1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penel podcast. I'm Paul swing you 2 00:00:05,360 --> 00:00:07,680 Speaker 1: along with my co host Lisa Brahma Waits. Each day 3 00:00:07,720 --> 00:00:10,240 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,280 --> 00:00:12,520 Speaker 1: you and your money. Whether at the grocery store or 5 00:00:12,560 --> 00:00:15,480 Speaker 1: the trading floor. Find a Bloomberg penl podcast on Apple 6 00:00:15,520 --> 00:00:17,959 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:17,960 --> 00:00:20,720 Speaker 1: at Bloomberg dot com. It is times check in with 8 00:00:20,720 --> 00:00:23,800 Speaker 1: our Bloomberg Opinion colleagues today, Tara la Chapelle, We are 9 00:00:23,840 --> 00:00:27,080 Speaker 1: so like lucky to have her darkening the doorway. As 10 00:00:27,440 --> 00:00:31,760 Speaker 1: Tom Keene would say. We're talking Netflix because Netflix is 11 00:00:31,960 --> 00:00:36,240 Speaker 1: reporting earnings after the bell, highly anticipated given how much 12 00:00:36,360 --> 00:00:40,080 Speaker 1: their shares have absolutely surged at how much competition they 13 00:00:40,120 --> 00:00:42,840 Speaker 1: face this year, Tara, what are you looking for when 14 00:00:42,840 --> 00:00:45,400 Speaker 1: they report? So? I think a lot of people expect 15 00:00:45,479 --> 00:00:47,680 Speaker 1: that the US numbers aren't going to be so great. 16 00:00:47,720 --> 00:00:50,040 Speaker 1: They might miss on those. Um you could tell by 17 00:00:50,040 --> 00:00:51,920 Speaker 1: sort of the ramp up and marketing they did towards 18 00:00:51,960 --> 00:00:53,920 Speaker 1: the end of last year, and a lot of their 19 00:00:54,000 --> 00:00:56,920 Speaker 1: newer movies and shows didn't get released until around the 20 00:00:56,920 --> 00:01:00,160 Speaker 1: holidays anyway, so you might see an uptick in customers 21 00:01:00,200 --> 00:01:03,720 Speaker 1: are up taking, customers leaving or a fewer sign ups 22 00:01:03,720 --> 00:01:06,360 Speaker 1: in the US, but really the growth is coming internationally, 23 00:01:06,440 --> 00:01:08,080 Speaker 1: so you can can kind of see how they're so 24 00:01:08,160 --> 00:01:10,760 Speaker 1: far ahead of these other apps that are launching, and 25 00:01:10,760 --> 00:01:12,600 Speaker 1: how these other companies like Disney A're going to have 26 00:01:12,640 --> 00:01:14,720 Speaker 1: to catch up with that. Um But I think as 27 00:01:14,720 --> 00:01:17,039 Speaker 1: far as the threat of you know, Disney Plus and 28 00:01:17,200 --> 00:01:19,959 Speaker 1: Apple TV Plus, there shouldn't be too much of an 29 00:01:19,959 --> 00:01:23,800 Speaker 1: impact on this quarters earnings yet because you know, these 30 00:01:23,840 --> 00:01:25,800 Speaker 1: apps are so new, and I don't think that they 31 00:01:25,840 --> 00:01:27,679 Speaker 1: had enough on them at launch for people to just 32 00:01:27,720 --> 00:01:30,679 Speaker 1: go ahead and just cut Netflix. But it does point 33 00:01:30,720 --> 00:01:33,720 Speaker 1: to you know, a higher rate of churn on all 34 00:01:33,800 --> 00:01:35,880 Speaker 1: of these apps towards the middle and end of this 35 00:01:35,959 --> 00:01:38,280 Speaker 1: year as more people become aware of these services and 36 00:01:38,319 --> 00:01:41,920 Speaker 1: start to kind of bounce between them. What is Netflix 37 00:01:42,080 --> 00:01:44,880 Speaker 1: management saying and Read Hastings, the co founder and CEO, 38 00:01:44,959 --> 00:01:47,360 Speaker 1: has really always been I think, very forthright with how 39 00:01:47,400 --> 00:01:50,600 Speaker 1: he used competition. What is he saying about how the 40 00:01:50,680 --> 00:01:53,440 Speaker 1: streaming you know environment is likely to play out over 41 00:01:53,440 --> 00:01:55,160 Speaker 1: the next few years. I mean, I think he thinks 42 00:01:55,160 --> 00:01:58,320 Speaker 1: there's room for everybody, but it does mean more spending. 43 00:01:58,400 --> 00:02:00,560 Speaker 1: You know, we're seeing that already. He said. You know, 44 00:02:00,640 --> 00:02:03,800 Speaker 1: Netflix spending had gone up like on new content last 45 00:02:03,840 --> 00:02:06,040 Speaker 1: year because you know, they can't make a show like 46 00:02:06,120 --> 00:02:08,320 Speaker 1: House of Cards at a hundred million dollars anymore. You know, 47 00:02:08,360 --> 00:02:11,720 Speaker 1: it's becoming very costly because there's just more studios and 48 00:02:11,760 --> 00:02:16,240 Speaker 1: more services competing for talent, and there's more demand for content. 49 00:02:16,320 --> 00:02:18,359 Speaker 1: So there's a lot more shows out today than there were, 50 00:02:18,400 --> 00:02:20,920 Speaker 1: you know, ten years ago on regular cable TV. So 51 00:02:21,000 --> 00:02:23,880 Speaker 1: I think it's just becoming very expensive. And I think 52 00:02:23,880 --> 00:02:27,600 Speaker 1: that's why last week's release or unveiling of Comcast and 53 00:02:27,639 --> 00:02:31,000 Speaker 1: bc US Peacock service was very interesting because they're going 54 00:02:31,320 --> 00:02:33,799 Speaker 1: the ad supported route, and I think that tells you that, 55 00:02:34,080 --> 00:02:36,720 Speaker 1: you know, Comcast realizes this isn't really a great business 56 00:02:36,760 --> 00:02:39,720 Speaker 1: model the way the streaming apps are now, and maybe 57 00:02:39,720 --> 00:02:41,799 Speaker 1: we're going to need to go to advertising to make 58 00:02:41,840 --> 00:02:44,240 Speaker 1: these profitable. And you were to call them about how 59 00:02:44,280 --> 00:02:47,200 Speaker 1: that's the right approach, I think. So, I mean, I 60 00:02:47,240 --> 00:02:50,359 Speaker 1: don't think ads are enjoyable, but I think that when 61 00:02:50,400 --> 00:02:52,720 Speaker 1: it comes down to price, and you know, just having 62 00:02:52,760 --> 00:02:55,840 Speaker 1: all these different services and it's it's just becomes very expensive. 63 00:02:55,840 --> 00:02:56,920 Speaker 1: I think at the end of the day. So I 64 00:02:56,919 --> 00:02:58,639 Speaker 1: think if they could find a way to have ads 65 00:02:58,680 --> 00:03:01,400 Speaker 1: be less and true of and maybe keep the cost down, 66 00:03:01,440 --> 00:03:04,360 Speaker 1: it would be good. Is there an opportunity here to 67 00:03:04,680 --> 00:03:07,519 Speaker 1: have no cost or a very low cost, get enough 68 00:03:07,520 --> 00:03:10,280 Speaker 1: of a critical mass? And if they're the only mover 69 00:03:10,560 --> 00:03:13,360 Speaker 1: in this kind of model, they can command a higher 70 00:03:13,400 --> 00:03:16,680 Speaker 1: premium from advertisers, and it's been shown that people would 71 00:03:16,720 --> 00:03:19,760 Speaker 1: prefer a lower cost than no ads. Is that absolutely? 72 00:03:19,800 --> 00:03:22,280 Speaker 1: They're going for eyeballs? And you know, Comcast even said 73 00:03:22,320 --> 00:03:24,720 Speaker 1: this is going to be free for not just Comcast subscribers, 74 00:03:24,800 --> 00:03:27,720 Speaker 1: but Cox subscribers as well, and they're hoping to talk 75 00:03:27,760 --> 00:03:30,240 Speaker 1: to the other cable operators about this and have those 76 00:03:30,280 --> 00:03:32,720 Speaker 1: operators make it free for their customers as well, because 77 00:03:32,720 --> 00:03:35,480 Speaker 1: this is all about getting eyeballs, not about getting a 78 00:03:35,520 --> 00:03:37,920 Speaker 1: five dollar ten dollar month subscription fee. And that's a 79 00:03:38,040 --> 00:03:40,800 Speaker 1: very different strategy than what these other companies are pursuing. 80 00:03:41,120 --> 00:03:44,000 Speaker 1: You know, the margins on that look a lot better. Um. 81 00:03:44,040 --> 00:03:46,080 Speaker 1: You know, Hulu makes more money off of its ad 82 00:03:46,120 --> 00:03:49,680 Speaker 1: supported customers than it's higher subscription based customers. So I 83 00:03:49,680 --> 00:03:52,160 Speaker 1: think that's what Comcast is looking at in China. Emulate. 84 00:03:52,680 --> 00:03:58,120 Speaker 1: Isn't Netflix still a stock that's driven by subscriber numbers 85 00:03:58,120 --> 00:04:01,320 Speaker 1: as opposed to you know, profit margins and free cash 86 00:04:01,320 --> 00:04:03,800 Speaker 1: flow and things like that. I guess for now, I mean, 87 00:04:03,840 --> 00:04:05,520 Speaker 1: I think this year that's going to have to change, 88 00:04:05,600 --> 00:04:07,920 Speaker 1: right or maybe they'll have to talk up international more. 89 00:04:07,960 --> 00:04:10,000 Speaker 1: We're just not going to see the growth on the 90 00:04:10,080 --> 00:04:12,800 Speaker 1: U S side anymore. And you know, Netflix has kind 91 00:04:12,800 --> 00:04:15,280 Speaker 1: of gone back and forth between talking about this goal 92 00:04:15,320 --> 00:04:18,560 Speaker 1: of getting to you know, cash flow positive versus well, 93 00:04:18,600 --> 00:04:20,640 Speaker 1: maybe not now, you know, because there's all these other 94 00:04:20,680 --> 00:04:23,920 Speaker 1: services and it's very expensive to stock this with content nowadays. 95 00:04:24,160 --> 00:04:26,080 Speaker 1: So I think I don't know what this story is 96 00:04:26,080 --> 00:04:27,560 Speaker 1: going to be this year. You know, something's going to 97 00:04:27,640 --> 00:04:31,120 Speaker 1: have to change in this business generally, Um, but right now, 98 00:04:31,200 --> 00:04:33,080 Speaker 1: I don't think subscriber numbers are going to be super 99 00:04:33,080 --> 00:04:36,039 Speaker 1: impressive tonight. Well, and shareholders don't care about cash burn 100 00:04:36,080 --> 00:04:38,880 Speaker 1: at this point. Right for Netflix, UM, they're starting to 101 00:04:38,880 --> 00:04:40,839 Speaker 1: care a little bit more. I think people are starting 102 00:04:40,839 --> 00:04:42,240 Speaker 1: to care a little bit more because they're going to 103 00:04:42,320 --> 00:04:45,040 Speaker 1: have competition for the first time, real competition. And as 104 00:04:45,120 --> 00:04:47,640 Speaker 1: much as read Hastings says that, you know, their competition 105 00:04:47,680 --> 00:04:50,200 Speaker 1: is still traditional cable TV and getting people to cut 106 00:04:50,240 --> 00:04:52,279 Speaker 1: the cord, and he kind of used it as anyone 107 00:04:52,320 --> 00:04:54,600 Speaker 1: who cuts the cord is good for the streaming industry. 108 00:04:54,880 --> 00:04:57,120 Speaker 1: You know, Netflix does have rivals, and they may not 109 00:04:57,160 --> 00:04:59,800 Speaker 1: be as great as Netflix, but they're gonna be out 110 00:04:59,800 --> 00:05:02,520 Speaker 1: there in people are curious interesting. I'd be interesting to 111 00:05:02,560 --> 00:05:05,400 Speaker 1: see to what extent these these stories can go from 112 00:05:05,400 --> 00:05:08,400 Speaker 1: being subscriber growth stories to kind of real business stories 113 00:05:08,440 --> 00:05:10,200 Speaker 1: and p and L because I think we'll be interesting 114 00:05:10,200 --> 00:05:13,960 Speaker 1: to see what Disney does if they start disclosing their subscribers, 115 00:05:13,960 --> 00:05:15,600 Speaker 1: which we don't know whether they're gonna do that, but 116 00:05:16,080 --> 00:05:18,880 Speaker 1: initially it seemed like they were subscriber numbers for Disney 117 00:05:18,880 --> 00:05:20,599 Speaker 1: plus Lease in the first day, the first week, the 118 00:05:20,600 --> 00:05:23,680 Speaker 1: first month. We're we're pretty good. Teary La Chapelle Entertainment 119 00:05:23,720 --> 00:05:26,960 Speaker 1: and telecommunications columns for Bloomberg Opinion. Thank joining us here 120 00:05:26,960 --> 00:05:29,479 Speaker 1: in our Bloomberg in Actor Brooker studio. You can read 121 00:05:29,520 --> 00:05:32,320 Speaker 1: more of terror stuff. It's awesome stuff which she covers 122 00:05:32,440 --> 00:05:33,919 Speaker 1: the T M T space. You can read that on 123 00:05:33,920 --> 00:05:36,960 Speaker 1: Bloomberg dot com, Slash Opinion and on the terminal by 124 00:05:37,000 --> 00:05:52,080 Speaker 1: typing O P I N go. Well, the Senate impeachment 125 00:05:52,160 --> 00:05:56,080 Speaker 1: trial begins in earnest later today to get a sense 126 00:05:56,080 --> 00:05:58,559 Speaker 1: of how this could play out. We welcome Bob mince. 127 00:05:58,560 --> 00:06:01,320 Speaker 1: Bob's a partner of Harder in English based in Newark, 128 00:06:01,320 --> 00:06:03,520 Speaker 1: New Jersey. Bob, thanks so much for joining us. I 129 00:06:03,560 --> 00:06:09,520 Speaker 1: guess the first question is will Senator McConnell allow witnesses 130 00:06:09,680 --> 00:06:11,960 Speaker 1: to be called? Because that is really probably the first 131 00:06:12,040 --> 00:06:15,560 Speaker 1: key issue here. Do anything. Yeah, That's ultimately what this 132 00:06:15,839 --> 00:06:19,120 Speaker 1: entire trial will be about. We're not going to get 133 00:06:19,160 --> 00:06:22,839 Speaker 1: that answer though, for several days, and I think people 134 00:06:22,880 --> 00:06:25,520 Speaker 1: watching this ought to be paying close attention to these 135 00:06:25,560 --> 00:06:29,080 Speaker 1: presentations given by the House managers and by the President's 136 00:06:29,120 --> 00:06:32,360 Speaker 1: defense team, and everything that is said during that process 137 00:06:32,360 --> 00:06:35,440 Speaker 1: should be viewed through the lens of the question of 138 00:06:35,520 --> 00:06:39,520 Speaker 1: will it bring four or more senators closer to perhaps 139 00:06:39,640 --> 00:06:42,240 Speaker 1: joining Democrats and asking for witnesses, or will it push 140 00:06:42,320 --> 00:06:46,039 Speaker 1: them further away from that, because ultimately the climax of 141 00:06:46,080 --> 00:06:48,520 Speaker 1: this trial will be that vote on whether to call 142 00:06:48,560 --> 00:06:51,560 Speaker 1: witnesses and whether to ask for additional documents. Bob, there 143 00:06:51,560 --> 00:06:54,560 Speaker 1: are a lot of discussions over the weekend about media 144 00:06:54,640 --> 00:06:58,440 Speaker 1: access to the hearings, with even c Span, not normally 145 00:06:58,440 --> 00:07:02,159 Speaker 1: thought of as a firebrand of of media outlets coming 146 00:07:02,160 --> 00:07:05,159 Speaker 1: out and and really lobbying for better access. Can you 147 00:07:05,160 --> 00:07:07,719 Speaker 1: talk a little bit about that and sort of in 148 00:07:07,880 --> 00:07:11,560 Speaker 1: perspective how common it is for press not really be 149 00:07:11,640 --> 00:07:16,520 Speaker 1: allowed into most of the proceedings. Well, we've obviously not 150 00:07:16,640 --> 00:07:19,480 Speaker 1: had very many impeachment trials. This will be only the 151 00:07:19,560 --> 00:07:22,520 Speaker 1: third and only the second in modern history since the 152 00:07:22,560 --> 00:07:26,160 Speaker 1: Clinton impeachment trial, and so a lot of this stuff 153 00:07:26,280 --> 00:07:29,600 Speaker 1: is really uncharted territory. What's going to be interesting here 154 00:07:29,920 --> 00:07:33,320 Speaker 1: is that while senators do get to ask questions, even 155 00:07:33,360 --> 00:07:36,240 Speaker 1: that process will be behind closed doors, so the media 156 00:07:36,320 --> 00:07:38,640 Speaker 1: will not be there to listen to what the senators 157 00:07:38,840 --> 00:07:41,480 Speaker 1: have to say. So there's a lot of pressure to 158 00:07:42,160 --> 00:07:44,560 Speaker 1: have this brought to the public, to have the media 159 00:07:44,600 --> 00:07:47,040 Speaker 1: there to watch what's going on, But there are also 160 00:07:47,080 --> 00:07:50,160 Speaker 1: some kind of vailing forces there that are against that, 161 00:07:50,360 --> 00:07:52,960 Speaker 1: such as the caucusing of senators privately to ask questions. 162 00:07:52,960 --> 00:07:55,320 Speaker 1: And then there's also the fact that mc McConnell is 163 00:07:55,360 --> 00:07:58,880 Speaker 1: pushing this twenty four hours of argument into a compressed 164 00:07:58,920 --> 00:08:01,200 Speaker 1: two day period. So it's quite possible that we're going 165 00:08:01,280 --> 00:08:04,000 Speaker 1: to see some of these presentations by the House managers 166 00:08:04,160 --> 00:08:08,680 Speaker 1: and by the president's defense team late into the evening. So, Bob, 167 00:08:08,720 --> 00:08:11,160 Speaker 1: what do you make of the White House defense brief, 168 00:08:11,200 --> 00:08:13,080 Speaker 1: the kind of the the what they are laying out 169 00:08:13,120 --> 00:08:18,360 Speaker 1: as the defense position. Well, what they're arguing essentially is 170 00:08:18,480 --> 00:08:21,960 Speaker 1: that there's been no crime here that's been committed, and 171 00:08:22,000 --> 00:08:26,040 Speaker 1: what's really being attacked here, uh, is the president's judgment 172 00:08:26,160 --> 00:08:28,640 Speaker 1: that he was merely acting in the United States been 173 00:08:28,880 --> 00:08:30,920 Speaker 1: interests and all of these charges are a little more 174 00:08:30,920 --> 00:08:35,760 Speaker 1: than political attacks by presidents by Democrats. But but really, 175 00:08:36,080 --> 00:08:38,080 Speaker 1: the most of the scholars out there who have looked 176 00:08:38,080 --> 00:08:41,560 Speaker 1: at this don't agree with the position that Republicans are taking. 177 00:08:41,640 --> 00:08:43,959 Speaker 1: They say that high crimes and misdemeanors do not have 178 00:08:44,040 --> 00:08:47,960 Speaker 1: to include an actual criminal act. The problem is that, 179 00:08:48,080 --> 00:08:51,480 Speaker 1: by by design, the framers gave very little guidance as 180 00:08:51,480 --> 00:08:54,320 Speaker 1: to what would constitute a high crime and misdemeanor and 181 00:08:54,360 --> 00:08:57,080 Speaker 1: really lifted up to the political process to be to 182 00:08:57,200 --> 00:08:59,960 Speaker 1: decide what would be enough to remove a president from office. 183 00:09:00,679 --> 00:09:04,840 Speaker 1: I'm curious about Chief Justice Roberts. What's his role exactly 184 00:09:04,880 --> 00:09:08,760 Speaker 1: going to be here? Yeah, that's a great question. Again, 185 00:09:08,800 --> 00:09:12,240 Speaker 1: the Constitution is very vague on what the role of 186 00:09:12,280 --> 00:09:16,520 Speaker 1: the chief Justice was. When Chief Justice Rehnquist presided over 187 00:09:16,880 --> 00:09:20,440 Speaker 1: the Clinton impeachment trial. He did very little. I think 188 00:09:20,440 --> 00:09:23,440 Speaker 1: he was famously quoted as saying he did nothing in particular, 189 00:09:23,600 --> 00:09:26,440 Speaker 1: and did it very well. So I don't think we're 190 00:09:26,440 --> 00:09:30,080 Speaker 1: going to see a very critical role played by Chief 191 00:09:30,160 --> 00:09:32,600 Speaker 1: Justice Roberts because one of the things that the impeachment 192 00:09:32,640 --> 00:09:35,320 Speaker 1: process provides is that even if the Chief Justice makes 193 00:09:35,320 --> 00:09:38,480 Speaker 1: a ruling, that ruling can be overturned by a simple 194 00:09:38,559 --> 00:09:42,080 Speaker 1: majority of the Senate. That's obviously not something we would 195 00:09:42,120 --> 00:09:45,120 Speaker 1: ever see in actual trial here, and it really sets 196 00:09:45,120 --> 00:09:47,680 Speaker 1: the stage for the fact that the Senate is the 197 00:09:47,679 --> 00:09:51,720 Speaker 1: one that will ultimately call the shots here. Last week, Bob, 198 00:09:51,720 --> 00:09:57,000 Speaker 1: the Department of Accountability found that uh, the withholding Ukraine 199 00:09:57,040 --> 00:10:01,000 Speaker 1: aid was in fact an issue a problem. Does that 200 00:10:01,160 --> 00:10:06,160 Speaker 1: factor at all into this impeachment process, Well, it's certainly 201 00:10:06,160 --> 00:10:08,520 Speaker 1: going to be something we're to see the Democrats arguing, 202 00:10:08,559 --> 00:10:09,960 Speaker 1: but at the end of the day, that was not 203 00:10:10,120 --> 00:10:13,679 Speaker 1: a finding of any criminal wrongdoing. And what the Republicans 204 00:10:13,679 --> 00:10:16,680 Speaker 1: are trying to do is frame this as an argument 205 00:10:16,800 --> 00:10:20,520 Speaker 1: that since no crime has been committed, President shouldn't be 206 00:10:20,679 --> 00:10:23,400 Speaker 1: removed for something that doesn't even rise to the level 207 00:10:23,640 --> 00:10:26,640 Speaker 1: of criminal conduct, and otherwise what we're doing is we're 208 00:10:26,679 --> 00:10:30,400 Speaker 1: taking political differences and allowing Democrats to use that as 209 00:10:30,400 --> 00:10:33,720 Speaker 1: a means to remove the president from office. Just taking 210 00:10:33,720 --> 00:10:35,880 Speaker 1: a step back, I think a lot of people aren't 211 00:10:35,920 --> 00:10:39,040 Speaker 1: following this as closely as people who are in the 212 00:10:39,040 --> 00:10:41,760 Speaker 1: Beltway or in the media world, and I'm wondering what 213 00:10:41,840 --> 00:10:43,680 Speaker 1: the big takeaway is going to be since we know 214 00:10:43,720 --> 00:10:45,800 Speaker 1: what the outcome is going to be. The likely outcome 215 00:10:46,320 --> 00:10:48,960 Speaker 1: is that the Senate will not vote to convict, and 216 00:10:49,000 --> 00:10:52,000 Speaker 1: then probably it will be a very short trial and 217 00:10:52,040 --> 00:10:54,839 Speaker 1: then everybody will move on. I'll be with a lot 218 00:10:54,840 --> 00:10:57,160 Speaker 1: of noise on both sides, or at least certainly on 219 00:10:57,200 --> 00:11:01,360 Speaker 1: the Democratic side. Is there a bigger legal takeaway from 220 00:11:01,360 --> 00:11:04,960 Speaker 1: this whole affair that you think is important? Yeah, well, 221 00:11:05,000 --> 00:11:08,960 Speaker 1: I think there is, and that is that for impeachment 222 00:11:09,080 --> 00:11:11,440 Speaker 1: to really work, I think what we've seen is that 223 00:11:11,440 --> 00:11:15,040 Speaker 1: there has to be at least some bipartisan buying. And 224 00:11:15,160 --> 00:11:18,760 Speaker 1: even in the Clinton impeachment process, when they began the 225 00:11:18,920 --> 00:11:22,000 Speaker 1: process and they adopted the rules for the trial itself, 226 00:11:22,520 --> 00:11:25,400 Speaker 1: it was a vote of one hundred zero. That meant 227 00:11:25,400 --> 00:11:29,440 Speaker 1: that every single senator brought into the process, even though 228 00:11:29,480 --> 00:11:31,960 Speaker 1: they may have disagreed with what the outcome would be 229 00:11:32,200 --> 00:11:35,000 Speaker 1: here we've seeing we're seeing just the opposite. We're going 230 00:11:35,080 --> 00:11:38,199 Speaker 1: to see a complete party line vote as to the process. 231 00:11:38,480 --> 00:11:41,120 Speaker 1: And if you don't have any buying from from the 232 00:11:41,120 --> 00:11:44,280 Speaker 1: other side as to the process, it's very hard to 233 00:11:44,280 --> 00:11:47,239 Speaker 1: believe that the outcome will be in any way bipartisan 234 00:11:47,320 --> 00:11:50,600 Speaker 1: or objective. What is your sense of timing here, Bob, 235 00:11:50,600 --> 00:11:53,920 Speaker 1: How should we think about this over the next few days. Well, 236 00:11:53,960 --> 00:11:57,480 Speaker 1: I think the critical moment will come when we do 237 00:11:57,640 --> 00:12:00,920 Speaker 1: have this decision about whether or not to callnesses. We're 238 00:12:00,960 --> 00:12:03,079 Speaker 1: going to have the arguments from both sides that will 239 00:12:03,080 --> 00:12:06,640 Speaker 1: occur over twenty four hour period that will still into 240 00:12:06,679 --> 00:12:10,120 Speaker 1: the weekend, and then I think sometime early next week, 241 00:12:10,240 --> 00:12:14,160 Speaker 1: after the Senate spends sixteen hours deliberating, they will call 242 00:12:14,280 --> 00:12:16,960 Speaker 1: up this critical question of whether or not there will 243 00:12:17,000 --> 00:12:19,679 Speaker 1: be witnesses here. And there are four senators on the 244 00:12:19,720 --> 00:12:24,080 Speaker 1: Republican side that have expressed some interesting calling witnesses, So 245 00:12:24,200 --> 00:12:27,400 Speaker 1: there's a possibility that four senators will swing over to 246 00:12:27,400 --> 00:12:30,640 Speaker 1: the Democratic side to allow for at least some witnesses 247 00:12:30,640 --> 00:12:33,080 Speaker 1: to be called. And if that happens, we go into 248 00:12:33,080 --> 00:12:35,640 Speaker 1: an entirely new phase. Of this trial that will be 249 00:12:35,720 --> 00:12:38,240 Speaker 1: unpredictable in terms of how we'll play out and how 250 00:12:38,280 --> 00:12:41,080 Speaker 1: long will last, Bob just twenty seconds. How should it 251 00:12:41,080 --> 00:12:45,560 Speaker 1: play out? From your perspective, Well, I think that we 252 00:12:45,559 --> 00:12:48,640 Speaker 1: ought to at least have some witnesses called here, and 253 00:12:48,679 --> 00:12:51,839 Speaker 1: I think that is a view of four senators. Whether 254 00:12:51,960 --> 00:12:55,760 Speaker 1: or not they will ultimately buck MTS McConnell, buck the party, 255 00:12:56,080 --> 00:12:58,640 Speaker 1: buck their base in order to do that, that remains 256 00:12:58,640 --> 00:13:01,719 Speaker 1: a big open question. Bob Man's, Thank you so much 257 00:13:01,760 --> 00:13:04,320 Speaker 1: for your perspective. Bob Men's is a partner at mcarter 258 00:13:04,440 --> 00:13:08,559 Speaker 1: in English in Newark, New Jersey. Also former federal organized 259 00:13:08,559 --> 00:13:11,360 Speaker 1: crime prosecutor and was assistant council to former New Jersey 260 00:13:11,360 --> 00:13:14,240 Speaker 1: Governor Tom Keane, So a lot of experience when it 261 00:13:14,280 --> 00:13:20,120 Speaker 1: comes Also Duke undergrad. This is I don't roll my 262 00:13:20,160 --> 00:13:22,360 Speaker 1: eyes because I have anything against Duke. I think Duke 263 00:13:22,480 --> 00:13:24,720 Speaker 1: is phenomenal school. We don't need to bring it up 264 00:13:24,760 --> 00:13:27,800 Speaker 1: every time, is except except that you do, right, That's 265 00:13:27,840 --> 00:13:29,760 Speaker 1: basically what you're saying. You're looking at me. Yes, we 266 00:13:29,800 --> 00:13:46,080 Speaker 1: do have to bring that up every every time. Looking 267 00:13:46,160 --> 00:13:49,360 Speaker 1: at the Brexit story, the never ending Brexit story, four 268 00:13:49,440 --> 00:13:53,240 Speaker 1: years and still moving interesting things that relates to the 269 00:13:53,320 --> 00:13:55,760 Speaker 1: equity markets. The good news is that the foot sea 270 00:13:55,840 --> 00:14:00,280 Speaker 1: has been increasing, that's the UK stock market. But bad 271 00:14:00,320 --> 00:14:03,280 Speaker 1: news is that the total value of that market is shrinking. 272 00:14:03,679 --> 00:14:06,120 Speaker 1: I'm not sure how that work math works, but our 273 00:14:06,240 --> 00:14:09,640 Speaker 1: next guest does, John Author, senior editor for Bloomberg Markets, 274 00:14:09,720 --> 00:14:12,640 Speaker 1: joining us here in our Bloomberg Interactive Broker Studio. So 275 00:14:12,920 --> 00:14:15,560 Speaker 1: reconcile those two things. For me, it's down to the 276 00:14:15,600 --> 00:14:23,080 Speaker 1: concept of the equitization. That companies are increasingly swapping equity 277 00:14:23,200 --> 00:14:26,640 Speaker 1: for debt for all the good reasons that debt is 278 00:14:26,720 --> 00:14:30,800 Speaker 1: extremely cheap these days, and because they are less interested 279 00:14:30,840 --> 00:14:35,840 Speaker 1: in raising capital from stock markets. So if a private 280 00:14:35,840 --> 00:14:39,480 Speaker 1: equity company takes out a large British company, and that 281 00:14:39,520 --> 00:14:42,520 Speaker 1: has been known to happen, that the index doesn't move 282 00:14:42,600 --> 00:14:44,880 Speaker 1: down as a result of that take out, but the 283 00:14:44,920 --> 00:14:48,440 Speaker 1: actual market cap of the companies in that index decreases 284 00:14:48,560 --> 00:14:52,040 Speaker 1: by by the by whatever that the value of that 285 00:14:52,360 --> 00:14:54,200 Speaker 1: stock company was when it was taken out. This is 286 00:14:54,240 --> 00:14:56,600 Speaker 1: a really interesting trend because we haven't just seen it 287 00:14:56,640 --> 00:15:00,480 Speaker 1: in the United Kingdom. We've seen it globally, with public 288 00:15:00,600 --> 00:15:04,320 Speaker 1: markets shrinking, public equity markets shrinking as an increasing number 289 00:15:04,360 --> 00:15:07,400 Speaker 1: of companies up to either stay or go private these 290 00:15:07,400 --> 00:15:10,360 Speaker 1: take private deals, and the latest over in the United Kingdom, 291 00:15:10,360 --> 00:15:13,280 Speaker 1: Warburg Pinkers is evidently a milling this deal to buy 292 00:15:13,400 --> 00:15:16,400 Speaker 1: Quilter PLC, which would be a take private deal. Where 293 00:15:16,480 --> 00:15:19,400 Speaker 1: is the potential consequence of this, I mean both when 294 00:15:19,400 --> 00:15:22,720 Speaker 1: it comes to potential terms and public markets as well 295 00:15:22,760 --> 00:15:27,080 Speaker 1: as the disclosures and the shareholder power when it comes 296 00:15:27,080 --> 00:15:28,960 Speaker 1: to some of these companies exactly. I mean, that's that 297 00:15:29,160 --> 00:15:31,120 Speaker 1: is the concern we've got to have here, is that 298 00:15:31,360 --> 00:15:34,920 Speaker 1: we've got a model of capitalism that's basically built around 299 00:15:35,000 --> 00:15:38,280 Speaker 1: shareholder capitalism for the last few decades, and it makes 300 00:15:38,320 --> 00:15:41,760 Speaker 1: a great deal of sense. You don't need to socialize 301 00:15:41,800 --> 00:15:45,120 Speaker 1: companies and have them open to the electric because they 302 00:15:45,120 --> 00:15:49,120 Speaker 1: are answerable to their shareholders into the open public markets. 303 00:15:49,720 --> 00:15:54,200 Speaker 1: If they're not so accountable in some general way through 304 00:15:54,760 --> 00:15:59,560 Speaker 1: capitalism through through open markets, it becomes much more questionable 305 00:16:00,360 --> 00:16:03,640 Speaker 1: how much public consents you're going to have in those companies, 306 00:16:03,640 --> 00:16:05,760 Speaker 1: and you've got to be more concerned about whether you're 307 00:16:05,800 --> 00:16:10,800 Speaker 1: really going to have the creative destruction that makes capitalism work. 308 00:16:11,360 --> 00:16:14,000 Speaker 1: It is a it is an underlying deep consent or 309 00:16:14,040 --> 00:16:17,400 Speaker 1: presumably these private equity players take these companies private, do 310 00:16:17,480 --> 00:16:19,240 Speaker 1: whatever they need to do over the three to five 311 00:16:19,280 --> 00:16:23,320 Speaker 1: year holding period, and then monetize exit through perhaps another 312 00:16:23,920 --> 00:16:26,560 Speaker 1: initial public offering. So shouldn't it all even out over time? 313 00:16:27,440 --> 00:16:29,720 Speaker 1: Well it maybe it should, but it doesn't or it 314 00:16:29,760 --> 00:16:33,400 Speaker 1: hasn't been in the last decade or so. Um In 315 00:16:33,440 --> 00:16:37,000 Speaker 1: many cases they're EXITINGCT to other private equity companies. Remember, 316 00:16:37,680 --> 00:16:40,080 Speaker 1: and also in many cases that you know, the the 317 00:16:40,640 --> 00:16:44,520 Speaker 1: actual assets that that emerge from the private equity process 318 00:16:44,600 --> 00:16:48,040 Speaker 1: might be smaller. Even if they've generated a big return 319 00:16:48,440 --> 00:16:51,400 Speaker 1: while they've been outside the public eye. They've they've generally 320 00:16:52,120 --> 00:16:54,200 Speaker 1: they've they're generally not as big as they were before. 321 00:16:54,480 --> 00:16:57,120 Speaker 1: So what's the issue here. Is it that the actual 322 00:16:57,160 --> 00:17:01,040 Speaker 1: shareholder structure or something about public equity mark goods is 323 00:17:01,160 --> 00:17:04,760 Speaker 1: insufficient to handle the needs of these companies right now? 324 00:17:05,160 --> 00:17:06,959 Speaker 1: Or is it just that there's so much money flooding 325 00:17:06,960 --> 00:17:09,560 Speaker 1: into debt markets based on what's happened from the central banks, 326 00:17:09,920 --> 00:17:12,879 Speaker 1: it's just better to be private, and it's ample financing 327 00:17:12,880 --> 00:17:16,040 Speaker 1: available both of the above, but I would But the 328 00:17:16,359 --> 00:17:18,679 Speaker 1: point I think is that if you say it's just 329 00:17:18,760 --> 00:17:21,439 Speaker 1: better to be private, which I think is true for 330 00:17:21,480 --> 00:17:24,240 Speaker 1: a lot of companies. That's an alarming thing to be 331 00:17:24,440 --> 00:17:30,800 Speaker 1: saying at this point because we have both an economy 332 00:17:31,480 --> 00:17:38,560 Speaker 1: and an ecosystem for savers that's built around public companies. Um, yeah, 333 00:17:38,880 --> 00:17:40,800 Speaker 1: that's it's a fair point. Basically, you're fur one K 334 00:17:41,000 --> 00:17:44,400 Speaker 1: program or whatever else. You're basically funneling money into public equities. 335 00:17:44,440 --> 00:17:47,399 Speaker 1: If that public pool of equities is shrinking, that means 336 00:17:47,400 --> 00:17:49,680 Speaker 1: that you've got that much less access than the companies 337 00:17:49,720 --> 00:17:51,399 Speaker 1: that choose to say private might be the ones that 338 00:17:51,440 --> 00:17:53,600 Speaker 1: actually are growing the fastest and give you the biggest 339 00:17:53,640 --> 00:17:57,479 Speaker 1: returns kind of thing. Right, We work for one that's yes, yes, 340 00:17:57,560 --> 00:17:59,879 Speaker 1: all right, full disclosure. Bloom Regulpi is private. But I 341 00:18:00,040 --> 00:18:02,760 Speaker 1: am I am wondering going forward? I mean, is the 342 00:18:02,800 --> 00:18:06,840 Speaker 1: answer just to open up private markets more easily, to 343 00:18:06,880 --> 00:18:11,359 Speaker 1: make it more easily accessible retail investor. I strongly believe 344 00:18:11,400 --> 00:18:14,159 Speaker 1: that it should be. Obviously, you need to be very careful, 345 00:18:14,200 --> 00:18:17,760 Speaker 1: indeed about how you regulate that. You don't want mom 346 00:18:17,760 --> 00:18:20,760 Speaker 1: and pop investors getting into private equity unless they are 347 00:18:20,800 --> 00:18:25,520 Speaker 1: having their hands held very gently indeed, But in general terms, 348 00:18:26,119 --> 00:18:28,720 Speaker 1: if you're in your twenties and only putting a pretty 349 00:18:28,760 --> 00:18:32,120 Speaker 1: small amount of money aside, but beginning to put money 350 00:18:32,160 --> 00:18:34,720 Speaker 1: aside into something like a four oh one K there 351 00:18:34,720 --> 00:18:37,640 Speaker 1: really shouldn't be anything much more sensible than private equity 352 00:18:37,680 --> 00:18:40,000 Speaker 1: to to put it into its money you don't want 353 00:18:40,040 --> 00:18:42,920 Speaker 1: for another forty or fifty years. You should be able 354 00:18:42,920 --> 00:18:46,280 Speaker 1: to that. That should be exactly the kind of patient 355 00:18:46,600 --> 00:18:49,919 Speaker 1: capital that would be good for that sector, and it 356 00:18:49,960 --> 00:18:53,359 Speaker 1: should be a way to go to them safe. So 357 00:18:53,520 --> 00:18:55,119 Speaker 1: certainly in the US we're starting to see that. We 358 00:18:55,160 --> 00:18:58,000 Speaker 1: had Arthur Levitt, the former chairman of the Securities Exchange Commission, 359 00:18:58,000 --> 00:19:00,000 Speaker 1: on over the last several weeks talking to us about 360 00:19:00,119 --> 00:19:02,919 Speaker 1: some of these bills coming out of the administration, talking 361 00:19:02,920 --> 00:19:06,000 Speaker 1: about making it easier for certain retail investors to get 362 00:19:06,040 --> 00:19:09,160 Speaker 1: into private equity. But of course there's obviously all those risks. 363 00:19:09,440 --> 00:19:11,480 Speaker 1: Um I want to switch switch gears real quickly. John, 364 00:19:11,920 --> 00:19:14,880 Speaker 1: give us a sense as we get close to Brexit 365 00:19:14,960 --> 00:19:19,120 Speaker 1: the next stage. What's the I'm seeing some articles about, 366 00:19:19,280 --> 00:19:22,840 Speaker 1: you know, re re relocating people from London to Paris, 367 00:19:22,960 --> 00:19:27,240 Speaker 1: for example, JP Morgan taking out HSBC's office space there. 368 00:19:27,520 --> 00:19:30,520 Speaker 1: What's the mood in the city of London among the 369 00:19:30,560 --> 00:19:33,639 Speaker 1: finance professionals. Is it like it's not going to be 370 00:19:33,800 --> 00:19:36,280 Speaker 1: that bad, or like, we still don't know what's going 371 00:19:36,320 --> 00:19:39,000 Speaker 1: to happen more. The latter I was in I was 372 00:19:39,080 --> 00:19:41,560 Speaker 1: in London for a couple of weeks, just just at 373 00:19:41,560 --> 00:19:45,440 Speaker 1: the beginning of the month. Um uh. I would mention 374 00:19:45,480 --> 00:19:50,320 Speaker 1: Amsterdam as well as Paris. Um people many more people 375 00:19:50,320 --> 00:19:52,520 Speaker 1: speak English. There, you've got the Skiffle Airport, which is 376 00:19:52,520 --> 00:19:58,040 Speaker 1: a very well connected airport. UM the general senses, they 377 00:19:58,080 --> 00:20:00,480 Speaker 1: still don't know exactly what's happening. But most of the 378 00:20:00,560 --> 00:20:04,240 Speaker 1: large banks are braced for a pretty hard Brexit, which 379 00:20:04,280 --> 00:20:06,679 Speaker 1: means that they're braced to move a lot of people 380 00:20:07,320 --> 00:20:09,960 Speaker 1: over to the continents. But you know, three or four 381 00:20:10,000 --> 00:20:12,359 Speaker 1: years ago people were rubbing their hands looking forward to 382 00:20:13,119 --> 00:20:16,040 Speaker 1: living in Paris on expact contracts for a few years, 383 00:20:16,040 --> 00:20:17,520 Speaker 1: and it doesn't look as though it's going to work 384 00:20:17,520 --> 00:20:20,240 Speaker 1: out quite that well for them. John Authors, thank you 385 00:20:20,280 --> 00:20:22,200 Speaker 1: so much for being with us. We really appreciated. John 386 00:20:22,280 --> 00:20:26,920 Speaker 1: Arthurs is a Bloomberg opinion columnist and senior markets editor 387 00:20:27,000 --> 00:20:42,040 Speaker 1: for Bloomberg News. Ob Jersey again, chief US interest rates 388 00:20:42,040 --> 00:20:44,360 Speaker 1: strategist from Bloomberg Intelligent just joined us on the phone here, 389 00:20:44,520 --> 00:20:46,360 Speaker 1: So I were good good to have you back talk 390 00:20:46,400 --> 00:20:49,760 Speaker 1: to us about why the Treasury decided on the twenty 391 00:20:49,840 --> 00:20:51,800 Speaker 1: year bond and maybe not the fifty year or the 392 00:20:51,840 --> 00:20:53,879 Speaker 1: hundred year bond. Yeah, so, so I think a hundred 393 00:20:53,920 --> 00:20:55,960 Speaker 1: year bond was always a pipe dream. Um, I don't 394 00:20:55,960 --> 00:20:58,320 Speaker 1: think that that was ever going to realistically come about. 