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Speaker 3: Let's turn to the Federal Reserve.
Speaker 2: The Trump administration parling the pressure on FED share Jpowell.
Speaker 4: The President said he is not going to fire Chair Powell.
Speaker 4: It would do Chair Powell a favor, and he would
Speaker 4: be doing the Institution of favor if if he did
Speaker 4: an internal review. This mission creep from the FED is
Speaker 4: endangering their independence and monetary policy.
Speaker 2: President Trump making a rev visit to the Federal Serve
Speaker 2: this afternoon to see the two point five billion dollar renovation.
Speaker 2: A Chi Raja Yaksha of Barclay's writes and concerns about
Speaker 2: FED independence persists, but we expect status quo to prevail
Speaker 2: actually joins us now for more a j E goodmonic,
Speaker 2: Good morning. This market is shaken off a lot, threats
Speaker 2: to fed independence, trade tariffs, threats actual tariffs.
Speaker 3: Can this economy keep shaking it off?
Speaker 5: Yeah?
Speaker 6: I think as long as you don't get a polysym
Speaker 6: mistake out of Washington on the magnitude of actually trying
Speaker 6: to fire the fetchure, which I don't think will happen.
Speaker 6: I think we are past the worst of it and
Speaker 6: we are looking forward to a big, you know, big
Speaker 6: boost and growth over the next few concert.
Speaker 2: This is really important because some people still fear that
Speaker 2: the worst of the data is ahead of us.
Speaker 6: What gives you confidence the fact that that I've been
Speaker 6: virtually no second order effects. Remember I agree with your
Speaker 6: Plivi's gust living made the point to that there have
Speaker 6: been substantial talis. If you told me we are a
Speaker 6: two and a half percent during the year we finished
Speaker 6: at seventeen eighteen, I would have been But part of
Speaker 6: the reason I would have been shaken is that because
Speaker 6: I would have expected business investment to pull back, I
Speaker 6: would have expected consumer precautionary savings to go up.
Speaker 5: Factors matters, John, None of those things.
Speaker 6: Have happened, and that's to do with the You know,
Speaker 6: if they were going to happen, they were going to
Speaker 6: happen with the headlines, they were not going to happen.
Speaker 5: When it actually plays out, it's.
Speaker 6: Very very hard for me to see big new second
Speaker 6: order effects now the consumer pulling back hard, and without that,
Speaker 6: you do not get a lusting like a recession, a
Speaker 6: lusting hit two years growth.
Speaker 1: Are we measuring the economy correctly? And I asked that
Speaker 1: because there is. There are pockets that are clearly suffering,
Speaker 1: and you're seeing that in numbers like from Southwest where
Speaker 1: consumers who don't have as much money aren't able to
Speaker 1: travel as much. But then you have this industrial revolution,
Speaker 1: this renaissance, this huge investment AI technology that's generating efficiency
Speaker 1: and profitability at the biggest and the most powerful companies
Speaker 1: and individuals.
Speaker 7: Is this showing up in.
Speaker 1: The data or is this just changing the way we
Speaker 1: understand our economy.
Speaker 6: I think it's the latter. I think we are measuring
Speaker 6: it correctly. There's no reason to believe that we've suddenly changed.
Speaker 6: The fact of the matter is what you said, the
Speaker 6: United States is two different economis.
Speaker 5: One is the old economy.
Speaker 6: You know, we all grow up believing housing is a
Speaker 6: business cycle, for example, and you know housing is struggling
Speaker 6: with mortgage rates staying.
Speaker 5: Where they are.
Speaker 6: The durable goods sector, you know, you mentioned airlines, they
Speaker 6: are struggling.
Speaker 5: Doesn't matter.
Speaker 6: You have the large tech side and the AI dividends
Speaker 6: starting to kick in, and I think that matters far
Speaker 6: more at an index level, at an economy white level.
Speaker 6: The fact that the hyperscaler is just never pulled back
Speaker 6: on spending. You know, you might have worried as an
Speaker 6: important into the United States about Mexico Canada, where I
Speaker 6: can make my business work or not. Who cares when
Speaker 6: Google is spending on the eighty five million dollars at
Speaker 6: a macro level.
