WEBVTT - Why Intrepid's Travis Likes Leucadia 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg pm L podcast. I'm Pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:32.280 podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. We 0:00:32.320 --> 0:00:34.800 have been talking a lot about how this year has 0:00:34.840 --> 0:00:38.280 been better for stock pickers because there is more divergence 0:00:38.320 --> 0:00:41.080 between shares and it's less of a macro story and 0:00:41.159 --> 0:00:46.280 moving more towards specific company stories. Mark Travis knows this 0:00:46.920 --> 0:00:49.879 as well as anyone President chief executive officer of Intrepid 0:00:49.920 --> 0:00:53.160 Capital Funds with nearly one billion dollars under management based 0:00:53.200 --> 0:00:57.360 in Jacksonville, Florida, and Mark, you know I'm wondering. I 0:00:57.400 --> 0:00:59.880 was looking through some of your top picks and the 0:01:00.080 --> 0:01:03.840 one that really caught my eye was Leucadia because this 0:01:03.920 --> 0:01:09.960 firm is an interesting bet on the boutique Jeffreys, which 0:01:10.080 --> 0:01:13.160 is at the heart of trading and a lot of 0:01:13.160 --> 0:01:15.680 people think of as a bell weather for the rest 0:01:15.680 --> 0:01:18.479 of Wall Street. Since the report earlier, given the fact 0:01:18.520 --> 0:01:21.640 that we are seeing lower trading results out of some 0:01:21.720 --> 0:01:24.880 of the banks. Does that weigh on your decision to 0:01:25.040 --> 0:01:29.520 sell or buy Lucadia, Well, Lisa, it's a great example 0:01:29.600 --> 0:01:32.920 of value lating security for us and in trepic capital. 0:01:33.040 --> 0:01:35.200 When we bought it in the high teens, it was 0:01:35.280 --> 0:01:39.399 at a discount to tangible book and as you're aware, 0:01:39.800 --> 0:01:42.800 UM Jeffreys is a material part of that of it, 0:01:43.240 --> 0:01:45.840 and it had been knocked down by fixed income trading 0:01:46.319 --> 0:01:50.400 at Jeffreys and UM also National Beef. The spreads were 0:01:50.440 --> 0:01:53.440 tight between UM, you know, cost of cattle and what 0:01:53.480 --> 0:01:56.200 they could sell them for. That's since widened out, and 0:01:56.520 --> 0:02:01.240 and UM Jeffreys is also reported improved fixed income trading UM. 0:02:01.360 --> 0:02:04.600 So you know we've done well in the time we've 0:02:04.600 --> 0:02:07.840 had it. I've followed Lukatia frankly since it was run 0:02:07.880 --> 0:02:11.239 by UM Mr Cummings and Steinberg back in the day. 0:02:11.480 --> 0:02:14.360 And it's really a kind of as some people refer 0:02:14.440 --> 0:02:17.320 to as a mini Berkshire Hathaway, which I've also been 0:02:17.360 --> 0:02:20.440 a shareholder, fortunately for a long period of time. So 0:02:20.639 --> 0:02:23.200 UM they used to own a winery too, I believe, 0:02:23.360 --> 0:02:25.560 and you used to get a discount. I believe you 0:02:25.560 --> 0:02:29.520 were a stockholder. I mean, if the more you appeel 0:02:29.560 --> 0:02:32.959 the onion PIM, the more you find it. Lucadia owns 0:02:33.200 --> 0:02:36.000 um as. You know, it's got oil and gas, it's 0:02:36.000 --> 0:02:39.720 got timber, it's got auto dealerships, It's got you know, 0:02:39.840 --> 0:02:43.440 on and on. So UM, I think in a in 0:02:43.480 --> 0:02:47.120 a world where there's very few miss priced securities, I 0:02:47.160 --> 0:02:49.920 think it's not unreasonably priced, even at this point in 0:02:49.960 --> 0:02:53.720 the you know, twenty six or seven dollar range. And um, 0:02:54.360 --> 0:02:57.480 you know, I think if if Mr Hadler continues to 0:02:57.520 --> 0:03:01.120 work as magic at Jeffreys, I think we'll improved share price, 0:03:01.560 --> 0:03:05.320 not to mention the other subcomponent parts, it will hopefully 0:03:05.639 --> 0:03:09.040 do well in addition to that. So Mark, I want 0:03:09.040 --> 0:03:11.600 to ask you about one particular company that you want 0:03:11.600 --> 0:03:14.280 to focus on. This is Sintel. And the reason I 0:03:14.320 --> 0:03:16.560 want to do this is because I don't know whether 0:03:16.639 --> 0:03:19.280 you've obviously I'm sure paid attention to the back and 0:03:19.360 --> 0:03:23.200 forth between financial technology and the ability to test certain 0:03:23.280 --> 0:03:26.160 systems and so on. They've got a big market in 0:03:26.240 --> 0:03:30.160 banking capital markets as well as cards and payments. I 0:03:30.200 --> 0:03:33.399 also note that there's the new chief executive coming into 0:03:33.440 --> 0:03:35.880 Bank of New York, Mellon, who was formerly the chief 0:03:35.880 --> 0:03:40.520 executive at Visa. So these kinds of industries are no 0:03:40.640 --> 0:03:45.200 longer strictly banks or or strictly payment systems. What if 0:03:45.200 --> 0:03:48.440 you could talk about sintell and how that caught your attention. Well, 0:03:48.480 --> 0:03:52.240 I think that there are three biggest customers are m X, 0:03:52.880 --> 0:03:57.480 State Street, and UM that acts and the way we 0:03:57.640 --> 0:04:01.520 became involved, I believe of him is a pre announced 0:04:01.840 --> 0:04:05.720 revenue decline. They pre announced maybe fifty million dollars off 0:04:05.720 --> 0:04:08.840 the top, and it knocked the shares down, But I 0:04:08.880 --> 0:04:12.600 think it was really driven by costco firing m X 0:04:13.000 --> 0:04:17.320 and MX pulling back the throttle on discretionary I T spending. 0:04:17.920 --> 0:04:21.640 UM management has bought a big sluck of slug of shares. 0:04:22.000 --> 0:04:25.240 They owned a significant part of it already. I think 0:04:25.279 --> 0:04:29.560 the h one Visa issue with Trump now and the 0:04:29.560 --> 0:04:33.839 executive office is somewhat of a problematic for them, and 0:04:34.040 --> 0:04:37.000 UM some of the other parts of the you know, 0:04:37.040 --> 0:04:42.240 technology space. UM uh, there's concerned that they haven't adapted 0:04:42.279 --> 0:04:45.640 to social media and whatever. But in the verticals where 0:04:45.640 --> 0:04:49.120 they are, I think they have very good margins, a 0:04:49.160 --> 0:04:52.880 lot of free cash flow, and UM, you know that's 0:04:52.880 --> 0:04:55.640 that's the position we're comfortable to wait until that cash 0:04:55.680 --> 0:04:58.279 bubbles forth and you get a price in the mid 0:04:58.320 --> 0:05:02.280 twenties versus six seventeen dollars today. Mark what's your time 0:05:02.320 --> 0:05:06.159 horizon when you're investing forever? All right? I wish we 0:05:06.200 --> 0:05:09.280 all had forever? No, this is important because I feel 0:05:09.279 --> 0:05:11.839 like right now people are saying things are very highly valued. 0:05:12.640 --> 0:05:14.760 Perhaps they are, but you can't invest in nothing if 0:05:14.760 --> 0:05:17.960 your time horizons forever. Well. Our our premise, Lisa and 0:05:18.000 --> 0:05:21.440 Intrepid Capital Funds has always been somewhat different, as Pim 0:05:21.520 --> 0:05:23.480 can not has head or shake his head one way 0:05:23.520 --> 0:05:26.120 or the other. But our our premises we want to 0:05:26.120 --> 0:05:29.640 find a material discount to a private market value using 0:05:29.920 --> 0:05:33.200 pretty high discount rates in our cash flow, and or 0:05:33.480 --> 0:05:36.039 we want to do an asset valuation break up again 0:05:36.040 --> 0:05:39.280 not making aggressive of assumptions about the current market values, 0:05:39.560 --> 0:05:41.480 and can we find a discount and if we can't 0:05:41.520 --> 0:05:45.919 find one, will default to cash. So the analogy I 0:05:46.000 --> 0:05:48.840 use for people is when prices are high, cash is high. 0:05:48.839 --> 0:05:51.479 When prices are low, cash is low. Alright, So how 0:05:51.560 --> 0:05:54.320 high is your cash holding right now? It's about how 0:05:54.400 --> 0:05:57.520 is that compared to say a year ago. Well, I've 0:05:57.520 --> 0:06:00.839 had some inflows, I've had some bonds uh old and 0:06:00.839 --> 0:06:04.920 I've had some securities bought out. Um it's higher though, 0:06:04.920 --> 0:06:07.919 I'm guessing it's six eight percent higher than it was 0:06:08.000 --> 0:06:10.680 this time last year. And how is the distribution between 0:06:10.680 --> 0:06:15.120 bonds and stocks changed? Stocks have come down, bonds have 0:06:15.160 --> 0:06:18.640 held about the same. Really, is it? Is it government 0:06:18.720 --> 0:06:22.680 or is it? It's always been kind of crossover paper alright, 0:06:22.720 --> 0:06:25.160 to like the double and triple B kind of Yeah, 0:06:25.200 --> 0:06:27.520 we dig around. The most interesting piece of paper on 0:06:27.680 --> 0:06:31.240 right now is a Primaro mining convert um. It trades 0:06:31.279 --> 0:06:33.600 about fifty eight since on the dollar. They have a 0:06:33.640 --> 0:06:37.560 single mind in Mexico and the Mexicans going strike until 0:06:37.560 --> 0:06:39.039 their wives tell them they have to go back to 0:06:39.040 --> 0:06:42.839 work and then the bondle rally and or whatever happens 0:06:42.880 --> 0:06:46.640 to goal prices. What's the biggest challenge right now to 0:06:46.680 --> 0:06:49.560 get people interested in stocks? We keep hearing about e 0:06:49.760 --> 0:06:55.279 t FS, index funds, low cost so on. People still 0:06:55.320 --> 0:06:59.479 interested in actual companies, like investing in businesses. You know, 0:06:59.520 --> 0:07:02.359 it's interesting and you mentioned that PIM we helped sponsor, 0:07:02.400 --> 0:07:05.359 in fact, we sponsor Bloomberg machine. At the University of 0:07:05.360 --> 0:07:08.719 North Florida, they have what they call the Osprey investment group, 0:07:09.080 --> 0:07:10.960 and I go every year and listen to these kids 0:07:11.000 --> 0:07:13.520 talk and they talk about the portfolio, and basically they 0:07:13.520 --> 0:07:16.400 bring him in in September October and they manage the 0:07:16.400 --> 0:07:19.560 money until April May and then they report he did 0:07:19.560 --> 0:07:23.840 air quotes, go on. Manage the money, yeah, and they 0:07:24.360 --> 0:07:27.240 you know, but it's a very trading centric philosophy and 0:07:27.280 --> 0:07:29.600 a lot of e t f s and what have you. 0:07:30.120 --> 0:07:32.320 And I made a comment to somebody recently, I said, 0:07:32.400 --> 0:07:34.200 I think they're probably bright kids, but I'd have to 0:07:34.320 --> 0:07:37.680 detrain them before they could work for me. So I 0:07:37.720 --> 0:07:39.960 wish it was a free lunch in the capital markets. 0:07:40.000 --> 0:07:42.240 I haven't been able to find one, and I don't 0:07:42.280 --> 0:07:45.440 think e t s are not necessarily a free lunch. Um. 0:07:45.520 --> 0:07:47.200 I want to find a good business at a good 0:07:47.240 --> 0:07:50.200 price and hang onto it as long as I can. 0:07:50.880 --> 0:07:52.920 I want of thanks very much for coming in and 0:07:53.000 --> 0:07:55.240 spending time with us. As always, Mark Travisy is the 0:07:55.240 --> 0:08:12.720 president chief executive of Intrepid Capital, based in Jacksonville, Florida. 0:08:13.400 --> 0:08:16.120 I want to turn our attention now to a topic 0:08:16.160 --> 0:08:18.960 of private equity and joining us as Eric Hershey is 0:08:19.000 --> 0:08:21.360 the vice chairman and the head of Strategic initiatives for 0:08:21.400 --> 0:08:26.200 Hamilton's Lane assets under management about forty billion dollars based 0:08:26.240 --> 0:08:28.560 in Philadelphia, Eric, thank you for being with us here 0:08:28.560 --> 0:08:30.960 in the studio. I just want to cast your mind 0:08:31.000 --> 0:08:33.880 back to March one of this year. There were two 0:08:33.920 --> 0:08:35.720 I p O s that kind of priced on the 0:08:35.800 --> 0:08:39.360 same day. Right. One was Hamilton's Lane and the other 0:08:39.480 --> 0:08:43.280 was Snap. The shares of Hamilton's Lane are up thirty 0:08:43.360 --> 0:08:47.720 nine percent since the I p O and the shares 0:08:48.200 --> 0:08:53.840 of Snap are down twelve How did you guys do this? Well? 0:08:54.280 --> 0:08:57.079 I think this certly shows the interest in the alternative side, 0:08:57.679 --> 0:09:01.160 that it's perhaps not as disappearing as an asset classes 0:09:01.520 --> 0:09:04.839 as I think perhaps other businesses. But it was funny 0:09:04.880 --> 0:09:07.520 we were kind of watching them along the way, and 0:09:07.840 --> 0:09:09.959 businesses have nothing to do with each other, and yet 0:09:09.960 --> 0:09:11.800 we were being kind of compared all the time because 0:09:12.440 --> 0:09:16.319 it's where investors same day. Well, I have to wonder, 0:09:16.360 --> 0:09:22.040 you know, last night Cowper's Board California Pension, the biggest 0:09:22.040 --> 0:09:25.760 pension plan public pension in the country, said that it 0:09:25.800 --> 0:09:29.280 was exploring direct investing in order to get around paying 0:09:29.320 --> 0:09:33.199 private equity firm such high fees. Uh. Do you hear 0:09:33.280 --> 0:09:37.520 a lot about investors, clients hoping to reduce their fees, 0:09:37.559 --> 0:09:39.600 and do you expect this to be an ongoing pressure? 0:09:39.840 --> 0:09:41.640 I think, Look, we live in a world where everyone 0:09:41.720 --> 0:09:44.840 wants to get more for less, and it's whether it's 0:09:44.840 --> 0:09:47.400 in the restaurant business, or whether it's in the investment business, 0:09:47.480 --> 0:09:51.040 whether it's in the retail space. Every client consumer is 0:09:51.080 --> 0:09:53.800 focused on trying to get the most value for their dollar. 0:09:54.240 --> 0:09:57.280 And the pension funds are not any different. Nobody loves 0:09:57.280 --> 0:10:01.000 to pay fees. But you gotta step back and ask 0:10:01.080 --> 0:10:03.760 the question of just because you don't like to pay fees, 0:10:03.800 --> 0:10:07.400 can you actually replicate the returns yourself with the resources 0:10:07.440 --> 0:10:10.480 you have at your disposal. That I think is the dilemma. 0:10:10.600 --> 0:10:11.959 I think we see it. We certainly hear a lot 0:10:11.960 --> 0:10:15.760 of institutions talking about trying to bypass this and bypass that. 0:10:16.440 --> 0:10:18.520 But then you sort of nod and say, okay, well 0:10:18.800 --> 0:10:21.800 what does that mean for your own infrastructure, your own resources, 0:10:22.280 --> 0:10:25.199 and can you actually attract and get the people necessary 0:10:25.600 --> 0:10:29.480 to generate the performance that you're seeing across the asset class? Eric, 0:10:29.520 --> 0:10:33.360 you're recently closed a fund. This is the Hamilton Lanes 0:10:33.360 --> 0:10:38.520 Strategic Opportunities Fund designed to target private credit investments around 0:10:38.600 --> 0:10:41.280 the globe. Just tell us quickly about the fund and 0:10:41.320 --> 0:10:43.880 how much you raised and what was the target. Maybe 0:10:43.880 --> 0:10:46.720 that tells people something about demand. Yeah, so we raised 0:10:46.920 --> 0:10:49.120 a significant amount over the target. And I think what 0:10:49.200 --> 0:10:51.760 it reflects is the fact that private credit is really 0:10:51.800 --> 0:10:55.079 the booming part of our overall industry. I think when 0:10:55.080 --> 0:10:57.880 you see as a kind of a yield starved overall environment, 0:10:58.200 --> 0:11:01.800 you're seeing investors just rapidly you kind of redeploy public 0:11:01.840 --> 0:11:06.160 fixed income assets into private fixed income assets, and so 0:11:06.280 --> 0:11:09.600 the market on the private side much more inefficient. Frankly, 0:11:09.640 --> 0:11:12.000 it's growing in scale. A lot of the practitioners the 0:11:12.040 --> 0:11:14.240 banks have been kind of knocked out of the business, 0:11:14.640 --> 0:11:16.200 and so you're seeing more of the kind of the 0:11:16.200 --> 0:11:19.040 private market GPS kind of stepping in to fill that void. 0:11:19.440 --> 0:11:22.520 And so again, returns have been very good. The spreads 0:11:22.520 --> 0:11:25.360 against the public market have been very, very wide, and 0:11:25.400 --> 0:11:28.359 you're seeing people who are happy to trade liquidity today 0:11:28.400 --> 0:11:30.920 for higher returns, and I think that's been a real shift. 0:11:31.160 --> 0:11:33.679 So the investment grade corporate on market in the US 0:11:33.800 --> 0:11:36.160 is about five point nine trillion dollars. The high yield 0:11:36.320 --> 0:11:39.240 public I'm talking about is one point three trillion dollars. 0:11:39.240 --> 0:11:42.520 How big in context? Just putting that into context, how 0:11:42.520 --> 0:11:46.000 big is this private debt market and how big has 0:11:46.000 --> 0:11:48.959 it grown? So it's tiny in context of that tiny, 0:11:49.040 --> 0:11:51.160 just like the entire private markets are tiny. We're looking 0:11:51.200 --> 0:11:55.400 at fundraising statistics last year and total dollars deployed. If 0:11:55.400 --> 0:11:57.959 you look at the total dollars invested across the entire 0:11:58.000 --> 0:12:01.480 private equity landscape, it wasn't enough money deployed last year 0:12:01.520 --> 0:12:03.920 to go buy Apple. I mean, that's the thing that 0:12:03.960 --> 0:12:05.360 I think when you step back and put it in 0:12:05.480 --> 0:12:10.439 context of the private markets are small in any metric 0:12:10.520 --> 0:12:13.000 in comparison to the public markets, but they're growing. But 0:12:13.040 --> 0:12:15.560 they're growing, and there's a lot of money chasing them. 0:12:15.679 --> 0:12:19.239 How concerned are you about these UH securities becoming overvalued 0:12:19.240 --> 0:12:21.360 at this point? Yeah? So I think the private markets 0:12:21.360 --> 0:12:23.440 have gotten expensive like the rest of the markets have 0:12:23.480 --> 0:12:25.560 gotten expensive. I think if you put the private markets 0:12:25.559 --> 0:12:28.320 in context of the public side, there you actually see 0:12:28.320 --> 0:12:31.000 that the private is still trading at a material discount 0:12:31.080 --> 0:12:33.719 to the public markets, and it should. Again a real 0:12:33.800 --> 0:12:36.720 lack of liquidity, and so again investors are kind of 0:12:36.760 --> 0:12:39.160 weighing that. I go back to my earlier comment. I 0:12:39.200 --> 0:12:41.360 think one of the things that's changing so much among 0:12:41.360 --> 0:12:46.240 the institutional investors how they think and value and price liquidity. 0:12:46.320 --> 0:12:48.679 I think, going into the financial crisis, most of them 0:12:48.679 --> 0:12:52.080 frankly overvalued liquidity. I think coming out of this, many 0:12:52.080 --> 0:12:54.520 of them are beginning to shift and say, we're pension 0:12:54.640 --> 0:12:57.640 We're gonna be around for decades, if not hundreds of years. 0:12:58.040 --> 0:13:00.280 We can probably start to take the chan ants of 0:13:00.360 --> 0:13:02.880 putting a lot more assets in an ill liquid bucket 0:13:03.200 --> 0:13:05.400 and take the better longer term returns for that. So 0:13:05.400 --> 0:13:09.239 the pendulum is swinging back to h accepting a liquidity. 0:13:09.320 --> 0:13:11.800 Eric Hush, thank you so much for joining us. Eric 0:13:11.840 --> 0:13:15.280 Kush's vice chairman and head of strategic Initiatives at Hamilton Lane, 0:13:15.480 --> 0:13:32.240 which oversees about forty billion dollars and it's based in Philadelphia. Well, 0:13:32.360 --> 0:13:36.520 Netflix shares are soaring, everyone's back in love with this 0:13:36.960 --> 0:13:42.000 video streaming service, and yet that cash burn just always 0:13:42.240 --> 0:13:45.040 is amazing. To Shara Ovid, who joins us now. Shara 0:13:45.080 --> 0:13:47.880 Ovida is a Bloomberg gad Fly columnist who has been 0:13:48.040 --> 0:13:50.360 talking a lot about this over the past two days, 0:13:50.800 --> 0:13:53.200 and I've been participating, so I thought, why don't we 0:13:53.240 --> 0:13:54.960 just talk to each other. Let's talk to each other. 0:13:54.960 --> 0:13:57.360 We need Yeah, we have the same conversation over and 0:13:57.360 --> 0:14:01.000 over again, Shira. So what's going on here and why 0:14:01.160 --> 0:14:04.960 are stock investors dismissing the fact that this company just 0:14:05.000 --> 0:14:07.560 can't seem to make money? Well, look, everything is a 0:14:07.559 --> 0:14:10.120 trade off right in in how you run a company. 0:14:10.120 --> 0:14:13.320 And Netflix has made a concerted strategy to try to 0:14:13.400 --> 0:14:16.440 grow its subscriber base as quickly as it possibly can 0:14:16.559 --> 0:14:19.400 in the US and outside, and as a result of that, 0:14:19.720 --> 0:14:23.480 it is hemorrhaging cash that haven't been free cash flow 0:14:23.520 --> 0:14:27.120 positive for three years. In the last twelve months, the 0:14:27.240 --> 0:14:31.720 free cash flow is negative two point one billion dollars, which, 0:14:32.000 --> 0:14:35.600 as I pointed out in my Gatfly column yesterday's bigger 0:14:35.640 --> 0:14:38.240 than the negative free cash flow at Tesla, which is 0:14:38.280 --> 0:14:43.280 sort of notorious for burning cash like there's no tomorrow. Sure, 0:14:43.800 --> 0:14:46.440 you know we've heard this kind of story before. When 0:14:46.440 --> 0:14:49.720 you talk about subscriber growth, my mind turns back to 0:14:50.640 --> 0:14:54.720 a O L and the idea that every month you 0:14:54.720 --> 0:14:57.400 would wait for those subscriber numbers, and if they were 0:14:57.440 --> 0:15:02.120 positive or exceeded estimates, then stock moved higher, if not lower, 0:15:02.160 --> 0:15:04.840 and then eventually of course you sell the company to 0:15:05.000 --> 0:15:07.720 Time Warner. Uh. This has got a market cap of 0:15:07.760 --> 0:15:12.040 about seventy eight billion dollars, which I think equals maybe 0:15:12.080 --> 0:15:16.600 what cash Apple has on its balance sheet. This is 0:15:16.680 --> 0:15:19.120 sticky money, though, this is different than this is like 0:15:19.200 --> 0:15:22.320 its own cable system, isn't it. Yeah, it's pretty sticky. 0:15:22.320 --> 0:15:27.000 I mean, look, you can. Yeah, it's not very expensive 0:15:27.040 --> 0:15:30.200 at least if you you know, for most households in 0:15:30.200 --> 0:15:32.960 the US, that's not very expensive. And it is pretty sticky. 0:15:32.960 --> 0:15:35.880 Although you can cancel Netflix at any time, right, It's 0:15:35.960 --> 0:15:39.440 it's not exactly a good luck trying to do that 0:15:39.480 --> 0:15:41.720 if you've got a family, Yes, exactly. I mean, look, 0:15:41.720 --> 0:15:44.320 the fact is that a lot of Netflix subscribers really 0:15:44.480 --> 0:15:45.920 like it and feel like they get a lot of 0:15:46.000 --> 0:15:47.960 value out of that ten bucks a month. Well, they 0:15:48.000 --> 0:15:50.160 got all the content to they get. The House of Cards. 0:15:50.200 --> 0:15:52.040 Aren't just the new black, right, I mean, these are 0:15:52.040 --> 0:15:53.960 all hit programs that you're not going to watch anywhere 0:15:53.960 --> 0:15:56.600 else I'm not. I mean, look, Netflix has a hunt 0:15:56.720 --> 0:16:01.680 more than a hundred million subscribers globally, in fifty million 0:16:01.720 --> 0:16:04.880 in the United States. That's roughly half of the households 0:16:04.880 --> 0:16:07.640 in the United States. With the broadband internet access. So 0:16:08.080 --> 0:16:10.240 by any measure, what they have done to build this 0:16:10.320 --> 0:16:15.520 company is incredibly impressive. They've changed the nature of entertainment. So, uh, 0:16:15.640 --> 0:16:17.800 you know, him was saying that they have a market 0:16:17.800 --> 0:16:20.800 cap of about seventy eight billion dollars, which makes them 0:16:20.840 --> 0:16:25.200 a very expensive takeover target if someone were interested in that. However, 0:16:25.680 --> 0:16:30.320 you do have to wonder if a conglomerate like Amazon 0:16:31.000 --> 0:16:36.320 that has perhaps broader distribution and more diversified streams of 0:16:36.360 --> 0:16:39.840 revenue might do well to own a company like this 0:16:39.960 --> 0:16:42.160 rather than trying to go it alone and compete in 0:16:42.240 --> 0:16:44.920 the content game. Is there any talk of that? Over 0:16:45.000 --> 0:16:51.000 the years, Netflix has definitely been the subject of takeover speculation, rumors, 0:16:51.040 --> 0:16:53.160 wish for thinking whatever you want to call it. A 0:16:53.240 --> 0:16:55.960 Disney and Apple or among the companies that are often 0:16:56.040 --> 0:16:59.560 mentioned as potential acquirers of Netflix. But yeah, it is 0:17:00.080 --> 0:17:03.920 a billion dollar plus company, so with a takeover premium, 0:17:03.960 --> 0:17:07.399 that's a hundred billion dollars even for Apple, that's a 0:17:07.520 --> 0:17:10.760 very large acquisition, so it's no easy feet And also, look, 0:17:10.800 --> 0:17:13.280 if you look at Amazon, that's a company that has 0:17:13.560 --> 0:17:16.800 sort of built a mini Netflix on its own without 0:17:16.880 --> 0:17:20.800 having to buy Netflix, and um, Apple and Facebook both 0:17:20.880 --> 0:17:24.840 have uh web video ambitions of their own that they're 0:17:24.880 --> 0:17:27.560 doing in how so, it's not impossible to sort of 0:17:27.600 --> 0:17:31.800 replicate Netflix or get close to replicating Netflix without buying Netflix. 0:17:31.880 --> 0:17:34.320 So Netflix expects to keep burning cash. What could they 0:17:34.359 --> 0:17:39.920 do that would change your mind about how damaging our not? Uh? Well, 0:17:40.080 --> 0:17:44.800 I I guess sustained subscriber growth would be helpful. And 0:17:45.320 --> 0:17:49.439 at some point, right and I don't know when that is, UM, 0:17:49.480 --> 0:17:52.280 they're gonna have to start showing that operating leverage right 0:17:52.320 --> 0:17:57.479 that where that that switch flips and they start they 0:17:57.520 --> 0:18:01.199 go from burning cash to generating cash. But until I 0:18:01.240 --> 0:18:04.000 see that actually happening, I think it's just worthwhile to 0:18:04.080 --> 0:18:07.440 keep reminding people this is not a strategy without risks. 0:18:07.720 --> 0:18:10.400 And if you look at the stock market, it's pricing 0:18:10.440 --> 0:18:14.200 in that Netflix is going to be totally fine. And 0:18:14.240 --> 0:18:17.080 I'm just saying, look, this is a this is a 0:18:17.160 --> 0:18:20.159 risky strategy where they're burning cash in order to grow 0:18:20.720 --> 0:18:23.119 and maybe that'll turn out great or maybe it won't. 0:18:23.680 --> 0:18:26.080 I want to thank you very much, Sharra Overday Bloomberg 0:18:26.119 --> 0:18:29.919 Gadfly columnists when it comes to all things technology and uh, 0:18:29.960 --> 0:18:32.919 I encourage you to read her latest column at Bloomberg 0:18:33.080 --> 0:18:49.399 dot com. All right, let's visit them with our congressional reporter, 0:18:49.480 --> 0:18:53.040 Laura lit Then she joins us from Washington, and Laura, 0:18:53.280 --> 0:18:55.880 thanks very much for being with us. A long night 0:18:55.960 --> 0:18:59.800 or a short night for Senate Republicans, Well, last night 0:18:59.840 --> 0:19:02.640 was the long night for reporters trying to cover them. 0:19:02.720 --> 0:19:05.280 But I don't expect tonight will be a late night now. 0:19:05.400 --> 0:19:07.439 I think they're trying to regroup. And the first thing 0:19:07.520 --> 0:19:09.720 that will happen today in the big moment, will be 0:19:09.760 --> 0:19:12.120 when Senate Republicans have a caucus meeting at two pm 0:19:12.119 --> 0:19:13.879 and try to figure out what they're going to do next. 0:19:14.600 --> 0:19:17.199 And um, yeah, you know there's gonna be a lot 0:19:17.240 --> 0:19:20.280 of feedback from McConnell from his rank and file. I'm 0:19:20.320 --> 0:19:21.919 sure that there will be. I mean, this is a 0:19:22.040 --> 0:19:24.800 huge loss for him. This is really this is the 0:19:24.840 --> 0:19:27.600 first time ever that he's the leader of the Republicans 0:19:27.640 --> 0:19:31.280 while they're in a majority. And how much does this 0:19:31.400 --> 0:19:37.639 set back his agenda? It potentially causes some loss of 0:19:37.720 --> 0:19:40.719 momentum for other issues they really have in the Senate 0:19:41.000 --> 0:19:44.240 other than confirming Neil Gorssh which was an a plus 0:19:44.280 --> 0:19:47.119 accomplishment for the Republicans of our President Trump. They have 0:19:47.280 --> 0:19:53.240 largely been simply doing confirmations of agencies and assistant secretaries 0:19:53.280 --> 0:19:55.280 and all kinds of positions after they moved from the 0:19:55.320 --> 0:19:57.560 cabinet and have not really been moving very much in 0:19:57.960 --> 0:20:01.119 policy wise. And this is a this is what they 0:20:01.160 --> 0:20:03.159 spent half a year on in the House, in the Senate. 0:20:03.840 --> 0:20:06.480 Uh And now they're going to have to try to 0:20:06.520 --> 0:20:10.879 see if they have lost momentum on other issues like 0:20:11.840 --> 0:20:13.960 the spending bills for next fiscal year, where they will 0:20:14.000 --> 0:20:17.160 need some bipartisan support. It might give Democrats a little 0:20:17.200 --> 0:20:20.040 more edge and those kind of talks over agency funding. 0:20:20.640 --> 0:20:23.600 And there's also an effort by the Republicans to push 0:20:23.680 --> 0:20:27.760 through a big overhaul of the tax code. Now, is 0:20:27.800 --> 0:20:32.119 there some procedural issues that are affected by the fact 0:20:32.160 --> 0:20:34.840 that this does not look like it will pass Because 0:20:35.240 --> 0:20:39.480 I understand that the president has sixty days from the 0:20:39.520 --> 0:20:42.879 time that he takes office. I believe in order to 0:20:43.400 --> 0:20:47.240 let's say, undo legislation or executive orders that were passed 0:20:47.280 --> 0:20:52.000 by a previous administration. That's not unusual. Well, that that 0:20:52.080 --> 0:20:54.760 time period, if you're talking about the Congressional Review Act, 0:20:55.560 --> 0:20:58.119 that that time perade passed us in May. That's what 0:20:58.160 --> 0:20:59.720 I mean. In other words, now they're going to have 0:20:59.800 --> 0:21:04.879 to put something together. Yes, and this is UH, you know, 0:21:05.040 --> 0:21:10.160 turning away from the regulatory agenda which that related to UM. 0:21:10.359 --> 0:21:13.840 They what will happen with healthcare is this vote is 0:21:13.960 --> 0:21:18.159 likely to UM to fail. To the vote they're going 0:21:18.200 --> 0:21:20.159 to turn to now as an alternative, which is simply 0:21:20.440 --> 0:21:23.479 to repeal Obamacare and then replace it in two years. 0:21:23.960 --> 0:21:25.679 And then what we end to pay will happen with 0:21:25.720 --> 0:21:27.760 healthcare is that we will move into kind of like 0:21:27.880 --> 0:21:32.439 bipartisan mode, UH with Democrats to talk about things like 0:21:32.560 --> 0:21:37.200 hasse sharing, subsidies for insurers on the Obamacare exchanges, and 0:21:37.359 --> 0:21:40.720 other things that can get support in both parties. Laura, 0:21:40.800 --> 0:21:43.639 how did this develop so quickly? Because there was a 0:21:43.680 --> 0:21:46.640 lot of back and forth and a lot of game 0:21:46.680 --> 0:21:49.840 playing and moving the needle in different directions, and and UH, 0:21:49.960 --> 0:21:52.760 Mitch McConnell had quite a bit of money he could 0:21:52.800 --> 0:21:55.520 kind of play with trying to get UH senators on 0:21:55.560 --> 0:21:57.760 board with him. And then all of a sudden overnight 0:21:57.840 --> 0:22:01.760 boom to senators parted way together with McConnell giving him 0:22:02.080 --> 0:22:05.600 UH to making it two votes short. Of the majority 0:22:05.640 --> 0:22:07.560 that he needed to pass this bill. How did this 0:22:07.680 --> 0:22:10.920 develop so quickly? It was a big surprise. In fact, 0:22:10.920 --> 0:22:14.640 the President had just finished a meeting, probably about an 0:22:14.720 --> 0:22:20.240 hour before the two senators Mike Lee and Um Jerry 0:22:20.280 --> 0:22:23.160 Moran came out against the bill. Uh. He was meeting 0:22:23.200 --> 0:22:26.000 to talk with seven senators, including two members of the leadership, 0:22:26.040 --> 0:22:29.119 about strategy on the bill and about a path forward. 0:22:29.640 --> 0:22:32.280 Lindsey Graham had just told me and other reporters that 0:22:32.320 --> 0:22:35.199 he got off a cell phone with John McCain UM 0:22:35.280 --> 0:22:39.000 heading into a Senate vote where McCain, whose surgery had 0:22:39.000 --> 0:22:42.359 had deprived McConnell of the votes to proceed right away 0:22:43.320 --> 0:22:46.760 over the weekend. H McCain was telling Graham. He said 0:22:46.800 --> 0:22:49.040 that he was just itching to get back to Washington 0:22:49.040 --> 0:22:50.840 and be back here next week to resume things. No 0:22:50.880 --> 0:22:53.639 one was really expecting this, and what happened with the 0:22:53.640 --> 0:22:56.639