Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg
Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern
Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business app.
Speaker 1: Listen on demand wherever you get your podcasts, or watch
Speaker 1: us live on YouTube.
Speaker 2: Constance Hunter gives us wonderful perspective this morning. How is
Speaker 2: your view on this change with the information of the
Speaker 2: last seventy two hours.
Speaker 3: Yeah, well, so just to recap, right, it was the
Speaker 3: benchmark revisions, and it was PPI, and of course the
Speaker 3: benchmark revisions we could anticipate in advance that those were
Speaker 3: very well forecast and we knew that it was going
Speaker 3: to be large, and obviously it's the large. It's even
Speaker 3: larger than the two thousand and nine benchmark revisions. And
Speaker 3: what it foreshadows is that the labor market is weaker,
Speaker 3: which is the same thing the last two data prints
Speaker 3: have been telling us. And then of course PPI was
Speaker 3: quite an interesting report. Yes, we saw goods prices see
Speaker 3: pressure and services prices soften. That's actually what the Fed
Speaker 3: sort of wants to see. I think they can look
Speaker 3: through higher goods prices. It is harder for them to
Speaker 3: look through sticky services prices. So that's quite encouraging actually,
Speaker 3: And of course the other thing that came out of
Speaker 3: PPI was that margins are companies are taking this, margins
Speaker 3: are shrinking and if that continues, that is not a
Speaker 3: very good outlook for the equity markets.
Speaker 4: I have the Eco Go screen up on the bloomer
Speaker 4: here looking at these these headline numbers. Beneath that what
Speaker 4: is most important to you? What are you going to
Speaker 4: be looking for when you begin to support through that release.
Speaker 3: Sure, we're going to be looking through all the details
Speaker 3: of goods, and of course it's going to be lumpy
Speaker 3: as these as these tariff effects get passed through. We
Speaker 3: haven't seen it in autos, for example. We did see
Speaker 3: some indication in the PPI that component parts are going up.
Speaker 3: Engines are going up, component parts are going up, and
Speaker 3: so we do expect that passed through to come eventually.
Speaker 3: I think it's going to be lumpy, right, So we
Speaker 3: have a forecast each month of some average that we
Speaker 3: think is going to occur over the next six months,
Speaker 3: but very likely it's going to come in one or
Speaker 3: two month bursts and then it's going to subside.
Speaker 2: Does Chinese deflation affect this report or is that just
Speaker 2: a sidebar on the other side of the world.
Speaker 3: So that's a great question, Tom, because in the past,
Speaker 3: disinflation or deflation in China has been exported to the
Speaker 3: rest of the world, and it would be still being
Speaker 3: exported to the rest of the world except that we
Speaker 3: have put tariffs on and so that passed.
Speaker 5: Through is not occurring.
Speaker 3: Interesting, and we're not the only ones, by the way,
Speaker 3: if you look globally, deminimus taxes started in force in
Speaker 3: twenty twenty four from countries around the world, pushing back
Speaker 3: on the disinflation and deflation and excess supply.
Speaker 4: Let me ask an unfair question here. There is so
Speaker 4: much scrutiny on the Bureau of Labor Statistics, and I
Speaker 4: think what that's done is and have gotten a lot
Speaker 4: of us to re engage with the processes that lead
Speaker 4: to the job numbers that we get. Indeed, these inflation
Speaker 4: numbers as well, just stepping back, how good are these numbers?
Speaker 4: How much are they telling us about the overall inflation picture.
Speaker 3: So the robustness of the policies and procedures that all
Speaker 3: of our statistical agencies follow, including the BLS, are extremely robust.
Speaker 3: They have multiple failsafes and by the way, like all
Speaker 3: of us, they're always looking to find improvements, and they're
Speaker 3: always looking to say, ah, this isn't exactly right. We
Speaker 3: need to improve this, we need to improve that. And
Speaker 3: I just want to say, on the face of it,
Speaker 3: revisions are a really critical part of how data is
Speaker 3: collected and then processed over time. Right. So the problem
Speaker 3: with the CPI is that it is an average basket
Speaker 3: and what we know is that people attached to what
Speaker 3: economists call salients.
Speaker 6: Right.
Speaker 5: So for me, it's that cup of coffee.
Speaker 3: I thought I had a vertical demand curve for coffee,
Speaker 3: that there was no price at which I would not
Speaker 3: buy out, buy coffee out in the morning.
Speaker 5: Yes, but that it.
Speaker 3: Turns out I do have a price, and that price
Speaker 3: seems to be switching to Sanka. Well the eight coffee yeah,
Speaker 3: and eight dollar latte is a really it's really tough
Speaker 3: to swallow.
