Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
Speaker 2: from our global headquarters in New York City. We are
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Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or
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Speaker 2: Terminal and the Bloomberg Business App. Sam Stovell of CFRRO
Speaker 2: has this to say. The lofty initial expectations for second
Speaker 2: quarter runnings growth have caused some megacap high flyers to
Speaker 2: fail to clear this elevated bar, causing investors to wonder
Speaker 2: if other megacap disappointments should be anticipated. Sam joins us
Speaker 2: now for more. So, Sam, let's get to the calendar.
Speaker 2: Let's go through next week, Microsoft, Amazon, Meta, Apple. Do
Speaker 2: you think we're set up for some disappointment here?
Speaker 3: Hey, Jonathan, Well, certainly, next week, forty percent of the
Speaker 3: cap weighting of the S and P five hundred tech
Speaker 3: sector will be reporting earnings even though expectations are that
Speaker 3: we've seen a better movement in earnings for the technology
Speaker 3: sector now at about seventeen percent, up from sixteen percent
Speaker 3: and change. I think yeah, investors will definitely be paying
Speaker 3: a lot of attention to what is said and implied
Speaker 3: with these upcoming earnings. The chip companies typically do have
Speaker 3: some challenges when it comes to third quarter areas, and
Speaker 3: our feeling is that, you know, while there could be
Speaker 3: some stumbling, we are maintaining our overweight recommendation on tech,
Speaker 3: mainly because companies will soon be looking at twenty twenty
Speaker 3: six estimates and pretty much ignoring what they are hearing
Speaker 3: right now in twenty twenty four.
Speaker 2: Some let's take the earnings so far this week, Let's
Speaker 2: pick out one name, Let's talk about the likes of
Speaker 2: our and we can think about how the way the
Speaker 2: market responded to what Alphabet had to say. Based on that,
Speaker 2: what our investor is in the mood to reward and
Speaker 2: what I invest is in the mood to punish. And
Speaker 2: I think that's something really interesting that we've got to
Speaker 2: try an answer an anticipation of the NINGX next week,
Speaker 2: because it felt like investors were in the mood to
Speaker 2: punish excess investment out of Alphabet, whatever you would call excess.
Speaker 2: I want to understand how that might set us up
Speaker 2: for next week, Sam, How do you think about that? Well?
Speaker 3: I think what that implies is that they're really investors
Speaker 3: are really only looking short term, because the investment that
Speaker 3: Alphabet was making is obviously for twenty twenty five, twenty
Speaker 3: twenty six, which is the cause for our optimism longer term.
Speaker 3: But in the near term, investors are basically saying that
Speaker 3: recently we had tech selling at a seventy eight percent
Speaker 3: premium to its average twenty year PE ratio, the market
Speaker 3: itself at a thirty eight percent premium, and the relative
Speaker 3: strength between the cap weighted tech and equal weighted tech
Speaker 3: sectors back to where we were during the dot com bubble.
Speaker 3: So I think that investors are saying, if there's any
Speaker 3: hint of disappointment, I'd rather sell first and ask questions later.
Speaker 2: Sam.
Speaker 4: I guess another way of putting this together is how
Speaker 4: low is the bar right now heading into next week
Speaker 4: for some of these earnings. After the sell off, we've
Speaker 4: seen a true correction down about thirteen percent since the
Speaker 4: July tenth record highs that we saw in the magnificent
Speaker 4: seven stocks.
Speaker 2: How much do you anticipate that.
Speaker 4: Any additional disappointment or even just not superlative type of
Speaker 4: results will provoke some pretty significant selling in addition to
Speaker 4: what we've already seen.
