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Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along

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Speaker 1: with Jonathan Farrow and Lisa Abramowitz. Join us each day

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Speaker 1: for insight from the best and economics, geopolitics, finance and investment.

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Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and

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Speaker 1: anywhere you get your podcasts, and always on Bloomberg dot Com,

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Speaker 1: the Bloomberg Terminal, and the Bloomberg Business App. Francis Dautle

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Speaker 1: joins us right now, this is an important brief, really

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Speaker 1: good at the minutia that adds up to our gross

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Speaker 1: domestic product. Francis, if we don't get a recession, but

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Speaker 1: we get sort of kind of like a muddle one

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Speaker 1: point five percent, one point one percent, zero point seven

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Speaker 1: percent GDP not under zero, what does that feel like?

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Speaker 2: Well, it depends how the central banks respond to it.

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Speaker 3: But Tom, I'm more concerned about that very slow but

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Speaker 3: assistant weakness than I am about a garden variety recession.

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Speaker 3: We know what to do in garden variety recessions, and

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Speaker 3: we know that central banks historically pivot. But what we're

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Speaker 3: witnessing is, yes, a COVID distorted economy where we're seeing

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Speaker 3: desynchronized elements. We're seeing a consumer that hang or hung

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Speaker 3: on much longer than they would have in other cycles.

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Speaker 3: Housing is already starting to reaccelerate. I'm not sure we're

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Speaker 3: going to get the same sort of response in things

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Speaker 3: like GDP data to the traditional shocks that we've seen,

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Speaker 3: and therefore the risk is that we continue to hear

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Speaker 3: while there's no recession.

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Speaker 2: Therefore you can go along.

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Speaker 3: But it's the FED says, well, no recession means we

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Speaker 3: hold that's a very different investment playbook.

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Speaker 1: Francis, you got a colored dot chart. It looks like

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Speaker 1: the new Louis Vutant purses that everybody's buying right now.

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Speaker 1: Don't ask me, folks while I know about that. But

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Speaker 1: the chart you mentioned is one of your great concerns

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Speaker 1: is what Lisa mentioned earlier, which is M two growth.

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Speaker 1: I'm surprised if Francis Donald is monitor astonis discuss that.

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Speaker 2: Well, Actually, I'm not just a monitorist.

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Speaker 3: We look at all elements that potentially lead to economy

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Speaker 3: at doing poorly. And that's the problem here, Tom, is

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Speaker 3: that no matter what way you assess where growth is going,

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Speaker 3: basically every traditional leading indicator of recessions is flashing red.

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Speaker 3: And some of these are flashing red not consistent with

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Speaker 3: garden variety or small recessions. But some of the big

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Speaker 3: problems that we had, like in two thousand and eight,

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Speaker 3: Now is.

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Speaker 2: That necessarily where you're going. No, But what I say

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Speaker 2: to my team is.

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Speaker 3: Even if we cut in half our concern about downsides

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Speaker 3: in growth, we're still looking at a very difficult economic environment.

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Speaker 3: And to ignore the breadth of the challenges that exist

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Speaker 3: and the breadth of the weakness we see in leading indicators,

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Speaker 3: I think it is going to be problematic.

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Speaker 1: And what's interesting your release is liz An Sanders really

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Speaker 1: underscoring this out on Twitter yesterday where you were on M.

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Speaker 4: Two growth well, and John was mentioning earlier as well,

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Speaker 4: this idea of what happened when suddenly the restriction by

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Speaker 4: central banks starts to play out in markets. Francis you

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Speaker 4: say that an economic muddle might not be so great.

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Speaker 4: It's very difficult to read because we don't understand what

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Speaker 4: the different inputs are and where we are in the

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Speaker 4: economic cycle. But if you just take it at face value,

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Speaker 4: why isn't it the Max Kuttner view of things, we're

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Speaker 4: basically if it's not too hot, not too cold. The

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Speaker 4: Fed's kind of stuck in the middle, and things can

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Speaker 4: grind forward at least for a few more months.

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Speaker 3: Because we're at extremely high levels of interest rates for

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Speaker 3: this level of the economy and we're heading towards a

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Speaker 3: sizeable credit crunch.

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Speaker 2: And this is why data.

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Speaker 3: Like the Senior Loan Officer Survey that we should be

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Speaker 3: getting by May eight is going to be just so

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Speaker 3: incredibly important, because even if GDP numbers are not negative,

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Speaker 3: this is still an economy that's going to struggle to

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Speaker 3: produce revenue.

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Speaker 2: It's going to struggle to produce jobs. We're going to

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Speaker 2: have to move away. Just like we've moved away from

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Speaker 2: the concept of.

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Speaker 3: The unemployment rate giving us a good sense of the

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Speaker 3: health of the labor market, we're going to have to

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Speaker 3: move away from GDP as giving us a good sense

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Speaker 3: of general economic activity that exists. And if the subtle

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Speaker 3: reserve is still going to be focused on these traditional

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Speaker 3: indicators like GDP and unemployment and even the PCE inflation rate,

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Speaker 3: then we're not going to get relief from them. And

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Speaker 3: this is a market that has already priced in some relief.

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Speaker 3: So the problem with slow growth that isn't a full

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Speaker 3: blown recession. Is that we likely don't get relief on

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Speaker 3: the rate size, and this is going to produce a

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Speaker 3: challenging risk environment.

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Speaker 4: So Francis, when you start talking about some of the

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Speaker 4: challenge profits and things at corporations, this has been one

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Speaker 4: of the most surprising aspects of this earning season. I

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Speaker 4: was looking yesterday at Procter and Gamble at Kimberly Clark,

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Speaker 4: and their profit margins expanded. They were able to raise

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Speaker 4: prices on consumers more than their underlying inflationary inputs. What

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Speaker 4: does this say about just how much weakness or not

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Speaker 4: there is, how much tolerance there still is in consumers

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Speaker 4: to absorb all of those price increases.

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Speaker 3: Well, it speaks to the desynchronized nature of this environment.

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Speaker 3: But as we move forward and we see credit pulled

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Speaker 3: back even more sharply, and we see some of the

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Speaker 3: challenges that flow through primarily to small businesses. I mean,

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Speaker 3: let's remember that small businesses are heavily credit dependent, and

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Speaker 3: they've created the majority of jobs since twenty twenty. So

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Speaker 3: as companies start to feel the pinch through the credit channels,

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Speaker 3: they're going to have to be cutting costs in some

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Speaker 3: way and I think that's going to flow through into

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Speaker 3: the labor market. So again we have a consumer that

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Speaker 3: held on longer than it would have historically, but all

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Speaker 3: evidence suggests xs savings are coming down.

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Speaker 2: Credit is not going.

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Speaker 3: To be available, and as you know, Lisa, there are

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Speaker 3: already some signs that the labor market is going to weaken.

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Speaker 3: So right now there's some ability to absorb those price increases,

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Speaker 3: but six months from now, not so much. And this

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Speaker 3: is when the story is going to change. And it

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Speaker 3: comes back to our job is not to tell us

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Speaker 3: what's happening right now. Right now we're okay, it's to

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Speaker 3: look forward six months. This is why it's so key

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Speaker 3: to disaggregate between coincident indicators, leading indicators and lagging indicators.

