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Speaker 1: Joining us on.

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Speaker 2: I'm Gonna do This is the Bloombergs Podcast along with

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Speaker 2: Jonathan Ferris and Lisa Ramot. Join us in each stay

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Speaker 2: insight from sneaking, politics, finances, investment.

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Speaker 1: Subscribe to Bloomberg Serance on demand certainly and Spotify. Get

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Speaker 1: your podcast as an always data on Bloomberg dot Com,

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Speaker 1: The Bloomberg the Revision and the Bloomberg Times.

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Speaker 3: When you look at what the revisions were to Q two,

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Speaker 3: core PC was unrevised, so didn't really tell you a

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Speaker 3: different story about the New York term inflation trend. I

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Speaker 3: think that's that's really important. A big downward vision to

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Speaker 3: consumer spending, which is surprising at this point in time.

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Speaker 3: We know that there was a big pick up during

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Speaker 3: the summer months, but I've been highlighting if you look

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Speaker 3: at the ba's credit card spending data, it slowed materially

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Speaker 3: throughout September. So I think you know, as you look

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Speaker 3: at what's been happening in Marcus, as you've seen consumer

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Speaker 3: discretionary stocks coming off a bit, where we've been concerned

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Speaker 3: about the head winds facing the consumer, I think we're

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Speaker 3: seeing it in the high frequency data coming through. But

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Speaker 3: you're still in this fuzzy period of time here where

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Speaker 3: it's unclear if it's just to give back from the

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Speaker 3: strong summer months that we had, or whether it's a

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Speaker 3: new trend on the consumer of weakening.

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Speaker 4: Is there a stronger signal that you're getting from the

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Speaker 4: job as claims to just keep coming in at incredibly

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Speaker 4: low rates.

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Speaker 1: Yeah.

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Speaker 3: I think when you look at the labor market, the

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Speaker 3: consistent story is one in which labor demand is coming

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Speaker 3: down materially and that is leading to a labor market

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Speaker 3: that is no longer extraordinarily tight. It's no longer very tight,

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Speaker 3: but it just looks historically tight. But at the same time,

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Speaker 3: there's not much evidence of layoffs taking place. That's true

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Speaker 3: in the jolts data, it's true in how people are

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Speaker 3: perceiving their job opportunities, it's true in the unemployment claims data.

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Speaker 3: So far, the key question will be if the consumer

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Speaker 3: does slow as we continue to anticipate as these headwinds hit,

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Speaker 3: can that story remain true? Can you continue to have

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Speaker 3: a slowing labor market that is only demand driven.

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Speaker 4: When you talk about a fuzzy period of time, and

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Speaker 4: this is important because we've been talking about how we

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Speaker 4: don't know that we're not a soft landing until it

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Speaker 4: no longer is. Is there a historical corollary that you

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Speaker 4: look to where there is a period of slow in

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Speaker 4: consumer spending but a very robust labor market. Is that

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Speaker 4: something that can be a persistent feature of an economy

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Speaker 4: for a prolonged period of time.

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Speaker 3: Yeah, you know, I think we were coming out of

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Speaker 3: this very unusual period, and so we're kind of prone

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Speaker 3: to say that everything is very unusual at what we're

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Speaker 3: seeing with the labor market. It is typically nonlinear. So

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Speaker 3: it is often the case that things look generally okay

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Speaker 3: until you have a shock and layoffs pickup. You know,

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Speaker 3: that's the Sam rule where if the unemployment rate rises

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Speaker 3: by fifty basis points, you have a recession, and it

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Speaker 3: always rises by more. So from that perspective, I don't

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Speaker 3: know that there's all that much that's unusual here. You know,

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Speaker 3: certainly from the lag of defects of monetary policy, people

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Speaker 3: are pointing towards it not hitting as much. The key

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Speaker 3: question is did it not tighten or hit as much

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Speaker 3: because we had a lot of latent physical stimulus in

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Speaker 3: the system and it's now beginning to bite. That's our view,

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Speaker 3: but there's a lot of uncertaint about whether that's the correct.

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Speaker 1: You right now, the data check folks, let's do that.

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Speaker 2: We get the green on the screen. We're up three

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Speaker 2: tenths of a percent on the SPX. The VIX comes

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Speaker 2: in nicely, sprightly from an eighteen level into seventeen zero

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Speaker 2: point ninety four tenure, yielding three basis points off the

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Speaker 2: announcement of claims really quite good to zero four with

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Speaker 2: a constructive leveling revision of to zero two. And we've

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Speaker 2: got the GDP numbers here. Let's stagger over to Michael

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Speaker 2: McKee for an insight. He's got the bramocam. I caught

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Speaker 2: in a bramocam McKeegan, let me in, let me in,

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Speaker 2: what do you got?

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Speaker 5: Well, we do have the revisions here, and it does

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Speaker 5: solve one of the mysteries or at least brings us

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Speaker 5: closer to an answer of why gross domestic income has

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Speaker 5: been lower than gross domestic product. It's because gross domestic

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Speaker 5: product was over measured. That right now, the government says

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Speaker 5: that the GDP from the fourth quarter of twenty nineteen

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Speaker 5: to the second quarter of twenty twenty was down seventeen

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Speaker 5: and a half percent. That is up seven tenths of

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Speaker 5: a percent point. But when the expansion started again from

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Speaker 5: twenty twenty the fourth quarter of twenty twenty through the

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Speaker 5: first quarter of twenty twenty three, GDP was up five

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Speaker 5: point six percent. That's two tenths lower than had been

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Speaker 5: originally estimated. So it brings those numbers into a little

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Speaker 5: bit more agreement.

