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 00:00:15,480 --> 00:00:18,720 Speaker 2: with Lisa Bromwitz and Amerie Hordernt. 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 00:00:27,720 --> 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 --> 00:00:37,440 Speaker 2: Terminal and the Bloomberg Business app. Calsey Barrow of JP 10 00:00:37,520 --> 00:00:39,680 Speaker 2: Morgan Asset Management has this to say. While the Fed 11 00:00:39,920 --> 00:00:42,160 Speaker 2: may have been uncomfortable with the lack of government data, 12 00:00:42,240 --> 00:00:45,519 Speaker 2: our conclusion from the information that is available is that 13 00:00:45,560 --> 00:00:48,519 Speaker 2: the labor market continues to gradually weaken. Calsei joins us 14 00:00:48,520 --> 00:00:50,760 Speaker 2: now from More Cassie, good morning, Good morning, and looking 15 00:00:50,760 --> 00:00:52,360 Speaker 2: forward to having you through the jobs number in about 16 00:00:52,360 --> 00:00:54,760 Speaker 2: ten minutes time. Let's talk about that job's number. Is 17 00:00:54,800 --> 00:00:56,920 Speaker 2: it stou? Does it make a difference to the debate 18 00:00:57,000 --> 00:00:58,040 Speaker 2: on December. 19 00:00:57,640 --> 00:01:00,800 Speaker 3: Tenth, Well, if we look at it, it's been seventy 20 00:01:00,920 --> 00:01:04,640 Speaker 3: six days since the last jobs report, So if anything 21 00:01:04,680 --> 00:01:08,200 Speaker 3: was in my fridge for seventy six days, I would say, yeah, 22 00:01:08,280 --> 00:01:11,280 Speaker 3: that's stale. Now, I think the most important thing that 23 00:01:11,319 --> 00:01:13,720 Speaker 3: we've learned over the last twenty four hours as it 24 00:01:13,760 --> 00:01:17,520 Speaker 3: relates to the rates market is the new BLS schedule. 25 00:01:18,240 --> 00:01:20,679 Speaker 3: So the fact that the FED is not going to 26 00:01:20,760 --> 00:01:25,680 Speaker 3: see the October or November jobs report until after the decision, 27 00:01:26,120 --> 00:01:29,640 Speaker 3: and as a result, probabilities that the FED is going 28 00:01:29,720 --> 00:01:32,600 Speaker 3: to cut in December has come down. Now I'm going 29 00:01:32,640 --> 00:01:34,520 Speaker 3: to go into a little bit of what the Fed 30 00:01:34,840 --> 00:01:38,000 Speaker 3: could do or will do, versus should do. Now, what 31 00:01:38,080 --> 00:01:41,240 Speaker 3: they will do, I think is probably skip the meeting 32 00:01:41,400 --> 00:01:44,720 Speaker 3: unless we get a really poor payrolls report today because 33 00:01:44,720 --> 00:01:47,680 Speaker 3: of the lack of data, because they are quote flying blind, 34 00:01:48,120 --> 00:01:51,240 Speaker 3: but I don't really believe they're flying blind. You know, 35 00:01:51,240 --> 00:01:54,040 Speaker 3: we've all been in planes. You go on a plane, 36 00:01:54,120 --> 00:01:58,120 Speaker 3: you fly through clouds, you fly through a fog. Right, 37 00:01:58,240 --> 00:02:00,440 Speaker 3: If I'm not a pilot, but I'm pretty sure sure 38 00:02:00,800 --> 00:02:03,120 Speaker 3: that when a pilot is slying a plane, they're not 39 00:02:03,120 --> 00:02:03,919 Speaker 3: looking out the window. 40 00:02:04,040 --> 00:02:04,200 Speaker 2: Right. 41 00:02:04,240 --> 00:02:07,640 Speaker 3: They have all of these technical radars and instruments that 42 00:02:07,680 --> 00:02:11,600 Speaker 3: they're using, and honestly, I think that there is enough 43 00:02:11,720 --> 00:02:14,200 Speaker 3: data out there for them to assess the labor market, 44 00:02:14,400 --> 00:02:17,400 Speaker 3: and as I said in that opening, to view it 45 00:02:17,480 --> 00:02:21,240 Speaker 3: as generally weakening over time. And that's even if this 46 00:02:21,400 --> 00:02:24,240 Speaker 3: job's report today comes out a little stronger. And if 47 00:02:24,240 --> 00:02:25,960 Speaker 3: we were to do a whisper number, which I know 48 00:02:25,960 --> 00:02:28,760 Speaker 3: we don't have for today's number, I would say it 49 00:02:28,880 --> 00:02:31,600 Speaker 3: feels like the market is prepared for a modestly stronger 50 00:02:31,680 --> 00:02:34,639 Speaker 3: number relative to what's on the echo screen for consensus. 51 00:02:34,720 --> 00:02:37,280 Speaker 4: So let's say it is moderately stronger and you don't 52 00:02:37,280 --> 00:02:40,200 Speaker 4: get a twenty five basis point rate cut next month, 53 00:02:40,480 --> 00:02:42,520 Speaker 4: Does that mean that a fifty basis point rate cut 54 00:02:42,600 --> 00:02:43,840 Speaker 4: in January is more likely? 55 00:02:44,120 --> 00:02:47,040 Speaker 3: I don't think so. I think that they feel moving 56 00:02:47,080 --> 00:02:51,120 Speaker 3: gradually is appropriate, particularly when you're so close to neutral. 57 00:02:51,960 --> 00:02:55,600 Speaker 3: So I think that if they do skip, we're still 58 00:02:55,639 --> 00:02:58,840 Speaker 3: looking for twenty five basis point rate cut in January. 59 00:02:59,200 --> 00:03:02,239 Speaker 3: The market has been very efficient in terms of its repricing, 60 00:03:02,480 --> 00:03:04,680 Speaker 3: so the past few days you've seen the probability of 61 00:03:04,720 --> 00:03:08,040 Speaker 3: December go down. But all of those rate cuts have 62 00:03:08,120 --> 00:03:10,880 Speaker 3: really just been pushed into twenty twenty six, and the 63 00:03:11,000 --> 00:03:13,640 Speaker 3: terminal rate for the Fed Funds rate hasn't actually changed 64 00:03:13,720 --> 00:03:18,679 Speaker 3: very much, so it's still around three point one percent approximately, 65 00:03:19,400 --> 00:03:22,520 Speaker 3: So the market is really looking at this as a skip, 66 00:03:22,840 --> 00:03:25,920 Speaker 3: not a pause, not a hold. And I think that 67 00:03:25,960 --> 00:03:28,880 Speaker 3: the dot plot is also going to communicate that, meaning, 68 00:03:28,919 --> 00:03:32,440 Speaker 3: even if they don't cut in December, the twenty twenty 69 00:03:32,440 --> 00:03:35,040 Speaker 3: six dot is going to be below the current Fed 70 00:03:35,080 --> 00:03:35,600 Speaker 3: funds rate. 71 00:03:35,880 --> 00:03:37,720 Speaker 4: I don't want to go back to this, but the 72 00:03:37,800 --> 00:03:40,640 Speaker 4: idea of the expiration date of the food in your fridge, 73 00:03:40,800 --> 00:03:44,040 Speaker 4: seventy six day oled wonderbread or canned beans are very 74 00:03:44,080 --> 00:03:47,240 Speaker 4: different than seventy six day old strawberries, And I just 75 00:03:47,360 --> 00:03:50,560 Speaker 4: wonder how useful it potentially could be. Even if fee 76 00:03:50,560 --> 00:03:52,400 Speaker 4: maybe you don't want to eat it, you could eat 77 00:03:52,400 --> 00:03:54,080 Speaker 4: it and not get sick. I mean, is there something 78 00:03:54,120 --> 00:03:56,520 Speaker 4: in this job data that's going to be relevant how 79 00:03:56,560 --> 00:03:58,440 Speaker 4: you see the trajectory for the Fed Reserve? 