WEBVTT - Bloomberg Surveillance TV: July 25, 2024 0:00:00.120 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:36.879 Terminal and the Bloomberg Business app. We begin with our 0:00:36.880 --> 0:00:39.400 top story, a big saloff in big tech, sending the 0:00:39.479 --> 0:00:41.280 S and P five hundred to its worst day since 0:00:41.280 --> 0:00:45.240 December twenty two. Anastasia amorroso I Capital writing this tech 0:00:45.280 --> 0:00:49.080 consolidation and saloff likely has more to go. Our performance 0:00:49.080 --> 0:00:51.760 in terms of positive surprises led the significant mag seven 0:00:51.800 --> 0:00:54.520 stocks out performance over the past year and a half, 0:00:54.800 --> 0:00:57.720 but it now may be coming to an end. Alastaja 0:00:57.800 --> 0:00:59.600 joins us for more. Anastaga, good morning, It's going to 0:00:59.600 --> 0:01:01.720 see you to see what are we seeing take place here? 0:01:01.800 --> 0:01:04.720 Just the massive technical unwind of consensus positions across the board. 0:01:05.080 --> 0:01:07.319 Is it a growth scare, rotation of boarding gap, what 0:01:07.440 --> 0:01:07.839 is this. 0:01:08.000 --> 0:01:10.360 Well, I think the technical backdrop is part of the story. 0:01:10.440 --> 0:01:13.200 And obviously you know the technicals were very stretched coming 0:01:13.200 --> 0:01:16.160 into I would say June for technology shares in particular, 0:01:16.280 --> 0:01:18.200 whether you looked at physicianing, whether you looked at the 0:01:18.240 --> 0:01:21.640 overbought conditions. Remember we were the relative strength indicator over 0:01:21.680 --> 0:01:23.000 seventy for quite some time. 0:01:23.240 --> 0:01:25.040 So I think that explains partly on wine. 0:01:25.040 --> 0:01:26.600 When you see a setup like that, you think, well, 0:01:26.640 --> 0:01:28.640 something's going to happen to take us down. But I 0:01:28.720 --> 0:01:31.839 do think also there's a more fundamental story here, which 0:01:31.880 --> 0:01:35.080 is their earning surprises. As I mentioned, that's what really 0:01:35.120 --> 0:01:37.640 lifted the Max seven stocks higher. If you look at 0:01:37.720 --> 0:01:39.920 buy how much they were beating expectations. 0:01:40.120 --> 0:01:41.280 That's one way to look at it. 0:01:41.319 --> 0:01:43.160 The rest of the S and P was not doing much, 0:01:43.319 --> 0:01:45.440 but the Max seven was doing a lot. The other 0:01:45.520 --> 0:01:47.760 thing to think about is how much were their earnings 0:01:47.800 --> 0:01:50.360 revisions going up for some of those technology stocks, And 0:01:50.400 --> 0:01:53.840 again it's by a significant amount. That is not likely 0:01:53.880 --> 0:01:56.560 to be the case going forward, and case in point, 0:01:56.600 --> 0:02:00.200 Alphabet and Tesla did not see the positive surprises or 0:02:00.200 --> 0:02:02.680 saw a negative surprise, and to your point, the market 0:02:02.720 --> 0:02:05.920 is really severely punishing that. So you have lofty expectations, 0:02:05.920 --> 0:02:09.079 you have lofty valuations, and now you don't have the same. 0:02:08.919 --> 0:02:10.720 Surprise factor as you did before. 0:02:10.800 --> 0:02:14.560 So that's why I think investors will continue this on 0:02:14.639 --> 0:02:15.399 wine trade. 0:02:15.919 --> 0:02:17.800 This is a very confusing market to me because on 0:02:17.800 --> 0:02:20.079 one hand, I believe in this sort of unwined story, 0:02:20.120 --> 0:02:22.240 and then it doesn't seem so pernicious. It's just basically 0:02:22.320 --> 0:02:25.799 taking chips off the table cashing in just technically for 0:02:25.919 --> 0:02:28.399 risk adjustment. On the flip side, I want to stick 0:02:28.400 --> 0:02:30.040 on American air for a second, and I'm not asking 0:02:30.080 --> 0:02:32.639 you to comment specifically on this airline, but the fact 0:02:32.639 --> 0:02:35.160 that the shares are down so much, even after as 0:02:35.240 --> 0:02:37.400 John was mentioning being punished all through the year, it 0:02:37.440 --> 0:02:40.680 is down twenty six percent year to date really suggests 0:02:40.680 --> 0:02:44.280 that we're coming off really low expectations and still getting 0:02:44.320 --> 0:02:46.280 punished when earnings disappoint. 