Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
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Speaker 2: Terminal and the Bloomberg Business App. Brian Gander of Stephol
Speaker 2: writes the following, Warsh has a history of hawkish FEUs
Speaker 2: which run contrary to Trump's goal. Brian joined us now
Speaker 2: for more bran That begs the question how did we
Speaker 2: get here?
Speaker 3: You know, I think you have to tip your hat
Speaker 3: to Kevin Walsh. I think the politics that went into this,
Speaker 3: there was a campaign. Basically, I think he ran a
Speaker 3: very good campaign to get the job. I mean, we've
Speaker 3: had a series of stories and new use leaks criticizing
Speaker 3: the other candidates, and I'm not you know, I have
Speaker 3: no personal knowledge who was behind that, but who's the
Speaker 3: last man standing Kevin mahsh So you would assume that
Speaker 3: there were some fingerprints on the effort that went into
Speaker 3: knocking down the other candidates. And let's not forget I
Speaker 3: mean with Donald Trump, personal relations matter a lot. And
Speaker 3: Walsh's father in law and Trump went to college together
Speaker 3: and or have business relationships going back decades. So there's
Speaker 3: always that angle that I think people overlook. You know,
Speaker 3: personality matters for Trump. Remember a lot of the nominees
Speaker 3: that have not worked out for him. Over time, he
Speaker 3: will turn and afterwards I'll say, well that person interviewed great.
Speaker 3: I think Kevin Walsh interviewed great.
Speaker 4: You know, Brian, I'm glad you brought that up because
Speaker 4: also there was a recent story about how Ron Lauder
Speaker 4: had this deal with Ukraine. Of course, as the Trump
Speaker 4: administration is trying to make sure that investors are there
Speaker 4: if they get a peace deal to rebuild that country.
Speaker 4: Are you saying potential Kevin Walsh is in this position
Speaker 4: because his proximity to power, not exactly how he thinks
Speaker 4: about the Federal Reserve.
Speaker 5: I think it's a factor.
Speaker 3: I mean, I can't rank what the factors are, but
Speaker 3: you know, kind of reiterating my earlier point with Donald Trump,
Speaker 3: personal relations matter. He wants to trust you, he wants
Speaker 3: to know you, and he just wants to feel good
Speaker 3: about you. And that personal connection that he has through laughter,
Speaker 3: I think matters. I think mattered in the process. I
Speaker 3: think it gave Wash and you know, an advantage that
Speaker 3: some other candidate. It's like a Rick Reader who did
Speaker 3: not have personal connections to the White House and to
Speaker 3: the President, does not have a long history with the president.
Speaker 3: I think that helped Wash hurt Reader.
Speaker 5: I think it.
Speaker 3: Hurt Christopher Waller a little bit.
Speaker 5: Quite frankly, Again, I have.
Speaker 3: No personal knowledge of this, but there doesn't seem to
Speaker 3: be a close personal connection with Waller and the President,
Speaker 3: and I think that hurt. There was a personal connection
Speaker 3: is a personal connection with Kevin Hassett. But you know, again,
Speaker 3: some of the some of the stories that came out
Speaker 3: were less than flattering about what how the FED may
Speaker 3: operate under Hassett, how the markets react, and maybe Trump
Speaker 3: took took a note of that.
Speaker 5: He said, how the market reacts?
Speaker 1: Brian, do you think that the move that we're seeing
Speaker 1: this morning is enough to make President Trump start to
Speaker 1: think did I make the right choice?
Speaker 5: No?
Speaker 3: I mean unless something changes during the confirmation process, but
Speaker 3: the immediate market reaction is not.
Speaker 5: As if the immediate.
Speaker 3: Market reaction was enough, we'd have, you know, policy whip
Speaker 3: song all over the place. Yes, the White House clearly
Speaker 3: looks at the markets, but I don't think there's always
Speaker 3: a knee jerk reaction to it. Let's see what happens
Speaker 3: over the next couple of months. Let's see what happens
Speaker 3: with the confirmation process, how that plays out. You know,
Speaker 3: as it has been discussed, it could be lengthy. There's
Speaker 3: going to be some political drama around it. It's not
Speaker 3: just Tom Tellis. Rampaul is going to have a problem
Speaker 3: on the Center floor if we get there.
