1 00:00:00,080 --> 00:00:07,400 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,960 --> 00:00:15,560 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Tom Keene along 3 00:00:15,600 --> 00:00:18,960 Speaker 2: with Paul Sweeney. Join us each day for insight from 4 00:00:18,960 --> 00:00:23,119 Speaker 2: the best in economics, finance, investment, and international relations. You 5 00:00:23,160 --> 00:00:26,520 Speaker 2: can also watch the show live on YouTube. Visit the 6 00:00:26,520 --> 00:00:31,280 Speaker 2: Bloomberg Podcast channel on YouTube to see the show weekday 7 00:00:31,280 --> 00:00:34,320 Speaker 2: mornings from seven to ten am Eastern from our global 8 00:00:34,360 --> 00:00:39,000 Speaker 2: headquarters in New York City. Subscribe to the podcast on Apple, Spotify, 9 00:00:39,360 --> 00:00:41,239 Speaker 2: or anywhere else you listen and. 10 00:00:41,320 --> 00:00:44,199 Speaker 3: Always I'm Bloomberg Radio, the Bloomberg. 11 00:00:43,800 --> 00:00:47,040 Speaker 2: Terminal, and the Bloomberg Business app being to get right 12 00:00:47,040 --> 00:00:48,560 Speaker 2: to this right now, Dan, I have joined us in 13 00:00:48,640 --> 00:00:50,839 Speaker 2: web bush share all over the media course as we. 14 00:00:50,920 --> 00:00:54,279 Speaker 3: Go into the Mag eight. Frenzy Warren Buffet, he's part 15 00:00:54,320 --> 00:00:55,639 Speaker 3: of the mag eight right now. 16 00:00:55,440 --> 00:00:58,880 Speaker 2: Sixty five buys on Nvidia eight old snowsls that you 17 00:00:58,960 --> 00:00:59,959 Speaker 2: don't follow in Vida. 18 00:01:00,600 --> 00:01:03,600 Speaker 3: You got a thug at webbush that follows it, right. 19 00:01:03,720 --> 00:01:06,440 Speaker 4: Yeah, So our view and Nvidio. You know, we have 20 00:01:06,440 --> 00:01:09,399 Speaker 4: one hundred and thirty eight hour probably start bult cases 21 00:01:09,440 --> 00:01:10,480 Speaker 4: one seventy five. 22 00:01:10,720 --> 00:01:12,959 Speaker 3: Bergstein went to one fifty this morning, and. 23 00:01:12,959 --> 00:01:14,840 Speaker 4: I think this is just the star. I mean, look, 24 00:01:14,880 --> 00:01:17,160 Speaker 4: I think this by the end of the day or 25 00:01:17,200 --> 00:01:18,839 Speaker 4: even the next twenty four hours, this is a stock 26 00:01:18,880 --> 00:01:21,600 Speaker 4: that should be in the green based on everything we 27 00:01:21,680 --> 00:01:24,559 Speaker 4: saw from Godfather of Ai Jensen the video, Well. 28 00:01:24,480 --> 00:01:26,399 Speaker 3: Get one more in here and I will so good. 29 00:01:26,720 --> 00:01:28,800 Speaker 5: So Dan, give us a sense. What did you hear 30 00:01:28,880 --> 00:01:33,400 Speaker 5: from nvidiot last night? They beat numbers? Maybe the guidance 31 00:01:33,440 --> 00:01:35,760 Speaker 5: wasn't where the street was expecting. But what did you 32 00:01:35,840 --> 00:01:37,319 Speaker 5: really take away from Nvidia last night? 33 00:01:37,920 --> 00:01:38,760 Speaker 3: So three things? 34 00:01:38,800 --> 00:01:42,800 Speaker 4: One demand, because the question is is they're double ordering? 35 00:01:42,840 --> 00:01:46,760 Speaker 4: What is enterprise demand demands actually accelerating. And there's no 36 00:01:46,840 --> 00:01:49,120 Speaker 4: better perch in terms of everything we're seeing from AI 37 00:01:49,640 --> 00:01:53,560 Speaker 4: than what Jensen sees. To Blackwell, all the fears right, 38 00:01:53,600 --> 00:01:57,240 Speaker 4: the words is that Gan delayed. They essentially put those 39 00:01:57,320 --> 00:02:00,000 Speaker 4: fears to rest, and that was so important. 40 00:02:00,560 --> 00:02:02,200 Speaker 3: You know, I'm the only one that does Matthews. You 41 00:02:02,360 --> 00:02:04,120 Speaker 3: not all this fancy Dan eyes talk. 42 00:02:04,560 --> 00:02:07,000 Speaker 2: You take the ten billion share bibic of Apple, They've 43 00:02:07,000 --> 00:02:09,000 Speaker 2: been doing it for years, divided by free cash flow. 44 00:02:09,440 --> 00:02:12,680 Speaker 2: You take a fifty billion statistic divided by Invidia's free 45 00:02:12,680 --> 00:02:17,080 Speaker 2: cash flow. To me, it was a ginormous announcement. Everybody's 46 00:02:17,520 --> 00:02:19,560 Speaker 2: saying it's not a big deal. Was a share buy 47 00:02:19,560 --> 00:02:20,280 Speaker 2: back a big deal? 48 00:02:20,360 --> 00:02:23,280 Speaker 4: It's a monster deal. And also this also goes to 49 00:02:23,320 --> 00:02:26,200 Speaker 4: a company you go back six months ago out year 50 00:02:26,240 --> 00:02:29,399 Speaker 4: by twenty five two dollars and earnings. Now it's gonna 51 00:02:29,400 --> 00:02:30,360 Speaker 4: be five to six hours. 52 00:02:30,639 --> 00:02:32,400 Speaker 3: I'm extended time here this morning with Dan. 53 00:02:32,440 --> 00:02:34,840 Speaker 2: I's we welcome you all around the world on YouTube, 54 00:02:34,840 --> 00:02:38,960 Speaker 2: on Android, Android auto, Apple car play as well. Okay, 55 00:02:39,440 --> 00:02:42,240 Speaker 2: I go to Apple, I go to the famed aggregation 56 00:02:42,360 --> 00:02:45,200 Speaker 2: of Tom Secunda in the Bloomberg News, and I'm just 57 00:02:45,240 --> 00:02:49,400 Speaker 2: going to read these Paul quickly mashable Apple music playlists 58 00:02:49,400 --> 00:02:54,120 Speaker 2: now transferable to YouTube music. University of Wisconsin denied new 59 00:02:54,200 --> 00:02:57,560 Speaker 2: trial as that go after somebody. Apple orders ten percent 60 00:02:57,639 --> 00:03:01,920 Speaker 2: more iPhones than last year. Apple iPhone seventeen rumored to 61 00:03:02,080 --> 00:03:05,840 Speaker 2: arrive at the Sweeney House before September fifteenth. And on 62 00:03:06,480 --> 00:03:10,799 Speaker 2: the last headline, Dan ives on Bloomberg Right now, I mean, 63 00:03:10,840 --> 00:03:13,239 Speaker 2: here's the news out of Tokyo Shock. 64 00:03:13,520 --> 00:03:16,280 Speaker 3: There's more iPhone orders. How do you translate that? 65 00:03:16,680 --> 00:03:19,639 Speaker 4: I mean, this is the start of an AI driven 66 00:03:19,720 --> 00:03:22,079 Speaker 4: super psych with iPhone sixteen. I think it's gonna be 67 00:03:22,200 --> 00:03:24,880 Speaker 4: historical period. Look, we've talked about a lot on the show. 68 00:03:25,360 --> 00:03:30,239 Speaker 4: Three hundred million of one point five billion iPhones, including Sweeney, 69 00:03:30,639 --> 00:03:35,520 Speaker 4: haven't upgraded in four plus years AI. Twenty five percent 70 00:03:35,560 --> 00:03:38,320 Speaker 4: of the world is going to access AI through an 71 00:03:38,360 --> 00:03:41,400 Speaker 4: Apple device. The consumer revolution all starts top of. 72 00:03:41,400 --> 00:03:42,400 Speaker 3: A push against you. 73 00:03:42,480 --> 00:03:45,760 Speaker 2: Tom Keen and Paul Sweeney don't give a damn about AI. 74 00:03:46,160 --> 00:03:48,920 Speaker 2: We just want an iPhone to know where our kids are. 75 00:03:49,640 --> 00:03:52,320 Speaker 2: What's a big deal about AI if Paul Sweeney's not 76 00:03:52,360 --> 00:03:53,000 Speaker 2: going to use it? 77 00:03:53,280 --> 00:03:56,160 Speaker 4: So that's today. If you look at the app, there's 78 00:03:56,160 --> 00:04:00,360 Speaker 4: gonna be hundreds of apps built on Apple Intelligence that 79 00:04:00,400 --> 00:04:04,440 Speaker 4: are gonna be AI driven as well as this open AI. 80 00:04:04,560 --> 00:04:06,760 Speaker 4: It's good. It's essentially gonna be a personal assistant that 81 00:04:06,840 --> 00:04:10,800 Speaker 4: really from a data perspective, understands Paul Simat understands, can 82 00:04:11,040 --> 00:04:14,320 Speaker 4: understand your habits. This is gonna change. This is how 83 00:04:14,400 --> 00:04:18,000 Speaker 4: most consumers are now going to interact with AI. 84 00:04:18,880 --> 00:04:22,080 Speaker 5: China. What's the latest on China? My concern always in 85 00:04:22,120 --> 00:04:24,680 Speaker 5: the back of my mind is that the average Chinese 86 00:04:24,720 --> 00:04:27,240 Speaker 5: consumer is saying, I'm just not buying an American. Is 87 00:04:27,279 --> 00:04:30,040 Speaker 5: that an issue for Apple in terms of market share? 88 00:04:30,240 --> 00:04:32,600 Speaker 4: I mean, as someone that spends time in the region. 89 00:04:33,080 --> 00:04:36,840 Speaker 4: The average Chinese consumer wants the best product in the world, 90 00:04:36,920 --> 00:04:40,080 Speaker 4: which is an Apple DEVICEE. So I'm not saying that 91 00:04:40,080 --> 00:04:44,280 Speaker 4: there aren't some geopolitical headwinds. We're actually seeing more taal 92 00:04:44,360 --> 00:04:47,520 Speaker 4: wins out of China, especially with iPhones sixteen. You have 93 00:04:47,560 --> 00:04:49,919 Speaker 4: one hundred million iPhones that are basically having upgrade in 94 00:04:49,920 --> 00:04:52,799 Speaker 4: four years. So I think any headwinds there have started 95 00:04:52,880 --> 00:04:56,320 Speaker 4: now come downents. That's why I cook ninety percent CEO, 96 00:04:56,480 --> 00:04:57,640 Speaker 4: ten percent politician. 97 00:04:57,960 --> 00:04:59,360 Speaker 1: Right, yeah, it's smart. 98 00:04:59,400 --> 00:05:00,839 Speaker 5: How about Indian We were just I was just talking 99 00:05:00,839 --> 00:05:02,920 Speaker 5: about this with somebody at the club last night, Tom 100 00:05:03,000 --> 00:05:05,560 Speaker 5: at the bar. We were talking iPhones in India. How 101 00:05:05,640 --> 00:05:07,000 Speaker 5: that came about? I have no idea. 102 00:05:07,320 --> 00:05:09,159 Speaker 2: I want to Were you at the club last night? 103 00:05:10,000 --> 00:05:13,240 Speaker 1: There's no club that would take I want to be 104 00:05:13,279 --> 00:05:14,120 Speaker 1: in that club I was. 105 00:05:14,360 --> 00:05:16,279 Speaker 4: Or were you at the watch party for an video? 106 00:05:16,760 --> 00:05:20,200 Speaker 2: Yes, Wisan Thalt was that whatever. 107 00:05:21,400 --> 00:05:23,080 Speaker 4: I thought Sweeney was going to be at that watch 108 00:05:23,120 --> 00:05:24,880 Speaker 4: but I at. 109 00:05:24,800 --> 00:05:27,200 Speaker 2: Least stay trading off his couch at the cottage. I 110 00:05:27,720 --> 00:05:30,200 Speaker 2: can only say my club last night, I was a club. 111 00:05:30,279 --> 00:05:31,640 Speaker 3: Do the dishes club. 112 00:05:32,920 --> 00:05:33,520 Speaker 1: India? 113 00:05:33,839 --> 00:05:36,680 Speaker 5: What's the opportunity there for Apple in India. Don't they 114 00:05:36,760 --> 00:05:39,520 Speaker 5: have to have a lower price phone in that market. 115 00:05:39,720 --> 00:05:42,800 Speaker 4: But in India you've actually had a rising middle class, 116 00:05:42,839 --> 00:05:45,080 Speaker 4: and I think if you that's always been a tough 117 00:05:45,120 --> 00:05:49,480 Speaker 4: market for Apple. Three percent iPhones we think called it. 118 00:05:49,600 --> 00:05:51,440 Speaker 4: By the next two years, it's going to be ten 119 00:05:51,480 --> 00:05:54,640 Speaker 4: to twelve percent overall iPhones. India is actually going to 120 00:05:54,680 --> 00:05:57,719 Speaker 4: be robust for Apple, especially on different price points. 121 00:05:57,760 --> 00:06:02,120 Speaker 2: How many iPhones are purchased one on a plan from 122 00:06:02,160 --> 00:06:05,240 Speaker 2: a phone company and not where somebody spends eight hundred 123 00:06:05,279 --> 00:06:06,480 Speaker 2: or one thousand dollars on. 124 00:06:06,440 --> 00:06:08,840 Speaker 4: The toy I mean it's a huge number. I mean 125 00:06:09,040 --> 00:06:11,320 Speaker 4: it's a huge number. And if you look at the 126 00:06:11,440 --> 00:06:14,640 Speaker 4: carrier discounts that's gonna come and this is the big thing. 127 00:06:14,680 --> 00:06:16,960 Speaker 2: Do you have information on them you'd like to break 128 00:06:17,120 --> 00:06:17,680 Speaker 2: on Bloomberg. 129 00:06:17,800 --> 00:06:21,640 Speaker 4: So everything we're seeing, we think it was going to 130 00:06:21,839 --> 00:06:29,720 Speaker 4: essentially be unprecedented types of promotion from especially US carriers, 131 00:06:29,760 --> 00:06:33,080 Speaker 4: just because this is the time. In other words, when 132 00:06:33,160 --> 00:06:35,960 Speaker 4: you think about five G when that came out and 133 00:06:36,000 --> 00:06:38,840 Speaker 4: now essentially AI this is really going to be the 134 00:06:38,880 --> 00:06:42,600 Speaker 4: opportunity in terms of carrier discounts and what really starts 135 00:06:42,720 --> 00:06:46,440 Speaker 4: to about maturity on a smartphone cycle. This is now 136 00:06:47,000 --> 00:06:50,520 Speaker 4: that consumer AI revolution that actually will go through Cooper Tino, 137 00:06:50,760 --> 00:06:53,320 Speaker 4: and we think that's how we have a four trillion 138 00:06:53,400 --> 00:06:55,280 Speaker 4: dollar mark cap as we you know, go into early 139 00:06:55,320 --> 00:06:55,760 Speaker 4: next year. 140 00:06:55,839 --> 00:06:57,520 Speaker 2: Do you have some of the parts on Apple you 141 00:06:57,520 --> 00:06:58,039 Speaker 2: can update? 142 00:06:58,240 --> 00:07:01,520 Speaker 4: Yes, so we have one point seven trillion. Is what 143 00:07:01,839 --> 00:07:05,320 Speaker 4: I view is the services value. And when you sort 144 00:07:05,360 --> 00:07:08,240 Speaker 4: of some of the parts that that's something where you know, 145 00:07:08,240 --> 00:07:10,720 Speaker 4: you got about one hundred billion a rev growing mid 146 00:07:10,760 --> 00:07:14,520 Speaker 4: teens free cash margins will double the hardware business. You 147 00:07:14,640 --> 00:07:17,880 Speaker 4: combine it, it's over four trillion. I think bull cases 148 00:07:18,000 --> 00:07:19,720 Speaker 4: ultimately you know over over three. 149 00:07:19,640 --> 00:07:23,680 Speaker 5: Hundred Microsoft, which I know you've been very bullish on Microsoft. 150 00:07:23,760 --> 00:07:25,119 Speaker 1: What's the thought these days? 151 00:07:25,240 --> 00:07:28,000 Speaker 4: You look in a videos call last night, you also 152 00:07:28,040 --> 00:07:31,160 Speaker 4: buy Microsoft because Nadella and Rednu are leading. Then on 153 00:07:31,200 --> 00:07:34,400 Speaker 4: the software side, you look at open Ai, they're really 154 00:07:34,480 --> 00:07:38,200 Speaker 4: dominating in that amount rushmore. That's where Nadella is along 155 00:07:38,280 --> 00:07:39,080 Speaker 4: with Jensen. 156 00:07:39,440 --> 00:07:44,360 Speaker 2: Does Blackwell compete with Azure or do they cohabitate? 