WEBVTT - PCE Breakdown and an AI Blowout 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.960 --> 0:00:15.560 This is the Bloomberg Surveillance Podcast. I'm Tom Keene along 0:00:15.600 --> 0:00:18.960 with Paul Sweeney. Join us each day for insight from 0:00:18.960 --> 0:00:23.119 the best in economics, finance, investment, and international relations. You 0:00:23.160 --> 0:00:25.800 can also watch the show live on YouTube. 0:00:26.120 --> 0:00:27.640 Visit the Bloomberg. 0:00:27.200 --> 0:00:31.760 Podcast channel on YouTube to see the show weekday mornings 0:00:31.760 --> 0:00:35.000 from seven to ten am Eastern from our global headquarters 0:00:35.159 --> 0:00:39.000 in New York City. Subscribe to the podcast on Apple, Spotify, 0:00:39.360 --> 0:00:42.920 or anywhere else you listen, and always I'm Bloomberg Radio, 0:00:43.080 --> 0:00:47.240 the Bloomberg Terminal, and the Bloomberg Business App. DOTTA was 0:00:47.280 --> 0:00:49.560 in the tantrum, going to hang up if I didn't 0:00:49.560 --> 0:00:50.640 ask about the real wage. 0:00:50.720 --> 0:00:52.920 Let's go there with a guy who predicted this. 0:00:53.080 --> 0:00:56.360 He was just outstanding of saying the negative gloom of 0:00:56.440 --> 0:01:00.640 negative real wages would flip to a positive real wage 0:01:00.880 --> 0:01:05.160 Neil Dota Renaissance Macro. Can you model positive real wages 0:01:05.319 --> 0:01:06.399 into the end of the year. 0:01:08.400 --> 0:01:11.640 You know, I think that's probable, but I think that's 0:01:11.720 --> 0:01:14.520 largely because inflation is going to be slowing, not because 0:01:16.240 --> 0:01:20.160 not because you know, nominal wage growth is going to accelerate, 0:01:20.280 --> 0:01:22.720 so you know, I think it's uh. I think that 0:01:22.800 --> 0:01:27.319 compositional story is important. You know, my optimism around real 0:01:27.360 --> 0:01:30.839 wage is improving is largely because I'm more confident, I think, 0:01:31.280 --> 0:01:34.360 relative to consensus, that inflation is cooling throughout the remainder 0:01:34.480 --> 0:01:36.480 of the year. If you look at what we've seen 0:01:36.520 --> 0:01:39.640 over the first quarter. Obviously it was a very strong 0:01:39.720 --> 0:01:42.959 quarter for inflation, as we all know and believe it 0:01:43.040 --> 0:01:45.880 or not, real wages didn't actually go up all that much, 0:01:45.920 --> 0:01:49.720 if at all, in Q one. So I think we 0:01:49.840 --> 0:01:53.320 have to be careful here about kind of tying the 0:01:53.400 --> 0:01:55.720 firm inflament because right now, Tom, it feels like to 0:01:55.760 --> 0:01:59.320 me that people look at the or the consensus looks 0:01:59.360 --> 0:02:01.520 at the strong and inflation numbers in the first quarter 0:02:01.800 --> 0:02:05.440 as reinforcing kind of like this inflationary boom like dynamic 0:02:05.480 --> 0:02:07.880 in the US economy. But I think when you take 0:02:07.920 --> 0:02:12.079 a step back with you know, we do know that 0:02:12.360 --> 0:02:15.000 wage growth has been moderating. Most of the forward looking 0:02:15.040 --> 0:02:17.359 indicators that we look at, you know, things like the 0:02:17.440 --> 0:02:22.600 quits rate posted wages suggests further cooling in in nominal 0:02:22.919 --> 0:02:27.480 compensation growth. If you have this sort of inflation continuing, 0:02:27.520 --> 0:02:29.320 you do need to start worrying a little bit about 0:02:29.320 --> 0:02:31.320 what that means for real wages and in turn what 0:02:31.360 --> 0:02:35.320 that means for consumer spending and corporate earnings. So you know, 0:02:35.440 --> 0:02:38.880 I mean, fortunately, I tend to think that inflation will slow, 0:02:38.960 --> 0:02:42.800 but I don't necessarily look at, you know, the inflation 0:02:42.880 --> 0:02:45.679 data in the first quarter as kind of reinforcing the 0:02:45.960 --> 0:02:48.320 stronger growth outlet. I actually think it presents a risk 0:02:48.360 --> 0:02:49.120 if it continues. 