Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
Speaker 1: my co host Matt Miller.
Speaker 2: Every business day we bring you interviews from CEOs, market pros,
Speaker 2: and Bloomberg experts, along with essential market moving news.
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Speaker 1: What a take a look at some eco data coming
Speaker 1: at here. I'm looking at the leading Economic indicators.
Speaker 3: Let me see what I pop it up on my
Speaker 3: ECO screen, which.
Speaker 1: Gives you all the economic data out there. The Leading
Speaker 1: Economic Index came in. It negative zero point six percent. I
Speaker 1: guess the bad news is it's it's a negative number,
Speaker 1: but it's in line with expectations and it's better than
Speaker 1: the prior month. But let's get some perspective on what
Speaker 1: this leading economic indicator means. Dana Peterson, she's a chief
Speaker 1: economist at the Conference Board. She joins us here. So
Speaker 1: Dana put this number in perspective for us.
Speaker 4: Sure, I mean this number is just in a string
Speaker 4: of really bad numbers of negative LAI prints the last year,
Speaker 4: and it continues to suggest when you look at the
Speaker 4: year over year measure of this that there's a recession.
Speaker 4: It's probably starting right about now. And indeed, when we
Speaker 4: look at the components, most of the components have been
Speaker 4: very weak, not only in the last month but over
Speaker 4: the last six months. And certainly credit conditions have been tightening,
Speaker 4: consumer confidence has been weaker, housing and activities been on
Speaker 4: the downturn. The only areas that have been somewhat better
Speaker 4: were certainly the labor market indicators even leading it. But
Speaker 4: even JABOS claims, which are leading indicators, have been picking
Speaker 4: up a little bit as the labor market is showing
Speaker 4: some signs of cracks.
Speaker 1: So, I mean, give us a sense, though, Dana, how
Speaker 1: is the trend here? You know, it's tough to read here,
Speaker 1: but what are you seeing in some of the data?
Speaker 1: Is you kind of do a three month or six
Speaker 1: months kind of trailing kind of look at this thing.
Speaker 4: Sure, so definitely a year on years down eight percent,
Speaker 4: so that's not great. And when we look at the
Speaker 4: six months that's down eight point seven percent, and so
Speaker 4: both these measures are pretty weak. Certainly three months, looking
Speaker 4: at three months, it's still down. So no matter what
Speaker 4: gauge or transformation you do on these data, it's telling
Speaker 4: us the same story that the economy is weakening, it's flowing.
Speaker 4: We've already seen housing activity cool. Businesses are investing less.
Speaker 4: But the key thing is the labor market and consumer
Speaker 4: spending on services. We saw in the retail sales data
Speaker 4: that consumers are still pleased to go out and go
Speaker 4: to restaurants and they are interested in services. And also
Speaker 4: the jobs market is holding up. But like I said,
Speaker 4: there are some signs of weakness, certainly amongst those former
Speaker 4: pandemic darlings that are restructuring at this time. But you
Speaker 4: still have a lot of those services industries where you
Speaker 4: have to physically show up to work still hiring. So
Speaker 4: that's the challenge certainly for our CEI, which is the
Speaker 4: current economic indicator, and that has not moved really, it's
Speaker 4: continuing to sow strength because two out of the four
Speaker 4: measures are from the labor market.
Speaker 1: So at the conference board, what is your kind of
Speaker 1: economic outlook in terms of recession?
Speaker 3: Are we having one? Are we in one?
Speaker 1: How deep will it be, how prolonged will it be?
Speaker 1: Where are you guys as you take a look at
Speaker 1: your data.
Speaker 4: Sure, we do believe a recession is going to happen.
Speaker 4: It will be short and shallow. We're thinking that we're
Speaker 4: probably going to see negative GDP growth in the second
Speaker 4: quarter where we are right now, and then it'll deepen
Speaker 4: in the third quarter, be a little less bad in
Speaker 4: the fourth quarter, and then by the beginning of next
Speaker 4: year we'll be coming out of it. So not too bad,
Speaker 4: but certainly a recession nonetheless.
Speaker 1: So in terms of inflation, that's clearly what our Federal
Speaker 1: Reserve is looking at here. And we heard comments from
Speaker 1: some FED members just over the last couple of days
Speaker 1: they were down in Amelia Island, Florida at the Atlanta
Speaker 1: FED conference Amelia Island, Florida. I mean, have a not Cleveland, John,
Speaker 1: I mean, who's kidding who here? But so, what do
Speaker 1: you think the FED is going to do with some
Speaker 1: of this data we're seeing here?
Speaker 3: Dana?
Speaker 1: Do you think this Fed's going to pause here? Do
Speaker 1: you think they even maybe even think about raising rates?
Speaker 1: Or where do you think we are here with a FED?
Speaker 4: Sure they're looking at everything. If they're looking at the
Speaker 4: leading indicators, yes, that does signal recession. But they have
Speaker 4: indicated that they are prepared for some quote unquote pain,
Speaker 4: which would be a mild recession. It's necessary to bring
Speaker 4: out inflation. And when we look at inflation, certainly last
Speaker 4: week we received the CPI, we saw some positive momentum downward,
Speaker 4: but still in all, both the headline and the core
Speaker 4: are pretty elevated. And the key drivers of underlying inflation
Speaker 4: right now are food prices on the good side, but
Speaker 4: on the services side, it's still housing in the form
Speaker 4: of rent. We should start seeing that come off in
Speaker 4: a couple of months, reflecting what's happened in home price valuations,
Speaker 4: but it's still those services, especially for travel and hotels
Speaker 4: and restaurants and healthcare, that are still very sticky, and
Speaker 4: that's what that's being challenged by. So against that backdrop,
Speaker 4: I would imagine the Fed would still look to raise
Speaker 4: interest rates at least one more time, and then once
Speaker 4: they're finished raising rates to keep them there elevated for
Speaker 4: the balands of this year.
Speaker 5: Dana Creadiegupta in New York here kind of hopping into
Speaker 5: this conversation. You're an economist by trade, of course, but
Speaker 5: from a markets perspective that doesn't seem to be priced
Speaker 5: in at all. It feels like the markets are looking
Speaker 5: ahead to cuts, are essentially just saying that the federal
Speaker 5: reserve is done hiking.
Speaker 6: And the core of that thesis is.
Speaker 5: Not only the recession call that you all were talking
Speaker 5: about at the beginning of the segment, but also the
Speaker 5: idea that the lags still haven't fully taken effect. Are
Speaker 5: you in that camp that we haven't seen the full
Speaker 5: effect of the tightening thus far, Well.
Speaker 4: No, we haven't seen the full effect because the lags
Speaker 4: are variable. It depends on what you're talking about. So
Speaker 4: certainly the housing market that's the first area of the
Speaker 4: economy to experience weakness when interest rates rise, and we've
Speaker 4: seen that. Also, businesses have pulled back on investments and
Speaker 4: capex and equipment. They're still spending on intellectual property that's
Speaker 4: kind of the digital transformation angle, but certainly businesses have
Speaker 4: pulled back. Consumers have also pulled back on durables. First
Speaker 4: of all, they're more focused on services, but also durables
Speaker 4: that anything that needs to be financed is more expensive.
Speaker 4: So the last piece of the puzzle really is services.
Speaker 4: So we're still waiting for that shoe to fall. But
Speaker 4: regarding what markets are anticipating, yes, you're right, markets are
Speaker 4: pricing in either I think most likely, you know, some
Speaker 4: kind of recession and thinking that if GDP numbers go
Speaker 4: negative or jobless or i'm sorry, jobs really weakened, that
Speaker 4: the Fed's going to blink. But I think the FED
Speaker 4: would only blink if it's really bad. And also, inflation
Speaker 4: gauges we're moving in the right direction right now, They're
Speaker 4: still very sticky, and I think the FED will would
Speaker 4: tolerate a mild recession in favor of addressing inflation. Inflation
Speaker 4: is the biggest problem in their view.
Speaker 1: All right, So I'm thinking about the labor market here
Speaker 1: and again we had a little bit better and expected
Speaker 1: jobs claims today. Where do you think the unemployment rate goes?
Speaker 1: I mean, I guess maybe just more broadly, are you
Speaker 1: kind of surprised that the labor market is as strong
Speaker 1: as it is and do you expect it to weaken
Speaker 1: materially going forward.
Speaker 4: I'm not surprised the labor market is as strong as
Speaker 4: it is, because the big difference between this potential recession
Speaker 4: and others is labor shortages. We have millions of baby
Speaker 4: boomers leaving the market the labor market, and there are
Speaker 4: enough younger people to work and replace them, and so
Speaker 4: businesses are caught in the mind. So they are many
Speaker 4: of them, according to our own survey, are hoarding workers.
Speaker 4: So they're not letting people go because they think if
Speaker 4: there is a recession, we'll be short, it will be shallow.
Speaker 4: And by the way, we don't want to everyone go
Speaker 4: and then have to bring them back at a higher
Speaker 4: pricing point. So that's why the labor market is showing
Speaker 4: signs of resiliency. It's not that it's out of step
Speaker 4: with weakness in the economy. It's because you have these
Speaker 4: severe labor shortages.
