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Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Lisa A.

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Speaker 2: Bromoid's along with Tom Keane and Jonathan Ferrow. Join us

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Speaker 2: each day for insight from the best in economics, geopolitics,

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Speaker 2: finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple,

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Speaker 2: Spotify and anywhere you get your podcasts, and always on

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Speaker 2: Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business app.

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Speaker 2: To talk about the specific sectors and some of the

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Speaker 2: rolling recessions. One of the recessions has been in the

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Speaker 2: logistics area and the shipping area. And I do before

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Speaker 2: we get to Steve Rashudo of Mizuho here, I do

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Speaker 2: want to just touch base with Lee Klascow Senior, a

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Speaker 2: logistics analyst at Bloomberg Intelligence.

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Speaker 1: And Lee, the reason why you're really.

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Speaker 2: The person who I want to speak to is to

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Speaker 2: understand how much we could be dealing with potential supply

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Speaker 2: chain disruptions again because of what we're seeing in the

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Speaker 2: Red Sea.

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Speaker 3: Yeah, I don't think these are going to be a

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Speaker 3: major dislocation. I think it's going to be more or

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Speaker 3: less a hiccup, if you will. And that effect is

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Speaker 3: that freight rates are arising. They're actually up but about

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Speaker 3: nine percent sequentially. A lot of that increase is being

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Speaker 3: driven by freight headed from Singapore, I'm sorry, from China

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Speaker 3: to Europe. That's been up pretty significantly, up around fifteen

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Speaker 3: sixteen percent over the last week, and it's up around

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Speaker 3: fifty percent since bottoming in October. But it also does

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Speaker 3: need to remind people that in twenty twenty one, to

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Speaker 3: ship a container used to cost fourteen thousand dollars.

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Speaker 4: That was a peak.

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Speaker 3: Today it's around fourteen hundred dollars. So rates are down significantly,

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Speaker 3: but we are seeing a bounce, and you know what's

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Speaker 3: going on in the Red Sea. I'm guessing that it's

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Speaker 3: not going to be long term in nature, and there's

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Speaker 3: going to be a resolution in the coming months.

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Speaker 5: And lee with that in mind, just quickly here if

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Speaker 5: you anticipate a resolution coming in fairly short order. Does

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Speaker 5: this ever touch the consumer if at all?

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Speaker 3: Absolutely, because if shippers are paying higher rates, they're going

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Speaker 3: to try to push that cost onto the consumer. But

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Speaker 3: remember there's a lot of T shirts that go into

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Speaker 3: a container, so we're talking about half a penny more

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Speaker 3: in terms of shipping costs to ship certain items. Obviously

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Speaker 3: larger items the impacts greater, but you know a lot

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Speaker 3: of stuff that goes on the ocean are usually lower

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Speaker 3: value stuff, where high value stuff is usually shipped via

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Speaker 3: air freight.

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Speaker 2: Lea Glasgow of Bloomberg Intelligence, thank you so much for

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Speaker 2: being with us. Short of visit, I do want to

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Speaker 2: get to the economic data that we just got, since

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Speaker 2: it is fascinating to be stever Shuddo here with us

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Speaker 2: chief economist at Mizuho Securities, and I.

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Speaker 1: Want to start there.

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Speaker 2: Initial jobbles claims came in below expectations. It's actually a

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Speaker 2: positive downside surprise, and yet you're seeing a real rally

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Speaker 2: in the two year which makes me think that the

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Speaker 2: Philadelphia outlook for manufacturing is of concern.

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Speaker 1: Is that right?

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Speaker 6: Well?

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Speaker 7: I think you have this environment where you have people

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Speaker 7: like you mentioned Harker talking about, you know, the grassroots

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Speaker 7: kind of sentiment that they're getting in terms of inform

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Speaker 7: from companies that tell them that there's a problem in

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Speaker 7: the underlying economic fabric, but you're not seeing it in

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Speaker 7: the broader macro perspective. I think this gets to what

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Speaker 7: was Katy was talking about in terms of rolling sector

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Speaker 7: recessions but I think it also gets to the fact

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Speaker 7: that expectations are really an issue because when I sit

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Speaker 7: down and I talk to CFOs and I talk to

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Speaker 7: CEOs of different companies in different industries, I get the

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Speaker 7: same message over and over again, which is the economy

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Speaker 7: is not going to do well, We're going to go

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Speaker 7: into a recession, but my business is doing really well.

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Speaker 7: And I kind of like, you know, time out, guys,

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Speaker 7: everybody tells me exactly the same thing. So if you're

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Speaker 7: all telling me your business is doing well, but you

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Speaker 7: all think the world isn't going to do well, then

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Speaker 7: maybe you've got to disconnect in terms of the underlying realities.

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Speaker 7: And this is why you see the continuing claims numbers

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Speaker 7: doing what they're doing, they're moving lower. So you also

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Speaker 7: see this in terms of the employment numbers. Everyone says, oh,

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Speaker 7: we're laying off workers, but then you go back and

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Speaker 7: look at their actual job counts and you see that

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Speaker 7: they've repositioned their workers into different parts of their business.

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Speaker 1: So put this together, I help us understand what that

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Speaker 1: actually going on.

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Speaker 2: Is Basically, people are feeling bad because they feel like

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Speaker 2: they should feel bad, and the actually things are very good,

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Speaker 2: and that the risk is actually to an acceleration in

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Speaker 2: the economy that people aren't expecting.

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Speaker 7: Well, I think the risk is the recession that the

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Speaker 7: market is expecting doesn't happen. You look at things like

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Speaker 7: the blue chip average, right, the blue chip average has

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Speaker 7: first half growth at zero point five percent. Now zero

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Speaker 7: point five percent is the closest you're going to get

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Speaker 7: the blue chip numbers to ever saying negative GDP before

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Speaker 7: you actually print negative GDP. So recession is priced into

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Speaker 7: the structure. If you don't get recession, you're going to

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Speaker 7: have to have a readjustment. This is exactly what happened

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Speaker 7: after the regional bank situation. Remember everyone forecasted a recession,

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Speaker 7: it didn't happen. Then we had that major summer sell off.

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Speaker 7: I'm not saying we're going to get as much of

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Speaker 7: a summer sell off as we got this time through,

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Speaker 7: but there certainly needs to be a correction in some

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Speaker 7: of these markets to reflect the fact that this economy

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Speaker 7: is not rolling over and playing dead, that expectations are

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Speaker 7: different than the reality, and eventually expectations have to adjust

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Speaker 7: to reality because reality is what it is, it's the reality.

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Speaker 5: Well, just to meditate a little bit on the evolution

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Speaker 5: of the recession calls. Remember twenty twenty three, it was

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Speaker 5: definitely going to happen, and then everyone started pushing out

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Speaker 5: the recession calls and then basically abandoning them all together.

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Speaker 5: There's actually a story on the terminal right now, City Group,

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Speaker 5: Deutsche Bank, Wolls Fargo, some of the last remaining on

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Speaker 5: the street who are still calling for a recession. But

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Speaker 5: to that idea that maybe rolling recessions are what we're

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Speaker 5: seeing at the sector level, is that the way we

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Speaker 5: should be thinking about this economy or are we smooth

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Speaker 5: sailing from here?

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Speaker 7: I think the economy is fundamentally healthy. I think we've

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Speaker 7: discovered that, you know, the FED is uncomfortable with a

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Speaker 7: five percent ten year note. I think the FED is

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Speaker 7: somewhat equally uncomfortable with a ten year note moving below

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Speaker 7: a four percent the way it is. But you have

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Speaker 7: to keep in mind the fair value trading range on

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Speaker 7: the ten year note, if you assume a two percent

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Speaker 7: target is basically three and three quarters to four and

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Speaker 7: a quarter. We're in the bottom half of that range.

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Speaker 7: And no one's going to be selling this market going

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Speaker 7: into the end of the year. There's zero sellers out

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Speaker 7: there and the bulls are still in favor. So what

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Speaker 7: you're seeing happening on the tayl like today with the

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Speaker 7: claims numbers coming lower, continuing claims coming lower. The gdpeople

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Speaker 7: number probably went down. I don't have the details, wy

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Speaker 7: I'm assuming because of inventory. Yeah, okay, so those are

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Speaker 7: things to tell you better growth going forward. And then

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Speaker 7: we latch onto the one thing here that we can say,

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Speaker 7: oh gee, it's time to be bullish again. We'll push

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Speaker 7: and I think by the end of the day we'll

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Speaker 7: realize it wasn't worth pushing.

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Speaker 5: So should we be just applauding the Fed right now?

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Speaker 5: Because you think about what we've seen so far. We've

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Speaker 5: seen inflation come down from once in a generation highs,

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Speaker 5: the unemployment rate is still under four percent, and I

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Speaker 5: mean everyone seems to be left and right abandoning their

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Speaker 5: recession calls. Have we is it safe to say that

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Speaker 5: the plane has just about landed here, that they actually

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Speaker 5: have pulled it off?

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Speaker 7: Well, I mean, the plane is never going to go

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Speaker 7: have a recession. We're never going to have a hard landing.

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Speaker 7: The only way you could have gotten the hard landing

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Speaker 7: is if the equity market corrected to earning's numbers, and

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Speaker 7: then you had companies being forced to really lay off

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Speaker 7: workers to drive up margins that never happened. And because

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Speaker 7: the FED kept on telling you we're going to cut rates.

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Speaker 7: So because the FED kept on telling you we're we're

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Speaker 7: going to cut rates, you never had that adjustment take place.

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Speaker 7: So the adjustment in terms of the macroeconomic stories clearly

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Speaker 7: why the FED did do that through forward guidance in

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Speaker 7: terms of whether or not they're going to achieve the

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Speaker 7: inflation numbers that's still open. We're looking at inflation numbers

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Speaker 7: that are closer to three percent than two percent now

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Speaker 7: unto average inflation targeting. And given the concept of this

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Speaker 7: FED in terms of the inflation concept not wanting to

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Speaker 7: get back to the zero bound at any particular point

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Speaker 7: in time in the future, they're willing to accept three percent.

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Speaker 7: The problem is that three percent the ten year note

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Speaker 7: is much too expensive. And if the ten year note

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Speaker 7: is much too expensive, then the equity market's much too expensive.

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Speaker 7: So the reality is the FED may get us to

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Speaker 7: a hotter landing, but the markets have to adjust to that,

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Speaker 7: and they haven't.

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Speaker 2: That's the reason why I was just going to ask you,

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Speaker 2: why are you bearish if you see the economy doing better.

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Speaker 1: Than expected and no recession.

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Speaker 2: Is this because you do think that there is this

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Speaker 2: inflationary underlying pressure that people are discounting and that there

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Speaker 2: is going to be a meaningful sell off in bonds

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Speaker 2: as people understand that.

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Speaker 7: Well, you have to keep in mind there is a

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Speaker 7: global deflationary force which is real incredible. By the same token,

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Speaker 7: there is a domestic cyclical inflationary force that's real incredible,

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Speaker 7: and it's been a battle between the two of them.

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Speaker 7: Markets never took on board the nine percent spike in inflation.

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Speaker 7: We never took that on board. So the fact that

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Speaker 7: we've come down to these levels, which are in the

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Speaker 7: fair value range of two to three two percent, we

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Speaker 7: have to ask ourselves a question is two or three?

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Speaker 7: This is the question we haven't answered yet, and that's

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Speaker 7: the critical question, and that determines whether or not where

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Speaker 7: you want to be in the bond market. And to me,

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Speaker 7: it also suggests that if this Federal Reserve were to

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Speaker 7: do something like take an insurance rate cut, because you

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Speaker 7: hear that conversation all the time. You saw that in

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Speaker 7: twenty eighteen to that, you saw that during the green

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Speaker 7: Span soft landing in the mid nineteen nineties, they took

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Speaker 7: these insurance rate cuts. The question was that these particular times,

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Speaker 7: in those particular times, was inflation hadn't spiked and we

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Speaker 7: didn't have the cyclical tightness that we have today. We do,

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Speaker 7: and in twenty eighteen twenty nineteen we had a disruption

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Speaker 7: in financial markets. We have no disruption in financial markets.

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Speaker 7: I think if the FED were to take insurance rate

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Speaker 7: cuts right now, the dollar would collapse. If the dollar

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Speaker 7: would collapse, you then get into a situation with the

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Speaker 7: global deflationary story no longer helps out the inflationary numbers

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Speaker 7: because we've been importing global deflation. But if the dollar collapses,

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Speaker 7: we no longer import global deflation, and at that point

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Speaker 7: in time, goods prices no longer go down. Goods prices

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Speaker 7: no longer go down. Then service prices are fully reflected

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Speaker 7: in inflation, and that becomes the rub for the FED.

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Speaker 7: That's why they're in this difficult balancing act of pushing

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Speaker 7: back when things get too aggressive, and when things go

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Speaker 7: too far the other way, they have to push the

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Speaker 7: other way. They're trying to fine tune this thing, and

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Speaker 7: so far they've been able to pull it off because

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Speaker 7: the market gives them credibility. You have to ask yourself

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Speaker 7: a question, how many times can you.

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Speaker 4: Get that lucky?

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Speaker 1: Steve Shuda, thank you so much.

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Speaker 2: You'll have to come back on in the new year

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Speaker 2: and tell us whether it's working or not.

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Speaker 1: Steve Harshuda there of Mizuho.

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Speaker 2: Stuart Kaiser ahead of US Equity Strategy, Trading Strategy at

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Speaker 2: City Group, joining us now, Stuart, I want to start there.

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Speaker 2: Do you sort of worry that you're not getting bullish

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Speaker 2: enough because the rest of the streets coming to you.

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Speaker 4: It's a good question. I mean, I'm definitely feeling more

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Speaker 4: bullish post FED. I think that we weren't going into

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Speaker 4: the FED, and as you know, we've been kind of bullish,

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Speaker 4: you know, the last few months expected a rally into

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Speaker 4: your end. The FED feels like they've extended that window

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Speaker 4: a little bit, just in the sense that they're being

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Speaker 4: more respectful of the dual mandate and probably a little

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Speaker 4: bit you know, quicker to come to the rescue, so

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Speaker 4: to speak, if we do see weakness and the growth data,

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Speaker 4: so you know, I think we're probably I don't know

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Speaker 4: if we're more bullish, but I think the bullishness is

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Speaker 4: probably has a wider window to perform in going to

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Speaker 4: twenty twenty four.

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Speaker 2: Well, the reason why I ask that is because if

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Speaker 2: we're at forty eight hundred, essentially you're not talking about

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Speaker 2: that big of a game through year end. And this

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Speaker 2: comes as you're expecting the economic data to come in

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Speaker 2: strong and to still show this is inflationary trend.

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Speaker 1: So what would it take for you to boost that

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Speaker 1: your end target.

