WEBVTT - Bloomberg Surveillance TV: February 6th, 2026 0:00:02.360 --> 0:00:06.720 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.640 --> 0:00:15.400 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordernt join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.919 anywhere else you listen, and as always on the Bloomberg 0:00:34.000 --> 0:00:37.360 Terminal and the Bloomberg Business app. We begin this hour 0:00:37.680 --> 0:00:40.200 with Stock's inchin Kaya, following a three day to client, 0:00:40.280 --> 0:00:43.040 Brian Leavett oven Vesco, writing the story is far from 0:00:43.080 --> 0:00:46.360 fully written. We expect leadership to rotate as the market 0:00:46.400 --> 0:00:50.080 differentiates actual earnings leverage from all the hype. 0:00:50.200 --> 0:00:51.960 Brian joined us now for more. Bran, good morning, Good 0:00:51.960 --> 0:00:52.720 to see you see. 0:00:53.000 --> 0:00:55.400 What was the last twenty four hours about compared to 0:00:55.440 --> 0:00:56.720 the previous two days. 0:00:57.120 --> 0:00:59.360 I would say that this is a market that's been 0:00:59.560 --> 0:01:03.120 letting off some steam, certainly in the hotter parts of 0:01:03.160 --> 0:01:06.479 the market, and primarily I think you got to look 0:01:06.520 --> 0:01:08.880 if you look at the broad index level, these markets 0:01:08.920 --> 0:01:10.720 are not down all that much. I mean, Na's deck 0:01:10.840 --> 0:01:13.160 down five percent over the last five days, is in 0:01:13.240 --> 0:01:16.319 great SMP a couple of percent. It's really the carnage 0:01:16.319 --> 0:01:18.440 being hit in the software stocks and some of the 0:01:18.480 --> 0:01:20.600 more speculative parts of the market. You see it in 0:01:21.319 --> 0:01:24.319 things like what happened with silver prices and bitcoin. But 0:01:24.600 --> 0:01:27.760 the reality is, when you look at all the investment 0:01:27.840 --> 0:01:30.520 that's likely to take place, we can parse whether the 0:01:30.520 --> 0:01:32.160 big companies at the top of the S and P 0:01:32.280 --> 0:01:34.679 five hundred are right to do so. But if you 0:01:34.720 --> 0:01:38.080 look at industrials, if you look at energy, if you 0:01:38.160 --> 0:01:42.240 look at the semiconductors, it's all held up fairly nicely. 0:01:42.319 --> 0:01:45.360 And it's all part of that rotation story that we're 0:01:45.400 --> 0:01:49.320 talking about. Less about who's going to win in that space, 0:01:49.360 --> 0:01:51.080 because that's going to be a big investment to win 0:01:51.120 --> 0:01:53.640 in that space, versus who's going to help support this 0:01:53.760 --> 0:01:54.320 build out. 0:01:55.240 --> 0:01:56.480 That story continues to play. 0:01:56.560 --> 0:01:58.920 That's certainly found real up until yesterday, and then the 0:01:58.960 --> 0:02:01.720 real economy scat kind of clicked in just a little bit. 0:02:01.760 --> 0:02:03.520 I don't want to overdo it, just a little bit. 0:02:03.680 --> 0:02:05.720 A couple of data points poking holes in a billcase 0:02:05.720 --> 0:02:07.920 for the ubst economy. That's something we need to talk about. 0:02:07.920 --> 0:02:10.720 Because people were piling into small caps that were comfortable 0:02:10.720 --> 0:02:13.040 in the equal weight close to all time highs. Should 0:02:13.080 --> 0:02:14.520 they still be comfortable with those traits? 