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OPEC, Trump, UBS, and WWE · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
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Speaker 1: my co host Matt Miller. Every business day we bring
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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
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Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
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Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
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Speaker 1: at Bloomberg dot com slash podcast. We're gonna get right
0:21
Speaker 1: into that energy story in a big way. We're gonna
0:24
Speaker 1: roundtable this thing with a couple of smart folks. Fernando Valley,
0:27
Speaker 1: he's the senior an also Bloomberg Intelligence. He's been covering
0:30
Speaker 1: the oil industry for decades. He's our global view guy.
0:33
Speaker 1: Mike mcglowe's senior macro strategists with Bloomberg Intelligence. Our commodities
0:37
Speaker 1: guru joins us viafone. Fernando's here in our Bloomberg Interactive
0:40
Speaker 1: Brokers studio. So since he's here, he's getting the gold star.
0:44
Speaker 1: You get to go first, Fernando. Opec. They surprised me.
0:47
Speaker 1: I woke up this morning. I wasn't expecting a production cut.
0:50
Speaker 1: What's what's going on with our friends at Opec? Plus
0:52
Speaker 1: same here? It moved up the timeline. We were expecting
0:55
Speaker 1: that they would do it around the June meeting, which
0:58
Speaker 1: is the presential meeting, the larger one, and they moved
1:01
Speaker 1: it up to Wednesday. The rumor mill says that muhammadan Salman,
1:07
Speaker 1: the Crown Princess of Saudi Arabia, was upset that the
1:10
Speaker 1: Biden administration did not do strategic petroleumers of purchases to
1:14
Speaker 1: help stabilize the prices, and so they decided to act quicker.
1:18
Speaker 1: Why didn't and then that's a little outside here, why
1:20
Speaker 1: haven't we built back the spr when there are a
1:23
Speaker 1: couple of reasons. First, they had tried to time the
1:26
Speaker 1: market to perfection and they didn't. And then even when
1:29
Speaker 1: prices dropped below the oil price set, they did not
1:32
Speaker 1: make those acquisitions because it was a pre sale of
1:35
Speaker 1: the expected sales over the next ten years. They just
1:38
Speaker 1: moved it up so they don't technically have to refill.
1:41
Speaker 1: But it does seem like they missed a golden chance
1:44
Speaker 1: to kind of time the market and create some support
1:48
Speaker 1: for the local industry as opposed to foreign industries. Get it, Yeah, No,
1:51
Speaker 1: it's it's pretty shocking that they weren't able to do that,
1:56
Speaker 1: especially since the price fell at one point below the
1:59
Speaker 1: level that they had set right to buy barrels. And
2:02
Speaker 1: at the same time President Biden warned there would be
2:06
Speaker 1: consequences for a cut that the Kingdom put into place
2:10
Speaker 1: last October, right a two million barrel a day cut,
2:12
Speaker 1: and those consequences never, as far as we know, came about. Yeah,
2:18
Speaker 1: they haven't materialized to tishing. And I think one of
2:22
Speaker 1: the problem is if they did make those acquisitions, they
2:26
Speaker 1: would have moved the price up a little bit above it.
2:29
Speaker 1: The WTI came to sixty six dollars versus a sixty
2:32
Speaker 1: eight price, so if they were to purchase that kind
2:34
Speaker 1: of level, you would have pushed it back up way
2:36
Speaker 1: above seventy dollars. So it was a limited window. But
2:40
Speaker 1: I think there was no real commitment, and apparently the
2:42
Speaker 1: Department of Energy doesn't have a strategy to make those
2:45
Speaker 1: purchases as are. This is what I'm gonna do. I'm
2:48
Speaker 1: gonna send Mike McLoone to the pits and just say
2:51
Speaker 1: start buying hand over fill. He's been right on his
2:55
Speaker 1: his oil podcasts. How does this OPEC movement here change
2:58
Speaker 1: your call, which has been these prices going down. I
3:01
Speaker 1: think what Fernando said really is scary. The fact that
3:04
Speaker 1: if they're going to try to raise prices as we
3:07
Speaker 1: tilt towards global recession, as you just saw the ism, manufacturing, employment,
3:12
Speaker 1: new orders all came out weaker than expected and below
3:14
Speaker 1: fifty as a federal reserves tighten, as o're entering a
3:17
Speaker 1: bankering crisis, just just adds to my fear that we're
3:20
Speaker 1: entering to the greatest global macroeconomic reset of our lifetime.
3:23
Speaker 1: So let's look at w TR right now. It's eighty
3:25
Speaker 1: dollars a barrel. It's still down nineteen percent on a
3:29
Speaker 1: one year basis, goals up two percent. But the key
3:33
Speaker 1: thing is bouncing the upper end of the range. But
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Speaker 1: before this happened today, net positions had all been stopped
3:37
Speaker 1: out because they're all bullish above a hundred. They got
3:40
Speaker 1: stopped on the sixty four. The low this year was
3:41
Speaker 1: sixty four. And I think the rational thing for people
3:44
Speaker 1: to do now is Okay, this is a bear market.
3:47
Speaker 1: We're bouncing and to start selling again to questions how
3:49
Speaker 1: that high pick kicks in, because it's there's the macro's
3:54
Speaker 1: overwhelming and the key thing, remember Ellen, was this at opec.
3:57
Speaker 1: OPEC is always when you have surprise cuts. It's always
3:59
Speaker 1: almost always consistent with bear markets. I want to hear
4:02
Speaker 1: more about your big concern there because our lifetime where
4:07
Speaker 1: were you old? So you're saying this is going to
4:09
Speaker 1: be the greatest, the greatest when you say global macroeconomic
4:13
Speaker 1: research resets of our lifetime. So I've been writing about
4:17
Speaker 1: it for about a year. I've been tightening and printing
4:19
Speaker 1: it more on headlines lately, but I had to get
4:20
Speaker 1: into a gradually. It's just the classic examples of biggest
4:24
Speaker 1: booms in history and the back of liquidity, and then
4:27
Speaker 1: the bus come as you take that liquidity away. Now
4:29
Speaker 1: you just look at money supply, you look at bank deposits.
4:31
Speaker 1: Things are negative things never before just plunging in. The
4:34
Speaker 1: FED is still tightening based on backward looking measures of
4:37
Speaker 1: inflation that were spiked by them in the first place.
4:40
Speaker 1: Because they didn't they waited too long and they cut
4:42
Speaker 1: too much. And I'm not blaming them, but it's just
4:43
Speaker 1: a classic pendulum singing swing heading the other way. In
4:48
Speaker 1: crude olt natural gas was one of the best indicators.
4:50
Speaker 1: It's the number one measure of heat, electricity and fertilizing
4:54
Speaker 1: this country. It's down eighty percent at two dollars, the
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Speaker 1: equivalent price in WTI is closer to forty forty five
5:00
Speaker 1: the cost of production in the US. I think that's
5:02
Speaker 1: where it's going. And just in the numbers, we saw
5:04
Speaker 1: Printon just a few minutes ago. Manufacturing in this country
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Speaker 1: and a global basis is negative and central banks are
5:11
Speaker 1: still tightening. That's a classic recessionary trajectory. And if you
5:16
Speaker 1: see what Anna wants is are chief economists. She said
5:18
Speaker 1: her calls for a recession in Q three and now
5:20
Speaker 1: she's pushing it closer. Basis point One of the reasons
5:25
Speaker 1: that you would be bullish oils because a limited spare
5:27
Speaker 1: capacity at OPEC and when you cut what have you
5:30
Speaker 1: just made spare capacity, So you're really trying to put
5:33
Speaker 1: in a floor to the price as opposed to make
5:35
Speaker 1: its spike. And so this is a tug of wars,
5:38
Speaker 1: Mike was saying, between interest rates and the FED trying
5:41
Speaker 1: to contain the overheating of the economy, and then other
5:44
Speaker 1: sides like OPEC trying to steer more inflation in higher prices,
5:48
Speaker 1: and so far demand seems to be winning, or like
5:51
Speaker 1: lower demand. I should say, yeah. But by the way, Mike,
5:54
Speaker 1: if you want to sell that book, I'm going to
5:55
Speaker 1: say change global macroeconomic reset. You got to say something
5:59
Speaker 1: that people understand, because I still don't know exactly what
6:01
Speaker 1: that is. If you say, you know, the greatest financial
6:05
Speaker 1: crisis of our lifetime, that book I'm buying good well.
6:09
Speaker 1: I expect to be you know, I expect to be
6:11
Speaker 1: writing the history Sunday and leaving it right now. You
6:14
Speaker 1: never really realize when you're middle of it. When you
6:15
Speaker 1: point out these facts, and if you study the history
6:17
Speaker 1: of booms and busts and supplying and contraction and coming
6:22
Speaker 1: on with liquidity, it's we're in one of the most
6:24
Speaker 1: severe cases of liquidity contraction ever. Now. The key point
6:27
Speaker 1: is we have a banking crisis, that's clear, and what
6:30
Speaker 1: cause that banking crisis is still Actually it's accelerating. The
6:34
Speaker 1: FED raised rates just what a week ago the ECB
6:37
Speaker 1: did the Bank of England. That's what's making it worse.
6:40
Speaker 1: And you know, the key thing that's the trigger is
6:44
Speaker 1: the stock market probably needs to go down. And good
6:46
Speaker 1: indications for that is what's happening with copper, and they
6:48
Speaker 1: trade tick for tick and if the stock market can
6:51
Speaker 1: stay up, everything's fine. But I think the biggest risk
6:53
Speaker 1: because it's more like to do what take the hint
6:55
Speaker 1: of the what people say the smarter bond market, I
6:58
Speaker 1: mean the two year note yield that and Fed funds
7:01
Speaker 1: at five percent? Is not that that's a recession indication, Fernando.
7:05
Speaker 1: We don't have a huge risk to the upside, do we?
7:07
Speaker 1: Because what if Chinese people get in their cars in droves,
7:12
Speaker 1: in hundreds of millions and drive around. What if Europe
7:14
Speaker 1: doesn't have a recession and they continue to drive everywhere
7:17
Speaker 1: and fill up their tanks. The OPAT plus companies are
7:20
Speaker 1: going to be able to come to market with, you know,
7:23
Speaker 1: cheat these production cuts as they have historically, right, they
7:26
Speaker 1: can to a certain extent if everyone goes through the
7:30
Speaker 1: door at the same time, and then we're probably short
7:31
Speaker 1: because we haven't invested in the industry. And that's the
7:34
Speaker 1: case we see in the long term why oil should
7:36
Speaker 1: be higher. But we agree with Mike. In the short term,
7:39
Speaker 1: the pressures on themand are just too strong that especially
7:43
Speaker 1: with the Chinese consumer being over levered, the European consumer
7:46
Speaker 1: being way too exposed to high energy prices, the US
7:50
Speaker 1: consumer between high leverage and higher energy prices also struggling.
7:55
Speaker 1: We see those pressures being too much in the short term,
7:57
Speaker 1: and then eventually that leads even more underinvestment in oil
8:01
Speaker 1: and gas, and that's when we see a supercycle for
8:03
Speaker 1: commodities really taking off. Wow, good stuff. We got these
8:06
Speaker 1: two guys on. Those are some superlidis. I know I'm
8:09
Speaker 1: going big time here. I told you. Fernando Valley, senior
8:12
Speaker 1: annalso Bloomberg Intelligence covering the energy space for Bloomberg Intelligence.
8:17
Speaker 1: And Mike mcloan is Scot's down in South Miami Beach,
8:20
Speaker 1: senior macro strategist for Bloomberg Intelligence. He's our commodities go
8:24
Speaker 1: to person. So we'll have to get those two folks
8:27
Speaker 1: on together. We have big moves in oil like we
8:29
Speaker 1: do today given the OPEC plus did even talk about
8:31
Speaker 1: good going over twenty eight thousand? I know we don't
8:33
Speaker 1: even get to that, but interesting stuff waking up this
8:36
Speaker 1: morning in the global energy space. We'll have more coming up.
8:39
Speaker 1: This is Bloomberg. You're listening to the Team Cancer Live program,
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Speaker 1: Bloomberg Markets weekdays at ten AMI staring on Bloomberg dot Com,
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Speaker 1: the I Heard Radio app and the Bloomberg Business appe.
8:53
Speaker 1: We're listening on demand wherever you get your podcast. Tomorrow
8:59
Speaker 1: we'll be a when history will be made, when former
9:02
Speaker 1: President Donald Trump will be indicted in Lower Manhattan. We
9:06
Speaker 1: want to get the latest on that. We go right
9:08
Speaker 1: to ground zero, if you will. Bloomberg's Curtty Gupta joins
9:11
Speaker 1: us from downtown Manhattan to discuss the latest on the
9:14
Speaker 1: ground there and also joined by Nick Ackerman. He is
9:17
Speaker 1: self employed the law office of Nick Ackerman. He was
9:19
Speaker 1: former assistant Special Watergate prosecutor. He joins us on the phone, Cretty,
9:24
Speaker 1: let's start with you. You're down in Manhattan. Just tell
9:27
Speaker 1: us where you are and what you're observing down there
9:30
Speaker 1: as we wait President Trump's indictment schedule for tomorrow. Yeah,
9:34
Speaker 1: a lot of anticipation in the air. It's interesting. So
9:37
Speaker 1: we're standing rights here outside of the New York District
9:40
Speaker 1: Attorney's office. So within the next forty eight hours, this
9:43
Speaker 1: is the spot where President Trump or former President Trump
9:46
Speaker 1: is expected to be arraigned at about two pm tomorrow afternoon.
9:49
Speaker 1: But look, it's going to be a really quick visit.
9:51
Speaker 1: He's gonna fly out from his Marlago esteate, or is
9:54
Speaker 1: at least expected to today. I want to say, in
9:57
Speaker 1: a couple of hours stay at Trump's how we're a
10:00
Speaker 1: few blocks north from here, which I hear is packed
10:02
Speaker 1: right now, only to get arranged, like I said, right
10:05
Speaker 1: out here outside the District Attorney's office in downtown Manhattan
10:08
Speaker 1: at two pm tomorrow, only to return again to his
10:11
Speaker 1: moral lago state at eight fifteenth pm tomorrow. So right
10:14
Speaker 1: now you're really seeing a lot of media presents, a
10:17
Speaker 1: lot of police presidents, actually a couple of protesters as well.
10:20
Speaker 1: You can really see the anticipation here isn't just for
10:23
Speaker 1: seeing President Trump go through this historic move, but also
10:26
Speaker 1: what the fallout might be, protests, rallies. The police are
10:29
Speaker 1: prepared for it. Allow, So he's going to go straight back.
10:31
Speaker 1: I guess he assumes he'll be released on his own recognizance, right,
10:34
Speaker 1: because usually if you're indicted, don't you don't they have
10:36
Speaker 1: to hold you? Or I don't know, Hey, Nick, let's
10:40
Speaker 1: let's bring you in Nick. How does this typically works?
10:42
Speaker 1: What's the legal process tomorrow for former President Trump? Well,
10:47
Speaker 1: the process of the arrangement is he will go in
10:49
Speaker 1: before the judge. The judge will ask him if he
10:53
Speaker 1: wants to read the charges, and he can either wave
10:56
Speaker 1: the reading or not. And at that point, the judge
11:01
Speaker 1: will ask whether how he pleads guilty or not guilty.
11:06
Speaker 1: Most all defendants plead not guilty at an arraignment, and
11:10
Speaker 1: then the judge sets bail. In this case, it's it's
11:14
Speaker 1: almost a certainty that he's going to be released on
11:16
Speaker 1: his own recognisance. Sometimes, if there's a situation that justifies
11:23
Speaker 1: bail because the person doesn't have roots to the community
11:27
Speaker 1: and as a flight risk, they would put up a
11:31
Speaker 1: certain amount for bail. But I don't think in this case.
11:33
Speaker 1: I think it's it's pretty much a dead certainty that
11:36
Speaker 1: he's going to be released on his own recognissance. Nick,
11:39
Speaker 1: what do you think about based upon what we know,
11:41
Speaker 1: which which is limited at this point, but based upon
11:43
Speaker 1: your experience as an assistant US attorney for the Southern
11:46
Speaker 1: District of New York from nineteen seventy six to nineteen
11:48
Speaker 1: eighty three, as I mentioned, a former assistant special Watergate
11:51
Speaker 1: prosecutor from seventy three to seventy five. Based upon your
11:54
Speaker 1: experience and based upon what we know, what do you
11:57
Speaker 1: think of this case here that the district attorneys of
12:00
Speaker 1: the screen, well, we don't know what the case is,
12:03
Speaker 1: we don't know what the charges are. The only thing
12:05
Speaker 1: we really know is that they have been looking, you know, publicly.
12:09
Speaker 1: That we know is that one of the things they
12:11
Speaker 1: clearly have been looking at is this Pecker, David Pecker,
12:16
Speaker 1: who is the head of the National Inquirer, and Donald
12:20
Speaker 1: Trump agreed that the National Inquirer would keep their eyes
12:24
Speaker 1: out for any kind of stories that might hurt Trump's
12:29
Speaker 1: chances for election in twoy sixteen, and as a result,
12:34
Speaker 1: they wound up paying off Karen McDougall, who is a
12:38
Speaker 1: former Playboy playmate, and they paid off Stormy Daniels. But
12:44
Speaker 1: part of what's going on here fits into the overall
12:47
Speaker 1: theme of falsification of records of the Trump organization, for
12:52
Speaker 1: which the Trump Organization has already been convicted of a
12:55
Speaker 1: criminal violation in Manhattan State Court. And so the real
13:01
Speaker 1: question is will there be other violations of falsification of records,
13:09
Speaker 1: of insurance fraud, bank fraud, falsification of annual statements for
13:15
Speaker 1: the Trump organization. Will that play a role in this indictment.
