Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: The single best idea, of course it would be after
Speaker 2: the fact, but tune into the FED to Sides this afternoon,
Speaker 2: which is a show we invented to just say let's
Speaker 2: have good conversation around a FED meeting. I remember when,
Speaker 2: you know, the first time we put it together ages ago.
Speaker 2: I think Scarlett Foo was with me at the time,
Speaker 2: and the basic idea was there's a lot of different opinions.
Speaker 2: I can't remember a time where there's more people swing
Speaker 2: in one way and more people swing in the other
Speaker 2: way that we see right now. And I would codify
Speaker 2: it in economics with Tom Percelli, who was on today
Speaker 2: with p Jim who said, look, they're going to cut rates.
Speaker 2: They have to cut rates, and he gave four reasons,
Speaker 2: and Lindsay piegsa At Stiefel, who says they're wrong. They
Speaker 2: need to get out front, raise rays, clamped this thing down,
Speaker 2: stopped this inflation trend, and then bring them down. And
Speaker 2: that's what we're trying to do at surveillance. We'll see
Speaker 2: if we can effort them for conversation next week or
Speaker 2: even the week on a single best idea today, two
Speaker 2: really different views here. The first one is Stuart Kaiser.
Speaker 2: Stuart Kaiser's a city group. He has been not a
Speaker 2: rabbid bull, but he's been someone that said, here's the
Speaker 2: framework for American exceptionalism, American GDP, and it's going to
Speaker 2: lead into higher stock prices. He looks at the broadening
Speaker 2: of the market and he says in earning season, it's
Speaker 2: tough to get the data right.
Speaker 3: The problem with the broadening theme for US has been
Speaker 3: it doesn't work in two conditions, one when you have
Speaker 3: risk rising and two, frankly during earnings because the fact
Speaker 3: is your Microsoft's, your Apples, your Amazons, your Google's are
Speaker 3: just putting up huge numbers. It harkens back a little
Speaker 3: bit to the late nineties when you were basically introducing
Speaker 3: a new technology into the system and you assumed a
Speaker 3: forecasts really large revenue growth, but you were a little on
Speaker 3: certain about, you know, both the size and timing of it.
Speaker 3: So I think what you're having is to your point,
Speaker 3: people are compartmentalizing a little bit, right, Like, I need
Speaker 3: to have some AI exposure on let me choose the
Speaker 3: way to do that, and then off to the side
Speaker 3: of that, I kind of need to model the rest
Speaker 3: of the market, you know, as a little bit independently.
Speaker 3: So it is a challenge, but it's a good challenge
Speaker 3: to have, right I think it's a good challenge to
Speaker 3: have that you have this large thematic revenue growth impulse
Speaker 3: kind of coming through the system and look at this
Speaker 3: is why you know, we've kind of joked the Nvidia
Speaker 3: earnings report in late May is priced as big an
Speaker 3: event as payrolls on Friday. Not only is it a
Speaker 3: big theme, it's also an uncertain theme. And even at
Speaker 3: the S and P level, that risk is being priced
Speaker 3: very aggressibly.
Speaker 2: Stud Kaiser City Group. There very sharp, huge response today
Speaker 2: and we'll get them back soon. I really want to
Speaker 2: emphasize that in the earning season we're in, there's different
Speaker 2: metrics that I hear and they come into vogue, that
Speaker 2: come out of vogue, and one of them off the
Speaker 2: tech juggernaut we've seen so far with Apple tomorrow is
Speaker 2: not organic revenue growth, which I think is pretty intuitive.
Speaker 2: It's like, okay, here's the company. Forget about acquisitions and
Speaker 2: all that, what's the actual interior revenue growth of the company.
Speaker 2: And of course, Coca Cola with a blowout eleven percent statistic.
Speaker 2: But one to start looking at is annual recurring revenue
Speaker 2: aar R. Somebody had this out on Twitter. I'm sorry,
Speaker 2: I can't cite them. I don't have it in front
Speaker 2: of me. But aarr is really really interesting about what's
Speaker 2: the belief in what a recurring revenue is at Google
Speaker 2: or at Amazon, or what we'll see from Apple, where
Speaker 2: there's a huge mystery about their recurring at revenue. That's
Speaker 2: a phrase, excuse me, I'm fighting a plague. That's a
Speaker 2: phrase that I think you really got to get used
Speaker 2: to in a two thousand and twenty five. You also
Speaker 2: get used to people with a venerable pass. Brian Whalen
Speaker 2: is at TCW. They're a ginormous West Coast Byside institution,
Speaker 2: lots of penchip, lots of institutional money. And he's in
Speaker 2: fixed income. And what's important is he was in the
Speaker 2: trenches at DLJ Donaldson, Lufkin, Jenarett, ages Ago, and so
Speaker 2: he brings a huge knowledge base of fixed income dynamics.
Speaker 2: And he's where I am, and where I am doesn't matter,
Speaker 2: but it really matters if Ken Rogoff of Harvard's at
Speaker 2: the same place. Ken Rogoff with David Wesson looked for
Speaker 2: that on Wall Street Week and Professor Rogoff was adamant.
Speaker 2: He's focused on the inflation adjusted yields plural and I
Speaker 2: totally agree with this that what we really care about,
Speaker 2: including Jerome Poal this afternoon, is an analysis of the
Speaker 2: real yield. Brian Whalen of TCW on the.
Speaker 1: Real yield, I think that's the knockout blow. I don't
Speaker 1: think this two point seven. I don't think this market
Speaker 1: could really even handle two point five. But if we
Speaker 1: saw a jump up to like two point seven percent,
Speaker 1: which is you know rates, last time we were at
Speaker 1: these levels that kind of level and real interest rates
Speaker 1: right before the financial crisis, clearly, you know, the economy,
Speaker 1: the markets couldn't handle it. This time around, we do
Speaker 1: the same thing, and then what would happen is that
Speaker 1: if you get rates up that high, you're going to see,
Speaker 1: you know, equity markets crater, and then you're going to
Speaker 1: hit financial conditions. And what you're going to see is
Speaker 1: a consumer who's already stressed and they're borrowing a lot
Speaker 1: more than they used to. And yes, spending is high,
Speaker 1: but they're doing it because of the wealth effects, because
Speaker 1: they look at their equity market portfolio and they say, hey,
Speaker 1: I feel I feel good. I've got more money than
Speaker 1: I had last year. Once you see that drop on
Speaker 1: your screen, you know, and you know on your broker
Speaker 1: screen that changes, that'll be the end.
Speaker 2: Let me translate this because that was a pro conversation
Speaker 2: right now, the ten year inflation adjusted yield. There's different
Speaker 2: measurements of this, there's different regimes you can use. Is
Speaker 2: two point twenty seven percent? Not that long ago, we're
Speaker 2: at one point nine something and it was like, are
Speaker 2: you kidding me? We're going to go through two percent?
Speaker 2: And we've gone up to two point two seven percent,
Speaker 2: And mister Whaleen there's talking about not he's not predicting,
Speaker 2: but he's saying, if you get a ten year real
Speaker 2: yield to two point four two point five and I
Speaker 2: believe he said two point seven percent, there you put
Speaker 2: some real stress on the balance sheets of America, the
Speaker 2: different individual the home and the corporate balance sheets as well.
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