1 00:00:02,520 --> 00:00:13,760 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 2 00:00:13,840 --> 00:00:17,920 Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern 3 00:00:18,200 --> 00:00:22,000 Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business App, 4 00:00:22,360 --> 00:00:25,680 Speaker 1: Listen on demand wherever you get your podcasts, or watch 5 00:00:25,760 --> 00:00:27,040 Speaker 1: us live on YouTube. 6 00:00:27,320 --> 00:00:31,760 Speaker 2: There is the pageantry of a president in the United Kingdom. 7 00:00:31,840 --> 00:00:34,120 Speaker 2: This is with our question of our interviewer the morning, 8 00:00:34,159 --> 00:00:39,040 Speaker 2: Tina Fordham joins us, founder of Fordham Global Foresight. Tin, 9 00:00:39,120 --> 00:00:42,040 Speaker 2: I read the obligatory BBC summary of what we're going 10 00:00:42,120 --> 00:00:44,919 Speaker 2: to see, and that's at full court press. I mean 11 00:00:44,960 --> 00:00:47,680 Speaker 2: the President will visit the tomb of the late Queen. 12 00:00:48,320 --> 00:00:51,440 Speaker 2: He'll be greeted by William and Catherine and the rest 13 00:00:51,479 --> 00:00:54,640 Speaker 2: and all the pageantry as well. How will the United 14 00:00:54,720 --> 00:00:56,920 Speaker 2: Kingdom greet President Trump? 15 00:00:59,120 --> 00:01:01,400 Speaker 3: Well, before we go there, can I just confirm the 16 00:01:01,440 --> 00:01:04,720 Speaker 3: Lime Bike race in London? 17 00:01:06,240 --> 00:01:11,000 Speaker 4: Yes, and I'll pass on the the booboo madness, but yeah, 18 00:01:11,520 --> 00:01:15,880 Speaker 4: I personally know many Lime Bike virgins who had to 19 00:01:15,959 --> 00:01:16,559 Speaker 4: come to Crik. 20 00:01:17,400 --> 00:01:19,640 Speaker 2: Let's pause. We can get back to the President in 21 00:01:19,720 --> 00:01:22,759 Speaker 2: a moment. How long is this idiocy going to go. 22 00:01:24,240 --> 00:01:25,039 Speaker 3: Indefinitely? 23 00:01:25,319 --> 00:01:29,160 Speaker 4: And I mean I tried to go to the theater 24 00:01:29,319 --> 00:01:34,720 Speaker 4: last night and involved ninety minute expeditions planned with military precision. 25 00:01:36,160 --> 00:01:38,640 Speaker 3: It has really had a. 26 00:01:38,680 --> 00:01:41,880 Speaker 4: Huge impact on business and everything else. We don't hear 27 00:01:41,920 --> 00:01:45,200 Speaker 4: anything about talks. And what's really annoying people here in 28 00:01:45,240 --> 00:01:49,880 Speaker 4: the UK is that the drivers are striking for a 29 00:01:50,000 --> 00:01:54,760 Speaker 4: thirty two hour work week, right and many of us 30 00:01:54,760 --> 00:01:57,800 Speaker 4: with those investment banking ninety two hour work weeks. 31 00:01:57,800 --> 00:01:59,480 Speaker 3: That as we're talking about. 32 00:02:01,320 --> 00:02:05,320 Speaker 2: Tina, Lisa from New York says, ask her, Tina, are 33 00:02:05,320 --> 00:02:08,200 Speaker 2: you wearing a helmet when you're in the bicycle battles? 34 00:02:09,080 --> 00:02:11,200 Speaker 3: I didn't say I was riding the line bikes. 35 00:02:11,360 --> 00:02:13,480 Speaker 2: Okay, good confusion. 36 00:02:14,400 --> 00:02:18,000 Speaker 4: And also no one wears helmets online bukes is it's 37 00:02:18,040 --> 00:02:18,799 Speaker 4: not the done thing. 38 00:02:18,960 --> 00:02:20,080 Speaker 2: See let me turn back to you. 39 00:02:20,120 --> 00:02:21,840 Speaker 5: In a few days ago, in my inbox landed an 40 00:02:21,840 --> 00:02:24,960 Speaker 5: email from someone else who charts geopolitical risk. That's the 41 00:02:24,960 --> 00:02:27,000 Speaker 5: In Bremmer of your Asia group, and the headline was 42 00:02:27,200 --> 00:02:30,320 Speaker 5: from G seven to SHE three, And of course Ian 43 00:02:30,360 --> 00:02:33,160 Speaker 5: Bremmer made his name most recently by according this term 44 00:02:33,200 --> 00:02:36,280 Speaker 5: G zero, suggesting that a lot of geopolitical alliances were 45 00:02:36,320 --> 00:02:40,640 Speaker 5: shifting and changing. I'm curious picking up on what he wrote, 46 00:02:40,840 --> 00:02:43,320 Speaker 5: how you thought about what we saw unfold in Beijing 47 00:02:43,960 --> 00:02:47,200 Speaker 5: a few days ago, President She They're greeting the leaders 48 00:02:47,200 --> 00:02:51,640 Speaker 5: of North Korea, India, Russia. What does that signal to you, 49 00:02:51,720 --> 00:02:55,280 Speaker 5: if anything, about the way that the geopolitical terrain is 50 00:02:55,320 --> 00:02:56,120 Speaker 5: shifting or not. 51 00:02:58,080 --> 00:03:03,320 Speaker 4: Well, the Shanghai co Opera An Organization summit was spectacular, 52 00:03:03,440 --> 00:03:06,720 Speaker 4: There's no other word for it. The military kit that 53 00:03:07,240 --> 00:03:11,400 Speaker 4: China had on display was, you know, both both impressive 54 00:03:11,400 --> 00:03:15,920 Speaker 4: and intimidating, depending upon where where you're sit on the globe. 55 00:03:16,480 --> 00:03:20,880 Speaker 4: And the optics of course of that, you know, triumvirate 56 00:03:21,200 --> 00:03:23,200 Speaker 4: of She, Puttin and. 57 00:03:23,600 --> 00:03:25,079 Speaker 3: Maudi was very striking. 58 00:03:25,160 --> 00:03:30,079 Speaker 4: But I do not buy the tripartite world idea, and 59 00:03:30,120 --> 00:03:34,240 Speaker 4: you can already see that, you know, Maudi and Trump 60 00:03:34,280 --> 00:03:37,920 Speaker 4: are are kind of, you know, looking to make up 61 00:03:37,960 --> 00:03:41,960 Speaker 4: a bit. I think it's something much more nebulous than that. 62 00:03:43,280 --> 00:03:46,680 Speaker 5: On this note, there was a story this morning about 63 00:03:47,000 --> 00:03:51,760 Speaker 5: China and Mexico's relationship, and China, through its it's Commerce Ministry, 64 00:03:51,760 --> 00:03:56,280 Speaker 5: delivering a stern message to to Mexico about a unilateral 65 00:03:56,320 --> 00:03:59,080 Speaker 5: tarff increased by Mexico even with the framework of WTO 66 00:03:59,160 --> 00:04:01,119 Speaker 5: rules to be seen as an He's been compromised toward 67 00:04:01,200 --> 00:04:04,920 Speaker 5: unilateral bullying. Could you frame that out for us the 68 00:04:04,960 --> 00:04:08,040 Speaker 5: way that we have seen China respond to this trade 69 00:04:08,080 --> 00:04:10,800 Speaker 5: war not on a bilateral basis visa the US, but 70 00:04:10,840 --> 00:04:13,160 Speaker 5: with other countries in its orbit. And what's the message 71 00:04:13,160 --> 00:04:15,600 Speaker 5: that it's trying to send here to Mexico with that 72 00:04:15,640 --> 00:04:16,440 Speaker 5: announcement today. 73 00:04:17,880 --> 00:04:20,080 Speaker 3: Well, let's put it in perspective. 