WEBVTT - US Producer Prices Jump, ECB Cuts 0:00:02.400 --> 0:00:06.720 Bloomberg Audio Studios, podcasts, radio news. 0:00:08.200 --> 0:00:12.080 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:00:12.160 --> 0:00:15.280 weekdays at ten am Eastern on Apple Card playing Android 0:00:15.280 --> 0:00:18.400 Auto with the Bloomberg Business App. Listen on demand wherever 0:00:18.440 --> 0:00:21.640 you get your podcasts, or watch us live on YouTube. 0:00:22.960 --> 0:00:25.880 Okay, to the economic data of the day, you're looking 0:00:25.920 --> 0:00:28.240 at PPI. If you back out food and you back 0:00:28.280 --> 0:00:30.280 out energy in a month, a month basis came in 0:00:30.360 --> 0:00:32.839 up two tenths of one percent. But if you keep 0:00:32.880 --> 0:00:35.440 it all in there, you take a look at PPI 0:00:35.560 --> 0:00:38.320 final demand at four tenths of one percent, and you 0:00:38.400 --> 0:00:39.920 have to wonder, kind of what's going on and we 0:00:40.320 --> 0:00:40.720 how's the. 0:00:40.680 --> 0:00:41.479 Right way to take this. 0:00:41.560 --> 0:00:43.879 On a year on your basis, final demand was up 0:00:43.920 --> 0:00:47.279 by about three percent. So Mike McKee, Bloomberg International Economics 0:00:47.280 --> 0:00:49.000 and Policy correspondent joins. 0:00:48.800 --> 0:00:50.280 Us literally no one better. 0:00:50.320 --> 0:00:52.680 And I know that because he's my bff and emails 0:00:52.720 --> 0:00:55.400 me things all the time like price of eggs alex 0:00:55.440 --> 0:00:57.200 that really contributed to the PPI. 0:00:57.880 --> 0:01:01.760 Eighty percent of the headline PPI was due to goods 0:01:01.800 --> 0:01:06.160 prices going up, and the majority of that was egg 0:01:06.200 --> 0:01:08.600 prices up fifty six percent. In the month. 0:01:08.920 --> 0:01:09.800 It's AV and flu. 0:01:11.040 --> 0:01:12.520 It has happened because. 0:01:12.280 --> 0:01:14.520 Paul like, why can't we make more chickens? But you know, 0:01:14.959 --> 0:01:16.520 well we do, but then we kill them all. Yes, 0:01:17.120 --> 0:01:18.800 get AV and flu. 0:01:20.720 --> 0:01:24.120 That was the major contributor, and that's the biggest reason 0:01:24.160 --> 0:01:25.720 that the core is so much less. 0:01:26.319 --> 0:01:28.919 The important thing for the FAD is. 0:01:28.800 --> 0:01:32.280 That the categories that they take from PPI and put 0:01:32.319 --> 0:01:38.440 into the calculations for PCE all were much lower, like airfares, insurance, 0:01:38.520 --> 0:01:42.920 things like that. So the outlook is much better than 0:01:42.959 --> 0:01:45.640 it looks on the headline basis. 0:01:45.560 --> 0:01:51.200 So net December eighteenth, we're still expecting I guess a 0:01:51.240 --> 0:01:52.559 twenty five basis point cut. 0:01:52.960 --> 0:01:56.200 We haven't seen any reason why we wouldn't at this point. 0:01:56.280 --> 0:01:59.480 A couple of FED officials have said they would be 0:01:59.560 --> 0:02:02.280 ready to pause soon, but they have said when that 0:02:02.440 --> 0:02:06.960 is so, Given that most of them have suggested they're 0:02:07.040 --> 0:02:09.800 still on track to cut rates, that's the bet. 0:02:10.840 --> 0:02:11.560 Here's my question. 0:02:11.639 --> 0:02:13.600 I feel like this is a day two story of 0:02:13.600 --> 0:02:16.359 the CPI that we got yesterday. Is that, I mean, 0:02:16.480 --> 0:02:21.640 inflation isn't conquered, like it's not, so why the still 0:02:21.639 --> 0:02:25.840 impetus to cut in a more aggressive way? 0:02:26.240 --> 0:02:28.200 Well, I don't know that it's any more aggressive. It's 0:02:28.320 --> 0:02:30.680 what they had laid out, and it's twenty five basis points, 0:02:30.680 --> 0:02:32.919 so not going back at fifty, But. 0:02:32.840 --> 0:02:34.760 Why even cut it all and we know that inflation 0:02:35.080 --> 0:02:36.040 isn't well, that's. 0:02:35.800 --> 0:02:39.720 What the pause folks are saying, is that we still 0:02:39.760 --> 0:02:43.320 need to make sure that inflation's going down. And the 0:02:43.400 --> 0:02:46.359 answer to that from the other side is that inflation 0:02:46.560 --> 0:02:50.040 is going down and it would continue to go down 0:02:50.680 --> 0:02:53.359 given even a lower interest rate. 0:02:53.639 --> 0:02:54.120 And one of the. 0:02:54.120 --> 0:02:57.240 Things they can point to from the CPI is that 0:02:57.360 --> 0:03:00.920 owner's equivalent rant the crazy way the government and calculates 0:03:00.919 --> 0:03:04.840 housing costs went down to just a two tenths rise, 0:03:04.880 --> 0:03:08.320 which is the lowest since January of twenty twenty one. 0:03:08.880 --> 0:03:10.720 So they have been waiting. 0:03:10.560 --> 0:03:14.200 For housing prices to roll over, and it may be 0:03:14.680 --> 0:03:16.960 that they're finally doing that. And if that's the case, 0:03:17.400 --> 0:03:21.680 when you back out housing from the CPI, you're pretty 0:03:21.720 --> 0:03:27.120 much at two percent. So the odds are they can 0:03:27.160 --> 0:03:29.360 they're going to look at that and say, we can 0:03:29.480 --> 0:03:32.360 cut some more. Not as much, maybe as we thought 0:03:32.360 --> 0:03:35.640 we would, neutral maybe higher, but we can cut some more. 0:03:35.800 --> 0:03:38.440 We also had jobs claims that came out today the 0:03:39.200 --> 0:03:41.720 highest in a couple of months. But I don't know, 0:03:41.720 --> 0:03:43.320 as long as I still see like a two twenty, 0:03:45.000 --> 0:03:45.400 I don't know. 0:03:45.760 --> 0:03:47.600 What did you take away? You're you're in range. 0:03:47.640 --> 0:03:49.880 The thing to remember about jobless claims this week is 0:03:49.960 --> 0:03:54.360 Thanksgiving was the prior week, and everybody took two days off, 0:03:54.480 --> 0:03:58.160 so nobody went and filed jobless claims during the Thursday 0:03:58.200 --> 0:04:00.320 and Friday, and so they all go last week when 0:04:00.360 --> 0:04:02.880 the office is really open, and we get this bump. 0:04:03.160 --> 0:04:05.120 This is aught of that. Did they teach you that 0:04:05.160 --> 0:04:06.200 in like economic school? 0:04:06.440 --> 0:04:10.480 Yeah, it's all classic holidays, holiday season. 0:04:11.200 --> 0:04:14.000 It is an issue called experience actually. 0:04:13.800 --> 0:04:19.039 Especially this time of year, because the holidays float, you know, 0:04:19.080 --> 0:04:21.560 they're they're at different times every year. And this was 0:04:21.600 --> 0:04:24.320 a very late Thanksgiving, which impacts retail sales. 0:04:24.040 --> 0:04:26.440 Which holidays that Yep, we heard that. 0:04:27.040 --> 0:04:29.080 Okay, so what are you looking at next? So we're 0:04:29.080 --> 0:04:31.359 going to get the FED on Wednesday? But then what 0:04:31.720 --> 0:04:33.839 I mean, like, what's going to be that market moving moment? 0:04:34.320 --> 0:04:35.880 Well, we're going to want to see what happens with 0:04:35.960 --> 0:04:38.760 retail sales next week, which is the same day as 0:04:38.800 --> 0:04:42.080 the first day of the FED meeting. Retail sales are 0:04:42.200 --> 0:04:46.359 expected to have risen. People still hanging in there, still 0:04:46.400 --> 0:04:49.039 spending money. And if that's the case, then that puts 0:04:49.080 --> 0:04:53.200 us in line for continued stronger than expected growth, which 0:04:53.240 --> 0:04:56.479 should be in theory inflationary, but raises the question of 0:04:56.520 --> 0:04:59.600 productivity is at rising and absorbing some of this, So 0:05:00.080 --> 0:05:01.919 a lot to look forward to in. 0:05:02.279 --> 0:05:03.080 The numbers ahead. 0:05:03.080 --> 0:05:07.159 But after the FED, I think everybody looks forward to Christmas, yes, 0:05:07.800 --> 0:05:14.040 and Hadika, and we will get PCE at the end 0:05:14.240 --> 0:05:17.120 of the at the end of the month, but we 0:05:17.240 --> 0:05:20.520 will be on that game. It's going to move markets. 