157 00:07:44,560 --> 00:07:49,600 Speaker 4: They're complementary. Thing about black I don't so essentially Blackwell 158 00:07:49,800 --> 00:07:53,920 Speaker 4: is almost the architecture, the foundation of a house. Microsoft 159 00:07:54,400 --> 00:07:58,280 Speaker 4: is the actual house, The actual rooms will be different 160 00:07:58,320 --> 00:08:02,320 Speaker 4: software players service now you know called salesforce and others. 161 00:08:02,360 --> 00:08:07,240 Speaker 4: What protects the house, cybersecurity names like pale Auto and others. Look, 162 00:08:07,280 --> 00:08:11,200 Speaker 4: I continue to think in Vidia today, it's Lebron in 163 00:08:11,280 --> 00:08:15,920 Speaker 4: high school. That's essentially where they are. Lebron in high school, 164 00:08:16,280 --> 00:08:18,160 Speaker 4: in Vidia, that's where they are. 165 00:08:18,840 --> 00:08:22,240 Speaker 5: So I guess when we think about this AI spending here, 166 00:08:22,280 --> 00:08:24,720 Speaker 5: the numbers are just almost numbing. 167 00:08:24,760 --> 00:08:25,600 Speaker 1: That is so big. 168 00:08:26,040 --> 00:08:30,360 Speaker 5: How much of the AI capital spending the is it 169 00:08:30,400 --> 00:08:33,440 Speaker 5: incremental versus just taken away from other tech budgets like 170 00:08:33,480 --> 00:08:34,200 Speaker 5: it or something. 171 00:08:34,320 --> 00:08:38,199 Speaker 4: So I'd say about eight hundred billion of the trillion 172 00:08:39,000 --> 00:08:42,360 Speaker 4: is incremental. Wow, so there's two hundred billion that. Of 173 00:08:42,360 --> 00:08:45,480 Speaker 4: course there's accounibalization impact and there will be losers on that, 174 00:08:45,880 --> 00:08:48,040 Speaker 4: but it really is incremental and it just speaks to 175 00:08:48,480 --> 00:08:50,920 Speaker 4: strong and get stronger in tech. And then you can 176 00:08:50,960 --> 00:08:54,360 Speaker 4: say about about regulatory. Regulatory is in a minivan going 177 00:08:54,400 --> 00:08:56,080 Speaker 4: forty miles an hour in the right lane, and the 178 00:08:56,160 --> 00:08:59,480 Speaker 4: technologies in a Ferrari key in the Ferrari left lane 179 00:08:59,480 --> 00:09:00,640 Speaker 4: going one hundred miles an hour. 180 00:09:00,840 --> 00:09:03,600 Speaker 2: What is the free cash flow growth of the mag 181 00:09:03,760 --> 00:09:07,079 Speaker 2: seven When you aggregate them together. There's a secret Excel 182 00:09:07,240 --> 00:09:09,480 Speaker 2: spreadsheet in the basement of the ives. 183 00:09:09,800 --> 00:09:13,400 Speaker 4: Free cash for growth of mag seven is i'd say 184 00:09:13,559 --> 00:09:16,439 Speaker 4: upper teams into potentially. 185 00:09:16,080 --> 00:09:17,760 Speaker 3: Really, you're gonna give me a two zero one. 186 00:09:17,800 --> 00:09:21,000 Speaker 4: I think it could start to now get that high 187 00:09:21,120 --> 00:09:23,760 Speaker 4: as we go into next two three. And that's why, look, 188 00:09:23,800 --> 00:09:26,920 Speaker 4: I get it. The bears continue to you know, they 189 00:09:26,920 --> 00:09:30,520 Speaker 4: sit there with their spreadsheets DCF being negative on tacking. 190 00:09:30,840 --> 00:09:33,439 Speaker 2: But I'm gonna stop there. This is too important. You're 191 00:09:33,480 --> 00:09:36,360 Speaker 2: going to DCF. I asked this with Paul yesterday. How 192 00:09:36,400 --> 00:09:40,360 Speaker 2: do you do with terminal value on these juggernuts? This 193 00:09:40,440 --> 00:09:42,280 Speaker 2: does not see FA one on one, but. 194 00:09:42,400 --> 00:09:46,040 Speaker 4: You have to ultimately trajectory out what the cap BAX 195 00:09:46,120 --> 00:09:50,680 Speaker 4: looks like, what's the incremental dollars and what that ultimately 196 00:09:50,720 --> 00:09:51,560 Speaker 4: means to the wall. 197 00:09:51,960 --> 00:09:53,360 Speaker 3: How far out this dan IVES go. 198 00:09:53,520 --> 00:09:56,800 Speaker 4: You basically have to go out six, eight, ten years 199 00:09:56,840 --> 00:09:58,720 Speaker 4: to actually do a trajector like when you look at 200 00:09:58,760 --> 00:10:01,640 Speaker 4: Microsoft the way they you get four and a half 201 00:10:01,720 --> 00:10:04,920 Speaker 4: five trillion, Okay, just for you have to be it's say, 202 00:10:04,960 --> 00:10:08,480 Speaker 4: how much of percentage of cappacks they're gonna get? What demonization? 203 00:10:08,800 --> 00:10:12,120 Speaker 4: What does the free cash will incrementally look like and 204 00:10:12,160 --> 00:10:14,400 Speaker 4: that's where all these stories change. But then there's other 205 00:10:14,520 --> 00:10:18,199 Speaker 4: names like a pall Andeer, the Messi of AI. It 206 00:10:18,320 --> 00:10:19,280 Speaker 4: wasn't even on the radar. 207 00:10:19,400 --> 00:10:23,120 Speaker 2: Now there n their core AI play. 208 00:10:23,520 --> 00:10:26,000 Speaker 5: Hey Dan, one of the key actributes of your research 209 00:10:26,080 --> 00:10:27,080 Speaker 5: is that you travel the globe. 210 00:10:27,200 --> 00:10:29,360 Speaker 1: You see people all over the place. What's your next trip? 211 00:10:29,960 --> 00:10:32,079 Speaker 4: So we'll be going to Asia on Monday, be there 212 00:10:32,120 --> 00:10:35,520 Speaker 4: for two weeks and look to me, that's where we've got. 213 00:10:35,600 --> 00:10:38,520 Speaker 4: That's where we get edged because I think a lot 214 00:10:38,600 --> 00:10:41,480 Speaker 4: of investors how they've missed AI revolution. They try to 215 00:10:41,520 --> 00:10:44,760 Speaker 4: find it on the Metro North Jersey transit on the 216 00:10:44,800 --> 00:10:46,640 Speaker 4: tenth four of their office building in New York or 217 00:10:46,640 --> 00:10:49,240 Speaker 4: San France. You gotta travel to see it, and I 218 00:10:49,280 --> 00:10:49,679 Speaker 4: think that. 219 00:10:49,840 --> 00:10:52,720 Speaker 2: So what do you see when you go to We see. 220 00:10:52,480 --> 00:10:56,280 Speaker 4: The suppliers, we see the component players. I also think 221 00:10:56,280 --> 00:11:00,559 Speaker 4: by seeing global investors you get a very good ends 222 00:11:00,600 --> 00:11:02,640 Speaker 4: in terms of where things are, and I think it 223 00:11:02,760 --> 00:11:05,000 Speaker 4: just gives you a little more perspective. 224 00:11:05,040 --> 00:11:08,200 Speaker 2: Final, can you convince John Tucker to upgrade this time around? 225 00:11:08,400 --> 00:11:08,480 Speaker 6: No? 226 00:11:08,640 --> 00:11:12,319 Speaker 4: I think I look, I think I think Tucker after 227 00:11:12,440 --> 00:11:15,400 Speaker 4: going to the In Video Watch party last night, that 228 00:11:15,600 --> 00:11:19,200 Speaker 4: he might now potentially upgrade to an iPhone. 229 00:11:19,920 --> 00:11:22,840 Speaker 1: Occursonally Blackwell ship Where have I heard that name? Remember 230 00:11:22,920 --> 00:11:25,600 Speaker 1: mister Blackwell, the guy who did the best and worst 231 00:11:25,600 --> 00:11:27,400 Speaker 1: stress less Oh yeah? Where would. 232 00:11:29,320 --> 00:11:31,720 Speaker 4: I think Kean would be at the top? Keen would 233 00:11:31,760 --> 00:11:33,440 Speaker 4: be at the top, and I'd be and maybe like 234 00:11:33,520 --> 00:11:34,679 Speaker 4: the like other. 235 00:11:34,559 --> 00:11:39,280 Speaker 2: Category and travels hugely valuable. Will curse feature mister Ryes 236 00:11:39,360 --> 00:11:42,239 Speaker 2: mister Munster together today on Bloomberg Surveillance. 