1 00:00:02,400 --> 00:00:06,760 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 00:00:15,520 --> 00:00:18,440 Speaker 2: with Lisa Bromwitz and a Marie Hortern. Join us each 4 00:00:18,520 --> 00:00:21,440 Speaker 2: day for insight from the best in markets, economics, and 5 00:00:21,480 --> 00:00:24,759 Speaker 2: geopolitics from our global headquarters in New York City. We 6 00:00:24,800 --> 00:00:27,479 Speaker 2: are live on Bloomberg Television weekday mornings from six to 7 00:00:27,560 --> 00:00:31,040 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify 8 00:00:31,240 --> 00:00:33,519 Speaker 2: or anywhere else you listen, and as always on the 9 00:00:33,520 --> 00:00:35,880 Speaker 2: Bloomberg Terminal and the Bloomberg Business app. 10 00:00:36,400 --> 00:00:39,360 Speaker 3: Socks rebounding following a rough day on Wall Street, Jim 11 00:00:39,400 --> 00:00:42,840 Speaker 3: Karen of Morgus Stanley Investment Runage Management, writing, we expect 12 00:00:42,880 --> 00:00:45,960 Speaker 3: turbulence in Q four as we gain more clarity on 13 00:00:46,000 --> 00:00:48,920 Speaker 3: what the initial conditions will be for twenty twenty six. 14 00:00:49,159 --> 00:00:52,320 Speaker 3: Jim joins us. Now, Jim, We're always supposed to see turbulence. 15 00:00:52,360 --> 00:00:54,960 Speaker 3: Why have we not seen any turbulence in the face 16 00:00:55,000 --> 00:00:58,320 Speaker 3: of so much doubt? And yet, frankly, AI companies, they'll 17 00:00:58,360 --> 00:00:59,840 Speaker 3: just keep on delivering. 18 00:01:00,480 --> 00:01:04,840 Speaker 1: Good morning and Happy Halloween. So look, I mean the markets. 19 00:01:05,160 --> 00:01:07,600 Speaker 4: I don't think the markets are experiencing the turbulence for 20 00:01:07,800 --> 00:01:09,560 Speaker 4: a lot of the things that you were just discussing 21 00:01:09,760 --> 00:01:12,919 Speaker 4: is that the big leaders the narrowness of this rally 22 00:01:12,959 --> 00:01:15,680 Speaker 4: that we've had, which is a large cap tech are 23 00:01:15,720 --> 00:01:20,319 Speaker 4: printing really strong numbers. Now, those might be just a 24 00:01:20,319 --> 00:01:22,360 Speaker 4: handful of stocks. When we look at the rest of 25 00:01:22,400 --> 00:01:25,520 Speaker 4: the stocks and the S and P five hundred, there 26 00:01:25,560 --> 00:01:27,959 Speaker 4: are some cracks, and it is reflecting some of the 27 00:01:27,959 --> 00:01:31,000 Speaker 4: weakness in the broader economy. I know we haven't gotten 28 00:01:31,000 --> 00:01:33,280 Speaker 4: any of the data yet, but we understand that things 29 00:01:33,280 --> 00:01:37,040 Speaker 4: aren't necessarily accelerating. What we have to recognize is that 30 00:01:37,080 --> 00:01:40,000 Speaker 4: the market is not the economy, and the economy. 31 00:01:39,560 --> 00:01:40,440 Speaker 1: Is not the market. 32 00:01:40,680 --> 00:01:42,960 Speaker 4: So when you think more broadly about the S and 33 00:01:43,000 --> 00:01:45,280 Speaker 4: P five hundred, say the S and P four ninety 34 00:01:45,280 --> 00:01:48,880 Speaker 4: three x the mag seven, what you're really looking at 35 00:01:49,200 --> 00:01:52,680 Speaker 4: is a broader picture also of the economy. So therefore, 36 00:01:52,840 --> 00:01:56,680 Speaker 4: if the economy is moderating at some point, then you're 37 00:01:56,880 --> 00:02:00,640 Speaker 4: likely to see those broader equities also some moderate But 38 00:02:00,880 --> 00:02:03,760 Speaker 4: the dominance of those mag seven is so strong, and 39 00:02:03,840 --> 00:02:06,720 Speaker 4: the earnings and the numbers that they're printing are so 40 00:02:07,000 --> 00:02:10,400 Speaker 4: monstrously strong, it's carrying the rest of the markets. So 41 00:02:10,440 --> 00:02:12,760 Speaker 4: that's why we're not really seeing the turbulence. It really 42 00:02:12,760 --> 00:02:14,960 Speaker 4: just depends where you look. If you look in other 43 00:02:15,120 --> 00:02:17,520 Speaker 4: broader sectors of the markets, you might see some of 44 00:02:17,520 --> 00:02:20,040 Speaker 4: that turbulence. And that's really where we think some of 45 00:02:20,080 --> 00:02:22,360 Speaker 4: the opportunity is going into twenty twenty six. 46 00:02:23,160 --> 00:02:23,960 Speaker 5: Can you build on that? 47 00:02:24,120 --> 00:02:25,520 Speaker 3: Where do you think we're going to see some sort 48 00:02:25,560 --> 00:02:28,520 Speaker 3: of rebound given the fact that some people are speculating 49 00:02:28,560 --> 00:02:31,880 Speaker 3: you can see a growing amount of this pain, given 50 00:02:31,919 --> 00:02:34,920 Speaker 3: the fact that prices are expected to continue to rise, 51 00:02:34,960 --> 00:02:37,920 Speaker 3: albeit not necessarily at the levels that we find twenty 52 00:02:38,080 --> 00:02:40,480 Speaker 3: twenty one in twenty twenty two, and there is this 53 00:02:40,600 --> 00:02:44,320 Speaker 3: feeling that this weakness in the lower income sphere is 54 00:02:44,360 --> 00:02:45,480 Speaker 3: just continuing to build. 55 00:02:46,400 --> 00:02:48,359 Speaker 1: Yeah, so we have to look at the full picture here, right. 56 00:02:48,360 --> 00:02:50,440 Speaker 4: So one of these things goes back to the tax 57 00:02:50,520 --> 00:02:53,680 Speaker 4: package that you know, one big beautiful bill that got 58 00:02:53,720 --> 00:02:57,800 Speaker 4: passed and effectively starting to think about the consumer and 59 00:02:57,840 --> 00:03:00,880 Speaker 4: what stimulus package they're going to get next year in 60 00:03:00,919 --> 00:03:04,600 Speaker 4: the form of bigger tax deductions. That number in terms 61 00:03:04,680 --> 00:03:07,400 Speaker 4: of what the consumer what tax payers are going to 62 00:03:07,400 --> 00:03:10,480 Speaker 4: pay less is somewhere on the order of one hundred 63 00:03:10,520 --> 00:03:13,760 Speaker 4: and sixty one hundred and seventy billion dollars, So that's 64 00:03:13,800 --> 00:03:16,000 Speaker 4: money that's going to be in the pocket of the consumer. 65 00:03:16,040 --> 00:03:19,239 Speaker 4: As we know consumption seventy percent of GDP. That can 66 00:03:19,320 --> 00:03:24,680 Speaker 4: keep consumption relatively robust, even though the labor market picture, 67 00:03:24,680 --> 00:03:27,639 Speaker 4: which is weak right now, it's currently weak right now, 68 00:03:28,240 --> 00:03:31,000 Speaker 4: might start to improve as we move into twenty twenty six. 69 00:03:31,480 --> 00:03:35,560 Speaker 4: Most economists forecasts into twenty twenty six is that we 70 00:03:35,600 --> 00:03:39,040 Speaker 4: will have better economic growth versus twenty twenty five. So 71 00:03:39,080 --> 00:03:42,960 Speaker 4: if you have a growing economy, likely in twenty twenty six, 72 00:03:43,400 --> 00:03:46,160 Speaker 4: and you have enough slack in the labor market at 73 00:03:46,160 --> 00:03:49,760 Speaker 4: this point to keep wages at a reasonable price, than 74 00:03:49,800 --> 00:03:52,880 Speaker 4: the profit margins and the earnings margins from any of 75 00:03:52,880 --> 00:03:56,680 Speaker 4: these companies can stay somewhat afloat. So we have to 76 00:03:56,720 --> 00:04:00,000 Speaker 4: recognize that whether it's accelerated depreciation, all of the various 77 00:04:00,000 --> 00:04:02,160 Speaker 4: things that came out of the tax package, this is 78 00:04:02,200 --> 00:04:05,400 Speaker 4: going to be a tailwind as we move into as 79 00:04:05,400 --> 00:04:06,720 Speaker 4: we move into twenty twenty six. 80 00:04:06,920 --> 00:04:09,320 Speaker 6: And Jim, I know you, and is the old adage 81 00:04:09,360 --> 00:04:11,480 Speaker 6: of many people saying that the stock market is not 82 00:04:11,560 --> 00:04:15,320 Speaker 6: the economy. Is that kind of changing though, because nearly 83 00:04:15,480 --> 00:04:19,520 Speaker 6: half of all household's own equities. It is a record 84 00:04:19,520 --> 00:04:23,200 Speaker 6: exposure from everyday people to this equity market. Have we 85 00:04:23,360 --> 00:04:26,760 Speaker 6: entered a scenario where this time around the put from 86 00:04:27,040 --> 00:04:31,120 Speaker 6: take your pick from the fed from the President has 87 00:04:31,120 --> 00:04:34,240 Speaker 6: gotten all the more important just because of household exposure 88 00:04:34,279 --> 00:04:34,920 Speaker 6: to equities. 89 00:04:35,680 --> 00:04:37,400 Speaker 1: Yeah, so it's a good point, right. 90 00:04:37,440 --> 00:04:40,080 Speaker 4: So the way I think about this is that conditions 91 00:04:40,120 --> 00:04:43,280 Speaker 4: have become increasingly fragile. As this market has moved up, 92 00:04:43,520 --> 00:04:47,000 Speaker 4: people's overall equity exposure has also moved up too, meaning 93 00:04:47,040 --> 00:04:49,599 Speaker 4: that their wealth effect is tied to what's happening in 94 00:04:49,640 --> 00:04:53,080 Speaker 4: the markets. And like any other time in markets, there 95 00:04:53,160 --> 00:04:55,720 Speaker 4: tend to be drawdowns and corrections and things like that, 96 00:04:55,800 --> 00:04:59,000 Speaker 4: and that can have a more of an outsized impact 97 00:04:59,080 --> 00:05:02,760 Speaker 4: on consumer spending in consumer psychology, because as you point 98 00:05:02,800 --> 00:05:06,120 Speaker 4: out that there is an attachment to the markets. But 99 00:05:06,440 --> 00:05:10,120 Speaker 4: that being said, most people, I would hope, when they're 100 00:05:10,160 --> 00:05:13,760 Speaker 4: investing in the markets, have a diversified portfolio that if 101 00:05:13,800 --> 00:05:17,360 Speaker 4: we do see this correction that may happen in the future. 102 00:05:17,400 --> 00:05:20,200 Speaker 4: At some point in the future, I think it's likely 103 00:05:20,279 --> 00:05:23,840 Speaker 4: to happen amongst the leaders currently right now, it's really 104 00:05:24,000 --> 00:05:27,800 Speaker 4: probably a large cap tech correction. Maybe that comes I'm 105 00:05:27,800 --> 00:05:30,799 Speaker 4: not forecasting that, but maybe that comes at some point. 106 00:05:30,960 --> 00:05:34,000 Speaker 4: But if you have a diversified portfolio, I think that 107 00:05:34,080 --> 00:05:38,240 Speaker 4: people's broader portfolios, well diversified portfolios, will hold it better 108 00:05:38,600 --> 00:05:42,479 Speaker 4: than what the actual headline of an equity drawdown might 109 00:05:42,520 --> 00:05:43,119 Speaker 4: actually show. 110 00:05:43,440 --> 00:05:45,120 Speaker 1: So it really gets down to that. 111 00:05:45,120 --> 00:05:46,919 Speaker 4: It's a hard question to answer because I don't know 112 00:05:46,960 --> 00:05:50,599 Speaker 4: how everybody's positioned, but I would expect that most people 113 00:05:50,600 --> 00:05:51,920 Speaker 4: are pretty well diversified. 114 00:05:52,080 --> 00:05:54,960 Speaker 6: A lot of the diversification, though, Jim, this year has 115 00:05:55,040 --> 00:05:57,719 Speaker 6: come in the form of gold, and we've seen incredible 116 00:05:57,800 --> 00:06:01,840 Speaker 6: volatility starting this week out with a three percent decline. 117 00:06:02,160 --> 00:06:03,000 Speaker 5: Is that a concern? 118 00:06:03,200 --> 00:06:06,120 Speaker 6: Is gold a good way to diversify, especially at these 119 00:06:06,200 --> 00:06:09,240 Speaker 6: levels where some serious volatilities being introduced. 120 00:06:10,040 --> 00:06:12,720 Speaker 4: Yeah, look, I mean it's one of these subjects here 121 00:06:12,760 --> 00:06:14,840 Speaker 4: where the price has gone up quite a bit. So 122 00:06:15,040 --> 00:06:17,080 Speaker 4: so anything that you say against that is like, well, 123 00:06:17,120 --> 00:06:19,599 Speaker 4: you've been wrawing in the markets and what we don't 124 00:06:19,640 --> 00:06:22,040 Speaker 4: have a position in gold in our portfolios? 125 00:06:22,720 --> 00:06:22,800 Speaker 7: Do? 126 00:06:22,920 --> 00:06:25,279 Speaker 1: I think it's a reasonable way to diversify. 127 00:06:25,400 --> 00:06:27,920 Speaker 4: Sure, you know, if you have, you know, a longer 128 00:06:28,040 --> 00:06:31,080 Speaker 4: term view and a broader portfolio, absolutely holding some gold 129 00:06:31,320 --> 00:06:33,640 Speaker 4: is always going to be a good idea, But are 130 00:06:33,680 --> 00:06:35,800 Speaker 4: there other things that you could also own too? 131 00:06:35,839 --> 00:06:38,200 Speaker 1: Could you own high quality US treasuries? 132 00:06:38,200 --> 00:06:42,159 Speaker 4: Could you own high quality investment grade bonds? Earn some 133 00:06:42,240 --> 00:06:45,560 Speaker 4: income and at least get some positive carry that should 134 00:06:45,600 --> 00:06:49,039 Speaker 4: be able to preserve capital and preserve income and things 135 00:06:49,080 --> 00:06:49,440 Speaker 4: like that. 136 00:06:49,760 --> 00:06:53,080 Speaker 1: So when I think about a portfolio for people who 137 00:06:53,120 --> 00:06:53,360 Speaker 1: you know. 138 00:06:53,279 --> 00:06:56,520 Speaker 4: Who are broadly investing, they generally need some liquidity that 139 00:06:56,600 --> 00:06:58,720 Speaker 4: and they also want to get some income. So that's 140 00:06:58,760 --> 00:07:01,440 Speaker 4: why we think about the you know, the more of 141 00:07:01,320 --> 00:07:05,200 Speaker 4: the broader equity market, including large captach, but then also 142 00:07:05,320 --> 00:07:09,320 Speaker 4: thinking about other items. But really at the margin gold 143 00:07:09,320 --> 00:07:11,920 Speaker 4: and I think gold has become very speculative at this point, 144 00:07:12,040 --> 00:07:14,680 Speaker 4: and I think people are chasing a lot of those returns. 145 00:07:15,080 --> 00:07:18,520 Speaker 2: Stay with US, MALPLINPEX, Savana's coming up off to this. 146 00:07:27,160 --> 00:07:29,600 Speaker 3: Apple's AAA is getting a boost following a revenue beat 147 00:07:29,640 --> 00:07:33,000 Speaker 3: and an upbeat holiday forecast. Gene Mounster of Deepwater Asset 148 00:07:33,000 --> 00:07:35,880 Speaker 3: Management writing this, I expect Apple to be the best 149 00:07:35,880 --> 00:07:38,280 Speaker 3: performing A mag seven through the end of the year. 150 00:07:38,320 --> 00:07:39,240 Speaker 5: Gene joins US. 151 00:07:39,160 --> 00:07:42,040 Speaker 3: Now Gene Apple best performing. 152 00:07:42,480 --> 00:07:47,440 Speaker 8: Why it's pretty straightforward. There's two big levers. First is 153 00:07:47,480 --> 00:07:50,960 Speaker 8: that iPhone demand for the next three quarters is likely 154 00:07:51,000 --> 00:07:53,360 Speaker 8: going to outpace the street. The street's looking for around 155 00:07:53,440 --> 00:07:56,520 Speaker 8: seven percent. I expect it to be ten percent. That, 156 00:07:56,640 --> 00:07:58,560 Speaker 8: of course, is one of the big focus. That's why 157 00:07:58,600 --> 00:08:01,600 Speaker 8: the stock was moving around after market yesterday. It's all 158 00:08:01,640 --> 00:08:04,760 Speaker 8: about the iPhone. So that piece, and it begs the 159 00:08:04,840 --> 00:08:07,560 Speaker 8: question of why is the iPhone going to be better? 160 00:08:07,600 --> 00:08:11,360 Speaker 8: It's not about AI features, It's less about product features. 161 00:08:11,800 --> 00:08:14,920 Speaker 8: It's more about this massive upgrade pool they had back. 162 00:08:14,800 --> 00:08:15,800 Speaker 9: In twenty twenty one. 163 00:08:15,840 --> 00:08:20,280 Speaker 8: As a reminder, that year, iPhone group thirty nine percent, 164 00:08:20,520 --> 00:08:24,320 Speaker 8: huge growth, and then the subsequent fifteen quarters it basically 165 00:08:24,560 --> 00:08:27,360 Speaker 8: was down a half of percent. And now we're starting 166 00:08:27,400 --> 00:08:30,720 Speaker 8: to reap the benefits of that big cycle. So that's 167 00:08:30,760 --> 00:08:33,240 Speaker 8: one piece is just we're going to see some better 168 00:08:33,280 --> 00:08:36,800 Speaker 8: iPhone numbers and expectations. And the second is that the 169 00:08:37,920 --> 00:08:41,760 Speaker 8: Apple Intelligence bar is just so low coming into the 170 00:08:41,880 --> 00:08:45,120 Speaker 8: new SI next year, and I think that hope springs 171 00:08:45,120 --> 00:08:48,040 Speaker 8: eternal when it comes to investors, and when it comes 172 00:08:48,080 --> 00:08:51,760 Speaker 8: to a feature like Apple Intelligence that I believe is 173 00:08:51,800 --> 00:08:54,760 Speaker 8: going to be the biggest step forward since the iPhone itself. 174 00:08:54,760 --> 00:08:57,320 Speaker 8: I mean, this is a massive potential for them to 175 00:08:57,360 --> 00:09:01,840 Speaker 8: contextualize personal data with some of a digital assistant, and 176 00:09:02,679 --> 00:09:04,800 Speaker 8: you know they've set this high bar out that it's. 177 00:09:04,679 --> 00:09:05,560 Speaker 9: Going to be next year. 178 00:09:05,640 --> 00:09:07,480 Speaker 8: Your own Mark German is seeing that it's going to 179 00:09:07,480 --> 00:09:10,960 Speaker 8: be kind of March March April timeframe, and I think 180 00:09:11,000 --> 00:09:13,520 Speaker 8: that anticipation that's going to be good for the multiple. 181 00:09:13,559 --> 00:09:15,760 Speaker 8: So when you put those two together, I think that 182 00:09:15,920 --> 00:09:18,199 Speaker 8: sales are going to be better because the iPhone upgrade pool. 183 00:09:18,320 --> 00:09:22,359 Speaker 8: And then separately, I think the multiple expands because anticipation 184 00:09:22,600 --> 00:09:25,199 Speaker 8: of what's going to happen with Apple Intelligence gene. 185 00:09:25,240 --> 00:09:29,000 Speaker 3: We were speaking with Dan Ives earlier of what Bush securities, 186 00:09:29,040 --> 00:09:31,160 Speaker 3: and he said that he expects Apple to partner with 187 00:09:31,160 --> 00:09:33,680 Speaker 3: the likes of Google with some sort of a Gemini 188 00:09:33,760 --> 00:09:37,120 Speaker 3: partnership to provide some of the heavy lifting for the 189 00:09:37,200 --> 00:09:38,000 Speaker 3: AI effort. 190 00:09:38,360 --> 00:09:39,640 Speaker 5: Is that something that you're expecting. 191 00:09:39,760 --> 00:09:42,240 Speaker 3: Is that kind of the underpinning of the optimism around 192 00:09:42,240 --> 00:09:42,840 Speaker 3: Apple AI. 193 00:09:44,600 --> 00:09:46,920 Speaker 8: That's part of it, And I think Dan's definitely onto 194 00:09:47,000 --> 00:09:51,480 Speaker 8: something that what's going on with Gemini and just Apple 195 00:09:51,520 --> 00:09:56,160 Speaker 8: working beyond GPT and OpenAI, and what they have told 196 00:09:56,240 --> 00:09:59,079 Speaker 8: us back at WWDC in June is that they are 197 00:09:59,120 --> 00:10:03,000 Speaker 8: open to other helpers, other platforms, other large language models 198 00:10:03,000 --> 00:10:07,120 Speaker 8: and they've specifically pointed out to Gemini. The essential question 199 00:10:07,720 --> 00:10:11,200 Speaker 8: is just how much is this just in terms of 200 00:10:11,240 --> 00:10:13,600 Speaker 8: the menu for developers. Are they going to just allow 201 00:10:13,600 --> 00:10:16,439 Speaker 8: developers to use the Gemini model when they build iOS 202 00:10:16,480 --> 00:10:20,079 Speaker 8: apps or is this something bigger where they really lean 203 00:10:20,240 --> 00:10:23,440 Speaker 8: on Gemini to power this new serie experience. And so 204 00:10:24,000 --> 00:10:27,839 Speaker 8: it is a daunting task to take this personalized data 205 00:10:27,960 --> 00:10:31,440 Speaker 8: and do this contextual build these personalized bots around it, 206 00:10:31,480 --> 00:10:34,160 Speaker 8: and so I expect them to pull from more than 207 00:10:34,200 --> 00:10:37,360 Speaker 8: one more than just opening eye to deliver that. So 208 00:10:37,400 --> 00:10:39,880 Speaker 8: I think he's onto something that One of the other 209 00:10:39,920 --> 00:10:42,360 Speaker 8: big questions around this is what does this mean in 210 00:10:42,440 --> 00:10:45,520 Speaker 8: terms of financially And in the case where they would 211 00:10:45,559 --> 00:10:47,720 Speaker 8: be doing something with Gemini, this is a little bit 212 00:10:47,720 --> 00:10:50,960 Speaker 8: of a different piece where there actually licensing technology from Google. 213 00:10:51,440 --> 00:10:54,760 Speaker 8: It's most likely where Apple would pay Google for that. 214 00:10:54,960 --> 00:10:58,319 Speaker 8: Now they've given guidance to expect some of their CAPEX 215 00:10:58,360 --> 00:11:00,839 Speaker 8: and some expenses around AI to go out modestly next 216 00:11:00,960 --> 00:11:03,520 Speaker 8: year a few billion dollars, which seems like chump change 217 00:11:03,559 --> 00:11:06,079 Speaker 8: when you look at these hundreds of billions of dollars 218 00:11:06,120 --> 00:11:09,480 Speaker 8: that are being spent. So the bottom line is that 219 00:11:09,520 --> 00:11:12,400 Speaker 8: this is a cost if they do end up leveraging 220 00:11:12,480 --> 00:11:15,800 Speaker 8: more around Google, is a cost that Apple can easily 221 00:11:15,840 --> 00:11:20,559 Speaker 8: manage and maintain the margins that investors love so much gain. 222 00:11:20,679 --> 00:11:22,760 Speaker 5: Is there any regulatory risk to that? 223 00:11:22,960 --> 00:11:26,520 Speaker 6: Is this a relationship that regulators would welcome and not challenge. 224 00:11:28,640 --> 00:11:32,640 Speaker 8: I mean, clearly the regulatory piece has been something that 225 00:11:32,720 --> 00:11:36,200 Speaker 8: is concerned investors, that that has been diminishing over time. 226 00:11:36,760 --> 00:11:37,920 Speaker 9: And I think what we. 227 00:11:37,880 --> 00:11:42,040 Speaker 8: Saw with the regulatory around Google and their search deal. 228 00:11:42,080 --> 00:11:45,160 Speaker 8: Of course, this is about a fifth of Apple's or 229 00:11:45,160 --> 00:11:48,440 Speaker 8: earnings come from this Google search placement, and so the 230 00:11:48,520 --> 00:11:51,160 Speaker 8: fact that that kind of went in a good direction 231 00:11:51,720 --> 00:11:53,200 Speaker 8: I think is a sign of a little bit of 232 00:11:53,200 --> 00:11:57,199 Speaker 8: a softening tone on the regulatory side. So I think 233 00:11:57,240 --> 00:12:00,280 Speaker 8: that this piece, you know, this dynamic around Google, it 234 00:12:00,440 --> 00:12:05,000 Speaker 8: largely won't have a regulatory topic. There is a question 235 00:12:05,080 --> 00:12:07,120 Speaker 8: about if Apple does want to do something bigger, if 236 00:12:07,120 --> 00:12:09,319 Speaker 8: they want to acquire somebody like a perplexity, which I 237 00:12:09,320 --> 00:12:11,800 Speaker 8: think would make a ton of sense for them, that 238 00:12:11,960 --> 00:12:13,960 Speaker 8: is something that may be a little bit more of 239 00:12:14,000 --> 00:12:17,079 Speaker 8: a challenge these big tech companies want to get a 240 00:12:17,080 --> 00:12:20,600 Speaker 8: hold of perplexity andthropic But I think that regulatory piece 241 00:12:20,679 --> 00:12:22,880 Speaker 8: is something that's going to make that less likely. 242 00:12:23,200 --> 00:12:26,840 Speaker 6: So, Gene, if a strong iPhone seventeen upgrade cycle allowed 243 00:12:26,880 --> 00:12:29,240 Speaker 6: Apple to play for time when it comes to their 244 00:12:29,280 --> 00:12:32,120 Speaker 6: AI offering, just how much time did it give them? 245 00:12:32,160 --> 00:12:35,000 Speaker 6: How patient are you willing to be to allow Apple 246 00:12:35,120 --> 00:12:38,400 Speaker 6: to figure out and solve the mess that currently is serie. 247 00:12:40,240 --> 00:12:44,120 Speaker 8: I mean, really, the central question for Apple over the 248 00:12:44,120 --> 00:12:48,200 Speaker 8: next two years, three years, maybe even five years of 249 00:12:48,200 --> 00:12:49,960 Speaker 8: how much time investors are going to give them to 250 00:12:49,960 --> 00:12:52,440 Speaker 8: figure this out. So point in time today is that 251 00:12:52,480 --> 00:12:54,920 Speaker 8: the bar is really high because they've set that bar 252 00:12:55,000 --> 00:12:56,800 Speaker 8: high about what the next series is going to look like. 253 00:12:57,120 --> 00:13:00,160 Speaker 8: But if we fast forward into April and let's say 254 00:13:00,200 --> 00:13:02,839 Speaker 8: that it's a disappointment, I think that the stock will 255 00:13:02,880 --> 00:13:06,200 Speaker 8: clearly trade off, but investors are going to give Apple 256 00:13:06,240 --> 00:13:09,680 Speaker 8: more time. Competitively, All that's on the horizon next year 257 00:13:09,720 --> 00:13:11,800 Speaker 8: is this new device that will see for the first 258 00:13:11,800 --> 00:13:14,280 Speaker 8: time from open AI will be available likely in twenty 259 00:13:14,320 --> 00:13:17,920 Speaker 8: twenty seven. But there has been essentially nothing that's happened 260 00:13:17,920 --> 00:13:21,560 Speaker 8: when it comes to consumer hardware AI that has changed 261 00:13:21,559 --> 00:13:25,120 Speaker 8: the competitive field, and so at the end of the day, 262 00:13:25,559 --> 00:13:27,559 Speaker 8: consumers love their Apple devices. 263 00:13:27,920 --> 00:13:30,280 Speaker 9: This resurgence we've seen. 264 00:13:30,640 --> 00:13:33,160 Speaker 8: With the iPhone in the last two quarters, and the 265 00:13:33,160 --> 00:13:36,760 Speaker 8: guidance for December is all about that commitment that Apple 266 00:13:36,920 --> 00:13:40,040 Speaker 8: customers have to the platform that upgrade pool. And so 267 00:13:40,559 --> 00:13:44,400 Speaker 8: the reality is is that these devices just become entrenched 268 00:13:44,400 --> 00:13:47,480 Speaker 8: in our lives just surround us. It's not just the phone, 269 00:13:47,679 --> 00:13:49,480 Speaker 8: and I think that that's going to give them much 270 00:13:49,520 --> 00:13:51,400 Speaker 8: more time. Yes, the stock is going to have some 271 00:13:51,520 --> 00:13:55,280 Speaker 8: variations around how people feel about any given change to 272 00:13:55,320 --> 00:13:58,959 Speaker 8: their AI, but ultimately they're going to Investors will give 273 00:13:59,000 --> 00:14:02,760 Speaker 8: them more time, and most importantly, the consumers will because 274 00:14:02,760 --> 00:14:05,360 Speaker 8: they've made such a big investment into Apple's products over 275 00:14:05,400 --> 00:14:06,120 Speaker 8: the last decade. 276 00:14:06,240 --> 00:14:07,920 Speaker 3: Jane just quickly hear you. So that Apple is going 277 00:14:07,960 --> 00:14:09,920 Speaker 3: to be the biggest gainer through the end of the year. 278 00:14:10,200 --> 00:14:12,800 Speaker 3: Who do you see in the magnificent seven names as 279 00:14:12,800 --> 00:14:13,760 Speaker 3: being the biggest loser? 280 00:14:15,640 --> 00:14:17,400 Speaker 9: I mean, I think that surprising. 281 00:14:17,440 --> 00:14:19,560 Speaker 8: I think Amazon is going to have its surge today, 282 00:14:19,600 --> 00:14:22,800 Speaker 8: but expectations that have shifted higher. I still think that 283 00:14:22,840 --> 00:14:26,200 Speaker 8: they're struggling with their losing share within cloud. Yes, they 284 00:14:26,200 --> 00:14:29,200 Speaker 8: had a good quarter with Aws, but that losing chair 285 00:14:29,320 --> 00:14:31,520 Speaker 8: piece and so it's been a laggard. 286 00:14:31,560 --> 00:14:33,120 Speaker 9: It's getting its stay in the sun today. 287 00:14:33,240 --> 00:14:35,160 Speaker 8: But I think that that's probably going to be towards 288 00:14:35,160 --> 00:14:36,040 Speaker 8: the bottom of the list. 289 00:14:36,520 --> 00:14:40,040 Speaker 2: Stay with US mulblindex Savana's coming up off to this. 290 00:14:49,560 --> 00:14:53,200 Speaker 3: Also some discussion with respect to Nvidia speaking in South 291 00:14:53,240 --> 00:14:57,200 Speaker 3: Korea about potentially restarting Blackwell sales into China. At least 292 00:14:57,200 --> 00:14:59,920 Speaker 3: that is Jensen Hwank's goal going forward. 293 00:15:00,040 --> 00:15:00,960 Speaker 5: Joining US now is at. 294 00:15:00,920 --> 00:15:04,240 Speaker 3: Mills of Raymond James, ed, I just wonder your takeaway 295 00:15:04,520 --> 00:15:09,280 Speaker 3: about how the geopolitical chips are falling after this jijinpaying 296 00:15:09,320 --> 00:15:10,160 Speaker 3: Donald Trump meeting. 297 00:15:11,240 --> 00:15:13,800 Speaker 7: I think they're basically where we would expect them to be, 298 00:15:13,880 --> 00:15:18,480 Speaker 7: which is getting a de escalation, getting delay. But the 299 00:15:18,520 --> 00:15:21,520 Speaker 7: real question now is how long does this last? And 300 00:15:21,600 --> 00:15:23,920 Speaker 7: I don't think there's anyone who thinks that we're going 301 00:15:23,960 --> 00:15:26,360 Speaker 7: to go through the next year or through the term 302 00:15:26,480 --> 00:15:29,720 Speaker 7: of President Trump without kind of some more hiccups. 303 00:15:30,200 --> 00:15:31,760 Speaker 1: This is a roller coaster ride. 304 00:15:31,880 --> 00:15:34,320 Speaker 7: I am sure there's going to be more export controls 305 00:15:34,320 --> 00:15:36,960 Speaker 7: that are going to be kind of suggested by either side, 306 00:15:37,520 --> 00:15:40,360 Speaker 7: But really the big question that we've been getting here 307 00:15:40,400 --> 00:15:43,920 Speaker 7: at Raymond James is how much semiconductors can go into China, 308 00:15:44,000 --> 00:15:47,440 Speaker 7: how much relaxation of some of those tech controls. We've 309 00:15:47,480 --> 00:15:50,720 Speaker 7: talked about that de risking in the last eight years, 310 00:15:50,720 --> 00:15:53,920 Speaker 7: that's been about blocking what China can buy. D risking 311 00:15:53,960 --> 00:15:56,840 Speaker 7: now in DC is making sure that China gets hooked 312 00:15:57,240 --> 00:16:00,400 Speaker 7: on our AI technology so that we don't have the 313 00:16:00,600 --> 00:16:04,560 Speaker 7: risk that China developed something else, and as a competitor globally, 314 00:16:04,920 --> 00:16:09,080 Speaker 7: that's a fundamental change that is going to potentially drive 315 00:16:09,120 --> 00:16:11,440 Speaker 7: a lot of this AI trade even a bit higher 316 00:16:11,880 --> 00:16:14,760 Speaker 7: as we get those kind of de risking sales into 317 00:16:14,840 --> 00:16:16,720 Speaker 7: China that were not expected to. 318 00:16:16,680 --> 00:16:20,200 Speaker 6: Lisa's point ed, the President had said that Blackwell would 319 00:16:20,240 --> 00:16:23,880 Speaker 6: be discussed. Jensen Wong said he hoped he'd be able 320 00:16:23,920 --> 00:16:27,120 Speaker 6: to sell Blackwell back into China, but it appears that 321 00:16:27,280 --> 00:16:30,040 Speaker 6: wasn't on the table during these negotiations. What do you 322 00:16:30,080 --> 00:16:32,320 Speaker 6: make of the fact that that specifically. 323 00:16:31,760 --> 00:16:32,280 Speaker 5: Was left out? 324 00:16:33,200 --> 00:16:36,640 Speaker 7: So Danny, the President said that in Nvidia in China 325 00:16:36,680 --> 00:16:39,320 Speaker 7: are going to have conversations and that he was going 326 00:16:39,360 --> 00:16:41,240 Speaker 7: to let Nvidia be the referee. 327 00:16:41,720 --> 00:16:44,040 Speaker 1: He did say that Blackwell late. 328 00:16:44,120 --> 00:16:47,920 Speaker 7: You know, in Nvidia's ladyship, the Rubin is probably off 329 00:16:47,960 --> 00:16:50,760 Speaker 7: the table, and I think that's appropriate. What we do 330 00:16:50,920 --> 00:16:53,720 Speaker 7: know is that the Trump administration had previously banned the 331 00:16:53,800 --> 00:16:56,960 Speaker 7: age twenty, they banned one of the AMD chips. They've 332 00:16:57,000 --> 00:17:00,520 Speaker 7: reversed those bands. China hasn't purchased that because they want 333 00:17:00,560 --> 00:17:02,920 Speaker 7: to see what else they can get. I do think 334 00:17:02,960 --> 00:17:05,640 Speaker 7: that there is a version of Blackwell that probably can 335 00:17:05,680 --> 00:17:08,600 Speaker 7: be sold into China. I do think that that is 336 00:17:08,640 --> 00:17:11,639 Speaker 7: going to be part of future negotiations. So on a 337 00:17:11,640 --> 00:17:13,600 Speaker 7: scale of one to ten, if I had been hoping 338 00:17:13,640 --> 00:17:15,600 Speaker 7: for a ten, what came out of this is probably 339 00:17:15,600 --> 00:17:18,320 Speaker 7: a six or a seven. And if we can get 340 00:17:18,359 --> 00:17:21,959 Speaker 7: those negotiations ongoing, it can go up from here. But 341 00:17:22,000 --> 00:17:26,199 Speaker 7: the opportunity to possibly relax tech standards versus where we 342 00:17:26,240 --> 00:17:29,000 Speaker 7: are where we've been is a fundamental shift in and 343 00:17:29,040 --> 00:17:31,640 Speaker 7: of itself, which gives optimism for a lot of investors 344 00:17:31,640 --> 00:17:32,239 Speaker 7: that I talked to. 345 00:17:32,440 --> 00:17:33,919 Speaker 5: So notably not a twelve. 346 00:17:34,000 --> 00:17:35,960 Speaker 6: As the President said that the outcome of the meeting 347 00:17:36,160 --> 00:17:38,080 Speaker 6: was ed, what else was it discussed? 348 00:17:38,119 --> 00:17:38,399 Speaker 5: Also? 349 00:17:38,560 --> 00:17:41,919 Speaker 6: TikTok Taiwan trans shipments. What do you make of just 350 00:17:41,920 --> 00:17:44,280 Speaker 6: what was left out of the discussions. 351 00:17:44,880 --> 00:17:47,720 Speaker 7: You know, it is a to our meeting, but that's 352 00:17:47,760 --> 00:17:49,400 Speaker 7: not very long when you kind of have all these 353 00:17:49,520 --> 00:17:52,119 Speaker 7: different negotiations. I think as it relates to TikTok that 354 00:17:52,160 --> 00:17:54,200 Speaker 7: has been moving along, that has had a lot of 355 00:17:54,280 --> 00:17:59,200 Speaker 7: other negotiations. One thing that I've always heard about President 356 00:17:59,240 --> 00:18:01,959 Speaker 7: she is that he likes to go into these meetings 357 00:18:02,000 --> 00:18:05,520 Speaker 7: with things ninety eight ninety nine percent settled. So I 358 00:18:05,600 --> 00:18:07,639 Speaker 7: think what was discussed in the meeting was what what 359 00:18:07,880 --> 00:18:09,879 Speaker 7: Bessen and his Kundter part were able to do the 360 00:18:09,880 --> 00:18:13,639 Speaker 7: week before. There is a desire to have another meeting 361 00:18:14,160 --> 00:18:16,399 Speaker 7: first half of next year, where Trump goes to China, 362 00:18:16,680 --> 00:18:19,520 Speaker 7: maybe she comes to the United States at an appropriate time, 363 00:18:20,040 --> 00:18:23,840 Speaker 7: so there is opportunities to follow up from this on 364 00:18:24,040 --> 00:18:27,159 Speaker 7: rare Earth. Yes, they are going to have this pause, 365 00:18:27,400 --> 00:18:31,000 Speaker 7: but because there's licensing, there's plenty of opportunities for China 366 00:18:31,040 --> 00:18:34,000 Speaker 7: to tighten in certain ways that will get us response. 367 00:18:34,520 --> 00:18:37,440 Speaker 7: So the fact that we have more to discuss at 368 00:18:37,560 --> 00:18:40,320 Speaker 7: later dates and other dates already set to kind of 369 00:18:40,800 --> 00:18:44,080 Speaker 7: have the leaders come together seems fairly appropriate at this point. 370 00:18:44,840 --> 00:18:45,920 Speaker 5: Just really quickly here. 371 00:18:46,040 --> 00:18:47,600 Speaker 3: Do you think they're going to get a completion to 372 00:18:47,640 --> 00:18:49,880 Speaker 3: this government shut down by Thanksgiving so we cannot worry 373 00:18:49,880 --> 00:18:50,680 Speaker 3: about flight de lies? 374 00:18:51,320 --> 00:18:53,840 Speaker 7: I think Thanksgiving, yes, But I think that that's where 375 00:18:53,880 --> 00:18:55,840 Speaker 7: I kind of have been putting the over under. Once 376 00:18:55,880 --> 00:18:58,440 Speaker 7: we get to November twenty first, which is the date 377 00:18:58,480 --> 00:19:02,560 Speaker 7: of the cr that passed the House, the conversation changes 378 00:19:02,560 --> 00:19:05,520 Speaker 7: because it's not that the Senate could just vote to 379 00:19:05,560 --> 00:19:08,280 Speaker 7: turn it on because there's nothing to vote on. I 380 00:19:08,400 --> 00:19:10,560 Speaker 7: do think that there's going to be a conversation today 381 00:19:10,560 --> 00:19:13,520 Speaker 7: and over the next week about nuking the fillerbuster. That's 382 00:19:13,520 --> 00:19:15,840 Speaker 7: what President Trump is put on true social I don't 383 00:19:15,880 --> 00:19:18,120 Speaker 7: think the Senate goes in that direction. I think that's 384 00:19:18,119 --> 00:19:22,000 Speaker 7: about Trump trying to regain negotiating leverage. But because of 385 00:19:22,040 --> 00:19:25,480 Speaker 7: those social media posts, this does go on at least 386 00:19:25,560 --> 00:19:29,520 Speaker 7: another week. As the pressure builds, President Trump is probably 387 00:19:29,520 --> 00:19:31,480 Speaker 7: going to have to be the off ramp. But as 388 00:19:31,520 --> 00:19:34,520 Speaker 7: we get closer to kind of November, you know, kind 389 00:19:34,520 --> 00:19:36,880 Speaker 7: of twenty first, and as we get closer to Thanksgiving, 390 00:19:37,040 --> 00:19:39,120 Speaker 7: that's really I think where this finally comes to a head. 391 00:19:39,200 --> 00:19:41,040 Speaker 7: I think we're at the beginning of the end, but 392 00:19:41,119 --> 00:19:43,600 Speaker 7: unfortunately we're still at the beginning, not the end. 393 00:19:44,000 --> 00:19:47,520 Speaker 2: Stay with us Mold Blindbeck Savannah's coming up off to this. 394 00:19:56,840 --> 00:20:00,919 Speaker 3: Meta defying AI spending gloom with a record break bond sale, 395 00:20:01,000 --> 00:20:03,800 Speaker 3: the social media giants selling thirty billion dollars of bonds 396 00:20:03,840 --> 00:20:04,760 Speaker 3: while drawing. 397 00:20:04,840 --> 00:20:06,120 Speaker 5: Record interest for the debt. 398 00:20:06,160 --> 00:20:08,240 Speaker 3: I think that there were offers of something north of 399 00:20:08,240 --> 00:20:11,399 Speaker 3: one hundred billion dollars. Winnie Caesar of Credit Sites writing this, 400 00:20:11,880 --> 00:20:15,720 Speaker 3: the acceleration in debt financed CAPEX on AI related initiatives 401 00:20:16,040 --> 00:20:18,720 Speaker 3: is weighing on free cash flow and credit metrics. Meta 402 00:20:18,840 --> 00:20:22,840 Speaker 3: could turn free cash flow negative next year as capex 403 00:20:22,880 --> 00:20:25,359 Speaker 3: reaches fifty percent of sales. When he joins US now, Winny, 404 00:20:25,400 --> 00:20:27,320 Speaker 3: great to see you, Thank you so much for being here. 405 00:20:27,600 --> 00:20:28,800 Speaker 5: How much are you getting. 406 00:20:28,560 --> 00:20:31,639 Speaker 3: Concerned about the amount of debt issuance tied to some 407 00:20:31,720 --> 00:20:32,920 Speaker 3: of these big tech companies? 408 00:20:33,920 --> 00:20:35,119 Speaker 10: Hey, good morning, Lisa. 409 00:20:35,359 --> 00:20:39,240 Speaker 11: So we are definitely seeing a shift away from cash 410 00:20:39,440 --> 00:20:44,960 Speaker 11: flow financed investment, equity financed investment back into intentional releveraging 411 00:20:45,080 --> 00:20:49,000 Speaker 11: and some debt financed investment, which is very typical of 412 00:20:49,040 --> 00:20:51,800 Speaker 11: that middle stage of the credit cycle where you start 413 00:20:51,840 --> 00:20:55,280 Speaker 11: to see more m and a more financial engineering as 414 00:20:55,359 --> 00:20:58,080 Speaker 11: bump up and in capax and spending. 415 00:20:58,560 --> 00:21:01,359 Speaker 10: And that does come with some additional. 416 00:21:00,840 --> 00:21:04,680 Speaker 11: Concerns around where valuations are and are they appropriately reflecting 417 00:21:04,680 --> 00:21:06,879 Speaker 11: the potential return on that investment. 418 00:21:07,560 --> 00:21:09,640 Speaker 3: At this point, do you think that investors just throw 419 00:21:09,680 --> 00:21:11,120 Speaker 3: caution to the way and as soon as they see 420 00:21:11,119 --> 00:21:14,920 Speaker 3: the word artificial intelligence in any kind of perspectus. 421 00:21:15,560 --> 00:21:18,000 Speaker 11: Well, I think it's a little bit of a more 422 00:21:18,080 --> 00:21:21,240 Speaker 11: nuance to you than that. I think that people realize 423 00:21:21,320 --> 00:21:25,200 Speaker 11: that AI is going to be a defining trend probably 424 00:21:25,280 --> 00:21:28,359 Speaker 11: for the next five, ten, twenty years. There was definitely 425 00:21:28,359 --> 00:21:31,040 Speaker 11: sustainability and durability there, but there are a lot of 426 00:21:31,040 --> 00:21:34,440 Speaker 11: open questions. Adds to the magnitude of return on investment, 427 00:21:34,520 --> 00:21:37,720 Speaker 11: the timing of that, and I think that people are 428 00:21:37,760 --> 00:21:40,919 Speaker 11: looking at things like metabond deals, which is still a 429 00:21:40,960 --> 00:21:44,720 Speaker 11: pretty high quality issuer, and thinking this seems like a 430 00:21:44,760 --> 00:21:47,800 Speaker 11: reasonablyful place to continue to put cash to work, especially 431 00:21:47,800 --> 00:21:50,359 Speaker 11: because that new bond sale did come with a pretty 432 00:21:50,359 --> 00:21:53,479 Speaker 11: significant new issue concession, which is something that a lot 433 00:21:53,520 --> 00:21:56,040 Speaker 11: of investors have not been getting this year in the 434 00:21:56,040 --> 00:22:00,520 Speaker 11: primary market. So there's that balance of are these valuations 435 00:22:00,520 --> 00:22:05,359 Speaker 11: compensating me for the potential risk in a higher quality company. Now, 436 00:22:05,359 --> 00:22:07,399 Speaker 11: if this is where a single BEE or triple C 437 00:22:07,560 --> 00:22:09,840 Speaker 11: related bond deal, I think that we'd have a very 438 00:22:09,840 --> 00:22:11,480 Speaker 11: different conversation. 439 00:22:11,480 --> 00:22:14,440 Speaker 6: When it's notable though, that the debt being raised isn't 440 00:22:14,480 --> 00:22:17,120 Speaker 6: just in the syndicate market. It's also private credit that's 441 00:22:17,119 --> 00:22:20,560 Speaker 6: been participating in this too. Meta also doing this a 442 00:22:20,680 --> 00:22:24,640 Speaker 6: JV with Blue Owl and PIMCO that leans on Meta's 443 00:22:24,720 --> 00:22:29,360 Speaker 6: credit worthiness without actually impacting Meta credit because it's off 444 00:22:29,400 --> 00:22:30,560 Speaker 6: balance sheet debt? 445 00:22:30,960 --> 00:22:31,879 Speaker 5: Is that concerning? 446 00:22:32,080 --> 00:22:35,200 Speaker 6: Especially with off balance sheet debt and that being used 447 00:22:35,200 --> 00:22:38,320 Speaker 6: as a way to fundraise it seems problematic in some areas. 448 00:22:38,920 --> 00:22:41,480 Speaker 11: Yes, I think that off balance sheet debt is always 449 00:22:41,480 --> 00:22:45,480 Speaker 11: a very appropriate Halloween topic. It gets your spooky senses 450 00:22:45,760 --> 00:22:48,760 Speaker 11: rising a little bit because there is a historic track 451 00:22:48,840 --> 00:22:52,000 Speaker 11: record of off balance sheet debt sometimes going a little 452 00:22:52,000 --> 00:22:56,200 Speaker 11: bit sideways. Now when it comes to the AI investment spend, 453 00:22:56,520 --> 00:22:59,840 Speaker 11: there is just the reality that so much capital is 454 00:23:00,080 --> 00:23:02,879 Speaker 11: being raised and needed to be put to work in 455 00:23:02,960 --> 00:23:05,960 Speaker 11: such a wide variety of initiatives that some sort of 456 00:23:06,000 --> 00:23:10,480 Speaker 11: diversification of financing does make some sense. Now that being said, 457 00:23:10,720 --> 00:23:14,040 Speaker 11: anytime we see off balance sheet we're definitely taking a 458 00:23:14,240 --> 00:23:17,480 Speaker 11: closer look, trying to ensure that we understand kind of 459 00:23:17,520 --> 00:23:20,960 Speaker 11: the stream of cash flows and where the risks. 460 00:23:20,640 --> 00:23:25,480 Speaker 6: Really lie well for things like project finance. In general, 461 00:23:25,960 --> 00:23:29,040 Speaker 6: things happen whennie there's forced masure. There are big events 462 00:23:29,040 --> 00:23:33,120 Speaker 6: that disrupt specially physical plants. Are those types of risks 463 00:23:33,160 --> 00:23:34,879 Speaker 6: fully appreciated by this market. 464 00:23:36,000 --> 00:23:39,479 Speaker 10: Yeah, that's a great point. Project finance can be a 465 00:23:39,520 --> 00:23:41,280 Speaker 10: really challenging. 466 00:23:40,840 --> 00:23:44,119 Speaker 11: Road sometimes, and I think when we look back at 467 00:23:44,200 --> 00:23:48,040 Speaker 11: valuations and where they stand, the reality is corporate credit 468 00:23:48,080 --> 00:23:51,560 Speaker 11: spreads are very very tight. Now, that doesn't mean that 469 00:23:51,600 --> 00:23:55,120 Speaker 11: they necessarily have to widen, but the balance of risks 470 00:23:55,200 --> 00:23:58,440 Speaker 11: does seem to be skewed much more to the widening 471 00:23:58,880 --> 00:24:02,800 Speaker 11: rather than incremental compression or tightening from here on out, 472 00:24:03,280 --> 00:24:05,360 Speaker 11: and that does leave us a little bit more cautious 473 00:24:05,480 --> 00:24:08,000 Speaker 11: just in terms of the direction of travel of spreads 474 00:24:08,119 --> 00:24:10,879 Speaker 11: more broadly, as we have this mix of kind of 475 00:24:11,000 --> 00:24:15,320 Speaker 11: broader macroeconomic risk with what's going on in the consumer complex, 476 00:24:15,480 --> 00:24:18,240 Speaker 11: and then also just capital structure and balance sheet risk 477 00:24:18,359 --> 00:24:22,040 Speaker 11: with how things are being financed, where the capital is flowing, 478 00:24:22,440 --> 00:24:24,840 Speaker 11: and whether that return on investment is going to be 479 00:24:24,880 --> 00:24:27,240 Speaker 11: realized in the relatively near term. 480 00:24:27,960 --> 00:24:30,960 Speaker 5: All of that, and spreads are barely moved. Winnie. 481 00:24:31,119 --> 00:24:34,439 Speaker 6: What would it take to significantly and sustainably wide spreads 482 00:24:34,440 --> 00:24:34,960 Speaker 6: at this point? 483 00:24:36,240 --> 00:24:38,520 Speaker 11: That is the question that every client is asking us, 484 00:24:38,560 --> 00:24:41,600 Speaker 11: and I think that it comes down to some sort 485 00:24:41,640 --> 00:24:45,919 Speaker 11: of acknowledgment that the fundamental picture is perhaps less healthy 486 00:24:46,080 --> 00:24:50,119 Speaker 11: than what people are currently anticipating. Earnings expectations for twenty 487 00:24:50,160 --> 00:24:51,840 Speaker 11: twenty six are pretty lofty. 488 00:24:52,160 --> 00:24:54,480 Speaker 10: The most recent earnings have come in I would. 489 00:24:54,320 --> 00:24:57,520 Speaker 11: Say, relatively well in aggregate, though we have seen some 490 00:24:57,640 --> 00:25:01,080 Speaker 11: signs of pressure in some different sectors. Now, what usually 491 00:25:01,160 --> 00:25:07,160 Speaker 11: changes that technical demand for fixed income is concerns around downgrades, 492 00:25:07,200 --> 00:25:11,560 Speaker 11: around defaults, around the potential recession word. And I do 493 00:25:11,600 --> 00:25:14,000 Speaker 11: think that over the next twelve months there is that 494 00:25:14,320 --> 00:25:19,119 Speaker 11: risk that some of these lofty expectations start to be 495 00:25:19,200 --> 00:25:21,800 Speaker 11: a little bit disappointed. And that's where you start to 496 00:25:21,840 --> 00:25:25,080 Speaker 11: introduce some of the conversations around what is the true 497 00:25:25,119 --> 00:25:29,240 Speaker 11: fundamental trajectory of corporate credit. We've enjoyed a massive ratings 498 00:25:29,320 --> 00:25:32,560 Speaker 11: upgrade cycle. Is that going to start to reverse and 499 00:25:32,560 --> 00:25:34,240 Speaker 11: start to spook investors a little bit. 500 00:25:34,640 --> 00:25:38,800 Speaker 3: I'm looking at a cuddly cockroach costume from Halloween cost 501 00:25:39,080 --> 00:25:40,000 Speaker 3: that looks. 502 00:25:39,760 --> 00:25:41,800 Speaker 5: Like it is definitely going to do the trick. 503 00:25:41,720 --> 00:25:44,720 Speaker 3: When you without government data, I'm just wondering, from your perspective, 504 00:25:44,800 --> 00:25:47,240 Speaker 3: is there any sign whatsoever that we do have that 505 00:25:47,359 --> 00:25:50,720 Speaker 3: downturn that could potentially call people's bluff. 506 00:25:52,000 --> 00:25:54,000 Speaker 11: Yeah, So I think then when we look at the 507 00:25:54,119 --> 00:25:57,919 Speaker 11: composition of economic growth recently, we do realize that so 508 00:25:58,080 --> 00:26:01,840 Speaker 11: much of the momentum in the broader economy and also 509 00:26:01,880 --> 00:26:05,680 Speaker 11: the market has been linked to AI spending, to tax spending, 510 00:26:05,760 --> 00:26:08,959 Speaker 11: to all of those initiatives. When we think about the 511 00:26:09,000 --> 00:26:11,440 Speaker 11: current health of the consumer, it's a little bit more 512 00:26:11,440 --> 00:26:14,560 Speaker 11: of a mixed bag, with the bank saying, hey, we're 513 00:26:14,600 --> 00:26:16,560 Speaker 11: not seeing a lot of signs of pressure here on 514 00:26:16,600 --> 00:26:19,879 Speaker 11: the consumer, and then some of the consumer products companies saying, 515 00:26:19,960 --> 00:26:24,080 Speaker 11: this is the worst consumer sentiment, the worst consumer environment 516 00:26:24,160 --> 00:26:27,040 Speaker 11: that we've seen in a very very long time. Trying 517 00:26:27,080 --> 00:26:30,240 Speaker 11: to reconcile all of those things, I think indicates to 518 00:26:30,320 --> 00:26:32,520 Speaker 11: us that the job market is going to be the 519 00:26:32,600 --> 00:26:33,440 Speaker 11: lynchpin here. 520 00:26:33,800 --> 00:26:36,520 Speaker 10: We've already seen a pretty significant downdraft in the pace 521 00:26:36,560 --> 00:26:37,400 Speaker 10: of job ads. 522 00:26:37,520 --> 00:26:39,719 Speaker 11: Of course, we are flying a little bit blind as 523 00:26:39,720 --> 00:26:42,640 Speaker 11: it relates to official economic data, but there are some 524 00:26:42,720 --> 00:26:46,080 Speaker 11: substitutions there that would generally point to not a super 525 00:26:46,200 --> 00:26:49,720 Speaker 11: encouraging labor market overall, and we're very much focused on 526 00:26:49,760 --> 00:26:50,560 Speaker 11: those announcements. 527 00:26:51,880 --> 00:26:55,360 Speaker 2: This is the Bloomberg Survendments podcast, bringing you the best 528 00:26:55,440 --> 00:26:58,760 Speaker 2: in market, economics, angio politics. 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