00:00I think today will be a little bit of a philosophical day in that he's going to have to talk
00:09about what happened in the meeting.
00:10I would think he's going to give his take on what the current situation is in the economy with employment
00:17and inflation.
00:18And I would think he's going to make a few points about his approach, his philosophical approach, in that, for
00:30example, he's going to want to see robust debate and disagreement inside the room.
00:35He's going to want to see less predicting by the Fed, less prognostication.
00:39He's going to want to see, though, patience and that over the horizon, some of the structural drivers, AI adoption,
00:49Chinese overcapacity.
00:51You know, he wants to be patient to see the disinflationary impacts.
00:55And he's going to have to, though, acknowledge that we're in an inflationary, sticky inflationary period right now.
01:03The war and straight opening will help.
01:06But he's going to have to also, I would hope he'll say, listen, if that inflation we think is going
01:11to be persistent, you know, that he's going to have to make clear he's prepared to act.
01:15So he's going to have to he's going to have to give people a little bit of a feel for
01:18him, establish his credibility.
01:20And I think this is a good opportunity to do that.
01:23Robert, how is his his, I guess, reputation within the members of the Fed today as he walks in for
01:30his first meeting here?
01:32How is he perceived within this Fed Reserve?
01:36Well, if you were just reading the newspapers and watching TV, you would you you might get a sense, you
01:43know, he's been an outside critic of the Fed.
01:46He's been critical of some of the mistakes they've made.
01:48I think now that he's inside, people may find this hard to believe, but my own view is a lot
01:56of that gets washed away.
01:58He's now one of us.
02:00Yeah.
02:00He's our leader.
02:07And so I think I think the judgments on him from here by people at the Fed will be based
02:15on what he does now.
02:17How does he communicate with us?
02:19How does he run the meeting?
02:21How how easy is he to work with?
02:25How constructive is he?
02:26And and so they'll they'll they'll be open minded.
02:29And they're going to want to, I would think, if I am my former seat, I'd want to do whatever
02:34I could to help him get off to a good start.
02:37And I think that'll be the dynamic.
02:42So D.O.T.S., one of the favorite functions on the Bloomberg terminal, the dots, getting a sense of
02:47kind of where the Fed is.
02:49Is that something that you think he may want?
02:53Mr. Mr. Warsh may want to do away with as he thinks about how the Fed should should be communicating
02:58to Global Wall Street?
03:01Probably.
03:02Yes.
03:02The question is, how does he get from here to there, given the dot plot's been around now for a
03:08number of years?
03:09But, yeah, I think he wants them to go less.
03:12And I agree with this to some extent, less on the prognostications.
03:17Don't get yourself boxed in by some predictions you've made.
03:23Leave yourself the opportunity to change your mind.
03:27I always said the dot plot had the shelf life of an unrefrigerated carton of milk.
03:33Meaning I go in there to the meeting.
03:36I give my views on the outlook.
03:38I give my views on the long run neutral rate, on the dots.
03:42And if something happens two weeks later, I may change my mind.
03:46And I think he knows that.
03:48And I don't think I think there'll be a lot of people around the FOMC table who will actually be
03:55won't be sorry that he wants to curtail that.
04:01Because it's put him in some awkward situations at times around the committee.
04:06But how he orchestrates it and how he works with the members to make sure that he gets buy-in
04:12for that, I don't know how he plans to do that.
04:15But I would think you'll see the trend will be toward re-reviewing that and predicting less.
04:22Rob, the inflation story is a challenge here for consumers in the marketplace.
04:28It's also a challenge for this Federal Reserve as they think about their dual mandate.
04:33How do you think they're looking at inflation here?
04:36As we do have oil coming down off of those highs from earlier in the year, but still probably higher
04:41than people would like to see.
04:42Yeah. So to me, the way I look at this, there's the monthly data, but the more important, bigger picture
04:52dynamic is we are in a CapEx, AI-driven, power data center-driven CapEx boom in the United States.
05:07And to some extent globally, but particularly in the United States.
05:10At the same time, due to tariffs, curtailment of immigration, so we have labor constraints, and then the third has
05:22been oil, which hopefully is getting resolved.
05:24You've got resource constraints while we've got a CapEx boom that calls on those resources.
05:31And so to me, it's not a shocker that the CapEx part of AI, the infrastructure build, is going to
05:41make inflation stickier.
05:43The adoption part over the horizon should be disinflationary, but we're right now in the teeth of the CapEx part.
05:50And so the straight of Hormuz being open, oil prices going down, that'll definitely help.
05:57And I think what it does is, for those who are more inclined to say we should be raising rates,
06:05I would think this bolsters the argument,
06:09let's kick the can a little longer for several months and see how this oil price decline, the bleed stops
06:16from that, and let's see if we start to see a cooling in the inflation rates.
06:21And so I would guess Kevin Worsh will be arguing for patience, and I think the straight being open helps
06:29with that.
06:30But the oil price is not the only issue.
06:33You've got this structural issue, which they have to be aware of and monitor and contend with.
06:39We're speaking with Robert Kaplan.
06:41He's the vice chairman at Goldman Sachs.
06:44He's former president of the Dallas Fed as well.
06:46Robert, you're mentioning AI, and you and your colleagues at Goldman Sachs are kind of right at the nexus of
06:53the capital formation,
06:55kind of fueling the growth of this AI thing.
06:58How do you guys, as I guess we're in year three or four, of really having an understanding of what
07:03AI can be,
07:05how are you guys thinking about this now as you work with your clients at Goldman Sachs?
07:10So there's a couple of different tracks, and yes, we're in the middle of both of these.
07:15First, there's the infrastructure build in that we need more compute.
07:21For as much compute as on the drawing boards, we need to create more compute,
07:28and adoption is outpacing, the demand for compute is outpacing the supply.
07:33So that means data centers, power, other infrastructure.
07:37And the CapEx related to that is creating all sorts of opportunities for Wall Street to raise capital, debt, equity,
07:48et cetera.
07:49There's then the AI adoption and the companies that are in the middle of that.
07:56And those companies are busy also growing and raising capital.
08:02I'll avoid specific names.
08:04But even most recently, SpaceX is part of that story, both the infrastructure and adoption stories.
08:12And so we are raising capital for that.
08:15And every client that I work on and that we're working on is involved in rethinking their business and their
08:25processes
08:28and using AI to improve their productivity, improve their distinctive value proposition.
08:36And they believe that if they don't do that, they're going to be left behind.
08:41And so this is also driving, in my opinion, substantial amount of merger activity.
08:47And that's why you're seeing so many mergers, not all because of this,
08:52but it's a big part of the story where I want more size and scale and ability to invest and
08:59bolster for this AI adoption
09:02because we're going to have to disrupt our own businesses so we can be competitive.
09:08And our competitors are going to be doing that.
09:10And so we're seeing it in multiple different channels.
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