WEBVTT - Markets Continue Rally as Trump Visits the Fed 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.040 us live on YouTube. 0:00:27.360 --> 0:00:32.040 Joining us now from Torno. David Rosenberg writing his important note. 0:00:31.800 --> 0:00:32.640 Into the weekend. 0:00:33.159 --> 0:00:35.879 David, there just seems to be a vacillation. You're almost 0:00:36.440 --> 0:00:40.559 a two part discussion of sustained higher inflation. Look at 0:00:40.560 --> 0:00:45.600 grocery prices or the idea of a disinflationary tendency if 0:00:45.640 --> 0:00:51.120 real estate levels out, do we maintain in Rosenberg disinflationary tendency? 0:00:51.600 --> 0:00:57.200 Well, just arithmetically, Tom, if real estate flattens out, And 0:00:57.320 --> 0:00:59.920 actually I think the risk is at real estate price 0:01:00.240 --> 0:01:03.160 are going to be going down as opposed to up. 0:01:03.200 --> 0:01:05.800 When you look at the latest stunt sold inventory numbers 0:01:06.200 --> 0:01:09.360 in the new and existing market, you know, when you 0:01:09.400 --> 0:01:11.880 look at the CPI, you know a third of the 0:01:11.880 --> 0:01:15.480 index is related to residential real estate. Forty percent of 0:01:15.520 --> 0:01:19.360 the core is related to residential real estate. So it 0:01:19.400 --> 0:01:22.080 is actually very important, and I think it's going to 0:01:22.080 --> 0:01:25.720 act as a very powerful antidote to the inflation we're 0:01:25.720 --> 0:01:28.400 going to get on the goods prices side from all 0:01:28.440 --> 0:01:29.040 the tariffs. 0:01:29.840 --> 0:01:31.560 Dick, and I'm very curious as you look ahead to 0:01:31.720 --> 0:01:34.839 the next week, and this is an extremely pivotal week 0:01:34.880 --> 0:01:37.000 in terms of economic data, in terms of earnings. We've 0:01:37.000 --> 0:01:39.280 got the FED meeting as well. Of course, Friday of 0:01:39.360 --> 0:01:41.600 next week the deadline of that extension of the ninety 0:01:41.640 --> 0:01:43.600 day pause that President Trump put in place on those 0:01:43.600 --> 0:01:47.520 reciprocal tears. What are you watching for as that week unfolds? 0:01:47.520 --> 0:01:49.320 What's going to give you the best sense here of 0:01:49.360 --> 0:01:51.240 the relative health of the US economy? 0:01:51.280 --> 0:01:53.920 And light of all I just mentioned, the most important 0:01:53.920 --> 0:01:56.960 thing next week is going to be the employment report, 0:01:58.200 --> 0:02:01.000 because that is going to tell all the tail as 0:02:01.040 --> 0:02:03.320 to you know, whether the FED is going to start 0:02:03.360 --> 0:02:08.640 to rekindle the rate cuts at the September meeting. That's 0:02:08.639 --> 0:02:12.280 really what we're waiting for. If we see cracks emerge 0:02:12.600 --> 0:02:16.200 in the labor market, and we see a loosening up 0:02:16.240 --> 0:02:19.080 in a labor market, the FED is going to feel 0:02:19.160 --> 0:02:23.040 quite a bit more relaxed that the goods inflation that 0:02:23.120 --> 0:02:27.800 we are seeing on the terrifile. If it doesn't feed 0:02:27.840 --> 0:02:31.640 into wages. That's going to be a comforting sign. So 0:02:31.680 --> 0:02:34.920 I'd say that the employment number in its entirety, you know, 0:02:35.000 --> 0:02:39.160 the headline, the revisions, what the unemployment rate does, the 0:02:39.200 --> 0:02:43.080 participation rate, but also keep a fermoil on the wage number, 0:02:43.200 --> 0:02:46.160 because what's really important here, and everybody's waxing on about 0:02:46.160 --> 0:02:48.320 how great the US economy is doing, I think it's 0:02:48.400 --> 0:02:53.520 rather mixed, is that real work based income and inflation 0:02:53.600 --> 0:02:58.560 adjusted terms is actually contracting. And that is going to 0:02:58.600 --> 0:03:01.640 be where you know, the from the tariffs is going 0:03:01.639 --> 0:03:03.520 to hit the wall on the labor market. So nothing, 0:03:03.680 --> 0:03:05.360 we know. The Fed's not going to do anything. I 0:03:05.360 --> 0:03:08.080 think they'll be they'll keep their cards close to their 0:03:08.160 --> 0:03:12.240 vest in terms of any guidance. The key is really 0:03:12.240 --> 0:03:14.120 going to be the labor market. That's what we're waiting 0:03:14.160 --> 0:03:16.480 for in terms of what it's going to mean for 0:03:16.880 --> 0:03:18.360 interest rates over the next few months. 