Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day
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Speaker 2: Terminal and the Bloomberg Business App. Lori Calvicina of RBC
Speaker 2: saying this for a material move higher in the market
Speaker 2: by year end to be justified on the math, we
Speaker 2: think investors will need to start focusing on the outlook
Speaker 2: for twenty five, where visibility still seems a bit limited.
Speaker 3: Laurie's with us here in New York. Lori, good morning
Speaker 3: to you.
Speaker 2: Thanks for having let's talk about twenty twenty five. I
Speaker 2: think it's so difficult to do without really knowing what
Speaker 2: happens in November.
Speaker 3: How hard is it to answer that question?
Speaker 4: Well, I think that's a great point. The exact point
Speaker 4: of client I spoke with last week made And it's
Speaker 4: interesting because, on the one hand, I have equity investors
Speaker 4: US based ones at least saying, oh, you know, there's
Speaker 4: not a lot to do on the election. We're not
Speaker 4: putting on any trades, and it's like, well, but visibility
Speaker 4: is limited, and you know, what happens in November really matter?
Speaker 3: So which one is it?
Speaker 4: I think you sort of a lack of clarity about
Speaker 4: what to do is also contributing to the fog.
Speaker 2: You had a line that we repeated over and over
Speaker 2: again on this program for the last several months. You
Speaker 2: said that talking about the election with clients was like
Speaker 2: staring at the sun.
Speaker 3: Is it still like staring at the sun?
Speaker 4: It shifted a little bit, and you know, my joke's
Speaker 4: not funny anymore post eclipse. But the reality is now
Speaker 4: I'm using the line safety and numbers because what I'm
Speaker 4: sensying from the US again, the US based people, not
Speaker 4: the people based outside of the US, but the US
Speaker 4: based people. They still don't really want to talk about
Speaker 4: the election all that much. And again I've heard some
Speaker 4: very impassioned defenses of I traded this in twenty sixteen,
Speaker 4: I traded this in twenty twenty. I'm not trading this
Speaker 4: again kind of coming out of the hedge fund community.
Speaker 4: The long goalies are like, yeah, I'll believe it when
Speaker 4: I see it. But the long goal only is what
Speaker 4: I'm hearing from them is that they're getting questions from
Speaker 4: their clients primarily based in Europe and Canada and Asia
Speaker 4: and other places outside the US. They're having to come
Speaker 4: up with talking points and they're having to dust off
Speaker 4: the historical playbooks and come up with something to say. Frankly,
Speaker 4: I don't think there is a lot of conviction from
Speaker 4: investors and again US based ones on which way the
Speaker 4: outcome is going to be. But there is a general
Speaker 4: sense that Congress is going to be divided and that
Speaker 4: you're going to have a split government generally, so not
Speaker 4: much is going to get done down the road. But
Speaker 4: that's really where people are right now. So we joke
Speaker 4: safety in numbers, let's talk about the charts, let's talk
Speaker 4: about the data, and we'll keep you all out of fights.
Speaker 5: Well, isn't that conviction itself that there's going to be
Speaker 5: gridlock in Washington?
Speaker 4: I think so, And look that is my base case
Speaker 4: as well. But what I've told people is if you
Speaker 4: kind of again separate the two investor bases, And if
Speaker 4: you talk to non people who don't sit in the US,
Speaker 4: they've generally been leaning into the Republican sweep idea for
Speaker 4: quite some time. So you know, it's always a question, right,
Speaker 4: what are investors expecting? What's priced in? Different parts of
Speaker 4: the market are pricing in different things, I think, but
Speaker 4: I don't think anybody's seen in the Democratic sweep. And
Speaker 4: even though that's not high on my radar either, I
Speaker 4: have been telling people you got to think about it
Speaker 4: a little bit, just because no one.
Speaker 5: Is okay, So what if you do think about it
Speaker 5: and you do say to yourself, okay, this is how
Speaker 5: I would position for blue sweep versus red sweep. What's
Speaker 5: the number one trade for each?
Speaker 4: So I think, you know, I heard one comment from
Speaker 4: a non US investor, you know, when we were talking
Speaker 4: about this concept of divided government, and they said, oh,
Speaker 4: I guess no more fiscal stimulus. So I thought that
Speaker 4: was I thought that was interesting. It was a very
Speaker 4: you know, kind of kind innocent little comment. But I
Speaker 4: thought that was really, you know, just sort of interesting
Speaker 4: because there's been so much consternation about, you know, well,
Speaker 4: this market shouldn't be this high, you know, gush darn
Speaker 4: that fiscal stimulus, and you know, sort of taking that
Speaker 4: idea out from out from you know, kind of the
Speaker 4: market backdrop I think is puzzling, you know, to some investors.
