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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. Brian Gander of Stephol writes the following, Warsh has a history of hawkish FEUs which run contrary to Trump's goal. Brian joined us now for more bran That begs the question how did we get here?
You know, I think you have to tip your hat to Kevin Walsh. I think the politics that went into this, there was a campaign. Basically, I think he ran a very good campaign to get the job. I mean, we've had a series of stories and new use leaks criticizing the other candidates, and I'm not you know, I have no personal knowledge who was behind that, but who's the last man standing Kevin mahsh So you would assume that there were some fingerprints on the effort that went into
knocking down the other candidates. And let's not forget I mean with Donald Trump, personal relations matter a lot. And Walsh's father in law and Trump went to college together and or have business relationships going back decades. So there's always that angle that I think people overlook. You know, personality matters for Trump. Remember a lot of the nominees that have not worked out for him. Over time, he will turn and afterwards I'll say, well that person interviewed great.
I think Kevin Walsh interviewed great.
You know, Brian, I'm glad you brought that up because also there was a recent story about how Ron Lauder had this deal with Ukraine. Of course, as the Trump administration is trying to make sure that investors are there if they get a peace deal to rebuild that country. Are you saying potential Kevin Walsh is in this position because his proximity to power, not exactly how he thinks about the Federal Reserve.
I think it's a factor.
I mean, I can't rank what the factors are, but you know, kind of reiterating my earlier point with Donald Trump, personal relations matter. He wants to trust you, he wants to know you, and he just wants to feel good about you. And that personal connection that he has through laughter, I think matters. I think mattered in the process. I think it gave Wash and you know, an advantage that
some other candidate. It's like a Rick Reader who did not have personal connections to the White House and to the President, does not have a long history with the president. I think that helped Wash hurt Reader.
I think it.
Hurt Christopher Waller a little bit.
Quite frankly, Again, I have.
No personal knowledge of this, but there doesn't seem to be a close personal connection with Waller and the President, and I think that hurt. There was a personal connection is a personal connection with Kevin Hassett. But you know, again, some of the some of the stories that came out were less than flattering about what how the FED may operate under Hassett, how the markets react, and maybe Trump took took a note of that.
He said, how the market reacts?
Brian, do you think that the move that we're seeing this morning is enough to make President Trump start to think did I make the right choice?
No?
I mean unless something changes during the confirmation process, but the immediate market reaction is not.
As if the immediate.
Market reaction was enough, we'd have, you know, policy whip song all over the place. Yes, the White House clearly looks at the markets, but I don't think there's always a knee jerk reaction to it. Let's see what happens over the next couple of months. Let's see what happens with the confirmation process, how that plays out. You know, as it has been discussed, it could be lengthy. There's going to be some political drama around it. It's not
just Tom Tellis. Rampaul is going to have a problem on the Center floor if we get there.
This is going to be a very.
Interesting confirmation process. And maybe something during that time pops up that gives the President time to pause, reconsider again. That's highly, highly speculative, but it's highly unlikely, but it's not impossible.
Stay with us.
More Bloomberg surveillance coming up after this. Senator Tom Taillis from North Carolina joins US small for more. Senator, welcome to the program. So you have been vowing to block any nomination to the Federal Reserve until the DJ wraps up its investigation. We have some news this morning. As you know, Kevin Walsh has been nominated by the President of the United States to succeed chair and power. Does it change anything for you.
Sir, No, it does. I am pleased with the nominee. I think that by most accounts he is well regarded. But we still have to clear the current matter. They're pursuing a on the basis of criminal intent testimony and a banking committee hearing that clearly had no criminal intent. So to me, you got some assistant US attorney with a dream in the DC district that should really determine whether or not this frivolous prosecution is worth holding up a fed born seat.
Senator, we have some time between now and May four that investigation to go away and for the confirmation process to open up. Have you given thoughts to what would happen if we don't have that time we get to May this is still lingering and the chairman steps away. What happens at it's help of the feder Reserve.
