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You know, a lot of tech earnings this weekend. Next remember Monday, all the way back to Monday. The world was rocked by this deep Seek thing. It seems like a lifetime ago.
A lifetime ago in an incredibly busy day for our next guest, who I think was on.
Every hour exactly of the day, exactly, multiple times exactly, Mandy sing singing around. Also he covers a technology space for Bloomberger Intelligence. MANDI but a lot of earnings.
Let's go back.
One of the names that we didn't get to talk about it I don't think at the time was Meta. They put out some pretty solid numbers. This stop is performing really well. What's the story at Meta?
I mean, look, this is a company that dominates the social media ad space, growing top line at over twenty percent and putting a lot of dollars in capex, and the street seems to appreciate it. Despite the deep seek News, which was a surprising part. I mean, they're actually taking their opex guide up as well, and Capex they raised prior to their deep seek News. And for me, the real comparison here is with Microsoft. Microsoft if you read the tea leaves hinted that this is the ear of peak.
Capex that they acknowledged the deep Seak development, and they said they probably are thinking of, you know, taking down costs, although they didn't guide to it, whereas Meta was like, this is going to drive more demand for AI on the inferencing side, and so we are doubling down. I mean, they actually raised their opex guide, which did surprise a lot of people relative to consensus.
Top of the earnings report. Mark Zuckerberg, CEO of Meta Founder, of course, we continue to make good progress on AI, glasses, and the future of social media. I'm excited to see these efforts scale further in twenty twenty five. Are you likewise excited about glasses and AI? In the context of Meta.
The one line that stood out for me was this is a make or break here for reality labs. Okay, what it tells.
You They pour a lot of money to Reality Lab.
And they're still going to lose twenty billion, another twenty billion dollars this year. So imagine how high the stock would be if you put a you know, even a fifteen times multiple on that twenty billion that they are losing, mean the stock would be easily ten percent higher. But the fact that he said this is make or break here, which means this is not going to be a recurring loss either this year this thing takes off, or they're
going to stop investing twenty billion dollars. And I think so that's a positive for the market.
Google they report earnings, I think Tuesday. What do you expect hear from them?
I mean the ad trends seem to be solid. That's what Meta alluded to. Probably I think both Meta and Google benefited from the TikTok uncertainty. Clearly the ad dollars are moving away from TikTok as a platform, and I think YouTube should show an acceleration and growth. So search is where, you know, everyone is kind of cynical about Google maintaining their ninety percent search.
So how do you think that plays out? I mean, is ai chat GPT?
What is it?
When I go on my Google thing, it comes up.
As Gemini Gemini.
Is that a thing? Look?
I mean in the end, you know, the search market is expanding because of generative AI. We will be searching for more things because the prompts are all over the place, so instead of going to Google dot com, they are prompts everywhere where we can do searches. Now, Google's problem is they have the ninety percent plus share, so I think volume wise, there will be an impact on Google Search. But what really is the big mode for Google is the fact that they monetize you know, just twenty to
thirty percent of their queries. The rest are all free, and they somehow have a way to combine all their family of apps data where there's Gmail Maps, all the other apps, and show you the most relevant ad which is why you know their ad pricing is way above everyone else. To my mind, that is a mode that's hard to break. All these you know LLLM offerings are subscription based. Nobody is really penetrating the you know or
hurting them on the ad site. Maybe Meta Meta said they will get into search via their WhatsApp platform, so Meta could be a competitor in search ad dollars, But everyone else so far is kind of going with the subscription offering. When it comes to LM searches.
The extraordinary ubiquity of Google Search is not new to anybody who has a phone or a computer, but situated for us in this moment where we have a new administration two weeks in looming law charge is this Department of Justice case against Google, speculation about Chrome being spun off. What happens to all of that? How do you see that? How does the company see that in the context of this new administration.
So you're right, if there is one big risk out there, it's that Department of Justice creates a case to divest Chrome. And if that happens, I mean we're talking about an easy ten to fifteen percent hit on search adrabic because in the end, you know, on the desktop, they are getting a lot of data through the Chrome browser even though they're not charging for it. I mean, that's why
the search is so effective. So it will hurt them. Now, our base case is, you know, the Department of Justice will see the competition now for search, and there's no way you can say Google is a monopoly. I mean, look at all the competition we were just talking about from LLLM players and so from that perspective, it's hard to argue even though they may have had a monopoly in search, but it's hard to argue they have it
now going forward given all the competition. So there will be some remedies, probably the one that Google has suggested from their side. Now, I don't know if the judge you will accept or not. Is you know, the exclusive arrangements they have with Apple to be the default platform,
and the payments they make to Apple and samsum. Maybe that goes away, but actually that could help Google because when it becomes a bidding mechanism, no one else is going to bid twenty billion dollars to be that default search, and so Google will still be the default search and the twenty billion could be all gross smart Interesting.
All right, we've all had roughly four or five days to digest this deep seak data that broke last weekend. My amateur take is maybe at a headwind for chip makers who sell all this stuff, but maybe a net positive for everybody else.
How do you view it?
Somebody asked me the Cocktor party tonight, That's what I'm going with.
Yes, I think that's a good take. The semiconductor guys should be worried, especially on their training side. If you were betting on scaling laws and data centers getting bigger and bigger, you needed more power. You have to rethink what happens now with deep seek talking about efficiency and gains of almost thirty times compared to you know, what the pricing was with the prior kind of set of llms. But look, I think the biggest beneficiaries here are the
software companies. There is no doubt that cheaper LLMS helps their margin. And that's why all the software companies, the cloud guys that want to integrate this LLM technology as an agent, they are the biggest beneficiaries. And we saw a nice bit up this week on the cloud software names.
All right, you know this was a big week for tech.
I mean it is a different things, yeah, I.
Mean it changed kind of a little bit of the narrative of this AI thing and intent. It's just not straighten up into the right. There's you get to manage some changes here. Mandepcheing, thank you so much for joining us. Mendepcheing, Senior analyst Technology Bloomberg Intelligence, actually coming into the office on a Friday, unlike his Unlike his bid management team, which meils it in regularly.
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Let's go back to the economy, folks. We have some economic data out today. We had a lot of economic data coming out really this week, and today's really focusing on inflation that seems to be in Czech Simona Mokutam. She is a chief economist at State Street. Simona, thanks so much for joining us here. What did you take away from today's inflation data.
Well, first of all, the reaction was a little bit of relief because there is so much reason for anxiety and concern and you know, so much uncertain deal around what's coming through in terms of policy. So it's nice to see that certain things are reliable and progressing along the lines of what had been expected. Even more so, it's not that you know, we had steady core PC in December, but I think what I'm looking forward to see is the resumption.
Of improvement in January.
And you know, what's what's nice to be able to say is that even if you were to get a really you know, significant month or month increase, hey the worst since you know, March of last year, you would still on a year on year basis yet to tenth improvements. So we have not been there in a while. In fact, the last time we had that improvement in year on year data for CORPC was June. So that is a good start to the year at least in that regard.
I want to pick up on something that our colleague Averag Jersey brought up, and that is the read that we got this morning on personal spending. I should not it came in ato point seven percent survey was point five And there's also revision to the last set of data we got that was revised upward as well. What does that strength that resilience and personal spending tell you about the strength of the consumer? Yes, and also just sort of what how it complicates the Fed's job you're going forward?
Yeah, I think this also takes me back to the GDP data we got a couple of days ago, and there was a lot of peculiarities, peculiar behavior in some of the components. One thing that really was striking was this extraordinary strength in consumer spending. That frankly, it's a little hard to reconcile when you look at the behavior of a real disposal income which is not quite as strong. And you've seen that this morning as well. You know the price of that. You know, surging consumption is a
decline in a savings rate. So then you have to ask yourself. You have the strength, but is it truly sustainable? And I would say not at the pace that we've seen over the last in Q four, So there has something has to give. Maybe we are under counting, maybe we're under measuring income. That has happened of course in the PS, but as things spend, there is too much of a divergence between income and spending to be convinced that the spending is free continues.
So some one of the inflation data today again kind of in line with the expectations. Yes, if I would probably like to see it come down a little bit. But there are concerns out there that maybe some of President Trump's policies, namely terriffs and immigration reform, will have an inflationary impact, a negative inflationary impact, higher inflation. Do you subscribe to that?
I think directionally there is no question about it. You are talking you know, a price shock via terris and potentially a negative supply shop to the labor market that could raise wages down the line. Between these two, I would think that terriries have more of an immediate inflationary impact just by their nature the ability to impose them on you know, a short notice.
But we have to also.
Remind ourselves that by for you know, if by comparison to other economies, the US is a large, diversified, but actually fairly closed the economy, just about fourteen percent of GDP, and we don't know what numbers we are talking about in terms of terrifts, so something that's you know, reasonably small number, it will not be a true make or break for the inflation pattern. And also it's important to
see what happens to services. Right, we are talking terarriffs on goods, but that's actually a small part of the economy. What matters even more is what happens to shelter rent inflation, and there the trend has been favorable.
Over the last few months.
I expect that to continue, so of course concern about what may happen, but also a little bit of reassurance that you have some upsetting positive developments in the service space.
You know, we have so much uncertainty, hear, when it comes to to trade policy, we're waiting to see what's put in place. In fact, if anything will be put in place. Is we do have more awareness now of the administration's immigration policies, and we've seen the uptick in the way that all of these agencies have gone after
immigrants are in this country without documents. Do you have a better sense now that we have seen that telegraph through executive orders, as we've seen some action in terms of policy action, that you can kind of think more clearly about the effect I could have on the economy.
Frankly, not a whole lot more clarity than we you know, we had a month or two ago. I think what we are seeing is what we sort of expected to see. There will be action on immigration, there will be deportations, but again, as with everything else, the devils in the dtail. So what exactly would be the cumulative number we are
talking about here? And so because I don't know, I try to also focus on what I do know, which is the reality that the US labor market today is much closer to balance than it was two years ago, if these policies were hitting, then I would have expected more of an immediate inflationary effect. Today you're looking at, you know, very low quits rate, very low average weekly hours. So there is a sense that labor resources are not necessarily so intensely utilized. There is no frauth in the
labor market, and that buys you sometime. At the same time, you know, what is the speed of deportations. I don't know, but it will take some time, I think, to truly make a dent in terms of the numbers that we are talking about. If you look at southern border encounters since twenty twenty one, you know, eight point eight million, it's going to take a long time to really make a dent in that. So because of that, I still subscribe to the view that short term I'm more worried
about cherrys from an inflation standpoint than immigration. Actually, medium term there's a different conversation, And I speak to you as an immigrant. We do need them, we do not need.
Those skills, so it does matter very much watch what happens.
But on a three to four months, even six months basis, I think you're already going to see the wage.
Effect Simona, thank you so much for joining Usimona Mokuta, chief Economs at State Street. Next time we're going to ask her about what it's like to live in Radio Romania, that's.
Where she's from.
This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Apple, Cocklay and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa Play Bloomberg eleven thirty.
You're busy time down in Washington, DC for the Trump administration as the transition continues. I want to get the latest on that. Jen Flinton joins US head of US Government Affairs for Invesco. Jen, let's talk about It's been a busy week for some of the President Trent's nominees, sitting in front of various Senate committees trying to get a proof here. What have been the highlights this week for you? It looks like we actually carried some of the RFK junior hearing as well well as that for
Tulsei Gabbard. What are you making so far?
Yeah, that's right. So RFKJ Robert F.
Kennedy Junior is now having accomplished both the Senate Help Committee and the Finance Committee.
It's going to take a committee.
Vote next week, most likely to advance him to the Senate floor. Cash Patel as well for the FBI director, and then of course Tulci Gabbard for the head of d and I these hearings were the most controversial hearings that we saw, and I think there's a question right now, especially with Chelsea Gabbard's nomination, whether she can get out
of committee. And we still don't know, because this is the Intelligence Committee, whether this will be a public vote or whether this will be a private, behind the scenes vote of the committee.
Well, all of this is unfolding. I imagine there is work underway on what I think the President and many of his economic advisors have said will be kind of the primary focus for them in the year ahead, and that is on getting this Trump era tax cutpill extended. Where are we in that process and when do we begin to get some indication of sort of what will
be in that what won't I know. There was that meeting in South Florida where a lot of members of Congress whose districts are affected by that cap on state local tax deduction for instance, went down and tried to lobby the president. Where are we in that process? When do we get clarity on where it's headed?
Yeah, that's right.
So the House Republican Conference met in Doral, Florida, and President Trump did talk to the group and sort of outline all of the big things that he wants to do.
What they haven't yet decided.
On is how to go forward on the reconciliation instructions. And that's a really key I know it's a process issue, but it's a really key part of this process. They have to pass a budget resolution with reconciliation instructions, a joint resolution out of both the House and the Senate.
And right now the House and the Senate are divided on the actual package, how big it should be, whether there should be one or two, because it's possible under the rules to do two reconciliation packages this year and
just a sort of step back. Reconciliation means that a simple majority in the Senate can pass a major bill out of the Senate, which is a big deal when typically bills take sixty votes to get out of the Senate, and there are rules around what can be included in reconciliation, and it really has to do with having some sort of revenue impact or debt impact. But they can do big things, and as we saw in the past, that's how TCGA passed.
Out of the first Trump administration.
And so they really expect to move forward on tax reform.
Before the end of the year.
The question is do they do one or two And that really has to be decided for I think in the House and we'll see that movement next week in the Budget Committee.
Jen how do they plan on paying for whatever package they do agree upon or does it even matter that they tell us how they're going to pay for it.
Well, they have to decide on and that is going to be sort of up to Senate Finance in ways
and means what the baseline is. And if the baseline is current policy, then technically for the context of scoring this bill, then they don't have to necessarily pay for the extension of the current provisions of the twenty seventeen tax bill the TCCHA, right, But there are other things that Trump wants to do that President Trump really detailed during the campaign and reiterated this week in Florida with extending some sort of no tax on tips and no
tax on Social Security benefits and no tax on overtime in common. Right, and so there are there's a real expansion here that they're going to have to deal with.
It's going to cost money.
Yep.
All right, Jen, thank you so much for joining us. Jen Flinton, head of US Government Affairs for Invesco, busy times down in Washington, DC for the Trump administration.
This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Apple, Corplay and Android Auto with the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal.
All right, folks, your daily look at the front pages around the world. Lisa Matteo newspapers.
What do you go for us today?
Okay?
Super Bowl around the corner, right.
You know, fans love their wings and their beer, but guacamole is a big part of it. You gotta have the quawk with the chips, okay, but now you might have to pay more for it. And the reason they're saying is because you know, we've been talking about President Trump starting to possibly set off those first wave of towers tomorrow, Canada and Mexico in the spotlight. So Mexico, yes, supplies upwards of ninety percent of the avocados, all right, so the prices could go up. There was a drown
in Mexico already shrank the crop to begin with. So it has this like interesting take about is Mexico the only place to get avocados?
Because that's what I started thinking.
I'm like, is that the only place to go get?
Yeah?
So it says how Chipotle gets them from like Columbia, Dominican Republic, A grocery chain by Kroger gets them from Chili and Peru.
But everything a condo price is already up fourteen percent this year.
Wow, do you make I'm not a qualk persone there? You failed to bring it in, Yes, the broker studio.
So what's what's any secret to your gualk here?
No, I got the tomatoes, onions, the cilantro, a live maybe little pepper, yeah, little garlic and er.
Yes, I'm such a glack person. But it is expensive.
I mean I get them, you know at the whole sales.
It's good by the grosser by the bag.
And then you got to kind of Lisia has away.
Refrigerators in the two freezers. What do you got as getting avocados from Lisa's backyard? They yeah, but.
You can't get what are you going to switch to salsa?
I don't I'm a good person.
Ok yeah, all right? What else we got?
Right?
This is for you, Paul, because I know you love Landman on Paramount right.
I have not yet watched it, but I've heard you toouting it. Yes, I don't know what one is? Can you define that for me? First? This is okay?
This is it?
And and by the way, there's a story in a journal is totally not real. I mean it doesn't depict it correctly.
Is the point.
But in the context of this show of the Landman is the oil guy out in the oil patch in West Texas that actually does it all. He manages all races, it does everything. Okay, keeps a local you know, Mexican cartel gangs, you know.
So it's and you told me this has made you an expert.
I'm an expert on the oil and gas basiness. But and it goes back to my point. Billy Bob Thornton, pound for pound, the best cursor on television.
He's the best.
He curses better than anybody, you know. So anyway, that's my But.
It's saying, how like the people of the real landmen, like all their families are calling them and as saying are you okay?
Yes?
Like is everything?
What do you do?
Like they're calling them in a panic to see if they're okay. But they're saying, well, you know what, my job's not that exciting. I really sit behind it. I look through contracts and real estate records.
Yeah, so this guy says his mondays are a little different. He spends most of his time reviewing lease contracts. There you go, perusing real estate records and advising landowners on how to deal with oil and gas companies that drill on the property, all sitting behind an office desk.
Apparently the amount of michelob ulture they drink or Michelob's light is accurate, ultra excuse me, it's accurate that the real landmen.
Okay, it's a tremendous product placement there for glob ultu. All right, what's next?
All right?
Lastly, this one, maybe you can help me out a little bit with the banker bonuses. They're saying that they're turning into this kind of scratch off ticket because stock swings. Bonus is like come in these restricted stock units, so it can be unpredictable.
And that this works okay in a good year, which we're having many good years cash cash only. Don't even talk to you about stock or rsues. Arny of that garbage. When we have a bad year or two and they don't have the cash on hand, then maybe I'll entertain taking some of this garbage. But I sell it all the first second half, Yeah, first second invest The best trade I ever made was selling credit Swiss stock in December of two thousand and four, eighty seven Swiss francs.
Go take a look at where that is now zero zero wown Swiss.
F See it's crazy because it's just so unpredictable.
But you're getting to that vesting process. There's actually a very cool calculator embedded in the story where you can see, yes, the true value of your bonus years out.
Yeah.
My pvice to kids is don't and if you do take it, sell it as quis a can. That is the newspaper segment with Lisa Matteo.
We appreciate that.
This is the Bloombergs or Aveillance podcast available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, seven to ten am Eastern on Bloomberg dot Com, the iHeartRadio app, tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal