WEBVTT - Surveillance: Michele sees recession by year end 0:00:05.120 --> 0:00:07.119 This is the Bloomberg Surveillance Podcast. 0:00:07.160 --> 0:00:11.039 I'm Tom Keene, along with Jonathan Farrell and Lisa Abramowitz. 0:00:11.280 --> 0:00:15.760 Join us each day for insight from the best an economics, geopolitics, 0:00:15.760 --> 0:00:20.720 finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, 0:00:20.960 --> 0:00:25.400 Spotify and anywhere you get your podcasts, and always on 0:00:25.520 --> 0:00:29.840 Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business app. 0:00:29.960 --> 0:00:33.199 Slew A FED speak today Collins Bouman, Harker Jefferson on 0:00:33.280 --> 0:00:35.639 Tap Cleveland FED, President of Rundamessa, speaking to the ft 0:00:35.760 --> 0:00:38.479 and saying, quote, I don't really see a compelling reason 0:00:38.520 --> 0:00:41.120 to pause. I would see more of a compelling case 0:00:41.360 --> 0:00:44.360 for bringing rates up and then holding for a while 0:00:44.400 --> 0:00:47.320 until you get less uncertain about where the economy is going. 0:00:47.680 --> 0:00:49.800 There's some good news. Bob Michael takes the other side 0:00:49.800 --> 0:00:52.559 of that of JP Morgan Asset Management, saying that we 0:00:52.600 --> 0:00:54.160 are going to get a pause. We expect the FED 0:00:54.160 --> 0:00:57.120 to pause hiking rates at the June f MC meeting 0:00:57.200 --> 0:00:59.240 and believe we have seen the last rate hike for 0:00:59.280 --> 0:01:01.280 this cycle. And the good news for Bob Michael is 0:01:01.560 --> 0:01:03.880 it sounds like his boss agrees with him to listen. 0:01:05.680 --> 0:01:08.360 You know, my simple view is that you know, the 0:01:08.880 --> 0:01:10.680 the right to pause at this point has been a 0:01:10.720 --> 0:01:14.160 big increase, you know, five hundred basis points, so take 0:01:14.200 --> 0:01:17.240 a pause. But I do think it's possible they're going 0:01:17.360 --> 0:01:18.160 to raise a little bit more. 0:01:19.400 --> 0:01:19.880 Take a pull. 0:01:20.040 --> 0:01:22.319 It sounds like a fish ready to go out. 0:01:22.640 --> 0:01:26.520 He looks secretary right. Okay, he looks melon like ready 0:01:26.520 --> 0:01:27.400 to sell the country. 0:01:27.480 --> 0:01:30.840 Andrew Mellon, Yeah, did you see Bob Michael is under secretary? 0:01:30.840 --> 0:01:32.080 I can see see. 0:01:31.920 --> 0:01:33.440 That joining us now, Robert Michael. 0:01:33.440 --> 0:01:36.959 Bob Michael had a fixed income JP Morgan Asset Management. 0:01:37.000 --> 0:01:39.040 And I want to go back to nineteen eighty four. 0:01:39.120 --> 0:01:43.039 You're a youngling at bankers Trust. Ian Rush is with Liverpool. 0:01:43.040 --> 0:01:45.360 They're doing better than good. This is way way back. 0:01:45.680 --> 0:01:48.320 And the basic idea is we used to clip coupons. 0:01:48.560 --> 0:01:51.320 Would you be sitting with mister Diamond now saying that 0:01:51.360 --> 0:01:53.880 we can make coupon and total return? 0:01:53.960 --> 0:01:54.120 Now? 0:01:54.160 --> 0:01:56.560 Are we going to see price up yeeld down in 0:01:56.600 --> 0:01:57.960 a basic bond portfolio. 0:01:58.240 --> 0:02:00.720 I can't tell you how relieved I am not to 0:02:00.760 --> 0:02:03.040 hear him tell me that I should be preparing for 0:02:03.080 --> 0:02:08.040 seven percent. So I'll take what I can from him 0:02:08.080 --> 0:02:10.760 that we're due for a pause and that should relax 0:02:10.800 --> 0:02:14.480 the markets. No, one hundred percent. This is the time 0:02:14.800 --> 0:02:19.959 where you clip coupons because yields have reset materially higher 0:02:19.960 --> 0:02:22.959 from where they were at the end of twenty twenty one. Actually, 0:02:23.000 --> 0:02:25.079 when you look at real yields in the bond market, 0:02:25.320 --> 0:02:29.280 they're the highest level going back fifteen seventeen years. We're 0:02:29.360 --> 0:02:33.000 going to get some capital appreciation on top of the 0:02:33.080 --> 0:02:37.000 coupon clipping. I'm looking for close to double digit returns 0:02:37.480 --> 0:02:39.760 on the Bloomberg aggregate over the next year. 0:02:39.840 --> 0:02:41.079 This is the key statement. 