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Speaker 2: Joining us now from Torno. David Rosenberg writing his important note.
Speaker 3: Into the weekend.
Speaker 4: David, there just seems to be a vacillation. You're almost
Speaker 4: a two part discussion of sustained higher inflation. Look at
Speaker 4: grocery prices or the idea of a disinflationary tendency if
Speaker 4: real estate levels out, do we maintain in Rosenberg disinflationary tendency?
Speaker 5: Well, just arithmetically, Tom, if real estate flattens out, And
Speaker 5: actually I think the risk is at real estate price
Speaker 5: are going to be going down as opposed to up.
Speaker 5: When you look at the latest stunt sold inventory numbers
Speaker 5: in the new and existing market, you know, when you
Speaker 5: look at the CPI, you know a third of the
Speaker 5: index is related to residential real estate. Forty percent of
Speaker 5: the core is related to residential real estate. So it
Speaker 5: is actually very important, and I think it's going to
Speaker 5: act as a very powerful antidote to the inflation we're
Speaker 5: going to get on the goods prices side from all
Speaker 5: the tariffs.
Speaker 6: Dick, and I'm very curious as you look ahead to
Speaker 6: the next week, and this is an extremely pivotal week
Speaker 6: in terms of economic data, in terms of earnings. We've
Speaker 6: got the FED meeting as well. Of course, Friday of
Speaker 6: next week the deadline of that extension of the ninety
Speaker 6: day pause that President Trump put in place on those
Speaker 6: reciprocal tears. What are you watching for as that week unfolds?
Speaker 6: What's going to give you the best sense here of
Speaker 6: the relative health of the US economy?
Speaker 5: And light of all I just mentioned, the most important
Speaker 5: thing next week is going to be the employment report,
Speaker 5: because that is going to tell all the tail as
Speaker 5: to you know, whether the FED is going to start
Speaker 5: to rekindle the rate cuts at the September meeting. That's
Speaker 5: really what we're waiting for. If we see cracks emerge
Speaker 5: in the labor market, and we see a loosening up
Speaker 5: in a labor market, the FED is going to feel
Speaker 5: quite a bit more relaxed that the goods inflation that
Speaker 5: we are seeing on the terrifile. If it doesn't feed
Speaker 5: into wages. That's going to be a comforting sign. So
Speaker 5: I'd say that the employment number in its entirety, you know,
Speaker 5: the headline, the revisions, what the unemployment rate does, the
Speaker 5: participation rate, but also keep a fermoil on the wage number,
Speaker 5: because what's really important here, and everybody's waxing on about
Speaker 5: how great the US economy is doing, I think it's
Speaker 5: rather mixed, is that real work based income and inflation
Speaker 5: adjusted terms is actually contracting. And that is going to
Speaker 5: be where you know, the from the tariffs is going
Speaker 5: to hit the wall on the labor market. So nothing,
Speaker 5: we know. The Fed's not going to do anything. I
Speaker 5: think they'll be they'll keep their cards close to their
Speaker 5: vest in terms of any guidance. The key is really
Speaker 5: going to be the labor market. That's what we're waiting
Speaker 5: for in terms of what it's going to mean for
Speaker 5: interest rates over the next few months.
Speaker 4: Well, then, David, on that real way analysis, the inflation
Speaker 4: adjusted way analysis, Let's go to eggs.
Speaker 2: Lisa Mateo is going to Costco in the next.
Speaker 4: Twelve eighteen hours to buy forty two dozen eggs just
Speaker 4: to get through the week. David, I'm looking at grocery
Speaker 4: prices it ain't happen.
Speaker 2: They're not Grocery prices are not coming down.
Speaker 5: Well, that's actually a global phenomenon. I mean, the fact
Speaker 5: that agricultural prices are going up so much is global
Speaker 5: in nature and is actually more related to climate change
Speaker 5: issues and the dramatic shifts and weather patterns than it
Speaker 5: has to really do with the tariffs. It's not just
Speaker 5: it's not just food, Tom. You know you've got furniture appliances.
Speaker 5: I think you'll start to start seeing it in the
Speaker 5: auto sector. Like goods prices in general, the next few
Speaker 5: months are going to be rising. The question is the
Speaker 5: persistence and as I said earlier, the extent to which
Speaker 5: the service sector and we mentioned real estate. The question
Speaker 5: will be the extent to which the service sector is
Speaker 5: going to act as a offset towards seeing in the
Speaker 5: goods part. But it's not just eggs. You're seeing more
Speaker 5: broadly based pressure coming on goods. You mentioned food. That's
Speaker 5: weather patterns for the most part, and disruptions from climate change.
Speaker 5: But the tariffs haven't had an impact yet. A big
Speaker 5: impact on the good side that's coming in the next
Speaker 5: few months. I'm not convinced it's going to be sustainable,
Speaker 5: but more on top of that, And it came down
Speaker 5: to the earlier question. Sixty percent of the CPI is
Speaker 5: in services, okay, and service sector is disinflating. The question
Speaker 5: is you're going to win that tug of war?
Speaker 4: I mean, Dave, you had that brilliant question earlier. Why
Speaker 4: did you get the last question, mister Rosenberg?
Speaker 6: David, I've been watching the closed circuit television from the
Speaker 6: Eckles Building looking at FED Chair Jerome Powell with his
Speaker 6: hard hat on and the President with his hard hat on.
Speaker 6: And I was reminded Tom, actually at the time we
Speaker 6: were in London touring the yet unfinished Bloomberg European Headquarters
Speaker 6: and you and I don hard hats. I'm going to
Speaker 6: dig up that photo for our YouTube viewers because it
Speaker 6: looks very similar what we're seeing here on. But David,
Speaker 6: to that point, as you watched those theatrics unfold yesterday,
Speaker 6: does it signal to you the end of this, you know,
Speaker 6: very confrontational ballet we've seen from the President and the
Speaker 6: FED Chair. Do you think that this story the effort
Speaker 6: on his part to put the FED Chair in a
Speaker 6: difficult position, to say the least, talk about firing him
Speaker 6: getting him out of that position has ended as a
Speaker 6: result of that grand tour that we saw of the
Speaker 6: Eckles Building yesterday afternoon.
Speaker 5: Well, I mean President Trump did say that he's no
Speaker 5: longer in a hurry to fire Trump, but clearly he's
Speaker 5: still exerting all the pressure publicly possible to get the
Speaker 5: Fed to cut interest rates. I would say prematurely. I
Speaker 5: think the Fed will cut rates, but at the right time,
Speaker 5: the President seems to be in a very big hurry.
Speaker 5: And you know what's troubling me is less the President
Speaker 5: and more that you're seeing all corners of the White
Speaker 5: House coming out and radically pressuring j. Powell to cut rates.
Speaker 5: We've got to keep in mind that J. Powell has
Speaker 5: the most powerful vote, but it's just one vote. I mean,
Speaker 5: it's the committee, it's the FMC that sets interest rates.
Speaker 5: I was more troubled actually by an interview that Kevin
Speaker 5: worsh gave yesterday where he said that he would cut
Speaker 5: rates immediately, starting at the at the next MC meeting,
Speaker 5: you know, next week. And I'm just you know, I
Speaker 5: cannot believe that you would cut rates. The market's not
Speaker 5: priced for it, and right now it's it seems unnecessary.
Speaker 5: So I'm still concerned about who the next chairman is
Speaker 5: going to be, and how politically influenced that chairman is
Speaker 5: going to be, and how that is going to create
Speaker 5: instability on the FOMC. Like what if there's a mutiny
Speaker 5: on the FED because the need is an institution, right,
Speaker 5: it's not one person, and they're going to defend their
Speaker 5: independence vigorously.
Speaker 4: Well said David, and I really want to emphasize, folks,
Speaker 4: when he gave you your civics lesson there, it's not
Speaker 4: just the chairman.
Speaker 2: Ala Green Spans standing on the podium of years ago.
Speaker 4: David Rosenberg, great brief on a Friday, Thank you so much.
Speaker 4: Up in Toronto with the first Place Toronto Blue Jays
Speaker 4: David Rosenberg.
Speaker 1: This morning, you're listening to the Bloomberg Surveillance Podcast. Catch
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Speaker 4: We now turn to the media and it's really an
Speaker 4: auspicious day to have Brian Weezer with us. Madison and
Speaker 4: Wall We welcome all over you in your commute across
Speaker 4: the nation. I noticed, Brian the Paramount comes in and
Speaker 4: I'm talking here without notes folks, that they began calling
Speaker 4: WBZTV in Boston.
Speaker 2: They took out six engineers, six photographers.
Speaker 4: Brian, is that twenty twenty six for the media business,
Speaker 4: where all the deck chairs move on the Titanic and
Speaker 4: they just start cutting jobs.
Speaker 7: I think that's accurate. You know.
Speaker 8: I think that the ongoing cost cuts are the apath forward,
Speaker 8: but not maybe the best one. I think that there
Speaker 8: are opportunities for growth, but the reality.
Speaker 7: Is that they keep doing what they're doing. There is
Speaker 7: no growth. We'll stop.
Speaker 6: I'm curious about the leadership structure of this new company.
Speaker 6: So you have one David Ellison, the son, of course
Speaker 6: of a very famous and a rich tech entrepreneur. He's
Speaker 6: forty two years old, David Ellison is and I look
Speaker 6: at her. Who's going to remain with this company? George Cheeks,
Speaker 6: I gather he's going to stick around. And then you've
Speaker 6: got Jeff Shell, who is it NBC Universe that left
Speaker 6: under a cloud of difficulty? How do you see them
Speaker 6: reorienting this company? So just again picking up on that
Speaker 6: notion of difficulty, how do they make this company work
Speaker 6: after this deal goes through.
Speaker 9: You know, they seem to be really focused on the
Speaker 9: studio for you know, maybe Ellison's reasons and just credit.
Speaker 10: I think Skydance has actually done pretty well as studios go.
Speaker 7: The problem is, studio.
Speaker 10: Business isn't the greatest business right now, and I don't
Speaker 10: know that that trajectory changes by much, but that does
Speaker 10: seem to be.
Speaker 7: The primary area and focus.
Speaker 11: Certainly they do some successful businesses, you know, I think
Speaker 11: is a positive as positive trajectory in the US and
Speaker 11: many countries.
Speaker 7: But the reality is that most.
Speaker 11: Of the legacy cable networks are just on a declining path.
Speaker 8: The broadcast network is durable, but it's facing certain challenges.
Speaker 11: The cost of content rights, sports in particular, it's just
Speaker 11: going up and up and up and up, and investment
Speaker 11: and news are important, but they're also being there political
Speaker 11: perspective to.
Speaker 4: Little surveillance history or Brian Reeser, I'm going to say
Speaker 4: ten years ago, way out front saying no, there won't
Speaker 4: be a death of TV. There's just going to be
Speaker 4: this slow attrition. So I saw a chart yesterday of
Speaker 4: basically Netflix flat with a dominant eight percent share, but
Speaker 4: YouTube with an upward slope.
Speaker 3: Do you just extrapolate that out?
Speaker 4: I mean, with all your wisdom, Brian, is YouTube just
Speaker 4: a linear or log linear extrapolation of growth into the future.
Speaker 10: I think that reflects that people are getting used to
Speaker 10: the idea that you can consume YouTube on your television set.
Speaker 7: Netflix is doing really well. The fact that they might
Speaker 7: be flat.
Speaker 3: I think they're.
Speaker 10: Ignored that there's an underlying growth trend for consumption, subscriptions
Speaker 10: and everything else.
Speaker 7: So Netflix is in a great position.
Speaker 10: YouTube is just different, and it happens to be consumed
Speaker 10: on television set with increasing volumes.
Speaker 7: That's maybe way to think about it.
Speaker 6: Rian, How should we look at what happened here regulatorily
Speaker 6: over the last few months leading up to this deal.
Speaker 6: So of course we're all fixated on Stephen Colbert losing
Speaker 6: his position in a matter of months here, the chair
Speaker 6: of the FCC was on Fox yesterday. I wouldn't answer the
Speaker 6: question directly if that was a result of conversations that
Speaker 6: he had with with David Ellison and others, but suffice
Speaker 6: to say that the political climate here is shaping a
Speaker 6: lot of the regulatory appetite for making deals like this one.
Speaker 6: Going forward, we see the vice that a lot of
Speaker 6: companies are under media companies are under. How do you
Speaker 6: look at that environment and what does it portend for
Speaker 6: you about further consolidation and what's going to happen to
Speaker 6: these legacy networks going forward?
Speaker 9: Yeah, well, I mean the political angle is going to
Speaker 9: be front and center for any company. It's not just
Speaker 9: the Paramount. We look at the inner public Omnicom transaction.
Speaker 10: The consent decree they had to sign is a remarkable,
Speaker 10: be ridiculous, but the point is that that's going to
Speaker 10: be the normal way of things for the foreseeable future.
Speaker 7: So it is when it is when it comes to
Speaker 7: media now.
Speaker 10: I did think it was kind of interesting and amusing
Speaker 10: that they noted a one point five billion dollar investment
Speaker 10: that Skuydance is making into the into the new entity.
Speaker 10: I don't know if you saw the news about Paramount
Speaker 10: comming to agree with the south Park books with a
Speaker 10: one point five billion dollar commitment. EI are not related,
Speaker 10: but kind of funny in context of the south Park
Speaker 10: episode that if.
Speaker 6: Yeah, I watched the clips, Tom, did you see the
Speaker 6: south Park? We want to air them, we want to
Speaker 6: air them here. We don't rea air them here on
Speaker 6: Bloomberg surveillance.
Speaker 7: But that's unusual. Those brave that they got that out.
Speaker 6: Yes, no, I completely agree it was brave.
Speaker 3: I'm not that pale. You're not get one more question.
Speaker 3: It's a family network. Come on, girl, Sweeney would never
Speaker 3: bring that up. No, you wouldn't.
Speaker 6: I'll ask you lastly, just about this ombudsman. That's part
Speaker 6: of this deal that the paramount's not going to have
Speaker 6: when they're kind of monitoring what what what what this
Speaker 6: company is doing when it comes to diversity efforts and
Speaker 6: what kind of politics are being evinced on on the air.
Speaker 6: Is this a template that we're going to see going forward?
Speaker 6: Are we going to see the government play or insisting
Speaker 6: upon a greater role for that kind of check on
Speaker 6: what programming is Brian?
Speaker 9: Yeah, absolutely, and that's obviously for the worst.
Speaker 7: I think that again, look to the inner public.
Speaker 12: Omnicom to consent to cruise maybe didn't get as much attention,
Speaker 12: but again, the fact that agencies cannot provide their clients
Speaker 12: with recommendations for brand safety, including things like whether or
Speaker 12: not there's inappropriate content politically speaking on a site. There's
Speaker 12: all sorts of restrictions that limit freedom of speech and
Speaker 12: companies that are coming through in these rooments now, so
Speaker 12: I think that is the path forward.
Speaker 4: Unfortunately, Brian, thank you so much, greatly, greatly appreciate it.
Speaker 4: If David Rosenberg, Brian Weezer get us started here on
Speaker 4: a Friday is a wonderful mister Weezer Madison.
Speaker 3: Wall on Media.
Speaker 2: He has nailed the durability of a television.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 4: Alicia Levine basically says, you don't go up, you.
Speaker 3: Don't win if you don't play.
Speaker 4: She's been in the market, would be in why we're
Speaker 4: thrilled she could join this morning. How has the character
Speaker 4: of the gloom Crew changed in the last six weeks.
Speaker 4: It's you know, you're too young to know this, but
Speaker 4: you go back to like some of the things eighty
Speaker 4: seven and ninety eight.
Speaker 3: This is an odd time for the gloom crew.
Speaker 13: It's a tough time for the Gloom crew. Look, their
Speaker 13: recovery to the old high is historic. Fifty five days
Speaker 13: from the low on April eighth to recover the old
Speaker 13: high in the SMP the second best time within you know,
Speaker 13: ninety eight, and we remember what happened then, and I
Speaker 13: think there are some parallels to the late nineties to
Speaker 13: what's happening here in the sense that we feel like
Speaker 13: we have a technological revolution on our hands, and it's investible.
Speaker 13: It's investible.
Speaker 3: I brought this up eight times this week, David. I
Speaker 3: hope I haven't bored you with it.
Speaker 4: It feels so much now like late ninety four, early
Speaker 4: nineteen ninety five.
Speaker 2: I've never said that in thirty years.
Speaker 6: How are you looking at the earning season that's underway here?
Speaker 6: We saw estimates that were markedly lower. The bar was
Speaker 6: much lower, I think, than we've seen in the past.
Speaker 6: We've had what one hundred and sixty plus companies report
Speaker 6: so far, I think eighty percent or more of them
Speaker 6: have beat those estimates. How are you framing it? How
Speaker 6: are you thinking about what these companies are reporting? What
Speaker 6: is not telling you about valuations in the future of
Speaker 6: this market?
Speaker 13: So if you look over all on the aggregate, as
Speaker 13: you know, earnings dropped precipitously, you know, February, March, April,
Speaker 13: May stabilizing in June. For twenty twenty five and twenty
Speaker 13: twenty six, we brought our earnings estimates down as well,
Speaker 13: and then in early May we brought our earnings estimates
Speaker 13: back up because it seemed very clear that the policy
Speaker 13: that was going to come out of tariffs was just
Speaker 13: not going to be as onerous as what we had
Speaker 13: heard in any early eight. With that, we brought our
Speaker 13: S and B targets up as well. Overall, the aggregate
Speaker 13: earnings are starting to hook upwards again. For twenty twenty
Speaker 13: five and twenty twenty six. We know the second quarter
Speaker 13: is there to beat, right, a four percent year over
Speaker 13: year growth will come in higher than that. The first
Speaker 13: quarter was a six percent beat. We probably beat by
Speaker 13: two or three percent in the second quarter here, and
Speaker 13: then the question really remains, you know, what happens with
Speaker 13: the tariffs?
Speaker 14: Who's eating the tariffs now?
Speaker 13: The Wall Street Journal has an article this morning that
Speaker 13: corporates are eating the terriffs, but we don't see it
Speaker 13: really yet in earnings estimates. I think that's the big question.
