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US Factory Activity Shrinks, Fed Meeting, Amazon Earnings · Bloomberg Intelligence

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  Speaker 2: IM manufacturing number, the price is paid. That's something and
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  Speaker 2: jumped quite a bit in March.
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  Speaker 3: Also, yeah, exactly, So I'm looking and so that data
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  Speaker 3: will break it down in just moments. But I'm looking
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  Speaker 3: at also the Jolts data data a little bit lower
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  Speaker 3: eight point five million the consensus with like eight point
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  Speaker 3: six to eight million. So the Jilt's opening has been
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  Speaker 3: a little bit fewer job openings out there.
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  Speaker 2: Yeah, so okay, we all brain paint the brush. We
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  Speaker 2: have a slow wing ish Yes, astronomy with inflation still
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  Speaker 2: ish high. Tim Feuory is the man behind the ism.
• 0:56
  Speaker 2: He has chaired for the Institute for Supply Management. He
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  Speaker 2: breaks down all the data's force. We love giving you
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  Speaker 2: this instant analysis of the data as it crosses the terminal. Tim,
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  Speaker 2: always great to see you walk us through these numbers.
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  Speaker 4: Now, good morning everyone.
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  Speaker 5: Yeah, a little bit of a disappointment, but you know,
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  Speaker 5: don't overreact to it. There's so much emotion around the
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  Speaker 5: fifty point fifty one versus forty nine nine.
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  Speaker 4: So we came into forty nine two. We sagged a
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  Speaker 4: little bit.
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  Speaker 5: The four elements that I watched for demands, three of
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  Speaker 5: those weakened a little bit.
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  Speaker 4: But I think this is just a bump in the road.
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  Speaker 5: I believe we're still on the tract of expansion that
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  Speaker 5: we started in January. On the output side, the revenue
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  Speaker 5: was good. We're still destaffing, but not as much as
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  Speaker 5: we were in the prior months, which I think is
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  Speaker 5: the appropriate thing to do. And the big disappointment in
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  Speaker 5: this month was really the input side, where the suppliers
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  Speaker 5: are still delivering faster, which is a bit of a
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  Speaker 5: surprise at this point, and the manufacturing inventory account is
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  Speaker 5: still contracting again a surprise.
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  Speaker 4: As you mentioned, Alex. The price is number.
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  Speaker 5: Coming in at almost sixty one is you know, definitely
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  Speaker 5: an eye opener. So dit a bit of research on that,
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  Speaker 5: and it seems to be all commodity related. It's steel,
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  Speaker 5: it's illuminum, it's plastics, and to some extent, crude oil driven,
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  Speaker 5: petrochemical driven, but not as much as the basic foundational commodity.
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  Speaker 5: So you know, I think we hit a little bit
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  Speaker 5: of a bump here, but I still believe that we're
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  Speaker 5: on the growth rejectory.
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  Speaker 6: So, tim, do I interpret that price is paid? Again?
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  Speaker 3: It came in at sixty point nine versus a consensus
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  Speaker 3: of fifty five point four and number last period fifty
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  Speaker 3: five point eight, So the higher prices paid, So I
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  Speaker 3: take that as inflationary, right.
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  Speaker 5: Well, it means that in the month people paid more,
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  Speaker 5: people paid higher prices than they did in the fire.
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  Speaker 5: So you could say that they're faced with higher prices
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  Speaker 5: for sure.
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  Speaker 2: And you mentioned him as commodity, so understood that. Okay,
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  Speaker 2: commodity pressures can be transitory, but nonetheless walk us through
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  Speaker 2: the inventory, production, and new order. So inventories are unchanged,
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  Speaker 2: production fell and new orders fell. So is that just
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  Speaker 2: that companies have restocked enough and they can hang tight
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  Speaker 2: for now or is it an end demand issue?
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  Speaker 5: No, they fell, but they're still expanding, so they slowed
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  Speaker 5: their rate of growth. Okay, on the production side, and
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  Speaker 5: we had a bit of a surprise I think last
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  Speaker 5: month on the production number being so strong from something
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  Speaker 5: that was slightly contracting.
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  Speaker 4: I think the prior month or that flat.
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  Speaker 5: So we're still expanding, but it's a bit of a
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  Speaker 5: slower rate, so that's positive. On the employment side, we're
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  Speaker 5: still contracting, but it is a slower rate, so we're
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  Speaker 5: not letting as many people go, which I think is
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  Speaker 5: appropriate too at this point. You know, at the end
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  Speaker 5: of April, if the second half of the year is
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  Speaker 5: going to be stronger than the first, and at some
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  Speaker 5: point you got to stop letting people go. And I
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  Speaker 5: think we talked about that last month, and I think
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  Speaker 5: that's happening now.
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  Speaker 4: So nothing unusual. On the output side.
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  Speaker 5: I think I would love to see a much more
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  Speaker 5: robust production number, but it just wasn't to be in April.
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  Speaker 5: I remember, April's a pretty strong manufacturing month. It's really
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  Speaker 5: the beginning of some pretty heavy outputs. So there's some
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  Speaker 5: seasonal factors in here, but I'm not going to say
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  Speaker 5: that that's the issue. I think we had a bit
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  Speaker 5: of a bump. I'm still optimistic about may you know.
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  Speaker 5: The pricing number is obviously concerning. We've had a couple
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  Speaker 5: of months here on growth. It's foundational, which on one hand,
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  Speaker 5: you could argue, Okay, that's because demand is coming back
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  Speaker 5: and prices are stabilizing and in some cases growing. If
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  Speaker 5: that's the case, all right, fine, but you still have
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  Speaker 5: to deal with the inflation number.
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  Speaker 2: Great stuff, Tim, really appreciate it. Thanks for the ins analysis.
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  Speaker 2: You know you have a busy day for you, Tim
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  Speaker 2: Fiory of the ISM Manufacturing team, he's the chair of
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  Speaker 2: that ISM Manufacturing coming a little bit light prices pay
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  Speaker 2: jumping a to over sixty. Although, Tim trying to even
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  Speaker 2: it out, so you know it's a bump. Relax, make
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  Speaker 2: it still be good. Let's not overreact.
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  Speaker 3: Yeah, we'll play by her so again, looking for the
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  Speaker 3: trend there, but a little bit of a concern there.
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  Speaker 3: We'll take a look at it.
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  Speaker 3: Dennis Lockhart Joints is here, former Atlanta FED President joining
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  Speaker 3: us from Atlanta. Dennis, I have to ask before we
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  Speaker 3: even start, if you tell me your office is located
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  Speaker 3: on Peachtree Street, I'm going to jump out the window.
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  Speaker 6: Is it on a Peachtree Street?
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  Speaker 7: Indeed it is.
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  Speaker 8: See my current office, which is my home, is on
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  Speaker 8: Peachtree Street, and it's about five or six miles north
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  Speaker 8: of the Fed Office, which is also a tenth and
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  Speaker 8: Peach Tree.
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  Speaker 6: See.
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  Speaker 3: I mean before there was Google Maps or I got
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  Speaker 3: lost in Atlanta every single time because every single street
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  Speaker 3: is Peachtree Road, Peachtree Street, Peachtree.
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  Speaker 6: Avenue, north east, southwest.
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  Speaker 7: I don't know every handle you can put on the
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  Speaker 7: word peach Tree is used.
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  Speaker 3: To like, yes, Peachtree, it's it's a phenomenon just specific
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  Speaker 3: to Atlanta. I don't know it's I know they've got
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  Speaker 3: they've got a secret code down there. Dennis, what do
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  Speaker 3: we going to hear from our Federal Reserve today at
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  Speaker 3: two pm wall Stree time?
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  Speaker 7: Well, I think, first of all, I don't think the
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  Speaker 7: statement is going to break new grounds. So I think
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  Speaker 7: it's really a question of Pal's press conference. I think
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  Speaker 7: he needs to kind of thread the needle here, come
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  Speaker 7: off as a bit balanced. I don't think he wants
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  Speaker 7: to encourage any expectation of a near term cut, meaning
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  Speaker 7: at the June and July meetings. But I don't think
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  Speaker 7: he also wants to abandon the idea that this year
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  Speaker 7: we will see some rate cuts, and to add to that,
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  Speaker 7: he probably cannot take off the table the scenario in
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  Speaker 7: which there is a rate hike. So to me, he's
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  Speaker 7: got to come across as balanced and measured in a
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  Speaker 7: certain sense, non committal, which.
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  Speaker 2: I'm sure he's going to try very hard at all
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  Speaker 2: the seventeen thousand questions that ask about a hike to
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  Speaker 2: do that? How in your experience, and you're taking a
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  Speaker 2: look at the economy and the data that's coming in
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  Speaker 2: which is showing some softness, How quickly can an economy cool?
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  Speaker 2: How soft can an economy get? Knowing the data points
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  Speaker 2: we have right.
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  Speaker 7: Now, short of a shock of some kind of supply
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  Speaker 7: shock is what we've experienced recently, I think the cooling
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  Speaker 7: will be gradual, and it will you know, it will
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  Speaker 7: be in a way fighting something that seems to be
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  Speaker 7: fueling the current resilience in the economy, and that is
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  Speaker 7: that we have a very good employment economy. When people
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  Speaker 7: are employed, they tend to have confidence in their income stream,
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  Speaker 7: and consequently they tend to consume. And that's what's as
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  Speaker 7: simplistically at least, that's what's driving the current strength of
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  Speaker 7: the economy, so we're gonna have to see some consumption
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  Speaker 7: slow down, which so far we really haven't seen a
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  Speaker 7: lot of.
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  Speaker 3: Dennis, there are some folks out there that are making
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  Speaker 3: the argument that the Fed pivot, if you will, in
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  Speaker 3: December to a more caution more dubbish tone that actually
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  Speaker 3: contributed to some of the inflation we're seeing here in
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  Speaker 3: the first quarter of twenty twenty four.
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  Speaker 7: Do you buy that, well, inflation expectations have risen a
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  Speaker 7: little bit. That's always a red flag for the Committee.
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  Speaker 7: They get concerned when they see expectations rising, and we've seen.
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  Speaker 1: That happen.
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  Speaker 7: That on balance, you know, should be a cautionary note,
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  Speaker 7: and you know that means they're going to maintain their
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  Speaker 7: posture of I would say slight hawkishness in these circumstances.
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  Speaker 2: To build on that point, I mean, you look at
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  Speaker 2: financial conditions Index like it's not tight. So when the
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  Speaker 2: Fed says things like we think that we're restrictive enough policy,
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  Speaker 2: why do they think that?
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  Speaker 7: I have a very good question. It may very well
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  Speaker 7: be a question that they're reconsidering. I think, you know,
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  Speaker 7: we just we've seen the economy tolerate this level of
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  Speaker 7: interest rates with apparently very little problem. The economy continues
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  Speaker 7: to move along very robustly even with the current setting
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  Speaker 7: of policy. So it wouldn't surprise me at all if individuals,
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  Speaker 7: at least in their fedspeak after the meeting, say that
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  Speaker 7: they're not so sure that the setting of policy is
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  Speaker 7: as restrictive as they thought. Now, one thing to keep
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  Speaker 7: in mind is the ten year has moved from about
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  Speaker 7: thirty ish too or sixty five to seventy, and that's tightening.
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  Speaker 7: That's not tightening policy, but that's tightening financial conditions. And
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  Speaker 7: we've seen that in the last few weeks.
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  Speaker 2: Yeah, to be fair, I mean, this is why I
• 10:14
  Speaker 2: take notes, Paul, because this was an IRA Jersey thing
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  Speaker 2: from yesterday and I was like, that's a brilliant question.
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  Speaker 2: I'm stealing it and I'm writing it down.
• 10:20
  Speaker 9: So there you go.
• 10:21
  Speaker 2: That's why I do it.
• 10:23
  Speaker 6: Is there a scenario here for twenty twenty four where
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  Speaker 6: there are no rate cuts?
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  Speaker 7: I don't think you can you can dismiss that idea
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  Speaker 7: of I don't think it's a base case at the moment,
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  Speaker 7: and I don't think the Committee importantly has abandoned the
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  Speaker 7: outlook or the view that they will ultimately cut rates
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  Speaker 7: later in the year, but I don't think I think
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  Speaker 7: it's a non zero probability that there are no rate
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  Speaker 7: cuts this year.
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  Speaker 10: So well off.
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  Speaker 3: I mean, I guess two o'clock we'll hear from the
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  Speaker 3: Fed here. I guess also that is just real quick.
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  Speaker 3: A rate hike, is that something that you think will
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  Speaker 3: be discussed or was discussed yesterday and today.
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  Speaker 7: I think at this time they chair pal and the
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  Speaker 7: committee overall probably don't want to entertain a rate hikes
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  Speaker 7: as they don't want want to create the market aftermath
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  Speaker 7: that would occur if there was a serious discussion of that.
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  Speaker 7: But at the same time, Palell can't take it off
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  Speaker 7: the table because he's got to keep I think the
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  Speaker 7: committee's options open to deal with whatever develops in the
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  Speaker 7: coming months.
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  Speaker 2: All right, Dennis, really great perspective. Thank you so much.
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  Speaker 2: As Lockhart, former Atlanta FED President, joining us from out
• 11:44
  Speaker 2: Peachtree Street, we decided, yeah.
• 11:46
  Speaker 3: So in the bio page, I mean, it's it's Peachtree
• 11:49
  Speaker 3: and it's p Stree Street, Peachtree Road, Peachtree Avenue, and
• 11:52
  Speaker 3: it's not just that northwest, southeast, northeast, and so literally
• 11:57
  Speaker 3: and you'd be sitting there and you give your the
• 11:59
  Speaker 3: capture an address, and you know, if you didn't have
• 12:02
  Speaker 3: it exactly perfect, he take you to a completely different
• 12:05
  Speaker 3: part of town, oh like forty minutes away.
• 12:08
  Speaker 6: I mean it was crazy. I'm like, you know he'd
• 12:10
  Speaker 6: be taking me somewhere. It's like, this isn't investco You're like.
• 12:14
  Speaker 2: This is somewhere very different the things we learn here
• 12:17
  Speaker 2: in Bloomberg Intelligence.
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  Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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  Speaker 2: I'm Alex Steel alongside Paul Sweeneymer Live Interactive Brokers Studio
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  Speaker 2: right here in midtown Manhattan. This is the Bloomberg Intelligence
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  Speaker 2: also tap our super solid lineup of external guests as well,
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  Speaker 2: who really knee deep in all the data that we're
• 13:00
  Speaker 2: getting the latest is at ism. Manufacturing data disappointing. The
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  Speaker 2: Jolts number also coming in a little bit lighter, but
• 13:06
  Speaker 2: yet still relatively strong. Jeffrey Cleveland is chief economist over
• 13:10
  Speaker 2: at Peydon Regal. He joins US now from Los Angeles. Jeffrey,
• 13:14
  Speaker 2: it is FED day. It is a big day. A
• 13:17
  Speaker 2: success for j. Powell would probably be a nothing burger.
• 13:20
  Speaker 2: What kind of burger do you want?
• 13:23
  Speaker 11: Well, okay, I was hoping for some more excitement. Actually,
• 13:26
  Speaker 11: happy Fed Day to you out. I mean, we're not
• 13:29
  Speaker 11: going to get any move on rates. I don't see
• 13:32
  Speaker 11: a lot of incentive for the Fed chair to try
• 13:34
  Speaker 11: to to try to move markets. Markets have moved towards
• 13:37
  Speaker 11: a more hawkish stance, removing a lot of the policy
• 13:41
  Speaker 11: accommodation that we saw priced in at the start of
• 13:43
  Speaker 11: the year. So I don't know if he needs to
• 13:45
  Speaker 11: do much, but I was hoping maybe just to stir
• 13:47
  Speaker 11: up something, we could get an announcement on the balance sheet,
• 13:51
  Speaker 11: so put her aside rates And they have been doing
• 13:53
  Speaker 11: this quantitative tightening for most of the last two years,
• 13:57
  Speaker 11: and they said, or at least Chair Paler said he
• 14:00
  Speaker 11: wanted to fairly soon begin the process of slowing the
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  Speaker 11: pace of balance sheet contraction, if you can follow that.
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  Speaker 11: So that could be something that's announced today to start
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  Speaker 11: in June, or maybe they put that announcement off told June.
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  Speaker 11: I don't know, but that's one idea for some excitement today.
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  Speaker 6: So, Jeffrey, from.
• 14:20
  Speaker 3: Your perspective, looking at the economic data that you see,
• 14:23
  Speaker 3: what do you think the Fed.
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  Speaker 6: Should do.
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  Speaker 11: Nothing at all? I think on the funds rate, they
• 14:30
  Speaker 11: just sit here. Yeah, I mean, there's no compelling case
• 14:34
  Speaker 11: to cut interest rates at this point. That GDP report
• 14:38
  Speaker 11: you know last week, if you exclude some of the
• 14:40
  Speaker 11: volatile components, we still see the underlying pace of growth
• 14:45
  Speaker 11: in this country at around three percent. We think we
• 14:48
  Speaker 11: could get a figure like that at an annualized rate
• 14:50
  Speaker 11: in Q two, which would be excellent. The unemployment rates low,
• 14:53
  Speaker 11: all the inflation data, all the inflation data in the
• 14:56
  Speaker 11: first quarter picked up relative to what everyone had hoped for.
• 15:00
  Speaker 11: So whether we're talking CPI or PCE or ECI from
• 15:04
  Speaker 11: yesterday right, everything's picked up. So there's no compelling case
• 15:07
  Speaker 11: here to cut rates. I don't know that there would
• 15:09
  Speaker 11: be a it would take a few months. If I'm
• 15:12
  Speaker 11: a policy maker, Paul, I want to see it leans
• 15:15
  Speaker 11: three months of inflation data. That's much cooler than we've
• 15:19
  Speaker 11: been witnessing. So I think that rules out doing anything
• 15:22
  Speaker 11: for now. That's why I thought the balance sheet would
• 15:23
  Speaker 11: be something they could do with their time in the interim.
• 15:26
  Speaker 2: We are just talking about this in the previous segment.
• 15:30
  Speaker 2: Why does the Fed and do you agree that the
• 15:33
  Speaker 2: policy is actually restrictive enough? When you take a look
• 15:36
  Speaker 2: at financial conditions, they are so lose. So what gives
• 15:38
  Speaker 2: them the confidence to say policy is at a restrictive
• 15:41
  Speaker 2: enough point.
• 15:44
  Speaker 11: Well, there's this hypothetical thing they have where they look
• 15:47
  Speaker 11: at the neutral rate, they look at the policy rate
• 15:49
  Speaker 11: relative to that, they say, we must be we must
• 15:51
  Speaker 11: be at a restrictive setting. Lots of bond people will
• 15:54
  Speaker 11: also look at real rates. So if you look at
• 15:57
  Speaker 11: your tips imply your real rates, or you look a
• 16:00
  Speaker 11: nominal yield minus some measure of inflation, it's positive. Now
• 16:03
  Speaker 11: it's been negative for quite some time, so people think
• 16:07
  Speaker 11: that's a restrictive. I'm a simple man, so I just
• 16:10
  Speaker 11: look at growth, inflation, the unemployment rate, and I think
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  Speaker 11: the jury is still out, Alex. It's tbd whether we're
• 16:17
  Speaker 11: actually that restrictive. I just got back from Europe. I
• 16:22
  Speaker 11: was in Germany, a lot of clients over there asking
• 16:24
  Speaker 11: that question, and one thing I said was, Hey, maybe
• 16:27
  Speaker 11: interest rates are just going to take more time to bite.
• 16:30
  Speaker 11: The US consumer is more insulated from rates. We've got
• 16:33
  Speaker 11: thirty year fixed mortgage for example. Many of my corporate clients,
• 16:36
  Speaker 11: you know, they've turned out their debt and they're earning
• 16:39
  Speaker 11: income on their assets, their savings that they've accrued, So
• 16:43
  Speaker 11: they're actually earning income at higher rates here. So maybe
• 16:45
  Speaker 11: they're more insulated from the interest rate increases that we've seen.
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  Speaker 11: So the U economy is very resilient. I think it's
• 16:52
  Speaker 11: tough to make the case. Things are very restrictive at
• 16:54
  Speaker 11: the present.
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  Speaker 3: Jeff we had some Jeffrey, we had some ISM data
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  Speaker 3: come out earlier this morning. Forty nine point two was
• 17:01
  Speaker 3: a headline number versus a consensus of fifty. We had
• 17:04
  Speaker 3: Tim Fury, who heads up the ISM, saying he's not
• 17:07
  Speaker 3: too concerned about it. It's a data point. How do
• 17:10
  Speaker 3: you think about just kind of the overall economy here today?
• 17:14
  Speaker 3: Is it strong enough from your perspective that the Fed
• 17:18
  Speaker 3: in fact can just kind of wait, yeah, it is.
• 17:22
  Speaker 11: You know, I got excited when we jump back above
• 17:24
  Speaker 11: fifty on IC we've been lingering below that. I gotta admit,
• 17:27
  Speaker 11: you know, that was an exciting moment for us. We
• 17:29
  Speaker 11: did a chart of the week on that. But probably
• 17:32
  Speaker 11: the most worrisome aspect of that is m POL price
• 17:35
  Speaker 11: is paid. Ye correct me if I'm wrong, but I
• 17:38
  Speaker 11: believe they leapt back up to sixty point nine on
• 17:40
  Speaker 11: that gage. So again, maybe the real story here. You know,
• 17:45
  Speaker 11: we've had some manufacturing weakness for some time, so that's
• 17:47
  Speaker 11: not really new. But the resurgence of some price pressures
• 17:51
  Speaker 11: that might be the real story here. And that's consistent
• 17:53
  Speaker 11: with some other price gauges in Q one, right.
• 17:56
  Speaker 2: And that's something that the FED can't do anything about,
• 17:58
  Speaker 2: Like if that's a commodity pass through thing, if it
• 18:00
  Speaker 2: stays higher, they can't do anything about that. Point in essence,
• 18:03
  Speaker 2: here's my question from earlier. If we don't get a
• 18:07
  Speaker 2: cut this year, could that be seen as a de
• 18:10
  Speaker 2: facto hike.
• 18:12
  Speaker 11: Well, it's definitely a tighter policy than financial market participants
• 18:16
  Speaker 11: had anticipated. You know, at the start of the year.
• 18:18
  Speaker 11: I remember on this program in January we were talking
• 18:21
  Speaker 11: I think there was one hundred and fifty basis points
• 18:23
  Speaker 11: of rate cuts priced in that definitely had an impact
• 18:26
  Speaker 11: on financial conditions, whether you're looking at a two year
• 18:28
  Speaker 11: yield or a ten year yield. So the consequence of
• 18:31
  Speaker 11: the removal of those rate cuts is, yeah, tighter financial
• 18:35
  Speaker 11: conditions across the board. But you know, I just keep
• 18:37
  Speaker 11: coming back to it when talking to clients. It's happening
• 18:40
  Speaker 11: for a good reason. It's because growth is holding up.
• 18:42
  Speaker 11: The economy is more resilient. We're talking three percent growth.
• 18:46
  Speaker 11: That's not a terrible environment. I guess if we went
• 18:49
  Speaker 11: back I don't know, five, six, seven years, and I
• 18:52
  Speaker 11: told you we'd wake up in twenty twenty four with
• 18:54
  Speaker 11: three percent growth, three point eight percent unemployment rate, it's
• 18:58
  Speaker 11: a little bit higher. It's a three percent in place.
• 19:00
  Speaker 11: You would take that deal. I think it would be
• 19:02
  Speaker 11: okay for corporate earnings overall. So I don't know, it's
• 19:07
  Speaker 11: a disastrous scenario here. It's disappointing if you expected a
• 19:10
  Speaker 11: lot of rate cuts, which we did not, So not.
• 19:13
  Speaker 6: Too disappointed, Jeffrey.
• 19:15
  Speaker 3: How about the US consumer. We're gonna get some earnings
• 19:17
  Speaker 3: starting next week from some of the retailers. How do
• 19:20
  Speaker 3: you think the US consumers is doing out there because
• 19:22
  Speaker 3: there's boy, there's a lot of crosswinds out there.
• 19:25
  Speaker 6: It'seah tough, but certain parts are doing okay. How do
• 19:29
  Speaker 6: you view the consumer?
• 19:30
  Speaker 11: I think, you know, I talked to a little, you know,
• 19:32
  Speaker 11: a lot, a wide range of clients, and some of
• 19:34
  Speaker 11: my clients tell me, hey, I don't care that inflation
• 19:37
  Speaker 11: is cooled off. You know, Jeffrey's it was six percent
• 19:40
  Speaker 11: on this core measure you're talking about. Now it's three percent.
• 19:43
  Speaker 11: You know, big deal prices are still high, Paul, That's
• 19:46
  Speaker 11: what they tell me. It's the price level that I
• 19:48
  Speaker 11: think they're referring to. That's the term we would use, right,
• 19:51
  Speaker 11: and so that's still I think that's still weighing on
• 19:53
  Speaker 11: a lot of consumers. There are consumers that are seeing
• 19:55
  Speaker 11: pretty good wage gains, but not all and we think
• 19:58
  Speaker 11: you're seeing that show up in some areas. So we're
• 20:00
  Speaker 11: seeing that in credit card delinquencies, We're seeing that in
• 20:02
  Speaker 11: some of the auto delinquency numbers. So it's something more
• 20:05
  Speaker 11: watching very carefully. I have to tell you though, in
• 20:08
  Speaker 11: aggregate when I see aggregate nominal consumer income still growing
• 20:14
  Speaker 11: at around six percent year on year through the latest
• 20:16
  Speaker 11: month of data, that is pretty good that can smooth
• 20:19
  Speaker 11: over a lot of the other problems that we see
• 20:21
  Speaker 11: out there.
• 20:21
  Speaker 6: So some signs of.
• 20:23
  Speaker 11: Weakness, but overall, US can consumer is in still great shape.
• 20:27
  Speaker 10: I think.
• 20:28
  Speaker 2: So before we let you go, it is the question
• 20:30
  Speaker 2: jobs Day Friday, what are your numbers?
• 20:33
  Speaker 11: I think reasonable guest is somewhere around two hundred thousand.
• 20:36
  Speaker 11: Wouldn't be surprised by that, which would be great. We
• 20:39
  Speaker 11: think you only need one hundred hundred and ten thousand
• 20:41
  Speaker 11: jobs to keep a lid on the unemployment rates, so
• 20:44
  Speaker 11: that should keep some downward pressure on the unemployment rate.
• 20:47
  Speaker 11: Another great month of job growth, I think, so we're
• 20:50
  Speaker 11: expecting pretty solid growth to continue here in the April data.
• 20:55
  Speaker 2: All right, Jeffrey, thanks a lot. We appreciate it. I
• 20:58
  Speaker 2: hope for your sake that it is not an a
• 21:00
  Speaker 2: burger that you can get excited. It does feel like
• 21:03
  Speaker 2: Jay Powell would like it to be a nothing burger,
• 21:05
  Speaker 2: so we'll see if that actually happens. Jeffrey Cleveland, chief
• 21:08
  Speaker 2: economists at Payton Regal, is standing by.
• 21:12
  Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
• 21:16
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• 21:30
  Speaker 3: Al Steele, Paul Sweeney, You're live here in our Bloomerg
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• 21:40
  Speaker 6: Of course, it is FED Day today.
• 21:42
  Speaker 3: We'll hear from the feed of two pm Wall Street
• 21:44
  Speaker 3: Time conference with the reporters at two point thirty Bloomberg
• 21:48
  Speaker 3: Complete coverage on Bloomberg Radio and TV at one thirty
• 21:50
  Speaker 3: pm Wall Street Time. Just check in with somebody who
• 21:53
  Speaker 3: I think is going to be paying attention to this meeting.