0:02:14.600 --> 0:02:15.200 Yeah? I think so. 0:02:15.480 --> 0:02:17.880 Let's remember we started the week with one of the 0:02:17.880 --> 0:02:20.640 great leading indicators of the economy, the Institute for Supply 0:02:20.800 --> 0:02:25.639 Management Purchasing Managers Index, which surged and climbed to fifty two. 0:02:25.720 --> 0:02:28.360 That's an expansion territory. We had not been there in 0:02:28.480 --> 0:02:33.280 quite a while. The New Order's component particularly strong within it, 0:02:33.280 --> 0:02:36.720 and prices paid relatively flat. So that's a good leading 0:02:36.720 --> 0:02:39.960 indicator of the economy. Now, when you think about the 0:02:40.080 --> 0:02:44.080 jobs market, yeah, jobless claims rose yesterday. Two hundred and 0:02:44.120 --> 0:02:49.880 fifty thousand is not a blowout jobless claim number, and 0:02:50.240 --> 0:02:52.639 it's also a little bit of a heads you win, 0:02:52.840 --> 0:02:55.600 tails you win type of scenario because the weakness in 0:02:55.680 --> 0:02:59.200 the economy suggests what I've always believed is lower interest 0:02:59.280 --> 0:03:02.240 rates on the shore end of the curve, which should 0:03:02.320 --> 0:03:05.959 continue to benefit lower capitalization stocks, more. 0:03:05.880 --> 0:03:06.800 Value oriented stocks. 0:03:06.840 --> 0:03:08.600 So I'm not ready to say that this is a 0:03:09.080 --> 0:03:12.760 economy that's rolling over. Credit spreads continue to remain tight, 0:03:13.040 --> 0:03:17.720 leading indicators are picking up, inflation expectations relatively containing. I 0:03:17.760 --> 0:03:19.519 think the FED is going to be bringing rates down 0:03:19.520 --> 0:03:20.400 towards three percent. 0:03:20.560 --> 0:03:22.359 It might not be an economy that's rolling over, but 0:03:22.400 --> 0:03:25.120 it's a really confusing economy. And Amazon exemplifies it in 0:03:25.120 --> 0:03:27.640 a perfect way. On one hand, they were behind a 0:03:27.680 --> 0:03:30.400 significant portion of some of those job cut announcements that 0:03:30.440 --> 0:03:33.000 we got from Challenger Gray and Christmas yesterday. On the 0:03:33.040 --> 0:03:35.320 same level, they're going to be spending two hundred billion 0:03:35.360 --> 0:03:37.720 dollars so far this year. How important is it for 0:03:37.800 --> 0:03:40.760 us to understand exactly what they are spending this money 0:03:40.800 --> 0:03:43.680 on to be able to infer what kind of growth 0:03:43.880 --> 0:03:46.600 and benefit to the underlying economy that actually will look like. 0:03:46.720 --> 0:03:49.760 Yeah, it's important, But if you take each component of 0:03:50.000 --> 0:03:53.720 economic activity, you take the consumer, we have to remember that, yeah, 0:03:53.760 --> 0:03:56.480 things may be weakening a little bit. Household net worth 0:03:56.600 --> 0:04:00.120 is at an all time high, unemployments relatively load, the 0:04:00.120 --> 0:04:02.800 business investment we know is going to be big, as 0:04:02.840 --> 0:04:05.440 you mentioned, and the government spend is going to be 0:04:05.480 --> 0:04:07.680 reasonable this year, not only in the United States but 0:04:07.720 --> 0:04:11.080 many parts of the world. So in aggregate, that's a 0:04:11.320 --> 0:04:15.120 good economic backdrop. Now when you think of this investment 0:04:15.200 --> 0:04:17.719 that's going to take place, There's a lot of parts 0:04:17.720 --> 0:04:21.480 of the economy that should benefit from in and again, 0:04:21.640 --> 0:04:22.680 industrials rallying. 0:04:22.880 --> 0:04:25.960 Energy has been rallying. Semiconductors were up fifteen. 0:04:25.680 --> 0:04:28.000 Percent year to date before this week, So I think 0:04:28.040 --> 0:04:32.000 that that story persists. Would I be diving back into 0:04:32.040 --> 0:04:34.960 software companies this morning after the self, No, I'd be 0:04:35.080 --> 0:04:39.880 mindful of that, But I think the real economic story continues, and. 0:04:39.760 --> 0:04:42.760 This is arguably the main reason for the broadening out trade. 0:04:43.080 --> 0:04:44.480 Real question right now is do you go into the 0:04:44.520 --> 0:04:46.880 hyperscalers given the fact that their business model seems to 0:04:46.880 --> 0:04:50.360 be changing from asset light to basically glorified utilities and 0:04:50.400 --> 0:04:51.279 real estate managers. 