WEBVTT - Surveillance: Notre Dame's Past & Future 0:00:00.080 --> 0:00:12.960 Ye. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:17.560 Jay Lee. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:28.159 Bloomberg dot Com, and of course on the Bloomberg. To 0:00:28.200 --> 0:00:30.400 the equity market in the United States, we are still 0:00:30.440 --> 0:00:33.879 within one percent of an all time high. Will the 0:00:33.920 --> 0:00:37.280 equity market find continued support from the fundamentals, both the 0:00:37.320 --> 0:00:39.080 earnings and the data. I'm pleased to say here in 0:00:39.080 --> 0:00:42.560 New York, Monamaha, John joins US now Alliance is Global Investors, 0:00:42.640 --> 0:00:45.639 US investment strategist. Good morning to Mona. Good morning John. 0:00:45.760 --> 0:00:48.360 So let's explore that question, shall we, and try and 0:00:48.400 --> 0:00:52.080 answer it. Will we find support from the fundamentals? Yeah, 0:00:52.120 --> 0:00:54.360 you know, I think the market, you know, year to 0:00:54.440 --> 0:00:59.280 date up about from the December low up now, so 0:00:59.400 --> 0:01:02.480 really uh to to get a next leg higher, we're 0:01:02.480 --> 0:01:05.760 gonna have to see a really impressive set of fundamentals. 0:01:05.959 --> 0:01:07.959 What we're looking at and where we're seeing signs of 0:01:08.000 --> 0:01:10.880 optimism is probably more towards the second half of the year, 0:01:10.959 --> 0:01:15.199 when not only China potentially rebounds um not only where 0:01:15.240 --> 0:01:18.520 we might get some European stabilization and the US earning 0:01:18.560 --> 0:01:21.440 story unfold. But some of the geopolitical tensions that we've 0:01:21.480 --> 0:01:25.399 talked about um US China trade, maybe even something around 0:01:25.400 --> 0:01:28.160 Brexit starts to clear up as well. So I think 0:01:28.200 --> 0:01:30.920 in order to get another leg higher here, one we'd 0:01:30.920 --> 0:01:33.600 be hopeful for some sort of consolidation. I think that 0:01:33.640 --> 0:01:36.240 would be healthy. Uh. And then two, we'd really need 0:01:36.319 --> 0:01:40.600 to see the global picture improve, the global the global 0:01:40.680 --> 0:01:46.400 picture improve. But the fact is it's been a stunning rally. 0:01:46.680 --> 0:01:48.880 J and J earnings just came out. I guess they 0:01:48.920 --> 0:01:51.680 were midpoint John, you know, not much to talk about there. 0:01:51.720 --> 0:01:55.160 They delivered boring average goods. Fine, great, Great. Are you, 0:01:55.240 --> 0:01:58.800 as a strategist going to micro analyze every earnings report 0:01:59.080 --> 0:02:03.520 the revenue and margin dynamics? You know? I think generally 0:02:03.960 --> 0:02:07.000 the earnings picture here in the US, where we were 0:02:07.000 --> 0:02:10.840 in the last quarter, revisions were moving downward, downward, downward. 0:02:11.320 --> 0:02:13.760 Now we are starting to see some basing in that, 0:02:13.880 --> 0:02:16.640 and we're seeing Q one earnings, which started in earnest 0:02:16.680 --> 0:02:20.440 last Friday, really beating expectations here. So Q one expectations 0:02:20.440 --> 0:02:22.679 are negative four percent, probably going to get closer to 0:02:23.200 --> 0:02:26.760 It's an expectation function. And as Pharaoh knows, it's out 0:02:26.840 --> 0:02:31.000 six months up twelve months. What's the earnings view out 0:02:31.080 --> 0:02:34.320 six months or twelve months. It's going to drive John's 0:02:34.320 --> 0:02:37.520 two oh one k back to excellence. Yeah, you know, 0:02:37.560 --> 0:02:39.880 I think in the US we're looking at four to 0:02:39.960 --> 0:02:42.480 six percent earnings growth this year. And it's interesting when 0:02:42.520 --> 0:02:45.960 you run the analysis different earnings environments, the type of 0:02:46.080 --> 0:02:48.600 S and P returns you can get. In this negative 0:02:48.639 --> 0:02:53.400 tent positive tent earnings growth environment, you actually get high 0:02:53.440 --> 0:02:56.799 single digits mid team returns. It's only when you're negative 0:02:56.840 --> 0:03:00.480 negative earnings that you get this negative What just John 0:03:00.639 --> 0:03:04.240 is so important. You can have flat earnings and stocks 0:03:04.280 --> 0:03:06.600 go up and there's silence in the room. How can 0:03:06.639 --> 0:03:09.400 that be? But there it is. That's what the math says. 0:03:09.520 --> 0:03:10.960 You know where the sonets in the room right now 0:03:11.080 --> 0:03:13.880 is with the financials. Some of these names can report 0:03:14.160 --> 0:03:17.880 record quarterly earnings and we've done even sniff. We just 0:03:18.040 --> 0:03:19.560 sort of look away and it doesn't even matter. Bank 0:03:19.600 --> 0:03:23.120 for America coming out this morning with record quarterly earnings. 0:03:23.120 --> 0:03:27.080 The question still is, Okay, that's what we expect. Where's 0:03:27.080 --> 0:03:29.520 the growth and what am I willing to pay for 0:03:29.560 --> 0:03:31.800 these earnings. What's the answer to that. Yeah, you know, 0:03:31.800 --> 0:03:34.000 I think financials is a tough one because you have 0:03:34.160 --> 0:03:36.600 the flattening yield curve dynamic that's been going on from 0:03:36.600 --> 0:03:39.760 nearly five years now. Um, when you look at rates 0:03:39.800 --> 0:03:43.480 coming down, yields coming down actually supports many other sectors 0:03:43.560 --> 0:03:47.760 except the banks. Banks don't thrive necessarily in a flattening 0:03:47.800 --> 0:03:50.400 yield curve environment, and certainly when when yields are lower 0:03:50.440 --> 0:03:53.160 in some cases around the world, negative not great for 0:03:53.200 --> 0:03:56.440 banks here, and so I think that's the story behind 0:03:56.520 --> 0:03:59.560 why financials have lagged somewhat. I think now we may 0:03:59.640 --> 0:04:02.920 see a bit of catch up here, given that earnings 0:04:03.160 --> 0:04:05.720 are coming out ahead of expectations. But I think from 0:04:05.760 --> 0:04:09.920 a sector perspective, we see opportunities beyond financials, and in fact, 0:04:10.360 --> 0:04:11.960 you know, when we look at where you want to 0:04:11.960 --> 0:04:15.000 go for growth in a lower growth environment, we continue 0:04:15.040 --> 0:04:18.520 to see technology and discretionary in particular, where the U 0:04:18.560 --> 0:04:21.240 S consumer seems to be quite supported here. Uh. The 0:04:21.240 --> 0:04:23.600 other hand of our what we call our Barbell approach 0:04:23.960 --> 0:04:26.800 is really healthcare and staples. Those are sectors that have 0:04:26.880 --> 0:04:29.159 lagged this year but really are defensive. Do well in 0:04:29.160 --> 0:04:30.960 a slowing growth environment. To be clear here, though, you 0:04:31.000 --> 0:04:35.240 don't buy the bank bologument, the financial valuations are going 0:04:35.240 --> 0:04:38.279 to rewrite higher, you know, I think it'll be tough 0:04:38.400 --> 0:04:42.719 in an environment where yields are going lower potentially and 0:04:42.760 --> 0:04:44.840 the FED is off the table for two thousand nineteen, 0:04:45.320 --> 0:04:47.479 many are expecting their right next move to be a 0:04:47.560 --> 0:04:50.040 rate cut. So I think that's a tough environment for banks. 0:04:50.200 --> 0:04:53.240 I do buy the US consumer story, which I think 0:04:53.440 --> 0:04:55.680 it is a positive for banks. So let's talk about 0:04:55.680 --> 0:04:58.400 the regional till that you're looking. At the moment, there's 0:04:58.400 --> 0:05:00.640 a lot of people getting excited about the very small 0:05:01.200 --> 0:05:05.039 green shoots appearing in Europe, and slowly I can feel 0:05:05.080 --> 0:05:08.960 the bearish sentiment capitulating as the year progresses. Where do 0:05:09.000 --> 0:05:12.159 you stand on that, that whole Europe versus US debate 0:05:12.240 --> 0:05:13.960 that we've had for the last couple of years. Yeah, 0:05:13.960 --> 0:05:16.480 I know. It's interesting. We came into the year with 0:05:16.520 --> 0:05:18.920 another very clear barbell. On one hand of that barbell 0:05:19.040 --> 0:05:21.240 was the US best on the block from a developed 0:05:21.279 --> 0:05:24.120 market perspective. Other hand of that barbell was China and 0:05:24.200 --> 0:05:28.839 parts of em Now, China, you know, has performed