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Speaker 2: What an honor to have with this Noural Rubini, professor.
Speaker 2: He's not emeritus. When you're you know you travel like
Speaker 2: he does. He's such a young kid.
Speaker 3: I don't know how emeritusy he is at New York University.
Speaker 3: Of course, Chairman Rubini at Global Economics. One of the
Speaker 3: great moments for me was with Professor Rubini and Davos
Speaker 3: a million years ago, where he's simply outlining two thousand
Speaker 3: and seven, eight and nine to come.
Speaker 2: No, I don't care.
Speaker 3: The reason you're here is I'm looking May thirty first, Munich,
Speaker 3: I mean a hitter like you got to be looking
Speaker 3: the private skybox on stub Hub inter Milan versus PSG
Speaker 3: for twenty nine thousand dollars. You got two seats in
Speaker 3: the private skybox.
Speaker 2: Are you gonna roll that?
Speaker 4: I'll watch it on TV.
Speaker 2: It's very exciting. He's a diehard from his youth in
Speaker 2: the old world inter Milan. I want to go back.
Speaker 3: This is really serious, folks, and it's off the radar
Speaker 3: right now. It shouldn't be bread sets or who you
Speaker 3: started has been on fire.
Speaker 2: You and Brad Setser wrote a book eleven years ago. Whatever.
Speaker 3: Fred Berxton wrote the wonderful introduction on EM. How does
Speaker 3: EM affect him? When I see Taiwan dollar go out
Speaker 3: five standard deviations?
Speaker 2: Whatever? How is emerging a market off the radar, affected.
Speaker 3: By China, US, US, Canada, US EU.
Speaker 2: What happens to your EM? Well?
Speaker 4: The good news for YM is that this time around
Speaker 4: the trade shalk have not led to a strengthening of
Speaker 4: the dollar, but rather a weakening of the dollar. With
Speaker 4: the dollar weekends, EM currencies tend to appreciate. It's also
Speaker 4: true that some of these Asian nations are sitting on
Speaker 4: trillions of dollars of US treasuries. Their fornasts are very high,
Speaker 4: and there's been some diversification because we've dented, how to say,
Speaker 4: the dollar as a major global reserve currency given our
Speaker 4: unstable policies, so people move out of US treasure and
Speaker 4: seldom and go back to their own local currency. There
Speaker 4: has been some appreciation and that has taken some momentum.
Speaker 4: There's also hope in Asia. I think that there'll be
Speaker 4: trade deals and the announce reciprocal tricks are going to
Speaker 4: be much smaller than an on April second. That's also
Speaker 4: strengthening some of these currencies, because some of them were
Speaker 4: weakening because of the risk of a trade war and
Speaker 4: so on. To think is a variety of factors leading
Speaker 4: to that happening.
Speaker 5: How concerned are you, if at all, about the US
Speaker 5: economy in the face of the uncertainty of all this
Speaker 5: trade discussion back and forth and back and forth. It
Speaker 5: seems like consumers might be pulling back. It seems like
Speaker 5: corporate executives are pulling back on guidance. I'm not sure
Speaker 5: how it's gonn to impact their businesses. Do you think
Speaker 5: that's going to affect yours economy?
Speaker 4: Well, there are some headwinds coming from trade and it's uncertainty,
Speaker 4: and there are some tailwinds coming from strong cappacks, especially
Speaker 4: aid riven and still good income growth, creation and so on.
Speaker 4: I would say that over the medium time. Actually, I'm
Speaker 4: quite bullish about US economy. I think that because of technology,
Speaker 4: US potential growth by the end of the deck it
Speaker 4: could be four percent, an increase of two underd business points,
Speaker 4: and even poor trade and migration policy can reduce growth
Speaker 4: only by fifty business points. So the ratio within the
Speaker 4: good stuff to underd business points to the bead fifties
Speaker 4: four to one. So I think we'll be onder verge
Speaker 4: of a secular boom over the next few years. So
Speaker 4: I'm quite optimistic. But then in the short rum we'll
Speaker 4: have probably a nearest by your end, there is an
Speaker 4: increasing pop.
Speaker 3: You mentioned a medium term. You gotta be from Europe
Speaker 3: to mention the medium term. We don't do that in America.
Speaker 3: My basic conundrum, Neurabini yep, is we've got the short
Speaker 3: term reality within an American political system which you live
Speaker 3: with President Clinton, out to the long term view of
Speaker 3: whatever Trump economics is and maybe a more optimistic future.
Speaker 3: How do we get is they would say up in
Speaker 3: Maine or you don't know this up in Maine where
Speaker 3: Lisa collects black flies.
Speaker 2: They get from here to there? How do we get
Speaker 2: from short term to long term success?
Speaker 4: The way we get it is this is here there'll
Speaker 4: be a massive slowdown of growth. As you point out,
Speaker 4: consumer and business confidence is down, inflation is going to
Speaker 4: go corpus y four percent by your end, and that's
Speaker 4: going to be a significant eaton real disposal income. So
Speaker 4: by Q four we're going to be in a near recession.
Speaker 4: The good news is that the FAT is now credibly
Speaker 4: committed to fight inflation. They're not cutting rates. Therefore infliction
Speaker 4: expeditions are anchored. Therefore, once infliction is higher but growth
Speaker 4: is lower and you have a beginning of increase in
Speaker 4: unemployment rate, the fact is going to be able to
Speaker 4: cut rates.
Speaker 2: The thing.
Speaker 4: It's going to be a short and shallow recession, maybe
Speaker 4: a couple of quarters a Q one, Q four and
Speaker 4: Q one of next year, and then we'll have a
Speaker 4: strong recovery because the tailweins coming from technology are massive.
Speaker 4: I guess is leading in all the technology of the future.
Speaker 3: Claims are out there on plan unit labor costs and productivity,
Speaker 3: we're elevated.
Speaker 2: That's what we'll talk about here. Unit labor costs jump.
Speaker 3: From a revised two percent up to five point seven percent.
Speaker 2: I got a terror regime of three percent.
Speaker 3: You arguably were one of the people that set up
Speaker 3: coming off the Atlantic Charter, the global trade, the globalization
Speaker 3: mantra of a lower terror regime. Even if we pop
Speaker 3: from one hundred and forty five percent drama in China
Speaker 3: and we come back down to like a blended thirteen percent,
Speaker 3: I don't get it. Is in the gap from a
Speaker 3: three percent blended terraff up to ten percent or thirteen
Speaker 3: percent blended heraf isn't that insurmountable.
Speaker 4: Probably the blend is going to be more than thirteen
Speaker 4: because my baseline is ten to fifteen percent for all
Speaker 4: the world and sixty percent for China, So the blend
Speaker 4: that could be in the high teens. It's a bad world.
Speaker 4: But let's put its way. I suppose that there is
Speaker 4: an average tariff reciprocal on Europe of ten percent as
Speaker 4: opposed to twenty.
Speaker 6: Big deal.
Speaker 4: The Europe can go up and down ten percent in
Speaker 4: a matter of months.
Speaker 6: So is it good?
Speaker 3: No?
Speaker 2: Is it terrible?
Speaker 4: It's going to something? Is that to destroy the world?
Speaker 4: Probably not, because currency can move more than ten percent
Speaker 4: in a matter of months. So, of course is a
Speaker 4: world that is fragmented. The world is the globalized. But
Speaker 4: if the average tarf were being say ten to fifteen
Speaker 4: percent rather than only three, the impact on growth is
Speaker 4: going to be how to say moderate? I would say
Speaker 4: this is will be moderate. Of course, with Chinese a
Speaker 4: different story. With China at sixty percent, we're going to
Speaker 4: de couple from China, and the shock on their growth
Speaker 4: and the shock around inflation is going to be significant.
Speaker 4: So I'm more worried about the fact we're not going
Speaker 4: to de escalate with China. You said fair extent with.
Speaker 3: All of your political economics neural regni. Do you believe
Speaker 3: common sense will come to the rescue in Washington?
Speaker 4: Well more than common sense. In December, I said there'll
Speaker 4: be four guard trades against stupid policy like tariffs, market discipline,
Speaker 4: good economic advisors, fed discipline, and thin majority in Congress.
Speaker 4: Guess what when the stock market crashed, bonding were higher,
Speaker 4: credit spreads are higher, they always hire. They blinked and
Speaker 4: they started to de escalate. Two In that game of
Speaker 4: Chicken between Trump and Powell, Trump blinked because he knew
Speaker 4: if it was a grund fire power, there'll be a
Speaker 4: shock to the market. So eblink the therefore fit fed
Speaker 4: independence was a binding constraint. Eventually, the Peter Navarro of
Speaker 4: the world were sidelines and the scot Passings of the world.
Speaker 4: At the upper end, good economic advisors and the fact
Speaker 4: the team I already mean it was boxing by Ford.
Speaker 4: That's exactly what they said.
Speaker 2: The running out of times I got.
Speaker 3: I got goosebumps because I got Nora Obini and Richard
Speaker 3: Porters back to back. I mean talk, it's an academic
Speaker 3: wonk fest here right now. Have you ever done a
Speaker 3: panel with Peter Navarro?
Speaker 4: I've not done a panel. I my team doing the
Speaker 4: Trump one administration in the White House a couple of times.
Speaker 4: So it's a strange economics from.
Speaker 3: Did you teach Navarro economics at New York University?
Speaker 2: No?
Speaker 4: No, he was at PhD at Harvard, So but we
Speaker 4: didn't overlap. Yeah, surprising a PhD economics from Harvard. But
Speaker 4: Steve Mian is also PhD in economics from Harvard, so
Speaker 4: do I How does I.
Speaker 2: Got twenty seconds? How does inter Milan be PSG? What?
Speaker 2: How does inter Milan be PSG? I don't know you're
Speaker 2: gonna be there. You spend twenty eight thousand dollars, Tobi,
Speaker 2: thank you, thank for. Lisa wants to know when's a
Speaker 2: new book out.
Speaker 4: I don't have any one. Mega Threats come out two
Speaker 4: years ago, still going and all the themes of the
Speaker 4: book Mega threats are still very important today. All the
Speaker 4: threats I talked about are materializing.
Speaker 3: Okay, So Maniel, thank you so much, greatly appreciate it.
Speaker 3: Noro Rabini, I can't say enough his commitment to what
Speaker 3: we do here on economics, finance, investment, and his international economics.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto
Speaker 1: with the Bloomberg Business app. You can also listen live
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Speaker 1: say Alexa Play Bloomberg eleven thirty.
Speaker 3: Ken Shinoda joins us right now with a pedigree at
Speaker 3: TCW over to Double Tree, Double Line Capital.
Speaker 2: Thrilled to have you with us.
Speaker 3: Kenny, You've got a different gloss from southern California than
Speaker 3: the rest of us when you look at Port of
Speaker 3: Los Angeles Long Beach dynamics within the finance and investment
Speaker 3: community of LA.
Speaker 2: What's the tone on this trade where it's different than
Speaker 2: New York.
Speaker 7: Yeah, Well, you know you're seeing a slowdown in port activity.
Speaker 7: We saw a big pull forward of imports ahead of
Speaker 7: the tariffs, which is one of the things that led
Speaker 7: to the decline in GDP in the first quarter, and
Speaker 7: we're waiting, watching to see how the hard data now
Speaker 7: comes in. You know, sentiment has rolled over pretty dramatically
Speaker 7: as you look at consumer and business sentiment, and I
Speaker 7: think the market right now is just waiting and watching
Speaker 7: for what the future data holds.
Speaker 5: You know, I'm looking at the GO function the Bloomberg
Speaker 5: Index browser for fixed income US Mortgage backed securities have been.
Speaker 8: The place to be this year so far to date.
Speaker 8: How do you guys think about that part of the business.
Speaker 7: Yeah, it's been a good run. You know, mortgages struggled
Speaker 7: dramatically during the rate rise and the coming out of
Speaker 7: QE into QT. Sometime in the middle of twenty twenty three,
Speaker 7: at the peak of rate volatility, the MBS index was
Speaker 7: about two hundred basis points behind the corporate bond index
Speaker 7: annualized for five years.
Speaker 6: Wow.
Speaker 7: I mean that's hard to do in fixed income. Nobody
Speaker 7: wants to talk to Yeah, but you know, from these
Speaker 7: valuations where you know, we're over ninetieth percentile on the
Speaker 7: MBS spread, and we think that's an interesting place to be,
Speaker 7: especially when you when you're worried about kind of more
Speaker 7: risk off potentially MBS tends to outperform corporate credit.
Speaker 8: So where do you guys see value today?
Speaker 5: I think what our market probably is characterized most is
Speaker 5: just uncertainty out there in the marketplace, whether it's Corporate
Speaker 5: America pulling back some of their earnings guidance, what it's
Speaker 5: the volatility and the bond market's the equity market uncertainly
Speaker 5: seems to be the story of the day. How does
Speaker 5: that impact kind of fixed income and agency?
Speaker 7: Yeah, well, you know, fixed income finally has kind of
Speaker 7: been a stable place with the Fed, you know, not
Speaker 7: not cutting but done hiking. It's kind of been a
Speaker 7: place of stability in portfolio. So I think people are
Speaker 7: kind of understanding the value of it. Everyone's been hiding
Speaker 7: out in T bills, So I think it's maybe time
Speaker 7: to move out, okay of that tea bill trade. And
Speaker 7: you don't have to go totally out the curve out
Speaker 7: to the tenure, but kind of the belly of the curve,
Speaker 7: the two to five year portion of the curve. Find
Speaker 7: a lot of opportunities there. But as we think about
Speaker 7: the credit landscape, you know, tariff and certain he kind
Speaker 7: of hits the corporate market a little bit more companies.
Speaker 7: If you go away from companies more to assets that
Speaker 7: are backed by consumer credit, things like mortgage backed securities,
Speaker 7: even credit cards, auto loans. Parts of the securitized market
Speaker 7: like commercial mortgage backed securities, you can find sectors that
Speaker 7: aren't as exposed to tariffs. And one could argue that
Speaker 7: increased labor costs, increased material costs will inhibit the supply
Speaker 7: of new homes and that'll actually be positive for home prices.
Speaker 3: Kischanoda with his thrill that it could be with Double
Speaker 3: Line Capital, and of course you know it associated with
Speaker 3: the wonderful, handsome Jeffrey Gundlock. Good morning ninety two nine
Speaker 3: FM up in handover New Hampshire, the land of Dartmouth
Speaker 3: where mister Gundlock matriculated years ago. Give me the line
Speaker 3: from Double Line, and I know Jefferys really opinionated on this.
Speaker 3: On private equity in private credit, I'm going to state
Speaker 3: that's off your remit, this is not the.
Speaker 2: Way Double Line rolls.
Speaker 3: But where are we ending up with private equity in
Speaker 3: private credit?
Speaker 7: Well, you know, private equity is struggling to get cash
Speaker 7: back to investors because the M and A markets kind
Speaker 7: of slowed down. The IPO markets slowed down, and so
Speaker 7: you're seeing a lot of a desire to sell in
Speaker 7: the secondary market. So there's there's going to be big
Speaker 7: growth secondaries.
Speaker 2: What's a percent of haircut that you guys observe.
Speaker 7: Oh, I mean, I think you could easily get ten
Speaker 7: twenty percent discounts to the to the NAV on those sales.
Speaker 7: And then the private credit markets. I think one of
Speaker 7: the reasons we didn't go into recession in twenty twenty
Speaker 7: three was that, you know, the old school way of
Speaker 7: of these cycles is the FED hikes rates, the couple
Speaker 7: of markets kind of shut down, companies can't access the
Speaker 7: credit markets, start people off, you go into recession. Well,
Speaker 7: guess what that happened. FED hiked raakes, the high heeled market,
Speaker 7: bank loan market was effectively shut down for a little bit,
Speaker 7: but private credit came to the rescue. I think the
Speaker 7: challenge is going to be for investors is that we
Speaker 7: haven't really seen the credit cycle, and at some point
Speaker 7: in time there will be losses and we'll see how
Speaker 7: I mean, I'm just.
Speaker 5: Thinking about the mortgage related opportunities in your business, and
Speaker 5: we haven't really seen the I don't know, I haven't
Speaker 5: seen like major blow ups in the credit side of
Speaker 5: the mortgage business.
Speaker 8: I mean, banks haven't been taking huge write downs.
Speaker 5: I haven't seen small banks blow out their numbers terribly
Speaker 5: because of more mortgage loans.
Speaker 8: Where's the pain?
Speaker 7: You know, the banks healed themselves after the Global financial crisis.
Speaker 8: They took less risks.
Speaker 7: The regulators have cramped down on them, so you know,
Speaker 7: there's been some pain some banks have exposure to, you know,
Speaker 7: commercial real estate loans. But I think we did a
Speaker 7: good job in the US kind of making sure that
Speaker 7: they don't take too many risks.
Speaker 3: What do you think of Buffett's cash gazillions?
Speaker 2: Does Double Line? Do you have a sideline.
Speaker 3: Bet with a gazillion dollars of cash you'd like to
Speaker 3: tell us about?
Speaker 7: Yeah, you know, he's he's probably happy. Cash has been
Speaker 7: a good place to be, and you know, I think
Speaker 7: that there's a lot of uncertainty out there. It's going
Speaker 7: to shake the markets up as that hard data comes in,
Speaker 7: and he's going to have some good buying opportunities.
Speaker 2: Very good, really really wonderful to visit with. You don't
Speaker 2: be a stranger. Thrilled that he's with us today with
Speaker 2: Double Line.
Speaker 3: Just as simple is that they've had a huge impact,
Speaker 3: and particularly you know, following the Gunlock Shnoda view has
Speaker 3: been something a lot of people have done.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on
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Speaker 3: Professor Porters of the London Business School with us today
Speaker 3: in studio. So the President speaking at ten o'clock, the
Speaker 3: Starmer speaking a bit later. I believe on a comprehensive
Speaker 3: trade agreement and all, and of course was sterling moving
Speaker 3: in the Bank of England. It's for our conversation, but
Speaker 3: we must start. Professor Portis with a gentleman who was
Speaker 3: so kind to me. I can't say enough about what
Speaker 3: Joseph Knight did for me, along with many other people.
Speaker 2: And all of this was wrapped.
Speaker 3: Around his invention of international relations and soft power.
Speaker 2: What is the legacy of the giant of Harvard.
Speaker 6: I'm afraid it looks rather shaky now. Sadly, Joe was
Speaker 6: a wonderful person and a terrific intellect, and the soft
Speaker 6: power concept really made headway during the day when soft
Speaker 6: power could exercise power. Now it seems that we've shifted
Speaker 6: away from that, and the environment, international environment is not
Speaker 6: conducive to the use of soft power.
Speaker 3: I see a substitution here that's off the mark. I
Speaker 3: see the chaos of Liz Trust. I see what we
Speaker 3: see out of sixteen hundred Pennsylvania Avenue. And the fallback
Speaker 3: is it's a Kissinger real politic. I don't buy it
Speaker 3: for a minute. I don't see an underlying theory towards
Speaker 3: Robert D. Kaplan and Henry Kissinger. Am I right?
Speaker 6: I think that is right. There's no underlying theory. But
Speaker 6: we are in we are in chaos mode, honestly internationally
Speaker 6: and to some extent domestically in this in this country,
Speaker 6: in the United States, and a bit in the UK,
Speaker 6: and some in Europe as well. So it's it's it's
Speaker 6: not good. The multilateral system is coming apart, and someone
Speaker 6: like Joe and I, for example, was a great proponent
Speaker 6: and advocate of multilateral stability, and it's it's going Sir.
Speaker 5: At the London Business School, when you talk about tariffs,
Speaker 5: when you teach your students about tariffs, how do you
Speaker 5: what context do you put tariffs.
Speaker 6: In Tariffs are a legitimate trade tool in certain circumstances,
Speaker 6: but the kind of wide ranging, blunt tariffs that that
Speaker 6: the current administration is imposing seemed to me to be
Speaker 6: very misguided. They will be inflationary, they will be contractionary.
