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This is the Bloomberg Surveillance Podcast. I'm Tom Keene along with Paul Sweeney. Join us each day for insight from the best in economics, finance, investment, and international relations. You can also watch the show live on YouTube. Visit the Bloomberg Podcast channel on YouTube to see the show weekday mornings from seven to ten am Eastern from our global headquarters in New York City. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen. And always I'm Bloomberg Radio,
the Bloomberg Terminal, and the Bloomberg Business app. In Pimpco in Newport Beach. I mean, in the old days, we're Bill and Muhammad down at the wedge surfing.
I see Mohammad across the hall on television right now. I'm exciting much.
Pimco Nexus here. Do you guys surf out of pimp.
I can't swim. I have a place in the Caribbean. I have a place in the Caribbean, Turks and Caicos, and I have to wear a life jacket anytime the water is above five foot eleven. He's a concrete jungle. Any anyone from New York's and Coca. It's all concrete. I learned to swim in a fourth above ground pool that's twelve feet long, so I really could.
Paul Saves, let's go to the bonds here.
I mean, for the longest time, we had no interest in talking to the PIMPCO people. Interest rates were zero. Now we can can't even get a phone call return because everybody wants to talk about bonds here, Tony. We've got real interest rates out there. There is some significant carry here for a lot of people. What's kind of thirty thousand foot view from your perspective at PIMCO, What are you telling clients to do with their fix to come investments?
Well, it's like a nirvana for an active bond manager. It's like a global bond buffet. There's so much to do. It hasn't been in a global bond market in a long time because, as you said, interest rates will low, and they will low everywhere in the twenty tens near zero, pin near zero, so there wasn't much to do. Now there's so many things moving around like butterflies. Just simply take your net, try to find the good ones and put them in your collection. So we'd say that drop
lower your fears and anxieties. First, I'd say there's three things not to do. One, don't try to time the market. Yields are high, they look very good, historically very good versus expected inflation in the twos and versus what's typical volatility. So I'd say, generally speaking, you want to be enamored by the bond market opportunities today and lock in today's indust rates. It's total return time. It's time to think about something beyond the yield potential price gains, and that's
what total return strategies are. And that could be and I don't mean a fund, but I mean the idea of potential gains and prices is what you want. And to put those yields higher, the returns higher.
So where do I go, Tony? I mean I could just go right outside right now and get it two year treasury at four point eight percent?
Do I do that?
Or do I go out and maybe take some more credit risk here?
How are you guys thinking about?
Well, intermediate maturities are probably the sweet spot and the Bloomberg aggregate, which is a compilation of lots of bonds. It's sort of a market cap weighted index has about forty percent US treasuries, twenty five percent agency mortgage backed securities, and twenty five percent corporate BONDZI. The average maturity on that, or duration and fancy bond language lingo, is around six seven years now. I often call those maturities, especially the
five year, the long bond of the short end. And if you think the Federal Reserve is going to be lowering short term interest rates, a two year, of course will rally, but not as much as the five year will, and so that'll really get moving when the Fed.
Does my chart of the year right now, I haven't decided yet, and somebody gave it to me. Thank you out on Twitter. I'm stealing it from you. Is the yield to worst the old Lehman Barclays now Bloomberg index the global yield to worst tony it's about sevens and deviations off the Voker Great Moderation. We've had this shift in the bond market. Do we recover to some form of trend of the Great moderation? Or are we resetting a new.
Vector of the bond market thinks it's the new vector looking at so future overnight futures, I think the likelihood is that interest rates that the twenty tens is the wrong analog for thinking about the future, meaning that it's more likely that we go back to the yields of past the past than we do the twenty tens, but not as high as the market's price. The market thinks the FED won't lower as possibly less than four the decade Closelue.
The real solution here, which is iconic in your book, folks, is twelve vendred pages only some of the tales Reddit Tony. The loop here is the x axis solves everything. Time will heal the return to wherever that yield. Yes.
In fact, the simple ideas that the stated yield is of course the likely return. So if you see on the Bloomberg aggregate five and an eighth five percent, that's likely to be your return over five years, as the starting yield is the major determinant of your future returns. There are things that could happen, could sprinkle in some outph and such, but that's the likely story. And given the now, here's really the most important thing to think about.
Price stability and the FED credibility the ability to knock the inflation rate down if you think it's going to get the inflation rate into the twos. A yield of five historically relative to that is very good. Now, remember what Chair Powell said recently was X would you be satisfied with inflation of three percent? He said, you shouldn't use the word satisfied and three percent in the same sentence. And you should believe. And here's the adage, don't fight
the Fed. Don't fight the FED means believing in its eventual success it will be able to get the inflation rate below three percent and keep it below. And it is already for the gauge of churn.
We don't care. What's to pretty wild? Did you think? Does she think we're going to get to two point xx? Like Clarendon?
They the economics team does. And I give you one really strong reason to think this. And I was reading back at Irving Fisher nineteen thirty three, Dead Deflation Theory.
Of Depression Fisher, Irving Fisher, Fisher.
Irving Fish, trying to understand the Great Depression. The key is loan growth. In the end, banks are factories. They make money. They're the only entities that can private credit entities slash money around that was already in the system. And long growth in the United States since the bank stress of twenty twenty three really meager two percent in Europe flat to negative for the past year and a half. You can't have strong spending in the long run with note with the factories not printing money.
I got, I got thirty seconds. Can you put Phil Knight into this or Chicago, if you're Fisher, can we get Knight or Humping into this?
Just do it.
I guess invest in bonds, lock in these swimming cast Please someone help me. I can't I do the doggy paddle. Within seconds of reaching Lisa took.
Me from a beginner to an advanced.
Interviewing red I wear a life jackets six feet out in the water.
We got to work on it. Anthony Crescenzi, thank you so much. Thank You's with Pimco. Smart stuff there and yield, and we'll get Tiffany Wilding on to straighten out the Pimpko dialog. Now is our most important interview of the day. Stop what you're doing, and we're going to do this very carefully. Lindsay Piegs works for Stifil outlier. I'm kidding, that's an economic firm out in the Midwest. And Lindsay has staked the ground. If this is a FED, it's
gonna be higher for longer, and even raise rates. Lindsay an update and your research notes it's stephel. Do you still believe that your own Powell will need to raise interest rates?
I think right now, looking at the inflationary environment, it's clear that inflation is very sticky and will likely remain noticeably above the two percent target for quite some time now. The Committee should take that as an indication that they stop short of a sufficiently restrictive level and take further action, meaning re engage in rate hikes. But Tom, I'm not
confident that they will listening to the latest message. It feels as if they'd rather remain on the sidelines, keeping this current elevated level of rates in place and wait for the improvement to happen more organically.
The real rate, the ten year real rates would I use Lindsay, I'm sure you've got stuff better than me. Two point zero eight percent right now, it didn't move all that much off this inflation nirvana of the last ten days. Where are the tip points? Where's the bracket? If you will around the real rate, that will force the Fed's.
Hand, that's a good question, because we didn't see much movement, even with the market cheering that cooler than expected CPI number, And given the fact that I don't see inflation moving much, in fact, nominal rates I think are pretty much range bound at this point. It's difficult to say what the threshold of pressure will be on the Fed because the Fed has been very clear that they're focused on policy easing.
So unless we saw a material backup in inflation, and I don't mean one tens of a percentage point, it would probably be in the range of half a percentage point, if not more. Only then would the Fed really feel as if they're backed up into a corner to take
further action to re engage. They're going to fight that prospect as much as possible as it forces them to admit a second policy error on the back end after a first round policy error of holding crisis level accommodation in place well passed it was appropriate waiting at those low levels till March of twenty.
T lindsay, if the Fed does stay consistent here at these levels in terms of the rates, is that going to be enough to slow down inflation? Will that be perhaps enough to push this economy into maybe a recession, which will certainly take care of inflation.
Well, I do think that at these rates we're going to continue to lose momentum. We've already seen the economy slow from five percent to three percent let's call it at year end, to sub two percent at the start of the year, but quarter to quarter volatility aside. I do expect the US economy to remain in positive territory for twenty twenty four, bouncing around a two ish percent pace. That's not enough to bring down inflation in of itself.
