WEBVTT - Everyone Still Chasing Netflix For International Subs 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penel podcast. I'm Paul swing you 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma Waits. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money. Whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:20.720 at Bloomberg dot com. It is times check in with 0:00:20.720 --> 0:00:23.800 our Bloomberg Opinion colleagues today, Tara la Chapelle, We are 0:00:23.840 --> 0:00:27.080 so like lucky to have her darkening the doorway. As 0:00:27.440 --> 0:00:31.760 Tom Keene would say. We're talking Netflix because Netflix is 0:00:31.960 --> 0:00:36.240 reporting earnings after the bell, highly anticipated given how much 0:00:36.360 --> 0:00:40.080 their shares have absolutely surged at how much competition they 0:00:40.120 --> 0:00:42.840 face this year, Tara, what are you looking for when 0:00:42.840 --> 0:00:45.400 they report? So? I think a lot of people expect 0:00:45.479 --> 0:00:47.680 that the US numbers aren't going to be so great. 0:00:47.720 --> 0:00:50.040 They might miss on those. Um you could tell by 0:00:50.040 --> 0:00:51.920 sort of the ramp up and marketing they did towards 0:00:51.960 --> 0:00:53.920 the end of last year, and a lot of their 0:00:54.000 --> 0:00:56.920 newer movies and shows didn't get released until around the 0:00:56.920 --> 0:01:00.160 holidays anyway, so you might see an uptick in customers 0:01:00.200 --> 0:01:03.720 are up taking, customers leaving or a fewer sign ups 0:01:03.720 --> 0:01:06.360 in the US, but really the growth is coming internationally, 0:01:06.440 --> 0:01:08.080 so you can can kind of see how they're so 0:01:08.160 --> 0:01:10.760 far ahead of these other apps that are launching, and 0:01:10.760 --> 0:01:12.600 how these other companies like Disney A're going to have 0:01:12.640 --> 0:01:14.720 to catch up with that. Um But I think as 0:01:14.720 --> 0:01:17.039 far as the threat of you know, Disney Plus and 0:01:17.200 --> 0:01:19.959 Apple TV Plus, there shouldn't be too much of an 0:01:19.959 --> 0:01:23.800 impact on this quarters earnings yet because you know, these 0:01:23.840 --> 0:01:25.800 apps are so new, and I don't think that they 0:01:25.840 --> 0:01:27.679 had enough on them at launch for people to just 0:01:27.720 --> 0:01:30.679 go ahead and just cut Netflix. But it does point 0:01:30.720 --> 0:01:33.720 to you know, a higher rate of churn on all 0:01:33.800 --> 0:01:35.880 of these apps towards the middle and end of this 0:01:35.959 --> 0:01:38.280 year as more people become aware of these services and 0:01:38.319 --> 0:01:41.920 start to kind of bounce between them. What is Netflix 0:01:42.080 --> 0:01:44.880 management saying and Read Hastings, the co founder and CEO, 0:01:44.959 --> 0:01:47.360 has really always been I think, very forthright with how 0:01:47.400 --> 0:01:50.600 he used competition. What is he saying about how the 0:01:50.680 --> 0:01:53.440 streaming you know environment is likely to play out over 0:01:53.440 --> 0:01:55.160 the next few years. I mean, I think he thinks 0:01:55.160 --> 0:01:58.320 there's room for everybody, but it does mean more spending. 0:01:58.400 --> 0:02:00.560 You know, we're seeing that already. He said. You know, 0:02:00.640 --> 0:02:03.800 Netflix spending had gone up like on new content last 0:02:03.840 --> 0:02:06.040 year because you know, they can't make a show like 0:02:06.120 --> 0:02:08.320 House of Cards at a hundred million dollars anymore. You know, 0:02:08.360 --> 0:02:11.720 it's becoming very costly because there's just more studios and 0:02:11.760 --> 0:02:16.240 more services competing for talent, and there's more demand for content. 