Speaker 5: This is going to be a very.
Speaker 3: Interesting confirmation process. And maybe something during that time pops
Speaker 3: up that gives the President time to pause, reconsider again.
Speaker 3: That's highly, highly speculative, but it's highly unlikely, but it's
Speaker 3: not impossible.
Speaker 5: Stay with us.
Speaker 2: More Bloomberg surveillance coming up after this. Senator Tom Taillis
Speaker 2: from North Carolina joins US small for more. Senator, welcome
Speaker 2: to the program. So you have been vowing to block
Speaker 2: any nomination to the Federal Reserve until the DJ wraps
Speaker 2: up its investigation. We have some news this morning. As
Speaker 2: you know, Kevin Walsh has been nominated by the President
Speaker 2: of the United States to succeed chair and power. Does
Speaker 2: it change anything for you.
Speaker 6: Sir, No, it does. I am pleased with the nominee.
Speaker 6: I think that by most accounts he is well regarded.
Speaker 6: But we still have to clear the current matter. They're
Speaker 6: pursuing a on the basis of criminal intent testimony and
Speaker 6: a banking committee hearing that clearly had no criminal intent.
Speaker 6: So to me, you got some assistant US attorney with
Speaker 6: a dream in the DC district that should really determine
Speaker 6: whether or not this frivolous prosecution is worth holding up
Speaker 6: a fed born seat.
Speaker 2: Senator, we have some time between now and May four
Speaker 2: that investigation to go away and for the confirmation process
Speaker 2: to open up. Have you given thoughts to what would
Speaker 2: happen if we don't have that time we get to
Speaker 2: May this is still lingering and the chairman steps away.
Speaker 2: What happens at it's help of the feder Reserve.
Speaker 6: Well, I think that we all need to understand we
Speaker 6: still have a working quorum of members, whether or not
Speaker 6: they have an acting chair. As a decision that the
Speaker 6: President and assume the Treasury Secretary and others can look at.
Speaker 6: But that's not my problem. We're here because of them,
Speaker 6: We're not here because of me, and so I think
Speaker 6: they should work expeditiously if they really do. I'm not
Speaker 6: an attorney. I watch a lot of crime shows, but
Speaker 6: doesn't look like there was any criminal intent here. They
Speaker 6: have to determine whether or not it's worth grinding this out.
Speaker 6: Like I said, I didn't put us here. Some assisted
Speaker 6: US attorney in d C District decided to put us here,
Speaker 6: and they've got determined if they have a case it's
Speaker 6: worth pursuing.
Speaker 1: Senator Tillis, has anyone from the administration or the Department
Speaker 1: of Justice reached out to you about the process of
Speaker 1: how this could go down or giving you confidence that
Speaker 1: this will be dropped in time for the confirmation hearing
Speaker 1: to go forward?
Speaker 6: Well, at LISA, I'd never talked about my conversations with
Speaker 6: any members. People always ask me what goes on at lunch.
Speaker 6: I just don't have those conversations, but my public statements
Speaker 6: stand for themselves.
Speaker 4: Is closing the investigation enough a Senator, or do you
Speaker 4: need other assurances that you think this administration is going
Speaker 4: to respect the FED independence.
Speaker 6: Well, right now, I think you do that by making
Speaker 6: a judge. Look, we've got two cases here, right, We've
Speaker 6: got the Cook case and we have the Power case.
Speaker 6: Both of those to me are instances of independence, and
Speaker 6: I'm staying focused on that one goal. I'm not really
Speaker 6: persuaded or even willing to entertain any discussions to take
Speaker 6: me off that goal.
Speaker 4: Okay, but you just mentioned the Lisa Cook case. Do
Speaker 4: you also need to see that wrapped up either by
Speaker 4: the Supreme Court in order to move forward?