237 00:11:42,280 --> 00:11:54,600 Speaker 3: That's the way that we will blog. 238 00:11:54,920 --> 00:11:57,160 Speaker 2: Richie joins us right now for tier price or they 239 00:11:57,200 --> 00:12:01,160 Speaker 2: are wonderful academics out of Beth and l see as 240 00:12:01,200 --> 00:12:02,080 Speaker 2: well Ballerina. 241 00:12:02,240 --> 00:12:03,679 Speaker 3: We had HSBC in here. 242 00:12:03,720 --> 00:12:06,840 Speaker 2: I think it was yesterday, day before with a brilliant 243 00:12:06,920 --> 00:12:14,000 Speaker 2: separation of the consumer in America, not you know, East West, right, 244 00:12:14,120 --> 00:12:18,160 Speaker 2: left politics or anything, but the haves and the have nots. 245 00:12:18,600 --> 00:12:21,559 Speaker 2: How polarized is the American consumer? 246 00:12:24,280 --> 00:12:26,880 Speaker 6: I think there are a couple of ways in which 247 00:12:26,920 --> 00:12:31,000 Speaker 6: you can characterize this. One is the fact that the 248 00:12:31,160 --> 00:12:34,719 Speaker 6: savings buffer and the bounce sheet of the consumer at 249 00:12:34,760 --> 00:12:39,640 Speaker 6: the bottom twenty to forty percent is significantly weaker than 250 00:12:39,679 --> 00:12:42,920 Speaker 6: the rest more well off consumers in the economy. They 251 00:12:43,040 --> 00:12:46,520 Speaker 6: ran out of a pandemic savings sooner, they didn't build 252 00:12:46,600 --> 00:12:51,040 Speaker 6: their cash buffers as much. And also, the other thing 253 00:12:51,080 --> 00:12:54,240 Speaker 6: that has been hitting the lower end consumer more than 254 00:12:54,520 --> 00:12:59,480 Speaker 6: upper income quantiles is inflation. We know that this proportion 255 00:12:59,559 --> 00:13:03,760 Speaker 6: of the enemy spends more on necessities like food and 256 00:13:03,960 --> 00:13:06,680 Speaker 6: energy gas at the pump station, and this is where 257 00:13:06,760 --> 00:13:11,839 Speaker 6: inflation has hit the hardest. I think what has compensated 258 00:13:12,000 --> 00:13:15,320 Speaker 6: a bit for this hardship in terms of inflation and 259 00:13:15,440 --> 00:13:18,720 Speaker 6: cash balances has been the fact that the labor market 260 00:13:18,760 --> 00:13:23,280 Speaker 6: has been so strong and so hot that income growth 261 00:13:23,280 --> 00:13:28,520 Speaker 6: and wage increases have been higher for those workers at 262 00:13:28,559 --> 00:13:31,080 Speaker 6: the lower end of the skill or the lower end 263 00:13:31,160 --> 00:13:34,560 Speaker 6: of the income distribution. So we've seen average hourly earnings 264 00:13:34,600 --> 00:13:40,080 Speaker 6: for retail hospitality increase more than other services parts of 265 00:13:40,120 --> 00:13:40,760 Speaker 6: the economy. 266 00:13:41,920 --> 00:13:46,680 Speaker 5: So Blarina, what did you make given that backdrop of 267 00:13:47,480 --> 00:13:50,920 Speaker 5: this economy is still pretty solid position? But the FED 268 00:13:51,000 --> 00:13:54,080 Speaker 5: on Friday add in Jacksonville, FED Chairman jpald seemed to 269 00:13:54,200 --> 00:13:57,600 Speaker 5: really really signal that they are open to cutting ridge 270 00:13:57,640 --> 00:14:00,320 Speaker 5: as soon as September. Is that seen reason to you? 271 00:14:02,040 --> 00:14:05,240 Speaker 6: So? I think this has been he telegraphed pretty well 272 00:14:05,280 --> 00:14:07,400 Speaker 6: that September is now a done deal, and I think 273 00:14:07,440 --> 00:14:11,280 Speaker 6: for the market is the question is what will be 274 00:14:11,400 --> 00:14:15,280 Speaker 6: the size of the cuts initially and the pace going forward. 275 00:14:15,360 --> 00:14:19,080 Speaker 6: We still don't have much clarity about the terminal rate 276 00:14:19,240 --> 00:14:22,720 Speaker 6: in this business cycle. And notable that Sir Powell again 277 00:14:22,840 --> 00:14:25,960 Speaker 6: did not comment on our star and at Librium interest rates. 278 00:14:26,120 --> 00:14:28,520 Speaker 6: So I think we have a bit more uncertainty about 279 00:14:28,520 --> 00:14:31,880 Speaker 6: the pace of cuts and the terminal rate. But we're 280 00:14:31,920 --> 00:14:34,600 Speaker 6: starting the cutting cycle. To your question, is this the 281 00:14:34,720 --> 00:14:37,640 Speaker 6: right thing? Why are we starting to have interest rates 282 00:14:37,640 --> 00:14:40,160 Speaker 6: at this point? We go back to the labor market. 283 00:14:40,200 --> 00:14:43,200 Speaker 6: When you look at the July payroll report, we're talking 284 00:14:43,240 --> 00:14:45,760 Speaker 6: about the magnificent sevens in the stock market. We have 285 00:14:45,800 --> 00:14:50,120 Speaker 6: a magnificent five in the labor market, with government, education, 286 00:14:52,120 --> 00:14:56,240 Speaker 6: health services, retail, hospitality driving about one hundred k of 287 00:14:56,280 --> 00:14:59,560 Speaker 6: the job increase. In total, the economy produced one hundred 288 00:14:59,600 --> 00:15:02,600 Speaker 6: and forty k net jobs, so you see how much 289 00:15:02,960 --> 00:15:06,360 Speaker 6: of job creation is being driven by this subsector. And 290 00:15:06,400 --> 00:15:10,400 Speaker 6: I think the FED is worried that tight interest rates 291 00:15:10,400 --> 00:15:13,520 Speaker 6: are high interest rates are restricting growth in the other 292 00:15:13,600 --> 00:15:17,720 Speaker 6: more interest rates sensitive parts of the economy, and that's 293 00:15:17,920 --> 00:15:20,200 Speaker 6: why I think they don't want to be behind the curve. 294 00:15:20,520 --> 00:15:23,800 Speaker 6: They want to start that easy cycle to make sure 295 00:15:23,800 --> 00:15:27,880 Speaker 6: we don't have a more abrupt labor market correction. 296 00:15:28,120 --> 00:15:30,400 Speaker 2: Okay, I'll go there, but give me the horse in 297 00:15:30,440 --> 00:15:32,240 Speaker 2: the cart, Loreina. This is what you do when you 298 00:15:32,480 --> 00:15:35,440 Speaker 2: when you have a master some lscy nail the horse 299 00:15:35,480 --> 00:15:38,040 Speaker 2: in the cart, Laurina, give me the horse in the cart. 300 00:15:38,280 --> 00:15:42,200 Speaker 2: The bond market's clearly signaling price up, yield down. 301 00:15:42,240 --> 00:15:42,960 Speaker 3: Not like China. 302 00:15:43,040 --> 00:15:46,400 Speaker 2: It's a different story. Is the bond market ahead of 303 00:15:46,400 --> 00:15:50,320 Speaker 2: the Fed? Or when the Fed cuts, do we get 304 00:15:50,440 --> 00:15:53,160 Speaker 2: further price up yield down in bonds. 305 00:15:55,520 --> 00:15:58,640 Speaker 6: I think the market is ahead of the Fed. My 306 00:15:58,880 --> 00:16:03,040 Speaker 6: view is that we do have such softening inactivity and 307 00:16:03,120 --> 00:16:06,080 Speaker 6: some loosening in the labor market, but the economy is 308 00:16:06,120 --> 00:16:09,040 Speaker 6: not weak, and so what we're seeing in this business 309 00:16:09,040 --> 00:16:11,680 Speaker 6: cycle is that the market gets way ahead of the Fed. 310 00:16:11,760 --> 00:16:16,080 Speaker 6: This happened back in December January as well. That loosens 311 00:16:16,160 --> 00:16:18,920 Speaker 6: financial conditions, and in some way it provides a bit 312 00:16:18,920 --> 00:16:22,200 Speaker 6: of a positive impulse, growth impulse to the economy. I 313 00:16:22,200 --> 00:16:25,240 Speaker 6: think we're doing that again now. But the economy overall 314 00:16:25,400 --> 00:16:28,360 Speaker 6: is not weak. I don't think we are about to 315 00:16:28,480 --> 00:16:31,040 Speaker 6: enter a recession, and so the market I think has 316 00:16:31,040 --> 00:16:34,240 Speaker 6: gone ahead of itself, is probably pricing in more cuts 317 00:16:34,280 --> 00:16:36,880 Speaker 6: than the FED needs to deliver. Now, let's be clear. 