Speaker 6: They the funny thing is that they've been complaining. Stephen Mirron,
Speaker 6: the chair of the Council of Economic Advisors, complained that
Speaker 6: the dollar has been too strong. Well, they've been very
Speaker 6: successful in bringing the dollar down, haven't they, right, why
Speaker 6: by causing some degree of chaos. So that's you know,
Speaker 6: they shouldn't be complaining about that anymore. And we'll see,
Speaker 6: we'll see how he adjusts that. This trade deal with
Speaker 6: the UK that is supposed to be announced in just
Speaker 6: a little while will not be any kind of comprehensive
Speaker 6: trade deal. It'll be good for us in the UK
Speaker 6: on cars and steel, and we have problems with both
Speaker 6: those industries, but really our main exports to the United
Speaker 6: States are services and the good side just isn't that important.
Speaker 8: In the UK?
Speaker 5: How are they viewing kind of our trade posture these days?
Speaker 5: Are they trying you think the UK is going to
Speaker 5: try to be accommodative, combative, what's in their best interest.
Speaker 6: I think Starmar is the Prime Minister. The UK is
Speaker 6: treading a very fine line and not quite clear which
Speaker 6: side of that line he's falling on as between the
Speaker 6: European Union and the United States, and he's trying to
Speaker 6: both have it both ways, good relationships with both. But
Speaker 6: it's not clear that that's going to be feasible, so
Speaker 6: he may in due course have to make some tough choices.
Speaker 6: If he will portray this deal with the Trump is
Speaker 6: about to announce, he will portray that as a great
Speaker 6: step forward. As I've said, I don't think it's a
Speaker 6: great step forward. It's useful, but the baseline, as far
Speaker 6: as I can, as far as I understand from the press,
Speaker 6: the baseline ten percent step tariff will stay spectacular.
Speaker 3: Thursday for you, Nora Rabinian. Richard portis with US now
Speaker 3: Professor Porters in the London Business School, Anna one, we'll
Speaker 3: get back to the markets here in the nine o'clock
Speaker 3: are Michael Nathanson with US on media and also Jen's
Speaker 3: Nordwig will be with us on a currency. I'm told
Speaker 3: doctor Wong will be in studio. Very rare for her
Speaker 3: to break away for entourage, Professor Portis. I think for Americans,
Speaker 3: if you read the British papers, it's almost a febrile
Speaker 3: political vibration if you will, across the different parts of
Speaker 3: Great Britain. When you look right now at what we're seeing,
Speaker 3: which is re form, Nigel Farage coming on, what is
Speaker 3: the character? Are they quote like Trump? Are they like
Speaker 3: Barry Goldwater from another time in place? What is the
Speaker 3: character of the Farrage?
Speaker 6: It's very Goldwater we could live with. The reform is
Speaker 6: a different story. No, they're much more like Trump actually,
Speaker 6: and they to some ext are modeling themselves on Trump
Speaker 6: and trying to get the Trump impromatur. So I think
Speaker 6: is it Are they dangerous in the medium term to
Speaker 6: the established parties? They are very dangerous to the Conservative Party.
Speaker 6: They are clearly pulling off a lot of Conservative Party
Speaker 6: voters and the Conservative Party may be in terminal decline,
Speaker 6: which would be a huge political revolution in the United
Speaker 6: Kingdom given their major they're dominance over political activity since
Speaker 6: the mid nineteenth century, so that would be a big thing.
Speaker 6: But I somehow I think that the Farage effect and
Speaker 6: so forth will moderate as we get closer to serious
Speaker 6: general elections and I honestly, I cannot see and I
Speaker 6: cannot see them holding the same, say, position in the
Speaker 6: polls a couple of years from now, as they hold
Speaker 6: out and you know, they've just taken over a number
Speaker 6: of local councils and mayor mayor, they're going to have
Speaker 6: to run these run these local governments and they have
Speaker 6: no experience in doing that, and they're going.
Speaker 2: To look bad.
Speaker 5: Professor, whenever we get in a studio, we have to
Speaker 5: ask you, what is the view of Brexit today with
Speaker 5: a little bit of hindsight, ues, I.
Speaker 6: Think the view of Brexit now that is wider and
Speaker 6: wider understanding what a disaster it has been, the economic effects,
Speaker 6: the political effects, and reform is one in a sense,
Speaker 6: one response in some dimensions to the to the politics
Speaker 6: of for Exit. And it's feeding on the voters that
Speaker 6: still believe that Brexit must have been a good thing,
Speaker 6: even though they're not feeling it.
Speaker 5: And so when English fans go over to Paris for
Speaker 5: soccer match, do they have to go through customs?
Speaker 2: Sure? Jeez, that a consumption?
Speaker 6: Absolutely absolutely, no, you go through passport control.
Speaker 8: They're just like Americans homes business.
Speaker 6: Yeah, it's we've lost some of our liberties. Yeah, no doubt.
Speaker 2: Professor Porters, thank you so much. Richard Porters, a London
Speaker 2: business school.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Apple Corplay and Android
Speaker 1: Auto with the Bloomberg Business App. You can also listen
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Speaker 1: Just say Alexa Play Bloomberg eleven thirty.
Speaker 5: Michael Nathan's and he's a founding partner in Senior Research
Speaker 5: chneral set Moffat, Nathan sen and Folks just one of
Speaker 5: the leading leading voice on a global media And today
Speaker 5: we want to really focus on this little company called Google.