Speaker 6: Yeah? I do. I mean because look, I mean we're
Speaker 6: talking about what looks like a paperwork error or if
Speaker 6: there was, if there was a mistake long before she
Speaker 6: was confirmed for the board. It's like, my goodness, guys,
Speaker 6: I mean, I don't know. Maybe Paulty or somebody thought
Speaker 6: that that was cute. I didn't.
Speaker 5: So just to be.
Speaker 4: Clear, it is not just the DOJ investigation to the
Speaker 4: FED that you need wrapped up. You also need the
Speaker 4: Supreme Court case wrapped up. So it's two issues right
Speaker 4: now and blocks for you to move forward with Kevin
Speaker 4: Warsh Yeah, well.
Speaker 6: No, let me let me buy fartate these one is
Speaker 6: moving forward with another that the case that will prevent
Speaker 6: me considering any board nominee is the Powell case. Uh,
Speaker 6: but I will not move forward. So for the for
Speaker 6: the FED chair, which we know expiers in February. Uh.
Speaker 6: The other case we have, you know, the Myron term
Speaker 6: is about to expire because he was filling up, you know,
Speaker 6: basically six weeks or I'm sorry, six months, we've got
Speaker 6: the Cook seat. Those are ones that are really going
Speaker 6: to be I'll take a look at the candidate, I'll
Speaker 6: take a look at how it would affect the board. Look,
Speaker 6: this is all in my opinion, this is all about
Speaker 6: sending a signal to the markets and to the business
Speaker 6: community that FED independence is critically important. And going after
Speaker 6: the chair I think took a stool out of the
Speaker 6: foundation of people's confidence, a lag out of the stool
Speaker 6: in the case of Cook, I do believe that it's
Speaker 6: another example of a trend, and the Senate has to
Speaker 6: stand in the breach. We have to make sure that
Speaker 6: the FED maintains its independence, and we cannot reward any
Speaker 6: bad behavior that seems like it's surely motivated not by
Speaker 6: the substance of the allegations, but by the interest in
Speaker 6: trying to undermind the Fed independence.
Speaker 2: The Senator, what's your understanding as to whether the Federal
Speaker 2: Reserve is cooperating with that investigation? Some conflicting reports over
Speaker 2: the past few days. What you'll read on the situation.
Speaker 6: I you know, I'm not really sure, Jonathan. I'm going
Speaker 6: to leave that. That's a better question to ask the
Speaker 6: administration of the DOJ.
Speaker 2: What if we get the opportunity to speak to them,
Speaker 2: I'm sure we'll ask. I've got the opportunity to ask
Speaker 2: you about the man and not just the process. You
Speaker 2: said this morning, and you've said it again that Kevin
Speaker 2: wassh is a qualified nominee with a deep understanding of
Speaker 2: monetary policy. For those familiar with Kevin Walsh in his
Speaker 2: time at the Federal Reserve back in the financial crisis,
Speaker 2: they have considered him to be on the more hawkish
Speaker 2: side of the spectrum of the on the FOMC. And
Speaker 2: there is some debate this morning, Centator about what Kevin
Speaker 2: Walsh actually stands for, given that we know the president
Speaker 2: wants lower interest rates, what's your understanding of what he
Speaker 2: stands for?
Speaker 6: Well, you know, with Chair Powell, I haven't agreed with
Speaker 6: all of his opinions. I'm not an economist or his positions,
Speaker 6: and sometimes I may be more hawkish than Chair Powell.
Speaker 6: So coming in, I think Walsh is a good independent.
Speaker 6: He's got an extraordinary reputation in a community of economists
Speaker 6: and people focused on the FED. I don't think that
Speaker 6: he would want to destroy his reputation by being independent.
Speaker 6: You know, you could have hawkish members like Waller and others,
Speaker 6: and I'm fine with them on the board to stretch
Speaker 6: the thinking. But I don't believe he comes in is
Speaker 6: more or less going to do the bidding of the administration,
Speaker 6: which is critically important and incidentally, I should say it's
Speaker 6: critically important for the health and hygiene of the administration.
Speaker 1: Senator tell Us, does this give you any more confidence
Speaker 1: that actually the independence of the Federal Reserve will not
Speaker 1: be undermined, that this actually is going to be a
Speaker 1: proper process once some of the roadblocks you're talking about
Speaker 1: are going to be cleared.
Speaker 6: Yeah, I think so, Lisa. And look, this is actually
Speaker 6: democracy and institutional separation at its finest. We have a disagreement,
Speaker 6: and we have a mechanism in place for resolving this
Speaker 6: and moving on. I hope that no one in the
Speaker 6: administration takes personal offense to this. I'm doing my job.
Speaker 4: Senator, do you have any understanding of the timeline?
Speaker 6: Well, you know, the investigations can go on forever. I mean,
Speaker 6: you could see one scenario where Chair Powell has two
Speaker 6: years left on his term even after he comes off
Speaker 6: the board. So I mean you could see this going
Speaker 6: on for two years or in my case, three hundred
Speaker 6: and thirty nine days.
Speaker 4: Because three hundred and thirty nine days that's when you're
Speaker 4: going to be retiring. And I know, Lisa ash you
Speaker 4: have had any conversation, and I want to ask you
Speaker 4: about those conversations, But have you, guys seen any indications
Speaker 4: from anyone that they do want to wrap up the
Speaker 4: DOJ investigation as soon as possible?
Speaker 6: Well, you know, I think and I think that the
Speaker 6: fact that they're putting forward this nominee knowing that it
Speaker 6: would be impossible to get helm through with the current
Speaker 6: position that I've taken, it suggests to me that maybe
Speaker 6: they are trying to find a way to deal with this.
Speaker 6: It could be adjudicated expeditiously, or it could be just
Speaker 6: determining that they also agree that there was no criminal
Speaker 6: intent and the chairs testimony and the Banking committee that
Speaker 6: I participated in.
Speaker 2: As soon as you just quickly, have you spoken to
Speaker 2: the White House as they reached out?
Speaker 6: You know, like I said, I have ongoing discussions. So
Speaker 6: the President I probably communicate once or twice a week
Speaker 6: at least through texts. So I have ongoing discussions. I'm
Speaker 6: not going to talk about the content of them. Jonathan,
Speaker 6: kind of groundhog Day. I'm going to answer the same
Speaker 6: question every day.
Speaker 5: Good movie I heard, Senator.
Speaker 2: We appreciate it's time.
Speaker 5: Thanks for jumping on the code. Stay with us.
Speaker 2: Multil Index Savannans coming up after this. Apple Shafes, Parent
Speaker 2: Gang sound study. Tech Giant posted best It's best ever
Speaker 2: a quarter of sales and a forecast one of our
Speaker 2: estimates thanks to record I find sales. Joining us now
Speaker 2: to discuss is down Ice of wet Bush. Thank good morning.
Speaker 2: Get to say it numbers a phenomenal Let's just start
Speaker 2: with the numbers of themselves. Where else did that growth
Speaker 2: in China come from?
Speaker 7: I mean, look, that's you know, it's pin up demand
Speaker 7: and then they're having success. I mean I found seventeen
Speaker 7: it's kind of you know, it's been sleepy, but actually
Speaker 7: a pretty huge upgrade. Second, I think you see in
Speaker 7: the numbers.
Speaker 5: You know obviously the stock reaction.
Speaker 7: Look, I'd say it's it's a yawner because investors are
Speaker 7: just so laser focused on AI.
Speaker 5: Right.
Speaker 7: And then there was like how they're gonna monetize what's
Speaker 7: that strategy? Cook talked about it a little, but in
Speaker 7: terms of the actual numbers and services and iPhone, Look,
Speaker 7: it was sort of a best case scenario. And I
Speaker 7: think now it's really about showing how they're going to
Speaker 7: monetize on AI. That's going to be their story for
Speaker 7: twenty twenty six.
Speaker 5: Cost.
Speaker 2: We need to talk about cost this well, something the
Speaker 2: typically doesn't come up, but it was anticipated this time around.
Speaker 2: One thing's getting more expensive.
Speaker 7: Yeah, just memory, right, I mean if you look at
Speaker 7: everything as you sand disk and what's happening on chips,
Speaker 7: it's supplied dram pricing everything that's happened across the board.
Speaker 7: But our view is like, ultimately when it comes to
Speaker 7: iPhone eighteen, they're going to have to raise prices probably
Speaker 7: by one hundred, one hundred and fifty dollars. So it's
Speaker 7: something that we worry about less from a margin perspective,
Speaker 7: but look, the reality is is that this stock being
Speaker 7: three twenty five, three fifty or where it is today.
Speaker 7: It's not going to be because of margins, because of iPhone,
Speaker 7: because it's served. It's about showing, truly that they have
Speaker 7: an AI strategy they're going to actually roll out that
Speaker 7: they can montize.
Speaker 6: Well.
Speaker 1: Part one of the pig skepticism behind Apple and the
Speaker 1: reason why it's underperformed since December since it hit a record,
Speaker 1: has been this question around is it just an iPhone company?
Speaker 5: Has it been able to diversify in a meaningful way.
Speaker 1: Yes, you did see that thirty billion dollars coming from services,
Speaker 1: but wearables the macline not seeing that same kind of growth.
Speaker 1: And I just wonder whether it's enough to just say
Speaker 1: that iPhone eighteen is going to come out with some
Speaker 1: incredible AI innovation and that's going to change the trajectory
Speaker 1: and some of the concerns that they can't move away
Speaker 1: from this one product.
Speaker 7: Yeah, I mean, look to your point, like, the reality is,
Speaker 7: like the core, the ingredients, the hearts and lungs of
Speaker 7: Apple are always going to be iPhone relative to as
Speaker 7: a percent of revenue. But I think their culture has
Speaker 7: definitely hurt them the last few years, especially because Ai'm
Speaker 7: not doing acquisitions and maybe they've done you know, like
Speaker 7: recently that they've done one a smart one. But the
Speaker 7: problem is that investors they're not going to give them credit,
Speaker 7: which speaks to our point like this is the year
Speaker 7: from Google to Siri to WWDC to Role.
Speaker 5: It's not gonna be on the hardware side.
Speaker 7: It's going to be how they monetize subscription in AI
Speaker 7: for the two point five billion iOS devices.
Speaker 1: So we've already seen this. With respect to the earnings
Speaker 1: from Microsoft and from Meta, Meta was rewarded because they
Speaker 1: showed how they were deploying this in terms of their advertising.
Speaker 1: Microsoft was penalized because guess what, they have to spend
Speaker 1: that much more and they're not seeing the benefits as
Speaker 1: quickly as people were expecting. What do you think investors
Speaker 1: are getting wrong? So I know you're really bullish and
Speaker 1: you think that people are underappreciating how quickly this can
Speaker 1: be rolled out? What are people getting wrong about what
Speaker 1: they're seeing in those numbers from say Microsoft or some
Speaker 1: of the skepticism around Apple about how quickly this can
Speaker 1: be deployed.
Speaker 5: It's a great question.
Speaker 7: Look, I mean Microsoft is almost meadow last quarter you know,
Speaker 7: in terms of the cap aacs and then now they're
Speaker 7: doing a you know, a ticket take perode for Zuckerberg
Speaker 7: and Meta, right. So I think it just comes down
Speaker 7: that for these companies, the challenge is like you have
Speaker 7: a fourth indust revolution. There's no anyone says AI bubble
Speaker 7: is not I don't think plugged into what's happening in
Speaker 7: terms of overall spending on what we're seeing, even on
Speaker 7: physical AI.
Speaker 5: Roboducts, autonomous and everything.
Speaker 7: But the reality is that for these companies it's a
Speaker 7: balancing act and if you just manage it by a
Speaker 7: quarter or two quarters, they'll lose out. And I think
Speaker 7: for Nadella and Microsoft that they got to spend on cabacs.
Speaker 7: Now do I think that conference call is probably a
Speaker 7: C plus relative to communication. I think that was disappointing
Speaker 7: and I think.
Speaker 5: That that really calls.
Speaker 2: I can't just ask it about conference calle Now it's
Speaker 2: worth three hundred and seventy five billion dollars to a company.
Speaker 2: I mean seriously, doesn't that how you use something about
Speaker 2: the price of something?
Speaker 7: Yeah, And I think what it does it shows the
Speaker 7: sensitivity from investors and you see the software self look
Speaker 7: at service now and software right now? Is that investors
Speaker 7: are so hygh percent you obviously talk about in the
Speaker 7: show all the time. Is that is capbacks? When am
Speaker 7: I going to see the modernization? When are we going
Speaker 7: to see the growth Azure? Is it forty percent?
Speaker 5: Growth? Is it thirty nine percent? Okay, what's the whisper number?
Speaker 7: So and I think on the conference call, investors want
Speaker 7: to see that cap bax toward Azure, toward toward cloud now.
Speaker 7: I think, on the other hand, like when you listenay,
Speaker 7: like when we see like alphabet next week, I think
Speaker 7: that's one Like they're now in a more of a
Speaker 7: pole position. But a year ago right in New York City,
Speaker 7: cab driver one touch, it was Barish on it. So
Speaker 7: I think that's that's the reality of what we've seen
Speaker 7: in big tech.
Speaker 6: Dan.
Speaker 4: When it comes to Tesla, do you think they merged
Speaker 4: with SpaceX or do you think it's XAI and SpaceX.
Speaker 7: So, I think it's SpaceX and x AI, But I
Speaker 7: believe Tesla is going to own a piece of that.
Speaker 5: I think that's sort of our view.
Speaker 7: And you made a great point because the reality is
Speaker 7: like the future from USK, it's not it's not delivery
Speaker 7: it's not call the future and we talk about all times.
Speaker 7: It's autonomous, it's robotics. And this is really slowly, piece
Speaker 7: by piece, brick by brick, him building what's essentially like
Speaker 7: the AI sort of ecosystem. And it just that's essential,
Speaker 7: I think, the step by step process.
Speaker 4: But if he's eyeing an IPO in June, how quickly
Speaker 4: does this.
Speaker 5: Need to get done?
Speaker 6: Oh?
Speaker 5: I think in the next few months. In other words,
Speaker 5: like this is something like before March madness.
Speaker 7: This is going to have to hit to give some
Speaker 7: time like before March, because especially with an IPO, you
Speaker 7: know in the summer.
Speaker 5: How much is it being.
Speaker 1: Driven by the fact that he is the underdog based
Speaker 1: on China's development of electric vehicles? How much is this
Speaker 1: not a failed bet but an idea that he cannot
Speaker 1: get dominance in the way that he once envisioned in
Speaker 1: this particular industry.
Speaker 7: Well, it speaks to like, look the trial with all
Speaker 7: men and open AI, that will happen. I think it
Speaker 7: speaks to like there's a view like maybe from behind
Speaker 7: from the AI perspective, now they have to go more aggressive.
Speaker 7: Xai's been a huge offensive bet. You look what's happened
Speaker 7: trying with buid and you know with the domestic competition.
Speaker 7: I think Musk is like he's read the room, but
Speaker 7: it speaks to argue like he is now more of
Speaker 7: like a wartime CEO in terms of what he's navigating.
Speaker 7: But look to put this all together for investors, it's
Speaker 7: it's a week of faith and we've talked about it,
Speaker 7: but the reality is like for Tesla would be a
Speaker 7: six hundreds of de Bees, eight hundreds of bold kids.
Speaker 7: For TASA, that's not going to get there on deliveries
Speaker 7: and gross margins. It's getting there on autonomous optimists and
Speaker 7: FSD penetration.
Speaker 2: This is the Bloomberg Surveillance Podcast, bringing you the best
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