December 10, 2025 • 47 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
Federal Reserve officials delivered a third consecutive interest-rate reduction and maintained their outlook for just one cut in 2026.
The Federal Open Market Committee voted 9-3 Wednesday to lower the benchmark federal funds rate by a quarter point to a range of 3.5%-3.75%. It also subtly altered the wording of its statement suggesting greater uncertainty about when it might cut rates again.
Speaking to reporters after the meeting, Chair Jerome Powell suggested the Fed had now done enough to bolster against the threat to employment while leaving rates high enough to continue weighing on price pressures.
When asked if it were a foregone conclusion that the Fed’s next move would be a cut, Powell demurred, but added that he didn’t see a rate hike as any official’s base case.
Today's show features:
- Bloomberg Intelligence Chief US Interest Rate Strategist Ira Jersey on the bond market’s reaction to Wednesday’s Federal Reserve rate call
- Steve Moore, Co-Founder of Unleash Prosperity and a former Trump Economic Advisor, and Bloomberg Economics US and Canada Economist Stuart Paul, on the search for the next Chairman of the Federal Reserve
- Bloomberg Intelligence Senior Technology Analyst Anurag Rana breaks down quarterly earnings from Oracle and Adobe
- Zach Wasserman, Chief Financial Officer at Huntington National Bank, on the financial sector outlook following the Federal Reserve's latest rate decision
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg business
Week Daily reporting from the magazine that helps global leaders
stay ahead with insight on the people, companies, and trends
shaping today's complex economy. Plus global business, finance and tech
(00:23):
news as it happens. The Bloomberg Business Week Daily Podcast
with Carol Masser and Tim Stenebek on Bloomberg Radio.
Speaker 2 (00:33):
All Right, Fed decision Day, the eighth and final FOMC
meeting of twenty twenty five. It is done, and widely
as expected, the Fed cutting rates for a third consecutive time.
Speaker 3 (00:44):
The Fed also maintaining its outlook for just one cut
in twenty twenty six. Okay, so two descents last time, yep,
this time three descents correct, but in different ways correct,
kind of spanning everything. That's Stephen Meyer into want a
more aggressive interest rate cut right at fifty basis points.
(01:04):
But maybe what people didn't expect were two dissenters who
wanted to hold rate study.
Speaker 2 (01:08):
Mister Goolsby of the Chicago Fed and mister Schmidt of
Kansas City.
Speaker 4 (01:13):
Yeah, exactly, saying we didn't need to do anything.
Speaker 3 (01:15):
Okay, Yeah, so not a lot of consensus, but.
Speaker 2 (01:18):
Must have been a healthy debate around the FED table
on the wall. Yeah, exactly. So now we're done for
the year and now we think about what's going to
happen next year.
Speaker 4 (01:26):
We got a lot of commentary on that from fedho J. Powell.
Speaker 2 (01:29):
In fact, one of the things he really emphasized repeatedly
in his comments in his opening statement that the committee
is in.
Speaker 4 (01:37):
A wait and see mode.
Speaker 2 (01:38):
Also noting, by our account, thank you Talia, our producer,
for actually pulling this out to our attention, noting by
our account for the third FOMC meeting in a row,
saying there is no risk free path forward.
Speaker 4 (01:51):
It's a challenging situation.
Speaker 5 (01:53):
In the near term. Risks to inflation are tilted to
the upside, and risks risks to employment to the downside.
A challenging situation. There is no risk free path for policy.
You're going to get a great deal of data between
now and the January meeting. Everyone around the table at
the fom SE agrees that inflation is too high and
(02:13):
that we want it to come down, and agrees that
the labor market has softened in that there's further risk.
Everyone agrees on that where the difference is how do
you wait those risks and what does your forecast look like?
And where do you ultimately weal Where do you think
the bigger risk is? And you know, it's very unusual
to have persistent tension between the two parts of the mandate.
(02:35):
We're well positioned to wait to see how the economy evolves.
Speaker 6 (02:38):
We'll just have to see.
Speaker 5 (02:39):
It's a very challenging situation. I think we're in a
good place too, as I mentioned, to wait and see
how the economy evolves.
Speaker 4 (02:45):
All right, very challenging situation.
Speaker 7 (02:47):
Fit your J.
Speaker 4 (02:48):
Powell.
Speaker 2 (02:48):
At the press conference, you also did say gradual labor
market cooling justified that rate cut today. So talking about
some weakness that we've got in the labor market.
Speaker 4 (02:58):
Next f MC decision, folks, Not.
Speaker 2 (03:00):
That we like to kind of look ahead, but we do.
January twenty eight, twenty twenty sixth.
Speaker 3 (03:04):
Mark your calendars, I am, are you?
Speaker 2 (03:07):
Oh yeah, it'll be the first of twenty twenty six. J.
Powell still will be FED chair, So it'll be interesting.
Speaker 4 (03:12):
We should point out.
Speaker 2 (03:13):
After the decision, President Trump at the White House made
some comments tim on today's FED move.
Speaker 4 (03:17):
He said that could have been doubled at least doubled.
Not a surprise.
Speaker 2 (03:21):
We have heard criticism from the President when it comes
to FED Chair J Powell.
Speaker 3 (03:25):
Well, interestingly enough, that's where Stephen Myron exactly, Stephen Myron voted,
who's widely seen as somebody who has the most connection
to the White House, who's on the FOMC.
Speaker 4 (03:34):
Yeah, exactly right.
Speaker 2 (03:35):
All right, So let's do a little bit more in
terms of the commentary around this decision. We've had a lot,
certainly come across the Bloomberg, including our live blog. Let's
see what our Bloomberg Intelligence chief US Interest rates strategist
Iri Jersey has to say about this. All right, Ira,
We have heard from Fedchair J. Powell for at least
the last three meetings where they cut that both sides
(03:56):
of the Fed's mandate is challenged at the FED decision today.
Speaker 4 (04:02):
Does it make sense to you?
Speaker 6 (04:04):
I think it does.
Speaker 8 (04:04):
I mean it was fully priced. And you know clearly
when they pivoted to worrying more about employment than inflation,
they were going to go more than fifty basis points
as kind of these risk management cuts, and you know
now that they've cut seventy five basis points. Another key
phrase that Jay Powell said was that that they're now
in the range of neutral. So basically, with all the
(04:25):
committee members, what is this mystical r star or real
neutral rate?
Speaker 3 (04:30):
And are we there yet?
Speaker 8 (04:31):
And he conceded that he thinks that they're now in
the range of being at neutral. So therefore this could
be the end of cuts, or maybe they're going to
cut again unless the economic data changes enough for them
to be comfortable cutting again, because like you mentioned, you know,
he did say that there's still this balance of risk
between inflation and employment.
Speaker 3 (04:50):
Yeah, exactly, And look he did say we're even between
now and January, not to mention between now and the
end of next year, when some people think that another
twenty five point rate will happen. He said, we're going
to get a great deal of data between now and
the January meeting, so a lot can change or a
lot can be confirmed in the meantime ira before that happens. Though,
I want to go back to this tension between the
(05:13):
different parts of the dual mandate. Which part do you
believe the FED needs to focus on more? Is it
inflation or is it maximum employment?
Speaker 8 (05:21):
Well, I actually think that at the moment there's very
little that they can do about inflation because you know
that the interest rates still are relatively high compared for
like the housing market, and there's not much that the
Federal Reserve can actually do to help the housing market
right now in terms of, you know, bringing house prices down,
Like what are they going to do there? You know,
if they lower interest rates a lot more, that's just
(05:43):
going to increase the value of some people's houses because
you know, maybe mortgage rates come down a little bit,
that increases affordability, and suddenly house prices actually go up,
which is actually against their mandate. And for other goods
and services, they don't seem to be particularly elastic, like
the elasticity to interest rate and a lot of these
other goods, whether it's even automobiles or any other large purchases,
(06:06):
there just doesn't seem to be a significant correlation between
the two at the moment. I think part of that
is quite frankly, because a large portion of the population
does have very low interest rate mortgages, so they're not
going to refi, it's not going to Lowering interest rates
isn't going to be as stimulative as it has been
in previous cycles. And at the same time, lowering interest
(06:27):
rates again, isn't going to necessarily bring inflation, make inflation
go significantly higher, if you know, if you don't get
a big lending boom. And I'm not sure that that
lending has you know, increased the whole heck of a
lot anyway. So anyway, the fact that they were close
to neutral, and we you know, we've always thought that
they'd probably cut a little bit beyond three percent because personally,
(06:49):
I'm a little bit more concerned about the job market.
I think the job market shows some cracks beneath the
surface that some people are either ignoring or you know,
everyone's making excuse for why we're at fifty k ish
payrolls the last couple of reports that we've gotten. But
the fact is is that companies are still reluctant to hire.
Speaker 6 (07:08):
You have seen in some of the survey data.
Speaker 8 (07:09):
Maybe that leveling out a little bit. Yeah, but I'm
still concerned about the job market, and I think that
the FED is and the people who voted for the
cut certainly are worried about the job market more than inflation.
Speaker 2 (07:19):
And we get to read on that next week. Hey,
one thing I want to do before we go. We
got about a minute and a half or so left
here Just quickly, Ira, the FED move to expand its
balance sheet again fresh purchases of short term treasury securities
to maintain what they said an ample supply of bank reserves.
Speaker 4 (07:36):
Just got about thirty seconds. What do we need to
know here?
Speaker 8 (07:38):
Yeah, well, that's actually probably the bigger story, even than
everything else that we just talked about, because it's much
larger than most of us thought it would be. They're
adding somewhere around one hundred and sixty billion dollars of
tea bills over the next couple of months.
Speaker 3 (07:52):
Through the April tax day.
Speaker 8 (07:54):
Risk assets seem to like that quite a lot, and
it made the whole meeting a lot more doubvish to
I think a lot of people's sensibilities and just looking
at the whole cut plus the Qiwi light, if you
want to call it that.
Speaker 2 (08:09):
All right, good stuff, Ira, Thank you so much. We'll
be looking out for your research. Also later on today
and into tomorrow, our Jersey chief US interest rates strategist
at Bloomberg Intelligence from BI headquarters in New Jersey.
Speaker 3 (08:20):
Stay with us more from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (08:27):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five eas during
Listen on Apple Karplay and Android Auto with the Bloomberg
Business app, or watch us live on YouTube.
Speaker 3 (08:42):
We're staying on the FED decision today. We're also thinking
about FED leadership come twenty twenty six, We've got a
great roundtable. Steve Moore's with us. He's co founder and
chair of the nonprofit Unleash Prosperity. He's a former economic
and senior policy advisor to Donald Trump in twenty sixteen
and twenty twenty four, and served as Chief Economist and
Distinguished Visiting Fellow at Heritage Foundation for twelve years. Yeah.
Speaker 2 (09:02):
He's also written a bunch of books, including trump Anomics,
Inside the America First Plan to Revive Our Economy. Also
another one, The Trump Economic Miracle. And you might remember
back in twenty nineteen, President Trump selected Steve Moore for
the Federal Reserve Board of Governors, which more ultimately withdrew from.
So we have a lot to unpack and talk about.
Steve joins us from Palm Beach, Florida. Great to have
(09:22):
him here. Also with us is Bloomberg Economics US and
Canada economist Stuart Paul. He's right here in our Bloomberg
Interactive Broker studio.
Speaker 4 (09:30):
Steve, I want to kick it off with you. Welcome.
Speaker 2 (09:32):
Nice to have you here on Bloomberg. Your key takeaways
from today's FED decision.
Speaker 7 (09:38):
Well, it was certainly Wall Street was happy with what
happened today. It was very expected that the Fed did
exactly what they announced today. Trump of course wants more
rate cuts. You know, Look, inflation has come down, and
it's still not where we wanted to be. We wanted
to be at the two percent at target, and so
(10:00):
we're running about two point seven two point eight, So
there's still work to be done to bring inflation down.
Of course, if you bring inflation down, affordability goes up.
But look, this is a booming economy right now. It
is so hot. Trump is right about that. In twenty
twenty six is going to be a monster year for
growth and for incomes and I believe for equities.
Speaker 3 (10:20):
If you were on the FOMC in a voting member,
how would you have voted today? What would you have
wanted to see?
Speaker 7 (10:25):
I would have done exactly what they did.
Speaker 3 (10:27):
You wouldn't have gone fifty basis points like Stephen Myron.
Speaker 7 (10:30):
No, I'm a little bit more of an inflation hot
than Steve and Steven. I know Stephen, he's a smart economist.
I lean towards making sure. I think the top priority
of the Fed should be to make sure that we
bring that inflation rate down to the target level. We're
not there yet, and you know, look at the as
a political matter, Trump really needs to continue to bring
(10:51):
that inflation rate down because people are still angry about prices.
Speaker 9 (10:56):
Mister Moore, is really difficult to square the circle between
being an inflation hawk and voting for or advocating for
additional rate cuts. When you see somebody like President Trump
focusing so much on affordability, but at the same time
calling for the FED to cut rates even more, how
do you really square the circle?
Speaker 6 (11:13):
How would you.
Speaker 9 (11:14):
Rationalize voting for a cut while also being an inflation hawk.
Speaker 7 (11:19):
Well, I think I believe that Wall Street puts way, way,
way too much influence and interest in FED rate cuts.
I mean, nobody the short term interest rate has become
almost irrelevant, So I really don't believe that it's all
(11:39):
that important. Frankly, whether it was a quarter point or
fifty percent, fifty points or doing nothing. I don't think
that it makes all that much difference. We should have
learned the lesson. By the way, what look, what we mean,
what we'd all like to see is for those mortgage
rates to come down, in the ten year treasury interest
rate to come down. The FED doesn't control that. I
(12:01):
know that may surprise people watching with the FED has
no impact on the ten year treasury or the thirty
year mortgage. And we know that, by the way, And
what happened in twenty twenty four when the FED cut
the discount rate and what happened to the I mean
the FED funds rate, and what happened to the mortgage
rate and the ten year treasury went up. So I
(12:22):
don't overly obsess about FED rate cuts. I think we're
in a pretty good look. The most important thing is
this incredibly healthy economy. We've got hundreds of billions of
dollars coming into the US economy of foreign investment. We've
got the highest s and P five hundred, the highest Dow,
(12:44):
and the highest Nazza in the history of the country.
People are making huge amounts of money. And this is
a bet when the markets go up, this is a
bet that policy will be well guided and that American
companies are going to make money. So I have a
hard time really having many much problem with the direction
that we're going in with respect to this economy. And
(13:05):
don't forget the sorry. In January, people will start to
see the middle income people will start to feel the
impact of those big, beautiful task cuts that passed and
in terms of less money deducted from their paychecks and taxes,
and the no tax on tips, the no tax on overtime.
Those are all positive features that will help middle class Americans.
Speaker 9 (13:28):
That's a really an interesting point that fiscal policy is
going to be especially accommodative in twenty twenty six. And
I think that one thing that's interesting is whether we're
going to see monetary policy that's equally accommodative or even
more so, And that's going to really depends on who
we get as the next Chairman of the Federal Reserve
and chairman.
Speaker 6 (13:46):
Of the FOMC.
Speaker 9 (13:48):
What do you make of the White House's floating of
a trial balloon with Kevin Hassett about three weeks ago
and then seeming to reconsider you know, if there's anybody
in the world who recognizes how difficult a process it
can be to make it through the Senate. It's you,
and so I'm really interested to hear what your thoughts
on what your thoughts are about what's going on in
(14:09):
the White House and on Capitol Hill in terms of
whipping up the votes to support someone perhaps like Hassett
or wash I like them both.
Speaker 7 (14:18):
I mean, I think the two Kevens, I've been saying
this for two years now that you know, it should
be one of those two as the FED chairman. I
also like Larry Kudlow, but I don't think Larry probably
is in the runnings to do it, but he'd be
an excellent FED share as well. But look, the two
Covens are monetary experts. They're extraordinary economists. I really truly
(14:43):
either one of them I think would be fantastic picks.
And I think they would also keep their eye on
the most important thing that the FED needs to do,
which is defend the dollar. Defend the dollar, make sure
that it's strong and stable. That's all the FED needs
to do. It doesn't have to worry about jobs, it
doesn't have to worry about climate change or any of
these other things. The most important thing is to keep
prices stable and the dollars strong. I think both would
(15:06):
do that.
Speaker 2 (15:06):
Steve, you have some great insight into President Trump behind
closed doors. You know, he did nominate you for a
FED governor position. You ultimately backed out of it. But
I'm just curious what were your conversations with President Trump
or what insight can you give to our audience, an
investing audience trying to understand read the tea leaves, because
(15:27):
we do have a president that most would agree that
he's transactional, and so I think we're trying to understand
that in terms of any appointments. Is that seen as
an expectation that you're going to do the President Trump's
bidding and listen to him if you are at the
FED in terms of what needs to be done in
cutting rates, if that's what he wants.
Speaker 7 (15:48):
Well, look, my opinion is that it is valuable to
have an independent FED, but I also believe that the
FED needs to be accountable and in my opinion, and
it hasn't been accountable in the last few years. That's
why we got, you know, a nine percent inflation under
the current Joan Powell and so.
Speaker 2 (16:10):
Well, when you say that that nine percent was the
result of the pandemic and incredible demand. I mean, there
were some you know, unexpected events. That's crazcal policy too,
fiscal policy. There was a lot of money slashing around.
When you can see that that nine percent inflation, any
president or any fed shair would have had to deal
with that.
Speaker 7 (16:30):
Well, listen. I mean, I do think that Trump made
a big mistake in that he passed a big, massive
spending bill right before he left office. So you could
you make a good point, but it was catastrophic everything
that happened under COVID. We made the biggest mistake in
the history of the United States and shutting down our economy,
shutting down our schools, shutting down our hospital It was outrageous,
(16:54):
and I think we've hopefully learned that level of lesson
that will never never do it again. But you are
quite correct that what caused the inflation, and I hope
we remember this lesson for many, many decades to come,
is that when you massively spend four trillion dollars, guess
what you're going to have inflation. And it didn't stimulate
the economy, it caused huge, huge reductions and real incomes
(17:18):
for middle class people. It destroyed middle class incomes. They
lost massive amounts of money because we very stupidly printed
all this money and spent it, dropped it out of helicopters.
And that's a policy that's never worked.
Speaker 3 (17:34):
So I want to go look. I think I think
it's an important You bring up a lot of important
points about what happened during the pandemic and the causes
of inflation. But to Carol's point, you do have this
direct line to the White House and to the President.
You advised him back in twenty sixteen, you advised him
in twenty twenty four. How would you characterize the relationship
with him right now and to what extent are you
and how often are you speaking to him about economic
(17:55):
matters that hit the United States.
Speaker 7 (17:59):
By the way, I hope there isn't still a debate
about what we did of COVID, because it really really
is important that we learn how incredibly enupt almost everything
that we did. And by the way, I'm in Florida
right now, in Palm Beach, and one of the few
politicians who got it right was Ron DeSantis, the governor here,
who did not shut down the Florida economy. And then
(18:20):
you have these blue blue states like New York and
California and my home state of Illinois that shut down
their economy, and that's one of the reasons, by way
the way, these blue states have never really made a
recovery from their tragic mistakes.
Speaker 3 (18:33):
So yeah, look, I don't think it's I don't I
don't want to. We don't have a ton of time,
so I don't want to rehash the pass. And I think,
you know, we could do an entire segment about that,
and that's.
Speaker 7 (18:41):
For people, right because it was you know, we don't
want to ever make that mistake again, right, we don't.
Speaker 3 (18:46):
Hopefully, hopefully we don't face another pandemic. And I don't
think any any of us we're countering your what you're
saying there. What I'm interested in is what you're you're
talking to the president about right now? What is the
line that you have to President Trump on economic policy?
Speaker 7 (19:00):
What I tell him is that I think the tax
cuts have been enormously beneficial and it's not a commen
date of fiscal policy on the tax side. What it is.
I mean, like, one of the most important things we
did in the Big Beautiful Bill was we are allowing
businesses to you know, instantly capitalize their expenditures and write
(19:23):
them off instantly. And I believe that's one of the
reasons we're seeing this capital boom in the United States.
I mean, if you look at the last nine months,
capital investment has been really strong as a result of
this tax cut. So it wasn't really meant to just
pump money into the economy. It was meant to incentivize
through lower tax rates, lower lowering the corporate rate, giving expensing,
(19:47):
lowering the individual income tax rate. Those are pro growth,
pro supply side policies that actually help bring inflation down.
I mean, it's very simple. If the economy produces more,
prices go down.
Speaker 2 (19:58):
Hey, one of the things I do to go back
to this idea of transactional and again I'm going to
go back to the insight that you have and having
conversations with President Trump before he you know, made a
nomination for you to join the FED and be a governor.
Because we've heard Jay, the President come out and say j.
Powell has been very bad for our country. He's terrible.
(20:19):
He's a terrible FED chair. I'd love for him to
lower interest rates. I call him too late. I'd love
to fire him. Tell us about would there be pressure
by President Trump with who he appoints for the next
FED share and would there be an assumption by the
person who takes that position to kind of do the
president's bidding.
Speaker 4 (20:40):
Give us some insight, if you could.
Speaker 7 (20:42):
I put it a little differently, it's a good question.
First of all, When I was nominated to be on
the FED, Trump never really you know, asked me about, well,
would you cut rates or would you raise rates or
so on. He just he had trusted in me as
an economist that I would get it right. So there
was no pressure, sure to sort of do his bidding.
(21:03):
Now with respect to Kevin Hassett or Kevin Walsh, which
I think is a good chance it's gonna be one
of those two. What he is doing is picking someone,
you say, do his bidding. He's picking someone who agrees
with his overall economic philosophy, and that's exactly what a
president should do. I don't think that means undue influence
on the independence of the FED, but I think it's basically,
(21:25):
you know, presidents deserve the monetary policy they want, frankly,
and so you know, I think they will they will
do they agree with Trump on monetary policy. And that's
one of the reasons one of the two of them
will be chosen. But I can't think of two economists
I admire more than Kevin Hassett and Kevin worsh.
Speaker 9 (21:47):
It's interesting that you bring up President Trump's economic philosophy
because I think that if you were to press him
to describe his economic philosophy with regards to monetary policy,
he would just say he's a low interest rate guy.
So is the expectation going to be from you know,
Kevin Hassarter, Kevin warsh that they will just deliver low
interest rates.
Speaker 7 (22:08):
You know, you make a good point. The one thing
that Trump has often sent to me is that he
likes low interest rates. And and I've always said, well,
mister President, low interest rates are good, but we also
want to make sure we don't cause inflation. And so
that is the kind of dual competing interests here. But
I think he gets it that, you know, what destroys
(22:29):
a presidency is inflation for one of whatever. You know,
we saw Jimmy Carter, Jimmy Carter lose because of inflation.
We saw Jerry Ford lose because of inflation. We saw this.
I think the major factor in this last of presidential
election was inflation. Americans hate, hate, hate, higher prices. It's
one of the reasons they're still in a foul mood
on the economy. So I believe that Kevin Hassett and
(22:54):
and Kevin worsh either one of them will be an
inflation hawk, and they will I predict we will bring
that inflation rate down to two percent.
Speaker 2 (23:04):
But one does wonder, since he's not running again, assuming
no third term, that maybe he doesn't care if there's inflation.
Speaker 4 (23:10):
I'm just going to put that out there. Why do
you want to go see?
Speaker 3 (23:13):
I mean, the Republicans certainly care, and affordability is going
to be a key message for them in the mid
for everybody in the midter. Hey, we only have thirty
seconds left, Steve. I just want to take a sharp
turn here, because, yeah, because you are an economist and
you watch what's happening closely, the US taking a stake
in publicly traded companies such as Intel, MP Materials and others.
Speaker 7 (23:32):
I don't like it. Hey, wow, no, no, no, never.