395 00:20:58,440 --> 00:21:00,479 Speaker 1: I think it has to do with liquidity. So one 396 00:21:00,480 --> 00:21:03,640 Speaker 1: of the things is at least bureaucratically, and the Treasury 397 00:21:03,640 --> 00:21:07,320 Speaker 1: Department likes to be regular and predictable, and the issue 398 00:21:07,359 --> 00:21:09,359 Speaker 1: with doing a fifty year it would be hard to 399 00:21:09,400 --> 00:21:13,120 Speaker 1: be regular and predictable in the issuance of that because, um, 400 00:21:13,119 --> 00:21:16,000 Speaker 1: while there might be a lot of demand, initially, UM, 401 00:21:16,080 --> 00:21:18,879 Speaker 1: how deep that demand is from the likes of pension 402 00:21:18,880 --> 00:21:22,440 Speaker 1: company of pension funds and insurance companies was a little 403 00:21:22,440 --> 00:21:25,240 Speaker 1: bit questionable. So a twenty year kind of fits some 404 00:21:25,320 --> 00:21:29,600 Speaker 1: other needs in that um it's still relatively long duration product. 405 00:21:29,800 --> 00:21:32,720 Speaker 1: It fits within you know, the ten year and the 406 00:21:32,800 --> 00:21:35,240 Speaker 1: third year. And quite frankly, and I think this is 407 00:21:35,240 --> 00:21:39,119 Speaker 1: an underappreciated fact, is that there's also futures instruments that 408 00:21:39,160 --> 00:21:42,480 Speaker 1: already trade in that context where you could use to 409 00:21:42,560 --> 00:21:45,240 Speaker 1: hedge that that part of the yield curve. So because 410 00:21:45,280 --> 00:21:48,760 Speaker 1: there's already these products that are liquid um it it'll 411 00:21:48,760 --> 00:21:52,680 Speaker 1: make issuance of them easier because dealers, for example, could 412 00:21:52,720 --> 00:21:54,800 Speaker 1: hedge the potential risk that they're going to take down 413 00:21:54,800 --> 00:21:56,439 Speaker 1: a lot of bonds. So so I think it it 414 00:21:56,520 --> 00:21:58,480 Speaker 1: fits a lot of those boxes where they can be 415 00:21:58,520 --> 00:22:01,280 Speaker 1: regular and predictable and also of um kind of good 416 00:22:01,280 --> 00:22:04,280 Speaker 1: execution and at the auctions I'm wondering just taking a 417 00:22:04,320 --> 00:22:07,480 Speaker 1: broader look at the treasury market, we saw overnight the 418 00:22:07,480 --> 00:22:11,080 Speaker 1: Bank of Japan coming out holding policy steady but increasing 419 00:22:11,480 --> 00:22:14,919 Speaker 1: their growth expectations. We're seeing that kind of across the board, 420 00:22:15,000 --> 00:22:19,200 Speaker 1: this view that central banks aren't moving any time soon 421 00:22:19,240 --> 00:22:22,080 Speaker 1: and are going to allow inflation to run hot. What's 422 00:22:22,119 --> 00:22:24,359 Speaker 1: the risk that they get what they ask for and 423 00:22:24,400 --> 00:22:28,600 Speaker 1: that that disrupts the bond market. Well, certainly the bond 424 00:22:28,600 --> 00:22:30,640 Speaker 1: market doesn't think that that's going to happen. I think 425 00:22:30,680 --> 00:22:33,440 Speaker 1: that there is leads to the risk that you're talking about, 426 00:22:33,440 --> 00:22:37,040 Speaker 1: where if inflation runs hot, because the expectation is that 427 00:22:37,119 --> 00:22:39,800 Speaker 1: central banks are going to leave interest rates you know, lower, 428 00:22:40,000 --> 00:22:42,080 Speaker 1: or say at this level, say the federal reserve, you know, 429 00:22:42,119 --> 00:22:44,320 Speaker 1: we think the Federal Reserve will be on hold probably 430 00:22:44,400 --> 00:22:46,120 Speaker 1: most of this year, if not all of this year, 431 00:22:46,160 --> 00:22:48,320 Speaker 1: and if anything, that they they're more like the ease 432 00:22:48,560 --> 00:22:51,520 Speaker 1: than hike. And so in an environment like that, if 433 00:22:51,560 --> 00:22:55,080 Speaker 1: you do get inflation, particularly at the core level, creeping 434 00:22:55,119 --> 00:22:58,240 Speaker 1: up above two percent, which right now core CPI has 435 00:22:58,280 --> 00:23:02,479 Speaker 1: been printing above two a but core pc the that 436 00:23:02,560 --> 00:23:06,479 Speaker 1: that's the Fed's preferred measure of inflation, that the personal 437 00:23:06,480 --> 00:23:09,800 Speaker 1: consumption expenditure is the flator. UM. If that creeps up 438 00:23:09,840 --> 00:23:11,720 Speaker 1: towards two two and a half, then you'd wind up 439 00:23:11,760 --> 00:23:15,520 Speaker 1: seeing probably a significant increase in things like tips break even. 440 00:23:15,600 --> 00:23:18,320 Speaker 1: So the inflation expectation built into the market right now 441 00:23:18,600 --> 00:23:21,840 Speaker 1: has been very steady, and if that starts to creep up, 442 00:23:21,920 --> 00:23:24,280 Speaker 1: that will wind up leading to a pretty big sell 443 00:23:24,320 --> 00:23:28,320 Speaker 1: off probably in UH nominal nominal yields. And you know, 444 00:23:28,480 --> 00:23:31,880 Speaker 1: an environment like that, UM twenty five basis point increase 445 00:23:31,880 --> 00:23:35,120 Speaker 1: in inflation expectations might lead to a fifty basis point 446 00:23:35,160 --> 00:23:37,680 Speaker 1: sell off and say ten year yields, So that would mean, um, 447 00:23:37,720 --> 00:23:40,160 Speaker 1: you know, ten year yields back above two percent probably 448 00:23:40,200 --> 00:23:44,119 Speaker 1: on a pretty persistent basis. UH. Give us an update 449 00:23:44,160 --> 00:23:45,920 Speaker 1: if you will, on kind of the short end of 450 00:23:45,960 --> 00:23:49,000 Speaker 1: the curve the repo market. Are we at a new 451 00:23:49,080 --> 00:23:51,280 Speaker 1: level of stability