1 00:00:00,120 --> 00:00:06,800 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,640 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,920 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 00:00:27,720 --> 00:00:31,240 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,960 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:37,360 Speaker 2: Terminal and the Bloomberg Business App. Russ Coasterrick at Black 10 00:00:37,400 --> 00:00:40,200 Speaker 2: Rog saying this, we think markets are vulnerable to modest 11 00:00:40,200 --> 00:00:43,199 Speaker 2: pullbacks on both sticky inflation as well as the pre 12 00:00:43,280 --> 00:00:46,120 Speaker 2: election trade as we get into late summer and fall 13 00:00:46,159 --> 00:00:49,159 Speaker 2: election season. That said, we think the market can end 14 00:00:49,159 --> 00:00:51,760 Speaker 2: this year higher. Russ joins us. Now for more so, 15 00:00:52,159 --> 00:00:54,480 Speaker 2: let's start with the equery market picture. Sir, you've been. 16 00:00:54,360 --> 00:00:55,640 Speaker 3: Trimming since spring. 17 00:00:55,880 --> 00:00:57,880 Speaker 2: I know you're still constructive on the stock market. Can 18 00:00:57,920 --> 00:00:59,840 Speaker 2: you just walk us through where you've been pulling back 19 00:00:59,880 --> 00:01:00,560 Speaker 2: to a little bit? 20 00:01:01,600 --> 00:01:02,840 Speaker 4: Absolutely good? More on, Jonathan. 21 00:01:02,920 --> 00:01:04,640 Speaker 5: You look, we still think the market is going to 22 00:01:04,760 --> 00:01:06,760 Speaker 5: end to year higher. We're still in a bold market. 23 00:01:07,120 --> 00:01:08,920 Speaker 5: You know, that said we've taken a little bit off 24 00:01:08,920 --> 00:01:10,959 Speaker 5: the table. We started doing that back in the spring, 25 00:01:11,440 --> 00:01:13,440 Speaker 5: and I think it reflects a few things. One the 26 00:01:13,480 --> 00:01:16,200 Speaker 5: magnitude of the gains, the fact that you still have 27 00:01:16,240 --> 00:01:19,640 Speaker 5: a lot of uncertainty around the Fed, and the you know, 28 00:01:19,720 --> 00:01:21,440 Speaker 5: the sentiment is going to get a little bit more 29 00:01:21,520 --> 00:01:24,280 Speaker 5: challenging as we get towards the end of summer and 30 00:01:24,319 --> 00:01:26,840 Speaker 5: the early fall and the market deals with the uncertainty 31 00:01:27,360 --> 00:01:28,800 Speaker 5: of a very unusual election. 32 00:01:29,959 --> 00:01:32,600 Speaker 2: What about the election, Russ are you concerned about because 33 00:01:32,600 --> 00:01:34,319 Speaker 2: what we hear from a lot of people is that 34 00:01:34,360 --> 00:01:36,480 Speaker 2: it's the bond market, not equities. And that's where the 35 00:01:36,560 --> 00:01:38,400 Speaker 2: risk is, is that how do you and the team see things? 36 00:01:39,800 --> 00:01:43,480 Speaker 5: You know, I think the biggest issue is really the 37 00:01:43,560 --> 00:01:47,200 Speaker 5: simply the uncertainty that hopefully will resolved once the election 38 00:01:47,319 --> 00:01:49,680 Speaker 5: is over. You know, in terms of whether or not 39 00:01:49,720 --> 00:01:51,840 Speaker 5: you're going to get aggressively long or short the market, 40 00:01:52,080 --> 00:01:53,880 Speaker 5: it's generally been the wrong call. 41 00:01:54,000 --> 00:01:56,960 Speaker 4: I think what you go back to or the fundamentals. 42 00:01:56,640 --> 00:02:01,520 Speaker 5: Strong growth, inflation has moderated, moderating, albeit not in a 43 00:02:01,640 --> 00:02:04,720 Speaker 5: straight line. But the reality is investors are likely to 44 00:02:04,760 --> 00:02:06,560 Speaker 5: deal with some of the uncertain team to run up, 45 00:02:06,760 --> 00:02:10,400 Speaker 5: and that often causes a little volatility in September and October. 46 00:02:10,520 --> 00:02:12,440 Speaker 6: Russ, it strikes me that we're talking about the equity 47 00:02:12,440 --> 00:02:16,120 Speaker 6: market as a monolith and taking risk exposure as though 48 00:02:16,160 --> 00:02:19,480 Speaker 6: all of it were exposed to macro risk or any 49 00:02:19,560 --> 00:02:22,519 Speaker 6: risk whatsoever. How much you just basically hide out in 50 00:02:22,600 --> 00:02:26,280 Speaker 6: certain cash rich companies, the magnificent two or three or 51 00:02:26,320 --> 00:02:30,359 Speaker 6: whatever is left, and basically stay away from small caps, 52 00:02:30,360 --> 00:02:32,560 Speaker 6: stay away from those that are interest rate sensitive, stay 53 00:02:32,560 --> 00:02:34,760 Speaker 6: away from those that are vulnerable to all these risks. 54 00:02:35,480 --> 00:02:37,680 Speaker 5: So this is a great question, and I do think 55 00:02:37,760 --> 00:02:40,639 Speaker 5: that the megacap trend again not necessarily just two or 56 00:02:40,680 --> 00:02:43,880 Speaker 5: three companies, but those companies that are exposed to these 57 00:02:44,040 --> 00:02:48,720 Speaker 5: longer term secular trends like AI, like internet commerce, like 58 00:02:48,720 --> 00:02:50,799 Speaker 5: cloud computing, they have further togo. 59 00:02:51,200 --> 00:02:53,080 Speaker 4: So that is definitely part of it. And I also 60 00:02:53,120 --> 00:02:54,959 Speaker 4: agree you were talking to me for about real estate. 61 00:02:55,480 --> 00:02:58,360 Speaker 5: One of the best ways to add value this year 62 00:02:58,720 --> 00:03:01,040 Speaker 5: has been to avoid what I would call rate data. 63 00:03:01,360 --> 00:03:03,480 Speaker 5: In other words, those segments in the market, whether we're 64 00:03:03,520 --> 00:03:06,720 Speaker 5: talking about low income consumers and companies that are geared 65 00:03:06,720 --> 00:03:11,040 Speaker 5: to their spending commercial real estate smaller regional banks. 66 00:03:11,360 --> 00:03:14,120 Speaker 4: These are all parts of the market. They're generally going 67 00:03:14,160 --> 00:03:14,680 Speaker 4: to be more. 68 00:03:14,560 --> 00:03:16,720 Speaker 5: Sensitive to the fact that rates have actually grind it 69 00:03:16,800 --> 00:03:19,079 Speaker 5: higher this year, and one of the things we've done 70 00:03:19,160 --> 00:03:22,040 Speaker 5: is try to minimize exposure to those segments. 71 00:03:22,320 --> 00:03:23,240 Speaker 4: Generally that's worked. 72 00:03:23,280 --> 00:03:26,120 Speaker 5: I think you continue to do it given this higher 73 00:03:26,120 --> 00:03:27,120 Speaker 5: for longer environment. 74 00:03:27,320 --> 00:03:29,920 Speaker 6: There's an ax that's developing because people need something to 75 00:03:29,919 --> 00:03:32,840 Speaker 6: worry about. People being myself as everyone basically says the 76 00:03:32,840 --> 00:03:35,960 Speaker 6: same thing in terms of crowding into the names that 77 00:03:36,000 --> 00:03:38,560 Speaker 6: have been just throwing off bucket loads of cash and 78 00:03:38,600 --> 00:03:40,600 Speaker 6: staying away from some of the more rate sensitive sectors. 79 00:03:40,640 --> 00:03:43,800 Speaker 6: It's the reason why we've seen the Russell two thousand underperform. 80 00:03:44,200 --> 00:03:46,800 Speaker 6: At what point do you worry about crowding and the 81 00:03:46,880 --> 00:03:49,760 Speaker 6: sense that you can't avoid going into these stocks if you. 82 00:03:49,720 --> 00:03:50,680 Speaker 7: Want to outperform. 83 00:03:51,040 --> 00:03:53,840 Speaker 6: But that leaves the market that much more vulnerable to 84 00:03:53,880 --> 00:03:57,119 Speaker 6: an idiosyncratic shock hinge to one of these companies. 85 00:03:58,400 --> 00:03:59,440 Speaker 4: I think it's a real risk. 86 00:04:00,160 --> 00:04:02,320 Speaker 5: Hard to argue that there's not been crowning, but it's 87 00:04:02,320 --> 00:04:04,680 Speaker 5: been interesting. You know, this is still a narrow market. 88 00:04:04,760 --> 00:04:07,360 Speaker 5: It's still a market led by a handful of names 89 00:04:07,360 --> 00:04:10,360 Speaker 5: that you have seen some broadening out good example, utilities. 