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 on Apple Podcasts or wherever you listen to podcasts, and at Bloomberg dot com slash podcast. Let's go to Ira Jersey. He covers all the interest rates stuff for Bloomberg in intelligence.
Ira.
You know me, I try to stay away from that whole interest rate thing, the whole yield curve discussion. You don't want me anywhere near that. But I guess what I'm hearing today and over the last couple of days is higher for longer for US interest rates. Is that what the market's telling.
You, Well, it's not so much the higher, it's more the stay high for longer. So the story really that we've been pricing the last couple of days, and we're talking about very short term, is the idea that the Federal Reserve is not going to be cutting interest rates, you know, maybe even into the second half of next year. So although we you know, we're still pricing for some
probability of a hike later this year. The more important thing is that we're starting to price out cuts, and pricing out cuts is you know, in my opinion, that's what the FED is really needed to try to try to convince the market of for a long time, because the fact that you were pricing in cuts just means that the market was was that And if you look at equities or credit, markets have just gotten easier and financial conditions have eased because people thought that the FED
was going to be early in cutting rates. And if they're not going to cut rates early, then that's just as good as hiking.
Isn't it. I mean, we're getting close to great financial crisis levels on rates. How high did we go back then on a ten year on the thirty year ioerd because that was like the sky is falling and it doesn't feel like that at all right now.
Well, if you're talking about the financial crisis in two thousand and seven, eight, you know, when we go back to the early two thousands, whereasically back to those levels on a lot of the curve, you know after two thousand and seven, you know, this is the first time we've seen rates basically in the last fifteen years anywhere close to these kinds of levels, particularly in the front end of the curve.
It's very isn't that crazy? Ira, Like two thousand and seven, two thousand and eight, we barely got above five percent on the tenure, right, And that was when like, if the TARP vote didn't pass, the United States was going to fail as a country. Like, how come were that level now?
Well, mainly because we're in much different inflationary dynamics now than we were back then, Right, so we have to have a monetary policy that's ultimately going to be more restrictive than it was back during the financial crisis. So you know, during the financial crisis, you had easing a monetary policy, You had the Federal Reserve, Remember you had the TARP vote, and then very soon thereafter they started their quantitative easing program and whether to buy a lot
of treasury, started to buy a lot of mortgages. Now that's reversing, right, So they started to do that. Remember in twenty eighteen, twenty nineteen, the economy started to slow. Then you had the pandemic, and that'll cause obviously the Federal Reserve to be even easier and way easier even
than it was during the financial crisis. So I think it's a it's reactive right now that we're going to see higher rates because of the strength of the economy, because of the monetary policy actions by the Fed, and importantly,
and I think this is definitely can't be underappreciated. And if you go back to when the Treasury Department at the beginning of the month came out and said we're going to issue a trillion dollars of debt this quarter, so just the July through September quarter, that was eye popping to a lot of people because it was two hundred billion dollars more than we thought. And I think
consensus was probably somewhere near there too. So you have supply dynamics on top of a reasonably strong economy and monetary policy that's going to stay very uh, you know, very tight for a while. All of those things are going to mean that rates are going to be you know, stuck probably at this these higher levels at least for you know, for a few quarters, if not even a year.
It's no good.
I'm looking to refinance the mortgage, IRA, You're not helping me out whatsoever, all right, No, not at all. Yeah, No, no, thank you very much again, Uh Jackson Hole, Wyoming. Matt and I will not be there, but our good friends at Bloomberg Surveillance will be there.
And why, I mean, what's the point of even going.
They're sending, well, they're gonna, They're sending the A team, So Ira, does it matter?
Yeah?
Does it matter?
Ira?
I doubt that that Ja Powell is going to say anything to uh, you know, to groundbreaking really because with press conferences at every single FOMC meeting, he only uh, you know, spoke to us in late July. So it's hard to imagine that even though the data has been a little bit better maybe than expectations, it hasn't been strong enough for you know, for the FED to completely
change their view. But there will be nuance. I think that we'll be listening for so things like if if Jay Powell starts talking about the medium term and about some of the structural shifts in the in the global economy with wages and with supply chains and the like, you know, we might be able to at least you know, glean some information from there. Will it be massively market moving?
I doubt it.
But at the same time, liquidity has been pretty poor, which is one of the reasons you've seen such big moves. So if he does happen to say something that's a little bit unexpected, you could see a pop here and there in the market, whether it's you know rates, you know, ten year yields, five bases points lower, five bases points.
Higher, real quick, Ira, Are you surprised how successful Messi's been in Miami so far?
Not really.
You know, Major League soccer teams have have salary caps, and they tend to spend their money more on attacking talent than they do on defenders. So Messi is just, you know, tearing up a lot of the defenses in Major League Soccer.
It's fun to watch. It'll taste coming to New York right now. And John Fair was just saying, I was listening on surveillance. A ticket that usually goes for seventy five or one hundred bucks in New York for the New York Red Red Bulls, when Miami comes in a thousand bucks.
Dude.
He told me that the DC game tickets start at twelve dollars. Yeah, but I mean once Messi and when Messi comes, tickets start at four ninety six exactly. That's a delta.
That's a delta. Ira Jersey, thanks so much for joining us. Irad Jersey chief US interest rate strategist and soccer strategist as well soccer owner. He's a mogul in the world of soccer.
You're listening to the team Can'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.
I'm so glad.
I'm not like like I'm managing a cyclical business. I put up a really good quarter. I saw a lot of tractors, the farmers in good shape. Yet my stock's down four percent because these darn analysts and investors are looking six, twelve, eighteen months down the road and saying, hey, it can't get any better than it is right now. Somebody has to live this on a daily basis is Brook Southerland, and she covers all the industrial stuff, including dear for Bloomberg Are Opinion.
Back to news.
I don't know where are you these things still in Bloomberg Opinion bo Yeah, Brook Joints is here in our Bloomberg Interactive Brokers Studio. So Brook, what did you take of the deer earnings? How's the American farmer doing these days?
You know, I think they had been doing pretty well, you know, on the back of rising crop prices, and that really provided an opportunity to go out and replace farm equipment because we had a very long period where you know, tractors were getting up there in terms of duration and people were holding off on purchases, and of course we've seen the other end of that, but now, you know, we're starting to see some pressure on crop prices, just with some of the harvesting proatorns that we've seen.
But I think, you know, sort of the the crux of the issues. If you look at deer's numbers, they're very good, but it's not volumes that's really driving everything here. It's priced. And they have a ton of pricing power because they are such a dominant provider of tractors, and they also really have invested in the technology curve in terms of making their machines more efficient, more productive for those farmers, and that has really helped them get pricing power.
But I think you have to wonder at what point have we reached sort of the peak of pushing through these price increases, we start to lap tougher comparisons. Has the farmer maybe had enough in terms of those price increases, And I think that's why you're seeing some of the pressure on the stairs today in the stock.
Yeah, it's come down substantially, but they're still doing really well. I look at comp chart comp on the Bloomberg. It automatically defaults to a five year period, and they have more than tripled over the past five years. You know, compared to an S and P that's up sixty six percent. The Industrials index on the S and P is up fifty two percent. So they're a huge outperformer, right, Who are their biggest competitors? Like, who else has the name, brand, recognition and quality of a John Deere?
I mean, not really anybody, And I think that's why they have so much pricing power. I mean, you do have competitors like CNH is one that people look at.
I know is another tractor maker that people like. Lamborghini actually makes trackers tractors, not the car company that's owned by Folkswagen. But of course, yeah, Lamborghini started out as a tractor maker. That's what Feruccio Lamborghini did.
Before make a better clutch.
Yeah, that's right. He got in a fight with Enzo Ferrari about the clutch and he shifted businesses.
But CNH has also made some comments about you know, we might be reaching sort of the limits of pricing increases with that farmer population. But and you know, to your point where you've seen that kind of really aggressive share climb, this is not the first time we wondered if this is as good as it gets for deer, because it has been a very good and somewhat prolonged ag production cycle here. But you know, at a certain point you can't go out forever.
If I'm a farmer at in Iowa, how long do I own it my dear tractor before I replace it?
Usually?
I think it depends, I mean again on sort of what the market dynamics are and when it is a good time to spend on new equipment. And then, like I said, you know, they're also investing in better technology that can really help on the productivity front, especially for farmers that are suffering with labor shortages, to help get around some of that. And I think that all sort of weighs on the decision making.
Process labor was an issue for Deer, and they solved that pretty quickly. I remember, is that an issue again or have they dealt with it for the long term and others have to now deal with that same issue.
Well, I mean, the thing with these union negotiations is they kind of come back around.
Well, That's why I'm wondering, because we're seeing it in automotive right the UAW right now is trying to negotiate a huge contract with GM and Ford and you also see you know, pilots and in airlines. The unions are getting agitated again. So has Deer, though, is that sort of one tailwind that they've already dealt with this?
I think that to your point about how well Deer has been doing. I think that's one reason why the unions feel so empowered is that that was a pretty significant wage increase when they struck that deal. And then you just look at how successful Deer had has been and how much it has been able to increase prices for its customers and ramp up profits that it could was in a great position to shoulder that extra wage costs for those employees. UPS is obviously talking about trying
to do the same thing down the road. They sounded very confident on their earnings call about being able to offset those higher wage costs with productivity improvements, investing in automation, things like that. And so I think that's what's really empowering the unions is they're saying, look, you're really raking it in and we want our for sure of that.
If I'm a farmer in Iowa again, I'm going back there and I want to invest in a big tractor. Does Deer give me financing or where do I How does that work?
They do have a financing arm?
Yes, okay, because that guy, I mean, like Ge for example, that got to be such a huge part of their business. It's not like that for Deer.
Well, Ge is now out of that.
That's right.
It didn't work that well.
For they went maybe too far, too many different directions at the same time.
But I do wonder though, I mean, is it is it a bonus to have your own in house financing arm when race ries like this, because you can find ways to maybe give customers a better deal than they're going to get from their local bank.
That was always the argument. I mean, that's why Ge got into that business in the first place. And you know why some of these other companies have these financing arms. But it'll certainly be interesting to see how that plays out as we get further into this interest.
Right, we've got you in studio, so we're going to just play around here. Rip up the script this, Tom Kean would say, US Steel a I didn't even think it was still in existence as a company until the takeover stuff happened. Where are we with that story here?
It's it's heating up. It's the center of a binning ward. It's one of the oldest American companies, used to be one of the biggest, and now it increasingly looks like it is going to be bought by somebody.
But they need so here's another place where unions have real strength. Right, Is it the case that the union has to support the bid in order for US Steel to be able to accept it.
What US Steel has said is that the union does not have a veto over a takeover offer, but they do have the ability to mount a counter offer, and they have said this morning that they are going to transfer that right to a counter offer to Cleveland Cliffs. But I don't know that. You know, there's a lot of aggressive rhetoric out there, and I don't know that we should assume that US Steal necessarily doesn't want to
sell to Cleveland Cliffs. There's some sort of bias against that sort of What they said is that they wanted Cleveland Cliffs to agree to an NDA to do a due diligence process, and Cleveland Cliffs wouldn't do that until they agreed to the economic terms upfront, which is somewhat unusual. And I think there's just a lot more of this process to play out. And I also don't think we
know who all of the parties are yet. So when US Steal announced its strategic review, they said they'd had multiple offers for all and also parts of the company. And I think there might be more players to come out of the woodwork here, and I think there's just a long way to go with this takeover story.
All right.
I got a question on a different issue, but you've been writing about it. So when I moved to Berlin into the sixteen, I had just bought myself a Portie nine to eleven carrerass here and I didn't want to lose it, so I paid the four and a half thousand dollars that I think it costs for me to get you know, half half a trailer on a freighter ship and shipped it over to Germany and it was great. I got to drive it on the Autuban. It absolutely
loved it. It was the perfect car for Germany. But when I moved back to New York at the end of twenty twenty one and I went to call the same shipper to ask how much it would be, they quoted me more than twenty thousand dollars, approaching twenty five thousand dollars, So the price had essentially gone up five x and I had to sell my beloved Carrera. It was I'm still a little bit heartbroken, although it helped me to finance my current home. Are those prices coming back down
to earth? Have we come back to normal now in terms of freight shipping, they have.
Come back down. I would say you maybe or surely moved at the raw town. If you've moved in the spring of twenty twenty three, you might have had a better quoted on that. But yes, so it is that we did see shipping prices really crashing back down to earth as we sort of had that pivot away from good spending back towards services. But now we're starting to see signs of life again in the freight market. The DRWY, the WCI freight indexes increased for six straight weeks. That's
the longest positive stretch since January twenty twenty two. And so, and you know, we're also seeing maybe some progress in the trucking market where we might be hitting a bottom and starting to find our way, you know, toward a point of stabilization, because it has been really rough for
that freight sector. I mean, I know there's a lot of debate about whether the broader economy is in a session, but the freight sector has been there and it's been tough out there, and we're starting to see sort of a light at the end of the tunnel.
I mean, you go over to like by the Port of Newark over there, like by Newark Airport, they got the container stack like twenty high.
Yeah, go get one of that. And I only needed half from my car because the containers I think are forty feet long and I only needed twenty feet. But I just couldn't justify paying twenty five grand, and I wouldn't have been able to afford my house if I hadn't sold the nine eleven. That's probably a good thing in a sense. I'm living in a Porsche in West Yes, all right, Brooks.
Other then she covers all the industrial stuff for Bloomberg Opinion. Joining us here in our Bloomberg Interactive Brokers Studio.
You're listening to the tape Cat's are live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and.
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Let's stop tech talk here. The tech stocks have been particularly the top five to seven names have really been leading this market this year. As people are in search for growth and what are they doing. They're generating a ton of cash, which raises the question, what are these tech companies doing with their cash? Let's bring in Angelas. You know he's a senior industry analyst at CFRA Research.
Hey, Angela.
Again, a lot of these tech companies, you know, it's putting up gobs and gobs and cash like Alphabet, you know, one hundred and eighteen billion dollar cash pile. What are these companies doing with their cash? And what do you think they should be doing with their cash?
Yeah, so for the most part, most of these you know, megacap tech names are really leveraging the cash towards buybacks, and it's what they've been doing for years at this point in time.
Clearly, Apple kind of you know the post.
A boy child in that area buying back, announcing a ninety billion dollar buy back earlier this year on top of the ninety billion they did last year.
So that's really where most of the cash is going.
Alphabet did the same thing, announcing a seventy billion dollar buy back this year on top of the seventy billion announced last year.
So that's where the cash is going.
A big reason for that is they really can't do anything else with it in the sense that the M and A market for a lot of these large cap companies are essentially closed outside of the fact that we are likely going to see an improved deal of that that Microsoft Activision transaction out there.
So we expect them to continue to.
Utilize most of the cash towards buybacks going forward, and we actually think that's the right move here and a big reason for that is it will support earnings grow. We do expect free cash flow to continue to grow here over the next five to ten years incrementally, and that'll continue to support a higher share price.
Innar view.
All right, So here's my pet peeve for the big tech names. I think they should be like Apple, for example, they should have a two and a half to three and a half percent dividend yield and they don't.
Why is that?
I think there's a perception out there where if you make a move like that, you know, it almost tells you that the maybe the growth trajectory of the company isn't going to be as favorable as maybe they believe that it should be. And you know, I think they do want to have a cash out there accessible in case they were able to go out there and make a a big splash out there in the market.
Gets somewhat a creative on the m and a side of things.
You know, clearly the regulatory environment does change over time, and I think they want to just have that cash available out there. And when you kind of look at what specifically Apple, right since twenty twelve, they've essentially bought back or reduced their sharecount by more than forty percent.
That's absolutely remarkable because many of these companies out there that do have buybacks that are essentially washing out, you know, they are essentially kind of just offsetting, you know, share dilution with those buybacks, Apple is actually reducing their shareccount and they will will continue.
To do so over the next decade.
So we think the growth rejectory for Apple continues to be very attractive.
And you know, when you look at a company like.
Apple specifically, we think that is a stock that continues to be under owned in many respects because there are a lot of fund managers out there that can't own seven percent of a stock like Apple. So it's really interesting that you continue to kind of reduce the share count while also having kind of this under owned asset out there.
So we think it's we continue to think it's the right move, and we think.
Apple continues to view their stock is an attractive opportunity from evaluation perspective.
I mean, I I hear this angelo from other analysts as well, that you know, they don't want to send the wrong sign to the markets that they're not a growth company, but Apple should set the tone. You know, they they don't the markets have to send a sign to Apple, not the other way around. They they they always have one hundred or two hundred billion dollars in cash and cash equivalents. I wonder what else they're gonna do with the money. I mean, why don't they make
a big acquisition? I look at I look at the money they have, right, I guess last fiscal year was one hundred and sixty nine billion dollars, And then I look at a Disney market cap one hundred and fifty seven. Why don't they just use it? No?
