-Betsy Duke, Former Federal Reserve Governor
-Pierre Ferragu, New Street Research Head of Global Technology Infrastructure
-Henrietta Treyz, Director of Economic Policy Research, Veda Partners
Betsy Duke, Former Federal Reserve Governor, provides reaction to Fed to Chair Powell. Pierre Ferragu of New Street Research previews Nvidia earnings scheduled for Wednesday. Henrietta Treyz of Veda Partners discusses the 2024 presidential candidates hitting the campaign trail again after the conventions.
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This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amrie Hordern. Join us each day for insight from the best in markets, economics, and geopolitics from our global headquarters in New York City. We are live on Bloomberg Television weekday mornings from six to nine am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always on the Bloomberg Terminal and the Bloomberg Business app. The former Fed Governor Bessie Duke writes in the following it would take something extraordinary to derail a twenty five basis point cut in September. The question we've all got what it would take to make if fifty Bessy joins us now for more, Betsy, wonderful to see you once again. Let's start with Friday and that speech on Friday. Lisa and I've got a similar question, and I think you might have the answer. Was the chairman speaking for the committee on Friday or speaking from South So for the.
Entire speech he was speaking for the committee except for the one line when he said, my confidence has grown that inflation is on a sustainable path. And there he said, my and that's very unusual for this, for this Cheerman. And I think what he was doing there was he was expressing his own opinion, but giving the committee room, not front running the committee, but giving the committee room in September through the sep to all put out their own estimates of both where the various indicators are going to be and their confidence in their forecasts.
Bessie, how big do you think the range will be in the Summary of Economic projections come September eighteenth? How wide is that range going to be?
The range of the projections themselves are the confidence. So the projections themselves, I don't think are going to be a terribly wide range, or not.
More than usual wide range.
But what I'm really watching for is the confidence and particularly the confidence in the inflation forecast. In the gym projections, there were just one or two participants who had more than actually normal confidence in their projections. All the rest of them said more uncertainty than usual. So that's the confidence piece that I'll be looking for.
Betsy, do you think that it's appropriate for this fedter reserve to be so disproportionately weighted to cutting rates at a time, or we're not seeing true weakness in a labor market.
Well, cutting rates is right now only reducing the amount of tightness. It's not in any way becoming stimulative, and so I think it is appropriate to begin that, but I think they'll go fairly slowly and feel their way along. The one piece that I don't think there's consensus on is what.
Is the level of neutral?
What is the neutral level of interest rates those that are neither stimulative nor restrictive, And I think they'll be feeling that went along to that point.
They also didn't really resolve the other issue, which was the theme of the whole conference, which was how much was monetary policy reponsible for bringing down inflation and how much could it be responsible for preventing some sort of downside to the labor market in general. I mean, did we get any answers to some of the bigger questions other than simply a FED show came out and said, yes, we're going to cut rates. We're going to start the process, so we could potentially cut a lot.
So actually I think he did address that question. The piece that he talked about is the importance of inflation expectations, and what I heard him say was, yes, you know, we were wrong on transitory. Once we realized we were wrong, we acted. And so what I heard from that is so the Fed might get the individual settings wrong from time to time, but its commitment to its mandate and willingness to act in furtherance of that mandate is most important for the confidence and anchoring inflation expectations. And that piece I think he declared victory on not necessarily inflation, but inflation expectations remaining anchored through this cycle of inflation.
Can we deal with inflation that contribution to actually bringing inflation down from eight down towards three. Let's see what's your impression of things, because in that speech on Friday, I think we certainly walked away with this idea that the Federal Reserve Chair was acknowledging that a lot of the work came from elsewhere.
Well, the problem this was a supply side driven inflation anyway, So a lot all of the work was on the supply side, which effect can't really effect. All the VET could do was whole demand in check as best it could while supply caught up. And that's true of the labor market as well as the goods market, and I think they did that. What I heard in this speech he recognized that the reduction inflation has come entirely from supply, including on the labor side. So when you look at labor, I don't think we have a week labor market. It's coming into balance, but it's coming into balance because of improvements and participation and increases in immigration, both of which have a.