90 00:04:11,080 --> 00:04:14,600 Speaker 5: Utilities is generally considered a low beta sector. It can 91 00:04:14,640 --> 00:04:17,279 Speaker 5: be a very rat sensitive sector having a good year. 92 00:04:17,320 --> 00:04:20,520 Speaker 5: Why is that well, of course, because for many investors, 93 00:04:20,520 --> 00:04:23,640 Speaker 5: they're realizing that one of the constraints on the AI 94 00:04:23,720 --> 00:04:27,320 Speaker 5: revolution is going to be electricity generation, and companies that 95 00:04:27,360 --> 00:04:30,320 Speaker 5: are geared to that, that are geared to utilities the grid, 96 00:04:30,360 --> 00:04:31,760 Speaker 5: et cetera, many of them. 97 00:04:31,720 --> 00:04:32,720 Speaker 4: Are having a great year. 98 00:04:32,760 --> 00:04:35,600 Speaker 5: Now, this is something we didn't see twelve or fifteen 99 00:04:35,640 --> 00:04:37,640 Speaker 5: or eighteen months ago, but I think it is an 100 00:04:37,680 --> 00:04:41,039 Speaker 5: example of investors looking beyond two, three, four or five 101 00:04:41,120 --> 00:04:44,720 Speaker 5: companies and thinking about one of the other beneficiaries of 102 00:04:44,760 --> 00:04:45,760 Speaker 5: this AI revolution. 103 00:04:46,040 --> 00:04:48,000 Speaker 2: Russ I've got to ask, though, if that means the 104 00:04:48,000 --> 00:04:51,520 Speaker 2: correlation between utilities and the biggest market way on a 105 00:04:51,640 --> 00:04:54,279 Speaker 2: SMP five hundred goes up, what am I actually owning 106 00:04:54,279 --> 00:04:55,120 Speaker 2: in the portfolio? 107 00:04:56,560 --> 00:04:59,160 Speaker 5: Well, you're still going to have a very big exposure 108 00:04:59,360 --> 00:05:01,400 Speaker 5: to that mega trend, and that's going to be something 109 00:05:01,839 --> 00:05:04,000 Speaker 5: along with economic growth and rate data that you're really 110 00:05:04,000 --> 00:05:05,880 Speaker 5: just going to have to decide how much of that 111 00:05:05,960 --> 00:05:08,520 Speaker 5: exposure do you want? That said, you know, again, I 112 00:05:08,520 --> 00:05:11,440 Speaker 5: think the reason that these trains have become crowded. Is 113 00:05:11,480 --> 00:05:14,080 Speaker 5: that there are multi year trends and the companies that 114 00:05:14,120 --> 00:05:16,440 Speaker 5: are give to them when we know their names, are 115 00:05:16,680 --> 00:05:20,159 Speaker 5: doing an amazing job of generating cash flow, and that's 116 00:05:20,200 --> 00:05:22,719 Speaker 5: still a very desired commodity. And you think about what's 117 00:05:22,760 --> 00:05:25,920 Speaker 5: work in this market, things like consistency companies that can 118 00:05:26,000 --> 00:05:30,520 Speaker 5: generate consistent revenue, consistent margins, and you know, again, if 119 00:05:30,560 --> 00:05:33,640 Speaker 5: you can you can stay long those themes I think 120 00:05:33,640 --> 00:05:34,440 Speaker 5: you're going to do all right. 121 00:05:34,720 --> 00:05:36,559 Speaker 2: Saw this line from Mike Wilson and more can standing 122 00:05:36,640 --> 00:05:39,400 Speaker 2: yesterday said bottom line, the data remains mixed, leaving all 123 00:05:39,440 --> 00:05:43,400 Speaker 2: the major macro outcomes on the table. RUSS is never easy. 124 00:05:44,000 --> 00:05:46,000 Speaker 2: I always sit here and say that what you guys 125 00:05:46,040 --> 00:05:48,680 Speaker 2: do is never easy. It's always easy looking back. But 126 00:05:48,839 --> 00:05:51,760 Speaker 2: what about this moment is more difficult than maybe other 127 00:05:51,839 --> 00:05:52,760 Speaker 2: moments in the past. 128 00:05:53,839 --> 00:05:57,000 Speaker 5: Well, I think I actually would agree with some of 129 00:05:57,000 --> 00:06:00,640 Speaker 5: the promise would microsine, which is that it's complicated up. Generally, 130 00:06:00,680 --> 00:06:04,000 Speaker 5: the economy is strong or it's certainly in decent shape. 131 00:06:04,000 --> 00:06:06,560 Speaker 5: We had more evidence of that last Friday with the 132 00:06:06,560 --> 00:06:09,320 Speaker 5: main non farm pay report. But there are segments in 133 00:06:09,320 --> 00:06:12,000 Speaker 5: the market that are under pressure. We've spoken about the 134 00:06:12,080 --> 00:06:15,159 Speaker 5: lower end consumer. They are feeling the pain of higher rates, 135 00:06:15,480 --> 00:06:18,920 Speaker 5: commercial real estate, the smaller banks. So I do think 136 00:06:19,240 --> 00:06:21,640 Speaker 5: that generally, if you look at the economy, you've got 137 00:06:21,760 --> 00:06:22,520 Speaker 5: strong growth. 138 00:06:22,560 --> 00:06:24,680 Speaker 4: It's likely to moderate in the back half of the year. 139 00:06:25,240 --> 00:06:27,200 Speaker 5: But you have to keep thinking about what are the 140 00:06:27,240 --> 00:06:30,520 Speaker 5: segments of the market that are going to feel pressure 141 00:06:30,920 --> 00:06:33,560 Speaker 5: because we are in a higher for longer environment where 142 00:06:33,600 --> 00:06:35,719 Speaker 5: the FED clearly does not have the latitude of the 143 00:06:35,800 --> 00:06:38,080 Speaker 5: desire to Russian cut rates. 144 00:06:38,279 --> 00:06:40,320 Speaker 2: Hi rush Graz to get your thoughts. As always, Buddy 145 00:06:40,400 --> 00:06:52,960 Speaker 2: Ross costrict there of black Drob. It's on thoughte have 146 00:06:53,040 --> 00:06:56,360 Speaker 2: maximum group rights in this Consumers feel like they have 147 00:06:56,440 --> 00:06:59,560 Speaker 2: new phones. When Apple updates it's mobile operating system to 148 00:06:59,600 --> 00:07:02,159 Speaker 2: the extent it rolls out its AI related efforts in 149 00:07:02,160 --> 00:07:04,800 Speaker 2: a way that breaks that bond with consumers, that could 150 00:07:04,839 --> 00:07:08,200 Speaker 2: result in backlash for the company. Tom joined us now 151 00:07:08,240 --> 00:07:10,080 Speaker 2: for more Tom, I just want to start with that point, 152 00:07:10,080 --> 00:07:12,960 Speaker 2: in what way would that break its bond with consumers? 153 00:07:13,320 --> 00:07:14,440 Speaker 1: If you want, there's two. 154 00:07:14,320 --> 00:07:19,360 Speaker 8: Real risks to Apple's brand on Apple Intelligence. One is 155 00:07:19,360 --> 00:07:23,320 Speaker 8: what I wrote there, which is when you buy an iPhone, 156 00:07:23,840 --> 00:07:27,320 Speaker 8: you get that new iPhone feeling every fall when they 157 00:07:27,400 --> 00:07:29,520 Speaker 8: roll out the new mobile operating system. 158 00:07:29,880 --> 00:07:32,680 Speaker 1: So if Apple's saying, you know, this, Apple. 159 00:07:32,400 --> 00:07:36,040 Speaker 8: Intelligence is really cool, which remains to be seen. If 160 00:07:36,040 --> 00:07:39,280 Speaker 8: it is, but you need to have an iPhone fifteen 161 00:07:39,400 --> 00:07:42,320 Speaker 8: pro because the chip on your iPhone fifteen is not 162 00:07:42,440 --> 00:07:45,200 Speaker 8: adequate to do it, then you do not get that 163 00:07:45,320 --> 00:07:48,560 Speaker 8: new iPhone feeling every time they upgrade the software, and 164 00:07:48,600 --> 00:07:50,920 Speaker 8: I think they're breaking a bond with the consumer. The 165 00:07:51,000 --> 00:07:54,080 Speaker 8: other risk to brand is that they've named it Apple Intelligence. 166 00:07:54,760 --> 00:07:57,400 Speaker 8: So if for you, Siri as a guide serious kind 167 00:07:57,400 --> 00:08:00,720 Speaker 8: of been a failure to the extent that my own 168 00:08:00,760 --> 00:08:04,400 Speaker 8: anecdotal use of Syria is a glorified egg timer. So 169 00:08:04,480 --> 00:08:06,400 Speaker 8: to the extent that now I'm going to rely on 170 00:08:06,560 --> 00:08:12,600 Speaker 8: Apple Intelligence and Siri for all this supposedly wonderful artificial intelligence, I. 171 00:08:12,600 --> 00:08:14,760 Speaker 1: Think there's a lot of brain risks for Apple in 172 00:08:14,840 --> 00:08:15,440 Speaker 1: the move here. 173 00:08:16,280 --> 00:08:16,480 Speaker 3: Tom. 174 00:08:16,480 --> 00:08:18,360 Speaker 2: This is interesting because we caught it with Dan Ives, 175 00:08:18,360 --> 00:08:20,160 Speaker 2: and I wish we'd formed a panel with you both 176 00:08:20,240 --> 00:08:22,480 Speaker 2: a little bit earlier this morning. Dan Ives of wet 177 00:08:22,520 --> 00:08:25,240 Speaker 2: Bush earlier today was saying, this is it. This is 178 00:08:25,240 --> 00:08:29,160 Speaker 2: going to be the thing that unlocks that elusive upgrading cycle, 179 00:08:29,560 --> 00:08:33,480 Speaker 2: that mega upgrading cycle we've been looking for for years now. 180 00:08:33,600 --> 00:08:35,320 Speaker 2: Dan says it's just around the corner based on what 181 00:08:35,360 --> 00:08:36,240 Speaker 2: they released yesterday. 