0:02:16.320 --> 0:02:18.359 So there's a lot more shows out today than there were, 0:02:18.400 --> 0:02:20.920 you know, ten years ago on regular cable TV. So 0:02:21.000 --> 0:02:23.880 I think it's just becoming very expensive. And I think 0:02:23.880 --> 0:02:27.600 that's why last week's release or unveiling of Comcast and 0:02:27.639 --> 0:02:31.000 bc US Peacock service was very interesting because they're going 0:02:31.320 --> 0:02:33.799 the ad supported route, and I think that tells you that, 0:02:34.080 --> 0:02:36.720 you know, Comcast realizes this isn't really a great business 0:02:36.760 --> 0:02:39.720 model the way the streaming apps are now, and maybe 0:02:39.720 --> 0:02:41.799 we're going to need to go to advertising to make 0:02:41.840 --> 0:02:44.240 these profitable. And you were to call them about how 0:02:44.280 --> 0:02:47.200 that's the right approach, I think. So, I mean, I 0:02:47.240 --> 0:02:50.359 don't think ads are enjoyable, but I think that when 0:02:50.400 --> 0:02:52.720 it comes down to price, and you know, just having 0:02:52.760 --> 0:02:55.840 all these different services and it's it's just becomes very expensive. 0:02:55.840 --> 0:02:56.920 I think at the end of the day. So I 0:02:56.919 --> 0:02:58.639 think if they could find a way to have ads 0:02:58.680 --> 0:03:01.400 be less and true of and maybe keep the cost down, 0:03:01.440 --> 0:03:04.360 it would be good. Is there an opportunity here to 0:03:04.680 --> 0:03:07.519 have no cost or a very low cost, get enough 0:03:07.520 --> 0:03:10.280 of a critical mass? And if they're the only mover 0:03:10.560 --> 0:03:13.360 in this kind of model, they can command a higher 0:03:13.400 --> 0:03:16.680 premium from advertisers, and it's been shown that people would 0:03:16.720 --> 0:03:19.760 prefer a lower cost than no ads. Is that absolutely? 0:03:19.800 --> 0:03:22.280 They're going for eyeballs? And you know, Comcast even said 0:03:22.320 --> 0:03:24.720 this is going to be free for not just Comcast subscribers, 0:03:24.800 --> 0:03:27.720 but Cox subscribers as well, and they're hoping to talk 0:03:27.760 --> 0:03:30.240 to the other cable operators about this and have those 0:03:30.280 --> 0:03:32.720 operators make it free for their customers as well, because 0:03:32.720 --> 0:03:35.480 this is all about getting eyeballs, not about getting a 0:03:35.520 --> 0:03:37.920 five dollar ten dollar month subscription fee. And that's a 0:03:38.040 --> 0:03:40.800 very different strategy than what these other companies are pursuing. 0:03:41.120 --> 0:03:44.000 You know, the margins on that look a lot better. Um. 0:03:44.040 --> 0:03:46.080 You know, Hulu makes more money off of its ad 0:03:46.120 --> 0:03:49.680 supported customers than it's higher subscription based customers. So I 0:03:49.680 --> 0:03:52.160 think that's what Comcast is looking at in China. Emulate. 0:03:52.680 --> 0:03:58.120 Isn't Netflix still a stock that's driven by subscriber numbers 0:03:58.120 --> 0:04:01.320 as opposed to you know, profit margins and free cash 0:04:01.320 --> 0:04:03.800 flow and things like that. I guess for now, I mean, 0:04:03.840 --> 0:04:05.520 I think this year that's going to have to change, 0:04:05.600 --> 0:04:07.920 right or maybe they'll have to talk up international more. 0:04:07.960 --> 0:04:10.000 We're just not going to see the growth on the 0:04:10.080 --> 0:04:12.800 U S side anymore. And you know, Netflix has kind 0:04:12.800 --> 0:04:15.280 of gone back and forth between talking about this goal 0:04:15.320 --> 0:04:18.560 of getting to you know, cash flow positive versus well, 0:04:18.600 --> 0:04:20.640 maybe not now, you know, because there's all these other 0:04:20.680 --> 0:04:23.920 services and it's very expensive to stock this with content nowadays. 0:04:24.160 --> 0:04:26.080 So I think I don't know what this story is 0:04:26.080 --> 0:04:27.560 going to be this year. You know, something's going to 0:04:27.640 --> 0:04:31.120 have to change in this business generally, Um, but right now, 0:04:31.200 --> 0:04:33.080 I don't think subscriber numbers are going to be super 0:04:33.080 --> 0:04:36.039 impressive tonight. Well, and shareholders don't care about cash burn 0:04:36.080 --> 0:04:38.880 at this point. Right for Netflix, UM, they're starting to 0:04:38.880 --> 0:04:40.839 care a little bit more. I think people are starting 0:04:40.839 --> 0:04:42.240 to care a little bit more because they're going to 0:04:42.320 --> 0:04:45.040 have competition for the first time, real competition. And as 0:04:45.120 --> 0:04:47.640 much as read Hastings says that, you know, their competition 0:04:47.680 --> 0:04:50.200 is still traditional cable TV and getting people to cut 0:04:50.240 --> 0:04:52.279 the cord, and he kind of used it as anyone 0:04:52.320 --> 0:04:54.600 who cuts the cord is good for the streaming industry. 0:04:54.880 --> 0:04:57.120 You know, Netflix does have rivals, and they may not 0:04:57.160 --> 0:04:59.800 be as great as Netflix, but they're gonna be out 0:04:59.800 --> 0:05:02.520 there in people are curious interesting. I'd be interesting to 0:05:02.560 --> 0:05:05.400 see to what extent these these stories can go from 0:05:05.400 --> 0:05:08.400 being subscriber growth stories to kind of real business stories 0:05:08.440 --> 0:05:10.200 and p and L because I think we'll be interesting 0:05:10.200 --> 0:05:13.960 to see what Disney does if they start disclosing their subscribers, 0:05:13.960 --> 0:05:15.600 which we don't know whether they're gonna do that, but 0:05:16.080 --> 0:05:18.880 initially it seemed like they were subscriber numbers for Disney 0:05:18.880 --> 0:05:20.599 plus Lease in the first day, the first week, the 0:05:20.600 --> 0:05:23.680 first month. We're we're pretty good. Teary La Chapelle Entertainment 0:05:23.720 --> 0:05:26.960 and telecommunications columns for Bloomberg Opinion. Thank joining us here 0:05:26.960 --> 0:05:29.479 in our Bloomberg in Actor Brooker studio. You can read 0:05:29.520 --> 0:05:32.320 more of terror stuff. It's awesome stuff which she covers 0:05:32.440 --> 0:05:33.919 the T M T space. You can read that on 0:05:33.920 --> 0:05:36.960 Bloomberg dot com, Slash Opinion and on the terminal by 0:05:37.000 --> 0:05:52.080 typing O P I N go. Well, the Senate impeachment 0:05:52.160 --> 0:05:56.080 trial begins in earnest later today to get a sense 0:05:56.080 --> 0:05:58.559 of how this could play out. We welcome Bob mince. 0:05:58.560 --> 0:06:01.320 Bob's a partner of Harder in English based in Newark, 0:06:01.320 --> 0:06:03.520 New Jersey. Bob, thanks so much for joining us. I 0:06:03.560 --> 0:06:09.520 guess the first question is will Senator McConnell allow witnesses 0:06:09.680 --> 0:06:11.960 to be called? Because that is really probably the first 0:06:12.040 --> 0:06:15.560 key issue here. Do anything. Yeah, That's ultimately what this 0:06:15.839 --> 0:06:19.120 entire trial will be about. We're not going to get 0:06:19.160 --> 0:06:22.839 that answer though, for several days, and I think people 0:06:22.880 --> 0:06:25.520 watching this ought to be paying close attention to these 0:06:25.560 --> 0:06:29.080 presentations given by the House managers and by the President's 0:06:29.120 --> 0:06:32.360 defense team, and everything that is said during that process 0:06:32.360 --> 0:06:35.440 should be viewed through the lens of the question of 0:06:35.520 --> 0:06:39.520 will it bring four or more senators closer to perhaps 0:06:39.640 --> 0:06:42.240 joining Democrats and asking for witnesses, or will it push 0:06:42.320 --> 0:06:46.039 them further away from that, because ultimately the climax of 0:06:46.080 --> 0:06:48.520 this trial will be that vote on whether to call 0:06:48.560 --> 0:06:51.560 witnesses and whether to ask for additional documents. Bob, there 0:06:51.560 --> 0:06:54.560 are a lot of discussions over the weekend about media 0:06:54.640 --> 0:06:58.440 access to the hearings, with even c Span, not normally 0:06:58.440 --> 0:07:02.159 thought of as a firebrand of of media outlets coming 0:07:02.160 --> 0:07:05.159 out and and really lobbying for better access. Can you 0:07:05.160 --> 0:07:07.719 talk a little bit about that and sort of in 0:07:07.880 --> 0:07:11.560 perspective how common it is for press not really be 0:07:11.640 --> 0:07:16.520 allowed into most of the proceedings. Well, we've obviously not 0:07:16.640 --> 0:07:19.480 had very many impeachment trials. This will be only the 0:07:19.560 --> 0:07:22.520 third and only the second in modern history since the 0:07:22.560 --> 0:07:26.160 Clinton impeachment trial, and so a lot of this stuff 0:07:26.280 --> 0:07:29.600 is really uncharted territory. What's