0:04:51.360 --> 0:04:54.280 Yeah, I mean I would go case by case. 0:04:54.320 --> 0:04:55.560 It's certainly not a monolith. 0:04:55.920 --> 0:04:58.440 Big story last year was that only two of the 0:04:58.560 --> 0:05:02.479 seven mag seven perform the market, and you're right, these 0:05:02.480 --> 0:05:04.840 stories have changed significantly. I mean, the things that we 0:05:04.920 --> 0:05:07.400 loved about some of these businesses with that they were 0:05:07.400 --> 0:05:11.719 near monopolistic, they did not have significant investment needs, and 0:05:11.760 --> 0:05:14.599 that all changes. So you've got to go company by company, 0:05:14.600 --> 0:05:16.800 be far more selective and can't say I'm just going 0:05:16.839 --> 0:05:17.800 to own the. 0:05:17.800 --> 0:05:20.640 Whole lot of them. There will be winners, there will 0:05:20.680 --> 0:05:23.120 be losers. Those business models have changed. 0:05:23.279 --> 0:05:25.120 Right you say, you're not going to wake up this 0:05:25.200 --> 0:05:27.440 morning and just go dive in and pick up some 0:05:27.920 --> 0:05:29.200 software company stock. 0:05:29.640 --> 0:05:31.839 Why not? Why isn't this a bibedit moment? 0:05:32.600 --> 0:05:34.400 Because for a lot of them, we still need to 0:05:34.760 --> 0:05:37.760 understand what does this really mean for the business model? 0:05:37.760 --> 0:05:39.960 And we knew all along AI. 0:05:39.839 --> 0:05:43.120 Is going to be quite disruptive for a lot of businesses. 0:05:43.160 --> 0:05:46.120 The question that investors should ask themselves over the next 0:05:46.120 --> 0:05:49.960 few years is it disruptive to more businesses than it 0:05:50.000 --> 0:05:52.880 is beneficial or is it beneficial to more businesses than 0:05:52.920 --> 0:05:53.760 it is disruptive. 0:05:53.760 --> 0:05:55.560 And I'm still in the ladder camp. 0:05:55.880 --> 0:05:57.919 There is a lot of companies that are going to 0:05:57.960 --> 0:06:02.000 benefit significantly from the AI build. You're already seeing profits 0:06:02.080 --> 0:06:07.279 high with employment, you know, profits to employment not significantly elevated. 0:06:07.400 --> 0:06:10.560 So we're in about right now where we're looking about. 0:06:10.640 --> 0:06:13.320 We're looking at the disruption, which always happens when there's 0:06:13.360 --> 0:06:17.360 technological advances, but history suggests that there's always far more 0:06:17.400 --> 0:06:18.720 beneficiaries than there are. 0:06:19.120 --> 0:06:20.320 Businesses are different. 0:06:20.560 --> 0:06:23.400 For you, though, A self described fomo guy who's not 0:06:23.440 --> 0:06:25.960 willing to lean into where the pain is right now, 0:06:26.000 --> 0:06:27.760 is it fair to say a bit of a change, 0:06:27.800 --> 0:06:28.839 a bit of a change. 0:06:28.880 --> 0:06:30.880 But I'm always looking for opportunities, so I have a 0:06:30.880 --> 0:06:34.120 fear of missing out, you know, across the broad market. 0:06:34.240 --> 0:06:36.400 And so it doesn't mean that I need to always 0:06:36.440 --> 0:06:40.599 be buying into dips or into you know, falling knives, 0:06:41.040 --> 0:06:43.800 just looking for where the opportunities lie. And you know 0:06:43.880 --> 0:06:47.800 again that that fomo is good. That phomo doesn't always exist, Jonathan, 0:06:47.880 --> 0:06:50.600 most of the time, and it exists when leading indicators 0:06:50.600 --> 0:06:52.680 of the economy are improving and the FED wants to ease. 0:06:52.680 --> 0:06:54.560 I'm definitely a fact at times this has found like 0:06:54.600 --> 0:06:57.760 a falling chainsaw and not a falling knife. Stay with 0:06:57.880 --> 0:07:10.800 us more Bloomberg Surveillance coming up after this, So can wait. 0:07:10.840 --> 0:07:11.440 The labor market. 