182 00:08:36,240 --> 00:08:36,920 Speaker 3: Why is he wrong? 183 00:08:38,240 --> 00:08:41,160 Speaker 8: He's wrong because I think that artificial intelligence is not 184 00:08:41,320 --> 00:08:44,440 Speaker 8: ready for prime time. When you think about hallucinations, you 185 00:08:44,480 --> 00:08:47,679 Speaker 8: think about the many issues that Google's had with barn 186 00:08:48,400 --> 00:08:52,120 Speaker 8: and then now integrating with Chat GPT, consumers are going 187 00:08:52,160 --> 00:08:53,520 Speaker 8: to get a lot of bad information. 188 00:08:53,880 --> 00:08:55,280 Speaker 1: It may not be have a rock. 189 00:08:55,200 --> 00:08:58,120 Speaker 8: Every day, or you know, include the glue when you 190 00:08:58,160 --> 00:09:00,400 Speaker 8: make the pizza to keep the cheese, the stick. Things 191 00:09:00,440 --> 00:09:03,040 Speaker 8: that nature and it may be. So I think that 192 00:09:03,920 --> 00:09:07,240 Speaker 8: I understand why Dan thinks this could be the elusive 193 00:09:07,360 --> 00:09:10,840 Speaker 8: upgrade cycle, the first major upgrade cycle since five G. 194 00:09:11,559 --> 00:09:13,480 Speaker 1: But I'm not convinced that we're there yet. 195 00:09:13,679 --> 00:09:16,720 Speaker 6: Tom, just to put a bow on this, basically, we 196 00:09:16,760 --> 00:09:19,480 Speaker 6: heard from Dan Ives that he will wear a black suit. 197 00:09:19,679 --> 00:09:22,680 Speaker 6: If they don't get the kind of increase in sales, well, 198 00:09:22,720 --> 00:09:25,520 Speaker 6: you wear dan ives wardrobe. But if they do see 199 00:09:25,640 --> 00:09:28,120 Speaker 6: that increase in sales come September, I. 200 00:09:28,080 --> 00:09:32,240 Speaker 8: Will wear his most obnoxious, boldest color outfit. We could 201 00:09:32,240 --> 00:09:34,720 Speaker 8: go Nick's blue and orange, even though I'm a Bulls fan. 202 00:09:35,440 --> 00:09:36,839 Speaker 1: Absolutely all right, we. 203 00:09:36,800 --> 00:09:37,600 Speaker 3: Will be there for that. 204 00:09:37,840 --> 00:09:40,280 Speaker 6: I will wonder just going forward. You said something that 205 00:09:40,360 --> 00:09:43,000 Speaker 6: I found really compelling, that this is breaking a bond 206 00:09:43,160 --> 00:09:45,800 Speaker 6: with the consumer. There has been a feeling that if 207 00:09:45,840 --> 00:09:48,199 Speaker 6: you had an Apple phone, if you had an iPhone, 208 00:09:48,679 --> 00:09:51,880 Speaker 6: you would be a subject of whatever kind of new 209 00:09:51,880 --> 00:09:55,560 Speaker 6: advancements were coming out for the phone. Specifically, you think 210 00:09:55,559 --> 00:09:57,480 Speaker 6: that this is actually going to cause people to turn 211 00:09:57,800 --> 00:09:59,360 Speaker 6: away from the iPhone? 212 00:09:59,400 --> 00:10:00,000 Speaker 1: Is that correct? 213 00:10:00,200 --> 00:10:01,840 Speaker 6: Or else just keep their old ones. 214 00:10:02,559 --> 00:10:05,760 Speaker 8: I think there's real risk here that the consumer will 215 00:10:05,760 --> 00:10:10,560 Speaker 8: be less enthralled to continue to buy smartphones from Apple 216 00:10:11,360 --> 00:10:13,560 Speaker 8: if they don't get that new phone feeling every fall 217 00:10:13,559 --> 00:10:15,480 Speaker 8: when they upgrade the software. So yeah, I think that's 218 00:10:15,559 --> 00:10:16,280 Speaker 8: real issue. 219 00:10:16,440 --> 00:10:17,160 Speaker 3: Where do they go? 220 00:10:17,559 --> 00:10:20,360 Speaker 6: And I guess this is why we saw Samsung kind 221 00:10:20,400 --> 00:10:24,160 Speaker 6: of trolling Apple yesterday, putting this out adding Apple doesn't 222 00:10:24,160 --> 00:10:27,360 Speaker 6: make it newer, groundbreaking, welcome to AI, followed by an 223 00:10:27,360 --> 00:10:30,640 Speaker 6: Apple emoji. This was Samsung's official account putting that out 224 00:10:30,640 --> 00:10:34,120 Speaker 6: there on social media. Do you think that Samsung wins 225 00:10:34,200 --> 00:10:37,760 Speaker 6: out here if they introduce something that's more polished, more advanced, 226 00:10:37,800 --> 00:10:41,280 Speaker 6: and frankly diverges more significantly from what's currently available. 227 00:10:42,040 --> 00:10:44,200 Speaker 8: Well, I think Samsung con went out to the extent 228 00:10:44,280 --> 00:10:48,640 Speaker 8: that a consumer dissatisfied with the Apple experience, either because 229 00:10:48,640 --> 00:10:51,080 Speaker 8: of Siri or Apple Intelligence or things of that nature, 230 00:10:51,280 --> 00:10:54,360 Speaker 8: may gravitate to Samsung. So yes, But at the same time, 231 00:10:54,440 --> 00:10:57,360 Speaker 8: I think that AI issues are kind of industry wide. 232 00:10:57,559 --> 00:11:02,000 Speaker 8: They're solucinating on sam phones as well. But yeah, I 233 00:11:02,000 --> 00:11:05,359 Speaker 8: think you might see some switching here if this bond 234 00:11:05,480 --> 00:11:06,280 Speaker 8: is in fact broken. 235 00:11:06,679 --> 00:11:06,960 Speaker 3: It's on. 236 00:11:07,160 --> 00:11:10,200 Speaker 2: This relationship with Google is interesting. You're one of the 237 00:11:10,200 --> 00:11:12,520 Speaker 2: few that's really really digging deep and talking about it. 238 00:11:13,000 --> 00:11:16,000 Speaker 2: I assume we'll be spending lots of time doing other 239 00:11:16,080 --> 00:11:18,920 Speaker 2: things and less time on Google Search, and I'm trying 240 00:11:18,920 --> 00:11:21,520 Speaker 2: to work out if that's sort of good for Apple 241 00:11:21,559 --> 00:11:23,199 Speaker 2: and bad for Google, or bad for both. 242 00:11:24,360 --> 00:11:26,320 Speaker 8: I do think that bad for Google is a fair 243 00:11:26,320 --> 00:11:29,680 Speaker 8: interpretation of yesterday's news to the extent that they're integrating 244 00:11:29,720 --> 00:11:32,720 Speaker 8: chat GBT, although they did open it to other large 245 00:11:32,760 --> 00:11:34,880 Speaker 8: language models, including. 246 00:11:34,480 --> 00:11:35,640 Speaker 1: Gemini from Google. 247 00:11:36,120 --> 00:11:38,960 Speaker 8: But yeah, I think that the challenge for Google in 248 00:11:39,080 --> 00:11:43,559 Speaker 8: search is to the extent that Microsoft integrates open AIS 249 00:11:43,600 --> 00:11:48,359 Speaker 8: technology and to the extent that consumers lean into artificial 250 00:11:48,400 --> 00:11:51,880 Speaker 8: intelligence to advanced search. Despite the challenges, that could be 251 00:11:51,880 --> 00:11:52,720 Speaker 8: a real issue. 252 00:11:52,520 --> 00:11:55,320 Speaker 6: For Google, not just Google, there is an issue for 253 00:11:55,559 --> 00:11:57,880 Speaker 6: a lot of apps and app creators that came out. 254 00:11:58,040 --> 00:12:00,880 Speaker 6: I'm thinking of Grammarly, I'm thinking of some others. There 255 00:12:00,920 --> 00:12:02,959 Speaker 6: was sort of a list of rip all of these 256 00:12:02,960 --> 00:12:05,960 Speaker 6: different apps yesterday trending as people took a look at 257 00:12:06,040 --> 00:12:08,640 Speaker 6: what would be rendered obsolete by some of this technology. 258 00:12:09,040 --> 00:12:10,760 Speaker 6: Do you think there's going to be a real tension, 259 00:12:11,040 --> 00:12:14,640 Speaker 6: particularly with Apple's dominance in the app Store, between some 260 00:12:14,720 --> 00:12:16,920 Speaker 6: of these app providers and frankly the fact that they've 261 00:12:16,960 --> 00:12:18,320 Speaker 6: been rendered obsolete overnight. 