1 00:00:02,520 --> 00:00:06,960 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:07,760 --> 00:00:07,920 Speaker 2: John. 3 00:00:08,000 --> 00:00:09,640 Speaker 3: Great to have you back with us. There is a 4 00:00:09,640 --> 00:00:13,560 Speaker 3: lot coming out investors. There is this laundry list. What's 5 00:00:13,840 --> 00:00:16,880 Speaker 3: most important to you when you think about the investment 6 00:00:16,960 --> 00:00:19,640 Speaker 3: environment and what shapes your strategy right now? 7 00:00:20,520 --> 00:00:24,400 Speaker 2: Well, I'm just sicking keying off of this monetary policy discussion. 8 00:00:24,560 --> 00:00:27,640 Speaker 2: I just have to say that the big piano hanging 9 00:00:27,680 --> 00:00:30,200 Speaker 2: over our heads to me is a federal budget deficit. 10 00:00:30,680 --> 00:00:32,640 Speaker 2: And since I saw you last, we actually got some 11 00:00:32,640 --> 00:00:36,159 Speaker 2: pretty good news for fiscal twenty five that as a 12 00:00:36,240 --> 00:00:40,040 Speaker 2: percent of GDP, the budget deficit had fallen from six 13 00:00:40,080 --> 00:00:42,839 Speaker 2: and a half percent to five point nine percent. I've 14 00:00:42,880 --> 00:00:45,120 Speaker 2: been focusing very much on the year that we just 15 00:00:45,159 --> 00:00:49,480 Speaker 2: started on October first, because I think, you know, that's 16 00:00:49,560 --> 00:00:52,479 Speaker 2: the big risk, right the FED. You know, the federal 17 00:00:52,520 --> 00:00:55,840 Speaker 2: government has to borrow or pay a trillion dollars a 18 00:00:55,920 --> 00:00:58,920 Speaker 2: year as sure, the FED governor, you know, affects that. 19 00:00:59,040 --> 00:01:01,800 Speaker 2: But what the Marcus think matters a lot too. And 20 00:01:01,840 --> 00:01:04,959 Speaker 2: if we can reduce that pressure by having better finances, 21 00:01:05,000 --> 00:01:07,440 Speaker 2: that's really good news for the market, I think. 22 00:01:07,560 --> 00:01:11,400 Speaker 3: But that's not an argument for having not an independent FED, right, 23 00:01:11,440 --> 00:01:14,160 Speaker 3: you still want to Fed. No, No, that does monetary 24 00:01:14,200 --> 00:01:17,240 Speaker 3: policy according to inflationary pressures and labor pressure. 25 00:01:17,360 --> 00:01:20,480 Speaker 2: Right, but what what you know, these the wonky economists 26 00:01:20,480 --> 00:01:23,039 Speaker 2: on Wall Street don't want is to have so much 27 00:01:23,160 --> 00:01:26,399 Speaker 2: debt that you basically are forcing the FED to use 28 00:01:26,440 --> 00:01:29,919 Speaker 2: something like Japan did yield curve control or some really 29 00:01:29,959 --> 00:01:35,039 Speaker 2: extraordinary measures that would really be unwelcome. So, you know, 30 00:01:35,080 --> 00:01:37,840 Speaker 2: we can talk about the personalities and everything, but right now, 31 00:01:37,880 --> 00:01:40,759 Speaker 2: the direction of movement is good compared to coming into 32 00:01:40,800 --> 00:01:43,360 Speaker 2: the year where we had a lot of fiscal concerns 33 00:01:43,400 --> 00:01:45,280 Speaker 2: and the FED chair would have had a lot more 34 00:01:45,319 --> 00:01:45,920 Speaker 2: on this plate. 