0:02:46.760 --> 0:02:48.000 Doesn't that reflect this. 0:02:48.000 --> 0:02:51.120 Feeling of sort of the unknown of how much and 0:02:51.120 --> 0:02:52.520 how quickly growth is weakening? 0:02:52.880 --> 0:02:55.720 Yeah, but I think the expectations were probably not low 0:02:55.840 --> 0:02:58.600 enough coming into this quarter. If you think about how 0:02:58.680 --> 0:03:02.760 much the expectations typically get revised down it's let's say 0:03:02.760 --> 0:03:05.160 three or four percent this time around that got revised 0:03:05.160 --> 0:03:07.160 down by all of half of a percent. So I 0:03:07.160 --> 0:03:10.160 don't think we really reset the bar substantially lower. And 0:03:10.240 --> 0:03:12.400 that's why going into the reporting season, one of the 0:03:12.400 --> 0:03:15.120 things we've been flagging is there's likely this disconnect that's 0:03:15.120 --> 0:03:18.519 building between the earnings expectations and what's happening in the economy. 0:03:18.720 --> 0:03:21.000 And if you look at the Economic Surprise Index, it's 0:03:21.000 --> 0:03:21.799 been negative for. 0:03:21.840 --> 0:03:22.520 Quite some time. 0:03:22.880 --> 0:03:25.359 If you look at the US consumer, Lisa, I think 0:03:25.400 --> 0:03:28.240 I'm now maybe finally joining you in that camp. There 0:03:28.320 --> 0:03:31.000 is a weakening in the US consumer, and there's the 0:03:31.080 --> 0:03:33.680 unemployment rate that did go up from three point four 0:03:33.720 --> 0:03:35.040 percent to four point one percent. 0:03:35.240 --> 0:03:36.800 That's not something to disregard. 0:03:37.120 --> 0:03:40.000 So I think that's the squaring that we have to 0:03:40.120 --> 0:03:43.200 do in the markets is acknowledged, the fact that earnings 0:03:43.200 --> 0:03:46.000 expectations were too high for the economic growth that we 0:03:46.040 --> 0:03:46.560 have today. 0:03:46.720 --> 0:03:49.400 What does that mean for how bullish bearish you are 0:03:49.680 --> 0:03:51.839 on say, tech stocks, which you used to really love 0:03:51.960 --> 0:03:53.520 and you used to lean into you so you can't 0:03:53.520 --> 0:03:56.080 just throw them out because everybody loves them. Yeah, at 0:03:56.080 --> 0:03:57.920 this point, are you looking to buy? 0:03:58.080 --> 0:03:59.720 Is this sort of a biable dip. 0:03:59.560 --> 0:04:01.600 Or is this thing that you stay away from because 0:04:01.920 --> 0:04:03.520 you don't want to get in front of a freight train. 0:04:04.120 --> 0:04:06.440 I think you don't buy just yet, or maybe you 0:04:06.600 --> 0:04:09.640 buy very slowly, but with the with the idea that 0:04:09.680 --> 0:04:11.880 this is likely to play out over the coming months. 0:04:11.960 --> 0:04:13.200 And you know the reason I. 0:04:13.160 --> 0:04:16.400 Say that lease is there's this, you know, Gardner's hype 0:04:16.760 --> 0:04:18.719 chart that I'm sure a lot of us and a 0:04:18.720 --> 0:04:20.800 lot of viewers have seen, and you go through this 0:04:21.600 --> 0:04:25.200 peak of inflated expectations cycle and what's on the other 0:04:25.320 --> 0:04:28.360 end is actually the trough of disillusionment. And I'm not 0:04:28.400 --> 0:04:31.120 saying that we're necessarily going that way for all of 0:04:31.160 --> 0:04:33.400 the AI stocks, but I think for some of them 0:04:33.400 --> 0:04:35.680 we're likely are or it's going to take longer to 0:04:35.800 --> 0:04:39.480 monetize the AI that we're all so excited about. 