Speaker 13: If there is some dispersion over who is paying the tariffs. Okay,
Speaker 13: a little bit consumer, a little bit corporate, a little
Speaker 13: bit exporter eats it. Then you have your earnings estimates
Speaker 13: staying higher. And then the multiple moved the market in
Speaker 13: the last three or four months. We went from eighteen
Speaker 13: times forward to twenty two times forward. Now earnings have
Speaker 13: to do the lifting, and.
Speaker 14: If earnings to come.
Speaker 13: Up, the denominator has to come up.
Speaker 3: Denominators the bottom bottom, bottom of the down back. Oh,
Speaker 3: very good. You noticed Chicago to learn that, David.
Speaker 6: Continue uh, let me pick up on that. We saw
Speaker 6: this note from Michael Harte at a Bank of America
Speaker 6: this morning. But there's still so much concentration in this market.
Speaker 6: What's your sense of when that's going to broaden out,
Speaker 6: what's going to be the catalytic factor that's going to
Speaker 6: get us sort of a broader move here in the
Speaker 6: SP five hundred.
Speaker 13: So let's just say that the top ten stocks in
Speaker 13: the SMP, you know, are about thirty percent of the SMP,
Speaker 13: which actually is on the low side as a percentage
Speaker 13: if you look at other global markets. So in Germany
Speaker 13: the top ten is over fifty percent. France the same.
Speaker 13: So if you look at other global markets, the concentration
Speaker 13: in the US is not unusual. What I will say
Speaker 13: is this is cyclicals or outperforming defensives here because you're
Speaker 13: the industrials are working. The financials are really working, because
Speaker 13: with a deregulatory agenda, you have other parts of the
Speaker 13: market working, and the mag seven is sort of breaking apart.
Speaker 14: Right, We're gonna have wind up with a new acronym here.
Speaker 13: So, but you need tech to work, and it must
Speaker 13: work because the behemoths of cash flow and margin growth
Speaker 13: are driving the rest of the SMP margin.
Speaker 3: Right.
Speaker 13: The margins of the Magnificent seven are double the margins
Speaker 13: of the rest of the S and P. So that
Speaker 13: has to work, and the cap X spend must produce earnings.
Speaker 13: Must It cannot just go into a black hole on
Speaker 13: a Friday.
Speaker 4: We're going to digress here with Alicia Levina being why
Speaker 4: we can do that. Our math skills are prodigious. I'm
Speaker 4: gonna do a little bit of technical stuff here for
Speaker 4: Global Wall Street.
Speaker 3: Cat me go get a coffee. Noh no, no.
Speaker 4: Take notes on the Intel it went seven to seventy.
Speaker 4: There were some challenging years recently in the pandemic Intel
Speaker 4: was near seventy my cell signal. This is log exponential
Speaker 4: moving averages. Just as a general statement, I didn't sell
Speaker 4: at the peak, but I got out at fifty three
Speaker 4: or fifty four when sixty seven down to fifty three
Speaker 4: and I was able to get out.
Speaker 2: That's technical analysis.
Speaker 4: How do you know when to get out of a
Speaker 4: treasured blue chip stock?
Speaker 13: So, as you know, I can't discuss individual stocks. This
Speaker 13: will be as this will be a generic discussion.
Speaker 3: But who tells what we're talking about?
Speaker 13: Well, I mean, you know, in the end, you're looking
Speaker 13: for signs of weakness, slightly slower growth quarter over quarter,
Speaker 13: you're looking.
Speaker 11: More CEO tone.
Speaker 13: You're looking You're looking at the top line slowing and
Speaker 13: margins compressing.
Speaker 14: And that's enough.
Speaker 13: And that's why you know, even if if a fast,
Speaker 13: if a growth stock misses its growth target, it gets
Speaker 13: destroyed because the story, you know, the wall streem moves
Speaker 13: it forward and you see the slower growth and it
Speaker 13: can't sustain the multiple.
Speaker 3: Good morning, Tom Galvin, iconic of Donaldson, Lufkin Jenrette.
Speaker 2: Glvin's the one that taught me to go up the
Speaker 2: income statement.
Speaker 4: Alicia, what you just said the first and second derivative
Speaker 4: study of revenue and ready for this, folks, David take
Speaker 4: notes partial derivatives of unit dynamics and price dynamics at
Speaker 4: the revenue line.
Speaker 14: You're freaking me out hard of the matter.
Speaker 3: No, seriously, is at the heart of the matter. Yes,
Speaker 3: is a revenue dynamic.