Speaker 4: To be honest, though, A Marie, we did a survey,
Speaker 4: you know, back in kind of early to mid April,
Speaker 4: where we actually asked our investors what would you you know,
Speaker 4: what would you buy, what would you sell? What's your
Speaker 4: outlook for different industries under the different scenarios and the
Speaker 4: Democratic sweep scenario. I think we only had like seventeen
Speaker 4: percent of our analysts were bearish, Fewer than that were bullish.
Speaker 4: Most were in the neutral camp. Generally, it's the healthcare
Speaker 4: sectors and the energy sectors that come up as bullish
Speaker 4: or bearish under different outcomes. You talk to my healthcare analysts,
Speaker 4: they're going to downplay the impact and tell you they're
Speaker 4: not really expecting too much out of either candidate depending
Speaker 4: on who wins. And with energy, I do, frankly wonder
Speaker 4: if people are just looking back at twenty twenty and
Speaker 4: don't realize that Biden's running a very different campaign than
Speaker 4: he was back then.
Speaker 6: He said, it's a kind of innocent comment to think
Speaker 6: that there's going to be no fiscal stimulus with SAVIDI
Speaker 6: governmor are you basically saying there is going to be
Speaker 6: fiscal stimulus additional rounds regardless of who wags you know.
Speaker 4: I don't know, but I will tell you that when
Speaker 4: I look at Trump and Biden and I look at
Speaker 4: the different issues, and you know, we kind of went
Speaker 4: through the Trump campaign website pretty closely. I know there's
Speaker 4: a lot of other stuff out there, but you know,
Speaker 4: it's sort of a struggle in our seat, frankly to
Speaker 4: figure out what to focus on and what's noise and
Speaker 4: what's real. But when I kind of go through, you know,
Speaker 4: kind of cut through the rhetoric and go through the
Speaker 4: policy ideas of different of the two different camps, it
Speaker 4: seems like they're both you know, talking about wanting to
Speaker 4: keep jobs in the US. There's a big commitment to
Speaker 4: restoring and I talk to investors, they think both these
Speaker 4: candidates are inflationary in terms of their views on trade
Speaker 4: and immigration. So I will say I think also US
Speaker 4: based investors again are struggling to come up with assalient
Speaker 4: differences from an investment perspective between the two candidates.
Speaker 6: At this point, then why are you just neutral? Why
Speaker 6: are you feeling not that great about stocks given the
Speaker 6: fact that probably either candidate is going to try to
Speaker 6: stimulate the economy after they wig, regardless of which party.
Speaker 4: Well, again, we go back to our base case and
Speaker 4: politics one oh one, and you know my politics one
Speaker 4: o one class Larry Sabadela used to always tell us
Speaker 4: all politics is local. But he also reminded us how
Speaker 4: bills get created. And that's what I find I educate
Speaker 4: a lot of investors about. It doesn't matter what these
Speaker 4: two candidates say, right, You've actually got to have cooperation
Speaker 4: from both chambers of Congress to get anything done. And
Speaker 4: as you look at the landscape, do you really see,
Speaker 4: unless you have a United government, anybody cooperating with anybody
Speaker 4: in the next four years? Me, not so much. So
Speaker 4: you know that, frankly, I think informs our view and
Speaker 4: a lot of investors' views, Like, on the one hand,
Speaker 4: doesn't really matter, is anything actually going to be able
Speaker 4: to get done?
Speaker 2: We're looking out to November because there's very little happening
Speaker 2: over the next week or so. What we saw happen
Speaker 2: last week, and I think we should go over it
Speaker 2: we saw a lot of people put a lot of
Speaker 2: weight on what most people would consider to be second
Speaker 2: tier economic data, which is an S and P global
Speaker 2: PMI in America.
Speaker 3: Surprising to the upside.
Speaker 2: Ignoring in video and video was up on the week
Speaker 2: by fifteen percent S and P five hundred, dead flat.
Speaker 3: What was that about?
Speaker 4: So I don't know so much about that particular data point,
Speaker 4: But if I rewind a couple weeks ago, I was
Speaker 4: out on the road and people were freaking out about
Speaker 4: the employment cost Index and I didn't even really even
Speaker 4: remember that that was a thing. And then the next
Speaker 4: week investors were making fun of the people who were
Speaker 4: freaking out about that the prior week. Sure, so I
Speaker 4: think it all goes back to if you look at
Speaker 4: twenty twenty five again, and we want to be forward looking,
Speaker 4: there's a lot of fog out there. There's a lot
Speaker 4: of clouds, not necessarily storm clouds, but just lack of visibility,
Speaker 4: and we're all just stuck.
Speaker 3: Talking about the FED.
