April 24, 2021 • 27 mins
This week, Mario Stefanidis, Roundhill Investments vice president of research, who actively manages the firm's sports-themed MVP ETF, joined to talk about the investment side of the short-lived European Super League. Ali Wolf, chief economist at Zonda, a housing market research and real estate analytics firm, came on to talk about the U.S. housing market. Then New York Times columnist and Nobel Prize-winning economist Paul Krugman joined for a wide-ranging interview on his economic outlook, inflation and why he thinks trade policy has always been overrated.
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Speaker 1 (00:08):
Welcome to Would You Miss This Week? I'm Joe Wisenthal.
This podcast has some of our favorite interviews from the
Daily Market Clothes show that I co anchor along with
Romaine Bostick and Caroline Hyde. What Do You Miss? It's
the perfect way to kick off your weekend. This week
we got the debut of a new professional sports league
and its implosion, all in a matter of days. On Monday,
(00:29):
twelve of the world's richest soccer clubs, including the marquee
names we all know like Arsenal, Chelsea, Manchester United, Liverpool,
Real Madrid and Barcelona, announced that they would be leaving
the Champions League to form their own breakaway super League
with funding from JP Morgan. The plans were met with
immediate backlash from fans, politicians and national leagues, with FIFA
vowing to ban any Super League players from World Cup competition.
(00:51):
The publicly traded soccer clubs like Juventus and Manchester United
got quite a boost on Monday, but for the last
few years they've been relatively flat, so we spoke about
it all. Mario Stefanidis, vice president of Research around Hill Investments.
Mario actively manages the firm's m v P e t
F which offers investor exposure to the world of sport.
We started by asking Mario, what about these teams structures
(01:13):
has failed to capture investor attention before? Now? I think
a part of it that really has depressed the long
term performance was due to COVID and these teams really
didn't have streaming strategies. These teams really relied on merchandise
and ticket sales UM for a large part of the revenue.
And I think part of the rally that you're seeing
(01:34):
now is this revolution um not only due to this
new formation of a super league, but due to the
increase in UH media rights and UH licensing fees that
a lot of these teams are able to command UM.
So you're write the long term performance of these teams
hasn't been great, but I think if this super league
really comes to fruition, I think this is UH great
(01:56):
growth opportunity for European soccer clubs. Is there any sort
of sense here though, that this would actually alienate fans
in any sort of way because there's gonna be a
lot of griping, But as we've seen here is particularly
in sports in the US, which already has kind of
that similar type of system as to what they're trying
to create over there. Fans always seem to always gravitate
back no matter what sort of changes happened that they
don't like. Yeah, that's a great point. I think your
(02:18):
hardcore fan might be a little dissuaded by this whole thing.
But when you think of your casual fan, I mean,
what better than a league where teams, the top teams
are competing on a weekly basis against each other that
previously didn't exist before the Champions League. It's an annual
off their an annual tournament. This is gonna be a
regular season on par with what we see in the
US with the MLB, with the NFL fixed teams, uh
(02:42):
that are predictably battling each other every year. Well, it's interesting.
I mean Comcast felt a bit which in Sky over here,
but BT group didn't, and they own the sports channel.
Why are they not hurting more from this, Maria? I
think it's still taking time to process. Um. Some people
on the street think this is just a gambit to
(03:02):
try to solicit higher licensing fees from existing agreements. M
b T they had paid about one and a half
billion pounds for the rights to stream Champions League in
UEFA games. Um, the economics might shift will shift more
towards the teams after this, no matter what. But it's
still to be seen whether this whole league will come
(03:23):
to fruition and result in a clean breakaway or whether
this is just a negotiating tactic um to retain more
of the economics behind the sponsorships and the licensing deals. So, Mario,
one of the things that people say is that the
it's hard to run these teams to have a shareholder focus.
That there is huge Uh. You know, obviously a huge
amount of money has to go to the players those
(03:45):
transfer fees. Uh, that really is where the value goes.
That you know that you have to run them for
the fans, the supporters of the clubs. That takes away
from the ability structurally. Is there a problem with publicly
traded football teams in Europe to run them for maximizing
shareholder value or is it just a matter of getting
the business model right? I think, Um, you know, when
(04:08):
you when you look at some of these contracts and
the amount players are being compensated per game, Uh, football
European football is way at the top when it comes
to baseball. These are some of the largest contracts, but
players are playing a hundred sixty two games in a
regular season. Um, with this new structure, you're gonna have
a magnitude more games being played and the economics are
(04:29):
really gonna become more favorable for these teams. I mean,
let's talk about the idea so of investing though in this.
I mean, obviously you have the m v P E
T F here, Uh, you know, there are a lot
and obviously I know it's more than just sports teams
in there. But when you talk about sort of trying
to invest uh on a sports team, it seems like
you're still kind of at the whim as to whether
those teams when, whether they do it consistently and if
(04:51):
they don't. I mean, I mean, how do you sort
of make that judgment call as to sort of what
makes a good investment or not when you're not really
dealing with the normal fundamentals that you would be doing
with with a different type of investment. Yes, so we're
not necessarily managing the portfolio on a fundamental basis. We're
just looking to give our shareholders beta exposure to this
world of pro sports. So the portfolio is about six
(05:12):
pro sports teams and then the balances apparel companies, media companies,
UM all in this ecosystem, and I think by offering
a diversified basket, we're not really betting on whether these
teams are gonna have a successful season or not. It's
the aggregate and the aggregate increases and franchise values that
we've seen over the last decade that I think can
generate long term returns for this fund. I mean, you
(05:36):
look at franchise value for NFL, NBA, MLB in Premier
league from these franchise values increased by which is more
than broad equities UM. These franchises are premium and scarce assets,
and I think by giving people a diversified basket of
of of these securities UM, they're able to invest alongside
the teams they know and love. Now, this week, we
(06:00):
got some surprising new data on the red hot US
housing market. In March, the momentum we've seen in the
housing market faded, with sales of previously owned homes falling
to a seven month low as a surgeon prices and
the lack of available properties limited potential buyers. Laurence Young,
the National Association of realtors chief economists put the blame
on the severe lack of supply and said the demand
(06:21):
is still very much there. Ahead of that data release,
we caught up with Allie Wolfe, the chief economist of
Zonda Housing market research and real estate analytics firm. We
started by asking Allie if there's anything that can be
done to curb the momentum and housing on the demand side.
