1 00:00:00,080 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:11,960 --> 00:00:15,560 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Tom Keene along 3 00:00:15,600 --> 00:00:18,960 Speaker 2: with Paul Sweeney. Join us each day for insight from 4 00:00:18,960 --> 00:00:23,119 Speaker 2: the best in economics, finance, investment, and international relations. You 5 00:00:23,160 --> 00:00:25,800 Speaker 2: can also watch the show live on YouTube. 6 00:00:26,120 --> 00:00:27,640 Speaker 3: Visit the Bloomberg. 7 00:00:27,200 --> 00:00:31,760 Speaker 2: Podcast channel on YouTube to see the show weekday mornings 8 00:00:31,760 --> 00:00:35,000 Speaker 2: from seven to ten am Eastern from our global headquarters 9 00:00:35,159 --> 00:00:39,000 Speaker 2: in New York City. Subscribe to the podcast on Apple, Spotify, 10 00:00:39,360 --> 00:00:42,920 Speaker 2: or anywhere else you listen, and always I'm Bloomberg Radio, 11 00:00:43,080 --> 00:00:46,320 Speaker 2: the Bloomberg Terminal, and the Bloomberg Business app. 12 00:00:46,760 --> 00:00:47,640 Speaker 3: This is a joy. 13 00:00:47,880 --> 00:00:52,560 Speaker 2: He is definitive in the world. A use of gold. 14 00:00:52,760 --> 00:00:56,560 Speaker 2: James Steele joins now from HSBC. Really honored to have 15 00:00:56,640 --> 00:01:00,440 Speaker 2: you in our studios. If we were to walk near 16 00:01:00,560 --> 00:01:04,240 Speaker 2: our offices by the Ritz Carlton in Dubai, where Jumana 17 00:01:04,319 --> 00:01:07,360 Speaker 2: Bertecci holds court, but if we go down by the 18 00:01:07,440 --> 00:01:11,280 Speaker 2: canal in the old historic souks, where all of the 19 00:01:11,280 --> 00:01:16,160 Speaker 2: Indian Ocean, all of Eurasia buys gold, what would be 20 00:01:16,240 --> 00:01:18,520 Speaker 2: the mood in the souks of Dubai. 21 00:01:19,600 --> 00:01:21,240 Speaker 4: Well, first of all, thank you for having me, Tom 22 00:01:21,440 --> 00:01:25,200 Speaker 4: it's a real pleasure, I think, one of restraint. And 23 00:01:25,240 --> 00:01:27,640 Speaker 4: now that we've seen such a big price rises, what 24 00:01:28,200 --> 00:01:31,800 Speaker 4: has resonated through the physical side of things, And that's 25 00:01:31,840 --> 00:01:35,880 Speaker 4: not hedge funds, that's not asset managers, portfolio managers. That's 26 00:01:35,920 --> 00:01:39,559 Speaker 4: the people on the ground, rich and poor, buying gold. 27 00:01:39,640 --> 00:01:45,200 Speaker 4: There's been a pullback. Bar demand is down. Physical coin 28 00:01:45,280 --> 00:01:48,280 Speaker 4: demand is down. We know that because the premiums have 29 00:01:48,360 --> 00:01:52,920 Speaker 4: come in. All the major mints are reporting somewhat lower demand, 30 00:01:53,200 --> 00:01:55,520 Speaker 4: with exception of the Royal Mint, which has been a 31 00:01:55,560 --> 00:01:59,680 Speaker 4: function of the election. So there's a trigger day demand 32 00:01:59,720 --> 00:02:03,320 Speaker 4: for and coins, which we tend to see. If it 33 00:02:03,400 --> 00:02:06,440 Speaker 4: ever looks in a democracy that the center left are 34 00:02:06,480 --> 00:02:08,560 Speaker 4: going to win, there tends to be an increase in 35 00:02:08,600 --> 00:02:10,840 Speaker 4: gold demand. But other than that, there's been there's been 36 00:02:10,880 --> 00:02:11,400 Speaker 4: a pullback. 37 00:02:11,600 --> 00:02:13,160 Speaker 3: I got to ask the question of the day. 38 00:02:13,400 --> 00:02:17,000 Speaker 2: Is Fort Knox still like Goldfinger? Is Fort Knox still 39 00:02:17,000 --> 00:02:18,560 Speaker 2: where we keep all our gold? 40 00:02:18,880 --> 00:02:22,320 Speaker 4: This is where we keep our gold in the United States, 41 00:02:22,440 --> 00:02:26,000 Speaker 4: And it has, to my knowledge, about thirty thousand highly 42 00:02:26,040 --> 00:02:28,040 Speaker 4: trained troops guarding it. 43 00:02:29,080 --> 00:02:30,720 Speaker 3: So it's like Goldfinger still. 44 00:02:31,680 --> 00:02:34,839 Speaker 4: It is it is there, and and it's it's it's 45 00:02:34,880 --> 00:02:35,959 Speaker 4: the country's gold. 46 00:02:36,000 --> 00:02:38,720 Speaker 2: Like is a bar of gold set at Fort Knox 47 00:02:38,880 --> 00:02:41,600 Speaker 2: for like sixty years or dare I say they've. 48 00:02:41,400 --> 00:02:42,880 Speaker 3: Been it's been there, it's been. 49 00:02:42,919 --> 00:02:44,080 Speaker 4: It's been there a long time. 50 00:02:45,880 --> 00:02:48,640 Speaker 3: And Fort Knox is not at costco, Yes, exactly. 51 00:02:48,840 --> 00:02:51,680 Speaker 4: The the you know, gold goes where the money goes. 52 00:02:52,320 --> 00:02:55,640 Speaker 4: And in the inter war and post war period it 53 00:02:55,720 --> 00:02:59,440 Speaker 4: came to the United States out of Europe. In the seventies, 54 00:02:59,480 --> 00:03:04,480 Speaker 4: it went from the Advanced countries to the Middle East 55 00:03:04,520 --> 00:03:08,480 Speaker 4: with oil, and now it's going to Asia. So and 56 00:03:08,520 --> 00:03:11,560 Speaker 4: this is true for the last two thousand years, gold 57 00:03:11,600 --> 00:03:13,960 Speaker 4: has followed where the money goes. 58 00:03:14,040 --> 00:03:16,240 Speaker 5: Okay, talk to us about China. Can you tell us 59 00:03:16,360 --> 00:03:19,600 Speaker 5: just give us a sense of demand for gold in China. 60 00:03:19,680 --> 00:03:20,280 Speaker 1: That's what I've heard. 61 00:03:20,440 --> 00:03:22,040 Speaker 5: I don't know anything about the gold business, but they 62 00:03:22,080 --> 00:03:25,800 Speaker 5: say China. What's China mean for a gold demand? Who's 63 00:03:25,840 --> 00:03:26,400 Speaker 5: buying gold? 64 00:03:26,480 --> 00:03:26,639 Speaker 3: Well? 65 00:03:26,639 --> 00:03:29,640 Speaker 4: I think you have to break it down into two components. 66 00:03:29,720 --> 00:03:33,280 Speaker 4: One is central bank demand, the demand from the People's 67 00:03:33,320 --> 00:03:37,640 Speaker 4: Bank of China, which, like all central bank demand, not 68 00:03:37,720 --> 00:03:41,000 Speaker 4: just theirs, is somewhat opaque and we never get timely 69 00:03:41,080 --> 00:03:42,840 Speaker 4: information generally speaking. 70 00:03:43,600 --> 00:03:44,440 Speaker 3: And also. 71 00:03:45,840 --> 00:03:49,320 Speaker 4: The demand outside of the People's Bank Now the demand 72 00:03:49,320 --> 00:03:52,160 Speaker 4: outside of the People's Bank has been very good, but 73 00:03:52,240 --> 00:03:56,400 Speaker 4: it's not necessarily because there's such devotees of gold. The 74 00:03:56,440 --> 00:04:00,440 Speaker 4: property market is down, the equity markets are down, and 75 00:04:01,200 --> 00:04:03,840 Speaker 4: most people in China don't quite have the same suite 76 00:04:03,840 --> 00:04:08,360 Speaker 4: of investments, even at the most sophisticated end, at the 77 00:04:08,360 --> 00:04:12,840 Speaker 4: professional investor end that we do, or British or American 78 00:04:12,880 --> 00:04:15,640 Speaker 4: hedge funds have, et cetera, et cetera. So when both 79 00:04:15,720 --> 00:04:18,719 Speaker 4: those things are down, gold is a winner by default, 80 00:04:19,400 --> 00:04:22,360 Speaker 4: and that's what we've seen. I don't necessarily think it's 81 00:04:22,400 --> 00:04:24,840 Speaker 4: because of a mad love affair with gold, and I 82 00:04:24,920 --> 00:04:28,480 Speaker 4: suspect that when or if I suppose when, is more 83 00:04:28,800 --> 00:04:32,760 Speaker 4: the question. The property market stabilizes, the equity markets they're stabilized, 84 00:04:33,120 --> 00:04:37,400 Speaker 4: will get gold underfunded. Now the central bank buying is 85 00:04:37,520 --> 00:04:40,159 Speaker 4: very different, and that's government buying. 