or is the market still looking for 452 00:23:51,359 --> 00:23:54,639 Speaker 1: perhaps a longer term solution to kind of stabilize the 453 00:23:54,640 --> 00:23:57,399 Speaker 1: short end. Yeah, so so the Fed is still I 454 00:23:57,440 --> 00:24:00,520 Speaker 1: think looking at um some kind of facility. They don't 455 00:24:00,520 --> 00:24:04,240 Speaker 1: like doing the traditional open market operations given the size 456 00:24:04,240 --> 00:24:06,240 Speaker 1: of their balance sheet right now. But we do have 457 00:24:06,680 --> 00:24:09,240 Speaker 1: a lot of stability in the funt end. And you know, 458 00:24:09,280 --> 00:24:11,080 Speaker 1: like we mentioned, and like I mentioned on your show, 459 00:24:11,480 --> 00:24:13,880 Speaker 1: quite a lot ball is that you know, these these 460 00:24:13,920 --> 00:24:17,080 Speaker 1: quarter end and these these kind of times when the 461 00:24:17,080 --> 00:24:20,840 Speaker 1: balance sheet moves around a lot because of of things 462 00:24:20,880 --> 00:24:25,240 Speaker 1: like tax receipts and UH and just natural functioning of 463 00:24:25,359 --> 00:24:29,320 Speaker 1: the financial sector. Um. You'll see these jumps in things 464 00:24:29,359 --> 00:24:31,600 Speaker 1: like the secured overnight financing rate or in the FED 465 00:24:31,640 --> 00:24:35,120 Speaker 1: funds rate UM, but they tend to stabilize very quickly. UM. 466 00:24:35,200 --> 00:24:37,280 Speaker 1: And and right now we're in this period of stability, 467 00:24:37,280 --> 00:24:39,040 Speaker 1: But you get towards the end of March and you're 468 00:24:39,040 --> 00:24:41,760 Speaker 1: gonna be back into a quarter end situation where you 469 00:24:41,800 --> 00:24:44,760 Speaker 1: could wind up seeing you know, some more volatility in repo. 470 00:24:45,040 --> 00:24:47,400 Speaker 1: But again, like that's normal, I mean that that happens 471 00:24:47,440 --> 00:24:49,679 Speaker 1: all the time. It's just now we're hyper sensitive to it. 472 00:24:49,960 --> 00:24:52,480 Speaker 1: Whereas you know, back in two thousand and five and 473 00:24:52,520 --> 00:24:55,280 Speaker 1: two thousand four, UM, when things like this happened, it 474 00:24:55,359 --> 00:24:57,480 Speaker 1: was only nerds like me that that actually paid attention. 475 00:24:57,600 --> 00:25:01,159 Speaker 1: And just to put respective and I might be filed 476 00:25:01,160 --> 00:25:04,040 Speaker 1: into the same category era. We did get the New 477 00:25:04,119 --> 00:25:07,240 Speaker 1: York Feds term rebo operation results out today and it 478 00:25:07,320 --> 00:25:12,399 Speaker 1: was undersubscribed, showing that there wasn't as much demand for 479 00:25:12,520 --> 00:25:15,359 Speaker 1: the services of this operation. Just to sort of feed 480 00:25:15,400 --> 00:25:18,520 Speaker 1: into the narrative that there isn't any kind of disruption, Hey, 481 00:25:18,680 --> 00:25:21,000 Speaker 1: I are going forward. One thing that's really been kind 482 00:25:21,000 --> 00:25:23,240 Speaker 1: of weighing on me is the lack of movement in 483 00:25:23,320 --> 00:25:26,720 Speaker 1: all markets, but including in the treasury market. It's been 484 00:25:26,760 --> 00:25:31,280 Speaker 1: really really steady and without really big moves. Does this 485 00:25:31,400 --> 00:25:35,240 Speaker 1: worry you that the market is not positioned for some 486 00:25:35,280 --> 00:25:40,040 Speaker 1: sort of disruption, albeit potentially something from inflation or potentially 487 00:25:40,040 --> 00:25:43,280 Speaker 1: a policy policy move. Well, what's interesting I think in 488 00:25:43,280 --> 00:25:45,679 Speaker 1: the treasury market in particular, and you're right, you know, 489 00:25:45,720 --> 00:25:48,400 Speaker 1: we've been in basically a pretty narrow range from about 490 00:25:48,440 --> 00:25:52,240 Speaker 1: one seventy broadly speaking for the last four months or 491 00:25:52,280 --> 00:25:54,359 Speaker 1: so UM. But I think one of the one of 492 00:25:54,359 --> 00:25:57,199 Speaker 1: the things that speculators are actually positioned very short. So 493 00:25:57,240 --> 00:26:00,480 Speaker 1: you look at treasury futures positioning and there's a lot 494 00:26:00,520 --> 00:26:03,800 Speaker 1: of long duration shorts in the market, and so I 495 00:26:03,800 --> 00:26:05,639 Speaker 1: think that's one of the things that's kind of impeding 496 00:26:05,920 --> 00:26:08,960 Speaker 1: more significant sell off that um So, it's it's a 497 00:26:09,000 --> 00:26:11,040 Speaker 1: little bit easier for those guys to cover at this 498 00:26:11,119 --> 00:26:13,440 Speaker 1: point if they don't think that the risk of higher 499 00:26:13,720 --> 00:26:17,480 Speaker 1: rates is is UH is increasing. So um so, I 500 00:26:17,520 --> 00:26:20,399 Speaker 1: think that that's actually kind of preventing a lot of 501 00:26:20,400 --> 00:26:24,040 Speaker 1: big moves, particularly to to higher yields and lower prices 502 00:26:24,040 --> 00:26:26,840 Speaker 1: in terms of the treasury market. Really interesting, especially at 503 00:26:26,840 --> 00:26:29,280 Speaker 1: a time when the Move index, which is a measure 504 00:26:29,320 --> 00:26:33,000 Speaker 1: of implied volatility in treasury yields going forward, is at 505 00:26:33,000 --> 00:26:35,640 Speaker 1: the lowest levels since May two nine. Interesting to see 506 00:26:35,640 --> 00:26:39,640 Speaker 1: the positioning isn't quite as vanilla as that range would suggest. 507 00:26:39,640 --> 00:26:41,639 Speaker 1: I Oro Jersey, thank you so much for being with us, O, 508 00:26:41,720 --> 00:26:44,920 Speaker 1: our Jersey chief US interest rate strategist for Bloomberg Intelligence, 509 00:26:44,960 --> 00:26:47,879 Speaker 1: joining us from Princeton, New Jersey. Thanks for listening to 510 00:26:47,880 --> 00:26:50,520 Speaker 1: the Bloomberg pan L podcast. You can subscribe and listen 511 00:26:50,600 --> 00:26:53,960 Speaker 1: to interviews at Apple Podcasts or whatever podcast platform you prefer. 512 00:26:54,359 --> 00:26:57,159 Speaker 1: Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa A. 513 00:26:57,200 --> 00:27:00,280 Speaker 1: Bram Woyd's I'm on Twitter at Lisa Bramwoit's one before 514 00:27:00,320 --> 00:27:03,080 Speaker 1: the podcast. You can always catch us worldwide on Bloomberg 515 00:27:03,160 --> 00:27:06,879 Speaker 1: Radio m