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Speaker 1: Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Speaker 2: We're just under twenty four hours away, Jess from the
Speaker 2: next FED decision FOMC. We've got some economic news today.
Speaker 2: We talked about it right, consumer confidence down to a
Speaker 2: five month low, dropping to a five month low in October,
Speaker 2: and then you got employment costs unexpectedly accelerating in the
Speaker 2: third quarter or so. That reminds us we've got a strong,
Speaker 2: strong labor market.
Speaker 3: And especially with some thoughts ahead of this FOMC meeting.
Speaker 3: Back with US is doctor Steve Shanky, chief economist and
Speaker 3: advisor at Keele Point and former staff member of the
Speaker 3: US Treasury while White House National Security Council. And then
Speaker 3: of course Steve is on zoom in Mexico, also with
Speaker 3: US as Bloomberg Economics owned US economist Stewart here of
Speaker 3: course in the Bloomberg Interactive Brokers studio, and so Stewart
Speaker 3: I wanted to kick off with today's data, so we
Speaker 3: did get a lot of indications here what wage growth
Speaker 3: does look like in the economic snaphot obviously of the economy.
Speaker 3: When you are thinking about FED share Jerome Pale tomorrow,
Speaker 3: what are your thoughts in what do you think that
Speaker 3: the Federal Reserve should do? Because we're not going to
Speaker 3: get those quarterly economic projections or the dot plots tomorrow.
Speaker 4: So it was a bit of a shocker to see
Speaker 4: the employment cost index tick up in Q three. It
Speaker 4: departs from what we've been seeing with the Atlanta Fed
Speaker 4: wage tracker, departs from what we've been seeing in the
Speaker 4: non farm payrolls report, where we've had modest wage growth
Speaker 4: that's actually been relatively consistent with two percent inflation, with
Speaker 4: the Fed's two percent inflation target. We don't think that
Speaker 4: the Fed is going to be in a position to
Speaker 4: hike tomorrow ninety seven some odd percent odds market applied
Speaker 4: probability that the Fed's going to maintain its current policy
Speaker 4: rate when it makes its announcement tomorrow, and we think
Speaker 4: that that is the right move. Though I wouldn't be
Speaker 4: so presumptuous as to tell Chairman Powell how.
Speaker 5: To do his job.
Speaker 2: I would either having said that way, I want to
Speaker 2: bring Steve into because what I think about A very
Speaker 2: wise individual said to me that Jay Powell, he's a lawyer,
Speaker 2: and he looks at the data in front of him, Steve,
Speaker 2: and that's what's going to determine the decision he's going
Speaker 2: to make on any given FOMC day. Having said that,
Speaker 2: so what is the data playbook that Jay Powell and
Speaker 2: company will be dealing with when they make that decision
Speaker 2: or just ahead of that decision tomorrow.
Speaker 6: Well, I absolutely agreet Carola, and the data that he
Speaker 6: has has in front of him is a little bit
Speaker 6: overwhelmeding just because it's so broad. I mean, we had
Speaker 6: this four point nine GDP growth number, but you know,
Speaker 6: consumer spending was up four percent and a rebuilding of inventories,
Speaker 6: which is a big variable, was up.
Speaker 7: So how do they discount that?
Speaker 6: Maybe he'll say something about that in his comments, as
Speaker 6: as Stewart said, the employment cost index unexpectedly up, but
Speaker 6: at the same time, a year over year, private wages
Speaker 6: and salaries were doubt a bit.
Speaker 7: Unemployment is not likely to.
Speaker 6: Fall, wages are looking to be on a downward trend
Speaker 6: when we look forward, and I think that the FED
Speaker 6: can probably see that. So the discussion, even with no
Speaker 6: rate increase, no change in tone, I think would be
Speaker 6: very interesting as chair of Powell answers questions about these
Speaker 6: data that.
Speaker 7: Are a little bit inconvenient.
Speaker 6: But at the same time he has a lot of
Speaker 6: other things that he can fall back to and point.
Speaker 2: To, well, come back back in stut because I just
Speaker 2: I do wonder in terms of, you know, what you
Speaker 2: think will be top of mind or the message that
Speaker 2: he's going to need to get across in that press conference,
Speaker 2: or what he might be you know, questioned about the
Speaker 2: most because I feel like we've well, no, okay, no decision,
Speaker 2: So we moved to the press conference.
Speaker 4: Right, So moving to the press conference. Here's just a
Speaker 4: typical strategy that Powell deploys at the press conference. If
Speaker 4: they were to ever make a hike a hawkish move,
Speaker 4: he ends up sounding a little bit more dubbish during
Speaker 4: the press conference if they do something that's a little
Speaker 4: bit you know, incrementally dookook right exactly, and you just
Speaker 4: hold on to your CDs. You watch equities move when
Speaker 4: he's in the middle of the press conference. But when
Speaker 4: they make something that's a little bit more dubvish, when
Speaker 4: they hold rates steadied as they will tomorrow. He's gonna
Speaker 4: most likely sound hawkish. He's going to talk about the
Speaker 4: persistence of growth, even if he takes Steve's really important
Speaker 4: points into consideration about thirty percent, about thirty percent of
Speaker 4: that four point nine percent Q OVERQ growth that we
Speaker 4: saw on Q three came from inventories. That doesn't exactly
Speaker 4: scream like organic growth in the US economy. Even if
Speaker 4: he were to take that into consideration, he's gonna end
Speaker 4: up saying every meeting is a live meeting. They're only
Speaker 4: making decisions for today. They're not making decisions for tomorrow.
Speaker 4: Based in the latest SEP, they're still showing another rate
Speaker 4: hike this year. So he's going to end up sounding
Speaker 4: a bit more hawkish at the press conference.
Speaker 2: Interesting how much.
Speaker 3: Does that job booning stew feed into the mistake from
Speaker 3: transitory that he dropped almost two years ago?
Speaker 4: You know, I think that it is still something that
Speaker 4: they think about. They don't want to end up with
Speaker 4: the egg on their face and perpetuity. They do want
Speaker 4: to end up showing some sort of dedication to bringing
Speaker 4: inflation back toward the two percent target. After having made
Speaker 4: such an important misstep and being so all too confident
Speaker 4: that inflation would come down naturally, and instead they're actually
Speaker 4: having to put in a lot of the work. And
Speaker 4: given the fact that the US hasn't been especially interest
Speaker 4: sensitive in their spending today and it's taken a lot
Speaker 4: more hiking than anticipated, I think that any sort of
Speaker 4: hawkish tone may exactly be part of that just and
Speaker 4: may be part of that legacy of dealing with that
Speaker 4: transitory egg on their faces.
Speaker 2: Hey, Steve, one of the things that I thought was
Speaker 2: really interesting. We've had a great story in the Bloomberg
Speaker 2: about corporate credit strength and that to really you know,
Speaker 2: tame inflation. The FED, you know, they're looking to tighten
Speaker 2: those financial conditions across the economy, but they really haven't
Speaker 2: made much of a dent in corporate America yet. So
Speaker 2: we're talking about you know, we look specifically at the
Speaker 2: extra yield investors demand for risk in the US investment
Speaker 2: grade and high yield bond markets, which has remained below
Speaker 2: their twenty year averages and well under level seen during
Speaker 2: historical times of stress in the economy, and borrowing remains robust.
