Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
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Speaker 2: anywhere else you listen, and as always on the Bloomberg
Speaker 2: Terminal and the Bloomberg Business app trailers. Watching of the
Speaker 2: Green Bank can sustain its momentum this year after its
Speaker 2: strongest yearly advance in nearly a decade. Kid Jukes of
Speaker 2: self gen Rights. Given the recent economic and political trends,
Speaker 2: Dollar bears should hibernate over the winter. Springshoots of life
Speaker 2: in the European economy, signs of fatigue in this incredible
Speaker 2: US cycle, and clarity on the policies of President Trump
Speaker 2: may all help by summer time. Patience is required through
Speaker 2: the winter and spring. Kit joined us now to kick
Speaker 2: off twenty five in the FX market. Happy in New
Speaker 2: Year and welcome to the programs. Sir, let's start with
Speaker 2: US exceptionalism. What is it built on and how sustainable
Speaker 2: are those pillars?
Speaker 3: Some of it's sustainable, I mean the technological gains you've
Speaker 3: just been talking about them, that they're a huge part
Speaker 3: of it. If we believe in the AI Revolution, and
Speaker 3: we believe in mag seven, then everything that's happening, then
Speaker 3: you know, the US has cornered that. So let's not
Speaker 3: knock that. I wouldn't necessarily knock the fact that the
Speaker 3: US has run a significantly more accommodative fiscal policy since
Speaker 3: twenty twenty. Really, you know, everybody in Europe's been struggling
Speaker 3: to try to get their budget balances back under control.
Speaker 3: The US has kept them a combodative policy and has
Speaker 3: had more growth than that helps keep the deficit a
Speaker 3: little bit more under control than elsewhere. So there's more
Speaker 3: than one piece to this.
Speaker 4: It's been there.
Speaker 3: But if the US does have to type in fiscal
Speaker 3: policy at some point, that may slow things down. We'll
Speaker 3: see how big the AI Revolution really is in the
Speaker 3: next ten years or so. I am not clever enough
Speaker 3: to judge quite how much continued growth that can give,
Speaker 3: and we will see whether the US can cope with
Speaker 3: the demands on the labor force, because the economy is
Speaker 3: running at this point on wealth gains from asset price increases,
Speaker 3: a tight labor market, a fairly divided economy in terms
Speaker 3: of winners and losers, and it doesn't look to me
Speaker 3: as if it's got much potential to accelerate in growth
Speaker 3: or indeed to continue at recent growth rates for that
Speaker 3: long unless we can get a productivity miracle from someone.
Speaker 5: Kay, what do you think is going to drive further
Speaker 5: dollar strength if we get an or perhaps euro strength.
Speaker 5: Will it be European disappointments, European surprises to the upside,
Speaker 5: Will it be great differentials or will it be ultimately
Speaker 5: just a real question of what the neutral rate is
Speaker 5: in the United States.
Speaker 3: I think the neutral rate is look higher in the
Speaker 3: United States than in Europe, and that's a challenge that
Speaker 3: it don't get written up about enough. Just that if
Speaker 3: my neutral rates higher than your neutral rate, my currency
Speaker 3: ought to be going up forever. I mean, it's not
Speaker 3: a stable equilibrium if we have these big divergences in
Speaker 3: neutral policy rates. So that's a major factor, But I
Speaker 3: think it's largely in the price. What I'm most uncertain
Speaker 3: about is the politics in the sense of have we
Speaker 3: priced in too much of what people expect from President
Speaker 3: elect Trump, or have we not priced it all in
Speaker 3: at all yet? In terms of what that does for
Speaker 3: the dollar, I've read so many pieces talking about the
Speaker 3: possible negative growth effects of his tariff proposals, plans, threats,
Speaker 3: whatever we want to call them. If he wants to
Speaker 3: get a deal that's good for the US, it has
Speaker 3: to be a deal that's good for the world and
Speaker 3: good for global trade. And if he does that, there's
Speaker 3: more upside to growth elsewhere than there is in the
Speaker 3: US from those deals if only everybody can embrace them,
Speaker 3: and that wouldn't be good for the dollars at the margin.
Speaker 3: I think the politics will be more important than the
Speaker 3: kind of straight economics. If all we're doing is trading
Speaker 3: what's happening economically now, I think we're just going to
Speaker 3: have a very strong dollar for as far as the
Speaker 3: eye can see. The debate about whether it can get
Speaker 3: back to parity for you're a dollar or you know,
Speaker 3: a little bit stronger generally than it is now, it's
Speaker 3: a tough debate. It's a really expensive currency that will
Speaker 3: stay expensive as long as the rest of the world
Speaker 3: is shoveling all of its savings into the United States
Speaker 3: to see how much money it can make out of
Speaker 3: the US equity market.
