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.
I'm the Bloomberg Markets Podcast on Apple Podcasts or wherever you listen to podcasts, and at Bloomberg dot com slash podcast. All right, here's a cool roundtable here. Yesterday was a crazy day in the world of cable news. Don Lemon from CNN gone, Tucker Carlson from Fox gone.
What does this mean for the business?
NBCUniversal Dave Yeah, Shell, mister Shell gone, So crazy day in the world of media. What does it mean for the politics as we head into the next election cycle? What does it mean for the business? We have a cool round table here. Wendy Schuller, Brown University professor. She joins us here, as does Mark Douglas, CEO of Mountain
Let's start with you, Wendy. I mean, really, with the Tucker Carlson thing, how does that impact the calculus I guess of the messaging if nothing else, of the Republican and maybe Donald Trump and some of the others.
I think It's really interesting to see how the momentum will shift or not shift. You know, we saw Fox to really kind of almost virtually dump Donald Trump and start really promoting Dusantis and Tucker Carlson sort of stuck with Trump in some ways, right, he wasn't really willing to go there, and that was a mouthpiece for Trump.
And now we see Dave Santis kind of endenduring some doubts, maybe faltering a little bit, hasn't really hasn't jumped in yet, and he's gone pretty far right on the social agenda, which I think making some Republicans a little nervous about electability. And so now what does Fox do. You've lost your mouthpiece for Trump. You were all in on Defantis, but now you've got doubts. So I think this is really
important for the Publican party. They used Fox to consolidate their message, put pressure on members in the Congress and state legislature just to go along with whoever they decide they want to anoint. And now it's unclear you know who's.
Going to be the anoint the yeah, And I mean you're the expert on this. Mark Douglass over at Mountain helps companies to drive, you know, marketing dollars and raise revenue, but you focus on the politics, Wendy. So before I get to Mark, you know, you teach the American Presidency at Brown, Introduction to the American Political Process, Congress, and
public Policy. Does Tucker Carlson have a future in some of those institutions that you're teaching about, because it seems to me he has a huge following and he can raise a lot of money, you know, with this sort of angry base that he has, and it's like a huge part of America.
Yeah, you're raising a fantastic point. He's I think I was fifty three years old and yesterday I said to my students, you know, I've seen new gingrids come and go and come and go and come and go, and it's never really gone. And I have absolutely no doubt that we will see Tucker Carlson again. The question is does he become Steve Bannon to the next candidate? Does
he go work with Trump? You know, there are a lot of things that we can see him re emerging to you and I think, you know his demise would be premature.
I mean, Senate, does he primary Trump? I feel like there's a lot more that he could do than you know, the eighty year old former president Mark Let me get to you on the business side of things. Does this hurt Fox at all? Tucker Carlson leaving, he has three point four million viewers. Are they there for him or are they there for the time slot?
Yeah? I think Tucker is a brand, and I think we're going to learn very quickly that brands have a lot of choices right now, and that Fox's brand is not as strong. So if you look at someone that the choices that someone like Tucker has is they can go to other platforms. Daily Wire, you know, one that their contracts was released. They offered Steven Crowder, who is someone you may not even even heard of, has nowhere
near the following a Tucker Carlson. They are from fifty million dollars to be on Daily Wire, and so the numbers you look at the plus looking at Tucker to get equity. I don't see Tucker becoming a political force in the sense of he goes off and creates something. I think there's huge media dollars out there for stars like Tucker, and also the audience he has, he needs to carry it someplace really soon. And I think you're looking at a deal that's on a level with a Joe Rogan.
You know.
One of the other points on that is Tucker had average three point three million viewers a day. Ben Shapiro has eleven million a day, right, Joe Rogan has eleven to twelve million a day. They have much much bigger audiences off of networks like Fox than they do on Fox. And so I think Tucker is just going to go where the money leads them. Their money's going to lead them onto YouTube, on the podcast and where you're talking fifty one hundred million dollar deals plus equity in the company.
But they're very different, right, I mean Joe Rogan, although he's out there, he's more of your open minded draw Ben Sjapiro, he's more of your sort of witty educated draw. Tucker Carlson. He has the ability to spread wacko conspiracy theories, spread fear, and spread hatred. Can you get someone else that does that for Fox? The probably not?
I mean replacing the most highly rated show on news. I mean it's a tall order. The advertisers they have are not the premium advertisers because they if you look at Mountain, like we have a feature where you can just block their networks that you don't want to advertise on on TV, and the number one block networks are CNN, Box and MSNBC.
So they don't.
Get the premium advertisers. So as long as they can bill the number of viewers, they won't lose ad dollars. But you know, matching Tucker in terms of nightly viewership, that's not going to be easy. And there's not a lot of There's not a lot of people to choose from. It's not like Tucker was a huge star before he arrived at Box for me, he was known to build that Yeah, exactly.
Okay, Hey, Wendy, President Biden just announced his reelection. Any what's your takeaway on that announcement and maybe more to the point, how he announced it would just kind of drop in a video.
Well, and you know, I guess it's really close to her exactly the same day that he announced, you know, four years ago, so I think there was some continuity there. Two things. One is I think that it forces the Democrats, now this is a big if to consolidate their messaging early. You know, he's running, he's the leader of the party.
