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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney. Alongside

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Speaker 1: my co host Matt Miller. Every business day, we bring

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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along

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Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast

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Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and

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Speaker 1: at Bloomberg dot com slash podcast. More good news for

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Speaker 1: those of us who work and live in New York City.

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Speaker 1: Maybe people looking to visit New York City. We got

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Speaker 1: president of Blase. You're saying, hey, we're gonna be fully

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Speaker 1: open July one, and that's good for a lot of businesses,

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Speaker 1: one of which is the theater of business, the movie

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Speaker 1: theater business. And we are so fortunate today that Richard Gelfond,

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Speaker 1: he's the CEO of IMAX, join us. Richard, I'm sure

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Speaker 1: you're welcoming this news. Give us your sense of what

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Speaker 1: this means for IMAX and for the movie theater business. Well,

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Speaker 1: first of all, I'm I like the news, but I'm

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Speaker 1: a little bit cautious. I am happy to be based

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Speaker 1: in New York. I live here and I've seen the

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Speaker 1: dance go on between Meridaba Zeo and governor Cuomo for

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Speaker 1: a long time, so you're quite correct. The mayor announced

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Speaker 1: it's opening. But we've seen I've seen that movie before,

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Speaker 1: and UM, we'll see what the governor says. If you

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Speaker 1: remember in past iterations, the mayor said one thing and

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Speaker 1: the governor said another thing. So it's a good first step.

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Speaker 1: But but I'm not doing the happy dance until I

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Speaker 1: hear from the governor. What kind of return do you

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Speaker 1: expect when, if, and when, um, people are fully allowed

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Speaker 1: to go back to the movies or the seats can

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Speaker 1: be packed, are you leaving a seat opening between viewers?

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Speaker 1: How's it gonna work. Well, we're gonna follow the regulation

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Speaker 1: and UM, you know, we've done tremendous um tremendously well

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Speaker 1: in um Asia where the pandemic is largely you know,

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Speaker 1: passed over, so place like Japan and China, there aren't

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Speaker 1: middle seats empty, there aren't middle rows, people wearing masks,

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Speaker 1: and you know, we've set records. So in Japan with

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Speaker 1: even seventy percent UM capacity, UM, two of the movies

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Speaker 1: have been the biggest movies in the history of Japan.

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Speaker 1: During this period of time, there's been a lot of

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Speaker 1: pent up demand in China. Um Our December was up

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Speaker 1: over twenty was up over nineteen. Chinese New Year was

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Speaker 1: upt you know, believe it or not. When people aren't

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Speaker 1: locked in their houses, they want to go back to

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Speaker 1: their normal lives and there's a lot of demand and

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Speaker 1: go to the movies. So I think once it opens up,

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Speaker 1: you're gonna see a lot of people want to go.

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Speaker 1: And even in the last few weeks, got Zilla versus

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Speaker 1: Kan did some fairly good numbers. Um Imax we had

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Speaker 1: over a thousand sold out shows on a weekend, but

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Speaker 1: the problem was capacity. It was only so the numbers

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Speaker 1: were limited. But I think once those limitations come off,

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Speaker 1: you know people are gonna come, Richard, people will come

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Speaker 1: if there's product to see. What is your understanding of

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Speaker 1: how Hollywood's gonna roll out movie? You know on the

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Speaker 1: in the back half of this year. So there's there's

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Speaker 1: a pretty set schedule right now. As you alluded to,

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Speaker 1: there's been a lot of movement in the schedule, but

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Speaker 1: I think it's pretty set now. So around Memorial Day

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Speaker 1: weekend movies start coming. Quiet Place two comes out in June.

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Speaker 1: I'm just naming some of the major blockbusters in June.

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Speaker 1: Fast nine comes out in July, Black Widow comes out.

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Speaker 1: Suicide Squad I think is in August. At the back

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Speaker 1: half of the year. Um, there's Top Gun Maverick, the

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Speaker 1: Tom Cruise sequel, which I think is gonna be amazing. Um,

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Speaker 1: there's the new Bond movie coming out. By the way,

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Speaker 1: both Bond and Top Gun were filmed with Imax cameras.

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Speaker 1: Actually the only way, the only way, thank you. I

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Speaker 1: appreciate the commercial and I'll give you one too. I'm

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Speaker 1: an absolute cinema fanatic and I love to go to

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Speaker 1: Imax films. Um. The one my favorite theater here in

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Speaker 1: Berlin was in pot Stammer Plots. It says temporarily close.

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Speaker 1: They're gonna open that up again. I don't know. There

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Speaker 1: was some local issues, if you remember, there were two

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Speaker 1: of them there, one at the Mercedes Complex and one

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Speaker 1: at pot Stammer Plots. So I don't know. Um, the

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Speaker 1: one of pot Stammer Plots, you're right, is temporary close.

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Speaker 1: I don't know what's gonna happen. You don't let me

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Speaker 1: finish the list though. At the file you're gonna really

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Speaker 1: like it, which is Dune, which is coming out at

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Speaker 1: the end, and that's a real spectacle that will really

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Speaker 1: benefit um from those huge Imax screens. All right, Richard,

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Speaker 1: We'll pay attention and we'll be looking forward to those movies. Um.

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Speaker 1: Interesting news again, New York about to reopen in in July.

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Speaker 1: That is certainly good news. Richard Galfon, CEO of the

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Speaker 1: Imax Corporation. Now, let's talk about us g d P

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Speaker 1: with Constant Hunter. She's the chief economist over at KPMG.

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Speaker 1: And Constance, we saw GDP numbers come out this morning.

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Speaker 1: Looks like, um, we're gonna see a pretty big growth

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Speaker 1: swing six point four, not matching the survey, but still strong. Right,

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Speaker 1: what's your view? Yeah, and when I'm dig down into

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Speaker 1: the details, right, it's it's good, good goods. That's what

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Speaker 1: drove this first quarter. And if we look out for

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Speaker 1: the rest of the year, we think we're going to

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Speaker 1: see now the pendulum swing over to services, which of

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Speaker 1: course have lagged since the pandemic started. And when we

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Speaker 1: get news like New York City's reopening in July, that

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Speaker 1: just further confirms our perception that we're going to see

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Speaker 1: a strong demand for services really driving growth for the

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Speaker 1: rest of the year. All right, So, Constance, given that

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Speaker 1: where we are in this reopening trade here, give us

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Speaker 1: your perspective on fiscal stimulus. What do you think this

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Speaker 1: economy really needs, if anything? So, I think what the

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Speaker 1: Biden administration is looking to do is more than just

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Speaker 1: stimulus right there. They're looking to reorient um distribution of

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Speaker 1: g d P to the lower half or lower income

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Speaker 1: UH recipients of the economy. And and that is a

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Speaker 1: little different than pure stimulus, I would say. Um. And

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Speaker 1: so things like childcare UH credits and things like education. UM,

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Speaker 1: these are investments that they're thinking is into our future. Um.

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Speaker 1: This is something I mean, the plan looks at a

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Speaker 1: long time period for these being implemented, and I would

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Speaker 1: look at it less as fiscal stimulus and more as

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Speaker 1: a reorientation. Although with that said, um, given where we

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Speaker 1: are growth wise, it would seem we do not need

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Speaker 1: further stimulus. Right that that is that is bringing cold

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Speaker 1: to Newcastle for this economy. UM constance. When I was

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Speaker 1: a kid, I will cop to being a total supply

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Speaker 1: side freak. I I first got into well in my teens, right,

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Speaker 1: I first got into it, and I was totally an Austrian,

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Speaker 1: and I thought, you know, raising capital gains tax would

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Speaker 1: just ruined the economy because nobody would invest. All of

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Speaker 1: those views are gone. There no more um really prominent credible,

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Speaker 1: uh freshwater economists out there. Everybody you look to is

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Speaker 1: um you know, a salt water Joe Stiglets, Paul Krugman,

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Speaker 1: Jeff Sachs, I mean, uh picketty for crying out loud.

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Speaker 1: What happened to the right in in in economics? Well,

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Speaker 1: I was with you, right, and so was Biden, by

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Speaker 1: the way, he voted for the for the Reagan tax

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Speaker 1: plan when he was when he was a senator, And

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Speaker 1: and we thought that that orthodoxy made a lot of sense.

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Speaker 1: And I think, like everything, things make sense up to

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Speaker 1: a point. When taken too far, they actually can invert

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Speaker 1: upon themselves and and be very deltarious. And I think

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Speaker 1: I think what we're seeing, especially with regard to our

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Speaker 1: our tax code, um, is that we we may be

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Speaker 1: we may be crossed rubicon and went a little bit

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Speaker 1: too far where it haste to be effective. And and

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Speaker 1: you can't know that, of course until you until you

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Speaker 1: live it. And so now we're seeing a viewpoint that

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Speaker 1: we need to move back. I think that we need

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Speaker 1: to be careful though with regard to that movement. I

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Speaker 1: think it's it's better to take it in incremental steps.

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Speaker 1: But are there any Milton Friedman acolytes left? Oh? I

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Speaker 1: think I think there are a few. I mean, I

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Speaker 1: think there's you know, there's the Art Laugher proponents of

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Speaker 1: the world there and there there are a few. There

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Speaker 1: are a few fresh water economy us out there. You know,

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Speaker 1: you can you can find their op eds here and there,

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Speaker 1: um so so, so they're definitely out there. But but

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Speaker 1: I think one of the things that that we're seeing

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Speaker 1: is when we look at the productivity the distribution of

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Speaker 1: productivity gains throughout the economy from the seventies until now right,

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Speaker 1: we see them the diminishing return to lower income households

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Speaker 1: of those productivity gains. And that's just not sustainable, right.

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Speaker 1: We we can't have a thriving economy going forward if

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Speaker 1: that continues to be the distribution so seconds constant. What's

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Speaker 1: the risk here? We're gonna be getting so much good

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Speaker 1: economic data, what's the risk here? Well, the risk is

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Speaker 1: is that we we overheat a little bit. And and

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Speaker 1: the question mark which was Powell addressed I think very

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Speaker 1: thoroughly yesterday, is is that transitory as many economists expect,

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Speaker 1: where doesn't have the possibility of un anchoring inflation expectations,

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Speaker 1: in which case that said will have to act sooner

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Speaker 1: before they see full employment. All right, Constant is great

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Speaker 1: to get your take on this. Uh, it is a

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Speaker 1: pretty strong growth when you when you dig into the numbers,

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Speaker 1: and we're looking for six point seven percent, at six

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Speaker 1: point four percent, better than a stick in the I

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Speaker 1: think we'll take it. Constant Hunter there, she is the

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Speaker 1: chief economist over at KPMG. I want to bring in

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Speaker 1: Mark Douglas right now, is the CEO of Steelhouse. Steelhouse

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Speaker 1: specializes in targeted ads. They're also the leader in highly

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Speaker 1: targeted ads on connected TV and is a partner with Facebook.

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Speaker 1: And Mark. The interesting thing, Um, I've I've noticed the

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Speaker 1: last couple of days talking to analysts about Facebook. I

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Speaker 1: thought the reopening would hurt um, you know, time spent

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Speaker 1: on the website. Everyone that I talked to was saying,

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Speaker 1: you know, the bigger the bigger problem is Apple's privacy changes.

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Speaker 1: This could really hit Facebook hard. You don't see it

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Speaker 1: that way, No, I don't. And the reason I don't

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Speaker 1: is because there are two methods by which Facebook essentially

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Speaker 1: connects with the users, and I mean the technical connection.

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Speaker 1: So one is mobile device I D s. That's what

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Speaker 1: everyone is talking about. But also there are cookies and

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Speaker 1: I you know, people hear a lot about how cookies

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Speaker 1: are being blocked. Cookie Facebook has cookies on virtually every

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Speaker 1: interactive device in the world. So if the Apple essentially

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Speaker 1: blocks mobile device ideas or I should say, you know,

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Speaker 1: not as many people opt into that. Facebook has a

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Speaker 1: multi billion size cookie space, so they have options that

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Speaker 1: these changes by Apple and not going to hurt Facebook.

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Speaker 1: In fact, they're probably going to help Facebook, all right.

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Speaker 1: Mark one of the things again, when you look across

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Speaker 1: the some of these digital advertising businesses, most notably Google

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Speaker 1: and Facebook and crushing top line numbers here they both

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Speaker 1: call out Or and certainly Facebook, the apples obviously changes.

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Speaker 1: Just briefly explain what those changes are and will they

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Speaker 1: negatively impact the growth of digital advertising. Yeah, it's really simple.

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Speaker 1: Your device has an I D you know, it's other

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Speaker 1: than your phone number, and so that idea is used

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Speaker 1: in the order for apps like the Facebook app to

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Speaker 1: be able to essentially no identify you or identify the

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Speaker 1: device and essentially keep information on it. What Apple is

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Speaker 1: doing is they're essentially saying you have to ask the

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Speaker 1: user of that device for permission to do that. And

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Speaker 1: so that's the change that Apple's doing and not blocking it.

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Speaker 1: They're adding a step to ask permission. And there's a

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Speaker 1: fear that a lot of people may say no, and

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Speaker 1: so that's really what the issue is. And but like

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Speaker 1: I said, Facebook has other options, and also it's not

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Speaker 1: clear that a lot of people are actually going to

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Speaker 1: say no to essentially that type of tracking. One of

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Speaker 1: the um notable things that Steve Jobs say was it's

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Speaker 1: not about giving people what they need, is about giving them. Sorry,

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Speaker 1: not about getting them what they want, but giving and

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Speaker 1: what they need. And um, I feel like there's a

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Speaker 1: lesson to be learned around targeted ads. People always say

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Speaker 1: they hate targeted ads or there they find it creepy. Um,

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Speaker 1: but I personally appreciate having ads pop up that are

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Speaker 1: relevant to me and not just you know, random stuff

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Speaker 1: that I don't want to look at. Do you think

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Speaker 1: that people maybe want them more than they think or

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Speaker 1: need them more than they think they do. Yeah. I

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Speaker 1: think the way to think about this is when you

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Speaker 1: go and buy a product, a significant percentage of the

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Speaker 1: cost of that product was the cost to find you

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Speaker 1: as a consumer. So if you go buy a mattress

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Speaker 1: from an online mattress company as much and that mattress

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Speaker 1: cost a thousand dollars, as much as four dollars of

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Speaker 1: the thousand dollars is what it costs to market to you,

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Speaker 1: to advertise to you, to find you as a consumer.

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Speaker 1: So if you make that harder for the company, you're

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Speaker 1: actually going to raise that cost, and eventually the cost

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Speaker 1: of the mattress itself is going to have to go up.

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Speaker 1: But if you do the opposite, then that cost goes down.

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Speaker 1: That's why companies, when you buy and they send you emails,

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Speaker 1: they'll send you discounts over an email because it's now

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Speaker 1: cheaper to the market to you. So it's not in

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Speaker 1: in the consumer interests to essentially make it harder to

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Speaker 1: reach you as a consumer for products you actually want

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Speaker 1: to buy, you're literally just gonna have to spend more

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Speaker 1: on those products. And I think that's not clear by consumers,

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Speaker 1: but I think it's going to become more clear over

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Speaker 1: time and they will opt into that type of essentially

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Speaker 1: advertising and other forms of marketing. Alright, Mark looking at

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Speaker 1: some of the results again from these big digital media companies,

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Speaker 1: Facebook and Google again crush it. Pinterest, however, came in

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Speaker 1: you know, lower than expected. Disappointed folks, are we seeing

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Speaker 1: you know, a just I guess, more and more market

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Speaker 1: share in terms of ad spend, digital ad spend go

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Speaker 1: to the big platforms and I'll even throw a Amazon

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Speaker 1: in there as well, and it's just crumbs for everybody else. Well,

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Speaker 1: I think this goes a little bit to the privacy

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Speaker 1: you know issue, which is as you have companies like

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Speaker 1: Google essentially shutting down third party cookies, you have Apple,

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Speaker 1: you know, essentially making mobile device ideas harder. They're essentially

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Speaker 1: consolidating their position. They're not actually, you know, essentially making

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Speaker 1: things more private because their data collection is being unaffected.

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Speaker 1: They're just making it harder for everyone else. So they

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Speaker 1: Google is in fact consolidating their position as a market

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Speaker 1: leader through changes in Chrome. Apple in some ways is

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Speaker 1: doing that with their changes to mobile device ideas, and

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Speaker 1: so that's going to negatively impact everyone else. So, you know,

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Speaker 1: the the the there is an element of that, but

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Speaker 1: I think it's coming in the form of privacy that

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Speaker 1: is not truly private. If their data collection is completely unaffected,

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Speaker 1: I gotta finally ask you about the Yankees. They don't

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Speaker 1: seem to be doing too well at the beginning of

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Speaker 1: the season. Here, Uh, Mark, I know you grew up

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Speaker 1: right by the stadium in the Bronx. What do you

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Speaker 1: expect from this team? So I well, right this very minute,

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Speaker 1: I'm living in Saloum, Mexico for the last six months.

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Speaker 1: I can't say following this season very slowly. And I'll

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Speaker 1: give you one quick story. I grew up nine blocks

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Speaker 1: from Yankee Stadium, but since I didn't have the money

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Speaker 1: to go to Yankee games, I was like, screw those guys,

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Speaker 1: I'm going to root for the Mets. So I was

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Speaker 1: a Mets fan living the Yankee Stadius. Well, now you

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Speaker 1: can afford to buy tickets to both both teams and

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Speaker 1: not even go from to loom. So great having you on.

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Speaker 1: Mark Douglas joining us the Steel Steelhouse CEO talking about

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Speaker 1: targeted advertising with Apple and Facebook. This is Bloomberg. I

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Speaker 1: want to bring in now. Mace McCain, President and chief

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Speaker 1: investment officer at Frost Investment Advisors. They managed five point

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Speaker 1: one billion dollars worth of assets, and Mace, we just

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Speaker 1: had a strong GDP print, We had a fed decision

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Speaker 1: yesterday where you heard the words transitory, transitory, transitory, and

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Speaker 1: yet Ford says the chip shortage is going to cost

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Speaker 1: it two and a half billion dollars. Apple says it's

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Speaker 1: going to be a three to four billion dollar hits,

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Speaker 1: not just the chip shortage. I'm looking for parts my

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Speaker 1: BMW R nine T. I need an exhaust hanger and

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Speaker 1: a GPS amount. They're made out of aluminum in the

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Speaker 1: company that makes them has trouble sourcing it. Plus, we

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Speaker 1: just talked about copper prices, iron ore resurging, food, gasoline.

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Speaker 1: Is this really transitory? There are elements I don't think

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Speaker 1: can be transitory, or there's other elements creeping in. I

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Speaker 1: think that we're going to be seeing pressure on upwards

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Speaker 1: on prices as we move forward. All right, so, Mace,

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Speaker 1: give us a sense of how you think this Federal

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Speaker 1: reserve is performing right here, given what match is kind

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Speaker 1: of laid out. Is some certainly some signs of higher inflation.

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Speaker 1: I think that they've kind of taken themselves out of

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Speaker 1: the game at a critical point here. Um they've said

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Speaker 1: that they're going indicated that they're not likely to remove

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Speaker 1: QUEI or stimulus until the fourth quarter. At the earliest expectations.

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Speaker 1: But some of these UM, these UM pricing processes you

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Speaker 1: pointed out, we're still seeing in spite of first quarter growth,

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Speaker 1: we continued to see inventories at a low level. And

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Speaker 1: we also have not seen a resurgence yet in UM

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Speaker 1: restaurants or hotel stays. So we're going to see continued

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Speaker 1: growth in pricing pressure in this and the supply chain

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Speaker 1: and UM. Some of these may be transitory, but there's

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Speaker 1: other indications that some of the other areas it may

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Speaker 1: not be transitory. UM Labor shortages UM continued to be acute.

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Speaker 1: It's hard to get people come back with the high

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Speaker 1: government UM payouts, and it seems like people are stuck

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Speaker 1: on the sofa rather than looking for jobs. I think

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Speaker 1: that's going to have an impact on the labor rates

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Speaker 1: is one of the key factors. We've heard that also

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Speaker 1: from We've had guests who on restaurants and hotels and

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Speaker 1: they say they just can't get anybody to come into work.

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Speaker 1: Of course, the answer to that conundrum is just to

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Speaker 1: raise what you're paying them UM. That's another thing that

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Speaker 1: then adds to inflation, and the FED can't be terribly

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Speaker 1: unhappy about that. Right, they want to see two two

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Speaker 1: and a half percent inflation, but are we going to

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Speaker 1: see more than that? Could we see three or four

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Speaker 1: percent over over time? Yes, I think we could, Especially

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Speaker 1: in the short term, we could see higher as we

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Speaker 1: try to as you pointed out on a semiconductor side,

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Speaker 1: that's causing shortages and autos, and I think that that's

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Speaker 1: going to give the auto manufacturers a lot of pricing power,

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Speaker 1: and even some of the more commodity like industries like

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Speaker 1: computers and technology equipment I think are going to have

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Speaker 1: pricing power in a short term. So I think that

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Speaker 1: the short term we could see some some very high

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Speaker 1: reported inflation numbers. The question is going to be is

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Speaker 1: the Fed right in their bet that this will be transitory.

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Speaker 1: That's going to be the key thing we're going to

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Speaker 1: be looking at going throughout the year is trying to

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Speaker 1: determine is a truly transitory and how much of it's

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Speaker 1: becoming ingrained in the economy. Let's go look at one

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Speaker 1: of the big drivers of inflation, oil prices. Here Mace

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Speaker 1: looking at Brent crewd at sixty eight dollars a barrel

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Speaker 1: today up another one point three, so definitely has been

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Speaker 1: moving higher we even Matt and I were talking earlier

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Speaker 1: this week about a Bloomberg News story four dollar gasoline

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Speaker 1: at the pump in California. When does energy, the price

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Speaker 1: ad energy become perhaps a headwind for the economy. I'm

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Speaker 1: gonna sure when he becomes a head wind, But I

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Speaker 1: do believe it's going to be one of those non

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Speaker 1: transitory price pressures because with the policy of the current

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Speaker 1: administration UM we have stopped building pipelines, which is going

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Speaker 1: to make it more difficult to supply in the United States.

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Speaker 1: It's also going to be a detriment to drilling new areas.

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Speaker 1: We're also making more difficult and to drill on federal land.

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Speaker 1: All these things are going to stack up at the

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Speaker 1: same time to limit supply at the same time that

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Speaker 1: we're about ready to increase demand. So I think, you know,

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Speaker 1: we've not eliminated the need for oil and gas in

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Speaker 1: our economy, and as said demand goes up, we're probably

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Speaker 1: going to continue to see higher prices on the oil

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Speaker 1: and gas side. And that's probably one of those non

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Speaker 1: transitory factors. So if we start looking forward at non

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Speaker 1: transitory factors, we have labor rates which may become ingrained

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Speaker 1: it's gonna be hard to see those rates go back down,

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Speaker 1: and then certainly energy prices, so those are kind of

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Speaker 1: starting to stack up in against the fat case. All right, Maze,

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Speaker 1: thanks very much for joining us. Really appreciate your insight

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Speaker 1: on this. Mace McCain, president, Chief investment officer at Frost

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Speaker 1: Investment Advisors. As I said, they have assets under management

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Speaker 1: totally more than five point one billion dollars. Thanks for

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Speaker 1: listening to the Bloomberg Markets podcast. You can subscribe. I've

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Speaker 1: been listening to interviews with Apple Podcasts or whatever podcast

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Speaker 1: platform you prefer. I'm Matt Miller. I'm on Twitter at

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Speaker 1: Matt Miller three and on Fall Sweeney. I'm on Twitter

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Speaker 1: at pt Sweeney Before the podcast. You can always catch

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Speaker 1: us worldwide at Bloomberg Radio