going to be interesting here 0:07:29.920 --> 0:07:33.320 is that while senators do get to ask questions, even 0:07:33.360 --> 0:07:36.240 that process will be behind closed doors, so the media 0:07:36.320 --> 0:07:38.640 will not be there to listen to what the senators 0:07:38.840 --> 0:07:41.480 have to say. So there's a lot of pressure to 0:07:42.160 --> 0:07:44.560 have this brought to the public, to have the media 0:07:44.600 --> 0:07:47.040 there to watch what's going on, But there are also 0:07:47.080 --> 0:07:50.160 some kind of vailing forces there that are against that, 0:07:50.360 --> 0:07:52.960 such as the caucusing of senators privately to ask questions. 0:07:52.960 --> 0:07:55.320 And then there's also the fact that mc McConnell is 0:07:55.360 --> 0:07:58.880 pushing this twenty four hours of argument into a compressed 0:07:58.920 --> 0:08:01.200 two day period. So it's quite possible that we're going 0:08:01.280 --> 0:08:04.000 to see some of these presentations by the House managers 0:08:04.160 --> 0:08:08.680 and by the president's defense team late into the evening. So, Bob, 0:08:08.720 --> 0:08:11.160 what do you make of the White House defense brief, 0:08:11.200 --> 0:08:13.080 the kind of the the what they are laying out 0:08:13.120 --> 0:08:18.360 as the defense position. Well, what they're arguing essentially is 0:08:18.480 --> 0:08:21.960 that there's been no crime here that's been committed, and 0:08:22.000 --> 0:08:26.040 what's really being attacked here, uh, is the president's judgment 0:08:26.160 --> 0:08:28.640 that he was merely acting in the United States been 0:08:28.880 --> 0:08:30.920 interests and all of these charges are a little more 0:08:30.920 --> 0:08:35.760 than political attacks by presidents by Democrats. But but really, 0:08:36.080 --> 0:08:38.080 the most of the scholars out there who have looked 0:08:38.080 --> 0:08:41.560 at this don't agree with the position that Republicans are taking. 0:08:41.640 --> 0:08:43.959 They say that high crimes and misdemeanors do not have 0:08:44.040 --> 0:08:47.960 to include an actual criminal act. The problem is that, 0:08:48.080 --> 0:08:51.480 by by design, the framers gave very little guidance as 0:08:51.480 --> 0:08:54.320 to what would constitute a high crime and misdemeanor and 0:08:54.360 --> 0:08:57.080 really lifted up to the political process to be to 0:08:57.200 --> 0:08:59.960 decide what would be enough to remove a president from office. 0:09:00.679 --> 0:09:04.840 I'm curious about Chief Justice Roberts. What's his role exactly 0:09:04.880 --> 0:09:08.760 going to be here? Yeah, that's a great question. Again, 0:09:08.800 --> 0:09:12.240 the Constitution is very vague on what the role of 0:09:12.280 --> 0:09:16.520 the chief Justice was. When Chief Justice Rehnquist presided over 0:09:16.880 --> 0:09:20.440 the Clinton impeachment trial. He did very little. I think 0:09:20.440 --> 0:09:23.440 he was famously quoted as saying he did nothing in particular, 0:09:23.600 --> 0:09:26.440 and did it very well. So I don't think we're 0:09:26.440 --> 0:09:30.080 going to see a very critical role played by Chief 0:09:30.160 --> 0:09:32.600 Justice Roberts because one of the things that the impeachment 0:09:32.640 --> 0:09:35.320 process provides is that even if the Chief Justice makes 0:09:35.320 --> 0:09:38.480 a ruling, that ruling can be overturned by a simple 0:09:38.559 --> 0:09:42.080 majority of the Senate. That's obviously not something we would 0:09:42.120 --> 0:09:45.120 ever see in actual trial here, and it really sets 0:09:45.120 --> 0:09:47.680 the stage for the fact that the Senate is the 0:09:47.679 --> 0:09:51.720 one that will ultimately call the shots here. Last week, Bob, 0:09:51.720 --> 0:09:57.000 the Department of Accountability found that uh, the withholding Ukraine 0:09:57.040 --> 0:10:01.000 aid was in fact an issue a problem. Does that 0:10:01.160 --> 0:10:06.160 factor at all into this impeachment process, Well, it's certainly 0:10:06.160 --> 0:10:08.520 going to be something we're to see the Democrats arguing, 0:10:08.559 --> 0:10:09.960 but at the end of the day, that was not 0:10:10.120 --> 0:10:13.679 a finding of any criminal wrongdoing. And what the Republicans 0:10:13.679 --> 0:10:16.680 are trying to do is frame this as an argument 0:10:16.800 --> 0:10:20.520 that since no crime has been committed, President shouldn't be 0:10:20.679 --> 0:10:23.400 removed for something that doesn't even rise to the level 0:10:23.640 --> 0:10:26.640 of criminal conduct, and otherwise what we're doing is we're 0:10:26.679 --> 0:10:30.400 taking political differences and allowing Democrats to use that as 0:10:30.400 --> 0:10:33.720 a means to remove the president from office. Just taking 0:10:33.720 --> 0:10:35.880 a step back, I think a lot of people aren't 0:10:35.920 --> 0:10:39.040 following this as closely as people who are in the 0:10:39.040 --> 0:10:41.760 Beltway or in the media world, and I'm wondering what 0:10:41.840 --> 0:10:43.680 the big takeaway is going to be since we know 0:10:43.720 --> 0:10:45.800 what the outcome is going to be. The likely outcome 0:10:46.320 --> 0:10:48.960 is that the Senate will not vote to convict, and 0:10:49.000 --> 0:10:52.000 then probably it will be a very short trial and 0:10:52.040 --> 0:10:54.839 then everybody will move on. I'll be with a lot 0:10:54.840 --> 0:10:57.160 of noise on both sides, or at least certainly on 0:10:57.200 --> 0:11:01.360 the Democratic side. Is there a bigger legal takeaway from 0:11:01.360 --> 0:11:04.960 this whole affair that you think is important? Yeah, well, 0:11:05.000 --> 0:11:08.960 I think there is, and that is that for impeachment 0:11:09.080 --> 0:11:11.440 to really work, I think what we've seen is that 0:11:11.440 --> 0:11:15.040 there has to be at least some bipartisan buying. And 0:11:15.160 --> 0:11:18.760 even in the Clinton impeachment process, when they began the 0:11:18.920 --> 0:11:22.000 process and they adopted the rules for the trial itself, 0:11:22.520 --> 0:11:25.400 it was a vote of one hundred zero. That meant 0:11:25.400 --> 0:11:29.440 that every single senator brought into the process, even though 0:11:29.480 --> 0:11:31.960 they may have disagreed with what the outcome would be 0:11:32.200 --> 0:11:35.000 here we've seeing we're seeing just the opposite. We're going 0:11:35.080 --> 0:11:38.199 to see a complete party line vote as to the process. 0:11:38.480 --> 0:11:41.120 And if you don't have any buying from from the 0:11:41.120 --> 0:11:44.280 other side as to the process, it's very hard to 0:11:44.280 --> 0:11:47.239 believe that the outcome will be in any way bipartisan 0:11:47.320 --> 0:11:50.600 or objective. What is your sense of timing here, Bob, 0:11:50.600 --> 0:11:53.920 How should we think about this over the next few days. Well, 0:11:53.960 --> 0:11:57.480 I think the critical moment will come when we do 0:11:57.640 --> 0:12:00.920 have this decision about whether or not to callnesses. We're 0:12:00.960 --> 0:12:03.079 going to have the arguments from both sides that will 0:12:03.080 --> 0:12:06.640 occur over twenty four hour period that will still into 0:12:06.679 --> 0:12:10.120 the weekend, and then I think sometime early next week, 0:12:10.240 --> 0:12:14.160 after the Senate spends sixteen hours deliberating, they will call 0:12:14.280 --> 0:12:16.960 up this critical question of whether or not there will 0:12:17.000 --> 0:12:19.679 be witnesses here. And there are four senators on the 0:12:19.720 --> 0:12:24.080 Republican side that have expressed some interesting calling witnesses, So 0:12:24.200 --> 0:12:27.400 there's a possibility that four senators will swing over to 0:12:27.400 --> 0:12:30.640 the Democratic side to allow for at least some witnesses 0:12:30.640 --> 0:12:33.080 to be called. And if that happens, we go into 0:12:33.080 --> 0:12:35.640 an entirely new phase. Of this trial that will be 0:12:35.720 --> 0:12:38.240 unpredictable in terms of how we'll play out and how 0:12:38.280 --> 0:12:41.080 long will last, Bob just twenty seconds. How should it 0:12:41.080 --> 0:12:45.560 play out? From your perspective, Well, I think that we 0:12:45.559 --> 0:12:48.640 ought to at least have some witnesses called here, and 0:12:48.679 --> 0:12:51.839 I think that is a view of four senators. Whether 0:12:51.960 --> 0:12:55.760 or not they will ultimately buck MTS McConnell, buck the party, 0:12:56.080 --> 0:12:58.640 buck their base in order to do that, that remains 0:12:58.640 --> 0:13:01.719 a big open question. Bob Man's, Thank you so much 0:13:01.760 --> 0:13:04.320 for your perspective. Bob Men's is a partner at mcarter 0:13:04.440 --> 0:13:08.559 in English in Newark, New Jersey. Also former federal organized 0:13:08.559 --> 0:13:11.360 crime prosecutor and was assistant council to former New Jersey 0:13:11.360 --> 0:13:14.240 Governor Tom Keane, So a lot of experience when it 0:13:14.280 --> 0:13:20.120 comes Also Duke undergrad. This is I don't roll my 0:13:20.160 --> 0:13:22.360 eyes because I have anything against Duke. I think Duke 0:13:22.480 --> 0:13:24.720 is phenomenal school. We don't need to bring it up 0:13:24.760 --> 0:13:27.800 every time, is except except that you do, right, That's 0:13:27.840 --> 0:13:29.760 basically what you're saying. You're looking at me. Yes, we 0:13:29.800 --> 0:13:46.080 do have to bring that up every every time. Looking 0:13:46.160 --> 0:13:49.360 at the Brexit story, the never ending Brexit story, four 0:13:49.440 --> 0:13:53.240 years and still moving interesting things that relates to the 0:13:53.320 --> 0:13:55.760 equity markets. The good news is that the foot sea 0:13:55.840 --> 0:14:00.280 has been increasing, that's the UK stock market. But bad 0:14:00.320 --> 0:14:03.280 news is that the total value of that market is shrinking. 0:14:03.679 --> 0:14:06.120 I'm not sure how that work math works, but our 0:14:06.240 --> 0:14:09.640 next guest does, John Author, senior editor for Bloomberg Markets, 0:14:09.720 --> 0:14:12.640 joining us here in our Bloomberg Interactive Broker Studio. So 0:14:12.920 --> 0:14:15.560 reconcile those two things. For me, it's down to the 0:14:15.600 --> 0:14:23.080 concept of the equitization. That companies are increasingly swapping equity 0:14:23.200 --> 0:14:26.640 for debt for all the good reasons that debt is 0:14:26.720 --> 0:14:30.800 extremely cheap these days, and because they are less interested 0:14:30.840 --> 0:14:35.840 in raising capital from stock markets. So if a private 0:14:35.840 --> 0:14:39.480 equity company takes out a large British company, and that 0:14:39.520 --> 0:14:42.520 has been known to happen, that the index doesn't move 0:14:42.600 --> 0:14:44.880 down as a result of that take out, but the 0:14:44.920 --> 0:14:48.440 actual market cap of the companies in that index decreases 0:14:48.560 --> 0:14:52.040 by by the by whatever that the value of that 0:14:52.360 --> 0:14:54.200 stock company was when it was taken out. This is 0:14:54.240 --> 0:14:56.600 a really interesting trend because we haven't just seen it 0:14:56.640 --> 0:15:00.480 in the United Kingdom. We've seen it globally, with public 0:15:00.600 --> 0:15:04.320 markets shrinking, public equity markets shrinking as an increasing number 0:15:04.360 --> 0:15:07.400 of companies up to either stay or go private these 0:15:07.400 --> 0:15:10.360 take private deals, and the latest over in the United Kingdom, 0:15:10.360 --> 0:15:13.280 Warburg Pinkers is evidently a milling this deal to buy 0:15:13.400 --> 0:15:16.400 Quilter PLC, which would be a take private deal. Where 0:15:16.480 --> 0:15:19.400 is the potential consequence of this, I mean both when 0:15:19.400 --> 0:15:22.720 it comes to potential terms and public markets as well 0:15:22.760 --> 0:15:27.080 as the disclosures and the shareholder power when it comes 0:15:27.080 --> 0:15:28.960 to some of these companies exactly. I mean, that's that 0:15:29.160 --> 0:15:31.120 is the concern we've got to have here, is that 0:15:31.360 --> 0:15:34.920 we've got a model of capitalism that's basically built around 0:15:35.000 --> 0:15:38.280 shareholder capitalism for the last few decades, and it makes 0:15:38.320 --> 0:15:41.760 a great deal of sense. You don't need to socialize 0:15:41.800 --> 0:15:45.120 companies and have them open to the electric because they 0:15:45.120 --> 0:15:49.120 are answerable to their shareholders into the open public markets. 