Speaker 1: Just quickly.
Speaker 5: As a spike that we've seen in natural gas prices
Speaker 5: in Europe just noise or is that something you're watching
Speaker 5: that could potentially affect the pair?
Speaker 1: Oh?
Speaker 3: I think we have to watch it pretty closely. I
Speaker 3: mean it's you know, we've known this was coming for
Speaker 3: long enough that you'd have thought some of it would
Speaker 3: be in the price. But with raw materials, nothing ever
Speaker 3: is right. You know, if the pipes golows down and
Speaker 3: it suddenly gets really cold, then you can have a
Speaker 3: short term spike that can have a short term impact
Speaker 3: on growth, that can have our short term impact on
Speaker 3: the currency. That's pretty negative. That the you know, the
Speaker 3: way we got euro dollar two to ninety five back
Speaker 3: in twenty twenty two was a terms of trade shock
Speaker 3: caused by higher gas prices. So we shouldn't we shouldn't
Speaker 3: ignore it.
Speaker 2: From pick Ay, Kit, good to see you as always,
Speaker 2: Kit jukestairs soft Gen.
Speaker 6: Let's turn back to tech.
Speaker 2: Dan Ives of Webbush writing we expect tech stocks to
Speaker 2: be up twenty five percent in twenty twenty five, as
Speaker 2: the street further digests a less regulatory spider web under
Speaker 2: Trump in the White House, with karn't FTC days in
Speaker 2: the rearview mirror, stronger AI initiatives within about weight on
Speaker 2: the Way, and the Goldilocks Foundation for Big Tech and
Speaker 2: Tesla looking into twenty five and beyond. Dan Ice joined
Speaker 2: us now for more Dan come on it the Happy
Speaker 2: New year, So that's good to see you. We can
Speaker 2: talk about some of these big gains through twenty four.
Speaker 2: Palanteer up three hundred and forty percent in video up
Speaker 2: one's seventy one, Tesla up sixty two. Here's another one,
Speaker 2: Vistra by two hundred and fifty eight percent. That was
Speaker 2: the biggest win on the S and P five hundred
Speaker 2: last year. That's a utility company. What is that telling
Speaker 2: you about the state of play in AI.
Speaker 4: It's about second third derivatives of AI. I mean, I
Speaker 4: think the big thing is it's two trillion of AI
Speaker 4: cap backs next three years, and I think, look, that's
Speaker 4: numbers that are really I believe going to be in stone.
Speaker 4: And there's a multiplier for every dollar spent on a
Speaker 4: video chip, there's an eight to ten dollars multiplier across
Speaker 4: software and across the rest of tech and infrastructure. You
Speaker 4: think about the power, the utilities, nuclear enginy, names like
Speaker 4: Aco and others. I mean, it just speaks to we're
Speaker 4: going into a new age. It's not just about big tech.
Speaker 4: I mean to your point about small caps. I think
Speaker 4: the big sort of proven moment is the multiplier playing out.
Speaker 4: It's the rest of tech, the rest of until is
Speaker 4: the rest of the market participating in this AI trend.
Speaker 4: That's really everything about that party. The only ones let
Speaker 4: in behind the velvet ropes been then Max seven and video.
Speaker 2: Has been sounding the picks and shovels that made a fortune.
Speaker 2: We've seen all the growth. Does Microsoft and Google in
Speaker 2: the like that have been spending all that money need
Speaker 2: to show some gold this year in a big white.
Speaker 4: Yeah, And I think that will start this quarter. I
Speaker 4: think you're gonna see an inflection point in the hyperscalurs
Speaker 4: for Microsoft or Amazon for Google in terms of what
Speaker 4: we see with more and more of those cloud work
Speaker 4: goods now showing up. And I think it's all about
Speaker 4: use cases. That's why you look at the messy of
Speaker 4: AI pound teer. You know, in terms of what the
Speaker 4: have done. That's just the first piece. Salesforce has been
Speaker 4: another software now starts to actually participate in this AI revolution.
Speaker 4: That's gonna be a key theme across twenty twenty five.
Speaker 4: Remember with you know, with con done at the FTC,
Speaker 4: M and A is going to massively accelery and that's
Speaker 4: another theme we're gonna be seeing it across tech.
