WEBVTT - Netflix, China, And Real Estate (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.520 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.000 at Bloomberg dot com slash podcast. All right, we need 0:00:22.040 --> 0:00:24.040 to get an update on China, and when we do that, 0:00:24.560 --> 0:00:26.840 we go to one person and one person only. That's 0:00:26.920 --> 0:00:31.160 Leland Mellon Miller, CEO of China Basebook International. Leland, thanks 0:00:31.160 --> 0:00:33.160 so much for joining us here. You know, I guess 0:00:33.200 --> 0:00:35.920 as we look to China here, we really have to 0:00:35.960 --> 0:00:39.400 start with are they open? Are they closed? Our certain 0:00:39.440 --> 0:00:42.159 regions open, are certain regions closed? Can you give us 0:00:42.159 --> 0:00:43.960 an overview kind of where we are right now with 0:00:44.080 --> 0:00:47.879 China and its economy. Yeah, I think that's the right 0:00:47.960 --> 0:00:50.440 question to be asking, because you know, China just came 0:00:50.479 --> 0:00:53.760 out with its first quarter results and and and they 0:00:53.760 --> 0:00:55.600 surprise a lot of people, not us, because you know, 0:00:55.640 --> 0:00:58.080 we had seen some some strength in January and February. 0:00:58.560 --> 0:01:00.640 But the but the real dynamy I make that people 0:01:00.640 --> 0:01:02.880 should be tracking is the fact that the economy is 0:01:02.920 --> 0:01:05.800 just shutting down, and it's not because there's a COVID outbreak. 0:01:05.800 --> 0:01:07.600 It's to prevent the COVID outbreaks. It's part of this 0:01:07.680 --> 0:01:10.880 COVID zero policy. And you're seeing with what a lot 0:01:10.880 --> 0:01:14.039 of people are saying is around g d P shutdown. 0:01:14.959 --> 0:01:18.160 Almost all the major ports are either shut down or 0:01:18.600 --> 0:01:22.840 massively backlog because there's a potential lockdown in progress. So 0:01:22.959 --> 0:01:25.520 you've got you've got a real problem. The March data 0:01:25.640 --> 0:01:27.880 showed a little bit of this, but April you know, 0:01:28.160 --> 0:01:31.040 I've said this before, but Aprilo is going to be 0:01:31.080 --> 0:01:34.840 the most important month for schids is January because the 0:01:34.840 --> 0:01:38.080 extent of the lockdowns are to dictate just how gruesome 0:01:38.200 --> 0:01:41.320 economic growth could potentially fall on the second quarter. So 0:01:41.360 --> 0:01:43.600 how what kind of drop do you expect? I mean, 0:01:43.600 --> 0:01:47.400 can you give us a range? Well, look, if if 0:01:47.480 --> 0:01:50.000 we see some of these big city lockdowns, and we're 0:01:50.000 --> 0:01:52.600 not talking about just Shanghai, but the two of the 0:01:52.600 --> 0:01:55.400 biggest cities in in in you know, down south in 0:01:55.480 --> 0:02:00.200 Guangdong Province are are are under either uh you know, 0:02:00.280 --> 0:02:03.520 the beginnings of a lockdown or or or or a 0:02:03.560 --> 0:02:07.440 lockdown already. Uh you know, we see this continue and 0:02:07.480 --> 0:02:09.240 at last more than one or two weeks. I mean, 0:02:09.240 --> 0:02:11.359 you could see a quarter with negative growth. Now that 0:02:11.400 --> 0:02:13.280 doesn't mean they're gonna announce it, but it just means that, 0:02:13.639 --> 0:02:16.200 you know, if you're shutting down most of the economy 0:02:16.280 --> 0:02:18.240 for a huge chunk of the quarter, you know, you 0:02:18.240 --> 0:02:20.880 could have some real problems with trying to get the 0:02:20.960 --> 0:02:24.880 number out of the gutter? So Leland, is there any 0:02:25.040 --> 0:02:28.760 pushback or pressure or from folks saying, hey, this is 0:02:28.800 --> 0:02:31.800 not the right COVID strategy here, the zero tolerance. I mean, 0:02:31.800 --> 0:02:34.440 maybe it worked in the beginning, but boy, with these 0:02:34.520 --> 0:02:39.079 you know, increasingly contagious variants, Uh, maybe not so much. 0:02:39.120 --> 0:02:42.799 Is there any push back on this policy? Well, I mean, 0:02:42.919 --> 0:02:45.920 individuals across China