Speaker 5: Some of the kids call it Alphabet. There's some instiant
Speaker 5: comments coming out of Apple yesterday from one of their leaders,
Speaker 5: and it kind of goes to the core of the
Speaker 5: Google story, which is search. It's the stuff we grew
Speaker 5: up on over the last twenty years. Michael, thanks for
Speaker 5: joining us here.
Speaker 8: Again.
Speaker 5: We had Eddie Q, Apple's senior vice president for Services,
Speaker 5: in testimony yesterday down to Washington, talking about how they
Speaker 5: might think about AI as a replacement for maybe some
Speaker 5: of the traditional search that we all grew up with what.
Speaker 8: Does that mean for our friends at alphabet.
Speaker 9: And then they also went on to say that, you know,
Speaker 9: search traffic was declining through their own Safari browser.
Speaker 2: Yep.
Speaker 9: What it means is that the next five years we
Speaker 9: all will search differently, and you know it's going to
Speaker 9: take a little bit of time, but more and more
Speaker 9: mainstream people will use chackbots to get single answer you
Speaker 9: answers on queries. Right, So the idea of going to
Speaker 9: links and finding the answers as you travel the web
Speaker 9: will be old school, new school is going to be
Speaker 9: here's your answer. The question is that's for one type
Speaker 9: of search, which is non commercial, Well what about commercial search?
Speaker 9: But yes, the goal is to give you one answer
Speaker 9: using an AI chatbot to give you what you want
Speaker 9: and not have you search all over the web for
Speaker 9: the you know, to find the information.
Speaker 5: So how does I mean that's the core of Google?
Speaker 8: How do they respond? How do they adapt?
Speaker 6: Okay?
Speaker 9: So Google has been responding, uh, and they've been doing
Speaker 9: a very measure right. So they've introduced something called AI overviews.
Speaker 9: So if you do search now you will see some
Speaker 9: of the above above the links an overview session which
Speaker 9: gives you the answer that you want, right. Their point
Speaker 9: is in the overview section. People then tend to click
Speaker 9: from there to a destination, and they spend more time
Speaker 9: in the destination. So that gives you an overview, clearly,
Speaker 9: But if you're interested in the history of the New
Speaker 9: York Rangers, you will leave that overview and go to
Speaker 9: the Ranger homepage, right, That's what they're saying. Secondly, in
Speaker 9: shopping at e commerce, you will get the one. You know,
Speaker 9: if I'm looking for running shoes, I would get the
Speaker 9: best running shoe for me. But if I'm a retailer,
Speaker 9: I will pay more for that query.
Speaker 2: Right.
Speaker 9: I want to find my intention in that search. Right.
Speaker 2: So that's what's going to happen.
Speaker 3: So Michael, just to we got to move on to
Speaker 3: another important topic. But the basic idea here is do
Speaker 3: you believe Apple will lose the Google search mechanism in place?
Speaker 2: Right now? Yeah?
Speaker 9: Tom, that's you know, Craig has to sell at Apple
Speaker 9: in part because we think when you read judgmenta's decision
Speaker 9: and where they're going in this case, right, that looks like,
Speaker 9: you know, Apple will not be able to get to
Speaker 9: twenty billion of TAC they're getting now at Google.
Speaker 2: I know it's going to change, yeah, Michael, I mean
Speaker 2: it was an option.
Speaker 3: I could look at New York Ranger highlights for the season,
Speaker 3: or watch every episode of and Or.
Speaker 2: You need to explain to me how Disney spent.
Speaker 3: Six hundred and fifty million dollars that they admit for
Speaker 3: two seasons of what cass and and Or is doing
Speaker 3: and they somehow make money off my nineteen dollars a month.
Speaker 3: I still don't get the math.
Speaker 2: How do they do it? Yes?
Speaker 9: Yes, well again, Tom, you know what if churn rate
Speaker 9: is only one or two or three percent, not everyone's
Speaker 9: watching and Or, and they've taken pricing on on Disney
Speaker 9: Plus and basically people are happy with you know, they're
Speaker 9: not cherry out of the product. It's kind of amazing
Speaker 9: right now. Disney's an anomaly because they also have kids programming,
Speaker 9: but you know, charity in streaming is pretty high. Look
Speaker 9: at Warner's results today, you know we'd argue that it
Speaker 9: wasn't a great result. So that's a whole another topic.
Speaker 5: So, Michael, as it relates to Disney, they finally turned
Speaker 5: the corner with your clients with institutional investors out there
Speaker 5: yesterday by saying, hey, we are solidly profitable in streaming.
Speaker 5: We figured this stuff out.
Speaker 8: The parks is a great business.
Speaker 5: You all know, the parks is a great business, and
Speaker 5: just don't even worry about the cable networks.
Speaker 8: Have they sold that story?
Speaker 9: Well, Paul, that is exactly the story that I would sell,
Speaker 9: and you just framed it really well. I think people
Speaker 9: still worried about the macro. It's hard not to when
Speaker 9: we listened Bloomberg Radio the morning, So I think yesterday
Speaker 9: also was a bit of a response.
Speaker 2: No, no, come on.
Speaker 9: It's it's it's you know, these are nervous times, right,
Speaker 9: But we were so worried about the parks, and historically
Speaker 9: parks tend to be a little bit later, you know,
Speaker 9: in terms of canaries and coal mine. So I think
Speaker 9: the recovery in stock yesterday was like, hey, we'ren't seeing
Speaker 9: it yet. In Disney, we're good for another quarter. But Paul,
Speaker 9: to your point, if they could do seven bucks of earnings,
Speaker 9: which has been a mythical number at Disney for years,
Speaker 9: and it's all parks at all streaming, the stocks are
Speaker 9: with a lot more than a hundred bucks right now. Right,
Speaker 9: That's what I think people are waking up.
Speaker 2: To Michael Nathanson.
Speaker 3: I'm fascinated by the execution of Brian Roberts Incorporated. I mean,
Speaker 3: there's eight ways to go here, folks. For those of
Speaker 3: you worldwide, NBC is splitting apart some of their Moffitt
Speaker 3: Nathans's world into different announcements, different geographies. Lots of emotion
Speaker 3: within the Bloomberg eleven three ye oh region, but take
Speaker 3: it worldwide. Are we going to see every media company
Speaker 3: do this, Michael Nathanson where they split apart the conglomerate.
Speaker 9: Tom, That's what's going to have to happen here, right
Speaker 9: because the market doesn't pay anything anymore for cable networks,
Speaker 9: so basically those assets will be shedded. But what's left
Speaker 9: there needs to be consolidation. This has been a theme
Speaker 9: we've had with you for years, so you can break
Speaker 9: out the caven outside of comcasts. You still have a
Speaker 9: problem with Peacock. It's not big enough, it's not global.
Speaker 9: You need a partner. So I still think we have, yeah,
Speaker 9: smaller companies with less assets, but at some point a
Speaker 9: consolidation of what's remaining. But we're not there yet because
Speaker 9: I don't see M and A on the you know,
Speaker 9: on the table because of regulatory issues.
Speaker 8: Well, Michael, that kind of goes to it. I mean
Speaker 8: you mentioned Warner Brothers Discovery.
Speaker 5: Again, their numbers were a little disappointing here today, But
Speaker 5: you think about the Warner Brothers Discoveries that paramounts maybe
Speaker 5: even in some pieces of Comcast. Is this an administration
Speaker 5: that would allow this industry to to consolidate?
Speaker 8: Do you think?
Speaker 3: No?
Speaker 9: For those of you who are listening in your car,
Speaker 9: I'm nodding my head, I'm shaking my head.
Speaker 2: No, there's no way.
Speaker 9: There is no way that this administration. You know, they're
Speaker 9: they're holding up a deal with Paramount because of sixty
Speaker 9: minutes right. There's no way they're going to allow these
Speaker 9: companies to get healthier through consolidation.
Speaker 2: It's not going to happen. Michael's single best buy please
Speaker 2: before we.
Speaker 9: Go, tom My single best buy. At this point in time,
Speaker 9: we've been pushing Meta here. It's pulled back a bit.
Speaker 9: We get you know, we've been pushing Meta. Robert who
Speaker 9: now covers Media has a buy on Netflix. You've had
Speaker 9: them on in Disney. So I'd say we're going with
Speaker 9: the hands out of winning this year. That's what we're pushing.
Speaker 9: But but to be fair, Meta has not been winning.
Speaker 9: It's just I think it's a safe it's a safe
Speaker 9: play of your large cap tech stocks. AI is seen
Speaker 9: as a beneficiary to them, and that's a hard you know,
Speaker 9: it's a hard ask for some of the other companies.
Speaker 3: Well, Lisa Matteo is a hard ask as well. Can
Speaker 3: Mike Sullivan get it done for the New York Rangers?
Speaker 9: Oh, Tom, we need to change a lot of players
Speaker 9: on that team. It's not the coach, it's the administration.
Speaker 9: You gotta get rid of with the GM also, I
Speaker 9: just want to go there.
Speaker 2: Yeah, but yeah, but I'll.
Speaker 9: Tell you this on the question of the day, which
Speaker 9: is alphabet. I think the market is big time wrestling
Speaker 9: about how disruptive AI will be to these companies that
Speaker 9: have been bulletproof for most of my career, right, Like,
Speaker 9: that's the big change, is that finally there's a question
Speaker 9: mark about sustainability and investment levels. And I think you've
Speaker 9: got Alphabet that in that zone of like, look, there's
Speaker 9: uncertainty here for the first time, right, And it's been
Speaker 9: a great, great company, great stock, and now we.
Speaker 3: Have don't be a stranger. Michael Nathans, and thank you
Speaker 3: so much. He co writes with Craig Moffatt Michael Nathanson
Speaker 3: Definitive on Wall Street.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto
Speaker 1: with the Bloomberg Business app. You can also watch us
Speaker 1: live every weekday on YouTube and always on the Bloomberg terminal.
Speaker 2: Lisa Newspapers, what do you have?
Speaker 10: Okay, we're starting with fashion. Okay, we're starting actually with thrifting.
Speaker 10: This is shopping at secondhand stores. Yes, we go from
Speaker 10: meg Gala and Louis Baton to thrifting. Okay, I love
Speaker 10: doing it, my daughter loves doing it. But Business Insider says,
Speaker 10: you know what, a lot more people are starting to
Speaker 10: do it. Go to these thrift stores because tariffs on
Speaker 10: Chinese goods, so it's cheaper, it's more affordable. They have
Speaker 10: clearance prices.
Speaker 6: You have.
Speaker 10: The senior leader at Goodwill is saying that it usually
Speaker 10: happens when times are tough. Right, people are watching their budgets,
Speaker 10: so they go to these thrift stores. You have reseller
Speaker 10: thread Up. They predict the secondhand market to reach three
Speaker 10: hundred and fifty billion by twenty twenty eight. That's up
Speaker 10: from one ninety seven billion and twenty twenty three. It's
Speaker 10: all about prices and what you come forward.
Speaker 2: How's rent the runway and all that doing where you rent.
Speaker 2: I never understood renting clothes, but there it is.
Speaker 10: It works because you don't have to kind of buy
Speaker 10: something and then just keep it and just keep wearing
Speaker 10: the same thing. You always get something new. You you know,
Speaker 10: give it back and you get something new.
Speaker 5: A lot of the youngs that way, ladies here at
Speaker 5: Bloomberg News, I see they do rent the runway.
Speaker 8: They say it, We're great, they love it.
Speaker 10: I haven't particularly done it, but I've heard a lot
Speaker 10: of stories, especially if you, you know, go out to
Speaker 10: different events like the Medcala.
Speaker 8: She's the one that turned on to that.
Speaker 2: Yeah.
Speaker 10: Next, Yeah, it's a big thing.
Speaker 2: Okay.
Speaker 10: We've talked about AI, right, all the different uses for AI.
Speaker 10: Another way AI is being put to use. I saw
Speaker 10: this in the.
Speaker 8: New York Times.
Speaker 10: It's bringing British novelist Agatha Christie back to life kind
Speaker 10: of Okay, So she passed away in nineteen seventy six, right,
Speaker 10: but now you have this as batar of her teaching
Speaker 10: an online writing course with BBC Maestro. This is this
Speaker 10: online lecture series like think masterclass, right, same thing, about
Speaker 10: one hundred and five dollars. So how it actually worked.
Speaker 10: You had this team of researchers, right, they wrote a script,
Speaker 10: they used her writings, her archived interviews, and they made
Speaker 10: a digital prosthetic which was made with AI and then
Speaker 10: fitted over a real actor's performance. So this is what
Speaker 10: they're doing the company this BBC Maestro says, you know what,
Speaker 10: we're not trying to pretend that this is really her,
Speaker 10: you know, brought to life. You know, we're just kind
Speaker 10: of bringing this to people. But her family though, who
Speaker 10: manages her, say it's say they're okay with it.
Speaker 8: They're fully on board.
Speaker 3: We maybe just read one of her classic books and
Speaker 3: how she ends.
Speaker 2: A book like no one else there you go. I
Speaker 2: mean that would be like the strangest thing AI.
Speaker 3: Michael Michael Nathanson with us here in the nine o'clock.
Speaker 2: Oh yeah, our on Google Apple in AI. What do
Speaker 2: you got next?
Speaker 6: Okay?
Speaker 8: Real I d day.
Speaker 10: Right, So we've been hearing so much about the delays editports,
Speaker 10: especially Newark. Adding to the noise was the big switch
Speaker 10: to real IDs that started yesterday.
Speaker 2: But I have one.
Speaker 8: You're the only one I know, but a.
Speaker 10: Lot of people don't. The lines of d m V
Speaker 10: are crazy. But it turns out that first day yesterday
Speaker 10: wasn't actually that bad. The Wallstreet Journal said they sent
Speaker 10: a travel conomist, they test, They tested the system with
Speaker 10: no photo. I D got through in twenty minutes flat.
Speaker 8: I mean, this is this is from nine to eleven.
Speaker 5: Yes, this, this whole move towards a different ID is
Speaker 5: from nine eleven.
Speaker 8: Were finally they kept getting pushed. I mean, what's wrong
Speaker 8: with the driver's license? Was that really the problem? Nine eleven?
Speaker 8: I don't think.
Speaker 2: I don't get It's just this is.
Speaker 8: A solution in search of a problem. I have no
Speaker 8: but I've got the I've got the passport. I've got
Speaker 8: the passport.
Speaker 5: Not bringing my passport, I've got the Global entry card
Speaker 5: and that's and that works okay. So but I mean,
Speaker 5: talk about a solution in search of a problem.
Speaker 3: I strongly agree just sold that America needs us.
Speaker 8: No, it's just it's tough.
Speaker 10: But you have to go there with the right documentation.
Speaker 10: Because my son got turned away three times, and.
Speaker 8: New Jersey's compliance with this is like the worst in
Speaker 8: the country.
Speaker 2: I've heard that Texas.
Speaker 8: Thank you very much. DMV. Okay, get a real downer,
Speaker 8: New Jersey. DMV. I've got a lifetime of scars.
Speaker 3: There is there such a thing as a Guinness Mimosa.
Speaker 2: There is the newspapers. Thank you so much.
Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,
Speaker 1: and anywhere else you get your podcasts. Listen live each weekday,
Speaker 1: seven to ten am Eastern on Bloomberg dot com, the
Speaker 1: iHeartRadio app tune In, and the Bloomberg Business app. You
Speaker 1: can also watch us live every weekday on YouTube and
Speaker 1: always on the Bloomberg terminal.