0:07:11.520 --> 0:07:13.640 This is what Stephanie Rotherwolf Research has got to say 0:07:13.640 --> 0:07:16.280 to that, Well, the data was disappointing. We wouldn't read 0:07:16.320 --> 0:07:18.960 too much into the latest prints, nor are we changing 0:07:19.040 --> 0:07:21.800 un view that the labor markets should improve from here. 0:07:21.880 --> 0:07:24.680 Stephanie joins us now for more. Stephanie, good morning. Why 0:07:24.680 --> 0:07:29.280 should we ignore challenger jobless claims and jelts okay. 0:07:29.040 --> 0:07:33.679 For claims, they were two hundred and thirty thousand. Historically speaking, 0:07:33.800 --> 0:07:36.040 that's not such a bad reading. There was a lot 0:07:36.080 --> 0:07:38.720 of weather disruption that week. When we're talking about Challenger, 0:07:39.040 --> 0:07:40.760 a lot of what was driven by UPS, which had 0:07:40.760 --> 0:07:44.640 a similar announcement last year, and the Challenger set itself 0:07:44.960 --> 0:07:49.000 that it's going to be driven by attrition and voluntary 0:07:49.000 --> 0:07:50.400 separations are the big part of it. 0:07:50.600 --> 0:07:51.400 Another reason for. 0:07:51.400 --> 0:07:55.040 Challenger was Amazon, So the bulk of the news was 0:07:55.080 --> 0:07:59.000 coming from either Tier three data or data that's not 0:07:59.000 --> 0:08:02.120 necessarily indicative of market that's actually detraating from here, We'll 0:08:02.120 --> 0:08:04.160 have to see what payroll shows, and our sense is 0:08:04.200 --> 0:08:06.760 that next week we'll learn that payrolls for January were 0:08:06.760 --> 0:08:08.480 fairly decent, and then of course there will be those 0:08:08.520 --> 0:08:09.080 download visions. 0:08:09.120 --> 0:08:11.440 Historically, I'm totally with you and I got the Challenger 0:08:11.520 --> 0:08:13.880 jobs cuts. We are all looking at the idea that 0:08:13.920 --> 0:08:16.280 this was really concentrated in three companies that have already 0:08:16.280 --> 0:08:18.520 announced a lot of these job cuts. Then the jobless 0:08:18.520 --> 0:08:20.400 claims come out, Yeah, it's a an eight week high, 0:08:20.440 --> 0:08:23.520 but ultimately still at a pretty low level. Then Joelts 0:08:23.600 --> 0:08:25.800 comes out and you look at it and it's saying, look, 0:08:25.840 --> 0:08:28.120 we're looking at the lowest job opening is going back 0:08:28.160 --> 0:08:30.920 to twenty twenty eight. How many of these can you 0:08:31.000 --> 0:08:33.560 explain off before you start to get a little self conscious. 0:08:33.559 --> 0:08:36.000 Wait a second, maybe something else is going on here. 0:08:36.360 --> 0:08:38.360 I think you have to take a step back and 0:08:38.800 --> 0:08:42.960 reassess your view. But our sense is one the consumer 0:08:43.000 --> 0:08:45.240 path is pretty good. We're gonna also have fiscal simulus 0:08:45.240 --> 0:08:48.720 that it's starting to hit the momentum. 0:08:48.920 --> 0:08:50.560 It seems to be improving. 0:08:50.600 --> 0:08:52.520 If you look rewind just a couple of days ago, 0:08:52.559 --> 0:08:54.599 we were looking at the ism and we're starting to 0:08:54.600 --> 0:08:56.760 get questions of is this early cycle? So how can 0:08:56.800 --> 0:08:58.439 it be both early cycle and late cycle at the 0:08:58.440 --> 0:09:01.920 same time. Our sense is that we are starting to 0:09:02.240 --> 0:09:06.120 improve cyclically. There were some negative news from some of 0:09:06.160 --> 0:09:08.600 these data sources that's probably not indicative of the trend. 0:09:08.640 --> 0:09:11.600 This happens very frequently, especially in the month of January, 0:09:11.640 --> 0:09:15.600 where you get some prints, especially associated with layoff news, 0:09:15.600 --> 0:09:16.560 which tends to be. 0:09:16.640 --> 0:09:17.720 A January phenomenon. 