Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: John.
Speaker 3: Great to have you back with us. There is a
Speaker 3: lot coming out investors. There is this laundry list. What's
Speaker 3: most important to you when you think about the investment
Speaker 3: environment and what shapes your strategy right now?
Speaker 2: Well, I'm just sicking keying off of this monetary policy discussion.
Speaker 2: I just have to say that the big piano hanging
Speaker 2: over our heads to me is a federal budget deficit.
Speaker 2: And since I saw you last, we actually got some
Speaker 2: pretty good news for fiscal twenty five that as a
Speaker 2: percent of GDP, the budget deficit had fallen from six
Speaker 2: and a half percent to five point nine percent. I've
Speaker 2: been focusing very much on the year that we just
Speaker 2: started on October first, because I think, you know, that's
Speaker 2: the big risk, right the FED. You know, the federal
Speaker 2: government has to borrow or pay a trillion dollars a
Speaker 2: year as sure, the FED governor, you know, affects that.
Speaker 2: But what the Marcus think matters a lot too. And
Speaker 2: if we can reduce that pressure by having better finances,
Speaker 2: that's really good news for the market, I think.
Speaker 3: But that's not an argument for having not an independent FED, right,
Speaker 3: you still want to Fed. No, No, that does monetary
Speaker 3: policy according to inflationary pressures and labor pressure.
Speaker 2: Right, but what what you know, these the wonky economists
Speaker 2: on Wall Street don't want is to have so much
Speaker 2: debt that you basically are forcing the FED to use
Speaker 2: something like Japan did yield curve control or some really
Speaker 2: extraordinary measures that would really be unwelcome. So, you know,
Speaker 2: we can talk about the personalities and everything, but right now,
Speaker 2: the direction of movement is good compared to coming into
Speaker 2: the year where we had a lot of fiscal concerns
Speaker 2: and the FED chair would have had a lot more
Speaker 2: on this plate.
Speaker 1: You when you were on with us last it was
Speaker 1: about a month ago. It was just before the government shutdown,
Speaker 1: and we asked you about whether or not a government
Speaker 1: shutdown actually matters to markets. Well, here we are.
Speaker 3: A month later, and it's amazing.
Speaker 1: It is amazing. I mean, it's the second longest shutdown
Speaker 1: in history entering you know, it's it's remarkable to see.
Speaker 1: Do you you said it didn't matter, right, Do you
Speaker 1: stand by it?
Speaker 2: Yeah? I mean I don't think that there's any evidence
Speaker 2: that has mattered. I think what's really worrisome though, is
Speaker 2: the fact that what.
Speaker 3: The dysfunctional government. You have a Washington of the government
Speaker 3: that isn't working.
Speaker 2: That they don't care, right, neither party really cares if
Speaker 2: something bad is happening, if they feel like the other
Speaker 2: party can get the blame. And again, you know, I
Speaker 2: mean I only talk about the debt problem, but you
Speaker 2: know that's really what we all worry about at the end, Like,
Speaker 2: well we never solve social security? Will we cut Social
Speaker 2: Security payments in twenty thirty three like we're scheduled to? Yeah,
Speaker 2: I mean, you know, those are the longer term concerns.
Speaker 3: When you look at this market environment. The other things
Speaker 3: that are coming, and these are obviously the ones that
Speaker 3: we just talked about, are super super big. But I
Speaker 3: do think about our focus on you know, these mag
Speaker 3: seven earnings. We get a big drop this week and
Speaker 3: we'll learn once again whether these AI investments are off.
Speaker 3: Last time around, we saw it with Medow and some
Speaker 3: of the other big hyperscalers that these investments seem to
Speaker 3: make sense at this point the AI trade.
Speaker 2: Where are you on that it's going to AI? We
Speaker 2: have a compute shortage that's very visible to the whole world.
Speaker 2: And you know what's really interesting, I did some research
Speaker 2: on this since we last talked, and open ai is
Speaker 2: really emerging as the giant in this area. So they
Speaker 2: have eight hundred million monthly active users. The next biggest, Gemini,
Speaker 2: has four hundred and fifty but much more interesting. So,
Speaker 2: your average website is now getting basically traffic coming from
Speaker 2: the AI chats somewhere between let's call it one percent
Speaker 2: at the low end and seventeen percent at the high end.
Speaker 2: Of the traffic that's going to your average website like
Speaker 2: the Bloomberg website or the van k website.
Speaker 3: We're not average million.
Speaker 2: I can't believe I said that. But of that traffic,
Speaker 2: open is generating over ninety percent of that traffic. They
Speaker 2: are completely dominating the other mag seven companies when it
Speaker 2: comes to you know that now on the flip side,
Speaker 2: they are trying to build out a ton of this
Speaker 2: compute and they don't have the money, right. All the
Speaker 2: other hyperscalers have a lot of revenue not public right,
Speaker 2: and the revenue is only forty to fifty billion, so
Speaker 2: and they want to spend hundreds of billions on compute.
Speaker 2: So that's the one thing that I look at as
Speaker 2: a potential weakness in this AI trade. But otherwise we've
Speaker 2: got at least two calendar years of demand to deal with.
Speaker 1: So you're not seeing ghosts of the late nineties tech
Speaker 1: crash here.
Speaker 2: As I said, the only vulnerability I see isn't this
Speaker 2: sort of systemic thing. It's one company that's spending a
Speaker 2: ton of money and so far they've been able to
Speaker 2: raise it. Everyone else has got the revenue to cover
Speaker 2: their spend, right, I mean, they've got the cash flow, and.
Speaker 1: I'm sure in opening I can keep raising money. It
Speaker 1: seems like there's plenty of demand or maybe even do
Speaker 1: are you are you doing chat GPT right now?
Speaker 2: Kara?
Speaker 3: No, no no, I was actually no, no, no no, I've.
Speaker 1: Just grabbed my phone.
Speaker 3: I did describe my phone, which is such a no
Speaker 3: noe when you're on air. Lisa Bramowitz, who we all
Speaker 3: she's incredible on surveillance on the TV side, and she
Speaker 3: said the Max seven stocks have accounted for almost half
Speaker 3: of the S and P five hundred and fifteen percent
Speaker 3: game this year. Microsoft, Alphabet, Amazon Meta expected to post
Speaker 3: a combined three hundred and sixty billion CAPEX in their
Speaker 3: current fiscal years and nearly four hundred and twenty billion
Speaker 3: next year So what I'm just wondering is the market
Speaker 3: we've talked about that we feel like in the earning
Speaker 3: season we're seeing breath expand. But again, these companies are
Speaker 3: still so important right to the trade.
Speaker 2: Yeah, they're really I mean, we want to ask ourselves
Speaker 2: why do they have such a high percent of the
Speaker 2: S and P five hundred and we have an answer
Speaker 2: because their profit dynamos. Not only is the revenue going up,
Speaker 2: but they're caught their employee bases are flat if it's
Speaker 2: not shrinking, so rising revenue, flat costs because one of
Speaker 2: the big beneficiars obviously are software companies.
Speaker 1: We have thirty seconds on gold.
Speaker 3: This is where you are going to go there?
Speaker 2: Yeah?
Speaker 1: Is that where you were going to going to go?
Speaker 1: Com so down eight percent from its peaks, from its peak,
Speaker 1: further to go?
Speaker 2: Yeah, twenty percent correction in the bull market would be
Speaker 2: my base case.
Speaker 1: That's your call. Thirty five dollars?
Speaker 3: Yes, okay, still not a bad year, right.
Speaker 2: Great, great year. I think the question is, you know,
Speaker 2: everyone's impatient already looking at their phones and during interviews,
Speaker 2: the question is how long does gold consolidate? Right?
Speaker 3: We're the goodness of the show.
Speaker 2: Twelve A whole twelve months of consolidation would bore the market.
Speaker 2: So we may have one of those situations, but still
Speaker 2: I you know, we like it long term, you know,
Speaker 2: for the next decade.
Speaker 3: Always fund when you join us, come back soon again.
Speaker 3: Jan van Ki is, of course, chief executive officer of
Speaker 3: venex joining us here in studio.