Surveillance: Consumer Strength With Sheets

at Strategist, Andrew. Let's start with your quotes. Quote, investors face early cycle timing, increasing the mid cycle conditions and late cycle valuations. Andrew, what does that mean? Yeah, thanks, good morning, It's nice to be here. So, you know, if you think about where we are just a little over the year, a year from the lows of activity belows of markets, you know, usually that would be a

pretty safely early cycle position. If we think about the last three or four cycles, they've been you know, seven, eight, nine year events, and so being one year out is still create still safely early in that process. But if you think about the conditions that we have that that very strong recovery and consumer spending, rising inflation, our economists think you'll see a lot more capex spending start to come through the system. Those are much more mid cycle dynamics.

Um you could throw in a peek and p M I s to that as well. And then valuations on many asset classes look more late cycle. There they're they're relatively expensive. That obviously varies. So this is a pretty complex picture for investors, and and kind of deviates from maybe a year ago or six months ago when those early cycle signals were much more consistent. I gotta congratulate Andrew and having a midyear review published on May sixteenth. I just think that's that's the way they do it

at Morgan Stanley. Andrew, you've got a grid showing a real biased to international bias to European equities as well. Is pricing power and international concept or is that really be a concept for the American market? Well, like, I think it matters, you know, I think it matters everywhere. I think it will matter more in the US. I think it's a you know, that quality theme is a more important theme for for Mike Wilson in our US

equity call. I think where Europe and some of the international developed markets have an advantages, you know, I think we know that the next six to twelve months are going to be a real debate between good data, but this question of is that good data too good? Is it going to lead to higher inflation? Is it gonna lead to a central bank policy response? I think that is going to drive a lot of the market debate

over the next six months. And in Europe and to a lesser extent, Japan are just in a very different part of that debate. You know they are. They are not as expensive, their inflationary pressures are not as significant. I think their central banks will be much slower to respond to any rise in inflationary data. So I think

that gives them a big advantage. And you you just mentioned on your program, Secretary Yelling will be talking about tax increases again, that's that's a story that that might impact the US market, but isn't currently on the table in Europe or Japan. And one thing that you're talking about is higher inflation and why that leads to your

call to downgrade credit to neutral from overweight. And I'm trying to understand what the bigger risk is to markets based on valuations currently higher than expected inflation or lower than expected growth, right, I mean, these are two concerns, and this is basically is what people are pitting themselves against when they talk about the FED and being perhaps countered to their view. Where do you stand on that, well, I think for markets broadly, I think weaker growth would

be the bigger risk. I think we saw that, you know, throughout the last and I think that was a defining feature of the last cycle, the post GFC period. It was all about risk to the downside. Now, you know, as much as we're all talking about inflation, I think we all need to acknowledge that, you know, growth improving, inflation picking up in central banks eventually raising rates is a incredibly normal pattern of behavior. That's that's happened time

and time and time again. So that's a very normal thing to happen as things improve, and it doesn't I think, preempt the idea that we're still in a bull market things will still be better. Where I think credit starts to get into a challenge though, is that if we're talking about a hotter cycle, if we're talking about central banks having greater willingness to to run a higher pressure economy, as our economists say, then you know that's an environment

where credit investors they don't benefit. If if growth is better, but they are still exposed. If that kind of hotter growth means that the next downturn is closer than it would otherwise be, Andrews got to leave it there on that. I'm pulled a note in the credit market. Morgan Stanley, chief cross assets strategist right now on foreign exchange, we have anticipated this because he has been more brilliant than anyone I know. I'm saying week dollar, week dollar, when's

it gonna happen? We're not sure. Martin McCormick is with t d S Curities Mark. The dollar finally breaks down, is it enough of a break for you to switch to a bit of a week dollar? Well, yeah, I think we still like the medium term dollar down story. I think there's an interesting element where the global economy is doing pretty good. It's catching up with the United States. We do see absolute growth levels that are favoring the US, but the delta of growth, which matters for currencies, is

moving in a week or dollar direction. The most important factor is really again, the FED is allowing the weakness in the dollar essentially because what they're trying to do is run the economy hot let inforlation run higher, and they're experimenting with what feels like an MMT type narrative. So you add those things together and a dollar still overvalued and we're still seeing again the global story is is moving the right direction. So those are ingredients for

a medium term dollar move lower. But I think the more interesting action is really on the kind of the month to month, the three month, the quarterly basis, which is really giving us really interesting pivot points to make tactical decisions whether or not you want to overweight or underway currencies against the dollar in that time line. So, Monk, we're trying to resolve a tug of wall at tension, as you've pointed out, between global reflation, a global synchronized recovery,

US exceptionalism between that tug of wall. Right now, Mam, what you think wins out? Yeah? I think right now we kind of have to downgrade global reflation a little bit. It's not really about US exceptionalism. But I think what we had is obviously week n FP print and really strong inflation numbers. I think what we've learned from a lot of conversations with clients is people are completely mixed.

It's one or the other, it's binary. Either the FED is making a huge mistake and they're gonna have to you know, they're gonna have to really work to make things better or they fall on our side, which is basically, they're not gonna taper anytime soon and they're not gonna hike rates until about But there's definitely a debate that is very lively that the Fed could taper or start talking about tapering in June, July, or even at Jackson

Hole in August. So that's live and I think in that environment, what we're seeing is reflation is starting to move a little bit lower. Based on the mobility that we track on a daily basis, volatier it should be higher, inflation break even should be a little bit lower, and real rate should be a little bit higher. So in that backdrop, that's a little bit more positive for the dollar um at least on a tactical basis versus kind

of the medium term outlook we just outline. So let's push this through euro dollar right now hi the year on euro dollar nine in to day high back on January six, What are you looking to push this through? And when three right now twenty three, what are you looking for on euro dollar? I think these are good fade levels. So if you're to take our right, yeah, I think yeah, if you're to take our year head forecast,

we're in a one eight team camp. So even at the end of the year, I think we're gonna see a little bit more of a stronger dollar verse the Euro. Again, I think most of the action effects is really gonna come down to factors that aren't really related or big driver of the Euro, which is really commodity exposure, value, relative economic growth, and even the equity store. I think the upside for the Euro that people aren't expecting isn't going to be a central bank trade. It's going to

be an equity story. So if European equity start to outperform like they have in or at least on the daily tracking of bt F flows, that's where I think people can be surprised by the euro. But based on the growth to carry, the value and the relative central bank policy. To me, Euro still a sell at two and you buy it back around seventeen. So what could be the trigger for what you're saying for for for the money flooding into European equities and driving euro higher?

What data points are you looking at? I think it comes down to the growth in the vaccine catch up story. That is a big narrative now that I think is important. But I think the problem is that there isn't enough on the other side to say there's a bunch of factors we want to buy the Euro one. But if the vaccine story and the growth delta are important, but we don't see the valuation story there. We don't see the carry argument, we don't see the yield curves deepness um.

So there's a couple of elements there, and obviously commodities is not a big driver of the Euro, and that's why you kind of want to look elsewhere. You're again like the Norwegian crone, you've got a hawker central bank, you've got commodity, you've got global connections. So I think with the Euro, what you would kind of need to

see it is it's already there in the price. Most of our models say the Euro is a little bit overdone, and that's why I'm little wary of chasing it, because you don't have a value story along with a very stellar growth story. You have a pickup story, which is is interesting, but it's really well known by the market.

So again I think for the equity story to work out is we really need to see what happens with the German elections later this year if we do get a pivot to a green lead movement kind of center left. I think MMT narrative is much better for Europe because it brings capital back into Europe, no more recycling in the current account surplus, and that would be beneficial for the Europe for the euro versus the MMT narrative is not as great for the U S because you're taxing.

You know where the marginal driver of innovation comes in the U S, which is the equity market, which is what the dollar needs. This site, Okay, just to pass through some from this and dig into a lot of what you're saying, and this is going back to the question of is fiscal spending good or bad for a currency, And you're saying that fiscal spending in Europe could be good, whereas fiscal spending in the U S could be bad for the dollar with respect to its strength because of

the taxation, it's likely to accompany it. Am I getting that correctly? Absolutely? I think it's very critical. One of the things that is most heavily missed and I'd say that, even especially the last five years, the relative equity story is absolutely critical. If you think about why the dollar was able to rally during the Trump years, a lot of it had to do as US equities outperformed the rest of the world, and the US yield curve was steepening while the rest of the yield the rest of

the world yield curve was flattening. For the dollar to really kind of make up what is I think a weak dollar policy from the Fed, it is going to need equity flows. So in a broad balance of payments context, you're gonna have a twin deficit. What does need an offset? The twin deficit during the Trump years was offset by

equity inflows and the growth story. So I think a big side of it here is if the Europe If European policymakers deliver more positive growth shocks, especially again with the German elections, maybe leading to more fiscal stimulus, that's an important to elopment because that gives people a reason to bring capital floats back into Europe where they've been recycling them out of Europe for the past ten years.

So that's where I do think it's critical. And if the us were to tax equity markets and tax the wealth and innovation that comes from the equity markets, that's a that's a negative for the dollar in the context of where the Fed's going and the global economy is. That's why again we like it lower over the medium term. Malco smile gonna say and Mot mcoll made the have tat Cecity is the global head of strategy. We're thrilled

to bring you truly the great synergy here. Synergy, I say Craig and Michael Nathanson as we look at so much of the distribution and content creation of our media business. Gentlemen, thank you so much for being with us this morning. Michael Nathans and very simple hearing Craig dive in on this as well. Get and here is adamant that the Roberts family in Philadelphia. You must respond, what would you suggest Comcast will do after we see Amazon MGM, after

we see Warner Discovery. Michael, Well, well, Tom, you're gonna like this. I'm gonna have heard to Craig today because you always say I take his question, So let me go to Craig first. That okay, because I don't want to s Yeah, thanks for having US back um. UM. You know, look, my guess is that while everybody wants Comcast to do something right away, uh and and they are clearly subscale in the streaming wars with Peacock today. UM, I don't really think there's anything for them to do

right now. I think they missed an opportunity with with Warner Media, that the fit with Warmer Warner Media would have been frankly, probably better than than between Warner Media Discovery and UM and and better than anything else. Why can't they top tick that even with a seven hundred million dollar break. Let's see, because because there really are any trust concerns number one um uh and and also

um the challenges. You know, there are some overlap issues like CNN and MSNBC that that clearly couldn't be together.

Um and then you have this problem of they probably don't want the cable networks UM, T, n T and TBS, so you start to sort of piece part the thing into the pieces that you that you really want, especially HBO, Max and and frankly, I don't think that's going to appeal to the A T and T board and A T and T. So my guess is they probably let this pitch go by with some frustration of having missed it, UM, and that they sort of bide their time because as

much as everybody would like to say the last dance partners have been chosen in the game is almost over, the reality is Peacock is not even relevant yet. And if they can build Peacock into at least a relevant service, and they've got the Olympics to help them do that, down the road, it may be that the right dance partner is actually Amazon UM and that Amazon uh prime if whether they do MGM or not, UM could end up being a potential suitor for for Comcast Media Business

or or somebody else. I don't think this burning urgency to say we've got to do something today or tomorrow is actually right, all right? Michael concerned, Michael, It kind of feels like here we're getting into those really last innings where people are really trying to make sure they're not the last one standing. So Amazon MGM, that goes to one of the kin of the subscale content players out there and MGM and make a lot of sense for Amazon or for some others. But how about VICOM,

CBS as well. UM, What do they do? UM? Because It just makes a question that even emerged Viacom CBS, Uh, it doesn't have quite the scale. No, it doesn't, Paul, they can't do very much. Right, what's left are you know, ponds on the chessboard? Right? You can go after lions Gate and can go after an AMC networks. They're not big, they're not scaled internationally. You know, this was so Creig's right. Comcast can take your time, but this was the last big global play to be had, right and after this

they're mostly domestic stories. So I think Vacom CBS is really stuck, and I think for the time being, you know, Comcast will sit on their hands. As Crect said, but there's really not a lot you can do with what with the pieces on the board. It just isn't enough scale out there. Do you with all the work you

guys have done, if you're just joining US worldwide? Craig mofat Michael Nathanson with us Nathanson and this historic week for media to the two of you, and I go to Michael Mobison's classic essay at credit Suites a good twelve thirteen years ago that there's only one or two in each category. Do we need a number three streaming person or number four streaming person or is can it be just Netflix and Disney win? Well, Tom, you know

we've talked too this for wire. I don't even know if streaming is a great business, right, Like, we haven't seen the proof points that streaming is a great business. It requires tons of capital, constant refresh as you know,

it's not Google, it's not Microsoft, is on Apple. Um, yeah, this may be a category when it's all said and done that you know, you know, the winners get get majority, but the majority is not enough to make this a category of high R o I C. Right, And we don't know how it ends up, but I think Craig and I both feel that we were coming from the media, it's going to be a worse R o I C trade. That's what we're moving towards. Fascinating And you know, Paul Swey,

what's so important here? And acts had a great bar chart. I'm sure they still from Craig Moffatt and Michael Nason, but it's amazing Netflix is essentially one tenth the market cap. Oh yeah, forget scaling here. That kind of brace me to My question for for for both of you, is is we see the news today of Apple taking a look at MGM okay nine billion dollars, But why is Amazon not looking at Viacom CBS. Why are they not looking at a much, much bigger asset out there because Netflix? Uh?

And I hate when I do it, because you're gonna say, Craig need more time. So, Craig, I was gonna say, because Netflix has proven you don't need to own traditional assets to build a global company, right, you don't need to buy other people's problems to scale this business. I gotta have one more question, and it's got to go to Craig Moffatt because he's been silent. Why Nathans and blathers on Craig, you you have been I went back and looked at Mr Stevenson the day of the dreable

TV speech. I mean, what does a T and T actually do? What do they say to their employees, what do they say to the board? What's what's the ninety day prescription for a T and T? After this mother of all failures? You know, I may surprise you with this because I've been, as you say, very critical of of this strategy. And I actually give some credit to John Stanky Um for for being able to acknowledge that this was a mistake. You know, you rarely see businesses

particularly this quickly. This is only a couple of years after they bought it. Um. You rarely see businesses where the management team that put a deal together is willing to acknowledge that it was a mistake and unwinded. Now they to be fair, they didn't have a choice. They were trying to fight three wars and they didn't have the money. But what did they do just because how do they compete with a juggernaut known as T Mobile. Look,

it's a real problem. There's what This deal was the right thing for the company to do, But it doesn't make a T and T and attractive asset because it doesn't fix the problem. The problem was that or what The problem they're left with is that by virtue of having spent all the money on media and and burdened their balance sheet, they've underspent in the wireless business. And now I don't see any future where they aren't a third place out of three wireless work. And so they've

still got a ton of wid job. You guys have been wonderful the last couple of days. They do want to mention, folks, We've had tons of inquiries. We protect the copyright of all of our guests, including Craig Moffatt. We don't protect the copyright of Michael Nathanson because he's a content guy. But gentlemen, thank you, thank you so much. Right now, in exceptionally important conversation with one of the candidates for that June twenty two primary in New York City,

Eric Adams joins us with just an absolutely remarkable biography. Eric, you're lining up the indorsements, you are on a dash to June twenty second. What is the endorsement? What does the support you most covet right now? Really everyday people, I like to say, those blue collar rookies, not only those employees, employees who are doing uh the construction and other jobs, but even on my accountants, my doctors. Uh. It's the symbol of blue collar collarism. I like to say,

heart working people in the city of New York. And they really have endorsed my campaign because they know I protected the city for twenty two years um and public safeties to prerequisite the prosperity. And that's the symbol I'm going to brain and it's the way you got to that twenty two year career. We're not gonna go into it right now because of time, but you add a most original path to serving with the nyp D. Tell us right now how the NYPD can change with Mayor Adams,

It's about rebuilding trust. I state I would state this we over again, and many of my colleagues that are running for office don't want to talk about this. We have to rebuild the trust, change the ecosystem of public safety, define the role of police, but most importantly, we need each other. Let me tell you something. The streets of our country in general, but specifically in New York, those streets are going to be controlled by the good guys

or the bad guys. And I'll be done if I'm going to let the bad guys take us back to the days when we were having two thousand homicides a year. I'm going to rebuild trust with law enforcement and communities in this city. Eric. This is an incredibly important message at a time when shootings we're up a hundred and sixty six percent year over year in April and New York City, when people are wondering, how do you accomplish

what you're looking for? Which is safer streets and preventing some of these shootings and other violent crimes from getting out of control. What's your recommendation As a twenty two year veteran of the New York Police Department, do you recommend putting plain clothes police officers in subways? What measures specifically are needed? Well, they are number of things we must look at, and dealing with this crime problem is

both prevention and intervention. Prevention that consists of the long term things we must do, but intervention is right now. We have three year old shot at Times Square. We had a number of homicides and shootings in the last few days. So it's about reinstituting a anti gun unit that is better trained, will have officers that are using their cameras properly, and we'll do what's called precision policing. We must go after the gangs and the over proliferation

of guns in our city. If we don't, we are not going to have the economic recovery. We won't have the tourism, the business travelers, or get our offices back up in operating. Eric, this is what a lot of people are saying. But if you don't have safe streets, you can't get businesses that already are thinking of leaving to stay in this city. What other measures are you going to take to keep them here, especially given the fact that the bill for all of these services and

all of these measures are racking up. And there's a deficit that we need to address as well. Yes, and there's also a great opportunity. Number one, thanks to our Senate and congressional delegation, we're going to have over ten billion dollars and similars come into our city. But the real question is are we going to squander this opportunity. We have to end the inequalities that we see in this city. And it's it's really because all of our

cities in America are just really dysfunctional. Cities are made up of agencies. If those agencies are not aligned, you're not going to get the results that you're looking for. So we must attract new businesses here, become the center of cybersecurity, of technology or self driving cars. We are too expensive to buire, acractic, and too difficult to do business in this city. And I'm going to turn that around. Air Canadas. I am really upset about your endorsement from

Doc Gooden. I don't know how I can do that. I need you to get in a horseman from Ellis Burke's the Boston Red Sox. Let's get on that today. How are you gonna bring together in New York? Everybody's polarized. There's like, well, I think there's foreigner candidates, Lisa, But but Mayor Adams? How are you gonna bring New York together? The fancy people the less fancy people? How do you do that? Day one? Well, first of all, we're going

to send out the right message. And listen, sixty five thousand New Yorkers are paying fifty one of our income taxes. They are they are only two percent of our income tax filers. I don't join the chorus that states, so what do they leave? No? We need them here. How are you gonna keep them here? How are you? What's your policy going to be to keep the upper one percent happy in New York City so they don't move

down to watch the Florida Marlins. Well, one thing is for sure, let me tell you, I hear from them all the time. Eric. We don't feel safe every We don't believe we can walk our streets and our community. We can't use our transit system in a safe way. All New York is no matter if you are a cab driver or a person that's in the back of a limousine. You want a safe city. And that is something I know far too well of what an unsafe city can do to the economic, economic environment and the

stability of the city. And I'm going to make this city a safe place to raise healthy children and families. Erica. Just before we let you go, this is a delicate issue. The New York Times had a story that I want to give you a chance to address where they were talking about some contributions that you've taken from businesses, uh that the city has influence on, and you have influence on as borough president. You've called money the enemy of

politics before. Do you have a response to the story. Yes, And it's not a delicate issue for me, No delicate, No issues delicate for me because I am extremely transplant parent. I'm wanted a few elected officials in the country that has a for pyramid, or i should say, a compliance officer that's on board with me. This story has been vetted so many times. I was surprised to see The New York Times placed this on their first page above the foe to give the appearance that any UH improprieties

took place. This has been vetted. We are clear compliance with all the rules, and I was really disappointed by the headline that gave the appearance of any any wrongdoings. We have not received any type of infractions based on how we handle our procedures at Borrow Hall. I am not impacted by money and politics. I'm impacted by what's needed for everyday New Yorkers in Brooklyn Knights, and I have done that for over thirty five years. Eric Adams,

thank you so much. She's a mayoral candidate the June primary vote here in New York City. Right now, Well, it is in that say that gets your attention. Let's get right to it. He has been our most direct and assertive guests here on the pandemic. I'm Asha Dolge are writing in the Hill, and I'll tell you, folks, it's real, straightforward and it gives pause as UH as well. Let me bring that up right now. I have characterized

testing as the original sin of COVID pandemic. There are very few reasons to test asymptomatic individuals beyond facilitating the COVID exposed unvaccinated ending quarantine early, or the unvaccinated international travel fully vaccinated persons as the CDC guidance state should not be tested unless symptomatic. Dr Adlga joins us. Right now, what's the next step? Dr Adlga, that's quite a statement here,

So then what is the best policy for America? The best policy is to really focus on testing symptomatic individuals and people who are exposed and unvaccinated who need to end Corny Team early, because right now we're in a position where we are getting false positives, because the prevalence of infection is falling in. We're in a place in this pandemic that we haven't been over. People above the age of sixty five have been fully vaccinated. Those were

the people that gave us this public health emergency. Those are the ones that we're getting hospitalized. We've increasingly removed the ability of this virus to threaten our hospitals, So now we've kind of gotten to a point where this is like other respiratory viruses and we have to start thinking about it. Like other respiratory viruses, we don't test

people asymptomatically for influenza. So I think we probably need to start ratcheting back a lot on this asymptomatic testing and focus on vaccinating people and testing people who are symptomatic, uh, either if they vaccinated or not vaccinated. Because I think we're in a good point, in a good trajectory. Speak to schools right now, it's May. We got to get to August and ramp up to September school start. Are you saying COVID and influenza that there's little distinction, that

there's little difference when it comes to younger children. What we find is that COVID nineteen and influenza probably are about comparable risks. They are both, they both they both have the same burden of illness in children. Actually, arguably you could say influenza as a higher burden in children. So what schools do for influenza, that should be what

they're doing for COVID nineteen. And I think it's even it's even more the case because the vaccine for COVID nineteen, which is which students twelve years and up are eligible before, is much more effective than the flu the flu vaccine. So I think we're in an okay place when it comes to schooling. I don't think the pool testing or asymptomatic testing is something that we should do in schools because you're going to get a lot of false positives,

You're going to have a lot of disruption. I think that we can continue the other mitigation measures of masks, trying to vaccinate the population, social distancing, but school should be open now, and I don't think testing should be

a barrier uh for for opening for opening school? Dr Delta, can you square the discrepancy between what you're saying, which is essentially we're moving into a new phase of the pandemic where it's no longer the pandemic, but it's just another illness us that we need to deal with on a regular basis. Whereas we have Singapore locking down after a handful of cases that have been detected in the community.

What is the potential approach that you see as the correct one internationally, especially as we see the cases surge in places like India. So I think if you've got a highly vaccinated population, you have a whole different menu of options that are there. If you're a country that's not highly vaccinated, like India, then your only options are those same what we call non pharmaceutical interventions. Where you have social distancing and you have advising people to stay

at home. All of that is something that you don't have to do if your population is highly protected with the vaccine, especially those high risk individuals. So I don't think what Singapore is doing is correct. I think right now the US is on the right policy for the first time, probably during the pandemic, the US actually has the correct policy where we've decoupled cases from severe severe disease, hospitalizations and death, which is exactly what the vaccine was

designed to do. So I think that that's the policy now, is to vaccinate your population as much as possible. In the only reason that you should be pushing these non pharmaceutical interventions is if you have not vaccinated enough of your high risk populations and you're worried about your hospitals going into crisis. We've removed that ability in the United

States by vaccinating those high risk individuals. Dr. Dodger. We also are looking at strains and other variants, and people sometimes point to that to say, look, we need to still remain vigilant and still remain cautious with respect to tracking the virus and making sure that you take social distancings precautions, and do you think that's fearmongering. Do you think that that's sort of unnecessary given the fact that a lot of the the vaccines have shown to be

proved effective against some of these strains. Definitely, when when you have a fully vaccinated population, a high percentage of your population fully vaccinated, those variants, even the more problematic variants like one three one from South Africa, they are still unable to cause serious disease, hospitalization in debt. Certainly, if you're an unvaccinated person, those variants do pose a risk to you, and if you're a unvaccinated country, it can be a real problem, as we've seen in places

like India. But I think that the variants are something that are vack scenes are very robust against. So the solution to the variants is to get vaccinated into vaccinate as much of your of your population as possible. Door down. You always gonna hate from me, sir as, always come back soon, dtr MESSI down to Dow Jones, Health consense to house security, Sania Scalta. This is the Bloomberg Surveillance Podcast.

Thanks for listening. Join us live weekdays from seven to ten am Eastern on Bloomberg Radio and on Bloomberg Television each day from six to nine am for insight from the best in economics, finance, investment, and international relations. And subscribe to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg dot com, and of course, on the terminal. I'm Tom Keene, and this is Bloomberg