Speaker 1: This is Bloomberg Business Wait inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: global business finance and tech news. The Bloomberg Business Week
Speaker 1: Podcast with Carol Messer and Tim Stenebek from Bloomberg Radio.
Speaker 2: We've got Callie Cox. She's a US investment analyst at
Speaker 2: each Brow and she's joining us on zoom. Callie. Always
Speaker 2: great to have you on. Thanks so much for making
Speaker 2: time for us this afternoon. As Jess was kind of mentioning, uh,
Speaker 2: market optimism right now looking really good. Market is up today,
Speaker 2: tech earnings really strong. Is that optimism out there warranted
Speaker 2: in your view?
Speaker 3: Yeah, I definitely think it is. And by the way,
Speaker 3: I am so jealous of whoever's going to the Beyonce concert.
Speaker 4: It's Maddie.
Speaker 2: CALLI fly up and come with me to Met Life
Speaker 2: tomorrow night.
Speaker 3: Oh my gosh, give me, give me some give me
Speaker 3: some time and I'll book my flight. Great, so excited
Speaker 3: for that. But you know, I really think it does.
Speaker 3: I think the optimism is warranted because investors, the economy,
Speaker 3: and the FED all seem to be on the same page.
Speaker 5: Now.
Speaker 3: There's no fighting the FED at this moment. No, earnings
Speaker 3: are coming out better than expected once again. Economic data
Speaker 3: is turning back up, especially on the consumer side. It's
Speaker 3: really hard to find a bearish narrative in this market.
Speaker 4: So seasonality looking at seag go in the terminal, you
Speaker 4: could pull up the heat map and look at historically
Speaker 4: how August September typically the worst months of the year.
Speaker 4: But we've also seen seasonality buck the trend, say like
Speaker 4: June swoon that didn't come to fruition, but July still
Speaker 4: was strong. But one of the big ones was just
Speaker 4: looking at the presidential cycle, the last three quarters were
Speaker 4: typically the strongest and that actually overlapped with what we've
Speaker 4: seen with this rally. How do you view the stock
Speaker 4: market heading into this weaker period seasonally wise?
Speaker 3: Yeah, so I'm glad you brought up seasonality because if
Speaker 3: I had to pick out two things that make me nervous,
Speaker 3: I'd probably say seasonality and sentiment, Because you're right, we're
Speaker 3: heading into weaker season of the year. You know, considering
Speaker 3: that we have a lot of people on vacation, volumes
Speaker 3: are lower. That can result in some error pockets of
Speaker 3: selling and you know buying. Quite honestly, if there's a
Speaker 3: headline that moves markets, and we saw that yesterday with
Speaker 3: yield curve control. You know, arguably a headline that probably
Speaker 3: didn't mean much for the US investor, it does for
Speaker 3: foreign exchange markets. It has you know, certain effects on
Speaker 3: company earnings and individual stocks, but on the whole, you know,
Speaker 3: when you're in a low volume period, you can see
Speaker 3: markets swing around a lot more. I'm not sure if
Speaker 3: that'll come to fruition this year. I mean, obviously we
Speaker 3: see a lot of momentum in the stock market right now,
Speaker 3: but at these levels, at this point, with rates so high,
Speaker 3: we are telling customers to, you know, consider a plan
Speaker 3: for if stocks fall. What would you do if we
Speaker 3: saw prices fall five or ten percent? Is it worth hedging,
Speaker 3: you know, is it worth making it making a plan
Speaker 3: to maybe buy some more shares? So you know, we're
Speaker 3: aware of the fact that prices could drop, and this
Speaker 3: is a part of the year where you know, we
Speaker 3: do see those air pockets and storms pop up.
Speaker 4: So then how are you advising clients to position or
Speaker 4: do you think that would be a buying opportunity if
Speaker 4: you do see the S and P five hundred pull
Speaker 4: back five ten percent.
Speaker 3: Well, I will say we've been more optimistic than the
Speaker 3: average Wall Street firm out there. We've been saying since
Speaker 3: November or December that you know, it's really hard to
Speaker 3: see stocks sell off when investors are prepared for the worst.
Speaker 3: And I don't think you can say that right now.
