1 00:00:00,040 --> 00:00:06,720 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,640 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordert. Join us each day 4 00:00:18,720 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,919 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,000 --> 00:00:37,240 Speaker 2: Terminal and the Bloomberg Business app. Then that's that one hundred, 10 00:00:37,240 --> 00:00:39,800 Speaker 2: as you all know. On Trackford's third straight weekly last, 11 00:00:40,000 --> 00:00:42,440 Speaker 2: Tom forty of Maxim Group covers Apple and Amazon with 12 00:00:42,560 --> 00:00:45,360 Speaker 2: a by rating on both. Tom joins us now for more. Tom, 13 00:00:45,479 --> 00:00:48,440 Speaker 2: The anxiety is overwhelming this week in the tech sector. 14 00:00:48,479 --> 00:00:50,320 Speaker 2: I don't even know if it's reached the main street 15 00:00:50,560 --> 00:00:53,880 Speaker 2: just yet, but on Wall Street the faar is skyheigh 16 00:00:54,160 --> 00:00:57,280 Speaker 2: in two names that you cover, Apple, Amazon. Let's start 17 00:00:57,280 --> 00:00:59,640 Speaker 2: with Amazon. Lisa mentioned this eight day run of declients 18 00:01:00,040 --> 00:01:03,560 Speaker 2: eighteen percent lower on Amazon. What has made that stop 19 00:01:03,600 --> 00:01:05,399 Speaker 2: fall out of bed over the last week. 20 00:01:06,240 --> 00:01:09,080 Speaker 3: Yeah, So when you think about the weakness in Amazon. 21 00:01:09,680 --> 00:01:12,279 Speaker 3: I think it's entirely related to the two hundred billion 22 00:01:12,319 --> 00:01:17,399 Speaker 3: dollar capex guidance by the company, and if you look historically, 23 00:01:17,640 --> 00:01:20,960 Speaker 3: without downplaying the significance of a two hundred million dollar 24 00:01:21,040 --> 00:01:24,800 Speaker 3: capex number for Amazon, but Amazon has a track record 25 00:01:24,920 --> 00:01:30,920 Speaker 3: of ramping investing when necessary to take advantage of opportunities, 26 00:01:31,280 --> 00:01:35,880 Speaker 3: and I do think that Amazon can take advantage or 27 00:01:35,920 --> 00:01:39,920 Speaker 3: capitalize in AI in ways other megacaps can't. They have 28 00:01:40,000 --> 00:01:43,360 Speaker 3: one point five sorry, one point five million employees, many 29 00:01:43,400 --> 00:01:46,920 Speaker 3: at the large fulfillment center level. To the extent that 30 00:01:46,959 --> 00:01:52,480 Speaker 3: they roll out robotics add automation, they can have greater efficiency. 31 00:01:52,840 --> 00:01:55,480 Speaker 3: Now you've been talking a lot about AI displacing jobs, 32 00:01:55,840 --> 00:01:58,000 Speaker 3: so I think that if you do the math equation 33 00:01:58,920 --> 00:02:02,520 Speaker 3: for Amazon, it would be to the extent that automation 34 00:02:03,200 --> 00:02:07,200 Speaker 3: reduced the headcount at the warehouse level. But at the 35 00:02:07,200 --> 00:02:09,480 Speaker 3: same time, you have to think about the new jobs 36 00:02:09,760 --> 00:02:12,560 Speaker 3: that automation would create, to the extent that someone has 37 00:02:12,600 --> 00:02:16,639 Speaker 3: to make the robots service the robots, things of that nature. So, yes, 38 00:02:16,680 --> 00:02:20,520 Speaker 3: I'm concerned about job loss from artificial intelligence, but I 39 00:02:20,520 --> 00:02:23,480 Speaker 3: think it's going to be an offset of job loss, 40 00:02:23,520 --> 00:02:25,000 Speaker 3: but also some job gains. 41 00:02:25,800 --> 00:02:26,000 Speaker 1: You know. 42 00:02:26,360 --> 00:02:29,360 Speaker 4: Tom John opened the show asking about this conflict that 43 00:02:29,440 --> 00:02:32,760 Speaker 4: I think really is the conflict. Either this capex that 44 00:02:32,840 --> 00:02:35,880 Speaker 4: all of these big tech companies are spending is not 45 00:02:36,080 --> 00:02:40,480 Speaker 4: worth it and ultimately is going to backfire on them 46 00:02:40,520 --> 00:02:44,040 Speaker 4: for a becoming asset heavy and not as profit heavy, 47 00:02:44,760 --> 00:02:47,720 Speaker 4: or people are just totally mispricing the story and the 48 00:02:47,760 --> 00:02:52,880 Speaker 4: disruption is actually yes significant on the other side, but 49 00:02:53,120 --> 00:02:55,519 Speaker 4: is going to benefit these companies in a significant way. 50 00:02:55,520 --> 00:02:56,079 Speaker 1: Which is it? 51 00:02:57,160 --> 00:03:00,239 Speaker 3: Well, okay for Amazon again of the belief that it'll 52 00:03:00,280 --> 00:03:02,920 Speaker 3: be worthwhile. And I think what's interesting is a student 53 00:03:02,919 --> 00:03:04,600 Speaker 3: of you know, having started covering the Internet in the 54 00:03:04,639 --> 00:03:07,680 Speaker 3: elite nineties, I remember the build out of dark fiber 55 00:03:07,720 --> 00:03:09,880 Speaker 3: and things of that nature. So I worry that we're 56 00:03:09,880 --> 00:03:12,320 Speaker 3: going to have this, you know, ghost data centers in 57 00:03:12,360 --> 00:03:14,760 Speaker 3: the future and things of that nature. But the good 58 00:03:14,760 --> 00:03:18,400 Speaker 3: news I think for Amazon and for other megacap tech 59 00:03:18,720 --> 00:03:22,600 Speaker 3: companies that are ramping their cap x is that presumably 60 00:03:22,720 --> 00:03:25,560 Speaker 3: if they don't see their returns, they can scale back 61 00:03:25,600 --> 00:03:28,840 Speaker 3: the numbers. It isn't that Amazon Amazon spending two hundred 62 00:03:28,880 --> 00:03:32,480 Speaker 3: billion in one day. So if you look at Amazon again, 63 00:03:32,720 --> 00:03:36,000 Speaker 3: they've scaled back some of their leasing commitments when they 64 00:03:36,080 --> 00:03:38,640 Speaker 3: determined that they didn't need as much fulfillment center square 65 00:03:38,640 --> 00:03:41,640 Speaker 3: footage because there wasn't a demand. So I do think 66 00:03:41,720 --> 00:03:44,760 Speaker 3: that as it pertains to Amazon, if they're not seeing 67 00:03:44,800 --> 00:03:48,160 Speaker 3: the positive performance, that they're expecting greater efficiency at the 68 00:03:48,160 --> 00:03:52,400 Speaker 3: warehouse level, a greater efficiency also at the software engineering level, 69 00:03:53,320 --> 00:03:55,920 Speaker 3: better sales from e commerce, things of that nature. It's 70 00:03:55,960 --> 00:03:57,880 Speaker 3: not like they can't stop the spending. They can, they 71 00:03:57,920 --> 00:03:58,640 Speaker 3: can turn it off. 72 00:03:59,080 --> 00:04:00,560 Speaker 1: Tom, is a tech really that good? 73 00:04:00,800 --> 00:04:02,960 Speaker 4: Is the air really that good to disrupt all of 74 00:04:03,000 --> 00:04:06,680 Speaker 4: these potential industries? Is the sort of heat seeking missile 75 00:04:06,960 --> 00:04:09,520 Speaker 4: that Joe A Motto of newberg Erman was talking about? 76 00:04:09,800 --> 00:04:12,920 Speaker 4: Is it truly that in terms of its effect efficacy? 77 00:04:13,840 --> 00:04:16,279 Speaker 3: So you're asking me, so today we'll call it, you know, 78 00:04:16,240 --> 00:04:19,000 Speaker 3: a day before Valentine's Day twenty twenty six. Is the 79 00:04:19,000 --> 00:04:22,320 Speaker 3: technology that good to the extent that I have, you know, 80 00:04:22,400 --> 00:04:25,480 Speaker 3: spent a lot of time with Alexa and Siri as 81 00:04:25,480 --> 00:04:28,679 Speaker 3: an example of you know, AI and things of that nature. 82 00:04:28,800 --> 00:04:31,720 Speaker 3: The answer is absolutely not. The question is in the 83 00:04:31,760 --> 00:04:34,480 Speaker 3: future will it be that good? And it remains to 84 00:04:34,480 --> 00:04:36,560 Speaker 3: be seen. But I would say, Lisa, I would say 85 00:04:36,560 --> 00:04:39,320 Speaker 3: today I'm convinced that tech is not that good, But 86 00:04:39,480 --> 00:04:41,560 Speaker 3: that doesn't mean directly we're not heading to a point 87 00:04:41,600 --> 00:04:43,920 Speaker 3: where it will be much better than this today. And 88 00:04:43,960 --> 00:04:46,520 Speaker 3: I think that's, you know, very much possible. 89 00:04:46,680 --> 00:04:48,279 Speaker 2: Tom. I'm not going to ask you if you're spending 90 00:04:48,320 --> 00:04:50,800 Speaker 2: Valot time's with Alexa and Siri. I'm not going to 91 00:04:50,800 --> 00:04:54,760 Speaker 2: ask that question. It is you basically asked it yourself taking. 92 00:04:54,520 --> 00:04:57,000 Speaker 3: My wife to dinner. But thanks Jonathan for worrying. 93 00:04:56,760 --> 00:04:59,320 Speaker 2: About otherwise you could have joined us. I was consented. 94 00:05:00,040 --> 00:05:01,520 Speaker 2: I'm going to follow up on Apple. I want to 95 00:05:01,560 --> 00:05:04,720 Speaker 2: talk about Apple very quickly. Five percent move. Is this 96 00:05:04,760 --> 00:05:07,320 Speaker 2: the thread of a margin squeeze from memory or is 97 00:05:07,360 --> 00:05:10,520 Speaker 2: it about falling behind with AI? What's the move about? 98 00:05:11,080 --> 00:05:14,480 Speaker 3: It has to be the margin squeeze on memory. So, Jonathan, 99 00:05:14,520 --> 00:05:16,560 Speaker 3: I was sticking back to last year being on your 100 00:05:16,600 --> 00:05:19,799 Speaker 3: show and wondering if we had a supercycle for AI 101 00:05:20,000 --> 00:05:24,640 Speaker 3: for Apple, twenty percent growth in iPhones in the December 102 00:05:24,720 --> 00:05:28,040 Speaker 3: quarter would make us think yes, But they absolutely they 103 00:05:28,040 --> 00:05:30,680 Speaker 3: are nowhere with AI. So I think that the five 104 00:05:30,680 --> 00:05:34,760 Speaker 3: percent move is concerned on memory. Apple historically does very 105 00:05:34,760 --> 00:05:37,640 Speaker 3: well when they have a product selling as well as 106 00:05:37,720 --> 00:05:41,039 Speaker 3: iPhone seventeen and improving the margin over time, they could 107 00:05:41,080 --> 00:05:45,040 Speaker 3: take price managing supply chains Tim Cook's forte. So I'm 108 00:05:45,080 --> 00:05:47,799 Speaker 3: not worried about memory, maybe as much as the market 109 00:05:47,839 --> 00:05:48,400 Speaker 3: is right now. 110 00:05:49,000 --> 00:05:52,440 Speaker 2: Stay with us. More Bloomberg surveillance coming up after this. 111 00:06:01,720 --> 00:06:04,320 Speaker 2: Tiffany want to get Pincock joins usnaps talk about the days. Tiffany, 112 00:06:04,320 --> 00:06:06,360 Speaker 2: welcome to the program. How much weight can we put 113 00:06:06,360 --> 00:06:10,000 Speaker 2: on this week's data? Halted, un expected payrolls soft that 114 00:06:10,120 --> 00:06:11,000 Speaker 2: expected CPI. 115 00:06:13,560 --> 00:06:15,840 Speaker 5: Well, I think this morning's inflation print, even though it 116 00:06:15,880 --> 00:06:18,880 Speaker 5: was in line with the Bloomberg consensus expectations, was actually 117 00:06:18,920 --> 00:06:21,479 Speaker 5: pretty encouraging under the surface. You know, I think there's 118 00:06:21,520 --> 00:06:24,359 Speaker 5: two things that we would highlight in that regard. You know, 119 00:06:24,440 --> 00:06:27,680 Speaker 5: one is just that shelter inflation, which had been stubbornly, 120 00:06:28,400 --> 00:06:31,920 Speaker 5: you know, just persistent since the pandemic. You know, it's 121 00:06:31,960 --> 00:06:35,360 Speaker 5: finally really decelerating, and we saw that in today's report. 