Speaker 2: It's it's on our way in here, Lisa and your
Speaker 2: pumpkin lot. It is.
Speaker 5: I know it's very expensive. And are you cutting back? Yes,
Speaker 5: I mean get home, let's.
Speaker 2: Go down to you. There's something different this year at
Speaker 2: our remembrances of September eleventh. Here we see the former
Speaker 2: governor of New York, Andrew Como, in conversation with Michael Bloomberg,
Speaker 2: as well as others. Mayor Adams is there.
Speaker 4: I saw Jase Johnson, the former Homeland Security Secretary with mister.
Speaker 2: Navarro I saw as well, and Secretary Lutnik is there.
Speaker 2: I should say that Michael Bloomberg, who has endorsed Andrew Como,
Speaker 2: is founder and majority owner of bloom briguelp the parent
Speaker 2: company of Bloomberg Radio. To those conversations, it has become
Speaker 2: a right of passage in New York. I think we
Speaker 2: need to convey that across this nation is Paul Sweeney
Speaker 2: says so eloquently, the light changes and you can barely
Speaker 2: get through it, and it gets harder every year. Navarro's
Speaker 2: standing with Cuomo the twenty David, your thoughts on these images.
Speaker 4: Yeah, I mean, I we're going to see I believe
Speaker 4: that the Vice President of the United States making his way
Speaker 4: to Lower Manhattan as well. President Trump is going to
Speaker 4: go to the Pentagon, and we see images of outside
Speaker 4: the Pentagon as well as we kind of again mark
Speaker 4: the way that all of this unfolded back in two
Speaker 4: thousand and one. So these dueling memorials taking place here
Speaker 4: on this on this Thursday morning in.
Speaker 2: The USA today. I believe has now Vice President in
Speaker 2: advanced with changed plans and we'll go directly to Utah.
Speaker 2: Has it unsure on that? Yeah, we'll get out front
Speaker 2: of that. We welcome all of you across the nation.
Speaker 2: On this eleventh of September. We are on the constance
Speaker 2: hunters with us you as we look at the inflation
Speaker 2: and claims report. It completely unfair and I need to
Speaker 2: get the Jason Furman annualized statistics three months. But Adam
Speaker 2: Long had those numbers this morning, and I'm sorry they're
Speaker 2: not two percent. This is the way it is. Do
Speaker 2: you say we're in an elevated inflation regime right now
Speaker 2: when you look at the annualized statistics?
Speaker 3: Of course, I mean zero point four percent annualized is
Speaker 3: a bit above four percent. If that number continues now,
Speaker 3: we expect their content to be elevated inflation for the
Speaker 3: next six seven months or so, especially in goods. But
Speaker 3: over that time period we do expect to see some
Speaker 3: moderation and services prices, especially housing services, and so by
Speaker 3: this time next year, our forecast for three month annualized
Speaker 3: core is around two point two percent, right, so very
Speaker 3: close to the FEDS target. And let's not forget that
Speaker 3: while we are seeing elevated prices and while people are
Speaker 3: attaching to salient whatever their salient price is right, and
Speaker 3: we saw feed inflation pretty significantly up in this book's report,
Speaker 3: the overall picture is that this is really being influenced
Speaker 3: by tariffs, which will feed through, that will pass through
Speaker 3: a year from now.
Speaker 2: Constance, thank you so much, Constance under eiu at stay
Speaker 2: with us. More from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on
Speaker 1: Applecarplay and Android Auto with the Bloomberg Business app, or
Speaker 1: watch us Live on YouTube.
Speaker 2: This should be a one hour conversation and along with
Speaker 2: a blistering essay oh in the last seventy two hours saying, look,
Speaker 2: the job character back eighteen months is a character of recession.
Speaker 2: Even though she says we may be in a new
Speaker 2: business cycle, We've got the inflation reports out as well,
Speaker 2: and I've got to go to the crafting of your
Speaker 2: paragraphs in the last seven hours or so. And you
Speaker 2: do an annualized calculation like Jason Furman at Harvard on
Speaker 2: a three month annualized inflation, et cetera. How bad is it?
Speaker 6: It's the three month annualized core CPI is three point
Speaker 6: six percent right now?
Speaker 2: Wow, can you expand on that? Please? It's radio Anna,
Speaker 2: you have to it's.
Speaker 7: You're not really well, yes, yes, tom So three point
Speaker 7: six percent is actually the one of the highests for
Speaker 7: over six months now. So I think the contour of
Speaker 7: three months annualized and this is a measure that Chris
Speaker 7: Waller has said he looks at. It's basically it has
Speaker 7: troughed a couple months ago and it's now on a rebound.
