January 3, 2025 • 41 mins
Watch Tom and Paul LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg Surveillance hosted by Tom Keene & Paul SweeneyJanuary 3rd, 2025
Featuring:
- Neil Dutta, Partner/Head: US Economic Research at Renaissance Macro Research, on the rise in bond yields, the outlook for recession, and the health of he US economy as we kick off 2025
- Priya Misra, Portfolio Manager - Core Plus Fund at JP Morgan Asset Management, talks about the US soft landing, peak rates, and where to go from here in fixed income
- Mike Wilson, Chief US Equity Strategist at Morgan Stanley, joins for two segments to discuss US economic resilience, where we are in the equity market bull run, and whether traders will experience more choppiness in 2025
- Lisa Mateo on newspapers
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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 the Bloomberg
Surveillance Podcast. Catch us live weekdays at seven am Eastern
on Apple CarPlay or Android Auto with the Bloomberg Business App.
Listen on demand wherever you get your podcasts, or watch
(00:25):
us live on YouTube.
Speaker 2 (00:27):
Two years ago, he used my economist to the yere.
He had an optimism about the American economy. Admitst recession
at gloom. Neil Doutta takes a continued victory lap. He's
with Renaissance at Macro this morning, stop by the FED show.
He was so wound up about the FED meeting was
he he called my people and said, I demand to
come on. Okay, joining us now because he demanded to
(00:49):
come on, Neil dota. Neil, let's go back to the
last FED meeting. Why did you go mental? Why did
you say I gotta come on?
Speaker 3 (00:55):
The FED decides, Well, thanks for having me on, Tom,
Happy New Year. Well, I would just say that it
was a complete one eighty from the meeting right before
that when they said they wouldn't prejudge policy outcomes right
after the election, and what do they do in December?
They prejudged policy outcomes before anything even happened, basically taking
(01:19):
out insurance some potential tariffs before you know, Trump even
takes the oath of office.
Speaker 2 (01:28):
I thought that was quite revealed.
Speaker 3 (01:30):
So, you know, this idea that the fedily responding to
the data and adjusting their forecasts, I don't really think
that washes if you look at how much the data
surprised on the upside with respect to March. I mean,
it would make more sense to push off raid cuts
at that meeting, but in December, you know, rasing two
(01:50):
cuts given the forecast revisions I thought was a little
bit much. So this was really about a balance of
risks story that they explicitly said that wouldn't do.
Speaker 2 (02:01):
The higher yields and the attendance strong dollar. Does that
force or cause a slowdown?
Speaker 3 (02:09):
I think so. I mean, when you look at the
nature of why interest rates had been going up, it
has very little to do with a rerating of nominal
growth expectations. I mean, if you look at the data,
you know, the your own Bloomberg Surprise Index has been
weakening in recent weeks, so the economic data has been slowing.
You know, if you look at inflation expectations, both of
surveys of consumers and businesses, they've been falling. So you know,
(02:32):
my sense is that this has something to do that's
not related to the data. I think it has to
do with term premiums. Maybe that's a function of QT.
Maybe that's a function of what's going on globally. You're
seeing rates go up in Japan for example. You know,
maybe there's a you know, risk around deficits and so
you know there's going to be more treasury issues relative
(02:52):
to the demand for treasuries. I mean, these are all
things that push up the term premium, but it doesn't
really have to do with growth expectations. And that the
term premium is going up, that's a tightening of financial conditions, right,
I mean, the declining term premium was a big driver
of you know, sort of risk appetite, you know, stronger
equity private you know in recent decades, frankly, and you know,
(03:15):
to the extent that's going away, that's going to be
a headwind for stocks.
Speaker 4 (03:19):
Neil, Neil, I'm at an equity guy. All I know
about the bond market is bond prices go up, yields
go down.
Speaker 2 (03:24):
That's mailed that.
Speaker 4 (03:26):
But I got my fetter reserved cutting interest rates. Why
are my yields in this bond market thing going up?
I thought the yield should be going down.
Speaker 2 (03:36):
Yeah, I mean it's a good question.
Speaker 3 (03:38):
I think. You know, obviously some rates are coming down.
Some private sector borrowing rates have been coming down alongside
the FEEDI using so for example, helock rates have been
coming down, Auto loan rates have been coming down. You know,
prime rates obviously have been coming down because those are
very much keyed off what the FED is doing. But
(03:59):
you know, things like more rates, those have been high elevated,
and yeah, and as I mentioned, I mean that's you know,
to some extent, it's it's out of the fed's control.
I mean, I think one reason why they're going up
is because, you know, at some level, the economy has
been doing a little bit better, at least initially after
(04:19):
the September meeting, somewhat better than expected. But I don't
think that goes far enough to explain why interest rates
have backed up. So I think that's part of the reason,
but it's not really the bulk of the reason.
Speaker 4 (04:30):
What's the FED focusing on here, Neil, do you think
is it? Is it the absolute inflation number? Is it
the labor market? What is the FED focusing on these days?
Speaker 2 (04:40):
Do you think? Well?
Speaker 3 (04:42):
I mean, I think to the extent that the September
meeting was a focus on the labor market, I think
December one kind of put inflation back in the driver's seat.
I mean, they're clearly all you have to do is
go through the document that they release with, you know,
with the Summary of economic projections, and go to the
balance of risks. Right, you have a overwhelming majority of
(05:04):
participants on the f MC seeing that the balance of
risk to core inflation are skewed to the upside. It
completely flipped from where they were in September. So I
think the real life of inflation data has taken on
a lot more importance than it did, you know, maybe
three months ago.
Speaker 2 (05:20):
And Neil done it with the Renaissance Macro. He'll be
with us for the entire half hour. I do want
to point out that he works with Jeffrey Degraph, who
had a better than good two thousand and four. We're
hoping to get mister mister de Graph is very tough
to me, you know, it sounds like it we can
get done anytime we want. Jeff to Graph is just
like absolutely impossible to get what do you learn from
(05:42):
Jeff to graph right now, Neil dout it when you
tie in is world class equity coverage into your call
of a slowing economy, how do you synthesize those two?
Speaker 3 (05:52):
Well, I mean I would say that the market has
been is over sold, you know, so that's you know,
reasonably good setup going in uh, you know, into the
new year, so you're sort of probably due for a bounce.
But I do think interest rates up at these levels
concern him, and so you know, that's something to keep
in and keep in mind, you know. For my own part,
(06:14):
I mean I would say that, you know, really, to me,
the big the big story, frankly, is the performance of housing, right.
I mean, this is why you know, you made Economist
of the Year back in twenty twenty three.
Speaker 2 (06:26):
I didn't get that. I didn't I didn't get that back.
Speaker 3 (06:28):
I didn't get it for twenty twenty four time, unfortunately.
But you know, I would just say that one of
the reasons why I made that, made the calls I
made in twenty for twenty you know, twenty twenty three,
is because at the end, you know, two years ago,
at the end of twenty twenty two, you know, the
FED was dialing back kind of the hikes, and housing
(06:49):
stocks were outperforming. So that's kind of a you know,
an interesting Now you have the FED cutting and housing
stocks are underperforming, so you know, I think that the
underperformance of home building is I think an important kind
of Yeah, Neil, I.
Speaker 2 (07:03):
Got a fiery response out on YouTube and the housing market.
What is your insight of where the housing market goes
for twenty twenty five.
Speaker 3 (07:15):
Well, I think it's not going to look particularly good
as we go into the spring selling season because mortgage
rates are running plose to seven percent. I mean, with
the labor markets cooling, the math doesn't work for a
lot of people. And I think that's the primary issue
right now with respect to housing.
Speaker 2 (07:32):
I mean, if you look at.
Speaker 3 (07:33):
Home building, new builders, new housing, if you look at
single family homes for sale that have been completed, that
number is up over fifty percent against last year. So
there's slack building in the new housing market. I think
Paul mentioned sort of the increasing inventory situation in parts
of the South and.
Speaker 2 (07:55):
The West.
Speaker 3 (07:56):
I mean, remember that's like the meat of the market,
right so if inventories are going up in those places,
that means that construction is going to be coming down. Yeah,
that's where most construction happens.
Speaker 2 (08:07):
Frankly, you know this is important. Eruption.
Speaker 3 (08:11):
Employment is at risk.
Speaker 2 (08:12):
Now I want to go to Neldata and Paul Sweeney
Lisa jump in on this. This is important. Isn't where
we live in aberration? Paul Sweeney like, where we live
isn't normal?
Speaker 4 (08:23):
No, because I think the density we have here in
the metro New York area is so crazy. That and
Lisa's looking for a new are you looking for.
Speaker 2 (08:32):
Six thousand square Now that's the backyard.
Speaker 5 (08:35):
But it's like getting out bid by these offers. That
is crazy. Like a house goes on the market for
six hundred thousand in New Jersey and.
Speaker 2 (08:41):
It sells for seven forty. It's me and it's like,
how do you get it?
Speaker 4 (08:45):
But that's not the rest of the world here, So hey, Neil,
so let's stop back. You know, we got the labor market,
the real estate market. How's the consumer doing out there?
How do you think about the consumer here in twenty
twenty five.
Speaker 3 (08:59):
I mean, I think it's going to be tough to
sustain the kind of consumption pace we saw last year, right,
I mean, if the labor markets are slowing and wage
growth is cooling, which I think is clearly happening because
you know, things like hiring rates are down, puts rates
are down. You know, there's not really much need for
firms to be paying up and bidding up the wages
of their workers. So with the slack in the labor market,
(09:20):
that's you know, slowly building. I mean, you know, the
labor market's not collapsing, but it's hard to be bullish
on the consumer given that environment. And I also think
there's probably a bit of an asymmetry, right, I mean,
you know, the thing that's been supporting I think consumption
has been you know, rising wealth, you know, sort of
equity prices going up, home price is going up. And
(09:41):
to the extent that that doesn't continue, I mean, we've
seen some slowing in stocks. I mean there's probably an
asymmetry there right where modest slowing gets you maybe an
outsized slow down in right.
Speaker 4 (09:52):
So that shape and K shaped Tokany, here's.
Speaker 2 (09:54):
The second time you've mentioned I like it. It makes.
