1 00:00:02,720 --> 00:00:10,600 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the 2 00:00:10,640 --> 00:00:14,600 Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 3 00:00:14,640 --> 00:00:17,880 Speaker 1: Eastern on Apple, Cocklay and Android Auto with the Bloomberg 4 00:00:17,960 --> 00:00:21,080 Speaker 1: Business App. Listen on demand wherever you get your podcasts, 5 00:00:21,400 --> 00:00:24,079 Speaker 1: or watch us live on YouTube. 6 00:00:24,320 --> 00:00:26,520 Speaker 2: I'm going to say a year maybe two years ago, 7 00:00:27,080 --> 00:00:28,760 Speaker 2: some tech analysts came in here and said, you know, 8 00:00:29,360 --> 00:00:31,360 Speaker 2: all these companies across the industries are spending a lot 9 00:00:31,400 --> 00:00:31,840 Speaker 2: on AI. 10 00:00:31,960 --> 00:00:32,319 Speaker 3: Mm hmm. 11 00:00:32,520 --> 00:00:35,080 Speaker 2: It's got to come from someplace that money. And he 12 00:00:35,280 --> 00:00:37,199 Speaker 2: highlighted one area that it's going to be hitting as, 13 00:00:37,200 --> 00:00:39,400 Speaker 2: which is some of these consultants out there. Let's pull 14 00:00:39,440 --> 00:00:41,120 Speaker 2: back on some of the money we're spending on consulting 15 00:00:41,280 --> 00:00:42,720 Speaker 2: because we have to invest in AI. 16 00:00:43,280 --> 00:00:45,159 Speaker 4: So it's not so much that they don't need their services, 17 00:00:45,200 --> 00:00:48,120 Speaker 4: it's that we're investing in AI, so we can hold 18 00:00:48,159 --> 00:00:49,360 Speaker 4: off on paying these guys. 19 00:00:49,600 --> 00:00:50,240 Speaker 5: Absolutely. 20 00:00:50,280 --> 00:00:52,440 Speaker 2: And I think in that analyst is Ana Rograna, Senior 21 00:00:52,440 --> 00:00:55,760 Speaker 2: Tech Analysts or Bloomberg Intelligence Honor. We saw Accenture today 22 00:00:55,960 --> 00:00:58,720 Speaker 2: give some guidance that really disappointed the street. The stock 23 00:00:58,800 --> 00:01:01,960 Speaker 2: is down eighteen percent year to data is down fifty 24 00:01:02,080 --> 00:01:04,920 Speaker 2: five zero percent. On a year to date basis down 25 00:01:04,959 --> 00:01:07,840 Speaker 2: fifteen percent today. What did you hear from Accentric? 26 00:01:09,040 --> 00:01:11,120 Speaker 6: I mean, to be honest, look at the carnage and 27 00:01:11,160 --> 00:01:13,200 Speaker 6: what they said was, you know, maybe one hundred hundred and. 28 00:01:13,160 --> 00:01:15,640 Speaker 7: Fifty basis points less growth for them. 29 00:01:15,760 --> 00:01:18,920 Speaker 6: I mean is this is really shocking because they talked 30 00:01:18,920 --> 00:01:22,120 Speaker 6: about it on They talked about projects being pushed out 31 00:01:22,160 --> 00:01:23,000 Speaker 6: into next. 32 00:01:22,880 --> 00:01:23,760 Speaker 7: Year and so forth. 33 00:01:23,800 --> 00:01:27,120 Speaker 6: And this goes into the thesis that you just repeated, 34 00:01:27,160 --> 00:01:29,160 Speaker 6: because at the end of the day, if you're going 35 00:01:29,200 --> 00:01:31,880 Speaker 6: to spend money, if an enterprise out of a corporation 36 00:01:32,000 --> 00:01:32,840 Speaker 6: is going to spend money on. 37 00:01:32,840 --> 00:01:34,760 Speaker 7: AI, where is that money going to come from. 38 00:01:34,800 --> 00:01:37,120 Speaker 6: You don't have budgets that are going to go up 39 00:01:37,160 --> 00:01:39,560 Speaker 6: fifty hundred percent. You're going to take it out from 40 00:01:39,720 --> 00:01:41,720 Speaker 6: the software bucket. You're going to take it out from 41 00:01:41,760 --> 00:01:45,160 Speaker 6: consulting bucket. You may not upgrade your PC. I mean, 42 00:01:45,200 --> 00:01:46,959 Speaker 6: it has to come from somewhere, and that's what we 43 00:01:47,000 --> 00:01:47,840 Speaker 6: are seeing right now. 44 00:01:48,320 --> 00:01:50,360 Speaker 4: It has to come from somewhere. And if it's coming 45 00:01:50,360 --> 00:01:53,160 Speaker 4: from software, it's coming from consulting. Does that mean that 46 00:01:53,320 --> 00:01:56,440 Speaker 4: the companies realize that they can get by just fine 47 00:01:56,480 --> 00:01:58,600 Speaker 4: without these consultants and they'll never need to go back 48 00:01:58,600 --> 00:02:00,760 Speaker 4: to them, or do they do the someths become something 49 00:02:00,840 --> 00:02:04,560 Speaker 4: that they just go to as needed on an emergency basis. 50 00:02:05,360 --> 00:02:07,640 Speaker 6: So Oka, over the last twenty five years, we have 51 00:02:07,760 --> 00:02:11,519 Speaker 6: seen this movie many times. It leads to a year 52 00:02:11,720 --> 00:02:15,119 Speaker 6: or so of anemic spending and then it bounces back 53 00:02:15,240 --> 00:02:17,920 Speaker 6: very strongly. The reason it bounces back is because you 54 00:02:18,000 --> 00:02:21,080 Speaker 6: cannot put those projects on hold forever. You need your 55 00:02:21,160 --> 00:02:24,480 Speaker 6: data cleaned up, you need your software systems upgraded, all 56 00:02:24,520 --> 00:02:26,840 Speaker 6: of those things. The thing that I was surprised by 57 00:02:27,000 --> 00:02:31,040 Speaker 6: in the Accenture earnings today is their headcounts still went up. 58 00:02:31,080 --> 00:02:33,440 Speaker 6: I mean, if there was massive AIA disruption going on 59 00:02:33,520 --> 00:02:36,880 Speaker 6: in that company, why would these guys hire any more people. 60 00:02:37,600 --> 00:02:40,239 Speaker 6: A company like Accentria has over seven hundred thousand people, 61 00:02:40,639 --> 00:02:43,799 Speaker 6: their nutrition rate is about fourteen percent, which means all 62 00:02:43,840 --> 00:02:45,920 Speaker 6: they have to do is not hired, and their headcom 63 00:02:46,000 --> 00:02:48,400 Speaker 6: goes from seven hundred thousand plus two that say six 64 00:02:48,520 --> 00:02:51,840 Speaker 6: hundred thousand, which is what you would expect when somebody 65 00:02:51,919 --> 00:02:54,840 Speaker 6: is being disrupted by AI. This is a classic case 66 00:02:54,919 --> 00:02:58,760 Speaker 6: of traditional spending not being strong and these guys getting 67 00:02:58,760 --> 00:02:59,440 Speaker 6: punished on it. 68 00:03:00,160 --> 00:03:03,520 Speaker 2: You mentioned software is another area that's under pressure. And again, 69 00:03:04,120 --> 00:03:06,360 Speaker 2: you know, you look at Salesforce, some of these names 70 00:03:06,360 --> 00:03:08,440 Speaker 2: that are down forty fifty percent. 