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

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

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

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

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

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Speaker 1: the Bloomberg Terminal, and the Bloomberg Business app. Right now,

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Speaker 1: he was an outlier, He's not anymore. Andrew hollen Horst

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Speaker 1: has led it's City Group. He's our chief US economist

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Speaker 1: on one two right AX, all of a sudden with

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Speaker 1: a number today, Andrew, I'm intersted in September twentieth, and

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Speaker 1: I just I'm absolutely my head is spinning over restrictive?

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Speaker 1: Are we close to restrictive in our complex mathematics of

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Speaker 1: this economy?

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Speaker 2: I mean, I don't know that you need to go

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Speaker 2: into the complex mathematics. We can, and that's important, But

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Speaker 2: if you just step back and you look at this

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Speaker 2: labor market data in particular, we've surprised month after month

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Speaker 2: to the upside. We continue to see these jobs numbers

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Speaker 2: coming in stronger, and I think Mike g have all

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Speaker 2: the right caveats around ADP employment. There's a lot of

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Speaker 2: reasons that that can differ from the official payrolls reading,

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Speaker 2: and we have some big seasonal adjustment issues. All of

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Speaker 2: that I think is right, but just take a step

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Speaker 2: back look at these jobs numbers. Hundreds of thousands of

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Speaker 2: additional jobs relative to expectations that have been created. That's

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Speaker 2: a signal that maybe we're not at appropriately restrictive rates.

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Speaker 3: Is that an appropriate signal? Is that a lagging indicator?

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Speaker 2: Andrew, That's the big issue is the FED is making

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Speaker 2: policy now looking at data that is going to depend

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Speaker 2: on their lagged policy making. And I think the bank issue,

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Speaker 2: the credit tightening, that's something that probably still is going

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Speaker 2: to be working its way through the economy, slowing things down.

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Speaker 2: The concern though, is that some areas have already been

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Speaker 2: worked through. If you look at the housing sector, we

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Speaker 2: bottomed in housing, we've come off that bottom, and we

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Speaker 2: didn't lose construction jobs. And that's a great thing for

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Speaker 2: construction worker is a good thing for the economy. But

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Speaker 2: if the FED is looking to loosen the labor market,

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Speaker 2: we're just really not seeing that in the data.

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Speaker 3: Can you hap me with that That's been a key

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Speaker 3: question for me in the last twenty four hours, and

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Speaker 3: I'll keep digging into this too with other guests later

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Speaker 3: on Bloomberg TV and on Bloomberg Radio. When you look

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Speaker 3: at the surprise indicators, that index is the highest been

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Speaker 3: since twenty twenty one. So that's the incoming information relative

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Speaker 3: to the estimates before that economic data. Is that because

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Speaker 3: things are better than expected or are things getting better?

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Speaker 3: Are they actually improving?

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Speaker 2: I think it is better than expected, And this is

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Speaker 2: really theory versus data, and the theory would tell you

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Speaker 2: interest rates are higher, real interest rates are higher, that

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Speaker 2: tailwind from lagged fiscal stimulus should be coming off. All

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Speaker 2: of those things should be slowing the economy, and we

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Speaker 2: think we see some signs that some of that slowing

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Speaker 2: is happening. But job growth has slowed down. It used

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Speaker 2: to be running a million a month, and it was

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Speaker 2: running five hundred thousand a month, but it slowed to

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Speaker 2: somewhere around three hundred thousand a month, and that's just

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Speaker 2: a lot fat than anyone would have expected at this point.

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Speaker 1: The arch issue here is Edheiman looks at a very

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Speaker 1: very weak economy and yet we've got service sector doing

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Speaker 1: this and that does City Group look at this as

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Speaker 1: a weak economy after two percent GDP AD justin in

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Speaker 1: the first quarter.

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Speaker 2: I think this cycle is just so different that some

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Speaker 2: of the standard indicators of weakness are not working the

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Speaker 2: way that they have historically. One example, John was talking

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Speaker 2: about before manufacturing manufacturing ism showing contraction. That's usually a

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Speaker 2: good leading indicator of recession. The housing sector being in contraction,

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Speaker 2: that's usually a good leading indicator of recession. But this

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Speaker 2: cycle is different. We have this transference to services fact

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Speaker 2: and the continuum.

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Speaker 1: Here are we, as constant just mentioned from Azuo, Are

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Speaker 1: we where it's a pandemic supply side analysis or is

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Speaker 1: it a demand side demand driven analysis? For the FED?

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Speaker 2: I think you have to do them together. And I

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Speaker 2: think that it's a commonly made statement now that well

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Speaker 2: central bank should be focused on the demand side, not

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Speaker 2: the supply side. You have to focus on where is

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Speaker 2: the demand side relative to the supply side. And unless

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Speaker 2: you think the shock to supply is some very transitory

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Speaker 2: issue and a lot of the issues that we have

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Speaker 2: on the supply side now are structural and we'll be

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Speaker 2: with us for some time. Central banks need to recognize

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Speaker 2: that supply side and then adjust demand accordingly.

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Speaker 3: I'm looking forward to bookmark in the address from Chairman

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Speaker 3: Pound and Jackson Hole next month with the address from

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Speaker 3: last year and comparing where unemployment was down and where

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Speaker 3: it is now, because i was looking for that to

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Speaker 3: come into three point six percent, which is basically where

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Speaker 3: it was where he was dressed in the public talking

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Speaker 3: about course in pain and potentially pain in the labor market.

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Speaker 1: I'm in the camp alocentra that this isn't in the textbooks,

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Speaker 1: as Andrew alludes to post pandemic. It's both sides, supply

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Speaker 1: and demand, and we're we're just making it up as

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Speaker 1: we go. Michael McKee, we're waiting for claims. How to

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Speaker 1: claims Michael McKee dovetail into the ADP report.

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Speaker 4: Well, I can tell you they come in a little

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Speaker 4: bit higher than anticipated, to two hundred and forty eight thousand.

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Speaker 4: That is higher than the initial report of two thirty

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Speaker 4: nine last week, but it is also higher than the

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Speaker 4: anticipated two forty five, so a bit of a rebuild

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Speaker 4: in claims. Now, this is a tough time of year

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Speaker 4: to get claims right because you have a couple of

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Speaker 4: things going on. We had a juneteenth holiday that was

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Speaker 4: in the last report, which is now revised down to

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Speaker 4: two thirty six, and that's a new holiday, so hard to.

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Speaker 1: Seasonally adjust for that.

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Speaker 4: And then you've got the auto industry shutdowns that come

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Speaker 4: around every summer. So I wouldn't put too much on

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Speaker 4: the actual number, but the level change is a little

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Speaker 4: bit stronger, but it's still nowhere near telling you that

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Speaker 4: we have a big layoff problem going on. One million,

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Speaker 4: seven hundred and twenty thousand continuing claims. That's down from

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Speaker 4: one seven thirty three the week before.

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Speaker 1: So the people who.

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Speaker 4: Are getting benefits has fallen back, which tells you so

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Speaker 4: thing as well. So that's two out of the three

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Speaker 4: or two out of the four. Today, we'll get jobs,

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Speaker 4: the Jolts numbers, and we'll get the services employment numbers

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Speaker 4: coming up, and then watch that two twenty five survey

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Speaker 4: for payrolls tomorrow.

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Speaker 1: That may change. The survey may change before the jobs.

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Speaker 4: Before the jobs report, because if we get all this strength,

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Speaker 4: people might start to build some of that into their

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Speaker 4: anticipated numbers.

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Speaker 1: Futures to tier eight negative thirty three on the sp

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Speaker 1: Futures were at a stick on the VICS fifteen point

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Speaker 1: two at nine the two year yield's got a life

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Speaker 1: of its own, up thirteen basis points five point zero

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Speaker 1: seven percent. Think with that money market funded City Group

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Speaker 1: is going to do. We have the honor of continuing

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Speaker 1: from City Group, where he is a seven point two

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Speaker 1: percent six month CD Andrew Holland Horst is with us,

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Speaker 1: they're chief US economist. I want to go to what

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Speaker 1: matters in the textbooks, which is not the yield of

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Speaker 1: the ten year four point zero two percent up nine

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Speaker 1: basis points, but a ten year inflation adjusted yield measurement

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Speaker 1: of one point seven seven percent, Given the hollend Horse

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Speaker 1: rate structure, given the Bill Dudley rate structure, given the

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Speaker 1: Mohammed Alarian rate structure, where's a comfortable real yield that

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Speaker 1: we can live with.

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Speaker 2: I think you're going to the right place, Tom, which

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Speaker 2: is that ten year inflation adjusted yield that's going to

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Speaker 2: control the level of activity in the economy. And what

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Speaker 2: we've seen historically is those level of real yields need

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Speaker 2: to get up above one percent, maybe even above two percent,

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Speaker 2: to really slow the economy. So that's the first thing

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Speaker 2: to keep in mind on the real yield story. The

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Speaker 2: second thing is what is the inflation number that you're subtracting.

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Speaker 2: That's really the key question. If you're subtracting two percent inflation,

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Speaker 2: then an approximately four percent your treasure yield is going

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Speaker 2: to be a two hundred basis point real yield. If

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Speaker 2: you're subtracting four percent inflation, then we're at zero real yield.

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Speaker 2: So that that's really the question. I think the question

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Speaker 2: is where is inflation going to run strong?

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Speaker 1: And you see one there what you got from Holland

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Speaker 1: or she's got three statistics, she got the nominal yield.

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Speaker 1: Take away the inflation, right, that's movable, and that gets

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Speaker 1: you to a real yield of the residual off the

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Speaker 1: back end. One of the themes we're hearing going to show

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Speaker 1: from smart people is the stickiness of our disinflation. What

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Speaker 1: is your call on disinflation? Do we get to three

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Speaker 1: percent whereas Jim Bianco states, we could actually reverse or

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Speaker 1: stay there for a good amount of time, what's your

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Speaker 1: call on inflation?

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Speaker 2: Yeah, so we have some positive dynamics over the next

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Speaker 2: few weeks actually in the inflation data, where you should

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Speaker 2: see used car prices coming down, shelter prices should be slowing.