0:09:17.800 --> 0:09:20.880 Well, maybe it's early cycle for fiber optic cables, but 0:09:20.920 --> 0:09:22.880 it's late cycle for humans that are actually trying to 0:09:22.960 --> 0:09:25.200 enter the workforce. I mean, how much do you glean 0:09:25.520 --> 0:09:28.800 that some of this weakness truly is coming from less 0:09:28.880 --> 0:09:33.000 human intensive jobs that really result from some of the 0:09:33.000 --> 0:09:36.040 capital expenditures that are supporting economic growth. 0:09:36.480 --> 0:09:37.720 There might be an element of that. 0:09:37.920 --> 0:09:40.079 So we were in some estimates looking at the rising 0:09:40.160 --> 0:09:42.520 unemployment rate since CHACHINGBT. 0:09:42.160 --> 0:09:44.360 Launched, and we found out about half of the rise the. 0:09:44.360 --> 0:09:46.520 Unemployment rate was tied to AI, and then the other 0:09:46.520 --> 0:09:50.200 half was more cyclical in nature. So the extent to 0:09:50.240 --> 0:09:52.040 which sure, there is half of it that is structural 0:09:52.040 --> 0:09:54.440 that will probably continue to rise, but the portion of 0:09:54.480 --> 0:09:57.080 it that is cyclical might actually reverse this year. If 0:09:57.120 --> 0:10:00.240 we actually do get a cyclical improvement in the economy. 0:10:00.040 --> 0:10:02.080 You do think that you could see about one to. 0:10:02.120 --> 0:10:04.160 Two tenths of downward pressure and the unemployment rate this 0:10:04.200 --> 0:10:07.760 year just because of economic uncertainty fading given last year 0:10:07.840 --> 0:10:11.280 was true peak peak tariff uncertainty UH a modest improvement 0:10:11.280 --> 0:10:13.720 in the consumer in which case you could see some 0:10:14.440 --> 0:10:16.560 modest hiring across the global industries. 0:10:16.720 --> 0:10:19.520 Chechiat is launched in twenty twenty two and they're taking 0:10:19.559 --> 0:10:20.760 fifty percent of the jobs right now. 0:10:20.800 --> 0:10:22.400 How does the FED deal with that? 0:10:23.520 --> 0:10:25.160 It's I it's a tough backdrop. 0:10:25.200 --> 0:10:27.800 I think they have to be thinking about the productivity, 0:10:27.800 --> 0:10:30.000 and it's kind of a call about whether this is 0:10:30.480 --> 0:10:35.800 product a productivity cycle, there's no harm in waiting at 0:10:35.880 --> 0:10:37.120 least through the middle part of the year, which is 0:10:37.120 --> 0:10:39.360 probably what the Fed's gonna ultimately end up doing, and 0:10:39.400 --> 0:10:39.760 then in the. 0:10:39.720 --> 0:10:41.439 Back part of the year they could probably caught a 0:10:41.440 --> 0:10:42.000 couple more. 0:10:41.840 --> 0:10:44.760 Times, and Warsh is gonna gonna guide them towards that 0:10:45.240 --> 0:10:47.200 because that will be an environment where inflation is also 0:10:47.240 --> 0:10:50.079 starting to fade. You when in productivity cycles you don't 0:10:50.120 --> 0:10:51.840 have inflation problems. 0:10:51.840 --> 0:10:53.199 At the same time the growth is strong. 0:10:53.400 --> 0:10:55.000 So if we start to see that inflation cools down, 0:10:55.000 --> 0:10:56.520 then it's an environment where they can still cut a 0:10:56.559 --> 0:10:57.240 couple more times. 0:10:57.360 --> 0:10:59.520 What will be the main driver of disinflation? 0:10:59.600 --> 0:11:01.800 Tours out a note today and he was talking about, 0:11:01.840 --> 0:11:04.000 actually you could see inflation creepier with things like the 0:11:04.040 --> 0:11:06.440 one big beautiful bill coming out for you, what is 0:11:06.520 --> 0:11:07.560 just inflationary. 