phenomenally 0:05:28.920 --> 0:05:33.640 this year, UM markets up plus we're looking at Oh no, 0:05:33.720 --> 0:05:36.520 I'm just gonna say quickly on the European question, we 0:05:36.560 --> 0:05:39.040 are you know what John was alluding to. We're starting 0:05:39.080 --> 0:05:42.000 to kind of come around to as well. Europe may 0:05:42.040 --> 0:05:45.120 benefit if there is a resolution to trade. It's a 0:05:45.120 --> 0:05:49.760 great source of dividends potentially and clearly has lagged the 0:05:49.800 --> 0:05:53.440 markets and from evaluation perspective, starting to look somewhat interesting, 0:05:53.640 --> 0:05:56.000 but again very data dependent year to date. I mean 0:05:56.080 --> 0:05:59.320 Chinese stocks, this is in US dollars, John, they're up 0:05:59.360 --> 0:06:03.200 thirty one percent. It maybe they're up if you look 0:06:03.200 --> 0:06:06.440 at another is that a real stock market? I mean, 0:06:06.480 --> 0:06:10.000 does Alians actually say to people China to invest in 0:06:10.120 --> 0:06:14.799 China stocks? Is actually normal? Biddess dynamics, you know the 0:06:14.800 --> 0:06:17.279 they've opened up their a shares market that we think 0:06:17.360 --> 0:06:19.560 is a real story. UM will become a larger and 0:06:19.640 --> 0:06:21.840 larger part of the m c I index. We agree 0:06:21.880 --> 0:06:24.560 though a lot of the Chinese equity market retail driven, 0:06:24.640 --> 0:06:26.839 and so that can be more volatile than than the 0:06:26.880 --> 0:06:29.440 average market. Okay, Mona, thank you so much for coming 0:06:29.480 --> 0:06:32.840 and just lights from Alians. But today I like John 0:06:32.839 --> 0:06:35.800 what you're framing there between the europe US dynamic, which 0:06:35.920 --> 0:06:54.080 means almost a May June story. George Cassidy with this 0:06:54.240 --> 0:06:57.320 RBC Campital Markets. His research note is, you know, the 0:06:57.320 --> 0:07:00.599 occasional small bank, lots of regional work, and he doesn't 0:07:00.600 --> 0:07:04.120 look at the two big defails like Bank America gerod. 0:07:04.200 --> 0:07:06.640 If I could go to one slide in the Bank 0:07:06.640 --> 0:07:09.560 of America first presentation, the power point, I'm going to 0:07:09.640 --> 0:07:14.200 guess it's twenty pages. The digital build out page is 0:07:14.400 --> 0:07:20.320 just extraordinary. Are we underestimating the speed of digital growth 0:07:20.480 --> 0:07:24.520 within American banking? Tommy, you bring up a really good 0:07:24.560 --> 0:07:27.640 point because I was looking at that page as well 0:07:27.840 --> 0:07:30.840 this morning, and what took my breath away was the 0:07:31.360 --> 0:07:35.440 person to person payment. When I sent John Farrell money, 0:07:35.480 --> 0:07:40.080 you know I lose on Liverpool, I sent him in 0:07:40.240 --> 0:07:42.920 rather having to write him and check. And so that 0:07:42.920 --> 0:07:46.360 that growth has been very impressive. And I think you 0:07:46.480 --> 0:07:49.080 put your thumb on something here. As much as there 0:07:49.200 --> 0:07:52.840 was a threat from the you know, tech area of 0:07:52.920 --> 0:07:56.000 the financial tech companies two or three years ago, companies 0:07:56.040 --> 0:07:59.240 like Bank America, JP Morgan, even some of our big 0:07:59.280 --> 0:08:03.160 regionals are spending incredible amounts the money and are at 0:08:03.200 --> 0:08:06.000 the cutting edge. And Bank America's right there, as evidenced 0:08:06.000 --> 0:08:08.920 by slide five. I mean, Jared, compared to say, the 0:08:08.960 --> 0:08:11.600 rest of Europe, the United States well behind on this 0:08:11.680 --> 0:08:14.040 kind of initiative. That's still people in this country that 0:08:14.080 --> 0:08:17.520 regularly pay their rent with the check and the check 0:08:17.560 --> 0:08:19.640 book is something that many people in Europe don't have 0:08:19.680 --> 0:08:21.920 in their pocket anymore, Gerard. So I just wonder how 0:08:21.960 --> 0:08:24.800 much growth is left here. And it sounds like a law. John, 0:08:24.880 --> 0:08:27.520 You hear a great point. I'm always when I travel 0:08:27.760 --> 0:08:30.480 over to Europe, I'm always amazed at how much further 0:08:30.600 --> 0:08:33.360 along they are. And one thing I remind myself is 0:08:33.360 --> 0:08:37.360 that we have legacy systems in our banking industry, as 0:08:37.440 --> 0:08:40.200 you well know, and because we have fifty seven hundred 0:08:40.200 --> 0:08:42.840 banks still, you've got to convert all fifties seven hundred 0:08:42.920 --> 0:08:45.680 over to these new systems. It takes time, and as 0:08:45.840 --> 0:08:48.920 why Canada and Europe are well ahead of us in 0:08:49.000 --> 0:08:52.080 our banking technology. But to your point, there's a lot 0:08:52.160 --> 0:08:55.240 of growth coming from our banks in this area, So jareded, 0:08:55.320 --> 0:08:57.040 loads of growth coming. We've got to talk about a 0:08:57.040 --> 0:08:59.880 complete bank. Just how much this moves the overall dial? 0:09:00.040 --> 0:09:03.080 Does they shifted? It's all I think over time it 0:09:03.160 --> 0:09:06.000 does because as you know, there will be a less 0:09:06.040 --> 0:09:09.600 of a need for branches, and branches is probably where 0:09:09.600 --> 0:09:12.560 the branch delivery channel is one of the most expensive 0:09:12.920 --> 0:09:16.640 parts of a retail bank. And because of this technology, 0:09:17.280 --> 0:09:19.640 we just won't need as many branches over the next 0:09:19.640 --> 0:09:23.240 ten years, and those branches will transport themselves more into 0:09:23.280 --> 0:09:28.120 sales centers and doing everyday transactions. What is the job 0:09:28.200 --> 0:09:32.200 dynamic when all these people say we need expense control? Right? 0:09:32.320 --> 0:09:35.719 Is Gerardcassity looking at any given big bank. Let's say, 0:09:35.720 --> 0:09:39.240 if a round number a hundred and fifty employees, is 0:09:39.280 --> 0:09:42.319 it a hundred year a hundred there? Is it divisions 0:09:42.320 --> 0:09:44.600 where they're going to take out five or ten thousand 0:09:45.120 --> 0:09:47.360 or are we missing the point? It could be something bigger. 0:09:48.240 --> 0:09:50.880 I think it's a hundred here and a hundred there, 0:09:50.920 --> 0:09:54.240 because you might remember tom coming out of the financial crisis, 0:09:55.040 --> 0:09:58.320 the banks had thousands of employees working on bad credit, 0:09:58.720 --> 0:10:01.120 and as you know, credit quality today is very strong, 0:10:01.440 --> 0:10:04.400 and so those people were either let go or moved 0:10:04.400 --> 0:10:07.040 into other areas. So I think what you'll see it 0:10:07.080 --> 0:10:10.960 won't be entire divisions. Technology I think will complement the 0:10:11.040 --> 0:10:14.000 human element of it. But it will change, no doubt 0:10:14.000 --> 0:10:16.240 about it, over the next ten years. Let's get the 0:10:16.240 --> 0:10:18.320 earning school counts now. He was a really rough session 0:10:18.360 --> 0:10:21.320 for Goldman yesterday. The stock was down three point eight percent. 0:10:21.760 --> 0:10:24.440 Sock GM coming out cutting the price target for Goldman 0:10:24.480 --> 0:10:27.840 to a street love once seventy. We closed yesterday just 0:10:27.960 --> 0:10:31.160 south of two hundred. What's the story there? I think 0:10:31.200 --> 0:10:33.480 a big loser of this quarterly earning season so far. 0:10:34.120 --> 0:10:37.320 I would say that because they're so concentrated in the 0:10:37.360 --> 0:10:40.319 capital markets. We all know from all the big banks, 0:10:40.679 --> 0:10:43.400 trading revenues were down year of a year, whether it 0:10:43.520 --> 0:10:46.600 was an equity or fick. But because they don't have 0:10:46.640 --> 0:10:49.760 the diversity of revenues of JP Morgan, Bank America and 0:10:49.880 --> 0:10:54.640 City Group, their results were more concentrated in capital markets. 0:10:54.880 --> 0:10:58.680 And even those diversified revenue companies like a Bank America today, 0:10:58.960 --> 0:11:01.640 their revenues were acted by the market. So I think 0:11:01.679 --> 0:11:05.800 you're right Goldman was affected more because they're more concentrated 0:11:05.840 --> 0:11:08.280 in that business. Jeri Cassie, if you didn't know the name, 0:11:08.280 --> 0:11:11.120 I'm glad. John brought up Golden Sacks ten year track 0:11:11.160 --> 0:11:14.600 record with dividend five point four nine percent a year 0:11:15.400 --> 0:11:19.440 in any other industry. That's just totally unacceptable. What's the 0:11:19.480 --> 0:11:23.800 magic of Goldman Sacks at five point four per year? 0:11:24.920 --> 0:11:28.200 I think it still has amongst the trading community, in 0:11:28.240 --> 0:11:31.960 particular the hedge funds. UM. They still have an attraction. 0:11:32.080 --> 0:11:35.439 People know that they can trade. This name is very liquid, 0:11:35.720 --> 0:11:38.800 it's volatile because of the capital markets. It's not a 0:11:39.480 --> 0:11:42.160 boring bank to say say the least. So I think 0:11:42.240 --> 0:11:45.360 that's the attraction rather than a long term you know 0:11:45.480 --> 0:11:47.920 investor who wants to buy and hold here's your valuable 0:11:48.000 --> 0:11:50.280 drug cassidy, thank you so much. After Bank of American 0:11:50.280 --> 0:12:07.520 and RBC cap, let's bring in bloom Bag intelligence, maybe 0:12:07.520 --> 0:12:10.600 analyst either Rack and Athan on Netflix armies which come 0:12:10.679 --> 0:12:16.640 after the closing about Gaithera subscriptions. What would they look like? Yes, yes, 0:12:16.720 --> 0:12:20.000 it is always a story, um a subscriber story, and 0:12:20.040 --> 0:12:22.400 as always the focus will be on some sub numbers. 0:12:22.920 --> 0:12:26.840 Management has guided to about eight point nine million new 0:12:26.840 --> 0:12:29.840 additions for this quarter, about one point six million in 0:12:29.960 --> 0:12:33.160 the U S and the rest international. But I think 0:12:33.160 --> 0:12:36.600 the bigger question John this quarter is really going to 0:12:36.679 --> 0:12:40.120 be the two que guide, uh that there really two concerns. 0:12:40.200 --> 0:12:43.160 I think that the market is looking at one, is 0:12:43.200 --> 0:12:46.720 the rising competition, especially with a very aggressive price point 0:12:46.920 --> 0:12:49.800 coming in from the Disney Plus service. Uh and then 0:12:49.880 --> 0:12:53.200 a thirteen to eighteen percent price hike that is actually 0:12:53.240 --> 0:12:57.200 taking effect for domestic subscribers in two que So gather 0:12:57.440 --> 0:12:59.920 how difficult historically is it to get any kind of 0:13:00.000 --> 0:13:02.719 clarity of what's about to happen in the future where 0:13:02.760 --> 0:13:07.120 Netflix adjust priced. We have pretty noisy quarters. Um, yeah, 0:13:07.200 --> 0:13:10.320 it is. There has been some volatility in the past, 0:13:10.640 --> 0:13:15.000 but actually the last time that they instituted a price increase, 0:13:15.080 --> 0:13:17.880 we did not see a whole lot of turn So 0:13:18.000 --> 0:13:21.600 kind of just showing how with the breadth, the quality 0:13:21.679 --> 0:13:25.559 and the quantity of their content um users are willing 0:13:25.600 --> 0:13:31.400 to digest even substantial price hikes. Netflix is Netflix, But 0:13:31.480 --> 0:13:34.000 it's also to me a mystery. We sort of vastly 0:13:34.080 --> 0:13:37.520 understand the sweat at Disney, the sweat at the old 0:13:37.520 --> 0:13:41.800 Time Warner, etcetera, and HBO management change. How is Netflix 0:13:42.080 --> 0:13:46.320 management responding to everybody wanting to be part of their 0:13:46.360 --> 0:13:50.079 streaming world? So Netflix has I mean they've they've been 0:13:50.120 --> 0:13:53.440 asked this question quartering and quarter out, and they've always 0:13:53.520 --> 0:13:56.960 kind of downplayed the competitive threat. I mean at the 0:13:57.040 --> 0:14:00.680 end of the day, Tom, Netflix offers consumers and a 0:14:00.840 --> 0:14:05.240 very compelling entertainment experience at a relatively low cost, without 0:14:05.280 --> 0:14:08.480 commercials and on any device. And if you look at 0:14:08.520 --> 0:14:12.760 the global market and the secular shift to streaming, they're 0:14:12.760 --> 0:14:16.800 relatively underpenetrated. And that's something that you know, Netflix management 0:14:16.880 --> 0:14:20.120 drives home, quadring and quarter out. Okay, so let's talk 