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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern

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Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business App.

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Speaker 1: Listen on demand wherever you get your podcasts, or watch

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Speaker 1: us live on YouTube.

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Speaker 2: This is a joy. We's spent weeks trying to get

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Speaker 2: her in here. She's with the BNP Perrybone Paris travels

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Speaker 2: like crazy. Isabou monteos Lago with us who is absolutely

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Speaker 2: brilliant on the larger view of what's out there. And

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Speaker 2: it's a She's an extinguished career at Black Rock and

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Speaker 2: now over at b MP Perry Bond, and we welcome her,

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Speaker 2: I should say, as an advisor to Christine Leaguard as well,

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Speaker 2: here's what I wonderful to have you here.

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Speaker 3: Thank you so much, good morning, Thanks for having.

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Speaker 4: Can we do this in English please? It's simple, is

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Speaker 4: I can make it. Americans have absolutely no clue at

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Speaker 4: the moonshot, which is the German stock market, the decks,

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Speaker 4: I call it the Roulette wheel of Europe, the Cospy,

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Speaker 4: the Korean market is a Relett wheel of Asia off

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Speaker 4: the what we call the Edyard Denny and Kopora October Low.

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Speaker 2: It's up twenty something percent per year off of the pandemic.

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Speaker 2: It's a double digit solid Why why is there such

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Speaker 2: a gloom about Europe If the stock market is a moonshot, I'm.

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Speaker 3: Not sure there is such a gloom about Europe. And

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Speaker 3: in fact, you know, I've been a meeting with clients

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Speaker 3: coming through Paris and record numbers from the US, Austrasia.

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Speaker 2: Yeah no, wait, wait to your table four, table five

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Speaker 2: a tour dojon.

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Speaker 3: No, No, not just that, not just that, but actually

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Speaker 3: asking about Europe because they realize there's something really interesting

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Speaker 3: starting to happen. And you're absolutely right to sing about

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Speaker 3: Germany because this is where the big in sentiment around

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Speaker 3: Europe started. And that was the announcement by Chancellor Mertz,

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Speaker 3: who wasn't even chancellor at the time, that Germany was

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Speaker 3: going to invest over a trillion euros in infrastructure and

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Speaker 3: in defense over the next ten years. And that then

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Speaker 3: opened the door to the European Commission announcing a plan

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Speaker 3: to rearm Europe to the tune of another eight hundred

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Speaker 3: billion euros, and that led to an acceleration of all

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Speaker 3: the structural reform agenda that had been outlined in the

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Speaker 3: Dragon Report last year, but frankly wasn't going anywhere in

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Speaker 3: a hurry. And all of a sudden you see people

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Speaker 3: going through Brussels and saying, this is a different atmosphere

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Speaker 3: then I've known my entire life. There is a wind

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Speaker 3: of change. There is a desire to listen to corporates

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Speaker 3: and to do things to actually boost growth as a priority.

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Speaker 3: And so you know, Europe's economy was, you know, not

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Speaker 3: growing very fast last year or the previous year compared

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Speaker 3: to the US. But now you're seeing this inversion of

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Speaker 3: trajectories with USA con it's lowing down and in several

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Speaker 3: dimensions underperforming expectations. And on the other hand, Europe's economy

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Speaker 3: growing faster than most people expected. In point six percent

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Speaker 3: q on Q in q on GDP. That's that's just

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Speaker 3: like much higher than anybody expected.

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Speaker 2: MATO is measuring out the way the Europeans measure. All

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Speaker 2: we know is after Allen Greenspan, it's a big number.

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Speaker 2: That was That's my sophisticated analysis.

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Speaker 5: Germany can certainly fund that type of investment. How about

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Speaker 5: the rest of Europe? I mean, I think a lot

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Speaker 5: of the market's less sure about other parts of Europe

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Speaker 5: being able to make similar types of commitments.

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Speaker 3: Well, one thing that's been really interesting, it's what's been

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Speaker 3: happening to spreads in uh In, you know, in in

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Speaker 3: in the Eurozone. You could have thought, well, German yials

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Speaker 3: go up, not not massively, but they you know, they

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Speaker 3: go up. This is bad news for the rest of Europe,

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Speaker 3: which you know has much higher debt l you know, France, Italy,

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Speaker 3: Spain and the likes, their spreads should go. And actually

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Speaker 3: the opposite has happened, or in a case of Italy

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Speaker 3: or the other spreads have stayed the same. And why

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Speaker 3: is that. I think it's because the market is correctly

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Speaker 3: anticipating that this German spending is going to increase the

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Speaker 3: growth trajectory and the whole of the Arozona is going

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Speaker 3: to benefit from that. And that's why. Now bear in mind,

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Speaker 3: none of these other countries, the high dead countries, are

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Speaker 3: planning to increase their deficits. They're going to rejig between

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Speaker 3: defense and other things. But the fact that the fiscally

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Speaker 3: austeer countries like Germany and others are prepared to do

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Speaker 3: more and the others are not going wild and retaining

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Speaker 3: the somewhat orthodox plans that they had. That's good news,

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Speaker 3: and that's why the spreads haven't. More so, this is

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Speaker 3: the markets essentially validating the physical plans.

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Speaker 2: The rudderic, particularly out of the Trump administration is I'm

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Speaker 2: going to call it just flat out Europe. Maybe there's

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Speaker 2: a nuance to that that I'm missing. Is Europe the

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Speaker 2: secret here into the equity performance in the investment Are

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Speaker 2: we finally seeing companies and even cultures in governments more

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Speaker 2: of an Anglo American capitalist model. Our stereotype of Americans

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Speaker 2: is well, okay, Denmark's socialist and everything else is sort

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Speaker 2: of almost that's the stereotype. But are we getting more

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Speaker 2: towards a rampant capitalism at the margin in Europe?

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Speaker 3: Yeah, that's a that's a tough one. I mean, I

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Speaker 3: think if you're talking about social model, social protections, there's

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Speaker 3: no desire to move away from that. There is, however,

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Speaker 3: more of a Kinsyan turn. Perhaps you could you could

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Speaker 3: say that not for the sake of turning kinsyun but

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Speaker 3: in the case of Germany, because they realize they've underinvested

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Speaker 3: in public infrastructure, they've under invested in defense. So as

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Speaker 3: a matter of fact, you're going to see a lot

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Speaker 3: more public spending in Germany and places that we're not

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Speaker 3: doing enough of it, and where we're Europe maybe also

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Speaker 3: turning more Anglo Saxon is in the effort to simplify

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Speaker 3: the regulatory burden. Now, interestingly, they've got this kind of

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Speaker 3: cute semantic obsession with not talking about deregulation exactly the

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Speaker 3: word is simplification. But nevertheless, this is something Europe needed,

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Speaker 3: and I think it's quite plausible that the US was

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Speaker 3: an inspiration for going in that direction, and now it's happening.

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Speaker 2: Starting strong that if you accrossination Isabelle Motaeus Ilago with

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Speaker 2: this scup chief economist BNP. Parry, but far more than that,

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Speaker 2: one of the great watchers of the Transatlantic dialogue, her

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Speaker 2: service with Christine Garden of course at black Rock for years,

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Speaker 2: with some Cambridge and San Po economic Let me get

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Speaker 2: one more sixty thousand foot questionnaire before Paul grills you

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Speaker 2: the arch question. Then, given everything you've said in the

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Speaker 2: New Europe is from treche, which is the diffusement of productivity,

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Speaker 2: is that the shock to come that we finally see

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Speaker 2: a greater productivity in Europe as Treche predicted, well.

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Speaker 3: That's that's what we need, and that was the main

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Speaker 3: call of the Draggy report. If you if you recall

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Speaker 3: he said, look, Europe has a problem. It's population is aging.

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Speaker 3: It's going to lose two million workers per year through

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Speaker 3: the end of the decade. Either we except we're going

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Speaker 3: to get poorer, or we need a massive acceleration in

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Speaker 3: productivity growth. And here's a whole shopping list of things

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Speaker 3: Europe needs to do to make it happen. This is

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Speaker 3: now all underway, and there's every reason to expect that

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Speaker 3: the push on infrastructure and on defense is gonna is

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Speaker 3: going to support that that acceleration in productivity growth. Now,

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Speaker 3: should we expect miracles, probably not, but we do think

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Speaker 3: that by the end of the decade, the Europe European

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Speaker 3: euros on trend growth care be one and one to

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Speaker 3: one and a half.

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Speaker 2: I met a Mira. Can you give me a hotel

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Speaker 2: room somewhere in the visit of Notre Dame? I mean,

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Speaker 2: can be ap work on it that doesn't cost two

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Speaker 2: thousand dollars.

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Speaker 6: A night out?

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Speaker 5: Isabelle talk to us about the view from Europe broadly

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Speaker 5: defined of the tariff discussions that have been dominating these

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Speaker 5: markets really for the better part of the last five

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Speaker 5: six months. What's the view from your company's governments, what

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Speaker 5: are you hearing from your clients?

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Speaker 3: So, look, Europe has a Europe when by then, I

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Speaker 3: mean the European Commission are true believers in the benefits

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Speaker 3: of free trade, and so they embarked in this the

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Speaker 3: trade discussions or this trade war, so to speak, with

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Speaker 3: the US with a view to saying, oh, this is

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Speaker 3: going to be great. We're going to offer to lower

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Speaker 3: our tariffs and the US is going to lower their

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Speaker 3: tariffs and we're going to end up with more trade.

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Speaker 3: This is going to be awesome. And it seems they've

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Speaker 3: realized in the course of the last few weeks, then

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Speaker 3: actually this is not really what the US wants. And

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Speaker 3: so now the discussion has got very much more concrete

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Speaker 3: to trying to do damage limitation, maybe that's one way

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Speaker 3: to put it, and accept that tariffs from the US

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Speaker 3: are probably going to be higher, but let's see what

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Speaker 3: we can do to minimize the cost. But I think

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Speaker 3: what's interesting is is Europe has decided to double down

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Speaker 3: on global trade with other partners than the US. We've

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Speaker 3: seen the beginning of a mending of the relationships with

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Speaker 3: the UK with the first improvement on the Brexit trade deal.

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Speaker 3: There are very advanced talks with India. There's consideration to

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Speaker 3: even joining the CPTPP. So Europe is doubling down on

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Speaker 3: global trade and is going to try to do damage

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Speaker 3: limitation with the US as best it can. But it's

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Speaker 3: trying to portray itself to the rest of the world

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Speaker 3: as a place that is open for trade, open for business,

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Speaker 3: and I think, back to Tom's point, that's also going

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Speaker 3: to help boost productivity going forward.

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Speaker 5: How unified is the European Union in terms of trade

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Speaker 5: negotiations well.

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Speaker 3: As on every issue. You know, different countries have different interests.

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Speaker 3: An economy that friends that is primarily services oriented is

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Speaker 3: going to be far less sensitive than say Germany, which

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Speaker 3: you know exports three percent of its GDP worth to

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Speaker 3: the US. But the important thing is it's the European

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Speaker 3: Commission that negotiates, so obviously it needs to get a

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Speaker 3: mandate from the member states, but by construction it is

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Speaker 3: fully unified because only the European Commission has the mandate

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Speaker 3: to negotiate, and that that helps a lot.

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Speaker 2: To think there's something about standing in Shanghai in the

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Speaker 2: Old Quarter, in the French Quarter and understanding while that

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Speaker 2: BNP Periba was in China literally before anyone else. I mean,

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Speaker 2: I don't think there's any discussion of this in America

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Speaker 2: going back to eighteen sixty Isabelle Matteosi Lago on China

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Speaker 2: and America. Right now, how's this mess going to end up?

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Speaker 3: That's the number one question I think for the rest

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Speaker 3: of the world. I think what we've seen and to

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Speaker 3: the point that Lisa was mentioning earlier about several confidence

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Speaker 3: indicators improving and we've seen also inflation expectations improving, I

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Speaker 3: think both sides have realized that actually they are in

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Speaker 3: a codependent relationship and the trade embargo that we got

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Speaker 3: to briefly was going to do serious damage.

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Speaker 2: I don't mean to interrupt, this is too important before

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Speaker 2: for really you just mentioned codependency. I associate it with

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Speaker 2: Catherine Mann now at the Bank of England. This codependence.

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Speaker 2: Does the Trump administration understand we have a linkage and

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Speaker 2: codependency in our many trade relationships with China, Well.

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Speaker 3: I think it very much does, and that's why there

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Speaker 3: are talks happening right now as we speak in London,

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Speaker 3: interestingly enough, not focused on tariffs, but focused on reopening

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Speaker 3: the flow of rare earth, without which a lot of

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Speaker 3: supply chains in America are going to come to a

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Speaker 3: standstill if these materials don't start flowing again. And so

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Speaker 3: so that's the essence of codependency, and I think that

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Speaker 3: probably came as a surprise.

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Speaker 2: We're scheduling a remote the second week of April next

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Speaker 2: year at Cafe Saint Rege used behind note dam right

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Speaker 2: out front there you know a little bit of you know,

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Speaker 2: early morning on Saint Luis. Can you like let me

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Speaker 2: start us off there.

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Speaker 3: Let's work on that.

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Speaker 2: Let's work on that. Thank you, Isabelle Matteo Salago. Thank

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Speaker 2: you so much for joining us today with b MP

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Speaker 2: Perryba of Paris.

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Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live

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Speaker 1: weekday afternoons from seven to ten am Eastern Listen on

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Speaker 1: watch us live on YouTube now.

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Speaker 2: Adam Madrid absolutely definitive on the broader commodity complex. Francisco

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Speaker 2: Blanche to a great extend at Bank of America has

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Speaker 2: invented what I'm almost going to call a cross assets

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Speaker 2: study of commodities. Wonderful to have you here. I'm going

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Speaker 2: to just cut to the chase. Let's say gold out

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Speaker 2: of the way. Does gold have legs? Does gold move higher?

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Speaker 2: Is a distinctive and different commodity? I think, I think

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Speaker 2: it really is. Tom.

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Speaker 7: We're saying just a little bit like we've seen with crypto,

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Speaker 7: and just like we're saying, I think with non dollar

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Speaker 7: assets real acids, we're seeing our rotation into gold. I

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Speaker 7: would say there's been a couple defining moments in gold.

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Speaker 7: Obviously O eight with the financial crisis was a big

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Speaker 7: defining moment where center banks suddenly went from net sellers

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Speaker 7: to net buyers. And then twenty twenty two with the

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Speaker 7: invasion of Russian invasion of Ukraine that suddenly led to

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Speaker 7: the freezing of Russian center bank acids and a huge

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Speaker 7: emergence in center bank gold sales. So purchase.

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Speaker 5: Sorry, interesting. I mean one of the other areas I

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Speaker 5: want to talk about is just oil.

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Speaker 6: Here.

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Speaker 5: I'm just not sure we've got oil. I got OPEQ

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Speaker 5: increasing supply. I had a little bit of a lift

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Speaker 5: in the price here of oil. Is it supply or demand?

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Speaker 5: That's driving oil these days.

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Speaker 7: Well, look, we are seasonally, we are we're heading towards

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Speaker 7: the peak of the demand window, which is July fourth,

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Speaker 7: and that I think was proughde in support. But Opek

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Speaker 7: will be adding barrels. They've committed to doing so, and

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Speaker 7: we'll keep doing so. And we still have a very

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Speaker 7: uncertain macro environment second half of year.

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Speaker 5: But then I've got my good friends then in Texas

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Speaker 5: and Oklahoma and Louisiana and in Pennsylvania with the shale.

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Speaker 5: They're still cranking the oil out into the market here.

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Speaker 5: So there's no shortage of supply, is there.

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Speaker 7: There's no shortage of supply for now. But I think

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Speaker 7: the lower prices are already having an effect. If you

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Speaker 7: look at the recount, recount is done pretty substantially in

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Speaker 7: the last three or four weeks, not only because prices

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Speaker 7: are lower, but also because tariffs are making producing oil

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Speaker 7: more expensive. Remember oil is steel in the ground, and

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Speaker 7: margins are getting thinner. That's why the recount and drilling

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Speaker 7: activity is falling out.

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Speaker 5: So from your perspective looking at the global macro, how

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Speaker 5: do you factor in all this tariff and the uncertainty

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Speaker 5: of the tariffs in the back and forth and are

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Speaker 5: the one hundred percent of the fifty percent or the

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Speaker 5: ten percent across the world. How does that impact your world?

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Speaker 2: It look?

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Speaker 7: I mean, I keep saying commodities are at the center

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Speaker 7: of tariffs because remember what you tireff are the commodities steel, aluminum?

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Speaker 7: Lots of concern about tires on copper. That's the reason

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Speaker 7: why LM stocks keep falling and stocks of copper in

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Speaker 7: the US keep rising. People are stockpiling anticipation of tariffs.

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Speaker 7: There's big, big movements in prices.

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Speaker 2: Here. I framed the Francisco Blanche with his folks at

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Speaker 2: the Bank of America. Here in commodities, we don't do

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Speaker 2: this enough. And you know with the crew of Edward

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Speaker 2: Morrison and Reshier Sharma at Morgan Stanley years ago, now

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Speaker 2: at Rockefeller, this is this is what it's about in

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Speaker 2: terms of a global discussion, you and Rearshire Sharma on

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Speaker 2: the high ground. I'm trying to assume a great commodity

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Speaker 2: bull market, like from the middle eighties out to two

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Speaker 2: thousand and nine twenty ten, down we came collapse. Yeah,

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Speaker 2: are we in? Are we in a reaffirmation of a

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Speaker 2: trending commodity bull market or do you just need to

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Speaker 2: see more evidence.

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Speaker 7: I think you need to see a little more evidence.

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Speaker 7: But remember we are we've actually seen generally commodity prices

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Speaker 7: palling cyclically driven by oil. The big question is when

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Speaker 7: shale is going to essentially stop growing, and when it does,

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Speaker 7: then we will be in a commodity bull market.

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Speaker 2: Isn't the big question China and they're insatiable desire for stuff.

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Speaker 7: There is some of that, but remember China's also seen

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Speaker 7: peak population growth and now it's other emerging markets, right,

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Speaker 7: I mean, commodity intensity is growing in places like India,

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Speaker 7: other parts of Southeast Asia, and then of course Africa.

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Speaker 7: So I mean, I do think there's a China story

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Speaker 7: behind this, but that's been the story of the last

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Speaker 7: twenty five years. It really is down to the rest

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Speaker 7: of the emerging markets going forward, and frankly to our

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Speaker 7: ability to keep pulling commodities out of ground.

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Speaker 5: Red Headline Cross and the Bloomberg terminal. Blackstone plans to

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Speaker 5: invest five hundred billion dollars in Europe over the next day.

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Speaker 5: That goes are conversations of earlier today here, how do you.

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Speaker 2: Think wait, wait, that's a couple. That's a couple call

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Speaker 2: to sec real estate developments in Dublins.

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Speaker 5: In Dublin, exactly right, So Francisco, as you think about

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Speaker 5: just the commodity space, when you travel around the world

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Speaker 5: talking to your institutional investor clients, how do you start,

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Speaker 5: how do you start your presentation? Will market payer market,

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Speaker 5: Let's be careful out there, how do you start it?

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Speaker 7: I mean, I think I think tariffs are just generally

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Speaker 7: a big negative for the commodity complex, pretty greaty for

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Speaker 7: cyclical commodities because they will slow down the global economy

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Speaker 7: and they will impact of course industrial activity. But we

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Speaker 7: also look at stimulus and it's a very different environment

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Speaker 7: to twenty eighteen nineteen. We have a massive budget that's

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Speaker 7: in the US about potentially to get bigger. We have

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Speaker 7: Germany stimulating, and of course the Chinese are better prepared

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Speaker 7: and last time, and they're also stimulating. So you know,

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Speaker 7: on the one hand, we are a little costio second

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Speaker 7: half of the year pretty good after peak drive season

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Speaker 7: in the US. But we look into twenty twenty six

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Speaker 7: and think, oh my god, there's so much stimulus coming through,

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Speaker 7: and maybe there's some trade deals and maybe there is

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Speaker 7: a pickup in global economic activity on the back of those,

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Speaker 7: so we have a very different world in twenty twenty six.

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Speaker 7: Back to Tom's point, maybe the commodies do turn the

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Speaker 7: corner sometime in the second half of twenty five.

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Speaker 2: And now, folks inorganic chemistry on a Tuesday with Francisco

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Speaker 2: Blanche two sm plus six H two Oh, put it

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Speaker 2: together in an inrd gas sphere of argun and you

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Speaker 2: end up with two smoh three plus three H two.

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Speaker 2: It's rare earth metals. Samarium, Bank of America on these things.

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Speaker 2: I didn't study these in school. My daughter, afterthought, has

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Speaker 2: a periodic table on the wall in her bedroom because

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Speaker 2: she's a nerd. Samarium. What do we need to know

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Speaker 2: from you about rare earth metals? Oh?

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Speaker 7: Look, I mean we saw happened Earth. So China expanded

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Speaker 7: production dramatically, prices collapsed, and many people shut their minds

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Speaker 7: around the world, and China became the sole supplier of

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Speaker 7: this thing. It's a classic Chinese playbook across many industries,

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Speaker 7: I have to say. And now they're using that as leverage.

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Speaker 7: It's not that the US isnaver airs. There's player of

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Speaker 7: airs here. There's player errs in many parties.

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Speaker 2: We just don't want to drill it because we don't

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Speaker 2: want the environmental and the labor. Is it that simple?

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Speaker 7: Well, there is that, then there is also the setting

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Speaker 7: up mines can take seven, eight, ten years. I mean

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Speaker 7: setting up mines is not fracking a gas well, which

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Speaker 7: takes a few weeks.

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Speaker 2: But so God Will just died, the ariconic photographer of

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Speaker 2: third world mining. We don't want to put twenty years

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Speaker 2: ago third world labor and environmental mining in America. That's

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Speaker 2: all this comes down to.

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Speaker 7: Right, Well, there's some of that, for sure, there's some

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Speaker 7: of that. But I do think, I mean, I do

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Speaker 7: think that ultimately it does take time to build up

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Speaker 7: this capabilities, right, and it's not always very profitable at

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Speaker 7: the end of the day. Remember, we live in a

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Speaker 7: capitalist society that where you have to get a return

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Speaker 7: on capital, there reasonable time that the Chinese do not

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Speaker 7: have the same kind of pressures. I mean a lot

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Speaker 7: of Chinese companies don't make any money. You have one

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Speaker 7: hundred car companies competing for market space in China and

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Speaker 7: around the world right now.

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Speaker 2: To Paul's question, where's oil in twelve months?

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Speaker 7: So I think it'll probably be higher. I see downward

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Speaker 7: pressure initially in the second half of the year. But

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Speaker 7: I think eventually, as you get more open oil in

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Speaker 7: the market and lower demand, lower prices in courts demand,

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Speaker 7: you will see in the higher prices.

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Speaker 2: The em demand comes on and we're off to the

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Speaker 2: races again.

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Speaker 7: And remember oil is kind of cheap in the sixties.

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Speaker 7: You know, we've had that's what it was ten years ago,

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Speaker 7: and we've had so much inflation. Right, So I do

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Speaker 7: think the big question mark on the macro front is

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Speaker 7: are we going to go from a regime of high inflation,

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Speaker 7: low growth to a regime of high inflation high growth

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Speaker 7: or low inflation low growth. And you know, I'm probably

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Speaker 7: more in the high inflation high growth camp. With all

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Speaker 7: the stimbls we're saying through right now, you write the

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Speaker 7: big beautiful bill.

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Speaker 2: This has been one of the Francisco Blanche. Thank you

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Speaker 2: so much driving all of commodity and derivative work at

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Speaker 2: the Bank of America.

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Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

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Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto

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Speaker 1: with the Bloomberg Business app. You can also listen live

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Speaker 1: on Amazon Alexa from our flagship New York station, Just

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Speaker 1: say Alexa Play Bloomberg eleven thirty.

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Speaker 2: David Dolt Jones is now the McQuary, Chris is Terry Weisman,

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Speaker 2: and now there's a really they're out of Australia, but

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Speaker 2: they're really eclectic, geographic and academic mix it. Quarry David

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Speaker 2: Doyle comes to us from Parksman out of British Columbia,

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Speaker 2: and of course all is work in Toronto as well.

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Speaker 2: I want to get to the Canadian US nexus in

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Speaker 2: a moment, But where is your I have no clue

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Speaker 2: where real GDP is now heading in America. I got Atlanta,

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Speaker 2: GDP given me Nirvana, and I got others gloomy. Which

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Speaker 2: is it?

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Speaker 8: Yeah, So I think it's you have to look beneath

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Speaker 8: the surface with the GDP data. I think the first

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Speaker 8: quarter overstated the weakness in the economy and the second

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Speaker 8: quarter is overstating the strength.

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Speaker 2: If you give me a tourish around two, I.

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Speaker 8: Think beneath the surface, and you know, it looks to

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Speaker 8: us like you might be slowing in the second half

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Speaker 8: of the year, but I don't think overlea severely.

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Speaker 2: Paul. That's the way we've come. We've come from two

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Speaker 2: decimal points, yeah, out to tourish yeah, exactly.

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Speaker 5: So, David, give us a sense of how you guys

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Speaker 5: are required or thinking about just overall the tariff's discussion,

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Speaker 5: the implementation, the you know, the changes in the tariff discussion,

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Speaker 5: and the uncertainty that's creating an economy. How have you

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Speaker 5: guys factored that into your numbers.

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Speaker 8: Yeah, so, certainly there's a lot of uncertainty. And I

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Speaker 8: think I said at an event last night that McCrory

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Speaker 8: was having that that's the year the word of the

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Speaker 8: year right now, the year of the word of twenty

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Speaker 8: twenty five. I think that's going to weigh on activity

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Speaker 8: in the second half of the year. You can already

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Speaker 8: see it in some of the indicators. But at the

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Speaker 8: same time, the economy is proving to be relatively resilient,

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Speaker 8: and I think there's good reason for that.

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Speaker 5: It feels to me like it comes down to the consumer.

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Speaker 5: The consumer still seems to be out there pretty active.

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Speaker 5: I guess if they feel like, if you've got a

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Speaker 5: job and the income's coming in, you're spending. It is

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Speaker 5: the consumer holding this economy up.

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Speaker 8: The consumer looks to be again, that word resilient comes

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Speaker 8: to mind. It's holding up, it's holding up a lot

435
00:23:14,160 --> 00:23:16,679
Speaker 8: better than a lot of folks would have anticipated. I

436
00:23:16,680 --> 00:23:19,000
Speaker 8: think the challenge that the consumer may confront later this

437
00:23:19,119 --> 00:23:21,159
Speaker 8: year is that you could see a pickup in some

438
00:23:21,200 --> 00:23:24,359
Speaker 8: of the inflation measures as the tariffs are passed on,

439
00:23:24,480 --> 00:23:26,760
Speaker 8: but you might not see the commensurate rise in nominal

440
00:23:26,800 --> 00:23:29,680
Speaker 8: wage growth. So of course real wage growth may slow slightly.