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Speaker 2: There's the heart of the matter to both of you,

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Speaker 2: Matt was Eddie and Mike McKee. Does this allow the

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Speaker 2: Fed to change course? Does it give them cover to

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Speaker 2: change tone?

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Speaker 3: I don't think so. I mean, when you're looking at

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Speaker 3: Q three trackers, we're at three point eight percent. You

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Speaker 3: know if the Atlanta FED closer to five percent, do

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Speaker 3: you see the job as claims data here today? You know,

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Speaker 3: the real time evidence that we have in terms of

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Speaker 3: what happens with the labor market and the growth data

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Speaker 3: so far for Q three, I think all fits with

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Speaker 3: them maintaining this hawkish bias, that the thread of another

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Speaker 3: rate hike that's out there. We don't think they deliver

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Speaker 3: on it, but I think that it fits with them

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Speaker 3: sticking with that story.

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Speaker 4: When you talk about you don't know whether that we're

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Speaker 4: seeing the lag in variable effects coming into play now.

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Speaker 4: We don't understand why they didn't happen earlier. We don't

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Speaker 4: understand a lot about this economy. What is your compass right,

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Speaker 4: especially at a time where we might not be getting

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Speaker 4: data from the government because of a government shutdown. What

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Speaker 4: is the most important data that you're tracking? Is it

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Speaker 4: credit card spending? Is it jobless claims? Is it something else?

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Speaker 4: The sort of intangibles that some of the FED officials

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Speaker 4: have said in the conversations with small business owners are

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Speaker 4: the most important.

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Speaker 3: Yeah, I think it appeared where you're not getting the

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Speaker 3: key backer data, you have to rely on some of

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Speaker 3: these other alternative data sets, the anecdotes that we might get,

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Speaker 3: the surveys from the isms and those types of services

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Speaker 3: will be incredibly important, I think for distilling what's happening

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Speaker 3: with the economy. But I think it's all about the

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Speaker 3: consumer and it's all about the labor market. We've done

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Speaker 3: some research in the past which suggests that continuing jobless

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Speaker 3: claims are the best real time indicator of recession. Right now,

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Speaker 3: they're clearly not telling you that we are in a recession.

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Speaker 3: They don't lead significantly, but they tell you when we

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Speaker 3: are in a recession, and so I think that remains

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Speaker 3: the key data point from a consumer perspective. I think

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Speaker 3: it is this card spending data. It gives you kind

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Speaker 3: of a weekly view on how things are evolving. It's volatile,

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Speaker 3: it has thesal adjustment issues, so there's a lot of

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Speaker 3: trickiness in it. But if you smooth through what we

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Speaker 3: look at over a four week basis, it slowed materially

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Speaker 3: over the back half of August and then into September.

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Speaker 4: Is it coherent with this idea that you could see

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Speaker 4: a sharp spike upward in the unemployment rate or is

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Speaker 4: that still very unclear in your view?

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Speaker 2: No.

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Speaker 3: I think if we have a slow down where growth

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Speaker 3: goes into negative territory and the consumer actually begins to

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Speaker 3: contract with where how much labor demand has come down,

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Speaker 3: I would not be surprised at all to see the

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Speaker 3: unemployment route begin to move higher. It's kind of part

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Speaker 3: of our baseline forecast. Timing that exactly when that happens

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Speaker 3: is very different.

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Speaker 1: Matt, was that e chief us a columns of Deutsche Bank?

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Speaker 6: We need sunglasses from next guest standouts of Wetbush remain

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Speaker 6: in bullish send this quote our view of tech stocks

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Speaker 6: that the transformation or growth around AI will continued, cloud cybersecurity,

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Speaker 6: a rebound of digital Antdellas will create a bringing board

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Speaker 6: of growth into twenty twenty four that is currently being

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Speaker 6: underappreciated by the street. Dani's TK of wet Bush out.

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Speaker 2: On the web quote the iPhone is getting really hot

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Speaker 2: when using it, even for a short while. Date July fourth,

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Speaker 2: two thousand and seven. This has happened before the uproar.

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Speaker 2: This morning, the man with titanium closed, Dan Ives joins

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Speaker 2: us this morning here on the latest stuff where OMG,

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Speaker 2: it's hot. First thing I said is, yeah, whenever they

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Speaker 2: bring out a new phone, the software is screwed up,

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Speaker 2: it's hot.

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Speaker 1: It's like not news, is it.

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Speaker 7: But this is not a surprised Apple. I mean the

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Speaker 7: Apple knew from a titanium that this was going to happen.

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Speaker 7: There will be some software updates fixed that come out

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Speaker 7: of the next week, and it's typical Cooper Tino. They're

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Speaker 7: going to fix it. And if you look ultimately at

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Speaker 7: the demand for this iPhone, it continues to be adding

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Speaker 7: much better.

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Speaker 1: Thanks BacT for seriously, we got to do this.

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Speaker 2: Is there any danger to the public with this, like

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Speaker 2: exploding around an airplane lithium.

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Speaker 1: But you know the gloom that's out there, something like danger.

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Speaker 4: Not all.

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Speaker 7: If you look at any even some of the ones

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Speaker 7: that have tested this in terms of stress tested it,

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Speaker 7: there's nothing like that. It's really just more it overheats

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Speaker 7: in some instances. But I believe this, this bug, that

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Speaker 7: the fix that they'll come out with it is going

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Speaker 7: to resild.

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Speaker 2: So if John's a Covent Garden buying a new iPhone,

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Speaker 2: he can go in safe.

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Speaker 7: He can go in safe, and he's gonna be able

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Speaker 7: to watch Premier League and do all of everything. He

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Speaker 7: loves descriptions.

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Speaker 6: When I just go back, it seems to you just

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Speaker 6: said something. You said demand will be better than expected.

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Speaker 6: In fact, you implied that it is better than expected.

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Speaker 6: Can you tell me about a what was expected and

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Speaker 6: be how you're engaging current demand?

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Speaker 1: What are you looking at?

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Speaker 7: If you look at lead times in terms of iPhone deliveries,

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Speaker 7: we are still ahead of iPhone fourteen and it's actually extending.

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Speaker 7: And if you look last year, you basically had a

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Speaker 7: shortage of iPhones. So when you actually combine what i'll

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Speaker 7: call about ten million incremental units that we actually have

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Speaker 7: now from an inventory perspective, we're tracking so far based

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Speaker 7: on our estimate about ten to twelve percent ahead expectations.

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Speaker 6: How do you make a distinction between scarcity that is,

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Speaker 6: let's say, massaged by the company that produces this particular handset,

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Speaker 6: and scarcity that's driven by real demand. Just doesn't Apple

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Speaker 6: play this game. It's difficult to get our products. There's

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Speaker 6: a big lead time, there's a delay. No, it's not

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Speaker 6: getting some AirPods, it takes two months. Everybody wants them.

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Speaker 6: Isn't that the whole marketing strategy?

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Speaker 1: Look?

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Speaker 7: And I think that it's a Rubik's cube to figure out,

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Speaker 7: and that's why we spend so much time in Easia

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Speaker 7: trying to understand what incremental units have actually been produced,

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Speaker 7: what the demand looks like relative to the supply chain.

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Speaker 7: And I think right now we're running probably about three

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Speaker 7: to four million units ahead, you know, if you look

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Speaker 7: relative to where iPhones are going to shape out. Also, asps,

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Speaker 7: even in China continue to go up because of the

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Speaker 7: pro And I think that's really the story here, is

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Speaker 7: that the ASP talents there and despite doomsdays sort of

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Speaker 7: you out there. I mean, you're basically seeing an iPhone

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Speaker 7: demand story going into how itdays that's going to be

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Speaker 7: ahead of expectation.

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Speaker 4: How much is Apple eating the lunch of everybody else

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Speaker 4: in terms of a market that is actually shrinking or

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Speaker 4: at least in stasis. When it comes to the smartphone market.

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Speaker 7: It's great. I mean, we've seen it in China. They've

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Speaker 7: gained about three hundred BIPs in market share the last

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Speaker 7: eighteen months, and I think even despite Huawei, I think

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Speaker 7: will continue to gain share because Huawei, if you buy

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Speaker 7: that phone, it's like buying an iPhone twelve and it

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Speaker 7: comes down to the chips and what they've done. From

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Speaker 7: a silicon perspective, it's the best smartphone in the world,

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Speaker 7: I think by by miles at this point.

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Speaker 4: Which raises a question in my mind, which is maybe

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Speaker 4: Apple is the cleaner shirt in a dirty hamper or

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Speaker 4: whatever the expression is. Yet the overall macro backdrop is

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Speaker 4: souring in a way that is more meaningful. We saw

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Speaker 4: that from Micron yesterday as some of the expectations coming

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Speaker 4: out seem to be more negative than people previously expected.

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Speaker 4: Where do interest rates have to stay to keep your

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Speaker 4: both thesis afloat without the macro gloom getting in the way.

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Speaker 7: Yeah, any look, and we've talked about it before. I mean,

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Speaker 7: obviously it's a macro backdrop that's really causing white knuckles

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Speaker 7: across tech bowls, and I think I see from investadors

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Speaker 7: in their daily basis. Look, look, I mean my view

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Speaker 7: is that going into this next year, I believe, you know,

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Speaker 7: Fed's gonna cut at least from a backdrop perspective.

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Speaker 1: But I focus.

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Speaker 7: I'm more macro aware, micro obsessed in terms of how

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Speaker 7: we've done it, and if I look at growth in tech,

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Speaker 7: I believe it's going to be the biggest growth we've

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Speaker 7: seen in the last thirty years. And that's why a

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Speaker 7: lot of the bears that have called ten of the

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Speaker 7: last two downturns, I get it. I get their thesis.

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Speaker 7: I just think we sit here six nine months from

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Speaker 7: now and Apples an all time.

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Speaker 2: High calendar item October is upon us, and institutions are behind.

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Speaker 2: With our question, they're under owned on Apple insiders share

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Speaker 2: ownership off the Bloomberg Apple sixty six percent, Sacha Nadella

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Speaker 2: and Microsoft seventy five percent, they're under owned end of

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Speaker 2: the year. Do you get a massive short squeeze to

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Speaker 2: get you from one seventy out to your two forty targets.

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Speaker 7: I mean our view is this is a stock that's

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Speaker 7: ultimately going to have a two in front of it

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Speaker 7: over the next three to four months. I think earning

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Speaker 7: season for Tech is going to cause I think a

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Speaker 7: major what does a.

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Speaker 2: Big institution do JP Morgan Asset Management name the company worldwide?

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Speaker 1: They're under owned in this dog. They have to buy

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Speaker 1: it in the year end.

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Speaker 7: Right, it is a gift what I view Apple here

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Speaker 7: a golden buying opportunity, and institutions that I talk to

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Speaker 7: continue it's a groundhog Day situation. New York City cab

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Speaker 7: drivers barish on Tech and Apple into earning season, and

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Speaker 7: I think we sit here end of the year and

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Speaker 7: we look back and this was an opportunity going into

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Speaker 7: what I view as a mini supercycle, especially as everyone's

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Speaker 7: position right now in big tech.

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Speaker 6: It's China a groundhouk Day situation, Isn't that new?

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Speaker 7: Well? I think when you look at China, I mean

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Speaker 7: even if you go back the worries about government ban

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Speaker 7: and everything we've seen, but yet you see the lines.

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Speaker 7: You see Chinese consumers that are actually lining up to

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Speaker 7: buy iPhone. So I think when I look at China,

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Speaker 7: Cook ten percent politician ninety percent CEO. That continues me

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Speaker 7: the hearts and lungs of the story. So I just

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Speaker 7: view that as one where it's the big bad wolf.

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Speaker 7: It's always the fear out there, but at least the

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Speaker 7: bark is going to be worse than bite. So far

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Speaker 7: in this cycle, I want to.

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Speaker 4: Just end broadening out to where the macro fears are.

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Speaker 4: Right now, this idea that we are seeing more strength

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Speaker 4: that is going to cause more profit margin compression, that's

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Speaker 4: going to lead to a lack of investment by a

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Speaker 4: lot of companies. How much does that delay or would

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Speaker 4: that delay your thesis of growing profits to new record

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Speaker 4: highs as a lot of companies invest in artificial intelligence

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Speaker 4: if they don't have the extra capital on hand to

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Speaker 4: do so.

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Speaker 7: Yeah, it would, And that's what we spend all of

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Speaker 7: our time. I'm not here in New York City, but

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Speaker 7: around the world trying to understand where the demand trends are.

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Speaker 7: I believe we're gonna sit here with cloud numbers from Microsoft, Amazon,

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Speaker 7: Google that beat expectation. We actually see the opposite that's

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Speaker 7: playing out, and I think that's really going to be

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Speaker 7: the surprise earning season. Of course, that's the biggest fear.

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Speaker 7: But at least what we see fundamentally speaking is actually

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Speaker 7: the opposite playing out despite some of the macro field.

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Speaker 6: And we comparing some businesses that are still delivering double

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Speaker 6: digit revenue growth and one business Apple the core of it,

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Speaker 6: that's not really delivering any growth at all. Two very

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Speaker 6: different stories, aren't they.

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Speaker 7: No doubt when you look at Cloud and what's happened

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Speaker 7: in AI. But I think we sit here a year

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Speaker 7: from now and that's a re accelerated growth story, not

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Speaker 7: just on iPhone but also services that's going toward double

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Speaker 7: digital growth. And I think Apple's one where the bears

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Speaker 7: for years have gotten it wrong, saying the best days

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Speaker 7: in the rearview mirror. They continue to underestimate the golden

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Speaker 7: story of Cooking Crest.

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Speaker 6: To be unfair down because they've been right because it

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Speaker 6: was a flat lined that isn't the company gone ex

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Speaker 6: growth when it comes to the iPhone.

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Speaker 7: Yeah, but I'd say they've been maybe right conceptually, but

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Speaker 7: wrong in the stock and I think wrong in the

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Speaker 7: valuation because I just view it right now. This is

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Speaker 7: just a pause from a growth perspective in what has

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Speaker 7: really been a multi year upgrade cycle that's gone on

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Speaker 7: an iPhone, and I think it's just I don't.

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Speaker 2: Mean to interrupt. It's just been a failure of stock.

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Speaker 2: Ten year annualized return twenty nine percent.

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Speaker 6: Yeah, Tom, it was backed up by tons of growth.

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Speaker 6: The point isn't the thing the question is, and it's

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Speaker 6: a valid one, is that growth isn't there anymore. They're

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Speaker 6: operating and I'm not here to make a judgment about

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Speaker 6: the future.

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Speaker 1: That's they're operating leverage.

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Speaker 6: To make an observation about the last twelve.

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Speaker 2: They're operating leverage down the income statement from single digit

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Speaker 2: revenue growth is historic. It's like back the Graham, Dot

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Speaker 2: and Coddle.

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Speaker 1: We've never seen it.

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Speaker 7: And it's just the Apple silicon chip story. Now they're

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Speaker 7: being intel their own game. They control the ecosystem.

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Speaker 2: Oh way, is the nanotechnology, the three millimeters nano technology?

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Speaker 1: Is that the cause of them being hot?

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Speaker 7: I believe that it's really more titanium in terms of

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Speaker 7: I'm serious, in terms of than it's just.

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Speaker 1: Busted your do you have the new iPhone? That's all

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Speaker 1: we want.

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Speaker 7: It's coming this week. It's coming delight, But it's on

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Speaker 7: delay because it's on delay because of demand, because Pharaoh

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Speaker 7: king and everyone's ordering it.

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Speaker 6: Then I was a kidding me. Then I was a

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Speaker 6: white fish. It's got to say it as a white.

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Speaker 1: Right now, without question.

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Speaker 2: For Global Wall Street our interview of the Day on bonds,

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Speaker 2: notes and bills, Alanonim has parchments in the usual accounting

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Speaker 2: economics from Villanova Macro Credit research at Blackrock with a

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Speaker 2: tour duty of gold and sacks and other places along

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Speaker 2: the winding at road. She joins us, what's the level

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Speaker 2: of sweat at black Rock? I mean, like, you know,

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Speaker 2: are you all the windows locked and you know you're

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Speaker 2: you're policing costs and the rest of them to be

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Speaker 2: sure they're okay.

