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 am Marie Hordern. Join us each
Speaker 2: day for insight from the best in markets, economics, and
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Speaker 2: Bloomberg Terminal and the Bloomberg Business. John starts of Oppenheimer,
Speaker 2: the Biggest Bull on Wall Street right in the following
Speaker 2: we do not expect any dramatic cards from the Fed,
Speaker 2: but rather measured trims. John joins us now for more.
Speaker 2: Juhnken morning, Good morning. Love that done, your biggest bull
Speaker 2: on Wall Street. It's how I said good morning to
Speaker 2: you when I first saw you this morning. All time
Speaker 2: highs on the SMP, record highs of the Nursdag not
Speaker 2: too far away on small caps are trimmed cuds enough,
Speaker 2: I think trim.
Speaker 1: Cuts will be in love. And the wonderful thing about
Speaker 1: trim cuts is for the FED, what it is is
Speaker 1: the economic data, particularly around the job's number, has offered
Speaker 1: an opportunity of essentially a free haul pass.
Speaker 3: So if the FED Chair.
Speaker 1: The FOMC Comte Committee come out with a cut, it's
Speaker 1: not politics. It's just the dual mandate and looking at
Speaker 1: what the weakness in the jobs market and adding some
Speaker 1: liquidity to the system. And it's also an anniversary shop
Speaker 1: in September. If they do twenty five BIPs, or if
Speaker 1: they do even fifty, the market should be able to
Speaker 1: take it digested.
Speaker 2: Let's address that weakness in a job's market, and we
Speaker 2: testing the limits of bad news being good news for stocks.
Speaker 1: You know, I think somewhere in the middle of that
Speaker 1: job it depends the way traders look at it and
Speaker 1: the way intermediate to longer term investors who are investing
Speaker 1: for retirement, which is a multi generational effort. Now that
Speaker 1: has changed the tone of the private investor and the
Speaker 1: size and presence of the individual private investor more than
Speaker 1: I've ever seen it in forty two years.
Speaker 4: At this point, we're watching what the FED signals next
Speaker 4: week and how that really will play forward. And John
Speaker 4: was talking about you know, he didn't say these words
Speaker 4: because he hates these words, but a hawkish cut or
Speaker 4: a dubbish cut. There's this question going forward if they
Speaker 4: are alluded to it. You alluded to it because you
Speaker 4: tried not to say it, which I admire, and you
Speaker 4: did that very well. But of course I'm going to
Speaker 4: filate that. I guess I'm curious if they are dubbish,
Speaker 4: if they do indicate that this is something more than
Speaker 4: a mid cycle adjustment, does that make you more bearish?
Speaker 1: Well, it would be Would that make me become bearish
Speaker 1: because I'm not buried?
Speaker 2: Okay?
Speaker 3: Would make you a little less bulleted? Yeah, well, it would.
Speaker 1: Certainly make me take a look at the data, see
Speaker 1: where we're going to take a look at what the
Speaker 1: what the terms were that when the FED chair is
Speaker 1: reporting to the press.
Speaker 3: How things went and answering questions. But overall, you know,
Speaker 3: what we've seen really over the last couple of years has.
Speaker 1: Been the size of the US economy and the resons
Speaker 1: allions that exhibited both by corporations and by the consumer,
Speaker 1: I mean the consumer.
Speaker 3: The soft data is.
Speaker 1: Oh, they're so worried about inflation, yet the consumer is
Speaker 1: still spending, you know, at different things. But it also
Speaker 1: prudently you know, this day of digitalization and information going
Speaker 1: around the world fairly quickly.
Speaker 3: It really is remarkable.
Speaker 1: When you look at the US economy around thirty trillion
Speaker 1: in size, still way ahead of China. After all these
Speaker 1: years of US hearing that China was going to surpass
Speaker 1: us and everything else, it hasn't happened. And we think
Speaker 1: a lot of that is related to innovation. The Federal
Speaker 1: Reserve has done its job, we think remarkably well, you know,
Speaker 1: once they got out from being behind the curve and
Speaker 1: what you we call it in March of twenty twenty two.
Speaker 3: So far with all the.