0:02:49.320 --> 0:02:52.400 All right, So you know, we've had a busy economic 0:02:52.639 --> 0:02:54.800 release schedule over the last twenty four hours with Q 0:02:54.840 --> 0:02:58.720 one GDP and then today's inflation. Can you wrap it 0:02:58.760 --> 0:03:01.840 all up for us in And how do you think 0:03:01.880 --> 0:03:04.320 the Fed is going to look at the last twenty 0:03:04.360 --> 0:03:05.359 four hours worth of data. 0:03:07.880 --> 0:03:09.480 I think they'll look at it and say, we have 0:03:09.560 --> 0:03:12.639 nothing to do right now. This sort of reinforces their 0:03:12.639 --> 0:03:15.679 belief that they have the benefit of time at the 0:03:15.800 --> 0:03:19.919 end of the day. I mean, you know, we have 0:03:20.080 --> 0:03:24.600 strong jobs growth and firm inflation. That's not a reason 0:03:24.600 --> 0:03:25.959 for them to cut rates at the moment. 0:03:27.280 --> 0:03:29.359 So all right, so let's kind of look ahead a 0:03:29.400 --> 0:03:33.520 little bit here. I mean, what is the inflation I mean, 0:03:33.520 --> 0:03:36.040 you think inflation is going to kind of moderate here 0:03:36.440 --> 0:03:37.440 in the back half of the year. 0:03:37.520 --> 0:03:40.840 If so, where will it moderate? Where will we see it? 0:03:43.280 --> 0:03:45.200 Well, I mean, ultimately I think it starts from the 0:03:45.280 --> 0:03:48.320 labor market on out. Okay, right, And you know, I 0:03:48.360 --> 0:03:50.720 think this sort of bottoms up approach is interesting, and 0:03:50.760 --> 0:03:53.000 certainly that's how people kind of nail the first quarter 0:03:53.040 --> 0:03:55.360 inflation data. But ultimately I think you have to stick 0:03:55.360 --> 0:03:58.280 to first principles. And what I rely on is basically 0:03:58.320 --> 0:04:01.400 a standard triangle model of inflation. You have embedded inflation 0:04:02.920 --> 0:04:05.360 or sort of an inflation expectations. You have a proxy 0:04:05.360 --> 0:04:07.600 for aggregate demand like the unemployment gap, and then you 0:04:07.640 --> 0:04:10.560 have some kind of cost push measure, right like exchange rates, 0:04:10.600 --> 0:04:13.680 import prices, something like that. So that's the standard triangle 0:04:13.720 --> 0:04:17.039 model of inflation that my former boss, Ethan Harris taught 0:04:17.080 --> 0:04:18.400 me about many many years. 0:04:18.279 --> 0:04:23.960 Ago in my mid Okay, here's let me lay out 0:04:24.000 --> 0:04:27.240 the next twenty minutes. Cam Dawson's waiting, she's having a tantrum. 0:04:27.240 --> 0:04:29.960 She's not on yet. I mean, we'll get cam Dawson 0:04:30.040 --> 0:04:32.839 out on the market's futures of forty two. It's a 0:04:32.880 --> 0:04:36.520 cam Dawson market, but we're doing Neil Dotta. Yes, we'll 0:04:36.520 --> 0:04:39.480 get to the New York Giants. But first Neil Dotta. 0:04:39.880 --> 0:04:42.279 Right where I wanted to go was Ethan Harris. 0:04:42.600 --> 0:04:43.200 Neil Dotta. 0:04:43.279 --> 0:04:49.560 Doctor Harris wrote a blistering LinkedIn article yesterday saying, would 0:04:49.600 --> 0:04:54.240 everybody wake up, calm down, and look at trim mean 0:04:54.600 --> 0:05:01.440 inflation statistics? Which is your favorite? Ethan Harris? A gusted inflation, 0:05:01.720 --> 0:05:06.279 Dallas Fed Cleveland this whichever? Which is Neil Dutta's favorite 0:05:06.720 --> 0:05:08.080 inflation statistic? 