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Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keene along

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Speaker 1: with Paul Sweeney. Join us each day for insight from

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Speaker 1: the best in economics, finance, investment, and international relations. You

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Speaker 1: can also watch the show live on YouTube. Visit the

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Speaker 1: Bloomberg Podcast channel on YouTube to see the show weekday

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Speaker 1: mornings from seven to ten am Eastern from our global

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Speaker 1: headquarters in New York City. Subscribe to the podcast on Apple, Spotify,

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Speaker 1: or anywhere else you listen and always I'm Bloomberg Radio,

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Speaker 1: the Bloomberg Terminal, and the Bloomberg Business App. You do

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Speaker 1: a book and like, that's okay, that's a big deal.

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Speaker 1: But then if you do a second book on the

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Speaker 1: same topic, you're like an authority. He is an authority.

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Speaker 1: Thomas Orlick has out understanding China's economic indicators. It's a

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Speaker 1: good book that doze off to. But when you're done

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Speaker 1: with that, you can wake up with China The Bubble

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Speaker 1: That Never Pops. It is now the required read as

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Speaker 1: the Bubble Pops China, the Bubble that Never Pops. Joining

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Speaker 1: as sant, Thomas orl like driving all of our economics

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Speaker 1: as well. Did you ever think Tom Orlock it would

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Speaker 1: get as bad it is now, where basically the President

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Speaker 1: of the United States President g of China has to

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Speaker 1: directly intervene to put a bit under equities. Was that

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Speaker 1: imaginable two years ago or twenty years ago.

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Speaker 2: The Chinese stock market's a strange beast, Tom. I think

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Speaker 2: it's important to keep in mind a couple of things.

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Speaker 2: The first is that there's a signal there. The fact

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Speaker 2: that China's stocks are amongst the worst performing in the

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Speaker 2: world this year is a gauge of the weakness in

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Speaker 2: China's economy. At the same time, it's important to remember

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Speaker 2: that China's stock market, whilst kind of symbolic of the economy,

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Speaker 2: is not the economy. There's not a lot household wealth

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Speaker 2: in the stock market. Businesses aren't raising a lot of

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Speaker 2: capital by issuing shit dares. So, yes, this is scary, Yes,

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Speaker 2: this is a bad sign. Yes, this is why t

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Speaker 2: jimping himself. We here is planning to intervene. But it's

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Speaker 2: not quite the catastrophe for China that it would be

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Speaker 2: in the United States. The S and P five hundred

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Speaker 2: was down so much.

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Speaker 1: Right now, we're clear in a market in New York City.

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Speaker 1: It's called office towers and you know, we have a

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Speaker 1: whole process bankruptcy or transactions whatever to clear. They don't

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Speaker 1: have that structure. How does a totalitarian regime clear a

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Speaker 1: distress market.

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Speaker 2: So it's a really interesting question, Tom, And actually I

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Speaker 2: don't want to sign two kind of Pollyanna. Everything's fine

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Speaker 2: about this, But part of the problem here, part of

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Speaker 2: the short term pain, is that China is moving to

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Speaker 2: get rid of that problem of moral hazard, get rid

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Speaker 2: of that problem that investors believe that the government in

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Speaker 2: the fire analysis will stand behind all the banks, stand

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Speaker 2: behind all the real estate developers, and prevent them from failing.

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Speaker 2: It's the removal of that implicit guarantee, which is actually

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Speaker 2: one of the big causes of stress and pain in

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Speaker 2: China's markets and economy right now. But when they get

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Speaker 2: through the end of it, and there's going to be

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Speaker 2: a long process, we think the property correction still has

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Speaker 2: a couple more years to run. In economy and markets

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Speaker 2: without such a severe moral hazard problem, well, hopefully it'll

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Speaker 2: be an economy and a market which is prime to

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Speaker 2: grow and rise again.

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Speaker 3: Hey, Tom, I know President g and other Chinese leaders

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Speaker 3: over the last six months or so we've been courting

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Speaker 3: Western investors Western countries kind of arguing about or supporting

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Speaker 3: the investment thesis for China. But there are a lot

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Speaker 3: of investors, not just em investors are saying China is

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Speaker 3: uninvestable because of the China risk, the government risk. Do

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Speaker 3: you sense that is that the government of China understands

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Speaker 3: that and that they're willing to make any types of

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Speaker 3: changes to be more receptive to Western investment.

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Speaker 2: So the China investment story has got I think three

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Speaker 2: really big problems. The first big problem is that we've

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Speaker 2: gone from an economy which in nominal dollar terms was

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Speaker 2: growing about twenty percent a year to an economy which

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Speaker 2: in nominal dollar terms isn't growing at all. That's significant

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Speaker 2: negative for investors. The second is relations with the United States.

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Speaker 2: Ten years ago, twenty years ago, you put your money

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Speaker 2: in China, there wasn't that geopolitical risk. Now there's the

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Speaker 2: risk of tariffs, the risk of sanctions, the risk of

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Speaker 2: political blowback. The third challenge, as you mentioned, Paul, is

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Speaker 2: that investors now believe that Beijing doesn't have their back, right,

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Speaker 2: and I think it's that piece of it which she

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Speaker 2: and his premiere and other members of China's leadership are

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Speaker 2: now trying to row back from the trouble. Is those

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Speaker 2: other two negatives falling growth, increase, geopolitical stress. They're still there,

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Speaker 2: and that means the mood music remains pretty pretty challenging.

