1 00:00:02,520 --> 00:00:13,760 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 2 00:00:13,840 --> 00:00:17,880 Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern 3 00:00:18,200 --> 00:00:22,000 Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business App. 4 00:00:22,360 --> 00:00:25,680 Speaker 1: Listen on demand wherever you get your podcasts, or watch 5 00:00:25,760 --> 00:00:27,040 Speaker 1: us live on YouTube. 6 00:00:27,200 --> 00:00:29,320 Speaker 2: Two years ago, he used my economist to the yere. 7 00:00:29,320 --> 00:00:33,720 Speaker 2: He had an optimism about the American economy. Admitst recession 8 00:00:34,159 --> 00:00:37,120 Speaker 2: at gloom. Neil Doutta takes a continued victory lap. He's 9 00:00:37,120 --> 00:00:40,920 Speaker 2: with Renaissance at Macro this morning, stop by the FED show. 10 00:00:41,000 --> 00:00:43,720 Speaker 2: He was so wound up about the FED meeting was 11 00:00:43,760 --> 00:00:46,800 Speaker 2: he he called my people and said, I demand to 12 00:00:46,840 --> 00:00:49,680 Speaker 2: come on. Okay, joining us now because he demanded to 13 00:00:49,680 --> 00:00:51,800 Speaker 2: come on, Neil dota. Neil, let's go back to the 14 00:00:51,880 --> 00:00:54,760 Speaker 2: last FED meeting. Why did you go mental? Why did 15 00:00:54,800 --> 00:00:55,920 Speaker 2: you say I gotta come on? 16 00:00:55,960 --> 00:01:01,000 Speaker 3: The FED decides, Well, thanks for having me on, Tom, 17 00:01:01,040 --> 00:01:04,880 Speaker 3: Happy New Year. Well, I would just say that it 18 00:01:04,920 --> 00:01:08,440 Speaker 3: was a complete one eighty from the meeting right before 19 00:01:08,520 --> 00:01:12,360 Speaker 3: that when they said they wouldn't prejudge policy outcomes right 20 00:01:12,400 --> 00:01:14,600 Speaker 3: after the election, and what do they do in December? 21 00:01:15,440 --> 00:01:19,880 Speaker 3: They prejudged policy outcomes before anything even happened, basically taking 22 00:01:19,920 --> 00:01:26,200 Speaker 3: out insurance some potential tariffs before you know, Trump even 23 00:01:26,760 --> 00:01:27,880 Speaker 3: takes the oath of office. 24 00:01:28,000 --> 00:01:29,360 Speaker 2: I thought that was quite revealed. 25 00:01:30,120 --> 00:01:33,720 Speaker 3: So, you know, this idea that the fedily responding to 26 00:01:33,760 --> 00:01:37,800 Speaker 3: the data and adjusting their forecasts, I don't really think 27 00:01:37,840 --> 00:01:41,200 Speaker 3: that washes if you look at how much the data 28 00:01:41,200 --> 00:01:43,640 Speaker 3: surprised on the upside with respect to March. I mean, 29 00:01:43,680 --> 00:01:46,680 Speaker 3: it would make more sense to push off raid cuts 30 00:01:46,680 --> 00:01:50,200 Speaker 3: at that meeting, but in December, you know, rasing two 31 00:01:50,240 --> 00:01:53,480 Speaker 3: cuts given the forecast revisions I thought was a little 32 00:01:53,480 --> 00:01:55,560 Speaker 3: bit much. So this was really about a balance of 33 00:01:55,640 --> 00:02:00,560 Speaker 3: risks story that they explicitly said that wouldn't do. 34 00:02:01,000 --> 00:02:04,880 Speaker 2: The higher yields and the attendance strong dollar. Does that 35 00:02:05,200 --> 00:02:07,320 Speaker 2: force or cause a slowdown? 36 00:02:09,120 --> 00:02:10,480 Speaker 3: I think so. I mean, when you look at the 37 00:02:10,560 --> 00:02:13,000 Speaker 3: nature of why interest rates had been going up, it 38 00:02:13,040 --> 00:02:15,320 Speaker 3: has very little to do with a rerating of nominal 39 00:02:15,320 --> 00:02:17,840 Speaker 3: growth expectations. I mean, if you look at the data, 40 00:02:18,800 --> 00:02:21,040 Speaker 3: you know, the your own Bloomberg Surprise Index has been 41 00:02:21,120 --> 00:02:25,320 Speaker 3: weakening in recent weeks, so the economic data has been slowing. 42 00:02:25,880 --> 00:02:28,360 Speaker 3: You know, if you look at inflation expectations, both of 43 00:02:28,440 --> 00:02:31,960 Speaker 3: surveys of consumers and businesses, they've been falling. So you know, 44 00:02:32,040 --> 00:02:34,200 Speaker 3: my sense is that this has something to do that's 45 00:02:34,240 --> 00:02:37,720 Speaker 3: not related to the data. I think it has to 46 00:02:37,720 --> 00:02:40,240 Speaker 3: do with term premiums. Maybe that's a function of QT. 47 00:02:40,440 --> 00:02:42,560 Speaker 3: Maybe that's a function of what's going on globally. You're 48 00:02:42,560 --> 00:02:46,880 Speaker 3: seeing rates go up in Japan for example. You know, 49 00:02:46,960 --> 00:02:50,440 Speaker 3: maybe there's a you know, risk around deficits and so 50 00:02:50,720 --> 00:02:52,880 Speaker 3: you know there's going to be more treasury issues relative 51 00:02:52,880 --> 00:02:54,799 Speaker 3: to the demand for treasuries. I mean, these are all 52 00:02:54,840 --> 00:02:57,560 Speaker 3: things that push up the term premium, but it doesn't 53 00:02:57,600 --> 00:03:01,040 Speaker 3: really have to do with growth expectations. And that the 54 00:03:01,080 --> 00:03:05,040 Speaker 3: term premium is going up, that's a tightening of financial conditions, right, 55 00:03:05,040 --> 00:03:08,040 Speaker 3: I mean, the declining term premium was a big driver 56 00:03:08,240 --> 00:03:10,800 Speaker 3: of you know, sort of risk appetite, you know, stronger 57 00:03:10,800 --> 00:03:15,680 Speaker 3: equity private you know in recent decades, frankly, and you know, 58 00:03:15,720 --> 00:03:17,640 Speaker 3: to the extent that's going away, that's going to be 59 00:03:17,639 --> 00:03:19,360 Speaker 3: a headwind for stocks. 60 00:03:19,800 --> 00:03:22,040 Speaker 4: Neil, Neil, I'm at an equity guy. All I know 61 00:03:22,040 --> 00:03:24,280 Speaker 4: about the bond market is bond prices go up, yields 62 00:03:24,360 --> 00:03:24,840 Speaker 4: go down. 63 00:03:24,880 --> 00:03:25,679 Speaker 2: That's mailed that. 64 00:03:26,960 --> 00:03:29,639 Speaker 4: But I got my fetter reserved cutting interest rates. Why 65 00:03:29,639 --> 00:03:33,400 Speaker 4: are my yields in this bond market thing going up? 66 00:03:33,440 --> 00:03:34,920 Speaker 4: I thought the yield should be going down. 67 00:03:36,800 --> 00:03:38,160 Speaker 2: Yeah, I mean it's a good question. 68 00:03:38,400 --> 00:03:41,840 Speaker 3: I think. You know, obviously some rates are coming down. 69 00:03:41,960 --> 00:03:45,360 Speaker 3: Some private sector borrowing rates have been coming down alongside 70 00:03:45,400 --> 00:03:48,000 Speaker 3: the FEEDI using so for example, helock rates have been 71 00:03:48,040 --> 00:03:52,360 Speaker 3: coming down, Auto loan rates have been coming down. You know, 72 00:03:52,720 --> 00:03:55,200 Speaker 3: prime rates obviously have been coming down because those are 73 00:03:55,280 --> 00:03:58,840 Speaker 3: very much keyed off what the FED is doing. But 74 00:03:59,200 --> 00:04:02,960 Speaker 3: you know, things like more rates, those have been high elevated, 75 00:04:03,240 --> 00:04:07,440 Speaker 3: and yeah, and as I mentioned, I mean that's you know, 76 00:04:07,520 --> 00:04:11,440 Speaker 3: to some extent, it's it's out of the fed's control. 77 00:04:11,520 --> 00:04:13,640 Speaker 3: I mean, I think one reason why they're going up 78 00:04:13,800 --> 00:04:16,960 Speaker 3: is because, you know, at some level, the economy has 79 00:04:17,000 --> 00:04:19,359 Speaker 3: been doing a little bit better, at least initially after 80 00:04:19,440 --> 00:04:23,159 Speaker 3: the September meeting, somewhat better than expected. But I don't 81 00:04:23,160 --> 00:04:26,480 Speaker 3: think that goes far enough to explain why interest rates 82 00:04:26,480 --> 00:04:28,320 Speaker 3: have backed up. So I think that's part of the reason, 83 00:04:28,320 --> 00:04:30,400 Speaker 3: but it's not really the bulk of the reason. 84 00:04:30,520 --> 00:04:33,279 Speaker 4: What's the FED focusing on here, Neil, do you think 85 00:04:33,400 --> 00:04:37,760 Speaker 4: is it? Is it the absolute inflation number? Is it 86 00:04:37,839 --> 00:04:40,719 Speaker 4: the labor market? What is the FED focusing on these days? 87 00:04:40,760 --> 00:04:42,159 Speaker 2: Do you think? Well? 88 00:04:42,160 --> 00:04:44,000 Speaker 3: I mean, I think to the extent that the September 89 00:04:44,040 --> 00:04:46,159 Speaker 3: meeting was a focus on the labor market, I think 90 00:04:47,000 --> 00:04:50,240 Speaker 3: December one kind of put inflation back in the driver's seat. 91 00:04:50,279 --> 00:04:52,680 Speaker 3: I mean, they're clearly all you have to do is 92 00:04:52,760 --> 00:04:56,880 Speaker 3: go through the document that they release with, you know, 93 00:04:56,880 --> 00:04:59,440 Speaker 3: with the Summary of economic projections, and go to the 94 00:04:59,480 --> 00:05:04,320 Speaker 3: balance of risks. Right, you have a overwhelming majority of 95 00:05:04,760 --> 00:05:07,760 Speaker 3: participants on the f MC seeing that the balance of 96 00:05:07,839 --> 00:05:10,160 Speaker 3: risk to core inflation are skewed to the upside. It 97 00:05:10,279 --> 00:05:13,240 Speaker 3: completely flipped from where they were in September. So I 98 00:05:13,279 --> 00:05:16,000 Speaker 3: think the real life of inflation data has taken on 99 00:05:16,040 --> 00:05:19,880 Speaker 3: a lot more importance than it did, you know, maybe 100 00:05:19,880 --> 00:05:20,560 Speaker 3: three months ago. 101 00:05:20,640 --> 00:05:22,719 Speaker 2: And Neil done it with the Renaissance Macro. He'll be 102 00:05:22,760 --> 00:05:25,200 Speaker 2: with us for the entire half hour. I do want 103 00:05:25,240 --> 00:05:27,800 Speaker 2: to point out that he works with Jeffrey Degraph, who 104 00:05:27,800 --> 00:05:30,920 Speaker 2: had a better than good two thousand and four. We're 105 00:05:30,920 --> 00:05:33,600 Speaker 2: hoping to get mister mister de Graph is very tough 106 00:05:33,600 --> 00:05:36,080 Speaker 2: to me, you know, it sounds like it we can 107 00:05:36,080 --> 00:05:38,760 Speaker 2: get done anytime we want. Jeff to Graph is just 108 00:05:38,800 --> 00:05:42,160 Speaker 2: like absolutely impossible to get what do you learn from 109 00:05:42,240 --> 00:05:44,520 Speaker 2: Jeff to graph right now, Neil dout it when you 110 00:05:44,680 --> 00:05:48,160 Speaker 2: tie in is world class equity coverage into your call 111 00:05:48,200 --> 00:05:51,240 Speaker 2: of a slowing economy, how do you synthesize those two? 112 00:05:52,839 --> 00:05:56,400 Speaker 3: Well, I mean I would say that the market has 113 00:05:56,520 --> 00:05:59,560 Speaker 3: been is over sold, you know, so that's you know, 114 00:05:59,640 --> 00:06:02,240 Speaker 3: reasonably good setup going in uh, you know, into the 115 00:06:02,279 --> 00:06:04,880 Speaker 3: new year, so you're sort of probably due for a bounce. 