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This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amrie Hortern. 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 LETI servandis this morning keeping the pressure on a run.
Their economy of square set the blockade is incredible. The power of about the blockade is incredible. They're not getting any money from oil and hopefully it can be worked out very soon. The guests were good down. As soon as the war's over, it will drop like a rock. Despite the fact that we are in what some people would call a war, we just hit a new high on the stock market.
So here's the laces.
This morning, President Trump vowing to maintain the blockade on Iranian pause Tehran, insisting it must be lifted before new talks can occur. At most of Raymond James Wrights in this any diplomatic path forward will likely be rocky and have to take the form of a near term framework that allows both sides to claim victory. Joined US now for more and welcome to the program. At times this
has been messy, that's inevitable. We've asked the question whether this is strategic ambiguity or just the lack of a strategy. Do you think we have a decent idea of what the strategy is now?
Well, John, I think the biggest concern that I have is right now, both sides feel the other one wants to get this over quicker. In both the United States and Iran think that they have the upper hand. And so unless someone feels this pressure, the streets of her moves are not reopening.
In the you know kind of back and forth.
Here.
Is it the oil price?
Is it the price at the gas pump here in the United States? Is it political pressure on Trump? Or is it the fact that the Iranian economy needs to move things through the straits. They have more than one hundred and fifty million barrels of oil on the water. They have oil wells that are about to get shut in. Who moves first is really the question that I'm getting the most here at Raymond.
James ed, how would targeted strikes accelerate the process by the US.
I think the hope there, Lisa, is that it is going to just force it, that there is going to be that threat that something has to move. And I think from a market perspective, I think the debate here is our targeted strikes a signal that the kinetic activity is about to really ramp up, or is that the push that finally reopens and gets us back to the negotiating table.
My bet is the immediate market reaction.
Would be the kind of fact that they think that this could reopen things, and this could be the catalyst to those talks restarting.
So the hope.
I have is that even with additional kinetic activity the market holds in there. The kind of risk there is that it actually kind of goes further self before we get any sort of solution.
Ed.
How does a deadline of sixty days calculate in this whole equation given the fact that ostensibly the administration we'd need to see congressional approval to continue the conflict beyond that.
Yeah, So there's two things there.
Under the Warpowers Act of nineteen seventy three, there is this sixty day deadline. What we heard from Secretary Haigseth yesterday is that the Trump administration doesn't think that they are hitting that sixty day deadline because of the ceasefire, and under this there's also a thirty day ability to kind of withdraw troops. However, we have seen presidents in the past violate this deadline. After sixty days, you are supposed to get the congressional authorization, but you go back
to the obamadministration. You actually had the House of Representatives vote to end activity in Libya because they were well beyond that sixty to ninety day period. The Senate never took that up. They tried to go to the courts. The court said, you know what, it's Congress's job. So right now it is a political issue for the Trump administration. And unless you have a veto proof majority in the House and the Senate, this law does not get enforced in two weeks time.
There's a mating with the Chinese leader. At initially when that date was set, when the original date was pushed out to the middle of May, people looked at the Canadar and said it will be over by then. Is that day important anymore?
It's very important because you have the number one economy sitting down with the number two economy. We don't have a huge expectation that there's going to be big deals that come out of the Trump and She meeting. There is a view that that could be some pressure. But there's growing questions that I'm getting here at Raymond James. Does this get pushed off again? We have not seen
the staff level negotiations. Besson and Greer have not met with their counterparts, and unless you have that fleshed out activity before the meeting, you're not going to get real deals into this meeting. The other big question that I've gotten here at Raymond James, is she, who said that this war is upsetting the world order, come in and try to be a bit more aggressive with President Trump. The risk there is that President Trump never stays on the defensive.
He goes on the offensive.
And if we have an escalation in the trade war with China, if we are questioning what's happening with tech restrictions on semiconductors, if we're questioning what's happening on critical minerals. Those are not positive headlines. I don't think we get there, but that risk is absolutely present over this next two weeks.
Are there any signs of that so far?
I've been struck by some of the commentary and corporate calls and thinking of Apple in particular and Tim Cook talking about how things are actually getting better in China and they actually reported it better than expected sales in China. Do you get any sense that the relationship is tension becoming more tense or do you think that we're entering a period of both sides wanting calm.
Yeah.
So after the October meeting between Trump and She, he gave an order. President Trump gave an order to the administration stand down, do not do anything that pokes China, which has given this opportunity to de escalate. There's been conversations with companies like Apple, can they work with a couple of Chinese companies to develop deals on memory because those have been very expensive products.
Those are openings.
Tim Cook has had a great relationship with President Trump since the beginning of this second term.
But if you see this kind of.
Shift and if she wants to make this change, because they hold a number of things that we need to run our economy.
He could get a little bit more aggressive.
Now.
The United States holds plenty of things that China needs to run their economy. It's just more of that personality driven decision making as we go into this discussion here kind.
Of two weeks from now, that can dictate that.
And I guess the one warning I'd have is that we've seen in the past China will escalate right before the meeting to be able to de escalate during the meeting. Trump's able to come out of the meeting and say I won these concessions that China had threatened. That's what we did in October. Will we do it again here in May?
Stay with us.
More Bloomberg surveillance coming up after this slightly more hawkish Federal Reserve this week. Crude price is still elevated, yet we enter May at all time highs on the S and P five hundred, kicking off a fresh trading month. Abbi Yoda of JP Morgan Private Bank writing, despite no when to the conflict in Iran, insight earnings didn't blink companies of beating expectations at a pace we haven't seen in years. Abby Joints us now for more Abbi, good monic,
good morning. Does this mean the situation the Middle East doesn't matter or just doesn't matter yet?
I think doesn't matter yet, right, Like you're not going to really in you know, we tried to lay out three scenarios when this conflict originated, thinking about you know,
what would it take for it to matter? Right, And there is a period of time, like a length that is a derition that is important to keep in mind, and for us, that's three to six months at these elevated prices, is particularly north of one hundred or one hundred and twenty dollars on a oil and so that's really where we're more concerned if we continue to see this extended through the summer, particularly given you know that heavy driving season and you've already seen that percent of
disposable income for the media consumer go up from around three and a half percent to four percent on gasoline. So if that continues to move higher, then that, you know, that could that could weigh on economic growth and sentiment more broadly. I think sentiment, the sentiment.
Channels very bad to say in sentiment already, Yes, consumer sentiment is really ready.
It has been the case for the past four or five years.
Well, this is the question. It's very is the question is going to ask you why is that relevant because it hasn't been Well, I.
Mean it's relevant because I mean it's stark in the sense that it's the lowest it's ever been, and it's at odds with what's going on from an economic standpoint and from a you know, stock market standpoint, earning standpoint, because at the end of the day, what ends up happening is we look at all these confidence measures, we want to have some read through there. But then when you look at the spending figures, right, the bank's all reported in the first couple of weeks of earnings and
spending growth is really really solid. Like a lot of these CEOs were like, you know what, you can't ask us this anymore because at the end of the day, like consumers are still spending, whether they feel poorly or not, they continue to spend. And you know, the makeup of that spend I think is shifted. Right, it's much more services oriented in our view, but it's still very elevated relative to history.
Has there been a shift over the past couple of weeks? And I asked this because Mark Zuckerberg in this letter that he sent out it Meta said that there was a trajectory change in metas ad business after the start of the US War, saying, if oil prices go up, then consumers spend more of their money on oil, on gas, and less on things that they would just buy that are just kind of discretionary things that the advertising might serve. Do you see this in any kind of way or is this an excuse?
Well, I mean, you haven't seen it in the results in terms of ad spend growth and the actual usage of these of these apps in terms of what they're spending on. I think what we're worried about again is if this stays higher for longer and creeps more into the confidence levels of consumers, that you start to see that spend shift. But for the most part, we just really haven't seen it in terms of the ad spend and the growth from a lot of these megacap names.
What's the argument to go more into equities right now after the rally that we've seen as oil prices continue to go higher and as yields continued to rise, I mean, why not just cash out and kind of have a more conservative portfolio and just sort of sits tight and wait for the next leg.
Well, so first, if inflation is in fact going higher, then you are losing purchasing power from anything that's like short term cash related investments. I think the other thing to keep in mind is we're at all time highs in an equity market, but the valuation is actually lower than when we started the year, and that's because we've seen earnings revisions that are in excess of what we've
seen from a price reaction standpoint. So, for example, for one Q earnings, we started this quarter with the expectation that earnings would grow twelve percent.
Now with a little.
Bit over fifty percent of market gap having reported, we're it close to twenty percent. That is enormous, and that's the sixth consecutive quarter of double digit earnings growth, right, So if you think about it, these aren't easy comps, right, We're already growing off of a very high base, and I think obviously technology and the tech related sectors are what's driving that. And the margin profile of the S and P five hundred is just very different than it
used to be, you know, ten fifteen years ago. So when you're looking at oh, you know, the elevated pe of twenty one to twenty two times. But the makeup of this is just very different and is worthy of that higher multiple.
Can we finish on one of your sanctify favorites? Something you know tons about chips, the rudy we saw in Stemmi's forty percent move in April. What do you tell people they should do in that sector now after a running.
Like that, I mean it's buying on strength, I think when you really and I think this is part of the heart, you know, reconciling this, Like we're three and a half years into when like this AI cycle, and I don't think that anyone would have thought that three and a half years in the infrastructure players would have been still the beneficiaries of this trade, right, you would have thought it would be the ads, And you're seeing all these you know, the margin expansion story happen in
play out. But because we're so supply constrained, in an energy constrained it really is that you're still seeing these these you know, the nuts and bolts of this build out.
Those are still the winners.
And I don't foresee we don't foresee that changing in the next you know, two three years.
Check the industry for so long though, That's why it's often so cyclical, but initially supply constrained, they build it out.
The opposite happens.
Bust, particularly on the memory side.
Right, So why is this different? Why does this have a long a timeline?
Well, because I think when you when you think about the starting line, like the starting line, we just didn't have the industrial capacity to really build.
Out what we need now.
Right, this all happened and accelerated very quickly, and we just didn't have the industrial base. Now there's obviously a lot of incentives to build that out, but we're still very far behind. And I think, you know, it's really been over the last like eight to ten months, call it where you've also seen it's just been this trade around all of these different components that go into this, right,
whether it's optical, whether it's memory. We're so those weren't really it was at first it was just GPUs and it was just you know, the compute. But now it's just this broader set of inputs that are all needed.
That we don't have enough of, and you think people should stick with that trade?
Yes, within tech were you know semis over hardware over software.
Stay with us more Bloomberg surveillance coming up after this. President Donald Trump hosting the Artomist two astronauts at the White House this week, the visit coming nearly a month after the historic trip around the Moon. I'm really pleased to say that. In the studio here in New York City, the NASA administrator Jared Isaac mun chared, good morning.
Going to see you.
It's good morning.
It's great to be here.
The pictures are amazic. I understand it costs a lot of money. Can you explain to all of us what we actually achieved in the last month.
Well, I would consider that Artemist two is part of a much bigger plan. So President Trump, during his first term created the Artemis program, America's commitment to return to the Moon. My first day on the job, he signs a National Space policy that says, pick up where Apollo seventeen left off. Return to the Moon, but go back to stay this time. Build an enduring presence, good luck. Build a moon base, which I mean it's going to
be a hub for scientific discovery, economic potential. Maybe we have a lunar economy someday, but it will be the technological proving ground for where we go next, which is more so all part of a bigger plan. Artemis two is just the opening act.
In the period of time, we have changed space exploration a lot. We've introduced commercial space exploration. What does that mean for the role of NASA as we try to achieve these things.
It's interesting I get that question all the time because there are some new names. You have, your SpaceX's and Blue origins that get everyone's attention. It's like, where does NASA fit in? I remind folks, you go back to the nineteen sixties. You had Boeing, yet McDonald douglas built the gem and E spacecraft. You had a Grummin that built the lander that put the astronauts on the Moon. Many of those players still exist today, but we have
some new and SpaceX Blue origin. NASA is at its best when we're doing the near impossible with no other agency, company, nation in the world is capable of accomplishing. And when we figure it out, if NASA can be one customer of many, we hand it off to industry and let competitive dynamics make it better, costs less. Launch is a great example. Right now, dozens of companies brought down the
cost put mass in orbit materially, NASA recalibrates. Like that picture you had on the screen, which was a nuclear powered spaceship, that's not something industry you should be playing with. They don't need to mess around with highly enriched uranium launch reactors over Earth. That's something that NASA is capable of doing. So we recalibrate again back to the near impossible.
The capabilities allows us to explore the outer sols.
Just I think about the space race down back in the fifties and sixties and how much that put grants in all sorts of academic centers to try to get up new scientists, to get them into exactly that kind of thing. Is this kind of what we're replicating here?
Well, I like to think, and I just told this to Congress this past week, is every dollar you give us inherent in it is inspiration.
So of course, the.
Rockets, the rockets, the astronauts are walking on the Moon, the explanes, the images that come back from James Webspace Telescope or our rovers on Mars. That's not enough, right, That's enough to spark the interest. You more kids dressing up as astronauts for Halloween. But we still have a huge grand portfolio that goes out to university. We have a top internship program right now, we take the top
one percent of internship applications. And what I like about our moon based program right now, we're going to have landers on the Moon on a near monthly cadence starting in early twenty twenty seven. We could raid the pantry at every NASA center for science instruments.
There won't be enough. So what does that mean?
There's kids in universities right now in the United States and across the world that are working on hardware that's going to be on the Moon in the years ahead.
There's an argument why focus on space when we have a lot of problems here on Earth to fix? Can you give us a sense of some of the scientific progress that's coming from some of these programs that has real world application beyond just necessarily hyperscalers on the moon?
Sure?
Well, I mean, first, we've been hearing this since the nineteen sixties too, And what I would say, it's a different, different budgetary environment now versus then. So nineteen sixties NASA is about four and a half percent of the discretionary budget.
We're about a quarter of.
A percentage now, So I would argue we can do both. We can make investments into a brighter future for the you know, for the world we want our children to grow up and try and address some of the hardships, the affordability, the challenges of the world we live in today. And does it matter for sure? Inspiration is a price worth paying for the next generation to take us even farther scientific economic potential, I mean, go to the moon.
What could a lunar economy look like someday? I mean, whether we are three D printing satellites like you described, or maybe we're mining helium three that could have quantum implications or future or future fusion power, a source of future fusion power, not to mention to just look knowledge. I mean, what do we stand a learning game? We've only just begun this great adventure.
Can you achieve these goals with budget cuts? They're the questions you've faced all through the last few weeks.
Well, I guess, and I'll tell you the same thing I told Congress on that is, you can't just look at the president's f y twenty seven budget requests without taking it in combination with the historic ten billion dollar investment that came from the Working Family Tax Cut Act, that one big beautiful bill, President Trump's signature life legislation. You take that ten billion plus twenty six appropriations plus twenty seven what can we do.
We can go back to the moon. We can do it with frequency.
We can build the moon base, we can launch a giant nuclear powered interplanetary spaceship, and do all the other things.
You've been to space, not once but twice, right, yes, sir. I don't have the imagination that you have about what this could be. When I hear things like data centers in space, I'm like, these guys are crazy. I just haven't flexed that muscle. I was never into sci fi. What could this be? What do you tell people? How imaginative do you need to be?
Well, let me let me hit that on two points one?
Where do you know?
What is my takeaway from coming back from space more twice? At this point we are at with respect to even exploring our Solar system, let alone the galaxy that you know the or the two trillion other galaxies out there.
We're at the.
Equivalency of hollowing out a log and using it to float across a pond like that is where we are at in this great adventure. It is so early. I mean, you have no idea where this is going to take us in years ahead. And then how do we get there? Well, a space economy sure would be great, because I don't think we're going to have that sci fi future we imagine with lots of space stations in orbital outposts and a Mars space if it's entirely paid for by the taxpayers.
So I want data centers in space to work. Why not take advantage of a giant fusion reactor that's already out there. I want, you know, I want three I want us three D printing organs. I want us making cancer curing drugs in micro gravity.
I want all that to come to fruition.
We can't force it into existence at NASA, but we can do all we can to ignite it.
You know, when Jared walked into the studio, one of my first questions to him was, you've made lots of money. You've had this great, successful life in private business. Why do you want to gome to government. I've never heard someone so excited in the job on government.
He feels like you can make a difference. I don't know, it's very exciting here. I wish I could hear you talk for the rest of the hour, frankly, because to me, this is really the exciting stuff where we could actually innovate and find new places. Do we want to find aliens that Do we actually want to find other life? I don't think so.
Person then I don't know.
This is the heart of what we do at NASA's to answer the question are we alone? I don't know how across two trillion gallony that we are not. I am when I have this conversation with a lot of folks, and we have missions out there right.
We're launched a.
Probe to Europa called Europa Clipper looking for biosignatures. We're launching a nuclear powered octicopter to Saturn's moon of Titan to look for biosignatures. And we have samples and tubes on Mars and if we bring those back, we put it in a better ninety percent chance.
To the breakway.
And you know what a conspiracy theorists are going to say, they pulled the plug.
They pulled the plug.
It's about to say it.
It was about to say it, Chad, thank you, sir. Absolutely, this is the Bloomberg Sevents podcast, bringing you the best in markets, economics, antient politics. You can watch the show live on bloombag 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 bloom Blog terminal and the Bloomberg Business Amp