Latest / Bloomberg Intelligence / Hard to Price in Tarrifs: Michael Zezas

Transcript

Hard to Price in Tarrifs: Michael Zezas · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Bramowitz. Each day we
• 0:11
  Speaker 1: bring you the most important, noteworthy, and useful interviews for
• 0:15
  Speaker 1: you and your money, whether you're at the grocery store
• 0:17
  Speaker 1: or the trading floor. Find the Bloomberg p m L
• 0:20
  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Now
• 0:33
  Speaker 1: is the right time to pressure China on its trade
• 0:37
  Speaker 1: policy because the US economy is strong enough to handle it.
• 0:40
  Speaker 1: This according to President Trump's Kevin Hassett, he is the
• 0:44
  Speaker 1: White House Council of Economic Advisor's chairman. Meanwhile, the price
• 0:48
  Speaker 1: of soybeans falling to the lowest levels since at one
• 0:52
  Speaker 1: point since now a lot of the tariffs that China
• 0:57
  Speaker 1: is planning to impose on US goods will hit the
• 1:00
  Speaker 1: farm belt. Joining me now to discuss this is Tom Halverson.
• 1:03
  Speaker 1: He's chief executive of co Bank, which extends loans and
• 1:08
  Speaker 1: other banking services to farms and other other wholesale and
• 1:14
  Speaker 1: livestock producers. Thank you so much for joining me today, Tom, Um.
• 1:18
  Speaker 1: I want to start with the price of soybeans falling
• 1:21
  Speaker 1: and some of the other kind of market responses to
• 1:24
  Speaker 1: China's tariffs. It seems like people are expecting the farm
• 1:28
  Speaker 1: belt to get hit pretty hard. What are you hearing
• 1:31
  Speaker 1: directly from the farmers who you work with, Yes, good morning, Lisa. Well,
• 1:35
  Speaker 1: what we're hearing both from the level of production agriculture
• 1:39
  Speaker 1: as well as their their cooperatives and other agribusiness who aggregate,
• 1:43
  Speaker 1: process and sell their their products is meaningful amount of
• 1:48
  Speaker 1: concern because the market is already starting to respond to this.
• 1:52
  Speaker 1: As you indicate, the price of soybeans is falling as
• 1:55
  Speaker 1: our other commodity products. And given that we export almost
• 2:00
  Speaker 1: fifty all of the soybeans produced in the United States,
• 2:03
  Speaker 1: we are particularly susceptible to changes in foreign demand for
• 2:09
  Speaker 1: our products. Given that we export approximately of all US
• 2:14
  Speaker 1: agricultural products, particularly susceptible. Can you talk about what you
• 2:18
  Speaker 1: expect the financial consequences to be in real terms? Well,
• 2:23
  Speaker 1: I would. I would contextualize that by saying, since the
• 2:27
  Speaker 1: United States Department of Agricultures assessment of net farm income
• 2:31
  Speaker 1: in the United States, it's off fifty since when it
• 2:35
  Speaker 1: was at it's high. So while while the rest of
• 2:39
  Speaker 1: the macro economy is generally doing quite favorably, the real economy,
• 2:43
  Speaker 1: and generally agricultural economy in particular, is doing much less
• 2:47
  Speaker 1: well right now as a result of commodity prices already
• 2:51
  Speaker 1: having fallen significantly off the highs that they had three
• 2:54
  Speaker 1: or four years ago. And so what we're anticipating is
• 2:57
  Speaker 1: is the market is going to respond on hereby further
• 3:01
  Speaker 1: falls potentially in in prices UH, and a lot of
• 3:04
  Speaker 1: the product that that that is already an inventory or
• 3:08
  Speaker 1: has now been planted for this year and this year's
• 3:10
  Speaker 1: season UH is going to create new challenges from a
• 3:15
  Speaker 1: pricing perspective as we have to find alternative markets potentially
• 3:19
  Speaker 1: for these products. If these terroffts and these changes in
• 3:23
  Speaker 1: market behavior and the underlying UH disagreements that we have
• 3:28
  Speaker 1: with China and other important agricultural export market governments can't
• 3:33
  Speaker 1: be resolved amicably and swiftly, do you think that there
• 3:37
  Speaker 1: will be more defaults just from the financial perspective as
• 3:41
  Speaker 1: the price falls of a lot of these commodities. Well,
• 3:46
  Speaker 1: I think that the pressure that's been building in in
• 3:49
  Speaker 1: agricultural production in the United States over the last two,
• 3:52
  Speaker 1: three or four years for the reasons I described, is
• 3:55
  Speaker 1: likely to intensify. As I say, if these if these
• 3:59
  Speaker 1: trade uh disagreements are not amicably and swiftly resolved, and
• 4:04
  Speaker 1: and one consequence of that would of course be potentially,
• 4:07
  Speaker 1: you know, more producers and other institutions involved in agricultural
• 4:12
  Speaker 1: production and processing and the like falling into financial stress.
