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Speaker 2: Joining us now as we slide into this CPI report,
Speaker 2: this important report. Constance Hunter, Senior Advisor Macro Policy Perspectives
Speaker 2: and of course always with the Economist Intelligence Unit, joins
Speaker 2: us today. I guess it's sort of like a mysterious report,
Speaker 2: to say the least. But is disinflation in place? If
Speaker 2: I see US and global yields moving.
Speaker 3: Higher, Well, the yields are probably moving higher for a
Speaker 3: number of reasons. But I think what we've seen is
Speaker 3: the disinflation and deeplyation in goods that's about to end, right,
Speaker 3: And I agree with Anna Wong. We're seeing softness and
Speaker 3: transportation services. That's about six percent of the waiting of CPI,
Speaker 3: and so the question is is that are the increases
Speaker 3: in goods and the fall and transportation going to offset
Speaker 3: each other When we look at core services though, we're
Speaker 3: still running a little bit above four percent year over year,
Speaker 3: So if we can.
Speaker 4: See what vets churche not yet, not yet, No.
Speaker 2: I will vets. They're way about four.
Speaker 5: Way about four percent? All right?
Speaker 6: So CPI ex food x energy year on year, and
Speaker 6: since this is two point eight percent, isn't that okay?
Speaker 7: Well, so I can live with that. So if we
Speaker 7: go back to that.
Speaker 3: So I was listening early this morning, and I forget
Speaker 3: the name of the guest you had on who was
Speaker 3: talking about the post nineties, the late nineties equity market, right,
Speaker 3: And in the nineties we had potential GDP was a
Speaker 3: bit higher, we had inflation between two and a half
Speaker 3: and three percent, and because growth was humming along, actually
Speaker 3: only two point eight percent was okay. The big question
Speaker 3: mark here is we are coming into potentially softer growth
Speaker 3: and even higher inflation going forward as a result of
Speaker 3: the tariffs.
Speaker 2: How could you forget? Julian and Manuel have everquor?
Speaker 7: I'm so sorry, Julian.
Speaker 2: Forgettable?
Speaker 5: My bad?
Speaker 7: You're right, Tom.
Speaker 5: So what do we do here?
Speaker 6: If you're the Federal Reserve, you see a print like
Speaker 6: two point eight percent, let's say it comes in there today.
Speaker 5: Do you feel like you've got more work to do?
Speaker 5: Do you feel like you can sit on your hands,
Speaker 5: do you need to cut rates?
Speaker 3: So what everybody is going to be looking for, and
Speaker 3: it's going to be challenging, right because these are lagging indicators.
Speaker 3: But what everybody's going to be looking for what are
Speaker 3: the clues not just about what it says where we
Speaker 3: would be going if we weren't having tariffs, but we're
Speaker 3: looking for clues about what is going to be inflation
Speaker 3: in May, June, July as a result of the tariffs.
Speaker 3: And so the details of this goods pricing is going
Speaker 3: to be really critical. And we have the amazing work
Speaker 3: by Cavallo and his colleagues on the real prices index, right,
Speaker 3: and if you look since March, we've seen import prices
Speaker 3: go up. But of course this allows domestic producers to say, well,
Speaker 3: I can also afford to raise my prices because my
Speaker 3: competition is raising their prices. Right, so you import overall inflation, I.
Speaker 2: Get forty two seconds, just as simple as I can.
Speaker 2: And this goes to Economics Intelligence Unit, all the wonderful
Speaker 2: work of ANA one here, your work with macro policy
Speaker 2: perspectives and Julia Cornado in your head, where is CPI
Speaker 2: twelve months out? Not your end, but just is it
Speaker 2: to Paul's point, is it three ish? Is it two
Speaker 2: point xi ish? You're going to make some news here
Speaker 2: four ish?
Speaker 8: No.
Speaker 3: I think the news here is that the growth shock
Speaker 3: is going to overtake the inflation shock. So you've asked
Speaker 3: the critical question, and I think twelve months out we
Speaker 3: could be looking at a two and a half percent inflation,
Speaker 3: provided that all of those core services that have been
Speaker 3: sticky continue to begin a little bit downward.
Speaker 6: Constin Hunter chief economists at the economist intelligence units still
Speaker 6: what it's in our Bloomberg Interactive Broker studio constants. We've
Speaker 6: had so much discussion about tariffs this year, has it
Speaker 6: impacted your GDP outlook at all? Because I'm not sure,
Speaker 6: actually I'm not even sure where we are with tariffs
Speaker 6: right now, but it seems like it's not as bad
Speaker 6: as it was maybe a couple of days ago.
Speaker 5: Has it impacted your GDP outlook?
Speaker 3: So what impacted our GDP outlook is the uncertainty that
Speaker 3: the the back and forth on tariff policy has caused.
Speaker 3: And of course this is intertwined with a bunch of
Speaker 3: dispersion regarding economists forecasts, and so it is that uncertainty
Speaker 3: that we think is going to drive the pullback in growth,
Speaker 3: and that's going to come from firms reducing capex because
Speaker 3: they're not quite sure where there where it.
Speaker 7: Makes sense to spend.
Speaker 3: We see from a we have a corporate network that
Speaker 3: are around the world. We have it in different cities
Speaker 3: and we've surveyed them and we ask them about in
Speaker 3: this tear for war, who are you going to choose
Speaker 3: to align with?
Speaker 9: You?
Speaker 3: You're going to choose to align with the US. Are
Speaker 3: you going to choose to align with China? Or are
Speaker 3: you going to try to stay neutral? And you know
Speaker 3: japan executive Japanese executives, yes, they want to align with
Speaker 3: the US. You look at executives at country companies based
Speaker 3: in other countries and they're reconsidering whether they want to
Speaker 3: align with the United States. That's going to impact capex.
Speaker 2: Here to your global view and constance hunters known for
Speaker 2: always taking things globally. My first chart of the day
Speaker 2: was generic forty years Japan yields are slipping away here, there,
Speaker 2: and everywhere. To me, that's lower fixed income prices. Do
Speaker 2: we underestimate the drift of the US ten year yield,
Speaker 2: the drift of Japan and other nations debt now.
Speaker 3: I think I think we shouldn't underestimate it.
Speaker 10: Right.
Speaker 7: We are seeing term premium come back.
Speaker 3: And if we go back to this nineties world we
Speaker 3: were talking about earlier, that is fine if you have
Speaker 3: stronger growth, stronger productivity. It has a dampening effect on
Speaker 3: growth if you don't have those things. If it's because
Speaker 3: of increased debt levels. And when we think about what's happening,
Speaker 3: we're looking at China really doing a huge stimulus to
Speaker 3: try to make up for this, increasing its debt levels.
Speaker 3: We're looking at Germany, you know, ending its debt break,
Speaker 3: increasing its debt levels. So there is a good reason
Speaker 3: that we are seeing term premium go higher here and
Speaker 3: around the world.
Speaker 2: A terrific work again always by the Top Live blog.
Speaker 2: It's one of the great premium products of the Bloomberg
Speaker 2: at Terminal Top Live and Chris Ansy driving forward all
Speaker 2: of that covered some of these We got to kind
Speaker 2: of says you got to react to some of these headlines.
Speaker 2: The annual gain and a headline CPI what our audience
Speaker 2: cares about at two point three percent is the smallest
Speaker 2: since February of twenty twenty one. In other words, before
Speaker 2: the big inflation surge of spring of twenty twenty one,
Speaker 2: but the trademard may reverse.
Speaker 7: That because of God, we're not seeing that yet.
Speaker 3: I was just glancing at the goods inflation from the
Speaker 3: release and from what they've the sort of top line numbers,
Speaker 3: and we're really not seeing any goods. We saw apparel
Speaker 3: continue to decline, we saw used cars continue to decline.