Speaker 13: It's actually much simpler than that. I'll say it for
Speaker 13: those who didn't understand what you just said, which is
Speaker 13: that the growth socks have to continue to exhibit the
Speaker 13: growth growthiness and it's very hard to meet elevated expectations.
Speaker 13: I mean, we're all married, right, very hard to meet
Speaker 13: at elevated expectations, and that's that's what you're looking for.
Speaker 13: So even a one to two percent miss on the
Speaker 13: revenue line creates an outsize downside move because it's the signal. Right,
Speaker 13: it seems to be irrational, but it's not because you're
Speaker 13: probably at a higher multiple and you have to start
Speaker 13: thinking about earnings.
Speaker 14: So and three years forward, that's the issue.
Speaker 13: Having said that, we're all in right, our team, our
Speaker 13: team is all in on AI. We think this is real.
Speaker 13: We think it's the beginning of the revolution. All of
Speaker 13: the corporate sector will have to incorporate these tools. We
Speaker 13: see the financials already doing it, and you're going to
Speaker 13: see it in healthcare as well. Any company that is
Speaker 13: data driven will be doing this, and that means for
Speaker 13: the foreseeable future it's there.
Speaker 14: One day it won't be there.
Speaker 13: But for now it's there.
Speaker 6: Even Tom Keen doing AI as we.
Speaker 4: Learn, I'm doing I'm gemin no idea what I'm doing.
Speaker 4: I'm learning and I'm using it one more, I'm using
Speaker 4: search less.
Speaker 3: That's it.
Speaker 4: That's the head Alicia being bottled that. Thank you so
Speaker 4: much as being where they're on the importance of looking
Speaker 4: up the income statement to revenue dynamics.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Apple Corplay and Android
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Speaker 4: Martin Norton joins us right now an actual allocations using empowered.
Speaker 3: They're Canadian.
Speaker 4: They're ginormous, full disclosure and power handles my puny four
Speaker 4: owin k. You know, I didn't start until it was
Speaker 4: like eighty, you know, sixty something.
Speaker 6: Yeah, Well I'm catting it's growing mightily. That grows.
Speaker 2: It was a triple average all cash from Roger's signature fund.
Speaker 2: Marta joins us on the strategy for Marta.
Speaker 4: What do you tell the people who have a fund
Speaker 4: that is now forty percent or dare I say fifty
Speaker 4: percent in their top ten stocks?
Speaker 15: I mean it's the concentration problem has been a problem
Speaker 15: in the US at least for the past several years,
Speaker 15: where there is this concern about how much people have
Speaker 15: in those top few names. And we know that a
Speaker 15: lot of investors, retirement investors included, have this preference for
Speaker 15: US equities, so there has been this kind of doubling
Speaker 15: down on that exposure. I think there's a few things
Speaker 15: that have shifted here. One is that the mag seven
Speaker 15: aren't quite as overvalued as they were at the start
Speaker 15: of the year. They had the one two punch, they
Speaker 15: had the deep seek sell off, then they had the
Speaker 15: sell off related to tariffs. So we have seen this
Speaker 15: tremendous move higher in the markets, as you all have
Speaker 15: been covering. We've seen technology in particular up forty five percent.
Speaker 15: We see valuations and technology look expensive, but the mag
Speaker 15: seven look a bit cheaper. They have idiosyncratic issues that
Speaker 15: are also going on. So I almost think that the
Speaker 15: concentration risk is less extreme than it was because it's
Speaker 15: not combined without valuation concern.
Speaker 4: The thud you heard up in Winnipeg or wherever was
Speaker 4: compliance falling off the chair.
Speaker 3: Why did you continue?
Speaker 2: Why did you continue the conversation? David Martin?
Speaker 6: What have you seen so far in this earning season?
Speaker 6: We were talking just a moment ago about the busyness
Speaker 6: of the upcoming week when it comes to earnings.
Speaker 7: What are you looking for?
Speaker 3: What are you hoping to.
Speaker 6: Learn as we have I think many dozens of companies
Speaker 6: reporting in the week ahead.
Speaker 15: Well, first, I mean, just to level set on the
Speaker 15: earnings conversation, and I know you've had several guys who've
Speaker 15: weighed on this. We have kind of this low bar
Speaker 15: in terms of what to expect with this earning season,
Speaker 15: and companies are clearing it with ease simply because expectations
Speaker 15: are low. But there's also some trends out there, the
Speaker 15: AI trend being a strong proponent as we go forward.
Speaker 15: I think what we want to see, particularly as it
Speaker 15: pertains to these technology companies the Max seven that continue
Speaker 15: to report, is how this AI theme is continuing to
Speaker 15: play out, of course the capital investments that they're making,
Speaker 15: but also are they realizing it, And we've had some
Speaker 15: green shoots in that regard. We're seeing some of the
Speaker 15: cost savings that some of these companies have reported. We're
Speaker 15: also seeing some broadening out of the AI trend, and
Speaker 15: I think that's something to keep an eye on. I'm
Speaker 15: not sure, though, and I think this is important. I'm
Speaker 15: not sure that the earning season this go around is
Speaker 15: going to reveal its entire hand as it attains to
Speaker 15: tariffs and as it pertains to AI.
Speaker 3: Martin.
Speaker 4: I got to get this, Martin. I think it's too important.
Speaker 4: Girl wants to ask a smart question. I'm going to
Speaker 4: be dumb. If you're going to be in equities in
Speaker 4: this great bullmarket, which has basically been NonStop since nine,
Speaker 4: a few hiccups like COVID along the way, you needed to.
Speaker 2: Withstand three draw downs.
Speaker 4: Negative thirty eight percent of the Dow Marta, the Dow
Speaker 4: Jones Industrial Average is the index Michael Barr and I
Speaker 4: follow negative thirty eight percent down, yep OH seven negative
Speaker 4: fifty three percent down, and recently COVID negative thirty eight percent.
Speaker 4: Now serious question, with your morning Star and power work.
Speaker 4: What percentage of people in equities and empower are ready
Speaker 4: for a thirty five percent draw down that's normal?
Speaker 15: Yeah, I think it's it's the magnitude of the draw
Speaker 15: dow you know that scale, that thirty five percent idea,
Speaker 15: and also the duration. I think investors got conditioned on
Speaker 15: this idea, especially with COVID, is that the snapback can
Speaker 15: be and will be always in meet. I'm not sure
Speaker 15: necessarily that that's the case always. Of course, with the GFC,
Speaker 15: we had a much longer duration. People had to weather
Speaker 15: that for much longer. I think that's the concern. If
Speaker 15: you get a massive pullback, I think the inclination of
Speaker 15: most investors is going to be like, oh, it's a
Speaker 15: great hashtag by the dip moment. I think if you
Speaker 15: have that extended, that's when you start to shake loose
Speaker 15: kind of the weak need of the group. And that's
Speaker 15: the concern.
Speaker 3: We haven't had this stated in the ages.
Speaker 6: No, that's very true.
Speaker 4: Like the Carter malaise, get one more in here. Carter
Speaker 4: was a broker from Georgia.
Speaker 6: Thank you very much, pena former, etcetera, etcetera.
Speaker 3: Marta.
Speaker 6: I wanted to ask you just on a sector by
Speaker 6: sector basis where you see opportunity. Now he's looking through
Speaker 6: your notes healthcare as something that you flagged, but it,
Speaker 6: like many of these sectors, does have the potential here
Speaker 6: for there will be some sort of regulatory weight on it.
Speaker 15: I mean, it's a really tricky question on the sector
Speaker 15: basis because if you look across the board at the
Speaker 15: sectors in the US, all of them, it feels like
Speaker 15: almost all of them, of course, calling out healthcare are
Speaker 15: extreme valuations. And so when we're talking about extreme valuations,
Speaker 15: we're taking the price to forward earnings, we're breaking it
Speaker 15: into deaciles for that sector's history, they're in those ninth
Speaker 15: tenth deaciles, and that's when that tends to suggest foward
Speaker 15: three year returns not quite a strong. Healthcare is one
Speaker 15: of those few areas that's especially cheap. But of course
Speaker 15: you don't have cheap for no reason. There's always some
Speaker 15: measure of hair. And we have concerns around the regulatory questions.
Speaker 15: We have concerns around tariffs. We're talking about massive tariffs
Speaker 15: on pharmaceuticals and so a lot of shifts that those
Speaker 15: companies are going to have to deal with. But I
Speaker 15: think the value of these valuations is that there's something
Speaker 15: already in the price. There's concern in the price, and
Speaker 15: there's not much concern any of these other sectors in
Speaker 15: the price.
Speaker 2: Martin Norton, thank you so much, Chief Investments.
Speaker 3: Createitis to poll.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 1: Just say Alexa Play Bloomberg eleven thirty.
Speaker 3: Oh the newspapers, are we not your free today?
Speaker 14: We are, yes, but we're cafine infused.
Speaker 6: It's just green tea, isn't it?
Speaker 14: Green tea and espresso shots.
Speaker 6: I see together? Good dar, all right, the newspaper won't
Speaker 6: waste any more time, you got it.
