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Speaker 1: Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Speaker 2: I think of Nirvana mostly as just the grunge band,
Speaker 2: but it's actually, I guess a state you can achieve
Speaker 2: if you what do enough yoga right.
Speaker 3: I guess there are some good you know, good meditation, yoga,
Speaker 3: breathing right, like get there.
Speaker 4: I like that, all right, So let's see what he
Speaker 4: has to say when it comes to the Nirvana scenario.
Speaker 4: The story the most right on the Bloomberg terminal has
Speaker 4: been really all day.
Speaker 3: So great to have back with us.
Speaker 4: I know you spoke to him earlier on TV, but
Speaker 4: right now joining us on Bloomberg Business Week at your
Speaker 4: Denny founder of your Denny Research, and.
Speaker 3: With us on Zoom in New York City.
Speaker 4: Ed, thank you so much for joining us. Talk to
Speaker 4: us about you know, your thinking this inverted yield curve
Speaker 4: that is like gloom and doom.
Speaker 3: We're going to have a recession, and.
Speaker 4: Yet you see it differently. Talk to us about it.
Speaker 4: And how you came to that.
Speaker 5: I do. Actually I wrote a short little book back
Speaker 5: in twenty eighteen titled what is the ill Curve really forecasting?
Speaker 5: And came to the conclusion that it's had a great
Speaker 5: record of forecasting recessions. But what it really does is
Speaker 5: forecasts the process that in the past led to recessions.
Speaker 5: So when the yell curve inverts, basically bond investors are saying,
Speaker 5: we are willing to buy a ten year bond at
Speaker 5: a yel below the two year because we think if
Speaker 5: the FED keeps raising rates, or even if they leave
Speaker 5: them here, something's going to break in the financial system.
Speaker 5: There'll be a financial crisis, and that will morph into
Speaker 5: an economy white credit crunch. And that's what caused recessions
Speaker 5: in the past. It wasn't the inverted yell curves. The
Speaker 5: inverted yell curve just anticipated that something bad would happen
Speaker 5: if the FED continue to raise interest rates. And so
Speaker 5: it's got a pretty good track record, a very good
Speaker 5: track record of anticipating exactly that kind of process. Now,
Speaker 5: how about the current situation. All in the current situation,
Speaker 5: it's done a great job, again of anticipating a financial crisis,
Speaker 5: we had a banking crisis back in March, but this
Speaker 5: time the FED came in so quickly with a liquidity
Speaker 5: facility to stabilize the situation. I mean, the FEDS used
Speaker 5: to play whack them all with these problems since two
Speaker 5: thousand and eight, two thousand and nine, so they whacked
Speaker 5: them all this time, and as a result, we did
Speaker 5: not so far get an economy white credit crunch are
Speaker 5: a recession.
Speaker 2: What do you think about this Fed ed? I mean
Speaker 2: you've worked for various FED I guess boards from the
Speaker 2: White House, from Wall Street? What do you think about
Speaker 2: Jerome Powllin how he's done here?
Speaker 5: Well, I think it's going to work out this time.
Speaker 5: There's a Tennessee on Wall Street to what sort of
Speaker 5: bemoan everything that the FED is doing. They clearly don't
Speaker 5: know what they're doing. Seems to be sort of a
Speaker 5: knee jerk reaction of FED watchers on Wall Street and
Speaker 5: other places. But I think they may actually have got
Speaker 5: that right this time. I mean, clearly they were laid
Speaker 5: in tightening, but once they realized that, they moved very
Speaker 5: aggressively from zero to five hundred basis points above zero
Speaker 5: with the FED funds rate and I think that's worked
Speaker 5: pretty well in moderating inflation without causing a recession so far.
Speaker 5: And I think again, they came in just in the
Speaker 5: nick of time here. Actually, they came in very quickly
Speaker 5: in dealing with the financial crisis that occurred in March,
Speaker 5: and as a result, we haven't had the typical process
Speaker 5: of financial crisis, credit crunch, and recession.
Speaker 3: Hey, and one thing Matt and I were talking about
Speaker 3: is the difference between the.
Speaker 4: Different yield curves. Right, we talk about the two in
Speaker 4: the ten, we talk about the three month in the ten.
Speaker 3: What is the yield curve that.
Speaker 4: You think individuals need to focus on to really get
Speaker 4: an idea of Okay, wait, yeah, we're headed for a recession.
Speaker 5: Well, the Index of Leading Economic Indicators is an important
Speaker 5: series and it tends to have a good track record
Speaker 5: of anticipating recessions. And one of its components is, in
Speaker 5: fact the shape of the Yelk curve. But it's the
Speaker 5: spread between the federal funds rate and the tenure yield.
Speaker 5: And so in this situation, I prefer the two year
Speaker 5: versus the tenure because I think the two year gives
Speaker 5: us a more day by day view of what the
Speaker 5: credit markets are thinking. Whereas the FED funds rate is
Speaker 5: totally driven by the Fed. The two year tends to
Speaker 5: anticipate what the Fed's going to do very well.
Speaker 2: But I think Powell in the past has talked about
Speaker 2: the three month ten year spread. I feel like Cam Harvey.
Speaker 2: I'm not sure which one he uses, but he kind
Speaker 2: of gave us this idea, right, He's a professor. I
Speaker 2: think at Duke who gave us this idea that the
Speaker 2: yield curve inversion could forecast a recession. Have we seen
Speaker 2: the three month tenuere spread invert and not had a recession?
Speaker 5: Well, again, the inverted yell curve was one of the
Speaker 5: components of the Index of Leading economic indicators. On both
Speaker 5: those series have had a spectacular track record of anticipating recessions.
Speaker 5: I think the last eight recessions were anticipated by an
Speaker 5: inverted yeal curve and by declining leading indicators. There have
Speaker 5: been some instances where they started to flash orange and
Speaker 5: nothing terrible happened. Those were basically consistent with mid cycle
Speaker 5: slowdowns in the economy, otherwise known as rolling recessions, and
Speaker 5: I think that's what's been going on in the current situation.
Speaker 5: I think We've actually had a recession since the beginning
Speaker 5: of last year. It's just been a rolling recession. It's
Speaker 5: been hitting different sectors at different times. It's certainly ask
Speaker 5: anybody in the housing market that's definitely been in a
Speaker 5: recession since the beginning of last year, and same thing
Speaker 5: goes for goods for the past year. There's been a
Speaker 5: recession in a good sector.
Speaker 4: Yeah, our rich Miller is highlighting you know, you're thinking
Speaker 4: about rolling recessions.
Speaker 3: You know, Cam, I mean Cambell Harvey also.
Speaker 4: No, I wasn't calling him camp but I was just
Speaker 4: saying Cambll Harvey, who also came up with this he
Speaker 4: for our story, said it's too early to say that
Speaker 4: the curve in version is a false signal. He said,
Speaker 4: the big question is not whether the downturn is coming,
Speaker 4: it's how severe it will be. I do worry that
Speaker 4: the FED, who two more raid hikes, will put enough
Speaker 4: gasoline on the fire that is going to push us
Speaker 4: in a very negative direction.
Speaker 3: Is that still a risk in your view?
Speaker 5: Well, that's what makes markets right. My view his view,
Speaker 5: and I guess my view is that the Yeld curve
Speaker 5: isn't going to work this time. As a predictor of
Speaker 5: a recession. It's worked very well as a predictor of
Speaker 5: a financial crisis caused by the FED raising interest rates.
Speaker 5: But I don't think we're going to get a recession
Speaker 5: out of it. But it is an open debate. I'll
Speaker 5: conceive that. I mean, you know, nobody's concluding that I'm
Speaker 5: right or the other side is right. It's just the
Speaker 5: other side has more history, you know, favoring the a
Speaker 5: recession outlook. But look, it's been since last summer that
Speaker 5: the yield curve has been inverted. It's been since December
Speaker 5: twenty twenty one that the index of leading indicators has
Speaker 5: been declining. And yet we don't have an economy writer recession.
Speaker 5: But I think we've had a rolling recessions. Right's been
Speaker 5: just hunky dory.
Speaker 2: I think Harvey actually is closer to your camp than
Speaker 2: the quote in our story illustrates, because I've talked to
Speaker 2: him in the last few months and he says this
Speaker 2: time is different and not that the yield curve in
Speaker 2: version is not signaling a recession. I want to ask you,
Speaker 2: you wrote FED watching for fun and profits, but you
Speaker 2: also like movie watching for fun, which I know because
Speaker 2: I spoke to you earlier about Oppenheimer. Carol and I
Speaker 2: are both excited about Barbie, but Oppenheimer's another one that
Speaker 2: just crushed it at the box office this weekend. What
Speaker 2: did you think, Well, you know, I.
Speaker 5: Had a choice of going with my daughter and her
Speaker 5: friends to see Barbie or going to see Oppenheimer. I
Speaker 5: decided to go see Oppenheimer, but she said she want
Speaker 5: I heard some bad reviews of Barbie, but she said
Speaker 5: that she really enjoyed it and wants to see it again,
Speaker 5: so I may join her because it's a cultural happening clearly,
Speaker 5: But with regards to Oppenheimer, it was an outstanding movie.
Speaker 5: The directing was awesome. Christopher Nolan did an amazing job
Speaker 5: of kind of going behind the story, not just behind
Speaker 5: the story, but behind Oppenheimer and looking at kind of
Speaker 5: Oppenheimer and it's times. I certainly had a understanding of
Speaker 5: the domestic and geopolitical consequences of developing and using the
Speaker 5: Adam baumb And then you know, there's certainly some philosophical
Speaker 5: discussion of what does it mean that humanity has created
Speaker 5: this horrible instrument of mass destruction that can just basically
Speaker 5: wipe out creation. So it's it's it's a three hour movie,
Speaker 5: but it goes by pretty quick, and I thought it
Speaker 5: was extremely well done.
Speaker 3: I love that.
Speaker 2: I really want to see it.
Speaker 3: I want to see both of the movies. Actually me too.
Speaker 4: Can I ask you real quickly, I'm going to go
Speaker 4: back to markets twenty five seconds. You made some great
Speaker 4: forecasts on Dow five thousand down ten thousand.
Speaker 3: Where do you see markets going from here? Just quickly?
Speaker 5: Well quickly, I say, I think we're going to go
Speaker 5: to forty eight hundred to fifty four hundred by the
Speaker 5: end of the next year, and I think more to
Speaker 5: the top of that range in the bottom.
Speaker 3: All right, that sounds like optimism to me.
Speaker 4: Good to leave it there, ed Thank you so much
Speaker 4: the movies, the markets.
Speaker 3: I talked a little Nirvana. That was really great. We
Speaker 3: really appreciate it, Edgar.
Speaker 2: Yeah, be well.
Speaker 4: Edyard Denny, founder of your Denny Research with us on
Speaker 4: zoom in New York City. But someone who has seen
Speaker 4: so many different market cycles, and I think how many
Speaker 4: times we've talked to.
Speaker 2: Him, Yeah, I say, you know, he worked at the Treasury,
Speaker 2: who worked for the Federal Reserve Bank of New York.
Speaker 2: He worked for the Federal Reserve, Board of Governors, and
Speaker 2: then various many Wall Street organizations.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 2: Now, we're going to talk about Twitter, right.
Speaker 3: We're gonna text everything app.
Speaker 2: Well it still is if you look at Twitter dot
Speaker 2: com and the ur L is still Twitter dot com.
Speaker 3: They're still working on it.
Speaker 4: Yeah.
Speaker 3: No, I went to Twitter with those Aria. Let's let's see.
Speaker 3: You know who knows about it.
Speaker 4: Bloomberg News Technology porter Alexbarenka, she's on zoom in La.
Speaker 3: I mean it feels like Elon's flywey oh.
Speaker 2: I see the X on Twitter now, yeah, it was
Speaker 2: on it, but it is still the u r L. Right, Alex,
Speaker 2: When are they going to change that? Do they get
Speaker 2: X dot com? Is that already?
Speaker 6: Given what I do know, A Matt is that I
Speaker 6: don't know when they're going to change that. In typical
Speaker 6: Elon Musk fashion, this change happen and basically late last
Speaker 6: night on the app now formerly known as Twitter, Musk
Speaker 6: was tweeting, Hey guys, we're going to change the name
Speaker 6: if somebody can come up with a good logo, pseudo
Speaker 6: crowdsourcing it as he's wont to do with follow tweets
Speaker 6: or I guess we now call them exers or some
Speaker 6: other name that will come up. And wouldn't you know,
Speaker 6: twelve hours ago the app is now called Twitter. So
Speaker 6: this kind of change across the board. It wasn't, let's say,
Speaker 6: a rollout that you'd see in other rebrandings of major
Speaker 6: technology or any other firm for that matter.
Speaker 2: So, Mike, two questions are is this just something that
Speaker 2: Elon Musk is trying to do to get attention back
Speaker 2: from Threads, which must by now have added two hundred
Speaker 2: million users. And also, is Linda Yakarino the CEO? Is
Speaker 2: she in charge of stuff or does she just kind
Speaker 2: of follow on tweet whatever Elon does.
Speaker 6: Well, I'll take the first question first.
Speaker 5: On X.
Speaker 6: Elon Musk has been obsessed with the idea of X
Speaker 6: for a long time. Our colleague Max Chafkin, who wrote
Speaker 6: a book on PayPal where Musk kind of made his name,
Speaker 6: reminded us that back then he tried to get PayPal
Speaker 6: called X and that didn't work. And of course we
Speaker 6: have SpaceX, the Tesla Model X, and his child's nickname
Speaker 6: is X. So this is something that we kind of
Speaker 6: knew was combing. It's something that he had announced when
Speaker 6: he bought this company. But now I guess in the
Speaker 6: snap of the fingers and the turning on of a
Speaker 6: big light projected on to Twitter's headquarters or Ex's headquarters,
Speaker 6: it's now official. But on here second question, So Musk
Speaker 6: did bring in Linda Yakarino, the former media executive, to
Speaker 6: run as CEO. Here You saw her today with like
Speaker 6: really jargony business speak, kind of piling on the excitement
Speaker 6: about this name change. You also saw you might have
Speaker 6: seen there were reports that Yakarino actually sent a letter
Speaker 6: out to employees. But there was something really interesting.
Speaker 7: In there that I noticed.
Speaker 6: She was talking about how this name change is the
Speaker 6: beginning of this second act that a lot of companies
Speaker 6: don't have a chance to do, and she pointed out
Speaker 6: that they have the opportunity to do this together. I
Speaker 6: will just point out that is very different than how
Speaker 6: this name change played out last night, not actually within
Speaker 6: the company but on the internet. As Musk is wants
Speaker 6: to do well.
Speaker 4: I just want to know was Linda part of this
Speaker 4: decision or did she play catch up?
Speaker 6: It seems like she is playing a lot of catchup.
Speaker 6: And because this is something that Musk has talked about
Speaker 6: in the past, I would hamper to guess that this
Speaker 6: predated Yakarino's kind of tenure here at Twitter. What she
Speaker 6: will have to do is continue to reassure advertisers, kind
Speaker 6: of the monetary lifeblood of X or Twitter, of this
Speaker 6: social media app, that this is a place that they
Speaker 6: should be spending their money. If you are an advertiser
Speaker 6: and you sit back and you kind of see these changes,
Speaker 6: there's two ways to think about it. There's the way
Speaker 6: that Musk really wants you to that Yakarina laid out
Speaker 6: in her letter to employees that this is the moves
Speaker 6: of an inventor, an inventive company who moves fast and
Speaker 6: is really agile. But kind of the bane of an
Speaker 6: advertiser's existence is uncertainty and quick changes, and Twitter or
Speaker 6: X has already been kind of having some struggles convincing
Speaker 6: advertisers that their platform is safe in a place that
Speaker 6: they should spend money. So whether or not she was
Speaker 6: involved in this decision. She is foresore as a CEO
Speaker 6: going to have to take the brunt a really important
Speaker 6: group of stakeholders in those advertisers to convince them that
Speaker 6: this is the beginning of something new and not just
Speaker 6: a continuation of kind of a maturial leader.
Speaker 4: Can I just say, though Twitter great brand name, Most
Speaker 4: would argue, why the heck would you start messing around
Speaker 4: with wet and we tweet it?
Speaker 3: It makes complete sense.
