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US Consumer Sentiment Rises, Boeing Strike · Bloomberg Intelligence

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Speaker 2: Let's get more on you missed.
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Speaker 3: So it was really that one year inflation expectation following
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Speaker 3: at two point seven percent, the lowest in December twenty twenty.
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Speaker 3: Johanna Sho's University of Michigan Surveys of Consumer director and
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Speaker 3: she joins us now walk us through the increase in
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Speaker 3: sentiment and the decline in those one year inflation expectations.
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Speaker 4: Consumers actually now have had several months of general improvements
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Speaker 4: and how they feel about the economy, and clearly the
0:47
Speaker 4: drop in one year inflation expectations is a huge part
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Speaker 4: of it. Consumers are one hundred percent aware and have
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Speaker 4: noticed that inflation has slowed down quite a bit, not
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Speaker 4: just this year, but over the course of the last
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Speaker 4: two Yearsnsumers are starting to feel a bit more optimistic
1:02
Speaker 4: about the future. You know, with one year business conditions,
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Speaker 4: we've had four or five consecutive months of increases at
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Speaker 4: this point, I think they are recovering a bit from
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Speaker 4: the malays that we were saying earlier in the summer.
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Speaker 5: So the headline, Joanne cam in it you've missed sentiment
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Speaker 5: sixty nine versus consensus sixty eight point five and sixty
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Speaker 5: seven point nine last period. Can you frame that give
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Speaker 5: us a sense of context there? Like, for example, for im,
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Speaker 5: above fifties means economies are expanding. Below fifty means it's contracting.
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Speaker 5: What does a number of sixty nine mean to you?
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Speaker 5: Put that in context for us?
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Speaker 6: Please?
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Speaker 4: So overall it's still below the historical average that we've
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Speaker 4: seen since nineteen seventy eight. But I think what's more
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Speaker 4: important than just the number itself is the overall trend.
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Speaker 4: And now we've had two consecutive months of increases in
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Speaker 4: in sentiment. We're at the highest level since in several
1:51
Speaker 4: months now, and so you know, I think the thing
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Speaker 4: to notice that consumers are starting to feel a bit
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Speaker 4: more upbeat, and that's the or trend that we've been seeing.
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Speaker 3: How does it go on party lines, Republican versus Democrat?
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Speaker 3: Because is this the first survey that really encapsulates Biden
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Speaker 3: out Harrison.
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Speaker 4: Yeah, We saw a bit of that at the with
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Speaker 4: the August reading, and we saw kind of a continuation
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Speaker 4: of that. So it's very clear that democrats are seeing
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Speaker 4: both Democrats and Republicans are now increasingly expecting a Harris
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Speaker 4: win relative to last month and certainly relative to when
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Speaker 4: it was Biden versus Trump. Now, Democrats think that's a
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Speaker 4: good thing, and we see that in their economic expectations
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Speaker 4: that really surged in August, and we were continuing to see,
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Speaker 4: you know, this higher level in September as well. Republicans,
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Speaker 4: on the other hand, think that the potential of a
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Speaker 4: Harris presidency is bad news, and their their sentiment, their
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Speaker 4: expectations have declined. And so we saw a widening of
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Speaker 4: the normal partisan gap in August, with Democrats improving, but
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Speaker 4: that was offset by Republicans. I'm getting worse, And we
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Speaker 4: saw a little bit more of that, not as dramatic
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Speaker 4: as last month, but that partisan gap is continuing to widen.
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Speaker 3: All right, Thanks so much to really appreciate Joanne Joan
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Speaker 3: Chu University of Michigan Surveys of Consumers Director joining us
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Speaker 3: there on. You mish solely grinding its way higher and
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Speaker 3: at that one year and Blanche expectation falling as well.
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Speaker 5: All right, let's go to our friends at Boeing here,
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Speaker 5: I mean, stockdown two point seven percent. They got to
3:43
Speaker 5: strike up there in that Pacific Northwest region of the world,
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Speaker 5: which is where they are generally based. I think the
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Speaker 5: heart and souls certainly there. George Ferguson joins us. He'son
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Speaker 5: Bloomberg Intelligence, Senior aerospace analyst for Bloomberg Intelligence. George, how
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Speaker 5: is it so we've got we've got to strike affecting
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Speaker 5: Boeing up there in the Seattle area. How impactful is
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Speaker 5: this strike to them? What do they need to do?
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Speaker 7: Yeah?
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Speaker 8: So it's super impactful, right because it's on there seven
4:15
Speaker 8: thirty seven Max, I mean, it's going to be on
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Speaker 8: the programs that are out of the Pacific Northwest, I
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Speaker 8: should say first once you're going to be seven sixty seven,
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Speaker 8: Triple seven and the seven thirty seven max.
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Speaker 6: The seven thirty seven max is what matters most.
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Speaker 8: Right, that's the revenue generator.
4:31
Speaker 6: That's the that's the cash flow generator. That's part of
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Speaker 6: that's not even part of.
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Speaker 8: That's the largest part of their recovery plan for the
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Speaker 8: back half, so super important. Look, we'll see how long
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Speaker 8: the strike lasts, but if they can't get seven thirty
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Speaker 8: sevens delivered, this bat half recovery isn't bad shape.
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Speaker 3: So let me get this straight. You were in the
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Speaker 3: city yesterday then there was this huge Bloomberg Intelligence celebrating
4:56
Speaker 3: fifteen year party where you all are like struggling to focus,
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Speaker 3: and it somehow you wind up back at home this morning.
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Speaker 2: What is this?
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Speaker 6: It's been a.
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Speaker 8: Busy twenty four hours. They wish they could have time
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Speaker 8: a strike differently, but.
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Speaker 3: I definitely thought it'd be showing up very tired. But
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Speaker 3: in the studio, all right, what's the TikTok?
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Speaker 2: Now? So what's the schedule of events?
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Speaker 8: Well, I mean, I think you know, Boeing and the
5:19
Speaker 8: machinists have to get back together at the table and
5:21
Speaker 8: figure out what the machinists want so they can get
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Speaker 8: them back on the job and start delivering airplanes and
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Speaker 8: generating cash right the meanest machinists sounded like they were
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Speaker 8: a little bit coy about it too. I heard one
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Speaker 8: of them saying, you know what, as soon as we
5:34
Speaker 8: have a chance, we'll get back together to talk about it,
5:36
Speaker 8: or something like that. So it sounds like they think
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Speaker 8: they've got a bit of the upper hand, which I
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Speaker 8: think they do. I think, you know, Boeing probably has
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Speaker 8: to go back and look in their pockets and figure
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Speaker 8: out how much more, how much more of a pay increase.
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Speaker 6: They can give.
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Speaker 8: Right the Spirit Aero Systems folks got a mid thirties
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Speaker 8: pay increase, So I suspect the machinists are looking at
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Speaker 8: that thinking, hey, we probably deserve something close to that.
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Speaker 8: And I think that they want some better guarantees on
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Speaker 8: an airplane.
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Speaker 6: They want to be guaranteed.
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Speaker 8: I think that the next generation seven thirty seven, it's
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Speaker 8: the most important airplane for Boeing. So if the machinist
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Speaker 8: union has sort of longevity in their sites, they want
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Speaker 8: to be building that.
6:21
Speaker 6: Seven thirty seven successor. And they don't want just the
6:24
Speaker 6: commitment to be able to build it to last for
6:26
Speaker 6: the four years of this contract. But they wanted to
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Speaker 6: last longer, if not forever.
6:32
Speaker 5: And George, just refresh our memory. Where does Boeing actually
6:35
Speaker 5: make their planes? I know they do it up in Seattle,
6:37
Speaker 5: but did they do it in the question maybe some
6:39
Speaker 5: areas of the country that are not unionized.
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Speaker 8: Well, so they do make the seven eighty seven in
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Speaker 8: South Carolina down by Charleston, and that's a non union plan,
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Speaker 8: So I expect that seven eighty seven production will continue.
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Speaker 8: Everything else is made up in the Pacific Northwest from
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Speaker 8: a commercial airplane stand point, and so seven sixty sevens,
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Speaker 8: triple sevens, they're made in Everett, Washington, north of Seattle,
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Speaker 8: and the seven thirty seven has made is final assembled
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Speaker 8: at a single plant in rent in Washington, which kind
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Speaker 8: of southeast of Seattle.
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Speaker 6: Those are all union shops. I expect them all to
7:17
Speaker 6: be doing little to know work today.
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Speaker 8: And then of course the fuselage comes out of Wichita,
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Speaker 8: which is owned by Spirit Air Systems, which Boeing.
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Speaker 6: Is buying, Whichita, Kansas.
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Speaker 8: But again, they had a strike earlier this year, got
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Speaker 8: mid thirties pay increase and they should be continuing to work.
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Speaker 2: So I guess then the question becomes how long?
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Speaker 3: Now I know we talked about that yesterday and you're like, look,
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Speaker 3: it can't go on more than like two weeks. One
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Speaker 3: analyst I was mentioning fifty days was what they were
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Speaker 3: kind of looking at, which is a significant cash burn
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Speaker 3: for Boeing.
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Speaker 2: What's your best guess?
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Speaker 8: Yeah, I mean, I think there's a lot of people
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Speaker 8: out there saying fifty days because that's the average strike
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Speaker 8: blah blah blah. I just don't, you know, I don't
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Speaker 8: subscribe to that being the right logic here. I'm saying
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Speaker 8: a couple of weeks because I think Boeing really needs
8:07
Speaker 8: these workers back on the job. There is no substitute
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Speaker 8: for these workers, period, and so I think they've got
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Speaker 8: to go engage the union intently and figure out what's
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Speaker 8: going to take to put them back, you know, back
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Speaker 8: on the job. I mean we think what we you know,
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Speaker 8: our analysis was that it would cost an extra billion
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Speaker 8: dollars a year or something like that for wages right
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Speaker 8: around there at the twenty five percent increase, that would
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Speaker 8: probably trim Boeing commercial margins one hundred and seventy two
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Speaker 8: hundred basis points.
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Speaker 6: Do you like that?
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Speaker 8: No, But it's not the end of the world, right,
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Speaker 8: They back in back pre pandemic, this was a company
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Speaker 8: that was making thirteen percent ish margins in that business
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Speaker 8: ten to thirteen.
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Speaker 6: So can you bear that and be profitable? You can?
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Speaker 6: Can you bear more?
8:57
Speaker 7: You can?
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Speaker 8: So I think that means that Boeing has the leeway.
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Speaker 8: They got to get the building airplanes in volume again.
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Speaker 8: So they got to engage the union and get it done.
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Speaker 8: That's why I'm saying, I think less than a couple
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Speaker 8: of weeks, I think they got to get it done.
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Speaker 5: Hey, George, I mean, I know in the past you
9:11
Speaker 5: talked to us about, you know, the labor shortages and
9:14
Speaker 5: aerospace industry. Where are we where's the industry in terms
9:18
Speaker 5: of getting past that is that's still a challenge getting
9:22
Speaker 5: good folks in the factory floors.
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Speaker 8: I think it's totally still a challenge, right, And so
9:28
Speaker 8: we saw a pretty decent turnover in the aerospace workers,
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Speaker 8: you know, coming out of the pandemic. I think some
9:34
Speaker 8: of them watched their industry. It looked like the collapse, right.
9:38
Speaker 8: Air travel went to zero for a couple of quarters,
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Speaker 8: or almost zero, so you know, demand for airplanes. People
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Speaker 8: looked at it and thought, hey, you know, the industry
9:47
Speaker 8: I'm in is horrible and if you are, I think
9:50
Speaker 8: near retirement age, you said let's cast it in and
9:52
Speaker 8: moved to Jacksonville, Florida or something like that, right, So
9:55
Speaker 8: it's hard to get those folks back to the line
9:57
Speaker 8: from Jacksonville and backfill.
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Speaker 6: Part of the backfield challenges.
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Speaker 8: The backfield came out of some of the suppliers, so
10:06
Speaker 8: they kind of hurt their own ecosystem as they pulled
10:09
Speaker 8: some of the backfill in. And they're in the middle
10:11
Speaker 8: of training that we even't heard CEO Calhoun say the
10:16
Speaker 8: old CEO Calhoun say. I think at one of his
10:19
Speaker 8: congressional testimonies he talked about people coming in the door
10:23
Speaker 8: having experience bending metal and you know, working with their hands,
10:26
Speaker 8: and I think, you know, he said something like in
10:28
Speaker 8: the old days, and this isn't exactly right, but it's close.
10:31
Speaker 8: You know, maybe seventy five percent of people that came
10:33
Speaker 8: to the door had experience working with their hands metalworking.