Well, I think that we all need to understand we still have a working quorum of members, whether or not they have an acting chair. As a decision that the President and assume the Treasury Secretary and others can look at. But that's not my problem. We're here because of them, We're not here because of me, and so I think they should work expeditiously if they really do. I'm not an attorney. I watch a lot of crime shows, but
doesn't look like there was any criminal intent here. They have to determine whether or not it's worth grinding this out. Like I said, I didn't put us here. Some assisted US attorney in d C District decided to put us here, and they've got determined if they have a case it's worth pursuing.
Senator Tillis, has anyone from the administration or the Department of Justice reached out to you about the process of how this could go down or giving you confidence that this will be dropped in time for the confirmation hearing to go forward?
Well, at LISA, I'd never talked about my conversations with any members. People always ask me what goes on at lunch. I just don't have those conversations, but my public statements stand for themselves.
Is closing the investigation enough a Senator, or do you need other assurances that you think this administration is going to respect the FED independence.
Well, right now, I think you do that by making a judge. Look, we've got two cases here, right, We've got the Cook case and we have the Power case. Both of those to me are instances of independence, and I'm staying focused on that one goal. I'm not really persuaded or even willing to entertain any discussions to take me off that goal.
Okay, but you just mentioned the Lisa Cook case. Do you also need to see that wrapped up either by the Supreme Court in order to move forward?
Yeah? I do. I mean because look, I mean we're talking about what looks like a paperwork error or if there was, if there was a mistake long before she was confirmed for the board. It's like, my goodness, guys, I mean, I don't know. Maybe Paulty or somebody thought that that was cute. I didn't.
So just to be.
Clear, it is not just the DOJ investigation to the FED that you need wrapped up. You also need the Supreme Court case wrapped up. So it's two issues right now and blocks for you to move forward with Kevin Warsh Yeah, well.
No, let me let me buy fartate these one is moving forward with another that the case that will prevent me considering any board nominee is the Powell case. Uh, but I will not move forward. So for the for the FED chair, which we know expiers in February. Uh. The other case we have, you know, the Myron term is about to expire because he was filling up, you know, basically six weeks or I'm sorry, six months, we've got
the Cook seat. Those are ones that are really going to be I'll take a look at the candidate, I'll take a look at how it would affect the board. Look, this is all in my opinion, this is all about sending a signal to the markets and to the business
community that FED independence is critically important. And going after the chair I think took a stool out of the foundation of people's confidence, a lag out of the stool in the case of Cook, I do believe that it's another example of a trend, and the Senate has to
stand in the breach. We have to make sure that the FED maintains its independence, and we cannot reward any bad behavior that seems like it's surely motivated not by the substance of the allegations, but by the interest in trying to undermind the Fed independence.
The Senator, what's your understanding as to whether the Federal Reserve is cooperating with that investigation? Some conflicting reports over the past few days. What you'll read on the situation.
I you know, I'm not really sure, Jonathan. I'm going to leave that. That's a better question to ask the administration of the DOJ.
What if we get the opportunity to speak to them, I'm sure we'll ask. I've got the opportunity to ask you about the man and not just the process. You said this morning, and you've said it again that Kevin wassh is a qualified nominee with a deep understanding of monetary policy. For those familiar with Kevin Walsh in his time at the Federal Reserve back in the financial crisis, they have considered him to be on the more hawkish
side of the spectrum of the on the FOMC. And there is some debate this morning, Centator about what Kevin Walsh actually stands for, given that we know the president wants lower interest rates, what's your understanding of what he stands for?
Well, you know, with Chair Powell, I haven't agreed with all of his opinions. I'm not an economist or his positions, and sometimes I may be more hawkish than Chair Powell. So coming in, I think Walsh is a good independent. He's got an extraordinary reputation in a community of economists and people focused on the FED. I don't think that he would want to destroy his reputation by being independent.
You know, you could have hawkish members like Waller and others, and I'm fine with them on the board to stretch the thinking. But I don't believe he comes in is more or less going to do the bidding of the administration, which is critically important and incidentally, I should say it's critically important for the health and hygiene of the administration.
Senator tell Us, does this give you any more confidence that actually the independence of the Federal Reserve will not be undermined, that this actually is going to be a proper process once some of the roadblocks you're talking about are going to be cleared.
Yeah, I think so, Lisa. And look, this is actually democracy and institutional separation at its finest. We have a disagreement, and we have a mechanism in place for resolving this and moving on. I hope that no one in the administration takes personal offense to this. I'm doing my job.
Senator, do you have any understanding of the timeline?
Well, you know, the investigations can go on forever. I mean, you could see one scenario where Chair Powell has two years left on his term even after he comes off the board. So I mean you could see this going on for two years or in my case, three hundred and thirty nine days.
Because three hundred and thirty nine days that's when you're going to be retiring. And I know, Lisa ash you have had any conversation, and I want to ask you about those conversations, But have you, guys seen any indications from anyone that they do want to wrap up the DOJ investigation as soon as possible?
Well, you know, I think and I think that the fact that they're putting forward this nominee knowing that it would be impossible to get helm through with the current position that I've taken, it suggests to me that maybe they are trying to find a way to deal with this. It could be adjudicated expeditiously, or it could be just determining that they also agree that there was no criminal intent and the chairs testimony and the Banking committee that I participated in.
As soon as you just quickly, have you spoken to the White House as they reached out?
You know, like I said, I have ongoing discussions. So the President I probably communicate once or twice a week at least through texts. So I have ongoing discussions. I'm not going to talk about the content of them. Jonathan, kind of groundhog Day. I'm going to answer the same question every day.
Good movie I heard, Senator.
We appreciate it's time.
Thanks for jumping on the code. Stay with us.
Multil Index Savannans coming up after this. Apple Shafes, Parent Gang sound study. Tech Giant posted best It's best ever a quarter of sales and a forecast one of our estimates thanks to record I find sales. Joining us now to discuss is down Ice of wet Bush. Thank good morning. Get to say it numbers a phenomenal Let's just start with the numbers of themselves. Where else did that growth in China come from?
I mean, look, that's you know, it's pin up demand and then they're having success. I mean I found seventeen it's kind of you know, it's been sleepy, but actually a pretty huge upgrade. Second, I think you see in the numbers.
You know obviously the stock reaction.
Look, I'd say it's it's a yawner because investors are just so laser focused on AI.
Right.
And then there was like how they're gonna monetize what's that strategy? Cook talked about it a little, but in terms of the actual numbers and services and iPhone, Look, it was sort of a best case scenario. And I think now it's really about showing how they're going to monetize on AI. That's going to be their story for twenty twenty six.
Cost.
We need to talk about cost this well, something the typically doesn't come up, but it was anticipated this time around. One thing's getting more expensive.
Yeah, just memory, right, I mean if you look at everything as you sand disk and what's happening on chips, it's supplied dram pricing everything that's happened across the board. But our view is like, ultimately when it comes to iPhone eighteen, they're going to have to raise prices probably
by one hundred, one hundred and fifty dollars. So it's something that we worry about less from a margin perspective, but look, the reality is is that this stock being three twenty five, three fifty or where it is today. It's not going to be because of margins, because of iPhone, because it's served. It's about showing, truly that they have an AI strategy they're going to actually roll out that they can montize.
Well.
Part one of the pig skepticism behind Apple and the reason why it's underperformed since December since it hit a record, has been this question around is it just an iPhone company?
Has it been able to diversify in a meaningful way.
Yes, you did see that thirty billion dollars coming from services, but wearables the macline not seeing that same kind of growth. And I just wonder whether it's enough to just say that iPhone eighteen is going to come out with some incredible AI innovation and that's going to change the trajectory and some of the concerns that they can't move away from this one product.
Yeah, I mean, look to your point, like, the reality is, like the core, the ingredients, the hearts and lungs of Apple are always going to be iPhone relative to as a percent of revenue. But I think their culture has definitely hurt them the last few years, especially because Ai'm not doing acquisitions and maybe they've done you know, like
recently that they've done one a smart one. But the problem is that investors they're not going to give them credit, which speaks to our point like this is the year from Google to Siri to WWDC to Role.
It's not gonna be on the hardware side.
It's going to be how they monetize subscription in AI for the two point five billion iOS devices.
So we've already seen this. With respect to the earnings from Microsoft and from Meta, Meta was rewarded because they showed how they were deploying this in terms of their advertising. Microsoft was penalized because guess what, they have to spend that much more and they're not seeing the benefits as quickly as people were expecting. What do you think investors are getting wrong? So I know you're really bullish and you think that people are underappreciating how quickly this can
be rolled out? What are people getting wrong about what they're seeing in those numbers from say Microsoft or some of the skepticism around Apple about how quickly this can be deployed.
It's a great question.
Look, I mean Microsoft is almost meadow last quarter you know, in terms of the cap aacs and then now they're doing a you know, a ticket take perode for Zuckerberg and Meta, right. So I think it just comes down that for these companies, the challenge is like you have a fourth indust revolution. There's no anyone says AI bubble is not I don't think plugged into what's happening in terms of overall spending on what we're seeing, even on physical AI.
Roboducts, autonomous and everything.
But the reality is that for these companies it's a balancing act and if you just manage it by a quarter or two quarters, they'll lose out. And I think for Nadella and Microsoft that they got to spend on cabacs. Now do I think that conference call is probably a C plus relative to communication. I think that was disappointing and I think.
That that really calls.
I can't just ask it about conference calle Now it's worth three hundred and seventy five billion dollars to a company. I mean seriously, doesn't that how you use something about the price of something?
Yeah, And I think what it does it shows the sensitivity from investors and you see the software self look at service now and software right now? Is that investors are so hygh percent you obviously talk about in the show all the time. Is that is capbacks? When am I going to see the modernization? When are we going to see the growth Azure? Is it forty percent?
Growth? Is it thirty nine percent? Okay, what's the whisper number?
So and I think on the conference call, investors want to see that cap bax toward Azure, toward toward cloud now. I think, on the other hand, like when you listenay, like when we see like alphabet next week, I think that's one Like they're now in a more of a pole position. But a year ago right in New York City, cab driver one touch, it was Barish on it. So I think that's that's the reality of what we've seen in big tech.
Dan.
When it comes to Tesla, do you think they merged with SpaceX or do you think it's XAI and SpaceX.
So, I think it's SpaceX and x AI, But I believe Tesla is going to own a piece of that.
I think that's sort of our view.
And you made a great point because the reality is like the future from USK, it's not it's not delivery it's not call the future and we talk about all times. It's autonomous, it's robotics. And this is really slowly, piece by piece, brick by brick, him building what's essentially like the AI sort of ecosystem. And it just that's essential, I think, the step by step process.
But if he's eyeing an IPO in June, how quickly does this.
Need to get done?
Oh?
I think in the next few months. In other words, like this is something like before March madness.
This is going to have to hit to give some time like before March, because especially with an IPO, you know in the summer.
How much is it being.
Driven by the fact that he is the underdog based on China's development of electric vehicles? How much is this not a failed bet but an idea that he cannot get dominance in the way that he once envisioned in this particular industry.
Well, it speaks to like, look the trial with all men and open AI, that will happen. I think it speaks to like there's a view like maybe from behind from the AI perspective, now they have to go more aggressive. Xai's been a huge offensive bet. You look what's happened trying with buid and you know with the domestic competition. I think Musk is like he's read the room, but it speaks to argue like he is now more of like a wartime CEO in terms of what he's navigating.
But look to put this all together for investors, it's it's a week of faith and we've talked about it, but the reality is like for Tesla would be a six hundreds of de Bees, eight hundreds of bold kids. For TASA, that's not going to get there on deliveries and gross margins. It's getting there on autonomous optimists and FSD penetration.
This is the Bloomberg Surveillance Podcast, bringing you the best in markets, economics, anchient politics. 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.