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Disney, Markets, Hilton, and Kellogg (Podcast) · Bloomberg Intelligence

0:00
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 podcast or wherever you listen to podcasts, and
0:18
Speaker 1: at Bloomberg dot com slash podcast. I want to get
0:22
Speaker 1: over right now to Keith Rogan Nathan. She is our
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Speaker 1: US media analyst for Bloomberg Intelligence. And of course we've
0:30
Speaker 1: got to talk more about what's going on with Disney.
0:32
Speaker 1: It's a big move today, and as Abigail points out,
0:35
Speaker 1: um it's a big move in general. Kind of are
0:38
Speaker 1: they winning this issue with Nelson Pelts or have they
0:41
Speaker 1: both won? Everyone's a winner, Githa, what do you think? Yeah?
0:45
Speaker 1: I agree, I think everyone is a winner. I mean
0:47
Speaker 1: a Pell's got what he wanted, uh, which is, you know,
0:51
Speaker 1: the stock price moved higher. And I think it's you know,
0:53
Speaker 1: just kind of even though it's a somewhat of an
0:55
Speaker 1: I think an unwelcome distraction for Disney when they had
0:58
Speaker 1: so much going on. It really kind of up to
1:00
Speaker 1: Bob Iger on his does and and forced him to
1:02
Speaker 1: kind of come up with the plan that he did,
1:05
Speaker 1: which he articulated yesterday, really kind of putting them now
1:09
Speaker 1: on that path to to sustainable earnings growth and profitability
1:12
Speaker 1: in the streaming business, two things that you know, investors
1:15
Speaker 1: really wanted to see very badly. Also striking to me
1:18
Speaker 1: about the earnings picture, specifically that you're seeing a pretty
1:21
Speaker 1: decent rebound in Parks in their parks business as opposed
1:24
Speaker 1: to a miss on their subscriber business. Talk to us
1:27
Speaker 1: about that divergence. It doesn't feel like we can call
1:29
Speaker 1: Disney and Media tech company anymore. I agree, pretty. I mean,
1:33
Speaker 1: if you look at just their operating results from from
1:36
Speaker 1: what they posted yesterday, hundred percent of their operating income
1:40
Speaker 1: now comes from the parks division. So I feel like
1:42
Speaker 1: it Parks still continues to be such a yes, a
1:47
Speaker 1: hundred percent. Um. You know, all of their operating income
1:50
Speaker 1: is generated by Parks because you know, whatever the linear
1:53
Speaker 1: networks were generating in operating income that was offset by
1:57
Speaker 1: the losses and the streaming division. Um, so Media really
2:01
Speaker 1: is net zero for them at this point. Um, and
2:05
Speaker 1: so everything is Sparks, and I feel like it is
2:07
Speaker 1: somewhat miss uh. I don't want to say misunderstood, but
2:11
Speaker 1: definitely underappreciated because it is such a big part of
2:15
Speaker 1: their profit equation. And what we're seeing is not just
2:18
Speaker 1: the comeback in parks, right, but we're seeing the sustained momentum.
2:21
Speaker 1: So you're looking at attendance, it was up eleven You
2:24
Speaker 1: look at a capita spending that was up last year,
2:27
Speaker 1: it was up over pre pandemic levels. But even if
2:30
Speaker 1: you look at the fiscal first quarter, it was again
2:33
Speaker 1: up about you know, eight percent or so, so again
2:36
Speaker 1: steady growth. And if you just look at US park
2:39
Speaker 1: margins thirty, I mean this was record high margins. So
2:44
Speaker 1: really they are you know, I want to say, firing
2:46
Speaker 1: on all cylinders, whether it's you know, revenue growth, whether
2:49
Speaker 1: it's extracting efficiencies in terms of costs um so Parks
2:52
Speaker 1: definitely is is just such uh you know, alliance share
2:56
Speaker 1: of the profits there for them at Disney. If I listen,
3:00
Speaker 1: I feel like they're leaving some money on the table
3:01
Speaker 1: because if I get HBO streaming, I get everything that
3:05
Speaker 1: HBO offers, or when I get Netflix or Amazon Prime,
3:09
Speaker 1: I get all of the products they offer over the
3:12
Speaker 1: box with my little app. But ESPN. If I get
3:17
Speaker 1: ESPN Plus, then I get like Division three softball and
3:21
Speaker 1: maybe some Ivy League quidditch games. Like, why is it
3:25
Speaker 1: that I can't get all of ESPN without having to
3:28
Speaker 1: fork out money that I'm that I'm unwilling to pay
3:32
Speaker 1: for some stupid old school cable package. Yeah, this is
3:36
Speaker 1: really the conundrum really for for Disney and for actually
3:40
Speaker 1: the whole media industry. Man, and you bring up a
3:42
Speaker 1: really good point. They are not able to go in
3:46
Speaker 1: or or I should say, all in on streaming when
3:49
Speaker 1: it comes to ESPN, just because ESPN really defines the
3:53
Speaker 1: linear TV bundle. So if ESPN or when ESPN makes
3:58
Speaker 1: that complete shift to uming, uh, that's pretty much the
4:02
Speaker 1: depth of the traditional TV bundle as we know it,
4:04
Speaker 1: because all of the sports rights, all of the content,
4:08
Speaker 1: you know, is with that linear ESPN networking. Remember, it
4:11
Speaker 1: still throws out about three and a half four billion
4:13
Speaker 1: dollars in cash flow year after years. So this is
4:16
Speaker 1: really a very important part of the profit story for them,
4:19
Speaker 1: or at at least it has been. It is going
4:21
Speaker 1: to be a diminishing part of it, but it has
4:23
Speaker 1: been for a long time, and they don't want to
4:25
Speaker 1: do anything to exacerbate card cutting because there still is value.
4:29
Speaker 1: I mean, even if it's generating lower IBADA, it's still
4:32
Speaker 1: throwing out cash and that that's important for business, at
4:35
Speaker 1: least for the businesses, especially when you know streaming is
4:38
Speaker 1: still um in a loss making phase. But couldn't they
4:42
Speaker 1: I mean, I would pay twenty hours a month if
4:44
Speaker 1: I could see real ESPN streaming and not have to
4:48
Speaker 1: buy a cable bundle for it. Do they make more
4:51
Speaker 1: than that on an so on a cable bundle, They're
4:55
Speaker 1: making about twelve dollars per subscriber. So so they had
5:00
Speaker 1: to do this, they had to take baby steps here,
5:03
Speaker 1: and they already did that. So they have the ESPN too,
5:05
Speaker 1: I'm sorry, the ESPN Plus product, which is you know,
5:08
Speaker 1: which really has all the non market content as you
5:11
Speaker 1: should be called n Yeah, yeah, good point, but it's
5:16
Speaker 1: all you know, the tier two sports. Uh. And the
5:18
Speaker 1: reason they can't get the n F, you can't get
5:20
Speaker 1: the NFL or you know, the the NBA or the
5:23
Speaker 1: MLB is because they want you to come back to
5:26
Speaker 1: the traditional TV package because they're they're still asking distributors
5:30
Speaker 1: to pay that twelve dollar fee per subscriber. UM. So
5:33
Speaker 1: it's gonna be interesting. I mean pricing is going to
5:35
Speaker 1: be the biggest sticking point when it comes to that,
5:39
Speaker 1: you know, streaming product. Where are they going to price
5:41
Speaker 1: ESPN plus? You know, our customers used at twenty dollars.
5:45
Speaker 1: I mean, I don't know how many customers would be
5:47
Speaker 1: willing to pay twenty dollars. So that is really something
5:50
Speaker 1: that they need to evalue it very closely. But I
5:52
Speaker 1: think just with them kind of separating out ESPN as
5:55
Speaker 1: as a segment by itself kind of definitely paved the
5:58
Speaker 1: way for them to do something much strategic with it,
6:00
Speaker 1: either you know, a spin a sale or or that
6:03
Speaker 1: big bush into streaming, maybe combining it with supports betting.
6:06
Speaker 1: We have to wait and watch. I have betting drives
6:09
Speaker 1: viewership for sure. Keith, thanks so much for joining us. KEITHA.
6:12
Speaker 1: Royan Nathan. There are US media analysts for Bloomberg Intelligence
6:15
Speaker 1: walking us through what's going on with Disney. We've all
6:22
Speaker 1: heard about quiet quitting, and surely it's on the rise
6:24
Speaker 1: now in bonus season. If you don't get what you
6:27
Speaker 1: want and you can't get a raise, you're less likely
6:31
Speaker 1: to quit your job, but you might as well just
6:32
Speaker 1: not give up anymore. UM. Quiet hiring is a term
6:37
Speaker 1: I've never heard before until now, and that's why we're
6:41
Speaker 1: gonna bring in Emily Rose, Senior director of Research at
6:43
Speaker 1: Gartner um n y I C ticker I T for
6:47
Speaker 1: Gartner if you want to check out the business there. Emily,
6:50
Speaker 1: thanks so much for joining us. What is quiet hiring
6:56
Speaker 1: so quiet hiring is how organizations are addressed in the
7:00
Speaker 1: fact that we've got a massive talent shortage while also
7:03
Speaker 1: some economic uncertainty by using the talent they have in
7:09
Speaker 1: house or contractors to add get the skills they need
7:15
Speaker 1: where they need the most without adding full time headcount.
7:21
Speaker 1: So they so they they're outsourcing, well, it could be
7:27
Speaker 1: outsourcing UM, but usually what we're actually seeing is a
7:30
Speaker 1: lot more of Okay, this part of the business is
7:33
Speaker 1: incredibly important to us. We're going to move talent over
7:36
Speaker 1: to make it happen. UM. You've seen examples from the
7:39
Speaker 1: airline industry where anyone who has an office job is
7:42
Speaker 1: being paid extra to take a shift as a bag
7:45
Speaker 1: of chandler Um or if it's not operational priorities, it
7:49
Speaker 1: might be strategic priorities. To say a business decides we
7:53
Speaker 1: desperately need data scientists. We know the hiring kinmeline for
7:56
Speaker 1: them is maybe nine months long or longer. So rather
8:00
Speaker 1: than cut our goals for the year and say we're
8:03
Speaker 1: just not going to meet them because we couldn't get
8:05
Speaker 1: the talent we need, We're going to go take some
8:07
Speaker 1: analysts from HR and Marketing who have some of the
8:10
Speaker 1: skills that we need and move them over and have
8:13
Speaker 1: them do some of the data science work and then
8:15
Speaker 1: either upskill them, maybe run them through a quick boot camp,
8:19
Speaker 1: or redesign the work a little bit so that either
8:21
Speaker 1: a contractor or someone else with the organization can do
8:24
Speaker 1: the parts of the role. But we can't do contractors.
8:28
Speaker 1: That's the thing I understand the bringing in contract work
8:32
Speaker 1: that makes sense and nothing new, um is are we
8:36
Speaker 1: in an environment where people are scared to add to
8:38
Speaker 1: headcount for you know Wall Street reasons. You don't see
8:43
Speaker 1: stocks jump when you add seven thousand people. You do
8:46
Speaker 1: see stocks jump when you cut seven thousand people. Is
8:49
Speaker 1: that why they might want to do this quietly? Exactly?
8:53
Speaker 1: So this is essentially a response to the fact that
8:57
Speaker 1: Wall Streets watching, Your stakeholders are watching and and not
9:01
Speaker 1: wanting to have massively high labor costs just skyrocket at
9:06
Speaker 1: this particular point in time, but also the fact that
9:10
Speaker 1: the work still needs to get done. So does that
9:13
Speaker 1: shop up in something like the seventeen thousand jobs we
9:16
Speaker 1: were got reported on on Friday. Is that something that's
9:19
Speaker 1: showing up in the data or is this kind of
9:21
Speaker 1: a great spot or a blind spot for the labor economy. Um,
9:25
Speaker 1: So this is something that you might not necessarily see
9:28
Speaker 1: in the job's numbers, because if someone's moving internally, um,
9:32
Speaker 1: it doesn't necessarily look like a job was added, but
9:36
Speaker 1: they are affecting that. Assuming that this goes well for
9:40
Speaker 1: someone and they're able to perform in the role, they're
9:44
Speaker 1: going to be more likely to stay at the organization
9:46
Speaker 1: and maybe move upwards, which is going to then, of
9:48
Speaker 1: course keep them from hopefully joining the labor market and
9:52
Speaker 1: going to another organization and raise their pay. Right because
9:55
Speaker 1: if I'm middle management but also a baggage handler, I'm
9:59
Speaker 1: going to want more me for that. You know, if
10:01
Speaker 1: I'm an analyst, but now I'm a data scientist, I
10:04
Speaker 1: feel like we deserve a bump. Yes, especially because data
10:08
Speaker 1: scientists are notoriously well paid compared to your typical HR
10:11
Speaker 1: marketing analyst. So this is somewhere where organizations have to
10:17
Speaker 1: see the that side of the coin. It's not enough
10:19
Speaker 1: to say we're gonna move you over because it's a
10:20
Speaker 1: strategic priority. So that's quiet hiring to pay people, So
10:24
Speaker 1: that's quiet hiring. Emily, what is the extremely loud hiring
10:29
Speaker 1: that we saw last Friday. What's going on with this
10:32
Speaker 1: labor market where we just continue to add more jobs
10:35
Speaker 1: than expected even as the Fed tries to raise rates
10:39
Speaker 1: and tighten financial conditions, and we see a florry of
10:43
Speaker 1: pink slips coming out of the West Coast and the
10:45
Speaker 1: Magic Kingdom. Yeah, so I can't speak to specific organizations,
10:50
Speaker 1: but in general with these layoffs, they're actually strikingly as
10:54
Speaker 1: difficult as they might be for the people going through
10:56
Speaker 1: them and their colleagues who are left behind, they are
11:00
Speaker 1: a small percentage of the workforce and so they make
11:03
Speaker 1: a lot of news, but they don't actually have a
11:06
Speaker 1: massive impact on a lot of our jobs numbers. And
11:10
Speaker 1: what we are seeing is that and the reason the
11:12
Speaker 1: jobs numbers are going up is pointing to that talent
11:15
Speaker 1: shortage that's driving quiet hiring, which is people desperately need
11:19
Speaker 1: talent and are constantly adding it. But what about the
11:22
Speaker 1: intangibles here, things like more sickly, unlimited sick days, more
11:27
Speaker 1: vacation time, whatever. The other intangibles are that a lot
11:32
Speaker 1: of these unions, for example, are really pushing for or
11:34
Speaker 1: how do you even factor that in so creating Those
11:37
Speaker 1: are actually great examples of how an organization might go
11:42
Speaker 1: about compensating someone or a group of people that they're
11:46
Speaker 1: moving over when they don't necessarily have the budget to
11:49
Speaker 1: do a massive compensation change. Maybe it's a one time bonus,
11:52
Speaker 1: maybe it's more flexibility, maybe it's more um pto. Whatever
11:57
Speaker 1: it is, you have to compensate people. As you value
12:00
Speaker 1: them enough to move them over, you're gonna want to
12:03
Speaker 1: keep them. But does that then have the same effect like,
12:08
Speaker 1: for example, is there a tradeoff then like I will
12:10
Speaker 1: be willing to take less pay as as Matt brings
12:14
Speaker 1: up if you give me these added benefits. Is there
12:17
Speaker 1: a way to see that trade off? Oh? Absolutely, And
12:20
Speaker 1: you can actually quantify it, so you can look at
12:22
Speaker 1: something and say, Dave pto is worth this much in salary,
12:26
Speaker 1: both in terms of what people are actually able to
12:28
Speaker 1: willing to trade off, so how they perceive it, and
12:31
Speaker 1: also what is the dollar value to the organization love
12:33
Speaker 1: to see that equation. Let's talk about raises and bonuses, UM,
12:39
Speaker 1: you know, beyond Wall Street, just generally in the American economy,
12:41
Speaker 1: as so many people are hired, um, and as we
12:47
Speaker 1: see so much UH inflation, employees are gonna want bumps.
12:52
Speaker 1: But I guess employers are going to be a little
12:54
Speaker 1: bit worried about the possible recession that that we're heading into,
12:59
Speaker 1: so there is likely to want to give those boosts
13:02
Speaker 1: to salary. What what are you seeing? We are seeing
13:06
Speaker 1: that the annual raise, particularly if it's the cost of
13:10
Speaker 1: living as opposed to a merit raise, is less than
13:13
Speaker 1: the current state of inflation in general. But of course
13:16
Speaker 1: accepting if there's a a union agreement that requires it
13:19
Speaker 1: to be tagged to annual inflation rates UM. So we
13:22
Speaker 1: are seeing that, And then associated with that is the
13:27
Speaker 1: lower that rate is UM, the more likely that organization
13:30
Speaker 1: is to see turnover. What does that then? Is that
13:33
Speaker 1: equivalent across all sectors? Are you seeing that or even
13:37
Speaker 1: the concept of quiet hiring more predominant in certain parts
13:40
Speaker 1: of the economy. So I would say that quiet hiring
13:44
Speaker 1: is a little bit less predominant right now in some
13:48
Speaker 1: of the larger tech organizations that are having layoffs because
13:51
Speaker 1: they are obviously dealing with a slightly different situation than
13:55
Speaker 1: a talent shortage. But for most organizations, we see this
13:58
Speaker 1: a lot. It's in some ways it's a little bit
14:00
Speaker 1: easier to do on site with on site workers. But
14:05
Speaker 1: we see this for desk based workers, we see this
14:07
Speaker 1: for deathless workers. We see this across industries. Where it's
14:11
Speaker 1: easier to do is where you have multiple business units.
14:15
Speaker 1: So say you can move someone when you decide to
14:18
Speaker 1: d prioritize a business unit, you can move people to
14:20
Speaker 1: the business unit you've prioritized. It's a little bit harder
14:24
Speaker 1: if you're extremely small as an organization. So coming back
14:29
Speaker 1: to the office, you mentioned desk less or desk spake
14:32
Speaker 1: space workers. Um is coming back to the office. I
14:35
Speaker 1: mean everyone's going to have to do or have we
14:37
Speaker 1: entered a new normal where a lot of people are
14:39
Speaker 1: going to work from home multiple days a week. I
14:42
Speaker 1: just wonder, because you know, if we do hit a recession,
14:45
Speaker 1: I've heard a lot of people say that's when companies
14:47
Speaker 1: are going to make people come back. They can try. Um,
14:52
Speaker 1: what we've seen is that that has not worked. So
14:55
Speaker 1: saying you're going to come back to the office. Here
14:56
Speaker 1: the days of the week we want to see you.
14:58
Speaker 1: Is they're very few situations where I've talked to clients
15:01
Speaker 1: about this and they've said it's going great. And part
15:06
Speaker 1: of it is that you have to actually explain now
15:09
Speaker 1: why someone should be coming into the office if they
15:12
Speaker 1: don't need to, and recognizing that actually by working remotely,
15:17
Speaker 1: they're saving on their transportation costs, their lunches, all of
15:22
Speaker 1: the different wear and tear on their clothing, and there
15:25
Speaker 1: their car or however they're getting into the office. All
15:28
Speaker 1: of these little things that add up, and also the
15:30
Speaker 1: convenience in many cases of working from home. So if
15:33
Speaker 1: you want to bring people into the office, one you
15:35
Speaker 1: may need to actually compensate them even more to get
15:38
Speaker 1: them there. But also you're gonna want to design those
15:41
Speaker 1: in office days very intentionally so that you're actually giving
15:45
Speaker 1: people a reason to want to be there. So rather
15:47
Speaker 1: than come into the office and do exactly what you're
15:50
Speaker 1: doing at home, just because we think it would be
15:52
Speaker 1: really nice if you somehow saw other people who you
15:55
Speaker 1: may not see because they may not have the same
15:57
Speaker 1: in office day as you. They need the actually organizations
16:01
Speaker 1: need to be saying when you're in the office, this
16:03
Speaker 1: is what we want from you. Here's how we've planned
16:05
Speaker 1: your day so that you will get these experiences we're
16:07
Speaker 1: looking for. All Right, Emily, great having on the program.
16:10
Speaker 1: Thanks so much for joining us. These topics I think
16:12
Speaker 1: are interesting too. Very many people for for for for
16:16
Speaker 1: some obvious reasons. Let's get over to Mike Vogel, saying
16:22
Speaker 1: right now he joins us from Cap Trust, where he's
16:25
Speaker 1: chief investment officer and managing director. Mike, what do you
16:29
Speaker 1: think of this rally that we've seen from the October lows.