0:11:08.520 --> 0:11:10.480 So in the first part of the year, I think 0:11:10.520 --> 0:11:12.679 that's the right We're going to probably see inflation move 0:11:12.720 --> 0:11:14.760 a little bit higher, in which case that's why we 0:11:14.800 --> 0:11:16.320 don't think that the FED is going to be cutting 0:11:16.640 --> 0:11:19.920 under Powell anymore. However, in the back part of the year, 0:11:19.960 --> 0:11:24.480 it's going to be driven by the typical disinflationary forces 0:11:24.480 --> 0:11:28.880 that is tied to productivity, which is lower wage inflation 0:11:28.920 --> 0:11:30.080 than would otherwise be the case. 0:11:30.200 --> 0:11:31.680 So first part of the year, I agree, we're. 0:11:31.520 --> 0:11:33.960 Going to likely see some pretty hot inflation prints, especially 0:11:33.960 --> 0:11:36.560 in Q one, that will probably start to fade, and 0:11:36.559 --> 0:11:38.160 then the narrative will shift in the back part of 0:11:38.160 --> 0:11:40.640 the year because that's when you'll start to see inflation cooling, 0:11:40.800 --> 0:11:42.760 and then labor costs also fairly modest. 0:11:42.840 --> 0:11:44.640 I don't expect a precise number from you, but just 0:11:44.679 --> 0:11:47.320 how much of GDP growth this year is going to 0:11:47.320 --> 0:11:50.000 come from the tech capex, not just the full companies 0:11:50.000 --> 0:11:51.320 but everybody else as well. 0:11:51.520 --> 0:11:55.560 Yeah, I think you'll it'll probably be fifty or so 0:11:55.640 --> 0:11:56.760 basis points on GDP. 0:11:57.160 --> 0:12:00.079 That's pretty impressive stuff. This is why it's interesting for 0:12:00.120 --> 0:12:02.440 the fener Reserve. They could be cunning interest rates potentially 0:12:02.440 --> 0:12:04.920 responding to a languor market the same time GDP's close 0:12:04.960 --> 0:12:06.840 to three you ever seen that before. 0:12:07.640 --> 0:12:10.600 It's a very unique environment and that's why they certainly 0:12:10.640 --> 0:12:12.720 will have a tough time cutting in the first. 0:12:12.600 --> 0:12:13.040 Part of the year. 0:12:13.080 --> 0:12:15.960 When you see growth actually accelerating. So the news this 0:12:16.000 --> 0:12:18.120 week I think is perhaps a bit of a one off, 0:12:18.160 --> 0:12:20.000 and we'll shift to data prints that are starting to 0:12:20.040 --> 0:12:22.720 surprise to the upside. Consumer data starting to pick up, 0:12:22.760 --> 0:12:26.800 sentiment improve, companies want to invest again because the economic 0:12:26.840 --> 0:12:29.400 backdrop is a bit better than where it's been, in 0:12:29.440 --> 0:12:32.800 which case, the fears about economy really decelerating a link 0:12:32.800 --> 0:12:33.200 market craft. 0:12:33.320 --> 0:12:34.920 It's basically what they did do at the end of 0:12:35.000 --> 0:12:37.800 last year. They were basically cunting interest rates with GDP 0:12:38.240 --> 0:12:41.800 three four percentage points high because of what we saw 0:12:42.000 --> 0:12:45.080 from tech campex, even though payroas growth is totally stilled. 0:12:45.360 --> 0:12:46.480 Look, they've been looking through this. 0:12:46.520 --> 0:12:49.400 They've actually been acknowledging that a productivity boom could come 0:12:49.400 --> 0:12:52.239 at the behest of an employment market that is sluggish. 0:12:52.480 --> 0:12:54.400 The one challenge to this, and the one thing that 0:12:54.400 --> 0:12:57.560 I've not heard people fully explore, is how do four 0:12:57.600 --> 0:12:59.959 companies spend six hundred and fifty billion dollars in one 0:13:00.200 --> 0:13:03.680 year without causing inflation? Because ultimately, what they're buying, yes, 0:13:03.760 --> 0:13:07.440 it's raw materials, it's land, it's housing, it's all of 0:13:07.480 --> 0:13:08.640 these different aspects. 0:13:08.760 --> 0:13:09.800 It's a lot of money. 0:13:09.840 --> 0:13:11.920 So how do we get that kind of spending without 0:13:11.960 --> 0:13:13.440 any kind of price distortion on the other. 0:13:13.320 --> 0:13:13.800 Side, definite. 