0:05:10.040 --> 0:05:13.000 Well, I mean, Ethan has been harping a lot on 0:05:13.040 --> 0:05:15.320 the trim mean inflation. I mean my pushback to that 0:05:15.440 --> 0:05:18.039 is that there's historically been a much higher I mean, 0:05:18.080 --> 0:05:20.000 there's an upward bias and a lot of these trim 0:05:20.040 --> 0:05:22.400 mean measures, trim mean median PC, they tend to run 0:05:22.440 --> 0:05:25.080 a lot higher than traditional core measures of inflation. If 0:05:25.080 --> 0:05:27.120 you go back to two thousand and eight as an example, 0:05:27.600 --> 0:05:30.799 trim mean inflation was running a lot hotter than traditional 0:05:30.800 --> 0:05:33.440 core and we I mean, could you imagine what would 0:05:33.480 --> 0:05:35.120 have happened if the FED was paying more attention to 0:05:35.120 --> 0:05:37.440 trim mean back then? You know, at any rate, I mean, 0:05:37.480 --> 0:05:39.560 what I meant to say with the triangle model is 0:05:39.560 --> 0:05:42.840 that if you go through these components, I mean inflation expectations. 0:05:42.880 --> 0:05:46.560 After coming down last year, they've kind of stabilized this year. 0:05:47.279 --> 0:05:50.440 Unit labor costs are slowing, right, I mean, and the 0:05:50.520 --> 0:05:53.719 dollar is stronger. So when you talk about slowing unit 0:05:53.800 --> 0:05:56.760 labor cost growth and firming dollar, where should we be 0:05:56.800 --> 0:06:00.520 about an upside inflation scenario? So I think you have 0:06:00.600 --> 0:06:03.080 to kind of stick with first principles. And you know, 0:06:03.160 --> 0:06:05.960 that's why I think we should the consensus should at 0:06:06.000 --> 0:06:08.880 least be open to the prospect of downside inflation surprises 0:06:08.920 --> 0:06:11.279 over the coming months on a magnitude of the upside 0:06:11.839 --> 0:06:13.320 surprises we got in Q one. 0:06:13.360 --> 0:06:16.800 Noah one question, the Giants go with a twenty year 0:06:16.839 --> 0:06:20.440 old kid from LSU. I think he walks into camp 0:06:20.520 --> 0:06:23.440 twenty one years old? Are these kids too young when 0:06:23.480 --> 0:06:24.520 they come to the NFL? 0:06:24.640 --> 0:06:24.800 Now? 0:06:26.520 --> 0:06:27.960 I mean, who am I to say that? I mean, 0:06:28.640 --> 0:06:32.680 I mean, they're great athletes. I don't know. I just 0:06:32.720 --> 0:06:35.360 hope that. Yeah, he helps the Giants offense spread out 0:06:35.400 --> 0:06:35.960 a little. 0:06:35.760 --> 0:06:40.880 Bit neighbors LSU. Yeah, it's fun. 0:06:40.920 --> 0:06:42.960 They went with the fun. Malik, excuse me, they went 0:06:42.960 --> 0:06:44.800 with the fun. You know, they didn't go to the 0:06:44.839 --> 0:06:48.280 boring for or you know, defensive guard or whatever. They 0:06:48.320 --> 0:06:51.040 went with something that's going to create some massive energy 0:06:51.400 --> 0:06:52.159 Malik neighbors. 0:06:52.200 --> 0:06:55.480 There were the New York giants. 0:07:05.279 --> 0:07:11.200 Cameron Dausin joins Now Chief investment Officer, New Edge Wealth Management, Cameron. 0:07:11.560 --> 0:07:13.880 The tech earnings have come in, I guess we've seen 0:07:14.360 --> 0:07:18.240 a good hunk. How is revenue growth doing? Are we 0:07:18.360 --> 0:07:22.200 seeing better than good revenue growth in this earning season? 0:07:23.640 --> 0:07:26.640 It's still healthy. There has been a moderation, mostly in 0:07:26.680 --> 0:07:30.360 some of the consumer names, just because inflation has moderated, 0:07:30.440 --> 0:07:32.880 meaning that you don't have as much pricing power as 0:07:32.920 --> 0:07:35.400 you've had over the last couple of years. But I 0:07:35.440 --> 0:07:38.440 think the real story is not just on the revenue line, 0:07:38.440 --> 0:07:41.280 but it's on the margin line. And how much operating 0:07:41.360 --> 0:07:45.520 leverage these tech companies are getting is absolutely incredible. A 0:07:45.560 --> 0:07:49.480 little bit of cost control and profits absolutely boom. I 0:07:49.520 --> 0:07:51.560 think you then add on top of that that all 0:07:51.600 --> 0:07:54.880 of these large cap names are sitting on massive cash piles. 