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Speaker 3: What's the expectation, Tom, I kind of think about, I guess,

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Speaker 3: what's the expectation that this Chinese economy can fundamentally turn

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Speaker 3: itself around. I think of, you know, just the demographics

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Speaker 3: of China just don't bode well for the economy longer term,

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Speaker 3: and I'm wondering, you know, what can the government do

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Speaker 3: to really turn this economy around.

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Speaker 2: So when I think about China right now, I think

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Speaker 2: about a really significant negative in the real estate sector,

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Speaker 2: and I think about a really significant positive signal in

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Speaker 2: the electric vehicle space. Right real estate is collapsing. We

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Speaker 2: can't sort of put lipstick on the pig. They've got

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Speaker 2: massive overcapacity there. It's going to be painful as they

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Speaker 2: work through that, But this too shall pass. Right by

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Speaker 2: twenty twenty five, twenty twenty six, they'll be through the

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Speaker 2: worst of this property correction, the electric vehicle story. I

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Speaker 2: think what that speaks to is China's longer term potential,

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Speaker 2: China's economic miracle from nineteen eighty till today. It's not

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Speaker 2: been based on real estate, it's been it's been based

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Speaker 2: on moving up the value chain from textiles to toys,

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Speaker 2: to leadership in high speed, trained sustainable energy, and now

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Speaker 2: electric vehicles. And it's that story, which, if it's sustained,

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Speaker 2: means that China's economic miracle, while not what it was,

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Speaker 2: is also not overin.

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Speaker 1: To clear the market. And let's assume they, you know,

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Speaker 1: as they've done before, they just write off refund where's

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Speaker 1: the money come from to bail out the property market?

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Speaker 1: Do they just print renmnby? Is it that simple?

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Speaker 2: So I think there's a couple of things to say here, Tom,

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Speaker 2: is that China is a high saving society with a

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Speaker 2: closed financial system, and what that means is that the

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Speaker 2: banks are almost always really well funded. Think about the

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Speaker 2: Lehman collapsed in two thousand and eight, where money fled

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Speaker 2: from the big banks in the United States. That's just

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Speaker 2: not going to happen in China. So that sort of

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Speaker 2: funding crisis, if you isn't going to be an issue

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Speaker 2: for bathing now, clearing the market, getting rid of the

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Speaker 2: bad investments, getting rid of the bankrupt property developers, that's

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Speaker 2: the process which China is in right now. And yes

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Speaker 2: it's extraordinarily painful. If you're holding an Evergrand bond, you've

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Speaker 2: lost a lot of money. If you're waiting for a

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Speaker 2: Chinese property developer to finish building your house, you could

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Speaker 2: be waiting a pretty long time. But at the end

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Speaker 2: of that process, China is going to have an economy

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Speaker 2: with less moral hazard, less dependency on building houses which

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Speaker 2: no one is going to live in, and more opportunity

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Speaker 2: for folks like the electric.

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Speaker 1: View going to be time. He sounds like you know,

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Speaker 1: he sounds or like, I mean, he's got this downb cold.

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Speaker 1: But what's a timeline on that workout? On a Hyachian basis,

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Speaker 1: they got to clear the market. Is it like an

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Speaker 1: or like one year or is it a four year

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Speaker 1: or is it a perfect date to a party congress.

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Speaker 2: It's always nice to time things to these moments in

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Speaker 2: the political calendar, isn't it.

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Speaker 1: So?

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Speaker 2: Look, this is kind of an art rather than a science.

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Speaker 2: The Chinese data is not perfect. There's lots of uncertainties there.

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Speaker 2: But by our estimate two years ago, China was building

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Speaker 2: about twenty thirty percent more property each year than it

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Speaker 2: needed to live in each year. Now we're about halfway

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Speaker 2: through that correction. What that suggests to me is there's

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Speaker 2: a by two years more pain in China's properties.

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Speaker 1: Actor Tom Rlick never enough time. Thank you so much.

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Speaker 1: I learned a lot there informative on China as well.

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Speaker 1: Look for his wonderful book. Arthur joining us. Now we

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Speaker 1: see a good one goal of you on economics, finance, investment,

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Speaker 1: and also the correlations, the linkage of all this, and

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Speaker 1: no one's better at it than Andrew Sheets of Morgan

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Speaker 1: Stanley joins us. As we discussed the linkages of the market. Andrew,

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Speaker 1: I saw a stockbond correlation that was wackle. It was

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Speaker 1: like the needle pegged, and that it was an odd

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Speaker 1: and strange time. How odd and how strange is this time?

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Speaker 2: Yeah?

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Speaker 4: Thanks, thanks Tom, It's great to be here with you.

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Speaker 4: You know, look, as I think you've discussed in this

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Speaker 4: program that the stockbond correlation has moved around a lot

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Speaker 4: during history. There's a lot of evidence, you know, certainly

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Speaker 4: kind of prior to the nineteen nineties, we're stock and

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Speaker 4: bond prices moved together, i e. Lower yields were generally

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Speaker 4: better for stocks, and then you know, more recently it's

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Speaker 4: been the other way around, where stocks have generally preferred

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Speaker 4: higher yields, And you know, I do think a good

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Speaker 4: way to frame that is previously the markets were more

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Speaker 4: worried about inflation, and obviously both bonds and stocks like

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Speaker 4: lower inflation, and more recently we've worried about growth. So

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Speaker 4: I do think the performance this week was was fascinating.