0:02:41.120 --> 0:02:43.320 And what's important about this is mister Diamond back to 0:02:43.360 --> 0:02:44.680 bank when actually knows what an. 0:02:44.720 --> 0:02:47.000 SMP blue book is. I mean, you have a blue 0:02:47.000 --> 0:02:48.160 book and you have bonds in it. 0:02:48.240 --> 0:02:50.840 You go through and you try to buy bonds for 0:02:51.120 --> 0:02:53.240 price up, yield down. 0:02:53.440 --> 0:02:55.440 Which kind of bonds will give you. 0:02:55.400 --> 0:02:58.280 The best pop there to get your double digit return. 0:02:58.680 --> 0:03:04.160 Well, we're currently intermediate government bonds look good to us, 0:03:04.200 --> 0:03:07.440 So we're thinking the five year treasury. We feel we've 0:03:07.480 --> 0:03:11.080 been given a gift in here with the backup in yields. Sure, 0:03:11.080 --> 0:03:13.359 we swung a little bit low and yields the market 0:03:13.400 --> 0:03:17.280 got all excited. Now it's going the other way. We 0:03:17.360 --> 0:03:19.880 do think that we're going to see three percent across 0:03:19.919 --> 0:03:22.840 the coupon curve by the end of the summer, and 0:03:22.880 --> 0:03:25.880 the five year seems to be the sweet spot, so 0:03:25.919 --> 0:03:28.880 we like that, and then we like high quality credit, 0:03:29.000 --> 0:03:31.960 so for sure we're going into investment grade corporates. We're 0:03:32.000 --> 0:03:36.080 actually starting to see a lot of overseas investors returning 0:03:36.120 --> 0:03:40.119 to the US investment grade corporate bond market. They're attracted 0:03:40.160 --> 0:03:41.600 by the yields there. 0:03:41.800 --> 0:03:45.080 The yields you jentlemor folds right into the disinflation deflationary 0:03:45.160 --> 0:03:45.960 Chinese impulse. 0:03:46.800 --> 0:03:48.600 Some of this you would state just on the yield 0:03:48.600 --> 0:03:51.080 curve for people who aren't familiar with what drives different 0:03:51.080 --> 0:03:53.200 parts of the yield curve. What is special about a 0:03:53.200 --> 0:03:56.000 five year maturity? Why is that the sweet spot for you? 0:03:56.960 --> 0:03:59.480 Because it gives you a couple of things. One, it 0:04:00.040 --> 0:04:04.240 gives you a reasonably high level of yield. Sure it's 0:04:04.320 --> 0:04:07.560 not cash. Cash is sitting out there at over five percent, 0:04:08.000 --> 0:04:10.920 but that's the cash trap. At this part of the cycle. 0:04:11.000 --> 0:04:13.240 You put money there and then a year from now 0:04:13.280 --> 0:04:17.320 it's gone. Your cash run rate is probably below four 0:04:17.360 --> 0:04:21.560 percent a year from now, so you've lost all of that, 0:04:21.760 --> 0:04:25.120 and then the yell curve starts to adjust to a 0:04:25.160 --> 0:04:28.640 central bank that's cutting rates again. We still think we're 0:04:28.680 --> 0:04:30.760 going to be in recession by the end of the year. 0:04:31.160 --> 0:04:34.800 Everything that's happened so far this year continues to tell 0:04:34.920 --> 0:04:38.599 us end of the year recession and first FED rate 0:04:38.680 --> 0:04:41.800 cut in September, and I know the recent data throw 0:04:41.920 --> 0:04:45.280 some of that into speculation. Not in our book. Things 0:04:45.279 --> 0:04:47.839 are playing out the way they should exactly. 0:04:48.000 --> 0:04:50.680 So five year in the treasury market one got it, okay, 0:04:51.160 --> 0:04:53.960 ig ton of amount coming from abroad, got that, okay. 0:04:54.720 --> 0:04:58.280 High yield you've got within your call a rate cut 0:04:58.360 --> 0:05:01.560 coal in September. Does it make sense to be buying 0:05:01.640 --> 0:05:04.320 high yield and taking more more credit risk at a 0:05:04.320 --> 0:05:05.960 time whether Fed's going to be cutting rights because you 0:05:06.000 --> 0:05:07.479 anticipate the economy is going to weaken. 0:05:08.360 --> 0:05:12.359 So I'm listening to the conversation at the start about 0:05:12.400 --> 0:05:17.080 the equity market and how we're isolating. Nvidia and a 0:05:17.080 --> 0:05:20.560 couple things have driven this rally, but there are other 0:05:20.640 --> 0:05:21.839 things that are lagging. 0:05:22.120 --> 0:05:22.240 Now. 0:05:22.240 --> 0:05:25.440 I'm a bond guy, which makes me an equity market expert, 0:05:26.560 --> 0:05:30.040 but I see a lot of I see a lot 0:05:30.040 --> 0:05:33.280 of Yeah, exactly, I see a lot of what's going 0:05:33.279 --> 0:05:35.320 on the equity market, in the high yield market, and 0:05:35.360 --> 0:05:38.839 we've parsed through all of this, and what you're looking 0:05:38.880 --> 0:05:43.200 at is the triple C universe is a thousand basis 0:05:43.240 --> 0:05:47.560 points over, so it's already coming under pressure, and the 0:05:47.640 --> 0:05:50.719 double B universe is in the three hundreds over, so 0:05:50.839 --> 0:05:54.839 that differentiation is already occurring. This is very different than 0:05:54.880 --> 0:05:58.520 where we were back in August September. Whenever we hit 0:05:58.560 --> 0:06:01.800 six hundred basis points. Oh, for pretty much most of 0:06:01.839 --> 0:06:05.240 the market was about six hundred basis points over. That 0:06:05.400 --> 0:06:08.760 was probably the time to take a shot over the 0:06:08.839 --> 0:06:11.960 near term. Now is not. Now the market is telling 0:06:12.000 --> 0:06:16.960 you there is differentiation beneath the surface. Investors are seeing 0:06:17.080 --> 0:06:19.840 cracks forming and they're trying to get out of the way. 0:06:20.000 --> 0:06:21.800 You said that things are playing out as they should 0:06:22.040 --> 0:06:23.600 to get to a recession by the end of the 0:06:23.720 --> 0:06:27.120 year and to get a fed to cut rates by September. 0:06:27.279 --> 0:06:29.240 Does that mean that we're in this sort of inflection 0:06:29.279 --> 0:06:31.640 point that we're going to see a rapid deceleration in 0:06:31.680 --> 0:06:33.440 some of the economic data in a way that we 0:06:33.520 --> 0:06:35.760 just haven't yet with all the upside surprises. 0:06:36.960 --> 0:06:41.320 Absolutely, and we've talked about this before, from the last 0:06:41.560 --> 0:06:46.440 FED rate hike until recession, it's historically averaged about a 0:06:46.520 --> 0:06:50.920 thirteen month period, so that long and variable takes time. 0:06:51.320 --> 0:06:54.479 We're now getting into a year and a quarter. We're 0:06:54.520 --> 0:06:56.880 going to start hitting the window when the four to 0:06:56.880 --> 0:07:00.520 seventy five basis point rate hikes start to hit. And 0:07:00.560 --> 0:07:04.839 you're already hearing about the funding pressure to businesses and 0:07:04.880 --> 0:07:08.400 households at a higher rate level, it's causing them to 0:07:08.440 --> 0:07:12.280 rethink things, and then the higher cost of everything that's 0:07:12.360 --> 0:07:15.960 causing them to rededicate where their spending goes to. So 0:07:16.480 --> 0:07:19.720 that catch up is coming. And some of the inflation 0:07:19.880 --> 0:07:24.760 data we're looking at Europe overnight or this morning came 0:07:24.800 --> 0:07:27.160 in so often. I know Italy surprised a little bit 0:07:27.200 --> 0:07:29.640 to the upside, but everything seems to be slowing down. 0:07:29.960 --> 0:07:32.720 The one thing that seems to have gone under the radar. 0:07:32.880 --> 0:07:36.200 Forget about what's going on in China. Look at the 0:07:36.240 --> 0:07:41.160 Bloomberg Commodities Index. It was one hundred and forty ish 0:07:41.200 --> 0:07:44.520 about a year ago. It's below one hundred now, and 0:07:44.560 --> 0:07:48.400 the trend is diving south at a rate that you 0:07:48.680 --> 0:07:52.840 only see headed into recession. So the weakness is there, 0:07:53.240 --> 0:07:55.360 the cumulative and lagged or catching up. 0:07:55.480 --> 0:07:57.559 This is important. A lot of people push back against 0:07:57.600 --> 0:08:00.440 commodities being a real signal this time around. This time 0:08:00.520 --> 0:08:01.960 is different with a lot of different things than I 0:08:01.960 --> 0:08:02.320 could see. 0:08:02.480 --> 0:08:04.360 Right, you don't use them for anything. 