Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Tom Keene along
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Speaker 2: out of the Emory University, Julian Emmanuel joins us. Right now,
Speaker 2: what was it like at Emery in Atlanta? Did you
Speaker 2: like cut class and go out to braves Ball.
Speaker 3: Well, we certainly went to the old the day now
Speaker 3: and there were five thousand people in the stands and
Speaker 3: you could.
Speaker 4: Sit right down, You could sit right.
Speaker 5: Down next to Ted Turner, and.
Speaker 6: Yeah, wonderful to have you here.
Speaker 2: You have the honor, you have the coolest equity job
Speaker 2: on the planet to hang with Ed Hyman every day
Speaker 2: at every Core SR is your shop in Ed linking
Speaker 2: into your work in equities, are you some two percent
Speaker 2: real GDP forward?
Speaker 3: Well, look, so Ed has been on the inflation slowing
Speaker 3: more than anticipated years and he's on the eventual the
Speaker 3: economy is going to slow more than anticipated towards the
Speaker 3: end of the year and into twenty twenty five. And
Speaker 3: so you know, when you put that all together, the
Speaker 3: conclusion is pretty obvious with regard to.
Speaker 2: What okay, economics dam phenomenal GDP? Why do stocks go
Speaker 2: up if the economy's slower.
Speaker 3: So there are a lot of moving parts at this
Speaker 3: point point, and the first is that there's lots and
Speaker 3: lots of liquidity out there, and no surprise to anyone,
Speaker 3: whether it's Corporate America throwing off as you sort of reference,
Speaker 3: you know, huge amounts of free cash flow. Obviously we
Speaker 3: know where that's centered, whether it's you know, households really
Speaker 3: flush with cash still. And frankly, there's this idea that
Speaker 3: the Fed will not necessarily when and the degree to
Speaker 3: which they're going to cut although we certainly heard this
Speaker 3: morning that the story get reiterated, but that they're actually
Speaker 3: going to do the right thing. So if inflation stays
Speaker 3: sticky for a number of more months. They'll be patient.
Speaker 3: If the economy starts to turn down, they will be
Speaker 3: less patient. Mistakes will not be made. Roll that all
Speaker 3: into the enthusiasm around AI and the potential for what
Speaker 3: we've seen as high multiple regimes can stay elevated, and
Speaker 3: you have a market that continues to rally.
Speaker 2: Paul, you got to Lisa does such a good job
Speaker 2: with that. You know, data check the Bloomberg Business Flash
Speaker 2: Tesla two oh nine, make it two ten is up
Speaker 2: nine dollars to nineteen.
Speaker 4: There you go.
Speaker 6: Okay, very good friend's tesla Lisa.
Speaker 4: Here's some nice round numbers for you, Tom, mister Manuel
Speaker 4: here he raised his year end twenty four s and
Speaker 4: P five hundred price target to six thousand from forty
Speaker 4: seven fifty and maybe saying seven thousand by year end
Speaker 4: twenty twenty five. Those are numbers you can sink your
Speaker 4: teeth into. What's driving that.
Speaker 3: At So so, really, what this was is some introspection
Speaker 3: on our parts, because it's very difficult to sort of
Speaker 3: set aside the valuation discipline because when you look at
Speaker 3: the long sweep of history, you know, buying low and
Speaker 3: you know, perhaps trimming high has been a pretty robust
Speaker 3: strategy to complement buy and hold. But what we found,
Speaker 3: and we have been proponents of AI underpinning the broader
Speaker 3: equity market for well over a year, I think we
Speaker 3: were pretty early to that party. We think it's still
Speaker 3: very early on in this theme is that these high
Speaker 3: valuation regimes can persist, and valuation alone is not a
Speaker 3: reason to sell stocks.
Speaker 5: And when we look at.
Speaker 3: The barbells right, the probability of recession the economy deteriorating,
Speaker 3: you know, materially in the near term, we don't see it.
Speaker 3: And then the probability of a bubble inflating, we certainly
Speaker 3: don't see.
Speaker 5: At this point. We're a long way from that.
Speaker 4: How much of those of that significant I'm talking to
Speaker 4: twenty five percent increase in your twenty four price target.
Speaker 4: You don't see the ell on the street today. You
Speaker 4: see other banks raising at bout two hundred, you know,
Speaker 4: just slightly three or four or five percent. How much
Speaker 4: of that was earnings? How much of that was expectation
Speaker 4: of FED cutting, what was kind of the driver's.
Speaker 3: He was really a mix of all of it. Okay, again,
Speaker 3: I go back to what I said earlier. Our confidence
Speaker 3: is whatever the right thing to do the FED is
Speaker 3: likely going to do the right thing.
Speaker 5: And that explains why we.
Speaker 3: Started the year at six and a half cuts priced
Speaker 3: in and came down to here where it basically we're
Speaker 3: at one and a half and stocks have not faltered
Speaker 3: materially during that time. We increased our earnings with the
Speaker 3: idea that even if a downturn hits later this year
Speaker 3: or early next, you still are in a robust cycle.
Speaker 2: So to your people in everqure Isi, sector by sector,
Speaker 2: you're the over strategists and that when you look at
Speaker 2: the big tech companies, is the risk of revenue shortfall?
Speaker 6: Is that really the sweat.
Speaker 2: Out there about the magnificent seven maintaining the excellence of
Speaker 2: thirty multiples?