Speaker 4 (09:58):
Exactly the K shaped to Kanya. It kind of makes
sense to me. So what should the FED do given that? Here?
I mean again, I guess if you look at the
warp function w I RP go on the Bloomberg Terminal
suggests maybe a couple of rate cuts this year. Should
the Fed do more?
Speaker 2 (10:13):
Do you think?
Speaker 3 (10:16):
I mean, I think they will do more because I
think the data is going to slow and inflation. I mean,
to me, the most notable thing that's happened, frankly is
the slowing in rental in rental inflation, housing rental inflation.
That's been really the main shortfall relative to the Fed's
longer run inflation objectives, and now that appears to be
(10:38):
working right, I mean in the favor of disinflation. So
I think that's important. Obviously we're all watching what's going
on with the dollar, but that's going to weigh on
the prices for imported goods, I think so. No, I
think the Fed's going to be ending up. If I
had to pick, I'd say that they're going to cut
more than twice. So I think that the front the
(11:00):
Yeld Curve is a pretty good place to park your
money at the moment.
Speaker 2 (11:04):
Neil da I wanted to go there in a dollar
kitschooks joining us in about two hours, folks with socchin
and you're just brilliant, but let's let's do let's talk
to foreign exchange trader Neil Dutta here as well. Are
the dollar movements Neil Dotta nonlinear or linear like d
x y one O seven, one o eight, one oh nine,
(11:25):
or is there a Neil Doutta tip point where things
begin to unravel?
Speaker 3 (11:31):
I mean, I think there's probably something to the idea
that you know, at a certain point, like more things
start breaking. But you know, let's I mean, when you
have like one percent currency moves, that's a big deal, right,
I mean, so I think the dollar is concerning across
multiple dimensions. I mean, Number one, obviously, it weighs on
US exporters, particularly manufacturing.
Speaker 2 (11:50):
That's number one.
Speaker 3 (11:51):
Number two, going back to the equity market discussion, it
weighs on earnings, right, particularly for tech companies that are
global in nature, and because that's been a big driver
of US stock prices. I think the fact that the
dollar has been strengthening is going to weigh on earnings
and by extension way on stocks. And I think it
(12:11):
matters for the rest of the world, obviously, particularly emerging markets,
because they have lots of dollar denominated debts, so the
cost of financing that goes up, and then you have
to start worrying about balance of payment problems in em
which obviously of their slowing that creates a negative feedback loop,
pushing the dollar up even more. So you know, I think,
(12:32):
you know, because of safe haven consideration. So yeah, I
think it's concerning. But again, that's not really a world
where the Fed can just kind of sit back in
its chair and say, oh, we're gonna cut twice this year, right,
So to me, the dollar represents an unambiguous tightening of
financial market connections.
Speaker 2 (12:52):
Neil Donna, thank you so much. Here's you valuable generous time.
Here on a Friday morning to start the year.
Speaker 1 (12:58):
Of you're listening to the Bloomberg Surveillance Podcast. Catch us
live weekday afternoons from seven to ten am Eastern Listen
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Speaker 2 (13:16):
A bond person comes in, Paul, you nailed early. What
did you say?
Speaker 6 (13:19):
Price up up, yields down, nail down.
Speaker 2 (13:22):
Okay, there we go, We're not going to do that.
Joining us now. Pria isra with a Friday get the
year started discussion, and everybody's sitting in their kitchen this
weekend discussing how much they've lost betting on football and
also their portfolio. You and I are going to talk
Jensen trainer sharp right now. Adults in the business say
(13:46):
how much did I make? But how much risk did
I make making what I made? And William Sharp out
at Stanford identified this explain to mere mortals worldwide what
the sharp rate is and why it matters.
Speaker 6 (14:02):
I love that you're talking about sharp ratio.
Speaker 2 (14:04):
It's great you and I can bring up bar conversation
on two people here.
Speaker 6 (14:09):
I love it.
Speaker 2 (14:10):
They're sitting at their their table this weekend and they're like,
why are we not making money? Sharp ratio?
Speaker 3 (14:16):
Go.
Speaker 7 (14:17):
So there's a lot of well I should start with
happy new Year, thank you for having me.
Speaker 2 (14:21):
I have children.
Speaker 7 (14:22):
Continue. The focus typically is on the return. It's what
return am I getting? You're getting that return taking risks
and you know, but you know you're talking about have
we not made money?
Speaker 6 (14:34):
Enough money?
Speaker 7 (14:35):
I think bond people who thought the Fed starting to
cut trades, and that was where we were a year ago.
The Fed's going to cut trades. They typically cut two
hundred three hundred basis points. You're gonna make a lot
of money in bonds. I don't think, well that that's
where they lost money. They put money in stocks. They
did well. We're in a soft landing. Pretty much every
risk asset did well. Credit did great. Now you take
(14:56):
stock and look at the uncertainty. You have the FED
with an army of PhDs saying we.
Speaker 6 (15:02):
Have a lot of uncertainty.
Speaker 7 (15:03):
We don't know how to manage the cyclical and the structure.
So we're pausing. And so that's where that shop comes in.
Let's look at the risk and return. So let's look
at the return relative to the risk, which is what
you will you do to sharp ratio. That's where I
think fixed income. You're getting six seven percent in high
quality fixed income with not a lot of risk because
(15:24):
I don't think exactly, and so that your denominator, if
it's lower, suddenly fixed income makes a lot of sense.
Speaker 2 (15:30):
And I'm one more than one question, folks, and Sweeney's
going to bring us back to normal. You have a
superior sharp ratio and the JP Morgan core bond versus
your peers and versus the index. That's a one year
sharp ratio. There's a three year look back, there's a
five year lookback. I'm wedded to the three year sharp ratio.
(15:50):
Folks of whatever four oh one k plan you've got,
which duration is the most value to prea miser?
Speaker 7 (15:57):
So I would say I think I do wonder Bob Michael,
I would say that we look at five year, ten
year consistency is such a big part of it's our DNA.
So just making sure that we can consistently outperform it.
Speaker 6 (16:10):
You know, how do you do this?
Speaker 7 (16:12):
You diversify a lot so that the risks are not
You're not, you know, wedded to one particular risk, and
you do your research. In a high cost of capital world,
dispersion is going to be high, meaning some sectors will
do well and others will not. And I wish I
could say we know exactly which sectors are going to
do well. If you diversify well and you do that research,
(16:33):
that's where you get that superior shock.
Speaker 2 (16:34):
You'll sharp ninety years old out of stay. Is that right? Yeah? Okay, good,
bring us back to some sense of normal.
Speaker 4 (16:42):
Twenty twenty four fixed income investors got paid to take
some risk, high yield leverage loans by far the best performers.
Is that going to spill over into twenty twenty five
do you.
Speaker 7 (16:53):
Think I think so, and yes, why let's look at fundamentals.
Fundamentals of the corporate sector is still very wrong.
Speaker 6 (17:00):
It was strong a year ago. It's still strong.
Speaker 7 (17:02):
You're looking at strong balance sheets, strong business models, earnings
are decent. We're also looking at what a company is
doing with their debt. Are they re levering up? That
would make me a little nervous. Mostly they're not. I
will say, since you talk about high yield and leverage,
I mean high yield default rates including the restructuring, has
been one and a half percent. It's low leverage loans
a little higher. So I think you have to be
(17:24):
careful what you buy. We like high quality, high yel
we like parts of leverage loans. I think fundamentals are strong.
Then let's look at technicals. Technical is extremely strong. People
are looking at the returns they had in equities and
they're saying, maybe we should rebalance.
Speaker 6 (17:38):
You look at fixed income. If you're getting or in.
Speaker 7 (17:40):
High yeld, you're getting seven eight percent with lower volatility.
That's why we're seeing continued inflows into bond funds. So
I would say technical fundamental very positive for fixed income.
I think you have another good year as long as
that soft landing is maintained.
Speaker 4 (17:54):
Are there some industries sectors that are attractive to that
screen well for you guys in terms of maybe taking
some credit risk.
Speaker 6 (18:00):
So I would say financials is an area that we like.
Speaker 7 (18:03):
Utilities is another one in investment grade within high yield
as parts of media and telecom that have been beaten
up and they've actually started to perform well. And that's
where but I would say rather than sectors even look
at companies, you have to drill down into balance sheets
to make sure you know what you own, particularly as
you sort of go down that risk spectrum.
Speaker 4 (18:26):
New issuance. We've seen a ton of new issuance in
the bond market. I mean, did they call you up
when Morgan standing a Goldman Sachs. They've got new issues,
so they called JP Morgan Asset Management to buy new issues.
Are you guys known as Hey, we'll buy pretty much
anything you got for sale? How do you guys do that?
Speaker 6 (18:41):
Not everything that's for sale.
Speaker 7 (18:42):
We absolutely look at the new issue market, sometimes as
a new issue premium. As there was we started to
see the new issue market sort of begin yesterday. We
would love to buy something with a premium because you're
getting paid to buy that new bond, which is actually
going to be more liquid, and you can get out
of some of your older bonds. We're getting in flows,
so we're invested.
Speaker 6 (19:00):
I mean, I think.
Speaker 7 (19:01):
January tends to be seasonally a higher issuance month, so
we expect more issuance. What I'm looking at is net issuance.
So five years ago, when COVID hit or four five
years ago, you have this big burst of issuance, And
what we're seeing now is that issuance is being refinanced.
If net issuance was picking up a lot, that means
(19:23):
a corporate sector is getting levered up.
Speaker 6 (19:25):
I might hesitate to buy.
Speaker 7 (19:27):
This is still net issuance we think will be actually
lower this year compared to last year. Gross issuance will
be high, but people have two Companies have to refinance,
Investors have to refinance.
Speaker 2 (19:36):
So Tim Cook watches a new episode of Silo tonight
on Apple TV, goes mental over the dystopian destruction of
the world, and he goes out and issues thirty billion
dollars of bonds. Do you want to buy Meg seven paper?
Speaker 7 (19:51):
I like the fundamentals of the Mac seven what I
don't love other spreads. I mean they're you're not getting
paid tight, You're not getting paid. I would rather, Okay,
you can take the same risk if you take it
in securitized PHM.
Speaker 6 (20:04):
That requires you. Does that mean so securitized.
Speaker 2 (20:07):
John Tucker's new iPhone?
Speaker 7 (20:08):
Is that?
Speaker 2 (20:09):
What that is?
Speaker 7 (20:10):
That would be a tranched up structured security with more
consumer risk. I mean there are some corporates in housing,
single family rental. They take all these loans, they put
it in a structure and tranch it.
Speaker 2 (20:24):
But Apple's not doing is securitize, right?
Speaker 7 (20:26):
I have to so I would say I'd like to
take that creditorisk, But where am I getting paid more
than the seventy eighty basis points you're getting paid? So
it's more about what return am I getting versus the
risk I'm taking. And that's why I would say securitize
will screen better than something like max seven though, I
you know the fundamentals are strong.
Speaker 4 (20:46):
Are you getting cash inflows into your bond funds these days?
What are what are your clients doing with allocation?
Speaker 2 (20:51):
Are they putting money into the bond funds?
Speaker 6 (20:53):
We are getting inflows.
Speaker 7 (20:54):
I think the industry is getting I'd like to say,
you know, are we getting more market share? I don't
know where the industries get more in flows. We're absolutely
getting inflows. I think people are looking at all in
yields and looking at their portfolios and saying, well, maybe
we should put some in fixed income. The other thing
they're looking at is cash is giving you four percent
and a bond fund is giving you five six percent.
Speaker 6 (21:16):
Okay, I'm picking up yield, and so I'm moving up there.
Speaker 2 (21:18):
I got twenty five seconds because you've got to move heat,
because Bar's got to sit down. It's in his contract
for two thousand and twenty five. Are you picking up
carpet yet for the new skyscraper? Are they of the
designers in saying, Pria, do you want it in maroon? Yep.
Speaker 7 (21:32):
We are very excited about that building. We can see
it go up in front of us and been inside.
We haven't, but it does look like it's getting there.
In seventy eight months, we're totally it'll be done.
Speaker 6 (21:42):
I hope.
Speaker 2 (21:43):
You know. It's like Silo. You look out the windows
of the cafeteria at Park Avenue and you're not sure
what you're looking at out there. Now we're doing a remote.
Speaker 4 (21:51):
I'm telling you, Jamie Diamond, right now, when that thing opens,
we're doing a remote for.
Speaker 2 (21:54):
Pretty Did you see the view she has? Now? Yeah,
she's important. She's looking at a brick wall like medicine.
Speaker 6 (22:00):
Exactly right now, I'm just looking at the screens. But yes,
it's a beautiful reading the Bloomberg screens.
Speaker 2 (22:04):
Right well, thank you, you can come back, pre amisser,
thank you so much. With JP Morgan, a really important
discussion here earlier on the sharp ratio. If you don't
know what that is, look it up, study it. But
I just can't say enough about the financial media return return,
return return, you know what it's about, the risks along
the way, matters a little bit. That was a clinic
(22:27):
with Priam misery of JP Morgan.
Speaker 1 (22:30):
This is the Bloomberg Surveillance Podcast. Listen live each weekday
starting at seven am Eastern on Applecarplay and Android Auto
with the Bloomberg Business app. You can also listen live
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say Alexa Play Bloomberg eleven thirty.
Speaker 2 (22:47):
Journeys Down Mike Wilson with Morgan Stanley with succeptionally intelligent
views on the market. He has not been a raging bull.
He's been someone who has participated but done it with
a bit of angst and caution as well. There's the
Mike Wilson word. Mike Wilson nimble. If I'm nimble after
(23:08):
five days down in a row or whatever it is,
how nimble am I into Monday? What do I do
now to reposition with confidence? Well?
Speaker 8 (23:19):
Good morning, Tom, Look I think and happy New Year.
I you know, I think what you said earlier is
listening to your chatting about do I get in now?
Do I what do I do? And that's really not
ever the right strategy. The right strategy is to have
something committed at all times and be balanced in your
portfolio so that you can ride out, you know, turbulent.
Speaker 2 (23:40):
Times when they arrive.
Speaker 8 (23:41):
And look, we've had a little bit of a bad
stretch here since the beginning of December, which doesn't really
surprise me given the run that we had, you know,
post election is just a lot of euphor you So
we're having a bit of correction here. I do think
the first half of twenty twenty five will probably be
a bit more challenging, and then the second half sets
(24:02):
up pretty well, assuming that you know, a forecast around
the economy and earnings come through. Everybody knows the market's expensive.
Everybody knows that. You know, we've had and sentiments crazy
right now, and that's just part of the game. I mean,
you have to, you know, you have to deal with that,
and that's why you have diversification in your portfolio.
Speaker 2 (24:23):
You look at factors. I think of Lizae Saunders over
Schwaub as well. Which is the factor now with the
closest Mike Wilson's study.
Speaker 8 (24:33):
Well, we look at all of them obviously, and I
would say it's been the you know, the factor that's
been most in favor has been quality and momentum. And
then recently both of those came off a bit because
that's where people were positioned. Okay, that doesn't mean that
those aren't still the places to be. It just means
that we're having a bit of a pullback in here.
And like I think, I think going into twenty twenty five,
(24:55):
there are some areas that got probably a little bit overdone,
some of the you know, some of the growth areas
that that factor in particular, probably people are paying up
for that too much. I think some of the size factors.
You know, people are rotated probably a little bit too
much into the small cap area and they're giving some
of that back now too. So that's just one sort
of arrow in our in our quiver. And uh, you know,
(25:17):
but but it's definitely something we watch closely.
Speaker 4 (25:20):
Hey, Mike, I'm reading your your more most recent note
about the breath of the market. It gets gets me
to thinking, here, I got the s and P five
twenty four is up like twenty three twenty four percent,
Yet the equal weighted SMP up only like you know,
ten or eleven percent. A what does that tell you?
I mean, is and how concerning is that for you?
Speaker 8 (25:42):
Well, I mean it's not really. Remember, breath is a symptom, okay,
of what's going on, not the cause. And so the
weaker breath tells us that, you know, certain things are
going and we think we've this is something we think
we've gotten very right over the last several years, which
is that it's a very government heavy, you know, economy. Right,
So if you actually look at the private economy, the
(26:02):
private economy has been sort of languishing, whether it's manufacturing
or housing. Some of the consumer goods areas I mean,
they're actually inter recession. They've been inter recession for two years.
And the government, heavy handed former government, whether it be
fiscal or monetary policy, has kind of kept things buoyed
and the market has figured that out. And of course
you have things like AI, you know, maybe weight loss drugs,
(26:25):
you know, certain themes that are very specific to certain areas,
and those areas have carried the day. Okay, So I
think the weak breath is symptomatic of this very unbalanced
economy that we're dealing with.
Speaker 2 (26:37):
Now.
Speaker 8 (26:37):
One thing to point out, however, is the second half
really since September the breath improved tremendously, And actually the
breath in twenty twenty four is still way better than
it was in twenty twenty three. So it's not all bad,
but it is a like I said, it's a symptom
of what I think is a very unbalanced kind of
recovery that is ongoing.
Speaker 4 (26:58):
So so you think about twenty twenty five, Mike, I
think a lot of folks are saying this, Really, if
there's gonna be any performance in twenty twenty five, it
really has to be driven by earnings growth, because maybe
the Fed's going to cut a couple of times, but
I'm not sure how much more than that. Are you
concerned that the earnings leg of this story is maybe
(27:18):
a little ahead of itself.
Speaker 8 (27:21):
Well, I mean, look the markets are they get ahead
of that, right, So the markets, you know, multiples, you know,
rallied because it anticipated in earnings recovery. Of course, this
summer we had some turbulence and then the fall things
picked up again. We think most of the of the
rally in the second half was driven by sort of
liquidity factors, and you know, the sentiment picking up around
the election, just hitting that behind us, you know, the
(27:43):
definitive outcome, et cetera. And so now we're a little
bit ahead of ourselves. So multiples probably have to consolidate
a bit. They for the key for this year is
are we going to get a broadening out in the
earnings participation? Okay, So earnings have been pretty lousy for
most companies over the last two years for the reasons
I mentioned earlier. Okay, interest rates are too high for
most businesses. Government is crowding out a lot of smaller
(28:04):
businesses and even larger businesses. To some extent, the global
economy is still kind of stuck in the mud. So
a lot of multinationals are not doing well. So the
key for next year is can we see a broadening
out of that earning recovery. We think we can, and
that's our job. Our job is to figure out where's
that earning is going to pick up. Financials is one
area where we've gotten more constructive recently because of the
earning story, specifically.
Speaker 2 (28:25):
Mike Wilson with US with Morgan Stanley. If I need
breadth to go higher, Mike Wilson is healthcare is so
dominant that if healthcare doesn't perform, I don't see an
intelligent gain in the market.
Speaker 8 (28:41):
No, I don't think so, Tom. I mean, healthcare has
been languishing for a while. It's been you know, there's
been some big home run winners and as I mentioned earlier,
some of the weight loss drug winners, et cetera. But
healthcare has been languishing for the better part of a
year and a half in a relative basis, and the
market's been fine. So I don't think it's necessary condition
it would be helpful. We'd like to see it happen.
(29:02):
I think for healthcare specifically, you know, with the appointment
of Bobby Kennedy. Well, let's see how that goes. I mean,
I think that the sector is probably gonna remain under
pressure until that confirmation. Hearing interesting, and then I think
from there we might we might get a bit of
a bounce.
Speaker 2 (29:16):
Yeah, Mike Wilson, tell me about the necessary condition for
breath to work. What is the single item that you're
studying with your team to say we have good breadth.
Speaker 8 (29:29):
It's what you said earlier, Tom, we need we need
better breath of earnings revisions. I mean, this has been
a theme of ours for the last two years.
Speaker 2 (29:35):
You know.
Speaker 8 (29:35):
One of the reasons why we weren't maybe as enthusiastic
as others in terms of the rally we've had is
because we thought it would be narrow. In fact, our
forecast suggested that that the earnings recovery itself was driven
by heavy cost cutting in the mag seven and then
of course they had AI, which helped a handful of companies.
You had, you had a few of the themes that
were driving you know, growth, You had government support for infrastructure,
(29:59):
spend things along those lines, and so it was very narrow.
So in order for the market breath, the price breath
to get better you need earnings breath to get better.
