Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside my co host Matt Miller.
Every business day we bring you interviews from CEOs, market pros, and Bloomberg experts, along with essential market moven news.
Find the Bloomberg Markets Podcast on Apple Podcasts or wherever you listen to podcasts, and at Bloomberg dot com Slash podcast. Big Big News Nugget Today on the Big I mean we have it's this NonStop. Microsoft wins a US court nod to buy Activision that remember this is a sixty nine billion dollar transaction to Federal Trade Commission was looking to kind of block this deal. The court said no, ruled in favor of Microsoft Activision stock Trading hire.
Here.
We want to get the details, and we're so fortunate to have Jenre with us because Jenri from Bloomberg Intelligence. She covers all the anti trust issues across a number of industries. She's really an expert on anti trust and we want to get her sense of what's happening here. So Jen, a big win for Microsoft and Activision, not a good day for the Federal Trade Commission. What do you take away from this?
There really isn't and you know, the Federal Trade Commission is going to have to rack up a win one of these days because their track record is not so great yet. But this was really a big deal for Microsoft. This was make or break the deal. If they had lost today, they probably would have had to abandon because the process then would have extended for years. So they needed this to move forward. And now it looks like,
really they just have the UK to tackle. And since the last time I talked to you, Paul, it looks like we have some developing news because they are talking about suspending the litigation in the UK, which means to me they're probably talking settlement at this point with the Competition and Markets Authority there.
So then would that mean the big barriers that were in front of it are potentially out of place at this point and it could more easily go through.
It looks like we're getting there absolutely if they can. If they can get to some sort of a settlement with the CMA and the UK, they're good to go.
Now.
I want to be clear, all that's.
Happened here today is that the refused to temporarily block the closing of this merger. The FTC still has an ongoing matter. Internally, it's called a part three, which is litigation to determine if the deal actually violates the antitrust laws.
There's nothing stopping.
The FTC from continuing to pursue that even if the deal is closed. At that point, though, it really becomes much harder for them because what they have to do is seek in order to unwind, which is even harder than in order to block a deal that's vertical in nature, which is tough to block to begin with.
But it doesn't necessarily mean even.
If they settle in the UK, even if they close the deal, doesn't necessarily mean that the legal challenge won't continue by the FTC. I would say, though, if that happens, I believe it's a losing battle on the FTC side.
All right, And Activision stock up eleven percent. It was up about five percent on the Microsoft on the when the court ruling came out, now up eleven percent. Maybe getting a sense that the UK may there may be a settlement there. So Jen, you're expert in kind of working with a Department of Justice, the Federal Trade Commission, all these regulatory bodies, and we know what the Biden administration it has been taking a harder stance on deals in general.
This looks like a bad day for the FTC. How bad was it?
You know?
I think it's pretty bad now. This was going to be a tough battle going in.
As I said, this is a vertical deal, and it's very hard to challenge a vertical deal. The last time an agency tried to do that, it was the Department of Justice with AT and T and Time Warner, and the DJ also lost that pretty resoundingly and also lost on appeal. By the way, in that case, it is very hard to prove harm when companies are vertically integrating. It's very different than when two competitors come together. Because
that concentrates a market. It's much more obvious how that might cause some consumer harm, and in a vertical situation it's less obvious and harder to prove.
But I do think this was a big test.
I mean, the FTC is simply trying to stop many companies, but in particular big tech platforms, from growing through acquisition. They tried to stop Meta from buying Within. They've now tried to stop Microsoft from buying Activision, and they haven't had success. It doesn't bode well for any future challenges, I think that may be coming up.
As far as when it comes to future challenges, what potential other mergers are on your radar that you're keeping a close eye on.
Well, I'm really watching Adobe Figma carefully because that's been pending for a while and the company's finished up their investigation in mid March, so I think something should happen there at any time that's before the Department of Justice, and I tend to think there will be a lawsuit to try to block it, because it sort of hits an area of heightened sensitivity right now, which it has the appearance of an incumbent buying a sort of smaller, scrappier,
nascent competitor, a company that's posing some competition now but might grow into a bigger competitive threat in the future if it stays independent. So I think there could be a lawsuit there. There's a little bit you know, broad Common VMware is also pending. I just saw some breaking news that that might get clearance in Europe. I think that a deadline there is something like next week for
the European decision. If that happens, I think that votes pretty well for getting clear And elsewhere we have Kroger and Albertson's very big grocery deal that's pending before the Federal Trade Commission, So we'll have to.
See in second half.
We could certainly see either a settlement there or a lawsuit to block. I tend to lean more toward to lawsuit to block because we just haven't seen a lot of settlement activity by this FTC or DOJ yet.
In the last year.
And then we have the pending litigation Jeck Blue and Spirit. The Department of Justice has already challenged that and that's going to start trial in October.
So I'm watching that one as well.
Lots of follow Hey, Jen.
We also have the folks from the PGA Tour testifying in front of Congress today pending merger between the PGA Tour and the Live Tour, including a big investment from a Saudi investment fund. I'm not sure if you're a golf fan, but is there antitrust risk because that sounds like a horizontal deal.
It is, And you know, Paul, I'll say, I'm kind of adjacent golf fan.
That kind of means a huge golf fan, and that makes.
Me adjacent, right, So sometimes I'm in front of the TV watching some of this stuff.
Yes, I agree with you.
That's a horizontal deal that superficially facially looks anti competitive, like a merger to monopoly or near to it. And so it's very surprising from an anti trust perspective that they move forward with this.
Now.
Congress is also worried about national security issues, so I think today's hearing may actually it covers both. I think it may be more focused on national security, you know, the idea perhaps that the saudiast could get in their hands the data of US golf fans, golf golf consumers, or even other issues. But from an anti trust perspective, Paul, it looks like a very difficult deal to do to me. And golf doesn't have an anti trust exemption like some
other sports leagues. For instance, baseball has some limited trust exemptions. Golf does not have that. So we'll have to see what happens here. We do know that DOJ has already opened an investigation the Ant Trust Division, so they're looking at it. They'll be investigating it, and if they filed a lawsuit to challenge that merger wouldn't surprise me at all.
Any indication of how long it could be before we get some more news about Microsoft and activision ah soon.
I think we're going to get news every day because their end date is July eighteenth, right, that's next Tuesday,
So they really want to close before July eighteenth. So I suspect they're talking right now very earnestly with the UK CMA, trying to reach some sort of settlement, maybe even with an agreement that let them close before their July eighteenth date, so maybe Monday or even this Friday and hold separate if they need to for continued discussions with the UK, or if a settlement can't be reached, to go through the appeal, because holding a company separate
obviously makes it much easier down the road to unwind
the deal if the UK were to veil. But I suspect at this point, given overwhelmingly the global regulators who cleared this deal, you know, Europe didn't only clear it that Europe said the settlement was pro competitive, that it wasn't just neutral, that it was pro competitive, and I think there's a lot of pressure on the CMA to let this go forward, also with some kind of a behavioral settlement promises by Microsoft not to take these Games exclusive.
All right, Jen, thanks so much for joining us. Really appreciate it.
Jenri antitrust litigation analysts for Bloomberg Intelligence, pining on a number of deals. The big news today Microsoft getting a court clearance to proceed next steps with its Penning acquisition activision. I remember that's a gaming company and this transaction is fight. It's sixty nine billion dollars, so even by Microsoft's standards, pretty darn material.
We'll have more reporting on that going forward.
You're listening to the team Ken's are Line program Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot com, the iHeartRadio app and the Bloomberg Business App, or listening on demand wherever you get your podcasts.
I'm looking at the Bloomberg Commodity Index exactly, and you know from its high recent high back in August September of last year, it's then about almost twenty percent, so that there's yeh, disinflation for you, I guess. But we got some in our studio here who knows a lot
more than we did. David Schastler, portfolio manager and head of quantitative investment Solutions at van Neck, joins us here in our Bloomberg Interactive Brokers Studio David talk to us, tell you guys at van Neck, how you guys trade invest in commodities?
Sure, so we manage a commodity fund, the tickers pit pit. It's throw back to the old commodity pits. Really what we do. It's a quantitative approach. So we're looking at a few different things. The first, we're looking at what is the structure of the curve, so are we in backwardation or canentangle? If we're in backwardation, it's an implication that there's some likely supply issues bullshtign so that's something
that we watch closely. Second Ndarily, what we're doing is we're looking at prices and seeing are these commodities well behaved or not. Clearly, natural gas has not been We've been significantly underweighted for a very long time now. And then the third mean reversion commodities are super cool in the sense of they may not have the most attractive return stream, but they're always zigging and zag right and if you watch those zig and zags relative to each other,
there's usually an opportunity. So we will look for mean reversion opportunities within there. So it's a very active strategy and that's.
What we do. So how are you advising clients to position at this.
Point within commodities or from an overall acid allocation?
Start with commodities first.
Within commodities, right now, we are bullish on energy. We have a round of fifty percent allocation five zero percent allocation to commodities, significantly higher than what you reference before with the Bloomberg Commodity Index. We're bullish on oil right We've got a big CPI report coming out tomorrow. Don't have a big view on that, but if you look at the CPI trends, inflation's falling largely because energy prices
are falling. We don't think that that trend continues. In fact, we're obviously betting in the opposite direction.
A lot of those issues.
We think are behind us. Lower prices, softer prices are discouraging production, right Saudi Arabia reducing production, eating into supply. Obviously the spr stuff largely behind us. We think loial prices firm up here, go higher. Clearly we're betting on that.
So then the production issues would be the catalyst to moving energy prices.
Yes, so hate to be bearish on the economy, but we are okay, But there's a relatively inelasticity of demand when it comes to energy prices, when it comes to oil. So we think we can see a softening and demand modestly. We think that the supply side is where the juice is in the story, and we think that that's what drives that's what firms up prices and eventually drives them higher as we move later in the year.
And now that the contra cost to this is Bloomberg intelligence. Mike mcgloan are commodity strategist. He says, if Miami Mikey says it goes to fifty before it goes to one hundred, it's just that's the and his thing is and I actually I won't speak for it, but anyway, so and I guess the bearish call is just demand that the
demand curve is outweighing the supply curve. Here is at a concern of you that demand out there, whether it's Russian up being as strong as we thought, whether it's being the continued tensions in Ukraine or whatever, maybe a recession in the US. How do you think about the demand side of the of the energy space.
Demand softening continues to soften because we do have a bearish view on the economy. That's what's likely going to happen when the FED takes the juice bowl away. So we think that that's going to continue. But it's a supply side story, so we'll think that the supply side is going to cause an imbalance sends oil prices higher. Now, if we're talking two to three months out, he may be right, we may be right. But if we're talking six twelve months out, we think that we're right.
So we talked about positioning specifically in the commodity space, what about more broadly.
Our view, broadly speaking, is that investors should have an allocation of ten to fifteen percent to assets with scarcity. We're talking about commodities, we're talking about natural resource equities, we're talking about gold bullying gold equities. These are the assets that have historically performed the best during periods of
high inflation. Now quick preview one r view on inflation This time is not different, meaning inflation doesn't happen often, but when it does happen, it sticks around for an extended period of time. We think that that's what happens. CPI again being pulled back because of energy prices. We think that reverses with periods of inflation, pockets of inflation, disinflationary pockets, pockets of inflation. It comes in waves. We are right now in a disinflationary wave. We've said it
for a long time. Once you get into one of these disinflationary waves, everybody's going to come out of the closet again and say, listen, we knew that inflation wasn't gonna happen. It was only temporary. That crowd's gonna come back out. They're going to be really, really loud. We think that they get tricked again. Inflation continues, and we end up with an average level of inflation significantly above two percent. During these regimes, you want to own assets
with scarcity. I look at the S and P five hundred right now, I get very nervous. I see a rich index. I see an imbalance index. I see an index that is dominated by the five biggest technology companies that have negative earning yield relative to short term treasuries. Then I look over at energy stocks. I see positive earning yields. I look over at diversified minors. I see
positive earning yields. I sit there, I scratch my head and say, how can you be comfortable with the s and P five hundred when you see such attractive opportunities, specifically with an energy. Most attractive segment of the market right.
Now in our opinion sugar.
I like sugar.
We've been bullish sugar for a long time.
Now, how do you what's what's the call on sugar?
So we've been bullish on it, We've taken profits on it, We're likely going to continue to do so. That's a supplied demand imbalanced story. We pick that up BA of all of our technicals. We're still bullsh on it. We maintain our Bush position on it. It's just a situation when you look at the commodity complex and you look at energy, and we see probably better opportunities there going forward than with sugar. But we've done well with the.
Sugar of seventeen percent year to date? Is it?
So if you invest in sugar, you just think the demands gonna higher than the supply, right? I mean it's just a commodity or is that kind of how you go back?
That's that's the case for all commodities.
Yeah, that's right.
So you just think that demand is higher than a supply. So it has it been a supply issue that you guys got right or was it the demand side?
It has been a supply issue that we got right. Why do we get it right though? We got it right because we read the tee lea's from the technicals of the market. So again, what are our three pillars of investing. We look at the structure of the future's curve, We look at the price of it. It had an attractive return profile and that's why we were biased towards it. Now, why was all that happening because of the weather situations?
Because of what happened on the underlying supply side of sugar, and that was the catalyst.
Where do you grow? Where's sugar grown? Where do we get sugar sugars?
India's big produce explorer, sugars sugars across the board?
Yeah, okay, I don't know if it was like some part of the world that was having a drought or this or that.
Yeah, so we read that, We read the tea leaves from the technicals. The technicals are driven from the supplied demanded balances. But we are not fundamental analysts. What we're doing is we're looking at the structure of the curve supply demand in balance.
What about infrastructure, because I know that's another big part when you're looking at the allocation within your ETF.
Infrastructure is really cool in the sense of if you are a bearish on the economy and you want to protect profit margins, think of companies that have effectively you can almost think about it as contract pricing. Think of
toll ros, airports, helports. These are businesses that are really insulated from inflation, so they can maintain profit margins and they are very defensive if we roll into a recession, which unfortunately is likely to happen given where we are right So when we think about the portfolio right now, we're invested in infrastructure through our inflation allocation. ETF ticker racks are a AX, it's around a sixteen percent allocation.
If the economy has a crash landing, obviously commodities are going to be vulnerable there, and we look at the portfolio and say what should do well. Infrastructure should do very well in that environment. That's why it's there. It's there's diverse fire, it's there to maintain profit margins. If inflation continues, which we expect.
Man, I learned a lot today, Sugar, Look, get this guy back.
David Schessler, portfolio manager and head of Quantitative Investment Solutions at van K doing commodities. Lots of symbols out there to follow some of those now, are those, David, just real quick? Are those funds or those ETFs? Etf ETFs? Okay, god forbid. Anybody does is a nu mutri fed fun business anymore.
It's all ETFs.
It definitely is.
That's what the kids auld. I get it. I get it.
The days of me going up to Boston seeing all the big mutual funds. I think that's a thing in the past. David Schasler, thanks so much for joining us.
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.
Jess met Paul Sweety here in the Bloomberg Interactive Brokers Studio and Paul as you know, we've been discussing so much about those big banks coming up reporting earnings, but also when it comes to the fed's Vice Chair for Supervision, Michael Barr is proposing those big bank regulation changes. What would happen with banks with at least one hundred billion dollars in assets could face higher capital limits? So who better to speak with us about both of those two topics?
And Alison Williams, senior Global Banks and Asset manager analysts with Bloomberg Intelligence, who's here in studio with us? So I'll start off Allison. When it comes to these changes that Michael Barr is proposing, can you walk us through what that really means in how the banking industry is reacting to this.
So we're still waiting for the finalization, but I think the surprising things were one that he went down to the hundred billion market cap I'm sorry, not market cap by asset size. And then also you know he was saying basically adding, you know, it would add like two percentage points two dollars for every one hundred billion in risk weighted assets, So.
Two dollars for everye hundred dollars.
I can't get away from saying the wrong thing here. But anyway, the bottom line is, can we just get the final rules. The Bank's been waiting for these for a long time, and so I think that's why maybe you didn't see much movement in the stocks yesterday, because you know, Powell had already hinted at sort of a twenty percent increase in capital required. Now we have this other hint, so we're still waiting to get the proposal.
The other thing that we got, which is sort of old news now, but we did get the stress tests. The banks all did well except for a city, and so that signal their requirements are coming down. So that's a key positive of banks are staying conservative, partly because of the Basil three endgame, and then you know, partly because of the economy.
So why are some of these new, I guess rules for the banks is this response to the some of those smaller banks stressed a few months ago.
So I think.
Maybe the the you know, dipping down to the applying the rules to a broader set of banks.
I think it definitely comes to.
That, Okay, but it seems to me there's already a lot of rules for the banks. Maybe I'm just paraphrasing Jamie Dimond here, but they just weren't enforced efficiently at all for some of these banks. It wasn't like there's not enough rules there, so that the existing rules were not efficiently enforced probably well.
And and part of it is right that you know, the rules are always you know, solving the last crisis. So one thing that we we know that happened since the global financial crisis is just the fact that, you know, the mortgage market has been tight, and so like that's the one area we don't even worry about this time around the residential mortgage.
We excuse me, do you worry about commercial mortgage? But it hasn't been a while since we've had to worry about that.
So Michael Barr basically saying that America's biggest banks are going to need more capital, But what about when it comes to these regional banks. To Paul's point, that obviously we're under those stresses during the spring, and what does that mean moving forward for some of these mid size or smaller banks.
And that's why to Paul's point, I think that's why we did get some regulations reaching out to these you know, super regional.
And big regional banks. Right, So it's not the smaller community.
Banks, but some of those regulations in recent years under quarrels had actually been rolled back, and so I think sort of bringing them back into the phrase is part of the issue.
But I would.
Say, you know, the key issue that sort of brought down those three banks, it was asset liability management. But it was a odd issue that happened across the banking sector where you had this huge inflow of deposits that was invested in securities, then rates went the other way, right, That's what caused it was the catalyst for these these three banks that, as I said, the asset valuability management was part of it, right, because what you saw for banks that managed it well was to say, look, we
know these aren't these deposits on permanent We're not going to tie them up in something that's going to potentially make us a liquid all right.
So we're gonna have some big banks reporting on Friday, which means we'll probably see you again, JP, Morgan, Wells, Farga and City Group.
So three of the biggies. What are we looking for here?
I can't imagine the capital markets business has been anything to write home about.
What are you really going to be looking at Uh.
It's not, and I think like there there's definitely a dichotomy in terms of the trading and feasts.
So I guess, you.
Know, if you just look at it sort of a one quarter of view, you'll see everything down. But trading is really normalizing into a historically high level. So if you look at a very long term chart, yes, trading is coming down a bit, but we're normalizing in an historically high level. Fees, on the other hand, are studying in levels closer to pre pandemic, so very low levels.
So one of the big things we're going to see this quarter, our higher expense is tied to severance and we're going to see you know, banks finally, I think coming to terms with the fact that, okay, this huge boom that we saw in twenty twenty one is not likely to repeat anytime soon, and we are hearing banks, you know, talk about some signs of life at the end of the second quarter, some pickup in activity, but you know, if you follow the money, the headcount cuts
and as I said, a lot of the severance charges.
I think that you know, banks are.
Sort of recognizing that, you know, we are going to be studying at these lower levels.
What do you think that interest margins will tell us? Obviously that's a key gauge when you're thinking about the profitability indicator when it comes to a lot of these big banks.
So I think, you know, my views is perhaps different than some of the some of the other analysts that you've heard out there.
Maybe it's just because of the banks.
That I'm looking at, But for banks like JP Morgan and City Group that have big credit card portfolios, we think that their margin could and their net interested income actually could be a little bit more resilient versus the other banks where commercial and industrial loans, so that's sort of the bread and butter of.
The commercial banks.
Bank America is also one a relatively bigger player in that market. Those loans are actually shrinking, coming in a little bit softer than expected. Bank America talked about some of their utilization rates, you know, things stab stabilizing. They thought things were going to get a little bit better there, but they're not. And so I think for those banks you could get net income a little bit softer than expected.
But I would keep in mind that the net interest income numbers, I mean, we are at a hugely robust level. It's just that investors are looking at you know, stocks are discounting mechanisms.
We look forward and you know.
The question is, you know, how far do we start going down from here?
All right, so thirty seconds here? What do you expect Jamie Diamond to say? That's too hard to predict.
You know what, I if I'm gonna guess he's going to talk about the regulations and really, like when you look at what's happening with these capital requirements, it's a it's a little bit crazy.
I mean, this is a key metric. It's something that we all agree on is important for the banks.
Yep.
Last year huge increases, this year, huge decreases.
How do you manage your.
Business one year to year one of the most important metrics continues to change and then, as you said, all the regulations, all the different mix.
Yep, it's a lot, I know. I mean, Jamie Diamond's called that.
JP Morgan calls a call I always listen into because you just never know what he's going to say. He feels free to say pretty much anything he does, and his filter is very and it makes for good listening. Allison Williams, Senior Global banks analyts for Bloomberg Intelligence. Joining us here in our Bloomberg Interactive Broker Studio.
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 shift gears here.
Let's talk a little bit telecom, TMT, tech media, Telecom. We'll bring in John Butler. He's a senior analyst at Bloomberg Intelligence. Joining us life here in our Bloomberg Interactive Broker Studio. John, You've been covering telecom for a long time. I'd like to start with the wireless business. Where are we today in terms of the players.
The market share and is this market growing at all?
Boy, it's getting awfully crowded in the wireless market these days.
You know.
The latest rumor is that Amazon may enter the market through a deal with Dish.
We'll see how that plays out. But it's a.
Slow growth year this year, and I think COVID disrupted a lot of industries and wireless has been no exception.
You know, we saw.
Very strong device growth during the outbreak. I think people were buying a lot of phones for their kids that they might otherwise not buy. They were connecting a lot of devices, and so we're living through that hangover. You know, the world's getting back to normal device growth and new line growth is coming down. And now you've got the added pressure on pricing coming from the cable operators like Dish, like Comcast and Charter, and now the specter of Amazon may be getting into the business.
I wanted to get your thoughts when it comes to valuations in the TMT sectors. So I'm looking at some Bloomberg Intelligence data when it comes to the forward earnings for that and right now it's around twenty two times forward earnings. But when you're excluding Microsoft, Apple, Google, Meta, it's abound nineteen times. So what does that really tell us? And are things still too pricey even if you're excluding some of those big names.
So I need to tread carefully with some commentary on valuation. But you know, it's no secret that the tech sector in general has done very well in this environment. I think people are responding to growth there. So you know the tech names that I cover, Zoom is a good example,
ring Central Cloud, flare. A number of those names continue to post double digit growth, even you know, during this tough economic environment, and so I think that may account for some of what you were referring to, the relatiatively inflated multiple relative to the broader market.
So talk to us about the broadband business, John, because that was such a growth business for the telecom companies, the cable companies. Everybody needed more broadband, we doing downloading video and all this kind of great stuff. Where are we in terms of that market and how'shaking out competitively?
Well?
That I think, Paul is part of the double whammy for the telcosen the cable operators in that that market is maturing now and also becoming price competitive. I think the good news there is that our appetite for content and downloading more and more content, and as content gets more bandwidth intensive, as we move up to HD streaming, you know that people are trading up to higher priced plans.
But in terms of organic growth new line think of it as new line growth that is really moderating here, and so I would call that markets as mature as wireless right now.
So if you take a look at what's happening with American Tower. That's something that's interesting to me, and you were talking about in a note recently about how overseas expansion is offsetting the churn there. What do you see when it comes to domestic growth picking up?
So, American Tower is one of big three, the big three tower companies here in the US, American Tower in public.
I wonder who's I think.
A great business that it's.
A terrific business.
It's actually a real estate business, and they make their money on leasing that vertical real estate on the towers to telecom companies that need to set up antennas to give US wireless service. American Tower and SBA, two of the three big three, are seeking a lot of growth overseas now that the US is largely a built out market.
So I mean, I guess American Tower and Crown Castle they've always had some or not always, but I mean certainly over the last ten or fifteen years, they've always had international growth. Do they go to developing markets like in India, for example, or do they stay in the more mature markets?
So Crown Castle does not.
They have said they're really going to stick with the US and they're rolling out of business.
Called small cells.
So these are think of many cell sites that you can run through neighborhoods to provide fixed wireless broadband for example, or higher bandwidth in transit hubs or stadiums. American Tower is the one that has ventured overseas and their biggest market is India, and they've lived some of the risks that you get when you go into these emerging markets,
which is political risk. They have got hit with an owner, the carriers got hit with an owner as spectrum tax, and suddenly they can't pay their tower leasing costs.
So it's been very tough on them in a way.
All right, thirty seconds, what happens to our good friend at Dish, Charlie Charlie Ergan.
Wow, this one could go either way. Honestly, Dish is living through a really tough capital crunch right now. So his immediate hurdle and his sole focus is on raising more money. I think if he can get it, they can go for a run in wireless. I think they can carve out a niche there. By US definition, they reach seventy percent of the US population with their own five G network. Now they really got to fill that out, though that number is very deceiving and that's where he needs the money.
I never thought I'd see Charlie back into a corner like this. He needs so successful for so long, he misread this spectrum play John Butler, Senior equity anals covering all the telecom stuff for Bloomberg Intelligence, talking about the wireless, the wireline, the towers, which is just an awesome, awesome business American Tower, Crown Castle, SBA.
You're listening to the tape. Catch 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.
What's happening with the dollars? So the Bloomberg Dollar Spot Index that's ticker symbol bbd x Y that's actually down almost ten percent from its peak at the end of
last September. So obviously the dollar was on a tear last year because of that correlation with the Fed aggressively hiking interest rates, but we've seen it paired back on those indications that perhaps the Fed is close to being done here, So I want to get straight to our next guest, who's going to break down and discuss with us what's happening when it comes to the four X space and the dollar. Jane Foley, Managing director and head
of ex FX Strategy at Rabobank, joining us here on Zoom. So, Jane, thank you so much for joining us, and please tell us your thoughts here when it comes to the four x market and what you're seeing when it comes to the dollar trading right now.
Well, with respect to the dollar, there's one word I think that's really entered into the framework here, and that is disinflation, so that the market is beginning to think, well, you know, look at look at the CPI forcast for tomorrow. That's obviously the key event of the week, and the market expectation here is for a headline number of three point one percent year on year, and that will be down from four percent in the last round and significantly
below where we've had that peak. And not only that, but there's been a variety of economic data just in the last few days, which again feeds this impression that, you know, are we finally seeing disinflation in the US. Of course, we've had the New York Fed Survey House inflation forecasts down to three point eight last month and lowest is more than two years. And we've had, of course, within that NFIB data which improved, but we have the
share of business increasing prices. That share has declined. This is now twenty nine percent of businesses from thirty two percent. So there's various different indicators here which has got the market excited. As you say that, yeah, you know what, they're going to hike interest rates in July. The Fed is, but perhaps that's then done. Whereas if you look at some other central banks, many of those G ten central banks,
well they've got some more easing to come. The UCB, for instance, that the market still thinks, I think might go in September as well as July. Canada for instance, expected to go again, RBA could go again, Norway, Sweden, and of course the UK. Perhaps now the market's expecting that one to have to go higher for even longer than most of the most of its peers.
So is it like, just take the UK for example, Jane, is the expectation that inflation there is going to be harder to fight than perhaps in the US.
Yes, absolutely. You know, for instance, we were talking about that the market consensus for the CPI printing in the US been three point one percent percent, but for the UK, disappointingly, for the last couple of months, the UK CPI inflation rates has been coming in higher than expected and it's remained now eight point seven percent. So that's a lot higher on almost any sort of metric than in the
US and also in the Eurozone. For instance, this morning in the UK we had the release of the latest labor Port report that the way component again not only was it revised up last month, but it was stronger than expected this month too. So these indications of second order price effects still very much there, and a lot of people in the fifties have left the labor market. We've got Brexit, of course, that has a labor market effect. And there's lots of interesting data with respect to housing.
So for instance, in the UK, unlike the US, people tend to fix their mortgages for maybe two years or five years. That's interesting because that means that you know, people will be faced with higher interest rates if they're package unwined sort of now. But perhaps even more interesting than that is that because of the aging demographics because of the baby boomers, so many more households own their
houses outright. These guys are probably net savers and they're benefiting from the hiking interest rates, meaning that the impact on those holding mortgages is less. So again the Bank of England probably has to work harder to really cool demand.
So what's your call on how to trade the dollar depending on how we see CPI shake out tomorrow.
Well, of course this is the short term trade. If CPI really does feed this disinflation review, then the dollar can go down and we've got your dollar, you know, probably going high above one ten again and perhaps getting a bit more comfortable at that level for now. But of course there's also the longer term view, and that's a lot more complicated because there is the risk that the US economy will be slowing it could see procession. Not only that, of course, but China is finding it's
recovery pretty difficult. So yes, we've had some better news today with respect to potential stimulus, but it's still finding it rough. In fact, most economies that are dominated and manufacturing are finding the going pretty tough. So we've got this situation where whereby we might have China slowing, the U is slowing, We've got pretty you know much stagnatory growth in the Eurozone. Now that sort of scenario isn't great for moving into risky assets. That sort of environment
is probably one which could be dollars supportive. So whilst we've got this short term dollar trade, maybe the dollar weekening if that, if that CPI comes in softer, that doesn't mean to say that the dollar is going to be selling off in the three to six month horizon, because a slower global economy will probably give the dollar some support. Yeah, Jane.
One of the questions I always have when I get smart currency people like you on is give me the case for a bare case for the US dollar.
I can't come up with one.
Is there a bare case a long term bear case for the US dollar going forward?
Well, you know, I think that's a very perceptive question because generally speaking, if the dollar is going to really weaken, you've got to have risk appetite, global risk appetite pretty strong. So with a dollar to be really very much on the back foot, it's because everybody and their dog is piling into emerging markets and on high risk acids, and you know that that will be away from the U S, which is considered to be you know more more of a safe haven. So that sort of scenario is not
on the cards. And that is why I say that I don't think the dollar is going to be selling off heavily over the three to six month horizon. If we've got this risk of a softer global economy, you really do need a really bullish case for global growth, in a really bullish case for emerging markets for the dollar to be really soft. And right now, you know, many may emerging markets, you know, they're week because China's week. You know a lot of them are selling materials, raw
materials into China. A lot of them, you know, finding it tough because China isn't manufacturing, you know, processing those raw materials. So right now, I don't think we do have that really bullish appetite for risk appetite which means that the dollar is going to find some support.
And Jane, to Paul's point, I was putting out a story that crossed the terminal in recent days looking at how hedgephones have actually swung to an overall beerish dollar bed for the first time since March. And that's basically tie to the wagers of the FED finally potentially approaching the end of its rate hiking cycle. What do you think that tells us when it comes to hedge fund positioning.
Well, you know that the hedge funds guys, you know, they can be quick in and they can be quick out. And I think certainly if we are going to see this disinflationary view for the US, we could see you know, the dollar weakening in the shorter term. Again, you know, I think we would have ne're a dollar but getting more comfortable, get in its feet under the table at
you know, one ten, and you're a dollar. If the CPI number comes in at three point one where the market consists, is it, or even if it comes in you know, slightly lower, but that is you know, maybe a one to three month few taking us up to September. But once we get beyond September, assuming that's where we definitely will have had its peak for not just the FED, but also for the ECB, that's probably when we're going to be feeling the cracks in global growth a lot more.
And that's I think when the dollar will begin to find that support.
Uh Jane bout thirty seconds left what's the popular trade with the kids these days in the currency market.
You know, I think right now it is probably euro dollar. It is looking, it has been looking as if it wanted to break higher. I think that USCPI data is going to be the focus. A few people obviously get in on the on the Norwegian code in the trade today that they are going to be hiking more, Canada is going to be hiking more, Sweden is going to be high king more. But I think really it's it's very much the focus is on euro dollar.
All right. Jane Foley, Managing director and head of ETHX Strategy at Rabobank, who is talking to us all things dollar four X, so great to get your insight on all of this. Thank you so much for joining us. But talking again, Paul, when we're looking at where the Bloomberg Spot indexes for the dollar, I mean, down close to about ten percent from that peak in September, so obviously all eyes on what happens with not just CPI but the Fed decision later this month.
As exactly, and that ten percent pullback again.
I still feel like I don't have a big long term bear case for the dollar, right It kind of feels like, oh, jeep dollars off me back running and buy some dollars.
And seeing what happens with He cost me six or seven.
Pounds to get a pint in London these days, that's a little high.
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Right down to this next story, the PGA and live. They are merging huge, huge news in the world of golf, in the world of sport, quite frankly, and it really was unexpected and really rocked the golf war, golf world, and of course it got the a tension of some members of Congress, and that's why they are down in DC right now doing giving some testimony. Kaylee Liones, Bloomberg
Television host joints us here from Washington, DC. Katie, what are we learning so far during this testimony by some of these PGA officials in Washington.
Well, as you say, Paul they're PGA officials, yes, the COO as well as a member of the board, mister Dunn. We're testifying today, but they weren't originally who the chair of this committee, subcommittee, Senator Blumenthal, the Democrat from Connecticut, wanted to hear from. He wanted to hear from the PGA Commissioner, Jay Monahan, who's currently out on medical leave, and he wanted to hear from the chief of Live Golf, as well as someone from the Saudi Investment Fund. None
of those people showed up. The other two said they had scheduling conflicts, so that kind of limits the information that the committee is able to talk about at the hearing today or ask questions about. Though they did unveil ahead as this hearing went underway, some of the facts about how this detail this deal went together. Some of those details WhatsApp messages for example, things we understand the
PGA and Live. We're talking about the idea that Live would stop poaching players, Tiger Woods would maybe own a Live team, people like Rory McIlroy would as well. There would be media sharing rights. So starting to get to some of the details on what this deal is. But of course for the chair he is very concerned about Sadi's involvement in this and the idea of sportswashing.
What are the main issues play that have raised red flags about this deal going forward?
Well, sports watching is definitely a big one, being that this is the Saudi investment fund we are talking about. And the accusation on the part of Chair Blumenthal and others has been that this is just another example of Saudi Arabia trying to wipe its slate cleaner, improve its image around the world, to kind of cast a side
concerns around human rights abuses. Jamal Kashogi of course one example of that, And so that's the accusation that's sportswa washing is at play here and that the Saudi government shouldn't be playing such an integral have such an integral influence on American culture and sports culture specifically. The others,
of course, are antitrust concerns. This subcommittee that was holding this hearing today doesn't actually have the power to block the deal, but I spoke with Senator Blumenthal on the sidelines before he went in to the room, and he said that what they can do is uncover facts, they can make policy suggestions and whatever they are able to uncover, they can give the depart of Justice, and the Department of Justice can use in that antitrust inquiry, and of
course the DOJ on competition grounds could actually block the deal.
You know, Katie.
One of the things that I think frustrates a lot of observers here of the game and of the business of golf is we just don't know anything about this deal, and nothing's really been released, and it's been you know, a number of weeks.
That in and of itself is really a cause for concern.
But I guess one of the questions that I think one of the messages that the PGA Tour is trying to get across is, hey, even though we're going to take billions of dollars from a solidy fund, we the PGA Tour will be in charge.
Yeah.
I mean, are they sticking with that?
Because if I'm putting in a couple billion dollars, I want some control here.
Yeah, they are sticking with that message. Also, the idea that this is a matter of survival, that they needed to do this in order for the tour to remain what it is currently because they had so many ongoing legal fights with Live and it had been so very contentious, which yes, is why this deal took everyone by surprise, but by its very nature would kind of ease that on the part of the PGA tour. So that's the message that they are sending. But as you allude to, Paul,
we really don't know so much of the details. That is something that Senator Blumenthal was bemoaning today, how not transparent it has been. We don't know all of the numbers around this. But for the PGA, they really are indicating that this was a matter of survival and preservation.
Kaylie, Do we have any sort of sense of a timetable here when we think about this deal, But then also when it comes to these hearings in how long this could all take to play out.
It could be sometime longer. As I said, the representatives from Live In the Saudi Investment Fund weren't at today's hearing, and for that reason, the chair has said that he plans to have more hearings in the future. He told me he's in active talks with both of those parties to try to get them before the subcommittee to testify. So those hearings themselves could take a while, and of course the Department of Justice inquiry could take some time
as well. It's very early stages here, and that is actually why many Republican members of this subcommittee today were pushing back on the idea that this hearing even should have been elt at this point. The ranking member, Senator Ron Johnson said he didn't think they should be having
this hearing. Others were pushing back during the hearing as well on the idea that this is really not what this subcommittee should be investigating at this point, raising issues like China, for example, that should be they say, a higher priority than this specifically.
All right, So, is there any kind of next steps here for either regulatory scrutiny or even god forbid, getting this deal done announced maybe with some details. Are are we learning anything today about what could be next steps?
Well?
Bloomberg has reported that the Department of Justice is watching this hearing very closely, and everything that the Senate Subcommittee unveiled today, that information likely will feedback into that DOJ inquiry. So we'll look for any next steps from the Justice Department on the anti trust front, and then I'll just be watching to see when Charman Bluementhal may announce the next hearing, because again he said that this is really
just the first one. There could be many of these to come in the future.
All Right, Kaylee, thank you so much for joining us. Really appreciate getting your report from Washington, DC. Katie Lines Bloomberg News talking about this LIVEPGA deal. We got some folks in front of Congress trying to explain what's happening.
You're listening to the tape. Catch our live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa play Bloomberg eleven thirty.
