WEBVTT - US Job Openings Unexpectedly Rose in April and Hiring Picked Up 0:00:02.720 --> 0:00:10.600 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.600 --> 0:00:14.600 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:14.640 --> 0:00:17.880 Eastern on Apple Coarclay, and Android Auto with the Bloomberg 0:00:17.920 --> 0:00:21.000 Business App. Listen on demand wherever you get your podcasts, 0:00:21.360 --> 0:00:23.120 or watch us live on YouTube. 0:00:23.520 --> 0:00:25.599 I Paulus pointing out earlier that we got some of 0:00:25.600 --> 0:00:28.880 that economic data. Factory orders lower for April. You also 0:00:29.320 --> 0:00:32.240 had Jolt job openings coming in better than expected. The 0:00:32.320 --> 0:00:35.400 quits rate also slightly better, although we are seeing more 0:00:35.440 --> 0:00:37.800 people getting fired or laid off, So I want to 0:00:37.920 --> 0:00:40.720 take that into account. With Ira Jersey, Boomberg Intelligence Senior 0:00:40.800 --> 0:00:43.680 US interest rate strategist, you're seeing a little bit of 0:00:43.720 --> 0:00:45.600 selling on that front end. Hey Iira, what's your. 0:00:45.520 --> 0:00:46.479 Take on these numbers? 0:00:47.360 --> 0:00:47.560 Yeah? 0:00:47.640 --> 0:00:51.000 Yeah, I disagree with that take. Actually, the way that 0:00:51.040 --> 0:00:53.080 I look at quits being down a little bit and 0:00:53.080 --> 0:00:54.959 then layoffs being up a little bit is actually weak 0:00:55.000 --> 0:00:58.200 for the economy because if you're if you're not thinking 0:00:58.240 --> 0:01:00.440 you can find another job, that's the reason you don't. 0:01:00.800 --> 0:01:02.560 You don't quit your job because you need to stay 0:01:02.560 --> 0:01:05.160 where you are. And then obviously with layoffs up, that's 0:01:05.200 --> 0:01:08.119 not particularly positive. Either, but it's it's all very incremental. 0:01:08.240 --> 0:01:11.759 This isn't These aren't huge moves, and certainly job openings 0:01:11.800 --> 0:01:14.120 being up a little bit in April, it's still. 0:01:13.920 --> 0:01:15.319 Not back to February levels. 0:01:15.360 --> 0:01:18.720 So again, like you know, we're talked about maybe you know, 0:01:18.800 --> 0:01:22.200 lower highs here in terms of the downtrend. But but 0:01:22.240 --> 0:01:24.080 some of the other data is also important to look at. 0:01:24.120 --> 0:01:28.120 So you think about factory orders, those missed to the downside, 0:01:28.319 --> 0:01:31.280 plus they were revised down as well the prior month. 0:01:31.680 --> 0:01:34.560 So so overall this is you know a little bit 0:01:34.600 --> 0:01:37.080 of a weak economy and you know the front end 0:01:37.200 --> 0:01:39.120 selling off. So two year yields being a little bit 0:01:39.200 --> 0:01:41.840 higher here is a little bit surprising because yes, the 0:01:41.920 --> 0:01:45.160 data isn't terrible, but it's also not particularly good. 0:01:47.560 --> 0:01:49.680 Kind of no matter how you slice it, IRA, it 0:01:49.680 --> 0:01:52.160 seems like this fetter reserve is not really getting any 0:01:52.440 --> 0:01:55.560 clear signals what to do next, which I guess for 0:01:55.680 --> 0:01:58.880 a lot of folks means let's do nothing here. How 0:01:58.880 --> 0:02:00.440 do you think they're going to interpret today data? 0:02:02.040 --> 0:02:03.640 Yeah, well, well I think that they're going to not 0:02:03.680 --> 0:02:05.800 be pleased with today's data, but at the same time 0:02:05.840 --> 0:02:08.600 they're waiting for the next shoot to drop on inflation, right, 0:02:08.639 --> 0:02:11.520 so next to so next week's inflation print is going 0:02:11.560 --> 0:02:13.440 to be is going to be important as well as 0:02:13.440 --> 0:02:17.320 this Friday's payrolls report. But you know that the likelihood 0:02:17.360 --> 0:02:19.520 that the Federal Reserve does anything at the June meeting 0:02:19.560 --> 0:02:22.280 is near zero because you're waiting to see what the 0:02:22.320 --> 0:02:25.760 fallout is of all the tariffs. Will that increase prices? 0:02:25.800 --> 0:02:28.960 Will how will that affect inflation and the inflation outlook. 0:02:29.520 --> 0:02:31.720 So all of those things probably mean that they sit 0:02:31.760 --> 0:02:34.480 on their hands. In fact, the minutes last week, according 0:02:34.520 --> 0:02:37.880 to our natural language processing model, suggested that they were 0:02:37.919 --> 0:02:40.320 as neutral as we want to be at the at. 0:02:40.200 --> 0:02:40.919 The last meeting. 0:02:43.120 --> 0:02:45.280 Yeah, you know, he does this thing and it's really cool. 0:02:45.680 --> 0:02:48.639 You put it in FED speak and then his model tells 0:02:48.680 --> 0:02:50.960 them whether they're on the bullish or the bearish side 0:02:51.040 --> 0:02:53.040 or I guess hawker dove side if we're putting it 0:02:53.240 --> 0:02:56.520 in FED terms. So walk me through what you're expecting 0:02:56.560 --> 0:02:58.680 then for Friday and how are positioned in the market, 0:02:58.680 --> 0:03:01.640 because honestly, it's it's been pretty calm the last two days. 0:03:02.840 --> 0:03:04.880 Well, so one of the one of the things that 0:03:04.880 --> 0:03:07.720 we've noted, and I was talking to to our derivative 0:03:07.720 --> 0:03:11.280 strategist Tander Sandu that just this morning, and he noted 0:03:11.360 --> 0:03:13.679 that for the for long end, right, So we've had 0:03:13.680 --> 0:03:15.480 this lot of angst with what's going on in the 0:03:15.480 --> 0:03:17.799 thirty year debt and even then your debt because of 0:03:17.840 --> 0:03:20.440 the fiscal situation and the fact that we're not really 0:03:20.840 --> 0:03:25.200 removing paying down deficits very much. That that people are 0:03:25.560 --> 0:03:28.120 long puts, right, So people have gotten out of the 0:03:28.160 --> 0:03:32.160 money puts on long bonds. So so therefore it might 0:03:32.200 --> 0:03:34.639 be more difficult for the long end to sell off 0:03:34.680 --> 0:03:38.200 just because people are appropriately hedged. But I do think 0:03:38.240 --> 0:03:40.400 that there's a lot of people who are, you know, 0:03:40.520 --> 0:03:43.720 kind of waiting and seeing what the economic outcome is 0:03:43.760 --> 0:03:46.640 going to be. But you know that being said, there 0:03:46.640 --> 0:03:48.880 are people who are think are nibbling at the edges, 0:03:48.920 --> 0:03:51.640 particularly when you get up to that five percent level 0:03:51.640 --> 0:03:55.880 in thirty year bonds because liability driven investors, so insurance companies, 0:03:55.960 --> 0:03:59.480 pension funds and a few others, they're really interested in 0:03:59.720 --> 0:04:02.680 treashjuries at five percent. So I think that's another reason 0:04:02.680 --> 0:04:04.760 why you keep on seeing a bit every time we 0:04:04.840 --> 0:04:06.920 kind of get above that five percent level on the 0:04:06.960 --> 0:04:07.440 long bond. 0:04:10.000 --> 0:04:12.960 Long ago Lisa Bronwitz taught me to look at the 0:04:12.960 --> 0:04:16.440 two tens spread there, and right now it's about fifty 0:04:16.480 --> 0:04:20.640 basis points of steepening. That feels kind of normal to me. 0:04:20.680 --> 0:04:22.160 Are kind of reasonable to me. How does it look 0:04:22.200 --> 0:04:22.440 to you? 0:04:23.920 --> 0:04:26.280 Yeah, so, actually on a historical basis, is actually still 0:04:26.360 --> 0:04:29.000 kind of low. Normally, when you look at the twos 0:04:29.000 --> 0:04:31.920 tens curve, it's somewhere closer to one hundred basis points 0:04:31.960 --> 0:04:35.600 on average. We do think there's some structural reasons why. 0:04:35.640 --> 0:04:38.040 I'm not sure that we'll get up to where it 0:04:38.120 --> 0:04:41.880 has during other cycles, but I do think that steepening 0:04:41.960 --> 0:04:44.359 is still probably the trade. Whether it's bull steepening or 0:04:44.360 --> 0:04:47.800 bear steepening, We're more likely to see steepening than we 0:04:47.880 --> 0:04:50.760 are significant flattening. I think over the next six months, 0:04:51.440 --> 0:04:56.080 you know the fiscal situation and will likely keep the 0:04:56.120 --> 0:04:58.719 long end where it is, or maybe even actually have 0:04:58.800 --> 0:05:01.280 that cheapened, so we yields go a little bit higher. 0:05:01.480 --> 0:05:05.000 But as the economy slows, which is our base case scenario, 0:05:05.560 --> 0:05:07.840 over the course of this year, it will become more 0:05:07.880 --> 0:05:10.120 obvious that the FED is going to cut rates, and 0:05:10.120 --> 0:05:13.200 cut rates, maybe more aggressively than what's currently priced, and 0:05:13.240 --> 0:05:15.920 that will cause two year yields and the front end 0:05:15.960 --> 0:05:19.280 of the yield curve to rally and yields go lower, 0:05:19.480 --> 0:05:22.599 So that will steep in the yield curve. So we 0:05:22.680 --> 0:05:24.600 think that over the course of this year, one way 0:05:24.680 --> 0:05:27.200 or the other, whether it's buller Bear, we'll see more 0:05:27.200 --> 0:05:28.240 steepening of the guild. 0:05:28.040 --> 0:05:31.800 Curve, right, buller Bear, Like, do you get it on 0:05:31.800 --> 0:05:33.320 the front end and that's why the curve goes up? 0:05:33.400 --> 0:05:34.479 Or do you get it on the back end and 0:05:34.480 --> 0:05:36.360 that's selling in the long end, and do we get 0:05:36.360 --> 0:05:36.760 that higher? 0:05:36.839 --> 0:05:37.000 Ira? 0:05:37.120 --> 0:05:41.000 Thanks a lot, Ira Jersey, Bloomberg Intelligence TFUs interest rate strategist. 0:05:41.040 --> 0:05:42.560 Joining us there. 0:05:43.320 --> 0:05:47.000 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:05:47.080 --> 0:05:50.160 weekdays at ten am Eastern on Apple, Cocklay and Android 0:05:50.200 --> 0:05:53.480 Auto with the Bloomberg Business App. Listen on demand wherever 0:05:53.560 --> 0:05:56.680 you get your podcasts, or watch us live on YouTube. 0:05:57.080 --> 0:06:00.920 Today, the OECD, which is international trade orization based in Paris, 0:06:01.000 --> 0:06:04.280 they slashed its government economic forecast due to Donald Trump's 0:06:04.320 --> 0:06:07.919 trade policies, citing the impact of tariffs and uncertainty on 0:06:08.160 --> 0:06:11.240 confidence and investments. Maybe we're starting to really see some 0:06:11.720 --> 0:06:16.240 impacts there globally, Zoe Shay Shaney WECE joins this here 0:06:16.320 --> 0:06:20.600 Western Europe Economy team leader. She's based in Frankfurt. Zoe, 0:06:20.720 --> 0:06:23.000 thanks so much for joining us here. Specifically, what is 0:06:23.040 --> 0:06:26.560 the OECD calling out for the US and for the 0:06:26.600 --> 0:06:27.440 global economy? 0:06:28.720 --> 0:06:31.800 So overall, the OECD, as you just mentioned, just cut 0:06:32.000 --> 0:06:35.360 its forecasts across the board and look, for the world, 0:06:35.440 --> 0:06:38.560 they were predicting for this year three point one percent growth, 0:06:38.760 --> 0:06:42.320 now it's just two point nine. Similarly for the US 0:06:42.320 --> 0:06:45.040 more drastically, actually, for the US they're pre predicting two 0:06:45.040 --> 0:06:47.159 point two and now they's just say one point six. 0:06:47.640 --> 0:06:49.920 And they're also next year for the US just present 0:06:50.160 --> 0:06:53.120 predict one point five percent growth. So overall, these are 0:06:53.200 --> 0:06:58.719 quite dramatic numbers and throughout the whole report. The reason 0:06:58.720 --> 0:07:02.360 they give for this is Trump tariffs and that this overall, 0:07:02.400 --> 0:07:05.800 this combative trade policy that's coming from the US just 0:07:05.880 --> 0:07:08.520 just hurting the world all over but the US here 0:07:08.520 --> 0:07:09.159 in particular. 0:07:11.400 --> 0:07:13.840 But so I wonder what their baseline is for tariffs. 0:07:13.920 --> 0:07:16.120 Is it that ten percent? Are they taking into account 0:07:16.160 --> 0:07:18.240 the tariffs that are currently in place? Like what's the 0:07:18.400 --> 0:07:19.200 tariff scenario? 0:07:20.600 --> 0:07:24.120 The tariff scenario is just general uncertainty. So they are 0:07:24.240 --> 0:07:27.560 very aware that because of the constant change and of 0:07:27.880 --> 0:07:31.440 Trump policy that he says one tariff one day and 0:07:31.520 --> 0:07:33.680 then changes again the next and then goes back and 0:07:33.720 --> 0:07:36.840 forth all the time, that they're just this inherent uncertainty 0:07:36.880 --> 0:07:40.400 here that will just hurt trade overall. If you look 0:07:40.400 --> 0:07:42.840 at the charts that's say, what trade would do if 0:07:42.840 --> 0:07:45.160 you compared with what they thought in December. What they're 0:07:45.200 --> 0:07:48.600 saying now, the picture is just incredibly dramatic, and they 0:07:48.640 --> 0:07:50.880 say that as long as this is there, as long 0:07:50.920 --> 0:07:54.720 as this uncertainty and this constant what's it called there 0:07:54.760 --> 0:07:57.200 and back again kind of trade policy is going on, 0:07:57.560 --> 0:08:01.040 that this is something that will just hurt theonomy, almost 0:08:01.080 --> 0:08:04.120 irrespective of what the trade to a trade, what the 0:08:04.120 --> 0:08:08.080 tariffs are actually like, then just as uncertainty damages so much. 0:08:10.640 --> 0:08:13.720 Zoe. You're based in Frankfort, you know, based upon my 0:08:13.840 --> 0:08:18.040 travel through EUROPEBA was considered Frankfurt to obviously be the 0:08:18.080 --> 0:08:20.960 you know, the corporate hub of Germany and certainly much 0:08:21.000 --> 0:08:23.760 of Europe here. What are you hearing from the German 0:08:24.600 --> 0:08:27.360 executives that you speak to about what we're seeing over 0:08:27.360 --> 0:08:28.240 the last several months. 0:08:29.480 --> 0:08:32.480 So Germany is an interesting situation because we just had 0:08:32.559 --> 0:08:36.800 elections here in February and there then a coalition was 0:08:36.800 --> 0:08:39.840 formed quite quickly. And even before the coalition was formed, 0:08:40.160 --> 0:08:43.240 because the fringe parties on the left on the right 0:08:43.640 --> 0:08:46.760 one so much in parliament, they still in the lane duck, 0:08:46.800 --> 0:08:51.559 Parliament still passed an incredibly generous fiscal package and also 0:08:51.559 --> 0:08:54.600 this huge defense package. So the defence package, we know, it's 0:08:54.600 --> 0:08:56.840 tricky how this will trickle through for the economy, but 0:08:56.920 --> 0:09:00.959 the fiscal package is really massive, and so just generally 0:09:01.040 --> 0:09:05.400 gave he gave executives here in Germany a whole boost 0:09:05.400 --> 0:09:09.360 of confidence because Germany, as we know, red tape here 0:09:09.880 --> 0:09:13.520 is it takes everything, takes agent's red tape is very prevalent. 0:09:14.040 --> 0:09:19.240 And the lad during the entire shorts with the time 0:09:19.280 --> 0:09:22.920 that Schorts was chancellor, the economy barely grew. There was 0:09:23.280 --> 0:09:26.400 one quarter of contraction, one of growth. It just was 0:09:26.520 --> 0:09:29.120 really very very sad, and so the fact that the 0:09:29.120 --> 0:09:31.600 god that would be this huge fiscal package made everyone happy. 0:09:31.840 --> 0:09:32.840 This was February. 0:09:33.000 --> 0:09:34.800 Then we got the Liberation. 0:09:34.520 --> 0:09:36.320 Day from the US and that has made them more 0:09:36.360 --> 0:09:40.559 uncertain overall. Though given the uncertainty there where, this hurts investment, 0:09:40.600 --> 0:09:43.240 they hurts or that, but the fact that there was 0:09:43.320 --> 0:09:46.719 this huge fiscal commitment does make executives a lot more 0:09:46.760 --> 0:09:47.720 confident than they were. 0:09:49.880 --> 0:09:52.839 All right, Zoey, thanks a lot, really appreciated. Zoe snay 0:09:52.840 --> 0:09:55.880 Wise Bloomberg Western European Economy team leader. She heads up 0:09:55.880 --> 0:09:58.040 all the stuff over there in Frankfort. So she's in 0:09:58.080 --> 0:10:01.360 Frankfort and Paul and I are here in a Maryland room. 0:10:02.920 --> 0:10:06.600 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:10:06.679 --> 0:10:09.760 weekdays at ten am Eastern on Apple, Cocklay and Android 0:10:09.800 --> 0:10:13.079 Auto with the Bloomberg Business App. Listen on demand wherever 0:10:13.160 --> 0:10:16.280 you get your podcasts, or watch us live on YouTube. 0:10:16.720 --> 0:10:19.120 We are in Maryland right at the National Harbor at 0:10:19.160 --> 0:10:21.800 the Gaylord Convention Center, as we have a lot of 0:10:21.840 --> 0:10:25.719 financial advisors kind of coming together and discussing ideas and 0:10:25.760 --> 0:10:29.080 how to manage asset and wealth management for three days 0:10:29.120 --> 0:10:32.520 of learning experiences and networking solutions as well. Really been 0:10:32.559 --> 0:10:35.680 a fascinating time so far. Keeping an eye on some 0:10:35.760 --> 0:10:38.640 of the equity moves. One is Meta and Constellation. Constellation 0:10:38.760 --> 0:10:40.720 Energy is up a little over half a percent, Metas 0:10:40.760 --> 0:10:43.240 down by five tens to one percent, but a Constellation 0:10:43.360 --> 0:10:45.959 Energy agree to sell power from an Illinois nuclear plant 0:10:45.960 --> 0:10:49.400 to Meta Platforms. Is a twenty year contract starting in 0:10:49.440 --> 0:10:52.280 mid twenty twenty seven. So Constellation's going to boost its 0:10:52.280 --> 0:10:56.080 own investment into the Clinton plans output and maybe we'll 0:10:56.080 --> 0:10:59.200 actually build another reactor at the site I did the 0:10:59.280 --> 0:11:01.000 energy and go, let's at a take angle now with 0:11:01.120 --> 0:11:04.760 man Deep saying Bloomberg intelligence in your technology analyst. Okay, 0:11:04.760 --> 0:11:06.280 Man Deep, why does Meta need this? 0:11:07.600 --> 0:11:11.200 Well, if they're raising their capex, which they did in 0:11:11.280 --> 0:11:15.240 their last earnings, that capex is going towards, you know, 0:11:15.320 --> 0:11:19.360 getting more AI chips, and you know, if you are 0:11:19.400 --> 0:11:22.480 putting more AI chips, you need more power. So clearly 0:11:23.160 --> 0:11:27.199 that is where the shortage is right now. And look, 0:11:27.320 --> 0:11:31.680 if this is an AI supercycle that we all believe 0:11:31.840 --> 0:11:35.360 it is going to be the case, and I think 0:11:35.480 --> 0:11:38.520 you will see a power supercycle as well. And in 0:11:38.559 --> 0:11:42.600 this case, all the hyperscalers will be looking to procure 0:11:42.720 --> 0:11:45.960 power for their data centers. I mean, Meta serves over 0:11:46.080 --> 0:11:50.920 three billion monthly active users across their family of apps. Now, granted, 0:11:51.400 --> 0:11:55.080 those users right now are using more CPU compute, but 0:11:55.160 --> 0:11:59.520 if you're rolling out AI tools and LLM searches. You 0:11:59.640 --> 0:12:02.280 need more power for the AI chips, and I think 0:12:02.320 --> 0:12:03.600 that's the intent here. 0:12:05.880 --> 0:12:07.720 And Mandy, let's be honest here. I mean, all you 0:12:07.840 --> 0:12:10.280 tech guys, you Silicon Valley guys, you always think you're 0:12:10.280 --> 0:12:13.080 the smartest guys in the room. But let's be honest. 0:12:13.120 --> 0:12:15.520 You guys don't know anything about the oil and gas 0:12:15.559 --> 0:12:19.640 business and the nuclear business. Why is Meta? And I'm 0:12:19.679 --> 0:12:21.760 guessing some others are going to kind of get more 0:12:21.840 --> 0:12:25.840 deeply and strategically involved in the energy side of their business. 0:12:25.880 --> 0:12:26.720 Is this a trend here? 0:12:27.640 --> 0:12:31.000 I mean, just look at how far they have come 0:12:31.040 --> 0:12:34.640 in terms of you know, infrastructure, Like a company like Google. 0:12:35.080 --> 0:12:38.559 Not only are they designing their own data centers and 0:12:38.840 --> 0:12:43.600 you know, creating their own chips, and now they are 0:12:43.920 --> 0:12:47.440 you know, procuring power to they extend that. They want 0:12:47.480 --> 0:12:51.160 to make sure that these AI chips, which can have 0:12:51.280 --> 0:12:55.640 volatile power needs, are most optimized when it comes to 0:12:55.679 --> 0:13:00.600 the efficiency of their infrastructure. And that's why these hyperscalar 0:13:00.720 --> 0:13:05.040 companies really have got so many different aspects to their mode. 0:13:05.080 --> 0:13:08.720 So it's not just about the search algorithm or in 0:13:08.760 --> 0:13:11.960 the case of Meta, you know, their social media knowledge graph. 0:13:12.040 --> 0:13:15.559 It is about the entirety of how they run their infrastructure, 0:13:15.600 --> 0:13:18.080 and that is what is a long term mode, because 0:13:18.120 --> 0:13:22.400 nobody else can operate at the scale at which these 0:13:22.480 --> 0:13:24.200 hyperscalers are operating right now. 0:13:26.240 --> 0:13:27.839 This is a fun fact in the article by Will 0:13:27.920 --> 0:13:30.160 Raid from Bloomberg. So Meta first of all, has a 0:13:30.200 --> 0:13:31.160 global energy head. 0:13:31.840 --> 0:13:35.080 They have a global energy head. Okay, all right, so 0:13:35.120 --> 0:13:35.400 they do. 0:13:35.520 --> 0:13:37.559 They're really kind of ramping that out, and they were 0:13:37.600 --> 0:13:40.440 looking at proposals the announcing December. They were looking at 0:13:40.480 --> 0:13:42.960 proposals for as much as four gigawatts of new US 0:13:43.040 --> 0:13:47.479 reactors and received fifty proposals from a range of companies, 0:13:47.800 --> 0:13:53.440 including Constellation. To that point, I'm also wondering Mande the 0:13:53.480 --> 0:13:56.880 significance of when they're building data centers and hyperscalers for 0:13:57.120 --> 0:14:00.120 lllm's a large language model and that training versus and 0:14:00.160 --> 0:14:02.520 they have to build stuff for inference which could be 0:14:02.559 --> 0:14:05.600 smaller and more co located, so closer to the cities, 0:14:05.640 --> 0:14:07.880 closer to our Paul and I have our phone. Does 0:14:07.880 --> 0:14:10.079 that tend to look different than in terms of their 0:14:10.120 --> 0:14:10.760 power needs? 0:14:11.160 --> 0:14:14.760 Absolutely, And I think so far the market was concentrated 0:14:14.800 --> 0:14:19.280 towards training. Every year you would have a ten times 0:14:19.400 --> 0:14:23.560 larger model, which was more intelligent and it could do 0:14:23.680 --> 0:14:26.280 more in terms of you know, answering your queries. But 0:14:26.720 --> 0:14:30.480 with inferencing, you're right, I mean, the traffic patterns may 0:14:30.560 --> 0:14:34.440 vary depending on the population, and so if you're serving 0:14:34.480 --> 0:14:38.080 traffic in New York, it's very different from serving traffic 0:14:38.160 --> 0:14:41.160 somewhere else that may not have the same concentration. And 0:14:41.960 --> 0:14:45.240 with that, I think the challenge these companies have had 0:14:45.320 --> 0:14:49.160 is the transmission lines can be upgraded. I mean you need, 0:14:49.840 --> 0:14:53.600 you know, a pretty lengthy review process and the whole 0:14:53.640 --> 0:14:57.040 thing may take years. So right now they are trying 0:14:57.080 --> 0:15:01.920 to procure power wherever they can to offset the increased consumption, 0:15:02.080 --> 0:15:04.680 and some of it may come at the expense of 0:15:04.920 --> 0:15:10.560 power usage for some other purpose. Then you know why 0:15:10.640 --> 0:15:14.880 data center is being prioritized here, and that is what 0:15:15.000 --> 0:15:18.880 will be interesting because with inferencing, the power needs can 0:15:18.920 --> 0:15:21.120 be variable. I mean, one trend we have seen is 0:15:21.400 --> 0:15:25.760 with reasoning, you need more compute, so you know, the 0:15:25.840 --> 0:15:28.360 model is thinking a lot more at the time you 0:15:28.400 --> 0:15:31.400 are putting the prompt in, as opposed to training, where 0:15:31.560 --> 0:15:34.600 all of the training is happening in background over a 0:15:34.640 --> 0:15:37.720 period of a few weeks. So reasoning is per query, 0:15:38.240 --> 0:15:41.480 and depending on how complex your query is, the model 0:15:41.560 --> 0:15:43.440 is doing more work and that's why it may need 0:15:43.480 --> 0:15:44.040 more power. 0:15:46.400 --> 0:15:49.720 Another data point from this Bloomberg News article, Meta is 0:15:49.760 --> 0:15:53.480 contracting for more power after the company's total electricity consumption 0:15:54.080 --> 0:15:57.720 nearly tripled from twenty nineteen to twenty twenty three. So yeah, 0:15:57.760 --> 0:16:00.960 I guess they need some more energy. Mandy position the 0:16:00.960 --> 0:16:04.520 CAPEX numbers for Meta and for these other tech companies, 0:16:04.720 --> 0:16:06.920 they need to take those CAPEX numbers up even more. 0:16:07.000 --> 0:16:08.920 They're going to get deeper into the energy space. 0:16:09.520 --> 0:16:13.119 I mean, all signs are the CAPEX numbers may continue 0:16:13.200 --> 0:16:17.400 to go up, but right now, the biggest component of 0:16:17.440 --> 0:16:22.360 the CAPEX is still the spend on the GPU chips. Obviously, 0:16:22.400 --> 0:16:25.880 the power needs will take some portion of the CAPEX, 0:16:25.920 --> 0:16:28.480 but it's still not as big as the chips. And 0:16:28.600 --> 0:16:30.680 think of it this way. If you're getting you know, 0:16:31.200 --> 0:16:34.520 twenty thousand in Nvidia chips, the cost of keeping them 0:16:34.600 --> 0:16:37.080 idle or not being able to utilize them one hundred 0:16:37.080 --> 0:16:40.080 percent is way higher than anything you are spending in 0:16:40.160 --> 0:16:43.480 terms of you know, the energy deal that they had, 0:16:43.560 --> 0:16:47.040 So clearly they are focusing on utilizing the chips that 0:16:47.040 --> 0:16:51.000 they have already procured and that's why they are proactive 0:16:51.080 --> 0:16:52.560 with you know, these power deals. 0:16:54.600 --> 0:16:56.440 All right, Mandy, thanks a lot, really appreciate and man 0:16:56.480 --> 0:16:59.840 deep saying joining us when we're intelligence senior Technology and. 0:17:01.800 --> 0:17:05.480 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:17:05.560 --> 0:17:08.680 weekdays at ten am Eastern on Apple, Cocklay and Android 0:17:08.680 --> 0:17:12.000 Auto with the Bloomberg Business App. Listen on demand wherever 0:17:12.040 --> 0:17:15.160 you get your podcasts, or watch us live on YouTube. 0:17:15.440 --> 0:17:18.320 Happy Tuesday, everybody, Alex Stealer alongside Paul Sweeny IM You're 0:17:18.400 --> 0:17:21.440 live from B and Y Insight twenty twenty five. We 0:17:21.800 --> 0:17:25.159 are in National Harbor Meryl app National Harbor, Maryland at 0:17:25.160 --> 0:17:29.280 the Gaylord Convention Center for this tremendous of men. Over 0:17:29.320 --> 0:17:31.840 two thousand people are here. They talk about ideas, they 0:17:31.880 --> 0:17:34.760 exchange thoughts about the markets and wealth management and private 0:17:34.800 --> 0:17:35.800 wealth and alternatives. 0:17:35.920 --> 0:17:37.200 It's a pretty exciting. 0:17:36.920 --> 0:17:39.000 Dynamic place to be and joining us is one of 0:17:39.040 --> 0:17:42.280 our favorites. Phil Orlando, chief equity market strategist and head 0:17:42.280 --> 0:17:45.120 of client portfolio Management at FREEDERA to Hermes. 0:17:45.119 --> 0:17:46.639 Phil, always good to see you, Alex. 0:17:46.680 --> 0:17:48.000 Thank you so much for having me back. 0:17:48.000 --> 0:17:48.600 It's a thrill. 0:17:48.760 --> 0:17:50.760 You've been coming to these for a long time, right, 0:17:50.840 --> 0:17:53.480 So what's the different vibe here this year? 0:17:53.640 --> 0:17:53.920 Is there? 0:17:53.920 --> 0:17:54.360 One? 0:17:55.480 --> 0:17:59.199 The vibe is very optimistic. Really, there is more of 0:17:59.240 --> 0:18:03.359 an emphasis on technology today and AI than there ever 0:18:03.480 --> 0:18:07.399 has been. But that probably it's not surprising given the 0:18:07.760 --> 0:18:12.199 evolution of the business. I've always found these conferences to 0:18:12.240 --> 0:18:14.960 be very cutting edge in terms of what are the 0:18:15.640 --> 0:18:17.639 key issues that are going to be driving us in 0:18:17.720 --> 0:18:21.240 the months and years forward, and so far I haven't 0:18:21.240 --> 0:18:24.080 been disappointed here today. 