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This is the Bloomberg Surveillance Podcast. I'm Tom Keene along with Paul Sweeney. Join us each day for insight from the best in economics, finance, investment, and international relations. You can also watch the show live on YouTube. Visit the Bloomberg Podcast channel on YouTube to see the show weekday mornings from seven to ten am Eastern from our global
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Cam Dawson joining us now chief Investment Officer at New Edgewealth. Great to have you with us here in studio. Let me just get your reaction to these numbers and what we heard from Neil there just a moment ago. It sounds like the trajectory seems smooth, the glide path is smooth. You're destined for this phantom soft landing. Your reaction to the numbers we've got and how does that dovetail with what you're strategizing and thinking about investments?
The data continues to thread this needle where it's not hot enough that we need to take rate cuts off the table, but it's also not cool enough to suggest.
That gold blocked.
Yeah, it's right in line in the sense that we don't have to pull forward rate cuts. We don't have to do fifty bases points in September. So it does give the FED the ability to have a certain degree of patients, which we think is actually good for equities. Urgency would be bad if you're cutting because you have to you have to get those cuts in. That would be something we don't think risk assets would like game.
This out for us. Neil Dudda is saying, the next stage of this is for the FED to figure out what that cut cycle is going to be, like, how do you navigate that, how do you think about equities within the context of that uncertainty? What the FED is going to do here after this begins.
The big, huge question mark is not when they start in what they do in twenty four, it's how this progresses in twenty five. You look through twenty six, there is nine cuts priced in which, if you don't have a recession, that's a really deep cutting cycle. Regardless of what you think about where the rate real FED funds rate should be. So when we think about the path into twenty five, we think the FED will still be data dependent, which is why we think that they want
to keep their options open in twenty four. Don't cut it every meeting, don't accelerate cuts, because that then allows them to be patient and see how the data comes in in twenty five.
Yeah, I'm telling me to ignore the real rates. I think, yeah, you love the real rate.
Well, no, I just look at it as range bound. Yes, what I put Kim. The thing here with Kim Dawson is there fluidity across the four accounting statements is an act of God. We're starting to see earnings and it's like the worry is OMG. Revenues aren't going to be where they are free cash? How growth is not going to be there? I'm saying, blowney, it's one by one every stock matters. Do you detect a trend to day in the dynamics of Kim Dawson ratios across seeing the accounting statements.
There is a very important thing that we're seeing with revenues versus earnings. Revenues aren't beating at a very high pace. Only about forty percent of companies are beating on revenues, but they're beating on earnings, which means companies are pulling all these levers below the line in order to make earnings materialize. And some of those are the quality, which is why stocks haven't necessarily been reacting.
Well, well, she knows, she's laughing at me.
Can you see there?
Knows you know she's she's just laughing at me. Cam. The bottom line is that theories there, But the key thing is forty percent of stocks are getting it done. How do you discern those forty percent of stocks that are delivering unit and price revenue mix that gets it done.
It's pricing power. And I think this is the biggest theme in question mark over the next World six.
I've written in the next week this is coming Jack Welch, coming back.
Well, you were hearing from companies time and time again that they're having trouble passing on higher cost to customers. And this is because inflation is falling. When you see CPI fall, that's effectively saying that companies aren't able to pass on these higher prices. That translates to margin pressure if this continues, and I think that that would be the question for twenty five. Maybe the FED like said
inflation's falling, Maybe consumers like it. Corporate profits might not like it as much.
Cam situate this for us and what we've seen over the course of this week last week as well, everyone is so blinded buyer distracted by handful of companies, by AI, these megacap companies. How do you see through that? What's your counsel to those who just have been distracted by that for so long now and at this point seeing the kind of rotation that we've seen or beginning to look elsewhere.
So if we think about the rotation in the terms of the accounting statements, I think it's actually an important way to view things. Right now, lower quality companies are rallying because they're getting balance sheet relief. What you're seeing is that interest rates are falling, and people are hoping that interest expense for those small caps, mostly those that are unprofitable, will be easier. The thing that is the question mark is if you continue to see this deceleration
and growth, do you get income statement pressure? So balance sheet relief is one thing, but does it come with income statement pressure, which is why we think you can buy left behind areas like small caps, like international, like value, but you have to focus on the high quality portions of that market. Don't taste junk because junk will reverse if you start to see softer growth.
Is junk.
No, Big tech isn't junk. But just because it's not junk doesn't mean it necessarily was properly priced. If you look at the valuations, they of the overall Tech index, it was trading higher than it was in twenty twenty one at the peak and twenty one. So we do see valuation as a risk, as a thing that could be reset, but that can be reset in the context of a broader medium from uptrend. These areas are still in uptrends, which we think need to be respected. At
a point. If you start to see earning's weakness, that's when we'll change our mind and say you should trend back on risk in some of these areas.
The key thing you're on a Friday or everybody's going to cash to keep up with me. The bottom line is you're still in a bullmarket mode.
Can anyone keep up now?
No, I'm trying to make the first folks, I'm looking at an odd lot in Apple. I'm thinking like thirty two shares, Yeah, Monday morning. But the answers, we're in a bullmarket, get over it.
It is a market that has been absolutely demanding that you respect the trend, and we still aren't oversold yet. I think that is important to note. We've had this volatility, but we're still in an up trend, which I think should be respected until that changes.
Okay, the highlight of the week right well, right now, we did led Zepplguy Okay, Lizzie Sauders is doing led Zeppelin. Somebody else is doing led Zeppelin. Carl up in New Hampshire emails in he's doing led Zeppelin. Madison Square Gardens nineteen seventy three. Ken Dawson, you listen and do this weekend led Zeppelin?
Wow, everyone is How did you know that? I just know I've got his finger on the pul the Zeitgey's on the pulse.
Told you Ki Ki, Kim won some LEDs upon love. Kim Dawson, thank you so much to see you. But do it's really really appreciate it. The politics of this of this July is simple gir and izing Hail Mary's that we won't have to work on Sunday. Also, Greg Valier may not have to work on Sunday. Why don't you bring in the exhausted Greg Valier of AGF.
Yes, Greg Valier joining us now with this important perspective on what's happening in Washington, indeed, with this campaign overall, and Greg, we're going to see this short video shot of Kamala Harris taking a phone call from former President Obama and Michelle Obama over and over and over again at the last one hour is prologue here, explain the significance of it. We have seen an incredibly rapid run here since Joe Biden dropped out of the run for
reelection of Democrats getting in line to support him. What is your sense of the significance here of this last piece going into that puzzle, the Obama's throwing their support behind the vice president.
Yeah, the party all of a sudden is looking pretty good, pretty unified on a lot of issues. I think that Obama coming on board is crucial, and I think the Republicans have not had a good week at the polls, and they definitely have not had a good week with Taylor Swift and jd Vance and Katz, which is one of the craziest issues I've ever seen in my career. And Vance, I think is on the wrong side of this issue.
On the Wright side of kats issues.
Anna Wong Chief Economists Bloomberg sent me a photo of George Washington's painting in the National Gallery on this topic.
Yeah, and we're supposed to hear from Jade Vance later. I think he's on Megan Kelly's show and she promises she will ask the public comedy about his comment.
Offspring.
Yes, the thing is there's a there's a deeper story here, as you guys of course know, and that is they want to mock Kamala Harris as somebody who never got married, never really had her own biological kids. I think that's a it's a pretty dirty trick, and I think they are trying to make an argument that childless, cat owning women are hurting the country. I mean, if that's just crazy stuff, you can't make this stuff up.
Craig, what is sticking you know? I think that this threw everything out of whack. Of course, the departure of Joe Biden in this race, the introduction of Kamala Harris's as the presumptive nominee. You see the Trump campaign fumbling a bit here. We got this statement last night saying they're not going to commit to a debate later this later this year until Kamala Harris gets the official nomination
from the Democratic Party. What does all this say to you and what's your sense of how that line of attack is coming focus so much as it is?
Yeah, you know, it's still July, you know, and I don't want to over emphasize. I've never believed a campaign really got underway until after Labor Day, so it's a time for them to iron out their soundbites and to get things in line for September. But it's not a fatal week for the Republicans, but they can't keep having weeks like this over and over.
Should they do the VP thing before the Sunday talk shows or should they really wait till August fourth before virtual anointment.
I would advise them to tease it like Trump has. There's no need to come out with it right away. I think it's down to two candidates. Tom It would either be Mark Kelly of Arizona, who I think will be the pick, or maybe Josh Shapiro, who's very good also help us with.
That calculus there, You look at those two very capable candidates for that position. Give us the pluses and minuses for each, if you would, Greg Well.
I would say, for Kelly, he's not in a state with a huge amount of Electoral College votes, a state the Democrats probably going to lose anyway, so that's a factor. And for Shapiro, he's very young, he's not totally experienced, but I think he is. He has a lot of upside. He's a quality candidate who could maybe make the difference of a point or two.
Greg, I want to get your observations of how these last few days have gone. I think what's really fascinating to me is, you know, Joe Biden has a very close inner circle, but he had a pretty sprawling campaign apparatus, and really in a matter of hours they took out the candidate and put a new one in. And it seems like that mechanism is working pretty seamlessly with that
new candidate. That's a surprise to me. I wonder if it is to you, And I'd love your counsel with the campaign of what they need to continue to do to keep it running efficiently.
And Well, it's a good question, David, and it is a bit of a surprise. I do think there'll be more legal action with the Republican saying that the Democrats didn't have the right to transfer all of this money. There's talk of trying to impeach Kamala Harris. I mean, that's not going to happen. But the one thing that stands out for me is that the Republicans still really
don't have an angle to attack her on. I don't think they're quite sure yet where their strongest point is, and they got to get that decided pretty soon.
Are they having meetings now in mar Laga wherever? Are they having meetings in weeks where they say we've got to move to the middle where they do a Reagan or is that just not part of the vocabulary.
I don't think it's part of the vocabulary, Tom. I think this is a group that is going to move to the right, just as the Democrats eventually probably will move to the left. But I don't see any sign in the Republican Party that they're going to try to win over, for example, Nicky Haley voters. I think that's a big mistake.
Woll Greg Value, you think it's so much eventful. I hope we do not talk to you Sunday afternoon or evening, mister Valier with AGF it's a mustard morning note and now an important conversation. I want to drive the conversation forward, which you can always do with gene Monster deepwater asset Management. One of the high points of the summer was a lengthy Nathan Hager conversation with Dan Ives and gene Monster
that was to be kind informative Gene Monster. Brent Braselin over at Piper Sandler Year Old Watch has an overweight on Microsoft. Loop has a strong strong effort there as well. Over. You know where you were years ago, You're now at deep water and I don't think you're doing by holds sell, but everybody else is saying if you're going to do AI, Microsoft is a conservative play, are they?
I think there's a lot of better places to be and maybe taking a step back, is that the first question that we should ask is do you believe or to what degree do you believe that AI will be transformative? And if you're in the camp that this is going to be something that comes close, meets or exceeds the hype, then Microsoft is going to go up. There's no doubt about it. I think there are better places to invest related to AI, which just given their pole position, may
seem a little bit out of touch. But the simple reason is that Microsoft doesn't have full control of their AI destiny. Is that they of course work closely with open AI, but their ownership is not in equity ownership. It's related to revenue, so they open EI can do things like do a deal with Apple, and ultimately is Microsoft has worked more, is building more of these small language models to try to diversify, and so I think
that they will clearly benefit. But we think that the best position company, despite the news yesterday around search GPT, is Google. And just to put that into the contrast to Microsoft is Google. They own their foundation, large language model, they have advanced Silicon, and they have distribution of six products that have a billion or more daily active users. And that's something. Those are three things that Microsoft can only claim two of.
Geane, there's so much of this that's hoping, a prayer and a promise when it comes to AI. So, picking up on what you said, and Tom's good counsel that we should look forward, let me look back only briefly to say, what can we take away from what we heard from Google, from Alphabet this week and layer that onto what we're going to hear next week from these other companies. I hear what you're saying about Microsoft in
the way that they're approaching AI. But is there the potential that this is perhaps a savvy move in that, you know, if this doesn't pan out to be as transformed, as widely transformative as many people think, not being all in on it might in fact be a good thing going forward.
Well, I think it would be a historical mistake if they're not in that. That's my opinion. But let's take the approach that the approach that they're spending a lot of money and it may be not money well spent. So just quickly to kind of frame that in is that these companies are spending about fifty billion a year on capex. So you figure over a three year period, one hundred and fifty billion, they're generating about one hundred billion a year in income. Of that cappex. By the way,
about half of it is related to AI. So said another way, seventy five billion over three years. Their market caps are two plus trillion dollars, and as Zuckerberg said this weekend, is Bloomberg podcast that there's just too much risk if they don't pursue this, because it is the biggest changes he talked about in the next ten to fifteen years. I think it's the biggest change in the
next fifty. But the point is is that I think that if one of these companies takes the approach of let's save ten billion dollars here, ten billion dollars there over a over a year period, I think it could be just a historic mistake. And so they get it.
Google set it, Sundar set on their call that they have to continue to embrace capex and ultimately David that that is the that's the central question of what AI investors should focus in on, at least over the next year or two years, is what does that capex pace look like.
I mean, the zuck is with Emily, Okay, fine, we got to get gene Monster on the big take with David Gura.
I mean, you know, I'd love it.
You know, I think we can't.
We can't shoot it as beautiful as Emily shot that interview with Zuckerberg.
No, we can't. So that's great. Gene Monster. Tell me about Apple. I guess they're doing Apple intelligence. It's not really AI, it's pretend AI. Forget about it. Everybody in this room are going to have to buy six, seven, eight iPhones come September October? Are we all sleeping into September? When Apple stuns us?
I think this stunt is going to be over the next year. And ultimately is that these features, well, they've been around for a year plus. Is that the fact that Apple is going to make them just work so seamlessly together. I think this is going to expose what I estimate twenty percent of the world to these AI tools many times a day, could be ten, twenty hundreds of times a day, and that is going to create a powerful upgrade cycle. The next three years for Apple
is going to be clear sailing. And I use those words with caution because you always want to have your guard open. But I think that this upgrade cycle, like you said, is going to be breathtaking. So I think that this is I own Apple, my personal account. I think it's going to continue to do.
Well. What's your Some of the parts on Apple come on, so I think that they can come on.
So I have to preface not investment advice, but the way I think about it is that. I think that they can earn nine dollars in about a year and a half. And I think a reasonable model is kind of a low thirties thirty multiple. At the peak of the dot com was one hundred multiples across the board. I think low thirties is very reasonable and kind of gets to about a three hundred and fifteen dollars stock.
He is that good, I mean, Jean Munster perfectly.
He's gonna come in here someday with a lime green jacket in a flower shirt with a pair of Nikes. Nobody in Minnesota has us, Jean Monster, thank you for being like Dan Eyes greatly appreciate that, mister. And really a high point of the summer, seriously is Deep Water's Geene Monster with Dan Eyes of Wedbush Smart. You agree or disagree, doesn't matter you, Janie. Look at the front pages the Olympic version with Lisa Matteo and Matt Aveton's premiere pa Lisa Matteo.
Yeah what he said, that's right, We're talking about the Paris Olympics. Okay, so kicks off. But they wanted to make the Olympic village perfect for these athletes, right, so they invested in all these things, but one thing that they forgot was, well they didn't actually forget, but an oversight was air conditioning. No air conditions, no air conditioning, no like no. So here's what's happening. They wanted to be more friendly for the environment. That's why they chose
not to do it. So they have these ruling floors. So so water goes through the floors and it, you know, drops the temperature by ten to twenty degrees, but it's still between seventy three and seventy nine degrees, so it's still warm for them. So you can purchase portable air conditions. It's an option, it's an upgrade. So guess which team has the most options.
That would be Team USA.
Tuesday ninety two degrees. In August a million years ago was one hundred and four. Okay, so what is the America doing.
America is taking the option doing the portable air conditioning units. They have five hundred and ninety two members on their team. Okay, so they have that many units in every room, some for the common areas. But there are some teams who are not opting for it. They're going to sweat it out. That is Germany. They have three hundred and fifty athletes. Only eleven units have been ordered.
So what does that mean when America turns out the air conditioners font and blue DIBs, it's not flash all right yet that's very fresh. I mean Pharaoh's like this Pharaoh, you know, the Pharaoh clan. They own half of the Midlands and they don't have any air condition And when it's like ninety five in the United Kingdom, there's.
Like nothing in the building. See.
I didn't realize this when people I've had friends who went to Europe and they're like, they have no air condition I'm like, what are you talking about.
Share up North is like it's like peaky blinders. I mean he grew up. It was just like peaky blinders and they don't have air conditioning. And those stone you.
Know, the miners, you didn't have it Rochester.
No, we we had screens to keep them lucky.
Yeah.
Yeah, I mean you didn't go outside. The deer flies are so vicious.
Next, this I thought was interesting. This stood out to me. I'm City Hall in New York City seeing a rise in the number of micrids that are going to get married. A lot of them spoke to the New York Times. So the New York Times put this article together and they said they're longtime couples, right, they never married in Latin America, where consentral unions are common, people don't get
married there as often. But now they're being advised by immigration lawyers social workers to formalize it because it could that certificate that they get it might help in their efforts to get asylum. So that's why you're starting to see.
This is a huge election issue.
Immigration, definitely a huge immigration and migration.
Yes, it's two separate things, very true. It's got to be right up front.
Yeah, and I think we'll see a lot of scrutiny on how this has played out in New York and other cities. And we've had what two hundred thousand migrants, I will say, when I was down covering a court case a few months back, flood of people getting married. It is if you come to New York, see it downtown. Yeah, I have been. You've been, no.
Door, Okay, I have had the privallege of you.
Okay over there.
Oh you think that's funny, mademoiselle mateo, continue have some bluten here, have some bluten conta.
Okay, this one is for you, Tom.
Okay.
So this was from the Financial Times. They kind of broke down the question of can we afford another dog? Okay, because people are saying, when your dog passes, do you want to get another one? So they broke down some of the number. This is in the UK though, so it might be a little bit different. You're gonna have to tell me if it's different here. But dog ownership they said cost anywhere from twenty five hundred to thirty
five hundred a year. They say, it's not true, it's more than that because they have the fancy pet really retailer Mungo and mad. I don't know if you go there. Maybe that's just a UK thing, but you can get there Bob and dog bag for nine hundred and ten dollars. Okay, so that's the fancy stuff.
Then you have the food.
The price of kennel's when you go on vacation kennel fee, yes.
You get that.
L they say is anywhere from one hundred to one hundred and fifty a day.
Is that right?
Is that how much? Those kids?
Here's the reality vet Bill got his teeth done.
Yes, okay, it was so successful.
The vet said this matters the horrace Man's School of Vetinary Medicine, and so kennel Fee needs that their teeth done. Plus they want to brightener because Kennelfie's the IQ of a Kardashian eighteen hundred large.
Next second morning to calabasses.
Next.
Okay, when you go on vacation and you go to the hotel, do you go to the hotel gym?
David?
Is this something you do that?
I notice that I got that question, Tom, Tom definitely does I have been on occasion?
I will yes, Okay, because the thing is some people don't want to share the hotel gym. I don't mind, but sharing the weights I kind of like, I'm very protective about it. So some people are hotels are catching on and they're doing wellness sweets. You got to pay about one hundred bucks extra. But there are rooms that have the equipment inside of it. Okay, So you have like the t rex bands, you have the stationary bikes, medicine, balld,
yoga mats, anything you want. You know, monitors with hit classes and yoga classes, so you can get everything done in your room and not have to go down.
Shows up to the hotel gym with his yoga. Matt. Yeah, so you gets it to himself.
Everybody clears out, same Sorr.
Last time I worked out of a gym was with Michael McKee.
Okay, I will.
Tell you it was twenty two years.
You have to ask Michael going to effort him in the stand?
Literally is the last time I darkened the door of a hotel? Jim McKee and I thank you for that, Mademoiselle Matteo. This is a Bloomberg Surveillance podcast, bringing you the best in economics, finance, investment, and international relations. You can also watch the show live on YouTube. Visit the Bloomberg Podcast channel on YouTube to see the show weekday mornings from seven to ten am Eastern from our global
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