Speaker 3: Well, so you hit the nail on the head on
Speaker 3: this tom. If we've been having this conversation four or
Speaker 3: five years ago, the idea that a large kept technology
Speaker 3: stock could persistently trade at thirty times would have been foolish, foolish.
Speaker 6: Why is it now not? This is critical.
Speaker 3: Essentially because there's a view and we share it that
Speaker 3: the way the economy is developing, the way technology is developing,
Speaker 3: is that you're going to have you know, revenue underpinnings.
Speaker 3: In the other part of that is, if you think
Speaker 3: about it right, you go back to late twenty twenty
Speaker 3: two when several of the Magnificent Seven basically disclosed that yes,
Speaker 3: they could in fact cut costs because they were stockpiling labor.
Speaker 3: The fact is is that corporate America has been getting
Speaker 3: ready for a recession that fortunately hasn't arrived yet for
Speaker 3: a year and a half, almost two years.
Speaker 4: So, Julian, I mean, Tom and I are still trying
Speaker 4: to wrap our heads around AI.
Speaker 6: What is it?
Speaker 4: I guess we start there, what is it? But anyway,
Speaker 4: how do we get exposure to it? Do we just
Speaker 4: buy Nvidia? How are you talking to your clients about AI?
Speaker 4: And maybe how to get exposure to it over time?
Speaker 3: So what we think is important because again, look, it's
Speaker 3: very difficult to buy stocks that have moved several hundred
Speaker 3: percent psychologically if you don't have a core position. You know,
Speaker 3: we think you should have a core position in those
Speaker 3: kinds of stocks. But when you look at it right,
Speaker 3: there is a number of companies that are proactively building
Speaker 3: competitive motes, both on the cost reduction side, which we
Speaker 3: all know that that will be part of the story
Speaker 3: as jobs transform, but also importantly on the customer interaction, retention,
Speaker 3: loyalty side. And these types of companies are very upfront
Speaker 3: about talking about it in they're quarterly earnings calls. And
Speaker 3: that's probably the most important thing that we as investors
Speaker 3: can do is listen to what they say about AI
Speaker 3: on the earnings calls. Those are the companies that you
Speaker 3: want to be thinking about.
Speaker 6: What's so important?
Speaker 2: You're Julian and this goes back to the great work
Speaker 2: of Ed your Denny and I'm calling this bull market
Speaker 2: that your Denny at Kompora Bullmarket.
Speaker 6: Edheimen will know who both those people are.
Speaker 2: But the answer is this goes back to the optimism
Speaker 2: to participate in the market. Allah, what CJ. Lawrence did
Speaker 2: years ago and what you do it? Evercore and Evercore
Speaker 2: Isi is well, I want you to speak to people
Speaker 2: under the siren call. Barry Ridolts has been on fire
Speaker 2: on this, the siren call of trying to time the market.
Speaker 2: Please you want to add on, you gotta play if
Speaker 2: you want to win.
Speaker 3: My ninety three year old father in law recently departed,
Speaker 3: lived a great life basically was in stocks until the
Speaker 3: end as much is in stocks as he could possibly
Speaker 3: because he believed that when you look at it and
Speaker 3: the data supports this, through economic cycles, through you know,
Speaker 3: political turmoil, through geopolitics, wars, all of these things that
Speaker 3: stocks are the long term income producing asset, and frankly,
Speaker 3: when you think about the things that we're trying to
Speaker 3: hedge inflation.
Speaker 5: Again some of these uncertainties.
Speaker 3: The other fact is is that if you look at it,
Speaker 3: the price chart of the S and P five hundred
Speaker 3: mirrors the growth in earnings. And if you're going to
Speaker 3: get long term earnings growth, which we do believe and fundamentally,
Speaker 3: you must be in stocks.
Speaker 6: Can you a year before?
Speaker 2: I would like probably quit, But I mean the surveillance
Speaker 2: casket folks, is I bet can you see me doing
Speaker 2: this show?
Speaker 6: Oh?
Speaker 4: Yes, yes, I absolutely, no questions, exactly, no problem there,
Speaker 4: one hundred.
Speaker 6: So Julian, all.
Speaker 4: Right, do I have to be I mean, tech has
Speaker 4: led this market for twenty five years? You have to
Speaker 4: be in tech, don't you?
Speaker 5: You do?
Speaker 4: You have to I mean, and it's almost like you
Speaker 4: throw out the valuation. I hate to say that, but
Speaker 4: how else do you play it?
Speaker 3: So we talked about this earlier. There will come a time.
Speaker 3: That time is not now when trimming a position in
Speaker 3: technology and communication services, which are the only two sectors
Speaker 3: out performing the S and P five hundred this year.
Speaker 3: And you would think that on balance, that would be
Speaker 3: a negative statement about the market. It is not looking
Speaker 3: out on a twelve month basis.
Speaker 2: We just got some hedge fund results and you know,
Speaker 2: they're like like Sentinel, seems like they're getting it done.
Speaker 2: And there's others as well, and you know, I mean,
Speaker 2: the Mets are playing better, soer point seven to two.
Speaker 6: Must be doing okay.
Speaker 2: And the answer, Julian is these are fee base a
Speaker 2: point two points.
Speaker 6: Two and twenty whatever the math is. I'm looking at
Speaker 6: a blended fund skewed to high tech. I'm gonna leave
Speaker 6: the name out of it.