10:37
Speaker 6: Now twenty five percent.
10:39
Speaker 8: So they're in the middle of trying to train that
10:42
Speaker 8: next generation of aerospace workers and the supply chain is
10:46
Speaker 8: still trying to backfill. I think it's it's been getting better, Yeah,
10:50
Speaker 8: but that training and backfill is still going there.
10:52
Speaker 2: All right, Hey George, we appreciate it.
10:54
Speaker 3: George ferguson Bloomberg Intelligence and your aerospace, defense and Airlines analyst.
10:58
Speaker 2: Great stuff. Good to see you there.
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11:17
Speaker 3: I'm Alex you alongside pauls. We need this Bloomberg Intelligence Radio.
11:21
Speaker 3: We bring you all the top news and business and
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Speaker 3: finance economics. So there are lens of our Bloomberg Intelligence folks.
11:26
Speaker 3: They cover two thousand companies and one hundred and thirty
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Speaker 3: industries worldwide. They're a little tired today. They had a
11:31
Speaker 3: fifteen year anniversary party yesterday, so you.
11:33
Speaker 5: Know, cut it loose a little bit.
11:35
Speaker 3: Yeah, yeah, yeah, yeah. I mean Paul got some sleep,
11:37
Speaker 3: but the other guys, I'm not sure. All right, But
11:39
Speaker 3: so we want to go outside of Bloomberg Intelligence now
11:41
Speaker 3: for a look on how to market is positioned into
11:43
Speaker 3: the FED. Mohagman is head of Solutions and Multi Asset
11:46
Speaker 3: Strategies over at Invesco and he joins us, Now, what
11:50
Speaker 3: is this setup like in terms of asset allocation headed
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Speaker 3: into Wednesday?
11:56
Speaker 9: Well, Alex, thanks for having me, nice to be here
11:58
Speaker 9: with you and Paul. I think, you know, we are
12:01
Speaker 9: continuing to maintain a bit of a defensive posture, and
12:04
Speaker 9: we have been defensive for about a couple of months now,
12:08
Speaker 9: and really this is around what we're seeing in economic
12:11
Speaker 9: growth expectations, both from the market and from the data.
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Speaker 9: We are very benchmark aware, so you know, I think
12:17
Speaker 9: that underweight isn't something that's significant at this point, just
12:21
Speaker 9: given how the economy has been incredibly resilient and the
12:24
Speaker 9: market has been incredibly resilient. But what we're seeing in
12:27
Speaker 9: the labor market and what we're seeing with economic growth
12:30
Speaker 9: over the several last several quarters is something that we're
12:32
Speaker 9: watching very closely.
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Speaker 7: Mo.
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Speaker 5: And how about being defensive, what does that mean fixed
12:38
Speaker 5: and come versus equities.
12:39
Speaker 9: Here, Yeah, so that means we have a little bit
12:42
Speaker 9: of a longer duration profile versus our benchmark, So we're
12:45
Speaker 9: you know, favoring fixed income over equity. So and within equities,
12:49
Speaker 9: you know, there's a bit of a tilt towards more
12:51
Speaker 9: defensive sector, so think healthcare, consumer staples, information technology. You know,
12:56
Speaker 9: these are the areas that are a bit more defensive.
12:58
Speaker 9: These are companies that are higher quality and lower volatility,
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Speaker 9: generally cash flow rich and can weather an economic downturn
13:05
Speaker 9: or a slow down in growth.
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Speaker 3: So does that mean that you think that the bond market,
13:09
Speaker 3: if we look at the equity in the bond market,
13:11
Speaker 3: is being on different pages in that we're making like
13:13
Speaker 3: another run in the smp here versus the bond bowl
13:16
Speaker 3: appears to be very sticky.
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Speaker 2: Does that mean that the economic.
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Speaker 3: Situation is geared more towards a recession than a soft
13:22
Speaker 3: landing in your view?
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Speaker 9: I don't think so. I think we're still probably base
13:27
Speaker 9: case soft landing. But you know, what we're thinking about
13:31
Speaker 9: is just in the shorter term period, so from a
13:33
Speaker 9: tactical perspective, just given how far extended the equity markets are,
13:38
Speaker 9: and you know, in our opinion, yields are very attractive
13:40
Speaker 9: at these levels they have been, although they've you know,
13:43
Speaker 9: come back a little bit. You know, we're kind of
13:46
Speaker 9: extending that duration profile getting underweight equity slightly relative to
13:50
Speaker 9: our benchmarks. And again this is all around growth and
13:53
Speaker 9: growth expectations. Although we don't necessarily see a recession in
13:56
Speaker 9: the next couple of quarters.
13:58
Speaker 5: So, MO, how about on the pick income side, are
14:00
Speaker 5: we sitting here in to your treasures at three point
14:03
Speaker 5: six percent or are we going out there and taking
14:04
Speaker 5: some credit risk? What are we doing there in fixingcome So.
14:09
Speaker 9: In credit we favor again higher quality credit, so you know,
14:12
Speaker 9: credit spreads continue to be incredibly tight, you know, relative
14:15
Speaker 9: to equities. I think credit is a very attractive risk
14:18
Speaker 9: adjusted allocation. But we're probably not right now favoring kind
14:22
Speaker 9: of the lower quality high yield sectors and we're taking
14:26
Speaker 9: a bit more.
14:27
Speaker 10: It's posteros.
14:28
Speaker 5: So the best performance this year and fixing them has
14:30
Speaker 5: been and by far has been in US corporate high.
14:32
Speaker 9: Yield exactly, and I think that's part of the reason
14:37
Speaker 9: that we've gotten a bit defensive. So just to kind
14:39
Speaker 9: of backtrack a little bit, you know, we have been
14:41
Speaker 9: pretty risk gone in portfolios for the last several years.
14:45
Speaker 9: You know, post COVID, we took a little bit more
14:48
Speaker 9: of an aggressive stance versus our benchmarks. We kind of
14:50
Speaker 9: maintained that stance over the last several years, and now
14:54
Speaker 9: what we're seeing is just that softening of the economic data.
14:57
Speaker 9: We're seeing some softening in the labor markets, and that's
15:00
Speaker 9: that's kind of what's informing a bit of a defensive posture.
15:02
Speaker 9: But I don't really want to overdo that, right. You know,
15:04
Speaker 9: we're not kind of underweight equities to a significant magnitude.