16:32
Speaker 1: I'm hearing a growing chorus of warnings from you know,
16:37
Speaker 1: very traditionally conservative parts of Wall Street. Yeah, it's a
16:41
Speaker 1: great question. Matt it Crety, thanks for having on. I
16:44
Speaker 1: think I think the issue is, you know, you're just
16:46
Speaker 1: talking about the recession and the inverted yield curve. You know,
16:49
Speaker 1: there's pretty much everything is pointing towards slower economic output
16:54
Speaker 1: coming for the rest of this year except for employment. Right,
16:58
Speaker 1: We've we've every time the eeld curves and lay inverted,
17:01
Speaker 1: we've had a recession, but we've never had a recession
17:04
Speaker 1: with employment this strong. So which one of those two
17:06
Speaker 1: is gonna win out. That's that's the battle on Wall
17:08
Speaker 1: Street today as we're talking, um, you know, the the rally,
17:12
Speaker 1: we think is a little bit of a knee jerk
17:13
Speaker 1: reaction from from just a you know, horrible, no good,
17:17
Speaker 1: very bad year last year and twenty two. And as
17:19
Speaker 1: a result, we've we've seen you know, the sort of
17:21
Speaker 1: the January effect on steroids a little bit. Um. We're
17:26
Speaker 1: we're we're of the belief that inflation is peaked, the
17:29
Speaker 1: Federal Reserve isn't going to be as aggressive as as
17:32
Speaker 1: um you know, we sort of thought that were going
17:35
Speaker 1: to be three or four months ago, and I think
17:37
Speaker 1: you're seeing that in the equity markets. But um, we
17:40
Speaker 1: we still believe that at some point, weaker earnings, softer
17:43
Speaker 1: economic growth, and and um high valuations are going to
17:47
Speaker 1: end up causing some problems and ingestion for the market
17:49
Speaker 1: this year. So we're just trying to be really patient
17:52
Speaker 1: and spick our spots when we want to add. But why,
17:55
Speaker 1: but why do we see you know, if we're seeing
17:58
Speaker 1: all these um, you know, bad signs in the data. Um,
18:03
Speaker 1: in terms of economic growth, why do we see such
18:06
Speaker 1: huge games and hiring. Well, that's that's exactly the dilemma.
18:11
Speaker 1: We've never seen this before. And you know, we're having
18:14
Speaker 1: we're having a discussion in our offices this morning about
18:16
Speaker 1: about this very things like what what has changed about
18:19
Speaker 1: the employment picture? Maybe it's the fluidity or lack of
18:21
Speaker 1: friction and employment. You can go, Hey, if you lose
18:23
Speaker 1: your job, you can go become an uber driver by
18:25
Speaker 1: four o'clock that afternoon. Right, There's there's the there's the
18:28
Speaker 1: ability to bounce around and move. We've had we've had
18:30
Speaker 1: people leaving the job market on on sort of different
18:34
Speaker 1: in a different end, right, the demographic spectrum. The older
18:37
Speaker 1: workers have left, uh in a lot of ways. Is
18:41
Speaker 1: there something different? I don't think we have an answer
18:42
Speaker 1: to this. We're just positing the question. Is there something
18:45
Speaker 1: different about the about the employment market in today's world
18:49
Speaker 1: that is changing the to use a technical word, the
18:53
Speaker 1: Phillips curve that the federal reserve uses, right, are we
18:56
Speaker 1: going to see a recession while employment stays high? We're
19:00
Speaker 1: are we going to see employments say high and pull
19:02
Speaker 1: us out and not allow us to go into recession?
19:04
Speaker 1: All of those things are on the table, and and
19:06
Speaker 1: and you know, for for people who are simply saying,
19:09
Speaker 1: you know, this is a one directional market. Now the
19:11
Speaker 1: Feds cut rates, and we're gonna the Feds going to
19:14
Speaker 1: cut rates, and and you know, the long term part
19:16
Speaker 1: of the curves is much lower now, and therefore you
19:19
Speaker 1: can bid up prices on the equity markets. We we
19:21
Speaker 1: just think that's that's just not how it's gonna play. Cratty.
19:25
Speaker 1: I've always loved the idea that if you lose your job,
19:28
Speaker 1: that's a recession. If I lose my job, that's a depression.
19:31
Speaker 1: But if neither one of us loses our jobs, Mike,
19:37
Speaker 1: let's apply all of those great questions to uh, the
19:41
Speaker 1: the market here. I mean, Matt started off this segment
19:45
Speaker 1: by talking about this two tons in version. Do you
19:47
Speaker 1: put any stock in it? Do you believe that this
19:49
Speaker 1: is still the signal it was, say ten years ago.
19:53
Speaker 1: Let's be clear, right, it's really it's really simple to
19:57
Speaker 1: get causality reversed. Um, it's not yield curve that causes
20:01
Speaker 1: a recession. It's a signal of some things that are
20:03
Speaker 1: going on in the markets that mostly the federal reserve
20:06
Speaker 1: tightening interest rates, that that has historically has led to recession.
20:11
Speaker 1: So don't you know don't confuse causality here. They're they're
20:14
Speaker 1: very often temporal or contemporaneous, so it's it's important to
20:18
Speaker 1: keep that clear. Just because we were in an in
20:20
Speaker 1: an inverted yield curve doesn't mean that we're gonna go
20:22
Speaker 1: in recession. It just means the FED has been aggressive
20:24
Speaker 1: because we had this a bout of inflation. It's also
20:27
Speaker 1: hard to separate out the impact of COVID that we've had.
20:29
Speaker 1: We've never been through this cycle before. We're still dealing
20:32
Speaker 1: with the ripples and after effects of COVID, you know,
20:35
Speaker 1: the COVID, the COVID rock that was thrown into the
20:37
Speaker 1: pond here is still creating big waves and and and
20:41
Speaker 1: having impact on labor markets and on on on inflation
20:45
Speaker 1: and so on. So that that is all that is
20:47
Speaker 1: all playing out, and our jobs market participants and analysis
20:51
Speaker 1: just sort of sorts through that and come up with
20:53
Speaker 1: our best estimate for where we might play where this
20:56
Speaker 1: might play out. But again, you don't need to look
21:00
Speaker 1: any further than we've we've you know, recessions have been
21:04
Speaker 1: have been signaled every time by an inverted yield curve,
21:07
Speaker 1: and we've never had a recession when employments this strong,
21:11
Speaker 1: which which of those two immovable forces are gonna are
21:15
Speaker 1: going to be proved to be movable? Right? So what
21:17
Speaker 1: do you do as an investor right now? I mean,
21:20
Speaker 1: if you're building a portfolio for say a new client
21:23
Speaker 1: comes in with a million bucks, where do you where
21:25
Speaker 1: do you put it? Yeah? Well, let let me give
21:27
Speaker 1: you a little context. So last year we were we
21:29
Speaker 1: were in really good shape. We were we felt super
21:31
Speaker 1: smart and super confident and super smug about about how
21:34
Speaker 1: well we did for clients because we were very conservative
21:37
Speaker 1: and and and and you know, um expected the markets
21:40
Speaker 1: of struggle. Um. Now, the problem is that same sense
21:44
Speaker 1: of smugness has become a quickly of fear of missing
21:47
Speaker 1: out because we're still conservatively positioned. So you know, full
21:50
Speaker 1: full disclosure here, right, those who felt super smart last
21:53
Speaker 1: year are feeling pretty stupid this year. And that's the
21:55
Speaker 1: way Marcus work, of course. And and um, so the
21:58
Speaker 1: question is in and I sort of sort of led
22:01
Speaker 1: with this a bit a minute ago that while the
22:04
Speaker 1: markets generating FOMO and it's gradually pulling people into the market, um,
22:09
Speaker 1: we're we're still remaining fairly conservative on our We have
22:13
Speaker 1: a we have a fairly high cash position, and are
22:14
Speaker 1: all equity portfolios for example. Um And and we're we're
22:18
Speaker 1: holding onto that because we just think we're gonna get
22:20
Speaker 1: opportunity later in the year. We just think that at
22:22
Speaker 1: some point, falling earnings and they are falling, right, the
22:25
Speaker 1: estimates are coming down. Um. You know, the FED, the
22:29
Speaker 1: Fed's work is probably mostly done. We'll see if they
22:31
Speaker 1: get to five five and a quarter, maybe even five
22:33
Speaker 1: and a half if employment stays high. But inflation seems
22:36
Speaker 1: to have come off really hard. Um And and you
22:40
Speaker 1: know that holds that whole mix, that holds stew is
22:43
Speaker 1: gonna end up creating some air pockets in the markets
22:45
Speaker 1: at some point. And and we we will likely, depending
22:48
Speaker 1: on facts and circumstances, get more aggressive when we get
22:51
Speaker 1: that chance. All right, Mike, thanks so much. Michael Olgising,
22:53
Speaker 1: their chief investment officer and managing director at Cap Trust,
23:01
Speaker 1: talk to us about some other earning stories. For example,
23:04
Speaker 1: Kellogg came out today. Uh maker. I think of them
23:07
Speaker 1: as the maker of corn flakes. Oh my god. Kayley
23:11
Speaker 1: Lines is leaving the building right now. I'm watching, We're
23:14
Speaker 1: watching out the Interactive broker studio. Kayley Lines is moving
23:17
Speaker 1: to Washington, d C. Today was her last day in
23:20
Speaker 1: the New York studio. This is really sad, guys. She
23:23
Speaker 1: is a She is a like what is it a
23:27
Speaker 1: super star? A Hallmark? I think of Bloomberg Television. Fun fact,
23:30
Speaker 1: before I wasn't hired at Bloomberg, I called up Kayley
23:32
Speaker 1: and I was like, Kayley, will help me with the
23:34
Speaker 1: interview to get this job. And she did. From my
23:37
Speaker 1: Charletsville dorm room at u v A. Right because it
23:39
Speaker 1: gives you. And almost half of Bloomberg staff worldwide went
23:43
Speaker 1: to u v A. It's just me. Did you go
23:45
Speaker 1: to uv A too? I did not. I went to
23:47
Speaker 1: Texas A. Wow, congratulations were going to a different college
23:51
Speaker 1: and everyone else. All right, let's get back to Kellogg
23:54
Speaker 1: corn flakes maker. Um, they came out with earnings today.
23:57
Speaker 1: What do you see? Yeah, so it's sales actually rose
24:01
Speaker 1: about twelve percent. So when you're thinking of Kellogg, you're
24:04
Speaker 1: thinking rice, crispies, cereal, cheese at crackers. Um. It's also
24:09
Speaker 1: has been raising its prices, similar to see these other
24:12
Speaker 1: consumer goods makers to really offset these higher costs. But
24:16
Speaker 1: that's something that is stuck out when you're looking at
24:18
Speaker 1: these these companies right now that how they're continuing to
24:21
Speaker 1: deal with it, some of them better more so than others.
24:24
Speaker 1: But as far as when it comes to the package
24:26
Speaker 1: good companies, that's been a big focus. And then something
24:29
Speaker 1: I wanted to point out, Matt, because I know you
24:31
Speaker 1: like to keep an eye on what happens with these
24:34
Speaker 1: auto makers, a Tesla in particular. I mean, we already
24:37
Speaker 1: had their earnings recently, but it actually it's stock has
24:40
Speaker 1: doubled from its low that was touched in early January,
24:43
Speaker 1: so it's basically up over a percent from its lows
24:46
Speaker 1: last year. That stock actually had plunged sixty five percent.
24:50
Speaker 1: A lot of that is on different optimism as far
24:53
Speaker 1: as these uh Actually the Biden administration said it will
24:57
Speaker 1: expand this newly revamped EV tax credit to allow SUVs
25:01
Speaker 1: costing up to eighty thousand dollars to receive those types
25:04
Speaker 1: of credits. But I know you focus a lot when
25:06
Speaker 1: it comes to the automakers. So it's curious kind of
25:09
Speaker 1: your thoughts on Tesla, what's going on there and this
25:12
Speaker 1: big rebound obviously we've seen this year compared to what
25:16
Speaker 1: had happened. The thing is, these are seven thousand, five
25:19
Speaker 1: hundred dollar rebates for buying logri cars. So this is
25:22
Speaker 1: a material amount of money for most consumers, right, and
25:26
Speaker 1: if you're going to buy a car that costs you know,
25:28
Speaker 1: forty fifty thousand dollars, that's a huge um. Yes, and
25:34
Speaker 1: so uh, the government has been so slow to come
25:38
Speaker 1: out with these rules. I want to buy a bmw
25:42
Speaker 1: X five right now. They make a hybrid version of it,
25:44
Speaker 1: and I'm just waiting to see if I'm really going
25:46
Speaker 1: to be eligible, because the worst thing would be to
25:49
Speaker 1: buy the car and then to find out from my
25:50
Speaker 1: accountant at the end of the year or the beginning
25:52
Speaker 1: next year, oh no, you're not eligible, and now the
25:55
Speaker 1: car costs me sevent more. I think Tesla is going
25:59
Speaker 1: through this same thing. Um. You know, a lot of
26:02
Speaker 1: the even American carmakers, if they don't get the right
26:04
Speaker 1: percentage of materials um in the battery from you know,
26:09
Speaker 1: North American or US friendly nations, they're not going to
26:12
Speaker 1: get the rebate. And so no one really knows what's
26:14
Speaker 1: going on. So it's hugely important that we get that direction.
26:17
Speaker 1: Jeff menton Uh from Texas and m thank you so
26:20
Speaker 1: much for joining us. Also, she's in charge of stocks
26:22
Speaker 1: coverage for Bloomberg News. Let's get to a couple of
26:27
Speaker 1: socks stories right now. We talked about Kellogg a little bit,
26:30
Speaker 1: and Jennet Jennifer Bartosh is going to join us on
26:32
Speaker 1: that senior industry analyst UM for Bloomberg Intelligence. Also talk
26:36
Speaker 1: a little bit about gaming and lodging because Hilton came
26:40
Speaker 1: out beating estimates as well as resilient consumers and uh
26:45
Speaker 1: paid up in an increase in corporate travel, pushed hotel
26:48
Speaker 1: prices higher as well. Um, thanks so much for joining us.