Speaker 3: I think sentiment is a lot more positive than it was,
Speaker 3: you know, seven or eight months ago. But you know,
Speaker 3: at the same time, we're seeing a lot of positive
Speaker 3: conditions swing in the bulls favor. So we think it's
Speaker 3: dangerous to let go of risk entirely in the first
Speaker 3: year of what looks like a bull market. I mean,
Speaker 3: the S and P five hundred rises an average of
Speaker 3: forty three percent in the first year of every bull
Speaker 3: market that we've seen since nineteen fifty. So we're telling
Speaker 3: our customers hold on to risk, but look at quality risk,
Speaker 3: look at companies that you think can weather recession. And
Speaker 3: on the bond side or outside of stocks, you really
Speaker 3: think about what could help you if a recession were
Speaker 3: to materialize. I mean, bonds, especially longer term treasury bonds,
Speaker 3: have been one of those classic recession hedges, and you know,
Speaker 3: if we see prices fall, they could at the very
Speaker 3: least provide you a sanity hedge in terms of, you know,
Speaker 3: managing your emotions and what could be a tough sell off.
Speaker 2: Do you think the Bears are going to get anything
Speaker 2: right this year?
Speaker 3: Oh, that's such a charged question. I mean, I think
Speaker 3: they have gotten a few things right. I mean, have
Speaker 3: we not forgotten that in March and in April? I mean,
Speaker 3: we had a banking scare that resulted from tighter policy,
Speaker 3: and that's still happening in the background. Of course, lending
Speaker 3: has picked up, but overall, we're looking at tighter conditions,
Speaker 3: and I think I think the pessimists are right in that,
Speaker 3: you know, we should still be aware of, you know,
Speaker 3: the lags that we could see in tighter monetary policy.
Speaker 3: So you know, it looks like we might be saved
Speaker 3: for the next month or two. But I'm certainly not
Speaker 3: one to step out there and say everything's okay. And
Speaker 3: that's why you know, we're telling customers again to you know,
Speaker 3: maybe look at some bonds, maybe look at diversifying your portfolio,
Speaker 3: and you know, maybe think about one of those more
Speaker 3: complex views where everything's going great right now, but you know,
Speaker 3: maybe there could be some differentiation among sectors or potentially
Speaker 3: some weakness in the overall market.
Speaker 4: What is sentiment telling us? When you have someone like
Speaker 4: Mike Wilson, obviously a well known bear on Wall Street,
Speaker 4: throwing in the towel this week saying that they were
Speaker 4: wrong but still holding a thirty nine hundred price target
Speaker 4: at the end of this year for the S and
Speaker 4: P five hundred, When does sentiment get a little bit
Speaker 4: too frothy for you?
Speaker 3: Well, the mood is getting better, and I wouldn't describe
Speaker 3: it as frothy quite yet. I actually wrote a note
Speaker 3: this week on the you know phrase we all know
Speaker 3: irrational exuberance and why we might not be be seeing
Speaker 3: irrational exuberance right now, especially after you know such a
Speaker 3: such an encouraging FED meeting and more I mean more
Speaker 3: importantly and encouraging FED press conference. I'd say now that
Speaker 3: you know, sentiment of course is getting better and investors
Speaker 3: have a right to feel better about the future. I
Speaker 3: think when it starts to get frothy is when we
Speaker 3: do start getting those conflicting signals. You know, data potentially weakening,
Speaker 3: seeing a lot of weakening and leading indicators. I mean,
Speaker 3: I'm looking at the job markets leading indicators right now,
Speaker 3: and you know, if we saw them weaken substantially in
Speaker 3: the weeks and months ahead, then I would probably raise
Speaker 3: the red flag and say, hey, something's wrong here. But
Speaker 3: right now it's it's pretty incredible to me about how
Speaker 3: many data series are turning in the bulls favor. So
Speaker 3: you know, stay on watch. Anything can happen. But you know,
Speaker 3: the market's momentum is moving higher, and if you're feeling
Speaker 3: encouraged about the future, there is a reason why you
Speaker 3: should feel that way.
Speaker 5: Yeah.
Speaker 2: Well, that momentum clearly driven by the AI euphoria. And
Speaker 2: we had that note from Michael Harten at this morning
Speaker 2: saying that rates are still too low to pop what
Speaker 2: he calls the AI baby bubble. I wonder, Kelley, to
Speaker 2: what extent do you foresee the fundamentals justifying these valuations
Speaker 2: for some of the n video like names out there
Speaker 2: in the second half of the year, and we have
Speaker 2: just about forty five seconds left.