0:08:04.080 --> 0:08:05.040 But hold on a second. 0:08:05.080 --> 0:08:05.920 But here's the issue. 0:08:05.920 --> 0:08:09.120 People saying that because of China and the inability to 0:08:09.120 --> 0:08:11.880 get that right, because of Russia and their willingness to 0:08:11.920 --> 0:08:14.440 pump much more than their allotted amount to try to 0:08:14.440 --> 0:08:16.560 get money to fund the war. Because of all of 0:08:16.560 --> 0:08:19.280 these issues, you're seeing distortions in the commodity market that 0:08:19.360 --> 0:08:21.280 do not comply with what they're seeing on the ground. 0:08:21.600 --> 0:08:23.880 How much are you using this as a key signal 0:08:23.880 --> 0:08:24.960 saying or where we should be? 0:08:26.080 --> 0:08:30.920 Well, you still have very low unemployment in the US. 0:08:30.960 --> 0:08:35.000 Everyone's talking about three and a half percent unemployment. Everyone's 0:08:35.040 --> 0:08:38.720 talking about wages have gone up and that there's a 0:08:38.800 --> 0:08:44.120 stickiness to core inflation. Everyone's talking about consumers want to 0:08:44.160 --> 0:08:47.520 spend on travel and leisure so that the demand is there. 0:08:47.800 --> 0:08:50.600 But if the demand is at a high enough level, 0:08:51.000 --> 0:08:55.720 you are going to see commodities prices pushed higher. People 0:08:55.800 --> 0:08:59.600 are spending on things. In buying things, it's just not 0:08:59.760 --> 0:09:03.840 a rate that sustains itself with the amount of supply. 0:09:03.920 --> 0:09:06.439 We're now seeing the bottlenecks have cleared. 0:09:06.800 --> 0:09:09.439 Well, this is awesome by Michael jpmorganism management. 0:09:19.520 --> 0:09:22.040 We're going to go to the congressman from in between 0:09:22.200 --> 0:09:25.800 the Cubs and the Brewers, Jamesville, Wisconsin. Brian Style joins 0:09:25.880 --> 0:09:28.719 us now Republican from Wisconsin with all that heritage of 0:09:28.800 --> 0:09:32.720 former Speaker Paul Ryan. Congressman, I'm going to go back 0:09:32.760 --> 0:09:37.040 to the election of twenty eighteen. You won with fifty one, 0:09:37.240 --> 0:09:39.720 maybe fifty two percent of the vote. You've done better 0:09:39.760 --> 0:09:43.760 in recent elections, doing better like sixty percent or whatever. 0:09:44.080 --> 0:09:49.840 I want you to comment on the vociferous conservative Republicans 0:09:50.280 --> 0:09:53.160 and what they're doing to Republicans who are more middle 0:09:53.200 --> 0:09:56.800 of the road. What is the damage being done by 0:09:57.360 --> 0:10:01.360 the strident Republicans to the oh more in the middle 0:10:01.400 --> 0:10:01.880 of the road. 0:10:03.520 --> 0:10:04.800 This vote is going to be a little bit of 0:10:04.800 --> 0:10:07.000 a vote of strange bedfellows. I think what you're going 0:10:07.080 --> 0:10:08.480 to see is, at the end of the day, there's 0:10:08.520 --> 0:10:11.120 some members that are going to allow perfection to be 0:10:11.200 --> 0:10:13.520 the enemy of the good all of us, I think 0:10:13.559 --> 0:10:15.480 would like to see us get our true fiscal house 0:10:15.480 --> 0:10:17.640 in order in the United States. This bill is only 0:10:17.640 --> 0:10:19.720 a step in the right direction, but it's a step 0:10:19.720 --> 0:10:21.880 in the right direction. It's the largest spending cuts that 0:10:21.880 --> 0:10:24.120 we're going to ever see in the United States of America. 0:10:24.240 --> 0:10:26.760 It has work requirements, it helps workers get back to work, 0:10:26.800 --> 0:10:29.160 and it does all this without raising taxes. And so 0:10:29.200 --> 0:10:30.559 at the end of the day, there's some people that 0:10:30.640 --> 0:10:32.439 would like to see a perfect bill, but I think 0:10:32.440 --> 0:10:33.960 if we have a good bill, you got to vote 0:10:33.960 --> 0:10:34.160 for it. 0:10:34.440 --> 0:10:37.480 Congressman Jim Garretty in the Washington Post had a brilliant 0:10:37.520 --> 0:10:41.319 half paragraph yesterday which said, Look, the Republicans have a 0:10:41.440 --> 0:10:45.760 narrow majority in the House. Can you expand that power 0:10:45.840 --> 0:10:50.040 in Washington with President Trump? After this budget debate? Can 0:10:50.800 --> 0:10:54.280 you get there with Donald Trump November of twenty twenty 0:10:54.320 --> 0:10:58.200 four to move beyond a narrow majority in the House. 0:11:00.080 --> 0:11:02.000 We're going to see now to the election in twenty 0:11:02.080 --> 0:11:04.400 twenty four is a lot of voices coming to the table, 0:11:04.440 --> 0:11:06.240 and I think the one that's going to be successful 0:11:06.360 --> 0:11:08.760 is the candidate that's going to talk about the future 0:11:08.800 --> 0:11:10.640 of the United States of America, about how we're going 0:11:10.679 --> 0:11:13.480 to grow the economy and address the fiscal situation that 0:11:13.520 --> 0:11:15.199 we're in. We're going to have a number of voices 0:11:15.320 --> 0:11:17.200 at the table. I don't think that's a bad thing, 0:11:17.480 --> 0:11:20.480 because I think we need to dramatically change course in Washington, 0:11:20.760 --> 0:11:24.360 in particular, following two years of dramatic increases of spending. 0:11:24.600 --> 0:11:26.400 A lot of people talk about the real discussion being 0:11:26.559 --> 0:11:29.720 entitlements and whether Social Security checks are going to have 0:11:29.800 --> 0:11:32.920 to be reduced, whether Medicare and Medicaid are going to 0:11:32.960 --> 0:11:36.319 have to receive less funding. Are you putting those things 0:11:36.360 --> 0:11:40.439 on the table in your discussion about further fiscal restraint. 0:11:41.679 --> 0:11:44.280 In this bill, we're only really dealing with eleven percent 0:11:44.360 --> 0:11:46.520 of the federal budget, and dealing with eleven percent, we 0:11:46.600 --> 0:11:49.120 got one point five trillion dollars of savings for the 0:11:49.160 --> 0:11:51.480 American people. But you're right, at the end of the day, 0:11:51.520 --> 0:11:54.679 it's the entitlement programs that are driving costs higher. This 0:11:54.760 --> 0:11:57.320 is going to be an opportunity here to bring Democrats 0:11:57.360 --> 0:11:59.800 and Republicans to the table to address those programs and 0:12:00.080 --> 0:12:03.520 really protect in particular social Security and Medicare for generations 0:12:03.559 --> 0:12:06.280 to come. But that's going to require a bipartisan approach 0:12:06.280 --> 0:12:08.880 of folks coming to the table, encourage of candidates who 0:12:08.920 --> 0:12:11.520 are running for president in twenty twenty four to talk 0:12:11.520 --> 0:12:13.640 about the reforms that are ultimately going to be needed. 0:12:13.880 --> 0:12:16.720 There's a large question around whether that will actually happen, 0:12:16.720 --> 0:12:18.400 and we've been having it with a lot of cynicism. 0:12:18.480 --> 0:12:21.360 I'm sure you have your own with insight from inside 0:12:21.360 --> 0:12:23.520 the Beltway. Wendy Schiller of Brown University was on the 0:12:23.520 --> 0:12:26.760 show earlier and she said Kevin McCarthy will remain Speaker 0:12:26.800 --> 0:12:29.320 of the House simply because the Democrats will back him 0:12:29.320 --> 0:12:31.480 if the Republicans won't, because at least it will be 0:12:31.520 --> 0:12:34.439 some sort of cohesive voice that is better than the alternative. 0:12:34.840 --> 0:12:38.280 Does that concern you that Kevin McCarthy will remain speaker, 0:12:38.320 --> 0:12:41.720 but perhaps only at the behest of Democrats who are 0:12:41.760 --> 0:12:43.040 concerned about the alternative. 