0:07:54.960 --> 0:07:57.880 That the longer that the FED keeps rates high, the 0:07:57.880 --> 0:08:00.280 more that they get to keep earning big yield on 0:08:00.400 --> 0:08:03.320 those cash piles, which just allows them to do things 0:08:03.400 --> 0:08:06.720 like start dividends and increase buybacks. So clearly for the 0:08:06.800 --> 0:08:09.000 large cap names, there's a very virtuous cycle. 0:08:09.280 --> 0:08:12.240 Sounds like Kim Dawson's sake in the Paul sweety kool 0:08:12.240 --> 0:08:12.640 aid here. 0:08:12.720 --> 0:08:13.960 Yeah, I mean the dividends. 0:08:13.960 --> 0:08:15.360 It's not the worst thing the world to put out 0:08:15.400 --> 0:08:18.920 a dividend there for your investors. So, Cam, what any 0:08:18.960 --> 0:08:22.960 takeaways just from earning so far this season? I mean, again, 0:08:23.000 --> 0:08:25.280 we're seeing some pretty strong numbers out of the tech names, 0:08:25.320 --> 0:08:27.280 and a lot of folks will say tech has to 0:08:27.360 --> 0:08:30.280 leave this market, so maybe we're in good shape. 0:08:30.280 --> 0:08:30.800 What do you seeing? 0:08:31.960 --> 0:08:35.360 It is encouraging that tech has held up well. We 0:08:35.400 --> 0:08:37.880 think the real tech test for tech will really come 0:08:37.920 --> 0:08:40.520 in the later part of the year and into twenty 0:08:40.559 --> 0:08:43.480 twenty five, because that's when forecasts are for tech earnings 0:08:43.480 --> 0:08:46.959 growth to accelerate rather meaningfully and then for the rest 0:08:47.000 --> 0:08:50.000 of the market to kind of take up the earnings 0:08:50.040 --> 0:08:53.600 growth and really be the key driver. So if that happens, 0:08:53.640 --> 0:08:57.080 and it will be something that is very a very 0:08:57.160 --> 0:08:59.640 high bar for the rest of the market to jump over. 0:09:00.160 --> 0:09:02.680 For now, tech is very strong and at thirty percent 0:09:02.679 --> 0:09:04.560 of the index for the S and P five hundred, 0:09:04.760 --> 0:09:07.240 that remains ultimately the most important sector. 0:09:07.520 --> 0:09:09.439 So I mean then that kind of goes to the 0:09:09.480 --> 0:09:12.439 issue Kim, that a lot of investors I think wrestle 0:09:12.480 --> 0:09:15.319 with which is do I overweight Do I stay overweight 0:09:15.360 --> 0:09:16.800 some of these tech names, or do I try to 0:09:17.200 --> 0:09:19.559 find some value in other parts of the market, whether 0:09:19.600 --> 0:09:21.720 that's financials or healthcare or energy. 0:09:21.920 --> 0:09:23.480 How do you think about that at this stage? 0:09:24.080 --> 0:09:26.520 Yeah, I mean that's the real push pull because tech 0:09:26.559 --> 0:09:29.640 has the earnings growth and the stock momentum, but it's 0:09:29.720 --> 0:09:33.480 extraordinarily crowded. If you look at sector flows, tech is 0:09:33.520 --> 0:09:36.560 the only sector that has had meaningful influence at seventy 0:09:36.600 --> 0:09:39.640 billion dollars using the Deutsche Bank data. And it's also 0:09:39.920 --> 0:09:42.480 really expensive. But on the other hand, if you look 0:09:42.480 --> 0:09:46.800 at the value sectors, they're underloved, under owned, very cheap 0:09:46.920 --> 0:09:50.840 in some areas. However, they don't have that earnings momentum. Yeah, 0:09:50.920 --> 0:09:54.040 they have seeing their stock prices pick up, which is encouraging. 0:09:54.120 --> 0:09:55.920 Okay, I have a toothpaste. Come, I'm going to name 0:09:55.960 --> 0:09:57.760 which one it is. With Kim, you go to the 0:09:57.760 --> 0:10:00.520 heart of the matter, which is ill look at the 0:10:00.679 --> 0:10:07.400 FA screen of a traditional, boring, wonderful, all American value company. 0:10:08.240 --> 0:10:12.400 They don't have the revenue pop. Can you predict the 0:10:12.400 --> 0:10:16.080 next twenty four months, Alawood Zuckerberg wrought that we're going 0:10:16.120 --> 0:10:20.080 to see a new rationalization of Jack Welch like cost 0:10:20.160 --> 0:10:22.160 cutting across all sectors. 0:10:23.600 --> 0:10:26.680 I used to cover gees. So I'm not necessarily going 0:10:26.760 --> 0:10:30.520 to laud the era of the Welch time and kind 0:10:30.520 --> 0:10:33.280 of the aftermath of that, because cost cutting, you can't 0:10:33.320 --> 0:10:36.320 cut your way to growth. I think the reality is 0:10:36.360 --> 0:10:39.440 and this is how we always focus our investments, which 0:10:39.480 --> 0:10:42.120 is once on high return on invested capital. So we 0:10:42.200 --> 0:10:44.880 want to focus on companies that for every dollar that 0:10:44.920 --> 0:10:48.240 they put into their business, they get more dollars out 0:10:48.280 --> 0:10:51.080 than the average bear. And so what that leads to 0:10:51.240 --> 0:10:52.920 is that you do find a lot of that within 0:10:53.040 --> 0:10:56.679 tech names, but there are also places within the industrials 0:10:56.760 --> 0:10:58.320 within even some give. 0:10:58.200 --> 0:11:00.000 Me an example, Come on, give me, it's not an 0:11:00.080 --> 0:11:02.920 average bar, it's an average Ninja turtle. Give give me 0:11:02.960 --> 0:11:07.280 an example, Cam Dawson of a value company doing our 0:11:07.800 --> 0:11:12.480 return on ROIC, doing ROIC in a nice way. 0:11:13.320 --> 0:11:16.720 Yeah. So some of the names within the industrials that 0:11:16.760 --> 0:11:19.000 we do like are in the services side of things. 0:11:19.000 --> 0:11:21.280 I can't give you any specific names, I'm sorry, and 0:11:21.280 --> 0:11:23.800 I don't even have any turtles with me today. But 0:11:23.880 --> 0:11:25.960 if you look at some of the services names that 0:11:26.240 --> 0:11:29.360 mask as industrials, they do a lot of things like 0:11:29.679 --> 0:11:32.880 insurance data and that type thing. They're really good in 0:11:33.000 --> 0:11:36.840 defensive or copy markets and don't have that same kind 0:11:36.880 --> 0:11:40.120 of sensitivity to underlying GDP where you have to see 0:11:40.120 --> 0:11:43.160 an absolutely booming economy just for them to make a 0:11:43.160 --> 0:11:44.000 little bit of money. 0:11:44.840 --> 0:11:47.600 So I guess let's just take a look at this 0:11:47.640 --> 0:11:51.200 economic data we saw in the last twenty four hours. Cam, 0:11:51.280 --> 0:11:54.480 what's your takeaway here as it relates to maybe how 0:11:54.520 --> 0:11:57.440 the Federal Reserve will kind of act over the next 0:11:57.600 --> 0:11:59.480 several months, And you learned anything over the last twenty 0:11:59.480 --> 0:12:03.439 four hours as it relates to our GDP our inflation picture. 0:12:04.240 --> 0:12:06.840 Yeah, I think it's ditto to what data said, which 0:12:06.920 --> 0:12:10.240 is that this data doesn't necessarily mean that the Fed 0:12:10.360 --> 0:12:13.480 has to do anything at this time. We think that 0:12:13.520 --> 0:12:16.719 the bar for rate hikes from here is much much 0:12:16.800 --> 0:12:20.319 higher than the bar for rate cuts. It just means 0:12:20.360 --> 0:12:22.400 that it won't take a lot of eating and economic 0:12:22.480 --> 0:12:24.960 data for the Fed to start putting that cut talk 0:12:25.040 --> 0:12:27.040 back on the table where you'd have to see a 0:12:27.080 --> 0:12:30.960 significant acceleration and inflation for the FED to start raising 0:12:31.080 --> 0:12:33.959 rates further. But we do think that the FED is 0:12:34.000 --> 0:12:36.480 going to keep rates as they are for some time 0:12:36.600 --> 0:12:40.920 because today simply doesn't support any urgency for them to 0:12:41.040 --> 0:12:41.640 start cutting. 0:12:41.920 --> 0:12:43.880 One quick question that we got to go to another 0:12:44.200 --> 0:12:47.760 area with you, Kim Dawson, what's your SPX call twelve 0:12:47.760 --> 0:12:48.400 months forward? 