318 00:16:36,960 --> 00:16:40,200 Speaker 6: I think the FED wants to start easing monetary policy, 319 00:16:40,640 --> 00:16:43,520 Speaker 6: wants to bring interest rates in a place where they 320 00:16:43,560 --> 00:16:46,400 Speaker 6: are more balanced, not as restrictive as they are right now. 321 00:16:46,600 --> 00:16:48,480 Speaker 6: But I don't think that they'll go all the way 322 00:16:48,480 --> 00:16:50,440 Speaker 6: to where the market is in the next twelve months. 323 00:16:51,080 --> 00:16:54,240 Speaker 5: Blarina, we had the you mentioned you were talking about 324 00:16:54,400 --> 00:16:58,000 Speaker 5: the labor market here, we had the s rule presumably 325 00:16:58,040 --> 00:17:01,800 Speaker 5: indicated that we're in a recession. Does that seem reasonable 326 00:17:01,840 --> 00:17:02,040 Speaker 5: to you? 327 00:17:03,600 --> 00:17:07,120 Speaker 6: I mean, this is a very interesting question. It's chir 328 00:17:07,280 --> 00:17:11,840 Speaker 6: Powell characterized it as a statistical normalcy, something that has 329 00:17:11,920 --> 00:17:15,000 Speaker 6: tended to happen historically, and it's very unusual that this 330 00:17:15,119 --> 00:17:17,520 Speaker 6: time round we're seeing this type of increase in the 331 00:17:17,600 --> 00:17:22,320 Speaker 6: unemployment rate with the economy being as strong as it is. Historically, 332 00:17:22,359 --> 00:17:25,000 Speaker 6: when the unemployment rate has increased so much, we've had 333 00:17:25,320 --> 00:17:30,640 Speaker 6: negative consumer spending growth, We've had weakness in industrial production, 334 00:17:30,800 --> 00:17:34,000 Speaker 6: much more pronounced than where it is right now. So 335 00:17:34,200 --> 00:17:37,800 Speaker 6: I think there is something here we need to take 336 00:17:38,119 --> 00:17:41,199 Speaker 6: signal from the loosening in the labor market, but I 337 00:17:41,240 --> 00:17:43,720 Speaker 6: don't think that the predictive power of the sum rule 338 00:17:43,800 --> 00:17:46,600 Speaker 6: this time around is as powerful as it's been in 339 00:17:46,640 --> 00:17:47,119 Speaker 6: the past. 340 00:17:47,400 --> 00:17:49,639 Speaker 2: Blurina, thank you for the brief this morning with t 341 00:17:50,000 --> 00:17:51,119 Speaker 2: Rowe Price, Baltimore. 342 00:17:51,960 --> 00:17:53,480 Speaker 3: The Blurina arote you with. 343 00:17:53,520 --> 00:18:00,879 Speaker 2: US joining US now does better math then Sarah House, 344 00:18:01,440 --> 00:18:02,280 Speaker 2: US economist. 345 00:18:02,359 --> 00:18:03,520 Speaker 3: It will's Fargo. 346 00:18:03,680 --> 00:18:07,600 Speaker 2: Sarah, excuse me, am, I off the mark to take 347 00:18:07,720 --> 00:18:11,359 Speaker 2: three percent real GDP, add in a GDP price index 348 00:18:11,400 --> 00:18:14,960 Speaker 2: a two point five, and I've got nominal GDP above 349 00:18:15,000 --> 00:18:15,760 Speaker 2: five percent. 350 00:18:17,119 --> 00:18:20,040 Speaker 7: That's how you do it. You're the math twist on. 351 00:18:21,320 --> 00:18:24,719 Speaker 2: Well, what's its signal? I'm sorry, that's a solid ecadomy. 352 00:18:24,760 --> 00:18:27,480 Speaker 2: That's morning in America right now. 353 00:18:27,560 --> 00:18:29,800 Speaker 7: It still signals that the US economy is in very 354 00:18:29,800 --> 00:18:33,640 Speaker 7: good shape. I think that upward revision in consumer spending 355 00:18:33,720 --> 00:18:36,639 Speaker 7: is pretty telling that even I think with some of 356 00:18:36,640 --> 00:18:38,720 Speaker 7: the slow down in income growth, it doesn't seem like 357 00:18:38,760 --> 00:18:42,439 Speaker 7: there's much to stop the US consumer as of now. 358 00:18:42,560 --> 00:18:45,480 Speaker 7: So still looking like pretty good momentum as we head 359 00:18:45,520 --> 00:18:49,399 Speaker 7: into the third quarter, and I think as we look ahead, 360 00:18:49,440 --> 00:18:53,760 Speaker 7: though still expecting a moderation just given that in some ways, 361 00:18:53,800 --> 00:18:57,040 Speaker 7: well despite all the strength that there, it is difficult 362 00:18:57,080 --> 00:19:00,400 Speaker 7: to sustain, I think, given that that income back in here. 363 00:19:00,440 --> 00:19:02,320 Speaker 2: But let me just finish the thought, let me close 364 00:19:02,359 --> 00:19:06,399 Speaker 2: the loop. What is the Wells Fargo micro data of 365 00:19:06,440 --> 00:19:08,439 Speaker 2: the quarter ending September thirty. 366 00:19:10,320 --> 00:19:13,120 Speaker 7: Yeah, so we're looking for a step down in consumer spending, 367 00:19:13,160 --> 00:19:15,919 Speaker 7: even as you did get a very strong start to 368 00:19:15,960 --> 00:19:18,520 Speaker 7: the quarter. So we saw that in the July retail sales. 369 00:19:18,560 --> 00:19:23,080 Speaker 7: We're expecting another pretty strong print in tomorrow's personal personal 370 00:19:23,119 --> 00:19:26,119 Speaker 7: spending numbers. But I think as we move through the quarter, 371 00:19:26,200 --> 00:19:28,240 Speaker 7: this down shift that we've seen in job growth, the 372 00:19:28,280 --> 00:19:31,919 Speaker 7: downshift that we've seen in nominal wage growth, the fact 373 00:19:31,920 --> 00:19:35,440 Speaker 7: that the excess savings from the pandemic have run dry 374 00:19:35,560 --> 00:19:39,080 Speaker 7: for most households, and also credit growth is running below 375 00:19:39,240 --> 00:19:42,879 Speaker 7: inflation for the consumer sector, it does mean that I 376 00:19:42,920 --> 00:19:46,560 Speaker 7: think this almost three percent pace of consumer spending that 377 00:19:46,600 --> 00:19:50,159 Speaker 7: we saw on the second quarter isn't going to be maintained. 378 00:19:50,440 --> 00:19:53,240 Speaker 5: All right, Sarah, given that backdrop for the consumer spending, 379 00:19:53,240 --> 00:19:55,720 Speaker 5: giving the backshop of the GDP print we just saw today, 380 00:19:56,160 --> 00:19:57,679 Speaker 5: how do you put in context what we heard from 381 00:19:57,680 --> 00:20:00,879 Speaker 5: FED Chairman j Palas Friday and Jackson Hole that the 382 00:20:00,960 --> 00:20:05,800 Speaker 5: time has come for policy to adjust I think that's right. 383 00:20:05,920 --> 00:20:08,879 Speaker 7: So when we look across the US economy, again, the 384 00:20:08,920 --> 00:20:13,800 Speaker 7: consumer is still spending, but the fundamentals are weakening. And really, 385 00:20:13,800 --> 00:20:17,480 Speaker 7: when it comes down the consumer, it's increasingly important what's 386 00:20:17,520 --> 00:20:20,960 Speaker 7: happening with the jobs market. And so I think given 387 00:20:21,000 --> 00:20:24,680 Speaker 7: the moderation that we've seen in hiring, so forget even 388 00:20:24,800 --> 00:20:27,800 Speaker 7: the backward looking benchmarks, but even just over the past 389 00:20:27,840 --> 00:20:30,280 Speaker 7: four months, where you've seen hiring at just a little 390 00:20:30,320 --> 00:20:32,760 Speaker 7: over a one hundred and fifty thousand pace, what we're 391 00:20:32,760 --> 00:20:35,240 Speaker 7: seeing in terms of the increase in the unemployment rate, 392 00:20:35,400 --> 00:20:39,240 Speaker 7: not just the temporary layoffs but the permanent job losers. 