74 00:04:20,160 --> 00:04:23,360 Speaker 4: I mean, throughout this kind of nine months where we've 75 00:04:23,400 --> 00:04:27,480 Speaker 4: had this huge effort by the Trump administration to put 76 00:04:27,560 --> 00:04:32,120 Speaker 4: forward an overhaul of America in the world, both from 77 00:04:32,200 --> 00:04:37,560 Speaker 4: trade and security perspective, China's been quiet. It has been 78 00:04:37,600 --> 00:04:42,640 Speaker 4: able to watch, to observe, to occasionally signal where it 79 00:04:42,800 --> 00:04:48,320 Speaker 4: stands with power, but it hasn't really risen to debate. 80 00:04:49,279 --> 00:04:53,280 Speaker 4: It is perhaps, you know, unique among the world's largest 81 00:04:53,279 --> 00:04:57,680 Speaker 4: economies in that it has still has this pause going 82 00:04:57,800 --> 00:05:02,400 Speaker 4: on the Trump tariffs, so that you know, strategic patience 83 00:05:02,440 --> 00:05:04,200 Speaker 4: that we see from China. 84 00:05:04,480 --> 00:05:05,680 Speaker 3: Is very much in evidence. 85 00:05:07,080 --> 00:05:10,080 Speaker 4: You know, the comments that you're talking about to me 86 00:05:10,279 --> 00:05:14,240 Speaker 4: reflect how we are still seeing a great deal of 87 00:05:14,279 --> 00:05:18,480 Speaker 4: international trade and in fact, I would say globalization continues, 88 00:05:18,800 --> 00:05:23,440 Speaker 4: but it is following different channels and excluding the US 89 00:05:23,720 --> 00:05:25,200 Speaker 4: increasing I'd like. 90 00:05:25,160 --> 00:05:26,960 Speaker 5: To stick with trade for one more minute, if I 91 00:05:26,960 --> 00:05:29,919 Speaker 5: could hear. And I'm curious about the conversations that you're having, Tina, 92 00:05:29,960 --> 00:05:33,680 Speaker 5: with executives with your clients at Fordum Global Foresight. What 93 00:05:33,680 --> 00:05:36,800 Speaker 5: they're telling you about the way that they're finding their 94 00:05:36,800 --> 00:05:39,080 Speaker 5: way through this now. I think there was that period, 95 00:05:39,200 --> 00:05:42,839 Speaker 5: certainly after the President's trade policies were announced at the beginning, 96 00:05:42,839 --> 00:05:44,720 Speaker 5: where we're all kind of fumbling trying to figure out 97 00:05:44,720 --> 00:05:46,520 Speaker 5: what they meant and what would stand. Of course, there's 98 00:05:46,560 --> 00:05:49,200 Speaker 5: the ambiguity here of what's going to hold up in 99 00:05:49,240 --> 00:05:52,360 Speaker 5: a court of law going forward. What are they telling 100 00:05:52,440 --> 00:05:55,760 Speaker 5: you about their confidence in, yes, the way these policies 101 00:05:55,800 --> 00:05:57,080 Speaker 5: are going to stand, but how they're going to be 102 00:05:57,080 --> 00:05:58,760 Speaker 5: able to kind of plan and do business with them 103 00:05:58,800 --> 00:05:59,200 Speaker 5: in place. 104 00:06:00,839 --> 00:06:04,440 Speaker 4: So our clients, I think have kind of gone through 105 00:06:04,560 --> 00:06:09,880 Speaker 4: the stages of grief with the previous status quo relationship 106 00:06:09,920 --> 00:06:12,600 Speaker 4: with the United States and indeed the global trade system. 107 00:06:13,360 --> 00:06:16,640 Speaker 4: And after several months, I would say, of a real 108 00:06:16,880 --> 00:06:21,440 Speaker 4: chill evident in the c suite, you know, in corporate 109 00:06:22,040 --> 00:06:25,040 Speaker 4: America and indeed the rest of the world. I've seen 110 00:06:25,040 --> 00:06:28,200 Speaker 4: a real increase in risk appetite and also just kind 111 00:06:28,240 --> 00:06:32,080 Speaker 4: of getting on with things and finding you know, new 112 00:06:32,120 --> 00:06:34,799 Speaker 4: opportunities and ways to make deals. 113 00:06:34,839 --> 00:06:36,280 Speaker 3: So I think you also are. 114 00:06:36,200 --> 00:06:38,000 Speaker 4: Starting to see that come through in the M and 115 00:06:38,040 --> 00:06:41,520 Speaker 4: A numbers for example. And you know, markets, for their part, 116 00:06:41,560 --> 00:06:45,360 Speaker 4: are our bullish. Corporate earnings haven't been hurt by all 117 00:06:45,400 --> 00:06:47,960 Speaker 4: of this, but I think there's more energy and more 118 00:06:48,040 --> 00:06:52,000 Speaker 4: creativity going into you know, finding finding new ways of 119 00:06:52,040 --> 00:06:52,800 Speaker 4: doing things. 120 00:06:52,600 --> 00:06:54,679 Speaker 2: Right, Tina, let me get this in. As we talked 121 00:06:54,680 --> 00:06:58,040 Speaker 2: about the joy of a strike in London, we are 122 00:06:58,080 --> 00:07:01,520 Speaker 2: mentioning President Trump's visit next week. How will he be 123 00:07:01,680 --> 00:07:05,919 Speaker 2: greeted in the United Kingdom. Obviously there'll be the usual protests, 124 00:07:06,000 --> 00:07:10,560 Speaker 2: I'll say, but I just find it remarkable the character 125 00:07:10,720 --> 00:07:12,840 Speaker 2: of the greeting our president will receive. 126 00:07:15,480 --> 00:07:18,840 Speaker 4: I suspect that that Downing Street will be very careful 127 00:07:19,280 --> 00:07:25,760 Speaker 4: about President Trump's potential encounters whilst he is here, going 128 00:07:25,760 --> 00:07:28,800 Speaker 4: to Windsor Castle seeing the Queen's tomb, which I've seen, 129 00:07:28,840 --> 00:07:33,040 Speaker 4: by the way, it's really something to do behold, as 130 00:07:33,120 --> 00:07:34,000 Speaker 4: is Windsor Castle. 131 00:07:34,080 --> 00:07:35,920 Speaker 3: I think the emphasis is going to be. 132 00:07:36,480 --> 00:07:41,120 Speaker 4: On the good links that exist, but of course in 133 00:07:41,200 --> 00:07:43,800 Speaker 4: the background is going to be the fact that the 134 00:07:43,920 --> 00:07:48,480 Speaker 4: UK ambassador to Washington, Peter Mandelsson was sacked. I saw 135 00:07:48,520 --> 00:07:52,040 Speaker 4: that he's just been fired from the consulting firm that 136 00:07:52,360 --> 00:07:55,560 Speaker 4: he works for, and that's an embarrassment not only for 137 00:07:55,920 --> 00:07:58,120 Speaker 4: pure starmer, for President Trump. 138 00:07:58,160 --> 00:08:02,200 Speaker 3: It suggests that the Epstein a real Tina Fornham. 139 00:08:02,240 --> 00:08:04,400 Speaker 2: Thank you so much, and a major shout out to 140 00:08:04,400 --> 00:08:08,320 Speaker 2: our team, Max Abelson and all who did the investigation 141 00:08:08,480 --> 00:08:11,840 Speaker 2: of the Bloomberg News essay. I really urge you skimm 142 00:08:11,840 --> 00:08:15,560 Speaker 2: of that. It's a very long effort. How eighteen thousand. 143 00:08:15,240 --> 00:08:17,960 Speaker 5: Eighty they obtained eighteen thousand emails of Jeffy Epstein's personal 144 00:08:18,000 --> 00:08:20,920 Speaker 5: email account and in that correspondence we're guess between him 145 00:08:20,920 --> 00:08:22,200 Speaker 5: and mister Mandelson's home. 146 00:08:22,160 --> 00:08:25,120 Speaker 2: And that with Alva Benni Morrison as well. Look for 147 00:08:25,120 --> 00:08:27,800 Speaker 2: that that story unfolds into the President's trip to the 148 00:08:27,920 --> 00:08:31,880 Speaker 2: United Kingdom. Will of course have complete coverage of that. 149 00:08:32,840 --> 00:08:37,000 Speaker 2: Stay with us. More from Bloomberg Surveillance coming up after this. 150 00:08:44,280 --> 00:08:47,840 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live 151 00:08:47,920 --> 00:08:51,080 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 152 00:08:51,160 --> 00:08:54,840 Speaker 1: Applecarplay and Android Auto with the Bloomberg Business app, or 153 00:08:54,960 --> 00:08:56,960 Speaker 1: watch US Live on YouTube. 154 00:08:56,600 --> 00:09:00,600 Speaker 2: The important economic conversation into the weekend. It is with 155 00:09:00,720 --> 00:09:06,320 Speaker 2: Claudia Sam. She's definitive out of Ned Gramlich's University of 156 00:09:06,360 --> 00:09:10,600 Speaker 2: Michigan Economics, a tour duty at the FED with our 157 00:09:10,679 --> 00:09:14,080 Speaker 2: question two years ago, the nation's economist of the year 158 00:09:14,120 --> 00:09:17,920 Speaker 2: in academics, with the Sum rule in all Claudius, not 159 00:09:18,200 --> 00:09:21,680 Speaker 2: is she so kind to us on Jobs Day? Claudia Sam, 160 00:09:22,000 --> 00:09:25,520 Speaker 2: Not on the FED day. But Claudia Sum, on your 161 00:09:25,840 --> 00:09:30,200 Speaker 2: American recession, Claudia is a pum rule clicked in here? 162 00:09:30,640 --> 00:09:33,599 Speaker 2: As we saw that revision to the jobs report. 163 00:09:33,960 --> 00:09:37,800 Speaker 6: No, no, the revision to the Jobs report was about 164 00:09:37,840 --> 00:09:41,200 Speaker 6: payroll employment. It did had no effect on our estimates 165 00:09:41,200 --> 00:09:44,440 Speaker 6: of the unemployment rate. It was the case last year 166 00:09:44,600 --> 00:09:48,959 Speaker 6: where those revisions to employments are relevant, that the unemployment 167 00:09:49,000 --> 00:09:52,480 Speaker 6: rate was rising. So I'd say that the revisions paid 168 00:09:52,520 --> 00:09:55,520 Speaker 6: a more consistent picture of the labor market. Right, the 169 00:09:55,559 --> 00:09:58,120 Speaker 6: unemployment rate had risen enough to trigger the Sam rule, 170 00:09:58,160 --> 00:10:00,560 Speaker 6: and we now know that the payrolls they'd and in 171 00:10:00,559 --> 00:10:02,840 Speaker 6: fact they'd slowed even more than what we had thought 172 00:10:02,880 --> 00:10:06,600 Speaker 6: at the time, So kind of more in harmony together, 173 00:10:06,840 --> 00:10:07,559 Speaker 6: I guess. 174 00:10:08,120 --> 00:10:11,160 Speaker 2: With the dynamics of where we are particularly the immigration 175 00:10:12,080 --> 00:10:16,080 Speaker 2: is a four point three percent unemployment rate what used 176 00:10:16,120 --> 00:10:19,200 Speaker 2: to be a higher unemployment rate? Can you say that? 177 00:10:21,320 --> 00:10:24,720 Speaker 6: So the unemployment rate that we would kind of settle 178 00:10:24,720 --> 00:10:27,400 Speaker 6: into when things are good, it does move around over time. 179 00:10:27,520 --> 00:10:29,840 Speaker 6: I think one reason we see unemployment rates that are 180 00:10:29,880 --> 00:10:32,240 Speaker 6: quite a bit lower than say, decades ago, you know, 181 00:10:32,240 --> 00:10:35,199 Speaker 6: four point three percent historically is quite low, is that 182 00:10:35,280 --> 00:10:37,800 Speaker 6: we have an older workforce. You know, workers who have 183 00:10:37,880 --> 00:10:40,560 Speaker 6: more experience tend to you know, move in and out 184 00:10:40,559 --> 00:10:42,920 Speaker 6: of jobs, lose jobs less frequently. So I think a 185 00:10:42,960 --> 00:10:45,360 Speaker 6: lot of it's demographics where we're at kind of this 186 00:10:45,480 --> 00:10:48,600 Speaker 6: lower unemployment rate. And that's why when you're trying to 187 00:10:48,640 --> 00:10:51,440 Speaker 6: think about where we headed. Are we headed to a recession? 188 00:10:51,480 --> 00:10:54,840 Speaker 6: Are things really going south? You look at changes in 189 00:10:54,880 --> 00:10:58,120 Speaker 6: the unemployment rate as opposed to a particular level, like 190 00:10:58,160 --> 00:11:02,160 Speaker 6: that's such an important We've seen in recent months unemployment 191 00:11:02,200 --> 00:11:06,240 Speaker 6: rate nudging its way up, still slowly, but moving in 192 00:11:06,280 --> 00:11:07,079 Speaker 6: the wrong direction. 193 00:11:08,320 --> 00:11:10,600 Speaker 2: Behold the shifting balance of risks. 194 00:11:10,600 --> 00:11:12,000 Speaker 5: And I want to ask you about that and the 195 00:11:12,040 --> 00:11:15,360 Speaker 5: Fed Reserve's capacity to deal with it. And I look 196 00:11:15,360 --> 00:11:18,000 Speaker 5: at the most recent Bloomberg survey of Wall Street economists, 197 00:11:18,000 --> 00:11:19,880 Speaker 5: there's this expectation here that the language is going to 198 00:11:19,920 --> 00:11:21,800 Speaker 5: change from the FED Chairman when he speaks on Wednesday 199 00:11:21,840 --> 00:11:24,760 Speaker 5: about the labor market and the condition that it's in. 200 00:11:25,520 --> 00:11:28,360 Speaker 5: What is your sense of this Fed Reserve's capacity to 201 00:11:28,440 --> 00:11:31,960 Speaker 5: deal with the shift here more toward the labor markets. 202 00:11:31,960 --> 00:11:34,400 Speaker 5: It seems it's going to be the case. And as 203 00:11:34,400 --> 00:11:36,160 Speaker 5: Tom and I were mentioning just a moment ago, we're 204 00:11:36,200 --> 00:11:37,680 Speaker 5: at a point here where we really don't have a 205 00:11:37,679 --> 00:11:40,680 Speaker 5: full grasp on the personnel around that table on Tuesday 206 00:11:40,800 --> 00:11:42,640 Speaker 5: and Wednesday. That's still very much up in the air, 207 00:11:43,559 --> 00:11:45,960 Speaker 5: perhaps a basic question, But does that color the conversation 208 00:11:46,000 --> 00:11:47,800 Speaker 5: that's going to take place there on Tuesday and Wednesday 209 00:11:47,800 --> 00:11:50,079 Speaker 5: at all? 210 00:11:50,720 --> 00:11:53,960 Speaker 6: The conversation and the rate decision is going to hinge 211 00:11:54,040 --> 00:11:56,280 Speaker 6: on the data and the FED are I mean, they 212 00:11:56,360 --> 00:12:00,720 Speaker 6: are grappling with a really tricky environment in the inflation 213 00:12:00,920 --> 00:12:03,760 Speaker 6: is inflation is too high? It is not, and it's 214 00:12:03,840 --> 00:12:07,360 Speaker 6: not moving towards the Fed's target right now. And then 215 00:12:07,520 --> 00:12:11,560 Speaker 6: you have employment that has really softened. I mean it 216 00:12:11,640 --> 00:12:14,000 Speaker 6: might be structural, might be immigration, but it might not be. 217 00:12:14,040 --> 00:12:16,120 Speaker 6: It might be demand as really slipping. And so like 218 00:12:16,160 --> 00:12:19,000 Speaker 6: the Fed's got one tool and they've got two problems 219 00:12:19,240 --> 00:12:21,920 Speaker 6: that are going in different directions, So they're going to 220 00:12:21,920 --> 00:12:24,319 Speaker 6: have to frame up and really like assess from the 221 00:12:24,400 --> 00:12:27,560 Speaker 6: data which which of these two risks is bigger and 222 00:12:27,640 --> 00:12:30,120 Speaker 6: more persistent. I mean that's the you know, that's the 223 00:12:30,120 --> 00:12:32,240 Speaker 6: way the Fed has outlined that it approaches us. 224 00:12:32,559 --> 00:12:34,320 Speaker 2: That's how they're going to do it next week. 225 00:12:35,040 --> 00:12:37,080 Speaker 6: But I mean, the reality is this is not going 226 00:12:37,080 --> 00:12:40,440 Speaker 6: to be a normal FMC meeting. Right There's a lot 227 00:12:40,679 --> 00:12:44,960 Speaker 6: and frankly it may matter more for the inflation outlook, 228 00:12:45,000 --> 00:12:47,200 Speaker 6: the rate outlook, not just the next week, but going 229 00:12:47,240 --> 00:12:50,000 Speaker 6: forward who actually is sitting at that table and voting, 230 00:12:50,360 --> 00:12:53,400 Speaker 6: because it will be a big change in FED policy 231 00:12:53,520 --> 00:12:55,120 Speaker 6: if least a cook is not there. 232 00:12:55,360 --> 00:12:57,959 Speaker 2: Claudia, one of the magical things you had was a 233 00:12:58,000 --> 00:13:01,760 Speaker 2: tour duty with a match Puro at Michigan. He folks 234 00:13:02,040 --> 00:13:06,199 Speaker 2: did more on inflation research than anyone I can imagine 235 00:13:06,679 --> 00:13:11,240 Speaker 2: within academics. I've been talking a lot, Claudia, in my 236 00:13:11,400 --> 00:13:16,080 Speaker 2: stilted way, about the substitution effect? Is it in place 237 00:13:16,200 --> 00:13:19,480 Speaker 2: now with this new bout of inflation. Lisa helped me here. 238 00:13:19,600 --> 00:13:26,320 Speaker 2: Joe Wisenthal had beef prices up, banana prices up, coffee 239 00:13:26,360 --> 00:13:30,880 Speaker 2: prices through the moon, Claudia, is it normal some economics 240 00:13:30,920 --> 00:13:34,439 Speaker 2: now as we substitute and try to get them Monday 241 00:13:34,480 --> 00:13:38,520 Speaker 2: with their diminished purchasing power, right, So, I mean it is. 242 00:13:38,720 --> 00:13:43,000 Speaker 6: It's a basic reality of economic behavior, and people are 243 00:13:43,040 --> 00:13:45,600 Speaker 6: going to They're going to react to prices. That's why 244 00:13:45,640 --> 00:13:48,160 Speaker 6: we have prices. It tells us something about what's scarce 245 00:13:48,200 --> 00:13:52,040 Speaker 6: and you know, what's available, and so there absolutely should 246 00:13:52,040 --> 00:13:55,400 Speaker 6: be seeing some adjustments. But we have to be you know, 247 00:13:55,880 --> 00:14:00,480 Speaker 6: real about the extent to which people can make substitutions, right, 248 00:14:00,520 --> 00:14:03,760 Speaker 6: Like there are you know, housing is very expensive for 249 00:14:04,200 --> 00:14:07,920 Speaker 6: many Americans, and it's also a necessity, right, so there 250 00:14:08,040 --> 00:14:10,360 Speaker 6: is a process of adjustment going on. Some of our 251 00:14:10,440 --> 00:14:15,120 Speaker 6: inflation statistics capture that substitution in real time better than others. 252 00:14:16,080 --> 00:14:20,160 Speaker 6: But I think we also shouldn't Like I would also 253 00:14:20,280 --> 00:14:23,280 Speaker 6: push back on some of the discussions around tariffs, whereas, oh, 254 00:14:23,320 --> 00:14:26,040 Speaker 6: it's a relative price change, like you know, the tariff goods, 255 00:14:26,240 --> 00:14:28,640 Speaker 6: their prices go up, so then people just shift to something, 256 00:14:28,760 --> 00:14:30,960 Speaker 6: you know, shift away from that, and then inflation overall 257 00:14:31,000 --> 00:14:32,920 Speaker 6: doesn't go up. I don't think that's the read that 258 00:14:32,960 --> 00:14:35,160 Speaker 6: we get out of the data inflation is stalled out 259 00:14:35,560 --> 00:14:39,360 Speaker 6: and is moving ever so slightly higher. So I think 260 00:14:39,600 --> 00:14:41,840 Speaker 6: substitution is there, but there are limits to how much 261 00:14:41,880 --> 00:14:44,520 Speaker 6: people can deal with these these price changes. 262 00:14:45,160 --> 00:14:48,600 Speaker 5: Tom has talked about the perniciousness of inflation, talked about 263 00:14:48,640 --> 00:14:51,000 Speaker 5: the stickiness of inflation. I want to just pick up 264 00:14:51,000 --> 00:14:52,560 Speaker 5: on something you said a moment ago, which is the 265 00:14:52,640 --> 00:14:55,360 Speaker 5: role that tariffs and trade policy is playing in all 266 00:14:55,440 --> 00:14:58,560 Speaker 5: of this. As you kind of assess the gumminess, the 267 00:14:58,640 --> 00:15:02,400 Speaker 5: glutinousness of of this inflation, how much of that has 268 00:15:02,440 --> 00:15:05,240 Speaker 5: to do with trade policy uncertainty thereof. 269 00:15:07,520 --> 00:15:11,280 Speaker 6: Was the trade policy is not helping in the sense 270 00:15:11,320 --> 00:15:14,480 Speaker 6: that we do see goods price inflation picking up some. 271 00:15:14,640 --> 00:15:18,800 Speaker 6: But honestly, the thing that we're dealing most with inflation 272 00:15:18,960 --> 00:15:21,480 Speaker 6: is on the services side, and that's the stickiness that 273 00:15:21,520 --> 00:15:25,480 Speaker 6: we came into this year with, Like that last mile 274 00:15:25,640 --> 00:15:29,400 Speaker 6: on some of the services, including non housing services, has 275 00:15:29,680 --> 00:15:31,600 Speaker 6: just it's been tough to get the. 276 00:15:32,120 --> 00:15:34,000 Speaker 2: Traction in that last bit. 277 00:15:34,080 --> 00:15:37,280 Speaker 6: And you know, while inflation is not you know, three 278 00:15:37,320 --> 00:15:40,520 Speaker 6: percent inflation versus two percent inflation is not like what 279 00:15:40,600 --> 00:15:43,360 Speaker 6: we were dealing with in twenty twenty two, like where 280 00:15:43,360 --> 00:15:45,840 Speaker 6: that was much bigger, but it's still it adds up. 281 00:15:45,960 --> 00:15:49,320 Speaker 6: I mean, these are price increases happening month after month 282 00:15:49,360 --> 00:15:53,000 Speaker 6: after month. Like it does cut into disposable income and 283 00:15:53,040 --> 00:15:54,440 Speaker 6: into people's purchasing power. 284 00:15:54,680 --> 00:15:56,680 Speaker 2: Claudie, let's finish up with this. I think this is 285 00:15:56,880 --> 00:15:59,600 Speaker 2: the huge deal. Okay, we go back to the six 286 00:15:59,680 --> 00:16:03,040 Speaker 2: sieson seventies, and most people today can't remember Walter Heller 287 00:16:03,320 --> 00:16:07,040 Speaker 2: and everybody hysterical about five percent inflation whatever it was 288 00:16:07,080 --> 00:16:11,359 Speaker 2: at the time before the Voker surge. Now we're nuancing 289 00:16:11,440 --> 00:16:14,280 Speaker 2: between two and three percent. I think of John Taylor 290 00:16:14,320 --> 00:16:17,800 Speaker 2: out of Stanford, many others, maybe McTeer in the Texas 291 00:16:17,840 --> 00:16:20,720 Speaker 2: Fed being cautious, we have to be at two percent. 292 00:16:21,320 --> 00:16:24,520 Speaker 2: One point eight percent would be better for Claudius som 293 00:16:25,280 --> 00:16:29,080 Speaker 2: to our listeners and viewers. Is two percent that much 294 00:16:29,200 --> 00:16:35,200 Speaker 2: different from two point eight or three percent inflation in 295 00:16:35,240 --> 00:16:36,080 Speaker 2: any given month. 296 00:16:36,200 --> 00:16:38,880 Speaker 6: No, it's not, but it does add up over time. 297 00:16:39,040 --> 00:16:41,440 Speaker 6: And also I think it is this very point about, 298 00:16:41,440 --> 00:16:45,320 Speaker 6: like let's keep things in perspective that it is very 299 00:16:45,360 --> 00:16:48,960 Speaker 6: relevant for the decision the Fed's going to make next week, 300 00:16:49,040 --> 00:16:51,560 Speaker 6: because we're talking about what's the risk of like inter recession. 301 00:16:51,560 --> 00:16:54,120 Speaker 6: The unemployment rate doesn't just nudge up, the unemployery goes 302 00:16:54,200 --> 00:16:58,320 Speaker 6: up by percentage points multiple and we have this issue 303 00:16:58,320 --> 00:17:01,840 Speaker 6: of inflation seems to be stuck closer to three percent 304 00:17:01,880 --> 00:17:04,399 Speaker 6: than two percent. So like you're balancing off which of 305 00:17:04,440 --> 00:17:06,600 Speaker 6: these two is the bigger problem? And is that keeping 306 00:17:06,640 --> 00:17:08,879 Speaker 6: it in perspective, I think that lands you on the 307 00:17:08,920 --> 00:17:10,160 Speaker 6: side of the risk here. 308 00:17:10,640 --> 00:17:13,800 Speaker 2: This is a bigger risk on the employment side. Claudia Sam, 309 00:17:14,119 --> 00:17:16,639 Speaker 2: thank you so much. Thank you patiently for waiting for 310 00:17:16,760 --> 00:17:19,560 Speaker 2: us as we spoke to Miles Miller and Terry Haynes. 311 00:17:19,600 --> 00:17:23,000 Speaker 2: She's a huge force here at Surveillance. Can't say enough 312 00:17:23,000 --> 00:17:27,000 Speaker 2: about her courage to confront the nation's economics. Claudia Sam. 313 00:17:27,119 --> 00:17:30,320 Speaker 2: We hope to see her eight thirty on the next 314 00:17:30,400 --> 00:17:34,200 Speaker 2: Jobs Day. Stay with us. More from Bloomberg Surveillance coming 315 00:17:34,280 --> 00:17:35,280 Speaker 2: up after this. 316 00:17:42,520 --> 00:17:46,080 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live 317 00:17:46,160 --> 00:17:49,320 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 318 00:17:49,400 --> 00:17:53,040 Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or 319 00:17:53,200 --> 00:17:54,760 Speaker 1: watch us live on YouTube. 320 00:17:54,920 --> 00:17:58,000 Speaker 2: Joining us now and hugely timely. It's always lovely on 321 00:17:58,040 --> 00:18:01,680 Speaker 2: a Friday to speak to Robert a cheater. He joins 322 00:18:01,760 --> 00:18:05,760 Speaker 2: us today from Silver Crest Asset Management. But in the 323 00:18:05,840 --> 00:18:10,280 Speaker 2: oddities of halfway through September, it's strange. Two weeks ago, 324 00:18:10,720 --> 00:18:15,680 Speaker 2: seventeen days ago, Robert Endless stories about seasonality. Woe is me, 325 00:18:15,880 --> 00:18:19,040 Speaker 2: September is terrible. Why are we going up with a 326 00:18:19,080 --> 00:18:23,159 Speaker 2: bid in the market. The Japanese market record high, the 327 00:18:23,280 --> 00:18:28,880 Speaker 2: Dow record high yesterday. Explain why given seasonality gloom. 328 00:18:29,320 --> 00:18:32,040 Speaker 7: Well, typically when everyone gets back to their proverbial desk 329 00:18:32,080 --> 00:18:34,200 Speaker 7: in September, they start to look at all the problems 330 00:18:34,240 --> 00:18:35,600 Speaker 7: that they missed in August. 331 00:18:35,760 --> 00:18:37,040 Speaker 2: And this year you've had a. 332 00:18:36,960 --> 00:18:39,639 Speaker 7: Different configuration, which is, if you start paying attention to 333 00:18:40,160 --> 00:18:42,919 Speaker 7: the fundamentals, the backdrop has actually improved. You know, the 334 00:18:42,960 --> 00:18:46,040 Speaker 7: last quarter earning season was well better than expected. The 335 00:18:46,080 --> 00:18:48,600 Speaker 7: outlook for the FED is well better than expected. You know, 336 00:18:48,680 --> 00:18:52,560 Speaker 7: we look at rate expectations for June of twenty six 337 00:18:52,680 --> 00:18:55,760 Speaker 7: as kind of you know, a focal point, and that's 338 00:18:55,760 --> 00:18:57,560 Speaker 7: come down over the course of this year from three 339 00:18:57,560 --> 00:18:59,320 Speaker 7: point nine to three. So that helps you on the 340 00:18:59,359 --> 00:19:03,719 Speaker 7: valuations side at earning season season fantastic. 341 00:19:04,040 --> 00:19:05,920 Speaker 2: I mean the stock market, David, I don't know if 342 00:19:05,920 --> 00:19:09,280 Speaker 2: you're aware of this, but the stock market equation is 343 00:19:09,320 --> 00:19:12,200 Speaker 2: two expecteds on each side of the equal side. We're 344 00:19:12,280 --> 00:19:17,280 Speaker 2: expecting out Robert Teeter, and we're like modeling in we're 345 00:19:17,359 --> 00:19:21,040 Speaker 2: guessing a good earning season, guessing a good earning season. 346 00:19:21,080 --> 00:19:23,800 Speaker 7: I think the remainder of the year kind of mid 347 00:19:23,840 --> 00:19:27,120 Speaker 7: to high single digits. The thing that has really interested 348 00:19:27,200 --> 00:19:29,640 Speaker 7: me is that almost every quarter, if you go back 349 00:19:29,680 --> 00:19:32,240 Speaker 7: over the past few years, you've had analysts doing a 350 00:19:32,280 --> 00:19:35,960 Speaker 7: great job estimating revenue and underestimating on the earning side. 351 00:19:36,080 --> 00:19:38,639 Speaker 7: And to me, that's really that productivity story that just 352 00:19:38,680 --> 00:19:42,240 Speaker 7: continues to build. So we look at margins now versus 353 00:19:42,240 --> 00:19:44,479 Speaker 7: margins in the few years leading into the pandemic as 354 00:19:44,560 --> 00:19:47,159 Speaker 7: kind of a comparison of normal to normal. They're higher 355 00:19:47,160 --> 00:19:49,960 Speaker 7: now a couple of sectors at peak margins other than 356 00:19:50,359 --> 00:19:53,280 Speaker 7: the very disrupted quarters, we're getting the job done. 357 00:19:53,440 --> 00:19:58,080 Speaker 2: Did you notice Robert Gurray has his own technical staff. Impressive. 358 00:19:58,119 --> 00:20:00,240 Speaker 2: I need that one's great. And they all have like 359 00:20:00,359 --> 00:20:04,320 Speaker 2: single names like Brocton just came in. Brockton has dug 360 00:20:04,400 --> 00:20:08,120 Speaker 2: out seats for Red Sox Yankees this weekend. I mean, 361 00:20:08,240 --> 00:20:10,000 Speaker 2: I mean, that's how they roll its. Is why I 362 00:20:10,000 --> 00:20:12,359 Speaker 2: don't have an AI agent. I don't need one are 363 00:20:12,359 --> 00:20:15,320 Speaker 2: they union? I mean, it's amazing how I don't have 364 00:20:15,359 --> 00:20:17,639 Speaker 2: a technical Steff, what was wrong with your computer? 365 00:20:17,840 --> 00:20:19,159 Speaker 5: I didn't have the clock up, I didn't know how 366 00:20:19,240 --> 00:20:21,000 Speaker 5: much you didn't know what to do with a sense 367 00:20:21,000 --> 00:20:23,960 Speaker 5: of Friday. And I don't want to just bumble ladies 368 00:20:24,000 --> 00:20:27,480 Speaker 5: and gentlemen, David Ger. You know, you use a word 369 00:20:27,480 --> 00:20:29,240 Speaker 5: that I've kind of been keeping track over the course 370 00:20:29,240 --> 00:20:31,600 Speaker 5: of the weekend. Tho's that's stagflation. Yes, you're not shying 371 00:20:31,600 --> 00:20:34,240 Speaker 5: away from using and help won't just help you have 372 00:20:34,560 --> 00:20:36,320 Speaker 5: me understand some how you're thinking about that in the 373 00:20:36,359 --> 00:20:38,560 Speaker 5: context that I was talking about AI agents a second ago. 374 00:20:38,760 --> 00:20:40,240 Speaker 5: How do you see that in this kind of broader 375 00:20:40,280 --> 00:20:42,800 Speaker 5: context of AI and productivity and and sort of where 376 00:20:42,800 --> 00:20:43,240 Speaker 5: we're heading. 377 00:20:43,320 --> 00:20:45,239 Speaker 7: Yeah, I think it's a very important issue. You know, 378 00:20:45,440 --> 00:20:47,480 Speaker 7: it's popped up a lot the last couple of weeks 379 00:20:47,520 --> 00:20:49,520 Speaker 7: just because of the direction of the data. So on 380 00:20:49,560 --> 00:20:51,960 Speaker 7: the stag side, the labor market has seemed a bit weak, 381 00:20:52,240 --> 00:20:54,320 Speaker 7: and on the inflation side, you continue to see the 382 00:20:54,400 --> 00:20:57,560 Speaker 7: numbers ticking just a little bit higher. So definitionally people 383 00:20:57,600 --> 00:21:00,360 Speaker 7: are starting to talk about stagflation. But I think when 384 00:21:00,359 --> 00:21:02,919 Speaker 7: you separate those two factors, and you look through the 385 00:21:02,920 --> 00:21:05,399 Speaker 7: AI theme really is playing out on both sides of 386 00:21:05,400 --> 00:21:08,760 Speaker 7: that equation. A lot of the labor market staleness, let's say, 387 00:21:08,800 --> 00:21:11,960 Speaker 7: I think is companies lagging headcount because they can be productive, 388 00:21:12,359 --> 00:21:15,120 Speaker 7: and on the inflation side, I think the numbers aren't 389 00:21:15,119 --> 00:21:17,800 Speaker 7: as bad as projected because companies are adaptating. 390 00:21:18,000 --> 00:21:20,320 Speaker 2: Keith Terry and yesterday from City Group, but he was 391 00:21:20,400 --> 00:21:23,320 Speaker 2: heated that the thing they learned of their tech conference 392 00:21:23,440 --> 00:21:26,480 Speaker 2: was the speed that this AI thing is moving at. 393 00:21:26,560 --> 00:21:29,840 Speaker 5: David just fascinated by one other line from that note, 394 00:21:29,840 --> 00:21:31,679 Speaker 5: that is that AI is likely helping to mitigate the 395 00:21:31,680 --> 00:21:35,160 Speaker 5: inflationary pulse from tariffs. Question we've had over the course 396 00:21:35,200 --> 00:21:36,640 Speaker 5: of the week is sort of what we know about 397 00:21:36,640 --> 00:21:38,920 Speaker 5: the effect that AI is going to have on productivity. 398 00:21:39,400 --> 00:21:40,320 Speaker 2: How confident are you? 399 00:21:40,359 --> 00:21:42,399 Speaker 5: What sense do you have of the weight it's going 400 00:21:42,400 --> 00:21:43,840 Speaker 5: to how it's going to improve things, and sort of 401 00:21:44,040 --> 00:21:45,840 Speaker 5: the weight it's going to have on the labor market broadly. 402 00:21:46,320 --> 00:21:48,360 Speaker 7: Well, there's not a whole lot of great data now, 403 00:21:48,400 --> 00:21:51,040 Speaker 7: but everything that we've seen, every study that we've looked at, 404 00:21:51,359 --> 00:21:55,040 Speaker 7: indicates that there is the potential for significant labor savings, 405 00:21:55,119 --> 00:21:57,280 Speaker 7: and pretty much every company that's been willing to talk 406 00:21:57,280 --> 00:21:59,439 Speaker 7: about it has mentioned that as well, but done so 407 00:21:59,480 --> 00:22:03,359 Speaker 7: in a veryious context of not we're replacing labor with 408 00:22:03,440 --> 00:22:05,760 Speaker 7: AI and laying people off, but rather we're going to 409 00:22:05,800 --> 00:22:08,280 Speaker 7: grow with slower headcount. And I think that's a really 410 00:22:08,320 --> 00:22:12,200 Speaker 7: positive trend for earnings. But the impact on inflation is similar. 411 00:22:12,840 --> 00:22:14,640 Speaker 7: When you get the tariff increase, you have a few 412 00:22:14,680 --> 00:22:16,399 Speaker 7: options of what you can do. You can pass it on, 413 00:22:16,480 --> 00:22:17,800 Speaker 7: you can eat it in margin, or you can go 414 00:22:17,880 --> 00:22:19,919 Speaker 7: back and say, is there something else we can do 415 00:22:20,119 --> 00:22:22,840 Speaker 7: to become more productive and offset in other areas? And 416 00:22:22,880 --> 00:22:24,200 Speaker 7: I think that's what companies are doing. 417 00:22:24,320 --> 00:22:26,679 Speaker 2: Robert Teeters, Silver Chris with us. We continue with and 418 00:22:26,760 --> 00:22:29,000 Speaker 2: we welcome all of you across the nation. On this 419 00:22:29,400 --> 00:22:32,320 Speaker 2: twelfth of September, Good Morning ninety nine and one FM 420 00:22:32,640 --> 00:22:36,159 Speaker 2: in Washington. Thanks to our Washington team. May she in 421 00:22:36,280 --> 00:22:39,720 Speaker 2: Awe for their assistance. Yesterday on the eleventh of September, 422 00:22:39,760 --> 00:22:43,000 Speaker 2: Good Morning ninety two nine FM and Boston on YouTube. 423 00:22:43,480 --> 00:22:46,479 Speaker 2: Thank you for the kickoff of September. Just wonderful growth 424 00:22:46,720 --> 00:22:50,760 Speaker 2: there is well. Subscribe to Bloomberg Podcasts. What do you 425 00:22:50,880 --> 00:22:56,000 Speaker 2: make is an equity animal of finely yield curve, compression 426 00:22:56,680 --> 00:23:02,240 Speaker 2: in real rates, inflation, adjusted rates, the residual. It's a calculation, folks, 427 00:23:02,400 --> 00:23:05,880 Speaker 2: We're not doing math on Friday. But finally the real 428 00:23:05,960 --> 00:23:09,560 Speaker 2: rate comes in. Yeah. I think it's hugely supportive to valuation. 429 00:23:09,760 --> 00:23:11,760 Speaker 7: So the way I explained the way I look at 430 00:23:11,840 --> 00:23:16,160 Speaker 7: valuation is number of factors that influence inflation, interest rates, sentiment, 431 00:23:16,280 --> 00:23:19,639 Speaker 7: domestic policy, global policy. Interest rate's a key input to 432 00:23:19,680 --> 00:23:22,880 Speaker 7: that equation. Of course, as that expected rate has come 433 00:23:22,960 --> 00:23:24,800 Speaker 7: down and we're looking for rate cuts, that gives you 434 00:23:24,920 --> 00:23:27,040 Speaker 7: a lot of support on the valuation side, a lot 435 00:23:27,040 --> 00:23:29,000 Speaker 7: of comfort to be able to look forward and say 436 00:23:29,200 --> 00:23:30,879 Speaker 7: we've got maybe a little bit of a tailwind to 437 00:23:30,960 --> 00:23:35,080 Speaker 7: the economy. And from a classic valuation asset allocation standpoint, 438 00:23:35,080 --> 00:23:38,440 Speaker 7: lower rates, higher valuation. I think that's a big plus. 439 00:23:38,640 --> 00:23:41,760 Speaker 7: It's something that has maybe gotten a bit stretched in 440 00:23:41,800 --> 00:23:44,120 Speaker 7: that even if you take out the nineties, we're sort 441 00:23:44,119 --> 00:23:47,080 Speaker 7: of at the high end of normal valuation ranges right now. 442 00:23:47,119 --> 00:23:50,760 Speaker 7: We counted it about the eight top eight percent overall 443 00:23:50,920 --> 00:23:53,479 Speaker 7: versus a long term history, and those higher numbers are 444 00:23:53,480 --> 00:23:56,200 Speaker 7: really are the nineties, so we're perhaps a bit stretched 445 00:23:56,200 --> 00:23:58,360 Speaker 7: on that metric. Further gains. I look to earnings. 446 00:23:59,040 --> 00:24:01,560 Speaker 5: We've got Tracy McMillian of Wells farg Win the Wings. 447 00:24:02,080 --> 00:24:05,000 Speaker 5: She writes about small caps, you write about small caps. 448 00:24:05,040 --> 00:24:07,119 Speaker 5: Let me set up here a debate among the two 449 00:24:07,160 --> 00:24:09,720 Speaker 5: of you. I guess a debate by proxy. You see 450 00:24:09,720 --> 00:24:11,560 Speaker 5: this as a moment when they are going to become 451 00:24:11,880 --> 00:24:13,600 Speaker 5: something investors should take a closer look at. 452 00:24:14,160 --> 00:24:14,520 Speaker 2: I do. 453 00:24:14,600 --> 00:24:16,439 Speaker 7: There have been a number of catalysts that we've been 454 00:24:16,480 --> 00:24:18,760 Speaker 7: waiting for for a while. Back at the end of 455 00:24:18,880 --> 00:24:21,000 Speaker 7: last year it looked like those catalysts were starting to 456 00:24:21,000 --> 00:24:23,399 Speaker 7: play out. They got delayed quite a bit, mostly because 457 00:24:23,400 --> 00:24:26,920 Speaker 7: of the noise around tariffs. First and foremost is interest rates. 458 00:24:26,960 --> 00:24:29,679 Speaker 7: There's two benefits to small caps there. One is the 459 00:24:29,720 --> 00:24:31,439 Speaker 7: interest rate costs that they have to pay, and the 460 00:24:31,480 --> 00:24:34,320 Speaker 7: second is the willingness of investors to participate in the 461 00:24:34,359 --> 00:24:37,359 Speaker 7: space given expected economic growth. Small caps do better when 462 00:24:37,440 --> 00:24:40,560 Speaker 7: growth is expected to improve. The second is M and A. 463 00:24:40,800 --> 00:24:42,840 Speaker 7: M and A, you know, really came out flat this year, 464 00:24:42,840 --> 00:24:44,480 Speaker 7: as started to pick up quite a bit in the 465 00:24:44,480 --> 00:24:46,360 Speaker 7: past few months. That helped small caps a lot. There 466 00:24:46,400 --> 00:24:49,119 Speaker 7: the target of those acquisitions. And then lastly, I think 467 00:24:49,160 --> 00:24:51,800 Speaker 7: these trends in productivity started out in large cap and 468 00:24:51,840 --> 00:24:53,960 Speaker 7: they will spread to small cap as companies start to 469 00:24:54,000 --> 00:24:56,119 Speaker 7: figure it out and the costs come down. So I 470 00:24:56,119 --> 00:24:58,199 Speaker 7: see those three catalysts starting to play out into the 471 00:24:58,200 --> 00:25:00,400 Speaker 7: course of next year. Small caps have got a pretty 472 00:25:00,440 --> 00:25:02,320 Speaker 7: nice bid here the past few weeks and expect it 473 00:25:02,359 --> 00:25:03,320 Speaker 7: to continue into next year. 474 00:25:03,680 --> 00:25:06,879 Speaker 2: Thirty the ETF the Russell two thousand ETFs up thirty 475 00:25:06,920 --> 00:25:09,800 Speaker 2: two percent from like early spring, like three cups of 476 00:25:09,840 --> 00:25:12,440 Speaker 2: coffee ago. Yeah, it's been been lagging for years. 477 00:25:12,440 --> 00:25:14,199 Speaker 7: So I kind of look at that first move as 478 00:25:14,280 --> 00:25:16,119 Speaker 7: the as the catch up move, and now it's time. 479 00:25:15,960 --> 00:25:18,119 Speaker 2: To get it out. Will said Robert you thank you 480 00:25:18,160 --> 00:25:22,280 Speaker 2: so much with silver Crest Asset managing. Stay with us 481 00:25:22,480 --> 00:25:25,720 Speaker 2: more from Bloomberg Surveillance coming up after this. 482 00:25:32,960 --> 00:25:36,560 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live 483 00:25:36,600 --> 00:25:39,760 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 484 00:25:39,840 --> 00:25:43,520 Speaker 1: Applecarplay and Android Auto with the Bloomberg Business app, or 485 00:25:43,680 --> 00:25:45,040 Speaker 1: watch us Live on YouTube. 486 00:25:45,119 --> 00:25:47,720 Speaker 2: Let's do the newspapers, Lisa Mateo here, Lisa, what do 487 00:25:47,760 --> 00:25:48,040 Speaker 2: you have? 488 00:25:48,280 --> 00:25:52,360 Speaker 8: Okay, David, are your kids teen years yet or not yet? 489 00:25:52,480 --> 00:25:56,480 Speaker 2: On the COSP on though, Felik, we're looking for the 490 00:25:56,520 --> 00:25:58,919 Speaker 2: first girl of gray hair. I'm waiting. 491 00:25:58,960 --> 00:26:01,159 Speaker 8: Do they do haul these things that the kids do 492 00:26:01,200 --> 00:26:02,000 Speaker 8: on social media? 493 00:26:02,119 --> 00:26:04,399 Speaker 5: I have heard of this term. Yes, I confess, I 494 00:26:04,400 --> 00:26:07,200 Speaker 5: don't know what it is exactly. Okay, let me explain. 495 00:26:07,320 --> 00:26:10,320 Speaker 8: Okay, So this is when teens go out right, they 496 00:26:10,440 --> 00:26:13,800 Speaker 8: do their shopping, they come back and they post videos 497 00:26:13,840 --> 00:26:16,679 Speaker 8: about all the stuff that they bought. Actually their parents 498 00:26:16,680 --> 00:26:18,720 Speaker 8: bought clarification. 499 00:26:19,280 --> 00:26:20,320 Speaker 2: Clarification on this. 500 00:26:20,640 --> 00:26:23,239 Speaker 8: So this is about back to school halls and how 501 00:26:23,280 --> 00:26:26,360 Speaker 8: they've come to another level. Kids are spending well, their 502 00:26:26,359 --> 00:26:29,040 Speaker 8: parents are spending hundreds of dollars because these kids want 503 00:26:29,040 --> 00:26:31,080 Speaker 8: to post all these videos. And it used to be 504 00:26:31,280 --> 00:26:34,280 Speaker 8: like my daughter did it, it was target, TJ max Yay, 505 00:26:34,440 --> 00:26:38,800 Speaker 8: you know, and now they're doing designer clothing, expensive beauty products, 506 00:26:38,800 --> 00:26:42,400 Speaker 8: trendy backpacks. They're spending like seven hundred dollars. And they 507 00:26:42,480 --> 00:26:46,119 Speaker 8: do it because if these videos go viral, then the 508 00:26:46,200 --> 00:26:49,200 Speaker 8: kids get these branding deals and you know, companies send them. 509 00:26:49,160 --> 00:26:53,680 Speaker 5: Free and maybe they get sixty eight lemon shirt for. 510 00:26:53,640 --> 00:26:58,320 Speaker 2: Free, for free. Yes, or we talked about the things 511 00:26:58,359 --> 00:27:01,480 Speaker 2: in the pack you talked about yesterday, the little boo 512 00:27:01,520 --> 00:27:02,879 Speaker 2: boo boo booths. 513 00:27:03,200 --> 00:27:07,960 Speaker 8: And say, yeah, they're they're out there, not as popular anymore. 514 00:27:08,160 --> 00:27:11,920 Speaker 8: They're going down. But apparently people you usuppose about those two. 515 00:27:11,960 --> 00:27:13,439 Speaker 8: So it was kind of like that thing doing their 516 00:27:13,480 --> 00:27:15,720 Speaker 8: la boo boo hall, not a should do a. 517 00:27:15,680 --> 00:27:21,760 Speaker 2: Hall video on LinkedIn. Tom Yeah, sure. 518 00:27:20,040 --> 00:27:22,680 Speaker 8: It's I actually did a costco hall once. 519 00:27:22,760 --> 00:27:23,640 Speaker 3: It was fantastic. 520 00:27:23,880 --> 00:27:26,840 Speaker 2: This this this bow tie found buried in the stack 521 00:27:26,960 --> 00:27:30,199 Speaker 2: this morning. This was back when mister mmes it was 522 00:27:30,240 --> 00:27:32,800 Speaker 2: like just horses, like in the nineteen cents. He made 523 00:27:32,800 --> 00:27:34,199 Speaker 2: it himself. We're still wearing it. 524 00:27:34,359 --> 00:27:34,520 Speaker 8: You know. 525 00:27:34,600 --> 00:27:36,679 Speaker 2: It's like it's like ancient. Next he has to do 526 00:27:36,720 --> 00:27:37,400 Speaker 2: the bow tie hall. 527 00:27:37,480 --> 00:27:40,120 Speaker 8: Okay, So we've heard about a lot of stories about 528 00:27:40,119 --> 00:27:43,120 Speaker 8: AI startup companies, right, but the Wall Street Journal says 529 00:27:43,160 --> 00:27:46,840 Speaker 8: the life of an AI founder it's not really glamorous. 530 00:27:46,920 --> 00:27:49,640 Speaker 8: It's no sleep, it's no booze, it's no fun. So 531 00:27:49,640 --> 00:27:51,840 Speaker 8: they spoke to a couple of AI founders, mostly in 532 00:27:51,840 --> 00:27:54,680 Speaker 8: their twenties. They basically live with their laptops, and they 533 00:27:54,720 --> 00:27:57,119 Speaker 8: said one guy said he puts in He put in 534 00:27:57,240 --> 00:28:01,040 Speaker 8: three ninety two hour weeks in a row. He went 535 00:28:01,080 --> 00:28:03,240 Speaker 8: a vacation once. You know, he wants to build this 536 00:28:03,320 --> 00:28:05,200 Speaker 8: ten billion dollar the company in ten years. 537 00:28:05,440 --> 00:28:08,360 Speaker 2: It's good about it. It's called investment banking and that's 538 00:28:08,400 --> 00:28:10,160 Speaker 2: what that's what you did. You're not shedding a tear. 539 00:28:11,960 --> 00:28:15,480 Speaker 2: I get really upset about this. I mean, how do 540 00:28:15,520 --> 00:28:18,200 Speaker 2: you learn this stuff in an AI with the incredible 541 00:28:18,280 --> 00:28:20,399 Speaker 2: coding skills they have. That's what it takes. 542 00:28:20,960 --> 00:28:23,720 Speaker 8: It's like and they say it's not all about the 543 00:28:23,720 --> 00:28:26,040 Speaker 8: financial they say, it's it's like a game like it's 544 00:28:26,080 --> 00:28:28,919 Speaker 8: this competitiveness as to who can be the most obsessed, 545 00:28:29,000 --> 00:28:30,640 Speaker 8: and that's what it kind of becomes. 546 00:28:30,800 --> 00:28:32,960 Speaker 2: I got an email from Pinterest. They got something new 547 00:28:33,000 --> 00:28:36,600 Speaker 2: out to They have no idea, your board, no idea? Yeah, 548 00:28:36,960 --> 00:28:40,560 Speaker 2: not interesting? Excuse me? Perplexity Its. 549 00:28:42,960 --> 00:28:45,880 Speaker 8: Next and the last one. This is just a look 550 00:28:45,920 --> 00:28:48,480 Speaker 8: over in London. Look back at the London tube strike, 551 00:28:48,560 --> 00:28:51,080 Speaker 8: right and how bad it got commuter struggling to get around. 552 00:28:51,360 --> 00:28:53,959 Speaker 8: So they were talking about you know, uber prices, rising, 553 00:28:54,160 --> 00:28:57,200 Speaker 8: bus lines stretching around. But the big thing were those 554 00:28:57,440 --> 00:29:01,160 Speaker 8: lime e bikes and it was the battle people were 555 00:29:01,280 --> 00:29:04,840 Speaker 8: sighting over these things. I mean, it was really bad. 556 00:29:05,640 --> 00:29:08,040 Speaker 8: Some people got complained. They call it lime bike leg 557 00:29:08,280 --> 00:29:10,320 Speaker 8: because it falls on you and it's like eighty six 558 00:29:10,360 --> 00:29:12,600 Speaker 8: pounds and you have people who've never ridden these things. 559 00:29:12,600 --> 00:29:14,600 Speaker 8: You know, they're in their heels, their worksuits, they're trying 560 00:29:14,600 --> 00:29:17,160 Speaker 8: to get to work now, and they're trying these bikes 561 00:29:17,160 --> 00:29:19,520 Speaker 8: for the first time, and it was just a disaster. 562 00:29:19,720 --> 00:29:22,040 Speaker 2: Some turmoil there and of course other parts of Europe 563 00:29:22,200 --> 00:29:25,320 Speaker 2: as well. Lisa Manteo, thanks so much. It is the newspapers. 564 00:29:25,800 --> 00:29:30,640 Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify, 565 00:29:30,760 --> 00:29:35,040 Speaker 1: and anywhere else you get your podcasts. 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