Bloomberg Economics US Economist Stuart Paul and Steven Skancke, Chief Economic Advisor at Keel Point, discuss the Federal Reserve meeting and provide a preview of Wednesday's rate decision. Bloomberg Technology Co-Host Ed Ludlow breaks down AMD reporting a lackluster revenue forecast and looks at the latest EV news. Martina Larkin, CEO of Project Liberty, talks about efforts to return ownership and control of personal data to individuals. Bloomberg Businessweek Editor Joel Weber and Bloomberg News Media and Entertainment Reporter Samantha Stewart share the details of Samantha's Businessweek Magazine story Hollywood Has Perfected the Lucrative Business of Horror Movies. And we Drive to the Close with Jimmy Lee, CEO at Wealth Consulting Group.
Hosts: Carol Massar and Jess Menton. Producer: Paul Brennan.
FULL TRANSCRIPT:
This is Bloomberg Business Wait inside from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio. We're just under twenty four hours away, Jess from the next FED decision FOMC. We've got some economic news today. We talked about it right, consumer confidence down to a five month low, dropping to a five month low in October, and then you got employment costs unexpectedly accelerating in the third quarter or so. That reminds us we've got a strong, strong labor market. And especially with some thoughts ahead of this FOMC meeting. Back with US is doctor Steve Shanky, chief economist and advisor at Keele Point and former staff member of the US Treasury while White House National Security Council. And then of course Steve is on zoom in Mexico, also with US as Bloomberg Economics owned US economist Stewart here of course in the Bloomberg Interactive Brokers studio, and so Stewart I wanted to kick off with today's data, so we did get a lot of indications here what wage growth does look like in the economic snaphot obviously of the economy. When you are thinking about FED share Jerome Pale tomorrow, what are your thoughts in what do you think that the Federal Reserve should do? Because we're not going to get those quarterly economic projections or the dot plots tomorrow. So it was a bit of a shocker to see the employment cost index tick up in Q three. It departs from what we've been seeing with the Atlanta Fed wage tracker, departs from what we've been seeing in the non farm payrolls report, where we've had modest wage growth that's actually been relatively consistent with two percent inflation, with the Fed's two percent inflation target. We don't think that the Fed is going to be in a position to hike tomorrow ninety seven some odd percent odds market applied probability that the Fed's going to maintain its current policy rate when it makes its announcement tomorrow, and we think that that is the right move. Though I wouldn't be so presumptuous as to tell Chairman Powell how to do his job. I would either having said that way, I want to bring Steve into because what I think about A very wise individual said to me that Jay Powell, he's a lawyer, and he looks at the data in front of him, Steve, and that's what's going to determine the decision he's going to make on any given FOMC day. Having said that, so what is the data playbook that Jay Powell and company will be dealing with when they make that decision or just ahead of that decision tomorrow. Well, I absolutely agreet Carola, and the data that he has has in front of him is a little bit overwhelmeding just because it's so broad. I mean, we had this four point nine GDP growth number, but you know, consumer spending was up four percent and a rebuilding of inventories, which is a big variable, was up. So how do they discount that? Maybe he'll say something about that in his comments, as as Stewart said, the employment cost index unexpectedly up, but at the same time, a year over year, private wages and salaries were doubt a bit. Unemployment is not likely to fall, wages are looking to be on a downward trend when we look forward, and I think that the FED can probably see that. So the discussion, even with no rate increase, no change in tone, I think would be very interesting as chair of Powell answers questions about these data that are a little bit inconvenient. But at the same time he has a lot of other things that he can fall back to and point to, well, come back back in stut because I just I do wonder in terms of, you know, what you think will be top of mind or the message that he's going to need to get across in that press conference, or what he might be you know, questioned about the most because I feel like we've well, no, okay, no decision, So we moved to the press conference, right, So moving to the press conference. Here's just a typical strategy that Powell deploys at the press conference. If they were to ever make a hike a hawkish move, he ends up sounding a little bit more dubbish during the press conference if they do something that's a little bit you know, incrementally dookook right exactly, and you just hold on to your CDs. You watch equities move when he's in the middle of the press conference. But when they make something that's a little bit more dubvish, when they hold rates steadied as they will tomorrow. He's gonna most likely sound hawkish. He's going to talk about the persistence of growth, even if he takes Steve's really important points into consideration about thirty percent, about thirty percent of that four point nine percent Q OVERQ growth that we saw on Q three came from inventories. That doesn't exactly scream like organic growth in the US economy. Even if he were to take that into consideration, he's gonna end up saying every meeting is a live meeting. They're only making decisions for today. They're not making decisions for tomorrow. Based in the latest SEP, they're still showing another rate hike this year. So he's going to end up sounding a bit more hawkish at the press conference. Interesting how much does that job booning stew feed into the mistake from transitory that he dropped almost two years ago? You know, I think that it is still something that they think about. They don't want to end up with the egg on their face and perpetuity. They do want to end up showing some sort of dedication to bringing inflation back toward the two percent target. After having made such an important misstep and being so all too confident that inflation would come down naturally, and instead they're actually having to put in a lot of the work. And given the fact that the US hasn't been especially interest sensitive in their spending today and it's taken a lot more hiking than anticipated, I think that any sort of hawkish tone may exactly