Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keene along
Speaker 1: with Paul Sweeney. Join us each day for insight from
Speaker 1: the best in economics, finance, investment, and international relations. You
Speaker 1: can also watch the show live on YouTube. Visit the
Speaker 1: Bloomberg Podcast channel on YouTube to see the show weekday
Speaker 1: mornings from seven to ten am Eastern from our global
Speaker 1: headquarters in New York City. Subscribe to the podcast on Apple, Spotify,
Speaker 1: or anywhere else you listen and always I'm Bloomberg Radio,
Speaker 1: the Bloomberg Terminal, and the Bloomberg Business App. You do
Speaker 1: a book and like, that's okay, that's a big deal.
Speaker 1: But then if you do a second book on the
Speaker 1: same topic, you're like an authority. He is an authority.
Speaker 1: Thomas Orlick has out understanding China's economic indicators. It's a
Speaker 1: good book that doze off to. But when you're done
Speaker 1: with that, you can wake up with China The Bubble
Speaker 1: That Never Pops. It is now the required read as
Speaker 1: the Bubble Pops China, the Bubble that Never Pops. Joining
Speaker 1: as sant, Thomas orl like driving all of our economics
Speaker 1: as well. Did you ever think Tom Orlock it would
Speaker 1: get as bad it is now, where basically the President
Speaker 1: of the United States President g of China has to
Speaker 1: directly intervene to put a bit under equities. Was that
Speaker 1: imaginable two years ago or twenty years ago.
Speaker 2: The Chinese stock market's a strange beast, Tom. I think
Speaker 2: it's important to keep in mind a couple of things.
Speaker 2: The first is that there's a signal there. The fact
Speaker 2: that China's stocks are amongst the worst performing in the
Speaker 2: world this year is a gauge of the weakness in
Speaker 2: China's economy. At the same time, it's important to remember
Speaker 2: that China's stock market, whilst kind of symbolic of the economy,
Speaker 2: is not the economy. There's not a lot household wealth
Speaker 2: in the stock market. Businesses aren't raising a lot of
Speaker 2: capital by issuing shit dares. So, yes, this is scary, Yes,
Speaker 2: this is a bad sign. Yes, this is why t
Speaker 2: jimping himself. We here is planning to intervene. But it's
Speaker 2: not quite the catastrophe for China that it would be
Speaker 2: in the United States. The S and P five hundred
Speaker 2: was down so much.
Speaker 1: Right now, we're clear in a market in New York City.
Speaker 1: It's called office towers and you know, we have a
Speaker 1: whole process bankruptcy or transactions whatever to clear. They don't
Speaker 1: have that structure. How does a totalitarian regime clear a
Speaker 1: distress market.
Speaker 2: So it's a really interesting question, Tom, And actually I
Speaker 2: don't want to sign two kind of Pollyanna. Everything's fine
Speaker 2: about this, But part of the problem here, part of
Speaker 2: the short term pain, is that China is moving to
Speaker 2: get rid of that problem of moral hazard, get rid
Speaker 2: of that problem that investors believe that the government in
Speaker 2: the fire analysis will stand behind all the banks, stand
Speaker 2: behind all the real estate developers, and prevent them from failing.
Speaker 2: It's the removal of that implicit guarantee, which is actually
Speaker 2: one of the big causes of stress and pain in
Speaker 2: China's markets and economy right now. But when they get
Speaker 2: through the end of it, and there's going to be
Speaker 2: a long process, we think the property correction still has
Speaker 2: a couple more years to run. In economy and markets
Speaker 2: without such a severe moral hazard problem, well, hopefully it'll
Speaker 2: be an economy and a market which is prime to
Speaker 2: grow and rise again.
Speaker 3: Hey, Tom, I know President g and other Chinese leaders
Speaker 3: over the last six months or so we've been courting
Speaker 3: Western investors Western countries kind of arguing about or supporting
Speaker 3: the investment thesis for China. But there are a lot
Speaker 3: of investors, not just em investors are saying China is
Speaker 3: uninvestable because of the China risk, the government risk. Do
Speaker 3: you sense that is that the government of China understands
Speaker 3: that and that they're willing to make any types of
Speaker 3: changes to be more receptive to Western investment.
Speaker 2: So the China investment story has got I think three
Speaker 2: really big problems. The first big problem is that we've
Speaker 2: gone from an economy which in nominal dollar terms was
Speaker 2: growing about twenty percent a year to an economy which
Speaker 2: in nominal dollar terms isn't growing at all. That's significant
Speaker 2: negative for investors. The second is relations with the United States.
