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Speaker 2: With consumer confidence number in ninety seven, the expectations coming
Speaker 2: in sixty six point four, you got to wonder what's
Speaker 2: behind that?
Speaker 3: Yeah, that and that expectation sixty six point four is
Speaker 3: down from last month's revised up seventy four, So a
Speaker 3: big drop there.
Speaker 2: Well, luckily we have Dana Peterson here, she's chief economists
Speaker 2: over at the Conference Board. They do this data, so
Speaker 2: it's great that we get her for that instant reaction.
Speaker 2: So just to recap that Consumer Conference consumer confidence number
Speaker 2: coming at ninety seven, Dana, what happened? What's behind that?
Speaker 4: Sure, this is the third month that the index has
Speaker 4: fallen off, and certainly in the month consumers were less
Speaker 4: optimistic about current employment conditions, and certainly looking forward they
Speaker 4: were less optimistic about employment, business and also income. But
Speaker 4: I would say that if you look out of the
Speaker 4: last two years, the headline measure has been moving back
Speaker 4: and forth in a pretty narrow range, but still in
Speaker 4: all three months down we really wonder what's going to
Speaker 4: happen in that fourth month.
Speaker 3: So how long does a trend here? I mean, it
Speaker 3: feels like a trend to me, and I'm looking at
Speaker 3: some of the revisions downward here, what is this data
Speaker 3: really telling us?
Speaker 2: Here?
Speaker 3: Is there a problem for this US economy?
Speaker 5: Here?
Speaker 4: Well, I would split it out, so the headline, well,
Speaker 4: the headline is made up of present conditions and also expectations.
Speaker 4: So the present conditions index has actually stayed pretty much afloat,
Speaker 4: even though it's moving back and forth a lot. But
Speaker 4: expectations really came off about a year or so ago,
Speaker 4: and they've just been flirting with that eighty threshold, and
Speaker 4: below eighty usually signals or recession. So it suggests consumers
Speaker 4: are a little worried about something. They're concerned about inflation still,
Speaker 4: and they're getting a little bit worried about the labor market.
Speaker 2: So to that point, this kind of goes to the
Speaker 2: whole idea that people feel really bad even though the
Speaker 2: overall data, like you could look at the employment cost
Speaker 2: in next coming and higher than estimated, you know, GDP
Speaker 2: I realized was a little cool, but still the data
Speaker 2: actually comes in pretty pretty strong. How do we understand that?
Speaker 6: So?
Speaker 4: I think the key thing is, on the one hand,
Speaker 4: consumers are working and so they feel good about that
Speaker 4: and they have income coming in, but then that income
Speaker 4: is eroded by inflation. Prices are still elevated. Even though
Speaker 4: prices aren't rising as quickly as they were, the level
Speaker 4: is high. People are saying eggs are eight bucks. I'm
Speaker 4: not used to that.
Speaker 3: I don't really like that, all right, Dana, thanks so
Speaker 3: much for joining us. Dana Peterson, she's a chief economist
Speaker 3: at the Conference Board. Kind of break down some of
Speaker 3: these consumer confidence data coming in today, and again the
Speaker 3: headline is Alex just reported Consumer Conference Board consumer confidence
Speaker 3: came in and reading you have ninety seven.
Speaker 7: Consensus was one zero four, one oh four. So a
Speaker 7: pretty big miss there.
Speaker 2: Straight up inflation, Like you're right, if you're gonna go
Speaker 2: pay eight bucks for eggs, Like that's how you feel,
Speaker 2: no matter what your paycheck necessarily is.
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Speaker 2: Thirty and Alex steelongside Paul Sweeney. This is Bloomberg Intelligence Radio,
Speaker 2: recover all the top news with our amazing analysts worldwide.
Speaker 2: They covered about two thousand companies and one hundred and
Speaker 2: thirty industries. We also want to give you the perspective
Speaker 2: of bigger market strategists, right, like, how do you look
Speaker 2: at it if you're looking at the longer term perspective
Speaker 2: when it comes to quity is and how the short
Speaker 2: term is dictating how you're going to see the outcome.
Speaker 2: Chris Watling is CEO and chief market strategist over at
Speaker 2: Longview Economics. He joined us now from Toronto, Canada. So
Speaker 2: I'm looking Chris at an SMP charter one month and
Speaker 2: clearly we had a decline last week. Right, we've retraced
Speaker 2: that we're up about three percent from the lows, but
Speaker 2: we're still down by about two two and a half
Speaker 2: percent from the peak that we saw back in early April.
Speaker 2: What do we make of the market?
Speaker 5: What do you make of the market? What a great
Speaker 5: question and morning Alex and Paul. Great to be on. Yeah,
Speaker 5: I mean it's it's I think it's it's time for
Speaker 5: a bit of give back, and we think about it.
Speaker 5: It's been extremely good run all the way from the
Speaker 5: sort of loads in October last year through to where
Speaker 5: we were at the beginning of April when we when
Speaker 5: we sort of hit the highs on the S and P,
Speaker 5: and and since then, I think we've had just a
Speaker 5: bit of give back, a bit of a pause, what
Speaker 5: I would call a healthy correction. And you know, part
Speaker 5: of the reasons for that is I think the market's
Speaker 5: time to think about the liquidity environment over the summer.
Speaker 8: You know, the RRP.
Speaker 5: This draining of the r RP has been a wheel
Speaker 5: driver for stock markets, for riskats. It's over the last
Speaker 5: seven eight months, as that's been drained and liquidity has
Speaker 5: come into equities, that's been a will positive. And also
Speaker 5: I think there's some issues about yields back up. This
Speaker 5: is a bit of a sort of biting on the
Speaker 5: valuation side of the equity market. And then on top
Speaker 5: of that, personally, I think grow it's going to surprise
Speaker 5: a little bit to the downside in the States this year.
