Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside my co host Matt Miller.
Every business day we bring you interviews from CEOs, market pros, and Bloomberg experts, along with essential market moven news.
Find the Bloomberg Markets podcast called Apple Podcasts or wherever you listen to podcasts, and at Bloomberg dot com slash podcast.
Now, let's turn to one of the other large stories today at Bloomberg Exclusive that China planning to broaden a ban on the use of iPhones and sensitive departments to government backed agencies and state companies in China. Anurag Runna is our senior tech analyst with Bloomberg Intelligence and he joins us by zoom Now. Anurrag, it sounds like this latest story is essentially expanding the scope of these restrictions.
They were already banned.
Well, they weren't banned, it sounds like, But it sounds like for some reason, the markets believe that at the scope is much broader than it was yesterday at the Wall Street Journal report coming out that you know, people were not being asked not to bring their iPhones in.
Is that?
Is that right here?
So I'll tell you.
I talked to the analysts in Asia and they basically said, listen, if you are a Chinese government official, you were not you were it was basically bad manners for you to even show your iPhone in the office, So you have I mean, this is just a This was not to be used at work at all and under any circumstances. So this is just an extension of that. But to be very frank I mean this, you know, financially, I would say, people government official not buying the iPhone is
not going to be material for Apple. But the question really is not so much about that. The question is is the close relationship that China has had with Apple or the Apple has had with China, are we seeing
some kind of indent in that. I think that is the biggest question here, because as everybody knows, Apple is very dependent on China for all its parts, all the assembly, and frankly, you know you were to look at all the US companies, Apple's done so much better than anybody else since even the tartafar begins, Apple was basically insulated from all of that.
Well, and Apple shares I guess, reacting here down three point seven percent. But I mean, do we have any indication that this would spread not just to the I guess twenty percent of sales roughly that China that Apple does in China, but also to the manufacturing end or is that just kind of the market's thinking ahead.
Yeah, I mean that's really what the big you know, the danger here is you know them nobody, you know, few government officials not buying the iPhone is not going to move the needle at all for Apple. But the question really is, you know, are they going to try to restrict other things We're going to have, you know, tariffs, it's all those things that are coming into play. But you know, we'll find out, I would say, in the next six to twelve months, if there is any change
in relationship. Apple's done a phenomenal job of its relationship, but China. It employs millions of people in China, not directly through their factories, and you know it, as you said, it's nineteen percent of Apple's revenue. So it is very overly dependent on China for a lot of things. So you know, I'm sure they are hoping that none of that changes. Because of recent events between the US and China.
Apple shares not doing poorly they're up thirty five thirty six percent year to date, but they have dipped below their one hundred day moving average right now trading at one hundred and seventy six dollars.
Even what do you think about about the stock on rag.
See when you look at it. I think a lot will depend on this overhang now, because next week we're going to see the new iPhone coming out, the iPhone fifteen. You know, we think it's going to do well. But at the same time, now we have another unnecessary cloud on top of this stock, so we have to figure
out what this really means. I do not know whether when Apple announces the iPhone of if they're going to make any comment on any of these news breaks, because I think as long as this overhang is there, you know, Apple will have a hard time in the near future.
How has Apple typically interacted with the Chinese government.
It's been amazing. I mean, they have done so much better than any other company in the Western world. They were not affected by any of the bands. They are very you know, widely welcome there. In fact, you know, one of the things we saw last year there was some issue with the with the production of the Pro model because of COVID nineteen restrictions in China, and that led to some you know, shortfall of shipments. But frankly, right about a month month and a half after that,
China changed their COVID policies. Now I'm not saying they did it because of Apple, but they have been very friendly to Apple, and Apple's been very nice to them.
What's the biggest opportunity for Apple? Is it India?
It is China. Actually, from a mathematical point of view, India is going to be very long term because you know, the gdpeople are capital for India is only twenty five hundred dollars, while in China it's about close to thirteen thousand dollars.
Just quickly here an rag because we only have about a minute left. What should we expect next week from the announcement of these new products? Is there anything that could really be a game changer?
I think the question really is the highest end model that they have, it's the iPhone Promax model. I'm looking for. The biggest thing we are looking for is, you know, what's the price of that product? Because that price has
remained constant for the last three years. If there is any changes to that price, I mean that really does wonders to the iPhone sales for the next twelve months, because that model itself is supposed to have a very high end camera, much better than anything Apple's done in the past.