0:13:13.840 --> 0:13:15.560 How does it show up in GDP? Does it come 0:13:15.640 --> 0:13:17.679 up through imports, investment? How does it show up? 0:13:17.720 --> 0:13:18.360 So the way that. 0:13:18.320 --> 0:13:20.199 We've been tracking it in GDP is looking at only 0:13:20.200 --> 0:13:22.560 the domestic portion of it, because it gets funky with 0:13:22.559 --> 0:13:25.240 the imports, because imports end up being a negative on 0:13:25.280 --> 0:13:27.959 GDP just based on GDP math. So we look at 0:13:27.960 --> 0:13:33.000 it based on the tech portion of capex, the construction, 0:13:33.360 --> 0:13:37.200 and what we find is that tech related domestic portion 0:13:37.320 --> 0:13:40.760 of AI capex is but in terms of size is 0:13:40.800 --> 0:13:42.760 about one and a half percent of GDP. So that 0:13:42.760 --> 0:13:44.760 compares to say, housing, which is about three and a 0:13:44.800 --> 0:13:45.760 half percent of GDP. 0:13:46.000 --> 0:13:47.959 So it is large. It is growing. 0:13:48.240 --> 0:13:50.080 If Jensen's forecasts are right, it'll grow it to a 0:13:50.080 --> 0:13:51.920 five percent of GDP by the end of the decade. 0:13:52.120 --> 0:13:53.840 I'm not sure I would bet on it being quite 0:13:53.880 --> 0:13:56.960 that high, but it's an important part of GDP, but 0:13:57.360 --> 0:14:00.200 perhaps not as big as some of the other major. 0:14:00.520 --> 0:14:02.280 Why is it not inflationary at anyway? 0:14:03.080 --> 0:14:06.040 I mean, I think it is modestly inflationary, certainly offsetting 0:14:06.080 --> 0:14:08.760 some of the disinflationary forces that are playing out otherwise, 0:14:09.000 --> 0:14:11.680 And when you think about these typical productivity type of booms, 0:14:11.720 --> 0:14:14.360 it ends up being modestly inflationary in the near term, 0:14:14.360 --> 0:14:16.080 and then in the medium to longer term it becomes 0:14:16.120 --> 0:14:19.680 disinflationary as you actually see the productivity gained. As a result, 0:14:19.960 --> 0:14:22.360 we haven't really seen much of that productivity gain yet. 0:14:22.560 --> 0:14:23.360 I think it's coming. 0:14:23.800 --> 0:14:25.760 So for the first part of the year, you know, 0:14:25.800 --> 0:14:28.840 you'll probably see those inflationary forces because there's a lot 0:14:28.920 --> 0:14:32.120 of positive demand shocks in the first couple of months, 0:14:32.120 --> 0:14:34.200 which is why I would emphasize the data that we 0:14:34.280 --> 0:14:37.520 got this week flagging that the labor market is starting 0:14:37.520 --> 0:14:39.760 to soft. It is probably not the right takeaway for 0:14:39.840 --> 0:14:40.640 the next couple of months. 0:14:40.640 --> 0:14:43.040 Watch your guests for next wait just quickly on Perils of. 0:14:43.000 --> 0:14:45.440 Eighty five thousand with some substantial download visions to the 0:14:45.600 --> 0:14:46.160 prior months. 0:14:46.640 --> 0:14:50.120 Stay with US multile Impex. Savannah's coming up off to this. 0:14:59.320 --> 0:15:01.200 Do you want to guess now? To continue the conversation 0:15:01.280 --> 0:15:05.080 to netline Hostatigus Janet. If Republican senators, in Tyler's words, 0:15:05.120 --> 0:15:07.320 are calling this waste of time, how much more time 0:15:07.480 --> 0:15:08.400 are they going to waste? 0:15:08.920 --> 0:15:09.920 Yeah, it's a great question. 0:15:09.960 --> 0:15:11.760 I mean, I think that, as Tyler pointed out, this 0:15:11.800 --> 0:15:15.360 is literally something that the Republican senators are now thinking, 0:15:15.360 --> 0:15:18.920 we need to get this investigation concluded. We need to 0:15:19.000 --> 0:15:21.360 kind of clear Powell, which is something that Tom Tillis 0:15:21.400 --> 0:15:23.880 is looking for because they do need his vote to 0:15:23.960 --> 0:15:26.640 move Kevin Walsh through the Senate Banking Committee and they 0:15:26.680 --> 0:15:29.800 would like Kevin Worsh to be confirmed before Jump Powell's 0:15:29.840 --> 0:15:32.040 term ends on May fifteenth. So I do you think 0:15:32.040 --> 0:15:34.880 you'll probably start to see some movement there to get 0:15:34.880 --> 0:15:37.160 this done, which I think, especially what we've seen coming 0:15:37.200 --> 0:15:41.120 from various