Speaker 6: It's fascinating and I can't imagine changing the name of
Speaker 6: Google or Kleenex. So you're losing what a decade and
Speaker 6: a half of history. I don't know you can tell
Speaker 6: in this interview, Guys, I'm struggling to know what to
Speaker 6: call it right now. I guess it'll sink and eventually
Speaker 6: I still don't have a new word for the term tweet.
Speaker 6: Maybe we'll be xing, I'm not quite sure.
Speaker 3: And that just come on totally.
Speaker 2: It's like something completely different.
Speaker 3: Exactly be for Bloomberg after Dark.
Speaker 2: Right, Well, listen, Alice, you you always impress me with
Speaker 2: your You've got your finger on the pulse of the zeitgeist,
Speaker 2: as Tom Kean would say, But it's a much younger
Speaker 2: thing than that. Are you involved in threads? Did you
Speaker 2: cross over like so many other people did. Is that
Speaker 2: has that really got any staying power or do people
Speaker 2: still all tweet?
Speaker 6: I am still I did cross over to threads because
Speaker 6: it was such an easy sign on from Instagram. I
Speaker 6: do feel this kind of moment of opportunity because Twitter
Speaker 6: looks like a different place than it did, so I've
Speaker 6: looked to threads. But also I'm still not sure what
Speaker 6: the long term value of threads will be for me,
Speaker 6: and I think a lot of users are still exploring
Speaker 6: that too. So while they are certainly with Meta being
Speaker 6: obviously a tech giant who knows how to monetize social
Speaker 6: media products, they're absolutely a challenger to the likes of Twitter.
Speaker 6: I also question where you are spending their time. The
Speaker 6: average TikTok user, say in the US, is spending ninety
Speaker 6: five minutes a day on that app. That is an
Speaker 6: obscene amount of time compared to twenty thirty forty minutes
Speaker 6: on the likes of Instagram or Twitter. So you know, yes,
Speaker 6: I'm on threads. I still think it's a question mark
Speaker 6: and it's not clear that they're kind of capturing this
Speaker 6: opportune moment as you have elon musk making noise over
Speaker 6: here at X but certainly I try to be in
Speaker 6: front of the zeit guys for you guys to see
Speaker 6: what's moving and shaking as a chronically online human being.
Speaker 3: How old are the people on TikTok.
Speaker 6: The people on TikTok are actually getting older, so majority
Speaker 6: of their users are under the age of thirty or
Speaker 6: thirty five, but you see about a quarter of their
Speaker 6: users are actually into their late thirties, forties and fifties.
Speaker 6: You have TikTok grandma. So this app, TikTok used to
Speaker 6: be kind of really of the use, but they're starting
Speaker 6: to encroach on that territory that Facebook, Instagram others have
Speaker 6: really kind of made their name on. And just today
Speaker 6: TikTok has also rolled out a text format, so there's
Speaker 6: maybe a little jab at both Twitter or x and
Speaker 6: threads in there as well. From this fast growing competitor
Speaker 6: who used to focus on video, who's now saying, hey, look,
Speaker 6: at least we can give you an option to post
Speaker 6: here on text.
Speaker 2: All right, This is I mean, it's all kind of
Speaker 2: fascinating stuff, but at the end of the day, journalists
Speaker 2: for the most part, are on Twitter, right. I mean,
Speaker 2: you look at threads, Alex, but I'm sure you don't
Speaker 2: wake up in the morning and it's the first thing
Speaker 2: you do.
Speaker 6: I do look at Twitter. Journalists are on Twitter, and
Speaker 6: increasingly I would make the argument for LinkedIn as well,
Speaker 6: because you kind of have that business slant for business
Speaker 6: journalists like me, and again that predictability of what audience
Speaker 6: do you have where that's going to be the thing
Speaker 6: that Threads is going to need to kind of answer
Speaker 6: for users, for folks like me who are kind of
Speaker 6: the core audience, and the folks who read Bloomberg and
Speaker 6: Business Weekends and fin twit.
Speaker 2: Right, it's fin twit for our for our listeners, for
Speaker 2: our viewers, for our readers.
Speaker 3: But it's absolutely it's funny that you say LinkedIn.
Speaker 4: I feel like that is like the sleeper social media
Speaker 4: app that we all kind of pooh poohed.
Speaker 3: It's like, I'm not looking for a job, why do
Speaker 3: I have to be on it?
Speaker 4: And increasingly when you do an interview with somebody or
Speaker 4: I get reached out, that's where I get pitches Like
Speaker 4: that has become I feel like almost the sleeper social
Speaker 4: media app, Alex.
Speaker 6: It has, and I can tell you that the comment
Speaker 6: dialogue on LinkedIn I see there looks like what my
Speaker 6: Twitter dialogue used to look like five years ago. So
Speaker 6: it's very interesting you have this kind of thinkfluent or
Speaker 6: vibe that LinkedIn's been known for people trying to show
Speaker 6: off their brains and their expertise. But because I think
Speaker 6: a lot of folks have been looking for another place
Speaker 6: that can replace what Twitter once was a place to
Speaker 6: share new updates and kind of those day to day
Speaker 6: things that are professionally slanted, folks are increasingly looking to LinkedIn,
Speaker 6: and I'm seeing not only the posting but also the
Speaker 6: engagement in the comments that I used to see elsewhere,
Speaker 6: whether that's on a tech story an article, or I
Speaker 6: post a lot of videos there as well, and those
Speaker 6: tend to do well too, So interesting sleeper idea there
Speaker 6: with LinkedIn, But certainly there's an opportunity for a text
Speaker 6: forward place to kind of take some audience here.
Speaker 3: You are the best.
Speaker 4: Alex Parinka technology port at Bloomberg News knows her stuff
Speaker 4: on Zoom from La Alex.
Speaker 3: Thanks.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 4: So I don't have any easy sigue to go from
Speaker 4: that to talking about Barbie, which I both have not
Speaker 4: yet seen.
Speaker 2: No, I actually had tickets on Saturday night.
Speaker 3: I know you talked about having tickets, and.
Speaker 2: My babysitter canceled kind of last minute ish. Hey, so so.
Speaker 3: You didn't get to go.
Speaker 2: But it was one of those days where I had
Speaker 2: I had a bunch of people over. There was so
Speaker 2: much going on early day. I was actually kind of
Speaker 2: happy just to put the down and go to bed.
Speaker 3: Yeah, but you both went nap time, go to sleep.
Speaker 2: But someday I will go see it. Now, I kind
Speaker 2: of want to see Oppenheimer more.
Speaker 3: Because of Edyard Denny. Yeah, I kind of want to
Speaker 3: see both.
Speaker 4: I want to see Appenheimer followed by Barbie. It's like dinner, dinner,
Speaker 4: and dessert.
Speaker 2: I just feel like, well, we can talk about it well.
Speaker 4: Needless to say, a lot of people did go to
Speaker 4: see both movies over the weekend.
Speaker 3: It was a big weekend for both Barbie.
Speaker 4: They took in about one hundred and sixty two million
Speaker 4: in ticket sales. According to com Score. It was the
Speaker 4: highest grossing debut of the year, passing the Super Mario
Speaker 4: Brothers movie, which probably.
Speaker 2: Don't understand how that was a winner. Who says, man,
Speaker 2: I can't wait to go see Super Mario Brothers this weekend.
Speaker 2: I loved the game just as much as the next guy,
Speaker 2: but I don't want to see a cartoon movie about it.
Speaker 2: As a grown adult.
Speaker 3: I don't know, but people go.
Speaker 4: Oppenheimer meantime brought in about eighty point five million. But
Speaker 4: we want to talk really about the merchandising mite of Barbie,
Speaker 4: all the Barbie merch that is out there. Katy Thomas,
Speaker 4: his lead at the Carnie Consumer Institute. She's on Zoom
Speaker 4: from Pittsburgh, Pennsylvania. Hey, Katie, nice to be talking with
Speaker 4: you again.
Speaker 3: I just say.
Speaker 4: Everywhere I turn, and I'll be honest. I was in
Speaker 4: Zara because they did this whole pop up store and
Speaker 4: there's all this pink and people were crazy buying anything
Speaker 4: and everything, and some of its closed, some of its stuff.
Speaker 3: But talk to us about the merch.
Speaker 7: Yes, I mean the sheer ubiquity of the marketing campaign
Speaker 7: has been unlike anything I've ever seen, and it did
Speaker 7: a really great job going across category. So to your point,
Speaker 7: you know you saw it Zara, You've seen it a
Speaker 7: lot in appareil and in beauty of course too, but
Speaker 7: then also the Barbie dream House, you say you're seeing
Speaker 7: it in home everything from paint colors to furniture.
Speaker 3: So that's where I think the.
Speaker 7: Marketing team did an incredible job of really just being
Speaker 7: all encompassing in terms of wanting to meet consumers where
Speaker 7: they are and just get eyeballs when in a time
Speaker 7: where I mean, as you were just talking about, there's
Speaker 7: so much competition across movies, brands and the like that
Speaker 7: you know, that team really was like, we're just gonna
Speaker 7: be everywhere all the time, and it worked.
Speaker 2: So I mean this, both Super Mario and Barbie have
Speaker 2: in common that they are movies that come essentially from
Speaker 2: children's toys. I get that Mario is a video game
Speaker 2: and a lot of teenagers play with it as well,
Speaker 2: but is there merch for adults out of this movie?
Speaker 2: Because the difference is Barbie was a live action film
Speaker 2: with real humans playing the parts, not animated so does
Speaker 2: that mean, like, uh, what's the name of the guy
Speaker 2: from Ryan? Does that mean that Ryan Gosling his jacket
Speaker 2: is now for sale?
Speaker 7: And Laura, Yes, right, Oh sure everybody wants a piece
Speaker 7: of that energy, don't they.
Speaker 6: Now.
Speaker 7: I wish what you saw actually would tell do a
Speaker 7: really nice job of was play the long game here
Speaker 7: with storytelling. And I think that's why you've seen Barbie
Speaker 7: be more successful than some of these other toys turned
Speaker 7: movie franchises. It's because they really have been building up stories.
Speaker 7: I mean, it does go back to, of course when
Speaker 7: she was created and vintage dolls, collector's items, but slowly
Speaker 7: over time they've been increasing their media presence and so
Speaker 7: that has exactly allowed for Barbie to move outside of
Speaker 7: the toy aisle into all of these other categories. And
Speaker 7: I don't think you see that same shift with most
Speaker 7: other brands, and there's just not that Barbie Kore aesthetic
Speaker 7: that again can really tap into many different categories, many
Speaker 7: different products people want to buy. I mean, and a
Speaker 7: lot of brands that even have official partnerships and if
Speaker 7: they sell something pink, you know it's Barbie.
Speaker 4: That's why I found that over the weekend and really
Speaker 4: kind of the last week or so that I know
Speaker 4: companies who didn't have any specific deal with Mattel or
Speaker 4: you know, to do some kind of connected merchandising, but
Speaker 4: they were like, we have.
Speaker 3: A pink nail polish, we have a pink jacket.
Speaker 4: Like it was just everybody was jumping on the bandwagon.
Speaker 4: I don't know what does it say for I don't know.
Speaker 4: And I also saw consumers snapping all this stuff up,
Speaker 4: buying Barbies in and her car when they went to
Speaker 4: the movies.
Speaker 3: You could buy it there. I mean, it's just kind
Speaker 3: of everywhere.
Speaker 4: Is there something to be gleaned in terms of consumption
Speaker 4: personal consumption?
Speaker 3: Well, I think, you know, Barbie.
Speaker 7: This is a bit of a unicorn. I think you know,
Speaker 7: there's already a lot of chatter how to replicate this
Speaker 7: with other movies or toys or what have you in
Speaker 7: the future, And I think this is something that will
Speaker 7: be hard to replicate. It was a lot of things
Speaker 7: coming together at once. So you're seeing a little bit
Speaker 7: of the nostalgia the gen X and millennials are having
Speaker 7: right now. You know that brand I grew up with
Speaker 7: something for my youth is really popular. You are already
Speaker 7: seeing a lot of love for bright colors and bright
Speaker 7: beauty and fashion coming out of the pandemic. We were
Speaker 7: all sick of being in our sweatpants and wanted to
Speaker 7: get out and get bright. And then there's, of course,
Speaker 7: you know, the angle just of course of women and
Speaker 7: increasingly being representative and diverse, and so Barbie kind of
Speaker 7: hit a bunch of things all at the right time
Speaker 7: that I don't know that other brands could replicate, at
Speaker 7: least in the order of growing from toy to all
Speaker 7: these other categories in the movie. I think an example
Speaker 7: in the reverse is something like Harry Potter, where when
Speaker 7: their licensing came up, I mean you can buy Harry
Speaker 7: Potter anything. I think I saw Harry Potter, you know,
Speaker 7: like glasses at Williams Sonoma. So I think it's just about,
Speaker 7: you know, really being able to go across the different
Speaker 7: categories in a way that just may not work for
Speaker 7: other brands.
Speaker 2: I heard, well, apparently according to the ultra woke, she
Speaker 2: can't be a white savior. I don't know exactly what
Speaker 2: that what I heard from some very wold people this
Speaker 2: morning that that's a problem addressed in terms of the consumer. Katie,
Speaker 2: do they have excess savings. I mean, this has been
Speaker 2: kind of a debate at the Fed for the last
Speaker 2: few months and something that is going to be decisive
Speaker 2: for the economy. You're a course at the Consumer Institute.
Speaker 2: So do we still have bank balances, you know, fatter
Speaker 2: than usual with you know, leftover stimulus.
Speaker 7: Well, I don't know specifically about savings. Savings rates have
Speaker 7: been dwindling. The stimulus money is largely spent. But what
Speaker 7: we have seen is that consumers are being just incredibly
Speaker 7: thoughtful about how they spend. So that's why we've seen
Speaker 7: retail sales continue to at least stay stable or even
Speaker 7: tick up in the face of price increases.
Speaker 3: Is because consumers.
Speaker 7: Are figuring out where to spend and where to save,
Speaker 7: so they'll especially other every day items. They're really trying
Speaker 7: to get the best bang for their buck. Stores with
Speaker 7: strong value props, you know, big box stores, dollar stores
Speaker 7: are doing well, but people are still setting money aside
Speaker 7: to save. And that's why you're also hearing stories like
Speaker 7: how you know, Taylor Swift and maybe now Barbie are
Speaker 7: saving the economy. So there is money to be spent
Speaker 7: and consumers are spending it.
Speaker 3: All right, Well, kind of interesting.
Speaker 4: I keep sharing all of the images to Matt because
Speaker 4: I can't believe you didn't know that they were clothes
Speaker 4: out there.
Speaker 2: No, No, I figured there would be. I just wanted
Speaker 2: wanted to know if they were selling you know, Ryan
Speaker 2: Gosling's specific jacket, you know, or Margot Robbie's actual wig.
Speaker 3: Oh oh, you mean, like not not.
Speaker 2: The single piece, but like a line of ken clothes
Speaker 2: for adults.
Speaker 3: They kind of did.
Speaker 2: I saw a guy on Fox who's apparently their national
Speaker 2: security advisor dressed up as you know, Don Johnson from
Speaker 2: Miami Vice. But I think it wasn't at all a joke.
Speaker 2: It was literally his outfit. He had a pale purple
Speaker 2: blazer and a T shirt on it. Yeah, it's coming back.
Speaker 4: Don't say it isn't so all right, Katie, Thanks so much.
Speaker 4: Katie Tomas, she's lead at the Carney Consumer Institute on
Speaker 4: Zoom from Pittsburgh, Pennsylvania. Don't you know everything that's old,
Speaker 4: it just comes around that.
Speaker 2: It just keeps coming. You're wearing Doc Martin's again.
Speaker 3: I know, are you?
Speaker 6: No?
Speaker 2: I did that in the nineties.
Speaker 3: You will do it again. Look, they even have cowboy hats.
Speaker 2: Taper jeans, Adidas Sambas tapp acid wash.
Speaker 4: Mom.
Speaker 3: That mom jeans thing though, man, that was wrong.
Speaker 2: Very all right.
Speaker 3: You are listening and watching Bloomberg Business Week. I'm Bloomberg
Speaker 3: Radio brother, Marco.
Speaker 2: Journal. How about you let me drive? No, no, no, honey, please,
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Speaker 3: I want to try it. It's a good question.
Speaker 1: The Drive to the Globe well by Yogadan on Bloomberg Radio.
Speaker 4: All right, everybody just got about eighteen minutes left in
Speaker 4: today's trading session.
Speaker 3: Getting ready to wrap up already the Monday trade. Carol
Speaker 3: Master along with Matthew Miller.
Speaker 4: In four Tim Stentevik and let's get to it with
Speaker 4: Alan Zephyron. He's founding partner co CEO at the registered
Speaker 4: investment advisor i EQ Capital. Usually talking remotely, but lucky
Speaker 4: for us, he made his way to the East coast,
Speaker 4: so he's here in our Bloomberg Interactive Broker studio.
Speaker 3: How are you.
Speaker 8: I'm doing great. Great to see you Carol and Matt.
Speaker 8: Great to see you today.
Speaker 3: What do you make of the market environment right now?
Speaker 8: Well, unfortunately for your listeners, I think we're a little
Speaker 8: ahead of ourselves, but there's so much momentum in the market.
Speaker 8: It's probably going to persist for a bit. But if
Speaker 8: you look at the market, the S and P five hundred,
Speaker 8: it's a nineteen percent year today and there's probably going
Speaker 8: to be zero earnings growth this year. So all it's
Speaker 8: been this year is a multiple expansion, and it's been
Speaker 8: done in the face of five hundred and twenty five
Speaker 8: basis points of FED tightening after this Wednesday. That's pretty remarkable.
Speaker 8: And to think that we're going to grow earning if
Speaker 8: you believe consensus estimates by twelve percent for the next
Speaker 8: two years after rate hikes that haven't even hit the
Speaker 8: economy yet, it's kind of hard to trade it twenty
Speaker 8: times forward earnings, which is fifteen percent above your long
Speaker 8: term average in the face of all these rate hikes,
Speaker 8: it expect double digit growth from here for the next
Speaker 8: couple of years. That seems like a stretch to us.
Speaker 8: So I don't want to say I'm overly gloomy, but
Speaker 8: a lot of good news is baked in, and with
Speaker 8: a softening economy to come, it seems it's going to
Speaker 8: be some rougher struggles with stocks for the next twelve months.
Speaker 4: We said that about BFA earlier that they thought a
Speaker 4: lot of the good news in terms of earnings was
Speaker 4: already baked in because of the stock.
Speaker 2: I've heard a lot of people today and last week
Speaker 2: really talk about a catch up trade. Since a lot
Speaker 2: of the games that you're talking about are only due
Speaker 2: to the Magnificent seven or maybe the Big eight, depending
Speaker 2: on how you want to measure it. You still have
Speaker 2: another four hundred and ninety stocks in the S and P.
Speaker 2: Not to mention, you know, the mid caps, the rustle,
Speaker 2: et cetera, that need to make gains to get there,
Speaker 2: and we're starting to see that broadening out of market gains.
Speaker 2: So do you like that?
Speaker 8: I like it in the short run, and it's remarkable.
Speaker 8: It turns out even earnings sorry multiple expansion on small
Speaker 8: and midcaps has been even greater because there's actually been
Speaker 8: a modest earnings decline in those companies.
Speaker 9: You're seeing the VIX has.
Speaker 8: Gone down, credit spreads have narrowed.
Speaker 9: In the last four months.
Speaker 8: We're up already twenty seven percent from the bottom on
Speaker 8: the S and P, and if we end up going
Speaker 8: up another five percent back to the peak, it'll have
Speaker 8: been within the next month. It'll have been the third
Speaker 8: quickest recovery in all time of a bear market.
Speaker 9: It's been extraordinarily quick.
Speaker 3: But it sounds like you don't buy it.
Speaker 8: I don't buy all of it. I certainly think the
Speaker 8: good news is built in. In the next twelve months,
Speaker 8: it's going to be rougher sledding. I think you're going
Speaker 8: to get lower than historically average rates of return, which
Speaker 8: have historically been about ten percent per year.
Speaker 9: I think we have to have multiples.
Speaker 8: Eventually compressed back to longer term avages, which are like
Speaker 8: seventeen eighteen times forward earnings, so you'll get some semblance
Speaker 8: of earnings growth. But I think it's a stretch. You
Speaker 8: think you're gonna get ten percent per annum for the
Speaker 8: next three to five years.
Speaker 2: Ed Hayman says this is a max momentum market. He
Speaker 2: compares it to the Internet gains that we saw in
Speaker 2: ninety five, the dot com in ninety nine twenty seventeen.
Speaker 2: But he says, the bears are underinvested here and the
Speaker 2: bulls will be over invested next year. Is that just
Speaker 2: too much timing for you.
Speaker 9: No, it's I mean that's the reality.
Speaker 8: Is time in the market and a long term investment
Speaker 8: perspective is the right course of action. So if I
Speaker 8: had cash today, I would just dollar cost average much
Speaker 8: more slowly into the market to buy extra time to
Speaker 8: get invested. But I'd still invest because I still think
Speaker 8: stocks are a very credible and important component of long
Speaker 8: term compounding of growth. But your starting point is not
Speaker 8: as good as it was a year ago.
Speaker 4: Is there a fixed it comes aspect to your strategy here?
Speaker 1: Yeah?
Speaker 9: Absolutely.
Speaker 8: First of all, with public rates being up the side,
Speaker 8: it's certainly attractive looking at tragedies, right why not? And
Speaker 8: even in the private markets to the degree someone has
Speaker 8: the disposition to look at non publicly traded investment vehicles
Speaker 8: but used to pay five or six percent, it's now
Speaker 8: paying over ten percent.
Speaker 3: So you're talking about private credit.
Speaker 8: Yeah, private credit is another mechanism that going to blow up. Well,
Speaker 8: I don't know if it will blow up, but it's
Speaker 8: certainly going to see a greater prevalence of defaults if
Speaker 8: we have a slowing economy in the next twelve months.
Speaker 8: But I don't believe you're going to have enough defaults
Speaker 8: to complete worsen the outcomes from private credit. You'll see
Speaker 8: modestly lower rates of return, but spreads in that private
Speaker 8: credit are still giving you double judgit yields that more
Speaker 8: than makes up the amount of defaults that you'll incur
Speaker 8: in the next twelve to twenty four months, so it.
Speaker 9: Still track this.
Speaker 8: There are public vehicles that trade that might provide daily
Speaker 8: or monthly liquidity. If you happen to be in what's
Speaker 8: called an accredited investor or a qualified purchaser and you
Speaker 8: have enough capital, you can look for private companies to
Speaker 8: help you get there too, But there are some public
Speaker 8: market alternatives that also can get you access to that
Speaker 8: asset class.
Speaker 4: Do you think it should be opened up more widely
Speaker 4: to retail investors, private credit, and private markets.
Speaker 8: I do think you should be democratized, but only to
Speaker 8: degree we have better disclosures about fees and risks, I
Speaker 8: actually think, and I'm not a big thing of regulation. Yeah, no,
Speaker 8: pop getting like the problem is there's so much legals
Speaker 8: in these documents.
Speaker 9: You just got to say flat out and big bullet
Speaker 9: fees are higher.
Speaker 3: Democratization to me sounds like good pr.
Speaker 9: It is its great parts. It's another word we on
Speaker 9: Wall Street, right, But.
Speaker 3: I mean, do you think it makes sense?
Speaker 4: Because it seems like everybody who comes in talks about
Speaker 4: public markets and the opportunities in private credit in particular.
Speaker 9: Yeah, I think it's I think it should be open up.
Speaker 8: But again, we need clear, plain English so people understand
Speaker 8: the fees they pay and the risks they take. That's
Speaker 8: what's missing. We have too many pages. Like if you
Speaker 8: ever got a home mortgage and they had two hundred
Speaker 8: pages of documents, you never read any of them, you
Speaker 8: just signed. It's the same kind of thing on all
Speaker 8: these these documents. We have to figure out a way
Speaker 8: to have much cleaner and safer, cleaner and more transparency
Speaker 8: with respect to disclosures. I think we should at that
Speaker 8: point allow investors to go in that class.
Speaker 4: You've worked at Goldman back in the day, Yeah, back
Speaker 4: in the day. It's a different day for Goldman today.
Speaker 4: What do you make of the Goldman of today.
Speaker 8: Well, first of all, when I was there, it was
Speaker 8: a private partnership, so I think just being a public
Speaker 8: company is a completely different situation. And then secondly, I
Speaker 8: think they have the pressures to try and grow earnings
Speaker 8: like any other public company, and so they find themselves
Speaker 8: divesting into other areas beyond their core competencies, and at
Speaker 8: times that works well and other times going into somewhat
Speaker 8: disparate somewhat not wholly related asset classes. Banking as opposed
Speaker 8: to investment banking, retail credit as opposed to corporate banking
Speaker 8: can lead to higher risks as well as higher return.
Speaker 8: So I think just the organization has shifted over time
Speaker 8: as a consequence of being a public company, and at
Speaker 8: times that works well, but at other times it doesn't
Speaker 8: end well.
Speaker 2: M and A coming back, you think anytime soon. This
Speaker 2: is where you know, Goldman and a lot of others
Speaker 2: have had problems, and I think on the call you
Speaker 2: heard David Soloman say that we're going to stick to
Speaker 2: this franchise and when it comes back, it's going to
Speaker 2: be great. But he didn't really make a call as
Speaker 2: to when.
Speaker 8: I think it's going to come back. But I think
Speaker 8: it's going to still be slow and plotting. As our
Speaker 8: belief at our firm is we are going to enter
Speaker 8: into our We are already in some kind of rolling, slow,
Speaker 8: shallow recession, just enough to prevent lots and lots of
Speaker 8: M and A and the volumes we saw in twenty
Speaker 8: twenty in early twenty twenty one, and when rates are
Speaker 8: this high, it mitigates to some degree the ability of
Speaker 8: companies to finance the purchases.
Speaker 9: So the business is very viable.
Speaker 8: But I think we have to slog through a difficult
Speaker 8: economic environment for the next six to twelve months before
Speaker 8: there's a lot of buoyancy to the.
Speaker 9: M and a market recovering.
Speaker 3: When does the FED start cutting rates?
Speaker 9: In you review, I don't.
Speaker 8: Yeah, I don't think the cut rates until twenty twenty four,
Speaker 8: and that's one of my issues.
Speaker 3: With the POME only next year.
Speaker 9: Yeah.
Speaker 8: Well, the problem I think is basically the conundrum is this,
Speaker 8: Typically the FED won't cut rates until it sees the
Speaker 8: economy deteriorating. When the economy deteriorates, you start to see
Speaker 8: earnings declines. It turns out, in order for the market
Speaker 8: to recover it takes about seven quarters after the SEED.
Speaker 9: Starts cutting rates doing stocks fall.
Speaker 5: Through three or four quarters positive.
Speaker 8: The explorings of getting released songs with.
Speaker 3: Studio own Iq.
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