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