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Let's get back to the CPI number.
So the takeaway in general seems to be that disinflation is not what we've seen, say, in the last three months, that what we're used to, But that doesn't necessarily mean that the economy is reaccelerating. So we kind of want to understand the nuance here. Here's Lindsay Pigs, chief economist over at Stifel. She joins us from Minneapolis. Lindsay, how would you categorize the CPI data this morning and does it change the trajectory at all for the FED? Well?
I would categorize it as a somewhat disappointing report for the Fed's that's still struggling desperately to reinstate price stability. Now, it's important not to look at one data point. That's never enough to sway the FED in one direction. Or the other. But we do have to put this in the context of ongoing, an ongoing lack of even downward
momentum in prices at best. Inflation has been uneven moving sideways for the past couple of months, and so this really underscores the need for the FED to remain focused on reaching that two percent target. Now, last month they were buoyed by this mounting concern for the labor market. But as we saw in the latest September labor market data,
the employment reports are still near full employment. The data suggests the labor market is still very solid, and so I do think that at this point the fed's focus may be better directed towards that price stability component of the dual mandate.
You know, Lindsa we were talking to Tom Keen and I are earlier today with the professor Cam Harvey at Duke University, and he's a big proponent of the fed's way, way, way behind, because they're using really dated data, particularly housing data, and if you take a look at some of the real rents and stuff like that, inflation's already whipped and this FED should be you know, cutting rates. Maybe how do you feel about that?
Well, I think there's a number of different ways to look at inflation, and sure, if we take out some of the stickiest components, you can get a much better read on inflation. But when we're trying to look at the overall price index for consumers, what we're feeling in terms of costs for goods and services out in the marketplace, that underlying core measure, which excludes food and energy because
those are extremely volatile. From a policy standpoint, that suggests that inflation is not quote whipped, and that the Fed's job of reinstating price stability has not been complete and remaining on a downward trajectory back to two percent is not a foregone conclusion. So I would caution against that
line of thinking. That could leave us in a very difficult position where the FED takes a more aggressive approach to policy in anticipation of further improvement, only to find out we're not there yet and the FED either has to reverse course or simply has driven us into the most unfavorable scenario of stagulation at that point.
But but, but, but that brings us to the other data point, which is initial jobless claims.
I know that they can be volatile.
I know you also have a hurricane Helene as well as the Boeing strike impact, Like there's those reads too, So which path is a FED follow like inflation slowing less than we thought or initial jobless claims rising more than we thought.
Well, I think you have to put the jobless claims, as you said, in the context of the events that are occurring in the economy at this point. Between the strikes and the hurricanes, we anticipated a lot of volatility, and you can tell that this is an outsized increase relative to the very calm trend that has been well
established for the past couple of years. You also have to put this one weekly data point in the context of again that September employment report, where we see wages, we see job vacancies, we see the participation rate, we see top line hiring, all suggesting tight ish conditions, lingering tightish conditions for the labor market, which does not support this pop in weekly jobless claims, again, which is primarily a reflection of some of these one off incidents in
the economy. The FED knows that the FED is not going to adjust policy based on a weekly data point, but again it does underscore this bifurcation among FED officials. As we saw in the Minutes yesterday, there are a number of FED officials that are concerned about the labor market and say that we should continue to cut in anticipation of weakness to support the labor market and the
broader economy regardless of what it takes. On the other side, you have Governor Bowman leaving the pack saying no, they're still upside risk to inflation, and that's where we need to keep our focus because without price stability, the economy doesn't work for anybody.
How about the consumer, lindsay, some of the data points you've seen over the last couple weeks, what's your read on the yost consumer.
Well, I think that consumer is surprisingly resilient at this point. The consumer is still out in the marketplace spending on goods and services, but they're doing so at a noticeably reduced pace. We've gone from double digits to eight to
six now down to an average pace of three. Again still positive, but a very clear second derivative decline or slower pace of positive expenditures as consumers are feeling the weight of higher prices, higher borrowing costs, the resumption of student debt payments, and so we see consumers increasingly turning to these less organic measures for support in order to keep spending in the marketplace. We see four oh one
k hardship withdrawals of double digits. We see consumers turning to an intergenerational wealth transfer, and of course, surprise, surprise, credit cards are up there on the list.
Yeah, absolutely, all right, lindsay, thanks a lot, really appreciate it. I still feel like it's all a ork check test at the end of the day, pigs. As she joins us from Stefelt.
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Let's say on the Hurricane Milton track. Of course, there were reports of tornadoes also pumbling through the state as well.
Let's take an impact. Let's take a look on the impact on the housing market.
Ken Johnson is Walker Family Chair of real Estate at the University of Mississippi. Ken, it's great to get your perspective on this. How do we know what the full damage is to say, the housing market. How long does that assessment take?
So we can make some upfront esturbations, but we probably won't know the full results quite honestly, for a couple of years. Using Ian as a test case, we're still recovering South Florida. That is, is still covering southwest Florida. From Ian, this appears to be less in scope, so we're probably still looking at several months before we've completely gotten rid of Hurricane Milton.
Talk to us about just I don't know you think about owning real estate Florida. But that is not for the faint of heart here because talk to us at just about I don't insurance and how this folks that are just.
Keep rebuilding and rebuilding. Is there are there lessons learned down there?
Well, many, many folks predict that these hurricanes are going to end the growth in Florida, and they've been on record for one hundred and fifty plus years. Going back over one hundred years, I think there's over thirty category threes or higher that have struck the state. Dire predictions have been made in the past and they never come about. And it's because the demand to live in Florida just
keeps increasing. Nice, solid economy, good weather, Son's hurricanes, warm in the winter, air conditioning works in the summer, strong business climate. People are coming to Florida and this is not going to stop.
What about the prices of those particular houses though, because what we can't argue is that insurance companies are dump in Florida right there's any local insurance companies. There are many stories of people's insurance premium is just rising really fast, which means it's hard then to sell the house. At the same time, maybe it's more expensive than to buy a house.
Does this need to settle out?
It does, and this has been an issue in Florida for quite some time now. It's slowly getting better. Some legislation was brought about in terms of limiting liability exposure off of certain types of damages and that you had to be timely and filing your claims slowly slowly taking effect. But home insurance is going to be an issue in Florida for years to come. The state does have an
insurer of last resort and that's the Citizens Group. If you there in Florida, you're very familiar with Citizens, So yes, it's a problem. It's something that'll work through. The reinsurance rates have gone down this year for Florida. That was really good news. Probably will not be again. So in other words, the people ensuring the insurance companies their rates had went down an end of twenty three, they'll probably be back up end of this year now due to the two storms combined.
All right, let's zoom out a little bit from Florida and just talk about affordability.
Housing affordability or lack there of in this country. Can you just give us a sense of how do we got to this place where we are now where it really seems to be a real stretch for so many Americans.
Housing affordability.
Sure, So, if I had to pick one item that was the most influential in this or the approximate cause of unaffordable housing at this point in time was post the last housing crash circa two thousand and seven and eight, depending on where you were in the country. The markets turned out. Real estate markets all over the country turned down. They bottomed about twelve but during that period in time, we lost thousands of small builders. Today we mostly have large,
publicly owned developers. It's hard to keep pace. We've just lost so many builders. You know, the difference between a builder and developer quite often is maybe the scale. So we have fewer but much much larger developers, But we still need those mom and pop builders that build those fifty plus or minus homes a year, and they just they left the market, or they were forced out, or they were forced into bankruptcy, and they have not come
back into the marketplace. That might so we're not building enough.
Years explanation I've heard for what we don't have enough supply that nuance. Does that mean then that this is a cyclical industry still, as you say, like, okay, so then you got to then we're going to overbuild at some point and then prices come down or is this truly structural?
I think it's still more cyclical. But this is this is an ongoing issue. So if we go through a few cycles and we haven't solved it, then yes, we have a chronic, persistent problem. I would love to see a little bit easier for the small builder to develop and thrive and restart. Getting that done is another set of circumstances to work through.
You know, one of the issues for a lot of folks is nobody wants to leave their home because so many people are sitting on you know, three four percent mortgages some people below.
You set me up, man, you do it on purpose.
At this point, I have two point seventy five, which I talk about all the time all the time.
So where do you think mortgage rates need to go?
Professor for you know, the Alex Steels of the world, saying, all right, I can consider selling my existing home and going somewhere else.
That would free up some inventory.
So our overall mortgage rates in the country, they're higher. Oddly they're higher since the Fed's announcement to lower the interbank loan rate, but that that'll correct itself in the next few weeks or so. But it's not necessarily what rate will have to come about such that folks will start to begin to sell those two point seventy five three percent loans. What will happen, probably more likely for those folks is they'll have a change in life event
I'm moving to another city. Unfortunately, financial distress will cause a lot of sale. So a lot of these things are going to be brought back. A lot of these properties are going to be brought back into the marketplace because I have to sell rather than I want to sell. But we're probably going to see an environment we'll get back to the four and a half spives. We're never I don't think in my professional lifetime will we ever
see two point seventy five or three percent again. That was just so unusual and we can't have that as the norm. And oh we're not back to the norm. Well that wasn't the norm.
Yeah, I was doing a little happy dance for those of you who were unfortunately smug.
Yes I am. I mean the air of smugness.
It's the one thing I can literally, the one thing I can brag about, and so I do walk about. It's still being a cyclical industry. How long do you think that cycle then could be? Like when do we get to like an oversupply situation?
Ten years? What does it look like?
So hard to say. Again, the cycle, this last cycle has been extended for several reasons, one of which is COVID, And we were talking about the low interest rates. We were pretty near a peak back in twenty ish, and then we had COVID and we've all had much easier access to capital, shortage of housing, we bid prices up. This is going to be quite some time. We're years in the catchup, so minimum another three to four years to catch up, maximum a decade.
All right, you just made the big move from Boca Raton, Florida, Florida Lanta University to Oxford, Mississippi thirty seconds.
What's the big difference.
Well, I have the best of both worlds now. Originally I'm from the South and I've always loved are that dreamt of being at a state university, flagship school SEC football and sports. I love Boca. So we've kept a place there in Boca, my wife and I have and we will continue to be there in the summers and at Christmas time. You know, to be anything above it ten is like a reflecting barrier in terms of winter cold.
But if you come to Oxford, you would understand why I wouldn't pass on this opportunity to come here and build a program.
Yeah, it's fantastic.
Old Miss Ken Johnson Walker Family Chair of real Estate at the University of Mississippi that is in Oxford, Mississippi. I just kind of googled map the because I always forget.
Where Oxford is. Northwestern part of the state. Just it's very close to Memphis. Tennessee. Actually, oh, it's closely the Arkansas border, but it is. You know, that's deep sec.
Country, Old miss but pretty cool there. But again, a big move from Bocah to Oxford.
I thought you were looking at an uber and I'm like, you're not goingwhere. For like two hours, I don't know what this guy's doing.
But now now I understand you where it's all about.
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Let's check in with somebody who's paying attention to earnings because they're going to kick off in size tomorrow with JP Morgan. We always pay attention to what Jamie Dimond says about the overall economy. Karen Murphy Joints is. She's a CIO at Kestra Investment Management. So Carol, we're gonna have earnings tomorrow. But I love to just get your thoughts here on that CPI print today and maybe how you think that may impact FED actions going forward.
Yeah, so I given the print today, I don't think there are too many doves who are celebrating. You know, this is definitely a little bit of a fly in the ointment of the deceleration and inflation that we've seen over the last couple of months.
That's it.
I mean, it looks like markets are taking it in stride. So, you know, inflation showed up a little bit hotter than what I think many of us would have liked to have seen, and I think it's a really good reminder that the FED has a tough job. You know, we saw also claims happened to come in today a little bit higher than expected. So what we're seeing now is inflation a little bit hotter than expected, labor market a little bit weaker than expected. So it's a really difficult trajectory.
So I think the FED is still on track to do a twenty five bit cut at its next meeting. Today's print won't be enough to really change the Fed's mind, but you know, it does highlight that there's a lot of complexity and a couple more sort of hotter inflation prints between now and the end of the year. It could start to slow those FED rate cuts.
Yeah, exactly, we've seen FED cuts kind of priced down a little bit up for twenty twenty five. So if we are okay, it's a two firm, does that mean that the US economy could reaccelerate? And then if we are seeing a longer economic cycle, does it change where in the market have to be invested with in equities.
I think that's the question that we should be asking ourselves, and I think the easy answer is that, like, we know that the economy and the market typically doesn't go in a straight line, So the FED is actively trying to pivot. Right. We had our first rate cut in quite a while, and that introduces a lot of cross currents into the market, and so it makes sense that the economy is going to kind of, you know, chunk around for a little bit. So yes, we could see
a reacceleration. I think the Fed will then you start to pull back a little bit. But this like lag issue in monetary policy is a really big challenge because the labor market starting to weaken a little bit is responding to rate cuts that happened quite some time ago. So even sorry rate hikes that happened quite some time ago.