116 00:06:06,240 --> 00:06:08,440 Speaker 3: But I do think interest rates up at these levels 117 00:06:08,480 --> 00:06:12,160 Speaker 3: concern him, and so you know, that's something to keep 118 00:06:12,200 --> 00:06:14,800 Speaker 3: in and keep in mind, you know. For my own part, 119 00:06:14,839 --> 00:06:17,760 Speaker 3: I mean I would say that, you know, really, to me, 120 00:06:17,960 --> 00:06:22,880 Speaker 3: the big the big story, frankly, is the performance of housing, right. 121 00:06:22,920 --> 00:06:24,880 Speaker 3: I mean, this is why you know, you made Economist 122 00:06:24,880 --> 00:06:26,400 Speaker 3: of the Year back in twenty twenty three. 123 00:06:26,800 --> 00:06:28,840 Speaker 2: I didn't get that. I didn't I didn't get that back. 124 00:06:28,880 --> 00:06:31,240 Speaker 3: I didn't get it for twenty twenty four time, unfortunately. 125 00:06:33,000 --> 00:06:35,280 Speaker 3: But you know, I would just say that one of 126 00:06:35,320 --> 00:06:37,159 Speaker 3: the reasons why I made that, made the calls I 127 00:06:37,200 --> 00:06:39,320 Speaker 3: made in twenty for twenty you know, twenty twenty three, 128 00:06:39,600 --> 00:06:42,200 Speaker 3: is because at the end, you know, two years ago, 129 00:06:42,320 --> 00:06:45,000 Speaker 3: at the end of twenty twenty two, you know, the 130 00:06:45,080 --> 00:06:49,760 Speaker 3: FED was dialing back kind of the hikes, and housing 131 00:06:49,800 --> 00:06:52,320 Speaker 3: stocks were outperforming. So that's kind of a you know, 132 00:06:52,600 --> 00:06:56,040 Speaker 3: an interesting Now you have the FED cutting and housing 133 00:06:56,040 --> 00:06:58,920 Speaker 3: stocks are underperforming, so you know, I think that the 134 00:06:59,200 --> 00:07:01,839 Speaker 3: underperformance of home building is I think an important kind 135 00:07:01,839 --> 00:07:03,320 Speaker 3: of Yeah, Neil, I. 136 00:07:03,320 --> 00:07:08,240 Speaker 2: Got a fiery response out on YouTube and the housing market. 137 00:07:08,320 --> 00:07:12,120 Speaker 2: What is your insight of where the housing market goes 138 00:07:12,120 --> 00:07:13,640 Speaker 2: for twenty twenty five. 139 00:07:15,400 --> 00:07:19,320 Speaker 3: Well, I think it's not going to look particularly good 140 00:07:19,400 --> 00:07:21,720 Speaker 3: as we go into the spring selling season because mortgage 141 00:07:21,760 --> 00:07:24,400 Speaker 3: rates are running plose to seven percent. I mean, with 142 00:07:24,440 --> 00:07:26,880 Speaker 3: the labor markets cooling, the math doesn't work for a 143 00:07:26,880 --> 00:07:29,880 Speaker 3: lot of people. And I think that's the primary issue 144 00:07:29,960 --> 00:07:32,240 Speaker 3: right now with respect to housing. 145 00:07:32,320 --> 00:07:33,280 Speaker 2: I mean, if you look at. 146 00:07:33,120 --> 00:07:38,680 Speaker 3: Home building, new builders, new housing, if you look at 147 00:07:38,800 --> 00:07:42,120 Speaker 3: single family homes for sale that have been completed, that 148 00:07:42,240 --> 00:07:45,320 Speaker 3: number is up over fifty percent against last year. So 149 00:07:45,360 --> 00:07:47,760 Speaker 3: there's slack building in the new housing market. I think 150 00:07:47,800 --> 00:07:52,040 Speaker 3: Paul mentioned sort of the increasing inventory situation in parts 151 00:07:52,080 --> 00:07:53,360 Speaker 3: of the South and. 152 00:07:55,640 --> 00:07:56,120 Speaker 2: The West. 153 00:07:56,160 --> 00:07:58,360 Speaker 3: I mean, remember that's like the meat of the market, 154 00:07:58,480 --> 00:08:01,480 Speaker 3: right so if inventories are going up in those places, 155 00:08:02,320 --> 00:08:05,760 Speaker 3: that means that construction is going to be coming down. Yeah, 156 00:08:05,800 --> 00:08:07,360 Speaker 3: that's where most construction happens. 157 00:08:07,400 --> 00:08:11,040 Speaker 2: Frankly, you know this is important. Eruption. 158 00:08:11,120 --> 00:08:12,600 Speaker 3: Employment is at risk. 159 00:08:12,640 --> 00:08:15,160 Speaker 2: Now I want to go to Neldata and Paul Sweeney 160 00:08:15,160 --> 00:08:18,840 Speaker 2: Lisa jump in on this. This is important. Isn't where 161 00:08:18,880 --> 00:08:22,360 Speaker 2: we live in aberration? Paul Sweeney like, where we live 162 00:08:22,480 --> 00:08:23,200 Speaker 2: isn't normal? 163 00:08:23,320 --> 00:08:26,120 Speaker 4: No, because I think the density we have here in 164 00:08:26,200 --> 00:08:29,400 Speaker 4: the metro New York area is so crazy. That and 165 00:08:29,440 --> 00:08:32,360 Speaker 4: Lisa's looking for a new are you looking for. 166 00:08:32,240 --> 00:08:35,400 Speaker 2: Six thousand square Now that's the backyard. 167 00:08:35,679 --> 00:08:38,000 Speaker 5: But it's like getting out bid by these offers. That 168 00:08:38,120 --> 00:08:39,880 Speaker 5: is crazy. Like a house goes on the market for 169 00:08:39,920 --> 00:08:41,920 Speaker 5: six hundred thousand in New Jersey and. 170 00:08:41,880 --> 00:08:44,160 Speaker 2: It sells for seven forty. It's me and it's like, 171 00:08:44,200 --> 00:08:44,839 Speaker 2: how do you get it? 172 00:08:45,000 --> 00:08:47,720 Speaker 4: But that's not the rest of the world here, So hey, Neil, 173 00:08:47,760 --> 00:08:50,559 Speaker 4: so let's stop back. You know, we got the labor market, 174 00:08:50,559 --> 00:08:53,959 Speaker 4: the real estate market. How's the consumer doing out there? 175 00:08:53,960 --> 00:08:56,640 Speaker 4: How do you think about the consumer here in twenty 176 00:08:56,640 --> 00:08:57,160 Speaker 4: twenty five. 177 00:08:59,600 --> 00:09:01,280 Speaker 3: I mean, I think it's going to be tough to 178 00:09:01,320 --> 00:09:04,480 Speaker 3: sustain the kind of consumption pace we saw last year, right, 179 00:09:04,520 --> 00:09:06,959 Speaker 3: I mean, if the labor markets are slowing and wage 180 00:09:06,960 --> 00:09:09,640 Speaker 3: growth is cooling, which I think is clearly happening because 181 00:09:10,000 --> 00:09:12,400 Speaker 3: you know, things like hiring rates are down, puts rates 182 00:09:12,440 --> 00:09:14,280 Speaker 3: are down. You know, there's not really much need for 183 00:09:14,360 --> 00:09:16,440 Speaker 3: firms to be paying up and bidding up the wages 184 00:09:16,480 --> 00:09:19,880 Speaker 3: of their workers. So with the slack in the labor market, 185 00:09:20,320 --> 00:09:22,280 Speaker 3: that's you know, slowly building. I mean, you know, the 186 00:09:22,360 --> 00:09:24,960 Speaker 3: labor market's not collapsing, but it's hard to be bullish 187 00:09:25,040 --> 00:09:27,880 Speaker 3: on the consumer given that environment. And I also think 188 00:09:27,920 --> 00:09:30,240 Speaker 3: there's probably a bit of an asymmetry, right, I mean, 189 00:09:30,559 --> 00:09:33,240 Speaker 3: you know, the thing that's been supporting I think consumption 190 00:09:33,360 --> 00:09:38,160 Speaker 3: has been you know, rising wealth, you know, sort of 191 00:09:38,800 --> 00:09:41,280 Speaker 3: equity prices going up, home price is going up. And 192 00:09:41,280 --> 00:09:43,679 Speaker 3: to the extent that that doesn't continue, I mean, we've 193 00:09:43,720 --> 00:09:46,560 Speaker 3: seen some slowing in stocks. I mean there's probably an 194 00:09:46,600 --> 00:09:49,280 Speaker 3: asymmetry there right where modest slowing gets you maybe an 195 00:09:49,320 --> 00:09:52,079 Speaker 3: outsized slow down in right. 196 00:09:52,160 --> 00:09:54,560 Speaker 4: So that shape and K shaped Tokany, here's. 197 00:09:54,320 --> 00:09:56,520 Speaker 2: The second time you've mentioned I like it. It makes. 198 00:09:58,200 --> 00:10:01,480 Speaker 4: Exactly the K shaped to Kanya. It kind of makes 199 00:10:01,480 --> 00:10:04,240 Speaker 4: sense to me. So what should the FED do given that? Here? 200 00:10:04,280 --> 00:10:05,720 Speaker 4: I mean again, I guess if you look at the 201 00:10:05,760 --> 00:10:09,280 Speaker 4: warp function w I RP go on the Bloomberg Terminal 202 00:10:09,960 --> 00:10:12,880 Speaker 4: suggests maybe a couple of rate cuts this year. Should 203 00:10:12,880 --> 00:10:13,720 Speaker 4: the Fed do more? 204 00:10:13,840 --> 00:10:14,240 Speaker 2: Do you think? 205 00:10:16,360 --> 00:10:21,040 Speaker 3: I mean, I think they will do more because I 206 00:10:21,040 --> 00:10:23,560 Speaker 3: think the data is going to slow and inflation. I mean, 207 00:10:23,920 --> 00:10:26,720 Speaker 3: to me, the most notable thing that's happened, frankly is 208 00:10:26,760 --> 00:10:30,640 Speaker 3: the slowing in rental in rental inflation, housing rental inflation. 