You know, you're going to run or lose on the success of the Biden administration, and that's going to force the Democrats, with very tough Senate race looking in twenty twenty four, to consolidate. And that's going to be, in the end of the day, helpful for fundraising. In other words, we're all on the same team. We got a fundraise. Plus it's the beginning of a new fundraising quarter, so you know, the numbers will look better for him at
the end of this quarter if he starts earlier. And I just really think this is about consolidating because you have to really take advantage of what looks to be disarray, both in the Republican Party in terms they're not, but also in the messaging machine of the Republican Party. I would circle back on Tucker though, you know, he's young enough and he's come pretty close to the sort of center of power, which is the White House. I would
not count him out. Maybe he makes a lot of money in the interim, but I would not count him out as running for a Senate seat in a safe Republican state somewhere and then launching for president.
All right, interesting stuff.
It was a crazy day yesterday with all the news coming out of the media space.
So it was a great, cool little round.
Dame, and then President Biden sneaks out, sneaks that little re election video in the middle of a giant Fox News Tucker Carlson, you know, media dates just unbelievable.
It is odd, odd odd makes for good news though.
Wendy Schillebrown University, Mark Douglas, CEO of Mountain joining us, talking except talking us about the politics of cable television.
You're listening to the teenth Kenserline 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 podcast.
We're just getting into the real teeth of this first quarter earnings season. Want to get a sense of kind of how some of the pros are approaching it. Randy Frederick, Managing director of Trading Derivatives at de Schwab Center for Financial Results, that joins us on the phone. Randy, again, we're just starting to get into some of the meat of this earning season.
Here.
We've already got the banks, and now we're starting to get some of the industrials and consumer names. Any takeaways you have here, what are you looking for, what are some of your clients looking for?
How are you approaching it?
Well, to be quite honest with you, earning season so far has actually been quite good. It's been better than expectations. Now that may very well be simply because the bar was set substantially lower, but it's actually been pretty good. Yes, earnings per share growth is actually negative two point eight percent so far, and we're about twenty four percent of the way through the S and P five hundred at
this point. But the expectation was for to be down about six and a half percent on a revenue basis same thing. We're up about five point seven percent so far, but the expectations was that we're that earnings would only be up one point nine percent. So no matter how you look at it, it's better than expected. And if you look at the beat rates, in other words, how many companies did better on earnings or better on revenue, same story, You've got better percentages in both cases than
the prior quarter. So it's been pretty good so far, and I think that's part of the reason why the market has held up reasonably well.
I think Randy Matt Miller here in the studio. Listen, you are expecting intraweek volatility because of all of these these earnings, and we saw a slew of them today. We're going to pick up tomorrow and then end the week with some macro data. But I wonder how you measure volatility, especially as the director managing director of trading derivatives. Do you still look at the VIX? Are you excited for VIX one D? Do you watch zero days two expiry options? How does it pro like you measure volatility?
So the answer is yes, I still watch the VIX a lot. The VIX has been around since ninety three, so it's got a very long track record. There are a number of other VIX related items that have been introduced, and VIX one D is just the most recent, and it will be not necessarily a replacement for the VIX, but instead it will actually complement it. There are a bunch of different volatility related indicators that have been out
there for quite a while. And you know, I think that when people say, oh, the VIX is broken or the VIX isn't working right, what they're not realizing is the VIX isn't broken. It's doing what it was intended to do. The purpose of the VIX was to measure volatility thirty days into the future, and so of course it doesn't necessarily reflect what's going on in the very very near term. That was never its intent. We have
a whole bunch of other gages. We've got the VIX three months, We've got the VIN, the v I X, the VIX nine day. All of these were introduced much later than the VIX to give people a look into parts of the market that they were not seeing from the VIX. It doesn't mean the VIX isn't working. It's just that people are looking for shorter term So frankly, it's a logical move by the CBOE to introduce this new gauge.
Well, we have seen a super tight trading range. I mean today we're breaking out of a little bit on the S and P, but we're on track for the tightest trading range in a month since twenty seventeen. What do you expect really.
Moves us out of that?
Last week? I thought the options expired on Friday was going to be awesome and then it turned out to be such a disappointment.
Yeah, I think the zero data trading, zero data expiration options thing is getting a bit overblown and people are paying a little bit too much attention to it. Keep in mind, you've always had zero data expiration options. It's just that originally they were only on the third Friday of the month. Then later we added weeklies, and so now you had them every Friday, and now on a handful not a large number, but a relatively handful of names, you have options that expire every day. So that ability
has always been there, it's just now they're more frequent. Yes, there's a lot of activity on it if you take a look at it, but if you're talking about things like a broad based index like the S and P five hundred or the SPY which is tied to that, those aren't like stocks that can drop twenty or thirty percent in a day. If that happens, we're in big trouble. And we know that that doesn't happen very often. I mean, it's been since nineteen eighty seven since we've had that
big of a move in an index like that. So I think there's a little bit too much attention being focused on this. It doesn't represent any more systemic risk than when you had two expirations a week, or just one expiration a week, or even just a couple of months. So I don't think that's a big issue. But part of the reason that I am expecting volatility to increase is because of what you just said. Last week, the VICS index was at its year to date low, and
it has been a very quiet market here. Very recently. We've had it, like you said, you know, three out of the last five days, we've had actually four out of the last five days, we've had the S and P five hundred moved less than three points, which is just a fraction. That's quite unusual, especially compared to what we've seen earlier this year and of course last year as well.
Randy, when you're looking at this market here over the next say, six to twelve months, what are kind of the things you need to be right on. Is it just the Fed, is it earnings? What are the things that you really need to have a strong conviction on.
Well, all of those things have an impact. Obviously this week, specifically, we're going to get a GDP number here on Thursday. People have been talking since last year that we would be in a recession at this year we're going to get a positive GDP number above two percent in all likelihood. The ranges are between about two and two and a
half percent if we have them. If we're going to have a recession this year, it didn't happen in Q one, and so far in Q two, it doesn't appear as if things are going that far down the hole on Granted, we're only a third of the way through, so we've got to keep an eye on GDP certainly, but even two consecutive quarters of negative GDP, at least in the
United States does not constitute a recession. In fact, we had that in Q one and Q two of last year, so we're going to need to see probably that plus a significant deterioration in the labor market. So far, we've seen a very minor uptick and weekly javas claims, which is the more forward looking employment data. We haven't seen anything negative in the monthly numbers, which we'll get a good of course, on the first Friday of the subsequent month.
That's kind of backward looking data. Earnings, of course, are obviously always important, and we're right now sort of ramping up into the thick part of earning season. I mean, we've got a lot of companies reporting earnings this week. S and P five hundred, well over one hundred companies due to announce this week so far, but the vast majority of the ones that have already announced, which is almost a third of them, have beaten expectations. So it's
again a pretty decent earning season. So we need to see inflation continue to moderate. Based on both the CPI and the PPI, inflation either peaked in June or September of last year. Yes, prices are still going up, but
they're going up at an ever decreasing rate. We're going to get a pc number on Friday, which, of course, as you know, is the FED favorite inflation engage, and all we really need from that one is to confirm the slowing trend of price increases that we got from both the c and the PPI, and.
We get the employment cost Index, which I think your own power looks closely. Yet, Randy, you have a job in one of the most complicated areas of finance derivatives, right, I mean, we can't even spell it. How do you look at at options to tell you what's happening in the market, Like, what do you think is the most interesting play happening in your world.
Yeah. So, derivatives is a very very very large category, and it includes all sorts of esoteric, over the counter, non standardized derivatives. I focus primarily on the options markets, the listed options markets, which are entirely fungible, multi exchanged, heavily regulated, standardized, and to a lesser extent, the futures markets. So what I'm looking for when I'm focusing on the options markets is what I found many many years ago
my career now about thirty five years. I've found many years ago that when people have an opinion in the markets, they tend to go to the derivatives' markets to express that opinion first, not the equities markets. And the reason for that is because there's leverage there. Now, you could say that's the tail wagging the dog, but in many respects, that's exactly what happens. So I watch changes, I watch trends in changes of put call racials, and there are
a lot of different put call racials. The ones that are on indexes are act for a different purpose. They're used primarily for hedging, whereas in the equity and ETF markets it's more directional and I look at open interest changes in the put call racials, and that's more longer term, and then of course things like volatility and a whole variety of other things. And it's not as intuitive as
you might think. But if you can look at past patterns, and I've got data that goes all the way back twenty five or thirty years on a lot of this stuff, and I can see looking for repeating patterns, and when things start to look similar to what they have looked in the past, they oftentimes tend to do the same things. Like anything, it's not perfect, but if it's right two even two thirds of the time, you can you can take action based on that.
I feel a little bit smarter now, I know.
And that's saying something Randy.
Adam listening. We got to get you to I'm in the studio and show us this data.
I have been there before and it's been a while, but I'd be happy to come back.
Are you based in Austin?
I am yes, man.
Now, is that city just busting at the seams? Let's be honest, it is.
It absolutely is. It's like you know, the nation, the city, national bird, or whatever you want to call it. Is the crane like everywhere else, and all the roads are under construction, so it can be challenging.
Everything cranes everywhere. It looks like Berlin in the nineties. I was there last week and I rode around for a couple days. All right, right, scooter, yep, And it's true.
I've traveled all over. I travel all over. I was in southern California just last week, and it's like it everywhere. So you know that signs again the economy is doing really well.
All right, Randy, thanks so much for joining us. Next time you're in the big city. Let us know. We'll get you in here. We'll chat derivatives.
Randy Frederick, Managing director Trading Derivatives at the Schwab Center for Financial Research.
That's pretty cool. I wont how many Schwab clients are trading derivatives.
You're listening to the tape catch a line program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa, playing Bloomberg eleven thirty all right.
Everybody knows Matt's a gearhead. But I'm not as crazy about cars. But I love aviation just everything about the business in terms of making planes, flying planes, all that kind of stuff. I was destined to own a private jet, but I don't. I don't know what happened along the way. Yeah, I should be one of those people that has a private jet and jets all around. But something when skewed you do why on jets?
I do fly lunch, you know, commercial airliners and those are pretty awesome also, especially if you lease them.
Yes, and so let's talk about that whole business. We're joining once again by Ali ben Elmdani nailed it, CEO of Al Aviation, who has extended us an invitation and open invitation to visit him in Marrakesh, which would be cool.
So I need to I need to talk to.
The powers that bag you will be in southern Spain for the month of August. Really, that can just.
Hire. That's what they do. That's what Europeans do. They take a month off.
That's not no anyway, Ali, thanks so much for joining us here. Talk to us about just the aviation business in general. It seems like every flight igon is packed. Talk to us about the aviation business.
How is it? Where are we in terms of capacity? What are you seeing in your business?
You're the one that leases jets to all of these big airlines around the world.
Well, first of all, thank you for having me. There's always the pleasure to be here. Look, it's amazing time for viation. If you fly anyway, you can see that all the flights are fully packed. There's a big demand. It's fully back to speed for domestic covel. So domestic hovel world wide is back at full speed, and so national tourvel is about eighty percent. Because Asia is a little bit lacking, but the moment's Asia is going to be back on is going to be full all over
the weld. Last time, always here, I told you it would be very hard to get tickets for this summer, and we see it now. All the airlines are going to make huge profits during the summer. We see it already happening. Some of the airlines making losses on the first quarter due to labor costs and fuel costs. But we believe that this summer is going to be an amazing summer for all those airlines. So it's an amazing
time for aviation. It's an amazing time for airlines. And the only maybe issue that we can look at is the supply chain for boring an ebers, so that gives a little bit of delay on the deliveris. And airlines need aircraft no more than any time before.
I mean, I wanted to ask about that. You guys are a global operation. You've got offices in New York, Dublin, Hong Kong. Do buy Casablanca?
Thank you?
It must be awesome. And I was thinking, probably the most difficult thing for you is to get a hold of planes, right because as soon as I'm sure as soon as you can buy them, they're leased out.
Yeah, most of them are. At least that's months in advance. All the airlines are begging for planes for the summer. We have no planes on the gund We'd love to have planes on the ground. LISE rates are going higher because of the demand and there's not enough supply. So it's a very good time to be leasing aircrafts because there's a big demand by all the airlines to operate them.
All right, So I was on an impression, which I think was a mistaken impression that at the beginning of the pandemic. When the world shut down, the airlines literally flew their airplanes to the desert in I don't know, Arizona parked them there. Can we just go get those and put them back in the air well.
A lot of the airlines, of course, they park all those planes in the south of Spain, France or in the deserts here in the US. The issue is to get back a plane into service and to make it air warty. That's a big issue. So you cannot just go and start like you start a car with new battery like. There's a lot of ages. There's lots of air wardingness that you have to do to make sure
that aircraft can fly again. So some of them, of course are back into service, but some of them had to be part of us because you couldn't get them back into service. There's two courses to put them back into service.
But so some of them just get scrapped and we need a new supply from Bowing an airbus to replace that, of.
Course, like on the Neo, on the Max. There's a big demand on the seven eighty seven and the eight fifty days big demand, so we need more supply of course from Airbus and Boeing. They are doing the best. It's not easy to make a plane, of course, they're doing the best, the amazing companies, but the supply chain issue that they have right now, and this song's only for aviation is worldwide, is a big issue that they are having to face, and their manogenes I think amazing need for both of them.
We like the seven eighty seven and the eight three fifty yep a lot. Paul and I love it as passengers, you know, because there are awesome wide body jets and you can get your own bedroom and stuff.
But you like the.
Narrow body aircraft right for your business purposes. You do a lot more with like the A three twenty, don't you.
Know, seven, because it's more liquid, you can't head them more easily. The precious pies, of course is one sid of the parts of a white body. So there's more demand of course for the now bodies. But the eight fifteen and seven eight seven we have few of them. Noble fleets are amazing aircraft to have in the fleets are there are very few efficients so those are aircraft that are needed by most of the operators.
Of course, where's the aviation industry globally in terms of supply of pilots.
Is that still an issue.
Yes, it'll be an issue for a while, but not only pilots. Mechanics, everything around aviation is going to be an issue for a while. A lots of them doing COVID, you know, did the attire got laid off, so not to get them back. It's very hard and there's a higher cost of labor. Of course, that's is unpacked for both mechanics, engineers. Everything in the aviation employments is kind of hard, like not get.
I've also started a notice pricing going up, kind of the first time in twenty years that I've seen airlines with real pricing power. I mean now they can charge double or triple what they had previously gotten, you know, for even economy tickets. Does that continue? You think they have it? We've already told us into the summer. But are they able to hold and raise those prices even further.
As long as we don't have enough supply of aircups. Yes, Because like if you fly anywhere like I flow yesterday, if you fly anyone in the US or overseas, you see that there's an issue that there's not enough seats, so they would be supply and demand, so the pvices are going to be higher because there's not enough supply.
So what's a typical deal for you look like if you're going to lease x number of jets to a well known airline, what are kind of like the terms of a deal? What are the key terms that you guys negotiate.
So first of all is the length. So usually we try to do as long as possible, especially with the major care so it's twelve year, fifteen years kind of lease. It starts at seven years usually the shortest one we have in our portfolio, and then you lease it to an airline, and of course better the credit is and if it's one of the major airlines, lower is the least factor that you are going to give them. Also,
it's a lot about relationships. You need to make sure that you protect the relationship with those airlines to make sure that when they need you, you are there. You cannot be always hard on the airline because it's more partnership. You only have few airlines you can deal with, so you need to make sure that you protect that relationship way deeply and with all the airlines that we have relationship with I think when they needed us they found especial during COVID.
But I imagine your cost of financing is starting the sore right, Yes, because of finance is.
Going higher, especially on the death side due to the unsail says. But in our markets there's a lag between the cost of finance seen and the least grate factor, which is the designs that we charge the airlines. There's usually six months delay. And I think in the next few months that Lee's grades factor is going to go higher, and therefore the cost of leasing aircrafts to the airlines is going to go higher.
So you buy do you buy directly from like air Bus? And as of no, we don't.
What we do is like when an airline goes and buy from Ebers and Bowing about one year before the issue IFP, and they come to us and say, guys, can you finance this aircraft that's we bost from Boys, Boying and Evers seven years ago, for example, So they have the PGPs, we completely the payments that they pay seven years before then they make all the payments and one year before the issue IFP in the market to ask who can do what we call a san and
Liz bag for those aircrafts or finances for those aircrafts, and that's how we do it's usually with airlines.
Very cool, that's a cool business. Yeah, I didn't even know that.
That's kind of how they get ahead of it, unlike what you probably used to do for let's say, cellular tower companies, right, they would sell those and lead them back and they do it, you know, before the first site actually hits the ground or fascinator.
All right, next time we do this amer cash Ali then El Madani, CEO of A B L Aviation, talking about the kind of the making of the sausage of the whole aerospace airline industry, how the planes actually get to the airlines and we get our little fannies in the seats, so supply shortage out there for airlines.
You're listening to the team. Ken's a our 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.
Again, right in the thick of earning season in a big way, let's check in with Liz Young, head of Investment Strategy, at so far, Liz, you know, we're starting to really get some sense of kind of where companies are seeing some choke points, where they're seeing some opportunities. What are you taking away from kind of what we've seen so far this earning season?
Yeah, thanks for having me. So, I think the first couple of things that we took away from it where everybody was fearing the bank earnings, and those turned out to be better than better than feared at least, which I think public sentiment except for First Republic, but I don't know that that was something that we were all hoping for some sort of huge positive surprise out of.
So a lot of the news that was out there I think was expected, but bank earnings, particularly big bank earnings, came in better than expected, and that was a nice sentiment boost to kick off earning season, which was different from what I think everybody feared could have been possible. And then as we've moved through, I mean, obviously we've still got a lot to go, and this is a
really big week for earnings, as is next week. But what we're seeing now is you've got even some consumer staples types companies and some consumer discretionary companies still seeing the benefit of being able to pass cost increases through in their prices, and revenues have grown maybe more than people expected as well. The one thing that we still need to be watching very very closely is that idea that profit margins were so fat coming into this and
that's what was going to protect us. As inflation comes down, revenues are likely to come down with it, and if companies have not cut costs enough or quickly enough to preserve those margins, we could start to hear about more and more pressure as the quarters roll on.
So what do we Last year, we did have some big fat profit margins right across the S and P five hundred. I think it was about fifteen percent, and we were looking at earnings of like two twenty three. What do you expect for.
This year, Liz, Well, it's interesting that expectations have not really come down very much in the last couple months, and right now, if things stay as expected, we'll have a flat year in twenty twenty three versus twenty twenty two, which I find difficult to imagine given the environment and given the fact that the FED has tightened conditions so much, and we're now hearing quite a few headlines about not only pressure and commercial real estate, but just credit tightening overall,
which is likely to pressure the availability of funds for smaller businesses, mid sized businesses. And that's something that takes a little while to bleed through into the greater economy, but it's certainly something that is not to be ignored. So I would expect that earnings probably contract, maybe just slightly, but I would expect them to contract for the full year.
And one of the other really interesting things that you can look at is in this earning season in particular, although it's expected to be negative growth for the quarter, the sectors that are expected to add positively to that number are mostly cyclical. So if we head into something like an economic contraction, we probably lose some of the strength in those cyclical sectors, which is why I feel like even just the flat earnings expectation year over year is a little bit fragile at this point.
Isn't it odd that we have such bearish sentiment. I mean, even you know, the bowls of yesterday are bears today Kilanovitch for example. And yet analysts haven't taken down their earnings expectations to below last year and hedge funds are short treasuries. Like, what's going on? How do you square this circle?
Yeah?
One of the themes that I've been talking about all year is that there's been these contradictory signals and somebody is going to be wrong. Right, one of them is going to be wrong. I would not ignore the bond market, and the signals of the bond market has been sending. All the different curve inversions, the volatility in something like the two year yield, those are not signs of a
stable market environment. Those are signs of a period where we're still ripe for large intra day or intra week swings. And I think we're sort of stuck in this purgatory right now where there hasn't been a catalyst on either the upside or the downside to get us out of a trading range in equities. And that's what we're all waiting for. But you're right that it seems like one another bull dies every day.
Right.
We've got a lot of headwinds and a lot of data, and just an environment doesn't usually bode well for equity return and equity upside. But the reality is that it's that old a dodge you don't fight the tape, and a lot of the strength still is showing itself in some of the technicals. There are obviously buyers there waiting for the littlest dip to put more money into work.
So we can't argue with that at this point. And I think it's what's kept us sort of in between those beacons on either side of a trading range in the S and P and even in the NAW deck to some degree.
You know, this is a little bit of a technical analysis question, but you know, the good news is the S and P is up five percent, our seven percent year to date. Kind of the questioning news is that there hasn't been.
Like a lot of breadth.
I guess if you will, and there hasn't been, you know, I'm just it doesn't feel like it's really being broadly embraced here. Is that in fact your read of it? And if so, does that wear you.
Well?
One of the things that you want to see if you believe that this is a new bowl market, and it would have to go hand in hand with the idea that this is also a new economic expansion or that we're in an economic expansionary environment. If that were the case, you would see something like smaller cap stocks at least participating in the rally, if not leading the rally,
and that is not what's been happening. So you're seeing a lot of the strength coming from big cap tech and just large cap names in general, which has an outsized effect on market cap weighted indices, and I think we're all aware of that. But in order for it to be consistent with a new bowl market an early expansion, you want to see small caps participate. You also want to see something like the gold the copper to gold ratio be rising, copper being more cyclical, gold being more
of a stable store of value. That's not been happening either, because gold continued to make new highs recently. So it's there are inconsistencies with the signals that you'd want to see in order to believe in this as a new bowl market, which I think is also why you see more and more people every day getting cautious because the data and the backup for saying that this is a bull market just isn't necessarily there in the way that we'd want.
It to be.
Well, And there's also the factor of returns. You can actually get those now, so if you're freaked out about this market, just like if you were freaked out about your bank. There are money markets out there. There are you know, atfs out there that can offer you very safe for five five and a half percent returns.
Right, Yeah, they can offer you income, They can offer you a yield, so it's not necessarily a capital return, but it is something that These are rates we haven't seen in decades, and they may be rates that we
don't see for a very long time again. So if you are in this kind of weighted out camp, which I would be at this point, the title of my blog last week was whistle while you wait, you can get a benefit for waiting it out and getting paid, well you wait right, getting paid in yield in some of those really safe places that would be the short end of the treasury curve, So anything shorter than about three years, that would be money markets that could be
CDs depending on where you want to put it. There are a lot of decent options out there to get paid while we.
Wait this out.
And Liz love to get your thoughts just on valuation in this market.
It feels it doesn't feel cheap to me by any means. And now I got smart folks like you telling me that I still got earnings risk in this market. So you really can't make a valuation call here, can you.
Well, valuations are never a good timing mechanism, so the fact that we're trading above the ten and fifteen year average on the SMP doesn't exactly give me warm and
fuzzy feelings about this being a good entry point. The other thing that I would say is if we're looking at eighteen point one eighteen point two times forward earnings, that's above the ten year average, that year period was spent with five of those years at zero interest rates, and the average tenure Treasury yield over that period was
about two to two point one percent. We are obviously in a different environment right now, so the valuations don't look all that compelling given what's going on in the economy and given what's going on in the rate environment. Now that being said, if the earnings come down further, if estimates come down further, and the results come in lower than expected, you're going to see what's called multiple expansion. And it's also difficult to argue that we deserve to
see more multiple expansion with deteriorating fundamentals. So it's true the valuation picture right now, if you're looking at that as some kind of guide, it doesn't seem like a great time to be putting new money to work.
I wanted to just also give you a shout out for that blog a post, Liz, because it's pretty awesome, the snow white thread going through. So while you wait looking for the poison Apple mirror, mirror on the wall, I just pulled it up on dot com. So just for our listeners, you can you can subscribe to Liz's blog on SOFI dot com. You can listen to it as well, which I think I'm gonna put my subscription in right now.
All right, Liz Young, thanks so much for joining us. Liz Young, head of Investment Strategy at SOFI.
You're listening to the tape cats are live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa play Bloomberg eleven thirty.
I'm going to get to the conversation now of the day.
Brian Stelter, he's the Walter Shorenstein Fellow at Harvard University, but we all know him as the former chief media correspondent at CNN, former media reporter for The New York Times, a published author several times over.
We really he was our go to guy on this topic.
We want to get a sense of what it means for Tucker Carlson to be let go at Fox, what does it mean for Don Lemon to be pushed out at CNN?
And there's nobody better. Brian, thank you so much for taking the time to join us.
I want to start with Tucker Carlson, because boy, that one took. I think everybody by surprise. What's your read of what's happening with some of these high profile names at these cable networks.
Yeah, Don Lemon's departure from CNN was inevitable, but Tucker Carlson's firing that was incredible. It's true that nobody saw that coming, including Tucker Carlson. He viewed himself as all powerful, as even bigger than Fox News. You know, he would sometimes criticize his bosses at Fox and that may have led to his dismissal. You know, we don't know for sure because Fox is not commenting. Carlson still hasn't said a word about this. It's been twenty five hours. He's
totally silent. But what we do now is that in the Dominion lawsuit, through the discovery process, Dominion was able to obtain Huger Carlson's phones, you know, his text messages, his emails, and some of those emails and texts were pretty embarrassing. They were out in public because of the legal filings, but many others were redacted. Many of the other messages were redacted. That means Fox knows what Tucker said, and Dominion knows what Tucker has said, but the rest
of us don't. And I think the answer to why he was dismissed is somewhere in those redacted text messages.
It's interesting because the ones that we saw he said, you know, Donald Trump was a demonic force, and he called the Trump team liars, and I think he may have said even that he hated President Trump. And then last week or two weeks ago, he sits down with the former president and gives him the most softball interview I have ever seen. What's happening in that relationship.
Brian The most generous assessment is that you know he was mad at his friend, right, he was mad at his friend for inciting a riot. The less generous explanation as the Carlson ze grifter. He's a hypocrite. He'll do whatever it takes to keep his audience happy, and if it means pretending to love Donald Trump when he hates sald Trump, then he'll go ahead and do that. I
think the answer is probably somewhere in the middle. I think what we were seeing from Carlson were messages in the heat of the moment, in that awful period between the election and the insurrection and then right after the insurrection. But I always remember what he said that night. You know, the police were still trying to restore order on January sixth, there was a curfew. The city was terrifying. And what
it Tucker said to his viewers that night. He looked in the camera and he said, this is not your fault, this is their fault. She never really said who they was. But that's Tucker's show in a nutshell, us versus them, you versus everyone else, us against the world. That's his message, and well to the extent that he needs to. You know, throw softballs to Trump to keep his own power and keeps to spreading that message, and he's willing to do it.
I mean, we've seen that kind of where will he re emerge?
We've seen that kind of scapegoadism right throughout history. Stirring up anger, stirring up fear seems to be a great business model for Fox. Does Carlson really have a monopoly on that or can they just put anybody in that spot? Well, this is a.
Supply and demand problem, right We're talking about the supply. Tucker Carlson was a supplier. Whoever replaces him will be a supplier. The thornier part of this is demand. Why is there a demand for that kind of rage news, hate news, you know, commentary that's full of resentment and grievance about what they perceived to be a loss to America. As you said, there's a long history of this in America and in other countries, and Tucker tapped into it
in a really unique way. But I do believe there are many others who would like a chance to give it a try. Now that said, Rupert Murdoch and Laughlin Murdoch, they are actually the bosses here, not Tucker. They are the ones they decided to make a change, and I have a feeling it's just an educated guess that they don't want to have a repeat her Carlson. They do not want another show that's going to live in these fever swamps that's going to indulge white identity politics to
the degree that Carlson did. I guess we're going to find out when they actually choose a new host. For now, they're probably going to have tryouts on the air for a while. But Brian Kilmead was the person they chose yes yesterday, and that's very revealing. Brian kilmeat is a conservative, but he is not a conspiracy monger the way Tker Carlson is. As one source said to me, Brand knows
where the line is. He knows where the line is, and I think that might be the kind of person the Murdochs want to install.