Speaker 5: What we saw at the end of last year was
Speaker 5: a lot of these other companies sort of the side
Speaker 5: effects of AI.
Speaker 1: Or the actual applications.
Speaker 5: We saw them take a pause in the applications of
Speaker 5: AI and really study exactly the use cases, study the
Speaker 5: most efficient way to do it. They stop deploying as
Speaker 5: much cash. What makes you think that they can apply
Speaker 5: some of the AI technology quickly enough to keep delivering
Speaker 5: the kinds of expansion and gains the hyperscalers to keep
Speaker 5: a twenty twenty five percent return that you're expecting in
Speaker 5: twenty twenty five.
Speaker 6: It's a great point.
Speaker 4: That's all the work we do, I mean, we look
Speaker 4: at when we talk to enterprise around the world and
Speaker 4: all the trial would do in Asia. It's showing that
Speaker 4: these use cases they're exploded for the enterprise. So as
Speaker 4: the ROI starts to continue to increase. That's why you're
Speaker 4: starting to see You saw a palenteer start in salesforce,
Speaker 4: you can see Mango, Snowflake and others. You can see
Speaker 4: it spread across the board on enterprise. But again, like
Speaker 4: the ships left the port. In other words, the AI
Speaker 4: cap BAX is going to be there now. Twenty twenty
Speaker 4: five is going to be about showing it, proving it
Speaker 4: in numbers. And that's why the reason we think stocks
Speaker 4: or tech stocks are going to be up twenty five percent,
Speaker 4: it's not just about big tech. It's about the rest
Speaker 4: of tech participating, software infrastructure, and well guy haters hate
Speaker 4: the last few years, that's sort of been what we've
Speaker 4: seen in tech. They will continue to sort of fire
Speaker 4: in a crowd theater type situations, but I think tech
Speaker 4: continues to move higher.
Speaker 5: How predicated is this theory on the idea that there
Speaker 5: can be some sort of expansion of the H one
Speaker 5: B visas that there can be an ongoing increase in
Speaker 5: employees and top talent to the United States.
Speaker 4: For the first time in thirty years, US is ahead
Speaker 4: of China. I mean, in my perspective from when it
Speaker 4: comes to tech, but to fuel that. In terms of
Speaker 4: AI revolution, it's talent, and I think what we've seen,
Speaker 4: we've definitely seen a lack as a supply demand. These
Speaker 4: companies more and more need to continue to fuel this
Speaker 4: with talent. So when you look at what we're seeing
Speaker 4: with H one B and ultimately is that all plays out,
Speaker 4: it will be something very very important that plays out
Speaker 4: in Silicon Valley and cross the tech world in twenty
Speaker 4: twenty five.
Speaker 2: Ala Musk has been at the full front of this debate,
Speaker 2: this argument over the holiday period.
Speaker 6: Let's talk about Tesla.
Speaker 2: Tesla an outlier in a pretty dreadful auto market, particularly
Speaker 2: for the European players.
Speaker 6: I think we stand drunkenmit of the one cent.
Speaker 2: You'd be surprised by how few people understand what makes
Speaker 2: the stock go up or down, what makes Testla go
Speaker 2: up or down, because it shures how it doesn't seem
Speaker 2: to be car sales will be something must make of it.
Speaker 4: But we're gonna have deliveries probably the next few hours.
Speaker 4: Right in terms of Q four, Look, I think this
Speaker 4: is this is an autonomous AI story for the next
Speaker 4: few years. And it goes back to the bet for
Speaker 4: the ages that Musk made on Trump continue. I think
Speaker 4: is going to really play out as the autonomous future.
Speaker 4: That's what you're betting on in Tesla. You don't see
Speaker 4: that in numbers today, but I think ultimately, I think
Speaker 4: that's worth the trillion dollars were in terms of the
Speaker 4: AI timers story. But next few out this week will
Speaker 4: be talking about deliveries and it comes down to China deliveries,
Speaker 4: which were really disaster at points in the last call
Speaker 4: twelve to eighteen months, have now started a rebound for
Speaker 4: Tesla and that's going to be very important.
Speaker 2: What gives you the confidence that that will continue because
Speaker 2: there are some similar questions happening in the luxury space
Speaker 2: with companies like alpam is China actually bottoming out for
Speaker 2: the consumer side of things.
Speaker 6: What gives you that confidence for twenty five.