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Speaker 3: And when you do that, sure coincident data is just fine,

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Speaker 3: but the leading indicators is where the challenges and confusing

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Speaker 3: those two I think.

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Speaker 2: Muddels the story.

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Speaker 5: Francis. The Bank of England has a message for us

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Speaker 5: all we need to accept that we're poorer. Apparently, in

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Speaker 5: one of the most insensitive remarks we've seen from a

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Speaker 5: central banker since Governor Bailey told us all to stop

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Speaker 5: asking for a pay rise. This is what Hugh Bill

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Speaker 5: has got to say, what we're facing now is the

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Speaker 5: reluctance to accept that, yes, we're all worse off and

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Speaker 5: we all have to take our share, to try and

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Speaker 5: pass that cost onto one of our compatriots and say

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Speaker 5: we'll be all right, but they will have to take

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Speaker 5: our share too. This is bizarre. He's effectively saying, Francis,

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Speaker 5: we need to accept that inflation is high and that

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Speaker 5: wage growth won't be enough, and we shouldn't push for

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Speaker 5: higher wages. Francis, what do you make of those comments

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Speaker 5: from Hugh pil of the Bank of England.

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Speaker 2: Well, it's concerning in the sense that we.

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Speaker 3: Know the bulk of these challenges have hit low income

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Speaker 3: households across the world who have seen their share of

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Speaker 3: spending on food and energy rise. You know, I do

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Speaker 3: interviews where the person prior to me is talking about

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Speaker 3: you know, record lines and food banks. So telling somebody

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Speaker 3: that is struggling to some food on the table that

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Speaker 3: they have to accept higher inflation is going to go

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Speaker 3: down a little bit more problematically. However, the bigger investment

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Speaker 3: concern here is that again we are used to in

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Speaker 3: an environment where central banks provide relief a central bank

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Speaker 3: put and comments like this keep me up at night

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Speaker 3: because they say, you know, some of the difficulty we're

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Speaker 3: seeing in you know, banks, some of the difficulty we're seeing.

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Speaker 2: For household is a feature, not a bug.

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Speaker 3: Of current central bank policy, and it suggests we have

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Speaker 3: to reassess that decision making function for all central banks globally,

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Speaker 3: and if we do that, we may not be getting

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Speaker 3: the standard relief rally that comes when you see lower growth.

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Speaker 3: It's effectively a stagflation response function and it is much

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Speaker 3: more challenging for almost all asset classes than you know

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Speaker 3: two quarter dip of FED cut or a Bank of

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Speaker 3: England cut a reacceleration. I'm not sure the market is

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Speaker 3: fully grasped on to the risk of a recession with

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Speaker 3: no rate cuts.

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Speaker 2: Comments like this worse than my concern.

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Speaker 5: Francis, thank you, Francis Donald of Manual Life Investment Management.

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Speaker 1: Peter sheer he gave the name Meta to Facebook. He's

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Speaker 1: the when he called up Zuckerberg and said, you know,

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Speaker 1: I think Meta has as a direct and name to

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Speaker 1: I still don't know what Meta means joining us now.

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Speaker 1: Peter Sheheer had a macro strategy Academy Securities pull together

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Speaker 1: these narratives. I mean, you and I have never seen

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Speaker 1: this before. Let's start with that, but pull together the

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Speaker 1: narratives that are making radio and TV listeners and viewers headspin.

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Speaker 6: I think we are on a slow bleed into the recession.

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Speaker 6: It's going to it is coming. It's starting at the

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Speaker 6: white collar level. I think almost go back to the

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Speaker 6: simplest thing. It's someone's expense is someone else's income. And

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Speaker 6: everything I read is about people cutting expenses, which is

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Speaker 6: going to hit someone's income, which is going to cause

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Speaker 6: them in turn to cut their expenses. And I don't

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Speaker 6: see anything switching that trajectory. I think the China reopening

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Speaker 6: was a headfake. It was never really a big reopening.

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Speaker 6: And to me, when opek Plus really cut production, they

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Speaker 6: were seeing what we were already seeing. Freight was down,

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Speaker 6: we're seeing shipping down. There is an economic slowdown occurring

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Speaker 6: just below the surface, and it's slowly taking effect. It's

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Speaker 6: going to be a grind. It's not going to be

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Speaker 6: like a great financial crisis or anything. And the fact

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Speaker 6: that the banks are in struggling with how to keep

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Speaker 6: deposits is going to hurt lending and that's going to

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Speaker 6: hurt the small business, which has been a huge driver

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Speaker 6: of success in the past, so much.

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Speaker 5: To unpack their peat. So let's go with China. It's

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Speaker 5: a pretty emphatic thing to say the reopening was a

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Speaker 5: head fake. Why was it a head fake?

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Speaker 6: First they were already partly open, so it wasn't like

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Speaker 6: going from zero to one hundred. They were going from

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Speaker 6: sixty to eighty, seventy to ninety whatever that was. But

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Speaker 6: also they are focusing more and more on their own economy,

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Speaker 6: right we don't First we already have this inventory I

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Speaker 6: hesitate to say glut, but I think we have an

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Speaker 6: inventory glut. We have overbuilt, we have supply chains that

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Speaker 6: have stacked up, so we don't really need China's production

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Speaker 6: right now. And more and more, or how I see

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Speaker 6: this world shaping as you have China Again we've said before,

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Speaker 6: aligning with the autocratic, resource rich nations, and what we're

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Speaker 6: seeing we're talking about the shift from maid in China

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Speaker 6: to made by China, and by that I mean China

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Speaker 6: used to take US products manufacturer give them back to

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Speaker 6: the US companies who sold them. Globally, I think you're

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Speaker 6: going to start see China trying to sell Chinese products

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Speaker 6: globally a little bit more and be a true competitor.

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Speaker 6: I think that's going to be the scary shift over

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Speaker 6: the next few years.

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Speaker 5: We can build on that later in the conversation if

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Speaker 5: we have time. If the reopening of China is a

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Speaker 5: head fake, what's Europe? With the cat forty up by

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Speaker 5: almost twenty percent, that tacks up by seventeen percent, what

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Speaker 5: would you call that?

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Speaker 1: You know?

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Speaker 6: Europe to me has become a bit of a mess.

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Speaker 6: They're trying to figure out I think where they fit

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Speaker 6: in right macrons approach, g they're figuring out how they

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Speaker 6: want to deal with Ukraine. So I'm not But the

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Speaker 6: nice part is I think some of their companies were undervalue.

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Speaker 6: They're mostly big global entities, so some of that catch

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Speaker 6: up because they've been behind made sense. I'm kind of

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Speaker 6: very neutral to burish on Europe. I think they've got

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Speaker 6: their own set of problems. On the other hand, I'm

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Speaker 6: fairly berrish to neutral globe right now.

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Speaker 4: Well, that's where I was going to That's what I

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Speaker 4: was going to say, is it really so much better

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Speaker 4: in the US. One of the issues that you raised

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Speaker 4: was smaller banks, regional banks, and the sort of ongoing

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Speaker 4: grind that we see there. We've been talking about First

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Speaker 4: Republic all morning. Is this a specific story or does

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Speaker 4: it indicate something broader that is just going to grind

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Speaker 4: out throughout the year.