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Speaker 4: Right if you look at Wednesday where you saw this

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Speaker 4: big draw down inequities with the FED kind of pushing

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Speaker 4: back on March. I mean, yields fell, you know when

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Speaker 4: that happened, So this wasn't you know, Oh no, the

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Speaker 4: Fed's not cutting rates, are not going to be low

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Speaker 4: enough to support stocks. That was not the message of

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Speaker 4: the bond market, and I think it was much more

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Speaker 4: about concern around around growth, concerned that maybe the FED

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Speaker 4: was ignoring some of the weaker data earlier this week.

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Speaker 4: So I think we've seen some stronger data. I think

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Speaker 4: ultimately that will be the best path for market.

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Speaker 1: Paul, I can't emphasize enough what Andrew Sheet said there,

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Speaker 1: how important it is, and that the financial media I'm

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Speaker 1: as guilty of this. Paul is not guilty of this.

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Speaker 1: Lisa Montail's an angel on this. We're addicted to the

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Speaker 1: parlor game, the fed, the monetary ballet, and what mister

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Speaker 1: Sheets just said, there is hello the real economy, maybe

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Speaker 1: the new burgeoning productivity as well.

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Speaker 3: Absolutely, Hey Andrew as a cross asset strategist for Morgan Stanley.

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Speaker 3: Where do you see the greatest opportunities here? When you

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Speaker 3: sit down with your clients, where do you see the

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Speaker 3: greatest opportunity? What do you suggest a focus here across assets?

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Speaker 4: So I think you know the this is not going

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Speaker 4: to be an easy year. You've seen a big run

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Speaker 4: up in prices in November and December, and in many

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Speaker 4: cases those prices rapidly move towards targets. We thought, you know,

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Speaker 4: you get to by the end of the year. But but

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Speaker 4: I think there are some still some opportunities. You know,

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Speaker 4: we think Japan is an equity market that still has

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Speaker 4: a good cyclical and structural story. Cyclical because the economy

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Speaker 4: remains quite strong. You have some of the cheapest cost

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Speaker 4: of capital in the world still, and then a good

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Speaker 4: structural stories. You still see corporate reform. A number of

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Speaker 4: the lad Am equity markets are relatively inexpensive. You have

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Speaker 4: policy easing cycles. We think some of those could still

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Speaker 4: be relatively attractive, and then it's not nearly as exciting.

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Speaker 4: But you know, in an asset class you know I'm

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Speaker 4: calling talking to you here in Europe. You know, European

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Speaker 4: investment grade credit spreads are kind of at the twenty

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Speaker 4: year median, which doesn't seem all that bad considering you've

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Speaker 4: got reasonable growth, you're going to have easing of ECB policy,

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Speaker 4: a very light supply, and I think that's another area

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Speaker 4: where investors can teak out some extra return.

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Speaker 1: You can do this on the Bloomberg Professional Service. The

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Speaker 1: Equity Index in Japan ye in ye end you're up

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Speaker 1: ten plus percent, double digit return. Nice. If you're in dollars,

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Speaker 1: as I believe I am, it's not quite as good,

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Speaker 1: up seven point six percent, so you're not two hundred

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Speaker 1: and fifty beeps off.

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Speaker 3: Hey, Andrew, you know, when Tom and I began our

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Speaker 3: Wallster careers way back when Japan was the bomb. You

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Speaker 3: had to be there, you had to work there, you

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Speaker 3: had to have exposure there, you had to have you know,

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Speaker 3: people there. But man, we haven't heard about Japan in

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Speaker 3: like thirty years. But now in the last year or so,

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Speaker 3: I'm hearing Warren Buffett, I'm hearing Andrew Sheets of Morgan Stanley,

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Speaker 3: people talking to me about Japan. Why are we talking

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Speaker 3: about Japan now?

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Speaker 4: So I think it's a fascinating example that you know,

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Speaker 4: markets move in in waves, and I do think at

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Speaker 4: one level, right you have, Japan is a very interesting

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Speaker 4: part of this global economic story. You know, if we

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Speaker 4: use the full Goldilocks narrative, you could argue China is

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Speaker 4: at risk of being too cold, there's not enough inflation,

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Speaker 4: the US and Europe are more in the middle, and

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Speaker 4: then Japan is hot. Japan is the market that is

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Speaker 4: going to be raising rates on our forecast this year.

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Speaker 4: So I think that puts it in an interesting part

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Speaker 4: of the macro narrative. You know, valuations have risen, but

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Speaker 4: they're notarticularly extreme, and I think that's still a market

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Speaker 4: where we see more corporate efficiency to be squeezed out.

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Speaker 4: And I think you've seen a push at the corporating

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Speaker 4: government level that's that's pretty unique and pretty rare that

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Speaker 4: we think can finally change that narrative frame.

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Speaker 1: Out the real yield. Had a wonderful evening last night

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Speaker 1: with Tracey Loa and Joe Wisenthal Andrew Sheets, and my

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Speaker 1: first question within their wonderful event was went downtime? Well,

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Speaker 1: I went, you know, Andrew Sheets came on just because

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Speaker 1: he celebrated. I went below fifty seventh Street. Someone's ever

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Speaker 1: heard of that? Andrew the real yield frame out the

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Speaker 1: Morgan Stanley view or the Andrew Sheets view on what

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Speaker 1: we do from one point nine zero percent? Do you

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Speaker 1: just see a lower real yield?

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Speaker 4: So I think the Morgan Stanley view here is quite clear.