0:03:18.360 --> 0:03:21.079 Well, then, David, on that real way analysis, the inflation 0:03:21.120 --> 0:03:23.920 adjusted way analysis, Let's go to eggs. 0:03:23.960 --> 0:03:27.160 Lisa Mateo is going to Costco in the next. 0:03:27.040 --> 0:03:30.440 Twelve eighteen hours to buy forty two dozen eggs just 0:03:30.480 --> 0:03:33.399 to get through the week. David, I'm looking at grocery 0:03:33.440 --> 0:03:35.160 prices it ain't happen. 0:03:35.360 --> 0:03:38.560 They're not Grocery prices are not coming down. 0:03:39.080 --> 0:03:42.600 Well, that's actually a global phenomenon. I mean, the fact 0:03:42.640 --> 0:03:47.840 that agricultural prices are going up so much is global 0:03:47.840 --> 0:03:52.080 in nature and is actually more related to climate change 0:03:52.120 --> 0:03:56.360 issues and the dramatic shifts and weather patterns than it 0:03:56.360 --> 0:03:58.200 has to really do with the tariffs. It's not just 0:03:58.840 --> 0:04:03.280 it's not just food, Tom. You know you've got furniture appliances. 0:04:03.760 --> 0:04:05.360 I think you'll start to start seeing it in the 0:04:05.360 --> 0:04:08.080 auto sector. Like goods prices in general, the next few 0:04:08.120 --> 0:04:12.120 months are going to be rising. The question is the 0:04:12.160 --> 0:04:14.840 persistence and as I said earlier, the extent to which 0:04:14.920 --> 0:04:18.799 the service sector and we mentioned real estate. The question 0:04:18.839 --> 0:04:20.839 will be the extent to which the service sector is 0:04:20.839 --> 0:04:24.479 going to act as a offset towards seeing in the 0:04:24.520 --> 0:04:27.320 goods part. But it's not just eggs. You're seeing more 0:04:27.360 --> 0:04:30.560 broadly based pressure coming on goods. You mentioned food. That's 0:04:30.800 --> 0:04:35.520 weather patterns for the most part, and disruptions from climate change. 0:04:35.560 --> 0:04:38.159 But the tariffs haven't had an impact yet. A big 0:04:38.200 --> 0:04:41.320 impact on the good side that's coming in the next 0:04:41.360 --> 0:04:44.240 few months. I'm not convinced it's going to be sustainable, 0:04:44.680 --> 0:04:46.600 but more on top of that, And it came down 0:04:46.600 --> 0:04:50.600 to the earlier question. Sixty percent of the CPI is 0:04:50.640 --> 0:04:55.679 in services, okay, and service sector is disinflating. The question 0:04:55.760 --> 0:04:57.240 is you're going to win that tug of war? 0:04:57.480 --> 0:05:00.120 I mean, Dave, you had that brilliant question earlier. Why 0:05:00.200 --> 0:05:02.440 did you get the last question, mister Rosenberg? 0:05:02.720 --> 0:05:05.640 David, I've been watching the closed circuit television from the 0:05:05.680 --> 0:05:08.480 Eckles Building looking at FED Chair Jerome Powell with his 0:05:08.480 --> 0:05:10.640 hard hat on and the President with his hard hat on. 0:05:10.680 --> 0:05:12.200 And I was reminded Tom, actually at the time we 0:05:12.200 --> 0:05:16.400 were in London touring the yet unfinished Bloomberg European Headquarters 0:05:16.400 --> 0:05:18.040 and you and I don hard hats. I'm going to 0:05:18.120 --> 0:05:21.000 dig up that photo for our YouTube viewers because it 0:05:21.000 --> 0:05:25.320 looks very similar what we're seeing here on. But David, 0:05:25.560 --> 0:05:29.440 to that point, as