80 00:03:58,680 --> 00:03:58,960 Speaker 2: Yeah? 81 00:03:59,000 --> 00:04:02,120 Speaker 3: Absolutely, But what I would say is if you look 82 00:04:02,160 --> 00:04:06,040 Speaker 3: at the NFPCHR, you pull it up on the Bloomberg terminal, 83 00:04:06,280 --> 00:04:08,440 Speaker 3: you type in GP, what you're going to see is 84 00:04:08,480 --> 00:04:11,520 Speaker 3: a saw tooth pattern. Right, The jobs numbers don't go 85 00:04:11,560 --> 00:04:13,600 Speaker 3: in a straight line. You have a slightly hotter, you 86 00:04:13,600 --> 00:04:16,240 Speaker 3: have a slightly weaker. You have to focus on the trend, 87 00:04:16,920 --> 00:04:18,720 Speaker 3: and so that's what I'm going to be focused on. 88 00:04:18,839 --> 00:04:20,880 Speaker 3: In a few minutes time, I'm going to be looking 89 00:04:20,920 --> 00:04:23,040 Speaker 3: at what the three and six month moving averages are. 90 00:04:23,120 --> 00:04:25,000 Speaker 3: I'm also going to be looking at how much of 91 00:04:25,040 --> 00:04:29,719 Speaker 3: the jobs are cyclical versus a cyclical So most of 92 00:04:29,760 --> 00:04:32,560 Speaker 3: the hiring that we've been seeing really in the last 93 00:04:32,600 --> 00:04:36,400 Speaker 3: six to twelve months has been a cyclical hiring, which 94 00:04:36,440 --> 00:04:38,800 Speaker 3: is I think an indication of the fact that the 95 00:04:38,880 --> 00:04:41,840 Speaker 3: labor market under the surface is a little bit more squishy. 96 00:04:42,240 --> 00:04:44,280 Speaker 3: Why that matters for the Fed. It doesn't mean that 97 00:04:44,320 --> 00:04:47,000 Speaker 3: they need to do emergency cuts, but it does mean 98 00:04:47,000 --> 00:04:49,760 Speaker 3: that if they do continue to cut, it doesn't threaten 99 00:04:50,000 --> 00:04:54,040 Speaker 3: their inflation mandate. And that's really the question here is 100 00:04:54,120 --> 00:04:57,680 Speaker 3: if they continue to cut, does that threaten their ability 101 00:04:57,720 --> 00:04:59,839 Speaker 3: to get back to two percent on inflation? And we 102 00:05:00,040 --> 00:05:03,320 Speaker 3: would say no, that we're not really seeing evidence in 103 00:05:03,360 --> 00:05:06,279 Speaker 3: the cyclical sides of the economy that wages are reaccelerating 104 00:05:06,360 --> 00:05:07,920 Speaker 3: or the labor market is retightening. 105 00:05:08,120 --> 00:05:10,880 Speaker 5: From your view, how political has December gotten. 106 00:05:12,279 --> 00:05:16,800 Speaker 3: I'm not sure it's gotten particularly political. I think this 107 00:05:16,920 --> 00:05:19,480 Speaker 3: is actually more about the fact that we are getting 108 00:05:19,520 --> 00:05:23,800 Speaker 3: close to estimates of neutral, and so every single decision 109 00:05:23,839 --> 00:05:26,840 Speaker 3: from here on out just gets harder. And to be fair, 110 00:05:27,920 --> 00:05:31,000 Speaker 3: it is harder for them without some of the data 111 00:05:31,279 --> 00:05:34,839 Speaker 3: that they had, So I wouldn't necessarily say it's more political. 112 00:05:34,880 --> 00:05:37,000 Speaker 3: I just think that it's a tougher part of the 113 00:05:37,040 --> 00:05:39,320 Speaker 3: economic cycle to try to determine what's going on. 114 00:05:39,360 --> 00:05:41,800 Speaker 2: I'm really asked this question earlier on. I'd love your view, 115 00:05:41,920 --> 00:05:44,440 Speaker 2: your opinion as a market participant, how you would react 116 00:05:44,480 --> 00:05:46,719 Speaker 2: if they delayed the meeting until after the dates had 117 00:05:46,760 --> 00:05:49,000 Speaker 2: dropped on December sixteenth. I'm not saying they're going to 118 00:05:49,000 --> 00:05:51,279 Speaker 2: do that, just as a market participant, how would you 119 00:05:51,279 --> 00:05:52,480 Speaker 2: respond to that? Is that a good thing? 120 00:05:52,920 --> 00:05:56,080 Speaker 3: I would be very surprised. I think the market would 121 00:05:56,080 --> 00:05:56,920 Speaker 3: be very surprised. 122 00:05:57,120 --> 00:06:00,320 Speaker 2: I mean that's surprisingly in a negative way, though. 123 00:06:00,720 --> 00:06:03,360 Speaker 3: I mean I'm thinking through this as as you're laying 124 00:06:03,400 --> 00:06:06,600 Speaker 3: it out your net worries, and I guess the market 125 00:06:06,640 --> 00:06:11,159 Speaker 3: would probably view that as the risk that the data 126 00:06:11,160 --> 00:06:13,919 Speaker 3: that they're going to receive is weaker, and so you know, 127 00:06:13,960 --> 00:06:16,680 Speaker 3: the Fed wants to pause so that they don't miss 128 00:06:16,720 --> 00:06:19,680 Speaker 3: an opportunity to cut and then have to wait all 129 00:06:19,720 --> 00:06:23,239 Speaker 3: the way till January. But it seems like a pretty 130 00:06:23,360 --> 00:06:26,039 Speaker 3: high hurdle. I mean, they put out those dates for 131 00:06:26,240 --> 00:06:28,719 Speaker 3: the schedule years in advance. 132 00:06:28,520 --> 00:06:30,760 Speaker 2: In the number drop just moments ago. Payrolls came in 133 00:06:30,800 --> 00:06:33,680 Speaker 2: at one nineteen. That's an upside surprise. The estimate was 134 00:06:33,720 --> 00:06:36,279 Speaker 2: fifty one k. That's a big upside surprise, but a 135 00:06:36,320 --> 00:06:38,320 Speaker 2: lot of nuance now swear a few of the data 136 00:06:38,360 --> 00:06:42,080 Speaker 2: points that points out negative revisions. Unemployment climb into four 137 00:06:42,120 --> 00:06:45,120 Speaker 2: point four percent from four point three The estimate was 138 00:06:45,160 --> 00:06:47,200 Speaker 2: for that to stay at four point three percent, and 139 00:06:47,240 --> 00:06:49,600 Speaker 2: some more timely data. If you're looking at continuing claims. 140 00:06:49,600 --> 00:06:52,200 Speaker 2: Continuing claims the wrong kind of upside surprise. So if 141 00:06:52,200 --> 00:06:54,520 Speaker 2: you're out of work in America at the moment, it's 142 00:06:54,560 --> 00:06:57,520 Speaker 2: getting harder and harder to get back into the labor force. 143 00:06:57,520 --> 00:06:59,880 Speaker 2: And that's what you see from that number. Almost repeatedly 144 00:07:00,120 --> 00:07:02,159 Speaker 2: over the last several months, they got the market reaction 145 00:07:02,480 --> 00:07:04,640 Speaker 2: equity features stillness, session highs on the S and P 146 00:07:04,839 --> 00:07:07,880 Speaker 2: five hundred and on the NASTAK supported by decent earnings 147 00:07:07,880 --> 00:07:11,480 Speaker 2: from Nvidia. Bond yields off the back of this initially lower, 148 00:07:11,640 --> 00:07:13,800 Speaker 2: they stay lower, down by three basis points on a 149 00:07:13,840 --> 00:07:17,000 Speaker 2: two year at three fifty five Calsie Barrow. If JP 150 00:07:17,120 --> 00:07:19,320 Speaker 2: Morgan still with us, Calsie, You've had ten minutes to 151 00:07:19,320 --> 00:07:20,120 Speaker 2: go over these numbers. 