I think that's a fair point. I think a big reason they don't do it.
I mean, maybe not as much as an Apple's case, but in others I think there you know, I think there would be too much kind of backlash from a regulatory perspective to allow a deal like that to take place, to be honest with you, but you know, I think Apple does want to kind of have that cash available just in case they want to make a move like that. But at the end of the day, listen, it's not in their DNA, right. They've never made an acquisition or for three billion dollars.
We know that.
And when you kind of look ahead, and we look at their pipeline. We continue to view this as a company that could no longer term continue to grow the EPs at a ten percent plus clip. And those buybacks in terms of you know, essentially buying back three percent of their shares to continue to help that EPs grow trajectory. We'll support that ten percent plus EPs clip. So again, we think it's the right move that they that cash.
That net cash balance has been dwindling over the last couple of years to maybe to your point where that they don't they acknowledged that they don't need as much cash out there, But in the same respect, I mean, listen, I mean, it's it's a great problem to have, right if you're Apple, if you're Alphabet, or anybody any of these other megacap tech firms out there.
All right, Angela, Aside from from Apple, what else do you like in your coverage area?
Yeah, I mean, listen, We do continue to like a lot of the chip names out there, you know, specifically kind of the ongoing AI.
Shift out there towards general of AI. We think you're still in the early innings there.
And Video of course, is a name that has you know, essentially tripled this year and essentially nearly quadrupled off its lows. But that being said, we do think that, you know, over the next kind of three to four years, you're going to see this shift, this titanic shift in the form of how computing and networking chips out there are going to kind of be valued and the amount of demand you're going to see kind of from this general
AI shift. And that being said, we continue to like in Vidia as well as Broadcom, which has been two of the big winners out there. On top of that, mar as well as A and D we think are going to be big winners in the coming years. On top of kind of you know, some of our favorite names on the megacat tech names.
I'll tell you what Angelo in Nvidia. I guess they report after the close on Wednesday. Man, they better put up a big print because given what their stock has done on the back of that true big raise they had last quarter, exciting, what's the risk in that name? Do you think? I mean, man, I can't think of a company's got more expectations built into their stock short term than in Video.
Yeah, And to be honest with you, it's going to be tough for them to kind of expede exceed some of those expectations out there. I mean, at this point in time, you kind of look at what they did in terms of their last quarterly results essentially kind of double the expectation on the data center side of things, and we do think that, you know, they've got a good problem out there in the sense that their chips
are supply constrained out there. When you kind of look at the valuation, at least relative to historical levels, it's actually not that demanding. So we think there's very little downside potential at least in terms of where the consensus estimates are, and there is upside potential. But that said, you know, the valuation is always kind of the question
mark with Nvidia. Here, we think where investors continue to underestimate the Nvidia story is really kind of the fact that this is more of a total solutions company rather.
Than a steamy conductor company.
So you know, the capabilities and the upside potential on the software side of the side of things, if they taught that up on this earning school, that's where the upside potential we think is for the stop.
All right, Angela, thanks so much for joining us. Really appreciate getting a couple of minutes of your time. Angelo is you know, he's a senior industry analyst, says c f r A Research.
You're listening to the team ken'shur 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.
Bitcoint off five point six percent is to just reporting twenty six tho ninety people heading for the exits.
Here.
I'm going to check in with the King of South Beach, Mike mcloan, senior macro strategist with Bloomberg Intelligence. Mike, what's happening out there with the bitcoin?
You always bring me on and I start laughing from those Southeast connotations. So I appreciate that.
I appreciate that Paul.
Bitcoin is I think resuming a bear mark, and I look at it. The headline I put out today is appeared to me it appairs similar to the US stock market in nineteen thirty when it rolled over and then it kept going over down after it bounced. And the key thing about it is, let's just look at bitcoin right before this COVID right before the biggest pomp and liquidity in history. It was around ten thousand and still right now it's around twenty six. So I think there's
risk it can head that way. It's the leading indicator. It's one of the most world speculative digital assets, most significant. But I think that leading indicator is what to me is important for the rest of the market, like the stock market. The key to me win is just look at that US government too. You know you can purchase a too. You note around five percent lock up almost ten percent in two years, first time you've been able to do that since about two thousand and seven. I
look at it. Every rational person in the planet who's got money and is invested is looking at that and saying, thank you, I'll do that. And I think that's what's happening with all risk assets, and it's just getting started.
Is there a concern that you know, Elon Musk has sold a ton of bitcoin? Didn't I read that somewhere?
Yeah, I thought he sold already. I heard SpaceX today. But this is a problem I think with bitcoin. You're kind I think in this case, some of these leverage longs that brought right when the black Rock announced that they were going to apply for an ETF, it hasn't been approved. The market rally from about twenty five thousand to just above thirty. You get a lot of leverage longs in theirs. I think we're stopping those people out, and it's they're getting long for the wrong reason. With
the hopium that you're going to get an ETF. To me, it's a fund of metals.
Yeah.
Well it's a word I learned from bitcoin people and crypto people, that opium. And so now it's the question of what stops this downward trajectory. So one thing I pointed out and published to say, if you just look at one hundred week move an average at Bitcoin, it's rolled over and it's trending downward for the highest velocity ever. Now Bitcoin's only been around about fourteen years. And then I think to myself, what stops just normal reversion of
the best performing asset ever. And number one thing is the FED is still tightening. The FED is still telling you is still taking liquid e the way, and here's a highly speculative asset that went up a lot. I still think that's the risk it continues to revert.
Mike this sounds for bitcoin. From what I'm hearing from you, that more of a technical kind of thing. Do I look at GRET charts? Do I see where a technical bottom is here? Do I start doing that kind of thing?