So even if the Fed starts to cut, it will be a while before we see it in the market, So it makes sense that the market will or the economy will sort of like reaccelerate and then slow down again, and it'll take a little while before we get to like that firm footing and determine where the FED should have its resting place be. So then what does the
market do in the meantime? I think smaller companies who rely more heavily on debt are a little bit more subject to the fed's whims, so as FED rates come down, they'll benefit more. If those rates take longer, it might take longer for them to see that real earnings reacceleration that we're waiting for. But there are multiple different pieces that kind of feed into that.
So given all that background, how are you guys positioned? First, let's go with the equity side of the equation.
How are you positioned there?
So we still are really favorable on equities, But what we found is that your core benchmarks have moved very
heavy into large cap or megacap and into growth. So what we're doing is kind of taking a step closer towards a little bit more even split between value and growth and favoring some of those somewhat smaller companies, and like I often say, you don't have to go all the way down to small cap in order to benefit from being out of that megacap You just you can just go into the smaller large cap or we think
megacap MidCap is really attractive as well. So just starting to step a little bit towards the center of that while still remaining overweight equities.
Yeah, I feel like I've been talking about mid caps for a bit, and every kind of day you got the SMP making a record high, the midcaps also make a run for it at the same time. Okay, how does that then position you in the bond market? Like, do we still get a steepener? It's just a matter of how we get that steepener that matters.
Yes, it does. And I think the easier sort of bet to make on the fixed income side is to be out of high yield credit, not completely out, but underweight high yield credit where we think if the FED rate cutting cycle takes longer than we'd like to, those are the companies that are going to face some pressure. And you see really low spreads there right, so you're not being paid a lot in order to take that risk. High quality corporate on the other hand, we think is
pretty attractive. There you get a nice interest rate bomb, you're not taking a huge amount of duration risk, but still benefiting from that higher overall yield compared to treasuries. So in treasuries there you know, would be more in the belly of the curve outside those really long duration which we've seen be fairly volatile as inflation sort of comes and goes. But you want to start to step off of those really short term rates.
And if I look at then GO function on the Bloomberg terminal, which gives me a nice overview kind of fixed income market year today performance, the best for fixed income has been and by far has been US high yield corporates.
Talks about the higher money now, love to get your thoughts there. What do you think about the high old market.
Yeah, so it's been super interesting to see how it's really led. And typically what we see is high yield is very highly correlated with equity markets. So in some ways, you know, that's a lot of what we've been seeing where it's very consistent that investors are looking for a little bit more risk, and so if they're dipping their toe into the fixed income market, high yield becomes an easy place to go. I also think as folks were worried about kind of the trajectory of the FED rate cut,
that was also a safer place to be. You're a little bit more inoculated from those rate changes because you have that spread. But again, that's looking in the rear view mirror. So we've seen that real strength in the past and going forward, I don't know that you're being paid to take a lot.
Of that risk.
Yeah, right, exactly. So then if you want to go in corporate credit, where's the right place, Like you're looking at double Bee's, Triple B's kind of thing.
Yeah, I think right in that place, And you can also go higher credit quality as well. Again, those spreads are fairly tight, but if you're in the belly part of the curve, you're a little bit protected from any of that volatility on the long end, and you can have some really nice, juicy yields. If you look at yields today in that space compared to the last ten years, you have among the best yields that we've seen during
some investors' lifetimes. So that's you know, that's a pretty attractive place to be.
And Cara, I think the month of September was either the biggest issuance month, but are one of the biggest issuance months of investment grade corporates. When you, as an investor see companies rushing to the market, what does that tell you about the market?
Take anything away from that.
Well, I think a lot of firms had really held off issuing debt because of uncertainty in the market. It's an uncertainty of where rates we're going to go. So I think this is a sign of confidence that people are willing to come back to the market. I would expect to continue to see issuance kind of tick up over the next couple of months, especially as if we see additional rate cuts. So I think it's a healthy sign for the market overall.
All right, Kara, really appreciate it. Thank you so very much for joining us Care. Murphy CEO Orchestra Investment Management. It all depends too, Paul, like, what do you think the catalyst is going to be? Deutsche Bank had a really interesting note oubt and I appreciate it is from the equity side, but saying that cyclical growth is now the key driver for equity is not infletion not rates, which makes an earning season kind of all the much more important.
Sure, maybe you're all talking your book.
Of what you like to cover, but still, but the idea is like, look, the Fed is going to do the thing. Other things are going to matter, especially if we get any sort of capex spend after the US election or even after earnings, for example.
And some of that's going to be structural rather than cyclical.
Yeah, in interesting to see, and I guess you know, uh, Jamie Diamond tomorrow. I think a lot of folks kind of really dial into that call hoping to get a view of kind of how the global economy is looking across all of their businesses. But again, maybe it could be a time for cyclicals. A lot of folks, as Caro was suggesting, maybe thinking about broadening out this mark a little bit at mid captain small cap.
So yep, keep keep that in mind.
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I we want to get the take now on what Hurricane Milton means for the reinsurance and the insurance companies. Matthew Palizoa, Bloomberg Intelligence Andior ANALYSTP and C Insurance joins US. Now, so how have you changed your modeling in terms of the impact for the insurers based on what we've seen.
So it looks like they avoided the worst case scenario we were talking about going into the storm. The inturyers talking about about one hundred billion dollars worth of insured losses, which would have made it the worst storm ever. That was predicated on a direct hit into Tampa Bay, which really didn't happen. So that was the good news. The bad news is still going to be a large insured loss event. Now. The other good news for the large national carriers when we kind of talked about this before,
is they're just not big players in that market. So companies like Travelers, Chubb, AIG, Hartford, they're not major players in the Florida home market. They will have losses from this, but much less than we initially anticipated. I come to like a midpoint of maybe five to six percent of annual EPs taken out from the storm.
What do we think that insured losses actually will end up being, if not one hundred billion.
So it's super early, Paul, But I mean, just back at the envelope, we're kind of looking at maybe ten to fifty or something like that. Like it could be on top Hurricane Ian twenty twenty two was sixty five. The early reports I'm hearing is the surge in Tampa was actually less than even Colleen, So it was less than Ian as well, So it could be lower than sixty five. But it's still early, and you've got the holding damage on top of it.
Is this, So how does it work done with premiums? I mean we're used to hurricanes, right, so like do premiums for insurers or reinsures wind up going up?
Like?
How does that work? And what's the immediate reaction?
So you got a bunch of dynamics in this whole insurance premiums going up.
Anyway, right for everyone?
Pretty much for everyone. That's been happening for a while now, And that is cost of materials, the frequency and severity of storms nationwide anyway, severe convective storms, kind of strong hail, stuff like that. So it's not just hurricanes, So that has been driving home insurance prices up anyway. Reinsurance prices insurance for insurance companies have been going up anyway, which
drives it up as well. What I think will happen, and not exactly want to make this call, but there's gonna be demand surge, meaning there's gonna be a huge demand for building materials and that is going to push up costs across the country as well, so that'll feed into price. So there's a bunch of upward things pushing on home insurance prices.
I don't know, it just feels like we've had a lot of storms, and I know this this season was actually.
Pretty common until just recently.
Then I go look at the S and P five hundred Property and casually insurance sub industry index, and there is such a thing on the Bloomberg terminal. It's up thirty eight percent year to date. These insurance stocks are doing well.
What's going on there? So what's the call?
Fundamentals still good for them, and we expected a busy hurricane season. Kind of new conditions were conducive to that happening, and there was a lot of formation. It just there weren't a lot of big landfalls but these stocks they're defensive, so it's like kind of when you get worried about the economy, they do okay, But then they can also benefit from the economy, so they're a nice play on both of those things. Interest rates going down is less
of an impact on them than other financials. It's not great for them. It helped them a lot, but if you have to own financials, they're less sensitive to interest rate moves. So there's a bunch of positives there. I see, sorry when I see fundamentals probably peaking, so you know, we might be at that point, but still still good fundamentals.
This might be a really silly question, but did the insurance policies just for homeowners are even small businesses. Do they ensure the right things for the type of weather pattern changes that we're seeing?
Good question? So that makes me so, well, here's the thing is that they do. So they step back the home insurance industry. It's not like they're raking in profits. It's not like, oh, there's a big flood and we didn't have to pay for it, and we're making a lot of money. We look so over the past ten years, the industry has paid out a dollar and three cents for every dollar they've taken in, and that's in losses and expenses. And that's even excluding you know, storm surge
and flood. So it's not any incredibly profitable business to be in anyway. So if you were to say, Okay, now these guys have to ensure flood, they have to in storm surge, then the prices of these policies would need to double. So to answer your question, out, they're not. But for them to ensure everything they need to would be prohibitively expensive.
It's sort of like how I wouldn't have wildfire insurance for a New York apartment, but then we had all that wildfire smoke, Like if that becomes like a common occurrence and it messes up with I don't know, whatever things you have in your house or apartment, like, that's different anyway.
Just I think did Warren Buffett go into the Florida insurance market in the last several years and was that a mistaken with.
Hindsight, so Berkshire has obviously vast insurance businesses. Geico's a big auto insurance writer in Florida. In twenty twenty three, they made a big bet on the Florida reinsurance market and that paid off handsomely for them. They could have lost a lot there, but it actually worked out well. You know, we would have to hear from them, but it appears that they kind of completely backed off of that market this year, which turns out to be another
good idea. So they'll have losses in there, no doubt, it will not be anywhere near the magnitude that it would impact another insurance company with a smaller balance sheet, So they'll have some losses from this. But last year they made a big bet on Florida the paid off this year. Pulling out that big bet was beneficial.
I didn't know insurance simms could go in and out of market so quickly.
So in the reinsurance market is easier, right, Like they can reprice on an annual they can all reprice on an annual basis. But there's less regulation in that market, so they can they can write or not anywhere in the world kind of where they want to.
All right, matt thanks lot, I really appreciate it. Matthew Palizowa, Bloomerg Intelligence Senior ANALYSP and C Insurance. We didn't even get to the cat bond market but apparently there were estimates that those catastrophic bonds would lose as much as fifteen percent, and now that's been repriced as well, so now maybe we're in single digit losses for that.
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Thirty, Alex Steel, Paul Sweeney live here in our Bloomberg ARCTA Brooker's studio in New York City, or streaming live on YouTube as well Bloomberg Radio Live. That's kind of where you can find us there when you search, I'll tell you it. In the world of M and A, I'm not sure i'd want to be a banker today. Maybe an M and A lawyer is something that would be I think I bill by.
The hour and get paid.
Or any trust lawyer, any trustler. Boom, because this FTC is no joke under President Biden. At Lena Khan, who heads this Federal Trade Commission. She is tough and she is a subject of our Big Take story today. Lena Khan has plenty more targets if she gets another term. Joining us is Max Chafkin. He's a senior reporter for Bloomberg BusinessWeek, and the story does appear in Bloomberg BusinessWeek
this week. It's his co author's Josh Idelsen Max Chafkins with this year, Max talk to us about Lena Khan. Who is she and how does she view the FTC as perhaps a check on consolidation and number of industries.
Yeah, Lena Khan is a really interesting figure in the Biden administration but also as a political figure today.
She's very young.
She's the youngest ever FTC chair at age thirty five. She also, you know, she sometimes described as an academic, but her academic career was very brief. She basically went almost straight from law school to this position. And she became kind of famous for writing this article in twenty seventeen arguing that, you know, regulators need to look at Anti Tree different differently, in particular in relation to Amazon.
So in the past most people said.
Hey, if prices are going down, that's good for consumers, No need to worry about it, Leni Khan argued in this paper that there are other costs of having Amazon dominate so many industries, cost to businesses, other smaller businesses, cost to labor, and maybe ultimately cost to consumers.
And that view.
Has kind of powered this new movement that has scrutinized a lot of the big tech companies. We've seen anti trust actions against you know, Google and Apple and Amazon and as well as as you're saying, a level of scrutiny on mergers that that feels new, that feels somewhat different from the past.
That's so interesting.
I love the way you phrase that. So we usually think about it as does it hurt consumers? And now we're thinking about hurting in a much broader sense. So if if we get a Harris or Trump.
Well we're gonna get one of them. So does that.
Change because one can make an argument that I'm sure Wall Street is pressing the Harris camp to all so have changes at the FTC.
Yeah.
My co writer on this, Josh Eidelson, and I spent a lot of time talking to various you know, donor
types and people who are pushing for various things. And what you learn is that the people who seem to be most vocal right now are sort of centrist Democrats and centrist Republicans, both of those, both of those groups the kind of who represents sort of what you might think of as like the normal kind of corporate consensus, the way that a lot of people thought about how government should relate to business over the last forty years or so.
They all are.
Kind of against Lena con in one way or another. You've seen a lot of angry, very angry Silicon Valley types saying that she's you know, destroying M and A, destroying the venture capital industry and so on, and you're seeing that kind of thing.
From sort of chamber of commerce Republican types.
Now where you see support is kind of the squad, the sort of progressive left that likes Lena Khan because.
She's pro union.