Simone's an Android user. No, I'm sorry to say.
I'm an iPhone user in part because of the because of the camera well, and also because I moved abroad and had to get an iPhone. I can't remember the actually irational, but.
Android users, I feel like they spoil a fun for just family.
John Tucker group chats who is an andreid.
He has a green bubble. John Tucker has a green bubble.
I thought, you know that that sounded like an insult, but then Matt went on to explain, you know, mister Spock would have anything.
I think mister Spock would be and Andrew, which.
I take as an attack on my ears.
No, it's because you're a very technical, technically savvy man.
All right, Honor Agrana, thanks very much for joining us.
You're listening to the Team Ken's Are Live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot com, the iHeartRadio app and the Bloomberg Business app, or listen on demand wherever you get your podcasts.
Let's get over to our legal reporter Ava Benny Morrison right now, she's at courthouse here in New York talk about breaking news on the FTX case. We have seen across the Bloomberg terminal that Ryan Salome, formerly of.
FTX, he's planning to play guilty.
It sounds like exactly he was as an executive along with SBF with Sam Bankman freed, and it looks like he's going to plead guildy criminal charges over the collapse of that cryptocurrency exchange EVA.
What do we know?
We know that Ryan Salame has been in negotiations with prosecutors for a while. Now today he is going to front the federal courthouse in downtown Manhattan and enter ala of guilty to criminal charges. We don't know yet what exactly what those charges are or whether that means he will also be a cooperating witness and agree to testify against Bankman freed or not.
Yeah, what does this mean for the potential cases against some of the other players in this You know Bankman Freed, some of his other former colleagues, Gary Wayang Caro, Allison, Shad Singh, you know, what do we understand and what does your reporting suggest about his willingness to cooperate with prosecutors there?
Well, from our reporting and talking to different sources, the sense we've got is Ryan has been digging his heels in about corporating with the prosecutors, So we understand that this will more than likely be a plea deal. He will agree to plead guilty to certain charges, but he doesn't want to testify against Sam bakman Fred and prosecutors actually may suggested that in a court filing a few weeks ago, saying that Ryan Salomey had said he would
take the fifth if he was called to testify. Worth noting here that prosecutors already have three former executives from FTX and alome To Research, Caroline Nelson, Gary Wang, and Nashad Singh, who have pleaded guilty to their conduct as well and have agreed to cooperate with prosecutors.
What do we know about how much money these guys have or gals?
In terms of Carolyn Ellison, you know, I think it's interesting that they're able to mount these legal defenses and they're not using state appointed lawyers, So do they have still a ton of cash stashed away.
That's a really good question. We know that some of these executives received huge loans from Alamina Research. We're talking tens of millions of dollars here, But some of the executives like Nishead Singh, who have previously played guilty, have also agreed to forfeit some of their assets, including property.
So it's unclear, but it's a really good question. They're not using public defenders, they're using private attorneys, so it'd be interesting to see just how much money they still have and whether that could potentially be called back by the FTX, bankruptcy estate.
AVA.
Really interesting stuff. Thank you for saying across this. This is Eva Benny Morrison. She's our legal reporter for Bloomberg News at the Courthouse in Manhattan.
You're listening to the teeth catch our line program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa play Bloomberg eleven thirty.
Now it's our time of the Thursday where we talk to Barry rid Holts, our Bloomer opinion colonists, founder of Ritsholt Wealth Management and host of Masters in Business. Love chatting with you always bear it and you have a bit of an interesting take out. You quote William Goldman, the scriptwriter for Butch Cassidy and The Sun Dance Kids. All the Presidents, Man, marathon Man, etcetera. Nobody knows Princess Princess Bride. There's too many, you.
Can get through all of them.
There's a laundry list, marathon Man, etcetera. Anyway, point being, nobody knows anything. So Wall Street doesn't know anything either.
Very well, well, let me give you a little context about what led Goldman to write that in his book Adventures in the Screen Trade. So there was a couple of guys named Lucas and Spielberg shopping moving around.
They couldn't get it made, and it.