152 00:07:20,160 --> 00:07:21,000 Speaker 6: What jumps down to you? 153 00:07:21,480 --> 00:07:24,360 Speaker 3: Yeah, So, first of all, on the market reaction, clearly 154 00:07:24,440 --> 00:07:28,120 Speaker 3: the market was somewhat prepared for a stronger number as 155 00:07:28,160 --> 00:07:32,560 Speaker 3: it relates to September. But then what you had in 156 00:07:32,600 --> 00:07:34,800 Speaker 3: the mix of it is a number of things that 157 00:07:35,480 --> 00:07:39,160 Speaker 3: pointed to less strength than just the headline number alone. 158 00:07:39,400 --> 00:07:41,520 Speaker 3: So to me, you know, the number of the things 159 00:07:41,520 --> 00:07:44,640 Speaker 3: that stood out were the unemployment rate moving higher and 160 00:07:44,680 --> 00:07:47,679 Speaker 3: on an unrounded basis that actually moved to four point 161 00:07:47,720 --> 00:07:52,160 Speaker 3: four to four, so not far away from four point five, 162 00:07:52,720 --> 00:07:56,040 Speaker 3: So you know, that's a meaningful thing to me. Continuing 163 00:07:56,080 --> 00:08:00,480 Speaker 3: claims also, new cycle high, as you mentioned, means it 164 00:08:00,520 --> 00:08:03,040 Speaker 3: is harder to find a job. And then the third 165 00:08:03,040 --> 00:08:06,600 Speaker 3: thing I would say is the concentration of job growth 166 00:08:06,720 --> 00:08:10,120 Speaker 3: is still very high. So as I see it, fifty 167 00:08:10,200 --> 00:08:14,080 Speaker 3: nine thousand jobs created in healthcare and education, which is 168 00:08:14,120 --> 00:08:18,400 Speaker 3: an acyclical area of the economy, and that's more than 169 00:08:18,440 --> 00:08:21,360 Speaker 3: half of the job gains. Where you have the cyclical 170 00:08:21,400 --> 00:08:24,520 Speaker 3: areas like manufacturing, professional business services. 171 00:08:24,160 --> 00:08:26,960 Speaker 2: Negative ay Stein, there's a chance we might get a 172 00:08:27,040 --> 00:08:28,400 Speaker 2: right cut next month. 173 00:08:28,560 --> 00:08:32,199 Speaker 3: Yeah, this really is an interesting development. I mean, our 174 00:08:32,240 --> 00:08:34,920 Speaker 3: base case has been that you will see a December 175 00:08:35,000 --> 00:08:38,840 Speaker 3: rate cut. We tempered our expectations because of the announcement 176 00:08:38,920 --> 00:08:42,320 Speaker 3: from the BLS, but our general view is that the 177 00:08:42,320 --> 00:08:45,120 Speaker 3: FED is going to maintain an easing bias, and that's 178 00:08:45,240 --> 00:08:49,559 Speaker 3: ultimately what's important. What's most important for the FED is 179 00:08:49,600 --> 00:08:53,480 Speaker 3: that the labor market is cooling, and as a result, 180 00:08:53,520 --> 00:08:56,840 Speaker 3: it means they're able to cut rates without threatening their 181 00:08:56,960 --> 00:09:01,319 Speaker 3: inflation objective. We see wages continue to mind moderate, We 182 00:09:01,360 --> 00:09:05,160 Speaker 3: see inflation outside of tariffs as fairly benign. The bond 183 00:09:05,160 --> 00:09:07,680 Speaker 3: market tends to agree with us as it relates to 184 00:09:08,840 --> 00:09:13,520 Speaker 3: you look at the inflation market itself, fairly benign pricing there. 185 00:09:13,960 --> 00:09:19,240 Speaker 3: And so I think this is an interesting report that 186 00:09:19,600 --> 00:09:23,440 Speaker 3: leaves December potentially still on the table, although it's going 187 00:09:23,520 --> 00:09:24,760 Speaker 3: to remain a pretty close. 188 00:09:24,520 --> 00:09:27,280 Speaker 4: Call if they do. If they decide not to cut 189 00:09:27,320 --> 00:09:29,760 Speaker 4: in December, do you get more conviction to go into 190 00:09:29,760 --> 00:09:32,680 Speaker 4: long duration bonds the idea that this actually will cause 191 00:09:32,720 --> 00:09:35,720 Speaker 4: the cracks to widen that we're seeing in the labor market. 192 00:09:36,040 --> 00:09:38,520 Speaker 3: So I think what we've experienced over the last few 193 00:09:38,600 --> 00:09:43,640 Speaker 3: weeks are great examples of fixed income behaving the way 194 00:09:43,679 --> 00:09:47,960 Speaker 3: that you would expect in periods when the market is 195 00:09:48,040 --> 00:09:51,600 Speaker 3: trading risk off, serving as the ballast, serving as the 196 00:09:51,640 --> 00:09:55,160 Speaker 3: diversifier within your portfolio, and that obviously comes down to 197 00:09:55,760 --> 00:09:57,480 Speaker 3: having duration in your portfolio. 198 00:09:57,600 --> 00:09:58,120 Speaker 7: So that is. 199 00:09:58,040 --> 00:10:01,280 Speaker 3: Something that we have liked. We have a range for 200 00:10:01,360 --> 00:10:04,079 Speaker 3: the tenure of three seventy five to four and a quarter. 201 00:10:04,320 --> 00:10:06,640 Speaker 3: When we're at the top of that range, you have 202 00:10:06,720 --> 00:10:11,760 Speaker 3: the opportunity to increase that position. When we move down 203 00:10:11,800 --> 00:10:13,800 Speaker 3: to the bottom of that range, we need to be 204 00:10:14,400 --> 00:10:16,640 Speaker 3: thinking about two things. Are we still in a soft 205 00:10:16,720 --> 00:10:19,640 Speaker 3: landing or is the economy changing. If we're still in 206 00:10:19,640 --> 00:10:22,199 Speaker 3: a soft landing, there's a limit to how much lower 207 00:10:22,240 --> 00:10:25,679 Speaker 3: yields can go. If we are concerned about a harder landing, 208 00:10:26,960 --> 00:10:30,480 Speaker 3: then there's even more space for rates to rally from here. 209 00:10:30,640 --> 00:10:32,360 Speaker 5: Kelsey, you brought up a great point. We're a hair 210 00:10:32,400 --> 00:10:34,400 Speaker 5: away from that line in the sand, really that Jay 211 00:10:34,440 --> 00:10:37,880 Speaker 5: Powell's outlined four point five percent unemployment rate. We were 212 00:10:37,920 --> 00:10:40,880 Speaker 5: almost just there. Isn't that going to give the impetus 213 00:10:40,880 --> 00:10:42,800 Speaker 5: on the FED that they should be concerned with the 214 00:10:42,880 --> 00:10:43,480 Speaker 5: labor market. 215 00:10:44,520 --> 00:10:48,040 Speaker 3: Quite possibly, But I do think that there are still 216 00:10:48,360 --> 00:10:54,640 Speaker 3: two core groups that are going to not necessarily change 217 00:10:54,640 --> 00:10:56,960 Speaker 3: their view as a result of this job support. I 218 00:10:57,040 --> 00:10:58,880 Speaker 3: just don't think it's enough so that the people who 219 00:10:58,920 --> 00:11:01,760 Speaker 3: wanted to stay on hold probably aren't going to look 220 00:11:01,760 --> 00:11:04,840 Speaker 3: at this immediately and say I need to change my view, 221 00:11:05,280 --> 00:11:09,120 Speaker 3: but they may be more likely to be less vocal 222 00:11:09,200 --> 00:11:13,200 Speaker 3: in terms of their descent. So it's kind of maybe 223 00:11:13,280 --> 00:11:19,000 Speaker 3: a nuance there of they're less intensely against it because 224 00:11:19,040 --> 00:11:21,080 Speaker 3: they are seeing that there are things happening on the 225 00:11:21,080 --> 00:11:23,800 Speaker 3: other side. But you know, for those who are more 226 00:11:23,800 --> 00:11:27,280 Speaker 3: concerned about inflation, that picture hasn't changed. We didn't get 227 00:11:27,320 --> 00:11:29,679 Speaker 3: any new data on inflation yet. Maybe a little bit 228 00:11:29,760 --> 00:11:34,280 Speaker 3: on the wage side, but you know that's limited, and 229 00:11:34,600 --> 00:11:36,640 Speaker 3: you know they can still say for four and a 230 00:11:36,679 --> 00:11:39,320 Speaker 3: half percent, that was what was in our forecast, So 231 00:11:39,400 --> 00:11:43,040 Speaker 3: not surprising us to the upside, and still a relatively 232 00:11:43,200 --> 00:11:45,200 Speaker 3: low unemployment rate versus history. 