262 00:12:19,600 --> 00:12:20,280 Speaker 1: Absolutely. 263 00:12:20,840 --> 00:12:22,800 Speaker 8: The number that that set out to me yesterday is 264 00:12:22,840 --> 00:12:26,480 Speaker 8: that there's only two thousand native apps for the Vision 265 00:12:26,559 --> 00:12:29,680 Speaker 8: pro So that feels like a low number one year 266 00:12:29,760 --> 00:12:33,400 Speaker 8: into the product, and I do it reminded. 267 00:12:32,920 --> 00:12:36,000 Speaker 1: Me on larger scale of the flashlight app. 268 00:12:36,440 --> 00:12:37,920 Speaker 8: So there was a point in time where if you 269 00:12:37,960 --> 00:12:40,240 Speaker 8: wanted to use your iPhone as a flashlight, you had 270 00:12:40,240 --> 00:12:44,120 Speaker 8: to get a dedicated app. Now it's a future within iPhone. 271 00:12:44,320 --> 00:12:47,960 Speaker 8: So yeah, I think there's a lot of risk of 272 00:12:48,200 --> 00:12:50,040 Speaker 8: irritating the developers here as well. 273 00:12:50,440 --> 00:12:52,120 Speaker 3: Tom. Just finally, we'd love your view. 274 00:12:52,280 --> 00:12:53,920 Speaker 2: Just to finish up, I want to hear a little 275 00:12:53,960 --> 00:12:56,200 Speaker 2: bit more from you on Elon Musk and that complain 276 00:12:56,320 --> 00:12:58,520 Speaker 2: for Melon, what did you actually make of that? 277 00:12:58,800 --> 00:13:00,520 Speaker 3: Do you actually think you'll follow through with that? 278 00:13:01,960 --> 00:13:05,360 Speaker 8: I do, and so I admit, though I'm only halfway 279 00:13:05,400 --> 00:13:09,560 Speaker 8: through Isaacson's book on Elon, which I'm enjoying immensely, but 280 00:13:09,679 --> 00:13:10,480 Speaker 8: I do think. 281 00:13:10,280 --> 00:13:14,120 Speaker 1: That Elon, while he may prave drama. 282 00:13:14,640 --> 00:13:17,679 Speaker 8: I think there's a lot of validity into his comments. 283 00:13:18,000 --> 00:13:21,319 Speaker 8: And I worry about the consumer who flip flops between 284 00:13:21,360 --> 00:13:25,679 Speaker 8: Apple Intelligence and Chat GPT, one that's supposedly privacy protected 285 00:13:25,960 --> 00:13:27,800 Speaker 8: and then one that's open and. 286 00:13:27,800 --> 00:13:28,600 Speaker 1: Doesn't know better. 287 00:13:29,080 --> 00:13:31,240 Speaker 8: So I think, you know, there's gonna be a lot 288 00:13:31,240 --> 00:13:33,840 Speaker 8: of fun stories. The good news is now we have 289 00:13:33,880 --> 00:13:35,199 Speaker 8: Apple strategy. Now we get to. 290 00:13:35,120 --> 00:13:35,920 Speaker 1: See how it works out. 291 00:13:36,080 --> 00:13:39,160 Speaker 2: Interesting Tom looking forward to the results. Tom fordy of 292 00:13:39,280 --> 00:13:51,439 Speaker 2: Maximum Group and I was of Wetburst joined us now 293 00:13:51,440 --> 00:13:53,600 Speaker 2: for more so, Dan, let's separrite the two stories. The 294 00:13:53,679 --> 00:13:56,240 Speaker 2: complaint coming from Elon Musk and what was unveiled yesterday. 295 00:13:56,280 --> 00:13:58,880 Speaker 2: And you were in Coopatino, California. So Dan, tell me 296 00:13:58,880 --> 00:14:01,240 Speaker 2: how impressed you were by yesterday's release. 297 00:14:02,320 --> 00:14:04,920 Speaker 9: I thought it was a historical moment for Apple, because 298 00:14:04,960 --> 00:14:07,600 Speaker 9: this is really now as much as we can talk 299 00:14:07,600 --> 00:14:12,240 Speaker 9: about the generative AI. From an enterprise perspective, the consumer 300 00:14:12,360 --> 00:14:14,920 Speaker 9: AI story is going to go through Apple. 301 00:14:15,160 --> 00:14:16,240 Speaker 10: This is significant. 302 00:14:16,400 --> 00:14:20,360 Speaker 9: I believe this will be a catalyst to an AI 303 00:14:20,480 --> 00:14:22,920 Speaker 9: driven super cycle over the next two years. 304 00:14:23,160 --> 00:14:25,760 Speaker 2: Dam we started the program by talking about Apple always 305 00:14:25,840 --> 00:14:28,280 Speaker 2: being late, but better. Can you tell me if this 306 00:14:28,360 --> 00:14:31,080 Speaker 2: is late and better? It feels late. I just need 307 00:14:31,120 --> 00:14:32,200 Speaker 2: to understand if it's better. 308 00:14:33,440 --> 00:14:35,520 Speaker 10: Yeah, I think we said was exactly great. 309 00:14:35,600 --> 00:14:39,960 Speaker 9: It's late, but you have two point two billion iOS devices, 310 00:14:40,240 --> 00:14:40,640 Speaker 9: so they. 311 00:14:40,600 --> 00:14:42,960 Speaker 10: Can be late. But they have an install base. 312 00:14:42,840 --> 00:14:46,720 Speaker 9: That's unrival and that's really what they're going after right now. 313 00:14:46,720 --> 00:14:49,520 Speaker 9: It's going to be on the services side, the modization. 314 00:14:50,480 --> 00:14:53,560 Speaker 9: I think eventu will be a subscription service. And then 315 00:14:53,560 --> 00:14:55,720 Speaker 9: this is something if you don't have an iPhone fifteen 316 00:14:55,840 --> 00:14:58,320 Speaker 9: or later, you're not going to be able to access 317 00:14:58,360 --> 00:14:59,360 Speaker 9: Apple intelligence. 318 00:14:59,400 --> 00:15:01,000 Speaker 10: And I think that that is the key. 319 00:15:01,040 --> 00:15:05,040 Speaker 9: The headline here is the long away at operat cycle 320 00:15:05,080 --> 00:15:07,600 Speaker 9: that we've talked about while on the show is now 321 00:15:07,640 --> 00:15:08,320 Speaker 9: in front of us. 322 00:15:08,640 --> 00:15:10,680 Speaker 6: So let's take it to that little bit. Dan. If 323 00:15:10,680 --> 00:15:16,160 Speaker 6: we don't see a material uptick in sales, say in September, November, December, 324 00:15:16,560 --> 00:15:19,440 Speaker 6: and October, are you going to basically retrench some of 325 00:15:19,480 --> 00:15:21,480 Speaker 6: your bullishness or do you think it could come as 326 00:15:21,840 --> 00:15:23,840 Speaker 6: as late as next year and it still would be valid. 327 00:15:24,760 --> 00:15:24,960 Speaker 1: Yeah. 328 00:15:24,960 --> 00:15:27,760 Speaker 9: If that doesn't happen, I'll come into the studio wearing 329 00:15:27,760 --> 00:15:32,440 Speaker 9: a black sports jacket because I because I believe this 330 00:15:32,640 --> 00:15:36,000 Speaker 9: is the start of a renaissance of growth. And I 331 00:15:36,000 --> 00:15:39,320 Speaker 9: think what's important now is that Apple, you know, really 332 00:15:39,440 --> 00:15:42,720 Speaker 9: unveiling their AI strategy. Of course, Altman there the open 333 00:15:42,760 --> 00:15:47,080 Speaker 9: AI being significant. I mean this is ultimately most consumers 334 00:15:47,120 --> 00:15:50,240 Speaker 9: twenty twenty five percent in the world, they will access 335 00:15:50,320 --> 00:15:52,320 Speaker 9: AI through an Apple device. 336 00:15:52,760 --> 00:15:55,160 Speaker 6: Well, if we end up with sales as soon as 337 00:15:55,160 --> 00:15:57,240 Speaker 6: next week, you'll be wearing the dray of stead. I'm 338 00:15:57,280 --> 00:15:59,040 Speaker 6: curious about the idea of. 339 00:15:59,000 --> 00:15:59,920 Speaker 3: A subscription, sir. 340 00:16:00,480 --> 00:16:01,640 Speaker 7: What are people going to be. 341 00:16:01,600 --> 00:16:04,560 Speaker 6: Subscribing to Given the fact that right now you've got 342 00:16:04,600 --> 00:16:07,240 Speaker 6: Apple Music, you have a number of other services, are 343 00:16:07,240 --> 00:16:09,760 Speaker 6: these going to subscribe to Apple Intelligence? 