441
00:23:29,720 --> 00:23:31,399
Speaker 8: So that's why we think there could be some slowing

442
00:23:31,400 --> 00:23:33,280
Speaker 8: in the economy, but again we're not expecting that to

443
00:23:33,280 --> 00:23:34,119
Speaker 8: be overly severe.

444
00:23:34,640 --> 00:23:38,480
Speaker 2: When you look at Canadian dollars litmus paper of the system.

445
00:23:38,800 --> 00:23:40,640
Speaker 2: I don't want you to make an mx S bit here,

446
00:23:40,720 --> 00:23:45,680
Speaker 2: but just the general tariff debate, is it going to

447
00:23:45,840 --> 00:23:49,480
Speaker 2: end up pro Canada or the dynamics so much that

448
00:23:49,520 --> 00:23:54,199
Speaker 2: they really harm the Canadian economy and Canadian dollar almost unhinges.

449
00:23:55,119 --> 00:23:59,280
Speaker 8: I think Canada is well positioned to benefit from the

450
00:23:59,320 --> 00:24:03,000
Speaker 8: trade uncertain well, just because the history of the relationship

451
00:24:03,280 --> 00:24:07,600
Speaker 8: with the US, the willingness of Carney to be pragmatic

452
00:24:07,680 --> 00:24:09,879
Speaker 8: in his approach to the United States. We've seen that

453
00:24:09,960 --> 00:24:12,680
Speaker 8: this week with the increase in defense spending that was announced.

454
00:24:13,560 --> 00:24:16,560
Speaker 2: This is a liberal increasing defensemend.

455
00:24:16,119 --> 00:24:18,520
Speaker 8: Yes, and it's not something that they signaled in the campaign,

456
00:24:18,600 --> 00:24:20,800
Speaker 8: but it's something now that they are signaling that it's

457
00:24:20,800 --> 00:24:23,520
Speaker 8: going to happen quite rapidly. On top of that, you

458
00:24:23,600 --> 00:24:26,560
Speaker 8: had a border security bill that was proposed last week.

459
00:24:26,640 --> 00:24:28,960
Speaker 8: So I think those sorts of things are going to

460
00:24:29,000 --> 00:24:31,560
Speaker 8: go a long ways towards moderating the trade rhetoric out

461
00:24:31,600 --> 00:24:32,040
Speaker 8: of the trumpet.

462
00:24:32,040 --> 00:24:34,000
Speaker 2: Well, let's talk about the dynamic right now. I was

463
00:24:34,080 --> 00:24:36,640
Speaker 2: up there with bloombergilp here a number of months ago.

464
00:24:36,640 --> 00:24:39,639
Speaker 2: It's pretty gloomy, and I'll suggest him, particularly with a

465
00:24:39,720 --> 00:24:44,320
Speaker 2: King's Speech to Parliament with mister Kearney present, was really

466
00:24:44,400 --> 00:24:46,240
Speaker 2: you know, it was pageantry and all that. I'm not

467
00:24:46,240 --> 00:24:49,120
Speaker 2: sure how to affected the Canadian people. We should clarify

468
00:24:49,160 --> 00:24:55,600
Speaker 2: that mister Kearney was chairman of Bloomberg Philanthropies here before

469
00:24:55,680 --> 00:24:59,560
Speaker 2: he chose to public service in Canada. Is it a

470
00:24:59,640 --> 00:25:03,639
Speaker 2: seat change in Canada now that Macquarie sees it, Is

471
00:25:03,640 --> 00:25:07,479
Speaker 2: it a dramatically new template for Canada or is it

472
00:25:07,520 --> 00:25:08,560
Speaker 2: a day to day grind?

473
00:25:09,240 --> 00:25:11,600
Speaker 8: So yeah, I think it's probably somewhere in between a

474
00:25:11,680 --> 00:25:14,520
Speaker 8: sea change, maybe overstating it at this point. I think

475
00:25:14,520 --> 00:25:17,520
Speaker 8: there's a lot of optimism though that you know, you

476
00:25:17,720 --> 00:25:19,840
Speaker 8: effectively the way that I've described it to folks, and

477
00:25:20,160 --> 00:25:22,520
Speaker 8: you know, no no offense to anyone that's a Justin

478
00:25:22,560 --> 00:25:26,760
Speaker 8: Trudeau supporter, but Canada was the Canadian economy was mismanaged

479
00:25:26,760 --> 00:25:29,439
Speaker 8: for close to a decade, and now you have someone

480
00:25:29,560 --> 00:25:33,600
Speaker 8: in who is pragmatic, who's highly competent, who's starting to

481
00:25:33,600 --> 00:25:35,879
Speaker 8: make signals about doing the right things to improve the

482
00:25:35,920 --> 00:25:36,760
Speaker 8: growth trajector a.

483
00:25:36,680 --> 00:25:39,800
Speaker 2: Personal question, with your focus on British Columbia, your heritage

484
00:25:39,840 --> 00:25:43,159
Speaker 2: of British Columbia, are they are they getting the drug

485
00:25:43,280 --> 00:25:45,880
Speaker 2: issue fixed out in Western Canada.

486
00:25:46,320 --> 00:25:48,960
Speaker 8: I think this federal bill that was tabled last week

487
00:25:49,160 --> 00:25:52,080
Speaker 8: is a giant first step towards that outcome. Right, I

488
00:25:52,119 --> 00:25:53,359
Speaker 8: don't think I think there's a lot of work to

489
00:25:53,359 --> 00:25:56,399
Speaker 8: be done there, but the fact that the federal government

490
00:25:56,440 --> 00:25:58,680
Speaker 8: is now taking it seriously. If you go back five

491
00:25:58,720 --> 00:26:02,119
Speaker 8: six months ago, they were dismissing the concerns and now

492
00:26:02,200 --> 00:26:03,320
Speaker 8: they're starting to take it seriously.

493
00:26:03,320 --> 00:26:04,560
Speaker 2: I think that's a very positive sign.

494
00:26:04,920 --> 00:26:08,480
Speaker 5: We've seen central banks around the world maintain relatively easing policies.

495
00:26:08,720 --> 00:26:10,400
Speaker 5: How about the US Federal Reserve, Where do you think

496
00:26:10,440 --> 00:26:12,120
Speaker 5: that's going to go? Where do you think this bed's

497
00:26:12,160 --> 00:26:12,440
Speaker 5: going to go?

498
00:26:13,119 --> 00:26:14,359
Speaker 8: I think the fact it will be in a bit

499
00:26:14,400 --> 00:26:16,680
Speaker 8: of a pickle later this year, right, I think you

500
00:26:16,720 --> 00:26:18,480
Speaker 8: could see slow in growth, maybe a little bit of

501
00:26:18,520 --> 00:26:21,800
Speaker 8: a rise in unemployment, but inflationary pressures are still going

502
00:26:21,840 --> 00:26:23,639
Speaker 8: to be there, so we think it might take a

503
00:26:23,640 --> 00:26:26,240
Speaker 8: little bit longer for them to cut than currently what's

504
00:26:26,240 --> 00:26:28,280
Speaker 8: price in the market. So you might be looking at

505
00:26:28,359 --> 00:26:30,720
Speaker 8: you know, maybe early twenty twenty six or very very

506
00:26:30,800 --> 00:26:34,000
Speaker 8: late this year. But I still think the next path

507
00:26:34,080 --> 00:26:34,720
Speaker 8: move is a cut.

508
00:26:34,920 --> 00:26:38,640
Speaker 2: Nolbody cares can the Edminton stop Brad marshan.

509
00:26:38,880 --> 00:26:43,639
Speaker 8: More important question? Based on last night, I'm not optimistic

510
00:26:43,640 --> 00:26:46,040
Speaker 8: about that, but let me tell you, most years, it's interesting.

511
00:26:46,400 --> 00:26:50,200
Speaker 8: Most years, Canadians will cheer against the other teams in Canada,

512
00:26:50,240 --> 00:26:52,679
Speaker 8: like there's sort of this sibling rivalry element to it.

513
00:26:52,960 --> 00:26:54,720
Speaker 8: But this year, I think because of what the Trump

514
00:26:54,720 --> 00:26:59,679
Speaker 8: administration has done, Canadians are broadly getting behind Yeah, spoilers, we.

515
00:27:00,200 --> 00:27:05,080
Speaker 2: Look forward to visiting Toronto the Marc Quarry tickets or something.

516
00:27:05,200 --> 00:27:08,520
Speaker 2: David Doyle of Toronto Macquarie, thank you so much.

517
00:27:15,640 --> 00:27:19,560
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

518
00:27:19,600 --> 00:27:22,640
Speaker 1: starting at seven am Eastern on Apple corplay and Android

519
00:27:22,640 --> 00:27:25,639
Speaker 1: auto with the Bloomberg Business app. You can also watch

520
00:27:25,720 --> 00:27:28,679
Speaker 1: us live every weekday on YouTube and always on the

521
00:27:28,680 --> 00:27:29,760
Speaker 1: Bloomberg terminal.

522
00:27:30,040 --> 00:27:33,360
Speaker 2: We're that question our important equity conversation of the day.

523
00:27:33,440 --> 00:27:37,560
Speaker 2: Jeffrey Degraft joins us legendary at Lehman years ago and

524
00:27:37,600 --> 00:27:40,040
Speaker 2: of course out at renmaca a guy named Dudda. I

525
00:27:40,080 --> 00:27:44,560
Speaker 2: think this economics as well, Jeff I want to go

526
00:27:44,680 --> 00:27:47,959
Speaker 2: right away into the factor analysis for Global Wall Street

527
00:27:48,440 --> 00:27:53,160
Speaker 2: in that we were wicked gloomy, then we had this

528
00:27:53,400 --> 00:27:57,080
Speaker 2: massive April mass of May, if you will, And there's

529
00:27:57,119 --> 00:27:59,879
Speaker 2: the now what, And are you suggesting in your right

530
00:28:00,080 --> 00:28:06,080
Speaker 2: means that the now what is truly back to momentum? Yeah?

531
00:28:06,200 --> 00:28:09,560
Speaker 6: I in fact, I don't think it's been nearly as

532
00:28:09,600 --> 00:28:14,240
Speaker 6: exploited as as you'd expect to see frankly at this point.

533
00:28:14,359 --> 00:28:17,000
Speaker 6: So you know, the beta trade worked off the bottom,

534
00:28:17,080 --> 00:28:20,920
Speaker 6: that's not you know, that's not unusual. That's in fact

535
00:28:20,960 --> 00:28:23,119
Speaker 6: about the one consistent thing that you get off of

536
00:28:23,560 --> 00:28:26,280
Speaker 6: meaningful market lows. And you know what we've been telling

537
00:28:26,320 --> 00:28:28,760
Speaker 6: clients for the last two or three weeks now is

538
00:28:29,080 --> 00:28:32,920
Speaker 6: let's move away from the beta trade and focus more

539
00:28:32,960 --> 00:28:35,639
Speaker 6: specifically on momentum. And the reason I say that is

540
00:28:35,680 --> 00:28:41,360
Speaker 6: because you know, the the momentum names today contained within

541
00:28:41,440 --> 00:28:44,240
Speaker 6: them the seeds of the narrative of tomorrow. And so

542
00:28:44,520 --> 00:28:47,840
Speaker 6: what we're looking for are the names that are leading,

543
00:28:48,000 --> 00:28:50,760
Speaker 6: because most likely that might not be a parent today,

544
00:28:50,840 --> 00:28:52,760
Speaker 6: but most likely as we get out in the next

545
00:28:52,800 --> 00:28:55,280
Speaker 6: three or six months, it's going to become very apparent

546
00:28:55,320 --> 00:28:58,160
Speaker 6: as to why they're leading, and they'll be more popular

547
00:28:58,680 --> 00:28:59,240
Speaker 6: than ever at.

548
00:28:59,120 --> 00:29:01,440
Speaker 2: That I should point out that Jeff de Graf's academics

549
00:29:01,480 --> 00:29:04,280
Speaker 2: are exceptional, not only with the CFA but the technical

550
00:29:04,320 --> 00:29:08,520
Speaker 2: analysis of the CMT organization as well. O K Jeff,

551
00:29:08,560 --> 00:29:11,000
Speaker 2: if I got momentum. One of my great criticisms of

552
00:29:11,040 --> 00:29:14,680
Speaker 2: Wall Street is a confusion over inertial force. This is

553
00:29:14,720 --> 00:29:18,280
Speaker 2: a physics concept, folks, which involves a little bit of

554
00:29:18,360 --> 00:29:22,000
Speaker 2: math and a little bit of misunderstanding as well. Does

555
00:29:22,120 --> 00:29:27,760
Speaker 2: mag seven on the income statement have an inertial force

556
00:29:28,160 --> 00:29:31,960
Speaker 2: that generates that next lega momentum?

557
00:29:32,560 --> 00:29:36,360
Speaker 6: That's a great question. I think from a fundamental standpoint,

558
00:29:36,480 --> 00:29:40,760
Speaker 6: they likely do. From a price standpoint, it's a mix.

559
00:29:41,000 --> 00:29:43,160
Speaker 6: It's a mixed bag, and I would give I would

560
00:29:43,200 --> 00:29:46,320
Speaker 6: give nod to say in Nvidia as an example. I'd

561
00:29:46,320 --> 00:29:50,600
Speaker 6: give nod to to Netflix as an example. I would

562
00:29:50,640 --> 00:29:55,320
Speaker 6: be more skeptical on something like Apple. I think Google

563
00:29:55,440 --> 00:29:59,800
Speaker 6: is to be determined. I think Microsoft is okay. And

564
00:29:59,840 --> 00:30:04,160
Speaker 6: I say that because the momentum hasn't really been as

565
00:30:04,320 --> 00:30:07,360
Speaker 6: strong and pervasive with those names as we would expect.

566
00:30:07,360 --> 00:30:10,240
Speaker 6: In other words, the volatility swelled, the returns went down,

567
00:30:10,680 --> 00:30:13,520
Speaker 6: and so with that it suppressed our momentum scores. And

568
00:30:13,560 --> 00:30:15,960
Speaker 6: so I'm really most interested in things that are making

569
00:30:16,000 --> 00:30:18,960
Speaker 6: new relative strength high here, and not all of those

570
00:30:19,040 --> 00:30:21,080
Speaker 6: are our mag seven names for sure.

571
00:30:21,920 --> 00:30:23,920
Speaker 5: Jeff, what does it tell you when we see the

572
00:30:24,000 --> 00:30:26,200
Speaker 5: S and P five hundred have that big sell off

573
00:30:26,240 --> 00:30:29,040
Speaker 5: earlier in the year over you know, tariff uncertainty, and

574
00:30:29,080 --> 00:30:32,280
Speaker 5: then come roaring right back and retrace almost all of

575
00:30:32,320 --> 00:30:34,200
Speaker 5: the sell off. What does that tell you when you

576
00:30:34,200 --> 00:30:34,640
Speaker 5: look at that.

577
00:30:34,640 --> 00:30:40,160
Speaker 6: Chart, Well, it's the characteristics of that move that count

578
00:30:40,200 --> 00:30:43,960
Speaker 6: for us. So you know, the the whatever up twenty

579
00:30:44,000 --> 00:30:46,440
Speaker 6: percent or down twenty percent, that's really, you know, kind

580
00:30:46,440 --> 00:30:49,800
Speaker 6: of a sideshow in our work. What really was important

581
00:30:49,840 --> 00:30:53,240
Speaker 6: for us is this was about a month ago now

582
00:30:53,360 --> 00:30:57,440
Speaker 6: that we saw the twenty day highs expand above our

583
00:30:57,480 --> 00:31:00,400
Speaker 6: threshold level. And when we see that, what it says

584
00:31:00,440 --> 00:31:03,360
Speaker 6: exactly your point around MAG seven is it's not just

585
00:31:03,440 --> 00:31:07,440
Speaker 6: about a select cadre of names driving the market. It

586
00:31:07,480 --> 00:31:10,320
Speaker 6: really is more of a wholesale move and it means

587
00:31:10,320 --> 00:31:13,080
Speaker 6: that money is coming into the market. And when that happens,

588
00:31:13,440 --> 00:31:17,200
Speaker 6: it's really really unusual for us not to have positive

589
00:31:17,200 --> 00:31:19,720
Speaker 6: forward returns as we look out three six in particularly

590
00:31:19,720 --> 00:31:21,880
Speaker 6: twelve months, there's a very good track record along that.

591
00:31:22,120 --> 00:31:24,280
Speaker 2: Jeff to graph with this folks on your morning commute

592
00:31:24,320 --> 00:31:28,800
Speaker 2: in the office. Subscribe to Bloomberg podcasts on YouTube, YouTube

593
00:31:28,840 --> 00:31:32,200
Speaker 2: in the office, YouTube at home as well. Jeff de Graph,

594
00:31:32,320 --> 00:31:35,000
Speaker 2: you mentioned relative strength, and of course you and I

595
00:31:35,160 --> 00:31:37,280
Speaker 2: years ago were weaned on this. I think a Dorsey

596
00:31:37,400 --> 00:31:42,320
Speaker 2: right in others relative to what take Apple, take Microsoft

597
00:31:42,360 --> 00:31:46,440
Speaker 2: and the others. Is that a conventional relative strength analysis

598
00:31:46,800 --> 00:31:49,800
Speaker 2: versus the standard and Forest five hundred or is there

599
00:31:49,840 --> 00:31:52,800
Speaker 2: a different de Graph formula.

600
00:31:52,840 --> 00:31:56,600
Speaker 6: Well, we use momentum and then we adjust it for volatility.

601
00:31:56,640 --> 00:31:58,320
Speaker 6: And the reason that we do that is because we

602
00:31:58,360 --> 00:32:00,800
Speaker 6: really want to know how much we're we're getting per

603
00:32:00,920 --> 00:32:04,040
Speaker 6: unit of risk. It's that simple, and so you know,

604
00:32:04,040 --> 00:32:06,040
Speaker 6: if you get into some momentum name, they might just

605
00:32:06,080 --> 00:32:07,959
Speaker 6: be beta. If you're going to get into a semiconductor

606
00:32:07,960 --> 00:32:09,840
Speaker 6: and you earn an uptrend or in a bull market,

607
00:32:10,040 --> 00:32:12,400
Speaker 6: you're just going to end up owning beta. So by

608
00:32:12,480 --> 00:32:17,280
Speaker 6: normalizing it through volatility, you're really able to tease out,

609
00:32:17,320 --> 00:32:20,400
Speaker 6: if you will, where you're getting the exceptional returns per

610
00:32:20,480 --> 00:32:24,440
Speaker 6: unit of risk. So we do adjust our momentum by that,

611
00:32:24,600 --> 00:32:27,640
Speaker 6: and that's essentially our relative strength formula as we look

612
00:32:27,680 --> 00:32:30,160
Speaker 6: at it historically. The nice thing about that is we

613
00:32:30,200 --> 00:32:32,320
Speaker 6: also will standardize that, and so it can give us

614
00:32:32,320 --> 00:32:35,920
Speaker 6: some indications as to where we might be out kicking

615
00:32:35,920 --> 00:32:37,840
Speaker 6: our coverage, if you will. In other words, the returns

616
00:32:37,840 --> 00:32:40,080
Speaker 6: have been far better than we would ever expect them

617
00:32:40,080 --> 00:32:42,280
Speaker 6: to be in terms of a sustainable type of path,

618
00:32:42,600 --> 00:32:44,640
Speaker 6: and that gives us an opportunity to say, hey, look

619
00:32:44,680 --> 00:32:46,640
Speaker 6: this has gone too far, and we want to be

620
00:32:46,680 --> 00:32:50,120
Speaker 6: really careful about mean reversion here because the likelihood of

621
00:32:50,160 --> 00:32:52,280
Speaker 6: these trees growing to the sky is very, very low.

622
00:32:52,960 --> 00:32:56,000
Speaker 5: Jeff, do you guys, do you care about who's buying

623
00:32:56,320 --> 00:32:59,640
Speaker 5: and selling stocks? Because what I found interesting this year

624
00:33:00,200 --> 00:33:03,520
Speaker 5: during this sell off, A we were told it wasn't

625
00:33:03,560 --> 00:33:06,320
Speaker 5: panic selling, but B we were told now with some

626
00:33:06,400 --> 00:33:09,440
Speaker 5: hindsight that it was retail buying into that sell off,

627
00:33:09,920 --> 00:33:11,840
Speaker 5: and boy, they look pretty smart these days. But do

628
00:33:11,920 --> 00:33:15,560
Speaker 5: you care if it's institutions or retail when the stocks

629
00:33:15,560 --> 00:33:18,560
Speaker 5: are trading not so much.

630
00:33:18,640 --> 00:33:21,360
Speaker 6: You know, we've looked at that data historically. I mean,

631
00:33:21,400 --> 00:33:24,280
Speaker 6: what I will tell you is whether it's institutions or

632
00:33:24,280 --> 00:33:26,880
Speaker 6: retail investors, people tend.

633
00:33:26,640 --> 00:33:27,640
Speaker 2: To chase returns.

634
00:33:27,680 --> 00:33:29,840
Speaker 6: It's not vice versa. So I don't really look at

635
00:33:29,880 --> 00:33:31,880
Speaker 6: it and say, ah, these people are buying, Therefore good

636
00:33:31,880 --> 00:33:34,080
Speaker 6: things are going to happen. That does happen in the

637
00:33:34,080 --> 00:33:37,320
Speaker 6: futures market. We do see in some instances. In fact,

638
00:33:37,360 --> 00:33:39,840
Speaker 6: right now, it's a pretty good example where commercial hedges

639
00:33:40,360 --> 00:33:43,280
Speaker 6: are net long the NDX futures and that tends to

640
00:33:43,320 --> 00:33:46,520
Speaker 6: have a pretty good track record for forward returns. So

641
00:33:46,840 --> 00:33:49,840
Speaker 6: the smart money, the hedgers, if you will, are actually

642
00:33:49,920 --> 00:33:52,920
Speaker 6: loaded up to the gills in INDIEX futures and that

643
00:33:53,000 --> 00:33:57,640
Speaker 6: implies good returns. But historically it's a hit or miss.

644
00:33:58,120 --> 00:34:01,640
Speaker 6: In some instances, small traders actually end up being very,

645
00:34:01,720 --> 00:34:04,680
Speaker 6: very precient in terms of calling bottoms. I would say

646
00:34:04,920 --> 00:34:08,719
Speaker 6: the one behavioral flaw that we've seen is that the

647
00:34:08,800 --> 00:34:11,200
Speaker 6: retail investor tends to be pretty good at a bottom,

648
00:34:11,480 --> 00:34:14,080
Speaker 6: but they tend to bail too quickly. They make five

649
00:34:14,160 --> 00:34:16,200
Speaker 6: or ten percent and they pull the cord and think,

650
00:34:16,239 --> 00:34:18,360
Speaker 6: you know, their geniuses, and then they miss the big moves.

651
00:34:18,400 --> 00:34:21,080
Speaker 6: So that's the one of the behavioral characteristics that we

652
00:34:21,120 --> 00:34:23,920
Speaker 6: have noticed. It's not so much that the retail investors

653
00:34:23,920 --> 00:34:26,000
Speaker 6: buying and that's bad. It's that they're buying and then

654
00:34:26,000 --> 00:34:29,560
Speaker 6: they sell to prematurely and that's what ends up costing them.

655
00:34:30,000 --> 00:34:33,680
Speaker 5: Jeck Already, I don't know sectors or factors that are

656
00:34:33,719 --> 00:34:35,719
Speaker 5: screening well for you guys these days.

657
00:34:37,000 --> 00:34:39,279
Speaker 6: Well, again, we think momentum has a long way to go.

658
00:34:39,960 --> 00:34:42,640
Speaker 6: You know, that's good news, So I think the summer

659
00:34:42,680 --> 00:34:46,000
Speaker 6: is going to be really a summer of momentum names.

660
00:34:46,000 --> 00:34:49,560
Speaker 6: So again following on that relative performance, it's interesting because

661
00:34:49,600 --> 00:34:51,920
Speaker 6: you know, when we look at the sectors broadly, it's

662
00:34:51,960 --> 00:34:53,359
Speaker 6: a mixed bag. I mean, I can show you as

663
00:34:53,360 --> 00:34:55,719
Speaker 6: many good names and industrials as it can poor names,

664
00:34:55,800 --> 00:34:59,560
Speaker 6: and the same thing for discretionary. So it's really, you know,

665
00:34:59,719 --> 00:35:03,680
Speaker 6: a of two cities regardless of the sector. I would

666
00:35:03,680 --> 00:35:06,719
Speaker 6: say within tech semiconductors. Again with the exception of call

667
00:35:06,760 --> 00:35:10,280
Speaker 6: it broad common in Nvidia. Don't really look that interesting.

668
00:35:10,520 --> 00:35:14,160
Speaker 6: Software looks really interesting to us. So it's it's really

669
00:35:14,480 --> 00:35:17,440
Speaker 6: down to the industry group, not even the sector level

670
00:35:17,520 --> 00:35:19,120
Speaker 6: that I think you have to distill.

671
00:35:19,200 --> 00:35:23,040
Speaker 2: This tell me about volume. Full disclosure, folks. I'm not

672
00:35:23,080 --> 00:35:25,960
Speaker 2: a great fan of a lot of volume analysis, But

673
00:35:26,040 --> 00:35:29,680
Speaker 2: Jeff to graph, is there a value to looking in

674
00:35:29,840 --> 00:35:33,719
Speaker 2: upon intended? Is there a value to looking at volume dynamics?

675
00:35:35,040 --> 00:35:38,520
Speaker 6: Look, you know, thirty five years ago I read Edwards

676
00:35:38,560 --> 00:35:41,440
Speaker 6: and McGee and it was all hopped up on volume.

677
00:35:42,040 --> 00:35:44,760
Speaker 6: And I read other books that were, you know, tomes

678
00:35:44,800 --> 00:35:47,200
Speaker 6: about that. And the good news is is over the

679
00:35:47,239 --> 00:35:49,000
Speaker 6: course of my career, computing power has gotten a lot

680
00:35:49,080 --> 00:35:50,880
Speaker 6: cheaper and a lot more powerful, and so we can

681
00:35:50,920 --> 00:35:54,400
Speaker 6: test these things. I can't tell you that a breakout

682
00:35:54,400 --> 00:35:57,240
Speaker 6: with volume is any more legitimate than a breakout without volume.

683
00:35:57,640 --> 00:36:00,000
Speaker 6: I have not been able to make volume work. Maybe

684
00:36:00,120 --> 00:36:02,680
Speaker 6: somebody can. It's just not something that we use in

685
00:36:02,760 --> 00:36:03,799
Speaker 6: our analysis.

686
00:36:03,800 --> 00:36:06,960
Speaker 2: I no, I'm sorry, folks. I'm like living the religion

687
00:36:07,000 --> 00:36:09,520
Speaker 2: here with Jeff Deograph. Jeff, do you have a first

688
00:36:09,680 --> 00:36:13,319
Speaker 2: edition Meggie nineteen forty eight? Do you have that on

689
00:36:13,360 --> 00:36:16,239
Speaker 2: your shore? I do not.