Speaker 3: It's not there yet, and the question is sort of
Speaker 3: when does that come? Does it come in May? And
Speaker 3: all indications are that it will be coming. And so
Speaker 3: we really go back to what's happening with Core, which
Speaker 3: was two point eight.
Speaker 2: Well, thank you, you drove the vics under eighteen. You're
Speaker 2: killing a constants hunter with us with the Economic Intelligence
Speaker 2: Unit today and Juliet Cornado of a micropolicy perspective seventeen
Speaker 2: point nine zero on the VIX. That's a whow statistic
Speaker 2: futures up nine down, futures off of UNC United Health
Speaker 2: showing a negative statistic nasdack up a solid four tenths
Speaker 2: of a percent. Paul I had a tantrum. He said, Tom,
Speaker 2: I'm sick and tired of John Lipsky and Constance Hunter
Speaker 2: and all these people at sixty thousand feet. Let's get
Speaker 2: the landing gear out with Matt Miskin Manual Life. Johnny
Speaker 2: Andcock Investments are co chief investment strategy. Matt tough question,
Speaker 2: what is your strategy this second third week of May.
Speaker 4: Well, we've gone from risk off to risk one in
Speaker 4: a matter of weeks, and it's been incredibly volatile for us.
Speaker 4: It's about just being patient here. We leaned a little
Speaker 4: bit into markets on the equity side amidst that drawdown
Speaker 4: because we didn't think it was that fundamental. But now frankly,
Speaker 4: we're back to the bond market and looking at disinflationary
Speaker 4: forces that CPI report did miss again. We actually had
Speaker 4: egg deflation, which is nice to see, and so we
Speaker 4: actually think you got to be patient here. Now things
Speaker 4: are back to being expensive on the risk side. Look
Speaker 4: to get some high quality income.
Speaker 2: He's too modest. Emily Rowland has nailed it with buy
Speaker 2: American by large cap. Stay the course, don't go to cash, Paul.
Speaker 6: Matt, What do we doing it in a fixed income
Speaker 6: space here? That to your treasures yielding during your four
Speaker 6: percent these days?
Speaker 5: Do you just hide out there? Do you try to
Speaker 5: take some credit risk here?
Speaker 4: We the short end, we don't mind. I mean, it's
Speaker 4: if that is attractive yields, you know, you can't you
Speaker 4: can't dismiss that. But also in the intermediate part of
Speaker 4: the curve, we just think it's completely hypnotized right now
Speaker 4: by political developments. It's so odd to us that the
Speaker 4: terror risk has come down and inflation's coming down, and
Speaker 4: yet the ten year treasure yield is accelerating higher. So
Speaker 4: it really has not been pricing in any disinflation in
Speaker 4: our view, and you're getting this really nice income stream
Speaker 4: again available to you in the bond market, and it's
Speaker 4: not it's blowing through all the risk issues that could
Speaker 4: be playing out. I mean, if you look at the
Speaker 4: risk assets right now, well back to twenty one times
Speaker 4: on the pe ratio of the SMP, high yield spreads
Speaker 4: are back to three percent. Industrials are the best performing
Speaker 4: sector now year to date, and financials are close behind
Speaker 4: risk assets. A price for perfection, high quality income has
Speaker 4: a lot of ability to run here. If this other
Speaker 4: side of the market gets a bit of a rotation
Speaker 4: or bid, again, what.
Speaker 6: Did you make of earnings there, Matt? Did they give
Speaker 6: you any confidence? Is it reflecting I guess the uncertainty
Speaker 6: of the tires situation we're in. What did you take
Speaker 6: away from earnings?
Speaker 2: You know, the US earning season has been great.
Speaker 4: It's just amazing how little that has been of attention
Speaker 4: from investors. So the US earning season is going out
Speaker 4: about fourteen percent year of the year growth clip, which
Speaker 4: is one of the best we've seen in years. And
Speaker 4: US equities are significantly underperforming their foreign counterparts. On the
Speaker 4: MSCIIFA earnings are down six percent year of a year,
Speaker 4: and that's the best performing part of the global equity market.
Speaker 4: So stocks are not following profits, they're following politics, and
Speaker 4: it's a lot of sentiment and to us, we're not
Speaker 4: going to be whip sawed by sentiment. We're going to
Speaker 4: follow the earnings. And even though the earnings have been good,
Speaker 4: the negative side of the story is that the earnings
Speaker 4: revisions have been coming down. So we started the year
Speaker 4: with nearly a fourteen percent earnings growth estimate for twenty
Speaker 4: twenty five. The streets view now it's nine. So our
Speaker 4: view is that's going to keep getting trimmed. S and
Speaker 4: p multiples just got expensive again. We want to look
Speaker 4: for high quality income and be patient here.
Speaker 2: Johnny Hancock was involved in all sorts of deals and
Speaker 2: negotiations at the Founding Fathers and you know, getting things
Speaker 2: done in the eighteenth century. He would have loved a big,
Speaker 2: beautiful tax bill. How does the tax bill coming? This
Speaker 2: is really the first time Paul I brought this up
Speaker 2: on the show. All of a sudden, folks, it's a
Speaker 2: summer legislative season. Matt Michigan. What's that going to do
Speaker 2: to the bond market. What's going to do to Emily
Speaker 2: Rowland's call in the equity market?
Speaker 4: You know, coming from Boston, we dislike taxes, just like
Speaker 4: almost all Americans. I mean, we're still getting over t
Speaker 4: tax over here, Tom, you know, legacy of Boston and
Speaker 4: ancestors here. But you know, in terms of Paul's see,
Speaker 4: it's been a give and take, and you know, tariffs
Speaker 4: we're going to be a negative on margins. They we're
Speaker 4: going to print margins. That's diminishing. Now we got a
Speaker 4: potential tax bill. At the end of the day, what
Speaker 4: we are seeing is that growth in profit margins are
Speaker 4: probably going to be limited. We just don't see much
Speaker 4: of a tax cut. We just see an extension of
Speaker 4: the current tax regime regime more likely, and it's just
Speaker 4: going to be one that you know, I think it's
Speaker 4: if you did a pie chart, it's ninety percent of
Speaker 4: investor intention right. Ten percent is everything else. But in
Speaker 4: our view, investors should be more attentive to global growth
Speaker 4: and fundamentals. And to us it's okay, but it is
Speaker 4: a decelerating growth environment We're likely to see over the
Speaker 4: course of the year.
Speaker 2: Where we in sixty forty somebody, I am sorry, I
Speaker 2: can't cite it, folks. Somebody had a great article this
Speaker 2: weekend on the death of sixty forty sixty percent equities,
Speaker 2: forty percent bonds go play golf outside Babson at the
Speaker 2: Wellesley Country Club. Matt miss can help me here is
Speaker 2: sixty forty still, Jermaine.
Speaker 4: It's great foundation still. In our view, it's just that
Speaker 4: the equity side of the portfolio, we think is going
Speaker 4: to have as a long term investor less return potential.
Speaker 4: We're coming off of amazing ten year fifteen year type
Speaker 4: returns out of the equity side, and the bond side
Speaker 4: has been brutal for like the last five years, and
Speaker 4: we just think that the bond side is going to
Speaker 4: take on more of a return driver over the next decade,
Speaker 4: the yields are a lot higher than they were five
Speaker 4: ten years ago. And then on the equity side, look
Speaker 4: if you want to look at credit or private debt
Speaker 4: or other things. Income as a return driver is our
Speaker 4: big theme over the next several years.
Speaker 2: Are buybacks, our share buybacks and income driver.
Speaker 4: It's okay, we'll take it as a capital return. It
Speaker 4: does help obviously, you know, reduce shares, increase earnings power.
Speaker 4: But at the end of the day, we've already done
Speaker 4: a lot of that. That has been a significant return driver.
Speaker 4: Capital appreciation. But good old dividends and income and.
Speaker 2: Yeah, thank you, Yeah, payments. Man, I got to go there,
Speaker 2: Thank you so much. Man Miskin with his manual life
Speaker 2: at Johnny Hancock running jug here folks. Paul Sweeney says,
Speaker 2: where's the beef, where's the dividend?
Speaker 6: Yep, exactly right. I've been asking Tim Cook that for
Speaker 6: a long time at Apple. Let's talk about the fixed
Speaker 6: income market, Tom, I'm.
Speaker 5: Looking at the ten year treasury. We're in about.
Speaker 6: Three basis points four point four to three percent and
Speaker 6: two people are talking about people are talking about it.
Speaker 6: I mean, you can actually talk to somebody in fixed
Speaker 6: income this days and have a reasonably interesting conversation.
Speaker 5: Years ago, you just get like zero percent return on
Speaker 5: the bond market. Whos to talk to these people?
Speaker 6: Kathy Jones, for example, she fixed income strategist that Charles
Speaker 6: Schwap nobody wanted to talk to her for like a decade.
Speaker 5: Now real yield in the fixed income space.
Speaker 6: Kathy, How are you guys at Charles Shwap thinking about
Speaker 6: the bond market these days.
Speaker 2: Now?
Speaker 5: I'm Paul.
Speaker 11: I think the key is that at the long end
Speaker 11: you still have some risk to the upside. We didn't
Speaker 11: see a tariff effect in this CPI report, which is great,
Speaker 11: but we do expect to see some impacts. Tariffs, even
Speaker 11: at a lower level, are still four or five times
Speaker 11: as high as they were before, so we'll probably see
Speaker 11: some tariff effect coming through towards the end of the year,
Speaker 11: and then we have all the budget talks to go through.
Speaker 11: So we think that the long end, the intermediate to
Speaker 11: long end, stays elevated. It doesn't necessarily have to go
Speaker 11: a lot higher here, but stays elevated because the term
Speaker 11: premium is going to stay up until we see some
Speaker 11: of those policy issues resolved.
Speaker 2: Hey, Kathy Jones review for our listeners and our viewers
Speaker 2: here this is important question, folks out the yield curve,
Speaker 2: Where does your own Powell and Company have impact? Don't
Speaker 2: give me it's just in the short term, belogny. Can
Speaker 2: they affect the belly of the curve? Cand your own
Speaker 2: power effect the price of the ten year note?
Speaker 11: Yeah, certainly, because they focus a lot on inflation expectations,
Speaker 11: and that's where you get the FED policy focus that
Speaker 11: moves out the yield curve. So the FED effects the
Speaker 11: yield curve certainly, very strongly out to two years, maybe
Speaker 11: three to five years, But when it comes to ten year,
Speaker 11: then you have to incorporate the inflation outlook and a
Speaker 11: bunch of other stuff. But keeping inflation expectations anchored, which
Speaker 11: I would say right now, I'm not sure they are
Speaker 11: fully anchored, but keeping those anchored is a big focus
Speaker 11: for the FED because that's what keeps the long end
Speaker 11: down relative to the short end.
Speaker 6: Tom, here's some inflation news that you can use. Eggs
Speaker 6: were down twelve point seven percent on the month, the
Speaker 6: biggest tumbles since nineteen eighty four. That's after the surgeon
Speaker 6: egg presses do the Avian flu. Of course, that's a
Speaker 6: coordinated Chris answer, seen editor for Bloomberg News. That's news
Speaker 6: you can use. I'll defer to call, of course.
Speaker 2: But that's why are they back to where they used
Speaker 2: to know? I took the photo of Kirkland eggs here.
Speaker 2: I'll get it out on social for Lisa Matteos. I
Speaker 2: know she's hanging on every word this morning. Yep. But
Speaker 2: the bottom line is, if you're paying seven forty nine
Speaker 2: a dozen for fancy eggs that were handpicked, you know,
Speaker 2: in a field in Connecticut, and you get your what is.
Speaker 5: A twelve point seven percent decline, then there's.
Speaker 2: Six dollars fifty nine. This is not happening. I can
Speaker 2: assure you. This is I'm reporting, folks, that's not happening.
Speaker 5: Kathy Jones have credit quality out there.
Speaker 6: I mean, with all this tariff talk and I'm concerned
Speaker 6: and some economic concerning that's bringing into the marketplace are
Speaker 6: fixing comp Infession is starting to worry about credit quality.
Speaker 11: We saw a little bit of windening of spreads, a
Speaker 11: fairly substantial widening of spreads as the tariff talk ratcheted up.
Speaker 11: They've come back a bit from there. We haven't seen
Speaker 11: them skyrocket, yet because of the economic data keep keep
Speaker 11: holding in pretty pretty well. So I think credit quality
Speaker 11: is peaked for the cycle, but it's definitely an investment rate,
Speaker 11: it's still pretty strong. I think in high yield it
Speaker 11: is kind of a mixed bag from here, but we
Speaker 11: haven't seen that downturn in the economy that would cause
Speaker 11: credit spreads to really widen significantly.
Speaker 2: From me, how do YouTube live chat? I mean, you
Speaker 2: know they don't care about you, they don't care about me. Well,
Speaker 2: one guy goes, I really don't care about John Tucker,
Speaker 2: But twenty four eggs it's shop right? Nine two doesn't?
Speaker 2: That's like five bucks? Yeah, it doesn't. I'm shopping at
Speaker 2: the wrong.
Speaker 12: Story, exactly right, kathyw Are there some sectors here that
Speaker 12: that kind of screen well for you guys here when
Speaker 12: you when you think about credit risk here, you.
Speaker 7: Know, we tend to look at it and aggregate.
Speaker 11: But I would say the areas that have held up
Speaker 11: well are still financials. Financials continue to be in very
Speaker 11: good shape.
Speaker 4: And those are.
Speaker 11: Issuers of not only investment grade bonds, but we're also
Speaker 11: issuers of say, preferreds, So you get to play either
Speaker 11: the higher risk, longer duration version of that in financials
Speaker 11: or the kind of intermedia term basic bond aspect of
Speaker 11: that the financials. But they're holding up pretty well.
Speaker 2: In this in this cacophony of news of international relations
Speaker 2: of Rianda and arrest. Kathy Jones, What is CFO is
Speaker 2: going to do on issuance? Do they say, let's go,
Speaker 2: let's go, let's go.
Speaker 11: You know, issuance is still holding up, But the opportunity
Speaker 11: set isn't that great, right because the curve sort of
Speaker 11: flattens out. You don't get a lot of advantage right
Speaker 11: now in issuing beyond maybe a little bit in the
Speaker 11: belly of the curve. So issuance is going to keep pace.
Speaker 11: But I don't think that these yields are so attractive
Speaker 11: that any CFO who hadn't already extended duration or hadn't
Speaker 11: already taken advantage of financing, would jump at these yields.
Speaker 2: Katy, thank you so much, greatly, greatly appreciate it. Kathy
Speaker 2: Jones with Charles Schwaber.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live
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Speaker 2: Joining us in the studio now, Brian Belski, He's here
Speaker 2: for two reasons. One is after the shock of yesterday.
Speaker 2: And also finally, the Minnesota Twins one eight games in
Speaker 2: a row and it's up there on a roll.
Speaker 8: It's amazing. I was there for one of them. Was
Speaker 8: a beautiful night in Minneapolis.
Speaker 2: It was well, are there blackflies at the Twins stadium
Speaker 2: in May? And is it like Cleveland where there's.
Speaker 8: We call them ganats? Yeah, yeah, yeah, it's uh.
Speaker 13: I went to several spring training games down at Fort
Speaker 13: Myers and then was up in Many for business last week,
Speaker 13: so I was able to catch a ball.
Speaker 2: Withhold says a book out, I'm not to invest and
Speaker 2: I'm not to invest is the panic and this is
Speaker 2: the modern disease that Brian and I are so against him,
Speaker 2: which is goady cash. How do you get back in
Speaker 2: the market if you're part of the goady cash crew?
Speaker 13: You buye and I think you try not to outsmart yourself.
Speaker 13: You know, We've been talking about this for years, Tom
Speaker 13: and everyone tries to time the market and try to
Speaker 13: be smarter than the market.
Speaker 8: The market is what the market is.
Speaker 13: And and thanks for sticking with us in terms of
Speaker 13: our view because many people did not, and we took
Speaker 13: a lot of heat in the media and a lot
Speaker 13: of heat internally, and a lot of heat from our clients.
Speaker 8: For all build Ian is such a lovely guy.
Speaker 13: I just did the ReConference keynote and he followed me,
Speaker 13: so I love that guy.
Speaker 8: Plus Minnesota guy. So you know, of course, but you know,
Speaker 8: and we we do what we do for a reason.
Speaker 13: We're investors. We're not going to react fear sells. People
Speaker 13: were making binary decisions based on emotion without having analysis,
Speaker 13: and the analysis said that, you know, the markets were
Speaker 13: not going to be as broken as everybody thought, and
Speaker 13: I think everyone was kind of once again jumping to conclusions.
Speaker 13: I really think, guys, that what's happening is we've kind
Speaker 13: of shocked ourselves into.
Speaker 8: A period of normalization, believe it or not.
Speaker 13: And so the periods that we've seen really for all
Speaker 13: intents and purposes, Tom and Paul since two thousand and
Speaker 13: seven have not been normal, not been normal. So we've
Speaker 13: been said saying for the last couple of years that
Speaker 13: we're entering normalization.
Speaker 6: So normalization is at a high single digit return expectation
Speaker 6: for equity markets.
Speaker 8: Yeah.
Speaker 13: I mean, if you go back historically, it's nine point
Speaker 13: six percent or nine point eight percent, they're all divided
Speaker 13: on there. So I think high single digit, low double
Speaker 13: digits for both the S and P five hundred and
Speaker 13: earnings growth. We said this in our year ahead piece
Speaker 13: for twenty twenty three that we published in November of
Speaker 13: twenty twenty two. At that report, guys, we said the
Speaker 13: new cyclical bull market has begun, part of our twenty
Speaker 13: five year secular ballmarket theme, which remains intact. We are
Speaker 13: now in year three of that cyclical bowl. And so
Speaker 13: at the end of the day, we think that you
Speaker 13: answer Tom's questions, don't try to outsmart yourself, be an investor.
Speaker 13: Stocks are higher twelve months from now, stocks are higher
Speaker 13: six months from now in this two shell pass.
Speaker 8: And oh, by the way, it looks like it's passed.
Speaker 2: Our financials a comfort stock for people's scared stiff.
Speaker 13: I think they are, Tom, because you know, a lot
Speaker 13: of people talk about deregulation going forward, but we talk
Speaker 13: about we think about how from a portfolio perspective, small
Speaker 13: men and large, we think there's massive under owning, under
Speaker 13: ownership of financials, and we think our major theme in
Speaker 13: large cap money would be scale in small cap moneys
Speaker 13: by small those small cat banks that have existing fantastic
Speaker 13: relationships and clean balance sheets. But we think it's the
Speaker 13: regional banks that are going to be interesting because they
Speaker 13: absolutely positively have to either get smaller or get bigger.
Speaker 13: And we think there's going to be a lot of
Speaker 13: consolidation twenty six to twenty seven.
Speaker 6: Hey, Brian, what did you make of earnings this cycle?
Speaker 6: Because we had a lot of companies kind of pulling guidance.
Speaker 6: It's kind of I guess at the height of this
Speaker 6: tariff uncertainty here, what did you make of earnings? Would
Speaker 6: you make of the guidance? How much can we hang
Speaker 6: or out on that?
Speaker 13: Well, the only difference now versus COVID where everybody pulled
Speaker 13: their guidance, they pulled on actually their forecast too. They
Speaker 13: haven't pulled their forecast. They just they came out with
Speaker 13: great earnings the majority above the long term trend in
Speaker 13: terms of.
Speaker 8: The first quarter.
Speaker 13: What we looked at as twenty twenty six numbers relative
Speaker 13: to twenty twenty five numbers, and we saw what we'd
Speaker 13: like to call this earnings revision low, meaning everyone.
Speaker 8: Dropped their numbers at once.
Speaker 13: So I think that at the end of the day,
Speaker 13: earnings are kind of tracking high single digit, low double
Speaker 13: digit increases for the S and P five hundred. We
Speaker 13: think small cap in MidCap can actually potentially do a
Speaker 13: little bit better, Paul. But I think this uncertainty with
Speaker 13: respect to what has occurred the first six months of
Speaker 13: the year five months of the year, I'm sorry with
Speaker 13: respect to the tariffs, is starting to unwind and you'll
Speaker 13: start to see more kind of consistent earnings. But again,
Speaker 13: I think earnings are set up to be under promise
Speaker 13: and over deliver, which is that's the kind of period
Speaker 13: that you want to be in.
Speaker 5: So, I mean, I'm trying to figure out. I'm reading
Speaker 5: all the bluebird stuff.
Speaker 8: I can't. Yeah, we are on terrors.
Speaker 5: I know we're higher. I don't know how much, but
Speaker 5: I know we're higher.
Speaker 6: So that's got to impact earnings margins, that kind of stuff.
Speaker 5: Is that reflected in the stocks?
Speaker 2: Do you think? Well?
Speaker 13: I think the one thing that people don't know is
Speaker 13: who's going to take on the cost. Is it going
Speaker 13: to come out of margins? It's going to be the
Speaker 13: consumer or the producer. I think so many people rush
Speaker 13: to judgments Paul that it was going to be the consumer.
Speaker 13: But what we're seeing is we're seeing that the consumer
Speaker 13: discretionary sector, I think from a bottoming perspective, looks very
Speaker 13: well in terms of earnings. That's exactly when you want
Speaker 13: to buy them quickly.
Speaker 2: Here the revenue persistency of MAG seven. I mean even
Speaker 2: if it's high single digit, which is pretty gloomy, but
Speaker 2: they if they sum up to a high single digit
Speaker 2: revenue persistency, that's constructive. Right. Yeah.
Speaker 8: Two things, actually three.
Speaker 13: You know, following me is one of the greatest stock
Speaker 13: pickers I've ever met, Nancy Tangler. I'm a great friend
Speaker 13: of mine, and I think we're entering into this period
Speaker 13: of stock picking and it means matter and you need.
Speaker 8: To have a lot of experience doing that. Number one.
Speaker 13: Number two, I've said this for a long time now,
Speaker 13: for at least ten plus years, that the MAG seven
Speaker 13: or the big cap tech stocks are.
Speaker 8: The new consumer staples.
Speaker 13: You go back to the nineties, we went to liquidity
Speaker 13: and where there was consistency, and maybe maybe their business
Speaker 13: models are changing a little bit. We're going to see
Speaker 13: that in Google clearly but I think the consistency of
Speaker 13: the of the revenue growth going forward and the liquidity
Speaker 13: that it offers investors, that's why you have to own
Speaker 13: some of these names.
Speaker 2: Brian, Thank you so much. Brian Belt, thanks with Speama
Speaker 2: Capital Markets. I got a tape safe somewhere if you
Speaker 2: when it was terrible out just saying just stay the course,
Speaker 2: just just be in there. We'll play that, you know,
Speaker 2: h end of the year, the vik the Vikings will
Speaker 2: be six and zero before they break the Northwest hearts
Speaker 2: one more time they've.
