00:00It's a great question. We haven't heard much from him so far. That really is the issue.
00:04We have had mixed messaging. We've had a lot of airing of dissent, which is not exactly calm
00:09markets. We've also had Scott Besant really, I would suggest, even undermining some of what's
00:15been going on at the Fed with his intervention when the Fed has not done anything with respect
00:20to rates. So investors are having a hard time reading it. We knew that they did doubt whether
00:25the Fed would be able to get inflation under control. That was possibly why the bond market
00:29sold off. Right now, there is a real adjustment phase going on. And I do think there will be
00:33parsing of every word. And that's perhaps not a situation he's particularly used to.
00:38You say that a big theme for you right now is the resilience of Europe,
00:43maybe getting lost in the sauce here. Where are you seeing opportunity in Europe?
00:49Well, let's actually look at the numbers. European growth has been positive, despite many of the
00:54headwinds coming its way and much of the negative momentum. So it has been marginally positive,
00:58not the same as the US. We're also seeing Germany having had strong growth, a bit of a surprise
01:03there. Strong startup activity in Germany. Yes, its industrial base is under threat, but there
01:08always are green shoots. We've seen this in the UK too, some important initiatives around technology
01:13there. And equally, the focus on AI sovereignty, whereby European governments really want to know
01:19that they can source their AI locally, that will not be dependent on geopolitical frictions,
01:23are subject to a sudden change. So I'd say all of that is pointing to quite a positive
01:28second leg of this AI wave that will be focused on Europe. And when we look at this second leg,
01:34what does it look like? Perhaps that there will be more productivity gains, particularly in the small
01:38and mid-cap arena of Europe. And so I'd say don't write Europe off yet. That's our message.
01:44So the weak dollar here brings into question this debasement trade, where maybe people are selling
01:51the US dollar, maybe buying some hard assets like, I don't know, gold, maybe even Bitcoin,
01:56but I'm looking at Bitcoin up near 80,000. How do you guys think about that debasement trade?
02:02Well, the debasement trade kind of comes and goes at the forefront of the mind of investors.
02:06Clearly, the bond market has this on its mind. The fact that we're seeing gold level off around here,
02:11and also Bitcoin surge, there is a concern that just there will be a trade-off between supporting
02:16the bond market and supporting the dollar. We saw that in Japan, they were not able to support the
02:20yen. They chose to support their bond market. And now when it looks like there is a support of the
02:25bond market clearly at the forefront of US government policy, the dollar will be sacrificed.
02:30That doesn't affect the local investor too much, except when they're on that trip to Europe.
02:34But it definitely will have an important effect on international investors and how they invest in the US
02:40and how those US assets make sense to them. That's going to be a big factor. Massive holding
02:45of US assets by non-US investors. And overall, it is going to import inflation into the US too. So
02:52that's going to be that delicate balance between supporting the bond market and keeping inflation
02:56at bay. What about new companies coming to market? And we're going to be hit with a flood of
03:04really big IPOs this fall, Anthropic, possibly OpenAI. We just heard today from Shein going public with an IPO
03:11on the Hong Kong Stock Exchange, going to value the company. This is that fast fashion company valuing them
03:18about $27 billion. What's your takeaway as we sort of gear up for what's really going to be a very
03:24busy IPO season?
03:26Well, it really illustrates how timing is everything when it comes to IPO. We're seeing massive changes
03:31in expectations around growth. And growth, we've seen this just in terms of the volume of venture
03:36capital activity, and even the projections we're seeing coming out of something like an Anthropic.
03:41We've heard an astronomical revenue figure is being touted there. So timing is everything. If they manage
03:46to get out Anthropic while the momentum is strong, and before some of the doubts creep in, that'll be
03:51great for them. When it comes to OpenAI, if their timing is wrong, or it hits just at a moment
03:56when
03:57doubts have started to really circulate, then they will miss that window. Shein is a great example of
04:01missing a window. They still need to go public, but the valuation is at a fraction of what it was
04:05before.
04:06And when we're looking at some of the IPO pipeline, it is really varied. We're seeing brands,
04:11Dunkin' brands, areas quite as diverse as that. So definitely that suggests a breadth in the market,
04:17a desire for some fresh activity, perhaps a jadedness with some of the concentration
04:21that we're seeing. Overall, very positive, but timing is everything, and the market may not stay
04:26this resilient for that long. Yeah, so I think you bring up a really good point about timing.
04:32Is being first really important for Anthropic? Because it looks like they're going to beat
04:36OpenAI to the market. Is that going to really matter as much?
04:41I don't know that it matters in the long run. Certainly, if OpenAI successfully comes to market,
04:46there will be, there is certainly room for two frontier model companies and that they've got
04:51massive share. They're growing. Goss seems to be growing on the side of OpenAI a little bit faster
04:56than it is in Anthropic. So I don't know that it really matters in the scheme of things, but the
04:59actual timing of the actual IPO, the momentum around that, and we saw with SpaceX, things were
05:04priced to perfection. We had pretty much an open space in terms of that IPO market at the time.
05:09Things went well. There was oversubscription, a lot of hype, ultimately some settling of that.
05:15But timing will matter, but I don't think it'll matter in the long run. I do think there is enough
05:19demand to cope with this. We still have the threat of the open models. That could also place some
05:24strain on the growth, but overall growth is still positive at the top line. But they will need to
05:30manage their timing extremely well. Ethan, we've had just extraordinary earnings for the first half
05:36year. Earnings in the second quarter like we rarely, rarely ever see here. Setting up tough
05:41comps, if nothing else, for 2027. How does that factor into your outlook?
05:47It's great that the old adage of investing past performance is no guarantee of future returns. But
05:51yes, the anchor always stays in place in terms of what we've just seen. Certainly earnings,
05:55we have to remember, are retrospective. They are reflecting a strong consumer that may have been
06:00on borrowed time. Certainly they were perhaps pushing the limits of what was affordable.
06:04And companies that felt they could have the chance to, with their inventories,
06:09maybe push through tariff price increases, maybe absorb some of that pain. So we've seen these strong
06:15earnings. I don't know that we will expect to see the same trajectory going forward.
06:19Much of the headlines have been lifted by just the massive growth at the hyperscalers and around AI
06:24demand. The CapEx has really been lifting that. And it will be ultimately strong for growth and
06:29strong for inflation, I would suggest. But as far as where the earnings go from here,
06:32a lot will depend on whether there is a pullback on some of that spending,
06:36whether we see also a consumer, that we see what's consumer sentiment is starting to fracture.
06:41So I would suggest, let's not extrapolate from the earnings we've just seen,
06:45but we do expect them to be positive. But let's also remember,
06:48companies are masters at communication today.
06:50So I'm not going to work with a lot of money
06:50I want to be happy with a couple of money.
06:51And I know I'm going to work with a lot of money that I'm going to be able to put
06:51out.
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