Speaker 14: This first article stood out to me. It's in the
Speaker 14: New York Times. It's about the division among New York
Speaker 14: families and the mayoral race. Because you have the young
Speaker 14: voters who supported Zormondami trying to persuade their parents now
Speaker 14: to do the same thing. And now the parents are
Speaker 14: starting to listen, so they're telling the New York Times,
Speaker 14: the moms and dad that even though they may not
Speaker 14: have supported Mumdammi initially because his lack of experience or
Speaker 14: his policies, they say that their move because how enthusiastic
Speaker 14: their kids are about this. They say the future belongs
Speaker 14: to them. So they also say they hear stories of
Speaker 14: their kids getting shamed by other people for supporting and
Speaker 14: they want to back their kids up and say, you
Speaker 14: know what, I'm going to stand behind my child and
Speaker 14: I'm going to go with them on this one. But
Speaker 14: it's weird because you're seeing this shift because usually it's
Speaker 14: the kids who inherit from the parents these views, but
Speaker 14: experts are saying the reason it's starting to change is
Speaker 14: because the parents want this better relationship with the kids,
Speaker 14: a better relationship than they had with their parents.
Speaker 6: Fascinating piece Genia Belafante's column in The Times, and this
Speaker 6: stood out to me. She says, in statistical terms, the
Speaker 6: young don't dominate in this city, the City of New York.
Speaker 6: They're roughly half a million more New Yorkers over fifty
Speaker 6: than those between the ages of twenty and thirty nine.
Speaker 6: The city's population, she writes, like its infrastructure is simply
Speaker 6: getting older and older.
Speaker 14: So this is just something.
Speaker 6: Really interesting to watch a lot of the folks with
Speaker 6: whom she spoke, not outright endorsing Mamdani in this race,
Speaker 6: but looking at their kids, seeing their enthusiasm for it,
Speaker 6: thinking about generational change, and it sounds like maybe tossing
Speaker 6: a little money towards this campaign.
Speaker 14: It is some of them have been donating. You're correct
Speaker 14: about that. Okay, So if speaking of giving money, okay,
Speaker 14: if you're feeling a little generous, did you know you
Speaker 14: can venmo the US government to help pay down the debt.
Speaker 6: You don't veno time to you don't.
Speaker 4: He's Brian wining a growled at me and Davos once.
Speaker 14: Time you got a zeld, I do the zel thing too.
Speaker 14: But you can use venmo, you know, like what you
Speaker 14: use to pay back your friends when you're splitting the
Speaker 14: check at dinner. You can use that to help pay
Speaker 14: down the debt. Business insider says it's it's started there
Speaker 14: earlier this year, but it's just starting to gain some
Speaker 14: traction because they've done it for years.
Speaker 7: Right.
Speaker 14: You can put your credit card, you can do you know,
Speaker 14: your bank account, your debit card. But this is just
Speaker 14: a new way for them to bring in someone.
Speaker 6: There's only getting more to pay down, right, it's only
Speaker 6: getting bigger.
Speaker 14: The four digits of the number. Okay, next, okay, and
Speaker 14: finally this one. There is an app that lets women
Speaker 14: anonymously post reviews about the guys they're dating. And it's
Speaker 14: soaring to the top of Apple's app store. It's called
Speaker 14: Tea and you think about it meaning like the gossip,
Speaker 14: like you spill the tea about somebody.
Speaker 6: So that's it's.
Speaker 14: Termed Tom Beyond It. But it launched in twenty twenty three,
Speaker 14: and it was launched by a man, if you believe
Speaker 14: it or not. His name is Sean Cook, and he
Speaker 14: started it because his mom was calfished and he wants
Speaker 14: women to have more transparency and talk about, you know,
Speaker 14: if anyone has been a criminal and kind of how
Speaker 14: this works. Okay, let me just put it out there.
Speaker 14: So basically, you post about a man. You can put
Speaker 14: his name, his age, his location, and you can include
Speaker 14: captions photos, and then there's red flags and green flags, no,
Speaker 14: no flags and green flags, and you could add comments.
Speaker 14: It's because that's a good one, and you can add comments.
Speaker 14: So it's kind of like this forum it's free until
Speaker 14: you want to do like more than five searches. Then
Speaker 14: you gotta pay fifteen bucks a month. But it's really
Speaker 14: starting to gain traction. But the controversy is because you
Speaker 14: know what guys are saying, Hey, that's my privacy, Like
Speaker 14: what if there are some false acts usations out there?
Speaker 14: And then I'm getting a bad rap for you know,
Speaker 14: you posting about me on this forum. So it is
Speaker 14: the new thing in dating. I'm just glad I'm saying yeah.
Speaker 14: I mean, I'm not saying tea and catfish.
Speaker 3: Potato.
Speaker 7: I'm glad I'm not single.
Speaker 3: God at LEASTAO the newspapers here. Thank you.
Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,
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