don't like the policy at all. I mean, 0:02:45.960 --> 0:02:48.560 I think anecdotally it's hard to find anyone who is 0:02:48.600 --> 0:02:52.360 supportive of the of the draconian extent that this lockdown 0:02:52.400 --> 0:02:55.000 has you know, has hit. But that's not the way 0:02:55.080 --> 0:02:57.440 China works. That it's dictated from the top down. And 0:02:57.480 --> 0:02:59.880 She Jin Ping wants to lockdowns, and he's doubled down 0:03:00.040 --> 0:03:03.000 that recently on the radio, and senior policy makers in 0:03:03.000 --> 0:03:04.720 the last few days have had tripled down on it. 0:03:04.800 --> 0:03:07.680 So they're not moving away from COVID zero anytime soon, 0:03:07.760 --> 0:03:10.760 no matter what the worries about economic growth and and 0:03:10.800 --> 0:03:14.120 other things are absolutely secondary to the general fears that 0:03:14.160 --> 0:03:17.520 they could have a major outbreak in the rural populations 0:03:17.560 --> 0:03:21.400 amongst the elderly and particularly underserved populations that don't have 0:03:21.440 --> 0:03:24.120 hospital capacity. And that's what they're really fearing, like a 0:03:24.160 --> 0:03:27.040 disaster during a politically sensitive year. So there's I mean, 0:03:27.480 --> 0:03:31.040 because it matters how much support j and Ping has 0:03:31.440 --> 0:03:35.640 amongst the population. But I guess his his play right 0:03:35.720 --> 0:03:39.240 now is I'd rather have them um perturbed with me 0:03:39.400 --> 0:03:44.000 over a lockdown than you know, ousting me over you know, 0:03:44.120 --> 0:03:48.920 a pandemic that overflows hospitals nationwide. Right, I mean, what 0:03:49.000 --> 0:03:50.920 he's trying to do, he's looking at the worst case 0:03:50.960 --> 0:03:52.960 scenario and trying to take that off the table, and 0:03:53.000 --> 0:03:55.080 then the next priority is to take the next level 0:03:55.160 --> 0:03:57.080 of bad case scenario and trying to take that off 0:03:57.080 --> 0:03:59.600 the table. What I don't think people understand right now, 0:03:59.600 --> 0:04:02.680 because they're obsessing over the you know, the growth rate 0:04:02.720 --> 0:04:06.120 and and and GDP targets and things like that, is 0:04:06.120 --> 0:04:08.120 that that's just not high on the priority list right now. 0:04:08.440 --> 0:04:11.920 You know that that's usually what the leadership in Beijing 0:04:12.000 --> 0:04:14.840 is obsessed with. But during this year, during a time 0:04:14.840 --> 0:04:17.159 where the the outbreak could spread out of control and 0:04:17.240 --> 0:04:19.919 cause havoc in the run up to the Party Congress 0:04:20.000 --> 0:04:22.839 is fall, that's not. Economic growth is not the priority. 0:04:22.920 --> 0:04:26.400 Stability is, security is, safety is and getting COVID under control. 0:04:26.480 --> 0:04:28.839 Do they feel like they can always bring back economic 0:04:28.880 --> 0:04:31.680 growth with the right kind of stimulus and and have 0:04:31.839 --> 0:04:37.200 they been enacting stimulus programs that that you would expect. Yeah, 0:04:37.200 --> 0:04:39.400 that's what gets so interesting. So so they have not 0:04:39.560 --> 0:04:42.160 been doing stimulus. You know, about a year ago we said, look, 0:04:42.200 --> 0:04:45.719 the economic growth models changed, the stimulus playbooks changed. You 0:04:45.720 --> 0:04:48.240 can see this in our data. There's just nothing percolating 0:04:48.320 --> 0:04:50.440 underneath the surface in terms of them getting ready to 0:04:50.440 --> 0:04:53.040 do a more active credit policy. And and a lot 0:04:53.120 --> 0:04:54.960 of people fought back and said, no, no, no, we 0:04:55.080 --> 0:04:57.200 understand the way China works. We understand this is a 0:04:57.240 --> 0:04:59.760 party congress here. They always go big in a party 0:04:59.760 --> 0:05:01.960 com this year and that was the wrong call that 0:05:02.040 --> 0:05:04.640 this is a different regime, this is a different kind 0:05:04.680 --> 0:05:07.240 of economic policy making. Now, the problem you have on 0:05:07.320 --> 0:05:09.039 top of that right now is if if most of 0:05:09.040 --> 0:05:10.760 the economy are a big chunk of the economy is 0:05:10.800 --> 0:05:12.880 locked down, how do you stimulate it even if you 0:05:12.920 --> 0:05:15.200 want to? So they have a question do they want 0:05:15.200 --> 0:05:17.080 to stimulate? But even if they choose to, which they 0:05:17.120 --> 0:05:20.480 have not yet chosen to, can they make it work? Leland? 0:05:20.480 --> 0:05:22.720 Just thirty seconds left. Is there any risk to she 0:05:23.120 --> 0:05:27.320 right now? I know you mentioned a uh political year. Yeah, 0:05:27.320 --> 0:05:29.640 I don't think so. Look, you know, there's no evidence 0:05:29.680 --> 0:05:32.240 that this is affecting she's standing. But you know, we're 0:05:32.279 --> 0:05:35.200 on the cusp of a very very big things happening 0:05:35.279 --> 0:05:37.400 right now. So he needs to get COVID under control 0:05:37.440 --> 0:05:39.600 and they need to get you know, economic growth back 0:05:39.680 --> 0:05:41.800 up the second half of the year. But no, I'm 0:05:41.839 --> 0:05:44.920 not seeing any immediate short term threats to his his governance. 0:05:45.240 --> 0:05:47.200 All right, Leland, good stuff, Thank you very much for 0:05:47.360 --> 0:05:50.000 your time. Again when we want to get the latest 0:05:50.200 --> 0:05:54.880 on what's going on in China politically economically. Returned to 0:05:55.080 --> 0:05:59.000 Leland Miller. He's a CEO of the China beij Book International, 0:05:59.080 --> 0:06:02.679 and boy, they have some of the best data sets 0:06:02.680 --> 0:06:06.000 proprietary data sets, over a hundred thousand unique data sets 0:06:06.040 --> 0:06:09.200 on all parts of the Chinese economy if you want 0:06:09.240 --> 0:06:11.320 to know what's going on over there and maybe get 0:06:11.360 --> 0:06:14.000 the real numbers as to economic growth in other areas. 0:06:14.200 --> 0:06:16.120 The good folks at the China Beige Book are the 0:06:16.120 --> 0:06:24.840 ones to go to Netflix today off year to date. 0:06:24.880 --> 0:06:26.680 You know, Matt, When I was covering the stock as 0:06:26.680 --> 0:06:29.600 an analyst, I said to folks, Netflix is a subscriber 0:06:29.640 --> 0:06:32.320 growth story. As long as subscribers continue to grow and 0:06:32.320 --> 0:06:35.640 hopefully at an increasing rate, stock works. Nothing's gonna stop it. 0:06:35.800 --> 0:06:39.080 But when the growth rate slows, or god forbid, it 0:06:39.120 --> 0:06:41.479 even goes negative, you don't want to be anywhere near this. 0:06:41.680 --> 0:06:44.440 It's the exact same call I had on America Online 0:06:44.640 --> 0:06:47.799 back in the early nineties and it pretty much worked. Uh, 0:06:47.880 --> 0:06:50.000 but we got a pro on right now, Michael Nathanson, 0:06:50.800 --> 0:06:55.159 I have an apology you do to make to Michael Nathanson. Michael, 0:06:55.440 --> 0:06:57.800 I have to say I've been reading your research for 0:06:58.320 --> 0:07:01.760 years and Craig's as well, and for some reason today 0:07:02.080 --> 0:07:10.040 I quoted you as Nathan moffattson. Maybe that sounds pretty good, Michael, 0:07:10.360 --> 0:07:14.720 what's your course? I corrected it right away. Michael Nathanson 0:07:14.760 --> 0:07:19.680 and Craig Moffitt founded Moffatt Nathanson. Is that right, that's correct, 0:07:19.760 --> 0:07:22.000 almost nine and a half years ago. Yeah, and before 0:07:22.040 --> 0:07:26.680 that they were top analysts at Where's It Bernstein and 0:07:26.720 --> 0:07:28.280 things like that. Just some smart dudes, and we always 0:07:28.280 --> 0:07:31.760 appreciate getting a few minutes of their time. Michael thirty 0:07:32.080 --> 0:07:34.920 foot view. I want your perspective. What are we seeing today? 0:07:34.960 --> 0:07:38.160 How are you viewing this company, this stock and this space. 0:07:39.040 --> 0:07:41.840 You know, Paul, you know you brought that reference to 0:07:41.960 --> 0:07:43.960 a O L. This is not a L because there 0:07:44.000 --> 0:07:46.000 was a lot of fraud and you well, we know, 0:07:46.160 --> 0:07:50.800 but you remember the stock right that when people get 0:07:50.840 --> 0:07:53.520 these transformational businesses, I don't know how to value them, 0:07:53.520 --> 0:07:54.960 They don't know how to think about them, so they 0:07:55.000 --> 0:07:58.080 get super amped up about the longterm growth opportunity to 0:07:58.160 --> 0:08:02.400 listen to everything. Management says they trust their models more 0:08:02.400 --> 0:08:05.360 than they trust their logic. Um, and so I'm thinking 0:08:05.360 --> 0:08:08.320 about this is you know, this is natural. As you said, 0:08:08.400 --> 0:08:12.400 you know, at some point companies can't raise pricing anymore, 0:08:12.440 --> 0:08:16.679 they can't add more songs, and then they have to pivot. Um. 0:08:16.720 --> 0:08:19.440 What surprising me is that just the lack of preparation 0:08:19.760 --> 0:08:21.640 in the pivot right, And that's I think what keep 0:08:21.680 --> 0:08:24.040 are reacting to when they read that investor letter and 0:08:24.080 --> 0:08:27.040 watched the interview, Like, wow, these guys steam a surprised 0:08:27.080 --> 0:08:30.240 at anyone about what's happening and why wouldn't they know 0:08:30.320 --> 0:08:33.800 more about their business then even those you know, slow 0:08:33.840 --> 0:08:39.280 south side analysts, you know, So what what did happen that? Um? 0:08:39.480 --> 0:08:42.880 You know, it was such a sudden shock to everyone. 0:08:43.640 --> 0:08:48.760 And um, now of course we were talking about this earlier. UM, 0:08:48.800 --> 0:08:53.000 they used to think people stealing accounts or passwords was 0:08:53.080 --> 0:08:55.760 just the cost of doing business. Now they're like, oh, man, 0:08:55.760 --> 0:08:58.040 there's a hundred million households they are paying. We need 0:08:58.080 --> 0:09:01.760 to get like a portion of them. Yeah, Like it's 0:09:01.760 --> 0:09:04.920 really interesting. So we we've asked over and over again 0:09:04.960 --> 0:09:06.840 like what is what's going on within the US and 0:09:06.880 --> 0:09:09.240 why do you why are you so bullish about you know, 0:09:09.440 --> 0:09:10.880 how much more of the US can grow there at 0:09:10.920 --> 0:09:13.760 seventy million or so? And they never acknowledge that there 0:09:13.840 --> 0:09:16.959 was this much password sharing with it within the US. UM. 0:09:17.000 --> 0:09:18.560 But if you add the pastor share in too the 0:09:18.640 --> 0:09:20.719 U S base, you're like, wow, you're really are at 0:09:21.400 --> 0:09:23.600 where the U S p TV market hit a wall, 0:09:23.640 --> 0:09:26.199 which is a hundred million subs. So the challenge is 0:09:26.240 --> 0:09:28.960 going to be you know, people like me who pay, 0:09:29.160 --> 0:09:30.920 you know, not almost twenty bucks a month for four 0:09:30.960 --> 0:09:34.880 Simultan streams. And I'm thinking, you know, maybe that's something 0:09:34.880 --> 0:09:37.520 that's allowed for my you know, college age kids or 0:09:38.040 --> 0:09:40.480 when I travel. The question is, you know, how are 0:09:40.480 --> 0:09:42.600 they gonna get me to actually now pay for someone 0:09:42.600 --> 0:09:45.480 who's out of my house, like a college student who's 0:09:45.559 --> 0:09:48.400 using my account but he's a household member. Right. It's 0:09:48.440 --> 0:09:50.719 like to me, there's a real question. This is why 0:09:50.720 --> 0:09:52.920 they even so reluctant to do it, because it does 0:09:53.000 --> 0:09:55.760 create some ill will, right, Like I've always paid more 0:09:55.800 --> 0:09:58.920 for Netflix for the optionality used on the road or 0:09:58.960 --> 0:10:00.880 have other family members, you was it out of the house, 0:10:01.520 --> 0:10:04.400 But now what's the rule? And I just think they're 0:10:04.400 --> 0:10:07.840 they're the devil's gonna in the details here and it 0:10:07.920 --> 0:10:10.640 could create some ill will, and I think that's why 0:10:10.640 --> 0:10:13.599 they haven't wanted to change. Well and is it is 0:10:13.600 --> 0:10:16.800 it going to be difficult because I, um, you know, 0:10:16.920 --> 0:10:20.000 have a Netflix account and I have four brothers who 0:10:20.040 --> 0:10:23.160 live all in different parts of the world. I don't 0:10:23.160 --> 0:10:27.280 know for sure, but I'm pretty sure when I see 0:10:27.360 --> 0:10:30.560 like most watched or recent history. I'm like, I didn't, 0:10:30.720 --> 0:10:32.800 I didn't watch that. You know, I'm pretty sure one 0:10:32.800 --> 0:10:35.800 of my kid brothers is using it. And Netflix must know, 0:10:36.040 --> 0:10:40.360 right when my password is being used simultaneously in Berlin, 0:10:40.600 --> 0:10:44.840 Scarsdale and l A. Right, don't they get that? Yes, 0:10:45.000 --> 0:10:47.480 they do get that, and it's one of it was 0:10:47.480 --> 0:10:49.840 one of the value adds, right, like, hey, we don't 0:10:49.880 --> 0:10:53.240 you know, let's look the other way. We're charging twenty bucks. 0:10:53.559 --> 0:10:55.320 It's worth it, you guys a lot of the product. 0:10:56.280 --> 0:10:58.280 But now they're running out of room. Right, So the 0:10:58.360 --> 0:11:02.240 question is gonna be if if you're paying for the 0:11:02.240 --> 0:11:05.160 four sound town of streams and only they're two in 0:11:05.200 --> 0:11:09.040 your house, well, you're gonna spin down. And will your 0:11:09.160 --> 0:11:12.320 family members actually want to pay for it? Like, we 0:11:12.360 --> 0:11:15.559 don't know, they're happy to get it for free. Um, 0:11:15.600 --> 0:11:18.960 but it's it's definitely it opens up a bunch of questions, right, 0:11:19.000 --> 0:11:21.600 And look, if the stock was cheaper, and it's definitely 0:11:21.600 --> 0:11:24.920 getting cheaper, I would have some optionality. I bet on 0:11:24.960 --> 0:11:27.480 the optionality of that. But we're still working our way 0:11:27.559 --> 0:11:30.360 through kind of what the right right pricing is the 0:11:30.400 --> 0:11:32.000 model that we see in front of us, Right, it's 0:11:32.000 --> 0:11:34.720 getting cheaper. So you think it's getting it's getting cheaper, 0:11:34.760 --> 0:11:36.760 because a little bit later we're gonna talk to Laura Martin. 0:11:36.840 --> 0:11:39.000 She's like the soul analyst on the street who's upgraded 0:11:39.040 --> 0:11:42.240 in Yeah. Well yeah, to our credit, she was even 0:11:42.240 --> 0:11:45.480 more negative than I was. She just selling stock. Yeah, 0:11:45.480 --> 0:11:48.640 it's hard to I mean basically it's gonna it's gonna 0:11:48.640 --> 0:11:51.480 get cheaper because as you know, you're going from this 0:11:51.800 --> 0:11:56.000 growth stock to growth purgatory, right, and as it gets 0:11:56.000 --> 0:11:57.839 to the value, we camp you need cash onw and 0:11:57.880 --> 0:12:00.160 earnings to have people come in and buy it. You're 0:12:00.240 --> 0:12:02.679 kind of in this nowhere land, right, and this is 0:12:02.720 --> 0:12:04.960 our reference kind of where you know you you noted 0:12:04.960 --> 0:12:07.520 it that you know twenty years ago we saw the 0:12:07.559 --> 0:12:11.040 same thing and it just takes a while for investor 0:12:11.040 --> 0:12:14.079 bass to turn over because there's a lot of evaluation 0:12:14.120 --> 0:12:16.720 support on things like cash flow. It's going to just 0:12:16.760 --> 0:12:21.360 take a while, right, New people show up, and so 0:12:21.679 --> 0:12:23.760 it's it's you know, I think they need to have 0:12:23.800 --> 0:12:26.200 better answers on how they're gonna roll out the passer 0:12:26.280 --> 0:12:29.040 cheering and the ad model. Like it seems like again 0:12:29.080 --> 0:12:31.320 like they were not prepared. Yeah, that's that's kind of 0:12:31.320 --> 0:12:33.360 what it came across to me. So we'll see how 0:12:33.360 --> 0:12:35.600 this plays out. Michael Nathanson, founding partner and senior Research 0:12:35.640 --> 0:12:42.360 Channels MOFA. Nathan's all right, let's check in on the economy. 0:12:42.400 --> 0:12:44.600 Here are we getting a recession this year and next year? 0:12:44.760 --> 0:12:48.720 It's checking with Brad Dalmon, chief economists for Courtland. Um. Brad, 0:12:48.840 --> 0:12:50.400 you know, one of the things when we think about 0:12:51.000 --> 0:12:54.160 this economy, what has really struck me is how strong 0:12:54.559 --> 0:12:56.640 the housing market has been really since day one of 0:12:56.720 --> 0:12:59.280 this pandemic. And we got some new housing starts a 0:12:59.320 --> 0:13:01.440 couple of days ago were that were very strong. What's 0:13:01.440 --> 0:13:03.760 your view? Is this market peaked? Are we going to 0:13:03.920 --> 0:13:06.000 roll over a little bit in terms of just real 0:13:06.080 --> 0:13:09.920 estate in this country? You think you be a peak 0:13:09.960 --> 0:13:13.000 of sorts? Right? You've seen the mortgage rates go up, 0:13:13.280 --> 0:13:15.520 but you can already see indications that the housing market's 0:13:15.520 --> 0:13:18.880 gonna cool a little bit, if it's slowing home price appreciation, 0:13:19.360 --> 0:13:22.480 if it's more supply starting to pick up on the market. 0:13:23.000 --> 0:13:25.640 Um So, in that sense, as certainly a peak, but 0:13:25.760 --> 0:13:29.040 I don't think anybody's expecting home prices to come down structurally. 0:13:30.400 --> 0:13:35.160 Is so we also saw a drop in existing home sales. 0:13:35.200 --> 0:13:37.760 But that's just because there's not enough inventory, well not 0:13:37.880 --> 0:13:41.800 just because it's also due to rising mortgage rates. What 0:13:41.920 --> 0:13:44.240 kind of effect is that going to have? Especially if 0:13:44.480 --> 0:13:46.120 what are we at right now four and a half 0:13:46.200 --> 0:13:48.679 almost five percent, What if mortgage rades get to six 0:13:48.840 --> 0:13:51.600 or seven, I think we'll see a demonsta will flow 0:13:51.640 --> 0:13:54.000 down and activity. There's been a big narrative that a 0:13:54.040 --> 0:13:57.319 lot of the upward pressure at home prices has been 0:13:57.320 --> 0:14:01.080 because of low listed inventory. Now it's think we'll see 0:14:01.160 --> 0:14:04.280 just how that theory is tested when mortgage rates do 0:14:04.400 --> 0:14:06.240 go up. I think a lot of people will be 0:14:06.280 --> 0:14:10.559 shocked to see just how quickly home price appreciation slows down. 0:14:10.360 --> 0:14:13.880 I can't believe more inventory hasn't come out, by the way, Brad, 0:14:13.960 --> 0:14:18.760 because I know multiple people who want to sell but 0:14:18.800 --> 0:14:22.320 are on the fence about when to do it, and 0:14:22.360 --> 0:14:26.960 now they're starting to rub their hands together, um about 0:14:27.000 --> 0:14:30.320 these mortgage rates and worrying, worrying that they waited too long. 0:14:31.800 --> 0:14:33.560 I would tend to agree with that. I think they 0:14:33.720 --> 0:14:36.400 probably have if that's really the position they're in. Maybe 0:14:36.400 --> 0:14:37.960 one exception to that will be you know, we all 0:14:37.960 --> 0:14:40.000 know about the rate hikes that are expected to be coming. 0:14:40.240 --> 0:14:42.840 Maybe that first double rate hike will shave fifty basis 0:14:42.840 --> 0:14:45.080 points off the tenure treasure rate and kind of bring 0:14:45.120 --> 0:14:48.240 mortgage rates back down for a little bit. All right, 0:14:48.280 --> 0:14:51.720 So when we talk about, like I guess, new housing construction, 0:14:52.040 --> 0:14:54.240 what I hear a lot is they're just not building 0:14:54.280 --> 0:14:57.400 the entry level inventory. Builders are too focused on the 0:14:57.480 --> 0:15:01.520 McMansions because obviously higher better margin. When we do look 0:15:01.520 --> 0:15:04.200 at new housing production coming onto the market, are we 0:15:04.200 --> 0:15:07.920 seeing any entry level It depends on really how you 0:15:07.920 --> 0:15:10.720 wanted to define it. I mean, all this new construction 0:15:10.760 --> 0:15:12.800 is going to happen on the margin. It's very difficult 0:15:12.840 --> 0:15:15.720 to provide this entry level housing without some kind of 0:15:15.760 --> 0:15:18.480 subsidy of any locations. But we can broaden the scope 0:15:18.480 --> 0:15:20.160 of what housing really is and we can look to 0:15:20.200 --> 0:15:23.360 rental housing in many ways as being entry level housing. 