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This is the Bloomberg Surveillance Podcast. I'm Tom Keene along with Paul Sweeney. Join us each day for insight from the best in economics, finance, investment, and international relations. You can also watch the show live on YouTube.

This is the Bloomberg Surveillance Podcast. I'm Tom Keene along with Paul Sweeney. Join us each day for insight from the best in economics, finance, investment, and international relations. You can also watch the show live on YouTube.

Visit the Bloomberg.

Visit the Bloomberg.

Podcast channel on YouTube to see the show weekday mornings from seven to ten am Eastern from our global headquarters in New York City. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen, and always I'm Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business app.

Podcast channel on YouTube to see the show weekday mornings from seven to ten am Eastern from our global headquarters in New York City. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen, and always I'm Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business app.

This is a joy.

This is a joy.

He is definitive in the world. A use of gold. James Steele joins now from HSBC. Really honored to have you in our studios. If we were to walk near our offices by the Ritz Carlton in Dubai, where Jumana Bertecci holds court, but if we go down by the canal in the old historic souks, where all of the Indian Ocean, all of Eurasia buys gold, what would be the mood in the souks of Dubai.

He is definitive in the world. A use of gold. James Steele joins now from HSBC. Really honored to have you in our studios. If we were to walk near our offices by the Ritz Carlton in Dubai, where Jumana Bertecci holds court, but if we go down by the canal in the old historic souks, where all of the Indian Ocean, all of Eurasia buys gold, what would be the mood in the souks of Dubai.

Well, first of all, thank you for having me, Tom it's a real pleasure, I think, one of restraint. And now that we've seen such a big price rises, what has resonated through the physical side of things, And that's not hedge funds, that's not asset managers, portfolio managers. That's the people on the ground, rich and poor, buying gold. There's been a pullback. Bar demand is down. Physical coin demand is down. We know that because the premiums have come in. All the major mints are reporting somewhat lower demand, with exception of the Royal Mint, which has been a function of the election. So there's a trigger day demand for and coins, which we tend to see. If it ever looks in a democracy that the center left are going to win, there tends to be an increase in gold demand. But other than that, there's been there's been a pullback.

Well, first of all, thank you for having me, Tom it's a real pleasure, I think, one of restraint. And now that we've seen such a big price rises, what has resonated through the physical side of things, And that's not hedge funds, that's not asset managers, portfolio managers. That's the people on the ground, rich and poor, buying gold. There's been a pullback. Bar demand is down. Physical coin demand is down. We know that because the premiums have come in. All the major mints are reporting somewhat lower demand, with exception of the Royal Mint, which has been a function of the election. So there's a trigger day demand for and coins, which we tend to see. If it ever looks in a democracy that the center left are going to win, there tends to be an increase in gold demand. But other than that, there's been there's been a pullback.

I got to ask the question of the day.

I got to ask the question of the day.

Is Fort Knox still like Goldfinger? Is Fort Knox still where we keep all our gold?

Is Fort Knox still like Goldfinger? Is Fort Knox still where we keep all our gold?

This is where we keep our gold in the United States, And it has, to my knowledge, about thirty thousand highly trained troops guarding it.

This is where we keep our gold in the United States, And it has, to my knowledge, about thirty thousand highly trained troops guarding it.

So it's like Goldfinger still.

So it's like Goldfinger still.

It is it is there, and and it's it's it's the country's gold.

It is it is there, and and it's it's it's the country's gold.

Like is a bar of gold set at Fort Knox for like sixty years or dare I say they've.

Like is a bar of gold set at Fort Knox for like sixty years or dare I say they've.

Been it's been there, it's been.

Been it's been there, it's been.

It's been there a long time.

It's been there a long time.

And Fort Knox is not at costco, Yes, exactly.

And Fort Knox is not at costco, Yes, exactly.

The the you know, gold goes where the money goes. And in the inter war and post war period it came to the United States out of Europe. In the seventies, it went from the Advanced countries to the Middle East with oil, and now it's going to Asia. So and this is true for the last two thousand years, gold has followed where the money goes.

The the you know, gold goes where the money goes. And in the inter war and post war period it came to the United States out of Europe. In the seventies, it went from the Advanced countries to the Middle East with oil, and now it's going to Asia. So and this is true for the last two thousand years, gold has followed where the money goes.

Okay, talk to us about China. Can you tell us just give us a sense of demand for gold in China.

Okay, talk to us about China. Can you tell us just give us a sense of demand for gold in China.

That's what I've heard.

That's what I've heard.

I don't know anything about the gold business, but they say China. What's China mean for a gold demand? Who's buying gold?

I don't know anything about the gold business, but they say China. What's China mean for a gold demand? Who's buying gold?

Well?

Well?

I think you have to break it down into two components. One is central bank demand, the demand from the People's Bank of China, which, like all central bank demand, not just theirs, is somewhat opaque and we never get timely information generally speaking.

I think you have to break it down into two components. One is central bank demand, the demand from the People's Bank of China, which, like all central bank demand, not just theirs, is somewhat opaque and we never get timely information generally speaking.

And also.

And also.

The demand outside of the People's Bank Now the demand outside of the People's Bank has been very good, but it's not necessarily because there's such devotees of gold. The property market is down, the equity markets are down, and most people in China don't quite have the same suite of investments, even at the most sophisticated end, at the professional investor end that we do, or British or American hedge funds have, et cetera, et cetera. So when both those things are down, gold is a winner by default, and that's what we've seen. I don't necessarily think it's because of a mad love affair with gold, and I suspect that when or if I suppose when, is more the question. The property market stabilizes, the equity markets they're stabilized, will get gold underfunded. Now the central bank buying is very different, and that's government buying.

The demand outside of the People's Bank Now the demand outside of the People's Bank has been very good, but it's not necessarily because there's such devotees of gold. The property market is down, the equity markets are down, and most people in China don't quite have the same suite of investments, even at the most sophisticated end, at the professional investor end that we do, or British or American hedge funds have, et cetera, et cetera. So when both those things are down, gold is a winner by default, and that's what we've seen. I don't necessarily think it's because of a mad love affair with gold, and I suspect that when or if I suppose when, is more the question. The property market stabilizes, the equity markets they're stabilized, will get gold underfunded. Now the central bank buying is very different, and that's government buying.