you watched those theatrics unfold yesterday, 0:05:29.440 --> 0:05:32.279 does it signal to you the end of this, you know, 0:05:32.600 --> 0:05:35.919 very confrontational ballet we've seen from the President and the 0:05:35.960 --> 0:05:38.200 FED Chair. Do you think that this story the effort 0:05:38.240 --> 0:05:40.359 on his part to put the FED Chair in a 0:05:40.360 --> 0:05:43.320 difficult position, to say the least, talk about firing him 0:05:43.320 --> 0:05:44.960 getting him out of that position has ended as a 0:05:44.960 --> 0:05:46.840 result of that grand tour that we saw of the 0:05:46.839 --> 0:05:48.280 Eckles Building yesterday afternoon. 0:05:48.560 --> 0:05:51.840 Well, I mean President Trump did say that he's no 0:05:51.880 --> 0:05:55.359 longer in a hurry to fire Trump, but clearly he's 0:05:55.360 --> 0:06:01.480 still exerting all the pressure publicly possible to get the 0:06:01.480 --> 0:06:05.240 Fed to cut interest rates. I would say prematurely. I 0:06:05.240 --> 0:06:08.000 think the Fed will cut rates, but at the right time, 0:06:08.760 --> 0:06:11.000 the President seems to be in a very big hurry. 0:06:12.080 --> 0:06:15.120 And you know what's troubling me is less the President 0:06:15.279 --> 0:06:17.960 and more that you're seeing all corners of the White 0:06:18.000 --> 0:06:23.440 House coming out and radically pressuring j. Powell to cut rates. 0:06:23.480 --> 0:06:25.320 We've got to keep in mind that J. Powell has 0:06:25.360 --> 0:06:28.320 the most powerful vote, but it's just one vote. I mean, 0:06:28.320 --> 0:06:31.359 it's the committee, it's the FMC that sets interest rates. 0:06:32.240 --> 0:06:34.680 I was more troubled actually by an interview that Kevin 0:06:34.720 --> 0:06:37.640 worsh gave yesterday where he said that he would cut 0:06:37.760 --> 0:06:41.960 rates immediately, starting at the at the next MC meeting, 0:06:42.680 --> 0:06:45.160 you know, next week. And I'm just you know, I 0:06:45.200 --> 0:06:48.120 cannot believe that you would cut rates. The market's not 0:06:48.160 --> 0:06:52.080 priced for it, and right now it's it seems unnecessary. 0:06:52.520 --> 0:06:55.359 So I'm still concerned about who the next chairman is 0:06:55.400 --> 0:06:59.000 going to be, and how politically influenced that chairman is 0:06:59.040 --> 0:07:01.560 going to be, and how that is going to create 0:07:01.640 --> 0:07:05.719 instability on the FOMC. Like what if there's a mutiny 0:07:05.760 --> 0:07:08.560 on the FED because the need is an institution, right, 0:07:08.600 --> 0:07:11.320 it's not one person, and they're going to defend their 0:07:11.360 --> 0:07:12.720 independence vigorously. 0:07:13.280 --> 0:07:15.640 Well said David, and I really want to emphasize, folks, 0:07:15.640 --> 0:07:18.200 when he gave you your civics lesson there, it's not 0:07:18.360 --> 0:07:19.120 just the chairman. 0:07:19.200 --> 0:07:22.280 Ala Green Spans standing on the podium of years ago. 0:07:22.360 --> 0:07:25.320 David Rosenberg, great brief on a Friday, Thank you so much. 0:07:25.560 --> 0:07:28.160 Up in Toronto with the first Place Toronto Blue Jays 0:07:28.200 --> 0:07:29.040 David Rosenberg. 0:07:29.640 --> 0:07:39.960 This morning, you're listening to the Bloomberg Surveillance Podcast. Catch 0:07:40.040 --> 0:07:42.800 us live weekday afternoons from seven to ten am. E's 0:07:42.880 --> 0:07:46.480 durn Listen on Applecarplay and Android Otto with the Bloomberg 0:07:46.520 --> 0:07:49.280 Business app, or watch us live on YouTube. 0:07:49.680 --> 0:07:53.120 We now turn to the media and it's really an 0:07:53.120 --> 0:07:56.640 auspicious day to have Brian Weezer with us. Madison and 0:07:56.680 --> 0:07:58.720 Wall We welcome all over you in your commute across 0:07:59.240 --> 0:08:04.120 the nation. I noticed, Brian the Paramount comes in and 0:08:04.360 --> 0:08:08.000 I'm talking here without notes folks, that they began calling 0:08:08.360 --> 0:08:10.240 WBZTV in Boston. 