Latest / Bloomberg Intelligence / Commodities, Bitcoin ETFs, and the Messi Effect (Podcast)

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Commodities, Bitcoin ETFs, and the Messi Effect (Podcast) · Bloomberg Intelligence

• 0:00
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
• 0:04
  Speaker 1: my co host Matt Miller.
• 0:05
  Speaker 2: Every business day we bring you interviews from CEOs, market pros,
• 0:09
  Speaker 2: and Bloomberg experts, along with essential market moving news.
• 0:14
  Speaker 1: Find the Bloomberg Markets podcast called Apple Podcasts or wherever
• 0:17
  Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast.
• 0:21
  Speaker 1: Chicago Board of Trade corn prices this year down thirty
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  Speaker 1: two percent. What is up with that? I'm meeting as
• 0:28
  Speaker 1: much corn as they ever have. I don't know what's
• 0:30
  Speaker 1: going on the price of corn. I guess it's more
• 0:32
  Speaker 1: supply than demand because it's a commodity. But let's check
• 0:34
  Speaker 1: out with somebody who does this stuff for a living. Literally,
• 0:37
  Speaker 1: Mike mcloughan, senior macro strategists for Bloomberg Intelligence. Mike, I'd
• 0:41
  Speaker 1: like corn as much as the next person. Why is
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  Speaker 1: the price of corn down thirty two percent?
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  Speaker 3: Well, hey, Paul, as a farmer, say it's the higher
• 0:49
  Speaker 3: price cure. That's the bottom line. Corn had a big
• 0:52
  Speaker 3: pump last year on the back of Russia. Russia's invasion
• 0:55
  Speaker 3: of Ukraine, and what does that typically do? It centifies
• 0:58
  Speaker 3: plenty more supply and we're it globally. The US has
• 1:02
  Speaker 3: ketchup a little bit. This should be a very good
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  Speaker 3: crop this year. Crop this year near the highest production ever.
• 1:07
  Speaker 3: And most notably what had the most time they pick
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  Speaker 3: up was a massive supply of corn and soybeans out
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  Speaker 3: of Brazil. And they just do what they've been doing
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  Speaker 3: for last almost twenty years. They just amp their production.
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  Speaker 3: And when you farmers can make profits, they always create
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  Speaker 3: a lot of supply. And that's the key thing to
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  Speaker 3: remember about corn, soybeans and wheat is they are just
• 1:24
  Speaker 3: they should never stay up because farmers can make more money.
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  Speaker 3: They'll plant when they can make money, like they did
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  Speaker 3: last year.
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  Speaker 1: You're right, because soybeans are down ten percent year to
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  Speaker 1: date and wheat is down twenty eight percent year to date.
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  Speaker 4: Yeah.
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  Speaker 5: So America has held the top spot in terms of
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  Speaker 5: corn exports for years, years and years and years, but
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  Speaker 5: now Brazil may be challenging it. What's the dynamic there
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  Speaker 5: and does this increase competition? Is that going to weigh
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  Speaker 5: on the price of corn for the first single future.
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  Speaker 3: Absolutely, it's the price of corn is heading towards four
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  Speaker 3: dollars a bushel right now. It's just about just below five,
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  Speaker 3: and it first traded that price in nineteen seventy four.
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  Speaker 3: That was on the Great Grain Robbery when Russia imported
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  Speaker 3: a whole I'm sorry this end Soviet Union imported a
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  Speaker 3: whole bunch of grain. But what you pointed out simonto,
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  Speaker 3: our body's in motion. Brazil's production has been increasing rapidly
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  Speaker 3: for at least the last ten years. If you just
• 2:22
  Speaker 3: like at charts going back to beginning two thousand and
• 2:25
  Speaker 3: it's still handy that way. But what happened with this war,
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  Speaker 3: which we pointed out right away, just created more and
• 2:31
  Speaker 3: more incentive to produce more corn. But also there's been
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  Speaker 3: a paradigm shift in the US. The US now uses
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  Speaker 3: almost forty percent of the crop for ethanol. But the
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  Speaker 3: unique thing about that is, you know, that's for motor
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  Speaker 3: vehicles for gasoline. The you ney thing about that is
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  Speaker 3: it's just going back the way we were before. And
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  Speaker 3: you know, in nineteen twenty, before the automobile became proliferated,
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  Speaker 3: a lot of the grains that were grown in as
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  Speaker 3: country oats, and hey, we're for feeding horses. Now it's
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  Speaker 3: just some of it feeds cars. So that's a key
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  Speaker 3: thing to remember about corn. In most agriculture countries. Most
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  Speaker 3: countries are we all subsidized their agriculture production, and we're
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  Speaker 3: getting to the point now where farmers may be able
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  Speaker 3: to be subsistent without a lot of these extra programs
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  Speaker 3: from the government. A lot of it's because we use
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  Speaker 3: it for clean fuel for ethanol.
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  Speaker 1: Might sound interesting, I know it's all intertwined. How hard
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  Speaker 1: or how easy is it to grow corn?
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  Speaker 3: So corn is difficult. It's the most fertilizer intensive crop.
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  Speaker 3: And as we mentioned that earlier segment, a lot of
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  Speaker 3: farmers will say out in Illinois where I'm from, zilk corn,
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  Speaker 3: grow bean, so they can plant corn the next year.
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  Speaker 3: But it's the most intensive for you need a lot
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  Speaker 3: of anhydros ammonia, which is the base for that is
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  Speaker 3: natural gas, which has plunged this year, which means costs
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  Speaker 3: of productions going down. But it's harder to grow. Beans
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  Speaker 3: are much easier. You don't really need a lot of fertilizer.
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  Speaker 3: But when you work them in rotation, they all work
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  Speaker 3: out better together.
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  Speaker 4: Well, And it's.
• 3:59
  Speaker 5: Interesting you you were mentioning the impact of the Russian
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  Speaker 5: invasion of Ukraine before, but fertilizer is a place also
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  Speaker 5: that is so incredibly dependent on China and Russia. And
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  Speaker 5: what it sounds like you're saying here is not that
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  Speaker 5: our desire for corn is or the global demand is
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  Speaker 5: falling anyway, and simply that the US is eating up
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  Speaker 5: more of the overall share for itself for non eat
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  Speaker 5: eating purposes. Does this add to the I guess do
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  Speaker 5: these shifts add to some of those sustainability concerns as
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  Speaker 5: the United States is increasingly dependent on corn for like
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  Speaker 5: transportation issues as well.
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  Speaker 3: Not at all. We can grow more. We still have
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  Speaker 3: about ten percent of our higher land in what's called
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  Speaker 3: the CRP, the Conservation Conservation Reserve program. I used to
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  Speaker 3: have my farm in that for a little while, and
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  Speaker 3: it's where the government pays you to not farm. So
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  Speaker 3: obviously not going to put your best form there. But
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  Speaker 3: that's the key thing about what's just come point out
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  Speaker 3: the facts of deflationary forces and corn. The average acre
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  Speaker 3: of corn plant and this year will probably produce about
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  Speaker 3: one hundred and seventy five bushels per acre. Just four
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  Speaker 3: or fifty years ago it was half that. So that's
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  Speaker 3: just what's happening with rapidly advancing technology, new seed technology,
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  Speaker 3: new planting, techniques is we can just create more with
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  Speaker 3: less every day. That's normally what happens with commodities. And
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  Speaker 3: corn is the most significant agriculture crop on the planet
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  Speaker 3: and it's the US has been the epicenter. But don't
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  Speaker 3: worry about us creating more. And even if we have
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  Speaker 3: a severe drought, there's a lot of different time zones.
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  Speaker 3: There's irrigation, and there's you know, plenty of production coming
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  Speaker 3: out of from south of the border, from Brazil. So
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  Speaker 3: you know, I look at it is I always like
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  Speaker 3: to point out when people get bullish when markets go up,
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  Speaker 3: grains are the number one commodity you never want to
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  Speaker 3: buy after they go up. It's a higher price cure.
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  Speaker 3: And the thing here's a new thing about ethanol is
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  Speaker 3: we are now rapidly going to EVS. Total consumption of
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  Speaker 3: unletted get in this country. He's still about five percent
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  Speaker 3: below where it was before COVID, and now we're switching
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  Speaker 3: EV so fast. Total sales of automobiles in the world
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  Speaker 3: now almost fifteen percent EBS. All that was accelerated by
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  Speaker 3: the war, and that means a lot of the demand
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  Speaker 3: source for corn might be going away.
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  Speaker 5: And I should note I'm looking at the chart of
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  Speaker 5: corn prices. We're back really to levels where we were
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  Speaker 5: in mid twenty twenty one. October twenty twenty one looks
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  Speaker 5: like so, as you said, be cautious about getting into
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  Speaker 5: commodities after so.
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  Speaker 1: Mike Spike, Mike, the mclone family used to be used
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  Speaker 1: on a farm in Indiana. How many farmers are there,
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  Speaker 1: like the maglones out there, like give us a sense
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  Speaker 1: of what's the farm economy in the US now versus
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  Speaker 1: like family owned farmers versus I guess corporate.