209 00:10:30,720 --> 00:10:35,360 Speaker 3: That's been really the main shortfall relative to the Fed's 210 00:10:35,720 --> 00:10:38,200 Speaker 3: longer run inflation objectives, and now that appears to be 211 00:10:38,480 --> 00:10:43,560 Speaker 3: working right, I mean in the favor of disinflation. So 212 00:10:43,640 --> 00:10:46,640 Speaker 3: I think that's important. Obviously we're all watching what's going 213 00:10:46,640 --> 00:10:50,160 Speaker 3: on with the dollar, but that's going to weigh on 214 00:10:50,240 --> 00:10:53,560 Speaker 3: the prices for imported goods, I think so. No, I 215 00:10:53,559 --> 00:10:55,360 Speaker 3: think the Fed's going to be ending up. If I 216 00:10:55,360 --> 00:10:56,960 Speaker 3: had to pick, I'd say that they're going to cut 217 00:10:57,000 --> 00:11:00,199 Speaker 3: more than twice. So I think that the front the 218 00:11:00,240 --> 00:11:03,480 Speaker 3: Yeld Curve is a pretty good place to park your 219 00:11:03,520 --> 00:11:04,280 Speaker 3: money at the moment. 220 00:11:04,640 --> 00:11:06,440 Speaker 2: Neil da I wanted to go there in a dollar 221 00:11:06,520 --> 00:11:09,200 Speaker 2: kitschooks joining us in about two hours, folks with socchin 222 00:11:09,280 --> 00:11:12,000 Speaker 2: and you're just brilliant, but let's let's do let's talk 223 00:11:12,000 --> 00:11:15,679 Speaker 2: to foreign exchange trader Neil Dutta here as well. Are 224 00:11:15,720 --> 00:11:19,800 Speaker 2: the dollar movements Neil Dotta nonlinear or linear like d 225 00:11:20,080 --> 00:11:24,400 Speaker 2: x y one O seven, one o eight, one oh nine, 226 00:11:25,040 --> 00:11:27,440 Speaker 2: or is there a Neil Doutta tip point where things 227 00:11:27,480 --> 00:11:28,559 Speaker 2: begin to unravel? 228 00:11:31,720 --> 00:11:34,160 Speaker 3: I mean, I think there's probably something to the idea 229 00:11:34,200 --> 00:11:36,280 Speaker 3: that you know, at a certain point, like more things 230 00:11:36,280 --> 00:11:38,520 Speaker 3: start breaking. But you know, let's I mean, when you 231 00:11:38,559 --> 00:11:42,240 Speaker 3: have like one percent currency moves, that's a big deal, right, 232 00:11:42,320 --> 00:11:45,320 Speaker 3: I mean, so I think the dollar is concerning across 233 00:11:45,440 --> 00:11:48,400 Speaker 3: multiple dimensions. I mean, Number one, obviously, it weighs on 234 00:11:48,520 --> 00:11:50,920 Speaker 3: US exporters, particularly manufacturing. 235 00:11:50,960 --> 00:11:51,640 Speaker 2: That's number one. 236 00:11:51,720 --> 00:11:55,160 Speaker 3: Number two, going back to the equity market discussion, it 237 00:11:55,200 --> 00:11:58,920 Speaker 3: weighs on earnings, right, particularly for tech companies that are 238 00:11:58,920 --> 00:12:01,839 Speaker 3: global in nature, and because that's been a big driver 239 00:12:01,960 --> 00:12:05,000 Speaker 3: of US stock prices. I think the fact that the 240 00:12:05,040 --> 00:12:07,439 Speaker 3: dollar has been strengthening is going to weigh on earnings 241 00:12:07,480 --> 00:12:11,800 Speaker 3: and by extension way on stocks. And I think it 242 00:12:11,880 --> 00:12:16,079 Speaker 3: matters for the rest of the world, obviously, particularly emerging markets, 243 00:12:16,120 --> 00:12:18,600 Speaker 3: because they have lots of dollar denominated debts, so the 244 00:12:18,640 --> 00:12:21,760 Speaker 3: cost of financing that goes up, and then you have 245 00:12:21,800 --> 00:12:24,840 Speaker 3: to start worrying about balance of payment problems in em 246 00:12:25,080 --> 00:12:28,720 Speaker 3: which obviously of their slowing that creates a negative feedback loop, 247 00:12:28,840 --> 00:12:32,040 Speaker 3: pushing the dollar up even more. So you know, I think, 248 00:12:32,679 --> 00:12:36,400 Speaker 3: you know, because of safe haven consideration. So yeah, I 249 00:12:36,400 --> 00:12:40,079 Speaker 3: think it's concerning. But again, that's not really a world 250 00:12:40,160 --> 00:12:43,200 Speaker 3: where the Fed can just kind of sit back in 251 00:12:43,280 --> 00:12:46,560 Speaker 3: its chair and say, oh, we're gonna cut twice this year, right, 252 00:12:46,679 --> 00:12:50,760 Speaker 3: So to me, the dollar represents an unambiguous tightening of 253 00:12:50,800 --> 00:12:52,160 Speaker 3: financial market connections. 254 00:12:52,200 --> 00:12:54,880 Speaker 2: Neil Donna, thank you so much. Here's you valuable generous time. 255 00:12:54,920 --> 00:12:58,319 Speaker 2: Here on a Friday morning to start the year. 256 00:12:58,160 --> 00:13:07,079 Speaker 1: Of you're listening to the Bloomberg Surveillance Podcast. Catch us 257 00:13:07,120 --> 00:13:10,439 Speaker 1: live weekday afternoons from seven to ten am Eastern Listen 258 00:13:10,520 --> 00:13:14,079 Speaker 1: on Applecarplay and Android Auto with the Bloomberg Business app, 259 00:13:14,240 --> 00:13:15,960 Speaker 1: or watch us live on YouTube. 260 00:13:16,080 --> 00:13:18,760 Speaker 2: A bond person comes in, Paul, you nailed early. What 261 00:13:18,800 --> 00:13:19,240 Speaker 2: did you say? 262 00:13:19,320 --> 00:13:22,240 Speaker 6: Price up up, yields down, nail down. 263 00:13:22,400 --> 00:13:24,560 Speaker 2: Okay, there we go, We're not going to do that. 264 00:13:24,679 --> 00:13:27,599 Speaker 2: Joining us now. Pria isra with a Friday get the 265 00:13:27,679 --> 00:13:31,520 Speaker 2: year started discussion, and everybody's sitting in their kitchen this 266 00:13:31,600 --> 00:13:35,080 Speaker 2: weekend discussing how much they've lost betting on football and 267 00:13:35,280 --> 00:13:38,880 Speaker 2: also their portfolio. You and I are going to talk 268 00:13:39,679 --> 00:13:45,559 Speaker 2: Jensen trainer sharp right now. Adults in the business say 269 00:13:46,000 --> 00:13:49,440 Speaker 2: how much did I make? But how much risk did 270 00:13:49,440 --> 00:13:53,360 Speaker 2: I make making what I made? And William Sharp out 271 00:13:53,400 --> 00:13:59,199 Speaker 2: at Stanford identified this explain to mere mortals worldwide what 272 00:13:59,240 --> 00:14:01,720 Speaker 2: the sharp rate is and why it matters. 273 00:14:02,320 --> 00:14:04,440 Speaker 6: I love that you're talking about sharp ratio. 274 00:14:04,600 --> 00:14:06,679 Speaker 2: It's great you and I can bring up bar conversation 275 00:14:07,520 --> 00:14:08,559 Speaker 2: on two people here. 276 00:14:09,520 --> 00:14:10,200 Speaker 6: I love it. 277 00:14:10,679 --> 00:14:14,320 Speaker 2: They're sitting at their their table this weekend and they're like, 278 00:14:14,480 --> 00:14:16,680 Speaker 2: why are we not making money? Sharp ratio? 279 00:14:16,840 --> 00:14:16,920 Speaker 3: Go. 280 00:14:17,440 --> 00:14:19,360 Speaker 7: So there's a lot of well I should start with 281 00:14:19,400 --> 00:14:21,040 Speaker 7: happy new Year, thank you for having me. 282 00:14:21,280 --> 00:14:22,200 Speaker 2: I have children. 283 00:14:22,320 --> 00:14:27,560 Speaker 7: Continue. The focus typically is on the return. It's what 284 00:14:27,720 --> 00:14:30,720 Speaker 7: return am I getting? You're getting that return taking risks 285 00:14:30,720 --> 00:14:33,120 Speaker 7: and you know, but you know you're talking about have 286 00:14:33,200 --> 00:14:34,400 Speaker 7: we not made money? 287 00:14:34,480 --> 00:14:35,000 Speaker 6: Enough money? 288 00:14:35,080 --> 00:14:37,880 Speaker 7: I think bond people who thought the Fed starting to 289 00:14:37,880 --> 00:14:40,280 Speaker 7: cut trades, and that was where we were a year ago. 290 00:14:40,520 --> 00:14:42,640 Speaker 7: The Fed's going to cut trades. They typically cut two 291 00:14:42,720 --> 00:14:44,840 Speaker 7: hundred three hundred basis points. You're gonna make a lot 292 00:14:44,840 --> 00:14:47,640 Speaker 7: of money in bonds. I don't think, well that that's 293 00:14:47,640 --> 00:14:50,360 Speaker 7: where they lost money. They put money in stocks. They 294 00:14:50,360 --> 00:14:53,000 Speaker 7: did well. We're in a soft landing. Pretty much every 295 00:14:53,120 --> 00:14:56,800 Speaker 7: risk asset did well. Credit did great. Now you take 296 00:14:56,840 --> 00:14:59,760 Speaker 7: stock and look at the uncertainty. You have the FED 297 00:15:00,320 --> 00:15:02,640 Speaker 7: with an army of PhDs saying we. 298 00:15:02,640 --> 00:15:03,560 Speaker 6: Have a lot of uncertainty. 299 00:15:03,600 --> 00:15:06,400 Speaker 7: We don't know how to manage the cyclical and the structure. 300 00:15:06,440 --> 00:15:09,560 Speaker 7: So we're pausing. And so that's where that shop comes in. 301 00:15:09,840 --> 00:15:13,040 Speaker 7: Let's look at the risk and return. So let's look 302 00:15:13,040 --> 00:15:15,040 Speaker 7: at the return relative to the risk, which is what 303 00:15:15,400 --> 00:15:17,920 Speaker 7: you will you do to sharp ratio. That's where I 304 00:15:17,920 --> 00:15:20,840 Speaker 7: think fixed income. You're getting six seven percent in high 305 00:15:20,960 --> 00:15:24,800 Speaker 7: quality fixed income with not a lot of risk because 306 00:15:24,800 --> 00:15:28,240 Speaker 7: I don't think exactly, and so that your denominator, if 307 00:15:28,240 --> 00:15:30,600 Speaker 7: it's lower, suddenly fixed income makes a lot of sense. 308 00:15:30,600 --> 00:15:33,440 Speaker 2: And I'm one more than one question, folks, and Sweeney's 309 00:15:33,440 --> 00:15:35,640 Speaker 2: going to bring us back to normal. You have a 310 00:15:35,760 --> 00:15:39,880 Speaker 2: superior sharp ratio and the JP Morgan core bond versus 311 00:15:39,880 --> 00:15:43,440 Speaker 2: your peers and versus the index. That's a one year 312 00:15:43,520 --> 00:15:46,880 Speaker 2: sharp ratio. There's a three year look back, there's a 313 00:15:46,960 --> 00:15:50,760 Speaker 2: five year lookback. I'm wedded to the three year sharp ratio. 