Speaker 1: Well, at the same time, back during the pandemic, it
Speaker 1: was sort of the revenge of the physical world. That
Speaker 1: was something that John said every morning as we walked in,
Speaker 1: and it was sort of the reality of trying to
Speaker 1: get toilet paper. Although he is tacked up, I am
Speaker 1: just wondering whether we're going to end up with revenge
Speaker 1: of the physical world once more. We're talking about investment
Speaker 1: in the cloud, all of this sort of technology that's
Speaker 1: for companies, the way we think, the way we do
Speaker 1: work in white collar businesses. What about the goods and
Speaker 1: services that have to go overroun on ships.
Speaker 6: I don't think there's going to be a revenge of
Speaker 6: the physical world. I almost think it's the other way around,
Speaker 6: meaning that right now we are all focused on llm's.
Speaker 6: You know, you put in text and you get out
Speaker 6: a bunch of information that is the AI models and
Speaker 6: that we think will hit services jobs.
Speaker 5: The fact of the matter is.
Speaker 6: I think there are three four five years away from
Speaker 6: the same thing happening where you put in a bunch
Speaker 6: of texts and you have a robot doing subtasks. I'm
Speaker 6: not kidding. This is not sci fi. It's you know,
Speaker 6: this is I feel the way I did about NVDA
Speaker 6: five years ago.
Speaker 5: You know, none of us thought it would get as
Speaker 5: big as it is.
Speaker 6: But the fact of the matter is, you know that
Speaker 6: Moore's law, you know the fact that things are twice
Speaker 6: as cheap every eighteen months or twice as powerful does
Speaker 6: work in the semiconductor world, doesn't work in the physical world.
Speaker 6: Fusing air and robotics is powerful, and I almost worry
Speaker 6: that you're going to have more of the.
Speaker 5: Profits continue to go to capital.
Speaker 6: We always go believing, you know, plumbers, you'll always need plumbers.
Speaker 5: Well you might not five seven, eight.
Speaker 2: Years from what you're saying could relatively mean the market
Speaker 2: is okay, but the employment market gets a whole lot worse.
Speaker 6: It does, and with our limits to that. The limits
Speaker 6: are put in by society.
Speaker 5: At some point.
Speaker 6: If there's seventy million knowledge workers in the United States,
Speaker 6: you know, I've had this A person I considered the
Speaker 6: single best investor of all time make the argument to
Speaker 6: me that he's looked at this upwards downwards five years
Speaker 6: from side, you know, Sunday, and he's telling me that
Speaker 6: ten million of these workers will not be needed in
Speaker 6: five to seven years.
Speaker 5: He's not saying they want have jobs.
Speaker 6: The economic activity that they do now, the value add
Speaker 6: will be done by machines. We see it in big tech, right,
Speaker 6: forty percent of coding. You realize Microsoft's let go of
Speaker 6: twenty thousand people. They have money coming out of the years.
Speaker 6: There's a reason why that this is happening. Eventually society
Speaker 6: pushes back. It's happened in every technological revolution. But the
Speaker 6: difference now, John, is that in the past, when you
Speaker 6: had had this right. We were okay with Debtor's prisons
Speaker 6: were ok which I one hundred years ago, you know,
Speaker 6: the transition that we didn't make noise this time it
Speaker 6: will make a lot of.
Speaker 2: Fun share with you are concerns mean, and I'll be
Speaker 2: open and personal abouts here for children of Thatcher and Reagan.
Speaker 2: I am highly concerned that if you concentrate capital and
Speaker 2: wealth in the hands of just a few, that the
Speaker 2: political movement, the corrective course of action on behalf of
Speaker 2: the paper, will be for the state to get a
Speaker 2: whole lot bigger, to go forward with higher taxes, universal
Speaker 2: basic income. And for people like me who don't really
Speaker 2: believe ideologically in that view of the world, that's scarce
Speaker 2: they live in daylight sadamy.
Speaker 5: It should, but that is a very real risk.
Speaker 6: Now, until we get there, you're going to have corporate
Speaker 6: earnings flat flattened, you know, for years to come, you're
Speaker 6: going to have operating margin leverage. And then the other
Speaker 6: side of it will be society pushing.
Speaker 5: But it's happened before.
Speaker 6: I mean, you know, six of the seven big oil
Speaker 6: majors came out of one company, Standard Oil, remember, you know,
Speaker 6: so this is not every fifteen to twenty fifty years.
Speaker 6: If you have a big technology change, but all of
Speaker 6: advantages go to capital, which is what is going to happen.
Speaker 6: I think eventually society will push back, But until it happens,
Speaker 6: it's actually a very nice ride the building.
Speaker 8: On John's point, should we just expect higher deficits then.
Speaker 5: No, I think so.
Speaker 6: The OBBA and the tariffs from revenues, the total deficit
Speaker 6: from that is not higher than if just the trump
Speaker 6: casks that were expiring had been extended, and we all
Speaker 6: thought they would be extended if nothing else right. The problem,
Speaker 6: the reason why the long bound in the United States
Speaker 6: refuses to come below five percent is not because the
Speaker 6: OBBA is more profligate.
Speaker 5: It's because it locks in.
Speaker 6: It makes it clear that we are not going to
Speaker 6: go away from six and a half to seven percent deficits,
Speaker 6: which is where we were this year, last.
Speaker 5: Year, for at least ten more years.
Speaker 6: You know, you mentioned Rachel Rees and the conversation from
Speaker 6: three weeks ago. The significant part was not that she
Speaker 6: got emotional in person. The significant part for me was
Speaker 6: Labor has a big parliamentary majority and cannot pass a
Speaker 6: simple change, a small change to the welfare build that
Speaker 6: was the significance of it.
Speaker 5: There's no political will.
Speaker 2: I appreciate your time, enjoy the right of the market
Speaker 2: right now sings for the message, and we'll catch up
Speaker 2: in five fist time. We just around a time you
Speaker 2: called Libby cantroll of Libby, goodmonic.
Speaker 7: Good morning August.
Speaker 3: First, are we going to wrap this up for it's
Speaker 3: not in new July ninth?
Speaker 9: Yeah, I mean, look, I think what we were been
Speaker 9: telling our clients is that we are going to be
Speaker 9: living with trade policy and tear policy uncertainty for the
Speaker 9: duration of this administration. So maybe we get a little
Speaker 9: bit more clarity. I would agree that fifteen percent is
Speaker 9: the new ten percent, ten percent is the new zero percent.
Speaker 7: Kind of the best.
Speaker 9: That a country can hope for those with trade surpluses
Speaker 9: is going to be ten percent, and then everything else
Speaker 9: is going to be higher. I mean, Japan got I
Speaker 9: think arguably a pretty good deal here.
Speaker 7: But again, if you just look, if we just take a.
Speaker 9: Step back and go back to December, right after the election,
Speaker 9: and we were just saying we're going to be sitting
Speaker 9: here and talking about how fifteen percent seems pretty benign
Speaker 9: on one of our closest ally and trading partners.
Speaker 7: I don't think anybody would believe it.
Speaker 9: So I think that the Overton window, if you will,
Speaker 9: has really been expanded here, kind of shattered in terms
Speaker 9: of what is acceptable in the markets and in Washington.
Speaker 9: And again, I think from an economic and markets perspective,
Speaker 9: we do think this will start having a bite at
Speaker 9: some point, even though maybe markets are just, you know,
Speaker 9: willfully ignoring the reality here.
Speaker 7: Well, all the market's numb.
Speaker 8: Has Trump basically conditioned them to accept fifteen percent because
Speaker 8: they're not as a sky high April second terraffs originally
Speaker 8: this administration came out.
Speaker 9: With yet and I think you know what we have
Speaker 9: been talking to our clients are the sort of like
Speaker 9: the taco man versus tariff man, this idea of Trump
Speaker 9: always chickening out, And if you actually look at the
Speaker 9: tariff level right now, it would not suggest that he
Speaker 9: is chickening out.
Speaker 7: Yet.