You know, I've spent most of my career trying to privatize,
not nationalize, So it's one of those issues I disagree
with the president, and I don't want I believe in
separation of business and state, and the less you know,
the government does to you know, to influence business decisions.
Speaker 3 (23:54):
I think the better your old school that way.
Speaker 7 (23:56):
Yeah, I am.
Speaker 3 (23:57):
It's a different It's definitely a different republic party.
Speaker 4 (24:00):
Thank you.
Speaker 3 (24:01):
From a business perspective today.
Speaker 2 (24:03):
I think there's a lot of investors out there too
who certainly would agree with you.
Speaker 4 (24:07):
Steve, Thank you so much. Really enjoyed this.
Speaker 2 (24:09):
Steve Moore, co founder and share of the nonprofit Unleashed
Prosperity and of course, as we said, a former economic
and senior advisor to President Trump in both of his terms,
and of course are great thanks to our own Bloomberg
Economics US and Canada economist Stewart Haul.
Speaker 3 (24:23):
Stay with us more from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (24:31):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five ees during
Listen on Applecarplay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 2 (24:46):
Oracle shares they are down about five and a half
percent here in the aftermarket meantime. Adobe shares there right
now little change, but they've been bouncing around a little bit.
Speaker 3 (24:54):
I want to bring in Bloomberg Intelligence senior technology analyst
Donna rug Rana to break down these earnings. I want
to start with what's going on with Oracle down close
to five percent in the after hours. The company reported
adjusted revenue for the second quarter that met the average
analyst estimate. Revenue, adjusted revenue coming in it's sixteen point
zh six billion, cloud revenue coming in eight billion dollars.
(25:18):
What's your initial reaction here and why are we seeing
the stock lower?
Speaker 10 (25:22):
So when you look at Oracle results as expected, the
backlog or the booking stumbers was very strong. That's been
over five hundred billion right now, but the realization of
some of that into revenue owned to cloud revenue was
slightly lower than what street was expecting. And one reason
for that good piece of supply constraint. They may not
have the necessary chips or equipment to fulfill that demand.
(25:43):
So I think there is going to be a lot
more discussion on the call about it. On the other side,
there was a little bit higher capex as well. So
for Oracle right now, I think the backlog or the
order book does not matter What really matters is how
can they convert that backlog into sales over the next
few years.
Speaker 2 (26:00):
All right, So you're talking about the RPO growth, right,
and we are getting another headline that says it's aided
by commitments from Meta and n Video. I mean, in
terms of where this commitments or these you know, order
flow continues to come from, does it matter that it
still is so concentrated in the hyperscalers?
Speaker 10 (26:16):
Well, as far as you know, the concentration is concerned
really depends on who's you know, who's committing those promises.
If the promises are for somebody like a Microsoft or
an Amazon or somebody else like Meta, it does make
sense because they actually have the cash flow to support it.
But the big question for everybody is it's out of
that three hundred plus billion commitments are from OPENINGI Where
(26:40):
does open A I have the money to fund a
lot of this expansion now Opening I think so over
the next few years they can get to that point
where they can then spend that money. But in terms
of certainty for an investor, I think you're better off
when the commitment is coming from a Meta or a Microsoft.
Speaker 2 (26:54):
Hey, ANAA, can we assume that those folks that continue
to invest in open ai, they have looked at the books.
They understand the financials of open ai because it is
not a publicly held company, and we know there are
some big time investors, including Microsoft in that company and others.
But can we assume that there's a real business there,
even though there's a lot that we don't know about it?
Speaker 10 (27:16):
Oh? Yes, absolutely, there's a real business. I mean nine
hundred million users and mean for chart GPT, I mean
this is the biggest consumer up out there when it
comes to AI tools. So this's definitely a real business there.
But the big question is do they need to spend
you know, three hundred five hundred seven hundred billion down
the road to in order to train their models. That's
an area where we are not sure how that translates
(27:37):
into future revenue.
Speaker 3 (27:39):
I'm looking, I'm looking for the word debt in the
press release coming from Oracle. I don't see it anywhere, Carol,
but not too surprising.
Speaker 4 (27:47):
I think that schell will come up on the call.
Speaker 3 (27:48):
It'll definitely come up on the call. But how should
investors be thinking about Oracle's debt position? Because that was
a concern a few weeks ago and you know, we
saw CDs evaluation as a result.
Speaker 6 (28:00):
Yeah.
Speaker 10 (28:01):
See, when you look at the size of their order book,
they just cannot fund it themselves. It's just not possible
given the free cash flow that they generate. So they
have to do something called a special but was vehicle
where you'll have a private equity player, you will have
private debt, and then you will have investments from maybe
SoftBank around the others to create as create an entity
(28:21):
that can fund a lot of the stargate you orders
that are flowing in. So it is going to be
a little more complicated than straight out going to the
debt market and raising capital.
Speaker 2 (28:31):
I know, because at some point I always wonder, you know,
when there's a lot of debtbek cred and there's a
lot of investors involved, how much are willing to throw
more money at it to make sure that it all
plays out right because the nervousness of it not happening
maybe because just of a shortage of capital.
Speaker 10 (28:46):
Yeah, but Carol, if you look at it when they
last came out in the market, I mean the news
that we heard was it was oversubscribed. I mean, these
companies are not having at this point any trouble raising
capital for the for data center expansion.
Speaker 4 (28:59):
All right, let's go to Adobe.
Speaker 3 (29:01):
Yeah, I'm just looking at what's going on with Adobe
right now. The company gave a strong sales growth outlook.
It's eased concerns about AI. The company giving an outlook
for revenue in the coming year. The top Dannal assessmates.
It suggested that AI features are helping fuel growth of
its creative software business. Just looking at shares of Adobe
in the after hours, they are kind of unchanged. They
(29:21):
bats around a little bit, but right now down about
three tenths of one percent. What do we need to
know about Adobe's report?
Speaker 10 (29:29):
Adobe's management needs to just come out and say we
are executing properly. They are, you know, I always say,
not worried about AI cannibalizing their business. Their margins were
very strong this time. What they promised a year ago,
they actually fulfilled it. For the next quarter. They are
talking about ten percent growth in the overall company annual
recurring revenue. So I think, overall, good results. But this
(29:51):
is a company where honestly, the sentiment is so negative.
No matter what they do, they just can't get a break.
Speaker 4 (29:57):
Hey, listen, the story today too.
Speaker 2 (29:59):
Anorog is that chatgypt users can now use Photoshop and
other creativity software from Adobe directly within the chatbot. So
we're looking at Open Eye continuing to bring kind of
third party apps into its product. Sounds like a plus
for Adobe, is it, you know? And where is Adobe's
role in the AI world? Where does it exactly fit in?
(30:21):
Is it like an add on or what?
Speaker 10 (30:23):
Yeah, So when you look at I think the biggest threat,
the reason why Adobe stock has not been able to
recover over the past two years is the biggest threat
is a lot of their main products their cash cows.
Whether it's Photoshop or some of the other video editing tools.
People are saying, you know, I can go to an
open source model and create a lot of that myself.
Now we don't think that is you know, there is
(30:45):
a reason forul to have Adobe down the road because
of workflow issues and how you edit those things and
how you manage that. But that is the threat, and
I think the only thing that can help them is
if they consistently execute like this for next several years
and showcase that their own AI products are gaining momentum
and they're working closely with people like open the Eye
(31:05):
and people like Google. I think they're both integrating those
models into their workflow. Also.
Speaker 3 (31:10):
Yeah, that's hard though, because I mean in Adobe, what
they want to do is they always want to come
out and say, you know, are our images and what
we creator are commercially safe? So what ess actually that means?
The translation is that if you're creative and you're working
on an ad campaign for a company, you're going to
know that whatever Firefly or whatever Adobe product you're using,
whatever it spits out, is something that you're not going
(31:30):
to get sued over. And that's not necessarily the case
with the other gene High models.
Speaker 10 (31:35):
No, I agree, But if you think about it, there
is a case that if there is a pyramid of
customers on the top, you have the enterprise customers who
are very concerned about it, but it's possible at the
base layer they may be customers either their individual users
or you know, very smart to come.
Speaker 3 (31:49):
That's a good point.
Speaker 7 (31:50):
They don't they don't really care about some sort.
Speaker 3 (31:51):
Of like person posting on Instagram isn't really going to
care if what they created it's like, you know, by copyright. Okay,
I get it, that makes sense.
Speaker 2 (31:58):
All right, what do you want to go, Carol, Well,
you know, I'm just thinking, you guys have a massive
AI report that is out there so timely as we
get ready for a new year, and.
Speaker 4 (32:09):
It gets into cross industry disruption of AI.
Speaker 3 (32:12):
And this is what vecher J. Powell was asked about today.
Speaker 2 (32:15):
Yes, exactly, he talked about it, and you know, so
I'm just curious talk to us about this report. Who
you guys all talked to and what were some of
the key findings.
Speaker 9 (32:25):
Yeah.
Speaker 10 (32:25):
You know, we embarked on this several months ago, and
our entire take was, we have all this CAPEX spending
on the tech side, what are the users saying, whether
they are financial services firms, consumer firms, you know, hospitals,
pharmaceutical companies. So we went out and looked at nine
industries and over six hundred C suite executives that were
surveyed for this report. And I think the biggest thing
(32:45):
the crime takeaway for US is every sector is extremely
worried about being disruptive disrupted. Now for US, we thought
only the software companies would be worried about it, but
you know, we saw industrial firms, auto firms, hospitals, they
were all saying that okay, you know, this is going
this could shake up our business, so we need to
invest and invest mode. The second thing we saw was
even in these sectors that you could considered laggards of
(33:09):
technology adoption, the people who are you know, part of
the employee base, they're very, very apt at using these
AI tools that we talk about, whether that's Shack, Gipt
and the others. So the level of awareness is there,
the understanding is there. Now it's going to take some
time for them to flow a lot of those technologies
into their code business so that they don't get eaten away.
Speaker 3 (33:30):
Hey, one more on this and it has to do
again we're thinking about We're just coming off of a
press conference with Peto J. Powell where I personally thought
and I told you this, you know, as the discussions
going on. One of my biggest takeaways was his answer
about AI and productivity and the idea that productivity growth
in the US, like he didn't think that he would
see a period of time with such an extended plus
(33:51):
two percent in terms of GDP growth. And you know,
we don't know what we can attribute to AI, but
there are also so many questions about Okay, what is
when to be the effect on employees, what's going to
be effect on different sectors of workers. Did you guys
hit on that at all in this report?
Speaker 10 (34:07):
Yeah, yeah, yeah, absolutely, And you know, productivity was the
number one factor. Everybody is going throwards. Other thing that
we have seen, and this is more predominant in the
software companies that we cover, is the level of revenue
growth and the level of headcount growth hasn't widened. I mean,
what I'm saying is the relationship that was very tight
before has moved on. So when you have a company
(34:28):
growing revenue at a particular rate, headcount is not growing
at that rate. We're not saying there are cuts out there,
but that delta is where the productivity is coming in,
which will eventually lead to and it's already we have
already seen that in certain cases is higher revenue per employee,
and that I think is the benchmark everybody needs to
focus on.
Speaker 2 (34:47):
Right, But he still had to say notching up in
layoffs yet, So I mean TBD right to see how
this kind of ultimately plays out. Hey, before you go,
there's one other question we wanted to ask you. Meta
platforms an open source money or tilting from an open
source to a closed source AI model. What is this
(35:07):
all about? I think it's called avocado. It's a new
model expected to take you.
Speaker 4 (35:11):
I know, I was like, what is that? I was
trying to like understand. Totally califul.
Speaker 10 (35:17):
Yeah, I'll take you back to many years ago when
there was Linux and Windows. Linux is open source. Windows
you gotta pay for it. You make money when you
have Windows, and very few companies out there have made
money when they have an open source product. Meta started
with this open source model really because the thing is
you and I can go and perfect this model and
then we can use it without paying Meta any money.
(35:37):
But if you have a closed end model, you have
to pay Meta that royalty. And you know, at the
end of the day, they're spending all these billions of dollars?
How are they going to monetize it? And I think
that's kind of one of the reasons for that pivot.
Speaker 2 (35:48):
It's like they were listening to everybody saying, well, how
are we going to monetize this? All this spend, how
are we going to monetize it? And Rock, thank you
so much man, and that report. I'm sure we're going
to lean on that a lot, especially in the new year,
on our Grana. He's senior technology analyst at Bloomberg Intelligence
out there at the Bloomberg News Bureau in Chicago.
Speaker 3 (36:06):
Stay with us more from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (36:14):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five eas during
Listen on Applecarplay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 2 (36:29):
FED cutting rates for three descents, projecting one cut in
twenty twenty six. So we also want to get into
kind of how it may impact bank lending as well.
We did see banks as a whole the KBW Bank
index rally in today's session off of the FED. With
a little bit more perspective, let's get to Zach Wasserman.
He's chief financial officer at the Columbus, Ohio based Huntington Bank.
(36:51):
Shares back with us. The company has a market cap
of nearly twenty seven billion shares her up five percent
year to date, and just today Tim Piper Sandler raising
the price target on the stock from fifteen to sixteen,
maintaining though it's underweight rating.
Speaker 3 (37:05):
Zach joining us here in the Bloomberg Interactive Broker's Studio. Zach,
great to talk with you again, especially appreciate you coming
into the studio. Did the FED get it right today?
Speaker 6 (37:12):
I think they did. You know, the analysis they did
that showed the labor markets still of course softening to
some degree, but inflation pressures continuing to be present and
with a potential for some higher price pressures as we
go into the early part of next year. I think
they got it right, and I think the outlook for
they've signaled probably one additional cut into twenty twenty six.
(37:35):
The market, by the way, is making in two cuts
for twenty twenty six. Somewhere in that range seems very
likely and I think helpful for the economy at this point.
Speaker 2 (37:42):
All right, Zach, So if you were sitting down with J. Powell,
what would you want to ask him right now?
Speaker 6 (37:49):
That's a good question. What is he going to do
after he leave his job?
Speaker 3 (37:52):
Do you think he will leave his job in the spring?
Speaker 6 (37:54):
I would think so, that's mine, that's myself.
Speaker 2 (37:56):
But do you think then, also Kevin has it is
a given? Like we're seeing that the President's meeting with
Kevin Warsh like, so it feels like things are.
Speaker 6 (38:03):
Still fluid well I'm not a party to those discussions.
I have no clue, but I certainly think that you know,
as the uh uh, you know, as they as they
think about how that how they're gonna chart their course
on interrul st rate policy, I think the path that
they've chosen at this point appears to be the right one,
very data reliant, uh appears to be you know, we're
(38:24):
landing the economy in a sweet spot.
Speaker 3 (38:26):
Okay, So can can Carol? Are you done with FED stuff?
Can I talk?
Speaker 2 (38:30):
Yes?
Speaker 3 (38:31):
Okay to you? Guys have been so acquisitive. I mean,
there's been a lot of M and A in your space.
You've been much more aggressive than others in your peer group.
Why now in terms of the aggressive aggressive posture, Well,
I wouldn't.
Speaker 6 (38:43):
Characterize our posture as aggressive. It's really, you know, for.
Speaker 4 (38:46):
Us, expansive, that's for sure.
Speaker 6 (38:47):
Well, certainly it's expansive. It's been it's been a dynamic
year for us, but primarily from an organic growth perspective.
You know, Huntington has been growing way faster than almost
any other bank in the industry at this point from
an organic perspective. And so when we think about these
partnership that we've announced we're a pleasure to announce two
partnerships this year. It's really all in service of sustainable,
long term organic growth.
Speaker 3 (39:08):
All them partnerships, not acquisition.
Speaker 6 (39:09):
We really do and that's intentional. The partnerships we've created
with Veritexs Bank and then Cadence Bank really are in
fact bringing these organizations together, making one plus one equals
three and for us will be a powerhouse in Texas,
will be present in a lot of terrific markets across
the South, and really together we're going to be a
(39:30):
much stronger organization. So they really are partnerships and ultimately
all in service of long term, sustainable organic growth.
Speaker 2 (39:36):
So you know, I've got family in South Carolina. They've
noticed some economic softness, and certainly the Vertex's deal was
about North Carolina and South Carolina. They've seen softness in
real estate which had been on fire. I'm just curious
your expansion plans there, your organic growth that you want
to do there. I think you guys were looking to
(39:56):
open more than fifty branches in those states. So is
that impacting any of the growth or you're on target
for that.
Speaker 6 (40:03):
We're on target for that. In fact, next year we
expect to open one branch every two weeks in the Carolina.
So we've got some products for your family, and we'd
love to take you on this customer. But we're really
excited about that, and in fact, the market reception we've
had so far has been tremendous. We've opened a several
new branch locations just in the last few months, and
each of them have beat their full year first year
(40:23):
deposit plan before they've even opened, to give you a sense,
because the market reception has been so strong.
Speaker 3 (40:28):
So with the look, I know, you know, I can
ask the question, but in terms of what you have
planned any more acquisitions, you know, look, how are you
thinking about it?
Speaker 6 (40:38):
The way we're thinking about it is if something comes.
Speaker 3 (40:40):
Up keepsakes to you.
Speaker 2 (40:41):
Just said they expect more, They expect more acquisitions to happen.
Speaker 7 (40:45):
Do you know.
Speaker 6 (40:47):
I think the industry has been consolidating for twenty years.
It will continue to consolidate for us. If something comes
up that's a creative to organic growth, that's a great
fit for us, we'll consider it. But otherwise it's all
about organic growth for us.
Speaker 3 (40:59):
Geographically, what's area of the country that's of interest to you,
Where you're where you don't have a presence.
Speaker 6 (41:03):
We love the markets that we're in right now. Yeah,
our markets. We're going to be twenty one states covering
more than fifty percent of the population of the country,
and in markets collectively that are growing thirty percent faster.
Speaker 3 (41:14):
Than the national a lot of states you're not in.
Speaker 6 (41:16):
True, you know, I think our view is we're not
trying to be a national bank. We're trying to you're
not trying to be a national stake explicitly, Okay, we
want to be deeply present in the states that we're in.
Speaker 3 (41:26):
So would that mean that if there were more expansion
it would be within the states that you're already in,
so you can become bigger in those places rather than
expanding the geographic foot printed places for something fit.
Speaker 6 (41:35):
I think that that's the right characterization. Okay, yes, but
I think again that's not our Our objective is not
m and a per se. Our objective is organic growth.
Speaker 2 (41:42):
The Goldman Financials Conference, and I think that's part of
also why the KBW Bank Index really rallied in a
big way out performance about two and a half percent higher.
They many said, and you guys presented there too, that
they're seeing a stable consumer despite worries of an economic
slow down.
Speaker 4 (41:58):
What are you guys seeing?
Speaker 6 (41:59):
We're seeing the same. I think we just were up
on stage this morning ourselves. That's a consumer stable consumer,
pipelines continue to be strong. From a lending perspective on
both consumer and commercial profitability is very strong. Credit is
very stable. It really looks like a solid economy from
our perspective. If all you did was read our internal reports,
(42:20):
it would belie what you're hearing in terms of the headlines,
which is very encouraging as we go into the end
of this year and into next year.
Speaker 3 (42:26):
Why do you think you're seeing in that distinction, like
you're seeing something The anecdotes and indeed some data are
showing softness in places. Why are you seeing strength?
Speaker 7 (42:36):
Look?
Speaker 6 (42:36):
I think in total, you're seeing consumer spending continues to grow. Corporations,
I think are more confident today than they would have
been at the middle of this year when there was
more uncertainties in the environment. We've had a tax bill pass,
We've had more teriff certainty come into the environment. The
government is now functioning again. I think as companies are
looking forward to twenty six, they're seeing this is another
(42:59):
year of growth. I just came out today saying that
the outlook for economic growth next year was more than
two percent GDP, and so that looks like an environment
where we should continue to be investing, continue to be expanding,
continue to be expanding. You know, in from a commercial
and consumer perspective, there is of course a bit of
a so called K shaped shaped economy happening. And yeah,
I think certain segments of the consumer environment have faced pressures,
(43:24):
particularly from inflation and higher interest rates. Our bank does
not have much exposure to that, and I think in
many cases the net of growth is continued to be positive.
Speaker 4 (43:32):
Who is your typical consumer?
Speaker 6 (43:34):
You know, from us, we're focused on the mass affluent
consumer base.
Speaker 2 (43:38):
And that's specifically target we do. Okay, sorry forgiving.
Speaker 6 (43:42):
We target the mass affluent, and we've got a very
strong base of consumers that are that are in that segment.
And then of course we're also one of the large
largest small business banks and commercial banks in the country
as well.
Speaker 3 (43:54):
What does mass affluent mean in your markets?
Speaker 6 (43:57):
You know, typically we're looking at customers who have a
net worth of or income of more than one hundred
thousand dollars net worths that are that are high and
of course we bank everyone, and we really our tagline
is welcome to all, and we mean that. But for
the most part our business is concentrated in that mass
out of one segment.
Speaker 2 (44:12):
From it, so loan origination activity. Tell us about what
you're kind of seeing since do you last reported?
Speaker 6 (44:17):
Yeah, In fact, we just this morning showed a quarter
to date loan growth of two point eight billion dollars
sequentially from last quarter. We're growing at about eight to
nine percent a year on year right now and actually
exceeding our own forecast that we set just a month ago.
Speaker 3 (44:31):
In the Bread press conference today, I found what jap
Powis said about AI really fascinating. This idea of productivity,
and it's going to get me to ask every single
person I talked to about not just how they're using AI,
but like productivity increases at your bank, Like what are
you seeing? How are they using it?
Speaker 6 (44:49):
We're doing a lot in AI. Actually it's increasing. Point
it sure is. I mean to give you a sense.
Last year in the fourth quarter we had two Jenai
projects going through our risk evaluation and implementation. Today we thirty.
There's about a dozen per month that are coming into
the pipeline. Software engineering is being made much more more productive.
We're seeing all manner of internal process improvement and now
(45:12):
customer facing applications as well, things that make the loan
approval process seamless and more effective, more personalized service.
Speaker 3 (45:19):
Is that going to increase earnings for you?
Speaker 10 (45:21):
Look?
Speaker 6 (45:21):
I think it will certainly create capacity for us to
then invest more. You know, our modus operandi is to
harvest and try to drive efficiencies in the baseline costs
so that we can deploy those expenses into investments.
Speaker 2 (45:35):
A few years ago, I used to actually drive up
to make a deposit. I used to talk to a teller.
I mean I was a kid at the time, you know,
and on my little book. But having said that, I
don't talk to a teller for the most part anymore.
Speaker 4 (45:46):
So will AI? In your estimation?
Speaker 2 (45:48):
We are talking to CEOs, our team, our tech team
just did a big AI report and they're talking to
executives across industries. Everybody seems to be in on AI.
But in terms of fat your j powsing hasn't really
impacted the labor market yet, will it?
Speaker 4 (46:04):
Does it? It has to right?
Speaker 6 (46:05):
Look, I think in the end, AI will touch almost
every element of human life and commercial activity, and ultimately
will supplant many of the more rote processes that we
use people to do. But it'll mean people could do
other things. You know, this will be a change in
the in the labor force in terms of what people
are are doing. And there's things that people can uniquely do,
(46:28):
make judgments, be creative, interact with other people, lead organizations.
I think, you know what's incumbent upon all employees and
I think about this myself, is you know where can
I shift my activities to where I uniquely add value?
Speaker 4 (46:43):
People matter? You matter?
Speaker 3 (46:45):
Thank you, Thank you, You matter.
Speaker 4 (46:47):
Zach Wasserman, thank you so much.
Speaker 6 (46:49):
With you.
Speaker 1 (46:50):
This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live weekday
afternoons from two to five pm 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
(47:11):
and always on the Bloomberg terminal
Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg business
Week Daily reporting from the magazine that helps global leaders
stay ahead with insight on the people, companies, and trends
shaping today's complex economy. Plus global business, finance and tech
(00:23):
news as it happens. The Bloomberg Business Week Daily Podcast
with Carol Masser and Tim Stenebek on Bloomberg Radio.