0:12:50.240 --> 0:12:52.480 We think that the returns are going to be closer 0:12:52.520 --> 0:12:55.839 to average given this starting point and what averages high 0:12:55.920 --> 0:12:59.160 single digits, And this starting point is one where you 0:12:59.559 --> 0:13:03.200 have allocations to equities that are not at peak levels 0:13:03.200 --> 0:13:06.600 but are extended, valuations that aren't at peak levels but 0:13:06.720 --> 0:13:10.000 are extended, which just supports that that kind of double 0:13:10.040 --> 0:13:13.120 digit better than average returns that we've had in different 0:13:13.200 --> 0:13:15.400 years is going to be quite hard to achieve. 0:13:15.559 --> 0:13:18.600 Like most people, that really kill its strategy. It started 0:13:18.600 --> 0:13:22.640 out with the individual security analysis. Kim Dawson, we got 0:13:22.640 --> 0:13:25.480 a I still don't get ge Aerospace out of Cincinnati, 0:13:25.679 --> 0:13:30.680 that's on American. But Kim Dawson, Lawrence Culp shows up 0:13:31.679 --> 0:13:32.320 and he's. 0:13:32.120 --> 0:13:34.240 He he's a Danaer and all that he's popped. Are 0:13:34.320 --> 0:13:35.600 you ready? Cam? 0:13:35.720 --> 0:13:39.480 Nineteen point three percent per year since he walked in 0:13:39.559 --> 0:13:45.200 the door. What the what Lawrence called the pieces he 0:13:45.320 --> 0:13:45.880 picked up. 0:13:46.440 --> 0:13:47.960 It's really something. 0:13:48.000 --> 0:13:54.280 What he's done Lean manufacturing is a beautiful thing. It's fantastic. 0:13:54.559 --> 0:13:56.840 The ability to be able to take costs out of 0:13:56.840 --> 0:14:00.000 a business without cutting to the bone and really focus 0:14:00.080 --> 0:14:03.000 sing on the kinds of businesses that can generate a 0:14:03.040 --> 0:14:05.920 great deal of upside. We've seen that with some companies 0:14:05.960 --> 0:14:08.439 like an idex or an ITW that use the eighty 0:14:08.520 --> 0:14:11.560 twenty approach. And the thing about those kinds of names 0:14:11.640 --> 0:14:13.680 is that it's again it gets you back to those 0:14:13.800 --> 0:14:17.400 high return on investing capital. Find companies that for every 0:14:17.440 --> 0:14:20.080 dollar that they put into their business, they get a 0:14:20.120 --> 0:14:20.800 greater farm. 0:14:21.080 --> 0:14:22.920 Kim Dawson, thank you so much for the New Edge. 0:14:23.000 --> 0:14:25.320 Really love it. That was really, really excellent. 0:14:29.640 --> 0:14:31.760 I got like a three hour conversation here right now 0:14:31.800 --> 0:14:33.560 with Mande singing Paul's. 0:14:33.200 --> 0:14:35.160 Got to do a victory lap here on the dividend. 0:14:35.600 --> 0:14:38.400 Mandy, Finally, I mean, I don't even know what with 0:14:38.760 --> 0:14:41.880 the puny dividend they're doing with the dividend payout ratio is, 0:14:42.320 --> 0:14:45.080 But are finally the tech boys going to grow up 0:14:45.600 --> 0:14:48.680 and give us a dividend and critically give us a 0:14:48.720 --> 0:14:52.720 dividend growth that somewhat correlates with their revenue growth. 0:14:53.440 --> 0:14:53.640 Yeah. 0:14:53.680 --> 0:14:56.720 And look, I think Google and Amazon wards at two 0:14:57.440 --> 0:15:00.360 out of the mag sakes that didn't do the two children. Yes, 0:15:00.600 --> 0:15:05.000 so it puts pressure on Amazon now to good point. 0:15:05.400 --> 0:15:07.440 H And they're like, let means off a cliff, Paul, 0:15:07.440 --> 0:15:09.200 You've been through this. I mean, Apple's got a one 0:15:09.280 --> 0:15:11.200 up them and you know, do a one hundred billion 0:15:11.240 --> 0:15:11.800 share buyback. 0:15:11.920 --> 0:15:15.800 Right, So I mean I'm looking at good at Google 0:15:15.840 --> 0:15:18.680 slash Facebook, you know, eighty billion dollars in free cash 0:15:18.680 --> 0:15:20.960 flow seventy billion they announced. 