122 00:06:35,600 --> 00:06:40,240 Speaker 5: You know, rental dynamics for new tenant rents actually suggests 123 00:06:40,279 --> 00:06:43,599 Speaker 5: that that you're seeing a pretty stagnant rental market and 124 00:06:43,640 --> 00:06:46,200 Speaker 5: that will ultimately feed into OERE with a lag. So 125 00:06:46,240 --> 00:06:48,360 Speaker 5: that's good news for the FED. I think the other 126 00:06:48,520 --> 00:06:50,760 Speaker 5: good news in this report, you know, is that the 127 00:06:50,839 --> 00:06:55,080 Speaker 5: terrorf related effects are largely fading. You know, so we 128 00:06:55,120 --> 00:06:57,240 Speaker 5: probably did get a little bit of a bounce back 129 00:06:57,279 --> 00:07:01,120 Speaker 5: in core goods prices retail goods prices from the discounting 130 00:07:01,120 --> 00:07:03,599 Speaker 5: that happened over the holiday season, you know, but ultimate 131 00:07:03,640 --> 00:07:06,080 Speaker 5: looks like terriff effects of kind of they're behind us 132 00:07:06,080 --> 00:07:08,479 Speaker 5: at this point. They were passed through to the extent 133 00:07:08,520 --> 00:07:11,400 Speaker 5: that companies were going to do it. So as that fades, 134 00:07:11,720 --> 00:07:14,640 Speaker 5: you know, you you should have a federal reserve that 135 00:07:14,640 --> 00:07:17,800 Speaker 5: that feels more comfortable, you know, cutting interest rates, you know, 136 00:07:18,000 --> 00:07:20,680 Speaker 5: it does look like they are a little bit restrictive 137 00:07:21,400 --> 00:07:23,840 Speaker 5: relative to the media and long term estimate of the 138 00:07:23,840 --> 00:07:26,320 Speaker 5: long run neutral interest rate. You know, so getting a 139 00:07:26,320 --> 00:07:28,560 Speaker 5: couple of more cuts in this year seems very reasonable 140 00:07:28,600 --> 00:07:28,920 Speaker 5: to us. 141 00:07:28,960 --> 00:07:31,000 Speaker 2: It's if we not, all right, cuts now created equally. 142 00:07:31,160 --> 00:07:33,280 Speaker 2: Do you see then a federal reserve that's cutting interest 143 00:07:33,360 --> 00:07:36,080 Speaker 2: rights because inflation gives them the space, or because the 144 00:07:36,160 --> 00:07:40,560 Speaker 2: labor market gives them a reason, you. 145 00:07:40,520 --> 00:07:43,520 Speaker 5: Know, so I think so for us, the outlook for 146 00:07:43,880 --> 00:07:46,720 Speaker 5: you know, for the labor market is pretty stable here. 147 00:07:47,320 --> 00:07:50,080 Speaker 5: You know, ultimately, we think growth is going to be Okay, 148 00:07:50,160 --> 00:07:52,560 Speaker 5: this year, you know, we're looking for two percent, you know, 149 00:07:52,600 --> 00:07:55,080 Speaker 5: that should support the labor market, but nevertheless, you do 150 00:07:55,200 --> 00:07:58,760 Speaker 5: have this AI related adjustment that's happening, you know, under 151 00:07:58,800 --> 00:08:01,720 Speaker 5: the surface, so you know, those those factors are sort 152 00:08:01,720 --> 00:08:03,920 Speaker 5: of offsetting. We're looking for the unemployment rate to kind 153 00:08:03,960 --> 00:08:06,520 Speaker 5: of stay where it is, and then outside of that, 154 00:08:06,560 --> 00:08:09,600 Speaker 5: we're looking for inflation to moderate, you know, moderate back 155 00:08:09,640 --> 00:08:12,240 Speaker 5: to target this year, so that in our view, would 156 00:08:12,240 --> 00:08:14,840 Speaker 5: be consistent with the Fed that that's easing somewhat. 157 00:08:15,240 --> 00:08:15,400 Speaker 2: You know. 158 00:08:15,440 --> 00:08:18,880 Speaker 5: Of course, if the unemployment rate were to rise much more, 159 00:08:19,000 --> 00:08:21,160 Speaker 5: you know, than that, that would that would warrant more 160 00:08:21,160 --> 00:08:22,040 Speaker 5: easing from the Fed. 161 00:08:22,320 --> 00:08:23,280 Speaker 1: Tiffany, do you think. 162 00:08:23,080 --> 00:08:25,160 Speaker 4: That this actually opens the door to three rate cuts 163 00:08:25,160 --> 00:08:27,440 Speaker 4: this year, as the market seems to be implying right now. 164 00:08:30,960 --> 00:08:34,360 Speaker 5: Yeah, I mean, we'll we'll definitely have to see. I mean, 165 00:08:34,400 --> 00:08:36,959 Speaker 5: it's certainly possible that they could get in three. 166 00:08:37,440 --> 00:08:37,640 Speaker 1: You know. 167 00:08:37,679 --> 00:08:40,480 Speaker 5: Again, I think as kind of a rough estimate, we're 168 00:08:40,520 --> 00:08:43,640 Speaker 5: looking at the mid the midpoint of the long run 169 00:08:43,760 --> 00:08:46,440 Speaker 5: neutral estimate, which is which is right around three percent. 