So thanks for having me, and housing is it's crazy.
(06:42):
I could pick up a dart and throw it at
a map of the US and I'd be betting money
that whatever market it landed on, that housing market is
going through a boom. So it is universal across geography.
It's universal across price point and buyer group from entry
level all the way up to the ultra luxury doing
really really well. All right, well, I mean here's the thing.
(07:05):
So it's going well, but a lot of people then
they look at the rate environment and they say, okay,
rates are tacking up. I know it's not nothing crazy yet,
but once you come off the floor, that sort of
scoops spooks some people. Then there's just the whole issue
here of uh, I guess availability and affordability and that
that's actually crimping ultimately ultimately crimping sales as well. How
do you factor that into your general outlook alle yep,
(07:27):
So it's a great question. The interesting thing about housing
is there are top line prices, so that's the price
that you see when you're on Zillo or when you're
on red fin, and when you're looking at that, that
makes housing look incredibly expensive. But we know that housing
is a monthly payment business for the consumer, and we've
run the numbers and with interest rates, yes they're off
(07:47):
from the floor, but they're still lower than where they
were last year. The monthly payment is still down, and
so there are some consumers that are savvy enough to
recognize that and say, well, I want to jump in
And that's creating that extra feverish pace today that people
are saying, I gotta get in now, I gotta get
in now. Uh. The issue is, of course, that interest
rates are likely going to go up, and if you're
(08:08):
a builder and you're signing a contract today, the lead
time until someone can get that home has now become extended.
We've heard up to fifteen months. That poses interest rate risk.
Fifteen months is that on the back of a supply
side issue in terms of lumber, in terms of building materials.
Why the big disconnect? Yes, I I smile because the
(08:32):
answer is it's everything. So it starts at supply side
issues of builders are saying supply side issues are going
to impact their ability to get homes delivered. Then you
have government delays, and this is not the government's fault,
local jurisdictions. They didn't think housing was going to be
this hot. Builders didn't think housing was going to be
this hot, and so the governments are scrambling to get
(08:54):
permits done, to get entitlements done. Labor. Do you remember
all we talked about in twenty nineteen was a labor shortage.
You almost never hear about it now because lumber is
taking the front of the front stage, and then of
course land, So there's just a lot of factors working
against the builders. Ellie, did the does the price of
lumber matter at all? Or is it literally just about
whether the builders can find the wood? Huh? So the
(09:19):
price of lumber does matter because we're thinking longer term.
If you are talking fifteen months from now and you're
talking potentially interest rates go up, well you have to
have someone that's going to be able to purchase the
home at that higher price for now. I texted with
a CEO of one of the biggest home builders yesterday
and I said, okay, what's what work around have you found?
And he said, there's no workaround. We're going to try
(09:41):
to be a little bit more efficient to the extent
that that's going to help. Some builders are trying to
ware house lumber, so saying, at least I know what
my costs are. But in a lot of cases, builders
are just raising prices and consumers saying, okay, I'm curious
about some of the other inflationary pressures there beyond lumber,
because we've heard at least an it release some concerns
about the costs of things like installation and flooring and
(10:04):
appliances and things and on some of the other components
that go into the final product here of a home. Here.
What are we seeing on that and how are builders
addressing it? Yeah, so another great question. And as you
look at it, we so to step back. Builders raise
prices month over month, and when you look at the numbers,
this is, according to zion To data, raised prices ten
(10:26):
tho dollars or more. Now that's an average. I've heard
of home prices going up two hundred and fifty thousand
dollars in six weeks, So it really depends on the market.
It's crazy. So to answer your question, Room Maine, what's
happening is lumbers going up, installations going up, stucco's going up,
concretes going up, and that's getting pasted onto the consumer.
(10:46):
And one thing I want to note is, right before
I got on this call with you guys, I was
talking to my friend. He's a building supplier, and he
said they held off raising prices because they knew that
builders are just getting probably left, right and center. But
res and is now in short supply, and he's a
cabinet supplier and he said he finally had to go
back to builders. He'd say, I'm sorry, but we can't
(11:07):
continue to eat these costs. This is getting kind of niche.
I mean, it was interesting that today Cannon Chord analyst
was out saying, look, maybe downgrade your outlook for lumber
equities because they think eventually the R and D is
going to come in, the CAPEX is going to come in,
we will get a supply side bump. So we've seen
as high as it gets. But yeah, I want to
go back to what you're saying in terms of the
throwing the dark thing. Is that true now with cities
(11:30):
as well, visa the getting out into the suburbs, where
a few months ago is all about the urban flight.
Is that not the case now? A high house prices
through the roof where they're looking to move Manhattan or
indeed the burbs yep. So two data points on that.
So the first is we look at Arizondo database, we
track actively selling communities, and we see that seventy of
(11:51):
the best selling communities are now twenty five plus miles
from essential business district. That's sevn D compared to thirty
percent of the best selling communities for their away from
downtown last year. So you're definitely seeing more interest in
the suburbs. But I'll say firsthand, I've gone out and
toward markets in places like Los Angeles. I've talked to
builders who are selling along the Silver Line in Washington,
(12:13):
d C. And they say, all the articles tell me
I need to be freaked out about demand, but people
keep coming, people keep signing contracts. So I do think
there are some parts of the city's if the price
has gone too high, that people may balk at that
and maybe they can get an incentive from a builder,
But I do really hold too that the demand is
(12:34):
is universal. Then we wrapped up the week with a
wide ranging conversation with New York Times calumnist and Nobel
Prize winning economist Paul Krugman. We started on the economy
and the widespread optimism and a bit of concern that's
growing from inflation, of course, from all the typical corners.
So I started by asking Professor Krugman if there's anything
(12:56):
that worries him. Well, I'm still not entirely sure that
we've got the pandemic under control. You know, we think
we've got it, but a little bit alarming. And look
I am we are. They'll put this way, Larry, this
is not being completely foolish here. There is a it's
(13:17):
a lot of money they were throwing at the economy,
and uh, it could be it could be a problem,
although I think we have ways to deal with it.
But um, so we're getting a really big boost to
the two things right now. I mean, I'm very optimistic,
but but there's always some there's both downside and upside risk.
Both both the pandemic hits us again or that this
thing goes too fast and you know, we're starting to
(13:39):
see bottlenecks things. Uh, there are a lot of problems
with with rapid recovery when we still have disrupted supply chains.
So this could be No, it's not going to be
totally smooth sailing. Well, I'm curious when you look at
the supply chains. We've been talking a lot about some
of the inflationary pressures out there, whether it's in some
of the commodities or now and some of the consumer
staples here. Some of that, of course is so to
(14:00):
tie to the economy sort of reheating, but a lot
of that is also tied here to the disruptions that
we had because of COVID. And I'm wondering if maybe that, uh,
if we if you consider some of those disruptions to
be temporary, that the inflationary pressures might not be as
heavy as some people think. Yeah, I think it's going
to be important, and I think the people have fed
(14:20):
know this that core inflation is actually not a sufficient
a sufficient statistic here that even you know, normally we
think that okay, this transitory stuff is basically food and energy,
but now there's gonna be transitory shortage as well, you
know chips uh number uh the as a shortage of containers.
So there's a lot of sort of unusual disruptions, all
(14:42):
of which is not fundamental, all of which doesn't mean
that we are actually are seeing an up arise in
underlying inflation. It just means that we're hitting some some
bottlenecks as we come back from a highly disrupted economy,
and stuff that should be disregarded in terms of study policy.
And so we're to don't you all have big buttons
that say, don't panic on the inflation troun sending policy
(15:05):
from a monetary policy front there when it comes to inflation,
when it comes to labor data. But there's also, of
course what the government is up to and asset prices. Well,
maybe a bit of inflation pressure took a leged around
today because they were worried about capital gains taxes coming forward.
What do you think about the inevitability or not of
tax increases and what it means for the overall economy. Well, yeah,
(15:29):
there's going to be I mean it's a little bit
bit weird, right. We had this is something that Biden
had said all along he was going to try to
do And now he says, I'm going to try to
do what I promised I was going to do in
the market. Although we get if a one percent fall
in stock prices is is all that you get from
a really major increase in capital gains taxes, that's that's
not a big problem. But yeah, I mean the Biden
(15:53):
has an ambitious a gender. Um, we have some fiscal space.
Interest rates are extremely low, We've have learned the debt
fear through exaggerated. But we don't have infinite fiscal space.
So some significant tax increases are going to be part
of the story. Um, and Biden is trying to do
those with not hitting the middle class at all. So
(16:14):
it's supposed to be corporate taxes and then high taxes,
high incomes, capital gains. Um. It's but something like that
is pretty much inevitable unless everything is you know, fails becauld. Still,
this stiff stuff could still stumble in Congress. It's possible
still that that you know, they need all fifty senators
(16:35):
but plus Kamala Harris to pass any of this stuff.
But but assuming that they're going to get through with
this stuff, there are going to need some taxes to
pay for at least part of it. Well, you say
that we don't have infinite fiscal space, but of course
at least we appear to have a lot more than
maybe people would have guessed several years ago, and we
have really big deficits and for a long time now
much inflation. Does your field have a good way of
(16:58):
measuring or estimating how much fiscal space we have? No,
we don't, I mean the the I mean the best
thing that we have is just actually ask uh what
how much? Uh? We We have some notion of what
what would it take to stabilize the ratio of debt
(17:20):
to GDP, but no idea of what the maximum number is.
It's really hard to find any examples of hitting that maximum,
and at least for our country like the United States,
that borrows in its own currency and is regarded as
as fundamentally as a sound responsible country. So it's not
clear that there's any pressing limit. There's a much more
obvious thing, which is inflation. If you are going to
(17:42):
overheat the economy, then that's functional finance. If you say,
what how much spending is too much for us to
have the capacity to meet the demand, But then we
have monetary policy to contain of that. So the only
thing we can really say is that wherever the limits
to debt are, they appear to be quite some ways off.
There have a vast countries have run levels of debt
(18:04):
to GDP there are a hundred points higher than where
we are without having a crisis. And so there's nothing,
there's no visible constraint on us right now except that
except that if you know, if we're gonna be running
persistent deficits of ten percent of GDP, that's not going
to be doable just because of the inflationary pressure. But
it's it's amazing how much people manage to convince themselves
that that there was a red line that we can't
(18:26):
cross somewhere nine GDP GDP. None of those things are
actually borne out by the historical evidence. So if we
ever do get to a point where we can sort
of visibly see what that level is, what that line
of the sand is, what's the reaction function functional? More importantly,
how fast can that reaction function uh sort of work
to sort of alleviate the fallout from that? Well, you know,
(18:49):
we have a being again country that bars in our
own currency. We have Uh, it's really hard I actually
tried to in the past. I tried to model uh
a crisis could look like, how how could you even
have a fast moving crisis for a country like the
United States, And you try to find a historical example
(19:09):
that actually of a country that in any way looks
like US, where there have been cases where people have
lost some confidence in the government's willingness to pay its bills.
But all that happens under those circumstances is that the
currency weekends, which is not the worst thing in the world.
