Bloomberg Surveillance 6/25/2026

[00:00:00] Speaker 1: what we all know is that earnings estimates continue to rip higher 2026 earnings are going [00:00:10] Speaker 2: to be okay the chip names have done a great deal of the heavy lifting if we see a broadening that would be a healthy sign in this market we think there's probably more weakness coming through the [00:00:20] Speaker 3: summer months this is Bloomberg surveillance with Jonathan Farrell Lisa Abramowitz and Ann Marie [00:00:27] Speaker 4: Horner live from New York City this morning good morning good morning for our audience worldwide [00:00:32] Speaker 5: Bloomberg surveillance starts right now coming into Thursday more fuel for the bulls equity futures pushing higher micron crushing guesstimate as Wall Street banks are getting a green light to boost payouts crude is declining wiping out a major wartime rally heading into the latest read on inflation [00:00:50] Speaker 6: will that be enough to dampen the enthusiasm that we're seeing in so many parts of U.S. markets as well as certain parts of the economy and that's emphasized by what we saw from the stress tests as well as micron earnings yes on one hand it is just inflationary the oil prices are coming down still core PCE is set to come in at 4.1 percent which would be the highest since April of 2023 and some of the contracts that are leading to these elevated prices are locked in for the next five years so it doesn't seem like that is going to be any time soon pricing power margins check out micron this [00:01:20] Speaker 5: morning 85 percent margins over at that company if anyone was doubting just how much pricing power they [00:01:28] Speaker 6: actually had well they're not having a good day today because ultimately they proved all doubters wrong and they're not having a good day but they're not having a good day but they're not having a good day but they're not going to be a good day. So when you start beating by seven billion dollars the net expectations for some of the some of the net margins was far below that 85 percent they can control a market they can lock people in for the next five years they can get up from payments and still they're running out of chips to sell 85 percent for gross margins is insane and not only beat their own [00:02:03] Speaker 7: expectations it also beat what they did last quarter a year ago 39 percent that's how much they were up and this also beat nvidia it's starting to feel like micron maybe has a little bit of the new new cool kid on the block the new nvidia [00:02:16] Speaker 5: of the street stock is up in the free market by 16 percent good news there for the banks good news that the crude good news there check out crude WTI and Brent this morning WTI in the 60s 69 Brent 72 wiping out the wartime rally a 60 plus percent move at one point all gone all gone so basically we are back to pre-war levels at the same time the AI [00:02:39] Speaker 7: trade is continuing and that is why there's so much positivity and momentum you know Jim Reed of Deutsche Bank put this in one of his notes it's not just the fact that oil keeps moving it's the fact that there's a lot of officials coming out the president this week had said this and a number of other individuals Marco Rubio secretary of state individuals in the Gulf said also they don't see Iran having a toll right now they're not tolling for these vessels which basically everyone is starting to feel like maybe we are somewhat going back to normal when it comes to the [00:03:06] Speaker 5: straighter from us so I think this is good news but there's always something to worry about thank you to us and stock over the Apollo with this quote the narrative in markets is changing from lower oil prices mean lower inflation to lower oil prices mean more demand in an already overheating economy which means higher [00:03:20] Speaker 6: inflation you're even hearing this over at the ECB ironically enough is not coming out and saying we can't let up our vigilance on inflation even if oil prices are coming down this as the ECB the ECB is Christine Lagarde at least has a different tone nonetheless this is sort of the push pull of markets right now on one hand you've got micron able to charge whatever they want for people who can't get enough of their memory chips and on the other hand yes you have one disinflationary input from oil prices how does this come out how do people see core pce how many people are going to say we're seeing peak acceleration in inflation versus the people saying hold on a second it's services sectors it's also the rare [00:03:59] Speaker 5: rare earth metals and a whole host of other components apparently things are so good it's bad equity futures this morning up by three quarters of one percent I kind of think it on the S&P 500 coming up this out Sebastian page of T. Rowe price does take pounce his back Terry Haynes of Pangea policy as President Trump clashes with Republican senators and Angelo Zeno of CFR as micron is breathing new life into the AI trade we begin this out with stocks pushing higher following a boost from microns blowout earnings report Sebastian page of T. Rowe price writing AI is an expanding theme from GPUs to other bottlenecks along the data center supply chain as Buzz Lightyear said to infinity and beyond Sebastian joins us now for more Seb welcome back to the program buddy you just saying stay on grip tight keep rounding this ball [00:04:41] Speaker 8: John when I wrote my notes I didn't think you'd pick up on the Buzz Lightyear quote I'm going to be honest we have an expanding trade from bottlenecks to you know more and more bottlenecks you're looking at cooling and electrification at aerospace at gas turbines we're invested in those bottlenecks we think it's a trade that has legs look the AI build out a lot of people mentioned those forecasts on your show but we're looking at 3 trillion by 2028 so it's a trade and it's going to continue to go in my mind the key question right now is when is this going to show in AI users margins now we have 300 analysts on our platform I read their notes but now I use AI to read their notes and I ask AI where are we seeing companies in our own proprietary research that are increasing their margins because they're using AI now I've seen estimates out there John that are I think exaggerated but anecdotally we're starting to see this as well in the users of AI this will be the next leg so I think the technology revolution will continue I'm conscious as I say this I sound a little bit like Dan Ives but yeah this we're long US [00:06:04] Speaker 5: large-cap growth stocks so I'll push back just a little bit and I'll give you the alternative view on things where the economics of all of this get a little bit complicated so the cost to build our capacity is increasing we can see that evidence by some of the margins of some of these companies at a time when the end user demand is getting a little bit fragile with regards to pricing overall and their rationing spending on AI how's that going to make sense going forward what we need to rationalize here look as long as the products keep [00:06:35] Speaker 8: improving and they are there is tremendous demand for it it looks to me like we're still scratching the surface on demand and usage of AI and by the way John I completely take the point that this spending is gigantic and free cash flows are coming down really fast for a lot of the a lot of the hyperscalers but you know if you think about it the price earnings on the Russell 1000 growth we were in the 30 range we peaked at 30 several times over the last five years John we're at 22 so there is you know trust the market there is an adjustment here that's been made you know this is this is in the bottom for Russell 1000 growth valuation this is in the bottom 30% of the last 10 year range you can also play AI bottlenecks by the way in other areas you can also play them in small and mid cap which were long too we have this barbell between US large cap growth and small and mid cap we're talking about the golden component once you have a component that becomes a part just a a bottleneck a part of that electrification power supply data center whatever it is your company stock goes vertical also merge markets a lot of people mention this on surveillance merge markets are becoming part of that trade. so yeah I mean it's not it's it's it's it's position you need to balance you need to diversify the risk in the portfolio for example I still think there's inflation risk in the portfolio for example I still think there's inflation risk in the portfolio and at some point that becomes part of the you know supplying the energy to AI that becomes part of the picture. [00:08:12] Speaker 6: we'll pick up on that in just one second Seb you're talking about trying to race to find the next bottleneck where you can see stocks go vertical akin to what we're seeing with micron this morning. I just wonder if people truly are understanding or if it's a healthy technical to just have a rolling ball of cash. on one hand people are chasing who has pricing power on the other hand Google shares down 8 percent this month Microsoft poised for its worst monthly loss going back to 2008 of 19 percent losses. The payers of this bill are getting penalized at what point is that a warning sign. [00:08:45] Speaker 8: I mean it is absolutely Lisa you have winners and losers and this is why skilled active management and fundamental research is working here. you're going to have software companies that are going to be disrupted but you're going to have companies that I think increasingly the next leg of this is along the bottlenecks to eventually the handoff to the users that are going to create real efficiency. I see it in our company. We're creating efficiency. We're improving our processes. It's really that that's going to be the next leg and that's what is going to keep it going. And again I go back to the fact that it's not you know a lot of this. increase in leverage and borrowing and decrease in free cash flow margins. A lot of it has been adjusted in the price. 22 relative to 30 range in prior episodes over the last five years. I think it's pretty good for Russell 1000 growth. So so could you justify the investment in further AI. [00:09:46] Speaker 6: if the borrowing costs were higher in the face of inflation in the face of some of this acceleration that we're seeing in other [00:09:55] Speaker 8: components and price components that everyone is trying to chase. Well the reality is that this three trillion is spending a lot of it is generating it generated by companies that still have a ton of cash. I don't like the comparisons to the dot com bubble but we're nowhere near the level of corporate leverage in aggregate that we had. So yes there is some borrowing. But if you look at the metrics by historical standards it's not it's not a very high level of leverage by historical standards. And there is tremendous capital that's available as we're seeing with IPOs and you know those debt issuance. I think there is there is demand for the end product. At the end of the day that's what really matters. People want to use it. There are billions of users already. They're just scratching the surface. I'm doing round tables with investors and I realize a lot of them my peers a lot of them are just starting. It makes me happy because I feel like we're really ahead in how we're using agents and so on in our investment process. But also it makes me think that as long as the demand for the end product is there people are willing to pay for it. We'll go through ups and downs. We'll go through episodes where tokens get more expensive and people go to cheaper models and so on. But the trend is our friend here. Three trillion spending by 28. Again Lisa I didn't think I'd come in this morning and sound like Dan Ives but we do have a long position in U.S. large cap growth. And you know we do believe in the AI bottlenecks and the expansion of that trade. [00:11:25] Speaker 7: You also are concerned that even with oil prices becoming lower that you actually think there's still a lot of inflation baked into the system. Is the Fed potentially having to maybe hike going to be an issue for [00:11:37] Speaker 8: where you see the market going. And you're Dan Ives bullishness this morning. Yeah. Look I'm Murray. If we're like 25 base points 50 base points of hikes. I don't think that's a big issue for markets. I do think generally though inflation right now is underestimated as a risk. You had the of the Torsten Slock quote earlier. I would argue that he's right. I would agree with that. Yes oil prices are coming back down really quickly. My view is that there's spent up inflation. There are lots of lags in inflation data and in inflation itself. You have from fertilizer to food. From freight and insurance to transportation to industrial production to the final goods. From fiscal stimulus to demand. There's lots of lags that are working their way through. By the way the last three months on the rolling basis the headline CPI is up 8 percent if you annualize it. You're not supposed to analyze three months. You know it's noisy data but still 8 percent. But the shelter for the last three months is 4.8 percent. There's also a lag defect here with prior rent increases. Now put all of this in context of the fact that the break even for the one year horizon is 1.7 percent and the one year inflation swap is 2.2 percent. So in my mind it's still an underestimated risk especially for the next three to six months. In the long run yeah we'll normalize. But I think the market is underpricing the inflation risk. I guess we have a print this morning. We'll see. I watch surveillance often with a 12 or 24 hour lag and I always I'm mindful that some people come in and make forecasts a few minutes before the data release. I'm not going to make that. I'm not going to do that this morning. It's always interesting to listen to it after the fact when you know what happened. But as a general trend I'm not talking necessarily PC maybe 4 percent this morning. But as a general trend the inflation here is underestimated by the market based on the pricing you see in break evens and inflation swaps. Not enough to upend this rally though. [00:13:40] Speaker 5: So it's good to see you. Sebastian page at T. Rowe price at least not for now. For now CapEx takers over spenders. We'll catch up with us in quarter of Wells Fargo later this morning. That's his trade. That's the trade that's worked. You mentioned the hyperscalers. The likes of meta and Microsoft those stocks are in a bear market. They've really struggled. Micron is not a struggle that is searching this morning. Even talking about the transfer of wealth. And right now the market is embracing the transfer of wealth. [00:14:04] Speaker 6: And trying to look toward who has that pricing power. Who has the next 85 percent pricing power. I can give advice and I will charge you something. And ultimately you know maybe I can make an 85 percent profit margin. 90 percent margins. [00:14:17] Speaker 5: For you. Yeah exactly. Obviously. Micron up by 16 to 17 percent. Just kidding. In the free market. Equity futures right now is 0.8 percent on the S&P 500. With an update on stories elsewhere this morning with your Bloomberg brief. Bonnie Quinn has more. Hey Bonnie. Good morning John. [00:14:31] Speaker 9: Back to back earthquakes devastating Venezuela. The biggest quakes in the country's history toppling buildings in Caracas knocking down power lines and damaging the capital's main airport. At least 32 people have been confirmed dead and more than 700 injured so far in the quakes. All of the biggest U.S. banks passing the Fed's annual stress tests allowing them to boost buybacks and dividends. The exam which is a result of the GFC assesses how 32 large lenders would withstand a severe global shock among scenarios. The Fed saying the results underscore the strengths of the banking system. Micron shares surging in the pre-market. The largest U.S. maker of computer memory chips giving a quarterly forecast that easily topped Wall Street estimates. Signaling an AI fueled growth run remains strong. And that is your Bloomberg brief. John. [00:15:20] Speaker 5: Hey Bonnie thank you. More from Bonnie in about 30 minutes time. Up next on the program struggling to maintain a united front. [00:15:27] Speaker 10: We're very proud of the party. I don't like a few people but that's okay. I think you know who they are. I'll give you that information someday. But for the most part we have a really well unified party. Did someone call him brother yesterday at this meeting? [00:15:40] Speaker 5: Yes. Okay. Terry Haynes of Pangea Policy can translate all of that in just a moment. Life from New York City this morning. Good morning. THE EQUITY IS PUSHING HIGH ON THE S&P 500. CRUSHING ESTIMATES, 85% MARGINS, MORE ON THIS THROUGHOUT THE PROGRAM. MICRON IN THE PRE-MARKET UP BY 17%. A SNAPSHOT OF EQUITY IN THE U.S. EQUITY FUTURES PUSHED IN HIGH ON THE S&P 500 UP BY 0.8. [00:16:23] Speaker 10: OUR PERFORMANCE ON THE NASDAQ UP BY 2.2%. EQUITY FUTURES PUSHED IN HIGH ON THE S&P 500. WE LIKE OUR LEADER, WE LIKE EVERYBODY IN THE ROOM. I DON'T LIKE A FEW PEOPLE, BUT THAT IS OKAY. [00:16:40] Speaker 5: I THINK YOU KNOW WHO THEY ARE. I WILL GIVE YOU THAT INFORMATION SOMEDAY. FOR THE MOST PART, WE HAVE A REALLY WELL UNIFIED PARTY. THE PRESIDENT SHOWING SOME SOLIDARITY WITH GOP SENATORS AFTER A CLOSED-DOOR MEETING DEVOLVED INTO A SHOUTING MATCH ON CAPITOL HILL. WE'LL JOIN US NOW FOR THE LATEST. GOOD MORNING, TYLER. [00:16:58] Speaker 11: HEY, JOHN. GOOD MORNING. I MEAN, TO BE A FLY ON THE WALL FOR THIS CLOSED-DOOR CONTENTIOUS MEETING YESTERDAY BETWEEN PRESIDENT TRUMP AND SENATE REPUBLICANS, THERE ARE REALLY TWO ISSUES AT PLAY HERE. THE FIRST IS THAT YESTERDAY PRESIDENT TRUMP PROBABLY CANCELLED THIS SIGNING CEREMONY FOR THE RECENTLY PASSED BIPARTISAN HOUSING BILL, WHICH REPUBLICANS WANT TO CAMPAIGN ON. HE SAYS HE'S NOT GOING TO SIGN THAT LEGISLATION UNTIL THEY PUT FORWARD HIS VOTER I.D. ACT. BUT AT THIS POINT, THAT DOESN'T REALLY SEEM LIKE A PLAUSIBLE OUTCOME. SENATE REPUBLICANS HAVE BEEN TELLING PRESIDENT TRUMP FOR MONTHS THAT THE VOTES ARE NOT THERE, THOUGH HOUSE SPEAKER MIKE JOHNSON IS HEADED TOWARDS THE WHITE HOUSE LATER TODAY. THAT'S SOMETHING TO WATCH AS IT APPEARS THEY'RE GOING TO TRY TO TAKE SOME OF THESE PROVISIONS AND GET IT THROUGH THE PARTISAN RECONCILIATION PROCESS, BUT IT'S NOT TOTALLY CLEAR THAT WILL EVEN PASS THE BUDGETARY STANDARDS. THE SECOND ISSUE IS THE ONE THAT YOU MENTIONED, THAT WE JUST SAW THE SENATE REBUKE PRESIDENT TRUMP OVER THE CONFLICT IN IRAN WITH FOUR REPUBLICANS CROSSING PARTY LINES. THAT INCLUDED SENATOR BILL CASSIDY WHO RECENTLY LOST HIS REELECTION BID AFTER FAILING TO SECURE PRESIDENT TRUMP'S ENDORSEMENT. HE TOLD REPORTERS THAT THEY GOT INTO A HEATED EXCHANGE SAYING THAT THEY QUOTE THAT HE QUOTE LOST