There's also some support from some corners of Silicon Valley, the parts of Silicon Valley that maybe are mad about Google and Amazon being so dominant. And then on the right you actually see support as well, because sort of like the trumpest right, the MAGA right, jd Vance types, the sort of young Trump supporters who tend to be really mad about tech dominance and also have somewhat populist views on business and on how government should should relate to business.
Do we have any idea how Vice President Harris feels about Lena Khan in this FTC She has.
Been studiously vague.
I would say I think the closest sign we have is this the price gouging proposal, Because so Harris announced that she was going to have the FTC crackdown on price gouging by grocery stores. That would be an expansion of the FTC's authority. We asked Lena Khan about this, and you know, her answer was somewhat careful and political, but essentially was like, hey, I'm open to it, and she made clear, you know, she would like to serve
another term. She feels there is a lot of work to be done, and you've seen over the last few months the FTC has been very active. I think they will continue to be very active.
We heard Jamie Diamond speak with Lisa Brahmins earlier this week, CEO of JP Morgan very much again saying who thinks that CEOs should have a seat at the table? That like half the cabinet should be probably overdid it, but half the cabinet should be CEOs and so I'm just wondering how that plays in to an FTC that is more aggressive against company mergers, like will there be a relationship to be had.
I mean, the most interesting thing to me about the Biden administration has been in years past. You know, I typically cover Silicon Valley, and when Silicon Valley would say this person is anti tech, this politician anti tech, that would provoke a reaction because no politician wants to be seen as anti tech or hasn't been. And the difference with Biden, and I think to some extent the difference with Trump, is both of them have been comfortable with that.
They say, you want to be mad at me billionaires, Okay, you know that's good politics.
I'm a populist. People tend to like that.
And we actually heard that, And there's some quote in this story of this effect, like you know, Reid.
Hoffmann speaking out against Lena Khan.
There are people on the left who think he is doing Lena Khan a huge favor because he's gonna make it very hard politically to fire her. And I think this position, the position you're hearing from Jamie Diamond and from lots of people in kind of the centrist, kind of traditional, you know.
Corporate roles.
I don't know how popular it is politically. The the ideas that are on the ascent are really populist ideas and you're seeing that on both sides.
And it's not just Lena Khan.
You know, you look at the Department of Justice, you're reporting your your piece here, they're taking a tough rule against Google, for example, Apple SEC chairman Garagant to pushing back on crypto.
So this is not just a Lena Khan thing.
No, absolutely not.
And I think, yeah, Jonathan Kanter, who's the head of Anti Trust that the DOJ, Gary Gensler, you said SEC.
It is Lena Khan has come to symbolize something.
And I think that it's partly because of her youth and and because of who she is and where she comes from. She's not a conventional Washington figure in any way. And also because you get this attitude that she doesn't care.
That and that can rub people the wrong way. And I think it does rub people the wrong way.
When you talk to business people, they are mad about policy, but they are also mad about tone, and I think that is some of what they're reacting to. And but of course that has its that has a political upside. We saw yesterday AOC coming out really swinging in favor of Lena Khan after Mark Cuban made some comments, he made some similar comments to us that we put in our story, but essentially criticizing Lena con AOC, saying it's going to be an all out brawl if you wanna,
if anyone wants to remove her. So I think this will be an interesting political issue whoever is elected in November.
All right, Max, thanks lot, really appreciate it. Max Chafkin, a Bloomberg at BusinessWeek senior reporter, this.
Is the big take piece.
You can check it out on Blueberg business Week and also a big take on the Bloomberg terminal. Really good stuff. It's gonna be so fascinating. And if you're, you know, a CEO, do you want to get into the M and A line and just kind of wait there or do you want to wait and see what happens after November and what happens to Lena Cohn?
Like what's your strategy?
You know?
Yeah, it seems like we talk to Jenri who's anti trust analyst at Bloomberg Intelligence, seemingly almost every week about every deal that gets announced, we got to go to jenary and say, are these right?
There?
Is going to let this thing go?
Ito's busier George Ferguson or Jenri exactly?
I don't know. I think it's a toss up at this point.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecard Play and Android Otto with the Bloomberg Business. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg eleven thirty.
This is Bloomberg Intelligence Radio.
We bring you all the top news, not about lice or Amazon, but other stuff too through our lens of our Bloomberg Intelligence folks. They cover two thousand companies one hundred and thirty industries around the world. Tim Craighead joins us now from Bloomberg Intelligence. He's a global chief content officer. He has his eyes on everything and they have a great note out that talks about ten companies to watch in the fourth quarter. All right, can you pick your favorite like.
