Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day
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Speaker 2: Terminal and the Bloomberg Business app. The former Fed Governor
Speaker 2: Bessie Duke writes in the following it would take something
Speaker 2: extraordinary to derail a twenty five basis point cut in September.
Speaker 2: The question we've all got what it would take to
Speaker 2: make if fifty Bessy joins us now for more, Betsy,
Speaker 2: wonderful to see you once again. Let's start with Friday
Speaker 2: and that speech on Friday. Lisa and I've got a
Speaker 2: similar question, and I think you might have the answer.
Speaker 2: Was the chairman speaking for the committee on Friday or
Speaker 2: speaking from South So for the.
Speaker 1: Entire speech he was speaking for the committee except for
Speaker 1: the one line when he said, my confidence has grown
Speaker 1: that inflation is on a sustainable path. And there he said,
Speaker 1: my and that's very unusual for this, for this Cheerman.
Speaker 1: And I think what he was doing there was he
Speaker 1: was expressing his own opinion, but giving the committee room,
Speaker 1: not front running the committee, but giving the committee room
Speaker 1: in September through the sep to all put out their
Speaker 1: own estimates of both where the various indicators are going
Speaker 1: to be and their confidence in their forecasts.
Speaker 2: Bessie, how big do you think the range will be
Speaker 2: in the Summary of Economic projections come September eighteenth? How
Speaker 2: wide is that range going to be?
Speaker 1: The range of the projections themselves are the confidence. So
Speaker 1: the projections themselves, I don't think are going to be
Speaker 1: a terribly wide range, or not.
Speaker 3: More than usual wide range.
Speaker 1: But what I'm really watching for is the confidence and
Speaker 1: particularly the confidence in the inflation forecast. In the gym projections,
Speaker 1: there were just one or two participants who had more
Speaker 1: than actually normal confidence in their projections. All the rest
Speaker 1: of them said more uncertainty than usual. So that's the
Speaker 1: confidence piece that I'll be looking for.
Speaker 4: Betsy, do you think that it's appropriate for this fedter
Speaker 4: reserve to be so disproportionately weighted to cutting rates at
Speaker 4: a time, or we're not seeing true weakness in a
Speaker 4: labor market.
Speaker 1: Well, cutting rates is right now only reducing the amount
Speaker 1: of tightness. It's not in any way becoming stimulative, and
Speaker 1: so I think it is appropriate to begin that, but
Speaker 1: I think they'll go fairly slowly and feel their way along.
Speaker 1: The one piece that I don't think there's consensus on
Speaker 1: is what.
Speaker 3: Is the level of neutral?
Speaker 1: What is the neutral level of interest rates those that
Speaker 1: are neither stimulative nor restrictive, And I think they'll be
Speaker 1: feeling that went along to that point.
Speaker 4: They also didn't really resolve the other issue, which was
Speaker 4: the theme of the whole conference, which was how much
Speaker 4: was monetary policy reponsible for bringing down inflation and how
Speaker 4: much could it be responsible for preventing some sort of
Speaker 4: downside to the labor market in general. I mean, did
Speaker 4: we get any answers to some of the bigger questions
Speaker 4: other than simply a FED show came out and said, yes,
Speaker 4: we're going to cut rates. We're going to start the process,
Speaker 4: so we could potentially cut a lot.
Speaker 1: So actually I think he did address that question. The
Speaker 1: piece that he talked about is the importance of inflation expectations,
Speaker 1: and what I heard him say was, yes, you know,
Speaker 1: we were wrong on transitory. Once we realized we were wrong,
Speaker 1: we acted. And so what I heard from that is
Speaker 1: so the Fed might get the individual settings wrong from
Speaker 1: time to time, but its commitment to its mandate and
Speaker 1: willingness to act in furtherance of that mandate is most
Speaker 1: important for the confidence and anchoring inflation expectations. And that
Speaker 1: piece I think he declared victory on not necessarily inflation,
Speaker 1: but inflation expectations remaining anchored through this cycle of inflation.
Speaker 2: Can we deal with inflation that contribution to actually bringing
Speaker 2: inflation down from eight down towards three. Let's see what's
Speaker 2: your impression of things, because in that speech on Friday,
Speaker 2: I think we certainly walked away with this idea that
Speaker 2: the Federal Reserve Chair was acknowledging that a lot of
Speaker 2: the work came from elsewhere.
Speaker 1: Well, the problem this was a supply side driven inflation anyway,
Speaker 1: So a lot all of the work was on the
Speaker 1: supply side, which effect can't really effect. All the VET
Speaker 1: could do was whole demand in check as best it
Speaker 1: could while supply caught up. And that's true of the
Speaker 1: labor market as well as the goods market, and I
Speaker 1: think they did that. What I heard in this speech
Speaker 1: he recognized that the reduction inflation has come entirely from supply,
Speaker 1: including on the labor side. So when you look at labor,
Speaker 1: I don't think we have a week labor market. It's
Speaker 1: coming into balance, but it's coming into balance because of
Speaker 1: improvements and participation and increases in immigration, both of which
Speaker 1: have a.
Speaker 3: Limit to how much they can continue to contribute.
Speaker 2: Bessie Juke, appreciate it. Thank you, Former Fed Governor Bessie Joke.
Speaker 2: Down the latest and the reaction there to that speech
Speaker 2: begs the question further improvements on inflation from here? Does
Speaker 2: it require the pain that the Federal Reserve chairman was
Speaker 2: talking about two years ago? And Miss Pierre Fadagho of
Speaker 2: New Street Research recently raising its price target on the
Speaker 2: AI giants to one, expecting reassuring signals in the earnings
Speaker 2: results that stuck us up by about a half or
Speaker 2: one percent this morning after a decent rally on Friday.
Speaker 2: Pierre fredagu of New Street joins us now for more
Speaker 2: pre just go through sort of base case expectations for
Speaker 2: you and a team coming on Wednesday.
Speaker 5: Yes, so on Wednesday, you know, investors got tricked up,
Speaker 5: trioked off a bit by all this noise about a
Speaker 5: black Whale family of chips and next generation chip's being delayed,
Speaker 5: and so that created some kind of like nervousness around
Speaker 5: the stock and to us, the reality is that NVDA
Speaker 5: is still in the same situation. All buyers are increasing
Speaker 5: their capex, the supply chain is increasing capacity very very steadily.
Speaker 5: So it's very reasonable to expect Nvidia to do better
Speaker 5: than what the guide did three months ago, and to
Speaker 5: guide for the next three months in the same vein
Speaker 5: like a above current expectations. So we think the numbers
Speaker 5: are going to do to do fine. And then the
Speaker 5: second thing is all investors are going to ask on
Speaker 5: the conference call about the black Well delays, what does
Speaker 5: that mean?
Speaker 3: Doesn't mean like gross is going.
Speaker 5: To slow down and now you here is kind of
Speaker 5: like counter intuitive. The reality is that when you launch
Speaker 5: a new chip like black Well, it's consuming more of
Speaker 5: your supply capacity.
Speaker 3: You need more HBM chips per GPU, you need more.
Speaker 5: Like Cobost packaging capacity per GPU, and so if the
Speaker 5: new chip is ramping slower, it's actually easying up capacity constraints,
Speaker 5: and so what we think is that management is going
Speaker 5: to explain on Wednesday that while black Bell might be
Speaker 5: delayed by six to eight or maybe twelve weeks, I
Speaker 5: hope the previous generation of Chips is actually going to
Speaker 5: continue to sell very well because we're sted in a
Speaker 5: world in which many, many, many people, many teams wants
Speaker 5: to have as many GPUs a SAP, and so if
Speaker 5: the next generation is not really yet, they'll keep buying
Speaker 5: a lot as much as they can of the previous generation.
Speaker 2: Piah, I wanted to ask you a few questions that
Speaker 2: I don't think will be answered on the call on Wednesday,
Speaker 2: and it's what's happening further downstream. I had this conversation
Speaker 2: last week with Bloomberg's man, Deep Sing, and he built
Speaker 2: things out for us a little bit as well. I'd
Speaker 2: love your thoughts too. When you hear from their biggest customers,
Speaker 2: they are still bulled up on investing in this cycle
Speaker 2: big time, without a doubt. It just gets the sense
Speaker 2: though the investors just on around the edges might be
Speaker 2: losing patients with the story that they actually want to
Speaker 2: start to see that investment and it's a real bottom
Speaker 2: line profit growth. PA, do you identify any kinds of
Speaker 2: investor restlessness further downstream with the end use case for AI?
Speaker 5: Yeah, I think you're spir that's becoming like the key
Speaker 5: questions that he concerned for investors, and that's the right
Speaker 5: way to look at it. So we're doing our best
Speaker 5: tracking down you know who's doing what with AI, and
Speaker 5: so far we think.
Speaker 3: Signals are extremely positive.
Speaker 5: Like you look at what Facebook can produce in terms
Speaker 5: of numbers of efficiency gains driven by the migration migration
Speaker 5: of their recommending recommendation engines on larger systems. When you
Speaker 5: hear like companies like Walmart telling about how much efficiency
Speaker 5: gains again form from AI, I think we're still in
Speaker 5: a phase where people are getting excited about it, and
Speaker 5: we are in that kind of like almost like contradictory
Speaker 5: situation where today if you don't invest in, whether you
Speaker 5: are like a Walmart using it or like an Amazon
Speaker 5: or a Google diploying the infrastructure, you're taking big risks
Speaker 5: because AI is very very powerful and evolving very very fast.
Speaker 5: So I think we're fairly safe in terms of the
Speaker 5: new flow coming in. But there is another reality, which
Speaker 5: is that we we are getting into twenty twenty five
Speaker 5: into a web that is going to spend like one
Speaker 5: hundred and fifty billion dollars on AI chips, and the
Speaker 5: key question is going to become again, well what's next?
Speaker 5: You know, can Nvida's business grow significantly from there?
Speaker 3: Again? But we're not going to have any.
Speaker 5: Visibility on that for at least, you know, the next
Speaker 5: six to nine months.
Speaker 4: Here do we have any visibility into what the policy
Speaker 4: backdrop is going to be and how that might affect
Speaker 4: in video? And I say this as there's a front
Speaker 4: page story in the Wall Street Journal today talking about
Speaker 4: how Chinese AI developers are basically working with internet brokers
Speaker 4: to access in video chips overseas that they can work
Speaker 4: on them without violating some of them bands on important
Speaker 4: CIN video chips into mainland China. And how much do
Speaker 4: you sort of look at this and see this as
Speaker 4: something they could potentially be a liability for the company
Speaker 4: that they talk about going forward.
Speaker 5: Yeah, I think it's it's always an overhang. You know,
Speaker 5: the government can do whatever they want. The invisible hand
Speaker 5: is still pushing pushing GPUs to watch China, and Chinese
Speaker 5: user actually still accessing their GPUs.
Speaker 3: The government has to to.
Speaker 5: Work on a on a thin line. You know, it's
Speaker 5: it's very very challenging. They don't want they want to
Speaker 5: keep you know, the leadership in AI in the US
Speaker 5: and for that they don't want to weakend Nvida or
Speaker 5: any any players, and they want to to make sure
Speaker 5: they don't let like I say, they don't let China,
Speaker 5: you know, catch up in terms of a capabilities. I
Speaker 5: think this balancing act is going to continue. We've seen
Speaker 5: it over the last two three years, and you have
Speaker 5: back and forth and you might have like a tightening
Speaker 5: of regulation around Nvidia, but now at the end of
Speaker 5: the day, you know, it's it's a smaller moving part. Remember,
Speaker 5: we are still in a world in which people want
Speaker 5: way more GPUs and way more chips than what is
Speaker 5: being produced. So if you have a ruling, you know,
Speaker 5: limiting again access for China to leading GPUs, China will
Speaker 5: instantly buy you know, previous generation GPUs, less powerful GPUs
Speaker 5: and then the more powerful GPUs. And maybe we had
Speaker 5: in our models that we're going to China next year,
Speaker 5: we're going to go to Western clients, and you know,
Speaker 5: I would call that a second order moving part. It
Speaker 5: might create a lot of headlines, but I don't think
Speaker 5: it's like enough to disrupt the trajectory as long as
Speaker 5: we are supply constraints nobly.
Speaker 2: Pierre, thank you for your clarity. As always, Pierre found
Speaker 2: a good New Street Research looking ahead to numbers from
Speaker 2: a video Wednesday afternoon.
Speaker 6: This morning, three ninety one, So.
Speaker 2: Here's the lacest. Vice President Kamala Harris back on the
Speaker 2: campaign travel this week as her campaign rags in over
Speaker 2: half a billion dollars post DNC and Donald Trump is
Speaker 2: maintaining a heavy presence in swing states after a week
Speaker 2: of counterprogramming the convention, Henretta Trees have Vader partners saying
Speaker 2: the following post Labor Day, she she could be in
Speaker 2: the lead nationally and in critical swing states by enough
Speaker 2: of a margin to emerge as the favorite to win
Speaker 2: the election. Harris has ushered in dramatic shifts in the
Speaker 2: electoral landscape, but is not yet favored to win the
Speaker 2: election in our opinion. Henrietta joins us now for more, Henretta,
Speaker 2: thanks for being with us. So I want to start
Speaker 2: with those numbers. Harris campaign and affiliates have raised five
Speaker 2: hundred and forty billion US dollars since Biden quit. How
Speaker 2: does that stack up against Campaign Trump and how are
Speaker 2: they spending it?
Speaker 7: Well, it doesn't compare to the Trump campaign at all.
Speaker 7: The Trump campaign is down into something in the ranger
Speaker 7: about sixty three million dollars for the entire month of
Speaker 7: July versus over two hundred and forty million dollars for
Speaker 7: the Harris campaign. The two are not equal. If you're
Speaker 7: looking at the fundraising numbers the DNC versus the RNC
Speaker 7: voter galvanization, the number of volunteers they've gotten in swing states,
Speaker 7: it's it's it's almost double the size, if not more,
Speaker 7: in the Harris camp. And I think that's something that
Speaker 7: the Trump campaign is actively worried about right now. You
Speaker 7: saw it from their internal polling memos this weekend. They're
Speaker 7: anticipating that not just has Commonala risen six points since
Speaker 7: she started the race just a few weeks ago, but
Speaker 7: she's going to increase another two to three points in
Speaker 7: the next couple of weeks, the next couple of days
Speaker 7: after the DNC. That's a natural bounce, but one that
Speaker 7: would supersed Trump and it probably won't fade. When you
Speaker 7: think about what Trump is doing on the trail, He's
Speaker 7: not going to campaign until Thursday and Friday. He'll be
Speaker 7: in Pennsylvania. I mean, every single day is critical here,
Speaker 7: particularly when you're behind, like the Trump campaign is now.
Speaker 2: Just to go a little bit deeper into these numbers,
Speaker 2: the five hundred and forty million, I said, bid an
Speaker 2: excuse me, five hundred and forty million. One third, yes,
Speaker 2: a heck of a lot more money. One third contributed
Speaker 2: in convention first time donors since the convention were first
Speaker 2: time donors. Two thirds were women. It's the gender split here,
Speaker 2: hendrid Of. It's interesting that gender split. How firmly entrenched
Speaker 2: you think that actually is the split between women and
Speaker 2: men in this country and who they're supporting.
Speaker 7: It is extremely firm. And I don't say that because
Speaker 7: it's just in the national data. It's in every single
Speaker 7: swing state as well, often by ten, eleven, twelve points.
Speaker 7: It's particularly noticeable amongst young male voters and every other
Speaker 7: female demographic, and it's even more pronounced between young male
Speaker 7: voters and every other age demographic of older male voters.
Speaker 7: So there is this extreme gender divide that is expanding
Speaker 7: and becoming more obvious as the race wears on.
Speaker 4: What the Harris.
Speaker 7: Campaign is going to do to dig into those numbers
Speaker 7: a little bit further with their super PACs like Future
Speaker 7: Forward is they're going to spend three hundred and seventy
Speaker 7: million dollars on AD campaigns between now and November fifth.
Speaker 7: So get ready to hear a lot about Kamala Harrison
Speaker 7: her campaign.
Speaker 4: How much is this gender divide really hinged to the
Speaker 4: issue of abortion, and how much can can Trump really
Speaker 4: counter that by coming out with things like what he
Speaker 4: did over the weekend talking about how he believes that
Speaker 4: states should decide for themselves, that they shouldn't be a
Speaker 4: federal abortion law, but that each state can make their
Speaker 4: own decisions.
Speaker 7: You know, I think that the state decision piece is
Speaker 7: really problematic because you have these state decisions being.
Speaker 3: Made at the ballot in November.
Speaker 7: In Florida, for example, where I think two thirds of
Speaker 7: abortions in the South are conducted, there is a band
Speaker 7: now at six weeks and they need to vote on
Speaker 7: that to maintain it in November. Whether it's Louisiana, Arizona, Nevada.
Speaker 7: I mean, these issues are on every single ballot. So
Speaker 7: the last thing you want is our repeat of twenty
Speaker 7: twenty two, which was a real problem for the Republican
Speaker 7: Party at the Senate and in the House, and that's
Speaker 7: what they're headed towards in twenty twenty four. And the
Speaker 7: messaging from the Trump campaign with JD. Vans and Donald
Speaker 7: Trump trying to come out as you know, pro IVF,
Speaker 7: but really saying some fundamentally problematic things about family planning,
Speaker 7: to put it nicely, is something that is alienating I
Speaker 7: think a lot of voters, and it's not just women,
Speaker 7: it's voters across the spectrum. Abortion is the number three
Speaker 7: issue that voters care about after inflation and immigration right now,
Speaker 7: and immigration and abortion are pretty neck and.
Speaker 4: Neck in the meantime. Your first point, inflation is something
Speaker 4: that we've not heard that much about. We heard, of course,
Speaker 4: the price gouging type of discussion from Kamala Harris, although
Speaker 4: we've seen some of her people walk it back and
Speaker 4: talk about how she's not actually going to get it
Speaker 4: passed and that it actually isn't, you know, an effort
Speaker 4: to take money away from grocery stores and things of
Speaker 4: that nature. I'm just wondering, how much are you getting
Speaker 4: a sense that the criticism of Kamala Harris that she
Speaker 4: isn't coming out with real policy how much is that landing.
Speaker 7: I think that it's landing amongst sort of the media groups,
Speaker 7: but amongst the general electorate. You don't see any of
Speaker 7: that translating to either her polls or fundraising. I mean,
Speaker 7: they made eighty six million dollars just last week alone.
Speaker 7: So the issue is not that she is not getting
Speaker 7: out in front of journalists and the press. That's an
Speaker 7: issue for the Trump campaign, but the American voter that's
Speaker 7: now newly galvanized. You know, Democrats are eighty three percent
Speaker 7: enthusiastic about this election versus seventy one percent of Republicans.
Speaker 7: It's not resonating with the average voter. And I think
Speaker 7: the real problem for Trump is that she doesn't need
Speaker 7: to get specific on policy. You know, we don't really
Speaker 7: need to have a robust discussion about where do you
Speaker 7: think carried interest tax rates should be, or capital gains
Speaker 7: tax rates, what kind of revenue are you trying to
Speaker 7: bring in to offset the cost of the child tax credit.
Speaker 4: We don't need any of that.
Speaker 7: We just need this sort of forward campaign versus do
Speaker 7: you want to go back to the Trump administration of
Speaker 7: the four years that he was in office? And that's
Speaker 7: really what the campaign is about and don't see that
Speaker 7: changing of the next seventy one days.
Speaker 2: Can we talk about policy, forgive me, but we want
Speaker 2: to talk about policies, so hopefully we can do that.
Speaker 2: This news came out from Canada from our team just
Speaker 2: moments ago. According to people familiar with the matter, Canada
Speaker 2: would impose new tariffs on Chinese made electric vehicles, aluminum
Speaker 2: and steel, lining up behind what we've heard from the
Speaker 2: United States already previously, the government plans to announce a
Speaker 2: one hundred percent levy on electric vehicles twenty five percent
Speaker 2: on steel and aluminum. Canada agrees with the United States.
Speaker 2: It seems to be by the world is when it
Speaker 2: comes to tariffs and China. How much daylight is there
Speaker 2: between Trump and Harris on this very key issue for
Speaker 2: a lot of voters.
Speaker 7: Well, I mean, let's be mindful that the Biden administration
Speaker 7: just a couple of weeks ago, months ago, put in
Speaker 7: the one hundred percent electric vehicles tiff, the three times
Speaker 7: higher steel on aluminum tariffs or steel tariffs. There is
Speaker 7: no question that the Trump administration started with tariffs, and
Speaker 7: the tariffs under Biden are higher and more exhaustive now
Speaker 7: than they were under Donald Trump, the USTR, the Department
Speaker 7: of Commerce, all the investment restrictions, export control restrictions.
Speaker 6: Are only growing.
Speaker 7: I don't see any scenario where any of these tariffs
Speaker 7: come off once they get put on. Think about what
Speaker 7: you'd have to see in order to take the tariffs up.
Speaker 7: You'd have to see China capitulate, China prove and then
Speaker 7: sustain that they had made changes on force, tech transfer,
Speaker 7: climate change, human rights, state subsidization. None of that has occurring.
Speaker 2: Henretta, thank you, Henritta Trace their Vada partner squeezed in
Speaker 2: some policy. This is the Bloomberg Surveillance Podcast, bringing you
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