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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. 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 Apps. Let's go over our new digital distribution. We do this for David Kirkpatrick, who is so out front on the new digital and the new digital for us as simple folks. YouTube. We're committed to it. Bloomberg Podcasts, We're working on it. We got radio tubes driving the bus here, but we got like ten people working on it. You're going to see all sorts of podcasts and this, that and the other thing planned out. We're doing it in a slow method
agal with great support of Google. I should mentioned as well Apple car Play and Android, but mostly Apple Bloomberg Business app. It's free and downloaded, car plays booming, no other way to put it, and it's in twenty other countries as well. Twelve years ago he changed journalism in Silicon Valley. Most of it was oh breathless, Oh my god, we had lattes and we did this. And he wrote just a real climpic, simple clear book of how in a ranch house on in Silicon Valley they invented Facebook.
And it was just amazing. The end of the book to make you cry where Zuckerberg's looking out at the whole new world after all from his driveway. David Kirkpatrick here on the Nvidia Effect. I am so honored.
I remember the day I gotta be on your show more time hearing there's a photo of you and me and Paul Kodrowski where you absolutely nailed the future of Facebook.
I think it was the day they went public, really really a great moment. We're here with the Nvidia Effect. If you were to write the book what is your Nvidia Effect.
That's a great way to ask the question. Tom.
I was thinking about how they're really you know Facebook. Of course, Meta is my longtime expertise, and here we have a company that's really taking a role in the industry that is not dissimilar to the role that Facebook had in those days of supercharged you know, domination and growth.
In fact, interestingly, I think you know, just two weeks ago or so, Facebook gained more in one day than any company ever had when they went up one hundred and ninety seven billion, which is hard to say and believe they did that.
I suspect today in video will go up more than that.
So we have these records being just shattered by these companies. It isn't the same. It's a chip company, but it's interesting.
It's also still run by its founder. It's a company that has its founder has had a long term view the entire time, which he is in extraordinary fashion realizing after thirty years of methodical development in a way that's not dissimilar from how Facebook was at the center of the change in global communications as the dominant company in social media, and Nvidia is now increasingly at the center of global not just communications but analysis and systems management
and computation generally as the central company in the AI revolution in terms of at least dollars I mean open Aiyes, out there doing this stuff, but these are the guys making the money.
Yeah, hey, David, you know, first of all, thank you for the notes you sent us this morning, and if you have not yet published them, please publish them somewhere on your social media.
I thought those were not as good as my usual no.
No, this, and I'll tell you what, just because for the average investor who wants to get a little perspective, your simple notes here today are very very helpful. You know, there are some folks out there, David that are suggesting that AI could be as big or bigger than the Internet. Can you help us put some perspective on that.
Well, it's not a crazy statement. I think we don't really know how big or even.
What AI is.
It's still at such an early stage of gestation that we are processing in real time. Even Jensen Wang, even Sam Altman are processing in real time.
What this could be.
But there's no question that what we're seeing and I was actually this is a point that I didn't put in the notes. That is, you're keying up. You know what happened when the Internet came along was the entire industry reconfigured around this new opportunity, and we are seeing something exactly like that now for a much, much, much bigger industry, which is that in that sense even more impressive.
You know, we have that the aggregate market cap of this industry is somewhere getting up close probably to ten trillion dollars. Maybe it's more than that. I haven't done the math, but that's the range we're talking about. You know, at the time the Internet came along, the tech industry in the most broad definition, might have been worth two hundred and fifty billion, three hundred billion.
I don't know. Maybe maybe I'm a little low.
There, but it was not a more a trillion, and so in a sense it's more important now than the Internet was. If it's true that we are entering a new phase of computation and social change based on computation, which is I essentially think the way you need to think of it, and this is it's like the Internet, a social change based on computation.
Right, that's what we're going through again.
Now, what's the free lunch on this, David Kirkpatrick, I've been looking at the thermodynamics of this. Everybody knows my view on bitdog. I'm not a fan. I think the thermodynamics of it is just bogus. But I don't believe that you're AI. But I'm ignorant. I mean, we're talking here about a massive infrastructure build out, a massive drag on electricity. It's just too much of a free lunch. David Kirkpatrick, what's the not the dark side, but what's the cost of this AI boom?
There are so many costs.