Was called Raiders of the Lost Dark, and everybody turned them down on it. And not long after that, Star or before that, Star Wars was another film that all the major studio execs turned down. And I kind of was reminded of this because very quietly in the midst of Barbenheimer, John Wick four snuck out and did nearly half a billion dollars in box office, which is a huge number for a fourth sequel of Just to Shoot
Him Up. And I did a little research and discovered nobody in Hollywood wanted to make the first Jock John Wick film.
And it's a reminder.
That experts who are thinking about the future really have very little expertise as to what's gonna happen next quarter, next year, next decade.
Nobody knows anything.
That I mean, this reminds me of the R Star debate that we're having. It seems beyond ridiculous. I mean, it's fine if you want to talk about whether or not the Fed's going to raise rates or cut but when you get into that kind of unknowable, it just is an exercise in futility.
Purely theoretical.
And we will be having that discussion this afternoon with John Williams at three thirty pm on Bloomberg Television.
But can I take you to the Wall Street Angleberry, because we had this great story out earlier this week, I think yesterday, I think Wall Street stock Market calls very by firm, end by floor, and I'm just illustrating, perhaps your point the cell side research teams are farm are negative on you as equities than the investment managed teams. You can see this even playing out within Morgan Stanley. So how do you how do you live in this in this sort of world if you are if you're a trader, So first.
It's really important to separate the signal from the noise. When I was on a trading desk, my habit was to create a reading list but not read anything until after four o'clock because if you read something early in the morning, it very often would influence how you trade it. And in fact, there have been academic studies that have looked as to how sunny or rainy it is in New York City, and the actual weather has an impact on whether or not markets trade up a little bit
or trade down a little bit. Your psyche is so malleable in ways that you're just wholly unaware of that. A nice day means you're more optimistic, and hey, it's beautiful out, and you tend to be more of a buyer. So you really have to know yourself. You really have to understand what's driving your decision making, and that's really really difficult for people to do. We are just very
much unaware of our internal thought process. We think we're making independent decisions, but lots of little influences affect how we invest, how we trade, how we make decisions.
Was John Wick four, any good? Did you watch four?
I haven't seen four yet.
I loved the first one, and I found the second one very amusing.
I haven't seen three yet.
What I kind of do is like what I did with Guardians of the Galaxy when the third one came out. I watched the first one, I watched the second one, and then we went to the movies to see the third one in three consecutive days. By the way, John Wick five already approved it's going to be out in twenty twenty six. Let me just put a little flesh on the b owns as to how much money this film made.
So it was made independently. The guys who were.
The choreographers and stuntmen for the Matrix movies were the co directors. They had Keanu Reeves attached to this. No one would make it, so they made it as an independent film. They self funded it. It costs twenty million dollars. Today, the John Wick franchise has generated two billion dollars between the box office, the streaming rights.
There was a spinoff film.
There was a television series, comic books, video games, two billion dollars. They couldn't get anybody to greenlight a twenty million dollar movie it And now turn around and let's apply this to investors. Which ETF, which mutual fund? What's the FED gonna do? Where're the mark? Where's the market gonna be? Instead of focusing on next month or next quarter. The one thing we know is that over ten and twenty year period we have a pretty good idea of
what assa class returns are going to be. Here's what stocks return, Here's what bonds return. And people have to stop thinking about tomorrow and start thinking about, hey, what about my kids, what about my retirement, what about my grandkids. That's a way to defeat the nobody knows anything sort of philosophy.
You know what I've noticed.
I've noticed here at work that a lot of people underestimate the allure of cars when it comes to selling clicks, for example, And the same is true in movies, right because that's the part of the part of the equation that made John Wick such a big teller. He has a boss for twenty nine in the first one. I think he has a Chevelle SS in the second one. And I guess people who don't care about cars really don't see the draw, but people who do are going to tune in for this kind of thing.
Yeah, Matt's looking at me, and I'm kind of rolling my eyes because I have to say, I don't know cars. I have a hybrid.
But but in the John Wick movie, the mcguindy that drives the plot is a bunch of hoodlums see his mustang and come to his house to steal it, not realizing this is one of the most deadly hit men in film lore. And so that's what starts the.
Whole and they kill his dog, right.
And that I need you to take this kill his dog, which is recently deceased wife had given to him.
It is just a great plot.
Barry, thanks so much for joining us. Barrier Holts on John Wick in the Markets.
You're listening to the Team Ken'ser Live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot Com, the iHeartRadio app, and the Bloomberg Business App, or listen on demand wherever you get your podcasts.
I am excited to welcome the mack E. Sales manager for the Ford Motor Company, Michael Sago joins us to talk about what's going on in this uh in this quickly growing industry with really one of I think the first standout products in American evs. Michael, thanks so much for joining us. What does sales look like now for the Machi? I mean I started seeing a lot more of them last year and they've become they've become very present,
at least in this region. How many do you sell in twenty twenty two and how many do you want to sell in twenty twenty three.
So we've had great sales in the last couple of months. So we actually took a bit of downtime earlier in the year to revamp our production facilities to make sure that we could meet demand for the Makis. So what's great now is a lot of those extra units that we've been able to produce are now out there in the market and available for purchase and for customers to get their hands on.
We're also hearing about the Mustang Machi Rally as well, which the Verge actually called the Ford's off roadius performance EVY yet tell us about the tell us all about what this is about.
Love it so really excited to write another chapter in Mustang's nearly six decade storied history with a Mustang Machi Rally. So, as you know, it's actually a four door suv that's all electric, seats five passengers, and we've had that vehicle and market for a couple of years.
And this new variant, the Rally.
Allows us to go off the pavement and confidently onto the dirt road. So this is a rally inspired electric suv with really aggressive rally styling all around and lots of extra capability built in. We've raised the vehicle twenty five millimeters, we have off road tires on it, we have extra special tune suspension for off roading. And this thing is going to be a beast. It's going to have at least six hundred and fifty pound feet of torque and do zero to sixty in under three point five seconds.
We're just looking at pictures of it there.
What I instantly wonder is why isn't it called a raptor, you know, because in the at least in the gas side of the business, when Ford makes an off road vehicle, at least in terms of the F one fifty and the Bronco. If it's if it's the pinnacle of the off road offering, if it's the Apex Predator, you now have the Raptor brand.
Great question.
So this is definitely different from a Raptor or a Bronco. This is the Machi Rally is not necessarily meant to be a rock crawler, but it's meant to perform really well at high speed on loose surfaces, similar to what a rally vehicle would do. And that's more the driving experience that we're a benchmarking rather than that's than some slow, precise rock crawling that you would use of bron Go or a Raptor to do.
I mean, I use the Bronco or the Raptor for the Baja one thousand. You know, I'm flying across the desert in that vehicle. In fact, I was one of the first Raptor buyers in my neighborhood.
Got one back in twenty fourteen.
In fact, I had my Raptor, was built at the rouge and hand delivered. Believe it or not, the keys were given to me in the factory by Alan Molally. It dates me a little bit, but yeah, I was a big, big fan of that vehicle. I still am. When are these electric off road vehicle is going to be on sale? When can I if I put in my order now, or can I put in my order now?
And when can I pick one up at the dealership?
So order banks are not quite open yet, but we're going to begin production early next year, targeting January right now, and deliveries will begin shortly after that. So call it a late Q one early Q two. You should be able to get your hand on one.
Of these price bump What are you thinking?
I'm looking already at the GT version of the Machi and I'm bumping up against sixty grand?
Is this going to put me over that?
So it'll be slightly over that.
We're targeting an MSRP of sixty five thousand right now, but it's a very dynamic environment, as you know, and we're going to confirm pricing closer to launch.
Okay, other than Matt who has like all the cars, who's your target?
Fyer here?
Great question.
So what we're doing with the rally is really bringing evs to folks that are adventure seekers and who value an active lifestyle. So somebody who really wants the best of both on road and off road. Somebody who wants this for their commute Monday through Friday, but also wants to take an off the beaten path adventure on the weekends and wants to be able to do all that in the same vehicle. So if you value technology and an exhilarating drive experience, this is definitely the vehicle for you.
One of the questions I always have about have had about evs is how I'm to be able to retrofit them later on, you know, because battery technology developed so quickly with a gas vehicle.
If I say I.
Have like a I don't know, a Boss three to Oho two and I want to put in, you know, like a four forty seven in there, I can just pull out the engine and swap it.
But it's much more difficult with a battery.
What's your thought on how we're going to be able to deal with these ten twenty years down the road.
So great question.
One of the best things about Mustang is how enthusiastic our customers are about the brand, and we see that with Maki as well. We see a lot of customers that want to customize their vehicles and we're definitely here for that, so we will have a full suite of
accessories that will be available when we launch. And the other thing that's great about electric vehicles is we're able to do things over through over the air updates and different software pieces that we weren't able to do before, So we can actually help you improve your vehicle over the air, so hopefully makes that process even easier for you in the future.
But that doesn't necessarily allow you to just kind of switch out your battery when the battery technology.
Improves, right, it's hard to get to I imagine you'd have to take out the interior and I mean if the batteries in the floor to skateboard, right, So.
So battery swapping, you know that that'll be definitely a conversation for another day. But there are things we can do with different calibrations of the of the engine through software that we can push through over the air updates to enhance performance, things like our Blue Crewise one point three that we're going to launch with the rally, you know, has has been something that that improves from from version to version, so a lot of this is actually going to happen automatically for you.
In the future.
Blue Cruise is kind of like an automated driving or something that gets closer to that, right.
Exactly, it's our hands free driving software that's that's in all Mustang Makis and Blue Cruise one point three. One of the greatest improvements is for narrow lanes and curves. It's actually been in our internal tests, has stayed in hands free mode five times longer than Blue Cruise one point zero.
Look, Michael, I've got to ask you about this because Ford and It's union discussions are so top of mind for markets right now. I know you're a marketing guy, but that you do really know about this vehicle. One of the concerns, I guess from the union side has been that the automation of these production of evs potentially, you know, puts them out of out of work.
You need far fewer people to build an.
Electric exactly have you know, does the production of the Machi and the Machi rally, you know, does that require far fewer people.
Yeah, So that's definitely a qui uesh for another day as well. We're excited about the rally and we're excited for production to begin in January, all right, Uh not?
They I had to ask, but we do have to ask those questions.
What about other versions?
Do you have any ideas about some other versions we could see of the Mustang Maki. Is this going to be something that where variants come out every couple of years.
So great question, and stay tuned for a few for details on the entire twenty four model year Mack Mustang Machi lineup. But I do want to share with you one mentality that our team has adopted, and it's called always on. So through with social media, with connected vehicle data that's aggregated and anonymized, we're able to listen to customers in a much more real time way than we
ever have in the past. This Machi rally is actually went from an idea in an email to an actual vehicle that you can drive in sixteen months, and that's a process that could typically take three to.
Four years at an automaker.
So we're really excited about all the different variants that can come from this in the future, and really hope that you stay tuned for the full twenty four mili year Mustang Machi lineup, which we'll be giving you more details on soon.
Michael, thanks so much for joining us really appreciate Michael Sego, their Macke sales manager at the Ford Motor Company.
You're listening to the tape. Catch our live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg eleven thirty.
Let's talk about pern Recard right now.
We have Alexander Riccard with us here, the CEO of the famed liquor maker with us. The brands are too numerous to mention. I grew up with My mom has always had the Glenn Livett around, has always had it handy in a healthy way, and I appreciate a lot of the I grew up with Absolute posters all over my wall.
When I was a kid.
It was the thing to find Absolute ads and then to collect all of them. And I'm older than you, so you may not remember that, Simon, But Alexander, thanks so much for joining us. What to you is the most important or the biggest growth driver of your business? Because you have so many brands, so many children to look after.
Hopefully adults excuse me, sorry, go ahead first, yeah.
Roll adults, absolutely listen. That the beauty is if you look at the way we grew over the last let's say twelve months, eighty five or percent of our growth came from six different categories. That's the beauty of the industry. I mean, every single category has amazing brands amongst it that are growing. You mentioned some of them. By the way, Absolutely, We've had an amazing year with Absolute Vodka. Globally, the
brand grew ten percent. You mentioned Glenn Livitt, one of the fastest growing single molts in the world, doing very well. And by the way, in the West, I could name Jamison as well, which is just flying off the shelves and it's great to see. But even other brands like Malibu and Kolua, or even our Kniak brand Mark I did want.
To ask you about do you love the big Lebowski.
Oh yeah, yeah, because the dude is drinking white Russians the whole time, and that's the first thing I think of when I look at Kalua.
And by the way, in the US, we have a great Absolute Martini combo that worked very well last October November December, ahead of the festive period. It's just amazing.