• 4:18
  Speaker 1: I'm wondering whether people within the farming community view this
• 4:24
  Speaker 1: as the US needing to capitulate or China needing to stop.
• 4:29
  Speaker 1: I mean, are they viewing this in political terms or
• 4:31
  Speaker 1: do they not really care? They just want the uncertainty
• 4:35
  Speaker 1: to sort of end and allow things to get back
• 4:38
  Speaker 1: to the way they used to be. Well, I think
• 4:40
  Speaker 1: I think if you ask you know, ten or a
• 4:42
  Speaker 1: hundred different people, you'll get ten or a hundred different opinions.
• 4:45
  Speaker 1: All of them, I would suggest, would be very well informed.
• 4:49
  Speaker 1: Because agricultural producers in the United States, being so significantly
• 4:53
  Speaker 1: dependent on foreign export markets, are actually quite knowledgeable and
• 4:57
  Speaker 1: sophisticated and understanding what's going on in places like China, Mexico,
• 5:02
  Speaker 1: and Canada where a lot of their product is sold.
• 5:05
  Speaker 1: And while they may have a thoughtful view about how
• 5:07
  Speaker 1: best to resolve these issues, I think for the for
• 5:10
  Speaker 1: the majority of people, what they want is for these
• 5:13
  Speaker 1: issues to be resolved and for some certainty to come
• 5:16
  Speaker 1: back into the marketplace, because they all know, as we do,
• 5:20
  Speaker 1: that that this is not just an issue today. Over
• 5:22
  Speaker 1: the next twenty years or twenty five years, we think
• 5:25
  Speaker 1: there will be more than two billion more people on
• 5:27
  Speaker 1: the earth, and of them will be in India, China,
• 5:30
  Speaker 1: and Africa. And that is a substantial upside trade export
• 5:36
  Speaker 1: opportunity for the United States, which has the world's most
• 5:40
  Speaker 1: successful and efficient agricultural production complex uh and and for
• 5:44
  Speaker 1: us to be able to capitalize on that opportunity over
• 5:47
  Speaker 1: the next five, ten, fifteen, twenty years, we need certainty,
• 5:51
  Speaker 1: and that certainty needs to be built on a foundation
• 5:53
  Speaker 1: of access on a free, fair and equitable basis to
• 5:57
  Speaker 1: foreign markets where people are going to need to buy
• 6:01
  Speaker 1: our surpluses and they're gonna want to buy our surpluses
• 6:04
  Speaker 1: because they're such high quality. Tom, just real quick here,
• 6:07
  Speaker 1: we just have a better minute left. Which state do
• 6:09
  Speaker 1: you think we'll get hit hardest by the tariffs? Uh?
• 6:14
  Speaker 1: You know, it depends on how all of this plays out.
• 6:17
  Speaker 1: And I can't tell you down to the down to
• 6:19
  Speaker 1: the dime, but if you look at you know, you
• 6:21
  Speaker 1: could answer that question almost specifically by commodity groups. So,
• 6:25
  Speaker 1: for example, almost of the cotton produced the United States
• 6:29
  Speaker 1: is is exported, right uh, Almost fifty of the soybeans
• 6:34
  Speaker 1: are exported. A substantial portion of that goes to goes
• 6:38
  Speaker 1: to China. While a lot of our soybeans come from
• 6:41
  Speaker 1: the Midwest, including places like you know, Iowa, Illinois and
• 6:45
  Speaker 1: other states. You know, it's the bread basket commodity producing
• 6:48
  Speaker 1: states particularly that produce some of the highest volume products
• 6:54
  Speaker 1: that may that may experience the most difficulties. Tom Haliverson,
• 6:58
  Speaker 1: thank you so much for joining me today. Tom Halverson
• 7:01
  Speaker 1: is President, chief executive officer of KO Bank, which extends
• 7:05
  Speaker 1: loans and other banking services to farms and other agricultural
• 7:09
  Speaker 1: producers across the US. It is hard to parse out
• 7:27
  Speaker 1: the noise from what you really need to pay attention to.
• 7:31
  Speaker 1: Right now, our next guest is going to talk about
• 7:34
  Speaker 1: that process from an investment perspective. Aaron Kennon joins us now.
• 7:38
  Speaker 1: He's co founder and chief executive officer of Clear Harbor
• 7:40
  Speaker 1: Asset Management, which is based in New York. Aaron, thank
• 7:44
  Speaker 1: you so much for being with me. And I just
• 7:46
  Speaker 1: want to start with the idea that the top headlines
• 7:50
  Speaker 1: today on this otherwise slow summer Monday has to do
• 7:56
  Speaker 1: with children being taken from their families and immigrant Asian
• 8:00
  Speaker 1: policy and who's to blame, and then you have a
• 8:02
  Speaker 1: potential trade war with China and the US. This in
• 8:07
  Speaker 1: the past few months has been noise for the markets
• 8:11
  Speaker 1: that most people have tried to block out. What are
• 8:14
  Speaker 1: you paying attention to right now? Well, thanks for having me, Lisa,
• 8:19
  Speaker 1: And certainly we don't want to discount the importance of
• 8:22
  Speaker 1: humanitarian concerns at the border, but we are keeping our
• 8:26
  Speaker 1: eyes on the fundamentals of what's happening in the economy
• 8:29
  Speaker 1: and trying to understand how that will impact various asset classes. So,
• 8:33
  Speaker 1: for example, in the United States, we're we're still looking
• 8:36
  Speaker 1: at a robust economic picture, both from the perspective of
• 8:40
  Speaker 1: fundamental data like retail sales and consumption and sentiment, as
• 8:45
  Speaker 1: well as frankly, that the underlying earnings, which as we
• 8:48
  Speaker 1: know in Q one were really strong and we expect
• 8:50
  Speaker 1: will be actually quite strong in Q two, based on
• 8:53
  Speaker 1: a bunch of different data points that that we're looking at.
• 8:57
  Speaker 1: I think that the story though on like two thousand
• 9:00
  Speaker 1: and seventeen, Lisa, where we saw this sort of synchronized
• 9:04
  Speaker 1: global growth story is that the Eurozone and even China
• 9:09
  Speaker 1: to a great extent, they're hitting some speed bombs, and
• 9:12
  Speaker 1: I think it's um It's it's not the tale of
• 9:15
  Speaker 1: two stories because growth is still positive, but certainly UH
• 9:18
  Speaker 1: there's much more to pass through at the moment. President
• 9:22
  Speaker 1: Trump's UH top economic advisor today said that this is
• 9:27
  Speaker 1: the time to start a trade skirmish with China because
• 9:31
  Speaker 1: the US economy is strong enough to withstand any potential setback,
• 9:36
  Speaker 1: even short term, given the fact that it's full speed
• 9:40
  Speaker 1: ahead right now. Do you agree? I don't. I think
• 9:44
  Speaker 1: the trade skirmishes are things that tend to happen in public,
• 9:48
  Speaker 1: and I think very important policy matters, even with countries
• 9:51
  Speaker 1: that are not our allies, but particularly countries that are
• 9:54
  Speaker 1: and I'm not referring now to China, but countries like
• 9:57
  Speaker 1: Canada and countries within the euro Zone. You deal with
• 10:00
  Speaker 1: a lot of disagreements in private, because when you come
• 10:03
  Speaker 1: to a conclusion, the other side is able to save
• 10:05
  Speaker 1: face and move forward, and that has huge political benefits.
• 10:08
  Speaker 1: So as much as I agree with some of the
• 10:10
  Speaker 1: concerns that the current administration has with China and maybe
• 10:13
  Speaker 1: even with some of our allies and reviewing things like NAFTA,
• 10:17
  Speaker 1: I think the approach is somewhat flawed and that it's
• 10:19
  Speaker 1: not allowing for them to achieve their own set objectives.
• 10:23
  Speaker 1: So are you changing any of your trading strategies or
• 10:27
  Speaker 1: your portfolios in response to some of these trade concerns
• 10:32
  Speaker 1: or is that sort of all hypothetical at this point? Well, so,
• 10:36
  Speaker 1: the real question on the trade war side is are
• 10:39
  Speaker 1: we actually going to enter a trade war or is
• 10:41
  Speaker 1: someone going to blank will be the US in the
• 10:44
  Speaker 1: case of the U S and China? What could it
• 10:46
  Speaker 1: be China. We don't know the outcome of that for sure,
• 10:49
  Speaker 1: as it pertains to how we're thinking about clients and
• 10:52
  Speaker 1: their portfolios. I mean, certainly one trend that's worth looking
• 10:56
  Speaker 1: at that isn't specific to to trade wars, but its
• 11:00
  Speaker 1: effect to a trend over the last six months is
• 11:02
  Speaker 1: inflation versus growth. Inflation was a real concern as we
• 11:06
  Speaker 1: sort of moved through the first quarter of this year.
• 11:08
  Speaker 1: It seems to have subsided. The data suggests that that's
• 11:11
  Speaker 1: warranted for it to be subsided um and now what
• 11:15
  Speaker 1: we're seeing is a concern around growth, and so for
• 11:18
  Speaker 1: the fixed income asset class. That's actually a bit of
• 11:21
  Speaker 1: a positive thing, right, So if inflation were to go up,
• 11:24
  Speaker 1: yields would probably trend higher, whereas if if growth were
• 11:28
  Speaker 1: to slow down, yields were to trend lower. So that's
• 11:30
  Speaker 1: sort of a roundabout wave me saying I don't mind
• 11:32
  Speaker 1: nudging sort of fixed income average maturity or average duration
• 11:37
  Speaker 1: towards a benchmark here, whereas the beginning of the year
• 11:40
  Speaker 1: I had a tendency to be a little shorter duration.
• 11:42
  Speaker 1: So we are making adjustments based on the economic fundamentals
• 11:46
  Speaker 1: that are that are occurring before us, UM, but we
• 11:49
  Speaker 1: were certainly not making predictions as to the likelihood of
• 11:51
  Speaker 1: an all out trade war. So you've been lengthening the
• 11:54
  Speaker 1: duration of your fixed income portfolio, Is that correct? Yeah? Yeah,
• 11:58
  Speaker 1: we we've We've been willing to to to move it
• 12:00
  Speaker 1: modestly outward as tenure treasuries have risen call it, fifty
• 12:04
  Speaker 1: basis points uh this year, and as the paradigm has
• 12:08
  Speaker 1: shifted from inflation to growth concerns. UM, we think that
• 12:13
  Speaker 1: it's a prudent thing for for us to do to
• 12:16
  Speaker 1: not make a huge bet by being a short duration
• 12:19
  Speaker 1: here at the moment as it pertains to equities. You
• 12:22
  Speaker 1: know what's interesting is earnings growth has been very robust
• 12:25
  Speaker 1: li so, but multiples forward multiples have come down, so
• 12:28
  Speaker 1: the markets cheaper even as corporate earnings have proven uh stronger.
• 12:33
  Speaker 1: So again we're we're not super bullish per se because
• 12:37
  Speaker 1: we've had a hugeage point running the United States, but
• 12:42
  Speaker 1: but we're still constructive. And I would also say that
• 12:44
  Speaker 1: when you look at the duration of this expansion since
• 12:48
  Speaker 1: the bottom of the Great Recession, or since the last
• 12:51
  Speaker 1: expansion every peak in the fall of two thousand and seven,
• 12:54
  Speaker 1: the cumulative GDP that has occurred since that period is
• 12:58
  Speaker 1: only about fifteen since so it's a very shallow expansion
• 13:02
  Speaker 1: that we've had. Now some could view that as a negative.
• 13:05
  Speaker 1: We view it as a positive, meaning that inventories haven't
• 13:08
  Speaker 1: been able to overshoot and that the expansion may have
• 13:11
  Speaker 1: many more months, many more quarters of legs here, unlike
• 13:14
  Speaker 1: some of the other expansionary periods of the last hundred years.
• 13:17
  Speaker 1: How concerned are you about the fact that non financial
• 13:20
  Speaker 1: companies are increasingly levering up right now, especially given the
• 13:25
  Speaker 1: fact that A. T and T and Comcast are poised
• 13:28
  Speaker 1: to buy Time Warner and possibly the Fox assets and
• 13:34
  Speaker 1: would end up with three hundred and fifty billion dollars
• 13:37
  Speaker 1: of bonds and loans on their books. That's according to
• 13:40
  Speaker 1: a study that was highlighted in the Wall Street Journal today.
• 13:42
  Speaker 1: Does that worry you, I think on on in isolation,
• 13:46
  Speaker 1: it doesn't worry us, or I should say in isolation,
• 13:50
  Speaker 1: it could worry us. But when when when we look
• 13:52
  Speaker 1: at the reality of where we are in the interst
• 13:54
  Speaker 1: rate complex, where monetary authorities are around the world, it's
• 13:58
  Speaker 1: just still a very easy money environment um with a
• 14:02
  Speaker 1: lack of inflation, with the ECB still at the zero bound,
• 14:05
  Speaker 1: and very devilish last week with Corona in Japan, very devish.
• 14:09
  Speaker 1: And yes, the United States is a sort of ahead
• 14:12
  Speaker 1: of the curve on on normalizing policy. We think that
• 14:16
  Speaker 1: if global growth truly does decelerate meaningfully, they're going to
• 14:19
  Speaker 1: hit the pause button. That's not our base case right now.
• 14:23
  Speaker 1: We still think that one or two rate hikes this year,
• 14:25
  Speaker 1: perhaps even two is possible. But M and A activity
• 14:29
  Speaker 1: has been robust. The cost of money relative to historicals
• 14:33
  Speaker 1: is still relatively inexpensive, so we're not particularly concerned about
• 14:37
  Speaker 1: that at the moment. Thank you so much for being
• 14:39
  Speaker 1: with me. Aaron Kennon is co founder and chief executive
• 14:42
  Speaker 1: officer of Clear Harbor Asset Management, based in New York.
• 14:47
  Speaker 1: Really interesting to hear this sort of on one hand
• 14:50
  Speaker 1: and on the other we are getting to, uh, sort
• 14:53
  Speaker 1: of the final innings, people say, although they've been saying
• 14:55
  Speaker 1: that for years of a credit cycle. Yet earnings do
• 14:58
  Speaker 1: look solid and expectations look solid going forward. We've entered
• 15:18
  Speaker 1: an escalatory cycle of tit for tat trade dispute. UH.
• 15:22
  Speaker 1: This is the conclusion to analysts led by Michael jesus
• 15:27
  Speaker 1: over at Morgan Stanley, chief US public Policy and municipal
• 15:29
  Speaker 1: strategist UH and Michael joins us. Now, Michael, thank you
• 15:33
  Speaker 1: so much for being with me. So just let's start there.
• 15:36
  Speaker 1: Why do you think that we're entering this cycle? Yeah, well,
• 15:41
  Speaker 1: so basically, I think the pattern of behavior now has
• 15:45
  Speaker 1: made it pretty clear that this isn't just a negotiation. UM,
• 15:50
  Speaker 1: that the US and its allies have some irustrating partners
• 15:54
  Speaker 1: to demonstrates some fundamentally different views of the payoffs of trade.
• 15:58
  Speaker 1: So what do I mean by that? Is at um
• 16:01
  Speaker 1: and when the US acts and the U responds, the
• 16:04
  Speaker 1: you or and or China responds, you know, the US
• 16:07
  Speaker 1: is acting in a way where it thinks it's leveling
• 16:09
  Speaker 1: the playing field. Trading partners are responding in the way
• 16:12
  Speaker 1: they think is leveling the playing field, and by definition
• 16:14
  Speaker 1: that means that they view the playing field differently, and
• 16:17
  Speaker 1: you continue to escalate. That's problem one, and then problem
• 16:20
  Speaker 1: too is um both sides kind of disagree on how
• 16:24
  Speaker 1: to kind of break the circuit right, and so negotiations
• 16:27
  Speaker 1: would be one obvious way, and it would seem, for example,
• 16:31
  Speaker 1: that the negotiations between the US and China, we're going
• 16:34
  Speaker 1: to or or thwart the initiation of the tariffs that
• 16:38
  Speaker 1: were announced on Friday. But that didn't necessarily happen. And
• 16:41
  Speaker 1: I think we got some insight into why that didn't
• 16:43
  Speaker 1: happen when wilb Ross told our European allies that he
• 16:46
  Speaker 1: didn't think that we couldn't negotiate um even after we've
• 16:50
  Speaker 1: instituted tariffs there, so that the institution of tariff shouldn't
• 16:54
  Speaker 1: they get um the possibility of negotiations. So in the
• 16:57
  Speaker 1: European Allies, Beer clear view it differently, so you don't
• 17:01
  Speaker 1: have an obvious circuit breaker, and you've got a dynamic
• 17:05
  Speaker 1: which is escalatory and so therefore we think markets are
• 17:07
  Speaker 1: going now going to have to think a couple of
• 17:09
  Speaker 1: steps ahead. It's not just about pricing what the Section
• 17:12
  Speaker 1: three or one tariffs are going to do the g
• 17:14
  Speaker 1: d P. You have to think about what the retaliation
• 17:17
  Speaker 1: and then the re retaliation means and when it accumulates together.