86 00:04:40,520 --> 00:04:40,719 Speaker 3: Now. 87 00:04:41,120 --> 00:04:44,560 Speaker 4: They reported you might as well noticed the pullback in 88 00:04:44,600 --> 00:04:47,560 Speaker 4: gold a few days ago. Last week, well, they reported 89 00:04:48,320 --> 00:04:54,760 Speaker 4: unchanged gold reserves for the previous month. That did not 90 00:04:54,960 --> 00:04:58,040 Speaker 4: mean that they've stopped buying. It just meant that they 91 00:04:58,040 --> 00:05:01,800 Speaker 4: didn't buy that month. That was misinterpreted, I think by 92 00:05:01,839 --> 00:05:05,080 Speaker 4: the market, and we got a very abrupt decline of 93 00:05:05,120 --> 00:05:09,240 Speaker 4: seventy seven seventy nine dollars that day, But it wasn't 94 00:05:09,279 --> 00:05:13,039 Speaker 4: a policy statement. They just said our gold reserves at 95 00:05:13,040 --> 00:05:14,760 Speaker 4: the end of May were the same as they were 96 00:05:14,760 --> 00:05:17,279 Speaker 4: at the end of April, and they had been accumulating 97 00:05:17,279 --> 00:05:20,040 Speaker 4: gold every month for the previous eighteen months. 98 00:05:20,440 --> 00:05:21,440 Speaker 3: So how about silver. 99 00:05:21,520 --> 00:05:24,239 Speaker 5: Do we think about silver different because that's up twenty 100 00:05:24,279 --> 00:05:27,880 Speaker 5: four percent this year? Is that just rising tides? Looking 101 00:05:27,880 --> 00:05:29,840 Speaker 5: all boats for silvers or special you do. 102 00:05:29,839 --> 00:05:34,400 Speaker 4: Tend to get a gold silver ratio that people will trade. 103 00:05:34,400 --> 00:05:36,320 Speaker 4: And I remember in the old days down at the 104 00:05:36,320 --> 00:05:38,800 Speaker 4: World Trade Center when I worked on the comes, when 105 00:05:38,839 --> 00:05:41,840 Speaker 4: it was called that, I would see people look over 106 00:05:41,920 --> 00:05:44,120 Speaker 4: at the silver booth and then back back to the 107 00:05:44,160 --> 00:05:47,800 Speaker 4: gold and they would trade. That's exactly how it used 108 00:05:47,800 --> 00:05:53,960 Speaker 4: to work. So the silver market's considerably less voluminous than 109 00:05:53,960 --> 00:05:56,719 Speaker 4: the gold market, and so when you get a big 110 00:05:56,720 --> 00:05:59,960 Speaker 4: moving gold, you generally get silver lifted. Now, the big 111 00:06:00,080 --> 00:06:03,240 Speaker 4: difference between the two is that over fifty percent something 112 00:06:03,320 --> 00:06:06,800 Speaker 4: like we estimate about fifty seven fifty eight percent of 113 00:06:06,839 --> 00:06:11,000 Speaker 4: silver demand is not for bars or jewelry or coins 114 00:06:11,240 --> 00:06:12,080 Speaker 4: the way it is for gold. 115 00:06:12,120 --> 00:06:12,600 Speaker 3: Industrial. 116 00:06:12,680 --> 00:06:19,320 Speaker 4: It's industrial exactly, and everything Now, even though we forecast 117 00:06:19,600 --> 00:06:23,560 Speaker 4: rather sluggish industrial production growth this year, everything you need 118 00:06:23,680 --> 00:06:27,680 Speaker 4: silverflo is growing at an above rate. So we think 119 00:06:27,760 --> 00:06:30,800 Speaker 4: the silver demand industrial demand is moving at twice the 120 00:06:30,880 --> 00:06:33,400 Speaker 4: rate of underlying industrial growth. 121 00:06:33,560 --> 00:06:36,720 Speaker 2: There is a book that is like James Steele wrote 122 00:06:36,760 --> 00:06:42,039 Speaker 2: the screenplay. It is William Silber Definitive of nineteen fourteen, 123 00:06:42,200 --> 00:06:45,400 Speaker 2: when we took the gold standard from Britain. He literally 124 00:06:45,400 --> 00:06:49,520 Speaker 2: describes the boat coming across the ocean where McAdoo said, 125 00:06:49,560 --> 00:06:53,360 Speaker 2: it's our time and we became dominant. There's a content, 126 00:06:53,480 --> 00:06:57,360 Speaker 2: there's a fear out there James Steele, that someday there's 127 00:06:57,400 --> 00:07:00,400 Speaker 2: going to be a boat to China where they steal 128 00:07:00,480 --> 00:07:03,880 Speaker 2: the gold standard from us. They deal they steal dollars, 129 00:07:03,880 --> 00:07:05,080 Speaker 2: sovereigntry from us. 130 00:07:05,080 --> 00:07:07,800 Speaker 4: How do you respond to it, Well, I think there's 131 00:07:07,920 --> 00:07:11,320 Speaker 4: enough room for everybody. The United States is an enormously 132 00:07:11,920 --> 00:07:16,360 Speaker 4: large economy. But I think what you're touching on is 133 00:07:16,360 --> 00:07:22,360 Speaker 4: maybe this issue of dollar d dollarization, and that's been 134 00:07:22,440 --> 00:07:25,560 Speaker 4: ascribed to some of the reasons that central banks, not 135 00:07:25,640 --> 00:07:29,560 Speaker 4: just China, have been buying gold. No, we don't believe 136 00:07:29,600 --> 00:07:33,320 Speaker 4: that there's going to be any loss of sovereignty for 137 00:07:33,400 --> 00:07:36,400 Speaker 4: the US dollar as far as the world's reserve currency 138 00:07:36,440 --> 00:07:39,000 Speaker 4: goes for the next ten twenty years, as far as 139 00:07:39,000 --> 00:07:42,280 Speaker 4: you can see for reasons that would take an entire program, 140 00:07:42,320 --> 00:07:45,240 Speaker 4: you and I could talk about it. But that's not 141 00:07:45,400 --> 00:07:48,200 Speaker 4: to say that every single central bank in the world 142 00:07:48,640 --> 00:07:52,680 Speaker 4: wants as many dollars as they do have. They may 143 00:07:52,720 --> 00:07:55,440 Speaker 4: want to reduce their reserves by say sixty five percent 144 00:07:55,800 --> 00:07:57,920 Speaker 4: to sixty two So what do you do with that 145 00:07:58,000 --> 00:08:01,120 Speaker 4: three percent? Well, there's they're very limited as to what 146 00:08:01,160 --> 00:08:04,440 Speaker 4: they can buy, both in fixed income and for currencies, 147 00:08:04,680 --> 00:08:06,400 Speaker 4: and there may be a reason that they wouldn't want 148 00:08:06,400 --> 00:08:09,360 Speaker 4: to buy the euro or the yen, and gold provides 149 00:08:09,400 --> 00:08:11,640 Speaker 4: a perfect sweet spot of getting out of the dollar 150 00:08:11,880 --> 00:08:14,160 Speaker 4: without going into something else. 151 00:08:14,240 --> 00:08:15,880 Speaker 3: Well, this is where I wanted to go. It's like 152 00:08:15,920 --> 00:08:16,840 Speaker 3: you read my script. 153 00:08:16,920 --> 00:08:22,560 Speaker 2: Dennis Gartman, very different from James Steele, has nailed gold up. 154 00:08:22,880 --> 00:08:27,040 Speaker 2: But he's also nailed it gold up in Japanese yen. 155 00:08:27,800 --> 00:08:31,640 Speaker 2: And it's shocking what Gartman predicts if Japan doesn't get 156 00:08:31,680 --> 00:08:34,440 Speaker 2: their act together and you don't see strong ye and 157 00:08:34,480 --> 00:08:37,640 Speaker 2: you see continued week yen. Is there a linkage between 158 00:08:37,679 --> 00:08:41,600 Speaker 2: James Steele's world of gold and currency that signals a 159 00:08:41,679 --> 00:08:43,600 Speaker 2: huge opportunity in Europe. 160 00:08:44,200 --> 00:08:45,760 Speaker 4: Well, I think you know much of that is the 161 00:08:45,800 --> 00:08:50,199 Speaker 4: currency play as well. Yes, and exactly, And you take. 162 00:08:50,040 --> 00:08:51,920 Speaker 3: It over to Jeremiah. I mean you guys are on 163 00:08:52,000 --> 00:08:52,920 Speaker 3: speaking terms, right. 164 00:08:54,400 --> 00:08:57,200 Speaker 4: I haven't spoken in a while, but we have done. 165 00:08:57,280 --> 00:08:59,280 Speaker 4: I think I can't remember when. 166 00:08:59,200 --> 00:09:02,199 Speaker 2: Talks daylight Steve Major, but Derren Myer, forget it. 167 00:09:02,240 --> 00:09:05,160 Speaker 4: But they're they're both. They are both brilliant analysts. Say, 168 00:09:05,200 --> 00:09:08,960 Speaker 4: I want to go on record as saying, but and 169 00:09:09,000 --> 00:09:10,720 Speaker 4: that's what we've seen. That's one of the reasons that 170 00:09:10,760 --> 00:09:14,520 Speaker 4: the physical demand for gold has weakened. If not only 171 00:09:14,559 --> 00:09:17,520 Speaker 4: has gold gone up, but in Roupeat terms, for example, 172 00:09:17,600 --> 00:09:21,920 Speaker 4: it's enormously expensive. So so yes, gold would be high 173 00:09:21,920 --> 00:09:25,319 Speaker 4: in Japanese terms if the end we're to weaken. But 174 00:09:25,480 --> 00:09:29,120 Speaker 4: but that's almost I don't want to quite say sophistry, 175 00:09:29,240 --> 00:09:30,800 Speaker 4: but it's getting on. 176 00:09:30,760 --> 00:09:33,360 Speaker 3: For we could say sophistry and survants. I don't know 177 00:09:33,360 --> 00:09:34,120 Speaker 3: how to spell it. 178 00:09:37,080 --> 00:09:37,560 Speaker 6: Exactly. 179 00:09:37,960 --> 00:09:41,280 Speaker 5: Jim gl c O the Global Commodities Monitor, that's all 180 00:09:41,280 --> 00:09:44,480 Speaker 5: I know about your business, commodities business. What's the trade 181 00:09:44,480 --> 00:09:46,520 Speaker 5: that people want to talk to you most about these days? 182 00:09:47,960 --> 00:09:52,360 Speaker 4: Well, trying to figure out a gold. One of the 183 00:09:52,720 --> 00:09:55,559 Speaker 4: one of the interesting things is that I've just come 184 00:09:55,600 --> 00:09:57,920 Speaker 4: back from Europe, and both in Europe and North America, 185 00:09:58,320 --> 00:10:02,640 Speaker 4: the previous rallies have had a clear smoking gun. This 186 00:10:02,679 --> 00:10:05,440 Speaker 4: one hasn't so much right, And that's what makes it 187 00:10:05,480 --> 00:10:08,559 Speaker 4: so interesting because it's a couple of things. There's geopolitics 188 00:10:08,600 --> 00:10:10,800 Speaker 4: going on as well. And one of the thing I 189 00:10:10,840 --> 00:10:13,160 Speaker 4: just want to mention, and why it's so influential, is 190 00:10:13,200 --> 00:10:15,320 Speaker 4: that you can come to me and you can say, Jim, 191 00:10:15,320 --> 00:10:17,319 Speaker 4: what happens to gold? Usually when the FED cuts by 192 00:10:17,320 --> 00:10:20,920 Speaker 4: fifty base points or when it increases but or when 193 00:10:20,960 --> 00:10:23,040 Speaker 4: the dollar goes up this much or down this much. 194 00:10:23,679 --> 00:10:26,320 Speaker 4: But Gaza is different from Ukraine, It's different from the 195 00:10:26,320 --> 00:10:29,360 Speaker 4: South China Sea, its different from the Taiwan Straits, and 196 00:10:29,400 --> 00:10:34,160 Speaker 4: so every geopolitical event may have a different impact on gold. 197 00:10:34,280 --> 00:10:35,240 Speaker 3: You can't muddel it. 198 00:10:35,679 --> 00:10:39,160 Speaker 2: Forty seconds left here, I'm asking for a friend. What's 199 00:10:39,240 --> 00:10:43,480 Speaker 2: the markup on gold? It a fancy store in fifty 200 00:10:43,520 --> 00:10:44,880 Speaker 2: seventh Street, like Tiffany. 201 00:10:45,600 --> 00:10:48,600 Speaker 3: It's very very high. Thank you. It's good to know that. 202 00:10:49,120 --> 00:10:53,520 Speaker 2: Why don't you say a double hundreds of percent plural? 203 00:10:53,559 --> 00:10:56,200 Speaker 4: Well, you're paying, but you're paying for the artistry, and 204 00:10:56,240 --> 00:10:58,040 Speaker 4: you're paying for the for the workmanship. 205 00:10:58,120 --> 00:10:59,800 Speaker 3: You're not paying for the blue book, paying. 206 00:10:59,600 --> 00:11:01,480 Speaker 4: For the you're paying for that too. 207 00:11:01,600 --> 00:11:02,640 Speaker 3: But I mean, and. 208 00:11:02,600 --> 00:11:06,199 Speaker 4: That's it's it's it's well worth it. It hasn't dimmed 209 00:11:06,640 --> 00:11:10,520 Speaker 4: they demand at the high end. But it's one of 210 00:11:10,600 --> 00:11:15,040 Speaker 4: the reasons the gold price doesn't doesn't change. And so 211 00:11:15,160 --> 00:11:18,240 Speaker 4: whereas in Asia you'll see that the markup is very 212 00:11:18,360 --> 00:11:22,120 Speaker 4: low and the price is changed rapidly in the shops. 213 00:11:22,160 --> 00:11:25,480 Speaker 3: Interesting. This has been a pleasure. Please come in again. 214 00:11:26,040 --> 00:11:27,560 Speaker 4: Thank you, Tom, Thank you for having me. 215 00:11:27,760 --> 00:11:32,000 Speaker 2: James Steele with a question the definitive guy on fundamental 216 00:11:32,000 --> 00:11:35,400 Speaker 2: Gold around this world from the Canal of Dubai to 217 00:11:35,520 --> 00:11:38,600 Speaker 2: Asia to Fort Knax. I saw a Goldfinger like a 218 00:11:38,600 --> 00:11:41,840 Speaker 2: while back. What a great movie. Still, I've never. 219 00:11:41,720 --> 00:11:44,680 Speaker 1: Been anybody I try to play a concert, you. 220 00:11:44,679 --> 00:11:46,400 Speaker 4: Know, I was, I was going to say, but I 221 00:11:46,440 --> 00:11:49,960 Speaker 4: thought it would be a party political broadcast. Our vault 222 00:11:50,000 --> 00:11:53,120 Speaker 4: is the second biggest vault in the American continent after 223 00:11:53,200 --> 00:11:53,800 Speaker 4: Fort Knox. 224 00:11:56,160 --> 00:11:59,520 Speaker 3: Wow, excuse me? Can I pray tell? Can I ask? 225 00:11:59,600 --> 00:12:01,560 Speaker 3: Where is the HSBC vault? 226 00:12:01,600 --> 00:12:05,480 Speaker 4: Yes, four fifty two Fifth Avenue. I could have taken 227 00:12:05,520 --> 00:12:06,520 Speaker 4: you into it a couple of years. 228 00:12:06,520 --> 00:12:09,560 Speaker 6: Ours taken notes. Thank you James always. 229 00:12:09,200 --> 00:12:12,160 Speaker 2: Great, James till thank you so much, huge, huge, huge 230 00:12:12,200 --> 00:12:25,840 Speaker 2: comments for James steal As there should be Virginia Mesanu 231 00:12:26,080 --> 00:12:29,960 Speaker 2: joins us now, yes, global cio equity at Alian's what 232 00:12:30,000 --> 00:12:35,000 Speaker 2: we really want to hear from her about this turmoil, Virginy. 233 00:12:35,160 --> 00:12:39,760 Speaker 2: What happened is Charles de Gaulle's fifth Republic? Where did 234 00:12:39,760 --> 00:12:43,280 Speaker 2: the middle go that Charles de gaud built out of 235 00:12:43,280 --> 00:12:44,080 Speaker 2: World War Two? 236 00:12:45,800 --> 00:12:48,480 Speaker 7: Well, I you know, it's it's really interesting and the 237 00:12:48,520 --> 00:12:53,160 Speaker 7: results of the European elections were really shocking in a way, 238 00:12:53,200 --> 00:12:58,360 Speaker 7: although not unexpected that I would say, you know, the 239 00:12:58,480 --> 00:13:03,240 Speaker 7: quantum of that shift is really important. It's a bit 240 00:13:03,280 --> 00:13:08,360 Speaker 7: of a uniform trend. You have Poland, Holland, France, Germany, Sweden, 241 00:13:08,400 --> 00:13:13,360 Speaker 7: they've all moved towards more the far right. And of 242 00:13:13,400 --> 00:13:18,120 Speaker 7: course the action that President Macrostecon calling for a snap 243 00:13:18,120 --> 00:13:25,120 Speaker 7: election yesterday is is really important. Right, It's a bit 244 00:13:26,080 --> 00:13:30,920 Speaker 7: but I think, yeah, he's got some good rationale for 245 00:13:31,040 --> 00:13:33,719 Speaker 7: doing it, but it's going to be really interesting. 246 00:13:33,960 --> 00:13:34,400 Speaker 3: Visionie. 247 00:13:34,400 --> 00:13:38,079 Speaker 2: I think of a list of surveillance guests, including Madame Leguard, 248 00:13:38,559 --> 00:13:42,400 Speaker 2: who have a transatlantic perspective. You're on that short list. 249 00:13:43,080 --> 00:13:47,520 Speaker 2: Can the tensions, the political tensions of Europe carry over 250 00:13:47,840 --> 00:13:52,360 Speaker 2: into America, in particularly to November of this year's election. 251 00:13:53,200 --> 00:13:57,720 Speaker 7: Well, I think they are definitely linked in the sense 252 00:13:57,800 --> 00:14:01,760 Speaker 7: that if you look at President Macon, he's done quite 253 00:14:01,840 --> 00:14:04,960 Speaker 7: well on the economic front, the defense front, if you want, 254 00:14:05,080 --> 00:14:09,160 Speaker 7: the diplomacy front. But some of the concerns that I've 255 00:14:09,240 --> 00:14:14,920 Speaker 7: led the French electorate to move to the right, where 256 00:14:14,920 --> 00:14:21,760 Speaker 7: domestic issues, issues of security, fear of the war, terrorist attacks, 257 00:14:21,920 --> 00:14:24,920 Speaker 7: a lot of attacks on kids at school for example, 258 00:14:25,440 --> 00:14:30,120 Speaker 7: immigration integration, you know, all those issues are important. And 259 00:14:30,160 --> 00:14:33,800 Speaker 7: of course the far right party is more in support 260 00:14:33,920 --> 00:14:39,080 Speaker 7: as Madame Lupinne and Bardella have made it public, more 261 00:14:39,120 --> 00:14:43,760 Speaker 7: in support of Trump. And also there's definitely some links there, Paul, 262 00:14:43,800 --> 00:14:44,200 Speaker 7: I think. 263 00:14:44,080 --> 00:14:45,080 Speaker 3: We need to clear this up. 264 00:14:45,160 --> 00:14:48,560 Speaker 2: I've had a lot of criticism about the use by 265 00:14:48,600 --> 00:14:50,080 Speaker 2: Bloomberg a far right. 266 00:14:50,400 --> 00:14:52,840 Speaker 3: We are not editorializing their folks. 267 00:14:53,240 --> 00:14:57,840 Speaker 2: The parties are actually there's three, and they're actually called 268 00:14:58,280 --> 00:15:01,920 Speaker 2: far right. When we say far right, that's the identifiable 269 00:15:02,080 --> 00:15:06,800 Speaker 2: name of three of the fraction parties of the more 270 00:15:06,840 --> 00:15:09,239 Speaker 2: conservative wing of French politics. 271 00:15:09,400 --> 00:15:11,160 Speaker 5: VI Jinnie talk to us about when we think about 272 00:15:11,200 --> 00:15:13,320 Speaker 5: over the last twenty four hours of the European Union 273 00:15:13,400 --> 00:15:15,880 Speaker 5: and in France with the snap elections, how much of 274 00:15:15,880 --> 00:15:19,600 Speaker 5: that is economics, how much are people concerned about their 275 00:15:19,640 --> 00:15:21,920 Speaker 5: economic outlook, inflation and so on. 276 00:15:23,640 --> 00:15:27,040 Speaker 7: Part of it is inflation, but I really think it's 277 00:15:27,080 --> 00:15:31,040 Speaker 7: all about security, immigration and in a way a vote 278 00:15:31,080 --> 00:15:35,640 Speaker 7: against green Green scene as a cost. It is really 279 00:15:35,640 --> 00:15:38,760 Speaker 7: interesting if you see one of the biggest loser, of 280 00:15:38,760 --> 00:15:41,840 Speaker 7: course is the Green Party. So I think that combined 281 00:15:41,880 --> 00:15:45,440 Speaker 7: with the rising popularity of mister Bardella, the twenty eight 282 00:15:45,520 --> 00:15:49,960 Speaker 7: year old, that if in fact there's a majority in 283 00:15:50,040 --> 00:15:56,560 Speaker 7: the next elections for Madame Lupinn, he could become a 284 00:15:56,680 --> 00:16:00,000 Speaker 7: very important part of the political life. And of course 285 00:16:00,080 --> 00:16:06,320 Speaker 7: he's very untested. The President Macon had promoted Monsieur Taala 286 00:16:06,760 --> 00:16:10,560 Speaker 7: as a younger if you want, politician, although older than Bordella, 287 00:16:11,080 --> 00:16:15,520 Speaker 7: and in the recent debates around the key topics around 288 00:16:15,520 --> 00:16:19,480 Speaker 7: electrification et cetera, it was very clear that mister Baldella 289 00:16:19,640 --> 00:16:22,680 Speaker 7: was not really prepared for such a mandate. And I 290 00:16:22,720 --> 00:16:25,200 Speaker 7: think that's the point that McCoy is trying to make. 291 00:16:25,680 --> 00:16:30,200 Speaker 7: Bring them in and see how they will or will 292 00:16:30,240 --> 00:16:33,320 Speaker 7: not be able to do as a big part of 293 00:16:33,360 --> 00:16:37,240 Speaker 7: the government and hopefully influence in his mind the next 294 00:16:37,240 --> 00:16:40,640 Speaker 7: elections in a couple of years in twenty seven. 295 00:16:41,000 --> 00:16:43,320 Speaker 5: All right, So, Reginia, given all that backdrop here that 296 00:16:43,360 --> 00:16:45,640 Speaker 5: we've seen over the last again couple of days coming 297 00:16:45,640 --> 00:16:49,400 Speaker 5: out of Europe at alliance, how do you think about just, 298 00:16:50,080 --> 00:16:53,000 Speaker 5: you know, allocating capital across the globe. I mean, how 299 00:16:53,000 --> 00:16:56,320 Speaker 5: do you think that Europe versus the US versus is 300 00:16:56,400 --> 00:16:57,640 Speaker 5: friends on sales. 301 00:16:57,560 --> 00:16:58,520 Speaker 3: Friends on sales. 302 00:16:58,520 --> 00:16:59,120 Speaker 6: That's simple. 303 00:17:00,120 --> 00:17:02,320 Speaker 7: You might be able to buy it a bit cheaper. 304 00:17:02,680 --> 00:17:06,720 Speaker 7: I mean, in general, the European markets are quite cheap. 305 00:17:07,560 --> 00:17:10,320 Speaker 7: Of course, what you have supporting the markets is also 306 00:17:10,560 --> 00:17:15,280 Speaker 7: the rate cuts taking place ahead of the FED. And 307 00:17:15,280 --> 00:17:17,320 Speaker 7: of course what are the next ones? When are the 308 00:17:17,320 --> 00:17:20,399 Speaker 7: next one? Is the big questions. You also have some 309 00:17:20,560 --> 00:17:26,919 Speaker 7: interesting themes around electrification, around industrials and and and the 310 00:17:27,119 --> 00:17:30,400 Speaker 7: energy transition. So we have not only the climate transition 311 00:17:30,520 --> 00:17:33,479 Speaker 7: but also the energy transition given what's happening with Russia, 312 00:17:34,040 --> 00:17:37,360 Speaker 7: and that is an important part of investment that I 313 00:17:37,440 --> 00:17:40,879 Speaker 7: think is interesting for global investors. 314 00:17:41,160 --> 00:17:43,800 Speaker 2: This has been very valuable Virginie Messina, who thank you 315 00:17:43,840 --> 00:17:47,560 Speaker 2: so much with allions as we are audible towards the turmoil, 316 00:17:47,600 --> 00:17:48,640 Speaker 2: the political. 317 00:17:48,200 --> 00:17:56,680 Speaker 3: Turmoil in France. How do you go summer claudiate USC? 318 00:17:57,320 --> 00:17:59,440 Speaker 6: I got to show up for class to do that. 319 00:17:59,480 --> 00:18:04,040 Speaker 2: Will running us now with parchment from USA and distinguished 320 00:18:04,680 --> 00:18:07,800 Speaker 2: at that as Lauren Goodwin, she strategius in New. 321 00:18:07,760 --> 00:18:08,720 Speaker 3: York life as well. 322 00:18:08,800 --> 00:18:13,240 Speaker 2: What was it like grinding and getting a deserved summicum 323 00:18:13,320 --> 00:18:15,840 Speaker 2: laudie at USC? Were you the only one in class 324 00:18:15,880 --> 00:18:16,680 Speaker 2: five days a week? 325 00:18:17,240 --> 00:18:19,639 Speaker 1: Well, they just hold class on the lawn, right, you. 326 00:18:19,720 --> 00:18:22,040 Speaker 3: Have to have economics on the law. 327 00:18:22,880 --> 00:18:25,280 Speaker 1: Really a whiteboard that rolls on wheels. I still have 328 00:18:25,280 --> 00:18:27,280 Speaker 1: one in my office. Actually it's a signature tree. 329 00:18:27,359 --> 00:18:28,160 Speaker 3: They literally would. 330 00:18:28,160 --> 00:18:31,679 Speaker 2: Roll the whiteboard out onto the lawn nose. 331 00:18:31,960 --> 00:18:33,639 Speaker 1: But I did take a skateboarder class. 332 00:18:33,880 --> 00:18:36,760 Speaker 5: You did take a skateboard to class. 333 00:18:37,600 --> 00:18:41,280 Speaker 2: I took a snowshovel and I'm lucky I got home. Lauren, 334 00:18:41,720 --> 00:18:45,280 Speaker 2: thanks for being with She worked for venerable firm. We've 335 00:18:45,320 --> 00:18:48,000 Speaker 2: done too much of the parlor game today. On the FED, 336 00:18:48,640 --> 00:18:50,840 Speaker 2: where's this fed going to be in a year or 337 00:18:50,880 --> 00:18:52,080 Speaker 2: in six months? 338 00:18:52,359 --> 00:18:54,879 Speaker 3: Do they have a plan or are they literally making 339 00:18:54,920 --> 00:18:56,600 Speaker 3: it up? Report the report? 340 00:18:57,320 --> 00:19:01,280 Speaker 1: I think that they're trying really hard to walk this 341 00:19:01,440 --> 00:19:05,280 Speaker 1: tightrope between really where they sit right now, which is 342 00:19:05,280 --> 00:19:08,320 Speaker 1: that the data are slowing. They believe they're restrictive, but 343 00:19:08,359 --> 00:19:10,440 Speaker 1: they want to make sure that that doesn't turn into 344 00:19:10,480 --> 00:19:13,919 Speaker 1: a policy mistake of being restrictive for too long. I 345 00:19:13,920 --> 00:19:16,520 Speaker 1: think that the challenge that they face on the six 346 00:19:16,600 --> 00:19:18,960 Speaker 1: to twelve month time horizon is that we're in a 347 00:19:19,200 --> 00:19:24,000 Speaker 1: very capital intensive phase of economic activity. That's related to 348 00:19:24,080 --> 00:19:29,280 Speaker 1: artificial intelligence, it's related to electrification and infrastructure. This is 349 00:19:29,359 --> 00:19:33,680 Speaker 1: a policy environment but also a corporate spending environment that's 350 00:19:34,000 --> 00:19:37,040 Speaker 1: constructive for economic activity, and that's going to be one. 351 00:19:37,040 --> 00:19:40,560 Speaker 1: We're getting inflation closer to two percent. Allowing them to 352 00:19:41,160 --> 00:19:43,320 Speaker 1: pull rates back to two and a half percent is 353 00:19:43,440 --> 00:19:44,320 Speaker 1: just going to take time. 354 00:19:44,720 --> 00:19:47,159 Speaker 5: So there's a lot of folks out there in academia 355 00:19:47,280 --> 00:19:49,879 Speaker 5: and in practice in the marketplace that are saying the 356 00:19:49,880 --> 00:19:51,800 Speaker 5: FED is missing the boat already. They need to be 357 00:19:51,840 --> 00:19:52,480 Speaker 5: cutting rates. 358 00:19:52,800 --> 00:19:53,440 Speaker 8: Now. 359 00:19:53,480 --> 00:19:54,560 Speaker 5: What do you say to those folks? 360 00:19:55,880 --> 00:19:59,840 Speaker 1: I tend to agree on the idea of the PI 361 00:20:00,280 --> 00:20:02,119 Speaker 1: that the time may be now for the pivot, and 362 00:20:02,119 --> 00:20:06,159 Speaker 1: that's because we are seeing not the aggregate economy, but 363 00:20:06,320 --> 00:20:11,000 Speaker 1: areas of interest rate sensitive sectors, areas of lower income consumers, 364 00:20:11,400 --> 00:20:14,560 Speaker 1: businesses that use banks or floating rate credit to borrow. 365 00:20:15,040 --> 00:20:17,520 Speaker 1: And that's been the case that that turning point has 366 00:20:17,560 --> 00:20:20,240 Speaker 1: been taking place over the past couple of years. And 367 00:20:20,320 --> 00:20:23,080 Speaker 1: so if we are looking to soft land the economy, 368 00:20:23,080 --> 00:20:25,480 Speaker 1: I think the evidence is in that inflation is moving 369 00:20:25,560 --> 00:20:28,439 Speaker 1: reliably downward. That's something that's that's that's been clear to 370 00:20:28,480 --> 00:20:30,680 Speaker 1: me over the last six months, and so I do 371 00:20:30,720 --> 00:20:33,159 Speaker 1: think that if the FED we're looking to extend the 372 00:20:33,240 --> 00:20:34,760 Speaker 1: cycle soon would. 373 00:20:34,520 --> 00:20:37,960 Speaker 2: Be the time bring your economics over to investment a 374 00:20:38,040 --> 00:20:42,800 Speaker 2: bond portfolio, in equity portfolio, do you need to set 375 00:20:42,800 --> 00:20:47,879 Speaker 2: your actuarial assumption higher because of higher for longer or 376 00:20:47,920 --> 00:20:50,919 Speaker 2: because of a new reset in our start? 377 00:20:51,400 --> 00:20:54,320 Speaker 1: I believe that you do. Our star I believe has 378 00:20:54,359 --> 00:20:56,840 Speaker 1: moved a bit higher as a result of this capital 379 00:20:56,880 --> 00:21:00,119 Speaker 1: intensive stage of economic growth that we're in. And it's 380 00:21:00,160 --> 00:21:05,240 Speaker 1: an environment where even in a traditional investor portfolio, you 381 00:21:05,960 --> 00:21:08,360 Speaker 1: investors may be missing the point in the transition point 382 00:21:08,400 --> 00:21:08,879 Speaker 1: we're looking at. 383 00:21:09,000 --> 00:21:11,520 Speaker 2: Okay, so what an actual assumption If you're popping six 384 00:21:11,560 --> 00:21:13,879 Speaker 2: percent and you're telling me I have to go to 385 00:21:13,960 --> 00:21:16,600 Speaker 2: seven percent, that means I have to put more funding 386 00:21:17,480 --> 00:21:20,280 Speaker 2: into my institutional or retail retirement account. 387 00:21:20,320 --> 00:21:21,160 Speaker 1: Right, Yes, that's right. 388 00:21:21,840 --> 00:21:22,720 Speaker 3: This is a big deal. 389 00:21:22,840 --> 00:21:23,560 Speaker 5: I know. 390 00:21:23,600 --> 00:21:26,199 Speaker 3: I mean, this is the government's way behind on this. 391 00:21:26,600 --> 00:21:30,000 Speaker 2: There should be increased levels in four oh one ki R. Yeah, 392 00:21:30,080 --> 00:21:31,680 Speaker 2: and pension and profit share. 393 00:21:31,480 --> 00:21:34,640 Speaker 5: On the sweeney offsprings are all maxing album the full 394 00:21:34,640 --> 00:21:37,480 Speaker 5: one kg and guarantee you that, Lauren, I love your 395 00:21:37,520 --> 00:21:40,400 Speaker 5: notes here. You give us some high conviction ideas here. 396 00:21:40,680 --> 00:21:42,720 Speaker 5: You say that equity valuations are high. A lot of 397 00:21:42,720 --> 00:21:46,239 Speaker 5: folks believe that. All right, what do I deal? I'm 398 00:21:46,280 --> 00:21:47,560 Speaker 5: not going to sell? Well, what do I do here? 399 00:21:47,880 --> 00:21:50,399 Speaker 5: If I feel like equity valuations are high? What are 400 00:21:50,440 --> 00:21:51,119 Speaker 5: my alternatives? 401 00:21:51,160 --> 00:21:53,199 Speaker 1: Look, I think that you have to stay invested, and 402 00:21:53,240 --> 00:21:55,399 Speaker 1: so what I'm about to say is not sell off 403 00:21:55,440 --> 00:21:57,240 Speaker 1: all your equity and put it into somewhere else. But 404 00:21:57,280 --> 00:21:59,520 Speaker 1: I do think that we've seen considerable gains, and the 405 00:21:59,560 --> 00:22:02,760 Speaker 1: average investor, if they had a sixty forty portfolio a 406 00:22:02,840 --> 00:22:04,840 Speaker 1: year ago or two years ago, they don't have that now. 407 00:22:05,119 --> 00:22:06,720 Speaker 1: And so if the question is where do I put 408 00:22:06,800 --> 00:22:09,960 Speaker 1: new money or where do I put those gains? I 409 00:22:10,000 --> 00:22:12,240 Speaker 1: think that given where we are in the cycle and 410 00:22:12,280 --> 00:22:14,760 Speaker 1: the strength that we've seen in the credit market, we've 411 00:22:14,760 --> 00:22:17,719 Speaker 1: got an environment where those equity market gains may be 412 00:22:17,720 --> 00:22:21,800 Speaker 1: better activated in fixed income and specifically in high yield. Okay, 413 00:22:21,800 --> 00:22:24,919 Speaker 1: it's a sector that, while of course risks arising for 414 00:22:25,000 --> 00:22:29,200 Speaker 1: the market as a whole, you have an interesting high coupon. 415 00:22:29,520 --> 00:22:32,720 Speaker 1: We're also seeing investors start to diversify their US equity 416 00:22:32,800 --> 00:22:36,080 Speaker 1: into international equity and move their cash into short duration 417 00:22:36,480 --> 00:22:38,520 Speaker 1: fixed income to try to lock in the higher rates 418 00:22:38,520 --> 00:22:41,320 Speaker 1: that we have. You think the FED cuts in September 419 00:22:41,400 --> 00:22:45,480 Speaker 1: or December or even January, the next couple of months 420 00:22:45,480 --> 00:22:48,200 Speaker 1: are historically the time to get in to capture those 421 00:22:48,280 --> 00:22:50,240 Speaker 1: higher yields before the market starts to react. 422 00:22:50,960 --> 00:22:52,399 Speaker 5: You know, we've been talking Tom and I have been 423 00:22:52,480 --> 00:22:56,320 Speaker 5: this morning about Apple and AI. How do you guys 424 00:22:56,359 --> 00:22:59,480 Speaker 5: think about AI? Is that's something you invest You just 425 00:22:59,520 --> 00:23:02,359 Speaker 5: own and say, okay, I've got my AI trader. How 426 00:23:02,400 --> 00:23:03,359 Speaker 5: do you guys think about that? 427 00:23:03,400 --> 00:23:05,080 Speaker 1: You know, this is something over the past year that 428 00:23:05,119 --> 00:23:06,960 Speaker 1: we've taken a deep dive on, not just in the 429 00:23:07,000 --> 00:23:09,920 Speaker 1: investment arm of our company, but also in the corporate 430 00:23:09,920 --> 00:23:13,000 Speaker 1: insurance company, working together to understand what these trends might 431 00:23:13,040 --> 00:23:15,359 Speaker 1: look like. There's a couple of ways to think about it. 432 00:23:15,480 --> 00:23:18,359 Speaker 1: I think First, the areas of the market, the Magnificent 433 00:23:18,440 --> 00:23:21,000 Speaker 1: seven that have already seen gains from AI. It's going 434 00:23:21,040 --> 00:23:23,959 Speaker 1: to be very difficult to displace these companies. That's because 435 00:23:24,000 --> 00:23:27,280 Speaker 1: the cost the barriers to entry of this foundational layer 436 00:23:27,320 --> 00:23:30,000 Speaker 1: of technology are just very high. They're doing good work 437 00:23:30,040 --> 00:23:33,119 Speaker 1: that people want, but it takes a lot of power 438 00:23:33,119 --> 00:23:35,200 Speaker 1: and infrastructure to do those things. So we think there's 439 00:23:35,200 --> 00:23:38,480 Speaker 1: a physical layer of artificial intelligence that can be invested 440 00:23:38,520 --> 00:23:42,159 Speaker 1: in via equity, bonds, real estate, and in the future 441 00:23:42,160 --> 00:23:45,240 Speaker 1: it's going to be regulation and ethics that shape corporate 442 00:23:45,320 --> 00:23:46,320 Speaker 1: use cases. We're not there yet. 443 00:23:46,400 --> 00:23:47,879 Speaker 2: I don't want you to get in trouble with the 444 00:23:47,920 --> 00:23:51,240 Speaker 2: general counsul of New York Life, but CIRE is not 445 00:23:51,400 --> 00:23:55,000 Speaker 2: getting fun. I mean, just in the last month thirty days, 446 00:23:55,480 --> 00:23:58,600 Speaker 2: it's really deteriorated. What's the fear level there? 447 00:23:59,040 --> 00:24:01,440 Speaker 1: You know, the fear level I would say is aware 448 00:24:01,680 --> 00:24:05,320 Speaker 1: but not fearful, if that makes sense. So a couple 449 00:24:05,320 --> 00:24:07,080 Speaker 1: of things. First, when we look at a global real 450 00:24:07,200 --> 00:24:10,040 Speaker 1: estate portfolio, we believe the bottom is in and other 451 00:24:10,119 --> 00:24:13,520 Speaker 1: parts of the world, including in Asia and in Europe 452 00:24:13,840 --> 00:24:16,440 Speaker 1: where office space is being used more. In the US, 453 00:24:16,520 --> 00:24:18,879 Speaker 1: there's still price discovery happening. That's a lot of the 454 00:24:18,920 --> 00:24:22,680 Speaker 1: newsflow that we see. There's a lot of what we're 455 00:24:22,720 --> 00:24:25,359 Speaker 1: seeing in the news over the past couple of couple 456 00:24:25,400 --> 00:24:29,040 Speaker 1: of a couple of weeks. But when we think about, 457 00:24:29,160 --> 00:24:31,879 Speaker 1: you know, what do you do now? It is very 458 00:24:31,960 --> 00:24:35,040 Speaker 1: likely that we're going to continue to see valuations written down, 459 00:24:35,200 --> 00:24:37,840 Speaker 1: much in the way that's happened in brick and mortar 460 00:24:37,920 --> 00:24:41,760 Speaker 1: retail over the last decade. I think that these write 461 00:24:41,800 --> 00:24:45,520 Speaker 1: downs continue over the next several years. But commercial real 462 00:24:45,600 --> 00:24:49,160 Speaker 1: estate is diversified differently from office I think regional banks 463 00:24:49,160 --> 00:24:53,399 Speaker 1: are less allocated to real estate than is typically appreciated, 464 00:24:53,440 --> 00:24:57,080 Speaker 1: and so this is a painful piece for investors in 465 00:24:57,119 --> 00:24:59,800 Speaker 1: their portfolio. Across the board. It's going to take time 466 00:24:59,840 --> 00:25:03,199 Speaker 1: to play out. But the systemic risk, all investors have 467 00:25:03,280 --> 00:25:04,880 Speaker 1: their eye on that, So I'm not as concerned. 468 00:25:04,960 --> 00:25:06,280 Speaker 3: Okay, Lauren, thank you so much. 469 00:25:06,320 --> 00:25:19,120 Speaker 8: Lauren goodred with us in New York Life. 470 00:25:19,600 --> 00:25:20,520 Speaker 3: This is a surprise. 471 00:25:20,720 --> 00:25:23,160 Speaker 2: Yeah, let me describe it for you as a best 472 00:25:23,280 --> 00:25:27,880 Speaker 2: I can Apple one ninety six comes down, one ninety three, 473 00:25:28,040 --> 00:25:30,840 Speaker 2: doom and gloom, and then everybody read Gene Munster, Paul, 474 00:25:31,280 --> 00:25:34,320 Speaker 2: and we got a moonshot on opening trading right up 475 00:25:34,359 --> 00:25:39,080 Speaker 2: buttressed against one ninety eight. That's Apple up five dollars 476 00:25:39,119 --> 00:25:40,920 Speaker 2: off the gloom of yesterday afternoon. 477 00:25:41,000 --> 00:25:43,080 Speaker 5: Yeah, stock an early trading tom up two point four 478 00:25:43,160 --> 00:25:46,040 Speaker 5: per hundred ninety eight dollars. It gives you a market 479 00:25:46,080 --> 00:25:50,000 Speaker 5: cap three point zero three trillion dollars. Stocks up about 480 00:25:50,000 --> 00:25:51,280 Speaker 5: twenty percent year to date. 481 00:25:51,440 --> 00:25:54,040 Speaker 2: What a joy to speak to Mark German of Bloomberg 482 00:25:54,080 --> 00:25:56,960 Speaker 2: News yesterday. Definitive on Apple. Let's listen. 483 00:25:57,640 --> 00:26:01,240 Speaker 9: You saw nothing today that's better than the competition. You 484 00:26:01,320 --> 00:26:05,880 Speaker 9: saw nothing today that's different from the competition except marketing 485 00:26:06,000 --> 00:26:09,480 Speaker 9: and a focus on privacy. Right, So that's the difference here. 486 00:26:10,080 --> 00:26:12,560 Speaker 9: They're not the first, but they're also not the best, 487 00:26:12,760 --> 00:26:15,600 Speaker 9: and they're not the most advanced. They're here extremely late, 488 00:26:16,240 --> 00:26:18,399 Speaker 9: and they showed up to the party without a gift. 489 00:26:19,080 --> 00:26:20,919 Speaker 2: It showed up to the party, and we saw it. 490 00:26:21,000 --> 00:26:24,080 Speaker 2: Yesterday's full disclosure. I turned it off after sixteen minutes 491 00:26:24,480 --> 00:26:26,920 Speaker 2: because I knew Genemunster would tell us what the hell 492 00:26:26,960 --> 00:26:30,800 Speaker 2: happened yesterday deep water asset managements at Gene Monster. 493 00:26:31,280 --> 00:26:32,800 Speaker 3: Jane, I saw your Twitter feed. 494 00:26:32,840 --> 00:26:35,919 Speaker 2: It's simple. The market listened to Gene Munster. Why is 495 00:26:36,080 --> 00:26:41,200 Speaker 2: Apple up five dollars off the gloom of five pm yesterday. 496 00:26:43,000 --> 00:26:46,120 Speaker 10: The reasons it up is because that even though these 497 00:26:46,119 --> 00:26:49,439 Speaker 10: features are features that we have seen that those that 498 00:26:49,480 --> 00:26:52,200 Speaker 10: have been following AI for the past year have seen 499 00:26:52,240 --> 00:26:55,200 Speaker 10: from other companies, the reason why this dock goes up 500 00:26:55,280 --> 00:26:57,840 Speaker 10: is these features are now going to be brought to 501 00:26:58,320 --> 00:27:02,400 Speaker 10: Apple users for the first time. They are transformative, and 502 00:27:02,520 --> 00:27:05,879 Speaker 10: Apple is going to require you to upgrade your hardware 503 00:27:06,400 --> 00:27:10,000 Speaker 10: to get access to these and so about eighty five 504 00:27:10,119 --> 00:27:12,879 Speaker 10: percent of the Apple hardware is going to be needed 505 00:27:12,880 --> 00:27:15,600 Speaker 10: to upgrade. And at the most basic level is that 506 00:27:16,200 --> 00:27:18,639 Speaker 10: these features are going to be something that I believe 507 00:27:18,720 --> 00:27:20,719 Speaker 10: consumers are going to want. 508 00:27:20,920 --> 00:27:26,040 Speaker 2: When will the cell side modify their what ifs, their 509 00:27:26,119 --> 00:27:32,280 Speaker 2: margins ratios, their free cash flow guesstimates? Does that happen now? 510 00:27:32,720 --> 00:27:36,080 Speaker 2: Does it happen ninety days from now? Does it happen 511 00:27:36,119 --> 00:27:37,560 Speaker 2: in twenty twenty six. 512 00:27:39,280 --> 00:27:42,359 Speaker 10: I think what you'll see is maybe twenty percent of 513 00:27:42,400 --> 00:27:44,760 Speaker 10: the analysts are generally on board with this is going 514 00:27:44,840 --> 00:27:46,919 Speaker 10: to have a nice lift over the next one to 515 00:27:46,960 --> 00:27:49,320 Speaker 10: three years, and so you'll see some of those changes 516 00:27:49,720 --> 00:27:52,639 Speaker 10: probably before they report the June quarter. So call it 517 00:27:52,680 --> 00:27:55,480 Speaker 10: in the next month or so, and then you'll see 518 00:27:55,520 --> 00:27:58,080 Speaker 10: the next phase, call it thirty percent will come in 519 00:27:58,200 --> 00:28:01,440 Speaker 10: after the next iPhones come out, which will be middle 520 00:28:01,440 --> 00:28:05,320 Speaker 10: of September, and then the laggards, the fifty percent, will 521 00:28:05,320 --> 00:28:09,800 Speaker 10: probably come in early, probably when they report their December 522 00:28:09,920 --> 00:28:12,320 Speaker 10: quarter of twenty twenty four, so that will be early 523 00:28:12,359 --> 00:28:15,080 Speaker 10: in twenty five. But I think that the trajectory of 524 00:28:15,119 --> 00:28:19,399 Speaker 10: this is you want to own stocks ahead of positive 525 00:28:19,440 --> 00:28:22,119 Speaker 10: earnings revisions, and I think over the next six to 526 00:28:22,200 --> 00:28:23,720 Speaker 10: nine months we're going to see those. And just to 527 00:28:23,800 --> 00:28:26,720 Speaker 10: kind of put a final thought on what the magnitude 528 00:28:26,720 --> 00:28:29,600 Speaker 10: of those revisions are, is that we're talking about growth 529 00:28:29,640 --> 00:28:33,359 Speaker 10: going from call it two percent in calendar twenty four 530 00:28:34,000 --> 00:28:37,359 Speaker 10: to around ten percent in calendar twenty five and maybe 531 00:28:37,480 --> 00:28:41,200 Speaker 10: twelve percent in calendar twenty six. So it's a nice 532 00:28:41,200 --> 00:28:43,720 Speaker 10: move higher. It's a far cry from what we've seen 533 00:28:43,720 --> 00:28:46,640 Speaker 10: from some of these other aipower companies in terms of 534 00:28:46,680 --> 00:28:50,959 Speaker 10: their growth rates, but it is for Apple, up twelve percent, 535 00:28:51,040 --> 00:28:53,680 Speaker 10: up ten percent is much better than the down two 536 00:28:54,280 --> 00:28:56,320 Speaker 10: that they have reported on average per quarter for the 537 00:28:56,400 --> 00:28:57,360 Speaker 10: last year and a half. 538 00:28:57,520 --> 00:29:00,840 Speaker 2: Paul Apple off the April gloom, that's where I sold 539 00:29:00,880 --> 00:29:02,920 Speaker 2: everything up percent. 540 00:29:02,720 --> 00:29:06,560 Speaker 5: Now zero perfect timing. Again, Hey Geene, I'm out here 541 00:29:06,600 --> 00:29:12,240 Speaker 5: sporting an iPhone eleven? Is this changed to a Is 542 00:29:12,240 --> 00:29:13,880 Speaker 5: that going to prompt me to get back into the 543 00:29:13,920 --> 00:29:15,960 Speaker 5: Apple Store and upgrade in September? 544 00:29:17,240 --> 00:29:18,080 Speaker 6: I think it will. 545 00:29:18,120 --> 00:29:21,600 Speaker 10: And again, I think that this is the fundamental piece 546 00:29:21,680 --> 00:29:25,280 Speaker 10: that a lot of those who just analyze this so 547 00:29:25,400 --> 00:29:28,840 Speaker 10: closely are focused on the trees versus the forest. Is 548 00:29:28,880 --> 00:29:32,000 Speaker 10: that I think that people like you are going to 549 00:29:32,080 --> 00:29:36,160 Speaker 10: see these features and want to get upgraded. And maybe 550 00:29:36,200 --> 00:29:38,840 Speaker 10: in your case, you're probably due for an upgrade either way. 551 00:29:38,880 --> 00:29:41,320 Speaker 10: But I think in the case of many people who 552 00:29:41,360 --> 00:29:43,680 Speaker 10: are three years out, I think that they're going to 553 00:29:43,720 --> 00:29:47,320 Speaker 10: see these features and undoubtedly want them. This is the 554 00:29:47,360 --> 00:29:51,400 Speaker 10: biggest change in Apple since the iPhone came out, and 555 00:29:51,400 --> 00:29:53,960 Speaker 10: that's a bold statement, but just to put some perspective 556 00:29:54,000 --> 00:29:56,840 Speaker 10: on it. Over the past, call it fifteen or so 557 00:29:56,960 --> 00:29:59,480 Speaker 10: years since the iPhone came out, what we have seen 558 00:29:59,640 --> 00:30:01,720 Speaker 10: is that, you know, we've had things like Vision Pro, 559 00:30:01,800 --> 00:30:06,240 Speaker 10: We've had services like Apple TV Plus, we've had the iPad, 560 00:30:06,320 --> 00:30:09,640 Speaker 10: we've had the App Store. Those have been kind of 561 00:30:09,640 --> 00:30:14,400 Speaker 10: the cornerstone announcements. But what this fundamentally does is change 562 00:30:14,440 --> 00:30:16,959 Speaker 10: the way that we interact with these devices. It's going 563 00:30:17,000 --> 00:30:19,520 Speaker 10: to add more value and Paul, I think that that 564 00:30:19,640 --> 00:30:22,560 Speaker 10: is going to be a major catalyst for upgrades here. 565 00:30:23,120 --> 00:30:26,480 Speaker 5: So it's interesting, Gene. I'm certainly ready for it. You're right, 566 00:30:26,800 --> 00:30:28,959 Speaker 5: I need to get out there and upgrade. But so, 567 00:30:30,200 --> 00:30:34,040 Speaker 5: how do you think Apple is really approaching AI? Gene? 568 00:30:34,520 --> 00:30:36,880 Speaker 5: Is this kind of like the first salvo in what 569 00:30:36,920 --> 00:30:40,000 Speaker 5: will be a kind of a multiple product or multiple 570 00:30:40,040 --> 00:30:43,640 Speaker 5: software kind of approach to really capturing AI in some 571 00:30:43,720 --> 00:30:44,640 Speaker 5: of the use cases? 