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Speaker 2: So there are reasons to think we're going to slow

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Speaker 2: into the end of the year, probably get down to

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Speaker 2: something like a four percent underlying core PCE pace, maybe

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Speaker 2: into the high threes. That's all good news for the FED.

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Speaker 2: The issue is looking further into twenty twenty four. Now,

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Speaker 2: if this housing rebound continues, if house prices continue to rise,

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Speaker 2: if the labor market stays tight, then it's really hard

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Speaker 2: to tell the story where inflation is disflace further and

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Speaker 2: you have risk that inflation actually increases. So that's not

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Speaker 2: our base case outlook, but I think those risks are

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Speaker 2: becoming a lot more material.

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Speaker 1: There's July twenty six, and then there's Jackson Hole. Does

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Speaker 1: all this chick might change what you believe you'll perceive

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Speaker 1: at Jackson Hole? Not so far.

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Speaker 4: I mean, I think a lot of depend on tomorrow

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Speaker 4: in the sense that if we get something like half

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Speaker 4: a million jobs created, they're going to raise rates. They're

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Speaker 4: probably going to raise rates in September, and Jay Powell

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Speaker 4: will explain it to us all in Jackson Hole. But

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Speaker 4: if it comes in more like the two twenty five

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Speaker 4: that's anticipated, then you've got open questions about September. So

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Speaker 4: let me throw that out to Andrew here when you

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Speaker 4: start to model out what happens over the next six months.

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Speaker 4: Let's just get to the end of twenty twenty three.

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Speaker 4: Do they go to or do they just go one

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Speaker 4: in hold? Are they on every other month? How should

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Speaker 4: people anticipate what the Fed's going to be doing.

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Speaker 2: Yeah, I don't think there's a strong presumption towards every

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Speaker 2: other month. We saw in the minutes as well in

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Speaker 2: comments from Chair Powell that they want to moderate the pace,

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Speaker 2: but they're not really telling us that that's necessarily every

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Speaker 2: other meeting, and they want to keep this kind of

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Speaker 2: very data dependent approach. So I think it's exactly what

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Speaker 2: you said. They're going to look at the labor market data,

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Speaker 2: They're going to look at the inflation data, Like I said,

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Speaker 2: core inflation. The next couple prints maybe are going to

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Speaker 2: be a little bit softer, So that should be somewhat

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Speaker 2: encouraging for FED officials. On the other hand, this research

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Speaker 2: and activity story and this two percent growth that is

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Speaker 2: continuing longer than expected, job growth that stays stronger than expected,

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Speaker 2: that might end up being pivotal for whether they make

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Speaker 2: that September hike or not. I agree with you. If

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Speaker 2: we see anything approaching what we saw in ADP and

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Speaker 2: the NFP reading, then that's probably a strong signal that

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Speaker 2: they will go ahead in September.

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Speaker 4: I'll get Tom all excited here because he loves to

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Speaker 4: talk about our star. But part of the calculation going forward,

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Speaker 4: you mentioned the two percent growth that goes on longer

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Speaker 4: than expected. Do you think that the neutral rate is

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Speaker 4: higher and will stay higher than it has been or

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Speaker 4: are you in the John Williams fed camp says we're

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Speaker 4: going to go back down to two percent and rates

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Speaker 4: can fall down as well.

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Speaker 2: I mean, I guess maybe you could say I'm in

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Speaker 2: the Louboch John Williams camp, which is a paper that

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Speaker 2: the two co authors wrote that suggests that you should

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Speaker 2: have this kind of very slow moving update to where

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Speaker 2: that our start is because we really don't observe it.

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Speaker 2: What we do observe is where's inflation, where's growth? And

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Speaker 2: if inflation and growth are coming in stronger than expected,

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Speaker 2: then you should start revising that up. So I am

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Speaker 2: kind of slowly starting to adjust higher where that our

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Speaker 2: star might be. I don't think we've come a long

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Speaker 2: way there yet. We have to see more data to

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Speaker 2: really know where we end up. If you look at

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Speaker 2: the FED stots. Remember that long run our star in

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Speaker 2: their dot plot came down significantly over the last decade

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Speaker 2: that they had the dot plot. We're starting to see

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Speaker 2: some of those dots move high, and I think that's

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Speaker 2: just appropriate given the data that we.

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Speaker 1: Say, just joining us, it is twenty three hours of chaos.

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Speaker 1: That's all on the way to put it. Michael McKee

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Speaker 1: is focused on the Jolt survey tomorrow will bring you

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Speaker 1: the unemployment data tomorrow, the job the two jobs reports.

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Speaker 1: This off the shock of ADP in a market on

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Speaker 1: the move, the equity space down thirty two points on

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Speaker 1: the SMB futures, the vic's out a stick fifteen point

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Speaker 1: two eight and the yields. I'm not going to take

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Speaker 1: a lot of time here, but I'm out nine basis

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Speaker 1: points higher ten year real yield. The two year yield

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Speaker 1: is a five point zero eight percent, really remarkable, and

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Speaker 1: to Hollanoards. I just brought up the City Group mortgage

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Speaker 1: rate and it's something like a published seven point zero

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Speaker 1: seven percent. What do these yield moves do to housing?

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Speaker 1: And it's to me, we're right on the edge of

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Speaker 1: a jump condition in the cost of money to affect

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Speaker 1: real estate.

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Speaker 2: Right, Higher mortgage rates are going to slow the housing market,

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Speaker 2: and we've seen that over the past few quarters. But

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Speaker 2: that mortgage rate actually peaked back in September October of

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Speaker 2: last year when ten year yields peak. Now we're getting

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Speaker 2: back to those levels again, so you can see those

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Speaker 2: same kind of mortgage rates. The issue that you've had

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Speaker 2: is that reduced demand for housing, but it also now

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Speaker 2: has reduced the supply of housing in the sense that

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Speaker 2: if you have an existing home, you don't want to

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Speaker 2: put that home on the market. You don't want to

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Speaker 2: lose that three percent mortgage rate. So we're seeing the

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Speaker 2: housing data is a really interesting development where we're actually

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Speaker 2: getting more activity in new housing starts. You're getting prices

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Speaker 2: that are moving higher because demand is lower, but like

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Speaker 2: we were talking about before, the supply is also lower,

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Speaker 2: and as that market adjust to that, you're actually starting

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Speaker 2: to see some renewed price pressure.

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Speaker 1: As a general statement, if businesses live in the nominal

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Speaker 1: space the top line space, sook's not the inflation adjusted

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Speaker 1: space I'm looking. I'm sorry, it's a jump condition and

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Speaker 1: fourteen basis points in the two year yield five point

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Speaker 1: zero nine percent. How does the business appetite change with

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Speaker 1: a shock of this Thursday morning?

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Speaker 2: Yeah, we definitely will see this feeding through to broader

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Speaker 2: credit conditions. You see that in the Senior Loan Officers

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Speaker 2: survey will be interesting. We'll get another look at that soon.

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Speaker 2: And you see lending conditions broadly that are tightening. This

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Speaker 2: is just going to take time to go through the

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Speaker 2: banking system and the credit system.

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Speaker 1: We had a viewer question, but I never get the

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Speaker 1: viewer questions. McKee's the only one that gets the viewer questions.

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Speaker 1: View you're getting is this from which governor? Is this

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Speaker 1: start going? You get all the questions, is this crossing

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Speaker 1: emailing it?

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Speaker 4: Well, it's a pretty simple question, and it's probably something

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Speaker 4: I should have thought of to ask you as well.

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Speaker 4: You guys are at one seventy for tomorrow, and that's

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Speaker 4: below the consensus. Do you change based on any of

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Speaker 4: this data? How are you going to put it together?

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Speaker 1: Yeah?

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Speaker 2: I don't think we'll change based on this. And the

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Speaker 2: issue there is what you mentioned, Mike, which is the

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Speaker 2: seasonal adjustment issues. The reason we're lower on tomorrow's number

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Speaker 2: is because this data is so difficult to seasonally adjust,

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Speaker 2: and that seasonal adjustment tends to differ between ADP and NFP,

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Speaker 2: So when we go back and look at this data,

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Speaker 2: I think we probably will end up being weaker on

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Speaker 2: NFP than we were on ADP, and we'll end up

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Speaker 2: attributing that to seasonal adjustment issues.

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Speaker 1: I look at it, my head spinning. You're going to

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Speaker 1: go back to the office today, do you guys rip

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Speaker 1: it up? Or do you just have to wait to

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Speaker 1: see what eight thirty tomorrow is?

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Speaker 2: You know, every day it's like we're starting over again.

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Speaker 2: I mean, the cycle has just been so different than

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Speaker 2: anything we've seen. So we take the data as we

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Speaker 2: get it.

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Speaker 1: And that I'm going to suggest describe as the central

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Speaker 1: Bank of the United States right now. To me, they're

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Speaker 1: wildly ex post as I've never defined in my mind before.

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Speaker 2: Yeah, I think that's right, a very reactionary, and.

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Speaker 1: I saw that at CenTra. I think all four people

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Speaker 1: they were all struggling to come up with theory. There's

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Speaker 1: no theory here.

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Speaker 2: Yeah, there is a sense in which the data have

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Speaker 2: just diverged so much from the theory that everyone has

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Speaker 2: become more empirical and more reactionary to the data.

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Speaker 1: Thank you so much for joining us. Can we see

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Speaker 1: you the Marday thirty. If we get a bang up

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Speaker 1: number like this, we get six hundred thousand non farm payrolls. Yeah,

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Speaker 1: pick up the phone. Andrew Hollinhurst with this was City Group,

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Speaker 1: long ago and far away. I was in Tokyo and

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Speaker 1: a gentleman from Credit Sweez came up to me and said,

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Speaker 1: thank you so much for telling people about our world

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Speaker 1: class literature. We say this now, of course, with the

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Speaker 1: death of credits and all of that effort was led

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Speaker 1: by Neil Sauce, who got me really really help jumpstart

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Speaker 1: everything I do here. And under Neil saus was a

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Speaker 1: guy named Dominic Constant. He and Ira Jersey led a

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Speaker 1: world class team synthesizing all of this mumble jumble together,

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Speaker 1: which you are joined by doctor Constam now at Missoula,

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Speaker 1: America's Dominic. Coming to cut to the chase you invented

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Speaker 1: super restrictive. Does Jerown Powell want to become super super restrictive?