I view it as the opposite. I was just on a call and they're toat pointing all the technicals. People trade it too much. I view it as number one headline is the FED is still tightening. And then you try to put it into things that we see as humans. We can't really you can see the tightening, can feel, but you can watch the price. And I just point out trends down, FEDS tightening. Use it discipline of a
good investor, respect the trend. So as far as I think people are looking at twenty five thousand is the first level, and then of course look at twenty thousand. I mentioned a level I think it could go back to in a normal recession environment, which is the view of Anna Wong our cheap economs. We should be heading towards the recession, which is the indication from the inverted Yeeld curve, And why not go back to ten thousand,
That's where it was before the FED. Well, that's where the it was hovering around ten thousand right before this massive pump on liquidity with the COVID. Now that liquidity is going way to break neck pace. Bottom line is all the lessons of history in assets that pump on liquidity, and when that liquidity goes away, you know that lessons are that assets usually reverted. It's a question of how far.
Where do you expect to see bitcoin in the coming years. I mean, is it possible that we drop back down to sixteen thousand or even test those limits again?
Yeah?
So I think it has a bottom around fifteen and most people look at that as oh, I'm going to be buying here and getting near there, and that is the risk I see as the bottom line for me, Matt is this is part of the macro. It's just a good indication that I think we're heading into more significant bear market. We look at the stock market, it typically doesn't bottom until about two years after the FED
starts easy. We haven't done that. They're still tightening, and to me, this is part of just this is the leading indicator. So I see, I don't know how long it takes, but like I said, I compared it to the stock market in nineteen thirty and right now it's a bear market. It's heading lower and the FED still tightening. So I don't even see light at the end of the tunnel for risk assets the bottom and bitcoin is just the best leading indicator.
All right.
So aside from bitcoin, what's the you know, if I go to a BBI commodity, what are some of the top two or three things you guys are working on.
Well, I'm still watching crude oil and now crudel is hovering about unchanged in the year. Obviously, I'm still bears crudel and a normal trajectory after the pump last year, as you typically head towards two cheap levels. Two cheap levels in crudel, not at eighty, it's around forty or fifty. And then you look at the macro of it. China is clearly in decline. Stops this downward revision and economic
outlook for China, I don't see it now. We should expect stimulus from there, but they just upset their biggest export customers, Europe and the US with this war. And it's not really China anymore. It's one leader, President Zy. So I think you're seeing a situation in China It's similar to peak Soviet Union and peak Japan in the late eighties early nineties. So there's a demand side and great and that's still going that way. When you look
at copper, copper is pointing that way. Copper is tilting lower. It's right around three dollars and seventy cents a pound. Its average price for the last year twenty years is three dollars a pound. That shows deflationary forces over overall. And I don't see what stops it from going that level. You have to see a major pickup in China, you have to see major weakness in US dollar and fed easy Typically they're they're all going the wrong way at
the moment. So I look at this is the early days of a bear market, and then you have to ask yourself, is just what happens to all these asks? If the US dour market rolls over for normal recession and typic, it doesn't bottom until we're well into an easing cycle. We're still tidying.
So when you're out of the clubbing South Beach, you don't talk commodities. Do you have, Mike, Please tell me you got a better game than that.
Well, I try to avoid the subject but I have to admit I've been in warning to most people, and people I just point out studying the history. I've been doing a lot of that late lately. Is I think we're heading towards the biggest reset of our lifetime. Now you just look at property values in Florida. There is no history of major fluctuations and property values in Florida. It looks like there's just starting to roll over. What
I'm hearing and this thing. The bottom line is we're still taking away the punch bowl, and that is what I'm really worried about. It's a classic example of the Look at PPI. The producer price in the next went from eighteen to minus three. That's finished goods. That's the biggest correction since nineteen forty eight, so pretty significant deflationary forces. And then you look at the Fed funds at five and a quarter, it's well above and CPI well above PEPI.
It's clearly contractory and we're just early days. So I look at this this is this is just a normal cycle. And the normal cycle is we're very elevating in risk assets. And bitcoin is the good leading indicator, which crude oil around forty, copper lower and you know, I just be lucky lucky. I mean, here's the lose lose. Every time the stock market's gone up, it's increased rate height expectations. I don't think the Fed's going to ease until the stock market tells him to by going down.
All right, Yeah, good stuff.
And I want to get you back on a little bit later, Mike, if we can to talk about what's going on with the eggs, because I think it's bigger than people realize, certainly bigger than we give it time for. And any he knows that stuff, I know. Yeah, all right, that's why he's the man for that.
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You know, Mat, when we talk about the economy, oftentimes folks to say, you know, I'm thinking about a hard landing. I'm thinking about a soft landing. And then we've recently heard this phrase, no landing and I think we need to talk to a licensed pilot, because I don't think that's even possible. Fortunate for us, our next guest is a licensed pilot, Jamie Patten. She's co head of Global Rates at TCW. So Jamie got a lot of smart
people there at TCW out in Los Angeles. What kind of economic landing are you guys calling for?
Well, thank you for bringing up the no landing scenario analogy, which is my least favorite analogy of all, mostly because it defies the laws of physics.
What goes up must come down.
But also just being a pilot, airplanes run on gas, and even if everything goes perfectly and you really don't want to land, you're going to run out of gas.
So I hate that analogy.
But I do love flying analogies, and I think that they're perfect for monetary policy hiking cycles, especially this one.
At TCW, we are expecting a hard landing.
Specifically, the analogy that I like the most is a soft field landing, which, to give you a little bit of background, not to talk about flying too much, but do it. Soft field landings are notoriously dangerous. Pilots never totally know what hazards lurk under the soft under the surface of a soft field landing. So a soft field landing is off airport. It could be grass, gravel, sand, snow exactly so, there could be wildlife wandering around. There's
barbed wire fences difficult to see from the air. A regional banking crisis might be brewing under the surface of a robust economy, and as we're coming in for this landing, we are not expecting it to be soft for a lot of reasons that I can get into, but we also see so many hazards and just the chances that the economy has a soft landing with a hiking cycle that's been the most aggressive and forty years, we just find to be very unlikely.
You know, I heard a great analogy this morning on surveillance from Laura Rain. She said that the economy is like an eighteen wheeler and before the Great Financial Crisis, when a lot of people still had fixed rate mortgages or floating rate mortgages, sorry, floating rate mortgages, the FED could pull on the brake lever and that would slow down like ten wheels, so it could bring, you know,
the economy to a stop relatively quickly. But now that everyone has shifted to fixed rate mortgages, the brake lever only affects like three or four wheels, and it's much harder to slow this truck down. Does that make more sense?
Absolutely so.
The way that we talk about this is the interesst rate sensitivity of the US economy, and specifically, we've heard a lot of FED speakers talk about this recently in the form of monetary policy lags. So we know they're long, we know they're variable, we know it takes time for an adjustment and monetary policy such as the FED hiking rates to feed its way through the macro economy, but
we don't know how long. And recently these Feds SPA, especially Waller last month, has said the lag should be shorter now because we have forward guidance that feeds into rates markets instantly, and the size of the shock will make the lags shorter.
We very much disagree with this.
We think that lags are likely to be longer today, not just The mortgage argument is a really good one. It's an eight trillion dollar agency MBS market and less than one percent now is adjustable rate. Prior to the global financial crisis, it was twelve to twenty times that. There are also other reasons that make our economy today less rates sensitive. One is the Fed's eight trillion dollar
ballance sheet cushioning the blow of financial markets. It was one trillion prior to the global financial crisis, and also some psychological impacts where the economy really has changed in some ways post COVID. One thing that we talk about here is labor hoarding. If a company had really struggled to get labor during COVID prior to COVID, they're also really hesitant to lay off that labor or reduce that
labor today. And it's harder to see that in economic data, but one thing you could look at is something like overtime hours, specifically in manufacturing. It's the lowest we've ever seen outside of recessionary times. So what does that tell us? We don't really need this labor, but we're going to keep it around, so maybe we just have them working less and less.
And then you.
Might ask, well, why does that all matter? Not just because we need to know when these interest rate hikes are going to impact the economy, but if the FED thinks that the interest rate impacts are going to impact the economy sooner, and we think that's not true. That means the FED is very likely to keep rates too high for too long, over tighten, and that would raise the risks of a larger than expected decline in growth
and eventually inflation. It supports our long duration position. I also think that's why this no landing scenario gets spread around, where people are just expecting the lag to be short. It's actually long. They think everything is great, but we see it coming crashing down pretty hard, just in more like a year instead of three months.
Man, you guys are brutal out there in la I mean, I know you got writer strikes and actors strikes, but.
Man, that's a dour outlook, not just brutal, a big deal, a massive attraction. If you're doing a tour around the country, do you stop at TCW.
That's me.
You build around TCW and Capitol Group and everything else falls into place.
All right.
So are we gonna get any rate cuts next year?
Jamie?
We do think the Fed will cut rates next year.
The market has the Fed cutting rates about halfway through the year. The Fed itself has has the Fed cutting rates about one hundred basis points.
Next year, we agree.
We think that the FED will wait to cut rates until they are very confident that inflation is heading back down towards their two percent target. And even though they're probably really happy with the progress they've seen in the June and July inflation prints, they still have a way to go. The last two prints for consumer prices CPI
was three percent three point two percent. That's one third of what inflation was last summer and one half of what it was even at the beginning of the year, but it still has.
A ways to go.
The fed's own forecast of core PC is still three point nine percent at the end of the year, so that's really far above their two percent targets.
Still, all right, Jamie Patten, that was excellent stuff. We're going to have you back whether you like it or not. Jamie Patten, co head of Global Rates at TCW. Not a soft landing kind of person. Definitely not a no landing kind of person, kind of suggesting there's a harder landing on the horizon.
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Gaming.
That's just the way of saying the casino business, which I love. Charles Gillespie, CEO of Gambling dot Com Joints is Charles, thanks so much for joining us here Gambling dot Com. Tell us about this company. What do you guys up to?
Thanks guys, great to be here. So, Gambling dot Com group publishes essentially online comparison shopping websites for the global online gambling industry. So you know, if you're going to go to Paris, for example, and you need to book a hotel, you're probably going to go to hotels dot com or Expedia or something like that, get all the information there at one place, and then book your hotel. We essentially do the same thing, but for online gambling.
So if you want to bet on sports and you're in New York or New Jersey or one of the other twenty five states where you can bet on sports legally in the United States, you come to gambling dot Com or one of our.
Fifty other websites.
We also have Bookies dot com, casinos dot com. We also on rotewire dot com, and we'll give you all that information help you find a you know, the best sports book or online casino for whatever your needs are.
Are you comparing the odds?
Who's going to offer me the best odds? Or what do you what are you actually measuring?
We do that.
Yeah, so bookies dot Com has got odds comparison then and tons of data about sports, but a lot of users, you know, they don't even need that level of information. They just want to know, Okay, in I don't know Pennsylvania, what sports books are even available, which ones are legal? And uh you know of the ones that are legal, well, which ones have the best sign up offers, which ones have the best customer service, which ones will pay me quickly if I win?
You know.
So in many cases, it's just kind of, frankly, more more basic things that move the needle for for individual users.