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Speaker 4: We do see a lower real yield. And you know,

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Speaker 4: I think that that will be driven by our thinking

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Speaker 4: is that that will be driven by clarity that policy

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Speaker 4: is sufficiently restrictive, that core inflation will continue to come down.

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Speaker 4: And again, if we think about you know, what is

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Speaker 4: one of the more surprising stories over the last six months.

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Speaker 4: You know, a lot of last year was driven by

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Speaker 4: fear of this last mile of inflation. We could get

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Speaker 4: down to three, we could never get down to two.

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Speaker 4: You know, six month annualized core PCE in the US

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Speaker 4: is one point nine. I mean we've kind of made it.

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Speaker 4: I mean it will still be choppy, but you've come

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Speaker 4: a long way. So I think as the market gets

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Speaker 4: more confident that policy is sufficiently restrictive, it will become

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Speaker 4: more confident that real rates do not need to be

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Speaker 4: this high over a longer period of time. And I

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Speaker 4: think that's where we think the most kind of value is.

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Speaker 4: So we're estimating really yields being somewhat lower. And then conversely,

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Speaker 4: I think as you move closer to the election, you

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Speaker 4: might get more concern around inflation longer run inflation expectations.

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Speaker 4: Could you see larger policy fifth there, So if yield

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Speaker 4: were to rise due to political uncertainty, we think that

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Speaker 4: comes through much more. Is more likely to come through

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Speaker 4: the inflation expectation side of the yield than the real

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Speaker 4: real side.

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Speaker 3: Hey, Andrew, just in fixed income last year, I was

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Speaker 3: surprised to see that the best performing fixed income area

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Speaker 3: was high yield. And with all the talk about recession

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Speaker 3: and it's right around the corner you got to be

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Speaker 3: worried about. I was surprised to see how yield does

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Speaker 3: so well. Where do you see opportunities in a fixed

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Speaker 3: income space here in.

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Speaker 4: Twenty four So I think that's absolutely right. High yield

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Speaker 4: was a surprisingly strong asset last year and benefited a

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Speaker 4: lot from the surprising strength of the economy. You know,

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Speaker 4: I think again, if we go back to a lot

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Speaker 4: of investors, and you know, we certainly fell victim to

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Speaker 4: this somewhat as well thought that you know, you were

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Speaker 4: in more of a late cycle market last year, or

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Speaker 4: a market that would be more have more growth risks

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Speaker 4: associated with them, even even as our economists expected the

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Speaker 4: soft landing, and so high yield really benefited from from

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Speaker 4: you know, the economy going down that more positive middle

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Speaker 4: path of avoiding those recessionary concerns. And then you know,

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Speaker 4: hy yield as a low to ration asset, so as

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Speaker 4: yield sold off, it benefited. So you know, that's I

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Speaker 4: think one explanation for the strength that we've had. You know,

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Speaker 4: the challenges yields have spreads of tightened yields have come down,

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Speaker 4: So you know, I think when we look within high yield,

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Speaker 4: we do have to be somewhat more more selective. You know,

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Speaker 4: we do think the loan market, where threads have lagged,

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Speaker 4: if if higher for longer loans can do somewhat better.

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Speaker 4: You also benefit potentially from some refinancing of loans into bonds.

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Speaker 4: And then while it's a much more difficult to be

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Speaker 4: kind of strategic about it, you know, triple C credit

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Speaker 4: has really lagged, and so you do have this market

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Speaker 4: and the one hand is seeming to embrace a soft

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Speaker 4: landing narrative, and yet the kind of riskiest, most economically

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Speaker 4: sensitive part of credit has really lagged in the US

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Speaker 4: in Europe, and I think that could be hard to

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Speaker 4: sustain if if the economy really is okay.

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Speaker 1: Andrew Sheets, thank you, it's been too long with Morgan,

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Speaker 1: Stanley and Londons. Just thrilled to have a mind. Peters

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Speaker 1: shere's one of those young guys. He joins us right now.

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Speaker 1: Real holistic view on the market with Academy security. Peter.

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Speaker 1: Is it a bull market? And by that, I mean,

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Speaker 1: do you see the exuberance in the silliness that comes

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Speaker 1: always with a bull market?

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Speaker 5: Not quite. I don't think. I've been thinking we saw

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Speaker 5: a little bit too much exuberant. I've been a little

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Speaker 5: bit concerned that we were topee on the market. I

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Speaker 5: would have to say some of the data, especially jobs

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Speaker 5: last week, is making me reconsider that we've seen an

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Speaker 5: uptick in the economic data since the middle of January. Yeah,

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Speaker 5: and I've been in this blowing economy's view and I'm

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Speaker 5: rethinking that maybe I'm missing something. Maybe we can really

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Speaker 5: sound to be strong, in which case is plenty of

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Speaker 5: room for the rest of the market to run. Are

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Speaker 5: with some of the big tech maybe's gone too far?

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Speaker 1: Peter? Are we aneuittizing cash flows? In that the romance

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Speaker 1: here and the rationalization and whatever the pe multiple is

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Speaker 1: depending on the sector, is that corporate leaders are having

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Speaker 1: persistent day after day, tick after tick casuals like say

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Speaker 1: the Apple app store is just one example. Is that

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Speaker 1: part of our bullmarket feel?

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Speaker 5: That is definitely part of the bullmarket feel. And I

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Speaker 5: would have to say, though, one thing that does give

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Speaker 5: me pause for caution, though that could keep running, is

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Speaker 5: when you have a trillion dollar company gain twenty percent

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Speaker 5: or two hundred billion dollars in market cap on Friday.