344 00:16:10,840 --> 00:16:13,080 Speaker 10: I think in first it's free and that's the key 345 00:16:13,200 --> 00:16:14,400 Speaker 10: for any Apple user. 346 00:16:14,480 --> 00:16:18,840 Speaker 9: But this is essentially an AI brand in the iPhone 347 00:16:19,320 --> 00:16:22,360 Speaker 9: and where eventually there's going to go developers that were 348 00:16:22,400 --> 00:16:24,800 Speaker 9: all there yesterday that I saw they're going to be 349 00:16:24,800 --> 00:16:29,160 Speaker 9: building hundreds of apps based on this technology stack within 350 00:16:29,200 --> 00:16:31,400 Speaker 9: the Apple ecosystem, and that's. 351 00:16:31,200 --> 00:16:33,720 Speaker 10: Where more and more consumers are going to interact with it. 352 00:16:33,800 --> 00:16:37,720 Speaker 9: This is just the start of now this AI party 353 00:16:37,760 --> 00:16:40,480 Speaker 9: coming to Cupertino. But as much as it's lead to 354 00:16:40,520 --> 00:16:44,400 Speaker 9: the party, it's still nine pm in this party that 355 00:16:44,480 --> 00:16:45,320 Speaker 9: I believe goes. 356 00:16:45,160 --> 00:16:46,160 Speaker 10: To four or five am. 357 00:16:46,440 --> 00:16:47,960 Speaker 2: Side, Dan, can you tell us why you la must 358 00:16:47,960 --> 00:16:49,120 Speaker 2: doesn't want to attend. 359 00:16:50,520 --> 00:16:54,000 Speaker 9: Because Musk had soured greats because ultimately this is what 360 00:16:54,040 --> 00:16:58,000 Speaker 9: he wanted to do from a tested perspective. Obviously there's 361 00:16:58,000 --> 00:17:01,600 Speaker 9: a beef with the open Ai going back years, but 362 00:17:01,760 --> 00:17:05,440 Speaker 9: this is essentially Apple in their castle saying it's our data, 363 00:17:05,440 --> 00:17:08,159 Speaker 9: it's our customers, you're not gonna have access. But I 364 00:17:08,240 --> 00:17:10,800 Speaker 9: believe Musk this could be just some stress going to 365 00:17:10,840 --> 00:17:13,639 Speaker 9: shaold of me this week. He's not gonna ban iPhones 366 00:17:13,680 --> 00:17:14,680 Speaker 9: in my opinion. 367 00:17:14,560 --> 00:17:16,960 Speaker 2: In super super simple terms, can you explain what his 368 00:17:17,080 --> 00:17:18,560 Speaker 2: complaint actually is? 369 00:17:18,760 --> 00:17:19,879 Speaker 3: What's he concerned about. 370 00:17:21,080 --> 00:17:24,960 Speaker 9: He's basically concerned about Apple and open ai having access 371 00:17:25,000 --> 00:17:27,199 Speaker 9: to the data and no one else has access to it, 372 00:17:27,880 --> 00:17:32,160 Speaker 9: and that what he speaks to would be a broader 373 00:17:32,240 --> 00:17:36,360 Speaker 9: concern among other tech players because Apple has a castle 374 00:17:36,440 --> 00:17:37,480 Speaker 9: that no one else has. 375 00:17:37,560 --> 00:17:38,639 Speaker 10: They have the devices. 376 00:17:38,680 --> 00:17:43,399 Speaker 9: It's one point five billion iPhones worldwide, and they're saying 377 00:17:43,800 --> 00:17:45,840 Speaker 9: it's me casser not to casta. 378 00:17:46,119 --> 00:17:48,000 Speaker 2: So, Danie, you mentioned Musk contesta and some of the 379 00:17:48,080 --> 00:17:51,400 Speaker 2: issues he's having. Let's stock that nine folds under your comforage, 380 00:17:51,480 --> 00:17:54,919 Speaker 2: Joe clearly, very very constructive on Apple. Where are you 381 00:17:55,000 --> 00:17:57,280 Speaker 2: now on Tesla? 382 00:17:57,400 --> 00:17:58,280 Speaker 10: Look, I think. 383 00:17:58,160 --> 00:18:00,800 Speaker 9: They've gone through a Category five storm, but they're starting 384 00:18:00,840 --> 00:18:01,680 Speaker 9: to turn the corner. 385 00:18:02,320 --> 00:18:03,440 Speaker 10: And in terms. 386 00:18:03,280 --> 00:18:05,720 Speaker 9: Of what we see later this week, I think that 387 00:18:05,920 --> 00:18:10,520 Speaker 9: compact does pass, that does remove and overhang, and then 388 00:18:10,560 --> 00:18:15,280 Speaker 9: it's all about stabilization in China, FSD and autonomous going forward. 389 00:18:15,400 --> 00:18:18,200 Speaker 10: I think right now the rich reward is there positive. 390 00:18:18,480 --> 00:18:21,119 Speaker 9: That's why the stock, I believe, is hanging in even 391 00:18:21,200 --> 00:18:25,159 Speaker 9: though they're going through some tough times from a demand perspective, 392 00:18:25,240 --> 00:18:29,040 Speaker 9: better days ahead despite what's definitely a white knuckle period 393 00:18:29,200 --> 00:18:30,359 Speaker 9: for Tesla shareholders. 394 00:18:30,560 --> 00:18:32,960 Speaker 6: That's it, dan We talk about the AI super cycle, 395 00:18:33,000 --> 00:18:34,719 Speaker 6: and that's the reason why Apple is sitting in its 396 00:18:34,800 --> 00:18:37,280 Speaker 6: castle and creating a party that's going to go to 397 00:18:37,320 --> 00:18:40,560 Speaker 6: four or five am. But there's a question for Tesla here. 398 00:18:40,680 --> 00:18:41,840 Speaker 7: You have Elon Musk. 399 00:18:42,160 --> 00:18:44,800 Speaker 6: You said sour grapes about not having this first. 400 00:18:44,800 --> 00:18:45,680 Speaker 7: This is what he wanted. 401 00:18:45,720 --> 00:18:50,320 Speaker 6: He wanted the castle and reportedly diverting chips from Nvidia 402 00:18:50,640 --> 00:18:53,920 Speaker 6: from Tesla to some of his other efforts because he 403 00:18:53,960 --> 00:18:56,320 Speaker 6: has no place to deploy them. Does that concern you 404 00:18:56,359 --> 00:19:00,400 Speaker 6: at all in terms of Tesla's valuation as a technolology 405 00:19:00,440 --> 00:19:02,840 Speaker 6: company and that as just a car company. 406 00:19:03,960 --> 00:19:08,680 Speaker 9: Yeah, Look, the AI initiatives have to be under Tesla, 407 00:19:08,720 --> 00:19:11,040 Speaker 9: and I think when Musk made that threat, and this 408 00:19:11,080 --> 00:19:12,920 Speaker 9: will come out as Cheryl in the meeting as well this. 409 00:19:12,920 --> 00:19:14,880 Speaker 10: Week, twenty five percent ownership. 410 00:19:14,920 --> 00:19:19,640 Speaker 9: Otherwise he takes AI out of Tesla, it does raise 411 00:19:19,720 --> 00:19:22,080 Speaker 9: some concerns, but I believe at the end of the day, 412 00:19:22,680 --> 00:19:25,040 Speaker 9: it's all going to be under the hood of the 413 00:19:25,160 --> 00:19:29,960 Speaker 9: Tesla ecosystem, and it's with Musk right now. It's a balance, 414 00:19:30,040 --> 00:19:34,000 Speaker 9: but it's a pivotal time for mus to prove that 415 00:19:34,240 --> 00:19:36,200 Speaker 9: AI will be under Tesla. 416 00:19:36,600 --> 00:19:38,320 Speaker 10: He recommits to being CEO. 417 00:19:38,960 --> 00:19:41,639 Speaker 9: No, I believe the next three to five years and 418 00:19:41,680 --> 00:19:43,560 Speaker 9: I think then we have better days ahead. But right 419 00:19:43,600 --> 00:19:47,919 Speaker 9: now it's definitely been a turbulent period and he doesn't 420 00:19:47,920 --> 00:19:48,320 Speaker 9: help that. 421 00:19:48,800 --> 00:19:51,200 Speaker 6: Dan on a bigger level, this is the first day 422 00:19:51,200 --> 00:19:53,080 Speaker 6: of a two day FED meeting, and a lot of 423 00:19:53,080 --> 00:19:56,399 Speaker 6: people are wondering how long can this continue? Where the 424 00:19:56,440 --> 00:20:00,600 Speaker 6: AI early starters just basically accumulate all the cash and 425 00:20:00,640 --> 00:20:03,359 Speaker 6: are the winners, and accumulate all of the investments that 426 00:20:03,400 --> 00:20:06,399 Speaker 6: we have from a lot of different investment managers, and 427 00:20:06,440 --> 00:20:09,399 Speaker 6: I leave most people behind. How long can that divergence 428 00:20:09,400 --> 00:20:11,480 Speaker 6: continue before something's got to give. 429 00:20:13,000 --> 00:20:16,080 Speaker 9: Look, I've been the valid now for two weeks, seen 430 00:20:16,200 --> 00:20:18,879 Speaker 9: twenty tech companies, you know, all front and center in 431 00:20:18,960 --> 00:20:19,280 Speaker 9: terms of. 432 00:20:19,240 --> 00:20:20,200 Speaker 10: The AI revolution. 433 00:20:21,280 --> 00:20:24,239 Speaker 9: This is in nineteen ninety five movement, nine ninety nine 434 00:20:24,359 --> 00:20:24,840 Speaker 9: nine movement. 435 00:20:24,880 --> 00:20:27,760 Speaker 10: And what I mean is tech the stronger and gets stronger. 436 00:20:28,480 --> 00:20:30,880 Speaker 9: And I don't see any slow down what we're seeing here, 437 00:20:30,920 --> 00:20:33,959 Speaker 9: what we're seeing in terms of supply chain Asia, And 438 00:20:34,000 --> 00:20:36,000 Speaker 9: that's why I believe this is a tech boal market 439 00:20:36,000 --> 00:20:39,280 Speaker 9: that continues to go forward for the next eighteen months. 