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  Speaker 3: Farms going much more corporate. So we it was always
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  Speaker 3: a gentleman's farm. My grandfather bought it during the Great Depression,
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  Speaker 3: and he always cash rented it. That's a term, use
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  Speaker 3: your own the landing, just let other people farming. They'll
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  Speaker 3: pay you a cash rent for that. Now I know
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  Speaker 3: a few big of these big producers out in Champagne, Illinois,
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  Speaker 3: which is some of the best ground in the planet,
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  Speaker 3: and they own the land, they manage it, and they
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  Speaker 3: just have farmers do it. So it's becoming much more corporate.
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  Speaker 3: But it's so efficient. It's just incredibly efficient. The key
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  Speaker 3: quote I get every time I get out there is
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  Speaker 3: the technology is so hard to keep up with. For instance,
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  Speaker 3: there's this thing called exact Shot from John Deere where
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  Speaker 3: they can now when they plant that seed, give it
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  Speaker 3: the exact amount of fertilizer where it needs where they
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  Speaker 3: want it, and it can reduce fertilizer costs by sixty percent.
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  Speaker 3: So it's just that rapidly advancing technology in the area.
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  Speaker 3: It's hard to keep up. The weather is still unpredictable,
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  Speaker 3: but we now have with hybrid seeds and things like
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  Speaker 3: that you can do pretty well with. For instance, there's
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  Speaker 3: ano example. When I was a kid, the average cornstock
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  Speaker 3: had one ear, and now you have two or so
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  Speaker 3: on per cornstock. My question is what stops that from
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  Speaker 3: going to six ears per cornstock. It's just the trends
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  Speaker 3: your friend for production, but app for prices.
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  Speaker 1: Wow, all right, let's switch gears here. I could talk
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  Speaker 1: to you know, and we're gonna be We'll get the
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  Speaker 1: port pillows at some point. But let's turn to gold.
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  Speaker 1: Here are we still just long gold and kind of
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  Speaker 1: short everything else?
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  Speaker 3: I look at gold as the most likely asset and
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  Speaker 3: commodity to continue advancing. Now that's not so profound because
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  Speaker 3: it typically outperforms most commodities over time, most knowly copper,
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  Speaker 3: most noted crudilil. But the average price this year is
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  Speaker 3: nineteen thirty three, one nine and thirty three. I love
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  Speaker 3: saying that, Paul, because that was a significant year where
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  Speaker 3: Franklin Delano Roosevelt debased the dollar versus gold, and that
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  Speaker 3: bottom all the deflation. Air forces bottom the stock market
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  Speaker 3: and it bottomed deflation. But I look at gold, that's
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  Speaker 3: the highest averaged price ever nineteen thirty three. I see
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  Speaker 3: that's a bull market that's just waiting to break out.
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  Speaker 3: The key triggers would be some form of fed pivot.
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  Speaker 3: As you mentioned the earlier segment, the WRP function is
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  Speaker 3: tilting that way, and I think the key thing to
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  Speaker 3: get that pet fed pivot is probably a stock market decline.
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  Speaker 3: But to me, gold is and I just show it
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  Speaker 3: on the year, it's up six percent. On a twelve
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  Speaker 3: month basis is up ten percent. Virtually every other commodity
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  Speaker 3: is down. Here's a question what stops that trajectory. I
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  Speaker 3: suspect it's more likely accel right, And as you heard
• 9:10
  Speaker 3: Ona Wong in the previous segment point about recession. Here's
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  Speaker 3: one thing I point out about gold is there's one
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  Speaker 3: hundred percent probability when an unemployment rallies from this level,
• 9:18
  Speaker 3: I mean goes higher, that we'll have a recession, because
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  Speaker 3: that's the way it's always worked, and that to me
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  Speaker 3: is what's going to trigger gold. So my theme this month,
• 9:24
  Speaker 3: as I'm probably mean my commodity outlook is golds has
• 9:27
  Speaker 3: been outperforming all other commodities. What stops it versus I'm
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  Speaker 3: a fareful it's going to accelerate, all right.
• 9:32
  Speaker 1: Mike, always great, great segment. Always appreciate getting your color there.
• 9:36
  Speaker 1: Mike mcgloan's senior macro strategist for Bloomberg Intelligence is sconced
• 9:40
  Speaker 1: down in Miami Beach.
• 9:43
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  Speaker 1: Sim Own Foxman, Paul Sweeney, You're in Bloomberg Interactive Broker Studio.
• 10:01
  Speaker 1: We're streaming live on YouTube, so head over to YouTube
• 10:03
  Speaker 1: dot com and search Bloomberg Radio. Let's look ETFs and
• 10:08
  Speaker 1: usually I want to talk about flows, where the money's going,
• 10:10
  Speaker 1: and all that kind of stuff. But I want to
• 10:12
  Speaker 1: do in the context. I'll start off at least by
• 10:14
  Speaker 1: talking about bitcoin ETFs because our next person, our next guest,
• 10:18
  Speaker 1: has some experience in that, Greg Taylor, CIO of Purpose
• 10:22
  Speaker 1: Investments up there in Canada, So Greg, I guess in
• 10:25
  Speaker 1: the ETF biz, at least here in the US, A
• 10:27
  Speaker 1: lot of talk this week has been, hey, maybe we're
• 10:30
  Speaker 1: going to get a bitcoin spot ETF. You guys already
• 10:34
  Speaker 1: have that in Canada, don't you. Can you tell us
• 10:35
  Speaker 1: a little bit about the bitcoin ETF.
• 10:40
  Speaker 7: Yeah, for sure, and thanks for having us on. Yeah,
• 10:42
  Speaker 7: in Canada. We like to think that we're one of
• 10:45
  Speaker 7: the first innovators in the ETF space. A lot of
• 10:47
  Speaker 7: the first and the ETFs globally have hopped in Canada,
• 10:50
  Speaker 7: and one of those of late has been the first spot,
• 10:53
  Speaker 7: the Bitcoin ETF, which we launched the Purpose in February
• 10:57
  Speaker 7: of twenty twenty one. And I think it's great to
• 10:59
  Speaker 7: hear the US is finally catching up and then to
• 11:02
  Speaker 7: launch one as well, because really, when you look at
• 11:04
  Speaker 7: any type of ETF in a commodity world, you do
• 11:07
  Speaker 7: want to have spot versus futures, and I think spot
• 11:10
  Speaker 7: ETF is something that would be welcome to the crypto space,
• 11:13
  Speaker 7: and the experience we've had with it has been very positive.
• 11:15
  Speaker 7: And since we launched our fund in February twenty one,
• 11:18
  Speaker 7: it's gotten over a billion of assts. It's one of
• 11:21
  Speaker 7: the most heavily traded in the TSX, and I think
• 11:24
  Speaker 7: it's been a really good experience for a lot of
• 11:25
  Speaker 7: investors and a good way to get access to the
• 11:28
  Speaker 7: crypto market in a more regulated environment.
• 11:30
  Speaker 1: So, based upon your experience with a spot bitcoin ETF,
• 11:35
  Speaker 1: are you what do you think has been or the
• 11:38
  Speaker 1: SEC or the US regulators have kind of missed judged
• 11:41
  Speaker 1: about a futures versus a spot ETF.
• 11:46
  Speaker 7: Well, when I think when you go between futures in
• 11:47
  Speaker 7: a spot, I think there's no real argument that a
• 11:50
  Speaker 7: spot one is way better. And when we set up
• 11:53
  Speaker 7: to launch our ri ETF, we weren't really inventing the wheel.
• 11:56
  Speaker 7: What we did is we really kind of copied or
• 11:59
  Speaker 7: mimicked the way other commodity ETFs have done. Basically, the
• 12:02
  Speaker 7: GLD is a widely traveled ETF in the US on
• 12:06
  Speaker 7: spot gold, and I think it's looking at when you
• 12:09
  Speaker 7: look at a spot versus the futures, there's always better
• 12:11
  Speaker 7: because the futures is always going to lose basis points
• 12:14
  Speaker 7: on the role, so it was curious why the SEC
• 12:17
  Speaker 7: would approve a futures based ETF versus a SPOT because
• 12:20
  Speaker 7: at the end of the day, the futures are going
• 12:21
  Speaker 7: to have to be backed by something, so there is
• 12:24
  Speaker 7: a way to get back in the system. But having
• 12:26
  Speaker 7: a futures based ETF isn't really good for anyone or
• 12:29
  Speaker 7: the system.
• 12:31
  Speaker 5: No, we saw a share or sorry, we saw the
• 12:33
  Speaker 5: price of bitcoin pop after the decision came down.
• 12:37
  Speaker 8: In this case, I think there was a lot of enthusiasm.
• 12:40
  Speaker 5: Hey all these people are going to pile into an
• 12:44
  Speaker 5: ETF rather than try and go out and buy bitcoin themselves.
• 12:49
  Speaker 5: That said, you know, there's a JP Morgan strategist talking
• 12:52
  Speaker 5: about how you know, if you have a launch, say
• 12:55
  Speaker 5: of one of these these bitcoin ETFs, it's not really
• 12:59
  Speaker 5: going to change the overall market enthusiasm for this. It's
• 13:03
  Speaker 5: just going to draw liquidity away from other products.
