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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern

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Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business App.

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Speaker 1: Listen on demand wherever you get your podcasts, or watch

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Speaker 1: us live on YouTube.

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Speaker 2: We are thrilled to start this morning and all through

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Speaker 2: the day fed coverage with Francis Donald. Incredibly strong is

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Speaker 2: chief economist at RBC Capital Markets that can't say enough

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Speaker 2: about the acuity, particularly from the border from Canada over

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Speaker 2: to the US for North America is well. I'm going

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Speaker 2: to make two observations. The money market fund used to

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Speaker 2: be four point x even five percent. The money market

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Speaker 2: fund is down three point six three point seven percent.

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Speaker 2: And the other observation is a landa GDP now. The

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Speaker 2: GDP now is a stunning three point five percent. Why

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Speaker 2: in God's name are we cutting interest rates? Tom?

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Speaker 3: If I woke up this morning and I'd been in

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Speaker 3: a coma and all I had was the data, I

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Speaker 3: would think, well, this Federal Reserve must be neutral or

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Speaker 3: hawkish heading into this period. They are in an environment

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Speaker 3: where inflation has been above target for fifty five months,

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Speaker 3: the unemployment rate is extraordinarily tight. In fact, there's only

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Speaker 3: two times in history, going back to the nineteen seventies,

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Speaker 3: when the unemployment rate has been this tight. What happened

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Speaker 3: to the concept of normalizing and growth is fine. So

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Speaker 3: what I want to hear from Chair Powell today is

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Speaker 3: why are you cutting the other.

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Speaker 4: Side of the argument. People are saying cut cut, let's go,

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Speaker 4: let's go, let's go.

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Speaker 2: A hasset Myron Frankly, A lot of other people as

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Speaker 2: well state their case.

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Speaker 3: Well, the unemployment rate is moving in the quote unquote

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Speaker 3: wrong direction, and historically labor markets move like forgive the

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Speaker 3: Canadian reference, in a hockey shape direction, which is that

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Speaker 3: when they weaken, they tend to weaken aggressively and quickly.

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Speaker 4: Except that this.

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Speaker 3: Labor market is a very different labor market than what

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Speaker 3: we see.

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Speaker 4: The game is.

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Speaker 2: Different with the stupid bendy sticks now that break all

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Speaker 2: the time. Yes, firstus the old days of Victoriaville's and

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Speaker 2: CCM five stripes.

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Speaker 3: If it's I agree with you, both literally and metaphorically

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Speaker 3: when it comes to economic data, which is that the

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Speaker 3: hockey sticks are indeed broken for a variety of reasons,

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Speaker 3: and I do not expect this unemployment rate to move

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Speaker 3: in a hockey shaped type of direction, And in fact,

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Speaker 3: I would say, could we maybe work through lunch and

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Speaker 3: look at the subcomponents of the unemployment rate, which will

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Speaker 3: tell you that the unemployment rate for the prime age

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Speaker 3: workers has been relatively stable and really the rise is

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Speaker 3: coming from twenty to twenty four year olds. Are we

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Speaker 3: cutting rates for twenty twenty four year olds? That's fine,

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Speaker 3: but I want to hear.

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Speaker 4: That should we do more hockey talk?

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Speaker 5: Yeah? Absolutely, like the hockey references. That's all good, Francis.

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Speaker 5: All right, let's assume we get the rate cut today.

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Speaker 5: What do you think the FED does in twenty twenty six, Well.

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Speaker 4: It depends.

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Speaker 3: You know, I'm going to be old school on this

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Speaker 3: fall and say it depends what the data does in

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Speaker 3: twenty twenty six. I am feeling a little introspective that

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Speaker 3: I used to spend so much time parceling out FED

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Speaker 3: talk because the FED was such a large input into

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Speaker 3: the economic outlook. But perhaps it's my now growing old age.

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Speaker 3: I didn't have a birthday this weekend, but I do

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Speaker 3: have a milestone one coming up, and increasingly I do

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Speaker 3: increasingly believe that the data will lead the story. And

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Speaker 3: while there are biases that exist within the FED. They're

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Speaker 3: probably within a reasonable margin of error. So one meeting

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Speaker 3: ahead or before twenty five basis points here or there.

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Speaker 3: And the really big problem heading into twenty twenty six is, frankly,

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Speaker 3: we're still missing a big chunk of twenty twenty five.

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Speaker 3: This Fed's going to this meeting with only real clarity

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Speaker 3: on where we were up until September, and I usually

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Speaker 3: were about a month delayed, but we're three months delayed,

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Speaker 3: and so between now and January we were going to

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Speaker 3: get a boatload of more data, three jobs reports, two

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Speaker 3: inflation prints, a lot more retail sales.

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Speaker 4: Twenty twenty six.

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Speaker 3: Clarity is going to become better as we head into

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Speaker 3: the end of January, but I will still say I

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Speaker 3: cannot believe that we are still not starting every conversation with.

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Speaker 4: Respect to tariff policy.

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Speaker 3: We are still in the midst of a once in

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Speaker 3: one hundred year trade shock. We have not yet seen

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Speaker 3: the full effects of that, and we don't even know

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Speaker 3: the final trade policies that are coming through going to

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Speaker 3: be really meaningful.

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Speaker 5: I'm not sure we're ever going to know them. What

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Speaker 5: is the view of terrass from Canada, Because you guys

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Speaker 5: are kind of a big trading partner for the US.

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Speaker 3: The last I heard, we are the primary trading partner.

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Speaker 4: Thank yeah.

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Speaker 3: So really sector specific, and I think that actually is

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Speaker 3: a good microcosm for both the US and Canadian economies

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Speaker 3: is that this trade shop has been a very sexual

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Speaker 3: and regional shock. So if you look in Canada, for example,

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Speaker 3: there are autos and steel and aluminum that have been

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Speaker 3: impacted to a certain extent, and in the United States,

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Speaker 3: same story, which is trade related. Sectors are shedding jobs,

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Speaker 3: but they're being offset pretty substantially by the healthcare sector

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Speaker 3: that is growing. And so the trade shop for me

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Speaker 3: has been a reminder that one GDP story, one inflation story,

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Speaker 3: one consumer story is no longer relevant and are telling

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Speaker 3: the real stories. And while we like to think that

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Speaker 3: one forecast on one sheet of paper will guide all

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Speaker 3: investment decisions, you have to reincreasingly bottom up and thinking

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Speaker 3: about watch sectors are being impacted, and that's the real

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Speaker 3: tariff impact that gets lost amidst the what is your

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Speaker 3: CPI forecast with respective tarif policy?

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Speaker 2: Bloomberg surveillance across the nation, across Canada as well with

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Speaker 2: US Francis Donald RBC, a lot of other good guests

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Speaker 2: coming up here to really flesh out this really interesting

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Speaker 2: nuanced FED day. And as Francis and Paul mentioned, we're

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Speaker 2: a little blind heer on economic data. Maybe it's not

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Speaker 2: as blind as six weeks ago, but we're blind. And

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Speaker 2: we get a bunch of data coming up on Serious

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Speaker 2: XM Channel one twenty one, Good Morning Canada. And we

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Speaker 2: also say on YouTube, subscribe to Bloomberg podcast. Okay, so

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Speaker 2: we're going to get a meeting and he's going to

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Speaker 2: basically say what you said. We're going to get a

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Speaker 2: lot of data here. It's a toggle switch. We're going

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Speaker 2: to be December twenty nine, December twenty seven. OMG Powell

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Speaker 2: was brilliant or OMG's a dummy? I mean, if that's

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Speaker 2: simple right.

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Speaker 3: Well, as Powell has told us, there is no risk

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Speaker 3: free path. The one thing I'll say is that there

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Speaker 3: is if you do have a buyas towards cutting, and

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Speaker 3: this Central Bank does have a bias towards that they

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Speaker 3: have expressed in multiple different ways that they want to

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Speaker 3: be closer to neutral. Now is your window.

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Speaker 6: You have a.

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Speaker 3: Window where actually the lack of data has given you

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Speaker 3: more optionality, but that window will close.

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Speaker 4: It will close by.

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Speaker 3: February when inflation starts to move much higher, and you

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Speaker 3: don't see that material duration in the deterioration in the labor.

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Speaker 2: Markt what does your own Powell do today for small

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Speaker 2: business in America?

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Speaker 4: Like the Palace which is just getting by?

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Speaker 3: Well, I got the wrong morning invite. It sounds like

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Speaker 3: right off the top, but I think that very little.

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Speaker 3: And as I said earlier, we used to talk a

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Speaker 3: lot about how FED policy was a major input into

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Speaker 3: the economy, but this is economy is decreasingly rate sensitive

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Speaker 3: on a go forward basis. The argument that we're going

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Speaker 3: to hear from the Fed is that the labor market

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Speaker 3: is deteriorating and therefore probably we're in restrictive policy. But

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Speaker 3: who is policy restrictive for right now? And if we

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Speaker 3: ease it by twenty five basis points, will you see

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Speaker 3: material changes? Our point has been that the real pain

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Speaker 3: of affordability and the real pain of prices and what's

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Speaker 3: weighing on small businesses is coming from things like tariffs,

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Speaker 3: not restrictive rate policy. So rate cuts today are like

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Speaker 3: taking a tail and all for a broken arm. It'll help,

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Speaker 3: but it's not going to curry.

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Speaker 2: You to Thailand al yesterday for a birthday. Tell twelve seconds.

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Speaker 2: Are the bond vigilantes out?

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Speaker 3: The bond vigilantes are always out, But where are they

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Speaker 3: on the curve is maybe the more important question. And

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Speaker 3: I suspect that they will be more present as we

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Speaker 3: head into February March, when that inflation data starts to

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Speaker 3: take it.

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Speaker 2: Oh yet, folks, I promise into the December, into the

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Speaker 2: beginning of the year, we will give you more information

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Speaker 2: on the nuances of what Francis Donald calls the spread market.

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Speaker 2: There's some huge dynamics going on right now. Francis Donald

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Speaker 2: with us with OURBC. Thank you so much for joining us.

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Speaker 4: Stay with us.

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Speaker 2: More from Bloomberg Surveillance coming up after this.

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Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live

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Speaker 1: weekday afternoons from seven to ten am Eastern Listen on

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Speaker 1: Applecarplay and Android Auto with the Bloomberg Business app, or

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Speaker 1: watch us live on YouTube.

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Speaker 2: When you hear me say we protect the copyright of

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Speaker 2: all of our guests, we take it very, very seriously.

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Speaker 2: I have in front of me a coveted five page

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Speaker 2: note from Moffatt and Nathanson in there. Just wonderful, Robert Fishman.

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Speaker 2: It's loaded with global Wall Street knowledge on this media merger.

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Speaker 2: We're thrilled at. Robert Fishman joins us right now, Robert,

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Speaker 2: I went right to exhibit too, which is the deal

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Speaker 2: valuation of Warner Brothers. It's three bar charts, folks, and

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Speaker 2: right in the middle is run rate synergies. I don't

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Speaker 2: buy for a minute anything, but whatever's going to get done,

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Speaker 2: there's going to be synergies way larger than what's published now.

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Speaker 4: Am I right on that?

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Speaker 7: So I assume you're first talking about the Netflix did

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Speaker 7: if we want to start there, and so, yes, I

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Speaker 7: think the answer to your question is that there's likely

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Speaker 7: to be more synergies from a Netflix Warner Brothers combination.