Jess Naton and Paul Suing here in the Bloomberg Interactive Brokers Studio and Paul up next. I wanted to talk what's happening with technology and especially when it comes to tech hiring for some of these top recruiting firms. When you think about big tech, and it obviously undergoing a lot of cost cutting efforts over the past year, but some of that has supported some of the stock prices
for some of these big companies. So I want to get straight to our next guest, Martha Heller, CEO and founder of Heller Search Associates, who's going to discuss with us some of the open tech roles and the outlook for tech hiring, obviously on the heels of when we got that softer than expected jobs report last week. Paul. So, Martha,
thank you so much for joining us. Tell us about Heller Search Associates, what you do and obviously how what you are exactly doing when it comes to helping recruit for these top level IT executive positions.
Sure, thanks so much for having me so.
At Heller Search, we recruit CTOs CIOs, chief security officer roles, head of software engineering, so technical roles. But not only in the tech sector. We were across every sector, healthcare, retail, industrial, manufacturing. So we pretty we have a very wide panoramic view of what's going on with tech hiring and what I see happening here. Yes, there was a bit of a lackbuster jobs report, but I think there is a bigger story here than uh, you know, supply chain and other
economic headwinds. What's happening now with most companies in the world is that they were born in an industrial economy where they had legacy products and services, and now everything is moving into a software economy or a data economy. So you're finding, you know, food processing businesses suddenly needing data scientists.
You're having retail.
Businesses needing more digital software engineers. So we are very busy here at Heller Search, and I predict that over the next few months we're going to see an uptick in the jobs report, but not with traditional roles, with software roles, security roles, data engineering roles that are new to these companies, So they don't yet know what is the compensation model, where do they fit in the org,
what is our recruiting strategy. So a lot of companies, as they're shifting to really becoming tech companies, whether they're healthcare, retail, automotive, you name it, they're shifting their workforce to being technologists. We think of technologists at Facebook, at Meta, at Twitter. Well, Walgreens is hiring technologists, Macy's is hiring technologists, but it's harder for them to get moving on that technology hiring bandwidth because these roles are new to them.
Martha, I have a lot of technologists working for me for the last decade I've had they've had the upper hand on me. Now the most recent is working from home versus coming to the office.
But now I see Google.
Facebook, all these companies out in the valley laying people off. Do I now have the leverage over my tech workers or do they.
Still have it?
I hate to say it, but they still have it back, So you need them. That being said, their leverage is waning a bit. Those technologists being laid off from the Silicon Valley companies will be good technologists for you, right what they've learned there they can transfer transfer to you. But it's still a tight market. It's still a heady skill set. Finding somebody to do cloud computing, for example,
it's a new skill set. So yes, those layoffs do salt in the market for you, but not so much that it becomes your market.
Martha, Whenever you're speaking with employers, what are they telling you about their view on the economy in the labor market when they're trying to hire.
Right now, you know a lot of my clients, and remember our clients are cross industry, are taking a wait and see approach. A lot of them have enough concerns about the economic headwinds that they are doing hiring freezes, not all of them, as I said, we're very busy, but the one area where they're taking an exception is
hiring in data, digital and technology. But yes, we are seeing with many of our clients, particularly in the industrial era that have been hit hard by supply chain issues, we're seeing some slow down on hiring there.
Martha, is our US educational system cranking out enough people with technology skills or do we need to recruit from outside the US? Where are we there in terms of the supply of these folks.
Well, I mean, I think what I would say is no, our educational system is not building enough of these technologists for sure.
But I also.
Feel that just going and getting them, you know, out of the country is not necessarily the way it's reaching out to underrepresented markets in.
The United States.
You know, everybody, you know, most companies say we absolutely have to have somebody who has a degree in computer science. Well, there are a lot of ways to learn computer science without going necessarily and getting a degree in it. So starting to look at underrepresented groups, people who may not have exactly the education that we want. But taking the onus on us in our companies to create that education.
That could be a very vital strategy for today's companies because there is a supply and demand problem.
How easy for how hard does it define talent? Right now?
If you have the right compensation, the role is exciting to a technologist. Technologists don't want to work on old technology. They want the new cool stuff. They want AI, they want cloud engineering. If you've got that opportunity, your compensation is lying and you will allow them to work remotely.
You can hire anybody you want. If you insist on everybody coming into the office, you're trying to get a cheap date by not paying at market, and you want people to work on very legacy technologies, which is, you know, asking somebody to sort of come and work at your you know, videotape store.
If you will, ye, then it's going to be hard.
Can I say I'm a Silicon Valley company and oh, you want to work in Boise idol?
Okay, Well that's salaries.
Cost of living Boise, Idaho is twenty percent less than the Bay area, So I'm going to pay you twenty percent less than you would into Bay.
Can I can I do that?
Yes?
Yes, you can do that?
And is that happening in the industry.
In some places it is.
I mean, what companies are trying to figure out now is do we make people come back.
We have decided we're going to bring everybody back. Oops.
Half our workforce move to boise I from Silicon Valley during the last three years.
So you know, if we are.
Going to leave them where they are paying them a compensation that allows them to live a certain lifestyle which is different from Silicon Valley. A lot of companies are experimenting with that. Where it all shakes out in a couple of years, we'll find.
Out, all right.
Martha, thank you so much for joining us. Really appreciate getting your thoughts there. Really interesting discussion there about the labor market, particularly in the technology space. Martha Heller, CEO of Heller Search Associates. So it's tough still there. I think that's still it just feels, you know, we have so many.
Technologies engineers here at Bloomberg.
Still having the upper hand there. That was a good question.
Yeah, I don't know. I think I think the technologists still have the upper hand.
Yeah.
Thanks for listening to the Bloomberg Markets podcast. 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.
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