That we supply.
But yeah, for the sophisticated users, we've got odds comparison and all kinds of great stuff.
Now, Charles, this is it's kind of a controversial business. If you're an adult, you should probably be able to make your own decisions about what you do with your money, and if it were illegal, you know, everybody would be doing it underground anyway. But did you have any reservations with using such blunt brand names? Gambling dot com and bookies dot com is something that I don't think my mom would want me messing around with.
Absolutely not.
I mean, you know, to borrow a British saying, you know, they do what it says on the tin.
You know, it's very clear. It's it's good branding.
You know.
I obviously I'm an industry guy.
I've been doing this for seventeen years, so you know, I've been drinking the kool aid for a long time. But I don't think that the industry is controversially controversial at all. You know, when you zoom out and look at it from a you know, you look at the whole kind of thing in its entirety. What I think is controversial is states that haven't regulated online gambling, because it's not like online galling isn't happening in these states. You said it yourself that you know, all these people
are playing online regardless. This is a question of whether they're at the regulated sites or if they're at the Costa Rican and Panama based sites. And you know, you can't help the problem gamblers if they're not within the regulated ecosystem because you don't know anything about.
Them, you know. So it's it's it's clearly a net.
Positive for every jurisdiction that regulates the industry because they get they get so many more tools to actually help people that need help. And that is the real thing that we should all be doing, is trying to do what we can to minimize gambling related harm and that that obviously starts with a regulated market.
How important was it for the industry and Charles for ESPN to really to ink their deal? I think was it with Pen? I forget was it with pen, but just to ink their deal to really kind of put jump into the deep end of the pool with their deal with Pen Entertainment.
Yeah, I'm not sure they're in the deep end of the pool.
I'd say they've they're in the shallow end or at the kittie pool, you know, they're not.
They're not actually the ones taking the bets.
And what they've done with Penn is they've licensed the ESPN name to Penn, but Pen is the regulated gambling operator with all the licenses that's going to do the heavy lifting.
But it is a very big deal.
You know, this, this American sports betting renaissance started in twenty eighteen with the Supreme Court decision, and you know, ever since that moment, all eyes have been on ESPN and there's been tons of speculation about what they may actually do. Disney's, you know, obviously had a very kind of conservative approach to the whole thing. They don't want to be seen to be in the gambling business. They
certainly don't have anything to do with online casino. And it took five years, but they've finally done a deal. It's a it's it's a relatively simple deal where they licensed their brands to pen and as they said, Penel operated. You know, there's there's other chess pieces they got moved around when Penn announced that deal.
Uh, you know, they.
Had previously acquired our Stool, which is, you know, a fascinating media organization and and talk.
About controversial David, Yeah.
There's plenty of things have been said about about Barstool, and I don't want to wade into that conversation, but just from a pure media perspective, I mean, they have incredible engagement and a lot of the content is highly compelling. You know, it is a it is a fascinating business. And and in the in the end, Pen, you know, I think realized maybe that's not the best fit for a regulated gambling company. You know, obviously not everybody agrees
with everything that that Portanoy says. And you know, I think certain gaming regulators in the end were just not totally comfortable, right, And and Pen needed to essentially replace that partner.
And that's what they've done.
And and and Dave Portnoy at the end of this is has come out looking like an absolute legend, sold barstool for you know, an actual proper fortuit, and then and now having gont it back for a dollar exactly.
It's it's the stuff that's fun to follow.
That, that's for sure. Charles Gillespie, thanks so much for joining us. Charles Gillespie is the CEO of Gambling dot Com. This is Bloomberg.
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Now. I have been covering the automotive industry for a couple of decades. As a result, I kind of know everybody that works in the industry. So oftentimes these manufacturers will give me cars or motorcycles to test drive for a week and figure out, you know, what the product is like, which is I think very helpful in my reporting. This week, I'm driving a car from a brand that's very close to my heart. It's an Audi qight.
E tron Audi qateron.
Art, which is a little bit confusing, but basically it's their biggest suv that's powered solely by batteries and well we have video of it as well, so if you're listening, you can go to YouTube dot com and just type
Bloomberg Radio and you'll see this vehicle. Now close to my heart because the first car I ever bought was an Audi a four Avant, the station wagon version sure that was not battery powered, back in two thousand and that was a two point five liter turbo diesel, which I loved so much, same color, pretty much, and the interior felt the same. Everything kind of felt the same. The only difference is the powertrain. I want to bring
in Kyle Stock. He is a senior correspondent for Bloomberg BusinessWeek. He covers the car industry very closely as well. And Kyle, first of all, I'm not sure if you've driven this Audi, but if you've driven almost any Audi, the experience is really similar. And I think that's what they're going for.
Yeah.
And then and it's like very techy luxury, right, I mean it's.
They do this very well with the screens, with the digital dials, with the you know, the real time map information.
It's a it's a spaceship cockpit for me.
It is, but in a in like an understated way. So they have Obviously tech is their thing. I think their motto is for sprung doorche Technique, which who Germany. In German, it means advancement through technology. That's what they've always done. Uh. The you know, everything in the car is luxurious and it's and it's and it's almost perfect in a refined kind of way, not in a flamboyant,
like in your face kind of way. You're not drowning in leather there's not a fifty five inch screen, but there's exactly as much as you need, which I think is really cool. But I don't think they've cracked the whole battery tech thing because the range just isn't as impressive as other electric SUVs and you don't get Kyle to kind of, you know, punch you in the gut acceleration that you do in other electric vehicles.
Yeah, you're talking about the Q eight.
You were just saying the Q eight e Tron, which is their new version of the E Tron. Now they're calling it the Q eight Etron, even though it's not nearly as big um or as you know, special looking as the gas powered Q eight. But yeah, they just they don't seem to have the get up and go the other evs have, or you know, three hundred four a mile range.
Why is that? I thought it isn't an E You don't talk about horsepower anymore, do you?
Or do you can talk about horsepower equivalent? And this one has four hundred horsepower equivalent. Don't get me wrong. It's not slow, right, zero to sixty in like six seconds, which for a gas car is fast, right, But for an EV. I mean Kyle, we're looking at you know, the Kia GT ev stix or whatever it's called. The zero sixty and five seconds, Like, you know, these evs are beating Porschas off the line.
Yeah.
Well, part of the part of the equation you're seeing here is that QA and a lot of the Audi's are big cars.
For one, they're heavy.
Evs are heavy, and the content they put in there is heavy. So you know, you have seats that massage you. You have all the heaters, you have, all the electronics, you have all the you know, the luxury trappings and trimmings and that you know, weighs on a zero to sixty time. But it is notable that, you know, all the Mercedes Electric SUVs are super heavy too, and those things are quick. The BMW i X, which is.
Their new like a bat out of hell.
Yeah, that's pretty quick. You can choose your own picture, you know. The Cadillact Lyric is another one in this class that's honestly, really nice and kind of understated. Like these they they, you know, are subtle with their choices. It's not all screens, it's not all you know, theater and drama and rushing lights.
But Kyle, What are what are the EV manufacturers what are they really marketing here? Or what are consumers finding a board?
Is it range?
Is it that it's zero to sixty that Matt focuses on.
Is it screens?
What are they really marketing on?
So they're really it's funny it used to be range.
It's then it went to sort of charging time, like high speed charging. You know, you won't have to wait more than ten minutes. And now it's sort of drifting into this like no compromise zone, Like you can have the giant CV you want with all the trappings and trimmings, and it will go far enough and it will charge fast enough, and you just just kind of don't worry about it.
You know.
Mercedes, like all the Mercedes electrics, except like the really entry level ones have you know, very impressive range figures.
A lot of them are over three or miles, and they're they're frank about it.
They say that, you know, if you buy a Mercedes, you don't want to have to worry about range. And then and then there's a there's another slice of the market that is really going after the performance.
Like Matt mentioned that that new Kia.
GT Audi has a couple of electric gts that are that are just kind of bonkers, the Porscha, of course, and and they're thrilling to drive.
You know what. The the funny thing is And this is the only time I think I've ever said anything like this in my life.
Oh, here we go.
Even though it's not the fastest, even though it doesn't have the most range, this might be the one that I would buy if I were looking for a bee V SUV because the road handling is so nice, you know, the air suspension is so luxurious, because it has everything you need but not a thing more. And because I've grown up with Audi kind of in my blood, I really like it. It starts at seventy five grand, which expensive, but it's not as expensive as you know, a Mercedes
or the BMW i X, which is ridiculously expensive. But it is more than the Lyric and certainly more than the Kia.
That BMW starts at eighty seven the Lyric.
I think it's the Cadillac the Okay, I got you, Okay.
Yeah, the Lyric.
That thing starts at basically fifty nine thousand, and it's a lot of car for that money. I mean fifty nine thousand, you can get an electric Kia.
It's really really like Nissan Ariyah costs about that much when you had the good one exactly.
I mean, Cadillac's not making a lot of them.
It costs extra to get all wheel drive and like you know, the super crew stuff. But that car, there's a lot of value there at that price point.
So, Matt, what do you once you get the what's Missus Miller driving?
She drives evolvough XC ninety T eight and she's it's a hybrid, it's not a fully there and she's so in love with it. She says, you can pry this truck away from my cold dead hands. Okay, so we're not on there, but you know, I think it's fine. I would go hybrid as well right now, because I'm just I don't think the infrastructure is quite there yet. Kyle for a fully for a full ev and they're such great choices. The Volvo's a nice one, especially for
my wife. I like the BMW X five hybrid because it actually has the Inline six, the incredibly refined you know BMW engine in line.
Six that's an internal combustion engine.
Yeah, but Inline six and a twenty five kilot battery.
So it's got.
But what do you think, Kyle about fully V versus hybrid.
I'm all in, man, I think it's there. I think the charging is getting there. You'll see we're doing a big piece. You'll see it in the next week or two about how much infrastructure.
Went in in the past year. Nice and then I didn't.
Five billion dollars is going into charging in the next twelve months from the I administration, not twelve months, and that's probably twenty four months.
But those stations will start popping up. I live out here in.
Colorado, so cold weather's a deal.
Elevations a deal wins a deal.
But I've never I haven't had a problem, and.
I think it's getting there.
Oh but I'll tell you the Goldilocks rig that I really like, Matt. I just had the Mercedes GL four point fifty E, which is a hybrid and a serious hybrid. So this thing, like standard great Mercedes SUV goes fifty miles on a charge, which to me is kind of a magic number because like, yes, you're hardly for burning gas if you have that kind of range, and you have the gas if you need it, if you're going farther. I love this car. I don't know if you've been in it yet.
I haven't tried it out. I definitely would would like to, but for now I've got to give this Q eight E Tron back. And it's a little bit of a bummer because you get in the flashy special cars and they're kind of fun and interesting to drive, but there are also a lot of work. This out eve to me like the perfect car for commuting. It's executive, it's German and.
Everything you like. All Right, Kyle, thanks so much for joining us, and we'll get back to you on This is more car stuff. Kyle Stocks, Senior correspondent, Bloomberg BusinessWeek. What is Matt Miller driving? We're gonna do this more often because it's always fun to talk cars, and we'll get some smart car people on here.
Thanks for listening to the Bloomberg Markets podcasts. You can subscribe and listen to interviews at 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,