0:05:20.839 --> 0:05:22.760 That's basically like, we're not really going to do much 0:05:22.800 --> 0:05:23.400 until the New. 0:05:23.400 --> 0:05:25.760 York fair enough, it's working that week between Christmas and 0:05:25.760 --> 0:05:26.080 New Years. 0:05:26.160 --> 0:05:27.840 You are pot you are. 0:05:27.920 --> 0:05:29.960 He does it because he takes every Friday off. 0:05:29.839 --> 0:05:33.920 In the summer, So that'sure. Yes, there's an idea. Yeah, 0:05:35.040 --> 0:05:36.680 it works at some point. All right, Thanks so much. 0:05:36.720 --> 0:05:42.640 Mike McKee, Bloomberger International Economics and Policy correspondent. Joining us there. 0:05:43.200 --> 0:05:47.080 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:05:47.160 --> 0:05:50.200 weekdays at ten am Eastern on Apple car Play and 0:05:50.200 --> 0:05:53.120 Android Auto with the Bloomberg Business app. You can also 0:05:53.200 --> 0:05:56.680 listen live on Amazon Alexa from our flagship New York station. 0:05:57.080 --> 0:06:01.400 Just say Alexa playing Bloomberg eleven thirty are good. 0:06:01.200 --> 0:06:04.039 Friends Over in Europe cutting rates yet again, the third 0:06:04.080 --> 0:06:07.360 straight meeting cutting rates, and it doesn't feel like they're 0:06:07.360 --> 0:06:10.920 cutting rates from any kind of particular position of strength. 0:06:10.960 --> 0:06:16.040 There's just some concern about economic struggles across much of 0:06:16.120 --> 0:06:19.520 Europe requiring lower rate. Let's break it down with Hugh Worthington, 0:06:19.560 --> 0:06:23.520 European rate strategists for Bloomberg Intelligence. He joins us from 0:06:23.560 --> 0:06:28.560 London via zoom Q. Again the third straight time, the 0:06:28.560 --> 0:06:30.000 ECB cutting rates here. 0:06:30.279 --> 0:06:30.920 What's your take? 0:06:32.480 --> 0:06:36.039 Yeah, well, the markets had quite an interesting reaction to it, 0:06:36.080 --> 0:06:39.480 actually because I think initially it looked at the headlines 0:06:39.480 --> 0:06:41.240 that came out of the ECB, as you said, we 0:06:41.560 --> 0:06:45.039 fully expected twenty five basis point rate cut. But there's 0:06:45.040 --> 0:06:47.200 a bit of change in language as well, basically saying 0:06:47.240 --> 0:06:50.760 that rates didn't need to stay restrictive going forward, which 0:06:50.800 --> 0:06:53.440 I think initially was taken to be sort of a 0:06:53.520 --> 0:06:57.400 very dubbish indication. And actually markets actually now moved to 0:06:57.520 --> 0:07:01.760 price a fifty basis point cut at their thirtieth of 0:07:01.839 --> 0:07:04.280 January meeting, which is a little bit harder than they 0:07:04.279 --> 0:07:08.680 had previously, basically being driven by worries about activity data. 0:07:08.760 --> 0:07:11.080 But right at the end of the meeting, Christine Leaguard 0:07:11.280 --> 0:07:13.160 did actually sort of put a little bit of spanning 0:07:13.240 --> 0:07:15.840 works and say that that suddenly they weren't so confident 0:07:15.880 --> 0:07:19.240 about the outlook for inflation, and maybe you know, the 0:07:19.280 --> 0:07:21.680 markets were probably or people were expecting her to be 0:07:21.920 --> 0:07:24.600 more saying that there are downside risks to inflation, and 0:07:24.640 --> 0:07:26.680 that seems to put the cats amongst the pigeons and 0:07:26.880 --> 0:07:29.760 basically set the front end bond deals or bondials generally 0:07:29.840 --> 0:07:33.800 in Europe, you know, trading higher again. So they've actually 0:07:33.800 --> 0:07:36.280 moved in a a ten basis point range around the 0:07:36.320 --> 0:07:38.320 ECB meeting, So you know, there's a little bit of 0:07:38.320 --> 0:07:40.000 a bit of mixed messaging going on. 0:07:40.320 --> 0:07:42.480 So it was really that last sentence and let's go 0:07:42.520 --> 0:07:44.720 through that one more time. So Christine Leaguard said that 0:07:44.760 --> 0:07:49.400 she wasn't they weren't as confident in the decline for inflation, 0:07:49.480 --> 0:07:51.520 that she was worried about upside risk. Is that what 0:07:51.560 --> 0:07:53.680 I'm reading It just seems like in Italy a ten 0:07:53.720 --> 0:07:56.000 basis point i'd jumped to the upside in the tenure 0:07:56.040 --> 0:07:57.360 feels a little extreme on that. 0:07:58.720 --> 0:08:01.800 Yeah, I think that also that move might have been 0:08:01.880 --> 0:08:03.640 a little bit something to do as well, that that 0:08:03.680 --> 0:08:06.400 people are concerned about this idea of pe P P 0:08:06.800 --> 0:08:10.840 pandemic que redemption. It's not happening from really actually basically 0:08:10.840 --> 0:08:14.440 she said next week onwards, and that pressuring on the spreads, 0:08:15.000 --> 0:08:17.640 that may be an element there. But yes, she said 0:08:17.680 --> 0:08:22.640 that she basically the I think the idea they that 0:08:22.680 --> 0:08:24.960 with a lot of the economist community is they look 0:08:24.960 --> 0:08:27.320 at the numbers for inflation going forward and they look 0:08:27.400 --> 0:08:30.520 like they're as flutters a pancake in Europe. But then 0:08:30.800 --> 0:08:33.640 she said that, and you know, I think everybody's assuming 0:08:33.679 --> 0:08:37.480 that basically the risks look really biased towards the downside. 0:08:37.679 --> 0:08:40.800 She basically refused to or didn't go along with that 0:08:41.360 --> 0:08:43.720 track of thinking, if you like. And that came in 0:08:43.800 --> 0:08:45.400 right at the end of the meeting, and that seems 0:08:45.400 --> 0:08:48.920 to have just literally it. Certainly it made the currency jump, 0:08:49.200 --> 0:08:51.280 and it made the yields jump. And what I think 0:08:51.320 --> 0:08:52.960 we've seen is a little bit whilst we are expecting 0:08:53.000 --> 0:08:56.679 a fifty basis point cut in January, what's markets maybe 0:08:56.720 --> 0:09:00.000 starting to do is just possibly looking for a little 0:09:00.040 --> 0:09:04.520 bit of a pause or less less aggressive cutting cycle 0:09:04.559 --> 0:09:06.640 there after that fifty basis point cut, and that that 0:09:06.720 --> 0:09:09.720 may be, you know what, the people that have taken away. 0:09:09.840 --> 0:09:12.040 We'll see if they sort of trying to lean against 0:09:12.040 --> 0:09:14.360 that as we get sort of reaction, which it tends 0:09:14.400 --> 0:09:16.040 to happen with ECB meetings the way they look at 0:09:16.040 --> 0:09:18.200 market reaction, they may not like it, they tend to 0:09:18.360 --> 0:09:21.640 try and lean against it in subsequent comments. Let's just 0:09:21.720 --> 0:09:22.880 keep an eye on that going forward. 0:09:23.200 --> 0:09:27.680 So Christine Legard, President of the ECB, calling out, you know, 0:09:27.800 --> 0:09:30.559 weaker than expected economic growth or just I guess maybe 0:09:30.679 --> 0:09:35.280 persistently weaker than expected growth here, what's kind of economic 0:09:35.320 --> 0:09:37.920 backdrop that's got the ECB concerned about growth? 0:09:40.320 --> 0:09:42.600 Well, I think we had a we had a it's 0:09:42.640 --> 0:09:45.319 actually people are expecting growth in eure to be pretty 0:09:45.320 --> 0:09:46.640 poor for a lot quite a long time, and it's 0:09:46.640 --> 0:09:48.960 actually held up pretty well. We've certainly had the Olympics 0:09:48.960 --> 0:09:52.080 in France and the summer may may have helped things 0:09:52.120 --> 0:09:54.640 a little bit. But more latterly, you know, I think 0:09:54.679 --> 0:09:59.040 that the there's just the higher instrates and the situation 0:09:59.080 --> 0:10:03.040 obviously into of the energy costs in Europe and the 0:10:03.520 --> 0:10:06.360 Russian Ukraine war and everything else has just weighed on things. 0:10:06.600 --> 0:10:10.840 And frankly, you know, the growth outlook has has It's 0:10:10.880 --> 0:10:14.520 going to be okay in twenty twenty four, you know. 0:10:14.640 --> 0:10:17.880 But it's basically that a lot of the PMI surveys 0:10:18.000 --> 0:10:21.000 and the survey data generally is pointing to at best 0:10:21.200 --> 0:10:25.160 sclerotic growth and in reality probably you know a little 0:10:25.160 --> 0:10:28.000 bit he possibly risk risk of contraction. Again, I think 0:10:28.000 --> 0:10:30.560 they looking at twenty twenty five GDP growth in the 0:10:30.600 --> 0:10:33.880 latest forecast was one point one percent. That was one 0:10:33.880 --> 0:10:37.480 point three percent from September time, and frankly, they'll probably 0:10:37.480 --> 0:10:39.240 be very lucky to be hitting that one point one 0:10:39.240 --> 0:10:40.200 percent set of target. 0:10:40.880 --> 0:10:43.360 Yeah, which really bigs the question. Also when do they 0:10:43.400 --> 0:10:46.319 actually start cutting because growth this week and they need 0:10:46.320 --> 0:10:50.360 to support the economy versus inflation has come down. Therefore 0:10:50.440 --> 0:10:53.480 they can remove that restriction. All right, Grace, thank you 0:10:53.480 --> 0:10:55.559 for explaining that to me, because I was so confused 0:10:55.640 --> 0:10:58.040 all throughout the presser and the statement and then looking 0:10:58.040 --> 0:11:00.439 at what happened to Italy. So I appreciate you. Hethington 0:11:00.720 --> 0:11:05.360 a Bloomberg Intelligence European rates, a strategist, but it is interesting. 0:11:05.400 --> 0:11:07.760 You know, you can't argue with the global cutting cycle. 0:11:08.320 --> 0:11:10.200 I think we're now just in how deep does that 0:11:10.280 --> 0:11:12.920 global cutting cycle go and where and does that actually 0:11:12.960 --> 0:11:15.480 should that inform where you put your money? 0:11:15.640 --> 0:11:18.079 Right in six station today we have the US Federal 0:11:18.120 --> 0:11:21.280 Reserve and the expectation is for a twenty five basis point. 0:11:21.320 --> 0:11:23.320 But you would like the day mat I. 0:11:23.360 --> 0:11:25.400 Got my right there, I got my calendar up there 0:11:25.440 --> 0:11:27.520 and everything I'm on top of it. Fed got is 0:11:27.800 --> 0:11:29.439 everything you need to know about the Federal Reserve. 0:11:29.640 --> 0:11:35.000 Right you're listening to the Bloomberg Intelligence Podcast. Catch us 0:11:35.040 --> 0:11:38.040 live weekdays at ten am Eastern on Apple Cardplay and 0:11:38.040 --> 0:11:41.120 Android Auto with the Bloomberg Business App. Listen on demand 0:11:41.160 --> 0:11:45.480 wherever you get your podcasts, or watch us live on YouTube. 0:11:46.480 --> 0:11:48.240 Alex Seal, Paul Sweeney, you live here in our Bloomberg 0:11:48.240 --> 0:11:51.200 Inactive Broker studio, streaming live on YouTube. It's head over 0:11:51.280 --> 0:11:53.920 there and Barry joins us in studio. She's a founder, 0:11:53.960 --> 0:11:58.280 manager partner of thread Needle. She invests money for a living. 0:11:59.280 --> 0:12:01.680 You know, I wrote in a chat, the surveillance chat 0:12:01.720 --> 0:12:03.400 this morning, I just dropped a note in and I said, hey, 0:12:03.480 --> 0:12:06.960 there is a palpable sense of optimism in this country 0:12:07.240 --> 0:12:10.760 since the election, and I think we've seen it in 0:12:10.840 --> 0:12:11.920 financial markets. 0:12:12.440 --> 0:12:14.400 Did you guys change your outlook. 0:12:14.040 --> 0:12:18.000 For investing opportunities risk post election? Here? 0:12:18.320 --> 0:12:21.320 I actually didn't. And while I'm optimistic, I don't have 0:12:21.440 --> 0:12:24.240 the same euphoria that I think we're seeing translate into 0:12:24.360 --> 0:12:27.319 the into these market outlooks. And one of the reasons 0:12:27.360 --> 0:12:30.199 actually is pertinent to today, which is I think we're 0:12:30.200 --> 0:12:32.199 going to see interest rates that are higher for longer 0:12:32.240 --> 0:12:34.800 than we expected, not just because of the inflation data 0:12:34.800 --> 0:12:37.120 we saw today, but because the noise around the policies 0:12:37.120 --> 0:12:39.319 that we think are coming in next year don't lend 0:12:39.320 --> 0:12:41.240 themselves in my opinion too, having a rate cut, and 0:12:41.280 --> 0:12:43.440 I think that changes the outlook for tech. I think 0:12:43.440 --> 0:12:46.760 it changes the outlook for some of these AI stories 0:12:46.760 --> 0:12:48.760 that have been getting the biggest pop over the last 0:12:48.760 --> 0:12:51.480 eighteen months. So I don't have the same you know, 0:12:52.480 --> 0:12:54.920 embrace of these massive all time highs that we're looking 0:12:54.960 --> 0:12:55.680 at for next year. 0:12:55.960 --> 0:12:57.720 So the other point though is, and we just heard 0:12:57.760 --> 0:12:59.640 from President like Donald Trump, is that we're going to 0:12:59.720 --> 0:13:00.600 get tax cuts. 0:13:00.679 --> 0:13:00.800 Yea. 0:13:01.040 --> 0:13:03.880 It feels like we're in a very animal spirit place 0:13:03.960 --> 0:13:06.000 right now I appreciate stacks are down today, but like 0:13:06.040 --> 0:13:08.559 I think there was a spac yesterday, like bitcoin in 0:13:08.559 --> 0:13:11.440 one hundred thousand, Like this isn't like a twenty eighteen 0:13:11.600 --> 0:13:14.400 feel in some respects does that offset? Like how does 0:13:14.440 --> 0:13:16.600 that meld with what you're saying? 0:13:16.880 --> 0:13:19.000 Yeah, well, when spacks are back and meme stocks are 0:13:19.040 --> 0:13:21.480 roaring again, then to your pint Alex, you know you're 0:13:21.480 --> 0:13:24.920 in this sort of place of I think we're in 0:13:24.920 --> 0:13:27.280 a bubble in some respects. Look, I think the at 0:13:27.320 --> 0:13:28.920 a minimum, I think we're going to see the tax 0:13:29.000 --> 0:13:31.640 cut extensions, right, we know that that's a certainty. It's 0:13:31.679 --> 0:13:33.280 I think there's a question as to whether we really 0:13:33.280 --> 0:13:36.840 see corporate tax rates coming down to fifteen percent. We'll 0:13:36.840 --> 0:13:40.440 see what the offsets are offsets are with tariffs. But 0:13:40.480 --> 0:13:43.679 I do think where we still have uncertainty. Right we 0:13:43.720 --> 0:13:45.720 don't know what's going to happen to big sectors like 0:13:45.720 --> 0:13:49.760 pharmaceuticals right when there's a change in healthcare policy. We 0:13:49.800 --> 0:13:52.120 don't really know yet what the impact of dog is 0:13:52.160 --> 0:13:53.880 going to be. If we're going to see margins getting 0:13:53.880 --> 0:13:56.800 squeezed in some big sectors like industrials of defense. So 0:13:57.559 --> 0:14:00.760 there is this optimism, but I do think that we 0:14:00.920 --> 0:14:03.280 have yet to understand what specific policies we're going to 0:14:03.280 --> 0:14:05.280 see from incoming President Trump, and until we do, I 0:14:05.280 --> 0:14:06.840 think it's difficult to make a real bed. 0:14:08.040 --> 0:14:10.240 Where do you see opportunities in the markets in general? 0:14:10.280 --> 0:14:12.360 Are there any sectors that are screening well for you 0:14:12.400 --> 0:14:13.199 guys these days? 0:14:13.280 --> 0:14:15.920 Yeah, there's some areas of consumer discretionary that I'm getting 0:14:15.920 --> 0:14:18.480 more excited about. So there's been a period of real 0:14:18.520 --> 0:14:20.480 noise around the state of the consumer. Over the last 0:14:20.520 --> 0:14:23.080 six months, we're getting more data that says it's sort 0:14:23.080 --> 0:14:26.240 of stabilizing to perhaps getting a little bit better as 0:14:26.240 --> 0:14:29.400 inflationary pressure abates for the parts of the population that's 0:14:29.440 --> 0:14:33.480 been hardest hit. Experiential is a place in alex I've 0:14:33.520 --> 0:14:35.000 talked about this with you in the past that I've 0:14:35.040 --> 0:14:37.960 always been excited about, and I think elements of travel. 0:14:38.040 --> 0:14:41.640 The cruise industry is one that was really, really well, 0:14:41.920 --> 0:14:44.280 really well. And this is what I actually bought, you know, 0:14:44.360 --> 0:14:46.800 Carnival Cruise is one I bought in the depths of 0:14:46.800 --> 0:14:50.080 twenty twenty. I bought airlines at the same time. Airlines 0:14:50.120 --> 0:14:52.680 I hung on too. Carnival I sold out of too early. 0:14:53.200 --> 0:14:54.960 And the reason was there was a period of time 0:14:55.040 --> 0:14:57.280 the recovery was much slower than it was for other 0:14:57.320 --> 0:14:59.360 parts of travel. People didn't want to be cooped up 0:14:59.640 --> 0:15:01.640 on these ships that are still that overhang of COVID 0:15:01.920 --> 0:15:04.360 and the leverage of these businesses, these ships. When you 0:15:04.400 --> 0:15:06.280 go buy a ship, you take out massive amounts of 0:15:06.280 --> 0:15:08.440 debt to finance them, and so I got spooked by 0:15:08.440 --> 0:15:11.720 the leverage levels. I now have conviction that the free 0:15:11.720 --> 0:15:14.600 cashlow profile, the margin profile, the ability to take price 0:15:14.600 --> 0:15:16.400 of this business is back where it should be. The 0:15:16.400 --> 0:15:18.600 deleveraging is happening. So that's why I've been going back 0:15:18.640 --> 0:15:20.040 into these kinds of names. 0:15:21.200 --> 0:15:25.120 Sorry you mentioned worried about tech than an AI. Yeah, 0:15:25.560 --> 0:15:28.080 I mean, do you is that really a levered play 0:15:28.360 --> 0:15:31.840 to rates? People talk about it as it's like a 0:15:31.880 --> 0:15:33.400 structural change. 0:15:33.920 --> 0:15:36.720 I think there are some cases where it is a 0:15:36.800 --> 0:15:39.000 levered play for rates. I think you've got some AI 0:15:39.600 --> 0:15:42.440 stories where the free cashlow profile where they part of the 0:15:42.440 --> 0:15:46.080 product that are to profitability remains not obvious. I think 0:15:46.080 --> 0:15:48.640 there are parts that are not leathered plays to rates. 0:15:48.680 --> 0:15:52.800 For example, the big tech businesses that are already free 0:15:52.840 --> 0:15:55.680 cashlow generative where they've gone through this twenty four month 0:15:55.720 --> 0:15:59.120 cycle of cost cutting and they're regress aggressing, aggressively reinvesting 0:15:59.160 --> 0:16:01.840 behind AI. That to me is not a levered play 0:16:01.840 --> 0:16:04.720 on rais. What that is, though, is setting up twenty 0:16:04.760 --> 0:16:06.440 twenty five for a real year of show me the 0:16:06.480 --> 0:16:08.880 money right, show me the productivity is coming through in 0:16:08.920 --> 0:16:10.920 your KPI is show me that your margin is truly 0:16:10.960 --> 0:16:13.360 being enhanced, showing you're getting adoption and you're taking price 0:16:13.400 --> 0:16:16.000 and this is not just becoming table stakes that I 0:16:16.000 --> 0:16:18.080 think is going to be the big question work for 0:16:18.080 --> 0:16:20.400 twenty twenty five is execution turning into dollars? 0:16:20.920 --> 0:16:22.760 On the consumer? What's your view on the consumer? How 0:16:22.760 --> 0:16:24.880 do you think the consumer's doing out there? Because if 0:16:24.880 --> 0:16:27.720 you're going along a cruise, yeah, company, I would think 0:16:27.760 --> 0:16:28.680 it's pretty constructive. 0:16:28.840 --> 0:16:31.680 Well, I'll answer your question in two parts. When it 0:16:31.720 --> 0:16:34.720 comes to cruises specifically, the value proposition for consumers is great. 0:16:34.720 --> 0:16:36.720 You're getting a vacation at a twenty five to fifty 0:16:36.720 --> 0:16:38.520 percent discount of the land based equivalent. 0:16:38.880 --> 0:16:41.360 So I say that again on cruise ship, I'm getting 0:16:41.360 --> 0:16:43.640 a vacation at a discount of the land based the 0:16:43.720 --> 0:16:44.480 land based equivalent. 0:16:44.560 --> 0:16:45.920 So if you were to go and fly. 0:16:46.280 --> 0:16:46.800 You're looking at that. 0:16:46.840 --> 0:16:48.600 Yeah, if you go to go fly to a hotel 0:16:48.800 --> 0:16:50.800 and that's saying Florida or a Vegas and then all 0:16:50.880 --> 0:16:53.400 you fly to a villa. Right, You've got the transportation 0:16:53.480 --> 0:16:55.120 and post a lot of these places. For cruises, you 0:16:55.160 --> 0:16:58.880 can drive to the ports of cool. It's all inclusive 0:16:59.560 --> 0:17:01.360 and if you you've got to think about it. Travel 0:17:01.360 --> 0:17:04.160 in the US has been really impacted by the cost 0:17:04.200 --> 0:17:07.320 of labor, by the services inflation that we've seen. A 0:17:07.320 --> 0:17:09.439 lot of these cruise lines are staffing with international labor. 0:17:09.760 --> 0:17:12.119 They're going out to nations outside the US to hire 0:17:12.160 --> 0:17:14.080 their staff, so that we haven't seen the same wage 0:17:14.080 --> 0:17:17.200 inflation that you've seen for domestic travel. So that's why 0:17:17.359 --> 0:17:19.800 when you're a consumer that's perhaps been pressured over the 0:17:19.920 --> 0:17:23.159 last year or so, this is actually an interesting value 0:17:23.160 --> 0:17:24.959 proposition for you if you want to take a vacation. 0:17:25.480 --> 0:17:27.400 More broadly, though, to answer your question, you know, I've 0:17:27.400 --> 0:17:30.320 been looking very closely at default rates on consumer credit cards, 0:17:30.680 --> 0:17:34.359 on auto loans, are looking at BNPL take up what 0:17:34.480 --> 0:17:37.880 that means for consumer spending. We saw these default rates 0:17:37.880 --> 0:17:39.920 creep up over the last sort of three to six months. 0:17:39.920 --> 0:17:41.720 It looks like they're now stabilizing if you look at 0:17:41.720 --> 0:17:43.600 the last amounts of data, so it feels as though 0:17:43.600 --> 0:17:45.439 there's a little bit of a reprieve coming. 0:17:45.520 --> 0:17:48.240 Does that a consumer call extend in to say retail? 0:17:48.320 --> 0:17:50.640 I mean talk about stocks on a terror. I can't 0:17:50.640 --> 0:17:52.359 tell you the number of days that Walmart has been 0:17:52.359 --> 0:17:53.480 in a fifty two week high. 0:17:53.760 --> 0:17:56.120 Yes, I love Walmart. I loved Walmart for a long time. 0:17:56.160 --> 0:17:57.920 I think Walmart's a little bit special and I think 0:17:57.960 --> 0:17:59.560 retail we have to break it down into a couple 0:17:59.560 --> 0:18:03.560 of considents parts Walmart. Let's look ahead to next year. 0:18:03.840 --> 0:18:06.920 Something like two thirds of Walmart's portfolio, by the way, 0:18:07.080 --> 0:18:09.600 is US sourced. So if we're now looking at retail 0:18:09.640 --> 0:18:11.960 and looking ahead to the tariff impact, I think Walmart's 0:18:12.000 --> 0:18:15.280 particularly well positioned in terms of its scale, it's ability 0:18:15.320 --> 0:18:19.000 to buy at lower costs, but also it's geographic mix. 0:18:20.280 --> 0:18:22.119 You look at retail like Macy's for example, and what 0:18:22.119 --> 0:18:26.600 happened Jesse. Department stores are still really really struggling. You 0:18:26.680 --> 0:18:30.080 look at certain specialty retail names. I never saw this coming. Abber, 0:18:30.160 --> 0:18:32.800 Crombie and Fitch has been on this unbelievable tear so 0:18:32.840 --> 0:18:35.159 you've had some brown turnarounds that have been very successful. 0:18:35.160 --> 0:18:38.600 You've got other retailers. Let's take the dollar stores, dollar generals. 0:18:39.200 --> 0:18:43.200 They're struggling right. Their share prices are absolutely in the toilet. 0:18:43.240 --> 0:18:44.720 So I think again, it comes back to what is 0:18:44.720 --> 0:18:47.000 the value proposition? How is a consumer being sliced and 0:18:47.040 --> 0:18:50.200 dice and who's playing to their strengths most effectively. 0:18:50.760 --> 0:18:53.040 One of my favorite deals back in the day doing 0:18:53.119 --> 0:18:55.280 deals was Live Nation putting that thing together. You like 0:18:55.359 --> 0:18:56.120