0:12:44.320 --> 0:12:46.640 I actually disagree with the analysis. I think Kevin McCarthy 0:12:46.679 --> 0:12:49.280 will remain Speaker with Republican votes. I actually don't even 0:12:49.280 --> 0:12:51.520 think you'll see a motion to vacate. We had a 0:12:51.640 --> 0:12:55.080 robust family conversation last night intil the late hours of 0:12:55.120 --> 0:12:58.480 the evening talking about this legislation. And while it's true 0:12:58.600 --> 0:13:00.760 there are some Republicans that would like to see a 0:13:00.800 --> 0:13:03.880 better bill. They think that they could get a perfect bill. 0:13:04.120 --> 0:13:05.800 At the end of the day, I think everybody in 0:13:05.800 --> 0:13:08.160 the room recognizes that this bill is a step in 0:13:08.200 --> 0:13:11.559 the right direction, and they're appreciative of the Republican negotiating 0:13:11.600 --> 0:13:14.160 team that moved the ball forward. You got to remember 0:13:14.360 --> 0:13:16.960 we started with the president saying that he was going 0:13:16.960 --> 0:13:19.280 to refuse to negotiate. He put his head in the sand, 0:13:19.480 --> 0:13:22.840 he went to Delaware, went off to Japan rather than negotiating, 0:13:22.880 --> 0:13:24.640 and at the end of the day, we came back 0:13:24.679 --> 0:13:27.120 with one comp five trillion dollars in savings. 0:13:27.160 --> 0:13:29.280 Car you sound like Paul Ryan on an off day. 0:13:29.360 --> 0:13:32.320 Come on, congressman, let's be come on. What I'm hearing 0:13:32.360 --> 0:13:35.160 in the zeitgeist right now from Anne Marie Horden is 0:13:35.280 --> 0:13:37.960 Democrats are taking a victory lap because they pretty much. 0:13:37.800 --> 0:13:38.720 Got what they wanted. 0:13:39.080 --> 0:13:41.960 Modern Republicans like you are saying, Okay, let's get this 0:13:42.040 --> 0:13:44.040 done and move on, and you got a bunch of 0:13:44.080 --> 0:13:46.880 people trying to block this and shut down the government. 0:13:47.240 --> 0:13:49.640 I got to go back to the fact you lived 0:13:49.840 --> 0:13:53.640 Paul Ryan's decline as Speaker. 0:13:53.240 --> 0:13:53.840 Of the House. 0:13:53.960 --> 0:13:57.760 I want to go from Bayer to Ryan to McCarthy. 0:13:58.200 --> 0:14:01.440 What does a speaker have to do now? Not to 0:14:01.480 --> 0:14:03.960 be Paul Ryan, not to be John Bahner. 0:14:05.600 --> 0:14:08.000 I think, actually the Republicans are quite unified in the 0:14:08.040 --> 0:14:09.680 House right now, and I think that shows when we 0:14:09.720 --> 0:14:12.640 passed the Limit Save Grow Act, many people across the 0:14:12.720 --> 0:14:16.000 United States underestimated the ability of Republicans to come together 0:14:16.040 --> 0:14:18.640 and unify and pass a bill. In fact, President Biden 0:14:18.679 --> 0:14:20.400 didn't think we could do it either. That was part 0:14:20.400 --> 0:14:23.080 of his negotiating tactics, and at the end of the day, 0:14:23.120 --> 0:14:25.480 we came together. I think the Republican conference in the 0:14:25.480 --> 0:14:28.480 House is quite unified to address the spending challenges that 0:14:28.480 --> 0:14:28.920 we face. 0:14:29.440 --> 0:14:32.360 But you know the speaker, Okay, I'll go with that, 0:14:32.440 --> 0:14:36.760 But the answer is John, the speaker, the speakership here. 0:14:36.600 --> 0:14:38.640 Is under real threat and it comes up suddenly? 0:14:38.680 --> 0:14:42.120 Did it come up suddenly? Congressman for Paul Ryan, was 0:14:42.160 --> 0:14:45.440 everything fine? And then boom, you're his aid in office, 0:14:45.480 --> 0:14:47.800 and all of a sudden, boom, he's under threat by 0:14:47.840 --> 0:14:48.760 these Republicans. 0:14:50.000 --> 0:14:51.960 I was working in the private sector for quite some time, 0:14:52.000 --> 0:14:54.120 so I wasn't on Capitol Hill for about twenty years 0:14:54.200 --> 0:14:56.640 before I ran for office. But I think what you 0:14:56.680 --> 0:14:58.800 see is at the end of the day that these 0:14:58.800 --> 0:15:01.240 things can rise on. Okay, but if you talk to 0:15:01.400 --> 0:15:04.640 Republican members, we're unified in the House Representatives. I think 0:15:04.720 --> 0:15:07.440 everyone recognizes that this is a good bill. There's just 0:15:07.440 --> 0:15:10.120 some conservative and Republican members that would like to have 0:15:10.200 --> 0:15:12.880 a better bill. That's not the bill that's on the table. 