, there are things governing how 413 00:19:54,560 --> 00:19:57,440 Speaker 1: quickly things can change from status quo in the very 414 00:19:57,480 --> 00:20:00,000 Speaker 1: near term. So if we want to close trade deficits 415 00:20:00,040 --> 00:20:03,840 Speaker 1: and we lose a lot of the reliance on foreign funding, 416 00:20:03,920 --> 00:20:07,600 Speaker 1: and given that the US has the highest financing needs 417 00:20:07,640 --> 00:20:10,560 Speaker 1: among G seven in terms of percentage of GDP and 418 00:20:10,800 --> 00:20:14,240 Speaker 1: one of the shortest average that maturity, there is something 419 00:20:14,320 --> 00:20:17,000 Speaker 1: that cannot really be messed around with, which is why 420 00:20:17,240 --> 00:20:20,480 Speaker 1: we believe, especially at times of a huge amount of 421 00:20:20,520 --> 00:20:25,119 Speaker 1: uncertainty in market narratives, this strategy is rewarding and effect 422 00:20:25,160 --> 00:20:26,320 Speaker 1: has worked really well this year. 423 00:20:26,440 --> 00:20:28,879 Speaker 7: Just quickly, how fragile does that make this market that 424 00:20:28,920 --> 00:20:32,840 Speaker 7: has become numb to extremes. 425 00:20:33,200 --> 00:20:38,439 Speaker 1: I think markets are not yet numb to extremes in 426 00:20:38,440 --> 00:20:42,160 Speaker 1: that you still see headlines like whipsawing day to day 427 00:20:42,240 --> 00:20:47,479 Speaker 1: market volacility. We see equity sensitivity to incoming data at 428 00:20:47,520 --> 00:20:51,800 Speaker 1: a much more elevated level compared to pre pandemic. We 429 00:20:51,880 --> 00:20:55,240 Speaker 1: see rage sensitivity to incoming data like we're talking about 430 00:20:55,320 --> 00:20:58,160 Speaker 1: month to month inflation print, but the long term ten 431 00:20:58,200 --> 00:21:01,679 Speaker 1: years sensitivity to months to on inflation Prince is so 432 00:21:01,760 --> 00:21:04,720 Speaker 1: much more elevated now, which means that markets are trying 433 00:21:04,720 --> 00:21:08,320 Speaker 1: to extrapolate from incoming data what it means for the 434 00:21:08,320 --> 00:21:11,040 Speaker 1: long term, which speaks to the laws of long term 435 00:21:11,080 --> 00:21:14,120 Speaker 1: macro anchor. Which is why if we have a very 436 00:21:14,280 --> 00:21:17,359 Speaker 1: clear kind of assessment of the fundamental picture that allows 437 00:21:17,440 --> 00:21:22,160 Speaker 1: us to play the current environment taxically and reversal strategies 438 00:21:22,200 --> 00:21:25,879 Speaker 1: in the middle of wildly swinging market narratives. Has been 439 00:21:25,960 --> 00:21:28,040 Speaker 1: very rewarding for our active platform. 440 00:21:27,880 --> 00:21:30,400 Speaker 2: Super thoughtful stuff. Welly, appreciate your time as always, thanks 441 00:21:30,400 --> 00:21:31,919 Speaker 2: for being with us, say in New York while leader 442 00:21:32,080 --> 00:21:44,119 Speaker 2: of Black Rob joining us now to discuss this and 443 00:21:44,160 --> 00:21:46,240 Speaker 2: a whole lot more on the US economy. Joe Leaphone, 444 00:21:46,359 --> 00:21:49,080 Speaker 2: the counsel at the Treasury Secretary Scale Bess and Joe, 445 00:21:49,080 --> 00:21:51,560 Speaker 2: welcome back to the program, Sir. The words of Chairman Power, 446 00:21:51,840 --> 00:21:54,600 Speaker 2: we didn't react at all. We're simply taking some time. 447 00:21:55,000 --> 00:21:58,000 Speaker 2: Why is his position not a convincing one? 448 00:21:59,560 --> 00:22:00,840 Speaker 8: Let me say this, Jonathan. 449 00:22:00,880 --> 00:22:04,320 Speaker 10: The fact is that the tariffs, whether you look at 450 00:22:04,320 --> 00:22:09,119 Speaker 10: the pc the CPI, import prices, all those metrics actually decelerate. 451 00:22:09,240 --> 00:22:12,520 Speaker 10: So not only did the consensus get it wrong where 452 00:22:12,560 --> 00:22:16,760 Speaker 10: inflation didn't pick up, it actually fell. The chair likes 453 00:22:16,760 --> 00:22:20,600 Speaker 10: to look at the supercore metric, which is services excluding 454 00:22:20,680 --> 00:22:24,679 Speaker 10: rents and energy, and that's actually fallen about a point 455 00:22:24,720 --> 00:22:29,679 Speaker 10: point plus since last September when the Fed first began cutting. 456 00:22:29,760 --> 00:22:34,480 Speaker 10: So many metrics show that inflation pressures are actually decelerating, 457 00:22:34,480 --> 00:22:38,280 Speaker 10: which obviously means that real interest rates are expanding, meaning 458 00:22:38,280 --> 00:22:41,439 Speaker 10: they're rising. So I don't want to be critical the 459 00:22:41,440 --> 00:22:44,640 Speaker 10: Fed per se. The president's done of his own, has 460 00:22:44,640 --> 00:22:47,199 Speaker 10: given his own spiel and and made some very powerful 461 00:22:47,280 --> 00:22:50,520 Speaker 10: arguments why race shou should fall. But there's no question 462 00:22:50,640 --> 00:22:52,919 Speaker 10: the inflation news has been much better than anybody thought. 463 00:22:53,359 --> 00:22:56,160 Speaker 10: And tariffs, as we've said many times, the Secretary Beston 464 00:22:56,200 --> 00:22:59,880 Speaker 10: has said, are not inflationary tariffs are. If they happen, 465 00:23:00,080 --> 00:23:02,760 Speaker 10: they haven't impacted the domestic economy. 466 00:23:02,760 --> 00:23:04,640 Speaker 8: It's a price level adjustment, Joe. 467 00:23:04,680 --> 00:23:07,360 Speaker 5: We're still waiting for the tariff rates and the President 468 00:23:07,400 --> 00:23:09,600 Speaker 5: is saying he's not moving the date next week. When 469 00:23:09,640 --> 00:23:12,359 Speaker 5: I speak to individuals that are sitting on the other 470 00:23:12,560 --> 00:23:16,240 Speaker 5: side of the US Trade Representative or treasure Secretary Scott Bessont, 471 00:23:16,400 --> 00:23:19,400 Speaker 5: they say that they have been told and given assurances 472 00:23:19,440 --> 00:23:23,639 Speaker 5: by this administration that if they are in good faith negotiations, 473 00:23:23,640 --> 00:23:25,440 Speaker 5: that that deadline can be pushed back. 474 00:23:25,560 --> 00:23:29,600 Speaker 10: Is that your understanding, Well, that's what Secretary Bestin has said, 475 00:23:29,640 --> 00:23:33,520 Speaker 10: and Secretary recently said about ten to twelve countries are 476 00:23:33,640 --> 00:23:36,639 Speaker 10: very close to a deal. There's about another twenty that 477 00:23:36,680 --> 00:23:39,680 Speaker 10: are also negotiating good faith, and Secretary vest At recently 478 00:23:39,800 --> 00:23:41,960 Speaker 10: highlighted that many deals could be done by Labor Day. 479 00:23:42,240 --> 00:23:44,840 Speaker 10: So does a lot of good progress. But on the terrafts, 480 00:23:44,840 --> 00:23:47,800 Speaker 10: I just want to be clear. The consensus view among 481 00:23:47,800 --> 00:23:50,800 Speaker 10: almost everybody was that teriffs would start to impact the 482 00:23:50,880 --> 00:23:53,439 Speaker 10: data in March. It didn't happen in March. It happened 483 00:23:53,480 --> 00:23:55,600 Speaker 10: in April, it didn't happen in May. And we know 484 00:23:55,680 --> 00:23:57,080 Speaker 10: there's a big number. 485 00:23:57,320 --> 00:23:58,520 Speaker 8: Associated with the revenue. 486 00:23:58,560 --> 00:24:02,040 Speaker 10: We could have three hundred billion of teriff for revenue 487 00:24:02,040 --> 00:24:02,720 Speaker 10: this year. 488 00:24:03,119 --> 00:24:03,760 Speaker 8: That's coming in. 489 00:24:03,800 --> 00:24:06,879 Speaker 10: So we've got these huge increase in revenues. So they're there, 490 00:24:07,200 --> 00:24:10,440 Speaker 10: and the reason the tariffs are impacting things in large 491 00:24:10,440 --> 00:24:13,080 Speaker 10: part is because foreign producers, as we learn from the 492 00:24:13,080 --> 00:24:15,639 Speaker 10: first Trump administration, are absorbing it in their margin. 493 00:24:16,600 --> 00:24:19,320 Speaker 5: When it comes to Japan specifically, the President said that 494 00:24:19,320 --> 00:24:21,600 Speaker 5: they're spoiled, and he talked about the fact that maybe 495 00:24:21,640 --> 00:24:24,600 Speaker 5: he's going to go for a thirty thirty five percent rate. 496 00:24:25,080 --> 00:24:27,359 Speaker 5: On a liberation day, they only had a twenty four 497 00:24:27,520 --> 00:24:31,800 Speaker 5: percent rate. Do you see any country going above April 498 00:24:31,880 --> 00:24:32,600 Speaker 5: second rates? 499 00:24:34,520 --> 00:24:38,560 Speaker 10: The President is a very tough negotiator, and I'm confident 500 00:24:38,560 --> 00:24:41,160 Speaker 10: that whatever winds up happening with Japan and everyone else 501 00:24:41,880 --> 00:24:44,120 Speaker 10: is going to be in the US best interest. This 502 00:24:44,160 --> 00:24:47,720 Speaker 10: is a negotiation, and again, as Secretary Bestins highlighted many times, 503 00:24:47,720 --> 00:24:50,920 Speaker 10: as long as countries are negotiating in good faith, that's 504 00:24:50,920 --> 00:24:52,639 Speaker 10: a positive and then we take it from there. But 505 00:24:52,720 --> 00:24:56,760 Speaker 10: I do expect, as a Secretary said, there are deals forthcoming. 506 00:24:57,240 --> 00:24:59,919 Speaker 7: The market response to all of this has been prettym 507 00:25:00,080 --> 00:25:03,680 Speaker 7: much a strug. We've seen new record highs for equity markets, 508 00:25:03,760 --> 00:25:06,280 Speaker 7: except the dollar has continued to weaken and weaken too, 509 00:25:06,280 --> 00:25:08,359 Speaker 7: some of the lowest levels, weakest levels going back to 510 00:25:08,359 --> 00:25:11,200 Speaker 7: twenty twenty two. At what point is that a concern 511 00:25:11,240 --> 00:25:13,160 Speaker 7: for you, Lisa? 512 00:25:13,200 --> 00:25:16,680 Speaker 10: First of all, a lot of that weakness is visa v. 513 00:25:16,800 --> 00:25:17,200 Speaker 8: The Euro. 514 00:25:17,760 --> 00:25:20,600 Speaker 10: If you look at the FEDS Real Broad Trade Weighted Index, 515 00:25:20,640 --> 00:25:23,840 Speaker 10: which is about twenty six countries, as opposed to believe 516 00:25:23,840 --> 00:25:25,920 Speaker 10: that the Bloomberg d x Y I think is only 517 00:25:25,960 --> 00:25:26,560 Speaker 10: six or seven. 518 00:25:26,560 --> 00:25:28,080 Speaker 8: It's a small small sample. 519 00:25:28,400 --> 00:25:30,640 Speaker 10: If you look at the Real Broad the Real Broad 520 00:25:30,640 --> 00:25:33,160 Speaker 10: Trade Weighted Index, it's close to one of the highest 521 00:25:33,200 --> 00:25:36,399 Speaker 10: readings we've had since the Plaza the cordback in nineteen 522 00:25:36,400 --> 00:25:36,840 Speaker 10: eighty five. 523 00:25:36,880 --> 00:25:39,119 Speaker 8: So this notion that somehow there is the. 524 00:25:39,200 --> 00:25:42,760 Speaker 10: Selling of US assets that the dollars week, some major 525 00:25:42,800 --> 00:25:45,960 Speaker 10: financial outlets have talked about that, it's completely incorrect. It's 526 00:25:46,040 --> 00:25:50,159 Speaker 10: not consistent with the TIC data. It's not inconsistent with 527 00:25:50,160 --> 00:25:51,520 Speaker 10: the recent BIS report. 528 00:25:51,560 --> 00:25:52,680 Speaker 8: We've talked about. 529 00:25:53,000 --> 00:25:56,000 Speaker 10: Some of the selling of assets in April, that brief 530 00:25:56,040 --> 00:25:59,480 Speaker 10: ceradi of selling was actually due to hedging, wasn't due 531 00:25:59,480 --> 00:26:02,480 Speaker 10: to lack demand for US assets. So the dollar is 532 00:26:02,480 --> 00:26:05,320 Speaker 10: the reserve currency. The dollar will be strong. The dollar 533 00:26:05,400 --> 00:26:09,240 Speaker 10: is still strong, and I think those concerns are greatly misplaced. 534 00:26:09,480 --> 00:26:12,679 Speaker 7: There is, though this building a worry about monetizing the 535 00:26:12,720 --> 00:26:15,280 Speaker 7: debt in order to pay for some of this bill. 536 00:26:15,280 --> 00:26:17,879 Speaker 7: This idea that you want to run the economy hot, 537 00:26:18,200 --> 00:26:21,880 Speaker 7: this emphasis on growth in order to offset the increase 538 00:26:21,880 --> 00:26:24,720 Speaker 7: in the deficit, at the same time that you're counting 539 00:26:24,720 --> 00:26:27,960 Speaker 7: on inflation not to pick up. How do you sort 540 00:26:27,960 --> 00:26:30,120 Speaker 7: of square that the idea that in the past, when 541 00:26:30,119 --> 00:26:32,440 Speaker 7: you run the economy hot, it typically has come along 542 00:26:32,480 --> 00:26:35,280 Speaker 7: with inflation, especially at times where there have been disruptions 543 00:26:35,320 --> 00:26:36,159 Speaker 7: to supply chains. 544 00:26:37,200 --> 00:26:37,400 Speaker 3: Yeah. 545 00:26:37,440 --> 00:26:39,679 Speaker 10: Well, you know, in the first Stump administration, growth was 546 00:26:39,720 --> 00:26:42,760 Speaker 10: nearly three percent and actually at three point four percent 547 00:26:43,320 --> 00:26:45,760 Speaker 10: in the fourth quarter year on year in twenty nineteen, 548 00:26:45,760 --> 00:26:48,800 Speaker 10: and inflation didn't pick up. The one big beautiful bill 549 00:26:48,840 --> 00:26:51,600 Speaker 10: which is making its way through the Congress, as you know, 550 00:26:52,480 --> 00:26:56,280 Speaker 10: increases supply side incentives to get growth to remain robust 551 00:26:56,680 --> 00:27:00,639 Speaker 10: through capital investment, in capital deepening, inflation will continue to fall. 552 00:27:01,280 --> 00:27:02,919 Speaker 8: The inflation news has been great, and that's the thing. 