440 00:20:39,400 --> 00:20:42,240 Speaker 9: But many they'll be in the right lane forty five 441 00:20:42,280 --> 00:20:45,480 Speaker 9: miles an hour in the minivan worrying about valuation. 442 00:20:45,760 --> 00:20:47,160 Speaker 10: I just think right now, this. 443 00:20:47,200 --> 00:20:50,080 Speaker 9: Tech party is gonna be left lane one hundred miles 444 00:20:50,119 --> 00:20:50,400 Speaker 9: an hour. 445 00:20:50,480 --> 00:20:57,119 Speaker 10: I don't see it slowing down. 446 00:21:02,280 --> 00:21:05,120 Speaker 2: Joining us now to discuss his TD's Mark McCormick alongside 447 00:21:05,160 --> 00:21:08,920 Speaker 2: Santante's Stephen Stanley. Jen It's great to catch up with you, Steven. 448 00:21:08,960 --> 00:21:10,760 Speaker 2: I've got to start with you. We caught up with 449 00:21:10,800 --> 00:21:12,760 Speaker 2: you a few months ago. I believe you were sat 450 00:21:13,000 --> 00:21:14,399 Speaker 2: right here to the right of me, not to the 451 00:21:14,440 --> 00:21:16,360 Speaker 2: left of me, and I was speaking to this individual 452 00:21:16,400 --> 00:21:18,320 Speaker 2: about when we were going to get that first interest 453 00:21:18,440 --> 00:21:21,760 Speaker 2: rate cut, and you said something like November, and Lisa 454 00:21:21,800 --> 00:21:23,439 Speaker 2: and I sort of looked at each other, like this 455 00:21:23,480 --> 00:21:26,359 Speaker 2: guy a little bit nuts, a bit crazy started twenty 456 00:21:26,359 --> 00:21:29,840 Speaker 2: four Everyone's looking for March, and you're like, November. November 457 00:21:30,000 --> 00:21:31,160 Speaker 2: is still November, isn't it. 458 00:21:31,480 --> 00:21:32,320 Speaker 4: That's still my call. 459 00:21:32,480 --> 00:21:35,560 Speaker 11: Yeah, Yeah, I think the inflation data are not cooperating, 460 00:21:35,640 --> 00:21:37,320 Speaker 11: so it's still going to be a while. 461 00:21:37,359 --> 00:21:39,280 Speaker 2: How do you think they'll view the labor market data 462 00:21:39,520 --> 00:21:40,240 Speaker 2: from Friday? 463 00:21:40,800 --> 00:21:43,440 Speaker 11: Yeah, I mean I think they've Schirm and Power kind 464 00:21:43,440 --> 00:21:45,879 Speaker 11: of broke the link a little bit between the labor 465 00:21:45,920 --> 00:21:49,440 Speaker 11: market and the economy and inflation earlier this year when 466 00:21:49,480 --> 00:21:53,280 Speaker 11: they suggested that maybe we can have the economy continue 467 00:21:53,280 --> 00:21:55,560 Speaker 11: to grow and still get inflation down. I think that 468 00:21:55,680 --> 00:21:58,720 Speaker 11: was a bit of an ill feated shift on his part. 469 00:21:58,880 --> 00:22:00,240 Speaker 10: But I think the. 470 00:22:00,200 --> 00:22:03,000 Speaker 11: Labor market only comes into play. It feels like if 471 00:22:03,119 --> 00:22:07,040 Speaker 11: things start to weaken dramatically, and obviously may suggest that 472 00:22:07,040 --> 00:22:09,880 Speaker 11: that's not happening. So it's back to inflation. 473 00:22:10,080 --> 00:22:12,200 Speaker 2: Mat mccomke, I want a sense to you how important 474 00:22:12,320 --> 00:22:14,560 Speaker 2: is tomorrow morning's pa CPI print. 475 00:22:16,240 --> 00:22:18,240 Speaker 12: I think it's important, But I think, as you mentioned, 476 00:22:18,240 --> 00:22:20,879 Speaker 12: the key thing here is like progress on inflation. I 477 00:22:20,920 --> 00:22:23,080 Speaker 12: think that's part of the thing is it's a stumbling block. 478 00:22:23,119 --> 00:22:25,000 Speaker 12: We're not seeing the progress that we need. You're also 479 00:22:25,040 --> 00:22:26,920 Speaker 12: going to see the FED likely revise up their core 480 00:22:26,960 --> 00:22:30,040 Speaker 12: PC numbers in terms of the target number they're looking at. 481 00:22:30,080 --> 00:22:32,440 Speaker 12: So when you think about whether or not inflation's moving 482 00:22:32,440 --> 00:22:35,360 Speaker 12: the right direction, it is is it moving fast enough 483 00:22:35,400 --> 00:22:37,120 Speaker 12: for the markets to kind of get on board with 484 00:22:37,160 --> 00:22:39,199 Speaker 12: the certainty of how many times they can cut this 485 00:22:39,280 --> 00:22:41,520 Speaker 12: year and reduce the volatility in the bond market. 486 00:22:41,880 --> 00:22:43,920 Speaker 7: I don't think we're going to see that tomorrow. 487 00:22:43,960 --> 00:22:45,680 Speaker 12: So I do think the key here is there's an 488 00:22:45,680 --> 00:22:50,240 Speaker 12: intersection of volatility that's not pricing the markets, the geopolitics 489 00:22:50,240 --> 00:22:52,960 Speaker 12: which continues to push on the fiscal side, and the fact. 490 00:22:52,800 --> 00:22:54,400 Speaker 7: That the markets aren't really prepared for any of. 491 00:22:54,359 --> 00:22:56,280 Speaker 6: Us So do you think Mark that the Fed's could 492 00:22:56,359 --> 00:22:58,719 Speaker 6: respond to this by doing absolutely nothing, trying to keep 493 00:22:58,760 --> 00:23:01,879 Speaker 6: things as stable as possible having and otherwise just in 494 00:23:02,040 --> 00:23:03,920 Speaker 6: terms of the balance a bit more of the dubbsh 495 00:23:04,359 --> 00:23:05,680 Speaker 6: side of things than Hawk. 496 00:23:06,720 --> 00:23:08,439 Speaker 7: Yeah, I think they're going to try to sound neutral. 497 00:23:08,440 --> 00:23:09,160 Speaker 7: They're not really. 498 00:23:09,200 --> 00:23:12,399 Speaker 12: They can't really project anything to the into September or 499 00:23:12,480 --> 00:23:14,880 Speaker 12: November December. At the moment, they still need to see 500 00:23:14,920 --> 00:23:18,240 Speaker 12: four inflation reports stilly get to the September meeting. So 501 00:23:18,280 --> 00:23:20,560 Speaker 12: I think right now the forward guidance and I think 502 00:23:20,640 --> 00:23:21,560 Speaker 12: markets understand this. 503 00:23:21,640 --> 00:23:22,800 Speaker 7: There's not much. 504 00:23:23,200 --> 00:23:26,080 Speaker 12: Significance that comes from Ford guidance because we're all data dependent. 505 00:23:26,200 --> 00:23:28,439 Speaker 12: So as we kind of watch the data come in, 506 00:23:28,520 --> 00:23:31,160 Speaker 12: if it's a soft month over month, which is maybe 507 00:23:31,160 --> 00:23:33,880 Speaker 12: a point twenty six, or if it's a hot month 508 00:23:33,920 --> 00:23:36,000 Speaker 12: over month, which is maybe point two eight, we're talking 509 00:23:36,000 --> 00:23:38,840 Speaker 12: about decimal points which the FED can't really provide the 510 00:23:38,920 --> 00:23:41,520 Speaker 12: guidance for the markets to feel very clear about where 511 00:23:41,520 --> 00:23:43,480 Speaker 12: we're going on this. And I think the one thing 512 00:23:43,520 --> 00:23:45,560 Speaker 12: that you know, most people are covering the market now 513 00:23:45,600 --> 00:23:48,040 Speaker 12: feels much clearer about is we're just going to see 514 00:23:48,040 --> 00:23:50,280 Speaker 12: more volatility. And I think that's the key thing that 515 00:23:50,320 --> 00:23:52,880 Speaker 12: we need for markets is is really you should be 516 00:23:52,920 --> 00:23:56,040 Speaker 12: trading and thinking about the surprises. Everything needs to go 517 00:23:56,240 --> 00:23:58,760 Speaker 12: right to get to this clear path, but you only 518 00:23:58,800 --> 00:24:00,880 Speaker 12: need one or two things to go wrong, and that's 519 00:24:00,880 --> 00:24:04,160 Speaker 12: where the asymmetries lie for markets, especially in the FX side. 520 00:24:04,280 --> 00:24:06,280 Speaker 6: All right, well we'll get to the X side in 521 00:24:06,280 --> 00:24:10,280 Speaker 6: a second. But Stephen, from your vantage point, this extreme volatility, 522 00:24:10,920 --> 00:24:13,119 Speaker 6: is there a cost to that when it comes to 523 00:24:13,240 --> 00:24:16,600 Speaker 6: both economics but also just market risk. When we talk 524 00:24:16,640 --> 00:24:19,400 Speaker 6: about how rapidly some of these yields are swinging, even 525 00:24:19,440 --> 00:24:21,159 Speaker 6: if the end of the day at the same place. 