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Speaker 8: No, I think we're all chat. We're navigating and good

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Speaker 8: morning and thank you for having me. I think we're

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Speaker 8: all navigating what is a very dynamic market that is

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Speaker 8: keeping us on our toes for sure. I think for

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Speaker 8: corporate credit investors, what we've really been focused on is

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Speaker 8: this higher cost of capital environment and we're seeing it

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Speaker 8: day by day kind of flow through the corporate credit market.

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Speaker 8: And really for corporate credit fixed rate investors, the headwood

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Speaker 8: has been on the risk free rate. We haven't seen

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Speaker 8: much repricing in credit spreads, and I think that's been

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Speaker 8: a really notable feature of the third quarter, and that's

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Speaker 8: probably something that will continue into the fourth quarter.

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Speaker 6: It's still happening just a little bit, just incrementally, we

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Speaker 6: get in that spread widening when you look within high

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Speaker 6: yield at the moment, where do you see the greater

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Speaker 6: pain being inflicted.

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Speaker 8: So we're seeing a really surprising dynamic actually where high

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Speaker 8: quality is lagging and the lower quality really parts of

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Speaker 8: the market are leading. And so if you just take

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Speaker 8: the three broad buckets of leverage loans, high yield bonds,

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Speaker 8: and investment grade bonds, arguably leverage loans are in the

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Speaker 8: weakest vulnerable fundamental position because they've been contending with this

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Speaker 8: higher borrowing costs for the past several quarters, really since

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Speaker 8: early twenty twenty two. But they've had the best performance

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Speaker 8: year to date. We don't think that that is sustainable

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Speaker 8: over the long term. As you know, we don't view

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Speaker 8: fixed rate corporate credit as immune from these headwinds either.

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Speaker 8: So I do think that there will be some words differentiation,

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Speaker 8: but I think going forward, what we've characterized it in

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Speaker 8: our fourth quarter outlook is it's going to be about

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Speaker 8: dispersion as opposed to widespread market disruption, and so when

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Speaker 8: we're dealing with potential headwinds to margins, wages, commodity costs,

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Speaker 8: potentially slowing economic growth, higher borrowing costs, we think that

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Speaker 8: that will really result in differentiation across the spectrum as

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Speaker 8: opposed to kind of this rising tide lifts all boats macro.

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Speaker 4: I want to go to the question that John asked

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Speaker 4: Ian Shepherdson, at what point will we feel the rates

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Speaker 4: that the FED has inflicted on the market and that

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Speaker 4: we're seeing priced into the risk free rate. When do

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Speaker 4: we see that wave of refinancing where companies actually starting

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Speaker 4: nine percent rates as opposed to the three percent rates

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Speaker 4: they locked in a couple of years ago.

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Speaker 8: So we're seeing it in the leverage loan market already.

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Speaker 8: For the fixed rate borrowers, we're starting to see that

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Speaker 8: come through. But frankly, I've been pleasantly surprised about the

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Speaker 8: high old market's ability to absorb the wave of September

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Speaker 8: issuance that we've had come through the high old market already.

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Speaker 8: So we do think that that will continue. That maturity

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Speaker 8: wall twenty twenty five through twenty twenty nine will need

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Speaker 8: to be addressed but we think that that will continue.

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Speaker 4: Just I really I'm curious though about where this money

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Speaker 4: is coming from, right, is this coming from another pool

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Speaker 4: like treasuries or is this coming from stalk investors.

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Speaker 8: Yeah, So we've done some surveys as a firm across

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Speaker 8: institutional investors, and there is a growing interest to deploy

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Speaker 8: capital into fixed income, largely due to the repricing and

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Speaker 8: all in yields that we've seen over the past few quarters.

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Speaker 8: I would say we're also seeing increased interest in areas

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Speaker 8: like private credit as well. So I do think there

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Speaker 8: was a decent amount of cash on the sidelines for

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Speaker 8: investors to kind of play in the new issue market.

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Speaker 8: In many instances, these are credits that these investors know well,

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Speaker 8: and so if they're seeing them come through the primary

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Speaker 8: market at a discounter on sale, that can be an

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Speaker 8: attractive opportunity to deploy capital. If it's a credit that

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Speaker 8: you know well, you're comfortable with the risk, and more importantly,

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Speaker 8: I think you're comfortable with the forward and that company's

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Speaker 8: ability to navigate through this higher cost of capital environment.

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Speaker 8: But as we've discussed previously, there will be winners and

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Speaker 8: losers in this, and we're already seeing that. In terms

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Speaker 8: of defaults, I think the issue is if you have

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Speaker 8: a capital structure that is over leveraged and perhaps formed

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Speaker 8: in a low rate environment of twenty twenty one even

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Speaker 8: early twenty twenty two, those need to be right sized

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Speaker 8: and so there will be some real differentiation there.

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Speaker 2: I think your note is dead on about cost to

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Speaker 2: capital and my monitor that is the ten year real yield.

439
00:20:48,600 --> 00:20:51,160
Speaker 2: There can be forty seven other tea leaves to look

440
00:20:51,200 --> 00:20:53,840
Speaker 2: at as well. So if I look at an elevated

441
00:20:54,000 --> 00:20:59,160
Speaker 2: shocking real rate where we are, I intuitively understand tangible

442
00:20:59,280 --> 00:21:03,359
Speaker 2: assets like real estate are affected immediately. How does this

443
00:21:03,600 --> 00:21:09,960
Speaker 2: new sustain real rate affect fungible assets like bonds, notes,

444
00:21:10,040 --> 00:21:10,560
Speaker 2: and bills.

445
00:21:10,920 --> 00:21:14,119
Speaker 8: I think one of the key takeaways that we're expecting

446
00:21:14,240 --> 00:21:18,520
Speaker 8: is that the bar for transactions is probably going to

447
00:21:18,560 --> 00:21:21,639
Speaker 8: be higher. So if you're a corporate and you are

448
00:21:21,720 --> 00:21:24,160
Speaker 8: thinking of doing an M and a transaction, the higher

449
00:21:24,200 --> 00:21:26,840
Speaker 8: real weight may make you say this is not as

450
00:21:26,840 --> 00:21:30,000
Speaker 8: an attractive opportunity given when my financing was much cheaper

451
00:21:30,280 --> 00:21:33,000
Speaker 8: going forward for real estate and even I think for

452
00:21:33,160 --> 00:21:38,200
Speaker 8: private equity and sponsor related transactions, we need increased clarity

453
00:21:38,200 --> 00:21:40,679
Speaker 8: on the macro, we don't necessarily need a good macro,

454
00:21:41,280 --> 00:21:44,240
Speaker 8: and so for corporates that are thinking of transacting, I

455
00:21:44,240 --> 00:21:46,359
Speaker 8: think if we can get comfortable that we're at the

456
00:21:46,440 --> 00:21:48,840
Speaker 8: end of the policy cycle, that will give them some

457
00:21:48,880 --> 00:21:51,320
Speaker 8: clarity to move forward. To your point, though, Tom, the

458
00:21:51,400 --> 00:21:54,280
Speaker 8: higher cost of capital in general will probably skew those

459
00:21:54,280 --> 00:21:58,159
Speaker 8: transactions towards the acquirers that don't need to rely on

460
00:21:58,160 --> 00:22:00,640
Speaker 8: the aggressive funding to get them done. These are cash

461
00:22:00,720 --> 00:22:04,160
Speaker 8: rich pharma, cash rich tech, highly rated investment grade companies

462
00:22:04,160 --> 00:22:06,440
Speaker 8: with strong financing. I think you are going to see

463
00:22:06,440 --> 00:22:08,760
Speaker 8: a mix shift in terms of the of the skewing

464
00:22:08,800 --> 00:22:10,960
Speaker 8: of the financing activity that we see going forward.

465
00:22:11,040 --> 00:22:13,639
Speaker 6: If we can get comfortable, I feel and comfortable.

466
00:22:13,359 --> 00:22:16,560
Speaker 8: I mean, I do think we were bracing for a

467
00:22:16,640 --> 00:22:18,879
Speaker 8: higher for longer environment with a higher cost of capital,

468
00:22:18,920 --> 00:22:21,040
Speaker 8: but the repricing that we've seen has been so swift

469
00:22:21,400 --> 00:22:24,040
Speaker 8: that it's hard to really feel comfortable that we're at

470
00:22:24,080 --> 00:22:26,280
Speaker 8: the end of it. And so it's a really challenging

471
00:22:26,440 --> 00:22:27,720
Speaker 8: dynamic backdrop to navigate.

472
00:22:27,760 --> 00:22:28,080
Speaker 2: For sure.

473
00:22:28,119 --> 00:22:30,000
Speaker 6: Amounta every time I wrap up a conversation with you,

474
00:22:30,080 --> 00:22:32,520
Speaker 6: it's a clinic, A clinic with a mandolina, a black

475
00:22:32,560 --> 00:22:34,680
Speaker 6: Rock commanda thank you as a wife, Thank you very much.

476
00:22:44,560 --> 00:22:47,639
Speaker 2: Brian Steals in the uh well the right the lower

477
00:22:47,760 --> 00:22:50,760
Speaker 2: right corner of Wisconsin to bring it out. He is

478
00:22:50,800 --> 00:22:54,399
Speaker 2: the Republican from Wisconsin and we joined us today. Brian,

479
00:22:54,440 --> 00:22:58,199
Speaker 2: we're talking here about civics one oh one. How do

480
00:22:58,280 --> 00:23:01,360
Speaker 2: you respond, as a grizzled pro oh to a debate

481
00:23:02,200 --> 00:23:06,320
Speaker 2: like that, a debate that just seems so juvenile.

482
00:23:07,400 --> 00:23:09,520
Speaker 9: I think we have to ask ourselves the question at

483
00:23:09,560 --> 00:23:12,240
Speaker 9: the end of the day, did viewers walk away informed

484
00:23:12,240 --> 00:23:15,280
Speaker 9: about the most important policy issues of the day. I

485
00:23:15,280 --> 00:23:17,359
Speaker 9: don't know that that format's leading to that. We have

486
00:23:17,400 --> 00:23:21,480
Speaker 9: so many serious challenges from the fiscal standpoint to foreign policy,

487
00:23:22,000 --> 00:23:24,800
Speaker 9: and this seems to be a conversation that's built for

488
00:23:24,880 --> 00:23:25,640
Speaker 9: Twitter clicks.

489
00:23:25,960 --> 00:23:29,159
Speaker 2: We've had a president and a former president enjoy the

490
00:23:29,200 --> 00:23:33,960
Speaker 2: climbs of Detroit, Wisconsin is sort of northwest Detroit or

491
00:23:34,000 --> 00:23:37,960
Speaker 2: maybe Detroit southeast Wisconsin will let you decide that your

492
00:23:38,000 --> 00:23:42,359
Speaker 2: thoughts on the political input of these two presidents into

493
00:23:42,400 --> 00:23:43,879
Speaker 2: the UAW process.