393 00:20:39,359 --> 00:20:42,680 Speaker 7: That the labor market has softened quite a bit. It's 394 00:20:42,760 --> 00:20:45,280 Speaker 7: back to where it was before the pandemic, if not 395 00:20:45,440 --> 00:20:48,159 Speaker 7: a little bit softer. So if we don't want to 396 00:20:48,200 --> 00:20:50,720 Speaker 7: see the labor market break, it's time to dial back 397 00:20:50,840 --> 00:20:54,720 Speaker 7: the degree of restrictiveness that we currently have said policy. 398 00:20:54,240 --> 00:20:56,879 Speaker 5: At DoD they dial it back by twenty five basis 399 00:20:56,880 --> 00:20:59,520 Speaker 5: points or fifty basis points in September, and does that 400 00:20:59,560 --> 00:20:59,960 Speaker 5: even matter. 401 00:21:01,600 --> 00:21:05,000 Speaker 7: So coming out of the jobs report that we got 402 00:21:05,040 --> 00:21:08,400 Speaker 7: on August second, we thought that they would would perhaps 403 00:21:08,400 --> 00:21:10,879 Speaker 7: go fifty basis points that's still our current call. But 404 00:21:10,960 --> 00:21:12,840 Speaker 7: I think it's really going to come down to what 405 00:21:12,880 --> 00:21:16,360 Speaker 7: we get out of the August jobs report on September sixth. 406 00:21:16,600 --> 00:21:18,159 Speaker 7: Given that you have seen, I think some of the 407 00:21:18,200 --> 00:21:21,240 Speaker 7: activity data hang in there, better claims have come back down, 408 00:21:21,520 --> 00:21:24,840 Speaker 7: as we saw again this morning. But also I think 409 00:21:24,880 --> 00:21:28,920 Speaker 7: you just haven't heard I think that that appetite from 410 00:21:29,080 --> 00:21:32,040 Speaker 7: the FOMC other members of the committee. So I think 411 00:21:32,040 --> 00:21:34,200 Speaker 7: it's going to be really hard to get a fifty 412 00:21:34,200 --> 00:21:37,479 Speaker 7: basis point cut at this point unless you see a 413 00:21:37,520 --> 00:21:41,320 Speaker 7: sharp weakening again in the jobs numbers coming out of 414 00:21:41,359 --> 00:21:44,040 Speaker 7: the next of the next viral report. But I think 415 00:21:44,080 --> 00:21:46,359 Speaker 7: it does look pretty clear that they will be cutting 416 00:21:46,359 --> 00:21:47,919 Speaker 7: to some degree. It just it's a bit of a 417 00:21:47,920 --> 00:21:50,240 Speaker 7: taller order for fifty, I think based on some of 418 00:21:50,240 --> 00:21:52,119 Speaker 7: the data and fed Skik recently. 419 00:21:52,080 --> 00:21:54,639 Speaker 2: Sir, one of the themes this week for US is 420 00:21:54,640 --> 00:21:57,840 Speaker 2: this sharped economy and consumption seventy percent of. 421 00:21:57,800 --> 00:22:00,560 Speaker 3: The economy between the halves and the head havenots. 422 00:22:01,000 --> 00:22:03,240 Speaker 2: What do you guys do immense work on this with 423 00:22:03,280 --> 00:22:08,240 Speaker 2: the Wells Fargo heritage. What is a polarization rather not that, 424 00:22:08,440 --> 00:22:13,360 Speaker 2: what is the polarity or barbell of the American consumer today. 425 00:22:14,800 --> 00:22:17,320 Speaker 7: Yeah, it is pretty stark where you know, I mentioned 426 00:22:17,359 --> 00:22:21,120 Speaker 7: some of that excess liquidity and estimate show it's run 427 00:22:21,200 --> 00:22:23,080 Speaker 7: dry for your lower end, and I think you are 428 00:22:23,119 --> 00:22:26,119 Speaker 7: seeing that stress when we look at things like delinquencies 429 00:22:26,119 --> 00:22:28,400 Speaker 7: among credit cards and autos or at the highest going 430 00:22:28,440 --> 00:22:31,919 Speaker 7: back since we're coming out of the financial crisis. But 431 00:22:32,119 --> 00:22:35,240 Speaker 7: again you're still seeing an aggregate putting up pretty strong 432 00:22:35,680 --> 00:22:40,480 Speaker 7: income and spending numbers because the upper echelons are still 433 00:22:40,520 --> 00:22:43,520 Speaker 7: doing pretty well, you know, So they're benefiting from still 434 00:22:43,520 --> 00:22:47,720 Speaker 7: being employed, they're benefiting from wealth increases that we've seen 435 00:22:47,720 --> 00:22:51,080 Speaker 7: coming out of the housing market and financial markets as well, 436 00:22:51,160 --> 00:22:53,879 Speaker 7: and so that's been able I think to mask some 437 00:22:53,920 --> 00:22:57,439 Speaker 7: of the ongoing stress that we've seen at the lower 438 00:22:57,560 --> 00:23:01,719 Speaker 7: end and keep consumer spending positive even if even as 439 00:23:01,720 --> 00:23:04,000 Speaker 7: we have seen I think some of the jobs numbers 440 00:23:04,000 --> 00:23:07,119 Speaker 7: we can and also just a slow down in average 441 00:23:07,119 --> 00:23:13,800 Speaker 7: hourly earnings at the lower end of job earners. 442 00:23:13,440 --> 00:23:17,200 Speaker 5: Sure question, but thank you. This is a big, big question, 443 00:23:17,680 --> 00:23:22,320 Speaker 5: big picture question kind of Sarah deficits the national debt. 444 00:23:22,720 --> 00:23:24,600 Speaker 5: I mean, do I have to worry about this in 445 00:23:24,600 --> 00:23:25,440 Speaker 5: my lifetime here? 446 00:23:27,520 --> 00:23:31,320 Speaker 7: So this is something I don't think there's a crisis moment. 447 00:23:31,400 --> 00:23:34,399 Speaker 7: There's no you know, set debt to GDP that all 448 00:23:34,440 --> 00:23:38,000 Speaker 7: of a sudden things go sideways. But I do think 449 00:23:38,080 --> 00:23:41,720 Speaker 7: that the trajectory that we've seen it is it is 450 00:23:41,800 --> 00:23:45,560 Speaker 7: concerning when we think about the rising cost of interest 451 00:23:45,840 --> 00:23:49,240 Speaker 7: on the debt and what that means for other forms 452 00:23:49,240 --> 00:23:52,040 Speaker 7: of spending. So particularly when you think about all these 453 00:23:52,080 --> 00:23:54,320 Speaker 7: budget battles that we have each and every year, we 454 00:23:54,359 --> 00:23:57,320 Speaker 7: can't get a budget passed on time. We're fighting over 455 00:23:57,520 --> 00:24:01,040 Speaker 7: a very small piece of the total spending pie that 456 00:24:01,040 --> 00:24:05,160 Speaker 7: that discretionary spending, whether it's defense or non defense. And 457 00:24:05,240 --> 00:24:08,040 Speaker 7: as that interest cost increases as well as you have 458 00:24:08,080 --> 00:24:11,880 Speaker 7: the upward trajectory and the mandatory entitlement spending, I think 459 00:24:11,920 --> 00:24:14,920 Speaker 7: it does make some of those those battles and even 460 00:24:15,320 --> 00:24:19,560 Speaker 7: more contentious. And I think you have perhaps less less 461 00:24:19,560 --> 00:24:23,240 Speaker 7: productive investment from the US government. So there's no crisis moment, 462 00:24:23,320 --> 00:24:26,320 Speaker 7: but I do think it has some erosion in terms 463 00:24:26,400 --> 00:24:27,880 Speaker 7: of the US economy. 