526 00:24:21,119 --> 00:24:23,400 Speaker 11: Well, I think it makes it very difficult as an investor. 527 00:24:24,240 --> 00:24:27,359 Speaker 11: And the FED certainly doesn't like to cause volatility, so 528 00:24:27,359 --> 00:24:30,159 Speaker 11: they're going to try to do what they can to 529 00:24:30,240 --> 00:24:32,439 Speaker 11: give an accurate picture of where they're headed. But the 530 00:24:32,480 --> 00:24:34,800 Speaker 11: problem is that they're data dependent, and so if the 531 00:24:34,880 --> 00:24:38,280 Speaker 11: data are volatile back and forth, high and low, then 532 00:24:38,480 --> 00:24:40,800 Speaker 11: the markets are going to be volatile, and the expectations 533 00:24:40,800 --> 00:24:42,240 Speaker 11: around the FED are also going to be volatile. 534 00:24:42,400 --> 00:24:44,520 Speaker 3: You see, they still believe that financial conditions are tight. 535 00:24:45,880 --> 00:24:47,800 Speaker 11: I think they believe that the level of the funds 536 00:24:47,840 --> 00:24:48,840 Speaker 11: rate is very tight. 537 00:24:50,160 --> 00:24:51,200 Speaker 3: Obviously you don't. 538 00:24:51,320 --> 00:24:53,200 Speaker 2: What do you think that's based on, Because we had 539 00:24:53,240 --> 00:24:55,360 Speaker 2: from built down to be former New York Fed President 540 00:24:55,720 --> 00:24:57,920 Speaker 2: right a great pay somepole in back opinion and said, 541 00:24:58,000 --> 00:25:01,040 Speaker 2: maybe it's high indefinitely, not high for longer. 542 00:25:01,720 --> 00:25:04,439 Speaker 11: Yeah. I think the problem for them is that there 543 00:25:04,440 --> 00:25:07,000 Speaker 11: are tailwinds that are working against what they're doing with 544 00:25:07,440 --> 00:25:10,360 Speaker 11: the rate level. One is their own balance sheet strategy, 545 00:25:10,400 --> 00:25:12,520 Speaker 11: where the balance sheet is still too big and that's 546 00:25:12,560 --> 00:25:15,639 Speaker 11: a lot of excess liquidity slashing around in the system 547 00:25:15,640 --> 00:25:17,280 Speaker 11: making financial conditions easier. 548 00:25:17,400 --> 00:25:18,760 Speaker 7: And the other one is fiscal. 549 00:25:18,400 --> 00:25:21,040 Speaker 11: Policy, which is continuing to stimulate the economy. 550 00:25:21,520 --> 00:25:24,480 Speaker 2: The stress that we are saying pocketslf it. We're saying 551 00:25:24,480 --> 00:25:26,880 Speaker 2: it at small banks. Regional lenders saw that last year, 552 00:25:27,000 --> 00:25:29,400 Speaker 2: got PINCA this morning warning a more to comp We're 553 00:25:29,440 --> 00:25:32,359 Speaker 2: seeing certain buildings have some difficulty and get priced that 554 00:25:32,560 --> 00:25:36,399 Speaker 2: really really stay discounts, particularly here in midsom Manhattan. Another 555 00:25:36,480 --> 00:25:38,199 Speaker 2: example of that. What do you think that is on 556 00:25:38,240 --> 00:25:39,840 Speaker 2: the radar for these officials? 557 00:25:40,440 --> 00:25:41,520 Speaker 3: Definitely watching it. 558 00:25:41,600 --> 00:25:44,280 Speaker 11: I mean I think to some degree the Fed probably 559 00:25:44,359 --> 00:25:46,600 Speaker 11: looks at the CIRE situation and says, look, this is 560 00:25:46,680 --> 00:25:52,159 Speaker 11: something we can't really address directly. Because this is a 561 00:25:52,240 --> 00:25:55,680 Speaker 11: secular change in the demand for commercial real estate after COVID, right, 562 00:25:55,760 --> 00:25:57,479 Speaker 11: so there's only so much they can do. They can 563 00:25:57,520 --> 00:26:00,560 Speaker 11: help to smooth the transition, but this is a a 564 00:26:00,680 --> 00:26:04,080 Speaker 11: change in the valuation of this sector that needs to happen. 565 00:26:04,440 --> 00:26:07,640 Speaker 11: But I think what they're watching more broadly is are 566 00:26:07,680 --> 00:26:10,080 Speaker 11: we seeing the effects of high interest rates? And it 567 00:26:10,119 --> 00:26:11,960 Speaker 11: does feel like we're starting to see that more. You're 568 00:26:11,960 --> 00:26:15,080 Speaker 11: hearing it more in the housing sector. The ISM Non 569 00:26:15,119 --> 00:26:18,840 Speaker 11: Manufacturing report last week there were several mentions by a 570 00:26:18,880 --> 00:26:22,800 Speaker 11: company by respondents in different industries who were saying, high 571 00:26:22,800 --> 00:26:26,280 Speaker 11: interest rates are really a negative for my business right now. So, 572 00:26:27,000 --> 00:26:30,280 Speaker 11: I mean, I think from that perspective they're probably justified 573 00:26:30,359 --> 00:26:32,520 Speaker 11: and feeling that. 574 00:26:31,840 --> 00:26:33,680 Speaker 3: The policy rate itself is high. 575 00:26:33,720 --> 00:26:37,639 Speaker 11: But as you say, financial conditions generally are not particularly restrictive. 576 00:26:37,960 --> 00:26:40,000 Speaker 6: Mark to build on that, I remember a couple of 577 00:26:40,040 --> 00:26:42,760 Speaker 6: months ago people were looking at property markets around the 578 00:26:42,760 --> 00:26:45,399 Speaker 6: world to determine which currency to go with. That was 579 00:26:45,400 --> 00:26:48,560 Speaker 6: actually one of the big risks and potentially indicators of 580 00:26:48,640 --> 00:26:51,240 Speaker 6: a central bank that would essentially be forced to cut 581 00:26:51,480 --> 00:26:55,119 Speaker 6: in order to preserve the sanctity of the economy in 582 00:26:55,160 --> 00:26:57,320 Speaker 6: that region. Do you think that that's still applicable. 583 00:26:58,640 --> 00:27:00,639 Speaker 12: Yeah, that's all we track very so we kind of 584 00:27:00,640 --> 00:27:03,160 Speaker 12: look at the effective mortgage rates and how it's correlated 585 00:27:03,200 --> 00:27:06,280 Speaker 12: with interest rates and kind of which currencies. 586 00:27:05,760 --> 00:27:07,040 Speaker 7: Are the most vulnerable to that. 587 00:27:07,119 --> 00:27:09,320 Speaker 12: You could you kind of play the home base here, 588 00:27:09,359 --> 00:27:11,280 Speaker 12: but it's very clear this is on the Bank of 589 00:27:11,320 --> 00:27:14,200 Speaker 12: Canada's radar screen, and it's very clear this is something 590 00:27:14,200 --> 00:27:16,480 Speaker 12: that was on most European currencies radar screen. 591 00:27:16,680 --> 00:27:16,800 Speaker 9: Light. 592 00:27:16,840 --> 00:27:20,120 Speaker 12: I always find the primary case study with Sweden, which 593 00:27:20,240 --> 00:27:22,639 Speaker 12: was if you looked at the mortgage rates, the bulk 594 00:27:22,680 --> 00:27:24,600 Speaker 12: of the mortgages were under one year and. 595 00:27:24,600 --> 00:27:25,520 Speaker 7: They were floating. 596 00:27:25,920 --> 00:27:28,879 Speaker 12: So Sweden already took the pain medicine and they've already 597 00:27:28,920 --> 00:27:31,400 Speaker 12: had a massive move in the currency market. 598 00:27:31,840 --> 00:27:33,560 Speaker 4: Things are starting to stabilize a little bit. 599 00:27:33,600 --> 00:27:35,600 Speaker 12: But that is something that's on I think the radar screen, 600 00:27:35,640 --> 00:27:38,320 Speaker 12: which is which are the next tiers of countries that 601 00:27:38,359 --> 00:27:41,520 Speaker 12: are very vulnerable to a housing disruption, and again this 602 00:27:41,600 --> 00:27:44,960 Speaker 12: is something that's very insulated in something that's resilient for 603 00:27:45,000 --> 00:27:48,600 Speaker 12: the US at least relative to other currencies, and how 604 00:27:48,640 --> 00:27:50,560 Speaker 12: you would look at the housing market as an impact. 