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Speaker 4: Well, I'd have to call Scott and ask him to

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Speaker 4: do that for us. But I think, look, from my perspective,

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Speaker 4: we still do have a modest recession in the middle

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Speaker 4: of the year from our US economist. So I think

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Speaker 4: really the question here is does that recession call continue

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Speaker 4: to get pushed out as it did through much of

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Speaker 4: twenty twenty three. And if that happens, and if the

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Speaker 4: FED is wanting to do quote unquote insurance cuts, then

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Speaker 4: you know, then the markets are going to be much

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Speaker 4: higher by year end. And I really think that that's

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Speaker 4: one of the big topics next year is a recession,

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Speaker 4: do we get it or not? And be kind of

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Speaker 4: what is the calculus for the FED? If you'd asked

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Speaker 4: me a couple of weeks ago, I would have said

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Speaker 4: the FED might be too slow to react because they

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Speaker 4: want to loosen up the economy. After the December FBC,

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Speaker 4: it seems like they're not going to be too slow

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Speaker 4: to react, and that might just add a little bit

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Speaker 4: of juice to your point as we get it too

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Speaker 4: next year.

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Speaker 5: Well, on the Fed's reaction function, are you basically saying

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Speaker 5: that the FED put is back or is it coming back?

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Speaker 4: I mean that that would be an initial takeaway from

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Speaker 4: the December FMC. I think my view, if you had

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Speaker 4: asked me in November would have been, you know, they're

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Speaker 4: not going to hike unless inflation hooks higher, and they're

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Speaker 4: probably not going to cut and unless we see meaningful

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Speaker 4: weakness in the labor side of the economy. The December

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Speaker 4: FMC suggested, you know, no, maybe there is this third

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Speaker 4: option where they could actually be doing quote unquote insurance cuts.

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Speaker 4: And if they do that, I think that's extremely bullish

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Speaker 4: for equities. I mean, if they're cutting in an environment

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Speaker 4: let's say, well we're printing one hundred and fifty k jobs,

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Speaker 4: then you know, equities, you're going higher.

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Speaker 5: Well, something that we've been tussling with is how much

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Speaker 5: rate cuts are actually going to matter. You think about

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Speaker 5: five hundred basis points of hikes, maybe causing a little

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Speaker 5: bit of indigestion in the stock market at one point,

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Speaker 5: not at all this year. We did have some turbulence

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Speaker 5: over the summer. And then you think about the economy

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Speaker 5: overall rate cuts. Does the why for why we're getting

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Speaker 5: rate cuts actually matter when it comes to this equity rally?

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Speaker 4: I think it does one hundred percent. You know, if

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Speaker 4: they're cutting because they're seeing real weakness in the labor

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Speaker 4: side of the economy, you know that that's much different

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Speaker 4: than if growth is sort of sideways, inflation's easing, and

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Speaker 4: they decide, hey, we're too restrictive. So I think I

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Speaker 4: think the why matters matter significantly, at least in my

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Speaker 4: view at this point.

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Speaker 2: Though, there is a question about earnings. And I know

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Speaker 2: that you say bad news is bad.

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Speaker 1: News, induce is good is have we really gotten such

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Speaker 1: good news on the earnings front.

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Speaker 2: I'm going to be speaking with Emily Roland later this morning,

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Speaker 2: and she basically pointed out that year on year S

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Speaker 2: and P five hundred, earnings barely grew zero xo point

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Speaker 2: six percent, and a lot of the gains that we've

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Speaker 2: seen are pricing in next year gains that are expected

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Speaker 2: to be robust.

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Speaker 1: Doesn't that concern you?

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Speaker 4: You know, it does a bit, I would say. I

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Speaker 4: think year on year we're tracking down about two percent

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Speaker 4: for SMP. You know, but if you had asked, if

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Speaker 4: you had asked this last December, what is the risk

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Speaker 4: to SMP earnings? People were throwing around two hundred numbers

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Speaker 4: or sub two hundred numbers, so you know, the year

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Speaker 4: on your growth isn't great, But the way the data

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Speaker 4: printed relative to expectations has been you know, very very

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Speaker 4: very positive. So I think I think that that's how

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Speaker 4: I view earnings this year. As we came into the

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Speaker 4: year with people throwing around one hundred eighty five to

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Speaker 4: two hundred dollars bear market type you know situations on EPs,

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Speaker 4: we're now going to print something that looks more like

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Speaker 4: two twenty scott On at City is a two forty

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Speaker 4: five for next year, which is, you know, got to

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Speaker 4: give you a pretty close to double digit EPs growth

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Speaker 4: in twenty twenty four, So not too worried. I think

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Speaker 4: if I hadn't described twenty twenty three better than feared,

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Speaker 4: and then twenty twenty four, it looks like, hopefully we're

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Speaker 4: going to get some actual not only EPs growth, but

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Speaker 4: a broadening out of EPs growth to a larger number

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Speaker 4: of sectors, which we do think is also important.

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Speaker 1: Exactly where I was going to go.

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Speaker 2: We had Margie ptel on earlier and saying maybe that

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Speaker 2: story is a little overplayed. Other people still sticking with

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Speaker 2: what's worked, including big tech. You're kind of taking a

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Speaker 2: little bit of a different tone.

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Speaker 4: Look, we thought big tech and growth was going to

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Speaker 4: work it to your end, and then as you got

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Speaker 4: into twenty twenty four, you needed to kind of do

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Speaker 4: a little bit of a reevaluation of things. And next year,

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Speaker 4: if you do get broader Ernie's growth after a year

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Speaker 4: in which you had very narrow large cap leadership, I

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Speaker 4: think there's a fair argument to say that, you know,

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Speaker 4: SMP equal weight, for instance, relative to S and P

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Speaker 4: cap weight, would make a lot of sense. What we've

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Speaker 4: seen this month is Russell two thousand is massively outperformed.

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Speaker 4: So I think what folks are saying is, you know,

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Speaker 4: growth growth may be better than we expected. The FED

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Speaker 4: actually may cut you know, without a recession. And I've

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Speaker 4: got a lot of stocks at the smaller size of

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Speaker 4: the cap spectrum that have meaningfully lagged, so I think

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Speaker 4: that the theme has legs. I do think Russell two

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Speaker 4: thousand were probably a little less comfortable with just from

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Speaker 4: a risk of war perspective, but definitely SMP equal weight

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Speaker 4: relative to capwaight is something that we think, we think

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Speaker 4: makes a lot of sense in earlier next year.

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Speaker 5: So we're talking about some big, longer term themes here,

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Speaker 5: of course, what the risks look like in twenty twenty

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Speaker 5: four and the opportunities. Let's talk about two thirty pm yesterday.

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Speaker 5: Of course, that sudden plunge that we saw on the

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Speaker 5: S and P five hundred, A lot of people pointing

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Speaker 5: to zero day options and the heavy put volume that

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Speaker 5: we saw there.

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Speaker 1: What do you make of that argument?

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Speaker 4: You know, our view is that the zero date options

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Speaker 4: is probably less likely to have caused that yesterday. Just

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Speaker 4: talking to the clients that we talked to on a

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Speaker 4: regular basis, everybody was searching. You know, some people said, oh,

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Speaker 4: it must be their twenty year bond auction, or maybe

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Speaker 4: it's just low volumes, you know, kind of late in

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Speaker 4: the month. You know, people throw zero date options out there.

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Speaker 4: I think is as a reason if they don't have

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Speaker 4: another reason. It's an easy kind of fallback reason. So

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Speaker 4: it's always possible that in a low volume day, a

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Speaker 4: small amount of flows can kind of get you going.

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Speaker 4: And it does feel like the markets were now, once

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Speaker 4: a direction is determined, we're just going to kind of

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Speaker 4: go that way because there's not a lot of volume

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Speaker 4: to push it back. So, you know, we're not generally

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Speaker 4: the camp of blaming zero date for these type of things.