0:14:20.120 --> 0:14:22.800 about this sentulist shift to streaming. Let's talk about what 0:14:22.920 --> 0:14:24.920 is ultimately driving it. I can tell you from my 0:14:24.920 --> 0:14:28.240 own personal perspective, what drove me to cut the cord 0:14:28.680 --> 0:14:31.240 was because it costs less just to buy Hulu and 0:14:31.280 --> 0:14:33.480 to have all the channels on that. We're now going 0:14:33.520 --> 0:14:36.400 towards this world where I need Hulu, Disney plus Netflix, 0:14:36.520 --> 0:14:39.320 HBO am I just going back to the cost of 0:14:39.400 --> 0:14:43.720 cable again. Yeah, I mean, you know that is kind 0:14:43.760 --> 0:14:46.520 of becoming an existential question. But I think what's going 0:14:46.600 --> 0:14:50.480 to happen, especially with the new Disney services, it might 0:14:50.560 --> 0:14:54.640 actually end up accelerating cord cutting a little bit. At 0:14:54.680 --> 0:14:56.720 the end of the day. I mean, there are there's 0:14:56.760 --> 0:15:00.440 a whole plethora of services out there, but once the 0:15:00.560 --> 0:15:03.080 dust settles, stay in the next two to three years, time. 0:15:03.120 --> 0:15:04.880 I think what we're going to see is they're going 0:15:04.960 --> 0:15:07.400 to be winners and losers. But I see both both 0:15:07.480 --> 0:15:12.320 Netflix and Disney emerging as winners. What about the news side? 0:15:12.440 --> 0:15:16.240 You know all the YouTube TV is John mentioned Hulu 0:15:16.560 --> 0:15:19.760 and and and all those do they compete against each other? 0:15:19.840 --> 0:15:24.160 Are they essentially monopolistic activity? So what we've actually seen 0:15:24.200 --> 0:15:26.680 so those tom are what we refer to as the 0:15:26.800 --> 0:15:30.240 virtual m v P d s or they're basically live 0:15:30.360 --> 0:15:34.760 TV services over the internet. Um, they have those services 0:15:34.800 --> 0:15:38.000 have managed to rack up about eight million subscribers so far, 0:15:38.080 --> 0:15:41.160 which is which is a pretty substantial number. But we've 0:15:41.240 --> 0:15:45.040 also seen but they're they're essentially not making any money. 0:15:45.600 --> 0:15:48.360 Uh and at some point, and we've actually seen this, 0:15:48.760 --> 0:15:50.920 direct TV now and some of the other services have 0:15:51.040 --> 0:15:54.400 been raising prices gradually and with that there has been 0:15:54.440 --> 0:15:58.320 some increased churn. So I'm not sure everything is hunky 0:15:58.400 --> 0:16:02.200 dory on you know, the school TV services front, Jennifer. 0:16:02.400 --> 0:16:05.200 I think what she just said there's absolutely critical and 0:16:05.200 --> 0:16:09.560 and and that we're not sure it's all new territory. Yeah, 0:16:10.200 --> 0:16:12.200 just that simple. I mean, how many soccer games are 0:16:12.200 --> 0:16:15.760 you watching a weekend? John? Two or three? Oh? You lie, 0:16:15.920 --> 0:16:20.800 you're watching five six three Max. Okay, I mean sports 0:16:20.920 --> 0:16:23.360 get very quickly her. Sports is still a big draw 0:16:23.480 --> 0:16:27.640 with YouTube TV right. Sports is absolutely a big drawing 0:16:27.760 --> 0:16:30.280 And and um, you know that was the whole bed 0:16:30.400 --> 0:16:32.840 that Fox made when they kind of sold their entertainment 0:16:32.880 --> 0:16:37.480 assets but kept sports and kept news writes to catch 0:16:37.520 --> 0:16:39.480 you with your great update, gething Rock and A and 0:16:39.520 --> 0:16:42.400 then Bloomberg Intelligence media analysts. We can't be down to 0:16:42.480 --> 0:16:58.280 Netflix earnings coming after the closing Bolt MATCHI Zeddi with 0:16:58.360 --> 0:17:02.000 US Chief Fields Economists doing your bank. And the joy 0:17:02.160 --> 0:17:05.000 of his research report is it is beyond loaded, not 0:17:05.040 --> 0:17:08.320 only with charts but with intelligence charts. It's like a 0:17:08.440 --> 0:17:12.800 it's like a you know, three hour interview happening right now. Um, John, 0:17:12.880 --> 0:17:15.399 I want to go to something pretty obscure mental lozette 0:17:15.480 --> 0:17:19.280 to begin with. You really slice and dice inventory dynamics 0:17:19.320 --> 0:17:24.480 and business investment. Exactly where are the inventories of American 0:17:24.520 --> 0:17:28.560 business right now? Yeah, you're you're absolutely right. I think 0:17:28.560 --> 0:17:31.359 it's really important for the near term growth outlook, UM, 0:17:31.560 --> 0:17:34.720 on some measures inventories. You know that we've had a 0:17:34.800 --> 0:17:39.119 recently big inventory build in the back half of last year. Um, 0:17:39.200 --> 0:17:41.840 and some people I think have built in an inventory 0:17:41.920 --> 0:17:44.440 drag on growth in the first half of this year. 0:17:44.800 --> 0:17:46.760 When we look at it, it doesn't look like it's 0:17:46.800 --> 0:17:50.840 something that should significantly way on production. Instead, it looks 0:17:50.880 --> 0:17:55.080 to us like you had a big import increase ahead 0:17:55.119 --> 0:17:58.919 of people that were expecting tariffs UM and that that 0:17:59.080 --> 0:18:02.000 really has not built into manufacturing inventories. And if you 0:18:02.040 --> 0:18:05.359 look at the I s M, when manufacturing firms don't 0:18:05.440 --> 0:18:07.760 think that their inventories are too high at this point. 0:18:08.520 --> 0:18:10.560 So we do not see a big inventory drag coming 0:18:10.840 --> 0:18:13.760 in the coming quotas from from the US. And as 0:18:13.800 --> 0:18:15.080 a result of that, I think we're a bit above 0:18:15.119 --> 0:18:17.680 consensus on on US growth. We we expect two point 0:18:17.680 --> 0:18:20.440 three percent growth this year. We're consensus is probably a 0:18:20.440 --> 0:18:23.320 little bit closer to two looking at this year in 0:18:23.400 --> 0:18:25.840 our survey, we've got it about two point four for 0:18:25.880 --> 0:18:28.680 the median estimate going into next year. Is when a 0:18:28.720 --> 0:18:31.560 lot of people see the deceleration. Matt one point nine 0:18:31.560 --> 0:18:37.000 percent the median estimate there, what's we have some something 0:18:37.119 --> 0:18:39.520 very similar to that. I think you know, most people 0:18:39.560 --> 0:18:42.639 are looking out to they're expecting a modest fiscal drag 0:18:43.359 --> 0:18:47.119 versus the positive fiscal impulse you had this year, there's 0:18:47.359 --> 0:18:51.040 some delay in the tightenings from the said which can 0:18:51.240 --> 0:18:54.159 take about eighteen months to work its way through the system, 0:18:54.200 --> 0:18:57.080 and so we have one nine percent growth again next year. 0:18:57.359 --> 0:18:59.399 I think more maybe more interestingly as you go out 0:18:59.440 --> 0:19:01.560 to one, which is a very long time from now. 0:19:02.200 --> 0:19:04.000 But I think a lot of people expect a continued 0:19:04.040 --> 0:19:06.879 deceleration in the US and global economy. We actually have 0:19:06.880 --> 0:19:10.600 to pick up. And I think the reason is with 0:19:10.640 --> 0:19:14.240 the Fed on hold, with them not getting to restrictive stance, 0:19:14.680 --> 0:19:17.480 and with the fiscal not being either a strong either 0:19:17.600 --> 0:19:19.840 driver or a a drag. There's really no good reason, I 0:19:19.840 --> 0:19:23.000 don't think for the economy to deviate materially from two. 0:19:23.480 --> 0:19:26.400 You buried the punchline. Did I hear you say next 0:19:26.480 --> 0:19:31.399 year one point nine? We do. Yeah, if you add 0:19:31.440 --> 0:19:34.920 on any kind of Peter Hooper Deutsche Bank inflation calculation, 0:19:35.400 --> 0:19:38.800 you're talking about a sub four percent nominal GDP. Right, 0:19:39.880 --> 0:19:42.200 that's correct? Is now? You studied this at u c 0:19:42.400 --> 0:19:44.040 l A. You wanted they got a library out at 0:19:44.080 --> 0:19:46.520 U c l A. Folks like Game of Thrones. You 0:19:46.560 --> 0:19:48.399 went into the library U c l A. Is there 0:19:48.440 --> 0:19:52.320 any politician in the history of mankind that can deal 0:19:52.400 --> 0:19:55.800 with a four percent or less nominal g d P, 0:19:56.400 --> 0:19:58.680 don't they By definition they have to always revert to 0:19:58.760 --> 0:20:03.679 fiscal expanse. Yeah, I think you know, there is a 0:20:03.680 --> 0:20:06.000 new normal