15:08
Speaker 9: We're not suggesting that people move into cash. It's actually
15:12
Speaker 9: quite the opposite. We're telling investors and clients to get
15:15
Speaker 9: out of cash. We've seen elevated cash balances now for
15:19
Speaker 9: a long time, and the yields on offer if you
15:22
Speaker 9: extend that duration, seem to be very attractive to us,
15:24
Speaker 9: especially as we're moving into an easing cycle and those
15:27
Speaker 9: short term rates are going to be coming down.
15:29
Speaker 2: Yeah.
15:29
Speaker 3: JP Morgan was saying that usually the rate cut cycle
15:32
Speaker 3: needs to get underway more significantly for than the money
15:34
Speaker 3: to move, But you're right, I mean over six tillion
15:36
Speaker 3: dollars ready to roll. Hey, I'm curious as to dollar yen.
15:40
Speaker 3: It has a pretty significant rerating at this point. I
15:42
Speaker 3: think we're at one forty right. There was some reports
15:45
Speaker 3: on Bloomberg that we're seeing some bullish bets on the
15:48
Speaker 3: yen right now. What's your take on where that currency
15:51
Speaker 3: goes and is the carry trade unwind situation.
15:55
Speaker 9: Over So from a currency perspective, just kind of consist
16:00
Speaker 9: with my comments earlier around equities and fixed income, we
16:03
Speaker 9: have a bit more of a defensive posture, So that
16:04
Speaker 9: means overweights and dollar, GBP, euro versus international currencies, you know,
16:10
Speaker 9: especially if you kind of think about the more emerging
16:12
Speaker 9: market currencies. You know, I think right now the defensive
16:18
Speaker 9: posture is probably warranted just given we're kind of going
16:20
Speaker 9: into election season. September and October tend to be more
16:23
Speaker 9: volatile months for the market overall, and that home country bias,
16:27
Speaker 9: at least for US is kind of an important factor
16:29
Speaker 9: as we get through the next few months.
16:31
Speaker 5: In terms of the equity market, where's evaluation for you guys?
16:34
Speaker 5: Do you feel like this market is fully valued at
16:37
Speaker 5: this point? How do you guys think about that?
16:40
Speaker 9: I would say fully valued to maybe a little extended,
16:42
Speaker 9: just given what we've seen here to date. So for us,
16:46
Speaker 9: there's no real concerns around earnings or earnings projections. There
16:51
Speaker 9: has been some revisions that we're taking a close look at,
16:54
Speaker 9: but for now, you know, I would I would say
16:56
Speaker 9: probably well priced or maybe a little bit extent did
17:01
Speaker 9: relative to what we see kind of on offer in
17:03
Speaker 9: other places outside of the US, and I think my
17:05
Speaker 9: comments are very much on the US side, and the
17:08
Speaker 9: equity market in the US is pretty concentrated. That's another
17:10
Speaker 9: topic that we're having a lot of conversations on with clients.
17:15
Speaker 9: You know, we expect to see that broadening if the
17:18
Speaker 9: economy continues to be resilient, but if we are going
17:21
Speaker 9: to go into a prolonged downturn or a growth kind
17:25
Speaker 9: of scare, you know, actually the defensive sectors should perform better.
17:30
Speaker 9: And I've talked about this a little bit on the
17:33
Speaker 9: show before. In the past the relationship between equity sectors
17:38
Speaker 9: and rates was was really when when wastes were going up,
17:42
Speaker 9: you know that that was not necessarily a good thing
17:45
Speaker 9: for sectors that had more duration exposure or more interest
17:48
Speaker 9: rates sensitivity, So technology, healthcare we've kind of seen the
17:51
Speaker 9: opposite of that. So you know, it's a little bit
17:54
Speaker 9: of a weird dynamic at the moment, but I do
17:56
Speaker 9: think that should renormalize. So what the catalyst needs to
18:00
Speaker 9: be for small cap value stocks to really get going again,
18:03
Speaker 9: I think is a little bit of a change in
18:06
Speaker 9: the regime and an economy that kind of reaccelerates because
18:10
Speaker 9: those companies small cap companies, value companies. They tend to
18:13
Speaker 9: have more operating leverage, they tend to be more geared
18:16
Speaker 9: to the business cycle, and I do think longer term
18:19
Speaker 9: that relationship will still hold.
18:20
Speaker 3: All right, Well, thanks a lot, We really appreciate thanks
18:22
Speaker 3: for stopping by mo Hagman joining us. There was his
18:25
Speaker 3: call on acid allocation. He had of solutions and multi
18:28
Speaker 3: asset strategies. Over at Invesco.
18:31
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
18:35
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18:38
Speaker 1: Auto with the Bloomberg Business App. You can also listen
18:41
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18:45
Speaker 1: Just Say Alexa, playing Bloomberg eleven thirty.
18:49
Speaker 3: Alex Steel alongside Paul Sweeney for Bloomberg Intelligence Radio. We're
18:52
Speaker 3: broadcasting to live from Interactive Broker Studio right here in
18:55
Speaker 3: midtown Manhattan. I saw that though for the Weimo thing
18:58
Speaker 3: that like a driverless car like show up even if
19:00
Speaker 3: you didn't order one, that'd be kind of weird, right,
19:03
Speaker 3: and yeah, like like, I mean, what if you don't.
19:05
Speaker 5: Want to get into car? The perfect stranger about it,
19:09
Speaker 5: no one at all?
19:10
Speaker 3: Yeah, Okay, well, it's an adjustment period for us.
19:12
Speaker 2: All all right? Joining us now is Dan.
19:14
Speaker 3: I was managing director and senior equity analyst at Wedbush Securities.
19:17
Speaker 3: I bet you he's probably bullish on WEIMO and would
19:19
Speaker 3: totally get into a driverless car, no worries, Am I right?
19:22
Speaker 7: Dan? I mean I've done it. Look, I think I
19:27
Speaker 7: think end of the decade, I think twenty percent of
19:29
Speaker 7: ride share are going to be no drivers.
19:32
Speaker 2: But isn't it weird that they would show up? You
19:33
Speaker 2: wouldn't have a choice.
19:34
Speaker 3: It would just be like, here's your driverless car, even
19:36
Speaker 3: if you don't want it.
19:38
Speaker 7: Yeah. Look, there's gonna be clearly kings to work out here.