0:15:13.000 --> 0:15:16.240 Congressman, I'm just a spectator and watching this play out 0:15:16.280 --> 0:15:18.360 for a long time, both within the United States and 0:15:18.560 --> 0:15:22.080 abroad as well, and every single time we get into 0:15:22.080 --> 0:15:25.360 this tobacco, we just raised the debt seating again and 0:15:25.400 --> 0:15:29.960 again and again and again. Whether that's a Republican president 0:15:30.480 --> 0:15:33.040 or a Democratic president, it's the same outcome. We raise 0:15:33.080 --> 0:15:36.400 the debt ceiling. Bron You heard JP Morgan's Jamie Diamond 0:15:36.440 --> 0:15:38.960 come in from the break there saying, I wish one 0:15:39.040 --> 0:15:40.920 day they'd get rid of the whole debt ceiling thing. 0:15:41.640 --> 0:15:43.800 Why do we still have it? And isn't it somewhat 0:15:43.880 --> 0:15:47.440 embarrassing for the president, whether Republican or Democrat, to go 0:15:47.520 --> 0:15:50.920 abroad to places like Japan for the G seven to 0:15:50.960 --> 0:15:54.200 try and lead the global effort on a whole bunch 0:15:54.240 --> 0:15:57.440 of issues to then be looking back and have this 0:15:57.520 --> 0:16:00.560 em type tobacco playing out at home. 0:16:02.520 --> 0:16:04.520 In a period of time of dividing government, there's actually 0:16:04.560 --> 0:16:08.040 a few opportunities to negotiate the spending reforms that are needed, 0:16:08.280 --> 0:16:11.120 in particular a period of time when executive authority has 0:16:11.200 --> 0:16:14.600 grown so dramatically. In this bill, we actually address the 0:16:14.600 --> 0:16:17.320 fact that the President tried to dramatically alter student loan 0:16:17.360 --> 0:16:20.960 payments that never went through Congress in the first place. Unfortunately, 0:16:21.160 --> 0:16:24.920 based on executive overreach, what we have is so few 0:16:24.960 --> 0:16:28.360 opportunities to get spending under control where the executives both 0:16:28.400 --> 0:16:32.200 parties are absolutely right continue to spend money through executive action. 0:16:32.640 --> 0:16:35.960 And this negotiation allows us to actually bring the president 0:16:36.000 --> 0:16:38.200 to the table and have a conversation about how we're 0:16:38.240 --> 0:16:40.200 going to get spending under control. And I think again, 0:16:40.240 --> 0:16:42.080 at the end of the day, this is overall a 0:16:42.080 --> 0:16:43.640 good bill moving us in the right direction. 0:16:43.760 --> 0:16:46.160 Yeah, the one bill assigned Congressman, don't you see where 0:16:46.160 --> 0:16:48.600 this is coming though? That ultimately, and we're out of time, 0:16:48.680 --> 0:16:50.560 So if you want to continue this conversation, by all means, 0:16:50.600 --> 0:16:53.000 come back another time. It just feels like we're in 0:16:53.080 --> 0:16:56.240 the process now of deliberately manufacturing crises to do exactly 0:16:56.240 --> 0:16:58.600 what you just explained it. At some point that's going 0:16:58.600 --> 0:17:02.080 to write the confidence in this country and potentially the 0:17:02.200 --> 0:17:04.760 ust market too. So we've got to leave it that, Congressman, 0:17:04.800 --> 0:17:06.880 if you want to continue, happy to do that another time, 0:17:06.880 --> 0:17:09.160 Congressman Brian style of that of Wisconsin. 0:17:13.320 --> 0:17:15.399 Right now, we're going to talk the talk of the 0:17:15.440 --> 0:17:20.800 moment in video with Angelo Zeno, senior equity analyst at CFIRA, who, 0:17:20.840 --> 0:17:24.800 in a brilliant note, has a courage to write what 0:17:24.920 --> 0:17:28.160 everybody's thinking. Which is the only way you can justify 0:17:28.200 --> 0:17:30.240 this is to extend your timeline. 0:17:30.520 --> 0:17:33.520 Angelo, you go right out to twenty. 