in terms of thinking about growth, both on 0:20:06.040 --> 0:20:10.320 the real and the nominal side. Um Whereas historically potential 0:20:10.359 --> 0:20:14.000 growth was three above, we now take a potential growth 0:20:14.000 --> 0:20:16.639 in real terms closer to two percent. And so along 0:20:16.680 --> 0:20:18.840 with that two percent real growth, you actually have pretty 0:20:18.840 --> 0:20:21.480 good labor market conditions. You have wage growth continue to 0:20:21.520 --> 0:20:23.880 pick up. We have the unemployment rate falling to three 0:20:23.920 --> 0:20:26.680 point six percent, which would be the lowest level in decades. 0:20:27.240 --> 0:20:29.879 And so all that from a you know, a voter perspective, 0:20:30.400 --> 0:20:33.120 from consumers perspective, actually think looks a lot better than 0:20:33.160 --> 0:20:37.680 you would expect given two real four percent nominal done. 0:20:37.680 --> 0:20:41.720 What Mr Lozettie just said there, I have never framed 0:20:42.040 --> 0:20:46.040 on the American economy. It's just absolutely original. Where we 0:20:46.119 --> 0:20:51.480 are given a suburb GDP shouldn't surprise you. Two percent 0:20:51.480 --> 0:20:54.159 real GDP is is basically potential in the minds of 0:20:54.200 --> 0:20:57.200 many for the US economy. This shouldn't come as a shock. 0:20:58.240 --> 0:21:00.600 It was unthinkable in my how do they have that 0:21:00.680 --> 0:21:02.760 run rate. It is a brand new world out there, 0:21:02.880 --> 0:21:08.000 but this is the new normal, absolutely it is. You know, 0:21:08.080 --> 0:21:10.520 we I think we're a little bit more optimistic on 0:21:10.760 --> 0:21:14.000 getting productivity a bit higher. There is this tendency as 0:21:14.359 --> 0:21:16.359 the labor market tens, as wage growth picks up and 0:21:16.400 --> 0:21:20.639 incentivizes businesses to do capex, and productivity move higher. Uh 0:21:20.720 --> 0:21:23.479 so we see potential a little bit above two. But 0:21:23.480 --> 0:21:25.840 we're absolutely right. The new normal is that potential growth 0:21:25.880 --> 0:21:28.520 is much lower than it's been historically. The FED fund 0:21:28.600 --> 0:21:30.840 rate is much lower than it's been historically. We think 0:21:30.840 --> 0:21:33.320 the FED is not at this point um and so 0:21:33.480 --> 0:21:35.480 for per markets, it's it's a new normal and thinking 0:21:35.480 --> 0:21:38.280 about how far the fact how much volatility you're gonna have. 0:21:38.359 --> 0:21:41.520 So just finally and quickly your assumption here, the base 0:21:41.560 --> 0:21:44.000 case for the trajectory for the US economy is based 0:21:44.000 --> 0:21:46.400 on a FED that goes nowhere, no heights next two years. 0:21:47.280 --> 0:21:50.320 It is, it is, And I think there's two countervailing 0:21:50.400 --> 0:21:54.000 forces here on on growth. We we're still pretty optimistic 0:21:54.000 --> 0:21:56.800 the labor market tight and wage growth picks up. On 0:21:56.880 --> 0:21:58.880 price inflation, on the other hand, we don't see that 0:21:58.880 --> 0:22:02.359 that moving to really higher, and in the context of 0:22:02.400 --> 0:22:05.840 the said reviewing their two percent inflation target, perhaps wanting 0:22:05.840 --> 0:22:08.040 to get inflation a bit higher if they moved to 0:22:08.040 --> 0:22:11.720 an average inflation targeting regime. We don't see them tightening 0:22:11.720 --> 0:22:14.080 as a result of that. This is wonderful path that 0:22:14.119 --> 0:22:32.600 was Zetti, thank you so much with Deutsche Bank. The 0:22:32.680 --> 0:22:36.879 mood in Paris this morning after what we would yesterday 0:22:37.000 --> 0:22:40.159 simply somber in the aftermath of the great fire that 0:22:40.359 --> 0:22:43.760 ripped through the cathedral of Notre Dame. The iconic structure 0:22:43.800 --> 0:22:46.560 took more than two hundred years to build. In just 0:22:46.640 --> 0:22:49.920 a few hours, that roof from back to medieval times 0:22:50.560 --> 0:22:54.200 it is gone, of course, the history extraordinary, from the 0:22:54.280 --> 0:22:59.600 liberation of Paris of the Nazis to the modern day. 0:23:00.160 --> 0:23:03.959