464 00:24:28,040 --> 00:24:30,200 Speaker 3: Sara, I'm putting it on Twitter and LinkedIn now. Something 465 00:24:30,240 --> 00:24:31,640 Speaker 3: I did, I don't know. 466 00:24:31,840 --> 00:24:35,320 Speaker 2: On the trip back from Jackson Hole, Paul Bramo took 467 00:24:35,359 --> 00:24:38,960 Speaker 2: the Gulf Stream took me like three days back, I 468 00:24:39,040 --> 00:24:43,000 Speaker 2: was on a covered wagon outside you know, co Zed Nebraska. 469 00:24:43,119 --> 00:24:47,720 Speaker 2: Sarah at the Brookings Institute, Peter Orzag of Lazard, Murdoch 470 00:24:47,760 --> 00:24:51,560 Speaker 2: of Lazard, and Robin Brooks put together a three part 471 00:24:51,880 --> 00:24:56,760 Speaker 2: essay which says, everybody calmed down. Most of what we're 472 00:24:56,760 --> 00:25:01,239 Speaker 2: talking about was the duration, the length, the unknown of 473 00:25:01,240 --> 00:25:02,760 Speaker 2: the effect of the pandemic. 474 00:25:03,119 --> 00:25:03,920 Speaker 3: Do you buy that? 475 00:25:05,960 --> 00:25:08,760 Speaker 7: I think so in terms of I think just how 476 00:25:08,800 --> 00:25:13,280 Speaker 7: long it's taken us to normalize has been a lot 477 00:25:13,320 --> 00:25:16,159 Speaker 7: longer than anyone expected. I think we saw that up 478 00:25:16,200 --> 00:25:20,200 Speaker 7: from the transitory issue of knew that there were a 479 00:25:20,280 --> 00:25:23,120 Speaker 7: lot of distortions caused from the pandemic. I just think 480 00:25:23,119 --> 00:25:27,160 Speaker 7: it was underappreciated how how long those those would last. 481 00:25:27,240 --> 00:25:29,399 Speaker 7: I think we've seen this in terms of just the 482 00:25:29,400 --> 00:25:32,640 Speaker 7: financial position of households coming out of the pandemic, given 483 00:25:32,720 --> 00:25:37,520 Speaker 7: all the support we had, the tale of how low 484 00:25:38,200 --> 00:25:40,399 Speaker 7: rates were early on that allowed a lot of people 485 00:25:40,400 --> 00:25:43,520 Speaker 7: to refinance their homes and haven't felt the impact of 486 00:25:43,600 --> 00:25:45,800 Speaker 7: higher rates. And so I think we you know, in 487 00:25:45,800 --> 00:25:50,119 Speaker 7: this more instant gratification society where everything's so fast, I 488 00:25:50,160 --> 00:25:52,960 Speaker 7: think I think it's been difficult for us to wrap 489 00:25:52,960 --> 00:25:55,919 Speaker 7: our heads around that it does take time for I 490 00:25:55,960 --> 00:25:58,720 Speaker 7: think some of these some of these effects to unwind, 491 00:25:58,720 --> 00:26:01,560 Speaker 7: and it's something we're still grappling with here in mid 492 00:26:01,640 --> 00:26:02,680 Speaker 7: to late twenty twenty four. 493 00:26:02,840 --> 00:26:05,119 Speaker 3: That's the camp. I'm in Sarah House. Thank you. So 494 00:26:05,160 --> 00:26:07,879 Speaker 3: I'm in the Sarahause campus. Oh yeah, yeah, wells Fargo, 495 00:26:07,960 --> 00:26:09,240 Speaker 3: thank you for that. 496 00:26:19,480 --> 00:26:22,720 Speaker 2: Gene Monster joins us here on the technology of the moment. 497 00:26:23,280 --> 00:26:24,960 Speaker 3: Geene Monster, I want to go bigger. 498 00:26:24,720 --> 00:26:26,760 Speaker 2: Broader with you because we sort of beat the death 499 00:26:26,840 --> 00:26:29,399 Speaker 2: you know, the Minutia News and all that on in 500 00:26:29,560 --> 00:26:34,440 Speaker 2: video and more iPhones out of Nikai saying Apple's doing better. 501 00:26:35,560 --> 00:26:38,639 Speaker 2: Scott Galloway is one of the wisest people I know, 502 00:26:39,160 --> 00:26:43,359 Speaker 2: and in some interview Gene Monster, Scott Galloway said, basically 503 00:26:43,440 --> 00:26:46,560 Speaker 2: the single most important thing in his life is he's 504 00:26:46,640 --> 00:26:51,640 Speaker 2: never listened to people who said sell Microsoft, sell Apple, 505 00:26:52,119 --> 00:26:56,640 Speaker 2: and now sell Invidia. Time Magazine Norman Seth the famous 506 00:26:56,680 --> 00:27:01,000 Speaker 2: photograph nineteen eighty four of Steve Jobs cross legged on 507 00:27:01,040 --> 00:27:04,200 Speaker 2: a living room floor with that ugly mac. The rich 508 00:27:04,280 --> 00:27:08,080 Speaker 2: kids owned it a million years ago. How does gene 509 00:27:08,080 --> 00:27:13,560 Speaker 2: Monster react emotionally when it's out there these tech juggernauts 510 00:27:13,720 --> 00:27:16,240 Speaker 2: sell Microsoft, sell Apple sell Nvidio. 511 00:27:18,280 --> 00:27:21,000 Speaker 8: Well, I think the how I think about it is 512 00:27:21,040 --> 00:27:22,840 Speaker 8: just what's the long term. You got to think the 513 00:27:22,840 --> 00:27:25,000 Speaker 8: long term play, and there's the near term, and that's 514 00:27:25,000 --> 00:27:28,240 Speaker 8: what's the vortex that's going around in Vidia today. And 515 00:27:28,280 --> 00:27:32,359 Speaker 8: I generally react to a view of where the world 516 00:27:32,440 --> 00:27:35,760 Speaker 8: is going. In the case of within Vidia, it's a belief, 517 00:27:35,840 --> 00:27:39,280 Speaker 8: a strong belief. I'm staking my career that AI is 518 00:27:39,320 --> 00:27:42,040 Speaker 8: going to be a bigger event, bigger impact than the Internet. 519 00:27:42,680 --> 00:27:46,240 Speaker 8: And if that's the case, this trading around in Vidia 520 00:27:46,280 --> 00:27:48,240 Speaker 8: today is largely noise, even though it is a three 521 00:27:48,359 --> 00:27:52,360 Speaker 8: trillion dollar company. And the reason why I still am 522 00:27:52,400 --> 00:27:55,400 Speaker 8: comfortable and think of this in that same class as 523 00:27:55,440 --> 00:28:00,600 Speaker 8: Apple and Microsoft is that, ultimately is if you believe 524 00:28:00,720 --> 00:28:04,200 Speaker 8: that AI is going to be is transformative, more transformative 525 00:28:04,200 --> 00:28:07,439 Speaker 8: than the Internet. And there's a second belief you have 526 00:28:07,480 --> 00:28:09,919 Speaker 8: to have is that the way to get there is 527 00:28:09,960 --> 00:28:12,640 Speaker 8: through scaling laws, which basically say you have to throw 528 00:28:12,760 --> 00:28:16,280 Speaker 8: more compute in data at the problem to solve for intelligence. 529 00:28:16,760 --> 00:28:18,560 Speaker 8: Then in video is going to be a winner, and 530 00:28:19,920 --> 00:28:22,800 Speaker 8: I think that it is in a great place. I 531 00:28:22,840 --> 00:28:26,920 Speaker 8: do want to add one an angle to an additional 532 00:28:26,960 --> 00:28:30,399 Speaker 8: angle to the context of just buying hold forever. Is 533 00:28:30,440 --> 00:28:33,080 Speaker 8: that deep water we own in video. I think the 534 00:28:33,119 --> 00:28:35,320 Speaker 8: next two years are going to be far better than 535 00:28:35,320 --> 00:28:38,880 Speaker 8: what people are expecting today. But at some point, when 536 00:28:39,160 --> 00:28:41,400 Speaker 8: you're a hardware only company, there is a point of 537 00:28:41,480 --> 00:28:45,040 Speaker 8: deceleration that needs to be taken into consideration. And I 538 00:28:45,080 --> 00:28:48,920 Speaker 8: think that two years, three years from now, this may 539 00:28:48,920 --> 00:28:51,959 Speaker 8: be a position that will trim, but we think today 540 00:28:52,080 --> 00:28:53,280 Speaker 8: is the time to own it. 541 00:28:54,040 --> 00:28:57,120 Speaker 5: Gen when somebody like you, Geene Montreal says are staking 542 00:28:57,160 --> 00:29:00,560 Speaker 5: their career on this, that really really resonate for a 543 00:29:00,600 --> 00:29:01,880 Speaker 5: lot of our listeners and viewers. 544 00:29:02,280 --> 00:29:03,200 Speaker 2: Can you just. 545 00:29:03,200 --> 00:29:05,800 Speaker 5: Remind us how you view AI in the context of 546 00:29:06,440 --> 00:29:10,560 Speaker 5: the internet, electricity stuff like that, because that really hit 547 00:29:10,600 --> 00:29:12,040 Speaker 5: home when you I first heard you say that. 548 00:29:14,040 --> 00:29:17,040 Speaker 8: So I mean, I guess that believe that this is 549 00:29:17,040 --> 00:29:18,840 Speaker 8: going to be transformed a kind of struggle for the 550 00:29:18,920 --> 00:29:21,640 Speaker 8: right analogy. Is it the internet is a mobile? Is 551 00:29:21,640 --> 00:29:26,160 Speaker 8: it electricity? And at the core of humanity is intelligence 552 00:29:26,640 --> 00:29:32,080 Speaker 8: and the concept of having intelligence in real time at 553 00:29:32,120 --> 00:29:35,360 Speaker 8: scale is something that it's hard to put a value 554 00:29:35,360 --> 00:29:39,120 Speaker 8: on it. I think it's much more valuable than connecting 555 00:29:39,200 --> 00:29:42,000 Speaker 8: machines and connecting data. As powerful as that has been. 556 00:29:42,080 --> 00:29:45,560 Speaker 8: I think intelligence is a powerful a more powerful aspect 557 00:29:45,600 --> 00:29:48,520 Speaker 8: to it, and so there is a piece of a 558 00:29:48,680 --> 00:29:52,120 Speaker 8: huge missing piece around the substance of what does that 559 00:29:52,160 --> 00:29:54,920 Speaker 8: actually mean, like how is that going to impact our lives? 560 00:29:55,280 --> 00:29:58,600 Speaker 8: And the use cases and the examples have been few 561 00:29:58,640 --> 00:30:01,480 Speaker 8: and far between about how a eyes like profoundly impacting 562 00:30:01,480 --> 00:30:03,880 Speaker 8: our lives. I just want to give one quick example. 563 00:30:03,880 --> 00:30:05,760 Speaker 8: If we'd go back on a time machine in ninety 564 00:30:05,800 --> 00:30:08,400 Speaker 8: five and be talking about the potential of the Internet, 565 00:30:08,440 --> 00:30:10,920 Speaker 8: we could easily frame out what that Facebook was going 566 00:30:10,960 --> 00:30:13,760 Speaker 8: to happen with social connecting over the internet. We could 567 00:30:13,960 --> 00:30:16,280 Speaker 8: see what that Netflix was coming around the corner with 568 00:30:16,360 --> 00:30:18,880 Speaker 8: video over the internet. But it would have been impossible 569 00:30:18,920 --> 00:30:20,960 Speaker 8: for us to understand that the smartphone was going to 570 00:30:21,000 --> 00:30:23,840 Speaker 8: come because that was obviously enabled by the Internet. Those 571 00:30:23,920 --> 00:30:26,320 Speaker 8: kind of second and third derivatives. And that's kind of 572 00:30:26,360 --> 00:30:30,880 Speaker 8: similar to how I think about AI more broadly. And 573 00:30:31,320 --> 00:30:34,320 Speaker 8: I'm not concerned that we don't have these killer use 574 00:30:34,360 --> 00:30:38,680 Speaker 8: cases today because I think that those will present themselves 575 00:30:38,920 --> 00:30:42,000 Speaker 8: as we reach closer to general and eventually super intelligence, 576 00:30:42,000 --> 00:30:44,680 Speaker 8: which is where it really gets crazy. 577 00:30:47,560 --> 00:30:50,479 Speaker 2: Were you surprised by the iPhone build out reported by 578 00:30:50,600 --> 00:30:54,200 Speaker 2: Nike today in Nikai rather in Tokyo. 579 00:30:54,600 --> 00:30:56,000 Speaker 3: Did that surprise your team. 580 00:30:55,880 --> 00:31:01,640 Speaker 8: Gene, I'm not surprised. I think what is most important 581 00:31:01,840 --> 00:31:04,440 Speaker 8: is that when I think about this next iPhone cycle, 582 00:31:05,360 --> 00:31:09,160 Speaker 8: you have to it comes back to this belief and 583 00:31:09,480 --> 00:31:11,120 Speaker 8: do you think that these features are going to be 584 00:31:11,200 --> 00:31:13,800 Speaker 8: exciting for people? And I just I don't worry about 585 00:31:13,800 --> 00:31:16,760 Speaker 8: what kind of the near term builds are, whether they're 586 00:31:16,800 --> 00:31:19,640 Speaker 8: positive or negative. What I think about is like, is 587 00:31:19,680 --> 00:31:22,920 Speaker 8: are these features people will want? And I just quickly 588 00:31:22,960 --> 00:31:25,520 Speaker 8: go back for I look back over kind of last 589 00:31:25,520 --> 00:31:28,960 Speaker 8: seventeen iPhone cycles and try to compare what these AI 590 00:31:29,000 --> 00:31:31,000 Speaker 8: features are going to do for demand, and I think 591 00:31:31,040 --> 00:31:33,080 Speaker 8: it's similar to the iPhone six plus that was the 592 00:31:33,120 --> 00:31:35,240 Speaker 8: first large. 593 00:31:35,200 --> 00:31:37,440 Speaker 2: Right, Oh yeah you have the iPhone six plus. 594 00:31:37,480 --> 00:31:39,520 Speaker 5: Yeah, I think so, But I'm uprating soon, Jeane. 595 00:31:40,400 --> 00:31:40,840 Speaker 3: That's good. 596 00:31:40,920 --> 00:31:41,480 Speaker 4: You're right there. 597 00:31:41,520 --> 00:31:44,760 Speaker 8: You're only ten years ten years in and it's time, Paul. 598 00:31:45,400 --> 00:31:48,000 Speaker 8: But the iPhone growth I went from twelve percent for 599 00:31:48,080 --> 00:31:51,400 Speaker 8: the iPhone five cycle to fifty two percent. I mean 600 00:31:51,440 --> 00:31:55,040 Speaker 8: it add a profound impact on how people got excited 601 00:31:55,080 --> 00:31:57,200 Speaker 8: about these devices. One just more quick thought about how 602 00:31:57,200 --> 00:32:00,480 Speaker 8: I think about the X cycle is that the If 603 00:32:00,480 --> 00:32:02,600 Speaker 8: we look at the total number of iPhones that are 604 00:32:02,600 --> 00:32:05,360 Speaker 8: out there, there's about one point five billion active iPhones. 605 00:32:05,800 --> 00:32:08,640 Speaker 8: The act the life is just over five years average 606 00:32:08,680 --> 00:32:12,320 Speaker 8: life of an iPhone. And if you take the next tranch, 607 00:32:12,800 --> 00:32:15,480 Speaker 8: so take not the one that typically upgrades this year, 608 00:32:15,520 --> 00:32:17,400 Speaker 8: but the one that's going to typically upgrade in late 609 00:32:17,400 --> 00:32:20,760 Speaker 8: twenty twenty six, and you assume ten percent of those, 610 00:32:20,840 --> 00:32:23,080 Speaker 8: just ten percent of those see these AI features and 611 00:32:23,120 --> 00:32:25,840 Speaker 8: say yes, I'm going to buy it. A year early, 612 00:32:26,240 --> 00:32:29,440 Speaker 8: the iPhone growth goes from seven to fifteen percent, and 613 00:32:29,520 --> 00:32:33,600 Speaker 8: so the sensitivity around just getting a small piece of 614 00:32:33,600 --> 00:32:36,680 Speaker 8: that massive pool to move forward is going to have 615 00:32:36,720 --> 00:32:38,160 Speaker 8: a measurable impact on the business. 616 00:32:38,320 --> 00:32:41,200 Speaker 2: Gene, thank you, Gene monster with us, thank you, I say, 617 00:32:41,280 --> 00:32:45,200 Speaker 2: really really appreciating. 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