0:04:39.520 --> 0:04:41.320 So that's why I think that part is going to 0:04:41.320 --> 0:04:42.760 take a little bit longer to play out. 0:04:42.960 --> 0:04:43.120 You know. 0:04:43.200 --> 0:04:44.799 The other part is just given how. 0:04:44.720 --> 0:04:49.040 Long investors have been some of the artificial intelligence stocks, 0:04:49.080 --> 0:04:50.919 I think there's still a lot of selling pressure that 0:04:51.000 --> 0:04:54.279 is likely to come forth. So that's why I would 0:04:54.560 --> 0:04:57.640 think about having a shopping list. But executing that shopping 0:04:57.720 --> 0:05:00.560 list probably over the next few months. The other thing too, 0:05:00.760 --> 0:05:03.720 the market is typically consolidate into the first or I 0:05:03.720 --> 0:05:06.200 should say after the first rate cuts. So whether it's July, 0:05:06.279 --> 0:05:08.719 whether it's September, the market is three months after the 0:05:08.720 --> 0:05:10.039 cut tended to consolidate. 0:05:10.800 --> 0:05:12.000 Information technology. 0:05:12.000 --> 0:05:14.719 If you use the nineteen ninety five cycle for example, 0:05:14.760 --> 0:05:18.200 as a soft landing scenario, infotech rallied into the first 0:05:18.240 --> 0:05:21.200 rate cut, but again it's sold off or consolidated after. 0:05:21.360 --> 0:05:23.359 So that's why I don't. 0:05:23.200 --> 0:05:26.279 Think it's a quick buy the dip here intoechnology, but 0:05:26.400 --> 0:05:28.720 think about is more of a protracted, let's say three 0:05:28.720 --> 0:05:29.920 months consolidation frame. 0:05:30.240 --> 0:05:32.240 Given you've now come on to Lisa's side about these 0:05:32.240 --> 0:05:34.000 concerns in the consumer. 0:05:34.120 --> 0:05:35.839 Where will that play out in the market. 0:05:37.240 --> 0:05:39.880 If consumers aren't spending, what does that mean for potentially 0:05:39.880 --> 0:05:42.040 stocks you want to begin on or pull. 0:05:42.120 --> 0:05:44.240 Well, first of all, what I would say, the consumers 0:05:44.279 --> 0:05:46.800 are spending, right, but they're not spending as much as 0:05:46.800 --> 0:05:48.680 they used to. If you look at credit card spending data, 0:05:48.680 --> 0:05:50.799 for example, if it was up seven or eight percent 0:05:50.839 --> 0:05:52.760 year of year, right now it's maybe three to five percent, 0:05:52.800 --> 0:05:54.640 depending on what kind of a consumer you look at, 0:05:54.760 --> 0:05:57.120 so I think it's a slow down story versus a 0:05:57.120 --> 0:06:01.240 recessionary consumer spending print. But I will say that one 0:06:01.279 --> 0:06:04.560 of the favorite trades that I have in the market today, 0:06:04.640 --> 0:06:06.520 or the rotation trade, which is the other side of 0:06:06.520 --> 0:06:09.440 the technology trade, which is going to things like regional 0:06:09.480 --> 0:06:10.400 banks for example. 0:06:10.800 --> 0:06:13.880 So it's probably not. 0:06:13.880 --> 0:06:15.840 As levered to the consumer as it is to the 0:06:15.839 --> 0:06:18.800 commercial real estate market for example, but regional banks are 0:06:18.839 --> 0:06:21.320 really levered to lower interest rates. 0:06:21.440 --> 0:06:23.040 I think the one or D that we have. 0:06:23.120 --> 0:06:25.160 In this market environment is the FED is likely to 0:06:25.240 --> 0:06:27.960 cut rates, if not this month, then probably in the 0:06:28.000 --> 0:06:29.960 next couple of months. And if that's the case, you 0:06:30.000 --> 0:06:31.840 want to go to those rate cutting beneficiaries. 0:06:32.120 --> 0:06:32.640 If you have. 0:06:32.720 --> 0:06:35.440 Lower rates than some of those unrealized losses on the 0:06:35.480 --> 0:06:38.600 balance sheets of those banks should maybe become less so. 0:06:38.600 --> 0:06:39.440 Than they were before. 0:06:39.800 --> 0:06:42.679 If you have lower rates, you should also have better 0:06:42.760 --> 0:06:45.600 income margins that interest margins for those banks. 0:06:45.839 --> 0:06:47.080 So that's where I. 0:06:47.080 --> 0:06:50.120 Would be looking to position in regionals and small caps 0:06:50.880 --> 0:06:54.600 and utilities, which all of those sort of avoid the consumer. 0:06:54.839 --> 0:06:57.600 Smozampi film in this morning equity features on a rush, 0:06:57.600 --> 0:06:59.600 so by about two tens of one percent just a 0:06:59.640 --> 0:07:01.920 opsode nation. More and more people sort of shift into 0:07:02.120 --> 0:07:05.080 Ramo's camp on the consumer. You notice that it always 0:07:05.080 --> 0:07:06.440 pointed view. They're like, I'm in your camp. 0:07:07.040 --> 0:07:09.880 It's like you run the count, run the camp. 0:07:09.920 --> 0:07:11.840 I'm sort of big pessimists. 0:07:11.880 --> 0:07:13.200 I'm a sort of gloom and doom. 0:07:13.200 --> 0:07:16.160 I think about the sixty forty and Sebastian page is 0:07:17.400 --> 0:07:20.040 Allocation Committee, and basically the bond people are on one side, 0:07:20.040 --> 0:07:21.920 the equity people on the other side, and there's sort 0:07:21.960 --> 0:07:24.600 of a cloud hanging up from bond people and equity. 0:07:24.440 --> 0:07:25.040 Without a die. 0:07:25.360 --> 0:07:27.600 You are a bond person and a stage amoroso of 0:07:27.600 --> 0:07:40.440 my capital and a stage of thank you. So here's 0:07:40.480 --> 0:07:43.400 the latest. Donald Trump ramping up his attacks on Kamala Harris, 0:07:43.440 --> 0:07:47.120 criticizing her record as San Francisco District Attorney and her 0:07:47.160 --> 0:07:50.600 stance on abortion rights. Harris taking aim at Trump and 0:07:50.640 --> 0:07:53.960 the GOP's ties to Project twenty twenty five Lebby Cantrill 0:07:54.000 --> 0:07:56.560 of PIMCO, saying this, well, Trump remains favorite to win 0:07:56.600 --> 0:07:59.320 at this point. His chances as well as the odds 0:07:59.360 --> 0:08:01.800 of a Republican sweep in Congress, and now lower than 0:08:01.800 --> 0:08:04.720 they were just last week. We now view the election 0:08:04.880 --> 0:08:08.400 is more dynamic, with likely more twists ahead. Lebby joins 0:08:08.440 --> 0:08:10.120 us for more Lebby, I can't imagine what those twists 0:08:10.200 --> 0:08:12.920 might be. So let's not even let's not even entertain that. 0:08:12.960 --> 0:08:14.640 I've got a poll in front of me. It's just dropped, 0:08:14.720 --> 0:08:15.920 so I'm going to share it with you. It comes 0:08:15.920 --> 0:08:18.240 from Emerson College, and it reads as follows. It's on 0:08:18.240 --> 0:08:21.320 swing states. In Arizona forty nine percent support for Trump, 0:08:21.360 --> 0:08:25.280 forty four for Harris. Georgia forty eight percent percent support 0:08:25.280 --> 0:08:28.480 for Trump, forty six for Harris, in Michigan forty six 0:08:28.560 --> 0:08:31.560 for Trump, forty five for Harris, Pennsylvania forty eight for Trump, 0:08:31.600 --> 0:08:34.880 forty six for Harris. Wisconsin, they are tied in Wisconsin 0:08:34.920 --> 0:08:38.440 at forty seven percent support Harris and Trump, respectively. When 0:08:38.440 --> 0:08:40.560 we start to get polls like that, more polls like 0:08:40.559 --> 0:08:42.559 that in the coming days and weeks, how much weight 0:08:42.640 --> 0:08:44.400 do you put on them in the early days and 0:08:44.440 --> 0:08:45.360 weeks of this contest. 0:08:45.440 --> 0:08:48.400 Yes, I would say that not a lot right now. 0:08:48.480 --> 0:08:51.200 I think that the polls will be much more telling 0:08:51.320 --> 0:08:54.679 if after the convention and then really in September. And 0:08:54.720 --> 0:08:56.480 this is what we have been telling clients even before 0:08:56.559 --> 0:08:59.559 all this drama, is that really wait until September because 0:08:59.559 --> 0:09:01.920 that's where and just statistically. 0:09:01.320 --> 0:09:02.720 Pulling becomes more predictive. 0:09:02.760 --> 0:09:05.439 Obviously, Poland's never going to be completely clearvoydt in terms 0:09:05.440 --> 0:09:09.240 of who actually shows up to vote, but it becomes 0:09:09.240 --> 0:09:11.199 more predictive as you get closer. So and I say 0:09:11.360 --> 0:09:14.600 especially this because it is so dynamic, because she really 0:09:14.679 --> 0:09:16.760 is reintroducing herself to voters. 0:09:17.440 --> 0:09:18.680 That's good and that's bad. 0:09:18.720 --> 0:09:21.560 I mean, she has a very progressive record that she 0:09:21.679 --> 0:09:23.360 ran on in twenty twenty that she's going to have 0:09:23.400 --> 0:09:25.920 to sort of defend and clarify and what have you. 0:09:26.679 --> 0:09:28.839 But I wouldn't necessarily, I would take all of this 0:09:29.000 --> 0:09:31.480 pulling with a big grain with a big grain of salt. 0:09:31.520 --> 0:09:35.000 So really, after the convention, really wait until September. I 0:09:35.000 --> 0:09:37.280 always tell clients that have a cocktail, go to the beach, 0:09:37.400 --> 0:09:39.920 enjoy your vacation, and then come back to politics and 0:09:39.960 --> 0:09:42.160 siss Sepember, because that's actually when I think it's really 0:09:42.280 --> 0:09:43.560 what will be much more indicative. 0:09:43.600 --> 0:09:45.480 It's hard to have a cocktail given the past few 0:09:45.520 --> 0:09:46.560 weeks that we've been dealing. 0:09:46.360 --> 0:09:47.679 With in US politics. 0:09:47.720 --> 0:09:49.719 But now there's a lot of emphasis on who she's 0:09:49.720 --> 0:09:51.960 going to pick as her running mate, who do you 0:09:52.000 --> 0:09:54.240 think is best for her, not just to support her 0:09:54.240 --> 0:09:57.120 and expand her views because you say she is very progressive, 0:09:57.559 --> 0:09:58.480 but also the. 0:09:58.360 --> 0:10:00.480 Math when it comes to electoral college. Yeah, and so 0:10:00.640 --> 0:10:02.400 I mean, is she very progressive? We don't know. 0:10:02.440 --> 0:10:04.040 I mean, just to clarify, I mean, she ran on 0:10:04.080 --> 0:10:07.599 a very progressive platform. She was a Democratic primary. Yeah, yes, no, 0:10:07.720 --> 0:10:09.880 And again she was running for national office even when 0:10:09.920 --> 0:10:11.880 she was in the Senate. So for sure she has 0:10:11.920 --> 0:10:13.839 a progressive record. I think that's the thing. Though it's 0:10:13.880 --> 0:10:16.120 unknown about hers where does she stand on in many 0:10:16.160 --> 0:10:18.800 of these issues. But you're absolutely right, her running mate 0:10:18.840 --> 0:10:21.640 is going to be a really, really important both because it. 0:10:21.679 --> 0:10:23.840 Is sort of the first public. 0:10:25.640 --> 0:10:29.240 Decision that she is going to make, and oftentimes, you know, 0:10:29.240 --> 0:10:31.200 picking your running mate is really a reflection of the 0:10:31.200 --> 0:10:34.440 top of the ticket's judgment, but also, as you talk about, 0:10:34.760 --> 0:10:38.360 is really the electoral college strategy Arizona, as John just said, 0:10:38.400 --> 0:10:41.720 I mean she's lagging in Arizona. Mark Kelly, the Senator 0:10:41.760 --> 0:10:45.360 from Arizona, who's more moderate, particularly in border issues, that's 0:10:45.400 --> 0:10:47.840 going to be a big liability for her, but also 0:10:47.840 --> 0:10:50.480 could help shore up support in Arizona and then Pennsylvania. 0:10:50.480 --> 0:10:53.160 I I of all those six states that you just mentioned, 0:10:53.200 --> 0:10:56.880 Pennsylvania is going to be the most critical state for 0:10:57.040 --> 0:11:00.000 if Democrats are going to win, they have to win Pennsylvania. 0:11:00.200 --> 0:11:02.760 It's necessary, but it's you know, asday, We're not sufficient. 0:11:02.760 --> 0:11:04.920 I mean, they will have to win other states as well. 0:11:05.280 --> 0:11:07.920 But if they lose Pennsylvania, Democrats have lost this race. 0:11:08.040 --> 0:11:09.200 So Josh Shapiro, the. 0:11:09.200 --> 0:11:13.800 Government popular governor who also has a more moderate stance 0:11:13.840 --> 0:11:16.560 on things like fracking, which she said she was going 0:11:16.640 --> 0:11:19.520 to ban. So yes, no exactly, and she says she's 0:11:19.520 --> 0:11:21.320 talked him a medicare for all, she's talked about defending 0:11:21.320 --> 0:11:23.600 the police, she's talking about banning fracking. I mean, again, 0:11:23.640 --> 0:11:27.200 she has a platform that will be untenable for her 0:11:27.240 --> 0:11:30.000 to run on and win. And that's why I think 0:11:30.000 --> 0:11:32.040 she will need to start clarifying much of that. 0:11:32.320 --> 0:11:32.480 Now. 0:11:32.480 --> 0:11:34.400 The other challenge, sorry, the other challenge is that she's 0:11:34.400 --> 0:11:37.320 the vice president and current city vice president, and she 0:11:37.360 --> 0:11:40.240 can't necessarily distance herself so much from Biden as well. 0:11:40.320 --> 0:11:42.560 So this is she has a lot of challenges, a 0:11:42.559 --> 0:11:44.640 lot of twists and turns ahead in terms of really 0:11:44.720 --> 0:11:46.160 navigating like the policy front. 0:11:46.240 --> 0:11:48.320 You said, the top of the ticket is the judgment 0:11:48.600 --> 0:11:50.760 of the candidate. What does that say about Trump and 0:11:50.800 --> 0:11:51.520 his pick of JD. 0:11:51.640 --> 0:11:53.640 Vans. Yeah, well, as we were. 0:11:53.480 --> 0:11:56.040 Just talking about, I mean this, this decision to pick 0:11:56.120 --> 0:11:58.600 Jade Vance was really a moment in time, right. It 0:11:58.640 --> 0:12:01.199 was on the heels of the assass a Nation attempt. 0:12:02.160 --> 0:12:04.680 It was when Biden was still in the race. It 0:12:04.800 --> 0:12:07.559 was when folks had odds of Trump winning at seventy 0:12:07.600 --> 0:12:12.040 five eighty percent. Republican sweep looked more likely than not, 0:12:12.760 --> 0:12:16.160 and so he wasn't necessarily as concerned about expanding his 0:12:16.480 --> 0:12:20.320 voter base. He wasn't as concerned about as being tight 0:12:20.400 --> 0:12:21.679 as it might end up being. 0:12:22.800 --> 0:12:24.640 So, you know, we'll see whether he, you. 0:12:24.559 --> 0:12:26.480 Know, how how he feels about that Jake Advance. But 0:12:26.520 --> 0:12:28.960 it is much more a doubling down on kind of 0:12:29.000 --> 0:12:32.880 MAGA and on trump Ism than say a Doug Bergham 0:12:32.960 --> 0:12:36.280 or even a Marco Rubio or certainly a Nicki Haley 0:12:36.320 --> 0:12:38.080 some of the other folks who were in the mix. 0:12:38.400 --> 0:12:40.640 So you note that Michelle Obama is still not going 0:12:40.640 --> 0:12:41.640 to do the nominee for. 0:12:44.120 --> 0:12:47.480 Get here, hold on a well, but hold on that 0:12:47.559 --> 0:12:47.880 was full. 0:12:47.960 --> 0:12:49.920 Okay, efinitely that was for us. 0:12:50.000 --> 0:12:51.880 But I really I'm not going to ask you about 0:12:51.880 --> 0:12:54.120 Michelle Obama. I don't think that I was the genesis 0:12:54.160 --> 0:12:55.800 of that. I do want to ask you, though, about 0:12:55.800 --> 0:12:58.280 the tenor of the discussions that you've been having with 0:12:58.440 --> 0:13:02.280 clients overseas outside of the US, how they're viewing this, 0:13:02.559 --> 0:13:05.679 how that affects their investment decisions, what questions they're asking 0:13:06.040 --> 0:13:08.640 to understand the potential ramifications of this. 0:13:08.880 --> 0:13:09.120 Yeah. 0:13:09.120 --> 0:13:11.800 So actually I'm still getting questions about Michelle Obama from 0:13:11.840 --> 0:13:14.520 our Asian clients and about Jamie Diamond. So you know, 0:13:14.679 --> 0:13:17.480 hope spring's eternal, I guess. So I would say there's 0:13:17.480 --> 0:13:20.040 sort of in two lanes. One is around fiscal and 0:13:20.080 --> 0:13:23.040 of course a lot of our clients overseas have a 0:13:23.040 --> 0:13:25.400 lot of dollar and a lot of treasuries exposure, so 0:13:26.280 --> 0:13:28.240 just trying to navigate that, and I think, as we've 0:13:28.280 --> 0:13:31.160 talked about, really the punchline here is that the deficit 0:13:31.240 --> 0:13:34.400 is the biggest loser in November. So regardless of who wins, 0:13:34.760 --> 0:13:38.240 the deficit will remain high, and not only because there 0:13:38.320 --> 0:13:40.520 might be new spending and there might be more task cuts, 0:13:40.520 --> 0:13:42.520 although I think that's going to be difficult just given 0:13:42.920 --> 0:13:45.640 where deficits are right now, but mostly because as we've 0:13:45.640 --> 0:13:47.680 talked about, there won't be a title bit reform, and 0:13:47.679 --> 0:13:49.760 that's what you really need in order to you know, 0:13:49.920 --> 0:13:52.720 to consolidate sort of the budget and what have you. 0:13:53.320 --> 0:13:55.520 And the other concern they have is of course around 0:13:55.520 --> 0:13:58.599 geopolitics and interestingly mixed views here, because I think a 0:13:58.640 --> 0:14:02.079 lot of folks to think that well, at least President Trump, 0:14:02.120 --> 0:14:03.720 we can negotiate. 0:14:03.120 --> 0:14:05.720 With him, whereas maybe a Biden. 0:14:05.520 --> 0:14:08.520 Or Harris may have more of an ideological view. So 0:14:08.920 --> 0:14:10.720 I'm not sure that's actually I'm not sure that's right. 0:14:10.760 --> 0:14:12.800 I mean again, I think the direction of travel here 0:14:13.280 --> 0:14:18.400 around tariffs, around export controls, around even capital flows, around 0:14:18.440 --> 0:14:21.600 scrutiny around you how US investors invest in China is 0:14:21.600 --> 0:14:24.120 going to be sort of pervasive, regardless of who wins. 0:14:24.120 --> 0:14:25.960 So in some ways there's I you know, my view 0:14:25.960 --> 0:14:28.600 is there are maybe fewer distinctions than folks think, but 0:14:28.640 --> 0:14:30.840 those are that's really where our clients are focused. 0:14:30.920 --> 0:14:36.560 The message from get a cocktail, enjoy the beach. 0:14:35.120 --> 0:14:36.120 Last week, how'd that work out? 0:14:36.200 --> 0:14:36.360 Yeah? 0:14:36.600 --> 0:14:38.720 Not well, I'll tell you, yes, this is what I'm 0:14:38.760 --> 0:14:40.960 trying to do, and sort of self something, but it's 0:14:41.000 --> 0:14:42.160 not really working out very well. 0:14:42.200 --> 0:14:42.400 Thank you. 0:14:42.480 --> 0:14:43.200 I like that advice. 0:14:43.280 --> 0:14:45.760 Levi's good to say. Thank you. Letty Cantroll and fim 0:14:45.840 --> 0:14:58.080 Co on the like to. Let's turned back to big tech. 0:14:58.240 --> 0:15:01.760 I spending on AI program and computing needs at Google 0:15:01.840 --> 0:15:04.960 parent Alphabet, prompting a sell off in big tech stocks 0:15:05.080 --> 0:15:07.760 as investors look for more return on AI spending. One 0:15:07.800 --> 0:15:11.760 area companies are investing heavily is in data center capacity. 0:15:12.080 --> 0:15:15.200 Voldemare is Lasak is the global head of Digital Infrastructure 0:15:15.200 --> 0:15:18.480 at KKR and says two mega trends are driving the 0:15:18.520 --> 0:15:22.320 demand for data center capacity, migrating data to the cloud 0:15:22.480 --> 0:15:25.840 and the rise of AI. Voldemarl joined just now for 0:15:25.920 --> 0:15:27.680 more voter Mark. Good to see you, sir, Thanks for 0:15:27.680 --> 0:15:29.720 having me, thank you for being here. Let's just talk 0:15:29.760 --> 0:15:33.320 about what is digital infrastructure. Let's start there, super simple. 0:15:33.440 --> 0:15:34.560 What are we describing here? 0:15:34.760 --> 0:15:36.760 Yeah, it's great, it's a great question. I mean, I 0:15:36.760 --> 0:15:39.400 think to ask the journal. Infrastructure really has three big pillars. 0:15:39.520 --> 0:15:43.280 There's mobile infrastructure traditionally think of it as towers, telecom towers. 0:15:43.680 --> 0:15:46.840 There is the fixed line infrastructure, so it could be 0:15:47.040 --> 0:15:50.520 you know, fiber that delivers connectivity to homes or enterprises. 0:15:50.880 --> 0:15:52.800 And of course I think the topic we're about to 0:15:52.800 --> 0:15:56.840 discuss this is cloud sort of storage and computing infrastructure, 0:15:56.880 --> 0:15:59.520 right ie, data centers most pronouncedly, So those to ours 0:15:59.560 --> 0:16:01.760 are the three big pillars at least how we define 0:16:01.760 --> 0:16:03.400 it digital infrastructure within KKR. 0:16:03.560 --> 0:16:06.080 So let's talk about the investment opportunities and how much 0:16:06.160 --> 0:16:08.280 is going to be invested over the next several years. 0:16:08.480 --> 0:16:10.200 I want to reflect on a quote that came from 0:16:10.240 --> 0:16:12.960 the Google CEO, the Alphabet CEO in the last couple 0:16:13.000 --> 0:16:16.000 of days, when he said, the biggest risk here in 0:16:16.040 --> 0:16:19.600 a cycle with a theme like this is underinvesting and 0:16:19.640 --> 0:16:22.920 not over investing. I sent from your perspective, you're going 0:16:22.960 --> 0:16:24.320 to agree with that stance, am I right? 0:16:24.640 --> 0:16:25.600 Yes? Yes? 0:16:25.640 --> 0:16:27.720 Why is that? Why is this such a big moment 0:16:27.760 --> 0:16:29.120 and why is that the right way to look at 0:16:29.160 --> 0:16:29.920 the balance of risks? 0:16:30.480 --> 0:16:32.880 Well, I think if let's look at the computing piece 0:16:32.960 --> 0:16:34.480 right of it, I think two mega themes that we 0:16:34.600 --> 0:16:37.480 have are obviously under computing and last mile connectivity. And 0:16:37.520 --> 0:16:39.520 I think maybe we'll touch a little bit later on Metronod, 0:16:39.520 --> 0:16:41.400 which is a deal with announced yesterday with a partnership 0:16:41.440 --> 0:16:44.000 with T mobile, but focusing on data center piece. I 0:16:44.000 --> 0:16:47.040 think if you look at the United States and say, 0:16:47.320 --> 0:16:49.960 what was the infrastructure, what was the spand to help 0:16:50.000 --> 0:16:52.840 facilitate the build out of Internet infrastructure or cloud infrastructure, 0:16:52.840 --> 0:16:55.880 So sixteen year cycle from nineteen ninety to two thousand and. 0:16:55.760 --> 0:16:57.280 Six to gigle whatts. 0:16:57.440 --> 0:16:59.520 No longer do we think about data centers in terms 0:16:59.560 --> 0:17:01.920 of square feet. It's really about the amount of power 0:17:02.040 --> 0:17:05.040 that the data centers have. So that's an important factor 0:17:05.080 --> 0:17:07.359 there to consider, and we'll touch on that in a second. 0:17:07.760 --> 0:17:11.679 So Internet infrastructure two gigabots, the next phase was Internet 0:17:11.720 --> 0:17:12.280 two point. 0:17:12.160 --> 0:17:14.159 Zero and cloud eight gigabotts. 0:17:14.160 --> 0:17:19.000 About fifteen years, technology cycles have accelerated, so we're now 0:17:19.040 --> 0:17:22.720 talking about AI build out, Cloud two point zero, Internet 0:17:22.760 --> 0:17:25.119 three point zero as a five year cycle and twenty 0:17:25.160 --> 0:17:27.919