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Speaker 2: We are thrilled to start this morning and all through
Speaker 2: the day fed coverage with Francis Donald. Incredibly strong is
Speaker 2: chief economist at RBC Capital Markets that can't say enough
Speaker 2: about the acuity, particularly from the border from Canada over
Speaker 2: to the US for North America is well. I'm going
Speaker 2: to make two observations. The money market fund used to
Speaker 2: be four point x even five percent. The money market
Speaker 2: fund is down three point six three point seven percent.
Speaker 2: And the other observation is a landa GDP now. The
Speaker 2: GDP now is a stunning three point five percent. Why
Speaker 2: in God's name are we cutting interest rates? Tom?
Speaker 3: If I woke up this morning and I'd been in
Speaker 3: a coma and all I had was the data, I
Speaker 3: would think, well, this Federal Reserve must be neutral or
Speaker 3: hawkish heading into this period. They are in an environment
Speaker 3: where inflation has been above target for fifty five months,
Speaker 3: the unemployment rate is extraordinarily tight. In fact, there's only
Speaker 3: two times in history, going back to the nineteen seventies,
Speaker 3: when the unemployment rate has been this tight. What happened
Speaker 3: to the concept of normalizing and growth is fine. So
Speaker 3: what I want to hear from Chair Powell today is
Speaker 3: why are you cutting the other.
Speaker 4: Side of the argument. People are saying cut cut, let's go,
Speaker 4: let's go, let's go.
Speaker 2: A hasset Myron Frankly, A lot of other people as
Speaker 2: well state their case.
Speaker 3: Well, the unemployment rate is moving in the quote unquote
Speaker 3: wrong direction, and historically labor markets move like forgive the
Speaker 3: Canadian reference, in a hockey shape direction, which is that
Speaker 3: when they weaken, they tend to weaken aggressively and quickly.
Speaker 4: Except that this.
Speaker 3: Labor market is a very different labor market than what
Speaker 3: we see.
Speaker 4: The game is.
Speaker 2: Different with the stupid bendy sticks now that break all
Speaker 2: the time. Yes, firstus the old days of Victoriaville's and
Speaker 2: CCM five stripes.
Speaker 3: If it's I agree with you, both literally and metaphorically
Speaker 3: when it comes to economic data, which is that the
Speaker 3: hockey sticks are indeed broken for a variety of reasons,
Speaker 3: and I do not expect this unemployment rate to move
Speaker 3: in a hockey shaped type of direction, And in fact,
Speaker 3: I would say, could we maybe work through lunch and
Speaker 3: look at the subcomponents of the unemployment rate, which will
Speaker 3: tell you that the unemployment rate for the prime age
Speaker 3: workers has been relatively stable and really the rise is
Speaker 3: coming from twenty to twenty four year olds. Are we
Speaker 3: cutting rates for twenty twenty four year olds? That's fine,
Speaker 3: but I want to hear.
Speaker 4: That should we do more hockey talk?
Speaker 5: Yeah? Absolutely, like the hockey references. That's all good, Francis.
Speaker 5: All right, let's assume we get the rate cut today.
Speaker 5: What do you think the FED does in twenty twenty six, Well.
Speaker 4: It depends.
Speaker 3: You know, I'm going to be old school on this
Speaker 3: fall and say it depends what the data does in
Speaker 3: twenty twenty six. I am feeling a little introspective that
Speaker 3: I used to spend so much time parceling out FED
Speaker 3: talk because the FED was such a large input into
Speaker 3: the economic outlook. But perhaps it's my now growing old age.
Speaker 3: I didn't have a birthday this weekend, but I do
Speaker 3: have a milestone one coming up, and increasingly I do
Speaker 3: increasingly believe that the data will lead the story. And
Speaker 3: while there are biases that exist within the FED. They're
Speaker 3: probably within a reasonable margin of error. So one meeting
Speaker 3: ahead or before twenty five basis points here or there.
Speaker 3: And the really big problem heading into twenty twenty six is, frankly,
Speaker 3: we're still missing a big chunk of twenty twenty five.
Speaker 3: This Fed's going to this meeting with only real clarity
Speaker 3: on where we were up until September, and I usually
Speaker 3: were about a month delayed, but we're three months delayed,
Speaker 3: and so between now and January we were going to
Speaker 3: get a boatload of more data, three jobs reports, two
Speaker 3: inflation prints, a lot more retail sales.