Speaker 2: Ten years ago, twenty years ago, you put your money
Speaker 2: in China, there wasn't that geopolitical risk. Now there's the
Speaker 2: risk of tariffs, the risk of sanctions, the risk of
Speaker 2: political blowback. The third challenge, as you mentioned, Paul, is
Speaker 2: that investors now believe that Beijing doesn't have their back, right,
Speaker 2: and I think it's that piece of it which she
Speaker 2: and his premiere and other members of China's leadership are
Speaker 2: now trying to row back from the trouble. Is those
Speaker 2: other two negatives falling growth, increase, geopolitical stress. They're still there,
Speaker 2: and that means the mood music remains pretty pretty challenging.
Speaker 3: What's the expectation, Tom, I kind of think about, I guess,
Speaker 3: what's the expectation that this Chinese economy can fundamentally turn
Speaker 3: itself around. I think of, you know, just the demographics
Speaker 3: of China just don't bode well for the economy longer term,
Speaker 3: and I'm wondering, you know, what can the government do
Speaker 3: to really turn this economy around.
Speaker 2: So when I think about China right now, I think
Speaker 2: about a really significant negative in the real estate sector,
Speaker 2: and I think about a really significant positive signal in
Speaker 2: the electric vehicle space. Right real estate is collapsing. We
Speaker 2: can't sort of put lipstick on the pig. They've got
Speaker 2: massive overcapacity there. It's going to be painful as they
Speaker 2: work through that, But this too shall pass. Right by
Speaker 2: twenty twenty five, twenty twenty six, they'll be through the
Speaker 2: worst of this property correction, the electric vehicle story. I
Speaker 2: think what that speaks to is China's longer term potential,
Speaker 2: China's economic miracle from nineteen eighty till today. It's not
Speaker 2: been based on real estate, it's been it's been based
Speaker 2: on moving up the value chain from textiles to toys,
Speaker 2: to leadership in high speed, trained sustainable energy, and now
Speaker 2: electric vehicles. And it's that story, which, if it's sustained,
Speaker 2: means that China's economic miracle, while not what it was,
Speaker 2: is also not overin.
Speaker 1: To clear the market. And let's assume they, you know,
Speaker 1: as they've done before, they just write off refund where's
Speaker 1: the money come from to bail out the property market?
Speaker 1: Do they just print renmnby? Is it that simple?
Speaker 2: So I think there's a couple of things to say here, Tom,
Speaker 2: is that China is a high saving society with a
Speaker 2: closed financial system, and what that means is that the
Speaker 2: banks are almost always really well funded. Think about the
Speaker 2: Lehman collapsed in two thousand and eight, where money fled
Speaker 2: from the big banks in the United States. That's just
Speaker 2: not going to happen in China. So that sort of
Speaker 2: funding crisis, if you isn't going to be an issue
Speaker 2: for bathing now, clearing the market, getting rid of the
Speaker 2: bad investments, getting rid of the bankrupt property developers, that's
Speaker 2: the process which China is in right now. And yes
Speaker 2: it's extraordinarily painful. If you're holding an Evergrand bond, you've
Speaker 2: lost a lot of money. If you're waiting for a
Speaker 2: Chinese property developer to finish building your house, you could
Speaker 2: be waiting a pretty long time. But at the end
Speaker 2: of that process, China is going to have an economy
Speaker 2: with less moral hazard, less dependency on building houses which
Speaker 2: no one is going to live in, and more opportunity
Speaker 2: for folks like the electric.
Speaker 1: View going to be time. He sounds like you know,
Speaker 1: he sounds or like, I mean, he's got this downb cold.
Speaker 1: But what's a timeline on that workout? On a Hyachian basis,
Speaker 1: they got to clear the market. Is it like an
Speaker 1: or like one year or is it a four year
Speaker 1: or is it a perfect date to a party congress.
Speaker 2: It's always nice to time things to these moments in
Speaker 2: the political calendar, isn't it.
Speaker 1: So?
Speaker 2: Look, this is kind of an art rather than a science.
Speaker 2: The Chinese data is not perfect. There's lots of uncertainties there.
Speaker 2: But by our estimate two years ago, China was building
Speaker 2: about twenty thirty percent more property each year than it
Speaker 2: needed to live in each year. Now we're about halfway
Speaker 2: through that correction. What that suggests to me is there's
Speaker 2: a by two years more pain in China's properties.
Speaker 1: Actor Tom Rlick never enough time. Thank you so much.
Speaker 1: I learned a lot there informative on China as well.
Speaker 1: Look for his wonderful book. Arthur joining us. Now we
Speaker 1: see a good one goal of you on economics, finance, investment,
Speaker 1: and also the correlations, the linkage of all this, and
Speaker 1: no one's better at it than Andrew Sheets of Morgan
Speaker 1: Stanley joins us. As we discussed the linkages of the market. Andrew,
Speaker 1: I saw a stockbond correlation that was wackle. It was
Speaker 1: like the needle pegged, and that it was an odd
Speaker 1: and strange time. How odd and how strange is this time?
Speaker 2: Yeah?
Speaker 4: Thanks, thanks Tom, It's great to be here with you.
Speaker 4: You know, look, as I think you've discussed in this
Speaker 4: program that the stockbond correlation has moved around a lot
Speaker 4: during history. There's a lot of evidence, you know, certainly
Speaker 4: kind of prior to the nineteen nineties, we're stock and
Speaker 4: bond prices moved together, i e. Lower yields were generally
Speaker 4: better for stocks, and then you know, more recently it's
Speaker 4: been the other way around, where stocks have generally preferred
Speaker 4: higher yields, And you know, I do think a good
Speaker 4: way to frame that is previously the markets were more
Speaker 4: worried about inflation, and obviously both bonds and stocks like
Speaker 4: lower inflation, and more recently we've worried about growth. So
Speaker 4: I do think the performance this week was was fascinating.
Speaker 4: Right if you look at Wednesday where you saw this
Speaker 4: big draw down inequities with the FED kind of pushing
Speaker 4: back on March. I mean, yields fell, you know when
Speaker 4: that happened, So this wasn't you know, Oh no, the
Speaker 4: Fed's not cutting rates, are not going to be low
Speaker 4: enough to support stocks. That was not the message of
Speaker 4: the bond market, and I think it was much more
Speaker 4: about concern around around growth, concerned that maybe the FED
Speaker 4: was ignoring some of the weaker data earlier this week.
Speaker 4: So I think we've seen some stronger data. I think
Speaker 4: ultimately that will be the best path for market.
Speaker 1: Paul, I can't emphasize enough what Andrew Sheet said there,
Speaker 1: how important it is, and that the financial media I'm
Speaker 1: as guilty of this. Paul is not guilty of this.
Speaker 1: Lisa Montail's an angel on this. We're addicted to the
Speaker 1: parlor game, the fed, the monetary ballet, and what mister
Speaker 1: Sheets just said, there is hello the real economy, maybe
Speaker 1: the new burgeoning productivity as well.
Speaker 3: Absolutely, Hey Andrew as a cross asset strategist for Morgan Stanley.
Speaker 3: Where do you see the greatest opportunities here? When you
Speaker 3: sit down with your clients, where do you see the
Speaker 3: greatest opportunity? What do you suggest a focus here across assets?
Speaker 4: So I think you know the this is not going
Speaker 4: to be an easy year. You've seen a big run
Speaker 4: up in prices in November and December, and in many
Speaker 4: cases those prices rapidly move towards targets. We thought, you know,
Speaker 4: you get to by the end of the year. But but
Speaker 4: I think there are some still some opportunities. You know,
Speaker 4: we think Japan is an equity market that still has
Speaker 4: a good cyclical and structural story. Cyclical because the economy
Speaker 4: remains quite strong. You have some of the cheapest cost
Speaker 4: of capital in the world still, and then a good
Speaker 4: structural stories. You still see corporate reform. A number of
Speaker 4: the lad Am equity markets are relatively inexpensive. You have
Speaker 4: policy easing cycles. We think some of those could still
Speaker 4: be relatively attractive, and then it's not nearly as exciting.
Speaker 4: But you know, in an asset class you know I'm
Speaker 4: calling talking to you here in Europe. You know, European
Speaker 4: investment grade credit spreads are kind of at the twenty
Speaker 4: year median, which doesn't seem all that bad considering you've
Speaker 4: got reasonable growth, you're going to have easing of ECB policy,
Speaker 4: a very light supply, and I think that's another area
Speaker 4: where investors can teak out some extra return.
Speaker 1: You can do this on the Bloomberg Professional Service. The
Speaker 1: Equity Index in Japan ye in ye end you're up
Speaker 1: ten plus percent, double digit return. Nice. If you're in dollars,
Speaker 1: as I believe I am, it's not quite as good,
Speaker 1: up seven point six percent, so you're not two hundred
Speaker 1: and fifty beeps off.
Speaker 3: Hey, Andrew, you know, when Tom and I began our
Speaker 3: Wallster careers way back when Japan was the bomb. You
Speaker 3: had to be there, you had to work there, you
Speaker 3: had to have exposure there, you had to have you know,
Speaker 3: people there. But man, we haven't heard about Japan in
Speaker 3: like thirty years. But now in the last year or so,
Speaker 3: I'm hearing Warren Buffett, I'm hearing Andrew Sheets of Morgan Stanley,
Speaker 3: people talking to me about Japan. Why are we talking
Speaker 3: about Japan now?
Speaker 4: So I think it's a fascinating example that you know,
Speaker 4: markets move in in waves, and I do think at
Speaker 4: one level, right you have, Japan is a very interesting
Speaker 4: part of this global economic story. You know, if we
Speaker 4: use the full Goldilocks narrative, you could argue China is
Speaker 4: at risk of being too cold, there's not enough inflation,
Speaker 4: the US and Europe are more in the middle, and
Speaker 4: then Japan is hot. Japan is the market that is
Speaker 4: going to be raising rates on our forecast this year.
Speaker 4: So I think that puts it in an interesting part
Speaker 4: of the macro narrative. You know, valuations have risen, but
Speaker 4: they're notarticularly extreme, and I think that's still a market
Speaker 4: where we see more corporate efficiency to be squeezed out.
Speaker 4: And I think you've seen a push at the corporating
Speaker 4: government level that's that's pretty unique and pretty rare that
Speaker 4: we think can finally change that narrative frame.
Speaker 1: Out the real yield. Had a wonderful evening last night
Speaker 1: with Tracey Loa and Joe Wisenthal Andrew Sheets, and my
Speaker 1: first question within their wonderful event was went downtime? Well,
Speaker 1: I went, you know, Andrew Sheets came on just because
Speaker 1: he celebrated. I went below fifty seventh Street. Someone's ever
Speaker 1: heard of that? Andrew the real yield frame out the
Speaker 1: Morgan Stanley view or the Andrew Sheets view on what
Speaker 1: we do from one point nine zero percent? Do you
Speaker 1: just see a lower real yield?
Speaker 4: So I think the Morgan Stanley view here is quite clear.
Speaker 4: We do see a lower real yield. And you know,
Speaker 4: I think that that will be driven by our thinking
Speaker 4: is that that will be driven by clarity that policy
Speaker 4: is sufficiently restrictive, that core inflation will continue to come down.
Speaker 4: And again, if we think about you know, what is
Speaker 4: one of the more surprising stories over the last six months.
Speaker 4: You know, a lot of last year was driven by
Speaker 4: fear of this last mile of inflation. We could get
Speaker 4: down to three, we could never get down to two.
Speaker 4: You know, six month annualized core PCE in the US
Speaker 4: is one point nine. I mean we've kind of made it.
Speaker 4: I mean it will still be choppy, but you've come
Speaker 4: a long way. So I think as the market gets
Speaker 4: more confident that policy is sufficiently restrictive, it will become
Speaker 4: more confident that real rates do not need to be
Speaker 4: this high over a longer period of time. And I
Speaker 4: think that's where we think the most kind of value is.
Speaker 4: So we're estimating really yields being somewhat lower. And then conversely,
Speaker 4: I think as you move closer to the election, you
Speaker 4: might get more concern around inflation longer run inflation expectations.
Speaker 4: Could you see larger policy fifth there, So if yield
Speaker 4: were to rise due to political uncertainty, we think that
Speaker 4: comes through much more. Is more likely to come through
Speaker 4: the inflation expectation side of the yield than the real
Speaker 4: real side.
Speaker 3: Hey, Andrew, just in fixed income last year, I was
Speaker 3: surprised to see that the best performing fixed income area
Speaker 3: was high yield. And with all the talk about recession
Speaker 3: and it's right around the corner you got to be
Speaker 3: worried about. I was surprised to see how yield does
Speaker 3: so well. Where do you see opportunities in a fixed
Speaker 3: income space here in.
Speaker 4: Twenty four So I think that's absolutely right. High yield
Speaker 4: was a surprisingly strong asset last year and benefited a
Speaker 4: lot from the surprising strength of the economy. You know,
Speaker 4: I think again, if we go back to a lot
Speaker 4: of investors, and you know, we certainly fell victim to
Speaker 4: this somewhat as well thought that you know, you were
Speaker 4: in more of a late cycle market last year, or
Speaker 4: a market that would be more have more growth risks
Speaker 4: associated with them, even even as our economists expected the
Speaker 4: soft landing, and so high yield really benefited from from
Speaker 4: you know, the economy going down that more positive middle
Speaker 4: path of avoiding those recessionary concerns. And then you know,
Speaker 4: hy yield as a low to ration asset, so as
Speaker 4: yield sold off, it benefited. So you know, that's I
Speaker 4: think one explanation for the strength that we've had. You know,
Speaker 4: the challenges yields have spreads of tightened yields have come down,
Speaker 4: So you know, I think when we look within high yield,
Speaker 4: we do have to be somewhat more more selective. You know,
Speaker 4: we do think the loan market, where threads have lagged,
Speaker 4: if if higher for longer loans can do somewhat better.
Speaker 4: You also benefit potentially from some refinancing of loans into bonds.
Speaker 4: And then while it's a much more difficult to be
Speaker 4: kind of strategic about it, you know, triple C credit
Speaker 4: has really lagged, and so you do have this market
Speaker 4: and the one hand is seeming to embrace a soft
Speaker 4: landing narrative, and yet the kind of riskiest, most economically
Speaker 4: sensitive part of credit has really lagged in the US
Speaker 4: in Europe, and I think that could be hard to
Speaker 4: sustain if if the economy really is okay.
Speaker 1: Andrew Sheets, thank you, it's been too long with Morgan,
Speaker 1: Stanley and Londons. Just thrilled to have a mind. Peters
Speaker 1: shere's one of those young guys. He joins us right now.
Speaker 1: Real holistic view on the market with Academy security. Peter.
Speaker 1: Is it a bull market? And by that, I mean,
Speaker 1: do you see the exuberance in the silliness that comes
Speaker 1: always with a bull market?
Speaker 5: Not quite. I don't think. I've been thinking we saw
Speaker 5: a little bit too much exuberant. I've been a little
Speaker 5: bit concerned that we were topee on the market. I
Speaker 5: would have to say some of the data, especially jobs
Speaker 5: last week, is making me reconsider that we've seen an
Speaker 5: uptick in the economic data since the middle of January. Yeah,
Speaker 5: and I've been in this blowing economy's view and I'm
Speaker 5: rethinking that maybe I'm missing something. Maybe we can really
Speaker 5: sound to be strong, in which case is plenty of
Speaker 5: room for the rest of the market to run. Are
Speaker 5: with some of the big tech maybe's gone too far?
Speaker 1: Peter? Are we aneuittizing cash flows? In that the romance
Speaker 1: here and the rationalization and whatever the pe multiple is
Speaker 1: depending on the sector, is that corporate leaders are having
Speaker 1: persistent day after day, tick after tick casuals like say
Speaker 1: the Apple app store is just one example. Is that
Speaker 1: part of our bullmarket feel?
Speaker 5: That is definitely part of the bullmarket feel. And I
Speaker 5: would have to say, though, one thing that does give
Speaker 5: me pause for caution, though that could keep running, is
Speaker 5: when you have a trillion dollar company gain twenty percent
Speaker 5: or two hundred billion dollars in market cap on Friday.
Speaker 5: It really makes you question this market sor efficient or not. Now,
Speaker 5: maybe we have that stock way under price, But that's
Speaker 5: just a move that struck me as odd. It might
Speaker 5: be significant that we could get more, but it's certainly
Speaker 5: odd that we can be mispricing a company by so much. Collectively.
Speaker 3: Yeah, that was a great Bloomberg piece on Friday, noting
Speaker 3: that big, big move up in marketcap two hundred billion dollars,
Speaker 3: and of course mister Zuckerberg has a big shareholder benefits there.
Speaker 3: Talk to us, Peter. It's just kind of about valuation here,
Speaker 3: when I feel like we don't talk about valuation enough.
Speaker 3: We had this big, big move up in the market
Speaker 3: in November and December, I don't recall a commensurate increase
Speaker 3: in earnings per share for the S and P. So
Speaker 3: I'm wondering, are we stretched your own valuation?
Speaker 1: No?
Speaker 5: I think two things are happening to me when I'm
Speaker 5: looking at valuation. One seems to be people have now
Speaker 5: just accepted that big tech can trade at a much
Speaker 5: higher pe maybe than it did in the past. It
Speaker 5: felt like last year people wanted to be underweight, that
Speaker 5: people spot those highps. It seems like that fighting's going away,
Speaker 5: which is a contrarion tells me maybe it's trying to
Speaker 5: be a bit cautious there, and we have gotten away
Speaker 5: like I liked it. In late November, when we finally
Speaker 5: started seeing small tech rally, we saw not small tech
Speaker 5: small caps rally. You saw a bank's rally, and you
Speaker 5: really started getting this fixation on valuation. Hey, I can
Speaker 5: buy these things that lower multiples. These are interesting companies
Speaker 5: strong free cash flow, and that discussion dictated. So I'm
Speaker 5: waiting for a sign to get back into those because
Speaker 5: they've underperformed a lot this year. It is what I'm
Speaker 5: looking at. And the one thing that does strike me
Speaker 5: somewhere in between is I look at ARKK so Arc
Speaker 5: kind of as you know, yep, weird tech, and that struggled.
Speaker 5: So people are being a little bit discerning, right It's
Speaker 5: not like it was during the peak of COVID, where
Speaker 5: anything with the story was getting bought. This is really
Speaker 5: a little bit more specific, which gives me some comfort
Speaker 5: that we're not going to have a major pullback and
Speaker 5: that we have some upside if these other stocks really
Speaker 5: start catching you know a bit. Again, are there.
Speaker 3: Any sectors out there in the marketplace that maybe screen
Speaker 3: well for you right now?
Speaker 5: I love the commodity space, commodity commodity RATEDTOX. I think
Speaker 5: we are doing reshoring. There's deeopolitical pressure. I think we're
Speaker 5: finally getting our story together, our act together on sustainable
Speaker 5: energy in that for the next ten years we're going
Speaker 5: to build out sustainable but we're also going to build
Speaker 5: out traditional energy sources. So I think the energy is
Speaker 5: great and for a trade I like China right.
Speaker 1: Now, Well that's where I wanted to go, Paul, excuse me, Peter,
Speaker 1: I need to go to China with the admirable securities differential,
Speaker 1: which is a huge board commitment by our American military,
Speaker 1: the thought of Academy securities on China and on the
Speaker 1: new projection of the United States the Pacific Room.
Speaker 5: So longer term, nothing is really changing. There is a
Speaker 5: high degree of friction, and there are going to be
Speaker 5: levels of technology we will just not share with China,
Speaker 5: so that is not changing and it's probably going to expand.
Speaker 5: So I think biotech chips, all those are going to
Speaker 5: be at issue with China. We are having the separation.
Speaker 5: I think everyone wants to figure out a way to
Speaker 5: work together. It's going to be tricky though to figure
Speaker 5: out where on that chain of technology you're comfortable with.
Speaker 5: And what still appeas is China that they want to
Speaker 5: do business with us. So I think long term there's struggles.
Speaker 5: Short term, we see it as a potential opportunity, partly
Speaker 5: because I think alile G may or may not be
Speaker 5: a dictator, he does have to cater to his middle
Speaker 5: class to some degree to remain in power. We saw
Speaker 5: that when we went from COVID with awful in China,
Speaker 5: there are some protests and all of a sudden COVID
Speaker 5: restrictions were lifted. I think he's going to do something
Speaker 5: to do boost markets and the economy because he cannot
Speaker 5: afford to have that middle class supper and maybe rally
Speaker 5: against the party.
Speaker 1: So you're optimistic of action by Beijing when you look
Speaker 1: at all the resources at Academy Securities.
Speaker 5: Yes, I think near term he has to do something.
Speaker 5: It's for his own political party, for his own staying
Speaker 5: in power, and that will propel market and right now
Speaker 5: China is so er invested. That's the opportunity.
Speaker 1: Peter Cheer, thank you so much with the Academy Securities.
Speaker 1: Many choices today in the headline's Lisa, where do you start?
Speaker 2: All right?
Speaker 6: Starting with the Wall Street Journal, there's been a shift
Speaker 6: in the retail real estate market. So it's happening in
Speaker 6: Europe now it's starting to happen in New York City.
Speaker 6: I want to point out a couple of them. You
Speaker 6: have Prada. They've agreed to buy the building on Fifth
Speaker 6: Avenue where their store is, the building next door as well,
Speaker 6: for more than eight hundred million dollars. You have Gucci's
Speaker 6: parent company. They're paying about one billion for a retail
Speaker 6: space just you blocks south of that, and then LVMH
Speaker 6: they're reportedly and talks about that Fifth Avenue retail space
Speaker 6: that's occupied by burned off.
Speaker 3: I wonder if they're getting deals now, I mean, because
Speaker 3: you know, you just think real estate down commercial real
Speaker 3: estate can't be strong here, so maybe they're getting some
Speaker 3: some deals here relative to three or four years ago.
Speaker 6: It could and I mean luxury goods there are sales
Speaker 6: are up, so they have the cash, you know, to
Speaker 6: do it. And it just makes sense because they're paying
Speaker 6: so much rent, especially.
Speaker 1: When they when they know, I mean, Pols the only
Speaker 1: one that shops over there. But the answer is it's
Speaker 1: from fifty seven Street ish yep, sort of down to
Speaker 1: Sacks fifth Avenue, right, I mean the goal is to
Speaker 1: get down to Rockefeller Center. And is a basic tone
Speaker 1: is that's going to have a complete revitalization off of COVID.
Speaker 6: Yeah, it's supposed to, because what they want to do
Speaker 6: is set their mark. You know, they want to know
Speaker 6: that they're going to be there hundred years from now.
Speaker 3: As opposed to paying rent exactly, and it just keeps going.
Speaker 1: Well.
Speaker 3: I think it's great. It's a great validation New York City.
Speaker 3: It's great validation at Midtown Manhattan. And when you see
Speaker 3: some of these these serious retailers, you know, investing their
Speaker 3: capital in Lewis Viutona.
Speaker 1: I mean the rumored number is they put one hundred
Speaker 1: million dollars into Tiffany.
Speaker 3: Yeah. Oh that's a great run.
Speaker 1: I mean they did a renovation.
Speaker 2: Yeah.
Speaker 1: And I think next door is the Nike Remember the
Speaker 1: Nike store. The kids would go in there and lighten
Speaker 1: your wallet, right, I think that's like a Deor store
Speaker 1: now while they wait to rebuild the you or something like. Okay,
Speaker 1: I can't.
Speaker 3: Contract them, all right, that's good for Fit, that for Madison.
Speaker 4: Antay.
Speaker 1: Way too much luxury talk, missus, missus King's listening this morning. Anytime, Lisa,
Speaker 1: you're in trouble, anytime you mentioned Rada, it gets me
Speaker 1: in trouble.
Speaker 2: Go it's good, all right.
Speaker 6: We're going over to London right now. A lot more
Speaker 6: people there opting to rent rather than buy because they
Speaker 6: don't want to pay Britain's high taxes. A lot of
Speaker 6: workers on short term contracts there. They're also working out
Speaker 6: where they want to live. Some still aren't sure yet.
Speaker 6: And because of that we talked about rent rising. Yeather,
Speaker 6: the rent is rising over there too in London for
Speaker 6: a place to live. The average prime rent in London
Speaker 6: increase three and a half percent between December twenty twenty
Speaker 6: two and December twenty twenty three.
Speaker 3: All right, I've got this is for Tom Keane. The
Speaker 3: living room of a four bedroom, four bathroom apartment in
Speaker 3: London's London's fashionable Chelsea neighborhood, which is where Tom would
Speaker 3: want to be potentially, if not. Mayfair listed with estate
Speaker 3: agent Chesterton's for thirty seven nine dollars.
Speaker 2: Per week per week.
Speaker 1: That's the rent.
Speaker 3: Yes, that's the rent. Because you don't want to buy
Speaker 3: over there necessarily right now, you maybe want to rent?
Speaker 3: Is why is what's happening?
Speaker 1: I don't even know from a lot of people. I
Speaker 1: don't think it's just London, but you know it's it's
Speaker 1: it's sort of basically out of control. And there's no
Speaker 1: other way to put a stagger on to our last idea.
Speaker 6: Yes, super Bowl commercials.
Speaker 1: Here we go. Super Bowl potatoes can be NonStop super
Speaker 1: Bowl to what Monday of next week are you off Monday?
Speaker 1: Take you take the super Bowl?
Speaker 3: Rich?
Speaker 1: Are you off Monday?
Speaker 6: Who's off?
Speaker 1: Yeah? You've booked that in when you thought the Giants
Speaker 1: would make it?
Speaker 6: Thinks all right the second you're in a row. The
Speaker 6: average cost of a thirty second ad spot during the
Speaker 6: Super Bowl seven million dollars.
Speaker 5: Right.
Speaker 6: But this a lot of businesses though they're tightening up
Speaker 6: their budgets and marketing, but not for their Super Bowl
Speaker 6: because Paul knows this is the one time like this
Speaker 6: is the big show, this is where they get the
Speaker 6: most eyes.
Speaker 3: Why Because everybody's audience has been fragmented across every single medium,
Speaker 3: which makes the fact that one hundred million people are
Speaker 3: going to watch an event, any event, which in this
Speaker 3: case is the super Bowl, you just can't get it
Speaker 3: anywhere else and you can't put a price to thave
Speaker 3: on that. So not only has CBS sold their spots
Speaker 3: for about seven million dollars a spot, but I guarantee
Speaker 3: you they've got three or four spots in their back
Speaker 3: pocket that they haven't sold, and somebody's gonna come in
Speaker 3: on Thursday and say I have to have this for
Speaker 3: want a new movie's coming out of whatever ten million dollars.
Speaker 1: So we know, is is crypto big now? Like remember
Speaker 1: it was the dot com nonprofitable dot com money spending
Speaker 1: their you know, Paul would go to a lunch bringing
Speaker 1: I p O money and they spend it on a
Speaker 1: super Bowl then and now it was crypto, right, Is
Speaker 1: there like a theme this year? Is like ai, I.
Speaker 3: Don't I think it's gonna be a lot of the there's.
Speaker 1: Like seven Apple are we in there?
Speaker 3: Yeah?
Speaker 1: I think you know, I talked to Reto keeper the
Speaker 1: MX we could run that puppy, so seven million bucks?
Speaker 3: Yeah, how about that? So I mean, but you're paying
Speaker 3: a gajillion dollars.
Speaker 6: For that, Like a lot of people, a lot of
Speaker 6: it's it's breaking up, like some are going to stream
Speaker 6: like a lot of shows are going to streaming. There's
Speaker 6: marketing and streaming. There's marketing in regular you know that
Speaker 6: Where is the money? Where do you get the most
Speaker 6: bang for your buck? That's what they're looking at.
Speaker 1: I still don't get the streaming model. We've really enjoyed
Speaker 1: watching the Spielberg Hanks Vehicle Masters in the Air about
Speaker 1: World War Two. It's just out, you know, you watch it.
Speaker 3: I'm into episode three.
Speaker 1: Yeah, yeah, But Paul, I still don't get the math.
Speaker 1: What did that thing cost? The answer is, I mean
Speaker 1: one hundred million plus.
Speaker 3: Yeah, I mean the cinematography and that thing and the
Speaker 3: quality of that production of this message year is unbelievable.
Speaker 1: My nine dollars a month or whatever is paying for.
Speaker 3: The I don't know.
Speaker 1: I you told me that was in a movie theater
Speaker 1: on the Upper West side Lincoln Center. I'd go over
Speaker 1: there with one or two or three people. I'd pick
Speaker 1: twenty something dollars per ticket.
Speaker 3: Popcorn podcast.
Speaker 1: You know, on the way out, I'm spending sixty sixty
Speaker 1: five bucks. They're doing it on nine dollars subscription. I
Speaker 1: don't get it.
Speaker 3: I don't get it. So you know, but again, that's
Speaker 3: the streaming model. Netflix makes plenty of money, plenty of profit.
Speaker 3: We can see that. Everybody else we have no idea,
Speaker 3: and we well, we do know that they're losing money,
Speaker 3: but when can you get profit?
Speaker 1: This is the Bloomberg Surveillance Podcast, bringing you the best
Speaker 1: in economics, finance, investment, and international relations. You can also
Speaker 1: watch the show live on YouTube. Visit the Bloomberg Podcast
Speaker 1: channel on YouTube to see the show weekday mornings from
Speaker 1: seven to ten am Eastern from our global headquarters in
Speaker 1: New York City. Subscribe to the podcast on Apple, Spotify,
Speaker 1: or anywhere else you listen, and always on Bloomberg Radio,
Speaker 1: the Bloomberg Terminal, and the Bloomberg Business app.