Speaker 4: I joked with a friend of mine recently that you know,
Speaker 4: in equity land, we've all had to become rate strategists
Speaker 4: and you know, kind of make friends with the economists
Speaker 4: and so any little breadcrumb of information that can shed
Speaker 4: light on the will they won't they? When they? You know,
Speaker 4: when are they going to go? That's all people seem
Speaker 4: to care about right now. And I think investing has
Speaker 4: changed over the years. We all get access to information,
Speaker 4: you know, whether it's the terminal or these other data sources.
Speaker 4: We can analyze things much much faster. That accelerated during COVID.
Speaker 4: So people are looking for any incremental piece of data
Speaker 4: that's not widely watched to get some sort of clue
Speaker 4: on this debate.
Speaker 2: Do you think we are just as sensitive to upside
Speaker 2: surprises as we are downside surprises? And with that in mind,
Speaker 2: what do you advocate for inequities at the moment?
Speaker 4: So in my mind, the rotation thesis still makes a
Speaker 4: lot of sense, and I actually can see that being
Speaker 4: consistent with a sideways market. If you think about the
Speaker 4: rate of upward revisions as a good gauge for earning sentiment,
Speaker 4: it's actually shifted back in favor of the top ten
Speaker 4: market cap names in the S and P five hundred,
Speaker 4: But throughout most of this reporting season, most of the
Speaker 4: upper revisions were coming for the other four hundred ninety
Speaker 4: stocks In the SMP, so I think, you know, we've
Speaker 4: seen a little bit of bumps in that, but generally
Speaker 4: that megacap growth trade is still quite expensive. It's still
Speaker 4: quite crowded, and it's got decelerating earnings growths and that
Speaker 4: always makes growth investors nervous. Now, the rotation thesis, I
Speaker 4: think it's not just about valuation, but it's also about
Speaker 4: the economic tailwinds that have been building. And if you
Speaker 4: look at twenty twenty four GDP, it's kind of stalled
Speaker 4: out around two point four percent. That's right at average.
Speaker 4: We haven't seen any movement to the twenty twenty five
Speaker 4: numbers yet, which are still sitting around.
Speaker 3: One to seven. That is weak GDP.
Speaker 4: And that's why I feel a little bit stuck right
Speaker 4: now because to really get excited on twenty twenty five,
Speaker 4: I need to see that number go up, and it's not.
Speaker 4: And it's not really going down either. It's not doing
Speaker 4: anything now the downside, I think your question is brilliant,
Speaker 4: you know, sort of the tail risks on both sides.
Speaker 4: What could drive us down? I think we're pretty fairly
Speaker 4: priced for a FED that you know, kind of maybe
Speaker 4: cuts once moderating inflation, maybe a little stickier than we
Speaker 4: end surely thought. But if we start to really see
Speaker 4: inflation expectations deteriorate, you know, in terms of moving up,
Speaker 4: if we start to see the Fed narrative fall apart, again,
Speaker 4: there's a little bit of downside risk to this market,
Speaker 4: and I think that's underappreciated.
Speaker 2: Flying blind into twenty five is becoming a little bit
Speaker 2: of a thing. Lori Cavsen and there F RPC.
Speaker 3: Joining us now.
Speaker 2: Prat s ReRAM Farcleys and Debor Cunning of Federated Hermes
Speaker 2: for a conversation about the Federal Reserve pleasure.
Speaker 3: I want to start with you.
Speaker 2: You've talked about the healthy skepticism you have about the
Speaker 2: degree of restrictiveness this Federal Reserve has with this policy rate,
Speaker 2: with this economy.
Speaker 3: Where'd you stand on that?
Speaker 7: Now?
Speaker 8: Hi, thanks for having me on the show.
Speaker 9: Yes, we've had our doubts.
Speaker 8: About if policy is restrictive enough, and I think you know,
Speaker 8: one thing that keeps fueling that doubt is just given
Speaker 8: how resilient the macroeconomic backdrob remain. You know, we've we
Speaker 8: we saw you know, pretty firm data on spending in
Speaker 8: Q one UH and honestly, our take on.
Speaker 9: The retail sales.
Speaker 8: The latest retail sales print is really that maybe demand
Speaker 8: just normalized after a very big March increased, and there's
Speaker 8: you know, the fundamentals for the US consumer still looks
Speaker 8: pretty firm. And I think, you know, we we echo
Speaker 8: what we learned from the minutes that there is some
Speaker 8: uncertainty regarding the restrictiveness of monitory pantacy.
Speaker 2: Debrah, how skeptically you you know, I'm probably not quite
Speaker 2: that skeptical.