13:20
Speaker 1: We just don't know at this point, and it's a
13:23
Speaker 1: pure guesswork as to what this indictment is going to
13:26
Speaker 1: look like. It could also involve actions that Donald Trump
13:31
Speaker 1: has taken in the last week by putting up that
13:33
Speaker 1: picture of him with a baseball bat and the district
13:36
Speaker 1: attorney that could wind up involving other charges. There could
13:40
Speaker 1: also be witness tampering relating to Michael Cohen. All of
13:45
Speaker 1: this is speculation at this point, right, Well, we're going
13:48
Speaker 1: to find out tomorrow. It does remind me that Trump
13:51
Speaker 1: essentially threatened death and destruction if he were indicted. Cratty,
13:56
Speaker 1: You're standing there at the DA's office, and you mentioned
13:58
Speaker 1: that there are a lot of people around trump O.
14:00
Speaker 1: Are there security concerns? Are we worried that there will
14:04
Speaker 1: be you know, busloads of angry protesters coming in from
14:09
Speaker 1: out of state. Well, it definitely is the worry, And
14:12
Speaker 1: I mean I can say that pretty confidently with the
14:14
Speaker 1: amount of police presidence here. It's not just about protection
14:17
Speaker 1: for President Trump as well. But you can see the barricade.
14:19
Speaker 1: You're even seeing media not necessarily about to be parked
14:22
Speaker 1: close side to where their cameras are parked, for example.
14:24
Speaker 1: So this is definitely the preparation for that worst ye scenario.
14:28
Speaker 1: But I think we also have to keep in mind
14:29
Speaker 1: that even President Trump's defense team over the weekend had
14:33
Speaker 1: come out on another network and said, look, we are
14:35
Speaker 1: trying to avoid showmanship or trying to avoid the theater.
14:38
Speaker 1: And Nick can perhaps comment on this, but I thought
14:40
Speaker 1: it was really interesting the way that they're talking about
14:43
Speaker 1: approaching this case. They're not looking to dismiss it. They're
14:46
Speaker 1: not looking to remove the presiding judge, who, by the way,
14:49
Speaker 1: has a history of presiding against the former president President Trump,
14:54
Speaker 1: even going as far to saying, one merchant, who of
14:56
Speaker 1: course is the judge presiding, he hates me. And those
14:58
Speaker 1: are some comments, a very wrong comments made on social media.
15:01
Speaker 1: Yet the defense team isn't actually looking to remove them
15:04
Speaker 1: from the case. And that's all to show that this
15:07
Speaker 1: is being done cooperatively, collaboratively and through the due process
15:11
Speaker 1: of law. Hey, Nick, just want to get a sense
15:14
Speaker 1: from you given up, there's a lot we don't know.
15:16
Speaker 1: But and assuming the former president, you know, does not
15:19
Speaker 1: plead some point at this case, what's the timing of
15:22
Speaker 1: a case like this, how would it progress and when
15:24
Speaker 1: would we actually get to a trial if there was
15:26
Speaker 1: a trial, Well, I hate to say it, but after tomorrow,
15:29
Speaker 1: it's probably going to be thoroughly boring. Um, what what's
15:33
Speaker 1: going to happen is just like at all other criminal cases.
15:37
Speaker 1: The defense is going to file motions. Um, they're probably
15:42
Speaker 1: the emotions are dismissed. It could be emotion for change
15:45
Speaker 1: of venue. There could be emotion for more details on
15:49
Speaker 1: the complaint in the indictment. But my senses, this is
15:53
Speaker 1: going to be a very detailed indictment, unlike most indictments.
15:59
Speaker 1: But there'll be the pre trial motion practice. The district
16:03
Speaker 1: attorney will have the opportunity to respond. This doesn't take
16:07
Speaker 1: place in a matter of days. It's going to be
16:09
Speaker 1: a matter of months as this goes back and forth.
16:13
Speaker 1: The judge then has to decide the motions. They'll be
16:16
Speaker 1: discovery where the DA's office has to provide the defense
16:21
Speaker 1: with documents that are in its possession that relate to
16:25
Speaker 1: the case. So this is this could very well take
16:29
Speaker 1: up to a year before it finally gets to trial.
16:32
Speaker 1: This is not going to happen overnight, all right, Really
16:35
Speaker 1: appreciate getting your insight there. Nick Ackerman, he's a former
16:38
Speaker 1: assistant special Watergate prosecutor and then he went on to
16:42
Speaker 1: be the Assistant US Attorney for the Southern District of
16:45
Speaker 1: New York from nineteen seventy six to eighty three. And
16:47
Speaker 1: he now has his own law office of Nick Ackerman,
16:49
Speaker 1: getting his thoughts there, and of course could Gupta on
16:51
Speaker 1: the ground downtown Manhattan for Bloomberg News on site at
16:55
Speaker 1: the DA's office in Lower Manhattan. If you're listening to
16:58
Speaker 1: the tape, Kens are a line program Bloomberg Markets weekdays
17:02
Speaker 1: at ten am Eastern on Bloomberg Radio, the Tuna app,
17:05
Speaker 1: Bloomberg dot Com, and the Bloomberg Business App. You can
17:08
Speaker 1: also listen live on Amazon Alexa from our flagship New
17:11
Speaker 1: York station. Just say Alexa play Bloomberg eleven thirty. I
17:16
Speaker 1: want to get to the banks here. It is grim
17:19
Speaker 1: news coming out of Switzerland. UBS buying credit Swiss. I
17:22
Speaker 1: guess that's the good news kind of. But there's a
17:26
Speaker 1: lot of redundancies there. They're going to cut a lot
17:27
Speaker 1: of people, and that's why we go to Alison Williams,
17:30
Speaker 1: Senior Global Banks Analysts. So, Alison, you saw some of
17:34
Speaker 1: the numbers here, tens of thousands of people likely to
17:37
Speaker 1: be let go. Here is this kind of part and
17:39
Speaker 1: parcel when you put two investment banks together, well, it is.
17:43
Speaker 1: It is generally with investment banks, especially areas where there
17:48
Speaker 1: might be direct overlaps such as such as research as
17:52
Speaker 1: you know, and it does seem like, you know, some
17:57
Speaker 1: of the reports I've seen that a lot of the
17:58
Speaker 1: cuts could be centered in Switzerland would also seem to
18:03
Speaker 1: make sense just because, um, there's probably a lot of
18:06
Speaker 1: overlap in terms of systems and management administration. And again
18:14
Speaker 1: it's it's it's tough to tell, and we've said since
18:16
Speaker 1: the beginning of this deal, it's tough to tell sort
18:19
Speaker 1: of what the what the revenue attrition is going to
18:24
Speaker 1: be from. You know, people that use both banks right
18:27
Speaker 1: and that now um maybe move some of their exposure
18:31
Speaker 1: to someone else that also will reverberate with employees. So um,
18:38
Speaker 1: So there are a lot of synergies, so to speak,
18:42
Speaker 1: but I wonder if they're as bad as as we anticipate.
18:45
Speaker 1: I mean, the market has been there for Credit Suite
18:47
Speaker 1: and ubs. There was enough share for both players before.
18:52
Speaker 1: And while I get that, you know in terms of
18:53
Speaker 1: back office or you know, wealthy clients that used both
18:57
Speaker 1: to hedge their bets in a sense, um, that's an overlap,
19:02
Speaker 1: But it seems like there still is enough room for
19:05
Speaker 1: this big business, isn't there? Yeah, I mean it does.
19:09
Speaker 1: I mean to me, it does seem a really big number.
19:13
Speaker 1: Like I scratched my head a little bit about where
19:15
Speaker 1: some of those will come, right, because a lot of
19:17
Speaker 1: the like asset management UM, you know, there's very complimentary products.
19:23
Speaker 1: And as I said, so there's some overlap in the
19:25
Speaker 1: investment bank, but that investment bank has already been so
19:29
Speaker 1: dramatically downsized. I'm not sure you know what's left to
19:33
Speaker 1: cut except for a couple of small areas that I mentioned.
19:37
Speaker 1: You know, a lot of the uh, you know, one
19:40
Speaker 1: of the compelling things that UBS ces is the ability
19:44
Speaker 1: to add the US presence and the technology presence that
19:47
Speaker 1: it doesn't have a credit suitee UM, and same thing
19:50
Speaker 1: in asset management, there's some complimentary things. And then in
19:53
Speaker 1: terms of the wealth management business you know, both globally
19:58
Speaker 1: and the Swiss in particular to the extent that you
20:03
Speaker 1: have a number of advisors with a number of client UM. Yes,
20:07
Speaker 1: as I said, there might be some overlap and some
20:09
Speaker 1: reduction of exposures, but the headline number is really significant.
20:15
Speaker 1: Little bit it is a little bit interesting to think,
20:19
Speaker 1: like where those cuts are going to write. I mean,
20:22
Speaker 1: this is this is this is all according to the
20:26
Speaker 1: Zontag Situngue, which is a Swiss newspaper citing an unidentified
20:30
Speaker 1: senior manager at ubs. They're saying thirty six thousand jobs
20:35
Speaker 1: will roll, so eleven thousand inside Switzerland, twenty five thousand
20:38
Speaker 1: outside Switzerland. And this is not at all a beloved
20:42
Speaker 1: deal domestically, So you can imagine that a local newspaper. Um,
20:46
Speaker 1: you know, if it bleeds, it leads, they might want
20:50
Speaker 1: to play it up a little bit just for sales.
20:52
Speaker 1: I don't know, yeah, and who knows how they're coming
20:56
Speaker 1: because the cuts, the cost cutting that they've talked about, um,
21:02
Speaker 1: you know, it's something like fifteen to twenty percent of
21:06
Speaker 1: the cost base. You know. Also could it be outsourcing again,
21:10
Speaker 1: like it's very hard to get to these really sizeable numbers.
21:14
Speaker 1: One one could imagine someone saying, oh, well, if it's
21:18
Speaker 1: this much percent of clasts, what does that mean for
21:20
Speaker 1: a headcount? But I think you know, again, it's it's
21:23
Speaker 1: a very different um, you know, business and some others. Right,
21:29
Speaker 1: So it's not like a typical we're going to have
21:31
Speaker 1: we know, two branches now we're only going to have one. Um,
21:35
Speaker 1: you know, how many headcounts? How many heads you really cut?
21:39
Speaker 1: If those branches are focused on serving Mualti clients and
21:42
Speaker 1: you're bringing those people together. They're we've sort of identified
21:46
Speaker 1: for you where we see the areas we're cuts, but
21:48
Speaker 1: it's still hard to get to that. So Elson's big numbers.
21:52
Speaker 1: I can't think of a reason. I mean, if I'm
21:54
Speaker 1: an UBS shareholder here, I have to be really patient,
21:57
Speaker 1: don't I'm because i don't know really what I've bought.
22:00
Speaker 1: I'm not really sure what I'm going to end up with.
22:03
Speaker 1: I mean, you really have to believe in UBS management
22:05
Speaker 1: to stick around for what it could be a multi
22:07
Speaker 1: year in integration, you do. And perhaps that's one of
22:11
Speaker 1: the reasons why they felt they needed to bring Ermadi back,
22:16
Speaker 1: you know, some of the fits and starts, um. You know,
22:19
Speaker 1: obviously Hammers was not there for that long, but some
22:22
Speaker 1: of the things that he had done, you know, in
22:24
Speaker 1: terms of buying the Digital Wealth Manager in the US,
22:28
Speaker 1: a deal that was later canceled, um, like we did
22:31
Speaker 1: evaluation or other reasons. Archigos actually happened under Hammer's watch,
22:39
Speaker 1: although you could certainly connect the dots to say that
22:42
Speaker 1: the risk culture was there before he got there. But
22:45
Speaker 1: URMANDI what he brings is, you know, he came in
22:49
Speaker 1: after if you can remember the rogue trader scandal or
22:53
Speaker 1: unauthorized incident as they like to call it, which we
22:56
Speaker 1: know means they lost money because generally a rogue trader
23:00
Speaker 1: make money. We don't hear about that. But you know
23:03
Speaker 1: he came in after that, he put in a plan.
23:06
Speaker 1: His plan was successful. He said he was going to
23:09
Speaker 1: shrink the investment bank and he did, and he did it,
23:12
Speaker 1: by the way, at a time when it was not
23:14
Speaker 1: that popular, Like they were the first bank to say,
23:16
Speaker 1: you know what, we don't have to be this big
23:17
Speaker 1: fix income. We don't have to be everything to everybody.
23:20
Speaker 1: We're going to focus where we want. We're going to
23:22
Speaker 1: focus on profitability and then manage through like a ten
23:26
Speaker 1: year period of like regulation, litigation, the things coming. So
23:31
Speaker 1: I think, yeah, to your point, it's a long period,
23:33
Speaker 1: but maybe that he gives some confidence. All right, Alison,
23:36
Speaker 1: thank you so much for joining us yet again. Alison Williams,
23:38
Speaker 1: Senior banks analyst for Bloomberg Intelligence, breaking down what is
23:42
Speaker 1: the beginnings of a long merger process ubs acquiring credit Swiss.
23:47
Speaker 1: You're listening to the Take Kids Are a live program
23:49
Speaker 1: Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio,
23:53
Speaker 1: the tune in app, Bloomberg dot Com, and the Bloomberg
23:56
Speaker 1: Business App. You can also listen live on Amazon Alexa
23:59
Speaker 1: from our flagship New York station, Just say Alexa play
24:03
Speaker 1: Bloomberg eleven thirty. Yeah, woke this warning to a big
24:07
Speaker 1: production cut command out. Plus looking at in the markets here,
24:11
Speaker 1: WTI crude oil up about five point eight percent, about
24:13
Speaker 1: just about eighty dollars per bower. What does that mean
24:16
Speaker 1: for global investors? Will Robert Teeter joins us here in
24:19
Speaker 1: our Bloomberg Director Broker studio. He's head of investment policy
24:22
Speaker 1: and strategy for Silver Crests Asset Management. Robert, thanks for
24:26
Speaker 1: so much for coming to the studio here. Again, what
24:29
Speaker 1: do you make of this move from OPEC in the
24:31
Speaker 1: in the impact on global energy? Yeah, it's a really
24:35
Speaker 1: interesting development in terms of a couple of different impacts.
24:38
Speaker 1: I think the first thing that I would say is
24:39
Speaker 1: that it does certainly send us a pretty important signal
24:42
Speaker 1: that perhaps demand in the global economy hasn't been quite
24:45
Speaker 1: as strong as we've all been expecting. I think that's
24:47
Speaker 1: one of the things that OPEC's been responding to here
24:49
Speaker 1: is trying to get prices up through restricting the supply
24:52
Speaker 1: side rather than relying on demand. And I think that's
24:54
Speaker 1: a pretty important signal in terms of demand outlook for
24:56
Speaker 1: global economics. I mean, you have, i've key drivers that
25:01
Speaker 1: you think we should be watching, bank stress, inflation, the economy, earnings,
25:06
Speaker 1: and the fixed income market. This I think goes to
25:09
Speaker 1: inflation and to the economy in a sense. It seems
25:14
Speaker 1: like it could drive inflation higher and slow the economy down.
25:18
Speaker 1: Is that Am I reading it the right way? I'm
25:20
Speaker 1: reading it that way as well. Certainly, mechanically speaking, higher
25:23
Speaker 1: oil prices will be inflationary. They will represent that classic
25:26
Speaker 1: tax on the consumer and take spending away from other
25:29
Speaker 1: other parts of the economy. I do think perhaps it
25:31
Speaker 1: plays into the rate hike cycle as well, though in
25:34
Speaker 1: terms of reading that signal that perhaps demand is a
25:36
Speaker 1: bit slower than we've been anticipating. So on the bank
25:40
Speaker 1: stress issue, is that something that's in our rearview mirror now.
25:44
Speaker 1: I mean, it was kind of acute there three or
25:46
Speaker 1: four weeks ago. Haven't heard too much since, but some
25:49
Speaker 1: of the drivers probably are still there. I think they are.
25:52
Speaker 1: I think in terms of depositors, it's in the rearview mirror. Certainly,
25:55
Speaker 1: the comments from FED officials have been very focused on
25:58
Speaker 1: protecting deposits. I think they've been very er that that
26:00
Speaker 1: issue is over and done with. When you think about
26:03
Speaker 1: earnings in the economy, I think the earnings drag on
26:06
Speaker 1: banks might be real, and I think when you think
26:08
Speaker 1: about the drag on economic activity from a slowdown in lending,
26:12
Speaker 1: that's going to be real as well. Although the fact
26:14
Speaker 1: that the crisis was sort of mostly over and done
26:16
Speaker 1: with relatively quickly bodes well for the outlook. But nonetheless,
26:19
Speaker 1: I think there will be follow through drag on the
26:21
Speaker 1: economy from a slowdown in lending, whether that's regulatory mandated
26:25
Speaker 1: or just more caution on balance sheets. So what does
26:27
Speaker 1: that mean? What are your expectations for earnings? Are we
26:30
Speaker 1: entering a recession and does that mean earnings come down? What?
26:34
Speaker 1: In percentage terms? I don't see a recession yet, So
26:37
Speaker 1: my view has been that we're running around two percent
26:39
Speaker 1: on the economy right now. I'd expect somewhere like another
26:42
Speaker 1: one percent drag from some of these issues in banking.