Speaker 2: And their fee is zero point three three percent running
Speaker 2: billions of dollars. I mean, I'm sorry. The fees add up,
Speaker 2: don't they? To your equity return, particularly when dividends are reinvested.
Speaker 6: They do.
Speaker 3: Look Jack Bogel's entire career was built on that concept,
Speaker 3: Tom founding Vanguard, and fees do add up.
Speaker 5: But what I would say about.
Speaker 3: That is, again, there are times in our lives when
Speaker 3: diversifying away from stocks in a portfolio where stocks are
Speaker 3: the bedrock actually allows you to buy more stock into weakness,
Speaker 3: and frankly, a hedge fund that does well in all
Speaker 3: weathers of market. There are certainly a number of them
Speaker 3: out there.
Speaker 5: You know.
Speaker 3: That's part of a prudently built portfolio as well, and
Speaker 3: there are a number of managers that have justified decades
Speaker 3: of that kind of fee structure.
Speaker 4: What is your quantitative strategy team telling you.
Speaker 3: So interestingly enough, and if you think about it, this
Speaker 3: is going to make sense. The last week we've certainly seen,
Speaker 3: let's say politely, a good deal more political volatility, and
Speaker 3: when you think about how the second half of the
Speaker 3: year is likely to get underway, what we found is
Speaker 3: that the valuation factor buying cheaper relatively stocks amongst sectors
Speaker 3: versus being the more expensive stocks actually hasn't worked. And
Speaker 3: that's not just a large cap tech concept. This is
Speaker 3: across all sectors. Our view is that when you think
Speaker 3: about in committing more capital stocks right now, you're probably
Speaker 3: going to be more inclined to be more valuation sensitive,
Speaker 3: considering that there's more political risk out there than normal.
Speaker 6: Julian, thank you so much. This has been great.
Speaker 7: Please really really appreciated.
Speaker 2: We need no translation on the debate and the fractious
Speaker 2: constructive debate at Morgan Stanley that, among others, Stephen Roach
Speaker 2: invented it is a different house. Joining us now for
Speaker 2: this half hour. Jim carron Cio, Cross Asset Solutions, Senior Officer,
Speaker 2: argument at Morgan Stanley.
Speaker 6: What is the distinction?
Speaker 7: What is the number one point of debate at your shop?
Speaker 8: I think what it is and by the way, I
Speaker 8: think what it really is is the question of when
Speaker 8: will the unemployment rates start to rise fast enough to
Speaker 8: give the Fed confidence in order to cut interest rates? Right,
Speaker 8: Because where the debate is today is there are various
Speaker 8: forms of inflation that are out there. Right, You've got
Speaker 8: the supercore which is running too hot. You've got core CPI,
Speaker 8: which has made a lot of progress. You've got core PCE,
Speaker 8: which is kind of like in the sweet spot. And
Speaker 8: the FED would go on that. But the question, though, is,
Speaker 8: with those three data points somewhat conflicting, where does the
Speaker 8: FED have confidence to actually go. Now we think that
Speaker 8: maybe the Fed will cut interest rates, it'll start in September,
Speaker 8: but what's required for that to happen is for the
Speaker 8: unemployment rate to actually start to show some progress higher.
Speaker 8: And why that's important is because the declining trend in inflation,
Speaker 8: and it is declining, will be viewed by the FED
Speaker 8: as sustainable and anchored decline in inflation. If the unemployment
Speaker 8: rate rises, which would then put pressure downwards on wages,
Speaker 8: wage inflation slowing should create a more stable inflation environment.
Speaker 8: So it's really a question about jobs creation, and it's
Speaker 8: a question about the path and pace at which inflation falls.
Speaker 4: That's interesting because again, I think most folks we talk
Speaker 4: to just say the Fed's focused on inflation, the focus
Speaker 4: on inflation and focused, but really it's labor component of inflation,
Speaker 4: which is key here. Is there a kind of a
Speaker 4: range and number of inflation that you think the FED
Speaker 4: will kick them into saying okay, we've got some movement here.
Speaker 4: Is at four point two percent? Is a four and
Speaker 4: a half percent?
Speaker 8: Yeah, so that's the output, right, So that's like I
Speaker 8: would almost think of that as the residual, ok right,
Speaker 8: I wouldn't really think of that as as as the appsolue.
Speaker 8: I mean yes, I mean ultimately it will come down
Speaker 8: to that number, and it's easiest way to understand it.
Speaker 8: But the FED invented something called the super core for inflation,
Speaker 8: and this is corehousing X services. This is really a
Speaker 8: measure of inflation that's focused on more of the labor
Speaker 8: intensive segments of the economy. So you're barber, you know
Speaker 8: a janitor, you know somebody who's labor intensive in terms.
Speaker 8: So basically it's really a way of measuring inflation that
Speaker 8: is being contributed by wages. So you know that number
Speaker 8: right now is still running pretty high at four point
Speaker 8: eight percent, but it is but it is likely to decline.
Speaker 8: So I would say that that to me is I
Speaker 8: would I would think of that as as really the
Speaker 8: measure that the Fed's going to watch. If that starts
Speaker 8: to come down, the natural output of that, or the
Speaker 8: residual of that, will be that the unemployment rate should
Speaker 8: start to move up towards four point two four point three.
Speaker 8: So I mean, if I simplified it, yeah, I'd say that,
Speaker 8: you know, around four point three four point two, I
Speaker 8: think the FED would feel comfortable.