Speaker 5: So grappling with all of those, I would say and
Speaker 5: as you said, the market bounced last week, it's sold
Speaker 5: off the prior week. You know, markets don't go down
Speaker 5: in straight lines, they don't go up in straight lines.
Speaker 5: So I think we've begun early eight for a bit
Speaker 5: of a gift back, a healthy correction, as I say,
Speaker 5: And I think it's it's good for the market, so
Speaker 5: it's important, and it often happens at the time when
Speaker 5: you begin some rotation in sector leadership.
Speaker 8: So that's kind of interesting as well.
Speaker 3: Chris, were about halfway through earning season here. Anything jumping
Speaker 3: out at you so far? I mean, I guess revenue
Speaker 3: is surprising, maybe one or two percent on the upside,
Speaker 3: earnings maybe eight or nine percent on the upside.
Speaker 7: Anything surprising you, well, I.
Speaker 5: Think, I mean the interesting thing I mean is somewhat surprising,
Speaker 5: but some sensible. I suppose you've got that following when
Speaker 5: when earnings have been a bit better. So, as you say,
Speaker 5: the earnings are surprising to the upside, they aren't deliver
Speaker 5: in growth. I think this de collective surprise is about
Speaker 5: eight percent at the moment, and normally it's three or
Speaker 5: four percent positive surprise, so that's coming in. I think
Speaker 5: it's quite interesting how some of the big stocks have
Speaker 5: been very mixed. We've seen over the last seven or
Speaker 5: so days, you know, some of the big cap tech
Speaker 5: having very different outcomes of very different performance as a result.
Speaker 5: So there's a lot of volatility on the back of
Speaker 5: that in some of those stocks, you know, ten percent
Speaker 5: moves on the day on earnings announcements. So I'd say
Speaker 5: those are probably so far the key features, lots to
Speaker 5: go for, lots to come.
Speaker 2: So Cameron christ writes a daily newsletter. He also contributes
Speaker 2: to m Live and he had one of the best
Speaker 2: sentences I've heard in a while on his daily article today.
Speaker 2: Chris He said, one of the basic principles of successfully
Speaker 2: navigating financial markets is that you should only date, not
Speaker 2: marry your positions. Thanks the question what positions should you
Speaker 2: date and what should you marry? Right now?
Speaker 8: Well, I like to think not only rather than I.
Speaker 2: Kind of like the dating marriage. But okay, I see
Speaker 2: your point, n versus owning.
Speaker 8: Yeah, it's all the same. What what should you date?
Speaker 5: What? I think you should you should be dating. If
Speaker 5: you're very short term trader, you should be short this
Speaker 5: equity market for for for a bunch of weeks, a
Speaker 5: couple of months. Uh, and you should be thinking about
Speaker 5: marrying at the at the bottom in a in a
Speaker 5: month or two time, because you know, the soft landing
Speaker 5: that I think is going to come in the US,
Speaker 5: coupled with some eventual rate cuts certainly in the out
Speaker 5: of the fair but also of course out of the
Speaker 5: European Central Bank and out of the UK, that's all coming.
Speaker 8: That's all very positive.
Speaker 5: So you know, you know, you want to you want
Speaker 5: to date in the short term and rent in the
Speaker 5: medium term. Gold we like, uh and gold gold you
Speaker 5: could almost marry, you know, I mean girl, I mean
Speaker 5: gold gold is gold is It's a terrific acid class
Speaker 5: at the moment. It's had a great run already this year.
Speaker 5: Of course it's given a bit of that back recently,
Speaker 5: but it's got a lot going for it.
Speaker 8: The Chinese are buying.
Speaker 5: There's some stories, I think on the Bloomberg termal today
Speaker 5: about Chinese buying, central bank buying. That's been a themal year.
Speaker 5: And it's not just the central bank in China, it's
Speaker 5: also the retailer. Is in China is time to buy,
Speaker 5: and there's of course an awful lot of them and
Speaker 5: a lot of liquidity around there. So we like gold,
Speaker 5: and it'll be helped when the FED eventually starts cutting rights.
Speaker 5: So I you know, as I say, could almost marry that.
Speaker 5: I actually think European banks you should own and rent
Speaker 5: and buy and everything.
Speaker 8: And I think I.
Speaker 5: Actually our left of field recommendation moments by Spanish mid caps,
Speaker 5: which is really out there but Spanish. Yeah, I know,
Speaker 5: I know it sounds a bit nuts, but actually has
Speaker 5: a lot to be said for them. It's an economy
Speaker 5: that's been neglected no one's really talked about for ten
Speaker 5: to fifteen years since the euro crisis. Are because the
Speaker 5: pigs crisis as it was known with with d sbing Spain,
Speaker 5: and you know, the economy has really sorted itself out
Speaker 5: over these last fifteen years. Healed a lot of structural imbalances.
Speaker 5: It's well set and it's going to get rate cuts
Speaker 5: when the ECB starts cutting, and it's going to benefit
Speaker 5: from those. And I think we're going to see strong
Speaker 5: growth out of Spain. And of course mid caps is
Speaker 5: a great way to play a domestic economy. So that
Speaker 5: is an own and a marry basically, not a rent
Speaker 5: or whatever the other one was.
Speaker 8: Dates.
Speaker 5: Yeah, So yeah, so that there's there's so much going on,
Speaker 5: there's so many opportunities out there.
Speaker 8: But yeah, you've got to distinguish between trading and investing.
Speaker 7: Which let's go, let's go hyper local.
Speaker 3: How's the economy in Clapham, which is a neighborhood south
Speaker 3: of London.
Speaker 8: Clapham, how's it?
Speaker 5: That's a great question. I do actually live very close
Speaker 5: to Clapham. I'm obviously in Canada at the moment, but Plapham,
Speaker 5: Clapham in South London is buzzing because it's full of
Speaker 5: twenty and thirty year olds basically who who love to
Speaker 5: get out and the sunshine started to come out and
Speaker 5: it's that time of year.
Speaker 8: So but but the British.
Speaker 5: Economy is not good now, which is perhaps more to
Speaker 5: your question. The British economy is flat. It's had no
Speaker 5: growth in two years. It's flat as a parent caake
Speaker 5: and it desperately needs weight cuts and we're going to
Speaker 5: be getting those pretty soon.
Speaker 3: Yes, So is that the expectation of the Bank Bank
Speaker 3: of England is not waiting on the Fed that the
Speaker 3: Bank of England is confident to cut rage sooner?
Speaker 8: Absolutely.
Speaker 5: I think that the Bank of England is just like
Speaker 5: the UCB and you would have seen Christine Lagarde a
Speaker 5: couple of weeks ago say, you know that the UCB
Speaker 5: is not is data dependent, not Fed dependent, trying to
Speaker 5: make that distinguish distinction between the FED and the European
Speaker 5: central banks. So same in the UK, different inflation dynamics,
Speaker 5: different growth dynamics, and therefore and need to get on
Speaker 5: with cuts.
Speaker 2: I wonder what the currencies are going to say about
Speaker 2: that and the very differentials. But okay, let's play it
Speaker 2: out a little bit. How strong does a dollar actually get.
Speaker 2: I mean, it is definitely breaking things.
Speaker 5: It is breaking things, and you're quite right, and it's
Speaker 5: probably got I think it's got one more flurry in
Speaker 5: it in this sort of risk of phase that we're
Speaker 5: thinking about in the near term, and of course the
Speaker 5: dollars are classic recipient of liquidity when.
Speaker 8: It's a risk off.
Speaker 5: But beyond that, I think we're going to get into
Speaker 5: a dollar bear market. You know, we've had a dollar
Speaker 5: bull market now for a long time, sort of ten
Speaker 5: plus years depending on your starting point, but a long
Speaker 5: old dollar bull market, and I think we're due a
Speaker 5: change in that sort of secular status of the currency.
Speaker 5: So yeah, I've given a few more weeks of strength
Speaker 5: in the dollars, we've complete this risk of phase, then
Speaker 5: as we get closer to fedweight cuts, because I mean,
Speaker 5: I think really in this risk of phase that you
Speaker 5: know the market wants to bully the FED for cuts.
Speaker 8: You know, we're still doing QT.
Speaker 5: I mean, this is an extraordinary thing, you know, And
Speaker 5: I think this will be tough for the stock market
Speaker 5: to to with with with QT ongoing. So yeah, so
Speaker 5: I think got one more, one more, one more florry
Speaker 5: in the dollar.
Speaker 3: One more floy and real quick, Chris, I mean, are
Speaker 3: we going to get a rate cut in the US
Speaker 3: here this year?
Speaker 8: I think so? Yeah?
Speaker 5: Okay, I mean I know the data is so mixed,
Speaker 5: isn't it. I mean, e CI not so good today.
Speaker 5: Consumer confidence is bad. It's it's a two speed economy,
Speaker 5: and I think that's why the data is so confusing.
Speaker 5: But I do think the reality is money is much
Speaker 5: tight and it has been. Fiscal stimulus is not as
Speaker 5: good as it was last year, in fact, quite the reverse,
Speaker 5: And so I think inflation will dissipate and you'll get
Speaker 5: a cut and maybe two, but certainly one.
Speaker 2: Hey, Chris really appreciated Chris Watling joining US from Longview Economics.
Speaker 2: Just so I know Paul Chris knows this, but you
Speaker 2: don't know. He is my mom's favorite.
Speaker 1: He is.
Speaker 3: He is nice.
Speaker 7: That's just for he.
Speaker 2: Doesn't know what to say to that. I just feel
Speaker 2: like he used to be on with me in the
Speaker 2: morning show. He used to jam for like an hour
Speaker 2: or two. And okay, she's Carol Steel's favorite out there.
Speaker 7: It's a big deal.
Speaker 2: It's a big deal means And speaking of the FED,
Speaker 2: Bloomberg Radio has full coverage for you starting at one
Speaker 2: thirty eastern tomorrow, very much. All looking forward to.
Speaker 7: That, Tom Lisa and John Farrell. How good is that?
Speaker 6: So good?
Speaker 2: Can't get any better?
Speaker 7: Talking about the FED?
Speaker 3: And then and Michael McKee, we're sending him on the
Speaker 3: sella train this say afternoon. He'll be down there ready
Speaker 3: to go and ask his question or two of the
Speaker 3: FED chairman during the press conference tomorrow afternoon, which starts
Speaker 3: at two thirty pm Wall Street time.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 7: Paramount.
Speaker 3: Paramount is the old CBS television networking stations. It's the Viacom,
Speaker 3: which is MTV and all that kind of good stuff,
Speaker 3: the Powermount movie and TV studio, all that's wrapped up
Speaker 3: into this company renamed Paramount.
Speaker 7: A lot going on there, let's put it.
Speaker 3: I mean they got reported earnings last night mixed, They
Speaker 3: replaced their CEO. That's not good with an office of CEO.
Speaker 3: And oh yeah, they're actually in discussions to be sold
Speaker 3: to one or more parties.