be part of that just and may be part of that legacy of dealing with that transitory egg on their faces. Hey, Steve, one of the things that I thought was really interesting. We've had a great story in the Bloomberg about corporate credit strength and that to really you know, tame inflation. The FED, you know, they're looking to tighten those financial conditions across the economy, but they really haven't made much of a dent in corporate America yet. So we're talking about you know, we look specifically at the extra yield investors demand for risk in the US investment grade and high yield bond markets, which has remained below their twenty year averages and well under level seen during historical times of stress in the economy, and borrowing remains robust. So would the FED like to see that tighten up a little bit and not be so upbeat that there's more work to be done. They look at things like that, well, they certainly would like to see the market providing less liquidity, and that goes right to the point that you make. But they're also there are also very wary, I believe, notwithstanding wanted to wanting to continue their Hockey's tone of doing anything that is that is going to fuel a further sell off in the bond market. They seem to be happy with where mid and longer term rates are, and so while they might not be particularly happy with with all the liquidity that continues to exist in the corporate market, my belief is that they'll be patient about it. Can I ask you, do you feel like if it's getting close to a neutral rate? Yes, I think that they are. They just just the comments that that some of the Governor's f MC members and Jay Powell made this past last week. They they seem to be getting comfortable with that. I mean, to Stewart's point, they don't want to. They don't want to let up up on their hawky is tone. But but when you sort of parse out some of the things that they've been saying recently, I think the answer to that is yes, Stu. We also have another wild car for tomorrow with the refunding in the treasury market. What are your expectations and what do you think that could mean for yield as far as what that pressure could mean for maybe longer duration and growth stocks in the equity market with growing auctions with higher deficits than had been previously projected, there's reason to believe that even just the term premium that had been getting blown out, that had been raising the entire yield curve that has been front of mind for FED policy makers, could even just get blown out even further. One thing that's super important, though, is that when you see higher long term rates moving as a consequence of a larger term premium, it means the FED has less work than it has to do. It could sort of sit back and relax, not really relax, but at least wait to see the economic consequences of higher long term field continuing to ripple through. So, for example, while the FED had been doing most of the heavy lifting deeply inverting the curve raising front end rates as aggressively as we've seen it point in the past forty years, now with longer term rates catching up as a consequence of a larger term premium, the FED can sort of slow down. And I think that that's that is downstream funk fiscal policy, and that is going to be an important factor tomorrow. Yeah, you do feel like, hey, if I get a little bit of an assist, it wouldn't mind Steve saving the last forty five seconds minute for you here in terms of that the specifics on that refunding, how does you've worked at Treasury, how does that factor into or and you've worked at the government, you've worked at the White House? How does that factor and you think into the Fed's thinking, Well, they had to be aware of it. You know, they've gotten caught up on this a couple of times in the past on their REPO activities, so they're certainly mindful of it. They want to be respectful, and the Treasury Secretary has has indicated a point of view that maybe isn't fully embraced by the market. But I think that the the FED is going to be sensitive and accommodating. Going to be interesting, very interesting. Hey, guys, thank you so much. I feel like there's a lot going on, but we need a little bit of a setup ahead of that FED decision, which you know, twenty four hours from now, less than twenty four it will be front and center for all of us guys. Thank you so much. Blueberg Economics US economist Stuart Paul joining us in our Bloomberg Interactive Broker Studio along with doctor Steve Skankey, chief economic advisor of at kill Point. As we mentioned, former staff member at the US Treasury and the White House National Security Council, joining us on zoom in Mexico, you're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern Listen on Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business App, or watch us live on YouTube. AMD, which is down, continues to be down about four percent in the aftermarket following its earnings. By the way, their chips have been used in the automotive world as well as Tesla's, so we want to talk about AMD, We want to talk about Tesla, and we also want to talk about it another ev maker, carmaker Stilantis. I'm trying to roll it all together and I'm going to toss it over to our Ed Ludlow, who is co host of Bloomberg Technology on Bloomberg TV because I'm going to throw it all at you. But let's start with AMD. I know there's a lot on your plate. This is our weekly look at the world of evs. We call it Bloomberg plugged in. But let's start with AMD, which is down in the aftermarket. What jumps out for you, Ed, Yeah, it's just a mixture of disappointment. Right. If you go to their forecast for the fourth quarter, the revenue range is five point eight to six point four billion dollars. The street wanted to c six six point four billion dollars, so the mid range point is kind of disappointing. But the biggest story here is that they're not seeing the PC recovery that Intel saw. They make GPUs that go into gaming consoles and high end gaming pieces and are warning us that slowing down. And even though they told us that they're super special AI accelerated chips I three hundred are on track to go into production and ship in the final three months of this year, there's kind of no tangible boost from that. Right, It's not going to book a substantive revenue until the beginning of next year, and it will take them time to catch up with Nvidio in the H one hundred. So it's a bit of a mixed bag, which is never really what you want in earnings. But the market's a little disappointed in shares of AMD. We're actually up more than fifty percent heading