Market Trends amid Global Uncertainty

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1:30This is the Bloomberg Surveillance Podcast. Catch us live weekdays at 7 a.m. Eastern on Apple CarPlay or Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. What we're doing here, folks, and again, I've really seen some really good literature in the last number of days. You see what we did record high in NASDAQ at that. And you learn the hard way, enjoying losing money, that if you're in the equity game, you better be briefed on fixed income at all time. Even unlike Kelsey Barrow, you have no clue what they're talking about.

2:05Executive Director Kelsey Barrow, her chair is closest to, I call it dangerous provisions. Okay. It's like a breakfast place at the J.P. Morgan building. Yep. You go, I think, do you have to go there, or is it just like comp? It's like a standard coffee shop. It's like a standard. Do you get a full English there at Daily Provisions? Sometimes. Sometimes. Kelsey Barrow with us with JP Morgan today. Let's pick up right where Gennady was there on the idea of crowding out full faith and credit paper. Do you and Bob Michael actually worry that the next Amazon tranche, why am I picking on Amazon? They're all there.

2:43Six others. Can they really crowd out your world? So I understand the concern. We are looking at very large numbers. But when I look at it holistically, we're not really seeing a lot of evidence of crowding out. And there's a couple reasons that I say that. So if you look at the investment grade market more broadly, if there was really a crowding out of hyperscaler supply, you should start to see spreads more broadly within the investment grade market start to widen. And they haven't. In fact, if you exclude hyperscalers from the investment grade index, in most cases, sprites are actually tightening.

3:23So that's one sign. Worry, worry, worry, angst, hand wringing. Everybody's getting gray hair except Kelsey and Alexis. OK, fine. Why haven't they widened? Fundamentals are still very strong within the market. And I think the other thing, you know, we're talking about this risk of crowding out. Well, on the other side of that, higher yields are bringing in more buyers. And so people are not necessarily looking explicitly at the credit spread in terms of their investment decision. They're looking at the all in yield and they're seeing all in yields at five, six, seven percent, depending on the maturity and the credit quality.

4:04And they're saying that is an attractive entry point. So when I look at the fundamentals, a couple things stand out to me. The first is the breadth of those fundamentals within the investment grade market make for a lot of different opportunities. So if you look at the 11 sectors within investment grade, this is the first time in five years that all 11 sectors are seeing positive earnings growth. Interesting. And I'm seeing like in your world there in a fixed income world, the best performance in U.S. fixed income is in my old business, U.S. leverage loans. Total returns three and a half percent.

4:42People are not afraid to take risk in this marketplace, it seems like. Right. So there's two components to that. One of that is the floating rate component of the leverage loans. Yields have risen. So you're getting a lot more protection. I used to lend a live war plus three. Yeah. Wow. Yeah, you're darn right. Can we still quote LIBOR on air? Well, we were lending to the cellular telephone business when I was just starting. So you had to go to your credit manager and say, yeah, we're lending against air. And that was a tough sell. But leveraged loans are still the way to go, it seems like. So that is one area, right?

5:16And the floating rate is one part of that. And then the other part is what we've been just talking about, which is credit spreads. They're perhaps narrow relative to history, but they're stable. and a lot of the concerns around the loan market, particularly, let's just say six months ago, we were talking about loans. We were concerned about, for example, the concentration in software within loans. You've seen a lot more stabilization on that front. Now, there's certainly still going to be disruption, but there's been stabilization. And then you take those loans and the other source of demand for leverage loans is CLOs, which is an area where we've been seeing some opportunity as well where you get that package of loans from the manager.

6:01You can get a lot of credit quality as well as spread pickup. About when Michael Barr's doing the news about 630, Sweeney's on the phone with his muni bond broker. Yep. Okay, listen to this. New Jersey Transportation Trust Fund Authority, NJTTFA, you're popping a 10.22 % yield on the 30-year paper. Why are we doing this if I can capture nominal GDP plus 400 beeps effective yield? I mean, the coupons are unreal right now. We have been looking at the muni market, and typically were separated between the taxable and the tax-exempt market. But then sometimes there's value that is just so screamingly obvious.