26:44
Speaker 1: So I'm in the camp of slightly positive economic growth
26:47
Speaker 1: and I'm in the camp that consensus earnings are about
26:50
Speaker 1: right for flat, although I do think there will be
26:52
Speaker 1: some reshuffling of the deck beneath that, and we'll get
26:54
Speaker 1: a lot more color on that as we get into
26:56
Speaker 1: earning season and see where some of those misses and
26:58
Speaker 1: beats are coming from. It all that backdrop, what do
27:01
Speaker 1: you expect our federal Reserve to do? There's you know,
27:04
Speaker 1: a lot of folks out there to saying, hey, another
27:06
Speaker 1: twenty five bases point hike, maybe two, But there's also
27:09
Speaker 1: a reasonable crowd out there saying this economy is slowing
27:12
Speaker 1: down everywhere you look. We had the ism data again today,
27:16
Speaker 1: this should be it. Maybe you can cut. I mean,
27:18
Speaker 1: what camp do you fall into. I'm in the camp
27:21
Speaker 1: of it. They'll either be a pause or twenty five
27:23
Speaker 1: and that will be the end of it. And I
27:25
Speaker 1: think if it is twenty five, it's unlikely to be
27:27
Speaker 1: more following. The one thing that I think will perhaps
27:29
Speaker 1: change over coming weeks will be that the rate cuts
27:32
Speaker 1: that have been priced in for later in the year,
27:34
Speaker 1: I think those will be going away. I read the
27:36
Speaker 1: signals from the FED as the bank crisis is not
27:38
Speaker 1: a major issue. They don't need to cut in response
27:40
Speaker 1: to that. Economy is okay. They don't need to cut
27:42
Speaker 1: in response to that, and that they'll be resolute in
27:44
Speaker 1: keeping rates where they are our twenty five bases points
27:46
Speaker 1: higher until inflation gets down to target. So let me
27:50
Speaker 1: get to the fifth driver. Then we've covered the banking stresses.
27:55
Speaker 1: We've covered inflation in the economy as well as earnings.
27:58
Speaker 1: The fixed income market has been aptly nut. So I
28:00
Speaker 1: mean I grafted the VIX, which is supposed to measure
28:04
Speaker 1: in some sense at least equity market volatility, against the
28:08
Speaker 1: move index, which measures bond market volatility, and the move
28:11
Speaker 1: index is just off the charts. I mean, looking at that,
28:14
Speaker 1: you would expect equities to be doing absolutely nothing, which
28:17
Speaker 1: is fair, a fair assessment, but the bond market just
28:20
Speaker 1: to be, I mean, going crazy. How does this affect
28:25
Speaker 1: your investment strategies? Yeah, so it's interesting. I read the
28:29
Speaker 1: volatility in a similar way, and I think I take
28:31
Speaker 1: it as to an indication that we're right around this
28:33
Speaker 1: inflection point. So we're near the end of the FED
28:36
Speaker 1: rate hike cycle. We're sort of on the edge of
28:38
Speaker 1: a recession, but not quite there, and so each incremental
28:40
Speaker 1: data point is going to trigger a pretty massive response
28:43
Speaker 1: in the fixed income markets. But I think if I
28:45
Speaker 1: zoom out from that a little bit and look away
28:47
Speaker 1: from day to day trading and think about this upcoming
28:49
Speaker 1: weeks and months, to me, we're likely to be range
28:52
Speaker 1: bound on treasuries. The range of you know, plus or
28:54
Speaker 1: minus thirty basis points are still from here, which is
28:57
Speaker 1: still some volatility. But I think dependent upon what signal
29:00
Speaker 1: as we get in terms of inflation, what signals we
29:02
Speaker 1: get on the FED. You see some of the data
29:03
Speaker 1: today in ism pointing to a slightly weaker economy. So
29:06
Speaker 1: I think all of these things balance out and keep
29:08
Speaker 1: us range bounding treasuries, even though there's been a lot
29:11
Speaker 1: of volatility lately. Robert, when you talk to folks in
29:14
Speaker 1: the marketplace, do you get a sense a lot of
29:16
Speaker 1: people missed that first quarter move? I mean, we'd s
29:19
Speaker 1: and p up just about seven percent in the first
29:21
Speaker 1: quarter and coming off with just a brutal twenty twenty
29:24
Speaker 1: two when you lost money is inequities, you lost money
29:26
Speaker 1: in bonds. Do you get a sense that people missed it.
29:30
Speaker 1: I think some people have missed it. I think it's
29:32
Speaker 1: been very easy to be barished at any point in
29:34
Speaker 1: time over the last couple of years, there's certainly lots
29:37
Speaker 1: of things going on that we can point to as negative.
29:39
Speaker 1: But one of the things that I've been impressed by,
29:41
Speaker 1: and you see it when you listen to company earnings calls,
29:44
Speaker 1: is just the dynamic response of companies and ways to
29:47
Speaker 1: find to manage around whatever the problems of the day
29:49
Speaker 1: might be, whether that's a OPEC oil cut or surprise
29:52
Speaker 1: inflation or the issues we had with COVID, and so
29:54
Speaker 1: companies are finding ways to make money, and so I
29:56
Speaker 1: think it's important to sort of stick with that story
29:58
Speaker 1: through the long haul, even though there there are lots
30:00
Speaker 1: of reasons to be barished today as there were a
30:02
Speaker 1: year ago. Where which companies? Where where are you looking
30:05
Speaker 1: to find those? Yeah? So I think we've seen some
30:07
Speaker 1: durability and earnings in the consumer discretionary space. I think
30:11
Speaker 1: we're still looking to see some positive earnings out of
30:13
Speaker 1: the industrial side, and we've and we've seen tech companies
30:16
Speaker 1: respond in a pretty interesting way to the situations that
30:19
Speaker 1: they're involved in. So whether that means earnings, beats or missus,
30:21
Speaker 1: I think they're doing a lot of things to restructure
30:23
Speaker 1: their businesses and create earnings. So those three sectors are
30:25
Speaker 1: ones that I think have the potential for durable gains
30:28
Speaker 1: and earnings going forward. We had our commodities analyst on
30:32
Speaker 1: earlier and what was the term he used, Matt like,
30:34
Speaker 1: I mean, he's got like Mike McLoone said, this will
30:37
Speaker 1: be the greatest global macroeconomic reset in history. Oh no,
30:43
Speaker 1: in our life, in our lifetime, but that's close enough
30:45
Speaker 1: to history because we're pretty old. Yeah, exactly so, I mean,
30:48
Speaker 1: I mean he was just kind of looking at it
30:49
Speaker 1: from interest rates and commodity prices and you know this
30:54
Speaker 1: and not and you know, weaning off of the stimulus
30:57
Speaker 1: from the pandemic. He thinks we're set up for how
31:00
Speaker 1: long the duration is, but certainly a violent move downward
31:03
Speaker 1: in this economy that's the hardest of hard landing. I
31:06
Speaker 1: guess it was kind of a Thomas Wood statement. I
31:08
Speaker 1: think it was, you know, the kind of thing we
31:10
Speaker 1: were hearing a lot after the Great Financial Crisis but
31:12
Speaker 1: didn't really come to pass. At some point, though, the
31:15
Speaker 1: chickens have to come home to roost, right. I think
31:18
Speaker 1: that's right, And I actually think the financial crisis is
31:20
Speaker 1: a good analogy in a way. We've had a massive
31:22
Speaker 1: cycle over the past few years related to the pandemic
31:25
Speaker 1: and we're sort of back to where we started, although
31:27
Speaker 1: I do think there will be some drags and some lags.
31:29
Speaker 1: And so if we look at, you know, long term
31:31
Speaker 1: numbers on economic growth coming into the pandemic era, we
31:34
Speaker 1: were around two percent. We're maybe there now, but a
31:36
Speaker 1: bit lower going forward because of all those drags. But
31:39
Speaker 1: I do think it's a reset. It's sort of a
31:41
Speaker 1: back to where we were before. Not a lot of
31:43
Speaker 1: dynamic activity on the economy, just slow growth. That doesn't
31:47
Speaker 1: seem like a bad thing. I mean, it doesn't seem
31:49
Speaker 1: as bad as McLoone put it, right, But they're not
31:52
Speaker 1: going to sell any books Robert, Yeah, Boks, Mike needs
31:54
Speaker 1: to write a book, and Robert needs to just make
31:57
Speaker 1: money for his clients, right, exactly, Easy peasy, all right.
31:59
Speaker 1: So Robert Energy is having its day in the sun today.