Speaker 1: I do believe that even in an environment where inflation
Speaker 1: remains at three to four percent, five and a quarter
Speaker 1: to five and a half, with the YO curve fairly
Speaker 1: flat inverted to some degrees, you go further out of
Speaker 1: the curve where you know, expectations are different from a
Speaker 1: timeframe standpoint. But I do believe, given where we are
Speaker 1: from a standpoint of growth in the economy, where we
Speaker 1: are from inflationary levels having you know, come down as
Speaker 1: far as they are, but still with the ways to go,
Speaker 1: that the level that is currently being dictated in the
Speaker 1: market at five plus percent, you know, for the money markets,
Speaker 1: five minus percent small amounts for the bond markets, seems
Speaker 1: to be doing its job. And I feel like the
Speaker 1: FED rhetoric that we have been hearing for pretty much
Speaker 1: from from everyone since the last meeting has been that
Speaker 1: it's high enough, it doesn't need to go higher at
Speaker 1: this point. So I feel like we're going to don't
Speaker 1: fight the FED type of trade at this point.
Speaker 3: That's said.
Speaker 6: Dever, do you think it would be a mistake to
Speaker 6: cut race here, given the fact that so many people
Speaker 6: are seeing enough momentum in the economy to really risk
Speaker 6: the potential for reacceleration and fleetion.
Speaker 3: I do.
Speaker 1: I think we're not to the most We're not to
Speaker 1: the time period that we need to see in place
Speaker 1: or touch due to inflation. Yet at this point we
Speaker 1: have seen some you know, maybe cracks in some of
Speaker 1: the data, you know, barring some of the secondsier data
Speaker 1: that that Mike was talking about earlier and that you
Speaker 1: were all speaking about. I think, you know, when you
Speaker 1: look at some of the employment statistics, if you look
Speaker 1: at you know, the Jolts data, maybe some of the
Speaker 1: broader indices. From an inflationary perspective, it certainly is not
Speaker 1: what I would call a crack that turns into you know,
Speaker 1: a big fisher or canyon. It's just something that I
Speaker 1: think probably takes the growth side of the equation down
Speaker 1: a little bit, more dependent upon the consumer, more dependent
Speaker 1: upon services than goods, and all of that plays into,
Speaker 1: you know, sort of keeping rates where they are. I
Speaker 1: don't think the Fed is at this point in any need,
Speaker 1: nor are they being compelled to move rates in either direction.
Speaker 6: Pusha what's your take on this?
Speaker 9: Tubsesaurius A.
Speaker 6: Strateigis was on earlier and he was saying that it
Speaker 6: would be a policy error for the Fetcher reserve to
Speaker 6: cut this year, given the fact that there is so
Speaker 6: much momentum and a lot of in the pipeline inflationary
Speaker 6: pressure that's going to come through next year.
Speaker 9: Do you agree?
Speaker 10: So?
Speaker 8: I think it really depends on how the data evolved
Speaker 8: here on. You know, our own baseline expectation is that
Speaker 8: perhaps they will find an opportunity to initiate a rate
Speaker 8: cut this year, you know, most likely in September, equally
Speaker 8: likely in December, just depending on you know, how the data,
Speaker 8: particularly the inflation prints play out, and and if we indeed,
Speaker 8: you know, get a series of point two percent month
Speaker 8: or a month on core pyce and you know that
Speaker 8: that evidence accumulates, I think it will be very hard
Speaker 8: for there would be no reason why they remain on hold.
Speaker 8: I think they can, you know, get their foot in
Speaker 8: and at least get one rate cut for it. From
Speaker 8: a from a risk management perspective, you know, policy would
Speaker 8: still be relatively restrictive in that world, but you know
Speaker 8: that will be a nod to the fact that the
Speaker 8: disinflationary progress has started.
Speaker 2: I'm pretty sure. I think this is the struggle we
Speaker 2: always have. We all know it's about the economic data.
Speaker 2: But what economic data? Do you ignore the solid jobless claims?
Speaker 2: Do you maybe put some emphasis on the slow down
Speaker 2: and reas house salves, do you put some weight on the.
Speaker 3: PMI from last week?
Speaker 2: Of all things, where do you place the most emphasis
Speaker 2: right now and the incoming information? And what do you
Speaker 2: choose to discount to ignore?
Speaker 8: Well, I think at this point we can't choose to
Speaker 8: discount or ignore anything. We know that you know, the
Speaker 8: FED is highly data dependent and the data is really
Speaker 8: our only guide to give us a sense of, you know,
Speaker 8: how restrictive monetary policy is and where and how the
Speaker 8: conditions are to support the disinflation process. But you know,
Speaker 8: just in terms of what we're really looking at, you know,
Speaker 8: it's the inflation outcomes themselves, which I think are top,
Speaker 8: top of the line, very important at this point in time.