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Speaker 6: So I think there's two things going on. One is

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Speaker 6: it's really been this shift away from this concern about

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Speaker 6: losing your deposits or bankruptcy to much more what yield

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Speaker 6: am I getting on those deposits? And is that yield

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Speaker 6: still functional for these banks? And then I think they've

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Speaker 6: also said on Wall Street on stay time, my boss

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Speaker 6: is this. You know your assets walk out the door

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Speaker 6: at five pm or six pm, whatever time your assets leave,

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Speaker 6: it's your people. And if you start losing your people,

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Speaker 6: that becomes very problematic. How do you retain those people

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Speaker 6: in an environment where you're struggling?

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Speaker 4: So is that really the key issue here that we're

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Speaker 4: going to see that more broadly throughout regional banks as

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Speaker 4: bigger banks try to basically parachute in take the best talent,

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Speaker 4: and then they'll just be this drip, drip drip that

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Speaker 4: will carry out and tighten credit throughout the year.

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Speaker 5: Yeah.

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Speaker 6: I think it's going to make people have to come

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Speaker 6: up with solutions fairly quickly, whether it's mergers acquisitions, and

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Speaker 6: they have some phenomenal relationships, some great business models at

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Speaker 6: these places. Everyone I have talked to who ever banked

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Speaker 6: with First Republics as they are phenomenal the treatment they got,

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Speaker 6: So there's value to that, and I think someone's got

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Speaker 6: to capture that before those acids do walk out the door.

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Speaker 1: Let me digress. We don't need a history lesson on

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Speaker 1: Milton Friedman one oh one. Does M two matter? Tell

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Speaker 1: us what M two is and why people like you

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Speaker 1: pay attention.

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Speaker 6: I have not been paying close attention to it lately

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Speaker 6: again it's been dropping off. But I think there's so

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Speaker 6: many others.

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Speaker 1: It was a rage thirty years ago.

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Speaker 6: It was all the rage, you know, back when we

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Speaker 6: had to figure out when Alan Greenspan was carrying his

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Speaker 6: briefcase in the left or right hand. They didn't tell

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Speaker 6: us what they were doing. Actually thought it was easier

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Speaker 6: sometimes when the FED wasn't trying to do this forward guidance.

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Speaker 6: They've gotten themselves in so much trouble, which is why

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Speaker 6: I think they had to hike last time for twenty

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Speaker 6: five BIPs when they should have already been stopping before that.

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Speaker 6: So I'm watching all these things, but I do think

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Speaker 6: the economy is slowing down and it's showing up in

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Speaker 6: some of the M two declines.

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Speaker 1: Are we super restrictive right now when you add in

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Speaker 1: the interest rate dynamics and the greater economy dynamics, the

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Speaker 1: balance sheet dynamics. Are we beyond restrictive?

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Speaker 6: I think so, And part of this it doesn't show up.

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Speaker 6: But again, people don't have car leases coming do every year.

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Speaker 6: But over a year, two years, three years, everyone's going

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Speaker 6: to have to reset. Corporations at a phenomenal job during

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Speaker 6: COVID issuing long day to debts at very low interest rates.

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Speaker 6: But some of that starts rolling off, and it's going

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Speaker 6: to take time for the five percent rates to hit

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Speaker 6: the consumer. I think we're at the early stages of that,

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Speaker 6: and it only gets worse. It's not like anyone's rolling

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Speaker 6: their five percent to five percent right now. We're still

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Speaker 6: having people rolling three percent to six percent, and that's

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Speaker 6: going to add weigh on this.

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Speaker 5: So part of this conversation is about vulnerable parts of

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Speaker 5: the market. And I promised you a pocket of time

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Speaker 5: to come back to the point you made about the

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Speaker 5: Chinese consumer and Chinese companies. Let's finish there. Who's vulnerable?

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Speaker 5: Is it the Tesla's of this world? Is it the

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Speaker 5: mvmh's of this world? Can they really go about creating

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Speaker 5: something like a luxury brands compete with the European players

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Speaker 5: and ev operator we know lots of names over in China.

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Speaker 5: What's the competition going to be most fast?

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Speaker 6: I think it's going to be for everyday items, So

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Speaker 6: whether it's cars, dishwashers, it's not going to be our quality,

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Speaker 6: but they are going to try and sell their brands.

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Speaker 6: They've taken a lot of the IP, they've got the

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Speaker 6: manufacturing know how. Now it's not as good as what

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Speaker 6: we produce or they produce for us, but it will

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Speaker 6: be cheaper and they will aggressively market that. One of

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Speaker 6: the things that really struck me on this was they

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Speaker 6: just struck a deal with Brazil where they're going to

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Speaker 6: make their BYD cars in Brazil. Now, part of that's

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Speaker 6: for tax reasons and stuff, but that to me is

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Speaker 6: just the signal that China wants to sell their things,

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Speaker 6: that we're really only consumed by Chinese broadly.

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Speaker 5: Amazing conversation, Peipe, we can have for a long long time.

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Speaker 5: Pitch their academic security is a head fake. The reopening

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Speaker 5: in China, it's on a head fake.

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Speaker 1: Christopher Marinac has not been a stranger. We really thank

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Speaker 1: him for his participation. Seems like day after day. Director

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Speaker 1: of Research, Jenny Montgomery Scott Christopher. What was out there yesterday?

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Speaker 2: Article to article?

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Speaker 1: Research note to research note was a guestimate of the

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Speaker 1: haircut needed. Let's review. They have garbage loans, jumbo mortgages

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Speaker 1: taken out of two percent. Whatever you can do the math.

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Speaker 1: Is there a way for you to ascertain the required

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Speaker 1: haircut for their management to find stability?

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Speaker 7: I think there is.

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Speaker 8: I mean, they have a lot of government securities and

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Speaker 8: loans that are simply underwater because.

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Speaker 7: Of interest rate. It's important that it's not a credit issue.

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Speaker 7: It's more interest rates.

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Speaker 8: And they've got fixed rate mortgages that were done to

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Speaker 8: three three and a half percent. In the world's easily

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Speaker 8: two points higher, if not three. So that is the

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Speaker 8: reason for the haircut. And of course it's the uncertainty

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Speaker 8: about the ability to raise capital. That's always where the

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Speaker 8: challenge is for these banks, going back many many.

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Speaker 7: Years in cycles.

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Speaker 8: So I think that the lack of knowledge and of

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Speaker 8: course the lack of questions Monday night didn't.

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Speaker 7: Help matters, and so here we are.

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Speaker 8: I think that the company needs a solution. There's three

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Speaker 8: ways out of this. They can raise capital, they can sell,

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Speaker 8: or they can fail.

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Speaker 1: Well, what's interesting here, Christopher, is the optionality this morning

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Speaker 1: for Secretary Yellen and other government institutions. Do you suggest

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Speaker 1: it'll be a clean haircut, whether without government intrusion, or

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Speaker 1: will they be able to negotiate some form of more

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Speaker 1: full balance sheet takeout that includes some form of equity option.

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Speaker 8: So the Treasury has a program in place for Community

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Speaker 8: development Banks CDFIs where the Treasury actually invested preferred last

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Speaker 8: year at a zero percent rate for two years and

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Speaker 8: then it was two percent after that. They would have

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Speaker 8: to make a special dispensation to make first republic of CDFI.

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Speaker 7: But it's not a crazy solution.