314 00:15:50,840 --> 00:15:53,400 Speaker 2: Folks of whatever four oh one k plan you've got, 315 00:15:53,640 --> 00:15:56,520 Speaker 2: which duration is the most value to prea miser? 316 00:15:57,520 --> 00:15:59,840 Speaker 7: So I would say I think I do wonder Bob Michael, 317 00:16:01,120 --> 00:16:03,400 Speaker 7: I would say that we look at five year, ten 318 00:16:03,480 --> 00:16:07,160 Speaker 7: year consistency is such a big part of it's our DNA. 319 00:16:07,520 --> 00:16:10,400 Speaker 7: So just making sure that we can consistently outperform it. 320 00:16:10,520 --> 00:16:11,960 Speaker 6: You know, how do you do this? 321 00:16:12,160 --> 00:16:15,320 Speaker 7: You diversify a lot so that the risks are not 322 00:16:15,560 --> 00:16:18,880 Speaker 7: You're not, you know, wedded to one particular risk, and 323 00:16:18,920 --> 00:16:22,160 Speaker 7: you do your research. In a high cost of capital world, 324 00:16:22,240 --> 00:16:25,960 Speaker 7: dispersion is going to be high, meaning some sectors will 325 00:16:25,960 --> 00:16:28,040 Speaker 7: do well and others will not. And I wish I 326 00:16:28,040 --> 00:16:29,960 Speaker 7: could say we know exactly which sectors are going to 327 00:16:29,960 --> 00:16:32,920 Speaker 7: do well. If you diversify well and you do that research, 328 00:16:33,160 --> 00:16:34,720 Speaker 7: that's where you get that superior shock. 329 00:16:34,960 --> 00:16:39,520 Speaker 2: You'll sharp ninety years old out of stay. Is that right? Yeah? Okay, good, 330 00:16:39,600 --> 00:16:41,760 Speaker 2: bring us back to some sense of normal. 331 00:16:42,120 --> 00:16:45,240 Speaker 4: Twenty twenty four fixed income investors got paid to take 332 00:16:45,280 --> 00:16:50,080 Speaker 4: some risk, high yield leverage loans by far the best performers. 333 00:16:51,040 --> 00:16:53,080 Speaker 4: Is that going to spill over into twenty twenty five 334 00:16:53,080 --> 00:16:53,320 Speaker 4: do you. 335 00:16:53,280 --> 00:16:56,800 Speaker 7: Think I think so, and yes, why let's look at fundamentals. 336 00:16:56,840 --> 00:17:00,200 Speaker 7: Fundamentals of the corporate sector is still very wrong. 337 00:17:00,200 --> 00:17:02,520 Speaker 6: It was strong a year ago. It's still strong. 338 00:17:02,680 --> 00:17:06,280 Speaker 7: You're looking at strong balance sheets, strong business models, earnings 339 00:17:06,280 --> 00:17:08,560 Speaker 7: are decent. We're also looking at what a company is 340 00:17:08,600 --> 00:17:10,879 Speaker 7: doing with their debt. Are they re levering up? That 341 00:17:10,880 --> 00:17:14,119 Speaker 7: would make me a little nervous. Mostly they're not. I 342 00:17:14,160 --> 00:17:16,480 Speaker 7: will say, since you talk about high yield and leverage, 343 00:17:16,720 --> 00:17:19,960 Speaker 7: I mean high yield default rates including the restructuring, has 344 00:17:20,000 --> 00:17:22,399 Speaker 7: been one and a half percent. It's low leverage loans 345 00:17:22,400 --> 00:17:24,119 Speaker 7: a little higher. So I think you have to be 346 00:17:24,160 --> 00:17:26,880 Speaker 7: careful what you buy. We like high quality, high yel 347 00:17:26,920 --> 00:17:30,440 Speaker 7: we like parts of leverage loans. I think fundamentals are strong. 348 00:17:30,600 --> 00:17:34,200 Speaker 7: Then let's look at technicals. Technical is extremely strong. People 349 00:17:34,200 --> 00:17:36,200 Speaker 7: are looking at the returns they had in equities and 350 00:17:36,240 --> 00:17:37,840 Speaker 7: they're saying, maybe we should rebalance. 351 00:17:38,160 --> 00:17:40,440 Speaker 6: You look at fixed income. If you're getting or in. 352 00:17:40,440 --> 00:17:43,720 Speaker 7: High yeld, you're getting seven eight percent with lower volatility. 353 00:17:44,240 --> 00:17:46,760 Speaker 7: That's why we're seeing continued inflows into bond funds. So 354 00:17:46,800 --> 00:17:50,320 Speaker 7: I would say technical fundamental very positive for fixed income. 355 00:17:50,520 --> 00:17:52,199 Speaker 7: I think you have another good year as long as 356 00:17:52,240 --> 00:17:53,760 Speaker 7: that soft landing is maintained. 357 00:17:54,040 --> 00:17:57,280 Speaker 4: Are there some industries sectors that are attractive to that 358 00:17:57,359 --> 00:17:59,280 Speaker 4: screen well for you guys in terms of maybe taking 359 00:17:59,280 --> 00:17:59,920 Speaker 4: some credit risk. 360 00:18:00,720 --> 00:18:02,960 Speaker 6: So I would say financials is an area that we like. 361 00:18:03,160 --> 00:18:07,040 Speaker 7: Utilities is another one in investment grade within high yield 362 00:18:07,040 --> 00:18:10,320 Speaker 7: as parts of media and telecom that have been beaten 363 00:18:10,440 --> 00:18:14,080 Speaker 7: up and they've actually started to perform well. And that's 364 00:18:14,080 --> 00:18:16,640 Speaker 7: where but I would say rather than sectors even look 365 00:18:16,680 --> 00:18:20,479 Speaker 7: at companies, you have to drill down into balance sheets 366 00:18:20,520 --> 00:18:22,960 Speaker 7: to make sure you know what you own, particularly as 367 00:18:22,960 --> 00:18:25,680 Speaker 7: you sort of go down that risk spectrum. 368 00:18:26,119 --> 00:18:28,560 Speaker 4: New issuance. We've seen a ton of new issuance in 369 00:18:28,600 --> 00:18:30,320 Speaker 4: the bond market. I mean, did they call you up 370 00:18:30,359 --> 00:18:32,879 Speaker 4: when Morgan standing a Goldman Sachs. They've got new issues, 371 00:18:32,920 --> 00:18:36,080 Speaker 4: so they called JP Morgan Asset Management to buy new issues. 372 00:18:36,119 --> 00:18:38,840 Speaker 4: Are you guys known as Hey, we'll buy pretty much 373 00:18:38,880 --> 00:18:40,960 Speaker 4: anything you got for sale? How do you guys do that? 374 00:18:41,320 --> 00:18:42,920 Speaker 6: Not everything that's for sale. 375 00:18:42,920 --> 00:18:45,320 Speaker 7: We absolutely look at the new issue market, sometimes as 376 00:18:45,320 --> 00:18:47,520 Speaker 7: a new issue premium. As there was we started to 377 00:18:47,560 --> 00:18:50,119 Speaker 7: see the new issue market sort of begin yesterday. We 378 00:18:50,160 --> 00:18:52,520 Speaker 7: would love to buy something with a premium because you're 379 00:18:52,560 --> 00:18:55,000 Speaker 7: getting paid to buy that new bond, which is actually 380 00:18:55,040 --> 00:18:57,320 Speaker 7: going to be more liquid, and you can get out 381 00:18:57,320 --> 00:18:59,399 Speaker 7: of some of your older bonds. We're getting in flows, 382 00:18:59,400 --> 00:19:00,000 Speaker 7: so we're invested. 383 00:19:00,520 --> 00:19:01,200 Speaker 6: I mean, I think. 384 00:19:01,160 --> 00:19:05,080 Speaker 7: January tends to be seasonally a higher issuance month, so 385 00:19:05,119 --> 00:19:08,280 Speaker 7: we expect more issuance. What I'm looking at is net issuance. 386 00:19:08,720 --> 00:19:12,840 Speaker 7: So five years ago, when COVID hit or four five 387 00:19:12,920 --> 00:19:17,360 Speaker 7: years ago, you have this big burst of issuance, And 388 00:19:17,520 --> 00:19:20,840 Speaker 7: what we're seeing now is that issuance is being refinanced. 389 00:19:21,160 --> 00:19:23,200 Speaker 7: If net issuance was picking up a lot, that means 390 00:19:23,240 --> 00:19:24,720 Speaker 7: a corporate sector is getting levered up. 391 00:19:25,119 --> 00:19:27,199 Speaker 6: I might hesitate to buy. 392 00:19:27,240 --> 00:19:29,639 Speaker 7: This is still net issuance we think will be actually 393 00:19:29,680 --> 00:19:32,640 Speaker 7: lower this year compared to last year. Gross issuance will 394 00:19:32,680 --> 00:19:35,200 Speaker 7: be high, but people have two Companies have to refinance, 395 00:19:35,280 --> 00:19:36,520 Speaker 7: Investors have to refinance. 396 00:19:36,600 --> 00:19:39,520 Speaker 2: So Tim Cook watches a new episode of Silo tonight 397 00:19:39,600 --> 00:19:43,679 Speaker 2: on Apple TV, goes mental over the dystopian destruction of 398 00:19:43,760 --> 00:19:46,679 Speaker 2: the world, and he goes out and issues thirty billion 399 00:19:46,720 --> 00:19:49,520 Speaker 2: dollars of bonds. Do you want to buy Meg seven paper? 400 00:19:51,040 --> 00:19:54,240 Speaker 7: I like the fundamentals of the Mac seven what I 401 00:19:54,280 --> 00:19:57,200 Speaker 7: don't love other spreads. I mean they're you're not getting 402 00:19:57,200 --> 00:20:00,840 Speaker 7: paid tight, You're not getting paid. I would rather, Okay, 403 00:20:00,920 --> 00:20:02,680 Speaker 7: you can take the same risk if you take it 404 00:20:02,720 --> 00:20:04,040 Speaker 7: in securitized PHM. 405 00:20:04,119 --> 00:20:07,639 Speaker 6: That requires you. Does that mean so securitized. 406 00:20:07,520 --> 00:20:08,760 Speaker 2: John Tucker's new iPhone? 407 00:20:08,840 --> 00:20:09,000 Speaker 7: Is that? 408 00:20:09,040 --> 00:20:09,560 Speaker 2: What that is? 409 00:20:10,480 --> 00:20:15,440 Speaker 7: That would be a tranched up structured security with more 410 00:20:15,480 --> 00:20:18,880 Speaker 7: consumer risk. I mean there are some corporates in housing, 411 00:20:19,040 --> 00:20:22,400 Speaker 7: single family rental. They take all these loans, they put 412 00:20:22,440 --> 00:20:23,919 Speaker 7: it in a structure and tranch it. 413 00:20:24,040 --> 00:20:26,600 Speaker 2: But Apple's not doing is securitize, right? 414 00:20:26,760 --> 00:20:28,480 Speaker 7: I have to so I would say I'd like to 415 00:20:28,520 --> 00:20:31,200 Speaker 7: take that creditorisk, But where am I getting paid more 416 00:20:31,240 --> 00:20:34,000 Speaker 7: than the seventy eighty basis points you're getting paid? So 417 00:20:34,240 --> 00:20:37,159 Speaker 7: it's more about what return am I getting versus the 418 00:20:37,320 --> 00:20:40,040 Speaker 7: risk I'm taking. And that's why I would say securitize 419 00:20:40,200 --> 00:20:43,720 Speaker 7: will screen better than something like max seven though, I 420 00:20:44,200 --> 00:20:45,560 Speaker 7: you know the fundamentals are strong. 