0:17:33.040 --> 0:17:35.880 Twenty four, and you say, look, with a twenty five 0:17:35.920 --> 0:17:40.560 percent growth pop, you're buying a forty multiple stock, why 0:17:40.560 --> 0:17:44.440 don't you extrapolate out to twenty twenty five? 0:17:46.440 --> 0:17:48.840 Yeah, I mean, listen, I think you can. I think 0:17:48.880 --> 0:17:52.280 there's always danger with kind of trappling the numbers out right, 0:17:52.480 --> 0:17:54.720 But I will say this, we are believers in kind 0:17:54.720 --> 0:17:58.280 of the entire video story, in kind of the AI story, 0:17:58.520 --> 0:18:02.080 the fact that kind of GPU's going to increasingly represent 0:18:02.119 --> 0:18:06.360 a bigger percentage of CAPEX dollars for these cloud companies. 0:18:06.560 --> 0:18:09.159 We do think over time over the next three to 0:18:09.240 --> 0:18:14.600 five years, the comhid and annual growth rate for GPUs 0:18:14.680 --> 0:18:18.000 and specifically that of Nvidia on the accelerator side of 0:18:18.040 --> 0:18:21.320 things in the cloud can grow at an annualized piece 0:18:21.560 --> 0:18:24.120 of north of kind of twenty to twenty five percent, 0:18:24.440 --> 0:18:27.320 and that can kind of get you to an EPs. 0:18:26.640 --> 0:18:29.080 Growth rate over time for in Vidia. 0:18:29.040 --> 0:18:33.360 Again north of twenty percent. If you're a believer that 0:18:33.440 --> 0:18:36.080 you know the top line for this company can continue 0:18:36.080 --> 0:18:38.760 to grow at a mid to high teams percentage pace. 0:18:39.000 --> 0:18:41.280 Are there other invidias out there? 0:18:42.680 --> 0:18:45.080 So we actually wrote a piece back in late March 0:18:45.200 --> 0:18:47.919 about kind of the biggest winners of kind of the 0:18:48.000 --> 0:18:51.560 generative AI boom within the semiconductor industry, and we kind 0:18:51.560 --> 0:18:54.800 of pointed to four names at that point in late March. 0:18:54.800 --> 0:18:57.880 And those four names were one, of course, in Nvidia, 0:18:58.040 --> 0:19:01.760 AMD is another name clearly a beneficiary and the GPU 0:19:01.840 --> 0:19:04.000 side of things over time as well. And then the 0:19:04.040 --> 0:19:07.680 other two names are more kind of network connectivity type names, 0:19:07.800 --> 0:19:11.520 and they were there were Marvel as well as Broadcom, 0:19:11.720 --> 0:19:14.600 a name that we think is highly underappreciated, a number 0:19:14.640 --> 0:19:16.200 a name that's going to report tomorrow. 0:19:15.960 --> 0:19:18.320 Night at the close, I'm wondering what a tech company 0:19:18.359 --> 0:19:20.719 is right now and which companies can actually take advantage 0:19:20.720 --> 0:19:24.359 of artificial intelligence. Some of this technology very clear cut 0:19:24.680 --> 0:19:28.760 AMD or in Nvidia, but what about Meta what about 0:19:28.920 --> 0:19:31.560 just in a broader sense, other companies that could potentially 0:19:31.600 --> 0:19:35.119 gain from the productivity of investments and artificial intelligence? How 0:19:35.160 --> 0:19:37.960 do you value which companies will gain and which actually 0:19:38.040 --> 0:19:39.840 won't at all and potentially could even lose. 0:19:40.680 --> 0:19:43.200 Yeah, listen, I think that's probably the most important question 0:19:43.280 --> 0:19:47.240 we get from investors right now. It's from a monetization perspective, 0:19:47.240 --> 0:19:49.240 who are going to be the biggest winners kind of 0:19:49.240 --> 0:19:51.879 from this AI boom? And that's really ant you know, 0:19:51.960 --> 0:19:54.119 it's a tough question to answer and say, you know, 0:19:54.440 --> 0:19:56.640 to your point, kind of the easy answer right now 0:19:56.920 --> 0:19:58.840 is on the semiconductor side of things, That is on 0:19:58.880 --> 0:20:01.439 the infrastructure side of the and kind of playing that 0:20:01.520 --> 0:20:03.720 and that's clearly where the kind of the the action 0:20:03.840 --> 0:20:04.320 has been. 0:20:04.160 --> 0:20:05.119