Speaker 2: In your process at universe, does sixty forty work or
Speaker 2: is there a sixty forty amendment to not so much
Speaker 2: a enhance return goose return.
Speaker 7: But to avoid challenges?
Speaker 6: What's the Karen sixty forty.
Speaker 8: Yeah, no, that's a great question, and it's going to
Speaker 8: be debated for a long time. But so it's not
Speaker 8: that the sixty forty doesn't work. It's just I think
Speaker 8: that the sixty forty will be suboptimal. And the reason
Speaker 8: why the sixty forty portfolio will be suboptimals we have
Speaker 8: to take a little bit of a trip through history.
Speaker 8: If you go back to nineteen eighty one to twenty
Speaker 8: twenty one, if you look at that forty year period
Speaker 8: of time, bonds did very well during that period. Thirty
Speaker 8: seven out of forty years, they made money so very stable,
Speaker 8: very good returns. Your sharp ratio or your risk adjusted
Speaker 8: return if you had a sixty forty portfolio was roughly
Speaker 8: seven percent, which is great, you know, passive investing sixty
Speaker 8: You know, sixty forty did really well for that forty
Speaker 8: year period of time. If you look from twenty twenty two,
Speaker 8: twenty three and into twenty four, what you're seeing is
Speaker 8: that bonds are becoming less stable, less reliably you know,
Speaker 8: producing good, solid returns, and that's likely.
Speaker 1: To occur into the future.
Speaker 8: So what it would suggest is that now the sixty
Speaker 8: forty might not give you passive might not give you
Speaker 8: seven percent, but it might actually only give you five,
Speaker 8: and that's a meaningful difference in types of return. So
Speaker 8: I would say that the new way of thinking about
Speaker 8: how do we use bonds to hedge our portfolio needs
Speaker 8: to be a lot more flexible. So it could be
Speaker 8: seventy thirty, it could be thirty seventy in some instances. Really,
Speaker 8: what we're trying to account for is the volatility of
Speaker 8: returns in bonds, which we think will start to follow
Speaker 8: the business cycle more than just being a forty year
Speaker 8: downward trending rates and strong performance for that period of time.
Speaker 8: So we have to account for the variability in bonds
Speaker 8: going forward to make the adjustments in terms of the
Speaker 8: allocation sixty forty. So it's not as simple as a
Speaker 8: passive I would say that. And you might even want
Speaker 8: to add alternative investments into the equation too.
Speaker 1: Well, I mean, I'm.
Speaker 8: Telling you because what it does is it creates a
Speaker 8: diversification element that is attracting returns.
Speaker 4: Jim Carreen, Cross Assets Solution, CIO, Morgan Stanley Investment Management.
Speaker 4: Hey Jim, At least in Tom, they've both been in
Speaker 4: the Magnificent seven stocks they're just laughing all the way
Speaker 4: to the bank. I unfortunately have not What do you
Speaker 4: tell equity investors to do? Who is it okay just
Speaker 4: to belong these Magnificent seven or do we actually have
Speaker 4: to do some homework?
Speaker 8: Well, you know, Look, I mean the way I think
Speaker 8: about this is follow the money. The Magnificent seven or
Speaker 8: the Magnificent ten or whatever it is.
Speaker 1: They're doing well because.
Speaker 8: Their earnings and their earnings revisions have been exceptionally strong.
Speaker 8: If you look at the S and P four ninety,
Speaker 8: so if you x out those seven or ten stocks,
Speaker 8: if you look at the earnings revisions in that category,
Speaker 8: it's been pretty close to flat.
Speaker 1: It's been relatively dismal.
Speaker 8: So so it's not that the broadening or the broader
Speaker 8: sectors of the market are these great opportunities that are
Speaker 8: just minting cash and earnings are going up. I think
Speaker 8: the market's rightfully so looking at it. So if you
Speaker 8: look at the if you look at the equity market,
Speaker 8: the SMP five hundred x the Magnificent seven, it's up
Speaker 8: about seven percent year to date, which is pretty good.
Speaker 1: I mean, that's not bad.
Speaker 8: If you look at the SP five hundred total with
Speaker 8: the magnificent seven in it. Then it's up, you know,
Speaker 8: closer to fifteen percent.
Speaker 1: Year to date. So you know, it's really a question
Speaker 1: of following the money.
Speaker 8: So I would have to say that the way that
Speaker 8: I would look at this is that you still want
Speaker 8: to look at the cap weighted SMP five hundred. I
Speaker 8: want to incorporate that overweight to those, you know, to
Speaker 8: those bigger stocks, because that's really what's capturing the earnings,
Speaker 8: that's what's driving the markets mostly right now, I think
Speaker 8: it's too early to say that we're going to have
Speaker 8: this cyclical recovery, that that everything's going to start to
Speaker 8: move higher, and therefore you can broaden out to the
Speaker 8: other four ninety with a lot of confidence. That's really
Speaker 8: not been the case for the last year plus, and
Speaker 8: I don't think that that's changing anytime soon because a
Speaker 8: big broad cyclical acceleration and recovery is not in our
Speaker 8: it's not our base case.
Speaker 4: How about evaluation here, I have earnings kept up with
Speaker 4: this move we've seen off that I guess October twenty
Speaker 4: three kind of level here.
Speaker 8: Yeah, I mean, look, I mean, you know, you mentioned
Speaker 8: in Vidia earlier, you know, and Jess, but but in
Speaker 8: Vidia is a thirty pe stock. You know, it's not
Speaker 8: like I mean, yeah, is that high. Sure it's high,
Speaker 8: but it's not a but it's not something that is
Speaker 8: astronomically high. A lot of the companies that are doing
Speaker 8: well are actually making money. So people make parallels back
Speaker 8: to the year twenty nineteen ninety nine, the dot com bubble.
Speaker 8: Back then, these companies weren't making money. Today, these big
Speaker 8: companies that are doing well are actually making a lot
Speaker 8: of money.
Speaker 1: Their ears are there to justify. So it's a big difference.
Speaker 2: Oh, I want to talk here about free cash. So
Speaker 2: I've been reading Michael Mobis and I've been going back
Speaker 2: the credit spec he's now Morgan Stanley. Do you guys
Speaker 2: talk Karen and Mobison talking talk about NERD Patrol.
Speaker 1: I invest with them.
Speaker 8: I mean, like, you know, I mean yeah, so so
Speaker 8: so absolutely. I mean he's one of the smartest people
Speaker 8: in the room. I mean, there's no question. So look,
Speaker 8: I think some of the factors that we look at
Speaker 8: to think about how we become let's say, defensive or
Speaker 8: smart about approaching this market.
Speaker 1: There's a couple factors.
Speaker 8: You know, size is going to matter, right, So the
Speaker 8: large cap companies are doing better than small They have
Speaker 8: better balance sheets, good strong balance sheets, free cash flow yield.
Speaker 8: So Mobison, you know, would be all over that earnings
Speaker 8: for share growth and interest rate coverage.
Speaker 2: Okay, so I want to go delta t on, you
Speaker 2: go aerospace engineering, right, and Jim you can literally go
Speaker 2: log log. You can throw a log on the axis here.
Speaker 2: I'm going to suggest that this era is where the
Speaker 2: terminal value is less important, and some form of waiting
Speaker 2: of quarter by quarter or year by year free cash
Speaker 2: flow excellence is getting us to these valuations. We've moved
Speaker 2: away from a classic seven year DCF.
Speaker 6: Do you agree? Yeah? Yeah.
Speaker 1: So so the way that I would phrase I totally
Speaker 1: hear you. So. So the way that I would phrase.
Speaker 8: That is that when you look at companies that don't
Speaker 8: have a lot of earnings, but you project a terminal
Speaker 8: value into the future and say, well, I can look
Speaker 8: past no earnings for a period of time because a
Speaker 8: terminal value is high, then that's you know, that error
Speaker 8: I think is that's not where we are.
Speaker 6: What about the magnificent seven?
Speaker 2: I mean Microsoft, let's just pick it is as Bomber
Speaker 2: did pretty well.
Speaker 6: You see that Microsoft, to me is not a seven year.
Speaker 2: Where's that? Where are they going to be? But it's
Speaker 2: a quarter to quarter slog of excellence?
Speaker 6: Right?
Speaker 1: Well, well, well let's turned into that.
Speaker 8: So so I'd say that the terminal value for a
Speaker 8: lot of these, you know, the magnificent seven. People debate
Speaker 8: as to how high it could actually possibly be, but
Speaker 8: it's a positive number, and it's a tangible positive number
Speaker 8: because they're making their earnings. The issue, though, is because
Speaker 8: they're valuations. And I think this gets to your point, Tom,
Speaker 8: because their valuations are relatively high and there's high expectations
Speaker 8: that they had better make their quarterly numbers, and if
Speaker 8: they don't, they're subject to a correction. And that's what
Speaker 8: makes the market relatively scary right now, is because you
Speaker 8: have such a narrow group of stocks that are really
Speaker 8: keeping up the index. If they miss a quarter, and
Speaker 8: if prices adjust in one of those stocks, it could
Speaker 8: have a meaningful impact on the overall index, and this
Speaker 8: could add to volatility in the markets.
Speaker 4: By the way, probably the best notes we get from
Speaker 4: any you know guest is this guy.
Speaker 6: I mean, he started Semanski.
Speaker 2: If you got through serismands Semanski physics and.
Speaker 4: You survive one thing jumps at me though, and I
Speaker 4: got to ask bunch equities, Yeah, this will be the
Speaker 4: only time this week I think we talked about French equities.
Speaker 1: Yeah, what's going on there.
Speaker 6: With the political minds?
Speaker 8: So look, I mean, you know, this is an outlier
Speaker 8: view on our portfolios, and when this political unrest took place,
Speaker 8: you know, we saw this as a buying opportunity, primarily
Speaker 8: in the equity space. And the reason is is I
Speaker 8: think that there was an overreaction in the markets to
Speaker 8: what happened in the French election. So yes, the National
Speaker 8: Rally Party Marine Lepenz party may take over the lower
Speaker 8: House of Congress and might have a majority state and
Speaker 8: I respect that it creates some you know, disruption in
Speaker 8: the political norms within France. But the reaction we had
Speaker 8: in the market, if you look at the spreads between
Speaker 8: French bonds and buns that spread, winding, widening over a
Speaker 8: one week period, rivaled the twenty eleven twenty twelve period
Speaker 8: when the European Union was in question.
Speaker 1: You know, in the first.
Speaker 8: Place, the equities fell to levels in terms of a
Speaker 8: standard deviation move back to you'd have to go back
Speaker 8: to twenty seventeen to see some of these moves. So
Speaker 8: the extreme amount of move that took place over this
Speaker 8: I just thought was just overdone. And if you look
Speaker 8: at French equities year to date, they're about flat.
Speaker 1: On the year. You know, they were negative on the year.
Speaker 8: And if you look at the rest of the equity
Speaker 8: markets across Europe, they're up about seven eight percent. You know,
Speaker 8: us this is so far being contained just to France,
Speaker 8: and I think that and also to a narrow set
Speaker 8: of French companies. The broader French market, I still think
Speaker 8: it is in good shape. And we saw this as
Speaker 8: an opportunity to buy good quality assets on the cheap.
Speaker 6: Jim Kurt, this has been enjoyed.
Speaker 2: The joining US now always tan and rested from Brown University.
Speaker 2: Wendy Schiller, Her books are definitive driving the Taubin Center
Speaker 2: at Brown Forward. Wendy, I gotta ask about the size
Speaker 2: of money in the donor culture than our modern politics.
Speaker 2: Did JFK or LBJ or Frankly Clinton or you know,
Speaker 2: Bush the younger bring in this kind of money the
Speaker 2: President Biden's bringing in well, I.
Speaker 9: Mean they didn't bring in the kind of money that
Speaker 9: we see today because they weren't legally allowed to, you know,
Speaker 9: have that kind of money contributed. You know, the rise
Speaker 9: of super packs, as you know, and super super packs
Speaker 9: make it possible for wealthy people to contribute hundreds of
Speaker 9: millions of dollars, and that just didn't exist back then.
Speaker 10: But as you well.
Speaker 9: Know, Tom, because you know your history, you know, there
Speaker 9: were other ways of coercive for gathering votes in those days.
Speaker 10: It didn't require that much money.
Speaker 9: But in Rhode Island in the eighteen nineties, you know,
Speaker 9: Nelson Aldrich was a signer from Ronal and he was
Speaker 9: also the sort of de factive majority leader in the
Speaker 9: Center Republican.
Speaker 10: He handled all the business stuff and all the trade.
Speaker 10: He would have his lieutenant's pay people five dollars or
Speaker 10: ten dollars, a lot of money in those days.
Speaker 2: You show up to vote, there's one hundred one hundred
Speaker 2: million dollars out there. Somebody raised it over three cups
Speaker 2: of coffee whatever. That's in a bank account, right, Whose
Speaker 2: money is that?
Speaker 9: I mean, it's really really wealthy people contribute a ton
Speaker 9: of money. But the question is really in this election,
Speaker 9: I'm going into your field now, is this really a
Speaker 9: good investment? Because voters know these two candidates really really well.
Speaker 9: Money matters the most when one candidate is not as
Speaker 9: well known. You get a lot of bang for the
Speaker 9: buck from money and visibility. But here what is the
Speaker 9: money buying? Particularly in Donald Trump's case, because Republicans don't
Speaker 9: have the kind of infrastructure that the.
Speaker 10: Democrats have to get out the vote.
Speaker 9: They have strong enthusiasm and stronger loyalty, but they don't
Speaker 9: have the operational advantage on the ground. What are they
Speaker 9: ringing for? That's my question?
Speaker 10: What do they need? What do they need the money?
Speaker 2: If they don't spend this pall, where is the money
Speaker 2: in five years?
Speaker 4: Oh, that's a great ques Christmas plub account exactly.
Speaker 5: But no.
Speaker 10: But they've also changed the rules so it's a little dodgy.
Speaker 9: But state party committees, for example, can now receive money
Speaker 9: from federal party committees. They used to, but Congress passed
Speaker 9: the law that lets them share that money.
Speaker 10: So it's it's much easier to meld the money than
Speaker 10: it used to be.
Speaker 4: Wendy, what did you make of President Biden's commentary last night?
Speaker 4: His speech last night in reaction to the Trump immunity ruling.
Speaker 10: It was much more coherent than his first twenty.
Speaker 9: Minutes of his big performance, which was a good thing
Speaker 9: if you're a President Biden's team. So the immunity decision,
Speaker 9: if you think about what the Framers wrote about what
Speaker 9: they worried about the presidency, it actually hues pretty closely
Speaker 9: to that text.
Speaker 10: In other words, I think they probably did the best
Speaker 10: they could with this immunity decision. People may disagree with.
Speaker 9: Me, but if you look at what the founders worried about,
Speaker 9: this is what they were trying to parse out, you know,
Speaker 9: individual corruption versus sort of abuse of power, but the
Speaker 9: prospect of Donald Trump unfettered with complete.
Speaker 10: Immunity, and that's the way the media is sort of
Speaker 10: portraying this.
Speaker 9: I think it might shift some of those independents that fled,
Speaker 9: perhaps on Thursday night, back into considering, you know, maybe
Speaker 9: we have to pick Biden not Trump, because we are
Speaker 9: concerned about having Donald Trump in office with the perception
Speaker 9: in his mind of no holds bar that he can
Speaker 9: do whatever he wants and he will go unpunished.
Speaker 4: What's the status of the leadership in the Democratic Party
Speaker 4: today as it relates to President Biden and his viability.
Speaker 10: Well, Paul, that.
Speaker 9: Would require identifying the leadership of the Democratic Party and
Speaker 9: This has been the whole conundrum for the Democrats. The
Speaker 9: President of the United States is typically the leader of
Speaker 9: the party, so this is really this and Biden has
Speaker 9: not really delegated in that respect. You know, Chuck Shimmer
Speaker 9: does this thing again, Jeffries does his thing. But really,
Speaker 9: if there's not even a Nancy Pelosi, whether you like
Speaker 9: her or you don't like her, she was a vocal
Speaker 9: leader in the party.
Speaker 10: You know, it's unclear to me whether it's.
Speaker 9: Barack Obama, it's form President Bill Clinton, who can talk
Speaker 9: to Biden about whether he steps aside. But right now,
Speaker 9: as a last night, he did not look like anybody
Speaker 9: who was walking.
Speaker 4: Out the door. So what should President Biden's strategy be
Speaker 4: going forward in this campaign?
Speaker 9: Whatever he did to prepare for his remarks yesterday, do
Speaker 9: that every day. Make sure that when you were going
Speaker 9: before the public, you sound and look vibrant. But also
Speaker 9: Trump Trump, Trump, and the issues that the Democrats are
Speaker 9: better on, particularly labor rights. You know, they have not
Speaker 9: talked enough about what our Republican trifecta.
Speaker 10: Will do to labor rights.
Speaker 9: And I think these are the key voters in the
Speaker 9: swing states, at least the fade West and Nevada for
Speaker 9: President of Biden's campaign.
Speaker 2: Professor Schuler of Providence for Rhode Island, explain to our
Speaker 2: national audience and our global audience, who the former governor
Speaker 2: of Rhode Island is some percolate. Henrietta Tre's mentioned this
Speaker 2: the other day, Gina Romundo on the list out there?
Speaker 6: Who is she?
Speaker 9: Jenia Mundo is a practical politician. She is business friendly
Speaker 9: and she it really solves things problem by problem she does.
Speaker 9: I know people might get upset. Remind me a little
Speaker 9: bit of President Obama. You know, she is not wedded
Speaker 9: to a particular ideology. She takes things as they come
Speaker 9: and tries to plan ahead and really take stands right.
Speaker 9: So that's the way she thinks. That's great for governing.
Speaker 9: Is it great for inspiring voters? That's a question mark
Speaker 9: in a presidential campaign.
Speaker 2: Can she appeal to the left of the Democratic Party?
Speaker 2: Can she check the boxes if President Biden has to.
Speaker 10: Check every day her record?
Speaker 9: You know, public unions in Lorelan still don't like her
Speaker 9: because of union of pension reform. But on things like
Speaker 9: women's freedom of choice, abortion, gun control, education, she's a
Speaker 9: very strong record as governor of Rhode Island. So you know,
Speaker 9: it depends what she pitches. But if you ask me
Speaker 9: to choose between Gina Romundo and Gretchen Whitmer, that's not
Speaker 9: a contest, right. Gretchen Whitmer can win Michigan. She seems
Speaker 9: reluctant to get into the fray, but she can bring
Speaker 9: a swing state. That's something Genemndeau has yet to prove.
Speaker 9: So if you're going to switch gears now, you know,
Speaker 9: I don't see where you picked U over Gresha wimmer.
Speaker 7: Cure's valuable ess A sure, thank you, Lisa, What do
Speaker 7: you have?
Speaker 11: All right? This is what we talked about before you
Speaker 11: mentioned it. Paul Barry Dillar is back. Yes, he led
Speaker 11: Paramount Pictures decades ago. He lost the bidding war for
Speaker 11: the company. Now he's considering making an offer for control
Speaker 11: of its parent company.
Speaker 5: Though.
Speaker 11: This is what the New York Times is reporting, sources
Speaker 11: telling them that Dylan of digital media company IAC, he
Speaker 11: signed a non disclosure agreement with National Amusements. But you know,
Speaker 11: Paramount iac National Musements they have not commented on this,
Speaker 11: but this is the word that is going out. I mean,
Speaker 11: Paramoun's been weighing HISS options for months, you know, that.
Speaker 6: Yeah.
Speaker 4: I mean Barry Dillar, He's done everything there is to
Speaker 4: do in media, including creating a little television network called
Speaker 4: the Fox Network thanks to Bart Simpson. But that was
Speaker 4: the eighties, that was the nineties. Again, in my opinion,
Speaker 4: as much as Admira Barry Diller, he has not a
Speaker 4: credible bidder. There has not been one credible bidder for
Speaker 4: Paramount this entire process, and that's shocking and said, but
Speaker 4: it just reflects kind of where we are in this
Speaker 4: evolution of the media business.
Speaker 6: It's a general statement.
Speaker 2: Do you are experts like Rich Greenfield, Michael Nathanson, do
Speaker 2: they assume somebody's gonna buy this and split break it up?
Speaker 4: You know, I'm not sure. I think a lot of
Speaker 4: people the real value here of Paramount is in the studio.
Speaker 4: I mean, the Paramount Film and Television studio is one
Speaker 4: of just three or four of that scale in the business.
Speaker 4: So that has value. How much value, I don't know.
Speaker 4: And how much value to put on the library, the
Speaker 4: cable networks that are part of Viacom to think about
Speaker 4: you know, MTV, Country Music, Television TENA and all those things.
Speaker 4: Either the value is declining every single day as cord
Speaker 4: cutting continues, so it's a real tough to value this asset.
Speaker 2: And I saw Warner Brothers Discovery I having the challenge
Speaker 2: to it yesterday afternoon.
Speaker 6: Next Lison, all.
