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This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amrie Hordert 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. We begin this hour, which starts looking to build on a record breaking nine day winning streak. Cameron Dawson of New Wege Wealth, writing, you can't stop the beats, with earning speeds and raises continuing to be the justification for new highs in equity markets, Cam joins us for more. Cameron, good morning, Good morning, it's going to see you.
Look.
The fundamental story I think is well understood at this point. The earnings have been super, super powerful. Where is the more speculative story emerging for you?
Oh?
Well, we've seen an incredible rally in the most speculative portions of the market. Look at the Goldman Sachs Unprofitable Tech Index, up fifteen percent in last week alone. It's up sixty five percent since the March lows. You look at the cohort of space names, most of them are unprofitable. They're up one hundred percent year to date. You look at the Russell twenty five hundred, the leaders in that
index are all coming from very unprofitable names. If you take out or if you look at the names that are actually generating profit and up and trading at a discount, they're only up about eight percent. So if you're a high quality name, you've been sitting out on that. You've been sitting out on this rally. So the question is how much can this speculative portion of markets continue.
So we've got some froth, you've identified it. Technico's a stretched. People have talked about that endlessly over the last two months or so. Is that enough reason to sit this out?
No, it's not, because the earnings picture is so very strong. But I think what we have to appreciate with the earning story is two really big things. The first one is the upside in the hyperscaler capex. This time last year, we're expecting hyperscaler capex to be up ten percent. That number today is eighty percent. So you remember that one
man's capex is another man's profit. And that brings you to the other really important point about this earning story, which is that we are in an operating leverage boom driven by the semiconductors. These are typically high operating leverage businesses, which just means that a little bit of sales growth generates a lot of earnings growth. And you've seen that because margins for semiconductors have expanded from thirty percent just
nine months ago to forty five percent today. So because we're seeing this increase in sales, it's causing a huge boom in profits. But what we have to watch is that if sales slow down a little bit, what you could see is this de leveraging of operating profits that could cause earnings growth to not be as robust as we look into twenty twenty seven.
I feel like we should have a bell that dings every time some with seven earnings earnings. You know, if you think drinking game, drug show, bramo, Okay, well we can plate for drinks, so you never know, you know, drinking coffee, there is an ultimate question, is it just going to be an earnings acceleration that's going to potentially drive some sort of correction to this, or could it just be by virtue of the supply that's coming to market.
Oh. I think that's a really interesting and important point because we've been in a world for the last few years where we've seen equity supply effectively falling. We've seen much more buybacks than we've seen any new equity issuance at the same time as equity demand has been very strong, simply because we push so much liquidity into the system during the COVID era. So we learn in economics one oh one when supply drops and demand goes up, prices
go up. So now we're in an environment where supply is certainly going up, whether it's from the IPOs or the Google issuance, and that just suggests that there is a lot of supply for this market to take down. And the question is is there the incremental demand to absorb all this incremental supply. So it very much is what we think of as a Shakespearean see change when it comes to that supply demand balance for the equity market.
How do you clear space to participate in some of these IPOs, do you, I mean, how do you sort of understand what to sell in order to playball right now?
Yeah, Well, the indices are forced to and I think that that's probably one of the most important points is that the industries are now being forced to put a weight in these names, and mostly for the Nasdaq, where there's going to be a multiplier on the float for a name like SpaceX. I think the question for us is that we will stick to our knitting when it
comes to valuation, discipline, and quality. And you look at name like SpaceX trading at what could be eighty to one hundred time sales on sales that have been growing about thirty percent. They've decelerated to fifteen percent back in the first quarter. But when you traded at eighty to one hundred time sales, even when those sales actually become something that becomes reality, the problem is you have to grow into that fulsome multiple. Palenteer is a great example
of this. Palenteer traded to ninety times sales in the middle of last year during that big, huge rally we had, and then the sales came. Sales are going to grow seventy two percent this year, but the stock has been flat because we've had to row into that high price of sales multiple. So for us as quality investors will always stay balanced with that valuation discipline.
Kern, though, do you think it's uncomfortable that, I mean, the Bank of America fund manager survey show this record inflow most overweight positions since twenty two thousand and two into equities. Is it uncomfortable that everyone is there?
Well, what's fascinating is that we are seeing those inflows because people are having to chase. If you look at the Deutsche Bank Consolidated Equity Positioning Index, it's only in the sixty first percentile, and that has gone into the danger zone. If you go back to late twenty twenty one, you were in the ninetieth percent plus. So there are signs that institutions have somewhat sat on the sidelines of this rally. I don't think that you can say the
same thing for households. Household equity allocations are still at all time highs. If you look at things like the put call ratio, that speaks to some of that complacency, and already there put call ratios are incredibly low, which just means that nobody is caring about downside protection right now.
So the balance of overall of overall positioning is that it's not enough to be a tail end of this market, but it's probably not quite enough to be an absolute headwind like we got you back at the end of twenty twenty one.
To Lisa's point, though, where are people selling? Is it other equities or are they just maybe selling things like crypto treasury to make sure they can get into some of these high flyers.
The fact that Crypto is sitting out on this risk on rally does suggest that people are potentially using that as liquidity to chase other areas of the market, because look, we know that there are a lot of momentum traders out there that are just chasing strong returns. So potentially that is the area where people are using that as liquidity to chase into into something like SpaceX.
Stay with us, mulplempeg Savannah's coming up off to this. If there is the greatest hits of topics, people on Wall Street do not want to talk about. The stratiformos is up there, and this is too. The Trump administration fighting back against the Supreme Court's tariff defeat with a fresh wave of levies, including a ten percent charge on imports from sixty different trading partners, leyby canselor Pimco joins us. Now for more, LIDDI, good morning.
Can you here to talk about this?
I'm so here for it.
You get the short straw, we can change the topic pretty quickly. Your thoughts on this action, where's this going? And how big is this wall going to be?
Even though I think this was sort of in the rear view mirror for the for Wall Street, this is actually very much expected. As a reminder, when the AIPA tariffs were struck down by the Supreme Court, the President of the USTR moved forward with something called Section one twenty two tariffs, the sort of blanketed ten percent tariffs across the board. Those expire though, on July twenty fourth,
so those have sort of a limit to this. So we were expecting that they would be using some of these other tools that Congress has actually provided to the President to move forward to try to rebuild that tariff wall. As you said, I think some of the interesting is that this tariff rate is maybe a little bit more benign, a little bit more reasonable. Certainly than those that we had seen a liberation day, but even those that we
had seen kind of post liberation day. So I think by the effect of average terifry, this might actually land it at a lower rate at the end of the day. But again, none of this is surprising. I also think there's a deficit angle here, which I know Lisa does like to talk about. Of course, this is revenue that the Treasury likes, that the US is sort of getting
addicted to it, if you will. It's one of the reasons why we think tariffs are going to be sticky sort of regardless of who wins in twenty twenty eight, because this is something that is generating quite a lot of revenue and again sort of politically is salient on both sides of the island.
Where does this put some of the trade deals though, that they have with Switzerland, the European Union. His massive summit was Shijing, Pang.
Yeah, I mean that is I think an open question a Marie. I think we've been a little bit skeptical of some of those pledges around those trade deals. Anyway, you haven't necessarily seen some of those investments come to fruition. For instance, you know, we'll see with the sort of the European trade deal in particular, just given that that is you know, sort of pending in the in the EU. So yeah, I have I think that's an open question for for sure.
Obviously a PIMPCO, you're tracking the mortgage market and what is going on with FHFA, and the director of fh FA now is the acting Director of National Intelligence. What was your reaction to Bill Poulty moving over to this space.
Yeah, I would say, you know, I think we would argue that second to the treasury market, the agency NBS market is probably the most important market, particularly to US. But I think, you know, just sort of writ large because of course that sets the mortgage rate that you know, consumers access. You know, this is I mean, it's an interesting choice. Obviously, Bill Poulty has been said, doesn't necessarily have the traditional background for an act for a DNA director.
I think the one thing that is important though is this is an acting position. And just as a reminder, something called the Vacancies Act that allows the President to move somebody in a vacant position, which is a Senate confirmed position, only at that other person is Senate confirmed only for two hundred and ten days, so I think it was very I think the present was very specific that this was an acting position. He hasn't actually nominated
him for the permanent position. That would of course require Senate confirmation. So I think my view we'll see is that this is probably a temporary post, not a permanent post. I do think though, as it relates to the mortgage market, this takes the chances of IPO for Fanny and Freddy very much off the table. That has been our view at PIMCO for many years. We think that risks actually increasing the mortgage rate, not decreasing the mortgage rate, which
is anathemach to what the administration wants at this point. Anyway, we think this is sort of the death knell for the IPO of Fany and Freddy.
This is actually incredibly important for a lot of people in the market, and they actually might view this as a bullish sign because there won't be more at risk introduced into the privatization of these particular agencies. Do you have the same kind of view, Yeah.
I think We've been engaging with policymakers and we said one thing that they could do was clarify the future of Fanny and Freddy and sort of take this idea of privatization off the table. I mean, they are, you know, for better or for worse, they're functioning in credibly well in conservatorship in terms of providing liquidity to the secondary
mortgage market. And if you do anything to sort of upset the relationship between the government and Fanny and Freddy, you do see that risk premium come back into mortgage yields, and so, you know, we think that there's an argument to be made that maybe some more clarification can actually decrease mortgage yields. Of course that's what the administration wants.
I find it fascinating. You're right, Tariff's not that exciting to me right now, just because it seems to leave us in the same place. The straight up from Moos isn't necessarily analyzable. But this particular administration Washington, d C. Has had more direct influence on markets than any I can remember in recent and modern history, whether it's personal sign off by the President on specific transactions, whether it's jaw owning specific companies that are doing different things. How
big are the lobbying bills? I mean, do you see all the lobbyists to sort of gathering around there to try to make sure that that deal gets in front of the right person.
Well, I think this is sort of interesting about this president is that, you know, a lot of what he is doing in terms of private industry is very much more indicative or in sort of parallel with what Democrats have done, right, sort of the state capitalism industrial policy. This used to be sort of the purview of Democrats picking winners and losers. Now you know President Trump is doing it. So yes, absolutely, our lobbyists kind of lining up.
I would say, just going back to the discussion of the mortgage market, something important that Fanny and Freddie have done is that they've been in the market. They've been buying agency nbs to try to decrease that mortgage rate. We think that's actually been quite effective. Now that was sort of upset by the Iran war, so I think in some ways it was negated by that. But it will be interesting, I think just in terms of the PULTI discussion, will that continue, Will they continue to be
in the market trying to decrease yields? But yeah, I mean broadly, this administration obviously much more interventionists than traditional Republican imagry.
You've got a really think through about what we're normalizing care. Stay with us. More Bloomberg Surveillance coming up after this. The former US Vice President Mike Pence warning of threats to the Republican Party in his latest book What Conservatives Believe, Rediscovering the Conservative Conscience, Pence writing, quote, Trump has not always governed as a conservative. The result is that many Americans are confused about what it means to be a conservative.
I'm very pleased to say the forty eighth Vice President of the United States, Mike Pence, joins us now for more. Mister Vice President. Welcome back to Bloomberg Surveillance on Bloomberg TV. Thank you great to be back on. It's good to see you, sir. I'll ask that question to you, what does it mean to be a conservative?