Speaker 8: And I think after that comes the labor market data
Speaker 8: and you know, prints related to consumer spending, so be
Speaker 8: it retail sales or the real personal spending estimates like
Speaker 8: we get this, I think those are the hard data
Speaker 8: that you know, we're really looking for keeping an eye out.
Speaker 8: And then again, you you know, it seems like every
Speaker 8: little data point is important, and as you rightly pointed out,
Speaker 8: you know, the market's reacted to the S and P
Speaker 8: global last week, So I think at this point in time,
Speaker 8: we can't afford to discount anything.
Speaker 6: Deborah, what's your take on this, given the fact that
Speaker 6: it seems like literally one comment in the page book
Speaker 6: potentially that we are not aware of, could move things
Speaker 6: if it is something that confirms a sneaking suspicion or
Speaker 6: fear in the market.
Speaker 9: You know, I agree that it's a mosaic.
Speaker 1: You can't it's hard to discount anything at this point,
Speaker 1: so taking in as much information as what you're being
Speaker 1: given and trying to digest it and put it into
Speaker 1: some you know, mosaic form that you can you know,
Speaker 1: theorize based on what your expectations are off of that
Speaker 1: that that collection of information and with the intention that
Speaker 1: hopefully that has something to do with you know, what
Speaker 1: what the FEDS intentions are. I think, you know, the
Speaker 1: the slow down in labor market quits, maybe the ratio
Speaker 1: of open positions to those available to be hired. Certainly
Speaker 1: the retail sales. I mean, the consumer really has been
Speaker 1: driving this economy. So really anything that has to do
Speaker 1: with the consumer in specific, but also from a broader
Speaker 1: mosaic standpoint, you can't ignore global you can't ignore you know,
Speaker 1: the non consumer.
Speaker 9: Aspect of the market either.
Speaker 1: It all forms you know, sort of the theory that
Speaker 1: you're trying to come up with, which is higher for longer.
Speaker 1: I still think too, when we're talking about rake cuts
Speaker 1: this year, we're only in main now. Granted we're at
Speaker 1: the end of May, we're almost at the beginning of summer,
Speaker 1: but there's a lot of this year to go, more
Speaker 1: than half of it. So I think many many things
Speaker 1: can happen. And what the FED is still trying to do,
Speaker 1: it's gain confidence, and I think that takes them somewhere
Speaker 1: in the neighborhood of probably two to five months, and
Speaker 1: that still puts US in twenty twenty four end of
Speaker 1: twenty twenty, but we're there end.
Speaker 5: Of twenty twenty four. But Deborah, to Lisa's point earlier,
Speaker 5: a lot of guests have come on this program and
Speaker 5: talking about all the inflation and pressures potentially in twenty
Speaker 5: twenty five, is the FED potentially how do they How
Speaker 5: do you think they think about twenty twenty five when
Speaker 5: they think about inflation, and when some people are saying
Speaker 5: that they mean to hike after they cut at the
Speaker 5: end of this year.
Speaker 9: I think that's overthinking it. At this point.
Speaker 1: I believe that, you know, their goal is to take
Speaker 1: what's available for them now. And yes, they do give
Speaker 1: one to three year types of forecasts in their series
Speaker 1: of economic projections, But in fact, I think they're really
Speaker 1: focused on what they do need to do now, and
Speaker 1: to the extent that that has some impact on the
Speaker 1: next year, the next two years, they'll deal with that
Speaker 1: at that particular point in time. So I really think
Speaker 1: they're focusing on what happens the rest of this year
Speaker 1: and then twenty twenty five. You know, maybe energy prices
Speaker 1: stop being the deflationary trend they've been, maybe housing stops
Speaker 1: being the inflationary trend that it's been. Maybe there are
Speaker 1: offsets that are different, but I think again that's something
Speaker 1: that they will address as that happens, not as it's
Speaker 1: you know, sort of forecast in the in the next year,
Speaker 1: but rather in the next next six months or so.
Speaker 6: Fujah, we're in the business of overthinking things, so let's
Speaker 6: go there. Sorry, but it is the key thing that
Speaker 6: a lot of people are trying to game out how
Speaker 6: much we do see in November, either policy shift from
Speaker 6: either candidate actually turbo charging any kind of inflationary pressure
Speaker 6: that's in the pike. How are you gaming out how
Speaker 6: this kind of percolates, whether it's immigration changes or tariff
Speaker 6: changes that actually end up being inflationary this year.