0:18:23.160 --> 0:18:25.359 Phil, I'm just looking at the S and P five hundred. 0:18:25.400 --> 0:18:28.560 We've almost completely round trip peaked to trough back up 0:18:28.600 --> 0:18:32.840 to peak here. What do you make of that? I mean, 0:18:32.840 --> 0:18:34.600 that was a short period of time, you saw big 0:18:34.640 --> 0:18:37.000 moves in the marketplace. What do you do looking forward 0:18:37.000 --> 0:18:39.040 for the next six months? Oh more to go? 0:18:39.640 --> 0:18:41.720 I mean remember our full year target for the S 0:18:41.760 --> 0:18:43.920 and P this year sixty five hundred. We've got a 0:18:44.000 --> 0:18:47.920 seven thousand next year. So yes, we've had a really 0:18:48.040 --> 0:18:50.160 nice bounce off of that support level. I think we're 0:18:50.240 --> 0:18:52.720 up about twenty three percent of the S and P 0:18:52.840 --> 0:18:56.800 five hundred. But again not surprising to us because that 0:18:57.720 --> 0:19:01.640 waterfall decline was largely a function of the uncertainty relating 0:19:01.680 --> 0:19:05.399 to the tariff situation, and to some degree, how is 0:19:05.440 --> 0:19:08.280 the tax legislation going to work. We're starting to get 0:19:08.359 --> 0:19:12.760 some early resolution of exactly, at least directionally, how that's 0:19:12.800 --> 0:19:14.920 going to play out, and the market at that point 0:19:14.920 --> 0:19:18.000 should begin to think about, Okay, what are the underlying fundamentals, 0:19:18.359 --> 0:19:22.120 not the chaos associated with what caused the decline back 0:19:22.160 --> 0:19:23.359 in early April. 0:19:23.480 --> 0:19:25.280 All right, let's pretend that we can put aside the kaas. 0:19:25.320 --> 0:19:27.280 Then for a second, does that mean that tech continues 0:19:27.280 --> 0:19:29.280 to lead or do we get the broadening out? 0:19:29.720 --> 0:19:33.639 Well, yes, they can both be true. 0:19:33.920 --> 0:19:38.359 So so our feeling going into the collapse was that 0:19:38.640 --> 0:19:41.639 Bill Rally did need to broaden out. We were de 0:19:41.760 --> 0:19:44.720 emphasizing sort of the technology and the Mag seven names 0:19:44.760 --> 0:19:47.080 because we felt that they were ahead of themselves. So 0:19:47.160 --> 0:19:50.680 the area of focus for us was the forgotten four 0:19:50.760 --> 0:19:53.960 ninety three, the value names, the international names, the smaller 0:19:54.000 --> 0:19:57.720 cap names. But as the market you came down twenty 0:19:57.760 --> 0:20:00.159 one percent, the Max seven names were down forty five 0:20:00.000 --> 0:20:04.080 five percent. So as we started to put additional money 0:20:04.080 --> 0:20:07.080 to work, we increased our equity allocation to a five 0:20:07.080 --> 0:20:10.800 percent overweight near the bottom that incremental ad for US 0:20:11.000 --> 0:20:14.040 was in domestic large cap growth. So we recognized that 0:20:14.080 --> 0:20:18.199 forty five percent down was actually an attractive point to 0:20:18.200 --> 0:20:19.600 start to put some money back to work. 0:20:20.000 --> 0:20:21.560 You know, with a little bit of hindsight, As we 0:20:21.640 --> 0:20:23.720 think back to that sell off in April, a couple 0:20:23.760 --> 0:20:25.960 of things kind of come to mind. Number One, we 0:20:26.040 --> 0:20:28.639 had people during the sell off telling us, you know, 0:20:28.920 --> 0:20:31.760 people aren't panicking out there. That's number one. And number two, 0:20:32.600 --> 0:20:35.240 retail is buying. What is that? What are those two 0:20:35.240 --> 0:20:36.560 things to kind of tell you that kind of I 0:20:36.600 --> 0:20:38.359 guess in hindsight I was said, boy, I should have 0:20:38.359 --> 0:20:40.639