Speaker 8: Been doing that, and then finish seven in ten, seven
Speaker 8: in ten.
Speaker 2: Brian Belski, thank you so much. As he mentioned, Nancy
Speaker 2: Tegler coming up. This is what we like to do, folks,
Speaker 2: just back to back excellence.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Applecarplay.
Speaker 10: And Android Auto with the Bloomberg Business app.
Speaker 1: You can also listen live on Amazon Alexa from our
Speaker 1: flagship New York station, Just say Alexa play Bloomberg eleven thirty.
Speaker 2: Nancy Tangler, like Brian Belski, what's the market going to do? Boring? Okay?
Speaker 2: If you roll like Nancy Tangler, and eleven years ago
Speaker 2: you write the introduction to your classic book, I'm looking
Speaker 2: at three beds four bass, seven thousand square feet Paradise
Speaker 2: Valley eight five two five three Arizona, three beds four
Speaker 2: bass for twenty five million dollars. Okay, Paradise Valley, And
Speaker 2: there you were.
Speaker 5: Nancy says, we.
Speaker 2: Got to interrupt. The Women's Guide to Successful Investing was
Speaker 2: important with Paul Gray McMillan, and then it became even
Speaker 2: more important. What was it like fighting to get that
Speaker 2: book published? Do you have to yell and screen? Did
Speaker 2: Laffler have to call up and beat on someone?
Speaker 14: Thank you for that, Tom, No, No, not at all.
Speaker 14: It was I think we were early on the whole
Speaker 14: issue of women, transfer of wealth to women.
Speaker 2: This a huge deal.
Speaker 14: And then the second edition, you know, happily they came
Speaker 14: to me and just I mean, you've written a ton.
Speaker 10: You know.
Speaker 14: It's harder to write a second edition than the first
Speaker 14: edition because you have to edit and then you have
Speaker 14: to add in topical stuff.
Speaker 7: But it's been it's been fun and important.
Speaker 2: Nobody cares. We want a third edition right now. I
Speaker 2: want you to talk to women after three months in
Speaker 2: a lifetime events and all the stereotypes out there that
Speaker 2: still exist. Yeah, how do women get hurted to understand equities?
Speaker 10: Yeah?
Speaker 14: Well, I think the research shows women make better investors
Speaker 14: than men. Let's just say we're as good of investors,
Speaker 14: because I just followed one of the greats.
Speaker 7: Brian Belski.
Speaker 14: But they need to give themselves permission, because women have
Speaker 14: excused themselves from the conversation. Average age of a widow
Speaker 14: is fifty nine in the US. I was fifty nine.
Speaker 14: Happily I'd been managing all the family wealth. But most
Speaker 14: that's a bad time to start learning. So they need
Speaker 14: to read my book, and then they need to listen
Speaker 14: to your show, and they need to read barons.
Speaker 2: The stereotypes are there's just like an auto ad or
Speaker 2: something I can't remember, and the guys worried about like
Speaker 2: three tuitions mortgages in that and the woman wants to
Speaker 2: figure out where to get a diet of coke. It's
Speaker 2: not funny, Paul. This is like, this is like the
Speaker 2: most important conversation we can have.
Speaker 6: Nancy, what did you What were you telling your clients
Speaker 6: when we actually had a market a couple of weeks ago,
Speaker 6: down twenty percent from it's in recent highs.
Speaker 5: That's a bear market for a lot of people. A
Speaker 5: lot of folks aren't.
Speaker 6: That experience with that, right, What kind of conversations were
Speaker 6: we having with them then and now?
Speaker 14: Well again, like Brian, we're long term investors, so we
Speaker 14: were buying okay, and you know, we were able to
Speaker 14: pick off a number of names like Microsoft, Talenteer twenty
Speaker 14: percent ago, just.
Speaker 7: A few weeks ago.
Speaker 14: So I think I've been hearing that the tech trade
Speaker 14: is over for the last three years.
Speaker 2: I was gonna say three decades.
Speaker 14: Or maybe three decades, but certainly the last three were
Speaker 14: every summer we get a bear market in technology because
Speaker 14: that's it.
Speaker 7: We're done.
Speaker 14: We're doing and we've just been in buying it and
Speaker 14: it's been great for our clients. And we also have
Speaker 14: a lot of history of outperformance, so that gives them
Speaker 14: confidence in a period like that.
Speaker 5: So what do we do now?
Speaker 6: I mean, I think tariffs are going to be lower
Speaker 6: than maybe we initially feared, but they're still higher than
Speaker 6: they were before. I guess that's a drag on economic growth.
Speaker 6: I'm not sure how much I think everybody's trying to
Speaker 6: do the math right now? What do you do in
Speaker 6: this kind of environment.
Speaker 14: Yeah, So, I mean I'm long for the days when
Speaker 14: we had a FED that used price level targeting like
Speaker 14: Wayne Angel, remember him, the.
Speaker 2: Late Waite Angel who just died. We just lost Wayne Angel.
Speaker 2: Explain his contribution off of Milton Friedman to our economic thoughts.
Speaker 7: Yeah, well he was forward looking, as you know.
Speaker 14: I mean he was looking at the currency exchange rates,
Speaker 14: commodity prices to really guide FED policy instead of looking
Speaker 14: at last month's data, which is what we have right now.
Speaker 14: And so I think when you when you have a
Speaker 14: FED that says tariffs, I can't do anything until I.
Speaker 7: Know what they are.
Speaker 14: That's not how this works. And so I think you
Speaker 14: have to be looking at things that are relevant.
Speaker 2: Is we have Paul mentioned it eloquently, if we have
Speaker 2: this walk back on the trade war? We had John
Speaker 2: Lipsky on earlier, it was much more apolitical and you
Speaker 2: know than the Laffler Tangler Republican heritage. Where is your group?
Speaker 2: Where is your tribe in Pleasant what's it called Pleasant Valley?
Speaker 2: Where is your tribe? Post Trump? Is it like we
Speaker 2: revert back to what we knew? Or do we go
Speaker 2: on to something different? Within a conservative economic ethos.
Speaker 8: Yeah.
Speaker 14: Well, I mean I personally think tariffs are bad. They're
Speaker 14: an indirect tax on the consumer tax. So I do
Speaker 14: think it would be much more constructive to focus on
Speaker 14: growth and focus on reasonable tax levels. So you know,
Speaker 14: if we get the extension of the TCJA and additional
Speaker 14: tax cuts which are in there, the salt deduction goes up,
Speaker 14: you get no tax on tips and social security. Potentially
Speaker 14: in overtime that will be I think helpful to growth.
Speaker 14: But we as a nation need to focus on spending discipline.
Speaker 14: We have none. This bill looks like it's going to
Speaker 14: be additive to the deficit, and we have to focus
Speaker 14: on growth and sent people. I love this idea of
Speaker 14: opening an account for every newborn in America where they
Speaker 14: learn to invest at a very young age and they
Speaker 14: see the power of compounding.
Speaker 6: Well, my daughter's gotten her three brothers to focus on
Speaker 6: this stuff.
Speaker 5: She's the only one that's got her.
Speaker 6: At Austria, see women exactly, she's she does the taxes
Speaker 6: for them as well.
Speaker 5: She saw some turbo tax. What do you think about
Speaker 5: the consumer? We're going to hear about the consumer on
Speaker 5: Thursday year.
Speaker 14: Yea, Paul, they are I mean, I think you know,
Speaker 14: we saw some pull forward. Custom duties in April were
Speaker 14: over sixteen billion versus eight billion the month before, So
Speaker 14: we didn't see it in first quarter earnings, but we
Speaker 14: are going to see it, I think in second quarter.
Speaker 14: But that said, I think the consumer continues to spend.
Speaker 14: The great eddi Ard Denny's comment that they.
Speaker 2: Spend there yesterday never he lifted, Yeah, I think off
Speaker 2: the top of my man's sixty five hundred.
Speaker 14: Yeah he did, and Boldman just raised theirs to sixty one.
Speaker 14: I don't live in that world, like I have to
Speaker 14: produce performance and so I can't change and wiggle. But yeah,
Speaker 14: and he said they spend when they're depressed because it
Speaker 14: produces dopamine. So I think we'll continue to see the
Speaker 14: consumer spent.
Speaker 2: I need your opinion on this. I think it's really important.
Speaker 2: I put out in a lovely, lovely small village in Massachusetts,
Speaker 2: somebody has a barbie garden. They have like hundreds of barbies.
Speaker 2: We've actually donated to it. I think we donated Barbie
Speaker 2: Ferrari with Ken and the whole thing. But like it's
Speaker 2: like hundreds of Barbies in their yard. People come by
Speaker 2: and stare at it. How many your thoughts on thirty
Speaker 2: barbies or three barbies? Is this what we've come to
Speaker 2: an American consumption? I'll bet you out of you know
Speaker 2: where you were at Point Loman before that you had
Speaker 2: what forty or fifty barbies.
Speaker 7: I wasn't really a barbie gal.
Speaker 2: No.
Speaker 7: I wanted to be a pilot in the Navy.
Speaker 2: So well they had Barbie top time.
Speaker 14: I think sometimes our administration, I'm gonna say it this way,
Speaker 14: has an unfortunate way with words.
Speaker 7: And that was just that was a statement I think
Speaker 7: to make.
Speaker 14: And I think we don't want that kind of We
Speaker 14: want growth, we don't want that kind of Well, we'll
Speaker 14: have to pull back on our own personal consumption, but
Speaker 14: the government doesn't have to. So I think we have
Speaker 14: to get some of this stuff right sized. I think,
Speaker 14: you know, once you get to Washington, you just lose touch.
Speaker 14: I interviewed for a position at the BED and the
Speaker 14: guy said to me, look what we've done for America.
Speaker 7: He was ex Goldman Sachs. We lowered rates.
Speaker 14: And I said, well, that's great if you if you
Speaker 14: are invested in risk assets, but not if you're retired
Speaker 14: with a certain assumption of interest rate, you know, income
Speaker 14: on your investments and now you're a greeter at Walmart.
Speaker 14: So they need perspective like I think they need to
Speaker 14: do time in Mid America.
Speaker 2: Can you come back again? We need a third edition
Speaker 2: of successful investigation, Nancy Tegler with this.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Applecarplay.
Speaker 10: And Android Auto with the Bloomberg Business app.
Speaker 1: You can also watch us live every weekday on YouTube
Speaker 1: and always on the Bloomberg terminal.
Speaker 2: This is a joy. What we do on surveillance around
Speaker 2: the busy schedule of our guests is wait till we
Speaker 2: can talk to them for an extended moment. And we
Speaker 2: have that with John Lipsky out of Iowa years ago
Speaker 2: in Wesleyan in Connecticut, and of course forever identified with Stanford.
Speaker 2: He attended the recent John Taylor conference with Michael McKee.
Speaker 2: John Lipsky's contribution to our public policy scheduled and less
Speaker 2: than scheduled, has been profound. At the International Monetary Fund
Speaker 2: and of course forever identified with JP Morgan Economics. John
Speaker 2: Lipsky thrilled to have you with us today.
Speaker 9: You're too kind, but it's a pleasure to be here.
Speaker 2: I got to start with the great loss of Joseph Nye.
Speaker 2: I want you to explain in the trenches of the IMF,
Speaker 2: you're speaking Illinois, You're working with a guard to write
Speaker 2: the ship. What Joseph ny contributed to international relations.
Speaker 9: Well, I've ran across him in a couple of ways. One,
Speaker 9: of course, the renowned for his inceptualization of the idea
Speaker 9: of soft power in international relations as opposed to simply
Speaker 9: hard power. And of course, in the context of the IMF,
Speaker 9: which was a foundational institution creating the post World War
Speaker 9: two order that restored the global economy and produced in
Speaker 9: the sixty years after World War Two the fastest sustained
Speaker 9: global economic growth probably ever, that the United States leadership
Speaker 9: in creating the institutional grid that was the foundation of
Speaker 9: the so called rules based international order was a reflection
Speaker 9: and a powerful and reflection of the US soft power.
Speaker 9: Joe was for many years also as widely as a
Speaker 9: professor at Kennedy School at Harvard and an essayist. Also
Speaker 9: was the US head of the Trilateral Commission, and so
Speaker 9: took an active but behind the scenes.
Speaker 2: In a way role of.
Speaker 9: Keeping certainly an international foreign policy elite together.
Speaker 2: John, let's ski let me ask you the money question
Speaker 2: that all listening to us across this nation want to know.
Speaker 2: After Trump, do we revert back to Ellipsky international relations
Speaker 2: and structure or do we go on to something new?
Speaker 9: Well, I don't know what Ellipsky structure would be, but
Speaker 9: the really, Tom, you know, at the in the in
Speaker 9: the first Trump administration, when there was already a degree
Speaker 9: of let's let's say, shock and uncertainty created about where
Speaker 9: the US policy was going. Uh, it was commonplace for
Speaker 9: Americans to tell foreigners, well, it's it's it's gonna it's
Speaker 9: gonna be even if Trump is gone, it's not going
Speaker 9: to be back to being the same again. And people
Speaker 9: would say, well, what do you mean exactly, and the
Speaker 9: answer would be I'm not sure either. Now we would
Speaker 9: be doubling down on that. Uh, let's let's look at
Speaker 9: the many ways that we would take a look at
Speaker 9: try to figure out what comes next. Right now, the
Speaker 9: President is enunciating and acting act acting energetically to pursue
Speaker 9: what he would call American First, America First. But Secretary
Speaker 9: of the Treasury Scott Bessen describes as America first doesn't
Speaker 9: mean America alone. Well, that that's good, but what exactly
Speaker 9: does it mean? And it's obvious that we don't know
Speaker 9: the answer, so we don't yet know what Trump two
Speaker 9: point zero is actually going to be. For example, let's
Speaker 9: take this in relation to the kind of question you
Speaker 9: were asking Tom the US and the World Trade Organization?
Speaker 9: Where are we on that reciprocal tariffs appear to be
Speaker 9: not a policy that's not compliant with one of the
Speaker 9: fundamental aspects of the World Trade Organization agreements, which is
Speaker 9: the principle of most favored nation. In other words, you
Speaker 9: don't go around discriminating country by country with differential tariff
Speaker 9: rates on the same product. That creates that inhibits international trade,
Speaker 9: creates a mess. Well, we seem to be pursuing that.
Speaker 9: So what does that mean with regard to such fundamental
Speaker 9: things as our support for the wt O.
Speaker 2: Well, forgive me John Lipsky with us here, folks, who
Speaker 2: welcome all of you across the nation on YouTube around
Speaker 2: the world. Good morning as well. In one of the
Speaker 2: great charms, here is ages ago in the Salmon Brothers Building,
Speaker 2: Building seven. Ye, Paul Sweeney got to walk the halls
Speaker 2: of John Lipsky.
Speaker 6: I was a lowly investment banking grunt that John Lipsky
Speaker 6: as a night there.
Speaker 5: So hey, John, what does it mean? I'm looking at
Speaker 5: the US dollar here.
Speaker 6: Stocks have bounced back, bonds have bounced, yields to come back, but.
Speaker 5: The dollar is still kind of under pressure here. What
Speaker 5: do you make of the US dollar here in the
Speaker 5: global economy?
Speaker 9: Well, it seems to me obviously markets are trying to
Speaker 9: find their way here. But I would I would say
Speaker 9: that there's there's little doubt that there has been a
Speaker 9: substantial reassessment of the outlook for the US economy that
Speaker 9: involves not just domestics, not just foreign investors, but domestic investors.
Speaker 9: But it has had an impact on the dollar. And
Speaker 9: I would say to roll the tape back to last
Speaker 9: fall when or even at Dobbos in January, the dominant
Speaker 9: theme was US exceptionalism. How is it that the US
Speaker 9: has faster productivity growth, more new business formation, stronger growth
Speaker 9: in business investment, etcetera. And entirely positive, not entirely, but
Speaker 9: substantially in positive view of the US economy, especially in
Speaker 9: differentiated form, it's that the US is doing It's not
Speaker 9: perfect a long way, but doing better than everybody else
Speaker 9: that has been fundamentally reassessed by policy developments that have
Speaker 9: caused investors everywhere to number one, look at to reassess
Speaker 9: US growth downwards, reassess inflation outlook upwards, and create more
Speaker 9: institutional uncertainty. Tom had mentioned earlier that I was last
Speaker 9: week in attending last week attending two conferences at Stanford University,
Speaker 9: and we heard presentation from Stanford professors who are measuring
Speaker 9: what they call the convenience premium for US Treasury securities
Speaker 9: that was formed one of the evidence of the investors
Speaker 9: of viewing not just the US economy but US markets
Speaker 9: is exceptional, and that seemingly has disappeared. So in other words,
Speaker 9: you could say a loss of safe haven or diminishment
Speaker 9: diminishment of the safe haven aspects of the US market.
Speaker 9: But I would say what you've seen in the dollar
Speaker 9: is again a fundamental reassessment of the differential view of
Speaker 9: the US economy, and not in a favorable way, to
Speaker 9: say the least. Hey John added on to that last word. Here,
Speaker 9: the degree of uncertainty about where policy is going. Since
Speaker 9: this has essentially been a policy driven upset, it remains
Speaker 9: pretty substantial.
Speaker 6: Hey John, I think you and I and most of
Speaker 6: our listeners, most of our viewers, we grew up in a.
Speaker 5: World where globalization was the story.
Speaker 6: You had to do your time in Tokyo, you had
Speaker 6: to do your time in London. This is a global economy,
Speaker 6: global market.
Speaker 5: Is that over?
Speaker 9: Oh no, not at all. As you see, the rest
Speaker 9: of the world is still obviously has to take important
Speaker 9: account of what the world's largest economy is doing, especially
Speaker 9: since it seems intent on altering at the very least,
Speaker 9: if not disrupting, the institutional frameworks that were created largely
Speaker 9: with the support of the United States. The rest of
Speaker 9: the world is continuing to trade. In other words, for example,
Speaker 9: within Asia, the growth of interregional trade continues to outstrip
Speaker 9: that of trade with the between regions. Especially in the US. Also,
Speaker 9: trade and services has continued to grow rapidly, and our
Speaker 9: trade policies that have caused so much upset have exclusively
Speaker 9: looked at trade in goods. But it's trades and services
Speaker 9: that forms part of the most interesting opportunity for the
Speaker 9: global economy.
Speaker 2: John, I want to get this in. I think it's
Speaker 2: just too important. Your heart and soul is of Iowa.
Speaker 2: Your mother's public office in Iowa, ages Ago, I have
Speaker 2: family on the Mississippi River in western Illinois, et cetera.
Speaker 2: And the basic idea and I go back to Smaller's
Speaker 2: classic essay in the fifties of isolationism in America, and
Speaker 2: it comes from Iowa. It comes from the Midwest. When
Speaker 2: you and I were kids. It was led by the
Speaker 2: Chicago Tribune. I want you to speak to the new
Speaker 2: breed of American isolationism. Now, how does that on the end? Now?
Speaker 9: Yeah, Tom, It's an excellent question, and it's a puzzlement
Speaker 9: to me thinking, let's let's keep it with Iowa.
Speaker 2: Iowa.
Speaker 9: Iowa remains an agricultural state in the sense of its products,
Speaker 9: even though actually direct direct farming is a very now
Speaker 9: is a very very small part of the labor force.
Speaker 9: But still US agricultural exports are an absolutely vital part
Speaker 9: of the Midwest farming and for Iowa, and for exact ample,
Speaker 9: the last time there was in Trump number one, when
Speaker 9: there was a big upset with agricultural trade with China,
Speaker 9: the administration ended up having to spend tens of billions
Speaker 9: of dollars in compensation, among others, to Iowa farmers for
Speaker 9: their lost income, and at the same time there has been.
Speaker 9: When I was growing up, Tom, let's just say what
Speaker 9: you would call there very there weren't very many folks
Speaker 9: of color around. But today at my old high school,
Speaker 9: I think it's it's considered exceptional if the valedictorian is
Speaker 9: one of those those very talented Asian kids who have
Speaker 9: settled in the wake, especially in the wake of the
Speaker 9: Vietnam War. And you can find in the construction industrial
Speaker 9: and let's see what's happening now and in the packing
Speaker 9: industry in Iowa a huge influx of Latin workers who
Speaker 9: are viewed as really very much multi the work, hard
Speaker 9: working folks. So it's and yet I was voted overwhelmingly
Speaker 9: for Trump, So it's as you would say, if call
Speaker 9: it isolationist seems jarring. But still it's certainly more nationalists
Speaker 9: and buying into the idea that the US has been
Speaker 9: taken advantage of by foreigners and by the elites.
Speaker 2: Thank you so much. And just as one example there
Speaker 2: of the change of the Middle West is of course
Speaker 2: the wonderful Jim Young Kim, who was at Dartmouth College
Speaker 2: and then the World Bank, serving right when John Lipsky
Speaker 2: was serving as well. John Lipsky, thank you for extended
Speaker 2: comments today, remembering Paul Sweeney a few years ago.
Speaker 8: Back to Brothers exactly as well.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Apple Corplay.
Speaker 10: And Android Auto with the Bloomberg Business app.
Speaker 1: You can also listen live on Amazon Alexa from our
Speaker 1: flagship New York station. Just say Alexa Play Bloomberg eleven thirty.
Speaker 6: Brian used a principal at Madison Wall. Brian, you're based
Speaker 6: in Portland, Oregon.
Speaker 5: I have no idea why you were there. I love
Speaker 5: the town, but you're.
Speaker 2: In New York.
Speaker 5: I am Laura Martin, our good friend from Needham. She's
Speaker 5: in New York. Why are all you media mobiles in
Speaker 5: New York this week?
Speaker 2: You don't like to hang out together?
Speaker 5: And it's upfront? Oh that that yeah? Tell us what
Speaker 5: upfront is? And why do we even have an upfront
Speaker 5: season anymore? Tell us what upfront is?
Speaker 2: Right? Well?
Speaker 15: The upfront is this period of time where the world's
Speaker 15: largest advertisers and the largest sellers of advertising in the
Speaker 15: United States and TV in particular, come together. The TV
Speaker 15: network owners and YouTube and Amazon all do big song
Speaker 15: and dances I think Lady Gaga is going to be
Speaker 15: at YouTube's broadcast tomorrow.
Speaker 5: Wow.
Speaker 2: And yeah.
Speaker 15: Basically they show what they're they've got planned for the
Speaker 15: next year and then and it's the time. Once they've
Speaker 15: done that, then everyone can forecast what they think audiences
Speaker 15: are going to be and then budgets basically start getting negotiated.
Speaker 15: That's what the whole upfront period is about.
Speaker 2: Bring us up to date with your historic call that
Speaker 2: TV will not go away. Well, we're brilliant on that.
Speaker 2: What's a new view from Brian Weezer.
Speaker 15: Well, it's a gradual erosion. I mean, I still think
Speaker 15: that the overall industry can grow the top line by
Speaker 15: let's say one percent. If you included streaming growth of
Speaker 15: call it ten percent, and you assume that subscription fees
Speaker 15: from PATV declines by call it six or seven percent,
Speaker 15: and ad revenue declines by call it three percent, the
Speaker 15: overall medium grows.
Speaker 2: By about a percent. So it doesn't die.
Speaker 15: It just evolves, and the profit margins might shrink, but
Speaker 15: it doesn't go away.
Speaker 5: If I'm CBS and Tom, some of these after parties
Speaker 5: for these upfronts, legendary stories I cannot tell.
Speaker 15: But that's what the NewYork Post is for exactly?
Speaker 5: Talk to just about I mean, what are the networks
Speaker 5: where they allocant? Are they spending money on their CBS
Speaker 5: television network programming? Are they putting everything on streaming these days? Well?
Speaker 15: I think that when you look at some of the
Speaker 15: networks like NBCU, it's kind of surprising, if not shocking,
Speaker 15: just the share of the content budget going to peacock
Speaker 15: versus going to the broadcast creative budget. Yeah, exactly, we're
Speaker 15: we're paying for content other than sports. Now, sports rights
Speaker 15: continues to be heavily skewed towards broadcast networks and cable networks,
Speaker 15: and that's primarily because you can get people to pay
Speaker 15: for the services right to access it, and the leagues
Speaker 15: want the reret and the reach of broadcast.
Speaker 2: Still. So if I go over to Michael's today for
Speaker 2: lunchare the calcald and all that they put me in
Speaker 2: the way back? And I'm back with the D class
Speaker 2: celebrities upfront? Are the fancy people you talk to leading
Speaker 2: the upfront charge? What are they talking about? Is it
Speaker 2: like one? They're talking about YouTube? What's the theme in
Speaker 2: the hallways? Here's the fun thing?
Speaker 15: Even though YouTube may very well have the biggest single
Speaker 15: event this week, it's really not part of the upfront
Speaker 15: CAN conversation, which is kind of weird, right. They want
Speaker 15: to be part of those conversations. They might be bigger
Speaker 15: than NBCU and Disney and Paramount combined, but they're not
Speaker 15: really part of the overall TV budget process because most
Speaker 15: marketers don't think of them as TV yet.
Speaker 6: See, that is so odd because that's where the I
Speaker 6: used to just say to people, wherever the eyeballs go,
Speaker 6: that's where ad.
Speaker 2: Dollars will go.
Speaker 5: And it's so slow, right, it's because it's different.
Speaker 15: Though in the eyes of the typical marketer, mister Beast
Speaker 15: might be comparable, but mister Beast by himself, Beast by himself,
Speaker 15: mister beat is relatively small. And so because you're buying audiences,
Speaker 15: not programs, when it comes to YouTube, it's hard to
Speaker 15: wrap your head around what you're getting. That's part of
Speaker 15: the issue.
Speaker 2: We're living this every day, folks, and we really treasure
Speaker 2: that you're on YouTube where there's good around the world,
Speaker 2: particularly in the Pacific. Rim evening, Good morning to your
Speaker 2: New York time on YouTube. Subscribe to Bloomberg Podcast if
Speaker 2: Brian Weezer saw our numbers, he'd be calling us exact
Speaker 2: beast exactly.
Speaker 6: So, Brian, how are advertisers thinking about broadcast television and
Speaker 6: cable television today?
Speaker 2: Yeah? Right now?
Speaker 15: Well today as in what may something? Right, I think
Speaker 15: they're still freaking out. Notwithstanding the yesterday's press conference. I
Speaker 15: think that there's still a lot of concerns and uncertainty
Speaker 15: about what their budgets are going to be, and so
Speaker 15: I think there's gonna be a lot of reluctance to
Speaker 15: put down money. That's the first thing, right.
Speaker 6: I think it's just general political economic issues.
Speaker 15: Uncertainty is a real issue because it's already a challenge
Speaker 15: when you're making these commitments for a period from say
Speaker 15: October to September of the following year, when you don't
Speaker 15: even know what economic policy is going to be in
Speaker 15: about thirty days, let alone sixty nine and twenty. So
Speaker 15: I think that that uncertainty is the first top of
Speaker 15: mind thing, and that's going to be a huge feature
Speaker 15: of this upfront in terms of reluctance to commit without
Speaker 15: a lot of flexibility. So that's the first in top
Speaker 15: of their mind. But digital platforms are even more important, right,
Speaker 15: So the TV budgets have a negative trajectory. Digital budgets
Speaker 15: continue to have a growing trajectory for large brands.
Speaker 2: Like single digit growing.
Speaker 15: I think this your single digit yeah, and I think
Speaker 15: that the double digits is the thing of the past.
Speaker 2: I mentioned you're in Portland. From Portland up to Vancouver,
Speaker 2: is the new Hollywood maybe through the Toronto and the
Speaker 2: rest that mister President Trump, mister President went after a
Speaker 2: good morning, Marilyn Monroe, thanks for listening. But the bottom
Speaker 2: line is the future of Hollywood if they're exporting ever
Speaker 2: labor transaction outside California.
Speaker 15: Yeah, Well, the smart thing if you're in the production
Speaker 15: business outside of the United States is to make sure
Speaker 15: you're doubling down your productions for outside of the United States.
Speaker 5: The United States is as.
Speaker 15: You guys follow as well as anywhere more pushing towards autarchy.
Speaker 15: I mean, the reality is that if you want to
Speaker 15: produce a content or any business or product for the
Speaker 15: United States, you, Kanye are going to need to have
Speaker 15: a US based operation. I think that Vancouver in particular
Speaker 15: where I'm from, and Toronto are heavily dependent on American productions,
Speaker 15: but if they focus on the rest of the world,
Speaker 15: huge opportunity.
Speaker 5: So what do we doing today on the upfront? What's
Speaker 5: the party today today?
Speaker 15: Disney is later today, so I'll be there.
Speaker 6: And so where we want getting this ESPN app that's
Speaker 6: going to have everything we all want?
Speaker 2: Yeah, well I don't coming.
Speaker 15: I don't know the specific schedule. But I think that
Speaker 15: the sports specific apps really have a limited audience because
Speaker 15: the number of people who are willing to pay only
Speaker 15: for that product are going to be limited. That's why
Speaker 15: the whole concept of having like a bundle of services is.
Speaker 5: A better business. Yest or charter, Oh no, would never
Speaker 5: pay for that.
Speaker 2: When you were Sterling Draper, did you ever beat did
Speaker 2: you ever beat Yodah Holloway? Oh? No's that?
Speaker 8: No?
Speaker 5: Yeah, I certainly no.
Speaker 15: I've said some I've got some people from that era.
Speaker 2: Was that was that when they.
Speaker 5: Sit they send the biggest Yeah?
Speaker 15: Remember I replaced the guy started in nineteen forty eight. Yes,
Speaker 15: and it was Bob Cohen.
Speaker 5: Bob Cohen, that's right. Bob Cohen was the definitive voice
Speaker 5: on Madison Avenue.
Speaker 2: What happens to not West Point Peperol WPP.
Speaker 15: I think that agencies generally are more likely twenty years
Speaker 15: from now you'll be able to recognize today's agencies in
Speaker 15: some form with a higher probability than meta will be around.
Speaker 2: Okay, mark our words.
Speaker 15: Mata is just heart probability.
Speaker 5: Probability.
Speaker 2: Yeah, don't be a stranger's thing. Can we get who
Speaker 2: should get live reporting from the upfronts? Joining the stem
Speaker 2: YEP upfront corresponding Brian, exactly right, very quit fun, Brian,
Speaker 2: thank you.
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