• 13:07
  Speaker 8: Is this a zero sum game to you?
• 13:10
  Speaker 7: I don't think it is yet, because I still think
• 13:12
  Speaker 7: crypto is a commodity that's still really in the early
• 13:15
  Speaker 7: innings of of its growth, and I think having a
• 13:19
  Speaker 7: spot ETF which is one of the best ways to
• 13:21
  Speaker 7: get access to it is only going to bring on
• 13:23
  Speaker 7: more investors. Currently, if you want to get exposure to
• 13:26
  Speaker 7: crypto the traditional way, it's really not the easiest system.
• 13:29
  Speaker 7: You have to open a separate account with the crypto provider.
• 13:32
  Speaker 7: You get figured if you're doing a cold or hot wallet,
• 13:35
  Speaker 7: and a lot of people just don't want to do that,
• 13:36
  Speaker 7: so they want to wait for an ETF that's going
• 13:39
  Speaker 7: to be easy and contract the index. And further to that,
• 13:42
  Speaker 7: I think a lot of people are looking again at
• 13:44
  Speaker 7: real assets. With the amount of money printing going on
• 13:47
  Speaker 7: in central banks, there has been a case to add
• 13:49
  Speaker 7: more of your portfolio towards real assets, and certainly the
• 13:52
  Speaker 7: commodities and gold and real estate are benefiting from this.
• 13:55
  Speaker 7: But I think there's also a way to get that
• 13:57
  Speaker 7: crypto with into that bucket of real assets. I think
• 14:00
  Speaker 7: there's demand for real assets or just demand for crypto,
• 14:03
  Speaker 7: and people want an easy way to do that, and
• 14:05
  Speaker 7: I think having a spot ETF is one of the
• 14:07
  Speaker 7: simplest ways to get access to it. So I don't
• 14:10
  Speaker 7: think it's a zero sum game. I think once the
• 14:12
  Speaker 7: US does get a spot ETF, I think that will
• 14:14
  Speaker 7: open up more buyers and sellers, and that's probably why
• 14:17
  Speaker 7: the commodity reacted so well to a hints that it
• 14:21
  Speaker 7: does seem like the US getting closer to approving this.
• 14:24
  Speaker 1: Great Let's step back and take a look at the
• 14:25
  Speaker 1: ETF space in general, give us just an overview. Are
• 14:29
  Speaker 1: is the money continuing to gush into etfses? To give
• 14:32
  Speaker 1: us a sense of how this year's been.
• 14:35
  Speaker 7: Yeah, we've had netflows and that positive flows this year.
• 14:38
  Speaker 7: ETFs have definitely been a way that a lot of
• 14:41
  Speaker 7: people are getting access to it. One of the big
• 14:43
  Speaker 7: box spots for us and I think for the whole
• 14:46
  Speaker 7: ecosystem in ETFs. In the last few months has been
• 14:49
  Speaker 7: really looking at the money market ETFs. Certainly money market
• 14:53
  Speaker 7: has become a hot topic of late, and with a
• 14:56
  Speaker 7: yields for cash in the five to six percent, I
• 14:58
  Speaker 7: think that's been an area people are trying to get
• 15:01
  Speaker 7: access to and I think that's where a lot of
• 15:03
  Speaker 7: the games with the whole sector have been. But I
• 15:05
  Speaker 7: think over time, people are looking for access and simple
• 15:08
  Speaker 7: ways to get it, and in a low fee environment,
• 15:10
  Speaker 7: I think ETFs are one of those ways to get
• 15:12
  Speaker 7: access to it.
• 15:14
  Speaker 5: Greg we've been hearing from some investment strategists, investment strategies
• 15:17
  Speaker 5: pointing to sort of defensive sectors in a way from
• 15:20
  Speaker 5: like the tech driven height that we've seen over the
• 15:24
  Speaker 5: past couple of months. Are we seeing places like healthcare
• 15:30
  Speaker 5: and places like energy reflected in some of the ETF
• 15:34
  Speaker 5: flows and will we see more of that as we
• 15:38
  Speaker 5: head towards the end of the year.
• 15:40
  Speaker 7: I think that's certainly the hope. And being a Canadian,
• 15:44
  Speaker 7: we're definitely what our indice is tilted more towards the
• 15:46
  Speaker 7: cyclicals and the resource sector. I think we'd love to
• 15:48
  Speaker 7: see that rotation away from technology towards the commodity sectors,
• 15:51
  Speaker 7: and we are starting to see that. Certainly. The last
• 15:55
  Speaker 7: few years has been really good for the commodity growth,
• 15:58
  Speaker 7: as we've seen both entered and base metals do quite well.
• 16:02
  Speaker 7: And I think that's really setting up quite nicely for
• 16:05
  Speaker 7: the second half the year. There's a lot of rumblings
• 16:07
  Speaker 7: about China launching other stimulus program into September, and as
• 16:11
  Speaker 7: the world starts to talk more about a soft landing
• 16:13
  Speaker 7: more stimulus from China. That's setting up for a decent
• 16:16
  Speaker 7: move in the commodities, and I think that could cause
• 16:19
  Speaker 7: more rotation away from these these textocks which have really
• 16:22
  Speaker 7: driven in this is higher to start the year, and
• 16:25
  Speaker 7: maybe some of that money flows back to the cyclicals,
• 16:27
  Speaker 7: which are setting up quite nicely. From a supply demand economics.
• 16:31
  Speaker 7: There's not a lot of supply for modern new minds
• 16:34
  Speaker 7: and new oil bills coming on. So I does feel
• 16:36
  Speaker 7: like the second half of the year could remind could
• 16:38
  Speaker 7: could belong to more the cyclicals than the text talks.
• 16:42
  Speaker 1: Hey, Greg, thanks so much for joining us. Really appreciate
• 16:44
  Speaker 1: getting your thoughts. Greg Taylor, CIO at Purpose Investments checking
• 16:48
  Speaker 1: in with us, giving us the latest on the ETF space.
• 16:52
  Speaker 1: Just continues to see amazing funds flow into the ETF space.
• 16:56
  Speaker 1: Makes you wonder about the future of the mutual fund business,
• 17:00
  Speaker 1: which we all grew up with, and now it's really
• 17:02
  Speaker 1: fair I think in large part due to the cost differential,
• 17:06
  Speaker 1: ETFs aer a way to go for a lot of folks.
• 17:07
  Speaker 5: Yeah, it's places like Betterman, etc.
• 17:11
  Speaker 1: Yeah, it's easy, yeah exactly, and it's interesting. I think
• 17:14
  Speaker 1: what I understand is from tax free accounts still a
• 17:17
  Speaker 1: place for mutual funds, but otherwise ets and the cost
• 17:20
  Speaker 1: truction and reporting and all the type of stuff seems
• 17:22
  Speaker 1: to be a better rapper.
• 17:23
  Speaker 6: You're listening to the tape Ken's are Live program Bloomberg
• 17:26
  Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, the
• 17:30
  Speaker 6: tune in app, Bloomberg dot Com, and the Bloomberg Business App.
• 17:33
  Speaker 6: You can also listen live on Amazon Alexa from our
• 17:36
  Speaker 6: flagship New York station. Just say Alexa play Bloomberg eleven thirty.
• 17:42
  Speaker 1: All right, we get some smart research coming out of
• 17:44
  Speaker 1: the folks at Bloomberg Intelligence. Joe Levington one of the
• 17:47
  Speaker 1: smarter folks we like at BI. He's a director of
• 17:50
  Speaker 1: credit research, so we better be good. But he's got
• 17:53
  Speaker 1: a nice note out here on Tesla and it's a
• 17:56
  Speaker 1: little bit different twist here and Joel covers the credit
• 17:59
  Speaker 1: side of some of these industrial companies. He joins his
• 18:02
  Speaker 1: life here in our Bloomberg Interactive Broker studio. Joe, what
• 18:04
  Speaker 1: do you think about tests there? Because our friends, you know,
• 18:08
  Speaker 1: in Detroit Ford GM Stalantis. I think they've got some
• 18:11
  Speaker 1: labor problem, don't they.
• 18:13
  Speaker 9: They have a massive labor problem coming up. There's a
• 18:16
  Speaker 9: strike with the UAW that's going to be set for
• 18:19
  Speaker 9: September fourteenth, as they work through their contracts expectations are
• 18:23
  Speaker 9: that pricing could go up thirty to forty percent on
• 18:27
  Speaker 9: their labor costs, which creates an opportunity for a low
• 18:30
  Speaker 9: cost player like Tesla to come in and continue to
• 18:33
  Speaker 9: price down. You know, Paul, the average Tesla price is
• 18:36
  Speaker 9: down about thirty seven percent this year already. And if
• 18:40
  Speaker 9: you really, yeah, even if you look at consensus estimates
• 18:42
  Speaker 9: just on their cars at the beginning of the year,
• 18:44
  Speaker 9: it would have the market was expecting about fifty four
• 18:47
  Speaker 9: thousand dollars of cards down to forty six thousand. So
• 18:49
  Speaker 9: they're really applying the pressure on these other old line
• 18:53
  Speaker 9: ice engine manufacturers to really step up or step out.
