Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg business
Speaker 1: Week Daily reporting from the magazine that helps global leaders
Speaker 1: stay ahead with insight on the people, companies, and trends
Speaker 1: shaping today's complex economy. Plus global business finance and tech
Speaker 1: news as it happens. The Bloomberg Business Week Daily Podcast
Speaker 1: with Carol Masser and Tim Stenebeck on Bloomberg Radio.
Speaker 2: I've been driving on.
Speaker 3: That man's went on, take a drive, put drive, Yeah,
Speaker 3: I drive.
Speaker 4: Can you just focus on driving, focus on the roads.
Speaker 5: Driving, because I'm asking you to.
Speaker 6: Just taking.
Speaker 7: Just drive baby, Let's see.
Speaker 8: This is the drive to the clothes. No, we don't
Speaker 8: need road on Bloomberg Radio.
Speaker 7: All right, everybody, just by eighteen nineteen minutes to go
Speaker 7: until we wrap up the trade on this Tuesday, November eleventh,
Speaker 7: Carol master Timstanovic live here in our Bloomberg Interactive Broker Studio.
Speaker 7: I mean, you look at the charts and we're definitely
Speaker 7: well off our worst levels of this session. But just
Speaker 7: up a hair, Tim, on the S and P five hundred.
Speaker 5: We just heard from.
Speaker 7: Bill and Alexis, and you still have the Nasdaq one
Speaker 7: hundred slightly lower, but again it's.
Speaker 5: Much more upbeat than where it was earlier in the session.
Speaker 9: I want to see what Eddie Gebora has to say
Speaker 9: about this. He's the co founder and CEO of Key
Speaker 9: Advisor's Wealth Management. The firm is more than nine hundred
Speaker 9: million dollars in assets under management. Eddie joins us here
Speaker 9: in the Bloomberg Interactive Broker's studio.
Speaker 3: It's good to see you. Thank you for having me.
Speaker 3: Welcome back.
Speaker 9: So the macro outlook here, Carol and I've been talking
Speaker 9: a lot about whether or not the government shutdown actually
Speaker 9: matters to equity investors. Jan van k right before the
Speaker 9: government shutdown, was on our program and he said, it
Speaker 9: doesn't matter. It doesn't affect the federal reserve and doesn't
Speaker 9: affect earnings.
Speaker 8: Do you agree?
Speaker 3: I do. As a matter of fact, I think this
Speaker 3: shutdown is a real bullish catalyst because I think the
Speaker 3: probability of a rate cut in December has gone up
Speaker 3: tremendously now because to be prior to the government shutdown,
Speaker 3: there was taught that the bond market wasn't really pricing
Speaker 3: in a December rate cut, and now the rate cut
Speaker 3: is about sixty percent because it is going to be
Speaker 3: a drag on economic data when it comes out, and
Speaker 3: so I think the FED is going to kind of
Speaker 3: err on the side of caution and go ahead and
Speaker 3: cut rates just because of the fears of a slowdown
Speaker 3: getting worse going into twenty twenty six. They don't want
Speaker 3: that on their watch. So I don't think it a
Speaker 3: big impact in regards to stocks. But what it does
Speaker 3: indirectly is increase that probability of the Santa Claus rally
Speaker 3: because the one thing I think that could end that
Speaker 3: would be if the FED does not cut in December.
Speaker 7: Having said that, you know, Churchery Secretary Scott Bessett has
Speaker 7: been out and about and he has said that he's
Speaker 7: going to be out and about over the next few
Speaker 7: weeks as he talks about the big, beautiful tax bill
Speaker 7: that was passed by Congress.
Speaker 5: What I'm curious about, Eddie is he kind of reed.
Speaker 7: When it comes to inflation concerns, and he talked about
Speaker 7: better times in twenty twenty six, So why would we need.
Speaker 5: A rate cut?
Speaker 3: So I think the rate cut is because we have
Speaker 3: this dynamical.
Speaker 7: Especially there's inflationary concerns and still pressures because they're going
Speaker 7: to pick the labor market and the economics slow down
Speaker 7: over where we are right now for an inflationary procedure
Speaker 7: the FED.
Speaker 3: That's correct the Fed, because inflation. I think the new
Speaker 3: normal has to be three percent. If the FED tries
Speaker 3: to get us down to two percent, it's going to
Speaker 3: be too late. We're not going to get there.
Speaker 5: But the isn't conceeded on that yet.
Speaker 3: They have not. However, I think last time when FED
Speaker 3: Chairman spoke, he talked about it being transitory, the tariff
Speaker 3: concerns in regards to inflation, and I think the new normal,
Speaker 3: they're going to be forced to pivot. I believe next
Speaker 3: year they will pivot and go away from that two
Speaker 3: percent number because at the end of the day, as
Speaker 3: long as we continue to grow economically, you focus more
Speaker 3: on growth, the inflation is not going to have a
Speaker 3: big of an impact. But if you just focus on
Speaker 3: inflation and cause growth to go down, you're going to
Speaker 3: have a double whamie where inflation is going to stay
Speaker 3: sticky and then potentially take us into a session.
Speaker 9: So you think under Fed shir J. Powell, the FED
Speaker 9: will abandoned the two percent goal.
Speaker 3: I do. I think that'll happen next year. Wow, Okay,
Speaker 3: they're going to be forced to because we're not going
Speaker 3: to get the two percent inflation. And if they stay
Speaker 3: tight with monetary policy, right this case shape the economy
Speaker 3: we have. They're killing small businesses and the bottom of
Speaker 3: the k the lower earners in this country are the
Speaker 3: ones that are getting hurt by this tighter monetarition.