Speaker 7: I'm not sure what's going on. There are a lot
Speaker 7: of moving pieces.
Speaker 3: Luckily we have Getha Rong Anathon joining us. She's a
Speaker 3: media analyst, the media analyst for Bloomberg Intelligence.
Speaker 7: She's based in Princeton, New Jersey.
Speaker 3: So, Githa, let's start with the potential ownership change here.
Speaker 3: There's lots of parties looking at Paramount. I guess the
Speaker 3: sky Dance, which is the media company owned by mister Ellison,
Speaker 3: the son of Larry Ellison.
Speaker 7: Of what is that? Where is he from?
Speaker 3: Well, yeah, Oracle, thank you? So where are we with
Speaker 3: those negotiations, Githa.
Speaker 6: Yeah, good morning, Paul and Alex so we're in the
Speaker 6: take of those negotiations. There there is an exclusive negotiating
Speaker 6: window that Paramount agreed to with sky Dance that one
Speaker 6: actually expires this Friday. So obviously the ouster of Bob
Speaker 6: Bakish as CEO, who was vehemently opposed to the deal,
Speaker 6: seems to suggest to us that they really have something
Speaker 6: lined up and something's kind of going to go through
Speaker 6: pretty quickly.
Speaker 2: What do we make of the actual earnings? I mean,
Speaker 2: I was on air breaking the numbers yesterday, and like,
Speaker 2: we didn't even talk about the numbers. We just talked
Speaker 2: about the CEO replacement and the weird three CEO thing
Speaker 2: they got going on. What did we learn within the numbers?
Speaker 6: So the actual earnings by itself, Alex was not bad
Speaker 6: at all. I mean, there were definitely some encouraging elements.
Speaker 6: We saw advertising hold up really well, but again one
Speaker 6: could argue that core advertising is still challenged. The reason
Speaker 6: that they reported the seventeen percent increase in advertising revenue
Speaker 6: in the first quarter was really all driven by the
Speaker 6: Super Bowl telecast that said, I mean, you know, if
Speaker 6: you kind of looked at their streaming business, we did
Speaker 6: see a pretty good momentum there in terms of subscriber numbers.
Speaker 6: You know, we did see some progress on a profitability,
Speaker 6: which is not not to say that it's actually profitable,
Speaker 6: just that the losses were a little bit better than
Speaker 6: what we were expecting. But overall, I mean, this is
Speaker 6: right now, as Paul kind of pointed out, this is
Speaker 6: peak uncertainty at paramount. Right now. We don't know what's
Speaker 6: going on with ownership. We don't know what's going on
Speaker 6: with leadership, we don't know what's going on with strategic direction.
Speaker 6: So it's all up in the air.
Speaker 3: So, Gita, I guess one of the big big questions
Speaker 3: on any change of ownership is what are they going
Speaker 3: to pay for share of the buyer? And are they
Speaker 3: going to pay the same price for Sherry Redstone's controlling shares,
Speaker 3: the super voting shares. Are they going to pay the
Speaker 3: same for those shares as they will for the plain
Speaker 3: old shareholders shares?
Speaker 7: So how's that work?
Speaker 6: Yeah, they're not, Paul, And that's kind of been the
Speaker 6: whole bone of contention. Right, So, the whole sky Dance
Speaker 6: proposal is kind of this very convoluted offer. It's this
Speaker 6: two step proposal where they basically pay out Sherry her
Speaker 6: interest in Paramount is worth something like about eight hundred,
Speaker 6: eight hundred and fifty million. They're going to pay her
Speaker 6: upwards of about two billion dollars, so she's getting a
Speaker 6: nice pocket of change there, but it's basically diluting everybody else,
Speaker 6: and that's why you have all of this shareholder consternation.
Speaker 6: Of course, Guy Dance is kind of addressing that. Now
Speaker 6: you know, they have sweetened the bid a little bit.
Speaker 6: They've thrown in about a three billion dollar cash infusion
Speaker 6: to pay down debt to buy back stock, but I'm
Speaker 6: not sure if that's going to be enough.
Speaker 2: Do you feel like this is the best and final
Speaker 2: offer from Skydance as we get to that Friday deadline?
Speaker 6: That's what they have said.
Speaker 2: Yes, did we learn anything from the numbers yesterday that
Speaker 2: shows what a buyer should be paying for shares?
Speaker 6: So we do have another concrete offer on the table,
Speaker 6: one that Sherry Redstone rejected. This was the offer from Apollo,
Speaker 6: which basically offered, you know, twelve billion dollars for the
Speaker 6: equity of the company versus what it's currently trading at,
Speaker 6: which is about eight billion, so you know, roughly about
Speaker 6: ninety to twenty dollars a share. So that's kind of
Speaker 6: where you know, the the Apollo deal stand. Of course,
Speaker 6: now there have been rumors that's they're partnering with Sony
Speaker 6: to again take that bid up a little bit. But
Speaker 6: you know, when we kind of did some of the
Speaker 6: parts analysis, you know, we think that this company is
Speaker 6: easily worth you know, upwards of twenty dollars a share.
Speaker 7: Yep, I've seen folks.
Speaker 3: If you want to check out that research analysis, you
Speaker 3: can go to Bigo in the terminal and search for
Speaker 3: Geetha's work. They did a lot of evaluation work on paramount.
Speaker 3: A lot of investors are looking at that work as well.
Speaker 3: So getha Friday is I guess one kind of date
Speaker 3: to keep in mind. But it just seems like with
Speaker 3: this dual class of stock and maybe different prices being
Speaker 3: paid for different classes of stock, this thing's gonna end
Speaker 3: up in court. It just feels like, what are most
Speaker 3: people thinking about this?