35 00:01:46,160 --> 00:01:49,000 Speaker 1: You when you were on with us last it was 36 00:01:49,040 --> 00:01:51,120 Speaker 1: about a month ago. It was just before the government shutdown, 37 00:01:51,120 --> 00:01:52,800 Speaker 1: and we asked you about whether or not a government 38 00:01:52,840 --> 00:01:55,559 Speaker 1: shutdown actually matters to markets. Well, here we are. 39 00:01:55,840 --> 00:01:57,840 Speaker 3: A month later, and it's amazing. 40 00:01:57,960 --> 00:02:00,000 Speaker 1: It is amazing. I mean, it's the second longest shutdown 41 00:02:00,360 --> 00:02:04,520 Speaker 1: in history entering you know, it's it's remarkable to see. 42 00:02:04,640 --> 00:02:06,840 Speaker 1: Do you you said it didn't matter, right, Do you 43 00:02:06,920 --> 00:02:07,520 Speaker 1: stand by it? 44 00:02:07,640 --> 00:02:09,720 Speaker 2: Yeah? I mean I don't think that there's any evidence 45 00:02:09,760 --> 00:02:13,120 Speaker 2: that has mattered. I think what's really worrisome though, is 46 00:02:13,160 --> 00:02:14,560 Speaker 2: the fact that what. 47 00:02:14,480 --> 00:02:18,119 Speaker 3: The dysfunctional government. You have a Washington of the government 48 00:02:18,600 --> 00:02:19,760 Speaker 3: that isn't working. 49 00:02:19,520 --> 00:02:23,079 Speaker 2: That they don't care, right, neither party really cares if 50 00:02:23,120 --> 00:02:25,600 Speaker 2: something bad is happening, if they feel like the other 51 00:02:25,639 --> 00:02:28,359 Speaker 2: party can get the blame. And again, you know, I 52 00:02:28,360 --> 00:02:31,080 Speaker 2: mean I only talk about the debt problem, but you 53 00:02:31,080 --> 00:02:33,760 Speaker 2: know that's really what we all worry about at the end, Like, 54 00:02:33,800 --> 00:02:36,640 Speaker 2: well we never solve social security? Will we cut Social 55 00:02:36,639 --> 00:02:39,839 Speaker 2: Security payments in twenty thirty three like we're scheduled to? Yeah, 56 00:02:39,880 --> 00:02:43,480 Speaker 2: I mean, you know, those are the longer term concerns. 57 00:02:44,360 --> 00:02:46,720 Speaker 3: When you look at this market environment. The other things 58 00:02:46,720 --> 00:02:48,560 Speaker 3: that are coming, and these are obviously the ones that 59 00:02:48,600 --> 00:02:51,120 Speaker 3: we just talked about, are super super big. But I 60 00:02:51,160 --> 00:02:53,560 Speaker 3: do think about our focus on you know, these mag 61 00:02:53,639 --> 00:02:56,440 Speaker 3: seven earnings. We get a big drop this week and 62 00:02:56,480 --> 00:03:00,320 Speaker 3: we'll learn once again whether these AI investments are off. 63 00:03:00,400 --> 00:03:01,920 Speaker 3: Last time around, we saw it with Medow and some 64 00:03:01,960 --> 00:03:05,520 Speaker 3: of the other big hyperscalers that these investments seem to 65 00:03:05,919 --> 00:03:08,680 Speaker 3: make sense at this point the AI trade. 66 00:03:08,720 --> 00:03:11,400 Speaker 2: Where are you on that it's going to AI? We 67 00:03:11,440 --> 00:03:15,600 Speaker 2: have a compute shortage that's very visible to the whole world. 