Speaker 5: Well, is the FED killing the lower wrong?
Speaker 7: Or you know, as we had a great conversation with
Speaker 7: Henrietta Tre's Veda Partners yesterday and getting to this point
Speaker 7: that you have records on Wall Street, yet you have
Speaker 7: you know, one in eight Americans on food stamps. That
Speaker 7: is not a Republican or Democratic policy that is cumulative
Speaker 7: over the years. So her point was that there are
Speaker 7: a lot of companies out there, and she named names
Speaker 7: that aren't really paying workers a living wage. So, you know,
Speaker 7: to put the blame on the FED doesn't seem to
Speaker 7: make sense to me.
Speaker 3: Well in regards to the FED, when I look at
Speaker 3: it from an entrepreneurial perspective, these small businesses, they don't
Speaker 3: go out and issue bonds to raise capital like the
Speaker 3: large companies have the luxury of doing. They have to
Speaker 3: go to their local bank to raise capital to get
Speaker 3: monetary to get money from those for loans, and when
Speaker 3: you talk to them, the increase in interest rates have
Speaker 3: really hurt them. So they don't have the capital that
Speaker 3: the other companies do. So when we talk about the
Speaker 3: FED keeping monetary policy tight and hurting the smaller businesses,
Speaker 3: that's what we're talking about. Are they solely the blame,
Speaker 3: of course not. I'm not putting all the blame on
Speaker 3: the FED, but that's a big component is being able
Speaker 3: to get capital.
Speaker 9: But the FED still will have a duel mandates stable
Speaker 9: prices and maximum employment. So from the stable price's perspective,
Speaker 9: what is the new two percent?
Speaker 3: So I think where we are right now two and
Speaker 3: a half to three percent on core, I think they
Speaker 3: can live with that at the because they've already been
Speaker 3: cutting rates when we are not down the two percent.
Speaker 3: They did a fifty basis point rate cut last year.
Speaker 3: They're doing rate cuts again now. So you can make
Speaker 3: the argument that they've already a ban in that, because
Speaker 3: why would they be cutting rates if they're not abandoning
Speaker 3: the two percent mandate?
Speaker 6: I don't know.
Speaker 3: To be preemptive, I think what there is.
Speaker 9: I mean some might say maybe they're concerned about the
Speaker 9: labor market.
Speaker 3: That's it. And this is why I say they're in
Speaker 3: a really tough spot because now they have to pick.
Speaker 3: Are they going to pick inflation?
Speaker 7: They flowing growth that they were concerned about, so doing
Speaker 7: something to kind of juice it a little bit.
Speaker 3: So that's why I think there they don't want to
Speaker 3: be abandoned the two percent, but they're going to be
Speaker 3: forced to because I think they're going to pick the
Speaker 3: labor market, and I think that's wise. I'd rather than
Speaker 3: pick the labor market and try to help it from
Speaker 3: slowing to a point where we go into a recession,
Speaker 3: so that way we can grow economically and hopefully continue
Speaker 3: to prosper here.
Speaker 7: But how do you grow when you have you know,
Speaker 7: I'm kind of obsessed with this story, and we're going
Speaker 7: to talk about it a little bit later on. But
Speaker 7: Walgreen's no longer giving many of its retail workers paid
Speaker 7: vacation time for Thanksgiving, Christmas, another major holidays company looking
Speaker 7: to cut costs under their new owners. Like it does
Speaker 7: seem like there is still a squeeze.
Speaker 5: On workers and wages.
Speaker 3: The unfortunate reality is, and this is a problem in
Speaker 3: this country. We recognize as we talk about it all
Speaker 3: the time, when it goes back to the K shaped
Speaker 3: economy that the wealthy, the top fifty percent in this
Speaker 3: country are continuing to do really well, and they're going
Speaker 3: to do well whether the Fed cuts or doesn't cut.
Speaker 3: So I think the focus on the FED and companies
Speaker 3: and businesses is the bottom part of the K. We're
Speaker 3: going to be prosper more if the entire economy is
Speaker 3: doing well.
Speaker 7: But doesn't policy have a responsibility too in terms of
Speaker 7: helping out the economy. We talk about the Treasury Secretary
Speaker 7: kind of on a tour to talk about the big
Speaker 7: beautiful bill. I mean, what is there for you know,
Speaker 7: Americans at large. I think this stem business or you know,
Speaker 7: there's lots of tax breaks, but it seems like for
Speaker 7: bigger corporations.
Speaker 3: So I think this stems from years in the making
Speaker 3: of the mouse and massive debt that our country has
Speaker 3: put ourselves into. That's ultimately what causes inflation, is you.
Speaker 7: Overstepending bill creates more debt too, right, it does.
Speaker 3: I mean every administration one ups the other. I mean
Speaker 3: the amount we have thirty plus trillion dollars of debt
Speaker 3: that did not happen overnight and so we have had
Speaker 3: a real fiscal problem and that's ultimately what's going to
Speaker 3: break the back of this market is the bond market
Speaker 3: at some point in time is going to say, you
Speaker 3: know what, I don't care what you do monetarily wise,
Speaker 3: the ten year is going to go through five percent.
Speaker 7: So what does that break in the market look like?
Speaker 7: So what does it mean for equities? And just got
Speaker 7: about thirty thirty five seconds here.
Speaker 3: This is an amazing bull run far, it's far from over.
Speaker 3: But when it does pop, this is a bubble. It's
Speaker 3: going to be ugly, and you need to be able
Speaker 3: to sell and pivot. We are not in a buy
Speaker 3: and hold strategy, and I don't think individual investors should.