Limit to how much they can continue to contribute.
Bessie Juke, appreciate it. Thank you, Former Fed Governor Bessie Joke. Down the latest and the reaction there to that speech begs the question further improvements on inflation from here? Does it require the pain that the Federal Reserve chairman was talking about two years ago? And Miss Pierre Fadagho of New Street Research recently raising its price target on the AI giants to one, expecting reassuring signals in the earnings results that stuck us up by about a half or one percent this morning after a decent rally on Friday. Pierre fredagu of New Street joins us now for more pre just go through sort of base case expectations for you and a team coming on Wednesday.
Yes, so on Wednesday, you know, investors got tricked up, trioked off a bit by all this noise about a black Whale family of chips and next generation chip's being delayed, and so that created some kind of like nervousness around the stock and to us, the reality is that NVDA is still in the same situation. All buyers are increasing their capex, the supply chain is increasing capacity very very steadily. So it's very reasonable to expect Nvidia to do better than what the guide did three months ago, and to guide for the next three months in the same vein like a above current expectations. So we think the numbers are going to do to do fine. And then the second thing is all investors are going to ask on the conference call about the black Well delays, what does that mean?
Doesn't mean like gross is going.
To slow down and now you here is kind of like counter intuitive. The reality is that when you launch a new chip like black Well, it's consuming more of your supply capacity.
You need more HBM chips per GPU, you need more.
Like Cobost packaging capacity per GPU, and so if the new chip is ramping slower, it's actually easying up capacity constraints, and so what we think is that management is going to explain on Wednesday that while black Bell might be delayed by six to eight or maybe twelve weeks, I hope the previous generation of Chips is actually going to continue to sell very well because we're sted in a world in which many, many, many people, many teams wants to have as many GPUs a SAP, and so if the next generation is not really yet, they'll keep buying a lot as much as they can of the previous generation.
Piah, I wanted to ask you a few questions that I don't think will be answered on the call on Wednesday, and it's what's happening further downstream. I had this conversation last week with Bloomberg's man, Deep Sing, and he built things out for us a little bit as well. I'd love your thoughts too. When you hear from their biggest customers, they are still bulled up on investing in this cycle big time, without a doubt. It just gets the sense though the investors just on around the edges might be losing patients with the story that they actually want to start to see that investment and it's a real bottom line profit growth. PA, do you identify any kinds of investor restlessness further downstream with the end use case for AI?
Yeah, I think you're spir that's becoming like the key questions that he concerned for investors, and that's the right way to look at it. So we're doing our best tracking down you know who's doing what with AI, and so far we think.
Signals are extremely positive.
Like you look at what Facebook can produce in terms of numbers of efficiency gains driven by the migration migration of their recommending recommendation engines on larger systems. When you hear like companies like Walmart telling about how much efficiency gains again form from AI, I think we're still in a phase where people are getting excited about it, and we are in that kind of like almost like contradictory situation where today if you don't invest in, whether you are like a Walmart using it or like an Amazon or a Google diploying the infrastructure, you're taking big risks because AI is very very powerful and evolving very very fast. So I think we're fairly safe in terms of the new flow coming in. But there is another reality, which is that we we are getting into twenty twenty five into a web that is going to spend like one hundred and fifty billion dollars on AI chips, and the key question is going to become again, well what's next? You know, can Nvida's business grow significantly from there?
Again? But we're not going to have any.
Visibility on that for at least, you know, the next six to nine months.
Here do we have any visibility into what the policy backdrop is going to be and how that might affect in video? And I say this as there's a front page story in the Wall Street Journal today talking about how Chinese AI developers are basically working with internet brokers to access in video chips overseas that they can work on them without violating some of them bands on important CIN video chips into mainland China. And how much do you sort of look at this and see this as something they could potentially be a liability for the company that they talk about going forward.