The closest you can get this you can go to
France and nineteen twenty six, and they had a fear
that they weren't actually going to be willing to pay
(19:31):
off their debts from World War One, um, but nothing
really terrible happened. The finance minister lost his job, but
nothing really terrible happened to the real economy. And I
think the same is true for us now. Paul. One
topic that people are talking a lot about these days
is you yourself. Paul Krugman, who was a big adam
to his essay on your intellectual evolution. I guess you
(19:52):
can describe it. And there's actually, you know, people are
noticing that there's sort of a difference emerging between say,
your views on certain things in Larry Summers you mentioned
last time. Do you even do you think it's born
out of an ideological disagreement or are you operating from
the same toolkit and just coming to different conclusions on
things like inflation, stimulus and so forth. We have very
(20:17):
much the same toolkit. I mean, Larry and I essentially
had the same teachers, have essentially looked at the world
the same way. Um, and I think we're just somehow,
I have to admit I'm a little puzzled. I mean,
I understand the worry that the same that we're doing
more stimulus than we need, and I'd say, well it's
not really stimulus, but still that we're throwing a lot
(20:38):
of money at the economy. I understand why Larry thinks
that minetarry policy can't be used to stabilize inflation. That
seems to me to be a new principle that I
hadn't heard before. But but look, with economics is not
an exact science, and smart people, even smart people, have
the same general framework, come to the data and reach
(21:02):
different conclusions. And if if some of the conclusions seem
awfully vehement. Well, you know, if if you're not going
to stand up for your conclusions, who will pool Is
there a difference in prioritization perhaps as well. Obviously a
lot of central banks out there are primarily focused on inflation,
but the US has this dual mandate labor market and inflation,
(21:25):
and more and more it becomes a labor market for everyone,
not just the few. And I'm interested as to whether
that nuance is something that certain economists are quite aligned with. No,
I don't think, well, I've got I mean, I can't psychoanalyze.
I mean, but it's not just very Summers Olivia Blanchard,
(21:47):
former chief. It comes to the I m F. And
it is also concerned that we're overdoing it um and
this is really I mean, I would say that that
part of the question is what you Yeah, there are
risks on all sides. Which of them do you think
our biggest? And I at least was very much. I
(22:09):
went through I spent months, years shouting into the wind
and the over sized fiscal policies of the Obama administration,
and my sense was that they missed a not just
an economic window, but they missed a political window by
going too small at the beginning. They ended up, you know,
(22:30):
half a loaf ended up being politically worse than none
because then people say, oh, you tried statements and didn't work,
and so there was a terrible Uh we we paid
a price for for many years. We're still in some
ways paying a price for that underpowered fiscal policy. So
I'm in the go big school. Uh And as I
used as I said, right, this is uh not God
(22:51):
administration that's doing things the way I would have wanted
Obama to do it. And so I'm high on it.
Maybe others who don't didn't have exactly the same life trajectory,
will will come up with a different set of priorities.
But I but I'm really pretty vehement on that. This
is the chance you've got to what's very likely a
transitory democratic you know, Grazer thin and transitory democratic control
(23:14):
of Congress. Uh. This is a chance to get a
lot of stuff done, and you have to take some
risks of of going big in order to do that.
So far, of course, in these first hundred days, we
have seen Biden at least try to go big. Here.
I am curious about trade policy. Here is something that
he has just now starting to address, uh, something that is,
of course as an issue that's been lingering now through
several administrations, and I'm wondering doesn't matter. Is it as
(23:36):
critical now as it might have been, say, eight years
ago or you know, sixteen years ago. Actually, trade policy
has always been overrated. I mean it's uh. I say
that as somebody who's spent the largest part of his
life working on trade policy. But it's one of those
issues where the closure you are to the subject, the
less melodramatic you get about how much it matters. The
(23:57):
difference between two percent of four percent terrorists is not
a big deal. It's there, It's just not the the U. S.
Trade policy has not been an important factor for our
economy um as a whole for a long time. It's
it's big for particular sectors, but really for the economy
as a whole, is not a big deal. Um. And
that's a good thing, because I think that we're really
(24:19):
Biden is is not really rolling back uh, you know,
everything Trump did uh there to probably end up I
hope that we'll end up will stop imposing national security
tariffs on Canada. But are we going to see a
return to the kind of pro globalism agenda that that
took place in the past, I don't think so the
(24:42):
uh there, it's it's not that important. But it's also
politically the Trump sort of created facts. Uh they nobody
Given everything else on his plate, why would the Biden
administration take the risk of being seen as soft on China.
So in a lot of ways we were. I think
we have had a permanent turn away. We're not going
(25:04):
to have any big new trade agreements for the foreseeable future.
We're probably not even going to unwind all that many
of the Trump tariffs UM. But luckily that's it's not
that critical. So it was the opening up the globalization
not that big of a deal either. I mean, if
the turnaway is not that big of a deal, all
that stuff, China entering the w t O, and when
(25:25):
we were we were in the globalization mood. Was that
all overstated in terms of its impact on anything, Well
not really. There's theres a difference between tariff policy and
UM and things technological developments that enable greater globalization. So
most of the rise we had an extraordinary As of
nineteen eighty, world trade as a share of GDP was
(25:48):
basically the same as it was in nineteen thirteen. All
of the everything that happened up to that point was
really just the recovery to where things had been before
the World Wars. But the surge and trade that took
place after that hyper globalization that went mattered quite a lot.
You can try to do estimates it. It significantly added
to global growth, but that's largely because a lot of
(26:10):
that was not about really it wasn't mostly just about
reducing tarists. Tarris were already pretty low by the nineteen eighties.
It was about finally learning what to do with containerships,
about learning to manage these global supply chains. And that
mattered a lot, and particularly mattered for developing countries, but
even for countries like the United States, that was a
significant gain. And that's not going away. When we talk
about globalization, stolling out globalization is the I M. S
(26:34):
term for it. Uh, it's not. We're not talking about
rolling back. We're not talking about going back to the
world as it was. We're talking about not having trade,
having made trade grow a little bit more slowly than
GDP instead of much faster than GDP in the decade ahead. Um.
And the point is that that change is not a
huge deal. It's it's not to say that globalization didn't matter,
(26:55):
although again it's people get global only. I guess what
the al term. People like to talk about that stuff
because it sounds important that sometimes it is, but it's
trade policy person paris within the range that we're seeing.