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Speaker 5: Well, I think he He's obviously already super restrictive, and

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Speaker 5: I think the only reason why they would be willing

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Speaker 5: to unwind that will be either if you get a

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Speaker 5: faster fall in inflation or you see the labor market

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Speaker 5: beginning to loosen up materially, which you know, the combination

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Speaker 5: of both we think will happen. I think the panic,

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Speaker 5: if you like, back in March going into of April May,

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Speaker 5: when rates were very low, the curve steepening. People are

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Speaker 5: focused on the banking crisis. That panic has obviously subsided,

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Speaker 5: thanks a lot to what the policymakers did, But there's

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Speaker 5: still a scar on the economy that I think you're

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Speaker 5: going to see coming through.

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Speaker 1: John, and they are opening. You mentioned this the idea

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Speaker 1: of March and we forget the bank trauma. While you

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Speaker 1: were gone, we had stress tests, and you'd think we'd

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Speaker 1: move beyond trauma. I'm not so sure.

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Speaker 3: Drink sure, that's our new drinking game while you were gone.

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Speaker 1: Yeah, but it's Jenny Cremel. That's what we're using.

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Speaker 3: Okay, nothing too hard because you're mentioning it so much.

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Speaker 3: Just to build on that. You said the scars are

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Speaker 3: there and they're going to start to come through. That

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Speaker 3: indicates that you believe a process did begin back in March.

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Speaker 3: Could you shine a light on that a little bit

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Speaker 3: more done? What are you seeing that it's taking place

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Speaker 3: at a moment you think will come to the surface.

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Speaker 5: Well, we know that credit conditions have tightened a lot

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Speaker 5: in the survey data, and that anyway works through to

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Speaker 5: a lag in terms of a lending growth itself slowing down,

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Speaker 5: and you can see in the weekly data lending growth

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Speaker 5: doesn't look particularly good, particularly for the larger banks. So

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Speaker 5: that's sort of one issue that's already in place. The

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Speaker 5: other issue is really the net interest margin story that

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Speaker 5: so you're going to start getting the bank earnings and

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Speaker 5: nims are going to get released, and you can model nims,

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Speaker 5: you know, relatively straightforward, and they're going to deteriorate. They're

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Speaker 5: clearly going to deteriorate. The curve is a very inverted

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Speaker 5: NIM compression, i would argue, is very much in place. Again,

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Speaker 5: it takes a few quarters to properly see through, but

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Speaker 5: we're talking about a swing of a few hundred billion

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Speaker 5: dollars potentially as much as that in terms of what

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Speaker 5: could be taken out of bank earnings essentially, and that's

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Speaker 5: just from the sort of top down macro view. And

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Speaker 5: then of course the issue is how that's distributed across

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Speaker 5: the banks. You know, some banks are going to be

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Speaker 5: much better place than other banks to deal with this.

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Speaker 5: The ones that really had to fight for deposits, if

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Speaker 5: you like, are going to be the ones that will

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Speaker 5: come back into focus. So the policymakers have done a lot,

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Speaker 5: I think, to put you to ring fence the crisis

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Speaker 5: in terms of sort of a banking systematics or a problem.

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Speaker 5: But that's all going to sort of feed through still

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Speaker 5: into weaker lending growth, and that collides with what we

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Speaker 5: think is going to be a loosening up for the

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Speaker 5: labor market because people are kind of there's too much

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Speaker 5: labor hoarding going on, not yet enough labor shedding going on.

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Speaker 5: But that transition I think will take place in the fall.

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Speaker 5: So we've had obviously a bit of a round trip

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Speaker 5: in markets, but I think the fundamentals behind the outlook

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Speaker 5: for the economy are still a little bit you know,

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Speaker 5: very much concerning if we can get a soft landing, fantastic,

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Speaker 5: but a hard landing is very much still on the radar.

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Speaker 3: I think, Tom, we need you to build on that

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Speaker 3: just a little bit more. You mentioned how some of

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Speaker 3: those banking issues might be distributed across the banking system.

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Speaker 3: How that will be distributed across banks small through to

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Speaker 3: large will have implications for how it's distributed through the economy.

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Speaker 3: Can you give me that element of it. Dom How

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Speaker 3: do you think this will show up in the broader economy.

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Speaker 3: Is it just small sections of the economy that starts

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Speaker 3: to struggle or is it a broader issue.

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Speaker 5: No, I think it's gonna it's gonna be it's going

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Speaker 5: to be a little bit like what we've already seen.

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Speaker 5: I think it's going to be the combination of the

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Speaker 5: banks that perhaps you haven't had the benefit of of

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Speaker 5: earning uh at i e. R rates at the FED.

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Speaker 5: You know, they haven't had the excess reserves perhaps, so

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Speaker 5: they've had to you know, on their income side, it's

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Speaker 5: been you know, it's been a bit more difficult. And

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Speaker 5: in addition, they've had to fight for their deposits. So

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Speaker 5: uh and and and you know that that's going to

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Speaker 5: be probably the same sort of thing that we saw before.

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Speaker 5: Uh and and and you know, in terms of the

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Speaker 5: economic impact, uh you know, you can just look at

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Speaker 5: the sectors that where there's clearly been sort of over employments.

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Speaker 5: I mean, you know, technology is obviously one. So I

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Speaker 5: think that's kind of you know where you'll probably see

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Speaker 5: the stress years ago.

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Speaker 1: Dominic, the most famous chart you generated was how everybody

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Speaker 1: was consistently wrong predicting higher rates. And there are these

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Speaker 1: little wisps and a Credit suitee model of wrong wrong, wrong, wrong,

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Speaker 1: wrong over time, and much saying you were wrong. I'm

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Speaker 1: saying the entire street was wrong. What's the chart now

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Speaker 1: that indicates how wrong we are? What's the chart now

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Speaker 1: that just we're just getting it wrong?

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Speaker 5: Well, I mean, I guess you know the way in

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Speaker 5: which the FED expects if you're going to look at

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Speaker 5: the same kind of hair charts we used to call them,

437
00:21:18,640 --> 00:21:22,200
Speaker 5: whereby the market had always consistently overestimated what the FED

438
00:21:22,320 --> 00:21:24,359
Speaker 5: was going to be doing. You can certainly argue that

439
00:21:24,359 --> 00:21:28,280
Speaker 5: the market has tended to underestimate the commitment of the

440
00:21:28,320 --> 00:21:32,080
Speaker 5: FED to sort of maintain rates at an elevated level

441
00:21:32,640 --> 00:21:35,040
Speaker 5: and keep pushing through. So if you go back a year,

442
00:21:35,600 --> 00:21:38,439
Speaker 5: you know, we were pricing four cuts, and you know,

443
00:21:38,480 --> 00:21:40,680
Speaker 5: come this year and obviously the market is not there now,

444
00:21:40,760 --> 00:21:42,639
Speaker 5: so it's been running on the other side of that.

445
00:21:42,840 --> 00:21:45,640
Speaker 1: That's where we're dovetailing you with Hollandhorse some city group here.

446
00:21:45,640 --> 00:21:48,360
Speaker 1: We're getting two different views. If we get an Andrew

447
00:21:48,440 --> 00:21:52,280
Speaker 1: Holland Horse market with two rate increases, how does our

448
00:21:52,280 --> 00:21:53,280
Speaker 1: world change?

449
00:21:53,760 --> 00:21:56,760
Speaker 5: Well, I mean, every time they hight rates, I think

450
00:21:56,760 --> 00:21:59,240
Speaker 5: the market is not going to be convinced that they're

451
00:21:59,240 --> 00:22:00,840
Speaker 5: going to have to do even more. I think it's

452
00:22:01,000 --> 00:22:03,000
Speaker 5: more like they hype, but you know that's the last

453
00:22:03,000 --> 00:22:04,639
Speaker 5: one sort of thing. Well, at least they reduce the

454
00:22:04,680 --> 00:22:07,200
Speaker 5: probability of the next hike. So the market is very

455
00:22:07,240 --> 00:22:10,520
Speaker 5: much and that's just a function of the super restrictive.

456
00:22:10,520 --> 00:22:11,879
Speaker 5: I mean, there's no way you can look at the

457
00:22:11,920 --> 00:22:14,560
Speaker 5: market in any kind of sort of context and say

458
00:22:14,600 --> 00:22:17,760
Speaker 5: that the Fed isn't very very restrictive in terms of

459
00:22:17,800 --> 00:22:20,600
Speaker 5: where real rates are. And it's just a question really

460
00:22:20,640 --> 00:22:23,959
Speaker 5: of what your view of inflation is. If inflation is

461
00:22:23,960 --> 00:22:26,399
Speaker 5: coming down, if the Fed doesn't do anything, they become

462
00:22:26,440 --> 00:22:29,359
Speaker 5: even more restrictive. And that's very important to it to

463
00:22:29,400 --> 00:22:32,160
Speaker 5: realize that even if you know the FED does sort

464
00:22:32,200 --> 00:22:33,680
Speaker 5: of get rates up to say five and a half

465
00:22:33,760 --> 00:22:36,520
Speaker 5: or even six percent and keep them there, unless you

466
00:22:36,520 --> 00:22:40,280
Speaker 5: think inflation is also going back up again, then that

467
00:22:40,359 --> 00:22:43,119
Speaker 5: policy will become just even more and more restrictive, and

468
00:22:43,160 --> 00:22:46,720
Speaker 5: they're going to have to unwind those rate hikes very

469
00:22:46,760 --> 00:22:49,959
Speaker 5: quickly otherwise they will collapse economy, and when we look

470
00:22:50,000 --> 00:22:52,679
Speaker 5: at inflation, I actually think the inflation picture in the

471
00:22:52,760 --> 00:22:55,719
Speaker 5: US is looking pretty good. The core services side has

472
00:22:55,760 --> 00:22:57,879
Speaker 5: come down and the good side is bad because of

473
00:22:58,080 --> 00:23:00,440
Speaker 5: used cars. But you know what, no one's actually buying

474
00:23:00,480 --> 00:23:03,320
Speaker 5: that many used cars in real terms. The real purchases

475
00:23:03,320 --> 00:23:05,000
Speaker 5: of used cars has been going down for the last

476
00:23:05,080 --> 00:23:07,240
Speaker 5: couple of months, but that's because the price has been

477
00:23:07,240 --> 00:23:10,320
Speaker 5: going up, and that's just the sort of supply side issue,

478
00:23:10,600 --> 00:23:12,960
Speaker 5: and that's not really, in my view, what the central

479
00:23:12,960 --> 00:23:15,199
Speaker 5: bank should be really focused on. That they should be

480
00:23:15,200 --> 00:23:18,199
Speaker 5: focused on demand side inflation. They can't really help the

481
00:23:18,240 --> 00:23:20,320
Speaker 5: supply side. So that's why we get into this sort

482
00:23:20,320 --> 00:23:23,880
Speaker 5: of concern around this really restrictive sort of policy, and

483
00:23:23,920 --> 00:23:26,600
Speaker 5: why the you know, you get this tail risk of

484
00:23:26,960 --> 00:23:29,399
Speaker 5: a harder landing when it all goes wrong, it's going

485
00:23:29,480 --> 00:23:31,960
Speaker 5: to go wrong pretty quickly, and that's why the FED

486
00:23:31,960 --> 00:23:33,879
Speaker 5: may have to reverse course very very quickly.