Speaker 11: Right, we go from Powermount to Imagine Entertainment. That's Ron Howard,
Speaker 11: Brian Grazer's company. They're looking for a buyer. This is
Speaker 11: according to the Wall Street Journal. They're working with an
Speaker 11: investment bank after receiving some interest, but a deal that
Speaker 11: could allow Imagine's main financial backer, who is Rain Group,
Speaker 11: to kind of exit. But there's been a lot going
Speaker 11: on Hollywood studio streamers. They're pulling back on the number
Speaker 11: of projects they take on. There was this big boom
Speaker 11: and spending, so valuations for independent production companies while they're
Speaker 11: starting to fall over the years. But it's not time
Speaker 11: the first time they explore a sale. If in twenty
Speaker 11: twenty two, Imagine talked about selling a more than seventy
Speaker 11: percent stake in the company to a London based investment
Speaker 11: firm for about six hundred million to eight hundred million dollars.
Speaker 11: So that kind of puts a price range out there.
Speaker 11: But this possibly could happen.
Speaker 4: Yes, I mean this is I mean they have a quality,
Speaker 4: huge quality of library here. But you know they're kind
Speaker 4: of probably coming to the end of their high output years.
Speaker 4: If you talked to Ron Howard and Brian Grazer, so
Speaker 4: let's like a music musician, Tom would sell their catalog,
Speaker 4: and we're seeing a lot of that these days. This
Speaker 4: is a little bit along those lines here.
Speaker 6: Somebody will buy Oh.
Speaker 9: That's a good comparison.
Speaker 11: But they have a few things. I mean, they have
Speaker 11: a series.
Speaker 4: For networks coming out.
Speaker 6: Help we go next.
Speaker 11: We've heard of shrink flation. We've talked about that, but
Speaker 11: now more retailers using upflation to get Americans to buy Okay.
Speaker 11: Upflation is when you find a new use for an
Speaker 11: old product and then you charge more for it. Okay,
Speaker 11: So this is being used. This is a great big
Speaker 11: take article. You have to take a look at it.
Speaker 4: On the terminal.
Speaker 11: Here's an example Procter and Gamble. They're charging fourteen dollars
Speaker 11: for this all over body deodorant, which is double the
Speaker 11: cost of a standard stick. So they're saying people, people
Speaker 11: are falling for it. Yes, the problem to consumer They're
Speaker 11: getting tired of shrink flation, right, so they started doing
Speaker 11: different things. You went to cheaper alternatives, you start to
Speaker 11: buy fewer essential items. But now Procter and Gamble actually
Speaker 11: found that revenue growth came from people buying fewer things
Speaker 11: at higher prices. So they're willing to pay more if
Speaker 11: they buy less of a few other things.
Speaker 6: It used to be easy. The rich kids in the
Speaker 6: neighborhood they had Irish.
Speaker 2: Spring, right, and the rest of us said, you know,
Speaker 2: I can't remember what BILLI was used to just does soap.
Speaker 2: They have Irish spring three houses away.
Speaker 11: You could smell at three houses.
Speaker 10: That's a tough smell.
Speaker 3: Okay.
Speaker 11: At the same time, fast food chains, we've been talking
Speaker 11: about this. They've been lowering prices to attract customers. So
Speaker 11: now we have another entry into the value meal wars.
Speaker 11: It is Sonic. Yes, Sonic says that unlike McDonald's, Burger King,
Speaker 11: Taco Bell, who are doing these temporary value meals, Sonic
Speaker 11: is saying their meal value is here to stay for good. Okay.
Speaker 11: They're calling it a fun ninety nine menu, So you
Speaker 11: have burgers, snacks, desserts, crunch wraps. They are a dollar
Speaker 11: ninety nine just for tom Okay.
Speaker 4: The dollar ninety nine menu will also introduce two new
Speaker 4: items at bacon ranch, Caso rap and a Southwest Crunch
Speaker 4: Caso wrap. He's gonna pull up in the Bentley at
Speaker 4: in the Hampton's like.
Speaker 6: Like they have tots for a dollar. How many touts
Speaker 6: do you get?
Speaker 11: It doesn't say which size it is. You can get
Speaker 11: a shake too, They have those, like twelve different flavors
Speaker 11: of shakes, Like.
Speaker 6: How big is a.
Speaker 4: Twelve or the sixteen into a sonic?
Speaker 11: I went when they first started opening, but I haven't been.
Speaker 6: I mean it's nice.
Speaker 11: You drive, you drive up right, No, you pull in
Speaker 11: and they the people come out to your car that
Speaker 11: used to do it on roller skates. I don't know
Speaker 11: they still do anymore.
Speaker 6: They roller a job.
Speaker 5: A while.
Speaker 6: Can you see.
Speaker 11: The servers come on the really anything else?
Speaker 4: No, but that's it.
Speaker 6: You mentioned butter, Yes, I mean, but butter is up.
Speaker 11: It's up, they're saying because more they're focused more on cheese,
Speaker 11: and that's.
Speaker 6: Taking away decide what to do with their milks or cows.
Speaker 6: Is what we want?
Speaker 11: Yeah, And the problem is that it's coming at the
Speaker 11: same time that you know, holiday season, baking season starting
Speaker 11: to you know, I don't want to sell a holiday
Speaker 11: in the summer.
Speaker 6: But it's it's coming up.
Speaker 2: It's coming up, Lisa Mateo, thank you so much the
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