Speaker 6: I think it definitely that there is a very very
Speaker 6: high property of litigation. I mean it's not probably, it's
Speaker 6: almost a certainty. At this point. Everybody has said all
Speaker 6: all the big shareholders, including Mario Gabelli, has said that
Speaker 6: they will definitely litigate if Sherry Redstone actually goes through
Speaker 6: with this deal, a deal which does not treat all
Speaker 6: shareholders equally. And this isn't something new, Paul with paramount.
Speaker 6: I mean, we've seen this litigation stuff happen over and
Speaker 6: over again. But it definitely is a huge risk and
Speaker 6: it's going to be interesting to see what Sony and
Speaker 6: Apollo kind of come up with. In the meantime, before I.
Speaker 2: Let you go, Warner Brothers Discovery is down like eight percent.
Speaker 6: Why Why because no NBA. So their NBA rights are
Speaker 6: actually being negotiated right now. They're currently paying about one
Speaker 6: point two billion. Rumor is that NBC, which is owned
Speaker 6: by Comcast, is kind of swooping in ready to pay
Speaker 6: about two and a half billion dollars to the NBA
Speaker 6: and snatching away the rights from from TNT. That's where
Speaker 6: you know, Warner Brothers owns TNT. That's where they show
Speaker 6: the NBA games. And remember NBA, TNT is kind of
Speaker 6: the anchor to the Warner Brothers TV portfolio, and the
Speaker 6: NBA is the anchor to the TN to the TNT network.
Speaker 6: So not having that is really going to hurt them.
Speaker 6: It's hurting them as you can see in the stock price.
Speaker 3: Today, turnover, speak of turnover and CEOs. How about David
Speaker 3: Zaslov the yea of Warner Brothers Discovery here? I mean
Speaker 3: the stocks down thirty four percent this year, down almost
Speaker 3: fifty percent over the last year. Holy can John alone
Speaker 3: cannot be happy with what's going on here? What's the
Speaker 3: thinking about Warner Brothers Discovery here?
Speaker 6: Hard to say, Paul. I mean, the whole story here
Speaker 6: was supposed to be synergies, which I think they've done
Speaker 6: a pretty good job on. But what's really kind of
Speaker 6: been out of their control has been the TV ad market,
Speaker 6: which has really you know, it's it's of course secularly challenged,
Speaker 6: and I think what made it even far, far worse
Speaker 6: was the Hollywood strikes, which just kind of resulted in
Speaker 6: no good content right now, and so they're kind of
Speaker 6: trying to work through all that. But you know, we've
Speaker 6: chatted before about this. The Ibadah number that they kind
Speaker 6: of showed everybody was fourteen billion. This year, they're going
Speaker 6: to go below ten billion. Add to that, you know,
Speaker 6: about forty billion dollars in debt, and it's really just
Speaker 6: a train wreck right now.
Speaker 2: I Mean, I feel like that is well said you know,
Speaker 2: I said hot mess yesterday about Paramount, train wreck about
Speaker 2: Warner Brothers Discovery. It fit of sums it up.
Speaker 3: I think the life of a media analyso and media
Speaker 3: investor these days.
Speaker 2: Yeah, it's so crazy to be. It is a place
Speaker 2: to be. And you know, you make we can make
Speaker 2: hey about Paramount what I think it's seventy one million subscribers,
Speaker 2: but then compare that to Netflix, right, forget it. Githa,
Speaker 2: thanks a lot. We appreciate you. You are the best.
Speaker 2: Keithan wrongana than she joins us. She is head of
Speaker 2: US media coverage for Bloomberg Intelligence. What's interesting too, I think, Paul,
Speaker 2: is that when you get to these companies, like the
Speaker 2: numbers in some ways then matter less. It's more about
Speaker 2: what the strategy is going to wind up being and
Speaker 2: who's going to be able to turn it around. Same
Speaker 2: thing for Warner Brothers Discovery and same thing for Paramount.
Speaker 7: Yeah.
Speaker 3: Absolutely, And it's been a very big challenge for the
Speaker 3: industry overall, you know, navigating that transition from the traditional
Speaker 3: distribution through cable to all.
Speaker 7: This streaming stuff.
Speaker 3: So I wan have to see how that plays out
Speaker 3: for both of these companies.
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Speaker 3: Smack dab in the middle of earnings and right now
Speaker 3: we're getting through the tech earnings and is a big
Speaker 3: week here next couple of days. Today after the close,
Speaker 3: Amazon sets report, and then Thursday, after the close, we'll
Speaker 3: hear from our good friends at Apple walk us through
Speaker 3: what are some of the key issues that we need
Speaker 3: to focus on that the market needs to focus on?
Speaker 7: Is Gene Monster.
Speaker 3: Gen Munster is the managing partner co founder of deep
Speaker 3: Water Asset Manager. He's been covering Silicon Valley for decades.
Speaker 3: He is absolutely a go to voice and we appreciate
Speaker 3: getting a few minutes of his time. Hey, Geene, let's
Speaker 3: start with Amazon. I guess it's all about the cloud,
Speaker 3: isn't it.
Speaker 9: Indeed, Paul, the cloud AWS is expected to continue to accelerate,
Speaker 9: So just taking a couple steps back, AWS growth over
Speaker 9: the past year and a half has been declining from
Speaker 9: high twenty percent and then at bottomed at twelve percent
Speaker 9: in the September quarter, bumped up to thirteen percent year
Speaker 9: of year growth in December, and expectations in print are
Speaker 9: for fifteen percent year ofver year growth in March. I
Speaker 9: mentioned and emphasize the word print there because the whisper
Speaker 9: numbers have been stoked after Amazon, after Azure and Google
Speaker 9: Cloud reported last week, and of course they had upside
Speaker 9: to their cloud numbers. I suspect that the whisper number
Speaker 9: is sixteen percent plus. In other words, if they print
Speaker 9: to sixteen percent growth up from thirteen in December, that
Speaker 9: may be viewed as a slight disappointment. A couple other
Speaker 9: just quick, really important parts related to the whole AWS conation.
Speaker 9: As a reminder, this is seventeen percent of Amazon's revenue
Speaker 9: and about sixty seven percent this is for calendar twenty
Speaker 9: three of their earnings. So it punches above its weight
Speaker 9: when it comes to profitability, and that's why investors are
Speaker 9: so hyper focused. And when you put all this together, Paul,
Speaker 9: what you have is a picture where AWS with leading
Speaker 9: market share continues to lose market share. I mentioned that
Speaker 9: sixteen percent whisper number if they deliver on that they're
Speaker 9: growing at half the rate that Azure and Google Cloud
Speaker 9: are growing. So this dynamic is it will post an
Speaker 9: improvement undoubtedly in AWS growth, but still the broader picture
Speaker 9: around the future of AWS, not the future, but the
Speaker 9: future market share is still in question as Google and
Speaker 9: Microsoft are really benefiting from how much they've been invested
Speaker 9: in AI and that has been powering their cloud business
Speaker 9: faster than Amazon.
Speaker 7: Folks, I've seen this time and time again. Gene Mounster speaks.
Speaker 7: People take notes.
Speaker 3: Alex Steel has been writing furiously over here listening to Gene.
Speaker 2: It's so true. I'm like, oh, I got to break
Speaker 2: Amazon after the bell, So let me really pay attention here.
Speaker 2: So if you go back to the AWS growth, why
Speaker 2: why did we see that decline in growth and how
Speaker 2: do we expect them at some point to get back
Speaker 2: up to twenty and then grow from there or is
Speaker 2: it now going to be in some kind of range.
Speaker 9: So during that period of call it high twenties to
Speaker 9: that twelve percent, Azure showed some also deceleration from mid
Speaker 9: thirties down to high twenties, Google Cloud from around thirty
Speaker 9: down to low twenties, and so it was just a
Speaker 9: kind of a broader corporate pullback in cloud spending I
Speaker 9: think had part of it, but I think the other
Speaker 9: part was this piece around what's going on on the
Speaker 9: model front, and specifically of course with Azure they've got
Speaker 9: the integration with open AI models, with Google their own
Speaker 9: deep Mind and what they've done with Gemini and building
Speaker 9: those models into their cloud offerings. And when it comes
Speaker 9: to Amazon, they do have an offering. It is related
Speaker 9: to anthropic. They also host a lot of the kind
Speaker 9: of open source models like Lama, But I think that
Speaker 9: that has played into it. So Alex, to put it
Speaker 9: in a perspective, I think that half of the decline
Speaker 9: has been that we saw earlier was because of the
Speaker 9: broader market corporate spending, and I think half is because
Speaker 9: I think that there are AI strategy well, it is
Speaker 9: forward thinking, still lacks some of the punch that Azure
Speaker 9: and Google Cloud is integrating.
Speaker 3: So ging this company has certainly evolved over the years
Speaker 3: that at least you and I have covered it. How
Speaker 3: do investors view this company right now? Like how do
Speaker 3: they think about the retail business? And they just kind
Speaker 3: of put us a relatively low multiple on it and
Speaker 3: kind of really just focus.
Speaker 8: On the cloud.
Speaker 9: Tonight, it is all about the cloud. I think that
Speaker 9: is that the central takeaway. I think that beyond this,
Speaker 9: we are seeing an improvement in some of the metrics
Speaker 9: around the retail business. And this, of course is the
Speaker 9: vast majority of their sales and the profitability is starting
Speaker 9: to move in the right direction, and part of that
Speaker 9: is because of how they've improved the logistics. Some of
Speaker 9: those have been more recently related to AI in terms
Speaker 9: of the planning. Some of it's just been good old
Speaker 9: fashioned algorithms that make their delivery more efficient. But the
Speaker 9: retail opportunity I see as kind of a changing of
Speaker 9: the guard and the Amazon story. Over the next couple
Speaker 9: of years, I think investors will progressively focus more on
Speaker 9: that business. I mentioned today almost seventy percent of Amazon's
Speaker 9: earnings come from AWS, and I think that number is
Speaker 9: going to continue to decline going forward because I think
Speaker 9: the retail business is going to improve, and the substance
Speaker 9: of the improvement is better efficiency at logistics. Of course,
Speaker 9: is a real this is real AI, it's not hype,
Speaker 9: it's real. And second is related to robotics. It's something
Speaker 9: that they've done this Kiva acquisition a long time ago.
Speaker 9: That's the start to it. But they have a profound
Speaker 9: opportunity in terms of integrating robotics over the next decade
Speaker 9: into logistics, which would have a positive impact on earning.
Speaker 9: So I do think that we will see the baton
Speaker 9: switch over the next couple of years in terms of
Speaker 9: the pressure point. We will be talking about AWS, but
Speaker 9: it won't be the center focus all right, So I.
Speaker 2: Feel like I'm relatively prepped now to break those earnings.
Speaker 2: So can you prep us for Apple on Thursday? For sure?
Speaker 9: I think Apple is going to be much more exciting
Speaker 9: in terms of kind of what the investor reaction is
Speaker 9: going to be because the setup we have is pretty
Speaker 9: well known that the businesses has been slow. The expectations.
Speaker 9: Their guidance was for revenue to be down five percent
Speaker 9: year every year, and that's generally where analysts are at
Speaker 9: the iPhone segment. Analysts are expecting it to be down
Speaker 9: ten percent, and if you take a step back over
Speaker 9: the last few years, it's continued to be flat to
Speaker 9: downsh the iPhone and regular China is a weakness. I
Speaker 9: just want to call out that's one of the key
Speaker 9: metrics that investors are going to be focusing on. In September.
Speaker 9: The China business was down three percent, in December down
Speaker 9: ten percent, and I believe that it's going to be
Speaker 9: down caught around thirteen to fifteen percent in the March quarter.
Speaker 9: So continued softness in China that's about twenty percent of
Speaker 9: Apple's overall redness. That's going to be one of the themes.
Speaker 9: The second theme, of course, is going to be related
Speaker 9: to when the bottom of the cycle happens, and I
Speaker 9: think they will give softish guidance for the June quarter,
Speaker 9: but the stock may actually react positive to that because
Speaker 9: once they've got that negative guidance in then investors can
Speaker 9: start to look to the back half of the year. Of course,
Speaker 9: the new iPhone cycle comes, that will probably have some
Speaker 9: AI branding around it, and that we should start to
Speaker 9: see some reacceleration. So the irony of this print is
Speaker 9: the weak March quarter, punky guidance for June might actually
Speaker 9: kind of mark the bottom. One last piece, of course,
Speaker 9: I buried the lead related to AI. This we're going
Speaker 9: to hear a lot more in the beginning June at
Speaker 9: their developer conference, and I think that there is a
Speaker 9: piece around this on Capex, of course, that was a
Speaker 9: hot topic last week. Apple has yet to talk about CAPEX,
Speaker 9: any big uptake in Capex. They stand alone amongst big tech,
Speaker 9: and I think this is going to be a quarter
Speaker 9: where investors get some medicine when it comes to Apple
Speaker 9: and how they are going to be spending in CAPEX.
Speaker 9: If in fact, Apple wants to participate in AI, which
Speaker 9: sounds like they want to, it's going to require a
Speaker 9: significant uptake in Capex, and that potentially could be at
Speaker 9: the cost of margins, a couple percent in margins. So
Speaker 9: that's the piece I'm bracing for is what their commentary
Speaker 9: on CAPEX is related to jenit of ai.
Speaker 3: Are you surprised, Gene that we haven't seen a more
Speaker 3: aggressive move on AI from Apple?
Speaker 9: Absolutely, I mean it's I mean there's silence today, it's
Speaker 9: more recently it's they've said more, but has been definiting
Speaker 9: at least in twenty twenty three. And I think that
Speaker 9: they've got a golden opportunity here. They have a brand
Speaker 9: around privacy. The current stage of AI that we're operating
Speaker 9: in is jenn of ai, where we prompt a model,
Speaker 9: it gets back, we can have a conversation. The next
Speaker 9: phase and this is it won't be products today with Apple,
Speaker 9: but I think ultimately where they're going to go is
Speaker 9: what's referred to as a gentic or agent or personalized day.
Speaker 9: You'll hear those terms interchanged, but this is the idea
Speaker 9: of AI actually completing a task for you instead of
Speaker 9: just responding in part to a conversation. And again, because
Speaker 9: I think what Apple does around privacy, I think they're
Speaker 9: going to have an invitation for consumers really to build
Speaker 9: some unique products around agentic AI down the road.
Speaker 7: All right, Gene, thanks so much for your time. Really appreciated.
Speaker 3: Gene, Monster, managing partner, co founder of Deepwater Asset Management.
Speaker 3: Give us a preview here for Amazon tonight after close
Speaker 3: and Apple reporting the results Thursday.
Speaker 7: After the close.
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Speaker 2: all the top news for you with our amazing analysts worldwide.
Speaker 2: They cover about two thousand companies and one hundred and
Speaker 2: thirty industries. So let's get to one of them right now.
Speaker 2: Look at mcdonald' stock doing a whole lot of nothing.
Speaker 2: It was down earlier today it has slight miss on
Speaker 2: earnings per share and their comp sales, particularly international missed estimates.
Speaker 2: But the big news everyone seems so excited about is
Speaker 2: his biggest burger thing. We're going to test it to
Speaker 2: try and spark some traffic growth right here, let's bring it,
Speaker 2: I mean, okay, just by two of them. Anyway, let's
Speaker 2: get more details on this with Michael Halen. He is
Speaker 2: a Bloomberg Intelligence senior restaurant and food service analyst, and
Speaker 2: he joins us. Now, okay, let's just kiss off the
Speaker 2: earnings before we get to this big burger thing. What
Speaker 2: was your biggest takeaway?
Speaker 10: I'd say the biggest takeaway was, you know the fact
Speaker 10: that April's flat so far in the United States, that's
Speaker 10: trailing the industry level. You know the industry data that
Speaker 10: we get so and also you know, restaurant brands reported
Speaker 10: this morning, and Burger King showed an acceleration in the
Speaker 10: US and their US numbers.
Speaker 11: So I would say that was the biggest surprise.
Speaker 1: You know.
Speaker 10: McDonald's still on a five year trend, is vastly outperforming
Speaker 10: Burger King almost the other quick service names, but there seems.
Speaker 11: To be some slowing.
Speaker 10: If I was to guess, some of that bad press
Speaker 10: around the eighteen dollars big mac meal in some markets,
Speaker 10: you know, could be hurting because we are seeing US
Speaker 10: consumers really push back against price increases right now, and
Speaker 10: they're they're being more picky about where they spend their money.
