1 00:00:02,360 --> 00:00:06,720 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,640 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hortern. Join us each day 4 00:00:18,720 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,840 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify, or 8 00:00:31,280 --> 00:00:33,919 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:35,840 Speaker 2: Terminal and the Bloomberg Business App. 10 00:00:36,600 --> 00:00:39,120 Speaker 1: US Interior Secretary Doug Burghram joins us. 11 00:00:39,120 --> 00:00:39,360 Speaker 3: Now. 12 00:00:39,840 --> 00:00:42,080 Speaker 1: Secretary Burghram, thank you so much for being with us. 13 00:00:42,159 --> 00:00:44,199 Speaker 1: I want to start with just how important it is 14 00:00:44,320 --> 00:00:47,639 Speaker 1: right now for the United States to increase energy supplies 15 00:00:47,680 --> 00:00:50,519 Speaker 1: across the board, not just with drilling, but across the 16 00:00:50,520 --> 00:00:53,440 Speaker 1: board the face of the demand coming from AI. 17 00:00:54,760 --> 00:00:57,280 Speaker 3: Well, good morning, Lid. You say, yes, it's absolutely essential, 18 00:00:57,320 --> 00:00:57,760 Speaker 3: and this is. 19 00:00:57,800 --> 00:01:02,320 Speaker 4: Part of the just a noun to National Security Plan 20 00:01:02,400 --> 00:01:06,800 Speaker 4: that the White House has released. That Security plan mentions 21 00:01:06,880 --> 00:01:11,039 Speaker 4: energy twenty three times. There's an entire section about energy dominance, 22 00:01:11,080 --> 00:01:14,440 Speaker 4: and folks should think about energy dominance as the ability 23 00:01:14,480 --> 00:01:16,560 Speaker 4: for the US to sell energy to our friends and 24 00:01:16,600 --> 00:01:18,920 Speaker 4: allies so they don't have to buy it from adversaries, 25 00:01:18,959 --> 00:01:22,640 Speaker 4: particularly those adversaries that are either funding terrorism or are 26 00:01:23,319 --> 00:01:28,600 Speaker 4: funding wars, actively funding war machines, and so it's core 27 00:01:28,640 --> 00:01:30,840 Speaker 4: to the strategy right now. But it's also, as you've 28 00:01:30,840 --> 00:01:33,040 Speaker 4: talked about on the show, is about with AI because 29 00:01:33,480 --> 00:01:35,399 Speaker 4: never before in a history have we been able to 30 00:01:35,440 --> 00:01:38,039 Speaker 4: convert a kill, a lot of electricity into intelligence. 31 00:01:38,080 --> 00:01:41,000 Speaker 3: The demand for that, regardless. 32 00:01:40,400 --> 00:01:44,039 Speaker 4: Of stock prices or stock movements, the demand for AI 33 00:01:44,240 --> 00:01:47,480 Speaker 4: for intelligence applied to every job, every company, every industry 34 00:01:47,560 --> 00:01:49,640 Speaker 4: is going to continue to increase the demand. 35 00:01:49,360 --> 00:01:51,320 Speaker 3: For electricity around the world. 36 00:01:51,680 --> 00:01:55,360 Speaker 4: The US as an energy dominant country, now the largest 37 00:01:55,400 --> 00:01:58,880 Speaker 4: oil producer in the world, largest LG exporter in the world, 38 00:01:59,440 --> 00:02:02,840 Speaker 4: and growing quickly with that strategy, it bodes well for 39 00:02:02,960 --> 00:02:05,640 Speaker 4: the future of the US, both in terms. 40 00:02:05,400 --> 00:02:08,000 Speaker 3: Of peace and in terms of prosperity. Secretary, I'm sure. 41 00:02:07,840 --> 00:02:10,720 Speaker 5: You're aware WTI is under sixty dollars a barrel. What's 42 00:02:10,760 --> 00:02:13,200 Speaker 5: the impetus for the oil and gas companies in the 43 00:02:13,280 --> 00:02:16,400 Speaker 5: United States to continue drilling wells at this price level, 44 00:02:16,400 --> 00:02:18,480 Speaker 5: which potentially could be a loss for them. 45 00:02:19,000 --> 00:02:21,240 Speaker 4: Well, I think one thing that we know that in 46 00:02:21,280 --> 00:02:25,120 Speaker 4: Trump administration we're cutting red tape so rapidly. We think 47 00:02:26,040 --> 00:02:29,200 Speaker 4: that one of the early targets we had was cut 48 00:02:29,240 --> 00:02:32,240 Speaker 4: ten percent of the cost away from those producers just 49 00:02:32,280 --> 00:02:36,280 Speaker 4: by cutting red tape. So if you think about sixty 50 00:02:36,280 --> 00:02:38,400 Speaker 4: bucks to day, it might be what sixty seven bucks 51 00:02:38,520 --> 00:02:43,480 Speaker 4: was a year ago because of our ability to take 52 00:02:43,560 --> 00:02:46,679 Speaker 4: cost out for those producers. And there's example after example, 53 00:02:47,400 --> 00:02:50,120 Speaker 4: whether it's from the EPA, the Department of Energy, Department 54 00:02:50,160 --> 00:02:51,520 Speaker 4: of Interior, where we've been able. 55 00:02:51,360 --> 00:02:52,720 Speaker 3: To help reduce costs. 56 00:02:52,720 --> 00:02:55,400 Speaker 4: And of course this industry has been better than almost 57 00:02:55,440 --> 00:02:59,160 Speaker 4: any in terms of gaining productivity. The shale producers now 58 00:02:59,480 --> 00:03:02,480 Speaker 4: drilling three mile laterals instead of two mile laterals, up 59 00:03:02,520 --> 00:03:06,320 Speaker 4: to four mile laterals in many places offshore. We've seen 60 00:03:06,360 --> 00:03:10,639 Speaker 4: examples overseas of people driving building ten mile laterals when 61 00:03:10,639 --> 00:03:14,040 Speaker 4: they're getting after the shale rock, all with the same. 62 00:03:13,840 --> 00:03:15,360 Speaker 3: Small well pad on the surface. 63 00:03:15,400 --> 00:03:18,680 Speaker 4: So, you know, great for great for land management, and 64 00:03:18,720 --> 00:03:20,000 Speaker 4: great for energy production. 65 00:03:20,120 --> 00:03:21,720 Speaker 3: And kudos to this industry. 66 00:03:22,040 --> 00:03:26,120 Speaker 4: This, the entire shale revolution has occurred through innovation, and 67 00:03:26,160 --> 00:03:29,040 Speaker 4: that innovation is going to continue, and with AI applied 68 00:03:29,040 --> 00:03:30,840 Speaker 4: to that, it's going to even get even better. So 69 00:03:31,280 --> 00:03:34,480 Speaker 4: I see the leading companies are getting their costs down 70 00:03:35,160 --> 00:03:36,560 Speaker 4: even as demand is going up. 71 00:03:36,680 --> 00:03:39,560 Speaker 5: But Baker Hughes is talking about drilling reactivity has falling 72 00:03:39,600 --> 00:03:43,080 Speaker 5: sixteen percent since Trump took office this year. The President 73 00:03:43,160 --> 00:03:46,360 Speaker 5: loves to talk about drill, baby, drill. Do you expect 74 00:03:46,400 --> 00:03:49,080 Speaker 5: that to change those numbers to change next year? 75 00:03:50,080 --> 00:03:52,000 Speaker 4: Well, I think again, I have to take a look 76 00:03:52,040 --> 00:03:54,880 Speaker 4: at the at the numbers when we talk about drilling activity. 77 00:03:54,880 --> 00:03:57,120 Speaker 4: In my home state of North Dakota, we had a 78 00:03:57,800 --> 00:04:00,360 Speaker 4: number of the well count was going down, but the 79 00:04:00,440 --> 00:04:03,400 Speaker 4: miles of lateral productive rock could be going up. 80 00:04:03,680 --> 00:04:05,280 Speaker 3: And so you know, analysts have. 81 00:04:05,240 --> 00:04:07,280 Speaker 4: Got to make sure that they're actually keeping up with 82 00:04:07,320 --> 00:04:11,480 Speaker 4: how fast this industry is changing, because we've got again 83 00:04:11,600 --> 00:04:14,640 Speaker 4: record production occurring right now and we expect to see 84 00:04:14,680 --> 00:04:16,799 Speaker 4: records through twenty twenty six. 85 00:04:17,160 --> 00:04:19,599 Speaker 1: One area where you have seen price increases has been 86 00:04:19,680 --> 00:04:22,279 Speaker 1: natural gas. Natural gas prices rising to the highest levels 87 00:04:22,279 --> 00:04:25,200 Speaker 1: in the US going back to twenty twenty two, and 88 00:04:25,279 --> 00:04:28,080 Speaker 1: a real question on how much the US can continue 89 00:04:28,080 --> 00:04:30,960 Speaker 1: to export to places like Europe in the face of 90 00:04:31,160 --> 00:04:34,080 Speaker 1: significantly higher prices here in the United States. How do 91 00:04:34,120 --> 00:04:36,039 Speaker 1: you plan to sort of set policy so that the 92 00:04:36,120 --> 00:04:38,599 Speaker 1: US can be a big exporter to places like Europe 93 00:04:38,640 --> 00:04:41,880 Speaker 1: while not allowing prices to go up so significantly in 94 00:04:41,880 --> 00:04:42,400 Speaker 1: the future. 95 00:04:43,279 --> 00:04:46,400 Speaker 4: Well, again, the key is its supply and its infrastructure. 96 00:04:47,160 --> 00:04:49,400 Speaker 4: We have places in the US right now where again, 97 00:04:49,440 --> 00:04:51,920 Speaker 4: there's not one price for gas in America as you know. 98 00:04:52,320 --> 00:04:54,200 Speaker 4: I mean, even though we've got the markets and we've 99 00:04:54,240 --> 00:04:59,040 Speaker 4: got Henry Hub, but we've got we've got widely raging prices, 100 00:04:59,080 --> 00:05:01,040 Speaker 4: I mean even in the different and a price in 101 00:05:01,120 --> 00:05:05,360 Speaker 4: Pennsylvania versus in New England because the lack of natural 102 00:05:05,360 --> 00:05:08,240 Speaker 4: gas pipelines that have been blocked into places like New England. 103 00:05:08,560 --> 00:05:10,880 Speaker 4: And when we think about we think about markets, you're 104 00:05:10,920 --> 00:05:13,960 Speaker 4: talking about AI and the Capital spen and going against 105 00:05:13,960 --> 00:05:18,520 Speaker 4: AI where we're an AI factory where we're actually creating 106 00:05:18,600 --> 00:05:22,719 Speaker 4: and manufacturing intelligence. Those plants are going to go to 107 00:05:22,760 --> 00:05:26,360 Speaker 4: the places where states have low electricity prices and policies 108 00:05:26,400 --> 00:05:29,880 Speaker 4: are setting price, not just markets. And we've got policies 109 00:05:30,000 --> 00:05:34,480 Speaker 4: in blue states around our country. California. You mentioned California. 110 00:05:34,560 --> 00:05:38,640 Speaker 4: Sixty three percent of California's oil is being imported from 111 00:05:38,680 --> 00:05:43,000 Speaker 4: foreign countries because of blocking of pipelines coming into that state. 112 00:05:44,120 --> 00:05:47,839 Speaker 4: They have a record number of internal combustion cars in California. 113 00:05:47,880 --> 00:05:50,240 Speaker 4: They have more internal combustion cars than any other state 114 00:05:50,320 --> 00:05:53,680 Speaker 4: as cars. And yet two refineries have announced that they're 115 00:05:53,720 --> 00:05:57,280 Speaker 4: shutting down in California because of policies, not because of 116 00:05:57,360 --> 00:05:59,720 Speaker 4: lack of demand, not because of lack of consumers. 117 00:06:00,480 --> 00:06:02,000 Speaker 3: And so what's going to happen. 118 00:06:02,760 --> 00:06:06,120 Speaker 4: You're going to have oil tankers and refined products coming 119 00:06:06,160 --> 00:06:08,640 Speaker 4: into San Francisco Bay and coming into Long Beach and 120 00:06:08,720 --> 00:06:12,400 Speaker 4: record numbers in California. Because of policies, they will have 121 00:06:12,480 --> 00:06:16,240 Speaker 4: higher gas prices than virtually any other state. So again, 122 00:06:16,640 --> 00:06:19,400 Speaker 4: we have a we have a strategy in America to 123 00:06:19,440 --> 00:06:22,680 Speaker 4: help every state. The Trump administration wants to have low 124 00:06:22,760 --> 00:06:26,159 Speaker 4: affordable energy prices for everybody, whether it's heating your home 125 00:06:26,279 --> 00:06:30,400 Speaker 4: or driving your car, or producing electricity for AI. But 126 00:06:30,480 --> 00:06:34,760 Speaker 4: we're going to need the collaboration from states to make sure. 127 00:06:34,760 --> 00:06:36,120 Speaker 3: And if states don't. 128 00:06:35,960 --> 00:06:37,920 Speaker 4: Want to collaborate on that, then you're going to see 129 00:06:37,960 --> 00:06:42,119 Speaker 4: this uh trillion dollars at AI, a historic amount of spend, 130 00:06:42,200 --> 00:06:46,000 Speaker 4: all going towards states that have pro energy policies that 131 00:06:46,120 --> 00:06:47,320 Speaker 4: drive down prices. 132 00:06:47,520 --> 00:06:51,760 Speaker 5: Secretary, We've seen a significant increase in energy costs especially 133 00:06:51,760 --> 00:06:54,560 Speaker 5: for individuals who live near data centers. How is the 134 00:06:54,680 --> 00:06:57,880 Speaker 5: US going to do both at once, both support these 135 00:06:57,880 --> 00:07:02,360 Speaker 5: AI inities but also make sure consumers energy prices remain affordable. 136 00:07:03,120 --> 00:07:04,640 Speaker 4: Well, if you said on the show, I mean these 137 00:07:04,760 --> 00:07:08,160 Speaker 4: prices are in electricity are local, not national. 138 00:07:08,600 --> 00:07:11,680 Speaker 3: And so there are the examples that you think. 139 00:07:11,800 --> 00:07:14,760 Speaker 4: We're driving that analysis right now and we're going to 140 00:07:14,800 --> 00:07:17,720 Speaker 4: be publishing that from the White House to the National 141 00:07:17,840 --> 00:07:21,400 Speaker 4: Energy Dominance Council, the Department of Energy doing great work 142 00:07:21,400 --> 00:07:23,160 Speaker 4: on that. But a lot of the higher prices that 143 00:07:23,200 --> 00:07:26,440 Speaker 4: you're seeing are not related to the AI data centers. 144 00:07:26,480 --> 00:07:28,160 Speaker 4: A lot of the A data centers are going to 145 00:07:28,200 --> 00:07:31,280 Speaker 4: be off the grid, behind the meter and then producing 146 00:07:31,360 --> 00:07:32,920 Speaker 4: adding more energy. 147 00:07:33,000 --> 00:07:35,000 Speaker 3: Then and putting some of that energy onto the grid. 148 00:07:35,040 --> 00:07:37,080 Speaker 3: So we could be actually increasing. 149 00:07:36,560 --> 00:07:39,200 Speaker 4: The supply in some of those areas where we've got 150 00:07:39,240 --> 00:07:42,040 Speaker 4: increased pricing. It's because of the policies they pursued the 151 00:07:42,080 --> 00:07:48,239 Speaker 4: last five years of having unreliable, intermittent and highly subsidized 152 00:07:49,120 --> 00:07:53,600 Speaker 4: and projects, including things like offshore wind where people were 153 00:07:53,600 --> 00:07:57,040 Speaker 4: spending eleven billion dollars to create one gigawatt of intermittent, 154 00:07:57,280 --> 00:07:59,720 Speaker 4: you know, versus spending one or two billion dollars to 155 00:07:59,760 --> 00:08:03,280 Speaker 4: create one gig a lot of assured seven by twenty 156 00:08:03,320 --> 00:08:06,200 Speaker 4: four hour powers. So the policy choices of the last 157 00:08:06,200 --> 00:08:10,400 Speaker 4: five years, driven by sometimes climate extremists, were the ones 158 00:08:10,440 --> 00:08:13,160 Speaker 4: that were that were that are driving up the prices 159 00:08:13,200 --> 00:08:15,520 Speaker 4: you're seeing. I mean, electricity costs three times as much 160 00:08:15,520 --> 00:08:19,320 Speaker 4: in New England as it does in North Dakota. That 161 00:08:19,440 --> 00:08:21,960 Speaker 4: is not that is not because of data centers. That's 162 00:08:22,000 --> 00:08:22,960 Speaker 4: because of policies. 163 00:08:23,480 --> 00:08:26,880 Speaker 2: Stay with us, Mulplinpex Savana's coming up off. 164 00:08:26,720 --> 00:08:38,600 Speaker 1: To this, Kate Moore of City Wealth writing, we remain 165 00:08:38,640 --> 00:08:41,800 Speaker 1: fully invested in equities on this nominal growth backdrop and 166 00:08:41,840 --> 00:08:44,880 Speaker 1: prefer gold over long and duration as a hedge to 167 00:08:45,000 --> 00:08:46,040 Speaker 1: risk given. 168 00:08:46,080 --> 00:08:47,520 Speaker 6: The upward pressure on rates. 169 00:08:47,720 --> 00:08:50,080 Speaker 1: Kate, I am so pleased to say, joins us now 170 00:08:50,120 --> 00:08:50,520 Speaker 1: for more. 171 00:08:50,600 --> 00:08:52,520 Speaker 6: Kate, good morning, Thank you forboding with warning. 172 00:08:52,840 --> 00:08:54,840 Speaker 1: So this has been a market that you've been cautious 173 00:08:54,840 --> 00:08:56,960 Speaker 1: about for a lot of this year. You still see 174 00:08:57,000 --> 00:08:59,720 Speaker 1: reasons that maybe the everything rally can't continue for. 175 00:08:59,760 --> 00:09:02,320 Speaker 6: Hours, but the tone has shifted. Why. 176 00:09:02,640 --> 00:09:04,920 Speaker 7: Okay, So it's not that I've been cautious, it's that 177 00:09:04,960 --> 00:09:07,719 Speaker 7: we didn't aggressively add to risk because we prefer to 178 00:09:07,720 --> 00:09:10,640 Speaker 7: take our exposure in large caps, and I continue to 179 00:09:10,880 --> 00:09:13,720 Speaker 7: even after seeing some of the small cap rally. I 180 00:09:13,760 --> 00:09:15,560 Speaker 7: think most of that and you kind of let into 181 00:09:15,559 --> 00:09:18,840 Speaker 7: this a moment. Ago has been around rate cut expectations, 182 00:09:19,080 --> 00:09:21,440 Speaker 7: and relative to some others, we don't think the FED 183 00:09:21,480 --> 00:09:23,880 Speaker 7: should be cutting of rates at every meeting from now 184 00:09:23,960 --> 00:09:26,560 Speaker 7: until next June. I know some people are hoping for 185 00:09:26,600 --> 00:09:29,160 Speaker 7: that and some pricing that in, and we think small 186 00:09:29,160 --> 00:09:31,760 Speaker 7: companies desperately need that in order to really sustain a 187 00:09:31,840 --> 00:09:34,600 Speaker 7: rally and to have better earnings and fundamentals. So we 188 00:09:34,720 --> 00:09:37,040 Speaker 7: prefer to take our risk in the large caps space. 