0:08:11.200 --> 0:08:14.600 They took out six engineers, six photographers. 0:08:15.560 --> 0:08:18.720 Brian, is that twenty twenty six for the media business, 0:08:19.040 --> 0:08:22.760 where all the deck chairs move on the Titanic and 0:08:22.800 --> 0:08:24.240 they just start cutting jobs. 0:08:25.720 --> 0:08:27.000 I think that's accurate. You know. 0:08:27.360 --> 0:08:31.760 I think that the ongoing cost cuts are the apath forward, 0:08:32.559 --> 0:08:35.360 but not maybe the best one. I think that there 0:08:35.400 --> 0:08:39.719 are opportunities for growth, but the reality. 0:08:39.440 --> 0:08:41.480 Is that they keep doing what they're doing. There is 0:08:41.520 --> 0:08:42.920 no growth. We'll stop. 0:08:43.880 --> 0:08:46.840 I'm curious about the leadership structure of this new company. 0:08:46.880 --> 0:08:48.880 So you have one David Ellison, the son, of course 0:08:48.880 --> 0:08:52.319 of a very famous and a rich tech entrepreneur. He's 0:08:52.360 --> 0:08:54.320 forty two years old, David Ellison is and I look 0:08:54.320 --> 0:08:57.000 at her. Who's going to remain with this company? George Cheeks, 0:08:57.000 --> 0:08:58.520 I gather he's going to stick around. And then you've 0:08:58.559 --> 0:09:01.319 got Jeff Shell, who is it NBC Universe that left 0:09:01.400 --> 0:09:05.480 under a cloud of difficulty? How do you see them 0:09:05.679 --> 0:09:08.400 reorienting this company? So just again picking up on that 0:09:08.440 --> 0:09:11.120 notion of difficulty, how do they make this company work 0:09:11.480 --> 0:09:12.600 after this deal goes through. 0:09:13.559 --> 0:09:15.400 You know, they seem to be really focused on the 0:09:15.480 --> 0:09:19.040 studio for you know, maybe Ellison's reasons and just credit. 0:09:19.120 --> 0:09:22.000 I think Skydance has actually done pretty well as studios go. 0:09:22.120 --> 0:09:23.520 The problem is, studio. 0:09:23.160 --> 0:09:27.640 Business isn't the greatest business right now, and I don't 0:09:27.679 --> 0:09:31.040 know that that trajectory changes by much, but that does 0:09:31.080 --> 0:09:31.680 seem to be. 0:09:31.600 --> 0:09:33.400 The primary area and focus. 0:09:34.160 --> 0:09:36.920 Certainly they do some successful businesses, you know, I think 0:09:37.040 --> 0:09:40.280 is a positive as positive trajectory in the US and 0:09:40.360 --> 0:09:41.000 many countries. 0:09:41.920 --> 0:09:44.040 But the reality is that most. 0:09:43.880 --> 0:09:47.520 Of the legacy cable networks are just on a declining path. 0:09:48.200 --> 0:09:53.000 The broadcast network is durable, but it's facing certain challenges. 0:09:52.679 --> 0:09:55.200 The cost of content rights, sports in particular, it's just 0:09:55.280 --> 0:09:58.320 going up and up and up and up, and investment 0:09:58.400 --> 0:10:02.240 and news are important, but they're also being there political 0:10:02.240 --> 0:10:02.840 perspective to. 0:10:03.200 --> 0:10:05.880 Little surveillance history or Brian Reeser, I'm going to say 0:10:05.880 --> 0:10:09.240 ten years ago, way out front saying no, there won't 0:10:09.280 --> 0:10:10.920 be a death of TV. There's just going to be 0:10:11.080 --> 0:10:14.400 this slow attrition. So I saw a chart yesterday of 0:10:14.520 --> 0:10:18.880 basically Netflix flat with a dominant eight percent share, but 0:10:19.040 --> 0:10:20.600 YouTube with an upward slope. 0:10:20.800 --> 0:10:22.480 Do you just extrapolate that out? 0:10:22.520 --> 0:10:25.520 I mean, with all your wisdom, Brian, is YouTube just 0:10:25.559 --> 0:10:30.600 a linear or log linear extrapolation of growth into the future. 0:10:31.720 --> 0:10:34.200 I think that reflects that people are getting used to 0:10:34.240 --> 0:10:37.920 the idea that you can consume YouTube on your television set. 0:10:38.040 --> 0:10:40.520 Netflix is doing really well. The fact that they might 0:10:40.559 --> 0:10:41.280 be flat. 0:10:41.440 --> 0:10:42.439 I think they're. 0:10:43.679 --> 0:10:47.559 Ignored that there's an underlying growth trend for consumption, subscriptions 0:10:47.600 --> 0:10:48.360 and everything else. 0:10:48.679 --> 0:10:50.400 So Netflix is in a great position. 0:10:51.040 --> 0:10:53.400 YouTube is just different, and it happens to be consumed 0:10:53.440 --> 0:10:56.400 on television set with increasing volumes. 0:10:56.520 --> 0:10:57.840 That's maybe way to think about it. 0:10:58.440 --> 0:11:01.960 Rian, How should we look at what happened here regulatorily 0:11:02.520 --> 0:11:04.400 over the last few months leading up to this deal. 0:11:04.480 --> 0:11:07.120 So of course we're all fixated on Stephen Colbert losing 0:11:07.160 --> 0:11:10.160 his position in a matter of months here, the chair 0:11:10.200 --> 0:11:12.719 of the FCC was on Fox yesterday. I wouldn't answer the 0:11:12.800 --> 0:11:15.360 question directly if that was a result of conversations that 0:11:15.400 --> 0:11:19.120 he had with with David Ellison and others, but suffice 0:11:19.160 --> 0:11:21.000 to say that the political climate here is shaping a 0:11:21.000 --> 0:11:23.920 lot of the regulatory appetite for making deals like this one. 0:11:24.000 --> 0:11:25.840 Going forward, we see the vice that a lot of 0:11:25.880 --> 0:11:28.880 companies are under media companies are under. How do you 0:11:29.040 --> 0:11:31.960 look at that environment and what does it portend for 0:11:32.040 --> 0:11:35.120 you about further consolidation and what's going to happen to 0:11:35.720 --> 0:11:37.160 these legacy networks going forward? 0:11:38.160 --> 0:11:40.720 Yeah, well, I mean the political angle is going to 0:11:40.720 --> 0:11:44.679 be front and center for any company. It's not just 0:11:45.000 --> 0:11:48.640 the Paramount. We look at the inner public Omnicom transaction. 0:11:48.840 --> 0:11:52.240 The consent decree they had to sign is a remarkable, 0:11:52.320 --> 0:11:56.040 be ridiculous, but the point is that that's going to 0:11:56.080 --> 0:11:59.440 be the normal way of things for the foreseeable future. 0:12:00.080 --> 0:12:01.640 So it is when it is when it comes to 0:12:01.920 --> 0:12:02.480 media now. 0:12:02.720 --> 0:12:04.640 I did think it was kind of interesting and amusing 0:12:04.679 --> 0:12:07.280 that they noted a one point five billion dollar investment 0:12:07.320 --> 0:12:10.880 that Skuydance is making into the into the new entity. 0:12:11.320 --> 0:12:13.200 I don't know if you saw the news about Paramount 0:12:13.360 --> 0:12:15.640 comming to agree with the south Park books with a 0:12:15.880 --> 0:12:19.640 one point five billion dollar commitment. EI are not related, 0:12:19.679 --> 0:12:21.800 but kind of funny in context of the south Park 0:12:21.840 --> 0:12:22.800 episode that if. 0:12:23.040 --> 0:12:25.080 Yeah, I watched the clips, Tom, did you see the 0:12:25.080 --> 0:12:26.880 south Park? We want to air them, we want to 0:12:26.880 --> 0:12:28.480 air them here. We don't rea air them here on 0:12:28.520 --> 0:12:29.360 Bloomberg surveillance. 0:12:29.800 --> 0:12:32.720 But that's unusual. Those brave that they got that out. 0:12:33.679 --> 0:12:35.720 Yes, no, I completely agree it was brave. 0:12:35.960 --> 0:12:39.680 I'm not that pale. You're not get one more question. 0:12:40.160 --> 0:12:43.240 It's a family network. Come on, girl, Sweeney would never 0:12:43.280 --> 0:12:44.679 bring that up. No, you wouldn't. 0:12:45.280 --> 0:12:47.600 I'll ask you lastly, just about this ombudsman. That's part 0:12:47.600 --> 0:12:49.240 of this deal that the paramount's not going to have 0:12:49.280 --> 0:12:51.280 when they're kind of monitoring what what what what this 0:12:51.400 --> 0:12:53.640 company is doing when it comes to diversity efforts and 0:12:54.000 --> 0:12:56.360 what kind of politics are being evinced on on the air. 0:12:56.880 --> 0:12:58.720 Is this a template that we're going to see going forward? 0:12:58.720 --> 0:13:00.640 Are we going to see the government play or insisting 0:13:00.679 --> 0:13:02.960 upon a greater role for that kind of check on 0:13:03.000 --> 0:13:04.120 what programming is Brian? 0:13:05.080 --> 0:13:08.000 Yeah, absolutely, and that's obviously for the worst. 0:13:08.440 --> 0:13:10.160 I think that again, look to the inner public. 0:13:10.160 --> 0:13:12.920 Omnicom to consent to cruise maybe didn't get as much attention, 0:13:13.120 --> 0:13:17.640 but again, the fact that agencies cannot provide their clients 0:13:17.640 --> 0:13:22.400 with recommendations for brand safety, including things like whether or 0:13:22.440 --> 0:13:26.120 not there's inappropriate content politically speaking on a site. There's 0:13:26.120 --> 0:13:28.719 all sorts of restrictions that limit freedom of speech and 0:13:28.800 --> 0:13:32.240 companies that are coming through in these rooments now, so 0:13:32.280 --> 0:13:33.560 I think that is the path forward. 0:13:33.640 --> 0:13:36.679 Unfortunately, Brian, thank you so much, greatly, greatly appreciate it. 0:13:36.800 --> 0:13:39.719 If David Rosenberg, Brian Weezer get us started here on 0:13:39.760 --> 0:13:43.679 a Friday is a wonderful mister Weezer Madison. 0:13:43.480 --> 0:13:44.680 Wall on Media. 0:13:44.760 --> 0:13:48.559 He has nailed the durability of a television. 0:13:48.840 --> 0:13:52.720 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:13:52.760 --> 0:13:55.800 starting at seven am Eastern on Apple Coarplay and Android 0:13:55.800 --> 0:13:58.840 Auto with the Bloomberg Business app. You can also listen 0:13:58.920 --> 0:14:02.160 live on Amazon Aloe from our flagship New York station, 0:14:02.720 --> 0:14:05.400 Just say Alexa play Bloomberg eleven thirty. 0:14:05.600 --> 0:14:09.319 Alicia Levine basically says, you don't go up, you. 0:14:09.240 --> 0:14:10.680 Don't win if you don't play. 0:14:10.800 --> 0:14:13.000 She's been in the market, would be in why we're 0:14:13.000 --> 0:14:16.600 thrilled she could join this morning. How has the character 0:14:16.800 --> 0:14:20.600 of the gloom Crew changed in the last six weeks. 0:14:20.640 --> 0:14:23.200 It's you know, you're too young to know this, but 0:14:23.280 --> 0:14:26.040 you go back to like some of the things eighty 0:14:26.160 --> 0:14:27.360 seven and ninety eight. 0:14:27.760 --> 0:14:29.960 This is an odd time for the gloom crew. 0:14:30.480 --> 0:14:34.280 It's a tough time for the Gloom crew. Look, their 0:14:34.320 --> 0:14:38.880 recovery to the old high is historic. Fifty five days 0:14:38.920 --> 0:14:42.400 from the low on April eighth to recover the old 0:14:42.480 --> 0:14:47.360 high in the SMP the second best time within you know, 0:14:47.560 --> 0:14:50.440 ninety eight, and we remember what happened then, and I 0:14:50.480 --> 0:14:53.880 think there are some parallels to the late nineties to 0:14:53.920 --> 0:14:57.280 what's happening here in the sense that we feel like 0:14:57.320 --> 0:15:01.520 we have a technological revolution on our hands, and it's investible. 0:15:02.080 --> 0:15:02.840 It's investible. 0:15:02.920 --> 0:15:04.840 I brought this up eight times this week, David. I 0:15:04.960 --> 0:15:06.520 hope I haven't bored you with it. 0:15:06.520 --> 0:15:09.880 It feels so much now like late ninety four, early 0:15:10.000 --> 0:15:11.040 nineteen ninety five. 0:15:11.520 --> 0:15:14.160 I've never said that in thirty years. 0:15:14.400 --> 0:15:17.320 How are you looking at the earning season that's underway here? 0:15:17.440 --> 0:15:19.800 We saw estimates that were markedly lower. The bar was 0:15:19.880 --> 0:15:21.680 much lower, I think, than we've seen in the past. 0:15:21.720 --> 0:15:23.960 We've had what one hundred and sixty plus companies report 0:15:24.000 --> 0:15:25.560 so far, I think eighty percent or more of them 0:15:26.000 --> 0:15:29.280 have beat those estimates. How are you framing it? How 0:15:29.280 --> 0:15:31.160 are you thinking about what these companies are reporting? What 0:15:31.200 --> 0:15:33.040 is not telling you about valuations in the future of 0:15:33.040 --> 0:15:33.440 this market? 0:15:33.600 --> 0:15:35.680 So if you look over all on the aggregate, as 0:15:35.720 --> 0:15:39.880 you know, earnings dropped precipitously, you know, February, March, April, 0:15:40.360 --> 0:15:43.640 May stabilizing in June. For twenty twenty five and twenty 0:15:43.720 --> 0:15:47.400 twenty six, we brought our earnings estimates down as well, 0:15:47.440 --> 0:15:50.160 and then in early May we brought our earnings estimates 0:15:50.200 --> 0:15:54.480 back up because it seemed very clear that the policy 0:15:54.520 --> 0:15:56.240 that was going to come out of tariffs was just 0:15:56.280 --> 0:15:58.640 not going to be as onerous as what we had 0:15:58.640 --> 0:16:01.200 heard in any early eight. With that, we brought our 0:16:01.280 --> 0:16:04.720 S and B targets up as well. Overall, the aggregate 0:16:05.120 --> 0:16:08.000 earnings are starting to hook upwards again. For twenty twenty 0:16:08.000 --> 0:16:10.720 five and twenty twenty six. We know the second quarter 0:16:11.440 --> 0:16:14.200 is there to beat, right, a four percent year over 0:16:14.280 --> 0:16:16.800 year growth will come in higher than that. The first 0:16:16.880 --> 0:16:20.080 quarter was a six percent beat. We probably beat by 0:16:20.120 --> 0:16:23.240 two or three percent in the second quarter here, and 0:16:23.280 --> 0:16:26.040 then the question really remains, you know, what happens with 0:16:26.080 --> 0:16:26.520 the tariffs? 0:16:26.560 --> 0:16:27.560 Who's eating the tariffs now? 0:16:27.560 --> 0:16:29.880 The Wall Street Journal has an article this morning that 0:16:29.960 --> 0:16:32.560 corporates are eating the terriffs, but we don't see it 0:16:32.800 --> 0:16:35.520 really yet in earnings estimates. I think that's the big question. 0:16:36.120 --> 0:16:40.360 If there is some dispersion over who is paying the tariffs. Okay, 0:16:40.560 --> 0:16:43.000 a little bit consumer, a little bit corporate, a little 0:16:43.000 --> 0:16:48.040 bit exporter eats it. Then you have your earnings estimates 0:16:48.200 --> 0:16:52.920 staying higher. And then the multiple moved the market in 0:16:52.960 --> 0:16:54.760 the last three or four months. We went from eighteen 0:16:54.760 --> 0:16:57.760 times forward to twenty two times forward. Now earnings have 0:16:57.800 --> 0:16:58.880 to do the lifting, and. 0:16:58.760 --> 0:17:00.520 If earnings to come. 0:17:00.400 --> 0:17:02.120 Up, the denominator has to come up. 0:17:02.560 --> 0:17:06.680 Denominators the bottom bottom, bottom of the down back. Oh, 0:17:06.880 --> 0:17:09.840 very good. You noticed Chicago to learn that, David. 0:17:09.640 --> 0:17:13.160 Continue uh, let me pick up on that. We saw 0:17:13.200 --> 0:17:14.920 this note from Michael Harte at a Bank of America 0:17:15.080 --> 0:17:17.840 this morning. But there's still so much concentration in this market. 0:17:18.640 --> 0:17:20.919 What's your sense of when that's going to broaden out, 0:17:20.960 --> 0:17:22.639 what's going to be the catalytic factor that's going to 0:17:22.640 --> 0:17:24.959 get us sort of a broader move here in the 0:17:25.000 --> 0:17:25.800 SP five hundred. 