605 00:27:50,600 --> 00:27:53,119 Speaker 12: So I'd say the one that's on everyone's radar screen 606 00:27:53,119 --> 00:27:55,840 Speaker 12: that we talked to happens to be Canada largely again 607 00:27:55,840 --> 00:27:58,320 Speaker 12: because they're mostly under the four to five year fixed 608 00:27:58,440 --> 00:28:01,800 Speaker 12: and those fixed mortgages are adjusting from the COVID period 609 00:28:01,880 --> 00:28:04,439 Speaker 12: now and you're basically seeing mortgages go from one and 610 00:28:04,480 --> 00:28:06,480 Speaker 12: a half to two all the way up to maybe 611 00:28:06,480 --> 00:28:08,800 Speaker 12: five six percent. So that is something that is going 612 00:28:08,840 --> 00:28:12,040 Speaker 12: to feed into consumer spending, consumer slow down. And this 613 00:28:12,119 --> 00:28:14,399 Speaker 12: is part of the G ten central bank divergence story, 614 00:28:14,720 --> 00:28:16,600 Speaker 12: which is, you know, the FED might not just have 615 00:28:16,680 --> 00:28:19,119 Speaker 12: to go is quickly or might not be able to 616 00:28:19,119 --> 00:28:21,240 Speaker 12: go at all, where all these other central banks do 617 00:28:21,359 --> 00:28:22,720 Speaker 12: have to go and they have to go. 618 00:28:22,720 --> 00:28:25,919 Speaker 6: Now, Stephen, Housing is one thing. Commercial real estate, though, 619 00:28:26,000 --> 00:28:28,480 Speaker 6: is another. And you are searing, as John mentioned, two 620 00:28:28,560 --> 00:28:31,120 Speaker 6: hundred billion dollars of maturities coming up within the next 621 00:28:31,200 --> 00:28:35,359 Speaker 6: twelve twenty four to eighteen months. And there's a question 622 00:28:35,560 --> 00:28:39,040 Speaker 6: of whether we're accurately pricing the risk that this could 623 00:28:39,080 --> 00:28:41,520 Speaker 6: cause the FED to respond in a more material way. 624 00:28:41,560 --> 00:28:43,680 Speaker 6: Should it be I don't want to say contagious that 625 00:28:43,760 --> 00:28:46,160 Speaker 6: might be too strong, but have sort of trickle out effects. 626 00:28:46,400 --> 00:28:48,040 Speaker 6: Do you buy into any of this? Are you watching 627 00:28:48,080 --> 00:28:49,400 Speaker 6: this really understand that risk. 628 00:28:50,000 --> 00:28:51,920 Speaker 11: Well, I think one thing to keep in mind is 629 00:28:52,000 --> 00:28:55,000 Speaker 11: that I mentioned the balance sheet before. I mean, liquidity 630 00:28:55,040 --> 00:28:58,200 Speaker 11: is still plentiful, right, so this isn't likely to lead 631 00:28:58,200 --> 00:29:02,000 Speaker 11: to a broader credit crunch. I think the other issue is, 632 00:29:02,080 --> 00:29:05,520 Speaker 11: unlike the housing situation fifteen years ago, there's not a 633 00:29:05,560 --> 00:29:10,600 Speaker 11: ton of leverage spread through the system that hinges on 634 00:29:10,640 --> 00:29:13,120 Speaker 11: commercial real estate. So I think the risks are very 635 00:29:13,120 --> 00:29:14,560 Speaker 11: different than they were in the lead up to the 636 00:29:14,560 --> 00:29:19,200 Speaker 11: financial crisis. Having said that, I mean I have to say, 637 00:29:19,240 --> 00:29:21,480 Speaker 11: I mean, you know, banks are sitting with a lot 638 00:29:21,520 --> 00:29:24,160 Speaker 11: of loans on their books that are that are in 639 00:29:24,320 --> 00:29:27,920 Speaker 11: some jeopardy, So I think there will be further adjustment 640 00:29:27,960 --> 00:29:30,680 Speaker 11: going forward. It's just a matter of how broad that 641 00:29:30,720 --> 00:29:34,920 Speaker 11: pain gets and what the overall environment is it resilient 642 00:29:35,040 --> 00:29:36,760 Speaker 11: enough to manage through that. 643 00:29:36,920 --> 00:29:39,280 Speaker 2: We're going to continue this conversation with mart McCormick a TD. 644 00:29:39,520 --> 00:29:40,880 Speaker 2: I know you've got to run, so I just wanted 645 00:29:40,880 --> 00:29:43,239 Speaker 2: to get some details from you novembers when they're going 646 00:29:43,280 --> 00:29:45,440 Speaker 2: to move first cup, that's you cool? Can we just 647 00:29:45,480 --> 00:29:47,360 Speaker 2: go to the top plot just quickly tomorrow what's going 648 00:29:47,440 --> 00:29:48,320 Speaker 2: to look like two or one? 649 00:29:48,560 --> 00:29:52,320 Speaker 11: I think it's probably median is probably two. There'll probably 650 00:29:52,320 --> 00:29:54,280 Speaker 11: been a minority of people with zero or one. 651 00:29:54,280 --> 00:29:56,560 Speaker 2: Though, what do you think the forecast directionally are going 652 00:29:56,600 --> 00:29:59,360 Speaker 2: to look like? Are we revising growth up and inflation up, 653 00:29:59,440 --> 00:30:00,280 Speaker 2: unemployment high? 654 00:30:00,360 --> 00:30:01,080 Speaker 3: What's that look like? 655 00:30:01,720 --> 00:30:04,200 Speaker 11: Not much of a change in growth in unemployment, but 656 00:30:04,240 --> 00:30:06,560 Speaker 11: probably we're going to need to go up on inflation 657 00:30:06,720 --> 00:30:08,400 Speaker 11: just for what's already happened. 658 00:30:08,120 --> 00:30:10,040 Speaker 2: Just a NUTCH higher on CPI. The difference between the 659 00:30:10,080 --> 00:30:11,800 Speaker 2: Federalserve and the ECB though, is that they do that 660 00:30:11,840 --> 00:30:13,560 Speaker 2: and they're not cutting interest rates on the same day. 661 00:30:13,720 --> 00:30:14,840 Speaker 3: Well, they were pre committed. 662 00:30:15,240 --> 00:30:17,080 Speaker 2: So can you imagine can I just finish on that? 663 00:30:17,120 --> 00:30:18,920 Speaker 2: Can you imagine if the Fed did what the ECP 664 00:30:19,040 --> 00:30:20,920 Speaker 2: did last week? What do you think that would look 665 00:30:20,960 --> 00:30:21,640 Speaker 2: like in markets? 666 00:30:21,960 --> 00:30:26,400 Speaker 11: Well, so, the Fed historically has tended to have a 667 00:30:26,520 --> 00:30:28,840 Speaker 11: very high bar for their first move, and the ECB, 668 00:30:29,080 --> 00:30:31,600 Speaker 11: as you said, kind of locked in that first move early. 669 00:30:32,400 --> 00:30:34,800 Speaker 11: The Fed has never really behaved that way, so it's 670 00:30:34,800 --> 00:30:36,640 Speaker 11: hard to say, but yeah, that would have that would 671 00:30:36,640 --> 00:30:37,320 Speaker 11: have been interesting. 672 00:30:37,520 --> 00:30:39,320 Speaker 2: I forgot who wrote the article, but I was someone 673 00:30:39,320 --> 00:30:42,479 Speaker 2: here at Blimberg that referenced a reverse tree shae. So 674 00:30:42,600 --> 00:30:44,680 Speaker 2: tree shae for those of you that maybe aren't familiar. 675 00:30:44,800 --> 00:30:47,600 Speaker 2: Former ECP president did a couple of hikes at. 676 00:30:47,600 --> 00:30:49,840 Speaker 3: Precisely the wrong time. I think one was in our way. 677 00:30:49,880 --> 00:30:52,160 Speaker 2: Another series of them around twenty eleven around the usone 678 00:30:52,160 --> 00:30:55,360 Speaker 2: debt crisis, a reverse tree shape big. Ultimately you've cut 679 00:30:55,400 --> 00:30:57,520 Speaker 2: too soon. That the cuts the mistake this time and 680 00:30:57,960 --> 00:30:58,480 Speaker 2: not the hike. 681 00:30:58,640 --> 00:30:59,080 Speaker 3: Well, we'll see. 682 00:30:59,120 --> 00:31:00,600 Speaker 6: I mean, is that really the is why the euro 683 00:31:00,760 --> 00:31:03,239 Speaker 6: is weakening so much? Probably some other issues, but it's 684 00:31:03,280 --> 00:31:04,840 Speaker 6: a good question, and it's something that people are going 685 00:31:04,840 --> 00:31:05,240 Speaker 6: to be asking. 686 00:31:05,320 --> 00:31:07,320 Speaker 3: Yes, something will keep asking. Steven. It's good to see you. 687 00:31:07,480 --> 00:31:07,800 Speaker 3: Thank you. 688 00:31:08,920 --> 00:31:12,480 Speaker 2: This is the Bloomberg Surveillance Podcast, bringing you the best 689 00:31:12,520 --> 00:31:15,840 Speaker 2: in markets, economics, angient politics. You can watch the show 690 00:31:15,880 --> 00:31:18,840 Speaker 2: live on Bloomberg TV weekday mornings from six am to 691 00:31:18,960 --> 00:31:22,720 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify 692 00:31:22,880 --> 00:31:25,080 Speaker 2: or anywhere else you listen, and as always, on the 693 00:31:25,080 --> 00:31:27,520 Speaker 2: Bloomberg Terminal and the Bloomberg Business app.