WEBVTT - Microsoft and OpenAI, Treasury Auction, and CZ Zhao 0:00:00.120 --> 0:00:04.360 Bloomberg is now on your dashboard with Apple CarPlay and 0:00:04.360 --> 0:00:08.160 Android Auto. It gives you access to every Bloomberg podcast, 0:00:08.280 --> 0:00:11.560 live audio feeds from Bloomberg Radio, print stories from Bloomberg 0:00:11.640 --> 0:00:14.920 News in audio form, and the latest headlines of the 0:00:14.920 --> 0:00:18.640 click of a button with Bloomberg News. Now it's free 0:00:18.680 --> 0:00:21.439 with the latest version of the Bloomberg Business App. That's 0:00:21.680 --> 0:00:24.400 the Bloomberg Business App. Get it on your phone in 0:00:24.440 --> 0:00:27.760 the Apple App Store or on Google Play. Just download 0:00:27.800 --> 0:00:30.560 the app, connect your phone to your car and get started. 0:00:30.960 --> 0:00:34.400 And it's all presented by our sponsor, Interactive Brokers. 0:00:35.400 --> 0:00:38.600 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:38.640 --> 0:00:39.800 my co host Matt Miller. 0:00:40.200 --> 0:00:44.159 Every business day we bring you interviews from CEOs, market pros, 0:00:44.320 --> 0:00:48.160 and Bloomberg experts, along with essential market Moven News. 0:00:48.720 --> 0:00:51.839 I'm the Bloomberg Markets podcast called Apple Podcasts or wherever 0:00:51.960 --> 0:00:55.080 you listen to podcasts, and at Bloomberg dot Com Slash podcast. 0:00:55.440 --> 0:00:57.960 I actually think it's a huge black eye for Silicon Valley. 0:00:57.960 --> 0:01:00.960 That's just my East Coast bias problem. Let's check in 0:01:01.000 --> 0:01:01.520 with Dan Ives. 0:01:01.520 --> 0:01:04.920 He's a senior equity analyst a web Bush Securities. Dan 0:01:04.959 --> 0:01:07.920 you follow Microsoft closer, you follow the tech space as 0:01:07.959 --> 0:01:10.320 closely as anyone else at here. We've had a few 0:01:10.400 --> 0:01:13.080 days here to kind of digest what is a very 0:01:13.120 --> 0:01:15.640 fluid situation still to this minute. 0:01:16.160 --> 0:01:17.440 What are some of your takeaways here? 0:01:18.640 --> 0:01:21.119 I mean, if you have a clown show that runs 0:01:21.120 --> 0:01:24.679 the board, this is what happens. And essentially this is 0:01:24.840 --> 0:01:28.480 four individuals that took down a ninety billion dollar company. 0:01:28.720 --> 0:01:32.080 And I think when what happened over the weekend, they 0:01:32.120 --> 0:01:35.800 were essentially seven year olds playing checkers at the kids table, 0:01:36.280 --> 0:01:40.840 and then the Della, the grandmaster chess wizard basically was 0:01:40.880 --> 0:01:43.720 three steps ahead took Alman. Now essentially this is a 0:01:43.760 --> 0:01:48.360 shell company where all the assets essentially moved to Microsoft. 0:01:48.640 --> 0:01:51.440 And is it all a surprise that all been so quickly? 0:01:51.640 --> 0:01:53.919 It seems to me it makes sense. But it seems 0:01:53.920 --> 0:01:56.720 that like very swift move for Microsoft to swoop in 0:01:57.000 --> 0:01:58.440 and snag Altman that quickly. 0:02:00.000 --> 0:02:03.120 Almost the golden child of AI, I mean, no different 0:02:03.120 --> 0:02:07.720 than Zuckerberg to social media, must to electric vehicles. He 0:02:07.960 --> 0:02:10.720 was the asset, you know him, Brockman and some of 0:02:10.720 --> 0:02:13.680 the top leaders. The last thing that could have happened, 0:02:13.880 --> 0:02:15.800 the worst case would have been them going to an 0:02:15.840 --> 0:02:20.960 Amazon of Google and Apple because there's just massive, massive 0:02:21.000 --> 0:02:23.799 demand for these assets in terms of not just them, 0:02:23.800 --> 0:02:26.840 but the seven hundred open Aim boys. Look, this is 0:02:26.919 --> 0:02:29.600 a board. I mean they're gonna be dealing with legal 0:02:29.639 --> 0:02:32.400 issues for probably you know, the next decade because of this. 0:02:32.560 --> 0:02:36.680 But the reality is they took down a ninety billion 0:02:36.800 --> 0:02:39.480 dollar company by themselves. 