0:15:20.600 --> 0:15:22.360 This, this buyback, So that's huge. 0:15:22.480 --> 0:15:24.680 Yeah, talk to us about the quarter that What did 0:15:24.680 --> 0:15:25.920 you see in the operations the quarter? 0:15:25.920 --> 0:15:28.160 What stood out for you? Because the market really likes 0:15:28.200 --> 0:15:28.640 what it saw. 0:15:28.840 --> 0:15:29.040 Yeah. 0:15:29.040 --> 0:15:32.760 I mean, look, everyone thought their search business is getting disrupted. 0:15:33.080 --> 0:15:36.960 They will, you know, slow down in terms of growth rates. 0:15:37.160 --> 0:15:39.640 They come out and really blow it out of the 0:15:39.680 --> 0:15:42.960 park on the search profitability. I mean that was the 0:15:43.040 --> 0:15:46.000 driver of why the operating margin was thirty two percent 0:15:46.400 --> 0:15:47.240 all time high. 0:15:47.400 --> 0:15:47.680 Wow. 0:15:47.680 --> 0:15:50.320 And that just goes to show how much pricing power 0:15:50.400 --> 0:15:53.600 this company has. They can raise the ad auction prices 0:15:53.600 --> 0:15:56.760 without telling advertisers and everyone will pay for it because 0:15:56.760 --> 0:16:02.040 that's how their ROI is on AdSpend. So clearly, you 0:16:02.080 --> 0:16:04.480 know they're flexing their muscle when it comes to ad 0:16:04.520 --> 0:16:08.240 pricing and YouTube and cloud being one hundred billion dollars 0:16:08.320 --> 0:16:11.760 underd business combined growing at over twenty five percent. 0:16:12.160 --> 0:16:14.040 That's the same. That's Tom. That's Tom. 0:16:14.200 --> 0:16:16.560 He's been calling out YouTube for a while here, I'm 0:16:16.560 --> 0:16:17.880 not sure the street. 0:16:18.360 --> 0:16:19.880 Do you think the street fully appreciates it? 0:16:19.880 --> 0:16:21.720 Oh, they do not iorialize you. 0:16:21.920 --> 0:16:23.800 I mean, can can I spin that out? 0:16:23.920 --> 0:16:28.160 There was a dislocation in the valuation that Google had 0:16:28.280 --> 0:16:31.640 versus relative to Microsoft, Microsoft trading at thirty three times 0:16:31.720 --> 0:16:34.360 pee versus Google at twenty three y okay. 0:16:34.560 --> 0:16:37.400 The basic idea here is Apple peels off services. Dan 0:16:37.480 --> 0:16:39.520 I says, no, they'll never do it. I don't know 0:16:39.560 --> 0:16:40.280 what that's worth. 0:16:40.840 --> 0:16:44.160 But Google could peel off or be forced to peel 0:16:44.200 --> 0:16:46.560 off YouTube. 0:16:46.360 --> 0:16:50.560 And it's ginormous. Is that the right you know, CFA term? Yeah? 0:16:50.640 --> 0:16:53.600 I mean their YouTube ad revenue grew twenty one percent. 0:16:53.640 --> 0:16:56.760 The subscription revenue is also north of twenty percent. 0:16:56.840 --> 0:16:57.560 So that's because of. 0:16:57.520 --> 0:17:01.960 Bloomberg surveillance out on YouTube search, Bloomberg podcast continue. 0:17:01.560 --> 0:17:04.080 And engagement is off the roof So I agree. I 0:17:04.119 --> 0:17:07.720 think YouTube itself could be a trillion dollar in market 0:17:07.760 --> 0:17:09.440 cap given its growth rate. 0:17:09.760 --> 0:17:11.880 So that puts Google you'd model out at what three 0:17:12.000 --> 0:17:12.520 trillion with. 0:17:13.119 --> 0:17:15.479 I think so, based on the numbers you saw last night. 0:17:15.560 --> 0:17:18.000 Are they listening to roofs? Come on for New York City. 0:17:18.119 --> 0:17:19.560 There's a whole history here, folks. 0:17:19.840 --> 0:17:22.479 I believe the Morgan Stanley the brain freezes on a Friday. 0:17:22.880 --> 0:17:28.280 Ruthport's a CFO out there. They finally the owners the CEO. 0:17:28.760 --> 0:17:31.120 Are they finally listening to Ruth? 0:17:32.080 --> 0:17:32.480 I think so. 0:17:32.520 --> 0:17:35.879 I mean she has additional responsibility now, you know, in terms, 0:17:35.960 --> 0:17:38.720 and they are looking for a new CFO given she 0:17:38.800 --> 0:17:40.320 has additional responsibility. 0:17:40.440 --> 0:17:44.200 But I'm going to give Paul Sweeney a massive victory 0:17:44.280 --> 0:17:45.480 lap on this one. So I'm going to put it 0:17:45.520 --> 0:17:47.119 up again. I just put it out on. 0:17:47.280 --> 0:17:50.200 Social This is the new world, This is the Sweeney world. 0:17:50.720 --> 0:17:54.440 Daniel Parris, pay a dividend. You don't have to be 0:17:54.600 --> 0:17:57.000 like Totel Europe or BNP Paridius. 0:17:57.119 --> 0:17:59.120 I pay something, so Mandy. 0:17:59.200 --> 0:18:03.520 But I still view AI as a threat to the 0:18:03.760 --> 0:18:05.680 core search business of Google. 0:18:05.760 --> 0:18:07.240 Is that a valid concern? Do you think? 0:18:08.119 --> 0:18:10.680 I mean, look, I could say the same about the 0:18:10.720 --> 0:18:13.879 cloud business for Microsoft. Yes, there is more competition, but 0:18:14.160 --> 0:18:17.120 in search they are the incumbent player. And what they're 0:18:17.800 --> 0:18:21.040 showing right now is they can integrate their generative AI 0:18:21.440 --> 0:18:26.119 stuff with their cloud, with their search and that actually 0:18:26.240 --> 0:18:28.520 is helping the business the pricing power of the business. 0:18:28.960 --> 0:18:31.639 Take what you learned here, I mean, from Texas Instruments 0:18:31.800 --> 0:18:36.680 over to Meta, Facebook, over to the two yesterday, bring 0:18:36.760 --> 0:18:37.520 it over to Apple. 0:18:37.560 --> 0:18:38.800 I believe it's on Tuesday. 0:18:39.600 --> 0:18:43.040 Well, so Apple, I think has a different problem when 0:18:43.080 --> 0:18:45.159 it comes to the China side of the business. The 0:18:45.240 --> 0:18:48.480 twenty percent revenue exposure, you can't do anything about that. 0:18:48.720 --> 0:18:51.920 Handseid revenue exposure they have, and the services side of 0:18:52.000 --> 0:18:54.360 the business is not going to look as good as 0:18:54.760 --> 0:18:54.920 you know. 0:18:55.040 --> 0:18:57.560 Microsoft and Google does a threat in their margins. 0:18:58.200 --> 0:19:00.840 It does. I mean, look, they have been in the 0:19:00.960 --> 0:19:05.440 antitrust crosshairs, even though you know not much will happen 0:19:05.560 --> 0:19:08.320 in the near term, but the fact that they can't 0:19:08.440 --> 0:19:11.239 you know, keep their take rates at thirty percent they 0:19:11.520 --> 0:19:13.840 used to have in the app store, that's gonna hurt 0:19:13.880 --> 0:19:17.160 the business. And they can't roll out new genei services 0:19:17.240 --> 0:19:19.719 because they don't have the infrastructure. I mean, all these 0:19:19.760 --> 0:19:23.800 companies are raising capex thirty forty fifty percent. Apple doesn't 0:19:23.840 --> 0:19:26.720 spend as much on their data centers and and that's 0:19:26.800 --> 0:19:30.399 where I think they will be sort of there behind 0:19:30.560 --> 0:19:32.440 and and it will be very hard for them to 0:19:32.560 --> 0:19:35.040 catch up in terms of, you know, the generative AI stuff, 0:19:35.040 --> 0:19:36.800 which is what the growth part of the. 0:19:36.800 --> 0:19:40.399 Business, the generative AI, Well, that's it. Don't get well, 0:19:40.440 --> 0:19:40.960 that's my question. 0:19:41.080 --> 0:19:43.359 I think they kind of do. So I was looking 0:19:43.400 --> 0:19:47.760 forward to this May seventh. I guess their their pig 0:19:47.840 --> 0:19:48.720 event coming up. 0:19:49.480 --> 0:19:52.240 Yeah, what are we going to do? Are they going 0:19:52.320 --> 0:19:54.880 to have a I guess transformative announcement? 0:19:54.880 --> 0:19:57.399 Do you think they will innovate with their chips? The 0:19:57.480 --> 0:20:00.800 biggest advantage that Apple has is it controls it's chips 0:20:00.920 --> 0:20:04.040 in their devices, and that's where the on device generative 0:20:04.040 --> 0:20:06.600