Speaker 1: Hikes, all the pauses, and very few cuts, no recession.
Speaker 3: Remarkable.
Speaker 4: A lot of people who are listening to are probably
Speaker 4: nodding along with this idea of innovation, especially when it
Speaker 4: comes to technology and how much that's powered what we've
Speaker 4: seen in the US equity markets. Can I continue powering it?
Speaker 4: Given how inflated expectations are and how difficult it is
Speaker 4: to price in a sea change in technology innovation at
Speaker 4: the scale that say Oracle is predicting, well.
Speaker 3: I would say, I think.
Speaker 1: What type of overvaluation is being placed by investment or
Speaker 1: capex at this point? Really is in the eyes and
Speaker 1: the ears of the beholder, because maybe the investments that
Speaker 1: are being made across the eleven sectors to participate in
Speaker 1: what AI can do, both for the consumer as well
Speaker 1: as for businesses, maybe this may be appropriate.
Speaker 3: What we're seeing, this is so.
Speaker 1: Different than the you know, I remember the tech bubble,
Speaker 1: you know, I mean, like father time, forty two years.
Speaker 5: In the business.
Speaker 1: Good lord, it's shocking, you know, I still feel thirty five,
Speaker 1: but it's like nearly one hundred, you know, at this point.
Speaker 1: But when I look at it, it's just this is
Speaker 1: not this is not beginners technology. This is, if anything,
Speaker 1: is technology that needs to be has to be checked
Speaker 1: somewhat by regulation necessary, but not by too much regulation.
Speaker 1: And yet what it offers in a world in which
Speaker 1: we have not reproduced enough to replace ourselves, AI may
Speaker 1: be able to fill things out in factories and in
Speaker 1: offices where there might be shortages of employees. I do
Speaker 1: think in case you think I'm just being too bullish
Speaker 1: or too positive, no, what I would say what does
Speaker 1: concern me is when we look at the current environment
Speaker 1: is moving forward, the first tranch beyond what we see
Speaker 1: in technology of layoffs will be a shock to the
Speaker 1: system and will cause a lot of questions as to
Speaker 1: how we're going to deal with it. But I think
Speaker 1: it's an opportunity for corporations to step up and train personnel,
Speaker 1: really position ourselves for what is genuinely a new economy
Speaker 1: that we are moving towards based on innovation.
Speaker 5: That's what I want to ask you to accept this innovation.
Speaker 5: Do we need to accept that we're just going to
Speaker 5: have bigger layoffs and less jobs in the economy.
Speaker 1: Well, I think I think that's the first part, you
Speaker 1: know that it gets.
Speaker 3: I think we need to prepare for that.
Speaker 1: And I think already we've heard Elon Musk and others
Speaker 1: mentioned things that may be necessary to be considered it
Speaker 1: really if we meet it with retraining, looking for opportunities,
Speaker 1: because the biggest thing is as wonderful as the machines
Speaker 1: can be.
Speaker 3: People love to deal with human beings. They just do
Speaker 3: or not always love. But I okay, well it's not no.
Speaker 6: But but at the same time, just think yourself, if
Speaker 6: you're trying to get some customer service, you know it's
Speaker 6: rare that you find an outfit that has real good
Speaker 6: beginners AI in those chat boxes and things to settle things.
Speaker 5: When you mentioned the consumer as well, yesterday we did
Speaker 5: see household furnishings becoming a bit more expensive, clothing, airfares
Speaker 5: are up. Are you concerned about more of a tariff
Speaker 5: pass through as we progress throughout twenty twenty five?
Speaker 1: I think most certainly in the near term, and then
Speaker 1: because we go forward, if we see the benefits that
Speaker 1: the administration expects from it and reducing our deficits, I
Speaker 1: think that would be it would be very much helpful.
Speaker 1: And I also think in addition to that, what we
Speaker 1: haven't seen yet across the sectors in a broad format
Speaker 1: is the reintroduction of competition. And usually, you know, my
Speaker 1: generation went through hyperinflation relative for the US back in
Speaker 1: the late seventies early eighties, and it took years to
Speaker 1: get rid of that inflation stickiness inflation. The institutional memory
Speaker 1: is relatively short, but for the humans that went through it, gosh,
Speaker 1: it takes a while. But eventually you find people go, hey,
Speaker 1: wait a minute, if I give up what I'm charging
Speaker 1: on a per unit price and do volume, I can
Speaker 1: really get ahead of my competition, my competitors. When that begins,
Speaker 1: and it'll start. We've seen a little bit of it
Speaker 1: earlier this year in the airlines, but now it's going
Speaker 1: the other way and that's its demand is what's doing.
Speaker 2: What you said about AI I think is so so important.
Speaker 2: What you're acknowledging is that it's going to be regressive upfront.
Speaker 2: This is something that Luke Kara, former colleague, has talked
Speaker 2: about extensively and something Leasa's hamme it hold on again
Speaker 2: and again and again over the last month or so,
Speaker 2: is that we could see a real decaupling between the
Speaker 2: performance of a stock market and the direction of the
Speaker 2: labor market. Is that what you think people are comfortable
Speaker 2: with going into twenty six?
Speaker 1: Oh, you know, at least at this point, I don't
Speaker 1: think that the market is looking as much to twenty six.
Speaker 3: Yeah, as to the end of this year. I really think.
Speaker 1: I think when we start looking at it in twenty six,
Speaker 1: it'll probably bring up a bit somewhat a periods of
Speaker 1: volatility when we see catalysts in terms of news items
Speaker 1: and things that they'll make trainers, skeptics and bears give
Speaker 1: them an opportunity to take profits without FOMA and what
Speaker 1: likely is a sexual ball market based on the degree
Speaker 1: of innovation we have today.
Speaker 3: Stay with us.
Speaker 2: Marble Impergs have it's coming up after this. Robert Fishman,
Speaker 2: senior research analyst of Muffin Nithisen, is writing this. We
Speaker 2: view the news as a key milestone in the Warner
Speaker 2: Brothers Discovery success story and potentially the opening of a
Speaker 2: second chapter for a growing media conglomerate. Robert joins is
Speaker 2: now for more. Robert, Welcome to the program sir. Let's
Speaker 2: just start with the basics. What's to like this morning
Speaker 2: with this potential tie up?
Speaker 7: Well, I think, as you just heard, what you have
Speaker 7: is a lot of potential strategic combination between these two players.
Speaker 7: We've been talking for a long time about the lack
Speaker 7: of scale on streaming and what this does is really
Speaker 7: help accelerate the streaming story by putting two subscale players
Speaker 7: together to help better compete in the current landscape. Then
Speaker 7: you also have to go to the cost savings that
Speaker 7: were just discussed. We're still working through our assumptions, but
Speaker 7: essentially there will be a lot of extra cost synergies
Speaker 7: putting these portfolios together. And then really what this does
Speaker 7: for Warner Brothers Discovery is allow them to accelerate that
Speaker 7: timeline that you just talked about. And really for investors
Speaker 7: to see the payoff of how valuable these assets are,
Speaker 7: like HBO and Max and Warner Brothers Studio. So it
Speaker 7: really is a really strong evidence of the value in
Speaker 7: the Warner Brothers portfolio.
Speaker 3: Once upon a.
Speaker 4: Time, the idea of CBS and CNN being combined and
Speaker 4: the idea of synergies read probably job losses and some
Speaker 4: consolidation of efforts would have raised concerns by regulators. Will
Speaker 4: it still or has the landscape changed so much competitively
Speaker 4: that it doesn't necessarily reach that level.
Speaker 7: Ye, that's a really interesting question. I would say that
Speaker 7: the landscape has clearly changed. You know, back to my
Speaker 7: first point, Streaming is first and foremost here and that's
Speaker 7: where all the I are going and already you know,
Speaker 7: essentially are for a lot of the parts in the
Speaker 7: media business on news specifically. Yes, it does seem like
Speaker 7: the strategic combination of a CBS News with a CNN
Speaker 7: would be something that that makes a lot of sense
Speaker 7: from a cost saving standpoint and strategically to put those
Speaker 7: two assets together.
Speaker 4: How much do you think that Warner Brothers is just
Speaker 4: going to hold off on any kind of deal because
Speaker 4: they were planning on splitting.
Speaker 3: Up, and they did believe that each of the pieces
Speaker 3: was worth a lot more than the whole.
Speaker 4: We are seeing a premium here in terms of the
Speaker 4: paramount Skydance offer from Ellison. But do you think that
Speaker 4: it's enough or do you think that it's going to
Speaker 4: have to be sweetened?
Speaker 7: Well, I think we're going to see how this all
Speaker 7: plays out, so that this is just kind of the
Speaker 7: first salvo. And really what we're really waiting to see
Speaker 7: is if there's gonna if the paramount sky Dance bid
Speaker 7: is going to bring in other bidders here, because that
Speaker 7: potentially has the opportunity to As we've seen in past,
Speaker 7: these are premium, you know, very very demanded assets, especially
Speaker 7: when you think about the studio and streaming and HBO.
Speaker 7: So if this is the opportunity for other companies to
Speaker 7: explore that that that's something that we're waiting to see
Speaker 7: if if that's going to bring in other potential bidders here.
Speaker 3: Potentially a price war.
Speaker 5: Who else could bid for these assets?
Speaker 7: Well, I mean, if you go through the list, clearly
Speaker 7: Comcast is a potential bidder. It's unclear you know, to
Speaker 7: the regular regulatory point if they're going to look to
Speaker 7: enter into into the fray and and you know, put
Speaker 7: their hat in the ring. But I think Comcast has
Speaker 7: long been discussed again from the streaming side and also
Speaker 7: from the studio side and other assets that that this
Speaker 7: can be part of that. The question is they're going
Speaker 7: through their own spin with versay it and you know,
Speaker 7: essentially do they want to change strategies as well? That
Speaker 7: that's that's that's a remains an open question. You know,
Speaker 7: obviously that the digital big bidders are someone's that that
Speaker 7: we all have to look at and and see whether
Speaker 7: or not they want to really throw the hat in
Speaker 7: the ring. Again from the regulatory side and even a
Speaker 7: company like Apple, if they really want to go all
Speaker 7: in on media, how much.
Speaker 5: More consolidation could we see Robert in this space.
Speaker 3: Well, this is a big one.
Speaker 7: We've been waiting for something like this for a little
Speaker 7: while now, again talking about the potential dance partners with
Speaker 7: a Comcast, with Warner Brothers, Discovery and and Paramounts being
Speaker 7: the three key players. So you know, I think this
Speaker 7: is going to lead to other potential dominoes that that
Speaker 7: could fall. But but clearly that this is the big
Speaker 7: one that we're all focused on right now.
Speaker 2: Stay with us Multpleinberg. Savannah's coming up after this. Andrew
Speaker 2: Holnholt of City Writing, we continue to expect one hundred
Speaker 2: and twenty five basis points of right cuts over the
Speaker 2: next five FMC meetings, with growing risk that the Fed
Speaker 2: will continue cutting interest rates below three percent. Andrew Joints
Speaker 2: is now for more, Andrew and Monic, I've got to
Speaker 2: get to that three percent call in just a moment, Boile,
Speaker 2: I want to address the danks for the last twenty
Speaker 2: four hours, so jobless claims came in close to four
Speaker 2: year highs, spiked a bit of concern. Then we got
Speaker 2: into the numbers and it screams one state, it screams Texas.
Speaker 2: Is that anything will be concerned about here at all?
Speaker 3: I mean, I think you.
Speaker 8: Always have to watch the jobless claims numbers. What we
Speaker 8: would look for is is this going to be a
Speaker 8: sustained movement.
Speaker 3: Up in jobless claims?
Speaker 8: A lot of times you get one week of data
Speaker 8: and it's weekly data, right, You're trying to seasonally a
Speaker 8: just weekly data in a holiday week spiked up in
Speaker 8: one state, So you never take that too seriously. So
Speaker 8: so I'd be kind of cautious in terms of getting
Speaker 8: too concerned about that number.
Speaker 2: The broader backdrop, though, the totality of the data, as
Speaker 2: the Fed likes to say, hasn't been great on the
Speaker 2: labor market side of things. When we go into next week,
Speaker 2: we're talking about the following mid cycle adjustment or the
Speaker 2: start of a really big easy cycle, and you've alluded
Speaker 2: to it, we're going to stop at three percent, or well,
Speaker 2: we need to go even further.
Speaker 8: I think it's increasingly clear that we're going to get
Speaker 8: to at least three percent. And you look at the
Speaker 8: jobs data, and we do have some conflict in the data.
Speaker 8: If you look at the household survey, where the unemployment
Speaker 8: rate comes from, unemployment rate has been more stable, did
Speaker 8: move up in the last report. You look at the
Speaker 8: payrolls data, and with these revisions, it's just fallen apart.
Speaker 8: I mean, we're running at twenty nine thousand jobs per
Speaker 8: month on a moving average basis, just twenty two thousand
Speaker 8: jobs last month. You look at the benchmark revisions and say,
Speaker 8: maybe we're overstating that payrolls number each month, So you know,
Speaker 8: subtract a little for that. We're probably close to zero
Speaker 8: job growth in terms of payrolls. So there's no question
Speaker 8: that you want to be moving rates at least back
Speaker 8: towards a more neutral setting. I think with the cooler
Speaker 8: inflation data that we're getting now, you can really start
Speaker 8: thinking about do they actually move below three percent?
Speaker 4: Hold on a second, the cooling inflation data cooling, sure,
Speaker 4: we're still above three percent on a year over year basis.
Speaker 4: You still haven't gotten below two percent going back more
Speaker 4: than four years. Is that enough at this point to
Speaker 4: be actually a reason for the Fed to cut aggressively?
Speaker 8: Well, I think the reason to cut aggressively is the
Speaker 8: jobs data, what we're seeing in the labor market. The
Speaker 8: question is how can strained are you by inflation? To
Speaker 8: your point, and you're right. You look at core pc inflation,
Speaker 8: we're still above three percent when we looked at the
Speaker 8: CPI report yesterday. Though, this is really interesting. You map
Speaker 8: that through to core PCEE inflation. We're getting just zero
Speaker 8: point two zero percent month on month core PCEE inflation.
Speaker 8: So that's monthly annualized core inflation that's running pretty close
Speaker 8: to two percent, and that year on year figure maybe
Speaker 8: going to come down to two point nine percent, so
Speaker 8: we could get below three percent on a year on
Speaker 8: year basis. I'm running close to two percent on a
Speaker 8: monthly basis. And remember this is August inflation data. This
Speaker 8: was meant to be the peak of tariff pass through
Speaker 8: and you know the high inflation that we were going
Speaker 8: to see, and we're close to target. So I think
Speaker 8: there's a lot less of a constrain on the inflation
Speaker 8: side that's going to be more underappreciated by the market
Speaker 8: right now. I think everyone's acknowledging now that you have
Speaker 8: this risk on the labor market side.
Speaker 3: I'm pretty clear what the Fed's going to do here.
Speaker 4: I mean, we've got the Restoration Hardware CEO cursing out
Speaker 4: the investors because of their inability to have pricing power,
Speaker 4: So it raises a question of further disinflation. There is
Speaker 4: a feeling though that going forward there is going to
Speaker 4: be a reacceleration of the economy, thus the bet on
Speaker 4: small caps, thus the bet on equities, And how much
Speaker 4: do you see that as sort of predicated on the
Speaker 4: FED cuts that you're talking about, that that will ignite
Speaker 4: the reacceleration of growth that so many people are hinging
Speaker 4: their bets on.
Speaker 8: There's a little bit of a disconnect between markets here,
Speaker 8: and this is I hear this when I speak with investors. Also,
Speaker 8: that equity market, I think definitely thinks that there will
Speaker 8: be this reacceleration in the economy.
Speaker 3: Not as clear to me that the rates.
Speaker 8: Market is sold on that, which is part of why
Speaker 8: we're pricing in these cuts in the rates market. So
Speaker 8: maybe you need to kind of reconcile those two markets
Speaker 8: with each other. I do think that these FED cuts
Speaker 8: are getting increasingly priced in. I think that is part
Speaker 8: of the story of what is supposed to get the
Speaker 8: economy moving a little bit faster. You look at the
Speaker 8: housing market, that's the most interest rate sensitive sector of
Speaker 8: the economy, and we have really weak housing right now.