Yeah, I think it's it's always an overhang. You know, the government can do whatever they want. The invisible hand is still pushing pushing GPUs to watch China, and Chinese user actually still accessing their GPUs.
The government has to to.
Work on a on a thin line. You know, it's it's very very challenging. They don't want they want to keep you know, the leadership in AI in the US and for that they don't want to weakend Nvida or any any players, and they want to to make sure they don't let like I say, they don't let China, you know, catch up in terms of a capabilities. I think this balancing act is going to continue. We've seen it over the last two three years, and you have back and forth and you might have like a tightening of regulation around Nvidia, but now at the end of the day, you know, it's it's a smaller moving part. Remember, we are still in a world in which people want way more GPUs and way more chips than what is being produced. So if you have a ruling, you know, limiting again access for China to leading GPUs, China will instantly buy you know, previous generation GPUs, less powerful GPUs and then the more powerful GPUs. And maybe we had in our models that we're going to China next year, we're going to go to Western clients, and you know, I would call that a second order moving part. It might create a lot of headlines, but I don't think it's like enough to disrupt the trajectory as long as we are supply constraints nobly.
Pierre, thank you for your clarity. As always, Pierre found a good New Street Research looking ahead to numbers from a video Wednesday afternoon.
This morning, three ninety one, So.
Here's the lacest. Vice President Kamala Harris back on the campaign travel this week as her campaign rags in over half a billion dollars post DNC and Donald Trump is maintaining a heavy presence in swing states after a week of counterprogramming the convention, Henretta Trees have Vader partners saying the following post Labor Day, she she could be in the lead nationally and in critical swing states by enough of a margin to emerge as the favorite to win the election. Harris has ushered in dramatic shifts in the electoral landscape, but is not yet favored to win the election in our opinion. Henrietta joins us now for more, Henretta, thanks for being with us. So I want to start with those numbers. Harris campaign and affiliates have raised five hundred and forty billion US dollars since Biden quit. How does that stack up against Campaign Trump and how are they spending it?
Well, it doesn't compare to the Trump campaign at all. The Trump campaign is down into something in the ranger about sixty three million dollars for the entire month of July versus over two hundred and forty million dollars for the Harris campaign. The two are not equal. If you're looking at the fundraising numbers the DNC versus the RNC voter galvanization, the number of volunteers they've gotten in swing states, it's it's it's almost double the size, if not more, in the Harris camp. And I think that's something that the Trump campaign is actively worried about right now. You saw it from their internal polling memos this weekend. They're anticipating that not just has Commonala risen six points since she started the race just a few weeks ago, but she's going to increase another two to three points in the next couple of weeks, the next couple of days after the DNC. That's a natural bounce, but one that would supersed Trump and it probably won't fade. When you think about what Trump is doing on the trail, He's not going to campaign until Thursday and Friday. He'll be in Pennsylvania. I mean, every single day is critical here, particularly when you're behind, like the Trump campaign is now.
Just to go a little bit deeper into these numbers, the five hundred and forty million, I said, bid an excuse me, five hundred and forty million. One third, yes, a heck of a lot more money. One third contributed in convention first time donors since the convention were first time donors. Two thirds were women. It's the gender split here, hendrid Of. It's interesting that gender split. How firmly entrenched you think that actually is the split between women and men in this country and who they're supporting.
It is extremely firm. And I don't say that because it's just in the national data. It's in every single swing state as well, often by ten, eleven, twelve points. It's particularly noticeable amongst young male voters and every other female demographic, and it's even more pronounced between young male voters and every other age demographic of older male voters. So there is this extreme gender divide that is expanding and becoming more obvious as the race wears on.
What the Harris.
Campaign is going to do to dig into those numbers a little bit further with their super PACs like Future Forward is they're going to spend three hundred and seventy million dollars on AD campaigns between now and November fifth. So get ready to hear a lot about Kamala Harrison her campaign.