But that being said, momentum is waning. Consumers are feeling pressure, businesses are feeling the weight of higher costs, higher borrowing costs. Now, at this point, consumers are still spending, businesses are still investing. But again it's that second derivative to client, it's that
loss of momentum. So the bigger question is where do we go as we turn the calendar page into twenty twenty five, and if we continue to see this loss of momentum with growth slowing to maybe a non accelerating pace, or at least falling below the bare minimum that you would expect for a developed economy, while at that point, if the FED is still tolerating above target inflation, my bigger concern is not a recession or a downturn, but
a period of stagflation, slow growth, elevated prices. That's going to make it very difficult for the FED to stimulate the economy and get us back onto a longer term trajectory of prosperity. Given this conundrum of low growth, high inflation, that really leaves traditional monetary policy metrics less than robust in terms of their impact on the economy.
He Lindzui.
This week, we also got a weaker than expected retail sales number. Some folks are telling me, don't worry about it. We had some good sales numbers out of Walmart yesterday. What's your take on this consumer well?
Certainly exacerbating the market's optimism for nearer term rate cuts was that softer than expected consumer spending report, because the prospect of slower inflation is certainly more convincing when domestic demand appears to be slowing in tandem. But I'm not necessarily convinced that that's what we're seeing, a material slow down in the consumer as the annual pace still remains
very solid. So yes, month to month volatility we are seeing as consumers shift the groups of services in their basket, but on an annual basis, three percent is still indicative of a very solid, resilient consumer.
I agree with you completely, lindsay A really important question. If we get a pigs in market and inflation is sticky and we have a two part America, do they haves the people with assets, do they benefit or are they harmed by difficult inflation?
No, I think we continue to see a growing divide between the asset holders and the non asset holders, because as long as the market continues to anticipate the FED eventually cutting rates, the market eventually focused on this easing policy that's going to continue to fuel these asset valuations in terms of the equity markets. And then from a housing market standpoint, which is the other sizeable component of growing these asset valuations, well, that comes down to a
simple supply and demand. And we came into this housing market cycle at a multi year deficit. So just by the nature of household formation, population growth, massive flows of immigration, it's likely that we continue to see housing demand outpaced supply, keeping prices elevated and again perpetuating that divide between asset holders and non asset holders.
Lindsay, thank you so much. Just brilliant, Lindsay, pegs are congratulations. I can't say enough, folks. Sir Paul, along with a guy named Jackson, invented modern publishing and he was determined his show and Mike Bloomberg was a huge participant in the show at the National Gallery in London, and it's down in Brooklyn right now. You can go see Paul McCartney nineteen sixty five black and white photographs, the original. They have the original copy of I Want to Hold
Your Hand. But Paul McCartney changed how musicians worldwide get paid single handedly did that with a guy named Michael Jackson at ATV Music years ago ATV Music, Yeah, sony ATV Music. That was mister Jackson. They owned the known world as we know it. This is a joy. Look at Shaw darkens the door. We never speak to him because he's in LA and gets in at three am.
You know, the whole thing. And Paul and I are really interested in like the death of Hollywood in that and yesterday I got a big hug from Michael McCarty over at Michael's who's iconic in californ Fournia cuisine and it's where you go when you're beautiful. I was supposed to go with ger today. I know, you know, girls has got to be I'm there with Jumana the other day, Jamana Bertucci. Michael's is old, Hollywood is old Hollywood gone.
Is there anybody darkening the door at McCarty's place anymore?
In Los Angeles? I would say that the there was a there was a generation of chefs that sort of typified Hollywood in the eighties, right Michael McCarty, Wolf King, Puck. Those people, their restaurants are still open, They're still vibrant. They definitely appeal to an older clientele. I don't think that if you were to Lisa wouldn't go, you know, if you were to talk to the people running some of the studios or maybe the new stars, because the fact is most of the people running the studios in
Hollywood are the Michael's demographic. I mean, that's one of the complaints in the business right now, is that Hollywood is being run by people in their sixties and seventies, and they're not a lot of opportunities for people in their thirties and forties to have a chance to make some changes.
Right, We've been talking about mister Ripley and you know within your magnificent nos folks, look show on a high ground Sunday once it come out.
Sunday, Sunday, three pm Pacific.
Do you have your interns type it or you know?
How's that word right? Every word?
Okay, we've been talking about I hope I'm pronouncing right, Steven Zalien and mister Ripley.
Yeah, he did.
Shindler's List, He's done all this.
Stuff, legendary screenwriter.
Now tell us about that person in the New Hollywood that we see dying when you look at the stock prices.
Well, if you think about that show, and I think I'm getting this right, that show is initially set up at Showtime and then when Paramount basically killed Showtime or folded it into Paramount Plus, that the new boss of Paramount Plus with Showtime, Chris McCarthy, who's now the co CEO of Paramount, I think, decided it wasn't the best fit for what they were trying to do. Strategically, look
black and white period piece. I get it. It doesn't scream commercial and Netflix, Switch has more money than almost anyone else to take some risks and pick things up. Swooped in and took it. Look, I don't think that show's a huge hit for that, but it certainly is beloved artistically, and we'll see if it gets a bunch of Emmy nominations when those come out over the summer.
So, Lucas, one of the things Tom and I talk about a lot is just kind of where we go here going forward from the media industry perspective, the business. I grew up in the media business. Everybody made money, everybody made money. Now those economics are really up.
For grad very challenged. Yeah, and do you think the.
Traditional media companies in Hollywood? You live there, you're seeing it every day, are they prepared to make that pivot? I'm thinking Paramount, I'm thinking Warner Brothers, Discovery. What's the feeling in Hollywood in LA about that?
I mean, look, the mood is pretty dour at the moment, because you see, the word for a year or two now has been sort of efficiency and economy and trying to cut back and save money. Right. You just had Bob Iger come out earlier this week at an investor conference and say we spent too much money launching Disney Plus. Now I think that's up for debate. They probably spent
an appropriate amount of money. But there's no question that you had a lot of companies, and especially the traditional ones, that were seeing their cable networks shrivel, and so they spent all this money on streaming and they haven't been able to make it a profitable business. Then they didn't necessarily have the right approach, and so now everyone's pulling back and everyone is scared about that because it's much much, much harder to get a project made than it used to be.
Let's talk just about Powermount.
That's the number one.
What happens this weekend, Lucas.
I keep telling Tom five years ago, I could have sold that company with three phone calls.
Now you can't give it away. Well, we will probably have an update on that later this morning.
I listen to Lucas Wispy.
But you're correct that. Look, it's not the most attractive business for people, right you know, it has it's the way it still makes all of its money for the most part is these cable networks that are getting smaller every year. It has a streaming business that's growing but doesn't make any money, and it has one of the weaker film and television studios around. And so you know, you've got David Ellison who has a lot of money and father. His father has a lot of money. He's
now built a decent sized media business. He wants to buy it. I think partially because it would make skuy Dance much bigger and build in the studio, but also because there's legacy there. Most of the other folks who'd be interested, you'd, yeah, you'd be buying it almost because you like the history of Paramount, not because it's a great business.
In the crushing lack of time that we have, because you refuse to get up at three am, Lucas Shaw. Does Tim Cook want to be in Hollywood? Does Jesse of Amazon want to be in Hollywood? Does Satya up north there in Washington? Do those tech people really want to play the Michaels lunch game.
I think it depends on how you define Hollywood. So Satya, Nadella, and Microsoft they're in entertainment right, They're one of the biggest video game companies in the world. I don't think they're especially interested in the film and television business. Sort of classic Hollywood. Amazon is in it. You know, they have a I don't know that they're going to invest at the same level as Netflix, but you know they have a bunch of sports rights. They're spending billions of
dollars on programming. Their prime video business is one of the largest in the world. Apple is sort of the big question mark. They have invested a bunch of money, but I don't think they're they're going to go buy a studio.
Paul's upset is Christmas NFL football un American.
Why they have Christmas NBA basketball?
Right?
So what happens here with sports? I mean Netflix, they're starting to go into sports. I mean, one could argue that the future of sports revenue and the value of all these franchises and all these big contracts, it's going to.
Be paid out of Silicon Valley, not Hollywood. Well, right now, the leagues are sort of have the best of both worlds. Right There was a while in scripted entertainment where you had broadcast and cable networks and streaming services and just all this money being spent, and that's sort of where we are with sports right now. You look at the NFL, they're in business with CBS, NBC, ABC, Fox, Amazon, YouTube and Netflix. That's a pretty good place to be.
The venue sports, the venue sports that just came out.
Oh they Yeah, I'm pretty skeptical of that business.
Last question, we are a walking experiment of YouTube and YouTube TV. What we're doing your Bloomberg surveillance? Yeah on YouTube right now? What's the power of YouTube combined with YouTube TV five years forward? Are we going to have jobs in five years? Yeah?
Because you're you're you're living proof that YouTube is a powerful medium. YouTube is the biggest media media company in the world and the most powerful one.
Keep it up.
YouTube TV is also going to probably become the biggest PATV distributor in this country in the next five years. So yeah, I think you're you're in good hands if you're in business with you.
Is it monetarizing for Google? Like, are they minting money on it every day?
I don't know that it's profitable because they spend a fortune on it. They only break it. They only break.
Out the Chanel dress yesterday.
Even you wise, YouTube is bigger than Netflix. You canbine advertising and subscription. It's a massive business, just not as profitable.
Okay, so paramount we should pay attention this morning.
Is that it will be an incremental update, but it will be an update incremental.
And did you go to the upfronts this week?
I went to a few of them yes.
Day, Lucashaw with Mark German. All I can say, folks is we have a series of newsletters out begin with Lucashaw and Mark German on Apple. I just can't say enough about the legit expertise he's writing it. He's got four interns from Pepperdine one of them one of them is a surf stud and they're writing at Popping Up, getting it out Saturday or Sunday. Lucashaw, thank you for the visiting. She's got seventy seven papers at her desk,
its stacked up. You can barely see Lisa at five am putting this together your daily look at the front pages, Lisa, what do you got?
Okay, you're gonna like this one. Cassette ta making a comeback?
Yes, okay.
I still collection those in the music because they say the majority is not the older generations, but it's a younger generation. Because shows like Stranger Things, Guardians and The Galaxy that feature cassettes like in their shows and movies that's sparking that younger generation. Taylor Swift, she's sold twenty one five hundred cassettes from her latest release. But you have Billie Eilish, Dua Lipa, Kendrick Lamar. They're all going to.
Cassette cassette players stage.
That's they're finding the cassette player. But the reason why, I'm like, so, what's the thing. So artists are saying that lower production costs Okay, new releases on vinyl can cost about thirty five cassettes as low as ten dollars, But they're also saying cassette sales had a bigger impact on chart position. I'm not sure how that plays out.
I mean, I get the vinyl thing. I mean I don't. I don't. I'd rather listen to title or something incredibly beautifully done digital, particularly through tubes, But I get vinyl. Paul, remember the celebration when we got rid of cassettes.
Well, going from a track to cassettes, well that was evolution. Tucker's still using a Trex to cassettes was like unbelievable technological beside.
Yeah, and then Dolby d Dolby, Yes, Dolby Dolby Dolby and the answers. It sucks.
I just hated when you had when it came out and then you had to take your pencil and like go like exactly.
So if I go to if I go to Brooklyn this week and there's going to be somebody in a two hundred dollars plaid shirt, David telling me I need to buy cassettes.
You gotta buy Himura does this?
I think it's a big take. Comes up our low fight with David.
Next, when you go to the airport, here's the thing and you do you bring your car? Do you take an Uber driver?
What do you? What do you do?
Never once have I driven to the aircraft in my professional life?
Did I read? That? Is your story that it's.
Like parking is packed, people can't find spots. There's are those receive flights. Well, I know when we go sometimes will bring our are because if you factor in we need the extra large you know, Uber. And then to go back and forth. Let's say we're going to JFK or somewhere really far. It's going to cause us ridiculous, but it's cheaper to take the daily rate and leave it really and then you can you know, kind of leave at your will. You know, you can just kind
of go. We do it like the outside of the airport parking, so it's a little bit even cheaper than the actual I always wondered too, did that but.
Are they going to raise the price or build more parts?
So they're trying to build more parking, that's one of the things the airports. They're also working to install these guidance systems that help direct you to open spots so that people don't wind up missing their flights because that's the problem. And then Memorial Days around the corner, so they're trying to put out this warning to people like, hey, you know, you better book your spot ahead of time, which you can also just don't get it.
I have no idea.
That's why I learned, so you don't have to do this.
I mean, I had no ideas.
Live five miles because you have your points on Southwest, which don't getting.
Your points on United.
You know, I wonder if Charlie pell AT's surveillance Europe on five dollars question, Ye, I wonder pellet his opinion.
Okay, TikTok is testing out sixty minute videos for its app, so that's going to put it in competition with YouTube, So that's the thing that they're working on now. It's a big thing because longer video uploads means more competition for a lot of the streaming services. But it's not clear when or when this is going to happen. It is kind of in this testing out phase. Is from Business Insider, So it'll be interesting to see because you know, we did. We've heard so much about YouTube and how
you know it's at the top of of streaming. But now if TikTok starts putting out these sixty minute videos, will that start to put it in competition with the other streaming services.
I don't know why they wouldn't.
Actually, I don't know why they wouldn't because the advertising dollars are out there. First of all, as you mentioned from that data we saw from Nielsen earlier this week, YouTube is a second and most visited video source in the marketplace after the Walt Disney Company and all their channels. So people are really spending a ton of time on
YouTube and YouTube selling advertising against that audience. I think TikTok, assuming it could stay in its current ownership, would think about doing the same.
Wow, would surveillance have to go on, TikTok, we could do that.
Not gonna happen. Take a note, Rich, ain't gonna happen. Let's move on.
Okay.
We talked about this yesterday because I was wearing this dress when I walked in and you commented on Tommy, you said, everybody ever got a TJ Max.
You know, she's not a Harper's Bazaar.
So the Wall Street Journal actually put out a story about this whole thing, how tj X Hall's becoming this badge of honors. I mean, you have people like Bethany Frankel, you know, she's going to TJ max in there looking for these different things. And we're talking Valentino coach goose.
Valentino prop to get the TJX it doesn't sell in Bloomingdale's, and then it would go to TGX. Maybe they're usually the older model the next season if it doesn't sell in Bloomingdale.
Exactly, exactly. So that's why you got my Calvin Kleine dress for thirty dollars.
That is amazing.
I mean, when Cavia Mateo hour.
Exactly, Calvin Clin think Lisa Mitaylo's gonna be wearing my dress at thirty dollars.
This started in Boston, and I have the clear memory of TJ Max being different, and they've become ever more different. Like you say, and the pros Dana Telsey, Joe Feldman, Oliver Chen and others. Robert Burke's who's ginormous within retail consulting, they will tell you there's always been a halo around TJ Max. I don't understand it. I think I was in one when Nixon was president. But you know, all I know is the pros say they're different.
Just big company.
It's got one hundred and twelve billion dollar market cap. It's up five percent this year. The stock is sub twenty seven percent over the past year. So it's done well in a tough retail.
Yet one more, it's Marshall's, It's Home Goods. All of them are all TJX.
Is you that one more? No?
No, I'm going to TJ maxxisque.
I'll post some pictures for you.
I think Valentino. But you know, actually I sort of see Celene, you know, I could see Lisa, you know Rock and Selene.
Yeah, yeah, absolutely, I mean I didn't know Lisa Mateo.
Lisa Mateo in charge of the newspapers on this Friday. This is a Bloomberg Surveillance podcast, bringing you the best in economics, finance, investment, and international relations. You can also watch the show live on YouTube. Visit the Bloomberg Podcast channel on YouTube to see the show weekday mornings from seven to ten am Eastern from our global headquarters in New York City. Subscribe to the podcast on Apple, Spotify,
or anywhere else you listen. And always I'm Bloomber Radio, the Bloomberg Terminal, and the Bloomberg Business App.