HIS TEMPER BUT THAT HE MATCHED PRESIDENT TRUMP'S TONE AND VOLUME. JOHN STILL, IT DOES APPEAR SOME PROGRESS ACTUALLY MIGHT HAVE BEEN MADE YESTERDAY. CASSIDY ABRUPTLY SWITCHED HIS VOTE ON A SEPARATE WAR POWERS RESOLUTION AFTER HE RECEIVED A BRIEFING AT THE WHITE HOUSE AND SO DID SENATOR RAND PAUL WHO SAID THAT HE UNDERSTOOD PRESIDENT TRUMP'S ARGUMENT IN THE ROOM YESTERDAY THAT WITHOUT A UNIFIED CONGRESS, THE U.S. COULD LOSE LEVERAGE AT THE NEGOTIATING TABLE. TYLER APPRECIATE THE UPDATE. [00:18:33] Speaker 5: MORE FROM TYLER THROUGHOUT THIS MORNING. LIVE FROM THE NATION'S CAPITAL, TERRY HAINTS OF PANGEA POLICY JOINS US NOW FOR MORE. TERRY, WELCOME TO THE PROGRAM. IS THIS MORE THAN JUST ABOUT WAR HEADING INTO THE MIDTERMS? [00:18:45] Speaker 12: GOOD MORNING, JOHN. I THINK IT'S PERFECTLY NORMAL THAT THE POT BOILS OVER SOMETIMES. I THINK PEOPLE WOULD HOPEFULLY NOT BE SURPRISED THAT PRIVATELY PEOPLE TALK TO EACH OTHER PRETTY FRANKLY IN POLITICS. AND THIS CERTAINLY IS THE CASE TODAY, PARTICULARLY WITH PEOPLE THAT THE PRESIDENT DIDN'T SUPPORT. BUT THE THROUGH LINE IS A COUPLE OF THINGS. THE THROUGH LINE IS IT'S NOT REALLY ABOUT THE WAR SO MUCH AS IT IS THE NOT TYING THE PRESIDENT'S HANDS IN NEGOTIATIONS. THAT BECAME VERY CLEAR. AND IT'S ALSO ABOUT THE PATH FORWARD, WHICH HAS A LOT TO DO WITH FUNDING FOR THE WAR. IT HAS TO DO MORE BROADLY WITH FUNDING FOR DEFENSE OF A TRILLION AND A HALF. AND THAT'S REALLY ALL THAT'S ON THE TABLE FOR THE REST OF THE YEAR BECAUSE REGULAR SPENDING WILL BE PUT OFF UNTIL AFTER THE MIDTERMS. [00:19:38] Speaker 7: TERRY, THOUGH, IS THIS JUST NORMAL GETTING THINGS OFF YOUR CHEST? YOU HAVE ONE SENATOR SAYING THAT LUCKILY NO ONE GOT STABBED, SENATOR JOHN KENNEDY, AND HE WAS A LITTLE NERVOUS THAT THEY PUT OUT THE METAL UTENCILS INSTEAD OF PLASTIC ONES. TRUMP CALLED SENATOR CASSIDY A LUNATIC. AND THAT WAS THE SENATOR THAT KEPT ADDRESSING TRUMP AS BROTHER. THIS FEELS MORE THAN JUST AIRING SOME POLICY DEBATES. [00:20:00] Speaker 12: WELL, YOU KNOW, IT'S -- AS YOU ALL KNOW, IT'S -- CASSIDY WAS NOT SUPPORTED BY TRUMP AND GOING INTO HIS PRIMARY AND INDEED LOST. THE PRESIDENT'S MADE A DECISION THAT WHAT THEY'RE GOING TO DO IS DO EVERYTHING POSSIBLE IN THE MIDTERMS TO STOKE TURNOUT. THEY MADE THE JUDGMENT -- I'M NOT DEFENDING THE JUDGMENT, I'M JUST THINKING ABOUT WHAT THEY'RE SAYING. THEY MADE THE JUDGMENT THAT HAVING SOMEBODY OTHER THAN CASSIDY IN THE SENATORIAL SEAT WOULD -- FOR THE ELECTION WOULD DRIVE MORE TURNOUT. AND THEY'VE DONE THAT IN A NUMBER OF PLACES. TEXAS, OF COURSE, IS ANOTHER ONE. AND, YEAH, SO THEY'RE FOCUSED ON THAT FUNDAMENTALLY. THE SENATE IS A CO-EQUAL BRANCH OF GOVERNMENT. DO I EXPECT SENATOR CASSIDY AND OTHER DISAFECTED SENATORS TO LIKE ANY OF THAT? I DON'T. BUT, YOU KNOW, THIS IS A BIG BOY GAME, TOO. [00:20:49] Speaker 7: TERRY, WHAT'S GOING ON WITH THE HOUSING BILL? HOUSING WAS SUPPOSED TO BE A NATIONAL EMERGENCY FOR THIS ADMINISTRATION. THEY NEED TO DELIVER THIS BEFORE THE MIDTERM ELECTIONS. IT IS BIPARTISAN SUPPORT IN CONGRESS, AS TYLER MENTIONED. YET, THE PRESIDENT WON'T SIGN IT. [00:21:03] Speaker 12: WELL, THE HOUSING BILL, YOU KNOW, IS -- BIPARTISAN IN WASHINGTON IS A LOT OF THINGS, AND ONE WAY IS TO GET BIPARTISANSHIP IS TO MAKE SURE THAT VERY LITTLE GETS DONE. YOU KNOW, NOBODY THINKS THE HOUSING BILL IS A PANACEA OR A HUGE STEP FORWARD, BUT IT IS SOMETHING THAT'S BEEN HAMMERED OUT OVER MONTHS. IT'S SOMETHING THAT BOTH PARTIES WANTED TO DO AND TO RUN ON. AND, YOU KNOW, THERE'S KIND OF TWO CAMPS IN WASHINGTON. ONE CAMP IS, YOU KNOW, I WANT TO RUN ON A RECORD, SO AS MUCH AS I HAVE ON THE RECORD OF ACHIEVEMENT IS POSSIBLE. THE OTHER IS KIND OF ASPIRATIONAL. THAT'S THE SAVE ACT SIDE OF THIS, WHERE, YOU KNOW, TRUMP WANTS TO HAMMER PEOPLE, WANTS THE SAVE ACT. HE'S NOT GOING TO GET IT, BUT, OF COURSE, THAT ALSO ALLOWS HIM TO STOKE TURNOUT AND HAMMER THE OTHER SIDE. SO, YOU KNOW, YOU'VE GOT PEOPLE IN WASHINGTON THAT WANT TO RUN ON ACHIEVEMENT. THEY'RE BEING DENIED THAT. BUT ON THE SUBSTANCE, NOBODY THINKS THIS IS A GREAT LEAP FORWARD. I MEAN, THE WALL STREET JOURNAL HAS BEEN EDITORIALIZING AGAINST IT FOR MONTHS. [00:22:11] Speaker 6: TERRY, WHO DO YOU THINK IS FACING THE BIGGER INTERNAL FIGHT HEADING INTO THE MID-TERM ELECTIONS, THE REPUBLICANS OR THE DEMOCRATS? [00:22:17] Speaker 12: WELL, I DON'T THINK -- I WOULD SAY THE DEMOCRATS, BUT, YOU KNOW, THE DEMOCRATS AREN'T REALLY FIGHTING. YOU'VE GOT A SITUATION WHERE THE KIND OF THE LEFT PROGRESSIVE SOCIALIST SIDE OF THE PARTY, WHICH IS WHERE THE MONEY AND THE ENERGY HAS BEEN FOR A FEW YEARS, IS BASICALLY SWEEPING CENTRISTS AWAY. AND THAT'S GOING TO BE A BIG PROBLEM FOR THEM IN THE MID-TERMS, BECAUSE IT'S GOING TO MAKE IT A LOT HARDER TO GO AFTER THE 40% OR SO OF UNDECIDED VOTERS, PEOPLE THAT DON'T REALLY CARE ABOUT THE IDEOLOGY, THEY JUST WANT RESULTS. THE BIG REASON WHY YOU END UP IN KIND OF THIS POPULIST WORLD THAT WE'RE IN NOW IS BECAUSE FOR THE LAST GENERATION, THE ESTABLISHMENTS IN BOTH PARTIES HAVEN'T REALLY ACHIEVED VERY MUCH, AND PEOPLE ARE REALLY, REALLY TIRED OF IT. SO, YOU KNOW, I THINK THE REPUBLICANS AT THE END OF THE DAY ARE GOING TO BE QUITE UNITED, FRANKLY, FOR A VARIETY OF REASONS. I MEAN, THEY'VE GOT REDISTRICTING ADVANTAGES, THEY'VE GOT MONEY ADVANTAGES, THE WAR ENDING AND OIL PRICES GOING DOWN, OF COURSE, HELPS THEM. I THINK THEY'VE LARGELY EQUALIZED THE TURNOUT ADVANTAGE. AND ON TOP OF THAT, YOU'VE GOT KIND OF WHAT I CALLED YESTERDAY, YOU KNOW, PIN THE TAIL ON THE DONKEY, LITERALLY, OF WHO THE CRAZY PARTY IS. AND BY NOVEMBER, WHAT THIS IS GOING TO BE ABOUT IS WHO THE CRAZY PARTY IS. IT'S PROBABLY NOT GOING TO BE THE REPUBLICANS IN A LOT OF [00:23:36] Speaker 5: PURPLE STATES. TERRY HAYNES, THANK YOU, SIR. TERRY HAYNES OF PANGEO POLICY WITH THE LATEST. FOR ESTABLISHMENT DEMOCRATS, IT'S OPERATION OSTRICH RIGHT NOW, PRETENDING THE NEW YORK PRIMARIES DIDN'T HAPPEN. THAT'S WHAT'S SAD ABOUT THE SPAC WITH THE REPUBLICANS IN THE LAST 24 HOURS. [00:23:54] Speaker 6: WHAT'S HAPPENING IN NEW YORK? THE TRUTH IS THAT BOTH PARTY ARE FACING A REAL FIGHT FOR THE HEART OF THAT PARTY. YES, PRESIDENT TRUMP HAS TAKEN A LOT OF THAT FOR THE [00:24:06] Speaker 7: REPUBLICANS. UNDERNEATH, THOUGH, A LOT OF DISAGREEMENTS. WHAT'S HILARIOUS IS YOU HAVE SENATE MAJORITY LEADER CHUCK SCHUMER SAYING THE ELECTION SHOWED A QUOTE GREAT [00:24:15] Speaker 5: UNIFIED PARTY. I THINK IT'S QUITE THE OPPOSITE. WE'LL GET TO THAT IN JUST A MOMENT. [00:24:30] Speaker ?: ON THE NASDAQ, THERE'S YOUR OUTPERFORMANCE. [00:24:32] Speaker 5: IT'S MICRON BREATHING NEW LIFE INTO THE AI TRADE. SNAPPING A THREE-DAY LOSING STREAK ON THE S&P 500. HOPEFULLY A LITTLE BIT LATER THIS MORNING. FUTURES POSITIVE BY 0.8%, FOLLOWING SOME STRONG NUMBERS IN THE BOTTOM. THE BOTTOM LATER IS A LITTLE BIT OF THE BOTTOM. ON THE NASDAQ, THERE'S YOUR OUTPERFORMANCE. YOU KNOW THE WHY. ON THE NASDAQ THIS MORNING, FUTURES UP BY 2.2%. THE SENT TO THE BOND MARKET, 2'S, 10'S AND 30'S. NICE RALLY ACROSS THE CURVE IN YESTERDAY'S SESSION. SMALL BOUNCE BACK UP A SINGLE BASIS POINT ON 10'S TO 440. SOME CURVE FLATTENING, SOME BULL FLATTENING INTO THIS MARKET. A STORY AGAIN IN THE LAST 24 HOURS. [00:25:14] Speaker 6: THE BOTTOM LATER IS A BOTTOM LATER OF THE BOTTOM LATER. IT COMES AS YOU SEE A GROWING WILLINGNESS, AT LEAST PERCEIVED, THIS PERCEPTION OF THIS IN MARKETS, OF FED OFFICIALS TO HIKE RATES IN THE FACE OF WHAT WE ARE SEEING. I GO BACK TO WHAT WE WERE TALKING ABOUT YESTERDAY. HOW MUCH IS THE EQUITY MARKET AND BOND MARKET SINGING FROM THE SAME HYMNAL GIVEN THE FACT THAT RIGHT NOW THE BOND MARKET IS PRICING IN ALMOST TWO FULL RATE HIKE FOR THIS YEAR. [00:25:40] Speaker 5: HOW PREDICATED IS THE FED IS ALL TALK AND NO ACTION? HOW PREDICATED IS THE STOCK MARKET RALLY ON THAT IDEA? SEBASTIAN PAIGE WITH US ABOUT 30 MINUTES AGO. SUPER BULLISH GROWTH STOPS IN AMERICA. THAT'S WHAT WE ARE SEEING WITH THE FED RATE HIGHS LATER THIS YEAR. CAN YOU HOLD THOSE TWO THOUGHTS AT THE SAME TIME GOING INTO THE REST OF THIS YEAR? [00:26:01] Speaker 6: IF YOU TAKE A LOOK AT FLOWS OVER THE PAST WEEK AND BANK OF AMERICA PUT OUT A GREAT TRACKER CITING EMPF DATA, IT SHOWS THAT PEOPLE WITHDREW A SIGNIFICANT AMOUNT FROM U.S. EQUITIES AND PUT A LOT OF MONEY INTO U.S. BONDS. RIGHT NOW PEOPLE ARE CHASING THE INCOME THAT YOU CAN GET FROM BONDS WHEN YOU SEE YIELDS GOING UP PARTICULARLY AT THE FRONT END AND THAT IS LEADING TO A LITTLE BIT OF A DOES THIS CONTINUE? IS THIS JUST A HEAD FAKE? [00:26:27] Speaker 5: DOES IT REALLY MATTER? WE WILL CONTINUE DISCUSSING THAT. BREAK BELOW 420 IN THE LAST 24 HOURS AT THE FRONT END OF THE YIELD CURVE. LET'S GET TO THE MOVING CREW. WTI AND BRENT WIPING OUT THE WARTIME RALLY. [00:26:44] Speaker 7: WTI BACK IN THE 60s. 69 THIS MORNING. BRENT CRUDE 72. WE HAVE THE PEAK HIGHS WHEN IT CAME TO THE IRAN CONFLICT. EVERY SINGLE DAY WE CONTINUE TO THEIR POSITIONS. WE HAVE THEIR POSITIONS. WE HAVE THEIR POSITIONS. WE HAVE THEIR POSITIONS. THINGS ARE LOOKING LIKE THEY ARE SLOWLY GETTING BACK TO NORMAL. I DON'T WANT TO BE SOMEONE WHO PUTS A TON OF RISK OUT THERE. WE HAVE TO REMEMBER WE ARE IN THE MIDDLE OF A 60-DAY CEASE-FIRE. WE ALSO NEED TO TAKE STOCK OF WHERE WE ARE GOING TO BE THE END OF AUGUST. DOES THIS CONTINUE OR POTENTIALLY IF TRUMP IS NOT GETTING WHAT HE WANTS, DO WE GO BACK TO SOME KINETIC FIGHTING? NO ONE IS THINKING ABOUT POST-60 [00:27:19] Speaker 5: POSITION. THAT IS GOOD NEWS. BRENT CRUDE DOWN BY 1.3% THIS MORNING. THREE HOURS AWAY FROM THE CASH OPEN WITH YOUR MORNING MOVERS. [00:27:28] Speaker 13: THE STAKES WERE HIGH AND MICRON DELIVERED. SHARES ARE SOARING 17.5% IN THE PRE-MARKET AFTER IT ISSUED A BLOCKBUSTER FORECAST AND SAID THAT GROSS MARGINS JUMPED TO NEARLY 85% LAST QUARTER. THE CEO SAYING THAT THERE IS STILL NO LINE OF SIGHT TO SUPPLY CATCHING UP WITH DEMAND. HE EXPECTS SHORTAGES TO CONTINUE BEYOND 2027. ONE OF THE DATA CENTERS SHOWS THEIR ELECTION. ANOTHER NAME HELPING TO LIFT THE CHIP TRADE THIS MORNING IS QUALCOMM. SHARES ARE SOARING 11.5% IN THE PRE-MARKET AFTER THE COMPANY SAID IT SEES $15 BILLION IN ANNUAL AI DATA CENTER SALES BY 2029. DATA CENTER PROCESSORS. IT IS SUPPLYING CHIPS FOR SMARTPHONES. NOW IT IS CHASING THE AI INFRASTRUCTURE BOOM SAYING THAT META WILL USE ITS NEW DATA CENTER PROCESSORS. AND IBM OUT WITH SOME NEWS JUST IN THE LAST FEW MOMENTS. SHARES ARE RISING 4.2% IN THE PRE-MARKET AFTER IT AVAILLED WHAT IT SAYS IS THE WORLD'S TINIEST AI CHIP TECHNOLOGY. THAT IS THE LAST FEW MOMENTS. IT WILL BE ABLE TO TALK ABOUT THE LAST FEW MOMENTS. THE BREAKTHROUGH COULD EVENTUALLY LEAD TO FASTER, [00:28:49] Speaker 5: MORE POWER EFFICIENT, SMALLER CHIPS ONCE THEY BECOME COMMERCIALLY AVAILABLE. JONATHAN: THAT STOCK HAS HAD A GREAT RUN. WE ADD TO THAT THIS MORNING. MICRON SURGING IN PRE-MARKET TRADING, EARNINGS CRUSHING ESTIMATES, LIFTING THE TECH SECTOR AND REIGNITING THE AI RALLY WITH DEMAND FOR MEMORY SHOWING NO SIGHT OF SLOWING. THE BANKS IS BOOSTING DIVIDENTS AFTER PASSING THE FED'S ANNUAL STRESS TEST, GIVING BILLIONS BACK TO INVESTORS. ALL 32 BANKS TESTED SHOWING THEY COULD WITHSTAND A HYPOTHETICAL ECONOMIC DOWNTURN. FINALLY, PRESIDENT DONALD TRUMP GOING AFTER BIG OIL. [00:29:22] Speaker 10: IT'S EXILE MOBILE, IT'S CHEVRON, IT'S SHELL, IT'S BP. IT'S A LOT OF THEM. THEY'RE NOT REDUCING THE PRICES COMMENSURATE WITH WHAT'S HAPPENING. WE ARE DOING A BIG INVESTIGATION ON IT. [00:29:38] Speaker 5: IT'S A BIG INVESTIGATION ON IT. THE PRESIDENT ORDERING THE DOJ TO INVESTIGATE THE COMPANY SAYING GAS PRICES SHOULD BE $2.25. [00:29:46] Speaker 6: THE NATIONAL AVERAGE RIGHT NOW HOLDING JUST BELOW $4 A [00:29:48] Speaker ?: BARREL. [00:29:48] Speaker 6: THIS HARKENS BACK TO ANOTHER ERA UNDER A DIFFERENT PRESIDENT WHERE THERE'S A LOT OF JOB OWNING OF THE OIL MAJORS. I WILL SAY IT HIGHLIGHTS THE SHIFTING ALLIANCES AND ALLEGIANCES RIGHT NOW WITH PRESIDENT TRUMP AND A NUMBER OF ERSTWILLE ALLIES, WHETHER IT'S THE OIL MAJORS WHO PREVIOUSLY WERE IN THE WHITE HOUSE TALKING ABOUT WHAT'S GOING ON IN VENEZUELA, TALKING ABOUT HOW MUCH THEY WERE PUMPING IN THE INCREDIBLE PREEMINENCE OF U.S. OIL MARKETS. ALSO TRUMP AND Bibi Netanyahu AT THE SAME TIME. THERE ARE ALL THESE FISSURES AT THIS MOMENT WHERE IT'S OPERATION GET TO MIDTERMS AND THERE ARE A COUPLE OF KEY COMPONENTS, IN PART, LARGE PART, GETTING OIL PRICES DOWN. [00:30:22] Speaker 5: $4 A BARREL, I SHOULD SAY $4 A GALLON BEFORE ANYONE GETS TOO EXCITED. BUT, YEAH, BIG SPREAD BETWEEN THAT AND THE 225 THE PRESIDENT IS AFTER. [00:30:28] Speaker 7: I DON'T THINK WE'VE SEEN 225 SINCE JANUARY OF 2019. SO WE'RE GOING WAY BACK TO WHERE THE PRESIDENT IS TRYING TO THINK WHERE GAS PRICES SHOULD BE. THE ISSUE IS, OF COURSE, IS THAT WHAT YOU ARE FILLING UP RIGHT NOW IN YOUR CAR, IF YOU WERE GOING OUT TODAY AND FILLING UP YOUR CAR, IS OIL THAT WAS PURCHASED WHEN THE PREMIUM WAS MUCH HIGHER. IT TAKES A LITTLE BIT LONGER. THERE'S GOING TO BE A SUPPLY CHAIN LAG. BUT THE FACT OF THE MATTER IS, GASOLINE PRICES ARE STILL BELOW $4 A GALLON. I CAN'T EVEN NAME ON MY HAND THE AMOUNT OF PEOPLE WHO SAID TO ME TRUMP IS GOING TO TAKE OUT THE BIDEN HIGH OF MORE THAN $5 A GALLON BECAUSE OF THE CONFLICT. [00:31:04] Speaker 5: DON'T ALLOW FINANCIAL LITERACY TO GET IN THE WAY OF A GOOD POLITICAL ARGUMENT DOWN IN WASHINGTON, D.C. REGARDLESS OF WHAT PARTY THEY'RE IN. [00:31:11] Speaker 6: WE'VE SEEN REPEATEDLY. IT CLEARLY IS IN BOLD RELIEF HEADING INTO THE MIDTERMS. [00:31:16] Speaker 5: LET'S GET TO THAT STOCK STORY. ANGELA, WE'VE TALKED ABOUT THE PROGRAM. ANGELA, WELCOME TO THE PROGRAM. THE COMPANY'S RECORD EARNINGS SIGNALING THERE'S MORE A.I. GROWTH AHEAD. ANGELA RAISING HIS PRICE TARGET ON THE STOCK TO 1500, WRITING THE BREATH OF MARGIN EXPANSION SHOWCASES THAT FAVORABLE PRICING DYNAMICS EXTEND BEYOND A.I. SPECIFIC APPLICATIONS. ANGELA JOINS US FOR MORE. ANGELA, WELCOME TO THE PROGRAM. THE NUMBER OF THE MORNING, THAT IS WHY THIS STOCK IS STILL TRADING AT A DISCOUNT TO OTHER NAMES IN ITS INDUSTRY GROUP. [00:31:53] Speaker 14: YEAH, AND JOHN, I THINK THE ANSWER TO THAT IS NOBODY BELIEVES IT IN TERMS OF THE MARGIN TRAJECTORY. AND WE DON'T BELIEVE IT EITHER. I DON'T THINK YOU CAN SUSTAIN AN 85% GROSS MARGIN FOR THE MEMORY INDUSTRY FOR X PERIOD AMOUNT OF TIME OR SEVERAL YEARS OUT. I DO THINK THEY CAN SUSTAIN THAT FOR THE NEXT COUPLE OF QUARTERS. I THINK MORE IMPORTANTLY THOUGH IS WHEN YOU LOOK AT THIS COMPANY, IT HAS COMPLETELY CHANGED. IT HAS BEEN TRANSFORMATIVE IN NATURE. WHEN YOU LOOK AT SOME OF THE LONG-TERM CUSTOMER AGREEMENTS THAT THEY HAVE JUST SIGNED, ABOUT 16 OF THEM, THE IMPROVEMENT IN TERMS OF REVENUE VISIBILITY FROM THAT AS WELL AS THE FREE CASH FLOW TRAJECTORY, WE ARE LOOKING AT NORTH OF 200 BILLION IN FREE CASH FLOW OVER THE NEXT THREE YEARS, AND WHAT THEY ARE NOW GOING TO BE ABLE TO USE THAT FREE CASH FLOW FOR, AND THAT IS GOING TO BE BUYBACKS. AND WHEN YOU LOOK AT THE BALANCE SHEET OF THIS COMPANY, IT HAS COMPLETELY CHANGED RELATIVE TO WHAT WE HAVE SEEN IN THE PAST. EVEN THOUGH AT SOME POINT THAT MARGIN TRAJECTORY IS GOING TO LET UP, AT THIS POINT IN TIME, THE WAY WE ARE LOOKING AT IT IS EVEN WHEN YOU GET THAT ROLL OVER, THE TROUGH MARGINS ARE STILL GOING TO BE WELL ABOVE THE PEAK MARGINS THAT WE HAVE SEEN IN PRIOR CYCLES. [00:33:05] Speaker 6: ANGELO, DOES IT MAKE SENSE TO YOU THAT ALL THE SEMICONDUCTOR STOCKS ARE TRADING IN TANDEM, THAT BECAUSE WE SAW GOOD RESULTS OUT OF MICRON, SK HYNIX RALLIED BY MORE THAN 10%? [00:33:14] Speaker 14: SO THE MEMORY, YOU KNOW, THE MEMORY BUCKET, YES. I MEAN, THAT MAKES SENSE TO US. I MEAN, YOU KNOW, CLEARLY WHAT going to be a benefit SK and Samsung. So to that degree, I think it makes sense. You're going to see similar type of results, I think, from those two. When you start thinking about things maybe from a broader perspective, I do understand the fact that, hey, listen, it is a positive, I think, for the broader semiconductor industry, because if you've got bottlenecks, you've got kind of that. I think the implied view is, hey, listen, this at this point now goes into 2028, or at least Micron has kind of given you the thumbs up that that's going to take place. That does bode well for that, the [00:33:55] Speaker 6: overall broader semi-trade. I guess what I'm getting at is, is it normal for stocks to go up or down by 20% every single day when people have a different sentiment or a different potential rumor coming out? And the inability to really price a name that has been on an absolute moonshot that has basically tripled in value and then some over the past 12 months. It just goes to the lack of understanding of this exponential type of growth and how you price it. Yeah, no, I think you make a fair point. And listen, I think, you know, when [00:34:23] Speaker 14: people saw the NVIDIA situation over the last three years or so, I think, you know, people thought that was kind of a one hit thing and we'd never see it again. And then you kind of look at what Micron's doing here, and it's even more pronounced than what we saw out of NVIDIA, which is just absolutely astonishing. But when you kind of think about just the wild moves that we've seen, I think it's one of those situations where nobody wants to be, no one wants to get caught, you know, holding this thing at the peak of a cycle. And because of that, you've got extreme volatility. I think what you're also kind of trying to figure out or what the streets trying to figure out is, again, what mid cycles look like, you know, what does normalized earnings trajectory look like? And because of that, there's just extreme volatility that you're going to see across the entire semiconductor industry and even more pronounced on the memory side. So I think that's, you know, a lot of what's going on at this point in time. So are these wilds, do these wild swings make sense? Not necessarily. But given the uncertainty that's out there, you know, we understand why that's happening. [00:35:25] Speaker 7: Angela, can we get a reaction to their mega margin? Is this the peak of their gross margins? [00:35:32] Speaker 14: I don't think it goes much higher than this in terms of gross margins. I do think you kind of level out here in the mid 80s. Again, I think there's some sort of limitation in terms of how far you can go in margins. Maybe there's some surprise quarter here over the next couple of quarters where it goes a little bit higher than that. But, you know, as you kind of get, you look towards a maybe a longer term trajectory, I'd say now, you know, potentially mid 70s, 70s look like something that's more realistic in nature, where, again, that's something that I didn't even think would have been possible here two, three years ago. So, again, you're looking at potentially peak margins. But when you look at that free cash flow potential, you look at the amount of stock this company can buy back given that free cash flow. And if the stock doesn't go higher, you're potentially looking at them, you know, reducing their share count. Let's call it at least 15 to 20 percent here over the next two to three years. Again, that provides some sort of gravitational pull to the upside