690
00:36:16,400 --> 00:36:18,000
Speaker 6: If you find me one, let me know please.

691
00:36:18,160 --> 00:36:20,839
Speaker 2: I read it cover to cover years ago. I lost

692
00:36:20,920 --> 00:36:24,440
Speaker 2: it along the way. So, oh okay, these seminal technics,

693
00:36:24,640 --> 00:36:27,640
Speaker 2: this whole technical analysis thing, folks, I think in the

694
00:36:27,719 --> 00:36:30,279
Speaker 2: media gets a really bad rap. Let's let's let's go

695
00:36:30,400 --> 00:36:32,320
Speaker 2: there quickly, Jeff to graph. Paul's got a bunch of

696
00:36:32,440 --> 00:36:37,840
Speaker 2: questions technical analysis. What's the biggest myth of Wall Street

697
00:36:38,320 --> 00:36:42,320
Speaker 2: is they look at the efficacy of using a timeline

698
00:36:42,360 --> 00:36:44,640
Speaker 2: on the X axis or point in figure charts.

699
00:36:46,560 --> 00:36:49,359
Speaker 6: Well, look, I think the and we say this all

700
00:36:49,360 --> 00:36:51,600
Speaker 6: the time. It's actually part of our disclosure. This is

701
00:36:51,640 --> 00:36:55,239
Speaker 6: a probability not a prediction business. And I think where

702
00:36:55,360 --> 00:36:59,400
Speaker 6: the flaw is is in almost anything people trying to

703
00:36:59,560 --> 00:37:02,799
Speaker 6: expect that they can predict the future using a lot

704
00:37:02,840 --> 00:37:05,880
Speaker 6: of the data, and that includes fundamentals. In many cases,

705
00:37:06,560 --> 00:37:09,880
Speaker 6: we're simply trend followers. We're momentum players. Now we understand

706
00:37:09,880 --> 00:37:12,799
Speaker 6: that there are points behaviorally where that can be an

707
00:37:12,800 --> 00:37:15,320
Speaker 6: achilles heel, and so we certainly try to adjust for that.

708
00:37:15,560 --> 00:37:20,040
Speaker 6: But really the whole idea is momentum and trends persist.

709
00:37:20,120 --> 00:37:22,680
Speaker 6: And I think it's as easy as just looking at

710
00:37:22,920 --> 00:37:25,640
Speaker 6: you know, ninety five percent of the corporations that are

711
00:37:25,680 --> 00:37:27,759
Speaker 6: out there. Usually if things are going well this quarter,

712
00:37:27,840 --> 00:37:29,600
Speaker 6: they're probably going to go well the next quarter, right,

713
00:37:29,640 --> 00:37:32,960
Speaker 6: And so you tend to have this autocorrelation, this momentum

714
00:37:33,080 --> 00:37:36,320
Speaker 6: that continues, and you know, the world is not necessarily

715
00:37:36,440 --> 00:37:39,080
Speaker 6: this random walk that I know gets a lot of talk,

716
00:37:40,000 --> 00:37:42,480
Speaker 6: and we just simply follow those trends. And by doing that,

717
00:37:43,040 --> 00:37:46,560
Speaker 6: what's amazing is how often it looks like you're predicting

718
00:37:46,600 --> 00:37:49,440
Speaker 6: the future. And so that's that's really the foundation of

719
00:37:49,480 --> 00:37:50,319
Speaker 6: how we think about the world.

720
00:37:50,440 --> 00:37:52,560
Speaker 2: Absolutely brilliant, except that it doesn't apply to the red

721
00:37:52,640 --> 00:37:56,319
Speaker 2: Sox Paul. What's important here to me on technical analysis

722
00:37:56,800 --> 00:37:59,000
Speaker 2: is it doesn't tell you how to make money. It

723
00:37:59,120 --> 00:38:06,480
Speaker 2: avoids about on a log normal basis, helps you avoid

724
00:38:07,160 --> 00:38:07,840
Speaker 2: getting crushed.

725
00:38:08,480 --> 00:38:12,160
Speaker 5: Made one more question, he Jeff, How do external factors

726
00:38:12,200 --> 00:38:17,000
Speaker 5: and I'm talking really external factors like teriffs and the

727
00:38:17,120 --> 00:38:20,440
Speaker 5: uncertain to created by tariffs and the constant noise associated

728
00:38:20,480 --> 00:38:22,800
Speaker 5: with tariff policy and trade policy, how does that impact

729
00:38:22,840 --> 00:38:23,200
Speaker 5: your work?

730
00:38:25,000 --> 00:38:28,879
Speaker 6: Well, obviously volatility is impactful. The way that we think

731
00:38:28,960 --> 00:38:32,719
Speaker 6: about it is there are really three reaction functions that

732
00:38:32,920 --> 00:38:35,840
Speaker 6: you have, and that's regardless of the infinite number of

733
00:38:37,640 --> 00:38:41,800
Speaker 6: scenarios that that that present themselves, and so you know,

734
00:38:41,920 --> 00:38:44,000
Speaker 6: we hear it a lot. Hey, we've never experienced tariffs

735
00:38:44,040 --> 00:38:46,120
Speaker 6: like this before. Okay, that's fine, but you know, at

736
00:38:46,120 --> 00:38:48,680
Speaker 6: the same time, we had never experienced COVID before either, right,

737
00:38:48,760 --> 00:38:51,080
Speaker 6: And so the way that we think about it is

738
00:38:51,480 --> 00:38:53,799
Speaker 6: there's there's really three things you can do. You can buy,

739
00:38:53,880 --> 00:38:56,520
Speaker 6: you can sell, you can hold, and when people react

740
00:38:56,719 --> 00:39:00,719
Speaker 6: in a herd like mentality and start to become what

741
00:39:00,760 --> 00:39:02,920
Speaker 6: we call very one dimensional. In other words, that's all

742
00:39:02,960 --> 00:39:06,000
Speaker 6: people are focused on. And you can use Google transfers, likes,

743
00:39:06,040 --> 00:39:09,120
Speaker 6: you can use. When people become one dimensional, we start

744
00:39:09,160 --> 00:39:12,040
Speaker 6: to think multidimensionally, and we start to think against the crowd.

745
00:39:12,120 --> 00:39:15,440
Speaker 6: And so you know, if it's a fifty to fifty probability,

746
00:39:15,520 --> 00:39:18,600
Speaker 6: but everybody's thinking it's, you know, eighty twenty, we'll take

747
00:39:18,680 --> 00:39:20,680
Speaker 6: fifty to fifty because the odds are just in our favor,

748
00:39:20,719 --> 00:39:23,160
Speaker 6: even if it might not be you know, the bulk

749
00:39:23,239 --> 00:39:25,320
Speaker 6: of the curve. So that's how we think about it

750
00:39:26,160 --> 00:39:29,000
Speaker 6: a lot, less about why and what, and about what

751
00:39:29,200 --> 00:39:32,000
Speaker 6: the reaction function is and are people reacting similarly to

752
00:39:32,080 --> 00:39:32,760
Speaker 6: other crises?

753
00:39:33,000 --> 00:39:35,680
Speaker 2: Chapter Thank You so much, greatly appreciate with Ren Man.

754
00:39:37,160 --> 00:39:41,040
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

755
00:39:41,080 --> 00:39:44,399
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto

756
00:39:44,520 --> 00:39:47,480
Speaker 1: with the Bloomberg Business app. You can also listen live

757
00:39:47,560 --> 00:39:51,120
Speaker 1: on Amazon Alexa from our flagship New York station, Just

758
00:39:51,200 --> 00:39:53,680
Speaker 1: say Alexa Play Bloomberg eleven thirty.

759
00:39:53,719 --> 00:39:56,440
Speaker 5: All right, Tom Kane, Lisa Mitteya. We're doing some newspapers

760
00:39:56,520 --> 00:39:59,480
Speaker 5: here today with Lisa Matteos.

761
00:39:59,600 --> 00:40:00,959
Speaker 2: She us Gemini AI.

762
00:40:01,239 --> 00:40:04,920
Speaker 5: That's a great question. That's a great question. This Gemini

763
00:40:05,120 --> 00:40:07,879
Speaker 5: maybe like a godsend for Lisa Mintaeo. Cut her worked

764
00:40:08,000 --> 00:40:11,600
Speaker 5: hours like half, be come more productive. She may sleep

765
00:40:11,680 --> 00:40:12,200
Speaker 5: in a ball.

766
00:40:12,440 --> 00:40:14,560
Speaker 2: Maybe it's going to put us all out of a job.

767
00:40:16,200 --> 00:40:20,080
Speaker 9: So now let's rest it there. Uh you know what,

768
00:40:20,480 --> 00:40:22,680
Speaker 9: let's go there. Okay, So we've been talking about right

769
00:40:22,760 --> 00:40:26,040
Speaker 9: AI and all that. So this article is from Business Insider.

770
00:40:26,120 --> 00:40:28,440
Speaker 9: It says, however, Coryan is Mark Mahiney. He said that

771
00:40:28,680 --> 00:40:32,879
Speaker 9: he used Chat, GTP and Gemini to assess what could

772
00:40:32,920 --> 00:40:36,360
Speaker 9: happen next in the DOJ's big case against Google's search business.

773
00:40:37,080 --> 00:40:37,279
Speaker 2: Yeah.

774
00:40:37,280 --> 00:40:39,600
Speaker 9: Anas, they're not just turning to lawyers, they're looking to

775
00:40:39,760 --> 00:40:41,880
Speaker 9: a I. Now, so here's an example of.

776
00:40:41,920 --> 00:40:42,359
Speaker 2: What he did.

777
00:40:42,440 --> 00:40:44,600
Speaker 9: So him and his team they gave Chat, GPT and

778
00:40:44,640 --> 00:40:47,640
Speaker 9: Gemini transcripts from the last day of court proceedings that's

779
00:40:47,680 --> 00:40:51,200
Speaker 9: more than eight hours of closing documents. Asked the chat

780
00:40:51,200 --> 00:40:54,000
Speaker 9: about two questions, what were the main takeaways and what

781
00:40:54,239 --> 00:40:58,640
Speaker 9: remedies would the judge most likely impose? And within seventeen

782
00:40:58,760 --> 00:41:02,200
Speaker 9: seconds of going through this eight hours of data, he said,

783
00:41:02,280 --> 00:41:06,120
Speaker 9: the models actually generate this concise summary. And they actually

784
00:41:06,280 --> 00:41:08,719
Speaker 9: went back to their legal experts that are consulted by

785
00:41:08,800 --> 00:41:11,040
Speaker 9: EVERCREP and they said, yeah, that's that's.

786
00:41:11,040 --> 00:41:12,160
Speaker 3: Kind of on pop.

787
00:41:12,719 --> 00:41:16,440
Speaker 5: What's what we would say believable. Mark Mahaney my mind,

788
00:41:16,520 --> 00:41:19,400
Speaker 5: the top Internet analyst on Wall Street. In my opinion,

789
00:41:19,719 --> 00:41:23,279
Speaker 5: that's pretty cool just using the technology in his research. Yeah,

790
00:41:23,440 --> 00:41:23,960
Speaker 5: but I mean to.

791
00:41:23,960 --> 00:41:25,840
Speaker 9: See actually the output of the art. You have to

792
00:41:25,880 --> 00:41:27,560
Speaker 9: read the article to find out. It goes into what

793
00:41:27,640 --> 00:41:31,839
Speaker 9: the output was art. No, No, not at all, as

794
00:41:32,320 --> 00:41:35,000
Speaker 9: Jim and I had to do their summary for you. Okay,

795
00:41:35,040 --> 00:41:37,160
Speaker 9: so this article, it's in the Wall Street Journal. It's

796
00:41:37,200 --> 00:41:40,200
Speaker 9: after my own Heart, After my daughter's Heart. They spoke

797
00:41:40,280 --> 00:41:42,160
Speaker 9: with a few women who were just looking to get

798
00:41:42,200 --> 00:41:44,839
Speaker 9: a better handle in their expenses right, because they say,

799
00:41:44,920 --> 00:41:46,520
Speaker 9: we have good jobs, we have a roommate, we have

800
00:41:46,520 --> 00:41:48,480
Speaker 9: an affordable car. Why am I broke?

801
00:41:48,560 --> 00:41:48,600
Speaker 2: Like?

802
00:41:48,640 --> 00:41:50,960
Speaker 9: Why am I living paycheck to paycheck? So what they

803
00:41:51,040 --> 00:41:54,359
Speaker 9: did is they tallied up their beauty expenses and they

804
00:41:54,440 --> 00:41:58,359
Speaker 9: were surprised at the results. Yes, two hundred dollars every

805
00:41:58,440 --> 00:42:02,160
Speaker 9: three months were cutting color, haircut, one hundred and fifteen

806
00:42:02,320 --> 00:42:06,520
Speaker 9: for eye lass extensions, eyebrow threadings. You have manicures, pedicures,

807
00:42:07,400 --> 00:42:09,640
Speaker 9: five hundred a year of makeup, and then you.

808
00:42:09,719 --> 00:42:11,200
Speaker 5: Have facial in your face.

809
00:42:12,680 --> 00:42:14,600
Speaker 9: They get then you get into the nitty gritty like

810
00:42:14,640 --> 00:42:16,960
Speaker 9: the facials and the spray tnds and all that kind

811
00:42:17,000 --> 00:42:19,520
Speaker 9: of stuff. So it made them sit back and say,

812
00:42:19,600 --> 00:42:23,000
Speaker 9: do I really need all of this stuff? What can

813
00:42:23,040 --> 00:42:24,120
Speaker 9: I start to chip away with?

814
00:42:24,440 --> 00:42:29,280
Speaker 2: So in the margin alter or Sophora or the historic

815
00:42:29,960 --> 00:42:32,719
Speaker 2: counter at Bloomingdale's in the first floor right across the

816
00:42:32,760 --> 00:42:36,000
Speaker 2: street from us, Yes, just behind me, Folks is Bloomingdale's.

817
00:42:37,000 --> 00:42:38,240
Speaker 2: The margins are unreal.

818
00:42:38,560 --> 00:42:40,640
Speaker 9: Yeah, it's it's atticate. It's like you feel like you

819
00:42:40,760 --> 00:42:42,759
Speaker 9: need everything. I go in my daughter's room, I open

820
00:42:42,800 --> 00:42:44,800
Speaker 9: the draw and there's million products.

821
00:42:46,600 --> 00:42:49,239
Speaker 2: If girls go to college. Do they take all the

822
00:42:49,360 --> 00:42:53,239
Speaker 2: bottles with them or does throw them out? Yes?

823
00:42:53,800 --> 00:42:57,000
Speaker 9: Probably, yes, they'll probably get new restock.

824
00:42:57,320 --> 00:42:57,760
Speaker 2: Restock.

825
00:42:58,640 --> 00:43:00,640
Speaker 9: You have to restock to go college.

826
00:43:01,160 --> 00:43:01,600
Speaker 2: Killing me.

827
00:43:01,840 --> 00:43:05,319
Speaker 9: Next, we're going to travel European vacations right up your alley, right, Okay,

828
00:43:05,400 --> 00:43:08,600
Speaker 9: So some Americans are like, stop hitting the brakes, right,

829
00:43:08,680 --> 00:43:11,440
Speaker 9: they don't want to do these big, expensive European vacations

830
00:43:11,480 --> 00:43:14,040
Speaker 9: this summer. But there's another group who is picking up

831
00:43:14,040 --> 00:43:17,480
Speaker 9: the slack, and that is Chinese travelers. So actually there

832
00:43:17,560 --> 00:43:20,040
Speaker 9: was a study from European Travel Commission that said seventy

833
00:43:20,080 --> 00:43:23,080
Speaker 9: two percent of Chinese responding said they plan to travel

834
00:43:23,120 --> 00:43:24,880
Speaker 9: to Europe this summer, and that's like up from ten

835
00:43:24,960 --> 00:43:28,200
Speaker 9: percent from twenty twenty four. And the only thing is

836
00:43:28,280 --> 00:43:31,719
Speaker 9: that they tend to spend less money, but they still

837
00:43:31,760 --> 00:43:33,640
Speaker 9: said they're going to be a big part of repue

838
00:43:33,680 --> 00:43:34,120
Speaker 9: for Europe.

839
00:43:34,560 --> 00:43:37,520
Speaker 2: I was sitting on the main glorious street in Helsinki,

840
00:43:37,640 --> 00:43:40,840
Speaker 2: putin Trump the cigar in my hand, and I realized

841
00:43:40,920 --> 00:43:44,319
Speaker 2: everybody around me is Chinese. They come over the North Pole.

842
00:43:44,960 --> 00:43:46,760
Speaker 2: It's a short plane flight.

843
00:43:47,680 --> 00:43:50,279
Speaker 5: It's not like it's the other side world.

844
00:43:50,800 --> 00:43:55,080
Speaker 2: It's not expensive, and it's quick. Oh, that's understanding. They

845
00:43:55,120 --> 00:43:59,080
Speaker 2: come over, They come over the poll, who knew? Who knew?

846
00:43:59,320 --> 00:44:02,000
Speaker 2: That's how they do. Lisa Mateo, thank you so much

847
00:44:02,120 --> 00:44:04,640
Speaker 2: the newspapers with Lisa Matteo.

848
00:44:04,920 --> 00:44:09,719
Speaker 1: This is the Bloomberg Surveillance Podcast, available on apples, Spotify,

849
00:44:09,880 --> 00:44:14,120
Speaker 1: and anywhere else you get your podcasts. Listen live each weekday,

850
00:44:14,280 --> 00:44:17,680
Speaker 1: seven to ten am Eastern on Bloomberg dot com, the

851
00:44:17,800 --> 00:44:21,800
Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You

852
00:44:21,880 --> 00:44:25,200
Speaker 1: can also watch us live every weekday on YouTube and

853
00:44:25,440 --> 00:44:27,160
Speaker 1: always on the Bloomberg terminal