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Speaker 8: It would actually give them capital from the government a

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Speaker 8: la tarp like we did in two thousand and eight.

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Speaker 8: But that would be a one company solution. I'm not

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Speaker 8: necessarily sure they're going to do that, but it is

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Speaker 8: an option that our secretary has at her disposal if

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Speaker 8: she wishes to.

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Speaker 5: Chris, you said three options race capital, sell assets, or fail.

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Speaker 5: Let's assume for good reason they don't want option three.

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Speaker 5: Can you tell me what option one actually looks like?

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Speaker 5: What would that look like? Raising capital?

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Speaker 8: Sure, so they would have to do a combination of

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Speaker 8: I think equity and preferred equity is the best alternative.

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Speaker 8: It would most likely be done, of course below last

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Speaker 8: night's price, but maybe not necessarily a lot below. It

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Speaker 8: would allow the tangible capital to recover, take losses, move

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Speaker 8: down the road, live to fight another day. I think

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Speaker 8: the question is will the company dilute their shareholders existing

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Speaker 8: shareholders by such a massive amount. I mean, we saw

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Speaker 8: this happen in two thousand and eight, nine and ten,

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Speaker 8: so it's not the first time we've been through this exercise.

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Speaker 7: But I think it's a question of where.

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Speaker 8: The board and the management team are willing to dilute

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Speaker 8: their existing team. I think they're going to have to

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Speaker 8: unless they can find a bid that's more reasonable.

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Speaker 4: Christopher, we're talking about this particular company, which we're now

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Speaker 4: debating whether it's idiosyncratic or whether it's representative of perhaps

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Speaker 4: larger ills in the regional banking sector. A'll be it

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Speaker 4: a more concentrated version of it. How do you look

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Speaker 4: at this in terms of what it exposed about the

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Speaker 4: broader sector.

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Speaker 8: So overall, credit quality is still really good. You know,

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Speaker 8: banks give out way better information today than they did

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Speaker 8: fifteen years ago. So if we looked at substandard rated credits,

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Speaker 8: special mentioned rated credits, anything that's not a pass you

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Speaker 8: typically have two to two and a half percent today.

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Speaker 7: That's problematic at a bank.

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Speaker 8: That's you know, a long way away from where we

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Speaker 8: were at eight, nine, ten percent back in the Great

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Speaker 8: Financial Crisis. So we have a long way to go

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Speaker 8: for credit quality to match the last cycle. So I

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Speaker 8: feel like the credit's not the issue. This is an

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Speaker 8: interest rate risk problem. And of course many banks have

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Speaker 8: held in maturity securities available for sales, securities that are

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Speaker 8: below water, and even though rates are down, there's still

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Speaker 8: below water easily ten to twelve percent. So we have

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Speaker 8: to either raise capital to create confidence around those losses,

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Speaker 8: or we simply have to wait. In the case of Republic,

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Speaker 8: it's impossible to wait. They need a solution, and they

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Speaker 8: need one very quickly.

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Speaker 4: We also have to think about what the implication is

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Speaker 4: for lending and just loan creation. UBS analysts put this out.

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Speaker 4: They say that bank commercial and industrial loan growth looks

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Speaker 4: to drop about five percent in the last three months

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Speaker 4: of the year and then ten percent in the first

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Speaker 4: quarter of twenty twenty four, which is associated with recession

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Speaker 4: like conditions. Do you agree, Are you starting to see

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Speaker 4: that type of necessary response to the lack of deposits,

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Speaker 4: to the concern around the balance sheet?

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Speaker 8: So I would disagree with the percentage change. I think

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Speaker 8: that the tightening is clearly on. Banks are going to

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Speaker 8: be very careful about the standards that they make and

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Speaker 8: the way that they allocate credit. However, the flip side

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Speaker 8: is going to be that they're going to charge a

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Speaker 8: lot more for that, and I think the earning asset

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Speaker 8: repricing in the banks is actually better than folks realize,

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Speaker 8: which could actually be a positive for Nenaitraist margins beyond

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Speaker 8: this quarter.

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Speaker 7: This quarter will be a challenge, but I think in third.

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Speaker 8: And fourth quarter we could see not only stabilization but

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Speaker 8: actually increases in margins.

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Speaker 5: Chris, I get that this was only really kicked off

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Speaker 5: in the middle of March March eighth with SVB, but

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Speaker 5: we've understood the right story for a long time now.

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Speaker 5: It's a pretty aggressive hiking cycle last year. I'm already

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Speaker 5: getting messages from people saying what took so long to

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Speaker 5: consider assets, sales, dis launch, what have management been doing right?

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Speaker 7: Well, it's a great point.

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Speaker 8: I think that a lot of companies thought that they

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Speaker 8: could simply use their liquidity from the homelan banks and

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Speaker 8: other sources to work through the issue. And I think

439
00:20:26,800 --> 00:20:29,520
Speaker 8: that was a false, false narrative for sure. I think

440
00:20:29,560 --> 00:20:32,400
Speaker 8: the reality is of banks would have been more likely

441
00:20:32,440 --> 00:20:34,840
Speaker 8: to hold money at the FED all along instead of

442
00:20:34,840 --> 00:20:35,560
Speaker 8: buying treasuries.

443
00:20:35,560 --> 00:20:37,399
Speaker 7: It would have been an easier solution. They wouldn't have

444
00:20:37,440 --> 00:20:38,840
Speaker 7: had the marked to market issue.

445
00:20:38,960 --> 00:20:41,720
Speaker 8: I think the marked to market accounting is what has

446
00:20:41,760 --> 00:20:44,199
Speaker 8: been harmful here. No different than two thousand and eight

447
00:20:44,240 --> 00:20:46,159
Speaker 8: and nine, but it is what it is. We have

448
00:20:46,200 --> 00:20:48,560
Speaker 8: to account for this every quarter, and of course, I

449
00:20:48,560 --> 00:20:51,680
Speaker 8: think the lack of understanding about when banks would see

450
00:20:52,160 --> 00:20:55,159
Speaker 8: either sales of their securities or simply just the natural amortization.

451
00:20:55,520 --> 00:20:56,960
Speaker 7: I think it's been one of the challenges.

452
00:20:57,200 --> 00:21:00,960
Speaker 8: We're getting better transparency, but I still think the issue

453
00:21:01,040 --> 00:21:04,520
Speaker 8: is to raise incremental capital to create confidence around the

454
00:21:04,560 --> 00:21:06,280
Speaker 8: issues that we still have these marked markets.

455
00:21:06,320 --> 00:21:09,560
Speaker 5: Hey, Chris, just wonderful to get continued input from you

456
00:21:09,840 --> 00:21:12,800
Speaker 5: on this stories that evolves. Thanks for bamdist Christopher Marnach

457
00:21:12,840 --> 00:21:15,360
Speaker 5: of Genny Montgomery Scott on the latest from First Republic.

458
00:21:19,480 --> 00:21:22,600
Speaker 1: What we know for certain is perhaps any president of

459
00:21:22,640 --> 00:21:27,280
Speaker 1: the United States, even of the Democratic persuasion, maybe would

460
00:21:27,320 --> 00:21:29,760
Speaker 1: like to talk to a banker in our legislative branch

461
00:21:29,840 --> 00:21:32,840
Speaker 1: this morning. He would of course pick the Republican from Arkansas,

462
00:21:33,200 --> 00:21:36,640
Speaker 1: french Hill. He have dealta trust years ago in Arkansas.

463
00:21:36,880 --> 00:21:40,359
Speaker 1: The banker french Hill joins us this morning, French I

464
00:21:40,359 --> 00:21:43,760
Speaker 1: think you, more than anyone in Congress, are qualified to

465
00:21:43,840 --> 00:21:47,760
Speaker 1: talk about the contagion effect of what happened with these

466
00:21:47,840 --> 00:21:52,480
Speaker 1: marketing exercises on the West Coast. There are seventy four

467
00:21:52,600 --> 00:21:57,439
Speaker 1: banks in Arkansas. How are they affected by SVB and

468
00:21:57,480 --> 00:21:59,960
Speaker 1: the alphabet soup that gets you to f.

469
00:22:02,080 --> 00:22:04,520
Speaker 9: Well, Tom, it's good to be with you this morning,

470
00:22:04,680 --> 00:22:07,280
Speaker 9: you know, and staying in touch with my bank commissioner

471
00:22:07,320 --> 00:22:11,240
Speaker 9: in Arkansas and touching base with the industry there. Our

472
00:22:11,600 --> 00:22:15,199
Speaker 9: bankers have done well. They've been able to maintain and

473
00:22:15,240 --> 00:22:18,320
Speaker 9: grow deposits. They had excellent earnings reports for the companies

474
00:22:18,359 --> 00:22:21,439
Speaker 9: that are public, so the business seems solid there. And

475
00:22:21,480 --> 00:22:24,960
Speaker 9: that's why I feel like the contagion and challenges that

476
00:22:24,960 --> 00:22:27,080
Speaker 9: we've had since the first week of March have been

477
00:22:27,080 --> 00:22:31,280
Speaker 9: connected to these banks with unusual business strategies.

478
00:22:30,960 --> 00:22:33,840
Speaker 1: Long ago and far away. Will you Isaac, Robert McTeer

479
00:22:33,920 --> 00:22:38,160
Speaker 1: and others had to deal with a multiple bank national crisis,

480
00:22:38,560 --> 00:22:41,600
Speaker 1: what action would you like to see from the executive

481
00:22:41,640 --> 00:22:44,240
Speaker 1: branch to assist the troubled bank?

482
00:22:45,560 --> 00:22:48,639
Speaker 9: You know, I think the Fed's taken quick action. I

483
00:22:48,680 --> 00:22:51,720
Speaker 9: think they had the tools that they need to resolve

484
00:22:51,760 --> 00:22:54,200
Speaker 9: the situations that we face right now, both in their

485
00:22:54,240 --> 00:23:00,280
Speaker 9: temporary loan facilities, in their thirteen Section thirteen power that

486
00:23:00,320 --> 00:23:03,920
Speaker 9: they have, and then the use of Dodd Frank's powers

487
00:23:03,960 --> 00:23:06,480
Speaker 9: in deposit insurance coverage if they feel like it's a

488
00:23:06,520 --> 00:23:07,359
Speaker 9: systemic risk.

489
00:23:07,720 --> 00:23:09,520
Speaker 4: Congressman, we have to shift. Here is a little bit

490
00:23:09,600 --> 00:23:11,840
Speaker 4: to the debt ceialing debate, which a lot of people

491
00:23:11,960 --> 00:23:14,520
Speaker 4: in markets aren't as focused on, but will be probably

492
00:23:14,800 --> 00:23:17,760
Speaker 4: in a couple months time or possibly sooner. Kevin McCarthy,

493
00:23:17,800 --> 00:23:20,399
Speaker 4: the Leader of the House for Republicans, is trying to

494
00:23:20,400 --> 00:23:23,680
Speaker 4: put together this Republican plan and push it through getting

495
00:23:23,800 --> 00:23:27,399
Speaker 4: votes to have this be the unified agreement at time

496
00:23:27,400 --> 00:23:29,159
Speaker 4: when a lot of people are pushing back in the

497
00:23:29,200 --> 00:23:32,159
Speaker 4: Republican Party. Do you support this build you think it

498
00:23:32,200 --> 00:23:34,000
Speaker 4: has what it means to cross the line.

499
00:23:35,160 --> 00:23:37,600
Speaker 9: Lisa, I do. I think Kevin McCarthy has listened to

500
00:23:37,640 --> 00:23:41,000
Speaker 9: his conference over the past sixty days and has created

501
00:23:41,040 --> 00:23:44,920
Speaker 9: a consensus program where it meets his two standards. One

502
00:23:44,920 --> 00:23:47,199
Speaker 9: that we would not support a clean debt seialing we

503
00:23:47,280 --> 00:23:49,280
Speaker 9: just don't have the support for that in our conference,

504
00:23:49,560 --> 00:23:52,440
Speaker 9: and we wouldn't support a tax increase. And so he's

505
00:23:52,480 --> 00:23:55,400
Speaker 9: crafted a plan that has savings of four point eight

506
00:23:55,440 --> 00:23:58,919
Speaker 9: trillion dollars over ten years and raises the debt ceiling

507
00:23:59,080 --> 00:24:01,800
Speaker 9: until next year. I think it will pass. It could

508
00:24:01,880 --> 00:24:04,240
Speaker 9: pass today, and I think he's done a good job

509
00:24:04,280 --> 00:24:06,840
Speaker 9: listening to our conference. And what we need, Lisa, is

510
00:24:06,840 --> 00:24:12,280
Speaker 9: for President Biden to answer Speaker McCarthy's call from February first,

511
00:24:12,560 --> 00:24:15,320
Speaker 9: let's meet and discuss this on a bipartisan basis.

512
00:24:15,359 --> 00:24:17,080
Speaker 4: Well, a lot of people would argue and push back,

513
00:24:17,119 --> 00:24:20,080
Speaker 4: saying that basically this is a grab bag of Republican

514
00:24:20,119 --> 00:24:25,000
Speaker 4: talking points sort of underneath the bill that Kevin McCarthy

515
00:24:25,080 --> 00:24:27,920
Speaker 4: has put together. I mean, is it the right starting point?

516
00:24:27,960 --> 00:24:30,919
Speaker 4: Do you feel like both sides, including the Republicans, are

517
00:24:30,960 --> 00:24:32,720
Speaker 4: debating and arguing in good faith.

518
00:24:34,040 --> 00:24:37,439
Speaker 9: Well, look, the Senate Democrats, led by Chuck Schumer can't

519
00:24:37,480 --> 00:24:40,000
Speaker 9: pass a clean debt ceiling, and so it's to the

520
00:24:40,080 --> 00:24:43,280
Speaker 9: House to lead by offering to increase the debt ceiling.

521
00:24:43,320 --> 00:24:44,959
Speaker 9: But go back to some of the things we've been

522
00:24:45,000 --> 00:24:47,840
Speaker 9: talking about now for two years, which is, let's stop

523
00:24:47,880 --> 00:24:51,520
Speaker 9: the pandemic level of spending. Let's go back to controlling spending.

524
00:24:51,800 --> 00:24:55,800
Speaker 9: We propose a spending cap on discretionary spending, and we

525
00:24:55,920 --> 00:24:58,480
Speaker 9: propose things that will help the economy grow, get people

526
00:24:58,560 --> 00:25:01,440
Speaker 9: back to work, and save time payers money. I think

527
00:25:01,440 --> 00:25:03,800
Speaker 9: it's a good list. I understand your point about what's

528
00:25:03,840 --> 00:25:06,160
Speaker 9: in it, but I think it's a very good starting point,

529
00:25:06,160 --> 00:25:09,000
Speaker 9: and it unifies Republicans to pass a debt ceiling.

530
00:25:09,080 --> 00:25:13,000
Speaker 1: In French, we've aged done this the late great Pete Peterson.

531
00:25:13,240 --> 00:25:17,600
Speaker 1: Paul Song has lost way too early. Sam Nunn of Georgia,

532
00:25:17,880 --> 00:25:20,639
Speaker 1: I've heard it all before. When are we going to

533
00:25:20,720 --> 00:25:24,760
Speaker 1: get our act together, such as a commission that we'll

534
00:25:24,800 --> 00:25:27,479
Speaker 1: get this done, where a commission will like you know,

535
00:25:27,520 --> 00:25:30,439
Speaker 1: Simpson Bulls, where we'll get a commission that we'll do

536
00:25:30,600 --> 00:25:34,000
Speaker 1: the job. Republicans and Democrats refuse to do.

537
00:25:35,119 --> 00:25:36,919
Speaker 9: Boy, Tom, it's such a good point, and I do

538
00:25:37,000 --> 00:25:41,200
Speaker 9: agree with you, particularly on mandatory spending in our programs

539
00:25:41,280 --> 00:25:44,239
Speaker 9: like Social Security, medicare, the big programs that grow at

540
00:25:44,240 --> 00:25:46,720
Speaker 9: six percent a year, sometimes three times the rate of

541
00:25:46,720 --> 00:25:50,040
Speaker 9: growth in the economy. President Obama had that opportunity with

542
00:25:50,080 --> 00:25:52,919
Speaker 9: Speaker Bayner, with Simpson Bowles, and no action took place.

543
00:25:53,440 --> 00:25:57,119
Speaker 9: But when President Johnson started the Great Society programs and

544
00:25:57,160 --> 00:26:00,639
Speaker 9: spent trillions, you had mandatory spending all a third of

545
00:26:00,680 --> 00:26:03,320
Speaker 9: the budget then and obviously not a big interest cost.

546
00:26:03,760 --> 00:26:06,399
Speaker 9: Now we have two thirds of the budget is mandatory spending,

547
00:26:06,400 --> 00:26:09,960
Speaker 9: and we're facing ten trillion dollars in interest only over

548
00:26:09,960 --> 00:26:12,919
Speaker 9: the next ten years. So I think a bipartisan commission

549
00:26:13,320 --> 00:26:16,040
Speaker 9: we tackle up or down mandatory spending is critical and

550
00:26:16,040 --> 00:26:16,920
Speaker 9: I would support that.

551
00:26:17,000 --> 00:26:20,439
Speaker 1: Away from your remed Olivia Blanchard does the economics and

552
00:26:20,480 --> 00:26:22,960
Speaker 1: says we got lucky. We got a set of low

553
00:26:23,040 --> 00:26:27,280
Speaker 1: interest rates, a low sluggish regime where growth could stay

554
00:26:27,320 --> 00:26:30,040
Speaker 1: above interestates. I don't want to go into the economics

555
00:26:30,119 --> 00:26:33,960
Speaker 1: right now, but basically he's suggesting the government had a

556
00:26:34,040 --> 00:26:37,600
Speaker 1: gift handed to them that allowed for this debt extension

557
00:26:38,040 --> 00:26:41,040
Speaker 1: over the last ten years. Do you feel now that

558
00:26:41,160 --> 00:26:45,080
Speaker 1: things have changed now the mathematics is different at the

559
00:26:45,119 --> 00:26:48,680
Speaker 1: Congressional Budget Office.

560
00:26:47,680 --> 00:26:50,359
Speaker 9: I think so, Tom. I mean you're facing interest costs

561
00:26:50,359 --> 00:26:54,919
Speaker 9: that will exceed the annual expenditures on national defense in

562
00:26:55,000 --> 00:26:57,920
Speaker 9: the coming year, and as I say, ten trillion dollars

563
00:26:57,920 --> 00:27:01,280
Speaker 9: of interest over the next ten years the President's forecast.

564
00:27:01,600 --> 00:27:04,840
Speaker 9: So we're talking about interest now truly crowding out spending

565
00:27:04,880 --> 00:27:07,640
Speaker 9: priorities for Congress. I think that's a wake up call

566
00:27:07,720 --> 00:27:09,320
Speaker 9: for the Congress, and a wake up call to go

567
00:27:09,400 --> 00:27:12,399
Speaker 9: back to debating how do we have zero deficits and

568
00:27:12,440 --> 00:27:14,520
Speaker 9: how do we reform mandatory spending programs.

569
00:27:14,560 --> 00:27:17,199
Speaker 5: A congressman, I'm confused, maybe because it's because I'm a

570
00:27:17,240 --> 00:27:19,960
Speaker 5: foreigner and have only lived here seven or eight years.

571
00:27:19,960 --> 00:27:21,960
Speaker 5: So help me. I thought you had to raise the

572
00:27:22,000 --> 00:27:25,600
Speaker 5: debt ceiling because of spending already approved by Congress. Is

573
00:27:25,640 --> 00:27:26,399
Speaker 5: that not the case?

574
00:27:27,520 --> 00:27:30,640
Speaker 9: Oh, Jonathan, you're very good this morning. Yes, of course,

575
00:27:30,680 --> 00:27:33,159
Speaker 9: you're raising the debt ceiling to cover spending that's already

576
00:27:33,160 --> 00:27:36,040
Speaker 9: taken place. But it gives us an opportunity to have

577
00:27:36,119 --> 00:27:39,359
Speaker 9: this two way conversation between the executive branch and the

578
00:27:39,440 --> 00:27:41,800
Speaker 9: legislative branch, and we've seen this all the time. This

579
00:27:41,840 --> 00:27:44,600
Speaker 9: is why I think Joe Biden's a hypocrite on this issue,

580
00:27:44,600 --> 00:27:47,440
Speaker 9: because he was the lead negotiator when he was Vice

581
00:27:47,480 --> 00:27:51,760
Speaker 9: president on increasing the debt ceiling with budget reforms. Nancy

582
00:27:51,760 --> 00:27:55,320
Speaker 9: Pelosi in twenty nineteen did the same thing to Donald Trump. Sorry,

583
00:27:55,480 --> 00:27:58,359
Speaker 9: we can't raise the clean debt ceiling. We need budget reforms.

584
00:27:58,600 --> 00:28:00,760
Speaker 9: So it's an opportunity for the two sides to have

585
00:28:00,840 --> 00:28:03,960
Speaker 9: a conversation. That's why the debt sealing vote is important.

586
00:28:04,040 --> 00:28:06,080
Speaker 5: I think I'd go one step further. It's a game

587
00:28:06,119 --> 00:28:09,400
Speaker 5: that Congress seems to play, the misleads the public. I'm

588
00:28:09,400 --> 00:28:12,160
Speaker 5: not here to advocate to say that we should have

589
00:28:12,760 --> 00:28:15,679
Speaker 5: massive deficits and that the debt should carry on piling

590
00:28:15,720 --> 00:28:18,520
Speaker 5: up to forty to fifty trillion. Congressman, I just think

591
00:28:18,520 --> 00:28:21,520
Speaker 5: it's disingenuous to sit here and say we've got a

592
00:28:21,560 --> 00:28:24,160
Speaker 5: debt problem, but at the same time, we can't raise

593
00:28:24,200 --> 00:28:27,520
Speaker 5: the debt limit because ultimately, as you know, it's Congress,

594
00:28:27,560 --> 00:28:29,840
Speaker 5: which you're a part of, that's alread approved this spending.

595
00:28:30,240 --> 00:28:32,440
Speaker 5: It doesn't matter who's in charge of Congress, you keep

596
00:28:32,440 --> 00:28:35,560
Speaker 5: approving this spending. We can at the same time. Can't

597
00:28:35,600 --> 00:28:37,560
Speaker 5: we say that you need to raise the debt limit,

598
00:28:37,720 --> 00:28:40,240
Speaker 5: but also we need to get debt under control. Can't

599
00:28:40,280 --> 00:28:42,480
Speaker 5: you say both those same things simultaneously.

600
00:28:43,320 --> 00:28:45,280
Speaker 9: Well, I think I have in this interview by answering

601
00:28:45,360 --> 00:28:48,080
Speaker 9: Tom's question about a commission to get the long term

602
00:28:48,160 --> 00:28:51,760
Speaker 9: drivers of debt and deficit down and also to your

603
00:28:51,800 --> 00:28:54,280
Speaker 9: point about bringing the two parties together to work on

604
00:28:54,320 --> 00:28:57,760
Speaker 9: a bipartisan basis. So I take your point technically, but

605
00:28:57,920 --> 00:29:01,480
Speaker 9: politicians need deadlines. They work on deadlines, and the dead

606
00:29:01,560 --> 00:29:04,640
Speaker 9: sailing is a hard deadline, and the budget ten year

607
00:29:04,720 --> 00:29:07,600
Speaker 9: forecast can be a more amorphous deadline.

608
00:29:07,840 --> 00:29:10,960
Speaker 5: Congressman, is a conversation we'll continue having notedown French show.

609
00:29:11,400 --> 00:29:13,200
Speaker 5: Thank you, sir, Thank you very much.

610
00:29:23,920 --> 00:29:27,240
Speaker 1: Timothy Horn is senior analyst at OpCo Oppenheimer and joins

611
00:29:27,320 --> 00:29:30,880
Speaker 1: us this morning with a real gift here on Microsoft

612
00:29:30,880 --> 00:29:32,680
Speaker 1: as well. Tim Let's go back to the time of

613
00:29:32,800 --> 00:29:36,600
Speaker 1: Rick Sherland and an old Microsoft of old. Let's begin

614
00:29:36,720 --> 00:29:40,960
Speaker 1: with a new Microsoft. How is this Microsoft different than

615
00:29:40,960 --> 00:29:44,400
Speaker 1: the Microsoft Rick Sherlind covered years ago at Gold and Sachs.

616
00:29:44,760 --> 00:29:47,680
Speaker 1: How's a new Microsoft different than our stereotype?

617
00:29:49,560 --> 00:29:51,360
Speaker 7: Well, for one, it's not a monopoly anymore.

618
00:29:51,400 --> 00:29:54,240
Speaker 10: So they've learned how to compete and create new products,

619
00:29:54,320 --> 00:29:57,680
Speaker 10: and they totally position to the cloud where they were really.

620
00:29:57,440 --> 00:30:00,400
Speaker 7: Far behind Amazon and as a result to be I

621
00:30:00,440 --> 00:30:01,720
Speaker 7: think a lot more innovative.

622
00:30:02,240 --> 00:30:04,600
Speaker 10: So you've seen them take the lead on AI and

623
00:30:04,640 --> 00:30:08,080
Speaker 10: they kind of optimize their infrastructure, the whole business model.

624
00:30:07,880 --> 00:30:10,240
Speaker 7: Right now around AI, which is very different.

625
00:30:10,640 --> 00:30:12,760
Speaker 1: What is their use of cash picture? We saw a

626
00:30:12,800 --> 00:30:15,200
Speaker 1: share a buyback from Google that was stunning. We see

627
00:30:15,200 --> 00:30:18,240
Speaker 1: it frankly from others outside the sector. But do you

628
00:30:18,360 --> 00:30:22,320
Speaker 1: look in the forward here with this good news, with margin, resiliency,

629
00:30:22,760 --> 00:30:26,200
Speaker 1: with a defensiveness, a constructive tone, do you look for

630
00:30:26,240 --> 00:30:29,000
Speaker 1: a new use of cash and share buyback and dividend.

631
00:30:30,400 --> 00:30:31,960
Speaker 7: They're going to be pretty steady.

632
00:30:32,000 --> 00:30:34,160
Speaker 10: They have a steady dividend, you know that's going to

633
00:30:34,200 --> 00:30:36,720
Speaker 10: grow in line with earnings. They steady buybacks and the

634
00:30:36,800 --> 00:30:39,080
Speaker 10: throwing in line with earnings. They say they're going to

635
00:30:39,080 --> 00:30:40,560
Speaker 10: spend a lot more money on Capex.

636
00:30:40,720 --> 00:30:41,440
Speaker 7: You know for AI.

637
00:30:41,600 --> 00:30:44,800
Speaker 10: These new Nvidio chips are very expensive and they're buying

638
00:30:44,800 --> 00:30:45,560
Speaker 10: an awful lot of them.

639
00:30:46,160 --> 00:30:51,880
Speaker 4: Do you buy the promise of open aye tim.

640
00:30:50,880 --> 00:30:53,920
Speaker 7: Totally completely and totally. I buy into it.

641
00:30:53,960 --> 00:30:55,720
Speaker 10: I think it's going to be the most profound thing

642
00:30:55,720 --> 00:30:58,680
Speaker 10: we've seen in ten, you know, maybe twenty years longer.

643
00:30:58,800 --> 00:31:00,760
Speaker 7: I kind of think back when I first got on.

644
00:31:00,760 --> 00:31:04,000
Speaker 10: The internet thirty years ago, you know, you know how

645
00:31:04,120 --> 00:31:05,760
Speaker 10: much of a revolution that was and how much it

646
00:31:05,840 --> 00:31:07,240
Speaker 10: changed my life, And I think we're going to look

647
00:31:07,240 --> 00:31:07,800
Speaker 10: at the same thing.

648
00:31:08,040 --> 00:31:10,720
Speaker 4: So then if that's the case, is it a reliability

649
00:31:10,800 --> 00:31:13,080
Speaker 4: for alphabet that they kind of downplayed it, perhaps to

650
00:31:13,080 --> 00:31:16,080
Speaker 4: get a competitive edge with respect to Microsoft, perhaps to

651
00:31:16,480 --> 00:31:18,720
Speaker 4: downplay fears that they're going to lose some sort of

652
00:31:18,760 --> 00:31:21,560
Speaker 4: pre eminence with their Google search engine to Microsoft. But

653
00:31:21,600 --> 00:31:23,280
Speaker 4: do you think that they're going to be left behind

654
00:31:23,360 --> 00:31:25,320
Speaker 4: because they're not emphasizing it to the same degree.