71 00:03:10,120 --> 00:03:11,560 Speaker 5: How's the thinking on Wall Street? 72 00:03:11,680 --> 00:03:15,720 Speaker 2: Kind of evolving here on a rag about software broadly 73 00:03:15,840 --> 00:03:18,320 Speaker 2: defined as it relates in an AI world. 74 00:03:19,600 --> 00:03:23,040 Speaker 6: The thinking is very simple right now. Trading is led 75 00:03:23,080 --> 00:03:26,440 Speaker 6: by short term focused you know, you could say investors 76 00:03:26,480 --> 00:03:30,200 Speaker 6: or speculators, and the trade is very simple. They understand, 77 00:03:30,440 --> 00:03:33,160 Speaker 6: one hundred percent, go long semis and get out of 78 00:03:33,200 --> 00:03:36,720 Speaker 6: anything that is software or services related. We already heard 79 00:03:36,800 --> 00:03:39,960 Speaker 6: yesterday from even Apple that you know, memory prices are up, 80 00:03:40,000 --> 00:03:42,760 Speaker 6: and so micround is up again, you know, on that stuff. 81 00:03:42,920 --> 00:03:45,200 Speaker 6: So it's a very easy trade for people to see. 82 00:03:45,440 --> 00:03:48,000 Speaker 6: They can't see by what going to happen in three 83 00:03:48,080 --> 00:03:52,160 Speaker 6: years to software companies or consulting companies. Why bother being 84 00:03:52,200 --> 00:03:54,920 Speaker 6: in it when the trade is very simple in front 85 00:03:54,960 --> 00:03:57,600 Speaker 6: of you, Google is raising capital to invest more in 86 00:03:57,640 --> 00:04:01,440 Speaker 6: AI infrastructure. Let's stick with the semi trade. Let's slick 87 00:04:01,480 --> 00:04:03,200 Speaker 6: with the AI infrastructure trade. 88 00:04:04,360 --> 00:04:04,640 Speaker 8: Anra. 89 00:04:04,840 --> 00:04:08,160 Speaker 4: We got news this week that Medalia, which is a 90 00:04:08,200 --> 00:04:12,080 Speaker 4: private equity backed software firm, is being taken over by 91 00:04:12,200 --> 00:04:16,080 Speaker 4: creditors led by Blackstone Toma Bravo, its sponsors said it 92 00:04:16,120 --> 00:04:18,440 Speaker 4: wasn't going to inject fresh cash into the company. 93 00:04:19,240 --> 00:04:22,159 Speaker 8: Does this spill over in any way to the public market. 94 00:04:23,400 --> 00:04:25,480 Speaker 6: So this has been a story for you know, I 95 00:04:25,520 --> 00:04:28,000 Speaker 6: would say, not not just right now, but for decades. 96 00:04:28,360 --> 00:04:31,800 Speaker 6: When software companies lose their market share or are smaller, 97 00:04:31,839 --> 00:04:34,840 Speaker 6: they actually go to private equity, they raise debt, and 98 00:04:35,040 --> 00:04:39,120 Speaker 6: that's how they exist. Our argument is companies with leading 99 00:04:39,160 --> 00:04:42,560 Speaker 6: market share, you know, companies like Service Now, companies like 100 00:04:42,600 --> 00:04:45,840 Speaker 6: work tape, companies like SAP, they're still growing and they 101 00:04:45,920 --> 00:04:48,000 Speaker 6: have a commanding. 102 00:04:47,480 --> 00:04:48,800 Speaker 7: Market share in that area. 103 00:04:48,880 --> 00:04:51,719 Speaker 6: Somebody like a Medalia are honestly a blip when it 104 00:04:51,760 --> 00:04:55,240 Speaker 6: comes to the market share of the entire software landscape. 105 00:04:55,320 --> 00:04:58,720 Speaker 6: So it's not surprising those companies that are private they 106 00:04:58,720 --> 00:05:00,680 Speaker 6: are not growing, they're you know, a. 107 00:05:00,640 --> 00:05:01,200 Speaker 7: Lot of debt. 108 00:05:01,880 --> 00:05:04,680 Speaker 6: You will see a lot more issues on that spectrum. 109 00:05:04,920 --> 00:05:07,200 Speaker 6: For our side, when we look at the larger companies, 110 00:05:07,400 --> 00:05:09,839 Speaker 6: I think this risk is insulated from them. 111 00:05:10,440 --> 00:05:13,320 Speaker 4: Understood that, you know, the big software companies are a 112 00:05:13,360 --> 00:05:17,200 Speaker 4: class unto themselves. But if we're not seeing these software 113 00:05:17,240 --> 00:05:21,000 Speaker 4: companies see their valuations adjusted, meaning their owners are not 114 00:05:21,200 --> 00:05:25,120 Speaker 4: marking down the value of these companies when they eventually do. 115 00:05:25,120 --> 00:05:26,440 Speaker 8: Does that have any. 116 00:05:26,480 --> 00:05:30,680 Speaker 4: Unintended consequences on the publicly traded part of the software industry, 117 00:05:30,839 --> 00:05:32,600 Speaker 4: even if it's not the big names, maybe some of 118 00:05:32,640 --> 00:05:33,599 Speaker 4: the MidCap ones. 119 00:05:34,600 --> 00:05:37,200 Speaker 6: Yeah, they will all be getting butchered. I mean you 120 00:05:37,200 --> 00:05:40,400 Speaker 6: can even see today they're getting clobbered because of Accenture. 121 00:05:41,279 --> 00:05:44,800 Speaker 6: Because the whole risk is anytime you have a company 122 00:05:44,880 --> 00:05:48,240 Speaker 6: at this point that is not semis related or hardware 123 00:05:48,240 --> 00:05:51,279 Speaker 6: related and has to do with human capital, people just say, 124 00:05:51,320 --> 00:05:52,880 Speaker 6: you know, find an easy way to say, you know what, 125 00:05:52,920 --> 00:05:54,200 Speaker 6: they are going to get disrupted. 126 00:05:54,440 --> 00:05:55,960 Speaker 7: This is not a business I want to be in. 127 00:05:56,279 --> 00:05:59,040 Speaker 6: I would rather stick around to something that's tied up 128 00:05:59,120 --> 00:06:01,680 Speaker 6: with chips or servers. 129 00:06:02,160 --> 00:06:04,320 Speaker 4: I remember when not so long ago, everyone wanted to 130 00:06:04,360 --> 00:06:05,920 Speaker 4: be in software. You didn't want to be in hardware. 131 00:06:05,960 --> 00:06:09,280 Speaker 4: Hardware's it was a commodity business, right, no chip companies, 132 00:06:09,680 --> 00:06:12,159 Speaker 4: no big mainframe computers or anything like that. 133 00:06:12,240 --> 00:06:13,880 Speaker 8: Let's go into software. Recurring revenue. 134 00:06:14,120 --> 00:06:17,480 Speaker 5: Yep, exactly, recurring revel that that was the clean Hey. 135 00:06:17,240 --> 00:06:18,800 Speaker 7: So look at Accentia for that matter. 136 00:06:18,960 --> 00:06:21,680 Speaker 6: Yeah, exactly, it's about that, Like it's about what twelve 137 00:06:21,839 --> 00:06:24,880 Speaker 6: thirteen percent free cash flow yield I've never seen that, 138 00:06:25,080 --> 00:06:26,960 Speaker 6: you know, at least in the twenty three years I've 139 00:06:26,960 --> 00:06:28,320 Speaker 6: covered Accentia. 