189 00:09:37,080 --> 00:09:38,920 Speaker 7: We've done quite well there, but it's not that we've 190 00:09:38,920 --> 00:09:41,120 Speaker 7: been out of the equity market or been underweight in 191 00:09:41,120 --> 00:09:43,480 Speaker 7: any way a shape or form. We just want to 192 00:09:43,520 --> 00:09:45,480 Speaker 7: be where their earnings are and where the free cash 193 00:09:45,559 --> 00:09:46,880 Speaker 7: is and where we have visibility. 194 00:09:47,280 --> 00:09:49,160 Speaker 6: And that served us really well this year. 195 00:09:49,280 --> 00:09:51,360 Speaker 1: So what you're saying is it sounds like you don't 196 00:09:51,400 --> 00:09:54,839 Speaker 1: buy that there is this truly durable rotation into small 197 00:09:54,880 --> 00:09:57,960 Speaker 1: caps and to expand out of just where the leadership 198 00:09:57,960 --> 00:09:58,280 Speaker 1: has been. 199 00:09:58,320 --> 00:09:58,920 Speaker 6: Is that correct? 200 00:09:59,040 --> 00:09:59,199 Speaker 8: Yeah? 201 00:09:59,280 --> 00:09:59,760 Speaker 6: I want to. 202 00:10:00,000 --> 00:10:02,079 Speaker 7: You know, so many people have written their year ahead 203 00:10:02,120 --> 00:10:04,439 Speaker 7: report saying once again, same thing they did at this 204 00:10:04,520 --> 00:10:06,720 Speaker 7: time last year. Next year is going to be year 205 00:10:06,760 --> 00:10:08,600 Speaker 7: of broadening. It's going to be your broadening in sectors, 206 00:10:08,640 --> 00:10:10,560 Speaker 7: it's going to be your broadening in terms of regions. 207 00:10:10,920 --> 00:10:13,440 Speaker 7: And I'm not a buyer of that today, this first 208 00:10:13,440 --> 00:10:16,360 Speaker 7: week in December. And let me explain why. Because we 209 00:10:17,280 --> 00:10:19,480 Speaker 7: are kind of later in the cycle. We are at 210 00:10:19,520 --> 00:10:21,920 Speaker 7: a point where you can pick and choose whatever economic 211 00:10:22,000 --> 00:10:24,000 Speaker 7: data you want to fit the narrative you want to 212 00:10:24,000 --> 00:10:27,280 Speaker 7: tell about the overall macro and what policy might do 213 00:10:27,480 --> 00:10:30,520 Speaker 7: to respond to that macro. And I think you have 214 00:10:30,559 --> 00:10:33,000 Speaker 7: to be very anchored to fundamentals and where we have 215 00:10:33,120 --> 00:10:35,280 Speaker 7: visibility into fundamentals. 216 00:10:34,760 --> 00:10:37,280 Speaker 6: Where we can see earnings, where. 217 00:10:37,040 --> 00:10:39,680 Speaker 7: We know that companies have the ability to weather any 218 00:10:39,760 --> 00:10:43,640 Speaker 7: kind of sort of storm in the economy, whether that's 219 00:10:43,760 --> 00:10:46,559 Speaker 7: a bit of inflation spike or a slightly weaker labor 220 00:10:46,640 --> 00:10:50,120 Speaker 7: market or policy headwind. That's where we want to be anchored, 221 00:10:50,480 --> 00:10:53,120 Speaker 7: and I think many investors will as well. You don't 222 00:10:53,200 --> 00:10:55,720 Speaker 7: just rotate for the sake of rotation. You just don't 223 00:10:55,720 --> 00:10:57,760 Speaker 7: buy the laggards for the sake of it. In fact, 224 00:10:57,880 --> 00:11:00,240 Speaker 7: we've done a bunch of quantitative studies to show that 225 00:11:00,480 --> 00:11:03,640 Speaker 7: when you employ that strategy, particularly after a full year 226 00:11:03,760 --> 00:11:07,240 Speaker 7: performance of kind of tech and comms, etc. You don't 227 00:11:07,280 --> 00:11:09,400 Speaker 7: perform as well. Some of these things that are doing 228 00:11:09,400 --> 00:11:11,640 Speaker 7: well deserve it, and we don't rotate for the sake 229 00:11:11,679 --> 00:11:12,800 Speaker 7: of rotating. But isn't the. 230 00:11:12,720 --> 00:11:16,200 Speaker 5: Table set this time around better than it was last 231 00:11:16,280 --> 00:11:19,080 Speaker 5: year in the sense that the FED looks likely remain accommoative. 232 00:11:19,760 --> 00:11:22,840 Speaker 5: You have deregulation push from this administration, and the trade 233 00:11:22,840 --> 00:11:24,760 Speaker 5: policy uncertainty is now behind us. 234 00:11:24,880 --> 00:11:27,240 Speaker 7: Well, so let me say this, We are really constructive 235 00:11:27,280 --> 00:11:29,520 Speaker 7: on the deregulatory side, and it's a reason we've been 236 00:11:29,559 --> 00:11:31,640 Speaker 7: talking about the opportunity in banks. I realize I do 237 00:11:31,720 --> 00:11:33,520 Speaker 7: work in a bank, but I also can be objective 238 00:11:34,080 --> 00:11:35,880 Speaker 7: and my job is to make my clients money in 239 00:11:35,920 --> 00:11:39,160 Speaker 7: all parts of the cycle and in all sectors. So yeah, 240 00:11:39,160 --> 00:11:43,520 Speaker 7: I see the regulatory side is a good tailwind for 241 00:11:43,679 --> 00:11:46,400 Speaker 7: parts of the market and for the economy. On the 242 00:11:46,440 --> 00:11:50,360 Speaker 7: trade side, much of the uncertainty is behind us, but 243 00:11:50,440 --> 00:11:52,800 Speaker 7: not all. And I like to say we were past 244 00:11:52,840 --> 00:11:55,680 Speaker 7: peak tariff shock, but we're still kind of working through 245 00:11:55,720 --> 00:11:58,160 Speaker 7: what's going to happen with the IEPA tariffs, which tariffs 246 00:11:58,200 --> 00:11:59,040 Speaker 7: are going to be enduring. 