Speaker 2: So would the FED like to see that tighten up
Speaker 2: a little bit and not be so upbeat that there's
Speaker 2: more work to be done. They look at things like that.
Speaker 6: Well, they certainly would like to see the market providing
Speaker 6: less liquidity, and that goes right to the point that
Speaker 6: you make.
Speaker 7: But they're also there are also very.
Speaker 6: Wary, I believe, notwithstanding wanted to wanting to continue their
Speaker 6: Hockey's tone of doing anything that is that is going
Speaker 6: to fuel a further sell off in the bond market.
Speaker 7: They seem to be happy with where mid and longer
Speaker 7: term rates are, and so while they might not be
Speaker 7: particularly happy with with all the liquidity that continues to
Speaker 7: exist in the corporate market, my belief is that they'll
Speaker 7: be patient about it.
Speaker 2: Can I ask you, do you feel like if it's
Speaker 2: getting close to a neutral rate?
Speaker 7: Yes, I think that they are.
Speaker 6: They just just the comments that that some of the
Speaker 6: Governor's f MC members and Jay Powell made this past
Speaker 6: last week. They they seem to be getting comfortable with that.
Speaker 6: I mean, to Stewart's point, they don't want to. They
Speaker 6: don't want to let up up on their hawky is tone.
Speaker 6: But but when you sort of parse out some of
Speaker 6: the things that they've been saying recently, I think the
Speaker 6: answer to that is yes, Stu.
Speaker 3: We also have another wild car for tomorrow with the
Speaker 3: refunding in the treasury market. What are your expectations and
Speaker 3: what do you think that could mean for yield as
Speaker 3: far as what that pressure could mean for maybe longer
Speaker 3: duration and growth stocks in the equity.
Speaker 4: Market with growing auctions with higher deficits than had been
Speaker 4: previously projected, there's reason to believe that even just the
Speaker 4: term premium that had been getting blown out, that had
Speaker 4: been raising the entire yield curve that has been front
Speaker 4: of mind for FED policy makers, could even just get
Speaker 4: blown out even further. One thing that's super important, though,
Speaker 4: is that when you see higher long term rates moving
Speaker 4: as a consequence of a larger term premium, it means
Speaker 4: the FED has less work than it has to do.
Speaker 4: It could sort of sit back and relax, not really relax,
Speaker 4: but at least wait to see the economic consequences of
Speaker 4: higher long term field continuing.
Speaker 5: To ripple through.
Speaker 4: So, for example, while the FED had been doing most
Speaker 4: of the heavy lifting deeply inverting the curve raising front
Speaker 4: end rates as aggressively as we've seen it point in
Speaker 4: the past forty years, now with longer term rates catching
Speaker 4: up as a consequence of a larger term premium, the
Speaker 4: FED can sort of slow down. And I think that
Speaker 4: that's that is downstream funk fiscal policy, and that is
Speaker 4: going to be an important factor tomorrow.
Speaker 2: Yeah, you do feel like, hey, if I get a
Speaker 2: little bit of an assist, it wouldn't mind Steve saving
Speaker 2: the last forty five seconds minute for you here in
Speaker 2: terms of that the specifics on that refunding, how does
Speaker 2: you've worked at Treasury, how does that factor into or
Speaker 2: and you've worked at the government, you've worked at the
Speaker 2: White House? How does that factor and you think into
Speaker 2: the Fed's thinking.
Speaker 7: Well, they had to be aware of it.
Speaker 6: You know, they've gotten caught up on this a couple
Speaker 6: of times in the past on their REPO activities, so
Speaker 6: they're certainly mindful of it. They want to be respectful,
Speaker 6: and the Treasury Secretary has has indicated a point of
Speaker 6: view that maybe isn't fully embraced.
Speaker 7: By the market.
Speaker 6: But I think that the the FED is going to
Speaker 6: be sensitive and accommodating.
Speaker 2: Going to be interesting, very interesting. Hey, guys, thank you
Speaker 2: so much. I feel like there's a lot going on,
Speaker 2: but we need a little bit of a setup ahead
Speaker 2: of that FED decision, which you know, twenty four hours
Speaker 2: from now, less than twenty four it will be front
Speaker 2: and center for all of us guys. Thank you so much.
Speaker 2: Blueberg Economics US economist Stuart Paul joining us in our
Speaker 2: Bloomberg Interactive Broker Studio along with doctor Steve Skankey, chief
Speaker 2: economic advisor of at kill Point. As we mentioned, former
Speaker 2: staff member at the US Treasury and the White House
Speaker 2: National Security Council, joining us on zoom in Mexico.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 2: AMD, which is down, continues to be down about four
Speaker 2: percent in the aftermarket following its earnings. By the way,
Speaker 2: their chips have been used in the automotive world as
Speaker 2: well as Tesla's, so we want to talk about AMD,
Speaker 2: We want to talk about Tesla, and we also want
Speaker 2: to talk about it another ev maker, carmaker Stilantis. I'm
Speaker 2: trying to roll it all together and I'm going to
Speaker 2: toss it over to our Ed Ludlow, who is co
Speaker 2: host of Bloomberg Technology on Bloomberg TV because I'm going
Speaker 2: to throw it all at you. But let's start with AMD.
Speaker 2: I know there's a lot on your plate. This is
Speaker 2: our weekly look at the world of evs. We call
Speaker 2: it Bloomberg plugged in. But let's start with AMD, which
Speaker 2: is down in the aftermarket. What jumps out for you, Ed, Yeah.
Speaker 8: It's just a mixture of disappointment. Right. If you go
Speaker 8: to their forecast for the fourth quarter, the revenue range
Speaker 8: is five point eight to six point four billion dollars.
Speaker 8: The street wanted to c six six point four billion dollars,
Speaker 8: so the mid range point is kind of disappointing. But
Speaker 8: the biggest story here is that they're not seeing the
Speaker 8: PC recovery that Intel saw. They make GPUs that go
Speaker 8: into gaming consoles and high end gaming pieces and are
Speaker 8: warning us that slowing down. And even though they told
Speaker 8: us that they're super special AI accelerated chips I three
Speaker 8: hundred are on track to go into production and ship
Speaker 8: in the final three months of this year, there's kind
Speaker 8: of no tangible boost from that. Right, It's not going
Speaker 8: to book a substantive revenue until the beginning of next year,
Speaker 8: and it will take them time to catch up with
Speaker 8: Nvidio in the H one hundred. So it's a bit
Speaker 8: of a mixed bag, which is never really what you
Speaker 8: want in earnings. But the market's a little disappointed.
Speaker 3: In shares of AMD. We're actually up more than fifty
Speaker 3: percent heading into this report. How much of this also
Speaker 3: when you have another stock that may have gotten ahead
Speaker 3: of itself after last year's sell off and chip names,
Speaker 3: does this make sense for some investors?
Speaker 8: Well, this is part of the story. You know. The
Speaker 8: data center business was a disappointment last quarter. A missed estimates,
Speaker 8: so they have a data center business that isn't yet
Speaker 8: reflecting the opportunity of AI. They're the number two PC
Speaker 8: processor maker behind Intel, and Intel gave us really promising
Speaker 8: glimpse that maybe that market is recovering and when all
Speaker 8: told is at the end of twenty twenty three, shipments
Speaker 8: will look better when we get them. AMD's results don't
Speaker 8: really reflect that. And as I said, we're excited about
Speaker 8: the mi I three hundred AI accelerator, but it's some
Speaker 8: way off still showing up up in the financial results.
Speaker 2: Yeah, it's pretty fascinating. If you're sitting down with the CEO,
Speaker 2: what would you ask them or ask yeah.
Speaker 8: Or at least i'd ask yeah, I'd ask what evidence
Speaker 8: do you have that you can continue at such a
Speaker 8: click that the mi I three hundred will gain traction
Speaker 8: in the market that the H one hundred. Did you know,
Speaker 8: all of the CEOs these chip companies say that we're
Speaker 8: just at the very beginning of this AI thing. There's
Speaker 8: going to be demand for all kinds of chips, all
Speaker 8: kinds of GPUs. Well, if that's the case, give me
Speaker 8: some data what the next twelve months looks like and
Speaker 8: how many of these you think you'll sell? And most
Speaker 8: importantly to who, Yeah, it's.
Speaker 2: Interesting to you to go down the revenue line. If
Speaker 2: you look at our des page right, like, I mean,
Speaker 2: gaming is important, client, you know, areas important, Data centers
Speaker 2: are important. I mean you're talking about, you know, over
Speaker 2: six billion revenue for each of those. So these are
Speaker 2: areas that they really want to be kind of you know,
Speaker 2: firing on all cylinders if you will correct and you
Speaker 2: kind of get this mixed bag.
Speaker 8: And it's in the history of both AMD and NVIDIA.
Speaker 8: The GPU graphics processing unit has its origins in video games. Right.
Speaker 8: It's a chip that can help handle lots of parallel
Speaker 8: data processes. That makes it great for AI. So in
Speaker 8: Vidia translated that to the AI use case. MD is
Speaker 8: seeing it can. We just haven't got any proof that
Speaker 8: it's done it yet.
Speaker 3: I wanted to switch gears and ask you, of course
Speaker 3: about Tesla because the valuation interes seeing how much it's
Speaker 3: shaved in billions because of some of these demand issues.
Speaker 3: How does this sort of plan too that when we
Speaker 3: are talking about ship makers and then obviously what this
Speaker 3: means for the EB space.
Speaker 8: Do you guys ever just wake up and think about
Speaker 8: monetary policy and rates? Yes, well I do.
Speaker 5: I do.
Speaker 8: Elon Musk is talking a lot about interest rates and
Speaker 8: why does the FED use rates as a mechanism to
Speaker 8: control inflation? Higher rates tampa demand in the economy. That's
Speaker 8: literally the mechanics of what they're trying to do, and
Speaker 8: we're seeing that play out now in the car industry.
Speaker 8: In the EV context, the early adopters have been and gone,
Speaker 8: they've bought their evs. Now it's the rest of Americans
Speaker 8: who face all kinds of household spending pressures, and there
Speaker 8: is evidence that EV's are kind of a victim of that.
Speaker 8: You know, earlier in the year, Tesla used price cuts
Speaker 8: to unlock new pockets of demand, and the narrative since
Speaker 8: October eighteenth is Tesla's shares it down almost twenty percent.
Speaker 8: They've shed billions of market cap because we're starting to
Speaker 8: question the demand that's actually there and the severity of
Speaker 8: the impact of rates.
Speaker 2: I mean, as it though all across the EV space.
Speaker 2: I mean, we've had a lot of conversations ed right
Speaker 2: around this and we thought, you know, we're getting this
Speaker 2: tipping point in terms of EV adoption, certainly throughout the world,
Speaker 2: but maybe getting closer to it here in the US.
Speaker 2: What's happened.
Speaker 8: Well, the other evidence that we point to is that
Speaker 8: the legacy auto makers, for example General Motors that are
Speaker 8: managing transition from combustion engine to EV have also tempered
Speaker 8: back their EV expectations. A part of that, of course,
Speaker 8: is the impact of UAW strikes and sort of business
Speaker 8: continuity and operations, but a part of it is a
Speaker 8: rethink on demand and you know, rethinking how much or
Speaker 8: how many evs they're going to have to build and
Speaker 8: how quickly to meet what is a lessening demand picture.
Speaker 2: But you have then Stilantis out right and their shares
Speaker 2: rallied better than expected revenue in the third quarter, and
Speaker 2: they talked about robust demand for their electric jeep Avenger.
Speaker 8: So and this is the beautiful story for a global
Speaker 8: news network like US, because Stillentis has this whole thing
Speaker 8: on a place called Europe. And in Europe it's a
Speaker 8: completely different market where smaller form factor vehicles a lower
Speaker 8: price point to doing really well. Brands that you have
Speaker 8: not heard of, like Sichuan have you done well in
Speaker 8: that market? And there are models of jeep that Stilantis
Speaker 8: make in Europe that we don't even have here in
Speaker 8: the US yet. And you know, so Slantis is an
Speaker 8: interesting one because it was late to the EV party,
Speaker 8: but its strategy is working in that continent and that
Speaker 8: insulated them somewhat from the North America story, where actually
Speaker 8: their pricing power on combustion engines was better anyway, and
Speaker 8: that helped offset some of the UAW disruption.
Speaker 3: What hurts them when it comes to some of their
Speaker 3: US counterparts.
Speaker 8: And rivals, what did you say, sorry I lost you
Speaker 8: in my AUS counterparts and rivals.
Speaker 3: For Stillantis, as far as when it does have the
Speaker 3: ability to be more unscathed obviously in Europe, but when
Speaker 3: it comes to the US sort of the dynamic where
Speaker 3: it has had other issues trying to catch up with
Speaker 3: maybe some of its rivals.
Speaker 8: Yeah, it's a really good question because Stilantis, under its
Speaker 8: different brands in this country, principally Jeep, Chrysler Ramp, does
Speaker 8: not have a sort of high volume selling EV model.
Speaker 8: You know, there are two parts to it. You know,
Speaker 8: if you take the pickup market, there's extreme brand loyalty here,
Speaker 8: so it's fair to assume that when we get an
Speaker 8: electric RAM that will resonate with the sort of loyal
Speaker 8: Ram audience. But in the consumer EV domain it's getting
Speaker 8: very competitive. You know. You not just have Tesla, but
Speaker 8: other pure play names like Rivian and Ford and GM
Speaker 8: moved quicker to bring battery electric pickups and SUVs to
Speaker 8: a country that loves those bigger form factor cars. Stilantis
Speaker 8: is late, but they're coming end of this year, beginning
Speaker 8: of twenty twenty four. How much traction they gain will
Speaker 8: be really interesting to track.
Speaker 2: You know, it makes me wonder, you know, coming off
Speaker 2: of all of these deals with the UAW the big
Speaker 2: three here in the US. Obviously Stilantis included, of course,
Speaker 2: in that whether or not they're going to be able
Speaker 2: to stick to their ev missions. I just wonder about
Speaker 2: the cost side.
Speaker 8: Of things, Ed, So, what Stilantis said is that the
Speaker 8: UAW strikes cost them about three billion dollars of sales revenue,
Speaker 8: but on the bottom line, the impact was much more muted,
Speaker 8: about eight hundred million dollars of impact because they were
Speaker 8: able to control their own cost discipline. And that's kind
Speaker 8: of been a feature of the Stilantis story, but it
Speaker 8: also delays. You know, they canceled their CEES showcase, for example,
Speaker 8: and part of selling EV's to consumers is getting out
Speaker 8: there talking them up. So it has had a sort
Speaker 8: of long term strategic impact.
Speaker 2: All right, I just want to know when you wake up,
Speaker 2: do you really talk think about the Fed monetary policy
Speaker 2: or is it about what Elan had to say?
Speaker 8: Come on, I really mean it, because it's partly like
Speaker 8: if you want to buy a house or a car,
Speaker 8: those are the two most important decisions you make.
Speaker 2: Look at all the stories matter, right, all the surveys
Speaker 2: we've been doing here at Bloomberg. It's top of mind
Speaker 2: for everyone. Everybody's feeling the pinch in it. Ed Lovelow,
Speaker 2: thank you so much an incredible roundup of a lot
Speaker 2: of different stories but tying it all together and finding
Speaker 2: that common thread Ed, of course, is co host of
Speaker 2: Bloomberg Technology on Bloomberg TV Cast.
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Speaker 2: On the Bloomberg Today. There's a story about how Google
Speaker 2: executives downplayed the company's artificial intelligence position during some testimony
Speaker 2: at a landmark federal anti trust trial, saying the company
Speaker 2: has tried to be slow and cautious because of the
Speaker 2: dangerous power of the technology. We just are definitely living
Speaker 2: in uncharted warders when it comes to generative AI and
Speaker 2: where it takes our world for better or worse. We're
Speaker 2: excited about chip companies and what they might make and
Speaker 2: what they might do. We just talked about AMD, But
Speaker 2: in terms of society, I think we're all trying to
Speaker 2: figure it out ultimately about what the impact will be and.
Speaker 3: What the potential ramifications could be for users of this.
Speaker 2: Well, we have a great guest. Martina Larkin is a
Speaker 2: CEO Project Liberty. It's an international nonprofit. They talk about
Speaker 2: working to create a new civic architecture for the digital world.
Speaker 2: So let's get to it. She is a former member
Speaker 2: of the World Economic Forms Executive Committee and sits on
Speaker 2: several nonprofit boards, including one devoted to innovation and technology
Speaker 2: at the European Commission. She joins us on zoom in London. Martina, welcome,
Speaker 2: Welcome to Bloomberg Business Week and our Bloomberg community. For
Speaker 2: those who are listening and watching right now, tell us
Speaker 2: a little bit more about your group and the mission
Speaker 2: that you are on.
Speaker 9: Hi, great to be here, Thank you for having me. Yes,
Speaker 9: as you said, we're building a saye for healthier Internet,
Speaker 9: and you really believe that this should be designed and
Speaker 9: governed for the common good, for society and not just
Speaker 9: for profit. I think you know in that even in
Speaker 9: that recent lawsuit, that we've seen these tech companies really
Speaker 9: having more of a motive around profit rather than the
Speaker 9: benefit of society. So we believe it's very important to
Speaker 9: refocus basically on the individuals and on society and look
Speaker 9: at what we can do better when it comes to
Speaker 9: social media, but now also AI obviously, and we've seen
Speaker 9: all the the problems that it has created, whether it's
Speaker 9: the mental health crisis or political polarization, the decline in
Speaker 9: trust in media and in our institution. So we want
Speaker 9: to take steps and build solutions that solve for that
Speaker 9: and create a better Internet, which is possible.
Speaker 2: And to be fair, there's a bunch of lawsuits going on.
Speaker 2: I think the loss that you mentioned is the one
Speaker 2: by California, the State of California and more than thirty
Speaker 2: state attorney generals against meta platforms right for allegedly enticing
Speaker 2: children onto Instagram and Facebook with addictive features. So that's
Speaker 2: going on. I'm assuming that's the case you were talking about.
Speaker 3: Correct, Yes, how exactly are you building this?
Speaker 9: So there's a number of factors here that we were considering.
Speaker 9: One is the technology itself, right, We want to build,
Speaker 9: say for a healthier technology, more responsible technology, and we
Speaker 9: have developed the decentralized protocol that allows us to retain
Speaker 9: control of our data and change the nature of both
Speaker 9: the Internet and social media by changing the business model,
Speaker 9: which lies at the bottom of all of that. And
Speaker 9: you know the fact that those big companies own our
Speaker 9: data and use it against us and particularly those who
Speaker 9: are vulnerable children and others, lies very much at the
Speaker 9: heart of that. But it goes beyond that. So the
Speaker 9: technology is obviously one aspect, but we also need regulation
Speaker 9: to solve for this, contributing to some of the safeguards
Speaker 9: and you know, guard rails around this, and of course
Speaker 9: the research and the governance is equally important. And then
Speaker 9: we strongly believe that we need to get people and
Speaker 9: organizations involved. So we have built a Global Alliance for
Speaker 9: Responsible Tech with organizations from around the world who want
Speaker 9: to contribute to this this mission as well.
Speaker 2: There's a lot out there, as you well know. You
Speaker 2: know the ad model, right, the acquisition of a lot
Speaker 2: of personal information, that dossi that have been built on
Speaker 2: each and every one of us. That's pretty powerful and
Speaker 2: it's very profitable for these companies. There's also regulating information
Speaker 2: and misinformation. But then we get into you know, are
Speaker 2: we kind of limiting kind of the right to speech.
Speaker 2: So if you had to pick one target that you
Speaker 2: would love to change, what would it be and how
Speaker 2: do we do it?
Speaker 9: Well, I think we have a real obligation to protect
Speaker 9: children first and foremost, and I think we need to
Speaker 9: put forward stronger legal protections for children online. I think
Speaker 9: that's just just the basics. And then I was in
Speaker 9: you know, Americans, you know, agree with that. The polls
Speaker 9: show that seventy percent of Americans and about ninety one
Speaker 9: percent of parents want that as well, and they want
Speaker 9: stronger protections of their children online. But we also need
Speaker 9: to require more transparency and we need to transform the
Speaker 9: industry with a new set of expectations around what is
Speaker 9: happening with the data, what kind of you know, models
Speaker 9: lie behind this, what are the business models behind it,
Speaker 9: what is happening to the data? And this has become
Speaker 9: even more apparent with AI that we don't these organizations
Speaker 9: don't even know where the data is coming from, what
Speaker 9: is happening to it, And so that those two factors
Speaker 9: I think are really important. But also of course building
Speaker 9: this new tech ecosystem, building these new technologies that actually
Speaker 9: you know, give us new hope and sort of a
Speaker 9: way forward where we just don't even have to look
Speaker 9: at the regulation, but we can just use the new
Speaker 9: technologies that enable that kind of environment to become a reality.
Speaker 3: What's the timetable on those types of new technologies when
Speaker 3: you do have things like AI constantly changing.
Speaker 9: Yeah, so on social media, we have this decentralized protocol
Speaker 9: right now live. So we have MiWi, which is a
Speaker 9: social media platform in the US that is using that
Speaker 9: decentralized protocol right now. So it's here and now we
Speaker 9: just need to accelerate it and get more people on
Speaker 9: it and more people demanding it, and that's the first step,
Speaker 9: and then this will help transform where we were going.
Speaker 2: Martina, what do you think is the biggest obstacle? I
Speaker 2: feel like we are looking over towards the European area
Speaker 2: in terms of a bigger fight when it comes to
Speaker 2: privacy issues, and I feel like those in the US
Speaker 2: are kind of watching what's going on overseas. What is
Speaker 2: the obstacle to getting it done? Is it lobbying, certainly
Speaker 2: in the US, is it lobbying in money, or what
Speaker 2: is it that you think prevents like age verification when
Speaker 2: it comes to something that would probably make it a
Speaker 2: lot safer for kids, or at least we could kind
Speaker 2: of police it a little bit more. Just got about
Speaker 2: forty seconds left.