140 00:06:28,600 --> 00:06:29,640 Speaker 5: Let's switch real quick. 141 00:06:29,640 --> 00:06:33,919 Speaker 2: Intel shares sure after Trump says it has struck a 142 00:06:33,960 --> 00:06:35,400 Speaker 2: deal with Apple for chip deal. 143 00:06:35,440 --> 00:06:36,200 Speaker 5: What's going on there? 144 00:06:37,160 --> 00:06:39,440 Speaker 6: Yeah, we'd have to find out whether it actually happened 145 00:06:39,520 --> 00:06:41,440 Speaker 6: or not, because I haven't seen the release from the 146 00:06:41,440 --> 00:06:44,840 Speaker 6: companies at this point. Now, the question here is Apple 147 00:06:45,200 --> 00:06:47,960 Speaker 6: does make its own chip, It goes to TSMC to 148 00:06:48,040 --> 00:06:50,960 Speaker 6: get them made and it and then those chip is 149 00:06:51,000 --> 00:06:53,520 Speaker 6: has their custom chips have been a big story of 150 00:06:53,600 --> 00:06:56,240 Speaker 6: selling their max and their phones. Now, if they are 151 00:06:56,360 --> 00:06:59,480 Speaker 6: getting a little bit off, you could say backlog issues 152 00:06:59,520 --> 00:07:04,560 Speaker 6: because DSMC is really busy doing AI chips, they could 153 00:07:04,600 --> 00:07:06,640 Speaker 6: go to Intel. But the big question, which I don't 154 00:07:06,640 --> 00:07:09,200 Speaker 6: know the answer for out is is can Intel even 155 00:07:09,240 --> 00:07:12,640 Speaker 6: manufacture the chips for Apple at this point? Because this 156 00:07:12,680 --> 00:07:15,440 Speaker 6: is not something that you could just you know, it's 157 00:07:15,560 --> 00:07:18,480 Speaker 6: not like construction you can find another vendor. You need 158 00:07:18,520 --> 00:07:21,200 Speaker 6: to have that technology and those nodes in order to 159 00:07:21,280 --> 00:07:24,360 Speaker 6: fulfill the demand from some of the leading tech companies 160 00:07:24,440 --> 00:07:24,880 Speaker 6: like Apple. 161 00:07:25,600 --> 00:07:25,800 Speaker 9: Yeah. 162 00:07:25,880 --> 00:07:28,640 Speaker 4: To on Rog's point, Intel declined to comment. Apple did 163 00:07:28,640 --> 00:07:32,640 Speaker 4: not comment as well. But you know that's to be fair. Now, 164 00:07:32,720 --> 00:07:35,320 Speaker 4: Intel of course has this deal with the White House 165 00:07:35,560 --> 00:07:37,560 Speaker 4: very quickly here on rog where the US government is 166 00:07:37,560 --> 00:07:40,280 Speaker 4: the biggest investor. So even if it's not a lot 167 00:07:40,320 --> 00:07:43,720 Speaker 4: of chips, just a symbolic amount says something to the market, 168 00:07:43,720 --> 00:07:44,120 Speaker 4: doesn't it. 169 00:07:45,040 --> 00:07:47,120 Speaker 6: Yeah, but that's the case. But that's also could be 170 00:07:47,240 --> 00:07:50,200 Speaker 6: just driven by market forces. Right now, we really are 171 00:07:50,240 --> 00:07:52,720 Speaker 6: in a crunch that you can't get enough semis and 172 00:07:52,800 --> 00:07:55,800 Speaker 6: chips out in the market given the AI infrastructure demand, 173 00:07:56,040 --> 00:07:58,600 Speaker 6: so they will go anywhere they can find chips at 174 00:07:58,640 --> 00:07:59,240 Speaker 6: this point. 175 00:07:59,480 --> 00:08:02,440 Speaker 8: Stay with us. More from Bloomberg Intelligence coming up after this. 176 00:08:06,240 --> 00:08:09,920 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch US Live 177 00:08:10,000 --> 00:08:13,080 Speaker 1: weekdays at ten am Eastern on Apple Coarclay, and Android 178 00:08:13,120 --> 00:08:16,400 Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever 179 00:08:16,480 --> 00:08:19,600 Speaker 1: you get your podcasts, or watch US live on YouTube. 180 00:08:20,440 --> 00:08:23,800 Speaker 5: President Trump has a deal with Iran. 181 00:08:24,280 --> 00:08:26,240 Speaker 2: Shifting the focus to the straight of horror moves and 182 00:08:26,280 --> 00:08:28,440 Speaker 2: getting that open with So let's get a sense of 183 00:08:28,480 --> 00:08:30,640 Speaker 2: what's going on here under the hood. Wayne Sanders, he's 184 00:08:30,680 --> 00:08:35,960 Speaker 2: a senior defense analyst for Bloomberg Intelligence. He's retired US 185 00:08:36,280 --> 00:08:39,400 Speaker 2: Army colonel. So we thank him, of course for his service. Wayne, 186 00:08:39,520 --> 00:08:43,319 Speaker 2: what do you make of this? I guess memorandum of understanding. 187 00:08:43,360 --> 00:08:45,320 Speaker 2: I think like we're inking a real estate deal here. 188 00:08:45,400 --> 00:08:47,480 Speaker 2: I'm not sure what's going on. Talk to us about 189 00:08:47,480 --> 00:08:50,880 Speaker 2: the Strait of Her moves? Can we can the Western 190 00:08:50,920 --> 00:08:53,360 Speaker 2: world really reopen the Straight of Horror moves? 191 00:08:55,000 --> 00:08:55,200 Speaker 9: Yeah? 192 00:08:55,240 --> 00:08:57,000 Speaker 10: I take it as a pretty good sign. Actually. 193 00:08:57,320 --> 00:08:59,200 Speaker 11: I think one of the biggest pieces the fact that 194 00:08:59,240 --> 00:09:01,520 Speaker 11: the Iranian press is involved in this and we have 195 00:09:01,600 --> 00:09:05,319 Speaker 11: not seen any backlash yet from IRGC or anyone else, 196 00:09:05,360 --> 00:09:08,240 Speaker 11: meaning that the four headed hydra from Iran that you 197 00:09:08,320 --> 00:09:10,360 Speaker 11: have to get all in place at the same time 198 00:09:10,360 --> 00:09:11,920 Speaker 11: to be able to move forward with an agreement. 199 00:09:12,360 --> 00:09:14,120 Speaker 10: We're actually seeing some of that movement. 