Speaker 4: Twenty twenty six.
Speaker 3: Clarity is going to become better as we head into
Speaker 3: the end of January, but I will still say I
Speaker 3: cannot believe that we are still not starting every conversation with.
Speaker 4: Respect to tariff policy.
Speaker 3: We are still in the midst of a once in
Speaker 3: one hundred year trade shock. We have not yet seen
Speaker 3: the full effects of that, and we don't even know
Speaker 3: the final trade policies that are coming through going to
Speaker 3: be really meaningful.
Speaker 5: I'm not sure we're ever going to know them. What
Speaker 5: is the view of terrass from Canada, Because you guys
Speaker 5: are kind of a big trading partner for the US.
Speaker 3: The last I heard, we are the primary trading partner.
Speaker 4: Thank yeah.
Speaker 3: So really sector specific, and I think that actually is
Speaker 3: a good microcosm for both the US and Canadian economies
Speaker 3: is that this trade shop has been a very sexual
Speaker 3: and regional shock. So if you look in Canada, for example,
Speaker 3: there are autos and steel and aluminum that have been
Speaker 3: impacted to a certain extent, and in the United States,
Speaker 3: same story, which is trade related. Sectors are shedding jobs,
Speaker 3: but they're being offset pretty substantially by the healthcare sector
Speaker 3: that is growing. And so the trade shop for me
Speaker 3: has been a reminder that one GDP story, one inflation story,
Speaker 3: one consumer story is no longer relevant and are telling
Speaker 3: the real stories. And while we like to think that
Speaker 3: one forecast on one sheet of paper will guide all
Speaker 3: investment decisions, you have to reincreasingly bottom up and thinking
Speaker 3: about watch sectors are being impacted, and that's the real
Speaker 3: tariff impact that gets lost amidst the what is your
Speaker 3: CPI forecast with respective tarif policy?
Speaker 2: Bloomberg surveillance across the nation, across Canada as well with
Speaker 2: US Francis Donald RBC, a lot of other good guests
Speaker 2: coming up here to really flesh out this really interesting
Speaker 2: nuanced FED day. And as Francis and Paul mentioned, we're
Speaker 2: a little blind heer on economic data. Maybe it's not
Speaker 2: as blind as six weeks ago, but we're blind. And
Speaker 2: we get a bunch of data coming up on Serious
Speaker 2: XM Channel one twenty one, Good Morning Canada. And we
Speaker 2: also say on YouTube, subscribe to Bloomberg podcast. Okay, so
Speaker 2: we're going to get a meeting and he's going to
Speaker 2: basically say what you said. We're going to get a
Speaker 2: lot of data here. It's a toggle switch. We're going
Speaker 2: to be December twenty nine, December twenty seven. OMG Powell
Speaker 2: was brilliant or OMG's a dummy? I mean, if that's
Speaker 2: simple right.
Speaker 3: Well, as Powell has told us, there is no risk
Speaker 3: free path. The one thing I'll say is that there
Speaker 3: is if you do have a buyas towards cutting, and
Speaker 3: this Central Bank does have a bias towards that they
Speaker 3: have expressed in multiple different ways that they want to
Speaker 3: be closer to neutral. Now is your window.
Speaker 6: You have a.
Speaker 3: Window where actually the lack of data has given you
Speaker 3: more optionality, but that window will close.
Speaker 4: It will close by.
Speaker 3: February when inflation starts to move much higher, and you
Speaker 3: don't see that material duration in the deterioration in the labor.
Speaker 2: Markt what does your own Powell do today for small
Speaker 2: business in America?
Speaker 4: Like the Palace which is just getting by?
Speaker 3: Well, I got the wrong morning invite. It sounds like
Speaker 3: right off the top, but I think that very little.
Speaker 3: And as I said earlier, we used to talk a
Speaker 3: lot about how FED policy was a major input into
Speaker 3: the economy, but this is economy is decreasingly rate sensitive
Speaker 3: on a go forward basis. The argument that we're going
Speaker 3: to hear from the Fed is that the labor market
Speaker 3: is deteriorating and therefore probably we're in restrictive policy. But
Speaker 3: who is policy restrictive for right now? And if we
Speaker 3: ease it by twenty five basis points, will you see
Speaker 3: material changes? Our point has been that the real pain
Speaker 3: of affordability and the real pain of prices and what's
Speaker 3: weighing on small businesses is coming from things like tariffs,
Speaker 3: not restrictive rate policy. So rate cuts today are like
Speaker 3: taking a tail and all for a broken arm. It'll help,
Speaker 3: but it's not going to curry.