Well, for decades, the Republican Party has really been the home of conservatism in this country. It's a commitment to limited govern free market economics, strong defense, American leadership in the world, and traditional values has really guided the Republican Party since Ronald Reagan came to the White House. And it's why I and millions of Americans were drawn to the Republican Party over the years. Our principal contest was
against the liberal Democratic Party over those decades. But as the Democratic Party has been overtaken by more progressive left policies, including socialist policies, not just in New York but all
around the country. I wrote the book because I wanted Republicans to know that there's a new threat to that conservative agenda within our movement from a populist right that would really challenge our commitment to limited government, to free enterprise, challenge America's role as leader of the free world, marginalized values. And I do think, as you quoted from the book, that many are confused about what it means to be a conservative. So that's what inspired what conservatives belief.
Well, you served alongside him, of course in the first term. Was he a conservative?
Then?
Well I think, Look, I say this in the book. You know, I know Donald Trump better than his most ardent defenders. We worked together every day and spoke every day for four and a half years, and in fairness to the President, he's actually never said he was a conservative. In fact, I lost count of the number of times that I would say in conversations in the Oval office. Well, that position is a conservative position, and he would he would wave his hand and say, what conservative, It's just
common sense and so. But in our administration, I will tell you I think we were very faithful in most cases to the traditional conservative agenda, appointing conservative judges, upholding the rule of law, and particularly in the area of free market and economics and free enterprise. We cut taxes,
rolled back regulations, unleashed American energy. But on economic issues, I think it's becoming more apparent, particularly in the business community across this country, with the advent of broad based tariffs imposed on friend and foe alike that while they were turned back by the Supreme Court, we saw the news this morning of a new round of tariffs attempted by the USTR, the nationalization of American businesses with something we never countenance in our administration, is much more part
of a traditional socialists thinking around the world. Price controls on pharmaceuticals and credit cards, these are I think these are policies that come out of the populous right amory and they represent a real shift. Now me, can I just say I think the second Trump administration has gotten a lot right, standing up to Iran, standing with Israel, extending those tax cuts, securing our border. But on some key issues, we've seen those populist right policies take hold.
And I want conservatives around the country to know that.
These are ideas that you'd hear from a Senator Elizabeth Warren or Senator Bernie Sanders. But the issue in Washington right now is there's a lot of people speaking out against this in Congress. Do you feel that Trump has gotten a lot more carte blanche this time around?
Well, I think so. I mean, the president is the leader of the party, and with majorities in the Congress, I think there's been a tremendous amount of deference to the president. But you put a fine point on it. In fact, in my book, I point out when the president first announced a nationalization policy, it might have been the Golden chairs in US steel, Elizabeth Warren said memorably, Donald Trump has come across an idea that I came up with years ago, and John might argue with the
nationalization with something Elizabeth Warren came up with. There might be a deeper history in other parts of the world, But I honestly believe that there's not been a great deal of awareness broadly among grassroots Americans about some of these shifts, but people are starting to wake up to it, and I hope my book is a part of that awakening. Not just because I think conservative policies are good for
the Republican Party. It's because I believe freedom, free market economics, commitment to limited government, and American leadership in the world is good for America.
To build on what Emory was talking about, though, we've seen recent primary elections and the people who are considered a bit more populist have been the winners of the Republican primary process. Those are the ones that have been backed by President Trump. He still has quite a bit of clout in getting those to Congress, to Washington, d C. He is, in many ways the Republican Party. Do you think that the Republican Party that you're talking about still exists?
Oh? I do.
And don't leave out his influence in primaries in Louisiana and Kentucky and Indiana, some state senate races in Indiana. Look, the President enjoys tremendous support among Republican primary voters, and I think it derives from the fact that from the time he came down that Golden escalator here in New York City. He has been willing to fight the radical left. He did it during our years together, he did it since,
battled through law Fair, won back the White House. And I think there's a great appreciation by Republican voters for his continued fight against the radical left. But what I wrote the book for was just to make sure that we don't conflate the loyalty to the president, as some on the populous right would have an embrace of a
new agenda for the Republican Party. I think the Republican Party has to be a party committed to free market economics and limited government and all the ideals and principles. I'm particularly troubled am read with your background on foreign affairs, particularly, I'm particularly troubled about the stops and starts on American
support for Ukraine. It was the populous right, voices inside and outside the administration that actually argued against striking Iran's nuclear facilities a year ago and even launching Operation Epic Fury, and even more troubling to me, voices on the populace writer questioning America's support for Israel, and with that rhetoric actually descending at times into the dark hallways of anti Semitism. Look,
that's not who conservatives are in this country. It's not what conservatives believe, and try and call it out in the book.
Let's finish on one particular policy debate that I think we'll be at, defining policy debate for the next decade perhaps, and that's Ai. I've sat he wondering at times, what is the conservative position? What will the conservative position be? I know what the left will do and how they respond, tax redistribute, tax redistribute. What's the conservative position on that technology? What's it going to be? How evolved in the next ten years or so.
Well, I encourage you to read my book, John, because you'll.
See I'm just going to come.
I think there is a Look, the conservative view would be that technology is neutral. It's neither good nor bad. I greatly admire the former chairman of Intel, who's written
a wonderful book entitled ar Ai for Good. And I think it's imperative that as we move into this that we trust the marketplace, but that also we ensure that that artificial intelligence work for us in the way that we want it to impact our economies, in our workplace, and most importantly for conservatives is that it respects the values, the universal values of the overwhelming majority of the American people who believe in and cherish freedom and cherish the
importance of family. You know, when you see troubling stories about the chat programs that actually assist teenagers in finding ways to take their own life, it's just tragic consequence. I think it's actually imperative the conservative step forward and say let's create the guardrails around AI so that consumers will have places to go for AI that really reflects our goals, our objectives, our values, and let the marketplace work.
Yeah, that's what I'm kind of getting at. I can trust the market rump Limpack. I think that's a great tradition of support for free markets and limited government in our audience. At least, can we trust the leadership of these companies?
Well, I think that's I think that's the real question today, and what we want to do is facilitate the emergence of alternatives within the marketplace. Look, I think the American people have understandably have concerns about AI, but have given the opportunity to spend their dollars and spend their business resources on AI that works for US and respects those universal values. I trust the American people will choose.
Well.
The one thing on AI to Jonathan's earlier point about what the left is going to do, Bernie Sanders says he wants to tax these companies fifty percent. Steve Bannon, which you know well from Trump's first term, one of his key architects of his rise and how Trump would speak, doesn't think Bernie Sanders goes far enough. Is that going to be the Republican position, whether you agree with it or not in twenty twenty eight.
Republicans don't raise taxes, Republicans cut taxes, and would caution you against giving anybody too much credit for Donald Trump's rise other than Donald Trump. I mean this president from.
Where the base is right now, Well, you.
Know, I honestly think that when you talk about the base, which is one of my least favorite terms in politics, we talk about our core voters, that there's, as I said to Lisa, a great, great appreciation and affection for the president. It's totally understandable for the fight that he's
waged against the radical left the last ten years. But on the populist right, there are voices that want to take that loyalty and permanently change the direction of the Republican Party to a big government party that embraces protectionism. Isolationism marginalizes values, and to put a fine point on it, I don't think that's what conservatives believe.
When did you speak to each other?
You know, we spoke shortly after he won re election and we had a war exchange.
John, it was what did you talk about?
I just congratulated him. Yeah, and I can tell he was moved by that, as was the first lady. Look, I uh, you know, President and I served together very closely. He wasn't just my president, he was my friend. Our administration didn't end the way I wanted it to, but I'll always believe, by God's grace, I did my duty that day. But you know, for me, it's I want
this president to succeed. I love this country, and I don't talk to the president as often as I used to, but I get the distinct impression that he still listens to me, and so I hope he gets a chance.
To I listened to you as well, and I promise you I'll read the book. It's coming next to the Thatcher biography on the Best Night Table all right to see a set. This is the Bloomberg's Events podcast, bringing you the best in markets, economics, ancient 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 out
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