0:15:23.640 --> 0:15:25.400 That to say, for that new household that's going to 0:15:25.480 --> 0:15:27.520 go out and form. If we look at these healthy 0:15:27.560 --> 0:15:29.160 starts that just came out, we did actually see an 0:15:29.200 --> 0:15:33.920 uptick in in five bedroom plus multi family units housing starts. 0:15:34.280 --> 0:15:36.240 So I think in that sense, we are building that 0:15:36.320 --> 0:15:38.640 kind of product. And we looked at the ownership side 0:15:38.640 --> 0:15:41.520 obviously it's a little bit of a different story, all right, Brad, 0:15:41.560 --> 0:15:44.720 good stuff. Appreciate getting your thoughts here on the overall 0:15:44.800 --> 0:15:47.000 real estate. We make some great points, by the way, 0:15:47.120 --> 0:15:50.440 especially when it comes to a rate hike. I'll note 0:15:50.440 --> 0:15:56.600 this morning Bank America um UH went bullish on US treasuries. 0:15:56.680 --> 0:15:58.680 They say, now the tenure yield is going to come 0:15:58.680 --> 0:16:01.120 down to two twenty five really, and right now we're 0:16:01.120 --> 0:16:03.800 hovering around to nine. And that's the idea, the same 0:16:03.840 --> 0:16:05.400 thing that Brad said, you know, you get, you get 0:16:05.400 --> 0:16:08.160 a raid hike, and that attracts that investors to come 0:16:08.200 --> 0:16:11.680 back in and they bring the yield, push the yields down. Interesting, 0:16:12.080 --> 0:16:14.640 the ten year treasury two point We were here at 0:16:14.640 --> 0:16:18.800 two to seven. Interesting, right, Brad Dalman, chief economists for Courtland. 0:16:23.480 --> 0:16:25.320 You know, Matt. In my career, I've seen a lot 0:16:25.360 --> 0:16:28.880 of sectors, a lot of stocks that have been subscriber 0:16:29.280 --> 0:16:33.800 momentum stocks, cable stock, sellier, telephone stocks, America Online back 0:16:33.800 --> 0:16:37.480 in the day, UH and now Netflix. And boy, when 0:16:37.520 --> 0:16:40.240 that momentum slows or reverses, you don't want to be 0:16:40.280 --> 0:16:42.960 anywhere near it. And that's what's happening today. Stocks down 0:16:43.000 --> 0:16:45.120 thirty six percent off of their earnings print last night. 0:16:45.440 --> 0:16:48.800 We have one of the smartest people on Wall Street 0:16:49.000 --> 0:16:52.160 for this stuff, law Martin. She's managing director Senior Media 0:16:52.200 --> 0:16:56.720 and Internet Analysts at need Hum. Laura Boy tough quarter 0:16:56.920 --> 0:17:00.640 for the friends at Netflix, but and had find downgrades 0:17:00.680 --> 0:17:03.360 on Wall Street. But then I see Laura Martin upgrades 0:17:03.360 --> 0:17:06.840 a stock today. What's your call? Are right? So our 0:17:06.840 --> 0:17:08.719 call was so we had to sell on it before 0:17:09.200 --> 0:17:11.480 and now we really like the fact that they've done 0:17:11.480 --> 0:17:15.000 the inevitable, which is announced in advertising tier. So one 0:17:15.040 --> 0:17:17.200 of their big problems was that they were sitting in 0:17:17.280 --> 0:17:20.760 an eighteen dollar price point when they had five competitors 0:17:20.960 --> 0:17:24.719 at a five dollar price point. And Disney and HBO 0:17:24.800 --> 0:17:26.919 Max have both announced they're going to have a lower 0:17:27.000 --> 0:17:30.560 priced ad tier, so this is great. They're catching up. 0:17:30.720 --> 0:17:34.040 Netflix is catching up, And I think the most important point, 0:17:34.040 --> 0:17:36.680 Paul is that these Silicon Valley companies have a real 0:17:36.800 --> 0:17:40.600 not invented here problem, and Netflix needs to look around 0:17:40.600 --> 0:17:42.919 and see what his competitors are doing better than it 0:17:43.000 --> 0:17:46.280 and adapt faster. Before everyone has an ad driven tier. 0:17:46.720 --> 0:17:48.760 They need to get there two years earlier than they 0:17:48.760 --> 0:17:51.480 did this time. And I'm hoping that this lesson makes 0:17:51.480 --> 0:17:54.440 some innovative faster based on what other people are already 0:17:54.480 --> 0:17:57.440 doing the market place. So first of all, um, you 0:17:57.560 --> 0:18:00.600 got some big props earlier from Michael Nathanson who said 0:18:00.640 --> 0:18:06.320 you've been right on this stock. Um. And secondly, UM, 0:18:06.400 --> 0:18:09.359 I wonder what you think about the content. Um. You know, 0:18:09.440 --> 0:18:12.440 obviously there have been some huge drivers for Netflix. I 0:18:12.480 --> 0:18:14.520 feel like House of Cards may have been the biggest one. 0:18:14.920 --> 0:18:19.359 It was one of those shows where everybody talked about it, 0:18:19.680 --> 0:18:23.560 everybody had to see it, and it was just a 0:18:23.640 --> 0:18:25.520 reason to go out and get Netflix. They've had a 0:18:25.560 --> 0:18:28.760 few of a few of those shows, um, but it 0:18:28.800 --> 0:18:30.320 doesn't seem like to have them right now. I mean, 0:18:30.320 --> 0:18:35.520 nobody's tripping over themselves to get Netflix for Britain right correct. 0:18:35.600 --> 0:18:38.000 And I think Squid Games was one of those shows. 0:18:38.040 --> 0:18:40.280 But the problem is is, you know, you're a longtime 0:18:40.320 --> 0:18:43.439 media analyst with me, and as you know, you know 0:18:43.480 --> 0:18:46.200 when you drop eight hours of squid Games all at once, 0:18:46.200 --> 0:18:48.080 somebody can pay for the month and then churn out 0:18:48.359 --> 0:18:51.160 that's dumb. They should be dropping these once a week 0:18:51.320 --> 0:18:53.920 and have to and do it mid months, So you 0:18:53.960 --> 0:18:56.480 have to subscribe for three months to watch with Games 0:18:56.520 --> 0:18:59.920 eight hours. Absolutely, we're talking about that earlier because I'm 0:19:00.040 --> 0:19:02.439 noticed Apple TV is doing that right. You have to 0:19:02.480 --> 0:19:06.480 wait until next Friday to see the following episode of 0:19:06.520 --> 0:19:10.560 For All Mankind or Slow Horses? Is Netflix had they 0:19:10.600 --> 0:19:13.920 said anything about going that way? They have not. They've 0:19:13.920 --> 0:19:16.080 specifically said they're not going to go that way because 0:19:16.080 --> 0:19:18.480 they think it's a better user experience. But I think 0:19:18.520 --> 0:19:22.959 they need to start balancing shareholder constituencies. And by the way, 0:19:23.000 --> 0:19:25.080 they're going to start losing employees because the stock is 0:19:25.119 --> 0:19:29.160 now down to two eight levels, so everybody who's joined 0:19:29.160 --> 0:19:31.040 the last four years is making no money on their 0:19:31.040 --> 0:19:33.520 stock for the indefinite future. So they're going to start 0:19:33.560 --> 0:19:35.720 losing employees unless they figure out how to make more 0:19:35.720 --> 0:19:38.760 economics out of the content spend there they have on 0:19:38.800 --> 0:19:41.200 their balance sheet. Matt, you want to know why. One 0:19:41.200 --> 0:19:43.040 of the reasons why law Martin's had such a long 0:19:43.080 --> 0:19:47.320 and successful career on Wall Streets many reasons, very smart research, 0:19:47.359 --> 0:19:49.960 but not afraid to go against consensus. So what do 0:19:50.000 --> 0:19:53.000 we see today nine down grades from all across Wall 0:19:53.000 --> 0:19:55.399 Street and then we get this upgrade that is out 0:19:55.440 --> 0:19:59.840 of consensus. That gets attention. Laura, is your upgrade saying, 0:20:00.560 --> 0:20:02.439 you know, hey, I think they've got it. As it 0:20:02.440 --> 0:20:06.280 relates to advertising video on demand, Is it based on valuation? 0:20:06.760 --> 0:20:08.400 How did you kind of come to that, because that's 0:20:08.400 --> 0:20:11.760 a tough call to make, right. So I think it's 0:20:11.800 --> 0:20:14.479 based mostly on the fact that I think adding an 0:20:14.520 --> 0:20:18.399 ad driven TAM doubles their um ad driven t here 0:20:18.440 --> 0:20:22.119 of doubles their total addressable market and increases their average 0:20:22.240 --> 0:20:27.360 economics per user, because we are hearing from other firms 0:20:27.400 --> 0:20:31.679