WEBVTT - Fed Officials Set to Extend Pause Without Saying Hikes Are Done 0:00:01.360 --> 0:00:05.680 This is Bloomberg Business Wait inside from the reporters and 0:00:05.880 --> 0:00:09.440 editors who bring you America's most trusted business magazine, plus 0:00:09.520 --> 0:00:13.680 global business, finance and tech news. The Bloomberg Business Week 0:00:13.720 --> 0:00:19.000 Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:20.480 --> 0:00:22.919 We're just under twenty four hours away, Jess from the 0:00:22.960 --> 0:00:26.280 next FED decision FOMC. We've got some economic news today. 0:00:26.320 --> 0:00:29.080 We talked about it right, consumer confidence down to a 0:00:29.120 --> 0:00:31.720 five month low, dropping to a five month low in October, 0:00:32.159 --> 0:00:34.760 and then you got employment costs unexpectedly accelerating in the 0:00:34.880 --> 0:00:37.800 third quarter or so. That reminds us we've got a strong, 0:00:37.840 --> 0:00:38.879 strong labor market. 0:00:39.120 --> 0:00:42.720 And especially with some thoughts ahead of this FOMC meeting. 0:00:42.760 --> 0:00:46.599 Back with US is doctor Steve Shanky, chief economist and 0:00:46.680 --> 0:00:50.400 advisor at Keele Point and former staff member of the 0:00:50.479 --> 0:00:53.960 US Treasury while White House National Security Council. And then 0:00:53.960 --> 0:00:57.120 of course Steve is on zoom in Mexico, also with 0:00:57.200 --> 0:01:01.120 US as Bloomberg Economics owned US economist Stewart here of 0:01:01.160 --> 0:01:05.720 course in the Bloomberg Interactive Brokers studio, and so Stewart 0:01:05.840 --> 0:01:08.759 I wanted to kick off with today's data, so we 0:01:08.840 --> 0:01:12.080 did get a lot of indications here what wage growth 0:01:12.160 --> 0:01:16.000 does look like in the economic snaphot obviously of the economy. 0:01:16.000 --> 0:01:19.080 When you are thinking about FED share Jerome Pale tomorrow, 0:01:19.200 --> 0:01:21.960 what are your thoughts in what do you think that 0:01:22.000 --> 0:01:24.080 the Federal Reserve should do? Because we're not going to 0:01:24.160 --> 0:01:27.000 get those quarterly economic projections or the dot plots tomorrow. 0:01:27.440 --> 0:01:28.920 So it was a bit of a shocker to see 0:01:28.920 --> 0:01:32.240 the employment cost index tick up in Q three. It 0:01:32.280 --> 0:01:34.520 departs from what we've been seeing with the Atlanta Fed 0:01:34.560 --> 0:01:36.679 wage tracker, departs from what we've been seeing in the 0:01:36.720 --> 0:01:39.399 non farm payrolls report, where we've had modest wage growth 0:01:39.640 --> 0:01:43.240 that's actually been relatively consistent with two percent inflation, with 0:01:43.240 --> 0:01:46.120 the Fed's two percent inflation target. We don't think that 0:01:46.360 --> 0:01:48.120 the Fed is going to be in a position to 0:01:48.160 --> 0:01:52.040 hike tomorrow ninety seven some odd percent odds market applied 0:01:52.040 --> 0:01:55.520 probability that the Fed's going to maintain its current policy 0:01:55.640 --> 0:01:59.480 rate when it makes its announcement tomorrow, and we think 0:01:59.480 --> 0:02:01.440 that that is the right move. Though I wouldn't be 0:02:01.480 --> 0:02:03.920 so presumptuous as to tell Chairman Powell how. 0:02:03.840 --> 0:02:04.480 To do his job. 0:02:04.600 --> 0:02:07.240 I would either having said that way, I want to 0:02:07.240 --> 0:02:09.560 bring Steve into because what I think about A very 0:02:09.560 --> 0:02:12.400 wise individual said to me that Jay Powell, he's a lawyer, 0:02:12.760 --> 0:02:15.280 and he looks at the data in front of him, Steve, 0:02:15.800 --> 0:02:18.360 and that's what's going to determine the decision he's going 0:02:18.400 --> 0:02:21.480 to make on any given FOMC day. Having said that, 0:02:21.520 --> 0:02:24.280 so what is the data playbook that Jay Powell and 0:02:24.320 --> 0:02:26.920 company will be dealing with when they make that decision 0:02:27.000 --> 0:02:28.560 or just ahead of that decision tomorrow. 0:02:29.840 --> 0:02:33.280 Well, I absolutely agreet Carola, and the data that he 0:02:33.320 --> 0:02:35.400 has has in front of him is a little bit 0:02:35.480 --> 0:02:39.079 overwhelmeding just because it's so broad. I mean, we had 0:02:39.120 --> 0:02:43.640 this four point nine GDP growth number, but you know, 0:02:43.960 --> 0:02:48.959 consumer spending was up four percent and a rebuilding of inventories, 0:02:49.000 --> 0:02:51.079 which is a big variable, was up. 0:02:51.160 --> 0:02:53.000 So how do they discount that? 0:02:53.120 --> 0:02:57.079 Maybe he'll say something about that in his comments, as 0:02:57.320 --> 0:03:02.800 as Stewart said, the employment cost index unexpectedly up, but 0:03:02.919 --> 0:03:06.920 at the same time, a year over year, private wages 0:03:06.960 --> 0:03:08.639 and salaries were doubt a bit. 0:03:10.480 --> 0:03:13.040 Unemployment is not likely to. 0:03:13.000 --> 0:03:18.360 Fall, wages are looking to be on a downward trend 0:03:18.400 --> 0:03:20.640 when we look forward, and I think that the FED 0:03:20.680 --> 0:03:26.080 can probably see that. So the discussion, even with no 0:03:26.200 --> 0:03:28.720 rate increase, no change in tone, I think would be 0:03:28.840 --> 0:03:34.480 very interesting as chair of Powell answers questions about these 0:03:34.600 --> 0:03:35.920 data that. 0:03:36.360 --> 0:03:37.640 Are a little bit inconvenient. 0:03:38.400 --> 0:03:41.200 But at the same time he has a lot of 0:03:41.240 --> 0:03:44.680 other things that he can fall back to and point. 0:03:44.440 --> 0:03:47.640 To, well, come back back in stut because I just 0:03:47.760 --> 0:03:50.480 I do wonder in terms of, you know, what you 0:03:50.520 --> 0:03:53.280 think will be top of mind or the message that 0:03:53.320 --> 0:03:55.600 he's going to need to get across in that press conference, 0:03:55.680 --> 0:03:58.280 or what he might be you know, questioned about the 0:03:58.320 --> 0:04:01.320 most because I feel like we've well, no, okay, no decision, 0:04:01.880 --> 0:04:03.600 So we moved to the press conference. 0:04:03.240 --> 0:04:05.160 Right, So moving to the press conference. Here's just a 0:04:05.200 --> 0:04:10.000 typical strategy that Powell deploys at the press conference. If 0:04:10.040 --> 0:04:12.880 they were to ever make a hike a hawkish move, 0:04:12.960 --> 0:04:14.680 he ends up sounding a little bit more dubbish during 0:04:14.720 --> 0:04:16.920 the press conference if they do something that's a little 0:04:16.960 --> 0:04:21.680 bit you know, incrementally dookook right exactly, and you just 0:04:21.720 --> 0:04:24.039 hold on to your CDs. You watch equities move when 0:04:24.040 --> 0:04:25.840 he's in the middle of the press conference. But when 0:04:25.839 --> 0:04:28.120 they make something that's a little bit more dubvish, when 0:04:28.120 --> 0:04:32.360 they hold rates steadied as they will tomorrow. He's gonna 0:04:32.520 --> 0:04:35.800 most likely sound hawkish. He's going to talk about the 0:04:35.839 --> 0:04:39.120 persistence of growth, even if he takes Steve's really important 0:04:39.120 --> 0:04:43.520 points into consideration about thirty percent, about thirty percent of 0:04:43.560 --> 0:04:45.760 that four point nine percent Q OVERQ growth that we 0:04:45.760 --> 0:04:48.640 saw on Q three came from inventories. That doesn't exactly 0:04:48.760 --> 0:04:52.120 scream like organic growth in the US economy. Even if 0:04:52.120 --> 0:04:53.880 he were to take that into consideration, he's gonna end 0:04:53.920 --> 0:04:57.000 up saying every meeting is a live meeting. They're only 0:04:57.040 --> 0:05:01.000 making decisions for today. They're not making decisions for tomorrow. 0:05:01.320 --> 0:05:03.800 Based in the latest SEP, they're still showing another rate 0:05:03.880 --> 0:05:08.080 hike this year. So he's going to end up sounding 0:05:08.120 --> 0:05:09.840 a bit more hawkish at the press conference. 0:05:10.040 --> 0:05:11.080 Interesting how much. 0:05:10.960 --> 0:05:14.240 Does that job booning stew feed into the mistake from 0:05:14.400 --> 0:05:17.159 transitory that he dropped almost two years ago? 0:05:18.839 --> 0:05:22.720 You know, I think that it is still something that 0:05:22.720 --> 0:05:24.479 they think about. They don't want to end up with 0:05:24.560 --> 0:05:26.720 the egg on their face and perpetuity. They do want 0:05:26.720 --> 0:05:29.120 to end up showing some sort of dedication to bringing 0:05:29.160 --> 0:05:32.039 inflation back toward the two percent target. After having made 0:05:32.080 --> 0:05:38.480 such an important misstep and being so all too confident 0:05:38.520 --> 0:05:41.719 that inflation would come down naturally, and instead they're actually 0:05:41.760 --> 0:05:43.240 having to put in a lot of the work. And 0:05:43.279 --> 0:05:47.279 given the fact that the US hasn't been especially interest 0:05:47.360 --> 0:05:50.800 sensitive in their spending today and it's taken a lot 0:05:50.839 --> 0:05:53.800 more hiking than anticipated, I think that any sort of 0:05:53.880 --> 0:05:56.520 hawkish tone may exactly be part of that just and 0:05:56.560 --> 0:05:59.479 may be part of that legacy of dealing with that 0:06:00.080 --> 0:06:01.400 transitory egg on their faces. 0:06:01.960 --> 0:06:03.320 Hey, Steve, one of the things that I thought was 0:06:03.360 --> 0:06:05.120 really interesting. We've had a great story in the Bloomberg 0:06:05.160 --> 0:06:08.200 about corporate credit strength and that to really you know, 0:06:08.400 --> 0:06:11.320 tame inflation. The FED, you know, they're looking to tighten 0:06:11.360 --> 0:06:15.239 those financial conditions across the economy, but they really haven't 0:06:15.560 --> 0:06:17.520 made much of a dent in corporate America yet. So 0:06:17.560 --> 0:06:19.560 we're talking about you know, we look specifically at the 0:06:19.560 --> 0:06:22.040 extra yield investors demand for risk in the US investment 0:06:22.080 --> 0:06:24.960 grade and high yield bond markets, which has remained below 0:06:25.000 --> 0:06:27.599 their twenty year averages and well under level seen during 0:06:27.640 --> 0:06:31.640 historical times of stress in the economy, and borrowing remains robust. 0:06:31.880 --> 0:06:34.440 So would the FED like to see that tighten up 0:06:34.440 --> 0:06:36.480 a little bit and not be so upbeat that there's 0:06:36.560 --> 0:06:38.960 more work to be done. They look at things like that. 0:06:40.240 --> 0:06:43.400 Well, they certainly would like to see the market providing 0:06:43.480 --> 0:06:46.840 less liquidity, and that goes right to the point that 0:06:47.360 --> 0:06:47.800 you make. 0:06:49.200 --> 0:06:51.760 But they're also there are also very. 0:06:52.680 --> 0:06:57.480 Wary, I believe, notwithstanding wanted to wanting to continue their 0:06:57.480 --> 0:07:00.560 Hockey's tone of doing anything that is that is going 0:07:00.640 --> 0:07:02.719 to fuel a further sell off in the bond market. 0:07:03.480 --> 0:07:06.599 They seem to be happy with where mid and longer 0:07:06.680 --> 0:07:10.960 term rates are, and so while they might not be 0:07:11.040 --> 0:07:14.360 particularly happy with with all the liquidity that continues to 0:07:14.840 --> 0:07:18.600 exist in the corporate market, my belief is that they'll 0:07:18.640 --> 0:07:19.560 be patient about it. 0:07:20.000 --> 0:07:21.400 Can I ask you, do you feel like if it's 0:07:21.440 --> 0:07:22.720 getting close to a neutral rate? 0:07:24.920 --> 0:07:26.040 Yes, I think that they are. 0:07:27.400 --> 0:07:30.920 They just just the comments that that some of the 0:07:30.960 --> 0:07:35.360 Governor's f MC members and Jay Powell made this past 0:07:35.800 --> 0:07:41.080 last week. They they seem to be getting comfortable with that. 0:07:41.840 --> 0:07:44.520 I mean, to Stewart's point, they don't want to. They 0:07:44.520 --> 0:07:49.800 don't want to let up up on their hawky is tone. 0:07:50.320 --> 0:07:52.600 But but when you sort of parse out some of 0:07:52.640 --> 0:07:55.000 the things that they've been saying recently, I think the 0:07:55.040 --> 0:07:57.720 answer to that is yes, Stu. 0:07:57.920 --> 0:08:01.160 We also have another wild car for tomorrow with the 0:08:01.320 --> 0:08:04.440 refunding in the treasury market. What are your expectations and 0:08:04.480 --> 0:08:05.960 what do you think that could mean for yield as 0:08:06.000 --> 0:08:08.480 far as what that pressure could mean for maybe longer 0:08:08.520 --> 0:08:10.680 duration and growth stocks in the equity. 0:08:10.240 --> 0:08:15.200 Market with growing auctions with higher deficits than had been 0:08:15.240 --> 0:08:19.480 previously projected, there's reason to believe that even just the 0:08:19.560 --> 0:08:21.560 term premium that had been getting blown out, that had 0:08:21.600 --> 0:08:24.480 been raising the entire yield curve that has been front 0:08:24.480 --> 0:08:27.080 of mind for FED policy makers, could even just get 0:08:27.080 --> 0:08:29.840 blown out even further. One thing that's super important, though, 0:08:29.920 --> 0:08:33.120 is that when you see higher long term rates moving 0:08:33.120 --> 0:08:37.080 as a consequence of a larger term premium, it means 0:08:37.120 --> 0:08:39.360 the FED has less work than it has to do. 0:08:39.440 --> 0:08:43.600 It could sort of sit back and relax, not really relax, 0:08:43.679 --> 0:08:46.880 but at least wait to see the economic consequences of 0:08:47.040 --> 0:08:49.719 higher long term field continuing. 0:08:49.240 --> 0:08:49.959 To ripple through. 0:08:50.240 --> 0:08:53.080 So, for example, while the FED had been doing most 0:08:53.160 --> 0:08:56.800 of the heavy lifting deeply inverting the curve raising front 0:08:56.880 --> 0:09:00.280 end rates as aggressively as we've seen it point in 0:09:00.280 --> 0:09:03.280 the past forty years, now with longer term rates catching 0:09:03.360 --> 0:09:05.920 up as a consequence of a larger term premium, the 0:09:05.960 --> 0:09:08.360 FED can sort of slow down. And I think that 0:09:08.360 --> 0:09:12.360 that's that is downstream funk fiscal policy, and that is 0:09:12.559 --> 0:09:14.240 going to be an important factor tomorrow. 0:09:14.360 --> 0:09:16.839 Yeah, you do feel like, hey, if I get a 0:09:16.880 --> 0:09:20.280 little bit of an assist, it wouldn't mind Steve saving 0:09:20.320 --> 0:09:23.240 the last forty five seconds minute for you here in 0:09:23.320 --> 0:09:27.320 terms of that the specifics on that refunding, how does 0:09:27.400 --> 0:09:30.720 you've worked at Treasury, how does that factor into or 0:09:30.920 --> 0:09:32.199 and you've worked at the government, you've worked at the 0:09:32.200 --> 0:09:34.040 White House? How does that factor and you think into 0:09:34.080 --> 0:09:35.080 the Fed's thinking. 0:09:36.440 --> 0:09:37.720 Well, they had to be aware of it. 0:09:38.040 --> 0:09:40.559 You know, they've gotten caught up on this a couple 0:09:40.559 --> 0:09:47.200 of times in the past on their REPO activities, so 0:09:47.240 --> 0:09:51.640 they're certainly mindful of it. They want to be respectful, 0:09:51.760 --> 0:09:55.800 and the Treasury Secretary has has indicated a point of 0:09:55.840 --> 0:09:58.720 view that maybe isn't fully embraced. 0:09:58.280 --> 0:09:58.920 By the market. 0:09:58.960 --> 0:10:01.080 But I think that the the FED is going to 0:10:01.120 --> 0:10:04.120 be sensitive and accommodating. 0:10:05.640 --> 0:10:08.160 Going to be interesting, very interesting. Hey, guys, thank you 0:10:08.200 --> 0:10:09.679 so much. I feel like there's a lot going on, 0:10:09.760 --> 0:10:11.360 but we need a little bit of a setup ahead 0:10:11.360 --> 0:10:14.160 of that FED decision, which you know, twenty four hours 0:10:14.160 --> 0:10:16.000 from now, less than twenty four it will be front 0:10:16.040 --> 0:10:18.720 and center for all of us guys. Thank you so much. 0:10:18.760 --> 0:10:21.880 Blueberg Economics US economist Stuart Paul joining us in our 0:10:21.920 --> 0:10:25.040 Bloomberg Interactive Broker Studio along with doctor Steve Skankey, chief 0:10:25.080 --> 0:10:27.800 economic advisor of at kill Point. As we mentioned, former 0:10:27.840 --> 0:10:29.880 staff member at the US Treasury and the White House 0:10:29.920 --> 0:10:33.679 National Security Council, joining us on zoom in Mexico. 0:10:33.840 --> 0:10:37.400 You're listening to the Bloomberg Business Week podcast. Catch us 0:10:37.440 --> 0:10:40.800 live weekday afternoons from three to six Eastern Listen on 0:10:40.840 --> 0:10:44.880 Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business App, 0:10:45.160 --> 0:10:46.840 or watch us live on YouTube. 0:10:47.800 --> 0:10:50.040 AMD, which is down, continues to be down about four 0:10:50.080 --> 0:10:52.720 percent in the aftermarket following its earnings. By the way, 0:10:52.760 --> 0:10:55.160 their chips have been used in the automotive world as 0:10:55.200 --> 0:10:57.840 well as Tesla's, so we want to talk about AMD, 0:10:57.960 --> 0:10:59.520 We want to talk about Tesla, and we also want 0:10:59.520 --> 0:11:03.040 to talk about it another ev maker, carmaker Stilantis. I'm 0:11:03.040 --> 0:11:06.400 trying to roll it all together and I'm going to 0:11:06.400 --> 0:11:08.760 toss it over to our Ed Ludlow, who is co 0:11:08.800 --> 0:11:11.040 host of Bloomberg Technology on Bloomberg TV because I'm going 0:11:11.120 --> 0:11:13.600 to throw it all at you. But let's start with AMD. 0:11:13.679 --> 0:11:15.319 I know there's a lot on your plate. This is 0:11:15.320 --> 0:11:17.640 our weekly look at the world of evs. We call 0:11:17.679 --> 0:11:20.120 it Bloomberg plugged in. But let's start with AMD, which 0:11:20.160 --> 0:11:23.559 is down in the aftermarket. What jumps out for you, Ed, Yeah. 0:11:23.520 --> 0:11:26.400 It's just a mixture of disappointment. Right. If you go 0:11:26.520 --> 0:11:31.080 to their forecast for the fourth quarter, the revenue range 0:11:31.160 --> 0:11:33.320 is five point eight to six point four billion dollars. 0:11:33.360 --> 0:11:36.160 The street wanted to c six six point four billion dollars, 0:11:36.160 --> 0:11:39.000 so the mid range point is kind of disappointing. But 0:11:39.040 --> 0:11:41.760 the biggest story here is that they're not seeing the 0:11:41.760 --> 0:11:45.800 PC recovery that Intel saw. They make GPUs that go 0:11:45.920 --> 0:11:48.840 into gaming consoles and high end gaming pieces and are 0:11:48.880 --> 0:11:51.800 warning us that slowing down. And even though they told 0:11:51.880 --> 0:11:55.199 us that they're super special AI accelerated chips I three 0:11:55.280 --> 0:11:58.160 hundred are on track to go into production and ship 0:11:58.320 --> 0:12:00.640 in the final three months of this year, there's kind 0:12:00.640 --> 0:12:03.600 of no tangible boost from that. Right, It's not going 0:12:03.640 --> 0:12:06.840 to book a substantive revenue until the beginning of next year, 0:12:07.040 --> 0:12:08.800 and it will take them time to catch up with 0:12:09.240 --> 0:12:11.240 Nvidio in the H one hundred. So it's a bit 0:12:11.280 --> 0:12:13.480 of a mixed bag, which is never really what you 0:12:13.520 --> 0:12:16.360 want in earnings. But the market's a little disappointed. 0:12:16.040 --> 0:12:18.920 In shares of AMD. We're actually up more than fifty 0:12:18.960 --> 0:12:21.840 percent heading into this report. How much of this also 0:12:22.080 --> 0:12:24.080 when you have another stock that may have gotten ahead 0:12:24.120 --> 0:12:26.679 of itself after last year's sell off and chip names, 0:12:26.840 --> 0:12:28.839 does this make sense for some investors? 0:12:29.440 --> 0:12:31.520 Well, this is part of the story. You know. The 0:12:31.640 --> 0:12:35.720 data center business was a disappointment last quarter. A missed estimates, 0:12:35.760 --> 0:12:37.920 so they have a data center business that isn't yet 0:12:37.920 --> 0:12:42.000 reflecting the opportunity of AI. They're the number two PC 0:12:42.160 --> 0:12:46.000 processor maker behind Intel, and Intel gave us really promising 0:12:46.040 --> 0:12:49.559 glimpse that maybe that market is recovering and when all 0:12:49.600 --> 0:12:52.040 told is at the end of twenty twenty three, shipments 0:12:52.080 --> 0:12:56.120 will look better when we get them. AMD's results don't 0:12:56.160 --> 0:12:59.160 really reflect that. And as I said, we're excited about 0:12:59.160 --> 0:13:02.000 the mi I three hundred AI accelerator, but it's some 0:13:02.120 --> 0:13:05.560 way off still showing up up in the financial results. 0:13:05.880 --> 0:13:08.200 Yeah, it's pretty fascinating. If you're sitting down with the CEO, 0:13:08.240 --> 0:13:11.119 what would you ask them or ask yeah. 0:13:10.960 --> 0:13:15.000 Or at least i'd ask yeah, I'd ask what evidence 0:13:15.040 --> 0:13:17.600 do you have that you can continue at such a 0:13:17.640 --> 0:13:20.280 click that the mi I three hundred will gain traction 0:13:20.360 --> 0:13:23.120 in the market that the H one hundred. Did you know, 0:13:23.240 --> 0:13:25.960 all of the CEOs these chip companies say that we're 0:13:26.000 --> 0:13:29.000 just at the very beginning of this AI thing. There's 0:13:29.000 --> 0:13:31.160 going to be demand for all kinds of chips, all 0:13:31.240 --> 0:13:33.840 kinds of GPUs. Well, if that's the case, give me 0:13:33.880 --> 0:13:36.640 some data what the next twelve months looks like and 0:13:36.679 --> 0:13:39.000 how many of these you think you'll sell? And most 0:13:39.040 --> 0:13:41.960 importantly to who, Yeah, it's. 0:13:42.040 --> 0:13:43.840 Interesting to you to go down the revenue line. If 0:13:43.840 --> 0:13:45.760 you look at our des page right, like, I mean, 0:13:45.840 --> 0:13:50.040 gaming is important, client, you know, areas important, Data centers 0:13:50.040 --> 0:13:52.680 are important. I mean you're talking about, you know, over 0:13:52.720 --> 0:13:55.560 six billion revenue for each of those. So these are 0:13:55.600 --> 0:13:58.600 areas that they really want to be kind of you know, 0:13:59.200 --> 0:14:02.200 firing on all cylinders if you will correct and you 0:14:02.280 --> 0:14:03.439 kind of get this mixed bag. 0:14:04.559 --> 0:14:07.240 And it's in the history of both AMD and NVIDIA. 0:14:07.720 --> 0:14:12.200 The GPU graphics processing unit has its origins in video games. Right. 0:14:12.320 --> 0:14:15.000 It's a chip that can help handle lots of parallel 0:14:15.200 --> 0:14:18.480 data processes. That makes it great for AI. So in 0:14:18.559 --> 0:14:22.080 Vidia translated that to the AI use case. MD is 0:14:22.120 --> 0:14:24.520 seeing it can. We just haven't got any proof that 0:14:24.520 --> 0:14:25.240 it's done it yet. 0:14:26.000 --> 0:14:27.880 I wanted to switch gears and ask you, of course 0:14:27.920 --> 0:14:31.640 about Tesla because the valuation interes seeing how much it's 0:14:31.680 --> 0:14:34.960 shaved in billions because of some of these demand issues. 0:14:35.000 --> 0:14:36.720 How does this sort of plan too that when we 0:14:36.760 --> 0:14:39.400 are talking about ship makers and then obviously what this 0:14:39.520 --> 0:14:40.680 means for the EB space. 0:14:41.320 --> 0:14:43.800 Do you guys ever just wake up and think about 0:14:43.800 --> 0:14:47.600 monetary policy and rates? Yes, well I do. 0:14:48.200 --> 0:14:48.520 I do. 0:14:50.280 --> 0:14:52.680 Elon Musk is talking a lot about interest rates and 0:14:52.800 --> 0:14:55.200 why does the FED use rates as a mechanism to 0:14:55.240 --> 0:14:59.360 control inflation? Higher rates tampa demand in the economy. That's 0:14:59.520 --> 0:15:02.600 literally the mechanics of what they're trying to do, and 0:15:02.640 --> 0:15:04.960 we're seeing that play out now in the car industry. 0:15:05.320 --> 0:15:08.640 In the EV context, the early adopters have been and gone, 0:15:08.680 --> 0:15:11.840 they've bought their evs. Now it's the rest of Americans 0:15:11.920 --> 0:15:15.280 who face all kinds of household spending pressures, and there 0:15:15.320 --> 0:15:18.280 is evidence that EV's are kind of a victim of that. 0:15:18.960 --> 0:15:21.640 You know, earlier in the year, Tesla used price cuts 0:15:21.640 --> 0:15:25.200 to unlock new pockets of demand, and the narrative since 0:15:25.400 --> 0:15:28.760 October eighteenth is Tesla's shares it down almost twenty percent. 0:15:29.080 --> 0:15:31.880 They've shed billions of market cap because we're starting to 0:15:31.960 --> 0:15:34.920 question the demand that's actually there and the severity of 0:15:34.920 --> 0:15:35.920 the impact of rates. 0:15:36.960 --> 0:15:39.680 I mean, as it though all across the EV space. 0:15:39.720 --> 0:15:41.680 I mean, we've had a lot of conversations ed right 0:15:41.800 --> 0:15:44.400 around this and we thought, you know, we're getting this 0:15:44.440 --> 0:15:48.760 tipping point in terms of EV adoption, certainly throughout the world, 0:15:48.840 --> 0:15:51.640 but maybe getting closer to it here in the US. 0:15:51.960 --> 0:15:52.880 What's happened. 0:15:53.760 --> 0:15:56.200 Well, the other evidence that we point to is that 0:15:56.280 --> 0:15:59.560 the legacy auto makers, for example General Motors that are 0:15:59.560 --> 0:16:03.640 managing transition from combustion engine to EV have also tempered 0:16:03.680 --> 0:16:06.880 back their EV expectations. A part of that, of course, 0:16:06.920 --> 0:16:09.840 is the impact of UAW strikes and sort of business 0:16:09.840 --> 0:16:12.400 continuity and operations, but a part of it is a 0:16:12.440 --> 0:16:17.600 rethink on demand and you know, rethinking how much or 0:16:17.600 --> 0:16:19.960 how many evs they're going to have to build and 0:16:20.000 --> 0:16:23.440 how quickly to meet what is a lessening demand picture. 0:16:24.000 --> 0:16:27.040 But you have then Stilantis out right and their shares 0:16:27.200 --> 0:16:29.760 rallied better than expected revenue in the third quarter, and 0:16:29.800 --> 0:16:33.680 they talked about robust demand for their electric jeep Avenger. 0:16:33.960 --> 0:16:37.240 So and this is the beautiful story for a global 0:16:37.320 --> 0:16:41.200 news network like US, because Stillentis has this whole thing 0:16:41.240 --> 0:16:43.960 on a place called Europe. And in Europe it's a 0:16:43.960 --> 0:16:47.560 completely different market where smaller form factor vehicles a lower 0:16:47.640 --> 0:16:50.760 price point to doing really well. Brands that you have 0:16:50.840 --> 0:16:54.360 not heard of, like Sichuan have you done well in 0:16:54.400 --> 0:16:59.000 that market? And there are models of jeep that Stilantis 0:16:59.000 --> 0:17:00.680 make in Europe that we don't even have here in 0:17:00.720 --> 0:17:03.560 the US yet. And you know, so Slantis is an 0:17:03.560 --> 0:17:05.520 interesting one because it was late to the EV party, 0:17:05.960 --> 0:17:08.080 but its strategy is working in that continent and that 0:17:08.160 --> 0:17:13.200 insulated them somewhat from the North America story, where actually 0:17:13.200 --> 0:17:16.119 their pricing power on combustion engines was better anyway, and 0:17:16.160 --> 0:17:18.400 that helped offset some of the UAW disruption. 0:17:18.960 --> 0:17:21.920 What hurts them when it comes to some of their 0:17:22.240 --> 0:17:24.160 US counterparts. 0:17:23.440 --> 0:17:26.960 And rivals, what did you say, sorry I lost you 0:17:26.960 --> 0:17:29.040 in my AUS counterparts and rivals. 0:17:28.840 --> 0:17:31.520 For Stillantis, as far as when it does have the 0:17:31.560 --> 0:17:34.960 ability to be more unscathed obviously in Europe, but when 0:17:35.000 --> 0:17:37.480 it comes to the US sort of the dynamic where 0:17:37.520 --> 0:17:39.720 it has had other issues trying to catch up with 0:17:39.760 --> 0:17:40.800 maybe some of its rivals. 0:17:41.080 --> 0:17:45.280 Yeah, it's a really good question because Stilantis, under its 0:17:45.280 --> 0:17:49.520 different brands in this country, principally Jeep, Chrysler Ramp, does 0:17:49.600 --> 0:17:53.879 not have a sort of high volume selling EV model. 0:17:54.400 --> 0:17:56.080 You know, there are two parts to it. You know, 0:17:56.080 --> 0:17:59.760 if you take the pickup market, there's extreme brand loyalty here, 0:18:00.160 --> 0:18:02.159 so it's fair to assume that when we get an 0:18:02.200 --> 0:18:05.119 electric RAM that will resonate with the sort of loyal 0:18:05.240 --> 0:18:09.200 Ram audience. But in the consumer EV domain it's getting 0:18:09.280 --> 0:18:12.040 very competitive. You know. You not just have Tesla, but 0:18:12.119 --> 0:18:15.680 other pure play names like Rivian and Ford and GM 0:18:15.840 --> 0:18:19.399 moved quicker to bring battery electric pickups and SUVs to 0:18:19.440 --> 0:18:24.160 a country that loves those bigger form factor cars. Stilantis 0:18:24.240 --> 0:18:26.520 is late, but they're coming end of this year, beginning 0:18:26.560 --> 0:18:29.200 of twenty twenty four. How much traction they gain will 0:18:29.240 --> 0:18:30.480 be really interesting to track. 0:18:31.119 --> 0:18:32.960 You know, it makes me wonder, you know, coming off 0:18:33.000 --> 0:18:35.120 of all of these deals with the UAW the big 0:18:35.119 --> 0:18:40.040 three here in the US. Obviously Stilantis included, of course, 0:18:40.040 --> 0:18:42.480 in that whether or not they're going to be able 0:18:42.520 --> 0:18:44.920 to stick to their ev missions. I just wonder about 0:18:44.920 --> 0:18:45.640 the cost side. 0:18:45.480 --> 0:18:48.520 Of things, Ed, So, what Stilantis said is that the 0:18:48.640 --> 0:18:53.560 UAW strikes cost them about three billion dollars of sales revenue, 0:18:53.760 --> 0:18:56.359 but on the bottom line, the impact was much more muted, 0:18:56.520 --> 0:19:00.760 about eight hundred million dollars of impact because they were 0:19:00.840 --> 0:19:04.440 able to control their own cost discipline. And that's kind 0:19:04.440 --> 0:19:08.119 of been a feature of the Stilantis story, but it 0:19:08.240 --> 0:19:12.399 also delays. You know, they canceled their CEES showcase, for example, 0:19:12.640 --> 0:19:14.960 and part of selling EV's to consumers is getting out 0:19:15.000 --> 0:19:17.440 there talking them up. So it has had a sort 0:19:17.440 --> 0:19:19.000 of long term strategic impact. 0:19:19.240 --> 0:19:20.560 All right, I just want to know when you wake up, 0:19:20.560 --> 0:19:22.800 do you really talk think about the Fed monetary policy 0:19:22.880 --> 0:19:24.640 or is it about what Elan had to say? 0:19:24.680 --> 0:19:28.480 Come on, I really mean it, because it's partly like 0:19:28.520 --> 0:19:30.040 if you want to buy a house or a car, 0:19:30.320 --> 0:19:32.480 those are the two most important decisions you make. 0:19:32.640 --> 0:19:34.600 Look at all the stories matter, right, all the surveys 0:19:34.640 --> 0:19:36.440 we've been doing here at Bloomberg. It's top of mind 0:19:36.480 --> 0:19:39.560 for everyone. Everybody's feeling the pinch in it. Ed Lovelow, 0:19:39.600 --> 0:19:41.600 thank you so much an incredible roundup of a lot 0:19:41.640 --> 0:19:44.280 of different stories but tying it all together and finding 0:19:44.400 --> 0:19:47.040 that common thread Ed, of course, is co host of 0:19:47.040 --> 0:19:48.960 Bloomberg Technology on Bloomberg TV Cast. 0:19:49.400 --> 0:19:52.959 You're listening to the Bloomberg Business Week podcast. Catch us 0:19:53.000 --> 0:19:57.040 live weekday afternoons from three to six Eastern on Bloomberg Radio, 0:19:57.200 --> 0:20:00.159 the Bloomberg Business app, and YouTube. You can a so 0:20:00.240 --> 0:20:03.360 listen live on Amazon Alexa from our flagship New York 0:20:03.440 --> 0:20:07.280 station Just Say Alexa, playing Bloomberg eleven thirty. 0:20:08.800 --> 0:20:11.480 On the Bloomberg Today. There's a story about how Google 0:20:11.520 --> 0:20:16.400 executives downplayed the company's artificial intelligence position during some testimony 0:20:16.760 --> 0:20:20.080 at a landmark federal anti trust trial, saying the company 0:20:20.400 --> 0:20:22.440 has tried to be slow and cautious because of the 0:20:22.520 --> 0:20:26.000 dangerous power of the technology. We just are definitely living 0:20:26.000 --> 0:20:28.800 in uncharted warders when it comes to generative AI and 0:20:28.840 --> 0:20:30.520 where it takes our world for better or worse. We're 0:20:30.520 --> 0:20:33.520 excited about chip companies and what they might make and 0:20:33.560 --> 0:20:36.040 what they might do. We just talked about AMD, But 0:20:36.160 --> 0:20:38.200 in terms of society, I think we're all trying to 0:20:38.200 --> 0:20:41.240 figure it out ultimately about what the impact will be and. 0:20:41.200 --> 0:20:44.399 What the potential ramifications could be for users of this. 0:20:44.680 --> 0:20:47.000 Well, we have a great guest. Martina Larkin is a 0:20:47.080 --> 0:20:51.160 CEO Project Liberty. It's an international nonprofit. They talk about 0:20:51.200 --> 0:20:54.280 working to create a new civic architecture for the digital world. 0:20:54.320 --> 0:20:56.240 So let's get to it. She is a former member 0:20:56.240 --> 0:20:59.080 of the World Economic Forms Executive Committee and sits on 0:20:59.160 --> 0:21:02.440 several nonprofit boards, including one devoted to innovation and technology 0:21:02.440 --> 0:21:06.520 at the European Commission. She joins us on zoom in London. Martina, welcome, 0:21:06.600 --> 0:21:10.720 Welcome to Bloomberg Business Week and our Bloomberg community. For 0:21:10.800 --> 0:21:13.240 those who are listening and watching right now, tell us 0:21:13.240 --> 0:21:15.439 a little bit more about your group and the mission 0:21:15.440 --> 0:21:16.040 that you are on. 0:21:17.760 --> 0:21:21.240 Hi, great to be here, Thank you for having me. Yes, 0:21:21.600 --> 0:21:25.040 as you said, we're building a saye for healthier Internet, 0:21:25.880 --> 0:21:29.480 and you really believe that this should be designed and 0:21:29.520 --> 0:21:32.359 governed for the common good, for society and not just 0:21:32.400 --> 0:21:35.639 for profit. I think you know in that even in 0:21:35.680 --> 0:21:40.639 that recent lawsuit, that we've seen these tech companies really 0:21:41.240 --> 0:21:45.240 having more of a motive around profit rather than the 0:21:45.280 --> 0:21:48.440 benefit of society. So we believe it's very important to 0:21:49.520 --> 0:21:54.000 refocus basically on the individuals and on society and look 0:21:54.040 --> 0:21:56.159 at what we can do better when it comes to 0:21:56.200 --> 0:21:58.920 social media, but now also AI obviously, and we've seen 0:21:59.359 --> 0:22:02.000 all the the problems that it has created, whether it's 0:22:02.000 --> 0:22:06.119 the mental health crisis or political polarization, the decline in 0:22:06.240 --> 0:22:09.920 trust in media and in our institution. So we want 0:22:09.960 --> 0:22:13.120 to take steps and build solutions that solve for that 0:22:13.320 --> 0:22:16.040 and create a better Internet, which is possible. 0:22:16.160 --> 0:22:17.879 And to be fair, there's a bunch of lawsuits going on. 0:22:17.920 --> 0:22:19.480 I think the loss that you mentioned is the one 0:22:19.480 --> 0:22:23.240 by California, the State of California and more than thirty 0:22:23.240 --> 0:22:28.720 state attorney generals against meta platforms right for allegedly enticing 0:22:28.960 --> 0:22:34.639 children onto Instagram and Facebook with addictive features. So that's 0:22:34.720 --> 0:22:37.840 going on. I'm assuming that's the case you were talking about. 0:22:38.480 --> 0:22:42.240 Correct, Yes, how exactly are you building this? 0:22:44.080 --> 0:22:47.800 So there's a number of factors here that we were considering. 0:22:47.840 --> 0:22:51.119 One is the technology itself, right, We want to build, 0:22:51.359 --> 0:22:56.240 say for a healthier technology, more responsible technology, and we 0:22:56.760 --> 0:23:00.600 have developed the decentralized protocol that allows us to retain 0:23:01.000 --> 0:23:03.680 control of our data and change the nature of both 0:23:03.680 --> 0:23:06.800 the Internet and social media by changing the business model, 0:23:06.960 --> 0:23:09.119 which lies at the bottom of all of that. And 0:23:09.359 --> 0:23:12.720 you know the fact that those big companies own our 0:23:12.840 --> 0:23:16.320 data and use it against us and particularly those who 0:23:16.320 --> 0:23:20.280 are vulnerable children and others, lies very much at the 0:23:20.280 --> 0:23:22.600 heart of that. But it goes beyond that. So the 0:23:22.640 --> 0:23:26.480 technology is obviously one aspect, but we also need regulation 0:23:27.000 --> 0:23:31.720 to solve for this, contributing to some of the safeguards 0:23:31.880 --> 0:23:35.359 and you know, guard rails around this, and of course 0:23:36.040 --> 0:23:40.200 the research and the governance is equally important. And then 0:23:40.359 --> 0:23:42.639 we strongly believe that we need to get people and 0:23:42.800 --> 0:23:46.159 organizations involved. So we have built a Global Alliance for 0:23:46.240 --> 0:23:49.560 Responsible Tech with organizations from around the world who want 0:23:49.600 --> 0:23:52.359 to contribute to this this mission as well. 0:23:52.480 --> 0:23:55.600 There's a lot out there, as you well know. You 0:23:55.640 --> 0:23:58.480 know the ad model, right, the acquisition of a lot 0:23:58.480 --> 0:24:00.879 of personal information, that dossi that have been built on 0:24:01.240 --> 0:24:03.200 each and every one of us. That's pretty powerful and 0:24:03.240 --> 0:24:09.320 it's very profitable for these companies. There's also regulating information 0:24:09.400 --> 0:24:11.920 and misinformation. But then we get into you know, are 0:24:11.920 --> 0:24:14.560 we kind of limiting kind of the right to speech. 0:24:14.640 --> 0:24:18.399 So if you had to pick one target that you 0:24:18.440 --> 0:24:22.120 would love to change, what would it be and how 0:24:22.119 --> 0:24:23.000 do we do it? 0:24:24.720 --> 0:24:29.040 Well, I think we have a real obligation to protect 0:24:29.240 --> 0:24:32.600 children first and foremost, and I think we need to 0:24:32.640 --> 0:24:35.840 put forward stronger legal protections for children online. I think 0:24:35.960 --> 0:24:38.879 that's just just the basics. And then I was in 0:24:38.920 --> 0:24:42.639 you know, Americans, you know, agree with that. The polls 0:24:42.680 --> 0:24:45.520 show that seventy percent of Americans and about ninety one 0:24:45.560 --> 0:24:48.760 percent of parents want that as well, and they want 0:24:48.800 --> 0:24:52.760 stronger protections of their children online. But we also need 0:24:52.800 --> 0:24:56.679 to require more transparency and we need to transform the 0:24:56.720 --> 0:25:00.320 industry with a new set of expectations around what is 0:25:00.320 --> 0:25:04.680 happening with the data, what kind of you know, models 0:25:04.720 --> 0:25:07.119 lie behind this, what are the business models behind it, 0:25:07.160 --> 0:25:09.280 what is happening to the data? And this has become 0:25:09.320 --> 0:25:13.080 even more apparent with AI that we don't these organizations 0:25:13.119 --> 0:25:16.639 don't even know where the data is coming from, what 0:25:16.760 --> 0:25:19.760 is happening to it, And so that those two factors 0:25:19.760 --> 0:25:23.320 I think are really important. But also of course building 0:25:23.359 --> 0:25:28.080 this new tech ecosystem, building these new technologies that actually 0:25:28.200 --> 0:25:30.600 you know, give us new hope and sort of a 0:25:30.680 --> 0:25:33.600 way forward where we just don't even have to look 0:25:33.600 --> 0:25:35.840 at the regulation, but we can just use the new 0:25:36.240 --> 0:25:40.920 technologies that enable that kind of environment to become a reality. 0:25:41.400 --> 0:25:44.520 What's the timetable on those types of new technologies when 0:25:44.520 --> 0:25:47.280 you do have things like AI constantly changing. 0:25:49.480 --> 0:25:54.480 Yeah, so on social media, we have this decentralized protocol 0:25:54.640 --> 0:25:57.840 right now live. So we have MiWi, which is a 0:25:57.880 --> 0:26:01.080 social media platform in the US that is using that 0:26:01.119 --> 0:26:05.760 decentralized protocol right now. So it's here and now we 0:26:06.040 --> 0:26:08.080 just need to accelerate it and get more people on 0:26:08.119 --> 0:26:11.000 it and more people demanding it, and that's the first step, 0:26:11.000 --> 0:26:15.000 and then this will help transform where we were going. 0:26:15.280 --> 0:26:17.919 Martina, what do you think is the biggest obstacle? I 0:26:17.960 --> 0:26:21.640 feel like we are looking over towards the European area 0:26:22.320 --> 0:26:25.119 in terms of a bigger fight when it comes to 0:26:25.119 --> 0:26:26.800 privacy issues, and I feel like those in the US 0:26:26.800 --> 0:26:29.720 are kind of watching what's going on overseas. What is 0:26:29.720 --> 0:26:32.560 the obstacle to getting it done? Is it lobbying, certainly 0:26:32.560 --> 0:26:35.080 in the US, is it lobbying in money, or what 0:26:35.280 --> 0:26:38.600 is it that you think prevents like age verification when 0:26:38.640 --> 0:26:41.199 it comes to something that would probably make it a 0:26:41.240 --> 0:26:43.160 lot safer for kids, or at least we could kind 0:26:43.160 --> 0:26:45.440 of police it a little bit more. Just got about 0:26:45.440 --> 0:26:47.560 forty seconds left. 0:26:47.800 --> 0:26:51.199 So one point certainly is to that people don't know 0:26:51.280 --> 0:26:53.680 that there's options, right from a tech perspective, they don't 0:26:53.680 --> 0:26:57.240 even know that have different doesn't have to be like that, right, 0:26:57.280 --> 0:26:59.840 the tech can be designed differently. And the second one 0:26:59.880 --> 0:27:05.720 is individuals and organizations need to demand greater transparency and 0:27:06.080 --> 0:27:08.800 you know, push forward regulation like KOSA for example in 0:27:08.840 --> 0:27:12.480 the US, that can be something that just is a 0:27:12.520 --> 0:27:16.400 first step towards building this much healthier ecosystem that we're 0:27:16.400 --> 0:27:16.960 talking about. 0:27:17.160 --> 0:27:19.239 And I'm sorry, what was that KOSA? I'm not oh, 0:27:19.320 --> 0:27:21.200 children's aline? Yeah, what does that stand? 0:27:21.200 --> 0:27:21.400 Fork? 0:27:21.480 --> 0:27:26.400 Yes, the Children's like put Privacy Bill basically, which is introduced, 0:27:26.400 --> 0:27:29.040 which is what was introduced this year in the US. 0:27:29.200 --> 0:27:32.000 All right, so appreciate it. I feel like this is 0:27:32.040 --> 0:27:34.480 a longer conversation and hopefully we can catch up with 0:27:34.520 --> 0:27:37.400 you again and curious too as you see maybe some 0:27:37.480 --> 0:27:40.520 progress to check back in with us. Martina Larkin. She's 0:27:40.600 --> 0:27:43.359 chief executive officer of Project Liberty, joining us on zoom 0:27:43.440 --> 0:27:44.960 from London. If you missed any of it, be sure 0:27:45.000 --> 0:27:47.080 to check out our podcast feed a little bit later. 0:27:46.920 --> 0:27:52.120 On you're listening to the Bloomberg Business Week podcast. Catch 0:27:52.160 --> 0:27:55.520 us live weekday afternoons from three to six Eastern Listen 0:27:55.600 --> 0:27:59.080 on Bloomberg dot com, the iHeartRadio app and the Bloomberg 0:27:59.119 --> 0:28:02.399 Business App, or watch us live on YouTube. 0:28:03.080 --> 0:28:06.119 Happy Halloween, everyone, tis the season for spooky movies. And 0:28:06.160 --> 0:28:08.560 did you know that of the top twenty most profitable 0:28:08.560 --> 0:28:13.320 films based on return of investments ROI since nineteen nineteen 0:28:13.400 --> 0:28:17.840 seventy seven, excuse me, nine are actually horror movies according 0:28:18.320 --> 0:28:21.879 to movie data analytics firms the numbers. Looking into this 0:28:22.080 --> 0:28:25.119 lucrative business of horror movies and how Hollywood just seems 0:28:25.160 --> 0:28:28.040 to just get it so right. Is Bloomberg News Media 0:28:28.040 --> 0:28:30.920 and entertainment reporter Samantha Stewart Sam joining us along with 0:28:30.960 --> 0:28:33.360 the editor of Bloomberg Business Week, jol Weber, both here 0:28:33.359 --> 0:28:36.560 in our Bloomberg Interactive Broker Studio. Sam story already online 0:28:36.560 --> 0:28:38.520 at Bloomberg dot com, Slash business Week, and of course 0:28:38.960 --> 0:28:42.920 on the Bloomberg Oh my God, ROI big. 0:28:42.680 --> 0:28:43.480 Time pretty good? 0:28:43.520 --> 0:28:43.680 Right. 0:28:46.120 --> 0:28:49.200 I feel like we did this story just so I 0:28:49.200 --> 0:28:52.320 could ask this question, this question, which is set up. 0:28:52.600 --> 0:28:55.280 Do you like scary movies like oh Man. 0:28:55.600 --> 0:28:57.560 Who doesn't like to get the heart movement? 0:28:57.960 --> 0:29:02.240 Scream dates me? But okay, I have a soft spot 0:29:02.640 --> 0:29:05.880 for Yeah, yeah, I have a soft spot for these 0:29:05.880 --> 0:29:08.400 scary movies. I think many of us like to be 0:29:08.440 --> 0:29:13.880 scared them. Yeah, but you know I get scared as 0:29:14.000 --> 0:29:16.360 an eight year old. You can hear like the key change, 0:29:16.400 --> 0:29:20.000 and he's just like I'm out here. Definitely, he's definitely 0:29:20.040 --> 0:29:23.000 not watching any of the movies that we're writing about here. 0:29:23.160 --> 0:29:25.760 What fascinating me about this and and why we tap 0:29:25.880 --> 0:29:31.719 Samantha for it? This is a money making formula and 0:29:31.800 --> 0:29:35.560 Hollywood has found it and almost perfected it. And it's like, 0:29:35.960 --> 0:29:37.920 the thing I like about it is like how little 0:29:38.240 --> 0:29:41.920 money can you spend to have a nice row? I 0:29:42.160 --> 0:29:45.160 And some of these movies have become franchises and they 0:29:45.280 --> 0:29:49.560 just have become this ongoing little geyser of money. And 0:29:49.560 --> 0:29:52.280 it's like, if you want the shortcut to like how 0:29:52.280 --> 0:29:54.240 to make it in Hollywood, I think you're looking at it. 0:29:54.240 --> 0:29:58.960 It's a scary movies. Samantha help us out here. When 0:29:58.960 --> 0:30:01.320 you started, what did you learn along the way? 0:30:01.960 --> 0:30:03.960 I mean it was really interesting just to see how 0:30:04.000 --> 0:30:06.840 profitable these scary movies are. I mean, looking at Paranormal 0:30:06.880 --> 0:30:10.720 Activity especially, its initial budget was only fifteen thousand dollars and. 0:30:10.720 --> 0:30:13.360 Then fifteen thousand dollars. 0:30:13.360 --> 0:30:19.520 It's crazy yeah, crazy, yeah, only fifteen thousand, and then 0:30:19.560 --> 0:30:21.600 went on to gross over one hundred and ninety four 0:30:21.600 --> 0:30:22.600 million worldwide. 0:30:22.640 --> 0:30:24.520 So that's a really big bang for your buck, I 0:30:24.520 --> 0:30:25.000 would say. 0:30:24.960 --> 0:30:26.560 A really big bang. That's all things. 0:30:26.680 --> 0:30:30.080 Like I said, how little money can you spend in 0:30:30.160 --> 0:30:33.560 order to like and that's just the first movie? How 0:30:33.560 --> 0:30:35.760 many did they make? It was like, you know, there's 0:30:35.760 --> 0:30:37.360 more than there's more than two. 0:30:37.200 --> 0:30:40.640 Sequels, sus So why are they so cheap and fast 0:30:40.800 --> 0:30:41.240 to make? 0:30:41.520 --> 0:30:42.880 I mean a lot of the time they don't have 0:30:42.920 --> 0:30:45.960 to spend as much money on a class type of artists, 0:30:46.040 --> 0:30:48.560 I mean in actors, because they're a lot cheaper to 0:30:48.640 --> 0:30:50.920 kind of pay for these lower budget actors. And then 0:30:50.920 --> 0:30:54.600 you can also, really sorry, spend less on sets and 0:30:54.640 --> 0:30:56.960 like CGI and all that kind of stuff. You don't 0:30:57.000 --> 0:30:58.880 require the same kind of things that maybe a Marvel 0:30:58.960 --> 0:30:59.880 film needs to be made. 0:31:00.080 --> 0:31:01.760 Can do a lot of this on a lower budget. 0:31:01.800 --> 0:31:04.720 I mean even paranormal activity the first time filmmaker or 0:31:04.760 --> 0:31:06.800 in Pelly made it in his house. 0:31:06.920 --> 0:31:09.560 Actually, that's what's crazy, right, We've all gotten so spil 0:31:09.640 --> 0:31:11.200 Like did you go back and watch the first Star 0:31:11.240 --> 0:31:14.040 Wars and you're like no special effects there. We've all 0:31:14.040 --> 0:31:16.640 gotten so used to like we want to be entertained 0:31:16.640 --> 0:31:18.880 with all these special effects. That's not what they do. 0:31:19.360 --> 0:31:20.600 They just scare the heck out of us. 0:31:20.680 --> 0:31:22.280 Yeah. 0:31:22.320 --> 0:31:27.080 Well, is it true though, that you know special effects 0:31:28.160 --> 0:31:31.640 can be gory? They can do things that you know 0:31:31.720 --> 0:31:35.760 fills in your imagination. For fifteen thousand dollars, your imagination 0:31:36.240 --> 0:31:38.680 will terrify you. And I think that is also part 0:31:38.680 --> 0:31:41.840 of the formula here too, is like, don't spend the money. 0:31:41.880 --> 0:31:44.720 I'm doing all the CGI stuff. Just let your brain 0:31:44.880 --> 0:31:47.080 fill in the gaps and your brain's going to do 0:31:47.120 --> 0:31:52.360 the work. So who in Hollywood does this better than anybody? 0:31:52.800 --> 0:31:55.200 I think Bluemouse has really kind of perfected that recipe. 0:31:55.320 --> 0:31:57.520 I mean they've went on to grows already five point 0:31:57.520 --> 0:32:00.200 seven billion for all the films that they've produced. And 0:32:00.240 --> 0:32:02.040 I mean look at Five Nights at Freddy's, which had 0:32:02.080 --> 0:32:05.160 just an absolutely stellar debut with eighty million dollars. I 0:32:05.160 --> 0:32:06.840 actually have not yet, which is crazy. 0:32:07.760 --> 0:32:09.960 I will say, the art and the story for it 0:32:10.000 --> 0:32:10.960 makes me a little terrified. 0:32:11.360 --> 0:32:13.120 No, the animatronics are definitely scary. 0:32:13.240 --> 0:32:16.040 Especially well that was the thing is like animatronics have 0:32:16.160 --> 0:32:18.760 always terrified me, but nobody made a movie on it. 0:32:18.920 --> 0:32:20.320 Now I'm definitely am scared. 0:32:20.800 --> 0:32:23.920 And they're the production company for Paranormal Activity. 0:32:24.000 --> 0:32:26.760 Yes, Paranormal Activity was kind of their breakout film, which 0:32:26.800 --> 0:32:30.240 really helped them kind of perfect and refine that low 0:32:30.240 --> 0:32:32.960 budget model that generates this huge ROI. 0:32:32.640 --> 0:32:34.280 We'll talk to us about Jason Blum. 0:32:34.520 --> 0:32:35.640 Oh, well, Jason Blum. 0:32:35.680 --> 0:32:37.920 I mean I'm kind of obsessed with He just did 0:32:37.960 --> 0:32:39.880 like a shark tank that did the Halloween version, and 0:32:39.920 --> 0:32:42.880 he came on and you know, pointed out like how 0:32:42.920 --> 0:32:45.520 well he has done and how in terms of top 0:32:45.520 --> 0:32:49.040 grossing movies, like he just has a ton, like one 0:32:49.080 --> 0:32:49.680 after another. 0:32:50.440 --> 0:32:52.320 No, I mean, I really think it's kind of honing 0:32:52.360 --> 0:32:56.120 into that whole lower budget idea and again kind of 0:32:56.200 --> 0:32:57.760 doing away with a lot of the things that these 0:32:57.800 --> 0:33:00.920 bigger budget films that Hollywood are known for often find 0:33:00.920 --> 0:33:03.160 to be kind of integral. And it's taking these kind 0:33:03.200 --> 0:33:06.440 of more original ideas and just going off of those 0:33:06.480 --> 0:33:07.560 and being able to make. 0:33:07.440 --> 0:33:10.160 These movies that have these huge but huge payoffs. 0:33:11.640 --> 0:33:17.400 Okay, so we've talked about the really cheap ones, we've chot, 0:33:17.520 --> 0:33:25.320 we've talked about the most noteworthy director Jason Blum. We 0:33:25.400 --> 0:33:26.600 haven't talked about the Conjuring. 0:33:26.840 --> 0:33:27.080 M h. 0:33:28.080 --> 0:33:30.920 That's the biggest franchise actually, which was made by Atomic Monster, 0:33:30.960 --> 0:33:33.760 which was founded by James Wand so he created the 0:33:33.760 --> 0:33:36.440 whole Conjuring franchise. And I mean by now there's about 0:33:36.440 --> 0:33:39.080 eight films and it's grossed over two billion at the 0:33:39.080 --> 0:33:40.520 box office, which is insane. 0:33:41.280 --> 0:33:45.560 So what was amazing about that? Again, it started with 0:33:45.640 --> 0:33:49.240 like a modest beginning and then you start ratching up 0:33:49.360 --> 0:33:51.800 the money. But like they did that first one in 0:33:51.840 --> 0:33:54.760 like thirty eight days, so like I mean like and 0:33:54.800 --> 0:33:58.080 that college campus. Yeah, and like Blair Witch, same thing 0:33:58.200 --> 0:34:00.800 like that. That was the one for me, like where 0:34:00.800 --> 0:34:03.320 I was like, it just showed how you can nail 0:34:03.360 --> 0:34:06.280 this genre and do it so well and just scare 0:34:06.320 --> 0:34:07.240 the Jesus out of. 0:34:07.200 --> 0:34:10.040 People, right, and everybody was talking about it, and that. 0:34:10.080 --> 0:34:18.399 Was like if Jasby again slightly slightly pre internetbody, can 0:34:18.440 --> 0:34:22.920 you tell? Okay? So which one surprised you that didn't 0:34:23.800 --> 0:34:27.880 kind of like rise above? Yeah, like that didn't break 0:34:27.920 --> 0:34:30.640 through like when you I mean part of the metrics 0:34:30.640 --> 0:34:32.560 that we're looking at here are ones that were like, 0:34:33.320 --> 0:34:38.480 you know, box office success, Midsomar didn't probably not a 0:34:38.560 --> 0:34:41.360 huge money maker, but like also a great example of 0:34:41.400 --> 0:34:44.400 this genre. So like if you don't have the money, 0:34:44.560 --> 0:34:47.480 if you don't, like there's still this cult thing that 0:34:47.520 --> 0:34:50.000 can happen, right, And like The Witch was another one 0:34:50.040 --> 0:34:51.839 that was really good in this regard where it had 0:34:51.920 --> 0:34:55.640 like really high kind of like film allura, I guess, right, 0:34:55.719 --> 0:34:58.480 So like what are the dynamics that you know, not 0:34:58.960 --> 0:35:01.120 that don't always just need money to succeed, right? 0:35:02.120 --> 0:35:04.879 I mean I think that what's really interesting about these 0:35:04.920 --> 0:35:07.479 films is that they're able to generate this and huge 0:35:07.600 --> 0:35:10.600 roi even though they don't always get the best reviews 0:35:10.640 --> 0:35:12.439 from critics. I mean a lot of these films aren't 0:35:12.480 --> 0:35:15.799 that well received. A lot of these films aren't that 0:35:15.840 --> 0:35:18.640 well received. And I mean one researcher found that actually 0:35:18.960 --> 0:35:22.240 the horror genre has the lowest correlation between box office 0:35:22.239 --> 0:35:25.640 performance and its critical reception, which I thought was really interesting. 0:35:25.960 --> 0:35:27.640 I mean, you look at the ratings for some of 0:35:27.840 --> 0:35:31.279 the highest grossing films this year, and they're not that aggressive. 0:35:32.080 --> 0:35:32.400 Yeah. 0:35:32.520 --> 0:35:34.440 Yeah, I also thought was interesting and I kind of 0:35:34.440 --> 0:35:36.400 felt this, Okay, I'm going in a completely you know, 0:35:36.440 --> 0:35:39.000 different direction. Don't judge me, but Barbie, like I felt 0:35:39.040 --> 0:35:40.640 like for the first time, like I was back in 0:35:40.640 --> 0:35:42.200 the theater and it was kind of a group experience. 0:35:42.239 --> 0:35:43.719 We were all kind of laughing and like kind of 0:35:44.040 --> 0:35:47.640 you know or whatever together. But this genre in particular, right, 0:35:47.680 --> 0:35:49.120 it is about a group experience. 0:35:49.320 --> 0:35:51.920 Yeah, I think that social kind of environment that horror 0:35:52.000 --> 0:35:54.680 really invites is what really brings people to the theaters 0:35:54.719 --> 0:35:57.040 to keep seeing these movies. I mean, especially looking at 0:35:57.080 --> 0:36:00.000 like gen Z and seeing how much more they prefer 0:36:00.040 --> 0:36:01.440 for the horror genre compared. 0:36:01.120 --> 0:36:02.840 To like the adult population at large. 0:36:02.880 --> 0:36:05.480 I mean, at least a third of gen Z and 0:36:05.600 --> 0:36:07.759 Lis horror is one of their favorite genres compared to 0:36:07.880 --> 0:36:10.359 just twenty two percent of US adults. And I mean 0:36:10.400 --> 0:36:13.000 even sixty six percent of gen Z has seen a 0:36:13.000 --> 0:36:15.640 horror movie in theaters in the last twelve months, Yes, 0:36:15.680 --> 0:36:18.239 in theaters, which I think is a lot actually gone 0:36:18.280 --> 0:36:21.840 in theaters, and it was compared to much lower margins 0:36:21.840 --> 0:36:22.520 across the board. 0:36:23.080 --> 0:36:25.520 I think that's bat that idea of like we don't 0:36:25.520 --> 0:36:27.480 care what critics have to say, but we want to 0:36:27.520 --> 0:36:30.600 go do this together. It's like it's that experiential thing 0:36:30.600 --> 0:36:33.680 that we It's so you know, experiential economy for twelve 0:36:33.760 --> 0:36:36.640 bucks and you know everybody makes money on it. It's 0:36:36.680 --> 0:36:37.520 pretty interesting. 0:36:37.640 --> 0:36:39.520 Well makes me wonder like reading this, and I'm going 0:36:39.560 --> 0:36:41.239 to go back to the return on investment because I 0:36:41.239 --> 0:36:43.200 feel like whenever we like look at something, you know 0:36:43.239 --> 0:36:45.480 that is such a part of the Bloomberg conversation, like 0:36:45.520 --> 0:36:49.440 it's just off the chart. So why aren't other major, 0:36:49.480 --> 0:36:52.719 bigger studios or are they chasing some of this? 0:36:53.560 --> 0:36:53.879 I think? 0:36:53.920 --> 0:36:55.040 I mean when you look at like a lot of 0:36:55.080 --> 0:36:56.960 the films that perform very well, I mean you think 0:36:57.000 --> 0:37:00.480 of the superhero films, Marvel films, Avatar, there's all this 0:37:00.560 --> 0:37:04.239 money on films on uh what's it called, like CGI 0:37:04.320 --> 0:37:07.200 and IP and all those kinds of things. So I 0:37:07.200 --> 0:37:09.719 think that's what really kind of puts them apart, is 0:37:09.719 --> 0:37:11.759 that these horror films again, like I said, don't have 0:37:11.840 --> 0:37:15.840 to invest in those same kinds of expensive assets of 0:37:15.840 --> 0:37:16.240 a film. 0:37:16.440 --> 0:37:18.719 I just think, right if I was a studio, I'd 0:37:18.719 --> 0:37:20.520 be like, why wouldn't I chase some of this? I mean, 0:37:20.560 --> 0:37:22.680 it's really kind of remarkable, and it just. 0:37:22.719 --> 0:37:27.200 What we gotta go personal. I gotta know, what's the 0:37:27.719 --> 0:37:29.520 movie that you won't watch because you're too scared? 0:37:29.560 --> 0:37:29.799 Of it. 0:37:29.920 --> 0:37:32.000 Okay, you're gonna really laugh at me, but this is 0:37:32.040 --> 0:37:34.680 a really, really old It was called Trilogy of Terror 0:37:34.719 --> 0:37:37.399 with Karen Black. I was a little kid. My older 0:37:37.400 --> 0:37:41.920 siblings were watching it, but there was this it was 0:37:41.960 --> 0:37:44.799 this like doll and it like lost its chain and 0:37:44.800 --> 0:37:46.680 then all of a sudden, it was like it wasn't 0:37:46.719 --> 0:37:48.800 a voodoo doll, but it was like I can't remember, 0:37:48.880 --> 0:37:50.719 but it was like a little little doll. And it 0:37:50.760 --> 0:37:53.239 started like attacking her with a knife, and it was 0:37:53.239 --> 0:37:54.879 like she's sitting on the couch and it like starts 0:37:54.880 --> 0:37:57.319 attacking her ankles, and then like it's thrown in the 0:37:57.320 --> 0:38:00.279 oven and she like and he inhales the fumes and 0:38:00.320 --> 0:38:04.239 then she becomes like the crazy woman. It's terrifying. I 0:38:04.280 --> 0:38:07.759 wouldn't put my feet down, like on my couch forever. 0:38:08.000 --> 0:38:10.880 Samantha, what's the Halloween movie that you don't want to 0:38:10.880 --> 0:38:11.840 watch because you're too scared of me? 0:38:12.239 --> 0:38:14.080 I was traumatized by The Mist when I was a 0:38:14.120 --> 0:38:16.279 lot younger. My brothers made me watch it when I 0:38:16.360 --> 0:38:18.319 was like eight years old, and it was just the 0:38:18.360 --> 0:38:20.360 most terrifying thing ever. Didn't want to go to a 0:38:20.360 --> 0:38:24.120 grocery store just for the fear of getting locked inside one. 0:38:24.160 --> 0:38:25.840 So I think that's it for me. Never again. 0:38:26.840 --> 0:38:29.200 I never liked when a stranger calls. 0:38:29.440 --> 0:38:30.520 It's terrifying me. 0:38:31.000 --> 0:38:32.560 There's one that was made in the seventies and then 0:38:32.560 --> 0:38:33.160 they redid it. 0:38:33.200 --> 0:38:34.959 I think that where it says like they're in the house, 0:38:34.960 --> 0:38:35.680 they're in the house. 0:38:35.800 --> 0:38:38.839 He's actually calling her from me inside that house. It's 0:38:38.840 --> 0:38:41.439 absolutely terrifying. And I've seen it once and I never 0:38:41.520 --> 0:38:42.480 wanted to watch it. 0:38:43.480 --> 0:38:45.759 But it isn't interesting like that concept of like you 0:38:45.800 --> 0:38:48.000 don't have to spell everything out, like I think about 0:38:48.200 --> 0:38:50.920 go back to Jaws, right and Steven Spielberg, Like the 0:38:50.960 --> 0:38:52.759 Shark wasn't working and so all they had was the 0:38:52.800 --> 0:38:55.160 fin But it was so effective in that you kind 0:38:55.200 --> 0:38:57.840 of just imagined so much of what was going on. 0:38:57.880 --> 0:39:00.279 The subtlety of it was really kind of cool. And 0:39:00.320 --> 0:39:02.359 then there's alien like the monsters. Man, that's good. 0:39:02.520 --> 0:39:06.279 I mean, those those are all of these are I mean. 0:39:06.480 --> 0:39:08.480 And that's the thing is, like I think there's this 0:39:10.239 --> 0:39:12.839 they stick with you, right, and like that's the thing 0:39:12.880 --> 0:39:14.759 about all of these. It's like I don't really want 0:39:14.760 --> 0:39:17.319 to watch these again. I don't really want to see 0:39:17.320 --> 0:39:20.160 the sequel and yet I know other people I can 0:39:20.200 --> 0:39:23.680 appreciate how good of a business this is because it 0:39:23.800 --> 0:39:26.560 just keeps churning out new ones. 0:39:26.840 --> 0:39:29.880 What I was really also fascinating about your story is that, Okay, 0:39:29.880 --> 0:39:32.000 it's all these kind of I feel like upstarts, people 0:39:32.040 --> 0:39:34.720 doing it differently. Maybe weren't household names, but now you're 0:39:34.719 --> 0:39:37.680 getting to know them. But it was a Stephen King 0:39:37.800 --> 0:39:42.240 movie right that was released in twenty seventeen by Warner Brothers. 0:39:42.560 --> 0:39:45.040 Grows seven hundred million worldwide, making it the biggest horror 0:39:45.080 --> 0:39:48.080 money maker ever. So like you go back to the master, 0:39:49.760 --> 0:39:51.640 So I don't know, I bet the ROI though I 0:39:51.680 --> 0:39:52.400 bet there wasn't. 0:39:53.680 --> 0:39:57.879 Well, just think about just how good he has been 0:39:58.320 --> 0:40:00.920 in this genre. I mean, like look like that's you 0:40:00.960 --> 0:40:05.640 know Shakespeare. I mean it is that level of goods 0:40:06.360 --> 0:40:08.799 where it just again and again and again and again 0:40:08.840 --> 0:40:11.640 and again, and like those were old ones that I 0:40:11.719 --> 0:40:14.439 think some of them have been remade, like like it 0:40:14.480 --> 0:40:17.279 was like these are That's what I just don't want 0:40:17.320 --> 0:40:17.640 to see. 0:40:18.080 --> 0:40:20.040 By the way, Sam, I'm curious when you were given 0:40:20.080 --> 0:40:22.560 this mission, did y'all? Is this another like creeping by 0:40:22.600 --> 0:40:26.359 your desk and like, hey, but I wonder when you 0:40:26.440 --> 0:40:28.759 like started this like how much do you. 0:40:30.520 --> 0:40:30.600 Like? 0:40:30.680 --> 0:40:33.120 How much? Was you know, kind of surprising to you 0:40:33.160 --> 0:40:34.800 as you kind of dug deeper and deeper into this, 0:40:34.840 --> 0:40:37.560 because the numbers are really impressive from you know, folks 0:40:37.560 --> 0:40:39.239 here who all are really kind of gung ho on 0:40:39.480 --> 0:40:42.360 everything financials. But what really kind of jumped out for. 0:40:42.360 --> 0:40:44.360 You, I mean, so much about it was really shocking 0:40:44.360 --> 0:40:46.759 to me because I personally was always a horror fan, 0:40:47.600 --> 0:40:50.640 but I never really had thought about like the budgets 0:40:50.640 --> 0:40:52.840 for those kinds of films and how it's not always 0:40:52.880 --> 0:40:55.200 those A list actors that you're seeing, and I didn't 0:40:55.239 --> 0:40:57.399 really think about how much cheaper that would make a film. 0:40:57.440 --> 0:40:58.759 I just thought about how much fun it was to 0:40:58.800 --> 0:41:00.520 watch with my family or with my friends and to 0:41:00.560 --> 0:41:03.120 be scared. And I think seeing that kind of verified 0:41:03.120 --> 0:41:04.759 in all of the research that I've done, it was 0:41:04.800 --> 0:41:06.080 really interesting, really rewarding. 0:41:06.080 --> 0:41:07.320 So you're like, Jill, I'm going to the movies. 0:41:07.320 --> 0:41:08.120 I got research to. 0:41:08.080 --> 0:41:15.040 Do, genuine research, right, Yeah. I look like every one 0:41:15.080 --> 0:41:16.920 of these ones that I've seen, I haven't seen them all, 0:41:17.000 --> 0:41:19.719 probably won't see them all. I love that, But there's 0:41:19.760 --> 0:41:23.680 this thing that I think just grabs you about this genre, 0:41:23.840 --> 0:41:27.080 and when you realize that there is this business story 0:41:27.160 --> 0:41:31.160 to it that is this dramatic, this ROI side, you 0:41:31.320 --> 0:41:33.760 just know we're going to be talking about this again 0:41:33.880 --> 0:41:36.600 for you know, decades, as long as we're making movies. 0:41:36.600 --> 0:41:38.279 We talked about all investments, right. I think if I'm 0:41:38.280 --> 0:41:40.000 an investor, I'm like, yeah, I'll give you some money. 0:41:40.080 --> 0:41:43.160 Here's here's twenty five thousand dollars to go make five movies. 0:41:43.600 --> 0:41:47.279 You know, really fun, great story, and like I said, 0:41:47.320 --> 0:41:49.360 we were talking about it throughout the day, so I 0:41:49.440 --> 0:41:53.160 really resonated with all of us. Sam Stewart's Bloomberg News 0:41:53.160 --> 0:41:55.640 Media and entertainment reporter check out our story on the 0:41:55.680 --> 0:41:58.879 Bloomberg and online, and of course the editor of Jill Webbard. 0:41:58.600 --> 0:42:00.600 Who knew lover of horror movies. 0:42:01.120 --> 0:42:04.320 Happy Halloween everyone. 0:42:03.719 --> 0:42:05.440 I'm brothering Mark on. 0:42:07.360 --> 0:42:08.040 The journal. 0:42:09.080 --> 0:42:10.040 How about you let me drive? 0:42:10.320 --> 0:42:14.200 Oh no, no, no, no, who's going to drive? Honey? Please? 0:42:14.320 --> 0:42:17.560 How do the riding gravel? Let's mate, I want to drive. 0:42:17.600 --> 0:42:21.719 It's a good question time. 0:42:24.560 --> 0:42:27.400 This is the drive to the Globe dot com for me. 0:42:27.520 --> 0:42:30.960 I think we'll buy around Young Don on Bluebirg Radio. 0:42:31.160 --> 0:42:33.200 All Right, everybody just about seventeen and a half minutes 0:42:33.280 --> 0:42:36.680 left in today's trading session on this Tuesday, October thirty. First, 0:42:36.960 --> 0:42:39.560 it's just heard from Charlie Equity's just kind of rolling 0:42:39.640 --> 0:42:43.040 over but little change, a little bit higher on this 0:42:43.560 --> 0:42:46.480 basically f O mc eve. I'm Carol Master along with 0:42:46.600 --> 0:42:50.200 Jess Metton in for Tim Stenovik on this Tuesday. It's 0:42:50.239 --> 0:42:51.920 an interesting market, but it does feel like we're just 0:42:52.000 --> 0:42:52.520 kind of waiting. 0:42:53.040 --> 0:42:55.960 It definitely seems to be the case, especially at the 0:42:56.080 --> 0:42:59.439 end of October, which technically is the most vaultatle month 0:42:59.680 --> 0:43:02.160 of the year, but the worst one is actually September, 0:43:02.160 --> 0:43:03.719 followed by Oguy, So. 0:43:03.800 --> 0:43:07.200 Hopefully maybe we were getting into a better season. Kid 0:43:07.400 --> 0:43:09.759 Santa Claus rally, don't even go there. All right, Let's 0:43:09.760 --> 0:43:11.560 see what Jimmy Lee has to say. He's founder and 0:43:11.600 --> 0:43:14.160 CEO at the Registered investment advisor Wealth Consulting Group. He's 0:43:14.200 --> 0:43:17.800 on zoom from c Are you in Georgia today or Vegas? 0:43:17.840 --> 0:43:18.720 I think he's in Vegas. 0:43:18.719 --> 0:43:21.040 I'm in I'm at the Highlands in North Carolina. 0:43:21.120 --> 0:43:22.479 Actually, oh, neither. 0:43:22.920 --> 0:43:24.960 You know you travel more than we do. I don't know. 0:43:25.000 --> 0:43:27.560 We just talked about the airlines like domestically having some 0:43:27.600 --> 0:43:29.640 issues you are flying around. 0:43:30.200 --> 0:43:32.000 I support the airlines, I know, I. 0:43:31.960 --> 0:43:34.200 Know well having said that, would you be a buyer 0:43:34.239 --> 0:43:37.680 of airlines after that Jet Blue news? It's really tanking 0:43:37.719 --> 0:43:38.919 in today's session. 0:43:39.560 --> 0:43:41.640 You know, with oil prices high. 0:43:41.880 --> 0:43:44.320 I think that that's an area that I would probably 0:43:44.320 --> 0:43:49.120 be cautious with right now. But overall, you know, earnings 0:43:49.239 --> 0:43:52.560 so far has been really good across the board. I mean, 0:43:52.719 --> 0:43:55.440 of the companies that reported last week, I think one 0:43:55.520 --> 0:43:58.440 hundred and sixty over eighty percent beat earnings, with an 0:43:58.440 --> 0:44:03.000 average of nine point two percent. That's actually from Bloomberg. 0:44:03.600 --> 0:44:06.680 We had a research committee this morning call and we 0:44:06.960 --> 0:44:10.880 were doing some research with Bloomberg, and that's from you guys. 0:44:10.920 --> 0:44:14.160 And then you know, including this week, we have twice 0:44:14.200 --> 0:44:17.520 as many upgrades as downgrades. So companies are navigating this 0:44:17.640 --> 0:44:21.359 high interest rate environment. And of course we saw the 0:44:21.400 --> 0:44:25.280 GDP number and third quarter was phenomenal, and the consumers 0:44:25.280 --> 0:44:27.040 are still spending, surprising everybody. 0:44:27.040 --> 0:44:29.360 All right, full disclosure, because that's how we are at Bloomberg, 0:44:29.360 --> 0:44:30.680 That's how we roll. What do you mean you were 0:44:30.719 --> 0:44:32.239 doing some work in research with. 0:44:32.200 --> 0:44:36.000 Bloomberg, Well, we have a Bloomberg terminal as well, and. 0:44:37.600 --> 0:44:39.959 Our Investment Committee, our CIO does a lot of work 0:44:40.080 --> 0:44:43.120 on the terminal with research and so forth. So that 0:44:43.480 --> 0:44:45.560 was one of the statistics that we were looking at, 0:44:46.400 --> 0:44:49.160 was just the earnings updates for companies last week in 0:44:49.200 --> 0:44:49.879 this week so far. 0:44:49.960 --> 0:44:53.759 Okay, just we like transparency now, but earnings make sense, Jess. 0:44:53.760 --> 0:44:54.960 We're in the midst of it. We're on the other 0:44:55.000 --> 0:44:56.840 side of it right in terms of the bulk of numbers. 0:44:57.000 --> 0:44:59.800 If you're not buying Jet Blue, what stocks are you? 0:45:01.760 --> 0:45:02.759 Well, we are. 0:45:03.200 --> 0:45:05.719 Let's talk about fixed income still, so we think that 0:45:05.760 --> 0:45:08.239 we're at the top of the cycle on rates, and 0:45:08.320 --> 0:45:11.080 while rates have been very volatile for the last thirty 0:45:11.120 --> 0:45:14.440 sixty days, we think that leaning into duration, I know 0:45:14.440 --> 0:45:16.520 a lot of other investors have done that, but leaning 0:45:16.520 --> 0:45:19.640 into duration now I think is a good safe bet 0:45:19.680 --> 0:45:22.120 for the next few years. Maybe not short term trade, 0:45:22.120 --> 0:45:23.240 but for the next few years. 0:45:23.440 --> 0:45:24.480 How far out would. 0:45:24.280 --> 0:45:25.040 You go far? 0:45:25.239 --> 0:45:26.799 How far out on the curve would you go? 0:45:27.800 --> 0:45:28.880 Well, believe it or not. 0:45:28.920 --> 0:45:31.160 We actually added some zero so that we could add 0:45:31.360 --> 0:45:33.400 just a teeny bit to get a lot more. 0:45:34.960 --> 0:45:36.200 Potential benefit from it. 0:45:36.320 --> 0:45:39.520 So but I think I think adding duration passed you know, 0:45:39.560 --> 0:45:41.880 even seven years might make sense for a lot of 0:45:41.920 --> 0:45:44.080 investors for your long term money. I think it's one 0:45:44.120 --> 0:45:46.640 of the easiest traits to make long term. On the 0:45:46.680 --> 0:45:49.880 equity side, I think that the interrat sensitive sectors that 0:45:49.920 --> 0:45:53.240 have been really been beaten up lately, real estate, tech stocks, 0:45:53.600 --> 0:45:55.600 I think that have an opportunity to take another run 0:45:55.640 --> 0:45:58.040 before the end of the year. And so I'm glad 0:45:58.040 --> 0:46:00.000 that there's still a lot of barish people out there. 0:46:01.080 --> 0:46:03.400 But I think what could happen is is that you know, 0:46:03.440 --> 0:46:06.920 the FED probably won't raise rates tomorrow, right according to 0:46:06.920 --> 0:46:09.920 the futures market in December, probably not as well. A 0:46:09.920 --> 0:46:12.480 lot of investors think that they're done, and if that 0:46:12.640 --> 0:46:15.319 becomes a consensus that they're done, I think there could 0:46:15.360 --> 0:46:17.480 be a lot of money down the road here chasing 0:46:17.480 --> 0:46:18.160 equity soon. 0:46:18.840 --> 0:46:20.960 You mentioned real estate, that sector in the S and 0:46:21.000 --> 0:46:25.480 P five hundred up about two percent today, well outperforming 0:46:25.600 --> 0:46:29.080 the other industry groups. What is it particularly that you 0:46:29.280 --> 0:46:30.600 like about real estate? 0:46:31.239 --> 0:46:35.120 Well, publicly traded real estate stocks have been you know, 0:46:35.200 --> 0:46:38.480 discounted off of the whole value of real estate in 0:46:38.520 --> 0:46:41.600 general last year and continuing with this year, and so 0:46:42.040 --> 0:46:44.640 we think that there's value in publicly traded real estate. 0:46:45.080 --> 0:46:47.480 I think you should be very active with that investment, 0:46:47.760 --> 0:46:51.560 and you know, maybe not necessarily overweighted too much. 0:46:51.600 --> 0:46:52.399 But there are. 0:46:52.280 --> 0:46:54.839 Areas that have been really beat up with interest rates 0:46:54.880 --> 0:46:57.279 going higher. That's one of them. And so I think 0:46:57.360 --> 0:47:00.840 in historically speaking, when that's happened before the public real 0:47:00.920 --> 0:47:03.400 estate market catches up, and it could happen very quickly. 0:47:03.440 --> 0:47:06.920 So I think that investors can have an opportunity there. 0:47:07.640 --> 0:47:10.360 Like I said, also with technology stocks. But also you know, 0:47:10.440 --> 0:47:12.440 I think quality is very important today. 0:47:12.600 --> 0:47:14.399 Jimmy, hang on a second before you move on from 0:47:14.640 --> 0:47:17.879 real estate. Real estate, you know, location, location, location, also 0:47:17.960 --> 0:47:22.320 type type type. I mean there's industrial, there's commercial, there's residential, 0:47:22.760 --> 0:47:25.520 there's logistics plays. There's a lot of ways to play it. 0:47:25.960 --> 0:47:28.600 So if there's long value in play in real estate, 0:47:28.680 --> 0:47:32.200 what is that long value play specifically. 0:47:32.320 --> 0:47:35.160 I I think you can be active and actually not 0:47:35.280 --> 0:47:37.640 just in public real estate. In public real estate, I 0:47:37.640 --> 0:47:40.720 would I would say that investors can go into general rates. 0:47:41.080 --> 0:47:43.000 You know, I know, I'm really scared about the office sector, 0:47:43.400 --> 0:47:46.120 but the office sector represents a smaller percentage of the 0:47:46.160 --> 0:47:47.560 general you know, public reed. 0:47:47.400 --> 0:47:48.160 Sector out there. 0:47:48.480 --> 0:47:50.120 But in private real estate, I think there are a 0:47:50.120 --> 0:47:52.360 lot of vehicles out there that a lot of investors 0:47:52.360 --> 0:47:56.640 can get money invested into, not just high net worth investors. Nowadays, 0:47:56.640 --> 0:48:00.320 with products out there with fresh capital, I think savvy 0:48:00.320 --> 0:48:03.560 real estate investors will have opportunity to buy and get 0:48:03.560 --> 0:48:06.600 into to takeover projects at a discount relative to where 0:48:06.640 --> 0:48:08.840 they were a year ago. So I think you have 0:48:08.880 --> 0:48:11.040 to be very selective and work with people that are 0:48:11.040 --> 0:48:14.240 experts in that space. But also on the debt side. 0:48:14.360 --> 0:48:16.399 I know that we've been long in the two talking 0:48:16.400 --> 0:48:20.000 about private credit, and again with fresh capital, I think 0:48:20.040 --> 0:48:23.360 with private credit you can get opportunities now that we 0:48:23.440 --> 0:48:26.080 just haven't seen in a long time. Again, that's a 0:48:26.280 --> 0:48:29.960 private credits a wide space, and you know, just talk 0:48:29.960 --> 0:48:31.880 about the different types of options to invest into a 0:48:31.920 --> 0:48:35.520 different managers be very selective there again, and I would 0:48:35.520 --> 0:48:37.680 stick with trying to be a little bit more conservative 0:48:39.080 --> 0:48:41.000 with those loans as much as possible too. 0:48:41.520 --> 0:48:43.840 I have a question about private credit. I'm glad you 0:48:43.880 --> 0:48:45.279 brought it up, because that is a one and a 0:48:45.320 --> 0:48:48.360 half trillion dollar quarter in the market right now. Recent 0:48:48.560 --> 0:48:51.359 weeks we've seen money come out of stocks, also come 0:48:51.360 --> 0:48:53.719 out of money market funds. Is that money going to 0:48:53.800 --> 0:48:54.560 private credit. 0:48:55.320 --> 0:48:57.799 I think a lot of it is, Jess, And I 0:48:57.840 --> 0:49:01.600 think that you know, especially now that there are vehicles 0:49:01.600 --> 0:49:04.560 that retail investors can can invest in two without being 0:49:04.600 --> 0:49:07.600 locked up as long as they used to have to 0:49:07.640 --> 0:49:10.640 be for private credit and investments. And so I think 0:49:10.680 --> 0:49:13.880 there are the perfilation of different types of investment vehicles 0:49:13.880 --> 0:49:17.040 out there nowadays, and in the private credit space allows 0:49:17.040 --> 0:49:20.919 a lot of participants to be in that investment rather 0:49:21.000 --> 0:49:24.360 than just institutional before. And so I think some of 0:49:24.360 --> 0:49:27.880 that money is leaving money markets and inequities too, because 0:49:27.880 --> 0:49:30.560 you can get double digit yields and with pretty good 0:49:30.600 --> 0:49:32.240 protection on the collateral. 0:49:32.440 --> 0:49:35.839 Hey, Jimmy, twenty five seconds, a new wealthy client comes 0:49:35.840 --> 0:49:37.880 to you and says, I got a bunch of money 0:49:37.920 --> 0:49:42.200 to invest. Where do you put it right now? Just quickly, 0:49:42.280 --> 0:49:42.920 really quickly. 0:49:42.960 --> 0:49:45.000 It's a very interesting time right now. But I would 0:49:45.080 --> 0:49:47.360 just go back to if it's long term money, seventy 0:49:47.400 --> 0:49:49.719 five percent of the time, the stock market's hired twelve 0:49:49.760 --> 0:49:52.880 months later, So I would say that we probably wouldn't 0:49:52.880 --> 0:49:55.720 be putting it all to work day one, but certainly 0:49:55.960 --> 0:49:57.719 a good chunk of it should be invested in a 0:49:57.760 --> 0:50:01.800 beautifully diversified portfoil and with a lot of quality companies, 0:50:01.880 --> 0:50:03.640 companies that can do well even if we get into 0:50:03.640 --> 0:50:04.960 a little bit of a slowdown. 0:50:04.560 --> 0:50:05.160 Here at some point. 0:50:05.280 --> 0:50:07.920 All right, Well, be well, Happy Halloween. Jimmy Lee, of course, 0:50:07.920 --> 0:50:11.280 founder and CEO at the registered investment advisor Wealth Consulting Group, 0:50:11.760 --> 0:50:13.440 joining us on this Tuesday. 0:50:14.480 --> 0:50:19.120 This is the Bloomberg Business Week podcast. Avail little on Apple, Spotify, 0:50:19.239 --> 0:50:22.960 and anywhere else you get your podcasts. Listen live weekday 0:50:23.000 --> 0:50:26.600 afternoons from three to six Eastern on Bloomberg dot com, 0:50:26.640 --> 0:50:29.959 the iHeartRadio app tune In, and the Bloomberg Business App. 0:50:30.000 --> 0:50:33.080 You can also watch us live every weekday on YouTube 0:50:33.200 --> 0:50:37.200 and always on the Bloomberg Terminale