This is the Bloomberg Surveillance Podcast. I'm Lisa A. Bromoids, along with Tom Keen and Jonathan Ferrell. Join us each day for insight from the best in economics, geopolitics, finance and investment. Subscribe to Bloomberg Surveillance un demand on Apple, Spotify and anywhere you get your podcasts, and always on Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business App.
From a beautiful Newport Beach, California, I'm Jonathan Ferrow, PIMCO, publishing its secular outlook, The Aftershock Economy, writes, quote, we see a window to step in as a senior lender in areas once occupied by regional banks, such as consumer lending, mortgage credit, and various forms of asset based finance. I'm very pleased to say that we can have that conversation now with the man himself, the boss, Pimco CEO, Manny Roman Money.
Good morning to you, Thanks for having.
Us morning Tolism. Nice to see you.
That quote feels like your kind of language. We're going to step in. My first thought when I read that was, why don't you just buy a bank? There's many banks sale right now. Why don't you just buy a bank?
What I think there are going to be many assets to buy, and maybe the best way I have to describe it is banks are going to be tight for capital. And when the type for capital, they have two ways of solving the problem. They can either raise more capital or they can sell assets. And the most likely scenario is there will be assets to sell in area where we have a big footprint mortgagers commercial with the state bonds, municipal bonds. Dan said that earlier today that he was
very keen on mortgagers. They'll be mortgagers to sell and will be there to step in and.
Try to buy them.
Are you looking at buying a franchise to do that or is that just something that happens.
Is something that we've built over the past twenty years.
And you know, there's good news and bad news when you have a tougher economic cycle. I think the better news is that the expected him goes up and they are significant block of assets to sell.
You know, it could be for example, equipment loans.
You know, one of the bank who was very big in equipment loans is out of business all of a sudden.
There's going to be a lot for us to do.
I hear this from other people too. I hear apollot side banks are going to step back. We're going to step back in. How competitive is this going to be? Can you give me some size and make the pie it's going to be.
It is going to be competitive because the seller has a fiduciary duty and there will be enough for some of us to do a lot and put money to work and be patient and wait for the right opportunity to do so. And I think I think the cycle is usually long, and so there's no rush to put money to work. There is a very discipline and systematic way to look at your opportunity, and some will look
better than the other. It may very well be that the single best asset turns out to be real estate where we have a big foot print, or it may very well be that it turns out to be commercial real estate. And you know mortgagers in this whole segment and.
Commercial redista is something you've brought up, and I've heard it from Dan. I spoke to Mark about it just moments ago. Should I be worried about commercial real estate? Can you talk me, just take me into the halls of this place this building. Have you all sat around a table, gone through every single portfolio and thought about what you don't want exposure to right now related to this one particular sector.
Well, I think we have, and I think we've seen the playbook before, and it is everything else being.
Equal a slow cycle.
So the banks will look at the portfolio and slowly but surely mark their books. I think you have a microstructure of the commercial real estate market, which is quite different depending on the city, depending on the places. Some places are clearly tested, some of them are doing just fine. I mean you can look at Austin, for example. You're hard praised to find an empty office in Austin. And the overall trend is going to be that people somehow
come back to work one way or the other. But there's a transition period where for sure there will be distress seller and people who have the wrong financing.
And I think the financing part.
Is really really important because it's one of the segments where we're very involved and people have borrows shot term in the past with very low rates. All of a sudden the financing is expiring, spreads are higher, and of course rates a much higher, and so then we need to address the situation either by selling or by refunding at more attractive terms for.
Us, Clearly, this business is going to change compared to what it was several decades ago. We've had a multi decade bond ballmarket. Most people assume that's now over based on the last twelve months. Can you tell me how this business will be different with that in mind? What you need to position for now versus what this firm was positioned for in the previous several decades.
What a very big change, and Dan mentioned this before is generative AI and how technology can change our business and thing for example, about the real estate market. We can hire one hundred people to go from city to city and kind of look at every single lease or every single property. Or we can use technology to give us a better grasp of where the alpha is and
where we think the opportunity is. When we think about communication with client, we can invest significantly in generative AI and actually give a better risk report, better customized report to clients and so on and so forth. And I think it's incredibly exciting. I see the work that we do with open AI and Microsoft as important as.
The birth of the Internet. I mean, is it is that it is.
You think it's that powerful, It is that powerful, and it will change your job also change your job too potentially.
Yeah, no, no, of course, of course. I mean I mean in a good way.
I think it will make us row up more productive and I think that's a really, really good thing.
Is that a challenge to your secular outlook?
I think secular on a super secular basis, everything else is being equal.
I think it means rates.
Are lower, but it also I think you should say that with a humongous amount of humble pie in a sense that the dispersion of events is going to be very big, and we don't know what we don't know, and it's easy for me to make prediction about what will happen ten years from that that.
I'd be very wrong.
Let's measure success AUM over the last ten years, and let's go back a decade. PIMCO was at about two trillion dollars AM, not too far away from the likes of Black Rock Black Rocks. AUM since then has more than doubled. The AM here is steady, steady, with some volatility, tons of volatility along the way, but it's basically unchanged in the last decade.
What do you think that reflects?
It reflects the decision we made is that we try to be very focused and do one thing and do it very well. And I think we went through a period of time where maybe fixed income wasn't as attractive.
As it is right now.
And we have the view that if we perform, if we significantly beat the passive benchmark, if we do better than appears, they will come. And we don't measure our success by the amount of assets where we have. We measure our success bet the returns we give to our investors in what is a very competitive market, and so and so and so. The real scene of asset manager is to try to be bigger for the sake of being bigger.
Because of economy of scale. We don't it's not a goal. Just to be clear, it's not a goal.
It's not a goal.
We're here to.
Perform with the money we've been trusted and if we do a good job, we'll be fine.
Well, let's talk about that good job. There have been a couple of difficulties. I want to talk about one specific name, which is Columbia properly trust.
What do I need to know about that? What happened. Can you just give me a better idea of what happened there?
Well, I think I think for obvious reasons, we don't specifically come on names. But of course we have a big portfolio of assets across the globe, and when you have a recession, some are going to be doing less well, and we're gonna work on trying to bet to get the best possible dot com. And the reality of fund management is you have, at any point in time things doing great and things doing less great, and we focus on the one doing let's great, and making sure we have the best possible dot com.
So is that just a reflection of being so big there across everything or was that a canary in the coal mine on a certain issue at a certain time.
No, I think it's a reflection of us having a diverse port for you. And I think you heard one of my competitor at Milkin's saying that very yeah well, saying that when you have a big realestate port for you, at any point in time, not everything is going to do great. And I think we're willing to do that as long as the net result for our investors is.
Going to be the right one. Some thing that's what matters.
One last issue that we need to discuss as well. And understand that perhaps you can't offer a great degree of clarity in detail because of litigation issues, But you know what name is going to come up in conversation now, credit sweets.
Now.
I just wonder from your perspective the future of the at one market continued convertibles.
After the events of the last couple of months.
As a firm, and if you don't want to talk directly about that institution, we don't have to. But as a firm, have you rethought about that particular class of securities.
Well, the banks, especially in Europe have a big need to issue eighty one as a way to raise enough equity to pass the stress test, and so there needs to be clear rule of engagement from both the banks and the regulator. And you've seen in the recent months the Bank of England and the ECB being incredibly vocal about what they think the rules of the game are and what a well functioning market has to offer to
make it attractive for investors to participate. And if the rules of the game are attractive and the price is right, you'll see plenty of people coming into this market and Pinco will be one of them. And if the rules of the games are biased or unclear or at the expense of investors, then maybe we'll decide to step.
Out of it.
Do you think that bars an unclear?
Now depends on the jurisdiction. We have welcomed the comments made by the ECB.
And the Bank of England.
Manley, it's good to see. It's good to see you the hostingers. I appreciate it. Thank you very much. We got to do this again next year as well. Money Rum and the pin cut.
Julian Emmanuel, chief equity Derivatives and quant strategists at Evercore ISA for the ISI for the hour. And this comes in the time when we are seeing this twenty percent potential gain on the S and P since the lows that we saw in October. Is this rally real?
We think it is. Actually, we don't want to put the label bull market on it, okay, because frankly, our base case is that sometime in the next twelve to eighteen months you're going to have a recession, which means you're going to have a sizeable pullback. But this is a cyclical rally where we think the hallmark of the last week or so is a broadening of participation.
What is it about the labels? You don't want to call it a bull market. You don't want to call it a pause, You want to whole call it a skip Like why does it matter?
Well, it matters a lot. If you go back to the two tech bubble burst bear market, you had several rallies of forty and fifty percent in the NASDAC before you made the final bottom. It is one of those things where rather than labeling, you have to think about how you want to think about the long term as either an individual investor or an active manager. And frankly, this is one of these times where those considerations are a bit different.
Is this a fun time?
It's a tough time, but look at the end, we're happier when equities go up.
I think we're seeing also a lot of potential risks of a bigger picture scale, whether it's what we saw over in Ukraine with that dam bursting and what it's doing some of these concerns about and escalating war there, or if it's ratcheting up of tensions in China between the US and China. How much are you looking at potential tail risks or do you think that that's what's damp in some of the valuations at this point that sort of set up for what you're talking about.
It's definitely damp in the valuations. And this, again, the period we believe we're entering, is one of those times where despite those risks, we do think we're going to see a little bit of multiple expansion, which is a bit counterintuitive but frankly what it does. And again going back to our options expertise, the VIX with a fourteen handle is absolutely fabulous in terms of protecting either downside risk or for some who are underperforming and may get pulled into a chase upside risks.
We're kind of bearing the lead here. On Sunday. You made a pretty big move. You upgraded, you increased your expectation for the S and PAY to forty four to fifty and potentially you might see that as soon as July.
Explain that's the hallmark of a momentum market, and I think look, clearly, the NASDAC has been in a momentum market essentially since the end of March, and for us the last week or so is encouraging because the S and P broadly has joined with that in its clear move above the forty two hundred level, which had been basically six or seven months versus of resistance. We're actually starting to see a little bit of broadening into the
small caps, which is very encouraging. But frankly, again, this is an environment where the momentum takes on a life of its own, and that's also a function of the fact that if you look at it, sentiment, whether you're measuring it in terms of the stock market or the economy or again thinking about risk, is incredibly, incredibly poor.
And yet at the same time we're seeing data that says there's a chance that this recession gets pushed out, it keeps getting pushed out, in may end up getting pushed out to twenty four.
And right now we're seeing basically a range bound market ahead of yet another day of quiet period for the Federal Reserve. But anything but when it comes to some of the international fluctuations, you see about a tenth of a percent decline on the S and P forty two seventy five, still on the forty three hundred watch we
didn't quite get there. Ongoing weakness over in the euro but it's basically bit around one oh six eight for quite a while, with a bit of a stronger dollar and tenyure yields lowered just to touch after those ISM services data that came out yesterday, kind of disappointing, even though still an expansion crewed a little bit off earlier lows. I want to note I said John's on the beach.
He's actually in Newport Beach. He's hosting the open from pimco's headquarters, which is the reason why he ditched me along with Tom. He'll be speaking with CEO Emmanuel Roman, CIO Dan Ivison, and former FED Vice chair Rich Claredo,
who's their head economic out they're at PIMCO. That's all coming up today starting at nine am Eastern today, annual shareholder meetings will happen for Zillow, Urban Outfitters, Palanteer, and Freeport macbere And I say this because we actually saw some really interesting guidance out of Taiwan Semiconductor Manufacturing Company,
basically downwardly revising some of their expectations. You're seeing shares off today, so it's sort of interesting to see some of the commentary coming out of these meetings at a time of such fluctuation and today I know that you love talking politics, Julian, so I really wanted to get you on this. Former New Jersey Governor Chris Christy is expected to jump into the race to become Republican candidate
for president. He has been called in one New York Times article the Trump's layer, people saying he has no chance to win, but his complete objective is to act as an attack dog on the stage in debates with the former President Trump. A pretty crowded field in the Republican race, potentially twelve candidates by July.
Well, you do wonder if Governor Christy is going to announce with a pair of everlast boxing gloves on his hands.
Essentially, yes, QUI.
Question about it. Look, this is healthy at least I think you can call it healthy. Let's see what happens. My question is and hopefully we'll have someone help us answer it is. You know who among the field aside from Trump and DeSantis, could potentially rise to sort of create a three way race. That's the big question.
And a lot of people are looking down to Virginia potentially for that, And we will get into that later. I do want to get to what we heard over in China, a recommendation that state owned banks start to reduce their deposit rates to encourage lending and to increase their margins. Joining us now is Bloomberg's Tom mackenzie, who covered China for more than a decade. He's in London, Tom, what do you make of this and also what do you make of the fact that it's not a mandate, it's a recommendation.
Yeah, there's a final line between a mandate and a recommendation when it comes to official policies out of aging when they lean on those state banks. Of course, the build u when we were talking about last week, Lisa, around the measures being put in place, at least the proposals being discussed, according to Bloomberg reporting to kind of shore
up the real estate market. Now you have more piecemeal efforts to try and put a floor under the growth that has come through from China, less strong, of course than many had expected. So leaning on the banks to reduce those deposit rates, it means that the banks can then look to lower the loan rates and provide more liquidity.
We did see loans new un loans that credit impulse came through in the first quarter, but then it dropped on April, and clearly there was concern about the fact that there wasn't that traction going forward in terms of liquidity and that demand for loans. Households, businesses, they're shoring up their balance sheets, households are paying down their mortgages.
The question really is is there the demand even if it becomes easier to take out a loan and to access to that liquidity, is that they're really the demand to kind of tap into that and then support the economy.
On one hand, this is kind of stimulus light and that's positive potentially for growth. On the other hand, this indicates that perhaps the Chinese Communist Party sees a bigger problem than they're letting on, which is it.
Well, it's interesting. I was speaking to How Hong, who was formerly a BOCOM, a really respected strategist there, and he said, look, this seems to me like a government that's running out of ideas. Bloomberg economics are they now view the chances of a benchmark rate cut. So for the one year and the five year medium term lending facilities, they expect those to be reduced, possibly as early as the middle of June. But there's a debate about that
Jones Lang Lacel. Economists there say they actually think this action to lean on the banks to reduce deposit rates and therefore give them the scope to reduce loan rates, that that probably pushes back a benchmark rate cut for the PBOC. By the way, for the context, they've cut just fifty basis points, just half of percent since the start of the pandemic in twenty twenty, so they do
have that dry powder. But again they have this massive debt pile, and there's that concern of course in terms of just adding to that if they go with a broad benchmark cut. But it's certainly something that now the buloving big economics seem things it's possibly likely.
Mid Jude Tommy Kenzie, thank you so much of Bloomberg. Joining us from London, Julian Emmanuel, have evercore as Isi here with me for the hour. What do you make of what's going on in China and the fact that the growth is sort of running out of steam to such a degree. Do you feel like a lot of that story has been priced in and is really on the wayne.
So we actually think that you're it's the bumpy path to a more sustainable number it's not six percent or north of six percent, but it may settle in towards five percent. The issue here is a couple of things. First off, the way that China wants and will likely grow is unlike the last twenty years, we are making
the transition to a domestic consumer led economy. And the issue is is that you know, you've had a second COVID wave over the last five or six weeks, and it's hard to say, I think right now just how much of a dampening effect that has. But you know, in hearing the suggestion that banks reduce their rates, I'm reminded of that phrase moral suasion that I suspect you'll get a degree greater of moral suasion if things don't pick up. And obviously the government is very, very in tune with the pulse.
The beatings will continue until morale improves a bit of that. I mean, there is this question though, going forward, about how much of a tailwind or a headwind China will be. And as you talk about upgrading your forecast for US equities, do you see US as sort of being I don't want to say a haven, but a new sort of spot of focus. After everyone was looking international for the first half of the year.
Well, again, it is a mixed bag because if you look at some of the consumer focus names selling into China, they have sold off in the last month, even as the rest of the market has stabilized, and obviously parts of it have rallied quite strongly, and that tells you that it is an open question. The one thing that does seem clear is that this whole idea that China is going to be this very discreete reason for inflation to take another leg higher that we don't subscribe.
To every morning. In your morning meetings, what do they seem like? Do people kind of sit around They're like, well, it's the same kind of waiting game. We're not sure, but today we see more games. I mean, is it sort of a momentum kind of discussion. Well, it is.
But and again when you think about it, ed Heiman has been absolutely on the forefront of the view that inflation is going to come in faster than people expect. Now the last month or two it's been a little bit choppier, and we look ahead to next week, we think that's likely to be assigned.
We certainly saw that from the ECB and their consumer inflation release that they put out today. Julian Emmanuel, chief Equity Derivatives and quant strategists at Evercore ISA, our next guest, has been talking about in earnings recession. He's also been talking about how you could see a soft landing and yet you could also see companies really have to ratch back what their profits are going to be. As Ander Sheet's chief cross asset strategistic Morgan Stanley, wonderful to have
you on. Let's just start first in your thoughts and what Neil was talking about earlier.
Well, look, I do think that we should acknowledge this is an unusual time in markets. And again I think in that opening clip showed you know, we have some of the highest core inflation since the eighties.
We have the.
Most inverted yield curve in the US in forty years, in Germany in thirty years. We have won of the lowest unemployment rates we've seen in the US since the nineteen sixties. So we're dealing investors are dealing with some unusual data.
You know.
Our view is that that the economy is going to slow in the US and Europe in the second half of the year, that the full effect of tightening has not yet been felt by the economy, but that tightening will continue to play out, and that even if you don't get a recession, the effect of slowing growth effect, especially the effect of slowing nominal GDP, is going to be bad for operating leverage, is going to put some pressure on earnings and mean that current expectations for earnings
growth we think are still high for this year, which creates some near term downside. Now I think as you look further out, the picture looks a little bit better, but near term, I think the market still has to get through a number of key challenges.
Andrew, you just put out a report talking about S and P earnings declining about sixteen percent through the end of this year. What have been some of the responses that you've gotten. How have you explained why you see that even though people have in revising upwards some of those earnings expectations.
Yeah, so I think investors are skeptical of that sort of earnings move, which is understandable. It's a below consensus estimate, so the consensus is understandably higher. But also I think you have investors who say, look, you've had economic data that's held up. Okay, So far, you've had very good performance from some of the largest companies in the market, and so that isative of investors being more optimistic that earnings can be stronger going forward. And so I guess
what we'd say to that is a couple of things. First, you know, we do run kind of forward earnings indicators, forward earnings estimates, and those estimates, those models have been pretty good at predicting the events so far, and those models are saying that there's going to be more downside to consensus than what the consensus expects. I'd think if you look at some of those larger cap names that about performing, their actual earnings growth has not been particularly strong.
And even if for the market, overall earnings growth is rapidly approaching kind of flat year every year. So this is a market that, even is still a pretty strong nominal GDP environment, is struggling to grow overall earnings. And we think that will get more difficult as you move ahead, as the market confronts the laged defect of rate hikes and the legged defect of some further tightening in bank credit conditions.
So Andrew High, this is Neil, can you explain exactly how the long and variable lags work. I mean, because you know, you've been hearing this argument now for you know, really since since last year, and you know, I would expect to see significant slowing in credit areas of the credit sensitive areas of the economy. But that's not what we're seeing. I mean, you know, housing autos, I mean, they look like they've been doing a little bit better.
So can you explain you know, how that how that will actually work when it's been you know, several quarters now that they've been hiking and and some of these credit sensitive areas are actually picking up.
Yeah, So look, I think that's the challenge. The challenge with long and variable legs is that they're long and they're variable, and so if we think about our estimates for that, we think that rate hikes you feel the full effect maybe with a twelve month leg, which means that if we had, you know, rate hikes starting at the beginning of last year, you are only now starting to feel the full effect of those rate hikes in the US and Europe. So we've not yet felt the
full effect. The full effect is still to come. Moreover, if we think about the real policy rate, right, the interest rate relative to inflation that is still going through some of its larger largest increases over the next several months as inflation finally falls, and we think the FED and the ECB keyp rates high. So I think the first element is we haven't yet seen enough time to see the full effect of those rate hikes play through the economy, and we have actually haven't seen the full
effect of rates relative to inflation. Now, I think as it relates to the more credit sensitive sectors of the economy, again, I think that's pretty fascinating because again, as we've talked about at the opening, the equity market overall is very strong. The most credit sensitive parts of the market, say the Russell two thousand small caps, more cyclical stocks, have really struggled. Commercial real estate credit sensitive has really struggled. So I think we are starting to see some of the act
of that tighter policy play out. It hasn't played out at the overall market cap level, but I think it's playing out below the surface, and I think we still have some of that to come, which is a reason why we think growth decelerates further into the second half of the year.
Andrew just quickly, how does this idea of a deceleration in earnings growth pair with a soft landing.
So I think they're actually quite compatible.
You know.
Again, if we think about the types of forecasts that we're seeing, we saw a market and earnings really outperform the economy over the last eighteen months. And I think one way of thinking about our estimates is that in the US, earnings in the market underperform the economy somewhat as you go forward, and especially because I think we think earnings are much more geared and much more linked to nominal GDP growth, which is decelerating sharply, maybe more
so than real growth. Another part of this that's important is the labor market. You know, I think if you have a soft landing, I think you're inherently talking about fewer job losses than you'd have in a recession. Well, fewer job losses is great for workers, but it might be more of a challenge for margins if the top line is slowing and costs aren't being pulled back in.
The same way.
After sheets of Morgan Stanley, thank you so much. One person who's gotten it right considerably and every single time was Dan Ives, who is senior equity out analyst over at Wedbush, who has come out with one positive prognostication after another. How much do the Bears hate you?
Oh?
I mean, it's kind of been a Bear hate party, and I like and ultimately, look, I appreciate it, and obviously, look, some of the smartest people I know are Bears. I just think it's something here where the shorts the Bears, they came out of their caves last year, you know, and obviously feeling really good going into the air. And my view is just it was going to be a lot better than fear in terms of overall tech spending.
But it was our v and we've talked about it that it's the most transformational trend we've seen in tech since the late nineties, and I think you just can't fight that, and that's why I think names like Microsoft and n Video, Apple and others continue to go higher.
I have to say that some of my best friends are Bears. Was always sort of the prelude too, is something negative that's pretty significant. I'm curious, though, after the announcement yesterday, you're still doubling down on some of the artificial intelligence embarkments of Apple, saying that this is where they're going next. A lot of other people didn't necessarily
take that away from the conference. What gives you confidence that that's kind of the next phase of their explosion and valuation and gross And I think.
That's typical, right, I mean for Apple for many years, I mean for the last decade. There's many people I know they've sort of fought it because they'll go to a conference, they'll just see a leaf. They don't see the forest through the trees. And I think essentially what Cooper, Tino and Cook are building here, it's another ecosystem within
the app store. And it all because, at least right now, there's a battle, a game of thrones for developers between Google Microsoft in terms of what we're seeing in terms of this eight hundred billion dollar AI revolution. Apple understands that that's why they have the gold install base and they have the developers. This is the first step on a broader strategy really to build another mood for developers and consumers.
So Dan obviously the Big five, Big seven, However, many stocks you want to target who have really capitalized on this last number of months of AI momentum, Who among sort of the second tier of maybe those companies that haven't yet fully realized the potential do you see as being most attractive first? And then the second question is what industries and specific do you think are likely to benefit over the next year or two.
Yeah, a great question because I think right now, okay, the first derivative the New York City cab Grevens, Microsoft, Navidia. But so now it's like who the second third derivatives. I think ultimately salesforce is going to be a big
derivative that no one's talking about. I think you have names like pal and Teer, which is another on the on the AI front, and I think what you're really starting to see right now from a cybersecurity perspective, it's really as more and more moves to the cloud, more moves to AI, you're gonna have huge benefits there names like pow Out, though Ford Net and others. That's why I believe this is not just today, it's five seven, ten stocks when we look out over the next one, two,
three years. I think this is really what I've views like a nineteen ninety five moment and iPhone moment relative to where we see it over the coming years. Obviously macro aware in terms of what we're seeing in that but I can tell you if from talking to developers enterprises, what we see in spending, I continue to U as a green light for overall tech stocks.
So this is a faith based kind of bet though at a certain point, right, this is faith that AI is going to be a transformational moment more than say the adoption of thirty five hundred dollars, you know, augmented reality sets that people are maybe not going to buy their children for the holidays. I'm just saying personally, but I'm just wondering from your perspective. You know, it's not
about one product. It's about sort of engaging in a whole new way of doing business and getting out front so that different companies can use your technology, software, whatever you have in a way that transforms the way they do business. Correct.
Yeah, I think it was faith based till the guidance heard around the world the Nvidia, the four billion dollar raise. That's where basically all the bears went into hibernation mood for the winner. And that really is what really changed everything for tech because that that was the numbers. And now in redmen, we're going to see it. Google, We're going to see these next few quarters, and that's why.
I can tell you a lot of investors they're not looking at the next one to two quarters, they're looking out of the next one two years. And that's why this really created the opportunity in terms of, you know, a market where I think many is still yelling fire in a crowd theater.
What do you say to the clients who are worried about valuations.
So it's the same clients that I've talked over the last twenty two years where I'll sit down there, like on transformational tech names, on the Amazons, the Googles, the test was if you look out over the next year on transformational tech companies, you'll miss every transformational tech stock the last twenty years and in the next twenty years. It's doing different than coming out of two thousand draft six round out of Michigan, Brady that first camp being like,
I just don't know if it's going to work. So I think that's sort of my view in terms of how you have to look at these transformational tech names.
So from your perspective, Julian, are you sort of buying into this? Do you feel like you kind of have to be overweight tech? Even after the rally.
So we've taken a little bit of a different tech right. So so for us we realize is that the momentum aspect, whether it's nineteen ninety five, and frankly, if you think about it, if Dan's right that this is nineteen ninety five and not ninety eight or ninety nine, we have a lot further to run. Or if it's later in the cycle, we like the kinds of names that have
actually shown both price momentum, earnings momentum. And for us, very importantly in a momentum driven market, is still defensive positioning, okay, and by that whether it's a bid to puts or high short interest. And actually you get a number of sort of the second and third tier technology names that Dan mentioned, as well as actually other industrial names that may or may not end up using AI more directly in the immediate term.
When you talk about positioning, that is what a lot of people talk about. The overweights right now, for the big tech names have gotten fairly extreme. Suddenly everyone's piling in because as much as the bears might be more vocal and the ones reaching out to you to say no way, and with all sorts of hate mail with lots of expletives, most people are saying, all right, we
buy it, We're in. How much is that going to potentially challenge the ability for these shares to really rally even if people buy into the story.
Look, but I still think institutionally speaking, many have been sitting on the sidelines with their six reasons to be negative, and now they're like, maybe they could focus on the weather. Hurricane season is a reasonably negative and I'm just trying to think about like other reasons negative. But so I think what's really starting to happen now is you looking at the derivatives. You get apple from some of the
parts perspective. I know this doc that continues to go much higher you look at now the macro is not rosy and rainbows.
We know that.
But I think what's starting to happen here when you look out the next four to six quarters. If you pick look, there's gonna be fakes, there's gonna be names that basically like ultimately feake it and then ultimately that's.
The froft that will come off.
But if you pick the winners, you pick what I've used the fundamental names to really own in cloud, CyberSecure and AI, and that's how you win here.
Ten seconds, When has Apple become a four trillion dollar company?
Look, I think I believe right now you carash On it is three and a half trillion. I think by twenty twenty five we're looking at a four trillion dollar or sooner.
Dan, I have of Wedbush. Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify, and anywhere else you get your podcasts. Listen live every weekday starting at seven am Eastern, on Bloomberg dot com, the iHeartRadio app tune In, and the Bloomberg Business app. You can watch us live on Bloomberg Television and always on the Bloomberg terminal. Thanks for listening. I'm Lisa Abramowitz, and this is Bloomberg