• 18:58
  Speaker 9: And you're starting to see some that's stepping out already
• 19:01
  Speaker 9: occurring that might be exacerbated by this by a potential strike.
• 19:05
  Speaker 7: You know.
• 19:05
  Speaker 5: What's interesting with the strikes though, is if the auto
• 19:08
  Speaker 5: workers are pretty successful, then doesn't it create pressure on
• 19:14
  Speaker 5: Tesla's own workforce to.
• 19:17
  Speaker 8: Say, hey, they got a good deal.
• 19:19
  Speaker 5: Maybe maybe we'll we'll get a good deal if we,
• 19:21
  Speaker 5: you know, resist the anti union efforts of Tesla and
• 19:25
  Speaker 5: go ahead and organize.
• 19:27
  Speaker 9: Yeah, one hundred percent, And I would start with a
• 19:30
  Speaker 9: base of if you know, labor costs go up thirty
• 19:33
  Speaker 9: to forty percent at Ford. At a non unionized plant
• 19:36
  Speaker 9: like at Tesla, if it goes a fifteen percent, you're
• 19:38
  Speaker 9: still ahead of the game point at least on a
• 19:41
  Speaker 9: relative basis, and you're already very far ahead of the game.
• 19:44
  Speaker 9: You have double the margins that you do out of
• 19:45
  Speaker 9: Ford or General Motors relative to Tesla, So it just
• 19:49
  Speaker 9: kind of further expands that difference.
• 19:51
  Speaker 1: Has there been any move to unionize Tesla over the years. No,
• 19:56
  Speaker 1: is there any expectation that will happen to UAW saying
• 19:59
  Speaker 1: we're just not going to deal that.
• 20:01
  Speaker 9: I don't know if they're saying that we're not going
• 20:02
  Speaker 9: to deal with it, but maybe this isn't the right
• 20:04
  Speaker 9: moment for that to occur.
• 20:05
  Speaker 5: My impression is that Elon Musk's been quite resistant to it.
• 20:10
  Speaker 5: What I mean, I mean, and if you I mean
• 20:14
  Speaker 5: you look at the kind of the labor agitation that's
• 20:18
  Speaker 5: been happening across the country between ups coming in with
• 20:21
  Speaker 5: a fantastic deal, pilots getting good deals, all that sort
• 20:25
  Speaker 5: of stuff.
• 20:26
  Speaker 8: You know, you do wonder if there if there will
• 20:28
  Speaker 8: be an uptake.
• 20:29
  Speaker 5: But but Tesla's had it as well. Some issues with
• 20:33
  Speaker 5: its cyber truck.
• 20:36
  Speaker 1: I wonder there is no truck. I mean, how can
• 20:38
  Speaker 1: you be how can you be an ev how can
• 20:41
  Speaker 1: you be an auto manufacturer in US without a truck? Well,
• 20:45
  Speaker 1: I mean.
• 20:47
  Speaker 8: I would love a truck, you know, it's fun. It
• 20:51
  Speaker 8: would be great.
• 20:51
  Speaker 5: But you can now I don't have a parking SPI
• 20:54
  Speaker 5: so trying to find street parking truck.
• 20:57
  Speaker 8: However, it would be cool looking.
• 20:59
  Speaker 5: But you know, we have a story out from yesterday.
• 21:02
  Speaker 5: Tesla's cyber truck is long on hype and short on specifications.
• 21:06
  Speaker 5: And how meaningful is this to the company overall?
• 21:09
  Speaker 1: It's not.
• 21:10
  Speaker 9: I mean the cyber truck is very, very niche. I
• 21:12
  Speaker 9: know sometimes it gets compared to the F one fifty.
• 21:15
  Speaker 1: I drove the F one fifty lightning awesome.
• 21:18
  Speaker 9: It's a machine. Yeah, it is a very big machine.
• 21:21
  Speaker 9: And Fordy is dominant in that area and we'll stay dominant.
• 21:24
  Speaker 9: The cyber truck is a niche product. And if you
• 21:26
  Speaker 9: look at consensus, that's exactly how they view it. It's
• 21:28
  Speaker 9: not meant for the contractor. It's meant for probably a
• 21:32
  Speaker 9: high net worth mails want to be able to make
• 21:36
  Speaker 9: a statement.
• 21:36
  Speaker 1: Yeah, I guess how the how are the bonds of
• 21:40
  Speaker 1: the big automakers, How are they trading these days? How
• 21:43
  Speaker 1: concerned are they about I guess first just this this
• 21:49
  Speaker 1: transition from internal combustion engines into into electric Like if
• 21:55
  Speaker 1: I were stockhold I would want to want to get
• 21:57
  Speaker 1: anywhere near these names.
• 21:58
  Speaker 9: How about the bonds, Paul, As always, the stocks have
• 22:02
  Speaker 9: really sold off over the last month or so if
• 22:04
  Speaker 9: you look at Ford and General Motors, but the bonds
• 22:07
  Speaker 9: have really held in relatively well. Maybe the CDs is
• 22:10
  Speaker 9: out about twenty basis points.
• 22:11
  Speaker 1: CDs is credit default swaps. I learned that a great
• 22:14
  Speaker 1: financial crisis. I didn't know that before.
• 22:16
  Speaker 9: You're on point again. So they've held in pretty well
• 22:21
  Speaker 9: relative to you know, where the stocks are at. And
• 22:25
  Speaker 9: I think that's large largely because if you look at
• 22:27
  Speaker 9: what the raiders have said. They've said, you know, if
• 22:29
  Speaker 9: you go back to twenty nineteen, when the last agreement
• 22:32
  Speaker 9: came out and there was a six week strikeover at
• 22:34
  Speaker 9: General Motors, they've already said like, hey, a situation like
• 22:38
  Speaker 9: that would not lead us to change our ratings. And
• 22:41
  Speaker 9: so that's a pretty fair and long kind of expectation
• 22:45
  Speaker 9: to have in that case. Back in twenty nineteen, it
• 22:48
  Speaker 9: costs GM a little over four billion dollars, just to
• 22:50
  Speaker 9: kind of put.
• 22:51
  Speaker 1: That in perspective.
• 22:52
  Speaker 5: Well, Elon Musk finds himself constantly sort of embroiled in
• 22:55
  Speaker 5: these scandals, whether it's something he tweets or most recently,
• 23:01
  Speaker 5: a probe, a reported probe into a secret glass house
• 23:07
  Speaker 5: that he may or may not have been building. How
• 23:11
  Speaker 5: do you think of headlines like this when you're evaluating
• 23:14
  Speaker 5: credit risk, because this is something the market can just
• 23:16
  Speaker 5: kind of like look past and wait to see where
• 23:19
  Speaker 5: things go.
• 23:19
  Speaker 9: Yeah, well, with Tesla, there's always event risk just in
• 23:22
  Speaker 9: headlines that you get. At least what I've seen on
• 23:25
  Speaker 9: the credit side is that when he is quiet and
• 23:28
  Speaker 9: the company is just working, their stock or their CDs
• 23:33
  Speaker 9: and their bonds tend to perform better. So a lot
• 23:36
  Speaker 9: of cases it would just be better if things were
• 23:38
  Speaker 9: quiet and you can kind of just move on and
• 23:40
  Speaker 9: focus on your operating acumen, in which they have a lot.
• 23:42
  Speaker 5: Of what's the magnitude of some of these reactions to you?
• 23:47
  Speaker 5: I don't know if the glass house was truly like
• 23:49
  Speaker 5: that big of a probe, but.
• 23:51
  Speaker 9: Yeah, for credit, I don't think that really means very much.
• 23:53
  Speaker 9: But certainly, it's just unnecessary waste use of time that
• 23:59
  Speaker 9: could be spent better in terms of improving your products.
• 24:01
  Speaker 1: Which Tesla going to hit the bond market?
• 24:04
  Speaker 9: You know, that's a great question, Paul, and I think
• 24:06
  Speaker 9: really the answer is once they're done cutting prices. And
• 24:09
  Speaker 9: the reason for that is one of the reasons that
• 24:11
  Speaker 9: they can do as much as they've done this year.
• 24:13
  Speaker 9: You know, if you're talking about a thirty four percent
• 24:15
  Speaker 9: or thirty five percent cut in your prices, you've never
• 24:18
  Speaker 9: heard of that in autos before.
• 24:20
  Speaker 6: Right.
• 24:20
  Speaker 9: You have to kind of go back to you, Henry
• 24:23
  Speaker 9: Ford to get that kind of level of price cutting.
• 24:27
  Speaker 9: And the reason for that is because most of the
• 24:29
  Speaker 9: auto companies have captive finance units. Right, So when you're
• 24:32
  Speaker 9: taking a loan out or a lease on one of
• 24:35
  Speaker 9: these cars, those cars wind up coming back, or a
• 24:38
  Speaker 9: high percentage of them come back to the auto company.
• 24:41
  Speaker 9: So they've financed that residual value at a certain level.
• 24:44
  Speaker 9: So you can go out and cut down the pricing
• 24:46
  Speaker 9: by thirty or thirty five percent, Otherwise you're going to
• 24:49
  Speaker 9: get destroyed in your finance company. Tesla doesn't really have
• 24:52
  Speaker 9: that issue, and so they're able to be much more
• 24:56
  Speaker 9: aggressive with their pricing and not impact their overall performance,
• 24:59
  Speaker 9: whereas the old line companies can't do that. Once they're
• 25:03
  Speaker 9: done with that, I think it's really you know, if
• 25:05
  Speaker 9: you think about their strategy of growing production fifty percent
• 25:08
  Speaker 9: a year for several years, they're gonna have to have
• 25:12
  Speaker 9: loans and leases become a bigger part of their business,
• 25:14
  Speaker 9: and so that'll be the impetus for seeing much more
• 25:18
  Speaker 9: debt coming out of the Tesla company.
• 25:20
  Speaker 1: I'm sure, I'm sure the bankers are pitching it. Joel Levinton,
• 25:23
  Speaker 1: he's the director of credit research at Bloomberg Intelligence, joining
• 25:26
  Speaker 1: us live here in our Bloomberg Interactive Broker Studio. We
• 25:28
  Speaker 1: appreciate getting your time there, Joel.
• 25:31
  Speaker 6: You're listening to the team. Ken's are Live program Bloomberg
• 25:34
  Speaker 6: Markets weekdays at ten am Eastern on Bloomberg dot Com,
• 25:38
  Speaker 6: the iHeartRadio app and the Bloomberg Business App, or listen
• 25:41
  Speaker 6: on demand wherever you get your podcasts.
• 25:45
  Speaker 1: Let's talk to streaming Biz, Netflix, Clear Winner, everybody else.
• 25:50
  Speaker 1: I have no idea so and I used to do
• 25:52
  Speaker 1: this stuff for a living. Mark Douglas knows. He's a
• 25:55
  Speaker 1: president's CEO of Mountain. He joins us live here in
• 25:57
  Speaker 1: our Bloomberg Interactive Broker Studio. So Mark, I mean again,
• 26:00
  Speaker 1: I think one of the questions people had at the
• 26:01
  Speaker 1: beginning of this evolution to streaming was, Okay, I get
• 26:05
  Speaker 1: Netflix is gonna winyah, how about everybody else? We're now
• 26:09
  Speaker 1: two three four years into this thing. We've got every
• 26:12
  Speaker 1: media company is into the streaming business. Are we what
• 26:15
  Speaker 1: are we learning here? Well?
• 26:16
  Speaker 4: I think what we're saying the reason Netflix continues to
• 26:20
  Speaker 4: win is because they have all the content to watch
• 26:25
  Speaker 4: when there's no other major show on the watch, and
• 26:29
  Speaker 4: then they also have some of the major shows, so
• 26:32
  Speaker 4: they I think just about everyone. When you turn on
• 26:35
  Speaker 4: the TV, the first thing you do is go see
• 26:37
  Speaker 4: what's on Netflix, right, and then so that puts them
• 26:40
  Speaker 4: in the first spot no matter what. And then after
• 26:43
  Speaker 4: that the second spot is live television, which is like
• 26:47
  Speaker 4: Hulu YouTube TV. And then what Disney was pretty lined
• 26:51
  Speaker 4: up to do was to really take that third slot
• 26:54
  Speaker 4: family programming, sports programming. But they seem to keep Star
• 26:58
  Speaker 4: Wars programming, but they keep seeming to stumble and and
• 27:04
  Speaker 4: so that's been the big challenge for that, and it
• 27:05
  Speaker 4: leaves that third slot open. Max is trying to be there,
• 27:08
  Speaker 4: Discoveries trying to be there, but I think most consumers
• 27:11
  Speaker 4: are like, Okay, I'm gonna do Disney for three months,
• 27:14
  Speaker 4: binge on that. Then I'll switch over the Showtime and
• 27:17
  Speaker 4: watch the like the current season of Billions. But I'm
• 27:21
  Speaker 4: gonna binge that. I'm going to cancel that, And that's
• 27:24
  Speaker 4: not really healthy if you're Showtime or or Max or
• 27:28
  Speaker 4: anyone like that.
• 27:29
  Speaker 5: So how are those folks trying to change their behavior
• 27:33
  Speaker 5: that you know behavior and make their service a mainstay?
• 27:38
  Speaker 4: I think what what you see is them trying to
• 27:43
  Speaker 4: go back to sports programming, but then that costs billions
• 27:46
  Speaker 4: of dollars in fees, so that's kind of like Amazon strategy.
• 27:51
  Speaker 4: And outside of that, I think they're like on a treadmill,
• 27:55
  Speaker 4: and they they really, quite frankly, don't know how to
• 27:59
  Speaker 4: get off of that tradmill unless they're going to try
• 28:02
  Speaker 4: to match the library of content that Netflix has. And
• 28:05
  Speaker 4: but Netflix is already occupied in that spot. So what
• 28:09
  Speaker 4: you're probably going to see is just a lot of consolidation.
• 28:11
  Speaker 4: That's really where that number three player is going to
• 28:13
  Speaker 4: come from.
• 28:14
  Speaker 1: Is well, I mean, who can consolidate Disney can't buy
• 28:16
  Speaker 1: Warner Brothers, Discovery or Fox or I mean, I mean
• 28:20
  Speaker 1: it they consolidated. It seems like they already did consolidated
• 28:23
  Speaker 1: as much as they possibly could in terms of the
• 28:25
  Speaker 1: big traditional media companies. I'm not sure any more deals
• 28:28
  Speaker 1: can get done.
• 28:29
  Speaker 4: Yeah, I mean people say, of course Apple can. I
• 28:31
  Speaker 4: mean they have like more money on hand than the
• 28:33
  Speaker 4: US government.
• 28:34
  Speaker 1: Or Dan Eyes and Red Bush Securities made a call
• 28:38
  Speaker 1: a few weeks ago that he believes that Apple will
• 28:42
  Speaker 1: buy ESPN, which kind of made some sense to me,
• 28:46
  Speaker 1: because boy, that would be a I think Disney surprisingly
• 28:50
  Speaker 1: wouldn't mind getting rid of Summer all of that, given
• 28:53
  Speaker 1: the decline, and uh, you know with the cord cutting issues,
• 28:56
  Speaker 1: is that something you think is reasonable?
• 28:58
  Speaker 4: Well, so, the thing I think that's miss Senders the
• 29:00
  Speaker 4: bad Apple is that Apple really wants to get a bundle.
• 29:04
  Speaker 4: So if you watch something, you listen to something, Apple Music,
• 29:07
  Speaker 4: you play it, Apple Games, you read it, Apple News.
• 29:11
  Speaker 4: They want twenty dollars a month from every iPhone user
• 29:15
  Speaker 4: on the planet, and they only do TV to finish
• 29:19
  Speaker 4: out that bundle. And the other things like Apple Music,
• 29:23
  Speaker 4: they have no production costs whatsoever. They don't make the music,
• 29:26
  Speaker 4: they don't make the games. They don't make the news articles,
• 29:29
  Speaker 4: and so the economics on that is, they just give
• 29:32
  Speaker 4: you enough TV content so you'll pay the nineteen ninety
• 29:35
  Speaker 4: nine a month or whatever the current price point is.
• 29:38
  Speaker 4: So I don't know that they have the incentive to
• 29:41
  Speaker 4: expand their footprint on TV given that the real money
• 29:44
  Speaker 4: comes from the eras, where they have no production costs whatsoever.
• 29:47
  Speaker 1: And I pitched them on every media company on the
• 29:49
  Speaker 1: planet for twenty years and got nowhere.
• 29:51
  Speaker 5: Yeah met them, yeah, yeah, And notably, I mean you
• 29:54
  Speaker 5: point out this Danives commentary, but our davely And, an
• 29:58
  Speaker 5: opinion columnist for bloomber says Apple doesn't need to buy ESPN.
• 30:04
  Speaker 8: To win in sports.
• 30:05
  Speaker 5: His argument is that they'd be better striking a partnership
• 30:08
  Speaker 5: that would showcase the ESPN channel within the Apple TV Plus.
• 30:13
  Speaker 4: Yeah, I think that makes sense. Also, Disney's like, this
• 30:17
  Speaker 4: is the thing about Disney right now, everyone on what
• 30:20
  Speaker 4: if you have a restaurant, great restaurant and people don't
• 30:24
  Speaker 4: seem to be showing up as much, You don't call
• 30:26
  Speaker 4: your accountant, You call the chef right and say what
• 30:29
  Speaker 4: are we doing wrong in the kitchen? And so you
• 30:32
  Speaker 4: see Disney and people like well, the company's not doing well,
• 30:36
  Speaker 4: and everyone wants to call the finance department and it
• 30:39
  Speaker 4: makes absolutely absolutely no sense.