Speaker 8: So I think in terms of being inflationary this year,
Speaker 8: I don't think those policy changes that are likely to
Speaker 8: have an immediate effect. You know, we in terms of tatiffs,
Speaker 8: we we've done some work in the past when we
Speaker 8: had the previous round of statiffs imposed. It takes time
Speaker 8: for these prices to filter through to the economy. So
Speaker 8: if there is a policy change in that direction, sure,
Speaker 8: you know it is, it will be an added impulse
Speaker 8: to inflation. But it's unlikely to be something that we
Speaker 8: feel in twenty twenty four. And of course I think
Speaker 8: the second the second step to that thinking is you
Speaker 8: know the scale of the policy, you know how many
Speaker 8: goods are we talking about, what's the share for all
Speaker 8: of that in our import basket? And even then, you know,
Speaker 8: the share of imports in the CPI or the PCE
Speaker 8: basket is fairly limited. So direct effects are limited and
Speaker 8: it'll take time for the second round effects to play out.
Speaker 2: I post it, thank you, We've got to leave it
Speaker 2: there and to temper as well.
Speaker 3: To the by for you. Thank you very much.
Speaker 2: An eighteenth MBI site, So it's insight for the Boston Southex,
Speaker 2: the team advancing to their second NBA Finals in the
Speaker 2: past three years after completing a series sweep of the
Speaker 2: Indiana Pacers in the Eastern Conference finals. An NBA title
Speaker 2: would cap a successful season for co owner Steve Paliuca,
Speaker 2: who just last week saw his Italian football side at
Speaker 2: Atlanta win the Europa League. Steve, it's wonderful to catch
Speaker 2: up with you, sir. We've been talking offline. I know
Speaker 2: I was so happy for you. Congratulations to you and
Speaker 2: a team I want to begin with Atalanta, and I
Speaker 2: want to go through what this means to you. They
Speaker 2: are the underdogs of bergamow overshadowed by their glamorous counterparts
Speaker 2: of Inter and Milan out of Milan. How important was
Speaker 2: that for you, for that side, for the history of
Speaker 2: that club.
Speaker 7: Well, I think it was huge.
Speaker 10: The Atlanta has not won the europe a couple one
Speaker 10: hundred years and the city of Bermos is just ecstatic
Speaker 10: right now. When the team came back from the game,
Speaker 10: there's a nice shot of the fans in the stands.
Speaker 7: There's ten thousand folks from Bergamo there and when they
Speaker 7: came back, they couldn't eve get out of the airport.
Speaker 7: It was mob.
Speaker 10: And then they they took a bus to the practice
Speaker 10: facility and that was also a mob. And at the field,
Speaker 10: so they're feeling great. There's Cardi Seciar goalie with the
Speaker 10: metal and it was just just a wonderful time.
Speaker 7: That's a big cup. By the way, two NBA championships
Speaker 7: were inside that cup.
Speaker 2: Steve, your approach to this club and the way this
Speaker 2: business has been run should be a case study in
Speaker 2: a lot of schools. I just want to go through
Speaker 2: some of that. So our audience really understands the background here.
Speaker 2: You've taken a chance on a lot of players that
Speaker 2: some clubs have left behind, including my own club Milan
Speaker 2: and the likes of CDK. You picked up Scamaka Lookman too.
Speaker 2: You've identified talent the likes of Coop Miners. This hasn't
Speaker 2: happened once, It's not happened twice. It's happened repeatedly. It's
Speaker 2: not an accident, Steve, where does that come from.
Speaker 10: I've got a lot of credits to Luca Percassi and
Speaker 10: the Italian team we have on the field there. They've
Speaker 10: done a fantastic job evaluating talent and really the mainstay
Speaker 10: of Atalanta is their academy. They invested heavily in the
Speaker 10: academy in the last fifteen years and that's paid a
Speaker 10: lot of dividends. Sol Being's a twenty one year old
Speaker 10: defenseman that starts the youngest one in.
Speaker 7: The entire Seria, and several others like that.
Speaker 10: And then I think really really taking players and putting
Speaker 10: them into a team orian sistem like the Celtics, and
Speaker 10: having them pass the ball and putting them the right spot.
Speaker 10: So the coaching staff, Luca Percassi. The whole organization gets
Speaker 10: credit for that, and you know it's been it's been
Speaker 10: been wonderful watch.
Speaker 7: You know.
Speaker 10: It also helped that we took a risk on Rests
Speaker 10: Finland two years ago and he's a very young player.
Speaker 10: I met him in stermn Gross Austria team that he
Speaker 10: played for, and he was eighteen and we paid I
Speaker 10: think a record sum for Roman record sums for eighteen
Speaker 10: year old that time. Twenty million in Manchester United came
Speaker 10: knocking the door of the season or we hated to
Speaker 10: lose them, but they paid.
Speaker 7: Eighty five million.
Speaker 10: Then we invested in Scamaca and several other players to
Speaker 10: improve the squad and it's been a magical season.
Speaker 3: Stave.
Speaker 2: Could we talk a little bit about that's one of
Speaker 2: the difference between Atalanta and the Celtics. When you have
Speaker 2: a star like Highland and you get Manchester United coming
Speaker 2: and with massive money, how difficult it is to retain
Speaker 2: that talent at a club like Atalanta, and whether that
Speaker 2: is still the future, is that inevitable, whether you're going
Speaker 2: to have to sell somebody stars again to continuously reinvent yourself,
Speaker 2: reinvent the club going forward.
Speaker 10: It's really not a different the NBAS and when you
Speaker 10: should win a championship, everybody watched your players, and so
Speaker 10: we think we can continue to prosper Atalanta with a
Speaker 10: mix of young players and a mix of players that
Speaker 10: are sold because they have great opportunities. I think we'll
Speaker 10: change that a bit. We'll play in European football. Before
Speaker 10: that win, we qualified for the Champions League and that
Speaker 10: win gives you a slide in the Champions legue as well,
Speaker 10: So that's going to be really helpful in our recruitment
Speaker 10: of players to improve the team.
Speaker 3: Further states, to really put you on the spot.
Speaker 2: Has it been harder to run a football club or
Speaker 2: a basketball team?
Speaker 7: They both have similar challenges. You know.
Speaker 10: It's all about getting and retaining top talent and keeping
Speaker 10: them motivated and trying to do everything that you can
Speaker 10: to make their lives easy so they go out of
Speaker 10: the pitch or go on the court and play hard.
Speaker 10: Try to do that in both organizations, it's very similar.
Speaker 10: Atalanta is kind of the can and do team with
Speaker 10: the great culture in Italy. It's the favorite team of
Speaker 10: many in Brahma Northern Lawn, but also also it's a
Speaker 10: favorite it's probably everybody's second favorite team in Italy where
Speaker 10: I just came back from Rome, and when we went
Speaker 10: to a hotel room, my wife and I found a
Speaker 10: large cake with an Atlanta symbol on it, So it's
Speaker 10: it's stem Atlanta fever in Italy.
Speaker 6: Right now, Steve, you are living pretty much everybody's dream.
Speaker 6: So congratulations for winning life. You have definitely done it.
Speaker 6: There is this idea, especially as you have two really
Speaker 6: successful team Celtics heading to their NBA finals, the second
Speaker 6: finals appearance in three seasons, how do you monetize this?
Speaker 6: And I know that that's not the reason why you
Speaker 6: do this. You're in this for the love of the
Speaker 6: sport and all the passion. Is it going direct to
Speaker 6: the distributors? Do you find it actually more compelling right
Speaker 6: now because you have the actual intellectual property in a
Speaker 6: way that has changed with new technological advancements.
Speaker 7: Absolutely.
Speaker 10: You know, when we purchased the Celtics back in two
Speaker 10: thousand and three, there was no Facebook or minimal social media,
Speaker 10: almost nothing that maybe email was the technology of the day.
Speaker 10: Now what we have is fans were counted back then
Speaker 10: in the hundreds of thousands.
Speaker 7: Now they're counting in the millions and possibly.
Speaker 10: Five hundred million a million for you know, global soccer
Speaker 10: teams and also the NBA which is prospering in Europe
Speaker 10: and China and all the world.
Speaker 7: So the landscap's really changed.
Speaker 10: These teams have become teams of the world, and the
Speaker 10: Boss of Celtics certainly have that reputation. It's in terms
Speaker 10: of monetization, it's just a virtual of circle. If you
Speaker 10: get more popular, you get great players, you have more
Speaker 10: great players, you get more fans, and it's great. It's
Speaker 10: a great place to be right now with being in
Speaker 10: the files a couple of years in a row.
Speaker 5: On that point, though, Steve, when you get a trophy,
Speaker 5: where does it immediately start to translate into money? Is
Speaker 5: it immediately in merchandise, ticket sales?
Speaker 7: The main area quickly translates into his sponsorship.
Speaker 10: So for the for the Celtics, just the building of
Speaker 10: the brand and having a championship team gets us more
Speaker 10: sponsorship income.
Speaker 7: When we bought the club especially.
Speaker 10: Was Demnimus and now it's in the tens of millions
Speaker 10: and approaching hundreds of millions. You know, brands want to
Speaker 10: be associated with the brand, like the Celtics and Atalanta
Speaker 10: as well.
Speaker 7: Getting the champions League gets up to lonch to more eyeballs.
Speaker 10: So having that championship culture and the brand and the
Speaker 10: reputation that that's what does it for the long term
Speaker 10: and creates value in.
Speaker 7: The short term.
Speaker 5: You went through what makes Atalanta so special and how
Speaker 5: you really transformed that team. What about the Celtics they're
Speaker 5: always winning? Why are they so good?
Speaker 7: Well, that's one of the better questions I've ever had.
Speaker 10: I guess I think they're good because we've had an
Speaker 10: incredible management team who lived by Wick Grosspec for twenty
Speaker 10: years now Rich Gothama President. It started out with Danny
Speaker 10: Age and Albrad Stevens in the basketball operation, a great coach.
Speaker 10: They all work together as a team and have been
Speaker 10: very smart and player trading and acquisitions.
Speaker 7: Same story in Atlanta.
Speaker 10: So it's all about tying, trying to get the top
Speaker 10: talent on the field and doing you know, in both organizations,
Speaker 10: we've lived doing more work and exploring.
Speaker 7: Using statistics, you know, using scouts.
Speaker 10: To see players twenty or thirty or forty times, following
Speaker 10: players from when they're eight years old into high school
Speaker 10: and college, and so that work ethic and kind of
Speaker 10: a will to win championship pervades each organization, and we've
Speaker 10: never been happier with those folks, and that's the great
Speaker 10: thing to see in both these situations. People were crying
Speaker 10: on the pitch at Atalanta after.
Speaker 7: That victory, and last night in Indiana, which is a
Speaker 7: great basketball town.
Speaker 10: You know, there was a huge celebration after that victory,
Speaker 10: and I'm just so happy for those players who work
Speaker 10: so hard. It's just really hard to win championships, and
Speaker 10: the NBA has had different champions the last five years.
Speaker 7: Same thing in Europe. It's just hard to get.
Speaker 10: Up every night and beat these great teams and overcome injuries.
Speaker 10: So I'm just pinched myself and hopefully the dree will
Speaker 10: continue next week.
Speaker 6: Steve, it sounded like you are a stabermetrics believer there
Speaker 6: for a second, so that seems to be part of
Speaker 6: what's going on. I will just say right now, you
Speaker 6: must be on such a high. Probably haven't slept in a.
Speaker 3: Couple of weeks.
Speaker 6: There is this question of what's next in terms of
Speaker 6: are you still interested in buying other teams? Is there
Speaker 6: still value out there or do you think that basically
Speaker 6: things have been bid up to such degree given all
Speaker 6: of the interests that pretty much the opportunities aren't there anymore.
Speaker 10: Well, when we bought the Celts in two thousand and three,
Speaker 10: the headline was a venture capitalist paid record price for
Speaker 10: team that was three hundred and sixty million, and now
Speaker 10: the values are counted in the four in the four billions.
Speaker 10: So that's been a question asked it every single year.
Speaker 10: I think the fact that this technology has changed.
Speaker 7: And sports are now global.
Speaker 10: In the fight for eyeballs between the new media such
Speaker 10: as Facebook and Apple and old media, the networks continues
Speaker 10: and everyone wants properties and get eyeballs, and the properties
Speaker 10: that get eyeballs are sports property.
Speaker 7: So I think there's still room to go up.
Speaker 2: Stay before we go, we've got to talk about a
Speaker 2: loss to the basketball world over a weekend. Bill Walton,
Speaker 2: we'd love a final word from you on his legacy.
Speaker 7: Yeah, I was devastated, Lesson. I'm so glad we won
Speaker 7: that game. I felt like Bill was looking down on it.
Speaker 7: I was very close to Bill in the twenty year
Speaker 7: run we had here.
Speaker 10: His son made you work for us at the Celtics,
Speaker 10: and I just texted Bill two weeks ago. He sent
Speaker 10: me his sons, I mean, I message about the winning
Speaker 10: the Europa Cup.
Speaker 7: Yes, he was watching that.
Speaker 10: He was an avid sports fan and avid Celtics fan,
Speaker 10: and everywhere he went he proselytized that what a great
Speaker 10: experience it was to be a Celtic and be a champion.
Speaker 7: So the world and the NBA has had a major.
Speaker 10: Loss in Bill russ In Bill Walton and two years
Speaker 10: before Bill Russell, two of the most iconic centers of
Speaker 10: the game. And we're going to really miss Bill, and
Speaker 10: hopefully our players will take extra heart into the games
Speaker 10: because of remembering Bill.
Speaker 2: We appreciate you, sir. Let's catch up soon. Congratulations for
Speaker 2: all your hard work and success. Boston Celtics co owner
Speaker 2: Steve Paluka. This is the Bloomberg Surveillance podcast, bringing you
Speaker 2: the best in markets, economics, and geopolitics. You can watch
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