19:42
Speaker 7: But I mean, and we'll see this at Tessa's Roado
19:45
Speaker 7: Taxi day. But the technology is starting to get to
19:49
Speaker 7: a point where this is no longer sci fi. I
19:52
Speaker 7: know the next few years, it's something where demisation is
19:55
Speaker 7: gonna be clear. That's why you see that Uber waymo
19:58
Speaker 7: mm hmm.
19:59
Speaker 3: Well, and I should point out that you're in Bangkok,
20:02
Speaker 3: so it's like, what time is it? It's like midnight
20:04
Speaker 3: now Friday and Friday. I know he's a good guy, Dan.
20:09
Speaker 3: We appreciate that by the way I'm looking at Adobe,
20:12
Speaker 3: Adobe is down nine percent.
20:14
Speaker 2: What was the problem with their earnings yesterday?
20:17
Speaker 7: I think it's really just the softer guidens. But I mean,
20:20
Speaker 7: in our opinion, this is just just a transition in
20:24
Speaker 7: that Adobe story. I mean, when you look at AI
20:26
Speaker 7: and use cases, I think they are probably within three
20:29
Speaker 7: to six months of significantly benefiting from AI stock obviously,
20:34
Speaker 7: you know, is one of the core plays in big tech.
20:37
Speaker 7: But you look at Adobe, obviously little softness. But then
20:40
Speaker 7: you look at a Oracle, which I think is probably
20:42
Speaker 7: even more important to the broader AI story for big tech.
20:47
Speaker 3: Then what about some of the other like so then
20:49
Speaker 3: how do we distinguish like what's the line item right?
20:52
Speaker 3: And as an investor, how do you know when to
20:55
Speaker 3: buy that? Like you might three see three to six
20:57
Speaker 3: months until we get a really big payoff for Adobe,
21:01
Speaker 3: how do you play it?
21:02
Speaker 7: Yeah, Look, that's why we use so much work in
21:06
Speaker 7: the field, because they're trying to figure out second third
21:09
Speaker 7: derivatives of AI. Who's benefit in terms of real monization.
21:13
Speaker 7: That's where you look at, of course Pall and Teer
21:16
Speaker 7: Oracle Service. Now I think Salesforce next week some big
21:19
Speaker 7: announcements at Dreamforce. What they're going to talk about now,
21:24
Speaker 7: Adobe maybe a little softer. They haven't seen it yet, right,
21:27
Speaker 7: So this is really gonna be sort of pieces of
21:31
Speaker 7: a puzzle trying to figure out who in software are
21:34
Speaker 7: benefits from the second derivative. Clearly the hyperscale players, and
21:38
Speaker 7: we would argue even cybersecurity are going to benefits. Is
21:41
Speaker 7: more workless, move to the cloud.
21:43
Speaker 5: So Dan, as soon as I get off the air
21:46
Speaker 5: here and finish up my twenty seven straight hours of radio,
21:48
Speaker 5: I'm gonna go to my Apple Store app and I'm
21:51
Speaker 5: going to pre order that Apple.
21:53
Speaker 2: Oh this is today, You're doing today?
21:54
Speaker 5: Do it today? Yeah, okay, already gave me my instructions
21:57
Speaker 5: Apple sixteen pro. I'm gonna spend a an jillion dollars.
22:00
Speaker 5: How many people are out there are going to be
22:01
Speaker 5: doing the same thing? How big is this new phone?
22:05
Speaker 7: Well, first off, I mean I think it is huge new,
22:07
Speaker 7: the Sweeney upgrade.
22:11
Speaker 2: This is the this is the start of the super psycle.
22:13
Speaker 7: I mean for years, exactly for years, the Sweeney upgrade.
22:17
Speaker 7: I know. But Paul, I mean I think now it
22:21
Speaker 7: comes down to it's not just you. There's three hundred
22:24
Speaker 7: million iPhones that have an upgrade four plus years. And
22:28
Speaker 7: this is everything we're seeing here in Asia is showing
22:32
Speaker 7: that this is weeding to what we believe is gonna
22:34
Speaker 7: be an AI driven supercycle. And I think we'll see
22:38
Speaker 7: this pre orders and obviously going to the next week,
22:41
Speaker 7: but I think demand's gonna be pretty robust here street.
22:44
Speaker 7: I think still underestimate what this is gonna be about.
22:47
Speaker 3: Okay, but are people in China really buying into that supercycle? Like,
22:50
Speaker 3: I know Asia is bigger than just China, but can
22:53
Speaker 3: we have a supercycle without a super strong China demand
22:56
Speaker 3: for the iPhone?
22:58
Speaker 7: Yeah, So it's a great point. You cannot have a
23:00
Speaker 7: super cycle without growth in China. To that point, you
23:06
Speaker 7: have one hundred million iPhones in China that are in
23:08
Speaker 7: that window of an upgrade opportunity, and everything we're seeing
23:12
Speaker 7: that actually China, you will now start to see modern
23:16
Speaker 7: to significant growth in the region from iPhone sixteen over
23:22
Speaker 7: you know, call it the next year. And that's huge Apple.
23:25
Speaker 7: I mean that goes from a headwind too, a taland
23:28
Speaker 7: which is really key this whole sum of the part
23:30
Speaker 7: story as it plays out, and they monetize China front
23:35
Speaker 7: and center.
23:36
Speaker 5: So folks when technology channels like Dan i'ves go to Asia,
23:41
Speaker 5: it's not just to see their clients. The big reason
23:44
Speaker 5: is to do what they call channel checks. Since much
23:46
Speaker 5: of global tech hardware software comes out of that part
23:50
Speaker 5: of the world. You get a good sense of kind
23:52
Speaker 5: of who's making this stuff, who's buying the stuff, who's
23:55
Speaker 5: selling the stuff. So Dan IIMs, what's kind of the
23:57
Speaker 5: vibe you're getting from your your channel checks there in
23:59
Speaker 5: Asia these days?
24:00
Speaker 7: Yeah, I mean look across Taiwan, and I think just
24:03
Speaker 7: across Asia, demand is not slowing. I mean it's accelerating
24:09
Speaker 7: in terms of broader when we look at from a
24:11
Speaker 7: chip perspective in ai which I think is very very
24:14
Speaker 7: important and Jensen talked about this week, demands outstream and
24:17
Speaker 7: supply we think twelve to fifteen X and that is
24:22
Speaker 7: the most important thing is the use cases where the
24:25
Speaker 7: it'torical pound tier that will ultimately be the drivers, but enterprises.
24:31
Speaker 7: We're talking about a trillion dours of tap acts that
24:35
Speaker 7: ultimately is coming to techo of the next three to
24:37
Speaker 7: four years.
24:39
Speaker 2: What is that?
24:41
Speaker 3: What you make of the in media rally the last
24:43
Speaker 3: five days, like how do you understand that structural shift
24:47
Speaker 3: and that thesis versus the daily swings of some of
24:51
Speaker 3: the biggest players where seemingly they become more important on
24:54
Speaker 3: the central banks some days and drag up the broader
24:57
Speaker 3: equity market, and I can't find a headline on that.
25:00
Speaker 7: Look, I think part of I mean that was a
25:02
Speaker 7: confluence of things from the watch parties to technicals to
25:05
Speaker 7: just come into September, and obviously the Macro sell off
25:08
Speaker 7: tech front and center. But I think, look, anyone that's
25:12
Speaker 7: doing checks in tech, you're not coming back in any
25:16
Speaker 7: way negative. Uninvidia. I mean, it is actually getting more
25:20
Speaker 7: and more incremental, not just for Nvidia chips, and I
25:23
Speaker 7: think brought the AI revolution, so we're gonna have these
25:27
Speaker 7: ebbs and flus. But I continue to believe this will
25:30
Speaker 7: be a tech market that ultimately rallies into your end
25:34
Speaker 7: because I think it all comes down to fundamentals and
25:38
Speaker 7: Macro's gonna do what Macro's going to do. But we
25:40
Speaker 7: are not seeing any So it is an acceleration clearly
25:44
Speaker 7: that we're seeing over the last few weeks.
25:47
Speaker 5: All Right, Dan, thanks so much for joining us there
25:49
Speaker 5: as always appreciated. Managing director, Senior equity analyst for Webbush
25:52
Speaker 5: to curious securities. He's Bangkok Tiland, go out and get
25:56
Speaker 5: into some trouble. Uh that's an order, so Dan, I'm
25:59
Speaker 5: doing it? Or use again there bullish seeing some channel
26:02
Speaker 5: checks there in Asia, suggesting that the demand continues to
26:05
Speaker 5: be there, not just for I guess Ai chips, but
26:07
Speaker 5: just for you know, tech in general.
26:09
Speaker 3: I feel like he's been in Asia for like a
26:10
Speaker 3: month the last three times I've talked to him.
26:12
Speaker 2: He's been there every.
26:13
Speaker 5: Time, five times a year. I think, oh yeah.
26:15
Speaker 3: But what I think is interesting, Like we can always
26:17
Speaker 3: joke about Dan ives being the bullish guy on tech
26:19
Speaker 3: for sure, but is so interesting to get that take
26:22
Speaker 3: on the structural shift versus a cyclical market and from
26:25
Speaker 3: understanding how the cyclicality makes sense when we're all transitioning
26:29
Speaker 3: to a different kind of world. And you can see
26:31
Speaker 3: that in lots of other sectors as well. Obviously energy
26:33
Speaker 3: is one that I'm gonna be paying attention to cars
26:35
Speaker 3: with EVS and the structure issues with that, So it's
26:38
Speaker 3: kind of fun.
26:40
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
26:44
Speaker 1: weekdays at ten am Eastern on Apple car Play and
26:47
Speaker 1: Android Auto with the Bloomberg Business You can also listen
26:51
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26:54
Speaker 1: Just say Alexa playing Bloomberg eleven thirty.
26:59
Speaker 5: All right, what are we doing here with these markets?
27:01
Speaker 5: That's a lot of folks are trying to figure out
27:03
Speaker 5: as a think about next week when we get the
27:06
Speaker 5: Federal Reserve giving us their thoughts on earnings. Cissel joins
27:11
Speaker 5: US Chief Presidency of Banryon Capital Management, joining us from
27:15
Speaker 5: Chicago via zoom. Shane, thanks so much for joining us here.
27:19
Speaker 5: We've had a whole slew of economic data really over
27:22
Speaker 5: the past a couple of weeks. You put it all
27:24
Speaker 5: together and it seems like the market is getting ready
27:28
Speaker 5: for the Fed to begin cutting rates. How are you
27:30
Speaker 5: guys positioning kind of your portfolio and what are you
27:32
Speaker 5: telling your clients?
27:34
Speaker 11: Well, as much as I love to be a confrarion,
27:37
Speaker 11: I am in complete alignment with market sentiment and that
27:41
Speaker 11: the Fed will cut at this meeting. You know, Chairman
27:44
Speaker 11: Powell has been very transparent and in his remarks at
27:48
Speaker 11: Jackson Hole, he was very clear that it was time
27:52
Speaker 11: to make a pivot from their previous roadmap to make changes,
28:01
Speaker 11: and cuts were part of that change. So I agree
28:04
Speaker 11: with the market. I think where the debate comes in
28:07
Speaker 11: is how big that rate cut will be. And as
28:09
Speaker 11: you noted earlier, the market probability for a fifty basis
28:14
Speaker 11: point cut is actually rising. And I'm not sure I
28:19
Speaker 11: understand what is driving this belief that the FED will
28:24
Speaker 11: cut fifty basis points. They've been super cautious, and I
28:29
Speaker 11: just can't imagine cutting fifty basis points without seeing something
28:35
Speaker 11: in the economic growth activity or in the US economy
28:40
Speaker 11: that warrants that kind of what I think would be
28:43
Speaker 11: kind of a knee jerk reaction. So we're telling clients,
28:47
Speaker 11: you know, to prepare for a loosening cycle. The FED
28:52
Speaker 11: is obviously loosening policy, and we want to take advantage
28:56
Speaker 11: of that, which in an economy where it's which is
29:00
Speaker 11: fairly stable, means that it's a risk on environment.
29:03
Speaker 3: So let's go back to what happened in Vidia in
29:06
Speaker 3: the last five days. Right, I mentioned this yesterday, Charlie
29:09
Speaker 3: Micgela got over at no Mora said that Nvidia was
29:11
Speaker 3: basically the central banker of power. That yeah, yeah, we
29:14
Speaker 3: can look at the FED, but it was Nvidia and
29:16
Speaker 3: the FOMO that kind of gripped the market that has
29:18
Speaker 3: really propelled the s and be higher this week. What
29:21
Speaker 3: matters more for you and your acid allocation, is it
29:23
Speaker 3: what's happening with Nvidia stock or what Jay Powell says
29:26
Speaker 3: on Wednesday?
29:27
Speaker 11: What Jay Powell says on Wednesday?
29:29
Speaker 2: Oh me and entirely Vida killing me. Sorry, I know
29:33
Speaker 2: I love Nvidia, I do.
29:35
Speaker 11: But as much as we want to pretend it's a
29:37
Speaker 11: proxy for the economy, and it is to some extent,
29:41
Speaker 11: we should not be basing our portfolio management decisions on, uh,
29:45
Speaker 11: the the technical trends of a single stock, especially one
29:50
Speaker 11: which is kind of you know, shrinking in terms of
29:54
Speaker 11: its growth potential. It's an amazing company. It's growing, you know,
29:58
Speaker 11: triple digits, but it's growing at a slower rate than
30:01
Speaker 11: it was a year ago, and that is reflective of
30:04
Speaker 11: what I think the economy is doing. But the Fed
30:07
Speaker 11: policies at the end of the day, what drives the
30:10
Speaker 11: underlying market liquidity and the under my alying opportunity for
30:15
Speaker 11: investors in banks or whatever they take access capital. So,
30:19
Speaker 11: you know, nvidious great and control access to capital.
30:23
Speaker 5: So I guess just looking at the equity markets in general,
30:26
Speaker 5: give us your thoughts on valuation here these days, a
30:29
Speaker 5: lot of folks feel like it's stretched. A lot of
30:32
Speaker 5: folks will say, yeah, but if you pull out some
30:33
Speaker 5: of those big tech names, not so much. So how
30:35
Speaker 5: do you guys look at it?
30:38
Speaker 11: So I learn at Fidelity, and this is super basic,
30:42
Speaker 11: but I think it's actually a really great tool for
30:45
Speaker 11: people out there who just want to do like quick
30:47
Speaker 11: math in their head. But I learned the role of
30:49
Speaker 11: twenty during my days at Fidelity. So that is taking
30:52
Speaker 11: the pe of the market and adding in the inflation
30:55
Speaker 11: number and then looking at it in a historical basis,
30:58
Speaker 11: and the general consensus zip it was valuations were above twenty,
31:03
Speaker 11: it was stretched, and if it was below twenty, it
31:06
Speaker 11: was attractive. And so we're well above twenty. Yes, some
31:12
Speaker 11: of that has to do with tech stocks and how
31:15
Speaker 11: how much they are are kind of weighing on the market.
31:18
Speaker 11: But I think even in the equal weight indexes we
31:21
Speaker 11: are above that twenty number, and so there's definitely opportunities
31:26
Speaker 11: in the market. But it feels like we're a little
31:28
Speaker 11: frothy here. I don't think we're super expensive by any
31:31
Speaker 11: stretch of the imagination, but I do think that I
31:35
Speaker 11: wouldn't call the market.
31:36
Speaker 2: Cheap favorite pick right now.
31:40
Speaker 10: You know, I really like Apple.
31:43
Speaker 11: I really like Apple.
31:44
Speaker 2: Okay, why so the stock up beating.
31:48
Speaker 11: Up, and then they had their iPhone event last week,
31:51
Speaker 11: which was sort of like anti climactic, So the stock.
31:54
Speaker 10: Has been kind of, you know, not doing much for
31:58
Speaker 10: a while.
31:58
Speaker 11: Valuation wise, it's attract when you compare to the rest
32:01
Speaker 11: of the Mag seven, and I think that overall, they're
32:06
Speaker 11: doing the right things to maintain market share, and I
32:09
Speaker 11: think that there's a potential for them to take market
32:11
Speaker 11: share in the future. So you know, from that standpoint,
32:15
Speaker 11: I think Apple has the ability to grow their global
32:18
Speaker 11: footprint and people like the ecosystem. I'm definitely one of
32:22
Speaker 11: those people. The stock is relatively attractive on a valuation basis,
32:26
Speaker 11: whereas you look at something like an n Video or
32:29
Speaker 11: one of the other names in the Mag seven and
32:30
Speaker 11: they don't look quite as attractive on a valuation basis.
32:34
Speaker 2: Paul scrolling on his old iPhone, ready.
32:36
Speaker 3: To buy the new iPhone very soon, as in like
32:39
Speaker 3: in forty five minutes time, exactly.
32:41
Speaker 2: All right, Shanna, thanks a lot, really appreciate it.
32:42
Speaker 3: A shanea ccil President CEO, benmon On Capital Management joining
32:46
Speaker 3: us there.
32:46
Speaker 2: Thank you. Very much.
32:49
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
32:53
Speaker 1: weekdays at ten am Eastern on Apple car Play and
32:56
Speaker 1: Android Auto with the Bloomberg Business app. You can also
32:59
Speaker 1: listen live on Amazon Alexa from our flagship New York station,
33:03
Speaker 1: Just Say Alexa playing Bloomberg eleven thirty.
33:07
Speaker 2: This is Bloomberg Intelligence Radio.
33:09
Speaker 3: We bring you all the top news in business and
33:11
Speaker 3: finance economics from our beautiful world headquarters right here in
33:14
Speaker 3: midtown Manhattan. There's a really interesting big Take story today
33:18
Speaker 3: that everyone should read. You can find it Bloomberg Big
33:22
Speaker 3: Takes story about college football players facing an ugly truth
33:25
Speaker 3: about payment details. You can read the story on Bloomberg
33:28
Speaker 3: and at Bloomberg dot com slash Big Tape. But we're
33:30
Speaker 3: lucky to Peter Robinson here. He's an investigations reporter here
33:33
Speaker 3: at Bloomberg News. Part of this story. I thought college
33:37
Speaker 3: football players got their own money now and that was awesome,
33:39
Speaker 3: and that was it.
33:40
Speaker 2: What's going on.
33:42
Speaker 12: That's exactly what the popular belief is. And that's why
33:45
Speaker 12: my colleague Noah Bluhire and I wanted to look into this.
33:48
Speaker 12: Because if you are a casual fan and you hear
33:52
Speaker 12: about these deals apparently worth millions for college football players.
33:56
Speaker 12: You think, well, that problem of the players being exploited
33:59
Speaker 12: while the coaches and the administrators make millions has been fixed.
34:03
Speaker 12: But we took a really deep dive into these contracts,
34:06
Speaker 12: and they're at most of the big time football schools.
34:09
Speaker 12: They're controlled by booster groups, which are essentially wealthy individuals,
34:14
Speaker 12: think the richest car dealer in town, and they're in
34:18
Speaker 12: charge of the deal. They write the contracts, and we
34:21
Speaker 12: actually got our hands on at least three of these contracts,
34:25
Speaker 12: and in many cases, according to other people we've talked
34:28
Speaker 12: to as well, these come with broad termination rights which
34:32
Speaker 12: wouldn't be seen in virtually any other industry. But there's
34:35
Speaker 12: one contract we looked at that said it can be
34:38
Speaker 12: terminated at any time for any reason. So players are
34:44
Speaker 12: essentially still being exploited. It's a version of the black
34:47
Speaker 12: market that's existed in college football for a long time.
34:50
Speaker 5: Peter, By and large, do these student athletes have representation,
34:54
Speaker 5: whether it's legal or an agent to kind of protect them.
34:57
Speaker 10: Here, it really catches catch can and it depends on
35:02
Speaker 10: the player.
35:03
Speaker 12: And you can imagine for someone who's a teenager, these
35:08
Speaker 12: are seventeen, eighteen, nineteen year old kids. They're entering this
35:12
Speaker 12: world for the first time. And a majority of the
35:16
Speaker 12: players to Division one schools are black, many from disadvantaged backgrounds,
35:21
Speaker 12: and so you have these situations where players are not
35:27
Speaker 12: aware of their options, they're not apprized of their options.
35:30
Speaker 12: And because it's a third party relationship between the university
35:34
Speaker 12: and these donor groups, there's really no one looking out
35:38
Speaker 12: for their interests. There's no one accountable when one of
35:40
Speaker 12: these deals goes wrong.
35:42
Speaker 2: So how do we fix this?
35:45
Speaker 12: Many people I've talked to look at the pro leagues
35:48
Speaker 12: and they say, what's happening in college football is a
35:51
Speaker 12: professionalization of college football, and in the pro leagues the
35:56
Speaker 12: players collectively bargain. In the pro leagues, the NFL Players Association,
36:03
Speaker 12: for instance, requires that the contracts be disclosed to them
36:06
Speaker 12: so that all the players know what all the terms are.
36:08
Speaker 12: It's a very transparent, very fair market, and so many
36:13
Speaker 12: people I talked to said that that's exactly what should
36:16
Speaker 12: happen in college support and at least in big time
36:19
Speaker 12: college football, where there are billions being made.
36:22
Speaker 5: These booster groups are now have a new moniker. They're
36:25
Speaker 5: called collectives. Which I think is kind of spooky in
36:27
Speaker 5: and of themselves. And we actually know some people that
36:30
Speaker 5: are parts of collectives of their university, and those are
36:32
Speaker 5: the ones that are who's monitoring or regulating these collectives?
36:36
Speaker 10: If anyone, Well, that's exactly the question. And yeah, you're right.
36:40
Speaker 12: The word collective hasn't been in popular use since the
36:44
Speaker 12: nineteen thirty Soviet Union. But because of the way that
36:49
Speaker 12: NCAA has lost repeated anti trust suits and has lost
36:53
Speaker 12: the ability to enforce really any rules over college football,
36:57
Speaker 12: there is no one monitoring this. Congress has looked at this,
37:01
Speaker 12: has held a dozen hearings since twenty twenty, but there
37:04
Speaker 12: just hasn't been the momentum for bipartisan legislation that might
37:08
Speaker 12: put some guardrails in this market.
37:11
Speaker 3: What about the whole and forgive my complete lack of knowledge.
37:14
Speaker 3: The likeness thing like image of likeness, what's that called?
37:16
Speaker 3: What's the nil?
37:18
Speaker 5: That's what we're talking.
37:19
Speaker 10: Yeah, okay, if you follow college.
37:22
Speaker 2: Sports, you clearly I don't look ahead.
37:27
Speaker 12: You know that name image likeness has become. It's amazing
37:30
Speaker 12: how rapidly it's become part of the daily coverage in sports,
37:34
Speaker 12: and it gives people the impression that athletes are signing
37:39
Speaker 12: endorsement deals with Nike, with Adidas, that they're out there
37:43
Speaker 12: on social media.
37:45
Speaker 10: But the interesting thing.
37:46
Speaker 12: About college football is that although there isn't really good
37:50
Speaker 12: statistics about this, the best statistics we have show that
37:54
Speaker 12: about eighty percent of these NIL deals are actually from
37:57
Speaker 12: these collectives. So people have the impression that Adidas and
38:00
Speaker 12: Nike are pouring money into into the sport, into especially
38:04
Speaker 12: specific players, but at least as far as what the
38:07
Speaker 12: players are making individually, that's not the case.
38:09
Speaker 10: It's still these collectives that are in charge.
38:13
Speaker 5: And Peter, is this a case so far with the
38:15
Speaker 5: big stars get most of the money and if you're
38:17
Speaker 5: in a non if you're in like an Olympic sport,
38:19
Speaker 5: you're not getting much if anything.
38:22
Speaker 12: Yeah, it really depends on the individual athlete. And like
38:26
Speaker 12: the rest of the economy, it's it's a star system.
38:29
Speaker 12: We looked closely at these contracts and talk to agents,
38:34
Speaker 12: and what's happening is that if you are a star
38:39
Speaker 12: with leverage, you can make you know, a starter at
38:42
Speaker 12: a at a power conference school in football can make
38:46
Speaker 12: in the six figures every year. But if you're not
38:49
Speaker 12: a starter, you you're on a month to month contract.
38:54
Speaker 12: If you don't perform well or if you're injured, that
38:56
Speaker 12: that money goes away. So it's just not a guarantee,
39:00
Speaker 12: especially in the same way that coaches have. Coaches, even
39:04
Speaker 12: assistant coaches in college football can make four hundred thousand,
39:07
Speaker 12: even up to two million and up.
39:08
Speaker 6: Wow.
39:09
Speaker 3: All right, Peter, thanks a lot, We really appreciate it
39:11
Speaker 3: was a really great piece everybody. Peter Robson Investigations reporter
39:14
Speaker 3: joining us from Seattle, Washington Again. You can find that
39:18
Speaker 3: story on the Bloomberg and at Bloomberg dot com Slash
39:21
Speaker 3: Big Take talking about college football players facing on ugly
39:24
Speaker 3: truth about how they actually get paid for step.
39:27
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