Now.

Now.

They reported you might as well noticed the pullback in gold a few days ago. Last week, well, they reported unchanged gold reserves for the previous month. That did not mean that they've stopped buying. It just meant that they didn't buy that month. That was misinterpreted, I think by the market, and we got a very abrupt decline of seventy seven seventy nine dollars that day, But it wasn't a policy statement. They just said our gold reserves at the end of May were the same as they were at the end of April, and they had been accumulating gold every month for the previous eighteen months.

They reported you might as well noticed the pullback in gold a few days ago. Last week, well, they reported unchanged gold reserves for the previous month. That did not mean that they've stopped buying. It just meant that they didn't buy that month. That was misinterpreted, I think by the market, and we got a very abrupt decline of seventy seven seventy nine dollars that day, But it wasn't a policy statement. They just said our gold reserves at the end of May were the same as they were at the end of April, and they had been accumulating gold every month for the previous eighteen months.

So how about silver.

So how about silver.

Do we think about silver different because that's up twenty four percent this year? Is that just rising tides? Looking all boats for silvers or special you do.

Do we think about silver different because that's up twenty four percent this year? Is that just rising tides? Looking all boats for silvers or special you do.

Tend to get a gold silver ratio that people will trade. And I remember in the old days down at the World Trade Center when I worked on the comes, when it was called that, I would see people look over at the silver booth and then back back to the gold and they would trade. That's exactly how it used to work. So the silver market's considerably less voluminous than the gold market, and so when you get a big moving gold, you generally get silver lifted. Now, the big difference between the two is that over fifty percent something like we estimate about fifty seven fifty eight percent of silver demand is not for bars or jewelry or coins the way it is for gold.

Tend to get a gold silver ratio that people will trade. And I remember in the old days down at the World Trade Center when I worked on the comes, when it was called that, I would see people look over at the silver booth and then back back to the gold and they would trade. That's exactly how it used to work. So the silver market's considerably less voluminous than the gold market, and so when you get a big moving gold, you generally get silver lifted. Now, the big difference between the two is that over fifty percent something like we estimate about fifty seven fifty eight percent of silver demand is not for bars or jewelry or coins the way it is for gold.

Industrial.

Industrial.

It's industrial exactly, and everything Now, even though we forecast rather sluggish industrial production growth this year, everything you need silverflo is growing at an above rate. So we think the silver demand industrial demand is moving at twice the rate of underlying industrial growth.

It's industrial exactly, and everything Now, even though we forecast rather sluggish industrial production growth this year, everything you need silverflo is growing at an above rate. So we think the silver demand industrial demand is moving at twice the rate of underlying industrial growth.

There is a book that is like James Steele wrote the screenplay. It is William Silber Definitive of nineteen fourteen, when we took the gold standard from Britain. He literally describes the boat coming across the ocean where McAdoo said, it's our time and we became dominant. There's a content, there's a fear out there James Steele, that someday there's going to be a boat to China where they steal the gold standard from us. They deal they steal dollars, sovereigntry from us.

There is a book that is like James Steele wrote the screenplay. It is William Silber Definitive of nineteen fourteen, when we took the gold standard from Britain. He literally describes the boat coming across the ocean where McAdoo said, it's our time and we became dominant. There's a content, there's a fear out there James Steele, that someday there's going to be a boat to China where they steal the gold standard from us. They deal they steal dollars, sovereigntry from us.

How do you respond to it, Well, I think there's enough room for everybody. The United States is an enormously large economy. But I think what you're touching on is maybe this issue of dollar d dollarization, and that's been ascribed to some of the reasons that central banks, not just China, have been buying gold. No, we don't believe that there's going to be any loss of sovereignty for the US dollar as far as the world's reserve currency goes for the next ten twenty years, as far as you can see for reasons that would take an entire program, you and I could talk about it. But that's not to say that every single central bank in the world wants as many dollars as they do have. They may want to reduce their reserves by say sixty five percent to sixty two So what do you do with that three percent? Well, there's they're very limited as to what they can buy, both in fixed income and for currencies, and there may be a reason that they wouldn't want to buy the euro or the yen, and gold provides a perfect sweet spot of getting out of the dollar without going into something else.

How do you respond to it, Well, I think there's enough room for everybody. The United States is an enormously large economy. But I think what you're touching on is maybe this issue of dollar d dollarization, and that's been ascribed to some of the reasons that central banks, not just China, have been buying gold. No, we don't believe that there's going to be any loss of sovereignty for the US dollar as far as the world's reserve currency goes for the next ten twenty years, as far as you can see for reasons that would take an entire program, you and I could talk about it. But that's not to say that every single central bank in the world wants as many dollars as they do have. They may want to reduce their reserves by say sixty five percent to sixty two So what do you do with that three percent? Well, there's they're very limited as to what they can buy, both in fixed income and for currencies, and there may be a reason that they wouldn't want to buy the euro or the yen, and gold provides a perfect sweet spot of getting out of the dollar without going into something else.

Well, this is where I wanted to go. It's like you read my script.

Well, this is where I wanted to go. It's like you read my script.

Dennis Gartman, very different from James Steele, has nailed gold up. But he's also nailed it gold up in Japanese yen. And it's shocking what Gartman predicts if Japan doesn't get their act together and you don't see strong ye and you see continued week yen. Is there a linkage between James Steele's world of gold and currency that signals a huge opportunity in Europe.

Dennis Gartman, very different from James Steele, has nailed gold up. But he's also nailed it gold up in Japanese yen. And it's shocking what Gartman predicts if Japan doesn't get their act together and you don't see strong ye and you see continued week yen. Is there a linkage between James Steele's world of gold and currency that signals a huge opportunity in Europe.

Well, I think you know much of that is the currency play as well. Yes, and exactly, And you take.

Well, I think you know much of that is the currency play as well. Yes, and exactly, And you take.

It over to Jeremiah. I mean you guys are on speaking terms, right.

It over to Jeremiah. I mean you guys are on speaking terms, right.

I haven't spoken in a while, but we have done. I think I can't remember when.

I haven't spoken in a while, but we have done. I think I can't remember when.

Talks daylight Steve Major, but Derren Myer, forget it.

Talks daylight Steve Major, but Derren Myer, forget it.

But they're they're both. They are both brilliant analysts. Say, I want to go on record as saying, but and that's what we've seen. That's one of the reasons that the physical demand for gold has weakened. If not only has gold gone up, but in Roupeat terms, for example, it's enormously expensive. So so yes, gold would be high in Japanese terms if the end we're to weaken. But but that's almost I don't want to quite say sophistry, but it's getting on.

But they're they're both. They are both brilliant analysts. Say, I want to go on record as saying, but and that's what we've seen. That's one of the reasons that the physical demand for gold has weakened. If not only has gold gone up, but in Roupeat terms, for example, it's enormously expensive. So so yes, gold would be high in Japanese terms if the end we're to weaken. But but that's almost I don't want to quite say sophistry, but it's getting on.

For we could say sophistry and survants. I don't know how to spell it.

For we could say sophistry and survants. I don't know how to spell it.

Exactly.

Exactly.

Jim gl c O the Global Commodities Monitor, that's all I know about your business, commodities business. What's the trade that people want to talk to you most about these days?

Jim gl c O the Global Commodities Monitor, that's all I know about your business, commodities business. What's the trade that people want to talk to you most about these days?

Well, trying to figure out a gold. One of the one of the interesting things is that I've just come back from Europe, and both in Europe and North America, the previous rallies have had a clear smoking gun. This one hasn't so much right, And that's what makes it so interesting because it's a couple of things. There's geopolitics going on as well. And one of the thing I just want to mention, and why it's so influential, is that you can come to me and you can say, Jim, what happens to gold? Usually when the FED cuts by fifty base points or when it increases but or when the dollar goes up this much or down this much. But Gaza is different from Ukraine, It's different from the South China Sea, its different from the Taiwan Straits, and so every geopolitical event may have a different impact on gold.

Well, trying to figure out a gold. One of the one of the interesting things is that I've just come back from Europe, and both in Europe and North America, the previous rallies have had a clear smoking gun. This one hasn't so much right, And that's what makes it so interesting because it's a couple of things. There's geopolitics going on as well. And one of the thing I just want to mention, and why it's so influential, is that you can come to me and you can say, Jim, what happens to gold? Usually when the FED cuts by fifty base points or when it increases but or when the dollar goes up this much or down this much. But Gaza is different from Ukraine, It's different from the South China Sea, its different from the Taiwan Straits, and so every geopolitical event may have a different impact on gold.

You can't muddel it.

You can't muddel it.

Forty seconds left here, I'm asking for a friend. What's the markup on gold? It a fancy store in fifty seventh Street, like Tiffany.

Forty seconds left here, I'm asking for a friend. What's the markup on gold? It a fancy store in fifty seventh Street, like Tiffany.

It's very very high. Thank you. It's good to know that.

It's very very high. Thank you. It's good to know that.

Why don't you say a double hundreds of percent plural?

Why don't you say a double hundreds of percent plural?

Well, you're paying, but you're paying for the artistry, and you're paying for the for the workmanship.

Well, you're paying, but you're paying for the artistry, and you're paying for the for the workmanship.

You're not paying for the blue book, paying.

You're not paying for the blue book, paying.

For the you're paying for that too.

For the you're paying for that too.

But I mean, and.

But I mean, and.

That's it's it's it's well worth it. It hasn't dimmed they demand at the high end. But it's one of the reasons the gold price doesn't doesn't change. And so whereas in Asia you'll see that the markup is very low and the price is changed rapidly in the shops.

That's it's it's it's well worth it. It hasn't dimmed they demand at the high end. But it's one of the reasons the gold price doesn't doesn't change. And so whereas in Asia you'll see that the markup is very low and the price is changed rapidly in the shops.

Interesting. This has been a pleasure. Please come in again.

Interesting. This has been a pleasure. Please come in again.

Thank you, Tom, Thank you for having me.

Thank you, Tom, Thank you for having me.

James Steele with a question the definitive guy on fundamental Gold around this world from the Canal of Dubai to Asia to Fort Knax. I saw a Goldfinger like a while back. What a great movie. Still, I've never.

James Steele with a question the definitive guy on fundamental Gold around this world from the Canal of Dubai to Asia to Fort Knax. I saw a Goldfinger like a while back. What a great movie. Still, I've never.

Been anybody I try to play a concert, you.

Been anybody I try to play a concert, you.

Know, I was, I was going to say, but I thought it would be a party political broadcast. Our vault is the second biggest vault in the American continent after Fort Knox.

Know, I was, I was going to say, but I thought it would be a party political broadcast. Our vault is the second biggest vault in the American continent after Fort Knox.

Wow, excuse me? Can I pray tell? Can I ask? Where is the HSBC vault?

Wow, excuse me? Can I pray tell? Can I ask? Where is the HSBC vault?

Yes, four fifty two Fifth Avenue. I could have taken you into it a couple of years.

Yes, four fifty two Fifth Avenue. I could have taken you into it a couple of years.

Ours taken notes. Thank you James always.

Ours taken notes. Thank you James always.

Great, James till thank you so much, huge, huge, huge comments for James steal As there should be Virginia Mesanu joins us now, yes, global cio equity at Alian's what we really want to hear from her about this turmoil, Virginy. What happened is Charles de Gaulle's fifth Republic? Where did the middle go that Charles de gaud built out of World War Two?

Great, James till thank you so much, huge, huge, huge comments for James steal As there should be Virginia Mesanu joins us now, yes, global cio equity at Alian's what we really want to hear from her about this turmoil, Virginy. What happened is Charles de Gaulle's fifth Republic? Where did the middle go that Charles de gaud built out of World War Two?