• 17:21
  Speaker 1: Our concern is that we think we are kind of
• 17:24
  Speaker 1: very close to unit offsetting all of the economic boost
• 17:28
  Speaker 1: that was created this year by ciscal policy, both the
• 17:30
  Speaker 1: tax cuts and the spending increases that were implemented. All right,
• 17:33
  Speaker 1: so let's go down the rabbit hole. Okay, what comes
• 17:35
  Speaker 1: next after the largely farm focused tariffs that China has
• 17:40
  Speaker 1: already announced. So those tariffs are if if the US
• 17:47
  Speaker 1: kind of follows what it's already said it would do
• 17:49
  Speaker 1: there in the middle of investigating and UM its news
• 17:53
  Speaker 1: is to be believed close to announcing, so perhaps sometime
• 17:56
  Speaker 1: in the next few weeks and intention to teariff another
• 17:59
  Speaker 1: one hundred billion dollars worth of UM Chinese imports, and
• 18:03
  Speaker 1: if China holds true to what it's stated it would do,
• 18:05
  Speaker 1: it would respond in kind, which would require another round
• 18:10
  Speaker 1: of tariffs on inside. Now, one of the interesting things
• 18:13
  Speaker 1: here is that UM China only imports about a hundred
• 18:15
  Speaker 1: and thirty billion dollars worth of good so UM how
• 18:18
  Speaker 1: it responds is a little bit murky, which is to say,
• 18:21
  Speaker 1: perhaps it's gonna have to just further increase its tariffs
• 18:24
  Speaker 1: to equate the economic damage, or well have to take
• 18:27
  Speaker 1: some other retaliatory actions. But that's kind of the next
• 18:31
  Speaker 1: level we think you have to count for there. And
• 18:32
  Speaker 1: then in terms of UM Europe, the response on the
• 18:37
  Speaker 1: steel aluminum tariffs, the US is flag that UM tariffing
• 18:42
  Speaker 1: foreign imports of autos is probably the next step there
• 18:44
  Speaker 1: that we have to account for. So those are the
• 18:47
  Speaker 1: two things we're watching out for now. Hundred billion dollars
• 18:49
  Speaker 1: on tariffs, hundred billion tariffs dre billion dollars with the
• 18:52
  Speaker 1: Chinese imports, and then foreign auto tariffs. Do you think
• 18:55
  Speaker 1: that the market is taking this seriously, this risk of
• 19:00
  Speaker 1: sort of a t for tat escalation. Yeah, I do.
• 19:05
  Speaker 1: I think it's very hard to price in exactly how
• 19:07
  Speaker 1: far this cycle goes before cooler heads prevail. So I
• 19:12
  Speaker 1: think what you've seen in you know, the equity markets,
• 19:15
  Speaker 1: for example, is I think it kind of healthy respect
• 19:18
  Speaker 1: for the unknown of this dynamic, it kind of sinks
• 19:21
  Speaker 1: with the view of our US equity strategy team, which
• 19:24
  Speaker 1: is that we're gonna be kind of range bound for
• 19:26
  Speaker 1: the balance of the year fifty price target and the
• 19:29
  Speaker 1: SMP with a range between twenty and twenty nine because
• 19:33
  Speaker 1: you know, ultimately we priced in at the end of
• 19:35
  Speaker 1: last year all the sort of benefits of the U. S.
• 19:38
  Speaker 1: Public policy agenda, i e. The fiscal impulse that we
• 19:42
  Speaker 1: got and you know, pe multiples peaked basically the day
• 19:46
  Speaker 1: that Senate the Senate passed UH tax reform, and now
• 19:51
  Speaker 1: we're in the middle of frightening in kind of the uh,
• 19:53
  Speaker 1: you know, the the less desirable parts of the U S.
• 19:56
  Speaker 1: Public policy agenda, and that means that we uh, you know,
• 19:59
  Speaker 1: we of a road the benefits that were priced in
• 20:02
  Speaker 1: at the end of the last year. So having kind
• 20:04
  Speaker 1: of a range bound, choppy and ultimately you know, kind
• 20:07
  Speaker 1: of a flattish market for the year makes sense to us.
• 20:10
  Speaker 1: We think these things are perhaps less than the price
• 20:12
  Speaker 1: if you look at the credit markets, which are still
• 20:14
  Speaker 1: hovering around all time tights, and I think the rates
• 20:17
  Speaker 1: markets over the course that you're going to show this
• 20:19
  Speaker 1: more through even flatter curves and ultimately a lower tenure
• 20:22
  Speaker 1: yield by the end of the year. Michael Jesus, thank
• 20:24
  Speaker 1: you so much for being with me. Your report was
• 20:26
  Speaker 1: fascinating and really illuminating, a really interesting way to look
• 20:30
  Speaker 1: at the fact that there isn't really a circuit breaker,
• 20:33
  Speaker 1: in your words, to change this cycle of the US
• 20:37
  Speaker 1: threatening tariffs, imposing them, and then the European Union in
• 20:41
  Speaker 1: China retaliating in kind. Michael Jesus is chief US Public
• 20:45
  Speaker 1: Policy and municipal strategist for Morgan Stanley in New York.
• 21:02
  Speaker 1: The new era of advertising is really interesting because it's
• 21:06
  Speaker 1: hard to know how companies should really be measuring the
• 21:09
  Speaker 1: efficacy of their advertisements on platforms such as Twitter and
• 21:15
  Speaker 1: Instagram and Facebook. Well. Jamie Gilpin focuses on this in
• 21:20
  Speaker 1: part as her role as chief marketing officer at Sprout Social.
• 21:25
  Speaker 1: She joins us, Now, Jamie, uh, your company just put
• 21:28
  Speaker 1: out a fascinating study taking a look at just how
• 21:32
  Speaker 1: companies are using social media, the fact that Facebook is
• 21:36
  Speaker 1: still the key the key social media platform that they use,
• 21:40
  Speaker 1: and the efficacy of some of these ads. Can we
• 21:43
  Speaker 1: just start with Facebook? Why does Facebook have such sticking
• 21:48
  Speaker 1: power as the influencer sure, and thanks for having me
• 21:52
  Speaker 1: really excited to talk about this. UM. There's so much
• 21:54
  Speaker 1: data in this report, UM, and you're right, we really
• 21:57
  Speaker 1: did focus on UM or actually the day to have
• 22:00
  Speaker 1: really brought to light UM the focus on our o
• 22:02
  Speaker 1: I and how marketers UM, all of us are thinking
• 22:05
  Speaker 1: differently about the social channels and and ultimately the value
• 22:09
  Speaker 1: they provide UM to our overall business strategy, not just marketing. UM.
• 22:13
  Speaker 1: And so you asked about Facebook, UM. You know, it's interesting.
• 22:16
  Speaker 1: We talked about this a lot internally. You know, Facebook
• 22:18
  Speaker 1: was in a lot of ways sort of the first
• 22:21
  Speaker 1: social UM, the first social channel or platform or network,
• 22:24
  Speaker 1: and so it's still because of that, you know, the
• 22:27
  Speaker 1: Kleenex if you will, UM, it's still has you know,
• 22:30
  Speaker 1: the the lion share of both usage from a consumer perspective, UM.
• 22:34
  Speaker 1: You've seen the report, it's it's upward of consumers use Facebook. UM.
• 22:38
  Speaker 1: But also on the marketer side, so marketers using UM
• 22:42
  Speaker 1: Facebook as one of their their major platforms. But what
• 22:45
  Speaker 1: I asked those thought was really interesting, UM, because the
• 22:47
  Speaker 1: data also shows the usage and so while it's still
• 22:51
  Speaker 1: one of the most popular networks from both a consumer
• 22:54
  Speaker 1: and from a marketer's point, of view. UM. Consumers are
• 22:57
  Speaker 1: starting to tell us that we're they're using Facebook, lass
• 23:00
  Speaker 1: and they're starting to use Instagram more right, they're starting
• 23:02
  Speaker 1: to use UM, YouTube, some of these other platforms more
• 23:06
  Speaker 1: UM than than perhaps the Facebook and some of the
• 23:10
  Speaker 1: early entrance. So just let's take a step back for
• 23:13
  Speaker 1: a second, and when a company decides how to engage
• 23:17
  Speaker 1: on social media with potential customers, how do they determine
• 23:21
  Speaker 1: whether their messages getting across effectively? Sure, and a lot
• 23:26
  Speaker 1: of this comes back to UM sort of the traditional
• 23:29
  Speaker 1: use cases of UM of listening or analytics UM. You know,
• 23:33
  Speaker 1: they've been around for a while. Actually, most organizations have
• 23:37
  Speaker 1: have been invested or investing in in these types of
• 23:40
  Speaker 1: UM sort of tools to help them here just actually
• 23:43
  Speaker 1: get insight into your exact question, UM, are we the
• 23:47
  Speaker 1: messages that we're putting out there, are they resonating with
• 23:49
  Speaker 1: our target audience? Because we we also hear a lot
• 23:52
  Speaker 1: of from brands UM, you know, just meeting with several
• 23:55
  Speaker 1: over the last few weeks, UM around. You know, the
• 23:59
  Speaker 1: audience on my social channels are for sure the kid
• 24:02
  Speaker 1: maybe of the parents who are making the decisions UM
• 24:05
  Speaker 1: to to buy certain products. UM. But how do we
• 24:08
  Speaker 1: really understand you know, the power or the influence of
• 24:11
  Speaker 1: those of that audience that we're reaching out to UM
• 24:15
  Speaker 1: and then more importantly, how do we ensure that we're
• 24:17
  Speaker 1: actually getting the audience that we need? And that really
• 24:19
  Speaker 1: comes back to again, a lot of these listening in
• 24:21
  Speaker 1: analytics tools UM that that that many brands are invested.
• 24:24
  Speaker 1: Hold on a second. When you say listening in analytics,
• 24:26
  Speaker 1: it's it's things like people clicking on an AD or
• 24:30
  Speaker 1: people you know, just going and shopping on that on
• 24:33
  Speaker 1: a website after visiting Facebook, which they could probably get
• 24:38
  Speaker 1: some insight into based on the cookies. Is that the
• 24:41
  Speaker 1: kind of okay exactly, I started to take a step back.
• 24:43
  Speaker 1: Sometimes I'm so far into this UM that that I
• 24:46
  Speaker 1: realized that that others don't have the sort of the context.