Speaker 6: Sure.
Speaker 3: Well, first of all, you can't call a bubble until
Speaker 3: you're past it. So that's the first thing I tell
Speaker 3: it anybody, if everybody asked me, if anybody asked me
Speaker 3: if AI is in a bubble. But I think we're
Speaker 3: already seeing some of those fundamentals come out. We're seeing
Speaker 3: companies like semiconductor companies raising their sales guidance. We're seeing
Speaker 3: other companies invest in AI technology, you know. So I
Speaker 3: think we're seeing it play out, But we have to
Speaker 3: remember that AI is an emerging theme and it could
Speaker 3: take some time to really see that show up in
Speaker 3: the numbers. For now, I mean, it's anybody's guests, So
Speaker 3: I'm not surprised people are excited about it, But at
Speaker 3: the same time, I'm not ready to call it a bubble.
Speaker 4: I feel like we have to get to a point
Speaker 4: where there's IPOs, where AI is probably attached to the
Speaker 4: name right, and we just aren't quite there yet. Do
Speaker 4: you feel that way, Kelly.
Speaker 3: I don't know if that's where I would get work,
Speaker 3: But where I would get worried is if we didn't
Speaker 3: see AI flow into the economy and we didn't see
Speaker 3: it utilized by companies. We didn't see it commercialized, if
Speaker 3: you will, and I think that's a step that any
Speaker 3: groundbreaking technology needs to.
Speaker 2: Make, right. That's gonna be the big question. Yeah, these
Speaker 2: companies can keep saying AI on their earnings calls, but
Speaker 2: how is Kroger going to monetize their AI usage there. Callie,
Speaker 2: thank you so much for joining us on this Friday.
Speaker 2: It's always a pleasure to get you on our coverage.
Speaker 2: That was Callie Cox. She's a US investment analyst at
Speaker 2: e Toro. She's also got great commentary on Twitter, so
Speaker 2: follow her over there for more.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 4: Better to come in and chat with us more about
Speaker 4: what's happening in the crypto space than Everett Milman, chief
Speaker 4: market analysts at Gainesville Coins, joining us on on zoom
Speaker 4: and to chat with us more about how this particular
Speaker 4: asset class has been performing. Thank you so much for
Speaker 4: joining us, and I want to get your take just
Speaker 4: as far as sort of the wild ride. I know
Speaker 4: there's obviously so many coins when we are talking about
Speaker 4: the crypto space, but your view on Bitcoin right now
Speaker 4: and while it's trading once again below that psychological level
Speaker 4: of thirty thousand.
Speaker 6: Right Thank you so much for having me on.
Speaker 7: It has been interesting to see that although we know
Speaker 7: bitcoin has experienced incredible volatility over the course of its history,
Speaker 7: over the much of this summer, it has remained fairly steady,
Speaker 7: kind of trading sideways around that thirty thousand level. And
Speaker 7: it raises an interesting question about whether or not bitcoin
Speaker 7: actually can function as money, because you have, on the
Speaker 7: one hand, the idea of a store of value that
Speaker 7: it needs to be steady and stable, But on the
Speaker 7: other hand, money is supposed to be used for spending,
Speaker 7: and in that sense, Bitcoin perhaps is better characterized as
Speaker 7: digital gold as purely a store of value, because as
Speaker 7: a medium of exchange it runs into this problem that
Speaker 7: is known as Gresham's law. Basically that bad money drives
Speaker 7: out good money. Bad money money that depreciates in value,
Speaker 7: people are going to want to spend that as quickly
Speaker 7: as possible, to get their hands on real things with
Speaker 7: it before it becomes worthless.
Speaker 6: Bitcoin.
Speaker 7: If a price does simply keep going up, as a
Speaker 7: lot of the advocates and evangelists certainly hope, that's not
Speaker 7: very good as money. That is the opposite problem that
Speaker 7: people would simply hoard the bitcoin and never use it
Speaker 7: as money or spend it. So I think that that
Speaker 7: brings up this interesting philosophical question about sure. I think
Speaker 7: bitcoin has established itself as a unique asset class, perhaps
Speaker 7: less so for other cryptocurrencies. But then the question does become, well,
Speaker 7: what is bitcoin? Is it money or is it simply
Speaker 7: kind of like a digital gold bar that you just
Speaker 7: put in the vault and keep.