Speaker 3: Well, I'm looking at history. I would tend to say
Speaker 3: that we are due for a double digit decline in
Speaker 3: the order of ten to thirteen percent, primarily because of
Speaker 3: the advance that we experience in the first quarter as
Speaker 3: well as for the first half. And as I had
Speaker 3: mentioned in terms of the valuation, however, I do think
Speaker 3: it'll be contained to a correction, not the beginning of
Speaker 3: a new bear market, and would probably end up representing
Speaker 3: a good buying opportunity as we approach the fourth quarter
Speaker 3: of this election year. Let me also mention that when
Speaker 3: it comes to elections, there's the possibility of a red wave.
Speaker 3: And whenever we have had waves in the past, We've
Speaker 3: had three Republican waves since World War two, seven democratic
Speaker 3: waves since World War two. That has added a percentage
Speaker 3: and a half to the average return in the first
Speaker 3: year of a new administration.
Speaker 2: So let me get this right, Stam.
Speaker 4: A lot of people are saying that a red wave
Speaker 4: or a blue wave but in this case, a red
Speaker 4: wave would actually cause inflation to go up and could
Speaker 4: become a problem for the bond market. You see it
Speaker 4: as the opposite that actually any kind of dominance in
Speaker 4: Congress would actually lead to greater returns in equity markets.
Speaker 2: Is that correct?
Speaker 3: That's what has historically happened. But obviously it's going to
Speaker 3: depend on what the new administration puts forth. If we
Speaker 3: do see in a sense very high walls in terms
Speaker 3: of tariffs and whatnot across the globe, then yes, that
Speaker 3: will end up being very restrictive, would be a hurt
Speaker 3: to our exports, would certainly smell or have the sniff
Speaker 3: test of the Smoot Hawley tariff back in the early
Speaker 3: nineteen thirties, which restricted global trade. So I don't think
Speaker 3: that would be a very good thing, and I believe
Speaker 3: that those who end up being in power would be
Speaker 3: very much aware of that.
Speaker 4: Sam. Just taking a step back, it seems like you're
Speaker 4: still pretty constructive on the overall backdrop for the US economy.
Speaker 4: It doesn't seem like you're sort of expecting my major
Speaker 4: fall off the cliff type of moment. What would you
Speaker 4: have to see to change that view? For some of
Speaker 4: the growth worries to become a true growth scare for you.
Speaker 3: Well, as I had mentioned, the valuations were stretched, in
Speaker 3: my opinion seventy eight percent premium for tech. Now it's
Speaker 3: down to about sixty four percent. So some more slight
Speaker 3: downward rotation for tech I think would be encouraging. I
Speaker 3: think if we get a software than expected PCE reading
Speaker 3: this morning, that could also help talk the market off
Speaker 3: the ledge. And because we've been seeing an improvement in
Speaker 3: the rotation beneath the surface, our lowry Technical Analysis ARM
Speaker 3: has been showing an encouraging amount of supply demand indicators
Speaker 3: that they monitor to say that while a short term
Speaker 3: pullback could certainly be in order, that they are looking
Speaker 3: at that as a good buying opportunity.
Speaker 2: Let's say what we get in twenty minutes? Hi Sam,
Speaker 2: Thank you, sir Sam.
Speaker 5: Stuff with a CF all right, it's.
Speaker 2: A licens this morning. Donald Trump's campaign refusing to commit
Speaker 2: so I to pay with Vice President and Kamala Harris
Speaker 2: until she officially becomes the Democratic nominee, a campaign spokesperson
Speaker 2: saying it would be quote inappropriate to schedule things because
Speaker 2: Democrats very well could still change their minds. Harris responding
Speaker 2: on social media saying, quote, what happened to any time,
Speaker 2: any place? Tober Marcus of Wolf Research joins us now
Speaker 2: for more, Tay, a bit of news this morning. Already
Speaker 2: the elusive endorsement gets delivered by the Obamas to Kamala Harris.
Speaker 2: There's a bit of a honeymoon period over the last
Speaker 2: couple of days, Tobin. I'm just wondering, from your perspective,
Speaker 2: how much longer that honeymoon period lasts.
Speaker 5: Well.
Speaker 1: I think that depends in large part on how Vice
Speaker 1: President Harris continues to perform on the campaign trail. Part
Speaker 1: of the reason why Democrats have been so energized and
Speaker 1: unified is just the relief at being out from under
Speaker 1: this Biden catastrophe that they've been living through for the
Speaker 1: course of the past month. But another part of it
Speaker 1: is that she's looked pretty good on the trail. You know,
Speaker 1: the early paid medias look good, a couple good adds
Speaker 1: up so far, and a string of you know, solid
Speaker 1: performances from her, so you know, she keeps delivering good performances.
Speaker 1: I think Democrats are like very ready to remain enthusiastic.
Speaker 1: I think there's a sort of helpable eagerness to have
Speaker 1: something to root for. But you know, obviously her her
Speaker 1: twenty twenty campaign did not go flawlessly to say the least.
Speaker 1: It's totally possible that we see things start to go
Speaker 1: a little bit, you know, less uniformly positively. And if so,
Speaker 1: then I think we'll start to see cracks on the Democratic.
Speaker 2: Side, Tobin.
Speaker 4: I thought that the New York Times Siena poll that
Speaker 4: just came out yesterday was fascinating, not because it showed
Speaker 4: that there was more of a tie between Kamala Harris
Speaker 4: and Donald Trump than we've seen for months with the
Speaker 4: former with President Biden, but this part is said that
Speaker 4: nearly ninety percent of voters said they approved of mister
Speaker 4: Biden's decision to exit the race. When have you ever, Tobin,
Speaker 4: see ninety percent of voters agree on something so pivotal
Speaker 4: as the sitting president stepping down from a race.
Speaker 1: Yeah, that's about as high a number as you can
Speaker 1: get in polls, As someone who has run a lot
Speaker 1: of polls in my life, you can it's really hard
Speaker 1: to come up with something that gets you a higher
Speaker 1: number than the ninety. So look, I mean, I think
Speaker 1: it just goes to show again how much palpable relief
Speaker 1: there is at being out front of this. There were
Speaker 1: differences of opinion, obviously on the Democratic side about how
Speaker 1: to handle this, how much pressure to put on Biden.
Speaker 1: There were certainly some people, including you know, for example,
Speaker 1: the congressional Blackhawks, who were standing with Biden through much
Speaker 1: of that pressure campaign to try and get him out.
Speaker 1: But now that he has left, I think there's very
Speaker 1: very little second testing of that. And you know, again
Speaker 1: there are some people who were hoping to have another
Speaker 1: candidate come out somehow, find some way to run a
Speaker 1: mini primary, you know, figure out if you can get
Speaker 1: one of these promising Democratic governors at the top of
Speaker 1: the ticket instead of in the runner up slot where
Speaker 1: they're being considered right now. But that was never really
Speaker 1: an option. And with all those people immediately bowing out,
Speaker 1: I think people are now backing the horse that is
Speaker 1: available to.
Speaker 4: Cheer for Tobin. There are a lot of people who
Speaker 4: are scratching their heads at the JD. Vans pick by
Speaker 4: former President Trump as the vice presidential pick, fact that
Speaker 4: he is very closely to Trump when it comes to
Speaker 4: some of his policies. Within the Democratic Party, how much
Speaker 4: momentum is there for picking a vice presidential candidate that
Speaker 4: really is more centrist even than perhaps Kamala Harris.
Speaker 1: Yeah, I think that's what's going to happen. There's questions
Speaker 1: about which one of the various different vice presidential hopefuls
Speaker 1: she will end up going with, but you know, I
Speaker 1: think common sense and the reporting about who is being
Speaker 1: vetted all point in the same direction, which is that
Speaker 1: she's looking for somebody who has some you know, moderate
Speaker 1: record and some outside the Beltway sort of vibes to them.