6:53So screamingly obvious. So screamingly obvious that you look at crossovers who come in, essentially, is the term. And we just had our investment quarterly in London. Everyone in GFIC, our senior investors, come together, and we look at the best ideas across sectors, including munis. And I would say the favorite chart within our investment quarterly of all the slides we looked at, which were hundreds, was probably the 30-year muni. Exactly. Yes. It's like, are you kidding me? Sweeney keeps bringing this up with me. Yeah, absolutely. I mean, the tax equivalent yields were... 10.22 %? Yeah, you can get a New York City general obligation, get a 9 % yield.

7:35I just want everybody to know, so screamingly obvious, they were a band. It's Stephen Talk House, Emma Gansett. I mean, they were really, really cool. Oh, yeah? Yeah, it was a really good band. They played Stevie Ray Vaughan like nobody. We got to go, Kelsey. Thank you for coming in. Absolutely. How do you get home here? Like, to get back to the home, the J.P. Morgan tire? You can walk. Do you just walk? I can walk. And that may be the best route today. I think that's the best route. Yeah, absolutely. The president in less than three hours at the U.N. just down the street from us at Lexington and 59th.

8:08Kelsey Barrow is with J.P. Morgan Investment Management. Stay with us. More from Bloomberg Surveillance coming up after this. If you invest or lead a business, one-sided views aren't enough. Join me, Brad Rogoff, and my team at Barclays Research as we debate what's driving markets on the Flipside podcast. Find the flip side wherever you get your podcasts.

9:00your team's template that you can review before presenting to your leadership team. Growing a business is ambitious, and ChatGPT can help you do it with confidence. Get started at chatgpt.com.

9:16You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10 a.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business App. Or watch us live on YouTube. I don't know what Robin Fitz is doing over at BNY. No. But I think their basic thing when they look at people is to say, what's the math skills? Because between Alicia Levine and Jeffrey Yu, it's scary. Yep. Jeffrey Yu with us now in studio, usually we see him in London or New York, kind of racing around. I think people are really curious, Jeff, about how you think. Like if you're fluent in Mandarin, fine.

9:52How did you get to Carleton College in Minnesota? Well, long story short, Carlton had an exchange program where they would send professors to educate Chinese academics in the 80s and 90s. And one of these professors came when I was looking at universities. I was in Beijing at the time, introduced me to this wonderful place called Northfield, Minnesota, and the rest is history. That's so cool. So they cherry-picked you out of Beijing, parachuted in there, and into LSE. The hallmark of your rigor, I would say, is the underpinning of tearing things apart. You're tearing apart rates right now. And you say, everybody get over inflation.

10:33This is about a rate discussion. Discuss that. Yes. And it's about finding the discipline to follow where real rates are. I had a conversation this morning with a client who was just worried about the UK's fiscal trajectory, France and elsewhere. But I look at our data and say, UK's LDI managers, they're buying guilt hand of your fist right now because real rates are very, very comfortable. Inflation adjusted rates. Inflation adjusted rates. And that's the thing over the last few months, even during the peak periods of the conflict, they didn't really move that much. You look at the five year, five years, for example.

11:09Tom, I'm still trying to figure out how Jeffrey has a English accent from Minnesota. That's another story for another day. Jeffrey, talk to us about our Federal Reserve. the meeting last week. Seems like if there was any credibility concerns, Mr. Warsh kind of put them to the side. Do you agree with that? Certainly, that is the verdict right now. And if you look at the bond markets, you know, let the market decide ultimately. And that clearly is the case. But taking a step back, was it ever in any doubt? Did our clients aggressively hedge their U.S. exposures in the first place? Yes, we did see some severe sales in the two weeks, I would say, after the July meeting.

11:46But after that, it sort of stabilized as well. So there is an alternative narrative to US exposures. It's all pretty much in place. What's the bet into the end of the year among fancy people that you talk to? I see the equity market yesterday, and the amateur would say it was one big short cover where, oops, I'm short, I got to turn around. Is there a short bet now that could provide so-called convexity to surge up? There wasn't a strong short bet in the first place, I think, especially if you look at the AI exposed stocks. I actually use South Korea as a very good proxy here, if you look at the memory side of things.