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Speaker 7: I think there's you bound to be some cost efficiencies

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Speaker 7: when I'm thinking about the programming spend and content spending

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Speaker 7: of putting those two companies together. But that's that's where

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Speaker 7: the company has started in terms of laying out what

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Speaker 7: the cost energies are for this deal.

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Speaker 4: Using the pro ratio evy to EB. I learned this

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Speaker 4: from Michaels. I know the only reason I know it.

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Speaker 2: Robert Fishman if you get synergies over six billion, do

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Speaker 2: you get ev to ebit which proves valuable for Netflix shareholders.

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Speaker 8: So let's let's break this down.

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Speaker 7: So what Netflix has said so far is two to

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Speaker 7: three billion dollars of cost energies. Paramount Skydance has thrown

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Speaker 7: out the six billion dollar cost energy number because they

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Speaker 7: are also buying the Global Networks portfolio. So the numbers

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Speaker 7: aren't really apples to apples because you have to clearly

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Speaker 7: understand that when putting the Paramount Skydance portfolio of cable

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Speaker 7: networks together along with the Warner Brothers portfolio of networks,

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Speaker 7: that there will be much larger cost energies when thinking

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Speaker 7: about that versus Netflix, which is only just bidding on

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Speaker 7: the streaming and studio assets in Warner Brothers. So again,

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Speaker 7: it's not exactly apples to apples when comparing the two numbers.

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Speaker 5: Hey, Rob, you know talking to some investors, heare One

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Speaker 5: of the narratives I'm getting is for Netflix, this is

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Speaker 5: a really nice to have. For Paramount Skuiddance, this is

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Speaker 5: kind of a must have.

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Speaker 4: Do you view it that way?

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Speaker 7: We do from the Paramount Skuidance side, and why we

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Speaker 7: upgraded Warner Brothers Discovery at the beginning of the year

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Speaker 7: is we thought that the consolidation in the industry was inevitable.

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Speaker 7: I think Michael's been on the show you over many

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Speaker 7: years talking about this. And so when you think about

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Speaker 7: who that the natural dance partners are, it was Comcast

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Speaker 7: and it still is, Paramount Skuydance now after the Skydance

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Speaker 7: deal and Warner Brothers Discovery. Those three are the most

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Speaker 7: natural players because they're all subscale in streaming. So when

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Speaker 7: thinking about how to solve that streaming scale issue from

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Speaker 7: a global basis, it's just natural to think that you

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Speaker 7: need to see some combination of those players. And so

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Speaker 7: that's essentially what's playing out in front of us. Paramounts

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Speaker 7: Skydance needs these assets in order to accelerate the timing

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Speaker 7: to reach the scale that they're desiring on a global

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Speaker 7: scale basis for Paramount Plus.

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Speaker 8: So yes, we very.

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Speaker 7: Much think that the combination with Paramount Skuidance is a

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Speaker 7: must have.

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Speaker 5: Rob the from an other perspective, if your Warner Brothers

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Speaker 5: Discover Discovery aside from price, do you think they have

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Speaker 5: a preference for one or the other and why so?

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Speaker 7: I think what we saw so far is that the

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Speaker 7: preference was Netflix, and you know that's they announced that

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Speaker 7: the deal on Friday, and you know, if you believe

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Speaker 7: everything that that's been written and that the paramount Skuidance

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Speaker 7: has put out from their perspective, they didn't continue to

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Speaker 7: engage with them. So I think that the preference on

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Speaker 7: the Warner Brothers Discovery side so far was Netflix. And

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Speaker 7: you know that that might be for a few different

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Speaker 7: reasons if you want to break that down. I mean, clearly,

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Speaker 7: Netflix brings an unprecedented global scale when thinking about what

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Speaker 7: the opportunity is for Netflix to monetize this content, and

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Speaker 7: Warner Brothers has licensed that content to Netflix.

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Speaker 8: Already, you know, over the many years.

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Speaker 7: So Netflix has essentially perfect information knowing how the content

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Speaker 7: would perform on their platform. And that's the opportunity that

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Speaker 7: I think that the company sees when monetizing this content

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Speaker 7: going forward.

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Speaker 4: Robert Fishman with us. We thrilledies with us.

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Speaker 2: Today's with Mafatt Nathanson to give you a perspective here.

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Speaker 2: Mafatt Nathanson out of Sanford Bernstein redefined independent media at

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Speaker 2: research again. Their research here in the last couple of

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Speaker 2: days has been just absolutely superb Rob Robert. One of

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Speaker 2: the joys of this process has been Michael Nathanson's long,

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Speaker 2: long note here on the merger on the first time

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Speaker 2: he met the leadership of Netflix in a nondescript office

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Speaker 2: ears in years.

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Speaker 4: Ago, and he says, it's media one oh one.

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Speaker 2: Do these mergers succeed or are we now at the

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Speaker 2: point where it's just ego and they're going to be

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Speaker 2: bad outcomes down the road.

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Speaker 7: Unfortunately, we do have a long history that you know,

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Speaker 7: Michael and I have been a part of where media

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Speaker 7: m and A is a lot more difficult to pull

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Speaker 7: off than just what the spreadsheets tell you. And yes,

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Speaker 7: you can, you can get to accretion, you can get

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Speaker 7: to you know, potential upside over the longer term when

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Speaker 7: thinking about how a new owner can take the assets

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Speaker 7: and redefine them. But the long history of media M

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Speaker 7: and A suggests that it's even more difficult than we

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Speaker 7: would all seem.

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Speaker 8: I think a lot of that comes.