I have ones.
I want to ask you about, Tim, but you pick your favorite and let's start there.
Well, you guys are talking about talking to your bartender and your Amazon driver. You're going to do that after you visit truly even better.
All right, So what's that company and why?
So you know, just to put context, this list of ten are all focus ideas of ours. So companies where we have a high conviction view that we think is different from what the market thinks. And there's catalyst ahead. True Leave is a marijuana grower and a distributor. They have stores. Seventy percent of their stores are in Florida, and Florida has on the referendum this November the potential for legalization for recreational use. It would be a big deal for Truely if this were to come through.
Yeah, I'm maybe Florida a huge market.
And you know what I recognized when we went over to Ireland, coupic Scope, they don't do the gummy thing over there.
They don't have the weed thing. They're gonna get on board there.
They maybe that's they don't really need to that.
They just go to New York and then they come back to.
Exact Ireland exactly.
Anti Sports talk to us about that because I feel like I know they're an Asian company, so I'm assuming this has a China call to it.
It does with an interesting twist. Anta is a is a sports wear company. They have a number of brands. I think when I've been on your show before, you may have seen that I've had an Arctics best on.
Tim is like an extreme biker, climber hiker, all the stuff.
That I just have good for you.
I got nothing on that, But no Arctics is owned by Anta. But the reason why Anta is on here is twofold number one. Do have a lot of things going on from the standpoint of driving their business with various brands, and the Olympics playthrough will get results when they report next in terms of how good it's been. The China national team were anti sports kit. But it's also a case. You've seen lots of news about Adidas and Nike and how they're trying to get their inventory
under control. That's making pricing better for sports where generally, and we think that that's playing through into anti sports margins as a corollary.
That's interesting when you compare it to like say Nike, I understand that they do different things, but still you've also on here, so this is basically straight up railroad stock.
Why do you guys like this one.
Well, there's two things here. If you were to look at a three year, five year type chart, you would see that this company has gone through some problems. They had a big right off and problem that was announced a year or so ago, stock had collapsed. That's been settled and they're on the right track. No pun intended at this point. But importantly, there is a new European union wide signaling system that's coming into place that is meant to be reducing a lot of complication between different
countries and whatnot. And it's an Alstom system. And in general the train businesses is running pretty well. We think they're on a road for recovery.
Tim the biggest mark or one of the bigger market cap names on your list is Saudi National Bank. And I'll start with I know nothing about Saudi National Bank, but it's fifty seven billion market cap.
What's the story there?
Yeah, you know, it's really interesting. And this is true for Saudi National Bank, it's also true for some others in the country. It's running contra to what most banks are experiencing. I think there's been lots of news and coverage and certainly we've written about the pressure coming ahead for most banks with their net interest margins as interest rates start to decline. You know, their their loan pricing comes down, and you know that's not great for margins.
Saudi National Bank isn't is an interesting case. We're given the nature of how their loans reprice versus their deposits repricing they actually stand to see over the course of the next six to twelve months, and then interest margin growth and expansion, and so it's running counter given just simply the nature of their asset and liability mix to to normal bank profitability in the current cycle we're in. So it's a really unusual story.
Okay, we got like a minute, can you do for solar for me? Because that's gonna for me that's a TVD based on what happens with the Inflation Reduction Act here in the US.
But you tell me it absolutely is. I mean, we all know that the election coming up is going to have a lot of implications for what happens from energy transition related spending and whatnot. That said, we're still going to see solar panels as a renewable energy source continued to grow. These guys are in the Catbird seat, so to speak, from the standpoint of they have a dominant
position in the US. They've got good technology. Even though the Chinese producers are bigger and lower cost with arguably better technology, there's way too many restrictions for China product to come into the States. And so for solar is not you wouldn't say it's in a monopoly position, but it's a very advantaged position. And almost regardless of what happens with the IRA, we think that they've got winded their back for better order growth. Going ahead, all.
Right, Tim, thanks a lot, super appreciate it.
Tim Kraig. We're gonna get you back because we got through what fine.
Yeah, we're going to get back. Yeah to New York. We need to get into New York.
You want to play, but Mark, let's go back.
We'll do the other five, all right, Tim Craig kad Bloomberg Intelligence a global Chief Content officer, joining us there on companies to watch in the fourth quarter.
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