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Speaker 4: It could it be one of a few things that

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Speaker 4: got listed.

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Speaker 6: You know.

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Speaker 4: Some people said, oh, a delayed reaction to FedEx numbers.

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Speaker 4: Some people said the twenty year bond auction, you know,

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Speaker 4: other people said zero date options. It's this is just

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Speaker 4: one of those I think late in the year, low volume,

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Speaker 4: you know, kind of we rallied a lot, take some

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Speaker 4: risk off the table.

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Speaker 5: I like the theory that it was a delayed reaction

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Speaker 5: to FedEx, because that would be quite a delayed, well

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Speaker 5: reaction if.

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Speaker 4: You don't have an answer, I mean people were I

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Speaker 4: think people were groping yesterday. Yeah, and you just kind

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Speaker 4: of you're looking for anything what has been bad news

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Speaker 4: theoretically that we've received in the last couple of days

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Speaker 4: that could have done it. I think the most notable

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Speaker 4: thing which you mentioned earlier, is equities move but other

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Speaker 4: assets didn't, and I think that's why people were a

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Speaker 4: little bit confused by it. Clearly didn't come from the

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Speaker 4: bond side of the ledger. Some folks said there were

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Speaker 4: just some you know, equity sell programs going through the system,

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Speaker 4: and that might just be risk reduction into your end.

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Speaker 4: Last year we kind of had this a little bit too, though.

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Speaker 4: We kind of rallied the first two or three weeks

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Speaker 4: of December and then the last two weeks of December

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Speaker 4: last year were a little wonky. So maybe we're having

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Speaker 4: that again.

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Speaker 1: So were you following Scott's advice just buying the tip?

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Speaker 2: Were you out there yesterday just scooping stuff up and

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Speaker 2: getting really excited?

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Speaker 6: I was.

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Speaker 4: I was trying to figure out what was happening. I

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Speaker 4: think the buy the dip stuff makes sense. I think

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Speaker 4: if you believe all the narrative we've had here right.

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Speaker 2: So, well, this is my issue. If you always buy

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Speaker 2: the dips, there will not be dips. So is that

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Speaker 2: what we're expecting? All the volatility that people are talking

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Speaker 2: about next year, there's a high risk of it not

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Speaker 2: happening because everyone's going to buy into any kind of

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Speaker 2: volatility that we see.

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Speaker 4: You know, what, it is possible there's still a lot

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Speaker 4: of cash on the sidelines. You know, if you're a

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Speaker 4: retail investor, you're sitting in money market and you get

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Speaker 4: told rates are going lower. You just missed a twenty

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Speaker 4: percent rally in the SMP and a fifty percent rally

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Speaker 4: in NASDAC. And if you believe we're not going to

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Speaker 4: to recession, I think there is the potential for money

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Speaker 4: to start to bleed into the market. To your point,

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Speaker 4: and kind of, you know, a retail put alongside the

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Speaker 4: Fed put maybe you know, kind of really improves your

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Speaker 4: risk reward. But to me, it all boils down to

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Speaker 4: labor market data. Labor market data holds in you just

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Speaker 4: want to continue to run long equity risk. If you

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Speaker 4: see weakness in that part of the economy, you need

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Speaker 4: to be excuse me, you'd be really really cautious about

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Speaker 4: how you manage to thinks.

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Speaker 2: Suirar Kaiser, thank you so much for being with us,

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Speaker 2: joining us now, I'm so pleased to say. Is Susan Thornton,

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Speaker 2: Senior Fellow at the Palsai China Center at Yal Susan,

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Speaker 2: I just want to get your sense of how much

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Speaker 2: of a sort of increased a threat. The NBC report

439
00:18:17,480 --> 00:18:20,480
Speaker 2: on what Jijinping told President Biden really was.

440
00:18:22,160 --> 00:18:24,600
Speaker 8: Yeah, thanks very much. I think this is really a

441
00:18:24,640 --> 00:18:27,440
Speaker 8: tempest in a teapot. The things that Xi Jinping said

442
00:18:27,520 --> 00:18:31,440
Speaker 8: on Taiwan and the meeting with Biden are absolutely not new.

443
00:18:31,880 --> 00:18:36,640
Speaker 8: The Chinese have repeated at almost every occasion that Taiwan

444
00:18:36,680 --> 00:18:40,080
Speaker 8: will be reunified at some point. So I don't think

445
00:18:40,320 --> 00:18:42,840
Speaker 8: anything that the Chinese would have said on this issue

446
00:18:42,920 --> 00:18:46,040
Speaker 8: would be considered new by people who watch this issue.

447
00:18:46,080 --> 00:18:48,320
Speaker 8: Maybe by people who don't watch this issue, they would

448
00:18:48,320 --> 00:18:51,359
Speaker 8: have been surprised. But I do think the Chinese are

449
00:18:51,400 --> 00:18:55,680
Speaker 8: kind of reflecting some concern that US policy is shifting

450
00:18:55,760 --> 00:18:59,960
Speaker 8: toward a support for a kind of permanent separation with Taiwan,

451
00:19:00,160 --> 00:19:03,680
Speaker 8: and that would be maybe something that would be causing

452
00:19:03,720 --> 00:19:06,159
Speaker 8: them a little bit of alarm and may have added

453
00:19:06,200 --> 00:19:09,120
Speaker 8: some umph to this kind of statement about Taiwan will

454
00:19:09,160 --> 00:19:10,000
Speaker 8: be reunified.

455
00:19:10,240 --> 00:19:12,239
Speaker 2: They added a lot of umph this morning when you

456
00:19:12,280 --> 00:19:16,800
Speaker 2: talk about the potential prohibition of exports of certain rare

457
00:19:16,880 --> 00:19:19,040
Speaker 2: earth metals that are really crucial to a lot of

458
00:19:19,040 --> 00:19:21,679
Speaker 2: electric vehicles, And this comes as there are reports that

459
00:19:21,720 --> 00:19:25,240
Speaker 2: the administration in the United States is thinking about possibly

460
00:19:25,480 --> 00:19:29,879
Speaker 2: increasing the tariffs on imports of certain goods having to

461
00:19:29,920 --> 00:19:33,520
Speaker 2: do electric vehicles from China. Is this a really material

462
00:19:33,600 --> 00:19:35,960
Speaker 2: increase in the tit for tat the trade war that

463
00:19:36,000 --> 00:19:38,000
Speaker 2: we saw really heat up a couple of years ago

464
00:19:38,040 --> 00:19:39,000
Speaker 2: with China and the US.

465
00:19:40,119 --> 00:19:42,879
Speaker 8: Well, you know, the Chinese have already announced in a

466
00:19:42,920 --> 00:19:48,520
Speaker 8: couple of other occasions some selected restrictions on exports of

467
00:19:48,640 --> 00:19:51,280
Speaker 8: rare earths, you know, trying to show that they have

468
00:19:51,440 --> 00:19:53,520
Speaker 8: cards that they can play too in this tit for

469
00:19:53,600 --> 00:19:55,879
Speaker 8: tat trade war. I think what we're seeing from the

470
00:19:55,880 --> 00:19:58,840
Speaker 8: Biden administration is a desire to kind of adjust some

471
00:19:58,960 --> 00:20:03,440
Speaker 8: of the tariffs that the Trump administration had imposed on China,

472
00:20:03,440 --> 00:20:07,240
Speaker 8: in which the Biden administration left on. So, you know,

473
00:20:07,359 --> 00:20:10,720
Speaker 8: evs are a particular concern because of the desire to

474
00:20:10,720 --> 00:20:14,359
Speaker 8: try to ramp up manufacturing here in the US. Of course,

475
00:20:14,400 --> 00:20:16,800
Speaker 8: they're also a big concern in Europe, and so I

476
00:20:16,840 --> 00:20:19,720
Speaker 8: think that's what we're looking at. Certainly, this is a

477
00:20:20,000 --> 00:20:22,879
Speaker 8: hugely successful sector for China, so they don't want to

478
00:20:22,920 --> 00:20:26,440
Speaker 8: see this tariff and position happen. I think probably they're

479
00:20:26,480 --> 00:20:28,879
Speaker 8: resigned to it at this point. And this is probably

480
00:20:29,359 --> 00:20:33,520
Speaker 8: you know, just a lot more signaling than something that's unexpected.