Speaker 1: In terms of people to round out the ticket again,
Speaker 1: could be governors, could be Senatra Kelly in Arizona, who,
Speaker 1: like I think, reads a little bit less Washington than
Speaker 1: a Senator usually would by virtue of his experience as
Speaker 1: an astronaut rather than a career politician. But one way
Speaker 1: or another, I think he, you know, is looking in
Speaker 1: the obvious place for the kind of person she'd want
Speaker 1: to fill out the ticket at Hobe.
Speaker 2: It's been interested to see the media and Democrats in
Speaker 2: the last couple of days or so almost remodel trying
Speaker 2: to remodel perceptions of Kamala Harris's role in this administration,
Speaker 2: to separate her from the border by pointing out repeatedly
Speaker 2: we might have called her the border Sar, but she
Speaker 2: was never the border Sara. This was about root causes, tope.
Speaker 2: And I just wonder whether you can pick and choose
Speaker 2: whether as the vice president, you can say I was
Speaker 2: involved in this, I had nothing to do with that.
Speaker 2: Can you really do that? How much distance will there
Speaker 2: be between her and the Biden legacy?
Speaker 1: So you know, obviously she's going to face attacks for
Speaker 1: everything that happened under the Biden administration.
Speaker 2: You know, both things in.
Speaker 1: Which she had some level of direct role, like again
Speaker 1: the sort of disputed portfolio about what exactly was her
Speaker 1: responsibility in terms of addressing the root causes of immigration,
Speaker 1: but even more broadly, I mean things that happened that
Speaker 1: she had nothing to do with, as she will continue
Speaker 1: to vice criticism for I have no reason to think
Speaker 1: that the Trump administration, for example, is going to stop
Speaker 1: criticizing the doll from after NS YEA and kind opinion
Speaker 1: not on her as a member of the Biden Harris administration,
Speaker 1: even though nobody believed that she was the decision maker
Speaker 1: on that. You know, that being said, it does seem
Speaker 1: to be the case in some of the early kind
Speaker 1: of pulling from Democratic pollsters that there is less baggage
Speaker 1: with her than there was with Biden on inflation, for example,
Speaker 1: which obviously had been one of the persistent vulnerabilities for
Speaker 1: President Biden in addition to his age. Looks to be
Speaker 1: the case that there's like a little bit less association
Speaker 1: of the retrospective bitterness in the run up and price
Speaker 1: levels just sting from the current run rate of immigration
Speaker 1: for Harris other than Biden, you know. And again, a
Speaker 1: lot of it comes down to her, like how effectively
Speaker 1: can she pivot away from some of these attacks both
Speaker 1: on the Biden record and on her past positions where
Speaker 1: obviously Republicans are already you know, kind of criticizing her
Speaker 1: for all the position taking that she did in twenty
Speaker 1: nineteen and twenty twenty around banning fracking, around decriminalizing border crossings,
Speaker 1: these various different things that she kind of signed on
Speaker 1: to during that primary when a lot of Democrats were
Speaker 1: racing to see who could get far this left, you know.
Speaker 1: But again, flip flopping is a thing that happens in politics.
Speaker 1: If she can give a compelling account at where she
Speaker 1: stands now and what she wants to do going forward,
Speaker 1: I think it does mitigate some of the vulnerability from
Speaker 1: the things she said in the past.
Speaker 2: They are the ultimate shape shifters. I expect no different
Speaker 2: from me the side, Tybin. Thank you, sir Tobin Marcus
Speaker 2: there of wolf free search a stick with sports. Acey
Speaker 2: Milan meeting English Premier League club Manchester City in a
Speaker 2: pre season friendly at Yankee Stadium tomorrow afternoon. It's the
Speaker 2: latest push in the United States by the Italian football jats,
Speaker 2: a market they've seen significant growth in since being bored
Speaker 2: by New York private equity firm Redbird Capital back in
Speaker 2: twenty twenty two. Pleased to say that joining us now
Speaker 2: to discuss is the AC Milan CEO Georgio Ferlani. Georgie, Joe,
Speaker 2: let's talk about this move. We've seen these friendlies before,
Speaker 2: AC Milan on tour playing other teams from the Premier
Speaker 2: League and elsewhere. It feels like we're getting closer to
Speaker 2: playing a regular season game in the United States of America. Georgia,
Speaker 2: Is that true? How close are we to an event
Speaker 2: like that taking place?