Speaker 7: And I think that what it is that.
Speaker 6: The I think the rate hikes in the last couple
Speaker 6: of years in the level of that funds rate is
Speaker 6: only sufficient to bring inflation back down to about two
Speaker 6: point seven or two point eight percent, and thereafter it
Speaker 6: is installed and it's now going And that's that's the bus.
Speaker 2: Let me squeeze in this question, because David's got a
Speaker 2: whole sequence of them that are smarter than mine. Is
Speaker 2: two point seven percent inflation life changing for our listeners
Speaker 2: and viewers. I would suggest analong it is.
Speaker 6: Well, that is actually a very fair question.
Speaker 8: So in many emerging markets, and I covered emerging markets
Speaker 8: earlier in my career, at many emerging marketsy four percent,
Speaker 8: five percent, six percent inflation with no problem with their economy, right.
Speaker 6: And there are some many academic papers who has found
Speaker 6: that inflation start cutting into activity and people inflation expectations
Speaker 6: once the central bank decides to do something about it.
Speaker 6: So if the FEDS inflation target is two percent, then
Speaker 6: inflation stuck at two point seven percent would be life
Speaker 6: changing in a sense that that distance that's zero point
Speaker 6: seven percentage point distance to travel well problem means over
Speaker 6: one hundred basis point of rate hike in order to
Speaker 6: get rid of I mean that is the what the
Speaker 6: kink in the flat part of the Phillips curve is about,
Speaker 6: is that once you get through the easy part of
Speaker 6: this inflation, which was the last three years, you're now
Speaker 6: stuck at two point seven percent, and if you really
Speaker 6: need it to bring it down to two point zero percent,
Speaker 6: you are actually we probably need to increase unemployment substantially.
Speaker 4: And I'm just confirming here the control room got you
Speaker 4: saying that's actually a very fair question to Tom King.
Speaker 4: That's a rare thing to hear from a gay from
Speaker 4: a guest here on this show.
Speaker 9: I'm not sure that you're aware, Anna of the Greenawation
Speaker 9: doesn't give me this keydas it's been four days into
Speaker 9: the week, and I don't know if you're aware of
Speaker 9: how much the note that you wrote yesterday animated the show.
Speaker 9: But Tom quoted early and often from your report on
Speaker 9: your recession call that you made here, saying the revisions
Speaker 9: in those jobs numbers confirmed the labor market began to
Speaker 9: recover shortly after the FED started cutting rates in September
Speaker 9: twenty fourth, then stalled out again. You said, it's possible
Speaker 9: the economy is either still in recession or in the
Speaker 9: early phase of a new business cycle. It was unfair
Speaker 9: you weren't with us yesterday. But I asked a question
Speaker 9: after reading that on air. So what so we marked
Speaker 9: that this may have happened, may be continuing. What does
Speaker 9: it tell us overall about the state of the US
Speaker 9: economy that the call that you made yesterday.
Speaker 6: Yes, it has tremendous implications. So suppose that we are
Speaker 6: in the early phase of the business cycle. It means
Speaker 6: that the moment the Fed cuts in late next week,
Speaker 6: we are probably going to see a pretty sharp recovery.
Speaker 6: But what's unique about this economy right now is there's
Speaker 6: a bottle, there's bottling up a lot of inflationary pressure.
Speaker 6: Firms are itching to pass through these tariff higher costs
Speaker 6: to consumers, but they couldn't so far, so they're waiting
Speaker 6: for the moment the economy is turning to pass it through.
Speaker 6: And I think once the economy is well in the
Speaker 6: recovery phase, that is when we are going to see
Speaker 6: a lot of these tariff pass through. And I think
Speaker 6: today's CPI report gives a little bit hints of that,
Speaker 6: which is that we see hotel prices and airfare prices
Speaker 6: go sharply up. And this is not something a recessionary
Speaker 6: economy should look like. That we should be seeing airfares
Speaker 6: and hotels plunging, not urging.
Speaker 2: And Joe Wisenthal folks saw as well beef prices confirming
Speaker 2: through the roof is doctor woe. Please stay with us.
Speaker 2: We have an exceptional five six, seven minutes here with remembrance,
Speaker 2: but anamog. Please stay with us, and we hope to
Speaker 2: pick up this conversation depending on the comments of the
Speaker 2: President of the United States in the last eighteen months,
Speaker 2: you know, somewhat argue the most influential rbider of our
Speaker 2: market economics in America. And I want to pick up
Speaker 2: on the essay David Gerra mentioned where you talked about recession.