Speaker 9: Yes, he has softened his most extreme stands. So will
Speaker 9: the effect of average tar freight go up to thirty percent?
Speaker 7: Not likely, But.
Speaker 9: Where we think it probably will Land is between fifteen
Speaker 9: and twenty percent. Fifteen and twenty percent tariff, I mean
Speaker 9: that's you know, that's not insignificant. So yes, I do
Speaker 9: think that in some ways, again this idea of you know,
Speaker 9: the Overton window sort of what's possible in Washington, he's
Speaker 9: expanded that so much that the market is somewhat desensitized.
Speaker 9: But we really, we do think this will start having
Speaker 9: actually real economic effects at some point.
Speaker 7: When it comes to these negotiations.
Speaker 8: I was really struck by the Japanese one because of
Speaker 8: that five hundred and fifty billion dollar fund, and I'm
Speaker 8: still kind of confused about exactly what it is because
Speaker 8: the Prime Minister of Japan is talking about that these
Speaker 8: are basically loan guarantees, and Howard Lutnik, the Commerce Secretary,
Speaker 8: is saying it's much much more than that. Almost sounds
Speaker 8: like a bit of a slush fund. Do you understand
Speaker 8: what the administration is looking for when it comes to
Speaker 8: training partners?
Speaker 9: Yeah, I think what we are, we are, like everybody else,
Speaker 9: is waiting for the details. I mean think a couple
Speaker 9: of things on this one is that, you know, for
Speaker 9: for another country to be funding our industrial policy, that
Speaker 9: could actually have some implications. So I think there's there's
Speaker 9: one of just sort of is this sort of politically
Speaker 9: realistic that you're actually relying on another country to actually
Speaker 9: make investments in things that are important from a national
Speaker 9: security or from an economic perspective for the country. The
Speaker 9: other which is a little bit technical and a little
Speaker 9: bit walking, but I think also important is if the
Speaker 9: adjective for the administration is to reduce the trade deficit,
Speaker 9: you can't reduce the trade deficit with the country and
Speaker 9: increase the capital account. Those things are supposed to be offset. So,
Speaker 9: you know, I think that you're trying to have kind
Speaker 9: of both ways here.
Speaker 7: So we'll sort of see what the details are.
Speaker 9: I think, you know, our you know, our suggestion to
Speaker 9: our clients is just to focus on what we do
Speaker 9: know though, which is the fifteen percent tariffs. And again
Speaker 9: that's that's an increase from the three percent that we
Speaker 9: had in January.
Speaker 1: And you have the joy on the opportunity of going
Speaker 1: around the world and explaining this to everybody. And I'm
Speaker 1: curious how different the reaction is for people not in
Speaker 1: the US versus the United States and how they plan
Speaker 1: to sort of operate around that.
Speaker 9: Yeah, I was just I was just saying before before
Speaker 9: the before the segment, that I was in Canada yesterday
Speaker 9: meeting with some of our large institutional clients.
Speaker 7: I've been all, you know, all over the world.
Speaker 9: We have the benefit of having long standing relationships with clients,
Speaker 9: you know, again outside of the US and inside the US,
Speaker 9: and then the perspective is different, you know. I think
Speaker 9: that you know, in some ways, there's there's asymmetry around
Speaker 9: the information. So I think there's some assumptions that are
Speaker 9: made that maybe are not necessarily right for our for
Speaker 9: our foreign clients. But I think more importantly, you know,
Speaker 9: our clients were already over index to sort of US
Speaker 9: equities to US dollar based assets coming into this year, right,
Speaker 9: the sort of the narrative of American exceptionalism, the expectation
Speaker 9: for you know, just blockbuster growth in the US and
Speaker 9: sort of languishing growth elsewhere come you know, in January,
Speaker 9: that obviously has changed. Those expectations have changed. So our
Speaker 9: clients in some ways, we're already reevaluating some of their
Speaker 9: dollar based asset allocation.
Speaker 7: And I think this probably has accelerated that.
