Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg Surveillance Podcast. Catch us live weekdays at seven am Eastern on Apple CarPlay or Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube Now.
Folks, it's not only the conversation of the day. I think it's sort of the conversation of the week. It's a holiday lengthened work week. It's sort of weird. And then there's after Laurie Kelvicina joins us out of US Equity Strategy RBC. She says, to play to when you have to participate, what do markets do after Thanksgiving? We used to shut down November fifteenth, we got an M and a boom Wall Street's mental What do you foresee to the end of the year in terms of oomph?
So question Tom, and I think, as we you know, we are sitting here this morning, the futures are up a little bit. We had a good Friday, We had a very stream. He did, he did, And look, I mean anecdotally, it sounds like they're a fair number of people who wanted to take some time off this week.
That aren't getting it.
So I think people are at a minimum, are going to be cranky when they get back after December. But I think the reality is that there have been a lot of things causing stress in this market, maybe not any single one of them enormous stress, but it all
kind of adds up. I think the FED was one of those, frankly, because we had seen expectations for cuts taken out, and when you've seen that happen in recent years, you know, kind of going back to late twenty twenty two, that tends to trip up the stock market, and when we put cuts back in, it tends to help the stock market. So I have no idea what they're going to say. I know that RBC's rate strategist has been in the December skip camp, and then he thinks they
resume next year. So my guess is the drama is not yet over. But we also know that valuations have been a problem since August, and we've seen, you know, f y two valuations sort of bumping up against ceilings. We're going to cycle into new earnings at some point, but right now companies don't want to talk a whole lot about twenty twenty six, So I think it's.
Also do you want to talk about until.
I don't think so either.
I mean, I will say, you know, the consumer companies are coming up. You know, we've got a few more this week. They're kind of trickling in. It was kind of hit or missed last week. There were some good ones, there were some not so good ones. You know, it does seem like there are certain retailers who are winning with all cohorts of consumers that have more value conscious offerings. So I think companies are still managing through pretty well.
But this feels very unsettled, to be honest, coming back post Thanksgiving.
So I know you guys at RBC have your twenty twenty six outlook here, what are the themes that you're going to be focused on for twenty cox Well, you.
Know, we actually we did sort of an early cut back in September of you know, this is what we're seeing for the second half, you know, kind of a second half September type target. We haven't done, you know, sort of here's the big burrimo.
For you know, the one that everyone right at the end of.
The year, partially because we had done that early one, but we had been saying seventy one hundred for sort of a mid to second half twenty twenty six kind of number. And I would say our messaging hasn't changed, which was that we have thought for quite some time the market was way overdue for kind of a five to ten percent garden variety type pullback. We finally crossed the five percent threshold on Thursday. That's very good news because I'd rather get this out of the way now
than have it overhanging the market early next year. And the way we've put it is, we think stocks can do well next year, but we do think we have some stuff to work through to get there. And the good news is we finally started working through those things.
But we've got arguably strong earnings environment. Second third quarter earnings were very good. We've got presumably a FED that's in a easing mode. Are those two things in and of themselves enough to move the market hired?
Well?
Well, this is the interesting sort of part of the FED conversation from an equity market perspective, right, which is.
You know, two or three more cuts, right.
I mean, that's good and that's helpful, but it's not like we're at the beginning of something big and long lasting. If you look at most forecasts around the street, right, this is kind of a modest adjustment cutting, you know, type cycle that most folks are talking about. I do think earning's growth is extremely important. I think that's what's been powering markets.
Can you model it out first Q one twenty twenty six.
In the first quarter?
I think that, you know, we I think January is going to be sort of a pivotal time, to be honest, Tom, when companies really kind of unveil the twenty twenty six out looks. And we keep seeing that in commentary, right, Analysts who dare to ask the question are getting brushed back, and companies are saying we'll get back to you in January or February. I don't think anyone's really going to care, honestly about four Q results by the time January February rolls around.
Interesting at Lori Kelvicina, we continue with the RBC at Capital Markets. I went and nerd early in the show. I'm going to do it again with the lawyer Paul. Can we go back to memory John Maloney Tacoma, remember telling to Coo, Okay, there was an invention, believe it or not, in the sixth exists didn't exist. Enterprise value
to EBITDA. I'm this weekend, I saw essays, essays, essays of this ratio of debt cash stock is compared to the income statement somewhere any income statement plus depreciation amortization. Do you have a conviction that, in the cacophity we're living now, you can use a modern ratio like EV to EBITDA.
So you know, it's funny Tom.