Speaker 4: It's what we see in terms of demand, in terms
Speaker 4: of what we see in terms of the overall China
Speaker 4: market for evs. I think Tesla, I think a lot
Speaker 4: of those price cuts in the rearview mirror, we're going
Speaker 4: to have white knuckle moments, But ultimately I think China
Speaker 4: is something that could be up twenty percent when it
Speaker 4: comes to delivery for Tesla and That's why I think
Speaker 4: right now it's one where I think where the bears
Speaker 4: have sort of misunderstood Tesla. It's ten to fifteen percent
Speaker 4: of delivery story now it's eighty five ninety percent AI autonomous.
Speaker 4: In terms of the future from Musk and Tesla.
Speaker 5: Sort of when you put together some of the things
Speaker 5: that you're talking about, you think, for the first time
Speaker 5: in thirty years, the US is actually ahead.
Speaker 1: Of China when it comes to development.
Speaker 5: At the same time, Tesla dominance and success has hinged
Speaker 5: on a.
Speaker 1: Success in China.
Speaker 5: So how do you see the evolution in twenty twenty
Speaker 5: five of the increasing divide, the increasing isolation between China's
Speaker 5: sort of tech stack and the United States is tech
Speaker 5: stack and how those sort of both compete but also evolve.
Speaker 4: In parallel YEA and the scheme of high stakes poker,
Speaker 4: because the reality is is that the reason Jensen's godfather
Speaker 4: of AI and what we've seen with Nvidia where the
Speaker 4: chip's coming from coming from China, coming from Asia. So
Speaker 4: that's why we're going to see this all play out
Speaker 4: with the China tariff discussions. I believe Musk is going
Speaker 4: to be heavily involved there. Cook ten percent politician ninety percent. CEO.
Speaker 4: Apple also plays a key role here, but I just
Speaker 4: believe that's something that ultimately it's not going to spoil
Speaker 4: the AI revolution trade. It's not going to spoil the
Speaker 4: chip trade. We will go through white knuckle moments. But
Speaker 4: my view, and it's been the playbook the last few years,
Speaker 4: you buy the winners on those opportunities, and I think
Speaker 4: that's going to me the theme this year.
Speaker 2: Pick the winner of the year, your number one Starle
Speaker 2: pick for twenty five.
Speaker 4: What is it, I think to me? Number one Stark
Speaker 4: pick I think continues to be in video here, and
Speaker 4: the reason is is that there's only one game in
Speaker 4: town when it comes to AI. So Godfather genend starks
Speaker 4: Ovis who sold off I think we see it here
Speaker 4: them along with Apple will be the first ones in
Speaker 4: the exclusive four trillion dollar.
Speaker 6: Marrik cap Well.
Speaker 2: The stock is up again this morning by one point
Speaker 2: six percent. Happy New Year, Happy year, Good to see you, buddy,
Speaker 2: Thanks for being here.
Speaker 6: Dan, it's there a web bush.
Speaker 2: Oh, David and Fimo joined us now for more with
Speaker 2: the year. It's lower on the session by five basis
Speaker 2: points at four fifty one, and first of all, Sir
Speaker 2: Happy New Year and welcome to the program. There's a
Speaker 2: lot to consider for the next twelve months. And there
Speaker 2: was three points that you put down tariffs, increased bon supply,
Speaker 2: and a pal showdown earl of the conversations you've had
Speaker 2: with your clients. Out of those three, what did you
Speaker 2: spend most time on.
Speaker 7: Well, we definitely spend the most time on tariffs right now,
Speaker 7: but it's a big unknown, and we actually tell people
Speaker 7: tarifs right now is providing us with an opportunity to
Speaker 7: go longer fixed income. And the reason why that is
Speaker 7: is all to talk about tariffs and the unknowns have
Speaker 7: increased yields to these levels, to what we would deem
Speaker 7: relatively attractive levels, both on a treasury and a corporate space.
Speaker 7: So we've been using this as an opportunity to add
Speaker 7: to duration and add to credit.
Speaker 2: So, oh, let's start with treasury and then we can
Speaker 2: move to credit. Is there a specific place on the
Speaker 2: treasury curve where you feel more comfortable to in that?
Speaker 7: Yeah, we actually feel ten years you're adequately rewarded at
Speaker 7: around four and a half. This first quarter is going
Speaker 7: to be very telling for treasuries, and the reason why
Speaker 7: it is is typically in the first quarter, what you
Speaker 7: get is real money accounts, and I'm talking about not
Speaker 7: hedge funds. I'm talking about large insurance funds, large pension plans.
Speaker 7: Typically money accounts in the first quarter reallocate their risk
Speaker 7: between fixed income and riskier assets. Given the price action
Speaker 7: that we saw last year, we should be seeing a
Speaker 7: significant rotation into fix income this first quarter. It's an
Speaker 7: known because of the inflation towers, as to whether that
Speaker 7: would happen, but we're putting our chips on the square
Speaker 7: that it will. So what that means is, from these
Speaker 7: levels at four and a half in ten year yields,
Speaker 7: there's a better chance of seeing four and a quarter
Speaker 7: than four seventy five in the first quarter of twenty
Speaker 7: twenty five.
Speaker 1: Roll How much is this driven by international accounts?
Speaker 5: We've been talking all morning about the euro and about
Speaker 5: the divergence between rates and real rates in the US
Speaker 5: versus Europe. How much is that the real money that
Speaker 5: you expect to come back in and say, on a
Speaker 5: relative basis, I'd rather put my money in treasuries.
Speaker 7: The interesting thing is, in the analysis I just gave
Speaker 7: you into the first quarter, I didn't even take into
Speaker 7: account international Now you add in international which does have
Speaker 7: an increasing appetite for US as that bolds well for
Speaker 7: all US assets, including fixed income. So that's that's another
Speaker 7: argument why we believe at least in the first quarter,
Speaker 7: it won't be higher for longer, but we think there's
Speaker 7: a better chance of seeing four in according four seventy five.
Speaker 7: I'll add in one more reason as to why we're
Speaker 7: overweight duration in ten year US treasuries and tips at
Speaker 7: these levels is that we expect tax receipts to be
Speaker 7: pretty good, which means the we're funding announcement or the
Speaker 7: amount of treasuries to be issued in the first quarter
Speaker 7: in first half this year could surprise to the downside.
Speaker 5: Normally, when you have a rally and treasuries, it's negative
Speaker 5: when it comes to risk assets. This time, though, you
Speaker 5: actually see it being positive for credit. And I'm curious
Speaker 5: about why, given the fact that typically when people pile
Speaker 5: into treasuries it's a sign that the economy is slowing.
Speaker 7: Well, you have to break down treasuries into two things.
Speaker 7: One is inflation and inflation expectation, and the other one
Speaker 7: is real rates. Those are the two drivers of treasury yields.
Speaker 7: Why we think this could be good for both risk
Speaker 7: assets and fixed income. The reason why we rally to
Speaker 7: four to twenty five we see that we believe ten
Speaker 7: year tips, which is the real rate, which is approximately
Speaker 7: two twenty now, could easily go down to two percent
Speaker 7: in one ninety. And the reason why we say easily
Speaker 7: is if you're an international investor looking to invest in
Speaker 7: you lass and you know you could get two hundred
Speaker 7: and twenty basis points over inflation for the balance of
Speaker 7: your holdings ten year tips, that's where you go. So
Speaker 7: we think the tip rally is going to be the
Speaker 7: driver of a lower yields, which is also beneficial for
Speaker 7: risk assets because it reduces your discount rate on your
Speaker 7: cash foles.
Speaker 2: Oh, can we just sit on credit just for a
Speaker 2: bit longer? Inequities, we spent a lot of time over
Speaker 2: the last month talking about negative breadth, the underperformance we've
Speaker 2: seen beneath the surface of the market, what we're seeing
Speaker 2: on the small caps. Terrible month in December after a
Speaker 2: great November. Did you see any confirmation of weakness in
Speaker 2: high yield at all? Any reason for concern?
Speaker 7: I wouldn't say confirmation weakness. We have seen high yield
Speaker 7: spreads widen and that just came off of you know,
Speaker 7: let's call it profit taking in December. But we do
Speaker 7: believe the environment, the context in which the economy is
Speaker 7: set up for in twenty twenty five under Trump presidency
Speaker 7: is beneficial for small, medium, and larger sized companies, you know,
Speaker 7: the deregulation. So what that means for us is a
Speaker 7: lower chance of probability of default in twenty twenty five.
Speaker 7: When we see lower chance of probability of default in
Speaker 7: twenty twenty five, that makes high yield more attractive because
Speaker 7: we say we're getting you know, even though it's tight
Speaker 7: credit spreads, we're still getting rewarded, especially on all in yield,
Speaker 7: for the risk that we're taking. So we're actually looking
Speaker 7: for opportunities to increase our high yield exposure selectively with
Speaker 7: selective names. As an active manager does.
Speaker 2: Oh, got to see you as always. Happy New year,
Speaker 2: ol Davis, there a female. This is the Bloomberg Seventans
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