Speaker 9: So one point certainly is to that people don't know
Speaker 9: that there's options, right from a tech perspective, they don't
Speaker 9: even know that have different doesn't have to be like that, right,
Speaker 9: the tech can be designed differently. And the second one
Speaker 9: is individuals and organizations need to demand greater transparency and
Speaker 9: you know, push forward regulation like KOSA for example in
Speaker 9: the US, that can be something that just is a
Speaker 9: first step towards building this much healthier ecosystem that we're
Speaker 9: talking about.
Speaker 2: And I'm sorry, what was that KOSA? I'm not oh,
Speaker 2: children's aline? Yeah, what does that stand?
Speaker 1: Fork?
Speaker 9: Yes, the Children's like put Privacy Bill basically, which is introduced,
Speaker 9: which is what was introduced this year in the US.
Speaker 2: All right, so appreciate it. I feel like this is
Speaker 2: a longer conversation and hopefully we can catch up with
Speaker 2: you again and curious too as you see maybe some
Speaker 2: progress to check back in with us. Martina Larkin. She's
Speaker 2: chief executive officer of Project Liberty, joining us on zoom
Speaker 2: from London. If you missed any of it, be sure
Speaker 2: to check out our podcast feed a little bit later.
Speaker 1: On you're listening to the Bloomberg Business Week podcast. Catch
Speaker 1: us live weekday afternoons from three to six Eastern Listen
Speaker 1: on Bloomberg dot com, the iHeartRadio app and the Bloomberg
Speaker 1: Business App, or watch us live on YouTube.
Speaker 10: Happy Halloween, everyone, tis the season for spooky movies. And
Speaker 10: did you know that of the top twenty most profitable
Speaker 10: films based on return of investments ROI since nineteen nineteen
Speaker 10: seventy seven, excuse me, nine are actually horror movies according
Speaker 10: to movie data analytics firms the numbers. Looking into this
Speaker 10: lucrative business of horror movies and how Hollywood just seems
Speaker 10: to just get it so right. Is Bloomberg News Media
Speaker 10: and entertainment reporter Samantha Stewart Sam joining us along with
Speaker 10: the editor of Bloomberg Business Week, jol Weber, both here
Speaker 10: in our Bloomberg Interactive Broker Studio. Sam story already online
Speaker 10: at Bloomberg dot com, Slash business Week, and of course
Speaker 10: on the Bloomberg Oh my God, ROI big.
Speaker 5: Time pretty good?
Speaker 7: Right.
Speaker 5: I feel like we did this story just so I
Speaker 5: could ask this question, this question, which is set up.
Speaker 5: Do you like scary movies like oh Man.
Speaker 2: Who doesn't like to get the heart movement?
Speaker 5: Scream dates me? But okay, I have a soft spot
Speaker 5: for Yeah, yeah, I have a soft spot for these
Speaker 5: scary movies. I think many of us like to be
Speaker 5: scared them. Yeah, but you know I get scared as
Speaker 5: an eight year old. You can hear like the key change,
Speaker 5: and he's just like I'm out here. Definitely, he's definitely
Speaker 5: not watching any of the movies that we're writing about here.
Speaker 5: What fascinating me about this and and why we tap
Speaker 5: Samantha for it? This is a money making formula and
Speaker 5: Hollywood has found it and almost perfected it. And it's like,
Speaker 5: the thing I like about it is like how little
Speaker 5: money can you spend to have a nice row? I
Speaker 5: And some of these movies have become franchises and they
Speaker 5: just have become this ongoing little geyser of money. And
Speaker 5: it's like, if you want the shortcut to like how
Speaker 5: to make it in Hollywood, I think you're looking at it.
Speaker 5: It's a scary movies. Samantha help us out here. When
Speaker 5: you started, what did you learn along the way?
Speaker 11: I mean it was really interesting just to see how
Speaker 11: profitable these scary movies are. I mean, looking at Paranormal
Speaker 11: Activity especially, its initial budget was only fifteen thousand dollars and.
Speaker 5: Then fifteen thousand dollars.
Speaker 11: It's crazy yeah, crazy, yeah, only fifteen thousand, and then
Speaker 11: went on to gross over one hundred and ninety four
Speaker 11: million worldwide.
Speaker 12: So that's a really big bang for your buck, I
Speaker 12: would say.
Speaker 2: A really big bang. That's all things.
Speaker 5: Like I said, how little money can you spend in
Speaker 5: order to like and that's just the first movie? How
Speaker 5: many did they make? It was like, you know, there's
Speaker 5: more than there's more than two.
Speaker 3: Sequels, sus So why are they so cheap and fast
Speaker 3: to make?
Speaker 11: I mean a lot of the time they don't have
Speaker 11: to spend as much money on a class type of artists,
Speaker 11: I mean in actors, because they're a lot cheaper to
Speaker 11: kind of pay for these lower budget actors. And then
Speaker 11: you can also, really sorry, spend less on sets and
Speaker 11: like CGI and all that kind of stuff. You don't
Speaker 11: require the same kind of things that maybe a Marvel
Speaker 11: film needs to be made.
Speaker 12: Can do a lot of this on a lower budget.
Speaker 11: I mean even paranormal activity the first time filmmaker or
Speaker 11: in Pelly made it in his house.
Speaker 2: Actually, that's what's crazy, right, We've all gotten so spil
Speaker 2: Like did you go back and watch the first Star
Speaker 2: Wars and you're like no special effects there. We've all
Speaker 2: gotten so used to like we want to be entertained
Speaker 2: with all these special effects. That's not what they do.
Speaker 2: They just scare the heck out of us.
Speaker 12: Yeah.
Speaker 5: Well, is it true though, that you know special effects
Speaker 5: can be gory? They can do things that you know
Speaker 5: fills in your imagination. For fifteen thousand dollars, your imagination
Speaker 5: will terrify you. And I think that is also part
Speaker 5: of the formula here too, is like, don't spend the money.
Speaker 5: I'm doing all the CGI stuff. Just let your brain
Speaker 5: fill in the gaps and your brain's going to do
Speaker 5: the work. So who in Hollywood does this better than anybody?
Speaker 11: I think Bluemouse has really kind of perfected that recipe.
Speaker 11: I mean they've went on to grows already five point
Speaker 11: seven billion for all the films that they've produced. And
Speaker 11: I mean look at Five Nights at Freddy's, which had
Speaker 11: just an absolutely stellar debut with eighty million dollars. I
Speaker 11: actually have not yet, which is crazy.
Speaker 5: I will say, the art and the story for it
Speaker 5: makes me a little terrified.
Speaker 11: No, the animatronics are definitely scary.
Speaker 5: Especially well that was the thing is like animatronics have
Speaker 5: always terrified me, but nobody made a movie on it.
Speaker 5: Now I'm definitely am scared.
Speaker 3: And they're the production company for Paranormal Activity.
Speaker 11: Yes, Paranormal Activity was kind of their breakout film, which
Speaker 11: really helped them kind of perfect and refine that low
Speaker 11: budget model that generates this huge ROI.
Speaker 2: We'll talk to us about Jason Blum.
Speaker 12: Oh, well, Jason Blum.
Speaker 2: I mean I'm kind of obsessed with He just did
Speaker 2: like a shark tank that did the Halloween version, and
Speaker 2: he came on and you know, pointed out like how
Speaker 2: well he has done and how in terms of top
Speaker 2: grossing movies, like he just has a ton, like one
Speaker 2: after another.
Speaker 11: No, I mean, I really think it's kind of honing
Speaker 11: into that whole lower budget idea and again kind of
Speaker 11: doing away with a lot of the things that these
Speaker 11: bigger budget films that Hollywood are known for often find
Speaker 11: to be kind of integral. And it's taking these kind
Speaker 11: of more original ideas and just going off of those
Speaker 11: and being able to make.
Speaker 12: These movies that have these huge but huge payoffs.
Speaker 5: Okay, so we've talked about the really cheap ones, we've chot,
Speaker 5: we've talked about the most noteworthy director Jason Blum. We
Speaker 5: haven't talked about the Conjuring.
Speaker 8: M h.
Speaker 11: That's the biggest franchise actually, which was made by Atomic Monster,
Speaker 11: which was founded by James Wand so he created the
Speaker 11: whole Conjuring franchise. And I mean by now there's about
Speaker 11: eight films and it's grossed over two billion at the
Speaker 11: box office, which is insane.
Speaker 5: So what was amazing about that? Again, it started with
Speaker 5: like a modest beginning and then you start ratching up
Speaker 5: the money. But like they did that first one in
Speaker 5: like thirty eight days, so like I mean like and
Speaker 5: that college campus. Yeah, and like Blair Witch, same thing
Speaker 5: like that. That was the one for me, like where
Speaker 5: I was like, it just showed how you can nail
Speaker 5: this genre and do it so well and just scare
Speaker 5: the Jesus out of.
Speaker 2: People, right, and everybody was talking about it, and that.
Speaker 5: Was like if Jasby again slightly slightly pre internetbody, can
Speaker 5: you tell? Okay? So which one surprised you that didn't
Speaker 5: kind of like rise above? Yeah, like that didn't break
Speaker 5: through like when you I mean part of the metrics
Speaker 5: that we're looking at here are ones that were like,
Speaker 5: you know, box office success, Midsomar didn't probably not a
Speaker 5: huge money maker, but like also a great example of
Speaker 5: this genre. So like if you don't have the money,
Speaker 5: if you don't, like there's still this cult thing that
Speaker 5: can happen, right, And like The Witch was another one
Speaker 5: that was really good in this regard where it had
Speaker 5: like really high kind of like film allura, I guess, right,
Speaker 5: So like what are the dynamics that you know, not
Speaker 5: that don't always just need money to succeed, right?
Speaker 11: I mean I think that what's really interesting about these
Speaker 11: films is that they're able to generate this and huge
Speaker 11: roi even though they don't always get the best reviews
Speaker 11: from critics. I mean a lot of these films aren't
Speaker 11: that well received. A lot of these films aren't that
Speaker 11: well received. And I mean one researcher found that actually
Speaker 11: the horror genre has the lowest correlation between box office
Speaker 11: performance and its critical reception, which I thought was really interesting.
Speaker 11: I mean, you look at the ratings for some of
Speaker 11: the highest grossing films this year, and they're not that aggressive.
Speaker 5: Yeah.
Speaker 2: Yeah, I also thought was interesting and I kind of
Speaker 2: felt this, Okay, I'm going in a completely you know,
Speaker 2: different direction. Don't judge me, but Barbie, like I felt
Speaker 2: like for the first time, like I was back in
Speaker 2: the theater and it was kind of a group experience.
Speaker 2: We were all kind of laughing and like kind of
Speaker 2: you know or whatever together. But this genre in particular, right,
Speaker 2: it is about a group experience.
Speaker 11: Yeah, I think that social kind of environment that horror
Speaker 11: really invites is what really brings people to the theaters
Speaker 11: to keep seeing these movies. I mean, especially looking at
Speaker 11: like gen Z and seeing how much more they prefer
Speaker 11: for the horror genre compared.
Speaker 12: To like the adult population at large.
Speaker 11: I mean, at least a third of gen Z and
Speaker 11: Lis horror is one of their favorite genres compared to
Speaker 11: just twenty two percent of US adults. And I mean
Speaker 11: even sixty six percent of gen Z has seen a
Speaker 11: horror movie in theaters in the last twelve months, Yes,
Speaker 11: in theaters, which I think is a lot actually gone
Speaker 11: in theaters, and it was compared to much lower margins
Speaker 11: across the board.
Speaker 5: I think that's bat that idea of like we don't
Speaker 5: care what critics have to say, but we want to
Speaker 5: go do this together. It's like it's that experiential thing
Speaker 5: that we It's so you know, experiential economy for twelve
Speaker 5: bucks and you know everybody makes money on it. It's
Speaker 5: pretty interesting.
Speaker 2: Well makes me wonder like reading this, and I'm going
Speaker 2: to go back to the return on investment because I
Speaker 2: feel like whenever we like look at something, you know
Speaker 2: that is such a part of the Bloomberg conversation, like
Speaker 2: it's just off the chart. So why aren't other major,
Speaker 2: bigger studios or are they chasing some of this?
Speaker 12: I think?
Speaker 11: I mean when you look at like a lot of
Speaker 11: the films that perform very well, I mean you think
Speaker 11: of the superhero films, Marvel films, Avatar, there's all this
Speaker 11: money on films on uh what's it called, like CGI
Speaker 11: and IP and all those kinds of things. So I
Speaker 11: think that's what really kind of puts them apart, is
Speaker 11: that these horror films again, like I said, don't have
Speaker 11: to invest in those same kinds of expensive assets of
Speaker 11: a film.
Speaker 2: I just think, right if I was a studio, I'd
Speaker 2: be like, why wouldn't I chase some of this? I mean,
Speaker 2: it's really kind of remarkable, and it just.
Speaker 5: What we gotta go personal. I gotta know, what's the
Speaker 5: movie that you won't watch because you're too scared?
Speaker 1: Of it.
Speaker 2: Okay, you're gonna really laugh at me, but this is
Speaker 2: a really, really old It was called Trilogy of Terror
Speaker 2: with Karen Black. I was a little kid. My older
Speaker 2: siblings were watching it, but there was this it was
Speaker 2: this like doll and it like lost its chain and
Speaker 2: then all of a sudden, it was like it wasn't
Speaker 2: a voodoo doll, but it was like I can't remember,
Speaker 2: but it was like a little little doll. And it
Speaker 2: started like attacking her with a knife, and it was
Speaker 2: like she's sitting on the couch and it like starts
Speaker 2: attacking her ankles, and then like it's thrown in the
Speaker 2: oven and she like and he inhales the fumes and
Speaker 2: then she becomes like the crazy woman. It's terrifying. I
Speaker 2: wouldn't put my feet down, like on my couch forever.
Speaker 5: Samantha, what's the Halloween movie that you don't want to
Speaker 5: watch because you're too scared of me?
Speaker 11: I was traumatized by The Mist when I was a
Speaker 11: lot younger. My brothers made me watch it when I
Speaker 11: was like eight years old, and it was just the
Speaker 11: most terrifying thing ever. Didn't want to go to a
Speaker 11: grocery store just for the fear of getting locked inside one.