• 30:40
  Speaker 1: Get the get the dishes right. They're like, get the
• 30:43
  Speaker 1: food right there, consumers. What do you think Disney needs
• 30:46
  Speaker 1: to do then they?
• 30:47
  Speaker 4: I think, I think when you look at the numbers
• 30:49
  Speaker 4: that Disney, their revenue has grown over it they doubled
• 30:53
  Speaker 4: in size of the last two years. The revenue has grown,
• 30:56
  Speaker 4: but if you look at their profitability that is tanked.
• 30:59
  Speaker 4: I mean they were doing like operating income like in
• 31:03
  Speaker 4: twenty nineteen, I think it was like fourteen eleven to
• 31:06
  Speaker 4: fourteen billion, and now it's like three billion. So I
• 31:09
  Speaker 4: think it's a plastic story of you got everyone needs
• 31:12
  Speaker 4: to get ten percent better at what they do and
• 31:16
  Speaker 4: they while doing it for ten percent less.
• 31:19
  Speaker 8: Is AI the future there? Like AI generated content?
• 31:23
  Speaker 4: I mean, I personally think that it literally goes back
• 31:26
  Speaker 4: to Disney, that the Disney brands the you know that people,
• 31:31
  Speaker 4: especially in the United States where it got controversial the
• 31:34
  Speaker 4: last couple of years, that people have to relove the
• 31:38
  Speaker 4: Disney brand. They have to relove the Star Wars brands,
• 31:41
  Speaker 4: the ESPN brand for sports, and that is not about
• 31:45
  Speaker 4: deals on you know on Wall Street that is about
• 31:47
  Speaker 4: who are leading these organizations under Bob Biger and where
• 31:51
  Speaker 4: is Bob Biger leading them. It's a very solvable problem.
• 31:55
  Speaker 4: It's not going to be solved. I mean doing deals
• 31:57
  Speaker 4: to get more consumers watching content, right, do that deal
• 32:01
  Speaker 4: with Apple? But that but like financial I say in
• 32:04
  Speaker 4: my company, the only type of engineering we're going to
• 32:06
  Speaker 4: do at Mountain is software engineering. We're not doing financial
• 32:10
  Speaker 4: engineering yet. We're going to grow through products people love,
• 32:13
  Speaker 4: and I think that is ultimately back to basics what
• 32:17
  Speaker 4: is needed at Disney speaking.
• 32:18
  Speaker 5: Of controversial products, CNN naming a former New York Times
• 32:23
  Speaker 5: head Mark Thompson as its next CEO.
• 32:27
  Speaker 8: What's your take as we bring in a newcomer to
• 32:31
  Speaker 8: try and turn the ship around.
• 32:33
  Speaker 4: Yeah, well, you know, the folks at CNN kind of
• 32:36
  Speaker 4: there was a rebellion, right and they literally, I mean
• 32:40
  Speaker 4: they tied the former guy, you know, and they wrapped
• 32:44
  Speaker 4: him in ropes and like pushed him off the ship
• 32:47
  Speaker 4: so metaphorically. And so I think the new person that
• 32:52
  Speaker 4: we're talking about, he definitely, you know, is someone that understands,
• 32:57
  Speaker 4: you know, this staff, and I think is going to
• 33:00
  Speaker 4: fit more there. The bigger news I think is making
• 33:02
  Speaker 4: more part of MAX because I think people just consume
• 33:06
  Speaker 4: their news while they're consuming other things. Like people don't
• 33:09
  Speaker 4: wake up as much and go I want to watch
• 33:11
  Speaker 4: the news. They more say I want to be entertained,
• 33:15
  Speaker 4: And wow, the news is very entertaining today in terms
• 33:19
  Speaker 4: of new you know, kind of the CNN and MSNBC
• 33:23
  Speaker 4: style news. We're sitting down in front of the television.
• 33:26
  Speaker 4: So making that part of MAX, I think is a
• 33:28
  Speaker 4: big deal. Gives them an audience to promote to gets
• 33:31
  Speaker 4: more people just knowing this is an option when you
• 33:35
  Speaker 4: go looking for content to watch. And I think that's
• 33:37
  Speaker 4: the biggest move there.
• 33:38
  Speaker 1: Hey, market based down in Miami. Your company's based in Miami.
• 33:41
  Speaker 1: How big is this Lionel messy thing? Yeah?
• 33:45
  Speaker 4: So Miami loves sports. I mean like like it has
• 33:48
  Speaker 4: become I used to go to Miami a few years
• 33:50
  Speaker 4: ago and be what, what what the hell do people
• 33:53
  Speaker 4: do for a living here? And now it's like become
• 33:57
  Speaker 4: so diverse, not but in every way possible. And they
• 34:01
  Speaker 4: love Formula one. They're loving you know, soccer or football
• 34:06
  Speaker 4: as the rest of the world calls it. And you
• 34:08
  Speaker 4: see messy posters all over the place, so I think
• 34:12
  Speaker 4: it is a big deal. I think it was a
• 34:14
  Speaker 4: perfect city for him. You know, I'm not out that much,
• 34:18
  Speaker 4: but apparently you can see him out a lot, and
• 34:21
  Speaker 4: I think he's doing a lot for Major League Soccer.
• 34:25
  Speaker 4: So I think it's a huge deal and he was.
• 34:28
  Speaker 1: A perfect person.
• 34:29
  Speaker 4: I mean the World Cup, I think you can almost
• 34:32
  Speaker 4: think Salt Bay because Salt Bay made the end of
• 34:36
  Speaker 4: the World Cup about Messi, not just his play on
• 34:40
  Speaker 4: the field.
• 34:40
  Speaker 1: But.
• 34:43
  Speaker 4: Yeah, it was like, why are you messing around with Messi?
• 34:46
  Speaker 1: It kind of like he became.
• 34:48
  Speaker 4: A martyr at the end of the you know, in
• 34:50
  Speaker 4: a couple of seconds at the end of the World Cup.
• 34:52
  Speaker 4: I think it's been great for him and great for
• 34:54
  Speaker 4: the sport. Obviously he was a phenomenal player before that.
• 34:57
  Speaker 1: Great for great for Miami, and maybe a good Apple
• 35:00
  Speaker 1: who is kind of part of this whole deal there.
• 35:03
  Speaker 1: So Apple putting some dipping their toe again into the
• 35:05
  Speaker 1: sports business. So we'll see, all right, right, Mark, thanks
• 35:08
  Speaker 1: so much for stopping by. Mark dougas he's a president,
• 35:11
  Speaker 1: he's the CEO of Mountain really knows what's happening in
• 35:14
  Speaker 1: the confluence of the media and technology. The whole streaming business,
• 35:18
  Speaker 1: all that good stuff.
• 35:19
  Speaker 6: You're listening to the tape cansur live program Bloomberg Markets
• 35:23
  Speaker 6: weekdays at ten am Eastern on Bloomberg Radio, the tune
• 35:26
  Speaker 6: in app, Bloomberg dot Com, and the Bloomberg Business App.
• 35:29
  Speaker 6: You can also listen live on Amazon Alexa from our
• 35:32
  Speaker 6: flagship New York station, Just say Alexa play Bloomberg eleven thirty.
• 35:38
  Speaker 1: Let's check out with Anna Wong. She's a chief US
• 35:40
  Speaker 1: economist with Bloomberg Economics. She joins us here and we
• 35:43
  Speaker 1: had a lot of economic data this morning. What did
• 35:47
  Speaker 1: you take on the inflation picture here in the United States?
• 35:52
  Speaker 7: Right?
• 35:52
  Speaker 10: And the inflation is still I think the story of
• 35:56
  Speaker 10: this inflation is still the dominant story. We saw the supercore,
• 36:00
  Speaker 10: which is core services excluding housing UH surged in July,
• 36:06
  Speaker 10: but that's driven by a very volatile category named financial management,
• 36:12
  Speaker 10: and that's related to the stock rally in July, so
• 36:16
  Speaker 10: I think, but all in all, for the real economy,
• 36:18
  Speaker 10: what matters are the other supercore categories, and those are
• 36:22
  Speaker 10: still showing some signs of disinflation. On the other hand,
• 36:27
  Speaker 10: consumption was has seen a burst in July, and we
• 36:32
  Speaker 10: traced that first to the Barbenheimer and Taylor Swift and
• 36:36
  Speaker 10: beyond effect. Yes, it's it's wait, let's come back to that.
• 36:41
  Speaker 1: What are we ascribing to Barbie and Oppenheimer?
• 36:45
  Speaker 10: Uh, this burst in consumption in July. Yeah, and and uh,
• 36:51
  Speaker 10: you know, the the biggest dulling concert last year in
• 36:55
  Speaker 10: North America is by a band called Bad Bunny. I
• 36:59
  Speaker 10: don't know you, but I don't know Bad Buddy, but
• 37:01
  Speaker 10: I do know Taylor Swift and Yonte and so together
• 37:05
  Speaker 10: they make for kind of like an Olympic event in July.
• 37:10
  Speaker 10: And that's why we see this unsustainable burst of consumption.
• 37:14
  Speaker 5: Yeah, that's real personal spending up zero point six percent
• 37:18
  Speaker 5: in July. That's the strongest advance since the start of
• 37:22
  Speaker 5: the year. So you're saying, and I use that, you
• 37:23
  Speaker 5: don't think we'll see another number on this caliber because no, Barbenheimer.
• 37:30
  Speaker 8: Well, Taylor Swift's continuing.
• 37:31
  Speaker 5: But I guess people bought tickets already, so we should
• 37:34
  Speaker 5: look for that number to come down from now on.
• 37:37
  Speaker 10: Well, so Taylor swift a tour in North America ends
• 37:41
  Speaker 10: after August, and so is Beyonce's tour. So in the
• 37:47
  Speaker 10: fourth quarter there will be you know, just think about
• 37:50
  Speaker 10: the fact that you don't even have a super pop
• 37:53
  Speaker 10: star to maintain the same level of spending. That will
• 37:56
  Speaker 10: be an automatic negative monthly growth go into September. And
• 38:02
  Speaker 10: then on top of that, you have the underlying force
• 38:05
  Speaker 10: of consumer balance sheets worsening as they have to pay
• 38:09
  Speaker 10: back student loans, and we're seeing an uptick in delinquent
• 38:12
  Speaker 10: these credit cards and auto loans. So yeah, I don't
• 38:15
  Speaker 10: think it is sustainable. We likely will be seeing some
• 38:18
  Speaker 10: negative prints in consumption going into a fall.
• 38:22
  Speaker 5: I wonder if this is a new lever of FED policy.
• 38:26
  Speaker 5: Have J Powell call up Taylor Swift, call up Beyonce,
• 38:31
  Speaker 5: tell them when to schedule their their tours to adjust
• 38:36
  Speaker 5: to as a new lever of monetary policy.
• 38:39
  Speaker 1: So I mean, and I'm guessing at the univers University
• 38:41
  Speaker 1: of Chicago where you got your PhD in economics, they
• 38:43
  Speaker 1: didn't give you. There wasn't a class on like t
• 38:46
  Speaker 1: Swift or the Concert impact on GDP and inflation.
• 38:50
  Speaker 5: Studying the Beatles and all that they do teach us
• 38:54
  Speaker 5: that people are rational, But the fact that consumers are
• 38:57
  Speaker 5: spending money that they don't.
• 38:58
  Speaker 10: Have seems to me that in fact, they give too
• 39:01
  Speaker 10: much credit to the median American consumer Bright.
• 39:04
  Speaker 1: All right, so can we take Anna, Can we take
• 39:07
  Speaker 1: recession talk off the table once and for all here?
• 39:11
  Speaker 10: Definitely not.
• 39:13
  Speaker 1: That's just your model speaking, Anna.
• 39:15
  Speaker 11: No.
• 39:15
  Speaker 10: If anything, this is this uh temporary boom in consumption
• 39:20
  Speaker 10: is actually increasing the possibility that in the next couple
• 39:25
  Speaker 10: of months we are going to see a negative PCE
• 39:29
  Speaker 10: in consumption and that's one of the indicators that go
• 39:33
  Speaker 10: into the NBR recession dating. And also on top of that,
• 39:37
  Speaker 10: going into the fall, we are we're going to have
• 39:39
  Speaker 10: a likely going to have a government shut down as
• 39:43
  Speaker 10: well as a ua W auto strike, and that could
• 39:46
  Speaker 10: both of them together could potentially turn the non farm
• 39:50
  Speaker 10: payroll report for October negative. So there you have it.
• 39:53
  Speaker 10: You know, the two remaining NBR indicators that was in
• 39:57
  Speaker 10: positive territory that kept a recession way, those are turning
• 40:01
  Speaker 10: around likely in the fall.
• 40:05
  Speaker 5: I want to address another somewhat cynical story that we
• 40:09
  Speaker 5: had out yesterday, poor Americans tap debt, buy less food
• 40:13
  Speaker 5: as consumer cracks widen. Essentially, this was a survey of
• 40:17
  Speaker 5: people on SNAP assistance programs, so people who with incomes
• 40:22
  Speaker 5: at or below up the poverty line, saying forty two
• 40:25
  Speaker 5: percent skip meals in August and fifty five percent eight
• 40:29
  Speaker 5: less because they couldn't afford food. That's more than double
• 40:32
  Speaker 5: than last year's shares. Talk to me about how the Fed,
• 40:37
  Speaker 5: how the federal government addresses what seems to be a
• 40:41
  Speaker 5: clear divide between higher income consumers and lower income consumers,
• 40:46
  Speaker 5: if they're trying to cool off inflation but without hurting
• 40:52
  Speaker 5: the bottom half.
• 40:54
  Speaker 10: Yeah, you're absolutely right, And it's an impossible balance to
• 40:59
  Speaker 10: strike because monetary policy is a very blunt instrument. It
• 41:03
  Speaker 10: does not differentiate between lower income and higher income. And
• 41:08
  Speaker 10: this is why inflation high inflation. You know, running the
• 41:12
  Speaker 10: economy hot in order to boost unemployment and on the
• 41:16
  Speaker 10: you know lower that that was the motivation for running
• 41:18
  Speaker 10: the economy hot, right, But ultimately inflation hurts the bottom
• 41:23
  Speaker 10: percentile of the household more than the upper half. So
• 41:27
  Speaker 10: it is, it is, it's just the impossible balance to strike.
• 41:32
  Speaker 1: All right. So, and I'm looking at the w I
• 41:34
  Speaker 1: RP function on the Bloomberg Terminal interest rate forecast. Lots
• 41:38
  Speaker 1: of rate cuts. Kind of is what the markets suggesting
• 41:41
  Speaker 1: for twenty twenty four. Yet it's I don't know, it's
• 41:44
  Speaker 1: been hugely wrong for a long time. Kind of what
• 41:47
  Speaker 1: the market's looking for. What do you think the Fed's
• 41:49
  Speaker 1: going to do in twenty twenty four?
• 41:51
  Speaker 10: Yeah, I actually thought that the the what the market
• 41:55
  Speaker 10: priced in so far about you know, one hundred BIPs
• 41:57
  Speaker 10: of rate cuts is reasonable by our model, because so
• 42:05
  Speaker 10: I think that that's a reasonable thing.
• 42:07
  Speaker 5: Toper, Yeah, I wonder you know, the FED says, well,
• 42:11
  Speaker 5: don't think about j PELI says, don't think about cuts.
• 42:13
  Speaker 5: And yet, and yet it seems like the market certainly
• 42:17
  Speaker 5: pricing in looks like four cuts by the December meeting
• 42:22
  Speaker 5: next year. Really quickly, we only have about thirty seconds here.
• 42:27
  Speaker 5: What are you looking for from the all important jobs
• 42:29
  Speaker 5: report tomorrow?
• 42:33
  Speaker 10: We're expecting one n eighty five K change in non
• 42:37
  Speaker 10: farm payroll and an unemployment rate of three.
• 42:41
  Speaker 1: You're not going to get a recession with three point
• 42:43
  Speaker 1: five percent unemployment, Anna, So I'm just telling you right now.
• 42:47
  Speaker 1: I know you've got a PhD in economics from the
• 42:49
  Speaker 1: near Chicago, undergraduate degree in economics and statistics from this
• 42:53
  Speaker 1: little place called Berkeley. I took two economics classes at
• 42:58
  Speaker 1: business School, so I think I know what I'm talking
• 43:00
  Speaker 1: about here despite your PhD. But we'll see how it
• 43:03
  Speaker 1: plays out. I'm in the no recession camp at Analog
• 43:05
  Speaker 1: is so much better than this than the rest of us,
• 43:09
  Speaker 1: and all this stuff. We appreciate getting some time there.
• 43:11
  Speaker 6: You're listening to the tape cans are live program Bloomberg
• 43:14
  Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, the
• 43:18
  Speaker 6: tune in app, Bloomberg dot Com, and the Bloomberg Business App.
• 43:21
  Speaker 6: You can also listen live on Amazon Alexa from our
• 43:24
  Speaker 6: flagship New York station. Just say Alexa play Bloomberg eleven thirty.
• 43:30
  Speaker 1: I buy my securities app. I hold them. I'm not trading,
• 43:33
  Speaker 1: but a lot of folks do buy and sell, buy
• 43:36
  Speaker 1: and sell, buy and sell, and oftentimes the timing there
• 43:39
  Speaker 1: isn't ideal, and that in fact really impacts their returns.
• 43:43
  Speaker 1: Kind of what have you experienced in your career?
• 43:47
  Speaker 11: So so a lot of this just traces back to
• 43:50
  Speaker 11: the emotionality of having capital at risk.
• 43:55
  Speaker 6: You know.
• 43:55
  Speaker 11: The upside is, hey, everybody, We're all going to be wealthy,
• 43:58
  Speaker 11: Isn't this fantastic? And everybody is always happy when the
• 44:02
  Speaker 11: markets are trending up like they've been for the past week,
• 44:05
  Speaker 11: in fact, back to October twenty twenty two.
• 44:09
  Speaker 1: But when you go through a full.
• 44:11
  Speaker 11: Year like twenty twenty two, people get very uncomfortable. Your
• 44:16
  Speaker 11: emotion gets in your way. And lots of studies have
• 44:20
  Speaker 11: been done on this. There's the dal Bar study, there's
• 44:24
  Speaker 11: countless academic studies. The one that intrigue me most recently
• 44:29
  Speaker 11: came from Morning Stars kind of snuck out in the
• 44:32
  Speaker 11: middle of the summer, called Mind the Gap, and it's
• 44:35
  Speaker 11: really fascinating and.
• 44:38
  Speaker 1: What does it kind of show us?
• 44:40
  Speaker 11: So when you look at the traditional studies of underperformance
• 44:46
  Speaker 11: of investors, they tend to say, hey, your stock selection,
• 44:51
  Speaker 11: or your market timing, or your use of leverage has
• 44:54
  Speaker 11: led you to underperform the benchmark. And everybody kind of
• 44:58
  Speaker 11: understands that. What's really shocking, and this is what the
• 45:03
  Speaker 11: morning Star study called Mind the Gap showed, is not
• 45:07
  Speaker 11: only do investors underperform a benchmark, they actually underperform their
• 45:14
  Speaker 11: own holdings. Meaning if you own ETF one and mutual
• 45:19
  Speaker 11: fund two, you would expect that you should get as
• 45:23
  Speaker 11: much returns as those products create, but the average investor
• 45:28
  Speaker 11: underperforms those holdings by about twenty two percent. And the
• 45:33
  Speaker 11: reason is what you alluded to before, timing. They tend
• 45:37
  Speaker 11: to chase products up or panic sell on the way down,
• 45:43
  Speaker 11: and that always leads to not just bad performance against
• 45:47
  Speaker 11: the benchmark, but you literally are doing worse than the
• 45:50
  Speaker 11: products that you own. It's quite fascinating interesting.
• 45:54
  Speaker 5: Well interpret for us the confounding mix of data that
• 46:01
  Speaker 5: we're seeing right now. I believe ubs Jason Draho termed
• 46:05
  Speaker 5: it a Markettheimer effect in congruous data and differing opinions
• 46:11
  Speaker 5: of or different different opinions of where the FED is
• 46:15
  Speaker 5: going to go.
• 46:17
  Speaker 8: How do you play this at this moment? What are
• 46:20
  Speaker 8: what are the salient points that you've been following?
• 46:25
  Speaker 11: So first, all economists suffer physics envy. You know, you
• 46:28
  Speaker 11: can land you know, physicists can land a craft on
• 46:36
  Speaker 11: an asteroid going fifty thousand miles away, fifty thousand miles
• 46:40
  Speaker 11: an hour, ten million miles away. So economists are jealous
• 46:44
  Speaker 11: of that, mostly because they can even tell you in
• 46:48
  Speaker 11: real time if we're in a recession or not.
• 46:50
  Speaker 6: Right.
• 46:51
  Speaker 11: So, when you compare the two sciences, and I use
• 46:54
  Speaker 11: that term loosely, one is a very precise science that
• 46:57
  Speaker 11: does unbelievable things, and the other are a bunch of
• 47:00
  Speaker 11: sociologists pretending to have a math background and pretending that
• 47:05
  Speaker 11: they're physicists, So start with that bit of bias on
• 47:09
  Speaker 11: my part. And then second, remember what the statistician George
• 47:14
  Speaker 11: Box said. All models are wrong, but some are useful,
• 47:18
  Speaker 11: and all of us, investors', strategists, but especially economists, tend
• 47:23
  Speaker 11: to forget that when we have a model of inflation,
• 47:26
  Speaker 11: when we have a model of GDP, we think somehow
• 47:31
  Speaker 11: that these models are you know, the Delphi of oracle,
• 47:34
  Speaker 11: and they're telling us the truth. What they are is
• 47:37
  Speaker 11: taking a super complicated world with a million moving parts
• 47:42
  Speaker 11: and thousands and thousands of data points and saying two
• 47:46
  Speaker 11: point two percent. You know, the old joke is, and
• 47:49
  Speaker 11: I don't want to just beat up on economists because
• 47:52
  Speaker 11: investors and strategists, all of us engage in this foolishness.
• 47:55
  Speaker 11: But the old joke is, what why do economists, you know,
• 47:59
  Speaker 11: show data to the second decimal point? And the answer
• 48:02
  Speaker 11: is to demonstrate they have a sense of humor.
• 48:07
  Speaker 1: Interesting, hey, Barry, you know one of the one of
• 48:09
  Speaker 1: the drivers of their stock market performance this year has
• 48:13
  Speaker 1: been a I and a lot of skeptics are out
• 48:15
  Speaker 1: there saying, boy this, I'm not sure if this is
• 48:18
  Speaker 1: real or if this should be really driving the markets here,
• 48:22
  Speaker 1: the AI may be overplayed. Do you have an opinion
• 48:24
  Speaker 1: on that?
• 48:27
  Speaker 11: Yeah, And I think it's when you go back and
• 48:29
  Speaker 11: look at history. No matter what the new technology is,
• 48:33
  Speaker 11: the cycle is kind of similar. Some people have called
• 48:36
  Speaker 11: this the Gartner hype cycle. But think back to internet
• 48:41
  Speaker 11: stocks or biotech stocks, or if you really want to
• 48:44
  Speaker 11: dust off the history books, railroad and steal stocks. A
• 48:48
  Speaker 11: new technology comes along, it changes everything. And while that's true,
• 48:54
  Speaker 11: nobody knows who the winners of that are going to be,
• 48:58
  Speaker 11: And so you have this land rush out who's left
• 49:01
  Speaker 11: standing in the world of personal computers. I mean, at
• 49:04
  Speaker 11: this point it's Apple and Dell and not a whole
• 49:07
  Speaker 11: lot of other people. But at the time there was
• 49:10
  Speaker 11: a giant land rush, there were hundreds of companies, most
• 49:13
  Speaker 11: of them fall by the wayside, radio, television, automobiles, pick
• 49:19
  Speaker 11: it to fiber optic, pick a technology, and it's the
• 49:22
  Speaker 11: same thing. So AI is probably going to be a
• 49:27
  Speaker 11: big thing at some point in the future. Figuring out
• 49:31
  Speaker 11: which company is going to be the winner, I don't
• 49:34
  Speaker 11: know if it's Microsoft or in Vidia. History has shown
• 49:38
  Speaker 11: us that very often there's a surprise winner. And at
• 49:41
  Speaker 11: the fact that we're talking about in Vidia for a
• 49:43
  Speaker 11: long time. Hey, they weren't also ran in the chip world.
• 49:46
  Speaker 11: Maybe they have this floating GPU thing that we could
• 49:49
  Speaker 11: use for gaming. Think about how rapidly things shay. But
• 49:55
  Speaker 11: by the way, not too long ago. I love finding
• 49:58
  Speaker 11: these old magazine articles. There was one about the BlackBerry
• 50:02
  Speaker 11: versus iPhone and you know this was about twenty plus
• 50:06
  Speaker 11: years ago. And I'm sorry about fifteen years ago, in
• 50:10
  Speaker 11: the late twenty two thousand's, like nine twenty ten.
• 50:14
  Speaker 1: And here's why.
• 50:15
  Speaker 11: The BlackBerry, you know, has a lot of fighting in it.
• 50:17
  Speaker 11: And you know this interloper from Apple. They're a computer company,
• 50:21
  Speaker 11: what do they know about phones? So our ability to
• 50:23
  Speaker 11: forecast the future, especially with technology, it's pretty mediocre. We
• 50:29
  Speaker 11: don't do a great job. AI is great. Your guest
• 50:33
  Speaker 11: is as good as mine as to which company ends
• 50:35
  Speaker 11: up being the winner.
• 50:36
  Speaker 1: Hey, Barry, thanks so much for joining us. As always,
• 50:38
  Speaker 1: always appreciate getting your unique perspective. Barry Ridholts. He's the
• 50:42
  Speaker 1: host of Masters in Business on Bloomberg Radio. Great podcast.
• 50:46
  Speaker 1: I recommend checking that out. Is also the chairman and
• 50:48
  Speaker 1: chief investment officer Rit Holt's Wealth Management and when Matt
• 50:52
  Speaker 1: Miller's in the studio. They tend to go off the
• 50:53
  Speaker 1: rails and talk about cars.
• 50:56
  Speaker 2: Thanks for listening to the Bloomberg Markets podcast. Caribe and
• 51:00
  Speaker 2: listen to interviews on Apple Podcasts or whatever podcast platform
• 51:04
  Speaker 2: you prefer. I'm Matt Miller. I'm on Twitter at Matt
• 51:08
  Speaker 2: Miller nineteen seventy three.
• 51:09
  Speaker 1: And I'm Paul Sweeney. I'm on Twitter at pt Sweeney.
• 51:12
  Speaker 1: Before the podcast, you can always catch us worldwide at
• 51:15
  Speaker 1: Bloomberg Radio