0:15:49.720 --> 0:15:54.200 If they're not so accountable in some general way through 0:15:54.760 --> 0:15:59.560 capitalism through through open markets, it becomes much more questionable 0:16:00.360 --> 0:16:03.640 how much public consents you're going to have in those companies, 0:16:03.640 --> 0:16:05.760 and you've got to be more concerned about whether you're 0:16:05.800 --> 0:16:10.800 really going to have the creative destruction that makes capitalism work. 0:16:11.360 --> 0:16:14.000 It is a it is an underlying deep consent or 0:16:14.040 --> 0:16:17.400 presumably these private equity players take these companies private, do 0:16:17.480 --> 0:16:19.240 whatever they need to do over the three to five 0:16:19.280 --> 0:16:23.320 year holding period, and then monetize exit through perhaps another 0:16:23.920 --> 0:16:26.560 initial public offering. So shouldn't it all even out over time? 0:16:27.440 --> 0:16:29.720 Well it maybe it should, but it doesn't or it 0:16:29.760 --> 0:16:33.400 hasn't been in the last decade or so. Um In 0:16:33.440 --> 0:16:37.000 many cases they're EXITINGCT to other private equity companies. Remember, 0:16:37.680 --> 0:16:40.080 and also in many cases that you know, the the 0:16:40.640 --> 0:16:44.520 actual assets that that emerge from the private equity process 0:16:44.600 --> 0:16:48.040 might be smaller. Even if they've generated a big return 0:16:48.440 --> 0:16:51.400 while they've been outside the public eye. They've they've generally 0:16:52.120 --> 0:16:54.200 they've they're generally not as big as they were before. 0:16:54.480 --> 0:16:57.120 So what's the issue here. Is it that the actual 0:16:57.160 --> 0:17:01.040 shareholder structure or something about public equity mark goods is 0:17:01.160 --> 0:17:04.760 insufficient to handle the needs of these companies right now? 0:17:05.160 --> 0:17:06.959 Or is it just that there's so much money flooding 0:17:06.960 --> 0:17:09.560 into debt markets based on what's happened from the central banks, 0:17:09.920 --> 0:17:12.879 it's just better to be private, and it's ample financing 0:17:12.880 --> 0:17:16.040 available both of the above, but I would But the 0:17:16.359 --> 0:17:18.679 point I think is that if you say it's just 0:17:18.760 --> 0:17:21.439 better to be private, which I think is true for 0:17:21.480 --> 0:17:24.240 a lot of companies. That's an alarming thing to be 0:17:24.440 --> 0:17:30.800 saying at this point because we have both an economy 0:17:31.480 --> 0:17:38.560 and an ecosystem for savers that's built around public companies. Um, yeah, 0:17:38.880 --> 0:17:40.800 that's it's a fair point. Basically, you're fur one K 0:17:41.000 --> 0:17:44.400 program or whatever else. You're basically funneling money into public equities. 0:17:44.440 --> 0:17:47.399 If that public pool of equities is shrinking, that means 0:17:47.400 --> 0:17:49.680 that you've got that much less access than the companies 0:17:49.720 --> 0:17:51.399 that choose to say private might be the ones that 0:17:51.440 --> 0:17:53.600 actually are growing the fastest and give you the biggest 0:17:53.640 --> 0:17:57.479 returns kind of thing. Right, We work for one that's yes, yes, 0:17:57.560 --> 0:17:59.879 all right, full disclosure. Bloom Regulpi is private. But I 0:18:00.040 --> 0:18:02.760 am I am wondering going forward? I mean, is the 0:18:02.800 --> 0:18:06.840 answer just to open up private markets more easily, to 0:18:06.880 --> 0:18:11.359 make it more easily accessible retail investor. I strongly believe 0:18:11.400 --> 0:18:14.159 that it should be. Obviously, you need to be very careful, 0:18:14.200 --> 0:18:17.760 indeed about how you regulate that. You don't want mom 0:18:17.760 --> 0:18:20.760 and pop investors getting into private equity unless they are 0:18:20.800 --> 0:18:25.520 having their hands held very gently indeed, But in general terms, 0:18:26.119 --> 0:18:28.720 if you're in your twenties and only putting a pretty 0:18:28.760 --> 0:18:32.120 small amount of money aside, but beginning to put money 0:18:32.160 --> 0:18:34.720 aside into something like a four