Speaker 2: Why can anawong study a recession so acutely and with
Speaker 2: your optimism say it's a new business cycle. And I've
Speaker 2: got to wait till the Red Sox win a world
Speaker 2: series for the NBER to formally say there's a recession.
Speaker 5: Why the delay, Well, because.
Speaker 6: Usually in the late part of a business cycle, you
Speaker 6: see that firms, small firms tend to go bust, and
Speaker 6: those small firms are very hard to capture in national statistics,
Speaker 6: so bls use a model to forecast this. Now, we
Speaker 6: have a lot of private sector alternative data nowadays, and
Speaker 6: the data we look at is a payroll provider focus
Speaker 6: a small to medium businesses, and these businesses were showing
Speaker 6: that the last two years had been terrible for them.
Speaker 6: But what I've been seeing in the last three months,
Speaker 6: maybe two or three months, is that these there is
Speaker 6: an upswing in these small to small medium businesses and
Speaker 6: in fact our own forecast error. Everyone makes errors, forecast errors,
Speaker 6: including us, And I've noticed that, based on these small
Speaker 6: medium businesses, our forecast error in the last two months
Speaker 6: have been consistently on the upside, which suggests to me
Speaker 6: that maybe that there is this early phace dynamics that's
Speaker 6: going on where you know, you see small caps and
Speaker 6: smaller business rebounding first before everything else are lifted.
Speaker 4: And I look at the note and look at what
Speaker 4: you wrote about those preliminary revisions. You say they flag
Speaker 4: a strong possibility that the economy entered a recession last
Speaker 4: year and recovered after the FED cut rates in late
Speaker 4: twenty twenty four. So say Chair Powell wanders into the
Speaker 4: anti chamber outside his office, there's the Bloomberg terminal. He
Speaker 4: pulls up your report. What does it say to him
Speaker 4: about perhaps mistakes made, but the path forward here if
Speaker 4: in fact that happened, how it might have colored if
Speaker 4: we do the counterfactual here, that the decisions that the
Speaker 4: Fed's made in the months between.
Speaker 6: I think Powell actually felt vindicated because he was the
Speaker 6: one who pushed for the fifty BIPs right it cut
Speaker 6: last September on the basis of the Beige Book. The
Speaker 6: Beige Book is a bunch of anecdotes and soft data,
Speaker 6: and many people in the market discounted these soft data,
Speaker 6: saying that hard data does not is showing that things
Speaker 6: are great well. But the soft data in the Beige
Speaker 6: Book is saying that employment was flat and declining. Now
Speaker 6: today the Beige Book is saying that employment is rising
Speaker 6: just slightly, so things are not as bad as last summer.
Speaker 6: Things are arising, you know, just barely, which is consistent
Speaker 6: with payrolls around twenty thousand or ten thousand per month.
Speaker 6: So I think Powell will look to this as saying
Speaker 6: that while he's going to take more signals from anecdotes
Speaker 6: and talking to businesses and firms.
Speaker 2: And I'm brilliant, and thank you so much for all
Speaker 2: of us the team's surveillance, for your work here. She's
Speaker 2: been just extraordinary over the last seventy two hours. Stay
Speaker 2: with us. More from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch US Live
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on
Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or
Speaker 1: watch US Live on.
Speaker 2: YouTube right now, we would digress and we've heard from
Speaker 2: a number of economists that the airlines are sprightly. I
Speaker 2: guess the defense business is sprightly. Germany's back in business.
Speaker 2: We have truly an expert this morning. This is someone
Speaker 2: that isn't just like, you know, what's Boeing going to do,
Speaker 2: what's Airbus going to do, but as a really encyclopedic
Speaker 2: handle on the defense business. Shia Luju joins US Aerospace
Speaker 2: and Defense equity research at Jeffreys as well. I got
Speaker 2: to ask the first question, whither Boeing? Is it finally
Speaker 2: up for Boeing?
Speaker 10: Yeah, the orders in August we're great. The deliveries were
Speaker 10: even better, So they finally seem to have a run
Speaker 10: rate of deliveries hitting their target and goal of thirty
Speaker 10: eight for our month. By the end of this year,
Speaker 10: we're going to forty two on the max.
Speaker 2: I mean, it was at one forty when Shila said
Speaker 2: by it and we're now popping to twenty seven. So
Speaker 2: it's back to being a blue chip security.
Speaker 10: Boeing is a tough name. It's not one of these
Speaker 10: momentum names that you could continue to say, you know,
Speaker 10: we're going to go from twenty four Max's last year
Speaker 10: a month to thirty eight this year.