233 00:11:47,280 --> 00:11:50,520 Speaker 2: Stay with US multile impag Savannah's coming up off to 234 00:11:50,640 --> 00:12:02,280 Speaker 2: this iterprise on the headline number, but plenty of nuance 235 00:12:02,480 --> 00:12:05,040 Speaker 2: beyond that. Slightly one key but another number that's interesting 236 00:12:05,120 --> 00:12:08,240 Speaker 2: is eighty point two percent. Here's what's coming from the BLS. Today. 237 00:12:08,280 --> 00:12:11,640 Speaker 2: The September estimates from the Establishment Survey include both data 238 00:12:11,640 --> 00:12:13,839 Speaker 2: collected on our normal schedule prior to the shutdown and 239 00:12:13,920 --> 00:12:18,160 Speaker 2: also September data that business is self reported electronically during 240 00:12:18,160 --> 00:12:21,040 Speaker 2: the shutdown. As a result, the Establishment Survey collection rate 241 00:12:21,320 --> 00:12:24,240 Speaker 2: eighty point two percent for this initial release of September 242 00:12:24,280 --> 00:12:27,040 Speaker 2: twenty five data is higher than usual, So a higher 243 00:12:27,120 --> 00:12:29,080 Speaker 2: quality report, if we can call it that. 244 00:12:29,280 --> 00:12:31,200 Speaker 4: Yeah, so what does this leave us? Does this leave 245 00:12:31,280 --> 00:12:32,880 Speaker 4: us with a good report or a bad report? And 246 00:12:32,920 --> 00:12:34,160 Speaker 4: you talk about how it's going to be a roar 247 00:12:34,240 --> 00:12:37,079 Speaker 4: shock test. That said, the fact that this is backward 248 00:12:37,080 --> 00:12:40,080 Speaker 4: looking at seventy six day old data at the same 249 00:12:40,120 --> 00:12:43,480 Speaker 4: time that you're seeing the ongoing continuing claims tick even 250 00:12:43,559 --> 00:12:46,440 Speaker 4: higher does seem to indicate there could be some kind 251 00:12:46,480 --> 00:12:48,959 Speaker 4: of shift on the FMC that leans toward where the 252 00:12:49,000 --> 00:12:49,800 Speaker 4: market would like it to be. 253 00:12:49,920 --> 00:12:52,440 Speaker 2: Nida Richardson of ADP joins us now for more, Nila, 254 00:12:52,480 --> 00:12:55,000 Speaker 2: welcome to the program. Some timely data, some not so 255 00:12:55,120 --> 00:12:57,000 Speaker 2: timely data. How many things set up in the labor 256 00:12:57,040 --> 00:12:58,600 Speaker 2: market from your vantage point? 257 00:13:00,080 --> 00:13:02,199 Speaker 7: The rule of my house is three days and it's out. 258 00:13:02,280 --> 00:13:06,240 Speaker 7: That's why we have a weekly But I'm going to 259 00:13:06,280 --> 00:13:09,079 Speaker 7: say that good news bad news, it's always good needs 260 00:13:09,160 --> 00:13:12,240 Speaker 7: to see job gains. So I'm cheering this September number. 261 00:13:12,280 --> 00:13:15,000 Speaker 7: I'm sharing the fact that seems to be stronger in 262 00:13:15,080 --> 00:13:17,320 Speaker 7: terms of the response rate, But I have to go 263 00:13:17,400 --> 00:13:20,880 Speaker 7: back to August because that's where the ADP numbers and 264 00:13:20,920 --> 00:13:23,520 Speaker 7: the BLS numbers are almost in sync. We saw four 265 00:13:23,559 --> 00:13:29,600 Speaker 7: thousand drop in August at ADP and that's very similar 266 00:13:29,600 --> 00:13:34,280 Speaker 7: to what the BLS saw as well. So going into September, 267 00:13:35,160 --> 00:13:38,320 Speaker 7: there's strength there, but we note that in October that 268 00:13:38,440 --> 00:13:41,800 Speaker 7: strength may have been mollified. September is an easy month 269 00:13:41,880 --> 00:13:44,839 Speaker 7: for seasonal adjustment. There's not as much hiring, but when 270 00:13:44,840 --> 00:13:49,599 Speaker 7: you go into that October November December period of seasonal workers, 271 00:13:50,040 --> 00:13:52,080 Speaker 7: it's going to be a little bit more challenging to 272 00:13:52,160 --> 00:13:57,360 Speaker 7: offset the seasonal factors. And to note, the private sector 273 00:13:57,480 --> 00:14:01,439 Speaker 7: was driving this jobs report, but it was the consumer 274 00:14:01,679 --> 00:14:05,840 Speaker 7: facing private sector that really carried the water in this 275 00:14:05,960 --> 00:14:09,120 Speaker 7: jobs reports. So so goes the consumer when it comes 276 00:14:09,160 --> 00:14:12,120 Speaker 7: to healthcare, when it comes to leisure and hospitality, so 277 00:14:12,240 --> 00:14:15,960 Speaker 7: goes the labor market. The connection between the consumer and 278 00:14:15,960 --> 00:14:18,160 Speaker 7: the labor market has never been stronger. 279 00:14:18,960 --> 00:14:20,520 Speaker 1: When you look at this report. 280 00:14:20,320 --> 00:14:22,840 Speaker 4: Right now, Neila, given that backdrop, does this give you 281 00:14:22,880 --> 00:14:25,040 Speaker 4: the justification in your head for the Federal Reserve to 282 00:14:25,040 --> 00:14:26,800 Speaker 4: cut rates next month? If you could just sort of 283 00:14:27,080 --> 00:14:29,200 Speaker 4: go there and get a sense. Is this a strong 284 00:14:29,280 --> 00:14:31,560 Speaker 4: read or a weak read in your view? 285 00:14:32,960 --> 00:14:37,840 Speaker 7: The whole context of the FED view of the labor 286 00:14:37,920 --> 00:14:41,880 Speaker 7: market is that labor demand and labor supply are falling 287 00:14:42,000 --> 00:14:47,240 Speaker 7: in lockstep. I think this report challenges that notion because 288 00:14:47,280 --> 00:14:50,160 Speaker 7: you see what you see is that the unemployment rate 289 00:14:50,280 --> 00:14:53,840 Speaker 7: ticked up, and on the worker side, you also saw 290 00:14:54,040 --> 00:14:56,720 Speaker 7: a bit of a rise in the labor force participation rate. 291 00:14:56,960 --> 00:14:59,360 Speaker 7: To me, that suggests that more people came into this 292 00:14:59,520 --> 00:15:02,840 Speaker 7: market looking for work and didn't find it. And that's 293 00:15:02,960 --> 00:15:06,160 Speaker 7: especially supported if you look at the continuing claims number 294 00:15:06,360 --> 00:15:10,040 Speaker 7: that is continuing to edge up, telling us it's taking 295 00:15:10,320 --> 00:15:13,400 Speaker 7: longer to get a job. This is a highly concentrated 296 00:15:13,480 --> 00:15:17,800 Speaker 7: labor market. Only a few sectors are strongly producing jobs. 297 00:15:18,000 --> 00:15:21,320 Speaker 7: It makes it challenging for workers with a general skill 298 00:15:21,360 --> 00:15:24,560 Speaker 7: set to find employment. And I think that's what's going 299 00:15:24,600 --> 00:15:27,600 Speaker 7: to challenge the Fed in December. It's not just a 300 00:15:27,680 --> 00:15:30,960 Speaker 7: strong jobs market. They have to look at the demand side. 301 00:15:31,080 --> 00:15:33,920 Speaker 7: It's how the supply side is faring in a very 302 00:15:34,000 --> 00:15:35,760 Speaker 7: concentrated labor market. 303 00:15:35,920 --> 00:15:38,440 Speaker 4: Does a FED rate cut change this picture? I guess 304 00:15:38,440 --> 00:15:40,800 Speaker 4: that is the key question that everyone keeps start coming 305 00:15:40,840 --> 00:15:41,120 Speaker 4: back to. 306 00:15:42,680 --> 00:15:46,440 Speaker 7: Well, if this data is backward looking, a FED policy 307 00:15:46,520 --> 00:15:50,480 Speaker 7: move is very much forward looking, right. We won't immediately 308 00:15:50,560 --> 00:15:53,960 Speaker 7: see if the effect of a rate cut on main street. 309 00:15:54,160 --> 00:15:58,680 Speaker 7: It will take several months for that apparatus to trickle in, 310 00:15:59,080 --> 00:16:02,840 Speaker 7: especially when you look at the key way that FED 311 00:16:02,880 --> 00:16:07,240 Speaker 7: policy transitions into main street is through the borrowing markets, 312 00:16:07,240 --> 00:16:10,520 Speaker 7: through the credit markets. Our consumer's positioned right now for 313 00:16:10,560 --> 00:16:14,640 Speaker 7: those big ticket purchases a house, a car, a refrigerator, 314 00:16:14,760 --> 00:16:17,200 Speaker 7: that really drives the labor market forward. 315 00:16:17,240 --> 00:16:18,480 Speaker 1: In terms of new hires. 316 00:16:18,720 --> 00:16:21,840 Speaker 7: I think when you come to the holiday season, that's 317 00:16:21,880 --> 00:16:24,480 Speaker 7: where the rubber meets the road. That's where the disconnect 318 00:16:24,560 --> 00:16:28,520 Speaker 7: between the wealthy consumer and the low in consumer really matters. 319 00:16:28,640 --> 00:16:32,200 Speaker 7: Because if that low end consumer, that low income consumer, 320 00:16:32,640 --> 00:16:35,920 Speaker 7: can't purchase in the same way as they do over 321 00:16:35,920 --> 00:16:40,240 Speaker 7: the holidays generally, then we won't get the growth factor 322 00:16:40,520 --> 00:16:43,640 Speaker 7: leading into the first quarter of the year. So a 323 00:16:43,720 --> 00:16:46,320 Speaker 7: lot is going to be born on the shoulders of 324 00:16:46,360 --> 00:16:49,400 Speaker 7: that low and can come consumer over the next three months, 325 00:16:49,520 --> 00:16:52,160 Speaker 7: both when it comes to seasonal hiring and when it 326 00:16:52,200 --> 00:16:53,680 Speaker 7: comes to seasonal spending. 327 00:16:53,960 --> 00:16:57,360 Speaker 2: Stay with US mult Bloomberg Surveillance coming up off to this. 328 00:17:05,960 --> 00:17:08,159 Speaker 2: Looking ahead to the Federal Reserve meeting, Sarah manx b 329 00:17:08,280 --> 00:17:11,360 Speaker 2: C Iowa moving writing December rate cut as a toss up, 330 00:17:11,640 --> 00:17:14,160 Speaker 2: but three rate cuts are expected over the next twelve 331 00:17:14,240 --> 00:17:17,120 Speaker 2: months as the Fed leans incrementally davish in the second 332 00:17:17,160 --> 00:17:19,120 Speaker 2: half of twenty six. Sarah joins us now for more 333 00:17:19,320 --> 00:17:21,600 Speaker 2: Sarah welcome. We've got to reflect on the data around 334 00:17:21,640 --> 00:17:24,880 Speaker 2: just moments ago. Something for absolutely everyone is it changed 335 00:17:24,880 --> 00:17:27,520 Speaker 2: the debate for December tenth on the f WEBC. 336 00:17:28,760 --> 00:17:29,960 Speaker 1: But we got two new. 337 00:17:29,840 --> 00:17:32,360 Speaker 8: Data points today to help us determine whether we're going 338 00:17:32,359 --> 00:17:34,760 Speaker 8: to get that rate cut in December. This is first 339 00:17:34,760 --> 00:17:37,639 Speaker 8: of all economic data trickling in with this employment data 340 00:17:37,680 --> 00:17:39,920 Speaker 8: and also technology. 341 00:17:39,320 --> 00:17:40,240 Speaker 1: And consumer earning. 342 00:17:40,320 --> 00:17:43,480 Speaker 8: So first of all, on the payils number for September, 343 00:17:43,800 --> 00:17:45,359 Speaker 8: the number scale, so. 344 00:17:45,280 --> 00:17:46,680 Speaker 1: There's something for everybody in it. 345 00:17:46,800 --> 00:17:49,440 Speaker 8: While we beat on paerils, we have downward revisions and 346 00:17:49,640 --> 00:17:52,679 Speaker 8: increasing unemployment rate, so I think that's mixed. In general, 347 00:17:52,720 --> 00:17:54,680 Speaker 8: we saw the odds of a rate cut move up 348 00:17:54,720 --> 00:17:58,720 Speaker 8: from thirty percent to forty percent on this number four December. Second, 349 00:17:58,720 --> 00:18:00,520 Speaker 8: the good news is earnings, which has been the good 350 00:18:00,560 --> 00:18:03,159 Speaker 8: news for the past few weeks, and video earning strong 351 00:18:03,400 --> 00:18:06,399 Speaker 8: Walmart showing the consumer is still shopping. That's good for 352 00:18:06,480 --> 00:18:09,240 Speaker 8: earnings and good for large cat tech. The bubble that 353 00:18:09,240 --> 00:18:12,280 Speaker 8: people were talking about in the markets was mostly in 354 00:18:12,520 --> 00:18:15,680 Speaker 8: unprofitable tech and speculative tech. But I think from here, 355 00:18:15,720 --> 00:18:18,560 Speaker 8: given in Vidia soothing the markets, tech will lead. We 356 00:18:18,600 --> 00:18:20,800 Speaker 8: will get three rate cuts over the next twelve months, 357 00:18:20,880 --> 00:18:23,400 Speaker 8: but December still a toss of We may approach close 358 00:18:23,440 --> 00:18:26,040 Speaker 8: to fifty percent chances of a rate cut, but most 359 00:18:26,080 --> 00:18:28,360 Speaker 8: of the FED has been leaning pockets recently. We heard 360 00:18:28,400 --> 00:18:29,840 Speaker 8: that in the Fed Minutes yesterday. 361 00:18:30,160 --> 00:18:31,960 Speaker 4: So you said that tech will lead, and this is 362 00:18:31,960 --> 00:18:35,320 Speaker 4: an important point. Will tech lead because the FED has 363 00:18:35,359 --> 00:18:38,879 Speaker 4: been more reluctant to cut rates aggressively, or will it 364 00:18:39,000 --> 00:18:42,320 Speaker 4: lead despite the fact that the FED is more reluctant 365 00:18:42,320 --> 00:18:43,040 Speaker 4: to cut rates. 366 00:18:44,359 --> 00:18:45,760 Speaker 1: Tech leads for two reasons. 