• 21:55
  Speaker 3: Pria Misrab, Managing director at JP Morgan Asset Management, joining
• 21:59
  Speaker 3: us from New York City via a zoom Pria, thanks
• 22:02
  Speaker 3: so much for joining us here.
• 22:03
  Speaker 6: I guess what we've heard.
• 22:04
  Speaker 3: From a lot of people today that Alex and I
• 22:06
  Speaker 3: have been chatting with is the expectations pretty low here
• 22:09
  Speaker 3: that the Fed's are going to try to stay a
• 22:10
  Speaker 3: steady course here. Any chance that they maybe kind of
• 22:14
  Speaker 3: go off script a little bit and maybe be a
• 22:16
  Speaker 3: little bit more hawkish than maybe they had been.
• 22:20
  Speaker 12: So I think they have to.
• 22:22
  Speaker 9: Mark to market, meaning in January and March Chepau said
• 22:25
  Speaker 9: he'd like more confidence, or the FED would like more
• 22:27
  Speaker 9: confidence before they can cut trace they have or none
• 22:31
  Speaker 9: of the data should give them more confidence.
• 22:33
  Speaker 12: So I think they have to acknowledge it.
• 22:35
  Speaker 9: I would argue Chepau has already acknowledged that, I think
• 22:38
  Speaker 9: repeating that and keeping the market sort and the market's
• 22:41
  Speaker 9: already priced that in. We've taken down the number of
• 22:45
  Speaker 9: cuts that the market was pricing in for this year
• 22:48
  Speaker 9: to now about thirty basis points much later in the year,
• 22:51
  Speaker 9: so the market's already I think priced in a FED
• 22:55
  Speaker 9: that has should not have had more confidence to cut tries.
• 22:57
  Speaker 9: I think reiterating that it be relatively neutral for the market.
• 23:02
  Speaker 9: I think what I'm watching is does Chair Powel show
• 23:05
  Speaker 9: that he just we need more time, that the FED
• 23:07
  Speaker 9: needs more time to get that confidence, or is his
• 23:11
  Speaker 9: belief that the disinflation process is still underway. Is that
• 23:15
  Speaker 9: belief a little challenged or is he losing faith in that?
• 23:18
  Speaker 9: I think then you can see a much bigger reaction
• 23:21
  Speaker 9: because if the FED starts to get nervous that monetary
• 23:23
  Speaker 9: policy is not restrictive, hikes come back on the table,
• 23:27
  Speaker 9: and I think then no market is really priced for that.
• 23:30
  Speaker 9: I think risk assets will really struggle if the Fed
• 23:33
  Speaker 9: is document rate hikes. I don't think they're there yet,
• 23:36
  Speaker 9: but there's a press conference and I know he's going
• 23:38
  Speaker 9: to be asked that question, and if he sounds a
• 23:40
  Speaker 9: little more nervous about the hot inflation readings, I think
• 23:43
  Speaker 9: then the market's absolutely going to pay attention.
• 23:46
  Speaker 2: What is appropriately priced? Then if you're looking at a
• 23:49
  Speaker 2: ten year at four point sixty five percent, you're looking
• 23:52
  Speaker 2: at a two year above barely above five Are these
• 23:57
  Speaker 2: the right levels? What do you do here?
• 24:00
  Speaker 9: So I think if rate cuts are still on the horizon,
• 24:03
  Speaker 9: and they could be later this year, they could be
• 24:06
  Speaker 9: next year, I think the rates market's actually very well
• 24:09
  Speaker 9: priced for that. I would actually argue that at four
• 24:12
  Speaker 9: seventy on the tenure were near the peak if the
• 24:15
  Speaker 9: FED is not going to hike any further.
• 24:17
  Speaker 12: I actually think, owning some.
• 24:18
  Speaker 9: Duration, we've stepped in a little bit, were a little
• 24:21
  Speaker 9: long duration looking for levels to add to that, So
• 24:25
  Speaker 9: you know, I think rates then would be near the
• 24:27
  Speaker 9: peak if the FED suggests that they may be taking
• 24:30
  Speaker 9: rate cuts off the table or heaven forbid talking about
• 24:34
  Speaker 9: rate hikes. I think then absolutely rates can rise some more,
• 24:37
  Speaker 9: you can breach that five percent level. But as long
• 24:40
  Speaker 9: as they are dangling that rate cut garret in front
• 24:43
  Speaker 9: of the market, I think even if it's a little
• 24:45
  Speaker 9: further out, I think actually rates are start to look
• 24:49
  Speaker 9: fair to cheap. Look at all in eiels, in rest
• 24:51
  Speaker 9: grate corporate you're getting six percent, securitized credit you can
• 24:55
  Speaker 9: get seven eight percent. I mean you're looking at equity
• 24:58
  Speaker 9: like returns in fixed and so as long as we're
• 25:01
  Speaker 9: not talking about rate hikes and cuts are still on
• 25:04
  Speaker 9: the horizon, I think fixed income makes sense.
• 25:06
  Speaker 12: Just have to be careful, you know what risk you're
• 25:08
  Speaker 12: taking in terms of credit. But you know, I think
• 25:12
  Speaker 12: rates should be near their peak, and.
• 25:14
  Speaker 6: That's kind of where I want to go.
• 25:15
  Speaker 3: Pre I was just wondering when you know, pros like you,
• 25:20
  Speaker 3: when you start thinking about credit risk and maybe taking
• 25:22
  Speaker 3: on more credit risk.
• 25:23
  Speaker 6: Because I think.
• 25:24
  Speaker 3: About the performance in the fixed income space in twenty
• 25:26
  Speaker 3: twenty three, against at least my expectations, the best performing
• 25:29
  Speaker 3: asset class was US high yield.
• 25:32
  Speaker 6: So I'm wondering if I should be taken some credit
• 25:34
  Speaker 6: risk here.
• 25:36
  Speaker 9: Sure, we've been adding well, we've been adding credit risks
• 25:38
  Speaker 9: really since late last year, once the FED suggested that
• 25:43
  Speaker 9: they were done hiking. That's normally a good sign for
• 25:47
  Speaker 9: risk assets as well as duration, as long as the
• 25:50
  Speaker 9: fundamentals are strong. And that's what I think if you
• 25:52
  Speaker 9: rely on research, we have a ton of research analysts looking.
• 25:55
  Speaker 12: At fundamentals of the company.
• 25:57
  Speaker 9: You talk about high yield, the company fundamentals are high
• 26:00
  Speaker 9: yield of investment grade are very strong.
• 26:02
  Speaker 12: I mean there are those companies.
• 26:04
  Speaker 9: That are struggling but being extremely careful about the business model,
• 26:07
  Speaker 9: about the balance sheet of you know, even high yield.
• 26:10
  Speaker 9: I think high quality, high heel makes sense. We've been
• 26:13
  Speaker 9: adding that risk. I think the other thing we watch
• 26:16
  Speaker 9: our flows, and we've had significant inflows into fixed income nets.