200 00:09:14,240 --> 00:09:16,480 Speaker 11: So now as you start to see some movement in 201 00:09:16,520 --> 00:09:19,400 Speaker 11: the Straits and you're actually I think at this point 202 00:09:19,440 --> 00:09:22,440 Speaker 11: in time, it also allows for the military as they 203 00:09:22,480 --> 00:09:25,360 Speaker 11: start moving back from some of the blockade positioning that 204 00:09:25,360 --> 00:09:28,160 Speaker 11: they're in, they can move into his own defense while 205 00:09:28,280 --> 00:09:31,640 Speaker 11: still being able to very quickly maneuver back if they 206 00:09:31,679 --> 00:09:31,960 Speaker 11: had to. 207 00:09:33,800 --> 00:09:36,280 Speaker 8: Wayene, where does Israel fit into all of this? 208 00:09:38,559 --> 00:09:41,000 Speaker 11: Israel right now, I see the next sixty days as 209 00:09:41,040 --> 00:09:43,520 Speaker 11: being obviously very critical Israel is going to pressure the 210 00:09:43,600 --> 00:09:45,920 Speaker 11: US as hard as they possibly can, especially when it 211 00:09:45,960 --> 00:09:50,440 Speaker 11: comes to the nuclear richment program. President Trump originally said 212 00:09:50,840 --> 00:09:54,440 Speaker 11: no escalation in enrichment, and he backed off a little 213 00:09:54,480 --> 00:09:56,800 Speaker 11: bit about that in the MA where he's now talking 214 00:09:56,880 --> 00:10:00,200 Speaker 11: about low grade enrichment. So think three to twenty percent, 215 00:10:00,200 --> 00:10:03,800 Speaker 11: which is normally used in that civilian power projection power 216 00:10:03,840 --> 00:10:08,160 Speaker 11: production perspective, and you need ninety percent high grade ian 217 00:10:08,240 --> 00:10:09,880 Speaker 11: rich geranium for nuclear weapons. 218 00:10:09,880 --> 00:10:11,400 Speaker 10: So there's a very large gap. 219 00:10:11,679 --> 00:10:14,160 Speaker 11: However, at this point in time, Israel doesn't look at 220 00:10:14,160 --> 00:10:16,440 Speaker 11: it that way. Israel looks at any type of enrichment 221 00:10:16,559 --> 00:10:19,000 Speaker 11: is going to be used towards a military grade program 222 00:10:19,160 --> 00:10:20,760 Speaker 11: and therefore shouldn't even be started. 223 00:10:21,559 --> 00:10:24,880 Speaker 12: So I guess over the next sixty days, when the 224 00:10:24,960 --> 00:10:27,520 Speaker 12: US and RAN will try to agree on restrictions on 225 00:10:27,600 --> 00:10:32,560 Speaker 12: Tehran's nuclear program, what should expectations be here. 226 00:10:34,800 --> 00:10:36,120 Speaker 10: It's gonna be rough. 227 00:10:36,160 --> 00:10:38,400 Speaker 11: Honestly, I don't know whether or not they can even 228 00:10:38,440 --> 00:10:40,920 Speaker 11: do this in sixty days. I think that you may 229 00:10:41,000 --> 00:10:43,800 Speaker 11: end up seeing an extension beyond that sixty day agreement 230 00:10:44,720 --> 00:10:47,600 Speaker 11: if going towards that, because they are so hardlined on 231 00:10:47,640 --> 00:10:50,680 Speaker 11: the both sides, I RAN needs to be able to 232 00:10:50,679 --> 00:10:52,320 Speaker 11: come back with a win and say no, we still 233 00:10:52,360 --> 00:10:54,480 Speaker 11: have a nuclear program even if it is that three 234 00:10:54,559 --> 00:10:58,040 Speaker 11: to twenty percent. However, the Gulf States as well as 235 00:10:58,080 --> 00:11:00,360 Speaker 11: Israel is looking at this saying do we want I 236 00:11:00,440 --> 00:11:02,959 Speaker 11: Ran to have any type of nuclear capability even if 237 00:11:02,960 --> 00:11:04,400 Speaker 11: it is at the low end. 238 00:11:06,000 --> 00:11:08,880 Speaker 4: So if you were in the oil markets, Wayne, what 239 00:11:08,920 --> 00:11:10,680 Speaker 4: would you be watching for? What do you think you 240 00:11:10,720 --> 00:11:11,800 Speaker 4: can kind of key off here? 241 00:11:13,559 --> 00:11:15,720 Speaker 11: I'm definitely I'm definitely not an oil expert, but I 242 00:11:15,720 --> 00:11:17,959 Speaker 11: would say that I think right now both Iran in 243 00:11:18,000 --> 00:11:20,439 Speaker 11: the US are looking at right now the replenishment of 244 00:11:20,480 --> 00:11:23,200 Speaker 11: stocks becomes a very key piece to this, and so 245 00:11:23,600 --> 00:11:27,360 Speaker 11: both sides have a very large positive upside right now 246 00:11:27,400 --> 00:11:29,440 Speaker 11: to allowing the strait to open, to be able to 247 00:11:29,480 --> 00:11:32,240 Speaker 11: alleviate some of that pressure. I think the key then 248 00:11:32,320 --> 00:11:35,079 Speaker 11: over the next sixty days, though while that starts, is 249 00:11:35,480 --> 00:11:37,720 Speaker 11: can we start reaching some of the agreements that the 250 00:11:37,800 --> 00:11:42,600 Speaker 11: longer term agreements ballistic missiles, the nuclear program, and easing 251 00:11:42,600 --> 00:11:44,880 Speaker 11: of sanctions, the other things that are in the deal. 252 00:11:45,520 --> 00:11:47,720 Speaker 11: Can all those things actually be solidified to the point 253 00:11:47,760 --> 00:11:50,600 Speaker 11: where both can return to their countries and say that 254 00:11:50,640 --> 00:11:51,160 Speaker 11: we've won. 255 00:11:51,679 --> 00:11:54,600 Speaker 4: Stay with us more from Bloomberg Intelligence coming up after this. 256 00:11:58,400 --> 00:12:01,760 Speaker 1: You're listening to the Bloomberg and Eligen's podcast. Catch us 257 00:12:01,800 --> 00:12:04,800 Speaker 1: Live weekdays at ten am Eastern on Apple Cocklay and 258 00:12:04,800 --> 00:12:07,640 Speaker 1: Android Auto with the blue Berg Business App. Listen on 259 00:12:07,679 --> 00:12:10,920 Speaker 1: demand wherever you get your podcasts, or watch us live 260 00:12:11,000 --> 00:12:11,640 Speaker 1: on YouTube. 261 00:12:12,480 --> 00:12:14,600 Speaker 5: At a Reserve meeting, yesuay, that was pretty interesting. 262 00:12:14,960 --> 00:12:15,160 Speaker 7: DC. 263 00:12:15,720 --> 00:12:20,800 Speaker 2: Yeah, terse statement, pretty clear language from Kevin Wassh, the 264 00:12:20,800 --> 00:12:21,520 Speaker 2: new FED chair. 265 00:12:22,000 --> 00:12:24,480 Speaker 4: He's a gen X FED chair, so I feel like 266 00:12:24,520 --> 00:12:27,440 Speaker 4: he went old school. He's bringing it back to what 267 00:12:27,520 --> 00:12:30,120 Speaker 4: it was before the era of let's hold a news 268 00:12:30,200 --> 00:12:35,800 Speaker 4: conference after every decision. Let's overly communicate under Ben Bernanki 269 00:12:35,960 --> 00:12:37,079 Speaker 4: and Jenni Yellen. 270 00:12:36,880 --> 00:12:37,680 Speaker 8: And j Powell. 271 00:12:37,960 --> 00:12:41,880 Speaker 2: Let's talk to somebody who actually follows closely what the 272 00:12:41,880 --> 00:12:44,240 Speaker 2: Federal Reserve is doing. That would be one Irid Jersey. 273 00:12:44,280 --> 00:12:47,600 Speaker 2: I rememized your takeaway from the meeting yesterday. What did 274 00:12:47,600 --> 00:12:48,320 Speaker 2: your market tell you? 275 00:12:49,600 --> 00:12:49,880 Speaker 9: Wow? 276 00:12:49,920 --> 00:12:52,720 Speaker 13: There were so many takeaways, Paul, I'm not sure that 277 00:12:52,760 --> 00:12:55,760 Speaker 13: I could do just one. I think from a market perspective, 278 00:12:55,800 --> 00:13:00,599 Speaker 13: it was clearly that the committee has turned hawkish, and 279 00:13:00,400 --> 00:13:05,000 Speaker 13: and Kevin Worsh, surprisingly to some had basically let them 280 00:13:05,320 --> 00:13:08,640 Speaker 13: let that hawkishness linger out there because he didn't take 281 00:13:08,679 --> 00:13:11,960 Speaker 13: any of it back during the press conference. So you know, 282 00:13:12,000 --> 00:13:15,200 Speaker 13: the market is is now priced for a couple of 283 00:13:15,240 --> 00:13:18,839 Speaker 13: interest rate hikes, but then an interest rate cut, which 284 00:13:19,280 --> 00:13:21,360 Speaker 13: something is wrong. And this isn't a note we put 285 00:13:21,360 --> 00:13:25,680 Speaker 13: out this morning on the terminal which either the market 286 00:13:25,800 --> 00:13:28,920 Speaker 13: is the market's pricing for some risk of two hikes, 287 00:13:28,920 --> 00:13:30,160 Speaker 13: which is completely feasible. 288 00:13:30,240 --> 00:13:30,360 Speaker 6: Right. 289 00:13:30,400 --> 00:13:32,760 Speaker 13: I can lay out a scenario where the Federal Reserve 290 00:13:32,800 --> 00:13:35,640 Speaker 13: would do that given the inflation situation and how strong 291 00:13:35,679 --> 00:13:38,880 Speaker 13: the economy seems to be. But there's no chance I 292 00:13:38,920 --> 00:13:40,719 Speaker 13: think after that that they wind up cutting within a 293 00:13:40,720 --> 00:13:41,280 Speaker 13: couple of months. 294 00:13:41,360 --> 00:13:41,480 Speaker 9: Right. 295 00:13:41,520 --> 00:13:43,599 Speaker 13: It is one of those two things is wrong, And 296 00:13:43,640 --> 00:13:46,320 Speaker 13: I think ultimately the market has to figure out what 297 00:13:46,440 --> 00:13:48,560 Speaker 13: it believes. Is it going to be a slow, meandering 298 00:13:48,679 --> 00:13:51,240 Speaker 13: group of hikes or the is the Fed going to 299 00:13:51,280 --> 00:13:53,240 Speaker 13: hike and then hold rates out a somewhat higher level 300 00:13:53,240 --> 00:13:53,720 Speaker 13: for a while. 301 00:13:54,240 --> 00:13:54,480 Speaker 11: IRA. 302 00:13:54,600 --> 00:13:56,800 Speaker 4: One of the things I was super fascinated by was 303 00:13:57,520 --> 00:13:59,319 Speaker 4: Kevin worsh saying that he wants to let the market 304 00:13:59,360 --> 00:14:02,120 Speaker 4: price in new data and react to what's happening in 305 00:14:02,160 --> 00:14:04,440 Speaker 4: the economy, rather than try to price in what it 306 00:14:04,520 --> 00:14:05,360 Speaker 4: thinks the FED. 307 00:14:05,160 --> 00:14:07,040 Speaker 8: Will do in the face of new data. 308 00:14:07,160 --> 00:14:09,600 Speaker 4: Does I mean he wants a pure market reaction, but 309 00:14:09,679 --> 00:14:12,840 Speaker 4: does this pure market reaction then become an input for 310 00:14:12,880 --> 00:14:13,240 Speaker 4: the FED? 311 00:14:13,920 --> 00:14:16,240 Speaker 9: Well, I disagree. I mean it always has been right. 312 00:14:16,240 --> 00:14:18,600 Speaker 13: The FED has alreadys taken into account what is the 313 00:14:18,600 --> 00:14:23,200 Speaker 13: market pricing. I think he's I think he thinks and wrongly, 314 00:14:23,280 --> 00:14:26,080 Speaker 13: and I disagree with with him on this. The market 315 00:14:26,080 --> 00:14:28,120 Speaker 13: has always right since I've been in this business since 316 00:14:28,200 --> 00:14:31,120 Speaker 13: nineteen ninety four. The market has always tried to anticipate 317 00:14:31,160 --> 00:14:34,720 Speaker 13: what is the Federal Reserve going to do? Now, you 318 00:14:34,760 --> 00:14:37,400 Speaker 13: know that changed a little bit with the more communication 319 00:14:37,560 --> 00:14:40,120 Speaker 13: because now instead of the market waiting for a meeting 320 00:14:40,240 --> 00:14:41,360 Speaker 13: or waiting for you. 321 00:14:41,320 --> 00:14:42,280 Speaker 9: Know, the H four one. 322 00:14:42,280 --> 00:14:44,440 Speaker 13: Look, I remember getting the H dot four dot one. 323 00:14:44,520 --> 00:14:46,760 Speaker 13: That's the Fed's balance sheet. I used to get that 324 00:14:46,840 --> 00:14:49,040 Speaker 13: off a fax machine so we could determine whether or 325 00:14:49,080 --> 00:14:51,440 Speaker 13: not the Federal Reserve was easy or hawkish, right like 326 00:14:52,200 --> 00:14:55,160 Speaker 13: you know so so. But we had to anticipate what 327 00:14:55,200 --> 00:14:57,200 Speaker 13: the next move was going to be, and that's always 328 00:14:57,200 --> 00:14:58,760 Speaker 13: what the market is trying to do. The market is 329 00:14:58,760 --> 00:15:01,520 Speaker 13: trying to discount what those next moves are. 330 00:15:01,840 --> 00:15:04,040 Speaker 9: Now it became you know, easier. 331 00:15:03,640 --> 00:15:05,040 Speaker 13: To determine what they were going to do at a 332 00:15:05,080 --> 00:15:07,880 Speaker 13: meeting because of all the FED speak, and you can 333 00:15:07,920 --> 00:15:10,160 Speaker 13: take a preponderance and the whole mosaic of all that 334 00:15:10,200 --> 00:15:13,800 Speaker 13: information that you could coalesce into what's the FED going 335 00:15:13,840 --> 00:15:16,920 Speaker 13: to do? But you still had you know, people try 336 00:15:16,960 --> 00:15:19,760 Speaker 13: to anticipate things even before you had all of this communication. 337 00:15:19,880 --> 00:15:23,920 Speaker 13: So I disagree with that idea altogether. And you know, 338 00:15:23,960 --> 00:15:26,440 Speaker 13: the FED always looks at things like inflation break evens 339 00:15:26,480 --> 00:15:28,960 Speaker 13: and you know what the market's pricing for hikes. 340 00:15:28,680 --> 00:15:32,360 Speaker 2: Or cuts for sure, Ira, I'm looking at the two 341 00:15:32,440 --> 00:15:34,800 Speaker 2: year treasury and a ten year treasure because Lisa Bromost 342 00:15:35,000 --> 00:15:36,760 Speaker 2: taught me how to do that, and I see the 343 00:15:37,160 --> 00:15:39,880 Speaker 2: it's only like twenty eight basis points between the twos 344 00:15:39,920 --> 00:15:42,160 Speaker 2: and tens, and that's a lot less than it was 345 00:15:42,240 --> 00:15:43,960 Speaker 2: three months ago, six months ago. 346 00:15:43,960 --> 00:15:44,640 Speaker 5: What does that tell me? 347 00:15:45,960 --> 00:15:49,440 Speaker 13: Yeah, so what's gone on recently? Right yesterday you saw 348 00:15:49,480 --> 00:15:51,800 Speaker 13: two year yields go up by you know, fourteen fifteen 349 00:15:51,840 --> 00:15:56,200 Speaker 13: basis points and the tenure didn't do very much of anything. 