367 00:18:45,800 --> 00:18:49,200 Speaker 8: The first one is a moderately weakening economy we are 368 00:18:49,240 --> 00:18:51,880 Speaker 8: seeing that in the payroll data, and second is a 369 00:18:51,920 --> 00:18:55,040 Speaker 8: slower pace of rate cuts. The moderate growth is good 370 00:18:55,040 --> 00:18:58,120 Speaker 8: for tech because they have their own structural drivers. Artificial 371 00:18:58,119 --> 00:19:01,400 Speaker 8: intelligence is alive and well debate when where we see 372 00:19:01,400 --> 00:19:03,960 Speaker 8: the ROI on all of the dollars spent on AI, 373 00:19:04,080 --> 00:19:07,439 Speaker 8: But we will see AI continue to increase productivity for 374 00:19:07,480 --> 00:19:10,320 Speaker 8: companies and eventually boost their revenues out of That's the 375 00:19:10,320 --> 00:19:12,760 Speaker 8: main structural driver for technology stocks, and I think they 376 00:19:12,760 --> 00:19:15,879 Speaker 8: will continue to lead from here unless the economy shows 377 00:19:16,080 --> 00:19:20,639 Speaker 8: significant signs of accelerating or the FED dramatically decreases rates. 378 00:19:20,800 --> 00:19:23,080 Speaker 2: Talk about timely. Speaking of the labor market, this from 379 00:19:23,160 --> 00:19:26,000 Speaker 2: Verizon just moments ago. Today, we will begin reducing our 380 00:19:26,000 --> 00:19:29,240 Speaker 2: workforce by more than thirteen thousand employees across the organization 381 00:19:29,680 --> 00:19:35,040 Speaker 2: and significantly reduce our outsourced and other outside labor expenses. Sarah. 382 00:19:35,160 --> 00:19:38,600 Speaker 2: Efficiency and operational efficiency? Is that going to be a 383 00:19:38,600 --> 00:19:40,120 Speaker 2: big theme for next year? 384 00:19:41,560 --> 00:19:43,680 Speaker 1: The two themes will be for twenty twenty six. 385 00:19:43,720 --> 00:19:47,040 Speaker 8: First of all, is that efficiency because of artificial intelligence, 386 00:19:47,080 --> 00:19:49,960 Speaker 8: every company seems to be talking about that. And also 387 00:19:50,200 --> 00:19:53,159 Speaker 8: because of inflation, we're hearing more and more about affordability 388 00:19:53,320 --> 00:19:56,200 Speaker 8: and actually some decreases in tariffs and areas like beef 389 00:19:56,240 --> 00:19:56,919 Speaker 8: and coffee. 390 00:19:57,160 --> 00:19:59,800 Speaker 1: Is the economy still affordable for the consumer? 391 00:20:00,080 --> 00:20:02,560 Speaker 8: Hearing a lot out of walmart on that today those 392 00:20:02,600 --> 00:20:04,320 Speaker 8: are two themes I think that are bubbling up and 393 00:20:04,320 --> 00:20:07,400 Speaker 8: will continue through twenty twenty six as we talk about 394 00:20:07,400 --> 00:20:09,920 Speaker 8: how are we going to incorporate the value of artificial 395 00:20:09,920 --> 00:20:11,439 Speaker 8: intelligence into our business models? 396 00:20:11,520 --> 00:20:14,280 Speaker 2: Sarah, just before you go topics right now into the 397 00:20:14,440 --> 00:20:15,760 Speaker 2: new year, what are they at the moment? 398 00:20:16,880 --> 00:20:21,040 Speaker 8: We love infrastructure infrastructures has tailwinds more building in the 399 00:20:21,200 --> 00:20:25,440 Speaker 8: United States, shift to artificial intelligence and electrification of our economy. 400 00:20:25,560 --> 00:20:29,119 Speaker 8: One stock, in particular, Ni Source in Indiana based utility, 401 00:20:29,280 --> 00:20:30,439 Speaker 8: will be a nice play on this. 402 00:20:30,560 --> 00:20:32,720 Speaker 1: It's one of the fastest growing utilities in the region. 403 00:20:32,880 --> 00:20:35,600 Speaker 8: And we also like more conservative stocks that grow their dividends. 404 00:20:35,640 --> 00:20:38,240 Speaker 8: Dividend growers also and nice Source is one that pays 405 00:20:38,240 --> 00:20:39,480 Speaker 8: a three percent dividend yields. 406 00:20:40,520 --> 00:20:44,000 Speaker 2: Stay with us mul Bloomberg Surveillance coming up after this. 407 00:20:52,760 --> 00:20:56,200 Speaker 2: Angelo Zino of CFRA writing this and videos data center 408 00:20:56,240 --> 00:21:01,480 Speaker 2: revenue demonstrating sequential acceleration that validates sound thesis on sustained 409 00:21:01,560 --> 00:21:05,280 Speaker 2: hyperscale of spending. Angelo joined us Now for more Angelo, 410 00:21:05,480 --> 00:21:08,280 Speaker 2: these numbers, is it sufficient to restore the faith in 411 00:21:08,320 --> 00:21:09,280 Speaker 2: this story? Once again? 412 00:21:11,200 --> 00:21:13,040 Speaker 9: So John, thanks for having me, and I'd say you know, 413 00:21:13,080 --> 00:21:15,600 Speaker 9: for today, Yes, I mean, I think some of the 414 00:21:15,640 --> 00:21:18,119 Speaker 9: concerns that are out there in the market continues to linger, 415 00:21:18,920 --> 00:21:20,800 Speaker 9: you know, and we all know what that is. I mean, 416 00:21:21,040 --> 00:21:24,159 Speaker 9: I think probably the biggest issue out there is on 417 00:21:24,280 --> 00:21:27,159 Speaker 9: the you know, the concern about financing and you know, 418 00:21:27,760 --> 00:21:31,120 Speaker 9: getting the necessary financing from a number of these customers, 419 00:21:31,200 --> 00:21:33,960 Speaker 9: not necessarily the hyperscalers, which we all know over the 420 00:21:34,040 --> 00:21:38,840 Speaker 9: last three years have been absolute monsters, spending spenders. But 421 00:21:38,920 --> 00:21:40,880 Speaker 9: as we look here kind of over the next three 422 00:21:40,920 --> 00:21:43,879 Speaker 9: to five years and we get this broadening out trade 423 00:21:43,920 --> 00:21:47,600 Speaker 9: within it the AI ecosystem, the likes of you know, 424 00:21:47,720 --> 00:21:51,840 Speaker 9: the the Oracles, the core weaves of the world, open 425 00:21:51,880 --> 00:21:54,520 Speaker 9: a eyes of the world, they're going to be bigger 426 00:21:54,640 --> 00:21:57,480 Speaker 9: contributors in these forecasts that you have out there for 427 00:21:57,600 --> 00:21:59,960 Speaker 9: in video, as well as the rest of the AI ecosystem. 428 00:22:00,280 --> 00:22:03,440 Speaker 9: And the question is, you know, clearly is the financing 429 00:22:03,520 --> 00:22:05,679 Speaker 9: going to be there as we find the broadened out here. 430 00:22:05,600 --> 00:22:07,520 Speaker 2: Angela, I'm so pleased you've gone there, because we've been 431 00:22:07,600 --> 00:22:09,879 Speaker 2: drained the distinction between the company and the way the 432 00:22:09,880 --> 00:22:12,240 Speaker 2: company is perceived in the stock market as a stock 433 00:22:12,520 --> 00:22:14,840 Speaker 2: because they're two very different stories and Angela. When it 434 00:22:14,840 --> 00:22:17,440 Speaker 2: came to the earnings of video, Yes they're fantastic, Yes 435 00:22:17,480 --> 00:22:19,359 Speaker 2: the guy is solid, But in many ways some of 436 00:22:19,359 --> 00:22:22,120 Speaker 2: that was inevitable because we know what's happening Gusequare, their 437 00:22:22,119 --> 00:22:24,600 Speaker 2: biggest customers are spending a lot of money and promising 438 00:22:24,600 --> 00:22:27,040 Speaker 2: to spend even more, Angela. What I'm trying to understand 439 00:22:27,080 --> 00:22:30,480 Speaker 2: this morning is whether what they've