68 00:03:16,440 --> 00:03:19,400 Speaker 2: And you know what's really interesting, I did some research 69 00:03:19,440 --> 00:03:22,400 Speaker 2: on this since we last talked, and open ai is 70 00:03:22,520 --> 00:03:25,600 Speaker 2: really emerging as the giant in this area. So they 71 00:03:25,600 --> 00:03:30,760 Speaker 2: have eight hundred million monthly active users. The next biggest, Gemini, 72 00:03:30,919 --> 00:03:34,040 Speaker 2: has four hundred and fifty but much more interesting. So, 73 00:03:34,160 --> 00:03:39,320 Speaker 2: your average website is now getting basically traffic coming from 74 00:03:39,320 --> 00:03:42,800 Speaker 2: the AI chats somewhere between let's call it one percent 75 00:03:42,840 --> 00:03:45,600 Speaker 2: at the low end and seventeen percent at the high end. 76 00:03:46,240 --> 00:03:49,120 Speaker 2: Of the traffic that's going to your average website like 77 00:03:49,160 --> 00:03:51,320 Speaker 2: the Bloomberg website or the van k website. 78 00:03:51,320 --> 00:03:52,320 Speaker 3: We're not average million. 79 00:03:55,640 --> 00:03:59,200 Speaker 2: I can't believe I said that. But of that traffic, 80 00:03:59,640 --> 00:04:04,120 Speaker 2: open is generating over ninety percent of that traffic. They 81 00:04:04,120 --> 00:04:08,400 Speaker 2: are completely dominating the other mag seven companies when it 82 00:04:08,440 --> 00:04:12,080 Speaker 2: comes to you know that now on the flip side, 83 00:04:12,280 --> 00:04:13,800 Speaker 2: they are trying to build out a ton of this 84 00:04:13,920 --> 00:04:16,680 Speaker 2: compute and they don't have the money, right. All the 85 00:04:16,720 --> 00:04:20,080 Speaker 2: other hyperscalers have a lot of revenue not public right, 86 00:04:20,160 --> 00:04:22,440 Speaker 2: and the revenue is only forty to fifty billion, so 87 00:04:22,600 --> 00:04:24,920 Speaker 2: and they want to spend hundreds of billions on compute. 88 00:04:24,960 --> 00:04:27,760 Speaker 2: So that's the one thing that I look at as 89 00:04:27,800 --> 00:04:30,960 Speaker 2: a potential weakness in this AI trade. But otherwise we've 90 00:04:30,960 --> 00:04:35,280 Speaker 2: got at least two calendar years of demand to deal with. 91 00:04:35,400 --> 00:04:39,240 Speaker 1: So you're not seeing ghosts of the late nineties tech 92 00:04:39,279 --> 00:04:39,800 Speaker 1: crash here. 93 00:04:40,640 --> 00:04:43,240 Speaker 2: As I said, the only vulnerability I see isn't this 94 00:04:43,279 --> 00:04:46,760 Speaker 2: sort of systemic thing. It's one company that's spending a 95 00:04:46,760 --> 00:04:49,320 Speaker 2: ton of money and so far they've been able to 96 00:04:49,360 --> 00:04:51,400 Speaker 2: raise it. Everyone else has got the revenue to cover 97 00:04:51,440 --> 00:04:54,160 Speaker 2: their spend, right, I mean, they've got the cash flow, and. 98 00:04:54,080 --> 00:04:56,400 Speaker 1: I'm sure in opening I can keep raising money. It 99 00:04:56,440 --> 00:04:58,960 Speaker 1: seems like there's plenty of demand or maybe even do 100 00:04:59,400 --> 00:05:01,120 Speaker 1: are you are you doing chat GPT right now? 101 00:05:01,200 --> 00:05:01,360 Speaker 2: Kara? 102 00:05:01,480 --> 00:05:04,599 Speaker 3: No, no no, I was actually no, no, no no, I've. 103 00:05:04,480 --> 00:05:05,560 Speaker 1: Just grabbed my phone. 104 00:05:05,600 --> 00:05:07,760 Speaker 3: I did describe my phone, which is such a no 105 00:05:07,760 --> 00:05:11,239 Speaker 3: noe when you're on air. Lisa Bramowitz, who we all 106 00:05:11,920 --> 00:05:15,080 Speaker 3: she's incredible on surveillance on the TV side, and she 107 00:05:15,080 --> 00:05:17,200 Speaker 3: said the Max seven stocks have accounted for almost half 108 00:05:17,240 --> 00:05:19,159 Speaker 3: of the S and P five hundred and fifteen percent 109 00:05:19,160 --> 00:05:23,039 Speaker 3: game this year. Microsoft, Alphabet, Amazon Meta expected to post 110 00:05:23,040 --> 00:05:25,280 Speaker 3: a combined three hundred and sixty billion CAPEX in their 111 00:05:25,320 --> 00:05:28,279 Speaker 3: current fiscal years and nearly four hundred and twenty billion 112 00:05:28,400 --> 00:05:33,479 Speaker 3: next year So what I'm just wondering is the market 113 00:05:33,760 --> 00:05:36,000 Speaker 3: we've talked about that we feel like in the earning 114 00:05:36,080 --> 00:05:40,520 Speaker 3: season we're seeing breath expand. But again, these companies are 115 00:05:40,560 --> 00:05:42,719 Speaker 3: still so important right to the trade. 116 00:05:42,800 --> 00:05:45,040 Speaker 2: Yeah, they're really I mean, we want to ask ourselves 117 00:05:45,080 --> 00:05:47,040 Speaker 2: why do they have such a high percent of the 118 00:05:47,080 --> 00:05:49,039 Speaker 2: S and P five hundred and we have an answer 119 00:05:49,240 --> 00:05:52,760 Speaker 2: because their profit dynamos. Not only is the revenue going up, 120 00:05:52,760 --> 00:05:56,160 Speaker 2: but they're caught their employee bases are flat if it's 121 00:05:56,279 --> 00:06:01,159 Speaker 2: not shrinking, so rising revenue, flat costs because one of 122 00:06:01,160 --> 00:06:03,720 Speaker 2: the big beneficiars obviously are software companies. 123 00:06:04,440 --> 00:06:05,839 Speaker 1: We have thirty seconds on gold. 124 00:06:05,960 --> 00:06:07,280 Speaker 3: This is where you are going to go there? 125 00:06:07,320 --> 00:06:07,480 Speaker 2: Yeah? 126 00:06:07,800 --> 00:06:08,960 Speaker 1: Is that where you were going to going to go? 127 00:06:09,240 --> 00:06:12,960 Speaker 1: Com so down eight percent from its peaks, from its peak, 128 00:06:13,520 --> 00:06:14,080 Speaker 1: further to go? 129 00:06:14,440 --> 00:06:17,240 Speaker 2: Yeah, twenty percent correction in the bull market would be 130 00:06:17,279 --> 00:06:17,920 Speaker 2: my base case. 131 00:06:17,960 --> 00:06:19,480 Speaker 1: That's your call. Thirty five dollars? 132 00:06:20,040 --> 00:06:22,240 Speaker 3: Yes, okay, still not a bad year, right. 133 00:06:22,560 --> 00:06:24,880 Speaker 2: Great, great year. I think the question is, you know, 134 00:06:24,920 --> 00:06:28,039 Speaker 2: everyone's impatient already looking at their phones and during interviews, 135 00:06:28,440 --> 00:06:32,160 Speaker 2: the question is how long does gold consolidate? Right? 136 00:06:32,520 --> 00:06:33,640 Speaker 3: We're the goodness of the show. 137 00:06:34,000 --> 00:06:37,680 Speaker 2: Twelve A whole twelve months of consolidation would bore the market. 138 00:06:38,040 --> 00:06:40,599 Speaker 2: So we may have one of those situations, but still 139 00:06:40,640 --> 00:06:43,080 Speaker 2: I you know, we like it long term, you know, 140 00:06:43,160 --> 00:06:44,039 Speaker 2: for the next decade. 141 00:06:44,279 --> 00:06:46,400 Speaker 3: Always fund when you join us, come back soon again. 142 00:06:47,240 --> 00:06:49,440 Speaker 3: Jan van Ki is, of course, chief executive officer of 143 00:06:49,480 --> 00:06:51,080 Speaker 3: venex joining us here in studio.