senators yesterday was really important to see that 0:15:41.160 --> 0:15:43.560 they really do also want to get this moving somewhere 0:15:43.560 --> 0:15:46.560 a little bit more quickly, because this is an important 0:15:47.280 --> 0:15:51.000 distraction potentially for getting Kevin Warsh ultimately on the FED. 0:15:51.160 --> 0:15:53.360 Movement from who is it the DOJ to wrap it 0:15:53.440 --> 0:15:57.520 up or for FED to actually also comply and send 0:15:57.640 --> 0:15:59.800 information that the DOJ is asking about in terms of 0:15:59.800 --> 0:16:00.560 the re innovations. 0:16:01.120 --> 0:16:02.640 Yes, I mean, I think that's a little bit to 0:16:02.680 --> 0:16:04.880 be determined, right, So it could be that maybe the 0:16:04.880 --> 0:16:07.360 FED it just hasn't responded to the questions yet. Maybe 0:16:07.400 --> 0:16:09.160 they just need to respond to the questions, and then 0:16:09.240 --> 0:16:13.440 the DOJ will kind of finalize the investigation and say 0:16:13.480 --> 0:16:16.960 that there's no wrongdoing here. Maybe it's some other form 0:16:17.000 --> 0:16:20.160 that that needs to take, but there probably is a 0:16:20.200 --> 0:16:23.360 way that this could be handled relatively quickly so that 0:16:23.400 --> 0:16:25.840 we can actually move on from this and then actually 0:16:25.920 --> 0:16:28.520 the Senate Banking Committee can bring in Kevin Worsh and 0:16:28.560 --> 0:16:29.760 actually have his confirmation. 0:16:29.840 --> 0:16:32.000 Hearing you sound hopeful of a quick timeline. 0:16:32.040 --> 0:16:34.600 If we don't do, just expect Powell to be chair 0:16:34.720 --> 0:16:35.520 until how long? 0:16:36.120 --> 0:16:38.280 Yeah, I mean, this is a really important question, and 0:16:38.360 --> 0:16:41.880 obviously there is discussions about what happens if you know, 0:16:42.000 --> 0:16:44.720 there is no one confirmed to be the FED chair 0:16:44.760 --> 0:16:48.040 when Powell's term ends, what happens does it become the 0:16:48.120 --> 0:16:50.680 vice chair? If there's no vice chairs, there are possibility 0:16:50.720 --> 0:16:52.680 that the vice chair could resign, you know, those are 0:16:52.720 --> 0:16:55.720 all things, and then ultimately the board could reappoint Powell. 0:16:56.080 --> 0:16:59.240 The other big question obviously is does Powell stay after 0:16:59.280 --> 0:17:02.040 his term spires. I think this is a really important 0:17:02.120 --> 0:17:04.200 question for what Kevin Worsh would like. 0:17:04.119 --> 0:17:04.879 To do with the FED. 0:17:05.520 --> 0:17:08.960 Obviously, whether or not the President can get another appointee 0:17:09.000 --> 0:17:12.840 onto the board of governors. They do want to engage 0:17:12.880 --> 0:17:16.080 in financial deregulation. A Vice chair Bowman has a proposal 0:17:16.119 --> 0:17:19.199 that she may announced as quickly as this month, so 0:17:19.240 --> 0:17:21.880 they do need to actually move forward on that. That's 0:17:21.920 --> 0:17:24.760 going to be key to Worsh's trying to reduce the 0:17:24.800 --> 0:17:27.120 size of the FED balance sheet. But they also need 0:17:27.160 --> 0:17:29.639 a majority of the FED board members to vote for 0:17:29.680 --> 0:17:31.040 the most aggressive plan. 0:17:30.880 --> 0:17:32.440 They could have right now. 0:17:32.480 --> 0:17:35.560 If Powell remains on the FED, that could limit the 0:17:35.600 --> 0:17:38.000 ability for them to actually get to that majority. So 0:17:38.080 --> 0:17:40.040 his staying on or not is going to be a 0:17:40.119 --> 0:17:43.520 key question moving forward as to how things actually proceed 0:17:43.960 --> 0:17:46.520 and also what might happen if there is no FED 0:17:46.520 --> 0:17:48.639 share confirmed before his term expires. 0:17:48.760 --> 0:17:51.680 While we wait for the next edition of Bachelor and Purgatory, Jenet, 0:17:51.720 --> 0:17:53.879