170 00:08:47,080 --> 00:08:48,560 Speaker 5: You know, they're at three and a half now, so 171 00:08:48,600 --> 00:08:50,800 Speaker 5: that implies two more cuts. You know, I think getting 172 00:08:50,840 --> 00:08:54,719 Speaker 5: another one in would you know, be the result of 173 00:08:55,280 --> 00:08:59,920 Speaker 5: more disinvationary pressure potentially target below target inflation or the 174 00:09:00,040 --> 00:09:01,280 Speaker 5: unemployment rate moving up. 175 00:09:01,559 --> 00:09:03,679 Speaker 1: I understand the idea of celebrating disinflation. 176 00:09:03,760 --> 00:09:05,880 Speaker 4: We're still at two point four percent year over year 177 00:09:05,880 --> 00:09:06,920 Speaker 4: for CPI. 178 00:09:06,880 --> 00:09:08,480 Speaker 1: And people are saying this is winning. 179 00:09:08,520 --> 00:09:11,400 Speaker 4: I mean, how strong is the disinflationary force coming from 180 00:09:11,440 --> 00:09:14,280 Speaker 4: the housing sector that gives you confidence that we're actually 181 00:09:14,280 --> 00:09:16,800 Speaker 4: going to get down to two percent even with FED 182 00:09:16,880 --> 00:09:19,720 Speaker 4: rate cuts, given that we've been above two. 183 00:09:19,640 --> 00:09:21,200 Speaker 1: Percent for five years. 184 00:09:24,120 --> 00:09:26,880 Speaker 5: Yeah, well so in the housing sector has certainly been 185 00:09:26,960 --> 00:09:31,280 Speaker 5: one of the reasons why that we've had stickier inflation. 186 00:09:31,480 --> 00:09:35,520 Speaker 5: So the housing, oh we are and rents, rental inflation 187 00:09:35,760 --> 00:09:38,840 Speaker 5: have been incredibly sticky, you know. You know that's in 188 00:09:38,920 --> 00:09:42,439 Speaker 5: part because of it just takes them longer to adjust, 189 00:09:43,240 --> 00:09:46,880 Speaker 5: you know, so they didn't accelerate as much as as 190 00:09:46,880 --> 00:09:49,440 Speaker 5: home prices did during the pandemic. But but now they're 191 00:09:49,440 --> 00:09:53,360 Speaker 5: decelerating at a slower pace. That's finally over. It looks 192 00:09:53,400 --> 00:09:56,120 Speaker 5: like that ketchup has happened in the rental market, you know, 193 00:09:56,160 --> 00:09:58,760 Speaker 5: and you can and you're now seeing more more stagnant 194 00:09:58,800 --> 00:10:00,720 Speaker 5: rental trends so that is import ortant. 195 00:10:00,760 --> 00:10:00,920 Speaker 1: You know. 196 00:10:00,960 --> 00:10:02,880 Speaker 5: But again, the other thing is is that the thing 197 00:10:02,960 --> 00:10:06,440 Speaker 5: that's held up overall inflation over the last year is 198 00:10:06,520 --> 00:10:09,880 Speaker 5: some pass through of the additional costs that companies have 199 00:10:09,920 --> 00:10:12,240 Speaker 5: to pay as a result of tariffs. But that's a 200 00:10:12,280 --> 00:10:15,440 Speaker 5: one time price level adjustment, and when we look at 201 00:10:15,480 --> 00:10:18,480 Speaker 5: core goods price behavior, you know, it looks like that 202 00:10:18,559 --> 00:10:21,200 Speaker 5: adjustments largely happen. So now that it's happened, you should 203 00:10:21,200 --> 00:10:24,760 Speaker 5: see core goods uh, you know, price inflation also starting 204 00:10:24,760 --> 00:10:27,199 Speaker 5: to decelerate. So again, all that is is good news 205 00:10:27,200 --> 00:10:27,680 Speaker 5: for the Fed. 206 00:10:28,040 --> 00:10:28,360 Speaker 1: Definitely. 207 00:10:28,440 --> 00:10:30,840 Speaker 2: Just one final comment if we can on the committee 208 00:10:30,880 --> 00:10:32,960 Speaker 2: that Kevin Walsh will ultimately at some point this year 209 00:10:33,080 --> 00:10:36,920 Speaker 2: be taken over. How contentious will things be? How divided 210 00:10:37,360 --> 00:10:38,400 Speaker 2: is that committee currently? 211 00:10:41,280 --> 00:10:43,440 Speaker 5: Well, I mean, you know, again, I think you I 212 00:10:43,440 --> 00:10:46,719 Speaker 5: think you want to look at where everybody is as 213 00:10:46,840 --> 00:10:49,440 Speaker 5: you know, where everybody's sort of writing down where they 214 00:10:49,480 --> 00:10:52,480 Speaker 5: think the long run neutral interest rate is, because because 215 00:10:52,480 --> 00:10:55,120 Speaker 5: that's going to be the debate this year, we think, 216 00:10:55,440 --> 00:10:58,200 Speaker 5: you know, and of course that the AI you know, 217 00:10:58,240 --> 00:11:02,560 Speaker 5: and the technology related diffusion will have implications for that 218 00:11:02,600 --> 00:11:03,400 Speaker 5: our star debate. 219 00:11:04,160 --> 00:11:06,319 Speaker 1: But there's a good. 220 00:11:06,120 --> 00:11:09,040 Speaker 5: Majority of the Committee that still thinks that the current 221 00:11:09,160 --> 00:11:12,440 Speaker 5: policy rate is above their estimate of our star, which 222 00:11:12,480 --> 00:11:14,760 Speaker 5: means policy is slightly restrictive, you know. And if you 223 00:11:14,880 --> 00:11:18,760 Speaker 5: have employment that is consistent with maximum levels, and you 224 00:11:18,800 --> 00:11:20,840 Speaker 5: have inflation that's running at target, you should be at 225 00:11:20,880 --> 00:11:23,680 Speaker 5: neutral policy. And so again the real debate this year 226 00:11:24,080 --> 00:11:26,480 Speaker 5: on the FED is where neutral policy is going to be, 227 00:11:26,880 --> 00:11:28,360 Speaker 5: you know. And again we're kind of looking at the 228 00:11:28,360 --> 00:11:30,880 Speaker 5: midpoint of their estimated range of three percent. 229 00:11:31,800 --> 00:11:35,280 Speaker 2: Stay with US mult Bloomberg Surveillance coming up after this 230 00:11:44,679 --> 00:11:47,840 Speaker 2: Global lead is gathering at the Munich Security Conference, the 231 00:11:47,920 --> 00:11:51,079 Speaker 2: US Secretary of Saint Marco Rubio leading a delegation as 232 00:11:51,080 --> 00:11:55,200 Speaker 2: the Trump administration pushes Transatlantic ties potentially to their limits. 233 00:11:55,280 --> 00:11:57,560 Speaker 2: The Republican Senator Tom Tillis is on the ground in 234 00:11:57,679 --> 00:12:00,320 Speaker 2: Munich and he joins US now for more. Senator, welcome 235 00:12:00,360 --> 00:12:02,360 Speaker 2: back to the program. Forgive me for doing this life 236 00:12:02,360 --> 00:12:04,520 Speaker 2: in the moment. But the news just crossed. This is 237 00:12:04,559 --> 00:12:07,720 Speaker 2: on Ali Baba reporting from Reuters. So the Trump administration 238 00:12:07,800 --> 00:12:09,680 Speaker 2: is expected to add Ali Baba to a list of 239 00:12:09,720 --> 00:12:13,480 Speaker 2: firms that allegedly help China's military. This according to reports 240 00:12:13,760 --> 00:12:18,079 Speaker 2: just moments ago. Senator clearly the US administration and Congress 241 00:12:18,080 --> 00:12:19,880 Speaker 2: for that matter, is looking to put a bit of 242 00:12:19,920 --> 00:12:23,440 Speaker 2: a squeeze on China landing in Europe and Munich, Germany. 243 00:12:23,520 --> 00:12:26,040 Speaker 2: Do you believe that you have the Europeans on site 244 00:12:26,200 --> 00:12:29,559 Speaker 2: in this effort. 245 00:12:30,920 --> 00:12:31,640 Speaker 1: I think we do. 246 00:12:31,720 --> 00:12:34,520 Speaker 6: But let's go back to Ali, Bob and honestly, any 247 00:12:34,640 --> 00:12:38,280 Speaker 6: business that's domiciled in China, does anybody really believe that 248 00:12:38,280 --> 00:12:41,840 Speaker 6: there's separation between the CCCP and the state owned enterprises 249 00:12:41,880 --> 00:12:44,439 Speaker 6: and other supposedly independent businesses. 250 00:12:44,480 --> 00:12:46,439 Speaker 1: I think the President is on. 251 00:12:46,440 --> 00:12:48,400 Speaker 6: The right track to make sure that we're starting to 252 00:12:48,440 --> 00:12:51,200 Speaker 6: hold China accountable. We need a good relationship with them, 253 00:12:51,360 --> 00:12:53,240 Speaker 6: but it needs to be one that's founded on trust. 254 00:12:53,280 --> 00:12:55,280 Speaker 6: And quite honestly, there are moves in China that I 255 00:12:55,320 --> 00:12:55,960 Speaker 6: don't trust. 256 00:12:56,559 --> 00:12:59,440 Speaker 2: So Senator, with that in mind, should US based investors 257 00:12:59,440 --> 00:13:03,679 Speaker 2: be able to have access to investing in these companies? 258 00:13:06,200 --> 00:13:10,560 Speaker 7: Well, look, I've got a real problem with We had. 259 00:13:10,480 --> 00:13:15,360 Speaker 6: A Banking Committee com meeting yesterday with Adkins before from 260 00:13:15,400 --> 00:13:18,080 Speaker 6: the SEC, and I've got a real problem with the 261 00:13:18,240 --> 00:13:22,200 Speaker 6: US getting into a trend of buying into some of 262 00:13:22,240 --> 00:13:26,080 Speaker 6: our companies. I feel like we should let the free 263 00:13:26,120 --> 00:13:29,720 Speaker 6: market really drive innovation and also back to the segment 264 00:13:29,800 --> 00:13:32,800 Speaker 6: before I watched your prior segment, we've also got. 265 00:13:32,760 --> 00:13:34,599 Speaker 7: On leiche I. We can't be afraid of it. 266 00:13:34,679 --> 00:13:36,440 Speaker 6: We have to embrace it, we have to leverage it, 267 00:13:36,640 --> 00:13:38,640 Speaker 6: and we have to be the leader in innovating it. 268 00:13:38,760 --> 00:13:41,880 Speaker 2: Well, Senator, let's talk about that. Creative destruction is a 269 00:13:42,000 --> 00:13:45,320 Speaker 2: feature of the US economy and American dynamism is something 270 00:13:45,360 --> 00:13:48,560 Speaker 2: Lisa was talking about earlier on this morning. Senator, I 271 00:13:48,559 --> 00:13:51,160 Speaker 2: feel like there's an aversion to that these days, and 272 00:13:51,200 --> 00:13:53,760 Speaker 2: a fear associated with some of the headlines we've all 273 00:13:53,800 --> 00:13:56,120 Speaker 2: seen over the past suite, the prospect of white collar 274 00:13:56,240 --> 00:13:59,560 Speaker 2: jobs being wiped down. How do we prepare for a 275 00:13:59,559 --> 00:14:03,440 Speaker 2: moment that and ensure that what globalization did to manufacturing 276 00:14:03,720 --> 00:14:09,360 Speaker 2: doesn't happen to services with AI A sure, well, we. 277 00:14:09,360 --> 00:14:11,959 Speaker 7: Have to be ever watchful, but the bell has been wrong. 278 00:14:12,120 --> 00:14:15,160 Speaker 6: We can either decide to be the innovation leader and 279 00:14:15,200 --> 00:14:19,560 Speaker 6: work with our partners and allies, the nations that we 280 00:14:19,640 --> 00:14:22,880 Speaker 6: have military alliances with, to make sure that the Western. 