494
00:23:44,800 --> 00:23:46,840
Speaker 9: I was born and raised in James, Wisconsin, where we

495
00:23:46,880 --> 00:23:49,880
Speaker 9: had an UAW General Motors plant that would ultimately leave

496
00:23:49,960 --> 00:23:53,280
Speaker 9: around twenty ten, and so I understand what these workers

497
00:23:53,320 --> 00:23:57,000
Speaker 9: are feeling right now who are on the picket lines. Ultimately,

498
00:23:57,880 --> 00:24:00,239
Speaker 9: workers across the country are feeling that they're wages have

499
00:24:00,280 --> 00:24:04,520
Speaker 9: not kept up with inflation, so they're fighting for more money. Politically,

500
00:24:04,600 --> 00:24:06,199
Speaker 9: I think this is the right move to go and

501
00:24:06,200 --> 00:24:08,920
Speaker 9: actually have the conversation with the men and women who

502
00:24:08,960 --> 00:24:11,440
Speaker 9: are working day in in, day out, and I think

503
00:24:11,480 --> 00:24:14,000
Speaker 9: at the end of the day, the bread and butter issue,

504
00:24:14,040 --> 00:24:17,439
Speaker 9: the fact that wages are well below inflation. The average

505
00:24:17,480 --> 00:24:19,880
Speaker 9: family is spending over seven hundred dollars a month more

506
00:24:19,920 --> 00:24:22,280
Speaker 9: today than they work two and a half years ago

507
00:24:22,400 --> 00:24:25,639
Speaker 9: for the same things, ultimately will punish Democrats.

508
00:24:25,760 --> 00:24:28,440
Speaker 4: As we talk about wages, there's a question about whether

509
00:24:28,720 --> 00:24:32,280
Speaker 4: eight hundred thousand government workers will get paid come Monday.

510
00:24:32,760 --> 00:24:34,720
Speaker 4: Given the fact that there is likely to be a shutdown.

511
00:24:34,720 --> 00:24:36,920
Speaker 4: Do you think it's appropriate for them to not get

512
00:24:36,960 --> 00:24:40,240
Speaker 4: paid in order to have some of the political rankling

513
00:24:40,280 --> 00:24:40,720
Speaker 4: worked out.

514
00:24:41,760 --> 00:24:44,760
Speaker 9: There's absolutely nothing positive that comes out of a shutdown.

515
00:24:44,800 --> 00:24:47,920
Speaker 9: It hurts the American people and the credibility of our government.

516
00:24:48,240 --> 00:24:50,760
Speaker 9: We're working to hopefully avoid that. That's going to be

517
00:24:50,800 --> 00:24:54,760
Speaker 9: a challenge, but hopefully cooler heads prevail here. By Saturday night,

518
00:24:55,040 --> 00:24:58,480
Speaker 9: there is nothing right with people Americans who are working,

519
00:24:58,760 --> 00:25:00,000
Speaker 9: who are not getting paid for that work.

520
00:25:00,200 --> 00:25:02,000
Speaker 4: What people are saying is that it's very likely that

521
00:25:02,040 --> 00:25:03,720
Speaker 4: there will be a shutdown, that there seems to be

522
00:25:03,720 --> 00:25:07,480
Speaker 4: an impasse, and that Kevin McCarthy is sort of not

523
00:25:07,560 --> 00:25:10,120
Speaker 4: doing his job very well as the leader of a

524
00:25:10,359 --> 00:25:13,120
Speaker 4: very fractured group. Do you think do you get the

525
00:25:13,160 --> 00:25:16,840
Speaker 4: sense that he is frustrated, that he regrets taking this job.

526
00:25:17,840 --> 00:25:19,639
Speaker 9: I think we're all frustrated. I think he's done a

527
00:25:19,640 --> 00:25:23,000
Speaker 9: pretty darn good job trying to wrangle everyone together to

528
00:25:23,080 --> 00:25:27,200
Speaker 9: move us forward. The Senate also is in dire straits.

529
00:25:27,240 --> 00:25:30,480
Speaker 9: They haven't moved their funding bills either. The entire system

530
00:25:30,600 --> 00:25:34,120
Speaker 9: of spending in Washington is completely broken and it needs

531
00:25:34,119 --> 00:25:37,159
Speaker 9: a complete rewrite. We're also here forty eight hours away.

532
00:25:37,480 --> 00:25:39,240
Speaker 9: What do we do? I think we really need to

533
00:25:39,280 --> 00:25:42,639
Speaker 9: come together to pass a clean stopgap measure keep funding

534
00:25:42,680 --> 00:25:45,480
Speaker 9: in government moving forward while we work out the details

535
00:25:45,520 --> 00:25:46,800
Speaker 9: of these important spending bills.

536
00:25:47,000 --> 00:25:48,200
Speaker 4: But you know, I want to just push back a

537
00:25:48,240 --> 00:25:51,080
Speaker 4: little bit because a congressman style you said that Senate

538
00:25:51,119 --> 00:25:54,240
Speaker 4: has their own problems. Mitch McConnell actually is working together

539
00:25:54,480 --> 00:25:56,679
Speaker 4: with the Democrats to try to come up with something.

540
00:25:56,840 --> 00:26:01,160
Speaker 4: They are passing through certain measures. An just about this

541
00:26:01,320 --> 00:26:03,960
Speaker 4: being both sides of the aisle? Is this a fundamentally

542
00:26:04,000 --> 00:26:07,119
Speaker 4: problematic issue with the House and really has nothing to

543
00:26:07,119 --> 00:26:09,000
Speaker 4: do with the Senate? It really is a House issue

544
00:26:09,160 --> 00:26:12,000
Speaker 4: led by some of the factors fic the fractures in

545
00:26:12,040 --> 00:26:13,200
Speaker 4: the Republican Party.

546
00:26:13,960 --> 00:26:15,719
Speaker 9: I'd offer it to you that there's a few members

547
00:26:15,760 --> 00:26:17,680
Speaker 9: on the Republican side in the House that probably get

548
00:26:18,080 --> 00:26:20,639
Speaker 9: a lot more media attention. But I would note that

549
00:26:20,680 --> 00:26:23,399
Speaker 9: as we actually look at the appropriations bills moving forward,

550
00:26:23,480 --> 00:26:26,879
Speaker 9: the Senate is maybe further behind than the House. Neither

551
00:26:27,200 --> 00:26:29,879
Speaker 9: are doing a good job. The underlying system here in

552
00:26:29,920 --> 00:26:33,560
Speaker 9: which we're working on spending in DC completely broken.

553
00:26:34,640 --> 00:26:39,479
Speaker 2: Congressman, would Ronald Reagan recognize your party? It seemed like

554
00:26:39,520 --> 00:26:42,440
Speaker 2: the nation we know this well has moved conservative over

555
00:26:42,480 --> 00:26:46,800
Speaker 2: the last twenty thirty dare I say forty years as well?

556
00:26:47,240 --> 00:26:50,920
Speaker 2: Where would Ronald Reagan fit into your modern GOP?

557
00:26:52,359 --> 00:26:54,680
Speaker 9: I think we're still a center right country, and I

558
00:26:54,720 --> 00:26:56,960
Speaker 9: think Ronald Reagan would be able to lead this well.

559
00:26:57,000 --> 00:26:59,760
Speaker 9: I think the big distinction is many of our most

560
00:27:00,040 --> 00:27:03,560
Speaker 9: our loudest policymakers are no longer speaking in the aspirational

561
00:27:03,640 --> 00:27:07,280
Speaker 9: tones that Ronald Reagan did. If we returned as conservatives

562
00:27:07,440 --> 00:27:10,480
Speaker 9: and talked about how we're going to produce opportunity, addressed

563
00:27:10,520 --> 00:27:11,000
Speaker 9: the big.

564
00:27:11,160 --> 00:27:12,600
Speaker 2: You do it. I don't mean to interrupt, but because

565
00:27:12,640 --> 00:27:16,000
Speaker 2: of time, concressmen, you nailed it, You absolutely nailed it.

566
00:27:16,400 --> 00:27:17,640
Speaker 1: Why can't your.

567
00:27:17,640 --> 00:27:23,520
Speaker 2: GOP leadership insist on that aspirational tone.

568
00:27:24,160 --> 00:27:28,040
Speaker 9: The broader media environment, Twitter and others seem to like

569
00:27:28,080 --> 00:27:31,000
Speaker 9: the confrontation. As we saw on the debate stage last night.

570
00:27:31,240 --> 00:27:33,840
Speaker 9: There aren't enough programs like yours that have substantive and

571
00:27:33,880 --> 00:27:36,640
Speaker 9: serious conversations about the policy issues of the day.

572
00:27:36,680 --> 00:27:37,159
Speaker 1: Okay, but you.

573
00:27:37,200 --> 00:27:39,880
Speaker 2: Got a guy in New York City, mister Trump, who

574
00:27:39,960 --> 00:27:44,400
Speaker 2: invented a GOP of grievance. It's a grievance party, which

575
00:27:44,440 --> 00:27:49,040
Speaker 2: is anathema to Jamesville, Wisconsin. How do you go from

576
00:27:49,080 --> 00:27:53,720
Speaker 2: a grievance GOP, not back to but towards something new

577
00:27:54,040 --> 00:27:58,280
Speaker 2: that is that aspiration of the GOP back to eighteen sixty?

578
00:27:59,280 --> 00:28:01,240
Speaker 9: Well, I can tell you when I'm at home in Wisconsin,

579
00:28:01,280 --> 00:28:04,680
Speaker 9: which founded the Republican Party and rippin Wisconsin, people are

580
00:28:04,720 --> 00:28:08,359
Speaker 9: still optimistic, believe our best days are ahead, recognize we

581
00:28:08,400 --> 00:28:11,439
Speaker 9: have serious and substantive challenges and what I think we

582
00:28:11,520 --> 00:28:14,040
Speaker 9: need as a leader of the party that talks about

583
00:28:14,160 --> 00:28:16,440
Speaker 9: how we are going to move forward in a difficult

584
00:28:16,440 --> 00:28:17,040
Speaker 9: period of time.

585
00:28:17,320 --> 00:28:19,080
Speaker 6: Congressman thank you. We got to clip some of that

586
00:28:19,119 --> 00:28:22,159
Speaker 6: and put it in primose. Congressman Brian Stylebe, thank you

587
00:28:22,240 --> 00:28:24,400
Speaker 6: very much, Seph for joining us on the Nightis as

588
00:28:24,400 --> 00:28:26,440
Speaker 6: a clock is ticket to Wall, It's take potential Shutdown.

589
00:28:26,600 --> 00:28:30,439
Speaker 2: Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify, and

590
00:28:30,560 --> 00:28:34,800
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591
00:28:35,040 --> 00:28:38,520
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592
00:28:38,640 --> 00:28:43,160
Speaker 2: iHeartRadio app, tune In, and the Bloomberg Business app. You

593
00:28:43,240 --> 00:28:47,239
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594
00:28:47,280 --> 00:28:48,360
Speaker 2: the Bloomberg Terminal.

595
00:28:48,760 --> 00:28:52,960
Speaker 1: Thanks for listening. I'm Tom Keen and this is Bloomberg

596
00:29:00,760 --> 00:29:01,200
Speaker 4: Is the most