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There is no other grind in engineering like Annapolis in the fire Holes program. There of nuclear power school or applied engineering and technology. Ted Mortonsons survived this. He's out at Baird right now and joins us on. Ted, what was it like your first day at our Naval Academy? It was brutal.
I mean I would say, you know, I look back and I try to figure out how I got through four years of that, going to going to class through Saturday. It was a real challenge. And I wasn't the smartest attach in the group.
That's what Stravina said. He did pretty good leaving the Navy. Where did you serve in the US Navy for this nation?
I flew for thirteen years really kind of the surveillance ani submarine. What the Pights are doing right now in the Straits of harm moves so grape flying pretty much all over the world.
We'd love to get you back on. We'd love to get you back on to talk about that. Sometimes I guess right now we'll be forced to do technology. You look at Nvidia and a lot of the research notes today say, look, it's all concentrated in two three five vendors as well. How bad does Google? How bad does Microsoft? How bad does some company? I don't know, how bad do they not want to use? In Nvidia?
There's a huge Navidia attacks on once you you know they have this whole system approach where you're buying essentially everything in a box and it's all in the video generated through architectures. Not only does that represent a price tax, but it also represents a fair degree of lock in. And I think if you look at where Google and specifically Amazon with trying to do their own Silicon in inference,
they just don't want this lock in. And that's one of the reasons why you're seeing all this other co development on silicon going on through broad common others.
Ted, what do you make and what's the conversation you're having with your clients about software and the AI threat to software? It becomes such a dominant theme just over the last three four weeks here what's the conversation you're having.
It's for adults only.
To be totally honest with you, I cover all of techs, so I see it, you know, from a not a siloed approach, but the whole tech eco structure. And if you look at the IGV, which is you know, pretty much of a software index, it's down twenty four percent year to date and basically in two months. This has absolutely annihilated attribution for a lot of my big big pms Number one, they can't get out. Number two. This pivot and Jensen alluded to it last night on the
videos call. The move to agentic or agents has just exploded exponentially, and that's the adjective he used in the last two months. And this is affecting all of software. It's a if you look what's happening with Entropic and I would do work on Opus four point five and even with chat GPT on their codex offering, you now can code an agent by not being a developer, by just either talking into your laptop or typing in and getting an agent. So agents are absolutely exploding out there.
And when you explode agents, you need a tremendous amount of compute in the video's right in the in the middle of that, and you need a lot of memory and we're short on memory. So this has been a pivot that I haven't seen in three decades of Nope.
I agree with you. I've never seen anything like it. And I guess the question for a lot of investors is just pick a name. A Salesforce dot Com doesn't get any more embedded than that. I mean, if you're a salesperson anywhere in any business, Salesforce dot com is your buddy. Is Salesforce dot Com at risk? Just to pick a name?
I think?
And I listened to that call last night, and you know, the large camp companies most likely will make it over the chasm on transitioning from a SAS model. And Jensen was pretty funny last night. He basically said software is changing, and you know, Navidia has a huge sw for a component that nobody really talks about, and it's these Kuda
libraries are very disruptive on traditional SAX. So he called software as a service a pre recorded software where eight or Agentic or what he's working on on Kuda libraries is real time. Wow, that's a big, big statement. And where my clients are having trouble is they can't model these companies. In the new world, it was easy to model like a CRM on SaaS revenue because it was reoccurring. Right now you introduced an agent, which is assumption views,
and nobody can get to free cash flow. So how do you put a multiple on free cash flow?
You can't model.
Ted Morn said, rob Ship's got a rob Shift has got a question, and that is simply, are they setting us up for revenue increases out there? I'm doing this or that for twenty dollars a month and it's great, And is it going to be like twelve months from now? Oh, I'm sorry, we've just lifted to fifty dollars a month. Is that where all this is heading?
I don't.
I personally think that Navidia is going to use technology innovation. This reuben cycle that they have in front of them is staggerly good. You can reduce a token costs, you know, the cost of per token by ten x and that's a paradigm shift on system design. I think they're just going for massive share across training and inference, and yes, you know they'll charge a premium for availability and functionality.
But I don't think they're out to gouge anybody. I think they're out to basically rule the THEAI infrastructure world globally.
Ted, thanks so much, greatly appreciated this morning. He's a Baird. Stay with us. More from Bloomberg Surveillance coming up after this.
You're listening to The bloombergs our Villain's podcast. Catch us Live weekday afternoons from seven to ten am. E's durn Listen on Applecarplay and Android Otto with the Bloomberg Business app, or watch US live on YouTube.
John Bilton lizsu He's had a global multi asset strategy at JP Morgan Asset Management. My good friend John Farroh is adamant that all annual market outlooks should be written March thirty first, because there's something always wacko that happens. Q one. Clearly, the tech pullback is there. How does JP Morgan reallocate for the tech tobaccle we're living right now?
Well, I think we've got to actually ask is it a tech debarcle or is it something which actually the market is doing what it should do, which is it's actually looking at what's happening at disruption at the stock level. One of the things that you know, colleagues of might often say is, remember this is a market of stocks. It's not a single entity. It's not a stock market, and I think we often forget that. What we've seen
is huge rotation. We've seen, i think an episode in the tech trade which is suddenly a realization that this disruption that tech is causing generally actually they're going to do some of that to their own sector as well. And as a result, I think the market is struggling or attempting to reprice that. But if we actually look at the sector overall, and remember we allocate off top down,
not at the stock level. In my particular line of business, actually tech and comm services are down one to two percent this year as sectors, after having risen one hundred and twenty and sixty percent, respectively in the last five So yes, we see single names, you know, getting hit
quite hard as their business models are being questioned. That the overall tech trade, we think is actually becoming a little bit more resilient if anything, because you're getting this pricing differentiation happening, which is what the stock market's supposed to be doing.
So from the sector level, the asset allocation level. Have you increased, decreased, or kept your tech exposure the same here?
So we continue to like holding tech and comm services for a couple of reasons. I think first and foremost, if we actually look at the revue when you hit that might come through software. We took a look at that and we said, okay, if we took that sector and we took some of these worst case scenarios in terms of the losses around revenue from software, what would that do to the overall revenue for the sectors? It
would take it down five six percent. Markets pricing at around about three times that level, So we think, if anything, actually it's cheapened up a long way. And the second thing I'd point out, if we take the MAG six or MAG seven I'm sorry, and we look at their valuation relative to the rest of the market, it's below the trough that it was out on Liberation Day, the
last time we had a big market turmoil event. So if anything relative to its average valuation to the rest of the market, it's looking pretty cheap at the moment.
How about us versus rest of the world, Because you know, we're patting ourselves on the shoulder on the back last year with the US SMP and the NASDAG, but Boil lots of markets outside of the US did appreciably better, and that's continuing into this year. How do you think about US versus the rest of the world?
For me, it's as much as anything else, a currency story. Okay, If I'm a European based investor and I bought a Global sixty forty priced in dollars, I did about three percent last year. If I talked to someone based here in the US, of course they haven't had that currency translation, They've done about seventeen percent on the same portfolio. That dollar hit is being significant, and I think, you know, if people talk a lot about this whole Cell America idea,
we just don't see it in the data. What we do see is a repricing downwards gradually of the US dollar, and we think it's got a little bit further to go. So I think we're getting two things going on. First and foremost, stimulus light we've not seen before coming through in Europe at long last, a bit more to come in China and Japan as well, which supports the growth
in those regions. But secondly, we've got the dollar gradually weakening, which of course accentuates interested in having that international exposure.
John Bilton with us. We're going to come back and really take advantage of his twisted education here to talk about others. AI uproar and had a global ALTESI strategy at Jpmore Asset Management features up six. Nice green to the screen right now, there's been a lift to the market after all. Of course, back and forth on Nvidia. Young eys will join us in the nine o'clock hour. The conversations on Nvidia today, Paul have has been absolutely spectacular.
Yeah, I mean again, a solid quarter. It's a beatn raise as the tech kids like to talk about.
It's good.
Is it on the magnitude that we've seen in the past. No, but I mean the larger law, the law of large numbers that nothing else would make that kind of difficult to do.
Well, we'll have to see here. I mean it is eight thirty and it's you know, in an hour we'll open the market as well. Let me get this up right now. Yeah, and now sweet ahead, it is now, but you know, claims come in below and a revision is two hundred and eight thousand. I mean I'm sorry, it's what we're hearing across the board. I mean, the labor market just hasn't cracked and at the same time the struggle of so many Americans.
Yep, absolutely so.
Again, the initial jobasclaims came into two hundred and twelve thousand concent as was two hundred and sixteen thousand. Last period was revised a little bit higher to two hundred and eight thousand.
So there you go. Talk so much of this AI debate that we're having, and what great informed conversations is about this strange word productivity, which comes down to efficiency. John Bilton of JP Morgan is exquisite on this. He's got legit chemistry chops out of the United Kingdom and enjoyed a tour of duty on the Charles at River.
It solos MIT. So in chemistry, the iconic nineteenth century shift, including the statue of Faraday on the River Thames, is to move from batch chemistry to flow chemistry and pipes. The world changed. We went from medieval Sir Isaac Newton alchemy to like DuPont and other gen C other giant chemistry companies. Then you go over to MIT where you learn productivity with the troops there. How does AI become a process where we win down the road.
So you're talking the Haber process of course, which takes me right back to my undergrad days. But how do we think about productivity? Stock and flow is incredibly important in Eliot any I knew you were.
Going here, and I set them up for this discuss the So.
What allows either to be more efficient? What allows the flow to be more efficient is a better idea of what the dynamics and the data are describing that flow. And that's something which AI can do. What it doesn't do is make the decisions around how to influence how that flow is going through. That's what a human being does. But where AI, I think has something which we can really lean into is that ability to help us quickly
pass through data and understand the problem. Seting it doesn't mean that suddenly it educates us, but it informs us, and I think that's an important subtlety.
No good. If you're helping Jennie Diamond right in your love and we know that are you're going to get two paragraphs in it this year. The stock is the water in the bathtub, I would suggest, and this is all the heritage of my family that we will see the water in the bathtub clearer and better with all this innovation. Do you agree with some of that idea?
I would agree with that. I'd also agree that what you can do is you can optimize how it flows. So if you've got the plug out of the bath, you've got the tap running into the bath. That's the classic old stock and flow view of the economy. You're able to see both what's in the bathtub much better. You're also able to see an optimal way to have it flow through the bathtub. And I think that's if we want to use an analogy, that to me is what productivity is about. And that's where AI can be
a helpful tool. It doesn't replace the person stood there looking at and this is beef I have with the some of the moves we've seen in software, the idea that all of a sudden AI can do everything.
We know.
AI has its limitations in its prone to hallucination. It requires that interface, but it can create a clearer picture in combination with that human expertise, and that, to me is why we're seeing this interesting situation two hundred and ten thousand on Jobless claims a few minutes ago below expectations. Yet we're not seeing wage pressure and that's because jobs are becoming more productive using the AI inputs.
Can you come back the second week in March. Paul wants us to do thermodynamics. Can we do some entreprise Jennie Diamonds. People are listening to this right now. How do we get a bathtub? The letter folks, that was a clinic on the chemistry dynamics, the nineteenth century models that we're all struggling with here as we look forward to twenty and thirty and beyond. John Bilton with a clinic their global Manta asset strategy. JP Morgan, he is
a chemist. Stay with us. More from Bloomberg Surveillance coming up after this.
You're listening to the Bloomberg Surveillance podcast. Catch us live weekday afternoons from seven to ten am Eastern. Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
True madis of course, with equity and strategy at met Life, pulling in all of his first class economics at ubs over the years, writes a blistering short note today from MetLife clients on AI in your job. We're thrilled that dru Madis could join us this morning. Our chief market strategist, Drew, thank you for this note. It's almost calming what Angelo said there at the back end. Paul, I didn't understand a word of it, Drew. I mean, just to cut to the chase. There's this fear out there off of
a briefing from Sutrini, which is getting a lot of criticism. AI. Can you fold it into our macroeconomics. Can you fold it into our guest of it of core economic data out one year or five years?
Well, I think you can, and I think you know.
Just to dispel a few things, one is like, this is not the AI jobs apocalypse. You know, we are thinking about this the wrong way. When I came into work today, I've got fifty things I want to do, and if AI can help me do thirty of them, right, my constraint is still how many people I have working for me and with me who can kind of engage with me and discuss things with me, And how much technology I have available?
Right, And that's anyone anywhere.
If I somehow use AI to discover fifty new things about the universe or my job, right, I'm going to get one hundred new questions from that knowledge, right that I then have to answer. And then when I answer those one hundred, I have a thousand I have to
answer off of those. And so you know, we're competitive species, right, and so like you know, I work at a firm that competes with other firms and everyone else does too, and you're trying to make your firm win, right, and so you're going to be constantly pushing for that knowledge they kind of be useful and then learn the next thing. And the best way to do that is obviously, you know, technology and then people, and the people was a key
part of it. I think it's actually kind of you know, I came from a liberal arts background, and I think, you know, those kids who chose liberal arts are going to be really happy in the coming future.
Drew, what do you say to a shareholder and I don't know Salesforce dot Com or any of these other software company or software as a service companies that Senior stock's really beaten down over the last several months, and yet their fundamentals are great, their earnings are great, the cash flows great. Everybody loves software.
What do you say to those shareholders.
You know, I don't know.
I don't so I don't follow equity, so I'll say that, and I don't certainly don't follow individual companies. But what I will say is that there is a bit of a panic motif that anyone who's bought a house knows that you buy a house and then someone shows up at your house, they knock on your door and they're like, oh, I used to work for the people who own this house before you know you bought it. And if you don't change this one thing really quickly, your whole house
will burn down. You all die, right, And then a lot of people end up hiring that contractor to do whatever useless piece of work it is. And it's just it's not to say that everything that's happening is useless, but I think that there's first of all, got to be a recognition that the pace is important and you
don't want to be left behind. But you also don't want to be pressured into kind of moving before you're reading right, And there's nothing wrong with thinking about things and how to kind of use technology in the best way for your company.
And I do think, you know, I think in terms of using AI.
You know, one of the main constraints is going to be the organizational structures of companies rather than finding things for AI to do or you know, I just think there's a lot more benefit to kind of expanding the knowledge base, and people are ignoring that part and the fact that the more knowledge each company has, the more competitive they are going to be, and the more wealth they will generate for the economy, the more productive the economy will be, and the higher the growth rate in
the economy will be. And that doesn't happen without.
People drew what's the overall kind of backdrop here as we think about tariffs.
We kind of put that the rest.
It seemed like the market had at least come to groups with the kind of the tariff regime. That kind of changed in the last couple of weeks with the Supreme Court ruling and President Trump's response to that. Now I guess as investors we all have to think about tariffs again. Is that impacted kind of your outlook for the markets here?
It hasn't, because, you know, we were kind of back at the same tariff rate, and you know, we kind of felt like we were living in a period of uncertainty and so that hasn't changed at all.
You know.
That being said, if you stay at a consistent level of uncertainty, that uncertainty becomes a feature, right, and so you can actually almost be in the plan for it. And so the more consistent things are in the universe, the easier they are to kind of forecast everything else. And that consistency can also be achieved with consistently uncertain true.
To bring it back to the market strategy. Right now, we haven't even had a correction a lot of inks in the market. Maybe we can say there's a flatness inequities out here on a portfolio basis, people retirees looking at two years, three years, five years, Do you make adjustments here or is it basically steady as should go from the plan of twenty twenty five.
I mean, as we think about our asset allocation. You know, we've been moving up in quality for some time, and so, you know, because spreads are so tight across so many sectors, you know, moving up in quality just kind of if I'm not going to get paid to take the risk, why wouldn't I just not get paid to take no risk?
Right?
And so you move towards a lower risk environment there, and you look for opportunities where you can risks that actually benefit you as opposed to just kind of generic risk. And I think that's what people should be thinking about, is you know what kind of risk am I willing to take?
And adjusting their portfolios accordingly du.
Manus, thank you so much, appreciated, uh with met Life. Stay with us. More from Bloomberg Surveillance coming up after this.
You're listening to the Bloomberg Surveillance podcast. Catch us Live weekday afternoons from seven to ten am Eastern Listen on Apple Karplay and Android Auto with the Bloomberg Business app, or watch us Live on YouTube.
Let's get right to the newspapers. We've got a special treat at the end with Paul Sweeney, Alexis Christophers is all newspapers.
So front page of the Wall Street Journal today, big story here on how Americans are leaving the US in.
Record right, every word of it, Thank you, right.
Fascinating story here, and it's not all to do right with the immigration crackdown. So they're leaving for a few reasons. The rise of remote work, which we saw we can do post pandemic, the high cost of living so affordability right, the key and this appetite for foreign lifestyles, especially in Europe where people find it more affordable and safer.
Yeah, but it's not just Europe.
Locals in places like Bali, Columbia and Thailand now protesting against the wave of gentrification.
Absolutely, and Cyper shut it down. They had so many Russians and Chinese coming in. Cypers shut it on program. In that article, what I noted was Portugal is still giarmis hot. I mean I was in Prague twenty years ago at nine o'clock at night, and everyone around me in a little cafe out of a movie was American.
And this is the cusp.
Yeah, you don't want to sit there hearing English being spoken all around you. That's not why you moved there.
The number four offsprings heading to Japan.
I don't know if he's coming back. We'll see that.
Yeah, I mean I have kids abroad, and actually, now that I think about it, they're almost all.
Is Los Angeles, bro, Yes, exactly, I've got one there as well.
It's a great article. Just you know, the two guys that did it over the journalist killed good stuff. Yeah, what do you got next?
All right?
The race is on for companies to get their tariff money back. So it's been less than a week since the Supreme Court struck down many of Trump's global terrors, and already nearly two thousand companies have filed lawsuits seeking their tariff money back. That's on top of the hundreds who filed suits and anticipation of that court ruling. And these are well known companies, Costco, Barnes and Noble, Goodyear,
Tire and Rubber. Before the High Court ruling, the lawyers for the Trump administration assured the lower courts that companies would be made whole and they would also be paid interest. They haven't said anything about that though, you know.
I saw some reporting recently and says, hey, do you want to incur potential the wrath of President Trump if you're a big company, public company and say you want your money back? Or do you just say that special eat at the bridge. I don't know, but now, but the companies they are in fact.
This could be miired in the sports for years to come, but there'll.
Be a point where they will win. I'm editorializing, and then somebody's got to write a check to FedEx like that.
Basically FedEx is one of the companies suing exactly.
They're going to issue te bills and government is what.
And this could happen well after there you go, This could happen well after Trump is out of office.
Next one one all right.
New York Times talks about how women are making their mark on the world of art collecting. So this is interesting. Women now control more than a third of global wealth, and recent data finds they are spending more on art than men. And guess what that's influencing what museums are buying. So it shows that women often buy works from little known artists more.
Than men do.
They buy artwork made by women. And Christie's over here in New York City, the auction house said that its female client base has grown ten percent. New crop of young female collectors as well. Let's hear it from them, gen Z and millennial women outspent men last year when it came to artwork.
I do a plug, sure, Amy ing enng Amy ing is the curator over at the Frick. She's an act of God. Her show that's there just opening Gainsborough. It's all the pretty pictures of people in the eighteenth Center. We know all the and I went in. I'm like, yeah, yeah, you know, okay, this is a punishment before lunchhowcake right. I was blown away about what the Frick Museum in New York has done with something is conventional. Is Gainesboro of the eighteenth century. I'm so happy to hear did
what Amy did was. It's just shocking how good it is.
Well, if you haven't gone to the Frick, guys, and you're able to go because post the renovation, it is really a treat.
Awesome.
Okay, thanks so much, alexis the newspapers here.
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