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Speaker 7: Down to the culture, and you know, when you start

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Speaker 7: smashing different cultures together, that obviously becomes a challenge, especially

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Speaker 7: in the media industry given the creative output that is needed,

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Speaker 7: but also just when thinking about where the headwinds and

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Speaker 7: the tailwinds are for the industry. A lot of these

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Speaker 7: recent media mergers have been focused more on the cable

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Speaker 7: network side, and clearly that the linear ecosystem has had

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Speaker 7: challenges over the past few years. So even with the

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Speaker 7: m and A potential and the cost cutting where we

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Speaker 7: started here, we haven't seen the true upside of those

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Speaker 7: deals because it's really just enabled them to cut costs

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Speaker 7: to offset the revenue headline synergy.

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Speaker 8: Yeah, that's Robert.

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Speaker 5: The regulatory hurdles here seemed pretty high for both players.

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Speaker 5: How do you game that out for both of these

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Speaker 5: bids here.

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Speaker 7: Yeah, there's a lot of noise around regulatory approval right now.

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Speaker 7: I mean clearly from the Paramount Skydance side, they seem

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Speaker 7: to have an upper hand right now just in terms

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Speaker 7: of the administration relationships that they have. At the same

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Speaker 7: time that the true answer should come down to how

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Speaker 7: the market is defined, and I think what Netflix is

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Speaker 7: out there talking about is when you when you view

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Speaker 7: the overall market to total total media consumption and look

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Speaker 7: at how Nielsen measures it, Netflix today only has eight

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Speaker 7: percent of that total pie, of the viewership pie in

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Speaker 7: the US, and so when you when you compare who

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Speaker 7: who Netflix is actually competing against YouTube actually has a

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Speaker 7: bigger share of that viewing pie and so on the

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Speaker 7: streaming side. And so when when you start thinking about

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Speaker 7: all the different portfolio of assets, Netflix actually is not

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Speaker 7: number one or two. The traditional media guys are above

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Speaker 7: them in terms of when you combine the linear television viewers.

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Speaker 4: Cut to the chase, Robert Fishman, do you think the

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Speaker 4: government is going to buy that?

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Speaker 7: I think it comes down to how you define the market.

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Speaker 7: And I think Netflix has a really strong point of

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Speaker 7: view here because what we haven't even talked about TikTok

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Speaker 7: and you know, Instagram, so that there are lots of

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Speaker 7: different ways that people engage with content these days.

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Speaker 2: I mean, I'm looking Robert Fishman at the end of

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Speaker 2: the Nathanson note, folks, ma fit Nathanson was way out

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Speaker 2: front on cord cutting.

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Speaker 4: Can't say enough about this.

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Speaker 2: And there he's got the F free, the phrase free options.

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Speaker 2: Like YouTube, Robert Fishman, the vector on YouTube is going up.

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Speaker 2: The vector on Netflix is flat. Why is that going

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Speaker 2: to change?

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Speaker 7: Well as part of this deal, I think what Netflix

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Speaker 7: is looking to do is exactly, you know, focus on

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Speaker 7: that engagement because to your point, yes, engagement is a

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Speaker 7: little bit more than flatted. It's been growing in the

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Speaker 7: second half, but compared to YouTube, no one is really

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Speaker 7: growing as fast as YouTube is over the past year loss.

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Speaker 7: And so what I think Netflix is looking at is

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Speaker 7: how can we supercharge our engagement through all of this

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Speaker 7: really premium content.

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Speaker 8: When thinking about HBO and.

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Speaker 7: The Warner Brothers library on the television side, plus all

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Speaker 7: the theatrical releases that come with that, that's a very

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Speaker 7: unique and rare opportunity to buy all this amazing premium

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Speaker 7: franchise content and help allow Netflix to really lean in

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Speaker 7: so that they can accelerate engagement.

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Speaker 5: Again, Robert, one of the variables in the Netflix deal

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Speaker 5: is how to value the cable network business that Warner

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Speaker 5: Brothers Discovery is going to spin out prior to a

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Speaker 5: potential acquisition by Netflix. I've seen anything from one dollar

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Speaker 5: to four or five dollars per share. How do you

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Speaker 5: guys value it?

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Speaker 7: Yeah, so we're working through all the updated numbers now,

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Speaker 7: but what we can say is clearly, when thinking about

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Speaker 7: what the value of this remaining asset would be, it

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Speaker 7: comes down to how how much net debt is really

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Speaker 7: left there From the equity perspective, So even if you

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Speaker 7: want to put a four to five times multiple on

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Speaker 7: the debate, and the range of how much equity value

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Speaker 7: is left after that really comes down to the net debt.

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Speaker 8: So what we're working through, you know, after all.

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Speaker 7: Of these deals have been announced, is how much has

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Speaker 7: transferred over you know, as part of the one scenario Netflix,

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Speaker 7: and how much is left if it is a standalone entity.

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Speaker 7: And that's the biggest wing factor in terms of the

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Speaker 7: dollar versus four.

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Speaker 2: Just one final question to Craig Moffatt and his historic work,

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Speaker 2: is cord cutting continuing?

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Speaker 7: So we just put out an updated note on this,

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Speaker 7: so I appreciate you asking. We've actually seen, for the

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Speaker 7: first time in a very long time, you know, cord

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Speaker 7: cutting actually start to get better.

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Speaker 8: And what do I mean by that?

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Speaker 7: We actually saw net ads grow this quarter, which is

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Speaker 7: really an unthinkable statement, you know, even twelve months ago.

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Speaker 7: And so where's that growth coming? From YouTube TV? Back

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Speaker 7: to our friends there, you know, continue to show some

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Speaker 7: really strong momentum, but also from the traditional distributors. You

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Speaker 7: know that that you've talked about with Craig for many

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Speaker 7: many years. Carter has turned the corner and they have

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Speaker 7: you know, started in to decline less and that's really

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Speaker 7: helped allow the overall industry to see improvements in that

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Speaker 7: core cutting trend. So, as you know, it's something that

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Speaker 7: we watched very closely and see after football season, how

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Speaker 7: many of those subscribers stick around.

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Speaker 4: Robert Fisherman, brilliant.

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Speaker 2: Thank you, thank you, Thank you so much again, Robert

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Speaker 2: Fisherman with Moffatt Nathanson. Thank you to Moffett Nathanson, Tyra,

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Speaker 2: thank you for getting those notes over to us today.

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Speaker 4: Stay with us.

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Speaker 2: More from Bloomberg Surveillance coming up after this.

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Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

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Speaker 1: starting at seven eight on Apple, Cocklay and Android Auto

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00:21:02,640 --> 00:21:05,600
Speaker 1: with the Bloomberg Business App. You can also listen live

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Speaker 1: on Amazon Alexa from our flagship New York station. Just

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Speaker 1: say Alexa play Bloomberg eleven thirty.

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Speaker 2: We are migrate over to Amanda Agotti. Thrilled and she's

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Speaker 2: been with us. Thank you for being so patient with

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Speaker 2: a s Amanda Gottis with PNC Bank. What does a

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Speaker 2: stock market want, Amanda Agatti out of today's fed festivities.

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Speaker 9: Well, I'm still hung up on your comment about private

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Speaker 9: equity buying into Penn State.

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Speaker 4: My jaw dropped.

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Speaker 9: You couldn't see it, but I was listening to you guys.

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Speaker 9: It's a value play. We can talk all day long

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Speaker 9: about Penn State football, but I'm going to refocus here

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Speaker 9: on FED day. Market wants a rate cut, but honestly,

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Speaker 9: the market's already got it priced in, so it's much

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Speaker 9: more about the path forward from here. Our base cases

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Speaker 9: maybe we get another one two as a stretch assignment

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Speaker 9: rate cuts in the new year. But I think the

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Speaker 9: market is maybe particularly interested in what the FED says

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Speaker 9: today about the liquidity profile of the market. You know,

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Speaker 9: our bank.

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Speaker 4: Reserves too low.

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Speaker 9: What are they thinking as it relates to QE or

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Speaker 9: maybe a QE LTE kind of program. Some of those

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Speaker 9: other topics I think are going to be more important

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Speaker 9: today in terms of the market's path forward than just

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Speaker 9: twenty five bits.

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Speaker 5: So if we do get twenty five basis points today,

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Speaker 5: maybe one, maybe two rate cuts next year, where's the

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Speaker 5: opportunity for P and C asset management in twenty twenty six.

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Speaker 5: Because we've had a really solid twenty twenty five in

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Speaker 5: both stocks end bonds. We sure have.

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Speaker 9: It's been a very very successful year. We'll take it

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Speaker 9: somewhat unexpected I think, I mean, we thought it was

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Speaker 9: going to be a good year. We didn't think it

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Speaker 9: was going to be quite this strong. But again, this

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Speaker 9: is an easy place to be wrong on. You have

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Speaker 9: such strong market returns. We think next year is going

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Speaker 9: to be another positive year, a little bit more muted.

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Speaker 9: That's not saying too much given returns this year, but

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Speaker 9: a little bit more muted next year really because we

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Speaker 9: think the purple haze of policy uncertainty is going to

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Speaker 9: continue to dominate next year. Midterm election year notoriously difficult

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Speaker 9: for equity market. So I think it's going to be

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Speaker 9: a choppy kind of policy noise driven sort of a year.

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Speaker 9: But the underlying fundamentals are so strong that by the

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Speaker 9: end of the year, I think we're going to be

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Speaker 9: in strong positive territory.

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Speaker 2: The heritage Amanda agattif PNC Bank is of course Stuart

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Speaker 2: Hoffman and really grounded economics. Do you buy the three

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Speaker 2: and a half percent run rate on GDP we see

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Speaker 2: out of Atlanta Fed right now.

443
00:23:38,520 --> 00:23:42,520
Speaker 9: Well, we certainly have gotten better than expected results really

444
00:23:42,560 --> 00:23:46,040
Speaker 9: over the course of this year. The Stu Hoffman or

445
00:23:46,119 --> 00:23:49,480
Speaker 9: the house view in terms of the economic forecast for

446
00:23:49,560 --> 00:23:53,000
Speaker 9: next year is a bit slower on a relative basis.

447
00:23:53,080 --> 00:23:57,000
Speaker 9: We're not talking recession, we're not even talking flatlining in

448
00:23:57,080 --> 00:23:59,040
Speaker 9: terms of growth, but I think there is a little

449
00:23:59,080 --> 00:24:01,520
Speaker 9: bit of a moderation in terms of that growth rate

450
00:24:01,840 --> 00:24:04,479
Speaker 9: that we would expect to see next year. The wild

451
00:24:04,520 --> 00:24:05,640
Speaker 9: card is going to be policy.

452
00:24:05,680 --> 00:24:05,880
Speaker 1: Though.

453
00:24:06,040 --> 00:24:08,639
Speaker 9: There's a decent amount of stimulus from all of the

454
00:24:08,640 --> 00:24:10,760
Speaker 9: good things that happened over the course of this year

455
00:24:11,240 --> 00:24:13,000
Speaker 9: that are going to come home to roos next year,

456
00:24:13,040 --> 00:24:16,240
Speaker 9: and so it could actually be an upside surprise. We

457
00:24:16,320 --> 00:24:18,879
Speaker 9: just haven't seen a lot of that flow through yet.

458
00:24:18,920 --> 00:24:21,240
Speaker 9: So I think it's going to be another solid year.

459
00:24:21,280 --> 00:24:22,320
Speaker 9: We'll call it good enough.

460
00:24:23,200 --> 00:24:26,040
Speaker 4: It's a freeing of the show. Call it mid November

461
00:24:26,119 --> 00:24:28,760
Speaker 4: to now. Is everybody's saying we're going to get a

462
00:24:28,800 --> 00:24:29,720
Speaker 4: policy pop?