How much is this gender divide really hinged to the issue of abortion, and how much can can Trump really counter that by coming out with things like what he did over the weekend talking about how he believes that states should decide for themselves, that they shouldn't be a federal abortion law, but that each state can make their own decisions.
You know, I think that the state decision piece is really problematic because you have these state decisions being.
Made at the ballot in November.
In Florida, for example, where I think two thirds of abortions in the South are conducted, there is a band now at six weeks and they need to vote on that to maintain it in November. Whether it's Louisiana, Arizona, Nevada. I mean, these issues are on every single ballot. So the last thing you want is our repeat of twenty twenty two, which was a real problem for the Republican Party at the Senate and in the House, and that's what they're headed towards in twenty twenty four. And the messaging from the Trump campaign with JD. Vans and Donald Trump trying to come out as you know, pro IVF, but really saying some fundamentally problematic things about family planning, to put it nicely, is something that is alienating I think a lot of voters, and it's not just women, it's voters across the spectrum. Abortion is the number three issue that voters care about after inflation and immigration right now, and immigration and abortion are pretty neck and.
Neck in the meantime. Your first point, inflation is something that we've not heard that much about. We heard, of course, the price gouging type of discussion from Kamala Harris, although we've seen some of her people walk it back and talk about how she's not actually going to get it passed and that it actually isn't, you know, an effort to take money away from grocery stores and things of that nature. I'm just wondering, how much are you getting a sense that the criticism of Kamala Harris that she isn't coming out with real policy how much is that landing.
I think that it's landing amongst sort of the media groups, but amongst the general electorate. You don't see any of that translating to either her polls or fundraising. I mean, they made eighty six million dollars just last week alone. So the issue is not that she is not getting out in front of journalists and the press. That's an issue for the Trump campaign, but the American voter that's now newly galvanized. You know, Democrats are eighty three percent enthusiastic about this election versus seventy one percent of Republicans. It's not resonating with the average voter. And I think the real problem for Trump is that she doesn't need to get specific on policy. You know, we don't really need to have a robust discussion about where do you think carried interest tax rates should be, or capital gains tax rates, what kind of revenue are you trying to bring in to offset the cost of the child tax credit.
We don't need any of that.
We just need this sort of forward campaign versus do you want to go back to the Trump administration of the four years that he was in office? And that's really what the campaign is about and don't see that changing of the next seventy one days.
Can we talk about policy, forgive me, but we want to talk about policies, so hopefully we can do that. This news came out from Canada from our team just moments ago. According to people familiar with the matter, Canada would impose new tariffs on Chinese made electric vehicles, aluminum and steel, lining up behind what we've heard from the United States already previously, the government plans to announce a one hundred percent levy on electric vehicles twenty five percent on steel and aluminum. Canada agrees with the United States. It seems to be by the world is when it comes to tariffs and China. How much daylight is there between Trump and Harris on this very key issue for a lot of voters.
Well, I mean, let's be mindful that the Biden administration just a couple of weeks ago, months ago, put in the one hundred percent electric vehicles tiff, the three times higher steel on aluminum tariffs or steel tariffs. There is no question that the Trump administration started with tariffs, and the tariffs under Biden are higher and more exhaustive now than they were under Donald Trump, the USTR, the Department of Commerce, all the investment restrictions, export control restrictions.
Are only growing.
I don't see any scenario where any of these tariffs come off once they get put on. Think about what you'd have to see in order to take the tariffs up. You'd have to see China capitulate, China prove and then sustain that they had made changes on force, tech transfer, climate change, human rights, state subsidization. None of that has occurring.
Henretta, thank you, Henritta Trace their Vada partner squeezed in some policy. This is the Bloomberg Surveillance Podcast, bringing you the best in markets, economics, angiopolitics. You can watch the show live on Bloomberg TV weekday mornings from six am to nine am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always, on the Bloomberg Terminal and the Bloomberg Business app