281 00:14:22,520 --> 00:14:24,800 Speaker 7: World is still in the front of it. 282 00:14:24,880 --> 00:14:27,720 Speaker 6: But I'm reminded of books that I read about the 283 00:14:27,760 --> 00:14:31,240 Speaker 6: Industrial Revolution and anytime that we've had a major leap 284 00:14:31,320 --> 00:14:32,320 Speaker 6: in technology. 285 00:14:32,800 --> 00:14:35,200 Speaker 7: We can't pretend like it didn't happen. 286 00:14:35,360 --> 00:14:37,640 Speaker 6: We have to figure out how to master it and 287 00:14:38,280 --> 00:14:41,400 Speaker 6: be the best practice and executing it and dealing with 288 00:14:41,440 --> 00:14:45,320 Speaker 6: all the potential negative consequences and job displacement. I think 289 00:14:45,360 --> 00:14:48,280 Speaker 6: the jury is still out on what the job displacement's 290 00:14:48,280 --> 00:14:50,040 Speaker 6: going to be. Does it mean that we've got to 291 00:14:50,040 --> 00:14:54,680 Speaker 6: put more money in education and retooling expertise around the 292 00:14:54,720 --> 00:14:58,320 Speaker 6: needs of the AI future, Probably almost certainly, But we 293 00:14:58,360 --> 00:14:59,200 Speaker 6: should resist it. 294 00:14:59,320 --> 00:15:00,080 Speaker 7: We should make sure. 295 00:15:00,000 --> 00:15:02,520 Speaker 6: Sure that we get rid of the patchwork of laws 296 00:15:02,560 --> 00:15:04,640 Speaker 6: that are being implemented at the state level that are 297 00:15:04,680 --> 00:15:09,560 Speaker 6: impediments to our own indigenous innovation and AI, come up 298 00:15:09,600 --> 00:15:11,640 Speaker 6: with rules of the road at a federal level, and 299 00:15:11,760 --> 00:15:14,720 Speaker 6: just unleashed the power of the US innovation economy to 300 00:15:14,800 --> 00:15:16,120 Speaker 6: lead the world to get into right. 301 00:15:17,000 --> 00:15:20,080 Speaker 4: Senator, do you feel like internationally there's the same skepticism 302 00:15:20,120 --> 00:15:23,960 Speaker 4: you're in Europe, it's known for regulating their experts in it, 303 00:15:24,000 --> 00:15:26,920 Speaker 4: and it seems like a growing number of people feel 304 00:15:27,000 --> 00:15:29,120 Speaker 4: like that is hampering some of the progress. 305 00:15:29,160 --> 00:15:31,920 Speaker 1: I mean, is there the same kind of enthusiasm. 306 00:15:32,080 --> 00:15:34,560 Speaker 4: What's the mood like around some of the AI story 307 00:15:34,560 --> 00:15:37,960 Speaker 4: that's causing a lot of a lot of volatility, certainly 308 00:15:38,040 --> 00:15:39,000 Speaker 4: here in the United States. 309 00:15:42,360 --> 00:15:45,440 Speaker 6: For years, I've been trying to remind everyone of how 310 00:15:45,480 --> 00:15:49,480 Speaker 6: critical we were of the GDPR data privacy, data breach 311 00:15:49,880 --> 00:15:51,640 Speaker 6: policies of the EU implement it. 312 00:15:51,680 --> 00:15:53,720 Speaker 7: They made mistakes, they corrected. 313 00:15:53,280 --> 00:15:56,840 Speaker 6: Some of them, but then states started gold plating some 314 00:15:56,920 --> 00:15:59,480 Speaker 6: of those policies California and other ones that are again 315 00:16:00,280 --> 00:16:03,440 Speaker 6: to our tech sector. What we need are national rule. 316 00:16:03,560 --> 00:16:07,040 Speaker 6: This is clearly interstate commerce. We need to preempt these laws, 317 00:16:07,440 --> 00:16:09,720 Speaker 6: make them better if we find the best practice, be 318 00:16:09,800 --> 00:16:12,720 Speaker 6: instructed by that at some state level. But we need 319 00:16:12,760 --> 00:16:16,160 Speaker 6: to set that platform right or the maligne users of 320 00:16:16,200 --> 00:16:19,800 Speaker 6: AI are going to outpace our ability to stay up 321 00:16:19,840 --> 00:16:20,200 Speaker 6: with them. 322 00:16:20,280 --> 00:16:21,000 Speaker 1: That's why I. 323 00:16:20,920 --> 00:16:23,600 Speaker 7: Think it's so important. I was the one, the. 324 00:16:23,600 --> 00:16:26,000 Speaker 6: Only one, actually nine to nine members voted against that. 325 00:16:26,080 --> 00:16:29,640 Speaker 6: There was an amendment last year to try and preempt 326 00:16:29,680 --> 00:16:31,960 Speaker 6: the AI laws at the state level come up with 327 00:16:32,000 --> 00:16:34,320 Speaker 6: a national standard. I think that we need to do 328 00:16:34,360 --> 00:16:36,800 Speaker 6: that very quickly, and we should throw data privacy data 329 00:16:36,800 --> 00:16:38,160 Speaker 6: breach out there so that we get it right and 330 00:16:38,240 --> 00:16:40,240 Speaker 6: maybe we have a gold plated state or that Europe 331 00:16:40,240 --> 00:16:41,120 Speaker 6: can be instructed by. 332 00:16:41,680 --> 00:16:44,440 Speaker 4: In the meantime, as people are concerned about this leave 333 00:16:44,480 --> 00:16:47,480 Speaker 4: and market transition and the pain that could come alongside it. 334 00:16:47,480 --> 00:16:49,400 Speaker 4: It's one reason why there's been so much focus on 335 00:16:49,400 --> 00:16:51,400 Speaker 4: the FED to reserve. It's one reason why people are 336 00:16:51,400 --> 00:16:54,480 Speaker 4: saying it might behoove the FED to cut rates more 337 00:16:54,480 --> 00:16:57,920 Speaker 4: aggressively in order to ease the pain for a number 338 00:16:57,920 --> 00:17:00,560 Speaker 4: of individuals that otherwise might be losing their job. I mean, 339 00:17:00,600 --> 00:17:04,040 Speaker 4: how much are you feeling satisfied in the process that 340 00:17:04,119 --> 00:17:07,479 Speaker 4: you could get a hearing for the nominee Kevin worsh 341 00:17:07,720 --> 00:17:08,159 Speaker 4: in the. 342 00:17:08,240 --> 00:17:10,359 Speaker 1: Not so distant future. Do you think that that's feasible. 