421 00:20:46,000 --> 00:20:48,840 Speaker 4: Are you getting cash inflows into your bond funds these days? 422 00:20:49,080 --> 00:20:51,800 Speaker 4: What are what are your clients doing with allocation? 423 00:20:51,960 --> 00:20:53,480 Speaker 2: Are they putting money into the bond funds? 424 00:20:53,520 --> 00:20:54,600 Speaker 6: We are getting inflows. 425 00:20:54,640 --> 00:20:56,760 Speaker 7: I think the industry is getting I'd like to say, 426 00:20:56,920 --> 00:20:58,760 Speaker 7: you know, are we getting more market share? I don't 427 00:20:58,800 --> 00:21:01,720 Speaker 7: know where the industries get more in flows. We're absolutely 428 00:21:01,720 --> 00:21:04,119 Speaker 7: getting inflows. I think people are looking at all in 429 00:21:04,240 --> 00:21:07,960 Speaker 7: yields and looking at their portfolios and saying, well, maybe 430 00:21:07,960 --> 00:21:10,040 Speaker 7: we should put some in fixed income. The other thing 431 00:21:10,040 --> 00:21:12,840 Speaker 7: they're looking at is cash is giving you four percent 432 00:21:13,520 --> 00:21:16,320 Speaker 7: and a bond fund is giving you five six percent. 433 00:21:16,440 --> 00:21:18,520 Speaker 6: Okay, I'm picking up yield, and so I'm moving up there. 434 00:21:18,520 --> 00:21:20,480 Speaker 2: I got twenty five seconds because you've got to move heat, 435 00:21:20,480 --> 00:21:22,520 Speaker 2: because Bar's got to sit down. It's in his contract 436 00:21:22,560 --> 00:21:25,439 Speaker 2: for two thousand and twenty five. Are you picking up 437 00:21:25,480 --> 00:21:28,639 Speaker 2: carpet yet for the new skyscraper? Are they of the 438 00:21:28,680 --> 00:21:32,160 Speaker 2: designers in saying, Pria, do you want it in maroon? Yep. 439 00:21:32,440 --> 00:21:34,800 Speaker 7: We are very excited about that building. We can see 440 00:21:34,840 --> 00:21:37,639 Speaker 7: it go up in front of us and been inside. 441 00:21:37,920 --> 00:21:40,280 Speaker 7: We haven't, but it does look like it's getting there. 442 00:21:40,320 --> 00:21:42,640 Speaker 7: In seventy eight months, we're totally it'll be done. 443 00:21:42,680 --> 00:21:43,000 Speaker 6: I hope. 444 00:21:43,040 --> 00:21:45,480 Speaker 2: You know. It's like Silo. You look out the windows 445 00:21:45,480 --> 00:21:48,760 Speaker 2: of the cafeteria at Park Avenue and you're not sure 446 00:21:48,760 --> 00:21:51,000 Speaker 2: what you're looking at out there. Now we're doing a remote. 447 00:21:51,040 --> 00:21:53,240 Speaker 4: I'm telling you, Jamie Diamond, right now, when that thing opens, 448 00:21:53,280 --> 00:21:54,040 Speaker 4: we're doing a remote for. 449 00:21:54,080 --> 00:21:56,560 Speaker 2: Pretty Did you see the view she has? Now? Yeah, 450 00:21:56,560 --> 00:22:01,080 Speaker 2: she's important. She's looking at a brick wall like medicine. 451 00:22:00,280 --> 00:22:02,840 Speaker 6: Exactly right now, I'm just looking at the screens. But yes, 452 00:22:02,840 --> 00:22:04,880 Speaker 6: it's a beautiful reading the Bloomberg screens. 453 00:22:04,960 --> 00:22:08,000 Speaker 2: Right well, thank you, you can come back, pre amisser, 454 00:22:08,080 --> 00:22:10,760 Speaker 2: thank you so much. With JP Morgan, a really important 455 00:22:10,760 --> 00:22:13,720 Speaker 2: discussion here earlier on the sharp ratio. If you don't 456 00:22:13,720 --> 00:22:15,960 Speaker 2: know what that is, look it up, study it. But 457 00:22:16,119 --> 00:22:20,760 Speaker 2: I just can't say enough about the financial media return return, 458 00:22:20,920 --> 00:22:24,760 Speaker 2: return return, you know what it's about, the risks along 459 00:22:24,840 --> 00:22:27,520 Speaker 2: the way, matters a little bit. That was a clinic 460 00:22:27,920 --> 00:22:30,359 Speaker 2: with Priam misery of JP Morgan. 461 00:22:30,600 --> 00:22:34,480 Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday 462 00:22:34,520 --> 00:22:37,919 Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto 463 00:22:37,960 --> 00:22:40,920 Speaker 1: with the Bloomberg Business app. You can also listen live 464 00:22:41,000 --> 00:22:44,560 Speaker 1: on Amazon Alexa from our flagship New York station, Just 465 00:22:44,600 --> 00:22:47,480 Speaker 1: say Alexa Play Bloomberg eleven thirty. 466 00:22:47,720 --> 00:22:52,880 Speaker 2: Journeys Down Mike Wilson with Morgan Stanley with succeptionally intelligent 467 00:22:53,000 --> 00:22:56,240 Speaker 2: views on the market. He has not been a raging bull. 468 00:22:56,600 --> 00:23:00,159 Speaker 2: He's been someone who has participated but done it with 469 00:23:00,200 --> 00:23:03,359 Speaker 2: a bit of angst and caution as well. There's the 470 00:23:03,400 --> 00:23:07,960 Speaker 2: Mike Wilson word. Mike Wilson nimble. If I'm nimble after 471 00:23:08,040 --> 00:23:10,360 Speaker 2: five days down in a row or whatever it is, 472 00:23:10,760 --> 00:23:13,760 Speaker 2: how nimble am I into Monday? What do I do 473 00:23:14,000 --> 00:23:19,199 Speaker 2: now to reposition with confidence? Well? 474 00:23:19,200 --> 00:23:21,560 Speaker 8: Good morning, Tom, Look I think and happy New Year. 475 00:23:21,640 --> 00:23:23,760 Speaker 8: I you know, I think what you said earlier is 476 00:23:23,800 --> 00:23:27,360 Speaker 8: listening to your chatting about do I get in now? 477 00:23:27,480 --> 00:23:29,720 Speaker 8: Do I what do I do? And that's really not 478 00:23:30,240 --> 00:23:32,520 Speaker 8: ever the right strategy. The right strategy is to have 479 00:23:32,600 --> 00:23:36,800 Speaker 8: something committed at all times and be balanced in your 480 00:23:36,800 --> 00:23:40,760 Speaker 8: portfolio so that you can ride out, you know, turbulent. 481 00:23:40,359 --> 00:23:41,600 Speaker 2: Times when they arrive. 482 00:23:41,760 --> 00:23:44,359 Speaker 8: And look, we've had a little bit of a bad 483 00:23:44,400 --> 00:23:47,800 Speaker 8: stretch here since the beginning of December, which doesn't really 484 00:23:47,880 --> 00:23:50,960 Speaker 8: surprise me given the run that we had, you know, 485 00:23:51,000 --> 00:23:53,280 Speaker 8: post election is just a lot of euphor you So 486 00:23:53,320 --> 00:23:56,200 Speaker 8: we're having a bit of correction here. I do think 487 00:23:56,280 --> 00:23:59,439 Speaker 8: the first half of twenty twenty five will probably be 488 00:23:59,480 --> 00:24:02,720 Speaker 8: a bit more challenging, and then the second half sets 489 00:24:02,760 --> 00:24:06,399 Speaker 8: up pretty well, assuming that you know, a forecast around 490 00:24:06,440 --> 00:24:11,200 Speaker 8: the economy and earnings come through. Everybody knows the market's expensive. 491 00:24:11,640 --> 00:24:14,879 Speaker 8: Everybody knows that. You know, we've had and sentiments crazy 492 00:24:15,000 --> 00:24:17,240 Speaker 8: right now, and that's just part of the game. I mean, 493 00:24:17,280 --> 00:24:19,600 Speaker 8: you have to, you know, you have to deal with that, 494 00:24:20,240 --> 00:24:22,800 Speaker 8: and that's why you have diversification in your portfolio. 495 00:24:23,119 --> 00:24:25,880 Speaker 2: You look at factors. I think of Lizae Saunders over 496 00:24:26,000 --> 00:24:29,000 Speaker 2: Schwaub as well. Which is the factor now with the 497 00:24:29,080 --> 00:24:31,240 Speaker 2: closest Mike Wilson's study. 498 00:24:33,160 --> 00:24:34,960 Speaker 8: Well, we look at all of them obviously, and I 499 00:24:34,960 --> 00:24:37,080 Speaker 8: would say it's been the you know, the factor that's 500 00:24:37,119 --> 00:24:41,399 Speaker 8: been most in favor has been quality and momentum. And 501 00:24:41,440 --> 00:24:43,840 Speaker 8: then recently both of those came off a bit because 502 00:24:43,880 --> 00:24:46,439 Speaker 8: that's where people were positioned. Okay, that doesn't mean that 503 00:24:46,480 --> 00:24:49,080 Speaker 8: those aren't still the places to be. It just means 504 00:24:49,119 --> 00:24:51,359 Speaker 8: that we're having a bit of a pullback in here. 505 00:24:51,440 --> 00:24:54,919 Speaker 8: And like I think, I think going into twenty twenty five, 506 00:24:55,320 --> 00:24:58,040 Speaker 8: there are some areas that got probably a little bit overdone, 507 00:24:58,600 --> 00:25:00,520 Speaker 8: some of the you know, some of the growth areas 508 00:25:01,200 --> 00:25:03,719 Speaker 8: that that factor in particular, probably people are paying up 509 00:25:03,720 --> 00:25:06,760 Speaker 8: for that too much. I think some of the size factors. 510 00:25:06,800 --> 00:25:08,480 Speaker 8: You know, people are rotated probably a little bit too 511 00:25:08,520 --> 00:25:11,399 Speaker 8: much into the small cap area and they're giving some 512 00:25:11,440 --> 00:25:14,800 Speaker 8: of that back now too. So that's just one sort 513 00:25:14,840 --> 00:25:17,520 Speaker 8: of arrow in our in our quiver. And uh, you know, 514 00:25:17,520 --> 00:25:19,920 Speaker 8: but but it's definitely something we watch closely. 