• 26:21
  Speaker 9: Supply or fixed income has not been that high. I mean,
• 26:24
  Speaker 9: companies have been issuing paper, but really to refinance their debt,
• 26:28
  Speaker 9: that their upcoming debt. We haven't seen the releveraging up
• 26:31
  Speaker 9: of the corporate sector. It's something I'm keeping an eye
• 26:33
  Speaker 9: out for because spreads are tight. If companies start to
• 26:36
  Speaker 9: re level, I get a little more nervous. But you
• 26:38
  Speaker 9: look at the supply demand picture for high yield, for
• 26:41
  Speaker 9: investment rate corporate, it's strong. Company fundamentals are strong. That
• 26:45
  Speaker 9: would be an argument for as long as the soft
• 26:47
  Speaker 9: landing continues, economic data remains strong, the consumer is strong.
• 26:51
  Speaker 9: I think owning some credit risks, you know, it makes sense.
• 26:55
  Speaker 9: Owning some duration risks closer to that four to seventy
• 26:58
  Speaker 9: five percent level to make sense as well. So I
• 27:01
  Speaker 9: think both of those risks are are attractive.
• 27:04
  Speaker 12: Here.
• 27:05
  Speaker 3: One of our YouTube viewers just kind of wrote in
• 27:08
  Speaker 3: and said, is that the Empire State building out your window?
• 27:11
  Speaker 3: Or is that like a screen saver kind of zoom thing.
• 27:16
  Speaker 12: Well, right now, it is a screen saver, but no,
• 27:20
  Speaker 12: I thought it was real.
• 27:22
  Speaker 9: Once the JP Morgan building is up, I'm hoping probably
• 27:25
  Speaker 9: not from my office. I sit there at screens all
• 27:27
  Speaker 9: day long, but I'm sure there will be views from them.
• 27:30
  Speaker 6: You're gonna get some great views.
• 27:31
  Speaker 3: And by the way, we're gonna do a remote broadcast
• 27:33
  Speaker 3: from down there when that building opens.
• 27:35
  Speaker 2: Oh that's exciting. Yes, okay, cool, all right, brio. What
• 27:40
  Speaker 2: if you take into account you mentioned sort of taking
• 27:43
  Speaker 2: on the credit risk, et cetera. How do we think
• 27:46
  Speaker 2: about all the supply that's going to come on in
• 27:48
  Speaker 2: terms of where you may take duration, where risk, where
• 27:51
  Speaker 2: the credit risk then lies. And I say supply, and
• 27:54
  Speaker 2: I mean from treasury, but also in terms of issuance
• 27:56
  Speaker 2: on the corporate side.
• 27:58
  Speaker 12: Sure, so a lot of issuance has happened.
• 28:00
  Speaker 9: I think there's been significant pre funding earlier this year,
• 28:04
  Speaker 9: So we are looking for less corporate supply on a
• 28:06
  Speaker 9: growth basis into year end, particularly as we go into
• 28:09
  Speaker 9: the election. But I think as we look at the
• 28:11
  Speaker 9: spread curve, and I'll get to the rate curve in
• 28:14
  Speaker 9: a minute, but the spread curve is pretty flat. So
• 28:17
  Speaker 9: we like owning the zero to five year part of
• 28:19
  Speaker 9: the spread curve just because you know, to take on
• 28:22
  Speaker 9: more additional credit risks, you know, just not getting paid
• 28:25
  Speaker 9: up enough. So you know, if the spread curve steepens,
• 28:28
  Speaker 9: I might look further out, but I would say zero
• 28:30
  Speaker 9: to five year when we talk about the treasury curve,
• 28:32
  Speaker 9: and that's why we have a lot of supply and
• 28:35
  Speaker 9: there's no pre funding. There's going to be treasury supply
• 28:38
  Speaker 9: as far as the eye can see for multiple generations.
• 28:40
  Speaker 9: Given our deficit outlook, I think there it's important to
• 28:44
  Speaker 9: think about what does the FED do?
• 28:46
  Speaker 12: And given our.
• 28:46
  Speaker 9: View that the FED is likely to start to cut rates,
• 28:49
  Speaker 9: we think in the third quarter, a couple of times
• 28:51
  Speaker 9: this year, a few more times next year. I think
• 28:54
  Speaker 9: that zero to five year is attractive, But given that
• 28:57
  Speaker 9: the cuts don't seem to be imminent, I think the five,
• 29:00
  Speaker 9: the three and five year, it's a little more attractive
• 29:03
  Speaker 9: because you know, the negative carry of owning that two
• 29:05
  Speaker 9: year is high. So I would say owning five year
• 29:09
  Speaker 9: duration and zero to five year credit, that's really I
• 29:12
  Speaker 9: think the sweet spot in the fixed income space right now.
• 29:15
  Speaker 3: All right, let me bring up an old issue here PRIA.
• 29:17
  Speaker 3: That's the inverted yield curve. We're still inverted two tens
• 29:20
  Speaker 3: thirty five basis points. And I was taught by none
• 29:22
  Speaker 3: of the professor cam Harvey who kind of penned this
• 29:25
  Speaker 3: whole thing that that usually leads to, like always a recession.
• 29:29
  Speaker 3: What's going on there with that yield curve?
• 29:32
  Speaker 9: So the FED has historically struggled to engineer a soft landing.
• 29:36
  Speaker 9: They did so in ninety five. I think twenty nineteen
• 29:40
  Speaker 9: might have been another case, except we had COVID, so
• 29:43
  Speaker 9: it's really not really a tested period. But here's why
• 29:47
  Speaker 9: people look at the eyelk curve and say that that's
• 29:49
  Speaker 9: a sign of a recession, because it's typically end of cycle.
• 29:52
  Speaker 9: The FED has tightened policy significantly, and then we head
• 29:55
  Speaker 9: into a recession and the Fed then tries to cut traits.
• 29:57
  Speaker 12: To down to that.
• 30:00
  Speaker 9: I think they're trying very, very hard to keep the
• 30:03
  Speaker 9: soft landing going. And that's why the talk of rate cuts.
• 30:06
  Speaker 12: I think they want to.
• 30:06
  Speaker 9: Take the edge off the market. Start cutting rates. If
• 30:10
  Speaker 9: the earlier they start, the slower they can cut in,
• 30:13
  Speaker 9: perhaps that narrow path to soft landing widens out a
• 30:16
  Speaker 9: little bit. I think that's why the Fed has been
• 30:19
  Speaker 9: preemptive in talking about rate cuts. They're looking at their
• 30:21
  Speaker 9: progress and inflation and saying, as long as we get
• 30:24
  Speaker 9: a little bit more confidence, we can cut rates. So
• 30:27
  Speaker 9: even though the inverted curve might imply a recession, I
• 30:29
  Speaker 9: think if and it's a big if, inflation stabilizes or
• 30:34
  Speaker 9: goes back bumpy road but goes back into disinflation and
• 30:37
  Speaker 9: the Fed starts to cut rates a little bit, they're
• 30:40
  Speaker 9: going to ease financial conditions enough to keep growth going.
• 30:43
  Speaker 9: And I think then that path you can get that
• 30:46
  Speaker 9: soft landing even in an inverted curve.
• 30:48
  Speaker 2: All right, we appreciate it. Thank you very much. Good
• 30:50
  Speaker 2: luck with the view. Priam Israel Fixing Come Portfolio Manager,
• 30:53
  Speaker 2: JP Morgan Asset Management is standing byer.