32:03
Speaker 1: You know, had a after I had had two or
32:05
Speaker 1: three great years, and then Nis you're given it a
32:08
Speaker 1: back smarting because he thinks he missed I think I
32:11
Speaker 1: missed that trade a little bit. So, but what do
32:13
Speaker 1: we do with energy from here? I mean, I know
32:15
Speaker 1: today's having a good day, but it hasn't been having
32:17
Speaker 1: a good twenty twenty three. In my view, I would
32:20
Speaker 1: say the outlook is okay. And the reason I say
32:23
Speaker 1: okay is I think the backdrop on economic growth is
32:25
Speaker 1: relatively slow. So that same signal that I think we
32:27
Speaker 1: got from OPEC today of not seeing a lot of
32:30
Speaker 1: demand side activity as far as energy, I think that
32:33
Speaker 1: backdrop is with us going forward. So while the price
32:35
Speaker 1: action might be favorable today and going forward, I think
32:38
Speaker 1: that's probably just an okay outlook rather than a great
32:40
Speaker 1: outlook for energy. So the the idea that OPEC is
32:43
Speaker 1: going to cut this surprise announcement that we got yesterday
32:47
Speaker 1: didn't rock your boat too much. Not a lot. I mean,
32:50
Speaker 1: I think the follow through on pricing will again be
32:52
Speaker 1: inflationary and a drag on the consumer. But I think
32:54
Speaker 1: it's more important to look at the demand side signal
32:57
Speaker 1: that it seems to be sending. That's a poor demand
32:59
Speaker 1: side signal. I know. Just thirty seconds Robert Tech it's
33:03
Speaker 1: having a good year after big really really lagging last big,
33:06
Speaker 1: big profitable Tech has done well. Yeah, yeah it has.
33:09
Speaker 1: And I think a lot of the rotation we've seen
33:11
Speaker 1: recently has been on the back of balance sheet strength.
33:14
Speaker 1: In my view, with inflation continuing to improve, you'll get
33:16
Speaker 1: rate stabilizing and some valuation boost on that front as well.
33:19
Speaker 1: So I think the outlook for technology is reasonably favorable
33:21
Speaker 1: here as long as they're cutting costs. That seems to
33:23
Speaker 1: be a theme for a lot of industries, a lot
33:26
Speaker 1: of companies. Robert Teeter, head of investment policy in a
33:28
Speaker 1: strategy group for Silver Crest Asset Management. We appreciate getting
33:32
Speaker 1: his time. Appreciate him coming into the Bloomberg and Actor
33:34
Speaker 1: Broker studio. You're listening to the Team Cancer Line program
33:39
Speaker 1: Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot Com,
33:43
Speaker 1: the Irhart Radio app, and the Bloomberg Business App. We're
33:46
Speaker 1: listening on demand wherever you get your podcast. I'm gonna guess, actually,
33:53
Speaker 1: I'll bet that our next guest is not the WWE fan.
33:57
Speaker 1: What do you think? I don't think he is either.
33:59
Speaker 1: All right, let's him in here. Jerry Smith. He's a
34:02
Speaker 1: reporter Bloomberg News. I think he knows more about ww
34:05
Speaker 1: than both of us combined. Yes, particularly in the last
34:07
Speaker 1: twenty twenty four hours. Because he's a reporter. This is
34:09
Speaker 1: his beat, all that media entertainment stuff, and he joins
34:13
Speaker 1: us live in a Bloomberg Interactive Broker studio, which is
34:16
Speaker 1: a strong performance from somebody who's a Wake Forest Demon deacon.
34:20
Speaker 1: So we appreciate him coming into the studio. So, Jerry,
34:22
Speaker 1: what's it he's ripping on you? Dude? What's a talent
34:25
Speaker 1: agency doing buying? You know, mister McMahon's WWE. So Endeavor
34:31
Speaker 1: is a lot more than a talent agency. They own UFC,
34:35
Speaker 1: so they are already into They're into with this okay,
34:37
Speaker 1: combat sports, and I think that's why a lot of
34:40
Speaker 1: people saw them as the front runner when WWE said
34:43
Speaker 1: that they were exploring a potential sale. As you can
34:46
Speaker 1: just see the obvious synergies, the crossover a fan bases
34:50
Speaker 1: between people who are fans of combat sports like UFC
34:54
Speaker 1: and WWE. So, first off, just some semantics here. I
34:59
Speaker 1: see the red sticky headline that crossed the Bloomberg terminal
35:02
Speaker 1: says Endeavor and WWE to combine in a deal valued
35:07
Speaker 1: it more than twenty one billion dollars? Is endeavor? Has
35:11
Speaker 1: it been reduced to just UFC? Are they really combining
35:14
Speaker 1: as a merger of equals? Or is Endeavor buying WWE?
35:17
Speaker 1: So Endeavor is gonna have fifty one percent of the
35:20
Speaker 1: new company, and WWE is gonna have forty nine percent
35:23
Speaker 1: of this new company. Um, and that it's going to
35:26
Speaker 1: trade under the stock ticker t KO, which is a
35:29
Speaker 1: fun a fun stock tick, technical knockout for those unfamiliar. Correct.
35:34
Speaker 1: So so it's a purchase essentially, it's not a combination.
35:37
Speaker 1: That's PR likes to spin it that way all the time. Um,
35:40
Speaker 1: I just need to sort it out because what do
35:41
Speaker 1: you call a flak? He hates that term, hate that,
35:45
Speaker 1: but it's for a good reason. Um. I just when
35:49
Speaker 1: I saw the headline, I thought, oh, maybe Endeavor has
35:51
Speaker 1: just uh you know, focused most of its business on UFC,
35:55
Speaker 1: and I didn't know that it dwindled down to that.
35:57
Speaker 1: But Endeavor does a lot more than just bat sports. Right.
36:01
Speaker 1: This is William Morris Endeavor, right right, I mean this
36:03
Speaker 1: is a massive talent agency. A lot of the biggest
36:07
Speaker 1: celebrities in Hollywood are represented by um talent agents. I
36:10
Speaker 1: mean obviously, um Ari Emmanuel runs Endeavor and kind of
36:14
Speaker 1: made famous by that show Gold was said to be
36:19
Speaker 1: based on on Ari Emmanuel. So they do that, you know,
36:22
Speaker 1: they broker major sports rights, A lot of sports leagues
36:26
Speaker 1: will UM, you know, higher endeavor to help them with
36:29
Speaker 1: their sports rights deals. So they do a lot more
36:32
Speaker 1: than just UFC. But as far as buying WWE, I
36:35
Speaker 1: think that's where a lot of people saw the synergies
36:37
Speaker 1: in this. So Vince McMahon, who was the control shareholder
36:41
Speaker 1: of WWE via his control stock, had ten votes per share.
36:45
Speaker 1: Did he have to body slam his daughter out of
36:47
Speaker 1: there to get control? Right? I mean, this is a
36:50
Speaker 1: remarkable turn of events for Vince McMahon. I mean considering
36:54
Speaker 1: just months ago he um, you know, he's been under
36:56
Speaker 1: investigation for um, you know, hush um alleged high money
37:00
Speaker 1: payments with UM, you know, involving his leadership of the company.
37:04
Speaker 1: And now he turns around and UM has this massive
37:07
Speaker 1: deal with Endeavor, so um, you know it's you never
37:11
Speaker 1: count out UM. Vince McMahon scorn stars though, right, But
37:15
Speaker 1: is he gonna so now his super voting stock is
37:17
Speaker 1: can be converted into just common stock, right, So he's
37:21
Speaker 1: not gonna have any outsized control here. He's in fact
37:23
Speaker 1: just gonna be a minority shaholder. Right. Yeah, he is
37:27
Speaker 1: somebody who and if you can actually see this in
37:30
Speaker 1: WWE's sec filings where they see him so important to
37:34
Speaker 1: WWE that if he was out of the picture, Um,
37:38
Speaker 1: you know, the creativity of the company would suffer and
37:41
Speaker 1: that would be material impact the company because he is
37:44
Speaker 1: for years. I mean, he is the guy who has
37:47
Speaker 1: um really orchestrated, um all of this behind the scenes.
37:50
Speaker 1: So he's very involved. So do we know what his
37:53
Speaker 1: role will be in his new couh he's still gonna
37:56
Speaker 1: be leading WWE. Um Nick con is gonna be uh
38:00
Speaker 1: technically leading WWE, but he's still there and it's um yeah,
38:04
Speaker 1: I mean it's going to be really interesting. He was
38:06
Speaker 1: on CNBC earlier. I thought it was a perfect fit.
38:10
Speaker 1: He said that, um, WW had many suitors for the company.
38:14
Speaker 1: Is that true? Where there are a lot of people
38:16
Speaker 1: after WWE? That's what That's what he said. Um, you
38:21
Speaker 1: know it's I think one thing to think about is
38:23
Speaker 1: this is live sports is extremely valuable right now if
38:27
Speaker 1: you think about what's happening in the industry with cord cutting.