What do you think about the possibility of Newsmax getting Tucker Carlson or are there any other networks that can really compete with Fox in terms of this kind of product at this level.
You know, again only an educated guest, but I think the only way that Carlson ends up at another far right network. Is if he buys the network, if he takes it over, if he becomes the you know, the head of the network. If he becomes you know, remember Oprah Winfrey a reformatted at a cable channel ten fifteen years ago, something called own. That's the only model I could see Tucker going because he feels he is way too big to be on a small, fringe cable channel
doing a show one hour a day. He wants an empire, and he was starting to build an empire at Fox. So I think it makes sense that he will go out and try to build an empire somewhere else.
Hey, Brian, you know I've as an equity research channel, so I covered Fox Corporation in the Murdoch family for decades, and I'm wondering, I'm not sure that I guess this feels much more like a Lachlan decision than a Murdoch decision, or do you think there was some more cohesion there.
It's so delicious because for years all we heard was that Lachlin and Tucker were so close, and my reporting
indicates that was true. They were chummy, they would hang out together when they were in the same city, but clearly there's been a fracture in the relationship or this is just one of those ruthless business decisions by Laughlin at the end of the day, though, I'd like to know more, and I hope we learn more about the Rupert Murdoch role in this, because we have read a lot of Rupert's emails, We've read his dissatisfaction with Donald Trump.
It increasingly feels like Rupert Murdoch, you know, has become prisoner to this radicalized GOP that he helped create. What I wonder is is he trying to drag it back toward the middle? Is he trying to drag it back more toward a reality based GOP. The day Tarry Carlson, you know, it was more of a Donald Trump Republican, well, Rupert Murdox more of an Asa Hutchinson, Chris Christie Republican. You know, part of this is a proxy for the war for the soul to Republican Party.
Is that what?
So I've heard that theory. I'm not sure how much credence I give that Fox is gonna try and get back towards the middle or just back towards the right from the ultra right. But what about CNN. I mean, they have voiced that I think that was part of the reason that Reliable Sources got canceled. And I want to say, I think a lot of people miss that show.
Brian, thank you.
Is that the reason that Don Lemon was out or was it just the comment about women being past their prime and there if they're not in their twenties and thirties.
Well, first of all, I don't technically know why my show was canceled. I know some folks think it was political. I don't know what happened, but I do believe Don Lemon was on thin ice and felt that he was on thin ice because of the new management at CNN. I think this was about more than any single incident. So the controversy about Nikki Haley, you know, that was
a self inflicted woun that was foolish. There were other foolish moments, but this seemed to be not any single there was at of any single episode, but rather an accumulation, an accumulation of controversies and frustrations. You know, it was almost just like Don Lemon and CNN were heading in two different directions, and it was kind of inevitable this day would come, it's.
Interesting that happened on the same day. What do you think of then, the decision by the Biden administration to put out like a quiet presidential election campaign launch video the morning after the Tucker Carlson news kind of rocks the media landscape.
Yeah.
I don't actually think they're related, although it is interesting timing and for Biden to be out there trying to basically say, let's you know, if if Biden in twenty twenty was saying make America saying again, make America calm again, then his message today is let's keep America calm, Let's keep America saying let's keep America just like lower let's keep a temperature down right, let's lower lower the temperature. That's the opposite of what cable knew this is about
these days, especially Fox. I think it is a false equivalence to claim that the Fox and CNN are two sides of a coin. They're not. Fox is its own beast, and Fox isn't anything but sane, calm, normal, right, and it's Carlson lurder. Carlson was, you know, kind of the most conspiratorial, im paomoid of them all at Fox.
So there's a.
There's a contrast. I suspect the Biden campaign does not mind, right, the really does not mind between the cable chaos, right, the pipers and noise that's out there, versus the Biden message, which is I'm gonna make you more for.
All right, Brian, We're gonna have to leave it there just because the time Brian Stealter, he is at Harvard University now formerly of CNN.
You're listening to the team. Can's a 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.
Getting back to one of my favorite topics, industrial America, where they make stuff, like in the Midwest. We had the gentleman from Hunting Bank in Ohio on earlier and he says, yeah, we make stuff. GE makes stuff, Boeing makes stuff, Three M makes stuff. So we want to talk industrials. We talked to Brooks Southerland. She's the Industrial and M and a columnist for Bloomberg Opinion. She joined us live here in our Bloomberg Interactive Brokers studio.
Let's start with.
Ge I'm looking at the PGeo function of on the Bloomberg terminal for G. It kind of gives you segment information because I want to see what's left of GE. And it seems like Aviation's big healthcare is big powers, big and renewable energy. That's where we are right.
Well, they actually have gotten rid of the healthcare.
They've gotten rid of the healthcare. We gotta update PGO.
That was in January, Okay, so the company had talked to us about the quarter they had and talked to us about kind of the stocks of fifty percent is the worst behind GE.
I think that it is, and I mean a lot of it is a reflection of that streamlining that you mentioned that you know, GE was just so complicated for so long, and it just it was hit by one crisis after another that targeted, you know, affected a number of its different business units. And I think that just made investors very apprehensive about owning this company because you just never really knew what you were going to get
on earnings day or really any other time. And the company is just a lot simpler than it was before. It's easier to understand, easier to digest, and I think you see that in today's earnings results as well. That this is you know, one of the cleaner, simpler earning statements I've seen from GE. And one of the bigger developments is that they had positive free cash flows.
I know that's been important not just for the creditors for this company, but also the equity holders want to see.
Free cass absolutely, and this is the first first quarter of positive free cash flows since twenty fifteen. So the company's always been back end weighted to the latter part of the year, and that's sort of been their typical cycle. But they've talked a lot about smoothing this out, creating a little bit more balanced and so what's really encouraging to see that number there today.
Okay, stocks up fifty percent, hit a fifty two week high today, So I mean, our most analysts kind of feel like, you know, this isn't maybe the Ge of our parents, but it's a pretty good company.
I think it's getting a lot better. And I think that you know, Larry Colp is very focused on operations. He's a big proponent of lean manufacturing, and he really gets into the weeds on how these businesses are run. And I think that that is paying off. It hasn't, you know, been the fastest process, but it's been slow and steady, and you're seeing GE make a lot of progress. Now. It's heading toward a spinoff of its power and renewable business in twenty twenty four, and that will leave you
with essentially just a pure play aerospace asset only. Hiccup there is that they will still have the long term care insurance liabilities, which leads some analysts to speculate could they try to pay somebody to take that off their hands, just to really clean up this story before you get to that aerospace focus. But there's a lot of appetite right now for aerospace companies when you think about, you know,
just clean stories. Here in the megacap space, it's Boeing has its own issues, and then you have raytheon, but that has a very sizeable defense business. And if you really want commercial aftermarket, GE is the company.
Yep.
Absolutely, I'm looking at the a n R function tracks analyst ratings sixteen buys seven holds. So some support on the street. All right, you had a great column from a couple of weeks ago. They really got my attention. Boeing can't seem to get out of its own way, and that kind of brings an issue we were talking
about earlier today on this show. Matt and I were interviewing a gentleman who's into business of leasing big commercial aircraft to these commercial airliners, and he says business is good with raising rates, lots of demand, there's just no supply of aircraft. Talk to us about what the good folks at Boeing, And I guess the same thing can be said for Airbus. Where's the snag in getting some of these airplanes off the production floor?
I mean, I think it's really all up and down the aerospace supply chain, which also includes ge as you know, one of the biggest makers of jet engines. And you know, you have to remember that the airlines in the US had a backstop where the US provided payroll support so that they can keep staff on the payroll for even during the depths of the pandemic. Now that hasn't necessarily always worked out the best for the airlines, but they did have that support that did not extend to the
aerospace manufacturers. So they all laid off workers in mass by the thousands, and now demand is back and they are trying to rebuild that labor pipeline and push out all the parts and supplies needed to make these planes. But that it's not that easy because in many cases you're trying to make up for an experience gap. There's
a lot of training involved in putting together airplanes. On the defense side, there's a lot of logistics around clearances, that kind of thing, and that's really been a hiccup. And then of course you have just the supply chain issues that everybody's been dealing with around semiconductor's commodities, parts, that sort of thing. Those issues seem to be getting better and it's really a labor challenge.
At this point.
So what is Boeing saying about its production output? Are they producing after capacity or are they still below capacity trying to add capacity? How did they kind of phrase out or you know, kind of how this is going to play out of the next couple of years.
I guess for these companies, sure.
Well, Boeing would like to produce its capacity. I mean, it has its own idiosyncratic issues where it had a lot of undelivered seven thirty seven Max jets sitting around because those planes were grounded for so long. Given the two crashes and you know now, and it's had a series of production issues as well that's affected its ability
to deliver seven eighty seven Dreamliners. And then we have a new production issue with the seven thirty seven Max, which the company has said will temporarily at least lead it to pause deliveries now. CEO Dave Calhoun at the company's annual meeting said they still expect to increase output of seven thirty seven Max jets, but I think that the onus is on the company to prove that they can do that. And it's not clear at this point just how big of a deal this latest production snap
it really is. We should get more details tomorrow when Boeing.
Reports earnings reports tomorrow.
Okay, so maybe we'll chaty ten Okay, just real quick, three M laying off some people. I'm used to seeing that from these tech companies out in Silicon Valley, but not the heart of America.
Just thirty seconds, which.
You should be used to seeing it from three M because this is the latest in a very long string of restructuring initiatives at this company that have really failed to have much of an impact. It's been talking for years about streamlining its operations, reorganizing its operating model, and you just do not see the payoff in the company's operating margins. Now. It does have, you know, its own separate issues in the legal world around legacy manufacturing of
pfas and military ear plugs. That's been the biggest anchor on the stock. But I think that investors are also just very frustrated with where this company is operationally now. It was one of the more diverse industrial conglomerates that's still out there after all of the spinoffs and breakups that we've seen, and so that certainly, you know, leaves it a little bit more exposed to macro trends. It does cater to consumers more than your typical manufacturer those
these days, and it's definitely seeing the pressure there. But I think there's a lot of well.
We talked about the analyst support for ge not so much here for three M one by rating fourteen holds and five outright. So so whatever this company I management team is selling the street, it doesn't appear that at least the analyst community is buying it. Brook thanks so much for joining us. Brook Sutherland always a treat to get on the show because we love talking about industrial America.
Brook Sutherland Industrial and m and a columnist for Bloomberg Opinion, joining us live here in our Bloomberg Conteractive Brokers studio. Lots moving on got earnings coming out all week. Busy, busy week. Busy's week actually for the dal Jones and for the SMP, so we'll stay on top of it.
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