It's just not that big a deal. And that's it
for what you missed this week. If you like to show,
(27:16):
make sure to subscribe and rate us at Apple podcast
or wherever you listen to podcasts. You can catch our
show every weekday from three thirty to five pm on
Bloomberg TV and from four to five pm on Twitter.
Thanks for listening and have a great week.
Welcome to Would You Miss This Week? I'm Joe Wisenthal.
This podcast has some of our favorite interviews from the
Daily Market Clothes show that I co anchor along with
Romaine Bostick and Caroline Hyde. What Do You Miss? It's
the perfect way to kick off your weekend. This week
we got the debut of a new professional sports league
and its implosion, all in a matter of days. On Monday,
(00:29):
twelve of the world's richest soccer clubs, including the marquee
names we all know like Arsenal, Chelsea, Manchester United, Liverpool,
Real Madrid and Barcelona, announced that they would be leaving
the Champions League to form their own breakaway super League
with funding from JP Morgan. The plans were met with
immediate backlash from fans, politicians and national leagues, with FIFA
vowing to ban any Super League players from World Cup competition.
(00:51):
The publicly traded soccer clubs like Juventus and Manchester United
got quite a boost on Monday, but for the last
few years they've been relatively flat, so we spoke about
it all. Mario Stefanidis, vice president of Research around Hill Investments.
Mario actively manages the firm's m v P e t
F which offers investor exposure to the world of sport.
We started by asking Mario, what about these teams structures
(01:13):
has failed to capture investor attention before? Now? I think
a part of it that really has depressed the long
term performance was due to COVID and these teams really
didn't have streaming strategies. These teams really relied on merchandise
and ticket sales UM for a large part of the revenue.
And I think part of the rally that you're seeing
(01:34):
now is this revolution um not only due to this
new formation of a super league, but due to the
increase in UH media rights and UH licensing fees that
a lot of these teams are able to command UM.
So you're write the long term performance of these teams
hasn't been great, but I think if this super league
really comes to fruition, I think this is UH great
(01:56):
growth opportunity for European soccer clubs. Is there any sort
of sense here though, that this would actually alienate fans
in any sort of way because there's gonna be a
lot of griping, But as we've seen here is particularly
in sports in the US, which already has kind of
that similar type of system as to what they're trying
to create over there. Fans always seem to always gravitate
back no matter what sort of changes happened that they
don't like. Yeah, that's a great point. I think your
(02:18):
hardcore fan might be a little dissuaded by this whole thing.
But when you think of your casual fan, I mean,
what better than a league where teams, the top teams
are competing on a weekly basis against each other that
previously didn't exist before the Champions League. It's an annual
off their an annual tournament. This is gonna be a
regular season on par with what we see in the
US with the MLB, with the NFL fixed teams, uh
(02:42):
that are predictably battling each other every year. Well, it's interesting.
I mean Comcast felt a bit which in Sky over here,
but BT group didn't, and they own the sports channel.
Why are they not hurting more from this, Maria? I
think it's still taking time to process. Um. Some people
on the street think this is just a gambit to
(03:02):
try to solicit higher licensing fees from existing agreements. M
b T they had paid about one and a half
billion pounds for the rights to stream Champions League in
UEFA games. Um, the economics might shift will shift more
towards the teams after this, no matter what. But it's
still to be seen whether this whole league will come
(03:23):
to fruition and result in a clean breakaway or whether
this is just a negotiating tactic um to retain more
of the economics behind the sponsorships and the licensing deals. So, Mario,
one of the things that people say is that the
it's hard to run these teams to have a shareholder focus.
That there is huge Uh. You know, obviously a huge
amount of money has to go to the players those
(03:45):
transfer fees. Uh, that really is where the value goes.
That you know that you have to run them for
the fans, the supporters of the clubs. That takes away
from the ability structurally. Is there a problem with publicly
traded football teams in Europe to run them for maximizing
shareholder value or is it just a matter of getting
the business model right? I think, Um, you know, when
(04:08):
you when you look at some of these contracts and
the amount players are being compensated per game, Uh, football
European football is way at the top when it comes
to baseball. These are some of the largest contracts, but
players are playing a hundred sixty two games in a
regular season. Um, with this new structure, you're gonna have
a magnitude more games being played and the economics are
(04:29):
really gonna become more favorable for these teams. I mean,
let's talk about the idea so of investing though in this.
I mean, obviously you have the m v P E
T F here, Uh, you know, there are a lot
and obviously I know it's more than just sports teams
in there. But when you talk about sort of trying
to invest uh on a sports team, it seems like
you're still kind of at the whim as to whether
those teams when, whether they do it consistently and if
(04:51):
they don't. I mean, I mean, how do you sort
of make that judgment call as to sort of what
makes a good investment or not when you're not really
dealing with the normal fundamentals that you would be doing
with with a different type of investment. Yes, so we're
not necessarily managing the portfolio on a fundamental basis. We're
just looking to give our shareholders beta exposure to this
world of pro sports. So the portfolio is about six
(05:12):
pro sports teams and then the balances apparel companies, media companies,
UM all in this ecosystem, and I think by offering
a diversified basket, we're not really betting on whether these
teams are gonna have a successful season or not. It's
the aggregate and the aggregate increases and franchise values that
we've seen over the last decade that I think can
generate long term returns for this fund. I mean, you
(05:36):
look at franchise value for NFL, NBA, MLB in Premier
league from these franchise values increased by which is more
than broad equities UM. These franchises are premium and scarce assets,
and I think by giving people a diversified basket of
of of these securities UM, they're able to invest alongside
the teams they know and love. Now, this week, we
(06:00):
got some surprising new data on the red hot US
housing market. In March, the momentum we've seen in the
housing market faded, with sales of previously owned homes falling
to a seven month low as a surgeon prices and
the lack of available properties limited potential buyers. Laurence Young,
the National Association of realtors chief economists put the blame
on the severe lack of supply and said the demand
(06:21):
is still very much there. Ahead of that data release,
we caught up with Allie Wolfe, the chief economist of
Zonda Housing market research and real estate analytics firm. We
started by asking Allie if there's anything that can be
done to curb the momentum and housing on the demand side.