Speaker 3: Large institutions are tactical. Every family, hard work and American
Speaker 3: family should have a tactical strategy as a way to
Speaker 3: protect against when this bubble does pop.
Speaker 7: And the bubble is going to pop because of debt,
Speaker 7: or because of the AI spend or all of it.
Speaker 3: It's going to be all of it, all of It's
Speaker 3: going to be a combination of it all and then
Speaker 3: the bond market will speak very loudly.
Speaker 7: So then administrative stration policies are our supportive or no, I.
Speaker 3: Think they're supportive of economic growth going into twenty twenty six.
Speaker 3: You know they are. That is our opinion. And look
Speaker 3: as a business owner myself, we pay our teams very well.
Speaker 5: Okay, well, that's good to know.
Speaker 7: Eddie Gebor, co founder and cefkey Advisor's Wealth Management.
Speaker 9: Stay with us. More from Bloomberg Business Week Daily coming
Speaker 9: up after this.
Speaker 1: You're listening to the Bloomberg Business Week Daily podcast. Catch
Speaker 1: us live weekday afternoons from two to five e's during
Speaker 1: the Listen on Applecarplay and Android Auto with the Bloomberg
Speaker 1: Business app, or watch us live on YouTube Now.
Speaker 7: As the US Treasury Secretary looks to highlight the administration policy,
Speaker 7: whether it's inflation or other aspects of their policies, we
Speaker 7: continue to live in a world that really lacks US
Speaker 7: government data. We did get one piece of private data today.
Speaker 7: ADP research suggested that the labor market slowed in the
Speaker 7: second half of last month. Traders, now we know, have
Speaker 7: relied on private data as the government closure tip has
Speaker 7: delayed the release of official statistics.
Speaker 9: Meantime, the government now and it's well known to the
Speaker 9: Bloomberg audience, who is with us right now Neil data
Speaker 9: partner and head of economics at Renaissance Macro Research. He
Speaker 9: joins us from New Jersey. Neil, good to have you
Speaker 9: back on the program. I want to start exactly there,
Speaker 9: and with regard to the shutdown, where we are longest
Speaker 9: shutdown on record, but also the lack of data, the
Speaker 9: picture that we're kind of piecing together from various disparate
Speaker 9: parts show that a labor market is weakening. In your view,
Speaker 9: how weak is it?
Speaker 3: You know?
Speaker 10: I tend to concern myself more with the direction as
Speaker 10: opposed to the magnitude, to be honest, but I think
Speaker 10: I think we're probably at the Fed's estimate for the
Speaker 10: unemployment rate for year end already, so a couple of
Speaker 10: months ahead of schedule. So that's not necessarily a good thing.
Speaker 10: So my sense is that the speed of the weakness has,
Speaker 10: you know, maybe picked up a little bit. But I
Speaker 10: think we're probably at four and a half percent already
Speaker 10: on the unemployment rate.
Speaker 8: Okay, if it were to.
Speaker 10: Come out, and you know, I think you know what
Speaker 10: people need to kind of answer is why do you
Speaker 10: think that stops? And what gets it to stop? Because
Speaker 10: I think when you look at it bottoms up like
Speaker 10: which you know, if you kind of go industry by industry,
Speaker 10: it's really hard to see where the growth and employment
Speaker 10: is coming from at the moment.
Speaker 7: Well, and on that, you know, I'm thinking about, Neil.
Speaker 7: Great to be talking with you again, the dual mandate, right,
Speaker 7: and so I'm just wondering if we continue to see weakness,
Speaker 7: you know, in the labor market. And then we just
Speaker 7: talked about Treasury Secretary Scott Best and kind of deflecting
Speaker 7: when it came to inflation, I sees out and about
Speaker 7: talking about the administration's policies. I mean, we've heard from
Speaker 7: Fetcher J. Powell about the struggles on both of those mandates.
Speaker 7: Do you think it's going to be a bit of
Speaker 7: a squeeze for the Fed, for the US economy, for
Speaker 7: all of us in terms of weaker labor market staying
Speaker 7: that way an inflationary is kind of staying that way.
Speaker 10: Well, I don't. I mean, my own view of it
Speaker 10: is that I don't view the trade offs as nearly
Speaker 10: as onerous as as the FED does. I mean, I
Speaker 10: think there's more downside risk to the labor market than
Speaker 10: there is upside risk to inflation. You know, at the
Speaker 10: end of the day. Inflation is three percent this year,
Speaker 10: it was three percent last year. The difference between this
Speaker 10: year and last year is tariffs. So that would tell
Speaker 10: me what that underlying inflation is probably slowing. And you
Speaker 10: know the fact that it's really hard to make a
Speaker 10: case for why tariffs are anything more than a one
Speaker 10: off lends support to the idea of the FET should
Speaker 10: continue to cut interest rates here in terms of and remember,
Speaker 10: you know, to me, the big story is that employment
Speaker 10: tends to evolve potentially in nonlinear ways. It kind of
Speaker 10: you know, once it gets once like an increase in
Speaker 10: the unemployment rate really gets going to keep ongoing. And
Speaker 10: that's why you have this sort of you know, it's episodic, right,
Speaker 10: I mean you see big spikes in the uneployment rate
Speaker 10: at times, right, Yeah, that's not really the case with inflation.
Speaker 10: And so in other words, inflation tends to move in
Speaker 10: a more linear way, and you know, particularly outside of
Speaker 10: commodities and unemployment, that's not necessarily the case. It tends
Speaker 10: to be more nonlinear in fashion. And I think that's
Speaker 10: what you know, frankly, the FED and you know, the
Speaker 10: the markets might be missing is the sort of downside
Speaker 10: kind of growth tail risks associated with with the labor markets.
Speaker 9: What if the Supreme Court comes back and says the
Speaker 9: tariffs are not legal as they're implemented, Does that change
Speaker 9: your view?
Speaker 10: No? I mean I think if you if you think
Speaker 10: that the Supreme Court is going to be the institution
Speaker 10: in Washington, d c. With the last word on tariffs,
Speaker 10: I think you're I mean, I'd like to have some
Speaker 10: of what you're smoking.
Speaker 9: Well, is that is that because you think there are
Speaker 9: other There are other avenues for the Trump administration department.
Speaker 10: Absolutely, the Congress. I mean, this is really about Congress,
Speaker 10: and Congress is frankly a lazy bunch, okay, And they've
Speaker 10: delegated a lot of their tariff authority to the White House.
Speaker 10: And there's a vast legal architecture from which the president
Speaker 10: can draw from to prosecute a trade war. And you know,
Speaker 10: I think immediately he could probably do a temporary fifteen
Speaker 10: percent baseline tariff, and he can do that for six months,
Speaker 10: and that will, you know, sort of act as a bridge,
Speaker 10: you know, to get towards national security tariffs. So I
Speaker 10: don't think we're out of the woods on tariffs because
Speaker 10: the Skotis rules it one way or the other. I mean,
Speaker 10: it's yeah, I think that's that's sort of wishful thinking
Speaker 10: in my opinion.
Speaker 5: Hey, couple of stories I just want to bring in.
Speaker 7: One was from last week Neil, and it was about
Speaker 7: US consumer sentiment telling to near the lowest on record,
Speaker 7: and part of it was the government shut down weighing
Speaker 7: on the economic outlook, but also high prices sering views
Speaker 7: about personal finances. There were also concerns about the labor
Speaker 7: market continuing to weaken in the future.
Speaker 5: We got that from that report.
Speaker 7: And then we just had a story that our Alexis
Speaker 7: Christophers mentioned about Walgreens no longer giving many of its
Speaker 7: retail workers paid vacation time for Thanksgiving, Christmas another major
Speaker 7: holiday holiday. Is the company looking to cut costs under
Speaker 7: new owners. Like, I just keep thinking about this K
Speaker 7: shaped economy and there's just so many people, and I
Speaker 7: think about the snap benefits, how many people are on
Speaker 7: food stamps and getting assistants, Like this economy doesn't feel great,
Speaker 7: and yet we have records on Wall Street and we
Speaker 7: have earnings that seem to be okay, and the AI
Speaker 7: spend is out there still in a big way.
Speaker 5: Even if there's been some questions over the last week
Speaker 5: or so.
Speaker 7: So I don't know, from an economic perspective, are we
Speaker 7: in a good economy or no.
Speaker 10: I mean I think we're in a very in a
Speaker 10: deeply imbalanced economy, Carol. And it's been that way for
Speaker 10: a while. Yeah, you know, I've and I recently wrote
Speaker 10: a piece for your colleague Joe Wisenthal on odd Lots,
Speaker 10: you know, just sort of characterizing the The economy is
Speaker 10: really three different things, right. It's you have the housing market,
Speaker 10: which I think is in recession, and you have the consumer,
Speaker 10: which is kind of, let's say, in the mid middle,
Speaker 10: and then you have AI, which is you know, booming.
Speaker 10: And when I go to client meetings and I give
Speaker 10: my sort of outlook on the economy, you know, the
Speaker 10: pushback that I get is kind of what you were describing, right,
Speaker 10: it's you know, AI, it's stocks, it's you know, the
Speaker 10: high end consumer. And people talk about that frankly, as
Speaker 10: if those are three separate things, but they're really deriudive
Speaker 10: of the same thing. And I think that's something to
Speaker 10: keep in mind here. The other thing I would say
Speaker 10: is that, you know, we talk a lot about the
Speaker 10: resilient consumer. We hear a lot about you know, never
Speaker 10: bet again the US consumer. The truth is, the consumer
Speaker 10: never actually gives you a signal ahead of an economic slump.
Speaker 7: Right.
Speaker 10: If you go back historically, consumer spending has never ever
Speaker 10: declined in the quarters leading up to broader economic downturn.
Speaker 5: Interest.
Speaker 10: Sometimes in an economic downturn, consumer spending actually expands, right, Like,
Speaker 10: go back to two thousand and one, right, Like, So
Speaker 10: that's not unusual either. So if you're waiting on the
Speaker 10: consumer to give you a tell, you've probably waited too long, right,
Speaker 10: I mean, consumption has a way of amplifying downturns. But
Speaker 10: I would just say, you know, what's been interesting to
Speaker 10: me is just how quick Yeah, Like the labor markets
Speaker 10: have evolved the way you've expected. Right, It's come for
Speaker 10: the young people first, and I think it's going to
Speaker 10: come for the affluent next.
Speaker 7: Interesting stuff out, Well, this is something we talked about
Speaker 7: the three a's in that Trump economy story. Neil Data
Speaker 7: good to connect again, Come back soon, partner and head
Speaker 7: of economics at Renaissance Macro Research with.
Speaker 9: Us more from Bloomberg Business Week Daily coming up after this.
Speaker 1: You're listening to the Bloomberg Business Week Daily Podcast. Catch
Speaker 1: us live weekday afternoons from two to five e's during
Speaker 1: Listen on Apple Karplay and Android Auto with the Bloomberg
Speaker 1: Business app, or watch us live on YouTube.
Speaker 9: Well, a record setting forty two day US government shutdown
Speaker 9: onopath to end as soon as today.
Speaker 3: We're thinking about that.
Speaker 9: But what's really on our minds is the functionality of
Speaker 9: US political parties, in particular, what is happening with Democrats,
Speaker 9: who some or many have said struggle with a single message,
Speaker 9: especially after some of those monitorates broke away.
Speaker 5: Yeah, it's like got some folks scratching their heads. This
Speaker 5: is after they broke away.
Speaker 7: They dropped their demand to renew expiring Affordable Care Acts
Speaker 7: subsidies ACA, and instead security Republican promise to vote on
Speaker 7: extending Obamacare insurance premium credits by mid December.
Speaker 9: Josh Green is Bloomberg Business Week national correspondent. He's the
Speaker 9: author of several books, including the number one New York
Speaker 9: Times bestseller Devil's Bargain, Steve Bannon, Donald Trump, and The
Speaker 9: Storming of the Presidency. He joins us from our Washington
Speaker 9: DC Bureau. Democrats Josh crossing the aisle to end the shutdown?
Speaker 9: Was it a quote terrible mistake, a Senator Elizabeth Warren
Speaker 9: told reporters. Governor Gavin Newsom called it, quote pathetic or
Speaker 9: is this smart ahead of the min terms? This is
Speaker 9: kind of a narrative that's emerging now. Republicans will own
Speaker 9: the ACEE, A premiums going up that'll affect a lot
Speaker 9: of their constituents.
Speaker 3: What's the chatter?
Speaker 4: Well, I think the overwhelming sentiment of the Democrat grass
Speaker 4: roots is anger and confusion that Democrats who've just come
Speaker 4: off the sweeping election victory, who polls showed were not
Speaker 4: being blamed for a shutdown that they in fact had caused,
Speaker 4: why they would suddenly decide to throw in the towel
Speaker 4: without really much much warning. I think is upset an
Speaker 4: awful lot of people, mostly at the grassroots level, but
Speaker 4: also from a lot of the politicians, especially ones like
Speaker 4: Gavin Newsom who maybe have their eye on the White
Speaker 4: House and are especially attuned to grassroots sentiment. But I
Speaker 4: think that there's another kind of quieter realist wing of
Speaker 4: the party that looked in the mirror and said, look,
Speaker 4: there's really no clear winning exit strategy.
Speaker 8: We've got to pull the plug at some time, so
Speaker 8: let's do it.
Speaker 4: Now before things get really bad for federal workers, before
Speaker 4: the entire US airline industry grinds to a halt, maybe
Speaker 4: on Thanksgiving weekend and just turn around and decided to
Speaker 4: kind of rip off the band aid. Now that's caused
Speaker 4: a lot of anger, but it's not necessarily clear that
Speaker 4: long term that this is going to.
Speaker 8: Be the wrong move.
Speaker 7: What's that like thinking or strategizing about, like, Okay, what
Speaker 7: party gets blamed? And you know, I was thinking about
Speaker 7: this when I was on a TSA line the government shutdown,
Speaker 7: and I look up at those screen screens, and who
Speaker 7: do I see Christy Nome, you know, playing over and
Speaker 7: over on a loop, And I just wonder the general public,
Speaker 7: like who do they blame? And so it was there
Speaker 7: a feeling that it was the Republican shutdown?
Speaker 5: Was it both the parties? How was it playing out?
Speaker 4: I mean, it's interesting dynamic over the last like three
Speaker 4: or four government shutdowns happened in pretty short order. Is
Speaker 4: that services start shutting down, national parks start shutting down,
Speaker 4: you have a problem with airlines. Everybody says, well, gee,
Speaker 4: who's to blame? And it's pretty clear whichever party shut
Speaker 4: down the government gets blamed by the other party. Because
Speaker 4: everybody in that party is on the same page, they
Speaker 4: can kind of point to the same bad guy. I
Speaker 4: think the tricky thing this time around was that President
Speaker 4: Trump didn't really seem to be all that interested in
Speaker 4: the shutdown for like the.
Speaker 8: First two or three weeks.
Speaker 4: He was much more interested in knocking down the east
Speaker 4: wind in the White House, building up his new ballroom,
Speaker 4: and so you had this kind of mixed message from
Speaker 4: Republicans where some Republicans in Congress were trying to run
Speaker 4: the ordinary playbook of blaming Democrats, but Trump wasn't really
Speaker 4: on that page, wasn't really doing that, and it's a
Speaker 4: much more interesting exciting story to write about this grand
Speaker 4: new ballroom that's apparently going up in the White House,
Speaker 4: and so nobody really focused on who was to blame,
Speaker 4: and when things starting going wrong, they just kind of
Speaker 4: naturally blamed the president and the party that controls Congress.
Speaker 7: You know, Josh, I do wonder like did things like
Speaker 7: you know, tearing down the ballroom, showing off a new
Speaker 7: marble bathroom at the White House that the President has,
Speaker 7: having a great Gatsby party for Halloween exactly.
Speaker 5: That was really over the top.
Speaker 7: If you saw some of the images, and I don't
Speaker 7: want to be political, but I do wonder this is
Speaker 7: a president who said, like, I am here for you,
Speaker 7: and I'm going to take actions that are here for
Speaker 7: more Americans.
Speaker 5: That's you know.
Speaker 7: At the same time, we're talking about one in eight
Speaker 7: who aren't going to get food stamps because of the
Speaker 7: government shutdown. So I'm just curious how that plays politically.
Speaker 7: Was that getting noticed that kind of gag, It definitely was.
Speaker 4: I think it does two things. I mean, going back
Speaker 4: to sort of that, you know, how a party deals
Speaker 4: with a shutdown. If all Republicans had been unified from
Speaker 4: day one, including President Trump saying, look, the Democrats did this,
Speaker 4: it's their fault, blame them, I think things would have
Speaker 4: ended much earlier. But like as we said, that didn't happen.
Speaker 4: Trump was more concerned with other things, and when he
Speaker 4: did begin to get upset about the shutdown, instead of
Speaker 4: blaming Democrats, he started getting angry at Republicans and told
Speaker 4: them they ought to eliminate the filibuster, which would be
Speaker 4: another way to open the government. But it's not something
Speaker 4: that Republicans wanted to do. And so as this fight
Speaker 4: was going on, you do see these images on TV
Speaker 4: on social media of the redecorations in the White House,
Speaker 4: of these glitzy parties at mar A Lago. Meanwhile, you know,
Speaker 4: food stamps are being frozen. The White House is out
Speaker 4: saying no, we don't want to pay these during the
Speaker 4: government shutdown. Democrats and states are having to take them
Speaker 4: to court. So it really did create a political problem
Speaker 4: that polls show pretty clearly was hurting President Trump's approval
Speaker 4: rating and hurting Republicans in Congress. And that's one reason
Speaker 4: why Democratic kind of grassroots and a lot of lawmakers
Speaker 4: were so upset that moderates in their caucus decided to
Speaker 4: pull the plug and in the shutdown early because they
Speaker 4: didn't think that it was hurting Democrats.
Speaker 8: They thought it was hurting their opponents.
Speaker 9: I think it was Mike Allen and Axios over the
Speaker 9: weekend who wrote a commentary about how it could be
Speaker 9: a challenge for the Trump administration to present themselves as
Speaker 9: fighting for the little guy or fighting for the middle
Speaker 9: class or the working class if they're not focused on
Speaker 9: the ACA subsidies or on funding SNAP during this time.
Speaker 9: I wonder if that message will resonate with voters going
Speaker 9: into the midterms in twenty six.
Speaker 4: Yeah, I think that's a really smart point. I think
Speaker 4: it might resonate even sooner. I did a Business Week
Speaker 4: newsletter yesterday just kind of my gloss on the shutdown
Speaker 4: and what was and what it was not accomplished. And
Speaker 4: I do think that one of the things that Democrats accomplished,
Speaker 4: even though so many of them are unhappy about the
Speaker 4: way things ended, They've added salients to this issue of
Speaker 4: rising Obamacare premiums. Originally, Democrats said were only going to
Speaker 4: reopen the government if Trump and Republicans agree to fund
Speaker 4: these provisions, it will help extend subsidies, keep insurance affordable.
Speaker 4: Republicans don't want to do that. They didn't do that,
Speaker 4: so even though Republicans are Democrats weren't able to win
Speaker 4: that is a concession to reopen the government. It's been
Speaker 4: on the front pages of newspapers. It's been in the news.
Speaker 4: I think the American public is very aware that these
Speaker 4: premiums are about to rise, and I think partly because
Speaker 4: of the spotlight that the shutdown shown on this issue.
Speaker 4: If in when those premiums do rise, the American people
Speaker 4: are largely going to bring Trump and Republicans and Essentially,
Speaker 4: it's going to be up to them to kind of
Speaker 4: find the solution, which isn't exactly how Democrats wanted things
Speaker 4: to end, but it could turn out to be that
Speaker 4: public pressure in the event of these rising premiums actually
Speaker 4: does produce some.
Speaker 8: Sort of solution that Democrats could get behind.
Speaker 7: So, you know, Josh, when the Republicans and the Democrats
Speaker 7: that went over to the other side are basically, you know,
Speaker 7: broke away and got this Republican promise to vote on
Speaker 7: extending Obamacare insurance premium credits by mid December, So politically
Speaker 7: it will happen or could Republicans back out? Just got
Speaker 7: about forty seconds here.
Speaker 4: I think it's very unlikely to happen. I mean, Republicans
Speaker 4: have been adamant that they're not going to vote to
Speaker 4: support these things. So you can have a vote, The
Speaker 4: vote will lose, and that will probably be the end
Speaker 4: of it, at least in the short term. If the
Speaker 4: vote were to win in the Senate, it would go
Speaker 4: to the House houses controlled by Republicans, and they've said
Speaker 4: they might not even take it up. But eventually, if
Speaker 4: interns premiums do go up and just ordinary people begin
Speaker 4: to react badly, to that, including Republican districts that could
Speaker 4: put pressure on Republicans and Trump to finally have to
Speaker 4: do something about it.
Speaker 5: And there's a record right of people of how they voted.
Speaker 8: Absolutely yeah.
Speaker 4: And ultimately, look, Republicans control Congress, they control the White House.
Speaker 8: The buck stops with them.
Speaker 4: If there needs to be a solution, they're ultimately going
Speaker 4: to have to come through and deliver one.
Speaker 5: All right, great stuff as always, Josh, Thank you so much.
Speaker 5: Josh Green.
Speaker 7: He is Bloomberg BusinessWeek National correspondent. Be sure to check
Speaker 7: out all of his writings. They are on the Bloomberg
Speaker 7: terminal and at Bloomberg dot Com.
Speaker 5: Really appreciate it. Order his books too, his book listen.
Speaker 7: He's the guy you want to talk to, like understood
Speaker 7: how President Trump got to the White House the first
Speaker 7: time around, and just continuing to report it all out.
Speaker 9: Josh Green out of Washington, DC. Stay with us more
Speaker 9: from Bloomberg Business Week Daily coming up after this.
Speaker 1: You're listening to the Bloomberg Business Week Daily Podcast. Catch
Speaker 1: us live weekday afternoons from two to five e's during
Speaker 1: the Listen on Applecarplay and Android Auto with the Bloomberg
Speaker 1: Business app, or watch US live on YouTube jay.
Speaker 7: On Stock and Company that we wanted to highlight it
Speaker 7: is the number one gator in the S and P
Speaker 7: five hundred. Today it's up about nine percent. We're talking
Speaker 7: about paramount Skydance shares rallying. In fact, they've been up
Speaker 7: more than twelve percent at their intra day high today
Speaker 7: after the newly merged company raised its target for job
Speaker 7: cuts and cost saving measures. As you know, the media
Speaker 7: and entertainment company has also been trying to buy rival
Speaker 7: Warner Brothers Discovery. It also said in a letter to
Speaker 7: shareholders we talked about this a little bit, that it
Speaker 7: plans an additional sixteen hundred person workforce reduction and did
Speaker 7: lay out a specific goal to achieve at least three
Speaker 7: billion dollars ten in cost saving.
Speaker 9: Results the company and its place in the world of
Speaker 9: media and its future too. Bloomberg Intelligence Senior media analyst
Speaker 9: Githa Ranganathen joins us. She's at Bloomberg Intelligence headquarters in Princeton,
Speaker 9: New Jersey. Getha is today's move before we get to
Speaker 9: the big pictures, Today's move all the result of that
Speaker 9: least at least three billion dollars in cost savings is
Speaker 9: that why investors are happy today.
Speaker 6: Yeah, absolutely, Tim.
Speaker 2: So you know, the three billion cost savings target, which
Speaker 2: was upward guidance, a revision from the two billion, basically
Speaker 2: caused them to lift their even target for twenty twenty six.
Speaker 2: I mean when I say lift, it's much higher than
Speaker 2: what consensus was expecting. So consensus was expecting around three
Speaker 2: point one billion for twenty twenty six. They came in
Speaker 2: a three point five billion, So I think that really
Speaker 2: gave investors some cost to cheer and that's that's driving
Speaker 2: the stock up wards today.
Speaker 9: Well, we should just remind everyone. Carol always points this
Speaker 9: out that you know that includes an additional sixteen hundred
Speaker 9: person work force reduction, So I would imagine there are
Speaker 9: people within the organization that are worried about not having
Speaker 9: a job in the near future. Do we know at
Speaker 9: all where these layoffs will hit.
Speaker 2: So these layoffs, actually the sixteen hundred are going to
Speaker 2: be a part of their Latin American operation, so they're
Speaker 2: going to do some of the divestitures of their Latin
Speaker 2: assets in Chile in Argentina, and a lot of those
Speaker 2: job cuts are actually associated with that.
Speaker 7: All right, So you know what I keep thinking is
Speaker 7: this the media company to watch right now.
Speaker 6: It definitely is Carol.
Speaker 2: So, you know a lot of what David Ellison and
Speaker 2: his team laid out yesterday. I mean, they came across
Speaker 2: as a really strong team with a very you know,
Speaker 2: they have a game plan, they know what they're doing.
Speaker 2: But at the end of the day, and if you
Speaker 2: just look at the playbook, right you guys mentioned the
Speaker 2: cost synergies, which are a big part of you know,
Speaker 2: the forward plan. But if you just kind of think
Speaker 2: back a few years, this is so reminiscent exactly what
Speaker 2: Warner Brothers Discovery did.
Speaker 6: This was their playbook.
Speaker 2: They came in with, you know, the merger of Warner
Speaker 2: Brothers and Discovery. They kind of kept raising their synergy targets.
Speaker 2: But at the end, what happened was everything fell apart
Speaker 2: because they couldn't really kind of get to the initial
Speaker 2: ebidat target that they had laid out up until this
Speaker 2: year of course, when they've you know, kind of came
Speaker 2: out with their whole plan to separate the company. So
Speaker 2: one doesn't really know what's going to happen with Paramount Skuydew. So, yes,
Speaker 2: things looked pretty promising as laid out by the management
Speaker 2: team yesterday. They obviously are not afraid to make big,
Speaker 2: bold bets when it comes to content. We saw them
Speaker 2: They're ready to spend about eight billion dollars on UFC content.
Speaker 2: They obviously are more than willing to go after Warner
Speaker 2: Brothers Discovery. But at the end of the day, it's
Speaker 2: going to come down to, you know, execution. Are they
Speaker 2: going to actually be able to execute? And even if
Speaker 2: they do execute, is it going to be enough? You know,
Speaker 2: those are really the questions because I'm not sure. Yes,
Speaker 2: they might be able to drive up their streaming subscriber
Speaker 2: base a little bit. They have about eighty million right now,
Speaker 2: but then when you're competing with Netflix, which has well
Speaker 2: over three hundred and ten million, again, what do you do?
Speaker 2: You need something transformative? So you do need that Horner
Speaker 2: Brothers Discovery acquisition.
Speaker 7: Well, I do think about kind of where media companies
Speaker 7: are going Gita. You know, who would have thought at
Speaker 7: one point that the major networks would ever be challenged?
Speaker 7: Who would ever thought, you know, ESPN went through its
Speaker 7: own like we've seen things that were juggernauts or given that,
Speaker 7: it's just not the way it is anymore.
Speaker 5: You know, so many of us are watching YouTube.
Speaker 7: Television or watching us things on our phone, or you know,
Speaker 7: we don't care what time things are on anymore. Like
Speaker 7: it's just been turned upside down. Look at the news business,
Speaker 7: how much that has changed. And I do think about,
Speaker 7: you know, what is the media company of the future.
Speaker 2: The media company of the future is one that can
Speaker 2: be agile, that can be nimble, you know, and that's
Speaker 2: exactly what Netflix has been able to do in terms of,
Speaker 2: you know, making They did make the content investments when
Speaker 2: they need to, when they needed to make it, but
Speaker 2: then they were able to pair back when they realized that,
Speaker 2: you know, that couldn't go on forever and when they
Speaker 2: were burning through through free cat right. The content company,
Speaker 2: or rather the media company of the future is one
Speaker 2: that can you know, adapt of the you know, we
Speaker 2: have to make investments in AI. We're seeing that AI
Speaker 2: is going to really kind of change the game when
Speaker 2: it comes to recommendations, when it comes to kind of
Speaker 2: tweaking algorithms, and even when it comes to cutting down
Speaker 2: on content costs. We're already seeing this play across the board,
Speaker 2: you know, in terms of post production cost it can
Speaker 2: kind of lead to a significant reduction. We're thinking at
Speaker 2: least baseline ten percent, and so a company that's able
Speaker 2: to achieve that and is ready for that is going
Speaker 2: to you know, really position itself for the future pretty well.
Speaker 9: Back to the idea of what assets the company might
Speaker 9: need to add in the near future. David Allison on
Speaker 9: the call GEITHA said he couldn't comment on speculation around
Speaker 9: deal making, but said, there are no.
Speaker 3: Must haves for us. Do you agree with that?
Speaker 5: I see just not trying to show his hand.
Speaker 9: Like, are there some assets or must have for this company?
Speaker 6: I think so, Tim.
Speaker 2: I mean again, they did, you know, full credit to
Speaker 2: the to the management team. They do seem to have
Speaker 2: a good strategy. They seem to be very bold and ambitious.
Speaker 2: There's absolutely no doubt about it. They are not going
Speaker 2: to just be okay with the status quo. That is
Speaker 2: absolutely clear. But you know, in their current configuration, I
Speaker 2: just don't think it's going to cut it when they
Speaker 2: have to compete with the likes of a Netflix or
Speaker 2: an Amazon or at Disney.
Speaker 6: They do need a better studio.
Speaker 2: Yes, they're you know, they're committing to basically doubling their
Speaker 2: theatrical output. But if you just kind of look at
Speaker 2: the you know, the performance of the studio over the
Speaker 2: past so many years it has clearly been such a laggard. So,
Speaker 2: you know, getting some of those Warner brother titles I
Speaker 2: think is transformative. They do need something for their streaming
Speaker 2: assets as well. Again, they're they're doing a lot of
Speaker 2: you know, things that they can you know, again in
Speaker 2: the in the current format. But again they need a
Speaker 2: lot more content. You know, the UFC is good, the
Speaker 2: NFL they have, but I don't think, you know, that's
Speaker 2: good for some amount of customer acquisition.
Speaker 6: I just don't think it's in.
Speaker 7: Now, hey swallowing Warner Brothers if indeed Warner Brothers Discovery,
Speaker 7: if indeed that gets done, I mean I think we
Speaker 7: all keep being like, well, wait, Paramitt scat Sky Answers
Speaker 7: is about an eighteen point three billion dollar market cap,
Speaker 7: Warner Brothers is about almost fifty seven billion. I mean,
Speaker 7: it's going to be a lot of debt, right, we
Speaker 7: see that typically in media companies.
Speaker 5: Is it manageable?
Speaker 6: I think it is manageable.
Speaker 2: I mean we have to remember here that you know,
Speaker 2: this is a little bit of an unusual situation. This
Speaker 2: is David Ellison. You know, his father is one of
Speaker 2: the richest people in the world, so I think financing
Speaker 2: might not necessarily I mean, yes, we've heard all these
Speaker 2: different reports of you know, the Paramount team kind of
Speaker 2: looking for private equity partners. We really don't know exactly
Speaker 2: how the financing structure is going to be, but I think,
Speaker 2: you know, in the grand scheme of things, and we've
Speaker 2: seen this even with the with the Warner Brothers Discovery
Speaker 2: you know management team that yes, they do have to
Speaker 2: take on a lot of debt, but I think I
Speaker 2: think in the end it will be it will be
Speaker 2: manageable because they still will have a good amount of
Speaker 2: free cash flow.
Speaker 5: All Right, We're gonna leave on that note. Hey, Githa,
Speaker 5: thank you so much. Giza and ganath On.
Speaker 7: She's senior media analyst at Bloomberg Intelligence, joining us from
Speaker 7: BI headquarters out there in Princeton, New Jersey. As we mentioned,
Speaker 7: Paramount Skydance continuing to be the top gainer in the
Speaker 7: S and P five hundred tim that's stock up about
Speaker 7: eight point seven percent.
Speaker 9: And one point it was up twelve and a half percent,
Speaker 9: so off its best loves of the day, but still
Speaker 9: enough to the upside to be that best performer in
Speaker 9: the s and P.
Speaker 5: I love it though. It's just kind of interesting. We'll
Speaker 5: see where it goes next. A.
Speaker 9: Right, are you watching anything on Paramount Plus because those
Speaker 9: price increases are going to come.
Speaker 5: I don't know. It's all a mush to me. Just
Speaker 5: go to the menu, I click.
Speaker 9: It's not what they that's not what they want to hear,
Speaker 9: but that is the reality for so many people.
Speaker 1: This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify,
Speaker 1: and anywhere else you get your podcasts. Listen live weekday
Speaker 1: afternoons from two to five pm Eastern on Bloomberg dot com,
Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app.
Speaker 1: You can also watch us live e read weekday on
Speaker 1: YouTube and always on the Bloomberg terminal