Speaker 5: Those are big.
Speaker 10: Growth rates for any if you're building a widget, let
Speaker 10: alone an aircraft. So I think you have to take
Speaker 10: that into account when you look at Boeing's momentum. But
Speaker 10: they are doing the right things. They're producing aircraft better,
Speaker 10: they're finally starting to turn the corner on free cash low.
Speaker 10: Their defense business is also turning the corner. This is
Speaker 10: a business that was losing about three billion dollars last year,
Speaker 10: so we're doing better there as well.
Speaker 4: Okay, she will be focused so much on these trade deals,
Speaker 4: but really, of course they're more than that, and you
Speaker 4: look at sort of what's been announced, and there are
Speaker 4: many where we don't have a lot of granular detail,
Speaker 4: but they're often kind of complimented by corporate deals and
Speaker 4: purchasing deals as well. And we were talking about yesterday
Speaker 4: the involvement of the US government and Intel these other companies.
Speaker 4: What's the effect that that's had that as the president
Speaker 4: and his team negotiate these deals, often there is a
Speaker 4: component part that involves purchasing X amount of aircraft or
Speaker 4: why amount of aircraft from Boeing or another company.
Speaker 10: It was one of my favorite pieces we published this
Speaker 10: year on April eighth, and it was really looking at
Speaker 10: how many airplanes does it take to get to the
Speaker 10: bottom of a trade deficit? So we looked at the
Speaker 10: biggest trade deficits that the US has among countries and
Speaker 10: how any airplanes they could buy per annum to offset
Speaker 10: that deficit. And sure enough, you know what's easier to
Speaker 10: offset a deficit than an aircraft that costs one hundred
Speaker 10: million to two hundred and fifty million. They add up
Speaker 10: kind of quickly, and we've seen that happen with multiple
Speaker 10: countries and some of Boeing's largest orders this year.
Speaker 2: Can I ask a dumb question that was brilliant what
Speaker 2: you just said? Apple iPhones are fifteen hundred two thousand bucks,
Speaker 2: but nobody spends that. We go to our phone carrier
Speaker 2: and we do a monthly plan. When you buy a
Speaker 2: Boeing seven seventy seven, do you buy it with a
Speaker 2: lump of one hundred million or they do it a
Speaker 2: monthly plan. No, it's just like my iPhone.
Speaker 10: When you put in an order, usually it's five percent down.
Speaker 10: But you know, you buy an aircraft upround when you
Speaker 10: when you receive the air cash. Yes, so you have delivery.
Speaker 10: Whether you finance it or release it, you are paying
Speaker 10: for the aircraft upfront. I'm curious, I'm delivery.
Speaker 4: Sorry, I'm curious of how the administration's approached defense has
Speaker 4: changed it on the industry side. So hexith running the
Speaker 4: Department of War as it's being called at least five
Speaker 4: by the administration itself. We've heard so much talk about
Speaker 4: new missile defense systems and the like. Famously, it's hard
Speaker 4: for the government to pivot. It's hard for the Pentagon
Speaker 4: to pivot. Is that happening now? Is it underway or
Speaker 4: we had a point where in terms of the weapons
Speaker 4: and programs that they're focused on, they're going to be different.
Speaker 5: Where are we in that process?
Speaker 10: I think that's where I've been a little bit surprised.
Speaker 10: So well, Golden Dome was first announced in January. It
Speaker 10: was sort of this concept. No one knew what it was.
Speaker 10: No one still knows what it is, but it's going
Speaker 10: to be one hundred and seventy five billion dollar missile
Speaker 10: defense shield system encompassing all sorts of threats. And fast
Speaker 10: forward eight to nine months, we're now at the stage
Speaker 10: where we have to spend twenty five billion. It's in
Speaker 10: the reconciliation bill by twenty twenty six. So the government
Speaker 10: has to essentially allocate the five large defense contractors and
Speaker 10: a bunch of small ones twenty five billion. And if
Speaker 10: you think about the defense budget, yes it's a trillion dollars,
Speaker 10: but really the allocation to R and D and procurement
Speaker 10: dollars is around four hundred billion, so twenty five billion
Speaker 10: actually increases their spending and potential. So Golden Dome is
Speaker 10: the contract. Our favorite name in defense is LHX. Another
Speaker 10: name we like is Letos. It's ID Services. We hosted
Speaker 10: lhx's CEO last week at our Jeffrey's Industrials conference, and
Speaker 10: they're putting in RFP. It's not even an RFP process.
Speaker 10: The government saying what can you demo for me? When
Speaker 10: come in and let's see what you got.