Speaker 2: In a wallet, the question that regulators are going to
Speaker 2: be tasked with answering. And having said that, we've got
Speaker 2: some regulatory news on the terminal crossing around three pm
Speaker 2: Eastern that Apple the Apple App Store rules face lawmaker
Speaker 2: scrutiny over crypto and NFTs. And this comes basically after
Speaker 2: complaints from the likes of Coinbase saying that Apple's in
Speaker 2: app purchase system doesn't support crypto, so they weren't able
Speaker 2: to comply with the Apple App Store rules even if
Speaker 2: they had tried. And now those questions are going to
Speaker 2: be dealt with by regulators. But having said that, I'm
Speaker 2: curious what do you think about the role of big
Speaker 2: tech companies when it comes to regulatory questions for crypto.
Speaker 2: Does a company like Apple help you in your quest
Speaker 2: to get crypto regulation clarity or does it hurt that effort?
Speaker 6: That is kind of a conundrum, right.
Speaker 7: It really brings up this question that cryptocurrency itself gets
Speaker 7: at the heart at how much control do we want
Speaker 7: governments to have over this three new world of the
Speaker 7: future of digital money, Because whether it is a tech company,
Speaker 7: a private enterprise, or indeed the government with the CBDC
Speaker 7: issuing these digital currencies, that does inevitably seem to be
Speaker 7: the path forward in the future, and up to now,
Speaker 7: somewhat confusingly, we've seen the SEC and the CFTC essentially
Speaker 7: attempt regulation purely by enforcement, and I think that what
Speaker 7: we're going to need in terms of clarity is actual
Speaker 7: legislation from Congress. So there are a few crypto bills
Speaker 7: that are currently being debated, one on stable coins and
Speaker 7: another the Loomis Jilibrand bill that is being workshopped. I
Speaker 7: would be very interested to see what comes out on
Speaker 7: the other end of those two laws, if indeed they
Speaker 7: do become laws, because there has to be some level
Speaker 7: of clarity about not just what kind of influence we're
Speaker 7: going to allow tech companies to have in the crypto space,
Speaker 7: but what is the government's position on these things, And
Speaker 7: I think it's been very unclear. That's really all that
Speaker 7: we can say at this point is that the government
Speaker 7: has not been able to establish a clear position, and
Speaker 7: rather than letting the executive branch and its agencies try
Speaker 7: and kind of grasp in the dark and change direction
Speaker 7: in midstream, it would be very helpful if Congress could
Speaker 7: come up with some sensible rules that go beyond simply,
Speaker 7: you know, punishing bad actors like FTX, and it actually
Speaker 7: established some framework for how do we think of cryptocurrencies
Speaker 7: and bitcoin relative to regular money or other forms of
Speaker 7: payments and transactions.
Speaker 4: And one of these biggest debates, especially in this crypto space,
Speaker 4: is what should and shouldn't count as a security in
Speaker 4: the eyes when it comes to US regulators. What's your
Speaker 4: view on that right?
Speaker 7: And as you referenced, we recently had the Ripple case
Speaker 7: in court and I think we got sort of a
Speaker 7: mixed or ambiguous response that Ripple seems have been vindicated
Speaker 7: that it is not a security, but it really was
Speaker 7: only looking the court was very narrowly looking at one
Speaker 7: aspect of sort of the creation of the token, not
Speaker 7: the downstream distribution of Ripple. Tooken's XRP when it gets
Speaker 7: to the secondary market or to retail In my opinion,
Speaker 7: I think it's fairly clear that most cryptocurrencies, as they
Speaker 7: are currently constructed, they are securities. They function like securities,
Speaker 7: they're traded on exchanges, but they are obviously not quite
Speaker 7: the same as other existing financial instruments. That being said,
Speaker 7: I think that is another one of these hot button
Speaker 7: issues that are at the center of the future of
Speaker 7: the crypto space that we need more clarity, we need
Speaker 7: sensible regulation in order for things to evolve and develop
Speaker 7: further than where they are right now, because everything is
Speaker 7: sort of in limbo.
Speaker 2: Well it is sort of in limbo, and that makes
Speaker 2: me wonder whether there's kind of a credibility question, least
Speaker 2: a pr question for crypto.
Speaker 3: This week, the.
Speaker 2: Terminal Tracker when it comes to word counts show that
Speaker 2: the Barbie movie got more mentions on the terminal than
Speaker 2: Bitcoin did, and that feels like a bad indicator for
Speaker 2: you for the second half.
Speaker 3: Of the year.
Speaker 6: Ah, that's a fair point. Obviously, the public consciousness or.
Speaker 7: Awareness of bitcoin as an investment has waxed and waned,
Speaker 7: and I think it's interesting to take into account that
Speaker 7: although cryptocurrency itself has inescapably become a bit of a
Speaker 7: political issue, we have multiple presidential candidates that are openly
Speaker 7: taking a stance. The most recent polling shows that actually
Speaker 7: the majority of the public is somewhat indifferent right now
Speaker 7: to what happens with cryptocurrency and where policy goes. And
Speaker 7: obviously within the space there are still mean coins and
Speaker 7: this curious culture of I would say unseriousness that characterizes
Speaker 7: the broader crypto space. But as of right now, without
Speaker 7: the clear legal framework, I think that that is simply
Speaker 7: the cost of admission, so to speak, in order to
Speaker 7: engage with some of the more interesting and promising ideas
Speaker 7: that are coming out of crypto.
Speaker 4: We only have about twenty seconds left. But what's the
Speaker 4: top question you hear from clients.
Speaker 7: Is what do I do with my cryptocurrency? Where do
Speaker 7: I put it? And I think that there is sort
Speaker 7: of a knowledge gap when it comes to using the technology.
Speaker 7: How do you get crypto into cold storage? How do
Speaker 7: you spend it? Those really basic questions about how do
Speaker 7: you even use the technology. So it's a user experience.
Speaker 4: Question definitely, and I feel like that's been going on
Speaker 4: for a while too. When it comes to blockchain, Well,
Speaker 4: thank you so much by going through breaking this down
Speaker 4: with us that's Everett Millman, chief market analysts at Gainesville Coin,
Speaker 4: speaking us about crypto all things and what's happening with bitcoin.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 2: Well, if you've got a great guest coming on to
Speaker 2: talk with us about all of the deal's news out there.
Speaker 2: Mitch Berlin is the vice chair of Strategy and Transactions
Speaker 2: at EY and he's joining us on Zoom from New Hope, Pennsylvania. Mitch,
Speaker 2: thanks so much for coming on with us on this Friday.
Speaker 2: As we were talking about it's been a tough environment
Speaker 2: to get deals done for the first half of the year,
Speaker 2: what would you say is going to be the single
Speaker 2: biggest catalyst to change that?
Speaker 8: It has been a difficult year. Thanks for having me,
Speaker 8: by the way. I think that the biggest catalyst for
Speaker 8: improving the Difficut lemonade market is predictability. Predictability in where
Speaker 8: the economy is going you know, you build these models
Speaker 8: to take your business case to the board, to do
Speaker 8: these deals based on a predictable economy, and if the
Speaker 8: economy is unstable, it's very hard to give board's confidence
Speaker 8: that those those predictable models that underlie your business case
Speaker 8: are actually going to come to realization.
Speaker 4: When you're speaking with CEOs, what are they telling you
Speaker 4: about how they feel about the direction of the economy
Speaker 4: right now?
Speaker 8: I think they're cautiously optimistic. They know that they need
Speaker 8: to actually do transactions if they want to transform, because
Speaker 8: M and A is the fastest path to transformation versus
Speaker 8: doing it organically. They're watching very closely. They're looking at
Speaker 8: the valuations out there. There's still a significant mismatch between
Speaker 8: the cost of capital evaluations, and one of those two
Speaker 8: things have to come down in addition to a predictable
Speaker 8: economy for M and A really to pick up again.
Speaker 4: So what would have to be rectified between those two
Speaker 4: what would we need to see happen?
Speaker 8: Well, you know, we do think that sometime in early
Speaker 8: twenty twenty four, hopefully the FED will will decrease the
Speaker 8: FED borrowing, right, so the cost of capital may come down,
Speaker 8: But if not, ultimately those that need to sell their
Speaker 8: businesses will have will have to become more realistic on
Speaker 8: what those businesses are worth, and we'll see a decrease
Speaker 8: in evaluations. We already have seen a slight decrease in valuations,
Speaker 8: but not enough to trigger a strong m and a
Speaker 8: market like we had in twenty twenty one or twenty twenty.