463
00:24:29,920 --> 00:24:32,560
Speaker 5: Yeah, we'll one being a beautiful bill. We'll see how

464
00:24:32,600 --> 00:24:33,880
Speaker 5: it ripples through the economy.

465
00:24:34,119 --> 00:24:34,520
Speaker 8: Amanda.

466
00:24:34,600 --> 00:24:37,320
Speaker 5: In the bond market, boy, twenty twenty five yet solid

467
00:24:37,440 --> 00:24:41,640
Speaker 5: high single digit returns in the bond market here, How

468
00:24:41,640 --> 00:24:43,399
Speaker 5: do you think about twenty twenty six? Because I can

469
00:24:43,440 --> 00:24:46,240
Speaker 5: sit here to two year treasury and clip three point

470
00:24:46,280 --> 00:24:49,040
Speaker 5: six percent coupons, do I need to take credit risk

471
00:24:49,080 --> 00:24:49,560
Speaker 5: on top of.

472
00:24:49,480 --> 00:24:54,160
Speaker 9: That well, if the backdrop continues to hold up as

473
00:24:54,200 --> 00:24:56,320
Speaker 9: it has been, and again we think next year is

474
00:24:56,320 --> 00:24:57,880
Speaker 9: going to be a good enough kind of a year.

475
00:24:58,200 --> 00:25:00,360
Speaker 9: I do think that there is an opportunity to take

476
00:25:00,400 --> 00:25:03,320
Speaker 9: on some additional credit risk. The challenge has been for

477
00:25:03,359 --> 00:25:05,760
Speaker 9: the last few years that spreads have been so tight,

478
00:25:06,240 --> 00:25:09,840
Speaker 9: AKA evaluations have been pretty high, and so there's not

479
00:25:10,000 --> 00:25:12,320
Speaker 9: a lot of room there. With spreads as tight as

480
00:25:12,359 --> 00:25:14,240
Speaker 9: they are and as well behaved as they are, that's

481
00:25:14,280 --> 00:25:16,520
Speaker 9: the good news that we don't see a big default

482
00:25:16,560 --> 00:25:19,040
Speaker 9: cycle kind of kicking off here. But I think there's

483
00:25:19,119 --> 00:25:21,159
Speaker 9: room for investors to take on some credit risk in

484
00:25:21,200 --> 00:25:21,720
Speaker 9: twenty six.

485
00:25:21,880 --> 00:25:23,879
Speaker 2: Can I go nerd as we close this up, Amanda,

486
00:25:23,920 --> 00:25:26,240
Speaker 2: I'm looking at the employment cost indecks SI, thank you

487
00:25:26,320 --> 00:25:29,800
Speaker 2: so much. Side leans on the employment cost indecks. It's

488
00:25:29,840 --> 00:25:32,920
Speaker 2: wages and benefits sort of summed it together. Year over

489
00:25:33,000 --> 00:25:37,840
Speaker 2: year we had a buoyant five percent ECI really big, big,

490
00:25:37,880 --> 00:25:41,080
Speaker 2: big wage and benefit growth. And come on, Amanda, we

491
00:25:41,119 --> 00:25:43,800
Speaker 2: come halfway back now to year over year three and

492
00:25:43,840 --> 00:25:44,520
Speaker 2: a half percent.

493
00:25:44,960 --> 00:25:48,480
Speaker 4: Is a surprise for next year a negative real wage?

494
00:25:49,800 --> 00:25:52,600
Speaker 9: Oh my goodness. I hope that's not the case, because

495
00:25:52,600 --> 00:25:56,200
Speaker 9: that's going to spell trouble, certainly for the labor market

496
00:25:56,320 --> 00:25:59,600
Speaker 9: and the consumer. I mean, you have to wonder how

497
00:25:59,680 --> 00:26:02,040
Speaker 9: you can pep up this pace, right at some point

498
00:26:02,200 --> 00:26:04,880
Speaker 9: it has to kind of moderate, but a negative real

499
00:26:04,880 --> 00:26:07,440
Speaker 9: wage is not going to be great for consumer spending

500
00:26:07,520 --> 00:26:10,440
Speaker 9: and consumer growth. Consumer's been hanging in there, but it's

501
00:26:10,480 --> 00:26:13,320
Speaker 9: really because of what you just said, wages benefits. The

502
00:26:13,359 --> 00:26:16,320
Speaker 9: labor market's been hanging in. Okay, to the extent that

503
00:26:16,359 --> 00:26:18,800
Speaker 9: we start to see that reverse, I think that could be,

504
00:26:19,160 --> 00:26:21,880
Speaker 9: you know, a wildcard to the downside for next year.

505
00:26:21,960 --> 00:26:24,600
Speaker 9: That's not in our MACE case, but certainly something to watch.

506
00:26:24,640 --> 00:26:26,840
Speaker 2: Amana, Thank you so much, Amanda Gotti with his chief

507
00:26:26,880 --> 00:26:29,560
Speaker 2: investment officer Assets A PMC bank.

508
00:26:29,640 --> 00:26:31,600
Speaker 4: Really appreciate it. Stay with us.

509
00:26:31,840 --> 00:26:42,120
Speaker 2: More from Bloomberg Surveillance coming up after this.

510
00:26:42,119 --> 00:26:46,040
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

511
00:26:46,080 --> 00:26:49,120
Speaker 1: starting at seven am Eastern on Apple Cocklay and Android

512
00:26:49,119 --> 00:26:52,159
Speaker 1: Auto with the Bloomberg Business app. You can also listen

513
00:26:52,240 --> 00:26:55,520
Speaker 1: live on Amazon Alexa from our flagship New York station.

514
00:26:56,040 --> 00:26:58,680
Speaker 1: Just say Alexa, play Bloomberg eleven thirty.

515
00:26:59,080 --> 00:26:59,920
Speaker 4: Yeah the newspaper.

516
00:27:01,480 --> 00:27:03,480
Speaker 6: Okay, do you like when you go into a bar,

517
00:27:03,600 --> 00:27:05,600
Speaker 6: they know your name, they have their drink, your drinks

518
00:27:05,640 --> 00:27:07,760
Speaker 6: that laid out for you. Does that make you happy?

519
00:27:07,840 --> 00:27:08,399
Speaker 6: Make you want to go?

520
00:27:08,520 --> 00:27:08,680
Speaker 4: Long?

521
00:27:10,520 --> 00:27:13,639
Speaker 5: Walk into the squand tavern marks got my Tito's and

522
00:27:13,640 --> 00:27:14,159
Speaker 5: you love that?

523
00:27:14,200 --> 00:27:14,440
Speaker 2: Sure?

524
00:27:14,520 --> 00:27:14,760
Speaker 5: See?

525
00:27:14,800 --> 00:27:19,439
Speaker 6: Okay, so this is happening more and more at airport lounges. No, yes,

526
00:27:19,520 --> 00:27:21,639
Speaker 6: because a lot more people are starting to travel a

527
00:27:21,680 --> 00:27:24,800
Speaker 6: little bit more, and so the airport lounges are becoming

528
00:27:25,160 --> 00:27:26,879
Speaker 6: a little bit more crowded. So the Wall Street Journal

529
00:27:26,920 --> 00:27:31,320
Speaker 6: actually shadowed this one bartender at the Delta Club at

530
00:27:31,320 --> 00:27:34,280
Speaker 6: Hartsfield Jackson Airport. It's like this five hundred you know

531
00:27:34,359 --> 00:27:37,800
Speaker 6: person lounge. Delta is you know, one of Delsa's largest, big,

532
00:27:37,800 --> 00:27:38,520
Speaker 6: big airport.

533
00:27:38,800 --> 00:27:39,720
Speaker 7: So she knows the.

534
00:27:39,640 --> 00:27:42,440
Speaker 6: Flyers by name, like they come in and she gives

535
00:27:42,480 --> 00:27:44,840
Speaker 6: them fly to talk about that families. Yes, so people

536
00:27:44,880 --> 00:27:47,880
Speaker 6: are traveling a little bit more. One guy left her

537
00:27:47,920 --> 00:27:50,159
Speaker 6: like a thousand dollars tip on his lemonade as a

538
00:27:50,200 --> 00:27:51,840
Speaker 6: holiday gift. You know, he paid for it with his

539
00:27:51,880 --> 00:27:56,520
Speaker 6: Delta miles. Background on the bartenders, which I know they

540
00:27:56,520 --> 00:27:58,800
Speaker 6: actually they don't work for Dena Delta, so it's like

541
00:27:58,840 --> 00:28:01,000
Speaker 6: an outside company that I'll breaks a sky club. So

542
00:28:01,000 --> 00:28:03,480
Speaker 6: they make about eight dollars an hour plus tips, and

543
00:28:03,520 --> 00:28:06,159
Speaker 6: then they're pulled and shared with the bar back and

544
00:28:06,200 --> 00:28:09,639
Speaker 6: they don't get the flight benefits. But people love coming

545
00:28:09,760 --> 00:28:11,960
Speaker 6: and seeing that familiar face as you go.

546
00:28:11,920 --> 00:28:14,600
Speaker 5: From some lounge guy for.

547
00:28:16,240 --> 00:28:19,399
Speaker 2: Really, one of the I'll leave his name out of it.

548
00:28:19,440 --> 00:28:22,919
Speaker 2: One of the major CEO said it's his single biggest headache.

549
00:28:23,560 --> 00:28:26,440
Speaker 2: It's a single to me, it's a busted concept.

550
00:28:26,480 --> 00:28:29,119
Speaker 5: Well so all the it seems like the airport renovations

551
00:28:29,160 --> 00:28:33,000
Speaker 5: now have really good restaurants and bars there in the terminal,

552
00:28:33,040 --> 00:28:34,679
Speaker 5: like you don't need to go, where as when I

553
00:28:34,680 --> 00:28:36,639
Speaker 5: fight International, I'm all in on the lounge.

554
00:28:36,720 --> 00:28:38,960
Speaker 4: But now aren't the drinks free in the list? Yes,

555
00:28:39,040 --> 00:28:44,480
Speaker 4: that's it's some Yeah, he throwed. British Air has one

556
00:28:44,520 --> 00:28:47,200
Speaker 4: at each end and one's a disaster and one's okay,

557
00:28:47,560 --> 00:28:48,160
Speaker 4: it's strange.

558
00:28:48,240 --> 00:28:50,640
Speaker 6: I haven't been I next. Okay, do you I think

559
00:28:50,680 --> 00:28:52,920
Speaker 6: we've had this conversation? Do you use instacart like to

560
00:28:52,960 --> 00:28:54,360
Speaker 6: do the shopping food shopping?

561
00:28:54,400 --> 00:28:58,120
Speaker 4: Addicted? We don't use insta cart, but yes, okay changed.

562
00:28:59,600 --> 00:29:01,040
Speaker 8: Specific fike Instacart.

