Markets, Streaming, And Crypto (Podcast)

We've got the ECB meeting tomorrow, the FED. We're gonna get at something in July, I believe, is the dates of lots for this market to digest. To take a step back and put it on into perspective, Luca Paolini, chief strategist for pick Ta Asset Management based in London. He joins us, Luca, as we stand back here and start to really get into the teeth of this earning season. What do you expect to hear from companies? What are

you looking for? What are you kind of paying attention to during these earnest conference calls that we're all listening to. What morning everyone, Well, I think you know the we tend to focus a lot on what company is gonna tell us about the consumer, I think we should actually look at investment because investment normally is the real driver would really create a recession. So I think from the consumer we know pretty much the fundamentals. We know what

can go right, what can wrong. I think the real for me the question mark and what I want to know if companies are holding back on investment, if they are reduced in accounts, and I think in this especially

discerning season, we actually expectations are quite low. I want to see the guidance and when I see companies telling us we are company enough or not company enough to basically expand, to increase basically to two to hire people, and that's for me, would be the focus because I think on the consumer we pretty much know the story. I think for on investments it's being very strong. And I think this is to me is the key things to watch, not so much the residence or not of

the consumer. Are I haven't seen evidence that companies are holding path, that they're waiting to make that decision. And on the on the fringe, certainly on the West Coast, starting to reduce at least the pace of hiring or even cut back on headcount. Well we've seen obviously apple in the data. When you look at for example, capital

good orders, I seen an outcome high. What is what has happened though that investment expectations or plans have been cut significantly, So again there is this kind of the data still looks very, very solid. I think, though I can see at the margin um some significant potentially reduction investment. But again that's where that's why I'm waiting for companies to tell us, because I think it's clear that momentum

is lowing. But it's also clear that you know, you don't want to basically get rid of people, and it's so difficult then to rehire them. So I think it's very important for me to have a sense if companies are confident enough and and I think that's the key point. Looka here at Bloomberg, we really take a global view. Our audience takes a global view. We have important day from the European Central Bank tomorrow. What are you looking for? UM?

You know, the European Central Bank as this incredible ability to disappoint UM. In the past two occasion when they create in July we had a recession. I think this time they'll have no other choice. I don't think that the interest rate, I I think it's more like, to be honest, for me, it's more likely to be fifty bus this point, because I think they want to send the message that they have in prestion under control, and at the same time they want to send a signal

that they're there to help the terriphery. So probably that that's a compromise that will emerge from from the council. Twenty five or fifty bus point, I think it's pretty much the same. I don't think it would change anything. But I think also they're they're forced to take action, you know, with the Europe pretty much a parity inflation going through the roof, I think that to take action, But I don't think it's going to be a huge market mover. I don't think that would make a big, big, big,

big difference for markets, to be honest with you. We saw the euro at least rally back through a dollar up to one oh three, one or two. Right now, Um does that kind of hold or do you see continued dollar strength here? I mean I'm looking across the spectrum. Right one, we're back up to the pound. Um still one thirty eight for the end, so still incredible weakness there.

But does does d x Y continue to rise? But I I do believe that the dollar is very very close to a major peak, secretical and and and also strategic. But you need, though, I think, to two things. What clear indication that you have inflation of peak. I think it does, but this is not the view of everyone. And second one we need to see a clear reacceleration in China, where the evidence is also not for people,

is strong. So I do believe, and you'll be surprised at what I'm saying, is that the currency which has them what upside here is the end, the end, because the end that's been effectively killed by what but interest rate expectations going up everywhere else apart from Japan. And and if the reason if the global economies leaps into recession the interest really differential, we go actually in favor

of Japan. And given that the expectation are solo and evaluations were attractive, I think and all sounds strange that the Japanese end could be the big surprise in the next three to six months for the year. I think there are too many risks in terms of the war in Ukraine, d C be Italy I think it's probably still a little bit too early to be bullish on the Europe. Look at real quick at thirty seconds happened fixed income. It's been a brutal first half of the year.

Any opportunities there, Yes, there are, There are in some emerging markets like Brazil. I think also in some parts of the of the credit market. Corporate depth, especially in the US, Triple A names saved names, good yelds. I think still solid in a way, solely fundamental. Yeah, we start to see some values again, especially in the US and some parts of YEM, but we stay away from Europe. All right, Luca, great stuff. Always appreciate getting your perspective.

Luca Paolini, chief strategist for picked A Asset Management. He is based in London. Why does everyone hate rats so much? Are they worse than squirrels or chipmunks? Yes? What did you say? Did you say poop? Yeah? I don't think you can say that. No, I'm not sure, but we'll check. Ken Fell. You says, maybe that's okay, okay. Our director, our global director, Ken Fellow says, you can, but let's not. Let's not. Let's know that's a brutal story, all right,

Greg Jarrett, thank you so much. Here are we got a Federal Reserve meeting coming up, said July. I think that's the big one, Jennifer Leasy, and your economist, managing director of Demo Capital Markets joins us. Jennifer, I mean we're in the midst of earning season. That's kind of got investors intention here. Um, but again, we know that the real focus is on this Federal Reserve as we think about inflation, as we think about recession. What do

you expect from our federal reserve? Good morning? And by the way, just on one funn'l know what you're saying earlier, how about raccoons? Yes, for the FT, I mean so for the Federal Reserve, I mean we so we expect a seventy five basis point Ray hike, Um, jesus next we call already, UM. I don't think um a lot of people anymore are thinking about a risk of a hundred basis point move, just given that we've seen the

softer data lately. UM. In terms of what he the Fed Area is going to say, I think he's I would expect him to soften his um, his his points about the economy. I mean, last time we heard from him was that was in Centrup, Portugal, and he was talking about how the US economy was in strong shape and well positioned to withstand tighter monetary policy. And I

still think that second point is probably still valid. But you know, we have again seen some weakening, you know, for example in the housing market, some slightly softer you know UM retail sales data last week, and those are the pieces of data that Governor Waller was what was talking about referring to in terms of what he was going to how he was going to vote next week. So I think centified basis points is probably the base case UM right now, and maybe soft softening is too

a little bit on the economy. By the way, I have a bet with Critty Gupta um dinner of her choice that inflation has peaked. I think it. I think nine point one percent was the high rating for cp I. Do you think I'm at risk of losing that bet? Boy? I hope it is UM. But I think over the next few months the the yar year comfortables might get

a little tougher UM. But I think for the July CPI UM report probably gonna see it pulled back, probably probably below the nine percent level, just given that gas prices to have. You know, we had some relief on the on that front at least, but again, broader measures, I mean broader measures in terms of the core measures are still quite elevated as well. So I don't know

if they have completely hit the peak. But we've been saying Q three and I think I've been saying September ish, so I'm sort of waffling on that front, but you know that I'm really hoping that n would be the peak. Jennifer, what do you make of this U S dollar? I mean, it's the highest if you look at the d X Y and next the highest and almost twenty years kind of thing they almos put that into perspective and kind of how you think things may play out. Don't afford.

It's got a lot of it still has a lot of tail winds behind it, just given you know how aggressive the FED is planning is still planning to be, you know, um raising rates expeditiously, and then when you're looking at it versus you know, for example, the euro even though you know everyone's expecting or we are all expecting the easy of you to do something tomorrow, you know, as your last guest said, you know, they have a habit of disappointing. Um. You know, this is probably a

great opportunity for them to prove everybody wrong. But if they don't, you know, we could see you know, the euro dip below parody again. Um, the pound. Also, it is getting a little bit of a tailwind this morning, but at the same time it also has a lot of headwinds facing it with potentially eleven percent inflation coming up, and of course you know, much slower growth in the second half with inflation so high. So I think because of that, just us all broadly, I think still has

some life left in it. By the way, there are many words we cannot use on radio to describe the European situation this winter. How much trouble is that economy in It's uh, that's one reach one area that I'm very concerned about, just because of that huge heavy reliance for too long, um on Russian energy. And even though they are now finally trying to rid themselves of that reliance by cutting cutting their their their dependents by two

thirds by the end of the year. You know, I would consume you say, good luck with that trying to build all those lergy terminals when you're still having a big shortage of supplies and of labor. Um. But this is the one point in time in my life I will say that maybe it's a good thing that there's uh climate change um and global warming because hopefully the winter will not be really really bad and you know, and so the gas usage will not be as high

as you know as the worst case scenario. But you know, this is one area that that for sure, I'm quite concerned about. Thirty seconds left gen Um, what's your recession kind of expectation? Is it above the US? For the US? Yeah, um, maybe a little bit over Um. We actually have a

negative sign pencilion for the early next year. Um. Maybe not you know your traditional um two quarters in a row of negative growth, but certainly much flower growth, almost like a growth recession, as we have unemployment taking up a little bit as well towards the end of this year and next. All right, Jennifer Lee, thank you so much. We always appreciate getting your thoughts here. Jennifer Lee, Senior

Economist and Managing director bemo Accoumpital Markets. Again the ECB meeting tomorrow, Bloomberg surveillance will be all over that in your early morning coverage you can rushed to short there and then of course we will definitely overcover the ECB. We love the e c B. Well, Christine looks some of us love it. Yeah, some of us love it. But again, certainly for European listeners and viewers, a big, big meeting tomorrow will certainly have all that. Looking at Netflix,

I reported some numbers last night. I think the takeaway was it could have been worse. Um. Looking at the stock, the good news is it's up four percent today. The bad news is down on a year to date basis. Let's break it all down with Mark Douglas, President CEO of Mountain. Mountain is an advertising software company enabling brands to drive measurable conversions, revenue and site visits. So Mark owned by owned by Ryan Reynolds, acquired Ryan Reynolds Creative Agency. Okay,

so Mark, how do we say this? I guess not owned by but you got together with Ryan Reynolds. Yeah, Ryan um chief creative officer or a Mountain. So he Um has made a lot of movies and I didn't want to do some other things, and he and I teamed up and he worked in Mountain working with a lot of our customers and obviously it's business strategy. So it's see I said it wrong. I said Mountain was owned by Ryan Reynolds. Actually Mountain bought Ryan Reynolds exactly

exactly the work maximum method, Yeah, maximum effort. I'm kidding, all right, Mark, So again Netflix numbers last You know, the tide has changed here. It's not, you know, grow at a breakneck speed kind of thing. They're trying to adjust to a new world order in terms of a lot more competition that maybe the easy growth in terms of subscriber growth is is done. What did you take

away from their results last night? Well, I think the one thing to take away is they still are twice as large as any of the competitors in terms of number of subscribers. So the number of subscribers is clearly slowed. I think Netflix people are are responding. Actually I think a bit more to how quickly they're responding, announcing the ads business, announcing um new ways of doing passwords sharing

that that generate revenues for them. And so I think that's the big too, that overshadow that there's still been some subscriber losses in the quarter. And I think you'll continue to see that there's some growth in the stock as people see them acting decisively. Okay, Mark, how about this advertising opportunity for Netflix? Um a lot of analysts on the Walsherter saying this could be a big deal in terms of the new source of revenue. How do

you think about that? Yeah, absolutely so. I think the opportunity here is it can be as potentially as large as Netflix's current revenues. So they have as much as of all viewing a TV has tone on Netflix. So it's just a huge amount of user engagement people watching shows on Netflix that they can potentially monitor size. Now, there are some challenges. All that content wasn't acquired by Netflix with advertising in mind, so they have to potentially

get rights to do ads on that content. They have to like find places to do it. But there's also a lot of opportunity because they have no legacy advertising business, they don't have to have thirty second TV ads. They can choose any format with any content over time, and I think the revenue potential is at least as large as Netflix is right now in terms of their their size.

What happened in this market yesterday I was at the crypto UM convention, and obviously crypto has been pooh pooed because of the incredible crash of bitcoin, but they all said, hey, you know what, it's nothing compared to Netflix. You know, Netflix has done much worse than than bitcoin, which I thought was a silly comparison, but um, it does show you just how much I guess froth was in streaming.

Is it all across streaming or was it just net Flix? Well, I don't, I mean frost it's been I think it's a pretty strong term. You have to look at it. That Netflix lead of revolution. They completely changed the relationship between consumers and entertainment, you know, allowing on demand viewing, allowing you to get you know, an entire season the shows all at once, and so that innovation I don't

think is I wouldn't perceive that as frosty. I would consider it that the market was crashing and Netflix announcement that we're having some subscriber losses, and you know, everyone reacted,

and I think obviously they have challenges. This is not going to be easy to transition into having an ad supported price point for them, But I think the potential there is clear, and so I think Potentially people overreacted in terms of the sell off and Netflix stock, and you know how the not the price declines in the last quarter and you and you're starting to see that turnaround. Mark, what do you think about as we step back and

take a look at the streaming business? Everybody and the brothers got a streaming service now, and they're all it seems like they're all named plus. Um, how does this shake out? I mean, are we going to have three players? Five players? Ten players? Are more? Well, there is a lot of consolvation. I mean if you look at like Netflix, Disney, Discovery Networks, NBC Universal, I think you're looking at like five companies or essentially half of the entertainment markets for

for you know, and television viewing at home. So there's already somewhat of a consolidation. I think you'll see that continue. Um. In the advertising space, actually, the brand advertising market is not really growing that quickly, so you're looking at somewhat of a market share war. In other words, you know, when Netflix comes to this market with TV ads and Disney comes in the market with Disney Plus, it's not like Procter and Gamble is going to allocate more budgets

for TV ads. So it's a bit of a market share war actually. So the opportunity is to expand the number of television advertisers to basically go beyond just these biggest advertisers or else it is going to be a bit of a fight and um, so they have to

kind of do both things. They have to get into that market with the biggest advertisers, and they have to innovate with Microsoft in case case of Netflix and Disney, you know, with their Hulu division, um, in terms of to essentially expand the market, or else everyone's going to be fighting over the you know, the same pool of dollars.

All right. So Mark Disney just came out a couple of days ago with an announcement they secured nine billion dollars in advertising commitments during its Upfront ad sales event, which happens kind of Mark May of every year. Uh, they're saying streaming played a big part of that. How do you what are your takeaways there? Well? I think the I mean, I know they love to announce up front, but I don't see upfront as a concept lasting for

many more years. The concept what's that? But the the thing is is that upfronts were created because you have, you know, a certain number of advertisers that are looking for the same shows that the same group of consumers are watching, and so they could get people to bid against each other to get that. But when you look at streaming, you know, you don't target basic, you don't care about the show. You care about who's the consumer I'm trying to reach, and so you don't really need

the upfronts in the same way. So I think, to me, we've reached peak upfront like that, like the parties on on going to be on the dep line, I don't think this is the any I think we've reached peak up front. But the industry overall will grow because the upfront models of fifty year old business model that is due for a change, and I think of change is going to our car. Yeah, it's some good stories, Matt

from some of these upfront parties. All right, that's Mark Douglas, President CEO of Mountain getting the latest on Netflix again. Kind of a mixed report last night, but the you know, still talking about what is a growing streaming industry. Let's check out with Mike mcblown, senior commodity strategies for Bloomberg Intelligence, and he's one of Matt one of those of the cool kids that during the pandemic relocated from the Northeast

down to Miami. And he's always, you know, boasting and talking a big game when we're freezing up here in January and February. Mike Howard things down in Miami in July. It's funny I came south. I can cool off in the summer. You guys are getting heat waves now, that's right. Wait are you here? I just saw you here yesterday. I was yesterday, but I had to come back to the rough digs here in Miami. It's it's tough, but you know, you got to do it. So do we

have what do we have going on here in Bitcoin? Well, I think the big macro pictures. Bitcoin is one of the biggest bull parks in history that just had its biggest steepest discount to its Hunter week moving average ever. That was just a few days ago. And then you look over the other one of the biggest bear markets in history, crude oil had its steepest premium to its Hunter weak movement average ever and that was just a few months ago. And I think what we're doing is

getting that reversion process now. So since we had that seventy five bases point hike which was last month, we're probably gonna get one next week. Bitcoin is up about ten and crude oil is down about ten percent. To me, that's what's going to continue to happen partly because of this is the macro the micro and the key thing I think to worry about it for a bitcoin is only if we get another big plunge in the stock market, bitcoin might drop. But it seems to be in the

process that coming out ahead. And I think that really showed us last Thursday. Remember we had that bounce in the stock market. Bitcoin did it first. It's like Mattisman point out point in a lot. It's just a great leading indicator at the moment. Still is so you tied oil and gold together? Are they well in this year? And that's one thing I've enjoyed it. At a few conference people asked me why are you writing so much

about Krudel. It's one of the most significant as people would say standard deviation moves versus the hunter week movement average ever in crudef futures and bitcoin, when I'm just seen as a normal discount in a bowl market, but I have to row open Krudel. So let's remember the beginning of the year, the FED was gonna hike twenty five basis points at every meeting, and then we had

this massive spike in commandities led by Crudeil. Now they're hiking seventy five basis points at two meetings in a row. I mean they are taking up the sledge hammer on markets. They are it's a sledgehammer, and it's okay the stock market sponsor, that's great, but I think they're going to

just keep tightens. The stock market gives up, and Bitcoin I think has had you know, it's pretty good bear market, but it's had the normal nuances you'd see in a in a you know, Nath and Technology were seeing that the leaves of some of the bankruptcies and stuff. But it's probably more likely just to come out ahead. It's this question of timing and Valtilly, what was your takeaway yesterday? I saw you at the Bloomberg Crypto conference in I

guess what do you call? It's not Midtown anymore. It's like the Grammercy Park area district in any case, Um, what was your takeaway there? We saw some big names Um talking Jack Millers, I spoke with Sam Bankman, Freed spoke with Matt Levine, UM, Michael nova Grad spoke with

Shonali Basket. What was your takeaway? Very similar Matt to what I took away from the SALT conference in Bahamas as lost the people in the space realized that this has got a little bit a bit overdone, in a little bit bubblicious, and we're personal bursting the bubble and out of that, so many people are so positive about the new technology, what it's gonna do, where it's gonna go.

And that was my takeaway from UM from Sam Bankman, Freed, Nova Grant said, I really like telling you, yes I was wrong, but moving on, this is a pretty significant technology. And also on my panel, you know where are we a year from now when we get past this period of we all remember from the dot com bubble. A year from now, we've built a better system and it's

about appreciation. Wow, So you were talking to us, but you're still a bull You're still But I wonder when you get when you step out of crypto bubbles, isn't it hard to keep being bullish after a drop from sixty whatever to well let's put it in context. We've dropped about twenty five trillion dollars from global equity is based on Bloomberg metrics, and we lost about a billion a trillion in cryptos. I mean now, right now, cryptos are a rounding error compared to what's happened in the macro.

We've had the biggest draw down in the in the in the bond commodity, in the bond future, which is why I started in trading pits in the eighties. Ever, and well it's since nineteen seventy seven, so the markets. Bitcoin is part of the and cryptos are part of that macro. But the thing is, is the fastest horse in the race where is it five or ten years

from now? So here's my bottom line in bitcoin. I fully expect this twenty thousand level is going to be like five thousand was the last beer market, and it's just a matter of time it gets two hundred thousand. Something has to change in the demand and adoption because the supplies declining, that has the prices have to go up,

and I don't think that's going to change. I think we're just going to see more dip by ever, like do you ever go out to dinner with people who aren't involved in crypto, or like hang out with someone who's been burned and doesn't want to go back into Do you have a heart doctor? Maybe he has lost money on like Mike Novgress mentioned, well, a lot of people got over their skis the way I look at

the bottom line for cryptos. If you're running and say a hundred newness of any acid, you don't have one or two of those units in crypto, you're at greater risk than not doing it. And to me, that narrative was kind of a smaller part of the bell curve maybe five years ago. Every day that goes by, it's an increasing nuance in the space. Realize, okay, I gotta get into space. I'm willing to buy dips in crypto.

It's got the highest spade. And if if the market goes up bitcoinsrob we're gonna go up the most cryptos. Where will and where is it five ten years from now? Do we really think the will going digital is not going to adapt this global digital collateral? And then you look at the theory, it's really the bottom line for n f T S tokenization, which is the key thing on of my panel there's nothing to stop the tokenization of assets. Regulation will push back, but it's a matter

of time. And the most widely trade to cryptos on the planet. The number one is the dollar. Key think I remember it's a token dis version over the dollar. All right, folks, everybody's out there. It's got a Bloomber turmal in front of them. B I Space, c O, M D GO. That's the commodities dashboard run by Mike mcglowa, Bloomberg Intelligence. It's got it all the soft commodities, the hard commodities, all this crypto stuff is the place to go. Well,

he'll know if we had a peak. Do we have a peak in inflation at least on the material side, Oh sure, it's very close. In terms of commodities. Commodities are plunge. You look at copper down in the year. It's the most extreme versus a hundred week moving on average since the christ since Lehman collapsed. So if copper is pointing out that we're heading for a major deflationary perry,

services is probably the problem. Right at least that's what I heard Tom Keen saying this morning that services could continue to rise in price. So all right, I could lose my bet with Critty. Alright, Mike mcglogan down in Miami, sweating it out with the masses, but probably no worse than here in New York City. I mean, I mean, try go down and so it was quite hot yesterday. Alright.

Mike mcglowan, Senior Commodity Strategies bloom Intelligence. Again. That uh ticker B I, SPACE, c O, M D GO is all of the commodity research coming out of Bloomberg Research, and Mike has covered everything over his several decade career. The hard commodity is the soft commodities energy. Uh. And now he's really established himself, as you know, within Bloomberg Intelligence and within I think the industry itself, one of the leading research voices for all things scriptose. We appreciate

getting some time from him. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews with Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller. Put on fall Sweeney I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio.