Transcripts For BLOOMBERG Bloomberg 20240703

We are down. Energy is the big drag today. You have oil down thats weighing on london right now. Novartis, people go on about the defensive nature of the pharmaceutical sector. Heres a Company Delivering on that. Maintaining sticky with guidance. Investors like the narrative that continues in terms of money coming back to them. That stock certainly responding strongly today. Imperial brands down by 3. 05 . Rishi sunak has set effectively over time he will raise the as it would age at which you can buy cigarettes in the u. K. , effectively he will be banning the purchase of cigarettes. If youre a 14yearold now you will never be able to legally buy cigarettes in this country. Its having an impact. Imperial brands down. Alix you also stole my oil thunder. S p down by 1 . We got adp weaker than estimated. We also have the ism Services Still doing well. New orders were weaker but thats because a retail clearing out. Oil was getting hit, down 3. 5 . You said the weakest gasoline supply demand, some balance coming into the market. The twoyear down by five basis points, the 30 year did touch 5 for a hot second and then came off that level. After the announced ism services , a buying resumed throughout. It feels like that 150 definitely now has been said, this is the line in the sand. We are a little bit away from that. Guy that was the action this time yesterday. Five basis points feels like a nothing move these days after the volatility weve been watching. We did go through 3 . On the german 10 year earlier on. We faded that move. Some interesting levels being pushed through, resisted a little bit. German 10 year, and feel like that was going to happen. Alix it really didnt and the speed at which we rerated. We spoke to rich clarida about of the moves in the bond market. Heres what he had to say about the curve. Richard we tried to distinguish between a neutral bond yield on the 10 year. We think we will be in a steeper yield curve. Theres no doubt in a world where government debts north of 100 of gdp we really do not have a consistent fiscal policy in the u. S. We will be in a we world of steeper curves for sure. Guy he knows. Takes us back to our question of the day. Given what we are seeing in the markets, how are you feeling . Feeling fearful or greedy. Joining us now is max cadden are. Max kettner. Are you feeling greedy or fearful . Max greedy to be honest. Credit has been pretty resilient. High yield investmentgrade credit. You can feel more fearful. In terms of what weve seen so far. Sentiment has already rerated quite a bit. If we look at the vix futures curve, survey based sentiment. A couple of those flagging quite a bit off of pessimism and fear. To me this is not the time or im saying now i need to really throw in the towel. Its particularly in the riskier credit, im getting 9 , thats fine. Maturities coming up, particularly highyield. Alix but max i guess what gives you the confidence it does not turn into fear . Sure, credit Market Holding up ok now but why do we think it will continue to hold up . Why do we think it will continue to be. Max i think part of that is theres already a lot of fear, looking at sentiment index, its collapsed quite a bit. You already have quite a bit of fear in the market already. Number two is when we look from a Growth Perspective from a growth expectations perspective, of the interesting thing is we see the same pattern from the last four or five quarters. Starting now q4 with the same set up a very pessimistic growth expectations for the u. S. If you look at q4, q1, q2, the expectations next year. The bar to beat in terms of growth expectations is really low. When you look at the earnings expectations for q3 its a little bit off quarter of quarter positive Earnings Growth that consensus is expecting and the revisions weve seen have really happened in the cyclical sectors in Consumer Discretionary and Energy Particularly in materials. Theres a lot of pessimism in those earnings expectations so the upcoming q3 earnings season could spring a bit of an upside surprise. Nothing to worry about, nothing to see here. Max im not worried that much about the level of yields, im worried about the volatility of yields. Thats the thing. Im not really worried if you tell me where to be at 5 . Its something we have to deal with. If you look at the s p, if you look at the material wall of the s p in 2024, superlow. If you look at the russell, less than 4 . Guy the russell has been tanked though. Max thats a different issue though. You have almost half the companies that do not make profits. Sort of the smallcap trade has gone in the u. S. Youve got around 40 of the Russell Companies making a profit. If i buy highyield over ig i buy russell over the s p, thats a profit issue not a yield issue. Alix do you like u. S. A european stocks with a set of you are talking about . Max the set up speaks for u. S. Stocks. Speak more broadly for u. S. Risk over european risk. The growth expectations are most pessimistic at the u. S. We are seeing more momentum behind the u. S. , seeing more momentum behind u. S. Earnings. Weve seen that in the q2 earnings season when you look at what we track and what we call guidance sentiment. We are seeing that is more in the u. S. And europe. That sort of tailwind last year from a weaker euro, that actually started to fade. We are actually having a tailwind compared to last year. We had that most for q3 in july and august. It never started to fade. In q3 relatively weaker dollar compared to last year is still for u. S. Earnings. Guy you sound like you have a high degree of certainty that this is a world you are understanding. Is that true . Max i wouldnt do my job well if i set i have no clue whats going on. I would be much less confident we went into it if yields would rise, volatility would rise. At the same time you have very high growth expectations, both topdown and also earnings. Now we are faced with higher yields and face relative value decision but at the same time i see almost no chance of positive surprises on the growth side, its Crystal Clear to go for bonds and equities. Whereas right now youre still faced with these relatively low growth expectations. I feel like the world is going down. Ive only had the most pessimistic questions from you. Guy ok. We ask you the questions at the beginning, are you fearful or greedy. Alix we put it out there. Guy we came through that unscathed. Max thats the most bullish question. Guy it had some bullish elements to it. We have to ask you, we have to be skeptical. Max thats absolutely true. Weve also been only faced with those negative guy so its not just me. Max again that gives you the confidence if people would say things are kind of fine, lets give up on the risk off stand spread everything is kind of fine. Then alarm bells have to start bringing. What about student debt, Consumer Credit . What about Government Shutdown and this and that . It gives you the confidence that people are pretty onesided in terms of their opinions. Alix max, thanks a lot. Max kettner, we appreciate it. Aston martin entering the lemans hypercard classic hypercard class. Hyper car class. This is bloomberg. A moment ago talking about max kettners sartorial eloquence. It gives us a chance to talk about your favorite subject, fashion. Kering under pressure as a result of bernstein downgrading the stock. Questioning the gucci reacceleration. They are not convinced. This speaks more broadly to what is happening with the luxury stocks and the fact they are getting dinged up ready badly. Lvmh, montclair, arish mall, richemont. You wonder if the stock market crackeds, whether that can hit these stocks harder. Will they stop spending if they start to see portfolios under pressure . Alix over three months, just to take a perspective of how badly they got hit. Richemony ist have some saying this is priced in but it raises questions as to the upper end of luxury and does it spread to other aspects of the market. We saw highend watches prices come down. We see that in areas like cars. Guy i use my board, the words reacceleration. Can you basically extrapolate from whats happening with businesses like richemont and lvmh into for rory and aston martin. Aston martin announcing the valkyrie hyper car will be competing against le mans. We will take it to endurance racing as well. The companys executive chairman joins us now from the companys new campus. Great to see you. Thank you for taking the time to join us here at bloomberg. Weve been discussing whats been happening with luxury spending more broadly. Watch prices are coming down, stocks like lvmh under pressure. There is a concern may be spending will slow down. Is that going to be true in your market in the upper end of the car market . Lawrence we are in a fortunate position, we do not feel that at all. Our order books have never been stronger starting with her suv, a couple years its taken 20 market share of highperformance luxury suvs and most recently weve announced we are rolling out our next generation front engine sports cars. We launched our db 12 in the south of france before the Monaco Grand Prix and the order book has never been stronger. I think as long as you have the right product, of the demand is 100 there. We are feeling great upside if anything at all. Alix i would bet lvmh says they have the right product as well. I wonder if you were to look at any crackeds you think they would emerge first . Lawrence again, we are not feeling any. A lot of it does have to do in the car business you roll out new launches of products after coming off of a sevenyearold product which sold out in our dealerships. We are not feeling any cracked whatsoever. Guy you are investing more into the business, you have mercedes on board, you have technology. We are seeing turbulence in Financial Markets is going to get harder and harder it looks like from here. Do you have the technology you need right now to compete with brands like ferrari . Lawrence we most certainly do. Our last Capital Raise was money to raise to pay down our mezzanine debt. We dont require any further funding whatsoever. As far as technology is concerned we are bringing out our new technology. The first of our next generation sports cars. Calling it a super tour of any grantor reason on the market. Better driving dynamics, more horsepower, so yes we are perfectly ahead of the competition as well as our performance. Alix that car behind you is a valkyrie and will be in le mans. What is the deal for you . What do you get from being in le mans . Lawrence its a hugely beneficial event for the company. You have millions of viewers around watching these cars, not just at le mans but historic tracks around the world for this is our Customer Base and we sell them at a substantial profit. Millions of viewers its extremely aspirational and has a triple trickle down a trickle down effect. Guy its a different market to f1. How are you seeing that story developing. What do you see coming from that over the next few seasons . The number of teams looks like how do you feel about that, give us a sense of how that brand will develop for you as we see more teams coming in. Lawrence formula one has truly transformed aston martin. It has introduced us to a much younger Customer Base. We have data showing 50 of the consumers today buying our product. They were not aston martin customers seeing before seeing us in formula one. Its transformed us in the highest level of technology in automotive, the highest luxury in automotive. So formula one has been transformative as a marketing tool. We are bringing performance to aston martin. Greater performance. For us its absolutely fantastic. Our largest market with now three races. Guy does that affect get diluted . More teams, in, youve seen the effect. Lawrence andretti has been approved by the fia which is one of two of the bodies that have to approve their entry. The second is fom who is not approved their entry. Alix if it does, are you worried there will be too many cooks in that f1 kitchen . Lawrence i think f1 is in a great place with 10 teams and i have a strong suspicion it will remain 10 teams. Guy interesting. Your revenue campus, how big your renovated campus, how much of an advantage does that give you . Lawrence its enormous. Over three buildings, we moved in may into building number one, building number three is one we will have online next september, that again for a Formula One Team to have the latest and greatest wind tunnel. The last one built in formula one was in 2004. You can imagine how technology has moved on in the last 20 years. It is a game changer. There is no other facility like this in formula one and again for us it is totally a game changer. Alix we totally appreciate it. Thank you very much. Have you ever driven one that looked like that for fun . Guy a formula one . No. Alix not a formula one. A fancy carpet guy a fancy car. Guy it was quite a lot of fun. I drove one of those around a place, that was fantastic. Alix this is bloomberg. Explore endless design possibilities. To find your personal style. Endless hardie® siding colors. Textures and styles. Its possible. With james hardie™. Alix its worth taking a check on the markets. S p up 2 10. The nasdaq 100 up 7 10. Tesla the bestperforming stock on the s p. On the downside you have energy, that feels like no surprise after seeing that selena inventory, the lowest since 1998, just to catch in on the desk check in on the 10 year. Percent doesnt seem that crazy anymore. 5 doesnt seem crazy anymore. Guy todays news needs to be seen in the context of yesterdays news. Fascinating to look at the fact we have not become completely unwound. Nothing goes in a Straight Line for long. Stoxx 600 flat today. Energy is a drag. The pound is higher. 1. 2144. You would see dollar weakness at some point. Euro, similar picture is yell as well. German 10year briefly earlier on we are waiting, we will figure out exactly whats can happen here next. We do not really know. We talked to so many people about the degree of certainty, not sure theres a great degree of certainty in these markets. Payrolls on friday, theres a lot going on today. It feels a little bit calmer. The closes coming up next. This is bloomberg. The close is coming up next. This is bloomberg. Guy wrapping up the session in europe, it has gotten gray. If youre looking for excitement, fever has Just Announced the world cup will be hosted by portugal, spain, morocco. The session has rolled over a little bit as the afternoon has progressed. We are down by. 1 . Waiting for the next big catalyst on friday, the payrolls. Tesco is up 3. 66 . The Company Coming out with positive guidance in terms of the topline. I was mentioning earlier what was happening with the story in the u. K. Rishi sunak will effectively be banning smoking. If you are 14 years old now, you will never be able to buy cigarettes in the u. K. Imperial brands sales and revenue also shall. Shelll. What will they do with the growth and stability in europe . We will get volvo carls cars and sales revenue. Volkswagen is struggling. It will not proceed with a big ev factory. It is having to maybe sideline staff because its not getting the demand that it was expecting from the evs it is making. It looks as if margins will come under pressure. Is the demand sustainable without a large amount of government help . Alix ford ev f150 sales have dropped. Its not smooth sailing around the board. What are you expecting tomorrow . Guest we are expecting similar numbers from july and august. Volvo has increased the production and that has continued building into fort. Ford. Guy what do you think is happening more broadly with demand . Volkswagen is really struggling at the moment. Im seeing factories not proceeding and staff being laid off. How would you describe ev demand in europe . Guest they are working off of backlogs in production. The demand, it is typically a car that you would have on subscription meaning you are subscribing by using the car. We are seeing the Interest Rates coming up and thats making it more expensive to buy the car. Also with Less Government subsidies, its becoming increasingly costly to drive. People are looking more at used cars. Alix also hybrids. There was a great article saying evs are too pricey so hybrids are looking better. What will we realistically get from governments to support the demand we will see need to see to have confidence in the autos . Guest when you have an economic slowdown around the corner and people become more cautious in their purchasing behavior, we have been in such a restraint situation from supplyside and also lower production levels. I guess its a tradeoff how much you want to drive that related vehicle sales. Its hard to come up with how much support they will give us. Guy as an investor, how much should you rely on governments in europe ejecting domestic manufacturing . One of the best selling cars in the Nordic Region is out of china. Im wondering whether or not Companies Like volvo need protecting, if they are being unfairly treated and whether or not the benefits of protecting them outweighs the opportunity that exists to sell into markets like china . Guest thats a very good question. Europe oems are very dependent on china. Europe has very restrictive emission. That makes it hard for china to compete. Both parties are dependent on each other. Guy it has to be fascinating to watch how this unfolds. Thank you very much indeed. European equity markets coming off of session lows. The ftse 100 under pressure. Oil stocks are weighing. Our question of the day, what are you feeling right now . Fearful or greedy . Our guest is joining us next. This is bloomberg. Guy coming p, right jacobs joini us 2 00 p. M. Your time. New york time. This is bloomberg. I still think there is something coming our way for some of us that havent fully structured. Im happy we did. I think we did some of it too late. I think it would have been better immediately going into covid, but i still see a lot of debt. I see a challenging environment on the whole. I dont think we have seen the end of covid yet for industry. Guy that was earlier on his companys restructuring, he has companies coming through chapter 11. The question of the day, are you feeling greedy or fearful . Our guest is alixpartners cohead. Great to see you. How are you feeling right now . Is it a world in which you feel greedy or you want to fear . Guest i think its both. It depends on your perspective. I agree with the sentiment of the ceo that its always better to get ahead of your issues. Doing something earlier definitely improves your optionality. The way i look at Something Like this is a crisis for some is a problem for others and an opportunity. I would say its both. Alix you are the person they come to for advice, so you have to do both. A lot of borrowers refinance when rates were low but highyield spreads are moving higher. Where will the distress come from and what does that look like . Guest i get asked this a lot about recession. The truth is, we are seeing a lot of underlying signs that whether or not there actually is a formal session. Recession, we are starting to see the consumers behave as if it is coming. We are seeing and talking with our ceos and cfos cross the board. Theyre trying to be prepared. Its being agile, looking at your financial hygiene. Not just fixing the balance sheet, but also looking at underlying operations. Topline costs. Looking at customers in your customer and product profitability. Its a holistic approach try to get ahead of whatever is coming. Whether its a recession or not, for sure there are Destructive Forces of their. Guy what do you think is happening under the cover of private markets right now . Give us your perspective . Guest one of the things as you mentioned i am at the Greenwich Economic Forum which caters to private equity investors. One of the dynamics that we have been seeing is increased m a activity. Another one is we are saying private equity sponsors more actively engaging and preemptively engaging, helping us through how we can make this Management Team successful. Hopeless think through what a Holistic Program looks like. The good news is, they are not waiting until theres a problem to reach out to anticipate. They are being active and supportive and getting in early as a sponsor to either hire advisors to get a holistic approach of what their options may be. Alix i wonder about your conversations with ceos about labor. The latest, kaiser pharmaceuticals employees might be going on strike. What do you tell ceos about unions and workers . Guest as you probably know, being a reformed turnaround professional, ive dealt with labor unions around the world. What strikes me about whats happening now and you think about the uaw, you look at the writers and actors strikes, its about some of the changes that are coming. From the writers and actors perspective, its ai, streaming services. Going back to the agreements made when the industry was different. Similarly with the uaw and other strikes, its about the changes that are coming. Its about the movement from combustion engines to ev. The parts suppliers, the need for workers. The discussions we are having now as it specifically relates to unions is flexibility, upscaling, trying to look to the future and what that looks like together. I think theres a common theme. Guy you think has been a more permanent shift in labors favor away from capital . Guest i dont think its a permanent anything. Point in time and reaction to some of the changes that we are seeing. Technological change, what is it mean for the workers. What does that mean for management in the companies . We are all trying to figure out how to capitalize on this in a positive way and think about what the Management Team and the workers of the future look like based on these changes coming our way whether its a different Distribution Channel by virtue of writers and actors or a change down the supply chain and what that means for the different parts, suppliers, and skills required in route to deliver the product. Alix if there was a word you described you used to describe the sentiment of your clients, what would it be . Guest anticipatory, which is good. Folks are trying to get ahead of the change that is surely coming and tried to think about what does it mean for them, their customers, their suppliers . How can we be flex will and agile . Alix really great stuff. Thank you very much. Coming, heres a potential thorn in your side, whats happening in congress. Jim jordan is throwing his hat in the ring to replace Kevin Mccarthy. This is bloomberg. Alix stocks are on session highs. I would not have expected this coming in this morning. Quite a move from an hour ago. The s p 500 up. 4 . The nasdaq 100 is up 1 . Yields are not on pressure today. The vix coming in little bit 19 handle. A little bit narrower than the typical spread. A broader selloff would catch up with selling we have seen for big tech. As for yields over the last three days, the 10 year yield, this is interesting because we were at 4. 88 percent. We have given some back, but we are still up 16 basis points on the week. This is one of the pressures that has stocks down. The two best sectors this year, communication session medication services. Communication services. Also communication tech. Look at the traditional yield heavy sectors, they are down. Utilities down 20 as yields go higher. Finally if we look at the equal weighted s p 500 because big tech has outperformed, it is down on the year. Guy i think we could be in for the ride. Shorterterm, the rest of the day. We have ftx opening arguments. President biden will be speaking on debt cancellations. I wonder what the white house makes of whats happening in congress . Alix apparently jim jordan announcing he is running to be the next house speaker. I want to go to washington, d. C. With the latest. What do we know . We know that jim jordan has officially said he is running and he chairs the judiciary committee. He is one of the leaders of the impeachment inquiry into joe biden. He could be one that some hardline conservatives would support but there are a number of names being floated including Steve Scalise who is fighting cancer. Its he is in a room with the texas republican delegation along with others. Other names have also been thrown about. Any of these individuals would need to get 218 votes to get the gavel. That wont start until next wednesday. They have time to sort things out. In january, it took teen rounds and four days for Kevin Mccarthy to be elected speaker. Guy how long can this last . What does this mean in terms of the debt ceiling and policymaking . The u. S. Government is not really functioning in the legislative branch. The active speaker only has limited power. Basically only to preside over a speaker vote. He cannot carry out normal business like voting on Appropriations Bills needed to keep the government open. A congressman spoke with us earlier suggesting the interim speaker needs to buckle up. The feeling seems to be in washington that this entire episode increases the likelihood of the government shutting down come the november 17 deadline. Alix what is the feeling in washington . To some extent, the public as like whatever. What is the feeling . Its quiet. A few members are meeting, but technically the entire house is not an session again until tuesday. What will they do in the meantime . Members of the senate have had harsh words for what went down the house. Theres a lot of upset about the fact that just eight republicans were able to destabilize the u. S. Government. It is chaos that we have gotten used to, but in other ways its unprecedented. Alix thank you, we appreciate your reporting. Matt gaetz will be on bloomberg balance of power at 5 00 p. M. New york time. That wraps it up for us. Coming up, Bloomberg Technology. This is bloomberg. Nice footwork. Man, youre lucky, watching live sports never used to be this easy. Now you can stream all your games like its nothing. Yes [ cheers ] yeah woho running up and down that field looks tough. Its a pitch. Get way more into what youre into when you stream on the xfinity 10g network. From the heart of where innovation, money and power to live in Silicon Valley and blake and beyond, this is Bloomberg Technology with Caroline Hyde and ed ludlow. Caroline i am Caroline Hyde. Ed ludlow is off. We will go live to the manhattan federal courthouse where the opening argument is set to begin for sam brickman feet sam brickman freed sam bankmanfrieds trial. The new pixel is more like an iphone. Lets check inn