Speaker 2 (00:33):
All Right, Fed decision Day, the eighth and final FOMC
meeting of twenty twenty five. It is done, and widely
as expected, the Fed cutting rates for a third consecutive time.
Speaker 3 (00:44):
The Fed also maintaining its outlook for just one cut
in twenty twenty six. Okay, so two descents last time, yep,
this time three descents correct, but in different ways correct,
kind of spanning everything. That's Stephen Meyer into want a
more aggressive interest rate cut right at fifty basis points.
(01:04):
But maybe what people didn't expect were two dissenters who
wanted to hold rate study.
Speaker 2 (01:08):
Mister Goolsby of the Chicago Fed and mister Schmidt of
Kansas City.
Speaker 4 (01:13):
Yeah, exactly, saying we didn't need to do anything.
Speaker 3 (01:15):
Okay, Yeah, so not a lot of consensus, but.
Speaker 2 (01:18):
Must have been a healthy debate around the FED table
on the wall. Yeah, exactly. So now we're done for
the year and now we think about what's going to
happen next year.
Speaker 4 (01:26):
We got a lot of commentary on that from fedho J. Powell.
Speaker 2 (01:29):
In fact, one of the things he really emphasized repeatedly
in his comments in his opening statement that the committee
is in.
Speaker 4 (01:37):
A wait and see mode.
Speaker 2 (01:38):
Also noting, by our account, thank you Talia, our producer,
for actually pulling this out to our attention, noting by
our account for the third FOMC meeting in a row,
saying there is no risk free path forward.
Speaker 4 (01:51):
It's a challenging situation.
Speaker 5 (01:53):
In the near term. Risks to inflation are tilted to
the upside, and risks risks to employment to the downside.
A challenging situation. There is no risk free path for policy.
You're going to get a great deal of data between
now and the January meeting. Everyone around the table at
the fom SE agrees that inflation is too high and
(02:13):
that we want it to come down, and agrees that
the labor market has softened in that there's further risk.
Everyone agrees on that where the difference is how do
you wait those risks and what does your forecast look like?
And where do you ultimately weal Where do you think
the bigger risk is? And you know, it's very unusual
to have persistent tension between the two parts of the mandate.
(02:35):
We're well positioned to wait to see how the economy evolves.
Speaker 6 (02:38):
We'll just have to see.
Speaker 5 (02:39):
It's a very challenging situation. I think we're in a
good place too, as I mentioned, to wait and see
how the economy evolves.
Speaker 4 (02:45):
All right, very challenging situation.
Speaker 7 (02:47):
Fit your J.
Speaker 4 (02:48):
Powell.
Speaker 2 (02:48):
At the press conference, you also did say gradual labor
market cooling justified that rate cut today. So talking about
some weakness that we've got in the labor market.
Speaker 4 (02:58):
Next f MC decision, folks, Not.
Speaker 2 (03:00):
That we like to kind of look ahead, but we do.
January twenty eight, twenty twenty sixth.
Speaker 3 (03:04):
Mark your calendars, I am, are you?
Speaker 2 (03:07):
Oh yeah, it'll be the first of twenty twenty six. J.
Powell still will be FED chair, So it'll be interesting.
Speaker 4 (03:12):
We should point out.
Speaker 2 (03:13):
After the decision, President Trump at the White House made
some comments tim on today's FED move.
Speaker 4 (03:17):
He said that could have been doubled at least doubled.
Not a surprise.
Speaker 2 (03:21):
We have heard criticism from the President when it comes
to FED Chair J Powell.
Speaker 3 (03:25):
Well, interestingly enough, that's where Stephen Myron exactly, Stephen Myron voted,
who's widely seen as somebody who has the most connection
to the White House, who's on the FOMC.
Speaker 4 (03:34):
Yeah, exactly right.
Speaker 2 (03:35):
All right, So let's do a little bit more in
terms of the commentary around this decision. We've had a lot,
certainly come across the Bloomberg, including our live blog. Let's
see what our Bloomberg Intelligence chief US Interest rates strategist
Iri Jersey has to say about this. All right, Ira,
We have heard from Fedchair J. Powell for at least
the last three meetings where they cut that both sides
(03:56):
of the Fed's mandate is challenged at the FED decision today.
Speaker 4 (04:02):
Does it make sense to you?
Speaker 6 (04:04):
I think it does.
Speaker 8 (04:04):
I mean it was fully priced. And you know clearly
when they pivoted to worrying more about employment than inflation,
they were going to go more than fifty basis points
as kind of these risk management cuts, and you know
now that they've cut seventy five basis points. Another key
phrase that Jay Powell said was that that they're now
in the range of neutral. So basically, with all the
(04:25):
committee members, what is this mystical r star or real
neutral rate?
Speaker 3 (04:30):
And are we there yet?
Speaker 8 (04:31):
And he conceded that he thinks that they're now in
the range of being at neutral. So therefore this could
be the end of cuts, or maybe they're going to
cut again unless the economic data changes enough for them
to be comfortable cutting again, because like you mentioned, you know,
he did say that there's still this balance of risk
between inflation and employment.
Speaker 3 (04:50):
Yeah, exactly, And look he did say we're even between
now and January, not to mention between now and the
end of next year, when some people think that another
twenty five point rate will happen. He said, we're going
to get a great deal of data between now and
the January meeting, so a lot can change or a
lot can be confirmed in the meantime ira before that happens. Though,
I want to go back to this tension between the
(05:13):
different parts of the dual mandate. Which part do you
believe the FED needs to focus on more? Is it
inflation or is it maximum employment?
Speaker 8 (05:21):
Well, I actually think that at the moment there's very
little that they can do about inflation because you know
that the interest rates still are relatively high compared for
like the housing market, and there's not much that the
Federal Reserve can actually do to help the housing market
right now in terms of, you know, bringing house prices down,
Like what are they going to do there? You know,
if they lower interest rates a lot more, that's just
(05:43):
going to increase the value of some people's houses because
you know, maybe mortgage rates come down a little bit,
that increases affordability, and suddenly house prices actually go up,
which is actually against their mandate. And for other goods
and services, they don't seem to be particularly elastic, like
the elasticity to interest rate and a lot of these
other goods, whether it's even automobiles or any other large purchases,
(06:06):
there just doesn't seem to be a significant correlation between
the two at the moment. I think part of that
is quite frankly, because a large portion of the population
does have very low interest rate mortgages, so they're not
going to refi, it's not going to Lowering interest rates
isn't going to be as stimulative as it has been
in previous cycles. And at the same time, lowering interest
(06:27):
rates again, isn't going to necessarily bring inflation, make inflation
go significantly higher, if you know, if you don't get
a big lending boom. And I'm not sure that that
lending has you know, increased the whole heck of a
lot anyway. So anyway, the fact that they were close
to neutral, and we you know, we've always thought that
they'd probably cut a little bit beyond three percent because personally,
(06:49):
I'm a little bit more concerned about the job market.
I think the job market shows some cracks beneath the
surface that some people are either ignoring or you know,
everyone's making excuse for why we're at fifty k ish
payrolls the last couple of reports that we've gotten. But
the fact is is that companies are still reluctant to hire.
Speaker 6 (07:08):
You have seen in some of the survey data.
Speaker 8 (07:09):
Maybe that leveling out a little bit. Yeah, but I'm
still concerned about the job market, and I think that
the FED is and the people who voted for the
cut certainly are worried about the job market more than inflation.
Speaker 2 (07:19):
And we get to read on that next week. Hey,
one thing I want to do before we go. We
got about a minute and a half or so left
here Just quickly, Ira, the FED move to expand its
balance sheet again fresh purchases of short term treasury securities
to maintain what they said an ample supply of bank reserves.
Speaker 4 (07:36):
Just got about thirty seconds. What do we need to
know here?
Speaker 8 (07:38):
Yeah, well, that's actually probably the bigger story, even than
everything else that we just talked about, because it's much
larger than most of us thought it would be. They're
adding somewhere around one hundred and sixty billion dollars of
tea bills over the next couple of months.
Speaker 3 (07:52):
Through the April tax day.
Speaker 8 (07:54):
Risk assets seem to like that quite a lot, and
it made the whole meeting a lot more doubvish to
I think a lot of people's sensibilities and just looking
at the whole cut plus the Qiwi light, if you
want to call it that.
Speaker 2 (08:09):
All right, good stuff, Ira, Thank you so much. We'll
be looking out for your research. Also later on today
and into tomorrow, our Jersey chief US interest rates strategist
at Bloomberg Intelligence from BI headquarters in New Jersey.
Speaker 3 (08:20):
Stay with us more from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (08:27):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five eas during
Listen on Apple Karplay and Android Auto with the Bloomberg
Business app, or watch us live on YouTube.
Speaker 3 (08:42):
We're staying on the FED decision today. We're also thinking
about FED leadership come twenty twenty six, We've got a
great roundtable. Steve Moore's with us. He's co founder and
chair of the nonprofit Unleash Prosperity. He's a former economic
and senior policy advisor to Donald Trump in twenty sixteen
and twenty twenty four, and served as Chief Economist and
Distinguished Visiting Fellow at Heritage Foundation for twelve years. Yeah.
Speaker 2 (09:02):
He's also written a bunch of books, including trump Anomics,
Inside the America First Plan to Revive Our Economy. Also
another one, The Trump Economic Miracle. And you might remember
back in twenty nineteen, President Trump selected Steve Moore for
the Federal Reserve Board of Governors, which more ultimately withdrew from.
So we have a lot to unpack and talk about.
Steve joins us from Palm Beach, Florida. Great to have
(09:22):
him here. Also with us is Bloomberg Economics US and
Canada economist Stuart Paul. He's right here in our Bloomberg
Interactive Broker studio.
Speaker 4 (09:30):
Steve, I want to kick it off with you. Welcome.
Speaker 2 (09:32):
Nice to have you here on Bloomberg. Your key takeaways
from today's FED decision.
Speaker 7 (09:38):
Well, it was certainly Wall Street was happy with what
happened today. It was very expected that the Fed did
exactly what they announced today. Trump of course wants more
rate cuts. You know, Look, inflation has come down, and
it's still not where we wanted to be. We wanted
to be at the two percent at target, and so
(10:00):
we're running about two point seven two point eight, So
there's still work to be done to bring inflation down.
Of course, if you bring inflation down, affordability goes up.
But look, this is a booming economy right now. It
is so hot. Trump is right about that. In twenty
twenty six is going to be a monster year for
growth and for incomes and I believe for equities.
Speaker 3 (10:20):
If you were on the FOMC in a voting member,
how would you have voted today? What would you have
wanted to see?
Speaker 7 (10:25):
I would have done exactly what they did.
Speaker 3 (10:27):
You wouldn't have gone fifty basis points like Stephen Myron.
Speaker 7 (10:30):
No, I'm a little bit more of an inflation hot
than Steve and Steven. I know Stephen, he's a smart economist.
I lean towards making sure. I think the top priority
of the Fed should be to make sure that we
bring that inflation rate down to the target level. We're
not there yet, and you know, look at the as
a political matter, Trump really needs to continue to bring
(10:51):
that inflation rate down because people are still angry about prices.
Speaker 9 (10:56):
Mister Moore, is really difficult to square the circle between
being an inflation hawk and voting for or advocating for
additional rate cuts. When you see somebody like President Trump
focusing so much on affordability, but at the same time
calling for the FED to cut rates even more, how
do you really square the circle?
Speaker 6 (11:13):
How would you.
Speaker 9 (11:14):
Rationalize voting for a cut while also being an inflation hawk.
Speaker 7 (11:19):
Well, I think I believe that Wall Street puts way, way,
way too much influence and interest in FED rate cuts.
I mean, nobody the short term interest rate has become
almost irrelevant, So I really don't believe that it's all
(11:39):
that important. Frankly, whether it was a quarter point or
fifty percent, fifty points or doing nothing. I don't think
that it makes all that much difference. We should have
learned the lesson. By the way, what look, what we mean,
what we'd all like to see is for those mortgage
rates to come down, in the ten year treasury interest
rate to come down. The FED doesn't control that. I
(12:01):
know that may surprise people watching with the FED has
no impact on the ten year treasury or the thirty
year mortgage. And we know that, by the way, And
what happened in twenty twenty four when the FED cut
the discount rate and what happened to the I mean
the FED funds rate, and what happened to the mortgage
rate and the ten year treasury went up. So I
(12:22):
don't overly obsess about FED rate cuts. I think we're
in a pretty good look. The most important thing is
this incredibly healthy economy. We've got hundreds of billions of
dollars coming into the US economy of foreign investment. We've
got the highest s and P five hundred, the highest Dow,
(12:44):
and the highest Nazza in the history of the country.
People are making huge amounts of money. And this is
a bet when the markets go up, this is a
bet that policy will be well guided and that American
companies are going to make money. So I have a
hard time really having many much problem with the direction
that we're going in with respect to this economy. And
(13:05):
don't forget the sorry. In January, people will start to
see the middle income people will start to feel the
impact of those big, beautiful task cuts that passed and
in terms of less money deducted from their paychecks and taxes,
and the no tax on tips, the no tax on overtime.
Those are all positive features that will help middle class Americans.
Speaker 9 (13:28):
That's a really an interesting point that fiscal policy is
going to be especially accommodative in twenty twenty six. And
I think that one thing that's interesting is whether we're
going to see monetary policy that's equally accommodative or even
more so, And that's going to really depends on who
we get as the next Chairman of the Federal Reserve
and chairman.
Speaker 6 (13:46):
Of the FOMC.
Speaker 9 (13:48):
What do you make of the White House's floating of
a trial balloon with Kevin Hassett about three weeks ago
and then seeming to reconsider you know, if there's anybody
in the world who recognizes how difficult a process it
can be to make it through the Senate. It's you,
and so I'm really interested to hear what your thoughts
on what your thoughts are about what's going on in
(14:09):
the White House and on Capitol Hill in terms of
whipping up the votes to support someone perhaps like Hassett
or wash I like them both.
Speaker 7 (14:18):
I mean, I think the two Kevens, I've been saying
this for two years now that you know, it should
be one of those two as the FED chairman. I
also like Larry Kudlow, but I don't think Larry probably
is in the runnings to do it, but he'd be
an excellent FED share as well. But look, the two
Covens are monetary experts. They're extraordinary economists. I really truly
(14:43):
either one of them I think would be fantastic picks.
And I think they would also keep their eye on
the most important thing that the FED needs to do,
which is defend the dollar. Defend the dollar, make sure
that it's strong and stable. That's all the FED needs
to do. It doesn't have to worry about jobs, it
doesn't have to worry about climate change or any of
these other things. The most important thing is to keep
prices stable and the dollars strong. I think both would
(15:06):
do that.
Speaker 2 (15:06):
Steve, you have some great insight into President Trump behind
closed doors. You know, he did nominate you for a
FED governor position. You ultimately backed out of it. But
I'm just curious what were your conversations with President Trump
or what insight can you give to our audience, an
investing audience trying to understand read the tea leaves, because
(15:27):
we do have a president that most would agree that
he's transactional, and so I think we're trying to understand
that in terms of any appointments. Is that seen as
an expectation that you're going to do the President Trump's
bidding and listen to him if you are at the
FED in terms of what needs to be done in
cutting rates, if that's what he wants.
Speaker 7 (15:48):
Well, look, my opinion is that it is valuable to
have an independent FED, but I also believe that the
FED needs to be accountable and in my opinion, and
it hasn't been accountable in the last few years. That's
why we got, you know, a nine percent inflation under
the current Joan Powell and so.
Speaker 2 (16:10):
Well, when you say that that nine percent was the
result of the pandemic and incredible demand. I mean, there
were some you know, unexpected events. That's crazcal policy too,
fiscal policy. There was a lot of money slashing around.
When you can see that that nine percent inflation, any
president or any fed shair would have had to deal
with that.
Speaker 7 (16:30):
Well, listen. I mean, I do think that Trump made
a big mistake in that he passed a big, massive
spending bill right before he left office. So you could
you make a good point, but it was catastrophic everything
that happened under COVID. We made the biggest mistake in
the history of the United States and shutting down our economy,
shutting down our schools, shutting down our hospital It was outrageous,
(16:54):
and I think we've hopefully learned that level of lesson
that will never never do it again. But you are
quite correct that what caused the inflation, and I hope
we remember this lesson for many, many decades to come,
is that when you massively spend four trillion dollars, guess
what you're going to have inflation. And it didn't stimulate
the economy, it caused huge, huge reductions and real incomes
(17:18):
for middle class people. It destroyed middle class incomes. They
lost massive amounts of money because we very stupidly printed
all this money and spent it, dropped it out of helicopters.
And that's a policy that's never worked.
Speaker 3 (17:34):
So I want to go look. I think I think
it's an important You bring up a lot of important
points about what happened during the pandemic and the causes
of inflation. But to Carol's point, you do have this
direct line to the White House and to the President.
You advised him back in twenty sixteen, you advised him
in twenty twenty four. How would you characterize the relationship
with him right now and to what extent are you
and how often are you speaking to him about economic
(17:55):
matters that hit the United States.
Speaker 7 (17:59):
By the way, I hope there isn't still a debate
about what we did of COVID, because it really really
is important that we learn how incredibly enupt almost everything
that we did. And by the way, I'm in Florida
right now, in Palm Beach, and one of the few
politicians who got it right was Ron DeSantis, the governor here,
who did not shut down the Florida economy. And then
(18:20):
you have these blue blue states like New York and
California and my home state of Illinois that shut down
their economy, and that's one of the reasons, by way
the way, these blue states have never really made a
recovery from their tragic mistakes.
Speaker 3 (18:33):
So yeah, look, I don't think it's I don't I
don't want to. We don't have a ton of time,
so I don't want to rehash the pass. And I think,
you know, we could do an entire segment about that,
and that's.
Speaker 7 (18:41):
For people, right because it was you know, we don't
want to ever make that mistake again, right, we don't.
Speaker 3 (18:46):
Hopefully, hopefully we don't face another pandemic. And I don't
think any any of us we're countering your what you're
saying there. What I'm interested in is what you're you're
talking to the president about right now? What is the
line that you have to President Trump on economic policy?
Speaker 7 (19:00):
What I tell him is that I think the tax
cuts have been enormously beneficial and it's not a commen
date of fiscal policy on the tax side. What it is.
I mean, like, one of the most important things we
did in the Big Beautiful Bill was we are allowing
businesses to you know, instantly capitalize their expenditures and write
(19:23):
them off instantly. And I believe that's one of the
reasons we're seeing this capital boom in the United States.
I mean, if you look at the last nine months,
capital investment has been really strong as a result of
this tax cut. So it wasn't really meant to just
pump money into the economy. It was meant to incentivize
through lower tax rates, lower lowering the corporate rate, giving expensing,
(19:47):
lowering the individual income tax rate. Those are pro growth,
pro supply side policies that actually help bring inflation down.
I mean, it's very simple. If the economy produces more,
prices go down.
Speaker 2 (19:58):
Hey, one of the things I do to go back
to this idea of transactional and again I'm going to
go back to the insight that you have and having
conversations with President Trump before he you know, made a
nomination for you to join the FED and be a governor.
Because we've heard Jay, the President come out and say j.
Powell has been very bad for our country. He's terrible.
(20:19):
He's a terrible FED chair. I'd love for him to
lower interest rates. I call him too late. I'd love
to fire him. Tell us about would there be pressure
by President Trump with who he appoints for the next
FED share and would there be an assumption by the
person who takes that position to kind of do the
president's bidding.
Speaker 4 (20:40):
Give us some insight, if you could.
Speaker 7 (20:42):
I put it a little differently, it's a good question.
First of all, When I was nominated to be on
the FED, Trump never really you know, asked me about, well,
would you cut rates or would you raise rates or
so on. He just he had trusted in me as
an economist that I would get it right. So there
was no pressure, sure to sort of do his bidding.
(21:03):
Now with respect to Kevin Hassett or Kevin Walsh, which
I think is a good chance it's gonna be one
of those two. What he is doing is picking someone,
you say, do his bidding. He's picking someone who agrees
with his overall economic philosophy, and that's exactly what a
president should do. I don't think that means undue influence
on the independence of the FED, but I think it's basically,
(21:25):
you know, presidents deserve the monetary policy they want, frankly,
and so you know, I think they will they will
do they agree with Trump on monetary policy. And that's
one of the reasons one of the two of them
will be chosen. But I can't think of two economists
I admire more than Kevin Hassett and Kevin worsh.
Speaker 9 (21:47):
It's interesting that you bring up President Trump's economic philosophy
because I think that if you were to press him
to describe his economic philosophy with regards to monetary policy,
he would just say he's a low interest rate guy.
So is the expectation going to be from you know,
Kevin Hassarter, Kevin warsh that they will just deliver low
interest rates.
Speaker 7 (22:08):
You know, you make a good point. The one thing
that Trump has often sent to me is that he
likes low interest rates. And and I've always said, well,
mister President, low interest rates are good, but we also
want to make sure we don't cause inflation. And so
that is the kind of dual competing interests here. But
I think he gets it that, you know, what destroys
(22:29):
a presidency is inflation for one of whatever. You know,
we saw Jimmy Carter, Jimmy Carter lose because of inflation.
We saw Jerry Ford lose because of inflation. We saw this.
I think the major factor in this last of presidential
election was inflation. Americans hate, hate, hate, higher prices. It's
one of the reasons they're still in a foul mood
on the economy. So I believe that Kevin Hassett and
(22:54):
and Kevin worsh either one of them will be an
inflation hawk, and they will I predict we will bring
that inflation rate down to two percent.
Speaker 2 (23:04):
But one does wonder, since he's not running again, assuming
no third term, that maybe he doesn't care if there's inflation.
Speaker 4 (23:10):
I'm just going to put that out there. Why do
you want to go see?
Speaker 3 (23:13):
I mean, the Republicans certainly care, and affordability is going
to be a key message for them in the mid
for everybody in the midter. Hey, we only have thirty
seconds left, Steve. I just want to take a sharp
turn here, because, yeah, because you are an economist and
you watch what's happening closely, the US taking a stake
in publicly traded companies such as Intel, MP Materials and others.
Speaker 7 (23:32):
I don't like it. Hey, wow, no, no, no, never.
You know, I've spent most of my career trying to privatize,
not nationalize, So it's one of those issues I disagree
with the president, and I don't want I believe in
separation of business and state, and the less you know,
the government does to you know, to influence business decisions.
Speaker 3 (23:54):
I think the better your old school that way.
Speaker 7 (23:56):
Yeah, I am.
Speaker 3 (23:57):
It's a different It's definitely a different republic party.
Speaker 4 (24:00):
Thank you.
Speaker 3 (24:01):
From a business perspective today.
Speaker 2 (24:03):
I think there's a lot of investors out there too
who certainly would agree with you.
Speaker 4 (24:07):
Steve, Thank you so much. Really enjoyed this.
Speaker 2 (24:09):
Steve Moore, co founder and share of the nonprofit Unleashed
Prosperity and of course, as we said, a former economic
and senior advisor to President Trump in both of his terms,
and of course are great thanks to our own Bloomberg
Economics US and Canada economist Stewart Haul.
Speaker 3 (24:23):
Stay with us more from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (24:31):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five ees during
Listen on Applecarplay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 2 (24:46):
Oracle shares they are down about five and a half
percent here in the aftermarket meantime. Adobe shares there right
now little change, but they've been bouncing around a little bit.
Speaker 3 (24:54):
I want to bring in Bloomberg Intelligence senior technology analyst
Donna rug Rana to break down these earnings. I want
to start with what's going on with Oracle down close
to five percent in the after hours. The company reported
adjusted revenue for the second quarter that met the average
analyst estimate. Revenue, adjusted revenue coming in it's sixteen point
zh six billion, cloud revenue coming in eight billion dollars.
(25:18):
What's your initial reaction here and why are we seeing
the stock lower?
Speaker 10 (25:22):
So when you look at Oracle results as expected, the
backlog or the booking stumbers was very strong. That's been
over five hundred billion right now, but the realization of
some of that into revenue owned to cloud revenue was
slightly lower than what street was expecting. And one reason
for that good piece of supply constraint. They may not
have the necessary chips or equipment to fulfill that demand.
(25:43):
So I think there is going to be a lot
more discussion on the call about it. On the other side,
there was a little bit higher capex as well. So
for Oracle right now, I think the backlog or the
order book does not matter What really matters is how
can they convert that backlog into sales over the next
few years.
Speaker 2 (26:00):
All right, So you're talking about the RPO growth, right,
and we are getting another headline that says it's aided
by commitments from Meta and n Video. I mean, in
terms of where this commitments or these you know, order
flow continues to come from, does it matter that it
still is so concentrated in the hyperscalers?
Speaker 10 (26:16):
Well, as far as you know, the concentration is concerned
really depends on who's you know, who's committing those promises.
If the promises are for somebody like a Microsoft or
an Amazon or somebody else like Meta, it does make
sense because they actually have the cash flow to support it.
But the big question for everybody is it's out of
that three hundred plus billion commitments are from OPENINGI Where
(26:40):
does open A I have the money to fund a
lot of this expansion now Opening I think so over
the next few years they can get to that point
where they can then spend that money. But in terms
of certainty for an investor, I think you're better off
when the commitment is coming from a Meta or a Microsoft.
Speaker 2 (26:54):
Hey, ANAA, can we assume that those folks that continue
to invest in open ai, they have looked at the books.
They understand the financials of open ai because it is
not a publicly held company, and we know there are
some big time investors, including Microsoft in that company and others.
But can we assume that there's a real business there,
even though there's a lot that we don't know about it?
Speaker 10 (27:16):
Oh? Yes, absolutely, there's a real business. I mean nine
hundred million users and mean for chart GPT, I mean
this is the biggest consumer up out there when it
comes to AI tools. So this's definitely a real business there.
But the big question is do they need to spend
you know, three hundred five hundred seven hundred billion down
the road to in order to train their models. That's
an area where we are not sure how that translates
(27:37):
into future revenue.
Speaker 3 (27:39):
I'm looking, I'm looking for the word debt in the
press release coming from Oracle. I don't see it anywhere, Carol,
but not too surprising.
Speaker 4 (27:47):
I think that schell will come up on the call.
Speaker 3 (27:48):
It'll definitely come up on the call. But how should
investors be thinking about Oracle's debt position? Because that was
a concern a few weeks ago and you know, we
saw CDs evaluation as a result.
Speaker 6 (28:00):
Yeah.
Speaker 10 (28:01):
See, when you look at the size of their order book,
they just cannot fund it themselves. It's just not possible
given the free cash flow that they generate. So they
have to do something called a special but was vehicle
where you'll have a private equity player, you will have
private debt, and then you will have investments from maybe
SoftBank around the others to create as create an entity
(28:21):
that can fund a lot of the stargate you orders
that are flowing in. So it is going to be
a little more complicated than straight out going to the
debt market and raising capital.
Speaker 2 (28:31):
I know, because at some point I always wonder, you know,
when there's a lot of debtbek cred and there's a
lot of investors involved, how much are willing to throw
more money at it to make sure that it all
plays out right because the nervousness of it not happening
maybe because just of a shortage of capital.
Speaker 10 (28:46):
Yeah, but Carol, if you look at it when they
last came out in the market, I mean the news
that we heard was it was oversubscribed. I mean, these
companies are not having at this point any trouble raising
capital for the for data center expansion.
Speaker 4 (28:59):
All right, let's go to Adobe.
Speaker 3 (29:01):
Yeah, I'm just looking at what's going on with Adobe
right now. The company gave a strong sales growth outlook.
It's eased concerns about AI. The company giving an outlook
for revenue in the coming year. The top Dannal assessmates.
It suggested that AI features are helping fuel growth of
its creative software business. Just looking at shares of Adobe
in the after hours, they are kind of unchanged. They
(29:21):
bats around a little bit, but right now down about
three tenths of one percent. What do we need to
know about Adobe's report?
Speaker 10 (29:29):
Adobe's management needs to just come out and say we
are executing properly. They are, you know, I always say,
not worried about AI cannibalizing their business. Their margins were
very strong this time. What they promised a year ago,
they actually fulfilled it. For the next quarter. They are
talking about ten percent growth in the overall company annual
recurring revenue. So I think, overall, good results. But this
(29:51):
is a company where honestly, the sentiment is so negative.
No matter what they do, they just can't get a break.
Speaker 4 (29:57):
Hey, listen, the story today too.
Speaker 2 (29:59):
Anorog is that chatgypt users can now use Photoshop and
other creativity software from Adobe directly within the chatbot. So
we're looking at Open Eye continuing to bring kind of
third party apps into its product. Sounds like a plus
for Adobe, is it, you know? And where is Adobe's
role in the AI world? Where does it exactly fit in?
(30:21):
Is it like an add on or what?
Speaker 10 (30:23):
Yeah, So when you look at I think the biggest threat,
the reason why Adobe stock has not been able to
recover over the past two years is the biggest threat
is a lot of their main products their cash cows.
Whether it's Photoshop or some of the other video editing tools.
People are saying, you know, I can go to an
open source model and create a lot of that myself.
Now we don't think that is you know, there is
(30:45):
a reason forul to have Adobe down the road because
of workflow issues and how you edit those things and
how you manage that. But that is the threat, and
I think the only thing that can help them is
if they consistently execute like this for next several years
and showcase that their own AI products are gaining momentum
and they're working closely with people like open the Eye
(31:05):
and people like Google. I think they're both integrating those
models into their workflow. Also.
Speaker 3 (31:10):
Yeah, that's hard though, because I mean in Adobe, what
they want to do is they always want to come
out and say, you know, are our images and what
we creator are commercially safe? So what ess actually that means?
The translation is that if you're creative and you're working
on an ad campaign for a company, you're going to
know that whatever Firefly or whatever Adobe product you're using,
whatever it spits out, is something that you're not going
(31:30):
to get sued over. And that's not necessarily the case
with the other gene High models.
Speaker 10 (31:35):
No, I agree, But if you think about it, there
is a case that if there is a pyramid of
customers on the top, you have the enterprise customers who
are very concerned about it, but it's possible at the
base layer they may be customers either their individual users
or you know, very smart to come.
Speaker 3 (31:49):
That's a good point.
Speaker 7 (31:50):
They don't they don't really care about some sort.
Speaker 3 (31:51):
Of like person posting on Instagram isn't really going to
care if what they created it's like, you know, by copyright. Okay,
I get it, that makes sense.
Speaker 2 (31:58):
All right, what do you want to go, Carol, Well,
you know, I'm just thinking, you guys have a massive
AI report that is out there so timely as we
get ready for a new year, and.
Speaker 4 (32:09):
It gets into cross industry disruption of AI.
Speaker 3 (32:12):
And this is what vecher J. Powell was asked about today.
Speaker 2 (32:15):
Yes, exactly, he talked about it, and you know, so
I'm just curious talk to us about this report. Who
you guys all talked to and what were some of
the key findings.
Speaker 9 (32:25):
Yeah.
Speaker 10 (32:25):
You know, we embarked on this several months ago, and
our entire take was, we have all this CAPEX spending
on the tech side, what are the users saying, whether
they are financial services firms, consumer firms, you know, hospitals,
pharmaceutical companies. So we went out and looked at nine
industries and over six hundred C suite executives that were
surveyed for this report. And I think the biggest thing
(32:45):
the crime takeaway for US is every sector is extremely
worried about being disruptive disrupted. Now for US, we thought
only the software companies would be worried about it, but
you know, we saw industrial firms, auto firms, hospitals, they
were all saying that okay, you know, this is going
this could shake up our business, so we need to
invest and invest mode. The second thing we saw was
even in these sectors that you could considered laggards of
(33:09):
technology adoption, the people who are you know, part of
the employee base, they're very, very apt at using these
AI tools that we talk about, whether that's Shack, Gipt
and the others. So the level of awareness is there,
the understanding is there. Now it's going to take some
time for them to flow a lot of those technologies
into their code business so that they don't get eaten away.
Speaker 3 (33:30):
Hey, one more on this and it has to do
again we're thinking about We're just coming off of a
press conference with Peto J. Powell where I personally thought
and I told you this, you know, as the discussions
going on. One of my biggest takeaways was his answer
about AI and productivity and the idea that productivity growth
in the US, like he didn't think that he would
see a period of time with such an extended plus
(33:51):
two percent in terms of GDP growth. And you know,
we don't know what we can attribute to AI, but
there are also so many questions about Okay, what is
when to be the effect on employees, what's going to
be effect on different sectors of workers. Did you guys
hit on that at all in this report?
Speaker 10 (34:07):
Yeah, yeah, yeah, absolutely, And you know, productivity was the
number one factor. Everybody is going throwards. Other thing that
we have seen, and this is more predominant in the
software companies that we cover, is the level of revenue
growth and the level of headcount growth hasn't widened. I mean,
what I'm saying is the relationship that was very tight
before has moved on. So when you have a company
(34:28):
growing revenue at a particular rate, headcount is not growing
at that rate. We're not saying there are cuts out there,
but that delta is where the productivity is coming in,
which will eventually lead to and it's already we have
already seen that in certain cases is higher revenue per employee,
and that I think is the benchmark everybody needs to
focus on.
Speaker 2 (34:47):
Right, But he still had to say notching up in
layoffs yet, So I mean TBD right to see how
this kind of ultimately plays out. Hey, before you go,
there's one other question we wanted to ask you. Meta
platforms an open source money or tilting from an open
source to a closed source AI model. What is this
(35:07):
all about? I think it's called avocado. It's a new
model expected to take you.
Speaker 4 (35:11):
I know, I was like, what is that? I was
trying to like understand. Totally califul.
Speaker 10 (35:17):
Yeah, I'll take you back to many years ago when
there was Linux and Windows. Linux is open source. Windows
you gotta pay for it. You make money when you
have Windows, and very few companies out there have made
money when they have an open source product. Meta started
with this open source model really because the thing is
you and I can go and perfect this model and
then we can use it without paying Meta any money.
(35:37):
But if you have a closed end model, you have
to pay Meta that royalty. And you know, at the
end of the day, they're spending all these billions of dollars?
How are they going to monetize it? And I think
that's kind of one of the reasons for that pivot.
Speaker 2 (35:48):
It's like they were listening to everybody saying, well, how
are we going to monetize this? All this spend, how
are we going to monetize it? And Rock, thank you
so much man, and that report. I'm sure we're going
to lean on that a lot, especially in the new year,
on our Grana. He's senior technology analyst at Bloomberg Intelligence
out there at the Bloomberg News Bureau in Chicago.
Speaker 3 (36:06):
Stay with us more from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (36:14):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five eas during
Listen on Applecarplay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 2 (36:29):
FED cutting rates for three descents, projecting one cut in
twenty twenty six. So we also want to get into
kind of how it may impact bank lending as well.
We did see banks as a whole the KBW Bank
index rally in today's session off of the FED. With
a little bit more perspective, let's get to Zach Wasserman.
He's chief financial officer at the Columbus, Ohio based Huntington Bank.
(36:51):
Shares back with us. The company has a market cap
of nearly twenty seven billion shares her up five percent
year to date, and just today Tim Piper Sandler raising
the price target on the stock from fifteen to sixteen,
maintaining though it's underweight rating.
Speaker 3 (37:05):
Zach joining us here in the Bloomberg Interactive Broker's Studio. Zach,
great to talk with you again, especially appreciate you coming
into the studio. Did the FED get it right today?
Speaker 6 (37:12):
I think they did. You know, the analysis they did
that showed the labor markets still of course softening to
some degree, but inflation pressures continuing to be present and
with a potential for some higher price pressures as we
go into the early part of next year. I think
they got it right, and I think the outlook for
they've signaled probably one additional cut into twenty twenty six.
(37:35):
The market, by the way, is making in two cuts
for twenty twenty six. Somewhere in that range seems very
likely and I think helpful for the economy at this point.
Speaker 2 (37:42):
All right, Zach, So if you were sitting down with J. Powell,
what would you want to ask him right now?
Speaker 6 (37:49):
That's a good question. What is he going to do
after he leave his job?
Speaker 3 (37:52):
Do you think he will leave his job in the spring?
Speaker 6 (37:54):
I would think so, that's mine, that's myself.
Speaker 2 (37:56):
But do you think then, also Kevin has it is
a given? Like we're seeing that the President's meeting with
Kevin Warsh like, so it feels like things are.
Speaker 6 (38:03):
Still fluid well I'm not a party to those discussions.
I have no clue, but I certainly think that you know,
as the uh uh, you know, as they as they
think about how that how they're gonna chart their course
on interrul st rate policy, I think the path that
they've chosen at this point appears to be the right one,
very data reliant, uh appears to be you know, we're
(38:24):
landing the economy in a sweet spot.
Speaker 3 (38:26):
Okay, So can can Carol? Are you done with FED stuff?
Can I talk?
Speaker 2 (38:30):
Yes?
Speaker 3 (38:31):
Okay to you? Guys have been so acquisitive. I mean,
there's been a lot of M and A in your space.
You've been much more aggressive than others in your peer group.
Why now in terms of the aggressive aggressive posture, Well,
I wouldn't.
Speaker 6 (38:43):
Characterize our posture as aggressive. It's really, you know, for.
Speaker 4 (38:46):
Us, expansive, that's for sure.
Speaker 6 (38:47):
Well, certainly it's expansive. It's been it's been a dynamic
year for us, but primarily from an organic growth perspective.
You know, Huntington has been growing way faster than almost
any other bank in the industry at this point from
an organic perspective. And so when we think about these
partnership that we've announced we're a pleasure to announce two
partnerships this year. It's really all in service of sustainable,
long term organic growth.
Speaker 3 (39:08):
All them partnerships, not acquisition.
Speaker 6 (39:09):
We really do and that's intentional. The partnerships we've created
with Veritexs Bank and then Cadence Bank really are in
fact bringing these organizations together, making one plus one equals
three and for us will be a powerhouse in Texas,
will be present in a lot of terrific markets across
the South, and really together we're going to be a
(39:30):
much stronger organization. So they really are partnerships and ultimately
all in service of long term, sustainable organic growth.
Speaker 2 (39:36):
So you know, I've got family in South Carolina. They've
noticed some economic softness, and certainly the Vertex's deal was
about North Carolina and South Carolina. They've seen softness in
real estate which had been on fire. I'm just curious
your expansion plans there, your organic growth that you want
to do there. I think you guys were looking to
(39:56):
open more than fifty branches in those states. So is
that impacting any of the growth or you're on target
for that.
Speaker 6 (40:03):
We're on target for that. In fact, next year we
expect to open one branch every two weeks in the Carolina.
So we've got some products for your family, and we'd
love to take you on this customer. But we're really
excited about that, and in fact, the market reception we've
had so far has been tremendous. We've opened a several
new branch locations just in the last few months, and
each of them have beat their full year first year
(40:23):
deposit plan before they've even opened, to give you a sense,
because the market reception has been so strong.
Speaker 3 (40:28):
So with the look, I know, you know, I can
ask the question, but in terms of what you have
planned any more acquisitions, you know, look, how are you
thinking about it?
Speaker 6 (40:38):
The way we're thinking about it is if something comes.
Speaker 3 (40:40):
Up keepsakes to you.
Speaker 2 (40:41):
Just said they expect more, They expect more acquisitions to happen.
Speaker 7 (40:45):
Do you know.
Speaker 6 (40:47):
I think the industry has been consolidating for twenty years.
It will continue to consolidate for us. If something comes
up that's a creative to organic growth, that's a great
fit for us, we'll consider it. But otherwise it's all
about organic growth for us.
Speaker 3 (40:59):
Geographically, what's area of the country that's of interest to you,
Where you're where you don't have a presence.
Speaker 6 (41:03):
We love the markets that we're in right now. Yeah,
our markets. We're going to be twenty one states covering
more than fifty percent of the population of the country,
and in markets collectively that are growing thirty percent faster.
Speaker 3 (41:14):
Than the national a lot of states you're not in.
Speaker 6 (41:16):
True, you know, I think our view is we're not
trying to be a national bank. We're trying to you're
not trying to be a national stake explicitly, Okay, we
want to be deeply present in the states that we're in.
Speaker 3 (41:26):
So would that mean that if there were more expansion
it would be within the states that you're already in,
so you can become bigger in those places rather than
expanding the geographic foot printed places for something fit.
Speaker 6 (41:35):
I think that that's the right characterization. Okay, yes, but
I think again that's not our Our objective is not
m and a per se. Our objective is organic growth.
Speaker 2 (41:42):
The Goldman Financials Conference, and I think that's part of
also why the KBW Bank Index really rallied in a
big way out performance about two and a half percent higher.
They many said, and you guys presented there too, that
they're seeing a stable consumer despite worries of an economic
slow down.
Speaker 4 (41:58):
What are you guys seeing?
Speaker 6 (41:59):
We're seeing the same. I think we just were up
on stage this morning ourselves. That's a consumer stable consumer,
pipelines continue to be strong. From a lending perspective on
both consumer and commercial profitability is very strong. Credit is
very stable. It really looks like a solid economy from
our perspective. If all you did was read our internal reports,
(42:20):
it would belie what you're hearing in terms of the headlines,
which is very encouraging as we go into the end
of this year and into next year.
Speaker 3 (42:26):
Why do you think you're seeing in that distinction, like
you're seeing something The anecdotes and indeed some data are
showing softness in places. Why are you seeing strength?
Speaker 7 (42:36):
Look?
Speaker 6 (42:36):
I think in total, you're seeing consumer spending continues to grow. Corporations,
I think are more confident today than they would have
been at the middle of this year when there was
more uncertainties in the environment. We've had a tax bill pass,
We've had more teriff certainty come into the environment. The
government is now functioning again. I think as companies are
looking forward to twenty six, they're seeing this is another
(42:59):
year of growth. I just came out today saying that
the outlook for economic growth next year was more than
two percent GDP, and so that looks like an environment
where we should continue to be investing, continue to be expanding,
continue to be expanding. You know, in from a commercial
and consumer perspective, there is of course a bit of
a so called K shaped shaped economy happening. And yeah,
I think certain segments of the consumer environment have faced pressures,
(43:24):
particularly from inflation and higher interest rates. Our bank does
not have much exposure to that, and I think in
many cases the net of growth is continued to be positive.
Speaker 4 (43:32):
Who is your typical consumer?
Speaker 6 (43:34):
You know, from us, we're focused on the mass affluent
consumer base.
Speaker 2 (43:38):
And that's specifically target we do. Okay, sorry forgiving.
Speaker 6 (43:42):
We target the mass affluent, and we've got a very
strong base of consumers that are that are in that segment.
And then of course we're also one of the large
largest small business banks and commercial banks in the country
as well.
Speaker 3 (43:54):
What does mass affluent mean in your markets?
Speaker 6 (43:57):
You know, typically we're looking at customers who have a
net worth of or income of more than one hundred
thousand dollars net worths that are that are high and
of course we bank everyone, and we really our tagline
is welcome to all, and we mean that. But for
the most part our business is concentrated in that mass
out of one segment.
Speaker 2 (44:12):
From it, so loan origination activity. Tell us about what
you're kind of seeing since do you last reported?
Speaker 6 (44:17):
Yeah, In fact, we just this morning showed a quarter
to date loan growth of two point eight billion dollars
sequentially from last quarter. We're growing at about eight to
nine percent a year on year right now and actually
exceeding our own forecast that we set just a month ago.
Speaker 3 (44:31):
In the Bread press conference today, I found what jap
Powis said about AI really fascinating. This idea of productivity,
and it's going to get me to ask every single
person I talked to about not just how they're using AI,
but like productivity increases at your bank, Like what are
you seeing? How are they using it?
Speaker 6 (44:49):
We're doing a lot in AI. Actually it's increasing. Point
it sure is. I mean to give you a sense.
Last year in the fourth quarter we had two Jenai
projects going through our risk evaluation and implementation. Today we thirty.
There's about a dozen per month that are coming into
the pipeline. Software engineering is being made much more more productive.
We're seeing all manner of internal process improvement and now
(45:12):
customer facing applications as well, things that make the loan
approval process seamless and more effective, more personalized service.
Speaker 3 (45:19):
Is that going to increase earnings for you?
Speaker 10 (45:21):
Look?
Speaker 6 (45:21):
I think it will certainly create capacity for us to
then invest more. You know, our modus operandi is to
harvest and try to drive efficiencies in the baseline costs
so that we can deploy those expenses into investments.
Speaker 2 (45:35):
A few years ago, I used to actually drive up
to make a deposit. I used to talk to a teller.
I mean I was a kid at the time, you know,
and on my little book. But having said that, I
don't talk to a teller for the most part anymore.
Speaker 4 (45:46):
So will AI? In your estimation?
Speaker 2 (45:48):
We are talking to CEOs, our team, our tech team
just did a big AI report and they're talking to
executives across industries. Everybody seems to be in on AI.
But in terms of fat your j powsing hasn't really
impacted the labor market yet, will it?
Speaker 4 (46:04):
Does it? It has to right?
Speaker 6 (46:05):
Look, I think in the end, AI will touch almost
every element of human life and commercial activity, and ultimately
will supplant many of the more rote processes that we
use people to do. But it'll mean people could do
other things. You know, this will be a change in
the in the labor force in terms of what people
are are doing. And there's things that people can uniquely do,
(46:28):
make judgments, be creative, interact with other people, lead organizations.
I think, you know what's incumbent upon all employees and
I think about this myself, is you know where can
I shift my activities to where I uniquely add value?
Speaker 4 (46:43):
People matter? You matter?
Speaker 3 (46:45):
Thank you, Thank you, You matter.
Speaker 4 (46:47):
Zach Wasserman, thank you so much.
Speaker 6 (46:49):
With you.
Speaker 1 (46:50):
This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live weekday
afternoons from two to five pm 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
(47:11):
and always on the Bloomberg terminal
Hosts And Creators
Tim Stenovec
Carol Massar
Popular Podcasts
Las Culturistas with Matt Rogers and Bowen Yang
Ding dong! Join your culture consultants, Matt Rogers and Bowen Yang, on an unforgettable journey into the beating heart of CULTURE. Alongside sizzling special guests, they GET INTO the hottest pop-culture moments of the day and the formative cultural experiences that turned them into Culturistas. Produced by the Big Money Players Network and iHeartRadio.
Crime Junkie
Does hearing about a true crime case always leave you scouring the internet for the truth behind the story? Dive into your next mystery with Crime Junkie. Every Monday, join your host Ashley Flowers as she unravels all the details of infamous and underreported true crime cases with her best friend Brit Prawat. From cold cases to missing persons and heroes in our community who seek justice, Crime Junkie is your destination for theories and stories you won’t hear anywhere else. Whether you're a seasoned true crime enthusiast or new to the genre, you'll find yourself on the edge of your seat awaiting a new episode every Monday. If you can never get enough true crime... Congratulations, you’ve found your people. Follow to join a community of Crime Junkies! Crime Junkie is presented by Audiochuck Media Company.
The Brothers Ortiz
The Brothers Ortiz is the story of two brothers–both successful, but in very different ways. Gabe Ortiz becomes a third-highest ranking officer in all of Texas while his younger brother Larry climbs the ranks in Puro Tango Blast, a notorious Texas Prison gang. Gabe doesn’t know all the details of his brother’s nefarious dealings, and he’s made a point not to ask, to protect their relationship. But when Larry is murdered during a home invasion in a rented beach house, Gabe has no choice but to look into what happened that night. To solve Larry’s murder, Gabe, and the whole Ortiz family, must ask each other tough questions.