26:52
Speaker 1: Brian and jen Let's start with Hilton because we haven't
26:55
Speaker 1: really really gone through the story yet. Brian, what is it? So?
26:58
Speaker 1: You know, Hilton had a good quarter as well as
27:00
Speaker 1: a pretty favorable outlook for next year going I should say,
27:04
Speaker 1: for this year. Uh, you know, there's a little bit
27:07
Speaker 1: of note of caution that they're accounting for the possibility
27:09
Speaker 1: of a of a second half twenty three slow down.
27:12
Speaker 1: Our economic recession doesn't stop them from having very nice
27:16
Speaker 1: games and net rooms and and revenue per available room.
27:19
Speaker 1: But overall, you know, pacing nicely both in terms of
27:22
Speaker 1: both leisure and business travel. What does that that mean
27:26
Speaker 1: for something like when we're talking about consumer and the
27:29
Speaker 1: willingness to spend is Hilton basically telling us that we're
27:33
Speaker 1: in the clear. I don't think they're saying necessarily were
27:37
Speaker 1: in the clear. We've come a long way, particularly in
27:39
Speaker 1: markets like the US and europri in terms of revenue
27:42
Speaker 1: per rail room increasing. That's all acknowledging that if we
27:45
Speaker 1: have economic slowdown in the second half, we could kind
27:48
Speaker 1: of slow at the margin. Also from a global perspective,
27:51
Speaker 1: Bear in mind, while I think the removal of travel
27:54
Speaker 1: restrictions in China will eventually help in the short term,
27:57
Speaker 1: you know, China revenue for available room still deeply underwater
28:01
Speaker 1: relative to pre pandemic. Well, elso, mostly because the initial
28:05
Speaker 1: effect of the relaxation of travel curse has been kind
28:08
Speaker 1: of a new round of COVID nineteen outbreaks. Well, Jennifer,
28:12
Speaker 1: hop on in here and give us a little bit
28:14
Speaker 1: more insight on kind of your take on on all
28:17
Speaker 1: of this, is that do you share that assessment that
28:19
Speaker 1: this is maybe not the all clear signal. Well, I
28:23
Speaker 1: think that we see a lot of mixed signals, and
28:25
Speaker 1: it really depends on what group of consumers you're looking at. Um,
28:29
Speaker 1: there is really a bifurcation in the in the US
28:31
Speaker 1: consumer and so those that are more well off or
28:35
Speaker 1: that are you know, involved with business travel UM, you know,
28:38
Speaker 1: those those signals may be strong. UM. For those who
28:41
Speaker 1: are at the lower end of the income spectrum, it's
28:43
Speaker 1: still a complicated story. And food inflation in particular, along
28:48
Speaker 1: with just overall higher cost of living has has really
28:51
Speaker 1: crimped budgets and made people a lot more cautious about
28:53
Speaker 1: where they're spending and how they're spending well. And you
28:55
Speaker 1: can see that difference in the stocks right because Hilton
28:59
Speaker 1: is up like twenty percent year to date. I know
29:01
Speaker 1: we're only at the beginning of February, but Kellogg is
29:04
Speaker 1: off five and a half percent year to date. Now
29:08
Speaker 1: the picture looks different UM last year, right, Hilton had
29:11
Speaker 1: a down year I think last year UM and Kellogg
29:14
Speaker 1: had had a strong year last year. Jen, Why do
29:17
Speaker 1: you see that bifurcation in terms of the stockments. But
29:21
Speaker 1: when you when you're looking at the companies and the
29:23
Speaker 1: space in which they play, UM, you know, the consumer
29:27
Speaker 1: has gotten less and less tolerant of higher priced food
29:31
Speaker 1: and so people at one point had pantries that were
29:34
Speaker 1: overflowing with goods so that they could go and they
29:36
Speaker 1: could select things at any given time to cook and prepare.
29:40
Speaker 1: They're much more selective now. Pantry sizes in kitchens are
29:43
Speaker 1: smaller UM, and people are being more selective about what
29:46
Speaker 1: they're buying and trying to control that food spent because
29:48
Speaker 1: of that high food inflation and the sense that prices
29:51
Speaker 1: are just too high UM and so that's impacting these
29:55
Speaker 1: package truth companies that didn't impact the retailers involved in
29:57
Speaker 1: the space that such as the grocer's UM and companies
30:01
Speaker 1: like Walmart and and her Target as well. We'll hop
30:04
Speaker 1: back in here, um Brian and talk to us a
30:07
Speaker 1: little bit about I guess the dynamic that gen is
30:09
Speaker 1: talking about. She's talking about it from a commodity perspective,
30:12
Speaker 1: but it feels like even a company like Hilton, for example,
30:15
Speaker 1: even the travel companies are going to be dealing with
30:17
Speaker 1: those margin pressures as well. Walk us with the numbers
30:20
Speaker 1: on that. That's definitely been a concern, although there was
30:23
Speaker 1: a comment on the Hilton earnings call which just ended
30:25
Speaker 1: that they're seeing a little bit maybe some moderation and
30:28
Speaker 1: some of the wage cost pressures of the tight labor market,
30:30
Speaker 1: which may very well reflect what we see happening. For example,
30:33
Speaker 1: in other sectors like retail, where maybe you know, some
30:36
Speaker 1: staffing levels are being normalized after a kind of the
30:40
Speaker 1: COVID demand impact. So if anything, although labor cost pressures
30:43
Speaker 1: throughout the service industry remain an issue, we may see
30:47
Speaker 1: a little bit of relief as in fact, you know,
30:49
Speaker 1: there's a little bit of flak in terms of the
30:51
Speaker 1: labor market. What's the outlook for these companies if we
30:54
Speaker 1: hit a big recession. I imagine Brian um, fewer people
30:57
Speaker 1: are going to check into Hilton it's a higher end
31:00
Speaker 1: hotel obviously, and more people are going to be eating
31:03
Speaker 1: corn flakes. I would agree with that. Yeah, Hilton has
31:08
Speaker 1: you know, first part does have high and hotels that
31:10
Speaker 1: also has a lot of kind of a comedy economy
31:13
Speaker 1: and limited service brand, so they kind of played the
31:16
Speaker 1: full spectrum of the market. You know, they are still
31:17
Speaker 1: expecting revenue for eloping room to be up on average
31:23
Speaker 1: three verses, so you're definitely looking for an up year,
31:26
Speaker 1: but it's probably gonna come more from North American and
31:28
Speaker 1: Europe than Asia, and there is factoring in the possibility
31:32
Speaker 1: that the room rate uh support of all that growth
31:36
Speaker 1: may slacken off a little bit in the second half
31:39
Speaker 1: if we do have a recession, and they're allowing for
31:41
Speaker 1: that possibility, but at least we go into the first half.
31:43
Speaker 1: You know, certainly with the man conditions in North America
31:46
Speaker 1: feeling quite favorable compared to where we were a year
31:49
Speaker 1: or two back. I'm glad you mentioned the North America
31:52
Speaker 1: piece of the equation because we have, of course, we're
31:53
Speaker 1: covering Disney earnings for example, all rarning long and one
31:56
Speaker 1: of the big stories there is the US versus International
31:59
Speaker 1: component does about Hilton from an international perspective, So you know,
32:04
Speaker 1: the trends really were were quite mixed. If you look
32:07
Speaker 1: at the trends in the quarter just reported, you know,
32:10
Speaker 1: the revenue prevailable room compared to let's say the four
32:12
Speaker 1: Q nineteen before the pandemic, it was up eight percent
32:15
Speaker 1: in the US, it was up to that benchmark in Europe,
32:19
Speaker 1: but it was down in Asia, and that's because China
32:23
Speaker 1: was down thirty seven percent. So again there's really some
32:27
Speaker 1: quite significant disparities across regions. If you compare, for example,
32:31
Speaker 1: the fourth quarter of twenty two to the fourth quarter
32:33
Speaker 1: of jen what about um Kellogg, How do they look
32:38
Speaker 1: when you divide them up by regions? I always think of, uh,
32:41
Speaker 1: you know, corn flakes is North American product, but I
32:43
Speaker 1: know that they sell that race Christy's and everything else
32:46
Speaker 1: overseas as well. They do. And when you look at
32:49
Speaker 1: the international portrait for for kellog Um, there are pockets
32:52
Speaker 1: of very strong growth which include Latin America and parts
32:55
Speaker 1: of they're emerging markets segment, especially in Africa and in Asia. UM.
33:01
Speaker 1: The region that's most pressured out of their entire global
33:04
Speaker 1: business right now is Europe UM. And part of that
33:06
Speaker 1: is still stemming from uh, you know, issues related to
33:09
Speaker 1: the Ukraine Russia war UM, but it's also that the
33:12
Speaker 1: consumer in Europe has been pulling back faster than in
33:16
Speaker 1: other regions, and so they're seeing that those customers are
33:18
Speaker 1: even more stressed um than we're seeing in in areas
33:22
Speaker 1: like the United States. All right, Jen, thanks so much
33:24
Speaker 1: for joining us. Jen Bartasha is there from Bloomberg Intelligence
33:28
Speaker 1: as well as Brian Egger also Bloomberg Intelligence. He covers
33:32
Speaker 1: gaming and lodging for us. I want to get to
33:38
Speaker 1: Matt Smith right now. He's an investment director at Ruffer
33:42
Speaker 1: and he joins us here in our interactive broker studio,
33:45
Speaker 1: even though he's normally a globe trotting master of the universe.
33:49
Speaker 1: Why are you here, Matt In in New York right now?
33:53
Speaker 1: I'm here as the manager of the fund we launched
33:56
Speaker 1: for US clients at the beginning of last Yet, what
33:58
Speaker 1: what's the fun focus on? So? Ruffer is a single
34:02
Speaker 1: strategy firm. We are the biggest global macro fund you've
34:06
Speaker 1: never heard of, at thirty two billion dollars. So this
34:11
Speaker 1: fund follows our single strategy and makes it available to
34:14
Speaker 1: US clients for the first time. What is that strategy?
34:16
Speaker 1: Good question. We are looking to deliver positive absolute returns.
34:22
Speaker 1: So isn't that what off helping? Well, there's a pretty
34:27
Speaker 1: big focus on relative returns out there. We're trying to
34:29
Speaker 1: not lose money. That's our primary goal, which seems almost
34:33
Speaker 1: comically unambitious, But it turns out that if you can
34:38
Speaker 1: do that and deliver decent returns on top, you will
34:43
Speaker 1: compound pretty powerfully. So you're not still worried about a benchmark.
34:46
Speaker 1: You're mainly worried about the zero bound. You don't want
34:49
Speaker 1: to go below it. That's correct, That which means what
34:52
Speaker 1: a lot less risk? I would imagine It means that
34:55
Speaker 1: we start portfolio construction from the perspective of risk minimization
35:00
Speaker 1: rather than return maximization, which is what most people would
35:02
Speaker 1: would think to do. Okay, so you're a macro fund.
35:05
Speaker 1: Where are you putting your money right now? So I
35:08
Speaker 1: think you can break it down into three different places.
35:11
Speaker 1: Are key structural trade, which I'm going to put in
35:14
Speaker 1: the FED capitulation bucket, is that no central bank in
35:20
Speaker 1: developed markets has got the political or popular mandate to
35:25
Speaker 1: genuinely get rid of inflation. They are all having a go,
35:31
Speaker 1: but we think when push comes to shove, the pain
35:35
Speaker 1: of dealing with inflation is still much greater than the
35:37
Speaker 1: pain of inflation itself, and that will take some time
35:41
Speaker 1: until that changes. So what does the portfolio result of
35:46
Speaker 1: that look like. It's an allocation to thirty and fifty
35:50
Speaker 1: year US and UK inflation link bonds. So really what
35:55
Speaker 1: we want is the inflation expectation which currently sits it
35:57
Speaker 1: around too that the breaking and we think that that
36:04
Speaker 1: reflects the market's belief in total FED credibility. And as
36:09
Speaker 1: that gets called into questions as people think, okay, inflation
36:13
Speaker 1: is not going to be two over the long term,
36:14
Speaker 1: maybe it could be three or four, those assets should
36:17
Speaker 1: should do pretty well. Did you hear David Rubenstein talking
36:19
Speaker 1: to j Pale the other day. He was like, why
36:22
Speaker 1: not three? Three seems good to me? Three doesn't seem
36:26
Speaker 1: good to me. Two doesn't even seem good to me.
36:28
Speaker 1: But I don't like inflation at all. But Rubenstein actually
36:31
Speaker 1: asked that question right, He said, like, why are we
36:33
Speaker 1: even shooting for two percent? Is that even a fair
36:35
Speaker 1: global standard of how It's like, well, that's the standard,
36:38
Speaker 1: he said. He said, why is it? And pal said
36:40
Speaker 1: because it's the global standard. There wasn't a better answer
36:43
Speaker 1: than that, just it is what it is. I think
36:47
Speaker 1: one of the most entertaining dynamics is that Wall Street,
36:51
Speaker 1: like cell side inflation expectations are totally in line with that,
36:56
Speaker 1: and it looks a bit like one of the SpaceX
36:59
Speaker 1: rocket endings. So you know, these SpaceX rockets come down
37:03
Speaker 1: from the outer atmosphere and they land on a boat
37:07
Speaker 1: perfectly Wall Street inflation expectations come down from twelve ten
37:12
Speaker 1: eight down to two and they just sit there. And
37:17
Speaker 1: I think if you go and YouTube failed SpaceX landings,
37:23
Speaker 1: you've got a lot of hits. You know, there's a
37:24
Speaker 1: lot of videos of when that went wrong. It seems
37:27
Speaker 1: to us extremely unlikely that they will be able to
37:30
Speaker 1: bring inflation down to two and it'll just stay there.
37:33
Speaker 1: Can I ask the mechanics of these investments? Thirty two
37:37
Speaker 1: billion dollars there's a lot of money, I mean for
37:40
Speaker 1: me and pretty that's a lot, I guess in the
37:43
Speaker 1: global treasuries market it's slightly less. But isn't there a
37:48
Speaker 1: liquidity issue with that? Even that some in terms of
37:52
Speaker 1: investing did the short answers? No? Uh, we play in
37:57
Speaker 1: pretty liquid global asset classes. That affords us, you know,
38:03
Speaker 1: plenty of room for maneuver. But I don't know. If
38:06
Speaker 1: you remember Jeremy Irons in important call, he says you've
38:10
Speaker 1: got to be either the fastest, the cleverest, or you've
38:14
Speaker 1: got to cheat. Um, we are not going to be
38:17
Speaker 1: the fastest, and we certainly don't cheat. I'm not saying
38:20
Speaker 1: we're the cleverest. But what we try to do is
38:22
Speaker 1: position in advance of where people want to end up,
38:25
Speaker 1: so we're always prepared for bad market outcomes. That means
38:32
Speaker 1: that liquidity normally historically has come to us at times
38:38
Speaker 1: of crisis, rather than us chasing some different positioning that
38:42
Speaker 1: we wish we had when things go wrong. I have
38:45
Speaker 1: a listener question for for for Matt here, I was
38:49
Speaker 1: told by my spies that you were speaking to John
38:51
Speaker 1: Arthur's before you came to our studio and grace us
38:54
Speaker 1: with your presence. He writes in and said John Arthur's
38:59
Speaker 1: he was very famous for having written for the f
39:02
Speaker 1: T for years and years years, very famous, full stop.
39:05
Speaker 1: I think yes, that's fair, which is yeah. I kind
39:08
Speaker 1: of pulled like a Madonna slash Mosis, thinking John Arthur's
39:10
Speaker 1: everyone else who years. Anyways, he's asking what the pressure
39:14
Speaker 1: from governments on inflation fighting could actually be. Is there
39:16
Speaker 1: an analogy to Nixon leaving Breton Woods? In so Nixon
39:25
Speaker 1: left putting you on spot Mat He always brings up
39:27
Speaker 1: Bredon Woods, just for Nixon left Bredon Woods because he
39:31
Speaker 1: couldn't hold the peg to gold because the the tightening
39:35
Speaker 1: he would have needed to do to keep the dollar
39:38
Speaker 1: on gold would have collapsed the U s economy, So
39:41
Speaker 1: he chose an easier path of no gold peg and
39:46
Speaker 1: inflation higher. Clearly, the US government today is not going
39:52
Speaker 1: to repeg to gold. That would definitely lead to some
39:55
Speaker 1: pretty bad economic outcomes quite quickly. Um, I don't think
39:59
Speaker 1: they're going to be able to tighten significantly. Either they
40:03
Speaker 1: are just going to continue solving problems with more spending,
40:08
Speaker 1: and that's what leaves you with higher structural insertion. So
40:12
Speaker 1: it's not just about the FED. I would have asked
40:16
Speaker 1: about a Vulcar analogy, but that's only monetary policy, right,
40:19
Speaker 1: and you're looking at this and a much more holistic way.
40:25
Speaker 1: I do think that the FED is actually it's not
40:27
Speaker 1: an irrelevance, but I think it's not where you should
40:29
Speaker 1: be looking for. How to position your portfolio structure is
40:32
Speaker 1: your time horizon. So we're trying to avoid losing money
40:37
Speaker 1: on a rolling twelve months basis. But the way we
40:41
Speaker 1: do that is to put in structural assets that we
40:44
Speaker 1: think are critical for protecting capital and then kind of
40:47
Speaker 1: encase them in other assets that allow to be agnostic
40:50
Speaker 1: to timing. So short answer is we deliberately don't have one,
40:55
Speaker 1: because predicting the future is easy so long as you
40:58
Speaker 1: don't have to predict when the future is going to happen.
41:01
Speaker 1: So um And and in terms of the FED being
41:05
Speaker 1: say less relevant, Um, you don't look at the Vulcar
41:10
Speaker 1: scenario and say that that FED was able to withstand
41:15
Speaker 1: political pressures that were you know, ten x what Jerome
41:19
Speaker 1: Pale if not a hundred x what Jerome Pale faces. Now,
41:23
Speaker 1: it doesn't that that FED was enabled to do what
41:26
Speaker 1: it did by political support. So everyone wants to be
41:31
Speaker 1: volca in advance, right, every central banker would want to
41:33
Speaker 1: run prudent monetary policy that you need a Reagan behind
41:36
Speaker 1: you exactly. So after ten years of being fed up
41:40
Speaker 1: with inflation uh V four, you had the Whip inflation.
41:44
Speaker 1: Now the wind campaign didn't work. It was only after
41:49
Speaker 1: the whole large sways that the voter base said, we're
41:53
Speaker 1: really sick of this. We'd like to elect someone with
41:57
Speaker 1: who's going to support or docks Montrey policy, supply side
42:01
Speaker 1: reform hammed on both sides Atlantic Thatcher and Reagan. The
42:06
Speaker 1: results were pretty clear. I don't see that right now.
42:11
Speaker 1: The government in Europe is supporting people facing rising prices,
42:18
Speaker 1: facing inflation with more money. In the US, it's the
42:21
Speaker 1: same if you have a high gasoline price or heating bill.
42:26
Speaker 1: You know the States are handing out stimulus. So yeah,
42:31
Speaker 1: I saw the German inflation print was lower today because
42:34
Speaker 1: Germany just picked up everybody's bills last which is not
42:39
Speaker 1: really helpful right in the long run, works for a while,
42:41
Speaker 1: but exactly in the long term. So that's why in
42:46
Speaker 1: the long term you run out of other people's money.
42:47
Speaker 1: Were you about to say that I was not, but
42:49
Speaker 1: I should have been. That's I believe a British quote.
42:52
Speaker 1: That's Margaret that you know it's it's for us. It's
42:56
Speaker 1: a fantastic heads as well as a return seeking opportunity.
42:59
Speaker 1: If INFLA expectations rise a lot, or people realize that
43:02
Speaker 1: the FED doesn't have the political support to titan properly,
43:10
Speaker 1: then it's premiuted to rise a lot in the bond market,
43:14
Speaker 1: in the equity market, cross asset um, so for us
43:19
Speaker 1: have some of that protection. There are some good return
43:22
Speaker 1: opportunities out there, but for the most part, you know,
43:26
Speaker 1: a five cent risk free rate is it's kind of competing. Matt.
43:30
Speaker 1: It was great having in the studio. Thanks so much
43:32
Speaker 1: for coming by, Matt Smith, investment director at Ruffer. Thanks
43:40
Speaker 1: for listening to the Bloomberg Markets podcast. You can subscribe
43:43
Speaker 1: and listen to interviews with Apple Podcasts or whatever podcast
43:47
Speaker 1: platform you prefer. I'm Matt Miller. I'm on Twitter at
43:51
Speaker 1: Matt Miller three on Boll Sweeney, I'm on Twitter at
43:55
Speaker 1: pt Sweeney before the podcast. You can always catch us
43:57
Speaker 1: worldwide at Bloomberg Radio t