38:30
Speaker 1: Anybody who can draw even just a few million viewers
38:34
Speaker 1: because WrestleMania was this weekend, right yeah, WrestleMania. I mean
38:37
Speaker 1: the viewership for that is huge. They're very big on
38:39
Speaker 1: social media as well. They're very savvy about WWE's social
38:43
Speaker 1: media presence. They've been trying to expand internationally. So yeah,
38:48
Speaker 1: I mean this is um, you know, whether they had
38:50
Speaker 1: multiple suitors or not, I'm is a good question, but
38:53
Speaker 1: it's certainly valuable. And I think they paired this where
38:56
Speaker 1: they were also renewing these deals with USA and Fox,
39:01
Speaker 1: which are they're two big broadcasters, so you know, we'll
39:04
Speaker 1: see what happens with those deals. So what do we
39:07
Speaker 1: what is Endeavor saying today about how they want to
39:10
Speaker 1: create value here? We're you know, because they're paying a
39:13
Speaker 1: pretty big number here, and but the w w E
39:17
Speaker 1: stock is down, so maybe they're getting you know, a
39:19
Speaker 1: good deal a relative to expectations. But where do they
39:23
Speaker 1: see the upside here? Yeah? I mean Ari Manuel said,
39:26
Speaker 1: you know, they're looking at doing some sort of streaming product, um,
39:29
Speaker 1: but I think there's also just cough save means and
39:32
Speaker 1: synergies involved, So you know, I think it's going to
39:35
Speaker 1: be um. You know, you're talking about two big properties
39:41
Speaker 1: in terms of live sports, combat sports, and I think
39:44
Speaker 1: they're not saying too much about the strategy just yet,
39:47
Speaker 1: but I think that that's you can see opportunities there
39:50
Speaker 1: of combining these companies and putting that together. One of
39:53
Speaker 1: the interesting things we've seen, besides Vince McMahon's mustache is
39:59
Speaker 1: the value for the curling up. I've got a little
40:02
Speaker 1: I've got a little thing going on here, only on radio, okay,
40:06
Speaker 1: not on TV. UM is that the WWE thinks maybe
40:09
Speaker 1: betting would be a good idea. How can you organize
40:13
Speaker 1: betting on what's essentially a fixed match? I assume these
40:17
Speaker 1: things are all fixed, right, They're scripted? Is the term, right? Jerry? Well?
40:22
Speaker 1: I think they, um, you know, there's been reporting out
40:24
Speaker 1: there that they had explored potential betting on WWE UM
40:29
Speaker 1: and they could see the opportunity there. Um, you know,
40:33
Speaker 1: similar to you can bet on UM award shows and
40:36
Speaker 1: it's you know which the outcome of those are already
40:39
Speaker 1: known to a small number of people. So I think, yeah,
40:43
Speaker 1: you can bet on the Oscars for example, Yeah, okay,
40:46
Speaker 1: or the Grammy's right fee. Only two award shows I
40:49
Speaker 1: can think of, but I'm sure there are others. Golden Globes.
40:52
Speaker 1: All you can bet on the Golden Globes. Okay, good
40:54
Speaker 1: to know. So, Jerry, is this is an all stock deal?
40:57
Speaker 1: Do we know or is they some cashion near Do
40:59
Speaker 1: we know? Um that I have the check on that.
41:02
Speaker 1: So I'm just wondering, like, who's going to really really
41:04
Speaker 1: control this thing? But I'm guessing Ari and the Endeavor
41:08
Speaker 1: folks will be doing it, and so this is a
41:10
Speaker 1: big deal. Do we know when this closes? I think
41:12
Speaker 1: they've said, um, later this year. Okay, all right, good stuff.
41:16
Speaker 1: That was fun. All right, wrestling. I'm just I know
41:18
Speaker 1: it's huge and people are into it. So the third
41:20
Speaker 1: time we've talked about it in the last two hours,
41:23
Speaker 1: I know, so we I feel like we've talked more
41:25
Speaker 1: about the WWE today than we have about oil well
41:28
Speaker 1: and the former president being indicted right now. Yeah, well
41:32
Speaker 1: that's tomorrow's news. So all right, Jerry Smith, thanks much
41:34
Speaker 1: for joining us. Jerry Smith is a media entertainment reporter
41:39
Speaker 1: for Bloomberg News and that includes wrestling and ultimate fighting stuff.
41:43
Speaker 1: And Jerry, are you a fan? I've dabbled, Yeah, you've dabbled.
41:47
Speaker 1: I would have lost that bet. All right, Jerry Smith
41:50
Speaker 1: breaking it down for us here, Endeavor buying WWE snapped
41:54
Speaker 1: into a slim gym. There you go, this is Bloomberg.
41:58
Speaker 1: You're listening to the take to our live program Bloomberg
42:01
Speaker 1: Markets weekdays at ten am Eastern on Bloomberg Radio, the
42:05
Speaker 1: tune in app, Bloomberg dot Com, and the Bloomberg Business App.
42:08
Speaker 1: You can also listen live on Amazon Alexa from our
42:11
Speaker 1: flagship New York station, jes Say Alexa play Bloomberg eleven thirty.
42:17
Speaker 1: The bank rate thirty year fixed mortgage six point eight
42:20
Speaker 1: one percent down from the peak, just a couple of
42:24
Speaker 1: USCO still sharply higher than what a lot of people got,
42:27
Speaker 1: just as recently as a year ago. I count myself lucky. Yes,
42:31
Speaker 1: you know, sometimes I'm so angry about the high taxes
42:34
Speaker 1: I pay living up in Westchester. But then I think,
42:36
Speaker 1: at least I got three percent of the mortgage, because
42:38
Speaker 1: that kind of makes up for it. That does, That does.
42:40
Speaker 1: Let's talk to somebody who follows this real estate stuff
42:43
Speaker 1: on a daily basis. Jeff Langbaum. He is the senior
42:47
Speaker 1: reets analyst for Bloomberg Intelligence. Hey, Jeff, I mean, there's
42:50
Speaker 1: a couple of ways we want to go here. People
42:53
Speaker 1: are concerned that the banks are going to run into
42:55
Speaker 1: some problems because interest rates are going up and a
42:58
Speaker 1: lot of these offices, these office complex out there, a
43:01
Speaker 1: lot of real estate owners. I got a refinance here
43:03
Speaker 1: and it's gonna be a lot more expensive. How do
43:05
Speaker 1: you look at that? How do you quantify that risk? Well? So, um,
43:10
Speaker 1: basically we're likely, like you mentioned, Paul Offices are in
43:13
Speaker 1: a perfect storm here. The you know, it's it's been
43:17
Speaker 1: a story for a while that um that you know,
43:21
Speaker 1: cash flow into building level is falling as there's a
43:24
Speaker 1: risk of you know, tenants pulling back on space and
43:27
Speaker 1: higher rates mean lower asset values. And at the same
43:30
Speaker 1: time all that's going on now, all of a sudden
43:32
Speaker 1: you kind of wonder when who's going to be willing
43:35
Speaker 1: to lend on these properties? When new death new when
43:38
Speaker 1: debt maturities come due over the next couple, next couple
43:41
Speaker 1: of years, um, and the landlords are you know, going
43:44
Speaker 1: to have to fight to find access to capital. So um,
43:49
Speaker 1: this is a real concern in the sector. And I
43:53
Speaker 1: noticed today we saw a story on the Bloomberg Terminal
43:56
Speaker 1: that Blackstones be Read, the famous Blackstone Read saw four
44:01
Speaker 1: and a half billion dollars of withdrawal requests in March.
44:04
Speaker 1: This is a third month in a row that they've
44:06
Speaker 1: been in that you know, four to five billion dollar area.
44:10
Speaker 1: Of course, they have shut down the gates. There's a
44:13
Speaker 1: I think a limit to what investors can take out
44:16
Speaker 1: in any given quarter five percent, so they haven't been
44:20
Speaker 1: able to withdraw that. But what does this mean for
44:24
Speaker 1: the industry. Well, I think what going on with the
44:28
Speaker 1: Blackstone Read is there's a disconnect right now between what
44:31
Speaker 1: public READ prices are showing to be the perceived value
44:35
Speaker 1: of commercial real estate versus where nonlisted shares like b
44:40
Speaker 1: READ and private real estate values are trading. And investors
44:44
Speaker 1: in b READ are looking at that and saying, well,
44:46
Speaker 1: if public reach shares are way down, this is going
44:49
Speaker 1: down too, let me try and get my money out.
44:51
Speaker 1: And so there's there's just a disconnect there, and I
44:53
Speaker 1: think one of the things that it's going to have
44:56
Speaker 1: to happen is private real estate values are going to
44:59
Speaker 1: have to come down some and then we'll have to
45:01
Speaker 1: figure out whether public reap shares came down too much
45:05
Speaker 1: or whether private values are going to have to chase
45:08
Speaker 1: them lower. All right, So how bad is it out there, Jeff?
45:12
Speaker 1: In the office world? I mean, you know, vacancies here
45:15
Speaker 1: in New York City still remain extraordinarily high, and no,
45:18
Speaker 1: I'm not gonna say vacancies, but people coming back to work.
45:21
Speaker 1: It just seems like this is a huge problem that
45:24
Speaker 1: I'm not sure when it gets people realizing Yeah, when
45:27
Speaker 1: when when will this be realized? When will the office
45:30
Speaker 1: owners really feel the pain when they come around they
45:32
Speaker 1: say their tenants don't want, don't need as much space.
45:35
Speaker 1: They're feeling it now. I mean, vacancy is high, not
45:38
Speaker 1: just you know, the amount of people in the buildings,
45:39
Speaker 1: but the amount of UM least space in the buildings.
45:42
Speaker 1: It's it's high. It's above historical levels UM, and it's
45:46
Speaker 1: going and it's probably going to get worse. But I
45:48
Speaker 1: think what's interesting and what needs to be UM thought
45:51
Speaker 1: about is that there really is going to have to
45:54
Speaker 1: be some sort of bifurcation between the better quality assets
45:58
Speaker 1: UM and the better and the better located assets and
46:00
Speaker 1: those that are you know, probably bound for obsolescence UM.
46:04
Speaker 1: And what you'll probably see is those better, better quality assets.
46:09
Speaker 1: You know, even if the existing tenants move out or
46:12
Speaker 1: pair back of their space, they'll have an easier time
46:14
Speaker 1: filling that space because their own assets. Where tenants are
46:17
Speaker 1: going to want to be UM, the older, more commodity
46:21
Speaker 1: like stuff. You know, that's going to be a real
46:24
Speaker 1: tough slog and it's going to impact the overall supplied
46:26
Speaker 1: demand dynamics, no doubt. Um. But you know, the better
46:30
Speaker 1: quality assets probably hold up better. It's a lot. It's
46:32
Speaker 1: a lot like what happened in the mall space over
46:34
Speaker 1: the last decade or so, where you know, the lower
46:38
Speaker 1: tier malls just kind of disappeared and the better, better
46:41
Speaker 1: quality malls. You know, did Okay? I love a good mall. Sure,
46:45
Speaker 1: I gotta Sammy, you're coming to New Jersey. I just
46:47
Speaker 1: was hanging out the Ridge Hill Mall in Yonkers. We
46:50
Speaker 1: do malls in Jersey. I want to check out the
46:53
Speaker 1: what is the American Dream Mall? Yeah? I know we
46:55
Speaker 1: can get over there, uh, Jeff. In terms of the movements,
46:59
Speaker 1: the flow us that you've seen, um, was there a
47:02
Speaker 1: marked difference pre and post SVB because the collapse of
47:07
Speaker 1: Silicon Valley Bank obviously tied to holding they're holding a
47:12
Speaker 1: chut charity portfolio and the move in rates. But everybody
47:15
Speaker 1: then started saying commercial real estate was the next shoot
47:18
Speaker 1: to drop. Has that freaked out big institutional holders, It
47:21
Speaker 1: freaked out the anybody invested in office reachs that's for sure.
47:26
Speaker 1: And you can look at the stock price performance on
47:29
Speaker 1: on you know, the Bloomberg Office Read index for example,
47:32
Speaker 1: and you know it was it was down. They underperformed
47:35
Speaker 1: last year just because of all the things that we've
47:37
Speaker 1: been talking about. But then all of a sudden in
47:38
Speaker 1: March when it became you know what, when refinancing became
47:42
Speaker 1: the new risk, the new headwind. Uh, they shot down
47:47
Speaker 1: um pretty rapidly, um completely disconnected from the rest of
47:52
Speaker 1: the reach sectors. They found a little bounced lately. I
47:55
Speaker 1: think probably a little short squeeze, a little you know,
47:58
Speaker 1: risk on type type move. But you know, there's been
48:00
Speaker 1: a real move away from those names because of the
48:03
Speaker 1: concern that if you can't refinance, your mortgage is coming due. Um,
48:08
Speaker 1: you know, what's the equity worth. So I think about
48:11
Speaker 1: just the New York marketings. I think that's one of
48:13
Speaker 1: the harder hit markets in the country, along with maybe
48:15
Speaker 1: San Francisco and New York. I'm looking at your research
48:18
Speaker 1: New York focused s L Green and Vornado. I mean,
48:21
Speaker 1: what do those reads do, what are they what are
48:23
Speaker 1: they telling me about the future of their business? I'm
48:25
Speaker 1: you know, you just look around in New York and
48:27
Speaker 1: it's it's tough to see a real rebound in office occupancies. Well,
48:32
Speaker 1: they do tend to own the better quality acids, like
48:34
Speaker 1: I was referring to before, So you know, they they
48:39
Speaker 1: probably m end up being okay, but not without pain
48:44
Speaker 1: in the in the near term. What they need to
48:46
Speaker 1: do is actually show UM that they have the ability
48:51
Speaker 1: to raise capital, that they have the ability to refinance
48:54
Speaker 1: that's that is coming due UM and you know, UM
48:59
Speaker 1: one way that they can do that is if they
49:01
Speaker 1: can sell some assets or or partial ownership interest in
49:05
Speaker 1: assets and prove that there is still demand to own
49:09
Speaker 1: this space and demand to lend on this space. And
49:13
Speaker 1: you know, that's something that's really going to take a
49:15
Speaker 1: little while to shake out. It's going to probably be
49:17
Speaker 1: the story of twenty twenty three, you know, proof that
49:20
Speaker 1: there is both debt and equity interest in office buildings.
49:24
Speaker 1: And it really remains to be seen. But you know,
49:28
Speaker 1: I do think that, you know, if if my argument
49:31
Speaker 1: about the bifurcation between quality holds true, that those guys
49:35
Speaker 1: end up being okay. How about Hudson Yards. I mean,
49:38
Speaker 1: that is an amazing redevelopment of Midtown West just west
49:43
Speaker 1: of Penn station and amazing office buildings and space over there.
49:48
Speaker 1: But that seemed to open almost like just right before
49:51
Speaker 1: the pandemic. How is it doing it? It's actually doing okay. UM.
49:55
Speaker 1: And you know one of the reasons it's doing okay
49:57
Speaker 1: is because they got those leases signed and you know,
50:00
Speaker 1: you've got long term leases and so we haven't really
50:02
Speaker 1: had as much opportunity for that to roll off yet. UM.
50:05
Speaker 1: And and you know, with the benefit of a long
50:08
Speaker 1: term lease is that even if people aren't coming back
50:11
Speaker 1: to work, the tenant is on the hook and so um.
50:14
Speaker 1: You know it will it will be an interesting shakeout
50:18
Speaker 1: over the next you know, couple of years to see
50:21
Speaker 1: what works and what doesn't. Um. But again, high quality
50:24
Speaker 1: new stuff really should be them, you know, the type
50:28
Speaker 1: of buildings that uh that that tend to um outperform
50:33
Speaker 1: versus the overall average. They have cool stuff to do
50:36
Speaker 1: over there, studios there, They've got this little Spain area
50:41
Speaker 1: which is I saw that eat there. Do do office
50:44
Speaker 1: big successful office properties have to offer experiences or do
50:49
Speaker 1: they have to have a daycare on site? Does there
50:52
Speaker 1: need to be a gym? Do you see that, Jeff,
50:54
Speaker 1: highly amenetized space will win out. I mean, you know, basically,
50:59
Speaker 1: what landlords are trying to do and what tenants are
51:03
Speaker 1: trying to do is figure out ways that they can
51:05
Speaker 1: make the office buildings somewhere where their tenants and their
51:09
Speaker 1: employees want to go. And you know, they're they're trying
51:12
Speaker 1: to figure out what works and it will evolve over time.
51:15
Speaker 1: But yeah, I mean, you know that that goes that
51:17
Speaker 1: goes hand in hand with you know, highly amenitizes, you know,
51:22
Speaker 1: landlords that can put capital into their buildings to make them,
51:25
Speaker 1: you know, up to the most modern required standards. And
51:29
Speaker 1: that's what's going to win out. Why can't a boss
51:32
Speaker 1: just say come back to work. I don't know how
51:34
Speaker 1: that does work, all right, Jeff, thanks so much for
51:36
Speaker 1: joining our Yeah, exactly waiting for your session. Jeff Langbaum,
51:39
Speaker 1: he's a senior read analyst for Bloomberg Intelligence breaking it
51:42
Speaker 1: down and lots of headwinds for the real real estate space,
51:46
Speaker 1: particularly on the commercial side. Do you think about the
51:48
Speaker 1: pandemic and people not coming into the office and now
51:51
Speaker 1: you've got you know, kind of refinancing risk here in
51:54
Speaker 1: a much higher interest rate environment, which is one thing
51:57
Speaker 1: after another impacting these companies. So it's good to have
52:00
Speaker 1: somebody like Jeff Langbaumo covers all of the reats able
52:04
Speaker 1: to get us a little bit smarter here. Thanks for
52:06
Speaker 1: listening to the Bloomberg Markets podcast. You can subscribe and
52:09
Speaker 1: listen to interviews with Apple Podcasts or whatever podcast platform
52:13
Speaker 1: you prefer. I'm Matt Miller. I'm on Twitter at Matt
52:17
Speaker 1: Miller nineteen seventy three. And I'm fall Sweeney. I'm on
52:20
Speaker 1: Twitter at pt Sweeney. Before the podcast, you can always
52:23
Speaker 1: catch us worldwide at Bloomberg Radio