here. So I don't think you necessarily need to see margins go higher. I actually think you can see margins actually level off and pull back from these levels to see the stock to continue to work. Do you have an update on the mega fabs that are coming to [00:36:41] Speaker 7: market? I mean, it's a very local New York story. When can we see that actually start impacting the company? [00:36:47] Speaker 14: Yeah, I mean, you're seeing them definitely pour more into the construction side of things here over the next couple of quarters. You're not going to see anything I'd see extremely pronounced, probably until 2028, 27 into 2028. So it's going to take time for a lot of these investments to really start showing up in terms of the additional capacity that's out there. And again, again, another issue and reason why we continue to see this memory bottleneck that's out there, not to mention when you kind of think about the complexity of, you know, this capacity coming online and what it takes to actually build high bandwidth memory. It soaks up and absorbs so much of that wafer capacity out there that, again, we could end up being in this kind of tight environment here. Well past 2028 in many respects. Angelo, it's going to catch up. Angelo Zina there of CFRA. [00:37:38] Speaker 5: Micron up by 18 percent. Bravo asking about the Cosby. You can have a good fundamental story. You build up leverage around it. Contributes to volatility. Check out the Cosby. That's the story in South Korea right now. The domestic investors, not just the international ones. The Cosby this week is still down by about 1 percent. It's almost flat on the week now. Dropped by 10 percent on Tuesday. We saw a massive move on Wednesday up by 3 percent. Up again by 5 percent again this morning. We've seen wild swings all week. [00:38:04] Speaker 6: And the different kinds of dynamics there in terms of the retail investor, as you've mentioned, that are levered up and have been investing or pulling back. And that creates an even bigger swing every single day. But you start to wonder how do you price a story like Micron when it's also Western Digital. It's SanDisk. It's SK Hynix. It's Samsung. Everything is kind of wildly swinging in one direction or another. And all it takes is a discussion of where you're accelerating production at one company that has specific factors that might have been to compete with China. This might be Micron's five year agreements with some of its clients. I mean, how much is bespoke? How much is sort of do they have a moat around this and how much is commoditized? There just aren't that many companies that actually do it. The stock this morning up by close to 18 percent. Let's get you an [00:38:44] Speaker 5: update on stories worldwide this morning with your Bloomberg Brief. Bonnie Quinn has more. Hey, Bonnie. [00:38:48] Speaker 9: Hey, John. In the UK, advisers to Andy Burnham are encouraging the would-be prime minister to consider reforming the BOE and breaking up the Treasury. Burnham hasn't laid out his vision for the British economy, but a business lobby group is warning against tax increases. NATO Secretary General Mark Rutte meeting President Trump in the Oval Office, seeking to ease Trump's frustration over allies' reluctance to support the Iran war. [00:39:13] Speaker 15: This president is really doing a huge amount of work to get NATO in better shape. He had a big success last year in The Hague with the 5 percent spending commitment. [00:39:24] Speaker 9: Trump reiterating his disappointment with European allies for not allowing the U.S. use their bases. DURING THE IRAN WAR. SHARES OF IBM JUMPING IN PRE-MARKET TRADING AFTER THE COMPANY UNVEILED THE WORLD'S FIRST SUB-1 NANOMETRE TECHNOLOGY. IBM CALLING THE A LANDMARK MOMENT IN COMPUTING, PUSHING TECHNOLOGY BEYOND THE NANOMETRE ERA TO THE SCALE OF ATOMS. [00:39:51] Speaker 16: WE HAVE A LANDMARK MOMENT IN THE HOME. [00:40:01] Speaker ?: WE WILL TALK ABOUT THAT IN THE NEXT HOUR. [00:40:01] Speaker 16: UP NEXT ON THE PROGRAM, FACING DOWN, THE INFLATION SQUEEZE. RIGHT NOW, THE PROBLEM IS INFLATION. [00:40:05] Speaker 5: THIS IS AN AMERICAN PER PEOPLE THAT WILL HAVE TO CONTEND WITH ONGOING THEIR EASTERN TIME. UP NEXT, NITA RICHARDSON OF ADP. [00:40:20] Speaker ?: THANKS FOR JOINING US. [00:40:32] Speaker 5: MORE DATA THIS MORNING, 8:30 EASTERN TIME, CHECK IT OUT. GOING INTO A CONTENTOUS FEW MONTHS BUILDING FOR THIS FEDERAL RESERVE. WE WILL GET JOBLESS CLAIMS. APPARENTLY THE LABOR MARKET IS NOT A PROBLEM FOR THIS FED. WE WILL MOVE ON QUICKLY. EQUITY FUTURES RIGHT NOW IN THE S&P 500, JUST ABOUT FIRMER BY THREE QUARTERS OF 1%. MASSIVE OUTPERFORMANCE, UP BY 2.2%. HEADING INTO THAT INFLATION DATA, CHECK OUT YIELDS, TUES, TENS AND THIRTYS. TUES THIS MORNING, A BREAK OF 420 YESTERDAY. A BREAK OF 1.5%. [00:41:20] Speaker 16: THE PROBLEM IS INFLATION. THIS IS AN AMERICAN PER PEOPLE THAT WILL HAVE TO CONTEND WITH ONGOING INFLATIONARY PRESSURES AND CORE SERVICES ALL THE WAY TO FOOD. THERE IS A LOT OF BREATH UNDER INFLATION. WHO IS BEARING THE CHALLENGES OF THAT? IT IS LOW AND MIDDLE INCOME AMERICANS. [00:41:38] Speaker 5: NEEDS TO BE INFLATION DATA DUE OUT IN JUST UNDER TWO HOURS TIME. RISING COSTS CONTINUING TO OUTPACE WAGE GROWTH. NEILA RICHARDSON OF ADP WRITING INFLATION CONTINUES TO WEIGH SO HEAVILY ON SENTIMENT. YEARS OF HIGHER PRICES, EVEN ALONGSIDE RISING WAGES, HAVE SHIFTED HOW HOUSEHOLDS EXPERIENCE THIS ECONOMY. NEILA JOINS US NOW FOR MORE. NEILA, WELCOME BACK TO THE INFLATION ISSUE HERE TO STAY. WELL, IT HAS BEEN PART OF FIVE [00:42:04] Speaker 17: YEARS OF OUR RECENT HISTORY, AND I THINK THAT IS WHAT IS HITTING MAIN STREET QUITE HARD. YOU KNOW, THE WALL STREET STOCK MARKET, THEY CAN LOOK AT TODAY'S NUMBERS AND PROJECT FORWARD. BUT WHAT CONSUMERS ARE DOING IS THEY ARE LOOKING BACK, BACK TO WHAT THEY COULD AFFORD A YEAR AGO, TWO YEARS AGO, MAYBE EVEN TEN YEARS AGO WHEN IT COMES TO HOUSING, AND THEY SEE THAT THEY ARE NOT KEEPING UP. THE BLS REPORTED THAT REAL WAGES ARE DECLINING IN MAY, YEAR OVER YEAR, AND FROM APRIL TO MAY. SO THE CUMULATION OF THESE HIGHER PRICES ARE REALLY WHAT CONSUMERS ARE TRYING TO ABSORB. AND, JONATHAN, I'LL HAVE TO NOTE THAT THE SAVINGS RATE RIGHT NOW IS THE LOWEST IT'S BEEN SINCE 2008, WHEN PEOPLE WERE LOSING HOUSES IN MASS, AND MOST WERE UNDER WATER. AND YET, YOU KNOW, WITH A BOOMING STOCK MARKET, WE'RE AT THE SAME LEVEL OF SAVINGS RATE. AND I THINK THAT NUMBER IN ITSELF SHOWS THE PRESSURE THAT HOUSEHOLDS ARE UNDER RIGHT NOW. [00:43:02] Speaker 6: JONATHAN: JOHN WAS MENTIONING, NEILA, HOW ONE THING THAT PEOPLE HAVE POINTED TO IS THAT YOU'RE SEEING INCREASING MOMENTUM IN THE U.S. LABOR MARKET AND WAGES ARE STARTING TO PICK UP AT A LEVEL WHERE SUDDENLY PEOPLE MIGHT BE ABLE TO OFFSET THE INCREASE IN PRICES. HOW MUCH IS THAT CONTINUING? HOW MUCH DO YOU SEE THAT AS BEING SORT OF THE BALLAST BEHIND THE INFLATION STORY? [00:43:20] Speaker 17: WELL, AT ADP, WE'RE A PAYROLL COMPANY, SO WE SEE THE WAGES HAVE BEEN STEADY. THEY'VE BEEN HOLDING FOR JOB STAYERS AT AROUND 4.5%. THAT'S FANTASTIC IN TERMS OF THE LEVEL. BUT, LISA, AGAIN, IT'S ABOUT THE ACCUMULATION. THE JOB INCREASES THAT MOST PEOPLE EXPERIENCE ARE NOT ENOUGH TO COMBAT FIVE YEARS OF RISING PRICES AT THE CLIP THAT WE'VE SEEN THEM RISE OVER THE LAST FIVE YEARS. AND PRICES ARE ALWAYS RISING. WE ALWAYS KNOW THAT. WAGES GENERALLY KEEP UP, BUT ABSORBING THEM IS BECOMING HARDER AND HARDER. AND I THINK THAT'S WHAT'S THE DISCONNECT HERE. YES, WAGE GROWTH IS PRETTY ROBUST AND THE LABOR MARKET IS FAIRLY STABLE. NEILA, IF THAT'S THE CASE, ARE YOU SAYING THAT IT'S NOT POSSIBLE FOR THIS LEVEL OF INFLATION TO BE SUSTAINABLE? THAT IS PROBABLY ONE OF THE MOST STABLE LABOR MARKETS IN U.S. HISTORY. I'LL EVEN GO OUT OF THE LIMB AND SAY THAT. AND YET, IT'S THE INFLATION PICTURE. THAT BACKDROP IS STILL [00:44:19] Speaker 6: ERODING THE CONFIDENCE THAT YOU SEE IN WORKERS BECAUSE THEY CAN'T KEEP UP. NEILA, IF THAT'S THE CASE, ARE YOU SAYING THAT IT'S NOT POSSIBLE FOR THIS LEVEL OF INFLATION TO BE SUSTAINABLE AND THAT ULTIMATELY, ESPECIALLY WITH A LITTLE BIT MORE, YOU'RE GOING TO SEE MORE DEMAND DESTRUCTION? [00:44:34] Speaker 17: YES, AND I THINK THAT'S ALREADY OCCURRING. LOOK, LISA, ONE OF THE WAYS THAT PEOPLE ACTUALLY INCREASE THEIR WAGES TO KEEP UP WITH INFLATION IS BY CHANGING JOBS. BUT IF THE LABOR MARKET IS STEADY, BUT IN SOME WAYS VERY STAGNANT, YOU'RE NOT SEEING A LOT OF HIRING, YOU'RE NOT SEEING A LOT OF TURNOVER, THAT MEANS THERE'S LESS OPPORTUNITY TO ACTUALLY GET THAT PAY BUMP BY CHANGING A JOB. SO WHAT DO YOU DO NEXT? WELL, THAT GOES BACK TO YOUR BUDGET. WHAT CAN YOU AFFORD? WHAT CAN YOU CUT? MAYBE IT'S THAT VACATION. BUT IT IS A CHANGE IN HOW PEOPLE ARE EXPERIENCING THE ECONOMY, EVEN IF THEIR WAGES ARE GOING UP. AND THAT'S THE IMPORTANT PART. THEY MAY HAVE A JOB. THEY MAY SEE WAGE INCREASES. IT'S STILL NOT ENOUGH IF THE OVERALL ECONOMY IS BECOMING MORE AND MORE EXPENSIVE. [00:45:20] Speaker 7: NEILA, WITH A LITTLE BIT OF HEAT TAKING OFF OF GASOLINE PRICES, DO CONSUMERS SAVE THAT OR ARE THEY JUST GOING OUT AND SPENDING THAT ELSEWHERE? MAYBE SOME CAN SAVE THAT. [00:45:30] Speaker 17: MAYBE SOME CAN SAVE THE GAS PRICE IS FILLING UP THE TANK. BUT MY SUSPICION IS THOSE FUNDS WILL BE DIVERTED TO WHERE ELSE WE'RE SEEING HIGHER INFLATION. I'M A LITTLE DISHEARTENED BY HIGHER RENTAL COSTS, FOR EXAMPLE. THAT WAS SUPPOSED TO BE GOING DOWN OVER THE LAST YEAR. WE'RE SEEING A PICKUP IN THOSE FEES. SO THERE'S PLENTY OF PLACES TO PUT THAT GAS SAVINGS. AND WE'RE NOT SURE THAT ENERGY PRICES ARE OUT OF THE WOODS YET SO THERE IS A LITTLE BIT OF UNCERTAINTY OF HOW LONG LOWER GAS PRICES WILL LAST. [00:46:03] Speaker 5: AND MAYBE DO YOU THINK THE FED HAS A ROLE TO PLAY HERE? [00:46:07] Speaker 17: YEAH. THEY ALWAYS HAVE A ROLE TO PLAY WHEN IT COMES TO INFLATION. THAT ROLE IS TO MAINTAIN PRICE STABILITY AS EVERYONE AT THE FED IS VERY LASER FOCUSED ON. BUT THE QUESTION, THE TRANSMISSION MECHANISM, JONATHAN, IS GENERALLY THROUGH THE HOUSING MARKET. AND THAT'S WHERE THE FED DOESN'T HAVE THE STRENGTH OF THE TOOLKIT THAT THEY USED TO. BECAUSE THERE'S NOT A LOT OF INVENTORY. THERE'S NOT A LOT OF HOME BUYING. THE AVERAGE AGE OF A NEW HOME BUYER, BACK WHEN I WAS A HOUSING ECONOMIST, WAS IN THEIR EARLY 30s. NOW THAT I'M FOCUSED ON THE LABOR MARKET, IT'S EARLY 40s. AND SO PEOPLE ARE NOT EXPERIENCING THAT LOW INTEREST RATE OR HOUSING ENVIRONMENT OR WEALTH ACCUMULATION FOR ANOTHER DECADE THAN THEY USED TO. AND I THINK THAT HAS AN EFFECT ON FED POLICY AND ITS TRANSMISSION IN THE MAIN STREET. [00:46:58] Speaker 5: NEILA, IT'S GOOD TO SEE YOU. REALLY THOUGHTFUL STUFF, AS ALWAYS. NEILA RICHARDSON THERE OF ADP HEADING INTO PCE DATA LATER THIS MORNING AT 8:30 FED RATE HIKES. [00:47:09] Speaker 6: AND YOU ASKED A GOOD QUESTION, WHICH IS ESSENTIALLY WHAT IS THE MECHANISM THAT A FED RATE HIKES WILL HAVE IN BRINGING DOWN INFLATION IN AREAS THAT MIGHT BE SOMEWHAT INDEPENDENT OF THOSE RATES. HOW MANY PEOPLE DO WE TALK TO THAT SAY THESE COMPANIES ARE GOING TO KEEP SPENDING ON ALL OF THE DIFFERENT AI-RELATED CAPEX, REGARDLESS OF WHETHER INTEREST RATES ARE 25 OR 50 BASIS POINTS HIGHER? [00:47:28] Speaker 5: AS WE KNOW, HOUSING IS SUPPLY CONSTRAINED. BUT SUPPLY CONSTRAINED FOR MANY REASONS, INCLUDING THE LOCK-IN SOME PEOPLE HAVE THE GOLDEN HANDCUFFS OF A 2-3 PERCENT MORTGAGE. [00:47:40] Speaker 6: I DON'T UNDERSTAND. AND THE ELECTED BUILDING IN CERTAIN MARKETS TOO. THIS IS TRUE. SOME PEOPLE DID GET IN WITH LOW INTEREST RATES. [00:47:50] Speaker 5: THOSE PEOPLE ARE NOT MOVING. THE REST OF THE WORLD IS SUFFERING. [00:47:52] Speaker 6: THAT'S THE ISSUE I'VE GOT WITH ALL THIS. [00:47:58] Speaker 5: THEY COULD RAISE RATES SIGNIFICANTLY. TORPEDO PROSPECTS, LOWER LONG END INTEREST RATES. WE'LL CATCH UP WITH THE BULLISH OF WELSH FARGO ALONGSIDE BANKS AMERICA. [00:48:24] Speaker 1: THANK YOU. WHAT WE ALL KNOW IS THAT EARNINGS ESTIMATES CONTINUE TO RIP HIGHER. [00:48:32] Speaker 16: 2026 EARNINGS ARE GOING TO BE OKAY. [00:48:34] Speaker 2: THE CHIP NAMES HAVE DONE A GREAT DEAL OF THE HEAVY LIFTING. IF WE SEE A BROADENING, THAT WOULD BE A HEALTHY SIGN IN THIS MARKET. WE THINK THERE'S PROBABLY MORE WEAKNESS COMING THROUGH THE [00:48:43] Speaker 18: SUMMER MONTHS. [00:48:44] Speaker 3: THIS IS BLOOMBERG SURVEILLANCE WITH JONATHAN FERRO, LISA IBRAMOWITZ AND ANNE-MARIE HORDERN. [00:48:52] Speaker 4: LIVE FROM NEW YORK CITY THIS MORNING, GOOD MORNING, GOOD [00:48:54] Speaker 5: MORNING FOR OUR AUDIENCE WORLDWIDE. THE SECOND HOUR OF BLOOMBERG SURVEILLANCE STARTS RIGHT NOW AND YOUR SCORES, THE PRICE ACTION LOOKS LIKE THIS. EQUITY FUTURES ON THE S&P. EQUITY, ON TRACK TO SNAP A THREE-DAY LOSING STREAK ON THE S&P 500, UP BY 0.8% OF 1%, ON THE NASDAQ 100, UP BY 2.3%. THANK YOU, MICRON, IN THE PRE-MARKET. THANK YOU, 85% MARGINS AND CRUSHING ESTIMATES. THAT STOCK IS UP BY 18% IN THE PRE-MARKET. HEADING INTO THIS, THE RATE DEBATE. THE TECH TRADE IS FINE BASED ON THIS SO FAR THIS MORNING. LATER THIS MORNING, 8:30 EASTERN TIME, PCE SETTING UP THE RATE DEBATE AT THE FEDERAL RESERVE. [00:49:28] Speaker 6: HOW MUCH IS INFLATION COMING FROM OTHER INPUTS OTHER THAN OIL, HOW MUCH IS THIS INDEPENDENT OF WHAT THE FED CAN DO, HOW MUCH IS THIS DEPENDENT ON THE AI TRADE, AND HOW MUCH DOES THIS DEPEND ON PEOPLE BEING ABLE TO BUY HERMES AND FERREGAMO TIES? AT A CERTAIN POINT, YOU LOOK AT ALL OF THIS AND YOU START WONDERING HOW MUCH WE ARE LOOKING AT AN OVERHEATED ECONOMY THAT THE FED CAN DO SOMETHING ABOUT, AND WILL THEY BE WILLING TO GIVEN THAT THEY HAVE A LOT OF TASK FORCES [00:49:49] Speaker 7: DISCUSSING ALL OF THESE THINGS? THE U.S. CONSUMER, AND MAYBE THAT'S INDIVIDUALS THAT HAVE BEEN ON THE SHOW, OR ANCHOR THE SHOW, HAVE SHOWN IMPRESSIVE DETERMINATION TO KEEP SHOPPING THROUGHOUT THE TARIFF AND OIL PRICE SHOCKS. WE HAVE ACTUALLY SEEN INDIVIDUALS JUST LOOK THROUGH THE TARIFF PRICE SHOCK, AND NOW THE OIL ISSUE IS BECOMING SO MUCH EASIER. WE ARE ERASING THE HIGHS WE [00:50:11] Speaker 6: HIGH-END GOODS TO GET SOME OF THESE HIGH-END GOODS. THIS IS PAUL SMITH ON THE SAIL, JUST FOR THE RECORD. THIS IS A THURSDAY TIE. I'M NOT GOING AFTER ANYONE. [00:50:30] Speaker 5: I WAS JUST SAYING YOU LOOK AT THE HIGH-END GOODS, THEY TEND TO BE INCREASING AT A FASTER PACE AND THAT IS BOOSTING. YOU HAVE TO GET ON WAITLIST THESE DAYS TO GET SOME OF THESE HIGH-END GOODS. THAT IS A TARGET FOR THE AMERICAN EARNINGS. THAT IS A TARGET FOR THE AMERICAN EARNINGS. THAT IS A TARGET FOR THE AMERICAN EARNINGS. AFTER BOOSTING HIS OUTLOOK FOR STOCKS, HEITH TERRY OF CITY AS MICRON'S BLOW OUT EARNINGS EASED AI CONCERNS. MEGAN SWEIVER OF BANK OF AMERICA CALLING FOR THREE RATE HIKES LATER THIS YEAR. WE BEGIN THIS OUT WITH STOCKS REBOUNDING AFTER MICRON'S RESULTS REIGNITED. ENTHUSIASM FOR THIS TECH TRADE. RAISING HIS YEAR-END PRICE TARGET FOR THE S&P CONTINUE TO PREFER CAPEX TAKERS OVER SPENDERS. OH SUNK JOINED US NOW FOR MORE. OH SUNK, GOOD MORNING. IS THAT MICRON OVER META, MICRON OVER MICROSOFT? [00:51:17] Speaker 19: SEMIS OVER HYPERSCALERS BASICALLY, CAPEX TAKERS OVER CAPEX SPENDERS. WE HAVE THIS FUNNY CHART THAT SHOWS THE RELATIVE PERFORMANCE OF CAPEX GROWERS. SO IF YOU WERE TO GO A LONG TOP 50 STOCKS IN THE S&P BY CAPEX GROWTH AND REBALANCE EACH MONTH, YOU'VE JUST UNDERPERFORMED ALMOST EVERY MONTH. MEANING THE MARKET HATES STOCKS THAT ARE IN AN INVESTMENT CYCLE WHICH ARE BASICALLY HYPERSCALERS TODAY. SO I THINK THE EASY TRADE STILL IS TO OWN AI INFRAS, SEMIS AND SOME OF THE CONSTRUCTION COMPANIES AND POWER THINGS LIKE THAT OVER HYPERSCALERS. [00:51:52] Speaker 5: WHEN DOES THE OVERSPEND INFORM THE SPENDING? WHEN IS THE PUSHBACK BY INVESTORS? YOU SAY INVESTORS HATE IT, BUT THE STOCKS, THE COMPANIES KEEP DOING IT. WHEN DOES IT STOP THEM? WHEN DO THEY LOOK AT THIS AND SAY, YOU KNOW WHAT, IT'S TIME TO PULL BACK? [00:52:05] Speaker 19: I THINK IT'S WAY TOO EARLY FOR THAT. I MEAN, WE HAVE SEEN THIS MOVIE BEFORE, RIGHT? DURING Q4 LAST YEAR, THE MARKET STARTED PUSHING BACK ON HYPERSCALERS, CAPEX. THEY DIDN'T CARE. THE MARKET IS PUSHING BACK NOW. THEY DON'T CARE. THEY'RE ACTUALLY RAISING EQUITY. I THINK IT'S WAY TOO EARLY FOR THAT. I THINK AS LONG AS DEMAND, TOKEN DEMAND AND COMPUTE DEMAND OVERALL, OUR PACE IS SUPPLY, WHICH IS THE CASE RIGHT NOW, I THINK THEY'RE GOING TO CONTINUE TO INVEST. [00:52:30] Speaker 6: ONE OF OUR LISTENERS PUT THIS CEO, MICRON CEO QUOTE AT ME FROM THE CONFERENCE CALL THAT I THOUGHT WAS PRETTY AMAZING. OUR CUSTOMERS ARE RECOGNIZING THAT SUPPLY SHORTAGES IN MEMORY AND STORAGE WILL TAKE CONSIDERABLE TIME TO IMPROVE. WE CURRENTLY DO NOT HAVE A LINE OF SIGHT AS TO WHEN MEMORY SUPPLY WILL BE ABLE TO CATCH UP WITH INCREASING DEMAND. THE IDEA OF WHAT SOME OF THESE COMPANIES ARE ABLE TO CHARGE IS MIND-BLOWING. HOW DO YOU BEGIN TO PRICE IN WHAT THE VALUATION OF A COMPANY LIKE THAT IS GIVEN THE FACT THAT MAYBE OVER THE NEXT FIVE YEARS THEY CAN HAVE 85% MARGINS. BUT IN 10 YEARS THERE WILL BE ANOTHER MICRON AND ANOTHER ONE AND ANOTHER ONE THAT WILL BE FLOODING THE ZONE WITH SUPPLY. [00:53:07] Speaker 19: YEAH I MEAN IT'S GOING TO BE VERY DIFFICULT TO VALUE THESE COMPANIES. THE THING IS IF YOU LOOK AT MULTIPLES THEY'RE NOT EXPENSIVE. THEY'RE ACTUALLY CHEAPER THAN WHERE IT WAS ABOUT A YEAR AGO. SO IT'S REALLY DRIVEN BY PROFITS. AND THESE PROFITS AS WE SAW LAST NIGHT IT'S STILL VERY VERY STRONG. I MEAN THAT'S REALLY WHY WE'RE BULISH ON EQUITIES OVERALL AND WHY WE UPGRADED OUR S&P TARGET. IT'S REALLY BECAUSE OF PROFITS. SO WE WERE BASICALLY NEUTRAL ABOUT TWO TO THREE WEEKS BEFORE WE TURNED BULISH AGAIN LAST WEEK. AND THE REASON WHY WE WERE NEUTRAL WAS BECAUSE SENTIMENT WAS EUPHORIC AND THERE WAS INFLATION CONCERN. SENTIMENT HAS NOW RESET. OUR SENTIMENT INDICATOR IS ACTUALLY FIRMLY NEUTRAL. INFLATION RISK. OIL IS DOWN TO 60s. SO I THINK INFLATION CONCERN IS GOING TO SUBSIDE AS WELL. THAT'S WHY WE TURNED BULISH. WANT TO PICK UP ON THAT. [00:53:56] Speaker 6: IS OIL PRICES DECLINING ENOUGH TO OFFSET THE INFLATION THAT WE'RE SEEING SAY IN MEMORY CHIPS OR OTHER COMPONENTS RELATED TO THE AI BUILDOUT AND OTHER PEOPLE WHO ARE EARNING MAYBE SOME OF THE PAYOUTS TO GO FROM GOOGLE SAY TO ANTHROPIC AND THEN THEY CAN PAY FOR WHATEVER THEY WANT. [00:54:11] Speaker 19: YEAH I MEAN FOR THE OVERALL ECONOMY MEMORY PRICES AND SOME OF THE INFLATION PRESSURE THAT WE'RE SEEING FROM THE BUILDUP ISN'T THAT MUCH. IT'S REALLY THE CONSUMER AND WHAT THEY SEE WHEN THEY FILL UP THEIR GAS TANK OR WHEN THEY GO GROSSER SHOPPING. AND WITH OIL DOWN TO 60 BUCKS, YOU KNOW, 60s, YOU KNOW, I THINK THE INFLATION AND PRESSURE IS GOING TO SUBSIDE OVER THE NEXT TWO MONTHS. AND THAT'S GOING TO ALLEVIATE SOME OF THE CONCERNS FOR THE MACRO CYCLE. BUT YOU DON'T THINK THEY SAVE IT. THEY ACTUALLY GO OUT AND SPEND IT, THE CONSUMER. YEAH. [00:54:39] Speaker 7: I MEAN, THE SAVINGS RATE IS PRETTY LOW. [00:54:41] Speaker 19: AND, YOU KNOW, THEY'RE GOING TO CONTINUE TO SPEND ON THE ECONOMY. AND WE HIGHLIGHTED TWO TAILWINDS THAT NOT MANY PEOPLE OR ACTUALLY NOBODY IS TALKING ABOUT FOR THE SECOND HALF OF THE YEAR. ONE OF WHICH IS THE TARIFF REFUND. SO WE WERE SKEPTICAL, TOO, THAT THE REFUNDS WERE ACTUALLY GOING TO GO OUT. BUT OVER THE PAST MONTH, THERE WAS $25 BILLION OF CHECKS BEING ISSUED TO THE IMPORTERS. AND TOTAL COLLECTED UNDER AEPA WAS $165 BILLION, WHICH IS ABOUT 50 BASIS POINTS OF GDP. SO IF THAT ACTUALLY GOES OUT TO COMPANIES, AND DURING THE Q1 EARNINGS SEASON, ABOUT 40 COMPANIES TALKED ABOUT TERRIFIEF FUND, AND EIGHT COMPANIES ACTUALLY RECOGNIZE IT AS EARNINGS. SO I THINK AS WE MOVE INTO THE SECOND QUARTER EARNINGS SEASON, I THINK MORE COMPANIES ARE GOING TO BE TALKING ABOUT IT, AND I THINK THAT'S GOING TO BOOST EPS EVEN MORE. [00:55:36] Speaker 7: WHAT'S THE OTHER TAIL ONE THAT NO ONE IS TALKING ABOUT? IT'S TRUMP ACCOUNTS. [00:55:39] Speaker 19: SO STARTING IN JULY, TRUMP ACCOUNTS WILL BE OPEN, AND PEOPLE CAN FUND THEIR KIDS TRUMP ACCOUNTS, AND THE GOVERNMENT IS GOING TO SUBSIDIZE ABOUT $1,000 FOR EACH KID BORN FROM 2025. AND WE ESTIMATE ABOUT $20 BILLION OF EQUITY INFLOWS JUST FROM TRUMP ACCOUNTS. AND THAT $20 BILLION IS GOING TO BE PRICE INSENSIVE FLOWS THAT HAPPENED MOSTLY IN JULY AND AUGUST CONCENTRATED IN U.S. EQUITIES. REALLY LARGE CAPS. SO IT'S GOING TO BENEFIT TECH OVER OTHERS, BUT IT'S GOING TO BE A PRETTY SIZABLE TAILWIND FOR THE OVERALL MARKET. [00:56:18] Speaker 5: SO THERE ARE THE TAILWINS. LET'S TALK ABOUT SOME PUSHBACK. SO THIS CAME FROM JP MORGAN, WHO ALSO RAISED THE PRICE TARGET ON THE S&P 500, BUT ACKNOWLEDGED THE FOLLOWING. WE'VE RESET THE BAR HIGHER, HEADING INTO EARNINGS SEASON AGAIN, MAKING IT MORE DIFFICULT FOR COMPANIES TO SIGNIFICANTLY SURPRISE TO THE UPSIDE. THE TAKEAWAY SEEMS TO BE THAT THINGS ARE SO GOOD THEY CAN'T GET BETTER. [00:56:34] Speaker 19: WHERE DO YOU STAND ON THAT? I MEAN, I THINK THE BAR HAS BEEN RISEN. BUT HISTORICALLY, WHEN WE ACTUALLY SEE EPS GETTING REVISED UP INTO EARNINGS, COMPANIES ACTUALLY TEND TO BEAT. SO THE EARNINGS MOMENTUM, IT TYPICALLY CONTINUES. AND I THINK Q2 EARNINGS SEASON, I THINK COMPANIES ARE GOING TO BEAT EVEN THE HIGHER BAR. AND I THINK THAT'S GOING TO CONTINUE TO PUSH THE MARKET HIGHER. DO YOU THINK THAT BROADENS OUT BEYOND THE OBVIOUS PLACES? I THINK SO. I DO THINK THE MARKET IS GOING TO BROADEN OUT A LITTLE BIT. WE STILL PREFER SEMIS AND AI INFRA OVER OTHERS. SO WE WERE ACTUALLY MORE IN THE CAMP THAT THINGS ARE GOING TO BROADEN OUT MORE MEANINGFULLY BEFORE THE FED. AND THE FED SOUNDED A LITTLE MORE HAWKISH THAN WHAT WE HAD INITIALLY EXPECTED. AND I THINK THAT IS A HEADWIND TO THE BROADENING TRADE. NOT NECESSARILY TO THE INDEX, BUT MORE FOR BROADENING. SO I DO THINK IT'S A HEADWIND. BUT CYCLE CALLS HAVE SOME CATCHUP TO DO. SO I THINK THE MARKET IS GOING TO BROADEN OUT A LITTLE BIT, BUT NOT AS MUCH AS WHAT WE HAD EXPECTED. [00:57:34] Speaker 6: SO THIS IS ANOTHER EXAMPLE OF THE BOND MARKET THINKING THAT RATE HIKES ARE IN THE COFFER AND EQUITY ANALYSTS SAYING NO WAY, NO HOW. YOU GUYS ARE JUST WRONG. IS THAT CORRECT? [00:57:43] Speaker 19: THE WAY WE INTERPRET THE BOND MARKET INTO THE EQUITY MARKET IS I THINK IT MATTERS MORE FOR THE BREATH OF THE MARKET RATHER THAN THE INDEX LEVEL. AS LONG AS THEY'RE NOT NECESSARILY HIKING THIS YEAR, I THINK THE MARKET IS ACTUALLY GOING TO DO WELL. OUR HOUSE VIEW IS THAT THEY'RE ACTUALLY GOING TO BE ON HOLD. SO IF THAT ACTUALLY PLAYS OUT, THEN I THINK THE MARKET IS GOING TO BE OKAY. AND EVEN THE HIKING CYCLE IS NOT THAT BAD. I MEAN, I THINK I FORGET THE EXACT STEP. BUT DURING THE TECH BUBBLE, I THINK IT TOOK, YOU KNOW, LIKE 150 BASIS POINTS OF HIKE BEFORE THE TECH BUBBLE ACTUALLY POPPED. SO, YOU KNOW, IT LASTED THROUGH THE HIKING CYCLE, DURING THE TECH BUBBLE. AND, YOU KNOW, I THINK ONE OR TWO HIKES IS GOING TO BE OKAY. THIS IS JUST FASCINATING TO ME, JOHN. [00:58:30] Speaker 6: WE HEARD THIS YESTERDAY FROM THE SAME COMPANY. SO THERE IS DEFINITELY THIS HOUSE CALL ABOUT NO HIKES. BUT STILL, I FIND THIS REALLY INTERESTING. USUALLY YOU THINK OF THE BOND MARKET AS A SMART MONEY AND THE STOCK MARKET IS THE DONE MONEY. IN THIS CASE, THE STOCK MARKET IS SAYING, YOU GUYS ARE FOOLING YOURSELVES IF YOU DON'T SEE WHAT'S HAPPENING WITH OIL, IF YOU DON'T SEE WHAT'S HAPPENING WITH OIL, IF YOU DON'T SEE WHAT'S HAPPENING AND SOME OF THESE OTHER DISINFLATIONARY INPUTS. AND, FRANKLY, WHAT'S HAPPENING POLITICALLY, THIS ISN'T A FED THAT'S GOING TO HIKE. [00:58:51] Speaker 5: I THINK WE ARE HAVING THAT DEBATE IN FIXED INCOME, THOUGH. OF THE RATE STRATEGISTS THAT ARE COMING ON, THERE IS A DEBATE RIGHT NOW ABOUT WHETHER THIS SWITCH UP AT THE FED IS A CHANGE IN STYLE OR A CHANGE IN SUBSTANCE. IS IT A CHANGE IN POLICY OR HOW WE COMMUNICATE POLICY? AND WE'LL SPEND THE NEXT FEW MONTHS TRYING TO FIGURE THIS OUT. [00:59:05] Speaker 6: IF YOU BELIEVE THAT IT'S A CHANGE IN STYLE AND NOT SUBSTANCE, AND YOU THINK THAT ACTUALLY WHAT THEY'RE GOING TO END UP DOING IS -- WELL, IF YOU THINK THAT THEY'RE GOING TO END UP KEEPING THINGS ON HOLD, THEN YOU BUY THE FRONT END OF THE YIELD CURVE. AND WE'VE SEEN A LITTLE BIT OF THAT OVER THE PAST COUPLE OF DAYS BECAUSE PEOPLE ARE SAYING, HOLD ON A SECOND, MAYBE THIS HAS GONE TOO FAR. [00:59:21] Speaker 5: GOOD TO SEE YOU. 79.50 ON THE S&P 500 YEAR-END. NEW PRICE TARGET OVER AT WELF-FARGO. EQUITY FUTURES RIGHT NOW POSITIVE BY 7/10 OF 1% ON THE S&P. MASSIVE OUTPERFORMANCE ON THE NASDAQ BY MORE THAN 2% SO FAR THIS MORNING. LET'S KEEP AN UPDATE ON STORIES WORLDWIDE WITH YOUR BLOOMBERG BRIEF. [00:59:39] Speaker 9: VONNIE QUINN HAS MORE. PRESIDENT DONALD TRUMP KICKING OFF THE UNITED STATES 250TH BIRTHDAY CELEBRATION WITH A RALLY STYLE SPEECH ON THE NATIONAL MALL. THE SPEECH IS THE FIRST OF MANY EVENTS IN THE ADMINISTRATION'S FREEDOM 250 PROGRAMMING THAT WILL STRETCH OVER 16 DAYS. THANK YOU VERY MUCH. ALIBABA IS ACCUSING OF TRYING TO ACCESS ITS AI MODELS. ALIBABA USED NEARLY 25,000 FAKE ACCOUNTS AND NEARLY 30 MILLION MESSAGE EXCHANGES WITH ITS CHAT BOT CLAWED, TARGETING ITS MOST PRIZED CAPABILITIES. QUALCOMM SHARES RISING IN THE PREMARKET. THE COMPANY FORECASTING SALES OF MORE THAN $15 BILLION A YEAR BY FISCAL 2029 THANKS TO THE BOOMING COMPANY. [01:00:34] Speaker ?: THANK YOU FOR THE UPDATE. [01:00:34] Speaker 5: I'M NEXT ON THE PROGRAM THE PRESIDENT CALLING OUT BIG OIL. [01:00:38] Speaker 10: I'M NEXT ON THE PROGRAM, BRIAN GARDNER OF STEEFEL, LIFE FROM NEW YORK CITY THIS MORNING. GOOD MORNING. [01:00:50] Speaker 5: GOOD MORNING. [01:01:00] Speaker ?: GOOD MORNING. MICRON HIGHER BY 18% AROUND THOSE LEVELS THROUGHOUT MUCH OF [01:01:12] Speaker 5: THIS MORNING. UP 18.5 RIGHT NOW. THAT IS LENDING ITSELF TO THIS MOVE RIGHT HERE. THE EQUITY IS HIGH ON THE S&P AND NASDAQ BY 2.2%. IN THE BOND MARKET, THINGS STABILIZED GOING INTO PCE A LITTLE BIT LATER. YIELDS ON THE FRONT END OF THE CURVE, 2 IS AROUND 415. CONTRIBUTING TO THAT MOVE, THIS MOVE IN CRUDE. CRUDE. YOU HAVE TWO THINGS GOING ON, MORE BARRELS MOVING TO THE STRAIGHT. THE SECRETARY RIGHT YESTERDAY TALKED ABOUT 72 SHIPS, 20 [01:01:48] Speaker 7: MILLION BARRELS TRANSITED THROUGH THE STRAIGHT. ALSO, DID YOU SEE THIS? IRAQ ARE REPORTING POTENTIALLY MAYBE GOING TO LEAVE OPEC BECAUSE THEY WANT TO HIT HIGHER QUOTAS. THIS IS THE UAE EFFECT. YOU CAN START TO SEE MORE COUNTRIES SAYING, THE UAE LEFT, THEY ARE GETTING AS MUCH PRODUCT OUT AS THEY WANT. WHY DO WE NEED TO BE HOLDEN TO THE KINGROM? THERE IS AN OLD SAYING IN FINANCIAL MARKETS THAT IF YOU WANT TO MAKE A FALL OUT OF SOMEONE, ASK THEM FOR A FORECAST OF CRUDE. THERE HAS BEEN A STORY THE [01:02:14] Speaker 5: LAST THREE MONTHS. PEOPLE UNDERESTIMATED HOW MUCH SUPPLY DEMAND DYNAMICS [01:02:20] Speaker 6: WOULD ADJUST, HOW MUCH DEMAND WOULD COME OUT OF THE MARKET COMING FROM PLACES LIKE CHINA. RIGHT NOW, THE MARKET IS GETTING FLOODED WITH BARRELS. SOME OF THE ANECDOTAL STORIES OF THE CALLS INBOUND ABOUT, HEY, WANT TO BUY MY OIL? IT GIVES YOU A SENSE OF HOW THE DEMAND DYNAMICS HAVEN'T CHANGED AS QUICKLY AS THE SUBLY DYNAMICS SEEM TO BE ADJUSTING. IT'S SUCH A STRANGE FIRST HALF OF THE YEAR. THE FIRST QUARTER FELT LIKE A LIFETIME. [01:02:42] Speaker 5: SECOND QUARTER, GONE. ABSOLUTELY, AND YOU LOOK AT WHAT THE MAIN DRIVING [01:02:48] Speaker 6: NARRATIVE HAS BEEN, I MEAN, WE'VE BEEN THROUGH TARIFFS, WE'VE BEEN THROUGH REBATES, WE'VE BEEN THROUGH THIS QUESTION OF THE STRAIGHT OR PHARMOOS, WE'VE BEEN THROUGH AI, WE'VE BEEN THROUGH THE BUS, WE'VE BEEN THROUGH THE CAPTURING OF [01:03:02] Speaker 7: NICHOLAS MADORO WAS SITTING IN JAIL JUST A FEW MILES SOUTH OF US. [01:03:07] Speaker 5: AT THE HALFWAY POINT OF THE YEAR, I THINK HALF OF WALL STREET READY TO RETIRE. LET'S TALK ABOUT ENERGY. THE PRESIDENT CALLING OUT BIG OIL. [01:03:16] Speaker 10: WE ARE NOT SEEING ANYTHING AT THE PUMP, BY COMPARISON TO WHAT IT SHOULD BE. WE SHOULD BE, IN MY OPINION, AT $2.25. EXCITE MOBILE, IT'S CHEVRON, IT'S SHELL, IT'S BP. THEY'RE NOT REDUCING THE PRICES COMMENSURATE WITH WHAT'S HAPPENING. WE ARE DOING A BIG INVESTIGATION. [01:03:40] Speaker 5: THIS MORNING, THE PRESIDENT ORDERING THE DOJ TO LOOK INTO OIL COMPANIES, SAYING GAS PRICES SHOULD BE $2.25. THE NATIONAL AVERAGE HOLDING JUST BELOW $4. BLOOMBERG'S TYLER KENDALL HAS THE LATEST FROM WASHINGTON. HEY, TYLER. [01:03:51] Speaker 11: HEY, JOHN. GOOD MORNING. THIS IS REALLY UNDERSCORING THE MOUNTING FRUSTRATION FROM PRESIDENT TRUMP ABOUT HOW HIGHER COSTS ARE BECOMING A POLITICAL LIABILITY AS WE HEAD INTO THE MIDTERMS NOW ALLEGING ANTI-COMPETITIVE BEHAVIOR. THOUGH THE INDUSTRY HAS POINTED OUT THAT GASOLINE PRICES DON'T ADJUST IMMEDIATELY TO CHANGES IN CRUDE BECAUSE THE EFFECT HAS TO MOVE THROUGH THE SUPPLY CHAIN AND IT CAN TAKE WEEKS TO GET FROM PIPELINES TO PROCESSING TO DISTRIBUTION. PLUS LOCAL GAS STATION OPERATORS SEE THEIR MARGINS SHRINK WHEN THERE ARE QUICK CLIMBS IN THE WHOLESALE COSTS WHICH TYPICALLY MEANS THAT THEY ARE MORE INCLINED TO LOWER THEIR PRICES GRADUALLY WHEN THEY'RE SETTING THOSE FINAL PRICES AT THE PUMP. NOW WE DID GET A RESPONSE FROM THE INDUSTRY ACCORDING TO THE AMERICAN PETROLEUM INSTITUTE WHICH REPRESENTS MANY OF THESE COMPANIES. THEY SAID IN PART IN A STATEMENT QUOTE OUR INDUSTRY SHARES THE GOAL OF DELIVERING RELIEF AT THE PUMP AND RESTORING STABILITY TO GLOBAL ENERGY MARKETS. THIS IS VERY REMINISCENT OF THE BID BY THE BIDEN ADMINISTRATION TO INVESTIGATE THESE BIG OIL COMPANIES AMID THE PRICE SPIKES RELATED TO THE CONFLICT IN UKRAINE. BUT JOHN, THIS FEELS VERY NOTABLE CONSIDERING THAT THE TRUMP ADMINISTRATION IS CONSIDERED TO BE VERY ALIGNED WITH THE OIL INDUSTRY WHEN IT COMES TO COLLABORATING ON THE PRESIDENT'S PUSH FOR MORE DOMESTIC DRILLING AND HIS DOMESTIC ENERGY AGENDA. BLOOMBERG NEWS DID REPORT IN APRIL THAT THE U.S. ENERGY SECRETARY AND INTERIOR SECRETARY CALLED UP THESE EXECUTIVES DIRECTLY AND ASKED THEM TO TRY TO BOOST SUPPLIES IN A BID TO BRING DOWN COSTS. [01:05:17] Speaker 5: TYLER KENDALL WITH THE LATEST. TYLER, THANK YOU. BRIAN GARDNER OF STIFFEL WRITING THE FOLLOWING. AFTER THE MIDTERMS, THE PRESIDENT WILL HAVE LESS INSENSITIVE TO NOT BLOW THINGS UP. THE CHANCES FOR POLITICAL VOLATILITY AND CHAOS ARE RISING. BRIAN, WE CALLED OUT THE FINANCIAL ILLITERACY OF THE LEFT, OF THE SENATOR OF MASSACHUSETTS, OF THE BIDEN WHITE HOUSE WHEN THEY SAID THESE KIND OF THINGS. WHY ARE WE SEEING IT FROM THE REPUBLICAN WHITE HOUSE NOW, AS WELL, GOING INTO THE MIDTERMS? [01:05:42] Speaker 20: THIS IS WHAT YOU GET IN A POPULIST ERA OF POLITICS THAT WE'RE IN, JONATHAN. IT'S PLAYING TO THE PUBLIC IN WAYS THAT YOU DON'T SEE IN NORMAL TIMES. SO, YOU KNOW, WE'RE GOING INTO THIS MIDTERM ELECTION, AND THE PRESIDENT DOES FEEL THE PRESSURE ON PRICES, ON AFFORDABILITY, AND HE'S TRYING TO PUSH ON WHATEVER LOVERS. NOW, I THINK WE'VE GOT TO TAKE A STEP BACK, BECAUSE THERE HAVE BEEN SIMILAR THREATS THROUGHOUT, RIGHT? WE GO BACK TO JANUARY. YOU'RE JUST TALKING ABOUT HOW THE FIRST QUARTER, YOU KNOW, SEEMED LIKE A LONG TIME AGO. ON THE FIRST QUARTER, HE WAS THREATENING CAPS ON INTEREST RATES OF CREDIT CART COMPANIES AND BANKS. AND SO, THAT NEVER CAME TO PASS. SO, I THINK WE NEED TO TAKE SOME OF THIS, THE THREATS AGAINST THE OIL COMPANIES, WITH A LARGE GRAIN OF SALT. BUT HE DOES FEEL EMBOLDENED TO GO OUT. AND, YOU KNOW, GOING INTO HIS LAST TWO YEARS, HE'S NOT GOING TO BE RESTRAINED BY NORMAL POLITICAL FACTORS. SO, I THINK WE'RE GOING TO SEE MORE ACTIONS BY THE WHITE HOUSE WHERE HE WANTS TO IMPOSE A LEGACY. SO, THERE'S GOING TO BE CHAOS AND VOLATILITY IN THE FUTURE. BRIAN, I WAS TRAVELING WITH THE PRESIDENT A FEW WEEKS AGO, [01:06:48] Speaker 7: AND I ASKED HIM IF HE FELT LIKE IT'S ODD TO BE ON THE SAME SIDE OF SOME POLICIES LIKE SENATOR BERNIE SANDERS. AND HE SAID, ACTUALLY, ON ECONOMICS, SOMETIMES THEY DO ALIGN. ARE YOU SAYING WE'RE GOING TO SEE MORE OF THAT AFTER THE MIDTERMS? [01:07:02] Speaker 20: I THINK THE CHANCES ARE HIGH THAT, YES, WE WILL. DON'T FORGET, LET'S GO BACK. I'LL GIVE YOU ANOTHER EXAMPLE. AFTER THE NOVEMBER ELECTIONS WITH THE ELECTION OF THE NEW MAYOR IN NEW YORK, THE TWO OF THEM MET AND HAD A FAIRLY CORDIAL CONVERSATION. AS SOMEBODY OBSERVED, GAME SEES GAME. SO THE PRESIDENT AND MAYOR MUNDAMI SEE IN EACH OTHER THAT POPULIST TENDENCY, THOSE POPULIST QUALITIES, HOW THEY PLAY TO THE PUBLIC AT LARGE, AND AN ANGRY PUBLIC. WHAT DOES THE PUBLIC WANT? THEY KNOW HOW TO PLAY ON THAT TO ADVANCE THEIR POLITICAL AGENDAS. [01:07:43] Speaker 7: YES, I THINK YESTERDAY HE CALLED MAYOR MUNDAMI HANDSOME OR GOOD-LOOKING DUDE. THAT'S CHARISMATIC. AT THE SAME TIME, HE'S HAVING A MASSIVE FIGHT WITH HIS OWN PARTY WHEN HE WENT TO THE GOP'S STEERING LAUNCH. ARE WE GOING TO SEE MORE OF THIS KIND OF REAL HOUSEWIVES OF D.C. KIND OF BLOW UP MEETINGS GOING INTO THE MIDTERM ELECTION? [01:08:02] Speaker 20: I THINK, YES. I MEAN, IT'S KIND OF HEAD SCRATCHING TO THE POLITICAL CLASS, AND TO REPUBLICAN STRATEGISTS, BECAUSE IT DOES WIND UP IMPOSING, INFLICTING SELF-IMPOSED WOUNDS, SELF-INFLICTED WOUNDS. IT DOES NOT HELP REPUBLICANS GOING INTO THE MIDTERMS. VOTERS ARE GOING TO BE VOTING ON IT AS A REFERENDUM ON THE PRESIDENT AND THE PRESIDENT'S PARTY. AND WHAT THIS DOES IS IT MAKES THEM LOOK INEFFECTIVE, CONFUSED, CHAOTIC. AND VOTERS DON'T WANT THAT. I THINK THERE'S BEEN A CLEAR MESSAGE THROUGHOUT THE LAST COUPLE OF CYCLES. VOTERS ARE DISCONTENT, THEY'RE UNHAPPY, BUT THEY ALSO WANT STABILITY. THAT'S WHY THEY WENT WITH BIDEN IN 2020. THAT'S WHY THEY WENT WITH TRUMP IN 2024, BECAUSE THEY DIDN'T THINK THAT BIDEN FULFILLED THAT. WHAT ARE WE GETTING? WE'RE NOT GETTING THAT. THE VOTERS ARE NOT GETTING THAT. I THINK ALL OF THIS IS JUST AGAINST THE PRESIDENT'S POLITICAL INTERESTS AND HIS PARTY'S POLITICAL INTERESTS. [01:09:07] Speaker 6: YOU WANT THAT AT LARGE, BUT WITH THE PRIMARY SYSTEM, WHICH YOU GET A LOT OF THE DIFFERENT, WHETHER IT'S DEMOCRAT OR REPUBLICAN, THE MORE EXTREME CANDIDATES, I JUST WONDER HOW MUCH WE CAN EXPECT AN ACCELERATION OF THAT IN THE MIDTERM ELECTIONS, GIVEN WHAT WE'VE SEEN IN THE NEW YORK ELECTIONS RECENTLY, AND MORE BROADLY, THIS POPULIST WAVE THAT'S GETTING TRACTION? [01:09:25] Speaker 20: IT'S NOT JUST A POPULIST WAVE, BUT IT'S AN ERA WHERE THE VOTING ELECTORATE OF THE TWO PARTIES, BIG CHUNKS OF THEM, ARE SITTING OUT. WE TALK ABOUT THE EXTREME CANDIDATES THAT ARE BEING NOMINATED IN THE PRIMARY SYSTEM. WELL, 75% TO 80% OF EACH PARTY SITS OUT AT PRIMARY. SO PEOPLE WILL BEMOAN THE LACK OF MODERATION, OF CENTRISM. IF YOU WANT CENTRISM, YOU'VE GOT TO GO OUT AND VOTE IN ORDER TO BEAT THE WINGS. THE TWO WINGS ARE DOMINATING THE PRIMARY PROCESSES, AND THE CENTER IS SITTING IT OUT. SO THAT'S WHY WE'RE IN THE POSITION THAT WE'RE IN. [01:10:06] Speaker 6: WHAT DO YOU THINK THAT MEANS FOR POLICY? WHAT DO YOU THINK ABOUT POLICY? WHAT SHOULD PEOPLE ON WALL STREET BE WATCHING IN TERMS OF POLICY SHIFTS? IS IT A RESTRICTION? IS IT WHEN IT COMES TO THE HOUSING MARKET, THIS ONE ASPECT OF IT RIGHT NOW IN LIMBO, BUT STILL THE INSTITUTIONAL INVESTORS WON'T HAVE THE ABILITY TO PLAY IN THIS [01:10:24] Speaker 20: MARKET AS MUCH? HOW MUCH IS THIS GOING TO MAKE ITS WAY INTO POLICY? I THINK THERE ARE LIMITS ON HOW MUCH PEOPLE ARE GOING TO MAKE IT. THERE ARE A COUPLE OF EXAMPLES OF SOME TRUMP PROPOSALS FROM EARLY IN THE YEAR THAT DID NOT HAPPEN. THE RHETORIC AROUND ANTITRUST WAS QUITE HEIGHTENED AFTER THE 2024 ELECTION. WE THOUGHT WE WERE GOING TO GET KIND OF AN EXTENSION OF THE BIDEN ANTITRUST POLICY. I THINK WE WERE IN A POSITION WHERE EVERYBODY KIND OF SINGS THE SAME SONG BUT NOT MAYBE FROM THE SAME HYMNAL. THEY ARE SINGING A TUNE BUT NOT THE SAME WORDS. SO THERE IS GOING TO BE TALK ABOUT A.I. RESTRICTIONS. THERE IS GOING TO BE TALK ABOUT AFFORDABILITY AS THERE HAS BEEN. BUT GETTING TO AN AGREEMENT ON HOW TO ADDRESS THAT, THERE IS A BIG GAP BETWEEN THE TWO PARTIES DESPITE THE FACT THAT THE PRESIDENT AND BERNIE SANDERS AND ELIZABETH WARREN WILL AGREE WITH EACH OTHER FROM TIME TO TIME. GETTING THEM IN A ROOM AND ACTUALLY HAMMERING OUT A DEAL IS MUCH MORE DIFFICULT SO I THINK THE MARKET KIND OF SEES THAT. THEY SEE THE LACK OF PROGRESS AND PRODUCTIVITY COMING OUT OF WASHINGTON AND JUST CHALK THIS ALL UP TO POLITICAL RHETORIC AND POLITICAL GRANDSTANDING AND THAT IS WHY I DON'T THINK WE HAVE SEEN A FOLLOW-THROUGH FROM THE POLITICAL RHETORIC INTO THE MARKET SO FAR. [01:11:39] Speaker 5: BRIAN, IT IS GOOD TO SEE YOU. ALWAYS GREAT TO CATCH UP. BRIAN GARDEN, IN MANY WAYS IT SET THE TONE FOR THE START OF THE YEAR. WHAT'S ACTUALLY GOTTEN THROUGH THOUGH AND I THINK THIS IS IMPORTANT. HOW MUCH IS THIS JAWBOATING WHETHER IT'S CALLING OUT EXXON WHEN HE'S NO [01:11:53] Speaker 6: FRIENDS OF DARREN WOODS. WE'VE SEEN THAT TIME AND TIME AGAIN. CHEVRON, ET CETERA. IS THIS SORT OF JAWBOATING TO TRY TO SAY, LOOK, I'M DOING SOMETHING. CHECK THIS OUT. I'M DOING SOMETHING ON AFFORDABILITY RATHER THAN AN ACTUAL POLICY PRESCRIPTION. DO YOU REMEMBER IN EARLY JANUARY, THERE WAS A PHONE CALL [01:12:10] Speaker 7: BETWEEN PRESIDENT TRUMP AND ELIZABETH WARREN, AND IT WAS ABOUT CAPPING CREDIT CARD INTEREST RATES? YEAH. [01:12:16] Speaker 5: STUNNING. THAT SET THE TONE FOR THE YEAR. BUT TO YOUR POINT, NOT MUCH GOT DONE. [01:12:22] Speaker 6: I LOVE THE IDEA OF HUMMING ALONG TO THE SAME HYMNAL BUT HAVING DIFFERENT WORDS. [01:12:25] Speaker 5: IT SOUNDS LIKE MY FAMILY TRYING TO SING ALONG TO A SONG. [01:12:31] Speaker 6: WHAT IS THE LATEST FIGHT? IT HAS BEEN A LOT OF JOY RECENTLY. [01:12:38] Speaker 5: END OF YEAR, PEOPLE ARE READY FOR THE SUMMER, GOING OUT [01:12:39] Speaker ?: LATE, SO I DON'T SEE THEM. [01:12:41] Speaker 5: TERRIFYING. THREE-DAY LOSING STREAK ON THE S&P 500. THIS MORNING WITH EQUITIES PUSHING HIGHER ON THE S&P BY POINT SIX, ON THE NASDAQ 100 BY TWO FULL PERCENTAGE POINTS. OFF THE BACK OF SOME STUNNING NUMBERS FROM MICRON. WE'LL SPEND SOME TIME ON THAT IN JUST A MOMENT. TWO'S, TENS AND THIRTY'S IN THE BOND MARKET GOING INTO PCE DATA LATER ON THIS MORNING LOOKED LIKE THIS. 415 ON TWO'S, TENS AROUND 440, A DROPPED BACK FROM 450. NICE RALLY JUST YESTERDAY. WE GET A LITTLE BIT LATER THIS MORNING. JUST BEAR IN MIND, ONCE YOU'VE GOT CPI AND PPI, WALL STREET HAS A PRETTY GOOD IDEA OF WHAT PCE WILL LOOK LIKE. [01:13:22] Speaker 6: AND IF THE WALL STREET ESTIMATES ARE CORRECT, WE'RE GOING TO GET 4.1% YEAR-OVER-YEAR CORE PCE ACCELERATION, WHICH WILL BE THE HIGHEST OR THE FASTEST PACE GOING BACK TO APRIL OF 2023. THAT'S THE BAD NEWS. THE GOOD NEWS IS SOME PEOPLE WILL ARGUE THAT IT'S GOING TO DECELERATE FROM HERE BECAUSE OF OIL PRICES GOING DOWN. IS IT? THAT IS THE BIG DEBATE RIGHT NOW ON [01:13:40] Speaker 5: WALL STREET. WE ARE COMMITTED TO 2%. INFLATION IS A CHOICE, ALL THE KIND OF THINGS YOU ARE HEARING FROM THE NEW FEDERAL RESERVE CHAIR, KEVIN WALSH. DOES THAT MEAN THEY NEED TO HIGH TO GET FROM 4 DOWN TO 2? [01:13:51] Speaker 6: I HAVE TO ASK THE TASK FORCE BECAUSE RIGHT NOW THE TASK FORCE IS EXAMINING WHETHER THAT IS THE CORRECT METRIC TO USE AND WHETHER THAT ACTUALLY OVERWEIGHTS SOME OF THE COMPONENTS COMING FROM AI. THEY COULD POTENTIALLY NOT BE AS STICKY AND, FRANKLY, BE LESS RELEVANT TO WHAT THE FED POLICY RATE IS. [01:14:02] Speaker 7: THE FED MIGHT BE IN A POSITION TO PUNT THIS A LITTLE BIT. WE JUST HAD A RESOLUTION IN TERMS OF A 60-DAY CEASE-FIRE AND OIL PRICES COMING DOWN. WHAT IS GOING TO BE BAKED INTO THIS P.C. IS OBVIOUSLY WHEN OIL PRICES, GASOLINE PRICES, DIESEL, WERE MUCH HIGHER. WHERE ARE WE GOING TO BE AT THE [01:14:19] Speaker 5: END OF THE SUMMER? WE ARE GETTING A HELPING HAND RIGHT NOW FROM ENERGY. CHECK IT OUT. BRENT AND WTI DECLINING ONCE AGAIN. BRENT THIS MORNING, 73, DOWN ABOUT 1%. JUST OFF THE LOWS OF THE SESSION. THE BARRELS ARE MOVING AND DEMAND STRUCTURALLY MAY BE [01:14:33] Speaker 6: PERMANENTLY DIMINISHED. I KEEP THINKING ABOUT WHAT DAN STRIVAN SAID YESTERDAY OF GOLDMAN SACKS. THE LEVEL OF SHIFT THAT YOU SAW OVER IN CHINA TO ELECTRIC VEHICLES EVEN IN EUROPE HAS BEEN STUNNING AND RAPID. AND THAT THE INCREASE IN OIL CONSUMPTION JUST ISN'T THERE IN THE SAME KIND OF WAY AS A RESULT OF THE STRUCTURAL DEMAND DESTRUCTION THAT YOU'VE SEEN. [01:14:56] Speaker 5: WITHOUT THE SHIFT IN CHINA, THE STOCKPILING TOO THAT CHINA WENT THROUGH OVER THE LAST YEAR SO THEY COULD PULL BACK ON IMPORTS, PULL BACK ON REFINING AS WELL. WITHOUT THAT, THEY HAVE A DIFFERENT STORY. THEY REALLY HELPED OUT. [01:15:06] Speaker 7: CHINA CAME TO THE RESCUE OF THE GLOBAL ECONOMY. ALMOST CAME TO THE RESCUE OF THIS ADMINISTRATION. THEY BUY THE LION SHARE OF IRANIAN CRUDE. MAYBE THE ADMINISTRATION WAS WILLING TO FORGO ANY ISSUES IN THE PAST THEY'VE HAD WITH CHINA. I IMAGINE THIS CAME UP AT THEIR CONVERSATION IN BEIJING. [01:15:26] Speaker 5: WITHOUT CHINA DOING THIS, YOU WOULD HAVE SEEN PRICES MUCH HIGHER. A FULL ROUND TRIP ON CRUDE. A VOLATILE ONE, AN EXHAUSTING ONE FOR EVERYONE. [01:15:34] Speaker 13: THANK YOU. THE BAR WAS HIGH AND MICRON MORE THAN CLEARED IT. SHARES ARE RISING 17.5% IN THE PRE-MARKET AFTER IT ISSUED A BLOCKBUSTER FORECAST SAYING THAT MARGINS JUMPED NEARLY 85% LAST QUARTER. THE CEO SAYING THAT THERE IS STILL NO LINE OF SIGHT TO SUPPLY CATCHING UP WITH DEMAND AND HE SEES SHORTAGES REMAINING BEYOND BEYOND. THANK YOU SO MUCH. THE EARNINGS OF TRADE THIS MORNING IS QUALCOMM SHARES ARE RISING 10.2%. AFTER SAYING IT EXPECTS NEARLY $15 BILLION IN AI DATA CENTER REVENUE BY 2029. NOW IT IS CHASING THE AI INFRASTRUCTURE BOOM. WE END ON ALIBABA. THOSE ADR'S FALLING NEARLY 3% IN THE PRE-MARKET AFTER ANTHROPIC ACCUSED THE CHINESE TECH GIANT OF ACCESSING ITS CLAWED AI MODEL DESPITE ITS BEST EFFORTS TO TRY AND KEEP THAT OUT OF CHINA SHOWING HOW FAR -- IF THE ALLEGATIONS ARE TRUE SHOWING HOW FAR COMPANIES ARE WILLING TO GO TO ACCESS THOSE LEADING [01:16:45] Speaker ?: MODELS. [01:16:45] Speaker 5: JONATHAN: THANK YOU FOR THE UPDATE. THANK YOU FOR JOINING US. THANK YOU FOR JOINING US. THANK YOU FOR JOINING US. THANK YOU FOR JOINING US. MICRON SHARES SURGING IN THE PRE-MARKET. THE CHIPMAKER DELIVERING BLOWOUT EARNINGS WITH A GROSS MARGIN OF 85%. MICRON'S RESULTS EASING CONCERNS AROUND AI-FULED GROWTH. ELSEWHERE, AS YAHARA SUGGESTED, ANTHROPIC ACCUSING ALIBABA OF LAUNCHING A LARGE-SCALE EFFORT TO "ILICITLY ACCESS CLAWED" WITH THE USE OF NEARLY 25,000 FRAUDULATE ACCOUNTS. SOURCES TELLING US HERE AT BLOOMBERG THE STAFFERS ARE KEY CONTRIBUTORS TO GOOGLE'S GEMINI. THEIR EXITS ARE THE LATEST IN A SERIES OF HIGH-PROFILE DEPARTURES. [01:17:26] Speaker 6: I DID SPEND SOME TIME TRYING TO FIND OUT HOW MUCH JONAS ADLER AND ALEXANDER PRITZEL ARE BEING PAID TO LEAVE GOOGLE AND GO TO ANTHROPIC, WHICH IS OF COURSE THE OPERATOR OF CLOD. COULDN'T FIND IT. I'M GUESSING QUITE A BIT. [01:17:40] Speaker 5: BASEBALL CONTRACT MONEY. [01:17:42] Speaker 6: PROBABLY BEYOND. I'M GUESSING QUITE A BIT. I'M GUESSING QUITE A BIT. I'M GUESSING QUITE A BIT. I'M GUESSING QUITE A BIT BECAUSE ULTIMATELY THIS IS PROBABLY THE KEY EXISTENTIAL RACE. IF YOU THINK THAT MICRON CAN SEE INSATIONABLE DEMAND, RIGHT NOW EVERY SINGLE TECH COMPANY HAS INSATIONABLE DEMAND FOR TALENT. AND RIGHT NOW YOU HAVE TO WONDER HOW MUCH THIS IS CONTRIBUTING TO SOME OF THE UNDERPERFORMANCE OF SOME OF THESE NAMES, WHETHER IT'S GOOGLE, WHETHER IT'S META, WHETHER IT'S AMAZON OR EVEN MICROSOFT. IT IS DIFFICULT FOR THEM TO RETAIN TALENT WHEN THEY CANNOT PROMISE THE KIND OF MOONSHOT FROM AN IPO AND THE SHARES THAT THEY MIGHT RECEIVE THAT YOU WOULD GET IF YOU GO TO THE LIKES OF ANTHROPIC. [01:18:19] Speaker 7: SIGNAL FIRE, A VENTURE CAPITAL FARM, DID A STUDY LAST YEAR. AND THIS IS WHAT THEY FOUND. DEEP MIND ENGINEERS ARE NEARLY 11 TIMES MORE LIKELY TO LEAVE FOR ANTHROPIC THAN THE REVERSE. IS THIS EVEN AWKWARD A LITTLE BIT FOR ALPHABET, GIVEN THE FACT THAT THEY COMPETE, BUT THEY'RE ALSO A PARTNER AS WELL WHEN IT COMES TO GOOGLE AND ALPHABET. I IMAGINE RIGHT NOW, BEFORE THE IPO, THIS IS WHERE YOU WOULD WANT TO GET IN. [01:18:41] Speaker 5: WOULDN'T YOU RATHER BE THAT KIND OF RICH, LIKE RICH AND NO ONE REALLY KNOWS YOUR NAME, AS OPPOSED TO RICH AND [01:18:45] Speaker 7: EVERYONE KNOWS WHO YOU ARE. [01:18:49] Speaker 5: IS THAT REALLY A QUESTION? SOME PEOPLE WANT TO BE FAMOUS, BRAMO. I'M NOT INTERESTED IN ANY OF THAT. IF I COULD END THAT KIND OF MONEY AND NO ONE KNEW WHO I WAS, AMAZING. [01:18:57] Speaker 7: I'M NOT THAT PICKY. HOWEVER YOU WANT TO THROW IT AT ME, THAT'S GOOD. I'M GLAD. YOU CAN SIT COURTSIDE IN THE NYX, YOU CAN SIT FRONT ROW AT WORLD CUP, NO ONE KNOWS YOU'RE THERE. [01:19:06] Speaker 5: I HATE THAT ABOUT THE WORLD CUP, BY THE WAY, SINCE YOU BRING THAT UP. THE CELEBRITY CAM, WHAT'S THAT ABOUT? I DON'T CARE. I DON'T CARE WHO'S IN THE STADIUM. [01:19:15] Speaker 6: ARE YOU NOT ENTERTAINED, JOHN? [01:19:16] Speaker 5: I THOUGHT WE WENT OVER THIS YESTERDAY. [01:19:18] Speaker 6: I DON'T NEED THAT TO ENTERTAIN ME. [01:19:19] Speaker 7: I LIKE THE CELEBRITY CAM, WHEN IT'S ON MIKE BLOOMBERG. I GET TO SEE WHO HE'S SITTING. THAT'S DIFFERENT. [01:19:25] Speaker 5: OF COURSE, THAT'S DIFFERENT. I LOVE THE CELEB CAM. LET'S TURN BACK TO OUR TOP STORY THIS MORNING. MICRON SHARES SURGING ON ITS BLOCKBUSTER FORECAST. HEATH TERRY OF CITY RESEARCH WRITING THE HEALTH OF THE AI TRADE WILL CONTINUE TO BE DEFINED BY THE IRRESISTIBLE FORCE OF ENTERPRISE DEMAND MEETING THE IMMOVABLE OBJECT OF INFERENCE CAPACITY. HEATH JOINS US NOW FOR MORE. HEATH, GOOD MORNING. GOOD TO SEE YOU. GOOD MORNING. LET'S PICK UP ON THAT ENTERPRISE DEMAND. JUST HOW ROBUST IS THAT RIGHT NOW? [01:19:49] Speaker 21: LOOK, IT'S INCREDIBLY ROBUST. WE'LL GET Q2 NUMBERS IN A FEW WEEKS. BUT IF YOU LOOK AT WHAT WE'VE SEEN OVER THE LAST FEW QUARTERS, WE'VE GONE FROM 28% YEAR OVER YEAR GROWTH IN Q1 OF LAST YEAR TO 33% IN Q2, TO 53% IN Q3, TO 91%, TO 141% IN Q1 OF THIS YEAR. LIKE, THAT KIND OF BEND IN THE S-CURVE THAT WE'RE SEEING HERE, AND WE BELIEVE IT'S GOING TO ACCELERATE AGAIN IN Q2, THAT'S THE BEST PROXY FOR WHAT'S HAPPENING IN ENTERPRISE DEMAND. AND ANYBODY WHO WORKS AT A FORTUNE 500-TYPE COMPANY THAT IS PUSHING THIS INTO PRODUCTION, CAN TELL YOU THEY'RE SEEING IT IN REAL TIME. [01:20:24] Speaker 5: THERE IS A RUSH TO BUILD OUT CAPACITY TO MEET ALL THIS DEMAND. SOME COMPANIES ARE BENEFITING MORE THAN OTHERS. MICRON WITH 85% MARGINS. OTHER COMPANIES THAT ARE DOING A LOT OF THE SPENDING RIGHT NOW ARE BEING PUNISHED. THE STOCKS ARE BEING PUNISHED. THIS IS A THING WE KEEP BRINGING UP. DO YOU THINK THAT CHANGES THE TRAJECTORY FOR SPENDING? [01:20:39] Speaker 21: LOOK, NO, I MEAN, NOT ANYTIME SOON, BECAUSE THE COMPANIES ARE GETTING REAL RETURNS ON THIS. THE MARKET RIGHT NOW IS NOT GIVING THE COMPANIES THAT ARE SPENDING ON THIS, THE HYPER SCALERS, THE KIND OF CREDIT THAT THEY NORMALLY WOULD FOR A COUPLE OF DIFFERENT REASONS. BUT THE BIGGEST ONE IS THERE IS THIS GAP BETWEEN WHEN YOU HAVE TO START SPENDING AND BUILDING ALL OF THIS OUT AND WHEN YOU ACTUALLY START SEEING THE RETURNS ON IT. IF YOU LOOK AT CASH RETURN ON CASH INVESTED, WHICH WE BELIEVE IS SORT OF THE BEST GAUGE OF THE RETURNS THAT THEY'RE ACTUALLY GENERATING ON THIS, THE HYPER SCALERS ARE GENERATING 29% RETURNS ON THIS INVESTMENT. VERY STABLE, 29% IN Q1, 29% IN Q4. IF YOU HAVE THE ABILITY TO BORROW AT 6% OR TO ISSUE EQUITY AND GET A 29% RETURN ON IT, YOU'RE SUPPOSED TO DO THAT REGARDLESS OF WHAT YOUR STOCK PRICE IS DOING. AND WHILE THE STOCK PRICES AREN'T DOING WHAT MICRON STOCK PRICE IS DOING, THEY'RE HANGING IN THERE ENOUGH THAT INVESTORS HAVEN'T REJECTED THIS, RIGHT? GOOGLE ISSUED $85 BILLION WORTH OF EQUITIES. THE MARKET DIDN'T REALLY BLINK. [01:21:37] Speaker 6: JUST TO BUILD ON WHAT JOHN IS TALKING ABOUT, MAYBE PEOPLE ARE STILL LENDING AND THEY'RE STILL ABLE TO RAISE CASH. NONETHELESS, IT'S GETTING A LITTLE BIT HAIRY FOR THE LIKES OF MICROSOFT, DOWN 18% FOR THIS WORST MONTHLY PERFORMANCE GOING BACK TO 2008. YOU SEE ORACLE DOWN MORE THAN 30%. ARE WE STARTING TO SEE THE BEGINNINGS OF INVESTOR PUSHBACK THAT MAYBE HASN'T PUT TEETH IN THIS TRADE BY WITHDRAWING CASH, BUT CERTAINLY HAS PUT A LITTLE BIT OF NOTICE AROUND THAT CAPITAL? [01:22:01] Speaker 21: WELL, THE THING THAT WE HAVE TO REMEMBER, PARTICULARLY WHEN IT COMES TO MICROSOFT AND ORACLE, IS THOSE ARE BOTH SOFTWARE COMPANIES. LOOK AT EVERYTHING ELSE IN SOFTWARE AND WHAT THOSE STOCKS HAVE DONE. THE MARKET IS NOT RESPONDING NEGATIVELY TO THE ACCELERATION AND GROWTH THAT YOU'RE SEEING AT AZURE, THE RETURNS YOU'RE SEEING AT AZURE. IT'S RESPONDING TO THE OTHER 70% OF MICROSOFT'S BUSINESS THAT IS SOFTWARE. IT'S RESPONDING TO THE BIGGEST PART OF ORACLE'S BUSINESS, WHICH IS SOFTWARE. AND SO I THINK THAT, IF ANYTHING, SHOULD ENCOURAGE MORE INVESTMENT IN THIS AREA, PARTICULARLY AS WE START TO SEE THE ACCELERATION IN AZURE REVENUES THROUGH THE END OF THIS YEAR, WHICH WE BELIEVE THE MARKET WILL RESPOND POSITIVELY TO. [01:22:45] Speaker 6: WE'VE SEEN THIS ROLLING BALL OF CASH. AND AS WE HEARD FROM SEBASTIAN PAGE EARLIER, EVERYONE IS LOOKING FOR THE CHOKE POINTS. THE NEXT PLACE WHERE YOU'RE GOING TO SEE THINGS JUST SORT OF SHOOT EXPONENTIALLY HIGHER BECAUSE OF THIS INSATIABLE DEMAND AND A LIMITED SUPPLY. AFTER MEMORY, WHAT'S NEXT? I MEAN, DO YOU HAVE YOUR EYE ON KIND OF THOSE CHOKE POINTS? I MEAN, WE DO. [01:23:03] Speaker 21: I MEAN, THE CHOKE POINTS SORT OF EXIST THROUGHOUT THE SUPPLY CHAIN RIGHT NOW. MEMORY IS OBVIOUSLY THE BIGGEST ONE. ANTHROPIC TOLD YOU THAT VERY LOUDLY A FEW WEEKS AGO WHEN THEY RAISED THEIR MOST RECENT ROUND. THEY HAD THE OPPORTUNITY TO CHOOSE STRATEGIC PARTNERS. THEY COULD HAVE PICKED ANYONE THEY WANTED. THEY CHOSE THREE, SAMSUNG, MICRON, AND HYNIX. AND SO, LIKE, ANYONE WHO'S SURPRISED BY WHAT'S HAPPENING WITH MICRON TODAY AND WHAT'S BEEN HAPPENING WITH HIGH BANDWITH MEMORY DIDN'T PAY ATTENTION TO WHAT ANTHROPIC TOLD THEM. THE NEXT POINT AFTER THAT IS, IT'S AT INTERCONNECT. IT'S IN STORAGE. IT'S IN LABOR IN A VERY BIG WAY. AND, OF COURSE, IT'S IN POWER. WE'VE BEEN TALKING ABOUT THAT FOR SO LONG. IT'S ALSO BECAUSE OF WHAT YOU SEE WITH MICRON. IT'S VERY MUCH IN SEMICAP EQUIPMENT. BECAUSE WE DO HAVE TO MAKE MORE MEMORY. WE DO HAVE TO MAKE MORE CHIPS. WE NEED MORE COMPUTE. WE NEED MORE STORAGE AND MEMORY. [01:23:52] Speaker 7: DO YOU THINK SOME OF THESE COMPANIES ALONG THE SUPPLY CHAIN, WE CAN POTENTIALLY SEE THESE ISSUES EMERGE LATER IN THE YEAR OR NEXT YEAR AS THEY BUILD THIS OUT, ARE UNDERVALUED RIGHT NOW? [01:24:01] Speaker 21: WELL, I MEAN, SO WE'VE BEEN SAYING THIS, LIKE, FROM -- I STARTED AT CITY A YEAR AGO. THE FIRST THING THAT WE SAID IS, YOU WANT TO BE WHERE THE BOTTLENECKS ARE. AND THAT HAS CONTINUED TO BE THE CASE. WE SORT OF STUCK WITH THAT. YOU HAVE -- THIS IS WHERE PRICING GOES. YOU WERE TALKING ABOUT SORT OF THE UNDERPERFORMANCE OF THE HYPER SCALERS. YOU WANT TO BE WHERE PEOPLE ARE SPENDING MONEY, NOT NECESSARILY WITH THE PEOPLE WHO ARE SPENDING THE MONEY. AND SO THAT'S GOING TO CONTINUE TO BE THE CASE. WE WOULD ARGUE IT'S NOT EVEN SO MUCH UNDERVALUED. IT'S JUST ESTIMATES ARE TOO LOW. CONSENSUS NUMBERS AREN'T HIGH ENOUGH, BECAUSE THE AMOUNT OF INFRASTRUCTURE THAT IS GOING TO GET BUILT, THE AMOUNT OF PRICING INCREASES THAT YOU'RE GOING TO SEE, THAT, YOU KNOW, IRRESISTIBLE DEMAND, IMMOVABLE SUPPLY. THE ONLY THING THAT BREAKS IN THAT IS PRICE. YOU SAW IT IN THE MICRON NUMBER. 85% GROSS MARGINS. MEMORY COMPANIES ARE NOT SUPPOSED TO HAVE 85% GROSS MARGINS. EVENTUALLY THAT WILL SETTLE OUT BECAUSE THAT'S WHAT CYCLICALS DO. BUT WE'RE A LONG WAY AWAY FROM THAT HAPPENING. [01:24:56] Speaker 6: YOU SAID THAT ONE OF THE CHOKE POINTS WAS IN LABOR. ARE YOU TALKING ABOUT JONAS ADLER? ARE YOU TALKING ABOUT DAVE WHO CONSTRUCTS SOME OF WHAT WE'RE SEEING WITH THE HYPER SCALER BUILDINGS? [01:25:05] Speaker 21: SO IT'S CERTAINLY BOTH. THERE IS NOT A LOT OF TALENT OUT THERE THAT HAS THE CAPABILITY OF ADVANCING THESE MODELS THE WAY THAT LEVEL OF SORT OF THE JONAS ADLER'S OF THE WORLD DO. I HAVE NO IDEA. BUT IF YOU LOOK AT SOME OF THE STUFF THAT WAS ANNOUNCED LAST SUMMER, WHEN META WAS DOING THESE DEALS, ANTHROPIC IS DOING THESE DEALS NOW. META WAS DOING THEM LAST SUMMER. IT WAS SIX. AND IN SOME CASES, YOU KNOW, IT WAS VERY LARGE SORT OF, YOU KNOW, IN SOME CASES, BILLION-DOLLAR KIND OF PAY PACKAGES OVER MULTI-MULTI-YEARS. AND WHEN YOU LOOK AT SORT OF THE ACQUISITION HIRES THAT MANY COMPANIES HAVE DONE, IT FALLS INTO THAT HUNDREDS OF MILLIONS AND BEYOND KIND OF LEVEL. THAT SAID, WHAT I WAS REFERRING TO IS VERY MUCH -- IT'S THE ELECTRICIANS, THE PLUMBERS, THE CONSTRUCTION PEOPLE THAT ACTUALLY HAVE TO BUILD THESE DATA CENTERS. THERE ARE VERY FEW PEOPLE IN THE WORLD THAT HAVE THE SKILLS TO BE ABLE TO BUILD AT THE LEVEL THAT THESE DATA CENTERS REQUIRE. AND THOSE PEOPLE ARE IN MASSIVE DEMAND RIGHT NOW. AND DESERVEDLY, THEY'RE GETTING PAID A LOT MORE, TOO. YES. [01:26:04] Speaker 6: AND THAT'S THE TAKEAWAY HERE. [01:26:05] Speaker 5: YEAH. [01:26:06] Speaker 6: NO, REALLY, I THINK THAT I NEED TO GIVE SOME NEW RECOMMENDATIONS TO MY CHILDREN. HEATH, IT'S GOOD TO SEE YOU. [01:26:10] Speaker 5: THANKS FOR BEING HERE. THANKS FOR HAVING ME. BREAKING IT DOWN, JUST A REAL CLINIC THERE FOR US. HEATH TERRY OF CITY RESEARCH. I THINK THAT'S THE SECOND TIME SO FAR THIS MORNING. BASICALLY, THE TAKEAWAY IS THE RUNWAY IS LONGER THAN YOU THINK IT IS WHEN IT COMES TO A LOT OF THESE THEMES. [01:26:21] Speaker 6: MICRON KIND OF THREW THAT IN EVERYONE'S FACE OVERNIGHT. I MEAN, THE IDEA THAT WE CAN SEE THAT KIND OF GAINS, THEN THE RHETORIC COMING OUT OF THE COMPANY SAYING, WE HAVE NO IDEA WHEN THE DEMAND IS GOING TO START TO FADE. BECAUSE RIGHT NOW, IT'S JUST TO THE MOON. [01:26:32] Speaker 5: MICRON THIS MORNING, UP BY CLOSE TO 18%. LET'S GET YOU AN UPDATE ON STORIES ELSEWHERE THIS MORNING WITH YOUR BLOOMBERG BRIEF. [01:26:38] Speaker 9: THANK YOU. OPEN AI UNVEILING ITS FIRST CUSTOM AI CHIP DEVELOPED IN PARTNERSHIP WITH BROADCOM. SO FAR, THE CHIP CALLED JALAPENO IS SHOWING COST SAVINGS OF ROUGHLY 50% AND WILL BE INTEGRATED INTO LARGE DATA CENTERS FROM OPEN AI BACKER MICROSOFT AND OTHER PARTNERS. WEDNESDAY TRADING FOLLOWING THE COMPANY'S EARNINGS. THE REACTION UNDERSCORING THE SKY-HIGH EXPECTATIONS FOR AI CHIP COMPANIES. IN SPORTS, SOUTH AFRICA QUALIFYING FOR THE KNUCK OUT STAGE OF THE WORLD CUP FOR THE FIRST TIME AFTER BEATING SOUTH KOREA 1-0. SWITZERLAND EDGING PAST CANADA TO FINISH IN THE TOP OF GROUP B AND BRAZIL BEATING SCOTLAND 3-0. [01:27:29] Speaker 5: THANK YOU VERY MUCH. THE TARTAN ARMY, THE WINNERS OF THE WORLD CUP SO FAR. [01:27:38] Speaker 6: IT'S NOT REALLY WORKED OUT BUT FANTASTIC TO SEE WHAT THOSE FANS HAVE DONE IN THE NORTHEAST OF THIS COUNTRY. IT'S BEEN FANTASTIC. I LOVE THE SPIRIT THAT WE HAVE BROUGHT. ALL OF THE FANS HAVE BEEN PRETTY AWESOME. I LIKE THE NORWEGIAN ROWERS. THE SCOTTS ARE PRETTY WILD. [01:27:58] Speaker 5: THEY ARE HAVING A GOOD TIME TOO. [01:28:04] Speaker 18: UP NEXT ON THE PROGRAM, THE FED'S HAWKISH TILL. WE DON'T THINK THE FED AND CHAIR WALSH ARE GOING TO BE ABLE TO RAISE INTEREST RATES LIKE THE BOND MARKET IS PRICED IN. [01:28:12] Speaker 22: THE FED'S HAWKISH, THE FED'S HAWKISH. THE FED'S HAWKISH, THE FED'S HAWKISH, CHAIR WALSH ESTABLISHING [01:28:19] Speaker 5: HIS INDEPENDENCE. NEW SHERIFF IN TOWN. THE FED'S HAWKISH, THE FED'S HAWKISH, THE FED'S HAWKISH. THE FED'S HAWKISH, THE FED'S HAWKISH, THE FED'S HAWKISH. THE AI TRADE UPENDED FOR ABOUT THREE DAYS AND NOT EVEN THAT. EQUITY FUTURES UP BY 0.6% ON THE S&P. THE FED'S HAWKISH, THE FED'S HAWKISH, THE FED'S HAWKISH. [01:29:08] Speaker 18: THE FED'S HAWKISH TILL. WE DON'T THINK THE FED AND CHAIR WALSH ARE GOING TO BE ABLE TO RAISE INTEREST RATES LIKE THE BOND MARKET IS PRICED IN. IT'S GOING TO BE HAPPENING FOR MONETARY POLICY. [01:29:24] Speaker 22: IT'S PART OF CHAIR WALSH ESTABLISHING HIS INDEPENDENCE. [01:29:28] Speaker 5: NEW SHERIFF IN TOWN. HERE'S THE LATEST THIS MORNING. PCE DATA DUE OUT IN JUST LESS THAN AN HOUR'S TIME. RISING INFLATION EXPECTED TO REINFORCE BETS. THE FEDERAL RESERVE WILL RAISE RATES IN THE COMING MONTHS. THE TEAM AT BANK OF AMERICA CALLING FOR THREE HIKES THIS YEAR. MEGAN SWIBER WRITING, WALSH IS A FED CHAIR WHO WANTS TO BE ACTIONABLE. THE TASK FORCES ARE NOT AT ALL TO BUY TIME BUT AT ALL TO GET HIGHER PROBABILITY OF A JULY HIKE. MEGAN JOINS US NOW FOR MORE. MEGAN, GOOD MORNING. GOOD MORNING. THIS IS THE DEBATE ON THIS PROGRAM RIGHT NOW. STYLE VERSUS SUBSTANCE. YOU DON'T JUST THINK THIS IS STYLE. YOU THINK THIS IS SUBSTANCE. THERE'S A SHIFT HERE. [01:29:58] Speaker 23: WE THINK THAT THIS IS SUBSTANCE, JOHN. AND WHAT WAS REALLY SHOCKING TO THE MARKET, NOT SO MUCH US, BECAUSE WE WERE ON MORE OF THE HAWKISH SIDE OF THE EQUATION, COMING INTO THE MEETING LAST WEEK, WAS JUST WORSH'S COMMITMENT TO BRING INFLATION BACK DOWN TO 2%. AND THIS NOTION THAT THE FED HAS BEEN MISSING ON THIS MANDATE FOR NOT JUST ONE OR TWO YEARS, BUT FIVE YEARS. WE GET THE PCE DATA THIS MORNING. PCE IS REALLY WHERE THE PROBLEM SITS. NOT SO MUCH CPI, CERTAINLY NOT INFLATION EXPECTATIONS IF YOU'RE LOOKING AT MARKET PRICING. AND THIS IS WHAT THE FED HAS TO ACKNOWLEDGE. THEY STILL HAVE THIS VERY FIRM COMMITMENT TO 2% PCE. AND THE DATA THIS MORNING WE THINK WILL WARRANT A FED THAT'S GOING TO HAVE TO HIGH RATE SOONER AND GET OUT FROM BEHIND THIS PROBLEM THAT'S BEEN PERSISTING FOR FIVE YEARS. [01:30:48] Speaker 5: AND TO YOUR POINT, NOT JUST HIKE ONCE, TWICE, THREE TIMES THIS YEAR. HOW WELL PRICED IS THAT STORY? [01:30:53] Speaker 23: IT'S NOT WELL PRICED, WE THINK. AND MY SENSE TALKING TO A LOT OF CLIENTS, A LOT OF INVESTORS ON THIS IS THAT THERE'S STILL A VERY BIG CONTINGENT THAT DO NOT THINK THAT WASH WILL DELIVER HIKES AT ALL. AND THAT REALLY