343 00:17:13,520 --> 00:17:15,480 Speaker 6: Well, we could have a hearing all we want, but 344 00:17:15,640 --> 00:17:19,080 Speaker 6: until the investigation is done. I still believe that the 345 00:17:19,119 --> 00:17:23,960 Speaker 6: initial inquiry and the investigation was a flex to try 346 00:17:23,960 --> 00:17:27,639 Speaker 6: and get the current chair to step aside. Chair Powell 347 00:17:27,720 --> 00:17:30,879 Speaker 6: has a term as chair that expires in May. He 348 00:17:30,920 --> 00:17:33,399 Speaker 6: also has a term that could extend for two more years. 349 00:17:33,560 --> 00:17:36,879 Speaker 6: I have no intention allowing any FED Board nominee to 350 00:17:36,960 --> 00:17:39,639 Speaker 6: move forward out of committee and to be confirmed until 351 00:17:39,680 --> 00:17:43,200 Speaker 6: this matter is subtled. Well, this is foundational to FED independence, 352 00:17:43,240 --> 00:17:44,800 Speaker 6: and I for one, I'm going to stand on the 353 00:17:44,840 --> 00:17:47,080 Speaker 6: side of certainty and FED independence. 354 00:17:47,160 --> 00:17:49,120 Speaker 7: Is what delivers certainty in our markets. 355 00:17:49,280 --> 00:17:51,760 Speaker 2: So Senator is intriguing because we heard from the Treasury 356 00:17:51,800 --> 00:17:55,080 Speaker 2: Secretary earlier on this morning speaking to the American press, 357 00:17:55,520 --> 00:17:58,280 Speaker 2: and he said the following that I spoke with Republican 358 00:17:58,359 --> 00:18:01,160 Speaker 2: senators early this week, and I think we have agreement 359 00:18:01,200 --> 00:18:03,480 Speaker 2: to go ahead with the Wash hearing. Do you have 360 00:18:03,480 --> 00:18:08,679 Speaker 2: an understanding of where he's getting that impression from. 361 00:18:08,840 --> 00:18:13,040 Speaker 6: Well, you know, I've said that if they shouldn't confuse 362 00:18:13,160 --> 00:18:16,359 Speaker 6: or conflate two issues, the suggestion that we should have 363 00:18:16,400 --> 00:18:19,800 Speaker 6: an oversight hearing to see how well this building project 364 00:18:19,840 --> 00:18:22,320 Speaker 6: with the FED has gone, It's fine with me. In fact, 365 00:18:22,359 --> 00:18:24,359 Speaker 6: I think we should have that kind of oversight for 366 00:18:24,400 --> 00:18:28,280 Speaker 6: the East Wing construction, the upfit of the air Force 367 00:18:28,359 --> 00:18:30,560 Speaker 6: one that's kind of a mini air Force one because 368 00:18:30,560 --> 00:18:32,200 Speaker 6: it can't fly out of US barners. 369 00:18:32,480 --> 00:18:34,560 Speaker 7: All of that is just good governance oversight. 370 00:18:35,000 --> 00:18:37,640 Speaker 6: None of that has anything to do with an investigation 371 00:18:37,800 --> 00:18:41,200 Speaker 6: that I believe was dead on arrival. We are talking 372 00:18:41,240 --> 00:18:45,199 Speaker 6: about two minutes of testimony that seven members of the 373 00:18:45,240 --> 00:18:48,399 Speaker 6: Banking Committee, Republican members including the chair. 374 00:18:48,240 --> 00:18:51,240 Speaker 7: Have all said did not constitute a crime. 375 00:18:51,280 --> 00:18:54,200 Speaker 6: We've got a prosecutor who's not listening to the eye 376 00:18:54,200 --> 00:18:57,439 Speaker 6: witnesses and continuing that's not productive, and I'm not going 377 00:18:57,480 --> 00:18:59,119 Speaker 6: to I'm not going to allow it. 378 00:18:59,200 --> 00:19:00,320 Speaker 2: Maybe they can commit. 379 00:19:00,000 --> 00:19:02,400 Speaker 7: It's Democrats to vote with them, but as long as 380 00:19:02,400 --> 00:19:02,760 Speaker 7: I'm the. 381 00:19:02,680 --> 00:19:05,080 Speaker 6: Deciding vote, we can have mister Warsh, who I would 382 00:19:05,160 --> 00:19:08,040 Speaker 6: love to be the next FED chair, but I'm not 383 00:19:08,080 --> 00:19:11,080 Speaker 6: going to confirm the next FED chair until I can 384 00:19:11,119 --> 00:19:13,919 Speaker 6: be absolutely certain that these sorts of flexes do not 385 00:19:14,040 --> 00:19:16,679 Speaker 6: always have members of the Federal. 386 00:19:16,080 --> 00:19:18,280 Speaker 7: Reserve Board or the Chair looking over. 387 00:19:18,160 --> 00:19:20,800 Speaker 6: Their shoulder wondering when they get the call from some 388 00:19:21,000 --> 00:19:22,240 Speaker 6: US attorney with a dream. 389 00:19:22,359 --> 00:19:24,639 Speaker 2: The Senator, if you had the call from Treasury or 390 00:19:24,640 --> 00:19:26,480 Speaker 2: from the White House about this, when was the last 391 00:19:26,520 --> 00:19:31,200 Speaker 2: time you had the conversation on the issue. 392 00:19:31,440 --> 00:19:35,560 Speaker 6: Well, I've had a conversation with the American people in 393 00:19:35,640 --> 00:19:37,960 Speaker 6: c SPAN yesterday on the floor, and I don't think 394 00:19:38,000 --> 00:19:39,119 Speaker 6: I was mincing words. 395 00:19:39,160 --> 00:19:40,920 Speaker 7: I'm not really known for that. 396 00:19:41,160 --> 00:19:44,120 Speaker 6: But if I need to make it very clear this 397 00:19:44,240 --> 00:19:48,240 Speaker 6: is about an end for our resolution, I'll get the 398 00:19:48,720 --> 00:19:50,399 Speaker 6: prosecutor the benefit of the doubt. 399 00:19:50,800 --> 00:19:52,960 Speaker 7: Provide me with evidence beyond the two. 400 00:19:52,920 --> 00:19:56,959 Speaker 6: Minutes of testimony and the committing that seven Republican members 401 00:19:56,960 --> 00:19:59,960 Speaker 6: said it was not criminal, it was not misleading the 402 00:20:00,000 --> 00:20:03,879 Speaker 6: there was no criminal intent. It's like an indictment looking 403 00:20:03,920 --> 00:20:06,280 Speaker 6: for a crime, and to me, it just it's at 404 00:20:06,320 --> 00:20:06,760 Speaker 6: the edge. 405 00:20:06,640 --> 00:20:09,600 Speaker 7: Of absurdity that I can't accept. And the only thing 406 00:20:09,640 --> 00:20:10,760 Speaker 7: I know that I can do is. 407 00:20:10,800 --> 00:20:13,960 Speaker 6: Exercise my right as an individual Senator to hold up 408 00:20:14,000 --> 00:20:18,159 Speaker 6: future nominations until this investigation is done. But to the 409 00:20:19,160 --> 00:20:22,679 Speaker 6: Assistant US Attorney bring me evidence beyond the two minutes 410 00:20:22,720 --> 00:20:25,159 Speaker 6: has been rejected out of hand by members, by the 411 00:20:25,160 --> 00:20:28,679 Speaker 6: majority of Republican members on the committee, or proved to 412 00:20:28,720 --> 00:20:32,720 Speaker 6: me that there's been an instance where a referral. What's 413 00:20:32,760 --> 00:20:34,800 Speaker 6: really odd about this? And I spoke about this on 414 00:20:34,840 --> 00:20:36,040 Speaker 6: the Senate for yesterday. 415 00:20:36,400 --> 00:20:40,000 Speaker 7: This is the first time that I can find where a. 416 00:20:39,920 --> 00:20:44,200 Speaker 6: Prosecutor moves forward with an investigation without a referral from 417 00:20:44,240 --> 00:20:47,080 Speaker 6: the chair or a member of the committee. Maybe somebody 418 00:20:47,080 --> 00:20:51,080 Speaker 6: can prove me wrong, But if that prosecutor has compelling information, 419 00:20:51,240 --> 00:20:53,480 Speaker 6: either the way they read that two minutes or something 420 00:20:53,520 --> 00:20:56,080 Speaker 6: else that no one's aware of, let me see. 421 00:20:55,840 --> 00:20:58,600 Speaker 2: It, Senator, before you go, time for one final question. 422 00:20:58,640 --> 00:21:01,159 Speaker 2: You're in Munich. Let's finish when we starts it. Chancellor 423 00:21:01,240 --> 00:21:05,000 Speaker 2: Marze just spoke moments ago and said the Transatlantic partnership 424 00:21:05,080 --> 00:21:08,600 Speaker 2: is no longer self evident. Senatetor how received, how well 425 00:21:08,640 --> 00:21:11,159 Speaker 2: received was your delegation in Munich? 426 00:21:14,400 --> 00:21:16,240 Speaker 6: Well, you know we're going to have I think we're 427 00:21:16,240 --> 00:21:17,840 Speaker 6: going to have a lively discussion here. 428 00:21:17,880 --> 00:21:20,840 Speaker 7: I had someone ask me about JD. 429 00:21:20,960 --> 00:21:23,840 Speaker 6: Vansa's vice president of Vance's speech last year. I said 430 00:21:23,840 --> 00:21:26,120 Speaker 6: that I wouldn't have given that speech, but I would 431 00:21:26,119 --> 00:21:29,560 Speaker 6: not have missed the opportunity to let my family of 432 00:21:29,720 --> 00:21:32,440 Speaker 6: nations in NATO know that one of the reasons we're 433 00:21:32,440 --> 00:21:35,320 Speaker 6: here is because of the two trillion dollar deficit over 434 00:21:35,400 --> 00:21:38,720 Speaker 6: twenty years. Johnathan, can you imagine how much more ready 435 00:21:38,760 --> 00:21:41,359 Speaker 6: we could be if all the demand signals that would 436 00:21:41,359 --> 00:21:45,240 Speaker 6: have come from two trillion dollars in weapons and our 437 00:21:45,440 --> 00:21:48,960 Speaker 6: mutual defense had actually been purchased by the countries of 438 00:21:49,040 --> 00:21:51,840 Speaker 6: NATO who had failed even meet their minimum requirement. 439 00:21:52,480 --> 00:21:54,840 Speaker 7: So I think there's frustration there that we. 440 00:21:54,720 --> 00:21:55,600 Speaker 1: Need to get passed. 441 00:21:55,600 --> 00:21:59,320 Speaker 6: But I am speaking I believe for the majority of 442 00:21:59,400 --> 00:22:02,159 Speaker 6: Congress who who knows that the Natal Alliance is the 443 00:22:02,200 --> 00:22:07,320 Speaker 6: most profound and impactful alliance and the history of mankind, 444 00:22:07,440 --> 00:22:09,359 Speaker 6: and we stand behind it, and we will as we 445 00:22:09,400 --> 00:22:11,639 Speaker 6: go through this discussion to get things back to normal. 446 00:22:12,600 --> 00:22:16,160 Speaker 2: This is the Bloomberg Surveillance Podcast, bringing you the best 447 00:22:16,160 --> 00:22:19,480 Speaker 2: in markets, economics, and geopolitics. You can watch the show 448 00:22:19,560 --> 00:22:22,480 Speaker 2: live on Bloomberg TV weekday mornings from six am to 449 00:22:22,640 --> 00:22:26,399 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify, 450 00:22:26,520 --> 00:22:28,760 Speaker 2: or anywhere else you listen, and as always, on the 451 00:22:28,800 --> 00:22:31,200 Speaker 2: Bloomberg Terminal and the Bloomberg Business app.