I don't think it's that complicated. And that's what we
think should happen in twenty twenty five, assuming once again
that you know, we don't get some policy changes that
are maybe negative for the market in the near term.
And that's really our concern the short term is that
(30:20):
we think some of the policy changes are probably going
to be more negative in the beginning and then more
positive in the second half.
Speaker 4 (30:27):
Hey, Mike, as we all know, the S and P
five hundred over each of the last two years has
grown north of twenty percent.
Speaker 2 (30:33):
I'm not sure.
Speaker 4 (30:34):
Earnings have grown to that extent, are we? What's the
valuation call right here? As you think about the market here.
Speaker 8 (30:42):
Mike, it's expensive. I mean, that's not a great insight.
I mean, this is probably the single biggest miss by
I think everybody in the last twelve months. I don't
recall anyone saying they thought we would trade to twenty
three times earnings. But of course everybody rode the wave,
including us, and you're happy to take it. And so
(31:02):
now you're sitting here twenty two twenty three times earnings
and you're like, oh, you know, well, now we need
to see the earnings actually surprised to the upside. And
you're exactly correct on the fact that earnings have not
been the main driver of the returns. The main driver
of the returns has been equity evaluations, right. And there's
been some specific names that have done a great job
(31:23):
in earnings and those are unique, but overall this has
been probably one of the biggest multiple expansions we've ever
seen coming out of a reception.
Speaker 2 (31:31):
And so what does it do with cash? For Mike Wilson,
for Lisa Shallatt and Morgan Stanley Wealth Management? Is cash
your friend right now?
Speaker 8 (31:41):
Well, I think you know, short duration fixed income in
general has been our friend for the last several years.
Being underweight you know duration, whether that's two years or
one year or cash, they're all doing the same thing
for your portfolio time but giving you a nice four
to five percent return with very little risk. And so
that's a great place to have some of your money
once again, not all of your money. You know, we're
(32:03):
probably five to seven percent in that cash rate region,
which is two years and end, and that's fine. That's
a good place to be when you're getting compensated. I mean,
just recall two years ago you're getting zero on that cash.
Now that's a bad deal, But today you're getting actually
a pretty positive return. And there's a place in every
portfolio for something like that. Just ask Warren Buffett.
Speaker 4 (32:25):
Hey, Mike, it seems like the market's discounting two FED
rate cuts this year.
Speaker 2 (32:32):
Is the market okay with that or do.
Speaker 4 (32:34):
They need to think the market needs to see a
little bit more or do you think the market is
fairly discounting to rate cuts.
Speaker 8 (32:41):
Well, first of all, let me just make an opening
statement about that. I mean, if there's one thing that
the markets have been more wrong about than FED cuts
over the last four years, I like to know what
it is, so you know, I mean, this has been
probably the single biggest whip saw, both on the upside
and the downside, that the markets have gotten wrong. So
I think looking at the bond market right now, what
(33:02):
they're pricing in is a waste of time because they
don't know. The FED doesn't even know what I would say. However,
one of the reasons why the breath is deteriorated, I
talked about that as a symptom the cause of the
breath deterioration. One of them is the fact that rates
have gone up at the back end almost one hundred
basis points since the FED has cut a hundred basis points.
Think about that. That means the term premium has really
(33:22):
gone up sharply, and that's been something we've been focused on.
When the term premium kind of gets up into this range,
you actually now are at risk of having an equity
valuation correction. So we think that's probably the main reason
why the breath has deteriorated here recently, more so than earnings.
And I think, you know, two cuts, sure, why not?
Could we get zero cuts next this year? Possibly could
(33:44):
we get four or five cuts. Maybe it just depends
on how things play out, but I think right now
two cuts is kind of the best guess, and the
bomb market is probably a little bit suspicious about that
based on how the back end straining.
Speaker 2 (33:56):
Mike Wilson, thank you so much, Chief you. S equity
strategist Morgan Stanley enters to be with us.
Speaker 1 (34:07):
This is the Bloomberg Surveillance Podcast. Listen live each weekday
starting at seven am Eastern on Apple Corplay and Android
Auto with the Bloomberg Business app. You can also watch
us live every weekday on YouTube and always on the
Bloomberg terminal.
Speaker 2 (34:22):
Yes, into twenty twenty five. We're extending the Lisa Mantel
hour into a longer day part as they say in
the business, Lisa, what do you have today?
Speaker 5 (34:32):
So younger drinkers. This is apparently according to Financial Times,
they are sipping less French wine. Yes, they're opting for
different beverages, rose beer, spirits, cutting out alcohol altogether. So
I'd like to go to Paris correspondent Tom Keene and
find out were they sipping less French wine in Perry.
Speaker 2 (34:52):
Yeah, I think they are. It's in the zeitgeist over there.
They're very concerned about it. And what's fascinating is selected
res staurant owners talking about how people are just flat
out drinking less. Yes, and you know, I did a
shout out on Twitter. John Ferrell absolutely nailed the impact
(35:13):
of this so zebic thing overall. Yeah, plus three days
got six percent. People are eating six percent less food
and it curbs your alcohol.
Speaker 5 (35:23):
Yeah, and drinking alcohol that a lot of sugar, So
are trying to stay away from I mean, you know,
especially wine, especially red wine. Pro tip and that's yes.
Speaker 2 (35:32):
You have a martini maybe two, and these are smaller martinis.
These are fifty mad men martinis. And then to cut
back on alcohol, the third martini, you have a reverse martini,
which is a little bit of gin but with vermouth.
That's how you that's a measured consumption declined.
Speaker 6 (35:51):
Very interesting.
Speaker 2 (35:52):
Interesting, But the red is a big no.
Speaker 5 (35:54):
But and it's it's causing a lot of people to change.
Like a lot of the producers. They have to focus
on higher quality wines, right because the younger generations like
certified organic wines, and then they're offering reds like whites,
low alcohol wines, but also making the low alcohol wine.
It's more expensive, so now the producer are having over
more money to make these low alcohol wines.
Speaker 4 (36:15):
We're drinking barber Escos now, that's what we're in. We're
drinking the barber Sco than Nebiola.
Speaker 2 (36:20):
Grape coming at it.
Speaker 4 (36:21):
Listen to you got turned on to that a couple
of years ago, and that's what we're drinking.
Speaker 2 (36:25):
I was one Morgan David, That's where I was.
Speaker 5 (36:30):
Next America apparently getting better at getting things done. Workers
and companies are getting more productive. Okay, this is Labor
Department data. Productivity rows two percent in the third quarter
compared to a year earlier. But the Wall Street Journal
says the reason why a lot of business owners using
AI to help write things like marketing plans, email social
media posts the influx of immigration. They say immigrants often
(36:54):
take those manual intensive jobs, so that allows other workers
to move up to these highly skilled roles. But also,
you know the QR codes that makes things you know
better because you have papermint instead of paper menus at restaurants.
I'm sure you've seen that.
Speaker 2 (37:06):
And if you do, hate it.
Speaker 3 (37:09):
Hate with.
Speaker 2 (37:12):
Why are you doing the Sparta is actually listening this morning.
Well it works like two days a week exactly. Sparta's
listening and you're talking productivity, Yes.
Speaker 5 (37:21):
Faster productivity. You know, productivity grows the faster the economy
can grow.
Speaker 2 (37:25):
So Tucker's got to get with it. Yes, the John
Tucker next.
Speaker 5 (37:32):
And the head of YouTube I know you're gonna like
this one is saying that artificial intelligence and online influencers
are going to help supercharge their growth in the coming years.
So this is Neil Mohan. He's telling the Financial Times
they're wrapping up AI spending. So they have two experimental
features from deep Mind that's like their AI unit it's
called dream screen and dream Track, and they generate videos
(37:54):
and music from text, so that's one thing they can do.
They also auto dub, which means that they train to
English language videos into eight other languages. And they're saying
it's going to help with online creators because that's their
big draw. Hundreds of millions of gen Z fans are
from these online creators, so that's really helping, you know,
to get their their your descriptions.
Speaker 2 (38:23):
That's a productivity that's PROTEI.
Speaker 5 (38:33):
That is Oh and since yesterday we were talking about
Apple TV Plus, please this story stood out to me.
Apple's actually offering a free all access pass to Apple
TV Plus this weekend today through Sunday, so you can
test it out, try it out, see if you like it.
And any device that supports Apple TV you have to
want to, you know, sign in with your Apple I
(38:54):
D so all those restrictions, but you can try it
out for free if you want, and they got to
get those subscribers.
Speaker 2 (39:00):
What do you think of this? I mean, where are
we in the streaming streaming?
Speaker 4 (39:03):
I mean it's obviously Netflix hugely profitable, Disney finally now profitable,
and some of the other players are going becoming profitable,
so again more and more contents going there, Tom And
the biggest issue.
Speaker 2 (39:15):
Is live sports.
Speaker 4 (39:16):
More and more live sports you're finding on the streaming
services here, including the football.
Speaker 2 (39:20):
Games coming up state Notre Dames on ESPN.
Speaker 4 (39:23):
Yeah, we're getting some The wild card games for the
NFL were on Amazon Prime. So if you don't have
Amazon Prime, you need to talk to somebody in your
extended family and figure out if somebody's got a membership there,
because that's where you're going to find the NFL wild
card games. Figure, let's go on streaming.
Speaker 2 (39:41):
I'm hooked on Silo and there's some disagreement in the household.
Some people think it's slow and doesn't move fast enough.
Speaker 6 (39:49):
I have to agree with that.
Speaker 5 (39:51):
I might agree with that person in your household. My
husband loves it, loves it, loves it.
Speaker 2 (39:56):
Yeah, and I'm finding it just magisterial land. Apple TV
is they call it dad TV, and I could see
why is that? Okay, it's that Netflix dad TV? I
don't know.
Speaker 4 (40:12):
Well there, I mean, the talent's getting paid. They're making
all these things for Apple TV and Paramount and all
the streaming stuff and the A list talents they're getting paid,
so like, I'll table stuff out on.
Speaker 2 (40:23):
YouTube, lid chat, ask Lisa Costco.
Speaker 5 (40:26):
Road trip to sleep No Costco road trip. My paycheck
went there last week and I have done.
Speaker 2 (40:33):
Thank you so much for the newspapers.
Speaker 1 (40:35):
This is the Bloomberg Surveillance podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live each weekday,
seven to ten am Easter and on Bloomberg dot com,
the iHeartRadio app tune In, and the Bloomberg Business app.
You can also watch us live every weekday on YouTube
(40:56):
and always on the Bloomberg terminal
Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg
Surveillance Podcast. Catch us live weekdays at seven am Eastern
on Apple CarPlay or Android Auto with the Bloomberg Business App.
Listen on demand wherever you get your podcasts, or watch
(00:25):
us live on YouTube.
Speaker 2 (00:27):
Two years ago, he used my economist to the yere.
He had an optimism about the American economy. Admitst recession
at gloom. Neil Doutta takes a continued victory lap. He's
with Renaissance at Macro this morning, stop by the FED show.
He was so wound up about the FED meeting was
he he called my people and said, I demand to
come on. Okay, joining us now because he demanded to
(00:49):
come on, Neil dota. Neil, let's go back to the
last FED meeting. Why did you go mental? Why did
you say I gotta come on?
Speaker 3 (00:55):
The FED decides, Well, thanks for having me on, Tom,
Happy New Year. Well, I would just say that it
was a complete one eighty from the meeting right before
that when they said they wouldn't prejudge policy outcomes right
after the election, and what do they do in December?
They prejudged policy outcomes before anything even happened, basically taking
(01:19):
out insurance some potential tariffs before you know, Trump even
takes the oath of office.
Speaker 2 (01:28):
I thought that was quite revealed.
Speaker 3 (01:30):
So, you know, this idea that the fedily responding to
the data and adjusting their forecasts, I don't really think
that washes if you look at how much the data
surprised on the upside with respect to March. I mean,
it would make more sense to push off raid cuts
at that meeting, but in December, you know, rasing two
(01:50):
cuts given the forecast revisions I thought was a little
bit much. So this was really about a balance of
risks story that they explicitly said that wouldn't do.
Speaker 2 (02:01):
The higher yields and the attendance strong dollar. Does that
force or cause a slowdown?
Speaker 3 (02:09):
I think so. I mean, when you look at the
nature of why interest rates had been going up, it
has very little to do with a rerating of nominal
growth expectations. I mean, if you look at the data,
you know, the your own Bloomberg Surprise Index has been
weakening in recent weeks, so the economic data has been slowing.
You know, if you look at inflation expectations, both of
surveys of consumers and businesses, they've been falling. So you know,
(02:32):
my sense is that this has something to do that's
not related to the data. I think it has to
do with term premiums. Maybe that's a function of QT.
Maybe that's a function of what's going on globally. You're
seeing rates go up in Japan for example. You know,
maybe there's a you know, risk around deficits and so
you know there's going to be more treasury issues relative
(02:52):
to the demand for treasuries. I mean, these are all
things that push up the term premium, but it doesn't
really have to do with growth expectations. And that the
term premium is going up, that's a tightening of financial conditions, right,
I mean, the declining term premium was a big driver
of you know, sort of risk appetite, you know, stronger
equity private you know in recent decades, frankly, and you know,
(03:15):
to the extent that's going away, that's going to be
a headwind for stocks.
Speaker 4 (03:19):
Neil, Neil, I'm at an equity guy. All I know
about the bond market is bond prices go up, yields
go down.
Speaker 2 (03:24):
That's mailed that.
Speaker 4 (03:26):
But I got my fetter reserved cutting interest rates. Why
are my yields in this bond market thing going up?
I thought the yield should be going down.
Speaker 2 (03:36):
Yeah, I mean it's a good question.
Speaker 3 (03:38):
I think. You know, obviously some rates are coming down.
Some private sector borrowing rates have been coming down alongside
the FEEDI using so for example, helock rates have been
coming down, Auto loan rates have been coming down. You know,
prime rates obviously have been coming down because those are
very much keyed off what the FED is doing. But
(03:59):
you know, things like more rates, those have been high elevated,
and yeah, and as I mentioned, I mean that's you know,
to some extent, it's it's out of the fed's control.
I mean, I think one reason why they're going up
is because, you know, at some level, the economy has
been doing a little bit better, at least initially after
(04:19):
the September meeting, somewhat better than expected. But I don't
think that goes far enough to explain why interest rates
have backed up. So I think that's part of the reason,
but it's not really the bulk of the reason.
Speaker 4 (04:30):
What's the FED focusing on here, Neil, do you think
is it? Is it the absolute inflation number? Is it
the labor market? What is the FED focusing on these days?
Speaker 2 (04:40):
Do you think? Well?
Speaker 3 (04:42):
I mean, I think to the extent that the September
meeting was a focus on the labor market, I think
December one kind of put inflation back in the driver's seat.
I mean, they're clearly all you have to do is
go through the document that they release with, you know,
with the Summary of economic projections, and go to the
balance of risks. Right, you have a overwhelming majority of
(05:04):
participants on the f MC seeing that the balance of
risk to core inflation are skewed to the upside. It
completely flipped from where they were in September. So I
think the real life of inflation data has taken on
a lot more importance than it did, you know, maybe
three months ago.
Speaker 2 (05:20):
And Neil done it with the Renaissance Macro. He'll be
with us for the entire half hour. I do want
to point out that he works with Jeffrey Degraph, who
had a better than good two thousand and four. We're
hoping to get mister mister de Graph is very tough
to me, you know, it sounds like it we can
get done anytime we want. Jeff to Graph is just
like absolutely impossible to get what do you learn from
(05:42):
Jeff to graph right now, Neil dout it when you
tie in is world class equity coverage into your call
of a slowing economy, how do you synthesize those two?
Speaker 3 (05:52):
Well, I mean I would say that the market has
been is over sold, you know, so that's you know,
reasonably good setup going in uh, you know, into the
new year, so you're sort of probably due for a bounce.
But I do think interest rates up at these levels
concern him, and so you know, that's something to keep
in and keep in mind, you know. For my own part,
(06:14):
I mean I would say that, you know, really, to me,
the big the big story, frankly, is the performance of housing, right.
I mean, this is why you know, you made Economist
of the Year back in twenty twenty three.
Speaker 2 (06:26):
I didn't get that. I didn't I didn't get that back.
Speaker 3 (06:28):
I didn't get it for twenty twenty four time, unfortunately.
But you know, I would just say that one of
the reasons why I made that, made the calls I
made in twenty for twenty you know, twenty twenty three,
is because at the end, you know, two years ago,
at the end of twenty twenty two, you know, the
FED was dialing back kind of the hikes, and housing
(06:49):
stocks were outperforming. So that's kind of a you know,
an interesting Now you have the FED cutting and housing
stocks are underperforming, so you know, I think that the
underperformance of home building is I think an important kind
of Yeah, Neil, I.
Speaker 2 (07:03):
Got a fiery response out on YouTube and the housing market.
What is your insight of where the housing market goes
for twenty twenty five.
Speaker 3 (07:15):
Well, I think it's not going to look particularly good
as we go into the spring selling season because mortgage
rates are running plose to seven percent. I mean, with
the labor markets cooling, the math doesn't work for a
lot of people. And I think that's the primary issue
right now with respect to housing.
Speaker 2 (07:32):
I mean, if you look at.
Speaker 3 (07:33):
Home building, new builders, new housing, if you look at
single family homes for sale that have been completed, that
number is up over fifty percent against last year. So
there's slack building in the new housing market. I think
Paul mentioned sort of the increasing inventory situation in parts
of the South and.
Speaker 2 (07:55):
The West.
Speaker 3 (07:56):
I mean, remember that's like the meat of the market,
right so if inventories are going up in those places,
that means that construction is going to be coming down. Yeah,
that's where most construction happens.
Speaker 2 (08:07):
Frankly, you know this is important. Eruption.
Speaker 3 (08:11):
Employment is at risk.
Speaker 2 (08:12):
Now I want to go to Neldata and Paul Sweeney
Lisa jump in on this. This is important. Isn't where
we live in aberration? Paul Sweeney like, where we live
isn't normal?
Speaker 4 (08:23):
No, because I think the density we have here in
the metro New York area is so crazy. That and
Lisa's looking for a new are you looking for.
Speaker 2 (08:32):
Six thousand square Now that's the backyard.
Speaker 5 (08:35):
But it's like getting out bid by these offers. That
is crazy. Like a house goes on the market for
six hundred thousand in New Jersey and.
Speaker 2 (08:41):
It sells for seven forty. It's me and it's like,
how do you get it?
Speaker 4 (08:45):
But that's not the rest of the world here, So hey, Neil,
so let's stop back. You know, we got the labor market,
the real estate market. How's the consumer doing out there?
How do you think about the consumer here in twenty
twenty five.
Speaker 3 (08:59):
I mean, I think it's going to be tough to
sustain the kind of consumption pace we saw last year, right,
I mean, if the labor markets are slowing and wage
growth is cooling, which I think is clearly happening because
you know, things like hiring rates are down, puts rates
are down. You know, there's not really much need for
firms to be paying up and bidding up the wages
of their workers. So with the slack in the labor market,
(09:20):
that's you know, slowly building. I mean, you know, the
labor market's not collapsing, but it's hard to be bullish
on the consumer given that environment. And I also think
there's probably a bit of an asymmetry, right, I mean,
you know, the thing that's been supporting I think consumption
has been you know, rising wealth, you know, sort of
equity prices going up, home price is going up. And
(09:41):
to the extent that that doesn't continue, I mean, we've
seen some slowing in stocks. I mean there's probably an
asymmetry there right where modest slowing gets you maybe an
outsized slow down in right.
Speaker 4 (09:52):
So that shape and K shaped Tokany, here's.
Speaker 2 (09:54):
The second time you've mentioned I like it. It makes.
Speaker 4 (09:58):
Exactly the K shaped to Kanya. It kind of makes
sense to me. So what should the FED do given that? Here?
I mean again, I guess if you look at the
warp function w I RP go on the Bloomberg Terminal
suggests maybe a couple of rate cuts this year. Should
the Fed do more?
Speaker 2 (10:13):
Do you think?
Speaker 3 (10:16):
I mean, I think they will do more because I
think the data is going to slow and inflation. I mean,
to me, the most notable thing that's happened, frankly is
the slowing in rental in rental inflation, housing rental inflation.
That's been really the main shortfall relative to the Fed's
longer run inflation objectives, and now that appears to be
(10:38):
working right, I mean in the favor of disinflation. So
I think that's important. Obviously we're all watching what's going
on with the dollar, but that's going to weigh on
the prices for imported goods, I think so. No, I
think the Fed's going to be ending up. If I
had to pick, I'd say that they're going to cut
more than twice. So I think that the front the
(11:00):
Yeld Curve is a pretty good place to park your
money at the moment.
Speaker 2 (11:04):
Neil da I wanted to go there in a dollar
kitschooks joining us in about two hours, folks with socchin
and you're just brilliant, but let's let's do let's talk
to foreign exchange trader Neil Dutta here as well. Are
the dollar movements Neil Dotta nonlinear or linear like d
x y one O seven, one o eight, one oh nine,
(11:25):
or is there a Neil Doutta tip point where things
begin to unravel?
Speaker 3 (11:31):
I mean, I think there's probably something to the idea
that you know, at a certain point, like more things
start breaking. But you know, let's I mean, when you
have like one percent currency moves, that's a big deal, right,
I mean, so I think the dollar is concerning across
multiple dimensions. I mean, Number one, obviously, it weighs on
US exporters, particularly manufacturing.
Speaker 2 (11:50):
That's number one.
Speaker 3 (11:51):
Number two, going back to the equity market discussion, it
weighs on earnings, right, particularly for tech companies that are
global in nature, and because that's been a big driver
of US stock prices. I think the fact that the
dollar has been strengthening is going to weigh on earnings
and by extension way on stocks. And I think it
(12:11):
matters for the rest of the world, obviously, particularly emerging markets,
because they have lots of dollar denominated debts, so the
cost of financing that goes up, and then you have
to start worrying about balance of payment problems in em
which obviously of their slowing that creates a negative feedback loop,
pushing the dollar up even more. So you know, I think,
(12:32):
you know, because of safe haven consideration. So yeah, I
think it's concerning. But again, that's not really a world
where the Fed can just kind of sit back in
its chair and say, oh, we're gonna cut twice this year, right,
So to me, the dollar represents an unambiguous tightening of
financial market connections.
Speaker 2 (12:52):
Neil Donna, thank you so much. Here's you valuable generous time.
Here on a Friday morning to start the year.
Speaker 1 (12:58):
Of you're listening to the Bloomberg Surveillance Podcast. Catch us
live weekday afternoons from seven to ten am Eastern Listen
on Applecarplay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 2 (13:16):
A bond person comes in, Paul, you nailed early. What
did you say?
Speaker 6 (13:19):
Price up up, yields down, nail down.
Speaker 2 (13:22):
Okay, there we go, We're not going to do that.
Joining us now. Pria isra with a Friday get the
year started discussion, and everybody's sitting in their kitchen this
weekend discussing how much they've lost betting on football and
also their portfolio. You and I are going to talk
Jensen trainer sharp right now. Adults in the business say
(13:46):
how much did I make? But how much risk did
I make making what I made? And William Sharp out
at Stanford identified this explain to mere mortals worldwide what
the sharp rate is and why it matters.
Speaker 6 (14:02):
I love that you're talking about sharp ratio.
Speaker 2 (14:04):
It's great you and I can bring up bar conversation
on two people here.
Speaker 6 (14:09):
I love it.
Speaker 2 (14:10):
They're sitting at their their table this weekend and they're like,
why are we not making money? Sharp ratio?
Speaker 3 (14:16):
Go.
Speaker 7 (14:17):
So there's a lot of well I should start with
happy new Year, thank you for having me.
Speaker 2 (14:21):
I have children.
Speaker 7 (14:22):
Continue. The focus typically is on the return. It's what
return am I getting? You're getting that return taking risks
and you know, but you know you're talking about have
we not made money?
Speaker 6 (14:34):
Enough money?
Speaker 7 (14:35):
I think bond people who thought the Fed starting to
cut trades, and that was where we were a year ago.
The Fed's going to cut trades. They typically cut two
hundred three hundred basis points. You're gonna make a lot
of money in bonds. I don't think, well that that's
where they lost money. They put money in stocks. They
did well. We're in a soft landing. Pretty much every
risk asset did well. Credit did great. Now you take
(14:56):
stock and look at the uncertainty. You have the FED
with an army of PhDs saying we.
Speaker 6 (15:02):
Have a lot of uncertainty.
Speaker 7 (15:03):
We don't know how to manage the cyclical and the structure.
So we're pausing. And so that's where that shop comes in.
Let's look at the risk and return. So let's look
at the return relative to the risk, which is what
you will you do to sharp ratio. That's where I
think fixed income. You're getting six seven percent in high
quality fixed income with not a lot of risk because
(15:24):
I don't think exactly, and so that your denominator, if
it's lower, suddenly fixed income makes a lot of sense.
Speaker 2 (15:30):
And I'm one more than one question, folks, and Sweeney's
going to bring us back to normal. You have a
superior sharp ratio and the JP Morgan core bond versus
your peers and versus the index. That's a one year
sharp ratio. There's a three year look back, there's a
five year lookback. I'm wedded to the three year sharp ratio.
(15:50):
Folks of whatever four oh one k plan you've got,
which duration is the most value to prea miser?
Speaker 7 (15:57):
So I would say I think I do wonder Bob Michael,
I would say that we look at five year, ten
year consistency is such a big part of it's our DNA.
So just making sure that we can consistently outperform it.
Speaker 6 (16:10):
You know, how do you do this?
Speaker 7 (16:12):
You diversify a lot so that the risks are not
You're not, you know, wedded to one particular risk, and
you do your research. In a high cost of capital world,
dispersion is going to be high, meaning some sectors will
do well and others will not. And I wish I
could say we know exactly which sectors are going to
do well. If you diversify well and you do that research,
(16:33):
that's where you get that superior shock.
Speaker 2 (16:34):
You'll sharp ninety years old out of stay. Is that right? Yeah? Okay, good,
bring us back to some sense of normal.
Speaker 4 (16:42):
Twenty twenty four fixed income investors got paid to take
some risk, high yield leverage loans by far the best performers.
Is that going to spill over into twenty twenty five
do you.
Speaker 7 (16:53):
Think I think so, and yes, why let's look at fundamentals.
Fundamentals of the corporate sector is still very wrong.
Speaker 6 (17:00):
It was strong a year ago. It's still strong.
Speaker 7 (17:02):
You're looking at strong balance sheets, strong business models, earnings
are decent. We're also looking at what a company is
doing with their debt. Are they re levering up? That
would make me a little nervous. Mostly they're not. I
will say, since you talk about high yield and leverage,
I mean high yield default rates including the restructuring, has
been one and a half percent. It's low leverage loans
a little higher. So I think you have to be
(17:24):
careful what you buy. We like high quality, high yel
we like parts of leverage loans. I think fundamentals are strong.
Then let's look at technicals. Technical is extremely strong. People
are looking at the returns they had in equities and
they're saying, maybe we should rebalance.
Speaker 6 (17:38):
You look at fixed income. If you're getting or in.
Speaker 7 (17:40):
High yeld, you're getting seven eight percent with lower volatility.
That's why we're seeing continued inflows into bond funds. So
I would say technical fundamental very positive for fixed income.
I think you have another good year as long as
that soft landing is maintained.
Speaker 4 (17:54):
Are there some industries sectors that are attractive to that
screen well for you guys in terms of maybe taking
some credit risk.
Speaker 6 (18:00):
So I would say financials is an area that we like.
Speaker 7 (18:03):
Utilities is another one in investment grade within high yield
as parts of media and telecom that have been beaten
up and they've actually started to perform well. And that's
where but I would say rather than sectors even look
at companies, you have to drill down into balance sheets
to make sure you know what you own, particularly as
you sort of go down that risk spectrum.
Speaker 4 (18:26):
New issuance. We've seen a ton of new issuance in
the bond market. I mean, did they call you up
when Morgan standing a Goldman Sachs. They've got new issues,
so they called JP Morgan Asset Management to buy new issues.
Are you guys known as Hey, we'll buy pretty much
anything you got for sale? How do you guys do that?
Speaker 6 (18:41):
Not everything that's for sale.
Speaker 7 (18:42):
We absolutely look at the new issue market, sometimes as
a new issue premium. As there was we started to
see the new issue market sort of begin yesterday. We
would love to buy something with a premium because you're
getting paid to buy that new bond, which is actually
going to be more liquid, and you can get out
of some of your older bonds. We're getting in flows,
so we're invested.
Speaker 6 (19:00):
I mean, I think.
Speaker 7 (19:01):
January tends to be seasonally a higher issuance month, so
we expect more issuance. What I'm looking at is net issuance.
So five years ago, when COVID hit or four five
years ago, you have this big burst of issuance, And
what we're seeing now is that issuance is being refinanced.
If net issuance was picking up a lot, that means
(19:23):
a corporate sector is getting levered up.
Speaker 6 (19:25):
I might hesitate to buy.
Speaker 7 (19:27):
This is still net issuance we think will be actually
lower this year compared to last year. Gross issuance will
be high, but people have two Companies have to refinance,
Investors have to refinance.
Speaker 2 (19:36):
So Tim Cook watches a new episode of Silo tonight
on Apple TV, goes mental over the dystopian destruction of
the world, and he goes out and issues thirty billion
dollars of bonds. Do you want to buy Meg seven paper?
Speaker 7 (19:51):
I like the fundamentals of the Mac seven what I
don't love other spreads. I mean they're you're not getting
paid tight, You're not getting paid. I would rather, Okay,
you can take the same risk if you take it
in securitized PHM.
Speaker 6 (20:04):
That requires you. Does that mean so securitized.
Speaker 2 (20:07):
John Tucker's new iPhone?
Speaker 7 (20:08):
Is that?
Speaker 2 (20:09):
What that is?
Speaker 7 (20:10):
That would be a tranched up structured security with more
consumer risk. I mean there are some corporates in housing,
single family rental. They take all these loans, they put
it in a structure and tranch it.
Speaker 2 (20:24):
But Apple's not doing is securitize, right?
Speaker 7 (20:26):
I have to so I would say I'd like to
take that creditorisk, But where am I getting paid more
than the seventy eighty basis points you're getting paid? So
it's more about what return am I getting versus the
risk I'm taking. And that's why I would say securitize
will screen better than something like max seven though, I
you know the fundamentals are strong.
Speaker 4 (20:46):
Are you getting cash inflows into your bond funds these days?
What are what are your clients doing with allocation?
Speaker 2 (20:51):
Are they putting money into the bond funds?
Speaker 6 (20:53):
We are getting inflows.
Speaker 7 (20:54):
I think the industry is getting I'd like to say,
you know, are we getting more market share? I don't
know where the industries get more in flows. We're absolutely
getting inflows. I think people are looking at all in
yields and looking at their portfolios and saying, well, maybe
we should put some in fixed income. The other thing
they're looking at is cash is giving you four percent
and a bond fund is giving you five six percent.
Speaker 6 (21:16):
Okay, I'm picking up yield, and so I'm moving up there.
Speaker 2 (21:18):
I got twenty five seconds because you've got to move heat,
because Bar's got to sit down. It's in his contract
for two thousand and twenty five. Are you picking up
carpet yet for the new skyscraper? Are they of the
designers in saying, Pria, do you want it in maroon? Yep.
Speaker 7 (21:32):
We are very excited about that building. We can see
it go up in front of us and been inside.
We haven't, but it does look like it's getting there.
In seventy eight months, we're totally it'll be done.
Speaker 6 (21:42):
I hope.
Speaker 2 (21:43):
You know. It's like Silo. You look out the windows
of the cafeteria at Park Avenue and you're not sure
what you're looking at out there. Now we're doing a remote.
Speaker 4 (21:51):
I'm telling you, Jamie Diamond, right now, when that thing opens,
we're doing a remote for.
Speaker 2 (21:54):
Pretty Did you see the view she has? Now? Yeah,
she's important. She's looking at a brick wall like medicine.
Speaker 6 (22:00):
Exactly right now, I'm just looking at the screens. But yes,
it's a beautiful reading the Bloomberg screens.
Speaker 2 (22:04):
Right well, thank you, you can come back, pre amisser,
thank you so much. With JP Morgan, a really important
discussion here earlier on the sharp ratio. If you don't
know what that is, look it up, study it. But
I just can't say enough about the financial media return return,
return return, you know what it's about, the risks along
the way, matters a little bit. That was a clinic
(22:27):
with Priam misery of JP Morgan.
Speaker 1 (22:30):
This is the Bloomberg Surveillance Podcast. Listen live each weekday
starting at seven am Eastern on Applecarplay and Android Auto
with the Bloomberg Business app. You can also listen live
on Amazon Alexa from our flagship New York station, Just
say Alexa Play Bloomberg eleven thirty.
Speaker 2 (22:47):
Journeys Down Mike Wilson with Morgan Stanley with succeptionally intelligent
views on the market. He has not been a raging bull.
He's been someone who has participated but done it with
a bit of angst and caution as well. There's the
Mike Wilson word. Mike Wilson nimble. If I'm nimble after
(23:08):
five days down in a row or whatever it is,
how nimble am I into Monday? What do I do
now to reposition with confidence? Well?
Speaker 8 (23:19):
Good morning, Tom, Look I think and happy New Year.
I you know, I think what you said earlier is
listening to your chatting about do I get in now?
Do I what do I do? And that's really not
ever the right strategy. The right strategy is to have
something committed at all times and be balanced in your
portfolio so that you can ride out, you know, turbulent.
Speaker 2 (23:40):
Times when they arrive.
Speaker 8 (23:41):
And look, we've had a little bit of a bad
stretch here since the beginning of December, which doesn't really
surprise me given the run that we had, you know,
post election is just a lot of euphor you So
we're having a bit of correction here. I do think
the first half of twenty twenty five will probably be
a bit more challenging, and then the second half sets
(24:02):
up pretty well, assuming that you know, a forecast around
the economy and earnings come through. Everybody knows the market's expensive.
Everybody knows that. You know, we've had and sentiments crazy
right now, and that's just part of the game. I mean,
you have to, you know, you have to deal with that,
and that's why you have diversification in your portfolio.
Speaker 2 (24:23):
You look at factors. I think of Lizae Saunders over
Schwaub as well. Which is the factor now with the
closest Mike Wilson's study.
Speaker 8 (24:33):
Well, we look at all of them obviously, and I
would say it's been the you know, the factor that's
been most in favor has been quality and momentum. And
then recently both of those came off a bit because
that's where people were positioned. Okay, that doesn't mean that
those aren't still the places to be. It just means
that we're having a bit of a pullback in here.
And like I think, I think going into twenty twenty five,
(24:55):
there are some areas that got probably a little bit overdone,
some of the you know, some of the growth areas
that that factor in particular, probably people are paying up
for that too much. I think some of the size factors.
You know, people are rotated probably a little bit too
much into the small cap area and they're giving some
of that back now too. So that's just one sort
of arrow in our in our quiver. And uh, you know,
(25:17):
but but it's definitely something we watch closely.
Speaker 4 (25:20):
Hey, Mike, I'm reading your your more most recent note
about the breath of the market. It gets gets me
to thinking, here, I got the s and P five
twenty four is up like twenty three twenty four percent,
Yet the equal weighted SMP up only like you know,
ten or eleven percent. A what does that tell you?
I mean, is and how concerning is that for you?
Speaker 8 (25:42):
Well, I mean it's not really. Remember, breath is a symptom, okay,
of what's going on, not the cause. And so the
weaker breath tells us that, you know, certain things are
going and we think we've this is something we think
we've gotten very right over the last several years, which
is that it's a very government heavy, you know, economy. Right,
So if you actually look at the private economy, the
(26:02):
private economy has been sort of languishing, whether it's manufacturing
or housing. Some of the consumer goods areas I mean,
they're actually inter recession. They've been inter recession for two years.
And the government, heavy handed former government, whether it be
fiscal or monetary policy, has kind of kept things buoyed
and the market has figured that out. And of course
you have things like AI, you know, maybe weight loss drugs,
(26:25):
you know, certain themes that are very specific to certain areas,
and those areas have carried the day. Okay, So I
think the weak breath is symptomatic of this very unbalanced
economy that we're dealing with.
Speaker 2 (26:37):
Now.
Speaker 8 (26:37):
One thing to point out, however, is the second half
really since September the breath improved tremendously, And actually the
breath in twenty twenty four is still way better than
it was in twenty twenty three. So it's not all bad,
but it is a like I said, it's a symptom
of what I think is a very unbalanced kind of
recovery that is ongoing.
Speaker 4 (26:58):
So so you think about twenty twenty five, Mike, I
think a lot of folks are saying this, Really, if
there's gonna be any performance in twenty twenty five, it
really has to be driven by earnings growth, because maybe
the Fed's going to cut a couple of times, but
I'm not sure how much more than that. Are you
concerned that the earnings leg of this story is maybe
(27:18):
a little ahead of itself.
Speaker 8 (27:21):
Well, I mean, look the markets are they get ahead
of that, right, So the markets, you know, multiples, you know,
rallied because it anticipated in earnings recovery. Of course, this
summer we had some turbulence and then the fall things
picked up again. We think most of the of the
rally in the second half was driven by sort of
liquidity factors, and you know, the sentiment picking up around
the election, just hitting that behind us, you know, the
(27:43):
definitive outcome, et cetera. And so now we're a little
bit ahead of ourselves. So multiples probably have to consolidate
a bit. They for the key for this year is
are we going to get a broadening out in the
earnings participation? Okay, So earnings have been pretty lousy for
most companies over the last two years for the reasons
I mentioned earlier. Okay, interest rates are too high for
most businesses. Government is crowding out a lot of smaller
(28:04):
businesses and even larger businesses. To some extent, the global
economy is still kind of stuck in the mud. So
a lot of multinationals are not doing well. So the
key for next year is can we see a broadening
out of that earning recovery. We think we can, and
that's our job. Our job is to figure out where's
that earning is going to pick up. Financials is one
area where we've gotten more constructive recently because of the
earning story, specifically.
Speaker 2 (28:25):
Mike Wilson with US with Morgan Stanley. If I need
breadth to go higher, Mike Wilson is healthcare is so
dominant that if healthcare doesn't perform, I don't see an
intelligent gain in the market.
Speaker 8 (28:41):
No, I don't think so, Tom. I mean, healthcare has
been languishing for a while. It's been you know, there's
been some big home run winners and as I mentioned earlier,
some of the weight loss drug winners, et cetera. But
healthcare has been languishing for the better part of a
year and a half in a relative basis, and the
market's been fine. So I don't think it's necessary condition
it would be helpful. We'd like to see it happen.
(29:02):
I think for healthcare specifically, you know, with the appointment
of Bobby Kennedy. Well, let's see how that goes. I mean,
I think that the sector is probably gonna remain under
pressure until that confirmation. Hearing interesting, and then I think
from there we might we might get a bit of
a bounce.
Speaker 2 (29:16):
Yeah, Mike Wilson, tell me about the necessary condition for
breath to work. What is the single item that you're
studying with your team to say we have good breadth.
Speaker 8 (29:29):
It's what you said earlier, Tom, we need we need
better breath of earnings revisions. I mean, this has been
a theme of ours for the last two years.
Speaker 2 (29:35):
You know.
Speaker 8 (29:35):
One of the reasons why we weren't maybe as enthusiastic
as others in terms of the rally we've had is
because we thought it would be narrow. In fact, our
forecast suggested that that the earnings recovery itself was driven
by heavy cost cutting in the mag seven and then
of course they had AI, which helped a handful of companies.
You had, you had a few of the themes that
were driving you know, growth, You had government support for infrastructure,
(29:59):
spend things along those lines, and so it was very narrow.
So in order for the market breath, the price breath
to get better you need earnings breath to get better.
I don't think it's that complicated. And that's what we
think should happen in twenty twenty five, assuming once again
that you know, we don't get some policy changes that
are maybe negative for the market in the near term.
And that's really our concern the short term is that
(30:20):
we think some of the policy changes are probably going
to be more negative in the beginning and then more
positive in the second half.
Speaker 4 (30:27):
Hey, Mike, as we all know, the S and P
five hundred over each of the last two years has
grown north of twenty percent.
Speaker 2 (30:33):
I'm not sure.
Speaker 4 (30:34):
Earnings have grown to that extent, are we? What's the
valuation call right here? As you think about the market here.
Speaker 8 (30:42):
Mike, it's expensive. I mean, that's not a great insight.
I mean, this is probably the single biggest miss by
I think everybody in the last twelve months. I don't
recall anyone saying they thought we would trade to twenty
three times earnings. But of course everybody rode the wave,
including us, and you're happy to take it. And so
(31:02):
now you're sitting here twenty two twenty three times earnings
and you're like, oh, you know, well, now we need
to see the earnings actually surprised to the upside. And
you're exactly correct on the fact that earnings have not
been the main driver of the returns. The main driver
of the returns has been equity evaluations, right. And there's
been some specific names that have done a great job
(31:23):
in earnings and those are unique, but overall this has
been probably one of the biggest multiple expansions we've ever
seen coming out of a reception.
Speaker 2 (31:31):
And so what does it do with cash? For Mike Wilson,
for Lisa Shallatt and Morgan Stanley Wealth Management? Is cash
your friend right now?
Speaker 8 (31:41):
Well, I think you know, short duration fixed income in
general has been our friend for the last several years.
Being underweight you know duration, whether that's two years or
one year or cash, they're all doing the same thing
for your portfolio time but giving you a nice four
to five percent return with very little risk. And so
that's a great place to have some of your money
once again, not all of your money. You know, we're
(32:03):
probably five to seven percent in that cash rate region,
which is two years and end, and that's fine. That's
a good place to be when you're getting compensated. I mean,
just recall two years ago you're getting zero on that cash.
Now that's a bad deal, But today you're getting actually
a pretty positive return. And there's a place in every
portfolio for something like that. Just ask Warren Buffett.
Speaker 4 (32:25):
Hey, Mike, it seems like the market's discounting two FED
rate cuts this year.
Speaker 2 (32:32):
Is the market okay with that or do.
Speaker 4 (32:34):
They need to think the market needs to see a
little bit more or do you think the market is
fairly discounting to rate cuts.
Speaker 8 (32:41):
Well, first of all, let me just make an opening
statement about that. I mean, if there's one thing that
the markets have been more wrong about than FED cuts
over the last four years, I like to know what
it is, so you know, I mean, this has been
probably the single biggest whip saw, both on the upside
and the downside, that the markets have gotten wrong. So
I think looking at the bond market right now, what
(33:02):
they're pricing in is a waste of time because they
don't know. The FED doesn't even know what I would say. However,
one of the reasons why the breath is deteriorated, I
talked about that as a symptom the cause of the
breath deterioration. One of them is the fact that rates
have gone up at the back end almost one hundred
basis points since the FED has cut a hundred basis points.
Think about that. That means the term premium has really
(33:22):
gone up sharply, and that's been something we've been focused on.
When the term premium kind of gets up into this range,
you actually now are at risk of having an equity
valuation correction. So we think that's probably the main reason
why the breath has deteriorated here recently, more so than earnings.
And I think, you know, two cuts, sure, why not?
Could we get zero cuts next this year? Possibly could
(33:44):
we get four or five cuts. Maybe it just depends
on how things play out, but I think right now
two cuts is kind of the best guess, and the
bomb market is probably a little bit suspicious about that
based on how the back end straining.
Speaker 2 (33:56):
Mike Wilson, thank you so much, Chief you. S equity
strategist Morgan Stanley enters to be with us.
Speaker 1 (34:07):
This is the Bloomberg Surveillance Podcast. Listen live each weekday
starting at seven am Eastern on Apple Corplay and Android
Auto with the Bloomberg Business app. You can also watch
us live every weekday on YouTube and always on the
Bloomberg terminal.
Speaker 2 (34:22):
Yes, into twenty twenty five. We're extending the Lisa Mantel
hour into a longer day part as they say in
the business, Lisa, what do you have today?
Speaker 5 (34:32):
So younger drinkers. This is apparently according to Financial Times,
they are sipping less French wine. Yes, they're opting for
different beverages, rose beer, spirits, cutting out alcohol altogether. So
I'd like to go to Paris correspondent Tom Keene and
find out were they sipping less French wine in Perry.
Speaker 2 (34:52):
Yeah, I think they are. It's in the zeitgeist over there.
They're very concerned about it. And what's fascinating is selected
res staurant owners talking about how people are just flat
out drinking less. Yes, and you know, I did a
shout out on Twitter. John Ferrell absolutely nailed the impact
(35:13):
of this so zebic thing overall. Yeah, plus three days
got six percent. People are eating six percent less food
and it curbs your alcohol.
Speaker 5 (35:23):
Yeah, and drinking alcohol that a lot of sugar, So
are trying to stay away from I mean, you know,
especially wine, especially red wine. Pro tip and that's yes.
Speaker 2 (35:32):
You have a martini maybe two, and these are smaller martinis.
These are fifty mad men martinis. And then to cut
back on alcohol, the third martini, you have a reverse martini,
which is a little bit of gin but with vermouth.
That's how you that's a measured consumption declined.
Speaker 6 (35:51):
Very interesting.
Speaker 2 (35:52):
Interesting, But the red is a big no.
Speaker 5 (35:54):
But and it's it's causing a lot of people to change.
Like a lot of the producers. They have to focus
on higher quality wines, right because the younger generations like
certified organic wines, and then they're offering reds like whites,
low alcohol wines, but also making the low alcohol wine.
It's more expensive, so now the producer are having over
more money to make these low alcohol wines.
Speaker 4 (36:15):
We're drinking barber Escos now, that's what we're in. We're
drinking the barber Sco than Nebiola.
Speaker 2 (36:20):
Grape coming at it.
Speaker 4 (36:21):
Listen to you got turned on to that a couple
of years ago, and that's what we're drinking.
Speaker 2 (36:25):
I was one Morgan David, That's where I was.
Speaker 5 (36:30):
Next America apparently getting better at getting things done. Workers
and companies are getting more productive. Okay, this is Labor
Department data. Productivity rows two percent in the third quarter
compared to a year earlier. But the Wall Street Journal
says the reason why a lot of business owners using
AI to help write things like marketing plans, email social
media posts the influx of immigration. They say immigrants often
(36:54):
take those manual intensive jobs, so that allows other workers
to move up to these highly skilled roles. But also,
you know the QR codes that makes things you know
better because you have papermint instead of paper menus at restaurants.
I'm sure you've seen that.
Speaker 2 (37:06):
And if you do, hate it.
Speaker 3 (37:09):
Hate with.
Speaker 2 (37:12):
Why are you doing the Sparta is actually listening this morning.
Well it works like two days a week exactly. Sparta's
listening and you're talking productivity, Yes.
Speaker 5 (37:21):
Faster productivity. You know, productivity grows the faster the economy
can grow.
Speaker 2 (37:25):
So Tucker's got to get with it. Yes, the John
Tucker next.
Speaker 5 (37:32):
And the head of YouTube I know you're gonna like
this one is saying that artificial intelligence and online influencers
are going to help supercharge their growth in the coming years.
So this is Neil Mohan. He's telling the Financial Times
they're wrapping up AI spending. So they have two experimental
features from deep Mind that's like their AI unit it's
called dream screen and dream Track, and they generate videos
(37:54):
and music from text, so that's one thing they can do.
They also auto dub, which means that they train to
English language videos into eight other languages. And they're saying
it's going to help with online creators because that's their
big draw. Hundreds of millions of gen Z fans are
from these online creators, so that's really helping, you know,
to get their their your descriptions.
Speaker 2 (38:23):
That's a productivity that's PROTEI.
Speaker 5 (38:33):
That is Oh and since yesterday we were talking about
Apple TV Plus, please this story stood out to me.
Apple's actually offering a free all access pass to Apple
TV Plus this weekend today through Sunday, so you can
test it out, try it out, see if you like it.
And any device that supports Apple TV you have to
want to, you know, sign in with your Apple I
(38:54):
D so all those restrictions, but you can try it
out for free if you want, and they got to
get those subscribers.
Speaker 2 (39:00):
What do you think of this? I mean, where are
we in the streaming streaming?
Speaker 4 (39:03):
I mean it's obviously Netflix hugely profitable, Disney finally now profitable,
and some of the other players are going becoming profitable,
so again more and more contents going there, Tom And
the biggest issue.
Speaker 2 (39:15):
Is live sports.
Speaker 4 (39:16):
More and more live sports you're finding on the streaming
services here, including the football.
Speaker 2 (39:20):
Games coming up state Notre Dames on ESPN.
Speaker 4 (39:23):
Yeah, we're getting some The wild card games for the
NFL were on Amazon Prime. So if you don't have
Amazon Prime, you need to talk to somebody in your
extended family and figure out if somebody's got a membership there,
because that's where you're going to find the NFL wild
card games. Figure, let's go on streaming.
Speaker 2 (39:41):
I'm hooked on Silo and there's some disagreement in the household.
Some people think it's slow and doesn't move fast enough.
Speaker 6 (39:49):
I have to agree with that.
Speaker 5 (39:51):
I might agree with that person in your household. My
husband loves it, loves it, loves it.
Speaker 2 (39:56):
Yeah, and I'm finding it just magisterial land. Apple TV
is they call it dad TV, and I could see
why is that? Okay, it's that Netflix dad TV? I
don't know.
Speaker 4 (40:12):
Well there, I mean, the talent's getting paid. They're making
all these things for Apple TV and Paramount and all
the streaming stuff and the A list talents they're getting paid,
so like, I'll table stuff out on.
Speaker 2 (40:23):
YouTube, lid chat, ask Lisa Costco.
Speaker 5 (40:26):
Road trip to sleep No Costco road trip. My paycheck
went there last week and I have done.
Speaker 2 (40:33):
Thank you so much for the newspapers.
Speaker 1 (40:35):
This is the Bloomberg Surveillance podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live each weekday,
seven to ten am Easter and on Bloomberg dot com,
the iHeartRadio app tune In, and the Bloomberg Business app.
You can also watch us live every weekday on YouTube
(40:56):
and always on the Bloomberg terminal
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