• 30:58
  Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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• 31:16
  Speaker 2: This is Bloomberg Intelligence Radio. We cover all the news
• 31:19
  Speaker 2: in economic and financial world with our top analyst over
• 31:23
  Speaker 2: at Bloomberg Intelligence. They cover two thousand companies one hundred
• 31:26
  Speaker 2: and thirty industries around the world. They're honestly probably the
• 31:28
  Speaker 2: smartest people that we talked to in this business. Ana
• 31:32
  Speaker 2: Ragrana is one of them. He's Bloomberg Intelligence Technology senior
• 31:35
  Speaker 2: technology analysts. And we're talking Amazon. So that's stock up
• 31:39
  Speaker 2: doing pretty well. It is up by about three point
• 31:41
  Speaker 2: three percent, having a nice surge yesterday when reported after
• 31:44
  Speaker 2: the closing bell, and it was all because of cloud
• 31:46
  Speaker 2: sales growth and AI demand. Anurag, what was your big
• 31:50
  Speaker 2: takeaway from yesterday and the call.
• 31:53
  Speaker 10: Yeah.
• 31:54
  Speaker 13: I think the big spike in AWS profit is something
• 31:56
  Speaker 13: that really alarmed us because you know, that was a
• 31:59
  Speaker 13: number we weren't expecting for I honestly a few years.
• 32:02
  Speaker 13: So if you look at it, AWS margins, operating margins
• 32:06
  Speaker 13: came close to thirty seven thirty eight percent, a little
• 32:08
  Speaker 13: over thirty seven, and that was like eight points or
• 32:11
  Speaker 13: eight percentage points higher than what Street was looking for
• 32:14
  Speaker 13: and fourteen percentage points over last year.
• 32:17
  Speaker 10: Absolutely phenomenal.
• 32:19
  Speaker 13: I think that's really what I am hoping that you know,
• 32:22
  Speaker 13: investors are focused on rather than all the other things.
• 32:25
  Speaker 3: All right ONNROD, give us a sense if we just
• 32:27
  Speaker 3: step back for those those that aren't cloud efficionados, give
• 32:31
  Speaker 3: us kind of the market share layout. How does this
• 32:33
  Speaker 3: market look between some of these big players like Microsoft
• 32:35
  Speaker 3: and Google and Amazon.
• 32:37
  Speaker 13: So Amazon only plays on the infrastructure layer, which is
• 32:40
  Speaker 13: trying to give people raw material to build their applications,
• 32:44
  Speaker 13: and when that they have a commanding market share over
• 32:46
  Speaker 13: forty percent of the market, and in fact that they
• 32:49
  Speaker 13: have maintained that for a while, I mean, which is
• 32:51
  Speaker 13: surprising because Microsoft has been gaining share on it, you know,
• 32:55
  Speaker 13: for a very long period of time. But from smaller players,
• 32:58
  Speaker 13: and also the market's growing very much. So Amazon's currently
• 33:01
  Speaker 13: at you know, revenue off over one hundred billion dollars
• 33:03
  Speaker 13: in this market, but over to all tech spending is
• 33:06
  Speaker 13: you know, north of two trillion, frankly, So there's a
• 33:09
  Speaker 13: lot of room to grow for everybody, not just Amazon,
• 33:12
  Speaker 13: but Amazon, Microsoft, Google, you know, even Oracle, I mean,
• 33:15
  Speaker 13: all of them will grow in this market.
• 33:18
  Speaker 2: So if we take a look at the different layers
• 33:20
  Speaker 2: of how AI kind of plays in too cloud, the
• 33:24
  Speaker 2: one area where Amazon maybe isn't getting as much market
• 33:28
  Speaker 2: share and maybe they're still developing that is the consumer
• 33:31
  Speaker 2: facing side. What can they do there? What is their
• 33:34
  Speaker 2: growth opportunity there?
• 33:37
  Speaker 13: Yeah, I mean they have a lot of you know,
• 33:39
  Speaker 13: I would say some apps that are working on it.
• 33:41
  Speaker 13: But really the reason why Microsoft is ahead right now
• 33:44
  Speaker 13: in that game is because of open Ai. They have
• 33:46
  Speaker 13: a partnership with open ai and they run open AI's
• 33:49
  Speaker 13: back end, which is when you do a search and
• 33:51
  Speaker 13: chat GPT, Microsoft is running those searchers in the background
• 33:55
  Speaker 13: or you know, the application runs on it, which is
• 33:58
  Speaker 13: why Microsoft is getting the benefit of it. For AWS,
• 34:01
  Speaker 13: the big benefit is going to come from companies or
• 34:03
  Speaker 13: big corporations when they go out and build their AI applications,
• 34:07
  Speaker 13: there's a high likelihood they're going to choose AWS as
• 34:10
  Speaker 13: much as they're going to choose Microsoft or Google. And
• 34:12
  Speaker 13: that's really what Amazon's betting on.
• 34:16
  Speaker 3: So you mentioned the margins, high margins at AWS. Can
• 34:20
  Speaker 3: they maintain those margins? What are the risks for those margins?
• 34:23
  Speaker 13: Yeah, I don't think they can maintain them, only because
• 34:25
  Speaker 13: they have to spend a fair amount of money in
• 34:27
  Speaker 13: order to reduce in order to fulfill the demand expanding
• 34:32
  Speaker 13: in data centers, buying new hardware, buying chips. So I'd
• 34:35
  Speaker 13: be very surprised if you see that number again for
• 34:38
  Speaker 13: a very long period of time. You know, frankly speaking,
• 34:40
  Speaker 13: I'll be happy with the thirty percent margin for the
• 34:42
  Speaker 13: next several years while they make sure that they're doing
• 34:45
  Speaker 13: the right investments to drive double digit growth rate on
• 34:48
  Speaker 13: their top line.
• 34:49
  Speaker 2: Let's talk about those investments. So they said they're going
• 34:51
  Speaker 2: to quote meaningfully step up their capex to pay for
• 34:55
  Speaker 2: all this AI infrastructure. But there was no like number
• 34:57
  Speaker 2: given when Meta said that market didn't like it. What
• 35:01
  Speaker 2: was the pass here that Amazon got?
• 35:04
  Speaker 13: Yeah, but you know, Amazon's basically showcasing that they actually
• 35:07
  Speaker 13: have been doing this successfully in terms of expanding data
• 35:10
  Speaker 13: centers based on the capacity, so you know, before going in,
• 35:14
  Speaker 13: you know, they had close to fifteen billion dollars yesterday
• 35:18
  Speaker 13: in the in the first quarter in terms of capex,
• 35:20
  Speaker 13: and it's going to go up over the next you
• 35:23
  Speaker 13: know quarter, So we think it's going to be north
• 35:25
  Speaker 13: of sixty five billion at this point for all of Amazon,
• 35:28
  Speaker 13: with most of it going to AWS.
• 35:30
  Speaker 10: But there's a reason for it.
• 35:31
  Speaker 13: They are getting contracts to fulfill cloud demand or you know,
• 35:35
  Speaker 13: they need to be able to expand that to fulfill
• 35:38
  Speaker 13: that massive cloud demand on a rock.
• 35:40
  Speaker 6: You know what I did not see yesterday and I
• 35:42
  Speaker 6: released a dividend. What's up with that? They got like
• 35:45
  Speaker 6: sixty to eighty billion dollars of free cash flow?
• 35:47
  Speaker 13: Yeah, I mean I I you know again, they're going
• 35:49
  Speaker 13: to spend that sixty five billion dollars next year on
• 35:52
  Speaker 13: capex also, so I'm okay with not having a dividend
• 35:55
  Speaker 13: for a while.
• 35:56
  Speaker 3: I would rather you're a technicals you guys think that
• 35:58
  Speaker 3: if you if you put out a dividend, it's signals
• 36:01
  Speaker 3: that you're no longer a growth story.
• 36:03
  Speaker 10: Yeah, it's a kiss of death. I'm not a big fan.
• 36:05
  Speaker 2: No, Microsoft, Google, Apple, they disagree with you.
• 36:10
  Speaker 10: Yeah, IBM kind of agrees with me at this.
• 36:13
  Speaker 2: Point that I mean, so, but you know, yeah, go ahead.
• 36:17
  Speaker 13: Yeah, So look at IBM. I mean, they have a
• 36:19
  Speaker 13: massive dividend yield. I would rather they, you know, they
• 36:22
  Speaker 13: take that money and buy a bunch of new Hashi
• 36:24
  Speaker 13: corpse kind of companies that are growing at fifteen to
• 36:27
  Speaker 13: twenty percent. That will change the face of the company,
• 36:29
  Speaker 13: make them, you know, even more relevant in the tech
• 36:31
  Speaker 13: space than they are right now. So I'm always in
• 36:34
  Speaker 13: that camp that when you are a tech company, you
• 36:36
  Speaker 13: gotta constantly reinvent yourself otherwise somebody will come and eat
• 36:40
  Speaker 13: your lunch.
• 36:40
  Speaker 3: I mean, on Rock and I, we just fundamentally disagree
• 36:42
  Speaker 3: on this.
• 36:43
  Speaker 6: We agree to disagree. We go to our separate corners.
• 36:45
  Speaker 2: Can I ask a dumb question for the two of you, then,
• 36:47
  Speaker 2: is there room for both of you to be right? Like,
• 36:49
  Speaker 2: can these tech companies throw off enough cash they can
• 36:51
  Speaker 2: reinvest in a healthy way and also pay a dividend?
• 36:53
  Speaker 13: Yes on our own, Yes, yes, absolutely, Alex, I completely
• 36:57
  Speaker 13: agree with that, because what happens is if you go
• 37:00
  Speaker 13: very small token dividend. It opens the doors to a
• 37:03
  Speaker 13: lot of institutional investors that are bound by their charter
• 37:07
  Speaker 13: to only invest in companies that they are dividend. So
• 37:10
  Speaker 13: there is a logical reason to do it. But I'm
• 37:12
  Speaker 13: okay with Amazon's going to take a year or two
• 37:14
  Speaker 13: years to get to that.
• 37:15
  Speaker 10: Path, all right.
• 37:16
  Speaker 2: So there's are where where you can both be read.
• 37:18
  Speaker 6: There's there's a place where we can meet them.
• 37:20
  Speaker 2: Is there a CAPEX number that you wouldn't like from Amazon?
• 37:23
  Speaker 2: They didn't give a number.
• 37:25
  Speaker 10: Now, not at this point. The only reason is because
• 37:27
  Speaker 10: we see forward contracts.
• 37:29
  Speaker 13: As of this morning, when they filed their ten Q,
• 37:31
  Speaker 13: we saw cloud commitments go up twenty nine percent.
• 37:34
  Speaker 10: I mean that's a very big number.
• 37:35
  Speaker 13: And frankly, when on the enterprise side, we haven't even
• 37:38
  Speaker 13: seen orders coming for AI at this point. AI orders
• 37:42
  Speaker 13: are only coming in from consumer applications like chat, GBT,
• 37:45
  Speaker 13: people running that. At this point, over the next few years,
• 37:48
  Speaker 13: we should see a massive spike in you know, people
• 37:51
  Speaker 13: creating new applications or companies creating new applications, and that's
• 37:55
  Speaker 13: going to only drive more growth for AWS, Microsoft and Google.
• 38:00
  Speaker 3: I just punched in Microsoft here. I'm surprised that the
• 38:03
  Speaker 3: stock's only up five percent year to date. I thought
• 38:06
  Speaker 3: it would have been more. Just seems like everything's going
• 38:08
  Speaker 3: their way. What's the Microsoft call here?
• 38:10
  Speaker 13: Yeah, if you go and look at all these big
• 38:12
  Speaker 13: companies that are supposed to be the big beneficiaries of
• 38:14
  Speaker 13: AA in the long run, they had a phenomenal last year.
• 38:17
  Speaker 13: I mean, it's just you just can't deny it that
• 38:19
  Speaker 13: the last you know, eighteen months have been really good
• 38:22
  Speaker 13: for the entire tech space, whether it's Microsoft or in
• 38:25
  Speaker 13: video or you know, Amazon. So I think there's just
• 38:28
  Speaker 13: that digestion phase at this point to see how things
• 38:31
  Speaker 13: end up. There's an election coming, the interest rates are
• 38:34
  Speaker 13: going up, so there is a fair amount of unsididity
• 38:37
  Speaker 13: out there that how will demand shape up the in
• 38:40
  Speaker 13: the second half.
• 38:41
  Speaker 10: And next year.
• 38:41
  Speaker 2: Okay, we have like thirty seconds left Apple tomorrow, what's
• 38:45
  Speaker 2: your number one thing?
• 38:46
  Speaker 10: Good course? Yeah.
• 38:47
  Speaker 13: The only things I want to hear is China and stabilization,
• 38:50
  Speaker 13: and then I'll be sleeping happily. I mean, other than that,
• 38:53
  Speaker 13: it's going to be a bad number for Apple.
• 38:55
  Speaker 2: Are we going to get that? China and stable is right?
• 38:57
  Speaker 3: We're going to get a disappointing number Apple, But again
• 39:00
  Speaker 3: its honor. It's just saying it's all about China, right.
• 39:03
  Speaker 2: But also can you stabilize versus increase? I guess would
• 39:07
  Speaker 2: be the distinction. Hey, on our great stuff. We appreciate you.
• 39:10
  Speaker 2: I am sure we'll be talking to you tomorrow as well.
• 39:11
  Speaker 2: On a rag Rana Bloomberg Intelligence, a tech senior technology
• 39:15
  Speaker 2: analyst joining us on Amazon as well as Apple. Do
• 39:17
  Speaker 2: you think if they have, like China, not growing but flat,
• 39:21
  Speaker 2: that would be goodness?
• 39:22
  Speaker 3: I think if I were an investor, I would be
• 39:25
  Speaker 3: happy that because my concern is it's a secular declining
• 39:28
  Speaker 3: market simply because they're losing market share.
• 39:31
  Speaker 2: Yeah, all right, good point.
• 39:33
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