553 00:27:02,960 --> 00:27:04,560 Speaker 8: If you look at the bond market, the. 554 00:27:04,520 --> 00:27:07,520 Speaker 10: Equity market's rallied on a second half boom and bond 555 00:27:07,560 --> 00:27:10,040 Speaker 10: market yields are down substantially. 556 00:27:09,520 --> 00:27:11,600 Speaker 8: From where they were earlier in the year, So the. 557 00:27:11,520 --> 00:27:16,720 Speaker 10: Capital markets are really responding very positively to what they expect. 558 00:27:16,800 --> 00:27:19,520 Speaker 10: On the inflation side, break even inflation has been stable. 559 00:27:19,840 --> 00:27:22,040 Speaker 10: So again, this notion some of that inflation is going 560 00:27:22,080 --> 00:27:25,119 Speaker 10: to pick up, that growth leads to faster inflation. This 561 00:27:25,520 --> 00:27:30,000 Speaker 10: Phillips curve mindset, if you will, completely wrong. We saw 562 00:27:30,040 --> 00:27:32,480 Speaker 10: under the first Trump administration, as they said, very strong 563 00:27:32,520 --> 00:27:35,440 Speaker 10: growth and low inflation. 564 00:27:35,480 --> 00:27:36,240 Speaker 8: And by the way, I once you. 565 00:27:36,200 --> 00:27:39,040 Speaker 10: Want to add the big problem with the CBO's numbers 566 00:27:39,119 --> 00:27:42,159 Speaker 10: is they're only assuming one point eight percent GDP growth. 567 00:27:42,359 --> 00:27:45,040 Speaker 8: That's woefully at woefully too low. 568 00:27:45,840 --> 00:27:49,960 Speaker 10: If we have a seventeen point two percent revenue shary GDP, 569 00:27:50,000 --> 00:27:52,400 Speaker 10: which is basically where we are now, and we grow 570 00:27:52,400 --> 00:27:55,199 Speaker 10: it a much more plausible and realistic three percent, that 571 00:27:55,280 --> 00:27:57,760 Speaker 10: gives you something like an extra almost an extra trillion 572 00:27:57,800 --> 00:28:02,280 Speaker 10: dollars in revenue relative to what CBO was forecasting. 573 00:28:01,640 --> 00:28:02,560 Speaker 8: Back in January. 574 00:28:02,760 --> 00:28:04,640 Speaker 10: And that's not even adding the revenues that are coming 575 00:28:04,640 --> 00:28:07,080 Speaker 10: from the tariff. So this notion that these deficits are 576 00:28:07,119 --> 00:28:10,240 Speaker 10: going to stay super high and grow completely I think 577 00:28:10,240 --> 00:28:13,440 Speaker 10: incorrect because it's based on a fallacious assumption of sub 578 00:28:13,440 --> 00:28:15,400 Speaker 10: two percent growth, which is very. 579 00:28:15,320 --> 00:28:15,760 Speaker 8: Very weak. 580 00:28:15,960 --> 00:28:18,480 Speaker 2: That's the argument the President's making this morning so far. 581 00:28:18,840 --> 00:28:21,520 Speaker 2: Just before you go, how much outreach is happening the 582 00:28:21,560 --> 00:28:24,000 Speaker 2: Treasury and from the White House just to communicate to 583 00:28:24,040 --> 00:28:27,159 Speaker 2: the public that the payrolls report might change, just the numbers. 584 00:28:27,200 --> 00:28:30,360 Speaker 2: What's considered good given the amount of immigration we had 585 00:28:30,680 --> 00:28:33,000 Speaker 2: over the last several years, and what's considered good now 586 00:28:33,320 --> 00:28:35,280 Speaker 2: is going to change that. Maybe one hundred k now 587 00:28:35,359 --> 00:28:37,800 Speaker 2: is actually a decent number, when one hundred k a 588 00:28:37,800 --> 00:28:41,560 Speaker 2: few years ago, with mass migration crossing the southern border 589 00:28:41,920 --> 00:28:44,480 Speaker 2: wasn't a good number. Do we have to reframe what's 590 00:28:44,480 --> 00:28:45,920 Speaker 2: good and what's bad in this labor moment? 