Speaker 7: Mike, I see. Just in the Bloomberg reporting here.
Speaker 3: Executives have also said that low income consumers in the US,
Speaker 3: which is an important part of the company's customer base,
Speaker 3: are pulling back. Is that Does that mean we're going
Speaker 3: to see more promotions which might be put freshl on
Speaker 3: the margins.
Speaker 11: Yeah, we see. Yeah.
Speaker 10: McDonald's has come out and said they're going to focus
Speaker 10: more on their value menu. They're going to continue to
Speaker 10: offer promotions, a lot of them.
Speaker 11: Through the apps. So it looks like a full on
Speaker 11: value war is here.
Speaker 10: I mean, Burger King said they're going to be a
Speaker 10: little bit more careful than they've been in the past
Speaker 10: with their price increases because you know, they've had some
Speaker 10: increases over.
Speaker 11: The last five years or so.
Speaker 10: I'm sorry, so Burger things to be a little bit
Speaker 10: more careful with their discounting because in the last five
Speaker 10: years or so they've gotten too aggressive and hurt franchising margins.
Speaker 11: So they kind of hoopooed that a little bit.
Speaker 10: But we think a full blown value war is here
Speaker 10: and it's on the table for twenty twenty four.
Speaker 2: So does the value war take into account a Bigger Burger?
Speaker 2: Is that the deal?
Speaker 11: Well? Value?
Speaker 10: You know, it's measured in a couple of ways. It's
Speaker 10: not just the price, but it's what you get for
Speaker 10: the price, right, And so you know, I'm sure McDonald's
Speaker 10: has done their legwork and they have some customer feedback
Speaker 10: that says that they want some Bigger Burgers on their menu,
Speaker 10: and so that's going to be interesting. They said they're
Speaker 10: going to start testing it in the second half of
Speaker 10: this year, so it may not hit the United States
Speaker 10: for quite some time.
Speaker 11: But yeah, there's a couple of ways to measure value.
Speaker 3: Hey, Mike, what are the McDonald's of the world, and
Speaker 3: you know, the other restaurant companies you talked to, what
Speaker 3: are they saying about these GLP one drugs? Are they
Speaker 3: really going to impact their business?
Speaker 10: You know, I don't think there's too much worry about
Speaker 10: that anymore. I know that was a big thing last
Speaker 10: summer and into the fall, and it really impacted the
Speaker 10: prices of some of these quick service restaurant chain stocks,
Speaker 10: especially McDonald's. But you know, I've seen a lot of
Speaker 10: different reports out there, and you know, the amount of
Speaker 10: people on these drugs ranges from you know, seven to
Speaker 10: twelve or maybe fifteen percent bit best case if once
Speaker 10: they get to like maybe a pill form instead of
Speaker 10: a shot, you know, and we don't know about long
Speaker 10: term side effects from some of these drugs, so I
Speaker 10: think initially there was some concern, but over time, McDonald's
Speaker 10: and these other chains, they're going to figure out how
Speaker 10: to make a seven to twelve percent smaller cheeseburger. Right
Speaker 10: They're getting smaller anyway, because beef prices are going they're
Speaker 10: going up, and you know, there's a historical situation in
Speaker 10: the cattle market right now, and so beef prices are
Speaker 10: going to continue to stay elevated in here for a
Speaker 10: couple of years, and so chains are already starting to
Speaker 10: try to, you know, solve for some of these problems,
Speaker 10: you know, ahead of broader adoption.
Speaker 2: Yeah, I mean you have to think that translation is
Speaker 2: going to hit in many different ways. But before we
Speaker 2: let you go, we have about a minute left. So
Speaker 2: who wins the value war right now? Based on what
Speaker 2: you've seen.
Speaker 10: Well, it's interesting because you know McDonald's historically has and
Speaker 10: so that's what's most interesting about them underperforming in April.
Speaker 10: Burger King is is an interesting one because you know,
Speaker 10: they have easier comps. They struggled coming out of the
Speaker 10: pandemic for a few years, right, and so they have
Speaker 10: easier comparisons to lap lower average unit volumes at the
Speaker 10: store level, and so there's room for some upside there.
Speaker 10: Chipotle absolutely continues to knock the cover off the ball,
Speaker 10: and you know McDonald's has scale, right, and so when
Speaker 10: they really start pushing on value, everyone else is going
Speaker 10: to feel it. So so you know, I'm confident that
Speaker 10: that McDonald's can kind of can kind of turn the
Speaker 10: tide here a little bit because they can just offer
Speaker 10: burgers and other items at prices their computers just can't match.
Speaker 7: All right, Michael, great stuff has always Mike Calin.
Speaker 3: He's a senior restaurant and food service analyst Bloomberg Intelligence.
Speaker 3: McDonald's putting out some numbers a little bit disappointing. The
Speaker 3: stock kind of flat here today, maybe you know, talking
Speaker 3: about is kind of where the demand is, where some
Speaker 3: of their customers are facing some pressure. So how promotional
Speaker 3: do you need to be and how innovative do you
Speaker 3: be in products?
Speaker 7: You know you.
Speaker 2: Just already said, right, I mean, he likes you.
Speaker 3: I get the same thing today that I got when
Speaker 3: I was like fifteen, which is a number two with
Speaker 3: a coke.
Speaker 7: It's like a quarter pound or something with cheese.
Speaker 2: Okay, And can you offer the price for that, Like
Speaker 2: I don't know.
Speaker 3: I don't even know now, but I'm sure the price
Speaker 3: is going to do it dramatically, so but we have
Speaker 3: to see.
Speaker 7: But it still works. But I think do it once
Speaker 7: or twice a year, so who cares.
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