0:02:40.000 --> 0:02:41.800 You know, with a little bit of hindsight, Dan, do 0:02:41.840 --> 0:02:44.920 we know why they did what they did? What was 0:02:44.960 --> 0:02:49.120 the core issue here for the actions on Friday? 0:02:50.000 --> 0:02:52.359 I think Paul, you hit on it. It's typical four to 0:02:52.400 --> 0:02:55.560 oh eight Valley, you know, where they you know, whether 0:02:55.600 --> 0:02:58.840 it was egos, political and not communication. I mean, all 0:02:58.919 --> 0:03:02.200 men became the face AI. It's a board that probably 0:03:02.240 --> 0:03:05.960 felt slighted, you know, obviously went back and forth, and 0:03:06.000 --> 0:03:09.600 then I do think they underestimate the ramifications. I mean, 0:03:09.720 --> 0:03:13.960 when you look at you chief scientist, co founder, one 0:03:13.960 --> 0:03:19.040 of the four vooted, was key in getting them fired. 0:03:19.680 --> 0:03:21.720 Then all of a sudden yesterday morning says, oh, he 0:03:21.840 --> 0:03:22.880 actually regrets it. 0:03:23.320 --> 0:03:23.560 Paul. 0:03:23.680 --> 0:03:27.840 That's like that's literally like burning someone's house down and 0:03:27.880 --> 0:03:30.600 then the next day coming with a Hallmark card and 0:03:31.160 --> 0:03:34.519 a he's a chocolate, saying I'm sorry, all right. 0:03:34.720 --> 0:03:37.120 So one of my issues or one of my questions, 0:03:37.160 --> 0:03:40.920 I guess Dan, is I mean the sam Altman and 0:03:41.240 --> 0:03:44.440 others are obviously key to this whole AI technology. But 0:03:44.480 --> 0:03:48.800 doesn't the intellectual property reside at open ai. Doesn't the 0:03:49.000 --> 0:03:52.040 entity control it and have most of the value as 0:03:52.040 --> 0:03:55.480 opposed to what's behind or what's between sam Altman's. 0:03:55.120 --> 0:04:00.800 Ears before Microsoft? Yes, after No, I mean now essential 0:04:00.880 --> 0:04:05.360 that technology is baked into Microsoft's ecosystem, and that was 0:04:05.480 --> 0:04:07.440 part of the deal. You know, in my even though 0:04:07.440 --> 0:04:11.120 it's forty nine percent, if you look how Microsoft actually 0:04:11.160 --> 0:04:14.120 structured the deal, I mean open AI. That technology is 0:04:14.200 --> 0:04:19.479 essentially embedded in Microsoft. That's why they recognize that the 0:04:19.640 --> 0:04:22.479 value of open ai is basically goes up and down 0:04:22.480 --> 0:04:25.960 the elevators if they come to Microsoft that open ai 0:04:26.920 --> 0:04:30.679 essentially is a board with a third rate ce interim 0:04:30.760 --> 0:04:34.719 CEO former Twitch And that's it. And now they'll just 0:04:34.720 --> 0:04:37.360 be spending all their time with lawyers. 0:04:37.200 --> 0:04:40.080 And Dan, what happens next and how do you incorporate 0:04:40.200 --> 0:04:43.680 sam Altman into your? Valuation of Microsoft stock was up 0:04:43.680 --> 0:04:46.640 two percent yesterday, but is not really continuing to add 0:04:46.640 --> 0:04:48.520 to those games. 0:04:49.160 --> 0:04:52.680 When we went to bed midnight Sunday. I mean Microsoft 0:04:52.720 --> 0:04:56.520 could have been down eight ten percent if Nidela didn't 0:04:56.560 --> 0:05:01.039 swoop in, because that was the fear. Now it's essentially 0:05:01.440 --> 0:05:03.920 I'd say Microsoft's in a stronger position today. You show 0:05:03.920 --> 0:05:06.719 the reaction yesterday then it was on Friday. It's a 0:05:06.760 --> 0:05:10.720 win win because either way, the legal, the global pressures, 0:05:10.880 --> 0:05:15.279 the board, they're lawyers, they're gonna resign. Then it's actually 0:05:15.279 --> 0:05:17.760 a better situation than was before Friday because you don't 0:05:17.760 --> 0:05:22.279 have a GV circus show board. They're blocking things and 0:05:22.320 --> 0:05:25.000 then if they just sit there, then they'll all just 0:05:25.040 --> 0:05:27.760 go to Microsoft and it's essentially a shell company. But 0:05:27.800 --> 0:05:30.240 it goes back to they were playing checkers, I eight 0:05:30.320 --> 0:05:32.240 year olds, Nadell was playing chess. 