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This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amrie Hordernt. 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 the sout with stocks, Agenkaiah on the Hills and videos, earnings report, Mark Leman of Citizens Commercial Bank, writing, it's not just a company print, it's a real time read on AI demand and the health of the entire ecosystem. Mark joins us now for more. Mark, welcome to the program. Let's get the health check. How is the health of the entire ecosystem?
It's definitely healthy, Jonathan. It's headlines every single day. Obviously we have been We're three days from the Trial of the Century, I guess, and it came and went. But it's still the most important story in the marketplace outside.
Of oil, and we're going to learn a lot.
Today outside of markets. Mark, AI's got a big PR problem. You would have seen the booze over the weekend, the clumsy comments coming from a bank CEO that we've covered extensively in the last twenty four hours. You and I have had this conversation. Is that becoming a bigger and bigger issue? And how do they address this?
You know, we did talk about it, and it does not seem to have abated at all. Like you said, it was the bank ceo, it was some graduation speeches. They do have a PR problem, and they've hired the best in the world, and that hasn't actually helped. I think unfortunately, as my kids would say, it is what it is in a way. I think there are some issues as it relates to messaging. There are some issues
that relates to what's going on in corporate America. But this freight train is moving as fast as power and actually it's accelerating and it's not going to slow down.
It's the policy story, though, Mark on the horizon, and maybe I'm thinking a little bit too further out a year, two years into twenty twenty eight and the next general if the public are booing and they're pushing back, and they can't get the message on track. I just wonder when the policy story starts to become a stock market problem.
Well, I analogized it to what happened four and eight and ten years ago when we had Mark raise his hand in front of Congress and all the Internet people raise their hands in front of Congress and begged them to regulate them. And I remember watching Orange Hatch and other people talk about the Internet as if they didn't understand it. And unfortunately, I think we're going to see Dejabu all over again, and that we don't have Congress really understanding if what is actually going on every single
day in corporate America. And you're right, the messaging in the general is going to be really.
Really important.
But think about that two years from now, two and a half years from now, in the big election in twenty twenty eight, we do have one obviously in the fall. What's going to happen in the next two and a half years is going to be We're going to look back and say, oh, my god, we knew this was coming, but it's.
Actually more than we even thought then. Well, so that's what's going to happen.
Forget regulation, what about just a massive tax on these companies. What's the impact of that on the stock market.
I don't see it.
I think there's going to be local jurisdictions that obviously make some big moves on that.
We saw it overseas in Europe.
If you remember what they did with Google and some other things. We saw that in the EU. I just don't see that here here in the States. I think it's a big messaging issue. I think it's a big issue as it relates to corporate America. But I just don't see the wherewithal for Congress in the federal government getting involved.
John mentioned the standard Charter CEO very clumsy language talking about AI and displacement of employees and basically to just use AI instead.
How do you talk about it.
I don't see it as just wholesale displacement of employees. What we're seeing is the empowerment of employees, and we're seeing the ability for people to just do more with the kind of tools that we're creating.
Citizens.
We have this reimagine the bank here and we're showing use cases that are very very powerful for people. I think it does question how many people you're going to need to do that. But I remember when I started on Wall Street a long time ago, I was the first person to get a BlackBerry. I was the first person to get email broadly. And it sounds so archaic right now, but boy, I taught a lot of people back then what it was like and what power it was,
and so to not be afraid of it. And I think we're seeing that here at Citizens So this, Oh my god, everyone's going to be home using AI for their career.
I just don't see it.
I see the empowerment more than I see the problems as it relates to total wholesale changes in employment.
Well, Mark, that's the important distinction, empowerment or replacement. The blank Arry was to help you. It was to empower you. It wasn't to replace you. And when we talk about agent KI, typically we're talking about replacement and not empowerment. Are we getting it wrong?
Well?
I think, as I always say, always and never are rarely true.
I think everybody being replaced because of AGENTIC I think is unlikely. I think that empowerment is really important. And you're right, Jonathan, the BlackBerry seems so archaic and novel, but back then it didn't. I will also say for the power of some of our early young staff members and some of the people who really understand the power of this to really make important strategy within our company and all companies around and show the power of it as opposed to the fear is really as important.
As anything in old school. I wish we never had the day where we started taking our work home with us, but that's another problem. Let's talk about the opportunity in video reporting after the closing bow. I've mentioned this a few times in the last hour. This used to be the blockbuster earnings report. Still is to some extent largest company on the planet. Of course, as some of its glitter. I think over the last month or so, because within
the rally in chips, the explosive moves have been elsewhere. Mark, what do you think is changing.
I think it is still the most important company in the world. It shows because it really does power. It's the fuel for the AI and fuel for corporate America right now. I think part of it is just the bigger they are. A little bit is sort of the messaging here. You've talked a little bit about the broadening of the chip market and what Intel and AMD have done. As it relates to Intel, it made the stock may have doubled in the last few months, but it's still
relative to that market cap. That's a one day move in in Nvidia, so I'm a little less worried that that move is.
In Vidia underperforming. I do think it's the most important company.
The bigger story, I think, Jonathan, is what's going on with the big AI companies and the share that's going on, the jockeying between Anthropic, open Ai and the others. There's plenty of market caap and there's plenty of investments still going on. That to me is still the biggest story in Nvidia is going to power all of.
Them follow the talent. Mark I'm following the talent, and I seem to be going to one and not the other. What's gone wrong at open Ai, well.
I think, like a lot of success stories, I think big management issues internally. Obviously, there's been some stories that we've all read about what's going on inside of open Ai. Anthropic has been really mighty in the last few months. They did, i think in terms of pr and in terms of their quality of their chips. I'm sorry their quality of their offering. They seem to have won. We saw that with the Iran and Warren some of the inner fighting that happened with the federal government.
That news certainly has seemed to die down.
And Therapic has done an incredible job obviously over the last year of their story, of their success, of their offering, it's second to none right now. I won't count open Ai out by any stretch. It's an enormous market. There's too many winners that we mentioned right here, but yes, things are Every single day we hear a different story, but Anthropic has definitely carried the last few months.
Stay with us. More Bloomberg surveillance coming up after this. So here's the latest this morning. President Donald Trump want to get fresh strikes on Iran in the coming days, as the White House pushes Tehran to return to the negotiating table. Katherine Thompson at the Cato Institute writing, the US is teetering on a knife edge of not only resumption of hostilities with Iran, but long term entanglement in both this conflict and the regent. Catherine joins us now
for more. Catherine, welcome to the program. Are we running out of options to maintain the status quo.
You know, I think we are. I think we're reaching that point. I don't think we're anning closer to a deal than when the President was speaking about a week ago. And I think that you know, in that time, particularly the foreign powers that are involved in this conversation. You know, on our side of these bilateral engagements, the UAE in particular, has taken a more emboldened stance. This puts more foreign interest on our side of the table, where Iran is
just contending with largely itself. And I think that this sets up a really dangerous dynamic going into conversations on a deal that now has a deadline of two to three days.
Well, Catherine, when it comes to this deal, I mean, the Wall Street journals reporting with Base, we all know that Iran's position of negotiations hasn't changed at all. As much as the Vice President and the President say that they want to make a deal, if their positions haven't changed, is the United States willing to give up some major concessions at the negotiating table or do you think the President will actually take the strikes?
I mean, I tend to think that given what we've seen from the President so far, the strikes are very very much the option that he's going to do as the best lover of pressure. The problem, as was pointed out in the previous segment, is the threat of Iranian retaliation. We know that that's the case, of course, we know that the Iranians would plan to retal if they're attacked again.
But the problem with this poses for the United States, who's in the midst of ammunitions crisis, is that Iranian retaliation would likely come on US basis and personnel throughout the rest of the region. That's going to require more of our most exquisite and expensive air defense air defense platforms to support a defense of our own personnel should that retaliation come, and that's something that we can't afford to treat lightly on our side as a strategic consideration.
That's the retaliation.
But what do you think the president will target if he's going to resume attacks.
That's hard to say, right. I mean, limited strikes, especially as was sort of outlined in the previous segment, could mean a lot of things. I mean, I don't know if that includes more energy infrastructure. I mean, I don't think it would include you know, leadership again or anything like that that we saw towards the beginning of the war.
But so it's hard to tell, like what could be considered limited to sort of get the Iranians to the table, that wouldn't you know, trigger again large scale retaliation that that that hurts our bases and our personnel in the region.
There seems to be two different negotiations going on in Jonathan spoke about this earlier this week. There's a negotiation to open up the strain of removes and then there's a real nuclear negotiation when it comes to opening up the strain of removes. Do you think that Trump administration has now convinced allies to come help?
You know, I think that this is a tricky one. As you guys pointed out in the in the segment prior right, NATO requires consensus to come to the table and to provide any support for out of area operations. The other, you know, sticky point of this situation for the Trump administration is that basically the Trump administration spent the first year in office, you know, berating the Europeans about doing out of area operations. They want focus on convention.
The Europeans focused on conventional defense and deterrence of the continent, which is absolutely something that that that is needed to keep you know, NATO sustainable for the future. But that's in direct conflict with this ask of now NATO putting together an out of area operation and out of area mission to go support the US efforts in Iran. That's going to be a really really heavy lift for consensus, and I think.
That we are.
I think we're quite far from it. I know we've got some time until the Angora Summit, but I think we're going to have a really hard time convincing some of those hold out NATO countries to come to our aid because politically it's very, very toxic for them.
Stay with us. Mulblinderg. Savanna's coming up off to this AI facing a massive week of backlash.
Today we stand on this edge of another technological transformation. It will touch every profession, every classroom, every hospital.
I know what many of you are feeling about that. I can hear you. There is a fear.
University graduates booming commencement speakers across the country when discussing the technology now the standard shout at c walking back commens after saying AI could replace quote lower value human capital. The Oxford Economics CEO in a s McFee pushing back on the negative AI narrative, writing, the speed of adoption is critical and it's assumed to be oddly enough for new jobs to be created to absorb those lost in ex choined us. Now for more and it's good morning, good to see you.
Good morning.
Let's get into the pushback, the backlash we've got right now. And what kind of labor market do you think we need to confront in the next several years.
Well, I think the near term picture is not one of you know, mass unemployment and rising layoffs and things that gets a lot of attention. But I think it's also important to note that if you look at let's say the information sector, you're also seeing higher hiring.
Rates as well.
So what that tells me is there's a lot of churn in the in the job market at the moment, but not a big net loss of jobs. So you know, for a lot of people, it's going to be about what the skills that are needed to navigate this labor market over.
What skills do you think will be needed? And do you think we face the same kind of thing that we had to face with globeation, except this time it's why color workers are not blue color.
Well, I think when you look at AI adoption at the moment, what is actually being used at in the surveys, it is things like drafting, It's things like you know,
automating relatively simple tasks. And really I think what will end up happening is that there's more emphasis on you know, kind of the more critical appraisal, the more insights those sorts of factors, and that will be what's really critical for people to be able to demonstrate because AI will be able to help with the sort of more day to day tasks.
What about the political economy, this is one area where you see the very far right, the Steve Bannons, and the very far left like Senator Bernie Sanders, actually agree on what these companies should be doing because of the potential job losses they're going to mean for the economy.
Yeah, well, I think you know this is there's no doubt this is a huge structural change for the economy of the next few years. We've not yet seen the big productivity gains, but we are like to see over the next couple of years. I think a bit of shift in that skills mix, and what we would expect is that you end up with as you lower the prices some of these tasks actually demand goes up. Is what's called Jevens paradox. You know, you start to see
more demand coming through. But the phasing of these things. As ever, with economics, we talk a lot about long and variable lags and things like that. Well, actually, in this context that's going to be really important because you're talking about you know, potentially a couple of years in the labor market where we have to navigate those shifting plates. So I think policy does have to play a role there.
That's political policy.
But if we're seeing potentially shifting labor market and it's going to be bumpy if we have higher unemployment because of AI, could federal reserve ratecut or any central bank ratecut actually solve that problem.
Well, I don't think it can solve the problem. As ever, Monetary policy is going to be one of those things that actually just tries to help mitigate some of the impacts, offset some of them. But I don't think that's what
we're seeing at the moment. We're seeing some churn. We eventually will see, you know, AI adoption spread we'll see the types of tasks that AI can help with sort of move up a little bit the value chain, and that will ultimately, you know, maybe even mean a sort of disinflationary task.
Do you think to help current workers or task to eliminate current workers?
So I think it'll be very much labor augmenting. It'll help current workers. I think that's the sort of thing that over time you'll see real wage gains because productivity rises.
You sound constructive, Yeah, you really do.
Yeah.
Do you get much pushback when you make this pitch?
Well, it does get you know, some people agree with me, and then others violently disagree with me. You know, I think that if you go back a couple of a couple of months and we had this kind of AI dystopian narrative really take hold, and this kind of idea that we would end up with, you know, the labor share really falling, and the you know, we're ultimately going to see a fall in demand. But the thing that I say is name another technology where that has happened.
You know, we have not seen historically a technology that has led to kind of lower demand. We obviously see resources moving around the economy, and that can be painful, and there'll be a role for policy in that.
This is a big picture question. What do you think the Industrial revolution would have looked like if the age of social media looked like can you imagine what the pushbank would have been like to that?
Yeah, well, I think that's one of the issues here, isn't it That you've got this narrative where you know, it's possible for really people to focus in on just one lens of bit and I think you know, what we try to do is step back and have a broader take on Yeah, some areas of the economy are going to face real disruption, others are going to pick up and move and with.
You think ultimately, as you know, though, there's a sequencing problem at least up front. Always see is the higher costs and the risk of job loss associated with this technology. What happens next? I don't know. You're constructive, and I hope you're right, But in the near term we've got a bit of an inflation problem already. Does this big push contribute to it?
It does, But I think in ways that probably people don't really understand people. A lot of people focus on the investment side and think Okay, that's pushing up demand. Remember there's a big import story that's associated, But that's the net impact on the economy now go good terms is only a few tenths from the big investment boom.
Where I think it is having an impact, particularly on the consumer basket, is that the push towards higher memory, higher value add chips is actually sort of crowding out, particularly in an environment where we're seeing some supply constraints
via the Middle East situation. That's where we're crowning out a little bit those lower endships, which are of course in lots of consumer goods, and we think that's probably going to add at peak something like three tenths to core PCE over the next couple of cours.
Where's you've got inflamation peak in at one number.
So we've got four percent for headline PC and sticking around three for a while in the core.
Can you cut with core around three? If you're Kevin Wash, can you make that push well?
I think one of the things that he's been very clear on is the forward look, which I think is right because remember, munty policy is not going to affect much today. It's going to affect things in two years time. His big idea, his big theme is that the course AI is going to be very disinflationary. They need to look to that and respond to that. So I think that's the narrative that we'll see. It made warble at times, but you know, I think in the near term we
see them just staying pat There's not much. There's not much to be gained from cutting right now, just as you're seeing inflation peak.
This is the Bloomberg Surveillance Podcast, bringing you the best in markets, economics, angio 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.