into this report. How much of this also when you have another stock that may have gotten ahead of itself after last year's sell off and chip names, does this make sense for some investors? Well, this is part of the story. You know. The data center business was a disappointment last quarter. A missed estimates, so they have a data center business that isn't yet reflecting the opportunity of AI. They're the number two PC processor maker behind Intel, and Intel gave us really promising glimpse that maybe that market is recovering and when all told is at the end of twenty twenty three, shipments will look better when we get them. AMD's results don't really reflect that. And as I said, we're excited about the mi I three hundred AI accelerator, but it's some way off still showing up up in the financial results. Yeah, it's pretty fascinating. If you're sitting down with the CEO, what would you ask them or ask yeah, or at least i'd ask yeah, I'd ask what evidence do you have that you can continue at such a click that the mi I three hundred will gain traction in the market that the H one hundred. Did you know, all of the CEOs these chip companies say that we're just at the very beginning of this AI thing. There's going to be demand for all kinds of chips, all kinds of GPUs. Well, if that's the case, give me some data what the next twelve months looks like and how many of these you think you'll sell? And most importantly to who, Yeah, it's interesting to you to go down the revenue line. If you look at our des page right, like, I mean, gaming is important, client, you know, areas important, Data centers are important. I mean you're talking about, you know, over six billion revenue for each of those. So these are areas that they really want to be kind of you know, firing on all cylinders if you will correct and you kind of get this mixed bag. And it's in the history of both AMD and NVIDIA. The GPU graphics processing unit has its origins in video games. Right. It's a chip that can help handle lots of parallel data processes. That makes it great for AI. So in Vidia translated that to the AI use case. MD is seeing it can. We just haven't got any proof that it's done it yet. I wanted to switch gears and ask you, of course about Tesla because the valuation interes seeing how much it's shaved in billions because of some of these demand issues. How does this sort of plan too that when we are talking about ship makers and then obviously what this means for the EB space. Do you guys ever just wake up and think about monetary policy and rates? Yes, well I do. I do. Elon Musk is talking a lot about interest rates and why does the FED use rates as a mechanism to control inflation? Higher rates tampa demand in the economy. That's literally the mechanics of what they're trying to do, and we're seeing that play out now in the car industry. In the EV context, the early adopters have been and gone, they've bought their evs. Now it's the rest of Americans who face all kinds of household spending pressures, and there is evidence that EV's are kind of a victim of that. You know, earlier in the year, Tesla used price cuts to unlock new pockets of demand, and the narrative since October eighteenth is Tesla's shares it down almost twenty percent. They've shed billions of market cap because we're starting to question the demand that's actually there and the severity of the impact of rates. I mean, as it though all across the EV space. I mean, we've had a lot of conversations ed right around this and we thought, you know, we're getting this tipping point in terms of EV adoption, certainly throughout the world, but maybe getting closer to it here in the US. What's happened. Well, the other evidence that we point to is that the legacy auto makers, for example General Motors that are managing transition from combustion engine to EV have also tempered back their EV expectations. A part of that, of course, is the impact of UAW strikes and sort of business continuity and operations, but a part of it is a rethink on demand and you know, rethinking how much or how many evs they're going to have to build and how quickly to meet what is a lessening demand picture. But you have then Stilantis out right and their shares rallied better than expected revenue in the third quarter, and they talked about robust demand for their electric jeep Avenger. So and this is the beautiful story for a global news network like US, because Stillentis has this whole thing on a place called Europe. And in Europe it's a completely different market where smaller form factor vehicles a lower price point to doing really well. Brands that you have not heard of, like Sichuan have you done well in that market? And there are models of jeep that Stilantis make in Europe that we don't even have here in the US yet. And you know, so Slantis is an interesting one because it was late to the EV party, but its strategy is working in that continent and that insulated them somewhat from the North America story, where actually their pricing power on combustion engines was better anyway, and that helped offset some of the UAW disruption. What hurts them when it comes to some of their US counterparts and rivals, what did you say, sorry I lost you in my AUS counterparts and rivals For Stillantis, as far as when it does have the ability to be more unscathed obviously in Europe, but when it comes to the US sort of the dynamic where it has had other issues trying to catch up with maybe some of its rivals. Yeah, it's a really good question because Stilantis, under its different brands in this country, principally Jeep, Chrysler Ramp, does not have a sort of high volume selling EV model. You know, there are two parts to it. You know, if you take the pickup market, there's extreme brand loyalty here, so it's fair to assume that when we get an electric RAM that will resonate with the sort of loyal Ram audience. But in the consumer EV domain it's getting very competitive. You know. You not just have Tesla, but other pure play names like Rivian and Ford and GM moved quicker to bring battery electric pickups and SUVs to a country that loves those bigger form factor cars. Stilantis is late, but they're coming end of this year, beginning of twenty twenty four. How much traction they gain will be really interesting to track. You know, it makes me wonder, you know, coming off of all of these deals with the UAW the big three here in the US. Obviously Stilantis included, of course, in that whether or not they're going to be able to stick to their ev missions. I just wonder about the cost side of things, Ed, So, what Stilantis said is that the UAW strikes cost them about three billion dollars of sales revenue, but on the bottom line, the impact was much more muted, about eight hundred million dollars of impact because they were able to control their own cost discipline. And that's kind of been a feature of the Stilantis story, but it also delays. You know, they canceled their CEES showcase, for example, and part of selling EV's to consumers is getting out there talking them up. So it has had a sort of long term strategic impact. All right, I just want to know when you wake up, do you really talk think about the Fed monetary policy or is it about what Elan had to say? Come on, I really mean it, because it's partly like if you want to buy a house or a car, those are the two most important decisions you make. Look at all the stories matter, right, all the surveys we've been doing here at Bloomberg. It's top of mind for everyone. Everybody's feeling the pinch in it. Ed Lovelow, thank you so much an incredible roundup of a lot of different stories but tying it all together and finding that common thread Ed, of course, is co host of Bloomberg Technology on Bloomberg TV Cast. You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern on Bloomberg Radio, the Bloomberg Business app, and YouTube. You can a so listen live on Amazon Alexa from our flagship New York station Just Say Alexa, playing Bloomberg eleven thirty on the Bloomberg Today. There's a story about how Google executives downplayed the company's artificial intelligence position during some testimony at a landmark federal anti trust trial, saying the company has tried to be slow and cautious because of the dangerous power of the technology. We just are definitely living in uncharted warders when it comes to generative AI and where it takes our world for better or worse. We're excited about chip companies and what they might make and what they might do. We just talked about AMD, But in terms of society, I think we're all trying to figure it out ultimately about what the impact will be and what the potential ramifications could be for users of this. Well, we have a great guest. Martina Larkin is a CEO Project Liberty. It's an international nonprofit. They talk about working to create a new civic architecture for the digital world. So let's get to it. She is a former member of the World Economic Forms Executive Committee and sits on several nonprofit boards, including one devoted to innovation and technology at the European Commission. She joins us on zoom in London. Martina, welcome, Welcome to Bloomberg Business Week and our Bloomberg community. For those who are listening and watching right now, tell us a little bit more about your group and the mission that you are on. Hi, great to be here, Thank you for having me. Yes, as you said, we're building a saye for healthier Internet, and you really believe that this should be designed and governed for the common good, for society and not just for profit. I think you know in that even in that recent lawsuit, that we've seen these tech companies really having more of a motive around profit rather than the benefit of society. So we believe it's very important to refocus basically on the individuals and on society and look at what we can do better when it comes to social media, but now also AI obviously, and we've seen all the the problems that it has created, whether it's the mental health crisis or political polarization, the decline in trust in media and in our institution. So we want to take steps and build solutions that solve for that and create a better Internet, which is possible. And to be fair, there's a bunch of lawsuits going on. I think the loss that you mentioned is the one by California, the State of California and more than thirty state attorney generals against meta platforms right for allegedly enticing children onto Instagram and Facebook with addictive features. So that's going on. I'm assuming that's the case you were talking about. Correct, Yes, how exactly are you building this? So there's a number of factors here that we were considering. One is the technology itself, right, We want to build, say for a healthier technology, more responsible technology, and we have developed the decentralized protocol that allows us to retain control of our data and change the nature of both the Internet and social media by changing the business model, which lies at the bottom of all of that. And you know the fact that those big companies own our data and use it against us and particularly those who are vulnerable children and others, lies very much at the heart of that. But it goes beyond that. So the technology is obviously one aspect, but we also need regulation to solve for this, contributing to some of the safeguards and you know, guard rails around this, and of course the research and the governance is equally important. And then we strongly believe that we need to get people and organizations involved. So we have built a Global Alliance for Responsible Tech with organizations from around the world who want to contribute to this this mission as well. There's a lot out there, as you well know. You know the ad model, right, the acquisition of a lot of personal information, that dossi that have been built on each and every one of us. That's pretty powerful and it's very profitable for these companies. There's also regulating information and misinformation. But then we get into you know, are we kind of limiting kind of the right to speech. So if you had to pick one target that you would love to change, what would it be and how do we do it? Well, I think we have a real obligation to protect children first and foremost, and I think we need to put forward stronger legal protections for children online. I think that's just just the basics. And then I was in you know, Americans, you know, agree with that. The polls show that seventy percent of Americans and about ninety one percent of parents want that as well, and they want stronger protections of their children online. But we also need to require more transparency and we need to transform the industry with a new set of expectations around what is happening with the data, what kind of you know, models lie behind this, what are the business models behind it, what is happening to the data? And this has become even more apparent with AI that we don't these organizations don't even know where the data is coming from, what is happening to it, And so that those two factors I think are really important. But also of course building this new tech ecosystem, building these new technologies that actually you know, give us new hope and sort of a way forward where we just don't even have to look at the regulation, but we can just use the new technologies that enable that kind of environment to become a reality. What's the timetable on those types of new technologies when you do have things like AI constantly changing. Yeah, so on social media, we have this decentralized protocol right now live. So we have MiWi, which is a social media platform in the US that is using that decentralized protocol right now. So it's here and now we just need to accelerate it and get more people on it and more people demanding it, and that's the first step, and then this will help transform where we were going. Martina, what do you think is the biggest obstacle? I feel like we are looking over towards the European area in terms of a bigger fight when it comes to privacy issues, and I feel like those in the US are kind of watching what's going on overseas. What is the obstacle to getting it done? Is it lobbying, certainly in the US, is it lobbying in money, or what is it that you think prevents like age verification when it comes to something that would probably make it a lot safer for kids, or at least we could kind of police it a little bit more. Just got about forty seconds left, So one point certainly is to that people don't know that there's options, right from a tech perspective, they don't even know that have different doesn't have to be like that, right, the tech can be designed differently. And the second one is individuals and organizations need to demand greater transparency and you know, push forward regulation like KOSA for example in the US, that can be something that just is a first step towards building this much healthier ecosystem that we're talking about. And I'm sorry, what was that KOSA? I'm not oh, children's aline? Yeah, what does that stand? Fork? Yes, the Children's like put Privacy Bill basically, which is introduced, which is what was introduced this year in the US. All right, so appreciate it. I feel like this is a longer conversation and hopefully we can catch up with you again and curious too as you see maybe some progress to check back in with us. Martina Larkin. She's chief executive officer of Project Liberty, joining us on zoom from London. If you missed any of it, be sure to check out our podcast feed a little bit later on you're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern Listen on Bloomberg dot com, the iHeartRadio app and the Bloomberg Business App, or watch us live on YouTube. Happy Halloween, everyone, tis the season for spooky movies. And did you know that of the top twenty most profitable films based on return of investments ROI since nineteen nineteen seventy seven, excuse me, nine are actually horror movies according to movie data analytics firms the numbers. Looking into this lucrative business of horror movies and how Hollywood just seems to just get it so right. Is Bloomberg News Media and entertainment reporter Samantha Stewart Sam joining us along with the editor of Bloomberg Business Week, jol Weber, both here in our Bloomberg Interactive Broker Studio. Sam story already online at Bloomberg dot com, Slash business Week, and of course on the Bloomberg Oh my God, ROI big time pretty good? Right. I feel like we did this story just so I could ask this question, this question, which is set up. Do you like scary movies like oh Man, who doesn't like to get the heart movement? Scream dates me? But okay, I have a soft spot for Yeah, yeah, I have a soft spot for these scary movies. I think many of us like to be scared them. Yeah, but you know I get scared as an eight year old. You can hear like the key change, and he's just like I'm out here. Definitely, he's definitely not watching any of the movies that we're writing about here. What fascinating me about this and and why we tap Samantha for it? This is a money making formula and Hollywood has found it and almost perfected it. And it's like, the thing I like about it is like how little money can you spend to have a nice row? I And some of these movies have become franchises and they just have become this ongoing little geyser of money. And it's like, if you want the shortcut to like how to make it in Hollywood, I think you're looking at it. It's a scary movies. Samantha help us out here. When you started, what did you learn along the way? I mean it was really interesting just to see how profitable these scary movies are. I mean, looking at Paranormal Activity especially, its initial budget was only fifteen thousand dollars and then fifteen thousand dollars. It's crazy yeah, crazy, yeah, only fifteen thousand, and then went on to gross over one hundred and ninety four million worldwide. So that's a really big bang for your buck, I would say, a really big bang. That's all things. Like I said, how little money can you spend in order to like and that's just the first movie? How many did they make? It was like, you know, there's more than there's more than two sequels, sus So why are they so cheap and fast to make? I mean a lot of the time they don't have to spend as much money on a class type of artists, I mean in actors, because they're a lot cheaper to kind of pay for these lower budget actors. And then you can also, really sorry, spend less on sets and like CGI and all that kind of stuff. You don't require the same kind of things that maybe a Marvel film needs to be made. Can do a lot of this on a lower budget. I mean even paranormal activity the first time filmmaker or in Pelly made it in his house. Actually, that's what's crazy, right, We've all gotten so spil Like did you go back and watch the first Star Wars and you're like no special effects there. We've all gotten so used to like we want to be entertained with all these special effects. That's not what they do. They just scare the heck out of us. Yeah. Well, is it true though, that you know special effects can be gory? They can do things that you know fills in your imagination. For fifteen thousand dollars, your imagination will terrify you. And I think that is also part of the formula here too, is like, don't spend the money. I'm doing all the CGI stuff. Just let your brain fill in the gaps and your brain's going to do the work. So who in Hollywood does this better than anybody? I think Bluemouse has really kind of perfected that recipe. I mean they've went on to grows already five point seven billion for all the films that they've produced. And I mean look at Five Nights at Freddy's, which had just an absolutely stellar debut with eighty million dollars. I actually have not yet, which is crazy. I will say, the art and the story for it makes me a little terrified. No, the animatronics are definitely scary. Especially well that was the thing is like animatronics have always terrified me, but nobody made a movie on it. Now I'm definitely am scared. And they're the production company for Paranormal Activity. Yes, Paranormal Activity was kind of their breakout film, which really helped them kind of perfect and refine that low budget model that generates this huge ROI we'll talk to us about Jason Blum. Oh, well, Jason Blum. I mean I'm kind of obsessed with He just did like a shark tank that did the Halloween version, and he came on and you know, pointed out like how well he has done and how in terms of top grossing movies, like he just has a ton, like one after another. No, I mean, I really think it's kind of honing into that whole lower budget idea and again kind of doing away with a lot of the things that these bigger budget films that Hollywood are known for often find to be kind of integral. And it's taking these kind of more original ideas and just going off of those and being able to make these movies that have these huge but huge payoffs. Okay, so we've talked about the really cheap ones, we've chot, we've talked about the most noteworthy director Jason Blum. We haven't talked about the Conjuring. M h. That's the biggest franchise actually, which was made by Atomic Monster, which was founded by James Wand so he created the whole Conjuring franchise. And I mean by now there's about eight films and it's grossed over two billion at the box office, which is insane. So what was amazing about that? Again, it started with like a modest beginning and then you start ratching up the money. But like they did that first one in like thirty eight days, so like I mean like and that college campus. Yeah, and like Blair Witch, same thing like that. That was the one for me, like where I was like, it just showed how you can nail this genre and do it so well and just scare the Jesus out of people, right, and everybody was talking about it, and that was like if Jasby again slightly slightly pre internetbody, can you tell? Okay? So which one surprised you that didn't kind of like rise above? Yeah, like that didn't break through like when you I mean part of the metrics that we're looking at here are ones that were like, you know, box office success, Midsomar didn't probably not a huge money maker, but like also a great example of this genre. So like if you don't have the money, if you don't, like there's still this cult thing that can happen, right, And like The Witch was another one that was really good in this regard where it had like really high kind of like film allura, I guess, right, So like what are the dynamics that you know, not that don't always just need money to succeed, right? I mean I think that what's really interesting about these films is that they're able to generate this and huge roi even though they don't always get the best reviews from critics. I mean a lot of these films aren't that well received. A lot of these films aren't that well received. And I mean one researcher found that actually the horror genre has the lowest correlation between box office performance and its critical reception, which I thought was really interesting. I mean, you look at the ratings for some of the highest grossing films this year, and they're not that aggressive. Yeah. Yeah, I also thought was interesting and I kind of felt this, Okay, I'm going in a completely you know, different direction. Don't judge me, but Barbie, like I felt like for the first time, like I was back in the theater and it was kind of a group experience. We were all kind of laughing and like kind of you know or whatever together. But this genre in particular, right, it is about a group experience. Yeah, I think that social kind of environment that horror really invites is what really brings people to the theaters to keep seeing these movies. I mean, especially looking at like gen Z and seeing how much more they prefer for the horror genre compared to like the adult population at large. I mean, at least a third of gen Z and Lis horror is one of their favorite genres compared to just twenty two percent of US adults. And I mean even sixty six percent of gen Z has seen a horror movie in theaters in the last twelve months, Yes, in theaters, which I think is a lot actually gone in theaters, and it was compared to much lower margins across the board. I think that's bat that idea of like we don't care what critics have to say, but we want to go do this together. It's like it's that experiential thing that we It's so you know, experiential economy for twelve bucks and you know everybody makes money on it. It's pretty interesting. Well makes me wonder like reading this, and I'm going to go back to the return on investment because I feel like whenever we like look at something, you know that is such a part of the Bloomberg conversation, like it's just off the chart. So why aren't other major, bigger studios or are they chasing some of this? I think? I mean when you look at like a lot of the films that perform very well, I mean you think of the superhero films, Marvel films, Avatar, there's all this money on films on uh what's it called, like CGI and IP and all those kinds of things. So I think that's what really kind of puts them apart, is that these horror films again, like I said, don't have to invest in those same kinds of expensive assets of a film. I just think, right if I was a studio, I'd be like, why wouldn't I chase some of this? I mean, it's really kind of remarkable, and it just what we gotta go personal. I gotta know, what's the movie that you won't watch because you're too scared? Of it. Okay, you're gonna really laugh at me, but this is a really, really old It was called Trilogy of Terror with Karen Black. I was a little kid. My older siblings were watching it, but there was this it was this like doll and it like lost its chain and then all of a sudden, it was like it wasn't a voodoo doll, but it was like I can't remember, but it was like a little little doll. And it started like attacking her with a knife, and it was like she's sitting on the couch and it like starts attacking her ankles, and then like it's thrown in the oven and she like and he inhales the fumes and then she becomes like the crazy woman. It's terrifying. I wouldn't put my feet down, like on my couch forever. Samantha, what's the Halloween movie that you don't want to watch because you're too scared of me? I was traumatized by The Mist when I was a lot younger. My brothers made me watch it when I was like eight years old, and it was just the most terrifying thing ever. Didn't want to go to a grocery store just for the fear of getting locked inside one. So I think that's it for me. Never again. I never liked when a stranger calls. It's terrifying me. There's one that was made in the seventies and then they redid it. I think that where it says like they're in the house, they're in the house. He's actually calling her from me inside that house. It's absolutely terrifying. And I've seen it once and I never wanted to watch it. But it isn't interesting like that concept of like you don't have to spell everything out, like I think about go back to Jaws, right and Steven Spielberg, Like the Shark wasn't working and so all they had was the fin But it was so effective in that you kind of just imagined so much of what was going on. The subtlety of it was really kind of cool. And then there's alien like the monsters. Man, that's good. I mean, those those are all of these are I mean. And that's the thing is, like I think there's this they stick with you, right, and like that's the thing about all of these. It's like I don't really want to watch these again. I don't really want to see the sequel and yet I know other people I can appreciate how good of a business this is because it just keeps churning out new ones. What I was really also fascinating about your story is that, Okay, it's all these kind of I feel like upstarts, people doing it differently. Maybe weren't household names, but now you're getting to know them. But it was a Stephen King movie right that was released in twenty seventeen by Warner Brothers. Grows seven hundred million worldwide, making it the biggest horror money maker ever. So like you go back to the master, So I don't know, I bet the ROI though I bet there wasn't. Well, just think about just how good he has been in this genre. I mean, like look like that's you know Shakespeare. I mean it is that level of goods where it just again and again and again and again and again, and like those were old ones that I think some of them have been remade, like like it was like these are That's what I just don't want to see. By the way, Sam, I'm curious when you were given this mission, did y'all? Is this another like creeping by your desk and like, hey, but I wonder when you like started this like how much do you like? How much? Was you know, kind of surprising to you as you kind of dug deeper and deeper into this, because the numbers are really impressive from you know, folks here who all are really kind of gung ho on everything financials. But what really kind of jumped out for you, I mean, so much about it was really shocking to me because I personally was always a horror fan, but I never really had thought about like the budgets for those kinds of films and how it's not always those A list actors that you're seeing, and I didn't really think about how much cheaper that would make a film. I just thought about how much fun it was to watch with my family or with my friends and to be scared. And I think seeing that kind of verified in all of the research that I've done, it was really interesting, really rewarding. So you're like, Jill, I'm going to the movies. I got research to do, genuine research, right, Yeah. I look like every one of these ones that I've seen, I haven't seen them all, probably won't see them all. I love that, But there's this thing that I think just grabs you about this genre, and when you realize that there is this business story to it that is this dramatic, this ROI side, you just know we're going to be talking about this again for you know, decades, as long as we're making movies. We talked about all investments, right. I think if I'm an investor, I'm like, yeah, I'll give you some money. Here's here's twenty five thousand dollars to go make five movies. You know, really fun, great story, and like I said, we were talking about it throughout the day, so I really resonated with all of us. Sam Stewart's Bloomberg News Media and entertainment reporter check out our story on the Bloomberg and online, and of course the editor of Jill Webbard, who knew lover of horror movies. Happy Halloween everyone, I'm brothering Mark on the journal. How about you let me drive? Oh no, no, no no, no, who's going to drive? Honey? Please? How do the riding gravel? Let's mate, I want to drive. It's a good question time. This is the drive to the Globe dot com for me. I think we'll buy around Young Don on Bluebirg Radio. All Right, everybody just about seventeen and a half minutes left in today's trading session on this Tuesday, October thirty. First, it's just heard from Charlie Equity's just kind of rolling over but little change, a little bit higher on this basically f O mc eve. I'm Carol Master along with Jess Metton in for Tim Stenovik on this Tuesday. It's an interesting market, but it does feel like we're just kind of waiting. It definitely seems to be the case, especially at the end of October, which technically is the most vaultatle month of the year, but the worst one is actually September, followed by Oguy, So hopefully maybe we were getting into a better season. Kid Santa Claus rally, don't even go there. All right, Let's see what Jimmy Lee has to say. He's founder and CEO at the Registered investment advisor Wealth Consulting Group. He's on zoom from c Are you in Georgia today or Vegas? I think he's in Vegas. I'm in I'm at the Highlands in North Carolina. Actually, oh, neither. You know you travel more than we do. I don't know. We just talked about the airlines like domestically having some issues you are flying around. I support the airlines, I know, I know well having said that, would you be a buyer of airlines after that Jet Blue news? It's really tanking in today's session, you know, with oil prices high. I think that that's an area that I would probably be cautious with right now. But overall, you know, earnings so far has been really good across the board. I mean, of the companies that reported last week, I think one hundred and sixty over eighty percent beat earnings, with an average of nine point two percent. That's actually from Bloomberg. We had a research committee this morning call and we were doing some research with Bloomberg, and that's from you guys. And then you know, including this week, we have twice as many upgrades as downgrades. So companies are navigating this high interest rate environment. And of course we saw the GDP number and third quarter was phenomenal, and the consumers are still spending, surprising everybody. All right, full disclosure, because that's how we are at Bloomberg, That's how we roll. What do you mean you were doing some work in research with Bloomberg, Well, we have a Bloomberg terminal as well, and our Investment Committee, our CIO does a lot of work on the terminal with research and so forth. So that was one of the statistics that we were looking at, was just the earnings updates for companies last week in this week so far. Okay, just we like transparency now, but earnings make sense, Jess. We're in the midst of it. We're on the other side of it right in terms of the bulk of numbers. If you're not buying Jet Blue, what stocks are you? Well, we are. Let's talk about fixed income still, so we think that we're at the top of the cycle on rates, and while rates have been very volatile for the last thirty sixty days, we think that leaning into duration, I know a lot of other investors have done that, but leaning into duration now I think is a good safe bet for the next few years. Maybe not short term trade, but for the next few years. How far out would you go far? How far out on the curve would you go? Well, believe it or not. We actually added some zero so that we could add just a teeny bit to get a lot more potential benefit from it. So but I think I think adding duration passed you know, even seven years might make sense for a lot of investors for your long term money. I think it's one of the easiest traits to make long term. On the equity side, I think that the interrat sensitive sectors that have been really been beaten up lately, real estate, tech stocks, I think that have an opportunity to take another run before the end of the year. And so I'm glad that there's still a lot of barish people out there. But I think what could happen is is that you know, the FED probably won't raise rates tomorrow, right according to the futures market in December, probably not as well. A lot of investors think that they're done, and if that becomes a consensus that they're done, I think there could be a lot of money down the road here chasing equity soon. You mentioned real estate, that sector in the S and P five hundred up about two percent today, well outperforming the other industry groups. What is it particularly that you like about real estate? Well, publicly traded real estate stocks have been you know, discounted off of the whole value of real estate in general last year and continuing with this year, and so we think that there's value in publicly traded real estate. I think you should be very active with that investment, and you know, maybe not necessarily overweighted too much. But there are areas that have been really beat up with interest rates going higher. That's one of them. And so I think in historically speaking, when that's happened before the public real estate market catches up, and it could happen very quickly. So I think that investors can have an opportunity there. Like I said, also with technology stocks. But also you know, I think quality is very important today. Jimmy, hang on a second before you move on from real estate. Real estate, you know, location, location, location, also type type type. I mean there's industrial, there's commercial, there's residential, there's logistics plays. There's a lot of ways to play it. So if there's long value in play in real estate, what is that long value play specifically, I I think you can be active and actually not just in public real estate. In public real estate, I would I would say that investors can go into general rates. You know, I know, I'm really scared about the office sector, but the office sector represents a smaller percentage of the general you know, public reed sector out there. But in private real estate, I think there are a lot of vehicles out there that a lot of investors can get money invested into, not just high net worth investors. Nowadays, with products out there with fresh capital, I think savvy real estate investors will have opportunity to buy and get into to takeover projects at a discount relative to where they were a year ago. So I think you have to be very selective and work with people that are experts in that space. But also on the debt side. I know that we've been long in the two talking about private credit, and again with fresh capital, I think with private credit you can get opportunities now that we just haven't seen in a long time. Again, that's a private credits a wide space, and you know, just talk about the different types of options to invest into a different managers be very selective there again, and I would stick with trying to be a little bit more conservative with those loans as much as possible too. I have a question about private credit. I'm glad you brought it up, because that is a one and a half trillion dollar quarter in the market right now. Recent weeks we've seen money come out of stocks, also come out of money market funds. Is that money going to private credit. I think a lot of it is, Jess, And I think that you know, especially now that there are vehicles that retail investors can can invest in two without being locked up as long as they used to have to be for private credit and investments. And so I think there are the perfilation of different types of investment vehicles out there nowadays, and in the private credit space allows a lot of participants to be in that investment rather than just institutional before. And so I think some of that money is leaving money markets and inequities too, because you can get double digit yields and with pretty good protection on the collateral. Hey, Jimmy, twenty five seconds, a new wealthy client comes to you and says, I got a bunch of money to invest. Where do you put it right now? Just quickly, really quickly. It's a very interesting time right now. But I would just go back to if it's long term money, seventy five percent of the time, the stock market's hired twelve months later, So I would say that we probably wouldn't be putting it all to work day one, but certainly a good chunk of it should be invested in a beautifully diversified portfoil and with a lot of quality companies, companies that can do well even if we get into a little bit of a slowdown here at some point. All right, Well, be well, Happy Halloween. Jimmy Lee, of course, founder and CEO at the registered investment advisor Wealth Consulting Group, joining us on this Tuesday. This is the Bloomberg Business Week podcast. Avail little on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from three to six 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 Terminale
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