Speaker 2: We would have to go in a moment here with
Speaker 2: a huge news flow. Today, as we speak, the ECP
Speaker 2: comes out with their headlines there's no rate change. You'll
Speaker 2: have Leguard's press conference. But I'm looking at nominal GDP,
Speaker 2: the inflation plus growth espers out there that are tepping
Speaker 2: as well. With all your expertise, Shila, do you believe
Speaker 2: that Germany will actually spur defense spending and a nominal
Speaker 2: GDP oomph in Europe?
Speaker 10: I was in Europe three weeks ago. I met with
Speaker 10: sixteen clients the equivalent of their labor day weekend. That
Speaker 10: does not happen in Europe. A defense analysts going to
Speaker 10: meet with sixteen investors, they've usually been hands off defense.
Speaker 10: But all I heard about was defense. So yes, I
Speaker 10: do think that the NATO countries are going to actually
Speaker 10: increase their spending. Historically, fifty percent of that has come
Speaker 10: back to US contractors. Let's say if it's even twenty
Speaker 10: five percent, that's two hundred and eighty billion additional dollars
Speaker 10: to the US contract I believe in the story. Wow,
Speaker 10: it's happening. I mean we're seeing orders from countries like
Speaker 10: Serbia to albert that Serbia has never been a country
Speaker 10: to order two billion dollars of equipment.
Speaker 2: Don't be a stranger, sheilacter her. Thank you so much.
Speaker 2: Stay with us. More from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on
Speaker 1: alval karplay and droid auto with the Bloomberg Business app,
Speaker 1: or watch us live on YouTube's.
Speaker 2: Terry's got the most important job in tech. He's a
Speaker 2: legend on Wall Street and it manages the technology analysis
Speaker 2: of City Group Right now. You had your soiree a
Speaker 2: few days ago. What was the biggest surprise for you
Speaker 2: at that event?
Speaker 11: I think the biggest takeaway We had two thousand people
Speaker 11: here in midtown, two hundred and fifty over two hundred
Speaker 11: and fifty company management teams, forty private AI companies that
Speaker 11: we hosted across a number of sessions and tracks, and
Speaker 11: I think the thing that everybody walked away from was
Speaker 11: with was this sense of urgency around artificial intelligence and
Speaker 11: just the pace of things.
Speaker 2: The pace of it it is.
Speaker 11: You know, their comparisons and Gershen and I were talking
Speaker 11: in the green room before this, there are comparisons being
Speaker 11: made to sort of prior cycles and technologies that we've
Speaker 11: been through, and where all of those comparisons fall flat
Speaker 11: is just the speed that is that this is moving at.
Speaker 11: And I don't think anybody walked out of that conference.
Speaker 2: Fire Tyler Radkey two days ago when he got Oracle wrong,
Speaker 2: Tyler Keith, I've never seen this. Look, I've never seen
Speaker 2: a jump in a blue chip stock like Oracle.
Speaker 11: Yeah, I'm right there with you. I've never seen anything
Speaker 11: like that. Tyler's a fantastic I'm medicated. I know as
Speaker 11: an analyst who's been doing this for like twenty five years,
Speaker 11: you've gone wrong. I've certainly gotten wrong right now.
Speaker 2: I mean, I know it's a brutal day for the nation.
Speaker 2: But the FBI is speaking right now, but they have
Speaker 2: Gersten Distant Felt and Heath, Terry and David when we
Speaker 2: invented this. This is what it's about. You.
Speaker 5: You're jealous that you were in the green room.
Speaker 2: They were talking out of Alabama with a slide roll
Speaker 2: he got from Werner von Braun and it was before
Speaker 2: Excel spreadsheets when Heath was doing this continued today.
Speaker 4: Let me pick up on the surprise that Tom's talking
Speaker 4: about and you're picking up on with those Oracle results.
Speaker 4: Put them into the broader picture here. What does it
Speaker 4: indicate about the speed the trajectory that we're on that
Speaker 4: we saw really such an exuberant growth there in Oracle
Speaker 4: as it's changed kind of its tack.
Speaker 11: More broadly, well, look, I think in that bigger picture,
Speaker 11: it is the combination of what we saw from Oracle,
Speaker 11: what we saw from Mango dB, what we saw from Snowflake.
Speaker 11: This AI moment that we're in is moving up the stack, right.
Speaker 11: This was an Nvidia Amphenol Arista Networks sort of thing
Speaker 11: as we did the picks and shovels part of this,
Speaker 11: and now we're moving up the stack to the data layer,
Speaker 11: the consumption layer, and so anything that sort of leveraged
Speaker 11: a consumption. We saw this in Microsoft's numbers back when
Speaker 11: they reported their June numbers. Anything leverage to consumption is
Speaker 11: seeing the kind of benefit that you saw out of Oracle.
Speaker 11: The reason Oracle had such a big reaction to it
Speaker 11: is because it is more of a surprise when you
Speaker 11: see it out of Oracle than it is when you
Speaker 11: see it out of micros.
Speaker 4: All some Microsoft doing this big deal with a Dutch
Speaker 4: company this week and other I just okay.
Speaker 2: Keep up with Mistral. They're doing an ASLM did a
Speaker 2: thing with Mysterill of France to keep them away from
Speaker 2: the Americans. What is the behavior of the executives? Are
Speaker 2: they like frenzy exuberants? Are they measured what's the actual demeanor.
Speaker 11: Yeah, I think frenzied is probably a lot closer than
Speaker 11: sort of measured.
Speaker 2: Right.
Speaker 11: No company wants to be left behind in this. This
Speaker 11: is a technology that is going to reorder the competitive
Speaker 11: stack across every industry. And so no board, no CEO
Speaker 11: is sitting there saying, you know what, let's play wait
Speaker 11: and see on this and the ones that are probably
Speaker 11: to regret it. We have a generation of leaders in
Speaker 11: office now that have been trained on the innovator's dilemma,
Speaker 11: and no one wants to be the next one of
Speaker 11: those companies left.
Speaker 2: We are honored that Heath Terry of City Group is
Speaker 2: with us. I made note of actually I think it
Speaker 2: was Tyler red that sent me some research on this,
Speaker 2: but in a very important visceral City Group meeting on
Speaker 2: all this technology. And when you look at the companies
Speaker 2: and the executives as well, they're all generally younger. They've
Speaker 2: seen cycles of that, your Steve Jobs and others Terodyne,
Speaker 2: Teledyne names that are ancient history, but this is the
Speaker 2: new new Which company has the best model? When you
Speaker 2: talk to the I don't know eighty seven analysts that
Speaker 2: report to you which company right, now is doing it
Speaker 2: best for Heath Terry, Well, look, I.
Speaker 11: Think if you look at the public companies that are
Speaker 11: out there, I'm assuming that's what you're what you're talking about.
Speaker 11: The companies that have the most leverage to this are
Speaker 11: the companies that are providing the models and the tools
Speaker 11: and the infrastructure for this. So Microsoft's obviously at the
Speaker 11: at the top of that list, alphabet Google is very
Speaker 11: close to the top of that list as well. And
Speaker 11: then you start to see some of these neo clouds
Speaker 11: that are emerging companies like core Weave that are that
Speaker 11: are really providing a lot of the capacity and benefiting
Speaker 11: from Nvidia's willingness to supply these clouds with the chips
Speaker 11: that are in such a short supply.
Speaker 2: David asked a question because I got a rude follow up,
Speaker 2: But you want Heath to stay around.
Speaker 4: Where are we in terms of domestic production for those chips.
Speaker 4: Of course, the swirling story here in the conversation about
Speaker 4: trade policy has been about in Nvidia about the export
Speaker 4: of those chips, but also just about the need to
Speaker 4: manufacture these high end chips here in the United States.
Speaker 4: How do you assess the progress the country's making and
Speaker 4: pushing ahead to that, which I know will take an
Speaker 4: ample amount of time, shall we say, to get up
Speaker 4: and running.
Speaker 11: Look, we have capacity in the US from TSMC's investments
Speaker 11: in Arizona, so you're starting to see that happening. We're
Speaker 11: still a very long way away. And what's perhaps even
Speaker 11: more important than the production capacity is the talent that's
Speaker 11: needed to produce those chefs. Most of that cutting edge salent,
Speaker 11: my question, is still sitting in Taiwan, and that's something
Speaker 11: that we clearly have to invest in.
Speaker 2: I got two questions here, and let's pretend you're in
Speaker 2: the office with Missus Frasier and she's just grilling you.
Speaker 2: Why in God's name is Lisa Matteo electric bill going
Speaker 2: up to pay for fancy tech people's AI development discuss?
Speaker 9: No.
Speaker 11: Look, that is going to be a huge challenge for
Speaker 11: the development of this. The utilities, the regulated utilities, are
Speaker 11: going to have to figure out how to divide this
Speaker 11: because there's a big difference between the electrical demand that
Speaker 11: you're seeing for AI and the trends that we were
Speaker 11: seeing in overall efficiency and power demand. And if this
Speaker 11: is going to be a cost that is driven by AI,
Speaker 11: driven by data centers. Then it's going to be a
Speaker 11: cost that needs to be borne by those data centers,
Speaker 11: and by the way, they've got the capacity to be
Speaker 11: able to do it.
Speaker 2: Back to John Reid and Walter Risten, you people Owned International,
Speaker 2: Do you have any studies the show that we can
Speaker 2: develop many thousands American manufacturing forces to do what they
Speaker 2: do in Asia? Or does City Groups City Bank? Did
Speaker 2: you just assume that we're going to import Asia manufacturing
Speaker 2: skill sets? How are we going to do this?
Speaker 11: I think it has to be both. I think you
Speaker 11: have to train people here at home. I think you
Speaker 11: have to import the talent from abroad. There is no
Speaker 11: way that you can get people up to speed as
Speaker 11: fast as they need to be to meet the moment
Speaker 11: that we're in right now. So that means having the
Speaker 11: kind of immigration policy, having the kind of active effort
Speaker 11: at bringing that kind of talent into the US. But
Speaker 11: then you also have to make the investment in the
Speaker 11: people here as well.
Speaker 4: Talking with Heath Terry had a tech and research at
Speaker 4: City As we watched that press conference in Utah rap
Speaker 4: up again with the head of Public Safety in Utah,
Speaker 4: the FBI Special Agent in charge, and the headlines from
Speaker 4: that update on the assassination of Charlie kirk Or. The
Speaker 4: police have been able to track the movements of the
Speaker 4: shooter involved. They have video that they're going through. There's
Speaker 4: also solicitation there at that news conference of video and
Speaker 4: footage photos from the event. They're trying to piece together
Speaker 4: what's happened here. Of course, we'll keep tabs on that
Speaker 4: over the course of the day as we follow that story,
Speaker 4: and keep your prize to memorials that are ongoing in
Speaker 4: Northern Virginia and Lower Manhattan Heath Terry, let me go
Speaker 4: back to that conference you mentioned at the top, because
Speaker 4: I want to get a sense from you how the
Speaker 4: conversation has changed or is changing. There is a moment
Speaker 4: when I think a lot of executives knew they had
Speaker 4: to do something with AI. They poured a lot of
Speaker 4: money into that effort, building up their capacity to do it.
Speaker 4: Is that still where we're at, or are you finding
Speaker 4: that more and more executives have a feeling about how
Speaker 4: to more narrowly tailor AI to the work that they're
Speaker 4: doing day in and day out, such that it's actually
Speaker 4: making a difference in terms of their productivity and what
Speaker 4: these companies are able to do.
Speaker 11: Yeah, I think we're somewhere in the middle of those two.
Speaker 11: You're still seeing this effort to really put a lot
Speaker 11: into proof of concept to try and bring these things on.
Speaker 11: At the same time, we are beginning to see sort
Speaker 11: of the proof of concepts go into production and it
Speaker 11: is having an impact. You look at some of the
Speaker 11: efficiency announcements that you've seen, Hiring starting to slow down
Speaker 11: as companies sort of take a break, particularly in areas
Speaker 11: like code development and customer service, take a break to
Speaker 11: figure out what they really have and what they need.
Speaker 11: As we get through this, our view on this is
Speaker 11: that if you make people more productive, particularly code developers,
Speaker 11: you're going to want more of them, not less.
Speaker 2: I got one final question, Tyler, Ricky, how did he
Speaker 2: get this across your desk? He has a four to
Speaker 2: ten target on Oracle, which I believe is top of
Speaker 2: the reset here, you know, September nine, September tenth. How
Speaker 2: does that work? Does the securities analysts have to get
Speaker 2: approval from you on a price target?
Speaker 11: No, they don't. Tyler's independent.
Speaker 2: He makes it up in a bar downtown.
Speaker 5: So again, Tyler, we're going to get Tyler in here
Speaker 5: talk so much about him. I feel like he's gotta
Speaker 5: you know, Tyler's just downtown.
Speaker 2: I'm just does Alabama football team this year. I'm not
Speaker 2: sure I will.
Speaker 11: We'll see this weekend, so I will. I will be
Speaker 11: in Tuscalos, all.
Speaker 2: Right, report he Jerry will be in tuscles to thank
Speaker 2: you so much. He's just sitting group driving all of
Speaker 2: their technology coverage.
Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,
Speaker 1: and anywhere else you get your podcasts. Listen live each
Speaker 1: week day, seven to ten Eastern on Bloomberg dot com,
Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app.
Speaker 1: You can also watch us live every weekday on YouTube
Speaker 1: and always on the Bloomberg terminal