481
00:20:34,320 --> 00:20:36,840
Speaker 5: So resigned to tariffs. But what about when it comes

482
00:20:36,880 --> 00:20:39,439
Speaker 5: to sanctions. I mean to go back to what Senator

483
00:20:39,440 --> 00:20:43,400
Speaker 5: Lindsay Graham said saying that he is intent on drafting

484
00:20:43,520 --> 00:20:46,520
Speaker 5: pre invasion sanctions from Hell to impose on China if

485
00:20:46,520 --> 00:20:50,160
Speaker 5: they take action to seize Taiwan. How would those sanctions

486
00:20:50,200 --> 00:20:54,080
Speaker 5: be received and would that actually deter China in any fashion?

487
00:20:55,280 --> 00:20:57,439
Speaker 8: Yeah, I think it's really important that we sort of

488
00:20:57,440 --> 00:21:01,280
Speaker 8: try to separate the Taiwan issues from the trade war

489
00:21:01,400 --> 00:21:05,520
Speaker 8: issues because they are very different, and people have, you know,

490
00:21:05,560 --> 00:21:08,720
Speaker 8: a tendency to try to lump all these things together,

491
00:21:08,840 --> 00:21:13,280
Speaker 8: especially up on Capitol Hill. You know, the issues around

492
00:21:13,359 --> 00:21:17,840
Speaker 8: trying to draft you know, pre invasion sanctions have been

493
00:21:17,880 --> 00:21:21,560
Speaker 8: talked about up on Capitol Hill for a while. You know,

494
00:21:21,640 --> 00:21:26,000
Speaker 8: it didn't work with Russia, and those sanctions were probably

495
00:21:27,160 --> 00:21:30,520
Speaker 8: much more dramatic than anything that could be imposed on

496
00:21:30,680 --> 00:21:32,960
Speaker 8: China in terms of trying to get the rest of

497
00:21:33,000 --> 00:21:34,679
Speaker 8: the countries in the world to go along with it.

498
00:21:34,760 --> 00:21:37,879
Speaker 8: Of course, sanctions regime only works to the extent that

499
00:21:37,920 --> 00:21:40,720
Speaker 8: you can get other countries to also join in so

500
00:21:40,840 --> 00:21:44,119
Speaker 8: I think this is an effort by you know, people

501
00:21:44,200 --> 00:21:46,480
Speaker 8: to try to show the Chinese that we really don't

502
00:21:46,480 --> 00:21:49,480
Speaker 8: want them to do this. But again, you know, the

503
00:21:49,560 --> 00:21:53,040
Speaker 8: summit was very successful, the some in San Francisco between

504
00:21:53,080 --> 00:21:56,560
Speaker 8: President Biden, President she and trying to tamp down this issue,

505
00:21:56,840 --> 00:21:59,720
Speaker 8: and it seems now like there's a desire in some

506
00:22:00,600 --> 00:22:02,720
Speaker 8: quarters to try to ramp it up again, and I

507
00:22:02,760 --> 00:22:05,359
Speaker 8: think that's unfortunate. I mean, we really do need to

508
00:22:05,840 --> 00:22:08,479
Speaker 8: see some stability on this issue going into what's going

509
00:22:08,520 --> 00:22:11,320
Speaker 8: to be a pretty tumultuous year in US China relations.

510
00:22:11,359 --> 00:22:13,160
Speaker 1: I think, well, Susan to that point.

511
00:22:13,200 --> 00:22:16,800
Speaker 5: Of course, the Apex Summit, it was perceived, is going well,

512
00:22:16,840 --> 00:22:18,639
Speaker 5: and I think that's why part of the reason why

513
00:22:18,720 --> 00:22:21,960
Speaker 5: there was surprise to see this report from NBC yesterday

514
00:22:21,960 --> 00:22:25,520
Speaker 5: when it comes to China's intentions with Taiwan. But I mean,

515
00:22:25,560 --> 00:22:28,280
Speaker 5: you made the great point that this isn't necessarily new

516
00:22:28,359 --> 00:22:31,040
Speaker 5: rhetoric from China when it comes to Taiwan.

517
00:22:32,040 --> 00:22:37,240
Speaker 8: Absolutely, I think the summit actually on Taiwan, my understanding

518
00:22:37,320 --> 00:22:39,520
Speaker 8: is the two leaders didn't really spend a lot of

519
00:22:39,600 --> 00:22:42,960
Speaker 8: time on that issue, and that there was a tacit

520
00:22:43,040 --> 00:22:46,160
Speaker 8: agreement to try to work to manage this difficult issue.

521
00:22:46,200 --> 00:22:48,639
Speaker 8: You know, we have the Taiwan election coming up on

522
00:22:48,760 --> 00:22:54,200
Speaker 8: January thirteenth, that's going to pose tensions and some difficulties

523
00:22:54,240 --> 00:22:57,480
Speaker 8: in the relationship. There'll be an inauguration in May, and

524
00:22:57,560 --> 00:23:00,879
Speaker 8: there's always a lot of bad back and forth between

525
00:23:00,960 --> 00:23:03,680
Speaker 8: the US and China and how these issues will be handled.

526
00:23:04,160 --> 00:23:07,040
Speaker 8: And I think what we're trying to get from the

527
00:23:07,080 --> 00:23:11,400
Speaker 8: summit was that these issues will be handled carefully, and

528
00:23:11,480 --> 00:23:14,680
Speaker 8: that was the message that was trying to be conveyed.

529
00:23:14,800 --> 00:23:19,600
Speaker 8: And now we've sort of got back to this increased

530
00:23:19,600 --> 00:23:23,639
Speaker 8: sort of hype around a possible military action, which I

531
00:23:23,680 --> 00:23:26,440
Speaker 8: agree with Michael Hurston, I don't think is imminent.

532
00:23:26,640 --> 00:23:29,440
Speaker 2: Given the fact that we are dealing with a very

533
00:23:29,440 --> 00:23:32,000
Speaker 2: political year heading into the election at the end of

534
00:23:32,000 --> 00:23:32,359
Speaker 2: the year.

535
00:23:32,760 --> 00:23:33,760
Speaker 1: How can there be.

536
00:23:33,640 --> 00:23:37,880
Speaker 2: Any kind of diplomatic discussions between China and the US

537
00:23:38,119 --> 00:23:40,760
Speaker 2: with any conviction if there is not clear who is

538
00:23:40,800 --> 00:23:43,000
Speaker 2: going to be in the White House come twenty twenty five.

539
00:23:44,320 --> 00:23:47,640
Speaker 8: Well, this is an issue for diplomats working on relationships

540
00:23:47,680 --> 00:23:50,040
Speaker 8: with pretty much every country in the world right now.