572 00:30:46,600 --> 00:30:48,680 Speaker 6: It is, This is definitely the first step. 573 00:30:48,720 --> 00:30:52,280 Speaker 10: And I think what we've seen is this distinction between 574 00:30:52,440 --> 00:30:56,680 Speaker 10: small versus large models, and so from a consumer perspective, 575 00:30:56,720 --> 00:30:58,440 Speaker 10: you don't need to worry about that, no need to 576 00:30:58,440 --> 00:31:01,720 Speaker 10: think about what the distinction is. But Apple is really 577 00:31:01,760 --> 00:31:04,680 Speaker 10: tackling the small models first. That's going to be that's 578 00:31:04,680 --> 00:31:05,959 Speaker 10: going to be the parts of it that are going 579 00:31:06,000 --> 00:31:08,560 Speaker 10: to do things related to our photos and our messages. 580 00:31:08,920 --> 00:31:10,960 Speaker 10: All that data is going to be kept encrypted in 581 00:31:11,000 --> 00:31:15,000 Speaker 10: private on your device, but the things that you can 582 00:31:15,080 --> 00:31:18,360 Speaker 10: do with that is relatively limited. To put in a 583 00:31:18,400 --> 00:31:22,280 Speaker 10: perspective that we measure the intelligence on these models in 584 00:31:22,360 --> 00:31:25,560 Speaker 10: terms of parameters in the case of these models. These 585 00:31:25,600 --> 00:31:28,240 Speaker 10: are three billion parameter models. That's a three billion parameter 586 00:31:28,280 --> 00:31:31,640 Speaker 10: model GPT four. They haven't disclosed what that is, but 587 00:31:31,680 --> 00:31:34,880 Speaker 10: it's probably around a trillion, and so this is an 588 00:31:34,960 --> 00:31:37,440 Speaker 10: order of magnitude different. They need to get more to 589 00:31:37,480 --> 00:31:39,719 Speaker 10: answer question Paul, in the next three to five years, 590 00:31:40,080 --> 00:31:42,840 Speaker 10: to get more into those large language models to really 591 00:31:42,880 --> 00:31:44,600 Speaker 10: have control of their AI future. 592 00:31:45,280 --> 00:31:49,080 Speaker 2: Jane Eric Schmidt didn't walk out on stage yesterday. Is 593 00:31:49,120 --> 00:31:52,440 Speaker 2: there any continuing dialogue with Google to me the bombshell, 594 00:31:53,040 --> 00:31:56,720 Speaker 2: even with a litigation various and sundry governments going after them. 595 00:31:57,200 --> 00:31:59,080 Speaker 2: I mean, I guess they got a linkage of Apple 596 00:31:59,120 --> 00:32:02,040 Speaker 2: and Microsoft's open AI, but am I going to get 597 00:32:02,080 --> 00:32:04,640 Speaker 2: a relationship between Apple and Google? 598 00:32:06,240 --> 00:32:08,200 Speaker 10: So that's going to have This is going to have 599 00:32:08,280 --> 00:32:11,040 Speaker 10: some formative impact. And just to quickly recap as Google 600 00:32:11,080 --> 00:32:14,360 Speaker 10: pays Apple somewhere between thirteen and fifteen billion dollars a 601 00:32:14,440 --> 00:32:18,479 Speaker 10: year to have Google as the default in your Safari browser, 602 00:32:18,600 --> 00:32:19,520 Speaker 10: so it's a big number. 603 00:32:19,920 --> 00:32:21,720 Speaker 6: Google has a product that. 604 00:32:21,720 --> 00:32:25,320 Speaker 10: Competes with Opening Eyes GPT that they didn't get the business, 605 00:32:25,520 --> 00:32:28,440 Speaker 10: so they're probably frustrated with that, but that's beyond the point. 606 00:32:28,760 --> 00:32:31,600 Speaker 10: What the point is is that Google makes their decisions 607 00:32:31,600 --> 00:32:34,760 Speaker 10: based on data, and if it continues to be profitable 608 00:32:34,800 --> 00:32:37,600 Speaker 10: for them to pay Apple thirteen plus. 609 00:32:37,400 --> 00:32:38,880 Speaker 6: Billion dollars a year, they'll do that. 610 00:32:39,320 --> 00:32:43,880 Speaker 10: But one aspect here, as Apple integrates GPT into their experience, 611 00:32:44,240 --> 00:32:48,040 Speaker 10: people will Google search less, and so I suspect that 612 00:32:48,160 --> 00:32:51,440 Speaker 10: the value of the deal with Google will diminish over 613 00:32:51,520 --> 00:32:53,880 Speaker 10: time because it's simply there's just going to be more 614 00:32:54,040 --> 00:32:56,800 Speaker 10: usage that's going to be shifting towards GPT. 615 00:32:57,000 --> 00:32:58,120 Speaker 6: Apple did say. 616 00:32:58,080 --> 00:33:00,440 Speaker 10: They will eventually allow you to plug M and I 617 00:33:00,560 --> 00:33:03,720 Speaker 10: into some of their base applications, so we'll see how 618 00:33:03,800 --> 00:33:05,440 Speaker 10: that plays out longer term. 619 00:33:05,560 --> 00:33:08,440 Speaker 2: I got another hour of questions Geene monster, thank you 620 00:33:08,480 --> 00:33:11,080 Speaker 2: so much, and I should find out mister Munster deep 621 00:33:11,160 --> 00:33:14,080 Speaker 2: water just tireless out on LinkedIn and Twitter. 622 00:33:14,240 --> 00:33:17,440 Speaker 3: Just I mean, he was the informative voice yesterday. 623 00:33:17,560 --> 00:33:20,600 Speaker 2: Absolutely everybody else is doing their thing and Gene's d vailue. 624 00:33:20,680 --> 00:33:22,600 Speaker 5: I mean, you know, Gene put in context a while 625 00:33:22,600 --> 00:33:24,480 Speaker 5: ago to talk about it, AI. I mean he puts 626 00:33:24,520 --> 00:33:29,240 Speaker 5: it right up there with electricity as to the impact 627 00:33:29,480 --> 00:33:33,160 Speaker 5: upon you know, yes, I feel in consumers, and he 628 00:33:33,240 --> 00:33:36,040 Speaker 5: puts the Internet at like forty just to give you 629 00:33:36,040 --> 00:33:39,720 Speaker 5: a sense of scale and magnitude of how Gene views 630 00:33:40,160 --> 00:33:42,520 Speaker 5: AI and its impact on technology. 631 00:33:43,000 --> 00:33:46,200 Speaker 2: This is a Bloomberg Surveillance podcast, bringing you the best 632 00:33:46,240 --> 00:33:51,000 Speaker 2: in economics, finance, investment, and international relations. You can also 633 00:33:51,080 --> 00:33:53,120 Speaker 2: watch the show live on YouTube. 634 00:33:53,480 --> 00:33:54,959 Speaker 3: Visit the Bloomberg. 635 00:33:54,560 --> 00:33:59,080 Speaker 2: Podcast channel on YouTube to see the show weekday mornings 636 00:33:59,080 --> 00:34:02,560 Speaker 2: from seven to ten Eastern from our global headquarters in 637 00:34:02,640 --> 00:34:06,360 Speaker 2: New York City. Subscribe to the podcast on Apple, Spotify, 638 00:34:06,720 --> 00:34:10,240 Speaker 2: or anywhere else you listen, and always on Bloomberg Radio, 639 00:34:10,440 --> 00:34:13,640 Speaker 2: the Bloomberg Terminal, and the Bloomberg Business app.