487
00:23:34,359 --> 00:23:48,359
Speaker 3: Amazing dumb constant there be Mazoo America's let's get to

488
00:23:48,359 --> 00:23:52,760
Speaker 3: Emily Rowland Co Chief investment strategist John Hadcock Investment Management. Emily,

489
00:23:52,800 --> 00:23:54,960
Speaker 3: wonderful to hear from you. As always, Tom and I

490
00:23:55,040 --> 00:23:56,679
Speaker 3: were just talking about it. You've got some people on

491
00:23:56,720 --> 00:24:00,760
Speaker 3: Wall Street forecasting recession, other people saying things set to improve.

492
00:24:00,920 --> 00:24:01,800
Speaker 3: Where are you and the team?

493
00:24:02,960 --> 00:24:06,560
Speaker 6: Yeah, this is a very very tricky late cycle environment

494
00:24:06,640 --> 00:24:09,639
Speaker 6: where things often look pretty great right before they're not.

495
00:24:09,800 --> 00:24:13,560
Speaker 6: And you had the great Ed Hyman on yesterday, you know,

496
00:24:13,680 --> 00:24:16,919
Speaker 6: talking about this how this late cycle environment's lasting a

497
00:24:16,960 --> 00:24:19,480
Speaker 6: long time. And we would define that as a period

498
00:24:19,800 --> 00:24:23,119
Speaker 6: in between when the leading economic indicators go negative and

499
00:24:23,600 --> 00:24:26,960
Speaker 6: through the recession, and that typically only lasts about six months.

500
00:24:26,960 --> 00:24:29,720
Speaker 6: But we're on month ten eleven, and in the six

501
00:24:30,040 --> 00:24:33,080
Speaker 6: seven example, you know, we went to eighteen months there.

502
00:24:33,160 --> 00:24:35,639
Speaker 6: So these are periods where you're seeing a lot of

503
00:24:35,720 --> 00:24:38,440
Speaker 6: chop in the economic data, a lot of chop in yield.

504
00:24:38,520 --> 00:24:40,920
Speaker 6: Do you want to participate in the market because risk

505
00:24:41,000 --> 00:24:44,320
Speaker 6: assets can see these big swings higher. But you guys

506
00:24:44,320 --> 00:24:46,560
Speaker 6: were talking about the I think it was the European

507
00:24:46,600 --> 00:24:49,000
Speaker 6: Grand Prix earlier on the show, and it got me

508
00:24:49,080 --> 00:24:51,760
Speaker 6: thinking about how you want to participate in this market

509
00:24:51,760 --> 00:24:55,080
Speaker 6: and and sort of like drafting in car racing, you

510
00:24:55,119 --> 00:24:58,639
Speaker 6: don't necessarily want to be out front here taking on

511
00:24:58,720 --> 00:25:01,520
Speaker 6: too much risk. You want to participate by owning things

512
00:25:01,520 --> 00:25:04,439
Speaker 6: like higher quality assets and leading into bonds.

513
00:25:04,800 --> 00:25:07,000
Speaker 1: I mean, I mean I look at Emily, where we

514
00:25:07,040 --> 00:25:10,200
Speaker 1: are and the zeitgeist just by quality, by persistent free

515
00:25:10,240 --> 00:25:13,600
Speaker 1: cash flow, I get all that. I just want to know,

516
00:25:13,680 --> 00:25:15,919
Speaker 1: do I want to be in the market or not

517
00:25:16,880 --> 00:25:19,520
Speaker 1: giving them away? My head spinning with the data. Are

518
00:25:19,560 --> 00:25:21,800
Speaker 1: you participating in equities?

519
00:25:22,520 --> 00:25:25,080
Speaker 6: Yeah, you definitely want to be there right now? As

520
00:25:25,119 --> 00:25:27,800
Speaker 6: I said before, you can see these massive swings higher

521
00:25:27,800 --> 00:25:30,879
Speaker 6: and risk assets as you almost see investors celebrating, as

522
00:25:30,960 --> 00:25:34,199
Speaker 6: John mentioned earlier, this idea that the economic data have

523
00:25:34,280 --> 00:25:37,000
Speaker 6: come in a lot better than expected in many cases,

524
00:25:37,359 --> 00:25:40,040
Speaker 6: So you want to you also want to think about

525
00:25:40,080 --> 00:25:43,360
Speaker 6: this kind of almost pivot party that's going on right

526
00:25:43,359 --> 00:25:46,159
Speaker 6: now as investors celebrate the idea that the FED is

527
00:25:46,200 --> 00:25:48,600
Speaker 6: getting to the end of its tightening cycle. We've only

528
00:25:48,600 --> 00:25:50,840
Speaker 6: got one more rate big priced in than a hole

529
00:25:50,960 --> 00:25:53,960
Speaker 6: then cuts in twenty twenty four. So the pivot party

530
00:25:54,000 --> 00:25:56,080
Speaker 6: can be a pretty powerful one. You want to go

531
00:25:56,200 --> 00:25:58,600
Speaker 6: to it, but you might want to think about, you know,

532
00:25:58,680 --> 00:26:00,879
Speaker 6: sipping on a light beer and instead of reaching for

533
00:26:00,920 --> 00:26:03,560
Speaker 6: the tequila because you might have you know, sort of

534
00:26:03,560 --> 00:26:05,000
Speaker 6: fewer regrets the next day.

535
00:26:05,080 --> 00:26:08,520
Speaker 1: Let's see a fair level four John there if you

536
00:26:08,560 --> 00:26:12,800
Speaker 1: haven't reached for the light light beer, John, I was

537
00:26:12,840 --> 00:26:16,000
Speaker 1: weaned on course and you and young Roland don't know

538
00:26:16,040 --> 00:26:18,560
Speaker 1: what cores three two beer. Is the only one that

539
00:26:18,640 --> 00:26:20,560
Speaker 1: knows that we talked is David Malpass.

540
00:26:20,560 --> 00:26:22,120
Speaker 3: So it's me about.

541
00:26:22,440 --> 00:26:25,440
Speaker 1: David Malpass had a keg of course three two beer

542
00:26:25,480 --> 00:26:28,560
Speaker 1: in his room at Colorado College years ago. It was

543
00:26:28,600 --> 00:26:33,359
Speaker 1: some moralistic Midwest evangelical thing. I don't know where this

544
00:26:33,400 --> 00:26:36,920
Speaker 1: is all before light beer. And so you were too young.

545
00:26:37,080 --> 00:26:38,920
Speaker 1: You were you know, you were getting shot in Vietnam,

546
00:26:39,320 --> 00:26:41,880
Speaker 1: but you were too young to have a bud So

547
00:26:41,960 --> 00:26:45,080
Speaker 1: you had a course three two beer, which is think

548
00:26:45,119 --> 00:26:48,000
Speaker 1: of it like like a course light. Put a glass

549
00:26:48,040 --> 00:26:51,440
Speaker 1: of water in it and now oh yeah, oh yeah.

550
00:26:52,359 --> 00:26:54,119
Speaker 3: Mal Pass had a.

551
00:26:54,200 --> 00:26:58,080
Speaker 1: Keg of course three two beer in his room at Colorado.

552
00:26:58,080 --> 00:26:59,120
Speaker 1: That's all we got through physics.

553
00:26:59,200 --> 00:27:01,080
Speaker 3: How do you think buds hose data over the July

554
00:27:01,200 --> 00:27:02,119
Speaker 3: fourth holiday?

555
00:27:02,280 --> 00:27:05,119
Speaker 1: Let's actually it's a really reportable issue. It's maybe not

556
00:27:05,119 --> 00:27:07,560
Speaker 1: what we do early morning, but you know, I think

557
00:27:07,600 --> 00:27:12,680
Speaker 1: in terms of marketing and advertising, the tobacco a bud

558
00:27:12,760 --> 00:27:16,280
Speaker 1: light really needs to be studied by every institution.

559
00:27:16,520 --> 00:27:18,560
Speaker 3: Look what you said, Emily let's move on from that.

560
00:27:18,880 --> 00:27:21,080
Speaker 3: Talk to me about stokes that you do like, sectors

561
00:27:21,160 --> 00:27:23,880
Speaker 3: you do like right now, and sectus you want to avoid.

562
00:27:24,840 --> 00:27:27,760
Speaker 6: Yeah, so we continue to lean into quality. That's companies

563
00:27:27,800 --> 00:27:30,600
Speaker 6: with great balance sheets, lots of cash, a limited need

564
00:27:30,640 --> 00:27:33,320
Speaker 6: to tap the capital markets in order to grow. That

565
00:27:33,359 --> 00:27:36,080
Speaker 6: does lead us to the technology sector. It leads us

566
00:27:36,119 --> 00:27:38,320
Speaker 6: to the US, which of course has an abundance of

567
00:27:38,320 --> 00:27:42,040
Speaker 6: technology stocks compared to the rest of the world. So

568
00:27:42,240 --> 00:27:44,520
Speaker 6: you know, we do recognize that tective course is run

569
00:27:44,560 --> 00:27:47,159
Speaker 6: a lot. We started to see that market leadership broaden.

570
00:27:47,560 --> 00:27:50,480
Speaker 6: We're worried about valuation risk as well, so we want

571
00:27:50,520 --> 00:27:52,400
Speaker 6: to look to parts of the market that can help

572
00:27:52,440 --> 00:27:56,240
Speaker 6: protect portfolios from that. Mid cap stocks in the US

573
00:27:56,240 --> 00:27:58,840
Speaker 6: mid cap value in particular, one of the only areas

574
00:27:58,840 --> 00:28:01,320
Speaker 6: that's trading at a discount not only to its own

575
00:28:01,359 --> 00:28:04,400
Speaker 6: large cap piers, but also to its own history. That's

576
00:28:04,440 --> 00:28:07,720
Speaker 6: another area that we're looking at in portfolios to diversify

577
00:28:07,960 --> 00:28:11,359
Speaker 6: and again leaning into bonds. You're getting five percent on

578
00:28:11,480 --> 00:28:14,920
Speaker 6: high quality bonds right now, investment grade corporate bonds up

579
00:28:14,960 --> 00:28:17,720
Speaker 6: in the credit spectrum. That's another place we think that

580
00:28:17,720 --> 00:28:20,600
Speaker 6: there's a great mix between risk and return.

581
00:28:20,800 --> 00:28:23,520
Speaker 3: If I remember correctly, Emily, and correct me if I'm wrong,

582
00:28:23,640 --> 00:28:26,520
Speaker 3: you didn't jump on the international bandwagon in the way

583
00:28:26,760 --> 00:28:28,239
Speaker 3: of the state at the stand of the year. I mean,

584
00:28:28,280 --> 00:28:28,880
Speaker 3: why was that?

585
00:28:30,000 --> 00:28:32,159
Speaker 6: Well, I think that there's an idea out there that

586
00:28:32,200 --> 00:28:36,600
Speaker 6: there's going to be this immaculate economic cycle where you know, somehow,

587
00:28:36,680 --> 00:28:39,480
Speaker 6: potentially the US goes into a recession, but the rest

588
00:28:39,520 --> 00:28:42,040
Speaker 6: of the world avoids one. And that's just never been

589
00:28:42,080 --> 00:28:44,800
Speaker 6: the case, and we continue to believe that we're going

590
00:28:44,800 --> 00:28:47,320
Speaker 6: to see a global economic recessions. You just look at

591
00:28:47,320 --> 00:28:50,280
Speaker 6: the PMIS on the manufacturing side. You know, Germany's at

592
00:28:50,280 --> 00:28:53,600
Speaker 6: forty two, and meanwhile you're seeing European equities.

593
00:28:53,160 --> 00:28:54,120
Speaker 2: At all time times.

594
00:28:54,600 --> 00:28:58,120
Speaker 6: To us, the macroeconomic fact drop just simply doesn't match

595
00:28:58,480 --> 00:29:01,800
Speaker 6: with a cross asset performance. And also when you think

596
00:29:01,840 --> 00:29:06,320
Speaker 6: about owning European equities, it's very cyclical, high data. They

597
00:29:06,400 --> 00:29:08,960
Speaker 6: tend to do better early in an economic cycle, and

598
00:29:09,040 --> 00:29:11,200
Speaker 6: right now we think we're in a late cycle environment.

599
00:29:11,240 --> 00:29:13,479
Speaker 6: So we think that you want to wait. We do

600
00:29:13,600 --> 00:29:16,400
Speaker 6: have some of it in portfolios or overweight Europe versus

601
00:29:16,400 --> 00:29:18,840
Speaker 6: emerging market equities, but we think that the better time

602
00:29:18,880 --> 00:29:21,240
Speaker 6: for Europe is going to be in the future.

603
00:29:21,400 --> 00:29:24,200
Speaker 3: Emily, wonderful to hear from you as always, Emily Rodland,

604
00:29:24,400 --> 00:29:35,680
Speaker 3: John Honkok Investment Management on boost sport that Joe can

605
00:29:35,680 --> 00:29:38,280
Speaker 3: convice joining us now, how is us macro strategy over

606
00:29:38,280 --> 00:29:40,600
Speaker 3: at m U f G. George, wonderful to hear from you, sir.

607
00:29:40,720 --> 00:29:42,840
Speaker 3: We all read the minutes yesterday, some of us did,

608
00:29:43,080 --> 00:29:46,240
Speaker 3: at least, I think TKK that's what I miss for George.

609
00:29:46,240 --> 00:29:47,520
Speaker 3: I think the question I've got to ask you is

610
00:29:47,520 --> 00:29:50,320
Speaker 3: how significant is the division emerging on the FMC.

611
00:29:51,480 --> 00:29:53,640
Speaker 7: Look, I don't think it's a significant yet. I mean

612
00:29:53,680 --> 00:29:56,400
Speaker 7: the commentary that we got after the minutes probably mattered more.

613
00:29:57,280 --> 00:29:59,960
Speaker 7: I mean they're going to most likely unless something really

614
00:30:00,040 --> 00:30:02,640
Speaker 7: he rails it from here untill then. But I do

615
00:30:02,680 --> 00:30:04,600
Speaker 7: think there was some important pieces in the midst that

616
00:30:04,640 --> 00:30:08,240
Speaker 7: are worth mentioning. And they're starting to focus on, you know,

617
00:30:08,560 --> 00:30:11,800
Speaker 7: although inflation is you know, they're highly attentive and that's

618
00:30:11,800 --> 00:30:14,040
Speaker 7: the main focus of their continues to be but they

619
00:30:14,040 --> 00:30:15,920
Speaker 7: are starting to focus on some of the growth factors,

620
00:30:16,400 --> 00:30:18,600
Speaker 7: like the fact that GDI is diverging from GDP. I

621
00:30:18,600 --> 00:30:20,520
Speaker 7: I'd never expected to see that in the FED minutes,

622
00:30:20,920 --> 00:30:23,480
Speaker 7: and the focus on like the BLS data, maybe's over

623
00:30:23,920 --> 00:30:25,880
Speaker 7: counting jobs. So I think the FED starts to think

624
00:30:25,920 --> 00:30:28,880
Speaker 7: about how robust is this recovery at this stage.

625
00:30:29,360 --> 00:30:31,600
Speaker 1: George thrilled to have you on today. Just the right

626
00:30:31,640 --> 00:30:33,720
Speaker 1: guest at the right time. I want to focus on

627
00:30:33,760 --> 00:30:37,320
Speaker 1: the inflation andjusted yield our listeners and viewers. It's not

628
00:30:37,360 --> 00:30:40,960
Speaker 1: a common statistic. It's at one point seventy three ballooning

629
00:30:41,080 --> 00:30:43,720
Speaker 1: up for one point five to eight. Where is your

630
00:30:43,840 --> 00:30:49,280
Speaker 1: pre pandemic pre pandemic normal on the real ten year yield?

631
00:30:50,240 --> 00:30:52,000
Speaker 7: On the real ten yearield. I think we're surpassing it.

632
00:30:52,000 --> 00:30:54,400
Speaker 7: I mean we're actually getting back to levels that we're

633
00:30:54,440 --> 00:30:56,400
Speaker 7: seeing pre GFC. I mean, if we were to make.

634
00:30:56,280 --> 00:30:59,560
Speaker 1: A move towards to agree, so, what is the level

635
00:30:59,560 --> 00:31:02,320
Speaker 1: here where the tension or it begins to fall apart?

636
00:31:03,240 --> 00:31:05,400
Speaker 7: Look so in any other time period. Because we've been

637
00:31:05,440 --> 00:31:07,840
Speaker 7: operating with these huge lags that have been kind of

638
00:31:07,840 --> 00:31:11,120
Speaker 7: this liquidity buffer has been allowing markets to ignore the

639
00:31:11,160 --> 00:31:13,320
Speaker 7: real rate. But if the real rate continues to move

640
00:31:13,360 --> 00:31:15,719
Speaker 7: marech higher like it has been, I think that financial

641
00:31:15,720 --> 00:31:17,000
Speaker 7: markets will take notice pretty soon.

642
00:31:17,240 --> 00:31:19,560
Speaker 3: George, you were spent in a hike then in several weeks,

643
00:31:19,600 --> 00:31:20,880
Speaker 3: just to be clear, just to start there.

644
00:31:21,840 --> 00:31:24,080
Speaker 7: Yes, I think I do think that given the language

645
00:31:24,080 --> 00:31:25,520
Speaker 7: as well as what's priced into the market, it will

646
00:31:25,560 --> 00:31:27,000
Speaker 7: take a lot to derail a hike.

647
00:31:27,240 --> 00:31:29,440
Speaker 3: And the next one after that. George, you expected another

648
00:31:29,440 --> 00:31:31,000
Speaker 3: one after that, because there's a lot of people that

649
00:31:31,040 --> 00:31:33,240
Speaker 3: think maybe they're go in July, perhaps they're done. Others

650
00:31:33,240 --> 00:31:35,320
Speaker 3: look at the FMC and what the committee is communicating

651
00:31:35,400 --> 00:31:39,520
Speaker 3: right now and see another one in our future, the

652
00:31:39,760 --> 00:31:40,400
Speaker 3: one that follows me.

653
00:31:40,440 --> 00:31:43,200
Speaker 7: I think it's really going to be about financial conditions.

654
00:31:43,200 --> 00:31:44,720
Speaker 7: I mean, we're starting to see more tightening, and I

655
00:31:44,760 --> 00:31:47,240
Speaker 7: think this real rate channel is important that Tom's highlighting.

656
00:31:47,480 --> 00:31:49,200
Speaker 7: So I think if we were to continue to see

657
00:31:49,520 --> 00:31:52,480
Speaker 7: the overall rate structure move higher, let's not forget that

658
00:31:52,920 --> 00:31:55,120
Speaker 7: since the being really since last year, the ten year

659
00:31:55,240 --> 00:31:58,000
Speaker 7: in general has treated well under the Fed funds market.

660
00:31:58,800 --> 00:32:01,000
Speaker 7: So if we get a kind of normation or a ketchup,

661
00:32:01,040 --> 00:32:03,560
Speaker 7: even if it's a brief catch up like an anti

662
00:32:03,680 --> 00:32:06,880
Speaker 7: seasonal rise in rates which people call a bear steepener,

663
00:32:06,880 --> 00:32:08,200
Speaker 7: which we have a little bit of that yesterday and

664
00:32:08,240 --> 00:32:10,680
Speaker 7: a little bit this morning, I think that really matters.

665
00:32:10,880 --> 00:32:11,640
Speaker 1: That will be where.

666
00:32:11,480 --> 00:32:14,920
Speaker 7: Tightening takes place. Because we've had rates under and that's

667
00:32:14,920 --> 00:32:16,560
Speaker 7: really helped out the housing market. So if we were

668
00:32:16,560 --> 00:32:18,239
Speaker 7: to continue to see a rise in five year ten

669
00:32:18,280 --> 00:32:20,200
Speaker 7: year rates, I think that would be a game changer.

670
00:32:20,240 --> 00:32:22,240
Speaker 3: Well, Joyce, let's build on that. Let's go further out

671
00:32:22,520 --> 00:32:24,880
Speaker 3: the curve. The Federal Reserve right now is communicating a

672
00:32:24,880 --> 00:32:27,520
Speaker 3: couple more hikes. You seem to be on board. Potentially

673
00:32:27,600 --> 00:32:30,160
Speaker 3: that's going to develop. The Federal Reserve is also communicating

674
00:32:30,160 --> 00:32:33,800
Speaker 3: at the same time, simultaneously, a mild recession potentially in

675
00:32:33,840 --> 00:32:36,640
Speaker 3: the second half. What should a ten year be doing

676
00:32:36,960 --> 00:32:39,400
Speaker 3: in the world of the Federal Reserve is projecting.

677
00:32:41,240 --> 00:32:42,960
Speaker 7: Well, I mean it depends what kind of inflation kind

678
00:32:42,960 --> 00:32:45,400
Speaker 7: of a recession we get. I mean we have this,

679
00:32:45,560 --> 00:32:47,560
Speaker 7: you know, we have about fifteen to twenty percent risk

680
00:32:47,600 --> 00:32:49,600
Speaker 7: of a statflation, which has never been really in the

681
00:32:49,640 --> 00:32:52,880
Speaker 7: cards for US economic forecasting. But I think that you know,

682
00:32:52,920 --> 00:32:55,320
Speaker 7: stackflation rists are out there that at some point, you know,

683
00:32:55,320 --> 00:32:57,400
Speaker 7: if the FAT can't really get inflation under control, I mean,

684
00:32:57,600 --> 00:33:00,680
Speaker 7: you're seeing similar situations with the BOE could raise rates

685
00:33:00,680 --> 00:33:02,600
Speaker 7: to ten percent and it might take longer to get

686
00:33:02,600 --> 00:33:04,880
Speaker 7: inflation down, and all you're going to do is crush

687
00:33:04,920 --> 00:33:06,960
Speaker 7: the economy, So I think, I mean, it really comes

688
00:33:06,960 --> 00:33:09,000
Speaker 7: down to like a stacklation recession nuance.

689
00:33:09,840 --> 00:33:13,959
Speaker 1: How does a yield curve disinvert? What is the what

690
00:33:14,040 --> 00:33:17,760
Speaker 1: are the threads of threat like that? John, thank you,

691
00:33:18,200 --> 00:33:22,080
Speaker 1: one of the threads of information that allow us to disinvert,

692
00:33:22,160 --> 00:33:25,760
Speaker 1: say from negative one oh five to say negative forty,

693
00:33:25,880 --> 00:33:26,719
Speaker 1: negative thirty.

694
00:33:27,800 --> 00:33:31,000
Speaker 7: So traditionally it's always been the FED cuts rates. I mean,

695
00:33:31,040 --> 00:33:33,360
Speaker 7: if the Fed work cut rates two hundred basis points,

696
00:33:33,720 --> 00:33:35,479
Speaker 7: the two year would move much faster than the ten

697
00:33:35,520 --> 00:33:38,440
Speaker 7: yure for sure. You know, bear steepeners are kind of

698
00:33:38,440 --> 00:33:41,120
Speaker 7: like unicorns, really hard to find. They're very rare when

699
00:33:41,120 --> 00:33:43,840
Speaker 7: they happen, they're short lived, but they're very painful. So

700
00:33:44,200 --> 00:33:46,600
Speaker 7: arise in long term rates. We haven't really seen that

701
00:33:46,640 --> 00:33:49,480
Speaker 7: happen on a consistent basis, so it would have to

702
00:33:49,520 --> 00:33:50,280
Speaker 7: come from the fine end.

703
00:33:50,840 --> 00:33:53,520
Speaker 1: This is critical, George. And you know, with MUFG and

704
00:33:53,560 --> 00:33:57,080
Speaker 1: the Japanese affiliation, you've got first order knowledge on this

705
00:33:57,160 --> 00:34:02,000
Speaker 1: domain knowledge on this. If the long term yields are lower,

706
00:34:02,800 --> 00:34:07,040
Speaker 1: is that pricing up yield down by foreign buyers of

707
00:34:07,080 --> 00:34:11,680
Speaker 1: full faith and credit US paper at this juncture?

708
00:34:11,719 --> 00:34:13,360
Speaker 7: Really, and you look at the actual public flows and

709
00:34:13,360 --> 00:34:15,760
Speaker 7: see what's going on. This has really been a domestic

710
00:34:15,840 --> 00:34:18,480
Speaker 7: driven the bomb market. It has been for quite some time.

711
00:34:18,560 --> 00:34:21,759
Speaker 7: We've seen less and less foreign influence for years and so,

712
00:34:22,360 --> 00:34:25,279
Speaker 7: and especially in the last number of months. I do

713
00:34:25,360 --> 00:34:28,239
Speaker 7: think that most of this will have to be taken down.

714
00:34:28,280 --> 00:34:30,360
Speaker 7: The supply that the US government's bringing to market a

715
00:34:30,400 --> 00:34:32,600
Speaker 7: lot of people have to be taken down by domestic investors.

716
00:34:32,719 --> 00:34:35,560
Speaker 7: I mean, foreign investors obviously play a critical role, but

717
00:34:35,600 --> 00:34:38,680
Speaker 7: I just think that given where funding costs are and

718
00:34:38,719 --> 00:34:41,600
Speaker 7: everything else that's going on, and more importantly, now, the

719
00:34:41,680 --> 00:34:45,360
Speaker 7: US Treasury has competition from other markets. Other sovereign markets

720
00:34:45,360 --> 00:34:48,040
Speaker 7: are yielding higher as well. So and we don't know

721
00:34:48,080 --> 00:34:49,600
Speaker 7: what the BOJA is going to do with its own policy,

722
00:34:49,600 --> 00:34:52,560
Speaker 7: which then might make jgbs more attractive at home. So

723
00:34:52,760 --> 00:34:56,080
Speaker 7: I think that the level of rates, the curve maintaining

724
00:34:56,120 --> 00:34:57,759
Speaker 7: its steepness is something that I think is going to

725
00:34:57,760 --> 00:35:00,960
Speaker 7: be critical, even when the FET starts cutting rates later on.

726
00:35:01,520 --> 00:35:05,520
Speaker 1: What is your strategy as a bond portfolio take a

727
00:35:05,560 --> 00:35:10,000
Speaker 1: full faith and credit portfolio. What is a duration strategy?

728
00:35:10,000 --> 00:35:11,680
Speaker 1: Do you barbell? Do you a ladder? To you a

729
00:35:11,719 --> 00:35:14,040
Speaker 1: single point? Do you go to cash? What do you do,

730
00:35:15,000 --> 00:35:15,560
Speaker 1: I mean think.

731
00:35:15,440 --> 00:35:17,200
Speaker 7: You have a bias of a ladder, but with a

732
00:35:17,280 --> 00:35:20,359
Speaker 7: misweighted I do think that you know at some point

733
00:35:20,440 --> 00:35:22,839
Speaker 7: you know, if that keeps raising rates, we have an

734
00:35:22,840 --> 00:35:25,520
Speaker 7: attractive front end. So I mean your risk reward is

735
00:35:25,560 --> 00:35:27,480
Speaker 7: how much downside can you get if rates were to

736
00:35:27,520 --> 00:35:30,239
Speaker 7: moving out of twenty five fifty versus them going down

737
00:35:30,280 --> 00:35:32,480
Speaker 7: one hundred or two hundred. Right, So the risk reward

738
00:35:32,480 --> 00:35:35,080
Speaker 7: has changed and you have to look for plays that

739
00:35:35,120 --> 00:35:38,760
Speaker 7: are more convex the mortgage, your mortgage rates and mortgage markets.

740
00:35:38,760 --> 00:35:42,160
Speaker 7: Mortage bonds specifically as rates rise would also be much

741
00:35:42,160 --> 00:35:42,760
Speaker 7: more attractive.

742
00:35:43,040 --> 00:35:45,360
Speaker 3: George, this was fun anything but boring right now in

743
00:35:45,360 --> 00:35:47,920
Speaker 3: the bottom market. Jeorge can converse there of m uf J.

744
00:35:59,080 --> 00:36:03,400
Speaker 3: The conversation outside of the cross asset analysis and financial

745
00:36:03,440 --> 00:36:07,520
Speaker 3: markets very much on the spat between Ala Musk and

746
00:36:07,560 --> 00:36:10,560
Speaker 3: Mark Zuckerberg. And it gets real overnight with the unveiling

747
00:36:10,640 --> 00:36:14,720
Speaker 3: of well they calling threads over Instagram a direct challenge

748
00:36:14,760 --> 00:36:16,640
Speaker 3: to Twitter Tom for Joonmy.

749
00:36:16,320 --> 00:36:19,879
Speaker 1: This is a non event, but unfortunately it's so important.

750
00:36:19,960 --> 00:36:21,640
Speaker 1: I think John, we got to get right to it.