350 00:15:56,240 --> 00:15:58,400 Speaker 13: And then today you see the ten year rallying and 351 00:15:59,400 --> 00:16:02,840 Speaker 13: knowld's coming down while the two years is hardly doing anything, 352 00:16:03,360 --> 00:16:05,640 Speaker 13: I think that that's an acknowledgment that the Federal. 353 00:16:05,440 --> 00:16:07,000 Speaker 9: Reserve is going to be hawkish. 354 00:16:07,360 --> 00:16:10,320 Speaker 13: You know, there was this fear going into Kevin Walsh's 355 00:16:10,360 --> 00:16:12,480 Speaker 13: first meeting that he was going to try to be 356 00:16:12,640 --> 00:16:15,800 Speaker 13: as douvish as possible because President Trump wants interest rates 357 00:16:15,800 --> 00:16:18,440 Speaker 13: to be cut and the like. But he acknowledged that 358 00:16:18,480 --> 00:16:21,760 Speaker 13: they want to get inflation down to two percent, and 359 00:16:22,240 --> 00:16:26,040 Speaker 13: you know, in saying that the market is now pricing 360 00:16:26,120 --> 00:16:29,240 Speaker 13: for the Federal Reserve to be somewhat more hawkish and 361 00:16:29,320 --> 00:16:32,320 Speaker 13: be on hold for a little while. I think ultimately 362 00:16:32,520 --> 00:16:34,960 Speaker 13: we probably will see us get back to maybe fifty 363 00:16:35,000 --> 00:16:38,800 Speaker 13: basis points on that two's tens curve. But that's predicated 364 00:16:38,840 --> 00:16:41,080 Speaker 13: on my idea that the Fed's probably just on hold 365 00:16:41,080 --> 00:16:43,480 Speaker 13: for the rest of the year, which is not something 366 00:16:43,520 --> 00:16:45,280 Speaker 13: that the two year currently is pricing. The two year 367 00:16:45,360 --> 00:16:47,680 Speaker 13: is pricing those two interest rate hekes that we talked 368 00:16:47,720 --> 00:16:48,920 Speaker 13: about a little while ago. 369 00:16:49,920 --> 00:16:52,080 Speaker 8: So we talked about the politics of it all. 370 00:16:52,600 --> 00:16:55,040 Speaker 4: You know, what was fascinating as well was President Trump's 371 00:16:55,040 --> 00:16:58,880 Speaker 4: response to the Fed's first rate decision under his new chair. 372 00:16:59,040 --> 00:17:02,200 Speaker 4: Kevin Walsh basically said, yeah, it's possible the Fed might 373 00:17:02,280 --> 00:17:07,640 Speaker 4: raise rates, it's all right, whatever, How do you interpret that? Ian, Well, 374 00:17:07,720 --> 00:17:10,720 Speaker 4: I'm so sorry that my mind is somewhere else. 375 00:17:13,520 --> 00:17:15,639 Speaker 13: I suspect that President Trump just you know, wants to 376 00:17:15,640 --> 00:17:17,760 Speaker 13: give Kevin Worrish at least a little leeway, you know, 377 00:17:18,320 --> 00:17:22,040 Speaker 13: coming into the first meeting and trying to determine, you know, 378 00:17:22,119 --> 00:17:24,160 Speaker 13: how to work, how we can work with the other 379 00:17:24,640 --> 00:17:27,440 Speaker 13: members of the of the FMC. And I do think 380 00:17:27,480 --> 00:17:32,080 Speaker 13: that the task forces that Kevin Morsh announced is kind 381 00:17:32,080 --> 00:17:35,119 Speaker 13: of a more diplomatic way for him to, you know, 382 00:17:35,280 --> 00:17:37,560 Speaker 13: first get a sense of what his colleagues are thinking. 383 00:17:37,640 --> 00:17:41,520 Speaker 13: And secondly, I kind of influence things through these task 384 00:17:41,520 --> 00:17:44,320 Speaker 13: forces and say, hey, we can't do things as we've 385 00:17:44,320 --> 00:17:46,280 Speaker 13: been doing them, or I don't want to be doing 386 00:17:46,320 --> 00:17:48,480 Speaker 13: things the way they've been doing them because they haven't 387 00:17:48,520 --> 00:17:52,520 Speaker 13: always worked and maybe things aren't as cohesive as they 388 00:17:52,560 --> 00:17:55,040 Speaker 13: can be. So so some of the things that might 389 00:17:55,080 --> 00:17:56,760 Speaker 13: come out of that is like a change in the 390 00:17:56,760 --> 00:17:59,920 Speaker 13: way that they think about inflation and the inflation framework 391 00:18:00,240 --> 00:18:01,440 Speaker 13: is the two percent target? 392 00:18:01,480 --> 00:18:05,720 Speaker 9: Correct? Is using the PC deflator the right measure? Right? 393 00:18:05,760 --> 00:18:08,080 Speaker 13: So those are things that they're going to discuss, and 394 00:18:08,400 --> 00:18:11,639 Speaker 13: the market may react either positively or negatively, depending what 395 00:18:11,680 --> 00:18:14,760 Speaker 13: comes out of some of these discussions. And I do 396 00:18:14,800 --> 00:18:17,359 Speaker 13: think that that Kevin Walsh is, you know, it's actually 397 00:18:17,400 --> 00:18:19,159 Speaker 13: pretty smart. I mean, I'll give him a lot of 398 00:18:19,200 --> 00:18:22,760 Speaker 13: credit for trying to work with his colleagues through this 399 00:18:22,880 --> 00:18:24,040 Speaker 13: task force environment. 400 00:18:24,640 --> 00:18:27,560 Speaker 8: Stay with us. More from Bloomberg Intelligence coming up after this. 401 00:18:31,760 --> 00:18:35,440 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 402 00:18:35,520 --> 00:18:38,600 Speaker 1: weekdays at ten am Eastern on Apple, Coarclay, and Android 403 00:18:38,640 --> 00:18:41,919 Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever 404 00:18:42,000 --> 00:18:45,120 Speaker 1: you get your podcasts, or watch us live on YouTube. 405 00:18:45,960 --> 00:18:47,800 Speaker 2: Let's get a sense of where we're going on these markets. 406 00:18:47,840 --> 00:18:49,720 Speaker 2: We've got a new FED chairman, we've got a new 407 00:18:50,000 --> 00:18:52,920 Speaker 2: sheriff in town, it seems like. But the market's reacting 408 00:18:52,960 --> 00:18:54,800 Speaker 2: well today. And Meletti joins us. 409 00:18:55,280 --> 00:18:56,880 Speaker 5: She is the head of equity. 410 00:18:56,600 --> 00:19:00,920 Speaker 2: Investments in all Spring Global Investments there in Milwaukee, Wisconsin. Again, 411 00:19:01,000 --> 00:19:04,000 Speaker 2: pound for pound, the best money managers I find in Milwaukee. 412 00:19:04,040 --> 00:19:05,440 Speaker 2: I don't know what it is out there, but they're 413 00:19:05,440 --> 00:19:05,920 Speaker 2: pretty good. 414 00:19:06,960 --> 00:19:07,800 Speaker 5: And thanks for. 415 00:19:07,680 --> 00:19:10,240 Speaker 2: Coming in here today. I know you're going to the 416 00:19:10,240 --> 00:19:12,879 Speaker 2: parade in a minute. What are you guys and what 417 00:19:12,920 --> 00:19:15,400 Speaker 2: are your portfolio management teams? What are they doing here 418 00:19:15,440 --> 00:19:16,680 Speaker 2: in this market these days? 419 00:19:17,040 --> 00:19:21,360 Speaker 14: They are trying to remain calm and focused on their 420 00:19:21,400 --> 00:19:24,720 Speaker 14: investment processes and what they do every day, and as 421 00:19:24,720 --> 00:19:27,159 Speaker 14: you know, it's really hard to do that when the 422 00:19:27,240 --> 00:19:31,040 Speaker 14: market seems to shift every day. In January and February 423 00:19:31,160 --> 00:19:34,600 Speaker 14: look like a completely different market than March, and then 424 00:19:34,640 --> 00:19:37,439 Speaker 14: April and May and even June now have been different 425 00:19:37,480 --> 00:19:40,280 Speaker 14: as well. So again sticking to what they do well, 426 00:19:40,320 --> 00:19:42,160 Speaker 14: and that's really focused on fundamentals. 427 00:19:43,280 --> 00:19:45,760 Speaker 4: So how are you rethinking or maybe not at all 428 00:19:47,080 --> 00:19:50,199 Speaker 4: your portfolio construction given what we heard yesterday, given this 429 00:19:50,320 --> 00:19:54,080 Speaker 4: renewed focus on fighting inflation from the Federal Reserve under 430 00:19:54,160 --> 00:19:54,640 Speaker 4: Kevin Walsh. 431 00:19:54,800 --> 00:19:57,359 Speaker 14: Yeah, I mean I think we were pretty balanced in 432 00:19:57,359 --> 00:20:00,960 Speaker 14: our views going into it in terms of, yes, there's 433 00:20:00,960 --> 00:20:04,359 Speaker 14: a new chair directionally, are things going to shift dramatically? 434 00:20:04,440 --> 00:20:06,679 Speaker 14: Probably not, And I think there was more kind of 435 00:20:06,680 --> 00:20:10,520 Speaker 14: confirmation of that yesterday him really trying to establish his 436 00:20:10,760 --> 00:20:15,359 Speaker 14: own credibility, probably with his cohorts. But I thought what 437 00:20:15,520 --> 00:20:19,200 Speaker 14: was new and interesting are the task force the task 438 00:20:19,240 --> 00:20:22,359 Speaker 14: forces that they've announced. I do think it's kind of 439 00:20:22,400 --> 00:20:25,119 Speaker 14: time to think about the future. Are we looking at 440 00:20:25,119 --> 00:20:27,159 Speaker 14: the right data sets all of those things, and I 441 00:20:27,160 --> 00:20:29,280 Speaker 14: think he brings that to the table too, So I 442 00:20:29,280 --> 00:20:32,600 Speaker 14: think there's still as strong independence the FED, no real 443 00:20:32,680 --> 00:20:34,000 Speaker 14: reason to change direction. 444 00:20:34,480 --> 00:20:37,440 Speaker 3: We're focused on obviously earnings, but also. 445 00:20:37,240 --> 00:20:40,680 Speaker 14: Inflation, and I think that the inflation story will really 446 00:20:40,680 --> 00:20:42,800 Speaker 14: give the shift of what happens longer term. 447 00:20:43,240 --> 00:20:45,520 Speaker 2: And we're starting this market to get some just mega 448 00:20:45,600 --> 00:20:48,720 Speaker 2: IPOs coming down. We had SpaceX, We're going to have 449 00:20:48,840 --> 00:20:51,440 Speaker 2: Anthropic and open a probably in the fall. I guess, 450 00:20:53,119 --> 00:20:56,080 Speaker 2: huge valuations, huge numbers of shares being issued. 451 00:20:56,080 --> 00:20:57,840 Speaker 5: What does that tell you about the market. Is that 452 00:20:57,880 --> 00:20:58,880 Speaker 5: a signal one way or together? 453 00:20:59,160 --> 00:21:03,600 Speaker 14: I mean, you know, it does like look, it does 454 00:21:03,680 --> 00:21:06,760 Speaker 14: give me a little bit of angst. Certainly lived through 455 00:21:06,760 --> 00:21:09,520 Speaker 14: cycles like this before, and when you see that much 456 00:21:09,600 --> 00:21:14,720 Speaker 14: capital being thrown into IPOs makes you feel a little uncomfortable. 457 00:21:14,800 --> 00:21:17,639 Speaker 14: For certain I think what's different this time for me 458 00:21:18,000 --> 00:21:21,520 Speaker 14: is fundamentals in terms of earnings and earnings growth continue 459 00:21:21,560 --> 00:21:24,680 Speaker 14: to be really, really strong. And more importantly, they seem 460 00:21:24,720 --> 00:21:27,760 Speaker 14: to be broadening out down cap, especially right so mid 461 00:21:27,800 --> 00:21:31,119 Speaker 14: cap and small cap companies seem to be also increasing 462 00:21:31,200 --> 00:21:35,280 Speaker 14: their earnings. And so if that is really the driver, 463 00:21:35,640 --> 00:21:38,480 Speaker 14: I'm a little bit more comfortable but like, look, this 464 00:21:38,560 --> 00:21:40,840 Speaker 14: AI spend, not all of the capital will be put 465 00:21:40,880 --> 00:21:44,080 Speaker 14: to good use as we know, and there will definitely 466 00:21:44,119 --> 00:21:45,320 Speaker 14: be a rocky road ahead. 467 00:21:45,359 --> 00:21:49,080 Speaker 4: I think in a rocky road scenario, where can you 468 00:21:49,200 --> 00:21:49,959 Speaker 4: go for shelter. 469 00:21:50,280 --> 00:21:52,639 Speaker 14: Yeah, there's a couple of spaces that we're looking at 470 00:21:52,640 --> 00:21:55,440 Speaker 14: that we think are interesting. You know, we've thought about 471 00:21:55,440 --> 00:21:58,000 Speaker 14: this AI innovation cycle. We know how important it is, 472 00:21:58,040 --> 00:21:59,960 Speaker 14: but we think the next phase kind of goes down 473 00:22:00,480 --> 00:22:04,520 Speaker 14: into applying it at an enterprise level into different industries 474 00:22:04,680 --> 00:22:07,600 Speaker 14: and that is creating some of the profit growth and 475 00:22:07,680 --> 00:22:13,040 Speaker 14: earnings growth. So generally speaking, we like industrials that seems 476 00:22:13,119 --> 00:22:16,720 Speaker 14: to be at a perfect intersection between the growth in 477 00:22:16,920 --> 00:22:20,560 Speaker 14: AI spend and what's going on there, but also at 478 00:22:20,600 --> 00:22:22,600 Speaker 14: the intersection of kind of reglobalization. 479 00:22:23,400 --> 00:22:26,040 Speaker 3: So that's an area we like, especially. 480 00:22:25,720 --> 00:22:28,440 Speaker 14: As you go down cap, the more MidCap names have 481 00:22:28,600 --> 00:22:31,480 Speaker 14: less global exposure, so they tend to be a little 482 00:22:31,520 --> 00:22:35,479 Speaker 14: bit more stable, and the valuation differences are you know, 483 00:22:35,520 --> 00:22:37,120 Speaker 14: make it even more attractive. 484 00:22:37,400 --> 00:22:40,399 Speaker 2: Smaller mid cap time to shine here, How are you 485 00:22:40,400 --> 00:22:41,000 Speaker 2: thinking about that? 486 00:22:41,119 --> 00:22:42,200 Speaker 3: It has been polling me. 487 00:22:42,480 --> 00:22:45,119 Speaker 14: It's kind of been the quiet little winner this year, 488 00:22:45,400 --> 00:22:48,040 Speaker 14: And yes, has it been pulled up by some of 489 00:22:48,040 --> 00:22:48,760 Speaker 14: this AI spend. 490 00:22:48,760 --> 00:22:52,920 Speaker 3: It certainly has. The thing I don't love about. 491 00:22:52,600 --> 00:22:57,200 Speaker 14: It is we still see kind of they a low earnings. 492 00:22:57,280 --> 00:23:01,720 Speaker 14: Quality factor continue to be really, really strong, and so 493 00:23:02,720 --> 00:23:05,120 Speaker 14: the market seems to be not just focused on high 494 00:23:05,200 --> 00:23:07,359 Speaker 14: quality companies in the small maty cap space, but also 495 00:23:07,400 --> 00:23:10,320 Speaker 14: the companies that may not screen quite as high for. 496 00:23:10,359 --> 00:23:14,520 Speaker 4: US and looking outside the US, which you know, people 497 00:23:14,920 --> 00:23:17,080 Speaker 4: were reluctant to do it for a long time, but 498 00:23:17,920 --> 00:23:21,239 Speaker 4: on a valuation basis, it's hard not to consider it. 499 00:23:21,560 --> 00:23:23,439 Speaker 4: How are you thinking about the emerging markets? How are 500 00:23:23,480 --> 00:23:25,120 Speaker 4: you thinking about the developed markets? 501 00:23:25,200 --> 00:23:26,160 Speaker 8: And xus? 502 00:23:26,600 --> 00:23:28,720 Speaker 14: Yeah, I mean I think the emerging markets, and Paul, 503 00:23:28,760 --> 00:23:30,680 Speaker 14: you can attest. I think more than a year ago 504 00:23:30,680 --> 00:23:32,720 Speaker 14: we were talking about it, and most of my career 505 00:23:32,720 --> 00:23:36,040 Speaker 14: I spent obviously in the domestic markets, but you could 506 00:23:36,119 --> 00:23:39,960 Speaker 14: see the interest level. But more importantly, the fundamentals really 507 00:23:40,000 --> 00:23:42,800 Speaker 14: start to shift last year, and we just published our 508 00:23:42,800 --> 00:23:46,600 Speaker 14: mid year review this week. We came into twenty twenty 509 00:23:46,640 --> 00:23:48,760 Speaker 14: six believing there was a lot more room to run 510 00:23:48,800 --> 00:23:51,560 Speaker 14: in em That has been the case and we believe 511 00:23:51,600 --> 00:23:53,120 Speaker 14: that will be the case to the rest of the year. 512 00:23:53,119 --> 00:23:55,399 Speaker 14: And it's yes, some of it's tied to the AI spend, 513 00:23:55,400 --> 00:23:59,920 Speaker 14: but also some of these emerging market countries have really matured, 514 00:24:00,160 --> 00:24:03,520 Speaker 14: are much more stable than they were before. And the 515 00:24:03,560 --> 00:24:08,800 Speaker 14: biggest factor is there's only five percent of global AUM 516 00:24:09,200 --> 00:24:12,040 Speaker 14: devoted to the space. The average over a long period 517 00:24:12,080 --> 00:24:14,919 Speaker 14: of time has been seven percent, And so if that 518 00:24:15,200 --> 00:24:17,600 Speaker 14: just rises a little bit, it could be five hundred 519 00:24:17,600 --> 00:24:20,840 Speaker 14: billion in investments yet to come. So we think it's 520 00:24:20,880 --> 00:24:23,879 Speaker 14: still an attractive area to be especially relative to the US. 521 00:24:24,440 --> 00:24:26,840 Speaker 2: And And I've been in this investment game for thirty 522 00:24:27,000 --> 00:24:30,399 Speaker 2: forty years now, And how do you think about this 523 00:24:30,480 --> 00:24:31,280 Speaker 2: AI story? 524 00:24:31,320 --> 00:24:31,760 Speaker 9: Just broadly. 525 00:24:31,800 --> 00:24:34,920 Speaker 2: We've been through internet cycles before, We've been through great plans, 526 00:24:35,160 --> 00:24:37,879 Speaker 2: I mean, telecoms. I mean, how does this ring for you? 527 00:24:38,080 --> 00:24:38,320 Speaker 5: Yeah? 528 00:24:38,400 --> 00:24:42,760 Speaker 14: I mean, look, this is probably the most innovation I've 529 00:24:42,800 --> 00:24:45,600 Speaker 14: seen in my lifetime on apps and just you know, 530 00:24:45,760 --> 00:24:50,400 Speaker 14: the markets. But I am a big believer. Our investment 531 00:24:50,440 --> 00:24:53,280 Speaker 14: teams are big believers in it. We're using it already 532 00:24:53,359 --> 00:24:57,439 Speaker 14: in our business. I only have a little bit of 533 00:24:57,480 --> 00:25:01,800 Speaker 14: angst on this solid foundation we have right now, including 534 00:25:01,920 --> 00:25:04,280 Speaker 14: the fundamental the earnings growth and other things that we 535 00:25:04,320 --> 00:25:07,320 Speaker 14: have with it. I worry do we have another deep 536 00:25:07,359 --> 00:25:10,840 Speaker 14: seek moment? Do we have another kind of black Swan 537 00:25:11,000 --> 00:25:16,000 Speaker 14: moment that just triggers a reversal of some of the 538 00:25:17,040 --> 00:25:20,600 Speaker 14: glory that the space has had. So again, I fundamentally 539 00:25:20,640 --> 00:25:23,880 Speaker 14: believe that this is real. Have we gotten a little 540 00:25:23,920 --> 00:25:26,840 Speaker 14: over excited and a little too narrow focused on just 541 00:25:26,920 --> 00:25:28,040 Speaker 14: AI in the markets? 542 00:25:28,359 --> 00:25:31,640 Speaker 3: I would say probably. Yeah. 543 00:25:31,680 --> 00:25:36,359 Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, 544 00:25:36,560 --> 00:25:40,040 Speaker 1: and anywhere else you get your podcasts. Listen live each 545 00:25:40,040 --> 00:25:43,800 Speaker 1: weekday ten am to noon Eastern on Bloomberg dot com, 546 00:25:43,920 --> 00:25:47,480 Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app. 547 00:25:47,880 --> 00:25:50,760 Speaker 1: You can also watch us live every weekday on YouTube 548 00:25:51,200 --> 00:25:53,440 Speaker 1: and always on the Bloomberg terminal.