Speaker 9: Certainly, the tariffs, I think again maybe they're impervious to that,
Speaker 9: maybe a little bit more desensitized some of the knocks
Speaker 9: on the FED, some of the cut questions about the
Speaker 9: in strength of the institutions, sort of the you know,
Speaker 9: the political, you know, functionality of Washington. I think those
Speaker 9: all are still questioned. The questions are front in terms
Speaker 9: of their in their minds.
Speaker 7: You know.
Speaker 1: Sam Zef of jpm Worgan Private Bank was on earlier
Speaker 1: and he said, initially people just work in the derivatives
Speaker 1: market to hedge their dollar exposure, but the actual reallocation
Speaker 1: happens over time. Is that something that you're seeing too,
Speaker 1: that there's a lot of reallocation away from dollar to
Speaker 1: dominated assets in the pipeline that hasn't fully come to
Speaker 1: the four yet.
Speaker 7: Yeah.
Speaker 9: I would say with our clients, we are seeing exactly
Speaker 9: that we were seeing them this sort of being taken
Speaker 9: out in the FX market, you know, hedging their dollar
Speaker 9: based exposure, and you know, you know, broadly speaking, there
Speaker 9: was some discussion around the tax bill. There was a
Speaker 9: section eight ninety nine, the revenge tax, which was definitely
Speaker 9: I think would have had some significant implications on actual
Speaker 9: asset allocation. I think now they are maybe sort of
Speaker 9: taking a step back and not necessarily divesting from the US,
Speaker 9: but I think sort of maybe hitting the hitting in
Speaker 9: a little bit more of the pose. But in terms
Speaker 9: of your new allocation new allocations, yes, but of course
Speaker 9: it's different for every client, so I don't want to
Speaker 9: sort of generalize, but I do think that there is,
Speaker 9: you know, more of which is a reevaluation of some
Speaker 9: of their dollar based assets.
Speaker 2: It's going to say thanks for being here. Let me
Speaker 2: cancher that a thin.
Speaker 3: Dan, I's of wet Bush.
Speaker 2: It's the biggest Tesla bull on the street with a
Speaker 2: price target of five hundred and an outperform rating. Dan
Speaker 2: joins us now for more, Dank and Mornic.
Speaker 5: Great to be here.
Speaker 2: Revenue down twelve percent, vehicles deliver down, average sunning, price down,
Speaker 2: and yet you're at five hundred dollars.
Speaker 3: Tell me why?
Speaker 10: Yeah, I mean, look the quarter itself nothing right home about,
Speaker 10: But I mean our view, it's about autonomous robotics. AI
Speaker 10: is the future for Tesla. So to me, yeah, it's
Speaker 10: a rough few quarters ahead, but I believe autonomous we
Speaker 10: are in the beginning what's going to be a trillion
Speaker 10: dollar valuation alone for a Tesla. So that's why I
Speaker 10: don't get so concern. We talk about deliveries which actually
Speaker 10: were kind of in line, you know, when we look
Speaker 10: at what's gonna happen the second half the story here
Speaker 10: when it comes to physical AI. Two best ones out there,
Speaker 10: it's gonna be Tessa and then video.
Speaker 2: Moving from a pre autonomy to a post autonomy world.
Speaker 2: Did he do enough on the call last night to
Speaker 2: convince investors that it's going to be smooth sigbink.
Speaker 10: Look, I mean obviously the call, you know, definitely some
Speaker 10: could have criticism in terms of you promising so much.
Speaker 7: Well, my view is if twenty to thirty.
Speaker 10: Percent of what he promised, you see in the next year,
Speaker 10: this is a stock that's up seventy eighty percent from here.
Speaker 10: So that's that's why when I look at Tesla, I
Speaker 10: don't focus, and we've talked about so much in the
Speaker 10: show over the years, I don't focus near term deliveries
Speaker 10: what that means in terms of you know, ev tax credits.
Speaker 10: This is an autonomous robotics story, and I think, look
Speaker 10: the AI revolutions we saw from you know, from from Alphabet.
Speaker 10: I mean, we are just in the early days of
Speaker 10: this playing out.
Speaker 1: Maybe I'm chicken little, but I was looking at this
Speaker 1: press call, diference. I was reading this and I was thinking,
Speaker 1: this is a disaster. I mean, Essentially this was a
Speaker 1: dreamstock and suddenly they're talking about tax credits and things
Speaker 1: of that nature. They used to talk about an affordable vehicle.
Speaker 1: Now they're talking about a stripped down model hy that
Speaker 1: doesn't sound that sexy at all, and they're going to
Speaker 1: expedite production of pre of other vehicles and put that
Speaker 1: on hold. What would it take for you to get barished?
Speaker 5: Yeah?
Speaker 10: Look, I mean you bring up great points and that
Speaker 10: will be the bearish points. And when it comes to
Speaker 10: the affordable next vehicle, is that just a stripped down version. Look,
Speaker 10: my view is that it comes down to like ROBOTAXI.
Speaker 10: If you're in twenty five cities in the next year
Speaker 10: and you should actually start to get volume production of optimists.
Speaker 10: When it comes to robotics, I think ninety percent of
Speaker 10: the future value is going to be in the AI story,
Speaker 10: not on the actual deliveries.
Speaker 5: In terms of cars out there.
Speaker 10: You have ten million vehicles in terms of teslas out there.
Speaker 10: It's all about the data and I believe the big
Speaker 10: thing is going to be the Sherelder mean where they'll
Speaker 10: have a significant investment XAI and I think that's where
Speaker 10: you get more of a wartime CEO in Musk, and
Speaker 10: I think that's really going to be the difference.
Speaker 1: Re satisfied by his answers about Xai, about the investments there,
Speaker 1: the crossover with Tesla, because there was a lot of
Speaker 1: ambiguity and he was asked that directly and he wasn't
Speaker 1: able to explain that connection and how it really does
Speaker 1: rebound over other than some people who are in this
Speaker 1: industry don't really want to work at a car company.
Speaker 1: I want to offer them an opportunity to.
Speaker 10: Yeah, I wouldn't say like that conference call is not
Speaker 10: you wouldn't put him in the Neery Hall of Fame
Speaker 10: that conference call. Okay, But but again we know, like
Speaker 10: with Musk, it's never going to be you know, it's
Speaker 10: not going to be Microsoft like. But my view is,
Speaker 10: and we've talked about it, like the board, they need
Speaker 10: to get.
Speaker 5: Him twenty five percent voted. I think that's key.
Speaker 10: Then that starts what's going to be a significant investment
Speaker 10: in Xai. But we've said also, are there guard rails
Speaker 10: there that they need to put on.
Speaker 5: You've seen him become less political since the.
Speaker 3: July fourth third party you know.
Speaker 10: Too, so I think, look, you want to seem less
Speaker 10: focused on that more focused on being CeAl because it
Speaker 10: comes down to the biggest asset for Tessa is Musk.
Speaker 8: The Press secretary yet yesterday was asked does the president
Speaker 8: support federal agencies contracting with Elon Musk's AI company.
Speaker 7: Her answer, I don't think so. No, can he do
Speaker 7: this about contracts?
Speaker 10: Look, I think, but then it comes out look at
Speaker 10: Groan when it comes to groc in the huge part
Speaker 10: of the do O D deal. Look, the reality is
Speaker 10: that Trump administration could say what they're going to say,
Speaker 10: but they need Musk. Of course they need Jensen. I
Speaker 10: mean they're gonna need leaders when it comes to you.
Speaker 3: Know, of what this AI revolution.
Speaker 5: I think.
Speaker 10: Look, that's the reality, and I do think at one
Speaker 10: point you'll start to see them. You know, I wouldn't
Speaker 10: say this I become friends again, but sort of men
Speaker 10: fences given what must needs.
Speaker 8: To do going to Elon Musk, Sam Altman were not
Speaker 8: called out yesterday when the President was giving shoutouts at
Speaker 8: this AI summit.
Speaker 7: Is Jensen Wang the new first buddy?
Speaker 5: Look, he's the cool kids table.
Speaker 10: I mean right now, like if you look where Jensen is,
Speaker 10: like he is the first buddy for.
Speaker 7: Trump because he's almost running Dan.
Speaker 10: Look, and the reality is there's one chip in the
Speaker 10: world fueling the AI revolution. And that's why when it
Speaker 10: comes to the Middle East trip, who's the right of him?
Speaker 5: Jensen?
Speaker 10: When it comes in that he's when it comes to
Speaker 10: China negotiation, the biggest poker chip that you have is
Speaker 10: a video.
Speaker 5: I mean when it comes down. So yeah, So.
Speaker 10: First Buddy is wearing a black leather jackets names Jensen.
Speaker 3: Final word, Alphabet. What do you think the numbers?
Speaker 10: I thought this was as bullish as you could see
Speaker 10: in terms of the action numbers from search, from YouTube.
Speaker 10: And this is no longer an alphabet in the corners
Speaker 10: say they crying, this is one coming out being like
Speaker 10: we're on the offense.
Speaker 2: You say, they can make the transition from that app
Speaker 2: model that's dominated the last several decades in Silicon Valley.
Speaker 3: We can make the transition away from them.
Speaker 10: I think it's going to be a renaissance for Alphabet.
Speaker 10: I still I believe from a large cap prosductive it's
Speaker 10: one of the best rest awards out there. That's why
Speaker 10: it's a table pounder. We went to twenty five in
Speaker 10: the price target and look, haters hate on this and
Speaker 10: I get it, but the Bears in hibernation mood, there
Speaker 10: was nothing on their call that they're going to grasp
Speaker 10: on to it. I want to see them increase cappex.
Speaker 10: It's an arms race of that right now in AI.
Speaker 10: You want to see them in the Lefley.
Speaker 2: The good news is the markets wanting to support them.
Speaker 2: Bremo that the stock is up off the back of
Speaker 2: this capex space and it's not down because then they
Speaker 2: have very different problems.
Speaker 1: Well, initially it was down, and that was interesting because
Speaker 1: people had the knee jerk reaction of stop spending so
Speaker 1: much before you can give us a sense of how
Speaker 1: you're going to monetize it. But as he spoke, and
Speaker 1: he talked about customer demand to change. Right now, I
Speaker 1: am chat cheepyteeing. Is Google Search in its decline and
Speaker 1: I will let you know what it says.
Speaker 10: But I also see the bears when they're in the
Speaker 10: hibernation mood, in the caves. They can find AI in
Speaker 10: the spreadsheets, and that's part of what I think how
Speaker 10: they've missed so much of the AI revolution.
Speaker 5: Look, get the popcorn out.
Speaker 10: This is just a precursor of what's going to be
Speaker 10: a bullsh Tecker, Microsoft, Meta Volunteer and others.
Speaker 3: Then I a Weber Standard Frey chet.
Speaker 2: Here, what's around a cycle?
Speaker 3: Native Richardson of IDP, Native of Monic.
Speaker 7: It's great to be here with you.
Speaker 3: It's good to see it.
Speaker 2: Let's talk about this job states. We've had a lot
Speaker 2: from a lot of people who say this lip of
Speaker 2: banka is no longer a reason to be holkish. Is
Speaker 2: it becoming a reason to be dubbish.
Speaker 11: I think you can't say that this labor market's not
Speaker 11: in transition. If you look at the last three months
Speaker 11: of hiring, they're slowing. It's clear. And so whether hawkish
Speaker 11: or dubbish, the l l labor market is an issue
Speaker 11: on the table to consider. And I think when we
Speaker 11: look at next week, which will be jobs week, uh,
Speaker 11: we'll see a continuation of a slowing trend. And I'd
Speaker 11: like to mark that trend with something that you can
Speaker 11: see clearly in the ADP data. The slowdown isn't coming
Speaker 11: from goods. It's coming from services, and that is the
Speaker 11: turnaround in the labor market. It has been that services
Speaker 11: have held the water for the labor market. It's really
Speaker 11: the goods sector that's suffered. And with terra in play. Still,
Speaker 11: you would think it would be the goods sector that
Speaker 11: is bringing down the momentum.
Speaker 7: It's not.
Speaker 11: It's services, which points to a whole different case study
Speaker 11: on what's really going on in the US economy. So
Speaker 11: talk us through what that case study is in terms
Speaker 11: of are we just seeing the cycle shift from goods
Speaker 11: to services, but goods goods hiring will pick up significantly,
Speaker 11: or does it speak to a broader.
Speaker 7: Type of trend.
Speaker 11: You know, there's so many megatrons right now, and I
Speaker 11: like to look at the first six months of twenty
Speaker 11: twenty five and compare it to the first six months
Speaker 11: of twenty nineteen before the pandemic. This was actually inspired
Speaker 11: by something Johnathan said about getting a pay raise, because
Speaker 11: if you look, I thought it was a great question.
Speaker 11: I wasn't satisfied with my answer, so I went to
Speaker 11: the data, and it turns out that there hasn't been
Speaker 11: an increase in new higher average pay and over a
Speaker 11: year eighteen dollars it's been and that's because the supply
Speaker 11: and demand dynamics have held firm. It's a really bound
Speaker 11: labor market. I think it breaks because we're seeing lower supply.
Speaker 11: The labor force participation rate now is lower than it was.
Speaker 7: Six years ago.
Speaker 11: There are fewer people working and looking for work, and
Speaker 11: that's what's going to keep pay a little bit higher
Speaker 11: or a little bit more stable for new hires than
Speaker 11: it was six years ago.
Speaker 1: So this rice is a really good, interesting question. Even
Speaker 1: if we get numbers that look pretty good on the
Speaker 1: jobless front, not that many jobless claims on the job
Speaker 1: creation front, more than some people would expect, is there
Speaker 1: anything about this labor market that's inflationary with wages increasing.
Speaker 11: Well, this is a very deep labor market. We talked
Speaker 11: about whether it's stock solid. I think of it as deep.
Speaker 11: Still waters run deep, and what you're seeing is that, yes,
Speaker 11: if you look at job stayers and job switchers, which
Speaker 11: we look at all the time at ADP.
Speaker 7: Pay growth is elevated.
Speaker 11: But when you look at those new hires they're pretty stagnant.
Speaker 11: And I also look at the job openings by the
Speaker 11: US government, which shows five hundred thousand more jobs now
Speaker 11: than and there were six years ago. But the hiring rate,
Speaker 11: the rate at which employers are hiring is lower three
Speaker 11: point four in May compared to May twenty nineteen three
Speaker 11: point eight. There is less urgency to fill those positions,
Speaker 11: and that's what's leading to this no higher, no fire
Speaker 11: stasis in the jobs market. I think it breaks because
Speaker 11: of labor supply issues, not necessarily labor demand issues.
Speaker 8: Governor Waller was sitting in your seat last week and
Speaker 8: it seemed to really weigh on him. The unemployment rate
Speaker 8: on recent college grads seven percent.
Speaker 7: What's going on? Why are they not able to get
Speaker 7: a job?
Speaker 11: Well, I think it bends back to the data we
Speaker 11: just saw continuing claims. It's harder to get a job
Speaker 11: in this labor market where supply and demand are in balance,
Speaker 11: and for young people coming out into the market, this
Speaker 11: is not their older brothers or sister's labor market in
Speaker 11: twenty twenty two. They were snatched right up. They have
Speaker 11: that expectation. Their older sister told them that they were
Speaker 11: snatched right up, and that was the ex expectation. It's
Speaker 11: not that labor market anymore. To a labor market that
Speaker 11: requires patients in networking, it's gen z. It's going to
Speaker 11: take a little bit longer. And where these college grads
Speaker 11: are coming out is what exactly is slowing Professional businesses.
Speaker 11: Services are slowing down, finance is slowing down. If they
Speaker 11: were coming out in construction, I think they would see
Speaker 11: that kind of snatch up in the labor market, but
Speaker 11: they're not seeing it now.
Speaker 3: Nyla.
Speaker 2: It's great to see you. Thanks for writing it down.
Speaker 2: Appreciate it. Nia Riches and there of ADP. This is
Speaker 2: the Bloomberg Surveillance Podcast, bringing you the best in markets, economics, angiopolitics.
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