Well, I you know, it's it's really interesting and the results of the European elections were really shocking in a way, although not unexpected that I would say, you know, the quantum of that shift is really important. It's a bit of a uniform trend. You have Poland, Holland, France, Germany, Sweden, they've all moved towards more the far right. And of course the action that President Macrostecon calling for a snap election yesterday is is really important. Right, It's a bit but I think, yeah, he's got some good rationale for doing it, but it's going to be really interesting.

Well, I you know, it's it's really interesting and the results of the European elections were really shocking in a way, although not unexpected that I would say, you know, the quantum of that shift is really important. It's a bit of a uniform trend. You have Poland, Holland, France, Germany, Sweden, they've all moved towards more the far right. And of course the action that President Macrostecon calling for a snap election yesterday is is really important. Right, It's a bit but I think, yeah, he's got some good rationale for doing it, but it's going to be really interesting.

Visionie.

Visionie.

I think of a list of surveillance guests, including Madame Leguard, who have a transatlantic perspective. You're on that short list. Can the tensions, the political tensions of Europe carry over into America, in particularly to November of this year's election.

I think of a list of surveillance guests, including Madame Leguard, who have a transatlantic perspective. You're on that short list. Can the tensions, the political tensions of Europe carry over into America, in particularly to November of this year's election.

Well, I think they are definitely linked in the sense that if you look at President Macon, he's done quite well on the economic front, the defense front, if you want, the diplomacy front. But some of the concerns that I've led the French electorate to move to the right, where domestic issues, issues of security, fear of the war, terrorist attacks, a lot of attacks on kids at school for example, immigration integration, you know, all those issues are important. And of course the far right party is more in support as Madame Lupinne and Bardella have made it public, more in support of Trump. And also there's definitely some links there, Paul, I think.

Well, I think they are definitely linked in the sense that if you look at President Macon, he's done quite well on the economic front, the defense front, if you want, the diplomacy front. But some of the concerns that I've led the French electorate to move to the right, where domestic issues, issues of security, fear of the war, terrorist attacks, a lot of attacks on kids at school for example, immigration integration, you know, all those issues are important. And of course the far right party is more in support as Madame Lupinne and Bardella have made it public, more in support of Trump. And also there's definitely some links there, Paul, I think.

We need to clear this up.

We need to clear this up.

I've had a lot of criticism about the use by Bloomberg a far right.

I've had a lot of criticism about the use by Bloomberg a far right.

We are not editorializing their folks.

We are not editorializing their folks.

The parties are actually there's three, and they're actually called far right. When we say far right, that's the identifiable name of three of the fraction parties of the more conservative wing of French politics.

The parties are actually there's three, and they're actually called far right. When we say far right, that's the identifiable name of three of the fraction parties of the more conservative wing of French politics.

VI Jinnie talk to us about when we think about over the last twenty four hours of the European Union and in France with the snap elections, how much of that is economics, how much are people concerned about their economic outlook, inflation and so on.

VI Jinnie talk to us about when we think about over the last twenty four hours of the European Union and in France with the snap elections, how much of that is economics, how much are people concerned about their economic outlook, inflation and so on.

Part of it is inflation, but I really think it's all about security, immigration and in a way a vote against green Green scene as a cost. It is really interesting if you see one of the biggest loser, of course is the Green Party. So I think that combined with the rising popularity of mister Bardella, the twenty eight year old, that if in fact there's a majority in the next elections for Madame Lupinn, he could become a very important part of the political life. And of course he's very untested. The President Macon had promoted Monsieur Taala as a younger if you want, politician, although older than Bordella, and in the recent debates around the key topics around electrification et cetera, it was very clear that mister Baldella was not really prepared for such a mandate. And I think that's the point that McCoy is trying to make. Bring them in and see how they will or will not be able to do as a big part of the government and hopefully influence in his mind the next elections in a couple of years in twenty seven.

Part of it is inflation, but I really think it's all about security, immigration and in a way a vote against green Green scene as a cost. It is really interesting if you see one of the biggest loser, of course is the Green Party. So I think that combined with the rising popularity of mister Bardella, the twenty eight year old, that if in fact there's a majority in the next elections for Madame Lupinn, he could become a very important part of the political life. And of course he's very untested. The President Macon had promoted Monsieur Taala as a younger if you want, politician, although older than Bordella, and in the recent debates around the key topics around electrification et cetera, it was very clear that mister Baldella was not really prepared for such a mandate. And I think that's the point that McCoy is trying to make. Bring them in and see how they will or will not be able to do as a big part of the government and hopefully influence in his mind the next elections in a couple of years in twenty seven.

All right, So, Reginia, given all that backdrop here that we've seen over the last again couple of days coming out of Europe at alliance, how do you think about just, you know, allocating capital across the globe. I mean, how do you think that Europe versus the US versus is friends on sales.

All right, So, Reginia, given all that backdrop here that we've seen over the last again couple of days coming out of Europe at alliance, how do you think about just, you know, allocating capital across the globe. I mean, how do you think that Europe versus the US versus is friends on sales.

Friends on sales.

Friends on sales.

That's simple.

That's simple.

You might be able to buy it a bit cheaper. I mean, in general, the European markets are quite cheap. Of course, what you have supporting the markets is also the rate cuts taking place ahead of the FED. And of course what are the next ones? When are the next one? Is the big questions. You also have some interesting themes around electrification, around industrials and and and the energy transition. So we have not only the climate transition but also the energy transition given what's happening with Russia, and that is an important part of investment that I think is interesting for global investors.

You might be able to buy it a bit cheaper. I mean, in general, the European markets are quite cheap. Of course, what you have supporting the markets is also the rate cuts taking place ahead of the FED. And of course what are the next ones? When are the next one? Is the big questions. You also have some interesting themes around electrification, around industrials and and and the energy transition. So we have not only the climate transition but also the energy transition given what's happening with Russia, and that is an important part of investment that I think is interesting for global investors.

This has been very valuable Virginie Messina, who thank you so much with allions as we are audible towards the turmoil, the political.

This has been very valuable Virginie Messina, who thank you so much with allions as we are audible towards the turmoil, the political.

Turmoil in France. How do you go summer claudiate USC?

Turmoil in France. How do you go summer claudiate USC?

I got to show up for class to do that.

I got to show up for class to do that.

Will running us now with parchment from USA and distinguished at that as Lauren Goodwin, she strategius in New.

Will running us now with parchment from USA and distinguished at that as Lauren Goodwin, she strategius in New.

York life as well.

York life as well.

What was it like grinding and getting a deserved summicum laudie at USC? Were you the only one in class five days a week?

What was it like grinding and getting a deserved summicum laudie at USC? Were you the only one in class five days a week?

Well, they just hold class on the lawn, right, you.

Well, they just hold class on the lawn, right, you.

Have to have economics on the law.

Have to have economics on the law.

Really a whiteboard that rolls on wheels. I still have one in my office. Actually it's a signature tree.

Really a whiteboard that rolls on wheels. I still have one in my office. Actually it's a signature tree.

They literally would.

They literally would.

Roll the whiteboard out onto the lawn nose.

Roll the whiteboard out onto the lawn nose.

But I did take a skateboarder class.

But I did take a skateboarder class.

You did take a skateboard to class.

You did take a skateboard to class.

I took a snowshovel and I'm lucky I got home. Lauren, thanks for being with She worked for venerable firm. We've done too much of the parlor game today. On the FED, where's this fed going to be in a year or in six months?

I took a snowshovel and I'm lucky I got home. Lauren, thanks for being with She worked for venerable firm. We've done too much of the parlor game today. On the FED, where's this fed going to be in a year or in six months?

Do they have a plan or are they literally making it up? Report the report?

Do they have a plan or are they literally making it up? Report the report?

I think that they're trying really hard to walk this tightrope between really where they sit right now, which is that the data are slowing. They believe they're restrictive, but they want to make sure that that doesn't turn into a policy mistake of being restrictive for too long. I think that the challenge that they face on the six to twelve month time horizon is that we're in a very capital intensive phase of economic activity. That's related to artificial intelligence, it's related to electrification and infrastructure. This is a policy environment but also a corporate spending environment that's constructive for economic activity, and that's going to be one. We're getting inflation closer to two percent. Allowing them to pull rates back to two and a half percent is just going to take time.

I think that they're trying really hard to walk this tightrope between really where they sit right now, which is that the data are slowing. They believe they're restrictive, but they want to make sure that that doesn't turn into a policy mistake of being restrictive for too long. I think that the challenge that they face on the six to twelve month time horizon is that we're in a very capital intensive phase of economic activity. That's related to artificial intelligence, it's related to electrification and infrastructure. This is a policy environment but also a corporate spending environment that's constructive for economic activity, and that's going to be one. We're getting inflation closer to two percent. Allowing them to pull rates back to two and a half percent is just going to take time.

So there's a lot of folks out there in academia and in practice in the marketplace that are saying the FED is missing the boat already. They need to be cutting rates.

So there's a lot of folks out there in academia and in practice in the marketplace that are saying the FED is missing the boat already. They need to be cutting rates.

Now.

Now.

What do you say to those folks?

What do you say to those folks?

I tend to agree on the idea of the PI that the time may be now for the pivot, and that's because we are seeing not the aggregate economy, but areas of interest rate sensitive sectors, areas of lower income consumers, businesses that use banks or floating rate credit to borrow. And that's been the case that that turning point has been taking place over the past couple of years. And so if we are looking to soft land the economy, I think the evidence is in that inflation is moving reliably downward. That's something that's that's that's been clear to me over the last six months, and so I do think that if the FED we're looking to extend the cycle soon would.

I tend to agree on the idea of the PI that the time may be now for the pivot, and that's because we are seeing not the aggregate economy, but areas of interest rate sensitive sectors, areas of lower income consumers, businesses that use banks or floating rate credit to borrow. And that's been the case that that turning point has been taking place over the past couple of years. And so if we are looking to soft land the economy, I think the evidence is in that inflation is moving reliably downward. That's something that's that's that's been clear to me over the last six months, and so I do think that if the FED we're looking to extend the cycle soon would.

Be the time bring your economics over to investment a bond portfolio, in equity portfolio, do you need to set your actuarial assumption higher because of higher for longer or because of a new reset in our start?

Be the time bring your economics over to investment a bond portfolio, in equity portfolio, do you need to set your actuarial assumption higher because of higher for longer or because of a new reset in our start?

I believe that you do. Our star I believe has moved a bit higher as a result of this capital intensive stage of economic growth that we're in. And it's an environment where even in a traditional investor portfolio, you investors may be missing the point in the transition point we're looking at.

I believe that you do. Our star I believe has moved a bit higher as a result of this capital intensive stage of economic growth that we're in. And it's an environment where even in a traditional investor portfolio, you investors may be missing the point in the transition point we're looking at.

Okay, so what an actual assumption If you're popping six percent and you're telling me I have to go to seven percent, that means I have to put more funding into my institutional or retail retirement account.

Okay, so what an actual assumption If you're popping six percent and you're telling me I have to go to seven percent, that means I have to put more funding into my institutional or retail retirement account.

Right, Yes, that's right.

Right, Yes, that's right.

This is a big deal.

This is a big deal.

I know.

I know.

I mean, this is the government's way behind on this.

I mean, this is the government's way behind on this.

There should be increased levels in four oh one ki R. Yeah, and pension and profit share.

There should be increased levels in four oh one ki R. Yeah, and pension and profit share.

On the sweeney offsprings are all maxing album the full one kg and guarantee you that, Lauren, I love your notes here. You give us some high conviction ideas here. You say that equity valuations are high. A lot of folks believe that. All right, what do I deal? I'm not going to sell? Well, what do I do here? If I feel like equity valuations are high? What are my alternatives?

On the sweeney offsprings are all maxing album the full one kg and guarantee you that, Lauren, I love your notes here. You give us some high conviction ideas here. You say that equity valuations are high. A lot of folks believe that. All right, what do I deal? I'm not going to sell? Well, what do I do here? If I feel like equity valuations are high? What are my alternatives?

Look, I think that you have to stay invested, and so what I'm about to say is not sell off all your equity and put it into somewhere else. But I do think that we've seen considerable gains, and the average investor, if they had a sixty forty portfolio a year ago or two years ago, they don't have that now. And so if the question is where do I put new money or where do I put those gains? I think that given where we are in the cycle and the strength that we've seen in the credit market, we've got an environment where those equity market gains may be better activated in fixed income and specifically in high yield. Okay, it's a sector that, while of course risks arising for the market as a whole, you have an interesting high coupon. We're also seeing investors start to diversify their US equity into international equity and move their cash into short duration fixed income to try to lock in the higher rates that we have. You think the FED cuts in September or December or even January, the next couple of months are historically the time to get in to capture those higher yields before the market starts to react.

Look, I think that you have to stay invested, and so what I'm about to say is not sell off all your equity and put it into somewhere else. But I do think that we've seen considerable gains, and the average investor, if they had a sixty forty portfolio a year ago or two years ago, they don't have that now. And so if the question is where do I put new money or where do I put those gains? I think that given where we are in the cycle and the strength that we've seen in the credit market, we've got an environment where those equity market gains may be better activated in fixed income and specifically in high yield. Okay, it's a sector that, while of course risks arising for the market as a whole, you have an interesting high coupon. We're also seeing investors start to diversify their US equity into international equity and move their cash into short duration fixed income to try to lock in the higher rates that we have. You think the FED cuts in September or December or even January, the next couple of months are historically the time to get in to capture those higher yields before the market starts to react.

You know, we've been talking Tom and I have been this morning about Apple and AI. How do you guys think about AI? Is that's something you invest You just own and say, okay, I've got my AI trader. How do you guys think about that?

You know, we've been talking Tom and I have been this morning about Apple and AI. How do you guys think about AI? Is that's something you invest You just own and say, okay, I've got my AI trader. How do you guys think about that?

You know, this is something over the past year that we've taken a deep dive on, not just in the investment arm of our company, but also in the corporate insurance company, working together to understand what these trends might look like. There's a couple of ways to think about it. I think First, the areas of the market, the Magnificent seven that have already seen gains from AI. It's going to be very difficult to displace these companies. That's because the cost the barriers to entry of this foundational layer of technology are just very high. They're doing good work that people want, but it takes a lot of power and infrastructure to do those things. So we think there's a physical layer of artificial intelligence that can be invested in via equity, bonds, real estate, and in the future it's going to be regulation and ethics that shape corporate use cases. We're not there yet.

You know, this is something over the past year that we've taken a deep dive on, not just in the investment arm of our company, but also in the corporate insurance company, working together to understand what these trends might look like. There's a couple of ways to think about it. I think First, the areas of the market, the Magnificent seven that have already seen gains from AI. It's going to be very difficult to displace these companies. That's because the cost the barriers to entry of this foundational layer of technology are just very high. They're doing good work that people want, but it takes a lot of power and infrastructure to do those things. So we think there's a physical layer of artificial intelligence that can be invested in via equity, bonds, real estate, and in the future it's going to be regulation and ethics that shape corporate use cases. We're not there yet.

I don't want you to get in trouble with the general counsul of New York Life, but CIRE is not getting fun. I mean, just in the last month thirty days, it's really deteriorated. What's the fear level there?

I don't want you to get in trouble with the general counsul of New York Life, but CIRE is not getting fun. I mean, just in the last month thirty days, it's really deteriorated. What's the fear level there?

You know, the fear level I would say is aware but not fearful, if that makes sense. So a couple of things. First, when we look at a global real estate portfolio, we believe the bottom is in and other parts of the world, including in Asia and in Europe where office space is being used more. In the US, there's still price discovery happening. That's a lot of the newsflow that we see. There's a lot of what we're seeing in the news over the past couple of couple of a couple of weeks. But when we think about, you know, what do you do now? It is very likely that we're going to continue to see valuations written down, much in the way that's happened in brick and mortar retail over the last decade. I think that these write downs continue over the next several years. But commercial real estate is diversified differently from office I think regional banks are less allocated to real estate than is typically appreciated, and so this is a painful piece for investors in their portfolio. Across the board. It's going to take time to play out. But the systemic risk, all investors have their eye on that, So I'm not as concerned.

You know, the fear level I would say is aware but not fearful, if that makes sense. So a couple of things. First, when we look at a global real estate portfolio, we believe the bottom is in and other parts of the world, including in Asia and in Europe where office space is being used more. In the US, there's still price discovery happening. That's a lot of the newsflow that we see. There's a lot of what we're seeing in the news over the past couple of couple of a couple of weeks. But when we think about, you know, what do you do now? It is very likely that we're going to continue to see valuations written down, much in the way that's happened in brick and mortar retail over the last decade. I think that these write downs continue over the next several years. But commercial real estate is diversified differently from office I think regional banks are less allocated to real estate than is typically appreciated, and so this is a painful piece for investors in their portfolio. Across the board. It's going to take time to play out. But the systemic risk, all investors have their eye on that, So I'm not as concerned.

Okay, Lauren, thank you so much.

Okay, Lauren, thank you so much.

Lauren goodred with us in New York Life.

Lauren goodred with us in New York Life.

This is a surprise.

This is a surprise.

Yeah, let me describe it for you as a best I can Apple one ninety six comes down, one ninety three, doom and gloom, and then everybody read Gene Munster, Paul, and we got a moonshot on opening trading right up buttressed against one ninety eight. That's Apple up five dollars off the gloom of yesterday afternoon.

Yeah, let me describe it for you as a best I can Apple one ninety six comes down, one ninety three, doom and gloom, and then everybody read Gene Munster, Paul, and we got a moonshot on opening trading right up buttressed against one ninety eight. That's Apple up five dollars off the gloom of yesterday afternoon.