Speaker 2: You to Thailand al yesterday for a birthday. Tell twelve seconds.
Speaker 2: Are the bond vigilantes out?
Speaker 3: The bond vigilantes are always out, But where are they
Speaker 3: on the curve is maybe the more important question. And
Speaker 3: I suspect that they will be more present as we
Speaker 3: head into February March, when that inflation data starts to
Speaker 3: take it.
Speaker 2: Oh yet, folks, I promise into the December, into the
Speaker 2: beginning of the year, we will give you more information
Speaker 2: on the nuances of what Francis Donald calls the spread market.
Speaker 2: There's some huge dynamics going on right now. Francis Donald
Speaker 2: with us with OURBC. Thank you so much for joining us.
Speaker 4: Stay with us.
Speaker 2: More from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live
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Speaker 2: When you hear me say we protect the copyright of
Speaker 2: all of our guests, we take it very, very seriously.
Speaker 2: I have in front of me a coveted five page
Speaker 2: note from Moffatt and Nathanson in there. Just wonderful, Robert Fishman.
Speaker 2: It's loaded with global Wall Street knowledge on this media merger.
Speaker 2: We're thrilled at. Robert Fishman joins us right now, Robert,
Speaker 2: I went right to exhibit too, which is the deal
Speaker 2: valuation of Warner Brothers. It's three bar charts, folks, and
Speaker 2: right in the middle is run rate synergies. I don't
Speaker 2: buy for a minute anything, but whatever's going to get done,
Speaker 2: there's going to be synergies way larger than what's published now.
Speaker 4: Am I right on that?
Speaker 7: So I assume you're first talking about the Netflix did
Speaker 7: if we want to start there, and so, yes, I
Speaker 7: think the answer to your question is that there's likely
Speaker 7: to be more synergies from a Netflix Warner Brothers combination.
Speaker 7: I think there's you bound to be some cost efficiencies
Speaker 7: when I'm thinking about the programming spend and content spending
Speaker 7: of putting those two companies together. But that's that's where
Speaker 7: the company has started in terms of laying out what
Speaker 7: the cost energies are for this deal.
Speaker 4: Using the pro ratio evy to EB. I learned this
Speaker 4: from Michaels. I know the only reason I know it.
Speaker 2: Robert Fishman if you get synergies over six billion, do
Speaker 2: you get ev to ebit which proves valuable for Netflix shareholders.
Speaker 8: So let's let's break this down.
Speaker 7: So what Netflix has said so far is two to
Speaker 7: three billion dollars of cost energies. Paramount Skydance has thrown
Speaker 7: out the six billion dollar cost energy number because they
Speaker 7: are also buying the Global Networks portfolio. So the numbers
Speaker 7: aren't really apples to apples because you have to clearly
Speaker 7: understand that when putting the Paramount Skydance portfolio of cable
Speaker 7: networks together along with the Warner Brothers portfolio of networks,
Speaker 7: that there will be much larger cost energies when thinking
Speaker 7: about that versus Netflix, which is only just bidding on
Speaker 7: the streaming and studio assets in Warner Brothers. So again,
Speaker 7: it's not exactly apples to apples when comparing the two numbers.
Speaker 5: Hey, Rob, you know talking to some investors, heare One
Speaker 5: of the narratives I'm getting is for Netflix, this is
Speaker 5: a really nice to have. For Paramount Skuiddance, this is
Speaker 5: kind of a must have.
Speaker 4: Do you view it that way?
Speaker 7: We do from the Paramount Skuidance side, and why we
Speaker 7: upgraded Warner Brothers Discovery at the beginning of the year
Speaker 7: is we thought that the consolidation in the industry was inevitable.
Speaker 7: I think Michael's been on the show you over many
Speaker 7: years talking about this. And so when you think about
Speaker 7: who that the natural dance partners are, it was Comcast
Speaker 7: and it still is, Paramount Skuydance now after the Skydance
Speaker 7: deal and Warner Brothers Discovery. Those three are the most
Speaker 7: natural players because they're all subscale in streaming. So when
Speaker 7: thinking about how to solve that streaming scale issue from
Speaker 7: a global basis, it's just natural to think that you
Speaker 7: need to see some combination of those players. And so
Speaker 7: that's essentially what's playing out in front of us. Paramounts
Speaker 7: Skydance needs these assets in order to accelerate the timing
Speaker 7: to reach the scale that they're desiring on a global
Speaker 7: scale basis for Paramount Plus.
Speaker 8: So yes, we very.
Speaker 7: Much think that the combination with Paramount Skuidance is a
Speaker 7: must have.
Speaker 5: Rob the from an other perspective, if your Warner Brothers
Speaker 5: Discover Discovery aside from price, do you think they have
Speaker 5: a preference for one or the other and why so?
Speaker 7: I think what we saw so far is that the
Speaker 7: preference was Netflix, and you know that's they announced that
Speaker 7: the deal on Friday, and you know, if you believe
Speaker 7: everything that that's been written and that the paramount Skuidance
Speaker 7: has put out from their perspective, they didn't continue to
Speaker 7: engage with them. So I think that the preference on
Speaker 7: the Warner Brothers Discovery side so far was Netflix. And
Speaker 7: you know that that might be for a few different
Speaker 7: reasons if you want to break that down. I mean, clearly,
Speaker 7: Netflix brings an unprecedented global scale when thinking about what
Speaker 7: the opportunity is for Netflix to monetize this content, and
Speaker 7: Warner Brothers has licensed that content to Netflix.
Speaker 8: Already, you know, over the many years.
Speaker 7: So Netflix has essentially perfect information knowing how the content
Speaker 7: would perform on their platform. And that's the opportunity that
Speaker 7: I think that the company sees when monetizing this content
Speaker 7: going forward.
Speaker 4: Robert Fishman with us. We thrilledies with us.
Speaker 2: Today's with Mafatt Nathanson to give you a perspective here.
Speaker 2: Mafatt Nathanson out of Sanford Bernstein redefined independent media at
Speaker 2: research again. Their research here in the last couple of
Speaker 2: days has been just absolutely superb Rob Robert. One of
Speaker 2: the joys of this process has been Michael Nathanson's long,
Speaker 2: long note here on the merger on the first time
Speaker 2: he met the leadership of Netflix in a nondescript office
Speaker 2: ears in years.
Speaker 4: Ago, and he says, it's media one oh one.
Speaker 2: Do these mergers succeed or are we now at the
Speaker 2: point where it's just ego and they're going to be
Speaker 2: bad outcomes down the road.
Speaker 7: Unfortunately, we do have a long history that you know,
Speaker 7: Michael and I have been a part of where media
Speaker 7: m and A is a lot more difficult to pull
Speaker 7: off than just what the spreadsheets tell you. And yes,
Speaker 7: you can, you can get to accretion, you can get
Speaker 7: to you know, potential upside over the longer term when
Speaker 7: thinking about how a new owner can take the assets
Speaker 7: and redefine them. But the long history of media M
Speaker 7: and A suggests that it's even more difficult than we
Speaker 7: would all seem.
Speaker 8: I think a lot of that comes.
Speaker 7: Down to the culture, and you know, when you start
Speaker 7: smashing different cultures together, that obviously becomes a challenge, especially
Speaker 7: in the media industry given the creative output that is needed,
Speaker 7: but also just when thinking about where the headwinds and
Speaker 7: the tailwinds are for the industry. A lot of these
Speaker 7: recent media mergers have been focused more on the cable
Speaker 7: network side, and clearly that the linear ecosystem has had
Speaker 7: challenges over the past few years. So even with the
Speaker 7: m and A potential and the cost cutting where we
Speaker 7: started here, we haven't seen the true upside of those
Speaker 7: deals because it's really just enabled them to cut costs
Speaker 7: to offset the revenue headline synergy.
Speaker 8: Yeah, that's Robert.
Speaker 5: The regulatory hurdles here seemed pretty high for both players.
Speaker 5: How do you game that out for both of these
Speaker 5: bids here.
Speaker 7: Yeah, there's a lot of noise around regulatory approval right now.
Speaker 7: I mean clearly from the Paramount Skydance side, they seem
Speaker 7: to have an upper hand right now just in terms
Speaker 7: of the administration relationships that they have. At the same
Speaker 7: time that the true answer should come down to how
Speaker 7: the market is defined, and I think what Netflix is
Speaker 7: out there talking about is when you when you view
Speaker 7: the overall market to total total media consumption and look
Speaker 7: at how Nielsen measures it, Netflix today only has eight
Speaker 7: percent of that total pie, of the viewership pie in
Speaker 7: the US, and so when you when you compare who
Speaker 7: who Netflix is actually competing against YouTube actually has a
Speaker 7: bigger share of that viewing pie and so on the
Speaker 7: streaming side. And so when when you start thinking about
Speaker 7: all the different portfolio of assets, Netflix actually is not
Speaker 7: number one or two. The traditional media guys are above
Speaker 7: them in terms of when you combine the linear television viewers.
Speaker 4: Cut to the chase, Robert Fishman, do you think the
Speaker 4: government is going to buy that?
Speaker 7: I think it comes down to how you define the market.
Speaker 7: And I think Netflix has a really strong point of
Speaker 7: view here because what we haven't even talked about TikTok
Speaker 7: and you know, Instagram, so that there are lots of
Speaker 7: different ways that people engage with content these days.
Speaker 2: I mean, I'm looking Robert Fishman at the end of
Speaker 2: the Nathanson note, folks, ma fit Nathanson was way out
Speaker 2: front on cord cutting.
Speaker 4: Can't say enough about this.
Speaker 2: And there he's got the F free, the phrase free options.
Speaker 2: Like YouTube, Robert Fishman, the vector on YouTube is going up.
Speaker 2: The vector on Netflix is flat. Why is that going
Speaker 2: to change?
Speaker 7: Well as part of this deal, I think what Netflix
Speaker 7: is looking to do is exactly, you know, focus on
Speaker 7: that engagement because to your point, yes, engagement is a
Speaker 7: little bit more than flatted. It's been growing in the
Speaker 7: second half, but compared to YouTube, no one is really
Speaker 7: growing as fast as YouTube is over the past year loss.
Speaker 7: And so what I think Netflix is looking at is
Speaker 7: how can we supercharge our engagement through all of this
Speaker 7: really premium content.
Speaker 8: When thinking about HBO and.
Speaker 7: The Warner Brothers library on the television side, plus all
Speaker 7: the theatrical releases that come with that, that's a very
Speaker 7: unique and rare opportunity to buy all this amazing premium
Speaker 7: franchise content and help allow Netflix to really lean in
Speaker 7: so that they can accelerate engagement.
Speaker 5: Again, Robert, one of the variables in the Netflix deal
Speaker 5: is how to value the cable network business that Warner
Speaker 5: Brothers Discovery is going to spin out prior to a
Speaker 5: potential acquisition by Netflix. I've seen anything from one dollar
Speaker 5: to four or five dollars per share. How do you
Speaker 5: guys value it?
Speaker 7: Yeah, so we're working through all the updated numbers now,
Speaker 7: but what we can say is clearly, when thinking about
Speaker 7: what the value of this remaining asset would be, it
Speaker 7: comes down to how how much net debt is really
Speaker 7: left there From the equity perspective, So even if you
Speaker 7: want to put a four to five times multiple on
Speaker 7: the debate, and the range of how much equity value
Speaker 7: is left after that really comes down to the net debt.
Speaker 8: So what we're working through, you know, after all.
Speaker 7: Of these deals have been announced, is how much has
Speaker 7: transferred over you know, as part of the one scenario Netflix,
Speaker 7: and how much is left if it is a standalone entity.
Speaker 7: And that's the biggest wing factor in terms of the
Speaker 7: dollar versus four.
Speaker 2: Just one final question to Craig Moffatt and his historic work,
Speaker 2: is cord cutting continuing?
Speaker 7: So we just put out an updated note on this,
Speaker 7: so I appreciate you asking. We've actually seen, for the
Speaker 7: first time in a very long time, you know, cord
Speaker 7: cutting actually start to get better.
Speaker 8: And what do I mean by that?
Speaker 7: We actually saw net ads grow this quarter, which is
Speaker 7: really an unthinkable statement, you know, even twelve months ago.
Speaker 7: And so where's that growth coming? From YouTube TV? Back
Speaker 7: to our friends there, you know, continue to show some
Speaker 7: really strong momentum, but also from the traditional distributors. You
Speaker 7: know that that you've talked about with Craig for many
Speaker 7: many years. Carter has turned the corner and they have
Speaker 7: you know, started in to decline less and that's really
Speaker 7: helped allow the overall industry to see improvements in that
Speaker 7: core cutting trend. So, as you know, it's something that
Speaker 7: we watched very closely and see after football season, how
Speaker 7: many of those subscribers stick around.
Speaker 4: Robert Fisherman, brilliant.
Speaker 2: Thank you, thank you, Thank you so much again, Robert
Speaker 2: Fisherman with Moffatt Nathanson. Thank you to Moffett Nathanson, Tyra,
Speaker 2: thank you for getting those notes over to us today.
Speaker 4: Stay with us.
Speaker 2: More from Bloomberg Surveillance coming up after this.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 1: say Alexa play Bloomberg eleven thirty.
Speaker 2: We are migrate over to Amanda Agotti. Thrilled and she's
Speaker 2: been with us. Thank you for being so patient with
Speaker 2: a s Amanda Gottis with PNC Bank. What does a
Speaker 2: stock market want, Amanda Agatti out of today's fed festivities.
Speaker 9: Well, I'm still hung up on your comment about private
Speaker 9: equity buying into Penn State.
Speaker 4: My jaw dropped.
Speaker 9: You couldn't see it, but I was listening to you guys.
Speaker 9: It's a value play. We can talk all day long
Speaker 9: about Penn State football, but I'm going to refocus here
Speaker 9: on FED day. Market wants a rate cut, but honestly,
Speaker 9: the market's already got it priced in, so it's much
Speaker 9: more about the path forward from here. Our base cases
Speaker 9: maybe we get another one two as a stretch assignment
Speaker 9: rate cuts in the new year. But I think the
Speaker 9: market is maybe particularly interested in what the FED says
Speaker 9: today about the liquidity profile of the market. You know,
Speaker 9: our bank.
Speaker 4: Reserves too low.
Speaker 9: What are they thinking as it relates to QE or
Speaker 9: maybe a QE LTE kind of program. Some of those
Speaker 9: other topics I think are going to be more important
Speaker 9: today in terms of the market's path forward than just
Speaker 9: twenty five bits.
Speaker 5: So if we do get twenty five basis points today,
Speaker 5: maybe one, maybe two rate cuts next year, where's the
Speaker 5: opportunity for P and C asset management in twenty twenty six.
Speaker 5: Because we've had a really solid twenty twenty five in
Speaker 5: both stocks end bonds. We sure have.
Speaker 9: It's been a very very successful year. We'll take it
Speaker 9: somewhat unexpected I think, I mean, we thought it was
Speaker 9: going to be a good year. We didn't think it
Speaker 9: was going to be quite this strong. But again, this
Speaker 9: is an easy place to be wrong on. You have
Speaker 9: such strong market returns. We think next year is going
Speaker 9: to be another positive year, a little bit more muted.
Speaker 9: That's not saying too much given returns this year, but
Speaker 9: a little bit more muted next year really because we
Speaker 9: think the purple haze of policy uncertainty is going to
Speaker 9: continue to dominate next year. Midterm election year notoriously difficult
Speaker 9: for equity market. So I think it's going to be
Speaker 9: a choppy kind of policy noise driven sort of a year.
Speaker 9: But the underlying fundamentals are so strong that by the
Speaker 9: end of the year, I think we're going to be
Speaker 9: in strong positive territory.
Speaker 2: The heritage Amanda agattif PNC Bank is of course Stuart
Speaker 2: Hoffman and really grounded economics. Do you buy the three
Speaker 2: and a half percent run rate on GDP we see
Speaker 2: out of Atlanta Fed right now.
Speaker 9: Well, we certainly have gotten better than expected results really
Speaker 9: over the course of this year. The Stu Hoffman or
Speaker 9: the house view in terms of the economic forecast for
Speaker 9: next year is a bit slower on a relative basis.
Speaker 9: We're not talking recession, we're not even talking flatlining in
Speaker 9: terms of growth, but I think there is a little
Speaker 9: bit of a moderation in terms of that growth rate
Speaker 9: that we would expect to see next year. The wild
Speaker 9: card is going to be policy.
Speaker 1: Though.
Speaker 9: There's a decent amount of stimulus from all of the
Speaker 9: good things that happened over the course of this year
Speaker 9: that are going to come home to roos next year,
Speaker 9: and so it could actually be an upside surprise. We
Speaker 9: just haven't seen a lot of that flow through yet.
Speaker 9: So I think it's going to be another solid year.
Speaker 9: We'll call it good enough.
Speaker 4: It's a freeing of the show. Call it mid November
Speaker 4: to now. Is everybody's saying we're going to get a
Speaker 4: policy pop?
Speaker 5: Yeah, we'll one being a beautiful bill. We'll see how
Speaker 5: it ripples through the economy.
Speaker 8: Amanda.
Speaker 5: In the bond market, boy, twenty twenty five yet solid
Speaker 5: high single digit returns in the bond market here, How
Speaker 5: do you think about twenty twenty six? Because I can
Speaker 5: sit here to two year treasury and clip three point
Speaker 5: six percent coupons, do I need to take credit risk
Speaker 5: on top of.
Speaker 9: That well, if the backdrop continues to hold up as
Speaker 9: it has been, and again we think next year is
Speaker 9: going to be a good enough kind of a year.
Speaker 9: I do think that there is an opportunity to take
Speaker 9: on some additional credit risk. The challenge has been for
Speaker 9: the last few years that spreads have been so tight,
Speaker 9: AKA evaluations have been pretty high, and so there's not
Speaker 9: a lot of room there. With spreads as tight as
Speaker 9: they are and as well behaved as they are, that's
Speaker 9: the good news that we don't see a big default
Speaker 9: cycle kind of kicking off here. But I think there's
Speaker 9: room for investors to take on some credit risk in
Speaker 9: twenty six.
Speaker 2: Can I go nerd as we close this up, Amanda,
Speaker 2: I'm looking at the employment cost indecks SI, thank you
Speaker 2: so much. Side leans on the employment cost indecks. It's
Speaker 2: wages and benefits sort of summed it together. Year over
Speaker 2: year we had a buoyant five percent ECI really big, big,
Speaker 2: big wage and benefit growth. And come on, Amanda, we
Speaker 2: come halfway back now to year over year three and
Speaker 2: a half percent.
Speaker 4: Is a surprise for next year a negative real wage?
Speaker 9: Oh my goodness. I hope that's not the case, because
Speaker 9: that's going to spell trouble, certainly for the labor market
Speaker 9: and the consumer. I mean, you have to wonder how
Speaker 9: you can pep up this pace, right at some point
Speaker 9: it has to kind of moderate, but a negative real
Speaker 9: wage is not going to be great for consumer spending
Speaker 9: and consumer growth. Consumer's been hanging in there, but it's
Speaker 9: really because of what you just said, wages benefits. The
Speaker 9: labor market's been hanging in. Okay, to the extent that
Speaker 9: we start to see that reverse, I think that could be,
Speaker 9: you know, a wildcard to the downside for next year.
Speaker 9: That's not in our MACE case, but certainly something to watch.
Speaker 2: Amana, Thank you so much, Amanda Gotti with his chief
Speaker 2: investment officer Assets A PMC bank.
Speaker 4: Really appreciate it. Stay with us.
Speaker 2: More from Bloomberg Surveillance coming up after this.
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Speaker 4: Yeah the newspaper.
Speaker 6: Okay, do you like when you go into a bar,
Speaker 6: they know your name, they have their drink, your drinks
Speaker 6: that laid out for you. Does that make you happy?
Speaker 6: Make you want to go?
Speaker 4: Long?
Speaker 5: Walk into the squand tavern marks got my Tito's and
Speaker 5: you love that?
Speaker 2: Sure?
Speaker 5: See?
Speaker 6: Okay, so this is happening more and more at airport lounges. No, yes,
Speaker 6: because a lot more people are starting to travel a
Speaker 6: little bit more, and so the airport lounges are becoming
Speaker 6: a little bit more crowded. So the Wall Street Journal
Speaker 6: actually shadowed this one bartender at the Delta Club at
Speaker 6: Hartsfield Jackson Airport. It's like this five hundred you know
Speaker 6: person lounge. Delta is you know, one of Delsa's largest, big,
Speaker 6: big airport.
Speaker 7: So she knows the.
Speaker 6: Flyers by name, like they come in and she gives
Speaker 6: them fly to talk about that families. Yes, so people
Speaker 6: are traveling a little bit more. One guy left her
Speaker 6: like a thousand dollars tip on his lemonade as a
Speaker 6: holiday gift. You know, he paid for it with his
Speaker 6: Delta miles. Background on the bartenders, which I know they
Speaker 6: actually they don't work for Dena Delta, so it's like
Speaker 6: an outside company that I'll breaks a sky club. So
Speaker 6: they make about eight dollars an hour plus tips, and
Speaker 6: then they're pulled and shared with the bar back and
Speaker 6: they don't get the flight benefits. But people love coming
Speaker 6: and seeing that familiar face as you go.
Speaker 5: From some lounge guy for.
Speaker 2: Really, one of the I'll leave his name out of it.
Speaker 2: One of the major CEO said it's his single biggest headache.
Speaker 2: It's a single to me, it's a busted concept.
Speaker 5: Well so all the it seems like the airport renovations
Speaker 5: now have really good restaurants and bars there in the terminal,
Speaker 5: like you don't need to go, where as when I
Speaker 5: fight International, I'm all in on the lounge.
Speaker 4: But now aren't the drinks free in the list? Yes,
Speaker 4: that's it's some Yeah, he throwed. British Air has one
Speaker 4: at each end and one's a disaster and one's okay,
Speaker 4: it's strange.
Speaker 6: I haven't been I next. Okay, do you I think
Speaker 6: we've had this conversation? Do you use instacart like to
Speaker 6: do the shopping food shopping?
Speaker 4: Addicted? We don't use insta cart, but yes, okay changed.
Speaker 8: Specific fike Instacart.
Speaker 6: There is a new study that shows that it's charging
Speaker 6: different prices to different customers at the same grocery items
Speaker 6: in the same store. It's a New York Post has
Speaker 6: this as a study by Groundwork Collaborative Consumer Reports. They
Speaker 6: serveted like over four hundred shoppers, you know, they were
Speaker 6: ordering groceries in the app for in store pickup, and
Speaker 6: nearly three quarters of grocery items surveys were sold at
Speaker 6: different price points. And so they asked them, how much
Speaker 6: do you think consumers are overpaying each year? And this
Speaker 6: company said an extra twelve hundred dollars on groceries. They're
Speaker 6: probably spending because of this algorithm that that has it
Speaker 6: picking different prices.
Speaker 5: It's not seen right I go.
Speaker 9: To the store.
Speaker 4: Yeah, me too. You still go to the store too?
Speaker 4: Like going to that?
Speaker 2: I do?
Speaker 5: I do the shop right. In Belmark, we like going there.
Speaker 4: It's like an event.
Speaker 5: It's an event.
Speaker 4: It's something to do. People are nice. Storaget lives. Does
Speaker 4: everyone worldwide know how? Sorry exactly?
Speaker 6: But when the music in the supermarket starts making you happy?
Speaker 4: Yes, you know. Your Friday nights are shot. Do you
Speaker 4: wear your ugly sweater to Costco when you go Christmas? Oh?
Speaker 6: No, no, no, no, not at all I do. Okay,
Speaker 6: So this is a new term for you to be
Speaker 6: aware of. Okay, for the young folks, there's a new
Speaker 6: phrase by gen Z that they say is killing the
Speaker 6: dating scene. Okay, It's called swag gap. It's when you
Speaker 6: show up at a bar like you're dressed for the
Speaker 6: vibe and then your date shows up in like hoodie
Speaker 6: and old sneakers. And they're saying, you know, because swaggy
Speaker 6: means like you have confidence, and so the gap is
Speaker 6: when you look at one person you look at the
Speaker 6: other and it's kind of not working. So the Wall
Speaker 6: Street jonal says, you know what, It's happening more and more,
Speaker 6: and the younger generation is getting tired.
Speaker 4: I just saw a video this front.
Speaker 2: She's they did this fabulous YouTube thing of restaurants and
Speaker 2: stuff in Paris, and the guy in the front she's Antoine.
Speaker 2: So the gap has never been wider between the way
Speaker 2: the French dress and the Americans in their sweatpants.
Speaker 4: A cultural Yeah, yeah, it's never been wider.
Speaker 5: When we went to say Italy, my friend says, you
Speaker 5: can't bring shorts to Italy.
Speaker 4: You can't wear shorts care somebody. You can't get in
Speaker 4: with shorts.
Speaker 5: Yeah, I mean we're just sight seeing. We're in a
Speaker 5: summer nopee.
Speaker 4: Lisa wan Tayo, the newspapers, thank you so much.
Speaker 1: This is the Bloomberg Surveillance Podcast, available on Apple, Spotify,
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