Speaker 4: So you mean, say the Federal Reserve does end up
Speaker 4: officially concluding sometime at the end of this year, but
Speaker 4: then keeps the terminal rate at a particular level. That's
Speaker 4: going to cost some issues there because they're not obviously
Speaker 4: cutting rates, they're still keeping them elevated, right.
Speaker 8: But at least keeping them elevated is still predictable, right,
Speaker 8: so then other things can adjust up and down to
Speaker 8: accommodate that. It's when you never know where it's going
Speaker 8: to be three months from now that creates havoc.
Speaker 2: Well, some of that havoc is happening with the Live
Speaker 2: Nation stock hitting it's fifty two week highs earlier today
Speaker 2: and then dropping as much as sixteen percent today. And
Speaker 2: I don't need you to talk about Live Nation specifically here,
Speaker 2: but I just think it's the perfect example of the
Speaker 2: challenge when it comes to M and A. Right now
Speaker 2: they have all this cash on hand because of all
Speaker 2: of this consumer spending on concert they were looking into
Speaker 2: some M and A. Now they get hit with this
Speaker 2: DOJ suit. So in your recommendation, how should companies be
Speaker 2: thinking about the cost of benefit analysis of getting into
Speaker 2: M and A when we are in such a tough
Speaker 2: regulatory environment and it might just be more beneficial to say,
Speaker 2: I'm just going to keep this dry powder on the
Speaker 2: sidelines for.
Speaker 3: A little bit.
Speaker 5: I think we are.
Speaker 8: But we have seen some successes against the FTC as well,
Speaker 8: you know where you know where they have where companies
Speaker 8: haven't gone up against FTC and actually one, so I
Speaker 8: would you know. I do think you have to, though,
Speaker 8: add additional time into your M and A timeline, particularly
Speaker 8: for large deals. I do think the M and A
Speaker 8: environment is only going to get more challenging. These new
Speaker 8: M and A guidelines are out for the first time
Speaker 8: in thirteen years. The FTC has revised these times. These
Speaker 8: guidelines most likely will make M and A more difficult,
Speaker 8: It'll make it more expensive. But if you build in
Speaker 8: the timeline, you know, I do think you can manage it,
Speaker 8: and we have seen successful fights against some of the
Speaker 8: FTC lawsuits AI.
Speaker 4: I have to get your thoughts on this because we
Speaker 4: constantly talk about this and how it impacts particular segments
Speaker 4: of the market. What are you seeing as far as
Speaker 4: how it's impacting M and A and are there particular
Speaker 4: sectors and industries that are maybe benefiting from that.
Speaker 8: Yeah, Well, it's interesting because AAI is the number one
Speaker 8: topic for the CEOs that we speak with. Last year
Speaker 8: is supply chain, the circular economy. This year, it's all
Speaker 8: about AI, and it's proven out in the numbers. About
Speaker 8: a third of the deals in the last six months
Speaker 8: have been tech deals, a lot of which are related
Speaker 8: to AI. So the few sectors that are really heavy
Speaker 8: players in the M and A markets relates to AI
Speaker 8: or healthcare, so they're looking at AI to help with
Speaker 8: medical research and diagnostics to make them more predictable. Financial
Speaker 8: services is using AI to make risk assessment, you know,
Speaker 8: to make more robust risk assessment decisions as they make
Speaker 8: their investment decisions. And then consumer and retails also heavily
Speaker 8: looking at AI to gauge consumer sentiment to better forecast
Speaker 8: inventory and demand management. Overall.
Speaker 2: Mitch final forty five seconds here, which industry. Do you
Speaker 2: anticipate benefiting the most from M and A deals in
Speaker 2: the second half of twenty twenty three.
Speaker 8: I think we're going to see a lot in Life sciences,
Speaker 8: and I think we're going to see a lot in
Speaker 8: consumer We've already seen their decrease. They continue to decline
Speaker 8: like every other sector a year over year, but they're
Speaker 8: declining at a smaller rate and the value of those
Speaker 8: deals are getting bigger. So we'll end up seeing more
Speaker 8: deals and bigger deals from those two sectors. Particularly life sciences.
Speaker 8: You always have the patent cliss things coming off patent
Speaker 8: and the life sciences companies need to continue to build
Speaker 8: the R and D pipeline, and the best way to
Speaker 8: do that is through acquisitions.
Speaker 2: Yeah, and we've seen a lot of movement in that
Speaker 2: space as well in the past couple of weeks, As
Speaker 2: Jess was mentioning, we are starting to see an uptick
Speaker 2: in these M and A deals, So definitely good sign
Speaker 2: for you and your colleagues there. Metch heading into the
Speaker 2: second half of this year. I really appreciate, really appreciate
Speaker 2: you joining us on this Friday afternoon. Thank you so much.
Speaker 2: That was Mitch Berlin. He's the vice chair of Strategy
Speaker 2: and Transactions for EY America's joining us on Zoom from
Speaker 2: New Hope, Pennsylvania to talk about the M and A space.
Speaker 3: I'm brother Marco, a journal How about you let me drive?
Speaker 5: Oh no, no, no, no, honey, please, I'll do the driving gravel.
Speaker 7: Let's mate, I want to try it. It's a good
Speaker 7: question time.
Speaker 1: This is the drive to the Globe.
Speaker 6: Dot com for me.
Speaker 1: Think well, Brogn on Bloomberg Radio.
Speaker 4: I'm really enjoying this Friday music. Jess beIN Madison Mills
Speaker 4: here the Bloomberg Interactive Brokers studio, filling in for Carol
Speaker 4: Masser and Tim Sedovik. So keep the girl power going
Speaker 4: with the rest of the afternoon. Matt, yeah, oh yeah.
Speaker 4: And it's been such a huge week. Obviously we've been
Speaker 4: talking about these wrapping up, these central bank meetings. Clearly
Speaker 4: the Federal Reserve obviously raising interest rates once again earlier
Speaker 4: this week. But the big thing this didn't come with
Speaker 4: those economic projections and the dot plots. Those are quarterly,
Speaker 4: so we will get another read on that actually two
Speaker 4: months from now, on September twentieth. A lot of data
Speaker 4: in between now and then, but we want to break
Speaker 4: down just the view here as far as positioning, also
Speaker 4: the outlook for when it comes to central banks as
Speaker 4: well as the economy. So who better to do it
Speaker 4: with than Greg Halter, director of research at Carnaby Investment Council,
Speaker 4: who is joining us on zoom. Greg, thank you so
Speaker 4: much for joining us on a Friday afternoon. I wanted
Speaker 4: to first just kind of get your take here of
Speaker 4: what FED Chair Jerome pal said on Wednesday, his view
Speaker 4: and then your outlook as far as the inflation data
Speaker 4: that we got this morning with the Employment Consts Index
Speaker 4: as well as the Fed's preferred gauge when it comes
Speaker 4: to the PCE.
Speaker 5: INDI here, yes, first of all, thank you for having
Speaker 5: me a pleasure to join you. Relative to the feeder
Speaker 5: reserve and what was announced this week pretty much as expected,
Speaker 5: raising the FED funds rate to five and a quarter
Speaker 5: at to five and a half, which is by the
Speaker 5: way highest in twenty two years. This morning we did
Speaker 5: get the PCE, which is the FEDS preferred inflation measure
Speaker 5: three point zero percent overall four point one ex food
Speaker 5: and energy both down versus may in the lowest in
Speaker 5: two years. So for the FED looking at data data data.
Speaker 5: Those are some good data points obviously one period, but
Speaker 5: the trend has been downward, so we think that is
Speaker 5: a positive overall for the markets.
Speaker 2: Well, you are just the best guest for us to
Speaker 2: possibly have when it comes to FED moves because of
Speaker 2: your experience with the Federal Reserve Bank of Cleveland, Greg,
Speaker 2: So I'm hoping that you can give us some inside
Speaker 2: intel into what the thinking of these Federal Reserve people
Speaker 2: is because it feels like you can pick your poison
Speaker 2: when it comes to the data and what narrative you want.
Speaker 2: So I'm curious if you can kind of put it
Speaker 2: into baseball terms for me here what inning are we
Speaker 2: in when it comes to the fight against inflation? Is
Speaker 2: the game almost over here? Or are we getting some pushback?
Speaker 5: Interesting question and relative to my experience with the FED
Speaker 5: the Fed of Cleveland, I was actually a commissioned bank examiner.
Speaker 5: I did get to sit in Alan Greenspan's chair at
Speaker 5: the FED, but in terms of policy, I was not
Speaker 5: involved in that other than the standpoint of examining banks
Speaker 5: and bank holly companies, which obviously became a very important
Speaker 5: topic in March of this year. So from that standpoint,
Speaker 5: you know, where are we probably in the eighth inning.
Speaker 2: That's really optimistic.
Speaker 6: Greg well, although.
Speaker 5: I will caution that by pointing out that commodities we're
Speaker 5: seeing some reflation currently. For instance, gasoline futures are up
Speaker 5: thirty percent since early May, diesel is up twenty five percent.
Speaker 5: Some metals have been rising, like lead, tin, nickel, zinc,
Speaker 5: iron ore, things we don't normally think about, but they're
Speaker 5: certainly used every day in manufacturing. So that's the question.
Speaker 5: Where are we in terms of commodities which had been
Speaker 5: tamed and coming down, And as we know, the long
Speaker 5: tailed areas like wages and rents have continued to be sticky.
Speaker 5: So it is intriguing and you look at what's happened
Speaker 5: to at least the stock market, and the stock market
Speaker 5: really has not seemed to care what's happened with inflation,
Speaker 5: interesting divergence. One thing I'd like to point out is
Speaker 5: that over the last three years we have seen things
Speaker 5: that have never and never say never, but never happened before,
Speaker 5: at least in many lifetimes. You know, the last pandemic
Speaker 5: was nineteen eighteen or so, no computers and no global trade.
Speaker 5: So from the standpoint of trying to make decisions on
Speaker 5: things that have happened over the last three years, and
Speaker 5: then applying traditional economic forecasts and base cases, a lot
Speaker 5: of that has gone out the window, and I think
Speaker 5: that's really cost some issues for the economists out there when.
Speaker 4: You're putting together research for not just the stock market
Speaker 4: but also the bond market. What do you think the
Speaker 4: diversence between the two is telling us about the direction
Speaker 4: of the economy.
Speaker 5: Probably Number one is, don't discount the consumer. It's been amazing.
Speaker 5: It's seventy percent of our economy two thirds basically, and
Speaker 5: the consumer somehow, some way continues to amaze on the
Speaker 5: upside in terms of being resilient. That's about all I
Speaker 5: can say. It's it is quite amazing, especially considering that
Speaker 5: we've had the highest pace of increases in interest rates
Speaker 5: in forty years, and yet here we are. You know,
Speaker 5: we hear the economic dire, the gloom, yet there's been
Speaker 5: no recession, at least technically. And you know, where I
Speaker 5: am in Cleveland, there's plenty of manufacturing business going on,
Speaker 5: new buildings being constructed. Home prices and home building are
Speaker 5: kind of through the roof, still bidding wars, so there's
Speaker 5: lots of divergences here, so to try and apply anything
Speaker 5: that is traditional in today's day and age is interesting
Speaker 5: to say the.
Speaker 2: You mentioned some of the construction and manufacturing work that
Speaker 2: you're seeing. I'm curious when you think about Bidenomics in
Speaker 2: the US bringing chip production stateside. Are you concerned at
Speaker 2: all about the impact Bidenomics could have when it comes
Speaker 2: to the inflation picture and stimulating the economy while the
Speaker 2: FED is trying so hard to fight inflation. And we've
Speaker 2: got about forty five seconds left for you.
Speaker 5: Sure, another great question. I think it's a good thing
Speaker 5: to bring manufacturing back. We've got Intel down south of
Speaker 5: US one hundred and twenty miles in the Columbus area
Speaker 5: putting up a big facility. You know, the question is
Speaker 5: can they find workers? Can they find qualified workers? That
Speaker 5: remains to be seen. But the spillover effects of these
Speaker 5: types of things are huge, from not just the plant,
Speaker 5: but the workers. They have to eat, they have to shop.
Speaker 5: It's just a huge multiplier impact.
Speaker 4: Great, well, it's been such a pleasure speaking with you
Speaker 4: and being able to get insight on all things FED
Speaker 4: and especially this interesting take what's been happening in particular
Speaker 4: corners of the commodity market and what that could mean
Speaker 4: with a tricky dynamic here for the FED, even though
Speaker 4: obviously we're seeing some bright spots here in green shoots
Speaker 4: when it comes to some of this latest batch of
Speaker 4: inflation data. So that's Greg Halter, director of Research at
Speaker 4: Carnavy Investment Council.
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