247 00:11:59,240 --> 00:12:00,959 Speaker 6: What will trade life like look. 248 00:12:01,040 --> 00:12:03,720 Speaker 7: I'll be honest, I'm encouraged when the administration is pulling 249 00:12:03,760 --> 00:12:06,280 Speaker 7: back or rolling back some of the tear of stay employed. 250 00:12:06,520 --> 00:12:09,520 Speaker 7: I think that I'd like to see a more moderate 251 00:12:09,559 --> 00:12:12,800 Speaker 7: inflation environment. But we know that higher prices are still 252 00:12:12,840 --> 00:12:16,800 Speaker 7: filtering into the costs and to the end prices that 253 00:12:17,120 --> 00:12:20,120 Speaker 7: companies are charging consumers. So I don't think we're past 254 00:12:20,360 --> 00:12:22,960 Speaker 7: the concern. I think people are tired of talking about 255 00:12:23,000 --> 00:12:25,600 Speaker 7: it and want it to go away. But inflation, I 256 00:12:25,600 --> 00:12:28,600 Speaker 7: think is spicier than many are pricing in the market. 257 00:12:28,600 --> 00:12:29,600 Speaker 6: That's a core of you of mine. 258 00:12:29,720 --> 00:12:31,400 Speaker 5: Lisa and I've been talking about all week what the 259 00:12:31,480 --> 00:12:34,920 Speaker 5: signal should be from the dollar stores and Walmart. Is 260 00:12:34,920 --> 00:12:37,080 Speaker 5: it a good signal in the economy and the consumer 261 00:12:37,240 --> 00:12:38,080 Speaker 5: or is it actually. 262 00:12:37,880 --> 00:12:38,840 Speaker 6: A negative one. 263 00:12:39,240 --> 00:12:42,120 Speaker 7: I think it is a cautious signal. I think we 264 00:12:42,160 --> 00:12:45,839 Speaker 7: are getting consumers who are continuing to spend. We like this, 265 00:12:46,040 --> 00:12:48,800 Speaker 7: but they're continuing to spend in a way that is 266 00:12:48,920 --> 00:12:53,200 Speaker 7: conscious of you know, brand, it's conscious of value, and it's. 267 00:12:53,040 --> 00:12:55,320 Speaker 6: Conscious of like, you know where the best deals are. 268 00:12:55,720 --> 00:12:57,800 Speaker 7: We all know how this went kind of over Black 269 00:12:57,800 --> 00:13:01,280 Speaker 7: Friday and the following weekend consumers are if they're in 270 00:13:01,320 --> 00:13:03,800 Speaker 7: the big box stores, they're using their phones to price 271 00:13:03,880 --> 00:13:06,360 Speaker 7: check at the same time, and we saw more people 272 00:13:06,480 --> 00:13:09,439 Speaker 7: shopping online than in the stores than we have historically. 273 00:13:09,640 --> 00:13:11,280 Speaker 6: Continued that to see that trend. 274 00:13:11,080 --> 00:13:15,240 Speaker 7: And that's largely because people are comparison pricing on non prices, 275 00:13:15,480 --> 00:13:17,680 Speaker 7: and I think that's a smart thing to do, but 276 00:13:17,760 --> 00:13:20,240 Speaker 7: they are not stopping spending. But we do need to 277 00:13:20,280 --> 00:13:22,360 Speaker 7: be recognized that we are at this later part of 278 00:13:22,400 --> 00:13:24,840 Speaker 7: the cycle that consumers are a bit fatigued. This has 279 00:13:24,840 --> 00:13:28,199 Speaker 7: been a tough year. They don't feel many things are affordable, 280 00:13:28,240 --> 00:13:31,600 Speaker 7: from the regular basket of goods to housing, et cetera. 281 00:13:31,840 --> 00:13:32,720 Speaker 6: And we need to listen to that. 282 00:13:32,760 --> 00:13:34,520 Speaker 7: In the administration needs to listen to that as well. 283 00:13:34,800 --> 00:13:37,640 Speaker 1: So you talk about how you are somewhat looking at 284 00:13:37,640 --> 00:13:39,920 Speaker 1: the large caps to continue to outperform, you're not screamingly 285 00:13:39,920 --> 00:13:42,640 Speaker 1: optimistic about the US economy at the same time not 286 00:13:42,720 --> 00:13:45,760 Speaker 1: seeing long duration as a hedge. I wonder how much 287 00:13:45,760 --> 00:13:48,200 Speaker 1: this has to do with the glut of supply not 288 00:13:48,240 --> 00:13:50,560 Speaker 1: only coming from the treasury market, but also from the 289 00:13:50,600 --> 00:13:53,400 Speaker 1: corporate bond space, as it helps to finance a lot 290 00:13:53,440 --> 00:13:55,360 Speaker 1: of the AI tech boom that we're seeing. 291 00:13:55,679 --> 00:13:58,640 Speaker 7: Yeah, so we've seen some sort of an uptick in 292 00:13:58,679 --> 00:14:02,520 Speaker 7: some of the financing for AI projects and AI adjacent 293 00:14:02,600 --> 00:14:05,400 Speaker 7: projects and infrastructure, but it's not setting off any. 294 00:14:05,280 --> 00:14:07,400 Speaker 6: Alarm bells for US. Frankly. 295 00:14:07,480 --> 00:14:09,640 Speaker 7: On the duration side, the thing that we're most concerned 296 00:14:09,640 --> 00:14:13,599 Speaker 7: about is that we are exhibiting very little fiscal discipline 297 00:14:13,760 --> 00:14:16,120 Speaker 7: in the US government. That is not a political statement, 298 00:14:16,160 --> 00:14:19,680 Speaker 7: that's true across both Republican and democratic administrations, and that 299 00:14:19,760 --> 00:14:21,200 Speaker 7: the rest of the world is kind of waking up 300 00:14:21,240 --> 00:14:23,160 Speaker 7: to this, and that this is not a great picture 301 00:14:23,240 --> 00:14:26,080 Speaker 7: over the medium term. Frankly, if we think inflation is 302 00:14:26,080 --> 00:14:28,520 Speaker 7: going to be a little spicier, and we think that 303 00:14:28,760 --> 00:14:31,400 Speaker 7: they were likely to get no fiscal discipline in twenty 304 00:14:31,480 --> 00:14:34,080 Speaker 7: twenty six, you know, the likelihood that bond yields stay 305 00:14:34,120 --> 00:14:35,520 Speaker 7: where they are and move a little bit higher, that 306 00:14:35,560 --> 00:14:37,840 Speaker 7: we're not going to get a lot of juice, you know, 307 00:14:37,840 --> 00:14:38,240 Speaker 7: I think. 308 00:14:38,160 --> 00:14:38,920 Speaker 6: Is quite high. 309 00:14:39,040 --> 00:14:42,680 Speaker 7: We prefer to hedge our long equity position with more 310 00:14:42,720 --> 00:14:43,800 Speaker 7: gold at this point. 311 00:14:43,880 --> 00:14:45,640 Speaker 6: Well, I wonder where credit fits in with this. 312 00:14:45,960 --> 00:14:49,000 Speaker 1: I'm saying this after Warner Brothers and Netflix their tie 313 00:14:49,080 --> 00:14:51,920 Speaker 1: up has been confirmed this morning. That deal is expected 314 00:14:51,960 --> 00:14:54,800 Speaker 1: to close of twelve to eighteen months. Netflix has been 315 00:14:54,800 --> 00:14:57,840 Speaker 1: talking about using a lot of cash as well as 316 00:14:58,000 --> 00:15:00,880 Speaker 1: buying shares. That is code for deb markets that are 317 00:15:00,880 --> 00:15:02,760 Speaker 1: going to be financing this since they don't have that 318 00:15:02,800 --> 00:15:05,080 Speaker 1: cash on their balance sheets. At what point do you 319 00:15:05,080 --> 00:15:07,120 Speaker 1: think that the credit market is going to experience some 320 00:15:07,200 --> 00:15:10,160 Speaker 1: fatigue with the massive issueance and seeing not only from 321 00:15:10,200 --> 00:15:12,720 Speaker 1: AI but from some of the other eminent activity that's 322 00:15:12,720 --> 00:15:13,400 Speaker 1: come down the pipe. 323 00:15:13,520 --> 00:15:15,640 Speaker 7: Yeah, I mean, this is an excellent question and actually 324 00:15:15,640 --> 00:15:17,240 Speaker 7: something we've been spending a lot of time on our 325 00:15:17,240 --> 00:15:20,240 Speaker 7: research side on this week, because we're asking ourselves, you know, 326 00:15:20,320 --> 00:15:22,440 Speaker 7: how much juice is they're left in the credit market. 327 00:15:22,520 --> 00:15:24,400 Speaker 7: We know spreads on the IG and the high yield 328 00:15:24,440 --> 00:15:27,920 Speaker 7: side are close to the fifteen year tights. It's great 329 00:15:27,960 --> 00:15:30,560 Speaker 7: if you're a company that's issuing, it's not so great 330 00:15:30,600 --> 00:15:33,080 Speaker 7: if you're looking for like a great total return from 331 00:15:33,080 --> 00:15:35,360 Speaker 7: that ass a class and as acid allocators, that's what 332 00:15:35,360 --> 00:15:38,720 Speaker 7: we're really examining. So while I'm not calling for any 333 00:15:38,720 --> 00:15:42,040 Speaker 7: significant spike in defaults, we have to ask ourselves, relative 334 00:15:42,080 --> 00:15:44,440 Speaker 7: to equities, can we get the returns that we need 335 00:15:44,520 --> 00:15:47,960 Speaker 7: on a risk adjusted basis from credit at this point 336 00:15:48,040 --> 00:15:50,920 Speaker 7: and we're less convinced, and we've been a little bit 337 00:15:51,040 --> 00:15:53,720 Speaker 7: underweight relative to our index. So if you're underweight credit, 338 00:15:53,920 --> 00:15:57,800 Speaker 7: but overweight equity, but overweight equities and underweight long duration, 339 00:15:58,280 --> 00:16:00,960 Speaker 7: balancing out with goal balancing out with this is a 340 00:16:01,040 --> 00:16:04,200 Speaker 7: new portfolio allocation. This looks like a different kind of 341 00:16:04,320 --> 00:16:08,000 Speaker 7: model than you know, pre pandemic, the sixty forty type 342 00:16:08,000 --> 00:16:10,960 Speaker 7: of allocation. It absolutely is and a big project we're 343 00:16:11,000 --> 00:16:13,800 Speaker 7: also undergoing is really kind of rethinking how we construct 344 00:16:13,880 --> 00:16:16,760 Speaker 7: portfolios in general for all of our clients. They need 345 00:16:16,800 --> 00:16:19,520 Speaker 7: to be outcomes based and not just static based on 346 00:16:19,520 --> 00:16:22,040 Speaker 7: a sixty forty benchmark. You know what part of the 347 00:16:22,080 --> 00:16:25,960 Speaker 7: portfolio needs to be generating growth, income and uncorrelated returns, 348 00:16:26,240 --> 00:16:28,520 Speaker 7: and then where do the traditional asset classes and factor 349 00:16:28,560 --> 00:16:31,600 Speaker 7: exposures fit into that. So this is a huge project 350 00:16:31,640 --> 00:16:33,880 Speaker 7: for us and we are really really excited about. 351 00:16:33,640 --> 00:16:34,280 Speaker 6: What will take it. 352 00:16:34,360 --> 00:16:37,240 Speaker 2: Stay with us. Multilemberg Savannah's coming up. 353 00:16:37,320 --> 00:16:37,880 Speaker 3: Off to this. 354 00:16:46,800 --> 00:16:50,320 Speaker 1: Cossa's Hunter of Economist Intelligence saying a hasset led FED 355 00:16:50,360 --> 00:16:53,600 Speaker 1: could go in multiple directions, writing if the hase To 356 00:16:53,680 --> 00:16:56,600 Speaker 1: who wrote about the deleterious effects of inflation shows up 357 00:16:56,640 --> 00:16:59,280 Speaker 1: at the FED, the markets should feel relieved. If his 358 00:16:59,480 --> 00:17:03,119 Speaker 1: loyalty to the president shows up, markets may show concerns. 359 00:17:03,440 --> 00:17:05,399 Speaker 1: Constance joins us. Now, Constant is great to see you. 360 00:17:05,400 --> 00:17:07,159 Speaker 1: Thank you so much for being here. I want to 361 00:17:07,160 --> 00:17:09,280 Speaker 1: start with why we haven't seen more concerned markets yet, 362 00:17:09,320 --> 00:17:12,000 Speaker 1: because ultimately, if you're looking to the market as a 363 00:17:12,040 --> 00:17:15,480 Speaker 1: barometer of fear, you're not saying any huge red flags. 364 00:17:15,560 --> 00:17:16,920 Speaker 6: So you're seeing zero fear. 365 00:17:17,960 --> 00:17:21,440 Speaker 8: And part of that could be that markets are looking 366 00:17:21,520 --> 00:17:23,560 Speaker 8: sort of short term, right they know that there's going 367 00:17:23,600 --> 00:17:25,440 Speaker 8: to be another or think that there's going to be 368 00:17:25,440 --> 00:17:29,040 Speaker 8: another FED rate cut in December. Also, it's the makeup 369 00:17:29,080 --> 00:17:31,400 Speaker 8: of the FED, right, the FED was designed as an 370 00:17:31,440 --> 00:17:34,840 Speaker 8: institution to be immune. 371 00:17:34,560 --> 00:17:36,080 Speaker 6: From political pressure. 372 00:17:36,160 --> 00:17:38,760 Speaker 8: So whether you're talking about the terms of the governors, 373 00:17:38,800 --> 00:17:41,919 Speaker 8: whether you're talking about the way the regional presidents are 374 00:17:41,920 --> 00:17:44,560 Speaker 8: set up, so all of this is a very intricate 375 00:17:44,680 --> 00:17:47,560 Speaker 8: timing game. I think the markets are betting on the 376 00:17:47,560 --> 00:17:50,960 Speaker 8: fact that the Supreme Court will punt the decision to 377 00:17:51,400 --> 00:17:57,240 Speaker 8: after February and so therefore Lisa Cook will remain in place. Right, 378 00:17:57,280 --> 00:18:01,040 Speaker 8: that's really critical because if you have a threshold of 379 00:18:01,080 --> 00:18:06,719 Speaker 8: five or four governors, they can overrule of the president's terms. 380 00:18:06,800 --> 00:18:09,160 Speaker 8: So there's a lot going on in terms of timing, 381 00:18:09,200 --> 00:18:11,600 Speaker 8: and I think the market is betting on a few 382 00:18:11,920 --> 00:18:15,879 Speaker 8: things that will keep that independence in place regardless of 383 00:18:15,920 --> 00:18:18,119 Speaker 8: who is fed share. But also, if you look at 384 00:18:18,160 --> 00:18:23,120 Speaker 8: Kevin Hasset's work from before he joined the first Trump administration, 385 00:18:23,640 --> 00:18:26,880 Speaker 8: it really centers on the importance of keeping inflation low 386 00:18:27,240 --> 00:18:31,639 Speaker 8: because the tax code is geared towards benefiting low firms 387 00:18:31,800 --> 00:18:34,960 Speaker 8: during periods of low inflation. Right, So it depends on 388 00:18:35,000 --> 00:18:36,159 Speaker 8: which Kevin Hassett shows up. 389 00:18:36,240 --> 00:18:38,359 Speaker 1: Yeah, it depends on which economy shows up too, right, 390 00:18:38,359 --> 00:18:41,080 Speaker 1: because ultimately you're at the behest of the market and 391 00:18:41,119 --> 00:18:42,960 Speaker 1: of the economy. Right now, we're kind of flying in 392 00:18:42,960 --> 00:18:44,600 Speaker 1: the dark because we aren't getting a lot of real 393 00:18:44,640 --> 00:18:45,040 Speaker 1: time data. 394 00:18:45,040 --> 00:18:47,520 Speaker 6: We should have just gotten the Non Bails report. 395 00:18:47,680 --> 00:18:50,800 Speaker 1: Sorry, newsflash, we're not getting it until December sixteenth. But 396 00:18:50,880 --> 00:18:54,639 Speaker 1: right now we are looking to September PCE report coming 397 00:18:54,720 --> 00:18:56,560 Speaker 1: up in about ninety minutes time. 398 00:18:56,640 --> 00:18:58,320 Speaker 6: I mean, what do they do with this? 399 00:18:58,440 --> 00:19:00,880 Speaker 1: How do we understand whether inflation is the bigger problem 400 00:19:00,960 --> 00:19:02,119 Speaker 1: or whether it's the labor market. 401 00:19:02,200 --> 00:19:04,720 Speaker 8: Well, we pretty much know what the PC report is 402 00:19:04,720 --> 00:19:06,840 Speaker 8: going to say with regard to inflation because a lot 403 00:19:06,840 --> 00:19:09,120 Speaker 8: of that is derived from the CPI and the PPI. 404 00:19:09,240 --> 00:19:12,520 Speaker 8: So we think it's about two point nine percent for 405 00:19:12,800 --> 00:19:16,360 Speaker 8: a headline zero point two two percent for core. Those 406 00:19:16,359 --> 00:19:19,880 Speaker 8: are both month over month numbers, right. The more interesting 407 00:19:19,920 --> 00:19:22,119 Speaker 8: thing is going to be looking for any signals in 408 00:19:22,160 --> 00:19:25,080 Speaker 8: the wage and income data. And so we are looking 409 00:19:25,119 --> 00:19:27,200 Speaker 8: for a little bit of softness in the wage data, 410 00:19:27,480 --> 00:19:29,720 Speaker 8: but that's going to give an indication of the strength 411 00:19:29,760 --> 00:19:30,680 Speaker 8: of the labor market. 412 00:19:30,920 --> 00:19:33,639 Speaker 5: When you say which Kevin Hasseid shows up, isn't he 413 00:19:33,720 --> 00:19:36,320 Speaker 5: being chosen because the one that is going to be 414 00:19:36,440 --> 00:19:40,280 Speaker 5: Donald Trump's chief marketer when it comes to the economy. 415 00:19:40,400 --> 00:19:42,479 Speaker 5: Isn't it going to be him that is going to 416 00:19:42,520 --> 00:19:44,640 Speaker 5: listen to him when it comes to lower rates, because 417 00:19:44,640 --> 00:19:46,199 Speaker 5: it's the only reason why he's being chosen. 418 00:19:46,359 --> 00:19:48,280 Speaker 8: I don't think it's the only reason why he's being chosen. 419 00:19:48,320 --> 00:19:50,680 Speaker 8: I mean, he is an economist who has a long 420 00:19:50,840 --> 00:19:55,119 Speaker 8: track record of being in DC being a policy maker. 421 00:19:55,200 --> 00:20:00,000 Speaker 8: He basically crafted the TCJA and he was very influential 422 00:20:00,160 --> 00:20:03,159 Speaker 8: and the Cares Act. So I think I think is 423 00:20:03,640 --> 00:20:07,240 Speaker 8: he's being chosen for those reasons. But remember he's going 424 00:20:07,280 --> 00:20:11,080 Speaker 8: to have to convince his fellow board members and the 425 00:20:11,119 --> 00:20:15,280 Speaker 8: presidents who are going to be voting next year, that 426 00:20:15,440 --> 00:20:19,320 Speaker 8: his policy direction is the direction that the FED needs 427 00:20:19,359 --> 00:20:21,280 Speaker 8: to go in, and that is a big question mark. 428 00:20:21,280 --> 00:20:23,040 Speaker 8: I mean that is he's going to have to use 429 00:20:23,040 --> 00:20:25,840 Speaker 8: a framework, and he's going to have to think about 430 00:20:25,840 --> 00:20:28,760 Speaker 8: policy within that framework. And keep in mind, we have 431 00:20:28,920 --> 00:20:32,280 Speaker 8: the benefits of the One Big Beautiful Bill Act coming 432 00:20:32,840 --> 00:20:37,800 Speaker 8: the delayed tax refunds. We're looking for over three percent 433 00:20:38,160 --> 00:20:41,159 Speaker 8: GDP growth in the first quarter, about three percent in 434 00:20:41,200 --> 00:20:43,920 Speaker 8: the second, and about three percent in the third. How 435 00:20:43,920 --> 00:20:45,680 Speaker 8: do you cut rates into that environment? 436 00:20:46,240 --> 00:20:49,320 Speaker 5: Do you think that potentially the rebates we're going to 437 00:20:49,359 --> 00:20:51,040 Speaker 5: get the One Big Beautiful Bill and the fact that 438 00:20:51,080 --> 00:20:53,520 Speaker 5: this administration is talking about two thousand dollars checks is 439 00:20:53,520 --> 00:20:56,000 Speaker 5: going to make the inflation picture that much harder for 440 00:20:56,000 --> 00:20:56,800 Speaker 5: the FED next year. 441 00:20:57,080 --> 00:20:59,120 Speaker 8: Well, the two thousand dollars checks, I think we need 442 00:20:59,160 --> 00:21:00,480 Speaker 8: to put aside because. 443 00:21:00,359 --> 00:21:02,640 Speaker 5: We keep talking going, but they keep talking, do keep 444 00:21:02,640 --> 00:21:04,359 Speaker 5: talking to and it's a midterm election? 445 00:21:04,680 --> 00:21:09,480 Speaker 8: Yes, fair enough, but yes, that would put more money 446 00:21:09,480 --> 00:21:13,040 Speaker 8: in people's pockets, and it would make them able to 447 00:21:13,040 --> 00:21:16,199 Speaker 8: withstand price increases because I think what you've seen with 448 00:21:16,280 --> 00:21:19,640 Speaker 8: the tariffs is a lot of concern about people's ability 449 00:21:19,680 --> 00:21:22,960 Speaker 8: to handle price increases. Firms have absorbed some of that 450 00:21:23,080 --> 00:21:27,199 Speaker 8: tariff increase, They've reduced hiring in order to sort of 451 00:21:27,240 --> 00:21:30,160 Speaker 8: compensate for that, and so the question is how much 452 00:21:30,160 --> 00:21:31,680 Speaker 8: are they going to be able to pass on? It 453 00:21:31,720 --> 00:21:33,600 Speaker 8: would stand to reason if people have more money in 454 00:21:33,600 --> 00:21:35,800 Speaker 8: their pockets, companies are going to be able to pass 455 00:21:35,800 --> 00:21:36,920 Speaker 8: on bigger price increases. 456 00:21:36,960 --> 00:21:39,880 Speaker 1: We're talking about a federal reserve that's set to ease policy, 457 00:21:40,000 --> 00:21:42,919 Speaker 1: and we're talking about pain among the consumer base at 458 00:21:42,920 --> 00:21:45,800 Speaker 1: the same time that Wall Street is talking about enthusiasm 459 00:21:45,920 --> 00:21:48,440 Speaker 1: for mergers and acquisitions. We've been talking on morning about 460 00:21:48,440 --> 00:21:52,160 Speaker 1: this deal of Netflix agreeing to buy Warner Brothers. We're 461 00:21:52,200 --> 00:21:55,000 Speaker 1: talking about returns that are likely to be above ten 462 00:21:55,040 --> 00:21:57,840 Speaker 1: percent on the S and P next year. Is this 463 00:21:57,880 --> 00:22:01,800 Speaker 1: a potential headwind or a tailwind for essential bankers that 464 00:22:01,840 --> 00:22:04,200 Speaker 1: are both looking for some sort of boost from consumption 465 00:22:04,440 --> 00:22:06,840 Speaker 1: that will come with more of the wealth effect, but 466 00:22:06,920 --> 00:22:10,359 Speaker 1: also could potentially be fueling froth in markets that seem 467 00:22:10,400 --> 00:22:11,400 Speaker 1: pretty accommodative. 468 00:22:11,960 --> 00:22:15,480 Speaker 8: So it all comes down to productivity, right, If we 469 00:22:15,600 --> 00:22:19,160 Speaker 8: really are getting the productivity gains and not just from 470 00:22:19,240 --> 00:22:21,960 Speaker 8: when we say AI right. It's not just generative AI 471 00:22:22,000 --> 00:22:25,320 Speaker 8: and chat GPT, but the productivity gains from just regular 472 00:22:25,400 --> 00:22:29,720 Speaker 8: AI right are still being diffused throughout the economy, and 473 00:22:30,640 --> 00:22:32,960 Speaker 8: that is an important driver of productivity growth. 474 00:22:33,240 --> 00:22:35,040 Speaker 6: So it really comes down to are. 475 00:22:34,880 --> 00:22:38,400 Speaker 8: We in a period of enhance productivity growth, in which 476 00:22:38,440 --> 00:22:41,720 Speaker 8: case the markets are not excessively frothy, in which case 477 00:22:41,760 --> 00:22:44,240 Speaker 8: the Fed has a lot more room to maneuver because 478 00:22:44,520 --> 00:22:47,919 Speaker 8: ultimately that will help inflation. But there's going to be 479 00:22:47,960 --> 00:22:50,520 Speaker 8: a lot of noise in the first and second quarter 480 00:22:50,600 --> 00:22:54,080 Speaker 8: in the data, and it's going to be very difficult 481 00:22:54,119 --> 00:22:56,560 Speaker 8: to interpret the underlying. 482 00:22:57,760 --> 00:22:59,600 Speaker 6: Factors that are happening in the economy. 483 00:23:00,640 --> 00:23:04,160 Speaker 2: This is the Bloomberg Surveillance podcast, bringing you the best 484 00:23:04,240 --> 00:23:07,320 Speaker 2: in markets, economics, a gio politics. You can watch the 485 00:23:07,320 --> 00:23:10,359 Speaker 2: show live on Bloomberg TV weekday mornings from six am 486 00:23:10,480 --> 00:23:13,639 Speaker 2: to nine am Eastern. Subscribe to the podcast on Apple, 487 00:23:13,920 --> 00:23:16,760 Speaker 2: Spotify or anywhere else you listen, and as always on 488 00:23:16,760 --> 00:23:19,280 Speaker 2: the Bloomberg Terminal and the Bloomberg Business app.