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Speaker 2: Cameron Dawson briefe from New Edge. I think a lot
Speaker 2: of our listeners know the Cameron Dawson line. What has
Speaker 2: changed for you in the last forty eight seventy two
Speaker 2: hours with a reaffirmation of equities.
Speaker 3: I think that what got reaffirmed is that we are
Speaker 3: still very much in an up trend. What got taken
Speaker 3: out or changed in the last twenty four hours is
Speaker 3: the risk that the Fed would be hiking rates at
Speaker 3: some point in twenty five or twenty six. The two
Speaker 3: year treasury yield got to four point four percent, which
Speaker 3: is just slightly below we're Fed funds is right now.
Speaker 3: That meant that you were pricing in some risk that
Speaker 3: we could get to hikes.
Speaker 2: I want to talk about the ambiguity out there. It's
Speaker 2: a microeconomic concept, folks, which is yields go up. OMG,
Speaker 2: that's bad for stocks. And I've had a number of
Speaker 2: sophisticated guests like you say, maybe.
Speaker 4: Not yields a bit higher.
Speaker 2: There's a bit more inflation, nominal GDP is better, and
Speaker 2: revenues come in sprightly like delta four out of eight
Speaker 2: banks whatever, Cardia and Switzerland. I mean, is this a
Speaker 2: revenue myss that we're going into.
Speaker 4: In this court?
Speaker 5: The smcreo.
Speaker 3: Well, I do think that we need to make a
Speaker 3: distinction between what's going on with European luxury and what
Speaker 3: could happen within US consumer stocks, because European luxury is
Speaker 3: benefiting from a week euro and a strong dollar. If
Speaker 3: we see US consumer stocks potentially coming out saying, hey,
Speaker 3: the dollar's really strong, it's weighing on some demand or
Speaker 3: weighing on our revenues, that could be a headwind. We
Speaker 3: do think at the end of the day, inflation is
Speaker 3: good for earnings because inflation allows you to have pricing power,
Speaker 3: it gives you revenue upside, it gives you operating leverage.
Speaker 3: So we do think that having a little inflation in
Speaker 3: the system is one of the reasons why earnings have
Speaker 3: been so strong.
Speaker 5: Kay, And it's only January sixteenth, so forgive me for
Speaker 5: the baseball reference pictures and catchers don't report until February eleventh.
Speaker 5: But here's my question for you. What inning are we in?
Speaker 5: I mean, seriously, I can hear people make a case
Speaker 5: that we're early stage, that we're late stage. Where are
Speaker 5: we in the business cycle right now?
Speaker 3: We've been thinking that we lean more towards late cycle
Speaker 3: because of your long cyclical indicators like where construction spending is.
Speaker 3: If you were early cycle, that would not be at peaks.
Speaker 3: But if we think about where we are from a
Speaker 3: pricing standpoint, we do have to appreciate that we're going
Speaker 3: into this year at a much higher valuation than we
Speaker 3: did the last two years. And we think the biggest
Speaker 3: question for twenty twenty five is whether or not the
Speaker 3: twenty twenty peak valuation about twenty three times earnings access
Speaker 3: as a ceiling or if it's just another step along
Speaker 3: the way to this huge multiple expansion that we've seen
Speaker 3: the last two years.
Speaker 5: Yeah, kim, let me let me build on this a
Speaker 5: little bit. I was looking at us real yields, right
Speaker 5: and I was looking at the two year versus the
Speaker 5: ten yeard, trying to decompose them, and they're telling me
Speaker 5: two different things. If you look at the moving yields
Speaker 5: and nominal yields. Much of it can be explained by
Speaker 5: inflation breakkeapings going up at least in the front end,
Speaker 5: but if you look out to the ten year, it's
Speaker 5: a move in real yields and growth expectations. So you know,
Speaker 5: I'm trying to kind of reconcile the two.
Speaker 4: What are your thoughts there?
Speaker 3: Yeah, and we also have to add in these fiscal concerns,
Speaker 3: the potential questions around how are you going to fund
Speaker 3: the fiscal deficit. Given the fact that we're hearing from
Speaker 3: Bessent today, we know that bills as a percentage of
Speaker 3: Treasury issuance or Treasury's outstanding is now at twenty percent
Speaker 3: or over twenty percent. That's more than what tee back
Speaker 3: the Treasury Borrowing Authority recommends, which just suggests that that
Speaker 3: is a huge question for how Besant is going to
Speaker 3: navigate these big deficits. Do we see them do more
Speaker 3: cubon issuance? Does that cause long yields to go up?
Speaker 3: Big questions?
Speaker 2: Kemp, I want you, you're so visible and enthusiastic about
Speaker 2: the American experiment. I want you to talk about a
Speaker 2: gloom crew quieted again, like go to cash, and then
Speaker 2: I got to figure out how to get back into
Speaker 2: the market once I'm in cash.
Speaker 4: What's your take on that.
Speaker 3: We do think that you should always see volatility as
Speaker 3: opportunity and it's a mindset shift that means that when
Speaker 3: nicely said, yeah, you do, when you see volatility, it's
Speaker 3: very easy for fear to kick back in and that's
Speaker 3: when you get frozen. You get that arrested development. So
Speaker 3: we think if you judge us as advisors, our success
Speaker 3: is when clients call us when there is volatility and
Speaker 3: say what should I buy? Versus saying get me out
Speaker 3: of this. I want to sell.
Speaker 2: This is so damien. I can't say enough. I mean,
Speaker 2: you're on the beach in Miami, you don't care. I'm
Speaker 2: inundated on the street, in restaurants, my email some of four,
Speaker 2: I'm inundated with people saying I'm afraid to participate.
Speaker 5: Well, I'm going to channel Brooks Ritchie in a little
Speaker 5: bit of behavioral finance here, because for me, as we
Speaker 5: get into January, it's all about positioning. It's all about sentiment, right,
Speaker 5: and so talk to me about financial conditions. I mean,
Speaker 5: what is it going to take to knock you us
Speaker 5: financial conditions back again just a little bit. I mean,
Speaker 5: is it going to be you know, equities coming off here?
Speaker 5: Or spreads? I mean, how tight can spreads go? I mean,
Speaker 5: talk to us about financial conditions? What are your expectations there?
Speaker 3: Isn't it fascinating? So the four main components of financial
Speaker 3: conditions being yields, currencies, equity prices, and credit spreads. Yields
Speaker 3: and currencies have all tightened, but because equities and credit
Speaker 3: spreads have remained so resilient, you haven't seen a tightening
Speaker 3: in financial conditions, which means we think that financial markets
Speaker 3: are effectively saying FED are not that tight. If the
Speaker 3: FED was that tight, credit spreads would not be at
Speaker 3: twenty year tights. If the FED was really weighing on
Speaker 3: economic activity in a significant way, you would not see
Speaker 3: how yield spreads where they are.
Speaker 4: What's your call in the market now?
Speaker 2: I mean, people, the whiplash the last two weeks has
Speaker 2: been you. We're deep into twenty twenty five. I mean,
Speaker 2: what's your call in the market this year?
Speaker 3: Respect the trend, but do not ignore the risks. Our
Speaker 3: call for twenty twenty five is a wide, choppy range.
Speaker 2: Okay, we got to run because they got to do
Speaker 2: bank earnings. You want to do bank earnings with us?
Speaker 5: Yeah, he's more can Stanley being able to talk about
Speaker 5: an entrance margins coming?
Speaker 2: Ken Leon joins us, Now he's really really I'm honored
Speaker 2: by this senior analyst Cfira with decades of experience.
Speaker 4: Ken.
Speaker 2: My basic take in my audience has heard this from me.
Speaker 2: The banks are literally sandbag and how much money they're making,
Speaker 2: they are profit machines. Let's start with the why Why
Speaker 2: are these big banks profit machines?
Speaker 6: The banks have a much stronger business model today Tom
Speaker 6: than what we spoke about maybe three, five or ten
Speaker 6: years ago. They have a blend of great franchises with
Speaker 6: recurring revenue fees for transactions across many businesses, and then
Speaker 6: on the up cycle for investing or really for investment banking,
Speaker 6: we're seeing the added benefits. So it's almost like putting
Speaker 6: fuel on the fire. And that's the story for twenty
Speaker 6: twenty five.
Speaker 2: Is there a monopolistic tendency here? Is there concentration of
Speaker 2: revenue and particularly concentration of profits so great that you
Speaker 2: are concerned?
Speaker 6: Well, we're not concerned, but investors have to be aware
Speaker 6: so that when you're investing in the overall market or
Speaker 6: the financial sector, the five global US banks or top
Speaker 6: ten constituents. And when we look at these banks, they're
Speaker 6: gaining wallet share across different businesses. So the answer is yes,
Speaker 6: consumer investment banking taking wallet share from Europe. Across most businesses,
Speaker 6: they have dominant positions.
Speaker 7: But that's a strength for America.
Speaker 8: Up.
Speaker 5: Ken, I'm sitting here next to gam Dawson and she's
Speaker 5: dying to ask you this question. I mean, bankers are
Speaker 5: claiming that there's just this enormous appetite for capital at
Speaker 5: current levels. I mean a surge and profitability. Not just JP,
Speaker 5: not just Goldman, but Wells and City as well, Yesterda,
Speaker 5: Wells Fargo. Yeah, I mean everyone is making money in
Speaker 5: this market. Ken, talk to us about BAA and Morgan Stanley.
Speaker 5: What are you focused on here?
Speaker 6: So we took a look at the numbers for Bank
Speaker 6: of America. They're slightly better than JP. Morgan A loan
Speaker 6: deposit growth three percent for buff Net enter or sink
Speaker 6: I'm three percent in the areas of global banking, very
Speaker 6: strong across all areas.
Speaker 7: I think any.
Speaker 6: Of these managements want to understate their book or outlaws
Speaker 6: than still early.
Speaker 2: This is my big theory. Cameron Dawson with us, we're
Speaker 2: doing this differently this time. Do you have Cam Dawson
Speaker 2: looking at the holistic market and Ken Leon with terrific
Speaker 2: granularity is really what surveillance is about.
Speaker 4: Kim Dawson, you're listening to this.
Speaker 2: Is this a year where you look at Ken Leon's
Speaker 2: work and say it's a sector acquisition or do you
Speaker 2: buy individual securities?
Speaker 8: Yeah?
Speaker 3: I mean we think the financials are set up for success.
Speaker 3: You have a strong economy, you have a steeper yield curve,
Speaker 3: you have the potential for regulatory improvement, and you have
Speaker 3: the potential for a return to business activity in M
Speaker 3: and A and IPOs. These are all important tailwinds. Just
Speaker 3: don't forget the banks are now not that cheap. They're
Speaker 3: trading at one and a half times book, which is
Speaker 3: effectively the peak chem You agree, ken.
Speaker 4: Leone, Are they rich? Yeah?
Speaker 6: So we in November we've put the report out stay
Speaker 6: the course for twenty twenty five. And what strategists don't
Speaker 6: know is sometimes you can earn into your valuation or higher.
Speaker 6: So we're going to see upward earnings estimates for the
Speaker 6: consensus through all this year, we're overweight the financial sector
Speaker 6: along with technology and communications services.
Speaker 5: Ken my Son was just on the Morgan stan Lee
Speaker 5: sophomore internship last night, and you know what, it's not
Speaker 5: about net interest margins. It's about wealth management. Talk to
Speaker 5: us about the seven one hundred and fifty what no,
Speaker 5: I'm sorry, I'm sorry, seven point three billion dollar beast.
Speaker 5: I mean, talk to us about wealth management, Morgan Stanley
Speaker 5: Q four. I mean it's kind of have been great, right,
Speaker 5: not lights out.
Speaker 6: It never has these enormous jumps in terms of growth,
Speaker 6: but they're just steady performers. What they do is they
Speaker 6: create the story for durable, recurring revenue fee services. And
Speaker 6: that's good because it's enabled Morgan Stanley in the last
Speaker 6: year or so to get a wide, higher and multiple closer,
Speaker 6: getting closer to a black Rock. So it is a
Speaker 6: blend with that strong franchise in wealth management. Goldman's coming
Speaker 6: up for different reasons, which is private ACNE and private
Speaker 6: capital will be their new secular growth area.
Speaker 2: I said this the other day, I think maybe it
Speaker 2: was yesterday, that Blackrock now is even beginning to be
Speaker 2: folded into the major bank analysis. With the success that
Speaker 2: we've seen We welcome all of you across the nation
Speaker 2: in your commute on Applecarplay.
Speaker 4: Android Otto.
Speaker 2: Good morning ninety nine one FM in Washington, Big events
Speaker 2: down there. We're gonna go to Ethan Brodner and Tel
Speaker 2: Aviv here in a bit. Good morning, ninety two nine FM, Boston,
Speaker 2: our flagship Bloomberg eleven to three to zero, New York.
Speaker 2: Good morning, and a first mentioned this morning YouTube Humbled
Speaker 2: by the attendance, Thank you so much. Subscribe to Bloomberg Podcasts.
Speaker 2: Ken Leon with us is CFII and Kim Dawson sitting in.
Speaker 4: As well with NewART t Wealth Damian.
Speaker 5: Yeah, Ken, I mean, look when I look at the
Speaker 5: Bank of Earnings and I try to break in and
Speaker 5: see what's going on undneath the surface, I look at
Speaker 5: dead underwriting because me that gives me a pretty decent
Speaker 5: lead on commercial real estate. You know, and we know
Speaker 5: what the commercial real estate market has looked like, and
Speaker 5: we know what it looks like right now. There's a
Speaker 5: lot of debt out there where you know, borrows are
Speaker 5: paying four percent and they're gonna have to adjust to
Speaker 5: an environment where they're paying eight nine percent. Now, talk
Speaker 5: to us about that hurdle. How do they get there
Speaker 5: and how are the banks helping them get there?
Speaker 6: Right? So, for any of the large banks, they mostly
Speaker 6: have exposure to multifamily, which is more stable. Commercial real
Speaker 6: estate is mostly office is at risk. We see it
Speaker 6: as kind of idiosyncratic for this year to twenty twenty six,
Speaker 6: which means no big reserves. They already took them. Additionally,
Speaker 6: the areas to still lendes areas like data centers for
Speaker 6: AI on a global basis and overhall. When we look
Speaker 6: at real estate, we're also seeing some deep values. So
Speaker 6: firms like Blackstone and KKR and others, we'll.
Speaker 7: Take a look at it.
Speaker 6: Brookfield's another one.
Speaker 5: Well, Ken, I mean I'm dying here. You talk a
Speaker 5: little bit more about these data centers.
Speaker 8: You know.
Speaker 5: My read on it is that the building of data
Speaker 5: centers accounts for easily one percent of GDP here in
Speaker 5: the US. I mean, Cam, what are your thoughts about,
Speaker 5: you know, that kind of convergence of you know, mag
Speaker 5: seven tech and the real estate sector. I mean, talk
Speaker 5: to us a little bit about what that means for
Speaker 5: the US economy.
Speaker 8: Yeah.
Speaker 3: Neil Dodger put out a really interesting note yesterday talking
Speaker 3: about how he thinks it's about a half a percentage
Speaker 3: point in the last year that tech has contributed and
Speaker 3: that you've seen a slow down in the permits or
Speaker 3: the initial kind of plans, which is a question of
Speaker 3: how long can it last?
Speaker 2: I got one more question, Ken Leander. What Damien was
Speaker 2: talking about there? I think is an important frame with
Speaker 2: your research capabilities at CFRA. Does Meg seven expand this
Speaker 2: year with data center buildouts? With the oomph, the productivity
Speaker 2: oomph of the American economy? Are we naiven a branded
Speaker 2: idea of just seven stocks?
Speaker 6: Well, it may not be seven stocks, you know, certainly
Speaker 6: there's some enormous companies that are just below that market.
Speaker 6: It's a very concentrated market. It does put a little
Speaker 6: bit higher risk on equities if you want to be defensive.
Speaker 6: Of course, Cameron could talk about an equal weight at
Speaker 6: S and P five hundred or the SMPA, divity and aristocrats.
Speaker 6: But overall, it's the market we're in.
Speaker 2: Cameron, I got twenty two seconds equal weight. It's all
Speaker 2: the rage now, isn't it. I mean every other page
Speaker 2: of Barons equal weight?
Speaker 4: What do you think?
Speaker 3: Be careful?
Speaker 5: Equal weight?
Speaker 4: Thank you?
Speaker 3: You have grown nine percent in the last two years.
Speaker 3: MAG seven earnings have grown one hundred and twenty five percent.
Speaker 2: This is why Cam Dawson's on, folks, She's got the detail.
Speaker 4: Say that one more time, it's too important.
Speaker 3: In the last two years, equal Weight earnings are up
Speaker 3: nine percent. Mag seven earnings are up one hundred and
Speaker 3: twenty five percent. No wonder, it's a consumation.
Speaker 2: The only one I know on the street that can
Speaker 2: do that is Sam Stolevall ken Leanes CFII.
Speaker 4: Thank you so much for joining us today.
Speaker 2: Cam Dawson, thank you as well, particularly for the acuity
Speaker 2: of theirs.
Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us Live
Speaker 1: weekday afternoons from seven to ten am Eastern. Listen on
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Speaker 2: We are honored to bring you Michael Nathansen of Maffatt
Speaker 2: Nathan sin on this horrific moment for Los Angeles. Michael,
Speaker 2: do you and Craig Moffatt have any idea how Hollywood
Speaker 2: pauses or shuts down or regroups.
Speaker 9: Were in tom That is the question, right, It's this
Speaker 9: is something that the industry did not need at this
Speaker 9: point in time, given that what you laid out of
Speaker 9: the past four years. I don't know how our groups, right,
Speaker 9: I don't know, you know, people have lost lives, homes.
Speaker 7: I just don't know the community. I don't know how
Speaker 7: they get back to work anytime soon.
Speaker 2: And the Hollywood reporter Ingrid Schmidt, folks, this is this
Speaker 2: is a minor story. Top Hollywood stylusts are helping fire
Speaker 2: victims rebuild their wardrobes. I mean, Michael pulled us over
Speaker 2: to the industry. Response you would hope for from people
Speaker 2: like Disney, like is basic as what do they do
Speaker 2: with the oscars?
Speaker 4: What do you and Craig presume they could do?
Speaker 9: I know it's interesting is invited to an award show
Speaker 9: next month, and I assumed it was going to be canceled, right,
Speaker 9: And I spoke to the people who were organizing it.
Speaker 9: They felt like, for the community's sake that it has
Speaker 9: to go on, right, the show must go on.
Speaker 7: Tom.
Speaker 9: I think they will try to get people together in
Speaker 9: a community and regroup and basically not slow down whatever
Speaker 9: was on the calendar.
Speaker 7: I really do, because it's you.
Speaker 9: Basically need to see people get together, figure out what
Speaker 9: you can do to help your neighbor. So I was
Speaker 9: surprised to learn that the thing what I was planning
Speaker 9: to go to was still on. So I have to
Speaker 9: believe the show will go on, Tom, I really do.
Speaker 4: Please.
Speaker 5: Well, Michael, I mean, look we I mean, you live
Speaker 5: in Scarsdale. I live in Ryan, New York. You know,
Speaker 5: we have friends out west, you know. And my question
Speaker 5: for you just you know, and what you're hearing and
Speaker 5: what you're you know, what what does your gut tell you?
Speaker 5: I mean, how is LA going to move through this?
Speaker 5: I mean, do you see migration? Do you see a
Speaker 5: lot of the wealthy people who are out along the
Speaker 5: pch you know, moving south, moving back to New York?
Speaker 5: Even I mean, talk to us a little bit about
Speaker 5: what you're hearing.
Speaker 9: Well, it's you know, Sally, one of our partners in
Speaker 9: Marfa Nathanson, lives by Brownwood and they spent some time
Speaker 9: down south of LA, and he was suggesting that people
Speaker 9: will move further south, away from the canyons and the hills,
Speaker 9: maybe closer to the beaches. But you know, so to
Speaker 9: your point him, you know, you've lost Rye, You've lost Scarsdale.
Speaker 9: It's that type of you know, erosion of a community.
Speaker 9: And I think it's going to take years for this
Speaker 9: community to rebuilt. I do think you're right.
Speaker 5: I think if you have the schools, I mean that's
Speaker 5: people like us. I mean, what do you send your
Speaker 5: kids to school?
Speaker 4: Now?
Speaker 5: What do you do?
Speaker 9: How do you read crazy or church or temple or hospitals.
Speaker 9: It's it's hard to imagine, but I think you will
Speaker 9: see a flight.
Speaker 8: I do.
Speaker 9: I think people will pick up and move someplace a
Speaker 9: little bit safer, maybe even cheaper.
Speaker 7: Right give them the.
Speaker 2: Cost of la Michael Nathanson, thank you for this perspective.
Speaker 2: And you must think Rob Carolyn or Bloomberg mediaist who's
Speaker 2: been sleepless for four or five six days, perhaps this
Speaker 2: morning some quiet and containment out in Los Angeles. Michael,
Speaker 2: I have to admit on Friday, I will go home,
Speaker 2: I will commit the surveillance nap, and then I'm going
Speaker 2: to get up and watch Silo the last season, the
Speaker 2: last episode of the season for Apple. Tim Cook is
Speaker 2: so Silo happy. He's doing photo things with the actress
Speaker 2: who's leading it as well. Is Apple making inroads into
Speaker 2: the Michael Nathanson world?
Speaker 9: Tom, I love their content. There's some of the best
Speaker 9: shows on TV. I haven't watched silo, I have to admit,
Speaker 9: but there's a bunch of other things I watch.
Speaker 7: They're not making a dent. Tom.
Speaker 9: There's where you look at overall Apple share of time
Speaker 9: spent streaming. Do you want to guess what their share
Speaker 9: of streaming is? It's less right, Wow, it's I know
Speaker 9: it's one percent, and it's just it's just terrible.
Speaker 4: So we've been when we go.
Speaker 9: To La to do our visits and tours, there's no
Speaker 9: one in that town who knows what Apple's long term
Speaker 9: plan is and what they want to be when they
Speaker 9: grow up.
Speaker 7: It's kind of amazing, right, it really is.
Speaker 5: Michael. I'd love to take this in a very different direction.
Speaker 5: I mean, you're I mean, I want to talk about
Speaker 5: data centers and I want to talk about Capex from
Speaker 5: the MAGS seven and Magain, I heard some very very
Speaker 5: interesting figures over the past few days that if you
Speaker 5: look back over the full year twenty twenty four and
Speaker 5: you look at the MAG seven and they're spending on
Speaker 5: data centers, and then you assume that banks are lever
Speaker 5: you know, providing you know, weughly five six times to
Speaker 5: leverage on that, you take that total that is pretty
Speaker 5: much eighty percent of all CAPEX for the country in
Speaker 5: twenty twenty four. I mean, does that number? Is that right?
Speaker 5: I mean, is the amount of CAPEX that's being spent
Speaker 5: on data centers? And forgive me, I don't know how
Speaker 5: much computing power it takes for chat GPT relative to
Speaker 5: a Google search. Maybe you can help me understand that.
Speaker 5: Is this right? I mean, does this make sense to you?
Speaker 7: It's a really interesting question.
Speaker 9: So far from when we look at Meta and Alphabet
Speaker 9: it has made sense because we're in the early phase
Speaker 9: of the build out right, and when you look at
Speaker 9: Meta's results, you can see the benefit of AI in
Speaker 9: their ad numbers and their engagement.
Speaker 7: You can see it at Google as well. Or we're
Speaker 7: to your question.
Speaker 9: We're at this really interesting tipping point where the cost
Speaker 9: of cappecks the depreciation of cappax. I know it's not
Speaker 9: in the morning, but I have to say depreciation at
Speaker 9: nine in the morning. The cost of cappacks will start
Speaker 9: hitting the income statements the next couple of years, and
Speaker 9: the question will be is will the advertising revenues, will
Speaker 9: the subscription revenues from cloud accelerate at the same rate as.
Speaker 7: At capex growth?
Speaker 9: Right that we're entering twenty five to twenty six will
Speaker 9: be kind of the test period to see if it
Speaker 9: may if these investages made sense to where we are today.
Speaker 9: It's penciled out, but the full cost of CAPBECKS is
Speaker 9: barely on the balance sheet today and barely on income
Speaker 9: statement today.
Speaker 5: Now talk to us also about like these data centers.
Speaker 5: I mean, is there a risk that they become obsolete?
Speaker 5: I mean, look at office. I mean, office is obsolete
Speaker 5: right now, right, No, tear it down and class the
Speaker 5: office here in real estate. But you know, I mean
Speaker 5: it is a concern. I know that all the servers,
Speaker 5: you know, their own kind of buy the Microsoft who
Speaker 5: in the data center so they can replace them if
Speaker 5: they do become obsolete. But just the footprints of these
Speaker 5: data centers and all the money that's being spent and
Speaker 5: building these huge, huge structures, I mean, is there any
Speaker 5: risk that you know, these things go obsolete and not
Speaker 5: too distant future.
Speaker 9: It's funny I was thinking of that this morning when
Speaker 9: I thought about how much someone like Elon Musk has
Speaker 9: just thrown into a quick build of a data center
Speaker 9: in Tennessee, right, how quickly they've done this. You would
Speaker 9: think logically, over time is the history of technology. Things
Speaker 9: become more efficient, lighter, and cheaper, right, And you would
Speaker 9: think over time these will look a bit old fashioned
Speaker 9: and archaic to have these massive centers housing all these
Speaker 9: these servers when the speed of change is going to
Speaker 9: produce something much lighter and smaller.
Speaker 7: I think you're right about that.
Speaker 2: Joining us, we thank you for being with us on
Speaker 2: your community across the nation on YouTube, from your home,
Speaker 2: from your office.
Speaker 4: Do you know that on a Arrivian you can watch
Speaker 4: us on YouTube in your car? Really?
Speaker 2: I don't know if that's a good thing or not,
Speaker 2: but that's what somebody told me. Michael Nathanson with us,
Speaker 2: and we thank him for trench and comments and the
Speaker 2: fire of the disaster in Los Angeles and these comments on.
Speaker 4: The bigger picture as well.
Speaker 2: Michael Nathanson, what's your single best idea for twenty twenty five?
Speaker 7: And you're gonna ask me that Tom asked me that
Speaker 7: every time.
Speaker 2: Like besides of Yankees not dropping the ball at the
Speaker 2: wrong what is your single best idea?
Speaker 7: The Rangers?
Speaker 5: You know selling we'll get to the Rangers, blow it up,
Speaker 5: blow it up outside your.
Speaker 4: Single best idea?
Speaker 9: So basically, my single best idea and I'm like, and
Speaker 9: I'm gonna punt because the best they do have with
Speaker 9: the firm is sports gambling. It's Flutter and FanDuel. Right,
Speaker 9: So my best idea. You know, we've been buyers of
Speaker 9: Meta and Alphabet right for a lot of time.
Speaker 7: Those will still work. They're fine.
Speaker 9: They're actually not that expensive relative to Apple, which I
Speaker 9: know you Craig on last week, which is a sell on.
Speaker 9: So in large cap tech, I'm fine with with owning
Speaker 9: Meta and Alphabet I mean there, it's fine. But the
Speaker 9: best structural idea we'll be buying into sports gambling with
Speaker 9: it within you.
Speaker 2: Okay, So here's what we're gonna do, because Damien, we're
Speaker 2: gonna rip up the script here. I'm interviewing Damien Sasaur
Speaker 2: and Michael Nathanson to get to the news here is well,
Speaker 2: let me start with Damien Sasauur as well, is gambling
Speaker 2: out of control in sports because of the addiction that
Speaker 2: all of us are written seeing each.
Speaker 4: And every day.
Speaker 5: Oh, you're asking me a question about what I know
Speaker 5: about the you're asking me at the morality of sports.
Speaker 2: I'm asking about it's grown so fast. That's why Nathanson.
Speaker 4: Has a buy on it.
Speaker 5: I don't think. I think I think Nathan's is right.
Speaker 5: You haven't even scratched the surface of just how much
Speaker 5: how far this can go. But here's my question. I mean,
Speaker 5: I mean, Michael can correct me if I'm wrong. We've expanded,
Speaker 5: I mean, the footprint of gambling hasn't really expanded so
Speaker 5: much this year relative to last. I mean, what Calgary,
Speaker 5: Calgary got sports gamble this year? Maybe Kentucky I think
Speaker 5: just legalized, Like and when is Florida? When does Texas?
Speaker 5: When does some of these really big states start to
Speaker 5: come online? Here is that part of your thesis?
Speaker 8: Right?
Speaker 9: So Robert Fishman on our and our our firm covers
Speaker 9: covers the sector, and what he's found is that our
Speaker 9: per capita basis, even though New Jersey has been rowing
Speaker 9: the years, in Europe.
Speaker 7: Per capital spending keeps going up.
Speaker 9: Right, So you may have thought that everyone you know
Speaker 9: is gambling and they're spending as much as they can.
Speaker 9: But we're finding we don't need those states to come
Speaker 9: online anytime soon because on a state by state basis,
Speaker 9: there's more per capitive spending and the competitive dynamic. Right,
Speaker 9: people started with all types of free bet offers, Those
Speaker 9: those platforms.
Speaker 7: Have gone away.
Speaker 9: Yeah, pretty much a two horse market fan duel and DraftKings.
Speaker 9: So it's become a duopoly and the per capitalist spend
Speaker 9: keeps going up.
Speaker 7: In Tom, I want to let you know I have
Speaker 7: deep concerns about.
Speaker 9: This as a as a parent and as a citizen.
Speaker 9: But it's legal, Tom, right, you know what it's people
Speaker 9: send to me. People have spent Thanksgiving Day watching their
Speaker 9: their grown children center our couch betting on Thanksgiving football
Speaker 9: games as a family activity basically, you know, I mean.
Speaker 4: This is so important.
Speaker 10: What have you and your team Michael Nathanson learned from.
Speaker 2: England in their decades, in almost centuries of really active
Speaker 2: betting is part of the social culture.
Speaker 4: I mean, is that what we're handling heading?
Speaker 2: We're going to become like you know, you know Ira
Speaker 2: Jersey losing his mortgage on Aston Villa.
Speaker 4: I mean, is that where we're heading?
Speaker 9: Well, you know it's interesting the UK has started to
Speaker 9: put some real guardrails around this topic. Right, So the
Speaker 9: UK regulators are concerned about just how much ease or
Speaker 9: how much generossity has been given to to betters and
Speaker 9: you know, and putting, and they put limits on certain
Speaker 9: types of bets. So you know, right now we're in
Speaker 9: this phase where it's just unchecked, right, And I have
Speaker 9: to think ten years from now, Tom, we'll look back
Speaker 9: and say, oh, we should have done more in regulatory right,
Speaker 9: But we're in this golden age of letting the market
Speaker 9: decide how much is enough?
Speaker 4: Right?
Speaker 5: All right, Michael, enough is enough?
Speaker 4: Here?
Speaker 5: What happened to the Rangers? I mean, seriously, they're planning
Speaker 5: a bit better lately, but I mean that the third
Speaker 5: worst record in the Eastern Conference. I mean, you know,
Speaker 5: outside of I mean, he's just the force of nature.
Speaker 5: You know, what is going on with the New York Rangers?
Speaker 7: You know, you know, it's interesting.
Speaker 9: So, as you know, we're analysts of firms and we
Speaker 9: have to look at strategies and CEO leadership decisions and culture.
Speaker 7: And I think there's a story about culture.
Speaker 4: Right.
Speaker 7: I think the GM and the coach lost the room.
Speaker 9: And as Tom knows, you know, hockey requires intensity and
Speaker 9: dedication and throwing your body on, you know, on the
Speaker 9: ice block shots, right.
Speaker 7: I think they lost the room.
Speaker 9: And by trading their captain and Genarado Goodrow and then
Speaker 9: Gettarad of Coco, they base.
Speaker 7: I think they lost momentum. I really is that simple?
Speaker 4: I really do.
Speaker 2: Okay, I got one minute, Michael Nathan says, I think I've.
Speaker 4: Got this right. As a foreigner.
Speaker 2: The Jets are terrible, the Giants are terrible, the Islanders
Speaker 2: are terrible.
Speaker 4: The Rangers are terrible.
Speaker 2: The Nets lost their worst games since time began last night?
Speaker 2: What is it about New York sports that makes it
Speaker 2: so damn bad?
Speaker 7: Tom? As a New Englander, I think it comes.
Speaker 9: Down to acknowledgement of ownership, right, like what did the
Speaker 9: Crafts do?
Speaker 7: What did the Boston Red Sox ownership?
Speaker 4: Getting it right?
Speaker 8: Do?
Speaker 4: I mean, he's never coming out again.
Speaker 9: I think it comes down to ownership, and we have
Speaker 9: some terrible owners in New York, and I wish you
Speaker 9: could have shareholder activism to replace all these folks.
Speaker 2: Michael, I just want to tell you I'm going to
Speaker 2: feature your comments on gambling and betting today on single
Speaker 2: Best Idea of the podcast. Thank you for the comments
Speaker 2: on this horror in Los Angeles. Thank you for your
Speaker 2: comments of what Lisa and I are worried about their
Speaker 2: kids and gambling. Mister Nathanson on zhigh Ground with Moffatt
Speaker 2: Nathan Center, this.
Speaker 1: Is the Bloomberg Surveillance Podcast. Listen live each weekday starting
Speaker 1: at seven am Eastern on Applecarplay and Android Auto with
Speaker 1: the Bloomberg Business app. You can also listen live on
Speaker 1: Amazon Alexa from our flagship New York station, Just say
Speaker 1: Alexa Play Bloomberg. Eleven thirty, with the.
Speaker 2: Death of President Carter, we looked back at the struggle
Speaker 2: of the Camp David Accords. The struggle now is far
Speaker 2: more visceral, and in our modern media, including Bloomberg headlines,
Speaker 2: far more immediate. No one has lived this like Ethan Bronner.
Speaker 2: He's Bloomberg News Israel bureau chief and definitive on Levn.
Speaker 4: I hate to say to Ethan, but me, the amateur,
Speaker 4: saw this coming.
Speaker 2: I saw the celebration what twelve hours ago, and now
Speaker 2: I've gotten the last one and twenty minutes backtracking and
Speaker 2: immense fragility. Tell me about the cabinet of net Yahoo.
Speaker 2: Tell me about the Israeli Parliament and where they fit
Speaker 2: into this matrix right now?
Speaker 8: Sure thing, Tom, You're you're showing your experience with your
Speaker 8: with your cynicism. It's not really cynicism. But look, I
Speaker 8: think that the difficulty is that there are two things
Speaker 8: going on right now that are slowing the deal. One
Speaker 8: is that, according to the Prime Minister of Israel, Benjamin
Speaker 8: Antania Hamas has imposed new demands and renegged on and
Speaker 8: other agreements, and therefore he's not letting his negotiators leave Doha,
Speaker 8: the capital of Katar, to come back and brief the
Speaker 8: cabinet to vote on it. Now. Even when there is
Speaker 8: such a vote, it will pass. But there is that. Now.
Speaker 8: There's the other problem, which is two far right parties
Speaker 8: are opposed to this. One of them has said it
Speaker 8: would bolt the government over the other has just had
Speaker 8: a two or three hour meeting and decided it won't
Speaker 8: bolt it now. It'll let the deal go for six weeks.
Speaker 8: But if Israel doesn't return to war after that, then
Speaker 8: it will h.
Speaker 2: With me today, Damien Sas are with really great expertise.
Speaker 2: You know, we could go to Jacob Frankel, the former
Speaker 2: governor of the Bank of Israel. But but there's a
Speaker 2: there's a linkage here, Damien says, are for Ethan Browner's
Speaker 2: world into just a fractured economy.
Speaker 4: From Cairo up is up to Anchora.
Speaker 5: Ethan, I just want to look a little bit north
Speaker 5: of Israel here. I want to look to Lebanon because
Speaker 5: some fascinating things are going on. It's the best performing
Speaker 5: bond market on the planet here in twenty twenty five.
Speaker 5: I mean these I mean they're basically in talks three
Speaker 5: structure thirty billion dollars worth of bonds after the most
Speaker 5: recent election. Talk to us about Israel, I mean the
Speaker 5: two prong fight Hamas and Hesbala, they look north. What
Speaker 5: are your thoughts there?
Speaker 8: No, I mean, you're absolutely right. I mean that's the
Speaker 8: sort of that crazy business is that if there is
Speaker 8: if these deals can go forward, there is an enormous
Speaker 8: amount of money ready to start investing israel Is. By
Speaker 8: the way, as soon as there was a notion that
Speaker 8: there would be a deal here, Israeli assets started to
Speaker 8: go up, including the Sheckle. So you're right, and you know,
Speaker 8: there is this very very delicate moment in Lebanon right
Speaker 8: now where we're perhaps in a post his blow moment.
Speaker 8: It's hard to really know, it's hard to believe it.
Speaker 8: But if we are, then perhaps we could enter a
Speaker 8: post Hummas moment in Gaza. But you know, the bedding
Speaker 8: I would say it would be probably in the other direction.
Speaker 8: I mean, it's not been a great period for the Reacher.
Speaker 5: Well, Ethan rates you know, FX, I mean, you're right
Speaker 5: in my wheelhouse there. But let's talk about commodities. I mean,
Speaker 5: bring crude up nine percent year to date. The Bloomberg
Speaker 5: Energy Index is up over ten percent this year alone.
Speaker 5: Obviously a lot of that has to do with the
Speaker 5: ceasefire arrangement. If it doesn't go through, can things just
Speaker 5: you know, snap back that quickly?
Speaker 4: I don't know.
Speaker 8: I mean, I really find it hard to believe that
Speaker 8: there will not be a deal, to be honest, but
Speaker 8: you know, there's so much hesitation right now in Israel
Speaker 8: that it makes me worry that it could fall apart.
Speaker 10: What is the Trump constituency in a complex Tel Aviv
Speaker 10: in Jerusalem, among the cabinet, the fourteen you know, Ethan,
Speaker 10: I'm making a joke, the fourteen parties of Israel. What
Speaker 10: is the Trump constituency within the people of Israel.
Speaker 8: Well, what's really interesting about that, Tom, is that this
Speaker 8: is this is one of the few countries in the
Speaker 8: world that wanted to vote for Trump. If it hadn't
Speaker 8: had a vote in November, it was sixty seven to
Speaker 8: seventy percent pro Trump, Now, what has happened here right
Speaker 8: now since this deal is that the far right is
Speaker 8: feeling betrayed by Trump that and the left is embracing
Speaker 8: Trump because the far right thinks that they're giving up
Speaker 8: too much. And this is true by the way of
Speaker 8: conservative Jews in the United States commentary magazine and so forth.
Speaker 8: We're saying that Trump has betrayed Israel by push for
Speaker 8: this deal. That is not how the center and left field.
Speaker 8: So it's a really strange situation.
Speaker 4: We have to leave it there.
Speaker 2: Ethan Bramer, thank you so much, and thank you to
Speaker 2: Alyssa Odenheimer and Dan Williams for their journalism out of
Speaker 2: Tel Aviv today. The headline and let me tell you
Speaker 2: this may not be the headline in twenty minutes. Israel
Speaker 2: says new demands by Hamas casting doubt on Gaza deal.
Speaker 4: We'll be stay abreast of that shakra through the day,
Speaker 4: and I know.
Speaker 2: David gerin the Big Take focused on it with a
Speaker 2: good effort in the last twelve hours as well.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto
Speaker 1: with the Bloomberg Business app. You can also watch us
Speaker 1: live every weekday on YouTube and always on the Bloomberg terminal.
Speaker 4: It's a daily look at the front pages. Lisa, what
Speaker 4: do you go?
Speaker 11: Well, we talked about this yesterday, but we didn't get
Speaker 11: into a d detail because we had a ton of
Speaker 11: bank eardings.
Speaker 10: We had CPI.
Speaker 11: It was a crazy day yesterday. But this is about
Speaker 11: the FDA banning artificial dye red three from being used
Speaker 11: in food because it's being linked to cancer. I mean,
Speaker 11: this is something that's used in like candy, cold medicine,
Speaker 11: some drugs as well baking decorations. But what's crazy is
Speaker 11: that thirty years ago the FDA banned this from being
Speaker 11: used in cosmetics because they found that tumors linked to
Speaker 11: the dye in lab rats. I think the difference now
Speaker 11: is there there is this provision that kind of pointed
Speaker 11: to two different things that caused cancer in humans, so
Speaker 11: kind of a provision chain. So that's why, yeah, they
Speaker 11: changed it.
Speaker 6: Going.
Speaker 4: I did, Damien, what you would do.
Speaker 2: I went and looked at those fancy, overpriced cherries I
Speaker 2: have to buy for Manhattan's and I.
Speaker 4: Was comforted they're completely free of red dye.
Speaker 5: Well, Tommy shows what I know. I thought it was
Speaker 5: banned thirty years ago. I didn't know it was cosmetics only.
Speaker 5: I mean, if you can't put it on your face,
Speaker 5: how are you allowed to eat?
Speaker 8: You eat it?
Speaker 4: Right?
Speaker 5: Exactly so? And yet it's in so many different things, right,
Speaker 5: I mean from sprink too. I mean, I don't you
Speaker 5: tell me.
Speaker 11: So much, morning Star Farms, plant based bacon strips. I know, Tom,
Speaker 11: those are in your fridge. So the plant based bacon strips.
Speaker 7: Okay, so you're gonna.
Speaker 11: Have to take them out. But if this is just
Speaker 11: the beginning, it's it's it goes beyond this, because they're
Speaker 11: looking at red number forty like it's gonna keep continuing.
Speaker 11: So which which is a good mix?
Speaker 4: What do you go?
Speaker 5: Okay?
Speaker 11: So Google signed this deal with the Associated Press to
Speaker 11: deliver up to date news through its Gemini AI chatbot.
Speaker 11: The reason this is big is because this is Google's
Speaker 11: first deal with the news publisher. So nobody saying how
Speaker 11: much Google is gonna pay AP for the content. But
Speaker 11: you'd start to notice a lot of these news publications.
Speaker 11: First they were starting to license their information to train
Speaker 11: these AI systems, and that was a big deal.
Speaker 5: And even speed over accuracy. Tom. It seems as a
Speaker 5: focus on getting the news to people quicker, regardless of
Speaker 5: whether it's right or wrong. So I think, you know,
Speaker 5: there's gonna be some sacrifices and some bumps along the road.
Speaker 5: But if Twitter is sorry X, is any indication of
Speaker 5: where we're headed with that? I think I think we
Speaker 5: should expect more of the thing from Google.
Speaker 7: Yeah.
Speaker 11: No, most definitely. And they even talk about this like
Speaker 11: going forward with entertainment, like it's entertainment going to start
Speaker 11: licensing movies and films to these AI companies that was
Speaker 11: talking about that.
Speaker 4: It's all Nason. I mean, Nason, you know, we really
Speaker 4: don't know where we are right now, right, Okay? True?
Speaker 4: What else do you have?
Speaker 5: Okay?
Speaker 11: So Super Bowl right, big time for commercials. But State
Speaker 11: Farm pulling out their ads because of everything that's going
Speaker 11: on with the Los Angeles fires. They're saying they received
Speaker 11: over seventy four hundred home auto claims. They're putting tens
Speaker 11: of millions of dollars back into the customer's hands, and
Speaker 11: they expect that to rise because as more residents start
Speaker 11: to go back and assess the damage that's happened to
Speaker 11: their homes. But It's like it's spotlight on the insurance industry.
Speaker 11: How companies have been like pulling back from California really difficult.
Speaker 4: This could be fascinating to see.
Speaker 2: Instagram's are very strong on this, different people talking about
Speaker 2: the tragedy that we're witnessing.
Speaker 4: One thing that would help would be LA's strong Are
Speaker 4: the rams Damian?
Speaker 5: Are the rams in the game like the rams are
Speaker 5: on the game. But I want to be very serious
Speaker 5: here for one minute. You know, we were at Crefzy
Speaker 5: we were talking about, you know, the LA wildfires and
Speaker 5: what does that mean for migration patterns out of LA.
Speaker 5: I mean, think about where people are obviously going to go.
Speaker 5: They're going to try and first go south. They're gonna
Speaker 5: go to Newport Beach. They're gonna try and go to
Speaker 5: San Diego. But then where do they go when they
Speaker 5: can't afford that and prices get ramped up?
Speaker 4: Right?
Speaker 5: Do they go to Phoenix? I mean do they go
Speaker 5: to I mean come back to New York. I can
Speaker 5: tell you this Tom, A lot of people are not
Speaker 5: staying in Los Angeles after this one. I think you're
Speaker 5: going to see some migration outward. Yeah, Well, it's discussion
Speaker 5: and by the way, We're not going to get Danny
Speaker 5: DeVito and I don't know Schwartz and the going the
Speaker 5: Super Bowl either, So I mean, come on, I mean,
Speaker 5: what are we talking about. Wasn't that big State Farm
Speaker 5: commercial last year in the Super Bowl.
Speaker 3: Yeah?
Speaker 2: Yeah, We're doing an honor of Damien and tanned and
Speaker 2: resteders today.
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