Speaker 5: When java severe labor shortages, Dana in just three thirty seconds,
Speaker 5: excuse me, are you worried at all about some sort
Speaker 5: of bifurcation when we're talking about kind of higher income
Speaker 5: lower income jobs or bisectors thirty seconds?
Speaker 6: Is that a concern for you at all?
Speaker 4: Well, I mean you're seeing it really is bisector So
Speaker 4: again the pandemic darlings, they are letting people go. The
Speaker 4: industries where you have to physically show up to work,
Speaker 4: they are hiring people, and everyone else in the middle,
Speaker 4: which is a lot, is not doing anything. So you
Speaker 4: are seeing this segmentation in the labor market.
Speaker 3: All right, Dana, thank you so much. We really appreciate it.
Speaker 1: Dan Peterson, chief Economists for the Conference Board, joining us today. Again,
Speaker 1: the leading economic indicator released by the Conference Board came
Speaker 1: in negative zero point six percent, in line with expectations.
Speaker 3: I don't know.
Speaker 1: I guess the good news is it's it's better than
Speaker 1: last month. But the bad news is it's still negative
Speaker 1: and consistently negative. So looking for turn there. Certain parts
Speaker 1: of the consumer remained very strong, as Dana was mentioning,
Speaker 1: but again the Conference Board calling for a shallow recession.
Speaker 7: You're listening to the team Can's are live program Bloomberg
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Speaker 1: You know what we've been mentioning just more and more
Speaker 1: and more and more over the last several months, is
Speaker 1: artificial intelligence. The kids call it AI. It's on the
Speaker 1: tip of every CEO's tongue. Doesn't matter what business they're in,
Speaker 1: where they are they a tech company, a non ten company.
Speaker 1: Everybody's talking about it AI. I'm convinced it's just a
Speaker 1: gooster stock multiple but we'll see what how real this is?
Speaker 3: It is real. It's see how this scene plays out.
Speaker 1: Now, when you think about AI, you think about there's
Speaker 1: got to be an ETF for AI, right.
Speaker 6: I mean, there's an ETF for everything.
Speaker 3: There's an ETF for everything.
Speaker 1: We've got the folks who have one of these ETFs.
Speaker 1: Chris Natividad, he's a co founder in CIO and Art Amador,
Speaker 1: co founder and COO of Equbot. Equbot has it? Am
Speaker 1: I going right there? That's right equbot boom hit that?
Speaker 3: All right?
Speaker 1: So do you guys have an AI powered e t
Speaker 1: F A I e Q is the ticker art tell
Speaker 1: us about what's going on there?
Speaker 3: Yeah?
Speaker 6: Absolutely?
Speaker 8: So what we what we do with aiq's It leverages
Speaker 8: IBM Watson's natural language processing and we analyze millions of
Speaker 8: news articles, social media posts, all of this unstructured data,
Speaker 8: and then we marry it with traditional data things like
Speaker 8: financials macro oh sorry, financials macro data. In order to
Speaker 8: make predictions on different prices, AIQ analyzes about five thousand
Speaker 8: US companies and then invest in about one hundred and
Speaker 8: twenty five and fifty names that have the highest opportunity
Speaker 8: for appreciation based on those those market signals.
Speaker 1: So all right, so talk to us about a little
Speaker 1: bit about kind of what are some of the names
Speaker 1: you guys have in there, and kind of how do
Speaker 1: you screen to put names in there, because again, there
Speaker 1: seems to be so many people that are really looking
Speaker 1: at this.
Speaker 3: Chris.
Speaker 9: Yeah, So when we think about AI, it's pattern recognition
Speaker 9: and that's what our system's doing. And some of the
Speaker 9: top names that we actually see are are AI related.
Speaker 10: So names like.
Speaker 9: Pollunteer and Google. I mean, these are are heavily referenced
Speaker 9: in a lot of the unstructured data that aren't mentioned.
Speaker 9: And when we think about it, you know, do we
Speaker 9: think there are going to be more instances of folks
Speaker 9: coming on social media and talking about companies and moving
Speaker 9: stock prices more in the future or less? And I
Speaker 9: definitely think it's pointing to that more.
Speaker 3: I think you're right.
Speaker 1: I just want to read a red headline just coming
Speaker 1: across the tape. Equity Residential founder and chairman Samuel Zell
Speaker 1: he dies at age eighty one.
Speaker 3: Will at more reporting on that coming up.
Speaker 5: Yeah, it's a pretty significant story. Of course, when we're
Speaker 5: talking about his group, the equity Office I believe purchased
Speaker 5: by Blackstone right about Yeah, I'm not.
Speaker 3: Sure if I know Samzell has been mister real estate,
Speaker 3: mister Reed.
Speaker 6: Yeah, absolutely decades.
Speaker 5: We're going to get Shanlie bassek in here asapt to
Speaker 5: cover that. But let's stick with the AI story for now.
Speaker 5: Let's start with the idea of whether or not AI
Speaker 5: is actually overpriced. It feels like the majority of the
Speaker 5: games in the last few months or so, especially in
Speaker 5: the tech market, have come from this AI mentioned as
Speaker 5: Paul said, is there any concern that this is kind
Speaker 5: of the end of it, this is peak AI?
Speaker 9: Absolutely not. And what just came out a few minutes
Speaker 9: ago is Goldman talking about the potential of AI rallying
Speaker 9: equity markets thirty percent the coming year. This morning we
Speaker 9: hear about news coming from the US government about putting
Speaker 9: in AI regulatory bodies, right, and so what we see
Speaker 9: from the data is that there's an AI arms race.
Speaker 9: You know, people the big players, Apples, the Googles, IBM,
Speaker 9: all of these large tech companies are investing in AIS.
Speaker 9: So there's going to be more data. It's coming and
Speaker 9: come quicker, and it's going to help us have the
Speaker 9: opportunity to really grow our businesses and what we do
Speaker 9: in our daily lives.
Speaker 1: So I found out. I was wondering about these two guys.
Speaker 1: Now I figured it out.
Speaker 3: They both got NBA from Berkeley.
Speaker 1: I mean, some smart dudes at Berkeley Outstanding School. So
Speaker 1: talk to us about like kind of what you think
Speaker 1: the future of AI is, and maybe let let's start
Speaker 1: with generative AI. Can you explain what generative AI is
Speaker 1: because I think that's when I think of A, that's
Speaker 1: what I think is really really AI.
Speaker 8: Yeah, so generative AI is is all the all the
Speaker 8: hot rage right now on our partner. I've being with
Speaker 8: Watson actually just came out with just just came out
Speaker 8: with Watson X, which leverages generative AI, which is leveraging transformers.
Speaker 8: But the way that we think about generative AI is
Speaker 8: it helps put things in context. Right, So, if you're
Speaker 8: using chat GBT, you ask it a question, it gives
Speaker 8: you an answer, Then you ask it another question and
Speaker 8: it gets the context right of the of the previous
Speaker 8: the previous question, uh for the next answer right.
Speaker 11: So it really helps put context around things.
Speaker 8: And so when we think about how we're using how
Speaker 8: we're using it, we have something called a convolutional knowledge
Speaker 8: graph that helps combine structure and unstructured data and so
Speaker 8: when we analyze news article, social media posts, it's not
Speaker 8: just about the sentiment, it's about the intent, right, how
Speaker 8: things are connected. And so what generate AI is going
Speaker 8: to do is going to provide more context which could
Speaker 8: lead to better predictions, whether it's markets or whether you're
Speaker 8: applying it to whatever particular problem you're you're trying to attack.
Speaker 5: When you talk about so that's generative AI. It feels
Speaker 5: like AI falls into a lot of different types of
Speaker 5: of usable things. Paul, like I said, Paul says this
Speaker 5: every day he goes pets dot Com could be could
Speaker 5: be using AI.
Speaker 6: There's dog food companies that are using AI, but there
Speaker 6: are different types. Can you walk us through just kind
Speaker 6: of the other use cases for it?
Speaker 9: Yeah, so you think about image recognition, right, how you know,
Speaker 9: thinking about medical discovery and how it's impacting and positively
Speaker 9: helping folks live better, healthier lives. Right, helped us discover
Speaker 9: the vaccines and treatments related to COVID more recently. Right,
Speaker 9: it helped me out this past Mother's Day, what do
Speaker 9: I need to be buying my mother?
Speaker 12: Right?
Speaker 3: And you know there are.
Speaker 9: Other folks at all stages of life that AI can
Speaker 9: really help you put things in front of you that
Speaker 9: you're not thinking about pattern recognition. Again, when we see
Speaker 9: the evolution of the hardware right with quantum computing, we
Speaker 9: truly see some great opportunities. And especially as our e
Speaker 9: t fai e Q improves on some of the different
Speaker 9: forms of trade timing. I think the best days are
Speaker 9: still ahead for a lot of these different players in
Speaker 9: the AI investment space.
Speaker 1: Right talk to us about the actual ETF here, How
Speaker 1: much is in that fund, how did the launch go?
Speaker 3: How big you think it can get?
Speaker 8: Yeah, so the opportunities tremendous. So AIQ was the first
Speaker 8: AI powered exchange trade or fund. It was the first
Speaker 8: time anyone was willing to kind of publicly put in
Speaker 8: you know, AI algram out there in the in the marketplace.
Speaker 8: And as of today, it's about one hundred million dollars
Speaker 8: in assets. But we have different indices out there that
Speaker 8: are being leveraged in banking products and insurance products, and
Speaker 8: in total, Equbot's got about five billion dollars in tracking
Speaker 8: AI indices and strategies, and so we think ai EQ
Speaker 8: could easily be over over a billion dollars and be
Speaker 8: one of the marquye AI funds and I think right now,
Speaker 8: I think it is the largest AI fund.
Speaker 1: Hey, Christy, I see like you know Palenteer, I'm sure
Speaker 1: looking at your top ten holdings, Palenteer, cloud Fair, dat Data, Dog,
Speaker 1: I get all that stuff, McKesson and Albemarle, you know
Speaker 1: kind of there's a healthcare company, a chemicals company. Why
Speaker 1: are they in that in your ETA?
Speaker 9: Yeah, you think about AI. It's pattern recognition, right. You
Speaker 9: think about some of the different things that can impact
Speaker 9: a stock price, the unstructured data about that our released
Speaker 9: from from news reports, syndicate research. You think about some
Speaker 9: of the technicals we may not be looking at, you know,
Speaker 9: the stochastics and mac and how are these impacting different
Speaker 9: stock prices? That The thing I'm trying to get to
Speaker 9: is different data points drive different stocks, right, And so
Speaker 9: having a neural network helping you supercharge your investment portfolio
Speaker 9: and understand and look at the data unbiased because quite honestly,
Speaker 9: us humans have a lot of different bias when we
Speaker 9: invest and select these stocks. Saying, hey, if I'm looking
Speaker 9: at all this data, which are the highest companies that
Speaker 9: are going to have that highest chance of market appreciation?
Speaker 9: And that's what it excites us. Again, we see the
Speaker 9: investment companies improving, the algorithms themselves improving, and so we
Speaker 9: still feel the fund's best days are still ahead.
Speaker 5: But album moral, for example, we don't have about a
Speaker 5: minute left. It's a lithium company, isn't it, or like
Speaker 5: a lithium mining company. From a fundamental perspective, how does
Speaker 5: that flow into the AI story or is this purely
Speaker 5: stock performance?
Speaker 9: Now again, fundamentals are just a single component, and those
Speaker 9: are just data points. You need to think about all
Speaker 9: of these structured data that you're talking about, all the
Speaker 9: different namonics that we're using on Bloomberg, but the unstructured
Speaker 9: data as well, and so you know that's really the
Speaker 9: opportunity how to look at it in aggregate.
Speaker 1: All right, that's extraordinarily interesting because I've been talking everybody's
Speaker 1: been talking about it AI pretty I mean, it's not
Speaker 1: just us, but everybody's talking about AI. Everybody's talking about ETFs.
Speaker 1: So why not have an AI E t F and these.
Speaker 6: Marriage of them both exactly what Katie Grafeld.
Speaker 3: Exactly exactly right? All right.
Speaker 1: Artm Amador COO and co founder of Qubot and Chris Natividad,
Speaker 1: cio of e Equalbot they joining us both here in
Speaker 1: a Bloomberg Interactive Broker studio.
Speaker 3: We appreciate that talking about AI e Q.
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Speaker 7: flagship New York station, Just Say Alexa play Bloomberg eleven thirty.
Speaker 1: The news that just broke was really interesting, particularly for
Speaker 1: folks that you know, play a lot in the real
Speaker 1: estate business. Think about the real estate investment trust business.
Speaker 3: Sam Zel passed away at the age of eighty one.
Speaker 1: Shelley Basic joints us here she covers all things Wall Street.
Speaker 3: Chanelie, what's your sense here?
Speaker 1: Sam Zel again, just a giant in the real estate business,
Speaker 1: in the investment business, in global finance business, A big.
Speaker 13: Name, certainly a shock to anybody who knew him. I'm
Speaker 13: messaging with some folks in the investment community now, and
Speaker 13: it's just very sad news. He was only really eighty
Speaker 13: one years old and very much was you know, very
Speaker 13: active very recently. I mean, we've had him pretty recently
Speaker 13: on Bloomberg television as well. Remember, yes, why is he
Speaker 13: so well known? He book a residential you know, real
Speaker 13: estate company public and that was really kind of a
Speaker 13: novel thing when it was happening. I remember he had
Speaker 13: been the founder and chairman of Equity Residential. That's a
Speaker 13: ticker EQR. He was founder and chairman. And so really
Speaker 13: he had been in the real estate business guy since college.
Speaker 13: I mean, this was his life's work. And in addition
Speaker 13: to his work in the real estate business, you have
Speaker 13: to kind of think about just the wide reach he
Speaker 13: had across many different institutions, from Northwestern University, Warton Reichman University,
Speaker 13: he has exposure to private education institution in Israel. So
Speaker 13: he really, you know, Chicago born, makes sense to have
Speaker 13: such a close tie to Northwestern as well. So a
Speaker 13: very large figure in finance who has passed away.
Speaker 1: And just according to Rich go On the Bloomberg terminal
Speaker 1: had a net worth of five point nine billion dollars.
Speaker 1: That made him the ranked four and at twenty third
Speaker 1: in terms of the Rich go List. So again, he's
Speaker 1: had obviously a long and very lucrative career.
Speaker 5: Yeah, and we got to go back to kind of
Speaker 5: his equity residential shaw I mentioned kind of the real
Speaker 5: estate presence that he had a thirty one billion dollar
Speaker 5: apartment owner, developer and operator, and of course that was
Speaker 5: an S and P five hundred member before I believe
Speaker 5: being acquired by Blackstone.
Speaker 13: If I'm well, no, equity residential currently is still a
Speaker 13: large company, but you're you're thinking about equity office. Yeah,
Speaker 13: I think that was a historic deal. So I'm glad
Speaker 13: you brought that up. Actually, I was just messaging with
Speaker 13: a banker that helped sell that company to Blackstone back
Speaker 13: before the financial crisis. So to the point that you
Speaker 13: were making here is that he was not only a
Speaker 13: big office sorry, a residential real estate owner, he was
Speaker 13: a massive deal maker, which was really what also kind
Speaker 13: of solidified his ties across Wall Street. I remember an
Speaker 13: interview I had done with him in one of the
Speaker 13: top bankers vice chairman of Institutional group over at the
Speaker 13: City Group a while back, and it was on Bloomberg Television,
Speaker 13: and they were just reminiscing about the good old days.
Speaker 13: Does every crisis deal era, But yes, you don't, really.
Speaker 11: You don't make them like that anymore.
Speaker 13: There are very few tycoons in this industry as large
Speaker 13: as Sam Zal.
Speaker 1: You know, he's obviously a real estate person, and I
Speaker 1: spent my career in the media industry, and our paths
Speaker 1: crossed a little bit in the mid two thousands because
Speaker 1: he backed the eight point three billion dollar buyout of
Speaker 1: media company Tribune in two thousand and seven, And you know,
Speaker 1: that was a time when people were unsure really where
Speaker 1: the newspaper media and the Tribune at the time owned
Speaker 1: a bunch of television stations as well.
Speaker 6: In the Chicago parent couple of Chicago.
Speaker 1: Chicago Tribune and back in the day, the Cubs as well,
Speaker 1: so kind of do it tying in that Chicago connection.
Speaker 1: So it wasn't just real estate. He was obviously an
Speaker 1: investor in other areas as well.
Speaker 12: Yeah.
Speaker 13: Absolutely, And to the point that you're making too, a
Speaker 13: deal maker in other areas outside of real estate as well.
Speaker 13: I think his dynamic personality when it came to doing deals,
Speaker 13: being bold and buying assets was a defined feature of
Speaker 13: samsou Shani Basik.
Speaker 5: Thank you as always, our Wall Street correspondent all over
Speaker 5: the Sam Cell story.
Speaker 7: You're listening to the team. Ken's a live program Bloomberg
Speaker 7: Markets weekdays at ten am. Eastern on Bloomberg dot com,
Speaker 7: the iHeartRadio app and the Bloomberg Business app or listening
Speaker 7: on demand wherever you get your podcasts.
Speaker 14: Ye.
Speaker 1: All right, let's go to Matt shut Now he's covers
Speaker 1: all the Washington DC stuff for Bloomberg Intelligence and Supreme
Speaker 1: Court upheld section.
Speaker 3: Two thirty here today.
Speaker 1: Now I know for it's social media liability shield and
Speaker 1: this is a big deal for the social media companies
Speaker 1: in general. So, Matt, how important? What tell us what
Speaker 1: the Supreme Court ruled today? Number one and number two?
Speaker 1: Why is that important?
Speaker 15: Yeah, Paul. So, so today the Supreme Court announced its
Speaker 15: decision on this case about the liability shield, and basically
Speaker 15: what the Court did is is punt on it. And
Speaker 15: so this is great news for the companies because what
Speaker 15: was really surprising was that the Court took this case
Speaker 15: at all and it heard argument in February on it
Speaker 15: because there was really no division among the courts of
Speaker 15: appeals that basically all the courts agreed that this liability
Speaker 15: shield protected all the social media companies that just because
Speaker 15: somebody posts something problematic, you can't go sue Google because
Speaker 15: someone posted that, And all the courts had agreed on
Speaker 15: that and the fact that the Supreme Court took this
Speaker 15: case suggested, WHOA, maybe they're going to make changes to
Speaker 15: this long standing liability shield. Well, today we found out
Speaker 15: that isn't the case. The court punted on the case
Speaker 15: and said, look, we don't even have to address the
Speaker 15: liability shield. This claim wasn't very strong in the first place,
Speaker 15: so we're not even going to go there. So they
Speaker 15: basically punted on it entirely. But that really eases what
Speaker 15: could have been a substantial risk if all of a
Speaker 15: sudden this liability shield had a big hole in it.