One of the big areas of demand for you and the large share of your business about over forty percent now is Asia. I know we talked you and I talked about this last week, but I want to discuss the changing appetites of particularly Chinese consumers. A. This is a place where they're seeing some economic pain, but how are their appetites for for alcohol changing at the moment?
You know it's it's it's when when the zero COVID strategy was over and after going through a normalization phase, we experienced in China exactly what the rest of the world experienced post pandemic, which is what I call revenge conviviality. Chinese consumers just started to go back out again in the trade, going to see their relatives, their their friends, a lot of weddings catching up and so on and
so forth. And as you said, there there is a little bit of macroeconomic softness in China right now which is impacting consumer confidence and therefore a little bit o our sales. But the underlying fundamentals are there. I mean, consumers want to go out.
Do they want sweeter stuff versus so.
In in China right now, they really love konyak, They really love whiskey in particular, Single Mold and Absolute is enjoying huge growth as the cocktail culture develops in China as well. And there's a big structural shift which we are seeing emerge in China, which are live venues, live entertainment venues basically bores with local bands playing music and Chinese consumers just going there and having a drink or two.
What you flagged to decline in sales in the current quarter is that globally and what do you think is behind that? Are people switching back from spirits to beer and wine or what's driving it?
No, what's driving is basically a softness right now in the quarter in China. And by the way, we're lapping arec quarter the previous year. Over the last two quarters in China we grew thirty two percent, So that's what we're lapping in a soft environment. Number two, we are lapping as well normalization in the US, which is by far our largest market. So we expect a soft negative in fact quord. So those tough comps, yeah, yeah, tough comps, but also normalization.
What about weed.
Is that not a big competitor because I think a lot of people in this country are drinking less alcohol and you know, eating more gummies for example.
No, you know, I had the question back in in fact, in twenty eighteen as cannabis was being legalized in a number of states. Ever since, we've really monitored the situation quite closely. And by the way, ever since, the spirit market, the category in which we operate, premium spirits, have accelerated. As a matter of fact, you know, the underlying trend in the US for spirits is usually four to five percent growth, and over the last three years in the US they've grown eight percent.
Our colleagues really quickly. Here our colleague flagged the decline and consumer appetite for alcohol because of GLP one drugs, those new weight loss ibetes drugs. Is this on your radar at all?
No, everything is on my radar, just like you know. You know, six years ago we spoke about cannabis, and ever since we've been looking at it closely, monitoring, just making sure and this is new, so it's it's it's still early to conclude anything tangible about it, but obviously we'll be looking at it closely.
Yeah, sure, Alexander, thanks so much for coming in. Really appreciate your time here.
Alexander Ricard there, the CEO of Perno Recard, the maker of Monkey forty seven, Schwartzwald dry Gin.
This is Bloomberg.
You're listening to the tape cans our live program, Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa playing Bloomberg eleven thirty.
I want to bring in our next guest, Jawad Mian. He is the founder at Stray Reflections, a global macro research firm with an unconventional view towards markets and trading. Joan, I want to ask you because we're looking at a pretty negative picture for some of these major tech names. In Nvidia, Apple shares both down you know, roughly in the three percent range, and then Asadac really leading our
losses today. We've heard some question marks about whether the AI hype will live up to the kind of standards that analysts have thought. Is this the end for this tech enthusiasm part of the rally.
I don't think so, you know, feeling lost, confuser and certain as much a hallmark of investing as a scarty conviction and the sense of calm. So this kind of period is quite normal. So what is confusing me actually is not the NATSAKS thirty seven percent rally, not that inflict has really receded with so little ectomic pain, and not even that the tenure bond yields are breaking out.
A confusing aspect for me is why institutionally industries are sitting still sitting out this bull market, which is why I believe any correction even here will be quite shallow.
Juwat. If I'm looking at the tenure right now, the yield at four point two seven percent, is there a point that the yields can break out? To you that we would see things actually materially start to break when it comes to some of these tech heavy stocks and indexes.
I think if the on yield is rising for the right reasons, which is based on greater klomic continence a higher real neutral rate, I think equities will do just fine in that scenario. If yields were rising like they did last year, where we were still dealing with inflation uncertainty. We weren't sure where the Fed rate high cycle would end. Confusion by the terminal rate. That was what was really
hurting stocks. Yeah, it's quite And you know, if we look at past you know cycles where above the rising since nineteen seventies, she noticed is that those periods are overwhelmingly positive for stocks. So in nine out of those eleven cycles, equis did okay the positive return of around thirteen percent over a twelve month horizon. What happens is tend to contract, but equities do okay because earnings grow
fast enough to offset those lower valuations. So even as bondials increase from four to four point three and let's say higher, if we are going to be seeing forward earnings climbing as we are current with S five hundred and brought up epsesment next year at two hundred and forty years, that's still is prop for equities.
And sorry to our our radio viewers there, I should have told you that the disembodied voice that you might have just heard before Jawad's was actually that of our Stash reporter Bailey Lipschaltz, who joins us for the next couple of minutes, fifteen to twenty minutes.
Here, you know, Jimad.
One of the big concerns has been the health of the consumer going forward, responsible for about two thirds of overall economic GDP. What are you reading in the tea leaves here from some of the earning statements we've had over the last couple of weeks. From the data that you're seeing.
So, I think the big question that concern this year coming into it was that where everyone was expecting a recession and it hasn't happened yet the liber market remains
quite healthy. I think what we're trying to understand now is the fact that intership and stivity in the US economy is historically low, and what that means is basically in consumers and households, we deleverged both the GFC and then POSTPIG given the booster incomes and the further plunge in interest costs you're looking at how so, oh.
It looks like we might have lost Jawad there. We'll be back to him soon as soon as we get him back on the line. Looking a mixed picture in stocks right now, dal Jones up about two tents of one percent, but we're seeing some weakness in SMP down about three tenths of one percent and the NASDAC down about one percent. Oh, I look, I believe we have Juwad back with us. You were talking about the consumer, the pain that the consumer has been feeling, but not
necessarily bad for stocks. I believe we lost you there. So just recap a little bit the last bit that you were saying there.
What I was saying was that you were realizing is that the intershiate tensitivity of the US economy or households and corporate low why consumers have so if you have nominal growth blocking in at around six seven percent, as has been the case so far this year, even if FET thundred five percent is not troublesome, it's only when you really have a sharper slowdown in nominal growth and higher interestrate levels that you start to see the consumer really pulling back. And that has the case so far.
I don't expect it to be the case of the next section nine months either, And drawn looking.
At the tape, obviously we're starting September off in the red, seasonally the worst month for major US averages. What can spur investors to put capital back into the market. We have CPI data coming up coming out about a week. We have a FED blackout period. Obviously there's a lot of macroeconomic concerns as it relates to Apple. What draws investors back into this market?
I think it's just a matter of understanding slows and participation levels. Right, So, even though recession concerns are fading, which you realize looking at different survey like the Bank of America, it was un managers of issues like global equity allocation is still at eleven percent underweight, which is one of a half stand deviation below the DOCTO average. You know, the overweighting bonds is the two standard deviation.
And so what you're seeing is currently this understanding that maybe why and stocks when bonds are yielding five percent of the short term But our view is actually bonds are expensive here and stocks could be relative cheap or a reliative basis. So I think it's going to be simply an understanding that with yields moving higher. It's usually investors came into the year quite underweight equities. They expected their private market book exposure will sort of help them
with that. The private markets have underperformed bundials have risen and they're realizing that equities underweight is even bigger than their thought. So in conversations when I pick up and compositioning data, is that we're going to see more and more participation flows moving into equities, which will keep any pullback quite shallow. Before we move from here, George.
As quickly, we only have about thirty seconds here, but I know that you are a portfolio manager in the Middle East. Recently in their past dramatic rise in the importance of that region has for the rest of the world. Is that something that can continue even if oil doesn't remain ninety dollars of arrow.
Yeah, I mean, I think there's plenty of equity buffers to be influential, and I think most importantly what matters from there is just the AILL production policy. Right, So that's the real way that you'll see a pass through from a global market perspective. You know, what is open going to do with AILL cuts And they've already said that they can extend their cuts for now, so which keeps aid prices higher than your tone.
Yeah, and very interesting.
That's Jawad Mihan, He's the founder of Stray reflections the global asset management firm. Thank you for joining us here on Bloomberg with me and Bailey Lipschaltz. This is Bloomberg.
Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews in Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller nineteen seventy three.
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