1 00:00:02,440 --> 00:00:06,800 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:11,680 --> 00:00:15,480 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,720 Speaker 2: with Lisa Bromwitz and Amrie Hortern. Join us each day 4 00:00:18,760 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,440 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,960 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,760 --> 00:00:31,319 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,960 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:37,159 Speaker 2: terminal and the Bloomberg Business app. Buzy joins us now 10 00:00:37,159 --> 00:00:39,720 Speaker 2: for more. Lizzy, Welcome to the program. Do you think 11 00:00:40,040 --> 00:00:42,959 Speaker 2: this economy is reaccelerating and do you think we're very 12 00:00:42,960 --> 00:00:45,040 Speaker 2: close to this FED skip and a meeting. 13 00:00:46,000 --> 00:00:48,839 Speaker 3: Well, I do think that yesterday's number showing this ongoing 14 00:00:48,880 --> 00:00:52,919 Speaker 3: resilience and strength of the consumer reinforces the notion that 15 00:00:52,960 --> 00:00:55,880 Speaker 3: we are on very solid footing. And when we look 16 00:00:55,880 --> 00:00:57,880 Speaker 3: at what the retail sales numbers are likely to do 17 00:00:57,960 --> 00:01:01,440 Speaker 3: to three third quarter growth would be an acceleration above 18 00:01:01,520 --> 00:01:04,320 Speaker 3: three percent from what we saw even in the second quarter. 19 00:01:04,720 --> 00:01:08,120 Speaker 3: So this does, I think, do two things. First, it 20 00:01:08,200 --> 00:01:11,959 Speaker 3: calls into question the fed's decision to make that outsized 21 00:01:12,040 --> 00:01:15,240 Speaker 3: rate cut in September, that fifty basis point production, but 22 00:01:15,319 --> 00:01:18,039 Speaker 3: it also now calls into question the need for additional 23 00:01:18,120 --> 00:01:20,400 Speaker 3: rate cuts, at least in the near term as we 24 00:01:20,400 --> 00:01:23,560 Speaker 3: look out to that November policy decision. I do think 25 00:01:23,640 --> 00:01:27,280 Speaker 3: any further indications, as I said, with a few data 26 00:01:27,280 --> 00:01:31,000 Speaker 3: points between now and then, any further indications of ongoing strength, 27 00:01:31,080 --> 00:01:34,319 Speaker 3: further strength in the labor market on the consumer, a 28 00:01:34,400 --> 00:01:38,200 Speaker 3: reacceleration and inflation does give the FED and out to 29 00:01:38,360 --> 00:01:40,600 Speaker 3: potentially bypass that November meeting. 30 00:01:40,840 --> 00:01:43,679 Speaker 2: So lindsay, as you know, that's talking about removing restriction, 31 00:01:44,000 --> 00:01:46,679 Speaker 2: not providing accommodation. And you can tell me if that's 32 00:01:46,720 --> 00:01:49,000 Speaker 2: a distinction without a difference or not in just a moment. 33 00:01:49,200 --> 00:01:51,960 Speaker 2: But ultimately, when they say recalibration, it feels like they 34 00:01:52,000 --> 00:01:55,200 Speaker 2: mean autopilot on the way down to neutral. Is that 35 00:01:55,240 --> 00:01:56,440 Speaker 2: the wrong way of thinking about this? 36 00:01:57,120 --> 00:02:00,240 Speaker 3: Well, I do think there's a very important distinction, and unfortunately, 37 00:02:00,280 --> 00:02:02,200 Speaker 3: I think the FED sent the wrong message with a 38 00:02:02,240 --> 00:02:05,520 Speaker 3: fifty basis point cut. It was an inappropriate message to 39 00:02:05,560 --> 00:02:07,919 Speaker 3: the market to suggest that they were in a rush 40 00:02:08,240 --> 00:02:10,800 Speaker 3: to not only get back to neutral, but potentially below 41 00:02:10,880 --> 00:02:14,400 Speaker 3: to provide support to an ailing economy, as opposed to 42 00:02:14,480 --> 00:02:17,600 Speaker 3: a softer twenty five basis point cut, which would have 43 00:02:17,639 --> 00:02:20,720 Speaker 3: indicated that the Fed is simply removing policy, firming at 44 00:02:20,760 --> 00:02:24,200 Speaker 3: a slow and tempered pace back towards neutral as the 45 00:02:24,280 --> 00:02:27,560 Speaker 3: data neutralize. So even if the Fed intended the latter, 46 00:02:27,760 --> 00:02:32,440 Speaker 3: the message was muddled with that outsized rate reduction of 47 00:02:32,440 --> 00:02:34,720 Speaker 3: fifty basis points, And now the Fed is caught in 48 00:02:34,760 --> 00:02:37,800 Speaker 3: a position where they're trying to backpeddal and not only 49 00:02:38,400 --> 00:02:42,520 Speaker 3: recalibrate market expectations, but now determine what the appropriate next 50 00:02:42,520 --> 00:02:46,400 Speaker 3: step will be after that outsized and that outsized cuts. 51 00:02:46,560 --> 00:02:48,400 Speaker 1: That's said Lindsay, a lot of people are looking at 52 00:02:48,400 --> 00:02:52,080 Speaker 1: the growth and potential reacceleration of the US economy and 53 00:02:52,160 --> 00:02:55,080 Speaker 1: not seeing it get accompanied with inflation really picking up 54 00:02:55,080 --> 00:02:56,880 Speaker 1: in a material way. We're not seeing that in break 55 00:02:56,919 --> 00:02:58,760 Speaker 1: even rates, We're not seeing that in a whole host 56 00:02:58,840 --> 00:03:02,600 Speaker 1: of other metrics. At what point do you actually see 57 00:03:02,720 --> 00:03:07,080 Speaker 1: inflation reaccelerating in tandem with growth, given the fact that 58 00:03:07,120 --> 00:03:12,320 Speaker 1: there are some reasons for inflation to keep declining, Well. 59 00:03:12,120 --> 00:03:15,960 Speaker 3: We are seeing some underlying metrics reaccelerate push further away 60 00:03:15,960 --> 00:03:19,360 Speaker 3: from the fed's two percent target. The core PCEE, for example, 61 00:03:19,480 --> 00:03:23,200 Speaker 3: tick tire. The super co also tick Tire. But you're right, 62 00:03:23,240 --> 00:03:25,560 Speaker 3: one tenth of a percentage point is not necessarily an 63 00:03:25,600 --> 00:03:30,320 Speaker 3: indication of a massive reacceleration of inflation. That being said, 64 00:03:30,680 --> 00:03:33,000 Speaker 3: we're not at two percent yet, so I think the 65 00:03:33,000 --> 00:03:35,680 Speaker 3: onus is still on the FED, not necessarily to avoid 66 00:03:35,680 --> 00:03:40,920 Speaker 3: a reacceleration, but to foster further improvement in inflation. The 67 00:03:40,920 --> 00:03:44,320 Speaker 3: Fed's job is not yet done, and a resurgence back 68 00:03:44,360 --> 00:03:47,520 Speaker 3: to a reversion seis way back to two percent is 69 00:03:47,560 --> 00:03:51,400 Speaker 3: not a foregone conclusion. So the FED, motivated by this 70 00:03:51,560 --> 00:03:55,000 Speaker 3: fear of impending weakness in the labor market, shifted their 71 00:03:55,040 --> 00:03:58,280 Speaker 3: focus away from inflation. Now we see that the labor 72 00:03:58,320 --> 00:04:02,720 Speaker 3: market's strength appears to be well founded, and the focus 73 00:04:02,760 --> 00:04:07,000 Speaker 3: of the FED should go back to getting inflation under control. Remember, 74 00:04:07,080 --> 00:04:11,360 Speaker 3: a soft landing is not just about maintaining positive growth, 75 00:04:11,720 --> 00:04:15,400 Speaker 3: but reinstating price stability at two percent, and we still 76 00:04:15,400 --> 00:04:17,760 Speaker 3: have quite a ways to go before we can achieve 77 00:04:17,760 --> 00:04:18,160 Speaker 3: that goal. 78 00:04:18,320 --> 00:04:21,159 Speaker 1: This is so interesting, Lindsay because essentially making the argument 79 00:04:21,200 --> 00:04:23,200 Speaker 1: that maybe the fedge take more of a page from 80 00:04:23,200 --> 00:04:25,919 Speaker 1: the ECB and having more of a single mandate in 81 00:04:26,000 --> 00:04:30,320 Speaker 1: terms of inflation, rather than focus so much on avoiding 82 00:04:30,360 --> 00:04:33,000 Speaker 1: some sort of weakening in the labor market. I just 83 00:04:33,080 --> 00:04:37,239 Speaker 1: wonder how often we've seen this. Whereas basically experiments. 84 00:04:36,880 --> 00:04:38,880 Speaker 4: On either side of the Atlantic. 85 00:04:38,560 --> 00:04:41,839 Speaker 1: We're one the ECB pledges to just focus purely on 86 00:04:41,880 --> 00:04:44,800 Speaker 1: bringing inflation down even in the face of economic weakness, 87 00:04:45,400 --> 00:04:49,679 Speaker 1: and the Federal Reserve to avoid any further weakness says, 88 00:04:49,720 --> 00:04:52,719 Speaker 1: inflation's coming down, that's good enough for us, We're cutting rates. 89 00:04:53,960 --> 00:04:56,360 Speaker 3: Well, I do think that the FED decided to move 90 00:04:56,400 --> 00:04:59,760 Speaker 3: its focus away from inflation prematurely. Remember, when we look 91 00:04:59,760 --> 00:05:02,000 Speaker 3: at it historical cycles, the Fed has been forced to 92 00:05:02,160 --> 00:05:06,800 Speaker 3: raise the Fed Funds rate above historically significantly above that 93 00:05:06,880 --> 00:05:10,240 Speaker 3: peak and inflation. So at five point six percent, five 94 00:05:10,279 --> 00:05:12,280 Speaker 3: and a half on the Fed funds rate was really 95 00:05:12,320 --> 00:05:15,320 Speaker 3: the bare minimum that we should have expected in terms 96 00:05:15,320 --> 00:05:18,599 Speaker 3: of this rate hike cycle. But given the massive amount 97 00:05:18,680 --> 00:05:22,680 Speaker 3: of liquidity and stimulus and cash pumped into the market, 98 00:05:22,880 --> 00:05:25,480 Speaker 3: it was really unreasonable to expect that the bare minim 99 00:05:25,839 --> 00:05:30,039 Speaker 3: would be the appropriate amount of policy restriction to reinstate 100 00:05:30,120 --> 00:05:32,920 Speaker 3: price stability. So I do think that the Fed stops 101 00:05:32,920 --> 00:05:35,440 Speaker 3: short of where we need it to be and now 102 00:05:35,480 --> 00:05:38,360 Speaker 3: to add fuel to the fire. They've reverted to this 103 00:05:38,520 --> 00:05:44,640 Speaker 3: policy pivot prematurely before really seeing that underlying disinflationary trend 104 00:05:44,800 --> 00:05:47,400 Speaker 3: take hold, and that leaves us in a very uncomfortable 105 00:05:47,400 --> 00:05:51,080 Speaker 3: position as growth it remained solid for now. If we 106 00:05:51,120 --> 00:05:53,919 Speaker 3: do start to lose momentum looking out to twenty five 107 00:05:54,040 --> 00:05:57,839 Speaker 3: twenty six, and the FED continues to tolerate above target inflation, 108 00:05:58,360 --> 00:06:00,920 Speaker 3: the biggest risk for the US AICO ONNY longer term 109 00:06:00,960 --> 00:06:04,240 Speaker 3: then is not a downturn like we're seeing necessarily in 110 00:06:04,560 --> 00:06:07,840 Speaker 3: our developed counterparts abroad, but a period of stagflation. 111 00:06:08,279 --> 00:06:10,839 Speaker 5: So lindsay, though, is there a chance if we continue 112 00:06:10,839 --> 00:06:14,080 Speaker 5: to grow and we do see inflation come down, continue 113 00:06:14,120 --> 00:06:15,800 Speaker 5: to come down, even though you do have concerns about 114 00:06:15,800 --> 00:06:18,479 Speaker 5: maybe a reacceleration, is there a chance we could just 115 00:06:18,600 --> 00:06:20,200 Speaker 5: grow bigger and not hotter. 116 00:06:22,200 --> 00:06:25,080 Speaker 3: Absolutely, And I think that's the utopic scenario that the 117 00:06:25,080 --> 00:06:27,400 Speaker 3: FET is looking for, that we continue to see this 118 00:06:27,520 --> 00:06:31,679 Speaker 3: acceleration and underlying growth resilience in the consumer, positive spending, 119 00:06:31,839 --> 00:06:34,760 Speaker 3: and positive acceleration in the labor market at the same 120 00:06:34,800 --> 00:06:37,880 Speaker 3: time that price pressures begin to wane back to two percent. 121 00:06:38,279 --> 00:06:41,200 Speaker 3: But again, that's a big gamble a big bet when 122 00:06:41,240 --> 00:06:45,680 Speaker 3: we haven't seen that established downward trend in price pressures. 123 00:06:45,720 --> 00:06:49,520 Speaker 3: We're still seeing very sticky components, sideways movement in the 124 00:06:49,520 --> 00:06:52,120 Speaker 3: core for one month that as I mentioned, a reacceleration 125 00:06:52,240 --> 00:06:55,520 Speaker 3: more recently, and we're also seeing some of these upside 126 00:06:55,640 --> 00:06:57,360 Speaker 3: risks to inflation that are still. 127 00:06:57,160 --> 00:06:57,919 Speaker 4: Hanging out there. 128 00:06:58,160 --> 00:07:02,080 Speaker 3: International factors that could disrupt commodity markets and lead to 129 00:07:02,120 --> 00:07:06,520 Speaker 3: higher prices, energy prices, fertilizer prices, factors that are outside 130 00:07:06,520 --> 00:07:09,840 Speaker 3: of the Fed's purview. Not to mention, a very contentious 131 00:07:10,040 --> 00:07:13,000 Speaker 3: election coming up in November, and regardless of which side 132 00:07:13,000 --> 00:07:15,800 Speaker 3: of the aisle we find ourselves on, either candidate is 133 00:07:15,840 --> 00:07:20,280 Speaker 3: proposing expansionary fiscal policy, which will continue to complicate the 134 00:07:20,320 --> 00:07:23,320 Speaker 3: Fed's ability to get back to that two percent level 135 00:07:23,320 --> 00:07:24,320 Speaker 3: of inflation. 136 00:07:24,080 --> 00:07:26,560 Speaker 2: And possibly contribute to high yields. Lindsay, We've got to 137 00:07:26,600 --> 00:07:28,920 Speaker 2: leave it there, Thank you, Lindsay, PX the of State. 138 00:07:29,000 --> 00:07:29,200 Speaker 6: Four. 139 00:07:38,720 --> 00:07:39,960 Speaker 4: Let's talk about foreign exchange. 140 00:07:39,960 --> 00:07:42,400 Speaker 2: The US dollar heading towards a third week of gains 141 00:07:42,400 --> 00:07:44,800 Speaker 2: after getting a boost from stronger than expected US retail 142 00:07:44,880 --> 00:07:47,720 Speaker 2: sales and an ECP rate cut. Kit Juice of solt 143 00:07:47,720 --> 00:07:51,160 Speaker 2: Gen writing, the market has been fed a steady diet 144 00:07:51,320 --> 00:07:53,920 Speaker 2: of stronger than expected US data are of late more 145 00:07:53,960 --> 00:07:56,239 Speaker 2: of the same will keep it bid, but perhaps mostly 146 00:07:56,280 --> 00:07:59,400 Speaker 2: against the China sensitive currencies. We're concerned about US tariffs 147 00:07:59,520 --> 00:08:01,520 Speaker 2: and dissip appointment at fiscal easing. 148 00:08:01,760 --> 00:08:02,559 Speaker 4: Aren't going away. 149 00:08:02,760 --> 00:08:03,480 Speaker 2: Kit joined US. 150 00:08:03,440 --> 00:08:03,960 Speaker 4: Now for more. 151 00:08:04,040 --> 00:08:06,000 Speaker 2: Kit, welcome to the program. We caught it with Jeff 152 00:08:06,080 --> 00:08:08,280 Speaker 2: you someone you know well a little bit earlier this morning. 153 00:08:08,600 --> 00:08:11,920 Speaker 2: He's looking for parity next year. Can you get on 154 00:08:11,960 --> 00:08:12,440 Speaker 2: board with that? 155 00:08:14,160 --> 00:08:16,239 Speaker 7: I had this sense that we would get somewhere closer 156 00:08:16,320 --> 00:08:18,440 Speaker 7: to one twenty, not that far on this bounce on 157 00:08:18,480 --> 00:08:21,800 Speaker 7: a US slowdown followed by possibly. 158 00:08:21,360 --> 00:08:22,240 Speaker 4: A move to parity. 159 00:08:22,320 --> 00:08:24,960 Speaker 7: Then, because the long run story is difficult. That the 160 00:08:25,120 --> 00:08:28,920 Speaker 7: challenge right now is that the market has bought so 161 00:08:29,120 --> 00:08:30,760 Speaker 7: many dollars. And when I mean the market and has 162 00:08:30,760 --> 00:08:33,800 Speaker 7: been the fire exchange market, I mean the capital inflows 163 00:08:33,800 --> 00:08:37,880 Speaker 7: from everybody sucked in by US yield by US tech talks, 164 00:08:37,920 --> 00:08:42,440 Speaker 7: by US exceptionalism, US outperformance overall over the last couple 165 00:08:42,480 --> 00:08:45,640 Speaker 7: of years. So you know, the world savings have gone 166 00:08:45,679 --> 00:08:49,320 Speaker 7: to the United States. And I mean I certainly thought 167 00:08:49,320 --> 00:08:52,040 Speaker 7: two months ago that once you started seeing people forced 168 00:08:52,040 --> 00:08:55,680 Speaker 7: to hedge those or reduce their risk that that would 169 00:08:55,720 --> 00:08:59,080 Speaker 7: give the euroor bounce or it wouldn't be anybody's favorite currency, 170 00:08:59,559 --> 00:09:03,920 Speaker 7: but it is the world's biggest net investor abroad, so 171 00:09:04,360 --> 00:09:06,720 Speaker 7: it makes a difference there, and that then the problem 172 00:09:06,760 --> 00:09:08,880 Speaker 7: would come back in two. Three is down the road. 173 00:09:09,080 --> 00:09:12,040 Speaker 7: I'm now utterly confused. Jeff much cleverer than me, But 174 00:09:12,080 --> 00:09:14,719 Speaker 7: I don't think we're going to get to parity on 175 00:09:14,760 --> 00:09:17,480 Speaker 7: the way down now. I think we have to clean 176 00:09:17,520 --> 00:09:20,400 Speaker 7: out some of the positioning at some point and get 177 00:09:20,400 --> 00:09:24,840 Speaker 7: a more meaningful dollar sell off before the US economic 178 00:09:24,880 --> 00:09:28,000 Speaker 7: outperformance can drive us lower. So in my mind it's 179 00:09:28,000 --> 00:09:30,160 Speaker 7: still a couple of years away. What we are now 180 00:09:30,360 --> 00:09:33,880 Speaker 7: is I think the market completely wrong footed by the 181 00:09:33,960 --> 00:09:36,320 Speaker 7: US economy. I mean, along with the Fed and everybody else. 182 00:09:36,559 --> 00:09:38,560 Speaker 2: Sure, so, Kit, let's talk about the difference between the 183 00:09:38,559 --> 00:09:41,040 Speaker 2: Federal Reserve and the ECP. The ECB has also been 184 00:09:41,080 --> 00:09:44,200 Speaker 2: surprised the other way. The ECB has been talking about 185 00:09:44,320 --> 00:09:47,080 Speaker 2: data dependence meeting by meeting. Do you get the sense 186 00:09:47,120 --> 00:09:49,520 Speaker 2: of markets just in the driving seat making the decisions 187 00:09:49,520 --> 00:09:51,199 Speaker 2: now for them? 188 00:09:51,760 --> 00:09:54,960 Speaker 7: The market certainly bullies them to some degree in the 189 00:09:55,040 --> 00:09:56,920 Speaker 7: sense that you know, you can kind of say you know, 190 00:09:56,960 --> 00:09:59,559 Speaker 7: did the Fed go fifty because the market was talking fifty, 191 00:09:59,640 --> 00:10:02,680 Speaker 7: or did the go fifty because because they were really 192 00:10:02,720 --> 00:10:06,120 Speaker 7: shocked by the data at the beginning of August. You know, 193 00:10:06,200 --> 00:10:08,120 Speaker 7: it's a bit of both. In one hopes it's more 194 00:10:08,160 --> 00:10:10,959 Speaker 7: the data that are doing it, but they might now say, yeah, 195 00:10:11,120 --> 00:10:13,240 Speaker 7: if we'd seen the data since then, we wouldn't have acted. 196 00:10:13,760 --> 00:10:18,040 Speaker 7: The Europe is a bit the same thing, but they've got, 197 00:10:18,080 --> 00:10:20,920 Speaker 7: you know, the ECB's big differences. It's only focusing on 198 00:10:21,000 --> 00:10:24,000 Speaker 7: inflation at least in principle, and to that extent, what 199 00:10:24,040 --> 00:10:27,040 Speaker 7: it was getting what it's now had is a surprising 200 00:10:27,120 --> 00:10:30,199 Speaker 7: slowdown inflation, but by its standards, and so it doesn't 201 00:10:30,200 --> 00:10:34,000 Speaker 7: really have an excuse not to get on with with easy. 202 00:10:34,160 --> 00:10:35,640 Speaker 4: We've had one month of that. 203 00:10:35,800 --> 00:10:37,439 Speaker 7: But you'd have to say we're going to get more 204 00:10:37,480 --> 00:10:40,760 Speaker 7: rate cuts down the road because I suspect inflation will 205 00:10:40,760 --> 00:10:43,200 Speaker 7: continue to fall because there is many growth and the 206 00:10:43,200 --> 00:10:47,360 Speaker 7: global back crops change. But they are all you know, yes, 207 00:10:47,440 --> 00:10:49,839 Speaker 7: the market is pushing because that's what the market does, 208 00:10:50,720 --> 00:10:53,480 Speaker 7: and the central banks are finding that when they get 209 00:10:53,559 --> 00:10:56,440 Speaker 7: data that support what the market does, that they can't 210 00:10:56,440 --> 00:10:58,160 Speaker 7: really resist the temptation of going with it. 211 00:10:58,280 --> 00:11:00,520 Speaker 1: As you said, very diplomatically, Kit, we haven't really learn 212 00:11:00,600 --> 00:11:02,880 Speaker 1: that much from ACB news conferences, and whether it's being 213 00:11:02,920 --> 00:11:05,080 Speaker 1: bullied by the market or the data, either way, they've 214 00:11:05,080 --> 00:11:07,000 Speaker 1: been sort of flipping and flopping in terms of their 215 00:11:07,040 --> 00:11:09,679 Speaker 1: overall message. That said, there seems like there was a shift. 216 00:11:09,720 --> 00:11:11,840 Speaker 1: And yesterday what I thought was interesting was it not 217 00:11:11,880 --> 00:11:14,480 Speaker 1: only was Christine Leguard talking about potential weakness, but she 218 00:11:14,520 --> 00:11:17,319 Speaker 1: made it political. She said that the potential of tariffs 219 00:11:17,360 --> 00:11:21,680 Speaker 1: in the United States actually increase the risk of downside 220 00:11:21,679 --> 00:11:26,120 Speaker 1: surprises to the area's struggling economy. How much do you 221 00:11:26,120 --> 00:11:29,600 Speaker 1: see the ECB cutting rates aggressively to get ahead of 222 00:11:29,640 --> 00:11:30,960 Speaker 1: whatever might be coming down the pike. 223 00:11:33,160 --> 00:11:36,319 Speaker 7: It's hard to imagine the ECB cutting rates aggressively. It's 224 00:11:36,800 --> 00:11:39,920 Speaker 7: not in that DNA to do anything other than react 225 00:11:39,960 --> 00:11:42,960 Speaker 7: to inflation. It's still, you know, the job is, the 226 00:11:43,000 --> 00:11:45,839 Speaker 7: job is to hit the inflation target. But I do 227 00:11:45,880 --> 00:11:48,960 Speaker 7: think they can pick up the pace from possibly, let's 228 00:11:48,960 --> 00:11:50,559 Speaker 7: put it this way, from what a lot of economists 229 00:11:50,600 --> 00:11:53,240 Speaker 7: that expected, while not quite keeping up with the pace, 230 00:11:53,360 --> 00:11:55,000 Speaker 7: that's priced end of the front end of the curve. 231 00:11:55,600 --> 00:11:59,960 Speaker 7: Because they are they are, It wouldn't take much more soli. 232 00:12:00,120 --> 00:12:05,040 Speaker 7: Doesn't they expect inflation data to push them into feeling that, yeah, look, 233 00:12:05,240 --> 00:12:07,160 Speaker 7: we have no reason not to get a move on. 234 00:12:07,600 --> 00:12:09,719 Speaker 1: At the same time, Kit on the flip side, there 235 00:12:09,720 --> 00:12:12,080 Speaker 1: seems to be this assumption that if the US puts 236 00:12:12,120 --> 00:12:15,200 Speaker 1: up its walls and does increase terraff substantially, that will 237 00:12:15,280 --> 00:12:18,440 Speaker 1: end up with a stronger dollar and a weaker everyone else. 238 00:12:18,640 --> 00:12:20,880 Speaker 1: And especially giving your opinion about how much of an 239 00:12:20,920 --> 00:12:23,079 Speaker 1: overweight there is in dollar assets, it. 240 00:12:23,000 --> 00:12:23,959 Speaker 4: Seems like you disagree. 241 00:12:24,000 --> 00:12:26,000 Speaker 1: Do you think that people are underprising the worst the 242 00:12:26,080 --> 00:12:28,120 Speaker 1: US economy in that type of scenario. 243 00:12:29,080 --> 00:12:31,200 Speaker 7: I think people are looking at the US economy in 244 00:12:31,280 --> 00:12:35,080 Speaker 7: all scenarios in a state of saying, we know the 245 00:12:35,200 --> 00:12:39,000 Speaker 7: US economy's done phenomenally well. We understand part of it 246 00:12:39,080 --> 00:12:42,280 Speaker 7: was the size of the fiscal easing that we saw 247 00:12:42,920 --> 00:12:45,640 Speaker 7: during the pandemic and immediately as the pandemic was ending. 248 00:12:46,160 --> 00:12:49,000 Speaker 7: We don't understand why the tightening that came after that 249 00:12:49,080 --> 00:12:52,040 Speaker 7: didn't slow the economy more. We don't understand how the 250 00:12:52,080 --> 00:12:55,120 Speaker 7: economy is reaccelerated in the last six weeks. Hell's bells, 251 00:12:55,440 --> 00:12:59,439 Speaker 7: let's stay with US assets because all the good stuff 252 00:12:59,480 --> 00:13:02,280 Speaker 7: comes out of this place. And I think that's there's 253 00:13:02,320 --> 00:13:04,680 Speaker 7: there's that kind of there's that kind of reluctance to 254 00:13:04,679 --> 00:13:06,120 Speaker 7: turn out and say, well where else can I where 255 00:13:06,120 --> 00:13:06,600 Speaker 7: else can I. 256 00:13:06,559 --> 00:13:07,200 Speaker 4: Put my money? 257 00:13:07,679 --> 00:13:11,360 Speaker 7: And you know, I mean the Japanese were selling were 258 00:13:11,400 --> 00:13:15,000 Speaker 7: selling US debt, you know, like crazy in in you know, 259 00:13:15,080 --> 00:13:17,280 Speaker 7: back in July, as they were trying to get out 260 00:13:17,280 --> 00:13:20,360 Speaker 7: of some of their trades. They're right back in there. 261 00:13:20,400 --> 00:13:24,160 Speaker 7: They're buying with Gusto again and probably US equities and 262 00:13:24,440 --> 00:13:28,000 Speaker 7: so on. So you know, there's no I think, I 263 00:13:28,000 --> 00:13:31,120 Speaker 7: think the market, you know, investors are as much caught 264 00:13:31,160 --> 00:13:35,320 Speaker 7: out by this unique economic cycle as economists or or 265 00:13:35,360 --> 00:13:38,439 Speaker 7: central bankers or all the rest of US. And and 266 00:13:38,720 --> 00:13:43,200 Speaker 7: the default is US is a Morazonian economy. It's growing faster, 267 00:13:43,360 --> 00:13:45,240 Speaker 7: There more investment opportunities, It's. 268 00:13:45,080 --> 00:13:46,160 Speaker 4: Got high yield. 269 00:13:47,200 --> 00:13:49,040 Speaker 7: You know, if I'm there, why should I Why should 270 00:13:49,080 --> 00:13:52,080 Speaker 7: I cut back pair hedge my currency too much? I 271 00:13:52,120 --> 00:13:54,880 Speaker 7: know I'm going to end up going back in later anyway, Kip. 272 00:13:54,880 --> 00:13:57,280 Speaker 5: Ahead of the US election, more people are talking about parody, 273 00:13:57,320 --> 00:13:59,560 Speaker 5: even though I know you think it's a few years away, 274 00:14:00,120 --> 00:14:02,679 Speaker 5: but you do say there is one trade that is 275 00:14:02,760 --> 00:14:06,720 Speaker 5: definitely perceived to be safe pre election, meaning regardless of 276 00:14:06,720 --> 00:14:07,400 Speaker 5: either candidate. 277 00:14:07,480 --> 00:14:08,200 Speaker 4: What is it. 278 00:14:09,720 --> 00:14:11,560 Speaker 7: Safe trades briers? You might have to tell me now, 279 00:14:11,600 --> 00:14:13,880 Speaker 7: I'm feeling nervous this morning that Nunny said. No, I 280 00:14:13,880 --> 00:14:16,760 Speaker 7: think people see the people see the safe trades as 281 00:14:16,760 --> 00:14:19,680 Speaker 7: being still to be short the Euro against various things, 282 00:14:20,120 --> 00:14:23,120 Speaker 7: and a lot of people see the political trade to 283 00:14:23,120 --> 00:14:25,720 Speaker 7: be short the UN against everything short. 284 00:14:25,440 --> 00:14:28,880 Speaker 5: To you on because either Harris or Trump is going 285 00:14:28,920 --> 00:14:29,880 Speaker 5: to be tough on China. 286 00:14:30,840 --> 00:14:33,120 Speaker 7: Yeah, I mean, I think the piece in markets thinking 287 00:14:33,160 --> 00:14:36,200 Speaker 7: about about election trades at the moment is that you 288 00:14:36,320 --> 00:14:40,800 Speaker 7: get bigger moves on a Trump event. So Trump is 289 00:14:41,640 --> 00:14:45,120 Speaker 7: he's more outspoken, and he's got clear he's got clear 290 00:14:45,120 --> 00:14:48,080 Speaker 7: intentions on things like Tarris. So if you think the 291 00:14:48,080 --> 00:14:49,760 Speaker 7: odds of them are fifty to fifty, for the sake 292 00:14:49,800 --> 00:14:52,640 Speaker 7: of argument, you get bigger moves on Trump. You don't 293 00:14:52,640 --> 00:14:55,080 Speaker 7: get moves the other way on Harris because she's less 294 00:14:55,160 --> 00:14:57,680 Speaker 7: likely to get a clean sweep apart from anything else. 295 00:14:57,920 --> 00:15:00,960 Speaker 7: So the market ends up concluding I'll have my I'll 296 00:15:01,000 --> 00:15:04,360 Speaker 7: have my Trump tar off trade now because I'm not 297 00:15:04,400 --> 00:15:07,200 Speaker 7: going to get hurt for heaven, and rightly or wrongly, 298 00:15:07,280 --> 00:15:09,440 Speaker 7: that that is a very popular track Kit. 299 00:15:09,480 --> 00:15:11,880 Speaker 2: I appreciate the update from you, sir. We're all confused 300 00:15:12,000 --> 00:15:24,160 Speaker 2: Kit jokes is such. Appreciate it, Thank you, sir. At 301 00:15:24,160 --> 00:15:27,920 Speaker 2: a Stagia Amarosai Capital writing. Some risks and unease, like 302 00:15:27,960 --> 00:15:30,840 Speaker 2: the rebounded yields and US dollar are still percolating in 303 00:15:30,880 --> 00:15:34,640 Speaker 2: the background, but given the positive economic momentum, we stay invested. 304 00:15:34,840 --> 00:15:37,000 Speaker 2: At A Stagia joins us now for more Anastagia, Good monk, 305 00:15:37,160 --> 00:15:37,640 Speaker 2: good morning. 306 00:15:37,680 --> 00:15:38,520 Speaker 4: What do you think is in the. 307 00:15:38,480 --> 00:15:41,840 Speaker 2: Driving seat Reecord expectations Ronics, Which one is it? 308 00:15:41,880 --> 00:15:43,080 Speaker 4: I think it's a little bit of both. 309 00:15:43,480 --> 00:15:45,080 Speaker 6: I mean, first of all, I think what's really truly 310 00:15:45,120 --> 00:15:47,120 Speaker 6: in the driving seat is the fact that the economy 311 00:15:47,280 --> 00:15:49,720 Speaker 6: is resilient, and that has been on full display this 312 00:15:49,800 --> 00:15:51,680 Speaker 6: week actually for the last couple of weeks. You know, 313 00:15:51,680 --> 00:15:53,760 Speaker 6: if you look at the Atlanta Fed GDP, now it's 314 00:15:53,840 --> 00:15:56,600 Speaker 6: actually tracking three point four percent. If you look at 315 00:15:56,600 --> 00:15:59,560 Speaker 6: the City Economic Surprise Index, which has been negative for 316 00:15:59,640 --> 00:16:01,920 Speaker 6: the ball of Q two and maybe even you know 317 00:16:02,000 --> 00:16:04,080 Speaker 6: start of Q three, that's actually turned positive in the 318 00:16:04,120 --> 00:16:06,440 Speaker 6: last couple of weeks. And then we've got retail sales 319 00:16:06,440 --> 00:16:10,360 Speaker 6: that you pointed out point seven percent core core print 320 00:16:10,400 --> 00:16:12,880 Speaker 6: that's really strong too, So I think that's what's truly 321 00:16:12,920 --> 00:16:15,440 Speaker 6: in the driving sea. But I also do think there's 322 00:16:15,440 --> 00:16:18,680 Speaker 6: this extension to the rate cut story, which is the 323 00:16:18,800 --> 00:16:21,560 Speaker 6: rate relief is being felled by the economy. It is 324 00:16:21,600 --> 00:16:26,120 Speaker 6: being felled by companies across corporates and consumers, and that's 325 00:16:26,160 --> 00:16:27,960 Speaker 6: starting to support the economy as well. 326 00:16:28,400 --> 00:16:31,560 Speaker 4: And then John Tie last point financials earnings. 327 00:16:31,600 --> 00:16:34,360 Speaker 6: I think that's been a really really key development in 328 00:16:34,400 --> 00:16:37,040 Speaker 6: the last week, and that's why we've seen financials breakout 329 00:16:37,080 --> 00:16:37,720 Speaker 6: to the upside. 330 00:16:37,760 --> 00:16:39,800 Speaker 2: The coast is clear for the financials. Let's talk about 331 00:16:39,800 --> 00:16:43,560 Speaker 2: tech SML says there's a problem. TYSEMC says there's no problem. 332 00:16:43,720 --> 00:16:45,640 Speaker 2: It's the coast cliff for tech gun into NIX. 333 00:16:46,720 --> 00:16:49,240 Speaker 6: Well, first of all, tech arnies have actually been revised higher, 334 00:16:49,320 --> 00:16:52,000 Speaker 6: you know, unlike the rest of the sectors that actually 335 00:16:52,080 --> 00:16:55,000 Speaker 6: have been revised lower. I do think that the setup 336 00:16:55,040 --> 00:16:58,200 Speaker 6: is constructive for technology. Look, if you look at ASML company, 337 00:16:58,400 --> 00:17:02,080 Speaker 6: that's a particular technology that goes into semiconductive manufacturing, and 338 00:17:02,160 --> 00:17:04,280 Speaker 6: you could see why there may be some delays and 339 00:17:04,320 --> 00:17:07,040 Speaker 6: capex for those. But if you look at TSMC, that 340 00:17:07,200 --> 00:17:10,760 Speaker 6: is the pulse of what is happening with semiconductive production 341 00:17:10,960 --> 00:17:12,000 Speaker 6: right here, right now. 342 00:17:12,359 --> 00:17:14,520 Speaker 4: And the couple of things that I heard from that report. 343 00:17:14,640 --> 00:17:18,040 Speaker 6: First of all is that AI demand is rock solid 344 00:17:18,119 --> 00:17:21,560 Speaker 6: and is accelerating. But John, the really really key thing 345 00:17:21,600 --> 00:17:24,960 Speaker 6: for semiconductors what's happening with non AI demand. And that's 346 00:17:24,960 --> 00:17:27,800 Speaker 6: where TSMC was also more constructive, saying that they do 347 00:17:27,960 --> 00:17:30,439 Speaker 6: expect to pick up and things like smartphone chips and 348 00:17:30,480 --> 00:17:32,639 Speaker 6: other things. So I think that sets it up nicely 349 00:17:32,720 --> 00:17:33,560 Speaker 6: for semiconductors. 350 00:17:33,800 --> 00:17:37,280 Speaker 1: So that secular changes, which is the AI trend, and 351 00:17:37,320 --> 00:17:40,320 Speaker 1: then there are the cyclical changes which we see. You 352 00:17:40,440 --> 00:17:42,760 Speaker 1: said something that I want to pick up on that 353 00:17:42,840 --> 00:17:47,639 Speaker 1: you're already seeing the rate cuts filter into increased economic activity. 354 00:17:47,960 --> 00:17:50,280 Speaker 1: How is it that so many people say the corporate 355 00:17:50,280 --> 00:17:53,600 Speaker 1: America did not feel the rate hikes, but that so 356 00:17:53,760 --> 00:17:56,440 Speaker 1: quickly the rate cuts are getting filtered into the economy. 357 00:17:56,640 --> 00:17:59,840 Speaker 6: Well, part of corporate America did feel the rate increases. 358 00:18:00,119 --> 00:18:01,960 Speaker 6: And that part is, for example, if you had a 359 00:18:02,040 --> 00:18:03,959 Speaker 6: leverage loan, if you issued a leverage loan, you were 360 00:18:04,000 --> 00:18:06,400 Speaker 6: paying much more to service at loan. If you took 361 00:18:06,400 --> 00:18:09,160 Speaker 6: on a private credit loan as well, you were paying 362 00:18:09,240 --> 00:18:12,040 Speaker 6: much more to service at debt as well, and that's where. 363 00:18:11,840 --> 00:18:12,760 Speaker 4: We see some of the resets. 364 00:18:12,760 --> 00:18:15,320 Speaker 6: And of course commercial real estate, you know, a big 365 00:18:15,359 --> 00:18:18,040 Speaker 6: portion of commercial real estate loans have been floating rate, 366 00:18:18,359 --> 00:18:20,600 Speaker 6: and there's a small fracture of the consumers have felt it. 367 00:18:20,840 --> 00:18:22,760 Speaker 4: But that's where I see the first recess. 368 00:18:22,760 --> 00:18:25,280 Speaker 6: So for example, in some of the big five banks 369 00:18:25,320 --> 00:18:29,359 Speaker 6: results that we saw, we see debt underieting really spike, 370 00:18:29,520 --> 00:18:33,360 Speaker 6: and that means companies are issuing more debt, they're refinancing 371 00:18:33,920 --> 00:18:36,520 Speaker 6: prior debt, and those dead costs are starting to reset 372 00:18:36,560 --> 00:18:39,600 Speaker 6: lower for part of corporate America. And then on the 373 00:18:39,600 --> 00:18:42,840 Speaker 6: consumer side, Lisa, you know, if you look at mortgage rates, 374 00:18:42,880 --> 00:18:45,360 Speaker 6: for example, they have pulled back obviously quite a bit 375 00:18:45,400 --> 00:18:48,080 Speaker 6: from the peaks, and we are starting to see an 376 00:18:48,160 --> 00:18:51,360 Speaker 6: uptick in refinancings and the banks are talking about that. 377 00:18:51,440 --> 00:18:53,439 Speaker 6: So those are the early indicators that I see. 378 00:18:53,560 --> 00:18:56,320 Speaker 1: For a while, in the high rate period which lasted, 379 00:18:56,480 --> 00:18:58,560 Speaker 1: it seems like a heartbeat relative to the zero rate 380 00:18:58,600 --> 00:19:00,920 Speaker 1: period that we had. For a very long time, people 381 00:19:00,920 --> 00:19:03,919 Speaker 1: felt like the bond market had precedence over stocks, that 382 00:19:04,040 --> 00:19:07,160 Speaker 1: essentially you could earn more and have less risk by 383 00:19:07,160 --> 00:19:10,680 Speaker 1: going into bonds. Is that equation increasingly shifting as we're 384 00:19:10,680 --> 00:19:14,199 Speaker 1: seeing currently in performance, but also just in terms of 385 00:19:14,240 --> 00:19:17,320 Speaker 1: if you can borrow more easily, doesn't that lift equity 386 00:19:17,400 --> 00:19:20,840 Speaker 1: valuations and increase the potential growth and sustainability? 387 00:19:20,920 --> 00:19:21,400 Speaker 4: It does? 388 00:19:21,480 --> 00:19:21,760 Speaker 7: It does? 389 00:19:21,800 --> 00:19:23,679 Speaker 6: There's so many pieces to pick up on there. You know, 390 00:19:23,720 --> 00:19:25,920 Speaker 6: first of all, now the yields have reset a little 391 00:19:25,920 --> 00:19:28,000 Speaker 6: bit higher to four percent or a little bit above that. 392 00:19:28,119 --> 00:19:30,480 Speaker 6: I do think going back into the bond trade might 393 00:19:30,520 --> 00:19:33,359 Speaker 6: be more compelling, But we're exactly into the bon trede. 394 00:19:33,359 --> 00:19:33,760 Speaker 4: Do you go? 395 00:19:34,080 --> 00:19:35,760 Speaker 6: Because if you look at high yield spreads, if you 396 00:19:35,760 --> 00:19:38,080 Speaker 6: look at investment grades spreads, they're really really tight. 397 00:19:38,160 --> 00:19:41,560 Speaker 4: So I don't know how compelling that is, especially. 398 00:19:41,040 --> 00:19:44,680 Speaker 6: If you are individual and you have to adjust for taxes. 399 00:19:44,960 --> 00:19:46,080 Speaker 4: So but on the flip. 400 00:19:45,840 --> 00:19:47,439 Speaker 6: Side, I do agree with you, and I'll kind of 401 00:19:47,440 --> 00:19:49,840 Speaker 6: extend this to private markets a little bit. The reason 402 00:19:49,880 --> 00:19:52,120 Speaker 6: why I think some of the private equity managers are 403 00:19:52,119 --> 00:19:54,840 Speaker 6: going to have strong results this quarter in the next. 404 00:19:54,640 --> 00:19:57,480 Speaker 4: Couple of quarters is because their debt that they. 405 00:19:57,440 --> 00:20:00,240 Speaker 6: May have taken out to finance some of their by 406 00:20:00,240 --> 00:20:03,399 Speaker 6: our companies that is starting to move lower. The cost 407 00:20:03,480 --> 00:20:06,480 Speaker 6: is starting to move lower, so therefore the profitability is 408 00:20:06,520 --> 00:20:10,200 Speaker 6: starting to improve, So I think that's really important. 409 00:20:10,400 --> 00:20:13,760 Speaker 2: Just how easy are financial conditions given everything you've just said, 410 00:20:14,040 --> 00:20:17,120 Speaker 2: Now in my private markets, how you spreads investment great spreads. 411 00:20:17,240 --> 00:20:19,880 Speaker 2: They are ridiculously tight, ridiculously tight. 412 00:20:20,119 --> 00:20:21,960 Speaker 4: Yeah, financial conditions are easy. 413 00:20:22,000 --> 00:20:23,560 Speaker 6: But to kind of go back to the point that 414 00:20:23,600 --> 00:20:27,919 Speaker 6: you made about restrictive policy versus easier monitory policy, I 415 00:20:27,920 --> 00:20:31,800 Speaker 6: mean we are still in restrictive monetary policy time frame. 416 00:20:31,880 --> 00:20:34,360 Speaker 6: I mean if you look at five percent nominal FED 417 00:20:34,359 --> 00:20:37,399 Speaker 6: funds rate and inflation, that's let's say somewhere around two 418 00:20:37,480 --> 00:20:40,280 Speaker 6: and a half percent, that's two hundred and fifty basis 419 00:20:40,280 --> 00:20:45,200 Speaker 6: points of restriction give or takes versus that. So as 420 00:20:45,320 --> 00:20:48,800 Speaker 6: easy as the financial market conditions are, I think the 421 00:20:48,840 --> 00:20:50,520 Speaker 6: Fed can still get easier. 422 00:20:50,560 --> 00:20:53,320 Speaker 2: So let's say they go another hundred at financial conditions 423 00:20:53,320 --> 00:20:55,359 Speaker 2: of this easy, is there a real risk of a 424 00:20:55,359 --> 00:20:57,880 Speaker 2: reacceleration in this economy? And do you think we can 425 00:20:57,880 --> 00:21:01,120 Speaker 2: achieve that without having a spike another one of inflation? 426 00:21:01,760 --> 00:21:03,120 Speaker 4: Look? I do, I do. 427 00:21:03,280 --> 00:21:06,120 Speaker 6: I do think the US economy can accelerate. And that's 428 00:21:06,119 --> 00:21:07,879 Speaker 6: what it's doing, by the way, in the third quarter. 429 00:21:08,119 --> 00:21:10,720 Speaker 6: And as you think about it, the more cores go 430 00:21:10,800 --> 00:21:14,000 Speaker 6: on the more benefits will accrue from lower rates across corporates, 431 00:21:14,040 --> 00:21:16,399 Speaker 6: real estate, and consumer. So I do think that for 432 00:21:16,400 --> 00:21:19,120 Speaker 6: twenty twenty five, we're setting ourselves south for the reacceleration. 433 00:21:19,480 --> 00:21:20,960 Speaker 4: The reason why I don't think. 434 00:21:20,840 --> 00:21:23,360 Speaker 6: This is going to cause this massive wave of inflation 435 00:21:23,440 --> 00:21:25,879 Speaker 6: that some people worry about is we don't have the 436 00:21:25,920 --> 00:21:28,520 Speaker 6: imbalances as we did coming out of the pandemic. 437 00:21:28,840 --> 00:21:32,679 Speaker 4: We don't have supply chain challenges. We don't have as 438 00:21:32,800 --> 00:21:34,200 Speaker 4: massive of a shortage of labor. 439 00:21:34,280 --> 00:21:38,040 Speaker 6: We don't have vacancies that were you know, two times 440 00:21:38,080 --> 00:21:41,160 Speaker 6: you know to vacancies per unemployed person, So we don't 441 00:21:41,200 --> 00:21:42,560 Speaker 6: have those major imbalances. 442 00:21:42,760 --> 00:21:46,880 Speaker 4: Can inflation stay stickier? Can it stay above two percent? Yeah? 443 00:21:46,920 --> 00:21:50,440 Speaker 4: I think so. But we're not talking about a search 444 00:21:50,480 --> 00:21:50,800 Speaker 4: to four. 445 00:21:51,000 --> 00:21:51,920 Speaker 1: So you're not a goldbug. 446 00:21:53,680 --> 00:21:56,480 Speaker 4: I'm not. Look, obviously gold has done quite well. 447 00:21:57,040 --> 00:21:59,120 Speaker 6: Gold has done quite well, which makes sense is real 448 00:21:59,200 --> 00:22:00,080 Speaker 6: interest rates fall. 449 00:22:00,119 --> 00:22:01,680 Speaker 4: But at the same time, look at equities. 450 00:22:01,880 --> 00:22:04,240 Speaker 6: Look at equities, Look at financials, and this has been 451 00:22:04,280 --> 00:22:07,080 Speaker 6: one of our favorite sectors, you know, to play this 452 00:22:07,160 --> 00:22:10,479 Speaker 6: pickup in cyclical activity. Look at technology, Look at by 453 00:22:10,520 --> 00:22:12,480 Speaker 6: the way, at some of the AI names. I know 454 00:22:12,560 --> 00:22:16,240 Speaker 6: I've talked to you about picking up the AI semiconductor companies, 455 00:22:16,280 --> 00:22:18,920 Speaker 6: But actually one of the interestring trades for next year 456 00:22:19,000 --> 00:22:22,040 Speaker 6: may be the rest of the MAC seven, which I 457 00:22:22,200 --> 00:22:24,800 Speaker 6: recently not liked because they're the ones that are spending 458 00:22:24,800 --> 00:22:28,560 Speaker 6: on AI capax. But if you look at the iqebex 459 00:22:28,680 --> 00:22:31,880 Speaker 6: numbers for some of the hyperscalers, they grew about forty 460 00:22:31,960 --> 00:22:34,280 Speaker 6: or fifty percent this year. They're likely to grow about 461 00:22:34,280 --> 00:22:36,840 Speaker 6: eleven percent next year. So I think the cappex spending 462 00:22:36,960 --> 00:22:40,080 Speaker 6: may be tapering off, but the monetization can actually be 463 00:22:40,119 --> 00:22:40,640 Speaker 6: picking up. 464 00:22:40,680 --> 00:22:42,360 Speaker 4: So that's why I look for opportunities. 465 00:22:42,400 --> 00:22:44,159 Speaker 5: Given what we know about the former president, do you 466 00:22:44,160 --> 00:22:46,760 Speaker 5: think he's a threat to the semiconductor AI trade? 467 00:22:47,480 --> 00:22:51,280 Speaker 6: Yes, yes, I think that is a risk to monitor 468 00:22:51,359 --> 00:22:52,120 Speaker 6: for sure. 469 00:22:52,440 --> 00:22:54,560 Speaker 5: Why is that not being priced in while everyone is, 470 00:22:54,800 --> 00:22:56,520 Speaker 5: you know, really going in on the Trump trade right 471 00:22:56,520 --> 00:22:58,520 Speaker 5: now Republican baskets out performing. 472 00:22:58,680 --> 00:23:01,000 Speaker 6: Yeah. I mean, look, you focus on this secular momentum, 473 00:23:01,080 --> 00:23:04,400 Speaker 6: which I don't think any president is ultimately going to derail. 474 00:23:04,760 --> 00:23:07,520 Speaker 6: But I do think that if we do move closer 475 00:23:07,560 --> 00:23:10,240 Speaker 6: to the possibility of a red sweep, you do have 476 00:23:10,320 --> 00:23:12,639 Speaker 6: to think long and hard about what. 477 00:23:12,520 --> 00:23:13,800 Speaker 4: That means for semiconductors. 478 00:23:14,080 --> 00:23:17,119 Speaker 6: You know, look in companies like Nvidia, for example, have 479 00:23:17,200 --> 00:23:22,320 Speaker 6: obviously already paired back some of their sales to foreign stakeholders. 480 00:23:22,359 --> 00:23:26,080 Speaker 6: But I do think that the headline risk for for you. 481 00:23:26,040 --> 00:23:28,080 Speaker 4: Know, think about the huge exposure that we. 482 00:23:28,040 --> 00:23:30,320 Speaker 6: Have in the semiconductor space from the fact that most 483 00:23:30,359 --> 00:23:33,080 Speaker 6: of the production is done in Taiwan, you know, think 484 00:23:33,080 --> 00:23:36,199 Speaker 6: about some of the other linkages to foreign countries. So 485 00:23:36,560 --> 00:23:39,760 Speaker 6: I do think it's a headline risk that should be monitored. 486 00:23:39,840 --> 00:23:42,119 Speaker 6: So I would be aware of that, I would be 487 00:23:42,200 --> 00:23:44,720 Speaker 6: quick to react to that. But in the meantime, I 488 00:23:44,720 --> 00:23:46,920 Speaker 6: think you have to focus on the trade that's there, 489 00:23:46,960 --> 00:23:47,600 Speaker 6: which is ai. 490 00:23:48,000 --> 00:23:49,680 Speaker 2: Things could change a lot in a few weeks time. 491 00:23:49,720 --> 00:23:52,280 Speaker 2: Anastas going to see it. Thank you, Anna Stagia amoso 492 00:23:52,520 --> 00:23:56,960 Speaker 2: Ev Capital. This is the Bloomberg Sevenans podcast, bringing you 493 00:23:57,200 --> 00:24:00,600 Speaker 2: the best in markets, economics, antient politics. You can watch 494 00:24:00,640 --> 00:24:03,400 Speaker 2: the show live on Bloomberg TV weekday mornings from six 495 00:24:03,440 --> 00:24:07,000 Speaker 2: am to nine am Eastern. Subscribe to the podcast on Apple, 496 00:24:07,280 --> 00:24:10,119 Speaker 2: Spotify or anywhere else you listen, and as always on 497 00:24:10,160 --> 00:24:12,640 Speaker 2: the Bloomberg Terminal and the Bloomberg Business app.