12:17And we can break it down into what retail had been doing, what institutionals had been doing. Retail just went over the skis in June and July. And then they come off institutionals. They were on the sidelines waiting to come back in. But over the last two months or so, they've flatlined. But crucially, no one's sold. So if I look at our short utilization rates, I look at our net flow levels and our custody data, there wasn't really a short position on to unwind because, like the earnings case, was still very, very strong. And now you look at the China news, you know that the investment is still going to go into this segment.

12:47Let the earnings do the talking. What's you calling the U.S. dollar these days? So I always say against what, right? So dollar will strengthen, I think, against the euro. Dollar will strengthen against sterling. Let's just say these fiscally challenged economies. But the dollar needs to adjust against APAC names. Dollar CNY is falling. Dollar Yen, that's a whole different story. Dollar Taiwan, dollar Korea. That's where the U.S.'s new AI-related exposures, the dollar needs to be changed. Critically off of Mundell and Trilemma, the interlinkages here. You mentioned Alexis, MIT doing better than Princeton.

13:17That was because of Rudy Dornbusch years ago. Jeff, you as simple as I can. Do you see foreign exchange dynamics predicting where we're heading right now? They will, but also it will predict where the imbalances are. So you talk about Trilemma, for example. How much of the foreign exchange flexibility or foreign exchange setting capabilities have these Asian exporters outsourced to the US? How much real monetary policy control are you retaining? How much have you really outsourced to the Fed as well? So I think the likes of Taiwan and South Korea, they need to adjust. So South Korea, in fairness, they are doing this.

13:52We call it leveling up in the UK. These new chip plants that are being built in the southwest of the country. Lots of investment supported by the government. Less economic. So the president is speaking here in two hours with President Xi. I think it's Wednesday he shows up. President's greeting him at the airport. That's what I hear. They got to make the gauntlet from the gate past all the fancy luxury stores to get to the cars. It's a joke, folks. Jeff, I look at Chinese renminbi. Nobody's talking about it. We've had stronger yuan here. Is that forced? Stronger in nominal terms. I wouldn't say it's forced.

14:26It's just a less so fair kind of situation. But because of disinflation, very weak inflation in China, in real terms, our favorite phrase, real RMB hasn't really moved at all. Can they turn it around? Are you an optimist that China can get their consumption model going? That is going to be the push up. Consumption, is it going to be, let's say, state consumption, government-based investment, or on the private side? I think there's a vigorous debate going on in China regarding that right now. But let's just do a thought experiment. Can you imagine where oil prices would be if China were going at 5%, 6 % or higher right now?

14:55So almost you don't want China to grow until we resolve global supply issues. Well, I'll get one more in here because I got one more before 10 of them. The AI trade, it's so important here for in the U.S. It just really dominates the discussion. How about in your world of Europe, Middle East, Asia? Europe wants to be part of the story. I think that's where the struggle is right now. Because for the sake of argument, President Xi and President Trump together, are they going to sort of define the rules globally right now? Europe doesn't have a seat at the table. So I think that's when the European delegations coming here this week to New York to have those discussions.

15:30They want to see where they can be part of the story. One final question. Alex Yal of the Philippines is not playing the China Open in Beijing. I mean, is a nation turned upside down because she's stiffening and going to the Olympics up in Japan? Well, so I think all of that is part of the wider narrative, soft power, that China does want to talk about something that the U.S. still has in spades. I think that's one area where Xi Jinping and I think President Trump, they can have very good discussion about as well. Paul brought it up. Dan Tannenbaum just emailed me. Where'd you get your British accent?

16:04Is that just learning in Beijing? No, it wasn't. So I actually, when I grew up in Oxford and Bristol, when I was younger, then I went back to Beijing. so between five and... That's right. I first saw you in the Cotswolds. Close to the Cotswolds and then being in Britain for the last 20-odd years or so now. This is my friend Jeff Hugh. Thank you so much. With BNY, I can't say enough. The academic, the quality of the mathematical rigor at BNY Bank of New York. Stay with us. More from Bloomberg Surveillance coming up after this.

16:43You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10 a.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business App. Or watch us live on YouTube. Okay, Alexis, thank you for mentioning this to me. This is, I mean, we're talking here 1914. It's got an accent. I don't know how to pronounce it. Panther DeCartier Bracelet Pavade. Okay. It's got yellow gold. It's got two emerald eyes for the cat, 54 onyx spots, one onyx nose, and 765 brilliant cut diamonds. Joining us now, official surveillance jeweler James Steele, chief commodity analyst at HSBC.

17:29If gold goes down, do they cut the price of fancy jewelry? Good morning, everybody. Not necessarily. There's a big difference between the markup in jewelry in the non-OECD world and the OECD world. It's considerably higher in the OECD world, which is why you may notice the gold market goes up and the gold market goes down. But there's no change in the shops necessarily in places like New York, London, Paris, etc. But in Mumbai and in Shanghai, there is most definitely a very rapid and quick change. Very cool. And that is where 70 percent of physical gold demand is concerned. I forgot to mention the Alexis bracelet at Cartier Ready.

18:12Yeah. Three hundred ten thousand dollars. Wow. There you go. OK. I mean, no problem. But I'm priceless, Tom. So there you go. Very good. James, you know, the Chinese gold imports are at record levels this year. Why is that? Well, gold is very popular in China. Now, you've got to differentiate, I think, between jewelry and coins. and small bars, which is weak. The demand for those things are weak. So that leaves us looking at the strong imports as really investment led. These are the large bars. And one of the ways that you can tell that demand is strong in China is that the Shanghai gold exchange premium has been positive.

18:56It rose up to eight, nine, ten dollars recently. That denotes a strong demand versus the international price. Now, some of this, there has been regulatory reform in China, which we've spoken about before. The 10 largest insurance companies are allowed to own bullion now, up to 15 % of their portfolio. Also in India, asset managers are now allowed to own bullion. So on the investment side, the demand is very strong, but that is not the case on the retail physical side. So it's interesting here. We're in a world here. It looks like we're in a higher interest rate world around the world, not just in the US.

19:43What does that typically mean for precious metals? Well, it used to be quite negative. And we saw, we've done work going back to 1973 when the gold window was closed and saw a nice inverse relationship between gold and And the real yield, real yield on the 10-year, that broke apart in 2022 when we got rapid retail and central bank buying. Now, higher yields are negative, and this is why the market has pulled back. But they're not as negative as they used to be. And if the reason for those yields being high is fiscal proficacy, then that's good for gold. James Steele with us with HSBC. Can't say enough about his expertise on the bars, the bullion, and all the rest stored in the world.

20:33At the price here, are you seeing people going out and drilling or mining for more gold? Well, where they can, Tom, and here's the big difference. Are we mined out worldwide? Well, it takes time. Now, when I first started in the business, by the time a few geologists said, we think there's gold here, to the time it went round your finger. Excuse me. James started in the business. Jack London was going up the mountain. Is that far better? Call of the wild. And it could be five to ten years. Now it's up to 20 years. 20 years to find the first ounce of gold. Well, by the time everything is done instead, and by the time it's around your finger, it could be well above ten years.

21:18Now also the grade of gold is dropping. I mean, people used to talk about peak oil, which was nonsense. But we do have peak gold. One ton of rock in South Africa in 1970 brought up about an ounce of gold. Now it's about two and a half tons of rock. So you see the grade, that's to say the amount of gold in a particular amount of ore that's brought up is falling worldwide. There is still plenty of gold, but it's harder to get, it's more expensive to get, and it takes longer to get. What we're seeing, though, is an increase in mining where it's possible, but also an increase in recycling. So old gold is coming onto the market.

22:03That's much more flexible on the supply side. Are you suggesting Alexis mail down her discarded jewelry? I don't know. You know, the volumes would be difficult to cope with, I suspect. Seriously, in New York City, Can you walk into a store in Midtown and they'll melt down whatever your bobble is? You can hand it in, yes. Yes. And it will be, not that person, but it will get melted down, recycled, put into new bars. Now, where this really is, again, not so much the West, but in non-OECD countries, particularly in India, where housewives are, 95 % of the gold in India is bought by women. Really?

22:48Yes. Yes. Wow. I'm talking about not the investment side. And there is a very active recycling market. And that's been one of the reasons that imports in India are down, because they've recycled so much. I'm looking at my GLCO page, the global commodity monitor here, and the precious metals. I see a lot of negatives. Platinum down 12%, palladium down 19%. What's going on out there? Well, this was the situation moving back to Iran. Okay. And this is why I'm glad you brought it up, because it explains what some people think is an anomaly in the gold market. You'll notice that after the attacks on Iran and the escalation in oil prices, gold fell.

23:34And the statistical work we've done is that, and again, I'm talking my age here. I remember in the 70s when gold and oil were correlated positively on the way up. In the 80s, they were correlated positively on the way down. That began to break apart as we got into this century. Now we believe it's more or less negative. And high oil prices have not been good for the more industrial precious metals like platinum and oklater. Do you or do the Hong Kong Shanghai Banking Corporation, do you have a prediction of gold in 12 months or 60 months? Do you make a call on price? Yes, we have an average of 4 ,560, an average for this year, and a couple of hundred higher for next year.

24:18Now, we have also going to see a very wide range, possibly not as wide as we've seen this year. That's the key. I mean, the ranges for gold are multiples, we think, of the absolute number for gold when I first started covering it. It's absolutely incredible. I've never seen it like this. $4 ,000 to$4 ,000, a 20 % decline. And now we're back to$4 ,400. Is that volatility typical in gold? No. No. No. And this is exactly the point I was making, that we've had double digit. We had 40 % vol earlier in the year, 9 % to 15 % usually. Thank you. James Steele, really, really appreciate you coming. It's always a joy to have him in just a very different twisted outlook.

25:04Look, he's chief commodities analyst, HSBC, James Steele there. Stay with us. More from Bloomberg Surveillance coming up after this.

25:21You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10 a.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business App. Or watch us live on YouTube.

25:40Okay, we're going to have some real fun here. Tariq Solomon joins us. Exquisitely brilliant on mining. And this harkens back within my, like, three lives ago to, like as Paul said, mining is out there. And the back story here is the new copper and maybe a new commodity boom. Tariq is with Calvert Research, Executive Director, Energy and Mining. So north of Crocodile Dundee is New Guinea. And in Papua, is that how you pronounce it? New Guinea is a mine that's out of a Spielberg movie called Grassberg. That's where they get new copper, right? Correct. And the copper market, like every other market, is the whim of the weather.

26:24And there, there was literally, Paul, out of Hollywood, a mudslide. Seven miners died. 18 ,000 people. Am I right? in the middle of nowhere? Yes, I mean, Grasberg is one of those big mega mines around the world that's been facing a lot of operational issues, which has contributed to the tightness we're seeing in copper. Running a mine is not an easy endeavor. It risks all around every which corner. And when one of these big ones goes offline, they don't come back straight away. It takes time and effort and usually some sort of remedial work. So Grasberg still isn't producing what it once should have.

27:02And at the same time, you've got a lot of upward pressure from the demand side for copper that's creating this situation now where we're pushing$15 ,000 a ton or about$7 a pound, which is, you know, it's a tide that lifts all boats. It's because he went to the University of Warwick. I pronounce it that way just to aggravate Farrow. Is it Warwick? They quote, how do you say it? Warwick. Warwick. And I say on air, I went to John on air, I say, yeah, the University of Warwick, it just pisses him off. It's like, I'm sorry, this is like at the Dorchester Hotel. You can't get a cocktail without an umbrella in it.

27:39No. And that's where all the miners hang out. That's where the miners hang out. Talk to us about just the investment case for mining stocks today. Where are we today? How are investors viewing these things? Well, previously it's been quite an unloved sector. It had a lot of cyclicality and a lot of operational risks. It wasn't particularly ESG friendly as well. but a few things have started to change now where it's having a bit of a moment. We've got metal prices up where they are, which is, I said, giving everyone a big tailwind. But if you peel that away, there's quite a solid structural supply-demand tightening that we don't think is going to sort of resolve itself in the short term.

28:19You've got things like electrification in the economy, global energy transition, the AI builder that needs a lot of these mined materials. and there aren't any disruptors or other parties that can really provide them. It's the mining industry. It's its job to get it to market. But you often, the phrase goes, you have to run to stand still in mining. It's hard work to get the stuff out of the ground year in, year out without having some of these slip-ups. So to go to the other side, do we know what the inventories are around the world and particularly in China? Do we know how much is just sitting there turning green?

28:58China is always a bit of a black box and is the biggest importer of copper and most other mine materials, as with oil as well, that creates a blind spot that we struggle to get around. But I would stress that if you're comparing it to oil, for example, the strain in the system that we're experiencing as oil is much more severe than in metals. Where we've seen focus in metals more go to is things like tariffs, the focus on critical minerals as part of the trade discussions between the US and China, but also the situation in the Gulf of Hormuz is locking up metals in that part of the world, which can't get out, and that's again tightening the market.

29:40So there's a lot going on at the moment now, but largely speaking, it's working in miners' favour if you can avoid some of the pitfalls and keep operating and producing the right metals in the right place at the right time. Are new mines being created these days? They are, but it's slow. Everything takes longer now, and you're running up against local permitting issues, arguments with your host government. There is problems with the geology because all of the low-hanging fruit has probably been exploited and you're going down in the second and third tier assets. Everything just takes longer. I use the analogy in this tech-obsessed world that we're in, that in 10 years, technology can transform itself.

30:23You get in cycles of innovation. In mining, you need 10 years just for anything to change. Where are you based? Me, in London. You've got to come back tomorrow. This is too interesting. Tarek, one final question. The president speaks here in an hour and 10 minutes. He's not going to mention rare metals. You're like an ugly mining pro. How do you respond to worries about germanium and gallium and this and that? It is real because we've seen the U.S. government do things that it hasn't done before, which is deploy federal money into the private enterprises in the U.S. to try and alleviate that stranglehold.

31:00It probably won't be discussed on the podium, but I'm pretty sure it's going to be discussed with Xi Jinping later in D.C. Is the only reason we're talking about rare metals is we'll let China have horrific mining labor experiences and we just don't want to do that in America? Not entirely, no. But we're trying to, in the collective West, alleviate that stranglehold, but there's no overnight fixes in mining. And so whatever approach we take, it's going to take time, unfortunately. This has been great. I was looking up dangerous animals at Graspert, Tarek Solomon, Calvert Research and Management.

31:37In the middle of New Guinea, there's Salvadori's Monitor, which is eight feet long. No, thank you. Stay with us. More from Bloomberg Surveillance coming up after this. With ChatGPT, you can do more than get answers. You can get things done. When you're running a business and looking to expand, you need a clear view of the landscape before making any decisions. ChatGPT can help you prepare. Connect your Google Drive, point to relevant files and reports and ask chat to research competitors, industry forecasts, and market signals. It can turn the findings into a strategic deck in your team's template that you can review before presenting to your leadership team.

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33:32You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10 a.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business App. Or watch us live on YouTube. I think what we'll do is get right to Nancy Tangler. I've been remiss. I have not been doing enough on the equity markets here, which means it's a good time to speak to Nancy Tangler. She is a glass F full. She is an optimist at Laffer Tangler. investments. What inning are we in? I mean, the silly cliche that we're all bored by, but maybe it's germane here. So many people think we're in the eighth or ninth inning and the reliever is dragging.

34:12We're not in the eighth or ninth inning. Are we in this market? For AI or just the markets? Market in general. Yeah. No, no. I mean, this ranks like fifth out of eight bull markets since 1966. So if you look at the analog, we're just getting started. We're up about 117%. You remember the 90s. We were significantly more than that. And I do think this is analogous to that, to a great extent. I remember vaguely, I remember the effervescence, Paul, of the 1960s. Johnson and Johnson. Haloid. Do you have Haloid? That was Xerox before his Xerox. I always love your notes, Nancy, because right up front, let's start with the things that matter, and that's earnings.

34:52Talk to us about earnings have been so strong in calendar year 26. How do you think about it going forward as a driver? I mean, if you look at guidance, we saw about 30 % of companies in the S &P raising guidance last quarter. And we also have a group of stocks on average that are down 20 % from their highs. So while the index is up, the average stock is down significantly. And then you've got multiple compressions. So I think if stocks are cheaper now than they were in January. And that's not hard to sustain. So I think, you know, you want to use these moments of volatility to recalibrate your holdings.

35:31I got to get my glasses on. Six stocks for 2026. Tangler's up 48%. You have Tesla here? Yeah, didn't do anything. Still long Tesla? I actually think it's interesting now. I think they're taking share back, Tom. So I think you want to pay attention here because it has done nothing for all year. And I think on a trailing one year as well. So there's a merger in our future, I think, with Tesla. I love the SpaceX story, despite the valuation. Did you get it right? No. Did we get SpaceX right? No, we bought some at the open and then we continued to buy down. So yeah, I mean, our average price is, I don't know, 140 bucks a share.

36:16That's getting it right. That's okay. That's, yeah, darn right. I think you have to judge that one three to five years from now, not early days of the IPO. So you've been, with your best ideas, heavily exposed to AI, which has been obviously a great trade here. How do you view the AI story right now? Yeah, so I felt like the recent announcement, the paper by Dario Amadai, I was kind of a philosophy paper that we probably would have had in graduate school. We would have put out. I didn't I thought it was a little bit cynical, a little bit about reclaiming the narrative. Look, we're altruistic. It reminded me of Mark Zuckerberg after the censorship issues where he was like, please regulate us like we can't control ourselves.

37:03I still think you want to belong the group. We're not slowing down. The infrastructure names are really interesting here. Goldman's done a report,$7.5 trillion being spent between now and 2031. So I think you just keep picking away at them. It felt a lot like deep seek to me. No, I got to be careful here, folks. My opinion doesn't matter. I like what Steve Eisman did with Carl Keatney over at the Death Star. 100. Where Eisman just went mental. He said, where's their moat? Where is the AI moat? Maybe Microsoft. That's about it. Yeah. Well, and we're lumping all the models together. But like if you look at open weight models, what NVIDIA did with Hugging Face, super interesting.

37:44I think what Meta's doing with Muse, we recently added that to our portfolios. Meta, that is. Do you have Muse on your phone? I don't yet. No. Paul Sweeney just downloaded it today. Did you? I was waiting for my new duo. My Apple duo. That's about a story. Are you going to get the duo? I think I am. You're such a hipster. I'm such a late adopter. But this one, I think I like it. So one of the, Nancy, for a lot of the tech names that you've owned and a lot of tech investors have owned, one of the main reasons is because of the tremendous free cash flow that they generate. It's less of a story these days with all the capex they're spending.

38:20Do you get comfortable with that or you get nervous with that? I mean, when you're going through a technological revolution, which we are, an economy in transition, I think, I mean, if they're not spending, I'm concerned. But free cash flow started to hook up again. It looks like it's just NVIDIA and Apple at the moment. But I think, you know, I think Amazon's going to get it right. I think Google's going to get it right. So I'm more interested in the established providers and the different models. You know, Jensen Wong came out and said, we're going after sovereigns and industries. We're not focused as much on the large language models.

38:56They don't have to be because they own those markets. But I think that's what's going to be different as we move forward. Different kinds of models for solving different things. Outside of technology, the name that's been on your list for a while is Goldman Sachs. Yeah. Talk to us about just Goldman and maybe the big Wall Street names these days. Yeah. So we've always we've liked that name. It's been our 12 best ideas. It was in five for 25. I think and it's done pretty much nothing this year. It's up single digits. I think it will unleash again as we begin to see the IPO market loosen up. And then you've got you had the trading problems last quarter.

39:33I think that will get resolved. So it's a non-interest sensitive way to play financials. We like their wealth management business as well. I mean, their returns aren't even close to ours, but their weight in the market is ginormous. Thank you. There we go. Thank you so much. Always ginormous on the Equity Market. Nancy Tengler, Matt with us with Laffer Tengler. Greatly appreciate it this morning. This is the Bloomberg Surveillance Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, 7 to 10 a.m. Eastern, on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app.

40:15You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

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