541
00:23:50,080 --> 00:23:52,200
Speaker 8: I mean, all countries are kind of looking at our

542
00:23:52,600 --> 00:23:56,720
Speaker 8: political situation and wondering what's going to happen and wondering

543
00:23:56,720 --> 00:23:58,679
Speaker 8: what kind of commitments they can make with US in

544
00:23:58,720 --> 00:24:01,879
Speaker 8: the coming year. So it is difficult, and you know,

545
00:24:02,000 --> 00:24:05,600
Speaker 8: probably especially difficult with China. The only thing I would

546
00:24:05,600 --> 00:24:09,400
Speaker 8: say about the US China relationship is that it's it's

547
00:24:09,600 --> 00:24:13,199
Speaker 8: less likely probably to turn on a dime with the

548
00:24:14,080 --> 00:24:17,080
Speaker 8: you know, accession of a Republican president, be it Trump

549
00:24:17,200 --> 00:24:20,360
Speaker 8: or anybody else, because I think there is this kind

550
00:24:20,359 --> 00:24:25,280
Speaker 8: of bipartisan approach to China which is quite you know,

551
00:24:25,440 --> 00:24:28,440
Speaker 8: hawkish at the moment and probably won't change no matter

552
00:24:28,440 --> 00:24:30,040
Speaker 8: who comes into the White House. And I think the

553
00:24:30,160 --> 00:24:32,959
Speaker 8: Chinese do know that, so they are so they are

554
00:24:33,000 --> 00:24:35,320
Speaker 8: looking at, you know, the coming year and then the

555
00:24:35,400 --> 00:24:38,199
Speaker 8: years after it sort of how to manage what's going

556
00:24:38,240 --> 00:24:40,040
Speaker 8: to be a pretty difficult time.

557
00:24:40,119 --> 00:24:42,399
Speaker 5: I think, Well, Susan, you bring up a question that

558
00:24:42,480 --> 00:24:44,080
Speaker 5: I think about all the time when it comes to

559
00:24:44,160 --> 00:24:45,240
Speaker 5: US China relations.

560
00:24:45,280 --> 00:24:47,720
Speaker 1: A lot of these issues go back years.

561
00:24:47,359 --> 00:24:50,960
Speaker 5: And years, they outlast any one administration, and like you mentioned,

562
00:24:51,240 --> 00:24:55,080
Speaker 5: being hawkish on China is very bipartisan at the moment.

563
00:24:55,119 --> 00:24:57,840
Speaker 5: And with that in mind, how much does it truly matter,

564
00:24:57,880 --> 00:25:02,280
Speaker 5: how consequential is it who is actually in the Oval Office.

565
00:25:03,440 --> 00:25:07,479
Speaker 8: Yeah, well, you mentioned that being hawkish on China is bipartisan. Now,

566
00:25:07,520 --> 00:25:09,960
Speaker 8: I mean, I think it actually goes a long way back,

567
00:25:09,960 --> 00:25:12,840
Speaker 8: and almost every issue we have today with China has

568
00:25:12,920 --> 00:25:17,600
Speaker 8: been around for decades, you know, especially on Taiwan, if

569
00:25:17,640 --> 00:25:20,160
Speaker 8: you go back and look at I've been looking at

570
00:25:20,200 --> 00:25:25,640
Speaker 8: historical records lately from the Harder administration, and you know,

571
00:25:25,840 --> 00:25:29,159
Speaker 8: every single issue was talked about at the time of

572
00:25:29,240 --> 00:25:32,520
Speaker 8: normalization between the US and China in nineteen seventy nine.

573
00:25:32,680 --> 00:25:36,600
Speaker 8: So we're forty five years on from that, and I

574
00:25:36,600 --> 00:25:40,560
Speaker 8: think it you know, it's just going to be two

575
00:25:40,680 --> 00:25:44,560
Speaker 8: big countries, huge economies, important players in the world, and

576
00:25:44,640 --> 00:25:48,120
Speaker 8: it's just going to be so difficult to figure out

577
00:25:48,160 --> 00:25:52,320
Speaker 8: how to manage all of these issues. I think the

578
00:25:52,359 --> 00:25:56,640
Speaker 8: most important thing is that whoever's in the White House

579
00:25:56,640 --> 00:25:59,840
Speaker 8: should be expressing confidence about the future of the United

580
00:25:59,840 --> 00:26:05,480
Speaker 8: States and our ability to be resilient and maintain our

581
00:26:05,960 --> 00:26:08,720
Speaker 8: competitive edge. I think that's the most important thing.

582
00:26:09,400 --> 00:26:11,920
Speaker 2: Susan Thornton of the Paul Side China Center at the

583
00:26:11,960 --> 00:26:18,920
Speaker 2: Yale University, thank you so much for being with us.

584
00:26:24,359 --> 00:26:26,000
Speaker 1: The media industry is consolidating.

585
00:26:26,000 --> 00:26:29,360
Speaker 2: We late yesterday learned that Warner Brothers and Paramount held

586
00:26:29,400 --> 00:26:33,639
Speaker 2: talks about a possible merger deal, putting potentially the studios

587
00:26:33,920 --> 00:26:36,720
Speaker 2: together and putting HBO and CBS under one roof, according

588
00:26:36,720 --> 00:26:39,320
Speaker 2: to people familiar with the matter. Robert Fishman, senior research

589
00:26:39,400 --> 00:26:43,040
Speaker 2: analyst at Mofatt Nathanson, writing this morning, we hesitate to

590
00:26:43,080 --> 00:26:46,000
Speaker 2: see the upside in any transaction for the Paramount company

591
00:26:46,040 --> 00:26:49,040
Speaker 2: as a whole, especially at its current premium valuation. Given

592
00:26:49,040 --> 00:26:51,960
Speaker 2: the pressure on the linear TV business. It's a great

593
00:26:51,960 --> 00:26:54,200
Speaker 2: place to start. And Robert, I'm so pleased to say,

594
00:26:54,280 --> 00:26:54,960
Speaker 2: is joining us.

595
00:26:54,840 --> 00:26:55,520
Speaker 1: Now to discuss.

596
00:26:55,760 --> 00:26:58,720
Speaker 2: Robert, that is my key question, what is the advantage

597
00:26:58,880 --> 00:27:01,280
Speaker 2: to tying up and CBS?

598
00:27:02,960 --> 00:27:04,399
Speaker 9: But good morning, thank you for having me.

599
00:27:04,960 --> 00:27:07,159
Speaker 6: I think the answer to the question right now is

600
00:27:07,200 --> 00:27:12,320
Speaker 6: the desperate times in media landscape and the companies are

601
00:27:12,359 --> 00:27:17,159
Speaker 6: facing significant challenges from a linear TV perspective given the

602
00:27:17,400 --> 00:27:21,560
Speaker 6: increasing rates of cord cutting. Linear advertising we think is

603
00:27:21,560 --> 00:27:24,800
Speaker 6: in secular declines right now. So all these companies are

604
00:27:24,800 --> 00:27:27,280
Speaker 6: looking to really just cut back and back to your

605
00:27:27,320 --> 00:27:30,199
Speaker 6: conversation earlier, try to figure out how to get to

606
00:27:30,240 --> 00:27:32,760
Speaker 6: this other side of the streaming pivot that they're all making.

607
00:27:33,280 --> 00:27:35,200
Speaker 9: But it's a really challenging time right now.

608
00:27:35,400 --> 00:27:37,120
Speaker 2: So do you think that this is a viable deal

609
00:27:37,240 --> 00:27:39,919
Speaker 2: or do you think that this is just basically CEOs

610
00:27:40,080 --> 00:27:42,000
Speaker 2: throwing in the talent, saying we'll talk to whoever we

611
00:27:42,040 --> 00:27:44,320
Speaker 2: can try to understand what could potentially work.

612
00:27:45,960 --> 00:27:48,199
Speaker 6: I think every company is really trying to figure it

613
00:27:48,240 --> 00:27:52,720
Speaker 6: out right now, and I do think that combinations are

614
00:27:52,880 --> 00:27:56,080
Speaker 6: likely to happen. Do I think that anything is going

615
00:27:56,119 --> 00:27:58,680
Speaker 6: to happen in the very near term. We have our

616
00:27:58,720 --> 00:28:01,800
Speaker 6: skepticism just because of the regulatory landscape that that was

617
00:28:01,880 --> 00:28:02,480
Speaker 6: just reference.

618
00:28:03,320 --> 00:28:05,439
Speaker 5: And something that I've been wondering about thinking about this

619
00:28:05,520 --> 00:28:10,080
Speaker 5: potential combination is how Warner Brothers would actually pay for this,

620
00:28:10,160 --> 00:28:13,200
Speaker 5: because as I understand it, they have a pretty hefty

621
00:28:13,320 --> 00:28:17,159
Speaker 5: debt load. You think back to that massive merger between

622
00:28:17,160 --> 00:28:19,640
Speaker 5: Discovery and Murder Media from twenty twenty one. How would

623
00:28:19,640 --> 00:28:22,200
Speaker 5: they actually fund this acquisition if it happens.

624
00:28:23,840 --> 00:28:27,240
Speaker 6: Yeah, we're still waiting to learn more details in terms

625
00:28:27,280 --> 00:28:30,480
Speaker 6: of the actual terms and how it would be structured.

626
00:28:30,720 --> 00:28:33,720
Speaker 6: I mean clearly that they would likely look for some

627
00:28:33,760 --> 00:28:37,879
Speaker 6: sort of stock component, if not a significant state in

628
00:28:38,480 --> 00:28:41,560
Speaker 6: the combined companies. So we still need to figure out

629
00:28:41,840 --> 00:28:45,760
Speaker 6: the exact combination. But to your point, all of these

630
00:28:45,840 --> 00:28:49,520
Speaker 6: companies are in a challenged position right now because of

631
00:28:49,560 --> 00:28:53,280
Speaker 6: the debt loads that they have, and that has limited

632
00:28:53,440 --> 00:28:57,120
Speaker 6: the flexibility that these companies have as they're coming through

633
00:28:58,000 --> 00:29:00,760
Speaker 6: the streaming pivot that they're looking to make and try

634
00:29:00,840 --> 00:29:02,880
Speaker 6: to get to the other side with the pressures of

635
00:29:02,920 --> 00:29:04,720
Speaker 6: the linear ecosystem going against them.

636
00:29:05,160 --> 00:29:07,640
Speaker 5: And if I were in the C suite at Netflix

637
00:29:07,800 --> 00:29:11,480
Speaker 5: or say at Apple's streaming are should I be worried

638
00:29:11,600 --> 00:29:14,960
Speaker 5: right now, not particularly just about this potential tie up,

639
00:29:14,960 --> 00:29:17,200
Speaker 5: but potential consolidation to come.

640
00:29:19,200 --> 00:29:24,720
Speaker 6: Well from the digital company perspective in terms of streaming specifically,

641
00:29:24,840 --> 00:29:27,760
Speaker 6: I mean, clearly, I would flip the question around. I'd

642
00:29:27,800 --> 00:29:30,760
Speaker 6: say the media companies should continue to be worried to

643
00:29:30,840 --> 00:29:34,400
Speaker 6: see how much bigger and stronger the digital companies are

644
00:29:34,400 --> 00:29:39,800
Speaker 6: getting in streaming, especially with public reports that Amazon continues

645
00:29:39,840 --> 00:29:43,200
Speaker 6: to be looking to go more in sports. And I

646
00:29:43,240 --> 00:29:46,000
Speaker 6: think the whole sports angle here is a really interesting

647
00:29:46,040 --> 00:29:50,400
Speaker 6: angle because what Warner Brothers Discovery does not have today

648
00:29:50,680 --> 00:29:53,480
Speaker 6: is a broadcast network, and what we know that they're

649
00:29:53,560 --> 00:29:56,040
Speaker 6: looking to do a big deal coming up in twenty

650
00:29:56,080 --> 00:29:59,080
Speaker 6: twenty four is going to be the NBA renewal, So

651
00:29:59,160 --> 00:30:01,840
Speaker 6: sports I think is a critical piece to all of

652
00:30:02,160 --> 00:30:05,920
Speaker 6: this potential consolidation question and how that plays out and

653
00:30:05,960 --> 00:30:10,800
Speaker 6: who owns what assets will have a significant impact on

654
00:30:11,640 --> 00:30:13,360
Speaker 6: the future of the sports landscape as well.

655
00:30:13,440 --> 00:30:15,680
Speaker 1: That's exactly where I was going to go, especially with CBS.

656
00:30:15,720 --> 00:30:18,040
Speaker 2: I wonder how much that's part of this, this idea

657
00:30:18,160 --> 00:30:21,400
Speaker 2: of trying to get in, especially before Amazon as they

658
00:30:21,440 --> 00:30:24,040
Speaker 2: bid on this. If Amazon or one of the other

659
00:30:24,080 --> 00:30:26,760
Speaker 2: streaming networks were to get a hold of some of

660
00:30:26,800 --> 00:30:29,920
Speaker 2: the rights to the sports teams or football in particular,

661
00:30:30,240 --> 00:30:32,360
Speaker 2: would that be the desnel for the cable channels.

662
00:30:34,040 --> 00:30:36,000
Speaker 9: Well, to some degree, it's already happening.

663
00:30:37,040 --> 00:30:41,240
Speaker 6: Amazon does have their Thursday Night package and they've succeeded

664
00:30:41,840 --> 00:30:45,400
Speaker 6: so far this season. We've seen real momentum there in

665
00:30:45,440 --> 00:30:48,360
Speaker 6: terms of viewership. So yes, I mean this is the

666
00:30:48,440 --> 00:30:52,240
Speaker 6: trend for sports. Sports is going over the top. Clearly,

667
00:30:52,520 --> 00:30:58,200
Speaker 6: ESPN remains the pivotal piece to the sports ecosystem, and

668
00:30:58,400 --> 00:31:01,760
Speaker 6: there's been lots of discussion in terms of the timing

669
00:31:01,800 --> 00:31:04,760
Speaker 6: of when they're going to take their flagship network over

670
00:31:04,800 --> 00:31:07,400
Speaker 6: the top as well. But all of these sports rights

671
00:31:07,400 --> 00:31:11,760
Speaker 6: are a critical piece again to the future of the

672
00:31:11,800 --> 00:31:15,400
Speaker 6: media landscape and to the whole sports ecosystem, and the

673
00:31:15,480 --> 00:31:18,800
Speaker 6: digital players play a critical piece as part of that

674
00:31:18,880 --> 00:31:19,280
Speaker 6: as well.

675
00:31:19,360 --> 00:31:21,080
Speaker 2: I have to say, as you're talking, Robert does not

676
00:31:21,200 --> 00:31:24,640
Speaker 2: sound very optimistic for a lot of these streaming channels

677
00:31:24,760 --> 00:31:27,320
Speaker 2: that are not Amazon or that are not Netflix. And

678
00:31:27,360 --> 00:31:29,440
Speaker 2: I'm wondering if the best game plan, according to you,

679
00:31:29,640 --> 00:31:33,280
Speaker 2: is just to basically put all of the sort of repertoire,

680
00:31:33,320 --> 00:31:35,960
Speaker 2: all the different shows together, give it as a streaming

681
00:31:36,040 --> 00:31:38,840
Speaker 2: offer that is only one stream, it's a bundled stream,

682
00:31:39,240 --> 00:31:41,600
Speaker 2: and just offering it like that, rather than trying to

683
00:31:41,600 --> 00:31:44,240
Speaker 2: compete in any kind of material way with the content

684
00:31:44,280 --> 00:31:45,920
Speaker 2: as well as just the pocketbook of some of these

685
00:31:45,920 --> 00:31:46,520
Speaker 2: other players.

686
00:31:47,920 --> 00:31:50,640
Speaker 6: I mean, we do think that reaggregation on the streaming

687
00:31:50,680 --> 00:31:51,800
Speaker 6: side is inevitable.

688
00:31:52,080 --> 00:31:54,600
Speaker 9: It will likely take some time to play out.

689
00:31:54,600 --> 00:31:59,000
Speaker 6: But this potential consolidation or whatever permutation you want to

690
00:31:59,040 --> 00:32:03,000
Speaker 6: throw out there is all one step closer to that

691
00:32:03,120 --> 00:32:03,560
Speaker 6: end goal.

692
00:32:04,360 --> 00:32:06,960
Speaker 5: And let's talk a little bit more about Paramount specifically,

693
00:32:07,040 --> 00:32:10,080
Speaker 5: because it was interesting to see this news yesterday about

694
00:32:10,360 --> 00:32:12,720
Speaker 5: Warner Brothers. When you think about what else we've heard

695
00:32:12,800 --> 00:32:15,640
Speaker 5: and learned about Paramount this week. Of course, holding talks

696
00:32:15,680 --> 00:32:19,000
Speaker 5: once again about a sale of the Black Entertainment Television

697
00:32:19,000 --> 00:32:23,120
Speaker 5: Network for example. We'll see if any buyers emerge. There

698
00:32:23,440 --> 00:32:27,360
Speaker 5: can Paramount stand alone as a standalone company if it's

699
00:32:27,360 --> 00:32:30,040
Speaker 5: not Warner Brothers, for example, do they need to be

700
00:32:30,080 --> 00:32:31,520
Speaker 5: acquired by someone else at this.

701
00:32:31,480 --> 00:32:36,480
Speaker 6: Point, yeah, I mean, I think the challenges at hand

702
00:32:36,520 --> 00:32:40,720
Speaker 6: are real and growing. We hosted a conference a couple

703
00:32:40,760 --> 00:32:44,200
Speaker 6: weeks ago now in terms of the future of the

704
00:32:44,240 --> 00:32:48,040
Speaker 6: impact of Charter deal, that the Disney Charter deal on

705
00:32:48,200 --> 00:32:51,200
Speaker 6: the rest of the ecosystem, and we believe and it's

706
00:32:51,200 --> 00:32:55,200
Speaker 6: been reported that Charter deal with Paramount is coming up,

707
00:32:55,480 --> 00:32:59,360
Speaker 6: but all future renewals per Paramounts given what we say,

708
00:33:00,160 --> 00:33:03,280
Speaker 6: essentially back to sports, that the fact that they're leaking

709
00:33:03,360 --> 00:33:06,680
Speaker 6: all of their premium sports rights, including the NFL over

710
00:33:06,720 --> 00:33:10,160
Speaker 6: the top, is going to be a significant challenge going

711
00:33:10,200 --> 00:33:13,800
Speaker 6: forward for Paramount, and we think that the renewal is

712
00:33:13,840 --> 00:33:15,640
Speaker 6: what will come under pressure because of.

713
00:33:15,520 --> 00:33:17,680
Speaker 9: That, and that will be another leg.

714
00:33:17,800 --> 00:33:20,400
Speaker 6: As far as what some of the risks are facing

715
00:33:20,440 --> 00:33:24,680
Speaker 6: this company. Coming back to the advertising story, it's a

716
00:33:24,680 --> 00:33:27,440
Speaker 6: real difficult time right now, and it's pretty clear to

717
00:33:27,600 --> 00:33:31,640
Speaker 6: us that television is in secular decline in terms of advertising,

718
00:33:32,040 --> 00:33:36,440
Speaker 6: and that's going to put another significant challenge ahead given

719
00:33:36,520 --> 00:33:40,120
Speaker 6: how high margin these dollars are and the exposure that

720
00:33:41,000 --> 00:33:44,800
Speaker 6: the TV network's TV media business is for Paramount is

721
00:33:44,840 --> 00:33:46,960
Speaker 6: generating essentially all of their profit today.

722
00:33:47,320 --> 00:33:50,080
Speaker 5: And of course the talks between Warner Brothers and Paramount,

723
00:33:50,080 --> 00:33:53,320
Speaker 5: they're preliminary, according to people familiar, may not lead to

724
00:33:53,360 --> 00:33:56,720
Speaker 5: an agreement, but let's say that it did, that these

725
00:33:56,760 --> 00:33:59,320
Speaker 5: two companies did combine. On the surface level, there's a

726
00:33:59,320 --> 00:34:02,800
Speaker 5: lot of overall between these two companies. What could that

727
00:34:02,840 --> 00:34:06,240
Speaker 5: potentially mean for restructuring and layoffs for example?

728
00:34:08,520 --> 00:34:13,000
Speaker 6: I mean, they would clearly be significant cost synergies involved

729
00:34:13,040 --> 00:34:16,000
Speaker 6: in the combination of these companies. But in the report

730
00:34:16,160 --> 00:34:19,440
Speaker 6: we published this morning, we alluded to the fact from

731
00:34:19,520 --> 00:34:23,920
Speaker 6: an overlap perspective that the cable network business would be

732
00:34:24,000 --> 00:34:27,400
Speaker 6: something with high concentration. So that's clearly something from a

733
00:34:27,440 --> 00:34:31,920
Speaker 6: regulatory standpoint that we would imagine is reviewed at the

734
00:34:32,040 --> 00:34:38,080
Speaker 6: very least again in this potential speculative type of combination,

735
00:34:38,600 --> 00:34:41,120
Speaker 6: and then you have to question what ends up with

736
00:34:41,400 --> 00:34:46,320
Speaker 6: the two different studios, whether or not Warner Brothers Discovery

737
00:34:46,480 --> 00:34:51,319
Speaker 6: would be forced or even opportunistically look to get rid

738
00:34:51,360 --> 00:34:53,080
Speaker 6: of the Paramount Studio as well.

739
00:34:53,320 --> 00:34:55,520
Speaker 2: Robert Fishman, if Buffet Nathanson, thank you so much for

740
00:34:55,560 --> 00:34:59,600
Speaker 2: being with us. Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify,

741
00:34:59,680 --> 00:35:02,839
Speaker 2: and where else you get your podcasts. Listen live every

742
00:35:02,880 --> 00:35:05,800
Speaker 2: weekday starting at seven am Eastern on Bloomberg dot com,

743
00:35:05,800 --> 00:35:08,200
Speaker 2: the iHeartRadio app tune In, and the.

744
00:35:08,160 --> 00:35:09,320
Speaker 1: Bloomberg Business app.

745
00:35:09,600 --> 00:35:12,880
Speaker 2: You can watch us live on Bloomberg Television and always

746
00:35:13,000 --> 00:35:16,399
Speaker 2: on the Bloomberg Terminal. Thanks for listening. I'm Lisa Abramowitz,

747
00:35:16,440 --> 00:35:17,480
Speaker 2: and this is Bloomberg