515 00:25:20,520 --> 00:25:23,280 Speaker 4: Hey, Mike, I'm reading your your more most recent note 516 00:25:23,320 --> 00:25:26,119 Speaker 4: about the breath of the market. It gets gets me 517 00:25:26,160 --> 00:25:27,639 Speaker 4: to thinking, here, I got the s and P five 518 00:25:28,359 --> 00:25:30,920 Speaker 4: twenty four is up like twenty three twenty four percent, 519 00:25:31,000 --> 00:25:33,760 Speaker 4: Yet the equal weighted SMP up only like you know, 520 00:25:33,800 --> 00:25:37,960 Speaker 4: ten or eleven percent. A what does that tell you? 521 00:25:38,080 --> 00:25:40,800 Speaker 4: I mean, is and how concerning is that for you? 522 00:25:42,600 --> 00:25:46,560 Speaker 8: Well, I mean it's not really. Remember, breath is a symptom, okay, 523 00:25:46,680 --> 00:25:49,080 Speaker 8: of what's going on, not the cause. And so the 524 00:25:49,119 --> 00:25:52,280 Speaker 8: weaker breath tells us that, you know, certain things are 525 00:25:52,320 --> 00:25:54,000 Speaker 8: going and we think we've this is something we think 526 00:25:54,000 --> 00:25:57,080 Speaker 8: we've gotten very right over the last several years, which 527 00:25:57,119 --> 00:26:00,719 Speaker 8: is that it's a very government heavy, you know, economy. Right, 528 00:26:00,760 --> 00:26:02,639 Speaker 8: So if you actually look at the private economy, the 529 00:26:02,680 --> 00:26:06,800 Speaker 8: private economy has been sort of languishing, whether it's manufacturing 530 00:26:06,920 --> 00:26:09,719 Speaker 8: or housing. Some of the consumer goods areas I mean, 531 00:26:09,760 --> 00:26:12,800 Speaker 8: they're actually inter recession. They've been inter recession for two years. 532 00:26:13,280 --> 00:26:16,280 Speaker 8: And the government, heavy handed former government, whether it be 533 00:26:16,320 --> 00:26:19,719 Speaker 8: fiscal or monetary policy, has kind of kept things buoyed 534 00:26:20,119 --> 00:26:22,080 Speaker 8: and the market has figured that out. And of course 535 00:26:22,119 --> 00:26:25,240 Speaker 8: you have things like AI, you know, maybe weight loss drugs, 536 00:26:25,280 --> 00:26:28,040 Speaker 8: you know, certain themes that are very specific to certain areas, 537 00:26:28,440 --> 00:26:30,920 Speaker 8: and those areas have carried the day. Okay, So I 538 00:26:31,520 --> 00:26:35,480 Speaker 8: think the weak breath is symptomatic of this very unbalanced 539 00:26:35,560 --> 00:26:37,320 Speaker 8: economy that we're dealing with. 540 00:26:37,400 --> 00:26:37,600 Speaker 2: Now. 541 00:26:37,840 --> 00:26:40,080 Speaker 8: One thing to point out, however, is the second half 542 00:26:40,840 --> 00:26:44,480 Speaker 8: really since September the breath improved tremendously, And actually the 543 00:26:44,480 --> 00:26:46,520 Speaker 8: breath in twenty twenty four is still way better than 544 00:26:46,560 --> 00:26:49,240 Speaker 8: it was in twenty twenty three. So it's not all bad, 545 00:26:49,840 --> 00:26:52,760 Speaker 8: but it is a like I said, it's a symptom 546 00:26:53,240 --> 00:26:55,639 Speaker 8: of what I think is a very unbalanced kind of 547 00:26:55,640 --> 00:26:57,400 Speaker 8: recovery that is ongoing. 548 00:26:58,480 --> 00:27:01,840 Speaker 4: So so you think about twenty twenty five, Mike, I 549 00:27:01,840 --> 00:27:04,959 Speaker 4: think a lot of folks are saying this, Really, if 550 00:27:05,000 --> 00:27:07,120 Speaker 4: there's gonna be any performance in twenty twenty five, it 551 00:27:07,200 --> 00:27:10,440 Speaker 4: really has to be driven by earnings growth, because maybe 552 00:27:10,480 --> 00:27:12,280 Speaker 4: the Fed's going to cut a couple of times, but 553 00:27:12,359 --> 00:27:14,600 Speaker 4: I'm not sure how much more than that. Are you 554 00:27:14,640 --> 00:27:18,800 Speaker 4: concerned that the earnings leg of this story is maybe 555 00:27:18,840 --> 00:27:19,800 Speaker 4: a little ahead of itself. 556 00:27:21,160 --> 00:27:23,359 Speaker 8: Well, I mean, look the markets are they get ahead 557 00:27:23,359 --> 00:27:26,320 Speaker 8: of that, right, So the markets, you know, multiples, you know, 558 00:27:26,440 --> 00:27:30,000 Speaker 8: rallied because it anticipated in earnings recovery. Of course, this 559 00:27:30,040 --> 00:27:32,960 Speaker 8: summer we had some turbulence and then the fall things 560 00:27:33,000 --> 00:27:35,000 Speaker 8: picked up again. We think most of the of the 561 00:27:35,119 --> 00:27:37,080 Speaker 8: rally in the second half was driven by sort of 562 00:27:37,080 --> 00:27:40,680 Speaker 8: liquidity factors, and you know, the sentiment picking up around 563 00:27:40,680 --> 00:27:43,439 Speaker 8: the election, just hitting that behind us, you know, the 564 00:27:43,520 --> 00:27:46,520 Speaker 8: definitive outcome, et cetera. And so now we're a little 565 00:27:46,520 --> 00:27:48,840 Speaker 8: bit ahead of ourselves. So multiples probably have to consolidate 566 00:27:48,880 --> 00:27:51,600 Speaker 8: a bit. They for the key for this year is 567 00:27:51,680 --> 00:27:53,399 Speaker 8: are we going to get a broadening out in the 568 00:27:53,440 --> 00:27:56,879 Speaker 8: earnings participation? Okay, So earnings have been pretty lousy for 569 00:27:57,000 --> 00:27:59,160 Speaker 8: most companies over the last two years for the reasons 570 00:27:59,240 --> 00:28:01,480 Speaker 8: I mentioned earlier. Okay, interest rates are too high for 571 00:28:01,560 --> 00:28:04,479 Speaker 8: most businesses. Government is crowding out a lot of smaller 572 00:28:04,480 --> 00:28:07,119 Speaker 8: businesses and even larger businesses. To some extent, the global 573 00:28:07,160 --> 00:28:09,600 Speaker 8: economy is still kind of stuck in the mud. So 574 00:28:09,680 --> 00:28:12,080 Speaker 8: a lot of multinationals are not doing well. So the 575 00:28:12,160 --> 00:28:14,320 Speaker 8: key for next year is can we see a broadening 576 00:28:14,359 --> 00:28:17,159 Speaker 8: out of that earning recovery. We think we can, and 577 00:28:17,160 --> 00:28:19,040 Speaker 8: that's our job. Our job is to figure out where's 578 00:28:19,040 --> 00:28:21,040 Speaker 8: that earning is going to pick up. Financials is one 579 00:28:21,080 --> 00:28:23,919 Speaker 8: area where we've gotten more constructive recently because of the 580 00:28:23,960 --> 00:28:25,920 Speaker 8: earning story, specifically. 581 00:28:25,480 --> 00:28:29,160 Speaker 2: Mike Wilson with US with Morgan Stanley. If I need 582 00:28:29,240 --> 00:28:33,520 Speaker 2: breadth to go higher, Mike Wilson is healthcare is so 583 00:28:33,760 --> 00:28:38,080 Speaker 2: dominant that if healthcare doesn't perform, I don't see an 584 00:28:38,120 --> 00:28:39,719 Speaker 2: intelligent gain in the market. 585 00:28:41,800 --> 00:28:43,479 Speaker 8: No, I don't think so, Tom. I mean, healthcare has 586 00:28:43,520 --> 00:28:46,240 Speaker 8: been languishing for a while. It's been you know, there's 587 00:28:46,280 --> 00:28:48,800 Speaker 8: been some big home run winners and as I mentioned earlier, 588 00:28:48,840 --> 00:28:51,360 Speaker 8: some of the weight loss drug winners, et cetera. But 589 00:28:51,880 --> 00:28:54,400 Speaker 8: healthcare has been languishing for the better part of a 590 00:28:54,480 --> 00:28:56,840 Speaker 8: year and a half in a relative basis, and the 591 00:28:56,880 --> 00:28:59,840 Speaker 8: market's been fine. So I don't think it's necessary condition 592 00:29:00,000 --> 00:29:01,960 Speaker 8: it would be helpful. We'd like to see it happen. 593 00:29:02,680 --> 00:29:05,920 Speaker 8: I think for healthcare specifically, you know, with the appointment 594 00:29:05,960 --> 00:29:08,800 Speaker 8: of Bobby Kennedy. Well, let's see how that goes. I mean, 595 00:29:08,840 --> 00:29:10,960 Speaker 8: I think that the sector is probably gonna remain under 596 00:29:10,960 --> 00:29:13,840 Speaker 8: pressure until that confirmation. Hearing interesting, and then I think 597 00:29:13,880 --> 00:29:15,400 Speaker 8: from there we might we might get a bit of 598 00:29:15,440 --> 00:29:15,840 Speaker 8: a bounce. 599 00:29:16,000 --> 00:29:20,480 Speaker 2: Yeah, Mike Wilson, tell me about the necessary condition for 600 00:29:20,600 --> 00:29:23,880 Speaker 2: breath to work. What is the single item that you're 601 00:29:23,960 --> 00:29:27,400 Speaker 2: studying with your team to say we have good breadth. 602 00:29:29,000 --> 00:29:31,040 Speaker 8: It's what you said earlier, Tom, we need we need 603 00:29:31,080 --> 00:29:33,480 Speaker 8: better breath of earnings revisions. I mean, this has been 604 00:29:33,480 --> 00:29:35,280 Speaker 8: a theme of ours for the last two years. 605 00:29:35,640 --> 00:29:35,800 Speaker 2: You know. 606 00:29:35,800 --> 00:29:38,400 Speaker 8: One of the reasons why we weren't maybe as enthusiastic 607 00:29:38,440 --> 00:29:41,520 Speaker 8: as others in terms of the rally we've had is 608 00:29:41,520 --> 00:29:44,160 Speaker 8: because we thought it would be narrow. In fact, our 609 00:29:44,200 --> 00:29:47,720 Speaker 8: forecast suggested that that the earnings recovery itself was driven 610 00:29:47,920 --> 00:29:50,719 Speaker 8: by heavy cost cutting in the mag seven and then 611 00:29:50,720 --> 00:29:53,600 Speaker 8: of course they had AI, which helped a handful of companies. 612 00:29:53,840 --> 00:29:55,280 Speaker 8: You had, you had a few of the themes that 613 00:29:55,280 --> 00:29:59,040 Speaker 8: were driving you know, growth, You had government support for infrastructure, 614 00:29:59,040 --> 00:30:01,960 Speaker 8: spend things along those lines, and so it was very narrow. 615 00:30:02,320 --> 00:30:04,960 Speaker 8: So in order for the market breath, the price breath 616 00:30:04,960 --> 00:30:06,680 Speaker 8: to get better you need earnings breath to get better. 617 00:30:06,800 --> 00:30:08,880 Speaker 8: I don't think it's that complicated. And that's what we 618 00:30:08,920 --> 00:30:13,120 Speaker 8: think should happen in twenty twenty five, assuming once again 619 00:30:13,160 --> 00:30:15,800 Speaker 8: that you know, we don't get some policy changes that 620 00:30:15,880 --> 00:30:18,280 Speaker 8: are maybe negative for the market in the near term. 621 00:30:18,320 --> 00:30:20,360 Speaker 8: And that's really our concern the short term is that 622 00:30:20,440 --> 00:30:22,959 Speaker 8: we think some of the policy changes are probably going 623 00:30:23,000 --> 00:30:24,880 Speaker 8: to be more negative in the beginning and then more 624 00:30:24,920 --> 00:30:26,160 Speaker 8: positive in the second half. 625 00:30:27,120 --> 00:30:29,480 Speaker 4: Hey, Mike, as we all know, the S and P 626 00:30:29,560 --> 00:30:31,560 Speaker 4: five hundred over each of the last two years has 627 00:30:31,720 --> 00:30:33,320 Speaker 4: grown north of twenty percent. 