563
00:29:01,280 --> 00:29:03,640
Speaker 6: There is a new study that shows that it's charging

564
00:29:03,680 --> 00:29:07,880
Speaker 6: different prices to different customers at the same grocery items

565
00:29:07,920 --> 00:29:10,360
Speaker 6: in the same store. It's a New York Post has

566
00:29:10,360 --> 00:29:13,440
Speaker 6: this as a study by Groundwork Collaborative Consumer Reports. They

567
00:29:13,480 --> 00:29:15,840
Speaker 6: serveted like over four hundred shoppers, you know, they were

568
00:29:15,920 --> 00:29:18,560
Speaker 6: ordering groceries in the app for in store pickup, and

569
00:29:18,600 --> 00:29:21,520
Speaker 6: nearly three quarters of grocery items surveys were sold at

570
00:29:21,560 --> 00:29:24,560
Speaker 6: different price points. And so they asked them, how much

571
00:29:24,560 --> 00:29:27,760
Speaker 6: do you think consumers are overpaying each year? And this

572
00:29:27,840 --> 00:29:30,640
Speaker 6: company said an extra twelve hundred dollars on groceries. They're

573
00:29:30,640 --> 00:29:33,800
Speaker 6: probably spending because of this algorithm that that has it

574
00:29:33,880 --> 00:29:34,920
Speaker 6: picking different prices.

575
00:29:35,000 --> 00:29:36,080
Speaker 5: It's not seen right I go.

576
00:29:36,040 --> 00:29:36,560
Speaker 9: To the store.

577
00:29:36,920 --> 00:29:39,040
Speaker 4: Yeah, me too. You still go to the store too?

578
00:29:39,240 --> 00:29:39,760
Speaker 4: Like going to that?

579
00:29:39,880 --> 00:29:40,080
Speaker 2: I do?

580
00:29:40,280 --> 00:29:42,680
Speaker 5: I do the shop right. In Belmark, we like going there.

581
00:29:42,800 --> 00:29:43,440
Speaker 4: It's like an event.

582
00:29:43,560 --> 00:29:44,120
Speaker 5: It's an event.

583
00:29:44,240 --> 00:29:47,840
Speaker 4: It's something to do. People are nice. Storaget lives. Does

584
00:29:48,160 --> 00:29:51,200
Speaker 4: everyone worldwide know how? Sorry exactly?

585
00:29:51,240 --> 00:29:53,920
Speaker 6: But when the music in the supermarket starts making you happy?

586
00:29:54,040 --> 00:29:56,320
Speaker 4: Yes, you know. Your Friday nights are shot. Do you

587
00:29:57,360 --> 00:30:01,760
Speaker 4: wear your ugly sweater to Costco when you go Christmas? Oh?

588
00:30:01,920 --> 00:30:06,400
Speaker 6: No, no, no, no, not at all I do. Okay,

589
00:30:06,400 --> 00:30:07,800
Speaker 6: So this is a new term for you to be

590
00:30:07,840 --> 00:30:10,280
Speaker 6: aware of. Okay, for the young folks, there's a new

591
00:30:10,280 --> 00:30:13,080
Speaker 6: phrase by gen Z that they say is killing the

592
00:30:13,160 --> 00:30:17,240
Speaker 6: dating scene. Okay, It's called swag gap. It's when you

593
00:30:17,280 --> 00:30:19,280
Speaker 6: show up at a bar like you're dressed for the

594
00:30:19,400 --> 00:30:22,000
Speaker 6: vibe and then your date shows up in like hoodie

595
00:30:22,080 --> 00:30:25,200
Speaker 6: and old sneakers. And they're saying, you know, because swaggy

596
00:30:25,240 --> 00:30:27,360
Speaker 6: means like you have confidence, and so the gap is

597
00:30:27,400 --> 00:30:29,160
Speaker 6: when you look at one person you look at the

598
00:30:29,200 --> 00:30:31,360
Speaker 6: other and it's kind of not working. So the Wall

599
00:30:31,360 --> 00:30:33,560
Speaker 6: Street jonal says, you know what, It's happening more and more,

600
00:30:33,600 --> 00:30:35,280
Speaker 6: and the younger generation is getting tired.

601
00:30:35,920 --> 00:30:37,320
Speaker 4: I just saw a video this front.

602
00:30:37,360 --> 00:30:40,600
Speaker 2: She's they did this fabulous YouTube thing of restaurants and

603
00:30:40,640 --> 00:30:44,240
Speaker 2: stuff in Paris, and the guy in the front she's Antoine.

604
00:30:44,520 --> 00:30:48,160
Speaker 2: So the gap has never been wider between the way

605
00:30:48,240 --> 00:30:51,560
Speaker 2: the French dress and the Americans in their sweatpants.

606
00:30:51,280 --> 00:30:55,240
Speaker 4: A cultural Yeah, yeah, it's never been wider.

607
00:30:55,840 --> 00:30:57,880
Speaker 5: When we went to say Italy, my friend says, you

608
00:30:58,000 --> 00:30:59,720
Speaker 5: can't bring shorts to Italy.

609
00:31:00,080 --> 00:31:02,760
Speaker 4: You can't wear shorts care somebody. You can't get in

610
00:31:02,760 --> 00:31:03,240
Speaker 4: with shorts.

611
00:31:03,320 --> 00:31:05,440
Speaker 5: Yeah, I mean we're just sight seeing. We're in a

612
00:31:05,480 --> 00:31:06,920
Speaker 5: summer nopee.

613
00:31:07,160 --> 00:31:09,360
Speaker 4: Lisa wan Tayo, the newspapers, thank you so much.

614
00:31:10,440 --> 00:31:15,280
Speaker 1: This is the Bloomberg Surveillance Podcast, available on Apple, Spotify,

615
00:31:15,400 --> 00:31:19,680
Speaker 1: and anywhere else you get your podcasts. Listen live each weekday,

616
00:31:19,800 --> 00:31:23,280
Speaker 1: seven to ten am Eastern on Bloomberg dot com, the

617
00:31:23,360 --> 00:31:27,400
Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You

618
00:31:27,440 --> 00:31:30,800
Speaker 1: can also watch us live every weekday on YouTube and

619
00:31:31,000 --> 00:31:32,720
Speaker 1: always on the Bloomberg terminal