So thanks for having me, and housing is it's crazy.
(06:42):
I could pick up a dart and throw it at
a map of the US and I'd be betting money
that whatever market it landed on, that housing market is
going through a boom. So it is universal across geography.
It's universal across price point and buyer group from entry
level all the way up to the ultra luxury doing
really really well. All right, well, I mean here's the thing.
(07:05):
So it's going well, but a lot of people then
they look at the rate environment and they say, okay,
rates are tacking up. I know it's not nothing crazy yet,
but once you come off the floor, that sort of
scoops spooks some people. Then there's just the whole issue
here of uh, I guess availability and affordability and that
that's actually crimping ultimately ultimately crimping sales as well. How
do you factor that into your general outlook alle yep,
(07:27):
So it's a great question. The interesting thing about housing
is there are top line prices, so that's the price
that you see when you're on Zillo or when you're
on red fin, and when you're looking at that, that
makes housing look incredibly expensive. But we know that housing
is a monthly payment business for the consumer, and we've
run the numbers and with interest rates, yes they're off
(07:47):
from the floor, but they're still lower than where they
were last year. The monthly payment is still down, and
so there are some consumers that are savvy enough to
recognize that and say, well, I want to jump in
And that's creating that extra feverish pace today that people
are saying, I gotta get in now, I gotta get
in now. Uh. The issue is, of course, that interest
rates are likely going to go up, and if you're
(08:08):
a builder and you're signing a contract today, the lead
time until someone can get that home has now become extended.
We've heard up to fifteen months. That poses interest rate risk.
Fifteen months is that on the back of a supply
side issue in terms of lumber, in terms of building materials.
Why the big disconnect? Yes, I I smile because the
(08:32):
answer is it's everything. So it starts at supply side
issues of builders are saying supply side issues are going
to impact their ability to get homes delivered. Then you
have government delays, and this is not the government's fault,
local jurisdictions. They didn't think housing was going to be
this hot. Builders didn't think housing was going to be
this hot, and so the governments are scrambling to get
(08:54):
permits done, to get entitlements done. Labor. Do you remember
all we talked about in twenty nineteen was a labor shortage.
You almost never hear about it now because lumber is
taking the front of the front stage, and then of
course land, So there's just a lot of factors working
against the builders. Ellie, did the does the price of
lumber matter at all? Or is it literally just about
whether the builders can find the wood? Huh? So the
(09:19):
price of lumber does matter because we're thinking longer term.
If you are talking fifteen months from now and you're
talking potentially interest rates go up, well you have to
have someone that's going to be able to purchase the
home at that higher price for now. I texted with
a CEO of one of the biggest home builders yesterday
and I said, okay, what's what work around have you found?
And he said, there's no workaround. We're going to try
(09:41):
to be a little bit more efficient to the extent
that that's going to help. Some builders are trying to
ware house lumber, so saying, at least I know what
my costs are. But in a lot of cases, builders
are just raising prices and consumers saying, okay, I'm curious
about some of the other inflationary pressures there beyond lumber,
because we've heard at least an it release some concerns
about the costs of things like installation and flooring and
(10:04):
appliances and things and on some of the other components
that go into the final product here of a home. Here.
What are we seeing on that and how are builders
addressing it? Yeah, so another great question. And as you
look at it, we so to step back. Builders raise
prices month over month, and when you look at the numbers,
this is, according to zion To data, raised prices ten
(10:26):
tho dollars or more. Now that's an average. I've heard
of home prices going up two hundred and fifty thousand
dollars in six weeks, So it really depends on the market.
It's crazy. So to answer your question, Room Maine, what's
happening is lumbers going up, installations going up, stucco's going up,
concretes going up, and that's getting pasted onto the consumer.
(10:46):
And one thing I want to note is, right before
I got on this call with you guys, I was
talking to my friend. He's a building supplier, and he
said they held off raising prices because they knew that
builders are just getting probably left, right and center. But
res and is now in short supply, and he's a
cabinet supplier and he said he finally had to go
back to builders. He'd say, I'm sorry, but we can't
(11:07):
continue to eat these costs. This is getting kind of niche.
I mean, it was interesting that today Cannon Chord analyst
was out saying, look, maybe downgrade your outlook for lumber
equities because they think eventually the R and D is
going to come in, the CAPEX is going to come in,
we will get a supply side bump. So we've seen
as high as it gets. But yeah, I want to
go back to what you're saying in terms of the
throwing the dark thing. Is that true now with cities
(11:30):
as well, visa the getting out into the suburbs, where
a few months ago is all about the urban flight.
Is that not the case now? A high house prices
through the roof where they're looking to move Manhattan or
indeed the burbs yep. So two data points on that.
So the first is we look at Arizondo database, we
track actively selling communities, and we see that seventy of
(11:51):
the best selling communities are now twenty five plus miles
from essential business district. That's sevn D compared to thirty
percent of the best selling communities for their away from
downtown last year. So you're definitely seeing more interest in
the suburbs. But I'll say firsthand, I've gone out and
toward markets in places like Los Angeles. I've talked to
builders who are selling along the Silver Line in Washington,
(12:13):
d C. And they say, all the articles tell me
I need to be freaked out about demand, but people
keep coming, people keep signing contracts. So I do think
there are some parts of the city's if the price
has gone too high, that people may balk at that
and maybe they can get an incentive from a builder,
But I do really hold too that the demand is
(12:34):
is universal. Then we wrapped up the week with a
wide ranging conversation with New York Times calumnist and Nobel
Prize winning economist Paul Krugman. We started on the economy
and the widespread optimism and a bit of concern that's
growing from inflation, of course, from all the typical corners.
So I started by asking Professor Krugman if there's anything
(12:56):
that worries him. Well, I'm still not entirely sure that
we've got the pandemic under control. You know, we think
we've got it, but a little bit alarming. And look
I am we are. They'll put this way, Larry, this
is not being completely foolish here. There is a it's
(13:17):
a lot of money they were throwing at the economy,
and uh, it could be it could be a problem,
although I think we have ways to deal with it.
But um, so we're getting a really big boost to
the two things right now. I mean, I'm very optimistic,
but but there's always some there's both downside and upside risk.
Both both the pandemic hits us again or that this
thing goes too fast and you know, we're starting to
(13:39):
see bottlenecks things. Uh, there are a lot of problems
with with rapid recovery when we still have disrupted supply chains.
So this could be No, it's not going to be
totally smooth sailing. Well, I'm curious when you look at
the supply chains. We've been talking a lot about some
of the inflationary pressures out there, whether it's in some
of the commodities or now and some of the consumer
staples here. Some of that, of course is so to
(14:00):
tie to the economy sort of reheating, but a lot
of that is also tied here to the disruptions that
we had because of COVID. And I'm wondering if maybe that, uh,
if we if you consider some of those disruptions to
be temporary, that the inflationary pressures might not be as
heavy as some people think. Yeah, I think it's going
to be important, and I think the people have fed
(14:20):
know this that core inflation is actually not a sufficient
a sufficient statistic here that even you know, normally we
think that okay, this transitory stuff is basically food and energy,
but now there's gonna be transitory shortage as well, you
know chips uh number uh the as a shortage of containers.
So there's a lot of sort of unusual disruptions, all
(14:42):
of which is not fundamental, all of which doesn't mean
that we are actually are seeing an up arise in
underlying inflation. It just means that we're hitting some some
bottlenecks as we come back from a highly disrupted economy,
and stuff that should be disregarded in terms of study policy.
And so we're to don't you all have big buttons
that say, don't panic on the inflation troun sending policy
(15:05):
from a monetary policy front there when it comes to inflation,
when it comes to labor data. But there's also, of
course what the government is up to and asset prices. Well,
maybe a bit of inflation pressure took a leged around
today because they were worried about capital gains taxes coming forward.
What do you think about the inevitability or not of
tax increases and what it means for the overall economy. Well, yeah,
(15:29):
there's going to be I mean it's a little bit
bit weird, right. We had this is something that Biden
had said all along he was going to try to
do And now he says, I'm going to try to
do what I promised I was going to do in
the market. Although we get if a one percent fall
in stock prices is is all that you get from
a really major increase in capital gains taxes, that's that's
not a big problem. But yeah, I mean the Biden
(15:53):
has an ambitious a gender. Um, we have some fiscal space.
Interest rates are extremely low, We've have learned the debt
fear through exaggerated. But we don't have infinite fiscal space.
So some significant tax increases are going to be part
of the story. Um, and Biden is trying to do
those with not hitting the middle class at all. So
(16:14):
it's supposed to be corporate taxes and then high taxes,
high incomes, capital gains. Um. It's but something like that
is pretty much inevitable unless everything is you know, fails becauld. Still,
this stiff stuff could still stumble in Congress. It's possible
still that that you know, they need all fifty senators
(16:35):
but plus Kamala Harris to pass any of this stuff.
But but assuming that they're going to get through with
this stuff, there are going to need some taxes to
pay for at least part of it. Well, you say
that we don't have infinite fiscal space, but of course
at least we appear to have a lot more than
maybe people would have guessed several years ago, and we
have really big deficits and for a long time now
much inflation. Does your field have a good way of
(16:58):
measuring or estimating how much fiscal space we have? No,
we don't, I mean the the I mean the best
thing that we have is just actually ask uh what
how much? Uh? We We have some notion of what
what would it take to stabilize the ratio of debt
(17:20):
to GDP, but no idea of what the maximum number is.
It's really hard to find any examples of hitting that maximum,
and at least for our country like the United States,
that borrows in its own currency and is regarded as
as fundamentally as a sound responsible country. So it's not
clear that there's any pressing limit. There's a much more
obvious thing, which is inflation. If you are going to
(17:42):
overheat the economy, then that's functional finance. If you say,
what how much spending is too much for us to
have the capacity to meet the demand, But then we
have monetary policy to contain of that. So the only
thing we can really say is that wherever the limits
to debt are, they appear to be quite some ways off.
There have a vast countries have run levels of debt
(18:04):
to GDP there are a hundred points higher than where
we are without having a crisis. And so there's nothing,
there's no visible constraint on us right now except that
except that if you know, if we're gonna be running
persistent deficits of ten percent of GDP, that's not going
to be doable just because of the inflationary pressure. But
it's it's amazing how much people manage to convince themselves
that that there was a red line that we can't
(18:26):
cross somewhere nine GDP GDP. None of those things are
actually borne out by the historical evidence. So if we
ever do get to a point where we can sort
of visibly see what that level is, what that line
of the sand is, what's the reaction function functional? More importantly,
how fast can that reaction function uh sort of work
to sort of alleviate the fallout from that? Well, you know,
(18:49):
we have a being again country that bars in our
own currency. We have Uh, it's really hard I actually
tried to in the past. I tried to model uh
a crisis could look like, how how could you even
have a fast moving crisis for a country like the
United States, And you try to find a historical example
(19:09):
that actually of a country that in any way looks
like US, where there have been cases where people have
lost some confidence in the government's willingness to pay its bills.
But all that happens under those circumstances is that the
currency weekends, which is not the worst thing in the world.