628 00:30:33,840 --> 00:30:34,720 Speaker 2: I'm not sure. 629 00:30:34,480 --> 00:30:38,960 Speaker 4: Earnings have grown to that extent, are we? What's the 630 00:30:39,040 --> 00:30:42,200 Speaker 4: valuation call right here? As you think about the market here. 631 00:30:42,080 --> 00:30:47,480 Speaker 8: Mike, it's expensive. I mean, that's not a great insight. 632 00:30:47,880 --> 00:30:51,040 Speaker 8: I mean, this is probably the single biggest miss by 633 00:30:51,280 --> 00:30:53,800 Speaker 8: I think everybody in the last twelve months. I don't 634 00:30:53,840 --> 00:30:56,200 Speaker 8: recall anyone saying they thought we would trade to twenty 635 00:30:56,240 --> 00:30:58,640 Speaker 8: three times earnings. But of course everybody rode the wave, 636 00:30:59,280 --> 00:31:02,040 Speaker 8: including us, and you're happy to take it. And so 637 00:31:02,120 --> 00:31:04,480 Speaker 8: now you're sitting here twenty two twenty three times earnings 638 00:31:04,480 --> 00:31:06,800 Speaker 8: and you're like, oh, you know, well, now we need 639 00:31:06,800 --> 00:31:09,880 Speaker 8: to see the earnings actually surprised to the upside. And 640 00:31:09,920 --> 00:31:12,600 Speaker 8: you're exactly correct on the fact that earnings have not 641 00:31:12,680 --> 00:31:16,560 Speaker 8: been the main driver of the returns. The main driver 642 00:31:16,640 --> 00:31:21,200 Speaker 8: of the returns has been equity evaluations, right. And there's 643 00:31:21,200 --> 00:31:23,160 Speaker 8: been some specific names that have done a great job 644 00:31:23,160 --> 00:31:26,520 Speaker 8: in earnings and those are unique, but overall this has 645 00:31:26,520 --> 00:31:29,000 Speaker 8: been probably one of the biggest multiple expansions we've ever 646 00:31:29,000 --> 00:31:31,160 Speaker 8: seen coming out of a reception. 647 00:31:31,240 --> 00:31:33,520 Speaker 2: And so what does it do with cash? For Mike Wilson, 648 00:31:33,920 --> 00:31:37,960 Speaker 2: for Lisa Shallatt and Morgan Stanley Wealth Management? Is cash 649 00:31:38,000 --> 00:31:39,040 Speaker 2: your friend right now? 650 00:31:41,280 --> 00:31:43,880 Speaker 8: Well, I think you know, short duration fixed income in 651 00:31:43,880 --> 00:31:46,280 Speaker 8: general has been our friend for the last several years. 652 00:31:46,880 --> 00:31:50,000 Speaker 8: Being underweight you know duration, whether that's two years or 653 00:31:50,040 --> 00:31:52,600 Speaker 8: one year or cash, they're all doing the same thing 654 00:31:52,640 --> 00:31:54,719 Speaker 8: for your portfolio time but giving you a nice four 655 00:31:54,760 --> 00:31:58,360 Speaker 8: to five percent return with very little risk. And so 656 00:31:58,520 --> 00:32:00,520 Speaker 8: that's a great place to have some of your money 657 00:32:00,560 --> 00:32:03,280 Speaker 8: once again, not all of your money. You know, we're 658 00:32:03,360 --> 00:32:07,680 Speaker 8: probably five to seven percent in that cash rate region, 659 00:32:07,720 --> 00:32:10,520 Speaker 8: which is two years and end, and that's fine. That's 660 00:32:10,520 --> 00:32:12,479 Speaker 8: a good place to be when you're getting compensated. I mean, 661 00:32:12,560 --> 00:32:15,760 Speaker 8: just recall two years ago you're getting zero on that cash. 662 00:32:15,800 --> 00:32:18,280 Speaker 8: Now that's a bad deal, But today you're getting actually 663 00:32:18,280 --> 00:32:21,720 Speaker 8: a pretty positive return. And there's a place in every 664 00:32:21,720 --> 00:32:24,280 Speaker 8: portfolio for something like that. Just ask Warren Buffett. 665 00:32:25,160 --> 00:32:28,760 Speaker 4: Hey, Mike, it seems like the market's discounting two FED 666 00:32:28,920 --> 00:32:30,640 Speaker 4: rate cuts this year. 667 00:32:32,680 --> 00:32:35,000 Speaker 2: Is the market okay with that or do. 668 00:32:34,960 --> 00:32:36,640 Speaker 4: They need to think the market needs to see a 669 00:32:36,640 --> 00:32:38,600 Speaker 4: little bit more or do you think the market is 670 00:32:38,640 --> 00:32:40,120 Speaker 4: fairly discounting to rate cuts. 671 00:32:41,280 --> 00:32:43,960 Speaker 8: Well, first of all, let me just make an opening 672 00:32:44,000 --> 00:32:46,440 Speaker 8: statement about that. I mean, if there's one thing that 673 00:32:46,480 --> 00:32:49,000 Speaker 8: the markets have been more wrong about than FED cuts 674 00:32:49,000 --> 00:32:50,440 Speaker 8: over the last four years, I like to know what 675 00:32:50,520 --> 00:32:53,840 Speaker 8: it is, so you know, I mean, this has been 676 00:32:54,160 --> 00:32:57,200 Speaker 8: probably the single biggest whip saw, both on the upside 677 00:32:57,240 --> 00:33:00,280 Speaker 8: and the downside, that the markets have gotten wrong. So 678 00:33:00,320 --> 00:33:02,320 Speaker 8: I think looking at the bond market right now, what 679 00:33:02,360 --> 00:33:04,880 Speaker 8: they're pricing in is a waste of time because they 680 00:33:04,920 --> 00:33:07,800 Speaker 8: don't know. The FED doesn't even know what I would say. However, 681 00:33:07,840 --> 00:33:09,640 Speaker 8: one of the reasons why the breath is deteriorated, I 682 00:33:09,640 --> 00:33:11,480 Speaker 8: talked about that as a symptom the cause of the 683 00:33:11,480 --> 00:33:14,320 Speaker 8: breath deterioration. One of them is the fact that rates 684 00:33:14,320 --> 00:33:17,160 Speaker 8: have gone up at the back end almost one hundred 685 00:33:17,160 --> 00:33:20,400 Speaker 8: basis points since the FED has cut a hundred basis points. 686 00:33:20,480 --> 00:33:22,800 Speaker 8: Think about that. That means the term premium has really 687 00:33:22,800 --> 00:33:25,480 Speaker 8: gone up sharply, and that's been something we've been focused on. 688 00:33:25,480 --> 00:33:27,760 Speaker 8: When the term premium kind of gets up into this range, 689 00:33:27,960 --> 00:33:30,560 Speaker 8: you actually now are at risk of having an equity 690 00:33:31,280 --> 00:33:35,000 Speaker 8: valuation correction. So we think that's probably the main reason 691 00:33:35,000 --> 00:33:38,160 Speaker 8: why the breath has deteriorated here recently, more so than earnings. 692 00:33:38,560 --> 00:33:41,160 Speaker 8: And I think, you know, two cuts, sure, why not? 693 00:33:41,760 --> 00:33:44,920 Speaker 8: Could we get zero cuts next this year? Possibly could 694 00:33:44,960 --> 00:33:47,440 Speaker 8: we get four or five cuts. Maybe it just depends 695 00:33:47,480 --> 00:33:49,520 Speaker 8: on how things play out, but I think right now 696 00:33:49,600 --> 00:33:52,360 Speaker 8: two cuts is kind of the best guess, and the 697 00:33:52,360 --> 00:33:55,000 Speaker 8: bomb market is probably a little bit suspicious about that 698 00:33:55,040 --> 00:33:56,400 Speaker 8: based on how the back end straining. 699 00:33:56,560 --> 00:33:58,640 Speaker 2: Mike Wilson, thank you so much, Chief you. S equity 700 00:33:58,680 --> 00:34:06,160 Speaker 2: strategist Morgan Stanley enters to be with us. 701 00:34:07,240 --> 00:34:11,160 Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday 702 00:34:11,200 --> 00:34:14,200 Speaker 1: starting at seven am Eastern on Apple Corplay and Android 703 00:34:14,239 --> 00:34:17,200 Speaker 1: Auto with the Bloomberg Business app. You can also watch 704 00:34:17,280 --> 00:34:20,239 Speaker 1: us live every weekday on YouTube and always on the 705 00:34:20,280 --> 00:34:21,360 Speaker 1: Bloomberg terminal. 706 00:34:22,000 --> 00:34:26,000 Speaker 2: Yes, into twenty twenty five. We're extending the Lisa Mantel 707 00:34:26,160 --> 00:34:30,080 Speaker 2: hour into a longer day part as they say in 708 00:34:30,160 --> 00:34:32,200 Speaker 2: the business, Lisa, what do you have today? 709 00:34:32,480 --> 00:34:36,040 Speaker 5: So younger drinkers. This is apparently according to Financial Times, 710 00:34:36,080 --> 00:34:40,680 Speaker 5: they are sipping less French wine. Yes, they're opting for 711 00:34:40,800 --> 00:34:45,840 Speaker 5: different beverages, rose beer, spirits, cutting out alcohol altogether. So 712 00:34:45,880 --> 00:34:48,000 Speaker 5: I'd like to go to Paris correspondent Tom Keene and 713 00:34:48,040 --> 00:34:51,680 Speaker 5: find out were they sipping less French wine in Perry. 714 00:34:52,000 --> 00:34:55,319 Speaker 2: Yeah, I think they are. It's in the zeitgeist over there. 715 00:34:55,360 --> 00:34:59,680 Speaker 2: They're very concerned about it. And what's fascinating is selected 716 00:34:59,719 --> 00:35:04,240 Speaker 2: res staurant owners talking about how people are just flat 717 00:35:04,280 --> 00:35:07,840 Speaker 2: out drinking less. Yes, and you know, I did a 718 00:35:07,840 --> 00:35:13,400 Speaker 2: shout out on Twitter. John Ferrell absolutely nailed the impact 719 00:35:13,480 --> 00:35:16,959 Speaker 2: of this so zebic thing overall. Yeah, plus three days 720 00:35:17,280 --> 00:35:20,240 Speaker 2: got six percent. People are eating six percent less food 721 00:35:20,560 --> 00:35:22,880 Speaker 2: and it curbs your alcohol. 722 00:35:23,120 --> 00:35:25,759 Speaker 5: Yeah, and drinking alcohol that a lot of sugar, So 723 00:35:25,840 --> 00:35:27,880 Speaker 5: are trying to stay away from I mean, you know, 724 00:35:28,360 --> 00:35:32,080 Speaker 5: especially wine, especially red wine. Pro tip and that's yes. 725 00:35:32,120 --> 00:35:36,160 Speaker 2: You have a martini maybe two, and these are smaller martinis. 726 00:35:36,160 --> 00:35:39,600 Speaker 2: These are fifty mad men martinis. And then to cut 727 00:35:39,640 --> 00:35:43,759 Speaker 2: back on alcohol, the third martini, you have a reverse martini, 728 00:35:44,840 --> 00:35:47,320 Speaker 2: which is a little bit of gin but with vermouth. 729 00:35:48,600 --> 00:35:51,080 Speaker 2: That's how you that's a measured consumption declined. 730 00:35:51,280 --> 00:35:51,920 Speaker 6: Very interesting. 731 00:35:52,080 --> 00:35:54,319 Speaker 2: Interesting, But the red is a big no. 732 00:35:54,360 --> 00:35:57,000 Speaker 5: But and it's it's causing a lot of people to change. 733 00:35:57,040 --> 00:35:58,960 Speaker 5: Like a lot of the producers. They have to focus 734 00:35:59,000 --> 00:36:02,880 Speaker 5: on higher quality wines, right because the younger generations like 735 00:36:02,960 --> 00:36:07,600 Speaker 5: certified organic wines, and then they're offering reds like whites, 736 00:36:07,719 --> 00:36:10,160 Speaker 5: low alcohol wines, but also making the low alcohol wine. 737 00:36:10,200 --> 00:36:12,680 Speaker 5: It's more expensive, so now the producer are having over 738 00:36:12,800 --> 00:36:15,200 Speaker 5: more money to make these low alcohol wines. 739 00:36:15,239 --> 00:36:18,600 Speaker 4: We're drinking barber Escos now, that's what we're in. We're 740 00:36:18,680 --> 00:36:20,600 Speaker 4: drinking the barber Sco than Nebiola. 741 00:36:20,200 --> 00:36:21,239 Speaker 2: Grape coming at it. 742 00:36:21,760 --> 00:36:24,080 Speaker 4: Listen to you got turned on to that a couple 743 00:36:24,080 --> 00:36:25,320 Speaker 4: of years ago, and that's what we're drinking. 744 00:36:25,880 --> 00:36:30,440 Speaker 2: I was one Morgan David, That's where I was. 745 00:36:30,640 --> 00:36:36,280 Speaker 5: Next America apparently getting better at getting things done. Workers 746 00:36:36,320 --> 00:36:39,200 Speaker 5: and companies are getting more productive. Okay, this is Labor 747 00:36:39,239 --> 00:36:41,919 Speaker 5: Department data. Productivity rows two percent in the third quarter 748 00:36:41,960 --> 00:36:44,319 Speaker 5: compared to a year earlier. But the Wall Street Journal 749 00:36:44,360 --> 00:36:47,120 Speaker 5: says the reason why a lot of business owners using 750 00:36:47,160 --> 00:36:50,280 Speaker 5: AI to help write things like marketing plans, email social 751 00:36:50,320 --> 00:36:54,200 Speaker 5: media posts the influx of immigration. They say immigrants often 752 00:36:54,239 --> 00:36:57,760 Speaker 5: take those manual intensive jobs, so that allows other workers 753 00:36:57,760 --> 00:37:00,760 Speaker 5: to move up to these highly skilled roles. But also, 754 00:37:00,800 --> 00:37:03,080 Speaker 5: you know the QR codes that makes things you know 755 00:37:03,120 --> 00:37:05,880 Speaker 5: better because you have papermint instead of paper menus at restaurants. 756 00:37:05,880 --> 00:37:07,719 Speaker 5: I'm sure you've seen that. 757 00:37:06,840 --> 00:37:12,000 Speaker 2: And if you do, hate it. 758 00:37:09,040 --> 00:37:10,560 Speaker 3: Hate with. 759 00:37:12,680 --> 00:37:16,120 Speaker 2: Why are you doing the Sparta is actually listening this morning. 760 00:37:16,360 --> 00:37:19,640 Speaker 2: Well it works like two days a week exactly. Sparta's 761 00:37:19,640 --> 00:37:22,080 Speaker 2: listening and you're talking productivity, Yes. 762 00:37:21,960 --> 00:37:25,360 Speaker 5: Faster productivity. You know, productivity grows the faster the economy 763 00:37:25,360 --> 00:37:25,719 Speaker 5: can grow. 764 00:37:25,760 --> 00:37:30,319 Speaker 2: So Tucker's got to get with it. Yes, the John 765 00:37:30,440 --> 00:37:32,000 Speaker 2: Tucker next. 766 00:37:32,480 --> 00:37:34,520 Speaker 5: And the head of YouTube I know you're gonna like 767 00:37:34,560 --> 00:37:38,279 Speaker 5: this one is saying that artificial intelligence and online influencers 768 00:37:38,320 --> 00:37:41,560 Speaker 5: are going to help supercharge their growth in the coming years. 769 00:37:41,560 --> 00:37:44,040 Speaker 5: So this is Neil Mohan. He's telling the Financial Times 770 00:37:44,640 --> 00:37:47,680 Speaker 5: they're wrapping up AI spending. So they have two experimental 771 00:37:47,680 --> 00:37:50,600 Speaker 5: features from deep Mind that's like their AI unit it's 772 00:37:50,600 --> 00:37:54,440 Speaker 5: called dream screen and dream Track, and they generate videos 773 00:37:54,480 --> 00:37:57,520 Speaker 5: and music from text, so that's one thing they can do. 774 00:37:57,800 --> 00:38:00,360 Speaker 5: They also auto dub, which means that they train to 775 00:38:00,440 --> 00:38:04,560 Speaker 5: English language videos into eight other languages. And they're saying 776 00:38:04,760 --> 00:38:07,880 Speaker 5: it's going to help with online creators because that's their 777 00:38:07,880 --> 00:38:10,359 Speaker 5: big draw. Hundreds of millions of gen Z fans are 778 00:38:10,360 --> 00:38:13,440 Speaker 5: from these online creators, so that's really helping, you know, 779 00:38:13,480 --> 00:38:21,000 Speaker 5: to get their their your descriptions. 780 00:38:23,800 --> 00:38:41,280 Speaker 2: That's a productivity that's PROTEI. 781 00:38:33,680 --> 00:38:35,959 Speaker 5: That is Oh and since yesterday we were talking about 782 00:38:35,960 --> 00:38:39,400 Speaker 5: Apple TV Plus, please this story stood out to me. 783 00:38:39,520 --> 00:38:43,040 Speaker 5: Apple's actually offering a free all access pass to Apple 784 00:38:43,080 --> 00:38:47,359 Speaker 5: TV Plus this weekend today through Sunday, so you can 785 00:38:47,440 --> 00:38:49,640 Speaker 5: test it out, try it out, see if you like it. 786 00:38:50,520 --> 00:38:52,840 Speaker 5: And any device that supports Apple TV you have to 787 00:38:52,920 --> 00:38:54,360 Speaker 5: want to, you know, sign in with your Apple I 788 00:38:54,440 --> 00:38:56,880 Speaker 5: D so all those restrictions, but you can try it 789 00:38:56,960 --> 00:38:58,960 Speaker 5: out for free if you want, and they got to 790 00:38:59,000 --> 00:39:00,000 Speaker 5: get those subscribers. 791 00:39:00,320 --> 00:39:01,799 Speaker 2: What do you think of this? I mean, where are 792 00:39:01,840 --> 00:39:03,120 Speaker 2: we in the streaming streaming? 793 00:39:03,160 --> 00:39:08,400 Speaker 4: I mean it's obviously Netflix hugely profitable, Disney finally now profitable, 794 00:39:08,480 --> 00:39:10,600 Speaker 4: and some of the other players are going becoming profitable, 795 00:39:10,640 --> 00:39:13,920 Speaker 4: so again more and more contents going there, Tom And 796 00:39:14,000 --> 00:39:15,400 Speaker 4: the biggest issue. 797 00:39:15,200 --> 00:39:16,000 Speaker 2: Is live sports. 798 00:39:16,360 --> 00:39:18,320 Speaker 4: More and more live sports you're finding on the streaming 799 00:39:18,360 --> 00:39:20,480 Speaker 4: services here, including the football. 800 00:39:20,080 --> 00:39:22,600 Speaker 2: Games coming up state Notre Dames on ESPN. 801 00:39:23,080 --> 00:39:25,480 Speaker 4: Yeah, we're getting some The wild card games for the 802 00:39:25,600 --> 00:39:28,560 Speaker 4: NFL were on Amazon Prime. So if you don't have 803 00:39:28,640 --> 00:39:31,600 Speaker 4: Amazon Prime, you need to talk to somebody in your 804 00:39:32,400 --> 00:39:35,400 Speaker 4: extended family and figure out if somebody's got a membership there, 805 00:39:35,440 --> 00:39:37,959 Speaker 4: because that's where you're going to find the NFL wild 806 00:39:38,040 --> 00:39:40,720 Speaker 4: card games. Figure, let's go on streaming. 807 00:39:41,000 --> 00:39:45,240 Speaker 2: I'm hooked on Silo and there's some disagreement in the household. 808 00:39:45,800 --> 00:39:49,279 Speaker 2: Some people think it's slow and doesn't move fast enough. 809 00:39:49,440 --> 00:39:50,560 Speaker 6: I have to agree with that. 810 00:39:51,680 --> 00:39:55,120 Speaker 5: I might agree with that person in your household. My 811 00:39:55,200 --> 00:39:56,560 Speaker 5: husband loves it, loves it, loves it. 812 00:39:56,719 --> 00:40:03,919 Speaker 2: Yeah, and I'm finding it just magisterial land. Apple TV 813 00:40:04,120 --> 00:40:06,520 Speaker 2: is they call it dad TV, and I could see 814 00:40:06,560 --> 00:40:11,400 Speaker 2: why is that? Okay, it's that Netflix dad TV? I 815 00:40:11,440 --> 00:40:11,680 Speaker 2: don't know. 816 00:40:12,160 --> 00:40:14,759 Speaker 4: Well there, I mean, the talent's getting paid. They're making 817 00:40:14,800 --> 00:40:18,200 Speaker 4: all these things for Apple TV and Paramount and all 818 00:40:18,239 --> 00:40:20,799 Speaker 4: the streaming stuff and the A list talents they're getting paid, 819 00:40:20,840 --> 00:40:23,040 Speaker 4: so like, I'll table stuff out on. 820 00:40:23,120 --> 00:40:26,480 Speaker 2: YouTube, lid chat, ask Lisa Costco. 821 00:40:26,239 --> 00:40:30,160 Speaker 5: Road trip to sleep No Costco road trip. My paycheck 822 00:40:30,200 --> 00:40:31,919 Speaker 5: went there last week and I have done. 823 00:40:33,600 --> 00:40:35,560 Speaker 2: Thank you so much for the newspapers. 824 00:40:35,800 --> 00:40:40,600 Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify, 825 00:40:40,760 --> 00:40:45,000 Speaker 1: and anywhere else you get your podcasts. Listen live each weekday, 826 00:40:45,160 --> 00:40:48,120 Speaker 1: seven to ten am Easter and on Bloomberg dot com, 827 00:40:48,520 --> 00:40:52,279 Speaker 1: the iHeartRadio app tune In, and the Bloomberg Business app. 828 00:40:52,640 --> 00:40:55,720 Speaker 1: You can also watch us live every weekday on YouTube 829 00:40:56,040 --> 00:40:58,040 Speaker 1: and always on the Bloomberg terminal