But again it's something that nobody yet really fully understands. I mean, it's interesting when you heard this crazy thing of Altman going out supposedly trying to get seven trillion invested in this arena, you know, which is a ridiculous, hyperbolic effort, but it suggests the scale of the resources
that are going to be employed here. And yes, from an electricity point, you know, one of the reasons Sam Altman is the biggest investor in one of the fusion startups is because Altman believes that without fusion, without nuclear fusion power, we won't be able to affordably get enough power for AI. That's the kind of things that people
in the industry are saying. So I actually think, though it's a two sided coin, happily as the Internet was in some ways, that we will get tons of social benefit and actually cost savings and efficiencies out of the application of this technology which is so expensive to run.
David my CEO last year, had to be Mark Zuckerberg the way he reversed around from that tobacco. Paul's covered this better than me. What's the next step for mister Zuckerberg and the conversation.
Well, obviously he's pivoted fully away from the metaverse in the short term. I do think, you know, one thing he's right about, and you know how critical I am with him. I wrote a piece in Time magazine which was unbelievably negative on their twentieth birthday two weeks ago.
Missus arbor.
I called it a tragedy. But but you know, they also.
Understand augmented reality in the same way that Apple does. And even though they're not going to have devices as good as Apple's. You know what's going to be interesting in this AI era is what the plat, what the interface is going to be. That's one of the key questions that isn't resolved. I think Facebook Meta may actually be positioning itself pretty well for the interface of the AI revolution as they pivoted toward augmented reality through Oculus,
et cetera. So it's not about the metaverse. It's about some kind of verse that is AI driven, and we're going to have to learn how to interact with it, all of us.
David, it's like Kirkpatrick. He's actually aged well. Read the Facebook Effect, trust me, folks, it's aged well. It's out in paperback now. The hardcover is a collector's item, like David Kirkpatrick. But thank you so much. We look forward to the Nvidia effect. John Levin joins us. He's a chartered financial analyst as well, and he writes for Bloomberg Opinion and he's written for in Vidia, and he basically says, America first, Thank you for joining us this morning on
this historic day. John, why is it American first with Nvidia?
Good morning Tom. Yeah.
So my take this morning was, you know, I hear a lot of people saying the US is getting too expensive. Let me take another look at Europe, you know, let me take a.
Look at Japan.
And the fact of the matter is, nowadays choices about geographic allocation are really kind of like choices about sector in disguise, right, And what you're saying when you take a look over at a lot of these markets is I want to underweigh tech, right, you know, Europe you're like overweighting financials and discretionary, you're overweighting industrials in Japan. If that's what you're really going for, you can achieve
that right here at home. Right, you can achieve it by going equal weight SMP five hundred, or maybe you take a flyer on some of these unloved sectors here here in the United States. But I don't get geographic diversification for geographic diversification's sake.
You know, I'm just looking at your opinion piece here today, Jonathan, and then just reaffirms something I learned from Tim Craighead, who runs a strategy for Bloomberg Intelligence out of London.
I keep saying to Tim, how come the.
European markets, the UK markets, there's so much cheaper.
Than the US.
And he says, no, Nuts, it's because we don't really have a tech sector over here. And you back out the tech sector and the market's not, you know, so cheap here. So for the US, I guess you get what you pay for, right, Jonathan.
Yeah, exactly. I mean, you know, look, this isn't a profound statement, but you know, the reason that the US has outperformed the world for the past fifteen years is because we have Silicon Valley, and because we have the mag seven and so, you know, our fortunes are our wagon has hitched to these folks.
And uh, if you.
Know, the sector starts starts to tumble, Uh, you know, we can go down too. But in the meantime, we're enjoying, Uh, we're enjoying all of the upside.
Right now, Paul up two hundred and fifty one down points. We're quoting to Dell our surveillance. Dow Jones Industrial Average correspondent Jonathan Farrell insists, but on a percentage basis, folks, Dow up six tens a percent, SMB five hundred, up one point two percent, with up two percent futures right now the nastack here four minutes into trading up one point nine percent.
So, Jonathan, you know, is there a concern here? I mean that may mean there's too much tech in this marketplace. I mean I kind of think tech has been, you know, it has been, you know, the leader for these markets for the last you know, fifteen twenty years, And I don't necessarily think that's a bad thing.
Are you concerned about there's too much concentration in tech?
Well, I mean, I mean, look, another obvious statement is that, you know tech is is very cyclical. You know, we're more susceptible to a downturn or something like this. And you know, let's face it, like I get, I get the handwringing. There is a lot tied to, for instance,
a single name. Right if you just if you just look at the spread of cell side expectations around around na video, right, Like the most bullish call on the street versus the most bearish call on the street can swing the entire outcome for the index over the next twelve months by something like four percentage points. You know, that's that's big for a single a single name. So I get it. But you know, at the end of the day, Uh, there are other ways to manage risk than than going abroad.
So how do you do that? If skew is so low? It's one of the Greek letters here, folks, I'm trying to impress it in here with a little bit of crossbow and analysis. John, It's simple. Does a derivative strategy work as hedging work here? Or do your risk missing a boom.
Oh the old UH tailhage those out of the money protective puts. I don't know, you know, that's that's uh. I don't want to miss mischaracterize this, but.
Bloomberg surveillance we allow you to mischaracterize continue.
But you know, I mean it's sort of sort of like the old uh Mark Spitznagel Universal Universe take, you know, like why bother UH deworsifying into UH into the bond market. I guess this was his take back when bonds were paying one percent and you could you could just keep enjoying that upside and sell yourself some some protective puts. It's a possible, it's a possibility.
Do you rebail? Do you believe in rebail? I mean, I mean you're on the dark side with the Bloomberg opinion, But I mean, what do you do your rebail in video?
Here?
Your rebail Microsoft? I don't think. So what do you mean sell it out to bring the down in a portfolio?
Yeah?
I mean yeah, so, like I said, I think an obvious and very simple strategy here is as you just go equal way right?
Yeah, all right, but I mean here, you know, it's what's interesting in your opinion piece, Jonathan is that tech stocks are expensive here in the US, but they're also expensive in other parts of the world as well. It's just that we have more of them. I guess there's a way to think about it.
Yeah, one hundred percent. I mean, a very simple and sort of illuminating exercise is, you know, just look at is in US tech versus MSCI world x US. It's the same, you know, Uh, it's the It's the same exact thing. So if you think that there's a bubble in US tech, you're going to find the same thing everywhere else in the world.
Have you been to the fund and Blow Hotel? Recently we're talking to Belchunis and Greidfeld. They spent like a week at the Fontain Blow Hotel. That part of the.
John I was, I was not.
I'm not one of these fancy Bloomberg people that hang out over in Miami Beach. I'm like a core Miami guy. I'm on the mainland here, Tom, Jonathan.
Thank you so much, greatly appreciate it. In Miami, they're writing for Bloomberg Opinion. I've got a really important conversation coming up here in the Interactive Brokers Studios with Dana Telsey. This is going to be hugely, timely, really important conversation. Yesterday I brought this up early, but I'll bringing up again. Tony Capiano has this pulse on what we do with their money. He runs a small hotel shop. It's not Motel Cease, it's Marriott, but Marriott's way more than Marriott.
Yeah, lots of brands like.
You say, what do they what do they not own? Maybe you got a.
Clear and you were lobbying for a choice hotel suite in.
Paris for the Olympics and I got nowhere with them.
We'll see you're trying to bribe.
Them, but you know. Anyways, his insight, which goes to Dana Telci's world at the Telsi Advisory Group, is they misjudged luxury. And what he said is luxury is just killing it. So let's take a given luxury stock. This is Lewis viewton it's the r No family and there's this gloom and Dana saying, stop it, don't give me this china. We're all gonna die stuff. Since the middle of January, Loose viewtont LVMH has a pop of twenty eight percent Dana Telcea with their luxury the rest.
Of the year in retail, Hi, how are you thank you so much for how.
Well give me? Give me LVMH and luxury and the rest of it is that where you want to be in retail.
I mean, I think the luxury, particularly LVMH is where you want to be in retail. And the reason why you want to be there in retail is because the brands that they own, the innovation and creativity that they have. Look at their distribution that they have, and they basically when you think about Sephora, right all the way up to whether it's wines and spirits or to whether it's jewelry, they have brands that people want to own and want
to buy. And let's not forget this is also the year of the paras Olympics, and they're a sponsor of those paras Olympics.
I mean, I look Dana, first of all, Dana on Sophora, can you have Sephora pay cash to teenagers to throw out one third of the bottles in their bathroom so that they'll buy more Sophora? I think that would be.
Only yes, only if they'd buy more at higher prices, and there you go.
They got to do that, and they will do that. We know that, Dana. I'm luxury here and it's critical. Can you make money and luxury gaming the fashion designers? I say this with a beyond fabulous The new Look with Coco Chanel and Christian d Or have you seen it on ample TV data? Do you love it?
Yes?
I have?
Yeah, it looks terrific.
Looks terrific.
Can you game? Can you make money and luxury based on gaming this designer or that designer?
It's a little harder to do, I think when you have something like it, and the reason why take a look at Gucci. You can't bet on the designers. Look what Caring basically doesn't have the same stable of designers that LVMH has when you're operating seventy five brands. So I don't necessarily think you bet on one designer or another designer. I think it's the health of the brand, and some brands are even more illustrious than just the
designer themselves. Look at our Mez. You don't know who the designer is, but doesn't everyone want anything or MEZ.
Makes Dana, you know, I want to ask you about the Chinese consumer, where we talk about luxury, that just seems to be one of the key key variables. And I'll walk home here to the Penn station today and I'll walk down Fifth Avenue. I'll walk down Madison Avenue and I'll see a ton of European tourists. I'm not seeing many Chinese tours here, and I know how critical they are to some of those big shops there on Madison and Fifth. Talk to us about the Chinese consumer.
Where is he or she?
I think they're staying local. I think they're staying in China. I don't think they're traveling as much as they had in the past. You're absolutely right, you're not seeing them. I am seeing a little bit more Europeans. I think that they're spending also, whether it's on vacations or other in going things and having experiences rather than just some of the goods. So it's spending on local brands, it's
spending on experiences. And almost every single luxury house has mentioned the impact of that Chinese consumer when they come back is anyone's guests. But it is incumbent upon every luxury brand to continue to drive the most innovation and continue to update and enhance their stores in China in order to remain relevant.
Interesting.
All right, let's back away from luxury get to where I tend to traffic here with the regular folk here. Just talk to us about the US consumer here. What are you seeing, you know, coming out of the holiday season, kind of plowing into spring season. What what are you seeing from the US consumer?
I think overall you can use the words discerning, cautious, choiceful. They're definitely whatever you want to call it. They're definitely more careful about their spending, whether it's discretionary or essentials. We all saw Walmart's announcement the other day and their sales, and they reported very strong holiday results with momentum exiting the business with you look at their US trends with a comp of four percent, I think there's a trade
down that's happening, and you're seeing that trade down. Even look at the off pricers, whether it's TJX, Burlington or Ross stores. Anytime their same store sales are above three percent, I always think they get the benefit of the trade down. They were that way in the third quarter. When they begin reporting next week, I think we're going to see that again.
If you're with us on Bloomberg survants Dana Telsey, the Telsey Advisory grew up here on YouTube Bloomberg podcasts, Thank You, what Chat? They're having fun with that today HJJ, good morning, and also on Apple car Play. We're out there with the Bloomberg Business app. It's free, you sign up for Apple CarPlay. Dana, I don't want to catch on awares here, but you're such a trooper, I'm going to go there.
I drove by Nordstrom's the other day. This is a ten year track record of negative seven percent per year. What in God's name did they do with that iconic Western brand? What does Nordstrom do to salvage itself?
I think overall one of the things that they need to do is if you think about what Nordstrom was, it appealed to an upper middle income consumer with very good brands, had inventory in stock, and what was the defining element of Nordstrom service that you can go in there and establish relationships and that service element was there.
I think the full line stores are missing some of that magic, and I think the focus has been on the rack, and I think some of the brands that they've put into their mix weren't the same as who that upper middle income consumer is. There's work to be done. And look at what you've seen at Bloomingdale's. Bloomingdale's has had strength. You haven't seen the strength at Nordstrom full line stores strength yet.
Lisa Matteo walks across the street, goes cross fifty ninth, turn right, and there's that alli at blooming Rail's, the bag alley. Yes, you run a gauntlet there. It's a Telsea gauntlet you run at Bloomingdale's. You never get to the other side without dropping two three grand data Telsey, we're out of time. Don't be a stranger. Just love it, Dana Telsea. There just really with Joe Feldman, really just
running terrific retail analysis. You didn't look at the front pages around the world, Lisa start, what do we got? I mean I thought there was a plethora of choices.
Yeah, there's a lot going on. This one I thought was interesting for a take on companies still doing business in Russia was from the Financial Times. They had an interview with the CEO of Mandalis and he said that the company's own shareholders they didn't pressure to leave Russia after its invasion of Ukraine and its largest shareholders are people like Vanguard, black Rock Capital, Capital Group as well. He said companies continue to do business in Russia, including Nestley,
Unilever as well. So there's other companies doing it. Critics, you have them out there. They're saying that the invasion, it's funding the invasion. He said that those who left Russia left their assets to friends of Vladimir Putin, So you have both sides of it there.
And we're talking new sanctions off of this tragic death. Yeah, yeah, but I don't think they've announce.
The reporting I've seen. You know, it's just the sanctions you've had an impactment really not so much.
We're going to do a disclaimer here. Of course, as Lisa mentions, Mandalese International, they provide us with tang really so you.
Know, thank you, you got it.
I want to take you over to New York Times Washington Post Big Space expedition case, Yes, Odysseus. It is expected to touch down on the Moon today five thirty pm Eastern. The company behind it, Intuitive Machines. They are looking to land in a spots south of the Polar region and if all goes well, here's the thing. It's going to be the first US moon landing in more than fifty years.
Thank you.
I mean, I don't know.
I love the space program. I love kind of what we do. But haven't we been there, done that? You know, have we already done that? It just seems odd here read you know, the Space Shuttle program.
I'm like, now, what do we do?
I'm trying to go. Has a great essay out two three days ago in Foreign Affairs about the state of India, Mody and all that. I really recommended, folks as a very quick, brilliant primer on where mister Mody is and he mentions in there India's participation in lunar flight, lunar landing in that, and it's about you know, I remember as a kid that heated debates over why are we doing this? Why it's never gone away?
Well, we were talking in the newsroom and they were saying, gen Z doesn't believe that we landed.
On the Okay, that's a conversation you missed Tom in the newsroom this morning.
Samantha, who was the representative of gen.
Z, one of our intrepid producers here, says a lot of her cohorts and gen Z believed that the whole Apollo thing scam.
I mean.
They didn't get up at three in the morning.
To watch the silent You can you rich, can you see if we can get Tom Hanks on? He got an effort, mister Hanks. Mister Hanks was the guy who wrote the intro to the Metropolitan Museum of Ours fiftieth anniversary of Landing on the Moon. If you're sitting in the basement and your father hands you a little plastic thing and it's got moon rock and dust in it, you sort of go, Okay, this is a fraud. No, I don't think so, And I should point out a lot of people died trying to make that effort long ago.
For a we we spent way too much time in that Quickly the.
Next newspaper exploration, this one is about working grads. They are in jobs that don't use their degrees. A new study says about half of them, and it's a big problem on their earnings, their career paths, and it's really adding some more fuel to that debate whether the value of a college education because the rising cost of an education. So here's what that study showed. It showed of the graduates and non college level jobs a year after leaving,
the vast majority remained underemployed a decade later. So those who graduated, you know with with with a job in something that they didn't study, continue to stay in that area for another ten years. And it says is that usually college level jobs they earn ninety percent more than people with just a high school diploma, but underemployed college graduates, those who take the positions not in they earn twenty five percent more. So you see the difference there from ninety to two.
Ye. This is really good research. And I grew up in a family where a lot of the jobs were not what they studied in school. My mother was very big on was educated at you know wherever. And the answer is today you've got this disease of people going into college degree programs where there's little opportunity for jobs out there. And that's how you get that ninety to twenty.
Well, I think what I find odd having for look me.
Wait, wait, wait, wait, folks, Paul Sweeney is god, his children are employed and continue.
But I find out his kids come into college and the expectation is that they already have their major decided. They don't know squad, I mean it's I didn't even think about a major un till late in my sophomore year. And that's when you pick your major because you don't know any.
Joseph frescona great, great business slaw giant. We're a bow tie small matter. I had a coarse three two beer in my hand and he said to me, Tom, if you don't change your major three times, you didn't go to college. Right. I changed my major three times. I went from hockey shavy tennis back to hockey. It was great. What else?
This is my favorite story?
Okay, the corporate jets. Yes, the I r S is cracking down on the personal residents.
Think about the surveillance Gulf stream, it is what are you going to do about it?
Look, so usually you can use it to get that deductible, right, but they say they're abusing it for the tax breaks. So they're gonna get dozens of audits in the spring. A lot of across different industries are starting with corporations and they could shift to individual audits.
Yes, could.
You know? I mean Pharaoh, I mean he's hit every day island off the coast of Italy, yep. With the Gulf Stream. He goes into Naples, I think is where he courts player take the boat around from.
There, but I'll drive.
I mean a lot of people, I mean these fancy people, seriously, they live on these planes.
Yeah, well, I mean you couldn't leaving the super Bowl in Vegas. A lot of people couldn't go to the next day because they couldn't get a slot to leave on Sunday.
But they liked Paul and May off the Mark. They literally live Sean.
And I know I know a couple of buddies of mine. They sold their company for a lot of money and they put a big chunk of that aside to fund their private aircraft use for the rest of their life.
They said, if we lost everything else, that'd be fine. We cannot lose our corporate aircraft.
I moved somebody into film from Economy of the Business Class today because it's a pretty good day and I didn't ask what it was going to cost. 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. Visit the Bloomberg Podcast channel on YouTube to see the show weekday mornings from seven to ten am
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