Yeah, stock an early trading tom up two point four per hundred ninety eight dollars. It gives you a market cap three point zero three trillion dollars. Stocks up about twenty percent year to date.

Yeah, stock an early trading tom up two point four per hundred ninety eight dollars. It gives you a market cap three point zero three trillion dollars. Stocks up about twenty percent year to date.

What a joy to speak to Mark German of Bloomberg News yesterday. Definitive on Apple. Let's listen.

What a joy to speak to Mark German of Bloomberg News yesterday. Definitive on Apple. Let's listen.

You saw nothing today that's better than the competition. You saw nothing today that's different from the competition except marketing and a focus on privacy. Right, So that's the difference here. They're not the first, but they're also not the best, and they're not the most advanced. They're here extremely late, and they showed up to the party without a gift.

You saw nothing today that's better than the competition. You saw nothing today that's different from the competition except marketing and a focus on privacy. Right, So that's the difference here. They're not the first, but they're also not the best, and they're not the most advanced. They're here extremely late, and they showed up to the party without a gift.

It showed up to the party, and we saw it. Yesterday's full disclosure. I turned it off after sixteen minutes because I knew Genemunster would tell us what the hell happened yesterday deep water asset managements at Gene Monster.

It showed up to the party, and we saw it. Yesterday's full disclosure. I turned it off after sixteen minutes because I knew Genemunster would tell us what the hell happened yesterday deep water asset managements at Gene Monster.

Jane, I saw your Twitter feed.

Jane, I saw your Twitter feed.

It's simple. The market listened to Gene Munster. Why is Apple up five dollars off the gloom of five pm yesterday.

It's simple. The market listened to Gene Munster. Why is Apple up five dollars off the gloom of five pm yesterday.

The reasons it up is because that even though these features are features that we have seen that those that have been following AI for the past year have seen from other companies, the reason why this dock goes up is these features are now going to be brought to Apple users for the first time. They are transformative, and Apple is going to require you to upgrade your hardware to get access to these and so about eighty five percent of the Apple hardware is going to be needed to upgrade. And at the most basic level is that these features are going to be something that I believe consumers are going to want.

The reasons it up is because that even though these features are features that we have seen that those that have been following AI for the past year have seen from other companies, the reason why this dock goes up is these features are now going to be brought to Apple users for the first time. They are transformative, and Apple is going to require you to upgrade your hardware to get access to these and so about eighty five percent of the Apple hardware is going to be needed to upgrade. And at the most basic level is that these features are going to be something that I believe consumers are going to want.

When will the cell side modify their what ifs, their margins ratios, their free cash flow guesstimates? Does that happen now? Does it happen ninety days from now? Does it happen in twenty twenty six.

When will the cell side modify their what ifs, their margins ratios, their free cash flow guesstimates? Does that happen now? Does it happen ninety days from now? Does it happen in twenty twenty six.

I think what you'll see is maybe twenty percent of the analysts are generally on board with this is going to have a nice lift over the next one to three years, and so you'll see some of those changes probably before they report the June quarter. So call it in the next month or so, and then you'll see the next phase, call it thirty percent will come in after the next iPhones come out, which will be middle of September, and then the laggards, the fifty percent, will probably come in early, probably when they report their December quarter of twenty twenty four, so that will be early in twenty five. But I think that the trajectory of this is you want to own stocks ahead of positive earnings revisions, and I think over the next six to nine months we're going to see those. And just to kind of put a final thought on what the magnitude of those revisions are, is that we're talking about growth going from call it two percent in calendar twenty four to around ten percent in calendar twenty five and maybe twelve percent in calendar twenty six. So it's a nice move higher. It's a far cry from what we've seen from some of these other aipower companies in terms of their growth rates, but it is for Apple, up twelve percent, up ten percent is much better than the down two that they have reported on average per quarter for the last year and a half.

I think what you'll see is maybe twenty percent of the analysts are generally on board with this is going to have a nice lift over the next one to three years, and so you'll see some of those changes probably before they report the June quarter. So call it in the next month or so, and then you'll see the next phase, call it thirty percent will come in after the next iPhones come out, which will be middle of September, and then the laggards, the fifty percent, will probably come in early, probably when they report their December quarter of twenty twenty four, so that will be early in twenty five. But I think that the trajectory of this is you want to own stocks ahead of positive earnings revisions, and I think over the next six to nine months we're going to see those. And just to kind of put a final thought on what the magnitude of those revisions are, is that we're talking about growth going from call it two percent in calendar twenty four to around ten percent in calendar twenty five and maybe twelve percent in calendar twenty six. So it's a nice move higher. It's a far cry from what we've seen from some of these other aipower companies in terms of their growth rates, but it is for Apple, up twelve percent, up ten percent is much better than the down two that they have reported on average per quarter for the last year and a half.

Paul Apple off the April gloom, that's where I sold everything up percent.

Paul Apple off the April gloom, that's where I sold everything up percent.

Now zero perfect timing. Again, Hey Geene, I'm out here sporting an iPhone eleven? Is this changed to a Is that going to prompt me to get back into the Apple Store and upgrade in September?

Now zero perfect timing. Again, Hey Geene, I'm out here sporting an iPhone eleven? Is this changed to a Is that going to prompt me to get back into the Apple Store and upgrade in September?

I think it will.

I think it will.

And again, I think that this is the fundamental piece that a lot of those who just analyze this so closely are focused on the trees versus the forest. Is that I think that people like you are going to see these features and want to get upgraded. And maybe in your case, you're probably due for an upgrade either way. But I think in the case of many people who are three years out, I think that they're going to see these features and undoubtedly want them. This is the biggest change in Apple since the iPhone came out, and that's a bold statement, but just to put some perspective on it. Over the past, call it fifteen or so years since the iPhone came out, what we have seen is that, you know, we've had things like Vision Pro, We've had services like Apple TV Plus, we've had the iPad, we've had the App Store. Those have been kind of the cornerstone announcements. But what this fundamentally does is change the way that we interact with these devices. It's going to add more value and Paul, I think that that is going to be a major catalyst for upgrades here.