unveiled overnight yesterday afternoon 440 00:22:30,600 --> 00:22:34,080 Speaker 2: is sufficient to reshift the story around the way people 441 00:22:34,080 --> 00:22:37,000 Speaker 2: are treating the stock because over the last several months, 442 00:22:37,040 --> 00:22:38,960 Speaker 2: for a long long time, over the last several years, 443 00:22:39,080 --> 00:22:40,680 Speaker 2: there was a view in this market that this story 444 00:22:40,760 --> 00:22:43,280 Speaker 2: was built on the balance sheets of the hyperscalers, and 445 00:22:43,320 --> 00:22:45,919 Speaker 2: this all made sense. It was strong. Now there's a 446 00:22:45,960 --> 00:22:49,560 Speaker 2: worry that this is built on something else. They're fueled financing, 447 00:22:49,920 --> 00:22:53,320 Speaker 2: maybe very skinny revenues developing over open AI and a 448 00:22:53,359 --> 00:22:55,840 Speaker 2: loss of confidence. Angelo, And this is what I want 449 00:22:55,840 --> 00:22:58,679 Speaker 2: to keep going back to. Have they said anything in 450 00:22:58,720 --> 00:23:01,159 Speaker 2: the last twenty four hours that gets the markets to 451 00:23:01,200 --> 00:23:03,919 Speaker 2: reshift is thinking again about how it addresses this story 452 00:23:04,160 --> 00:23:05,320 Speaker 2: in the stock market. 453 00:23:06,480 --> 00:23:11,480 Speaker 9: So not necessarily, but that being said, listen, I think 454 00:23:11,520 --> 00:23:13,240 Speaker 9: when you kind of look out here over the next 455 00:23:13,240 --> 00:23:15,359 Speaker 9: couple of years. I think the expectations out there, I 456 00:23:15,440 --> 00:23:18,120 Speaker 9: think from most of the analyst community is not one 457 00:23:18,160 --> 00:23:21,119 Speaker 9: where you know, we're necessarily expecting north of a trillion 458 00:23:21,160 --> 00:23:23,760 Speaker 9: dollars and spent from open AI at least that's not 459 00:23:23,840 --> 00:23:26,800 Speaker 9: in the forecast, in the consensus estimates at this top 460 00:23:26,840 --> 00:23:27,400 Speaker 9: point in time. 461 00:23:27,600 --> 00:23:28,920 Speaker 6: So I think that's a good thing. 462 00:23:28,960 --> 00:23:31,359 Speaker 9: But when you kind of look at the you know, 463 00:23:31,520 --> 00:23:34,879 Speaker 9: the broader investment community there, they're kind of looking at, hey, listen, 464 00:23:35,040 --> 00:23:37,560 Speaker 9: there are these promises that are being made or commitments 465 00:23:37,600 --> 00:23:39,360 Speaker 9: being made, and there's no way they're going to meet 466 00:23:39,359 --> 00:23:41,479 Speaker 9: these commitments. What I would tell you is that they 467 00:23:41,480 --> 00:23:45,000 Speaker 9: don't necessarily need to see those full commitments being made 468 00:23:45,000 --> 00:23:48,200 Speaker 9: in many respects, and there are going to be many 469 00:23:48,240 --> 00:23:50,399 Speaker 9: different ways that in video is going to continue to 470 00:23:50,400 --> 00:23:53,480 Speaker 9: see higher revenue and bringing out of their ecosystem. And 471 00:23:53,520 --> 00:23:56,280 Speaker 9: I think it's also important to note that these hyperscalers 472 00:23:56,280 --> 00:23:58,520 Speaker 9: will probably get much bigger in nature here over the 473 00:23:58,600 --> 00:23:59,560 Speaker 9: next five to six years. 474 00:23:59,560 --> 00:24:01,520 Speaker 6: I mean, looking for Microsoft. 475 00:24:01,200 --> 00:24:03,720 Speaker 9: To see their revenue double here over the next six years, 476 00:24:03,800 --> 00:24:07,199 Speaker 9: We're looking for Alpha Bit to see their revenue go up, 477 00:24:07,240 --> 00:24:10,040 Speaker 9: you know, seventy hundred percent, So that cloud business for 478 00:24:10,160 --> 00:24:12,680 Speaker 9: these hyperscalers are going to continue to get much bigger 479 00:24:12,680 --> 00:24:16,480 Speaker 9: and bigger. We've seen the great momentum out of two 480 00:24:16,560 --> 00:24:19,720 Speaker 9: three earning season from these hyperscalers, so we do think 481 00:24:19,760 --> 00:24:22,960 Speaker 9: those companies will continue to pave the way, and then 482 00:24:23,000 --> 00:24:26,280 Speaker 9: that broughting out trade is going to be the question mark. 483 00:24:26,320 --> 00:24:29,280 Speaker 9: But again, I think as long as it's incremental in 484 00:24:29,400 --> 00:24:32,480 Speaker 9: nature and we see some sovereign AI opportunities like we 485 00:24:32,640 --> 00:24:36,120 Speaker 9: just saw announced yesterday, I think that's going to help 486 00:24:36,160 --> 00:24:38,800 Speaker 9: the overall narrative and get the sot hire here. 487 00:24:38,760 --> 00:24:41,560 Speaker 4: Angelo, that's a key key point there, the sovereign purchases. 488 00:24:41,600 --> 00:24:43,320 Speaker 4: And we'll get to China in just one second. And 489 00:24:43,320 --> 00:24:47,080 Speaker 4: how feasible that opening reopening could potentially be. I just 490 00:24:47,119 --> 00:24:50,720 Speaker 4: wonder if you were satisfied by the response to having 491 00:24:50,760 --> 00:24:54,200 Speaker 4: to finance some of your customers to continue buying your chips. 492 00:24:54,280 --> 00:24:57,639 Speaker 4: So fear around circular financing and why in video feels 493 00:24:57,640 --> 00:24:59,640 Speaker 4: the need to do that if there is so much 494 00:24:59,760 --> 00:25:00,719 Speaker 4: ex ternal demand. 495 00:25:02,560 --> 00:25:05,080 Speaker 9: I think in some respects in video feels like it's 496 00:25:05,119 --> 00:25:08,320 Speaker 9: an obligation of theirs, And you know, I would necessarily 497 00:25:08,320 --> 00:25:11,560 Speaker 9: go as far as to say they're doing anything that 498 00:25:11,680 --> 00:25:14,359 Speaker 9: isn't prudent in nature. I think this is one of 499 00:25:14,440 --> 00:25:19,040 Speaker 9: those instances where it's extremely expensive to build a data center. 500 00:25:19,280 --> 00:25:20,760 Speaker 6: You're looking at it can gig a why you know. 501 00:25:20,800 --> 00:25:24,600 Speaker 9: Data center read about fifty billion dollars in nature, and 502 00:25:24,640 --> 00:25:26,960 Speaker 9: in Vidia is essentially taking the line's share of the 503 00:25:26,960 --> 00:25:29,640 Speaker 9: profits for the industry. So in many respects, what they 504 00:25:29,680 --> 00:25:34,000 Speaker 9: are doing is reinvesting those profits into the eCos to 505 00:25:34,040 --> 00:25:36,760 Speaker 9: help build the AI ecosystem. In some respects, I don't 506 00:25:36,800 --> 00:25:39,840 Speaker 9: necessarily think that's a bad use of funding. I also 507 00:25:39,920 --> 00:25:42,680 Speaker 9: think it helps to kind of improve the stickiness across 508 00:25:43,280 --> 00:25:46,120 Speaker 9: you know, where they are within the ecosystem. So overall, 509 00:25:46,520 --> 00:25:50,720 Speaker 9: I'm not necessarily concerned about some of these circular financing 510 00:25:50,760 --> 00:25:53,960 Speaker 9: issues however, and I'd actually expect to see more of 511 00:25:54,040 --> 00:25:56,000 Speaker 9: this take place here over the next couple of years. 