COMES FROM MORE OF THIS INERTIA THAT WE'VE SEEN THE MARKET TRADE WITH OVER THE PAST YEAR, THAT TRUMP WAS GOING TO APPOINT SOMEONE TO THE FED WHO WAS JUST GOING TO BLINDLE BE ABLE TO CUT RATES. WE ALSO HAVE THIS GLOBAL DYNAMIC GOING ON AS WE SEE HIKES GETTING TAKEN OUT OF EUROPEAN CURVE, GUILT CURVE, AND THAT'S BECAUSE THOSE HIKES WERE VERY MUCH MORE SO PREDICATED ON THE INFLATION COMING FROM OIL. THIS IS NOT THE CASE IN THE U.S. WHERE WE HAVE MUCH MORE STRENGTH COMING FROM CORE NUMBERS, COMING FROM SERVICES INFLATION. AND THAT REALLY IS WHAT UNDERPINS OUR CONVICTION THAT THE FED IS GOING TO HIKE HERE. WHAT ABOUT THE TASK FORCES? DON'T THEY HAVE TO GET STARTED? I DON'T THINK LISA THAT THEY'RE GOING TO WAIT UNTIL WE SEE THE CONCLUSIONS OF THESE TASK FORCES TO ACTUALLY ACTION ANYTHING. WE ACTUALLY TAKE A VERY DIFFERENT NOTION THAN I THINK MANY IN THE MARKET WHO HAVE BEEN LOOKING AT THIS TASK FORCE, YOU KNOW, MANDATE AND SAYING THIS IS JUST A WAY FOR WORSH TO BUY HIMSELF SOME TIME. HE'S GOING TO RETHINK WHAT THE INFLATION MANDATE LOOKS LIKE. HE'S GOING TO THINK MORE DIFFERENTLY ABOUT WHAT DATA TO LOOK AT, THINK MORE ABOUT FED COMMUNICATION. WE THINK THAT THAT IS JUST ANOTHER SIGNAL THAT WORSH IS SOMEONE WHO WANTS TO STEP IN THERE AND GET THE JOB DONE. AND IF YOU CAN GET IN THERE, DO 75 BASIS POINTS OF HIKES, REVERSE WHAT THE FED DID LAST YEAR IN TERMS OF THOSE INSURANCE CUTS THAT WE SAW, IT GETS THE FED BACK TO A BETTER PLACE WHERE THEY CAN SAY WE'VE DELIVERED NOW ON THIS INFLATION MANDATE AND WE CAN CUT RATES BACK DOWN TO WHEREVER THEY THINK NEUTRAL IS. [01:32:37] Speaker 6: WHAT DO YOU THINK WILL BE THE TRIGGER IN TERMS OF THE DATA THAT WE'RE GOING TO BE GETTING NOT JUST TODAY BUT OVER THE NEXT FEW WEEKS THAT WILL ALLOW THE FED TO ACTUALLY TAKE ACTION AS SOON AS [01:32:46] Speaker 23: JULY? LISA, I THINK IT JUST HAS TO BE SIMILAR TO WHAT WE'VE BEEN SEEING IN RECENT MONTHS. BREAK EVEN, PAYROLLS, CREATION, EVERYONE HAS BEEN THINKING IS VERY, VERY LOW. PAYROLLS NUMBERS ON A THREE-MONTH AVERAGE BASIS HAVE BEEN MORE THAN DOUBLED, CLOSE TO TRIPLE WHAT MANY ECONOMISTS WERE EXPECTING IN TERMS OF WHAT THAT BREAK EVEN NUMBER IS. WE SEE ANOTHER STRONG PAYROLLS PRINT. THAT'S A GO SIGN FOR US FROM THE FED. IT'S ALSO, OF COURSE, GOING TO COME DOWN TO THE INFLATION DATA. A BIG ISSUE HERE THAT WE GET PUSHED BACK ON IS CERTAINLY IN COMING MONTHS, MONTH OVER MONTH, CPI, PCE, IS GOING TO BE NEGATIVE ON A HEADLINE BASIS. BUT WHAT THE MARKET'S GOT TO VERY QUICKLY THEN DO IS TAKE THE CPI DATA, AS IT HAS BEEN DOING, AND TRYING TO IMPLY WHAT THAT MEANS FOR PCE. AND WE'LL GET THE DATA THIS MORNING, BUT IT DOES SEEM TO US LIKE IT'S GOING TO BE A SIGNAL THAT THE FED NEEDS TO GET OUT FROM BEHIND THE CURVE. [01:33:37] Speaker 7: HOW MANY HIKES ARE YOU EXPECTING BEFORE THE MIDTERM ELECTION? [01:33:40] Speaker 23: WELL, WE'RE EXPECTING THE FED TO GO IN SEPTEMBER, OCTOBER. SO ULTIMATELY, 50 BASIS POINTS. IT'S NOT REALLY, IN OUR VIEW, THIS IMPORTANCE OF MIDTERMS. IT'S THIS ACKNOWLEDGEMENT OF THE ISSUE FOR VOTERS. MORE BROADLY, THAT INFLATION HAS BEEN ONE OF THE KEY LEADING ISSUES AROUND CONSUMER SENTIMENT. EVERYONE KNOWS THAT. THE FED KNOWS THAT. AND THEY NEED TO GET THEIR CREDIBILITY BACK. [01:34:06] Speaker 5: THE WHITE HOUSE WOULD LIKE LONG RATES DOWN, NOT JUST SHORT RATES. LONG RATES ARE COMING IN RELATIVE TO THE MOVE WE'RE SEEING IN TWOS. WHEN YOU SIT WITH THE TEAM RIGHT NOW, HOW DOES YOUR OUTLOOK FOR SHORT RATES INFORM YOUR OUTLOOK FOR LONG RATES? IT'S QUITE DIFFERENT RIGHT NOW. [01:34:20] Speaker 23: WHEN WE THINK ABOUT CURVE MOVES, EVERYONE ON OUR TEAM IS MUCH MORE SO IN THIS FLATTENER CAMP. I JUST RECOMMENDED A TRADE THIS MORNING TO ACTUALLY IMPLEMENT THIS FLATTENER TRADE IN REAL YIELDS VERSUS NOMINALS. BECAUSE IF WE DO SEE THE FED GETTING OUT FROM BEHIND THE CURVE ON INFLATION, THERE'S ACTUALLY MORE ROOM THAT INFLATION COMPENSATION, THE WAY THE MARKET PRICES THAT, CAN DECLINE. WE DO SEE IN PERIODS OF TIME WHERE THE FED IS HIKING TO OFFSET THESE INFLATIONARY PRESSURES, REAL YIELD CURVE CAN INVERT. SO FOR US, IT'S MORE OF A STORY THAT FRONT-END RATES ARE MOVING HIGHER VERSUS 10-YEAR RATES. IF THE MARKET TAKES THIS FED MESSAGING AS THEY'RE GOING TO GET IN THERE, THEY'RE GOING TO QUICKLY HIKE, THEN IT ALLOWS THEM TO GET BACK TO NEUTRAL IN LATER YEARS, IT MAY ACTUALLY RESULT IN A TWIST FLATTENING OF THE CURVE WHERE YOU HAVE FRONT-END RATES MOVING HIGHER AND 10-YEAR-AND-OUT RATES MOVING LOWER. [01:35:12] Speaker 5: THOUGHTFUL STUFF. MEGAN, THANK YOU. WE'VE SEEN THAT FLATTENING COMING TO THIS MARKET. [01:35:17] Speaker 6: NOT WITH REAL YIELDS. JUST TO PICK UP ON WHAT MEGAN WAS TALKING ABOUT, RIGHT NOW, 10-YEAR REAL YIELDS ARE ABOUT 2.2%. THEY'RE CLOSE TO THAT HIGH POINT LEVEL THAT WE SAW BACK IN 2023 OF 2.5%. YOU COULD ARGUE THIS IS PART OF WHAT WE'RE SEEING WITH THE WABLES GOING ON IN SOME OF THE RISK ASSETS. IF YOU START TO SEE THAT COME IN AND YOU GET THAT CURVE FLATTENING AND IT POTENTIALLY GETS THAT INVERSION, THAT'S FASCINATING. IT GIVES YOU A SENSE OF HOW THE FED MIGHT BE THINKING ABOUT THIS, TOO. [01:35:41] Speaker 5: SOMETHING TO LOOK FOR GOING INTO YEAR-END, POTENTIALLY, AND OVER THE NEXT FEW MONTHS. THE TASK FORCE, NOT JUST A TALKING SHOP, NOT JUST DESIGNED TO DELAY TIME, AT LEAST IN THE OPINION, THE VIEW OF BANK OF AMERICA DESIGNED TO GET THINGS DONE. IF THIS PRESIDENT WANTS TO GET RATES [01:35:54] Speaker 6: LOWER AND HE'S TALKING ABOUT TEN YEAR YIELDS, THEN THIS MIGHT BE THE ONLY WAY TO DO IT, IS TO POTENTIALLY HIKE RATES IN THE FRONT END. DID BESSEN ALLUDE TO THAT THIS [01:36:03] Speaker 5: WEEK? YEAH. KIND OF. COMING UP, THE FORMER NEW YORK FED PRESIDENT, DARIUS DALE OF 42 MACRO, ALL OF THAT IN THE THIRD OUT OF BLOOMBERG SURVEILLANCE JUST AROUND THE CORNER. IT'S UP NEXT. [01:36:36] Speaker 16: RIGHT NOW THE PROBLEM IS INFLATION. WE'VE BEEN FLAGGING THE BREATH OF INFLATIONARY PRESSURES FOR SOME TIME. [01:36:42] Speaker 23: THE FOMC HAS TO BE PARTICULARLY ATTENTIVE TO ITS MANDATE AROUND PRICE STABILITY. [01:36:47] Speaker 24: THE ECONOMY IS GOING TO STRENGTHEN. INFLATION PROBABLY IS GOING TO SLOW DOWN. [01:36:51] Speaker 18: OUR VIEW IS THAT WE'RE GOING TO SEE PEAK RATES AND PEAK INFLATION IN THE SECOND QUARTER OF THIS YEAR. [01:36:56] Speaker 3: THIS IS BLOOMBERG SURVEILLANCE WITH JONATHAN FERRO, LISA [01:37:00] Speaker 4: ABROMOWITZ AND ANNE-MARIE HORDERN. LIVE FROM NEW YORK CITY THIS MORNING, GOOD MORNING, GOOD [01:37:07] Speaker 5: MORNING FOR OUR AUDIENCE WORLDWIDE. THE THIRD HOUR OF BLOOMBERG SURVEILLANCE STARTS RIGHT NOW. THE PRICE ACTION LOOKS LIKE THIS. EQUITY FUTURES UP BY 0.6% ON THE S&P 500, UP BY 2% ON THE NASDAQ. THANKS TO THIS MOVE. MICRON IN THE PRE-MARKET FLYING ALL MORNING, UP BY 17% SO FAR. AND THE OUTLOOK FOR STOCKS APPARENTLY IS GETTING BETTER AND BETTER. WE'VE HAD UPGRADES TO PRICE TARGETS AT WELLS FARGO, BARCLAYS, J.P. MORGAN, NOW SOCK GEN TAKING ITS S&P 500 TARGET TO 8K. WHAT'S FASCINATING IS YOU HAVEN'T SEEN PARTICIPATION IN [01:37:39] Speaker 6: SOME OF THE BIGGEST NAMES OUT THERE. YOU'VE SEEN SOME OF THE BIGGEST HYPER SCALERS ACTUALLY LOSING TREMENDOUS VALUE OVER THE PAST MONTH EVEN AS YOU SEE THE EQUAL WEIGHT OUTPERFORMING UP A PERCENT. YOU HAVE THE LIKES OF MICROSOFT DOWN 18%, ORACLE DOWN 30%, GOOGLE DOWN 8% SO FAR IN JUNE. NONETHELESS, PEOPLE ARE LOOKING AT THE ROTATION, PEOPLE ARE LOOKING AT THE PROFITS, PEOPLE ARE LOOKING AT MICRON AND THE OTHER SEMICONDUCTORS, WESTERN DIGITAL, ET CETERA. THEY ARE SAYING THERE STILL IS UPSIDE BECAUSE IT IS REAL. IF YOU DOUBT IT IS REAL, TAKE A LOOK AT MICRON EARNINGS AND WEAP BECAUSE ULTIMATELY IT IS DELIVERING IN THE 85% MARGINS. [01:38:15] Speaker 5: LET'S GET TO THE BANK STORY. CHECK OUT JP MORGAN IN THE PRE-MARKET. THESE HEADLINES JUST CROSSED IN THE BLOOMBERG TERMINAL. THERE WAS A TIME RIGHT BEFORE LLOYD BLANKFIDE STEPS ASIDE THAT A RACE STARTED BETWEEN TWO CO-PRESIDENTS GOING INTO THAT. JP MORGAN MAKING A SIMILAR ANNOUNCEMENT, LISA, THIS MORNING. [01:38:33] Speaker 6: DOUG PETNO AND TROY ROARBAO ARE NAMED CO-PRESIDENTS AND MARIANNE LAKE HAS DECIDED TO RETIRE. WHAT WE ARE HEARING IS THAT TROY ROARBAO WILL BE THE CEO OF CONSUMER AND COMMUNITY BANKING. WHAT WE SEE FROM DOUG PETNO IS HE WILL BE CEO OF COMMERCIAL AND THE INVESTMENT BANK. THIS COMES AS PEOPLE ARE THINKING ABOUT THE SUCCESSION OF JAMIE DIMON AS CEO. THERE HAVE BEEN A NUMBER OF PEOPLE WHO HAVE BEEN ELEVATED. RIGHT NOW WE HAVE TO IMAGINE THAT DOUG PETNO AND TROY ROARBAO ARE SQUARELY IN THE LEAD TO OVERTAKE THAT C-Suite [01:39:07] Speaker 5: POSITION. LISA, YOU KNOW THE BANK WELL. TYPICALLY WHEN YOU SPEAK TO JAMIE DIMON, WE'VE ALL SEEN HIM ASKED THE QUESTION REPEATEDLY HOW MUCH LONGER. HE WOULD SAY FIVE YEARS. FIVE YEARS AFTER THOSE HEADLINES, WHAT DO YOU THINK THE RESPONSE WOULD BE THIS [01:39:20] Speaker 6: MORNING? HE'S ALREADY MOVED BACK FROM THAT. HE SAID HE STILL HAS A LOT OF DIFFERENT WAYS. THERE IS ALSO A QUESTION OF WHETHER HE COULD REMAIN CHAIRMAN WHILE A NEW C.E.O. COMES IN BECAUSE RIGHT NOW JAMIE DIMON IS CHAIR AND C.E.O. WE HAVE SEEN A NUMBER OF OTHER BANKS TAKE MOVES TO CREATE A SUCCESSION PLAN AND THEN GET THE PERSON IN PLACE OVER THE PAST COUPLE OF YEARS. THE SPECULATION IS GOING TO BE VERY HOT, ESPECIALLY BECAUSE THESE TWO INDIVIDUALS WERE PEGGED AS LIKELY SUCCESSORS IN THE PAST ALONG WITH A FEW OTHERS, IT SEEMS LIKE THE CREW IS NARROWING DOWN. THE MOVE FROM MARIANNE LAKE SPEAKS FOR ITSELF, DOESN'T IT? [01:39:57] Speaker 5: SHE'S NOT GOING TO BE IT AND THAT IS WHAT PEOPLE ARE GOING TO ASSUME. J.P. MORGAN IN THE PREMARKET UP BY ABOUT A THIRD OF 1%. MORE DETAILS ON THAT FOR YOU WHEN WE GET THEM. COMING UP THIS HOUR WE'LL CATCH UP WITH THE AI TRADE BOUNCING BACK, THE FORMER NEW YORK FED PRESIDENT BILL DUDLEY ON THE RISK BEHIND THE FED CHAIR'S INFLATION DATA, THAT INFLATION DATA ABOUT 26 MINUTES AWAY. WE JUST HAD A CONVERSATION AROUND THE TABLE ABOUT THREE HIKES THIS YEAR WITH BANK OF AMERICA. THEY ARE LOOKING FOR THOSE HIKES TO START MAYBE AS SOON AS [01:40:24] Speaker 6: JULY. AND THAT WOULD FOLLOW CORE PCE COMING IN WHAT IS EXPECTED TO BE 4.1%, THE HOTTEST LEVEL, THE FASTEST PACE OF ACCELERATION GOING BACK TO APRIL OF 2023. LET'S BEGIN THIS OUT WITH STOCKS [01:40:36] Speaker 5: GAINING AFTER MICRON EARNING SPARKED A NEW WAVE OF MOMENTUM FOR THE TECH TRADE. LESANNE SANDERS OF CHARLES SWAB NOTING THERE IS SAME BUS RISK FROM ENORMOUS CONCENTRATION IN NARROW CLUSTER OF SEMIS, HYPER SCALERS, AND MEMORY CHIPMAKERS. LESANNE JOINS US NOW FOR MORE. LESANNE, WHENEVER YOU GET THE JITTERS, EVERYONE WANTS OFF THE BUS. THEN YOU GET A RALLY ON A SOCK LIKE MICRON, EVERYONE WANTS OFF AGAIN. HOW CONCERNED ARE PEOPLE OUT THERE ABOUT BEING IN THE SAME [01:40:59] Speaker 24: TRADE? I THINK MANY OF THE COHORTS, INSTITUTIONAL COHORTS THAT PLAY OFF OF EACH OTHER'S POSITIONING, SYSTEMATICS, LONG SHORT HEDGE FUND COMMUNITY, COMMODITY TRADING ADVISORS, AND THEN I WOULD PUT THE RETAIL TRADER IN THE MIX, TOO. THEY ARE PAYING, ACTUALLY, CROWDED TRADES AND LOOKING TO POTENTIALLY PRESS SOME SHORTS. THAT IS REALLY SHORT ATTENTION SPAN, MONEY MOVING RAPIDLY. THAT IS WHY YOU ARE SEEING THESE INCREDIBLE ROTATIONS UNDER THE SURFACE, AND IT IS NOW HAPPENING AT THAT SUBSECTOR, EVEN SUBINDUSTRY LEVEL. I THINK THAT KIND OF BACKDROP IN THIS ENVIRONMENT OF SHORT-TERM ISM WITH NARRATIVES THAT CAN CHANGE REALLY QUICKLY, OR YOU GET AN EARNINGS REPORT LIKE WE DID LAST NIGHT, AND IT IS JUST RAPID-FIRE MOVEMENT OF MONEY. [01:41:46] Speaker 5: WHEN IT COMES TO THE FUNDAMENTALS, AND I KNOW LOTS OF LEVERAGE HAS BEEN BUILT UP AROUND THE FUNDAMENTALS, BUT LET'S FOCUS ON THE FUNDAMENTALS. WE ARE ASKING THE QUESTION, LOOK AT THE SPENDERS, THEY ARE UNDER PRESSURE, META, MICROSOFT, THE STOCKS ARE IN BEAR MARKETS, WHEN DO THEY PULL BACK ON THE CAPEX? AND THE TAKE AWAY, THE REACTION WE HAVE HAD THIS MORNING, ULTIMATELY, THIS RUNWAY FOR THIS SPENDING IS LONGER THAN YOU THINK IT IS. THESE THEMES CAN CARRY ON. THERE IS A LOT OF OXYGEN STILL LEFT UP HERE. DO YOU SEE IT QUITE THE SAME WAY? [01:42:13] Speaker 24: I DO. I THINK THE RUNWAY IS LONG FOR SPENDING BASED ON THE DEMAND SIDE OF THE EQUATION. I THINK WHAT WE ARE STARTING TO FACE NOW, THOUGH, ARE CONSTRAINTS AS IT RELATES TO INPUTS AND COSTS. AND AT THE CORPORATE LEVEL, THE SORT OF UTILIZERS OF A.I. AND THE SPENDERS ON A.I. FROM AN ENTERPRISE STANDPOINT, YOU ARE NOW FINDING THAT THERE IS STARTING TO BE A LITTLE BIT OF A PUSHBACK BECAUSE COSTS HAVE GONE UP SO MUCH. IN FACT, YOU GUYS KNOW RICK WORSTER, OUR CEO, AND I HAD AN INTERESTING EMAIL EXCHANGE LAST WEEK, TALKING ABOUT IN SOME CASES NOW THERE IS THE REASSESSMENT OF THE COST OF HUMAN CAPITAL, MAYBE IN RELATIVE TERMS LOOKING SOMEWHAT INEXPENSIVE. SO I THINK THAT IS THE STAGE WE ARE IN RIGHT NOW. [01:42:58] Speaker 6: LIZANNE, HOW DO YOU VIEW THE HYPERSCALERS THAT ARE BEING BEATEN UP AS THEY ARE THE SPENDERS ON ALL OF THIS CAPEX THAT SEEMS TO BE JUST EVER GROWING? [01:43:07] Speaker 24: THEY ARE THE DULL NEW OBJECTS. IF YOU LOOK AT A COHORT LIKE THE MAGNIFICANT SEVEN, THOSE STOCKS FROM A PRICE PERFORMANCE STANDPOINT, THE BEST PERFORMER WHICH IS ALPHABET ISN'T EVEN IN THE TOP 200 OF S&P 500 PERFORMANCE. WHEN YOU TALK ABOUT CONTRIBUTION TO RETURN, BECAUSE YOU HAVE THE MULTIPLIER OF THEIR EXTREMELY LARGE CAP SIZE, YOU DON'T EVEN HAVE ANY OF THE SEVEN IN THE TOP 10 IN TERMS OF CONTRIBUTION TO RETURN. I THINK THERE IS FINALLY AN AWAKENING TO THIS SHIFT IN FOCUS AWAY FROM THOSE EARLY PLAYERS OF THE AI TRADE. IT IS STILL EMBEDDED IN A LOT OF THE CONCENTRATION THAT EXISTS IN PORTFOLIOS, BUT YOU ARE STARTING TO SEE INCREASED PRESSURE BECAUSE OF THAT DESIRE TO ROTATE INTO MORE ATTRACTIVE AREAS. [01:43:55] Speaker 6: MORE ATTRACTIVE AREAS IN WHETHER IT IS THE MEMORY CHIPS OR OTHER AREAS THAT ARE SUPPLY CONSTRAINED THAT ARE RELATED TO THE TECH TRADE, BUT IT IS BEYOND THAT ALSO TO THE CONCEPT OF THE EFFICIENCIES THAT ARE BUILT FROM AI AND OTHERS. I'M JUST WONDERING HOW MUCH THE BROADENING OUT TRADE HINGES ON THE FED REMAINING ON HOLD, ON INFLATION, GOING BACK DOWN, ON THE ACCELERATION THAT WE EXPECT LATER TODAY TO BE THE PEAK OF WHERE WE ARE IN TERMS OF PRICE INCREASES. [01:44:22] Speaker 24: SO I THINK THE MARKET HAS EMBEDDED IN ITS EXPECTATIONS NOW THAT THE FED IS AT BEST ON HOLD AND OBVIOUSLY THE MARKET PRICING IN HIKES AND YOU DO SEE SOME ROTATION TO TAKE ADVANTAGE OF WHERE THERE IS SORT OF MORE OR LESS CORRELATION TO THE RATE CYCLE. IT IS ALSO THE CASE THOUGH THAT THIS BROADENING OUT IS NOT JUST WITHIN THE AI SPACE, IT IS MORE BROADLY WITHIN THE MARKET. PART OF THE REASON WHY THE RUSSELL 2000 IS SO HANDILY OUTPERFORMING THE S&P IS BECAUSE IT HAS EXPOSURE IN AREAS LIKE HEALTH CARE AND BIOTECH. I THINK THAT IS AN INTERESTING STORY THAT IS BEING LESS TOLD RIGHT NOW. OVER THE LAST YEAR, IT IS SINGLE DIGIT PERCENTAGE OF S&P STOCKS THAT HAVE OUTPERFORMED THE INDEX ITSELF. OVER THE PAST MONTHS, 60% OF S&P STOCKS HAVE OUTPERFORMED THE INDEX ITSELF. YOU HAVE HAD THESE DOWN DAYS WHERE YOU HAVE HAD POSITIVE BREATH. I THINK THAT IS AN INTERESTING STORY THAT IS GETTING TOLD UNDER THE SURFACE OF THESE CAP [01:45:20] Speaker ?: WEIGHTED INDEXES. [01:45:20] Speaker 24: LISA: [01:45:21] Speaker 7: WHAT KIND OF STOCK MARKET COULD WE SEE IF WE GET THE THREE HIKES THAT BANK OF AMERICA JUST TOLD US THEY ARE EXPECTING [01:45:30] Speaker 24: TWO BEFORE THE MIDTERM ELECTION IN NOVEMBER? I THINK THE MARKET WOULD PROBABLY HAVE TO GO THROUGH A DIGESTION PHASE IF IT IS THREE HIKES. I THINK THERE IS SORT OF THIS HOPE THAT THE INFLATION FIGHTING CREDIBILITY THAT KEVIN WASHINGTON, THE FED, THE FED, THAT THAT MAY BE ENOUGH TO RESTRAIN THINGS. IF YOU SEE SOME VOLATILITY IN THE MARKET YOU CAN SEE FINANCIAL CONDITIONS TIGHTEN IN A WAY THAT MAYBE TAKES A LITTLE BIT OF THAT PRESSURE OFF THE FED. IF YOU SEE SOME VOLATILITY IN THE MARKET, THE BOTTOM LINE IS THEY ARE STILL DATA DEPENDENT. SO WITH EVERY DATA POINT THAT WE GET IN, MORE SO ON THE INFLATION SIDE OF THE DUAL MANDATE, MAYBE A LITTLE BIT LESS ON THE LABOR MARKET SIDE, UNLESS YOU GET AN EXTREME MOVE IN THE LABOR MARKET EITHER TOWARD THE POSITIVE OR TOWARD THE NEGATIVE, I THINK THOSE EXPECTATIONS AROUND FED POLICY ARE GOING TO CONTINUE TO JUMP AROUND. [01:46:20] Speaker 5: JUST TO WRAP THINGS UP, ON THE DISCONNECT BETWEEN CRUDE AND WHAT HAS HAPPENED WITH RATES, WHAT HAS YOUR REACTION BEEN TO THAT? [01:46:27] Speaker 24: I THINK THERE MAY BE SOMETHING TO THE NOTION THAT EVEN THOUGH THE MOVE SIGNIFICANTLY HIGHER IN OIL PRICES DID NOT CAUSE A MAJOR STRAIN ON THE ECONOMY, I THINK THERE IS VALIDITY TO THE IDEA THAT MAYBE LOWER OIL, LOWER GAS PRICES IN AN ENVIRONMENT WHERE CONSUMERS STILL OBVIOUSLY WANT TO SPEND, THAT THAT COULD PROVIDE A LITTLE BIT OF BOOST TO THE ECONOMY, WHICH COULD IN TURN EXACERBATE THE INFLATION PROBLEM, NOT TO MENTION THE FACT THAT THERE ARE INFLATION FEEDERS THAT ARE NOT JUST OIL. AI IS AN INFLATION STORY. MONEY SUPPLY IS AN INFLATION STORY. I THINK THAT IS WHAT IS GETTING BUILT INTO EXPECTATIONS [01:47:02] Speaker 5: HERE. THANKS FOR JOINING US. [01:47:13] Speaker 6: HOW MUCH HAS THE MARKET BAKED IN THE EXPECTATION OF TRUE RATE HIKES ON THE HEELS OF WHAT A LOT OF PEOPLE ARE EXPECTING IS INCREDIBLY HOT. [01:47:22] Speaker 5: LET'S GET YOU AN UPDATE ON STORIES THIS MORNING. SOME BREAKING NEWS CROSSING JUST MOMENTS AGO. [01:47:29] Speaker 9: THANKS FOR HAVING THEM. THE CO-CEOES OF THE COMMERCIAL AND INVESTMENT BANK WILL BECOME CO-PRESIDENTS OF THE COMPANY EFFECTIVE IMMEDIATELY. THE COMPANY IS TALKING ABOUT THE COMPANY EFFECTIVE. [01:48:01] Speaker 10: THE COMPANY WILL BE GOUGING, I HOPE THEY ARE NOT, OTHERWISE [01:48:03] Speaker 9: INCREDIBLY, BUT WE ARE NOT GOING TO PLAY GAMES. THE PRESIDENT ORDERING THE DOJ TO INVESTIGATE THE COMPANY SAYING GAS SHOULD BE $2.25 A GALLON, NOT $4, WHICH IS CURRENTLY THE NATIONAL AVERAGE. ARIES'S PRIVATE CREDIT FUND CAPTING REDEMPTIONS AT 5% AGAIN. THE FUND SAW REQUEST TO WITHDRAW MORE THAN 14% OF SHARES OUTSTANDING AS OF APRIL 30. [01:48:28] Speaker 5: THE ANNOUNCEMENT FOLLOWS SIMILAR MOVES IN THE PRIVATE CREDIT MARKET. I THINK WE ARE SEEING A BIG DEVELOPMENT IN THE C-SUITE AND THE FUTURE LEADERSHIP OF THIS COMPANY. [01:48:38] Speaker 6: IT SEEMS TO HAVE BEEN SOME SORT OF RACE AND PEOPLE WANTED TO TRY OUT FOR THE JOB IN REAL TIME. NOW WE HAVE A WHITTLING DOWN AND IT SEEMS LIKE THERE ARE TWO PEOPLE LEFT, DOUG PETNO AND TROY WHO BOTH ARE BEING ELEVATED TO BE CO-PRESIDENTS OF JP MORGAN. THIS IS WHAT THE RACE IS. THE RACE IS LOOKING FOR MORE THAN 25 YEARS. [01:49:10] Speaker 5: WILL RETIRE ACCORDING TO THE STATEMENT? A REALLY KEY QUESTION IN THE SUCCESSION RACE AT THE U.S.'s BIGGEST BANK. [01:49:13] Speaker 6: ARE WE DOWN TO TWO? WE HAVE PLAYED THIS GAME QUITE A FEW TIMES. IT FEELS LIKE WE ARE DOWN TO TWO. THEY ARE DOWN TO TWO. [01:49:30] Speaker 5: THEY ARE NOT GOING TO GET COMPLACENT. WE WILL COME BACK TO THAT STORY LATER THIS MORNING. THANKS FOR JOINING US. WE ARE LIVE FROM NEW YORK CITY THIS MORNING. [01:49:45] Speaker ?: WE ARE LIVE FROM NEW YORK CITY THIS MORNING. [01:49:55] Speaker 21: WE ARE LIVE FROM NEW YORK CITY THIS MORNING. THE CHOKEPOINTS SORT OF EXIST THROUGHOUT THE SUPPLY CHAIN RIGHT NOW. MEMORY IS OBVIOUSLY THE BIGGEST ONE. ANTHROPIC TOLD YOU THAT VERY LOUDLY A FEW WEEKS AGO. THEY HAD THE OPPORTUNITY TO CHOOSE STRATEGIC PARTNERS. THEY COULD HAVE PICKED ANYONE THEY WANTED. THEY CHOSE THREE. ANYONE WHO IS SURPRISED BY WHAT IS HAPPENING WITH MICRON TODAY AND WHAT HAS BEEN HAPPENING WITH HIGH BANDWITH MEMORY DIDN'T PAY ATTENTION TO WHAT ANTHROPIC TOLD THEM. [01:50:29] Speaker 5: THERE ARE MANY PEOPLE SURPRISED. EVIDENCE BY THE MOVE IN MICRON THIS MORNING. CLEARLY MANY PEOPLE WEREN'T PAYING ATTENTION. THAT WAS HEATH TERRY OF CITY, MYSELF INCLUDED. EQUITY FUTURES THIS MORNING ON THE S&P 500 UP BY 0.1%. WE'VE BEEN TRYING TO PAY ATTENTION. WE'VE BEEN TRYING TO DEMOCRATS TO DEMOCRATS. WE'VE BEEN TRYING TO DEMOCRATS. J.P. MORGAN, A SHAKE-UP IN THE C-Suite, TWO CO-PRESIDENTS, STOCK IS UP BY 0.5%. THIS WILL GET PEOPLE TALKING ON [01:51:02] Speaker 6: WALL STREET ABOUT GETTING CLOSER TO THAT MOMENT FOR JAMIE DIAMOND TO DEPART. DOES HE DEPART AS CHAIR AND CEO, DOES IT MATTER? EITHER WAY, DOUG PETNO AND TROY ROEBAUT SQUARELY IN THE HOT SEAT IN A COMPETITION FOR WHO IS GOING TO BE THE NEXT DEMOCRATS. THE RACE IS DOWN TO TWO. [01:51:19] Speaker 5: IF THE RACE IS DOWN TO TWO, THEY ARE GETTING CLOSER TO SOME SORT OF SUCCESSION. JONATHAN: SAW THIS WITH SWARTS, SAW THIS WITH SOLOMON AT THE TIME. [01:51:30] Speaker 6: YOU HAVE TO PICK ONE AND THE OTHER LEAVES TYPICALLY BECAUSE YOU ARE GOING TO BE THE CEO OR GO TO GREEN PASTURES. THE FACT THAT WE SAW ONE OF THE INDIVIDUALS WHO WAS NAMED AS A POTENTIAL SUCCESSOR, MARIANNE LAKE, DROP OUT, GIVES THAT SUGGESTION THAT NOW IT IS BEING WHITTLED DOWN. [01:51:45] Speaker 5: IT DOES GET AWKWARD. THIS CAN ONLY LAST SO LONG. THE NUMBER ONE IS MICRON, MICRON HAVING A MASSIVE SESSION SO FAR. GOING INTO THE OPENING BELL. THAT STOCK IS UP SO FAR THIS MORNING BY 17%. LET'S GET YOU SOME MORNING CALLS WITH ONE STOCK IN FOCUS. MICRON, FIRST UP, MELIUS DOUBLING ITS PRICE TARGET TO A STREET HIGH 2200 AFTER THE COMPANY SHATTERED EARNINGS EXPECTATIONS. THE SECOND CALL FROM JP MORGAN NEARLY TRIPLING ITS PRICE TARGET SAYING THE COMPANY'S MULTI-YEAR CUSTOMER DEALS MARK A FUNDAMENTAL TRANSFORMATION. THE THIRD AND FINAL CALL FROM BED, MORE THAN DOUBLING ITS PRICE TARGET SAYING THE CUSTOMER AGREEMENTS PROVIDE VISIBILITY TO MULTIPLE EXPANSION. THEY WEREN'T PAYING ATTENTION, EITHER? [01:52:26] Speaker 6: HONESTLY, IT SEEMS LIKE PAYING ATTENTION ISN'T GOOD ENOUGH. YOU NEED TO BE ABLE TO PRICE OUT AN EXPONENTIAL TYPE OF PROGRESSION AND EVERYONE KNOWS THAT'S VERY DIFFICULT TO DO. [01:52:36] Speaker 5: JUST A FANTASTIC MOVE ON THAT NAME SO FAR THIS MORNING. LET'S TURN BACK TO THE FED BECAUSE IN 12 MINUTES TIME WE'LL BE TALKING ABOUT INFLATION. CHAIR KEVIN WASH MAKING CHANGES AT THE CENTRAL BANK, LIMITED FORWARD GUIDANCE, CREATING TASK FORCES AND PUTTING EVEN MORE WEIGHT ON SIGNALS FROM FINANCIAL MARKETS. THE FORMER NEW YORK FED PRESIDENT BIDEN DUDLEY WANG IN WRITING THIS, A FRESH LOOK IS APPROPRIATE, BUT THIS NEEDS TO BE DONE WITH GREATER CARE THAN WASH HAS SHOWN TO DATE. BILL JOINS US NOW FOR MORE. WELCOME TO THE SHOW. IT'S NICE TO REFLECT ON THESE KIND OF THINGS WITH YOU. THANKS FOR BEING WITH US. WHAT ARE YOU REFLECTING ON RIGHT NOW? [01:53:07] Speaker 25: WHAT ARE YOU CONCERNED ABOUT AS THIS COMES TOGETHER? WHAT I'M CONCERNED ABOUT IS THAT I'M PERFECTLY FINE WITH GETTING RID OF FORD GUIDANCE, BUT WHAT I'M CONCERNED ABOUT IS WORCH IS NOT DISCLOSING WHAT IS MONETARY POLICY REACTION FUNCTIONS. IN OTHER WORDS, HOW WOULD THE FED ADJUST POLICY AS THE ECONOMIC ENVIRONMENT CHANGES? I THINK THAT'S A BIG MISTAKE. THE IDEA THAT YOU CAN RELY ON FINANCIAL MARKETS TO TELL YOU WHAT YOU SHOULD DO IN TERMS OF MONETARY POLICY, THAT WON'T WORK BECAUSE MARKETS PRICE TO WHAT THEY THINK THE FED WILL DO. SO IF THE FED IS LOOKING AT THE MARKETS AND THE MARKETS ARE LOOKING AT THE FED, HOW IS POLICY ACTUALLY SET? IT'S REALLY IMPORTANT IN THE UNITED STATES THAT MARKETS UNDERSTAND HOW THE FED IS GOING TO REACT BECAUSE MONETARY POLICY WORKS MAINLY THROUGH FINANCIAL CONDITIONS, THE EFFECTS OF SHORT-TERM RATES ON BONDS, STOCKS, CREDIT SPREADS, THE DOLLAR. SO IF THE MARKETS DON'T UNDERSTAND WHAT THE FED IS DOING, THOSE MARKETS AREN'T GOING TO BE PRICED APPROPRIATELY RELATIVE TO WHAT THE FED IS ACTUALLY GOING TO DO, AND THAT'S GOING TO SLOW DOWN THE TRANSMISSION OF MONETARY POLICY TO THE REAL ECONOMY, BUT IT'S ALSO GOING TO MAKE IT LESS EFFICIENT. SO IT SEEMS TO ME LIKE YOU'VE GOT TO PROVIDE MORE GUIDANCE ABOUT HOW YOU'RE ACTUALLY GOING TO REACT IF THINGS EVOLVE DIFFERENTLY [01:54:12] Speaker 5: THAN YOU ANTICIPATE. TO YOUR POINT, I THINK YOU'RE PICKING UP ON ATTENTION WE ALL WITNESSED IN THE NEWS CONFERENCE. HE SEEMED TO FIND DIFFICULT TO SEPARATE FORWARD GUIDANCE FROM COMMUNICATING, ARTICULATING A REACTION FUNCTION. WHERE DO YOU THINK THAT CAME FROM? WHY IS THAT DIFFICULT? DO YOU THINK IT'S [01:54:27] Speaker 25: STRAIGHTFORWARD? I THINK IT'S STRAIGHTFORWARD. I THINK FORWARD GUIDANCE IS REALLY BASICALLY SAYING, HERE'S WHAT WE EXPECT TO DO NEXT. THE MONETARY POLICY REACTION FUNCTION ISN'T ABOUT WHAT WE'RE GOING TO DO NEXT. IT'S ABOUT HOW WE WOULD REACT TO DIFFERENT SORTS OF INCOMING INFORMATION. SO I THINK HE NEEDS TO DISTINGUISH BETWEEN THOSE TWO THINGS. RIGHT NOW, I DON'T REALLY UNDERSTAND HOW HE EXPECTS TO SET MONETARY POLICY. THE JOB OF MONETARY POLICY IS THE FED'S JOB, NOT THE MARKET'S JOB. THE FED NEEDS TO DO HIS JOB. [01:54:55] Speaker 6: PART OF HIS ARGUMENT, PERHAPS JUST BEING GENEROUS, MIGHT BE THAT THERE ARE TASK FORCES FOR THAT. ESSENTIALLY THEY HAVE TO UNDERSTAND WHAT DATA THEY'RE LOOKING AT BEFORE THEY UNDERSTAND EXACTLY HOW THEY SHOULD REACT. DO YOU BUY THAT ARGUMENT? [01:55:06] Speaker 25: OBVIOUSLY IT MAKES SENSE TO TAKE A FRESH LOOK AT WHAT DATA IS AVAILABLE. BUT AT THE END OF THE DAY, THESE TASK FORCES HAVE A FINITE LIFE. THE FED HAS BASICALLY GOT TO CONDUCT MONITOR POLICY, NOT JUST OVER THE NEXT SIX MONTHS, BUT OVER THE NEXT NUMBER OF YEARS. SO I THINK THE RELIANCE ON TASK FORCES, MAYBE BUYS HIM SOME TIME TO THINK ABOUT WHAT HE REALLY WANTS TO DO. BUT AT THE END OF THE DAY, THESE TASK FORCES ARE NOT A REPLACEMENT FOR THE FED COMMUNICATING ABOUT HOW IT'S GOING TO ACT AS ECONOMIC CONDITIONS CHANGE. [01:55:33] Speaker 6: RIGHT NOW, BILL, WHEN YOU TAKE A LOOK AT THE INFLATION RATE, WHEN YOU TAKE A LOOK AT THE OIL INPUT, BUT ALSO THE BROADENING AS WE'RE SEEING IT IN PCE, WHICH WE'RE GOING TO GET IN ABOUT NINE MINUTES' TIME, DO YOU THINK IT IS APPROPRIATE FOR THEM TO HIKE AT LEAST ONCE, IF NOT TWICE OR THREE TIMES THIS YEAR? [01:55:49] Speaker 25: WELL, I THINK THAT THE CASE FOR MONETARY POLICY BECOMING A BIT TIGHTER IS PRETTY COMPELLING TO ME FOR TWO REASONS. NUMBER ONE, WE'VE BEEN AT THIS LEVEL OF RATES OR HIGHER FOR THREE YEARS AND THE ECONOMY IS STILL AT 4.3% UNEMPLOYANT RATE. SO WHAT'S THE EVIDENCE THAT MONETARY POLICY IS RESTRICTIVE? AND SECOND, FINANCIAL CONDITIONS ARE REALLY ACCOMMODATIVE. THE BOARD HAS A MODEL OF FINANCIAL CONDITIONS. AND RIGHT NOW IT SHOWS THE IMPULSE TO GROWTH OVER THE NEXT YEAR IS OVER 1% POSITIVE ON GDP GROWTH. THAT'S THE HIGHEST SINCE LATE 2001, EARLY 2022. SO I THINK THAT EASY FINANCIAL CONDITIONS, NO EVIDENCE THAT MONETARY POLICY IS RESTRICTIVE, A TIME THAT YOU MISSED YOUR TARGET FOR MORE THAN FIVE YEARS, DOES CREATE A STRONG ARGUMENT FOR TIGHTENING MONETARY POLICY. I'M ALIGNED WITH ALBERTO MUSLIM, LORI LOGAN. BUT WHAT I THINK DOESN'T REALLY MATTER IS REALLY WHAT KEVIN WARSCH IS ULTIMATELY GOING TO DO. ONE THING THAT'S GOING TO HELP A LITTLE BIT IN GIVING HIM A LITTLE BIT MORE TIME IS THIS IS PROBABLY THE LAST BAD HEADLINE INFLATION REPORT WE'RE GOING TO HAVE FOR A WHILE. BECAUSE WITH THE DECLINE IN OIL PRICES, WHEN WE GET THE INFLATION DATA FOR JUNE, HEADLINE INFLATION AT BOTH THE CPI AND PCE LEVEL IS GOING TO DECLINE QUITE SIGNIFICANTLY. [01:57:01] Speaker 7: BUT WHAT ABOUT THE HOUSING MARKET? ISN'T IT STILL FAIR TO SAY WHAT WE HAVE IS HIGHLY RESTRICTIVE FOR HOUSING? [01:57:07] Speaker 25: I THINK HOUSING IS NOT DOING WELL FOR A COUPLE OF REASONS. THE MAIN REASON, THOUGH, IS LACK OF DEMAND BECAUSE WE DON'T HAVE ANY LABOR FORCE GROWTH. SO IF YOU DON'T HAVE LABOR FORCE GROWTH, YOU DON'T HAVE HOUSEHOLD FORMATION. IF YOU DON'T HAVE HOUSEHOLD FORMATION, YOU DON'T HAVE A LOT OF DEMAND FOR HOUSES. THERE'S ALSO AN AFFORDABILITY ISSUE IN TERMS OF WHAT LEVEL OF INCOME YOU HAVE TO ACHIEVE TO BE ABLE TO BUY A HOUSE. BUT I DON'T THINK -- YOU LOOK AT MORTGAGE RATES, ARE MORTGAGE RATES PARTICULARLY HIGH? THEY'RE HIGH RELATIVE TO THE LAST 15 YEARS OR SO. BUT IF YOU GO BACK PRIOR TO THE GREAT FINANCIAL CRISIS, MORTGAGE RATES IN THE 6.5% RANGE, NO ONE WOULD VIEW THAT AS PARTICULARLY HIGH. [01:57:43] Speaker 7: IT IS HIGH IF YOU'RE SITTING ON A 3% RATE AND YOU REFUSE TO MOVE, BECAUSE THEN IT DOESN'T OFFER UP A LOT MORE HOUSING FOR EVERYONE ELSE. [01:57:51] Speaker 25: WELL, THERE'S A LOCK-IN EFFECTS. PEOPLE ARE DECIDING NOT TO MOVE BECAUSE THEY DON'T WANT TO LOSE THE ADVANTAGE OF THOSE VERY LOW MORTGAGE RATES. BUT IF THEY MOVE, THEY'RE DEMANDING ANOTHER HOUSE. I'M NOT SURE THAT WILL HAVE A BIG EFFECT ON HOUSING AFFORDABILITY. THE BIG QUESTION FOR HOUSING AFFORDABILITY IS WHAT CAN YOU DO ABOUT ZONING, LAND USE TO BASICALLY ALLOW MORE HOMES TO ACTUALLY BE PRODUCED. INCREASING THE SUPPLY OF HOUSING WOULD THEN WEIGH ON HOUSING PRICES, AND THAT WOULD MAKE HOUSING MORE AFFORDABLE. I DON'T THINK IT'S A BIG [01:58:23] Speaker 5: INTEREST RATE PROBLEM, FRANKLY. A FEW QUESTIONS ON THIS INSTITUTION. YOU'VE WORKED AT IT A LONG TIME FROM YOUR POSITION AT THE NEW YORK FED GOING DOWN TO WASHINGTON ON SO MANY OCCASIONS. HOW EASY IS IT TO CHANGE THIS [01:58:36] Speaker 25: INSTITUTION? THERE'S A LOT OF INERTIA IN THE SENSE THAT YOU HAVE STAFF THAT ARE GOING TO BE THERE A LOT LONGER THAN KEVIN WASH IS GOING TO BE THERE, FOR EXAMPLE. THE STAFF HAS A LOT OF PRIDE IN THEIR WORK AND DESERVEDLY SO BECAUSE THEY HAVE A TREMENDOUS AMOUNT OF EXPERTISE. YOU CAN DEFINITELY MOVE THINGS IF YOU HAVE A BETTER MOUSETRAP. WHEN I WENT DOWN TO THE NEW YORK FED AFTER THE SECOND DAY WHEN I WAS PRESIDENT OF THE NEW YORK FED, I BASICALLY SAID MY MANTRA IS BEST IDEA WINS. THE BEST IDEA THAT PEOPLE COME UP WITH SHOULD ACTUALLY DOMINATE REGARDLESS OF WHERE IT COMES FROM. AND I THINK THE BOARD STAFF, THE STAFFS OF THE FEDERAL RESERVE BANKS REALLY SUSCRIBED TO THAT. SO IF KEVIN WASH AND THE TASK FORCES COME UP WITH BETTER IDEAS, I THINK THOSE BEST IDEAS WILL ACTUALLY WIN. [01:59:19] Speaker 5: IT ALWAYS IS. THANK YOU, SIR. FORMER NEW YORK FED PRESIDENT BILL DUDLEY ON THIS FEDERAL RESERVE, GOING TO THIS INFLATION PRINT IN ABOUT FIVE MINUTES TIME. AS BILL POINTED OUT, THIS COULD BE THE WORST ONE. THEN WE MOVE ON TO BETTER PRINTS IN A MONTHS AHEAD GIVEN THIS MOVE IN ENERGY. [01:59:31] Speaker 6: BETTER IS A RELATIVE TERM, THOUGH, ESPECIALLY WHEN WE ARE TALKING ABOUT THE HIGHEST INFLATION GOING BACK TO APRIL OF 2023. AND WOULD THAT BE ENOUGH? I'M THINKING ABOUT BILL DUDLEY BEING SYMPATHETIC WITH THE LORI LOGANS OF THE WORLD SAYING -- AND THE BATH HAMMICKS OF THE WORLD SAYING HE WOULD BE IN FAVOR OF TIGHTENING POLICY. DOES IT MATTER WHAT KEVIN WASH THINKS IF A NUMBER OF THE COMMITTEE MEMBERS ARE IN FAVOR OF, SAY, RAISING RATES AS SOON AS JULY, LIKE BANK OF AMERICA THINKS? [01:59:55] Speaker 5: I'M HOPING TO BE TALKING ABOUT THRES AND NOT FOURS. [01:59:57] Speaker 6: THRES ARE STILL A PROBLEM. THIS IS THE POINT. WE HAVEN'T SEEN IT COME DOWN AND IT IS ACCELERATING IN A [02:00:03] Speaker 5: NUMBER OF DIFFERENT PLACES. WE ARE LOOKING FOR A FOUR HANDLE IN JUST A MOMENT ON PCE YEAR-OVER-YEAR. THAT BREAK IN INFLATION DATA JUST AROUND THE CORNER. STEPHANIE ROTH OF WOLF RESEARCH JOINS US TO BREAK IT DOWN. [02:00:16] Speaker ?: THAT DATA A FEW MINUTES AWAY. [02:00:27] Speaker 5: EQUITY FUTURES ON THE S&P 500 POSITIVE BY 0.6. ON THE NASDAQ, SOME REAL OUTPERFORMANCE. THE NASDAQ 100 UP BY TWO PERCENTAGE POINTS. IN THE BOND MARKET, WE WON'T BE TALKING ABOUT MICRON. WE WILL BE TALKING ABOUT PCE IN JUST A MOMENT. YIELDS UP BY SINGLE BASIS POINT. THE TWO YEAR AROUND 415. UP A BASIS POINT OF 2 ON TENS TO 4.41. WITH THE ECONOMIC DATA, LET'S CROSS OVER TO ENDER KAREN FOR MORE. ENDER, THAT DATA, BACK TO CROSS ANY MOMENT NOW. [02:01:10] Speaker 26: YEP, SO WE'RE SEEING A FALL IN PERSONAL SPENDING. BUT ON THE CORE PCE INDEX ON MONTH, UP 0.3%. JOHN, THAT'S IN LINE. AND THE HEADLINE BASIS ON MONTH, UP 0.4. JUST A TOUCH BELOW EXPECTATIONS. SO, LOOKING ON THE MONTHLY NUMBERS FOR PCE, EITHER COMING IN LINE OR A TOUCH BELOW. PERHAPS HINTING AT, NOT AS BAD A STORY AS SOME CONCERNED. BUT NONETHELESS, THESE NUMBERS DO CONFIRM THAT PCE, WHICH IS THE FED'S PREFERRED INFLATION GAGE, REMAINS WELL ABOVE WHERE THEY WANT TO BE, WELL ABOVE THEIR TARGETED. WE KNOW SOME OF THIS STORY IS DOWN TO AIRLINE FAIRS, TO PORTFOLIO FEES, IT'S IMPORT COSTS AND HEALTH CARE COSTS HAVE BEEN PART OF IT. WE'LL HAVE TO BREAK DOWN THE DETAIL AS WE GO. BUT THESE NUMBERS, AS I SAY TO YOU, MORE OR LESS IN LINE, BUT CERTAINLY NOT WHERE THE FED WOULD WANT THEM TO BE. IT LEANS INTO THIS NEW HAWKISH NARRATIVE THAT WE HAVE. [02:01:55] Speaker 5: EXPECTATIONS MATTER, SMALL DOWNSIDE SURPRISE ON THE HEADLINE. OPENING THE DOOR TO THIS MOVE AT THE FRONT END OF THE YIELD CURVE, YIELDS WERE PUSHING JUST A LITTLE BIT HIGHER BY BASIS POINT. NOW THEY'RE DROPPING BY TWO BASIS POINTS AT THE FRONT END OF THE CURVE. CHECK IT OUT, TUES DOWN BY TWO TO THREE BASIS POINTS AT THE MOMENT. BACK DOWN TO 412. IN THE LAST FEW DAYS, WE WERE LOOKING AT 420. SO THAT'S A REAL REPRICING AT THE FRONT END OF THE CURVE, YIELDS DOWN. THAT UNLOCKS THIS MOVE AT THE EQUITY MARKET LEVEL. EQUITY FEATURES PUSHING HIGH ONCE AGAIN, UP 0.8% NOW ON THE S&P 500, UP BY 2.4 ON THE NASDAQ 100. AN EARLY MOVE, AS WE OFTEN SAY IN THIS PROGRAM, NOT ALWAYS THE RIGHT ONE, BUT THIS IS THE EARLY MOVE OFF THE BACK OF THIS SMALL DOWNSIDE SURPRISE ON PCE. [02:02:32] Speaker 6: PEOPLE WERE WORRIED THAT IT COULD SHOW SIGNS OF ACCELERATION. WE REALLY HAVE TO DIG INTO THE DETAILS TO UNDERSTAND WHERE SOME OF THE INFLATIONARY INPUTS ARE. JUST TO GIVE THE EXACT NUMBERS, 3.4% CORE PCE ON A YEAR-OVER-YEAR BASIS. THAT WOULD BE THE HIGHEST SINCE NOVEMBER OF 2023. THE HEADLINE PCE PRICE INDEX COMING IN AT 4.1%. THAT'S THE HIGHEST GOING BACK TO APRIL OF 2023. AGAIN, IT MATTERS THE COMPONENTS. HOW MUCH OF THIS IS GOING TO FADE, AND CAN THAT GIVE YOU TRUE RELIEF THAT THE FED CAN LOOK PAST THIS, EVEN THOUGH WE STILL ARE WAY ABOVE THAT 2% TARGET? AND THE FOUR IS BAD. [02:03:05] Speaker 5: THREE IS NOT GREAT. BUT IS THIS AS BAD AS IT GETS LOOKING OUT THROUGH THE SUMMER NOW, GIVEN THE DEVELOPMENTS WE'RE SEEING IN ENERGY? [02:03:11] Speaker 26: WELL, THAT IS THE BIG QUESTION, JOHN. SO, YOU KNOW, TO YOUR POINT, THESE NUMBERS ARE FOR MAY. IT'S AHEAD OF THE IRAN DEAL. WHATEVER ONE'S VIEWS ON THAT ARE. IF THAT ENERGY STORY HOLDS AND PLAYS OUT, WE'RE OBVIOUSLY GOING TO SEE WILD SWINGS ON HEADLINE INFLATION. AND OBVIOUSLY THAT WILL TRICKLE THROUGH THE INFLATION STORY. BUT NONETHELESS, THESE NUMBERS WHERE WE ARE RIGHT HERE, RIGHT NOW, ARE PROBABLY THE REASON WHY FED OFFICIALS ARE LOOKING AT PCE WITH A THREE HANDLE BY THE END OF THE YEAR. EVEN IF THE ENERGY STORY HOLDS TOGETHER, WILL IT BE ENOUGH TO GET PCE BACK BELOW THREE AND HEADING TOWARDS ITS TARGET? THAT REMAINS A BIG ASK, JOHN, BECAUSE IT'S NOT JUST ENERGY. REMEMBER, THERE'S THE AI STORY. THERE ARE POCKETS OF SERVICES AND INFLATION. AND THERE'S THE RENTAL DISINFLATION STORY, WHICH HASN'T GONE AWAY. SO, I THINK RIGHT HERE, RIGHT NOW, THE INFLATION STORY REMAINS AN OPEN BOOK LEANING TOWARDS THE HAWKISH SIDE OF THE DEBATE. ANDRE, IT'S GOOD TO SEE YOU. [02:04:01] Speaker 5: IT ALWAYS IS. THANK YOU, SIR. AND THE CURRENT OF BLOOMBERG NEWS DOWN IN WASHINGTON, D.C. GOOD TO SEE PERSONAL INCOME AND PERSONAL SPENDING COMING STRONGER THAN EXPECTED AS WELL. WE BETTER EVEN TALK ABOUT JOBLESS CLAIMS AT 8:30 ON A THURSDAY MORNING THESE DAYS BECAUSE YOU CAN GUESS WHERE JOBLESS CLAIMS ARE, 215. [02:04:19] Speaker 6: I'M NOT EVEN LOOKING. WHAT ARE WE, 215? 225, THE RIGHT KIND OF DOWNSIDE SURPRISE. YOU MUST HAVE LOOKED, BUT AT THE SAME TIME, YOU WOULD BE FORGIVEN FOR JUST ASSUMING THAT IT WAS RIGHT AROUND THERE. WE WOULD BE FORGIVEN TO BE INVESTMENT. IT'S GOING TO BE COMING IN HARDER THAN EXPECTED. 0.7% VERSUS 0.4% GIVES YOU A SENSE THAT MAYBE THERE IS HEAT UNDER THE MARKET. THERE ARE A LOT OF WAYS TO [02:04:43] Speaker 5: READ THIS. THE COMPONENTS REALLY MATTER. EQUITY FUTURES UP BY 0.8. ON THE NASDAQ WE'RE UP BY 2.3%. LET'S GET TO THE DETAILS. STEPHANIE ROTH OF WALTH RESEARCH JOINS US AROUND THE TABLE. GOOD MORNING. YOU'VE HAD A CHANCE TO [02:04:55] Speaker 27: LOOK AT THE DETAILS. HOW BAD IS THIS? I THINK THAT YOUR CORE PCE NUMBER CAME IN LIGHTER THAN I WOULD SAY EVEN THOUGH IT MET CONSENSUS. THERE WERE MANY OUT THERE THAT FEARED IT WOULD BE ROUNDING UP CLOSER TO 0.4%, WHICH WAS A LEGITIMATE RISK. SO IF YOU LOOK AT CORE PCE INFLATION, IT CAME IN AT 0.32. THERE WERE MANY THAT WERE THINKING IT WOULD COME IN ABOVE THAT 0.35, WHICH WOULD PUSH IT UP TO 0.4. SO I THINK THAT'S SOME OF THE MARKET'S REACTION. BECAUSE IT WAS, I GUESS, THE WORST-CASE SCENARIO WOULD HAVE BEEN AVOIDED. NOW, THE QUESTION, OF COURSE, IS, ON A GO-FORWARD BASIS, WHAT ARE WE GOING TO SEE IN TERMS OF THE INFLATION DATA? NOW, MUCH OF IT, MUCH OF THE IMPACT ON CORE IS NOT REALLY RELATED TO THE IRAN WAR. IT'S NOT REALLY RELATED TO ENERGY PRICES. IT'S BEEN A COMBINATION OF LINGERING TARIF EFFECTS, AI IMPORTANTLY, AND THEN, OF COURSE, YOU HAVE THE IRAN WAR. SO THE NEXT COUPLE OF MONTHS ARE YOU GOING TO SEE A NOTABLE DISINFLATION. YOU KIND OF NEED TO SEE CORE PCE RUNNING 0.2 OR BELOW FOR THE FED TO FEEL MORE COMFORTABLE IN THIS ENVIRONMENT. [02:05:52] Speaker 5: SO, STEPHANIE, THIS IS IMPORTANT BECAUSE WE'VE NOTICED THE SAME THING OF FINANCIAL MARKETS, A DISCONNECT BETWEEN THE MOVE IN CRUDE AND THE MOVE IN INTEREST RATES. WHAT YOU CAN SEE IS A MASSIVE ROUND TRIP ON CRUDE, WIPING OUT ALL THE WARTIME GAINS, AND YIELDS AT THE FRONT END OF THE CURVE ARE STILL HIGHER BY 70 BASIS POINTS, RELATIVE TO WHERE THEY WERE AT THE END OF FEBRUARY BEFORE THIS WAR STARTED. THERE IS A BELIEF THIS FED STILL HIKES, EVEN IF THIS INFLATION DATA IMPROVES FROM THE FOURS DOWN TO THE THREES. DO YOU SEE IT THE SAME WAY? [02:06:15] Speaker 27: YEAH, I THINK WE'RE IN AN ENVIRONMENT WHERE THERE'S NOT THAT MUCH TIME FOR THE FED TO BE ABLE TO FEEL COMFORTABLE ABOUT THE INFLATION PATH. AND CHAIR WORSH LAST WEEK KIND OF SET THE STAGE FOR, YOU KNOW, WE'LL SEE WHAT HAPPENS IN SIX WEEKS. IS THE DATA GOING TO BE BETTER ENOUGH IN SIX WEEKS FOR THEM TO FEEL BETTER? AND AGAIN, MAYBE IN SEPTEMBER. SO, OUR BASE CASE IS THAT THE FED WILL ULTIMATELY STAY ON HOLD AND IT WILL BE THE MARKETS DOING THE WORK. BUT THE PATH HAS GOTTEN A LOT NOWER FOR THAT. YOU REALLY NEED TO SEE ALL OF THE INFLATION PRINTS, YOU KNOW, SURPRISE TO THE DOWNSIDE FROM HERE. YOU NEED TO SEE A BIT OF A RISING UNEMPLOYMENT RATE, AS YOU OFTEN DO IN THE SUMMER. BUT IF EVERY SINGLE DATA POINT DOESN'T FALL IN LINE, THEN THE FED IS GOING TO GO. [02:06:52] Speaker 6: IS THIS A SIGN THAT THE FED IS ACTUALLY EASY ON THE MONETARY POLICY? THAT NOT ONLY IS THE RATE NOT RESTRICTIVE, BUT IT ACTUALLY IS ACCOMMODATIVE IN THE FACE OF THE BUILDOUT OF A.I. OR DO YOU THINK THAT THIS IS EXOGENOUS FACTORS THAT ARE CREEPING IN OR THAT ARE JUST ONE, TWO PUNCHES, WHETHER IT'S THE TARIFFS OR WHETHER IT'S THE OIL PRICES OR WHETHER IT'S SOME OF THE A.I. INPUTS? [02:07:12] Speaker 27: IF THE FED HIKES ONE OR TWO TIMES, EVEN THREE TIMES, THAT'S NOT GOING TO IMPACT THE A.I. TRADE. A.I. IS STILL GOING TO BE AN IMPORTANT FORCE FOR THE ECONOMY. SO IT'S A LOT OF -- I GUESS TO YOUR POINT, IT'S SOMEWHAT EXOGENOUS FACTORS THAT DON'T REALLY RELY ON THE LEVEL OF INTEREST RATE SO PRECISELY. IT DOESN'T REALLY MATTER BECAUSE THE ROI ON THIS INVESTMENT IS SO MUCH HIGHER THAN THE CURRENT LEVEL OF INTEREST RATE THAT IT DOESN'T REALLY MATTER. THESE PROJECTS ARE GOING TO GET DONE, THE INVESTMENT IS GOING TO HAPPEN AND GROWTH IS GOING TO BE QUITE SOLID. AND THEN, OF COURSE, YOU WERE TALKING EARLIER ON THE SHOW, HOUSING IS STILL AN ISSUE, BUT IT'S A RELATIVELY SMALL PART OF THE ECONOMY AND EVERYTHING ELSE IS RUNNING RELATIVELY FIRM. [02:07:48] Speaker 6: SO, CAN WE MAKE ANY CONCLUSIONS ABOUT THE FED'S POLICY RATE AND ITS INFLUENCE OVER THE INFLATION? RIGHT NOW, ARE THESE TWO DIVERSE FROM EACH OTHER? ARE THEY SPEAKING TO ANOTHER ERA THAT HAS BECOME OBSOLETE, KIND OF IN SUPPORT OF THESE TASK FORCES THAT ARE GOING TO REASSESS EXACTLY WHAT THE ROLE IS OF THIS INSTITUTION? [02:08:05] Speaker 27: YEAH, INTEREST RATES STILL MATTER. SO, TO THE EXTENT THAT IT MATTERS FOR FINANCIAL CONDITIONS, IF THEY END UP FALLING THROUGH WITH THE COUPLE OF RATES HIKES THAT ARE PRICED IN, LET'S SAY THEY EVEN DO TWO, THAT WOULD AT LEAST MATCH WHAT MARKET IS PRICING AND THAT COULD KEEP FINANCIAL CONDITIONS STABLE. THEY DON'T REALLY WANT TO BE EASING FINANCIAL CONDITIONS IN THIS ENVIRONMENT. SO, SURPRISING IN A DOUBISH WAY AT THIS POINT COULD JUST FUEL SOME ADDITIONAL INFLATIONARY PRESSURE SPECIFICALLY COMING FROM RISK ASSETS. BUT THAT SAID, RATES ARE NOT THAT RESTRICTIVE FOR MOST OF THE ECONOMY. BUT SOME OF IT JUST HAS TO KIND OF RUN ITS COURSE. AI STUFF IS SORT OF A SHORT-TERM TREND THAT IS VERY IMPORTANT AND EVENTUALLY WILL BE DISINFLATIONARY. AT THE MOMENT, IT IS INFLATIONARY. [02:08:45] Speaker 7: HOW WEAK WOULD THE LABOR MARKET HAVE TO BE FOR THE FED EITHER TO STAY ON HOLD OR CONSIDER MAYBE EVEN BRINGING UP A CUT? [02:08:51] Speaker 27: SO, IN ORDER FOR THEM TO STAY ON HOLD, I THINK YOU NEED TO SEE, YOU KNOW, 4-4 OVER THE SUMMER, MAYBE 4-5 ON THE UNEMPLOYMENT RATE. FOR THEM TO BE CONSIDERING A CUT, I THINK IT NEEDS TO BE NOTABLY HIGHER THAN THAT AND THEN SEEING SIGNS OF DISINFLATIONARY. CORE PCE RUNNING, YOU KNOW, IN THE BELOW POINT, NOTABLY BELOW POINT 2 PERCENT AND THE UNEMPLOYMENT RATE REALLY STARTING TO HEAD SIGNIFICANTLY HIGHER AND PAYROLLS SURPRISE TO THE DOWNSIDE. NOW, THIS IS THE WHOLE BIG STORY TO GET TO A PLACE WHERE THEY'RE CUTTING. IT'S A REALLY DIFFICULT STORY TO TELL HOW THEY ACTUALLY GET TO THOSE CUTS. I THINK IT WOULD BE AN ENVIRONMENT WHERE THE LABOR MARKET SURPRISES IN A MEANINGFUL WAY. AND IT'S KIND OF HARD TO SEE THAT MOMENTUM DETERIORATE SO QUICKLY. [02:09:32] Speaker 5: BILL DUDLEY WAS WITH US 15 MINUTES AGO. BILL REACTED THE SAME WAY MANY PEOPLE DID TO THE NEWS CONFERENCE. WHY DID THE NEW FED CHAIR FIND IT DIFFICULT TO DRAW A DISTINCTION BETWEEN OFFERING FORWARD GUIDANCE AND ARTICULATING THE REACTION FUNCTION OF THE COMMITTEE? [02:09:48] Speaker 27: I THINK HE DIDN'T WANT TO MAKE ANY PROMISES. HE ALSO DIDN'T WANT TO COMMIT TO HIKES, ESPECIALLY AT THE FIRST MEETING. BUT IT WAS INTERESTING THAT TRUMP DURING THAT MEETING MADE THE COMMENT ABOUT, YOU KNOW, WHATEVER THAT THEY'RE DOING, WHATEVER THEY ARE DOING IN THIS MEETING AND, YOU KNOW, MAYBE IT WILL HIKES RATES. IT DOESN'T REALLY MATTER. SO IT WAS INTERESTING TO SEE THAT HE BACKED OFF BECAUSE THAT WAS A BIG ARGUMENT MANY PEOPLE WERE MAKING FOR WORSH COMING IN AND BEING A MORE DOVISH CHAIR. [02:10:14] Speaker 7: BUT HE DIDN'T BACK OFF YESTERDAY. THE PRESIDENT LITERALLY SAID LOW INTEREST RATES WILL SOLVE EVERYTHING. GET THE INTEREST RATES DOWN. [02:10:21] Speaker 27: BUT AT LEAST HE DIDN'T ATTACK WORSH IN THAT MOMENT. OF COURSE HE'S STILL ALWAYS GOING TO BE A LOW INTEREST RATE GUY. BUT THE FACT THAT IN THE FIRST MEETING HE DIDN'T START THE PATH OF GOING AFTER WORSH IS NOTABLE BECAUSE THAT AT LEAST SEPARATES THE TWO. HE'S ALWAYS GOING TO WANT LOW INTEREST RATES AND, YOU KNOW, EVENTUALLY MAYBE THEY CAN GET THERE. BUT THIS IS NOT THE ENVIRONMENT FOR THAT. [02:10:40] Speaker 5: WE SAW THE SAME THING FROM THE TREASURY SECRETARY. THAT'S FOR SURE EARLIER THIS WEEK AT THE ECONOMIC CLUB IN NEW YORK EVENT HERE IN NEW YORK CITY. STEPHANIE, IT'S GOOD TO SEE YOU. THANKS FOR BEING HERE. THE PREFERRED READ ON INFLATION FOR THE FEDERAL RESERVE AT LEAST FOR NOW BECAUSE THAT MIGHT CHANGE LATER IN THE SUMMER. PCE COMING IN AT THE STRONGEST LEVEL GOING BACK TO 2023. SPRING OF 23. APRIL TO BE PRECISE. [02:11:02] Speaker 6: SO RIGHT NOW I'M LOOKING AT SOME OF THE COMPONENTS UNDER PCE AND WHAT ACTUALLY WAS THE ACCELERATION SERVICES CAME IN PRETTY HOT, CONTRIBUTING A SIGNIFICANT PORTION OF THAT. ALSO NON-DURABLE GOODS. SO WHEN YOU TAKE A LOOK AT THIS, IT DOESN'T LOOK LIKE THIS IS AS MUCH DIRECTLY RELATED TO OIL PRICES AS OTHER FACTORS. THIS IS SORT OF THE SPREADING OUT, THE BROADENING OUT IN SERVICES-SIDE INFLATION THAT HAS THE LIKES OF AUSTIN GOOLSBY CONCERNED. AND YOU SEE THAT IN A LOT OF THIS DATA. [02:11:31] Speaker 5: SPEAKING OF HIGH PRICES, THIS IS FROM APPLE. THE TEAM JUST BREAKING THE NUMBERS FOR US. IT COMES FROM APPLE. RAISING PRICES ON MAC, IPAD, ACROSS THE BOARD. YOU'RE SEEING THESE PRICES TO COUNTER THE COST OF MEMORY AND THE MEMORY SHORTAGE. THIS IS THE MICRON STORY IN MANY WAYS AS WELL. THIS STOCK IS DOWN BY 4/10 OF 1%. BUT THAT'S THE REALITY FROM THE AI SPEND THAT WE'RE SEEING, THAT THEME, THE EXPENSE WE'RE SEEING, AND THE PASS THROUGH TO THE END CONSUMER. [02:11:56] Speaker 6: IF YOU BOUGHT MACBOOK AIR A COUPLE OF DAYS AGO, THEN CONGRATULATIONS. LIKE LISA. YOU AVOIDED A $200 INCREASE FOR THAT MACBOOK AIR BECAUSE THAT PRICE IS INCREASING TO $1299 FROM $1,099. MACBOOK NEO SIMILAR. LOOK, THIS AGAIN GOES TO THE WAY THAT THE AI TRADE IS LEADING TO INFLATION. AS DEFANY WAS JUST SAYING, IT IS LEADING TO REAL NEAR-TERM INFLATION THAT YOU'RE SEEING SHOW UP IN CONSUMER GOODS. THE BIG QUESTION HERE IS, DO YOU GET DEMAND DESTRUCTION FROM THIS? OR DO YOU ULTIMATELY JUST GET PEOPLE SAYING, REALLY, AGAIN, AND THEN FLUNKING DOWN THEIR PLASTIC? [02:12:28] Speaker 5: LOOK AT THE COMMENTARY FROM THE COMPANY. RAPID EXPANSION OF AI DATA CENTERS CREATED A MEMORY SURGE. WE'VE NEVER SEEN A COMPONENT PRICE INCREASE THIS MUCH THIS [02:12:38] Speaker 6: QUICKLY. IT IS SORT OF AN EXAMPLE OF HOW QUICKLY THEY WERE ABLE TO RAISE PRICES IN 85% MARGINS. HOW MUCH ARE WE GOING TO SEE THIS NOT JUST IN APPLE, BUT ALSO IN CARS, ALSO IN ANY OTHER COMPONENT THAT YOU END UP BUYING, ANY OTHER CONSUMER ELECTRONIC THAT REQUIRES MEMORY. [02:12:54] Speaker 7: TIM COOK DID WARN US IN AN INTERVIEW RECENTLY IN THE WALL STREET JOURNAL. HE SAID IT IS UNAVOIDABLE WHEN IT COMES TO RAISING THE PRICES OF IPHONES. NOW IT IS THE WHOLE SUITE OF APPLE PRODUCTS. I HEAR THIS AND HEAR WHAT THEY ARE SAYING IN TERMS OF THIS IS BECAUSE OF THE AI BUILDOUT. THIS IS ANOTHER REASON WHY THE AMERICAN VOTER IN NOVEMBER IS GOING TO HATE THESE AI COMPANIES AND WANT THEM ADDRESSED. THEY WANT DATA CENTERS IN THEIR BACKYARD. THEY WANT THEIR ELECTRICITY PRICES GOING UP. AND NO ONE WANTS TO SPEND MORE ON THEIR IPHONE. [02:13:21] Speaker 5: HOW MUCH LONGER CAN THIS GO ON? THERE IS SOME RUNWAY HERE. WE'VE BEEN TOLD THAT REPEATEDLY AND APPLE IS TELLING YOU SOMETHING SIMILAR THIS MORNING. [02:13:28] Speaker 6: WE ARE NOT AT A POINT WHERE WE ARE SAYING THIS IS GOING TO END ANY TIME SOON. THE COMPANY WAS SAYING THAT THEY SHIELDED THEIR CONSUMERS FOR MONTHS NOW WITH ABSORBING THE PRICE INCREASES. THEY CAN'T. AND THEY SAID ULTIMATELY THESE CONSTRAINTS ARE GOING TO LAST FOR A LONG TIME. WE'VE HEARD THE SAME THING FROM MICRON. AND GUESS WHAT? WE'VE HEARD THE SAME THING FROM MICRON. WE'VE HEARD THE SAME THING. [02:13:51] Speaker 5: THIS IS WHY YOU COULD GET HOARDING. THIS IS WHY PEOPLE MIGHT SAY THAT'S NOT GREAT. BUT IF YOU GET IN NOW IT'S GOING TO RAISE ANOTHER $200. WHO IS HOARDING? YOU NAILED THAT TRADE. WE'LL GIVE YOU THAT ONE. WE'LL GIVE YOU THAT ONE. WE'LL GIVE YOU THAT ONE. EQUITY FUTURES UP BY 0.8%. PCE ON ONE READ AT LEAST. A SMALL DOWNSIDE SURPRISE RELATIVE TO EXPECTATIONS. THAT UNLOCKS THIS MOVE AT THE FRONT END OF THE YIELD CURVE. DOWN BY FIVE BASIS POINTS ON TWO. A BREAK OF 4.1% SO FAR THIS MORNING. THE OPENING BELL ABOUT 47 MINUTES AWAY FOR EQUITIES. [02:14:21] Speaker 9: LET'S GET YOU AN UPDATE ON STORIES WORLDWIDE THIS MORNING. WITH YOUR BLOOMBERG BRIEF, BONNIE QUINN HAS MORE. LAST WEEK, THE FED'S PREFERRED INFLATION GAGE MEETING ESTIMATES JUMPING 0.3% FOR THE MONTH OF MAY. JOBLESS CLAIMS COMING IN AT 215,000 LAST WEEK, BELOW THE ESTIMATED 225,000. AND PERSONAL SPENDING FOR THE MONTH EXCEEDING ESTIMATES, RISING 0.3% VERSUS THE EXPECTED 0.2%. A CHANGE AT THE TOP OF JP MORGAN. THE BANK ANNOUNCING TROY ROARBAW AND DOUG PETNO, THE CO-CEOES OF THE COMMERCIAL AND INVESTMENT BANK, WILL BECOME INVESTMENT. MARIANNE LAKE, CURRENTLY CEO OF CONSUMER AND COMMUNITY BANK, [02:15:04] Speaker ?: IS RETIRING THE MOVE, FUELING SPECULATION ABOUT WHO WILL [02:15:05] Speaker 9: EVENTUALLY REPLACE CEO JAMIE DIMON. FORD NAMED THE TOP MAINSTREAM BRAND FOR NEW VEHICLE QUALITY BY J.D. POWER FOR THE FIRST TIME SINCE 2010. [02:15:14] Speaker 28: HEARING THE MOVE FOR THE FIRST TIME SINCE 2000. THE COMPANY'S SUCCESSS. THAT HUMAN MOTIVATION TO PAY ATTENTION TO EVERYONE, EVERYTHING, IS AMAZING. LOOK, WE MAKE 85% OF OUR VEHICLES IN THE U.S., MATT. THESE VEHICLES IN SOUTH KOREA OR JAPAN. WE ARE NOT BUILDING THESE VEHICLES IN SOUTH KOREA OR JAPAN. THESE ARE AMERICAN WORKERS BEATING TOYOTA AND HUNDAI AND [02:15:44] Speaker 9: WE BEAT THEM ALL. [02:15:55] Speaker 5: YOU CAN HEAR ABOUT THE FULL INTERVIEW WITH JIM FARLEY AT 9:00 A.M. EASTERN. THAT IS YOUR BLOOMBERG REEF. UP NEXT ON THE PROGRAM, WE WILL SET YOU UP FOR THE DAY AHEAD PLUS WE WILL CATCH UP WITH DARIUS DALE OF 42 MACRO ON HOW THE FED COULD POSE A HEADWIND FOR MARKETS. [02:16:06] Speaker ?: RIGHT NOW, NO SUCH HEADWIND. EQUITIES BOUNCE IN UP BY 0.8%. THANK YOU. [02:16:26] Speaker 27: IT IS CERTAINLY BETTER TO SEE THAT YOUR CORE PCE NUMBER CAME IN LIGHTER THAN I WOULD SAY, EVEN THOUGH IT MET CONSENSUS. THERE WERE MANY OUT THERE THAT FEARED IT WOULD BE ROUNDING UP CLOSER TO 0.4%, WHICH WAS A LEGITIMATE RISK. THE QUESTION, OF COURSE, IS ON A GO-FORWARD BASIS, WHAT ARE WE [02:16:42] Speaker 5: GOING TO SEE IN TERMS OF THE INFLATION DATA? THAT WAS STEPHANIE ROTH OF WOLF RESEARCH, 4.1%, A NUMBER WE HAVEN'T SEEN GOING BACK SOME THREE YEARS, APRIL 2023. A SMALL DOWNSIDE SURPRISE, IF YOU LOOK AT SOMETHING VERY, VERY SPECIFIC LIKE THE HEADLINE NUMBER MONTH OVER MONTH, WHICH WAS .4 AND THE ESTIMATE WAS .5. THAT UNLOCKED THIS MOVE IN THE EQUITY MARKET UP BY 0.9% ON THE S&P, ON THE NASDAQ UP BY 2.4. ADDING SOME MORE WEIGHT TO A RALLY THAT WAS REALLY TRIGGERED BY A MASSIVE MOVE FROM MICRON IN THE PRE-MARKET. WE'LL SPEND SOME TIME ON THAT NAME IN JUST A MOMENT. IN THE BOND MARKET THEN, TWO-YEAR YIELDS ARE LOWER, OFF THE BACK OF THAT MOVE ON INFLATION DOWN BY FOUR BASIS POINTS. IF YOU LOOK AT THE PARTICULAR REPORT, IF YOU LOOK AT THE [02:17:36] Speaker 6: PARTICULAR REPORT, YOU WILL HAVE TO PAY UP FOR YOUR FAVORITE ELECTRONIC DEVICE. WHAT IS NEXT? IF YOU TAKE A LOOK AT THE DETAILS OF THIS PARTICULAR REPORT, IT IS COMING LARGELY FROM INTERNATIONAL AIRFARES. THANK YOU, WORLD CUP AND ALL OF THOSE FANS COMING HERE IN FINANCIAL MARKETS. GOING FORWARD, HOW MUCH IS COMING FROM PERSONAL ELECTRONICS AS WELL AS THE SERVICES SECTOR THAT HAVE TO DEPLOY MORE CASH IN ORDER TO BUY SOME OF THOSE PERSONAL ELECTRONICS TO FUEL THE BUSINESSES. A LOT OF QUESTIONS. [02:18:04] Speaker 5: WE'LL SPEND SOME TIME ON THEM IN JUST A MOMENT. LET'S GET SOME SINGLE NAMES. [02:18:11] Speaker 13: WE START WITH THE STOCK OF THE MOMENT. MICRON SHARES ARE ADDING TO GAINS UP 18.3% IN THE PRE-MARKET AFTER IT ISSUED A BLOCKBUSTER OUTLOOK AND SAID THAT MARGINS JUMPED NEARLY 85% LAST QUARTER. THE CEO SAYING THAT HE EXPECTS THE MEMORY SHORTAGE TO CONTINUE BEYOND 2027. FOR THAT REASON, AS YOU SAID, WE ARE NOW SEEING APPLE HIKING PRICES ON PRODUCTS LIKE ITS MACBOOK AND THIS CONFIRMS THE BOTTLENECK THAT WE ARE SEEING. FOR THAT REASON, WE ARE SEEING THE ENTIRE MEMORY TRADE UP THIS MORNING WITH SANDUSK UP 16% IN THE PRE-MARKET. THE BROADER CHIP ECOSYSTEM IS ALSO UP BECAUSE OF QUALCOMM. SHARES ARE UP 10.4% IN THE PRE-MARKET AFTER IT SAID THAT IT EXPECTS $15 BILLION IN ANNUAL AI DATA CENTER REVENUE BY 2029. IT IS A SHIFT FROM A COMPANY THAT MADE ITS NAME SUPPLYING CHIPS FOR SMARTPHONES BUT NOW IT IS GOING ALL IN ON THE AI INFRASTRUCTURE BOOM AND EVEN SAID THAT META WILL START USING ITS NEWEST DATA CENTER PROCESSORS. WE END ON A FUN ONE. IT IS DAY TWO OF WENDY'S ME MANIA. SHARES ARE UP NEARLY 12% IN THE PRE-MARKET AFTER THEY SAW THEIR BEST DAY IN FIVE YEARS YESTERDAY WITH A 26% POP. IT ALL STARTED WITH A WALL STREET BETS POST TO SAVE THE COMPANY THAT TRIGGERED WHAT WE ARE PROBABLY SEEING AS A SHORT SQUEEZE OF THE SHARES UP AGAINST TODAY. JONATHAN: [02:19:44] Speaker 5: THANK YOU FOR THE UPDATE. THE BALL IS GETTING SO MUCH GOOD NEWS. THINK ABOUT IT. MICRON, FANTASTIC NUMBERS AFTER THE CLOSE YESTERDAY. SURGING IN THE PRE-MARKET ENERGY ROLLING GO FOR THE BANKS. THE BANKS. THE BANKS AND THE BANKS AND THEN JUST A SMALL, SMALL, DECENT SURPRISE ON INFLATION. TINY, TINY DOWNSIDE SURPRISE ON PCE. SOMETHING TO WORRY ABOUT. DARIUS DAD AT 42 MACRO SAYS THE FED MAY ELECT TO TIGHTEN NOW SO IT CAN EASE EVEN MORE LATER. EVEN IF THERE WILL EVENTUALLY BE DATA CENTERS IN SPACE. DARIUS JOINS US NOW FOR MORE. DARIUS, GOOD TO SEE YOU, BUDDY. [02:20:27] Speaker ?: GREAT TO SEE YOU, GUYS. [02:20:27] Speaker 5: SHOULD I BE WORRIED ABOUT THE OUTLOOK FOR THIS FEDERAL RESERVE? [02:20:30] Speaker 29: I'M NOT WORRIED. I THINK THEY'RE -- I SAID THIS WITH TOM EARLIER -- I THINK THEY'RE GOING TO PLAY ACTION PASS SO THEY CAN SET UP THE RUN. THEY HAVE TO SPOOK THE MARKETS AND REGAIN SOME OF THAT CREDIBILITY ON INFLATION FIGHTING JUST SO THAT THEY CAN CREATE MORE SCOPE TO EASE MONETARY POLICY IN THE ENSUING YEAR. [02:20:44] Speaker 5: LET ME JUST JUMP IN. IS IT A COMMUNICATION EXERCISE? CAN YOU ACHIEVE THAT THROUGH COMMUNICATION ALONE OR DO YOU NEED TO ACTUALLY HIKE INTEREST RATES? [02:20:50] Speaker 29: I THINK INTEREST RATES ARE THE WRONG TOOL. I THINK IT'S A BALANCE SHEET EXERCISE IN OUR OPINION BECAUSE WE THINK THEY NEED TO TARGET THE SPECULATIVE EXCESSES AT THE TOP PART OF THE K-SHAPED U.S. ECONOMY. SO RIGHT NOW THE FED HAS GOT TO TAKE RESERVE MANAGED PURCHASES TO ZERO AND THREATEN THE MARKET THAT THEY MAY REINSTATE BALANCE SHEET RUNOFF IN ORDER TO TAKE SOME OF THE PRESSURE OUT OF FINANCIAL MARKETS THAT IS LEADING COMPANIES LIKE APPLE TO RAISE THEIR PRICES. [02:21:11] Speaker 5: IS THAT WHAT YOU ARE EXPECTED TO SEE THIS SUMMER? [02:21:13] Speaker 29: OR IS THAT TOO SOON? IN OUR OPINION, BASED ON OUR OUTLOOK FOR WHAT THE LIKELY NET RESULT OF THE FIVE TASK FORCES IS LIKELY TO BE, WE THINK IT WILL BE A DOVISH NET RESULT. NOT ALL DOVISH, BUT A DOVISH NET RESULT. SO IN ORDER FOR THEM TO CREATE SCOPE FOR THAT, CREATE A RUNWAY FOR THAT, THEY ARE GOING TO HAVE TO TAKE SOME STEAM OFF THE BOIL FROM AN INFLATION FIGHTING PERSPECTIVE IN THE [02:21:33] Speaker 6: COMING MONTHS. HOW EXACTLY WOULD THAT BE EFFECTUATED WITH THE BALANCE SHEET AND WHERE IN THE RISK ASSET MARKET WOULD YOU ACTUALLY SEE THE RAMIFICATIONS OF THAT? [02:21:40] Speaker 29: I THINK IF THE S&P 500 IS DOWN 10% TO 15% AND THE FED SAYS OKAY, ENOUGH IS ENOUGH, YOU TAKE THE STEAM OFF THE BOIL. I MEAN, RIGHT NOW WE ARE ANNUALIZING ON PCE, CORE PCE INFLATION 3.5%, SUPERCORE NORTH OF 4%. NOW, THESE ARE SOME PRETTY UNCOMFORTABLE NUMBERS. AND SO ULTIMATELY WE KNOW WE'RE AT PINK INFLATION, THOSE NUMBERS ARE GOING TO COME DOWN. BUT THE RATE OF CHANGE OF THAT DECELERATION COULD BE AN ISSUE FOR THE MARKET IN THE CONTEXT OF WHAT WE JUST SAW WITH APPLE. FUN FACT, I WROTE MY SENIOR THESIS AT YALE ABOUT HOW A MARKET-BASED ECONOMY CAN'T HAVE A SINGLE-PAYER HEALTHCARE SYSTEM BECAUSE IT WOULD DRAIN RESOURCES FROM THE OTHER SECTORS OF THE ECONOMY AND PUSH UP INFLATION. THAT'S EXACTLY WHAT'S HAPPENING RIGHT NOW WITH AI AND APPLE. [02:22:18] Speaker 6: SO RIGHT NOW THAT'S PART OF THE REASON WHY YOU'RE SEEING INFLATION WHERE IT IS. AND YOU'RE SAYING THAT IN ORDER TO LOWER THAT INFLATION, YOU NEED TO SEE SOME SORT OF SIGNIFICANT DRAW DOWN IN EQUITY MARKETS. HOW ARE YOU POSITIONING AHEAD OF THAT? OR HOW ARE YOU RECOMMENDING POSITIONING AHEAD OF THAT? [02:22:33] Speaker 29: WELL, THE FIRST STEP OF THE TRADE, AND WE THINK IT'S ALREADY ON, IS THE SOURCE OF FUNDS TRADE WHERE THE INVESTORS ARE USING, YOU KNOW, THESE SORT OF AI PROVIDERS, PARTICULARLY THE HYPERSCALERS, TO CAPITALIZE THE AI ADOPTERS AND THE BUSINESSES IN THE ECONOMY THAT HAVE BEEN LEFT BEHIND, NOT JUST IN THIS PARTICULAR MARKET CYCLE, BUT FOR, YOU KNOW, 10-15 YEARS. IN OUR OPINION, WE THINK THAT TRADE IS DURABLE. WE TALKED ABOUT IT LAST TIME WE WERE ON THE SHOW. WE THINK THAT TRADE IS DURABLE. IT HAS MULTI-YEAR LEGS. BUT IF THE MARKET IS DOWN, YOU KNOW, 10-15% IN S&P TERMS THIS SUMMER OR THIS FALL, NOTHING IS GOING TO WORK. I MEAN, WHAT DO YOU HIDE OUT? VOLATILITY. [02:23:03] Speaker 5: DARRIS, IT'S GOOD TO SEE YOU. THANK YOU, BUDDY. DARRIS DALE, 42 MACRO. JUST ANOTHER DIMENSION, ANOTHER WAY OF THINKING ABOUT THIS FEDERAL RESERVE. AND THERE'S A RANGE OF VIEWS RIGHT NOW BECAUSE A LOT OF PEOPLE ARE FILLING IN THE BLANKS BECAUSE THERE WAS SO MANY IN THE NEWS CONFERENCE JUST LAST WEEK. [02:23:18] Speaker 6: YEAH, WE'RE ALL MOONLEIGHTING AS TASK FORCE MEMBERS BECAUSE ULTIMATELY WE WANT TO KNOW THE ANSWERS. THAT SAID, IS THIS A FEATURE OR A BUG, THE LACK OF UNDERSTANDING OF THE RESPONSE MECHANISM FOR THE FEDERAL RESERVE? AND ULTIMATELY YOU'VE GOT PEOPLE LINING UP ON BOTH SIDES. [02:23:32] Speaker 7: BUT, I THINK YOU ASKED THE RIGHT QUESTION. CAN YOU SET DETERRENTS ALONE JUST WITH COMMUNICATION OR DO THEY ACTUALLY NEED TO DELIVER ON THAT HIKE TO ACTUALLY SHOW THEY REALLY DO CARE ABOUT GETTING INFLATION CLOSER TO TARGET? [02:23:42] Speaker 5: THERE'S A SENSE THEY MIGHT HAVE TO DELIVER. FOR NOW, THIS EQUITY MARKET IS ENJOYING WHAT IT'S GOT. WE'RE UP BY 0.1% ON THE S&P 500. YIELDS ARE DECLINING INFLATION, A SMALL, VERY SMALL DOWNSIDE SURPRISE. COMING UP TOMORROW, ALEX HALTMAN OF BARCLAYS, EDDIE FISHMAN OF CFR, RUSS BROWNBACK OF BLACKROCK, CAMERON DAWSON OF NEW EDGE WEALTH, BRAMO, ANNE-MARIE, LONG WEEKEND? LONG WEEKEND, IS THAT WHAT'S HAPPENING? LONG WEEKEND, RIO AGAIN? NO, I'M NOT GOING TO RIO, I'M GOING TO ASPEN. ASPEN FOR THE WEEKEND, DARLING. [02:24:18] Speaker 24: MAYBE I WILL TOO. YOU'RE WELCOME TO JOIN.