Speaker 6: Good morning, Thanks for having me. You're right. We do
Speaker 6: these tours in the summer regularly to play friendlies against
Speaker 6: other top teams. Look, there's regulatory challenges in moving abroad
Speaker 6: and into a different market domestic league games, but we
Speaker 6: certainly think if you really want to develop a fan
Speaker 6: base and you really want to expand your business in
Speaker 6: the US, this would be a critical part. So we
Speaker 6: will be working with cityr Our League and the other
Speaker 6: regulatory bodies to allow us.
Speaker 2: You've mentioned the bodies you need to work with. Can
Speaker 2: you just build on that the obstacles for something like
Speaker 2: that to take place. Have you had a meeting with
Speaker 2: study out the regulatory bodies about this already? Have you
Speaker 2: taken steps to kind of push this forward? How close
Speaker 2: are we to something like this?
Speaker 6: We certainly have discussed it then needs to be discussed
Speaker 6: also with WAIFA and with FIFA and the authorities here.
Speaker 4: In the US.
Speaker 6: There have been attempts in then also distant past to
Speaker 6: play games. La Liga tried to but it didn't work out.
Speaker 4: So we'll keep on important.
Speaker 6: Just in the same way that American leagues have expanded
Speaker 6: globally by the regular season games not just friendly outside
Speaker 6: of America, we need to do the same the other
Speaker 6: way around.
Speaker 4: Georgia, I gotta say we just saw basically a mini
Speaker 4: world Cup.
Speaker 2: We saw the Euros.
Speaker 4: We saw also Copa America taking place at the same time.
Speaker 4: Pretty much everyone who I knew on the weekends was
Speaker 4: watching some of the games as they really got into it.
Speaker 4: The enthusiasm, though, in the United States for games that
Speaker 4: were held here was surprisingly not very strong. We didn't
Speaker 4: hear that much about games that were happening nearby. Have
Speaker 4: you been disappointed by how some of these games have
Speaker 4: rolled out at a time when there certainly is more interest,
Speaker 4: but maybe not in the way that there isn't in
Speaker 4: many of the other markets around the world.
Speaker 6: Look, I think the Ugmate Test will be the World Club,
Speaker 6: and you know that is really the top top content,
Speaker 6: well together with top games of European continental leagues.
Speaker 4: And Georgia, I think that we're having some trouble with
Speaker 4: the sound. Let's just try to re establish that and
Speaker 4: then we get you back real quick so that we
Speaker 4: can make sure that we understand everything.
Speaker 2: Georgia, let's come back to you. I'm happy to say
Speaker 2: that you are just Johnny and we are still with
Speaker 2: the acy Milan CEO, Georgio Frelani, Georgio, I know there
Speaker 2: was a little bit of a technical connection, but I
Speaker 2: want to come back to some of the comments we
Speaker 2: were having around the table. It feels like ac Milan
Speaker 2: has become more American in the last year or so
Speaker 2: and maybe less Italian. The very fact that there wasn't
Speaker 2: a single ac Milan on the Italian roster of the
Speaker 2: Euros this summer. Is that a financial decision or a
Speaker 2: sporting decision?
Speaker 6: Very good question. We've definitely become more American. We're owned
Speaker 6: by an American firm, which is Redbert Capital Partner, which
Speaker 6: is a leading investor in sports media and entertainment, and
Speaker 6: we work very closely with them. We've also become more
Speaker 6: American on the field, so we have I think you
Speaker 6: were saying two American players. Our decisions on who to
Speaker 6: field are entirely sporting.
Speaker 2: Uh.
Speaker 6: There is in a decision on the base of, you know, what,
Speaker 6: what passport a player has, but it's about how good
Speaker 6: the player is. Obviously, UH, some players just by nature
Speaker 6: of being American. In our case, we have two players,
Speaker 6: including Christian Polovik, have a certain commercial appeal in the US,
Speaker 6: which is certainly helpful. But we don't drive sporting decisions
Speaker 6: by passport looks.
Speaker 4: We were talking Georgio about how the United States is
Speaker 4: a really expensive market that there's a lot of money here,
Speaker 4: and so that's one reason why a lot of people
Speaker 4: want to come here, is because they're dollars and a
Speaker 4: lot of eyeballs to come. They are also a lot
Speaker 4: of dollars coming from the Middle East, and you're going
Speaker 4: to be focused off facing off with Man City, Georgio.
Speaker 4: How open are you to tapping seemingly endless appetite in
Speaker 4: the Middle East to own clubs in Europe.
Speaker 6: So we have at least in a different way, which
Speaker 6: is on the commercial side. So we've opened an office
Speaker 6: in Dubai, were the first European football club to open
Speaker 6: an office in Dubai. We've had a long standing fifteen
Speaker 6: plus year relationship with Emirates the airline. We have other
Speaker 6: commercial partners in the region, including the Kursner Group, and
Speaker 6: so the way we've gone about it is not sort
Speaker 6: of via let's say, equity injections, but rather via commercial partnerships.
Speaker 2: I just want to squeeze in one final question and
Speaker 2: I'll ask this as said as an ac Milan fan,
Speaker 2: a lifelong fan like yourself. We both remember the ac
Speaker 2: Milan of Capello and Saki of Barrazi and Maldini. We've
Speaker 2: both been disappointed with the performance of the team over
Speaker 2: the last twenty years and the trajectory that we've been on.
Speaker 2: I remember when the club became a sealing club, and
Speaker 2: I identify that summer when we've sold Ebra and we
Speaker 2: sold Tiago silver to Paris Sanja Man. It felt like
Speaker 2: that was a moment where AC Milan became a club
Speaker 2: they needed to sell players and couldn't buy that talent anymore.
Speaker 2: This summer we've got two big players, the left back
Speaker 2: Theo Hernandez and we've got the goalkeeper Mike Manyan. I
Speaker 2: want to understand whether that's two talents that you need
Speaker 2: to monetize to fund the rest of the project or
Speaker 2: whether AC Milan is back in a position where it
Speaker 2: can keep world class talent. Just what is the state
Speaker 2: of play?
Speaker 6: Yeah, so this morning side, our ambition is to fight
Speaker 6: for the title in Italy every year and to be
Speaker 6: competitive and the champions. Now we do this while on
Speaker 6: the lets the other side running a business that is sustainable.
Speaker 6: So to give you some facts, we two years ago
Speaker 6: was a first year in which a Cimlan was profitable.
Speaker 6: First year in seventeen years, and last year was the
Speaker 6: second year, and I don't think it's ever happened to
Speaker 6: a Simlan to be profitable in two consecutive years. What
Speaker 6: that translated into is we're not forced to sell players
Speaker 6: because of capital shortage or cash flow issues. So you know,
Speaker 6: I picking one word is that we don't need to
Speaker 6: sell anyone. So as a fan, I'm telling you you
Speaker 6: shouldn't be worried about that.
Speaker 2: Well's the fan. It's good to hear. Georgia. Good luck
Speaker 2: tomorrow and hopefully we can catch up soon. Georgia Falani,
Speaker 2: the ac Milan CEO. This is the Bloomberg Seventans podcast,
Speaker 2: bringing you the best in markets, economics, antient politics. You
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Speaker 2: as always on the Bloomberg Terminal and the Bloomberg Business app.
Speaker 3: Mm hmm