The closest you can get this you can go to
France and nineteen twenty six, and they had a fear
that they weren't actually going to be willing to pay
(19:31):
off their debts from World War One, um, but nothing
really terrible happened. The finance minister lost his job, but
nothing really terrible happened to the real economy. And I
think the same is true for us now. Paul. One
topic that people are talking a lot about these days
is you yourself. Paul Krugman, who was a big adam
to his essay on your intellectual evolution. I guess you
(19:52):
can describe it. And there's actually, you know, people are
noticing that there's sort of a difference emerging between say,
your views on certain things in Larry Summers you mentioned
last time. Do you even do you think it's born
out of an ideological disagreement or are you operating from
the same toolkit and just coming to different conclusions on
things like inflation, stimulus and so forth. We have very
(20:17):
much the same toolkit. I mean, Larry and I essentially
had the same teachers, have essentially looked at the world
the same way. Um, and I think we're just somehow,
I have to admit I'm a little puzzled. I mean,
I understand the worry that the same that we're doing
more stimulus than we need, and I'd say, well it's
not really stimulus, but still that we're throwing a lot
(20:38):
of money at the economy. I understand why Larry thinks
that minetarry policy can't be used to stabilize inflation. That
seems to me to be a new principle that I
hadn't heard before. But but look, with economics is not
an exact science, and smart people, even smart people, have
the same general framework, come to the data and reach
(21:02):
different conclusions. And if if some of the conclusions seem
awfully vehement. Well, you know, if if you're not going
to stand up for your conclusions, who will pool Is
there a difference in prioritization perhaps as well. Obviously a
lot of central banks out there are primarily focused on inflation,
but the US has this dual mandate labor market and inflation,
(21:25):
and more and more it becomes a labor market for everyone,
not just the few. And I'm interested as to whether
that nuance is something that certain economists are quite aligned with. No,
I don't think, well, I've got I mean, I can't psychoanalyze.
I mean, but it's not just very Summers Olivia Blanchard,
(21:47):
former chief. It comes to the I m F. And
it is also concerned that we're overdoing it um and
this is really I mean, I would say that that
part of the question is what you Yeah, there are
risks on all sides. Which of them do you think
our biggest? And I at least was very much. I
(22:09):
went through I spent months, years shouting into the wind
and the over sized fiscal policies of the Obama administration,
and my sense was that they missed a not just
an economic window, but they missed a political window by
going too small at the beginning. They ended up, you know,
(22:30):
half a loaf ended up being politically worse than none
because then people say, oh, you tried statements and didn't work,
and so there was a terrible Uh we we paid
a price for for many years. We're still in some
ways paying a price for that underpowered fiscal policy. So
I'm in the go big school. Uh And as I
used as I said, right, this is uh not God
(22:51):
administration that's doing things the way I would have wanted
Obama to do it. And so I'm high on it.
Maybe others who don't didn't have exactly the same life trajectory,
will will come up with a different set of priorities.
But I but I'm really pretty vehement on that. This
is the chance you've got to what's very likely a
transitory democratic you know, Grazer thin and transitory democratic control
(23:14):
of Congress. Uh. This is a chance to get a
lot of stuff done, and you have to take some
risks of of going big in order to do that.
So far, of course, in these first hundred days, we
have seen Biden at least try to go big. Here.
I am curious about trade policy. Here is something that
he has just now starting to address, uh, something that is,
of course as an issue that's been lingering now through
several administrations, and I'm wondering doesn't matter. Is it as
(23:36):
critical now as it might have been, say, eight years
ago or you know, sixteen years ago. Actually, trade policy
has always been overrated. I mean it's uh. I say
that as somebody who's spent the largest part of his
life working on trade policy. But it's one of those
issues where the closure you are to the subject, the
less melodramatic you get about how much it matters. The
(23:57):
difference between two percent of four percent terrorists is not
a big deal. It's there, It's just not the the U. S.
Trade policy has not been an important factor for our
economy um as a whole for a long time. It's
it's big for particular sectors, but really for the economy
as a whole, is not a big deal. Um. And
that's a good thing, because I think that we're really
(24:19):
Biden is is not really rolling back uh, you know,
everything Trump did uh there to probably end up I
hope that we'll end up will stop imposing national security
tariffs on Canada. But are we going to see a
return to the kind of pro globalism agenda that that
took place in the past, I don't think so the
(24:42):
uh there, it's it's not that important. But it's also
politically the Trump sort of created facts. Uh they nobody
Given everything else on his plate, why would the Biden
administration take the risk of being seen as soft on China.
So in a lot of ways we were. I think
we have had a permanent turn away. We're not going
(25:04):
to have any big new trade agreements for the foreseeable future.
We're probably not even going to unwind all that many
of the Trump tariffs UM. But luckily that's it's not
that critical. So it was the opening up the globalization
not that big of a deal either. I mean, if
the turnaway is not that big of a deal, all
that stuff, China entering the w t O, and when
(25:25):
we were we were in the globalization mood. Was that
all overstated in terms of its impact on anything, Well
not really. There's theres a difference between tariff policy and
UM and things technological developments that enable greater globalization. So
most of the rise we had an extraordinary As of
nineteen eighty, world trade as a share of GDP was
(25:48):
basically the same as it was in nineteen thirteen. All
of the everything that happened up to that point was
really just the recovery to where things had been before
the World Wars. But the surge and trade that took
place after that hyper globalization that went mattered quite a lot.
You can try to do estimates it. It significantly added
to global growth, but that's largely because a lot of
(26:10):
that was not about really it wasn't mostly just about
reducing tarists. Tarris were already pretty low by the nineteen eighties.
It was about finally learning what to do with containerships,
about learning to manage these global supply chains. And that
mattered a lot, and particularly mattered for developing countries, but
even for countries like the United States, that was a
significant gain. And that's not going away. When we talk
about globalization, stolling out globalization is the I M. S
(26:34):
term for it. Uh, it's not. We're not talking about
rolling back. We're not talking about going back to the
world as it was. We're talking about not having trade,
having made trade grow a little bit more slowly than
GDP instead of much faster than GDP in the decade ahead. Um.
And the point is that that change is not a
huge deal. It's it's not to say that globalization didn't matter,
(26:55):
although again it's people get global only. I guess what
the al term. People like to talk about that stuff
because it sounds important that sometimes it is, but it's
trade policy person paris within the range that we're seeing.
It's just not that big a deal. And that's it
for what you missed this week. If you like to show,
(27:16):
make sure to subscribe and rate us at Apple podcast
or wherever you listen to podcasts. You can catch our
show every weekday from three thirty to five pm on
Bloomberg TV and from four to five pm on Twitter.
Thanks for listening and have a great week.
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