oh one K there 0:18:34.720 --> 0:18:37.640 really shouldn't be anything much more sensible than private equity 0:18:37.680 --> 0:18:40.000 to to put it into its money you don't want 0:18:40.040 --> 0:18:42.920 for another forty or fifty years. You should be able 0:18:42.920 --> 0:18:46.280 to that. That should be exactly the kind of patient 0:18:46.600 --> 0:18:49.919 capital that would be good for that sector, and it 0:18:49.960 --> 0:18:53.359 should be a way to go to them safe. So 0:18:53.520 --> 0:18:55.119 certainly in the US we're starting to see that. We 0:18:55.160 --> 0:18:58.000 had Arthur Levitt, the former chairman of the Securities Exchange Commission, 0:18:58.000 --> 0:19:00.000 on over the last several weeks talking to us about 0:19:00.119 --> 0:19:02.919 some of these bills coming out of the administration, talking 0:19:02.920 --> 0:19:06.000 about making it easier for certain retail investors to get 0:19:06.040 --> 0:19:09.160 into private equity. But of course there's obviously all those risks. 0:19:09.440 --> 0:19:11.480 Um I want to switch switch gears real quickly. John, 0:19:11.920 --> 0:19:14.880 give us a sense as we get close to Brexit 0:19:14.960 --> 0:19:19.120 the next stage. What's the I'm seeing some articles about, 0:19:19.280 --> 0:19:22.840 you know, re re relocating people from London to Paris, 0:19:22.960 --> 0:19:27.240 for example, JP Morgan taking out HSBC's office space there. 0:19:27.520 --> 0:19:30.520 What's the mood in the city of London among the 0:19:30.560 --> 0:19:33.639 finance professionals. Is it like it's not going to be 0:19:33.800 --> 0:19:36.280 that bad, or like, we still don't know what's going 0:19:36.320 --> 0:19:39.000 to happen more. The latter I was in I was 0:19:39.080 --> 0:19:41.560 in London for a couple of weeks, just just at 0:19:41.560 --> 0:19:45.440 the beginning of the month. Um uh. I would mention 0:19:45.480 --> 0:19:50.320 Amsterdam as well as Paris. Um people many more people 0:19:50.320 --> 0:19:52.520 speak English. There, you've got the Skiffle Airport, which is 0:19:52.520 --> 0:19:58.040 a very well connected airport. UM the general senses, they 0:19:58.080 --> 0:20:00.480 still don't know exactly what's happening. But most of the 0:20:00.560 --> 0:20:04.240 large banks are braced for a pretty hard Brexit, which 0:20:04.280 --> 0:20:06.679 means that they're braced to move a lot of people 0:20:07.320 --> 0:20:09.960 over to the continents. But you know, three or four 0:20:10.000 --> 0:20:12.359 years ago people were rubbing their hands looking forward to 0:20:13.119 --> 0:20:16.040 living in Paris on expact contracts for a few years, 0:20:16.040 --> 0:20:17.520 and it doesn't look as though it's going to work 0:20:17.520 --> 0:20:20.240 out quite that well for them. John Authors, thank you 0:20:20.280 --> 0:20:22.200 so much for being with us. We really appreciated. John 0:20:22.280 --> 0:20:26.920 Arthurs is a Bloomberg opinion columnist and senior markets editor 0:20:27.000 --> 0:20:42.040 for Bloomberg News. Ob Jersey again, chief US interest rates 0:20:42.040 --> 0:20:44.360 strategist from Bloomberg Intelligent just joined us on the phone here, 0:20:44.520 --> 0:20:46.360 So I were good good to have you back talk 0:20:46.400 --> 0:20:49.760 to us about why the Treasury decided on the twenty 0:20:49.840 --> 0:20:51.800 year bond and maybe not the fifty year or the 0:20:51.840 --> 0:20:53.879 hundred year bond. Yeah, so, so I think a hundred 0:20:53.920 --> 0:20:55.960 year bond was always a pipe dream. Um, I don't 0:20:55.960 --> 0:20:58.320 think that that was ever going to realistically come about. 0:20:58.440 --> 0:21:00.479 I think it has to do with liquidity. So one 0:21:00.480 --> 0:21:03.640 of the things is at least bureaucratically, and the Treasury 0:21:03.640 --> 0:21:07.320 Department likes to be regular and predictable, and the issue 0:21:07.359 --> 0:21:09.359 with doing a fifty year it would be hard to 0:21:09.400 --> 0:21:13.120 be regular and predictable in the issuance of that because, um, 0:21:13.119 --> 0:21:16.000 while there might be a lot of demand, initially, UM, 0:21:16.080 --> 0:21:18.879