And again, I think that this is the fundamental piece that a lot of those who just analyze this so closely are focused on the trees versus the forest. Is that I think that people like you are going to see these features and want to get upgraded. And maybe in your case, you're probably due for an upgrade either way. But I think in the case of many people who are three years out, I think that they're going to see these features and undoubtedly want them. This is the biggest change in Apple since the iPhone came out, and that's a bold statement, but just to put some perspective on it. Over the past, call it fifteen or so years since the iPhone came out, what we have seen is that, you know, we've had things like Vision Pro, We've had services like Apple TV Plus, we've had the iPad, we've had the App Store. Those have been kind of the cornerstone announcements. But what this fundamentally does is change the way that we interact with these devices. It's going to add more value and Paul, I think that that is going to be a major catalyst for upgrades here.

So it's interesting, Gene. I'm certainly ready for it. You're right, I need to get out there and upgrade. But so, how do you think Apple is really approaching AI? Gene? Is this kind of like the first salvo in what will be a kind of a multiple product or multiple software kind of approach to really capturing AI in some of the use cases?

So it's interesting, Gene. I'm certainly ready for it. You're right, I need to get out there and upgrade. But so, how do you think Apple is really approaching AI? Gene? Is this kind of like the first salvo in what will be a kind of a multiple product or multiple software kind of approach to really capturing AI in some of the use cases?

It is, This is definitely the first step.

It is, This is definitely the first step.

And I think what we've seen is this distinction between small versus large models, and so from a consumer perspective, you don't need to worry about that, no need to think about what the distinction is. But Apple is really tackling the small models first. That's going to be that's going to be the parts of it that are going to do things related to our photos and our messages. All that data is going to be kept encrypted in private on your device, but the things that you can do with that is relatively limited. To put in a perspective that we measure the intelligence on these models in terms of parameters in the case of these models. These are three billion parameter models. That's a three billion parameter model GPT four. They haven't disclosed what that is, but it's probably around a trillion, and so this is an order of magnitude different. They need to get more to answer question Paul, in the next three to five years, to get more into those large language models to really have control of their AI future.

And I think what we've seen is this distinction between small versus large models, and so from a consumer perspective, you don't need to worry about that, no need to think about what the distinction is. But Apple is really tackling the small models first. That's going to be that's going to be the parts of it that are going to do things related to our photos and our messages. All that data is going to be kept encrypted in private on your device, but the things that you can do with that is relatively limited. To put in a perspective that we measure the intelligence on these models in terms of parameters in the case of these models. These are three billion parameter models. That's a three billion parameter model GPT four. They haven't disclosed what that is, but it's probably around a trillion, and so this is an order of magnitude different. They need to get more to answer question Paul, in the next three to five years, to get more into those large language models to really have control of their AI future.

Jane Eric Schmidt didn't walk out on stage yesterday. Is there any continuing dialogue with Google to me the bombshell, even with a litigation various and sundry governments going after them. I mean, I guess they got a linkage of Apple and Microsoft's open AI, but am I going to get a relationship between Apple and Google?

Jane Eric Schmidt didn't walk out on stage yesterday. Is there any continuing dialogue with Google to me the bombshell, even with a litigation various and sundry governments going after them. I mean, I guess they got a linkage of Apple and Microsoft's open AI, but am I going to get a relationship between Apple and Google?

So that's going to have This is going to have some formative impact. And just to quickly recap as Google pays Apple somewhere between thirteen and fifteen billion dollars a year to have Google as the default in your Safari browser, so it's a big number.

So that's going to have This is going to have some formative impact. And just to quickly recap as Google pays Apple somewhere between thirteen and fifteen billion dollars a year to have Google as the default in your Safari browser, so it's a big number.

Google has a product that.

Google has a product that.

Competes with Opening Eyes GPT that they didn't get the business, so they're probably frustrated with that, but that's beyond the point. What the point is is that Google makes their decisions based on data, and if it continues to be profitable for them to pay Apple thirteen plus.

Competes with Opening Eyes GPT that they didn't get the business, so they're probably frustrated with that, but that's beyond the point. What the point is is that Google makes their decisions based on data, and if it continues to be profitable for them to pay Apple thirteen plus.

Billion dollars a year, they'll do that.

Billion dollars a year, they'll do that.

But one aspect here, as Apple integrates GPT into their experience, people will Google search less, and so I suspect that the value of the deal with Google will diminish over time because it's simply there's just going to be more usage that's going to be shifting towards GPT.

But one aspect here, as Apple integrates GPT into their experience, people will Google search less, and so I suspect that the value of the deal with Google will diminish over time because it's simply there's just going to be more usage that's going to be shifting towards GPT.

Apple did say.

Apple did say.

They will eventually allow you to plug M and I into some of their base applications, so we'll see how that plays out longer term.

They will eventually allow you to plug M and I into some of their base applications, so we'll see how that plays out longer term.

I got another hour of questions Geene monster, thank you so much, and I should find out mister Munster deep water just tireless out on LinkedIn and Twitter.

I got another hour of questions Geene monster, thank you so much, and I should find out mister Munster deep water just tireless out on LinkedIn and Twitter.

Just I mean, he was the informative voice yesterday.

Just I mean, he was the informative voice yesterday.

Absolutely everybody else is doing their thing and Gene's d vailue.

Absolutely everybody else is doing their thing and Gene's d vailue.

I mean, you know, Gene put in context a while ago to talk about it, AI. I mean he puts it right up there with electricity as to the impact upon you know, yes, I feel in consumers, and he puts the Internet at like forty just to give you a sense of scale and magnitude of how Gene views AI and its impact on technology.

I mean, you know, Gene put in context a while ago to talk about it, AI. I mean he puts it right up there with electricity as to the impact upon you know, yes, I feel in consumers, and he puts the Internet at like forty just to give you a sense of scale and magnitude of how Gene views AI and its impact on technology.

This is a Bloomberg Surveillance podcast, bringing you the best in economics, finance, investment, and international relations. You can also watch the show live on YouTube.

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