0:17:25.920 --> 0:17:29.119 So let's just say that the top ten stocks in 0:17:29.160 --> 0:17:33.560 the SMP, you know, are about thirty percent of the SMP, 0:17:34.200 --> 0:17:37.040 which actually is on the low side as a percentage 0:17:37.040 --> 0:17:39.159 if you look at other global markets. So in Germany 0:17:39.200 --> 0:17:42.320 the top ten is over fifty percent. France the same. 0:17:42.720 --> 0:17:45.280 So if you look at other global markets, the concentration 0:17:45.400 --> 0:17:48.200 in the US is not unusual. What I will say 0:17:48.240 --> 0:17:51.600 is this is cyclicals or outperforming defensives here because you're 0:17:51.640 --> 0:17:54.600 the industrials are working. The financials are really working, because 0:17:54.640 --> 0:17:57.560 with a deregulatory agenda, you have other parts of the 0:17:57.600 --> 0:18:01.560 market working, and the mag seven is sort of breaking apart. 0:18:01.640 --> 0:18:03.520 Right, We're gonna have wind up with a new acronym here. 0:18:04.680 --> 0:18:07.480 So, but you need tech to work, and it must 0:18:07.520 --> 0:18:10.919 work because the behemoths of cash flow and margin growth 0:18:10.920 --> 0:18:13.479 are driving the rest of the SMP margin. 0:18:13.560 --> 0:18:13.679 Right. 0:18:14.160 --> 0:18:17.960 The margins of the Magnificent seven are double the margins 0:18:17.960 --> 0:18:20.040 of the rest of the S and P. So that 0:18:20.240 --> 0:18:25.240 has to work, and the cap X spend must produce earnings. 0:18:25.560 --> 0:18:27.639 Must It cannot just go into a black hole on 0:18:27.680 --> 0:18:28.080 a Friday. 0:18:28.080 --> 0:18:30.400 We're going to digress here with Alicia Levina being why 0:18:30.440 --> 0:18:32.439 we can do that. Our math skills are prodigious. I'm 0:18:32.440 --> 0:18:34.639 gonna do a little bit of technical stuff here for 0:18:34.760 --> 0:18:35.720 Global Wall Street. 0:18:35.760 --> 0:18:37.800 Cat me go get a coffee. Noh no, no. 0:18:38.359 --> 0:18:43.160 Take notes on the Intel it went seven to seventy. 0:18:43.600 --> 0:18:47.880 There were some challenging years recently in the pandemic Intel 0:18:48.000 --> 0:18:52.800 was near seventy my cell signal. This is log exponential 0:18:52.840 --> 0:18:56.600 moving averages. Just as a general statement, I didn't sell 0:18:56.640 --> 0:18:59.200 at the peak, but I got out at fifty three 0:18:59.280 --> 0:19:03.280 or fifty four when sixty seven down to fifty three 0:19:03.480 --> 0:19:05.000 and I was able to get out. 0:19:05.600 --> 0:19:07.200 That's technical analysis. 0:19:07.560 --> 0:19:09.399 How do you know when to get out of a 0:19:09.520 --> 0:19:11.240 treasured blue chip stock? 0:19:12.040 --> 0:19:14.639 So, as you know, I can't discuss individual stocks. This 0:19:14.680 --> 0:19:17.480 will be as this will be a generic discussion. 0:19:17.560 --> 0:19:18.800 But who tells what we're talking about? 0:19:18.800 --> 0:19:21.280 Well, I mean, you know, in the end, you're looking 0:19:21.440 --> 0:19:25.320 for signs of weakness, slightly slower growth quarter over quarter, 0:19:25.480 --> 0:19:26.280 you're looking. 0:19:26.160 --> 0:19:29.040 More CEO tone. 0:19:28.280 --> 0:19:31.879 You're looking You're looking at the top line slowing and 0:19:31.960 --> 0:19:33.119 margins compressing. 0:19:33.400 --> 0:19:34.400 And that's enough. 0:19:34.440 --> 0:19:37.280 And that's why you know, even if if a fast, 0:19:37.440 --> 0:19:42.399 if a growth stock misses its growth target, it gets 0:19:42.440 --> 0:19:47.399 destroyed because the story, you know, the wall streem moves 0:19:47.400 --> 0:19:49.280 it forward and you see the slower growth and it 0:19:49.320 --> 0:19:50.320 can't sustain the multiple. 0:19:50.359 --> 0:19:53.840 Good morning, Tom Galvin, iconic of Donaldson, Lufkin Jenrette. 0:19:53.880 --> 0:19:55.679 Glvin's the one that taught me to go up the 0:19:55.680 --> 0:19:56.840