751
00:36:21,840 --> 00:36:22,799
Speaker 3: I would do that right.

752
00:36:22,880 --> 00:36:26,279
Speaker 1: Nash is an important voice on this. Dan Ives has

753
00:36:26,360 --> 00:36:29,520
Speaker 1: earned the credibility. I'm going to say eight months ago,

754
00:36:29,600 --> 00:36:31,799
Speaker 1: he was the dumbest guy in the block. How dare

755
00:36:31,840 --> 00:36:34,640
Speaker 1: you think we're going up? And we have had a

756
00:36:34,840 --> 00:36:39,160
Speaker 1: dan ives market from the third week of October twenty

757
00:36:39,280 --> 00:36:41,880
Speaker 1: twenty two. I got to get the threads. But what

758
00:36:42,000 --> 00:36:44,719
Speaker 1: did you see in October of twenty two the rest

759
00:36:44,760 --> 00:36:45,880
Speaker 1: of us did not see.

760
00:36:46,120 --> 00:36:48,840
Speaker 8: I think it was fundamentals that were going to be

761
00:36:48,840 --> 00:36:52,480
Speaker 8: a lot more stable than I think why the skeptics

762
00:36:52,520 --> 00:36:57,200
Speaker 8: thought what we were seeing specifically in cloud, in enterprise,

763
00:36:57,360 --> 00:36:59,680
Speaker 8: and even when it comes to consumer with names like

764
00:36:59,719 --> 00:37:02,319
Speaker 8: app we just felt like the bark was worse than

765
00:37:02,360 --> 00:37:04,960
Speaker 8: the bite. And then starting in the fall, that's when

766
00:37:04,960 --> 00:37:07,960
Speaker 8: we started to do our AI research, and in my opinion,

767
00:37:08,000 --> 00:37:10,839
Speaker 8: it was gonna be the biggest transformational trend that we've

768
00:37:10,840 --> 00:37:13,160
Speaker 8: seen in tech. And I think as that's played out

769
00:37:13,719 --> 00:37:15,520
Speaker 8: that combo is sort of where we are.

770
00:37:15,719 --> 00:37:17,960
Speaker 1: I got any other questions, but we've got this idiocy

771
00:37:18,000 --> 00:37:20,760
Speaker 1: this morning. Threads canna get critical mass.

772
00:37:21,080 --> 00:37:23,319
Speaker 8: I think it's gonna be very difficult to get critical mass.

773
00:37:23,400 --> 00:37:25,040
Speaker 8: I think right now the name of the game for

774
00:37:25,160 --> 00:37:28,759
Speaker 8: Zuckerberg and Meta is just further expanded Instagram based in

775
00:37:28,840 --> 00:37:32,920
Speaker 8: terms of the cross sell opportunity eventually advertising. They're trying

776
00:37:32,920 --> 00:37:34,759
Speaker 8: to strike while the iron's hot, given some of the

777
00:37:34,840 --> 00:37:37,480
Speaker 8: issues we've seen with Twitter and Musk, but getting the

778
00:37:37,520 --> 00:37:40,480
Speaker 8: scale is going to be difficult. But Musk has left

779
00:37:40,600 --> 00:37:43,600
Speaker 8: open opportunity here. We saw what happened this weekend. There's

780
00:37:43,600 --> 00:37:46,440
Speaker 8: a lot of frustration building and I believe this is

781
00:37:46,520 --> 00:37:48,600
Speaker 8: just a drum roll to what's going to probably be

782
00:37:48,640 --> 00:37:49,920
Speaker 8: the cage match this fall.

783
00:37:50,000 --> 00:37:52,359
Speaker 3: Looking forward to that cage match too, Let's dig into

784
00:37:52,400 --> 00:37:54,840
Speaker 3: that define critical mass. What is that? What's the number?

785
00:37:55,200 --> 00:37:57,120
Speaker 8: Well, I think you really have to start to get

786
00:37:57,160 --> 00:38:01,279
Speaker 8: to something i'll call thirty forty million users. You know,

787
00:38:01,440 --> 00:38:03,000
Speaker 8: when you start thinking about where.

788
00:38:03,400 --> 00:38:05,360
Speaker 3: You've got, they're going to have that by the end

789
00:38:05,360 --> 00:38:05,600
Speaker 3: of away.

790
00:38:06,480 --> 00:38:08,480
Speaker 1: But thirty forty million users.

791
00:38:08,480 --> 00:38:11,399
Speaker 8: You need engage. It's not just about the users. That's

792
00:38:11,440 --> 00:38:13,520
Speaker 8: the one thing. You'll see sign ups in the first

793
00:38:13,560 --> 00:38:16,560
Speaker 8: seven hours, ten million, twenty million. It's about you get

794
00:38:16,600 --> 00:38:19,080
Speaker 8: to forty to fifty million, then scale to one hundred

795
00:38:19,120 --> 00:38:22,600
Speaker 8: million plus in the next call it six to nine months.

796
00:38:22,880 --> 00:38:25,400
Speaker 8: But engagement on the platform's key.

797
00:38:25,160 --> 00:38:27,279
Speaker 3: That often is about that down But I wonder why

798
00:38:27,320 --> 00:38:30,239
Speaker 3: because Instagram already has this pre loaded base they can

799
00:38:30,320 --> 00:38:33,120
Speaker 3: port directly. I did a sign up yesterday. There's no

800
00:38:33,200 --> 00:38:36,400
Speaker 3: friction there. It's always really easy to execute. Why do

801
00:38:36,480 --> 00:38:37,239
Speaker 3: you have doubts?

802
00:38:37,880 --> 00:38:40,439
Speaker 8: It's really because if you look at anything that's tried

803
00:38:40,520 --> 00:38:43,920
Speaker 8: to challenge Twitter in terms of any of the other platforms,

804
00:38:43,960 --> 00:38:47,400
Speaker 8: it's been very difficult to scale. Now Here, for Zuckerberg,

805
00:38:47,480 --> 00:38:50,000
Speaker 8: you got a billion plus users you could tap into.

806
00:38:50,560 --> 00:38:54,640
Speaker 8: They've had women of success I think scaling other standalone apps,

807
00:38:55,040 --> 00:38:58,080
Speaker 8: and I think right now the question is how much

808
00:38:58,120 --> 00:39:00,319
Speaker 8: resources are they going to put into this. Is this

809
00:39:00,520 --> 00:39:03,440
Speaker 8: just sort of a moonshot type project or something that

810
00:39:03,480 --> 00:39:06,200
Speaker 8: they really want to scale? And look, I think for Zuckerberg,

811
00:39:06,280 --> 00:39:09,239
Speaker 8: there they went from a position of massive weakness, going

812
00:39:09,320 --> 00:39:11,600
Speaker 8: back to you know when you talk about eight nine

813
00:39:11,640 --> 00:39:14,920
Speaker 8: months ago to now to flex the muscles moment from

814
00:39:15,120 --> 00:39:18,560
Speaker 8: for Zuckerberg, sure, you're especially going towards You're not on

815
00:39:18,719 --> 00:39:19,480
Speaker 8: here yet.

816
00:39:19,880 --> 00:39:21,319
Speaker 1: I'm not what do you wait?

817
00:39:21,400 --> 00:39:25,000
Speaker 8: Come on you d I'm waiting till I'm wait. I

818
00:39:25,040 --> 00:39:30,360
Speaker 8: was waiting for you. But so now that Pharaoh and Keenron,

819
00:39:30,600 --> 00:39:31,040
Speaker 8: I'll go on.

820
00:39:31,480 --> 00:39:33,880
Speaker 3: Mark Zuckerberg says this, I think there should be a

821
00:39:33,920 --> 00:39:36,839
Speaker 3: public conversations out with one bidon plus people on it.

822
00:39:37,120 --> 00:39:39,359
Speaker 3: Twitter has had the opportunity to do this, but as

823
00:39:39,400 --> 00:39:41,160
Speaker 3: of now did a lot of people have had the

824
00:39:41,160 --> 00:39:44,239
Speaker 3: opportunity at Twitter to do this and they failed? What

825
00:39:44,320 --> 00:39:46,239
Speaker 3: did they get wrong? And we're still trying to work

826
00:39:46,239 --> 00:39:47,880
Speaker 3: this out? And why is Mark Zuckerberg the man that

827
00:39:47,960 --> 00:39:48,680
Speaker 3: might be able to do it?

828
00:39:48,920 --> 00:39:49,080
Speaker 1: Yeah?

829
00:39:49,120 --> 00:39:51,160
Speaker 8: I think it's it's minisation. I mean, if you look

830
00:39:51,200 --> 00:39:53,600
Speaker 8: with Zuckerberg has been able to do. Obviously with the

831
00:39:53,600 --> 00:39:59,400
Speaker 8: meta platform, monetizing has obviously been key. Ultimately that's been

832
00:39:59,400 --> 00:40:01,839
Speaker 8: the issue for Twitter. That's been the uphill battle. They're

833
00:40:01,840 --> 00:40:05,400
Speaker 8: trying to get it from verification, subscription, every which way.

834
00:40:05,719 --> 00:40:08,560
Speaker 8: I think that's been the big challenge for them, especially

835
00:40:08,640 --> 00:40:10,880
Speaker 8: in this essential arms race that's going on in the

836
00:40:10,920 --> 00:40:12,360
Speaker 8: space to find.

837
00:40:12,160 --> 00:40:14,520
Speaker 1: That you know, Lizzie Sunders has just done. We all

838
00:40:14,560 --> 00:40:18,080
Speaker 1: agree it's been a multiple expansion. How does a growthy

839
00:40:18,120 --> 00:40:21,200
Speaker 1: guy yet like you, an Apple fanboy, how do you

840
00:40:21,440 --> 00:40:25,920
Speaker 1: adapt to the multiple expansion of the various and Sunday

841
00:40:25,960 --> 00:40:27,560
Speaker 1: wunderstocks of the last year.

842
00:40:27,800 --> 00:40:30,200
Speaker 8: Yeah, I mean I view it especially when I look

843
00:40:30,200 --> 00:40:32,040
Speaker 8: at a name Mike Apple, where you're going into a

844
00:40:32,080 --> 00:40:36,200
Speaker 8: mini super cycle with iPhone fifteen. I think multiple expansion

845
00:40:36,280 --> 00:40:40,240
Speaker 8: is really about the increased opportunity to monetize an install

846
00:40:40,280 --> 00:40:42,200
Speaker 8: based It's all install based based.

847
00:40:41,920 --> 00:40:43,400
Speaker 1: So it's as ecosystem belogna.

848
00:40:43,640 --> 00:40:46,680
Speaker 8: And but that's why what's happening in Redmond? What's happening

849
00:40:46,760 --> 00:40:49,799
Speaker 8: Cooper Tino? I think it's really been what's on the

850
00:40:49,880 --> 00:40:52,920
Speaker 8: other side of the mount And I think that's really

851
00:40:53,000 --> 00:40:53,279
Speaker 8: the key.

852
00:40:53,360 --> 00:40:56,040
Speaker 1: Are we just running our terminal value out? If the

853
00:40:56,080 --> 00:40:59,080
Speaker 1: cfass five years seven years, are we all buying Apple

854
00:40:59,120 --> 00:41:02,160
Speaker 1: because we think it's an nine year terminal value.

855
00:41:01,880 --> 00:41:05,719
Speaker 8: By That's that's exactly my view. I did. Okay, look,

856
00:41:05,760 --> 00:41:09,399
Speaker 8: you're you're the professor and the tactician of MAK and I.

857
00:41:09,320 --> 00:41:13,120
Speaker 3: Think when you look at Cooper that time could come back.

858
00:41:13,200 --> 00:41:17,880
Speaker 8: But that's why we believe three trillion. This train just

859
00:41:17,920 --> 00:41:18,479
Speaker 8: doesn't stop.

860
00:41:18,600 --> 00:41:20,560
Speaker 1: The biggest problem. You don't see this on radio, but

861
00:41:20,640 --> 00:41:27,080
Speaker 1: he dresses conservative for us because conservative. He's got like

862
00:41:27,200 --> 00:41:30,799
Speaker 1: it's a clash, Like the shoes are outrageous. He goes

863
00:41:30,840 --> 00:41:34,120
Speaker 1: on Wapner and he's dressed like you know, it's party time.

864
00:41:34,239 --> 00:41:35,680
Speaker 1: Friday afternoon, four pm.

865
00:41:35,800 --> 00:41:37,560
Speaker 3: They dressed down over that the Stalk Exchange.

866
00:41:37,560 --> 00:41:39,680
Speaker 1: Oh, they don't dress down. They just dressed. It's like

867
00:41:39,719 --> 00:41:42,000
Speaker 1: a cultural thing. He dresses. He might as well wear

868
00:41:42,040 --> 00:41:43,000
Speaker 1: a tuxedo.

869
00:41:42,600 --> 00:41:46,360
Speaker 8: When I'm with such debonair, like the way like someone

870
00:41:46,400 --> 00:41:49,720
Speaker 8: like I need to dress a little down and then waiter.

871
00:41:49,800 --> 00:41:51,080
Speaker 8: I'm just gonna go on threads.

872
00:41:51,239 --> 00:41:54,239
Speaker 1: Apple, Bye, Target, give me some update here. We're coming

873
00:41:54,280 --> 00:41:55,080
Speaker 1: in an earning season.

874
00:41:55,080 --> 00:41:57,399
Speaker 8: They're going to do it again to twenty based too

875
00:41:57,440 --> 00:42:01,120
Speaker 8: fifty bullcase. I think this now starts to to four trillion.

876
00:42:01,160 --> 00:42:04,080
Speaker 8: In my opinion, I think it's gonna be another trophy case,

877
00:42:04,480 --> 00:42:06,480
Speaker 8: not just quarter, but in terms of what we're seeing

878
00:42:06,560 --> 00:42:10,759
Speaker 8: going into iPhone fifteen into September for Cook and Cooper Tino,

879
00:42:10,880 --> 00:42:13,320
Speaker 8: which is why I believe this is really just the

880
00:42:13,400 --> 00:42:13,840
Speaker 8: start of this.

881
00:42:14,280 --> 00:42:16,319
Speaker 1: Is a secret on ives. He actually knows the data.

882
00:42:16,480 --> 00:42:19,560
Speaker 1: How many people like John Tucker and Bloomberg Radio have

883
00:42:19,640 --> 00:42:22,719
Speaker 1: an iPhone that's four hundred years old or they're gonna

884
00:42:22,760 --> 00:42:23,799
Speaker 1: bite for the new toy.

885
00:42:23,880 --> 00:42:26,600
Speaker 8: It's John Tucker in two hundred and fifty million other

886
00:42:26,840 --> 00:42:30,840
Speaker 8: individuals that have not upgraded their iPhone in four plus years.

887
00:42:30,880 --> 00:42:35,280
Speaker 8: That's the key, and that's ultimately why right now Apple

888
00:42:35,360 --> 00:42:37,839
Speaker 8: continues to short to own it and everyone else paying rent.

889
00:42:37,920 --> 00:42:40,960
Speaker 3: I'm hold enough the upgrade At the moment, I just

890
00:42:40,960 --> 00:42:43,640
Speaker 3: don't see anythink in the new iPhone that I particularly one.

891
00:42:44,000 --> 00:42:46,759
Speaker 1: I'm a data book to me. It's a technology. He

892
00:42:46,920 --> 00:42:48,520
Speaker 1: is this this new phone?

893
00:42:48,600 --> 00:42:48,960
Speaker 3: Is it quick?

894
00:42:49,200 --> 00:42:51,680
Speaker 1: Don't buy it? Don't buy it? You buy it just

895
00:42:51,760 --> 00:42:52,360
Speaker 1: for the battery?

896
00:42:52,600 --> 00:42:53,040
Speaker 3: Is the camera?

897
00:42:53,440 --> 00:42:55,680
Speaker 1: Which is the camera's battery? Yeah, you buy it for

898
00:42:55,719 --> 00:42:56,200
Speaker 1: the battery.

899
00:42:56,280 --> 00:42:58,440
Speaker 3: That's exactly why I end up up griding because they

900
00:42:59,120 --> 00:43:01,400
Speaker 3: killed the battery. They get in that the new phones

901
00:43:01,440 --> 00:43:02,000
Speaker 3: got what more?

902
00:43:02,040 --> 00:43:02,400
Speaker 1: Wisban?

903
00:43:02,480 --> 00:43:02,920
Speaker 3: You know what they do?

904
00:43:03,080 --> 00:43:04,120
Speaker 1: Man? You talked to German.

905
00:43:04,680 --> 00:43:07,880
Speaker 8: Look and ultimately what I believe here it's not just

906
00:43:07,920 --> 00:43:10,680
Speaker 8: about technology we're going to see on the camera side,

907
00:43:10,840 --> 00:43:12,640
Speaker 8: we're going to see on the chip. But I think

908
00:43:12,640 --> 00:43:14,279
Speaker 8: it's really going to be at the software because I

909
00:43:14,320 --> 00:43:16,400
Speaker 8: believe this is really the start of what's going to

910
00:43:16,440 --> 00:43:19,759
Speaker 8: be the AI ecosystem being built out in Cooper Team.

911
00:43:19,800 --> 00:43:21,319
Speaker 3: I've asked you this before. You've got to have a

912
00:43:21,320 --> 00:43:23,279
Speaker 3: better answer this time. It didn't like the last one.

913
00:43:23,360 --> 00:43:25,000
Speaker 3: What are you talking about with Apple and AI?

914
00:43:25,560 --> 00:43:26,120
Speaker 1: What is it?

915
00:43:26,200 --> 00:43:27,560
Speaker 3: What it is on steroids?

916
00:43:27,600 --> 00:43:30,160
Speaker 8: No, Because ultimately twelve eighteen months from now, you are

917
00:43:30,160 --> 00:43:33,759
Speaker 8: going to have a separate app store for Apple that's

918
00:43:33,920 --> 00:43:37,960
Speaker 8: AI apps only within the within the ecosystem, and I

919
00:43:38,040 --> 00:43:40,360
Speaker 8: believe for developers and in terms of the sum of

920
00:43:40,360 --> 00:43:43,480
Speaker 8: the parts, that could ultimately add forty to fifty dollars

921
00:43:43,520 --> 00:43:46,200
Speaker 8: per share that we see for Apple, and that I

922
00:43:46,200 --> 00:43:48,880
Speaker 8: think that's the next leg of the stool along with

923
00:43:48,920 --> 00:43:50,799
Speaker 8: the Apple Car in twenty twenty.

924
00:43:50,480 --> 00:43:53,160
Speaker 3: Six, twenty twenty six for the Apple Car, that's a cool.

925
00:43:53,280 --> 00:43:55,560
Speaker 8: Yeah, And I believe it's a matter of when, not if.

926
00:43:55,760 --> 00:43:58,800
Speaker 8: And it just shows as much as the haters continue

927
00:43:58,800 --> 00:44:02,160
Speaker 8: to fire and a crowd theaters innovations done at Apple.

928
00:44:02,719 --> 00:44:06,200
Speaker 8: Yet again, the continued innovate. And that's why Cook is

929
00:44:06,320 --> 00:44:09,000
Speaker 8: Hall of Fame CEO tactician like he is.

930
00:44:09,160 --> 00:44:11,200
Speaker 3: Okay, that nice of white Push. Thank God to see

931
00:44:11,239 --> 00:44:12,920
Speaker 3: you great the good update.

932
00:44:13,640 --> 00:44:17,520
Speaker 1: Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify, and

933
00:44:17,640 --> 00:44:21,840
Speaker 1: anywhere else you get your podcasts. Listen live every weekday

934
00:44:22,120 --> 00:44:25,600
Speaker 1: starting at seven am Eastern on Bloomberg dot com, the

935
00:44:25,719 --> 00:44:30,279
Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You

936
00:44:30,280 --> 00:44:34,239
Speaker 1: can watch us live on Bloomberg Television and always on

937
00:44:34,360 --> 00:44:38,319
Speaker 1: the Bloomberg terminal. Thanks for listening. I'm Tom Keen, and

938
00:44:38,480 --> 00:44:40,040
Speaker 1: this is Bloomberg