Speaker 12: So I think that's it for me. Never again.
Speaker 3: I never liked when a stranger calls.
Speaker 12: It's terrifying me.
Speaker 3: There's one that was made in the seventies and then
Speaker 3: they redid it.
Speaker 2: I think that where it says like they're in the house,
Speaker 2: they're in the house.
Speaker 3: He's actually calling her from me inside that house. It's
Speaker 3: absolutely terrifying. And I've seen it once and I never
Speaker 3: wanted to watch it.
Speaker 2: But it isn't interesting like that concept of like you
Speaker 2: don't have to spell everything out, like I think about
Speaker 2: go back to Jaws, right and Steven Spielberg, Like the
Speaker 2: Shark wasn't working and so all they had was the
Speaker 2: fin But it was so effective in that you kind
Speaker 2: of just imagined so much of what was going on.
Speaker 2: The subtlety of it was really kind of cool. And
Speaker 2: then there's alien like the monsters. Man, that's good.
Speaker 5: I mean, those those are all of these are I mean.
Speaker 5: And that's the thing is, like I think there's this
Speaker 5: they stick with you, right, and like that's the thing
Speaker 5: about all of these. It's like I don't really want
Speaker 5: to watch these again. I don't really want to see
Speaker 5: the sequel and yet I know other people I can
Speaker 5: appreciate how good of a business this is because it
Speaker 5: just keeps churning out new ones.
Speaker 2: What I was really also fascinating about your story is that, Okay,
Speaker 2: it's all these kind of I feel like upstarts, people
Speaker 2: doing it differently. Maybe weren't household names, but now you're
Speaker 2: getting to know them. But it was a Stephen King
Speaker 2: movie right that was released in twenty seventeen by Warner Brothers.
Speaker 2: Grows seven hundred million worldwide, making it the biggest horror
Speaker 2: money maker ever. So like you go back to the master,
Speaker 2: So I don't know, I bet the ROI though I
Speaker 2: bet there wasn't.
Speaker 5: Well, just think about just how good he has been
Speaker 5: in this genre. I mean, like look like that's you
Speaker 5: know Shakespeare. I mean it is that level of goods
Speaker 5: where it just again and again and again and again
Speaker 5: and again, and like those were old ones that I
Speaker 5: think some of them have been remade, like like it
Speaker 5: was like these are That's what I just don't want
Speaker 5: to see.
Speaker 2: By the way, Sam, I'm curious when you were given
Speaker 2: this mission, did y'all? Is this another like creeping by
Speaker 2: your desk and like, hey, but I wonder when you
Speaker 2: like started this like how much do you.
Speaker 3: Like?
Speaker 2: How much? Was you know, kind of surprising to you
Speaker 2: as you kind of dug deeper and deeper into this,
Speaker 2: because the numbers are really impressive from you know, folks
Speaker 2: here who all are really kind of gung ho on
Speaker 2: everything financials. But what really kind of jumped out for.
Speaker 11: You, I mean, so much about it was really shocking
Speaker 11: to me because I personally was always a horror fan,
Speaker 11: but I never really had thought about like the budgets
Speaker 11: for those kinds of films and how it's not always
Speaker 11: those A list actors that you're seeing, and I didn't
Speaker 11: really think about how much cheaper that would make a film.
Speaker 11: I just thought about how much fun it was to
Speaker 11: watch with my family or with my friends and to
Speaker 11: be scared. And I think seeing that kind of verified
Speaker 11: in all of the research that I've done, it was
Speaker 11: really interesting, really rewarding.
Speaker 2: So you're like, Jill, I'm going to the movies.
Speaker 12: I got research to.
Speaker 5: Do, genuine research, right, Yeah. I look like every one
Speaker 5: of these ones that I've seen, I haven't seen them all,
Speaker 5: probably won't see them all. I love that, But there's
Speaker 5: this thing that I think just grabs you about this genre,
Speaker 5: and when you realize that there is this business story
Speaker 5: to it that is this dramatic, this ROI side, you
Speaker 5: just know we're going to be talking about this again
Speaker 5: for you know, decades, as long as we're making movies.
Speaker 2: We talked about all investments, right. I think if I'm
Speaker 2: an investor, I'm like, yeah, I'll give you some money.
Speaker 2: Here's here's twenty five thousand dollars to go make five movies.
Speaker 2: You know, really fun, great story, and like I said,
Speaker 2: we were talking about it throughout the day, so I
Speaker 2: really resonated with all of us. Sam Stewart's Bloomberg News
Speaker 2: Media and entertainment reporter check out our story on the
Speaker 2: Bloomberg and online, and of course the editor of Jill Webbard.
Speaker 4: Who knew lover of horror movies.
Speaker 2: Happy Halloween everyone.
Speaker 13: I'm brothering Mark on.
Speaker 5: The journal.
Speaker 2: How about you let me drive?
Speaker 5: Oh no, no, no, no, who's going to drive? Honey? Please?
Speaker 5: How do the riding gravel? Let's mate, I want to drive.
Speaker 13: It's a good question time.
Speaker 5: This is the drive to the Globe dot com for me.
Speaker 7: I think we'll buy around Young Don on Bluebirg Radio.
Speaker 2: All Right, everybody just about seventeen and a half minutes
Speaker 2: left in today's trading session on this Tuesday, October thirty. First,
Speaker 2: it's just heard from Charlie Equity's just kind of rolling
Speaker 2: over but little change, a little bit higher on this
Speaker 2: basically f O mc eve. I'm Carol Master along with
Speaker 2: Jess Metton in for Tim Stenovik on this Tuesday. It's
Speaker 2: an interesting market, but it does feel like we're just
Speaker 2: kind of waiting.
Speaker 3: It definitely seems to be the case, especially at the
Speaker 3: end of October, which technically is the most vaultatle month
Speaker 3: of the year, but the worst one is actually September,
Speaker 3: followed by Oguy, So.
Speaker 2: Hopefully maybe we were getting into a better season. Kid
Speaker 2: Santa Claus rally, don't even go there. All right, Let's
Speaker 2: see what Jimmy Lee has to say. He's founder and
Speaker 2: CEO at the Registered investment advisor Wealth Consulting Group. He's
Speaker 2: on zoom from c Are you in Georgia today or Vegas?
Speaker 12: I think he's in Vegas.
Speaker 13: I'm in I'm at the Highlands in North Carolina.
Speaker 5: Actually, oh, neither.
Speaker 2: You know you travel more than we do. I don't know.
Speaker 2: We just talked about the airlines like domestically having some
Speaker 2: issues you are flying around.
Speaker 13: I support the airlines, I know, I.
Speaker 2: Know well having said that, would you be a buyer
Speaker 2: of airlines after that Jet Blue news? It's really tanking
Speaker 2: in today's session.
Speaker 13: You know, with oil prices high.
Speaker 14: I think that that's an area that I would probably
Speaker 14: be cautious with right now. But overall, you know, earnings
Speaker 14: so far has been really good across the board. I mean,
Speaker 14: of the companies that reported last week, I think one
Speaker 14: hundred and sixty over eighty percent beat earnings, with an
Speaker 14: average of nine point two percent. That's actually from Bloomberg.
Speaker 14: We had a research committee this morning call and we
Speaker 14: were doing some research with Bloomberg, and that's from you guys.