512 00:25:56,000 --> 00:25:58,200 Speaker 9: So it is something that I think investors need to 513 00:25:58,200 --> 00:26:00,399 Speaker 9: get somewhat comfortable with. But again, I mean if it 514 00:26:00,440 --> 00:26:03,480 Speaker 9: gets to a level where it gets just out of control, 515 00:26:03,520 --> 00:26:05,679 Speaker 9: I think that's what becomes problematic. 516 00:26:05,920 --> 00:26:08,560 Speaker 4: How much upside is they're doing video shares. If President 517 00:26:08,560 --> 00:26:11,960 Speaker 4: Trump gets his way and the Congress is forced to 518 00:26:12,040 --> 00:26:14,680 Speaker 4: drop some of the restrictions in terms of sales into 519 00:26:14,720 --> 00:26:16,800 Speaker 4: places like China from Nvidia. 520 00:26:18,720 --> 00:26:21,120 Speaker 6: So i'd say in Video, I'd say China itself. 521 00:26:21,160 --> 00:26:24,000 Speaker 9: We're looking potentially at least at least twenty to thirty 522 00:26:24,000 --> 00:26:27,439 Speaker 9: billion dollars in annual you know, sales added to in 523 00:26:27,560 --> 00:26:28,920 Speaker 9: Video's revenue. 524 00:26:28,920 --> 00:26:30,480 Speaker 6: We think that would be conservative in nature. 525 00:26:31,640 --> 00:26:33,919 Speaker 9: And you know, again that would probably add let's call 526 00:26:34,000 --> 00:26:36,840 Speaker 9: it about eight to ten percent to their to their 527 00:26:36,880 --> 00:26:39,920 Speaker 9: revenue trajectory, and you know you'd see a likewise impact 528 00:26:39,920 --> 00:26:41,560 Speaker 9: in terms of the stock price move. Let's call it 529 00:26:41,600 --> 00:26:44,439 Speaker 9: a ten to fifteen percent initial boost we think from 530 00:26:45,119 --> 00:26:47,520 Speaker 9: that approval. So you know, we'll see whether or not 531 00:26:47,520 --> 00:26:50,320 Speaker 9: there's going to be upside if there's approval, and then 532 00:26:50,400 --> 00:26:53,159 Speaker 9: you know to what extent those companies will spend on 533 00:26:53,280 --> 00:26:55,760 Speaker 9: in Video's ecosystem. But you know the good thing is 534 00:26:55,800 --> 00:26:57,760 Speaker 9: it's at zero dollars at this point in time, and 535 00:26:57,760 --> 00:27:01,040 Speaker 9: their significant upside potential if they're able to get into China. 536 00:27:01,520 --> 00:27:03,560 Speaker 5: When you think about the upside potential, I know the 537 00:27:03,560 --> 00:27:06,159 Speaker 5: Commerce Department yesterday came out with the green light to 538 00:27:06,240 --> 00:27:09,719 Speaker 5: sell chips to the UAE in Saudi Arabia. Is it 539 00:27:09,800 --> 00:27:13,000 Speaker 5: big enough to fill that gap that exists right now, 540 00:27:13,040 --> 00:27:15,040 Speaker 5: that whole when it comes to Beijing. 541 00:27:16,119 --> 00:27:18,760 Speaker 6: Probably not, I mean, and maybe over time it will be. 542 00:27:18,880 --> 00:27:20,080 Speaker 6: And again, you know, the good. 543 00:27:20,000 --> 00:27:22,639 Speaker 9: Thing is it's zero dollars in revenue or essentially zero 544 00:27:23,160 --> 00:27:26,200 Speaker 9: coming out of China. I would say this, China's got 545 00:27:26,200 --> 00:27:30,080 Speaker 9: the second large, you know, the second largest ecosystem of 546 00:27:30,640 --> 00:27:32,800 Speaker 9: hyperscalers out there, right you do want to sell into 547 00:27:32,840 --> 00:27:35,399 Speaker 9: the Ali Baba's bydus ten cents of the world, and 548 00:27:35,600 --> 00:27:37,959 Speaker 9: that would be an enormous positive if they can do that. 549 00:27:38,560 --> 00:27:41,199 Speaker 9: I'd also say, you know, when you kind of think 550 00:27:41,240 --> 00:27:43,800 Speaker 9: about the developers that are out there, the developer community, 551 00:27:43,840 --> 00:27:46,600 Speaker 9: it's something that Jensen has repeatedly said he wants he 552 00:27:46,640 --> 00:27:49,000 Speaker 9: wants to make sure he's got access to and that 553 00:27:49,040 --> 00:27:51,760 Speaker 9: they continue to build on in Video's ecosystem. That's not 554 00:27:51,880 --> 00:27:54,320 Speaker 9: something you're going to get in any other area of 555 00:27:54,320 --> 00:27:54,720 Speaker 9: the world. 556 00:27:55,040 --> 00:27:56,640 Speaker 6: So it's extremely important. 557 00:27:56,680 --> 00:27:59,560 Speaker 9: We think from that perspective that you know, in Vidia 558 00:27:59,640 --> 00:28:01,040 Speaker 9: gets into China. 559 00:28:01,119 --> 00:28:03,359 Speaker 5: Given that what you just said about how he talks 560 00:28:03,400 --> 00:28:07,879 Speaker 5: to Chinese developers, how difficult is this line to walk 561 00:28:07,920 --> 00:28:10,640 Speaker 5: for Jensen Wang when it comes between Washington and Beijing. 562 00:28:12,280 --> 00:28:14,040 Speaker 9: I think if I think it's a difficult line, I 563 00:28:14,040 --> 00:28:16,359 Speaker 9: think if there's anyone that can can successfully do it, 564 00:28:16,359 --> 00:28:18,639 Speaker 9: it's it's Jensen. And you know, maybe you throw you know, 565 00:28:18,680 --> 00:28:21,360 Speaker 9: Tim Cook in there in some respects, and how he's. 566 00:28:21,200 --> 00:28:24,280 Speaker 6: Handled, you know, kind of the China US relations. 567 00:28:24,320 --> 00:28:27,199 Speaker 9: I think there aren't many CEOs that can do a 568 00:28:27,200 --> 00:28:29,119 Speaker 9: good job with that. The great thing with Jensen is 569 00:28:29,400 --> 00:28:31,920 Speaker 9: it seems like he's got the ears of both nations 570 00:28:31,920 --> 00:28:34,480 Speaker 9: at this point in time, and that that's a huge positive. 571 00:28:35,119 --> 00:28:37,080 Speaker 9: He's got that power, and we think, and you know, 572 00:28:37,119 --> 00:28:40,000 Speaker 9: in many respects, we'll see how all this plays out, 573 00:28:40,840 --> 00:28:43,000 Speaker 9: but you know, it's it's taken longer than we've thought. 574 00:28:43,000 --> 00:28:44,560 Speaker 9: To be honest with you, we thought at this point 575 00:28:44,600 --> 00:28:47,400 Speaker 9: in time we probably would have seen in nvidio, you know, 576 00:28:47,680 --> 00:28:51,760 Speaker 9: back into China. But again, these geopolitical uncertainties and you 577 00:28:51,800 --> 00:28:53,320 Speaker 9: never know how long they're going to drag out. 578 00:28:54,520 --> 00:28:57,840 Speaker 2: This is the bloomberg S Evenans podcast, bringing you the 579 00:28:57,840 --> 00:29:01,200 Speaker 2: best in markets, economics, and Giapolo. You can watch the 580 00:29:01,240 --> 00:29:04,240 Speaker 2: show live on Bloomberg TV weekday mornings from six am 581 00:29:04,360 --> 00:29:08,320 Speaker 2: to nine am Eastern. Subscribe to the podcast on Apple, Spotify, 582 00:29:08,480 --> 00:29:10,720 Speaker 2: or anywhere else you listen, and, as always on the 583 00:29:10,720 --> 00:29:13,160 Speaker 2: Bloomberg Terminal and the Bloomberg Business app.