Speaker 1: Bloomberg Audio Studios. Podcasts Radio News.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Farrow, along
Speaker 2: with Lisa Abramowitz and Anne-Marie Hordern. Join us each day
Speaker 2: for insight from the best in markets, economics and geopolitics.
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Speaker 1: Eastern.
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Speaker 2: you listen. And as always, on the Bloomberg Terminal and
Speaker 2: the Bloomberg Business App. We begin this hour with stocks
Speaker 2: and yields holding steady ahead of more earnings and inflation
Speaker 2: data later this morning. Marvin Lowe of State Street writing,
Speaker 2: while recent data has thrown a bit of cold water
Speaker 2: on the strength of the economy, we don't find a
Speaker 2: reason to fade the view that the Fed will still
Speaker 2: need to tighten before year end. Marvin joins us now
Speaker 2: for more. Marvin, good morning, sir. It's good to see you.
Speaker 2: Do you expect to get a guide from Kevin Walsh
Speaker 2: in a few days' time on that?
Speaker 3: You know what?
Speaker 4: We're not going to hear from him with regard to
Speaker 4: what he thinks September is going to look like or
Speaker 4: even December is going to look like. All we can
Speaker 4: hope for is that we get a little bit more
Speaker 4: sense into what his thinking is, how the Fed's going
Speaker 4: to actually approach the concept of the reaction function, and
Speaker 4: really to give the market a little bit more comfort
Speaker 4: that July is not the way the Fed operates and
Speaker 4: not the way the new chairman operates.
Speaker 2: How do you think the Fed operates and the new
Speaker 2: chairman operates?
Speaker 4: Well, you know, I think it's still, you know, generally
Speaker 4: as divided as we saw at the beginning of this year.
Speaker 4: Those opinions are out there. You know, certainly the data
Speaker 4: has given the Fed a little bit more room to
Speaker 4: think about things. But you continue to have half of
Speaker 4: the committee that thinks that there is a fairly low
Speaker 4: hurdle with which they should hike rates. And I think
Speaker 4: that that winds up being the theme that we take
Speaker 4: into the latter part of this year.
Speaker 5: To your point, Marvin, we even heard from Susan Collins,
Speaker 5: somebody who previously had been in the hold camp. Yesterday,
Speaker 5: she had an essay where it seemed to be a
Speaker 5: bit more hawkish, saying that the onus is on the
Speaker 5: inflation data to keep getting better for her to remain
Speaker 5: on hold. Otherwise, it might be appropriate to tighten. Where
Speaker 5: is the inflation coming from if it isn't coming from
Speaker 5: oil prices, if it isn't coming from some of these
Speaker 5: supply-side shocks?
Speaker 6: Yeah, I mean, for sure.
Speaker 4: After five plus years of this kind of embedded inflation,
Speaker 4: that is the concern of the Fed. Forward guidance and
Speaker 4: forward expectations around inflation is ultimately the self-fulfilling prophecy. And
Speaker 4: I think that that's the risk, that we've got a
Speaker 4: Fed that theoretically is remaining patient in the face of
Speaker 4: an inflation target, which is starting to mean nothing. And
Speaker 4: that is influences both the services part of the economy,
Speaker 4: which certainly is the bigger part of what we wind
Speaker 4: up generating wealth from in this country. And it's something
Speaker 4: that standing on the sidelines becomes less and less acceptable.
Speaker 5: Isn't this a data story, though, and less of a
Speaker 5: Kevin Warsh story? I mean, what can you learn from
Speaker 5: Kevin Warsh that gives you a sense of whether or
Speaker 5: not the degree to which they are prepared to hike
Speaker 5: rates later this year?
Speaker 4: Yeah, I mean, certainly data is always going to be
Speaker 4: an important part of this discussion. And we've got this
Speaker 4: kind of little bit of soft patch in the middle
Speaker 4: of the summer. We'll see what August inflation looks like.
Speaker 4: Our readings kind of around August inflation kind of in
Speaker 4: a more real-time perspective is that it is coming back
Speaker 4: to a certain degree. So that hat is not completely
Speaker 4: shoved back in the bag. But it also is a
Speaker 4: story about U.S.
Speaker 7: Growth.
Speaker 4: It also is a story about demand for duration capital
Speaker 4: in the U.S.
Speaker 1: And globally.
Speaker 4: And what we need to learn from Warsh is how
Speaker 4: he parses the data as well as kind of this
Speaker 4: R-star capital demand perspective. And, you know, clearly the Treasury
Speaker 4: Secretary is throwing his hat in the ring around that
Speaker 4: longer-term duration story and that broader demand for capital. And
Speaker 4: for me, it's always been part of why we need
Speaker 4: to think about tightening, and.
Speaker 1: That hasn't changed.
Speaker 2: Marvin, do you care that Drucker Miller used AI? way
Speaker 2: in place. That's where the buzz.
Speaker 4: Is right now.
Speaker 6: Yeah, I don't.
Speaker 4: I loved your conversation because I have the same on
Speaker 4: the trading desk every day. I still write all of
Speaker 4: my work. I find that the actual writing helps me think.
Speaker 4: I think my analysis improves as a result of that.
Speaker 4: So call me a Luddite. I'm not necessarily willing to
Speaker 4: allow it to write my analysis. But Stanley Druckenmiller is
Speaker 4: has all the street credit that is needed. And it's
Speaker 4: fine that he uses AI.
Speaker 2: Stay with us. More Bloomberg surveillance coming up after this.
Speaker 2: A small move in the grand scheme of things, but
Speaker 2: a stronger economy and a slightly hotter economy. If you
Speaker 2: look at the strength, personal income better than expected, personal
Speaker 2: spending better than expected. And as for the heat, PCE
Speaker 2: coming in just a bit firmer than anticipated on the headline.
Speaker 2: One more payrolls report on the 4th, a week later,
Speaker 2: a CPI print. Stephanie Roth of Wolf Research joins us
Speaker 2: now for more. Stephanie, good morning.
Speaker 1: Good morning.
Speaker 2: Have you seen enough to stop this Fed from hiking
Speaker 2: in September?
Speaker 7: Yes, I think so. I mean, barely so, but I
Speaker 7: think so. I mean, today's core PC just barely rounded
Speaker 7: down to 0.2. It's 0.2455, so we almost got a 0.3,
Speaker 7: which would have potentially rattled markets just to some extent
Speaker 7: as everybody sees their Bloomberg screen. I think we're in
Speaker 7: an environment where the data will look a little bit
Speaker 7: cooler in the next couple of prints, such that the
Speaker 7: Fed can avoid hiking and.
Speaker 1: Do it credibly.
Speaker 7: So we're going to see another round of inflation data.
Speaker 7: That will probably come in on the softer side. The
Speaker 7: seasonals are in our favor.
Speaker 1: The Fed officials all know that at the end of September,
Speaker 1: we're going to get.
Speaker 7: Some revisions to how they're calculating PCE. In today's print,
Speaker 7: portfolio management was up 5.6%. That is a piece of
Speaker 7: the inflation data that's going to change in a couple
Speaker 7: of in a couple of weeks, therefore it might bring
Speaker 7: some downward pressure to the data.
Speaker 1: So overall, we're likely to see.
Speaker 7: An environment where the labor market data look a little
Speaker 7: bit softer from here and the inflation data also cool
Speaker 7: such that they can just sort of wait and see
Speaker 7: and therefore they don't ultimately have to hike.
Speaker 2: Are you looking for a wait and see speech on Friday?
Speaker 7: Yeah, I think he's not going to say a whole lot.
Speaker 7: I mean, granted, of course, it's not Q & A,
Speaker 7: which is what tends to sort of create some market volatility.
Speaker 7: He'll probably correct some of the.
Speaker 1: Points that the market didn't like last time.
Speaker 7: He'll probably talk about 2% is for sure the inflation target.
Speaker 7: We're not looking at changing the inflation measures, at least
Speaker 7: at this point. He'll correct the reasons as to why
Speaker 7: they did not end up hiking in July. They were
Speaker 7: probably looking for softer inflation data. And then outside of that,
Speaker 7: I don't think we're going to hear a whole lot.
Speaker 5: Do you think that the emphasis still will be on
Speaker 5: remaining on hold, that otherwise this would be a Fed
Speaker 5: that would be desiring to hike rates? In other words,
Speaker 5: are we going to see the hawk still dominate the discussion,
Speaker 5: even with a non-speech from Kevin Warsh and this sort
Speaker 5: of assumption that he's going to try to remain on
Speaker 5: hold as long as possible?
Speaker 7: I think to some extent, but the data have very
Speaker 7: much been in their favor. I mean, if you look
Speaker 7: at the last two months, we've had two consecutive months
Speaker 7: of softer inflation data. We've had employment data that's mixed,
Speaker 7: if not somewhat concerning to some extent on the headline level.
Speaker 7: In the next print, we'll probably see a bit of
Speaker 7: a tick up in the unemployment rate with payrolls running
Speaker 7: at an okay pace. So they're not really going to
Speaker 7: be in the same urgency to hype that they felt
Speaker 7: in July. And we're in an environment where wage inflation
Speaker 7: is pretty sluggish and therefore it's not feeding into inflation.
Speaker 5: Are we just justifying why we're reacting so strongly to
Speaker 5: oil prices? I mean, essentially, is this a bond market
Speaker 5: that's being dictated by oil and people are running around
Speaker 5: fanatically saying, it's not just oil, it's all these other things.
Speaker 5: Then oil prices go down and it's like, oh, look
Speaker 5: at this, it's inflation and oil helps.
Speaker 1: To some extent, I think you're right.
Speaker 7: I mean, I was surprised the extent to which yields
Speaker 7: didn't reflect the softer inflation data that we've seen, because
Speaker 7: the data couldn't have been cooler for the most part
Speaker 7: in the last couple of months, yet yields continued to
Speaker 7: back up. And, you know, of course, people talk about
Speaker 7: supply and the deficit and all these dynamics that haven't
Speaker 7: really changed in the last couple of months, yet you
Speaker 7: see yields continue to back up. So certainly we saw
Speaker 7: the moves yesterday seem to be oil-related. I think it's
Speaker 7: a combination of things. When people wake up after Labor Day,
Speaker 7: we'll probably be in an environment where the data comes
Speaker 7: more into focus, then focus on a Fed that's not
Speaker 7: likely to hike, and therefore yields can come down a bit.
Speaker 5: Where is inflation the most problematic? Take out oil prices
Speaker 5: that are somewhat volatile. I know it's difficult because it
Speaker 5: impedes in a lot of different areas. Is AI-related inflation problematic?
Speaker 5: Are we seeing inflation in other areas that suggests that
Speaker 5: it's becoming more pervasive in the psychology and in commerce?
Speaker 7: So when we think about the reasons as to why
Speaker 7: core inflation has been elevated this year, I would say
Speaker 7: it's three things. It's been the Iran war, which at
Speaker 7: this point, we're kind of seeing a bouncing around in oil,
Speaker 7: but kind of somewhat stable at this point.
Speaker 1: It's been tariffs, which are going to be rolling off
Speaker 1: the data. And you're, in fact, you're.
Speaker 7: Starting to see some companies come out and say they're
Speaker 7: using some tariff refunds to.
Speaker 1: Offset some prices.
Speaker 5: Not with Sydney, Canada.
Speaker 1: Right. Fair. And then the big thing has been the chips.
Speaker 7: So I think by far the biggest thing we should
Speaker 7: be watching is on the AI-related inflation because that's a
Speaker 7: piece that hasn't fully worked its way through the data
Speaker 7: at this point. We think for the most part we've
Speaker 7: seen the impact flow through into computers and accessories and
Speaker 7: that type of thing. But it's possible there's another piece
Speaker 7: of the AI puzzle that pops up in the inflation
Speaker 7: data that we're not necessarily aware of at this point.
Speaker 7: This is the part that could be still adding some
Speaker 7: inflationary pressure. The other two factors are very much moving
Speaker 7: into disinflationary territory looking ahead.
Speaker 2: I just saw a headline from Bath & Body Works.
Speaker 2: They saw approximately $ 80 million in 2Q tariff refunds. So
Speaker 2: many of those companies got money back. How different would
Speaker 2: this conversation have been? We'd be this close to 0.3.
Speaker 2: You said it. How different would this conversation have been
Speaker 2: if we did get a 0.3?
Speaker 7: Funny enough, I mean, it's just, I mean, it's fractions
Speaker 7: of a basis point here. I think the conversation would
Speaker 7: be different.
Speaker 2: Isn't that really silly?
Speaker 1: Completely, no question. But it's just this, like, mental model.
Speaker 7: And you see, you know, you look on your Bloomberg screen,
Speaker 7: which is rounded to, you know, to one decimal, and
Speaker 7: it's 0.2, so we can all breathe a sigh of relief.
Speaker 1: But you're right.
Speaker 7: I think we would be talking more about yields rising
Speaker 7: a bit on the back of the data if we
Speaker 7: had just rounded up, you know, slightly to 0.3. I
Speaker 7: think the conversation would be modestly different.
Speaker 2: Stay with us. More Bloomberg surveillance coming up after this.
Speaker 2: Let's talk about something less risky than investing in open AI, apparently.
Speaker 2: Private capital piling into sports with at least five U.S.
Speaker 2: professional teams striking deals to change ownership just this summer.
Speaker 2: Investors fueling record valuations with more than 96 billion flowing
Speaker 2: to the asset class since 2018. Mark Heim is the
Speaker 2: CEO of Capital Investment Corp and has stakes in teams
Speaker 2: across the NFL, MLB and Premier League, telling Puck News recently...
Speaker 2: At today's valuations, there's meaningfully less downside risk in owning
Speaker 2: a piece of the Lakers than a piece of open AI. Mark,
Speaker 2: I'm pleased to say, join us now for more. Mark,
Speaker 2: welcome to the program. Quite a provocative quote, but I'm
Speaker 2: going to build on it and ask you this question, Mark.
Speaker 2: Do you think in some ways this is the one
Speaker 2: part of the entertainment industry that might well be insulated
Speaker 2: from what happens with AI?
Speaker 6: For sure.
Speaker 3: First of all, it's great to be with you guys.
Speaker 3: For sure, this is much more insulated from AI than
Speaker 3: most parts of the entertainment industry. Sports and music are
Speaker 3: the two things that bring us together at scale.
Speaker 6: AI is not going to change that. The drama and.
Speaker 3: The excitement and the communal experience of coming together to
Speaker 3: watch your favorite team isn't going away. In fact, I
Speaker 3: would argue it's only going to grow as people have
Speaker 3: more time and more money. They're going to go and
Speaker 3: try to do stuff like this and have these kind
Speaker 3: of experiences.
Speaker 2: Mark, let's talk about opportunities then for investment. I was
Speaker 2: reading through the transcript of that interview that you did
Speaker 2: with Park News. And within that, you reflected on that
Speaker 2: opportunity to get a franchise in Philadelphia, I believe, Mark,
Speaker 2: to get exposure to the NBA back then. Is there
Speaker 2: a similar opportunity that's available right now compared to the
Speaker 2: one that you passed up back then?
Speaker 6: No.
Speaker 3: To invest in the 76ers at a $ 250 million valuation? No.
Speaker 3: I mean, look, back then, sports teams have always had
Speaker 3: a bit of being valued on the business, traditional business valuations.
Speaker 3: and a bit on intangible things, whether people wanted it
Speaker 3: because they loved the sports or the experience, or because
Speaker 3: they viewed it as a store of value and uncorrelated assets,
Speaker 3: always had that mix.
Speaker 6: What's happened over time is that the.
Speaker 3: Amount of the valuation that's now the intangible part, the
Speaker 3: uncorrelated part, the store of value, has grown so much.
Speaker 3: And that's why I don't know what the 76ers would
Speaker 3: be worth today, but it's at least 20 times as much.
Speaker 3: And in the major sports, you're not going to find
Speaker 3: that again.
Speaker 5: Mark, a lot of people were decrying the Middle Eastern
Speaker 5: money that was going into soccer, in particular football. in
Speaker 5: Europe as distorting valuations so as to make it absolutely
Speaker 5: unaffordable to get involved if you are an investor, at
Speaker 5: least not attractive multiples. Do you see that kind of
Speaker 5: dynamic starting to happen in any other regions? Is that
Speaker 5: something that you are following closely?
Speaker 3: Well, I mean, look, it is getting harder and harder
Speaker 3: for all kinds of people to be the majority owner
Speaker 3: of these teams. You see the prices. You showed the
Speaker 3: logos of the five trades in the U.S. But what's
Speaker 3: interesting is at the same time the prices are going up,
Speaker 3: what is driving a lot of it is actually a
Speaker 3: much more vibrant market today. for minority owner stakes, limited
Speaker 3: partner stakes in these teams. And the amount of capital
Speaker 3: that people are investing to take those minority stakes is growing.
Speaker 3: And so the headline price is going up. The majority
Speaker 3: owner ticket price is also going up. But a lot
Speaker 3: of the capital is actually coming from the people in
Speaker 3: the cap structure around the majority owner.
Speaker 5: Do you have aspirations to become a control owner for
Speaker 5: any particular.
Speaker 3: Well, I do own the tennis tournament in Washington that
Speaker 3: just ended, which really was my childhood dream. I was
Speaker 3: a ball kid at the tournament, and I'm fortunate enough.
Speaker 6: That I do own that, and I.
Speaker 3: As you noted, I'm an investor in the Commanders and
Speaker 3: the Orioles and Leeds United.
Speaker 6: And I love that.
Speaker 3: I love both being the control owner in a big
Speaker 3: event that means a lot to me, but I also
Speaker 3: actually enjoy being a supportive minority owner in the other things.
Speaker 2: Mark, can we talk about Premier League football? You mentioned
Speaker 2: Leeds United. I'm always fascinated by the American perspective on this.
Speaker 2: When you look at the franchise value of, say, the
Speaker 2: Seattle Seahawks, close to $ 10 billion.
Speaker 3: Right.
Speaker 2: Without any disrespect to these Seattle Seahawks, I think that
Speaker 2: we can sit here and safely say that on a
Speaker 2: global basis, Manchester United is a far more visible franchise.
Speaker 2: And yet for some reason, These American franchises are able
Speaker 2: to generate that much more brand value and attract that
Speaker 2: much more money. And they seem to be valued at
Speaker 2: a higher level, a bigger premium, if you will, Mark,
Speaker 2: compared to English football, Mark. What gives? What explains that?
Speaker 6: It's such a fascinating question.
Speaker 3: And actually, the other thing I would add is actually
Speaker 3: now if you look at MLS franchises, Some of them
Speaker 3: are more than Premier League teams. And you would say, well,
Speaker 3: how is that possible? It really comes down to two things.
Speaker 3: One is the economic model for European football teams is
Speaker 3: not that great. Even the ones that generate the most
Speaker 3: revenue don't generate very much at all of a bottom line.
Speaker 3: And so that's one. But the other huge one is
Speaker 3: relegation risk. And it's best shown when you compare a
Speaker 3: league like MLS that doesn't have relegation risk and you
Speaker 3: look at the ones that do. It's a huge discount
Speaker 3: because not only, obviously, the prestige drops if you get relegated,
Speaker 3: but you lose a massive amount of revenue at all
Speaker 3: when that happens. And so a huge amount of the difference,
Speaker 3: I think, is explained by actually relegation risk.
Speaker 2: Can we pick up on that, Mark, and just apply
Speaker 2: it to, say, Leeds United? Leeds United is one of
Speaker 2: those clubs that always runs the risk of being relegated
Speaker 2: in the Premier League. It takes a lot of investment
Speaker 2: to stay up. You've managed to do that. Mark, does
Speaker 2: that affect and influence how you run the club? compared to, say,
Speaker 2: how you'd run a franchise in America. And for those
Speaker 2: not in your world, can you give us examples?
Speaker 3: Yeah. So, first of all, I'm not in the control.
Speaker 3: I mean, the team is run terrifically well by a
Speaker 3: group of executives affiliated with actually the San Francisco 49ers.
Speaker 6: They do a great job.
Speaker 3: And I'm not in the weeds with them on that one.
Speaker 3: But we talk a lot and I see it. And, well,
Speaker 3: it does have a huge implication on how you run
Speaker 3: the team because you When you're relegated, you lose 200
Speaker 3: million pounds of revenue over two years. And then when
Speaker 3: you come back in, you get that back. And so
Speaker 3: when you're in that zone, it's a lot harder to
Speaker 3: have long-term planning the way you do in an American
Speaker 3: traditional sports franchise because you have this revenue uncertainty both ways. Now,
Speaker 3: We had a great season last year. We finished mid-table.
Speaker 3: We're feeling really good now. You start to see how
Speaker 3: you can start to invest. And in fact, once we
Speaker 3: got promoted, we announced meaningful stadium expansion plan to Ellen Road,
Speaker 3: our home stadium, which you wouldn't have done while you
Speaker 3: were relegated. But when you get promoted and you believe
Speaker 3: you're going to stay up, then you get the revenue
Speaker 3: certainty that then actually lets you invest in all parts
Speaker 3: of the club, including the stadium.
Speaker 5: Mark? Since you're on the other side of this discussion,
Speaker 5: often on this show we'll talk about ticket prices, whether
Speaker 5: it's to the U.S. Open or whether it was to
Speaker 5: the World Cup. We'll say the prices are just too high.
Speaker 5: How do you balance the actual price of tickets versus
Speaker 5: the revenues that you get from other streams of advertising
Speaker 5: and beyond from just having the most eyeballs possible?
Speaker 6: Yeah, that's a great question.
Speaker 3: Obviously, it's a hot topic this week already because of
Speaker 3: the U.S.
Speaker 6: Open and some of the ticket prices there.
Speaker 3: Look, I view our ownership in these teams as caretakers
Speaker 3: for community assets. You really these teams or these events
Speaker 3: means so much to so many people. I think you
Speaker 3: have a real obligation to finding ways to making them
Speaker 3: accessible for everyone in your community. And I think that
Speaker 3: there is a business part of it, that it's good business.
Speaker 3: But far beyond that, it really is part of your
Speaker 3: responsibility as the owner. is to make sure that people
Speaker 3: can attend these events.
Speaker 6: And so you've got to find ways. Now, there's a
Speaker 6: lot of ways to it.
Speaker 3: Some sessions in a tennis tournament are less popular than others.
Speaker 3: So you can offer cheaper tickets. You can allocate tickets
Speaker 3: to certain groups. The challenge, and this is what happened
Speaker 3: at the U.S. Open, is with an incredibly liquid and
Speaker 3: easily transferable secondary market, if you sell tickets cheap to someone,
Speaker 3: it's very hard to regulate them not putting them back
Speaker 3: on the market and getting the market price.
Speaker 6: And that's a bit of what's going on here.
Speaker 3: Even the most well-intentioned owners who do this end up
Speaker 3: not able to accomplishing their goal because people, it's so
Speaker 3: easy these days once you get a.
Speaker 6: So it's a challenge, but you saw the U.S.
Speaker 3: Open found a way to get 1,000 tickets in the
Speaker 3: hands of New Yorkers. We do similar things with the community.
Speaker 3: Our tennis tournament is.
Speaker 6: in.
Speaker 3: We do the same thing with the commanders. I really
Speaker 3: think it is part of your responsibility as an owner.
Speaker 3: The other thing I would say that I think happened
Speaker 3: this week at the U.S. Open and is happening is
Speaker 3: it's so easy to put tickets on the market that.
Speaker 3: When your days or weeks out from an event, people
Speaker 3: will just put the ticket on the market with an
Speaker 3: aspirational price. And so the headline looks really bad. The
Speaker 3: reality is... As the event gets closer, usually the prices
Speaker 3: come down.
Speaker 6: It's not as bad. But that headline of people going
Speaker 6: online and seeing these prices, I think, you know, obviously
Speaker 6: upsets people.
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