0:05:32.600 --> 0:05:35.359 So do you think Sam Alman? I mean, I don't know. 0:05:35.480 --> 0:05:37.840 I haven't even seen an interviewed. There's a guy, I mean, 0:05:37.920 --> 0:05:41.000 for us who aren't tech folks really under the radar? 0:05:41.240 --> 0:05:43.839 Can he work and can these people work in a 0:05:43.839 --> 0:05:48.039 big corporate organization like Microsoft? Can he report to somebody, 0:05:48.440 --> 0:05:50.800 some other executive, whether it's Nadella or someone else. 0:05:52.680 --> 0:05:54.960 Oh, it's a great question. And in Microsoft, I mean 0:05:55.120 --> 0:05:58.040 they're very well versed in doing this in terms of 0:05:58.080 --> 0:06:02.680 almost an entrepreneur atmosphere in that Redman headquarters on campus. 0:06:03.440 --> 0:06:05.360 Just leave them alone do what they do. I mean, 0:06:05.400 --> 0:06:07.599 it's similar to the success they've had with LinkedIn and 0:06:07.640 --> 0:06:11.800 other assets that's part of that DNA and Microsoft, which 0:06:11.800 --> 0:06:14.680 speaks to why all men Brockman signed up so quickly. 0:06:15.160 --> 0:06:18.640 And now either way it's a win win for Microsoft. 0:06:19.000 --> 0:06:22.560 They are positioned for a Nadella just a phenomenal PR 0:06:23.480 --> 0:06:26.880 show yesterday, because that's just putting more and more pressure 0:06:27.440 --> 0:06:31.839 on the board because either whichever which way it happens, 0:06:31.880 --> 0:06:33.719 it's a win for Microsoft. 0:06:33.920 --> 0:06:36.400 So, Dan, from your perspective, what do you think is 0:06:36.440 --> 0:06:41.640 a better structure for this AI investment and technology to 0:06:41.680 --> 0:06:45.520 continue to flourish. Is it for Sam to go back 0:06:45.600 --> 0:06:47.760 and his team to go back to OPENII with a 0:06:47.839 --> 0:06:51.800 revamped board. Would that be better than sitting within the 0:06:51.800 --> 0:06:55.719 halls of Microsoft. How do you think that should play out? 0:06:56.720 --> 0:06:59.359 You get rid of the four circus show board members 0:07:00.040 --> 0:07:02.640 and you put in Brett Tayler, Marissa Meyer, you have 0:07:02.680 --> 0:07:06.160 someone from Microsoft, a legit board governance is there? I 0:07:06.200 --> 0:07:09.000 think that would also give comfort to the Beltway. You're 0:07:09.040 --> 0:07:11.960 just given how important this technology is, and then they 0:07:12.000 --> 0:07:15.320 go back it's actually buried than before. That's the ideal situation. 0:07:15.880 --> 0:07:18.880 That's what everyone thought was going to happen Sunday, and 0:07:18.920 --> 0:07:21.960 they're just turned into what's going to be an infamous 0:07:22.000 --> 0:07:25.560 probably a Netflix documentary at one point in terms of 0:07:25.640 --> 0:07:27.360 what happened here, and. 0:07:27.360 --> 0:07:30.640 You mentioned Alman could have gone to Amazon, Google, Alphabet 0:07:30.760 --> 0:07:33.800 and others. How does this move impact those companies and 0:07:33.840 --> 0:07:36.080 their ambitions within AI? 0:07:37.520 --> 0:07:40.680 Yes, basically offering to match any offer out there for 0:07:40.800 --> 0:07:45.280 AI engineers. I mean there's massive, massive demand, call it 0:07:45.400 --> 0:07:49.960 fifty x for everyone. Employee, Google, Amazon, They're going to 0:07:50.040 --> 0:07:54.360 be aggressive trying to get assets because of this air pocket. Look, 0:07:54.360 --> 0:07:57.040 it definitely gives them a window that they could gain 0:07:57.120 --> 0:08:01.400 some share, get some engineers, get some helpers. Then maybe 0:08:01.440 --> 0:08:05.200 they could have gone before with significant pay packages. This 0:08:05.360 --> 0:08:07.480 is going to be you know, a friends. You look 0:08:07.640 --> 0:08:10.640 right now, if you're an AI developer, engineer in the valley, 0:08:11.160 --> 0:08:14.040 I mean you probably drinking of mimosas in the morning. 0:08:15.280 --> 0:08:17.440 So Dan, I mean, just again, I'm an old school 0:08:17.640 --> 0:08:18.920 East Coast Wall Street guy. 0:08:19.560 --> 0:08:22.280 It's almost embarrassing for Silicon Valley. 0:08:22.320 --> 0:08:24.200 I mean I would almost be like, God, this past 0:08:24.200 --> 0:08:26.520 four or five days makes us look like a bunch 0:08:26.600 --> 0:08:27.360 of kids here. 0:08:29.320 --> 0:08:30.680 What are you hearing out there. 0:08:33.280 --> 0:08:35.920 For the weekend? I mean from people you know very 0:08:35.960 --> 0:08:40.640 close to the situation. It's an embarrassment. It's a historical embarrassment, 0:08:41.280 --> 0:08:43.760 and it just shows what happens when you don't have 0:08:43.840 --> 0:08:46.920 adults in the room and some of these political sort 0:08:46.920 --> 0:08:49.080 of back and forth. This is what happened. But that's 0:08:49.160 --> 0:08:53.640 also why you need the Nedallas and Microsofts to basically 0:08:53.720 --> 0:08:56.840 swoop in and make sure that this goes no further. 0:08:57.160 --> 0:09:00.240 And that's why right now the board backs against the Well, 0:09:00.240 --> 0:09:03.960 they're probably on their phone with lawyers the whole day exactly. 0:09:04.200 --> 0:09:05.880 All right, Dan, thanks so much for joining us. Really 0:09:05.920 --> 0:09:06.400 appreciate it. 0:09:06.480 --> 0:09:09.199 Just been an extraordinary story there, Dan Ives, Managing director, 0:09:09.520 --> 0:09:13.000 Senior Ecoity analyst at Wedbush Securities, kind of giving us 0:09:13.000 --> 0:09:13.640 some of the latest. 0:09:13.679 --> 0:09:17.880 Here. You're listening to the team Ken's are live program 0:09:18.000 --> 0:09:21.920 Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot com, 0:09:22.000 --> 0:09:25.160 the iHeartRadio app and the Bloomberg Business app, or listen 0:09:25.240 --> 0:09:27.480 on demand wherever you get your podcasts. 0:09:29.320 --> 0:09:32.360 All right, we're streaming live here at YouTube as well, 0:09:32.400 --> 0:09:34.840 so check us out there, So Bailey, it's a time 0:09:34.880 --> 0:09:37.560 of year where strategists and people in the money management 0:09:37.559 --> 0:09:40.400 business start thinking about next year, you know, and a 0:09:40.440 --> 0:09:42.640 lot of folks even think of being farther out over 0:09:42.640 --> 0:09:44.080 the next three, five, ten years. 0:09:44.240 --> 0:09:46.120 One of those is Shanad Colton Grant. 0:09:46.160 --> 0:09:49.400 She is a global head of investor solutions at a 0:09:49.400 --> 0:09:52.640 little financial institution known by the name of b NY 0:09:52.960 --> 0:09:55.760 Mellon and she joins us here. Shanate, thanks so much 0:09:55.800 --> 0:09:58.960 for joining us here. I know, you guys you've got 0:09:58.960 --> 0:10:01.600 a what you guys call all capital markets assumptions kind 0:10:01.600 --> 0:10:04.320 of You guys look out across asset classes for a 0:10:04.360 --> 0:10:06.760 long period of time. What are you guys thinking about 0:10:06.800 --> 0:10:09.520 as you look out going forward? Because it's been a 0:10:09.600 --> 0:10:12.120 you know, it's been twenty twenty two, it's a tough year, 0:10:12.160 --> 0:10:14.360 and twenty twenty three has been a little bit better. 0:10:14.360 --> 0:10:16.120 But as you guys think ahead, what are some of 0:10:16.160 --> 0:10:16.880 your key themes? 0:10:18.760 --> 0:10:21.360 Well delighted to be here and yes, so we have 0:10:21.640 --> 0:10:25.360 just published our twenty twenty four capital Market assumptions and 0:10:25.400 --> 0:10:28.000 these are really the risk and return assumptions that are 0:10:28.040 --> 0:10:32.640 intended to guide investors in how they develop long term 0:10:32.720 --> 0:10:36.760 strategic acid allocations. So this is very different than something 0:10:36.840 --> 0:10:39.920 like a twenty twenty four outlook. This is much more 0:10:39.960 --> 0:10:43.640 long term in nature. Now your reference to twenty twenty three, 0:10:43.880 --> 0:10:47.240 or rather the poor market returns in twenty twenty two. 0:10:48.240 --> 0:10:53.120 So last year when we published these expectations, our expected 0:10:53.160 --> 0:10:57.080 returns for several asset classes had moved considerably higher following 0:10:57.080 --> 0:11:00.280 those poor returns for particularly equities and bonds in twenty 0:11:00.320 --> 0:11:04.920 twenty two. Our outlook for twenty twenty four, of rather 0:11:04.960 --> 0:11:09.240 our expectations over ten years continue that theme, albeit at 0:11:09.240 --> 0:11:12.120 a slightly slower pace. And so a couple of themes 0:11:12.120 --> 0:11:15.120 that I wanted to really highlight. First of all, slowing inflation. 0:11:15.840 --> 0:11:18.880 Central bank tightening around the globe has really had the 0:11:18.920 --> 0:11:22.400 desired impact of obtaining inflation from the high single digits 0:11:22.440 --> 0:11:25.199 we were seeing too low to mid single digits in 0:11:25.280 --> 0:11:28.800 most developed market economies. But the last mile in getting 0:11:28.800 --> 0:11:31.560 inflation down to central bank targets is probably going to 0:11:31.559 --> 0:11:35.840 be the most difficult, and so built into these forecasts 0:11:36.080 --> 0:11:38.840 we expect that central banks will begin to loosen policy soon, 0:11:39.400 --> 0:11:41.720 but we still expect that over the next ten years 0:11:41.800 --> 0:11:44.480 interest rates will settle at higher levels than we've seen 0:11:44.520 --> 0:11:47.160 in the last decade or so since the financial crisis, 0:11:47.640 --> 0:11:50.240 and those higher rates are one of the factors that 0:11:50.360 --> 0:11:54.560 driver moderately higher return and volatility forecasts in twenty twenty four. 0:11:55.080 --> 0:11:57.760 And how did those high how do those higher rates 0:11:57.800 --> 0:12:01.840 impact the investment in terms of different asset classes in 0:12:01.920 --> 0:12:04.600 the interest in where people should be putting money. 0:12:04.440 --> 0:12:08.079 To work and great point, so I would say when 0:12:08.080 --> 0:12:12.280 we look across the asset classes, first of all US equities, 0:12:12.800 --> 0:12:16.120 our expected return for US equities really stand out among 0:12:16.160 --> 0:12:20.319 equity markets as being revised higher. And that's across capitalizations. 0:12:20.640 --> 0:12:23.880 It's largely driven by our expectations that the US economy 0:12:23.880 --> 0:12:26.520 will continue to outperform the rest of the developed world, 0:12:27.000 --> 0:12:29.800 the focus on innovation in the US as a particular tailwind, 0:12:30.679 --> 0:12:34.880 specifically when we think about productivity games related to AI. 0:12:35.840 --> 0:12:38.480 And of course higher rates means higher yield in bonds, 0:12:38.520 --> 0:12:41.080 and we think bonds will benefit not only because of 0:12:41.120 --> 0:12:44.400 higher current yields, but they're also going to benefit as 0:12:44.440 --> 0:12:48.240 the economy slows, which is what we expect, a slowing 0:12:48.360 --> 0:12:51.320 not an outright recession in the near term. 0:12:52.040 --> 0:12:54.599 Schneid in twenty twenty two. In particular that sixty to 0:12:54.640 --> 0:12:57.439 forty portfolio really took a beating. There's this nowhere to 0:12:57.520 --> 0:13:00.520 hide here. How do you guys think about ALLOCA here? 0:13:00.559 --> 0:13:05.720 I mean, presumably you know, alternative assets is also someplace 0:13:06.080 --> 0:13:08.280 you might consider. How do you think about all alternatives 0:13:09.080 --> 0:13:10.400 as part of a portfolio? 0:13:11.520 --> 0:13:15.360 Well, it's a great question, and two points here. One, 0:13:15.840 --> 0:13:19.000 we all think about sixty forty, but the sixty forty 0:13:19.160 --> 0:13:22.040 twenty years ago was actually quite different and is quite 0:13:22.040 --> 0:13:25.480 different than what a straightforward public market exposure to sixty 0:13:25.520 --> 0:13:28.760 forty is today. And so that means that private markets 0:13:28.800 --> 0:13:32.800 become a much more important part of your portfolio, and 0:13:32.880 --> 0:13:36.480 also alternatives to really help with diversification. The thing that 0:13:36.520 --> 0:13:39.440 we often don't talk about when we use the shorthand 0:13:39.480 --> 0:13:41.679 of sixty forty is, you know, even look at the 0:13:41.760 --> 0:13:43.720 number of public companies in the US. At the end 0:13:43.760 --> 0:13:47.040 of the nineties, it was close to eight thousand. Today 0:13:47.240 --> 0:13:50.600 it's less than four thousand. So companies are staying private 0:13:50.600 --> 0:13:53.079 for longer, and it means that if you don't have 0:13:53.120 --> 0:13:56.680 that private market exposure, you are losing out on the 0:13:56.760 --> 0:14:01.760 ultra high growth phase where companies are going public. A 0:14:01.800 --> 0:14:03.880 lot of the high the household names that we would 0:14:03.920 --> 0:14:06.840 think about in recent years it went public, they were 0:14:06.840 --> 0:14:09.400 already large cap stocks by the the time they came 0:14:09.480 --> 0:14:11.000 to the market. So if you don't have that private 0:14:11.080 --> 0:14:14.120 market exposure in your portfolio, you miss out on that completely. 0:14:14.400 --> 0:14:16.480 So I think that that's point number one in relation 0:14:16.600 --> 0:14:20.000 to sixty forty. You need to think broader, probably somewhere 0:14:20.000 --> 0:14:22.440 in the region of a twenty to twenty five percent 0:14:22.480 --> 0:14:26.120 allocation to private markets and alternatives, depending on your your 0:14:26.200 --> 0:14:31.480 risk tolerance. But the second point is that actually over 0:14:31.520 --> 0:14:35.440 the next ten years, purely from an index only perspective, 0:14:36.000 --> 0:14:40.400 we expect a six point four percent expected return over 0:14:40.880 --> 0:14:43.840 the next decade or so for that public market only 0:14:43.920 --> 0:14:48.680 sixty forty portfolio. That's because we see a moderately higher 0:14:48.720 --> 0:14:52.520 return in a number of equity markets and also those 0:14:52.680 --> 0:14:58.080 higher fixed income expected returns given the starting point of 0:14:58.200 --> 0:14:59.520 yields and. 0:14:59.520 --> 0:15:02.160 Looking at AI obviously being the theme of the year, 0:15:02.400 --> 0:15:06.320 does AI have to work to drive markets hire especially 0:15:06.320 --> 0:15:08.920 equity markets when you're looking at what we've seen from 0:15:08.960 --> 0:15:11.640 the likes of Nvidia and Microsoft in terms of sheer 0:15:11.680 --> 0:15:13.480 market cap being added this year. 0:15:14.520 --> 0:15:17.320 Well, look, clearly it is not the only driver, but 0:15:17.360 --> 0:15:19.720 there's been a huge amount of excitement about the technology 0:15:19.760 --> 0:15:22.360 this year. What we think is really interesting when we 0:15:22.440 --> 0:15:26.080 look ahead, and similar to if we think about the 0:15:27.160 --> 0:15:30.200 advent of the Internet and we go back and think 0:15:30.200 --> 0:15:33.480 about dot com. Look, there's a lot we don't know 0:15:33.520 --> 0:15:36.920 about exactly how this will evolve, but what we can 0:15:37.120 --> 0:15:40.880 say is that AI has the potential to significantly impact 0:15:40.920 --> 0:15:44.440 global GDP and global inflation over the next decade. What 0:15:44.520 --> 0:15:47.240 we're looking at near term is an early promise to 0:15:47.880 --> 0:15:51.200 automate some tasks, but really the full extent of its 0:15:51.200 --> 0:15:55.760 impact on productivity, global growth, disinflation. We haven't seen it yet, 0:15:56.440 --> 0:15:59.680 but our sense is that over the next ten years 0:16:00.640 --> 0:16:04.160 we're going to see astounding progress. We'll see a lot 0:16:04.200 --> 0:16:07.920 of new jobs created, new products and services that I 0:16:08.040 --> 0:16:11.080 really haven't been invented yet. And in the context of 0:16:11.120 --> 0:16:15.720 a broadly declining population in an economy, increased productivity is 0:16:15.720 --> 0:16:18.120 critical to support ongoing economic growth. 0:16:18.600 --> 0:16:20.680 Shanate, thank you so much for joining us. Really appreciate 0:16:20.720 --> 0:16:24.080 getting your insights here. Shand Colton Grant. She's a global 0:16:24.080 --> 0:16:27.560 head of Investor Solutions at bny Mellon. 0:16:27.960 --> 0:16:31.600 You're listening to the tape Ketsur Live program Bloomberg Markets 0:16:31.640 --> 0:16:35.040 weekdays at ten am Eastern on Bloomberg Radio, the tune 0:16:35.080 --> 0:16:38.040 in app, Bloomberg dot Com, and the Bloomberg Business App. 0:16:38.080 --> 0:16:40.880 You can also listen live on Amazon Alexa from our 0:16:40.920 --> 0:16:45.960 flagship New York station, Just say Alexa, Play Bloomberg eleven thirty. 0:16:46.920 --> 0:16:50.880 Let's talk bonds. Let's talk risk at Harrison Joints. And 0:16:51.000 --> 0:16:53.960 he's a senior editor at Bloomberg News and author of 0:16:54.080 --> 0:16:57.600 Everything Risk, a column to check that out. And Lis McCormick, 0:16:57.640 --> 0:17:00.520 chief correspondent of Macromarkets at Bloomberg News. Both of those 0:17:00.520 --> 0:17:02.920 folks join us. Ed hears in studio, Liz is joining 0:17:02.960 --> 0:17:04.720 us via zoom and I want to start with you 0:17:04.800 --> 0:17:06.760 because I got a problem, my friend. You got your 0:17:06.840 --> 0:17:11.280 latest note out. Your another's opinion piece evokes nineteen ninety nine. 0:17:11.400 --> 0:17:15.000 I was there, dude, and two thousand was there. It's 0:17:15.040 --> 0:17:17.240 just not good, that whole burst thing of the bubble. 0:17:17.680 --> 0:17:20.520 Although I did top tick the market, signed my contract 0:17:20.560 --> 0:17:24.159 with Credit Swiss First Boston, February of two thousand, oh boom, 0:17:24.480 --> 0:17:26.600 top ticked it. Three weeks later the world came to 0:17:26.640 --> 0:17:30.000 an end. I didn't care, so Ed you talk about 0:17:30.080 --> 0:17:32.720 markets and bubbles bursting. How do you kind of feel 0:17:32.760 --> 0:17:35.000 like we are right now as we head into twenty 0:17:35.040 --> 0:17:35.520 twenty four. 0:17:36.119 --> 0:17:38.200 Yeah, I think that we're u It's a good quick 0:17:38.280 --> 0:17:41.160 question because I think we're at a point where if 0:17:41.200 --> 0:17:45.080 things get a little more exciting, they could be too exciting. 0:17:45.119 --> 0:17:45.359 Okay. 0:17:45.400 --> 0:17:47.639 I think it's interesting that we're talking about this on 0:17:47.680 --> 0:17:50.160 the day that in Video is right awarding, because I mean, 0:17:50.280 --> 0:17:53.959 is that not the company that sort of tells you 0:17:54.040 --> 0:17:55.719 whether or not it's going to be exciting or not. 0:17:55.880 --> 0:18:00.479 Because if Nvidia is able to continue to outperform and 0:18:00.520 --> 0:18:04.479 therefore the stock goes higher, that tells you what the 0:18:04.480 --> 0:18:05.119 sentiment is. 0:18:05.320 --> 0:18:05.520 Yep. 0:18:06.000 --> 0:18:07.960 Well, with that in mind, I guess are you in 0:18:08.000 --> 0:18:10.720 the camp of this is a market driven by seven 0:18:10.800 --> 0:18:13.040 plus three stocks? And how does that impact kind of 0:18:13.040 --> 0:18:16.960 your view of risk? More broadly speaking, given every time 0:18:16.960 --> 0:18:18.720 I pull up a GP on the S and P 0:18:18.800 --> 0:18:21.000 or Nasdaq one hundred, it seems everything's rosy, but not 0:18:21.040 --> 0:18:22.119 so much under the surface. 0:18:22.359 --> 0:18:24.119 Yeah, Well, you know, the interesting bit is how the 0:18:24.200 --> 0:18:28.200 rustle two thousand actually responded recently as we've gone up. 0:18:28.480 --> 0:18:31.520 I mean, all of this was driven by rates from 0:18:31.560 --> 0:18:33.439 where I can sit, and that says that, you know, 0:18:33.520 --> 0:18:37.160 rates went down, everything went up because of the potential 0:18:37.200 --> 0:18:39.720 for a soft lane. And it's interesting when you say 0:18:39.760 --> 0:18:43.240 seven plus three, you know, I'm thinking about the Magnificent seven. 0:18:43.600 --> 0:18:45.679 It used to have Netflix in there. Do you remember, 0:18:45.720 --> 0:18:48.840 like a two years ago, Netflix was ejected and yet 0:18:49.359 --> 0:18:51.679 they continue to go higher. So what it tells you 0:18:51.840 --> 0:18:55.600 is is that as long as the economy holds and 0:18:55.680 --> 0:18:59.280 these companies can keep their margins going, we still have 0:18:59.400 --> 0:19:04.320 the potential for the reality to continue higher. The hope, however, 0:19:04.440 --> 0:19:07.639 is that it doesn't go into two thousand mode, you know, 0:19:07.720 --> 0:19:10.560 so that so that we don't get that sort of 0:19:10.920 --> 0:19:12.879 negative reaction on the backside of that. 0:19:13.320 --> 0:19:15.359 All right, Liz, you're coming to us from what I 0:19:15.400 --> 0:19:18.960 call the yellow room, so great paint drop there. What's 0:19:19.040 --> 0:19:21.760 the bond market telling us here about where we are 0:19:21.920 --> 0:19:24.240 kind of in the cycle. It seems like we've seen 0:19:24.280 --> 0:19:26.840 maybe peak rates. What are you seeing in the bond market? 0:19:28.600 --> 0:19:30.280 Yeah, so I'm going to get to that, just kind 0:19:30.280 --> 0:19:32.480 of getting my head around. Just meant and could marry 0:19:32.520 --> 0:19:38.400 the one of the McCormick things. But yeah, the bond market, 0:19:38.560 --> 0:19:41.000 so it seems like, you know, I hate to go 0:19:41.080 --> 0:19:43.480 with consensus, because you know, we know what happened with 0:19:43.520 --> 0:19:46.679 the consensus going into this year, but definitely most of 0:19:46.720 --> 0:19:48.880 Wall Street things, and I don't think that's a bad 0:19:48.960 --> 0:19:51.119 call that you know, we've seen the peak and rates, 0:19:51.160 --> 0:19:54.560 like someone was saying, getting the ten year note, or 0:19:54.840 --> 0:19:57.840 remember we had almost five's all across the curve. That 0:19:58.000 --> 0:20:00.840 happening again is a very high bar a right, because 0:20:01.119 --> 0:20:03.840 most likely the Fed is done. But I think the 0:20:03.880 --> 0:20:07.080 bond market is saying the worst is over. How fast 0:20:07.200 --> 0:20:10.199 rates go down is an open question, right, There's a 0:20:10.240 --> 0:20:13.240 lot of uncertainty I think into next year. Even people 0:20:13.320 --> 0:20:15.960 saying the Fed's gonna cut. You know, Rich Miller in 0:20:16.359 --> 0:20:19.199 Washington was saying some smart stuff earlier to me and 0:20:19.240 --> 0:20:21.879 some others that you know, the question is if the 0:20:21.920 --> 0:20:24.399 Fed starts cutting, why, you know, are they cutting for 0:20:24.440 --> 0:20:27.400 these kind of call it technical just to so rates 0:20:27.400 --> 0:20:30.040 don't get too restrictive if inflation goes down or if 0:20:30.080 --> 0:20:32.359 the economy is doing very poorly and they have to 0:20:32.400 --> 0:20:35.639 cut quickly then and a lot that that's the bigger 0:20:35.720 --> 0:20:38.639 juice for the bond market. So I think just how 0:20:38.760 --> 0:20:41.200 far yields can go the shape of the yield curve 0:20:41.320 --> 0:20:44.400 most people see steepening. You know that's going to be 0:20:44.680 --> 0:20:46.679 yet to be seen because you know this, you know, 0:20:46.800 --> 0:20:49.520 recession we everyone thought was coming this year didn't pan out. 0:20:49.600 --> 0:20:51.160 So we'll see what happens next year. 0:20:51.760 --> 0:20:54.119 I you know, Liz, I try to avoid, you know, 0:20:54.440 --> 0:20:56.200 these Treasury auctions because there are a lot of smart 0:20:56.200 --> 0:20:59.399 people like you and Ira Jersey that do focus on them. 0:20:59.400 --> 0:21:00.919 But what what have you learned from some of the 0:21:00.960 --> 0:21:04.960 recent auctions out there? Is are Treasury refunding working. 0:21:06.080 --> 0:21:06.280 Well? 0:21:06.359 --> 0:21:06.639 Yeah? 0:21:06.680 --> 0:21:09.439 I mean so the twenty year, which, to be honest 0:21:09.520 --> 0:21:12.120 is all has always been like the lame duck here 0:21:12.240 --> 0:21:16.320 or the problem child that is for Treasury. That didn't 0:21:16.359 --> 0:21:18.760 go so bad yesterday, and people were worried about that. 0:21:19.040 --> 0:21:21.640