591 00:28:45,960 --> 00:28:46,960 Speaker 8: No, I don't know. 592 00:28:47,120 --> 00:28:49,280 Speaker 10: I mean, as you know, the payroll numbers are subject 593 00:28:49,280 --> 00:28:52,840 Speaker 10: to significant revision. The income numbers are actually been very good. 594 00:28:52,840 --> 00:28:56,400 Speaker 10: If the compensation figures in real terms, they're accelerating, feel 595 00:28:56,440 --> 00:28:59,360 Speaker 10: like at blue collar wages. Average hourly earnings for super 596 00:28:59,640 --> 00:29:02,840 Speaker 10: non advisory production workers are up almost two percent the 597 00:29:02,880 --> 00:29:05,240 Speaker 10: first five months of President Trump's term. That's the best 598 00:29:05,680 --> 00:29:08,720 Speaker 10: five months effectively to start a new administration ever going 599 00:29:08,760 --> 00:29:12,080 Speaker 10: back sixty years. So the income trends are great. You know, 600 00:29:12,160 --> 00:29:14,280 Speaker 10: a plumb rate's going to stay low. And again, if 601 00:29:14,320 --> 00:29:16,600 Speaker 10: we get the one big beautiful bill, Jonathan, that is 602 00:29:16,640 --> 00:29:19,880 Speaker 10: going to get rid of lot, get rid of a 603 00:29:19,880 --> 00:29:22,240 Speaker 10: lot of the uncertainty that's there in the market where 604 00:29:22,280 --> 00:29:25,080 Speaker 10: companies can make capital plans. Accordingly, they're not worrying about 605 00:29:25,120 --> 00:29:27,240 Speaker 10: tax rates going up because again, if you look at 606 00:29:27,280 --> 00:29:32,560 Speaker 10: small businesses, the pastor businesses, the Chapter S companies, they're 607 00:29:32,600 --> 00:29:35,400 Speaker 10: paying the marginal rate. So when they get some certainty 608 00:29:35,440 --> 00:29:37,280 Speaker 10: on that and they create forty percent of the jobs, 609 00:29:37,280 --> 00:29:39,640 Speaker 10: you're going to see the labor markets tightened and growth 610 00:29:39,680 --> 00:29:40,960 Speaker 10: accelerate in the second half. 611 00:29:40,840 --> 00:29:41,240 Speaker 8: Of the year. 612 00:29:41,400 --> 00:29:43,720 Speaker 2: I Joe appreciate time as always Jonah, only that have 613 00:29:43,720 --> 00:29:46,120 Speaker 2: the counselor to a twice three secondary skill plessant on 614 00:29:46,120 --> 00:29:46,840 Speaker 2: the labor market. 615 00:29:46,960 --> 00:29:47,120 Speaker 3: There. 616 00:29:48,040 --> 00:29:51,600 Speaker 2: This is the Bloomberg Seventans podcast, bringing you the best 617 00:29:51,600 --> 00:29:54,720 Speaker 2: in markets, economics, and giet politics. You can watch the 618 00:29:54,720 --> 00:29:57,720 Speaker 2: show live on Bloomberg TV weekday mornings from six am 619 00:29:57,840 --> 00:30:01,000 Speaker 2: to nine am Eastern. Subscribe to the podcast on Apple, 620 00:30:01,280 --> 00:30:04,120 Speaker 2: Spotify or anywhere else you listen, and as always on 621 00:30:04,160 --> 00:30:06,600 Speaker 2: the Bloomberg Terminal and the Bloomberg Business app 622 00:30:10,520 --> 00:30:11,000 Speaker 4: Mm hmm.