Speaker 14: And then you know, including this week, we have twice
Speaker 14: as many upgrades as downgrades. So companies are navigating this
Speaker 14: high interest rate environment. And of course we saw the
Speaker 14: GDP number and third quarter was phenomenal, and the consumers
Speaker 14: are still spending, surprising everybody.
Speaker 2: All right, full disclosure, because that's how we are at Bloomberg,
Speaker 2: That's how we roll. What do you mean you were
Speaker 2: doing some work in research with.
Speaker 13: Bloomberg, Well, we have a Bloomberg terminal as well, and.
Speaker 14: Our Investment Committee, our CIO does a lot of work
Speaker 14: on the terminal with research and so forth. So that
Speaker 14: was one of the statistics that we were looking at,
Speaker 14: was just the earnings updates for companies last week in
Speaker 14: this week so far.
Speaker 2: Okay, just we like transparency now, but earnings make sense, Jess.
Speaker 2: We're in the midst of it. We're on the other
Speaker 2: side of it right in terms of the bulk of numbers.
Speaker 3: If you're not buying Jet Blue, what stocks are you?
Speaker 13: Well, we are.
Speaker 14: Let's talk about fixed income still, so we think that
Speaker 14: we're at the top of the cycle on rates, and
Speaker 14: while rates have been very volatile for the last thirty
Speaker 14: sixty days, we think that leaning into duration, I know
Speaker 14: a lot of other investors have done that, but leaning
Speaker 14: into duration now I think is a good safe bet
Speaker 14: for the next few years. Maybe not short term trade,
Speaker 14: but for the next few years.
Speaker 13: How far out would.
Speaker 6: You go far?
Speaker 2: How far out on the curve would you go?
Speaker 13: Well, believe it or not.
Speaker 14: We actually added some zero so that we could add
Speaker 14: just a teeny bit to get a lot more.
Speaker 13: Potential benefit from it.
Speaker 14: So but I think I think adding duration passed you know,
Speaker 14: even seven years might make sense for a lot of
Speaker 14: investors for your long term money. I think it's one
Speaker 14: of the easiest traits to make long term. On the
Speaker 14: equity side, I think that the interrat sensitive sectors that
Speaker 14: have been really been beaten up lately, real estate, tech stocks,
Speaker 14: I think that have an opportunity to take another run
Speaker 14: before the end of the year. And so I'm glad
Speaker 14: that there's still a lot of barish people out there.
Speaker 14: But I think what could happen is is that you know,
Speaker 14: the FED probably won't raise rates tomorrow, right according to
Speaker 14: the futures market in December, probably not as well. A
Speaker 14: lot of investors think that they're done, and if that
Speaker 14: becomes a consensus that they're done, I think there could
Speaker 14: be a lot of money down the road here chasing
Speaker 14: equity soon.
Speaker 3: You mentioned real estate, that sector in the S and
Speaker 3: P five hundred up about two percent today, well outperforming
Speaker 3: the other industry groups. What is it particularly that you
Speaker 3: like about real estate?
Speaker 14: Well, publicly traded real estate stocks have been you know,
Speaker 14: discounted off of the whole value of real estate in
Speaker 14: general last year and continuing with this year, and so
Speaker 14: we think that there's value in publicly traded real estate.
Speaker 14: I think you should be very active with that investment,
Speaker 14: and you know, maybe not necessarily overweighted too much.
Speaker 7: But there are.
Speaker 14: Areas that have been really beat up with interest rates
Speaker 14: going higher. That's one of them. And so I think
Speaker 14: in historically speaking, when that's happened before the public real
Speaker 14: estate market catches up, and it could happen very quickly.
Speaker 14: So I think that investors can have an opportunity there.
Speaker 14: Like I said, also with technology stocks. But also you know,
Speaker 14: I think quality is very important today.
Speaker 2: Jimmy, hang on a second before you move on from
Speaker 2: real estate. Real estate, you know, location, location, location, also
Speaker 2: type type type. I mean there's industrial, there's commercial, there's residential,
Speaker 2: there's logistics plays. There's a lot of ways to play it.
Speaker 2: So if there's long value in play in real estate,
Speaker 2: what is that long value play specifically.
Speaker 14: I I think you can be active and actually not
Speaker 14: just in public real estate. In public real estate, I
Speaker 14: would I would say that investors can go into general rates.
Speaker 14: You know, I know, I'm really scared about the office sector,
Speaker 14: but the office sector represents a smaller percentage of the
Speaker 14: general you know, public reed.
Speaker 13: Sector out there.
Speaker 14: But in private real estate, I think there are a
Speaker 14: lot of vehicles out there that a lot of investors
Speaker 14: can get money invested into, not just high net worth investors. Nowadays,
Speaker 14: with products out there with fresh capital, I think savvy
Speaker 14: real estate investors will have opportunity to buy and get
Speaker 14: into to takeover projects at a discount relative to where
Speaker 14: they were a year ago. So I think you have
Speaker 14: to be very selective and work with people that are
Speaker 14: experts in that space. But also on the debt side.
Speaker 14: I know that we've been long in the two talking
Speaker 14: about private credit, and again with fresh capital, I think
Speaker 14: with private credit you can get opportunities now that we
Speaker 14: just haven't seen in a long time. Again, that's a
Speaker 14: private credits a wide space, and you know, just talk
Speaker 14: about the different types of options to invest into a
Speaker 14: different managers be very selective there again, and I would
Speaker 14: stick with trying to be a little bit more conservative
Speaker 14: with those loans as much as possible too.
Speaker 3: I have a question about private credit. I'm glad you
Speaker 3: brought it up, because that is a one and a
Speaker 3: half trillion dollar quarter in the market right now. Recent
Speaker 3: weeks we've seen money come out of stocks, also come
Speaker 3: out of money market funds. Is that money going to
Speaker 3: private credit.
Speaker 14: I think a lot of it is, Jess, And I
Speaker 14: think that you know, especially now that there are vehicles
Speaker 14: that retail investors can can invest in two without being
Speaker 14: locked up as long as they used to have to
Speaker 14: be for private credit and investments. And so I think
Speaker 14: there are the perfilation of different types of investment vehicles
Speaker 14: out there nowadays, and in the private credit space allows
Speaker 14: a lot of participants to be in that investment rather
Speaker 14: than just institutional before. And so I think some of
Speaker 14: that money is leaving money markets and inequities too, because
Speaker 14: you can get double digit yields and with pretty good
Speaker 14: protection on the collateral.
Speaker 2: Hey, Jimmy, twenty five seconds, a new wealthy client comes
Speaker 2: to you and says, I got a bunch of money
Speaker 2: to invest. Where do you put it right now? Just quickly,
Speaker 2: really quickly.
Speaker 14: It's a very interesting time right now. But I would
Speaker 14: just go back to if it's long term money, seventy
Speaker 14: five percent of the time, the stock market's hired twelve
Speaker 14: months later, So I would say that we probably wouldn't
Speaker 14: be putting it all to work day one, but certainly
Speaker 14: a good chunk of it should be invested in a
Speaker 14: beautifully diversified portfoil and with a lot of quality companies,
Speaker 14: companies that can do well even if we get into
Speaker 14: a little bit of a slowdown.
Speaker 13: Here at some point.
Speaker 2: All right, Well, be well, Happy Halloween. Jimmy Lee, of course,
Speaker 2: founder and CEO at the registered investment advisor Wealth Consulting Group,
Speaker 2: joining us on this Tuesday.
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