655
00:31:26,840 --> 00:31:28,920
Speaker 10: It's going to be the critical six to nine months

656
00:31:28,920 --> 00:31:31,920
Speaker 10: ahead of us because open ai gets better and better

657
00:31:31,960 --> 00:31:34,320
Speaker 10: the more people they have using it. But we know

658
00:31:34,400 --> 00:31:36,640
Speaker 10: that Google and Amazon are throwing billions of.

659
00:31:36,560 --> 00:31:38,840
Speaker 7: Dollars at AI. We know they have very very good

660
00:31:38,920 --> 00:31:40,040
Speaker 7: large language models.

661
00:31:40,400 --> 00:31:42,040
Speaker 10: The key is I got to get them rolled out

662
00:31:42,040 --> 00:31:44,600
Speaker 10: and get people using them, or else Microsoft will once

663
00:31:44,600 --> 00:31:48,120
Speaker 10: again become the operative system, likely with the PC for

664
00:31:48,200 --> 00:31:51,440
Speaker 10: one of the most important technologies for the next twenty years.

665
00:31:51,560 --> 00:31:55,160
Speaker 4: I understand the promise of this purely from a technological

666
00:31:55,160 --> 00:31:56,880
Speaker 4: point of view, and the promise of in terms of

667
00:31:56,880 --> 00:31:59,840
Speaker 4: efficiency as well as productivity tim but what is the

668
00:31:59,840 --> 00:32:04,720
Speaker 4: timeframe for this being actually profitable for the likes of Microsoft.

669
00:32:05,720 --> 00:32:06,600
Speaker 7: For open Ai.

670
00:32:06,760 --> 00:32:10,240
Speaker 10: For them, they have a problem of product called GitHub Copilot,

671
00:32:10,240 --> 00:32:13,320
Speaker 10: which is helping people write software, and it's improved the

672
00:32:13,360 --> 00:32:17,120
Speaker 10: amount of software any programer can break by fifty percent.

673
00:32:17,480 --> 00:32:19,480
Speaker 10: They charged ten dollars a month for that, and they

674
00:32:19,480 --> 00:32:23,000
Speaker 10: have ten thousand companies using that product. They're going to

675
00:32:23,080 --> 00:32:27,240
Speaker 10: charge similar kind of add on for Office three sixty five,

676
00:32:27,440 --> 00:32:28,920
Speaker 10: and that will probably be in.

677
00:32:28,880 --> 00:32:30,520
Speaker 7: The next six to twelve months.

678
00:32:30,680 --> 00:32:33,600
Speaker 10: They'll start really adding on prices on these different applications.

679
00:32:33,640 --> 00:32:36,560
Speaker 10: But importantly, they're just bundling together a whole set of

680
00:32:36,600 --> 00:32:38,920
Speaker 10: new products. They're getting a whole set of new customers

681
00:32:38,920 --> 00:32:41,640
Speaker 10: they never would have gotten before new startups sort of

682
00:32:41,680 --> 00:32:43,520
Speaker 10: gone to Amazon. Now they're going to Microsoft.

683
00:32:43,880 --> 00:32:47,520
Speaker 1: Tim, you've been doing this for ages. Can you extrapolate

684
00:32:47,640 --> 00:32:51,680
Speaker 1: what you witnessed yesterday with Microsoft pre market seven maybe

685
00:32:51,720 --> 00:32:55,120
Speaker 1: even eight percent? Can you extrapolate that over to all

686
00:32:55,160 --> 00:32:58,280
Speaker 1: the other texts, over to Apple, over to Nvidia over

687
00:32:58,320 --> 00:32:59,880
Speaker 1: to Broadcom, et cetera.

688
00:33:01,800 --> 00:33:02,719
Speaker 7: That's a great question.

689
00:33:03,000 --> 00:33:06,360
Speaker 10: I think Microsoft's gaining share, so it's going to be

690
00:33:06,360 --> 00:33:08,520
Speaker 10: a little difficult. I mean, Amazon's quarter is going to

691
00:33:08,520 --> 00:33:11,080
Speaker 10: be very important. But I think this is company by company.

692
00:33:11,400 --> 00:33:13,160
Speaker 10: You know, talking to the math of the call, they're

693
00:33:13,200 --> 00:33:15,320
Speaker 10: not trying to say they're a leading indicator on Macro.

694
00:33:16,240 --> 00:33:18,400
Speaker 10: You know, they don't really know where Macro's going. It's

695
00:33:18,440 --> 00:33:21,360
Speaker 10: probably is slowing down if you listen to mister drug

696
00:33:21,360 --> 00:33:24,200
Speaker 10: and Millery's calling as you were referencing before, for a

697
00:33:24,200 --> 00:33:27,200
Speaker 10: hard landing. But they think they're gaining share on like

698
00:33:27,280 --> 00:33:28,960
Speaker 10: six or seven different products.

699
00:33:28,560 --> 00:33:29,520
Speaker 7: And they're probably right.

700
00:33:29,640 --> 00:33:32,800
Speaker 10: So I'm not entirely sure what it means for the

701
00:33:32,800 --> 00:33:34,280
Speaker 10: whole tech center sector at.

702
00:33:34,240 --> 00:33:37,040
Speaker 4: This point, Tim, As you talk about this arms race

703
00:33:37,120 --> 00:33:40,600
Speaker 4: and artificial intelligence, where are the ethical concerns, especially as

704
00:33:40,640 --> 00:33:43,280
Speaker 4: a lot of tech giants have been talking about perhaps

705
00:33:43,320 --> 00:33:45,880
Speaker 4: pumping the brakes a little bit and understanding it a

706
00:33:45,880 --> 00:33:47,880
Speaker 4: little bit better before it gets rolled out in some

707
00:33:47,920 --> 00:33:49,000
Speaker 4: sort of mass.

708
00:33:51,120 --> 00:33:51,960
Speaker 7: It's a great question.

709
00:33:52,360 --> 00:33:55,320
Speaker 10: I'm no expert on it, but you know, automobiles skill

710
00:33:55,320 --> 00:33:57,240
Speaker 10: a lot of people, firearms skill a lot of people

711
00:33:57,320 --> 00:33:58,960
Speaker 10: go on and on a lot of medicine kills a

712
00:33:59,000 --> 00:34:01,120
Speaker 10: lot of people. You know, it doesn't mean that be

713
00:34:01,200 --> 00:34:04,360
Speaker 10: kind of self developing medicines and I think the genie's

714
00:34:04,360 --> 00:34:06,360
Speaker 10: out of the box here and AI we're moving forward.

715
00:34:06,480 --> 00:34:08,120
Speaker 10: You know, whatever happens, we're just going to meet some

716
00:34:08,160 --> 00:34:10,839
Speaker 10: regulatory I think guardrails around it.

717
00:34:11,120 --> 00:34:13,440
Speaker 5: Hi, Tim, thanks for the like syst on Microsoft, Let's

718
00:34:13,440 --> 00:34:16,120
Speaker 5: stuck us out by close to wit percent. That's the name.

719
00:34:16,160 --> 00:34:17,920
Speaker 5: Will be focused on gotting to the opening bounty.

720
00:34:18,120 --> 00:34:21,960
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721
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722
00:34:26,560 --> 00:34:30,080
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723
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726
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