Speaker 1: All Right, we're talking to Matt chetn Holm Bloomberg Intelligence
Speaker 1: covering the Supreme Court case talking about social media liability.
Speaker 1: I want to thank Shanali Bassk. She kind of gave
Speaker 1: us the latest on the passing of sam Zel. Shanali
Speaker 1: Basque covers all things Wall Street for us. So, Matt,
Speaker 1: who brought this case and are they going to come
Speaker 1: back again?
Speaker 3: Do you think?
Speaker 12: Yeah?
Speaker 15: So, So, this case was brought against Google by by
Speaker 15: someone a family of a person who was killed in
Speaker 15: a terrorist attack, and and the allegation was that that
Speaker 15: Google recommended that content, that that led to the harm
Speaker 15: and and so this is an on you know, there's
Speaker 15: endless amounts of harm in the real world that can
Speaker 15: be caused in linked back to social media postings, and
Speaker 15: so in theory, if if the companies like Google or
Speaker 15: Facebook could could be sued every time they promote harmful content,
Speaker 15: it opens up, you know, endless litigation, hundreds of millions
Speaker 15: of dollars a year of cases they would have to fight.
Speaker 15: And that's why it was a big deal that the Court,
Speaker 15: you know, took this because it suggested maybe they want
Speaker 15: to make changes. But but you know, we kind of
Speaker 15: dialed that back a little bit in February when the
Speaker 15: Court really dug in on this and asked questions of
Speaker 15: the Council on both sides. It really we had a
Speaker 15: pretty clear signal at that point the justices weren't ready
Speaker 15: to make major changes. They didn't want to break the
Speaker 15: Internet basically, and so and that's what we're seeing today
Speaker 15: with this decision is Oops, maybe we shouldn't have gone here,
Speaker 15: Maybe we shouldn't have taken this case. We're not going
Speaker 15: to touch Section two thirty at this point. But you're right,
Speaker 15: this is not the end of the story. Congress is
Speaker 15: going to keep looking at whether it should change the
Speaker 15: liability shield. And you're going to see more cases brought
Speaker 15: and more tests coming down the road, but this eases
Speaker 15: the immediate concern.
Speaker 3: All right, Matt, thanks so much for joining us on
Speaker 3: short note. Really appreciated.
Speaker 1: Matt schetting home bloombergntellents down in Washington, DC giving us
Speaker 1: the latest from the Supreme.
Speaker 7: You're listening to the tape Cat's are live program Bloomberg
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the
Speaker 7: tune in app, Bloomberg dot Com, and the Bloomberg Business App.
Speaker 7: You can also listen live on Amazon Alexa from our
Speaker 7: flagship New York station, Just say Alexa play Bloomberg eleven thirty.
Speaker 3: I think some of the big news coming out this morning.
Speaker 1: There's a lot of news, as are typically is, but
Speaker 1: Speaker Kevin McCarthy said he expects the House to consider
Speaker 1: a deal on the federal debt limit next week, offering
Speaker 1: his most positive takeout on the negotiations to avoid a default. Negotiators,
Speaker 1: he told reporters Thursday, are in a quote much better
Speaker 1: place now. I can see now where a deal can
Speaker 1: come together, he said.
Speaker 3: So that's good news. Let's check in with Liz McCormick.
Speaker 1: She covers the treasury markets like no other for Bloomberg News,
Speaker 1: and she and Alexander Harris have a great article out
Speaker 1: here that I love the headline.
Speaker 3: It really grabs your attention.
Speaker 1: A one trillion dollar T bill deluge is painful risk
Speaker 1: of a debt limit deal. So, Liz, what do you
Speaker 1: mean by that is? If there were a debt default,
Speaker 1: they would try to, I don't know, cover themselves with
Speaker 1: a bunch of T bills.
Speaker 14: Well, no, not exactly that ball. And hey, so if
Speaker 14: there's not a debt default and we get which, like
Speaker 14: you were saying, McCarthy's comments today seem very positive that
Speaker 14: they may get a deal next week. So once we
Speaker 14: get kind of back to status quo that Janet Yellen
Speaker 14: is not working under extraordinary measures, they have to kind
Speaker 14: of resume normal policy, which part of that is they
Speaker 14: have to rebuild there. They carry a cash buffer they
Speaker 14: call the you know, Treasury General Account in case of
Speaker 14: emergency tech failure that they can fund themselves for a
Speaker 14: few days without having an issue new debt, and that
Speaker 14: is really dwindled down. So they have to sell this
Speaker 14: deluge of bills to help build that up again, and
Speaker 14: that's what we're getting at, which some of the mechanics,
Speaker 14: the way it works, is going to ultimately, you know,
Speaker 14: pull reserves out of the system and drain liquidity.
Speaker 5: Well, Liz, even if we get these headlines, it doesn't
Speaker 5: feel like the markets.
Speaker 6: Are acting much to it.
Speaker 5: I'm the equity markets popped briefly. We're still hired by
Speaker 5: four tens and one percent on the Sep. Five hundred
Speaker 5: from like two tenths higher, so not a massive move there.
Speaker 5: But even the bond market note necessarily the spike and
Speaker 5: yields I would have expected, Why what's going on here?
Speaker 12: Is this?
Speaker 6: Is this reservation or is this priced in? How do
Speaker 6: you interpret that?
Speaker 14: Well, I think, I mean that's a great point because
Speaker 14: we were looking like, even though you know how they
Speaker 14: avoid the bills that are going to mature right at
Speaker 14: the X date that's around June one, those bills remain
Speaker 14: way above that, so there's that kink in the bill curve.
Speaker 14: So I think investors are saying, yeah, this all sounds good,
Speaker 14: but we won't believe it till it's all done, because
Speaker 14: we've been through this before that. I mean, most people say, yeah,
Speaker 14: a deal's going to get done, because I've been through
Speaker 14: this movie. It happens, but you know, twenty eleven was
Speaker 14: a mess. And I think until it's all signed on
Speaker 14: the dot line, some of these traders, especially in the
Speaker 14: rates market in the Bill area most especially, they're just
Speaker 14: not going to kind of say, oh, let me jump
Speaker 14: in until we know for sure the deal is done. Plus,
Speaker 14: like I think you guys were talking early Lori Logan's
Speaker 14: comments about you know, June may be in play. That's
Speaker 14: got the short end rates higher.
Speaker 11: So there's some cross currents.
Speaker 14: But I do think the market has to kind of
Speaker 14: really see it to believe. And like you said, the
Speaker 14: stock market didn't go nuts, right, I mean went up
Speaker 14: a little, but I just think we know how it goes.
Speaker 14: Then you know, President Biden could say X, and you know,
Speaker 14: all of a sudden, we're back to square zero.
Speaker 12: So but it does look good.
Speaker 14: Our DC reporting seems to indicate that I.
Speaker 1: Were also joined by Michael McKee, Bloomberg Economics corresponding. He
Speaker 1: joins us here in a Bloomberg studio, Michael, what do
Speaker 1: you make of this? Is this kind of what we
Speaker 1: expected from a timing perspective here, and what does it mean?
Speaker 3: Overall, do you think.
Speaker 16: Well, it might even be sooner than we expected kind
Speaker 16: of timing perspective, since everybody's betting on a last minute
Speaker 16: deal and we have until approximately June first. I think
Speaker 16: this is, though, the way it normally plays out. Now.
Speaker 16: The complicating factor here is what we're talking about is
Speaker 16: the White House and the Republican leader on the ill
Speaker 16: maybe making progress together. The question is, then, what do
Speaker 16: the rank and file in both parties think, because we've
Speaker 16: talked a lot about Republicans and whether or not they
Speaker 16: will go along with anything Kevin McCarthy negotiates. And then
Speaker 16: the Democrats have been very upset in the Senate too
Speaker 16: about the possibility that Biden would give away too much
Speaker 16: and for one thing, agree to work requirements for federal aid.
Speaker 16: So we have to see how the main bodies of
Speaker 16: the House and Senate react in each party before we'll
Speaker 16: have a better idea of whether this can actually pass.
Speaker 16: So you've got those two cliffs. The negotiators have to
Speaker 16: reach agreement, but then they have to sell it to
Speaker 16: their people.
Speaker 6: And this of course follows.
Speaker 5: I think that news maybe a day or two ago
Speaker 5: that President Biden had already kind of slimmed down his
Speaker 5: negotiating team as well, which is a positive sign.
Speaker 6: Mike, talk to us about the read through for the
Speaker 6: Federal Reserve. There is there.
Speaker 3: Any we know?
Speaker 5: Truman Powell was, as so Jenny Yellen very confident about, Well,
Speaker 5: they'll get to a deal.
Speaker 12: They have to.
Speaker 6: They have to raise the debt ceiling in some way.
Speaker 6: Any read through here for the.
Speaker 3: Fed not yet.
Speaker 16: The Fed, like everybody else, is watching from the outside
Speaker 16: what's going on. They have come up with their plans
Speaker 16: for what they would do if we did reach the
Speaker 16: debt ceiling, if we went over that cliff, which they
Speaker 16: are disclosing, but we know from history kind of the
Speaker 16: things that they're looking at, it would obviously have a
Speaker 16: major impact on the June FED decision if we were
Speaker 16: to go over the cliff. But I don't think they
Speaker 16: are gonna I was asked about this morning. They're not
Speaker 16: really talking about it or putting it out there as
Speaker 16: an issue because it's so fluid and so uncertain that
Speaker 16: there isn't really anything they can say. Obviously, if we
Speaker 16: go over the cliff, they have to probably react, but
Speaker 16: if we don't, it doesn't make any difference.
Speaker 1: Hey, Liz again in your reporting, you talk about this
Speaker 1: one trillion dollar number in a te bill more. Is
Speaker 1: that something the market can handle an orderly fashion, do
Speaker 1: you think or is that going to be really disruptive?
Speaker 14: Well, you know, I will say in the Treasury Department,
Speaker 14: who I've talked to off and on for years.
Speaker 6: They have a plan.
Speaker 14: They know this is going to be a lot. They
Speaker 14: reached out to the primary dealers ahead of their last
Speaker 14: kind of gathering and said, how do we do this,
Speaker 14: you know, in the best way to not cause disruption?
Speaker 14: So I think Paul, they're going to be careful. I mean,
Speaker 14: it will filter through to rates and such, but they
Speaker 14: don't want it to be so disruptive that there's all
Speaker 14: these dislocations. So whether they're going to try to spread
Speaker 14: it out enough. Some of these over a trillion issuance
Speaker 14: is out through the third quarter, so I think the
Speaker 14: US Treasury Department is going to be very careful. They've
Speaker 14: also seen this movie before where they've had to unfortunately
Speaker 14: get their cash balance painfully low and then look to
Speaker 14: build it up very fast. But either way, the net effects,
Speaker 14: you know, from the way the mechanics work, is we
Speaker 14: should see reserves come down somewhat in the banking system.
Speaker 14: But you know, let's hope and I have trust in
Speaker 14: them that the Treasury Department can do it, you know,
Speaker 14: with as least pain as possible for the market.
Speaker 5: Mike, in our last minute here, when you're talking about
Speaker 5: government spending at the end of the day, when you're
Speaker 5: talking about the nuts and bolts of this deal, how
Speaker 5: much of it could be inflationary.
Speaker 16: It's an interesting question. If a cut back on spending,
Speaker 16: then you would have some deflationary effects, but it's generally
Speaker 16: spread out over such a long period of time that
Speaker 16: it wouldn't have much of an impact on what's going on.
Speaker 16: What might have more of an impact is what Liz
Speaker 16: was talking about. If they have to rebuild the TGA
Speaker 16: very quickly and liquidity drains out, that could have an impact.
Speaker 16: But we'll have to see how that plays out.
Speaker 1: Hi, Michael McKay, thanks so much for jumping in here.
Speaker 1: Michael McKay, Bloomberg's economics correspondent, joining us here in our
Speaker 1: Bloomberg Interactive Broker studio and List McCormick, chief corresponding Global
Speaker 1: macro markets, breaking down this story today on Bloomberg News.
Speaker 1: Check out her reporting there. She joined us some Bloomberg
Speaker 1: News on the phone.
Speaker 7: You're listening to the tape our live program, Bloomberg Markets
Speaker 7: weekdays at ten am Eastern on Bloomberg Radio, the tune
Speaker 7: in app, Bloomberg dot Com, and the Bloomberg Business App.
Speaker 7: You can also listen live on Amazon Alexa from our
Speaker 7: flagship New York station, Just say Alexa Play Bloomberg eleven thirty's.
Speaker 1: Thrilled to have our next guest here in studio, Lauramartin,
Speaker 1: Managing Director, Senior Media and Internet Analyst at Needham Folks.
Speaker 1: There are good animals out there, and then there are
Speaker 1: rock stars, and Laura Martin is a rock star, covering
Speaker 1: the media, the internet space, wherever this stuff evolves. Now
Speaker 1: she's into ad tech and who knows what else, but
Speaker 1: Laura Martin joins us here in our Bloomberg Interactive Brookers studio. Hey, Lore,
Speaker 1: you guys had your eighteenth annual Needum Company Investor Conference
Speaker 1: this week in New York City. A bunch of CEOs coming,
Speaker 1: a bunch of institutional investors.
Speaker 3: What were some of your takeaways from that look?
Speaker 17: I would say the most disturbing takeaway was a panel
Speaker 17: I ran where two of the very smart people in
Speaker 17: this panel said the future of advertising has no humans
Speaker 17: in it. It is one hundred percent generated AI. It
Speaker 17: is all a B testing mad no mad men, no,
Speaker 17: no mad men like Madison Avenue closed like it's going
Speaker 17: to the dogs. And it was going to be one
Speaker 17: hundred percent like generative AI making the ad, putting the
Speaker 17: title on it, seeing if you clicked, doing a B
Speaker 17: testing doing the next one. That no human beings would
Speaker 17: be involved in advertising. So I don't know where that
Speaker 17: leaves Coke and Pepsi and perfume companies. But according to
Speaker 17: these guys, it's all about the tech and generative AI.
Speaker 3: We've heard that everywhere.
Speaker 6: Don Draper will be very upset about to hear that.
Speaker 1: We were just had some guests in here that have
Speaker 1: an ETF. It's called AI eq EQ so an ETF
Speaker 1: on all things AI.
Speaker 12: Yeah.
Speaker 3: Wild.
Speaker 6: What's the timeframe on that though? Is that happening like
Speaker 6: next year?
Speaker 17: So no, they were saying that to him this was
Speaker 17: the end state of where advertising. The pail was called
Speaker 17: future of advertising. So he's saying the end state is
Speaker 17: that we all know quote, we all know this is
Speaker 17: where the end state is in ten years, humans aren't
Speaker 17: involved in advertising it's one hundred percent yet out of AI.
Speaker 1: So let me frame this after people Lara has been
Speaker 1: covering media for a long time.
Speaker 3: Started you know, I'm talking.
Speaker 1: Newspapers, radio, TV, the big entertainment guys like viacommon Disney
Speaker 1: and now all the Internet, the metas in the world
Speaker 1: and all that kind of stuff.
Speaker 3: The biggest, one of the biggest disruptions.
Speaker 1: I think we've seen in that timeframe has been a
Speaker 1: the Internet, but be streaming. Streaming has just disrupted your industry,
Speaker 1: the global big media industry.
Speaker 3: How do you think this shakes out?
Speaker 1: What does it mean for Disney, for Paramount, for Warner Brothers, Discovery,
Speaker 1: and for Netflix.
Speaker 17: So I think one of the things that some people
Speaker 17: miss on the investment side is that media, when you
Speaker 17: and I followed it together, Paul was really either local,
Speaker 17: which is what newspapers are, or then it was over
Speaker 17: the air broadcast, which was like a city, you know,
Speaker 17: a d M A, or then cable made it regional.
Speaker 17: And now what's happened is streaming has made it global.
Speaker 17: So you can actually price it about half in the
Speaker 17: US because you're going to get ten cents for South
Speaker 17: of and you're going to get eight cents from Germany,
Speaker 17: and you're going to go to Africa and get three cents,
Speaker 17: And when you add all that up, it will end
Speaker 17: up at one hundred and ten percent of a US
Speaker 17: only or two hundred percent of a local only market.
Speaker 17: So media becoming global, but the returns on capital when
Speaker 17: you go offshore are really low because you have to
Speaker 17: lose money in a bunch of those countries in the beginning,
Speaker 17: because we have the biggest AD market. So I think
Speaker 17: these economics of companies who are only US are overstated
Speaker 17: because they are going to have to spend money to
Speaker 17: be global over time, because they have to compete with
Speaker 17: the big global empires like Netflix and HBO, Max and Disney.
Speaker 17: They're all going to be global in the end because
Speaker 17: they need some of their economics to come from outside
Speaker 17: the US.
Speaker 5: I'm glad you mentioned the Netflix story because isn't that
Speaker 5: their entire strategy that their most of their growth is
Speaker 5: coming from abroad, not stateside. The last time you were
Speaker 5: on our show, you called for an ad of recession,
Speaker 5: which you're timing on that.
Speaker 17: Yeah, So I would say in every case I interviewed
Speaker 17: twenty CEOs in street, either streaming or they all have advertising.
Speaker 17: I've sort of an advertising analyst, So what I would
Speaker 17: say is every single guy is seeing strength somewhere so
Speaker 17: in their CEOs, so they're sort of hopelessly optimistic always.
Speaker 17: So some guys are saying, we're seeing more strength in
Speaker 17: the EU than in the US. Other guys are saying,
Speaker 17: I'm seeing strengthen autos, which would be great because autos
Speaker 17: is like half of where it was pre COVID. I'm
Speaker 17: seeing strength in retail CpG, consumer product, packaged goods coming
Speaker 17: back through these retail media networks. Every CEO said he's
Speaker 17: seeing strengthen something, but if you push him, he says, oh,
Speaker 17: but by the way travels down or financial services into
Speaker 17: our tech spending em andy. Everybody says that the film
Speaker 17: studios not advertising. That's called media and entertainment advertising, and
Speaker 17: they are high premium payers. They pay for interactive adue
Speaker 17: and it's full color takeovers, and so that everybody says
Speaker 17: that's week. So the question is when all of these
Speaker 17: categories of advertise come back, because they have eighty percent margins,
Speaker 17: but it is not yet.
Speaker 1: So this week is also in addition to the week
Speaker 1: of your commerce, the week of upfront. That's when a broadcasting,
Speaker 1: cable and networks say come to New York. They get
Speaker 1: all the advertisers on Madison Avenue who still have jobs
Speaker 1: and say, hey, here are shows for next season. Pony
Speaker 1: up some money and advertising help us pre prefund our
Speaker 1: slate for next year. A why do we still have
Speaker 1: an upfront? And B what was the tone this year?
Speaker 17: So I was saying the most important thing this year
Speaker 17: and it's been a transition, but this year they went
Speaker 17: all in is they'd say, here's ten pieces of the
Speaker 17: new content. These eight are for our streaming service, and
Speaker 17: they don't mention the linear TV network.
Speaker 7: Wow.
Speaker 17: In the olden days, you'd window, you'd say it's gonna
Speaker 17: be on linear TV first, or it's going to be
Speaker 17: on streaming first, and then we're gonna put it on
Speaker 17: linear TV three weeks later because then you can get
Speaker 17: different windows. But no, nobody's doing that. Nope, everybody's saying
Speaker 17: we're releasing this and some of the some of the
Speaker 17: content feel absolutely feels prime time broadcast worthy three million
Speaker 17: dollars an hour, but they're putting it on their streaming
Speaker 17: platform and they will release it weekly like a normal
Speaker 17: broadcaster does. It won't be binge viewed, but the money
Speaker 17: going into this streaming is worthy of over the air
Speaker 17: trawelvision from pre covid.
Speaker 5: Well that you're talking about the streaming story because it
Speaker 5: brings me to kind of tech and advertising and the
Speaker 5: mixture there.
Speaker 6: But traditional tech like Apple or Tesla, for example.
Speaker 5: I think Tesla made headlines this week and saying that
Speaker 5: Elon Mussing, you know, we're going to dip our toe
Speaker 5: into advertising, and it turned their stock into into.
Speaker 6: A lot of green. What's your take on that?
Speaker 5: Like traditional kind of hardware auto companies dipping their toe
Speaker 5: into advertising, you know.
Speaker 17: It is my point of view, advertising is like heroin.
Speaker 17: It has eighty percent margins, and the minute you have reached,
Speaker 17: especially like a Tesla, think how desirable that target audience
Speaker 17: is and they're captive in your cars Like airport advertising,
Speaker 17: you know, you suddenly have a very narrow tarrogate market
Speaker 17: that's really valuable and hard to reach because those people
Speaker 17: pay extra for their streaming services not to have ads.
Speaker 17: So it is I think advertising is an easy revenue stream.
Speaker 17: Wall Street loves multiple revenue streams and it has eighty
Speaker 17: percent margins. So once you build a direct salesforce or
Speaker 17: you go programmatic where you don't have to do anything
Speaker 17: except hire one of these big tech stacks. Then you
Speaker 17: get all this new money and Wall Street loves it,
Speaker 17: and it's actually a really good in my opinion. Maybe
Speaker 17: it's a little invasive to your customer, but if he's
Speaker 17: a wealthy customer and you're showing in private islands off
Speaker 17: Hawaii like that, actually you could argue is value added
Speaker 17: to him because he didn't know it existed and now
Speaker 17: he knows where to go on vacation in Christmas Lard.
Speaker 1: You've covered, you know, your coverage is the big media
Speaker 1: companies to tech companies and all that enabling stuff.
Speaker 3: What's your top pick right these days?
Speaker 17: So we're still of a view that we're in we
Speaker 17: might still go into recession. So I think it's a
Speaker 17: little too early to do advertising. So we would be
Speaker 17: an Apple okay, defensive, no advertising yet to speak of advertising.
Speaker 17: Revenue stream on the horizon. So I like that is
Speaker 17: ninety billion dollars of free cash frow, nice and liquid.
Speaker 17: If I'm wrong, you can get out today. After tomorrow
Speaker 17: you won't move the shares. So I would say Apple
Speaker 17: will be my top pick until it's clear that advertising
Speaker 17: is not going to go through some kind of hard landing,
Speaker 17: soft landing, downdraft.
Speaker 1: And then it might be some of the more the
Speaker 1: viacoms of Disney's, those types of things that do have
Speaker 1: a more advertising.
Speaker 17: So good question, Paul. I mean what I would say
Speaker 17: is I cover a lot of companies that are one
Speaker 17: hundred percent advertising. So if we're going to have an
Speaker 17: advertising bounce, an advertising company will double, triple, quadruple. I
Speaker 17: want to be at one hundred percent ad driven, which
Speaker 17: sort of begs the question, we're what buyer buys Disney
Speaker 17: and Paramount and Fox now they're neither a fender, you know, Fisher.
Speaker 3: Foul exactly right, all R. Laura Martin, thank you so
Speaker 3: much for joining us.
Speaker 1: Laura Martin is a managing director, senior media and Internet
Speaker 1: analyst at Need. I'm a real joy to get here
Speaker 1: in our studio, shoes in town for her conference, a
Speaker 1: lot of investors, a lot of media company CEO's time
Speaker 1: well spent.
Speaker 7: You're listening to the tape Cat's are live program Bloomberg
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the
Speaker 7: tune in app, Bloomberg dot com, and the Bloomberg Business app.
Speaker 7: You can also listen live on Amazon Alexa from our
Speaker 7: flagship New York station, Just say Alexa play Bloomberg eleven thirty.
Speaker 1: If we're talking about homebuilders, let's continue that discussion. Homebuilders
Speaker 1: are capitalizing on a seemingly unquenchable thirst for new housing
Speaker 1: as buyers struggle with limited inventories and mortgage rates.
Speaker 3: I wondered who wrote that wonderful line.
Speaker 1: Norah Melinda, Equity's reporter for Bloomberg News, joins us live
Speaker 1: in our Bloomberg Interactive Brokers studio. So noorah, there's not
Speaker 1: a lot of inventory out there, right, So we really
Speaker 1: if people want to buy houses, they get up buy,
Speaker 1: they're probably gonna be buying new houses.
Speaker 3: I guess right.
Speaker 11: I mean, thanks for having me on.
Speaker 10: Existing home sales actually used to make up about ninety
Speaker 10: percent of the housing market, and so that didn't really
Speaker 10: leave as much space for new homebuilders that I continue
Speaker 10: to watch. But you know, we're seeing with rising mortgage
Speaker 10: rates and really a lot of people not wanting to
Speaker 10: move out of the houses that they already own, there's
Speaker 10: not much inventory left and so this has really made
Speaker 10: a complete perfect runway for home builders. They're soaring it's
Speaker 10: really a rebound store. You know, homebuilders were down almost
Speaker 10: as much as forty percent last year, so we saw
Speaker 10: that last June, and now they're up about trading above
Speaker 10: about twenty seven percent above their two hundred day moving average.
Speaker 10: So it's a really stellar thing to look at right now.
Speaker 18: Is that perform or mens linked to more homes for
Speaker 18: people like us to all go out and buy, hopefully.
Speaker 11: Someday, Definitely, I hope so.
Speaker 10: I mean, that's what I'm hearing from a lot of
Speaker 10: the sources that I'm speaking to. It seems as though
Speaker 10: homebuilders are just building rapidly. They're really trying to meet
Speaker 10: this demand. Of course, we already see a really really
Speaker 10: strong demand with the fact of the housing crisis. You know,
Speaker 10: there aren't enough homes for people to move in, and
Speaker 10: there's really really high demand, and so homebuilders may actually
Speaker 10: be solving that problem that we are seeing in the
Speaker 10: housing market right now.
Speaker 3: What are homebuilders building?
Speaker 1: I Mean, the concern I've heard from a lot of
Speaker 1: folks is one of the big problems we have in
Speaker 1: the housing stock in the US is there's not enough
Speaker 1: entry level housing. You know, the builders are out there
Speaker 1: building the McMansions, why because that's where the margin is.
Speaker 1: I understand that, but that's not really meeting market demand.
Speaker 1: What are they buying these what are they building these days?
Speaker 11: Right for the average ones?
Speaker 10: You know, maybe we're not looking for those million dollar mansions,
Speaker 10: but not not yet at this point at least. But
Speaker 10: you know, we are seeing a lot of companies like
Speaker 10: maybe Dr Horton offering incentives to get people to move
Speaker 10: into their homes that they're building. So I know, der
Speaker 10: Horton had just said at a conference earlier this week
Speaker 10: that it's buying down rates on about sixty five percent
Speaker 10: of its sales, and so things like this. If you're
Speaker 10: seeing a mortgage rate of maybe six point five percent
Speaker 10: and Dr Horton or another company like it is willing
Speaker 10: to bring your mortgage rate down to five point five
Speaker 10: or maybe five percent even, it's going to make you
Speaker 10: feel a little bit more inclined to maybe make that purchase.
Speaker 18: Do we know, though, which kind of income bracket they're
Speaker 18: targeting with the home builds in particular, or is it
Speaker 18: just kind of across the board and then they're offering
Speaker 18: these incentives to get whoever they can.
Speaker 11: To get in.
Speaker 10: So what I've been hearing is it tends to be
Speaker 10: more so across the board. But as you said to
Speaker 10: your earlier point, there are a lot of you know,
Speaker 10: maybe Middle America that are looking for homes and may
Speaker 10: not be able to afford it. So I think that's
Speaker 10: something that we'll have to look forward to as we
Speaker 10: continue to iron and look through the earnings.
Speaker 1: So it looks like for these you know, homebuilders, I'm
Speaker 1: looking at like Toll Brothers and DH Horton and think
Speaker 1: things like that, they're still building because even though the
Speaker 1: rates are mortgage rates are six seven percent versus you know,
Speaker 1: like three percent up until just recently, they're still seeing
Speaker 1: the demand.
Speaker 11: They are seeing demand.
Speaker 12: Is it just like.
Speaker 1: Doing Florida and Texas? I mean that's where everybody's moving,
Speaker 1: you know, not me. But is that kind of where
Speaker 1: the demand is or is it more broader?
Speaker 11: I mean, I think it's pretty brought across markets.
Speaker 10: I mean, obviously in New York City we even have
Speaker 10: issues with you know, intense housing demand. So we are
Speaker 10: really seeing it across multiple markets. But as you mentioned,
Speaker 10: you know, the Florida's and maybe the Texas states are
Speaker 10: maybe seeing a little bit more there.
Speaker 18: Yeah, And I know, Nora that you look more macro
Speaker 18: entire sectors when it comes to real estate, Can you
Speaker 18: talk a little bit about why we're seeing the rally
Speaker 18: in you know, the home builder sector in particular now
Speaker 18: versus you know, among prior to that as a month
Speaker 18: forward from them.
Speaker 10: I mean, I think all of this conversation in regards
Speaker 10: you know, to the FED and just the macro environment
Speaker 10: that we're currently in, my sources are saying that this
Speaker 10: is just the prime time for home builders. They're seeing,
Speaker 10: you know, they're taking market share from where maybe a
Speaker 10: lot of existing home sale companies you know, would have
Speaker 10: been making up in the market, but now they have
Speaker 10: this runway with less competition, we're seeing low inventory and
Speaker 10: they're able to solve that problem.
Speaker 11: So this is the perfect timing for them to really soar.
Speaker 1: LB one commodity is the generic one that I use
Speaker 1: for lumber, and it's just been so incredibly volatile, and
Speaker 1: I can't imagine being a person whose job is to
Speaker 1: build houses, and that's I got to think that's one
Speaker 1: of my big raw materials. What do the builders say
Speaker 1: about just the cost to build these houses, whether it's
Speaker 1: lumber or other products, in terms of actually building them,
Speaker 1: what's that doing to their margins.
Speaker 10: Yeah, I mean I think that that is a place
Speaker 10: that a lot lot of people have been turning their attention.
Speaker 10: I mean, obviously in the past we had all these
Speaker 10: issues with being able to actually, you know, get these materials,
Speaker 10: and so now as you're pointing out, you know, looking
Speaker 10: at lumber and all of these different prices, how is
Speaker 10: that all pricing in and how much of a cost
Speaker 10: is that on these companies.
Speaker 11: That's something that we'll have to just wait and see.
Speaker 1: But they've had some pretty good earnings, right, I mean,
Speaker 1: Time has reported some pretty good earnings, So as you said,
Speaker 1: this is kind of the time to be in that
Speaker 1: to be in that sector, I guess. And knowing you're
Speaker 1: a reporter, you quote a couple of analysts on the
Speaker 1: street or pretty.
Speaker 10: Bullish, definitely, I mean, most analysts that I've spoken to
Speaker 10: are very bullish. And as you mentioned there a lot
Speaker 10: of these past earnings have been positive, but not only that,
Speaker 10: but also positive forecast to come, which has been you know,
Speaker 10: kind of having people raise an eyebrow. Of course, we're
Speaker 10: in this really tough economy right now and in this
Speaker 10: tough macro environment, but they're still forecasting maybe some more
Speaker 10: positivity to come and saying that demand will continue.
Speaker 11: So to your point, I think.
Speaker 10: Maybe a lot of people are looking at this as
Speaker 10: a space to be Maybe it could be a space
Speaker 10: that will continue to.
Speaker 18: Flourish within this earning season. What did people like most
Speaker 18: when it came to, you know, earning's calls for home builders?
Speaker 6: What the street like most?
Speaker 10: Yes, the street was really paying attention to my earlier point,
Speaker 10: the forecast that in addition to orders beats, that's a
Speaker 10: really really big metric that we look at in regards
Speaker 10: to the homebuilders sector, and a lot of these companies
Speaker 10: were just having orders beats across the board. So that
Speaker 10: just you know, kind of gives you more of a
Speaker 10: positive sentiment for the market.
Speaker 3: When I think about it.
Speaker 1: You know, home being built unders a bunch in my
Speaker 1: town being built right now. There's just a swarm of
Speaker 1: people there. You know, they've all got their nail guns
Speaker 1: and whatnot. But what are the builders saying about getting labor?
Speaker 1: Because I know, for a while, like everybody else, that
Speaker 1: was a problem.
Speaker 10: Yes, and you know, we've had like multiple conversations and
Speaker 10: multiple articles and conversations coming out about labor. But I
Speaker 10: think that is a place that people are really tuned
Speaker 10: into right now, do we have enough people to act
Speaker 10: actually get the job done? And it seems that it's varied,
Speaker 10: but it does seem as though like it still tends
Speaker 10: to be like more of a positive amount of individuals
Speaker 10: who are actually able to get, you know, to work
Speaker 10: and get the job done.
Speaker 11: That's what I've been hearing from sources.
Speaker 3: I'm looking at Toll Brothers right here.
Speaker 1: The A n R function just gives you a sense
Speaker 1: of analyst rating, analyst recommendation. So for Toll Brothers, which
Speaker 1: I think is you know, kind of me kind of
Speaker 1: a one of the belt bell Weathers in the group
Speaker 1: ten buy ratings, seven holds and two cells, so kind
Speaker 1: of split, you know people. I guess the analysts are
Speaker 1: trying to figure out, hey, is this trade played out?
Speaker 3: Is more to go? So we'll see how that goes.
Speaker 1: They had some good earnings this quarter coming from the
Speaker 1: builders normal Linda, thanks so much for joining us here.
Speaker 1: Nor Is, the equities reporter for Bloomberg News. Her report
Speaker 1: here on home builders sore to new highs on insatiable
Speaker 1: housing demand.
Speaker 3: How about that?
Speaker 1: So but you got to think, Maddie, they got you know,
Speaker 1: I'd like to see I guess the marketplace would like
Speaker 1: to see some more affordable housing go out there for
Speaker 1: folks as opposed to just another mcmanson.
Speaker 7: You're listening to the tape Cat's are live program Bloomberg
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Speaker 1: All right, Fandeep Singer's senior Analysty covers technology from Bloomberg Intelligence.
Speaker 1: I have no idea what he does, but he's in
Speaker 1: our studio, so I'm going to ask him to explain
Speaker 1: chat GPT. Not to someone who's like a five year old,
Speaker 1: to someone who's like a fifty nine year old. Okay,
Speaker 1: explain chat GPT, pretend on fifty nine years old.
Speaker 12: Well, and I'll preface it by saying, we did a
Speaker 12: survey where we wanted to see where is chat GPT
Speaker 12: kind of resonating the most? And we found out in
Speaker 12: that survey the early adopters are the gen zs and
Speaker 12: you know, the sixteen to thirty four year olds. The
Speaker 12: thirty five plus are still behind when it comes to
Speaker 12: trying it out and just in terms of their usage.
Speaker 12: So clearly it's a gen Z phenomenon.
Speaker 3: Which you're not even gen Z.
Speaker 12: Well I'm not, but I covered the space. Sorry, there
Speaker 12: you go, so sure, line a line, But I.
Speaker 18: Am in the group that's using it every single day.
Speaker 12: And I think in our survey was obvious that people
Speaker 12: prefer it over the traditional search. They find it to
Speaker 12: be more useful time saver, and they are willing to
Speaker 12: pay for it, but only pay up to ten dollars,
Speaker 12: So that was the difference, Like even though the current
Speaker 12: subscription is twenty dollars, the propensity to pay for it
Speaker 12: is still low. They want it free, as is expected,
Speaker 12: and so I think the conclusion from that was ads
Speaker 12: will still be the way this thing is gonna get monetized.
Speaker 12: And Google showed in their io event last week like
Speaker 12: you can have a follow up reply tab and then
Speaker 12: they can save the content of the prior search. So
Speaker 12: we'rely the search page as we know it will evolve,
Speaker 12: and that is getting more and more obvious with this
Speaker 12: you know, chat GPT revolution.
Speaker 1: Why is Google at a fifty two week high at
Speaker 1: one hundred and you know, twenty two dollars.
Speaker 3: Isn't this bad for Google?
Speaker 1: Or is Google saying We're gonna use chat GPT better
Speaker 1: than everybody else?
Speaker 12: So just to make that distinction, chat gipt is a
Speaker 12: foundational model, a large language model that is trained on
Speaker 12: rich open source Internet data set as well as any
Speaker 12: proprietary data set that OpenAI has. Google has its own
Speaker 12: large language model. It's called Palm two. They had a
Speaker 12: first iteration and now this is the second version. And
Speaker 12: think of you know, any Internet company in this space
Speaker 12: has the potential to develop their own large language model
Speaker 12: simply because of how rich their business is. Like all
Speaker 12: the social media platforms. I mean, I put meta in
Speaker 12: that same bucket, they have their own foundational large anguage
Speaker 12: model because of the rich data that they have from
Speaker 12: their platform. So I think Internet companies in general are
Speaker 12: at an advantage in this generative AI race simply because
Speaker 12: they have a lot of their own data. Software companies,
Speaker 12: on the other hand, Microsoft didn't have a choice but
Speaker 12: to partner with chat gipt because Microsoft doesn't have its
Speaker 12: own data. So how do you develop that foundational large
Speaker 12: language model.
Speaker 7: You need data and the way you get data is.
Speaker 12: One through open Internet, but also your own first party data,
Speaker 12: which is what Google has, Meta has and chatchipt has
Speaker 12: shown they also have that.
Speaker 3: Well, I'm tossing.
Speaker 18: I have a million questions I could ask you about this,
Speaker 18: but I guess, like not to sound kind of like
Speaker 18: a crypto enthusiast type, but if it the whole point
Speaker 18: is that it's open source, why would I ever consider
Speaker 18: paying for it?
Speaker 12: You know what I mean? Because the quality of the
Speaker 12: results matter. So you're going to use chat cipt or
Speaker 12: anything equivalent only if it's better than traditional search. So
Speaker 12: the quality of the search really matters here, and based
Speaker 12: on the quality and the use case, you may be
Speaker 12: willing to pay for it.
Speaker 18: You know, right now it's free and it's doing what
Speaker 18: I need. You know what I mean, Like, why would
Speaker 18: we offer it? Why would you start to pay for something?
Speaker 12: So chat GPT plus has no restriction on the number
Speaker 12: of queries you can have in a day. It has
Speaker 12: some more features around the experience you have as a
Speaker 12: paid user versus a freemium user. So a casual user
Speaker 12: is happy to be a freemium user, but if you are,
Speaker 12: you know, using this for hundreds of queries in a day,
Speaker 12: and you are a prolific I mean, you really like
Speaker 12: this tool, then I think you may be willing to
Speaker 12: pay for it, So.
Speaker 18: Maybe it's more of a company play. Then do you
Speaker 18: see that being the main customer?
Speaker 12: I would say it has work related use cases. I
Speaker 12: mean we are talking about white collar jobs being affected
Speaker 12: by chat GIPT in certain cases get automated. How do
Speaker 12: you drive that productivity? I mean, ultimately, it has to
Speaker 12: save time, it has to make you productive and that
Speaker 12: in those cases, again, I am of the belief, you know,
Speaker 12: ads will still be the predominant way this thing gets monetized,
Speaker 12: but in a corporate setting, you're not willing to look
Speaker 12: at ADS while you're using this tool, so you'll probably
Speaker 12: subscribe to it.
Speaker 3: Does Bloomberg Intelligence have a chat GPT primer?
Speaker 12: We have our own generative AI forecast, and we actually
Speaker 12: will have a detailed segment level analysis. It's still not published,
Speaker 12: so I'm just giving you a teaser there, okay, but
Speaker 12: we will have our own segmentation for this entire market,
Speaker 12: which is I think overused at this point of time.
Speaker 18: Well, that's interesting because we were talking yesterday about Steve
Speaker 18: Cohen saying you know AI, it's the big thing, which, yeah,
Speaker 18: we've been discussing this, but if tech as a sector
Speaker 18: has sort of peaked, is AI the place to find
Speaker 18: growth right now?
Speaker 12: I mean there is no doubt that this will drive
Speaker 12: the next leg of growth. Now the question is how
Speaker 12: do you monetize it? Who gets displaced in terms of
Speaker 12: you know, the incumbents that are getting affected. But when
Speaker 12: it comes to the next leg of growth, I mean
Speaker 12: this is huge simply because everyone realizes.
Speaker 3: Now we have this, is this AI or is this
Speaker 3: chat GPT? Explain the difference or what.
Speaker 12: I would say large language models. So chat GPT is
Speaker 12: one of the large language models that is out there.
Speaker 12: As I said, Google has their own large language model,
Speaker 12: Meta has their own large alguage models. And you're going
Speaker 12: to see more.
Speaker 3: And more language models. Okay, yes, because and.
Speaker 12: The reason why they're called large language is because of
Speaker 12: the number of parameters. We're talking about one hundred billion parameters.
Speaker 12: Think of a regression model, it's got five ten different variables.
Speaker 12: We're talking about billions of variables. In terms of training
Speaker 12: an algorithm.
Speaker 3: Do we need it right? Do we need to regulate
Speaker 3: this thing?
Speaker 12: And that's where Samuel Altman's testimony comes into limelight. I mean,
Speaker 12: obviously he was grilled this week around the safety issues.
Speaker 12: And look, from a large company's standpoint like Google, they
Speaker 12: would want regulation because this will prevent everyone else from
Speaker 12: really competing in this space. And the bar is even higher,
Speaker 12: like to even train a large anguage model, you need
Speaker 12: ten thousand GPUs. So we're talking about a big upfront
Speaker 12: investment here in terms of anybody who wants to compete
Speaker 12: in this space. Otherwise, you just take what chatchipt offers you,
Speaker 12: which is a large anguage model they've already trained. You're
Speaker 12: just a user of that language model and building an
Speaker 12: application on top of it. Think of it as the
Speaker 12: app store. You're building apps on an iOS, but iOS
Speaker 12: is the operating system. Chat Gipt is giving you a platform.
Speaker 12: You're building an app on top of it. And so
Speaker 12: that's the kind of war that I foresee is Google
Speaker 12: having its own large Anglin model Meta and this is
Speaker 12: like the operating system of equivalent Android iOS and you know.
Speaker 1: So on all right, I just my own survey right now,
Speaker 1: like the group chat for my four children, I asking
Speaker 1: them how they use chat GPT, so I like know
Speaker 1: what to what I hear Okay, No.
Speaker 18: Well it's it's a very important question, Paul. And I
Speaker 18: guess I wonder too what they're using it for, because
Speaker 18: you're comparing it to search, but I don't use it.
Speaker 18: I still google things that I just want to search.
Speaker 18: And then there are other things like writing emails that
Speaker 18: I use chat GPT for.
Speaker 3: So what instruction do you give write an email?
Speaker 7: Teach?
Speaker 18: It gives me so specific, which is what I really
Speaker 18: like about it. I can say, write an email to
Speaker 18: my boss that is professional but also casual that says
Speaker 18: I'm just making this up. I'd like to request a
Speaker 18: week off to whatever for this thing, and it'll write
Speaker 18: it for you. And then you can say back, that
Speaker 18: was too long, cut it in half, and it'll do
Speaker 18: it in a second. And I just don't want to
Speaker 18: have to think about writing the email, so it does.
Speaker 14: It for you.
Speaker 18: Or you can say, make an itinerary for for a
Speaker 18: week in Switzerland and it sends you a whole thing.
Speaker 18: It can write a video script with suggestions, so that strings.
Speaker 1: Up, Like I thought, schools write my turn paper on X, X,
Speaker 1: Y and Z, so the New York City schools and
Speaker 1: there's news out and I know you guys send it
Speaker 1: to me. But there's news out today that the New
Speaker 1: York City had kind of forbidden chat GPT in New
Speaker 1: York City schools.
Speaker 3: They've just rescinded that.
Speaker 12: Yeah, because I think the co pilot use case is
Speaker 12: very interesting. Can it help you learn a concept faster
Speaker 12: because you have this you know, assistant that is available
Speaker 12: where you can understand the concept because this thing is
Speaker 12: an assisting you in the R and D?
Speaker 1: Is there a feeling that all right, we're I was
Speaker 1: gonna use a baseball analogy, but that may not work
Speaker 1: for you, but I'm gonna go there. We're not even
Speaker 1: this is using cricket very top yet, the very top
Speaker 1: of the first inning, right, we're on the on deckshert.
Speaker 3: We haven't even started the game yet. That's how really
Speaker 3: we feel.
Speaker 12: We're talking about foundational models here. The apps will be
Speaker 12: built on top of these foundational models. So, as I said,
Speaker 12: I think gofeed as an operating system equivalent. Right now,
Speaker 12: you have that base operating system. The apps will be
Speaker 12: developed as we go on.
Speaker 3: All right, I'll go there.
Speaker 1: I'll wait for your primer to come out from Bloomberg Intelligence,
Speaker 1: because that's how I learned most stuff I don't know,
Speaker 1: Man Deep Seeing, senior analyst technology for Bloomberg Intelligence, joining
Speaker 1: us here in a Bloomberg Interactive Brokers studio, making us
Speaker 1: even more confused, if that's possible.
Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can
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Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
Speaker 2: at Matt Miller nineteen seventy three.
Speaker 3: And on ball Sweeney I'm on Twitter at pt Sweeney.
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