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Speaker 5: It really makes you question this market sor efficient or not. Now,

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Speaker 5: maybe we have that stock way under price, But that's

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Speaker 5: just a move that struck me as odd. It might

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Speaker 5: be significant that we could get more, but it's certainly

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Speaker 5: odd that we can be mispricing a company by so much. Collectively.

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Speaker 3: Yeah, that was a great Bloomberg piece on Friday, noting

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Speaker 3: that big, big move up in marketcap two hundred billion dollars,

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Speaker 3: and of course mister Zuckerberg has a big shareholder benefits there.

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Speaker 3: Talk to us, Peter. It's just kind of about valuation here,

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Speaker 3: when I feel like we don't talk about valuation enough.

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Speaker 3: We had this big, big move up in the market

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Speaker 3: in November and December, I don't recall a commensurate increase

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Speaker 3: in earnings per share for the S and P. So

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Speaker 3: I'm wondering, are we stretched your own valuation?

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Speaker 1: No?

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Speaker 5: I think two things are happening to me when I'm

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Speaker 5: looking at valuation. One seems to be people have now

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Speaker 5: just accepted that big tech can trade at a much

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Speaker 5: higher pe maybe than it did in the past. It

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Speaker 5: felt like last year people wanted to be underweight, that

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Speaker 5: people spot those highps. It seems like that fighting's going away,

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Speaker 5: which is a contrarion tells me maybe it's trying to

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Speaker 5: be a bit cautious there, and we have gotten away

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Speaker 5: like I liked it. In late November, when we finally

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Speaker 5: started seeing small tech rally, we saw not small tech

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Speaker 5: small caps rally. You saw a bank's rally, and you

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Speaker 5: really started getting this fixation on valuation. Hey, I can

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Speaker 5: buy these things that lower multiples. These are interesting companies

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Speaker 5: strong free cash flow, and that discussion dictated. So I'm

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Speaker 5: waiting for a sign to get back into those because

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Speaker 5: they've underperformed a lot this year. It is what I'm

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Speaker 5: looking at. And the one thing that does strike me

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Speaker 5: somewhere in between is I look at ARKK so Arc

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Speaker 5: kind of as you know, yep, weird tech, and that struggled.

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Speaker 5: So people are being a little bit discerning, right It's

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Speaker 5: not like it was during the peak of COVID, where

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Speaker 5: anything with the story was getting bought. This is really

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Speaker 5: a little bit more specific, which gives me some comfort

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Speaker 5: that we're not going to have a major pullback and

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Speaker 5: that we have some upside if these other stocks really

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Speaker 5: start catching you know a bit. Again, are there.

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Speaker 3: Any sectors out there in the marketplace that maybe screen

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Speaker 3: well for you right now?

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Speaker 5: I love the commodity space, commodity commodity RATEDTOX. I think

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Speaker 5: we are doing reshoring. There's deeopolitical pressure. I think we're

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Speaker 5: finally getting our story together, our act together on sustainable

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Speaker 5: energy in that for the next ten years we're going

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Speaker 5: to build out sustainable but we're also going to build

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Speaker 5: out traditional energy sources. So I think the energy is

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Speaker 5: great and for a trade I like China right.

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Speaker 1: Now, Well that's where I wanted to go, Paul, excuse me, Peter,

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Speaker 1: I need to go to China with the admirable securities differential,

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Speaker 1: which is a huge board commitment by our American military,

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Speaker 1: the thought of Academy securities on China and on the

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Speaker 1: new projection of the United States the Pacific Room.

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Speaker 5: So longer term, nothing is really changing. There is a

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Speaker 5: high degree of friction, and there are going to be

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Speaker 5: levels of technology we will just not share with China,

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Speaker 5: so that is not changing and it's probably going to expand.

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Speaker 5: So I think biotech chips, all those are going to

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Speaker 5: be at issue with China. We are having the separation.

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Speaker 5: I think everyone wants to figure out a way to

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Speaker 5: work together. It's going to be tricky though to figure

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Speaker 5: out where on that chain of technology you're comfortable with.

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Speaker 5: And what still appeas is China that they want to

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Speaker 5: do business with us. So I think long term there's struggles.

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Speaker 5: Short term, we see it as a potential opportunity, partly

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Speaker 5: because I think alile G may or may not be

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Speaker 5: a dictator, he does have to cater to his middle

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Speaker 5: class to some degree to remain in power. We saw

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Speaker 5: that when we went from COVID with awful in China,

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Speaker 5: there are some protests and all of a sudden COVID

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Speaker 5: restrictions were lifted. I think he's going to do something

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Speaker 5: to do boost markets and the economy because he cannot

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Speaker 5: afford to have that middle class supper and maybe rally

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Speaker 5: against the party.

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Speaker 1: So you're optimistic of action by Beijing when you look

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Speaker 1: at all the resources at Academy Securities.

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Speaker 5: Yes, I think near term he has to do something.

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Speaker 5: It's for his own political party, for his own staying

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Speaker 5: in power, and that will propel market and right now

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Speaker 5: China is so er invested. That's the opportunity.

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Speaker 1: Peter Cheer, thank you so much with the Academy Securities.

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Speaker 1: Many choices today in the headline's Lisa, where do you start?

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Speaker 2: All right?

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Speaker 6: Starting with the Wall Street Journal, there's been a shift

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Speaker 6: in the retail real estate market. So it's happening in

433
00:23:44,080 --> 00:23:46,200
Speaker 6: Europe now it's starting to happen in New York City.

434
00:23:46,240 --> 00:23:47,600
Speaker 6: I want to point out a couple of them. You

435
00:23:47,600 --> 00:23:50,119
Speaker 6: have Prada. They've agreed to buy the building on Fifth

436
00:23:50,119 --> 00:23:53,400
Speaker 6: Avenue where their store is, the building next door as well,

437
00:23:53,440 --> 00:23:56,359
Speaker 6: for more than eight hundred million dollars. You have Gucci's

438
00:23:56,400 --> 00:23:58,960
Speaker 6: parent company. They're paying about one billion for a retail

439
00:23:59,000 --> 00:24:01,920
Speaker 6: space just you blocks south of that, and then LVMH

440
00:24:02,000 --> 00:24:04,760
Speaker 6: they're reportedly and talks about that Fifth Avenue retail space

441
00:24:05,000 --> 00:24:06,560
Speaker 6: that's occupied by burned off.

442
00:24:06,600 --> 00:24:08,640
Speaker 3: I wonder if they're getting deals now, I mean, because

443
00:24:08,840 --> 00:24:12,280
Speaker 3: you know, you just think real estate down commercial real

444
00:24:12,359 --> 00:24:15,320
Speaker 3: estate can't be strong here, so maybe they're getting some

445
00:24:15,320 --> 00:24:17,520
Speaker 3: some deals here relative to three or four years ago.

446
00:24:17,600 --> 00:24:20,960
Speaker 6: It could and I mean luxury goods there are sales

447
00:24:21,000 --> 00:24:23,040
Speaker 6: are up, so they have the cash, you know, to

448
00:24:23,119 --> 00:24:25,360
Speaker 6: do it. And it just makes sense because they're paying

449
00:24:25,359 --> 00:24:26,960
Speaker 6: so much rent, especially.

450
00:24:26,640 --> 00:24:29,240
Speaker 1: When they when they know, I mean, Pols the only

451
00:24:29,280 --> 00:24:32,000
Speaker 1: one that shops over there. But the answer is it's

452
00:24:32,080 --> 00:24:36,080
Speaker 1: from fifty seven Street ish yep, sort of down to

453
00:24:36,119 --> 00:24:38,080
Speaker 1: Sacks fifth Avenue, right, I mean the goal is to

454
00:24:38,119 --> 00:24:41,320
Speaker 1: get down to Rockefeller Center. And is a basic tone

455
00:24:41,400 --> 00:24:45,160
Speaker 1: is that's going to have a complete revitalization off of COVID.

456
00:24:45,680 --> 00:24:48,320
Speaker 6: Yeah, it's supposed to, because what they want to do

457
00:24:48,560 --> 00:24:50,879
Speaker 6: is set their mark. You know, they want to know

458
00:24:50,920 --> 00:24:53,560
Speaker 6: that they're going to be there hundred years from now.

459
00:24:54,000 --> 00:24:57,360
Speaker 3: As opposed to paying rent exactly, and it just keeps going.

460
00:24:57,400 --> 00:24:57,560
Speaker 1: Well.

461
00:24:57,840 --> 00:25:00,680
Speaker 3: I think it's great. It's a great validation New York City.

462
00:25:00,680 --> 00:25:04,359
Speaker 3: It's great validation at Midtown Manhattan. And when you see

463
00:25:04,359 --> 00:25:08,000
Speaker 3: some of these these serious retailers, you know, investing their

464
00:25:08,040 --> 00:25:09,320
Speaker 3: capital in Lewis Viutona.

465
00:25:09,359 --> 00:25:11,520
Speaker 1: I mean the rumored number is they put one hundred

466
00:25:11,520 --> 00:25:12,880
Speaker 1: million dollars into Tiffany.

467
00:25:13,119 --> 00:25:14,240
Speaker 3: Yeah. Oh that's a great run.

468
00:25:14,320 --> 00:25:15,840
Speaker 1: I mean they did a renovation.

469
00:25:16,119 --> 00:25:16,320
Speaker 2: Yeah.

470
00:25:16,560 --> 00:25:18,840
Speaker 1: And I think next door is the Nike Remember the

471
00:25:18,920 --> 00:25:21,880
Speaker 1: Nike store. The kids would go in there and lighten

472
00:25:21,920 --> 00:25:25,000
Speaker 1: your wallet, right, I think that's like a Deor store

473
00:25:25,080 --> 00:25:28,280
Speaker 1: now while they wait to rebuild the you or something like. Okay,

474
00:25:28,320 --> 00:25:28,840
Speaker 1: I can't.

475
00:25:28,640 --> 00:25:31,200
Speaker 3: Contract them, all right, that's good for Fit, that for Madison.

476
00:25:31,200 --> 00:25:31,440
Speaker 4: Antay.

477
00:25:31,520 --> 00:25:36,439
Speaker 1: Way too much luxury talk, missus, missus King's listening this morning. Anytime, Lisa,

478
00:25:36,480 --> 00:25:40,320
Speaker 1: you're in trouble, anytime you mentioned Rada, it gets me

479
00:25:40,400 --> 00:25:40,879
Speaker 1: in trouble.

480
00:25:41,000 --> 00:25:42,399
Speaker 2: Go it's good, all right.

481
00:25:42,400 --> 00:25:45,520
Speaker 6: We're going over to London right now. A lot more

482
00:25:45,560 --> 00:25:48,879
Speaker 6: people there opting to rent rather than buy because they

483
00:25:48,920 --> 00:25:51,439
Speaker 6: don't want to pay Britain's high taxes. A lot of

484
00:25:51,440 --> 00:25:55,040
Speaker 6: workers on short term contracts there. They're also working out

485
00:25:55,160 --> 00:25:57,320
Speaker 6: where they want to live. Some still aren't sure yet.

486
00:25:57,520 --> 00:25:59,880
Speaker 6: And because of that we talked about rent rising. Yeather,

487
00:26:00,080 --> 00:26:02,760
Speaker 6: the rent is rising over there too in London for

488
00:26:02,800 --> 00:26:04,680
Speaker 6: a place to live. The average prime rent in London

489
00:26:04,720 --> 00:26:07,400
Speaker 6: increase three and a half percent between December twenty twenty

490
00:26:07,440 --> 00:26:09,080
Speaker 6: two and December twenty twenty three.

491
00:26:09,080 --> 00:26:11,320
Speaker 3: All right, I've got this is for Tom Keane. The

492
00:26:11,359 --> 00:26:14,399
Speaker 3: living room of a four bedroom, four bathroom apartment in

493
00:26:14,440 --> 00:26:17,480
Speaker 3: London's London's fashionable Chelsea neighborhood, which is where Tom would

494
00:26:17,520 --> 00:26:20,879
Speaker 3: want to be potentially, if not. Mayfair listed with estate

495
00:26:20,920 --> 00:26:24,960
Speaker 3: agent Chesterton's for thirty seven nine dollars.

496
00:26:24,840 --> 00:26:27,840
Speaker 2: Per week per week.

497
00:26:27,960 --> 00:26:28,639
Speaker 1: That's the rent.

498
00:26:28,800 --> 00:26:30,600
Speaker 3: Yes, that's the rent. Because you don't want to buy

499
00:26:30,640 --> 00:26:33,200
Speaker 3: over there necessarily right now, you maybe want to rent?

500
00:26:33,320 --> 00:26:34,439
Speaker 3: Is why is what's happening?

501
00:26:34,440 --> 00:26:35,960
Speaker 1: I don't even know from a lot of people. I

502
00:26:36,000 --> 00:26:37,919
Speaker 1: don't think it's just London, but you know it's it's

503
00:26:38,000 --> 00:26:40,840
Speaker 1: it's sort of basically out of control. And there's no

504
00:26:40,880 --> 00:26:44,439
Speaker 1: other way to put a stagger on to our last idea.

505
00:26:44,680 --> 00:26:47,120
Speaker 6: Yes, super Bowl commercials.

506
00:26:46,880 --> 00:26:50,359
Speaker 1: Here we go. Super Bowl potatoes can be NonStop super

507
00:26:50,400 --> 00:26:53,959
Speaker 1: Bowl to what Monday of next week are you off Monday?

508
00:26:54,720 --> 00:26:56,080
Speaker 1: Take you take the super Bowl?

509
00:26:56,960 --> 00:26:57,160
Speaker 3: Rich?

510
00:26:57,160 --> 00:26:58,119
Speaker 1: Are you off Monday?

511
00:26:58,160 --> 00:26:59,160
Speaker 6: Who's off?

512
00:27:01,600 --> 00:27:04,200
Speaker 1: Yeah? You've booked that in when you thought the Giants

513
00:27:04,200 --> 00:27:04,800
Speaker 1: would make it?

514
00:27:04,880 --> 00:27:08,240
Speaker 6: Thinks all right the second you're in a row. The

515
00:27:08,280 --> 00:27:10,680
Speaker 6: average cost of a thirty second ad spot during the

516
00:27:10,680 --> 00:27:13,120
Speaker 6: Super Bowl seven million dollars.

517
00:27:13,320 --> 00:27:13,520
Speaker 5: Right.

518
00:27:13,800 --> 00:27:15,919
Speaker 6: But this a lot of businesses though they're tightening up

519
00:27:15,920 --> 00:27:18,840
Speaker 6: their budgets and marketing, but not for their Super Bowl

520
00:27:18,880 --> 00:27:21,760
Speaker 6: because Paul knows this is the one time like this

521
00:27:21,840 --> 00:27:23,600
Speaker 6: is the big show, this is where they get the

522
00:27:23,640 --> 00:27:24,280
Speaker 6: most eyes.

523
00:27:24,920 --> 00:27:32,040
Speaker 3: Why Because everybody's audience has been fragmented across every single medium,

524
00:27:32,520 --> 00:27:34,800
Speaker 3: which makes the fact that one hundred million people are

525
00:27:34,800 --> 00:27:37,040
Speaker 3: going to watch an event, any event, which in this

526
00:27:37,080 --> 00:27:39,439
Speaker 3: case is the super Bowl, you just can't get it

527
00:27:39,480 --> 00:27:41,280
Speaker 3: anywhere else and you can't put a price to thave

528
00:27:41,359 --> 00:27:43,879
Speaker 3: on that. So not only has CBS sold their spots

529
00:27:43,880 --> 00:27:46,960
Speaker 3: for about seven million dollars a spot, but I guarantee

530
00:27:46,960 --> 00:27:49,720
Speaker 3: you they've got three or four spots in their back

531
00:27:49,760 --> 00:27:52,679
Speaker 3: pocket that they haven't sold, and somebody's gonna come in

532
00:27:52,720 --> 00:27:55,840
Speaker 3: on Thursday and say I have to have this for

533
00:27:56,520 --> 00:27:59,320
Speaker 3: want a new movie's coming out of whatever ten million dollars.

534
00:27:59,160 --> 00:28:02,040
Speaker 1: So we know, is is crypto big now? Like remember

535
00:28:02,080 --> 00:28:05,480
Speaker 1: it was the dot com nonprofitable dot com money spending

536
00:28:05,520 --> 00:28:07,400
Speaker 1: their you know, Paul would go to a lunch bringing

537
00:28:07,480 --> 00:28:09,159
Speaker 1: I p O money and they spend it on a

538
00:28:09,200 --> 00:28:12,280
Speaker 1: super Bowl then and now it was crypto, right, Is

539
00:28:12,320 --> 00:28:14,880
Speaker 1: there like a theme this year? Is like ai, I.

540
00:28:14,800 --> 00:28:18,200
Speaker 3: Don't I think it's gonna be a lot of the there's.

541
00:28:18,080 --> 00:28:24,399
Speaker 1: Like seven Apple are we in there?

542
00:28:22,600 --> 00:28:25,520
Speaker 3: Yeah?

543
00:28:25,720 --> 00:28:28,199
Speaker 1: I think you know, I talked to Reto keeper the

544
00:28:28,320 --> 00:28:32,439
Speaker 1: MX we could run that puppy, so seven million bucks?

545
00:28:32,520 --> 00:28:34,320
Speaker 3: Yeah, how about that? So I mean, but you're paying

546
00:28:34,320 --> 00:28:35,160
Speaker 3: a gajillion dollars.

547
00:28:35,000 --> 00:28:36,840
Speaker 6: For that, Like a lot of people, a lot of

548
00:28:37,680 --> 00:28:39,840
Speaker 6: it's it's breaking up, like some are going to stream

549
00:28:39,960 --> 00:28:41,920
Speaker 6: like a lot of shows are going to streaming. There's

550
00:28:41,960 --> 00:28:44,080
Speaker 6: marketing and streaming. There's marketing in regular you know that

551
00:28:44,240 --> 00:28:45,840
Speaker 6: Where is the money? Where do you get the most

552
00:28:45,840 --> 00:28:47,280
Speaker 6: bang for your buck? That's what they're looking at.

553
00:28:47,320 --> 00:28:50,200
Speaker 1: I still don't get the streaming model. We've really enjoyed

554
00:28:50,200 --> 00:28:54,720
Speaker 1: watching the Spielberg Hanks Vehicle Masters in the Air about

555
00:28:54,720 --> 00:28:56,920
Speaker 1: World War Two. It's just out, you know, you watch it.

556
00:28:57,200 --> 00:28:59,040
Speaker 3: I'm into episode three.

557
00:28:59,120 --> 00:29:01,400
Speaker 1: Yeah, yeah, But Paul, I still don't get the math.

558
00:29:01,520 --> 00:29:03,600
Speaker 1: What did that thing cost? The answer is, I mean

559
00:29:03,640 --> 00:29:04,760
Speaker 1: one hundred million plus.

560
00:29:04,840 --> 00:29:07,200
Speaker 3: Yeah, I mean the cinematography and that thing and the

561
00:29:07,320 --> 00:29:10,760
Speaker 3: quality of that production of this message year is unbelievable.

562
00:29:10,760 --> 00:29:14,520
Speaker 1: My nine dollars a month or whatever is paying for.

563
00:29:14,520 --> 00:29:16,000
Speaker 3: The I don't know.

564
00:29:16,200 --> 00:29:17,880
Speaker 1: I you told me that was in a movie theater

565
00:29:18,080 --> 00:29:21,720
Speaker 1: on the Upper West side Lincoln Center. I'd go over

566
00:29:21,760 --> 00:29:26,040
Speaker 1: there with one or two or three people. I'd pick

567
00:29:26,120 --> 00:29:27,959
Speaker 1: twenty something dollars per ticket.

568
00:29:28,240 --> 00:29:29,400
Speaker 3: Popcorn podcast.

569
00:29:29,720 --> 00:29:31,920
Speaker 1: You know, on the way out, I'm spending sixty sixty

570
00:29:31,920 --> 00:29:35,480
Speaker 1: five bucks. They're doing it on nine dollars subscription. I

571
00:29:35,520 --> 00:29:36,040
Speaker 1: don't get it.

572
00:29:36,120 --> 00:29:38,200
Speaker 3: I don't get it. So you know, but again, that's

573
00:29:38,280 --> 00:29:41,400
Speaker 3: the streaming model. Netflix makes plenty of money, plenty of profit.

574
00:29:41,440 --> 00:29:44,720
Speaker 3: We can see that. Everybody else we have no idea,

575
00:29:44,760 --> 00:29:46,880
Speaker 3: and we well, we do know that they're losing money,

576
00:29:46,920 --> 00:29:47,920
Speaker 3: but when can you get profit?

577
00:29:48,520 --> 00:29:51,720
Speaker 1: This is the Bloomberg Surveillance Podcast, bringing you the best

578
00:29:51,720 --> 00:29:56,520
Speaker 1: in economics, finance, investment, and international relations. You can also

579
00:29:56,600 --> 00:30:00,640
Speaker 1: watch the show live on YouTube. Visit the Bloomberg Podcast

580
00:30:00,760 --> 00:30:04,800
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581
00:30:04,840 --> 00:30:08,080
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582
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583
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584
00:30:15,960 --> 00:30:19,160
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