• 24:49
  Speaker 1: So so yeah, I think of that exactly like listening
• 24:51
  Speaker 1: at a broad scale. But there are tools that can
• 24:53
  Speaker 1: aggregate all of those different touchpoints that you just went
• 24:56
  Speaker 1: through UM to to give you insight into what's happening
• 24:59
  Speaker 1: at a broader So you're saying that you are starting
• 25:02
  Speaker 1: to notice that people are spending a little bit less
• 25:06
  Speaker 1: time on Facebook and going to YouTube or Twitter, Instagram instead.
• 25:10
  Speaker 1: Our companies are marketers responding to that by advertising less
• 25:16
  Speaker 1: or putting less of a focus on Facebook than perhaps
• 25:19
  Speaker 1: they have uh in the recent past. No, and the
• 25:23
  Speaker 1: main reason is just because consumers are saying they're using
• 25:26
  Speaker 1: it less. Um. They're still using it quite a bit,
• 25:28
  Speaker 1: I mean parts of twelve hours a week, right, but
• 25:31
  Speaker 1: consumers are spending on Facebook. So it is still a
• 25:35
  Speaker 1: very powerful networking platform for both consumers and and brands
• 25:39
  Speaker 1: and quite frankly for that connection between the two. Um.
• 25:42
  Speaker 1: But you are starting to see, and this is what
• 25:44
  Speaker 1: the data UM shows in the study, UM, that that
• 25:47
  Speaker 1: markers are starting to take a more serious look UM
• 25:50
  Speaker 1: at Instagram and Twitter in particular. UM. Still trying to
• 25:54
  Speaker 1: figure out Pinterest, UM, still trying to figure out YouTube. UM.
• 25:58
  Speaker 1: You know some of the definitely Snapchat, Um not quite
• 26:03
  Speaker 1: uh you know, to the level of of some of
• 26:05
  Speaker 1: the other new entrants. But but again, you know, we're
• 26:07
  Speaker 1: dipping our toes and we're trying to figure out how
• 26:09
  Speaker 1: we use these networks to make that ultimate connection that
• 26:11
  Speaker 1: we're trying to drive. Just real quick here, I'd love
• 26:14
  Speaker 1: to get your take on whether social media budgets in
• 26:17
  Speaker 1: general have been increasing by marketers and just the scope
• 26:21
  Speaker 1: of of just how much more uh, they're putting towards
• 26:24
  Speaker 1: social media. Sure, yeah, I found this actually really interesting. Um.
• 26:29
  Speaker 1: You know, we talked you know at the very beginning
• 26:31
  Speaker 1: of this conversation around r o I return on investment. Yeah, exactly,
• 26:35
  Speaker 1: return on investment and really turn honestly return on effort UM,
• 26:39
  Speaker 1: because this is more than just UM, it's more than
• 26:41
  Speaker 1: just budgets, is also people as well, and so um,
• 26:44
  Speaker 1: while marketers are are having a challenge really um applying
• 26:49
  Speaker 1: a direct return on investment from their social efforts, they
• 26:52
  Speaker 1: are still absolutely making an investment here. But what's interesting
• 26:55
  Speaker 1: is they're making it with their budget. So of marketers
• 26:59
  Speaker 1: are saying they're going to allocate more budget to social
• 27:01
  Speaker 1: marketing and that um that comes by ads, that comes
• 27:04
  Speaker 1: by by tools. Right, there's lots that goes into that.
• 27:07
  Speaker 1: But what's interesting on that is only said that they're
• 27:10
  Speaker 1: going to hire more staff. So while you know, and
• 27:13
  Speaker 1: that's where that sort of that lever was, we think
• 27:15
  Speaker 1: about marketers, the staff is a longer term investment and
• 27:19
  Speaker 1: so UM, while I see, while I know and I
• 27:21
  Speaker 1: have confident in this platform and networks as a as
• 27:24
  Speaker 1: a huge opportunity to communicate and more importantly, connect with
• 27:28
  Speaker 1: my customer and consumer base. UM. I'm willing to put
• 27:31
  Speaker 1: more budget there, but I'm still trying to figure out
• 27:33
  Speaker 1: the staff side. UM, and so I think there's a
• 27:36
  Speaker 1: really interesting nuance there in the data. Jamie Calvin, thank
• 27:39
  Speaker 1: you so much for joining me today. Jamie Gilpin is
• 27:41
  Speaker 1: chief marketing officer for Sprout Social. Thanks for listening to
• 27:49
  Speaker 1: the Bloomberg P and L podcast. You can subscribe and
• 27:52
  Speaker 1: listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast
• 27:56
  Speaker 1: platform you prefer. I'm Pim Fox. I'm on Twitter at
• 28:00
  Speaker 1: Pam Fox. I'm on Twitter at Lisa Abramo wits one.
• 28:03
  Speaker 1: Before the podcast, you can always catch us worldwide on
• 28:06
  Speaker 1: Bloomberg Radio