Speaker 3: In terms of activity. In terms of prices moving lower.
Speaker 8: You need to get rates lower if you want to
Speaker 8: re accelerate that portion of the economy.
Speaker 3: The question, though, is if fit cuts interest.
Speaker 8: Rates, it's going to bring down policy rates, it's going
Speaker 8: to bring down the two year yield. How much lower
Speaker 8: will we get in terms of the ten year yield.
Speaker 8: It has been moving down together with the front end
Speaker 8: of the yield curve, but I think that's still an
Speaker 8: open question.
Speaker 5: Andrew, how likely is it potentially that they go fifty
Speaker 5: basis points, especially given everything you've just outlined in the
Speaker 5: last five minutes.
Speaker 8: So I think fundamentally, you can look at this data
Speaker 8: and you can say, look back at June payrolls. June
Speaker 8: payrolls originally reported above one hundred and fifty thousand.
Speaker 3: Now it's negative. Right, if we had had a negative.
Speaker 8: Payrolls print in June, I'm pretty sure this is a
Speaker 8: FED that would have been cutting in July.
Speaker 7: Right.
Speaker 8: We have seen rate cuts by now. That said, they're
Speaker 8: a big diferences across the committee. Remember back in June,
Speaker 8: we had a lot of FED officials who didn't want
Speaker 8: to cut at all. This year, Powell has to pull
Speaker 8: that committee together. So twenty five basis points I think
Speaker 8: is going to be a lot easier to build a
Speaker 8: consensus around. We could see some descents for fifty. I
Speaker 8: wouldn't be surprised if we see some descents, but twenty
Speaker 8: five looks much much more likely than fifty.
Speaker 5: What is a FED under Laurence Lindsay, Kevin Warsh or
Speaker 5: James Bullard look like, given the fact that those are
Speaker 5: the most recent individuals to sit down the Treasury Secretary.
Speaker 8: Yeah, personnel matters here, right, There's no question that the
Speaker 8: fedchair matters. It is a committee, right, So we always
Speaker 8: think about where are the votes actually going to line
Speaker 8: up in terms of where policy rates go. One discussion,
Speaker 8: we're talking about three percent. Why does everyone talk about
Speaker 8: three percent? That's kind of a notion of where maybe
Speaker 8: the neutral policy rate is. Different candidates for fedchair are
Speaker 8: going to have different views about where the neutral raiate is.
Speaker 8: And I'm pretty sure when Treasury Secretary Beston is interviewing
Speaker 8: these FED officials, that's one of the discussions that they're having.
Speaker 8: So where do you see neutral? How quickly do you
Speaker 8: think we need to get to neutral? That could depend
Speaker 8: on FED scher.
Speaker 3: And where do you see neutral?
Speaker 8: I think neutral is still around three percent here. So
Speaker 8: when we talk about the FED cutting below three percent,
Speaker 8: that really are they going to actually go to stimulative levels?
Speaker 8: To Lisa's point, if you have an inflation problem, it
Speaker 8: gets pretty awkward to get below neutral. But if this
Speaker 8: inflation problem is, you know, kind of quickly disappearing, which
Speaker 8: I think it may in the next few months of data,
Speaker 8: all of a sudden, there's less of a constrained and yeah,
Speaker 8: you should support the labor market.
Speaker 2: Got about sixty seconds left. They don't forecast payrolls, they
Speaker 2: forecast unemployment, and they've got unemployment year round at four
Speaker 2: point five percent, core PC at three point one. Is
Speaker 2: there anythink that's evolved since the last meeting that sound
Speaker 2: of whack with the June SEP.
Speaker 8: Those for forecasts can actually pretty much stay where they are.
Speaker 8: And I think the way that Cher Paul will talk
Speaker 8: about this, and he said this at Jackson Hole is
Speaker 8: not where that point estimate is. So you might still
Speaker 8: be at four point five percent on the unemployment rate.
Speaker 8: What's the risk around that you're running twenty nine thousand payrolls?
Speaker 3: It's to the upside.
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