A number of years back, I actually surveyed all of my analysts about what valuation metrics they thought were appropriate for their industries, and I made them give me two. And I did find that a lot of the tech related analysts gave me.
EV related metrics.
That was really where it tended to be limited, to be honest, And then the thing that everybody sort of agreed on it may not have been their first indicator. In fact, it usually wasn't their first indicator, but forward pe. So I tend to still be a forward pe person because I think, you know, when you're comparing industries, you're comparing sectors, you're comparing size segments, you need something that's more universally applicable.
All right, let's stay with the earnings theme. Here, are the earnings strong enough to support this market and to drive it higher?
Right now?
Do you think so?
You know, there's healthy earnings growth embedded in the consensus expectations for next year when we've modeled it out. We haven't gotten quite as constructive on as consensus, but we've still gott you know, some healthy numbers. I think around like ten percent or so. The reality, though, is that earning sentiment matters just as much as the earnings themselves. And the rate of upward revisions for the broader market peaked in August.
We don't have post and video.
You know, sort of results yet for that particular indicator that we look at the rate of upward revisions. So what I need to see in coming weeks is as analysts go back and do like all their little modeling, you know, and update all their numbers, do we surpass or return to that August peak? And we just don't know the answer to the question yet. But I think one thing markets are struggling with is the idea that earning sentiment it's okay, it's just not as good as it was.
Interesting LORI, we don't care. What we care about is how do you do mashed potatoes Thanksgiving?
I'm gonna be honest with you, Tom. I don't cook. I hate I burn everything. I just we we with our Thanksgiving. We go to my in laws and we're responsible for old wine, pies and bread.
So and we buy some very nice pies.
Why do you make old wine? You like? Cook Wednesday night?
I'm gonna be on I don't do this either. I run after the children and let my husband do it.
Okay, honest right in front. It's actually a lot like laurd Kelvinsy have a wonderful holiday. Thank you for that brief and particularly the CFA worthiness a e v uh. Stay with us. More from Bloomberg Surveillance coming up after this.
You're listening to the Bloomberg Surveillance podcast. Catch us live weekday afternoons from seven to ten am Eastern Listen on Apple, Karplay and Android Otto with the Bloomberg Business app, or watch us live on YouTube.
Joining us out Smart and Spain on a Planet. Michael McLoone Bloomberg Intelligence senior, Come out of the Analyst. Tom stopped making fun of bitcoin at thirty thousand. Boom up it went gold, Boom up it went what are you focused on A wise one this morning?
Well, I like, I want to tilt over to your term before Tom of bitdog, I think is becoming bit doog.
The world's changed for cryptocurrencies.
We had this massive pump on the having and the ETF pilot and the Trump administration jumping on board and very well entrenched into space now and it's peaked. It's a classic I think peak bull market peaks on euphoria. The thing is now it's dragging everything lower with it. So as of Friday, the Bloomberg Galaxy Crypto index was down twenty one percent. On the air was up almost a third. Bitcoin is right now down about ten percent year.
The key things where's it go next? The key thing I look at is at the same time cryptos are going lower, stock market volatile is just buried.
Now.
We know the VIX is up, but one hundred and twenty day volatile he's still around eleven percent.
That's a very low level. So I think the whole space has.
Got more more de risking to go into the end of the year, which is probably the primary risk is there for bitcoin?
Does technical analysis work Mike? And if so, was there a support number like I don't know. I just kind of thought support was one hundred thousand, and we blue past that exactly.
That was the key level, certainly psychological, now, Paul, it has to work. It doesn't know, so it has to work, but it has to matter because, as time always points out, there's no underlying there's no basis. Like I trade crude all futures, I know I'm trading those against crudel, I'll trade treasury bond futures.
I know I'm trading those against treasury bonds.
In bitcoin, at cryptos, there's no basis except for crypto dollars. So the key level now, I think it's around eighty four. It's been holding eighty four. It's a decent support level. The key resistance is around ninety four. That'd be unchanged on the year and my bias. It's more a greater risk of breaking through eighty four and get towards fifty than going higher.
And the key thing about.
Fifty is is I love how crypto people say look at the chart, but if you look like an annual chart going back to twenty twenty twenty one, fifty has been a key level for many years.
Wow, fifty all right?
Gold Gold seems to be holding at that four thousand level here pretty solidly.
Mike, is that a good support here?
It's becoming a part of it.
Gold's been and stare step rally step up to three thousand, hangout, step out the four thousand hangout.
The problem is now.
It's so extended versus a sixty month moving average. Tom would like this. It's about a three standard deviation move. You have to go back to nineteen eighties. And the key thing that's happening about Gold, it's well exactly, it's never rallied that this type of velocity with stock market one hundred and twenty day volatily this low, that's just never happened. That's what I'm concerned that that volatili might pick up into the year end.
Mike, we don't care. Coral Gables, Florida is the real estate market cracked? I mean, real estate never goes down in Coral Gables, right Well, I'm hearing it everywhere.
Paul is certainly here recently reduced most buyers, most transactions now are reduced prices. And that's what I get from my colleague on the journals team, which I sit right next. I'm hearing it everywhere. Same with farm land in the Midwest, which I'm very close to. Recent reduced prices are all trying to dropping. They're just not buying lifting offers anymore.
One point six million Navari Avenue cozy, two thousand square feet. It's a cross the seahouse. It's cozy three three one three four, all right. I mean, you know they're.
Living in some high rise Miami thing with all the high.
Then you got to play Miami Vice music exactly.
He's not doing the bungalow thing.
I okay, you know, I may I may have to do a road trip down there.
Yeah, you know, span the Michael take care of us.
Michael, put me on the Harley and off we go. Michael mcgloone, thank you so much. I'm a wonderful beginning to the holiday season. McLoone, smarter than the average bar.
And all the people warming down to South Florida, all the snow bunnies and some Mike can't get a reservation in his restaurants anymore.
We're talking to New York City people, and New Wave going down.
Made all the people coming down for the most time, I don't know, can't get a parking spot anymore.
Stay with us. More from Bloomberg Surveillance coming up after this.
This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Applecarplay and Android Auto with 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.
She has been more than patient. Rayan Mittrion is a Callen Family Office schedule to be with us a few days ago, and there was this breaking news of that breaking news, and we had to say see her right now. We celebrate Ryan Mettrion with us. Do you have a clear vision Ryan, for Callen Family Office into next year?
We're relatively optimistic. There's a lot to feel good about. I mean, earnings have been incredibly strong, you know, we're just wrapping up the fourth Street quarter of double digit earnings.
Growth.
Spending has been strong, especially obviously as related to AI, and that has been providing a huge tailwind to stocks. And we have a generally dubbish bed. So all of that helps us to think that we should still continue to see some upside possibility for equities going into next year.
How does tech lead tech?
I mean, tech has been incredibly strong right over the last couple of years, and we've seen this since the April lows and now we're getting a little bit of volatility, which is healthy, but there continues to be a lot of strength in that sector. I mean, we see these hyperscalers that are spending these incredible amounts of CAPEX to
build out their AI infrastructure. That's going to have a huge demand, and really that's such a big part of the market that as long as those companies continue to do well and we see that demand held up, it should continue to help the tech side, don't you?
Said Lori Keviscino was the interview of the day. I'm sorry, Ryan's killing it, Paul. I know because this is a tone I hear from people her in the trenches. Her belief and conviction in the market is a lot of what I hear of people.
Well, she's a graduate of Vanderbilt, so she's riding high a long with Damian Sassar and the football team at Vanderbilt. But technology ran I'm just looking at your notes, and you laid out so clearly. In Vidia's eight percent of the S and P five hundred and megacap Tech is almost forty percent of the index. So if you're constructive on the market, you got to be constructive on tech. Is that kind of where you guys, are you really do?
I mean, because if those companies are struggling, the broader market is going to struggle. Now that being said, we do want to have diversify exposure and we want to have, you know, investments in other areas as well, because these can can move the market so quickly, as we've certainly seen. But you have to have the exposure or you've been missing out.
How else do we think about these equity marketchare ran outside of technology? Are there sectors that screenwall for you? Are there factors that screenwall for you?
I mean, we want to have we want to.
Have exposure exposure broadly. We've certainly seen tech do well. We've certainly seen utilities and industrials do well in their ties to all this data center spending. We want to have exposure to financials is another area. But I mean we want to we want to have exposure on the value side of things. We want to have small cap exposure,
and we want to have international exposure. I mean international has really outperformed us so far this year, mostly due to a weeker dollar, but we do want to have exposure in all those areas.
Uh Riyan mitre On with Ush's partnered Hell and Family Office, I'm curious into the you know, with all the success of this bull market at a family and office, do you have a pressure to over diversify or is it under diversification. We're the more focus, more bet on a given idea. You know, it really depends.
We have the ability because we're working with ultra high net worth investors that really have a multi generational focus, so we can be more aggressive, we can take some of those bets because these clients don't necessarily need those funds near term because of the level of wealth that they have. But we do tend to diversify, and we have the ability to get into parts of the market that some traditional investors may not be able to get into.
When you're looking at private markets and hedge funds and different types of things that allow us to complement our traditional portfolios. So that's been, you know, something that we can do, but it's I wouldn't say that there's pressure, but there's certainly a lot of opportunity, and we do believe in diversification.
I mean, Paul, chastise me because I haven't brought this up today. If you brought in, if you bought in rather to public or private credit, I mean alternative investments or do you guys stay a mile wide of that.
No, we certainly have exposure there. I mean, we do have traditional bond allocations. A lot of our investors are in high tax brackets, so a lot of it's in UNI bonds and UNI high yield, but we do we do invest in private credit, and there is a lot of hype around there, and you want to make sure if you're investing, that you're investing with the right firm in the right places because there could be some problems
going forward in that area. As with any investment, you just want to make sure that you're with a high quality firm and that because there can be such a divergence in returns between the top and bottom quartile funds in that type of space.
Ran your family office clients, what is their appetite for alternative investments?
It varies, right, every investor is different, but our typical allocation would include between twenty and twenty five percent in alternatives, and that can be a small amount in hedge funds, some credit oriented strategies or diversified multistrat funds that give us different types of exposures that we can get in the traditional markets, and then rounding that out with private equity, private credit, private real estate.
Things like that.
I mean, historically you can get a three to five percent premium over traditional equity returns in private equity, and we have seen that it's additive to returns over time.
Are you going to Vanderbilt, Tennessee?
I mean, right, I wish I was.
If ever there was a year, this is the year, right.
You have to enjoy it well lasts.
So it's been a fun season, that's for sure.
Ran, thank you so much. Don't be a stranger. You love to have you back, ryand Mitreon with this Callum Family Office, stay with us. More from Bloomberg Surveillance coming up after this.
This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Apple Coarplay and Android Auto with 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 a short visit.
Right now with enterag Rana, which should be a long visit. He is definitive on cloud, definitive on what these companies are doing, and a RAG Over the weekend, the consensus view was Google Gemini three was a home run over the Fenway Wall, over the Turnpike, over the cask and Flagon helping a home run for Google was Gemini three. Now, I think it's a big deal.
I mean, you could see the stock of the acting today and one of the things we talk about in our notes today is that Apple is actually going to use one of their models for CD upcoming release. I think that's a very good deal for Apple. They don't even have to pay as much. I mean they're going to pay probably around a billion dollars a year for it. And you know that's so it is very clear now that it's not going to be Open AI taking everything.
It is going to be spread across multiple models, and I think that's I think the big takeaway for all of us is this the.
Apple AI play.
Then Ana raghas is to partner up with existing players and say that's it, that's our play.
Yeah, and Paul, we just say, you know.
One of the notes that we published today basically shows that Apple's capital expenditures as a percentage of sale is merely at three percent, compared to Microsoft at forty percent. And what Apple is saying is, you guys, fight it out and tell me who has the best model. I'm going to just use it in the end and I'll pay you, you know, if you're lucky.
All right, So what's the next data point you're looking for on this AI play? We had the really good numbers out of in Vidia. What's the next when you talk to your institutional investor clients, what's the next kind of data point milepost for you guys.
I think one of the things we have to do is look at the application of AI models across all verticals, different sectors.
What are they doing.
What is the final game for banks, for hospitals, Because everybody understands the AI infrastructure play and what's happening over there, but what is the use case? And that's where I think the digestion is going to take some time, whether it's all of twenty six or maybe twenty six and twenty seven.
So what are you watching for into the end of the year, into the first weeks of January and are within this AI like, where is the revenue going to come from? Is that a study you're having with your team.
Yeah, so the revenue is going to come from enterprise applications so big you could say Fortune two thousand companies, when they're going to take their applications their core business and add more AI capabilities within that. That's you know, But the thing is, unlike just going out and getting a consumer app there is usually going to be a a long tail or a while when enterprises add that particular capability. Now, I think throughout the year we're going
to see moderate pickup in those applications. The big question right now is what happens to the air infrastructure build And one of the things we have been talking about is, you know, when it comes to the hyperskale cloud provider, whether that's Amazon, Microsoft, or Google, we're really not that concerned about them overbuilding. But because even if let's say they overbuild and they don't have to do anything for the next one or two years, their core business will
take care of that build of infrastructure. That's not true for somebody like an OpenAI me.
No longer visit in RUG around, Thank you so much with Bloomberg Intelligence just world class technology analysis.
This is the Bloomberg Surveillance Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, seven to ten am Eastern on Bloomberg dot com, the iHeartRadio app, tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal